PIMCO Corporate & Income Strategy Fund

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act File Number:    811-10555
Registrant Name:    PIMCO Corporate & Income Strategy Fund
Address of Principal Executive Offices:   

1633 Broadway

New York, NY 10019

Name and Address of Agent for Service:   

Trent W. Walker

650 Newport Center Drive

Newport Beach, CA 92660

Registrant’s telephone number, including area code:    (844) 337-4626
Date of Fiscal Year End:    July 31
Date of Reporting Period:    April 30, 2018


Item 1. Schedule of Investments


Schedule of Investments

PIMCO Corporate & Income Strategy Fund

April 30, 2018 (Unaudited)

(AMOUNTS IN THOUSANDS*, EXCEPT NUMBER OF SHARES, CONTRACTS AND UNITS, IF ANY)

 

                                         
    PRINCIPAL
AMOUNT
(000S)
    MARKET
VALUE
(000S)
 

INVESTMENTS IN SECURITIES 122.2% ¤

   

LOAN PARTICIPATIONS AND ASSIGNMENTS 3.3%

   

Alphabet Holding Co., Inc.

   

5.401% (LIBOR03M + 3.500%) due 09/26/2024 ~

  $ 100     $ 86  

Altice Financing S.A.

   

5.098% (LIBOR03M + 2.750%) due 01/31/2026 ~

    16       16  

Avantor, Inc.

   

5.901% (LIBOR03M + 4.000%) due 11/21/2024 ~

    50       50  

Beacon Roofing Supply, Inc.

   

4.128% (LIBOR03M + 2.250%) due 01/02/2025 ~

    40       40  

California Resources Corp.

   

6.647% (LIBOR03M + 4.750%) due 12/31/2022 ~

    100       102  

Centene Corp.

   

TBD% due 09/13/2018

    1,400       1,400  

CenturyLink, Inc.

   

4.651% (LIBOR03M + 2.750%) due 01/31/2025 ~

    998       984  

Crown Americas LLC

   

4.312% (LIBOR03M + 2.000%) due 01/29/2025 ~

    50       51  

CSC Holdings LLC

   

4.397% (LIBOR03M + 2.500%) due 01/25/2026 ~

    100       100  

Forbes Energy Services LLC

   

5.000% - 7.000% due 04/13/2021

    148       150  

Frontier Communications Corp.

   

5.660% (LIBOR03M + 3.750%) due 06/15/2024 ~

    597       591  

iHeartCommunications, Inc.

   

TBD% due 01/30/2019 ^(e)

    14,300       11,360  

IRB Holding Corp.

   

5.128% - 5.248% (LIBOR03M + 3.250%) due 02/05/2025 ~

    100       101  

McDermott Technology, Inc.

   

TBD% due 04/04/2025 «

    1,000       980  

MH Sub LLC

   

5.647% (LIBOR03M + 3.750%) due 09/13/2024 ~

    119       120  

Ministry of Finance and Economic Affairs

   

TBD% due 12/10/2019 «

    200       200  

Multi Color Corp.

   

4.151% (LIBOR03M + 2.250%) due 10/31/2024 ~

    16       16  

Parexel International Corp.

   

4.651% (LIBOR03M + 2.750%) due 09/27/2024 ~

    100       100  

Ply Gem Industries, Inc.

   

6.089% (LIBOR03M + 3.750%) due 04/12/2025 ~

    200       202  

Sequa Mezzanine Holdings LLC

   

7.071% (LIBOR03M + 5.000%) due 11/28/2021 ~

    218       221  

11.362% (LIBOR03M + 9.000%) due 04/28/2022 ~

    90       92  

Sprint Communications, Inc.

   

4.438% (LIBOR03M + 2.500%) due 02/02/2024 ~

    1,584       1,590  

Syniverse Holdings, Inc.

   

6.895% (LIBOR03M + 5.000%) due 03/09/2023 ~

    20       20  

West Corp.

   

5.901% (LIBOR03M + 4.000%) due 10/10/2024 ~

    32       32  

Westmoreland Coal Co.

   

8.802% (LIBOR03M + 6.500%) due 12/16/2020 ~

    955       333  

Wyndham Hotels & Resorts, Inc.

   

TBD% due 03/28/2025

    100       101  
   

 

 

 

Total Loan Participations and Assignments

(Cost $21,419)

      19,038  
   

 

 

 

CORPORATE BONDS & NOTES 46.8%

   

BANKING & FINANCE 22.6%

   

AGFC Capital Trust

   

4.098% (US0003M + 1.750%) due 01/15/2067 ~

    2,300       1,322  

Ally Financial, Inc.

   

8.000% due 11/01/2031 (m)

      6,486       7,908  

Ardonagh Midco PLC

   

8.375% due 07/15/2023

  GBP 3,237       4,672  

Assurant, Inc.

   

4.200% due 09/27/2023

  $ 54       54  

Athene Holding Ltd.

   

4.125% due 01/12/2028

    52       49  

Avolon Holdings Funding Ltd.

   

5.500% due 01/15/2023

    170       170  

AXA Equitable Holdings, Inc.

   

3.900% due 04/20/2023

    20       20  

4.350% due 04/20/2028

    124       121  

5.000% due 04/20/2048

    72       69  


                                         
             

Banco Bilbao Vizcaya Argentaria S.A.

   

6.750% due 02/18/2020 •(i)(j)

  EUR 600       783  

Banco do Brasil S.A.

   

4.875% due 04/19/2023

  $ 1,000       995  

Banco Espirito Santo S.A.

   

4.000% due 01/21/2019 ^(e)

  EUR 4,300       1,532  

Banco Santander S.A.

   

6.250% due 09/11/2021 •(i)(j)

    500       669  

Barclays PLC

   

3.250% due 01/17/2033

  GBP 200       263  

6.500% due 09/15/2019 •(i)(j)

  EUR 2,200       2,830  

7.250% due 03/15/2023 •(i)(j)

  GBP 6,300       9,411  

8.000% due 12/15/2020 •(i)(j)

  EUR 2,100       2,923  

Blackstone CQP Holdco LP

   

6.000% due 08/18/2021

  $ 900       907  

6.500% due 03/20/2021

    4,900       4,949  

Brighthouse Holdings LLC

   

6.500% due 07/27/2037 (i)

    70       72  

Brookfield Finance, Inc.

   

3.900% due 01/25/2028

    88       84  

4.700% due 09/20/2047

    196       188  

Cantor Fitzgerald LP

   

6.500% due 06/17/2022 (m)

    8,000       8,642  

CIT Group, Inc.

   

5.250% due 03/07/2025

    52       53  

Credit Agricole S.A.

   

7.875% due 01/23/2024 •(i)(j)(m)

    830       903  

Credit Suisse Group AG

   

7.500% due 12/11/2023 •(i)(j)(m)

    7,105       7,718  

Emerald Bay S.A.

   

0.000% due 10/08/2020 (h)

  EUR 1,657       1,881  

EPR Properties

   

4.750% due 12/15/2026 (m)

  $ 3,100       3,037  

Equinix, Inc.

   

2.875% due 03/15/2024

  EUR 100       121  

2.875% due 02/01/2026

    100       117  

Fairfax Financial Holdings Ltd.

   

4.850% due 04/17/2028

  $ 54       53  

Flagstar Bancorp, Inc.

   

6.125% due 07/15/2021 (m)

    3,500       3,700  

Fortress Transportation & Infrastructure Investors LLC

   

6.750% due 03/15/2022 (m)

    262       267  

Freedom Mortgage Corp.

   

8.250% due 04/15/2025

    116       116  

GSPA Monetization Trust

   

6.422% due 10/09/2029

    3,609       4,083  

HSBC Holdings PLC

   

6.000% due 09/29/2023 •(i)(j)

  EUR 3,193       4,468  

6.500% due 03/23/2028 •(i)

  $ 480       488  

Hunt Cos., Inc.

   

6.250% due 02/15/2026

    24       23  

Iron Mountain, Inc.

   

5.250% due 03/15/2028

    6       6  

iStar, Inc.

   

4.625% due 09/15/2020

    13       13  

5.250% due 09/15/2022

    48       47  

Jefferies Finance LLC

   

6.875% due 04/15/2022

    1,000       1,001  

7.375% due 04/01/2020 (m)

    2,100       2,129  

7.500% due 04/15/2021

    1,444       1,473  

Kennedy-Wilson, Inc.

   

5.875% due 04/01/2024

    66       65  

Life Storage LP

   

3.875% due 12/15/2027

    28       26  

Lloyds Banking Group PLC

   

7.625% due 06/27/2023 •(i)(j)

  GBP   2,166       3,383  

7.875% due 06/27/2029 •(i)(j)

    1,500       2,504  

LoanCore Capital Markets LLC

   

6.875% due 06/01/2020 (m)

  $ 6,100       6,218  

Meiji Yasuda Life Insurance Co.

   

5.100% due 04/26/2048 •

    200       204  

MetLife, Inc.

   

5.875% due 03/15/2028 •(i)

    140       143  

MPT Operating Partnership LP

   

5.250% due 08/01/2026

    495       484  

Nationwide Building Society

   

10.250% ~(i)

  GBP 12       2,684  

Navient Corp.

   

5.625% due 08/01/2033 (m)

  $ 914       791  

6.500% due 06/15/2022

    78       80  

Oppenheimer Holdings, Inc.

   

6.750% due 07/01/2022

    1,496       1,541  

Physicians Realty LP

   

3.950% due 01/15/2028

    61       57  

Provident Funding Associates LP

   

6.375% due 06/15/2025

    27       27  


                                         
             

Rio Oil Finance Trust

   

8.200% due 04/06/2028

    250       261  

9.250% due 07/06/2024

    375       413  

9.250% due 07/06/2024 (m)

    2,725       3,001  

Royal Bank of Scotland Group PLC

   

7.500% due 08/10/2020 •(i)(j)

    3,070       3,232  

8.000% due 08/10/2025 •(i)(j)

    6,390       7,005  

8.625% due 08/15/2021 •(i)(j)

    2,700       2,963  

Santander UK Group Holdings PLC

   

6.750% due 06/24/2024 •(i)(j)

  GBP 3,795       5,688  

7.375% due 06/24/2022 •(i)(j)

    3,520       5,289  

Societe Generale S.A.

   

6.750% due 04/06/2028 •(i)(j)

  $ 200       199  

Spirit Realty LP

   

4.450% due 09/15/2026 (m)

    1,600       1,524  

Springleaf Finance Corp.

   

5.625% due 03/15/2023

    1,200       1,191  

6.125% due 05/15/2022

    656       675  

6.875% due 03/15/2025

    300       304  

8.250% due 10/01/2023

      1,200       1,320  

STORE Capital Corp.

   

4.500% due 03/15/2028

    36       35  

Tesco Property Finance PLC

   

7.623% due 07/13/2039

  GBP 413       773  

WeWork Cos., Inc.

   

7.875% due 05/01/2025

  $ 72       70  
   

 

 

 
      132,480  
   

 

 

 

INDUSTRIALS 19.7%

   

Air Canada Pass-Through Trust

   

3.700% due 07/15/2027

    24       23  

Altice Financing S.A.

   

6.625% due 02/15/2023

    2,300       2,306  

7.500% due 05/15/2026 (m)

    1,600       1,576  

Altice France S.A.

   

7.375% due 05/01/2026

    5,340       5,200  

American Woodmark Corp.

   

4.875% due 03/15/2026

    12       12  

Andeavor Logistics LP

   

3.500% due 12/01/2022

    10       10  

4.250% due 12/01/2027

    18       18  

Bacardi Ltd.

   

4.450% due 05/15/2025

    100       100  

4.700% due 05/15/2028

    100       100  

5.150% due 05/15/2038

    100       99  

5.300% due 05/15/2048

    100       99  

Berry Global, Inc.

   

4.500% due 02/15/2026

    33       32  

BMC Software Finance, Inc.

   

8.125% due 07/15/2021 (m)

    2,748       2,755  

Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)

   

9.000% due 10/15/2019 (d)(m)

    2,849       2,845  

Caesars Resort Collection LLC

   

5.250% due 10/15/2025

    8       8  

Cequel Communications Holdings LLC

   

7.500% due 04/01/2028

    200       204  

CH Robinson Worldwide, Inc.

   

4.200% due 04/15/2028

    40       40  

Charles River Laboratories International, Inc.

   

5.500% due 04/01/2026

    26       27  

Charter Communications Operating LLC

   

4.200% due 03/15/2028

    134       126  

Cheniere Energy Partners LP

   

5.250% due 10/01/2025

    31       30  

Chesapeake Energy Corp.

   

5.598% (US0003M + 3.250%) due 04/15/2019 ~

    115       115  

Cleveland-Cliffs, Inc.

   

4.875% due 01/15/2024

    32       31  

Community Health Systems, Inc.

   

5.125% due 08/01/2021

    2,175       2,012  

6.250% due 03/31/2023 (m)

    4,990       4,563  

Continental Airlines Pass-Through Trust

   

9.798% due 10/01/2022

    646       693  

Coty, Inc.

   

6.500% due 04/15/2026

    6       6  

Crown Americas LLC

   

4.750% due 02/01/2026

    21       20  

CSC Holdings LLC

   

5.375% due 02/01/2028

    200       188  

CSN Resources S.A.

   

6.500% due 07/21/2020

    402       393  

CVS Health Corp.

   

4.300% due 03/25/2028

    390       385  

DAE Funding LLC

   

4.000% due 08/01/2020

    60       60  


                                         
             

DriveTime Automotive Group, Inc.

   

8.000% due 06/01/2021 (m)

    4,100       4,131  

Ensco PLC

   

7.750% due 02/01/2026

    10       9  

Exela Intermediate LLC

   

10.000% due 07/15/2023 (m)

    117       118  

Ferroglobe PLC

   

9.375% due 03/01/2022

    1,550       1,631  

Ford Motor Co.

   

7.700% due 05/15/2097 (m)

    7,315       8,812  

Fresh Market, Inc.

   

9.750% due 05/01/2023 (m)

    5,650       3,136  

Frontier Finance PLC

   

8.000% due 03/23/2022

  GBP   4,600       6,562  

Full House Resorts, Inc.

   

8.575% due 01/31/2024 «

  $ 299       294  

General Electric Co.

   

5.000% due 01/21/2021 •(i)

    60       59  

Hadrian Merger Sub, Inc.

   

8.500% due 05/01/2026

    40       40  

Harland Clarke Holdings Corp.

   

8.375% due 08/15/2022

    52       53  

HCA, Inc.

   

7.500% due 11/15/2095

    1,200       1,197  

Hilton Domestic Operating Co., Inc.

   

5.125% due 05/01/2026

    131       132  

Hologic, Inc.

   

4.375% due 10/15/2025

    24       23  

iHeartCommunications, Inc.

   

9.000% due 09/15/2022 ^(e)

    3,440       2,761  

IHS Markit Ltd.

   

4.000% due 03/01/2026

    4       4  

Ingevity Corp.

   

4.500% due 02/01/2026

    40       39  

Intelsat Jackson Holdings S.A.

   

7.250% due 10/15/2020 (m)

    7,220       7,085  

9.750% due 07/15/2025

    115       113  

Intelsat Luxembourg S.A.

   

6.750% due 06/01/2018

    2,440       2,428  

7.750% due 06/01/2021 (m)

    10,492       7,161  

8.125% due 06/01/2023

    1,121       706  

Intrepid Aviation Group Holdings LLC

   

6.875% due 02/15/2019

    7,895       7,816  

IRB Holding Corp.

   

6.750% due 02/15/2026

    2       2  

Kinder Morgan, Inc.

   

7.800% due 08/01/2031 (m)

    3,580       4,425  

Live Nation Entertainment, Inc.

   

5.625% due 03/15/2026

    20       20  

Mallinckrodt International Finance S.A.

   

5.500% due 04/15/2025

    474       359  

Meredith Corp.

   

6.875% due 02/01/2026

    42       43  

Metinvest BV

   

8.500% due 04/23/2026

    1,000       965  

Netflix, Inc.

   

4.875% due 04/15/2028

    25       24  

New Albertson’s LP

   

6.570% due 02/23/2028 (m)

    5,600       3,780  

Nufarm Australia Ltd.

   

5.750% due 04/30/2026

    52       52  

Odebrecht Oil & Gas Finance Ltd.

   

0.000% due 05/30/2018 (h)(i)

    345       8  

0.000% due 05/31/2018 (h)(i)

    407       10  

OI European Group BV

   

4.000% due 03/15/2023

    18       17  

Park Aerospace Holdings Ltd.

   

3.625% due 03/15/2021

    80       77  

4.500% due 03/15/2023

    159       153  

5.250% due 08/15/2022

    13       13  

5.500% due 02/15/2024

    36       35  

Pelabuhan Indonesia Persero PT

   

4.500% due 05/02/2023 (c)

    200       199  

Petroleos Mexicanos

   

6.500% due 03/13/2027

    220       228  

6.750% due 09/21/2047

    120       116  

PetSmart, Inc.

   

5.875% due 06/01/2025

    108       78  

Pisces Midco, Inc.

   

8.000% due 04/15/2026

    174       175  

Pitney Bowes, Inc.

   

4.700% due 04/01/2023

    34       32  

QVC, Inc.

   

5.450% due 08/15/2034

    900       850  

5.950% due 03/15/2043 (m)

    3,682       3,502  


                                         
             

Radiate Holdco LLC

   

6.875% due 02/15/2023

    70       68  

Rockpoint Gas Storage Canada Ltd.

   

7.000% due 03/31/2023

    8       8  

Russian Railways via RZD Capital PLC

   

7.487% due 03/25/2031

  GBP 1,000       1,724  

Safeway, Inc.

   

7.250% due 02/01/2031 (m)

  $ 1,345       1,135  

Scientific Games International, Inc.

   

5.000% due 10/15/2025

    11       11  

Shelf Drilling Holdings Ltd.

   

8.250% due 02/15/2025

    52       53  

Sigma Holdco BV

   

5.750% due 05/15/2026 (c)

  EUR 100       120  

Spirit Issuer PLC

   

3.392% (BP0003M + 2.700%) due 12/28/2031 ~

  GBP   1,000       1,349  

6.582% due 12/28/2027

    1,400       1,995  

Sprint Spectrum Co. LLC

   

4.738% due 03/20/2025 (m)

  $ 200       202  

5.152% due 03/20/2028 (m)

    400       406  

Standard Industries, Inc.

   

4.750% due 01/15/2028

    94       88  

Sunoco LP

   

4.875% due 01/15/2023

    64       63  

T-Mobile USA, Inc.

   

4.750% due 02/01/2028

    19       18  

Telenet Finance Luxembourg Notes SARL

   

5.500% due 03/01/2028

    200       192  

Teva Pharmaceutical Finance Netherlands BV

   

3.250% due 04/15/2022

  EUR 300       369  

4.500% due 03/01/2025

    100       123  

6.000% due 04/15/2024

  $ 200       194  

Times Square Hotel Trust

   

8.528% due 08/01/2026

    1,583       1,859  

TopBuild Escrow Corp.

   

5.625% due 05/01/2026

    51       51  

Transcontinental Gas Pipe Line Co. LLC

   

4.600% due 03/15/2048

    28       27  

Tronox, Inc.

   

6.500% due 04/15/2026

    30       30  

Unique Pub Finance Co. PLC

   

5.659% due 06/30/2027

  GBP 3,469       5,331  

6.542% due 03/30/2021

    1,237       1,802  

United Group BV

   

4.375% due 07/01/2022

  EUR 100       124  

4.875% due 07/01/2024

    100       124  

Univision Communications, Inc.

   

5.125% due 02/15/2025

  $ 400       370  

UPCB Finance Ltd.

   

3.625% due 06/15/2029

  EUR 190       228  

Valeant Pharmaceuticals International, Inc.

   

5.500% due 11/01/2025

  $ 20       20  

6.500% due 03/15/2022

    86       90  

7.000% due 03/15/2024

    165       175  

ViaSat, Inc.

   

5.625% due 09/15/2025

    92       88  

Viking Cruises Ltd.

   

5.875% due 09/15/2027

    26       25  

Virgin Media Secured Finance PLC

   

5.000% due 04/15/2027

  GBP 300       410  

VOC Escrow Ltd.

   

5.000% due 02/15/2028

  $ 72       70  

Vrio Finco LLC

   

6.875% due 04/04/2028

    525       524  

Westmoreland Coal Co.

   

8.750% due 01/01/2022

    5,765       1,989  

Wind Tre SpA

   

2.625% due 01/20/2023

  EUR 200       220  

2.750% due 01/20/2024 •

    200       225  
   

 

 

 
      115,449  
   

 

 

 

UTILITIES 4.5%

   

AT&T, Inc.

   

3.400% due 08/14/2024 (m)

  $ 390       394  

3.900% due 08/14/2027 (m)

    350       354  

4.900% due 08/15/2037 (m)

    358       352  

5.150% due 02/15/2050 (m)

    538       525  

5.300% due 08/15/2058 (m)

    1,260       1,253  

Calpine Corp.

   

5.250% due 06/01/2026

    42       40  

DTEK Finance PLC (10.750% Cash or 10.750% PIK)

   

10.750% due 12/31/2024 (d)

    2,713       2,888  

Frontier Communications Corp.

   

8.500% due 04/01/2026

    100       98  


                                         

Mountain States Telephone & Telegraph Co.

   

7.375% due 05/01/2030

    8,200       8,510  

Odebrecht Drilling Norbe Ltd.

   

6.350% due 12/01/2021

    105       103  

Odebrecht Drilling Norbe Ltd. (6.350% Cash or 7.350% PIK)

   

7.350% due 12/01/2026 (d)

    168       92  

Odebrecht Offshore Drilling Finance Ltd.

   

6.720% due 12/01/2022

    1,386       1,336  

Odebrecht Offshore Drilling Finance Ltd. (6.720% Cash or 7.200% PIK)

   

7.720% due 12/01/2026 (d)

    1,603       477  

Odebrecht Offshore Drilling Finance Ltd. (6.720% Cash or 7.720% PIK)

   

7.720% due 12/01/2026 (d)

    2,578       767  

Petrobras Global Finance BV

   

5.299% due 01/27/2025

    32       31  

5.999% due 01/27/2028

    160       156  

6.250% due 12/14/2026

  GBP 4,800       7,175  

6.625% due 01/16/2034

    100       147  

6.750% due 01/27/2041

  $ 866       824  

7.375% due 01/17/2027

    36       39  

Rio Oil Finance Trust

   

9.750% due 01/06/2027 (m)

    191       212  

9.750% due 01/06/2027

    229       254  

Sprint Corp.

   

7.625% due 03/01/2026

    183       193  

Verizon Communications, Inc.

   

2.875% due 01/15/2038

  EUR 100       122  

3.375% due 10/27/2036

  GBP 100       137  
   

 

 

 
      26,479  
   

 

 

 
Total Corporate Bonds & Notes
(Cost $266,438)
      274,408  
   

 

 

 

CONVERTIBLE BONDS & NOTES 0.8%

   

INDUSTRIALS 0.8%

   

Caesars Entertainment Corp.

   

5.000% due 10/01/2024

  $ 994       1,748  

DISH Network Corp.

   

3.375% due 08/15/2026

    3,400       3,094  
   

 

 

 
Total Convertible Bonds & Notes
(Cost $5,254)
      4,842  
   

 

 

 

MUNICIPAL BONDS & NOTES 4.9%

   

CALIFORNIA 0.9%

   

Riverside County, California Redevelopment Successor Agency Tax Allocation Bonds, Series 2010

   

7.750% due 10/01/2037

    1,220       1,360  

Stockton Public Financing Authority, California Revenue Bonds, (BABs), Series 2009

   

7.942% due 10/01/2038

    3,400       3,619  
   

 

 

 
      4,979  
   

 

 

 

ILLINOIS 2.4%

   

Chicago, Illinois General Obligation Bonds, (BABs), Series 2010

   

7.517% due 01/01/2040

    12,700       13,756  

Chicago, Illinois General Obligation Bonds, Series 2014

   

6.314% due 01/01/2044

    60       59  

Chicago, Illinois General Obligation Bonds, Series 2017

   

7.045% due 01/01/2029

    110       117  

Illinois State General Obligation Bonds, (BABs), Series 2010

   

6.725% due 04/01/2035

    35       36  

7.350% due 07/01/2035

    20       22  

Illinois State General Obligation Bonds, Series 2003

   

5.100% due 06/01/2033

    270       252  
   

 

 

 
      14,242  
   

 

 

 

VIRGINIA 0.1%

   

Tobacco Settlement Financing Corp., Virginia Revenue Bonds, Series 2007

   

6.706% due 06/01/2046

    785       752  
   

 

 

 

WEST VIRGINIA 1.5%

   

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

   

0.000% due 06/01/2047 (h)

    44,400       2,651  

7.467% due 06/01/2047

    5,870       5,795  
   

 

 

 
      8,446  
   

 

 

 
Total Municipal Bonds & Notes
(Cost $25,974)
      28,419  
   

 

 

 

U.S. GOVERNMENT AGENCIES 6.4%

   

Fannie Mae

   

3.000% due 02/25/2043 (a)

    54,996       11,139  

5.447% (US0001M + 3.550%) due 07/25/2029 ~

    850       930  

7.647% (US0001M + 5.750%) due 07/25/2029 ~

    1,150       1,354  


                                         

Freddie Mac

   

0.000% due 04/25/2045 - 08/25/2046 (b)(h)

    17,300       13,770  

0.100% due 02/25/2046 - 08/25/2046 (a)

    130,739       332  

0.200% due 04/25/2045 (a)

    5,683       8  

4.626% due 11/25/2055 «~

    8,189       4,924  

9.447% (US0001M + 7.550%) due 12/25/2027 ~

    3,290       4,080  

12.647% (US0001M + 10.750%) due 03/25/2025 ~

    731       1,001  
   

 

 

 
Total U.S. Government Agencies
(Cost $35,082)
      37,538  
   

 

 

 

NON-AGENCY MORTGAGE-BACKED SECURITIES 24.7%

   

Banc of America Alternative Loan Trust

   

5.500% due 10/25/2035 ^

    4,243       3,940  

6.000% due 01/25/2036 ^

    106       104  

Banc of America Funding Trust

   

6.000% due 07/25/2037 ^

    307       292  

Banc of America Mortgage Trust

   

3.907% due 03/25/2035 ~

    88       86  

6.000% due 03/25/2037 ^

    350       333  

BCAP LLC

   

6.809% due 07/26/2036 ~

    1,627       1,819  

BCAP LLC Trust

   

3.512% due 03/27/2036 ~

    2,221       1,469  

3.562% due 08/28/2037 ~

    6,955       6,747  

4.962% due 03/26/2037

    902       640  

Bear Stearns ALT-A Trust

   

2.397% (US0001M + 0.500%) due 01/25/2036 ^~

    1,397       1,473  

3.533% due 11/25/2036 ^~

    4,309       3,672  

3.600% due 08/25/2036 ^~

    941       740  

3.676% due 09/25/2035 ^~

    591       506  

3.691% due 09/25/2047 ^~

    6,584       5,448  

4.015% due 11/25/2035 ^~

    5,888       5,557  

Bear Stearns Commercial Mortgage Securities Trust

   

5.912% due 04/12/2038 ~

    210       163  

Bear Stearns Mortgage Funding Trust

   

7.500% due 08/25/2036

    1,050       1,090  

CD Mortgage Trust

   

5.688% due 10/15/2048

    7,792       4,024  

Chase Mortgage Finance Trust

   

3.476% due 12/25/2035 ^~

    11       10  

6.000% due 07/25/2037 ^

    884       764  

Citigroup Mortgage Loan Trust

   

3.558% due 04/25/2037 ^~

    273       237  

3.703% due 09/25/2037 ^~

    2,061       1,795  

Citigroup/Deutsche Bank Commercial Mortgage Trust

   

5.398% due 12/11/2049 ~

    41       24  

Commercial Mortgage Loan Trust

   

6.263% due 12/10/2049 ~

    2,543       1,576  

Countrywide Alternative Loan Resecuritization Trust

   

6.000% due 08/25/2037 ^~

    1,186       934  

Countrywide Alternative Loan Trust

   

5.500% due 03/25/2035

    314       240  

5.750% due 01/25/2035

    386       387  

5.750% due 02/25/2035

    426       420  

5.750% due 03/25/2037 ^

    761       679  

6.000% due 02/25/2035

    1,127       1,115  

6.000% due 04/25/2036

    1,171       917  

6.000% due 02/25/2037 ^

    5,779       3,991  

6.000% due 04/25/2037 ^

    1,289       987  

6.000% due 07/25/2037 ^

    225       219  

6.250% (US0001M + 0.650%) due 12/25/2036 ^~

    1,610       1,235  

6.500% due 08/25/2036 ^

    541       358  

Countrywide Home Loan Mortgage Pass-Through Trust

   

3.402% due 09/20/2036 ^~

    306       266  

6.000% due 07/25/2037

    1,857       1,555  

Credit Suisse Mortgage Capital Certificates

   

3.667% due 10/26/2036 ~

    6,178       4,877  

Epic Drummond Ltd.

   

0.000% due 01/25/2022 •

  EUR 135       162  

GS Mortgage Securities Corp.

   

4.744% due 10/10/2032 ~

  $ 5,300       4,747  

GS Mortgage Securities Trust

   

5.622% due 11/10/2039

    938       814  

GSR Mortgage Loan Trust

   

3.596% due 08/25/2034 ~

    401       390  

5.500% due 05/25/2036 ^

    355       486  

6.000% due 02/25/2036 ^

    2,855       2,293  

HarborView Mortgage Loan Trust

   

2.376% (US0001M + 0.480%) due 01/19/2036 ^~

    3,885       2,862  

3.564% due 06/19/2036 ^~

    7,392       5,294  

IndyMac Mortgage Loan Trust

   

6.500% due 07/25/2037 ^

    3,394       2,210  

Jefferies Resecuritization Trust

   

6.000% due 05/26/2036

    13,510       10,823  

JPMorgan Alternative Loan Trust

   

3.244% due 03/25/2037 ^~

    1,832       1,722  

6.000% due 12/25/2035 ^

    1,841       1,782  


                                         

JPMorgan Chase Commercial Mortgage Securities Trust

   

5.623% due 05/12/2045

    1,290       1,201  

JPMorgan Mortgage Trust

   

3.517% due 02/25/2036 ^~

    2,593       2,347  

3.546% due 01/25/2037 ^~

    682       673  

3.733% due 04/25/2037 ~

    10       9  

LB-UBS Commercial Mortgage Trust

   

5.407% due 11/15/2038

    868       666  

5.562% due 02/15/2040 ~

    888       566  

Lehman Mortgage Trust

   

6.000% due 07/25/2037 ^

    180       174  

Lehman XS Trust

   

2.117% (US0001M + 0.220%) due 06/25/2047 ~

    2,270       2,057  

MASTR Alternative Loan Trust

   

6.750% due 07/25/2036

    1,882       1,302  

Merrill Lynch Mortgage Investors Trust

   

3.557% due 03/25/2036 ^~

    807       627  

Motel 6 Trust

   

8.823% (LIBOR01M + 6.927%) due 08/15/2019 ~

    7,862       8,004  

Residential Accredit Loans, Inc. Trust

   

2.127% (US0001M + 0.230%) due 05/25/2037 ^~

    184       148  

4.490% due 12/26/2034 ^~

    2,039       1,657  

6.000% due 08/25/2036 ^

    377       345  

Residential Asset Mortgage Products Trust

   

6.500% due 12/25/2031

    475       476  

Residential Asset Securitization Trust

   

6.000% due 11/25/2036 ^

    2,705       1,780  

6.250% due 09/25/2037 ^

    2,725       1,939  

6.250% due 06/25/2046 ~

    1,388       1,212  

Residential Funding Mortgage Securities, Inc. Trust

   

4.191% due 02/25/2037 ~

    1,737       1,383  

6.500% due 03/25/2032

    149       154  

Sequoia Mortgage Trust

   

3.470% due 02/20/2047 ~

    386       346  

3.479% due 07/20/2037 ^~

    776       682  

Structured Adjustable Rate Mortgage Loan Trust

   

3.569% due 11/25/2036 ^~

    2,776       2,700  

3.570% due 01/25/2036 ^~

    2,321       1,815  

3.582% due 07/25/2035 ^~

    840       782  

3.599% due 07/25/2036 ^~

    8,073       7,378  

3.636% due 07/25/2036 ^~

    583       514  

3.643% due 03/25/2037 ^~

    3,083       2,591  

Suntrust Adjustable Rate Mortgage Loan Trust

   

3.708% due 02/25/2037 ^~

    381       345  

3.789% due 04/25/2037 ^~

    589       502  

WaMu Mortgage Pass-Through Certificates Trust

   

3.175% due 07/25/2037 ^~

    485       406  

3.324% due 02/25/2037 ^~

    620       601  

3.345% due 10/25/2036 ^~

    2,353       2,182  

3.403% due 07/25/2037 ^~

    1,111       1,036  

Washington Mutual Mortgage Pass-Through Certificates Trust

   

2.218% (12MTA + 0.840%) due 05/25/2047 ^~

    161       29  

6.000% due 10/25/2035 ^

    1,914       1,519  

Wells Fargo Mortgage-Backed Securities Trust

   

3.914% due 07/25/2036 ^~

    380       385  

4.129% due 05/25/2036 ^~

    68       70  
   

 

 

 
Total Non-Agency Mortgage-Backed Securities
(Cost $133,536)
      144,877  
   

 

 

 

ASSET-BACKED SECURITIES 20.6%

   

ACE Securities Corp. Home Equity Loan Trust

   

2.287% (US0001M + 0.390%) due 02/25/2036 ~

    26,927       17,043  

Adagio CLO DAC

   

0.000% due 04/30/2031 ~

  EUR 1,800       1,957  

Airspeed Ltd.

   

2.167% (LIBOR01M + 0.270%) due 06/15/2032 ~

  $ 3,164       2,757  

Apidos CLO

   

0.000% due 01/20/2031 ~

    4,500       4,244  

Argent Securities Trust

   

2.087% (US0001M + 0.190%) due 03/25/2036 ~

    3,885       2,348  

Bear Stearns Asset-Backed Securities Trust

   

2.037% (US0001M + 0.140%) due 10/25/2036 ^~

    4,923       5,081  

6.500% due 10/25/2036 ^

    366       288  

Belle Haven ABS CDO Ltd.

   

2.571% (LIBOR03M + 0.250%) due 07/05/2046 ~

    175,347       1,718  

BlueMountain CLO Ltd.

   

7.792% (US0003M + 5.450%) due 04/13/2027 ~

    1,000       1,004  

CIFC Funding Ltd.

   

0.000% due 05/24/2026 (h)

    2,300       1,427  

0.000% due 07/22/2026 (h)

    1,500       882  

Citigroup Mortgage Loan Trust

   

2.057% (US0001M + 0.160%) due 12/25/2036 ~

    4,126       2,723  

Countrywide Asset-Backed Certificates

   

2.037% (US0001M + 0.140%) due 06/25/2047 ^~

    1,710       1,594  

2.067% (US0001M + 0.170%) due 03/25/2037 ~

    2,002       1,943  


                                         

First Franklin Mortgage Loan Trust

   

2.842% (US0001M + 0.945%) due 09/25/2035 ~

    3,655       2,521  

2.872% (US0001M + 0.975%) due 05/25/2036 ~

    7,290       3,775  

Fremont Home Loan Trust

   

2.827% (US0001M + 0.930%) due 06/25/2035 ^~

    6,000       5,690  

Grosvenor Place CLO BV

   

0.000% due 04/30/2029 ~

  EUR 500       456  

Home Equity Mortgage Loan Asset-Backed Trust

   

2.057% (US0001M + 0.160%) due 07/25/2037 ~

  $ 10,608       7,039  

HSI Asset Securitization Corp. Trust

   

0.000% due 10/25/2036 (b)(h)

    3,309       1,356  

JPMorgan Mortgage Acquisition Trust

   

4.791% due 10/25/2030 ^

    6,028       4,327  

Lehman XS Trust

   

5.170% due 08/25/2035 ^

    196       195  

LNR CDO Ltd.

   

2.181% (LIBOR01M + 0.280%) due 02/28/2043 ~

    7,290       5,292  

Long Beach Mortgage Loan Trust

   

2.197% (US0001M + 0.300%) due 01/25/2036 ~

    4,813       4,352  

Magnetite Ltd.

   

7.498% (US0003M + 5.150%) due 04/15/2027 ~

    1,000       987  

Merrill Lynch Mortgage Investors Trust

   

2.057% (US0001M + 0.160%) due 04/25/2037 ~

    574       364  

Morgan Stanley ABS Capital, Inc. Trust

   

2.047% (US0001M + 0.150%) due 06/25/2036 ~

    955       831  

Morgan Stanley Mortgage Loan Trust

   

6.250% due 07/25/2047 ^~

    717       512  

Park Place Securities, Inc. Asset-Backed Pass-Through Certificates

   

2.417% (US0001M + 0.520%) due 08/25/2035 ~

    5,000       4,214  

3.667% (US0001M + 1.770%) due 10/25/2034 ~

    573       535  

Residential Asset Mortgage Products Trust

   

3.097% (US0001M + 1.200%) due 01/25/2035 ^~

    2,792       2,188  

SLM Student Loan EDC Repackaging Trust

   

0.000% due 10/28/2029 «(h)

    3       3,268  

SLM Student Loan Trust

   

0.000% due 01/25/2042 «(h)

    4       3,000  

SoFi Professional Loan Program LLC

   

0.000% due 05/25/2040 «(h)

    4,300       2,397  

0.000% due 07/25/2040 «(h)

    21       1,229  

0.000% due 09/25/2040 «(a)(h)

    1,718       1,014  

Soundview Home Loan Trust

   

2.147% (US0001M + 0.250%) due 08/25/2037 ~

    2,000       1,775  

South Coast Funding Ltd.

   

2.411% (LIBOR03M + 0.600%) due 08/10/2038 ~

    10,240       1,997  

Symphony CLO Ltd.

   

6.948% (US0003M + 4.600%) due 07/14/2026 ~

    2,000       1,991  

Taberna Preferred Funding Ltd.

   

2.167% (US0003M + 0.380%) due 08/05/2036 ~

    431       366  

2.167% (US0003M + 0.380%) due 08/05/2036 ^~

    7,971       6,776  

2.791% (LIBOR03M + 0.470%) due 07/05/2035 ~

    7,945       7,389  
   

 

 

 
Total Asset-Backed Securities
(Cost $110,408)
      120,845  
   

 

 

 

SOVEREIGN ISSUES 6.3%

   

Argentina Government International Bond

   

2.260% due 12/31/2038

  EUR 3,970       3,298  

3.375% due 01/15/2023

    200       239  

3.875% due 01/15/2022

    200       247  

5.250% due 01/15/2028

    200       235  

6.250% due 11/09/2047

    100       112  

7.820% due 12/31/2033

    9,275       12,388  

22.844% (BADLARPP) due 10/04/2022 ~

  ARS 58       5  

24.839% (BADLARPP + 2.000%) due 04/03/2022 ~

    60,426       2,941  

26.088% (BADLARPP + 3.250%) due 03/01/2020 ~

    800       40  

28.875% (ARPP7DRR) due 06/21/2020 ~

    82,402       4,202  

Autonomous Community of Catalonia

   

4.750% due 06/04/2018

  EUR 10       12  

4.900% due 09/15/2021

    1,500       1,994  

Egypt Government International Bond

   

4.750% due 04/16/2026

    300       362  

5.625% due 04/16/2030

    300       359  

Peru Government International Bond

   

6.350% due 08/12/2028

  PEN 2,700       903  

Qatar Government International Bond

   

3.875% due 04/23/2023

  $ 400       399  

4.500% due 04/23/2028

    200       200  

5.103% due 04/23/2048

    200       199  

Republic of Greece Government International Bond

   

3.000% due 02/24/2023

  EUR 142       175  

3.000% due 02/24/2024

    142       174  

3.000% due 02/24/2025

    142       172  

3.000% due 02/24/2026

    142       170  

3.000% due 02/24/2027

    142       170  

3.000% due 02/24/2028

    142       168  

3.000% due 02/24/2029

    142       165  

3.000% due 02/24/2030

    142       163  


                                         

3.000% due 02/24/2031

    142       161  

3.000% due 02/24/2032

    142       159  

3.000% due 02/24/2033

    142       158  

3.000% due 02/24/2034

    142       156  

3.000% due 02/24/2035

    142       157  

3.000% due 02/24/2036

    142       154  

3.000% due 02/24/2037

    142       154  

3.000% due 02/24/2038

    142       153  

3.000% due 02/24/2039

    142       152  

3.000% due 02/24/2040

    142       152  

3.000% due 02/24/2041

    142       153  

3.000% due 02/24/2042

    142       153  

4.750% due 04/17/2019

    400       501  

Saudi Government International Bond

   

4.000% due 04/17/2025

  $ 2,900       2,862  

4.500% due 04/17/2030

    1,000       988  

5.000% due 04/17/2049

    1,000       961  

Turkey Government International Bond

   

6.125% due 10/24/2028

    200       200  

Venezuela Government International Bond

   

6.000% due 12/09/2020 ^(e)

    240       68  

9.250% due 09/15/2027 ^(e)

    308       97  
   

 

 

 
Total Sovereign Issues
(Cost $35,578)
      37,031  
   

 

 

 
    SHARES        

COMMON STOCKS 1.3%

   

CONSUMER DISCRETIONARY 0.9%

   

Caesars Entertainment Corp. (f)

    466,592       5,296  
   

 

 

 

ENERGY 0.2%

   

Forbes Energy Services Ltd. (f)(k)

    11,400       87  

Ocean Rig UDW, Inc. (f)

    41,602       1,009  
   

 

 

 
      1,096  
   

 

 

 

FINANCIALS 0.2%

   

TIG FinCo PLC «(k)

    761,602       1,258  
   

 

 

 
Total Common Stocks
(Cost $7,583)
      7,650  
   

 

 

 

WARRANTS 0.0%

   

INDUSTRIALS 0.0%

   

Sequa Corp. - Exp. 04/28/2024 «

    775,000       234  
   

 

 

 
Total Warrants
(Cost $0)
      234  
   

 

 

 

PREFERRED SECURITIES 3.5%

   

BANKING & FINANCE 1.3%

   

Farm Credit Bank of Texas

   

10.000% due 12/15/2020 (i)(k)

    6,250       7,375  
   

 

 

 

INDUSTRIALS 2.2%

   

Sequa Corp.

   

9.000% «

    14,354       12,919  
   

 

 

 
Total Preferred Securities
(Cost $22,042)
      20,294  
   

 

 

 

REAL ESTATE INVESTMENT TRUSTS 1.3%

   

REAL ESTATE 1.3%

   

VICI Properties, Inc. (k)

    416,263       7,568  
   

 

 

 
Total Real Estate Investment Trusts
(Cost $5,426)
      7,568  
   

 

 

 


                                         

SHORT-TERM INSTRUMENTS 2.3%

   

REPURCHASE AGREEMENTS (l) 1.9%

      11,183  
   

 

 

 
    PRINCIPAL
AMOUNT
(000S)
       

SHORT-TERM NOTES 0.1%

   

Letras del Banco Central de la Republica Argentina

   

25.150% due 10/17/2018

  ARS 2,400       105  

25.600% due 07/18/2018

    806       37  

25.650% due 08/15/2018

    880       40  

25.700% due 07/18/2018

    4,600       212  

26.250% due 05/16/2018

    3,880       187  

26.450% due 05/16/2018

    100       5  
   

 

 

 
      586  
   

 

 

 

ARGENTINA TREASURY BILLS 0.1%

   

9.328% due 09/14/2018 (g)(h)

    11,190       531  
   

 

 

 

U.S. TREASURY BILLS 0.2%

   

1.688% due 05/03/2018 - 07/12/2018 (g)(h)(o)(q)

  $ 1,252       1,248  
   

 

 

 
Total Short-Term Instruments
(Cost $13,605)
      13,548  
   

 

 

 
Total Investments in Securities
(Cost $682,345)
      716,292  
   

 

 

 
Total Investments 122.2%
(Cost $682,345)
    $ 716,292  
Financial Derivative Instruments (n)(p) 0.5%
(Cost or Premiums, net $12,557)
      2,773  
Preferred Shares (0.9)%       (5,525
Other Assets and Liabilities, net (21.8)%       (127,505
   

 

 

 
Net Assets Applicable to Common Shareholders 100.0%     $ 586,035  
   

 

 

 

 


Notes to Schedule of Investments:

 

* A zero balance may reflect actual amounts rounding to less than one thousand.

 

¤ The geographical classification of foreign (non-U.S.) securities in this report are classified by the country of incorporation of a holding. In certain instances, a security’s country of incorporation may be different from its country of economic exposure.

 

^ Security is in default.

 

« Security valued using significant unobservable inputs (Level 3).

 

~ Variable or Floating rate security. Rate shown is the rate in effect as of period end. Certain variable rate securities are not based on a published reference rate and spread, rather are determined by the issuer or agent and are based on current market conditions. Reference rate is as of reset date, which may vary by security. These securities may not indicate a reference rate and/or spread in their description.

 

  Rate shown is the rate in effect as of period end. The rate may be based on a fixed rate, a capped rate or a floor rate and may convert to a variable or floating rate in the future. These securities do not indicate a reference rate and spread in their description.

 

(a) Interest only security.

 

(b) Principal only security.

 

(c) When-issued security.

 

(d) Payment in-kind security.

 

(e) Security is not accruing income as of the date of this report.

 

(f) Security did not produce income within the last twelve months.

 

(g) Coupon represents a weighted average yield to maturity.

 

(h) Zero coupon security.

 

(i) Perpetual maturity; date shown, if applicable, represents next contractual call date.

 

(j) Contingent convertible security.

 

(k) Restricted Securities:

 

Issuer Description      Acquisition Date        Cost       

Market

Value

      

Market Value

as Percentage

of Net Assets

 

Farm Credit Bank of Texas 10.000% due 12/15/2020

       05/20/2014        $ 7,688        $ 7,375          1.26%  

Forbes Energy Services Ltd.

       10/09/2014 - 11/18/2016          370          87          0.02     

TIG FinCo PLC

       04/02/2015 - 07/20/2017          1,020          1,258          0.21     

VICI Properties, Inc.

       02/02/2015 - 11/17/2017          5,426          7,568          1.29     
         

 

 

      

 

 

      

 

 

 
     $   14,504        $   16,288          2.78%  
         

 

 

      

 

 

      

 

 

 

Borrowings and Other Financing Transactions

 

(l) Repurchase Agreements:

 

Counterparty   Lending
Rate
  Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By     Collateral
(Received)
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received  (1)
 
FICC  

1.250%

    04/30/2018       05/01/2018     $   2,083       U.S. Treasury Notes 2.750% due 02/28/2025     $ (2,129   $ 2,083     $ 2,083  
SAL  

1.830   

    04/30/2018       05/01/2018       9,100       U.S. Treasury Notes 2.000% due 10/31/2021       (9,295     9,100       9,101  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

      $   (11,424   $   11,183     $   11,184  
           

 

 

   

 

 

   

 

 

 

Reverse Repurchase Agreements:

 

Counterparty   

Borrowing

Rate (2)

    

Settlement

Date

    

Maturity

Date

   

Amount

Borrowed (2)

   

Payable for

Reverse

Repurchase

Agreements

 

FOB

     2.150      04/24/2018        05/08/2018     $   (11,558   $ (11,563

NOM

     2.450        04/16/2018        05/17/2018       (7,017     (7,024

RDR

     2.500        03/19/2018        06/19/2018       (4,349     (4,362

RTA

     2.585        03/07/2018        06/07/2018       (3,276     (3,276
     2.837        03/14/2018        09/14/2018       (7,072     (7,099

SOG

     2.380        03/07/2018        06/07/2018       (4,689     (4,706
     2.380        03/12/2018        06/12/2018       (5,144     (5,161
     2.470        04/17/2018        07/17/2018       (8,415     (8,423

UBS

     2.280        02/27/2018        05/31/2018       (1,460     (1,466
     2.340        02/05/2018        05/07/2018       (16,026     (16,114
     2.370        03/12/2018        06/13/2018       (699     (701
     2.370        04/10/2018        06/13/2018       (2,046     (2,049
     2.410        03/21/2018        06/12/2018       (573     (575
     2.530        02/27/2018        05/31/2018       (2,249     (2,259
     2.580        03/05/2018        06/05/2018       (4,678     (4,697
     2.620        03/12/2018        06/13/2018       (2,733     (2,743
     2.890        04/13/2018        05/14/2018       (5,395     (5,403
            

 

 

 

Total Reverse Repurchase Agreements

             $   (87,621
            

 

 

 

 


(m) Securities with an aggregate market value of $96,197 have been pledged as collateral under the terms of master agreements as of April 30, 2018.

 

(1) Includes accrued interest.
(2)  The average amount of borrowings outstanding during the period ended April 30, 2018 was $(96,963) at a weighted average interest rate of 2.018%. Average borrowings may include sale-buyback transactions and reverse repurchase agreements, if held during the period.

 

(n) Financial Derivative Instruments: Exchange-Traded or Centrally Cleared

Swap Agreements:

Credit Default Swaps on Corporate Issues - Sell Protection (1)

 

      Variation Margin  
Reference Entity  

Fixed

Receive Rate

   

Payment

Frequency

   

Maturity

Date

    

Implied

Credit Spread at

April 30, 2018 (2)

   

Notional

Amount (3)

   

Premiums

Paid/

(Received)

   

Unrealized

Appreciation/

(Depreciation)

   

Market

Value (4)

    Asset     Liability  

Frontier Communications Corp.

    5.000%       Quarterly       06/20/2020        8.984%     $ 5,500     $ (177   $   (125   $ (302   $ 0     $ (16

Navient Corp.

    5.000          Quarterly       12/20/2021        1.999          600       21       46       67       0       (1

Novo Banco S.A.

    5.000          Quarterly       12/20/2021        7.268        EUR 100       (23     17       (6     2       0  
            

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           $   (179   $ (62   $   (241   $   2     $   (17
            

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Credit Default Swaps on Credit Indices - Sell Protection (1)

 

      Variation Margin  
Index/Tranches   

Fixed

Receive Rate

    

Payment

Frequency

  

Maturity

Date

    

Notional

Amount (3)

   

Premiums

Paid/

(Received)

   

Unrealized

Appreciation/

(Depreciation)

   

Market

Value (4)

    Asset     Liability  

CDX.HY-30 5-Year Index

     5.000        Quarterly      06/20/2023      $ 8,800     $ 490     $ 169     $ 659     $ 0     $ (3
                

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Interest Rate Swaps

 

 
      Variation Margin  

Pay/Receive

Floating Rate

   Floating Rate Index    Fixed Rate     

Payment

Frequency

  

Maturity

Date

    

Notional

Amount

   

Premiums

Paid/

(Received)

   

Unrealized

Appreciation/

(Depreciation)

   

Market

Value

    Asset     Liability  
Pay   

3-Month USD-LIBOR

     2.000    Semi-Annual      12/16/2020      $ 59,300     $ 1,546     $ (2,485   $ (939   $ 0     $ (3
Pay   

3-Month USD-LIBOR

     2.000      Semi-Annual      06/15/2021        36,800       1,248       (2,005     (757     0       (4
Pay   

3-Month USD-LIBOR

     2.250      Semi-Annual      12/20/2022        62,000       747       (2,186     (1,439     3       0  
Pay   

3-Month USD-LIBOR

     2.750      Semi-Annual      06/17/2025        75,590       4,664       (5,148     (484     29       0  
Pay   

3-Month USD-LIBOR

     2.500      Semi-Annual      12/20/2027        44,900       325       (1,971     (1,646     22       0  
Pay   

3-Month USD-LIBOR

     3.500      Semi-Annual      06/19/2044        169,400       (5,526     20,962       15,436       125       0  
Receive (5)   

3-Month USD-LIBOR

     2.500      Semi-Annual      06/20/2048        226,900       9,562       16,618       26,180       0       (66
Pay   

6-Month AUD-BBR-BBSW

     3.500      Semi-Annual      06/17/2025      AUD 7,600       188       128       316       49       0  
Receive (5)   

6-Month EUR-EURIBOR

     1.000      Annual      06/20/2028      EUR 2,000       1       6       7       0       (5
Receive (5)   

6-Month EUR-EURIBOR

     1.250      Annual      09/19/2028        13,000       (182     (67     (249     0       (30
Receive (5)   

6-Month GBP-LIBOR

     1.500      Semi-Annual      09/19/2028      GBP 21,100       486       (175     311       0       (145
                

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        $   13,059     $   23,677     $   36,736     $   228     $   (253
                

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

    $   13,370     $   23,784     $   37,154     $   230     $   (273
                

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 


(o) Securities with an aggregate market value of $642 and cash of $10,240 have been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of April 30, 2018.

 

(1) If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(2)  Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
(3)  The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(4)  The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
(5)  This instrument has a forward starting effective date.

 

(p) Financial Derivative Instruments: Over the Counter

Forward Foreign Currency Contracts:

 

       Unrealized Appreciation/(Depreciation)  
Counterparty  

Settlement

Month

     Currency to
be Delivered
    

Currency to

be Received

     Asset     Liability  

BOA

    05/2018      ARS 490      $ 23      $ 0     $ 0  

BPS

    05/2018      PEN 3,120        955        0       (4
    05/2018      $ 41      ARS 831        0       (1
    06/2018      ARS    12,998      $ 611        0       (3
    07/2018        5,596        258        0       (1
    08/2018        880        41        1       0  

BRC

    05/2018      $ 41      ARS 856        0       0  
    06/2018        132      RUB 7,496        0       (13

CBK

    05/2018      ARS 390      $ 19        0       0  
    05/2018      EUR 5,610        6,798        23       0  
    05/2018      $ 1,744      GBP 1,242        0       (34
    05/2018        395      RUB 22,620        0       (36
    06/2018      ARS 3,392      $ 160        0       (1
    07/2018        1,062        49        0       0  

FBF

    05/2018        280        14        0       0  
    05/2018      $ 2,494      RUB    141,276        0       (257

GLM

    05/2018      ARS 180      $ 9        0       0  
    05/2018      RUB 22,620        365        6       0  
    07/2018      $ 362      RUB 22,620        0       (6

HUS

    05/2018      ARS 400      $ 19        0       0  
    05/2018      GBP 47,483        67,597        2,225       0  
    05/2018      $ 38      ARS 773        0       (1
    05/2018        2,874      RUB  166,871        0       (231
    07/2018      ARS 806      $ 38        1       0  

JPM

    05/2018      $ 468      EUR 380        0       (9
    07/2018      ARS 1,109      $ 51        0       0  

MSB

    06/2018      EUR 4,955        6,018        21       0  

RYL

    05/2018      ARS 2,800        136        1       0  

SCX

    05/2018      $ 64,569      GBP 46,241        0       (907
    06/2018      GBP 46,241      $ 64,656        903       0  

SSB

    05/2018      $ 40,427      EUR 33,202        0       (332
    06/2018      EUR  33,203      $ 40,519        332       0  

UAG

    05/2018        32,928        40,868        1,105       0  
          

 

 

   

 

 

 

Total Forward Foreign Currency Contracts

 

   $   4,618     $   (1,836
          

 

 

   

 

 

 

Swap Agreements:

Credit Default Swaps on Corporate Issues - Sell Protection (1)

 

      Swap Agreements, at Value  
Counterparty    Reference Entity   

Fixed

Receive Rate

    

Payment

Frequency

    

Maturity

Date

    

Implied Credit

Spread at
April 30, 2018 (2)

   

Notional

Amount (3)

   

Premiums

Paid/(Received)

   

Unrealized

Appreciation/

(Depreciation)

    Asset     Liability  
BPS   

Petrobras Global Finance BV

     1.000      Quarterly        12/20/2019        0.754   $ 2,400     $ (247   $ 258     $ 11     $ 0  
GST   

Petrobras Global Finance BV

     1.000        Quarterly        12/20/2019        0.754       5,300       (543     567       24       0  
  

Petrobras Global Finance BV

     1.000        Quarterly        09/20/2020        0.965       10       (1     1       0       0  
  

Petrobras Global Finance BV

     1.000        Quarterly        12/20/2021        1.458       100       (16     15       0       (1
HUS   

Petrobras Global Finance BV

     1.000        Quarterly        09/20/2020        0.965       40       (6     6       0       0  
                  

 

 

   

 

 

   

 

 

   

 

 

 
             $ (813   $ 847     $ 35     $ (1
                  

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

    $   (813   $   847     $   35     $   (1
                  

 

 

   

 

 

   

 

 

   

 

 

 

 

(q) Securities with an aggregate market value of $280 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of April 30, 2018.


(1)  If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(2)  Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
(3)  The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

Fair Value Measurements

The following is a summary of the fair valuations according to the inputs used as of April 30, 2018 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory    Level 1        Level 2        Level 3        Fair Value
at 04/30/2018
 

Investments in Securities, at Value

 

Loan Participations and Assignments

   $ 0        $ 17,858        $ 1,180        $ 19,038  

Corporate Bonds & Notes

 

Banking & Finance

     0          132,480          0          132,480  

Industrials

     0          115,155          294          115,449  

Utilities

     0          26,479          0          26,479  

Convertible Bonds & Notes

 

Industrials

     0          4,842          0          4,842  

Municipal Bonds & Notes

 

California

     0          4,979          0          4,979  

Illinois

     0          14,242          0          14,242  

Virginia

     0          752          0          752  

West Virginia

     0          8,446          0          8,446  

U.S. Government Agencies

     0          32,614          4,924          37,538  

Non-Agency Mortgage-Backed Securities

     0          144,877          0          144,877  

Asset-Backed Securities

     0          109,937          10,908          120,845  

Sovereign Issues

     0          37,031          0          37,031  

Common Stocks

 

Consumer Discretionary

     5,296          0          0          5,296  

Energy

     1,096          0          0          1,096  

Financials

     0          0          1,258          1,258  

Warrants

                 

Industrials

     0          0          234          234  

Preferred Securities

                 

Banking & Finance

     0          7,375          0          7,375  

Industrials

     0          0          12,919          12,919  

Real Estate Investment Trusts

                 

Real Estate

     7,568          0          0          7,568  

Short-Term Instruments

                 

Repurchase Agreements

     0          11,183          0          11,183  

Short-Term Notes

     0          586          0          586  

Argentina Treasury Bills

     0          531          0          531  

U.S. Treasury Bills

     0          1,248          0          1,248  

Total Investments

   $ 13,960        $ 670,615        $ 31,717        $ 716,292  

Financial Derivative Instruments - Assets

 

Exchange-traded or centrally cleared

     0          230          0          230  

Over the counter

     0          4,653          0          4,653  
   $ 0        $ 4,883        $ 0        $ 4,883  

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

     0          (273        0          (273

Over the counter

     0          (1,837        0          (1,837
     $ 0        $ (2,110      $ 0        $ (2,110

Total Financial Derivative Instruments

   $ 0        $ 2,773        $ 0        $ 2,773  

Totals

   $   13,960        $   673,388        $   31,717        $   719,065  

There were no significant transfers among Levels 1 and 2 during the period ended April 30, 2018.

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended April 30, 2018:

 

Category and Subcategory   Beginning
Balance
at 07/31/2017
    Net
Purchases
    Net
Sales
    Accrued
Discounts/
(Premiums)
    Realized
Gain/
(Loss)
    Net Change in
Unrealized
Appreciation/
(Depreciation) (1)
    Transfers
into
Level 3
    Transfers
out
of Level 3
    Ending
Balance
at 04/30/2018
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held at
04/30/2018 (1)
 
Investments in Securities, at Value  

Loan Participations and Assignments

  $ 739     $ 1,198     $ (600   $ 4     $ 6     $ (17   $ 0     $ (150   $ 1,180     $ (9

Corporate Bonds & Notes

                   

Banking & Finance

    4,451       0       (251     2       15       (62     0       (4,155     0       0  

Industrials

    6,060       294       (6,061     0       62       (61     0       0       294       1  

U.S. Government Agencies

    4,713       0       (61     99       24       149       0       0       4,924       146  

Asset-Backed Securities

    11,281       0       0       66       0       (439     0       0       10,908       (439

Common Stocks

                   

Financials

    1,005       0       0       0       0       253       0       0       1,258       253  

Warrants

                   

Industrials

    363       0       0       0       0       (129     0       0       234       (129

Preferred Securities

                   

Industrials

    14,002       0       0       0       0       (1,083     0       0       12,919       (1,083
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $ 42,614     $ 1,492     $ (6,973   $ 171     $ 107     $ (1,389   $ 0     $ (4,305   $ 31,717     $ (1,260
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 


The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory    Ending
Balance
at 04/30/2018
     Valuation Technique   Unobservable Inputs    Input Value(s)
(% Unless Noted Otherwise)
 

Investments in Securities, at Value

 

Loan Participations and Assignments

   $ 1,180      Proxy Pricing   Base Price      98.000 - 100.000  

Corporate Bonds & Notes

          

Industrials

     294     

Other Valuation Techniques (2)

 

      

U.S. Government Agencies

     4,924      Proxy Pricing   Base Price      60.130  

Asset-Backed Securities

     10,908      Proxy Pricing   Base Price      55.750 - 100,000.000  

Common Stocks

          

Financials

     1,258     

Other Valuation Techniques  (2)

 

      

Warrants

          

Industrials

     234     

Other Valuation Techniques  (2)

 

      

Preferred Securities

          

Industrials

     12,919     

Indicative Market Quotation

 

Broker Quote

   $ 900.000  
  

 

 

         

Total

   $ 31,717          
  

 

 

         

 

(1)  Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at April 30, 2018 may be due to an investment no longer held or categorized as Level 3 at period end.
(2)  Includes valuation techniques not defined in the Supplementary Notes to Schedule of Investments as securities valued using such techniques are not considered significant to the Fund.

See Accompanying Notes


Notes to Financial Statements

1. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

(a) Investment Valuation Policies The net asset value (“NAV”) of the Fund’s shares is determined by dividing the total value of portfolio investments and other assets attributable to the Fund less any liabilities by the total number of shares outstanding of the Fund.

On each day that the New York Stock Exchange (“NYSE”) is open, Fund shares are ordinarily valued as of the close of regular trading (“NYSE Close”). Information that becomes known to the Fund or its agents after the time as of which NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day. The Fund reserves the right to change the time as of which its NAV is calculated if the Fund closes earlier, or as permitted by the U.S. Securities and Exchange Commission (the “SEC”).

For purposes of calculating a NAV, portfolio securities and other assets for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of official closing prices or the last reported sales prices, or if no sales are reported, based on quotes obtained from established market makers or prices (including evaluated prices) supplied by the Fund’s approved pricing services, quotation reporting systems and other third-party sources (together, “Pricing Services”). The Fund will normally use pricing data for domestic equity securities received shortly after the NYSE Close and does not normally take into account trading, clearances or settlements that take place after the NYSE Close. If market value pricing is used, a foreign (non-U.S.) equity security traded on a foreign exchange or on more than one exchange is typically valued using pricing information from the exchange considered by Pacific Investment Management Company LLC (“PIMCO” or the “Manager”) to be the primary exchange. A foreign (non-U.S.) equity security will be valued as of the close of trading on the foreign exchange, or the NYSE Close, if the NYSE Close occurs before the end of trading on the foreign exchange. Domestic and foreign (non-U.S.) fixed income securities, non-exchange traded derivatives, and equity options are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services using data reflecting the earlier closing of the principal markets for those securities. Prices obtained from Pricing Services may be based on, among other things, information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Certain fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date. Exchange-traded options, except equity options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Swap agreements are valued on the basis of bid quotes obtained from brokers and dealers or market-based prices supplied by Pricing Services. The Fund’s investments in open-end management investment companies, other than exchange-traded funds (“ETFs”), are valued at the NAVs of such investments.

If a foreign (non-U.S.) equity security’s value has materially changed after the close of the security’s primary exchange or principal market but before the NYSE Close, the security may be valued at fair value based on procedures established and approved by the Board of Trustees (the “Board”). Foreign (non-U.S.) equity securities that do not trade when the NYSE is open are also valued at fair value. With respect to foreign (non-U.S.) equity securities, the Fund may determine the fair value of investments based on information provided by Pricing Services and other third-party vendors, which may recommend fair value or adjustments with reference to other securities, indices or assets. In considering whether fair valuation is required and in determining fair values, the Fund may, among other things, consider significant events (which may be considered to include changes in the value of U.S. securities or securities indices) that occur after the close of the relevant market and before the NYSE Close. The Fund may utilize modeling tools provided by third-party vendors to determine fair values of non-U.S. securities. For these purposes, any movement in the applicable reference index or instrument (“zero trigger”) relating to the non-U.S security being fair valued between the earlier close of the applicable foreign market and the NYSE Close may be deemed to be a significant event, prompting the application of the pricing model (effectively resulting in daily fair valuations). Foreign exchanges may permit trading in foreign (non-U.S.) equity securities on days when the Trust is not open for business, which may result in the Fund’s portfolio investments being affected when shareholders are unable to buy or sell shares.

Senior secured floating rate loans for which an active secondary market exists to a reliable degree will be valued at the mean of the last available bid/ask prices in the market for such loans, as provided by a Pricing Service. Senior secured floating rate loans for which an active secondary market does not exist to a reliable degree will be valued at fair value, which is intended to approximate market value. In valuing a senior secured floating rate loan at fair value, the factors considered may include, but are not limited to, the following: (a) the creditworthiness of the borrower and any intermediate participants, (b) the terms of the loan, (c) recent prices in the market for similar loans, if any, and (d) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.

Investments valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from Pricing Services. As a result, the value of such investments and, in turn, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the Fund is not open for business. As a result, to the extent that the Fund holds foreign (non-U.S.) investments, the value of those investments may change at times when shareholders are unable to buy or sell shares and the value of such investments will be reflected in the Fund’s next calculated NAV.

Investments for which market quotes or market based valuations are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction. The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated to PIMCO the responsibility for applying the fair valuation methods. In the event that market quotes or market based valuations are not readily available, and the security or asset cannot be valued pursuant to a Board approved valuation method, the value of the security or asset will be determined in good faith by the Valuation Oversight Committee of the Board (“Valuation Oversight Committee”), generally based on recommendations provided by the Manager. Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information, bid/ask information, indicative market quotations (“Broker Quotes”), Pricing Services’ prices), including where events occur after the close of the relevant market, but prior to the NYSE Close, that materially affect the values of the Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the values of the Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be reevaluated in light of such significant events.

When the Fund uses fair valuation to determine the value of a portfolio security or other asset for purposes of calculating its NAV, such investments will not be priced on the basis of quotes from the primary market in which they are traded, but rather may be priced by another method that the Board or persons acting at their direction believe reflects fair value. Fair valuation may require subjective determinations about the value of a security. While the Fund’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of pricing, the Fund cannot ensure that fair values determined by the Board or persons acting at their direction would accurately reflect the price that the Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Fund may differ from the value that would be realized if the securities were sold.


(b) Fair Value Hierarchy U.S. GAAP describes fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to valuation methods and requires disclosure of the fair value hierarchy, separately for each major category of assets and liabilities, that segregates fair value measurements into levels (Level 1, 2, or 3). The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Levels 1, 2, and 3 of the fair value hierarchy are defined as follows:

 

  Level 1—Quoted prices in active markets or exchanges for identical assets and liabilities.

 

  Level 2—Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

 

  Level 3—Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair value of investments.

Assets or liabilities categorized as Level 2 or 3 as of period end have been transferred between Levels 2 and 3 since the prior period due to changes in the method utilized in valuing the investments. Transfers from Level 3 to Level 2 are a result of the availability of current and reliable market-based data provided by Pricing Services or other valuation techniques which utilize significant observable inputs. In accordance with the requirements of U.S. GAAP, the amounts of transfers between Levels 1 and 2 and transfers into and out of Level 3, if material, are disclosed in the Notes to Schedule of Investments for the Fund.

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to realized gain (loss), unrealized appreciation (depreciation), purchases and sales, accrued discounts (premiums), and transfers into and out of the Level 3 category during the period. The end of period value is used for the transfers between Levels of the Fund’s assets and liabilities. Additionally, U.S. GAAP requires quantitative information regarding the significant unobservable inputs used in the determination of fair value of assets or liabilities categorized as Level 3 in the fair value hierarchy. In accordance with the requirements of U.S. GAAP, a fair value hierarchy, and if material, a Level 3 reconciliation and details of significant unobservable inputs, have been included in the Notes to Schedule of Investments for the Fund.

(c) Valuation Techniques and the Fair Value Hierarchy

Level 1 and Level 2 trading assets and trading liabilities, at fair value The valuation methods (or “techniques”) and significant inputs used in determining the fair values of portfolio securities or other assets and liabilities categorized as Level 1 and Level 2 of the fair value hierarchy are as follows:

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities and non-U.S. bonds are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The Pricing Services’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Fixed income securities purchased on a delayed-delivery basis or as a repurchase commitment in a sale-buyback transaction are marked to market daily until settlement at the forward settlement date and are categorized as Level 2 of the fair value hierarchy.

Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows and market-based yield spreads for each tranche, and incorporate deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Common stocks, ETFs, exchange-traded notes and financial derivative instruments, such as futures contracts, rights and warrants, or options on futures that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy.

Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the NYSE Close. These securities are valued using Pricing Services that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Equity exchange-traded options and over the counter financial derivative instruments, such as forward foreign currency contracts and options contracts derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of quotes obtained from a quotation reporting system, established market makers or Pricing Services (normally determined as of the NYSE Close). Depending on the product and the terms of the transaction, financial derivative instruments can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as quoted prices, issuer details, indices, bid/ask spreads, interest rates, implied volatilities, yield curves, dividends and exchange rates. Financial derivative instruments that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Centrally cleared swaps and over the counter swaps derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. They are valued using a broker-dealer bid quotation or on market-based prices provided by Pricing Services (normally determined as of the NYSE close). Centrally cleared swaps and over the counter swaps can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models may use inputs that are observed from actively quoted markets such as the overnight index swap rate (“OIS”), London Interbank Offered Rate (“LIBOR”) forward rate, interest rates, yield curves and credit spreads. These securities are categorized as Level 2 of the fair value hierarchy.


Level 3 trading assets and trading liabilities, at fair value When a fair valuation method is applied by PIMCO that uses significant unobservable inputs, investments will be priced by a method that the Board or persons acting at their direction believe reflects fair value and are categorized as Level 3 of the fair value hierarchy. The valuation techniques and significant inputs used in determining the fair values of portfolio assets and liabilities categorized as Level 3 of the fair value hierarchy are as follows:

Proxy pricing procedures set the base price of a fixed income security and subsequently adjust the price proportionally to market value changes of a pre-determined security deemed to be comparable in duration, generally a U.S. Treasury or sovereign note based on country of issuance. The base price may be a broker-dealer quote, transaction price, or an internal value as derived by analysis of market data. The base price of the security may be reset on a periodic basis based on the availability of market data and procedures approved by the Valuation Oversight Committee. Significant changes in the unobservable inputs of the proxy pricing process (the base price) would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.

If third-party evaluated vendor pricing is not available or not deemed to be indicative of fair value, the Manager may elect to obtain Broker Quotes directly from the broker-dealer or passed through from a third-party vendor. In the event that fair value is based upon a single sourced Broker Quote, these securities are categorized as Level 3 of the fair value hierarchy. Broker Quotes are typically received from established market participants. Although independently received, the Manager does not have the transparency to view the underlying inputs which support the market quotation. Significant changes in the Broker Quote would have direct and proportional changes in the fair value of the security.

Short-term debt instruments (such as commercial paper) having a remaining maturity of 60 days or less may be valued at amortized cost, so long as the amortized cost value of such short-term debt instruments is approximately the same as the fair value of the instrument as determined without the use of amortized cost valuation. These securities are categorized as Level 2 or Level 3 of the fair value hierarchy depending on the source of the base price.

2. FEDERAL INCOME TAX MATTERS

The Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”) and distribute all of its taxable income and net realized gains, if applicable, to shareholders. Accordingly, no provision for Federal income taxes has been made.

The Fund may be subject to local withholding taxes, including those imposed on realized capital gains. Any applicable foreign capital gains tax is accrued daily based upon net unrealized gains, and may be payable following the sale of any applicable investments.

In accordance with U.S. GAAP, the Manager has reviewed the Fund’s tax positions for all open tax years. As of April 30, 2018, the Fund has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions it has taken or expects to take in future tax returns.

The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.


GLOSSARY: (abbreviations that may be used in the preceding statements)      (Unaudited)
Counterparty Abbreviations:         
BOA    Bank of America N.A.   GST    Goldman Sachs International   RYL    Royal Bank of Scotland Group PLC
BPS    BNP Paribas S.A.   HUS    HSBC Bank USA N.A.   SAL    Citigroup Global Markets, Inc.
BRC    Barclays Bank PLC   JPM    JP Morgan Chase Bank N.A.   SCX    Standard Chartered Bank
CBK    Citibank N.A.   MSB    Morgan Stanley Bank, N.A   SOG    Societe Generale
FBF    Credit Suisse International   NOM    Nomura Securities International Inc.   SSB    State Street Bank and Trust Co.
FICC    Fixed Income Clearing Corporation   RDR    RBC Capital Markets LLC   UAG    UBS AG Stamford
FOB    Credit Suisse Securities (USA) LLC   RTA    Bank of New York Mellon Corp.   UBS    UBS Securities LLC
GLM    Goldman Sachs Bank USA          
Currency Abbreviations:                  
ARS    Argentine Peso   GBP    British Pound   RUB    Russian Ruble
AUD    Australian Dollar   PEN    Peruvian New Sol   USD (or $)    United States Dollar
EUR    Euro          
Index/Spread Abbreviations:                  
12MTA    12 Month Treasury Average   CDX.HY    Credit Derivatives Index - High Yield   LIBOR03M    3 Month USD-LIBOR
ARPP7DRR    Argentina Central Bank 7 Day Repo Reference Rate   EUR003M    3 Month EUR Swap Rate   US0001M    1 Month USD Swap Rate
BADLARPP    Argentina Badlar Floating Rate Notes   LIBOR01M    1 Month USD-LIBOR   US0003M    3 Month USD Swap Rate
BP0003M    3 Month GBP-LIBOR          
Other Abbreviations:                  
ABS    Asset-Backed Security   CDO    Collateralized Debt Obligation   LIBOR    London Interbank Offered Rate
ALT    Alternate Loan Trust   CLO    Collateralized Loan Obligation   PIK    Payment-in-Kind
BABs    Build America Bonds   DAC    Designated Activity Company   TBA    To-Be-Announced
BBR    Bank Bill Rate   EURIBOR    Euro Interbank Offered Rate   TBD%    Interest rate to be determined when loan settles
BBSW    Bank Bill Swap Reference Rate          


Item 2. Controls and Procedures

 

  (a) The principal executive officer and principal financial & accounting officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.

 

  (b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR