Item 1. | Reports to Shareholders. |
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Deborah A. DeCotis | Joshua D. Ratner | |
Chair of the Board of Trustees | President |
Total Returns of Certain Asset Classes for the Period Ended December 31, 2023 | ||
Asset Class (as measured by, currency) | Six-Month | |
U.S. large cap equities (S&P 500 Index, USD) | 8.04% | |
Global equities (MSCI World Index, USD) | 7.56% | |
European equities (MSCI Europe Index, EUR) | 4.24% | |
Emerging market equities (MSCI Emerging Markets Index, EUR) | 4.71% | |
Japanese equities (Nikkei 225 Index, JPY) | 1.74% | |
Emerging market local bonds (JPMorgan Government Bond Index-Emerging Markets Global Diversified Index, USD Unhedged) | 4.55% | |
Emerging market external debt (JPMorgan Emerging Markets Bond Index (EMBI) Global, USD Hedged) | 6.40% | |
Below investment grade bonds (ICE BofAML Developed Markets High Yield Constrained Index, USD Hedged) | 7.90% | |
Global investment grade credit bonds (Bloomberg Global Aggregate Credit Index, USD Hedged) | 5.52% | |
Fixed-rate, local currency government debt of investment grade countries (Bloomberg Global Treasury Index, USD Hedged) | 3.48% |
2 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 3 |
4 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 5 |
6 | PIMCO CLOSED-END FUNDS |
Fund Name | Inception Date | Diversification Status | ||||||||||
PIMCO Dynamic Income Strategy Fund | 02/01/2019 | Non-Diversified |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 7 |
8 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 9 |
PIMCO Dynamic Income Strategy Fund | Symbol on NYSE - PDX |
Allocation Breakdown as of December 31, 2023 † § | ||||
Common Stocks | 50.6 | % | ||
Corporate Bonds & Notes | 18.6 | % | ||
Short-Term Instruments ‡ | 18.4 | % | ||
Master Limited Partnerships | 8.1 | % | ||
Loan Participations and Assignments | 2.2 | % | ||
Non-Agency Mortgage-Backed Securities | 2.1 | % |
† | % of Investments, at value. |
§ | Allocation Breakdown and % of investments exclude securities sold short and financial derivative instruments, if any. |
‡ | Includes Central Funds Used for Cash Management Purposes. |
Fund Information (as of December 31, 2023) (1) | ||||
Market Price | $ | 20.48 | ||
NAV | $ | 22.54 | ||
Premium/(Discount) to NAV | (9.14 | )% | ||
Market Price Distribution Rate (2) | 4.30 | % | ||
NAV Distribution Rate (2) | 3.90 | % | ||
Total Effective Leverage (3) | 0.00 | % |
Average Annual Total Return (1) for the period ended December 31, 2023 | ||||||||||||||
6 Month* | 1 Year | Commencement of Operations (02/01/19) | ||||||||||||
Market Price | 32.89% | 44.17% | 9.23% | |||||||||||
NAV | 24.45% | 32.05% | 10.02% | |||||||||||
ICE BofAML US High Yield Index ± | 7.63% | 13.46% | 4.32% | |||||||||||
Alerian MLP Index | 15.37% | 26.56% | 9.35% |
* | Cumulative return. |
± | Effective November 21, 2023, the Fund’s broad based securities market index was changed from the Alerian MLP Index to the ICE BofAML US High Yield Index because the Fund’s investment manager has determined that the ICE BofAML US High Yield Index more closely aligns with the investment strategies of the Fund. |
10 | PIMCO CLOSED-END FUNDS |
(1) | Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the sale of Fund shares. Total return, market price, NAV, market price distribution rate, and NAV distribution rate will fluctuate with changes in market conditions. Performance current to the most recent month-end is available at www.pimco.com or via (844)33-PIMCO. Performance is calculated assuming all dividends and distributions are reinvested at prices obtained under the Fund’s dividend reinvestment plan. Performance does not reflect any brokerage commissions in connection with the purchase or sale of Fund shares. |
Performance of the Index is shown in light of a requirement by the Securities and Exchange Commission that the performance of an appropriate broad-based securities market index be disclosed. However, the Fund is not managed to an index nor should the Index be viewed as a “benchmark” for the Fund’s performance. The Index is not intended to be indicative of the Fund’s investment strategies, portfolio components or past or future performance. Please see Additional Information Regarding the Fund for a description of the Fund’s principal investment strategies. |
(2) | Distribution rates are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or Market Price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be provided to shareholders when such information is available. |
(3) | Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage). |
» | Exposure to midstream equities contributed to absolute performance, as the asset class posted positive returns. |
» | Exposure to a U.S. liquefied natural gas supplier, contributed to absolute performance, as the security posted positive returns. |
» | Exposure to high yield corporate credit contributed to absolute performance, as the asset class posted positive returns. |
» | There were no material detractors for this Fund. |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 11 |
Index* | Index Description | |
ICE BofAML U.S. High Yield Index | ICE BofAML U.S. High Yield Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Qualifying bonds must have at least one year remaining term to maturity, a fixed coupon schedule and a minimum amount outstanding of USD 100 million. Bonds must be rated below investment grade based on a composite of Moody’s and S&P. | |
Alerian MLP Index | The Alerian MLP Index is the leading gauge of large- and mid-cap energy master limited partnerships (MLPs). It is afloat-adjusted, capitalization-weighted index, which includes 50 prominent companies. |
12 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 13 |
Investment Operations | Less Distributions (c) | ||||||||||||||||||||||||||||||||||||||||||||
Selected Per Share Data for the Year or Period Ended ^ : | Net Asset Value Beginning of Year or Period (a) | Net Investment Income (Loss) (b) | Net Realized/ Unrealized Gain (Loss) | Total | From Net Investment Income | From Net Realized Capital Gains | Tax Basis Return of Capital | Total | |||||||||||||||||||||||||||||||||||||
07/01/2023 - 12/31/2023+ | $ | 18.49 | $ | 0.19 | $ | 4.30 | $ | 4.49 | $ | (0.44 | ) | $ | 0.00 | $ | 0.00 | $ | (0.44 | ) | |||||||||||||||||||||||||||
06/30/2023 | 15.24 | 0.39 | 3.74 | 4.13 | (0.66 | ) | 0.00 | (0.22 | ) | (0.88 | ) | ||||||||||||||||||||||||||||||||||
06/30/2022 | 14.27 | 0.43 | 1.32 | 1.75 | (0.47 | ) | 0.00 | (0.31 | ) | (0.78 | ) | ||||||||||||||||||||||||||||||||||
06/30/2021 | 8.63 | 0.32 | 6.00 | 6.32 | (0.09 | ) | 0.00 | (0.59 | ) | (0.68 | ) | ||||||||||||||||||||||||||||||||||
06/30/2020 | 20.00 | 0.55 | (10.04 | ) | (9.49 | ) | (0.48 | ) | (0.28 | ) | (1.12 | ) | (1.88 | ) | |||||||||||||||||||||||||||||||
02/01/2019 - 06/30/2019 | 20.00 | 0.26 | 0.24 | 0.50 | (0.50 | ) | 0.00 | 0.00 | (0.50 | ) |
^ | A zero balance may reflect actual amounts rounding to less than $0.01 or 0.01%. |
+ | Unaudited |
* | Annualized, except for organizational expense, if any. |
( a) | Includes adjustments required by U.S. GAAP and may differ from net asset values and performance reported elsewhere by the Fund. |
( b) | Per share amounts based on average number of shares outstanding during the year or period. |
( c) | The tax characterization of distributions is determined in accordance with Federal income tax regulations. The actual tax characterization of distributions paid is determined at the end of the fiscal year. See Note 2, Distributions — Common Shares, in the Notes to Financial Statements for more information. |
( d) | Total investment return is calculated assuming a purchase of a share at the market price on the first day and a sale of a share at the market price on the last day of each year reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions in connection with the purchase or sale of Fund shares. |
( e) | Ratio includes interest expense which primarily relates to participation in borrowing and financing transactions. See Note 5, Borrowings and Other Financing Transactions, in the Notes to Financial Statements for more information. |
(f) | Ratios shown do not include expenses of the investment companies in which the Fund may invest. See Note 9, Fees and Expenses, in the Notes to Financial Statements for more information regarding the expenses and any applicable fee waivers associated with these investments. |
14 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Common Share | Ratios/Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios to Average Net Assets (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset Value End of Year or Period (a) | Market Price End of Year or Period | Total Investment Return (d) | Net Assets End of Year or Period (000s) | Expenses (e) | Expenses Excluding Waivers (e) | Expenses Excluding Interest Expense | Expenses Excluding Interest Expense and Waivers | Net Investment Income (Loss) | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||||
$ | 22.54 | $ | 20.48 | 32.89 | % | $ | 1,007,599 | 2.36 | %* | 2.38 | %* | 1.49 | %* | 1.51 | %* | 1.83 | %* | 46 | % | ||||||||||||||||||||||||||||||||||
18.49 | 15.76 | 29.99 | 826,517 | 2.66 | 2.68 | 1.65 | 1.67 | 2.16 | 50 | ||||||||||||||||||||||||||||||||||||||||||||
15.24 | 12.84 | 8.76 | 681,193 | 1.76 | 1.79 | 1.68 | 1.71 | 2.71 | 77 | ||||||||||||||||||||||||||||||||||||||||||||
14.27 | 12.50 | 90.94 | 637,792 | 1.54 | 1.60 | 1.53 | 1.59 | 2.96 | 118 | ||||||||||||||||||||||||||||||||||||||||||||
8.63 | 7.06 | (57.04 | ) | 385,774 | 2.61 | 2.65 | 1.85 | 1.89 | 3.73 | 57 | |||||||||||||||||||||||||||||||||||||||||||
20.00 | 19.63 | 0.09 | 891,608 | 2.63 | * | 2.64 | * | 1.80 | * | 1.81 | * | 3.14 | * | 25 |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 15 |
(Amounts in thousands † | ||||
Assets: | ||||
Investments, at value | ||||
Investments in securities* | $ | 935,060 | ||
Investments in Affiliates | 94,141 | |||
Financial Derivative Instruments | ||||
Exchange-traded or centrally cleared | 6 | |||
Over the counter | 23,543 | |||
Cash | 7,968 | |||
Deposits with counterparty | 1,195 | |||
Foreign currency, at value | 13 | |||
Receivable for investments sold | 1,066 | |||
Receivable for investments in Affiliates sold | 200 | |||
Interest and/or dividends receivable | 4,858 | |||
Dividends receivable from Affiliates | 379 | |||
Other assets | 35 | |||
Total Assets | 1,068,464 | |||
Liabilities: | ||||
Financial Derivative Instruments | ||||
Exchange-traded or centrally cleared | $ | 30 | ||
Over the counter | 727 | |||
Payable for investments purchased | 30,354 | |||
Payable for investments in Affiliates purchased | 438 | |||
Deposits from counterparty | 18,325 | |||
Distributions payable to common shareholders | 9,835 | |||
Accrued management fees | 1,155 | |||
Other liabilities | 1 | |||
Total Liabilities | 60,865 | |||
Commitments and contingent liabilities ^ | ||||
Net Assets | $ | 1,007,599 | ||
Net Assets Consist of: | ||||
Par Value ^^ | $ | 0 | ||
Paid in capital in excess of par | 793,952 | |||
Distributable earnings (accumulated loss) | 213,647 | |||
Net Assets | $ | 1,007,599 | ||
Common Shares Outstanding: | 44,707 | |||
Net Asset Value Per Common Share (a) | $ | 22.54 | ||
Cost of investments in securities | $ | 644,373 | ||
Cost of investments in Affiliates | $ | 94,127 | ||
Cost of foreign currency held | $ | 13 | ||
* Includes repurchase agreements of: | $ | 75,586 |
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
^ | See Note 9, Fees and Expenses, in the Notes to Financial Statements for more information. |
^^ | ($0.00001 per share). |
(a) | Includes adjustments required by U.S. GAAP and may differ from net asset values and performance reported elsewhere by the Fund. |
16 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Six Months Ended December 31, 2023 (Unaudited) | ||||
(Amounts in thousands † | ||||
Investment Income: | ||||
Interest | $ | 10,461 | ||
Dividends, net of foreign taxes* | 8,948 | |||
Dividends from Investments in Affiliates | 414 | |||
Total Income | 19,823 | |||
Expenses: | ||||
Management fees | 7,088 | |||
Trustee fees and related expenses | 48 | |||
Interest expense | 4,124 | |||
Miscellaneous expense | 2 | |||
Total Expenses | 11,262 | |||
Waiver and/or Reimbursement by PIMCO | (75 | ) | ||
Net Expenses | 11,187 | |||
Net Investment Income (Loss) | 8,636 | |||
Net Realized Gain (Loss): | ||||
Investments in securities | 21,518 | |||
Investments in Affiliates | 3 | |||
Exchange-traded or centrally cleared financial derivative instruments | 26,059 | |||
Over the counter financial derivative instruments | 14,972 | |||
Foreign currency | 335 | |||
Net Realized Gain (Loss) | 62,887 | |||
Net Change in Unrealized Appreciation (Depreciation): | ||||
Investments in securities | 130,196 | |||
Investments in Affiliates | 15 | |||
Exchange-traded or centrally cleared financial derivative instruments | (13,831 | ) | ||
Over the counter financial derivative instruments | 12,854 | |||
Foreign currency assets and liabilities | (4 | ) | ||
Net Change in Unrealized Appreciation (Depreciation) | 129,230 | |||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 200,753 | ||
* Foreign tax withholdings - Dividends | $ | 38 |
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 17 |
(Amounts in thousands † | Six Months Ended December 31, 2023 (Unaudited) | Year Ended June 30, 2023 | ||||||
Increase (Decrease) in Net Assets from: | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 8,636 | $ | 17,216 | ||||
Net realized gain (loss) | 62,887 | 82,373 | ||||||
Net change in unrealized appreciation (depreciation) | 129,230 | 85,077 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 200,753 | 184,666 | ||||||
Distributions to Common Shareholders: | ||||||||
From net investment income and/or net realized capital gains | (19,671 | ) | (29,461 | ) | ||||
Tax basis return of capital | 0 | (9,881 | ) | |||||
Total Distributions to Common Shareholders (a) | (19,671 | ) | (39,342 | ) | ||||
Total Increase (Decrease) in Net Assets | 181,082 | 145,324 | ||||||
Net Assets: | ||||||||
Beginning of period | 826,517 | 681,193 | ||||||
End of period | $ | 1,007,599 | $ | 826,517 |
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
(a) | The tax characterization of distributions is determined in accordance with Federal income tax regulations. The actual tax characterization of distributions paid is determined at the end of the fiscal year. See Note 2, Distributions — Common Shares, in the Notes to Financial Statements for more information. |
18 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Six Months Ended December 31, 2023 (Unaudited) (Amounts in thousands † | ||||
Cash Flows Provided by (Used for) Operating Activities: | ||||
Net increase (decrease) in net assets resulting from operations | $ | 200,753 | ||
Adjustments to Reconcile Net Increase (Decrease) in Net Assets from Operations to Net Cash Provided by (Used for) Operating Activities: | ||||
Purchases of long-term securities | (458,289 | ) | ||
Proceeds from sales of long-term securities | 688,795 | |||
(Purchases) Proceeds from sales of short-term portfolio investments, net | (130,307 | ) | ||
(Increase) decrease in deposits with counterparty | 7,556 | |||
(Increase) decrease in receivable for investments sold | 2,185 | |||
(Increase) decrease in interest and/or dividends receivable | (1,288 | ) | ||
(Increase) decrease in dividends receivable from Affiliates | (379 | ) | ||
Proceeds from (Payments on) exchange-traded or centrally cleared financial derivative instruments | 12,646 | |||
Proceeds from (Payments on) over the counter financial derivative instruments | 14,973 | |||
(Increase) decrease in other assets | (8 | ) | ||
Increase (decrease) in payable for investments purchased | 27,418 | |||
Increase (decrease) in deposits from counterparty | 8,288 | |||
Increase (decrease) in accrued management fees | (2 | ) | ||
Proceeds from (Payments on) foreign currency transactions | 331 | |||
Increase (decrease) in other liabilities | 1 | |||
Net Realized (Gain) Loss | ||||
Investments in securities | (21,518 | ) | ||
Investments in Affiliates | (3 | ) | ||
Exchange-traded or centrally cleared financial derivative instruments | (26,059 | ) | ||
Over the counter financial derivative instruments | (14,972 | ) | ||
Foreign currency | (335 | ) | ||
Net Change in Unrealized (Appreciation) Depreciation | ||||
Investments in securities | (130,196 | ) | ||
Investments in Affiliates | (15 | ) | ||
Exchange-traded or centrally cleared financial derivative instruments | 13,831 | |||
Over the counter financial derivative instruments | (12,854 | ) | ||
Foreign currency assets and liabilities | 4 | |||
Net amortization (accretion) on investments | (1,603 | ) | ||
Net Cash Provided by (Used for) Operating Activities | 178,953 | |||
Cash Flows Received from (Used for) Financing Activities: | ||||
Cash distributions paid | (19,672 | ) | ||
Proceeds from reverse repurchase agreements | 1,120,475 | |||
Payments on reverse repurchase agreements | (1,272,609 | ) | ||
Net Cash Received from (Used for) Financing Activities | (171,806 | ) | ||
Net Increase (Decrease) in Cash and Foreign Currency | 7,147 | |||
Cash and Foreign Currency: | ||||
Beginning of period | 834 | |||
End of period | $ | 7,981 | ||
Supplemental Disclosure of Cash Flow Information: | ||||
Interest expense paid during the period | $ | 4,549 |
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 19 |
PRINCIPAL AMOUNT (000S) | MARKET VALUE (000S) | |||||||||||
INVESTMENTS IN SECURITIES 92.8% | ||||||||||||
LOAN PARTICIPATIONS AND ASSIGNMENTS 2.3% | ||||||||||||
BDO U.S.A. PC | ||||||||||||
11.356% due 08/31/2028 « | $ | 4,524 | $ | 4,505 | ||||||||
Castlelake Aviation Ltd. | ||||||||||||
8.135% due 10/22/2027 | 2,970 | 2,978 | ||||||||||
Chobani LLC | ||||||||||||
9.112% due 10/25/2027 | 3,000 | 3,009 | ||||||||||
Forward Air Corp. | ||||||||||||
9.856% due 12/19/2030 | 1,800 | 1,711 | ||||||||||
Lifepoint Health, Inc. | ||||||||||||
11.168% due 11/16/2028 | 6,700 | 6,692 | ||||||||||
Project Alpha Intermediate Holding, Inc. | ||||||||||||
10.106% due 10/28/2030 | 4,000 | 4,030 | ||||||||||
Total Loan Participations and Assignments (Cost $22,439) | 22,925 | |||||||||||
CORPORATE BONDS & NOTES 19.0% | ||||||||||||
BANKING & FINANCE 1.3% | ||||||||||||
Brandywine Operating Partnership LP | ||||||||||||
7.800% due 03/15/2028 | 2,000 | 2,025 | ||||||||||
Credit Agricole SA | ||||||||||||
6.316% due 10/03/2029 | 100 | 105 | ||||||||||
EPR Properties | ||||||||||||
3.750% due 08/15/2029 | 3,100 | 2,730 | ||||||||||
GA Global Funding Trust | ||||||||||||
2.900% due 01/06/2032 | 2,700 | 2,212 | ||||||||||
HAT Holdings LLC | ||||||||||||
8.000% due 06/15/2027 | 5,000 | 5,213 | ||||||||||
Highwoods Realty LP | ||||||||||||
7.650% due 02/01/2034 | 100 | 108 | ||||||||||
Kilroy Realty LP | ||||||||||||
4.250% due 08/15/2029 | 100 | 92 | ||||||||||
4.750% due 12/15/2028 | 100 | 95 | ||||||||||
12,580 | ||||||||||||
INDUSTRIALS 14.6% | ||||||||||||
American Builders & Contractors Supply Co., Inc. | ||||||||||||
3.875% due 11/15/2029 | 4,600 | 4,106 | ||||||||||
B.C. Unlimited Liability Co. | ||||||||||||
3.875% due 01/15/2028 | 2,300 | 2,175 | ||||||||||
Carvana Co. (14.000% PIK) | ||||||||||||
14.000% due 06/01/2031 (b) | 3,600 | 2,909 | ||||||||||
Cheniere Energy, Inc. | ||||||||||||
4.625% due 10/15/2028 | 4,000 | 3,907 | ||||||||||
Cloud Software Group, Inc. | ||||||||||||
6.500% due 03/31/2029 | 4,400 | 4,194 |
PRINCIPAL AMOUNT (000S) | MARKET VALUE (000S) | |||||||||||
Community Health Systems, Inc. | ||||||||||||
5.625% due 03/15/2027 | $ | 5,700 | $ | 5,304 | ||||||||
Comstock Resources, Inc. | ||||||||||||
6.750% due 03/01/2029 | 2,350 | 2,152 | ||||||||||
Continental Resources, Inc. | ||||||||||||
2.875% due 04/01/2032 | 5,500 | 4,466 | ||||||||||
5.750% due 01/15/2031 | 2,100 | 2,092 | ||||||||||
CQP Holdco LP | ||||||||||||
5.500% due 06/15/2031 | 6,200 | 5,884 | ||||||||||
DT Midstream, Inc. | ||||||||||||
4.125% due 06/15/2029 | 2,350 | 2,165 | ||||||||||
4.375% due 06/15/2031 | 1,200 | 1,084 | ||||||||||
Energy Transfer LP | ||||||||||||
5.625% due 05/01/2027 (f) | 3,100 | 3,092 | ||||||||||
6.050% due 12/01/2026 (f) | 200 | 206 | ||||||||||
6.125% due 12/15/2045 (f) | 2,000 | 2,019 | ||||||||||
6.250% due 04/15/2049 (f) | 3,000 | 3,109 | ||||||||||
EnLink Midstream LLC | ||||||||||||
6.500% due 09/01/2030 | 600 | 613 | ||||||||||
EQM Midstream Partners LP | ||||||||||||
4.500% due 01/15/2029 (g) | 1,800 | 1,702 | ||||||||||
4.750% due 01/15/2031 (g) | 2,400 | 2,237 | ||||||||||
5.500% due 07/15/2028 (g) | 1,100 | 1,091 | ||||||||||
7.500% due 06/01/2030 (g) | 3,100 | 3,336 | ||||||||||
Howard Midstream Energy Partners LLC | ||||||||||||
8.875% due 07/15/2028 | 800 | 841 | ||||||||||
Intelsat Jackson Holdings SA | ||||||||||||
6.500% due 03/15/2030 | 1,547 | 1,478 | ||||||||||
Matador Resources Co. | ||||||||||||
6.875% due 04/15/2028 | 3,000 | 3,046 | ||||||||||
Mineral Resources Ltd. | ||||||||||||
9.250% due 10/01/2028 | 4,000 | 4,260 | ||||||||||
National Fuel Gas Co. | ||||||||||||
2.950% due 03/01/2031 | 1,425 | 1,195 | ||||||||||
Newfold Digital Holdings Group, Inc. | ||||||||||||
11.750% due 10/15/2028 | 3,800 | 4,091 | ||||||||||
NextEra Energy Operating Partners LP | ||||||||||||
3.875% due 10/15/2026 (h) | 100 | 95 | ||||||||||
4.250% due 07/15/2024 (h) | 100 | 99 | ||||||||||
4.500% due 09/15/2027 (h) | 1,275 | 1,228 | ||||||||||
7.250% due 01/15/2029 (h) | 800 | 838 | ||||||||||
Noble Finance LLC | ||||||||||||
8.000% due 04/15/2030 | 500 | 521 | ||||||||||
Northriver Midstream Finance LP | ||||||||||||
5.625% due 02/15/2026 | 2,000 | 1,941 | ||||||||||
Olympus Water U.S. Holding Corp. | ||||||||||||
4.250% due 10/01/2028 | 6,600 | 5,946 | ||||||||||
Parkland Corp. | ||||||||||||
4.500% due 10/01/2029 | 3,900 | 3,579 | ||||||||||
4.625% due 05/01/2030 | 3,000 | 2,763 |
20 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
PRINCIPAL AMOUNT (000S) | MARKET VALUE (000S) | |||||||||||
Permian Resources Operating LLC | ||||||||||||
5.875% due 07/01/2029 | $ | 2,300 | $ | 2,245 | ||||||||
Raising Cane’s Restaurants LLC | ||||||||||||
9.375% due 05/01/2029 | 200 | 214 | ||||||||||
Rand Parent LLC | ||||||||||||
8.500% due 02/15/2030 | 5,000 | 4,787 | ||||||||||
Santos Finance Ltd. | ||||||||||||
6.875% due 09/19/2033 | 300 | 318 | ||||||||||
Seadrill Finance Ltd. | ||||||||||||
8.375% due 08/01/2030 | 5,750 | 6,004 | ||||||||||
Sitio Royalties Operating Partnership LP | ||||||||||||
7.875% due 11/01/2028 (h) | 6,000 | 6,222 | ||||||||||
Southwestern Energy Co. | ||||||||||||
5.375% due 03/15/2030 | 2,250 | 2,200 | ||||||||||
Spirit AeroSystems, Inc. | ||||||||||||
9.750% due 11/15/2030 | 200 | 215 | ||||||||||
Strathcona Resources Ltd. | ||||||||||||
6.875% due 08/01/2026 | 3,200 | 3,058 | ||||||||||
Suburban Propane Partners LP | ||||||||||||
5.000% due 06/01/2031 (f) | 2,900 | 2,633 | ||||||||||
Sunoco LP | ||||||||||||
4.500% due 05/15/2029 (f) | 6,500 | 6,045 | ||||||||||
4.500% due 04/30/2030 (f) | 3,000 | 2,781 | ||||||||||
USA Compression Partners LP | ||||||||||||
6.875% due 09/01/2027 (f) | 2,500 | 2,473 | ||||||||||
Valaris Ltd. | ||||||||||||
8.375% due 04/30/2030 | 6,700 | 6,870 | ||||||||||
Vital Energy, Inc. | ||||||||||||
7.750% due 07/31/2029 | 4,200 | 4,020 | ||||||||||
9.750% due 10/15/2030 | 200 | 208 | ||||||||||
Weatherford International Ltd. | ||||||||||||
8.625% due 04/30/2030 | 3,000 | 3,135 | ||||||||||
ZipRecruiter, Inc. | ||||||||||||
5.000% due 01/15/2030 | 4,800 | 4,196 | ||||||||||
147,388 | ||||||||||||
UTILITIES 3.1% | ||||||||||||
Antero Midstream Partners LP | ||||||||||||
5.750% due 01/15/2028 (h) | 3,200 | 3,171 | ||||||||||
Enel Finance International NV | ||||||||||||
2.250% due 07/12/2031 | 5,200 | 4,229 | ||||||||||
Hilcorp Energy LP | ||||||||||||
6.000% due 02/01/2031 | 3,400 | 3,290 | ||||||||||
ONEOK, Inc. | ||||||||||||
6.050% due 09/01/2033 | 8,000 | 8,480 | ||||||||||
Tallgrass Energy Partners LP | ||||||||||||
6.000% due 12/31/2030 (g) | 5,700 | 5,307 | ||||||||||
Targa Resources Partners LP | ||||||||||||
4.875% due 02/01/2031 (g) | 2,300 | 2,237 |
PRINCIPAL AMOUNT (000S) | MARKET VALUE (000S) | |||||||||||
5.500% due 03/01/2030 (g) | $ | 4,300 | $ | 4,303 | ||||||||
31,017 | ||||||||||||
Total Corporate Bonds & Notes (Cost $185,539) | 190,985 | |||||||||||
NON-AGENCY MORTGAGE-BACKED SECURITIES 2.1% | ||||||||||||
Angel Oak Mortgage Trust | ||||||||||||
4.800% due 11/25/2067 þ | 1,000 | 973 | ||||||||||
BX Trust | ||||||||||||
8.079% due 05/15/2035 • | 5,000 | 4,824 | ||||||||||
GCAT Trust | ||||||||||||
4.250% due 05/25/2067 | 1,000 | 921 | ||||||||||
GS Mortgage-Backed Securities Trust | ||||||||||||
3.750% due 10/25/2057 | 2,843 | 2,743 | ||||||||||
MFA Trust | ||||||||||||
6.105% due 12/25/2068 þ | 1,000 | 1,006 | ||||||||||
OBX Trust | ||||||||||||
6.465% due 10/25/2063 þ | 992 | 1,005 | ||||||||||
OPEN Trust | ||||||||||||
8.451% due 10/15/2028 | 494 | 496 | ||||||||||
PRKCM Trust | ||||||||||||
7.225% due 11/25/2058 þ | 983 | 1,009 | ||||||||||
PRPM LLC | ||||||||||||
4.000% due 11/25/2053 þ | 487 | 463 | ||||||||||
PRPM Trust | ||||||||||||
6.221% due 11/25/2068 þ | 1,000 | 1,005 | ||||||||||
SMRT Commercial Mortgage Trust | ||||||||||||
6.362% due 01/15/2039 • | 500 | 490 | ||||||||||
Towd Point Mortgage Trust | ||||||||||||
3.000% due 06/25/2058 ~ | 1,925 | 1,800 | ||||||||||
Verus Securitization Trust | ||||||||||||
6.259% due 12/25/2068 þ | 1,000 | 1,008 | ||||||||||
6.876% due 11/25/2068 | 996 | 1,016 | ||||||||||
Wells Fargo Commercial Mortgage Trust | ||||||||||||
8.967% due 02/15/2037 | 3,000 | 2,870 | ||||||||||
Total Non-Agency Mortgage-Backed Securities (Cost $21,402) | 21,629 | |||||||||||
SHARES | ||||||||||||
COMMON STOCKS 51.7% | ||||||||||||
COMMUNICATION SERVICES 2.6% | ||||||||||||
AT&T, Inc. | 1,575,600 | 26,439 | ||||||||||
CONSUMER STAPLES 0.4% | ||||||||||||
Kenvue, Inc. | 200,900 | 4,325 | ||||||||||
See Accompanying Notes | SEMIANNUAL REPORT | DECEMBER 31, 2023 | 21 |
SHARES | MARKET VALUE (000S) | |||||||||||
ENERGY 25.4% | ||||||||||||
Antero Midstream Corp. | 1,145,100 | $ | 14,348 | |||||||||
Antero Resources Corp. (c) | 369,500 | 8,380 | ||||||||||
Chesapeake Energy Corp. | 132,750 | 10,214 | ||||||||||
Devon Energy Corp. | 52,800 | 2,392 | ||||||||||
Diamondback Energy, Inc. | 82,100 | 12,732 | ||||||||||
DTE Midstream, Inc. | 284,000 | 15,563 | ||||||||||
EnLink Midstream LLC | 1,414,100 | 17,195 | ||||||||||
EQT Corp. | 325,750 | 12,594 | ||||||||||
Kinder Morgan, Inc. | 1,165,400 | 20,558 | ||||||||||
Marathon Oil Corp. | 516,400 | 12,476 | ||||||||||
Occidental Petroleum Corp. | 84,983 | 5,074 | ||||||||||
ONEOK, Inc. | 367,100 | 25,778 | ||||||||||
Plains GP Holdings LP ‘A’ (h) | 1,358,300 | 21,665 | ||||||||||
Targa Resources Corp. | 470,300 | 40,855 | ||||||||||
Williams Cos., Inc. | 1,038,700 | 36,178 | ||||||||||
256,002 | ||||||||||||
FINANCIALS 21.1% | ||||||||||||
Intelsat Emergence SA «(c)(i) | 21,303 | 607 | ||||||||||
Venture Global Holdings Cls ‘A’ «(c)(i) | 3,473 | 211,763 | ||||||||||
212,370 | ||||||||||||
HEALTH CARE 1.6% | ||||||||||||
Organon & Co. | 1,104,700 | 15,930 | ||||||||||
INDUSTRIALS 0.5% | ||||||||||||
AP Moller - Maersk AS ‘B’ | 2,600 | 4,674 | ||||||||||
UTILITIES 0.1% | ||||||||||||
Orsted AS | 22,300 | 1,236 | ||||||||||
Total Common Stocks (Cost $246,096) | 520,976 | |||||||||||
MASTER LIMITED PARTNERSHIPS 8.2% | ||||||||||||
ENERGY 8.2% | ||||||||||||
Energy Transfer LP | 3,011,483 | 41,558 | ||||||||||
Enterprise Products Partners LP | 330,687 | 8,714 | ||||||||||
MPLX LP | 383,500 | 14,082 |
SHARES | MARKET VALUE (000S) | |||||||||||
Plains All American Pipeline LP | 403,400 | $ | 6,112 | |||||||||
Western Midstream Partners LP | 429,768 | 12,575 | ||||||||||
Total Master Limited Partnerships (Cost $73,393) | 83,041 | |||||||||||
PRINCIPAL AMOUNT (000S) | ||||||||||||
SHORT-TERM INSTRUMENTS 9.5% | ||||||||||||
REPURCHASE AGREEMENTS (j) 7.5% | ||||||||||||
75,586 | ||||||||||||
U.S. TREASURY BILLS 2.0% | ||||||||||||
5.369% due 01/30/2024 (d)(e) | $ | 20,000 | 19,918 | |||||||||
Total Short-Term Instruments (Cost $95,504) | 95,504 | |||||||||||
Total Investments in Securities (Cost $644,373) | 935,060 | |||||||||||
SHARES | ||||||||||||
INVESTMENTS IN AFFILIATES 9.3% | ||||||||||||
SHORT-TERM INSTRUMENTS 9.3% | ||||||||||||
CENTRAL FUNDS USED FOR CASH MANAGEMENT PURPOSES 9.3% | ||||||||||||
PIMCO Short-Term Floating NAV Portfolio III | 9,678,351 | 94,141 | ||||||||||
Total Short-Term Instruments (Cost $94,127) | 94,141 | |||||||||||
Total Investments in Affiliates (Cost $94,127) | 94,141 | |||||||||||
Total Investments 102.1% (Cost $738,500) | $ | 1,029,201 | ||||||||||
Financial Derivative Instruments (k)(l) 2.3% (Cost or Premiums, net $0) | 22,792 | |||||||||||
Other Assets and Liabilities, net (4.4)% | (44,394 | ) | ||||||||||
Net Assets 100.0% | $ | 1,007,599 | ||||||||||
22 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
* | A zero balance may reflect actual amounts rounding to less than one thousand. |
« | 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. |
þ | Coupon represents a rate which changes periodically based on a predetermined schedule or event. Rate shown is the rate in effect as of period end. |
(a) | When-issued security. |
(b) | Payment in-kind security. |
(c) | Security did not produce income within the last twelve months. |
(d) | Zero coupon security. |
(e) | Coupon represents a yield to maturity. |
(f) | Comprises of a debt issuance of a qualified publicly-traded partnership (“QPTP”). |
(g) | As a result of the completion of a recent corporation action, common units of the previous QPTP are no longer publicly traded. The succeeding entity per the respective corporate action is treated as a Corporation for U.S. Tax purposes. |
(h) | This Company is structured like a Master Limited Partnership, but is not treated as a QPTP for required regulated investment company (“RIC”) asset diversification purposes. |
Issuer Description | Acquisition Date | Cost | Market Value | Market Value as Percentage of Net Assets | ||||||||||||
Intelsat Emergence SA | 02/05/2020 - 07/03/2023 | $ | 1,699 | $ | 607 | 0.06 | % | |||||||||
Venture Global Holdings Cls ‘A’ | 06/27/2019 - 09/07/2022 | 22,361 | 211,763 | 21.02 | ||||||||||||
$ | 24,060 | $ | 212,370 | 21.08 | % | |||||||||||
Counterparty | Lending Rate | Settlement Date | Maturity Date | Principal Amount | Collateralized By | Collateral (Received) | Repurchase Agreements, at Value | Repurchase Agreement Proceeds to be Received (1) | ||||||||||||||||||||||
BOS | 5.420 | % | 12/29/2023 | 01/02/2024 | $ | 26,500 | U.S. Treasury Notes 3.625% due 03/31/2030 | $ | (27,070 | ) | $ | 26,500 | $ | 26,516 | ||||||||||||||||
5.450 | 01/02/2024 | 01/03/2024 | 100 | U.S. Treasury Notes 3.500% due 01/31/2028 | (103 | ) | 100 | 100 | ||||||||||||||||||||||
5.490 | 01/02/2024 | 01/03/2024 | 22,800 | U.S. Treasury Notes 0.750% due 04/30/2026 | (23,264 | ) | 22,800 | 22,800 | ||||||||||||||||||||||
DEU | 5.420 | 12/29/2023 | 01/02/2024 | 25,900 | U.S. Treasury Bonds 2.000% due 11/15/2041 | (26,399 | ) | 25,900 | 25,916 | |||||||||||||||||||||
SSB | 2.600 | 12/29/2023 | 01/02/2024 | 286 | U.S. Treasury Notes 0.250% due 07/31/2025 (2) | (292 | ) | 286 | 286 | |||||||||||||||||||||
Total Repurchase Agreements | $ | (77,128 | ) | $ | 75,586 | $ | 75,618 | |||||||||||||||||||||||
See Accompanying Notes | SEMIANNUAL REPORT | DECEMBER 31, 2023 | 23 |
Counterparty | Repurchase Agreement Proceeds to be Received (1) | Payable for Reverse Repurchase Agreements | Payable for Sale-Buyback Transactions | Total Borrowings and Other Financing Transactions | Collateral Pledged/ (Received) | Net Exposure (3) | ||||||||||||||||||
Global/Master Repurchase Agreement | ||||||||||||||||||||||||
BOS | $ | 49,416 | $ | 0 | $ | 0 | $ | 49,416 | $ | (50,437 | ) | $ | (1,021 | ) | ||||||||||
DEU | 25,916 | 0 | 0 | 25,916 | (26,399 | ) | (483 | ) | ||||||||||||||||
SSB | 286 | 0 | 0 | 286 | (292 | ) | (6 | ) | ||||||||||||||||
Total Borrowings and Other Financing Transactions | $ | 75,618 | $ | 0 | $ | 0 | ||||||||||||||||||
(1) | Includes accrued interest. |
(2) | Collateral is held in custody by the counterparty. |
(3) | Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Netting Arrangements, in the Notes to Financial Statements for more information. |
Description | Expiration Month | # of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | Variation Margin | |||||||||||||||||||||||
Asset | Liability | |||||||||||||||||||||||||||
California Carbon Allowance December Futures | 12/2024 | 606 | $ | 25,646 | $ | 1,459 | $ | 6 | $ | 0 | ||||||||||||||||||
Natural Gas October Futures | 09/2024 | 141 | 3,866 | (1,678 | ) | 0 | (24 | ) | ||||||||||||||||||||
$ | (219 | ) | $ | 6 | $ | (24 | ) | |||||||||||||||||||||
Description | Expiration Month | # of Contracts | Notional Amount | Unrealized Appreciation/ (Depreciation) | Variation Margin | |||||||||||||||||||||||
Asset | Liability | |||||||||||||||||||||||||||
Natural Gas December Futures | 11/2024 | 141 | $ | (4,990 | ) | $ | (141 | ) | $ | 0 | $ | (6 | ) | |||||||||||||||
Total Futures Contracts | $ | (360 | ) | $ | 6 | $ | (30 | ) | ||||||||||||||||||||
24 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Financial Derivative Assets | Financial Derivative Liabilities | |||||||||||||||||||||||||||||||||||
Market Value | Variation Margin Asset | Market Value | Variation Margin Liability | |||||||||||||||||||||||||||||||||
Purchased Options | Futures | Swap Agreements | Total | Written Options | Futures | Swap Agreements | Total | |||||||||||||||||||||||||||||
Total Exchange-Traded or Centrally Cleared | $ | 0 | $ | 6 | $ | 0 | $ | 6 | $ | 0 | $ | (30 | ) | $ | 0 | $ | (30 | ) | ||||||||||||||||||
Counterparty | Settlement Month | Currency to be Delivered | Currency to be Received | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||
Asset | Liability | |||||||||||||||||||||||||||
BOA | 01/2024 | GBP | 119 | $ | 151 | $ | 0 | $ | (1 | ) | ||||||||||||||||||
BPS | 01/2024 | DKK | 26,355 | 3,887 | 0 | (16 | ) | |||||||||||||||||||||
01/2024 | EUR | 178 | 195 | 0 | (2 | ) | ||||||||||||||||||||||
01/2024 | $ | 956 | EUR | 882 | 18 | 0 | ||||||||||||||||||||||
CBK | 01/2024 | 516 | 477 | 11 | 0 | |||||||||||||||||||||||
GLM | 01/2024 | CAD | 7,138 | $ | 5,253 | 0 | (135 | ) | ||||||||||||||||||||
01/2024 | DKK | 34,915 | 5,150 | 0 | (22 | ) | ||||||||||||||||||||||
MBC | 01/2024 | EUR | 385 | 417 | 0 | (8 | ) | |||||||||||||||||||||
01/2024 | $ | 2,823 | EUR | 2,572 | 17 | 0 | ||||||||||||||||||||||
SCX | 01/2024 | 13 | 12 | 0 | 0 | |||||||||||||||||||||||
UAG | 01/2024 | 412 | 375 | 2 | 0 | |||||||||||||||||||||||
Total Forward Foreign Currency Contracts | $ | 48 | $ | (184 | ) | |||||||||||||||||||||||
Counterparty | Pay/ Receive (1) | Underlying Reference | # of Units | Financing Rate | Payment Frequency | Maturity Date | Notional Amount | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | Swap Agreements, at Value | ||||||||||||||||||||||||||
Asset | Liability | |||||||||||||||||||||||||||||||||||
FAR | Receive | AMZX Index | 18,621 | 5.880% (1-Month USD-LIBOR plus a specified spread) | Maturity | 08/21/2024 | $ | 32,132 | $ | 0 | $ | 2,271 | $ | 2,271 | $ | 0 | ||||||||||||||||||||
Receive | AMZX Index | 12,287 | 5.860% (1-Month USD-LIBOR plus a specified spread) | Maturity | 01/08/2025 | 23,281 | 0 | (196 | ) | 0 | (196 | ) | ||||||||||||||||||||||||
Receive | AMZX Index | 16,268 | 5.920% (1-Month USD-LIBOR plus a specified spread) | Maturity | 01/22/2025 | 30,627 | 0 | 6 | 6 | 0 |
See Accompanying Notes | SEMIANNUAL REPORT | DECEMBER 31, 2023 | 25 |
Counterparty | Pay/ Receive (1) | Underlying Reference | # of Units | Financing Rate | Payment Frequency | Maturity Date | Notional Amount | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | Swap Agreements, at Value | ||||||||||||||||||||||||||
Asset | Liability | |||||||||||||||||||||||||||||||||||
JPM | Receive | Alerian Midstream Energy Total Return Index | 16,689 | 6.010% (1-Month USD-LIBOR plus a specified spread) | Maturity | 11/06/2024 | $ | 12,400 | $ | 0 | $ | 603 | $ | 603 | $ | 0 | ||||||||||||||||||||
Receive | AMZX Index | 12,312 | 5.880% (1-Month USD-LIBOR plus a specified spread) | Maturity | 01/22/2025 | 22,681 | 0 | 479 | 479 | 0 | ||||||||||||||||||||||||||
MYI | Receive | Alerian Midstream Energy Total Return Index | 23,390 | 5.360% (1-Month USD-LIBOR plus a specified spread) | Maturity | 01/22/2025 | 18,180 | 0 | 261 | 261 | 0 | |||||||||||||||||||||||||
$ | 0 | $ | 3,424 | $ | 3,620 | $ | (196 | ) | ||||||||||||||||||||||||||||
Counterparty | Pay/ Receive (1) | Underlying Reference | # of Shares | Financing Rate | Payment Frequency | Maturity Date | Notional Amount | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | Swap Agreements, at Value | ||||||||||||||||||||||||||
Asset | Liability | |||||||||||||||||||||||||||||||||||
BOA | Receive | Energy Transfer LP | 1,143,495 | 5.850% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/07/2024 | $ | 14,328 | $ | 0 | $ | 2,062 | $ | 2,062 | $ | 0 | ||||||||||||||||||||
Receive | Enterprise Products Partners LP | 702,000 | 5.770% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/07/2024 | 17,929 | 0 | 968 | 968 | 0 | ||||||||||||||||||||||||||
Receive | MPLX LP | 710,500 | 5.770% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/07/2024 | 24,017 | 0 | 2,800 | 2,800 | 0 | ||||||||||||||||||||||||||
Receive | Plains All American Pipeline LP | 936,200 | 5.860% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/07/2024 | 12,018 | 0 | 2,372 | 2,372 | 0 | ||||||||||||||||||||||||||
Receive | Western Gas Partners LP | 779,700 | 5.760% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/07/2024 | 21,238 | 0 | 2,052 | 2,052 | 0 | ||||||||||||||||||||||||||
Receive | Plains All American Pipeline LP | 170,000 | 5.830% (1-Month USD-LIBOR plus a specified spread) | Monthly | 11/13/2024 | 2,576 | 0 | (13 | ) | 0 | (13 | ) | ||||||||||||||||||||||||
FAR | Receive | Energy Transfer LP | 1,131,421 | 5.810% (1-Month USD-LIBOR plus a specified spread) | Maturity | 03/13/2024 | 14,460 | 0 | 1,462 | 1,462 | 0 | |||||||||||||||||||||||||
Receive | Enterprise Products Partners LP | 670,000 | 5.810% (1-Month USD-LIBOR plus a specified spread) | Maturity | 03/13/2024 | 17,319 | 0 | 441 | 441 | 0 | ||||||||||||||||||||||||||
Receive | MPLX LP | 318,000 | 5.810% (1-Month USD-LIBOR plus a specified spread) | Maturity | 03/13/2024 | 11,000 | 0 | 874 | 874 | 0 | ||||||||||||||||||||||||||
Receive | Plains All American Pipeline LP | 152,000 | 5.810% (1-Month USD-LIBOR plus a specified spread) | Maturity | 03/13/2024 | 1,933 | 0 | 392 | 392 | 0 | ||||||||||||||||||||||||||
Receive | Western Gas Partners LP | 216,550 | 5.810% (1-Month USD-LIBOR plus a specified spread) | Maturity | 03/13/2024 | 6,055 | 0 | 401 | 401 | 0 | ||||||||||||||||||||||||||
Receive | Plains All American Pipeline LP | 706,000 | 5.860% (1-Month USD-LIBOR plus a specified spread) | Maturity | 11/06/2024 | 11,084 | 0 | (334 | ) | 0 | (334 | ) | ||||||||||||||||||||||||
Receive | Western Gas Partners LP | 410,000 | 5.860% (1-Month USD-LIBOR plus a specified spread) | Maturity | 11/06/2024 | 11,341 | 0 | 754 | 754 | 0 | ||||||||||||||||||||||||||
GST | Receive | Energy Transfer LP | 938,239 | 5.930% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/21/2024 | 11,737 | 0 | 1,717 | 1,717 | 0 |
26 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Counterparty | Pay/ Receive (1) | Underlying Reference | # of Shares | Financing Rate | Payment Frequency | Maturity Date | Notional Amount | Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | Swap Agreements, at Value | ||||||||||||||||||||||||||
Asset | Liability | |||||||||||||||||||||||||||||||||||
Receive | Enterprise Products Partners LP | 398,000 | 5.930% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/21/2024 | $ | 10,006 | $ | 0 | $ | 713 | $ | 713 | $ | 0 | |||||||||||||||||||||
Receive | MPLX LP | 399,000 | 5.930% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/21/2024 | 13,550 | 0 | 1,613 | 1,613 | 0 | ||||||||||||||||||||||||||
Receive | Plains All American Pipeline LP | 274,000 | 5.930% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/21/2024 | 3,318 | 0 | 941 | 941 | 0 | ||||||||||||||||||||||||||
Receive | Western Gas Partners LP | 117,425 | 5.930% (1-Month USD-LIBOR plus a specified spread) | Maturity | 02/21/2024 | 3,235 | 0 | 313 | 313 | 0 | ||||||||||||||||||||||||||
$ | 0 | $ | 19,528 | $ | 19,875 | $ | (347 | ) | ||||||||||||||||||||||||||||
Total Swap Agreements | $ | 0 | $ | 22,952 | $ | 23,495 | $ | (543 | ) | |||||||||||||||||||||||||||
Financial Derivative Assets | Financial Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Purchased Options | Swap Agreements | Total Over the Counter | Forward Foreign Currency Contracts | Written Options | Swap Agreements | Total Over the Counter | Net Market Value of OTC Derivatives | Collateral Pledged/ (Received) | Net Exposure (2) | |||||||||||||||||||||||||||||||||||||
BOA | $ | 0 | $ | 0 | $ | 10,254 | $ | 10,254 | $ | (1 | ) | $ | 0 | $ | (13 | ) | $ | (14 | ) | $ | 10,240 | $ | (10,040 | ) | $ | 200 | ||||||||||||||||||||||
BPS | 18 | 0 | 0 | 18 | (18 | ) | 0 | 0 | (18 | ) | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
CBK | 11 | 0 | 0 | 11 | 0 | 0 | 0 | 0 | 11 | 0 | 11 | |||||||||||||||||||||||||||||||||||||
FAR | 0 | 0 | 6,601 | 6,601 | 0 | 0 | (530 | ) | (530 | ) | 6,071 | (1,648 | ) | 4,423 | ||||||||||||||||||||||||||||||||||
GLM | 0 | 0 | 0 | 0 | (157 | ) | 0 | 0 | (157 | ) | (157 | ) | 0 | (157 | ) | |||||||||||||||||||||||||||||||||
GST | 0 | 0 | 5,297 | 5,297 | 0 | 0 | 0 | 0 | 5,297 | (5,130 | ) | 167 | ||||||||||||||||||||||||||||||||||||
JPM | 0 | 0 | 1,082 | 1,082 | 0 | 0 | 0 | 0 | 1,082 | (1,140 | ) | (58 | ) | |||||||||||||||||||||||||||||||||||
MBC | 17 | 0 | 0 | 17 | (8 | ) | 0 | 0 | (8 | ) | 9 | 0 | 9 | |||||||||||||||||||||||||||||||||||
MYI | 0 | 0 | 261 | 261 | 0 | 0 | 0 | 0 | 261 | (300 | ) | (39 | ) | |||||||||||||||||||||||||||||||||||
UAG | 2 | 0 | 0 | 2 | 0 | 0 | 0 | 0 | 2 | 0 | 2 | |||||||||||||||||||||||||||||||||||||
Total Over the Counter | $ | 48 | $ | 0 | $ | 23,495 | $ | 23,543 | $ | (184 | ) | $ | 0 | $ | (543 | ) | $ | (727 | ) | |||||||||||||||||||||||||||||
(1) | Receive represents that the Fund receives payments for any positive net return on the underlying reference. The Fund makes payments for any negative net return on such underlying reference. Pay represents that the Fund receives payments for any negative net return on the underlying reference. The Fund makes payments for any positive net return on such underlying reference. |
(2) | Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC derivatives can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Netting Arrangements, in the Notes to Financial Statements for more information. |
See Accompanying Notes | SEMIANNUAL REPORT | DECEMBER 31, 2023 | 27 |
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||
Commodity Contracts | Credit Contracts | Equity Contracts | Foreign Exchange Contracts | Interest Rate Contracts | Total | |||||||||||||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||||||||||
Exchange-traded or centrally cleared | ||||||||||||||||||||||||
Futures | $ | 6 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 6 | ||||||||||||
Over the counter | ||||||||||||||||||||||||
Forward Foreign Currency Contracts | $ | 0 | $ | 0 | $ | 0 | $ | 48 | $ | 0 | $ | 48 | ||||||||||||
Swap Agreements | 0 | 0 | 23,495 | 0 | 0 | 23,495 | ||||||||||||||||||
$ | 0 | $ | 0 | $ | 23,495 | $ | 48 | $ | 0 | $ | 23,543 | |||||||||||||
$ | 6 | $ | 0 | $ | 23,495 | $ | 48 | $ | 0 | $ | 23,549 | |||||||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||||||||||
Exchange-traded or centrally cleared | ||||||||||||||||||||||||
Futures | $ | 30 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 30 | ||||||||||||
Over the counter | ||||||||||||||||||||||||
Forward Foreign Currency Contracts | $ | 0 | $ | 0 | $ | 0 | $ | 184 | $ | 0 | $ | 184 | ||||||||||||
Swap Agreements | 0 | 0 | 543 | 0 | 0 | 543 | ||||||||||||||||||
$ | 0 | $ | 0 | $ | 543 | $ | 184 | $ | 0 | $ | 727 | |||||||||||||
$ | 30 | $ | 0 | $ | 543 | $ | 184 | $ | 0 | $ | 757 | |||||||||||||
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||
Commodity Contracts | Credit Contracts | Equity Contracts | Foreign Exchange Contracts | Interest Rate Contracts | Total | |||||||||||||||||||
Net Realized Gain (Loss) on Financial Derivative Instruments | ||||||||||||||||||||||||
Exchange-traded or centrally cleared | ||||||||||||||||||||||||
Written Options | $ | 60 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 60 | ||||||||||||
Futures | 12,739 | 0 | 0 | 0 | 0 | 12,739 | ||||||||||||||||||
Swap Agreements | 0 | 0 | 0 | 0 | 13,260 | 13,260 | ||||||||||||||||||
$ | 12,799 | $ | 0 | $ | 0 | $ | 0 | $ | 13,260 | $ | 26,059 | |||||||||||||
Over the counter | ||||||||||||||||||||||||
Forward Foreign Currency Contracts | $ | 0 | $ | 0 | $ | 0 | $ | 202 | $ | 0 | $ | 202 | ||||||||||||
Swap Agreements | 0 | 0 | 14,770 | 0 | 0 | 14,770 | ||||||||||||||||||
$ | 0 | $ | 0 | $ | 14,770 | $ | 202 | $ | 0 | $ | 14,972 | |||||||||||||
$ | 12,799 | $ | 0 | $ | 14,770 | $ | 202 | $ | 13,260 | $ | 41,031 | |||||||||||||
28 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||
Commodity Contracts | Credit Contracts | Equity Contracts | Foreign Exchange Contracts | Interest Rate Contracts | Total | |||||||||||||||||||
Net Change in Unrealized Appreciation (Depreciation) on Financial Derivative Instruments | ||||||||||||||||||||||||
Exchange-traded or centrally cleared | ||||||||||||||||||||||||
Written Options | $ | (10 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | (10 | ) | ||||||||||
Futures | (1,319 | ) | 0 | 0 | 0 | 0 | (1,319 | ) | ||||||||||||||||
Swap Agreements | 0 | 0 | 0 | 0 | (12,502 | ) | (12,502 | ) | ||||||||||||||||
$ | (1,329 | ) | $ | 0 | $ | 0 | $ | 0 | $ | (12,502 | ) | $ | (13,831 | ) | ||||||||||
Over the counter | ||||||||||||||||||||||||
Forward Foreign Currency Contracts | $ | 0 | $ | 0 | $ | 0 | $ | 485 | $ | 0 | $ | 485 | ||||||||||||
Swap Agreements | 0 | 0 | 12,369 | 0 | 0 | 12,369 | ||||||||||||||||||
$ | 0 | $ | 0 | $ | 12,369 | $ | 485 | $ | 0 | $ | 12,854 | |||||||||||||
$ | (1,329 | ) | $ | 0 | $ | 12,369 | $ | 485 | $ | (12,502 | ) | $ | (977 | ) | ||||||||||
Category and Subcategory | Level 1 | Level 2 | Level 3 | Fair Value at 12/31/2023 | ||||||||||||
Investments in Securities, at Value | ||||||||||||||||
Loan Participations and Assignments | $ | 0 | $ | 18,420 | $ | 4,505 | $ | 22,925 | ||||||||
Corporate Bonds & Notes | ||||||||||||||||
Banking & Finance | 0 | 12,580 | 0 | 12,580 | ||||||||||||
Industrials | 0 | 147,388 | 0 | 147,388 | ||||||||||||
Utilities | 0 | 31,017 | 0 | 31,017 | ||||||||||||
Non-Agency Mortgage-Backed Securities | 0 | 21,629 | 0 | 21,629 | ||||||||||||
Common Stocks | ||||||||||||||||
Communication Services | 26,439 | 0 | 0 | 26,439 | ||||||||||||
Consumer Staples | 4,325 | 0 | 0 | 4,325 | ||||||||||||
Energy | 256,002 | 0 | 0 | 256,002 | ||||||||||||
Financials | 0 | 0 | 212,370 | 212,370 | ||||||||||||
Health Care | 15,930 | 0 | 0 | 15,930 | ||||||||||||
Industrials | 0 | 4,674 | 0 | 4,674 | ||||||||||||
Utilities | 0 | 1,236 | 0 | 1,236 | ||||||||||||
Master Limited Partnerships | ||||||||||||||||
Energy | 83,041 | 0 | 0 | 83,041 | ||||||||||||
Short-Term Instruments | ||||||||||||||||
Repurchase Agreements | 0 | 75,586 | 0 | 75,586 | ||||||||||||
U.S. Treasury Bills | 0 | 19,918 | 0 | 19,918 | ||||||||||||
$ | 385,737 | $ | 332,448 | $ | 216,875 | $ | 935,060 | |||||||||
Investments in Affiliates, at Value | ||||||||||||||||
Short-Term Instruments | ||||||||||||||||
Central Funds Used for Cash Management Purposes | $ | 94,141 | $ | 0 | $ | 0 | $ | 94,141 | ||||||||
Total Investments | $ | 479,878 | $ | 332,448 | $ | 216,875 | $ | 1,029,201 | ||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||
Exchange-traded or centrally cleared | 6 | 0 | 0 | 6 | ||||||||||||
Over the counter | 0 | 23,543 | 0 | 23,543 | ||||||||||||
$ | 6 | $ | 23,543 | $ | 0 | $ | 23,549 |
See Accompanying Notes | SEMIANNUAL REPORT | DECEMBER 31, 2023 | 29 |
Category and Subcategory | Level 1 | Level 2 | Level 3 | Fair Value at 12/31/2023 | ||||||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||
Exchange-traded or centrally cleared | $ | (30 | ) | $ | 0 | $ | 0 | $ | (30 | ) | ||||||
Over the counter | 0 | (727 | ) | 0 | (727 | ) | ||||||||||
$ | (30 | ) | $ | (727 | ) | $ | 0 | $ | (757 | ) | ||||||
Total Financial Derivative Instruments | $ | (24 | ) | $ | 22,816 | $ | 0 | $ | 22,792 | |||||||
Totals | $ | 479,854 | $ | 355,264 | $ | 216,875 | $ | 1,051,993 | ||||||||
Category and Subcategory | Beginning Balance at 06/30/2023 | Net Purchases | Net Sales/ Settlements | 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 12/31/2023 | Net Change in Unrealized Appreciation/ (Depreciation) on Investments Held at 12/31/2023 (1) | ||||||||||||||||||||||||||||||
Investments in Securities, at Value | ||||||||||||||||||||||||||||||||||||||||
Loan Participations and Assignments | $ | 3,720 | $ | 4,444 | $ | (4,011 | ) | $ | 21 | $ | 283 | $ | 48 | $ | 0 | $ | 0 | $ | 4,505 | $ | 68 | |||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Energy | 100,536 | 0 | (22,361 | ) | 0 | 0 | (78,175 | ) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Financials | 489 | 22,361 | 0 | 0 | 0 | 189,520 | 0 | 0 | 212,370 | 189,520 | ||||||||||||||||||||||||||||||
Rights | ||||||||||||||||||||||||||||||||||||||||
Financials | 11 | 0 | (21 | ) | 0 | 21 | (11 | ) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||||||||||
Financials | 16 | 0 | (21 | ) | 0 | 21 | (16 | ) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Totals | $ | 104,772 | $ | 26,805 | $ | (26,414 | ) | $ | 21 | $ | 325 | $ | 111,366 | $ | 0 | $ | 0 | $ | 216,875 | $ | 189,588 | |||||||||||||||||||
Category and Subcategory | Ending Balance at 12/31/2023 | Valuation Technique | Unobservable Inputs | (% Unless Noted Otherwise) | ||||||||||||||||||||||
Input Value(s) | Weighted Average | |||||||||||||||||||||||||
Investments in Securities, at Value | ||||||||||||||||||||||||||
Loan Participations and Assignments | $ | 4,505 | Discounted Cash Flow | Discount Rate | 10.440 | — | ||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||
Financials | 211,763 | Comparable Companies/Discounted Cash Flow | Multiple/Discount Rate | X/ | % | 10.400/16.250 | — | |||||||||||||||||||
607 | Comparable Companies | EBITDA Multiple | X | 4.000 | — | |||||||||||||||||||||
Total | $ | 216,875 | ||||||||||||||||||||||||
(1) | Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at December 31, 2023 may be due to an investment no longer held or categorized as Level 3 at period end. |
30 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 31 |
32 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 33 |
34 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 35 |
36 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 37 |
∎ | Level 1 — Quoted prices (unadjusted) 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 Valuation Designee that are used in determining the fair value of investments. |
38 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 39 |
40 | PIMCO CLOSED-END FUNDS |
Market Value 06/30/2023 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Market Value 12/31/2023 | Dividend Income (1) | Realized Net Capital Gain Distributions (1) | |||||||||||||||||||||||
$ | 0 | $ | 148,773 | $ | (54,650) | $ | 3 | $ | 15 | $ | 94,141 | $ | 414 | $ | 0 |
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
(1) | The tax characterization of distributions is determined in accordance with Federal income tax regulations and may contain a return of capital. The actual tax characterization of distributions received is determined at the end of the fiscal year of the affiliated fund. See Note 2, Distributions to Shareholders, in the Notes to Financial Statements for more information. |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 41 |
42 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 43 |
44 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 45 |
46 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 47 |
48 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 49 |
50 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 51 |
52 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 53 |
54 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 55 |
56 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 57 |
58 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 59 |
60 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 61 |
62 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 63 |
64 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 65 |
66 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 67 |
68 | PIMCO CLOSED-END FUNDS |
U.S. Government/Agency | All Other | |||||||||||||
Purchases | Sales | Purchases | Sales | |||||||||||
$ | 169,995 | $ | 380,156 | $ | 288,294 | $ | 295,274 | |||||||
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 69 |
Fund name | Subsidiary | Date of Formation | Subsidiary % of Consolidated Fund Net Assets | |||||||||||
PIMCO Dynamic Income Strategy Fund | Cayman Commodity Fund IX Ltd. | 12/14/2018 | 2.8% | |||||||||||
PIMCO Dynamic Income Strategy Fund | NRGX SPV I LLC | 11/07/2022 | 0.8% | |||||||||||
PIMCO Dynamic Income Strategy Fund | NRGX SPV II LLC | 11/07/2022 | 0.0% |
70 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 71 |
72 | PIMCO CLOSED-END FUNDS |
Short-Term | Long-Term | |||||
$ | 7,686 | $ | 132,681 |
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
Federal Tax Cost | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) (1) | |||||||||||
$ | 738,500 | $ | 326,578 | $ | (13,421) | $ | 313,157 |
† | A zero balance may reflect actual amounts rounding to less than one thousand. |
(1) | Primary differences, if any, between book and tax net unrealized appreciation/(depreciation) are attributable to wash sale loss deferrals for federal income tax purposes. |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 73 |
Counterparty Abbreviations: | ||||||
BOA | Bank of America N.A. | JPM | JP Morgan Chase Bank N.A. | |||
BOS | BofA Securities, Inc. | MBC | HSBC Bank Plc | |||
BPS | BNP Paribas S.A. | MYI | Morgan Stanley & Co. International PLC | |||
CBK | Citibank N.A. | PER | Pershing LLC | |||
DEU | Deutsche Bank Securities, Inc. | SCX | Standard Chartered Bank, London | |||
FAR | Wells Fargo Bank National Association | SSB | State Street Bank and Trust Co. | |||
GLM | Goldman Sachs Bank USA | UAG | UBS AG Stamford | |||
GST | Goldman Sachs International | |||||
Currency Abbreviations: | ||||||
CAD | Canadian Dollar | GBP | British Pound | |||
DKK | Danish Krone | USD (or $) | United States Dollar | |||
EUR | Euro | |||||
Exchange Abbreviations: | ||||||
OTC | Over the Counter | |||||
Index/Spread Abbreviations: | ||||||
AMZX | Alerian MLP Total Return Index | |||||
Other Abbreviations: | ||||||
LIBOR | London Interbank Offered Rate | TBA | To-Be-Announced | |||
PIK | Payment-in-Kind |
74 | PIMCO CLOSED-END FUNDS |
Net Investment Income* | Net Realized Capital Gains* | Paid-in Surplus or Other Capital Sources** | Total (per common share) | |||||||||||||||||
September 2023 | $ | 0.1149 | $ | 0.0000 | $ | 0.1051 | $ | 0.2200 | ||||||||||||
December 2023 | $ | 0.0671 | $ | 0.0000 | $ | 0.1529 | $ | 0.2200 |
* | The source of dividends provided in the table differs, in some respects, from information presented in this report prepared in accordance with generally accepted accounting principles, or U.S. GAAP. For example, net earnings from certain interest rate swap contracts are included as a source of net investment income for purposes of Section 19(a). Accordingly, the information in the table may differ from information in the accompanying financial statements that are presented on the basis of U.S. GAAP and may differ from tax information presented in the footnotes. Amounts shown may include accumulated, as well as fiscal period net income and net profits. |
** | Occurs when a fund distributes an amount greater than its accumulated net income and net profits. Amounts are not reflective of a fund’s net income, yield, earnings or investment performance. |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 75 |
76 | PIMCO CLOSED-END FUNDS |
SEMIANNUAL REPORT | DECEMBER 31, 2023 | 77 |
Item | 2. Code of Ethics. |
The information required by this Item 2 is only required in an annual report on this Form N-CSR.
Item 3. | Audit Committee Financial Expert. |
The information required by this Item 3 is only required in an annual report on this Form N-CSR.
Item 4. | Principal Accountant Fees and Services. |
The information required by this Item 4 is only required in an annual report on this Form N-CSR.
Item 5. | Audit Committee of Listed Registrants. |
The information required by this Item 5 is only required in an annual report on this Form N-CSR.
Item 6. | Schedule of Investments. |
The information required by this Item 6 is included as part of the semiannual report to shareholders filed under Item 1 of this Form N-CSR.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
The information required by this Item 7 is only required in an annual report on this Form N-CSR.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
(a)(1)
As of March 4, 2024, the following individuals have primary responsibility for the day-to-day management of the PIMCO Dynamic Income Strategy Fund (the “Fund”): Prior name for PDX was PIMCO Energy and Tactical Credit Opportunities Fund.
Daniel J. Ivascyn
Mr. Ivascyn has been the lead portfolio manager of the Fund since its inception in November 2022. Mr. Ivascyn is Group Chief Investment Officer and a managing director in the Newport Beach office. Mr. Ivascyn is lead portfolio manager for the firm’s income strategies and credit hedge fund and mortgage opportunistic strategies. He is a member of PIMCO’s Executive Committee and a member of the Investment Committee. Morningstar named him Fixed-Income Fund Manager of the Year (U.S.) for 2013, and he was inducted into the Fixed Income Analysts Society Hall of Fame in 2019. Prior to joining PIMCO in 1998, he worked at Bear Stearns in the asset-backed securities group, as well as T. Rowe Price and Fidelity Investments.
Alfred T. Murata
Mr. Murata has been a portfolio manager of the Fund since its inception in January 2022. Mr. Murata is a managing director in the Newport Beach office and a portfolio manager on the mortgage credit team. Prior to joining PIMCO in 2001, he researched and implemented exotic equity and interest rate derivatives at Nikko Financial Technologies.
Giang Bui
Ms. Bui has been a portfolio manager of the Fund since October 2023. Ms. Bui is an executive vice president in the Newport Beach office and a portfolio manager and trader of securitized debt instruments and bank loans, focusing on collateralized loan obligations (CLOs), leveraged loans, asset-backed collateralized debt obligations, and off-the-run sectors within structured products. Ms Bui joined PIMCO in 2000 and is a member of the bank loan portfolio management team, responsible for bank loan investments and the management of PIMCO-issued CLOs. She has 24 years of investment
experience and holds an MBA from the Anderson School of Management at the University of California, Los Angeles and an undergraduate degree from the University of California, San Diego.
John M. Devir
Mr. Devir has been a portfolio manager of the Fund since its inception in February 2019. Mr. Devir is an executive vice president and portfolio manager in the Newport Beach office. He is the head of Americas credit research, lead analyst for global energy, and lead portfolio manager for MLP and energy infrastructure and long/short equity strategies. Prior to joining PIMCO in 2011, he was a managing director and head of equity strategies at Barclays Capital in New York.
Greg E. Sharenow
Mr. Sharenow has been a portfolio manager of the Fund since its inception in February 2019. Mr. Sharenow is a managing director and portfolio manager in the Newport Beach office, focusing on commodities and real assets. He also co-manages PIMCO’s Energy and Tactical Credit Opportunities fund. Prior to joining PIMCO in 2011, he was an energy trader at Hess Energy Trading, Goldman Sachs, and DE Shaw. Mr. Sharenow was previously senior energy economist at Goldman Sachs.
Mark R. Kiesel
Mr. Kiesel has been a portfolio manager of the Fund since its inception in February 2019. Mr. Kiesel is CIO Global Credit and a managing director in the Newport Beach office. He is a member of the PIMCO Investment Committee, a generalist portfolio manager and the global head of corporate bond portfolio management. He has served as a portfolio manager, head of equity derivatives and as a senior Credit Analyst since joining PIMCO in 1996.
(a)(2)
The following summarizes information regarding each of the accounts, excluding the Fund, managed by the Portfolio Managers as of December 31, 2023, including accounts managed by a team, committee, or other group that includes the Portfolio Managers. Unless mentioned otherwise, the advisory fee charged for managing each of the accounts listed below is not based on performance.
Registered Investment Companies
| Other Pooled Investment Vehicles
| Other Accounts
| ||||||||||
Portfolio Manager
| # | AUM($million) | # | AUM($million) | # | AUM($million) | ||||||
Daniel J. Ivascyn1
| 22 | $183,141.92 | 24 | $99,993.65 | 27 | $39,157.74 | ||||||
Alfred T. Murata2
| 22 | $187,508.17 | 22 | $46,920.92 | 6 | $1,476.14 | ||||||
Giang Bui3
| 7 | $4,251.05 | 3 | $7,190.21 | 1 | $466.66 | ||||||
John Devir
| 0 | $0.00 | 1 | $98.36 | 1 | $157.40 | ||||||
Greg Sharenow4
| 4 | $10,863.49 | 15 | $12,123.54 | 3 | $649.39 | ||||||
Mark Kiesel5
| 19 | $119,511.81 | 49 | $66,362.05 | 82 | $56,615.03 |
1 Of these Other Pooled Investment Vehicles, 10 account(s) totaling $18,483.74 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts. Of these Other Accounts, 1 account(s) totaling $318.34 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts.
2 Of these Other Pooled Investment Vehicles, 5 account(s) totaling $8,858.53 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts.
3 Of these Other Pooled Investment Vehicles, 2 account(s) totaling $6,783.38 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts.
4 Of these Other Pooled Investment Vehicles, 2 account(s) totaling $3,492.12 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts. Of these Other Accounts, 1 account(s) totaling $54.25 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts.
5 Of these Other Pooled Investment Vehicles, 2 account(s) totaling $163.98 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts. Of these Other Accounts, 2 account(s) totaling $1,593.25 million in assets pay(s) an advisory fee that is based in part on the performance of the accounts.
From time to time, potential and actual conflicts of interest may arise between a portfolio manager’s management of the investments of the Fund, on the one hand, and the management of other accounts, on the other. Potential and actual conflicts of interest may also arise as a result of PIMCO’s other business activities and PIMCO’s possession of material non-public information (“MNPI”) about an issuer. Other accounts managed by a portfolio manager might have similar investment objectives or strategies as the Fund, track the same index the Fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. The other accounts might also have different investment objectives or strategies than the Fund. Investors should be aware that investments made by the Fund and the results achieved by the Fund at any given time are not expected to be the same as those made by other funds for which PIMCO acts as investment adviser, including funds with names, investment objectives and policies, and/or portfolio management teams, similar to the Fund. This may be attributable to a wide variety of factors, including, but not limited to, the use of a different strategy or portfolio management team, when a particular fund commenced operations or the size of a particular fund, in each case as compared to other similar funds. Potential and actual conflicts of interest may also arise as a result of PIMCO serving as investment adviser to accounts that invest in the Fund or to accounts in which the Fund invests. In this case, such conflicts of interest could in theory give rise to incentives for PIMCO to, among other things, vote proxies, purchase or redeem shares of the underlying account, or take other actions with respect to the underlying account, in a manner beneficial to the investing account and/or PIMCO but detrimental to the underlying account. Such conflicts of interest could similarly in theory give rise to incentives for PIMCO to, among other things, vote proxies or purchase or redeem shares of the underlying account, or take other actions with respect to the underlying account, in a manner beneficial to the underlying account and/or PIMCO and that may or may not be detrimental to the investing account. For example, even if there is a fee waiver or reimbursement in place relating to the Fund’s investment in an underlying account, or relating to an investing account’s investment in the Fund, this will not necessarily eliminate all conflicts of interest, as PIMCO could nevertheless have a financial incentive to favor investments in PIMCO-affiliated funds and managers (for example, to increase the assets under management of PIMCO or a fund, product or line of business, or otherwise provide support to, certain funds, products or lines of business), which could also impact the manner in which certain transaction fees are set. Conversely, PIMCO’s duties to the Fund, as well as regulatory or other limitations applicable to the Fund, may affect the courses of action available to PIMCO-advised accounts (including the Fund) that invest in the Fund in a manner that is detrimental to such investing accounts. In addition, regulatory restrictions, actual or potential conflicts of interest or other considerations may cause PIMCO to restrict or prohibit participation in certain investments.
Because PIMCO is affiliated with Allianz SE, a large multi-national financial institution (together with its affiliates, “Allianz”), conflicts similar to those described below may occur between the Fund or other accounts managed by PIMCO and PIMCO’s affiliates or accounts managed by those affiliates. Those affiliates (or their clients), which generally operate autonomously from PIMCO, may take actions that are adverse to the Fund or other accounts managed by PIMCO. In many cases, PIMCO will not be in a position to mitigate those actions or address those conflicts, which could adversely affect the performance of the Fund or other accounts managed by PIMCO (each, a “Client,” and collectively, the “Clients”). In addition, because certain Clients are affiliates of PIMCO or have investors who are affiliates or employees of PIMCO, PIMCO may have incentives to resolve conflicts of interest in favor of these Clients over other Clients.
Knowledge and Timing of Fund Trades. A potential conflict of interest may arise as a result of a portfolio manager’s day-to-day management of the Fund. Because of their positions with the Fund, the portfolio managers know the size, timing and possible market impact of the Fund’s trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of the Fund.
Cross Trades. A potential conflict of interest may arise in instances where the Fund buys an instrument from a Client or sells an instrument to a Client (each, a “cross trade”). Such conflicts of interest may arise, among other reasons, as a result of PIMCO representing the interests of both the buying party and the selling party in the cross trade or because the
price at which the instrument is bought or sold through a cross trade may not be as favorable as the price that might have been obtained had the trade been executed in the open market. PIMCO effects cross trades when appropriate pursuant to procedures adopted under applicable rules and SEC guidance. Among other things, such procedures require that the cross trade is consistent with the respective investment policies and investment restrictions of both parties and is in the best interests of both the buying and selling accounts.
Investment Opportunities. A potential conflict of interest may arise as a result of a portfolio manager’s management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for one or more Clients, but may not be available in sufficient quantities for all accounts to participate fully. In addition, regulatory issues applicable to PIMCO or the Fund or other accounts may result in the Fund not receiving securities that may otherwise be appropriate for them. Similarly, there may be limited opportunity to sell an investment held by the Fund and another Client. In addition, regulatory issues applicable to PIMCO or the Fund or other accounts may result in the Fund not receiving securities that may otherwise be appropriate for it. Similarly, there may be limited opportunity to sell an investment held by the Fund and another Client. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. In addition, regulatory issues applicable to PIMCO or one or more Clients may result in certain Clients not receiving securities that may otherwise be appropriate for them.
PIMCO seeks to allocate orders across eligible Client accounts with similar investment guidelines and investment styles fairly and equitably, taking into consideration relevant factors including, among others, applicable investment restrictions and guidelines, including regulatory restrictions; Client account-specific investment objectives, restrictions and other Client instructions, as applicable; risk tolerances; amounts of available cash; the need to rebalance a Client account’s portfolio (e.g., due to investor contributions and redemptions); whether the allocation would result in a Client account receiving a trivial amount or an amount below the established minimum quantity; regulatory requirements; the origin of the investment; the bases for an issuer’s allocation to PIMCO; and other Client account-specific factors. As part of PIMCO’s trade allocation process, portions of new fixed income investment opportunities are distributed among Client account categories where the relevant portfolio managers seek to participate in the investment. Those portions are then further allocated among the Client accounts within such categories pursuant to PIMCO’s trade allocation policy. Portfolio managers managing quantitative strategies and specialized accounts, such as those focused on international securities, mortgage-backed securities, bank loans, or other specialized asset classes, will likely receive an increased distribution of new fixed income investment opportunities where the investment involves a quantitative strategy or specialized asset class that matches the investment objective or focus of the Client account category. PIMCO seeks to allocate fixed income investments to Client accounts with the general purpose of maintaining consistent concentrations across similar accounts and achieving, as nearly as possible, portfolio characteristic parity among such accounts. Client accounts furthest from achieving portfolio characteristic parity typically receive priority in allocations. With respect to an order to buy or sell an equity security in the secondary market, PIMCO seeks to allocate the order across Client accounts with similar investment guidelines and investment styles fairly and equitably over time, taking into consideration the relevant factors discussed above.
Any particular allocation decision among Client accounts may be more or less advantageous to any one Client or group of Clients, and certain allocations will, to the extent consistent with PIMCO’s fiduciary obligations, deviate from a pro rata basis among Clients in order to address for example, differences in legal, tax, regulatory, risk management, concentration, exposure, Client guideline limitations and/or mandate or strategy considerations for the relevant Clients. PIMCO may determine that an investment opportunity or particular purchases or sales are appropriate for one or more Clients, but not appropriate for other Clients, or are appropriate or suitable for, or available to, Clients but in different sizes, terms, or timing than is appropriate or suitable for other Clients. For example, some Clients have higher risk tolerances than other Clients, such as private funds, which, in turn, allows PIMCO to allocate a wider variety and/or greater percentage of certain types of investments (which may or may not outperform other types of investments) to such Clients. Further, the respective risk tolerances of different types of Clients may change over time as market conditions change. Those Clients receiving an increased allocation as a result of the effect of their respective risk tolerance may be Clients that pay higher investment management fees or that pay incentive fees. In addition, certain Client account categories focusing on certain types of investments or asset classes will be given priority in new issue distribution and allocation with respect to the investments or asset classes that are the focus of their investment mandate. PIMCO may also take into account the bases for an issuer’s allocation to PIMCO, for example, by giving priority allocations to Client accounts holding existing positions in the issuer’s debt if the issuer’s allocation to PIMCO is based on such holdings. PIMCO also may determine not to allocate to or purchase or sell for certain Clients all investments for which all Clients may be eligible. Legal, contractual, or regulatory issues and/or related expenses applicable to PIMCO or one or more Clients may result in certain Clients not receiving securities that may otherwise be appropriate for them or may result in
PIMCO selling securities out of Client accounts even if it might otherwise be beneficial to continue to hold them. Additional factors that are taken into account in the distribution and allocation of investment opportunities to Client accounts include, without limitation: ability to utilize leverage and risk tolerance of the Client account; the amount of discretion and trade authority given to PIMCO by the Client; availability of other similar investment opportunities; the Client account’s investment horizon and objectives; hedging, cash and liquidity needs of the portfolio; minimum increments and lot sizes; and underlying benchmark factors. Given all of the foregoing factors, the amount, timing, structuring, or terms of an investment by a Client, including the Fund, may differ from, and performance may be lower than, investments and performance of other Clients, including those that may provide greater fees or other compensation (including performance-based fees or allocations) to PIMCO. PIMCO has also adopted additional procedures to complement the general trade allocation policy that are designed to address potential conflicts of interest due to the side-by-side management of the Fund and certain pooled investment vehicles, including investment opportunity allocation issues.
From time to time, PIMCO may take an investment position or action for one or more Clients that may be different from, or inconsistent with, an action or position taken for one or more other Clients having similar or differing investment objectives. These positions and actions may adversely impact, or in some instances may benefit, one or more affected Clients (including Clients that are PIMCO affiliates) in which PIMCO has an interest, or which pays PIMCO higher fees or a performance fee. For example, a Client may buy a security and another Client may establish a short position in that same security. The subsequent short sale may result in a decrease in the price of the security that the other Client holds. Similarly, transactions or investments by one or more Clients may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of another Client.
When PIMCO implements for one Client a portfolio decision or strategy ahead of, or contemporaneously with, similar portfolio decisions or strategies of another Client, market impact, liquidity constraints or other factors could result in one or more Clients receiving less favorable trading results, the costs of implementing such portfolio decisions or strategies could be increased or such Clients could otherwise be disadvantaged. On the other hand, potential conflicts may also arise because portfolio decisions regarding a Client may benefit other Clients. For example, the sale of a long position or establishment of a short position for a Client may decrease the price of the same security sold short by (and therefore benefit) other Clients, and the purchase of a security or covering of a short position in a security for a Client may increase the price of the same security held by (and therefore benefit) other Clients.
Under certain circumstances, a Client may invest in a transaction in which one or more other Clients are expected to participate, or already have made or will seek to make, an investment. In addition, to the extent permitted by applicable law, a Client may also engage in investment transactions that may result in other Clients being relieved of obligations, or that may cause other Clients to divest certain investments (e.g., a Client may make a loan to, or directly or indirectly acquire securities or indebtedness of, a company that uses the proceeds to refinance or reorganize its capital structure, which could result in repayment of debt held by another Client). Such Clients (or groups of Clients) may have conflicting interests and objectives in connection with such investments, including with respect to views on the operations or activities of the issuer involved, the targeted returns from the investment and the timeframe for, and method of, exiting the investment. When making such investments, PIMCO may do so in a way that favors one Client over another Client, even if both Clients are investing in the same security at the same time. Certain Clients may invest on a “parallel” basis (i.e., proportionately in all transactions at substantially the same time and on substantially the same terms and conditions). In addition, other accounts may expect to invest in many of the same types of investments as another account. However, there may be investments in which one or more of such accounts does not invest (or invests on different terms or on a non-pro rata basis) due to factors such as legal, tax, regulatory, business, contractual or other similar considerations or due to the provisions of a Client’s governing documents. Decisions as to the allocation of investment opportunities among such Clients present numerous conflicts of interest, which may not be resolved in a manner that is favorable to a Client’s interests. To the extent an investment is not allocated pro rata among such entities, a Client could incur a disproportionate amount of income or loss related to such investment relative to such other Client.
In addition, Clients may invest alongside one another in the same underlying investments or otherwise pursuant to a substantially similar investment strategy as one or more other Clients. In such cases, certain Clients may have preferential liquidity and information rights relative to other Clients holding the same investments, with the result that such Clients will be able to withdraw/redeem their interests in underlying investments in priority to Clients who may have more limited access to information or more restrictive withdrawal/redemption rights. Clients with more limited information rights or more restrictive liquidity may therefore be adversely affected in the event of a downturn in the markets.
Further, potential conflicts may be inherent in PIMCO’s use of multiple strategies. For example, conflicts will arise in cases where different Clients invest in different parts of an issuer’s capital structure, including circumstances in which one or more Clients may own private securities or obligations of an issuer and other Clients may own or seek to acquire private securities of the same issuer. For example, a Client may acquire a loan, loan participation or a loan assignment of a particular borrower in which one or more other Clients have an equity investment, or may invest in senior debt obligations of an issuer for one Client and junior debt obligations or equity of the same issuer for another Client.
PIMCO may also, for example, direct a Client to invest in a tranche of a structured finance vehicle, such as a CLO or CDO, where PIMCO is also, at the same or different time, directing another Client to make investments in a different tranche of the same vehicle, which tranche’s interests may be adverse to other tranches. PIMCO may also cause a Client to purchase from, or sell assets to, an entity, such as a structured finance vehicle, in which other Clients may have an interest, potentially in a manner that will have an adverse effect on the other Clients. There may also be conflicts where, for example, a Client holds certain debt or equity securities of an issuer, and that same issuer has issued other debt, equity or other instruments that are owned by other Clients or by an entity, such as a structured finance vehicle, in which other Clients have an interest.
In each of the situations described above, PIMCO may take actions with respect to the assets held by one Client that are adverse to the other Clients, for example, by foreclosing on loans, by putting an issuer into default, or by exercising rights to purchase or sell to an issuer, causing an issuer to take actions adverse to certain classes of securities, or otherwise. In negotiating the terms and conditions of any such investments, or any subsequent amendments or waivers or taking any other actions, PIMCO may find that the interests of a Client and the interests of one or more other Clients could conflict. In these situations, decisions over items such as whether to make the investment or take an action, proxy voting, corporate reorganization, how to exit an investment, or bankruptcy or similar matters (including, for example, whether to trigger an event of default or the terms of any workout) may result in conflicts of interest. Similarly, if an issuer in which a Client and one or more other Clients directly or indirectly hold different classes of securities (or other assets, instruments or obligations issued by such issuer or underlying investments of such issuer) encounters financial problems, decisions over the terms of any workout will raise conflicts of interests (including, for example, conflicts over proposed waivers and amendments to debt covenants). For example, a debt holder may be better served by a liquidation of the issuer in which it may be paid in full, whereas an equity or junior bond holder might prefer a reorganization that holds the potential to create value for the equity holders. In some cases PIMCO may refrain from taking certain actions or making certain investments on behalf of Clients in order to avoid or mitigate certain conflicts of interest or to prevent adverse regulatory or other effects on PIMCO, or may sell investments for certain Clients (in each case potentially disadvantaging the Clients on whose behalf the actions are not taken, investments not made, or investments sold). In other cases, PIMCO may not refrain from taking actions or making investments on behalf of certain Clients that have the potential to disadvantage other Clients. In addition, PIMCO may take actions or refrain from taking actions in order to mitigate legal risks to PIMCO or its affiliates or its Clients even if disadvantageous to a Client’s account. Moreover, a Client may invest in a transaction in which one or more other Clients are expected to participate, or already have made or will seek to make, an investment.
Additionally, certain conflicts may exist with respect to portfolio managers who make investment decisions on behalf of several different types of Clients. Such portfolio managers may have an incentive to allocate trades, time or resources to certain Clients, including those Clients who pay higher investment management fees or that pay incentive fees or allocations, over other Clients. These conflicts may be heightened with respect to portfolio managers who are eligible to receive a performance allocation under certain circumstances as part of their compensation.
From time to time, PIMCO personnel may come into possession of MNPI which, if disclosed, might affect an investor’s decision to buy, sell or hold a security. Should a PIMCO employee come into possession of MNPI with respect to an issuer, he or she generally will be prohibited from communicating such information to, or using such information for the benefit of, Clients, which could limit the ability of Clients to buy, sell or hold certain investments, thereby limiting the investment opportunities or exit strategies available to Clients. In addition, holdings in the securities or other instruments of an issuer by PIMCO or its affiliates may affect the ability of a Client to make certain acquisitions of or enter into certain transactions with such issuer. PIMCO has no obligation or responsibility to disclose such information to, or use such information for the benefit of, any person (including Clients).
PIMCO maintains one or more restricted lists of companies whose securities are subject to certain trading prohibitions due to PIMCO’s business activities. PIMCO may restrict trading in an issuer’s securities if the issuer is on a restricted list or if PIMCO has MNPI about that issuer. In some situations, PIMCO may restrict Clients from trading in a particular issuer’s securities in order to allow PIMCO to receive MNPI on behalf of other Clients. A Client may be unable to buy or sell certain securities until the restriction is lifted, which could disadvantage the Client. PIMCO may also be restricted
from making (or divesting of) investments in respect of some Clients but not others. In some cases PIMCO may not initiate or recommend certain types of transactions, or may otherwise restrict or limit its advice relating to certain securities if a security is restricted due to MNPI or if PIMCO is seeking to limit receipt of MNPI.
PIMCO may conduct litigation or engage in other legal actions on behalf of one or more Clients. In such cases, Clients may be required to bear certain fees, costs, expenses and liabilities associated with the litigation. Other Clients that are or were investors in, or otherwise involved with, the subject investments may or may not (depending on the circumstances) be parties to such litigation actions, with the result that certain Clients may participate in litigation actions in which not all Clients with similar investments may participate, and such non-participating Clients may benefit from the results of such litigation actions without bearing or otherwise being subject to the associated fees, costs, expenses and liabilities. PIMCO, for example, typically does not pursue legal claims on behalf of its separate accounts. Furthermore, in certain situations, litigation or other legal actions pursued by PIMCO on behalf of a Client may be brought against or be otherwise adverse to a portfolio company or other investment held by a Client.
Co-Investments. The 1940 Act imposes significant limits on co-investment with affiliates of the Fund. The Fund has received exemptive relief from the SEC that, to the extent the Fund relies on such relief, permits it to (among other things) co-invest with certain other persons, including certain affiliates of the Investment Manager and certain public or private funds managed by the Investment Manager and its affiliates, subject to certain terms and conditions. Co-investment transactions may give rise to conflicts of interest or perceived conflicts of interest among the Fund and its affiliates. The exemptive relief from the SEC with respect to co-investments imposes extensive conditions on any co-investments made in reliance on such relief that may limit or restrict the Fund’s ability to participate in an investment or participate in an investment to a lesser extent. An inability to receive the desired allocation to potential investments may affect the Fund’s ability to achieve the desired investment returns. In the event investment opportunities are allocated among the Fund and its affiliates pursuant to co-investment exemptive relief, the Fund may not be able to structure its investment portfolio in the manner desired. Although PIMCO will endeavor to allocate investment opportunities in a fair and equitable manner, the Fund will generally not be permitted to co-invest in any issuer in which a fund managed by PIMCO or any of its downstream affiliates (other than the Fund and its downstream affiliates) currently has an investment. However, the Fund would be able to co-invest with funds managed by PIMCO or any of its downstream affiliates, subject to compliance with existing regulatory guidance, applicable regulations and its allocation procedures. Pursuant to co-investment exemptive relief, the Fund will be able to invest in opportunities in which PIMCO and/or its affiliates has an investment, and PIMCO and/or its affiliates will be able to invest in opportunities in which the Fund has made an investment. From time to time, the Fund and its affiliates may make investments at different levels of an issuer’s capital structure or otherwise in different classes of an issuer’s securities. Such investments inherently give rise to conflicts of interest or perceived conflicts of interest between or among the various classes of securities that may be held by such entities. PIMCO has adopted procedures governing the co-investment in securities acquired in private placements with certain clients of PIMCO.
The foregoing is not a complete list of conflicts to which PIMCO or Clients may be subject. PIMCO seeks to review conflicts on a case-by-case basis as they arise. Any review will take into consideration the interests of the relevant Clients, the circumstances giving rise to the conflict, applicable PIMCO policies and procedures, and applicable laws. Clients (and investors in the Fund) should be aware that conflicts will not necessarily be resolved in favor of their interests and may in fact be resolved in a manner adverse to their interests. PIMCO will attempt to resolve such matters fairly, but even so, matters may be resolved in favor of other Clients which pay PIMCO higher fees or performance fees or in which PIMCO or its affiliates have a significant proprietary interest. There can be no assurance that any actual or potential conflicts of interest will not result in a particular Client or group of Clients receiving less favorable investment terms in or returns from certain investments than if such conflicts of interest did not exist.
Conflicts like those described above may also occur between Clients, on the one hand, and PIMCO or its affiliates, on the other. These conflicts will not always be resolved in favor of the Client. In addition, because PIMCO is affiliated with Allianz, a large multi-national financial institution, conflicts similar to those described above may occur between clients of PIMCO and PIMCO’s affiliates or accounts managed by those affiliates. Those affiliates (or their clients), which generally operate autonomously from PIMCO, may take actions that are adverse to PIMCO’s Clients. In many cases, PIMCO will have limited or no ability to mitigate those actions or address those conflicts, which could adversely affect Client performance. In addition, certain regulatory or internal restrictions may prohibit PIMCO from using certain brokers or investing in certain companies (even if such companies are not affiliated with Allianz) because of the applicability of certain laws and regulations or internal Allianz policies applicable to PIMCO, Allianz SE or their affiliates. An account’s willingness to negotiate terms or take actions with respect to an investment may also be, directly or indirectly, constrained or otherwise impacted to the extent Allianz SE, PIMCO, and/or their affiliates, directors, partners, managers, members,
officers or personnel are also invested therein or otherwise have a connection to the subject investment (e.g., serving as a trustee or board member thereof).
Performance Fees. A portfolio manager may advise certain accounts with respect to which the advisory fee is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the portfolio manager in that the portfolio manager may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to the Fund. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities between the Fund and such other accounts on a fair and equitable basis over time.
Certain service providers to the Fund are expected to be owned by or otherwise related to or affiliated with a Client, and in certain cases, such service providers are expected to be, or are owned by, employed by, or otherwise related to, PIMCO, Allianz SE, their affiliates and/or their respective employees, consultants and other personnel. PIMCO may, in its sole discretion, determine to provide, or engage or recommend an affiliate of PIMCO to provide, certain services to the Fund, instead of engaging or recommending one or more third parties to provide such services. Subject to the governance requirements of a particular fund and applicable law, PIMCO or its affiliates, as applicable, will receive compensation in connection with the provision of such services. As a result, PIMCO faces a conflict of interest when selecting or recommending service providers for the Fund. Fees paid to an affiliated service provider will be determined in PIMCO’s commercially reasonable discretion, taking into account the relevant facts and circumstances, and consistent with PIMCO’s responsibilities. Although PIMCO has adopted various policies and procedures intended to mitigate or otherwise manage conflicts of interest with respect to affiliated service providers, there can be no guarantee that such policies and procedures (which may be modified or terminated at any time in PIMCO’s sole discretion) will be successful.
(a)(3)
As of December 31, 2023, the following explains the compensation structure of the individuals who have primary responsibility for day-to-day portfolio management of the Fund:
Portfolio Manager Compensation
PIMCO and its affiliates approach to compensation seeks to provide professionals with a compensation process that is driven by values of collaboration, openness, responsibility and excellence.
Generally, compensation packages consist of three components. The compensation program for portfolio managers is designed to align with clients’ interests, emphasizing each portfolio manager’s ability to generate long-term investment success for clients, among other factors. A portfolio manager’s compensation is not based solely on the performance of the Fund or any other account managed by that portfolio manager:
Base Salary – Base salary is determined based on core job responsibilities, positions/levels and market factors. Base salary levels are reviewed annually, when there is a significant change in job responsibilities or position, or a significant change in market levels.
Variable Compensation – In addition to a base salary, portfolio managers have a variable component of their compensation, which is based on a combination of individual and company performance and includes both qualitative and quantitative factors. The following non-exhaustive list of qualitative and quantitative factors is considered when determining total compensation for portfolio managers:
• | Performance measured over a variety of longer- and shorter-term periods, including 5-year, 4-year, 3-year, 2-year and 1-year dollar-weighted and account-weighted, pre-tax total and risk-adjusted investment performance as judged against the applicable benchmarks (which may include internal investment performance-related benchmarks) for each account managed by a portfolio manager (including the Fund) and relative to applicable industry peer groups and; |
• | Amount and nature of assets managed by the portfolio manager. |
The variable compensation component of an employee’s compensation may include a deferred component. The deferred portion will generally be subject to vesting and may appreciate or depreciate based on the performance of PIMCO
and/or its affiliates. PIMCO’s Long-Term Incentive Plan provides participants with deferred cash awards that appreciate or depreciate based on PIMCO’s operating earnings over a rolling three-year period.
Portfolio managers who are Managing Directors of PIMCO receive compensation from a non-qualified profit sharing plan consisting of a portion of PIMCO’s net profits. Portfolio managers who are Managing Directors receive an amount determined by the Compensation Committee, based upon an individual’s overall contribution to the firm.
(a)(4)
The following summarizes the dollar range of securities of the Fund each Portfolio Manager beneficially owned as of December 31, 2023:
Portfolio Manager | Dollar Range of Equity Securities of the Fund Owned as of December 31, 2023
| |
Daniel J. Ivascyn
| Over $1,000,000 | |
Alfred T. Murata
| $10,001 - $50,000 | |
Giang Bui
| None | |
John Devir
| $100,001 - $500,000 | |
Greg Sharenow
| $500,001 - $1,000,000 | |
Mark Kiesel
| Over $1,000,000 |
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
None.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.
Item 11. | Controls and Procedures. |
(a) | The principal executive officer and principal financial & accounting officer have concluded as of a date within 90 days of the filing date of this report, based on their evaluation of the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act), that the design of such procedures is effective to provide reasonable assurance that material information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. |
(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 270.30a-3(d))) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
None.
Item 13. | Exhibits. |
(a)(1) | Exhibit 99.CODE—Code of Ethics is not applicable for semiannual reports. |
(a)(2) | Exhibit 99.CERT—Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
(a)(3) | None. | |
(a)(4) | There was no change in the registrant’s independent public accountant for the period covered by the report. | |
(b) | Exhibit 99.906CERT—Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PIMCO Dynamic Income Strategy Fund | ||||
By: | /s/ Joshua D. Ratner | |||
| ||||
Joshua D. Ratner | ||||
President (Principal Executive Officer) | ||||
Date: | March 4, 2024 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | ||||
By: | /s/ Joshua D. Ratner | |||
| ||||
Joshua D. Ratner | ||||
President (Principal Executive Officer) | ||||
Date: | March 4, 2024 | |||
By: | /s/ Bijal Y. Parikh | |||
| ||||
Bijal Y. Parikh | ||||
Treasurer (Principal Financial & Accounting Officer) | ||||
Date: | March 4, 2024 |