Annual Report. PIMCO Funds. March 31, 2018

Transcription

1 PIMCO Funds Annual Report March 31, 2018 Asset Allocation Funds PIMCO Multi-Strategy Alternative Fund PIMCO REALPATH 2020 Fund PIMCO REALPATH 2025 Fund PIMCO REALPATH 2030 Fund PIMCO REALPATH 2035 Fund PIMCO REALPATH 2040 Fund PIMCO REALPATH 2045 Fund PIMCO REALPATH 2050 Fund PIMCO REALPATH 2055 Fund PIMCO REALPATH Income Fund PIMCO Global Multi-Asset Fund

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3 Table of Contents Page Chairman s Letter 2 Important Information About the Funds 4 Expense Examples 18 Benchmark Descriptions 20 Financial Highlights 22 Statements of Assets and Liabilities 32 Consolidated Statement of Assets and Liabilities 36 Statements of Operations 38 Consolidated Statement of Operations 40 Statements of Changes in Net Assets 41 Consolidated Statements of Changes in Net Assets 44 Notes to Financial Statements 101 Report of Independent Registered Public Accounting Firm 137 Glossary 138 Federal Income Tax Information 139 Management of the Trust 140 Privacy Policy 143 Fund Fund Summary Schedule of Investments PIMCO Multi-Strategy Alternative Fund 7 45 PIMCO REALPATH 2020 Fund 8 53 PIMCO REALPATH 2025 Fund 9 57 PIMCO REALPATH 2030 Fund PIMCO REALPATH 2035 Fund PIMCO REALPATH 2040 Fund PIMCO REALPATH 2045 Fund PIMCO REALPATH 2050 Fund PIMCO REALPATH 2055 Fund PIMCO REALPATH Income Fund PIMCO Global Multi-Asset Fund (1) (1) Consolidated Schedule of Investments This material is authorized for use only when preceded or accompanied by the current PIMCO Funds prospectuses. The Shareholder Reports for the other series of the PIMCO Funds are printed separately.

4 Chairman s Letter Dear Shareholder, Following is the PIMCO Funds Annual Report, which covers the 12-month reporting period ended March 31, On the subsequent pages you will find specific details regarding investment results and a discussion of factors that most affected performance over the reporting period. For the 12-month reporting period ended March 31, 2018 The U.S. economy continued to expand during the reporting period. Looking back, U.S. gross domestic product (GDP) expanded at an annual pace of 3.1%, 3.2% and 2.9% during the second, third and fourth quarters of 2017, respectively. The Commerce Department s initial reading released after the reporting period had ended showed that first quarter 2018 GDP grew at an annual pace of 2.3%. The Federal Reserve (Fed) continued to normalize monetary policy during the reporting period. After raising interest rates in March and June 2017, the Fed again raised rates in December, moving the federal funds rate up to a range between 1.25% and 1.50%. In addition, in October 2017, the Fed started to reduce its balance sheet. Finally, at its March 2018 meeting, the Fed again increased rates to a range between 1.50% and 1.75%. The Fed also indicated that it expected to make two additional rate hikes in 2018, although this will be data-dependent. Economic activity outside the U.S. also accelerated during the reporting period. Regardless, the European Central Bank (ECB) and Bank of Japan maintained their highly accommodative monetary policies. Other central banks took a more hawkish stance. In November 2017, the Bank of England instituted its first rate hike since 2007, and the Bank of Canada raised rates twice during the reporting period. Meanwhile, the ECB indicated that it may pare back its quantitative easing program in The U.S. Treasury yield curve flattened during the reporting period, as short-term rates moved up more than their longer-term counterparts. The increase in rates at the short end of the yield curve was mostly due to Fed interest rate hikes. The yield on the benchmark 10-year U.S. Treasury note was 2.74% at the end of the reporting period, up from 2.40% on March 31, U.S. Treasuries, as measured by the Bloomberg Barclays U.S. Treasury Index, returned 0.43% over the 12 months ended March 31, Meanwhile the Bloomberg Barclays U.S. Aggregate Bond Index, a widely used index of U.S. investment grade bonds, returned 1.20% over the period. Riskier fixed income asset classes, including high yield corporate bonds and emerging market debt, outperformed the broad U.S. market. While there were periods of volatility, they performed well given overall solid investor demand. The ICE BofAML U.S. High Yield Index returned 3.69% over the reporting period, whereas emerging market external debt, as represented by the JPMorgan Emerging Markets Bond Index (EMBI) Global, returned 3.34% over the reporting period. Emerging market local bonds, as represented by the JPMorgan Government Bond Index-Emerging Markets Global Diversified Index (Unhedged), returned 12.99% over the reporting period. Global equities generally rose over the first 10 months of the period. This rally was driven by a number of factors, including improving global growth, corporate profits that often exceeded expectations and, in the U.S., optimism surrounding the passage of a tax reform bill in December However, a portion of those gains were given back during the final two months of the period. This was partially due to concerns over less accommodative central bank policies and fears of a trade war. All told, U.S. equities, as represented by the S&P 500 Index, returned 13.99% over the reporting period. Emerging market equities, as measured by the MSCI Emerging Markets Index, returned 24.93% over the period, whereas global equities, as represented by the MSCI World Index, returned 13.59%. Elsewhere, Japanese equities, as represented by the Nikkei 225 Index, returned 15.50% over the reporting period and European equities, as represented by the MSCI Europe Index, returned -0.43%. Commodity prices fluctuated but generally moved higher during the 12 months ended March 31, When the reporting period began, crude oil was approximately $51 a barrel. By the end of the period it was roughly $65 a 2 PIMCO ASSET ALLOCATION FUNDS

5 barrel. This ascent was driven in part by planned and observed production cuts by OPEC and the collapse in Venezuelan oil production, as well as good global growth maintaining demand. Elsewhere, gold and copper prices also moved higher over the reporting period. Finally, during the reporting period, there were periods of volatility in the foreign exchange markets, possibly due, at least in part, to signs of improving global growth, decoupling central bank policies, and a number of geopolitical events. The U.S. dollar generally weakened against other major currencies over the reporting period. For example, the U.S. dollar fell 15.05%, 12.16% and 4.55% versus the euro, British pound and Japanese yen, respectively, during the 12 months ended March 31, Thank you for the assets you have placed with us. We deeply value your trust, and we work diligently to meet your broad investment needs. For any questions regarding your PIMCO Funds investments, please contact your account manager, or call one of our shareholder associates at PIMCO. We also invite you to visit our website at to learn more about our global viewpoints. Sincerely, Brent R. Harris Chairman of the Board PIMCO Funds May 24, 2018 Past performance is no guarantee of future results. Unless otherwise noted, index returns reflect the reinvestment of income distributions and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an unmanaged index. ANNUAL REPORT MARCH 31,

6 Important Information About the Funds PIMCO Funds (the Trust ) is an open-end management investment company that includes the PIMCO Multi-Strategy Alternative Fund, PIMCO REALPATH 2020 Fund, PIMCO REALPATH 2025 Fund, PIMCO REALPATH 2030 Fund, PIMCO REALPATH 2035 Fund, PIMCO REALPATH 2040 Fund, PIMCO REALPATH 2045 Fund, PIMCO REALPATH 2050 Fund, PIMCO REALPATH 2055 Fund, PIMCO REALPATH Income Fund, and PIMCO Global Multi-Asset Fund (each a Fund and collectively, the Funds ). The PIMCO Multi-Strategy Alternative Fund may invest its respective assets in Institutional Class or Class M shares of any funds of the Trust and PIMCO Equity Series, an affiliated open-end investment company, except funds of funds, or shares of any funds of the PIMCO ETF Trust, an affiliated investment company. The PIMCO REALPATH Funds and the PIMCO Global Multi-Asset Fund may invest their respective assets in Institutional Class or Class M shares of any funds of the Trust and PIMCO Equity Series, except funds of funds. These underlying investments are referred to as Underlying PIMCO Funds. The PIMCO Multi-Strategy Alternative Fund may also invest its respective assets in other affiliated and unaffiliated funds. The PIMCO REALPATH Funds and the PIMCO Global Multi-Asset Fund also may invest their respective assets in other affiliated funds, including funds of PIMCO ETF Trust, and unaffiliated funds. These underlying investments, together with the Underlying PIMCO Funds, are referred to as Acquired Funds. The cost of investing in these Funds will generally be higher than the cost of investing in a mutual fund that invests directly in individual stocks and bonds. We believe that bond funds have an important role to play in a welldiversified investment portfolio. It is important to note, however, that in an environment where interest rates may trend upward, rising rates would negatively impact the performance of most bond funds, and fixed income securities and other instruments held by a Fund are likely to decrease in value. A wide variety of factors can cause interest rates to rise (e.g., central bank monetary policies, inflation rates, general economic conditions, etc.). In addition, changes in interest rates can be sudden and unpredictable, and there is no guarantee that Fund management will anticipate such movement accurately. The Funds may lose money as a result of movements in interest rates. As of the date of this report, interest rates in the U.S. and many parts of the world, including certain European countries, are at or near historically low levels. As such, bond funds may currently face an increased exposure to the risks associated with a rising interest rate environment. This is especially true as the Fed ended its quantitative easing program in October 2014 and has begun, and may continue, to raise interest rates. To the extent the Fed continues to raise interest rates, there is a risk that rates across the financial system may rise. Further, while bond markets have steadily grown over the past three decades, dealer inventories of corporate bonds are near historic lows in relation to market size. As a result, there has been a significant reduction in the ability of dealers to make markets. Bond funds and individual bonds with a longer duration (a measure used to determine the sensitivity of a security s price to changes in interest rates) tend to be more sensitive to changes in interest rates, usually making them more volatile than securities or funds with shorter durations. All of the factors mentioned above, individually or collectively, could lead to increased volatility and/or lower liquidity in the fixed income markets or negatively impact a Fund s performance or cause a Fund to incur losses. As a result, a Fund may experience increased shareholder redemptions, which, among other things, could further reduce the net assets of the Fund. The Funds may be subject to various risks as described in each Fund s prospectus and in the Principal Risks in the Notes to Financial Statements. The PIMCO REALPATH Funds are designed to provide investors with a comprehensive retirement solution tailored to the time when they expect to retire and plan to start withdrawing money (the target date ). Each PIMCO REALPATH Fund follows a target asset allocation schedule that changes over time to help reduce portfolio risk, increasing its exposure to conservative investments as the target date approaches. The principal value of a Fund is not guaranteed at any time, including the target date. A Fund s shareholders may experience losses, including losses near, at, or after the target year indicated in the PIMCO REALPATH Fund s name. The geographical classification of foreign (non-u.s.) securities in this report are classified by the country of incorporation of a holding. In certain instances, a security s country of incorporation may be different from its country of economic exposure. On each individual Fund Summary page in this Shareholder Report, the Average Annual Total Return table and Cumulative Returns chart measure performance assuming that any dividend and capital gain distributions were reinvested. The Cumulative Returns chart and Average Annual Total Return table reflect any sales load that would have applied at the time of purchase or any Contingent Deferred Sales Charge ( CDSC ) that would have applied if a full redemption occurred on the last business day of the period shown in the Cumulative Returns chart. Class A shares are subject to an initial sales charge. A CDSC may be imposed in certain circumstances on Class A shares that are purchased without an initial sales charge and then redeemed during the first 12 months after purchase. Class C shares are subject to a 1% CDSC, which may apply in the first year. The Cumulative Returns chart reflects only Institutional Class performance. Performance for Class P, 4 PIMCO ASSET ALLOCATION FUNDS

7 Administrative Class, Class A, Class C and Class R shares, if applicable, is typically lower than Institutional Class performance due to the lower expenses paid by Institutional Class shares. Performance shown is net of fees and expenses. The minimum initial investment amount for Institutional Class, Class P and Administrative Class shares is $1,000,000. The minimum initial investment amount for Class A and Class C shares is $1,000. There is no minimum initial investment for Class R shares. Each Fund measures its performance against at least one broad-based securities market index ( benchmark index ) and a Lipper Average, which is calculated by Lipper, Inc. ( Lipper ), a Thomson Reuters company, and represents the total return performance averages of funds that are tracked by Lipper that have the same fund classification. Each benchmark index and Lipper Average does not take into account fees, expenses or taxes. A Fund s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. 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. The following table discloses the inception dates of each Fund and its respective share classes along with each Fund s diversification status as of period end: Fund Name Fund Inception Institutional Class Class P* Administrative Class Class A** Class C Class R Diversification Status PIMCO Multi-Strategy Alternative Fund 12/30/14 12/30/14 12/30/14 12/30/14 Diversified PIMCO REALPATH 2020 Fund 03/31/08 03/31/08 06/30/08 03/31/08 Diversified PIMCO REALPATH 2025 Fund 06/30/11 06/30/11 06/30/11 06/30/11 Diversified PIMCO REALPATH 2030 Fund 03/31/08 03/31/08 06/30/08 03/31/08 Diversified PIMCO REALPATH 2035 Fund 06/30/11 06/30/11 06/30/11 06/30/11 Diversified PIMCO REALPATH 2040 Fund 03/31/08 03/31/08 06/30/08 03/31/08 Diversified PIMCO REALPATH 2045 Fund 02/29/12 02/29/12 02/29/12 02/29/12 Diversified PIMCO REALPATH 2050 Fund 03/31/08 03/31/08 06/30/08 03/31/08 Diversified PIMCO REALPATH 2055 Fund 12/31/14 12/31/14 12/31/14 12/31/14 Diversified PIMCO REALPATH Income Fund 03/31/08 03/31/08 06/30/08 03/31/08 Diversified PIMCO Global Multi-Asset Fund 10/29/08 10/29/08 10/29/08 10/29/08 10/29/08 10/29/08 Diversified * See the Subsequent Events Note in the Notes to Financial Statements for information regarding the name of Class P. ** Effective March 23, 2018, Class D shares were automatically converted into Class A shares of the same Fund. An investment in a Fund is not a bank deposit and is not guaranteed or insured by the Federal Deposit Insurance Corporation ( FDIC ) or any other government agency. It is possible to lose money on investments in a Fund. The Trustees are responsible generally for overseeing the management of the Trust. The Trustees authorize the Trust to enter into service agreements with the Adviser, the Distributor, the Administrator and other service providers in order to provide, and in some cases authorize service providers to procure through other parties, necessary or desirable services on behalf of the Trust and the Funds. Shareholders are not parties to or third-party beneficiaries of such service agreements. Neither a Fund s prospectus nor a Fund s summary prospectus, the Trust s Statement of Additional Information ( SAI ), any contracts filed as exhibits to the Trust s registration statement, nor any other communications, disclosure documents or regulatory filings (including this report) from or on behalf of the Trust or a Fund creates a contract between or among any shareholder of a Fund, on the one hand, and the Trust, a Fund, a service provider to the Trust or a Fund, and/or the Trustees or officers of the Trust, on the other hand. The Trustees (or the Trust and its officers, service providers or other delegates acting under authority of the Trustees) may amend the most recent prospectus or use a new prospectus, summary prospectus or SAI with respect to a Fund or the Trust, and/or amend, file and/or issue any other communications, disclosure documents or regulatory filings, and may amend or enter into any contracts to which the Trust or a Fund is a party, and interpret the investment objective(s), policies, restrictions and contractual provisions applicable to any Fund, without shareholder input or approval, except in circumstances in which shareholder approval is specifically required by law (such as changes to fundamental investment policies) or where a shareholder approval requirement is specifically disclosed in the Trust s then-current prospectus or SAI. PIMCO has adopted written proxy voting policies and procedures ( Proxy Policy ) as required by Rule 206(4)-6 under the Investment ANNUAL REPORT MARCH 31,

8 Important Information About the Funds (Cont.) Advisers Act of 1940, as amended. The Proxy Policy has been adopted by the Trust as the policies and procedures that PIMCO will use when voting proxies on behalf of the Funds. A description of the policies and procedures that PIMCO uses to vote proxies relating to portfolio securities of each Fund, and information about how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30th, are available without charge, upon request, by calling the Trust at (888) 87-PIMCO, on the Funds website at and on the Securities and Exchange Commission s ( SEC ) website at The Trust files a complete schedule of each Fund s portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. A copy of each Fund s Form N-Q is available on the SEC s website at and may be reviewed and copied at the SEC s Public Reference Room in Washington, D.C. A copy of each Fund s Form N-Q is also available without charge, upon request, by calling the Trust at (888) 87-PIMCO and on the Funds website at Information on the operation of the Public Reference Room may be obtained by calling SEC PIMCO ASSET ALLOCATION FUNDS

9 PIMCO Multi-Strategy Alternative Fund Institutional Class - PXAIX Class A - PXAAX Class P - PXAPX Cumulative Returns Through March 31, 2018 Top 10 Holdings as of 03/31/ Investment Objective and Strategy Overview (in millions) $ /14 08/16 03/18 INSTITUTIONAL CLASS $1,063,137 INDEX $1,026,105 $1,000,000 invested at the end of the month when the Fund s Institutional Class commenced operations. Average Annual Total Return for the period ended March 31, 2018 PIMCO EqS Long/Short Fund 19.0% PIMCO TRENDS Managed Futures Strategy Fund 16.9% PIMCO RAE Worldwide Long/ Short PLUS Fund 15.5% PIMCO Credit Absolute Return Fund 7.2% PIMCO RealEstateRealReturn Strategy Fund 4.9% PIMCO Mortgage Opportunities Fund 4.9% PIMCO Unconstrained Bond Fund 4.8% U.S. Treasury Notes 2.125% due 12/31/ % Fannie Mae, TBA 2.2% U.S. Treasury Notes 2.250% due 11/15/ % 1 % of Investments, at value. Top 10 Holdings and % of Investments exclude securities sold short, financial derivative instruments and short-term instruments, if any. 1 Year Fund Inception (12/30/14) PIMCO Multi-Strategy Alternative Fund Institutional Class 1.87% 1.90% PIMCO Multi-Strategy Alternative Fund Class P 1.70% 1.81% PIMCO Multi-Strategy Alternative Fund Class A 1.44% 1.54% PIMCO Multi-Strategy Alternative Fund Class A (adjusted) (2.32)% 0.35% 3 Month USD LIBOR Index 1.38% 0.80% Lipper Alternative Multi-Strategy Funds Average 1.65% 1.22% / All Fund returns are net of fees and expenses. / Average annual total return since 12/31/2014. Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. The adjusted returns take into account the maximum sales charge of 3.75% on Class A shares. For performance current to the most recent month-end, visit or via (888) 87-PIMCO. The Fund s total annual operating expense ratio in effect as of period end, which includes the Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses), were 1.99% for Institutional Class shares, 2.09% for Class P shares, and 2.39% for Class A shares. Details regarding any changes to the Fund s operating expenses, subsequent to period end, can be found in the Fund s current prospectus, as supplemented. PIMCO Multi-Strategy Alternative Fund seeks maximum total return, consistent with prudent investment management, by investing under normal circumstances in multiple alternative strategies, which may be represented by a combination of affiliated and unaffiliated funds, which may or may not be registered under the Investment Company Act of 1940, as amended (the 1940 Act ), Fixed Income Instruments, equity securities, forwards or derivatives, such as options, futures contracts or swap agreements. Fixed Income Instruments include bonds, debt securities and other similar instruments issued by various U.S. and non-u.s. public- or private-sector entities. The Fund will invest in such funds, securities, instruments and other investments to the extent permitted under the 1940 Act, or any exemptive relief therefrom. Fund strategies may change from time to time. Please refer to the Fund s current prospectus for more information regarding the Fund s strategy. Fund Insights The following affected performance during the reporting period:» Allocations to mortgage relative value and credit relative value strategies, achieved primarily through PIMCO Credit Absolute Return Fund and PIMCO Mortgage Opportunities Fund, contributed to performance, as these Underlying PIMCO Funds had positive performance.» Allocations to global absolute return fixed income, achieved primarily through the PIMCO Unconstrained Bond Fund and the absolute return fixed income collateral of the PIMCO RAE Worldwide Long/Short PLUS Fund, contributed to performance, as the strategies had positive performance.» Allocations to equity long/short strategies, achieved primarily through the PIMCO EqS Long/Short Fund, contributed to performance, as the underlying PIMCO Fund had positive performance.» Allocations to managed futures strategies, achieved primarily through the PIMCO TRENDS Managed Futures Strategy, contributed to returns, as the underlying PIMCO Fund had positive returns.» Allocations to equity market neutral strategies, via total return swaps that replicate index exposure, detracted from performance, as the long leg of the PIMCO global equity market neutral strategy underperformed the MSCI World Index and the RAE Fundamental US Large Index underperformed the S&P 500 Index. ANNUAL REPORT MARCH 31,

10 PIMCO REALPATH 2020 Fund Institutional Class - PRWIX Class A - PTYAX Administrative Class - PFNAX Cumulative Returns Through March 31, 2018 Top 10 Holdings as of 03/31/ Investment Objective and Strategy Overview (in millions) $ /08 03/13 03/18 INDEX $1,752,049 INSTITUTIONAL CLASS $1,530,583 $1,000,000 invested at the end of the month when the Fund s Institutional Class commenced operations. Average Annual Total Return for the period ended March 31, 2018 PIMCO StocksPLUS Fund 21.3% PIMCO Income Fund 13.8% PIMCO Total Return Fund 9.2% PIMCO Real Return Fund 7.8% PIMCO Foreign Bond Fund (U.S. Dollar-Hedged) 5.0% PIMCO Real Return Asset Fund 5.0% PIMCO High Yield Fund 4.7% PIMCO Long-Term Credit Fund 3.7% PIMCO Long Duration Total Return Fund 3.7% PIMCO RealEstateRealReturn Strategy Fund 2.9% 1 % of Investments, at value. Top 10 Holdings and % of Investments exclude securities sold short, financial derivative instruments and short-term instruments, if any. 1 Year 5 Years 10 Years Fund Inception (03/31/08) PIMCO REALPATH 2020 Fund Institutional Class 8.10% 3.88% 4.35% 4.35% PIMCO REALPATH 2020 Fund Administrative Class 7.79% 3.61% 4.09% 4.09% PIMCO REALPATH 2020 Fund Class A 7.46% 3.35% 3.79% 3.79% PIMCO REALPATH 2020 Fund Class A (adjusted) 1.55% 2.19% 3.20% 3.20% S&P Target Date 2020 Index 7.80% 6.63% 5.77% 5.77% Lipper Mixed-Asset Target 2020 Funds Average 7.14% 5.32% 4.97% 4.97% All Fund returns are net of fees and expenses. Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. The adjusted returns take into account the maximum sales charge of 5.50% on Class A shares. For performance current to the most recent month-end, visit or via (888) 87-PIMCO. For periods prior to the inception date of the Class P, Administrative Class, Class A, Class C, Class M, and Class R shares (if applicable), performance information shown is based on the performance of the Fund s Institutional Class shares. The prior Institutional Class performance has been adjusted to reflect the distribution and/or service fees and other expenses paid by the Class P, Administrative Class, Class A, Class C, Class M, and Class R shares, respectively. The Fund s total annual operating expense ratio in effect as of period end, which includes the Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses), were 1.12% for Institutional Class shares, 1.37% for Administrative Class shares, and 1.57% for Class A shares. Details regarding any changes to the Fund s operating expenses, subsequent to period end, can be found in the Fund s current prospectus, as supplemented. PIMCO REALPATH 2020 Fund seeks to maximize real return, consistent with preservation of real capital and prudent investment management, by investing under normal circumstances in a combination of affiliated and unaffiliated funds, which may or may not be registered under the Investment Company Act of 1940, Fixed Income Instruments of varying maturities, equity securities, forwards and derivatives. Fixed Income Instruments include bonds, debt securities and other similar instruments issued by various U.S. and non-u.s. public- or privatesector entities. The Fund may invest in Institutional Class or Class M shares of any funds of the Trust and PIMCO Equity Series, an affiliated open-end investment company, except funds of funds, and may also invest in other affiliated funds, including funds of PIMCO ETF Trust, and unaffiliated funds. The primary difference between PIMCO REALPATH Funds is their asset allocation, which varies depending on the number of years left until the selfelected year of retirement indicated in PIMCO REALPATH Fund s name. The Fund s long-term asset allocations are based on a glide path developed by PIMCO and are based on quantitative and qualitative data relating to various risk metrics, long-term market trends, correlation of asset types and actuarial assumptions of life expectancy and retirement. The Fund s glide path changes over time, generally becoming more conservative as the Fund approaches the target date. PIMCO may adjust the Fund s actual asset allocation exposures from the long-term targets specified by the glide path based on PIMCO s real-time views of perceived risks and opportunities. Fund strategies may change from time to time. Please refer to the Fund s current prospectus for more information regarding the Fund s strategy. Fund Insights The following affected performance during the reporting period:» Exposure to U.S. large market capitalization equities benefited absolute performance, as U.S. large market capitalization equities posted positive returns.» Exposure to non-u.s. equities in developed markets benefited absolute performance, as non-u.s. equities in developed markets posted positive returns.» Exposure to equities in emerging markets benefited absolute performance, as equities in emerging markets posted positive returns.» Exposure to U.S. small market capitalization equities benefited absolute performance, as U.S. small market capitalization equities posted positive returns.» Exposure to real estate investment trusts (REITs) detracted from absolute performance, as REITs posted negative returns. 8 PIMCO ASSET ALLOCATION FUNDS

11 PIMCO REALPATH 2025 Fund Institutional Class - PENTX Class A - PENZX Administrative Class - PENMX Cumulative Returns Through March 31, 2018 Top 10 Holdings as of 03/31/ Investment Objective and Strategy Overview (in millions) $ /11 11/14 03/18 INDEX $1,609,905 INSTITUTIONAL CLASS $1,371,919 $1,000,000 invested at the end of the month when the Fund s Institutional Class commenced operations. Average Annual Total Return for the period ended March 31, 2018 PIMCO StocksPLUS Fund 26.0% PIMCO Income Fund 9.4% PIMCO Real Return Asset Fund 6.4% PIMCO Total Return Fund 5.8% PIMCO Real Return Fund 4.9% PIMCO Long-Term Credit Fund 4.8% PIMCO Long Duration Total Return Fund 4.7% PIMCO High Yield Fund 3.6% PIMCO RealEstateRealReturn Strategy Fund 3.6% PIMCO Foreign Bond Fund (U.S. Dollar-Hedged) 3.1% 1 % of Investments, at value. Top 10 Holdings and % of Investments exclude securities sold short, financial derivative instruments and short-term instruments, if any. 1 Year 5 Years Fund Inception (06/30/11) PIMCO REALPATH 2025 Fund Institutional Class 8.97% 4.34% 4.79% PIMCO REALPATH 2025 Fund Administrative Class 8.80% 4.10% 4.54% PIMCO REALPATH 2025 Fund Class A 8.45% 3.84% 4.29% PIMCO REALPATH 2025 Fund Class A (adjusted) 2.49% 2.67% 3.43% S&P Target Date 2025 Index 9.03% 7.34% 7.30% Lipper Mixed-Asset Target 2025 Funds Average 8.65% 6.45% 6.81% All Fund returns are net of fees and expenses. Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. The adjusted returns take into account the maximum sales charge of 5.50% on Class A shares. For performance current to the most recent month-end, visit or via (888) 87-PIMCO. The Fund s total annual operating expense ratio in effect as of period end, which includes the Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses), were 1.11% for Institutional Class shares, 1.36% for Administrative Class shares, and 1.56% for Class A shares. Details regarding any changes to the Fund s operating expenses, subsequent to period end, can be found in the Fund s current prospectus, as supplemented. PIMCO REALPATH 2025 Fund seeks to maximize real return, consistent with preservation of real capital and prudent investment management, by investing under normal circumstances in a combination of affiliated and unaffiliated funds, which may or may not be registered under the Investment Company Act of 1940, Fixed Income Instruments of varying maturities, equity securities, forwards and derivatives. Fixed Income Instruments include bonds, debt securities and other similar instruments issued by various U.S. and non-u.s. public- or privatesector entities. The Fund may invest in Institutional Class or Class M shares of any funds of the Trust and PIMCO Equity Series, an affiliated open-end investment company, except funds of funds, and may also invest in other affiliated funds, including funds of PIMCO ETF Trust, and unaffiliated funds. The primary difference between PIMCO REALPATH Funds is their asset allocation, which varies depending on the number of years left until the selfelected year of retirement indicated in PIMCO REALPATH Fund s name. The Fund s long-term asset allocations are based on a glide path developed by PIMCO and are based on quantitative and qualitative data relating to various risk metrics, long-term market trends, correlation of asset types and actuarial assumptions of life expectancy and retirement. The Fund s glide path changes over time, generally becoming more conservative as the Fund approaches the target date. PIMCO may adjust the Fund s actual asset allocation exposures from the long-term targets specified by the glide path based on PIMCO s real-time views of perceived risks and opportunities. Fund strategies may change from time to time. Please refer to the Fund s current prospectus for more information regarding the Fund s strategy. Fund Insights The following affected performance during the reporting period:» Exposure to U.S. large market capitalization equities benefited absolute performance, as U.S. large market capitalization equities posted positive returns.» Exposure to non-u.s. equities in developed markets benefited absolute performance, as non-u.s. equities in developed markets posted positive returns.» Exposure to equities in emerging markets benefited absolute performance, as equities in emerging markets posted positive returns.» Exposure to U.S. small market capitalization equities benefited absolute performance, as U.S. small market capitalization equities posted positive returns.» Exposure to real estate investment trusts (REITs) detracted from absolute performance, as REITs posted negative returns. ANNUAL REPORT MARCH 31,

12 PIMCO REALPATH 2030 Fund Institutional Class - PRLIX Class A - PEHAX Administrative Class - PNLAX Cumulative Returns Through March 31, 2018 Top 10 Holdings as of 03/31/ Investment Objective and Strategy Overview (in millions) $ /08 03/13 03/18 INDEX $1,858,249 INSTITUTIONAL CLASS $1,579,724 $1,000,000 invested at the end of the month when the Fund s Institutional Class commenced operations. Average Annual Total Return for the period ended March 31, 2018 PIMCO StocksPLUS Fund 30.5% PIMCO Income Fund 7.2% PIMCO Short Asset Investment Fund 7.1% PIMCO Real Return Asset Fund 5.7% PIMCO Long-Term Credit Fund 4.3% PIMCO Long Duration Total Return Fund 4.3% PIMCO RealEstateRealReturn Strategy Fund 4.3% PIMCO Total Return Fund 4.2% PIMCO Real Return Fund 3.6% PIMCO High Yield Fund 3.0% 1 % of Investments, at value. Top 10 Holdings and % of Investments exclude securities sold short, financial derivative instruments and short-term instruments, if any. 1 Year 5 Years 10 Years Fund Inception (03/31/08) PIMCO REALPATH 2030 Fund Institutional Class 9.86% 4.99% 4.68% 4.68% PIMCO REALPATH 2030 Fund Administrative Class 9.64% 4.72% 4.42% 4.42% PIMCO REALPATH 2030 Fund Class A 9.40% 4.48% 4.12% 4.12% PIMCO REALPATH 2030 Fund Class A (adjusted) 3.39% 3.30% 3.54% 3.54% S&P Target Date 2030 Index 10.19% 8.02% 6.39% 6.39% Lipper Mixed-Asset Target 2030 Funds Average 10.12% 7.17% 5.79% 5.79% All Fund returns are net of fees and expenses. Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. The adjusted returns take into account the maximum sales charge of 5.50% on Class A shares. For performance current to the most recent month-end, visit or via (888) 87-PIMCO. For periods prior to the inception date of the Class P, Administrative Class, Class A, Class C, Class M, and Class R shares (if applicable), performance information shown is based on the performance of the Fund s Institutional Class shares. The prior Institutional Class performance has been adjusted to reflect the distribution and/or service fees and other expenses paid by the Class P, Administrative Class, Class A, Class C, Class M, and Class R shares, respectively. The Fund s total annual operating expense ratio in effect as of period end, which includes the Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses), were 1.14% for Institutional Class shares, 1.39% for Administrative Class shares, and 1.59% for Class A shares. Details regarding any changes to the Fund s operating expenses, subsequent to period end, can be found in the Fund s current prospectus, as supplemented. PIMCO REALPATH 2030 Fund seeks to maximize real return, consistent with preservation of real capital and prudent investment management, by investing under normal circumstances in a combination of affiliated and unaffiliated funds, which may or may not be registered under the Investment Company Act of 1940, Fixed Income Instruments of varying maturities, equity securities, forwards and derivatives. Fixed Income Instruments include bonds, debt securities and other similar instruments issued by various U.S. and non-u.s. public- or privatesector entities. The Fund may invest in Institutional Class or Class M shares of any funds of the Trust and PIMCO Equity Series, an affiliated open-end investment company, except funds of funds, and may also invest in other affiliated funds, including funds of PIMCO ETF Trust, and unaffiliated funds. The primary difference between PIMCO REALPATH Funds is their asset allocation, which varies depending on the number of years left until the selfelected year of retirement indicated in PIMCO REALPATH Fund s name. The Fund s long-term asset allocations are based on a glide path developed by PIMCO and are based on quantitative and qualitative data relating to various risk metrics, long-term market trends, correlation of asset types and actuarial assumptions of life expectancy and retirement. The Fund s glide path changes over time, generally becoming more conservative as the Fund approaches the target date. PIMCO may adjust the Fund s actual asset allocation exposures from the long-term targets specified by the glide path based on PIMCO s real-time views of perceived risks and opportunities. Fund strategies may change from time to time. Please refer to the Fund s current prospectus for more information regarding the Fund s strategy. Fund Insights The following affected performance during the reporting period:» Exposure to U.S. large market capitalization equities benefited absolute performance, as U.S. large market capitalization equities posted positive returns.» Exposure to non-u.s. equities in developed markets benefited absolute performance, as non-u.s. equities in developed markets posted positive returns.» Exposure to equities in emerging markets benefited absolute performance, as equities in emerging markets posted positive returns.» Exposure to U.S. small market capitalization equities benefited absolute performance, as U.S. small market capitalization equities posted positive returns.» Exposure to real estate investment trusts (REITs) detracted from absolute performance, as REITs posted negative returns. 10 PIMCO ASSET ALLOCATION FUNDS

13 PIMCO REALPATH 2035 Fund Institutional Class - PIVIX Class A - PIVAX Administrative Class - PIVNX Cumulative Returns Through March 31, 2018 Top 10 Holdings as of 03/31/ Investment Objective and Strategy Overview (in millions) $ /11 11/14 03/18 INDEX $1,719,598 INSTITUTIONAL CLASS $1,452,335 $1,000,000 invested at the end of the month when the Fund s Institutional Class commenced operations. Average Annual Total Return for the period ended March 31, 2018 PIMCO StocksPLUS Fund 34.5% PIMCO Short Asset Investment Fund 18.2% PIMCO Income Fund 5.8% PIMCO RealEstateRealReturn Strategy Fund 4.8% PIMCO Real Return Asset Fund 4.1% PIMCO Total Return Fund 3.1% PIMCO Long Duration Total Return Fund 3.1% PIMCO Long-Term Credit Fund 3.1% PIMCO Real Return Fund 2.7% PIMCO High Yield Fund 2.6% 1 % of Investments, at value. Top 10 Holdings and % of Investments exclude securities sold short, financial derivative instruments and short-term instruments, if any. 1 Year 5 Years Fund Inception (06/30/11) PIMCO REALPATH 2035 Fund Institutional Class 10.53% 5.32% 5.68% PIMCO REALPATH 2035 Fund Administrative Class 10.12% 5.04% 5.39% PIMCO REALPATH 2035 Fund Class A 9.96% 4.78% 5.16% PIMCO REALPATH 2035 Fund Class A (adjusted) 3.89% 3.59% 4.28% S&P Target Date 2035 Index 11.31% 8.64% 8.35% Lipper Mixed-Asset Target 2035 Funds Average 11.74% 8.13% 7.98% All Fund returns are net of fees and expenses. Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. The adjusted returns take into account the maximum sales charge of 5.50% on Class A shares. For performance current to the most recent month-end, visit or via (888) 87-PIMCO. The Fund s total annual operating expense ratio in effect as of period end, which includes the Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses), were 1.11% for Institutional Class shares, 1.36% for Administrative Class shares, and 1.56% for Class A shares. Details regarding any changes to the Fund s operating expenses, subsequent to period end, can be found in the Fund s current prospectus, as supplemented. PIMCO REALPATH 2035 Fund seeks to maximize real return, consistent with preservation of real capital and prudent investment management, by investing under normal circumstances in a combination of affiliated and unaffiliated funds, which may or may not be registered under the Investment Company Act of 1940, Fixed Income Instruments of varying maturities, equity securities, forwards and derivatives. Fixed Income Instruments include bonds, debt securities and other similar instruments issued by various U.S. and non-u.s. public- or privatesector entities. The Fund may invest in Institutional Class or Class M shares of any funds of the Trust and PIMCO Equity Series, an affiliated open-end investment company, except funds of funds, and may also invest in other affiliated funds, including funds of PIMCO ETF Trust, and unaffiliated funds. The primary difference between PIMCO REALPATH Funds is their asset allocation, which varies depending on the number of years left until the selfelected year of retirement indicated in PIMCO REALPATH Fund s name. The Fund s long-term asset allocations are based on a glide path developed by PIMCO and are based on quantitative and qualitative data relating to various risk metrics, long-term market trends, correlation of asset types and actuarial assumptions of life expectancy and retirement. The Fund s glide path changes over time, generally becoming more conservative as the Fund approaches the target date. PIMCO may adjust the Fund s actual asset allocation exposures from the long-term targets specified by the glide path based on PIMCO s real-time views of perceived risks and opportunities. Fund strategies may change from time to time. Please refer to the Fund s current prospectus for more information regarding the Fund s strategy. Fund Insights The following affected performance during the reporting period:» Exposure to U.S. large market capitalization equities benefited absolute performance, as U.S. large market capitalization equities posted positive returns.» Exposure to non-u.s. equities in developed markets benefited absolute performance, as non-u.s. equities in developed markets posted positive returns.» Exposure to equities in emerging markets benefited absolute performance, as equities in emerging markets posted positive returns.» Exposure to U.S. small market capitalization equities benefited absolute performance, as U.S. small market capitalization equities posted positive returns.» Exposure to real estate investment trusts (REITs) detracted from absolute performance, as REITs posted negative returns. ANNUAL REPORT MARCH 31,

14 PIMCO REALPATH 2040 Fund Institutional Class - PROIX Class A - POFAX Administrative Class - PEOAX Cumulative Returns Through March 31, 2018 Top 10 Holdings as of 03/31/ Investment Objective and Strategy Overview (in millions) $ /08 03/13 03/18 INDEX $1,935,667 INSTITUTIONAL CLASS $1,662,142 $1,000,000 invested at the end of the month when the Fund s Institutional Class commenced operations. Average Annual Total Return for the period ended March 31, 2018 PIMCO StocksPLUS Fund 38.5% PIMCO Short Asset Investment Fund 16.8% PIMCO RealEstateRealReturn Strategy Fund 5.4% PIMCO Income Fund 4.5% PIMCO Real Return Asset Fund 2.9% PIMCO Total Return Fund 2.3% PIMCO High Yield Fund 2.2% PIMCO Long-Term Credit Fund 2.2% PIMCO Long Duration Total Return Fund 2.1% PIMCO CommodityRealReturn Strategy Fund 2.0% 1 % of Investments, at value. Top 10 Holdings and % of Investments exclude securities sold short, financial derivative instruments and short-term instruments, if any. 1 Year 5 Years 10 Years Fund Inception (03/31/08) PIMCO REALPATH 2040 Fund Institutional Class 10.91% 5.41% 5.21% 5.21% PIMCO REALPATH 2040 Fund Administrative Class 10.68% 5.16% 4.96% 4.96% PIMCO REALPATH 2040 Fund Class A 10.50% 4.92% 4.68% 4.68% PIMCO REALPATH 2040 Fund Class A (adjusted) 4.47% 3.74% 4.09% 4.09% S&P Target Date 2040 Index 12.07% 9.07% 6.83% 6.83% Lipper Mixed-Asset Target 2040 Funds Average 12.25% 8.25% 6.27% 6.27% All Fund returns are net of fees and expenses. Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. The adjusted returns take into account the maximum sales charge of 5.50% on Class A shares. For performance current to the most recent month-end, visit or via (888) 87-PIMCO. For periods prior to the inception date of the Class P, Administrative Class, Class A, Class C, Class M, and Class R shares (if applicable), performance information shown is based on the performance of the Fund s Institutional Class shares. The prior Institutional Class performance has been adjusted to reflect the distribution and/or service fees and other expenses paid by the Class P, Administrative Class, Class A, Class C, Class M, and Class R shares, respectively. The Fund s total annual operating expense ratio in effect as of period end, which includes the Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses), were 1.11% for Institutional Class shares, 1.36% for Administrative Class shares, and 1.56% for Class A shares. Details regarding any changes to the Fund s operating expenses, subsequent to period end, can be found in the Fund s current prospectus, as supplemented. PIMCO REALPATH 2040 Fund seeks to maximize real return, consistent with preservation of real capital and prudent investment management, by investing under normal circumstances in a combination of affiliated and unaffiliated funds, which may or may not be registered under the Investment Company Act of 1940, Fixed Income Instruments of varying maturities, equity securities, forwards and derivatives. Fixed Income Instruments include bonds, debt securities and other similar instruments issued by various U.S. and non-u.s. public- or privatesector entities. The Fund may invest in Institutional Class or Class M shares of any funds of the Trust and PIMCO Equity Series, an affiliated open-end investment company, except funds of funds, and may also invest in other affiliated funds, including funds of PIMCO ETF Trust, and unaffiliated funds. The primary difference between PIMCO REALPATH Funds is their asset allocation, which varies depending on the number of years left until the selfelected year of retirement indicated in PIMCO REALPATH Fund s name. The Fund s long-term asset allocations are based on a glide path developed by PIMCO and are based on quantitative and qualitative data relating to various risk metrics, long-term market trends, correlation of asset types and actuarial assumptions of life expectancy and retirement. The Fund s glide path changes over time, generally becoming more conservative as the Fund approaches the target date. PIMCO may adjust the Fund s actual asset allocation exposures from the long-term targets specified by the glide path based on PIMCO s real-time views of perceived risks and opportunities. Fund strategies may change from time to time. Please refer to the Fund s current prospectus for more information regarding the Fund s strategy. Fund Insights The following affected performance during the reporting period:» Exposure to U.S. large market capitalization equities benefited absolute performance, as U.S. large market capitalization equities posted positive returns.» Exposure to non-u.s. equities in developed markets benefited absolute performance, as non-u.s. equities in developed markets posted positive returns.» Exposure to equities in emerging markets benefited absolute performance, as equities in emerging markets posted positive returns.» Exposure to U.S. small market capitalization equities benefited absolute performance, as U.S. small market capitalization equities posted positive returns.» Exposure to real estate investment trusts (REITs) detracted from absolute performance, as REITs posted negative returns. 12 PIMCO ASSET ALLOCATION FUNDS