UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

OMB APPROVAL

 

OMB Number:    3235-0578
Expires:    April 30, 2013
Estimated average burden hours per response: 5.6

 

 

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-10555

 

 

PIMCO Corporate Income Fund

(Exact name of registrant as specified in charter)

 

1633 Broadway New York, New York

 

10019

(Address of principal executive offices)

 

(Zip code)

 

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

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

212-739-3371

 

 

Date of fiscal year end:

October 31, 2011

 

 

 

 

Date of reporting period:

July 31, 2011

 

 

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-2001. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 



 

Item 1. Schedule of Investments

 

PIMCO Corporate Income Fund Schedule of Investments

July 31, 2011 (unaudited)

 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

CORPORATE BONDS & NOTES—61.4%

 

 

 

 

 

Airlines—2.0%

 

 

 

 

 

 

 

American Airlines Pass Through Trust,

 

 

 

 

 

$1,000

 

7.858%, 4/1/13 (AGC)

 

Ba1/BBB-

 

$1,005,000

 

1,877

 

10.375%, 1/2/21 (i)

 

Baa3/A-

 

2,168,206

 

1,908

 

Continental Airlines Pass Through Trust, 9.798%, 4/1/21

 

Ba3/B

 

1,975,158

 

8,528

 

Northwest Airlines, Inc., 7.15%, 4/1/21 (MBIA)

 

Ba3/BB+

 

8,528,249

 

 

 

United Air Lines Pass Through Trust,

 

 

 

 

 

1,371

 

7.336%, 1/2/21 (a)(b)(d)(j)

 

 

 

 

 

 

 

(acquisition cost-$1,371,062; purchased 6/19/07)

 

Ba2/B+

 

1,288,798

 

2,727

 

10.40%, 5/1/18 (i)

 

Baa2/BBB+

 

3,071,555

 

 

 

 

 

 

 

18,036,966

 

 

 

 

 

 

 

Automotive—0.2%

 

 

 

 

 

1,500

 

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

 

Ba3/B+

 

1,849,882

 

 

 

 

 

 

 

 

 

Banking—8.6%

 

 

 

 

 

4,000

 

ABN Amro North American Holding Preferred Capital Repackage Trust I,

 

 

 

 

 

 

 

6.523%, 11/8/12 (a)(d)(g)

 

Ba3/BB+

 

3,700,000

 

2,400

 

AgFirst Farm Credit Bank, 7.30%, 8/29/11 (a)(b)(d)(g)(j)

 

 

 

 

 

 

 

(acquisition cost-$1,904,000; purchased 2/26/10-3/2/10)

 

NR/A

 

2,410,567

 

1,150

 

BankAmerica Capital II, 8.00%, 12/15/26

 

Baa3/BB+

 

1,180,188

 

 

 

Barclays Bank PLC,

 

 

 

 

 

4,600

 

7.434%, 12/15/17 (a)(d)(g)(i)

 

Baa2/A-

 

4,634,500

 

7,760

 

10.179%, 6/12/21 (a)(d)(i)

 

Baa1/A

 

9,661,200

 

£200

 

14.00%, 6/15/19 (g)

 

Baa2/A-

 

399,693

 

$5,000

 

BPCE S.A., 12.50%, 9/30/19 (a)(b)(d)(g)(i)(j)

 

 

 

 

 

 

 

(acquisition cost-$5,600,000; purchased 1/11/11)

 

Baa3/NR

 

5,810,230

 

25,290

 

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA,

 

 

 

 

 

 

 

11.00%, 6/30/19 (a)(d)(g)(i)

 

A2/AA-

 

32,401,978

 

2,000

 

HBOS PLC, 6.75%, 5/21/18 (a)(d)(i)

 

Baa3/BBB

 

2,008,044

 

1,000

 

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

 

A3/A-

 

1,340,000

 

€4,100

 

Intesa Sanpaolo SpA, 8.375%, 10/14/19 (g)

 

Baa2/BBB+

 

5,537,810

 

 

 

Regions Financial Corp.,

 

 

 

 

 

$1,900

 

7.375%, 12/10/37

 

B1/BB

 

1,813,240

 

3,400

 

7.75%, 11/10/14

 

Ba3/BB+

 

3,628,521

 

£1,200

 

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

 

Baa2/A-

 

2,075,615

 

 

 

 

 

 

 

76,601,586

 

 

 

 

 

 

 

Building & Construction—0.3%

 

 

 

 

 

$1,000

 

Desarrolladora Homex SAB De C.V., 9.50%, 12/11/19 (a)(d)

 

Ba3/BB-

 

1,097,500

 

1,700

 

Macmillan Bloedel Pembroke L.P., 7.70%, 2/15/26

 

Ba1/BBB-

 

1,920,344

 

 

 

 

 

 

 

3,017,844

 

 

 

 

 

 

 

Consumer Products—0.2%

 

 

 

 

 

1,700

 

Reynolds Group Issuer, Inc., 9.00%, 4/15/19 (a)(d)

 

Caa1/B-

 

1,700,000

 

 

 

 

 

 

 

 

 

Energy—0.4%

 

 

 

 

 

4,300

 

Dynegy Roseton / Danskammer Pass Through Trust,

 

 

 

 

 

 

 

7.67%, 11/8/16, Ser. B

 

Ca/CC

 

3,332,500

 

 

 

 

 

 

 

 

 

Financial Services—28.8%

 

 

 

 

 

2,300

 

AGFC Capital Trust I,

 

 

 

 

 

 

 

6.00%, 1/15/67 (converts to FRN on 1/15/17) (a)(d)

 

Caa2/CCC-

 

1,552,500

 

 



 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

Financial Services (continued)

 

 

 

 

 

 

 

Ally Financial, Inc.,

 

 

 

 

 

$240

 

5.35%, 1/15/14

 

B1/B+

 

$237,282

 

70

 

5.75%, 1/15/14

 

B1/B+

 

69,838

 

372

 

5.85%, 6/15/13

 

B1/B+

 

369,782

 

225

 

6.00%, 7/15/13

 

B1/B+

 

222,302

 

34

 

6.00%, 3/15/19

 

B1/B+

 

32,023

 

494

 

6.00%, 9/15/19

 

B1/B+

 

460,303

 

492

 

6.05%, 8/15/19

 

B1/B+

 

459,453

 

659

 

6.125%, 10/15/19

 

B1/B+

 

615,265

 

343

 

6.15%, 9/15/19

 

B1/B+

 

322,726

 

5

 

6.15%, 10/15/19

 

B1/B+

 

4,695

 

10

 

6.20%, 4/15/19

 

B1/B+

 

9,495

 

517

 

6.25%, 12/15/18

 

B1/B+

 

495,365

 

10

 

6.25%, 4/15/19

 

B1/B+

 

9,520

 

182

 

6.25%, 5/15/19

 

B1/NR

 

172,558

 

10

 

6.25%, 7/15/19

 

B1/B+

 

9,454

 

620

 

6.30%, 8/15/19

 

B1/B+

 

588,496

 

210

 

6.35%, 5/15/13

 

B1/B+

 

209,780

 

5

 

6.35%, 7/15/19

 

B1/B+

 

4,757

 

158

 

6.40%, 12/15/18

 

B1/B+

 

152,724

 

133

 

6.50%, 2/15/16

 

B1/B+

 

131,948

 

771

 

6.50%, 6/15/18

 

B1/B+

 

771,672

 

666

 

6.50%, 11/15/18

 

B1/B+

 

649,656

 

879

 

6.50%, 12/15/18

 

B1/B+

 

854,479

 

11

 

6.50%, 5/15/19

 

B1/B+

 

10,595

 

55

 

6.50%, 1/15/20

 

B1/B+

 

50,271

 

78

 

6.60%, 5/15/18

 

B1/B+

 

77,976

 

476

 

6.65%, 6/15/18

 

B1/B+

 

477,208

 

770

 

6.65%, 10/15/18

 

B1/B+

 

766,985

 

682

 

6.70%, 6/15/18

 

B1/B+

 

683,689

 

250

 

6.70%, 11/15/18

 

B1/B+

 

246,608

 

499

 

6.70%, 12/15/19

 

B1/B+

 

484,180

 

195

 

6.75%, 8/15/16

 

B1/B+

 

193,714

 

10

 

6.75%, 6/15/17

 

B1/B+

 

10,008

 

26

 

6.75%, 3/15/18

 

B1/B+

 

25,874

 

554

 

6.75%, 7/15/18

 

B1/B+

 

555,309

 

113

 

6.75%, 9/15/18

 

B1/B+

 

111,176

 

432

 

6.75%, 10/15/18

 

B1/B+

 

428,744

 

125

 

6.75%, 11/15/18

 

B1/B+

 

125,009

 

293

 

6.75%, 5/15/19

 

B1/B+

 

286,331

 

209

 

6.75%, 6/15/19

 

B1/B+

 

203,512

 

682

 

6.80%, 9/15/18

 

B1/B+

 

681,892

 

135

 

6.80%, 10/15/18

 

B1/B+

 

135,023

 

30

 

6.85%, 5/15/18

 

B1/B+

 

29,991

 

80

 

6.875%, 7/15/18

 

B1/B+

 

80,062

 

133

 

6.90%, 6/15/17

 

B1/B+

 

133,365

 

535

 

6.90%, 7/15/18

 

B1/B+

 

536,594

 

320

 

6.90%, 8/15/18

 

B1/B+

 

318,453

 

10

 

7.00%, 8/15/16

 

B1/B+

 

10,003

 

133

 

7.00%, 2/15/18

 

B1/B+

 

133,093

 

2,262

 

7.00%, 5/15/18

 

B1/B+

 

2,262,197

 

60

 

7.00%, 8/15/18

 

B1/B+

 

59,999

 

975

 

7.00%, 9/15/18

 

B1/B+

 

971,931

 

 



 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

Financial Services (continued)

 

 

 

 

 

$560

 

7.00%, 11/15/23

 

B1/B+

 

$547,674

 

107

 

7.05%, 3/15/18

 

B1/B+

 

107,000

 

1,771

 

7.05%, 4/15/18

 

B1/B+

 

1,771,136

 

105

 

7.125%, 10/15/17

 

B1/B+

 

105,230

 

148

 

7.15%, 6/15/16

 

B1/B+

 

148,057

 

143

 

7.15%, 9/15/18

 

B1/B+

 

142,982

 

210

 

7.15%, 1/15/25

 

B1/B+

 

206,805

 

270

 

7.25%, 9/15/17

 

B1/B+

 

267,149

 

214

 

7.25%, 4/15/18

 

B1/B+

 

214,555

 

1,515

 

7.25%, 8/15/18

 

B1/B+

 

1,516,628

 

385

 

7.25%, 9/15/18

 

B1/B+

 

384,991

 

50

 

7.25%, 3/15/25

 

B1/B+

 

49,260

 

227

 

7.30%, 12/15/17

 

B1/B+

 

223,808

 

61

 

7.30%, 1/15/18

 

B1/B+

 

61,153

 

12,781

 

7.375%, 11/15/16

 

B1/B+

 

12,823,382

 

80

 

7.375%, 4/15/18

 

B1/B+

 

80,317

 

20

 

7.40%, 12/15/17

 

B1/B+

 

20,052

 

16

 

7.50%, 11/15/16

 

B1/B+

 

16,004

 

45

 

7.50%, 11/15/17

 

B1/B+

 

45,120

 

23

 

7.50%, 12/15/17

 

B1/B+

 

23,062

 

27

 

7.625%, 11/15/12

 

B1/B+

 

27,072

 

266

 

9.00%, 7/15/20

 

B1/B+

 

269,982

 

2,000

 

American Express Co., 6.80%, 9/1/66 (converts to FRN on 9/1/16)

 

Baa2/BB

 

2,067,500

 

€1,500

 

American General Finance Corp., 4.125%, 11/29/13

 

B3/B

 

2,016,508

 

$5,000

 

BAC Capital Trust XIV, 5.63%, 3/15/12 (g)

 

Ba3/BB+

 

3,662,500

 

 

 

BNP Paribas S.A. (g),

 

 

 

 

 

6,700

 

7.195%, 6/25/37 (a)(d)(i)

 

Baa1/A

 

6,331,500

 

€350

 

7.781%, 7/2/18

 

Baa1/A

 

520,517

 

$3,300

 

C10 Capital SPV Ltd., 6.722%, 12/31/16 (g)

 

NR/B-

 

2,310,000

 

1,790

 

Capital One Bank USA N.A., 8.80%, 7/15/19 (i)

 

Baa1/BBB

 

2,255,409

 

1,500

 

Capital One Capital V, 10.25%, 8/15/39

 

Baa3/BB

 

1,596,375

 

3,300

 

Capital One Capital VI, 8.875%, 5/15/40

 

Baa3/BB

 

3,467,142

 

1,558

 

Cedar Brakes II LLC, 9.875%, 9/1/13 (a)(d)

 

Baa3/BBB-

 

1,624,649

 

500

 

Cemex Finance LLC, 9.50%, 12/14/16 (a)(d)

 

NR/B

 

486,250

 

 

 

CIT Group, Inc.,

 

 

 

 

 

546

 

7.00%, 5/1/14

 

B2/B+

 

551,252

 

280

 

7.00%, 5/1/15

 

B2/B+

 

281,314

 

467

 

7.00%, 5/1/16

 

B2/B+

 

468,273

 

653

 

7.00%, 5/1/17

 

B2/B+

 

655,583

 

 

 

Citigroup, Inc.,

 

 

 

 

 

CAD 1,300

 

5.365%, 3/6/36 (a)(b)(j)

 

 

 

 

 

 

 

(acquisition cost-$1,126,438; purchased 5/19/11)

 

Baa1/A-

 

1,199,077

 

$300

 

6.125%, 8/25/36

 

Baa1/A-

 

298,161

 

21,500

 

Citigroup Capital XXI, 8.30%, 12/21/77 (converts to FRN on 12/21/37)

 

Ba1/BB+

 

22,145,000

 

 

 

Credit Agricole S.A. (g),

 

 

 

 

 

2,800

 

6.637%, 5/31/17 (a)(d)(i)

 

A3/BBB+

 

2,408,000

 

€2,000

 

7.875%, 10/26/19

 

A3/BBB+

 

2,960,013

 

$6,000

 

8.375%, 10/13/19 (a)(d)(i)

 

A3/BBB+

 

6,210,000

 

£500

 

General Electric Capital Corp.,

 

 

 

 

 

 

 

6.50%, 9/15/67 (converts to FRN on 9/15/17) (a)(d)

 

Aa3/A+

 

816,622

 

 

 

Goldman Sachs Group, Inc. (i),

 

 

 

 

 

$4,000

 

6.45%, 5/1/36

 

A2/A-

 

3,896,860

 

 



 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

Financial Services (continued)

 

 

 

 

 

$7,000

 

6.75%, 10/1/37

 

A2/A-

 

$7,013,692

 

 

 

International Lease Finance Corp.,

 

 

 

 

 

1,500

 

5.65%, 6/1/14

 

B1/BBB-

 

1,530,000

 

2,900

 

6.75%, 9/1/16 (a)(d)

 

Ba3/BBB-

 

3,088,500

 

1,000

 

8.625%, 9/15/15

 

B1/BBB-

 

1,106,250

 

11,000

 

JPMorgan Chase & Co., 7.90%, 4/30/18 (g)

 

Baa1/BBB+

 

11,830,951

 

4,100

 

JPMorgan Chase Capital XX,

 

 

 

 

 

 

 

6.55%, 9/15/66 (converts to FRN on 9/15/36) (i)

 

A2/BBB+

 

4,169,220

 

 

 

LBG Capital No.1 PLC,

 

 

 

 

 

€300

 

7.375%, 3/12/20

 

Ba3/BB

 

388,178

 

£100

 

7.588%, 5/12/20

 

Ba3/BB

 

147,731

 

£200

 

7.867%, 12/17/19

 

Ba3/BB

 

297,103

 

£400

 

7.869%, 8/25/20

 

Ba3/BB

 

601,099

 

$12,700

 

7.875%, 11/1/20 (a)(d)

 

Ba3/BB

 

12,033,250

 

17,500

 

8.00%, 6/15/20 (a)(d)(g)

 

NR/BB-

 

16,275,000

 

8,500

 

8.50%, 12/17/21 (a)(d)(g)

 

NR/BB-

 

7,607,500

 

£300

 

11.04%, 3/19/20

 

Ba3/BB

 

521,366

 

 

 

LBG Capital No.2 PLC,

 

 

 

 

 

€400

 

8.875%, 2/7/20

 

Ba2/BB+

 

566,138

 

£3,100

 

9.125%, 7/15/20

 

Ba2/BB+

 

4,938,388

 

£500

 

9.334%, 2/7/20

 

Ba2/BB+

 

804,311

 

$13,000

 

Lehman Brothers Holdings, Inc., 6.875%, 5/2/18 (e)

 

WR/NR

 

3,623,750

 

5,200

 

PNC Financial Services Group, Inc., 6.75%, 8/1/21 (g)

 

Baa3/BBB

 

5,207,966

 

4,100

 

Royal Bank of Scotland Group PLC, 7.648%, 9/30/31 (g)

 

Ba2/BB

 

3,556,750

 

 

 

SLM Corp.,

 

 

 

 

 

5,900

 

8.00%, 3/25/20

 

Ba1/BBB-

 

6,476,607

 

13,500

 

8.45%, 6/15/18

 

Ba1/BBB-

 

15,117,732

 

€4,000

 

Societe Generale S.A., 7.756%, 5/22/13 (g)

 

Baa2/BBB+

 

5,575,169

 

 

 

Springleaf Finance Corp.,

 

 

 

 

 

$2,200

 

5.40%, 12/1/15

 

B3/B

 

2,046,000

 

500

 

6.50%, 9/15/17

 

B3/B

 

457,500

 

3,000

 

6.90%, 12/15/17

 

B3/B

 

2,823,750

 

12,100

 

Wachovia Capital Trust III, 5.570%, 8/29/11 (g)(i)

 

Baa3/A-

 

11,328,625

 

14,000

 

Wells Fargo & Co., 7.98%, 3/15/18 (g)

 

Baa3/A-

 

15,067,500

 

3,800

 

Wells Fargo Capital XV, 9.75%, 9/26/13 (g)(i)

 

Baa3/A-

 

4,042,250

 

 

 

 

 

 

 

254,018,065

 

 

 

 

 

 

 

Healthcare & Hospitals—2.1%

 

 

 

 

 

 

 

HCA, Inc.,

 

 

 

 

 

10,000

 

7.875%, 2/15/20

 

Ba3/BB

 

10,875,000

 

3,600

 

8.50%, 4/15/19

 

Ba3/BB

 

3,987,000

 

3,500

 

9.625%, 11/15/16, PIK

 

B2/BB-

 

3,753,750

 

 

 

 

 

 

 

18,615,750

 

 

 

 

 

 

 

Hotels/Gaming—0.5%

 

 

 

 

 

 

 

MGM Resorts International,

 

 

 

 

 

700

 

10.375%, 5/15/14

 

Ba3/B

 

803,250

 

1,050

 

11.125%, 11/15/17

 

Ba3/B

 

1,215,375

 

2,254

 

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

 

Baa3/BB+

 

2,500,975

 

 

 

 

 

 

 

4,519,600

 

 



 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

Insurance—15.0%

 

 

 

 

 

$15,700

 

American General Capital II, 8.50%, 7/1/30

 

Baa2/BBB-

 

$17,348,500

 

1,400

 

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

 

Baa2/BBB-

 

1,473,500

 

9,000

 

American General Institutional Capital B, 8.125%, 3/15/46 (a)(d)

 

Baa2/BBB-

 

9,765,000

 

 

 

American International Group, Inc.,

 

 

 

 

 

14,000

 

6.25%, 3/15/87

 

Baa2/BBB

 

12,705,000

 

MXN 16,000

 

7.98%, 6/15/17

 

Baa1/A-

 

1,242,616

 

$36,750

 

8.175%, 5/15/68 (converts to FRN on 5/15/38) (i)

 

Baa2/BBB

 

40,195,313

 

18,700

 

8.25%, 8/15/18 (i)

 

Baa1/A-

 

22,231,962

 

£4,000

 

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

 

Baa2/BBB

 

6,713,536

 

$5,100

 

Dai-ichi Life Insurance Co., Ltd., 7.25%, 7/25/21 (a)(d)(g)(i)

 

A3/BBB+

 

5,394,387

 

2,600

 

Genworth Financial, Inc., 8.625%, 12/15/16 (i)

 

Baa3/BBB

 

2,782,666

 

5,000

 

Metlife Capital Trust IV, 7.875%, 12/15/67 (a)(d)(i)

 

Baa2/BBB

 

5,501,385

 

6,800

 

Pacific Life Insurance Co., 7.90%, 12/30/23 (a)(d)(i)

 

A3/A-

 

7,936,300

 

 

 

 

 

 

 

133,290,165

 

 

 

 

 

 

 

Metals & Mining—0.5%

 

 

 

 

 

200

 

Freeport-McMoRan Copper & Gold, Inc., 8.375%, 4/1/17

 

Baa3/BBB-

 

218,748

 

4,000

 

Gerdau Holdings, Inc., 7.00%, 1/20/20 (a)(d)(i)

 

NR/BBB-

 

4,490,000

 

 

 

 

 

 

 

4,708,748

 

 

 

 

 

 

 

Paper/Paper Products—0.1%

 

 

 

 

 

850

 

Norske Skogindustrier ASA, 6.125%, 10/15/15 (a)(d)

 

B2/B-

 

658,750

 

 

 

 

 

 

 

 

 

Telecommunications—1.8%

 

 

 

 

 

8,200

 

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

 

Baa3/BBB-

 

8,666,369

 

5,360

 

Qwest Corp., 7.20%, 11/10/26 (i)

 

Baa3/BBB-

 

5,386,800

 

€1,300

 

Wind Acquisition Finance S.A., 11.75%, 7/15/17

 

B2/BB-

 

2,068,776

 

 

 

 

 

 

 

16,121,945

 

 

 

 

 

 

 

Transportation—0.1%

 

 

 

 

 

$666

 

Federal Express Corp. Pass Through Trust, 7.65%, 1/15/14

 

Baa2/BBB

 

684,572

 

 

 

 

 

 

 

 

 

Utilities—0.8%

 

 

 

 

 

3,900

 

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

 

NR/B-

 

4,178,850

 

1,700

 

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

 

Ba2/B

 

1,547,000

 

1,100

 

PPL Capital Funding, Inc.,

 

 

 

 

 

 

 

6.70%, 3/30/67 (converts to FRN on 3/30/17)

 

Ba1/BB+

 

1,085,306

 

 

 

 

 

 

 

6,811,156

 

 

 

Total Corporate Bonds & Notes (cost—$461,125,250)

 

 

 

543,967,529

 

 

 

 

 

 

 

 

 

MUNICIPAL BONDS—16.5%

 

 

 

 

 

California—7.6%

 

 

 

 

 

9,000

 

Alameda Cnty. JT Powers Auth. Rev., 7.046%, 12/1/44, Ser. A

 

A1/AA

 

9,763,290

 

1,800

 

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

 

NR/BBB+

 

1,878,444

 

7,700

 

Los Angeles Cnty. Public Works Financing Auth. Rev., 7.618%, 8/1/40

 

A1/A+

 

8,565,942

 

2,400

 

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

 

A2/NR

 

2,687,784

 

1,100

 

Riverside Cnty. Redev. Agcy., Tax Allocation,

 

 

 

 

 

 

 

7.50%, 10/1/30, Ser. A-T

 

A3/A-

 

1,107,788

 

2,100

 

San Luis Obispo Cnty. Rev., zero coupon, 9/1/27, Ser. C (NPFGC)

 

Baa1/AA-

 

672,420

 

800

 

San Marcos Unified School Dist., GO, zero coupon, 8/1/29

 

Aa2/AA-

 

259,296

 

 

 

State Public Works Board Rev.,

 

 

 

 

 

5,900

 

7.804%, 3/1/35, Ser. B-2

 

Aa3/BBB+

 

6,164,202

 

 



 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

California (continued)

 

 

 

 

 

$20,000

 

8.361%, 10/1/34, Ser. G-2

 

A2/BBB+

 

$22,491,000

 

5,000

 

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

 

A1/A-

 

5,721,750

 

7,400

 

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

 

NR/A

 

7,765,856

 

 

 

 

 

 

 

67,077,772

 

 

 

 

 

 

 

Colorado—0.6%

 

 

 

 

 

5,000

 

Denver Public Schools, CP, 7.017%, 12/15/37, Ser. B

 

Aa3/A+

 

5,733,550

 

 

 

 

 

 

 

District of Columbia—1.5%

 

 

 

 

 

13,000

 

Metropolitan Airports Auth. Rev., 7.462%, 10/1/46

 

Baa1/BBB+

 

13,329,290

 

 

 

 

 

 

 

 

 

Louisiana—0.2%

 

 

 

 

 

 

 

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

 

 

 

 

 

800

 

8.30%, 12/1/29

 

A3/BBB

 

868,344

 

820

 

8.55%, 12/1/34

 

A3/BBB

 

870,914

 

300

 

8.80%, 12/1/39

 

A3/BBB

 

321,099

 

 

 

 

 

 

 

2,060,357

 

 

 

 

 

 

 

Nevada—1.8%

 

 

 

 

 

14,800

 

Las Vegas Valley Water Dist., GO, 7.263%, 6/1/34

 

Aa2/AA+

 

15,933,236

 

 

 

 

 

 

 

 

 

Ohio—2.1%

 

 

 

 

 

14,000

 

American Municipal Power-Ohio, Inc. Rev.,

 

 

 

 

 

 

 

Comb Hydroelectric Projects, 8.084%, 2/15/50, Ser. B

 

A3/A

 

18,281,340

 

 

 

 

 

 

 

Pennsylvania—0.1%

 

 

 

 

 

2,000

 

Philadelphia Auth. for Industrial Dev. Rev.,

 

 

 

 

 

 

 

zero coupon, 4/15/26, Ser. B (AMBAC)

 

A2/BBB

 

695,120

 

 

 

 

 

 

 

 

 

Texas—2.6%

 

 

 

 

 

4,000

 

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

 

A1/A+

 

4,319,240

 

17,200

 

North Texas Tollway Auth. Rev., 8.91%, 2/1/30

 

Baa3/NR

 

18,838,988

 

 

 

 

 

 

 

23,158,228

 

 

 

Total Municipal Bonds (cost—$136,268,712)

 

 

 

146,268,893

 

 

 

 

 

 

 

 

 

MORTGAGE-BACKED SECURITIES—13.9%

 

 

 

 

 

1,346

 

American Home Mortgage Assets, 0.417%, 9/25/46, CMO, FRN

 

C/D

 

177,905

 

377

 

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

 

Caa2/NR

 

261,717

 

7,600

 

Banc of America Funding Corp., 6.00%, 3/25/37, CMO

 

Caa2/CCC

 

5,583,750

 

 

 

BCAP LLC Trust (a)(d)(f),

 

 

 

 

 

2,500

 

5.876%, 3/26/37

 

NR/NR

 

217,275

 

2,000

 

10.25%, 6/25/36

 

NR/NR

 

244,623

 

2,812

 

Bear Stearns Alt-A Trust, 4.516%, 11/25/36, CMO, VRN

 

Caa3/CCC

 

1,621,412

 

2,378

 

Chase Commercial Mortgage Securities Corp.,

 

 

 

 

 

 

 

6.887%, 10/15/32, CMO (a)(d)

 

NR/BB+

 

2,372,973

 

 

 

Chase Mortgage Finance Corp., CMO,

 

 

 

 

 

11,891

 

2.526%, 3/25/37, FRN

 

Caa2/NR

 

9,247,595

 

93

 

2.935%, 12/25/35, FRN

 

NR/CC

 

89,756

 

3,087

 

6.00%, 7/25/37

 

NR/CCC

 

2,555,047

 

3,781

 

Citicorp Mortgage Securities, Inc., 6.00%, 6/25/36, CMO

 

Caa1/NR

 

3,547,714

 

 

 

Countrywide Alternative Loan Trust, CMO,

 

 

 

 

 

424

 

5.50%, 3/25/36

 

Caa3/NR

 

295,771

 

 



 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

$2,165

 

5.75%, 3/25/37

 

Caa3/CCC

 

$1,554,466

 

1,338

 

6.50%, 8/25/36

 

Ca/CC

 

785,323

 

 

 

Countrywide Home Loan Mortgage Pass Through Trust, CMO,

 

 

 

 

 

834

 

3.419%, 9/20/36, VRN

 

Ca/CC

 

469,278

 

3,440

 

5.50%, 10/25/35

 

Caa1/NR

 

3,284,866

 

3,381

 

5.75%, 3/25/37

 

NR/CCC

 

2,910,690

 

1,800

 

6.00%, 2/25/37

 

NR/CC

 

1,502,323

 

1,600

 

6.00%, 3/25/37

 

NR/CCC

 

1,332,822

 

741

 

6.00%, 4/25/37

 

NR/CCC

 

682,760

 

15,000

 

6.00%, 5/25/37

 

Caa3/NR

 

11,728,492

 

 

 

Credit Suisse Mortgage Capital Certificates, CMO,

 

 

 

 

 

1,689

 

6.00%, 2/25/37

 

NR/CCC

 

1,442,101

 

4,213

 

6.00%, 6/25/37

 

NR/D

 

3,671,602

 

 

 

GSR Mortgage Loan Trust, CMO,

 

 

 

 

 

820

 

5.50%, 5/25/36

 

NR/CCC

 

707,813

 

9,274

 

6.00%, 2/25/36

 

NR/CCC

 

8,170,240

 

 

 

JPMorgan Mortgage Trust, CMO,

 

 

 

 

 

5,052

 

5.00%, 3/25/37

 

NR/CCC

 

4,072,396

 

2,321

 

5.561%, 1/25/37, VRN

 

Caa2/NR

 

1,802,197

 

840

 

6.00%, 8/25/37

 

NR/CCC

 

749,027

 

6,084

 

Morgan Stanley Mortgage Loan Trust, 6.00%, 2/25/36, CMO

 

Caa2/CC

 

5,022,469

 

1,429

 

Residential Accredit Loans, Inc., 0.417%, 5/25/37, CMO, FRN

 

C/CCC

 

385,900

 

3,403

 

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

 

NR/BB-

 

3,409,456

 

1,042

 

Residential Asset Securitization Trust, 6.00%, 9/25/36, CMO

 

Ca/D

 

583,652

 

 

 

Residential Funding Mortgage Securities I, CMO,

 

 

 

 

 

2,800

 

6.00%, 1/25/37

 

Caa2/NR

 

2,401,382

 

3,313

 

6.25%, 8/25/36

 

Caa1/CCC

 

2,749,434

 

1,143

 

Sequoia Mortgage Trust, 4.798%, 2/20/47, CMO, VRN

 

NR/CCC

 

925,695

 

1,321

 

Suntrust Adjustable Rate Mortgage Loan Trust,

 

 

 

 

 

 

 

5.824%, 2/25/37, CMO, FRN

 

NR/CCC

 

942,661

 

 

 

WaMu Mortgage Pass Through Certificates, CMO,

 

 

 

 

 

1,345

 

5.470%, 7/25/37, VRN

 

NR/CC

 

887,535

 

15,217

 

5.603%, 7/25/37, FRN

 

NR/CCC

 

12,966,164

 

2,000

 

5.653%, 2/25/37, FRN

 

NR/CCC

 

1,686,318

 

797

 

5.833%, 9/25/36, VRN

 

NR/CCC

 

591,970

 

 

 

Washington Mutual Alternative Mortgage Pass Through Certificates, CMO, FRN,

 

 

 

 

 

1,494

 

1.023%, 4/25/47

 

C/CCC

 

291,867

 

1,426

 

1.103%, 5/25/47

 

C/CCC

 

379,467

 

 

 

Wells Fargo Mortgage-Backed Securities Trust, CMO,

 

 

 

 

 

8,151

 

2.734%, 7/25/36, FRN

 

NR/CC

 

6,794,217

 

271

 

2.743%, 5/25/36, FRN

 

Caa2/NR

 

205,053

 

1,469

 

2.743%, 7/25/36, FRN

 

NR/CC

 

1,142,046

 

726

 

2.770%, 4/25/36, VRN

 

NR/CC

 

610,098

 

4,403

 

4.907%, 10/25/36, FRN

 

NR/CCC

 

3,426,323

 

1,800

 

6.00%, 7/25/37

 

B3/CCC

 

1,718,072

 

5,700

 

6.00%, 8/25/37

 

Caa1/NR

 

5,249,483

 

 

 

Total Mortgage-Backed Securities (cost—$117,798,904)

 

 

 

123,451,196

 

 

 

 

 

 

 

 

 

SENIOR LOANS (a)(c)—2.3%

 

 

 

 

 

Financial Services—2.3%

 

 

 

 

 

898

 

CIT Group, Inc., 6.25%, 8/11/15, Term 3

 

 

 

902,565

 

20,000

 

Springleaf Finance Corp., 5.50%, 5/10/17

 

 

 

19,604,680

 

 

 

Total Senior Loans (cost—$20,818,598)

 

 

 

20,507,245

 

 



 

 

 

 

 

Credit Rating

 

 

 

Shares

 

 

 

(Moody’s/S&P)

 

Value*

 

PREFERRED STOCK—2.2%

 

 

 

 

 

Banking—0.2%

 

 

 

 

 

30,200

 

CoBank Acb, 11.00%, 7/1/13, Ser. C (a)(b)(d)(g)(j)

 

 

 

 

 

 

 

(acquisition cost-$1,678,450; purchased 2/26/10-2/1/11)

 

NR/A

 

$1,646,145

 

 

 

 

 

 

 

 

 

Financial Services—2.0%

 

 

 

 

 

100,000

 

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

 

Caa1/CCC

 

2,462,000

 

100,000

 

Citigroup Capital XIII, 7.875%, 10/30/15 (k)

 

Ba1/BB+

 

2,707,000

 

512,000

 

GMAC Capital Trust I, 8.125%, 2/15/16, Ser. 2 (k)

 

B3/CCC

 

13,103,360

 

 

 

 

 

 

 

18,272,360

 

 

 

Total Preferred Stock (cost—$19,478,450)

 

 

 

19,918,505

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK—1.9%

 

 

 

 

 

Financial Services—1.0%

 

 

 

 

 

8,050

 

Wells Fargo & Co., 7.50%, 3/15/13, Ser. L (g)

 

Baa3/A-

 

8,546,685

 

 

 

 

 

 

 

 

 

Insurance—0.0%

 

 

 

 

 

195,785

 

American International Group, Inc., 8.50%, 8/1/11

 

Baa2/NR

 

234,942

 

 

 

 

 

 

 

 

 

Utilities—0.9%

 

 

 

 

 

 

 

PPL Corp.,

 

 

 

 

 

53,400

 

8.75%, 5/1/14

 

NR/NR

 

2,864,376

 

90,000

 

9.50%, 7/1/13

 

NR/NR

 

5,048,100

 

 

 

 

 

 

 

7,912,476

 

 

 

Total Convertible Preferred Stock (cost—$13,927,024)

 

 

 

16,694,103

 

 

 

 

 

 

 

 

 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

 

 

 

 

(000s)

 

 

 

 

 

 

 

SOVEREIGN DEBT OBLIGATIONS—0.8%

 

 

 

 

 

Brazil—0.8%

 

 

 

 

 

BRL 8,400

 

Brazilian Government International Bond,

 

 

 

 

 

 

 

12.50%, 1/5/22 (cost—$4,873,628)

 

Baa2/BBB-

 

6,960,054

 

 

 

 

 

 

 

 

 

ASSET-BACKED SECURITIES—0.3%

 

 

 

 

 

$2,344

 

GSAA Trust, 6.295%, 6/25/36

 

Caa3/CCC

 

1,353,787

 

1,543

 

Morgan Stanley Mortgage Loan Trust, 6.25%, 7/25/47, VRN

 

Caa2/CCC

 

1,221,285

 

 

 

Total Asset-Backed Securities (cost—$2,334,724)

 

 

 

2,575,072

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

MUTUAL FUNDS—0.0%

 

 

 

 

 

3,160

 

BlackRock MuniYield Quality Fund II, Inc.

 

 

 

36,719

 

7,895

 

BlackRock MuniYield Quality Fund III, Inc.

 

 

 

96,082

 

 

 

Total Mutual Funds (cost—$137,571)

 

 

 

132,801

 

 



 

Principal

 

 

 

 

 

 

 

Amount

 

 

 

Credit Rating

 

 

 

(000s)

 

 

 

(Moody’s/S&P)

 

Value*

 

SHORT-TERM INVESTMENTS—0.7%

 

 

 

 

 

Corporate Notes—0.3%

 

 

 

 

 

Financial Services—0.2%

 

 

 

 

 

 

 

Ally Financial, Inc.,

 

 

 

 

 

$90

 

2.001%, 9/15/11, FRN

 

B1/B+

 

$90,167

 

130

 

2.101%, 12/15/11, FRN

 

B1/B+

 

129,616

 

50

 

2.131%, 1/16/12, FRN

 

B1/B+

 

49,818

 

115

 

2.231%, 1/17/12, FRN

 

B1/B+

 

114,632

 

100

 

2.281%, 2/15/12, FRN

 

B1/B+

 

99,626

 

149

 

2.301%, 12/15/11, FRN

 

B1/B+

 

148,668

 

76

 

2.431%, 2/15/12, FRN

 

B1/B+

 

75,776

 

40

 

2.551%, 3/15/12, FRN

 

B1/B+

 

39,738

 

896

 

6.75%, 7/15/12

 

WR/NR

 

891,973

 

 

 

 

 

 

 

1,640,014

 

 

 

 

 

 

 

Utilities—0.1%

 

 

 

 

 

627

 

East Coast Power LLC, 7.066%, 3/31/12

 

Baa3/BBB

 

632,147

 

 

 

Total Corporate Notes (cost—$2,255,503)

 

 

 

2,272,161

 

 

 

 

 

 

 

 

 

U.S. Treasury Obligations (h)(l)—0.1%

 

 

 

 

 

 

 

U.S. Treasury Bills,

 

 

 

 

 

1,283

 

0.010%-0.062%, 8/18/11-8/25/11 (cost—$1,282,973)

 

 

 

1,282,973

 

 

 

 

 

 

 

 

 

Repurchase Agreements—0.3%

 

 

 

 

 

1,000

 

Barclays Capital, Inc., dated 7/29/11, 0.15%, due 8/1/11, proceeds $1,000,013; collateralized by U.S. Treasury Inflation Index Notes, 3.00%, 7/15/12, valued at $1,020,566 including accrued interest

 

 

 

1,000,000

 

1,306

 

State Street Bank & Trust Co., dated 7/29/11, 0.01%, due 8/1/11, proceeds $1,306,001; collateralized by U.S. Treasury Notes, 1.75%, due 5/31/16, valued at $1,334,574 including accrued interest

 

 

 

1,306,000

 

 

 

Total Repurchase Agreements (cost—$2,306,000)

 

 

 

2,306,000

 

 

 

Total Short-Term Investments (cost—$5,844,476)

 

 

 

5,861,134

 

 

 

 

 

 

 

 

 

 

 

Total Investments (cost—$782,607,337) (m)—100.0%

 

 

 

$886,336,532

 

 



 


Notes to Schedule of Investments:

 

 

*

Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services.

 

Portfolio securities and other financial instruments for which market quotations are not readily available, or for which a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to procedures established by the Board of Trustees, or persons acting at their discretion pursuant to procedures established by the Board of Trustees, including certain fixed income securities which may be valued with reference to securities whose prices are more readily available. The Fund’s investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the mean between the last quoted bid and ask price. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Exchange-traded futures are valued at the settlement price determined by the relevant exchange. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days. Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from pricing services. As a result, the net asset value (“NAV”) of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the New York Stock Exchange (“NYSE”) is closed.

 

 

 

The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold and these differences could be material. The Fund’s NAV is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the NYSE on each day the NYSE is open for business.

 

 

(a)

Private Placement—Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $192,780,073, representing 21.8% of total investments.

 

 

(b)

Illiquid.

 

 

(c)

These securities generally pay interest at rates which are periodically pre-determined by reference to a base lending rate plus a premium. These base lending rates are generally either the lending rate offered by one or more major European banks, such as the “LIBOR” or the prime rate offered by one or more major United States banks, or the certificate of deposit rate. These securities are generally considered to be restricted as the Fund is ordinarily contractually obligated to receive approval from the Agent bank and/or borrower prior to disposition. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional payments by the borrower. Such prepayments cannot be predicted with certainty. The interest rate disclosed reflects the rate in effect on July 31, 2011.

 

 

(d)

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

 

 

(e)

In default.

 

 

(f)

Fair-Valued—Securities with an aggregate value of $461,898, representing 0.1% of total investments.

 

 

(g)

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

 

 

(h)

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

 

 

(i)

All or partial amount segregated for the benefit of the counterparty as collateral for reverse repurchase agreements.

 

 

(j)

Restricted. The aggregate acquisition cost of such securities is $11,679,950. The aggregate market value is $12,354,817, representing 1.4% of total investments.

 

 

(k)

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

 

 

(l)

Rates reflect the effective yields at purchase date.

 

 

(m)

At July 31, 2011, the cost basis of investments for federal income tax purposes was $783,029,108. Gross unrealized appreciation was $119,822,046; gross unrealized depreciation was $16,514,622; and net unrealized appreciation was $103,307,424. The difference between book and tax cost basis was attributable to wash sales.

 

Glossary:

AGC—insured by Assured Guaranty Corp.

AMBAC—insured by American Municipal Bond Assurance Corp.

BRL—Brazilian Real

£—British Pound

CAD—Canadian Dollar

CMO—Collateralized Mortgage Obligation

CP—Certificates of Participation

€—Euro

FRN—Floating Rate Note. The interest rate disclosed reflects the rate in effect on July 31, 2011.

GO—General Obligation Bond

LIBOR—London Inter-Bank Offered Rate

MBIA—insured by Municipal Bond Investors Assurance

MXN—Mexican Peso

NPFGC—insured by National Public Finance Guarantee Corp.

NR—Not Rated

PIK—Payment-in-Kind

VRN—Variable Rate Note. Instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The interest rate disclosed reflects the rate in effect on July 31, 2011.

WR—Withdrawn Rating

 



 

Other Investments:

 

(A)  Futures contracts outstanding at July 31, 2011:

 

 

 

 

 

Market

 

 

 

 

 

 

 

 

 

Value

 

Expiration

 

Unrealized

 

Type

 

Contracts

 

(000s)

 

Date

 

Appreciation

 

Long:

Financial Futures Euro—90 day

 

354

 

 

$88,026

 

3/19/12

 

$256,650

 

 

Financial Futures Euro—90 day

 

284

 

 

70,595

 

6/18/12

 

13,714

 

 

Financial Futures Euro—90 day

 

284

 

 

70,553

 

9/17/12

 

106,014

 

 

Financial Futures Euro—90 day

 

284

 

 

70,485

 

12/17/12

 

205,414

 

 

Financial Futures Euro—90 day

 

284

 

 

70,411

 

3/18/13

 

294,165

 

 

Financial Futures Euro—90 day

 

21

 

 

5,199

 

6/17/13

 

11,909

 

 

 

 

 

 

 

 

 

$887,866

 

 

At July 31, 2011, Corporate Income pledged cash collateral of $179,000 for futures contracts.

 

(B) Credit default swap agreements:

Sell protection swap agreements outstanding at July 31, 2011 (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

Upfront

 

 

 

Swap Counterparty/

 

Notional Amount

 

Credit

 

Termination

 

Payments

 

Market

 

Premiums

 

Unrealized

 

Referenced Debt Issuer

 

(000s) (3)

 

Spread (2)

 

Date

 

Received

 

Value (4)

 

Received

 

Appreciation

 

Bank of America:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazilian Government International Bond

 

$2,600

 

1.03

%

12/20/15

 

1.00

%

$(544

)

$(19,925

)

$19,381

 

Barclays Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazilian Government International Bond

 

10,400

 

1.03

%

12/20/15

 

1.00

%

(2,178

)

(77,143

)

74,965

 

Citigroup:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SLM

 

10,000

 

1.83

%

12/20/13

 

5.00

%

801,516

 

(1,096,500

)

1,898,016

 

HSBC Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mexico Government International Bond

 

4,000

 

1.02

%

12/20/15

 

1.00

%

1,696

 

(51,182

)

52,878

 

 

 

 

 

 

 

 

 

 

 

$800,490

 

$(1,244,750

)

$2,045,240

 

 


(1) If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

 

(2) Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

(3) This represents the maximum potential amount the Fund could be required to make available as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

 

(4) The quoted market prices and resulting values for credit default swap agreements serve as an indicator of the status at July 31, 2011 of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

(C) Interest rate swap agreements outstanding at July 31, 2011:

 

 

 

Notional

 

 

 

Rate Type

 

 

 

Upfront

 

Unrealized

 

Swap

 

Amount

 

Termination

 

Payments

 

Payments

 

Market

 

Premiums

 

Appreciation

 

Counterparty

 

(000s)

 

Date

 

Made

 

Received

 

Value

 

Received

 

(Depreciation)

 

JPMorgan Chase

 

$157,000

 

12/21/41

 

4.00%

 

3-Month USD-LIBOR

 

$(2,791,962

)

$(843,090

)

$(1,948,872

)

Royal Bank of Scotland

 

158,000

 

9/19/13

 

0.50%

 

Federal Funds Overnight Rate

 

90,985

 

(237,527

)

328,512

 

 

 

 

 

 

 

 

 

 

 

$(2,700,977

)

$(1,080,617

)

$(1,620,360

)

 


LIBOR - London Inter-Bank Offered Rate

 



 

(D)  Forward foreign currency contracts outstanding at July 31, 2011:

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

U.S.$ Value on

 

U.S.$ Value

 

Appreciation

 

 

 

Counterparty

 

Origination Date

 

July 31, 2011

 

(Depreciation)

 

Purchased:

 

 

 

 

 

 

 

 

 

186,100 Brazilian Real settling 9/2/11

 

Bank of America

 

$100,000

 

$119,043

 

$19,043

 

10,967,965 Brazilian Real settling 8/2/11

 

Barclays Bank

 

6,859,265

 

7,072,228

 

212,963

 

185,950 Brazilian Real settling 9/2/11

 

Morgan Stanley

 

100,000

 

118,947

 

18,947

 

328,000 British Pound settling 9/13/11

 

Citigroup

 

527,752

 

538,160

 

10,408

 

800,000 Chinese Yuan Renminbi settling 11/15/11

 

Barclays Bank

 

124,514

 

124,350

 

(164

)

4,809,971 Chinese Yuan Renminbi settling 11/15/11

 

Citigroup

 

740,394

 

747,647

 

7,253

 

3,124,846 Chinese Yuan Renminbi settling 11/15/11

 

JPMorgan Chase

 

486,200

 

485,717

 

(483

)

4,058,000 Indian Rupee settling 8/12/11

 

Barclays Bank

 

86,488

 

91,664

 

5,176

 

600,000 Indian Rupee settling 8/12/11

 

Deutsche Bank

 

12,834

 

13,553

 

719

 

4,658,000 Indian Rupee settling 7/12/12

 

JPMorgan Chase

 

100,215

 

100,180

 

(35

)

645,493 Mexican Peso settling 11/18/11

 

Deutsche Bank

 

54,889

 

54,460

 

(429

)

130,000 Mexican Peso settling 11/18/11

 

Morgan Stanley

 

11,013

 

10,968

 

(45

)

1,520,300 South African Rand settling 9/13/11

 

Barclays Bank

 

200,000

 

226,093

 

26,093

 

759,900 South African Rand settling 9/13/11

 

Morgan Stanley

 

100,000

 

113,010

 

13,010

 

Sold:

 

 

 

 

 

 

 

 

 

10,967,965 Brazilian Real settling 9/2/11

 

Barclays Bank

 

6,815,787

 

7,015,906

 

(200,119

)

10,967,964 Brazilian Real settling 8/2/11

 

UBS

 

6,784,588

 

7,072,228

 

(287,640

)

3,624,000 British Pound settling 9/13/11

 

Barclays Bank

 

5,925,168

 

5,946,015

 

(20,847

)

3,624,000 British Pound settling 9/13/11

 

Citigroup

 

5,931,673

 

5,946,015

 

(14,342

)

400,000 British Pound settling 9/13/11

 

Royal Bank of Scotland

 

645,192

 

656,293

 

(11,101

)

3,570,000 British Pound settling 9/13/11

 

UBS

 

5,861,986

 

5,857,415

 

4,571

 

652,000 Canadian Dollar settling 9/19/11

 

Deutsche Bank

 

661,845

 

681,683

 

(19,838

)

267,000 Canadian Dollar settling 9/19/11

 

Royal Bank of Canada

 

270,749

 

279,155

 

(8,406

)

8,573,600 Chinese Yuan Renminbi settling 9/14/11

 

JPMorgan Chase

 

1,322,066

 

1,331,335

 

(9,269

)

7,322,000 Euro settling 10/19/11

 

Credit Suisse First Boston

 

10,223,343

 

10,501,113

 

(277,770

)

7,323,000 Euro settling 10/19/11

 

Morgan Stanley

 

10,204,601

 

10,502,547

 

(297,946

)

4,658,000 Indian Rupee settling 8/12/11

 

JPMorgan Chase

 

104,721

 

105,216

 

(495

)

36,202 Malaysian Ringgit settling 8/11/11

 

Citigroup

 

11,700

 

12,189

 

(489

)

2,063,338 South African Rand settling 10/28/11

 

HSBC Bank

 

293,242

 

304,840

 

(11,598

)

 

 

 

 

 

 

 

 

$(842,833

)

 

At July 31, 2011, $1,380,000 was held in cash as collateral for derivatives.  Cash collateral held may be invested in accordance with the Fund’s investment strategy.

 

(E) Open reverse repurchase agreements at July 31, 2011:

 

Counterparty

 

Rate

 

Trade Date

 

Maturity Date

 

Principal & Interest

 

Principal

 

Bank of America

 

0.45

%

7/28/11

 

8/29/11

 

$34,472,008

 

$34,470,284

 

Barclays Bank

 

0.45

%

6/28/11

 

8/1/11

 

10,790,584

 

10,786,000

 

 

 

0.45

%

7/19/11

 

8/18/11

 

3,555,578

 

3,555,000

 

 

 

0.45

%

7/28/11

 

8/24/11

 

30,203,510

 

30,202,000

 

 

 

0.45

%

7/29/11

 

8/30/11

 

22,091,828

 

22,091,000

 

 

 

0.60

%

7/27/11

 

8/29/11

 

18,982,582

 

18,981,000

 

Deutsche Bank

 

0.38

%

7/20/11

 

8/22/11

 

4,446,563

 

4,446,000

 

 

 

0.38

%

7/22/11

 

8/22/11

 

2,782,294

 

2,782,000

 

 

 

0.38

%

7/26/11

 

8/26/11

 

14,532,920

 

14,532,000

 

 

 

0.45

%

7/22/11

 

8/22/11

 

2,799,350

 

2,799,000

 

Greenwich Capital Markets

 

0.40

%

7/13/11

 

8/15/11

 

1,222,258

 

1,222,000

 

UBS

 

0.29

%

7/22/11

 

8/23/11

 

1,953,157

 

1,953,000

 

 

 

0.31

%

7/12/11

 

8/12/11

 

5,149,887

 

5,149,000

 

 

 

 

 

 

 

 

 

 

 

$152,968,284

 

 

The weighted average daily balance of reverse repurchase agreements outstanding during the nine months ended July 31, 2011 was $155,382,209 at a weighted average interest rate of 0.47%. The total market value of underlying collateral (refer to the Schedule of Investments for positions segregated for the benefit of the counterparty as collateral for reverse repurchase agreements) for open reverse repurchase agreements at July 31, 2011 was $158,174,950.

 

At July 31, 2011, $90,000 was held in cash as collateral for reverse repurchase agreements. Cash collateral held may be invested in accordance with the Fund’s investment strategy.

 



 

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:

 

·      Level 1 — quoted prices in active markets for identical investments that the Fund has the ability to access

·      Level 2 — valuations based on other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) or quotes from inactive exchanges

·      Level 3 — valuations based on significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in the aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation technique used.

 

The valuation techniques used by the Fund to measure fair value during the nine months ended July 31, 2011 maximized the use of observable inputs and minimized the use of unobservable inputs. When fair-valuing securities, the Fund utilized option adjusted spread pricing techniques.

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Fund generally uses to evaluate how to classify each major category of assets and liabilities for Level 2 and Level 3, in accordance with Generally Accepted Accounting Principles.

 

Equity Securities (Common and Preferred Stock) — Equity securities traded in inactive markets and certain foreign equity securities are valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from independent pricing services that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

U.S. Treasury Obligations — U.S. Treasury obligations are valued by independent pricing services based on pricing models that evaluate the mean between the most recently quoted bid and ask price. The models also take into consideration data received from active market makers and broker-dealers, yield curves, and the spread over comparable U.S. Treasury issues. The spreads change daily in response to market conditions and are generally obtained from the new issue market and broker-dealer sources. To the extent that these inputs are observable, the values of U.S. Treasury obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Government Sponsored Enterprise and Mortgage-Backed Securities — Government sponsored enterprise and mortgage-backed securities are valued by independent pricing services using pricing models based on inputs that include issuer type, coupon, cash flows, mortgage prepayment projection tables and Adjustable Rate Mortgage evaluations that incorporate index data, periodic and life caps, the next coupon reset date, and the convertibility of the bond. To the extent that these inputs are observable, the values of government sponsored enterprise and mortgage-backed securities are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Municipal Bonds — Municipal bonds are valued by independent pricing services based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-want lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable, the values of municipal bonds are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Sovereign Debt Obligations — Sovereign debt obligations are valued by independent pricing services based on discounted cash flow models that incorporate option adjusted spreads along with benchmark curves and credit spreads. In addition, international bond markets are monitored regularly for information pertaining to the issuer and/or the specific issue. To the extent that these inputs are observable, the values of sovereign debt obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Corporate Bonds & Notes — Corporate bonds and notes are generally comprised of two main categories: investment grade bonds and high yield bonds. Investment grade bonds are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, and option adjusted spread models that include base curve and spread curve inputs. Adjustments to individual bonds can be applied to recognize trading differences compared to other bonds issued by the same issuer. High yield bonds are valued by independent pricing services based primarily on broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector-specific trends. To the extent that these inputs are observable, the values of corporate bonds and notes are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Asset-Backed Securities and Collateralized Mortgage Obligations — Asset-backed securities and collateralized mortgage obligations are valued by independent pricing services using pricing models based on a security’s average life volatility. The models also take into account tranche characteristics such as coupon average life, collateral types, ratings, the issuer and tranche type, underlying collateral and performance of the collateral, and discount margin for certain floating rate issues. To the extent that these inputs are observable, the values of asset-backed securities and collateralized mortgage obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Forward Foreign Currency Contracts — Forward foreign currency contracts are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, actual trading information and foreign currency exchange rates gathered from leading market makers and foreign currency exchange trading centers throughout the world. To the extent that these inputs are observable, the values of forward foreign currency contracts are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Interest Rate Swaps — Interest rate swaps are valued by independent pricing services using pricing models that are based on real-time intraday snapshots of relevant interest rate curves that are built using the most actively traded securities for a given maturity. The pricing models also incorporate cash and money market rates. In addition, market data pertaining to interest rate swaps is monitored regularly to ensure that interest rates are properly depicting the current market rate. To the extent that these inputs are observable, the values of interest rate swaps are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 



 

Credit Default Swaps — Credit default swaps are valued by independent pricing services using pricing models that take into account, among other factors, information received from market makers and broker-dealers, default probabilities from index specific credit spread curves, recovery rates, and cash flows. To the extent that these inputs are observable, the values of credit default swaps are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Senior Loans — Senior loans are valued by independent pricing services based on the average of quoted prices received from multiple dealers or valued relative to other benchmark securities when broker-dealer quotes are unavailable. To the extent that these inputs are observable, the values of senior loans are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

The Fund’s policy is to recognize transfers between levels at the end of the reporting period.

 

A summary of the inputs used at July 31, 2011 in valuing the Fund’s assets and liabilities is listed below:

 

 

 

 

 

Level 2 -

 

Level 3 -

 

 

 

 

 

 

 

Other Significant

 

Significant

 

 

 

 

 

Level 1 -

 

Observable

 

Unobservable

 

Value at

 

 

 

Quoted Prices

 

Inputs

 

Inputs

 

7/31/11

 

Investments in Securities - Assets

 

 

 

 

 

 

 

 

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

Airlines

 

 

$8,528,249

 

$9,508,717

 

$18,036,966

 

Energy

 

 

 

3,332,500

 

3,332,500

 

Transportation

 

 

 

684,572

 

684,572

 

All Other

 

 

521,913,491

 

 

521,913,491

 

Municipal Bonds

 

 

146,268,893

 

 

146,268,893

 

Mortgage-Backed Securities

 

 

122,989,298

 

461,898

 

123,451,196

 

Senior Loans

 

 

20,507,245

 

 

20,507,245

 

Preferred Stock:

 

 

 

 

 

 

 

 

 

Banking

 

 

1,646,145

 

 

1,646,145

 

Financial Services

 

$5,169,000

 

13,103,360

 

 

18,272,360

 

Convertible Preferred Stock

 

16,694,103

 

 

 

16,694,103

 

Sovereign Debt Obligations

 

 

6,960,054

 

 

6,960,054

 

Asset-Backed Securities

 

 

2,575,072

 

 

2,575,072

 

Mutual Funds

 

132,801

 

 

 

132,801

 

Short-Term Investments

 

 

5,861,134

 

 

5,861,134

 

Total Investments in Securities - Assets

 

$21,995,904

 

$850,352,941

 

$13,987,687

 

$886,336,532

 

 

 

 

 

 

 

 

 

 

 

Other Financial Instruments* - Assets

 

 

 

 

 

 

 

 

 

Credit Contracts

 

 

$2,045,240

 

 

$2,045,240

 

Foreign Exchange Contracts

 

 

318,183

 

 

318,183

 

Interest Rate Contracts

 

$887,866

 

328,512

 

 

1,216,378

 

Total Other Financial Instruments* - Assets

 

$887,866

 

$2,691,935

 

 

$3,579,801

 

 

 

 

 

 

 

 

 

 

 

Other Financial Instruments* - Liabilities

 

 

 

 

 

 

 

 

 

Foreign Exchange Contracts

 

 

$(1,161,016

)

 

$(1,161,016

)

Interest Rate Contracts

 

 

(1,948,872

)

 

(1,948,872

)

Total Other Financial Instruments* - Liabilities

 

 

$(3,109,888

)

 

$(3,109,888

)

 

 

 

 

 

 

 

 

 

 

Total Investments

 

$22,883,770

 

$849,934,988

 

$13,987,687

 

$886,806,445

 

 


*Other financial instruments not reflected in the Schedule of Investments, such as futures contracts, swap agreements and forward foreign currency contracts, are valued at the unrealized appreciation (depreciation) of the instrument.

 

There were no significant transfers between Levels 1 and 2 during the nine months ended July 31, 2011.

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the nine months ended July 31, 2011, was as follows:

 

 

 

 

 

Net

 

 

 

 

 

Net Change

 

 

 

 

 

 

 

 

 

Beginning

 

Purchases

 

Accrued

 

Net

 

in Unrealized

 

Transfers

 

Transfers

 

Ending

 

 

 

Balance

 

(Sales) and

 

Discounts

 

Realized

 

Appreciation/

 

into

 

out of

 

Balance

 

 

 

10/31/10

 

Settlements

 

(Premiums)

 

Gain (Loss)

 

Depreciation

 

Level 3

 

Level 3*

 

7/31/11

 

Investments in Securities - Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines

 

$10,370,772

 

$(728,224

)

$(7,540

)

$(2,372

)

$(123,919

)

 

 

$9,508,717

 

Energy

 

3,999,000

 

 

45,908

 

 

(712,408

)

 

 

3,332,500

 

Financial Services

 

24,307,835

 

 

6,420

 

 

(431,755

)

 

$(23,882,500

)

 

Transportation

 

690,252

 

(22,281

)

(1,543

)

(221

)

18,365

 

 

 

684,572

 

Mortgage-Backed Securities

 

 

466,400

 

26,862

 

 

(31,364

)

 

 

461,898

 

Total Investments

 

$39,367,859

 

$(284,105

)

$70,107

 

$(2,593

)

$(1,281,081

)

 

$(23,882,500

)

$13,987,687

 

 


*Transferred out of Level 3 into Level 2 because sufficient observable inputs were available.

 

The net change in unrealized appreciation/depreciation of Level 3 investments which the Portfolio held at July 31, 2011, was $(805,336).

 



 

Item 2. Controls and Procedures

 

(a) The registrant’s President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR270.3a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

 

(b) There were no significant changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits

 

(a) Exhibit 99.302 Cert. — Certification pursuant to Section 302 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.

 

Registrant: PIMCO Corporate Income Fund

 

 

 

By

/s/ Brian S. Shlissel

 

President & Chief Executive Officer

 

 

 

Date: September 20, 2011

 

 

 

By

/s/ Lawrence G. Altadonna

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

Date: September 20, 2011

 

 

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/ Brian S. Shlissel

 

President & Chief Executive Officer

 

 

 

Date: September 20, 2011

 

 

 

By

/s/ Lawrence G. Altadonna

 

Treasurer, Principal Financial & Accounting Officer

 

Date: September 20, 2011