PCM Fund, Inc.
     

OMB APPROVAL

     

OMB Number:

  3235-0578
     

Expires:

  April 30, 2010
      Estimated average burden hours per response   10.5

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 811-07816

PCM Fund, Inc.

(Exact name of registrant as specified in charter)

 

1345 Avenue of the Americas New York, New York    10105
(Address of principal executive offices)    (Zip code)

Lawrence G. Altadonna – 1345 Avenue of the Americas New York, New York 10105

(Name and address of agent for service)

Registrant’s telephone number, including area code: 212-739-3371

Date of fiscal year end: December 31, 2010

Date of reporting period: March 31, 2010

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b 1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

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


Item 1. Schedule of Investments

PCM Fund, Inc. Schedule of Investments

March 31, 2010 (unaudited)

 

Principal
Amount
(000s)
         Credit Rating
(Moody’s/S&P)
   Value*

MORTGAGE-BACKED SECURITIES—125.4%

  
$721    American Home Mortgage Assets, 1.383%, 11/25/46, CMO, FRN    Caa1/CCC    $338,040
420    Banc of America Alternative Loan Trust, 6.25%, 1/25/37, CMO    Ca/NR    215,456
   Banc of America Commercial Mortgage, Inc., CMO (i),      
2,000   

5.414%, 9/10/47

   Aaa/AAA    2,004,429
2,500   

7.224%, 4/15/36, VRN

   A1/NR    2,417,710
1,694   

7.975%, 11/15/31, VRN

   Aaa/AA+    1,639,970
   Banc of America Funding Corp., CMO,      
468   

5.798%, 3/20/36, FRN

   B3/BB    352,406
1,243   

7.00%, 10/25/37

   NR/CCC    845,791
2,000    Banc of America Large Loan, Inc., 0.98%, 8/15/29, CMO, FRN (a)(c)    Aaa/AA    1,591,515
936    Banc of America Mortgage Securities, Inc., 5.180%, 6/25/35, CMO, FRN    Ba3/NR    765,310
1,000    BCRR Trust, 5.858%, 7/17/40, CMO, VRN (a)(c)    Aaa/NR    816,373
640    Bear Stearns Adjustable Rate Mortgage Trust,      
  

4.785%, 5/25/34, CMO, FRN (i)

   A2/A+    587,890
   Bear Stearns Alt-A Trust, CMO,      
470   

3.618%, 9/25/34, VRN

   A2/AAA    310,756
335   

5.460%, 7/25/35, FRN

   Ba1/CCC    231,328
2,000   

5.648%, 8/25/36, VRN

   Caa3/CC    783,357
356   

5.754%, 5/25/36, VRN

   Caa2/CC    195,164
893   

6.25%, 8/25/36, VRN

   Caa2/CCC    423,064
323    Bear Stearns Asset Backed Securities Trust, 5.50%, 12/25/35, CMO    Caa1/CCC    248,680
   Bear Stearns Commercial Mortgage Securities, CMO,      
1   

5.06%, 11/15/16

   Aaa/AAA    972
3,000   

5.694%, 6/11/50, VRN (i)

   NR/A+    2,973,286
2,000   

5.719%, 6/11/40, VRN

   Aaa/NR    1,977,063
1,000   

5.812%, 5/11/39, VRN (a)(c)

   NR/BBB+    727,830
1,332   

6.50%, 2/15/32 (c)

   NR/BB    1,020,049
1,737    CBA Commercial Small Balance Commercial Mortgage,      
  

5.54%, 1/25/39, CMO (a)(c)(f)

   Ca/BBB-    967,906
2,500    Citigroup Commercial Mortgage Trust, 5.699%, 12/10/49, CMO, VRN (i)    Aaa/AA    2,493,046
   Citigroup Mortgage Loan Trust, Inc., CMO, VRN,      
1,022   

5.199%, 9/25/35

   NR/CCC    791,128
969   

5.676%, 11/25/36

   NR/CCC    722,661
4,012    Citigroup/Deutsche Bank Commercial Mortgage Trust,      
  

5.322%, 12/11/49, CMO (i)

   Aaa/A-    3,889,275
3,000    Commercial Capital Access One, Inc., 7.950%, 11/15/28, CMO, VRN (a)(c)    NR/NR    1,063,506
   Commercial Mortgage Pass Through Certificates, CMO (a)(c),      
1,500   

6.586%, 7/16/34 (i)

   Aaa/AAA    1,606,489
1,500   

6.812%, 7/16/34, VRN

   Aa2/A+    1,397,767
2,893   

6.83%, 2/14/34, VRN (i)

   Aaa/NR    2,980,057
   Countrywide Alternative Loan Trust, CMO,      
584   

0.526%, 2/25/37, FRN

   Caa2/CCC    322,153
395   

6.00%, 11/25/35

   Caa2/CCC    301,755
   Credit Suisse First Boston Mortgage Securities Corp., CMO,      
22,545   

1.42%, 12/15/35, IO, VRN (a)(c)(i)

   NR/AAA    691,392
3,000   

6.574%, 12/15/35 (i)

   Aaa/AAA    3,155,572
200   

7.00%, 2/25/33

   Aaa/AAA    205,645
2,000   

7.46%, 1/17/35, VRN (c)

   NR/NR    2,179,153
   Credit Suisse Mortgage Capital Certificates, CMO,      
1,100   

0.40%, 10/15/21, FRN (a)(c)

   Aa1/AAA    916,538
5,000   

5.467%, 9/15/39 (i)

   Aaa/AAA    4,811,169
461   

5.896%, 4/25/36

   Caa1/CCC    319,978
370   

6.50%, 5/25/36

   Caa2/CC    134,842


PCM Fund, Inc. Schedule of Investments

March 31, 2010 (unaudited)

 

Principal
Amount
(000s)
         Credit Rating
(Moody’s/S&P)
   Value*
$1,925    CW Capital Cobalt Ltd., 5.223%, 8/15/48, CMO    NR/AA-    $1,840,569
4,185    FFCA Secured Lending Corp., 1.22%, 9/18/27, CMO, IO, VRN (a)(c)    Aaa/NR    89,035
398    First Horizon Alternative Mortgage Securities,      
  

5.369%, 8/25/35, CMO, FRN

   B1/CCC    108,142
384    First Horizon Asset Securities, Inc., 2.899%, 4/25/35, CMO, FRN    Baa2/AAA    351,463
2,000    First Union-Lehman Brothers-Bank of America, 6.778%, 11/18/35, CMO (i)    Aaa/AAA    2,145,213
   GMAC Commercial Mortgage Securities, Inc., CMO (c),      
2,000   

6.50%, 5/15/35 (i)

   NR/BBB    2,090,586
1,500   

6.944%, 5/15/30, VRN (a)

   NR/NR    837,882
1,500   

8.052%, 9/15/35, VRN (a)

   NR/NR    1,446,173
   Greenwich Capital Commercial Funding Corp., CMO,      
1,500   

5.419%, 1/5/36, VRN (a)(c)

   A2/A+    1,304,137
2,000   

5.444%, 3/10/39

   Aaa/A    1,947,857
   GS Mortgage Securities Corp. II, CMO,      
2,000   

1.278%, 3/6/20, FRN (a)(c)

   NR/BB    1,631,327
5,750   

5.56%, 11/10/39 (i)

   Aaa/NR    5,700,627
3,480   

7.397%, 8/5/18, VRN (a)(c)

   Baa2/NR    2,659,301
   JPMorgan Chase Commercial Mortgage Securities Corp., CMO,      
3,000   

0.68%, 7/15/19, FRN (a)(c)

   Aa2/NR    2,278,450
9,427   

1.00%, 3/12/39, IO, VRN (a)(c)(i)

   Aaa/NR    304,791
2,000   

5.65%, 3/18/51, VRN (a)(c)

   Aa3/NR    1,556,250
1,400   

5.746%, 2/12/49, VRN

   Aaa/A+    1,393,364
1,195   

5.794%, 2/12/51, VRN (i)

   Aaa/A+    1,193,902
1,150   

5.990%, 2/15/51, VRN (i)

   Aaa/A-    1,164,083
2,000   

6.162%, 5/12/34 (i)

   Aaa/NR    2,128,185
   JPMorgan Mortgage Trust, CMO,      
680   

4.071%, 7/25/35, FRN

   B1/AAA    607,494
518   

5.119%, 10/25/35, VRN

   Ba3/NR    480,766
950    LB Commercial Conduit Mortgage Trust, 5.949%, 7/15/44, CMO, VRN    Aaa/A    919,060
   LB-UBS Commercial Mortgage Trust, CMO,      
1,278   

5.347%, 11/15/38 (i)

   NR/AAA    1,284,287
1,500   

5.683%, 7/15/35 (a)(c)

   Ba1/BBB-    693,269
1,572   

6.95%, 3/15/34, VRN (a)(c)

   A1/A    1,375,530
2,000   

7.29%, 9/15/34 (a)(c)

   B1/NR    1,906,007
1,799    Luminent Mortgage Trust, 0.416%, 12/25/36, CMO, FRN    B2/B+    954,267
   Merrill Lynch/Countrywide Commercial Mortgage Trust, CMO,      
1,500   

5.485%, 3/12/51, VRN (i)

   Aaa/NR    1,377,815
2,300   

5.70%, 9/12/49

   NR/A+    2,172,178
1,500    Merrill Lynch Mortgage Investors, Inc., 6.414%, 12/15/30, CMO, VRN    A3/AA+    1,606,576
   MLCC Mortgage Investors, Inc., CMO, FRN,      
614   

0.456%, 7/25/30

   Aa2/AAA    437,798
204   

0.496%, 11/25/35

   A1/BBB    172,513
714   

0.496%, 11/25/35

   A3/BBB    611,765
535   

0.576%, 11/25/29

   Aaa/AAA    436,550
   Morgan Stanley Capital I, CMO,      
2,000   

5.447%, 2/12/44, VRN

   Aaa/A    1,911,232
315   

5.692%, 4/15/49, VRN

   Aaa/A-    289,458
558   

5.809%, 12/12/49

   NR/A+    549,149
   Morgan Stanley Mortgage Loan Trust, CMO,      
783   

3.440%, 1/25/35, VRN

   NR/CCC    101,641
1,000   

6.00%, 8/25/37

   NR/CCC    783,637
1,897    Nationslink Funding Corp., 7.105%, 1/20/13, CMO, VRN (a)(c)    NR/BBB+    2,009,162
   Ocwen Residential MBS Corp., CMO, VRN (a)(c),      
259   

6.835%, 6/25/39 (e)

   NR/NR    8,847
2,298   

7.00%, 10/25/40 (f)

   B3/NR    259,512


PCM Fund, Inc. Schedule of Investments

March 31, 2010 (unaudited)

 

Principal
Amount
(000s)
         Credit Rating
(Moody’s/S&P)
   Value*
   RBSCF Trust, CMO, VRN (a)(c)(f),      
$1,000   

5.223%, 8/26/47

   NR/NR    $870,000
1,000   

5.331%, 2/26/44

   NR/NR    850,000
1,000   

5.336%, 5/16/47

   NR/NR    870,000
2,744   

6.068%, 2/17/51

   NR/NR    1,900,220
   Residential Accredit Loans, Inc., CMO,      
778   

6.00%, 8/25/35

   NR/CCC    578,648
812   

6.50%, 9/25/37

   NR/CC    474,636
683    Residential Asset Securitization Trust, 6.00%, 3/25/37, CMO    NR/CC    466,836
   RMF Commercial Mortgage Pass Through Certificates, CMO (a)(c),      
247   

7.471%, 1/15/19

   NR/NR    172,963
265   

9.35%, 1/15/19, VRN

   NR/NR    75,583
328    Sequoia Mortgage Trust, 0.440%, 7/20/36, CMO, FRN    Ba3/BBB+    267,488
   Structured Adjustable Rate Mortgage Loan Trust, CMO, VRN,      
1,543   

5.882%, 11/25/36

   NR/CC    1,178,452
1,785   

5.976%, 4/25/36

   NR/CC    1,176,400
466    Structured Asset Securities Corp., 5.00%, 5/25/35, CMO    Baa3/AAA    410,778
425    TBW Mortgage Backed Pass Through Certificates, 6.00%, 7/25/36, CMO    NR/D    256,520
3,000    TrizecHahn Office Properties, 7.604%, 5/15/16, CMO (a)(c)    Baa1/A    3,064,485
1,000    UBS Commercial Mortgage Trust, 0.814%, 7/15/24 (a)(c)    Aa1/BB+    622,968
   Wachovia Bank Commercial Mortgage Trust, CMO,      
3,000   

0.350%, 9/15/21, FRN (a)(c)

   A1/A+    2,246,367
42,284   

1.00%, 10/15/41, IO, VRN (a)(c)(i)

   Aaa/AAA    827,289
2,500   

5.188%, 2/15/41, VRN (a)(c)

   Baa2/BBB    1,905,162
1,000   

5.509%, 4/15/47

   Aaa/BBB+    906,369
5,044   

5.605%, 2/15/35, VRN (a)(b)(c)(j)

     
  

(acquisition cost-$4,627,870; purchased 3/31/10)

   NR/AA-    4,627,870
1,825   

5.902%, 2/15/51, VRN

   Aaa/BBB    1,649,248
          
   Total Mortgage-Backed Securities (cost—$131,219,175)       127,934,603
          

CORPORATE BONDS & NOTES—37.9%

  

Airlines—8.0%

  
4,706    American Airlines Pass Through Trust, 6.817%, 11/23/12 (i)    B2/BB-    4,729,530
518    Northwest Airlines, Inc., 1.001%, 5/20/14, FRN (MBIA) (i)    Baa2/BBB-    445,121
   United Air Lines Pass Through Trust (i),      
890   

6.636%, 1/2/24

   Ba1/BB+    822,809
1,000   

9.75%, 1/15/17

   Ba1/BBB    1,052,500
1,000   

10.40%, 5/1/18

   Ba1/BBB    1,075,000
          
         8,124,960
          

Automotive—0.7%

  
750    Tenneco, Inc., 8.625%, 11/15/14 (i)    Caa2/CCC+    765,000
          

Banking—3.0%

  
1,000    American Express Bank FSB, 0.380%, 5/29/12, FRN (i)    A2/BBB+    986,395
2,000    Regions Financial Corp., 7.75%, 11/10/14 (i)    Baa3/BBB-    2,106,308
          
         3,092,703
          

Electric—0.2%

  
250    Dynegy Holdings, Inc., 7.125%, 5/15/18    B3/B    178,750
          

Energy—1.0%

  
950    Consol Energy, Inc., 8.00%, 4/1/17 (a)(b)(c)(d)(j)      
  

(acquisition cost-$950,000; purchased 3/25/10)

   B1/BB    980,875


PCM Fund, Inc. Schedule of Investments

March 31, 2010 (unaudited)

 

Principal
Amount
(000s)
         Credit Rating
(Moody’s/S&P)
   Value*

Financial Services—14.6%

  
$900    American General Finance Corp., 0.507%, 12/15/11, FRN (i)    B2/B    $841,964
1,000    Cantor Fitzgerald L.P., 7.875%, 10/15/19 (a)(c)(i)    Baa3/BBB    1,003,808
   CIT Group, Inc.,      
183   

7.00%, 5/1/13

   NR/NR    179,738
275   

7.00%, 5/1/14

   NR/NR    260,666
275   

7.00%, 5/1/15

   NR/NR    257,227
459   

7.00%, 5/1/16

   NR/NR    424,126
642   

7.00%, 5/1/17

   NR/NR    593,779
   Ford Motor Credit Co. LLC (i),      
2,000   

7.25%, 10/25/11

   B1/B-    2,068,538
500   

8.00%, 12/15/16

   B1/B-    527,220
2,000   

9.875%, 8/10/11

   B1/B-    2,121,836
500    General Electric Capital Corp., 0.376%, 6/12/12, FRN    Aa2/AA+    486,278
2,000    GMAC, Inc., 8.30%, 2/12/15 (a)(c)(i)    B3/B    2,105,000
1,000    Merrill Lynch & Co., Inc., 0.711%, 1/15/15, FRN (i)    A2/A    932,510
1,200    Morgan Stanley, 0.731%, 10/15/15, FRN (i)    A2/A    1,113,083
   SLM Corp. (i),      
1,000   

0.479%, 10/25/11, FRN

   Ba1/BBB-    951,310
1,000   

8.45%, 6/15/18

   Ba1/BBB-    1,012,841
          
         14,879,924
          

Hotels/Gaming—1.1%

  
1,100    MGM Mirage, 9.00%, 3/15/20 (a)(b)(c)(j)      
  

(acquisition cost-$1,102,625; purchased 3/9/10-3/10/10)

   B1/B    1,138,500
          

Insurance—5.6%

  
   American International Group, Inc. (i),      
2,000   

4.25%, 5/15/13

   A3/A-    1,964,576
500   

5.45%, 5/18/17

   A3/A-    460,403
3,500   

5.85%, 1/16/18

   A3/A-    3,256,631
          
         5,681,610
          

Paper/Paper Products—0.9%

  
1,000    Weyerhaeuser Co., 7.375%, 3/15/32 (i)    Ba1/BBB-    966,319
          

Retail—2.8%

  
   CVS Pass Through Trust (i),      
1,792   

5.88%, 1/10/28

   Baa2/NR    1,753,738
998   

7.507%, 1/10/32 (a)(c)

   Baa2/BBB+    1,112,828
          
         2,866,566
          
   Total Corporate Bonds & Notes (cost—$35,162,687)       38,675,207
          

ASSET-BACKED SECURITIES—5.4%

  
268    Ameriquest Mortgage Securities, Inc., 5.854%, 2/25/33, FRN (e)    Ca/D    23,191
158    Asset Backed Securities Corp. Home Equity, 2.990%, 6/21/29, FRN    Caa1/NR    20,551
1,073    Bear Stearns Asset Backed Securities Trust, 4.323%, 7/25/36, VRN    NR/CCC    686,447
96    CDC Mortgage Capital Trust, 5.346%, 3/25/33, FRN    C/D    1,034
1,214    Denver Arena Trust, 6.94%, 11/15/19 (a)(c)    NR/NR    1,095,536
138    EMC Mortgage Loan Trust, 0.896%, 2/25/41, FRN (a)(c)    NR/NR    116,064
278    GSAA Trust, 0.516%, 6/25/35, FRN    Aa3/AA+    167,817
73    Keystone Owner Trust, 9.00%, 1/25/29 (a)(c)    Baa3/NR    70,647
950    Lehman XS Trust, 5.42%, 11/25/35    Ba1/AAA    673,395


PCM Fund, Inc. Schedule of Investments

March 31, 2010 (unaudited)

 

Principal
Amount
(000s)
         Credit Rating
(Moody’s/S&P)
   Value*
$2,455    Merrill Lynch First Franklin Mortgage Loan Trust,      
  

0.486%, 5/25/37, FRN

   Ca/CCC    $1,034,228
1,000    Oakwood Mortgage Investors, Inc., 6.89%, 11/15/32, VRN    C/CCC-    326,259
131    PPM America High Yield CBO Ltd., 1.334%, 6/1/11 (b)(f)    NR/NR    58,297
102    Southern Pacific Secured Asset Corp., 0.586%, 7/25/29, FRN    B3/BB+    48,778
68    Structured Asset Investment Loan Trust, 4.746%, 10/25/33, FRN    Caa2/CC    4,671
1,000    UCFC Manufactured Housing Contract, 7.90%, 1/15/28, VRN    Ca/NR    1,089,375
1,856    UPS Capital Business Credit, 5.98%, 4/15/26, FRN (c)    C/NR    75,404
          
   Total Asset-Backed Securities (cost—$7,339,614)       5,491,694
          

MUNICIPAL BONDS & NOTES—2.2%

  

Arkansas—0.6%

  
865   

Little Rock Municipal Property Owners Multipurpose Improvement Dist. No. 10, Special Tax, Capital Improvement Projects, 7.20%, 3/1/32, Ser. B

   NR/NR    623,094
          

Iowa—0.4%

  
345    Dickinson Cnty. Rev., Spirit Lake, 7.75%, 12/1/12, Ser. B    NR/NR    365,976
          

Virginia—0.5%

  
565    Lexington Industrial Dev. Auth. Rev., 8.00%, 1/1/15, Ser. C    NR/NR    532,134
          

West Virginia—0.7%

  
960    Tobacco Settlement Finance Auth. Rev., 7.467%, 6/1/47, Ser. A    Baa3/BBB    763,296
          
   Total Municipal Bonds & Notes (cost—$2,667,735)       2,284,500
          

Shares

              

COMMON STOCK (h)—0.7%

  

Diversified Financial Services—0.6%

  
15,786    CIT Group, Inc.       615,022
          

Energy—0.1%

  
1,294    SemGroup Corp., Class A       37,519
          
   Total Common Stock (cost—$304,123)       652,541
          

Principal
Amount
(000s)

              

U.S. GOVERNMENT AGENCY SECURITIES—0.0%

  
$32    Federal Housing Administration, 8.36%, 1/1/12 (f) (cost—$31,758)    Aaa/AAA    31,700
          

Shares

              
        

WARRANTS (h)—0.0%

  

Energy—0.0%

  
1,362    SemGroup Corp., expires 11/14/30 (cost—$6,128)       11,235
          

SHORT-TERM INVESTMENTS—11.6%

  

Principal

Amount
(000s)

              

Corporate Notes—7.2%

  

Financial Services—6.6%

  
$1,300    American General Finance Corp., 4.625%, 9/1/10 (i)    B2/B    1,298,167


PCM Fund, Inc. Schedule of Investments

March 31, 2010 (unaudited)

 

Principal
Amount
(000s)
         Credit Rating
(Moody’s/S&P)
   Value*  
Financial Services (contiuned)
     
   International Lease Finance Corp.,      
$100   

0.472%, 5/24/10, FRN

   B1/BB+    $100,007   
2,100   

4.875%, 9/1/10 (i)

   B1/BB+    2,100,191   
2,200   

4.95%, 2/1/11 (i)

   B1/BB+    2,202,088   
1,000   

5.625%, 9/15/10 (i)

   B1/BB+    1,007,165   
            
         6,707,618   
            

Insurance—0.6%

  
600    American International Group, Inc., 4.70%, 10/1/10 (i)    A3/A-    605,931   
            
   Total Corporate Notes (cost—$6,872,084)       7,313,549   
            

Mortgage-Backed Securities—0.7%

  
1,000   

First Union-National Bank-Bank of America Commercial Mortgage Trust, 6.00%, 1/15/11, CMO (a)(c) (cost—$1,000,981)

   Ba3/NR    690,937   
            

U.S. Government Agency Securities—0.0%

  
4    Freddie Mac, 0.109%, 2/1/11, FRN (g) (cost—$3,999)    Aaa/AAA    3,998   
            

Repurchase Agreements—3.7%

  
3,200   

Barclays Capital, Inc., dated 3/31/10, 0.01%, due 4/1/10, proceeds $3,200,001; collateralized by U.S. Treasury Bills, zero coupon, due 5/20/10, valued at $3,264,357

      3,200,000   
591   

State Street Bank & Trust Co., dated 3/31/10, 0.01%, due 4/1/10, proceeds $591,000; collateralized by Federal Home Loan Bank, 4.375%, due 9/17/10, valued at $607,198 including accrued interest

      591,000   
            
   Total Repurchase Agreements (cost—$3,791,000)       3,791,000   
            
   Total Short-Term Investments (cost—$11,668,064)       11,799,484   
            
   Total Investments (cost—$188,399,284)—183.2%       186,880,964   
   Liabilities in excess of other assets—(83.2%)       (84,878,714
            
   Net Assets—100%       $102,002,250   
            


Notes to Schedule of Investments:

 

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

Portfolio securities and other financial instruments for which market quotations are not readily available or for which a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to procedures established by the Board of Directors, or persons acting at their discretion pursuant to procedures established by the Board of Directors, including certain fixed income securities which may be valued with reference to securities whose prices are more readily available. The Fund's investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the mean between the last quoted bid and ask price for those securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. 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. Securities purchased on a when-issued basis are marked to market daily until settlement at the forward settlement date. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.

The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold and these differences could be material. The Fund’s NAV is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the 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 $57,466,148, representing 56.3% of net assets.

 

(b) Illiquid.

 

(c) 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.

 

(d) When-issued. To be settled after March 31, 2010.

 

(e) In default.

 

(f) Fair-Valued—Securities with an aggregate value of $5,807,635, representing 5.7% of net assets.

 

(g) All or partial amount segregated as collateral for swaps.

 

(h) Non-income producing.

 

(i) All or partial amount segregated as collateral for reverse repurchase agreements.

 

(j) Restricted. The aggregate acquisition cost of such securities is $6,680,495. The aggregate market value of $6,747,245 is approximately 6.6% of net assets.

Glossary:

 

CMO  

—Collateralized Mortgage Obligation

FRN  

—Floating Rate Note. The interest rate disclosed reflects the rate in effect on March 31, 2010.

IO  

—Interest Only

MBIA  

—insured by Municipal Bond Investors Assurance

NR  

—Not Rated

VRN  

—Variable Rate Note. Instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The interest rate disclosed reflects the rate in effect on March 31, 2010.

Other Investments:

(A) Credit default swap agreements:

Sell protection swap agreements outstanding at March 31, 2010(1):

 

Swap Counterparty/Referenced Debt Issuer    Notional Amount
Payable on  Default
(000s)(3)
   Credit
Spread(2)
    Termination
Date
   Payments
Received
    Market
Value(4)
   Upfront
Premiums
Received
    Unrealized
Appreciation

Citigroup:

                 

SLM

   $ 1,000    3.31   12/20/13    5.00   $ 58,254    $ (157,500   $ 215,754

Deutsche Bank:

                 

American International Group

     2,000    2.01   3/20/13    2.10     6,367             6,367

SLM

     1,000    3.31   12/20/13    5.00     58,254      (122,500     180,754

SLM

     3,000    3.79   3/20/19    5.35     299,723             299,723

Merrill Lynch:

                 

SLM

     700    3.31   12/20/13    5.00     40,777      (98,000     138,777
                               
             $ 463,375    $ (378,000   $ 841,375
                               


 

(1)

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

 

(2)

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

 

(3)

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

 

(4)

The quoted market prices and resulting values for credit default swap agreements serve as an indicator of the status at March 31, 2010 of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

The Fund received $350,000 in cash as collateral for swap contracts. Cash collateral received may be invested in accordance with the Fund’s investment strategy.

(B) Open reverse repurchase agreements at March 31, 2010 were:

 

Counterparty    Rate      Trade Date      Maturity Date      Principal & Interest      Principal

Bank of America

   0.45%      3/8/10      4/8/10      $ 2,122,432      $ 2,121,795
   0.45%      3/10/10      4/9/10        962,815        962,550
   0.45%      3/17/10      4/16/10        987,148        986,963
   0.45%      3/25/10      4/26/10        924,081        924,000
   0.98%      3/3/10      4/5/10        1,631,287        1,630,000
   0.98%      3/5/10      4/6/10        1,101,809        1,101,000
   0.98%      3/16/10      4/16/10        1,395,608        1,395,000
   0.98%      3/17/10      4/19/10        2,197,897        2,197,000

Barclays Bank

   0.55%      3/8/10      4/7/10        7,342,691        7,340,000
   0.55%      3/10/10      4/9/10        1,025,344        1,025,000
   0.55%      3/16/10      4/15/10        885,216        885,000
   0.55%      3/17/10      4/16/10        423,097        423,000
   0.75%      3/4/10      4/5/10        4,031,350        4,029,000
   0.75%      3/5/10      4/6/10        1,873,053        1,872,000
   0.75%      3/8/10      4/7/10        1,334,667        1,334,000
   0.75%      3/16/10      4/15/10        1,162,387        1,162,000
   0.75%      3/17/10      4/16/10        3,421,069        3,420,000
   0.75%      3/26/10      4/26/10        1,341,168        1,341,000
   1.00%      3/8/10      4/8/10        3,733,487        3,731,000
   1.15%      3/16/10      4/15/10        1,017,520        1,017,000

Credit Suisse First Boston

   0.45%      3/4/10      4/5/10        1,698,594        1,698,000
   0.55%      3/16/10      4/16/10        1,945,475        1,945,000

Greenwich

   0.83%      3/10/10      4/9/10        10,291,217        10,286,000
   0.84%      3/22/10      4/21/10        8,128,896        8,127,000
   0.98%      3/16/10      4/14/10        2,250,980        2,250,000
   0.98%      3/18/10      4/16/10        1,904,726        1,904,000
   0.99%      3/22/10      4/21/10        2,263,622        2,263,000

JPMorgan

   0.75%      3/10/10      4/9/10        3,112,426        3,111,000
   0.75%      3/25/10      4/26/10        1,822,266        1,822,000

Morgan Stanley

   0.75%      3/29/10      4/27/10        649,041        649,000
   1.00%      3/4/10      4/5/10        1,413,098        1,412,000
   1.00%      3/5/10      4/6/10        1,068,801        1,068,000
   1.00%      3/19/10      4/19/10        2,683,969        2,683,000
                          
                       $ 78,115,308
                          

The weighted average daily balance of reverse repurchase agreements outstanding during the three months ended March 31, 2010 was $74,596,836 at a weighted average interest rate of 0.82%. The total market value of underlying collateral (refer to the Schedule of Investments for positions segregated as collateral for reverse repurchase agreements) for open reverse repurchase agreements at March 31, 2010 was $87,864,777.

The Fund received $594,782 and $310,000 in principal value of U.S. government agency securities and corporate bonds, respectively, and $705,000 in cash as collateral for reverse repurchase agreements outstanding. Cash collateral received may be invested in accordance with the Fund’s investment strategy. Collateral received as securities cannot be pledged.


Fair Value Measurements

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

 

   

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

 

   

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

 

   

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

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

The valuation techniques used by the Fund to measure fair value during the three months ended March 31, 2010 maximized the use of observable inputs and minimized the use of unobservable inputs. When fair-valuing securities, the Fund utilized option adjusted spread pricing.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

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

A summary of the inputs used at March 31, 2010 in valuing the Fund’s assets and liabilities is listed below:

 

      Level 1—
Quoted Prices
   Level 2—
Other Significant
Observable
Inputs
   Level 3—
Significant
Unobservable
Inputs
   Value at
3/31/10

Investments in Securities—Assets

           

Mortgaged-Backed Securities

   $ 4,627,870    $ 117,589,095    $ 5,717,638    $ 127,934,603

Corporate Bonds & Notes:

           

Airlines

          4,729,530      3,395,430      8,124,960

All Other

          30,550,247           30,550,247

Asset-Backed Securities

          5,433,397      58,297      5,491,694

Municipal Bonds & Notes

          2,284,500           2,284,500

Common Stock:

           

Energy

          37,519           37,519

All Other

     615,022                615,022

U.S. Government Agency Securities

               31,700      31,700

Warrants

               11,235      11,235

Short-Term Investments

          11,799,484           11,799,484

Total Investments in Securities—Assets

   $ 5,242,892    $ 172,423,772    $ 9,214,300    $ 186,880,964

Other Financial Instruments*

        $ 841,375         $ 841,375

Total Investments

   $ 5,242,892    $ 173,265,147    $ 9,214,300    $ 187,722,339

 

* Other Financial Instruments are derivative instruments not reflected in the Schedule of Investments, such as swap agreements, which are valued at the unrealized appreciation (depreciation) of the instrument.

There were no significant transfers into and out of Levels 1 and 2 during the three months ended March 31, 2010.

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the three months ended March 31, 2010, was as follows:

 

      Beginning
Balance
12/31/09
   Net
Purchases (Sales)
and Settlements
    Accrued
Discounts
(Premiums)
    Net Realized
Gain (Loss)
    Net Change
in Unrealized
Appreciation/
Depreciation
    Transfers into
Level 3
   Transfers out
of Level 3**
    Ending
Balance
3/31/10

Investments in Securities—Assets

                  

Mortgaged-Backed Securities

   $ 5,440,288    $ (276,995   $ 56,540      $ 149,402      $ 1,173,622         $ (825,219   $ 5,717,638

Corporate Bonds & Notes:

                  

Airlines

     3,298,685      (40,314     4,898        3,615        128,546                  3,395,430

Asset-Backed Securities

     58,579             1,662               (1,944               58,297

U.S. Government Agency Securities

     40,161      (8,347     (19     (52     (43               31,700

Warrants

     6,128                           5,107                  11,235

Total Investments

   $ 8,843,841    $ (325,656   $ 63,081      $ 152,965      $ 1,305,288         $ (825,219   $ 9,214,300

 

** Transferred out of Level 3 because more observable inputs were available to determine price and therefore was transferred into Level 2 during the three months ended March 31, 2010.

The net change in unrealized appreciation/depreciation of investments which the Fund held at March 31, 2010 was $1,017,850.


Item 2. Controls and Procedures

 

(a) The registrant’s President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 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 controls 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


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant: PCM Fund, Inc.
By:   /s/ Brian S. Shlissel
  President & Chief Executive Officer

 

Date: May 18, 2010

By:   /s/ Lawrence G. Altadonna
  Treasurer, Principal Financial & Accounting Officer

Date: May 18, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:   /s/ Brian S. Shlissel
  President & Chief Executive Officer

 

Date: May 18, 2010

By:   /s/ Lawrence G. Altadonna
  Treasurer, Principal Financial & Accounting Officer

Date: May 18, 2010