UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act File Number:		811-10379
Registrant Name:		PIMCO California Municipal Income Fund
Address of Principal Executive Offices:		1633 Broadway
		New York, NY 10019
Name and Address of Agent for Service:		William G. Galipeau
		1633 Broadway
		New York, NY 10019
Registrant’s telephone number, including area code:		888-877-4626
Date of Fiscal Year End:		April 30, 2015
Date of Reporting Period:		July 31, 2014

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Item 1. Schedule of Investments

PIMCO California Municipal Income Fund

July 31, 2014 (unaudited)

 

 

Principal Amount (000s)						Value*
	CALIFORNIA MUNICIPAL BONDS & NOTES—87.3%
	$10,000			Bay Area Toll Auth. Rev., San Francisco Bay Area, 5.00%, 4/1/34, Ser. F-1 (Pre-refunded @ $100, 4/1/18) (c)		$	11,533,500
	1,500			California Cnty. Tobacco Securitization Agcy. Rev., 5.60%, 6/1/36			1,281,540
	5,000			Chula Vista Rev., San Diego Gas & Electric, 5.875%, 2/15/34, Ser. B			5,703,350
	650			City & Cnty. of San Francisco, Capital Improvement Projects, CP, 5.25%, 4/1/31, Ser. A			722,332
	350			Contra Costa Cnty. Public Financing Auth., Tax Allocation, 5.85%, 8/1/33, Ser. A			350,070
	5,000			Desert Community College Dist., GO, 5.00%, 8/1/37, Ser. C (AGM)			5,347,400
	6,300			Eastern Municipal Water Dist., CP, 5.00%, 7/1/35, Ser. H			6,845,706
				Educational Facs. Auth. Rev. (h),
	10,200			Claremont McKenna College, 5.00%, 1/1/39			11,035,686
	10,000			Univ. of Southern California, 5.00%, 10/1/39, Ser. A			11,026,300
	2,975			El Dorado Irrigation Dist. & El Dorado Water Agcy., CP, 5.75%, 8/1/39, Ser. A (AGC) (Pre-refunded @ $100, 8/ 1/14) (c)			2,975,000
	14,425			El Monte, Department of Public Social Services Fac., Phase II, CP, 5.25%, 1/1/34 (AMBAC) (a)(b)(i) (acquisition cost-$14,425,000; purchased 8/2/01)			14,465,678
	1,000			Folsom Redev. Agcy., Tax Allocation, 5.50%, 8/1/36			1,025,380
				Fremont Community Facs. Dist. No. 1, Special Tax,
	165			6.00%, 9/1/18			165,254
	505			6.00%, 9/1/19			505,773
	3,500			6.30%, 9/1/31			3,503,150
				Golden State Tobacco Securitization Corp. Rev.,
	3,000			5.00%, 6/1/35, Ser. A (FGIC)			3,085,170
	6,000			5.00%, 6/1/38, Ser. A (FGIC)			6,145,380
	1,600			5.00%, 6/1/45 (AMBAC-TCRS)			1,628,608
	2,195			5.00%, 6/1/45, Ser. A			2,234,247
	8,300			5.125%, 6/1/47, Ser. A-1			6,109,381
	21,875			5.75%, 6/1/47, Ser. A-1			17,466,312
				Health Facs. Financing Auth. Rev.,
	2,000			Adventist Health System, 5.75%, 9/1/39, Ser. A			2,240,960
	2,000			Catholic Healthcare West, 6.00%, 7/1/34, Ser. A			2,005,880
	4,000			Catholic Healthcare West, 6.00%, 7/1/39, Ser. A			4,458,480
	11,000			Stanford Hospital Clinics, 5.00%, 8/15/51, Ser. A			11,855,650
	1,000			Children’s Hospital of Orange Cnty., 6.50%, 11/1/38, Ser. A			1,177,470
	1,450			Scripps Health, 5.00%, 11/15/36, Ser. A			1,564,057
	3,400			Stanford Hospital, 5.25%, 11/15/40, Ser. A-2			3,758,462
	1,000			Sutter Health, 5.00%, 8/15/35, Ser. D			1,098,610
	1,600			Sutter Health, 5.00%, 11/15/42, Ser. A (IBC-NPFGC)			1,667,360
	3,000			Sutter Health, 5.00%, 8/15/52, Ser. A			3,213,660
	2,800			Sutter Health, 6.00%, 8/15/42, Ser. B			3,326,232
	1,000			Imperial Irrigation Dist. Rev., 5.00%, 11/1/41, Ser. C			1,081,040
	10,000			Infrastructure & Economic Dev. Bank Rev., Independent System Operator Corp., 5.00%, 2/1/39			10,698,900
	10,590			Kern Cnty., Capital Improvements Projects, CP, 5.75%, 8/1/35, Ser. A (AGC)			11,659,590
				Lancaster Redev. Agcy., Tax Allocation,
	215			6.875%, 8/1/39			248,271
	285			6.875%, 8/1/39 (Pre-refunded @ $100, 8/ 1/19) (c)			362,301
	5,000			Long Beach Airport Rev., 5.00%, 6/1/40, Ser. A			5,193,950
	1,000			Long Beach Bond Finance Auth. Rev., Long Beach Natural Gas, 5.50%, 11/15/27, Ser. A			1,173,630
				Los Angeles Department of Water & Power Rev.,
	5,000			4.75%, 7/1/30, Ser. A-2 (AGM) (h)			5,148,300
	4,100			5.00%, 7/1/37, Ser. B			4,560,307
	8,650			5.00%, 7/1/43, Ser. B			9,546,146
	3,000			5.375%, 7/1/34, Ser. A (h)			3,333,780
	7,000			5.375%, 7/1/38, Ser. A (h)			7,729,750
				Los Angeles Unified School Dist., GO,
	10,000			5.00%, 7/1/29, Ser. I (h)			11,344,900
	3,500			5.00%, 1/1/34, Ser. I			3,892,980
	5,000			5.00%, 1/1/34, Ser. I (h)			5,561,400
	250			5.30%, 1/1/34, Ser. D			282,740
	1,900			M-S-R Energy Auth. Rev., 6.50%, 11/1/39, Ser. B			2,500,837
	700			Malibu, City Hall Project, CP, 5.00%, 7/1/39, Ser. A			726,138
				Municipal Finance Auth. Rev.,
	1,045			Azusa Pacific Univ. Project, 7.75%, 4/1/31, Ser. B			1,223,308
	2,900			Biola Univ., 5.875%, 10/1/34			3,225,844
	1,250			Peralta Community College Dist., GO, 5.00%, 8/1/39, Ser. C			1,355,388
				Pollution Control Financing Auth. Rev.,
	1,250			American Water Capital Corp. Project, 5.25%, 8/1/40 (a)(b)(d)(i) (acquisition cost-$1,250,000; purchased 8/11/10)			1,324,963
	2,000			San Jose Water Co. Projects, 5.10%, 6/1/40			2,085,700
	5,000			Sacramento Cnty. Sanitation Dists. Financing Auth. Rev., 5.00%, 8/1/30 (NPFGC)			5,221,650
	6,250			San Diego Cnty. Water Auth., CP, 5.00%, 5/1/38, Ser. 2008-A (AGM)			6,815,875
	3,285			San Diego Regional Building Auth. Rev., Cnty. Operations Center & Annex, 5.375%, 2/1/36, Ser. A			3,606,043
				San Joaquin Hills Transportation Corridor Agcy. Rev., Ser. A,
	5,000			5.50%, 1/15/28			5,002,500
	5,000			5.70%, 1/15/19			5,108,500

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PIMCO California Municipal Income Fund

July 31, 2014 (unaudited) (continued)

 

 

Principal Amount (000s)						Value*
$	230			San Jose, Special Assessment, 5.60%, 9/2/17, Ser. 24-Q		$	237,137
	1,500			San Jose Hotel Tax Rev., Convention Center Expansion, 6.50%, 5/1/36			1,767,960
	1,200			San Marcos Unified School Dist., GO, 5.00%, 8/1/38, Ser. A			1,303,764
	3,500			Santa Clara Cnty. Financing Auth. Rev., El Camino Hospital, 5.75%, 2/1/41, Ser. A (AMBAC)			3,752,455
	1,300			Santa Cruz Cnty. Redev. Agcy., Tax Allocation, Live Oak/Soquel Community, 7.00%, 9/1/36, Ser. A			1,487,655
				State, GO,
	5,885			5.00%, 9/1/35			6,346,855
	100			5.00%, 6/1/37			107,312
	3,000			5.00%, 12/1/37			3,256,590
	7,000			5.00%, 11/1/43			7,711,970
	2,400			5.25%, 11/1/40			2,716,728
	1,500			5.50%, 3/1/40			1,699,305
	2,000			6.00%, 4/1/38			2,350,960
	2,000			6.00%, 11/1/39			2,391,560
				State Public Works Board Rev.,
	2,000			5.75%, 10/1/30, Ser. G-1			2,309,360
	2,000			California State Univ., 6.00%, 11/1/34, Ser. J			2,340,560
	1,500			Judicial Council Projects, 5.00%, 12/1/29, Ser. D			1,685,355
	2,000			Regents Univ., 5.00%, 4/1/34, Ser. E (Pre-refunded @ $100, 4/1/19) (c)			2,359,000
	3,915			Statewide Communities Dev. Auth., The Internext Group, CP, 5.375%, 4/1/30			3,924,983
				Statewide Communities Dev. Auth. Rev.,
	1,000			American Baptist Homes West, 6.25%, 10/1/39			1,063,110
	900			California Baptist Univ., 5.50%, 11/1/38, Ser. A			903,978
	845			Catholic Healthcare West, 5.50%, 7/1/31, Ser. D			923,551
	10,000			Cottage Health, 5.00%, 11/1/40			10,769,700
	7,500			Kaiser Permanente, 5.00%, 4/1/42, Ser. A			8,092,650
	1,000			Kaiser Permanente, 5.25%, 3/1/45, Ser. B			1,030,850
	1,000			Lancer Student Housing Project, 7.50%, 6/1/42			1,109,910
	1,870			Methodist Hospital Project, 6.625%, 8/1/29 (FHA)			2,208,507
	6,875			Methodist Hospital Project, 6.75%, 2/1/38 (FHA)			8,106,656
	100			St. Joseph Health System, 5.125%, 7/1/24 (NPFGC)			111,722
	3,200			St. Joseph Health System, 5.75%, 7/1/47, Ser. A-3 (FGIC)			3,528,160
	2,000			Sutter Health, 6.00%, 8/15/42, Ser. A			2,375,880
	4,000			Univ. of California Irvine E. Campus, 5.125%, 5/15/31			4,271,960
	4,500			Univ. of California Irvine E. Campus, 5.375%, 5/15/38			4,838,985
	6,300			Torrance Rev., Torrance Memorial Medical Center, 5.00%, 9/1/40, Ser. A			6,629,553
	2,500			Township Health Care Dist, GO, 5.00%, 8/1/43, Ser. B			2,682,900
	2,000			Turlock, Emanuel Medical Center, CP, 5.50%, 10/15/37, Ser. B			2,219,440
	2,000			Univ. of California Rev., 5.00%, 5/15/43, Ser. J			2,174,480
	1,000			Westlake Village, CP, 5.00%, 6/1/39			1,018,760
				Total California Municipal Bonds & Notes (cost-$344,202,716)			381,347,030
	OTHER MUNICIPAL BONDS & NOTES—3.0%
				Iowa—1.7%
	8,600			Tobacco Settlement Auth. Rev., 5.60%, 6/1/34, Ser. B			7,543,920
				Texas—1.3%
	5,000			Wood Cnty. Central Hospital Dist. Rev., East Texas Medical Center Quitman Project, 6.00%, 11/1/41			5,471,500
				Total Other Municipal Bonds & Notes (cost-$13,878,739)			13,015,420
	CALIFORNIA VARIABLE RATE NOTES (a)(b)(d)(f)(i)—1.8%
				Health Facs. Financing Auth. Rev.,
	1,000			3.00%, 11/15/36, Ser. 3193 (e) (acquisition cost-$972,060; purchased 6/7/10)			1,172,210
	6,000			9.953%, 11/15/42, Ser. 3255 (acquisition cost-$3,698,520; purchased 3/25/11)			6,580,320
				Total California Variable Rate Notes (cost-$4,678,401)			7,752,530
	SHORT-TERM INVESTMENTS—7.9%
				Repurchase Agreements—2.8%
	12,400			Banc of America Securities LLC, dated 7/31/14, 0.13%, due 8/1/14, proceeds $12,400,045; collateralized by U.S. Treasury Notes, 0.625%, due 9/30/17, valued at $12,680,640 including accrued interest (cost-$12,400,000)			12,400,000
				California Variable Rate Demand Notes (f)(g)—2.7%
	5,275			East Bay Municipal Utility Dist. Rev., 0.04%, 6/1/38, (final maturity 6/1/38), Ser. A-4			5,275,000
	6,500			Health Facs. Financing Auth. Rev., 0.03%, 10/1/31, (final maturity 10/1/31), Ser. B			6,500,000
				Total California Variable Rate Demand Notes (cost-$11,775,000)			11,775,000
				U.S. Government Agency Securities—2.4%
	10,500			Fannie Mae Discount Notes, 0.096%, 1/20/15 (j) (cost-$10,495,234)			10,495,234
				Total Short-Term Investments (cost-$34,670,234)			34,670,234
				Total Investments (cost-$397,430,090) (k)—100.0%		$	436,785,214

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PIMCO California Municipal Income Fund

July 31, 2014 (unaudited) (continued)

 

Industry classification of portfolio holdings as a percentage of total investments was as follows:

 

Revenue Bonds:
Health, Hospital & Nursing Home Revenue			24.2	%
Tobacco Settlement Funded			10.4
College & University Revenue			6.5
Electric Power & Light Revenue			6.1
Water Revenue			5.6
Highway Revenue Tolls			4.9
Lease (Abatement)			2.8
Local or Guaranteed Housing			2.3
Natural Gas Revenue			2.1
Sewer Revenue			1.2
Port, Airport & Marina Revenue			1.2
Hotel Occupancy Tax			0.4
Total Revenue Bonds							67.7	%
General Obligation							13.4
Certificates of Participation							11.8
Repurchase Agreements							2.8
U.S. Government Agency Securities							2.4
Special Tax							1.0
Tax Allocation							0.8
Special Assessment							0.1
Total Investments							100.0	%

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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. 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.

The Board of Trustees (the “Board”) has adopted procedures for valuing portfolio securities and other financial instruments in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to Allianz Global Investors Fund Management LLC (the “Investment Manager”) and Pacific Investment Management Company LLC (the “Sub-Adviser”). The Fund’s Valuation Committee was established by the Board to oversee the implementation of the Fund’s valuation methods and to make fair value determinations on behalf of the Board, as instructed. The Sub-Adviser monitors the continued appropriateness of methods applied and determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Sub-Adviser determines that a valuation method may no longer be appropriate, another valuation method may be selected, or the Valuation Committee will be convened to consider the matter and take any appropriate action in accordance with procedures set forth by the Board. The Board shall review the appropriateness of the valuation methods and these methods may be amended or supplemented from time to time by the Valuation Committee.

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 premium or discount based on their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.

The prices used by the Fund to value investments may differ from the value that would be realized if the investments were sold, and these differences could be material. Fund’s net asset value (“NAV”) is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“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 $23,543,171, representing 5.4% of total investments.

 

(b)

Illiquid.

 

(c)	Pre-refunded bonds are collateralized by U.S. Government or other eligible securities which are held in escrow and used to pay principal and interest and retire the bonds at the earliest refunding date (payment date).

 

(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)	Inverse Floater—The interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index. The interest rate disclosed reflects the rate in effect on July 31, 2014.

 

(f)

Variable Rate Notes—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, 2014.

 

(g)	Date shown is date of next put.

 

(h)	Residual Interest Bonds held in Trust—Securities represent underlying bonds transferred to a separate securitization trust established in a tender option bond transaction in which the Fund acquired the residual interest certificates. These securities serve as collateral in a financing transaction.

 

(i)	Restricted. The aggregate acquisition cost of such securities is $20,345,580. The aggregate value is $23,543,171, representing 5.4% of total investments.

 

(j)	Rates reflect the effective yields at purchase date.

 

(k)

At July 31, 2014, the cost basis of portfolio securities for federal income tax purposes was $397,430,090. Gross unrealized appreciation was $42,789,914; gross unrealized depreciation was $3,434,790; and net unrealized appreciation was $39,335,124. The difference between book and tax cost was attributable to wash sale loss deferrals and the differing treatment of Inverse Floater transactions.

Glossary:

AGC—insured by Assured Guaranty Corp.

AGM—insured by Assured Guaranty Municipal Corp.

AMBAC—insured by American Municipal Bond Assurance Corp.

CP—Certificates of Participation

FGIC—insured by Financial Guaranty Insurance Co.

FHA—insured by Federal Housing Administration

GO—General Obligation Bond

IBC—Insurance Bond Certificate

NPFGC—insured by National Public Finance Guarantee Corp.

TCRS—Temporary Custodian Receipts

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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, which may include, but are not limited to, quoted prices for similar assets or liabilities, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates or other market corroborated inputs

 

•

Level 3 – valuations based on significant unobservable inputs (including the Sub-Adviser’s or Valuation Committee’s own assumptions and securities whose price was determined by using a single broker’s quote)

The valuation techniques used by the Fund to measure fair value during the three months ended July 31, 2014 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.

The Fund’s policy is to recognize transfers between levels at the end of the reporting period. An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to the 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 techniques used. Investments categorized as Level 1 or 2 as of period end may have been transferred between Levels 1 and 2 since the prior period due to changes in the valuation method utilized in valuing the investments.

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 within Level 2 and Level 3, in accordance with Generally Accepted Accounting Principles.

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 life caps and the next coupon reset date. 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 & Notes and Variable Rate Notes — Municipal bonds & notes and variable rate notes 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 or note insurance. To the extent that these inputs are observable, the values of municipal bonds & notes and variable rate notes are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

A summary of the inputs used at July 31, 2014 in valuing the Fund’s assets and liabilities is listed below (refer to the Schedule of Investments for more detailed information on Investments in Securities):

 

		Level 1 - Quoted Prices				Level 2 - Other Significant Observable Inputs				Level 3 - Significant Unobservable Inputs				Value at 7/31/14
Investments in Securities - Assets
California Municipal Bonds & Notes		$	—			$	381,347,030			$	—			$	381,347,030
Other Municipal Bonds & Notes			—				13,015,420				—				13,015,420
California Variable Rate Notes			—				7,752,530				—				7,752,530
Short-Term Investments			—				34,670,234				—				34,670,234
Totals		$	—			$	436,785,214			$	—			$	436,785,214

At July 31, 2014, there were no transfers between Levels 1 and 2.

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Item 2. Controls and Procedures

(a) The registrant’s President, Principal 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 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no significant changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-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

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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 California Municipal Income Fund
By:		/s/ Peter G. Strelow
Peter G. Strelow President, Principal Executive Officer
Date: September 26, 2014
By:		/s/ William G. Galipeau
William G. Galipeau, Treasurer, Principal Financial & Accounting Officer
Date: September 26, 2014

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/ Peter G. Strelow
Peter G. Strelow, President, Principal Executive Officer
Date: September 26, 2014
By:		/s/ William G. Galipeau
William G. Galipeau, Treasurer, Principal Financial & Accounting Officer
Date: September 26, 2014