Tactical exposure to emerging markets Underweight to healthcare/pharmaceuticals Underweight to utilities

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2 Portfolio performance The Investment Grade Credit strategy underperformed its index for the quarter as bottom-up sector/security selection detracted from returns, while positive contributions from interest rate strategies mitigated negative relative performance. Class: Inception date: Fund assets (in millions): Annual operating expense: INST 28 Apr '00 $12, % CONTRIBUTORS Interest rate strategies Tactical exposure to non-agency MBS Overweight to banking and select financials Portfolio strategy *Bloomberg Barclays U.S. Credit Index **Unless stated, the fund does not have an unsubsidized yield. DETRACTORS Tactical exposure to emerging markets Underweight to healthcare/pharmaceuticals Underweight to utilities Performance periods ended 31 Dec '17 3 mos. 6 mos. 1 yr. 3 yrs. 5 yrs. 10 yrs. SI Fund before fees Fund after fees Benchmark* Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month end, visit pimco.com or call PIMCO. PIMCO continues to de-risk portfolios as spreads continue to grind tighter, but most credit portfolios remain modestly overweight spread and slightly underweight interest rate duration overall. We see opportunity in credit market sectors with barriers to entry, growth, pricing power, and asset coverage. We are favoring banks/financials, pipelines, consumerrelated sectors, rails, gaming/lodging, and housing; we remain cautious on deflationary sectors such as retail and telecom. Summary information 30-day SEC yield** Distribution yield Effective duration (yrs) Benchmark duration provider (yrs) Benchmark duration PIMCO (yrs) Effective maturity (yrs) Average coupon Net currency exposure Tracking error (10 yrs) 31 Dec ' % 3.70% % 3.58% 2.08 Information ratio (10 yrs) 0.94 Top 5 overweight industries (MV%) Portfolio BM* Banks Financial Other Gaming Pipelines Independent E&P Top 5 underweight industries (MV%) Portfolio BM* Technology Retailers Food & Beverage Pharmaceuticals Diversified Manufacturing As of 31 December

3 Yield to maturity (%) Excess return (%) Credit spreads finished the quarter tighter Credit spreads tightened further in Q4, amid continued optimism surrounding growth and the passage of pro-growth tax reform. Spread compression was driven mainly by expectations of improving corporate fundamentals and the rise in Treasury yields. Fundamentals and technicals remain supportive of credit returns, while we view credit beta at best fairly valued today. Specifically, the Bloomberg Barclays U.S. Credit Index returned +1.05% over the quarter, outperforming likeduration Treasuries by +0.89%. U.S. credit yields and spreads U.S. credit yield to maturity (LHS) U.S. credit OAS (RHS) OAS (bps) U.S. credit excess returns by sector Q4 ' Key outperformers Key underperformers Dec '13 Dec '14 Dec '15 Dec '16 Dec '17 80 Credit spreads tightened 7 bps in Q4 to 89 bps, given sustained synchronized global expansion combined with relatively low government yields across most developed markets. Source: Bloomberg Barclays U.S. Credit Index Commodity related sectors continued to outperform driven by strong price tailwinds, and supermarkets rebounded following negative performance driven by Amazon's expansion into the industry the prior quarter. Pharmaceuticals underperformed, driven by Teva's poor performance and resulting downgrades. As of 31 December

4 Change in yield Change in spread Returns (%) Positive returns from top-down/macro strategies offset by detractions from sector/security selection The Investment Grade Credit strategy underperformed during the quarter, due primarily to detractions from underweights to healthcare/pharma and utilities as well as negative contributions from tactical exposure to emerging markets. Positive contributions came from interest rate positioning, tactical exposure to non- Agency MBS, and an overweight to banking. Banking Select subordinate bank capital securities, particularly Additional Tier 1 bonds issued by core European and UK banks, in addition to preference shares of U.S. banks, rallied in Q4 alongside strong bank earnings, rising stock prices, and continued equity capital build. Non-Agency MBS Non-Agency MBS market technicals and fundamentals remained supportive in Q4, given low interest rate volatility, slow prepayment speeds, and overall strength in the housing sector. Collateral performance continued its gradual longrun improving fundamental trend, in line with PIMCO s expectations. Utilities Utilities outperformed the broader investment grade credit market, supported by improving fundamentals due to cost recovery mechanisms and the ongoing management of operating costs. Further, the sector saw relatively flat demand in the power market. Yields Q4 ' U.S. 10yr Germany 10yr 0 Japan 10yr EM Local Spreads Q4 ' Breakeven inflation U.S. IG U.S. HY EM external Currencies and commodities Q4 ' % 30% 20% 10% 0% -10% -20% 1.6% 14.1% Euro 11.5% 8.9% 10.7% 3.8% 2.0% -0.1% Japanese EM yen currencies -4.3% Energy 29.4% Industrial metals -2.0% -11.0% Agriculture Source: EM local (JPMorgan GBI-EM Global Diversified Composite Yield to Maturity Index); U.S. investment grade credit (Bloomberg Barclays U.S. Aggregate Corporate Average OAS Index); U.S. high yield credit (Bloomberg Barclays U.S. Corporate High Yield Average OAS Index); EM external (JPMorgan Emerging Bond Index Global Sovereign Spread); EM currencies (JPMorgan ELMI Plus Composite); Energy (Bloomberg Energy Subindex Total Return Index); Industrial metals (Bloomberg Industrial Metals Subindex Total Return Index); Agriculture (Bloomberg Agriculture Total Return Index) As of 31 December

5 U.S. GDP: 2.25% 2.75 % CPI: 1.75% 2.25% -- RUSSIA GDP: 1.50% % CPI: 3.25% % U.K. GDP: 1.25% % CPI: 2.25% % -- EUROZONE GDP: 2.00% % HICP: 1.00% % JAPAN GDP: 1.00% % CPI: 0.75% % MEXICO GDP: 2.00% % CPI: 3.25% % CHINA GDP: 5.75% % CPI: 2.00% % BRAZIL GDP: 2.00% % CPI: 3.75% % INDIA GDP: 7.00% % CPI: 4.00% % Forecasts GDP Inflation % of world GDP Change relative to 2017 data PIMCO forecast ranges as of December Real GDP and inflation projections reflect the midpoints of PIMCO s forecast ranges for Developed Markets Emerging Markets World As of 31 December

6 Strategic Positioning PIMCO remains modestly overweight credit risk and slightly underweight interest rate duration, in spite of valuations that are at best fairly valued today. Fundamentals and technicals should remain supportive of credit spreads given ongoing synchronized global growth and low global government yields. Additionally, low inflation should keep global monetary policy accommodative, despite a modest reduction in global central bank balance sheets over time. Our bottom-up positioning emphasizes housing-related sectors and other high quality non-cyclical credits tied to the consumer that are closer to mid-cycle, in addition to banks/specialty finance, REITs and select emerging markets. Key strategies Banks and specialty finance Improving profitability, higher equity capital ratios, healthy and improving balance sheets and exposure to housing activity are supportive of the financial sector. Housing-related sectors We are favoring select building products, non-agency MBS and other credits tied to the housing sector stand to benefit from the ongoing housing recovery. Pipelines Attractive valuations exist for midstream energy / pipelines credits with critical infrastructure, hard assets and those that are located in areas of relatively high energy production. Industries exposed to re-leveraging risk Certain sectors remain at risk as issuers have taken advantage of low interest rates to engage in mergers and acquisitions and other shareholder remuneration that has boosted leverage. As of 31 December

7 Key rate duration exposure yrs 5-15 yrs 15+ yrs Portfolio (yrs) ** Benchmark duration is calculated by PIMCO Benchmark: Bloomberg Barclays U.S. Credit Index 30 Sep '17 31 Dec '17 Benchmark (yrs)** Benchmark (yrs)** 30 Sep '17 31 Dec '17 31 Dec ' yrs yrs yrs Total Interest rate exposure Portfolio (yrs) Benchmark (yrs)** 30 Sep '17 31 Dec '17 31 Dec '17 Effective duration Bull market duration Bear market duration Spread duration Mortgage spread duration Corporate spread duration Emerging markets spread duration Swap spread duration Covered bond spread duration Sovereign related spread duration Derivative exposure (% of duration) 30 Sep '17 31 Dec '17 Government futures Interest rate swaps Credit default swaps* Purchased swaps Written swaps Options Purchased options Written options Mortgage derivatives Money Market derivatives Futures Interest rate swaps Other derivatives * Shown as a percentage of market value As of 31 December

8 Country exposure by currency of settlement 30 Sep '17 31 Dec '17 Duration (yrs) FX (%) Duration (yrs) FX (%) United States Japan Eurozone Euro Currency European Union Germany Italy Netherlands Spain United Kingdom Europe non-emu Poland Dollar Block Australia New Zealand Other Industrialized Countries Chile Singapore South Korea EM - Asia China India Indonesia EM - Latin America Argentina Brazil Mexico Peru EM - CEEMEA Russia South Africa Total Emerging markets exposure by country of risk 30 Sep '17 31 Dec '17 % of MV short duration instruments % of MV bonds Duration (yrs) % of MV short duration instruments % of MV bonds Duration (yrs) Argentina Brazil China Colombia EM Index Product India Indonesia Iraq Mexico Panama Peru Russia South Africa Turkey Ukraine Total As of 31 December

9 PIMCO Investment Grade Corporate Bond Fund (net of fees performance) Performance periods ended: 31 Dec '17 Annual operating expense NAV currency Class Inception date 3 mos. 6 mos. 1 yr. 3 yrs. 5 yrs. 10 yrs. SI Class A (at NAV) USD 30 Jul ' Class A (at MOP) USD 30 Jul ' Class ADMIN USD 30 Sep ' Class C (at NAV) USD 30 Jul ' Class C (at MOP) USD 30 Jul ' Class D USD 30 Jul ' Class INST USD 28 Apr ' Class P USD 30 Apr ' Bloomberg Barclays U.S. Credit Index Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month end, visit pimco.com or call PIMCO. The maximum offering price (MOP) returns take into account the Class A maximum initial sales charge of 3.75%. The maximum offering price (MOP) returns take into account the contingent deferred sales charge (CDSC) for Class C shares, which for this fund is 1.00%. Interest expense results from the Fund's use of certain investments such as tender option bond floating rate certificates. Such expense is required to be treated as a Fund expense for accounting purposes and is not payable to Pacific Investment Management Company LLC ("PIMCO"). Any interest expense amount will vary based on the Fund's use of those investments as an investment strategy best suited to seek the objective of the Fund. Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement excluding interest expense are 0.900%, 0.750%, 1.650%, 0.900%, 0.500%, and 0.600% for the A Class, ADMIN Class, C Class, D Class, INST Class, and P Class, respectively. Certain classes may have an inception date which is different than the inception date of the fund. For the periods prior to the inception date of the oldest class shares, performance information is based on the performance of the oldest class shares, adjusted to reflect the actual distribution and/or service (12b-1) fees and other expenses paid by the other class shares. As of 31 December

10 This material is authorized for use only when preceded or accompanied by the current PIMCO funds prospectus or summary prospectus, if available. Past performance is not a guarantee or a reliable indicator of future results. The performance figures presented reflect the total return performance, after fees, and reflect changes in share price and reinvestment of dividend and capital gain distributions. All periods longer than one year are annualized. The minimum initial investment for institutional, administrative, and P class shares is $1 million; however, it may be modified for certain financial intermediaries who submit trades on behalf of eligible investors. There is no assurance that any fund, including any fund that has experienced high or unusual performance for one or more periods, will experience similar levels of performance in the future. High performance is defined as a significant increase in either 1) a fund s total return in excess of that of the fund s benchmark between reporting periods or 2) a fund s total return in excess of the fund s historical returns between reporting periods. Unusual performance is defined as a significant change in a fund s performance as compared to one or more previous reporting periods. Investments made by a Fund and the results achieved by a Fund are not expected to be the same as those made by any other PIMCO-advised Fund, including those with a similar name, investment objective or policies. A new or smaller Fund s performance may not represent how the Fund is expected to or may perform in the long-term. New Funds have limited operating histories for investors to evaluate and new and smaller Funds may not attract sufficient assets to achieve investment and trading efficiencies. A Fund may be forced to sell a comparatively large portion of its portfolio to meet significant shareholder redemptions for cash, or hold a comparatively large portion of its portfolio in cash due to significant share purchases for cash, in each case when the Fund otherwise would not seek to do so, which may adversely affect performance. Differences in the Fund s performance versus the index and related attribution information with respect to particular categories of securities or individual positions may be attributable, in part, to differences in the pricing methodologies used by the Fund and the index. Portfolio allocations and other information in the charts in this Quarterly Investment Report are based on the fund's net assets. These percentages may differ from those used for the fund's compliance calculations, including the fund's prospectus, regulatory, and other investment limitations and policies, which may be based on total assets of the fund or other measurements, may include or exclude various categories of investments from those covered in the portfolio allocation categories shown in this report, and may be based on different classifications and measurements of the fund's investments and other criteria. All funds are separately monitored for compliance with prospectus and regulatory requirements. A word about risk: Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss. The Bloomberg Barclays U.S. Credit Index is an unmanaged index comprised of publicly issued U.S. corporate and specified non-u.s. debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered. This index was formerly known as the Bloomberg Barclays Credit Investment Grade Index. It is not possible to invest directly in an unmanaged index. As of 31 December

11 The following defined terms are used throughout the report. Emerging market short duration instruments includes an emerging market security or other instrument economically tied to an emerging market country by country of risk with an effective duration less than one year and rated investment grade or higher or if unrated, determined to be similar quality by PIMCO. Net other short duration instruments includes securities and other instruments (except instruments tied to emerging markets by country of risk) with an effective duration less than one year and rated investment grade or higher or, if unrated, determined by PIMCO to be of comparable quality, commingled liquidity funds, uninvested cash, interest receivables, net unsettled trades, broker money and derivatives offset. With respect to certain categories of short duration securities, the Adviser reserves the discretion to require a minimum credit rating higher than investment grade for inclusion in this category. Short duration derivatives and derivatives offsets include: 1) derivatives with an effective duration less than one year and where the country of risk is not an emerging market country (for example, Eurodollar futures) and 2) offsets associated with investments in futures, swaps and other derivatives. Such offsets may be taken at the notional value of the derivative position which in certain instances may exceed the actual amount owed on such positions. Municipals/Other may include convertibles, preferred and yankee bonds. The SEC yield is an annualized yield based on the most recent 30 day period. The average distribution yield is the average of the last four quarterly distribution yields. The quarterly distribution yield is calculated by annualizing the quarter's distribution and dividing by the NAV on the last business day of the period. It does not include long- or short-term capital gains distributions. Average coupon is the average of the coupon payments of the underlying bonds within the portfolio. Average effective maturity is a weighted average of all the maturities of the bonds in a portfolio, computed by weighting each bond s effective maturity by the market value of the security. Duration is the measure of a bond's price sensitivity to interest rates and is expressed in years. Effective duration is the duration for a bond with an embedded option when the value is calculated to include the expected change in cash flow caused by the option as interest rates change. Information ratio is a ratio of portfolio returns above the returns of a benchmark to the volatility of those returns. Tracking error measures the dispersion or volatility of excess returns relative to a benchmark. Tracking error measures the dispersion or volatility of excess returns relative to a benchmark. Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice. The performance figures presented reflect the performance for the institutional class unless otherwise noted. A note about Sector exposure: Other indicates swaps and securities issued in euros. A note about Emerging markets exposure by country of risk: country of risk reflects the country of incorporation of the ultimate parent company. PIMCO uses an internal model for calculating effective duration, which may result in a different value for the duration of an index compared to the duration calculated by the index provider or another third party. This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. PIMCO Investments LLC, distributor, 1633 Broadway, New York, NY, is a company of PIMCO 2018 PIMCO. 707_QIR-4Q17 As of 31 December

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