UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

811-10555

 

PIMCO Corporate & Income Strategy Fund

(Exact name of registrant as specified in charter)

 

1633 Broadway, New York, New York

 

10019

(Address of principal executive offices)

 

(Zip code)

 

Lawrence G. Altadonna - 1633 Broadway, New York, New York 10019

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

212-739-3371

 

 

Date of fiscal year end:

October 31, 2013

 

 

Date of reporting period:

April 30, 2013

 

 



 

Item 1. Report to Shareholders

 

 

 

 

 

 

 


 

Contents

 

2–3

 

Letter to Shareholders

4–5

 

Fund Insights

6–7

 

Performance & Statistics

8–39

 

Schedules of Investments

40

 

Statements of Assets and Liabilities

41

 

Statements of Operations

42–43

 

Statements of Changes in Net Assets

44

 

Statement of Cash Flows

45–65

 

Notes to Financial Statements

66–67

 

Financial Highlights

68

 

Annual Shareholder Meeting Results/Proxy Voting Policies & Procedures

 


 

Letter from the Chairman and President & CEO

 

Dear Shareholder:

 

The US economy expanded during the six-month fiscal reporting period ended April 30, 2013. However, growth was uneven and unemployment remained a concern. Despite this, many US stock market indices reached record highs and lower rated corporate bonds produced strong results.

 

Six Months in Review

For the six-month fiscal reporting period ended April 30, 2013:

 

n  PIMCO Corporate & Income Strategy Fund advanced 8.72% on net asset value (“NAV”) and 6.89% on market price.

Hans W. Kertess

Chairman

 

 

n  PIMCO Income Opportunity Fund rose 12.85% on NAV and 15.27% on market price.

 

The US economy continued to grow during the fiscal six-month reporting period, but the pace of the expansion was far from robust. Gross domestic product (“GDP”), the value of goods and services produced in the country, the broadest measure of US economic activity and the principal indicator of economic performance, grew at an annual pace of 0.4% during the fourth quarter of 2012 and accelerated to an annual rate of 2.5% (preliminary estimate) during the first quarter of 2013.

 

Brian S. Shlissel

President & CEO

 

The Federal Reserve (the “Fed”) initiated a number of actions to support the economy and reduce unemployment. In September 2012, prior to the beginning of the fiscal reporting period, the Fed introduced a third round of “quantitative easing” which entailed the purchasing of $40 billion of mortgage securities each month. Toward the end of 2012, the Fed revealed that it would continue to purchase $40 billion of mortgage securities each month, in addition to purchasing $45 billion per month of longer-term Treasuries on an open-ended basis. At its meeting in December, the Fed said that it expected to keep the Fed Funds rate in the 0.0% to 0.25% range: “...as long as the unemployment rate remains above 6.5%,” provided that inflation remains well contained.

 

Yields on US Treasury bonds trended lower during the six-months ended April 30, 2013. The benchmark ten-year Treasury bond commenced the fiscal period yielding 1.72% and ended the period at 1.70%. Continued low yields reflected a variety of concerns, including Europe’s ongoing sovereign debt crisis, uncertainties regarding fiscal policy and decelerating global economic growth.

 

 

2

April 30, 2013 | Semi-Annual Report

 

 


 

Outlook

 

Recent US economic data, in general, has been weaker than anticipated, leading to concerns of another spring/summer slowdown. At the conclusion of its meeting in March 2013, the Fed stated that it was seeing “a return to moderate economic growth following a pause late last year.” However, the Fed also acknowledged that “fiscal policy is restraining economic growth.” Whether the economy is currently experiencing a temporary “soft patch” or larger setback remains to be seen. Given this uncertainty and continued high unemployment, we expect the Fed will maintain an accommodative monetary stance.

 

Receive this report electronically and eliminate paper mailings.

 

 

To enroll, visit:

us.allianzgi.com/edelivery.

 

 

Concerns related to the European sovereign debt crisis reemerged during the reporting period amid inconclusive election results in Italy and a banking crisis in Cyprus. In addition, austerity measures remain a headwind for European Union countries. In China, while growth has decelerated, a “soft landing” for China’s economy appears likely.

 

For specific information on the Funds and their performance, please review the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ shareholder servicing agent at (800) 254-5197. In addition, a wide range of information and resources is available on our website, us.allianzgi.com/closedendfunds.

 

Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager, and Pacific Investment Management Company LLC (“PIMCO”), the Funds’ sub-adviser, we thank you for investing with us.

 

We remain dedicated to serving your investment needs.

 

Sincerely,

 

 

 

Hans W. Kertess

Brian S. Shlissel

Chairman of the Board of Trustees  

President & Chief Executive Officer

 

 

Semi-Annual Report | April 30, 2013

3

 


 

Fund Insights

PIMCO Corporate & Income Strategy Fund

PIMCO Income Opportunity Fund

April 30, 2013 (unaudited)

 

For the fiscal six-months ended April 30, 2013, PIMCO Corporate & Income Strategy Fund returned 8.72% on net asset value (“NAV”) and 6.89% on market price.

 

For the fiscal six-months ended April 30, 2013, PIMCO Income Opportunity Fund returned 12.85% on NAV and 15.27% on market price.

 

While the US fixed income market experienced periods of volatility during the reporting period, all told positive results were generated. Market volatility was triggered by a number of factors, including uncertainty regarding the “fiscal cliff” and sequestration, as well as the ongoing European sovereign debt crisis. However, with the Federal Reserve (the “Fed”) maintaining its highly accommodative monetary policy, investor demand for higher yielding securities was generally solid. All told, during the six-months ended April 30, 2013, both short- and long-term Treasury yields declined and the yield curve steepened. A number of spread sectors (non-US Treasuries) outperformed equal-duration Treasuries, with high yield corporate bonds generating the strongest returns.

 

In comparison to the 0.90% return for the overall US fixed income market (as measured by the Barclays US Aggregate Index), high yield and investment grade bonds returned 7.26% and 1.54%, respectively (as measured by the Barclays US High Yield and Barclays US Credit Indices) for the six-month reporting period.

 

Given strong overall investor demand, on a total return basis, lower rated, higher yielding investment grade corporate bonds generally outperformed their higher quality counterparts. For instance, AAA-, AA-, A and BBB-rated issues, as measured by the Barclays US Credit Index, returned 0.88%, 1.34%, 1.29%, and 2.04%, respectively, during the six-months ended April 30, 2013.1 Within the high yield market, BB-rated issues returned 5.62%, versus 7.20% for B-rated securities, as measured by the Barclays US High Yield Index.

 

PIMCO Corporate & Income Strategy

 

Sector and duration positioning drive results

An overweighting to the banking and life insurance sectors contributed to results, as these

 

1. The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio. The quality ratings of individual issues/issuers are provided to indicate the credit-worthiness of such issues/issuer and generally range from AAA, Aaa, or AAA (highest) to D, C, or D (lowest) for S&P, Moody’s, and Fitch respectively.

 

2. The Barclays US Credit Index consists of publicly issued US corporate and specified foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. It includes both corporate and non-corporate sectors. The corporate sectors are Industrial, Utility, and Finance, which include both US and non-US corporations. The non-corporate sectors are Sovereign, Supranational, Foreign Agency, and Foreign Local Government. The B of A Merrill Lynch BB/B Constrained Index tracks the performance of BB-B Rated US dollar-denominated corporate bonds publicly issued in the US domestic market. Qualifying bonds are capitalization-weighted provided the total allocation to an individual issuer (defined by Bloomberg tickers) does not exceed 2%. Issuers that exceed the limit are reduced to 2% and the face value of each of their bonds is adjusted on a pro-rata basis. Similarly, the face value of bonds of all other issuers that fall below the 2% cap are increased on a pro-rata basis. It is not possible to invest directly in an unmanaged index.

 

 

4

April 30, 2013 | Semi-Annual Report

 

 


 

issues outperformed the credit market as measured by the Fund’s benchmark, the 80% Barclays US Credit/20% B of A Merrill Lynch BB/B Constrained Index (the “Index”),2 during the reporting period. An overweighting to airlines was also positive for returns due to its outperformance versus the Index. The Fund’s duration positioning was also rewarded, as the Fund was targeted to have a shorter duration than that of the Index.

 

On the downside, underweightings in health care and independent exploration and production energy companies were negative for results as these sectors outperformed the Index.

 

PIMCO Income Opportunity

 

Sector positioning and yield curve positioning drive results

The Fund produced strong absolute returns during the six-month reporting period. Allocations to non-agency mortgage-backed securities were a significant contributor to results, as these securities outperformed the broader market. Driving these strong returns were generally robust investor demand for higher yielding assets and continued signs of a recovery in the housing market. An emphasis on select, high quality, banking issues was also beneficial to performance, as these securities generally outperformed the broad market during the reporting period. An overweight to the insurance sector and positions in select insurance issues enhanced performance as they outperformed the broader credit market during the six-months ended April 30, 2013. The Fund’s overweighting to the front end of the yield curve added to performance as front end rates trended lower during the reporting period. An overweighting to credit spread duration was also helpful, as credit spreads tightened during the reporting period.

 

There were no meaningful detractors from performance during the period.

 

 

 

Semi-Annual Report | April 30, 2013

5


 

Performance and Statistics

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited)

 

Total Return(1):

 

Market Price

 

NAV

Six Month

 

  6.89%

 

  8.72%

1 Year

 

26.70%

 

26.97%

5 Year

 

17.59%

 

19.04%

10 Year

 

13.75%

 

13.07%

Commencement of Operations (12/21/01) to 4/30/13

 

13.26%

 

13.08%

 

Market Price/NAV Performance:

 

Market Price/NAV

Commencement of Operations (12/21/01) to 4/30/13

 

Market Price

 

$18.47

 

 

NAV

 

$16.38

 NAV

 

Premium to NAV

 

12.76%

 Market Price

 

Market Price Yield(2)

 

7.31%

 

 

Leverage Ratio(3)

 

21.32%

 

 

 

 

 

 

(1) Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all dividends and distributions, if any, have been reinvested. Total return does not reflect broker commissions or sales charges in connection with the purchase or sale of Fund shares. Total return for a period of more than one year represents the average annual total return. Total return for a period of less than one year is not annualized.

 

Performance at market price will differ from results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends.

 

An investment in the Fund involves risk, including the loss of principal. Total return, market price, market price yield and NAV will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and, once issued, shares of closed-end funds are traded in the open market through a stock exchange. NAV is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

 

(2) Market Price Yield is determined by dividing the annualized current monthly dividend per common share (comprised of net investment income) by the market price per common share at April 30, 2013.

 

(3) Represents Preferred Shares outstanding, (“Leverage”) as a percentage of total managed assets. Total managed assets refer to total assets (including assets attributable to Leverage) minus liabilities (other than liabilities representing Leverage).

 

 

6

April 30, 2013 | Semi-Annual Report

 

 


 

Performance and Statistics

PIMCO Income Opportunity Fund

April 30, 2013 (unaudited)

 

Total Return(1):

 

Market Price

 

NAV

Six Month

 

15.27%

 

12.85%

1 Year

 

34.21%

 

31.35%

5 Year

 

19.23%

 

17.46%

Commencement of Operations (11/30/07) to 4/30/13

 

17.11%

 

16.34%

 

Market Price/NAV Performance:

 

Market Price/NAV:

Commencement of Operations (11/30/07) to 4/30/13

 

Market Price

 

$32.48

 

 

NAV

 

$29.63

 NAV

 

Premium to NAV

 

9.62%

 Market Price

 

Market Price Yield(2)

 

7.02%

 

 

Leverage Ratio(3)

 

36.13%

 

 

 

 

 

 

(1) Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all dividends and distributions, if any, have been reinvested. Total return does not reflect broker commissions or sales charges in connection with the purchase or sale of Fund shares. Total return for a period of more than one year represents the average annual total return. Total return for a period of less than one year is not annualized.

 

Performance at market price will differ from results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends.

 

An investment in the Fund involves risk, including the loss of principal. Total return, market price, market price yield and NAV will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and, once issued, shares of closed-end funds are traded in the open market through a stock exchange. NAV is equal to total assets less total liabilities divided by the number of shares outstanding. Holdings are subject to change daily.

 

(2) Market Price Yield is determined by dividing the annualized current monthly dividend per share (comprised of net investment income and short-term capital gains, if any) by the market price per common share at April 30, 2013.

 

(3) Represents Reverse Repurchase Agreements (“Leverage”) outstanding, as a percentage of total managed assets. Total managed assets refer to total assets (including assets attributable to Leverage) minus liabilities (other than liabilities representing Leverage).

 

 

Semi-Annual Report | April 30, 2013

7

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited)

 

Principal
Amount
(000s)

 

 

 

Value

 

Corporate Bonds & Notes – 40.8%

 

 

 

Airlines – 0.9%

 

 

 

$1,635

 

American Airlines Pass-Through Trust, 10.375%, 1/2/21

 

$1,726,802

 

1,657

 

Continental Airlines Pass-Through Trust, 9.798%, 10/1/22

 

1,880,818

 

 

 

United Air Lines Pass-Through Trust,

 

 

 

1,273

 

7.336%, 1/2/21 (a) (b) (c) (j) (acquisition cost-$1,273,478; purchased 6/19/07)

 

1,286,213

 

1,907

 

10.40%, 5/1/18

 

2,212,457

 

 

 

 

 

7,106,290

 

Auto Manufacturers – 0.3%

 

 

 

1,500

 

Ford Motor Co., 9.98%, 2/15/47

 

2,292,277

 

Banking – 26.8%

 

 

 

2,400

 

AgFirst Farm Credit Bank, 7.30%, 5/15/13 (a) (b) (c) (g) (j) (acquisition cost-$1,904,000; purchased 2/26/10-3/2/10)

 

2,400,262

 

 

 

Ally Financial, Inc.,

 

 

 

240

 

5.35%, 1/15/14

 

240,473

 

70

 

5.75%, 1/15/14

 

70,054

 

753

 

6.00%, 7/15/13-9/15/19

 

754,347

 

492

 

6.05%, 8/15/19

 

492,260

 

659

 

6.125%, 10/15/19

 

658,590

 

348

 

6.15%, 9/15/19-10/15/19

 

345,155

 

10

 

6.20%, 4/15/19

 

10,001

 

719

 

6.25%, 12/15/18-7/15/19

 

717,638

 

620

 

6.30%, 8/15/19

 

613,916

 

5

 

6.35%, 7/15/19

 

5,001

 

158

 

6.40%, 12/15/18

 

158,006

 

2,515

 

6.50%, 2/15/16-1/15/20

 

2,514,422

 

78

 

6.60%, 5/15/18

 

78,465

 

1,246

 

6.65%, 6/15/18-10/15/18

 

1,245,664

 

1,431

 

6.70%, 6/15/18-12/15/19

 

1,430,701

 

1,957

 

6.75%, 8/15/16-6/15/19

 

1,955,605

 

817

 

6.80%, 9/15/18-10/15/18

 

815,310

 

30

 

6.85%, 5/15/18

 

30,184

 

80

 

6.875%, 7/15/18

 

79,644

 

988

 

6.90%, 6/15/17-8/15/18

 

991,117

 

4,000

 

7.00%, 8/15/16-11/15/23

 

4,010,668

 

1,878

 

7.05%, 3/15/18-4/15/18

 

1,891,328

 

105

 

7.125%, 10/15/17

 

104,002

 

501

 

7.15%, 6/15/16-1/15/25

 

501,773

 

2,434

 

7.25%, 9/15/17-3/15/25

 

2,434,826

 

288

 

7.30%, 12/15/17-1/15/18

 

287,665

 

12,861

 

7.375%, 11/15/16-4/15/18

 

12,886,196

 

20

 

7.40%, 12/15/17

 

20,037

 

84

 

7.50%, 11/15/16-12/15/17

 

83,808

 

266

 

9.00%, 7/15/20

 

266,078

 

MXN35,000

 

Bank of America Corp., 4.854%, 4/29/25 (f) (h) (l)

 

3,462,359

 

£17,500

 

Barclays Bank PLC, 14.00%, 6/15/19 (g)

 

37,795,564

 

 

 

8

April 30, 2013 | Semi-Annual Report

 

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

$5,000

 

BPCE S.A., 12.50%, 9/30/19 (a) (c) (g)

 

$6,325,290

 

27,790

 

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, 11.00%, 6/30/19 (a) (c) (g)

 

37,543,512

 

 

 

Credit Agricole S.A. (g),

 

 

 

€800

 

7.875%, 10/26/19

 

1,159,101

 

$21,400

 

8.375%, 10/13/19 (a) (c)

 

23,941,250

 

1,000

 

HSBC Capital Funding L.P., 10.176%, 6/30/30 (g)

 

1,452,500

 

 

 

LBG Capital No. 1 PLC,

 

 

 

€300

 

7.375%, 3/12/20

 

411,896

 

£100

 

7.588%, 5/12/20

 

165,432

 

200

 

7.867%, 12/17/19

 

331,329

 

400

 

7.869%, 8/25/20

 

667,008

 

$12,700

 

7.875%, 11/1/20 (a) (b) (c) (j) (acquisition cost-$10,447,750; purchased 12/7/09-4/16/10)

 

13,995,400

 

17,500

 

8.00%, 6/15/20 (a) (c) (g)

 

18,824,960

 

8,500

 

8.50%, 12/17/21 (a) (c) (g)

 

9,125,625

 

£300

 

11.04%, 3/19/20

 

553,195

 

 

 

LBG Capital No. 2 PLC,

 

 

 

€400

 

8.875%, 2/7/20

 

588,993

 

£3,100

 

9.125%, 7/15/20

 

5,378,688

 

500

 

9.334%, 2/7/20

 

875,306

 

 

 

Royal Bank of Scotland Group PLC (g),

 

 

 

$1,000

 

6.99%, 10/5/17 (a) (b) (c) (j) (acquisition cost-$770,000; purchased 1/30/12)

 

990,000

 

7,800

 

7.648%, 9/30/31

 

8,229,000

 

£1,200

 

Santander Finance Preferred S.A. Unipersonal, 11.30%, 7/27/14 (g)

 

1,985,554

 

 

 

 

 

211,895,158

 

Building Materials – 0.0%

 

 

 

$400

 

Desarrolladora Homex S.A.B. de C.V., 9.50%, 12/11/19 (a) (c)

 

246,000

 

Diversified Financial Services – 4.5%

 

 

 

2,300

 

AGFC Capital Trust I, 6.00%, 1/15/67 (converts to FRN on 1/15/17) (a) (c)

 

1,863,000

 

 

 

International Lease Finance Corp.,

 

 

 

2,900

 

6.75%, 9/1/16 (a) (c)

 

3,313,250

 

1,000

 

8.625%, 9/15/15

 

1,143,750

 

 

 

SLM Corp.,

 

 

 

5,900

 

8.00%, 3/25/20

 

6,842,708

 

12,500

 

8.45%, 6/15/18

 

14,742,137

 

 

 

Springleaf Finance Corp.,

 

 

 

€1,500

 

4.125%, 11/29/13

 

1,985,378

 

$2,200

 

5.40%, 12/1/15

 

2,307,250

 

500

 

6.50%, 9/15/17

 

515,000

 

3,000

 

6.90%, 12/15/17

 

3,136,875

 

 

 

 

 

35,849,348

 

Electric Utilities – 0.4%

 

 

 

800

 

AES Andres Dominicana Ltd., 9.50%, 11/12/20 (a) (c)

 

874,000

 

4,300

 

Dynegy Roseton LLC / Dynegy Danskammer LLC Pass-Through Trust, 7.67%, 11/8/16, Ser. B (b) (e) (f)

 

107,281

 

 

 

Semi-Annual Report | April 30, 2013

9

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

$1,215

 

FPL Energy Wind Funding LLC, 6.876%, 6/27/17 (a) (c)

 

$1,050,975

 

1,100

 

PPL Capital Funding, Inc., 6.70%, 3/30/67 (converts to FRN on 3/30/17)

 

1,169,754

 

 

 

 

 

3,202,010

 

Healthcare-Services – 0.5%

 

 

 

3,600

 

HCA, Inc., 8.50%, 4/15/19

 

3,978,000

 

Household Products/Wares – 0.2%

 

 

 

1,700

 

Reynolds Group Issuer, Inc., 9.00%, 4/15/19

 

1,844,500

 

Insurance – 4.9%

 

 

 

3,400

 

American General Institutional Capital A, 7.57%, 12/1/45 (a) (c)

 

4,296,818

 

 

 

American International Group, Inc.,

 

 

 

MXN16,000

 

7.98%, 6/15/17

 

1,289,800

 

€2,000

 

8.00%, 5/22/68 (converts to FRN on 5/22/18)

 

3,127,757

 

$12,700

 

8.25%, 8/15/18

 

16,507,536

 

£3,400

 

8.625%, 5/22/68 (converts to FRN on 5/22/18)

 

6,496,119

 

500

 

8.625%, 5/22/68 (converts to FRN on 5/22/18) (a) (b) (c) (j) 
(acquisition cost-$820,199; purchased 5/7/12)

 

955,312

 

$5,100

 

Dai-ichi Life Insurance Co., Ltd., 7.25%, 7/25/21 (a) (b) (c) (g) (j) 
(acquisition cost-$4,985,000; purchased 3/8/11-3/15/11)

 

5,967,536

 

 

 

 

 

38,640,878

 

Lodging – 0.4%

 

 

 

2,115

 

Times Square Hotel Trust, 8.528%, 8/1/26 (a) (c)

 

2,854,572

 

Telecommunications – 1.9%

 

 

 

8,200

 

Mountain States Telephone & Telegraph Co., 7.375%, 5/1/30

 

9,186,055

 

5,360

 

Qwest Corp., 7.20%, 11/10/26

 

5,433,700

 

 

 

 

 

14,619,755

 

Total Corporate Bonds & Notes (cost-$269,512,418)

 

322,528,788

 

Mortgage-Backed Securities – 27.8%

 

 

 

757

 

American Home Mortgage Assets Trust, 0.43%, 9/25/46 CMO (l)

 

95,752

 

289

 

Banc of America Alternative Loan Trust, 6.00%, 1/25/36 CMO

 

232,722

 

 

 

Banc of America Funding Trust, CMO,

 

 

 

6,326

 

6.00%, 3/25/37

 

5,798,390

 

749

 

6.00%, 7/25/37

 

588,008

 

527

 

Banc of America Mortgage Trust, 6.50%, 9/25/33 CMO

 

545,025

 

 

 

BCAP LLC Trust, CMO (a) (c) (l),

 

 

 

2,500

 

4.81%, 3/26/37

 

813,029

 

867

 

13.479%, 6/26/36

 

176,465

 

 

 

Bear Stearns ALT-A Trust, CMO (l),

 

 

 

2,500

 

2.89%, 11/25/36

 

1,779,298

 

1,802

 

2.903%, 9/25/35

 

1,464,647

 

1,733

 

5.051%, 8/25/36

 

1,274,800

 

 

 

Chase Mortgage Finance Trust, CMO,

 

 

 

2

 

2.763%, 3/25/37 (l)

 

1,531

 

27

 

2.902%, 12/25/35 (l)

 

25,163

 

2,211

 

6.00%, 7/25/37

 

2,027,977

 

3,307

 

Citicorp Mortgage Securities Trust, 6.00%, 6/25/36 CMO

 

3,416,239

 

 

 

10

April 30, 2013 | Semi-Annual Report

 

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

$2,266

 

Citigroup Mortgage Loan Trust, Inc., 5.323%, 8/25/35 CMO (l)

 

$2,260,660

 

10,155

 

Citimortgage Alternative Loan Trust, 5.75%, 5/25/37 CMO (d)

 

8,837,861

 

5,493

 

Citimortgage Alternative Loan Trust, 6.00%, 6/25/37 CMO

 

4,819,044

 

 

 

Countrywide Alternative Loan Trust, CMO,

 

 

 

757

 

5.50%, 3/25/35

 

707,164

 

338

 

5.50%, 3/25/36

 

265,846

 

4,159

 

5.50%, 5/25/36

 

3,004,480

 

972

 

5.75%, 1/25/35

 

927,818

 

1,779

 

5.75%, 3/25/37

 

1,466,462

 

908

 

6.00%, 2/25/35

 

908,479

 

3,170

 

6.00%, 2/25/37

 

2,420,399

 

2,741

 

6.00%, 4/25/37

 

2,203,960

 

1,043

 

6.00%, 7/25/37

 

946,232

 

2,255

 

6.00%, 8/25/37

 

1,561,303

 

3,055

 

6.25%, 12/25/36 (l)

 

2,504,472

 

1,038

 

6.50%, 8/25/36

 

794,788

 

 

 

Countrywide Home Loan Mortgage Pass-Through Trust, CMO,

 

 

 

632

 

2.819%, 9/20/36 (l)

 

428,171

 

1,617

 

5.50%, 10/25/35

 

1,631,586

 

2,158

 

5.75%, 3/25/37

 

1,952,793

 

1,406

 

6.00%, 2/25/37

 

1,339,293

 

1,276

 

6.00%, 3/25/37

 

1,201,726

 

402

 

6.00%, 4/25/37

 

365,173

 

 

 

Credit Suisse Mortgage Capital Certificates Mortgage-Backed Trust, CMO,

 

 

 

3,062

 

5.863%, 2/25/37 (l)

 

2,014,224

 

1,328

 

6.00%, 2/25/37

 

1,232,884

 

3,096

 

6.00%, 6/25/37

 

2,832,706

 

2,829

 

6.75%, 8/25/36

 

2,191,450

 

1,730

 

Deutsche ALT-B Securities Mortgage Loan Trust, 5.945%, 2/25/36 CMO

 

1,434,462

 

11,534

 

First Horizon Alternative Mortgage Securities Trust, 6.00%, 8/25/36 CMO

 

10,055,676

 

 

 

GSR Mortgage Loan Trust, CMO,

 

 

 

1,243

 

2.681%, 8/25/34 (l)

 

1,150,672

 

2,604

 

5.106%, 11/25/35 (l)

 

2,566,965

 

536

 

5.50%, 5/25/36

 

495,153

 

7,484

 

6.00%, 2/25/36

 

7,288,113

 

4,679

 

IndyMac IMSC Mortgage Loan Trust, 6.50%, 7/25/37 CMO

 

2,961,148

 

 

 

JPMorgan Alternative Loan Trust, CMO,

 

 

 

3,841

 

5.626%, 3/25/37 (l)

 

2,964,218

 

2,500

 

6.31%, 8/25/36

 

1,952,096

 

 

 

JPMorgan Mortgage Trust, CMO,

 

 

 

7,974

 

2.841%, 2/25/36 (l)

 

7,186,150

 

3,257

 

5.00%, 3/25/37

 

2,972,468

 

1,752

 

5.27%, 1/25/37 (l)

 

1,515,271

 

233

 

5.75%, 1/25/36

 

222,145

 

613

 

6.00%, 8/25/37

 

544,195

 

 

 

Semi-Annual Report | April 30, 2013

11

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Lehman Mortgage Trust, CMO,

 

 

 

$1,967

 

6.00%, 7/25/36

 

$1,600,955

 

643

 

6.00%, 7/25/37

 

566,941

 

3,483

 

MASTR Alternative Loans Trust, 6.75%, 7/25/36 CMO

 

2,557,628

 

1,350

 

Merrill Lynch Mortgage Investors Trust, 3.00%, 3/25/36 CMO (l)

 

980,476

 

 

 

Morgan Stanley Mortgage Loan Trust, CMO,

 

 

 

5,717

 

5.188%, 5/25/36 (l)

 

4,641,305

 

4,442

 

6.00%, 2/25/36

 

4,245,227

 

8,872

 

New Century Alternative Mortgage Loan Trust, 6.173%, 7/25/36 CMO (l)

 

6,592,400

 

 

 

Residential Accredit Loans, Inc., CMO,

 

 

 

1,163

 

0.43%, 5/25/37 (l)

 

222,429

 

1,120

 

6.00%, 6/25/36

 

928,260

 

4,702

 

6.00%, 8/25/36

 

3,893,169

 

3,740

 

6.00%, 9/25/36

 

2,677,307

 

5,171

 

6.00%, 12/25/36 (d)

 

4,380,854

 

2,161

 

Residential Asset Mortgage Products, Inc., 6.50%, 12/25/31 CMO

 

2,178,935

 

 

 

Residential Asset Securitization Trust, CMO,

 

 

 

875

 

6.00%, 9/25/36

 

571,601

 

2,887

 

6.00%, 3/25/37

 

2,266,796

 

4,007

 

6.00%, 5/25/37

 

3,747,479

 

4,252

 

6.25%, 9/25/37

 

3,080,672

 

 

 

Residential Funding Mortgage Securities I, CMO,

 

 

 

2,001

 

6.00%, 1/25/37

 

1,816,173

 

2,412

 

6.25%, 8/25/36

 

2,304,245

 

412

 

6.50%, 3/25/32

 

434,485

 

886

 

Sequoia Mortgage Trust, 2.60%, 2/20/47 CMO (l)

 

779,352

 

 

 

Structured Adjustable Rate Mortgage Loan Trust, CMO (l),

 

 

 

4,809

 

5.168%, 1/25/36

 

3,983,085

 

2,597

 

5.265%, 7/25/35 (d)

 

2,345,329

 

5,773

 

5.285%, 5/25/36

 

5,063,486

 

1,892

 

5.432%, 7/25/36

 

1,818,918

 

4,108

 

5.488%, 11/25/36

 

3,436,542

 

 

 

Suntrust Adjustable Rate Mortgage Loan Trust, CMO (l),

 

 

 

1,789

 

5.447%, 4/25/37

 

1,528,512

 

975

 

5.816%, 2/25/37

 

842,539

 

15,664

 

Thornburg Mortgage Securities Trust, 5.75%, 6/25/47 CMO (l)

 

14,564,312

 

 

 

WaMu Mortgage Pass-Through Certificates, CMO (l),

 

 

 

988

 

2.526%, 7/25/37

 

780,194

 

667

 

2.664%, 9/25/36

 

564,350

 

1,711

 

5.075%, 2/25/37

 

1,640,171

 

2,258

 

6.092%, 10/25/36

 

2,056,603

 

 

 

Washington Mutual Mortgage Pass-Through Certificates, CMO,

 

 

 

424

 

0.938%, 4/25/47 (l)

 

16,679

 

1,113

 

1.016%, 5/25/47 (l)

 

109,710

 

3,933

 

6.00%, 10/25/35

 

3,279,360

 

1,502

 

6.00%, 6/25/37

 

1,274,150

 

 

 

12

April 30, 2013 | Semi-Annual Report

 

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

$1,910

 

Wells Fargo Alternative Loan Trust, 6.00%, 7/25/37 CMO

 

$1,829,140

 

 

 

Wells Fargo Mortgage-Backed Securities Trust, CMO,

 

 

 

211

 

2.62%, 5/25/36 (l)

 

197,483

 

1,139

 

2.695%, 7/25/36 (l)

 

1,057,416

 

553

 

2.709%, 4/25/36 (l)

 

523,340

 

9,741

 

5.325%, 8/25/36 (l)

 

9,372,312

 

1,303

 

5.647%, 10/25/36 (l)

 

1,272,184

 

1,380

 

6.00%, 7/25/37

 

1,369,861

 

Total Mortgage-Backed Securities (cost-$201,084,768)

 

219,759,117

 

Asset-Backed Securities – 4.5%

 

 

 

462

 

Bear Stearns Asset-Backed Securities Trust, 6.50%, 10/25/36

 

383,543

 

 

 

Countrywide Asset-Backed Certificates (l),

 

 

 

3,764

 

5.526%, 7/25/36

 

3,575,204

 

7,000

 

5.621%, 10/25/46

 

6,241,116

 

2,100

 

GSAA Home Equity Trust, 6.295%, 6/25/36

 

1,387,948

 

12,451

 

Inwood Park Ltd., 0.501%, 1/20/21 CDO (a) (c) (l)

 

12,360,340

 

8,400

 

JPMorgan Mortgage Acquisition Corp., 5.294%, 1/25/37

 

6,174,097

 

2,753

 

Mid-State Trust IV, 8.33%, 4/1/30

 

2,928,873

 

1,654

 

Mid-State Trust VII, 6.34%, 10/15/36

 

1,748,364

 

1,261

 

Morgan Stanley Mortgage Loan Trust, 6.25%, 7/25/47 (l)

 

998,023

 

Total Asset-Backed Securities (cost-$35,145,916)

 

35,797,508

 

Municipal Bonds – 4.0%

 

 

 

California – 3.0%

 

 

 

4,200

 

City & Cnty. of San Francisco, Capital Improvement Projects, CP, 6.487%, 11/1/41, Ser. D

 

4,887,456

 

1,800

 

Long Beach Redev. Agcy., Tax Allocation, 8.36%, 8/1/40

 

2,002,806

 

2,400

 

Oakland Unified School Dist., Alameda Cnty., GO, 9.50%, 8/1/34

 

2,822,184

 

5,000

 

State, GO, 7.95%, 3/1/36

 

6,375,450

 

7,400

 

Stockton Public Financing Auth. Rev., 7.942%, 10/1/38, Ser. B

 

7,429,304

 

 

 

 

 

23,517,200

 

Louisiana – 0.3%

 

 

 

 

 

New Orleans, Public Improvements, GO, Ser. A,

 

 

 

800

 

8.30%, 12/1/29

 

991,968

 

820

 

8.55%, 12/1/34

 

1,028,477

 

300

 

8.80%, 12/1/39

 

380,163

 

 

 

 

 

2,400,608

 

Texas – 0.7%

 

 

 

4,000

 

Dallas Convention Center Hotel Dev. Corp. Rev., 7.088%, 1/1/42

 

5,228,040

 

Total Municipal Bonds (cost-$27,979,684)

 

31,145,848

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Preferred Stock (k) – 3.3%

 

 

 

Banking – 2.9%

 

 

 

100,000

 

Ally Financial, Inc., 8.50%, 5/15/16, Ser. A (g)

 

2,677,000

 

 

 

Semi-Annual Report | April 30, 2013

13

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

Shares

 

 

 

Value

 

30,200

 

CoBank ACB, 11.00%, 7/1/13, Ser. C (a) (b) (c) (g) (j)  (acquisition cost-$1,678,450; purchased 2/26/10-2/1/11)

 

$1,671,383

 

672,250

 

GMAC Capital Trust I, 8.125%, 2/15/40, Ser. 2

 

18,412,927

 

 

 

 

 

22,761,310

 

Diversified Financial Services – 0.4%

 

 

 

120,000

 

Citigroup Capital XIII, 7.875%, 10/30/40

 

3,388,800

 

Total Preferred Stock (cost-$24,601,792)

 

26,150,110

 

 

 

 

 

 

 

Principal
Amount
(000s)

 

 

 

 

 

Sovereign Debt Obligations – 0.2%

 

 

 

Spain – 0.2%

 

 

 

€700

 

Autonomous Community of Catalonia, 3.875%, 9/15/15

 

918,823

 

500

 

Junta de Comunidades de Castilla–La Mancha, 4.875%, 3/18/20

 

627,246

 

Total Sovereign Debt Obligations (cost-$1,440,789)

 

1,546,069

 

U.S. Government Agency Securities – 0.1%

 

 

 

Fannie Mae – 0.0%

 

 

 

$1,487

 

3.50%, 1/25/43, CMO, IO (b)

 

277,167

 

Ginnie Mae – 0.1%

 

 

 

2,222

 

4.00%, 5/16/42, CMO, IO (b)

 

383,322

 

Total U.S. Government Agency Securities (cost-$680,046)

 

660,489

 

Short-Term Investments – 19.3%

 

 

 

Repurchase Agreements – 19.2%

 

 

 

27,700

 

Citigroup Global Markets, Inc.,
dated 4/30/13, 0.16%-0.19%, due 5/1/13, proceeds $27,700,128; collateralized by Freddie Mac, 1.02%, due 10/16/17, valued at $5,619,414 and U.S. Treasury Notes, 0.75%, due 10/31/17, valued at $22,655,850 including accrued interest

 

27,700,000

 

24,400

 

JPMorgan Securities, Inc.,
dated 4/30/13-5/1/13, 0.17%, due 5/1/13-5/2/13, proceeds $24,400,115; collateralized by U.S. Treasury Notes, 2.125%, due 12/31/15, valued at $24,919,450 including accrued interest

 

24,400,000

 

11,100

 

Morgan Stanley & Co., Inc.,
dated 4/30/13, 0.18%, due 5/1/13, proceeds $11,100,056; collateralized by U.S. Treasury Bonds, 3.50%, due 2/15/39, valued at $11,299,925 including accrued interest

 

11,100,000

 

 

 

14

April 30, 2013 | Semi-Annual Report

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

$50,000

 

RBC Capital Markets LLC,
dated 4/30/13, 0.15%, due 5/1/13, proceeds $50,000,208; collateralized by U.S. Treasury Notes, 0.625%, due 11/30/17, valued at $51,001,887 including accrued interest

 

$50,000,000

 

36,800

 

Royal Bank of Scotland,
dated 4/30/13, 0.16%, due 5/1/13, proceeds $36,800,164; collateralized by U.S. Treasury Notes, 0.125%, due 4/30/15, valued at $37,540,398 including accrued interest

 

36,800,000

 

2,164

 

State Street Bank and Trust Co.,
dated 4/30/13, 0.01%, due 5/1/13, proceeds $2,164,001; collateralized by Freddie Mac, 2.08%, due 10/17/22, valued at $2,208,858 including accrued interest

 

2,164,000

 

Total Repurchase Agreements (cost-$152,164,000)

 

152,164,000

 

U.S. Treasury Obligations (i) (m) – 0.1%

 

 

 

760

 

U.S. Treasury Bills, 0.097%-0.122%, 2/6/14 (cost-$759,344)

 

759,437

 

Total Short-Term Investments (cost-$152,923,344)

 

152,923,437

 

Total Investments (cost-$713,368,757) –100.0%

 

$790,511,366

 

 

Notes to Schedule of Investments:

 

(a)

Private Placement–Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $150,875,192, representing 19.1% of total investments.

(b)

Illiquid.

(c)

144A–Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.

(d)

When-issued or delayed-delivery. To be settled/delivered after April 30, 2013.

(e)

In default.

(f)

Fair-Valued–Securities with an aggregate value of $3,569,640, representing 0.5% of total investments. See Note 1(a) and Note 1(b) in the Notes to Financial Statements.

(g)

Perpetual maturity. The date shown, if any, is the next call date. For Corporate Bonds & Notes the interest rate is fixed until the first call date and variable thereafter.

(h)

Inflationary Bonds–Principal amount of security is adjusted for inflation/deflation.

(i)

All or partial amount segregated for the benefit of the counterparty as collateral for derivatives.

(j)

Restricted. The aggregate acquisition cost of such securities is $21,878,877. The aggregate value is $27,266,106, representing 3.4% of total investments.

(k)

Dividend rate is fixed until the first call date and variable thereafter.

(l)

Variable or Floating Rate Security–Securities with an interest rate that changes periodically. The interest rate disclosed reflects the rate in effect on April 30, 2013.

(m)

Rates reflect the effective yields at purchase date.

 

 

Semi-Annual Report | April 30, 2013

15

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

(n)  Interest rate swap agreements outstanding at April 30, 2013:

 

OTC swap agreements:

 

 

 

 

 

 

 

Rate Type

 

 

 

 

 

 

 

Swap
Counterparty

 

Notional
Amount
(000s)

 

Termination
Date

 

Payments
Made

 

Payments
Received

 

Value

 

Upfront
Premiums
Paid

 

Unrealized
Appreciation

 

Goldman Sachs 

 

 $64,000

 

6/18/18

 

3-Month -USD LIBOR

 

1.25%

 

$352,345

 

 

$12,452

 

 

$339,893

 

 

Goldman Sachs 

 

280,000

 

12/18/22

 

3-Month -USD LIBOR

 

2.30%

 

2,784,875

 

 

507,002

 

 

2,277,873

 

 

Morgan Stanley 

 

111,200

 

7/31/20

 

3-Month -USD LIBOR

 

1.85%

 

891,074

 

 

147,980

 

 

743,094

 

 

Royal Bank of Scotland 

 

156,000

 

12/18/22

 

3-Month -USD LIBOR

 

2.30%

 

 

1,551,572

 

 

263,830

 

 

1,287,742

 

 

 

 

 

 

 

 

 

 

 

 

$5,579,866

 

 

$931,264

 

 

$4,648,602

 

 

 

Centrally cleared swap agreements:

 

 

 

 

 

 

 

Rate Type

 

 

 

 

 

Broker (Exchange)

 

Notional
Amount
(000s)

 

Termination
Date

 

Payments
Made

 

Payments
Received

 

Value

 

Unrealized
Depreciation

 

Goldman Sachs (CME) 

 

$50,000

 

6/19/43

 

2.75%

 

3-Month -USD LIBOR

 

 

$880,143

 

 

$(2,864,218

)

 

(o)  Forward foreign currency contracts outstanding at April 30, 2013:

 

 

 

Counterparty

 

U.S.$ Value on
Origination Date

 

U.S.$ Value
April 30, 2013

 

Unrealized
Appreciation
(Depreciation)

Purchased:

 

 

 

 

 

 

 

 

 

35,960,000 British Pound settling 5/2/13

 

Bank of America

 

$54,886,575

 

$55,858,459

 

$971,884

 

1,390,000 Canadian Dollar settling 6/20/13

 

HSBC Bank

 

1,357,194

 

1,378,144

 

20,950

 

7,542,000 Euro settling 5/2/13

 

BNP Paribas

 

9,800,829

 

9,932,440

 

131,611

 

1,340,000 Euro settling 5/2/13

 

Royal Bank of Scotland

 

1,748,845

 

1,764,714

 

15,869

 

839,000 Mexican Peso settling 6/27/13

 

BNP Paribas

 

68,930

 

68,784

 

(146)

 

Sold:

 

 

 

 

 

 

 

 

 

35,960,000 British Pound settling 6/4/13

 

Bank of America

 

54,874,960

 

55,846,269

 

(971,309)

 

13,740,000 British Pound settling 5/2/13

 

Credit Suisse First Boston

 

20,764,451

 

21,343,026

 

(578,575)

 

22,220,000 British Pound settling 5/2/13

 

Deutsche Bank

 

34,217,444

 

34,515,433

 

(297,989)

 

 

 

16

April 30, 2013 | Semi-Annual Report

 

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

 

 

Counterparty

 

U.S.$ Value on
Origination Date

 

U.S.$ Value April 30, 2013

 

Unrealized
Appreciation
(Depreciation)

380,000 British Pound settling 6/4/13

 

HSBC Bank

 

$586,437

 

$590,144

 

$(3,707

)

1,386,000 British Pound settling 6/12/13

 

Royal Bank of Scotland

 

2,095,605

 

2,152,374

 

(56,769

)

1,063,000 Canadian Dollar settling 6/20/13

 

Royal Bank of Scotland

 

1,032,435

 

1,053,933

 

(21,498

)

7,542,000 Euro settling 6/4/13

 

BNP Paribas

 

9,802,956

 

9,934,469

 

(131,513

)

8,882,000 Euro settling 5/2/13

 

Credit Suisse First Boston

 

11,395,117

 

11,697,154

 

(302,037

)

839,000 Mexican Peso settling 5/3/13

 

BNP Paribas

 

69,247

 

69,097

 

150

 

13,900,726 Mexican Peso settling 6/27/13

 

UBS

 

1,079,962

 

1,139,633

 

 

(59,671

)

 

 

 

 

 

 

 

 

 

$(1,282,750

)

 

(p)  

At April 30, 2013, the Fund held $5,075,000 in cash as collateral and pledged cash collateral of $4,091,000 for derivative contracts. Cash collateral held may be invested in accordance with the Fund’s investment strategy.

(q)  

The weighted average daily balance of reverse repurchase agreements outstanding during the six months ended April 30, 2013 was $20,338,573, at a weighted average interest rate of 0.61%. There were no open reverse repurchase agreements at April 30, 2013.

(r)  

Fair Value Measurements–See Note 1(b) in the Notes to Financial Statements.

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
4/30/13

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

Airlines

 

 

 

$7,106,290

 

$7,106,290

 

Banking

 

 

$208,432,799

 

3,462,359

 

211,895,158

 

Electric Utilities

 

 

3,094,729

 

107,281

 

3,202,010

 

All Other

 

 

100,325,330

 

 

100,325,330

 

Mortgage-Backed Securities

 

 

219,582,652

 

176,465

 

219,759,117

 

Asset-Backed Securities

 

 

35,797,508

 

 

35,797,508

 

Municipal Bonds

 

 

31,145,848

 

 

31,145,848

 

Preferred Stock:

 

 

 

 

 

 

 

 

 

Banking

 

$21,089,927

 

1,671,383

 

 

22,761,310

 

Diversified Financial Services

 

3,388,800

 

 

 

3,388,800

 

Sovereign Debt Obligations

 

 

1,546,069

 

 

1,546,069

 

U.S. Government Agency Securities

 

 

660,489

 

 

660,489

 

Short-Term Investments

 

 

152,923,437

 

 

152,923,437

 

 

 

24,478,727

 

755,180,244

 

10,852,395

 

790,511,366

 

Other Financial Instruments* – Assets

 

 

 

 

 

 

 

 

 

Foreign Exchange Contracts

 

 

1,140,464

 

 

1,140,464

 

Interest Rate Contracts

 

 

4,648,602

 

 

4,648,602

 

 

 

 

5,789,066

 

 

5,789,066

 

 

 

Semi-Annual Report | April 30, 2013

17

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

 

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
4/30/13

 

Other Financial Instruments* – Liabilities

 

 

 

 

 

 

 

 

 

Foreign Exchange Contracts

 

 

$(2,423,214)

 

 

$(2,423,214

)

Interest Rate Contracts

 

 

(2,864,218)

 

 

(2,864,218

)

 

 

 

(5,287,432)

 

 

(5,287,432

)

Totals

 

$24,478,727

 

$755,681,878

 

$10,852,395

 

$791,013,000

 

 

At April 30, 2013, there were no transfers between Levels 1 and 2.

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the six months ended April 30, 2013, was as follows:

 

 

 

Beginning
Balance
10/31/12

 

Purchases

 

Sales

 

Accrued
Discount
(Premiums)

 

Net
Realized
Gain
(Loss)

 

Net Change
in Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3

 

Transfers
out of
Level 3**

 

Ending
Balance
4/30/13

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines

 

$7,502,811

 

 

$(465,727

)

$(52

)

$(1,638

)

$70,896

 

 

 

 

$7,106,290

 

Banking

 

 

$3,220,552

 

 

(6,207

)

 

248,014

 

 

 

 

3,462,359

 

Electric Utilities

 

215,000

 

 

 

 

 

(107,719

)

 

 

 

107,281

 

Mortgage-Backed Securities

 

591,933

 

 

 

61,243

 

$(85,862

)†

422,180

 

 

 

$(813,029

)

176,465

 

Totals

 

$8,309,744

 

$3,220,552

 

$(465,727

)

$54,984

 

$(87,500

)

$633,371

 

 

 

$(813,029

)

$10,852,395

 

 

The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at April 30, 2013.

 

 

 

Ending Balance
at 4/30/13

 

Valuation
Technique Used

 

Unobservable
Inputs

 

Input Values

Corporate Bonds & Notes

 

$7,106,290

 

Third-Party pricing vendor

 

Single Broker Quote

 

$101.00 – $116.00

 

 

3,569,640

 

Benchmark pricing

 

Security Price Reset

 

$2.49 – $9.89

Mortgage-Backed Securities

 

176,465

 

Third-Party pricing vendor

 

Single Broker Quote

 

$20.35

 

                 Relates to paydown shortfall.

*                 Other financial instruments are derivatives, such as swap agreements and forward foreign currency contracts, which are valued at the unrealized appreciation (depreciation) of the instrument.

**          Transferred out of Level 3 into Level 2 because an evaluated price with observable inputs from an independent third-party pricing vendor became available.

 

The net change in unrealized appreciation/depreciation of Level 3 investments, held at April 30, 2013, was $276,674. Net realized gain (loss) and net change in unrealized appreciation/depreciation are reflected on the Statement of Operations.

 

18

 

April 30, 2013 | Semi-Annual Report

 

 


 

Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2013 (unaudited) (continued)

 

 

 

(s)  The following is a summary of the fair valuation derivative instruments categorized by risk exposure:

 

The effect of derivatives on the Statement of Assets and Liabilities at April 30, 2013:

 

Location

 

Interest
Rate
Contracts

 

Foreign
Exchange
Contracts

 

Total

 

Asset derivatives:

 

 

 

 

 

 

 

Unrealized appreciation of OTC swaps

 

$4,648,602

 

 

$4,648,602

 

Receivable for variation margin on centrally cleared swaps*

 

157,746

 

 

157,746

 

Unrealized appreciation of forward foreign currency contracts

 

 

$1,140,464

 

1,140,464

 

Total asset derivatives

 

$4,806,348

 

$1,140,464

 

$5,946,812

 

 

 

 

 

 

 

 

 

Liability derivatives:

 

 

 

 

 

 

 

Unrealized depreciation of forward foreign currency contracts

 

$–

 

$(2,423,214

)

$(2,423,214

)

 

*                 Included in net unrealized depreciation of $(2,864,218) on centrally cleared swaps as reported in note (n) of the Notes to Schedule of Investments.

 

The effect of derivatives on the Statement of Operations for the six months ended April 30, 2013:

 

Location

 

Interest
Rate
Contracts

 

Foreign
Exchange
Contracts

 

Total

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

Swaps

 

$(3,157,902

)

 

$(3,157,902

)

Foreign currency transactions (forward foreign currency contracts

 

 

$1,640,066

 

1,640,066

 

Total net realized gain (loss)

 

$(3,157,902

)

$1,640,066

 

$(1,517,836

)

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/depreciation of:

 

 

 

 

 

 

 

Swaps

 

$1,632,615

 

 

$1,632,615

 

Foreign currency transactions (forward foreign currency contracts

 

 

$(1,418,892

)

(1,418,892

)

Total net change in unrealized appreciation/depreciation

 

$1,632,615

 

$(1,418,892

)

$213,723

 

 

The average volume (measured at each fiscal quarter-end) of derivative activity during the six months ended April 30, 2013:

 

 

Forward Foreign
Currency Contracts
(1)

 

Interest Rate

 

 

Purchased

 

Sold

 

Swap Agreements (2)

 

 

$44,068,187

 

$88,331,387

 

$461,200

 

 

(1)  U.S. $ Value on origination date

(2)  Notional Amount (in thousands)

 

Glossary:

£

-

British Pound

FRN

-

Floating Rate Note

CDO

-

Collateralized Debt Obligation

GO

-

General Obligation Bond

CME

-

Chicago Mercantile Exchange

IO

-

Interest Only

CMO

-

Collateralized Mortgage Obligation

LIBOR

-

London Inter-Bank Offered Rate

CP

-

Certificates of Participation

MXN

-

Mexican Peso

-

Euro

OTC

-

Over-the-Counter

 

 

 

See accompanying Notes to Financial Statements | Semi-Annual Report | April 30, 2013

19

 

 


 

Schedule of Investments

PIMCO Income Opportunity Fund

April 30, 2013 (unaudited)

 

Principal
Amount
(000s)

 

 

 

Value

 

Mortgage-Backed Securities – 50.3%

 

 

 

$358

 

Adjustable Rate Mortgage Trust, 2.918%, 1/25/36 CMO (m)

 

$317,281

 

£347

 

Auburn Securities 4 PLC, 0.895%, 10/1/41 CMO (m)

 

509,546

 

 

 

Banc of America Funding Trust, CMO (m),

 

 

 

$333

 

2.643%, 12/20/36

 

336,394

 

2,424

 

2.87%, 3/20/36

 

2,090,050

 

1,918

 

2.99%, 12/20/34

 

1,683,622

 

478

 

3.20%, 12/20/34

 

320,456

 

1,027

 

5.892%, 10/20/46

 

854,866

 

3,152

 

Banc of America Large Loan Trust, 2.499%, 11/15/15 CMO (a) (d) (m)

 

3,184,565

 

 

 

Banc of America Mortgage Trust, CMO,

 

 

 

238

 

2.997%, 10/20/46 (m)

 

148,335

 

513

 

3.107%, 6/25/35 (m)

 

507,980

 

366

 

3.115%, 9/25/34 (m)

 

366,777

 

1,000

 

5.75%, 8/25/34

 

1,066,011

 

 

 

BCAP LLC Trust, CMO (a) (d) (m),

 

 

 

2,532

 

1.957%, 11/26/37

 

2,475,658

 

550

 

5.009%, 3/26/36

 

517,847

 

 

 

Bear Stearns Adjustable Rate Mortgage Trust, CMO (m),

 

 

 

173

 

2.804%, 9/25/34

 

157,307

 

1,631

 

2.804%, 10/25/36

 

1,367,849

 

621

 

2.882%, 1/25/35

 

616,771

 

731

 

2.91%, 8/25/47

 

531,122

 

1,348

 

5.255%, 3/25/35

 

1,331,914

 

725

 

5.348%, 6/25/47

 

673,742

 

215

 

5.424%, 9/25/34

 

217,831

 

 

 

Bear Stearns ALT-A Trust, CMO (m),

 

 

 

2,711

 

0.36%, 6/25/46

 

1,496,571

 

1,619

 

0.90%, 1/25/35

 

1,600,599

 

564

 

2.581%, 4/25/35

 

472,193

 

110

 

2.753%, 11/25/35

 

91,823

 

1,497

 

2.766%, 5/25/36

 

1,043,727

 

933

 

2.941%, 5/25/35

 

753,832

 

1,714

 

2.974%, 9/25/34

 

1,568,447

 

1,098

 

3.397%, 9/25/34

 

1,062,632

 

590

 

4.653%, 7/25/35

 

487,666

 

1,015

 

4.661%, 11/25/36

 

852,870

 

6,203

 

4.923%, 8/25/36

 

4,151,972

 

886

 

5.051%, 8/25/36

 

651,565

 

2,500

 

Bear Stearns Commercial Mortgage Securities Trust, 5.577%, 3/13/40 CMO (a) (d) (m)

 

2,508,182

 

£546

 

Bluestone Securities PLC, 0.727%, 6/9/43 CMO (m)

 

780,115

 

$3,866

 

CBA Commercial Small Balance Commercial Mortgage, 5.54%, 1/25/39 CMO (a) (b) (d) (l) (acquisition cost-$2,179,633; purchased 11/18/09)

 

2,497,049

 

€709

 

Celtic Residential Irish Mortgage Securitisation No. 9 PLC, 0.359%, 11/13/47 CMO (m)

 

726,482

 

 

20

 

April 30, 2013 | Semi-Annual Report

 

 


 

Schedule of Investments

PIMCO Income Opportunity Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

 

 

Chase Mortgage Finance Trust, CMO,

 

 

 

$1,787

 

5.50%, 11/25/21

 

$1,714,551

 

2,005

 

6.00%, 3/25/37

 

1,757,024

 

 

 

Citigroup Mortgage Loan Trust, Inc., CMO,

 

 

 

4,624

 

2.989%, 3/25/37 (m)

 

3,483,574

 

992

 

5.50%, 11/25/35

 

873,577

 

2,170

 

Commercial Mortgage Trust, 6.052%, 7/10/46 CMO (a) (d) (m)

 

2,524,465

 

 

 

Countrywide Alternative Loan Trust, CMO,

 

 

 

1,523

 

0.394%, 12/20/46 (m)

 

1,028,798

 

1,766

 

0.45%, 6/25/37 (m)

 

942,062

 

3,692

 

0.533%, 11/20/35 (m)

 

2,756,910

 

3,432

 

0.55%, 5/25/36 (m)

 

1,941,895

 

299

 

5.50%, 10/25/35

 

278,709

 

645

 

5.75%, 5/25/36 (e)

 

520,510

 

600

 

6.00%, 11/25/35

 

379,318

 

677

 

6.00%, 4/25/36

 

544,994

 

1,161

 

6.00%, 4/25/37

 

906,748

 

5,821

 

6.00%, 5/25/37

 

4,697,836

 

671

 

6.25%, 8/25/37

 

550,155

 

856

 

6.50%, 9/25/32

 

810,597

 

2,230

 

6.50%, 7/25/35

 

1,323,250

 

907

 

6.50%, 6/25/36

 

700,789

 

 

 

Countrywide Home Loan Mortgage Pass-Through Trust, CMO,

 

 

 

1,365

 

0.52%, 3/25/35 (m)

 

1,136,264

 

52

 

2.801%, 10/20/35 (m)

 

43,680

 

219

 

2.836%, 8/20/35 (m)

 

187,157

 

635

 

2.896%, 6/20/35 (m)

 

488,464

 

5,178

 

3.00%, 11/25/35 (m)

 

4,568,185

 

139

 

3.061%, 8/25/34 (m)

 

128,240

 

1,546

 

3.144%, 9/25/47 (m)

 

1,297,788

 

1,803

 

3.149%, 3/25/37 (m)

 

1,258,334

 

306

 

5.50%, 8/25/35

 

304,536

 

2,509

 

Credit Suisse First Boston Mortgage Securities Corp., 7.50%, 5/25/32 CMO

 

2,613,970

 

 

 

Credit Suisse Mortgage Capital Certificates Mortgage-Backed Trust, CMO,

 

 

 

867

 

0.369%, 10/15/21 (a) (d) (m)

 

852,090

 

1,009

 

0.80%, 7/25/36 (m)

 

382,308

 

790

 

5.896%, 4/25/36

 

671,774

 

672

 

6.50%, 5/25/36

 

497,649

 

754

 

6.50%, 7/26/36

 

508,836

 

€5,192

 

DECO 14-Pan Europe 5BV, 0.366%, 10/27/20 CMO (m)

 

6,750,942

 

$1,049

 

Deutsche ALT-A Securities Mortgage Loan Trust, 0.35%, 2/25/47 CMO (m)

 

774,495

 

222

 

Deutsche ALT-B Securities Mortgage Loan Trust, 6.25%, 7/25/36 CMO (m)

 

148,816

 

536

 

Deutsche Mortgage Securities, Inc. Mortgage Loan Trust, 5.50%, 9/25/33 CMO

 

554,163

 

1,049

 

Downey Savings & Loan Assoc. Mortgage Loan Trust, 0.379%, 4/19/47 CMO (m)

 

268,687

 

 

 

EMF-NL BV, CMO (m),

 

 

 

€800

 

1.21%, 7/17/41

 

790,170

 

 

 

 

Semi-Annual Report | April 30, 2013

21

 

 


 

Schedule of Investments

PIMCO Income Opportunity Fund

April 30, 2013 (unaudited) (continued)

 

Principal
Amount
(000s)

 

 

 

Value

 

€1,000

 

1.46%, 10/17/41

 

$1,146,421

 

279

 

European Property Capital EPC, 0.821%, 5/22/15

 

211,580

 

$3,500

 

Extended Stay America Trust, 7.625%, 12/5/19 CMO (a) (d)

 

3,758,610

 

 

 

First Horizon Alternative Mortgage Securities Trust, CMO,

 

 

 

2,577

 

2.288%, 11/25/36 (m)

 

1,935,727

 

1,879

 

2.331%, 5/25/36 (m)

 

1,525,553

 

536

 

2.397%, 8/25/35 (m)

 

112,626

 

430

 

2.416%, 2/25/36 (m)

 

327,782

 

237

 

6.25%, 11/25/36

 

196,101

 

 

 

First Horizon Mortgage Pass-Through Trust, CMO,

 

 

 

2,171

 

2.576%, 1/25/37 (m)

 

1,949,675

 

343

 

5.015%, 7/25/37 (m)