UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-10385
Pacific Funds Series Trust (formerly called Pacific Life Funds)
(Exact name of registrant as specified in charter)
700 Newport Center Drive, P.O. Box 7500
Newport Beach, CA 92660
(Address of principal executive offices) (Zip code)
Robin S. Yonis
Vice President and General Counsel of Pacific Funds Series Trust
700 Newport Center Drive, P.O. Box 9000
Newport Beach, CA 92660
(Name and address of agent for service)
Copies to:
Anthony H. Zacharski, Esq.
Dechert LLP
90 State House Square
Hartford, CT 06103
Registrant’s telephone number, including area code: 949-219-6767
Date of fiscal year end: March 31
Date of reporting period: March 31, 2015
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR 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 Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270 30e-1).
ANNUAL REPORT
AS OF MARCH 31, 2015
| TABLE OF CONTENTS |
||
| A-1 | ||
| A-2 | ||
| B-1 | ||
| C-1 | ||
| C-3 | ||
| C-5 | ||
| C-9 | ||
| D-1 | ||
| E-1 | ||
| F-1 | ||
| F-2 | ||
| F-4 | ||
| Approval of Investment Advisory Agreement and Sub-Advisory Agreements |
F-7 | |
| F-19 |
Pacific Funds Series Trust, which is a Delaware statutory trust, may be referred to as “Pacific Funds”
(formerly named Pacific Life Funds) or the “Trust”.
PACIFIC FUNDS
We are pleased to share with you the Annual Report dated March 31, 2015 for Pacific Funds Series Trust (“Pacific Funds” or the “Trust”). Pacific Funds is comprised of 34 funds, 12 of which are included in this report (each individually, a “fund” and collectively, the “funds”) and are available for direct investment. Pacific Life Fund Advisors LLC (PLFA), as Adviser to the funds, manages Pacific FundsSM Portfolio Optimization Conservative, Pacific FundsSM Portfolio Optimization Moderate-Conservative, Pacific FundsSM Portfolio Optimization Moderate, Pacific FundsSM Portfolio Optimization Growth, Pacific FundsSM Portfolio Optimization Aggressive-Growth funds (Portfolio Optimization Funds) and Pacific FundsSM Diversified Alternatives. Each of the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives is an asset allocation “fund of funds” and invests in certain other funds (PF Underlying Funds) of the Trust. PLFA supervises the management of the PF Underlying Funds which are only available for investment by the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives and are included in a separate PF Underlying Funds Annual Report. Please see “Where to Go for More Information” for instructions on how to obtain the PF Underlying Funds’ Annual Report. PLFA also does business under the name “Pacific Asset Management” and manages Pacific FundsSM Short Duration Income, Pacific FundsSM Core Income, Pacific FundsSM Strategic Income, Pacific FundsSM Floating Rate Income, Pacific FundsSM Limited Duration High Income, and Pacific FundsSM High Income under that name. The Adviser and Pacific Asset Management and their funds as of March 31, 2015 are listed below:
| Manager | Fund | Page Number | ||
| Pacific Life Fund Advisors LLC (PLFA) | Pacific FundsSM Portfolio Optimization Conservative (formerly named PL Portfolio Optimization Conservative) | A-5 | ||
| Pacific FundsSM Portfolio Optimization Moderate-Conservative (formerly named PL Portfolio Optimization Moderate-Conservative) | A-7 | |||
| Pacific FundsSM Portfolio Optimization Moderate (formerly named PL Portfolio Optimization Moderate) | A-9 | |||
| Pacific FundsSM Portfolio Optimization Growth (formerly named PL Portfolio Optimization Moderate-Aggressive) | A-11 | |||
| Pacific FundsSM Portfolio Optimization Aggressive-Growth (formerly named PL Portfolio Optimization Aggressive) | A-13 | |||
| Pacific FundsSM Diversified Alternatives (formerly named PL Diversified Alternatives) | A-14 | |||
| Pacific Asset Management | Pacific FundsSM Short Duration Income (formerly named PL Short Duration Bond) | A-15 | ||
| Pacific FundsSM Core Income (formerly named PL Income) | A-16 | |||
| Pacific FundsSM Strategic Income (formerly named PL Strategic Income) | A-17 | |||
| Pacific FundsSM Floating Rate Income (formerly named PL Floating Rate Income) | A-18 | |||
| Pacific FundsSM Limited Duration High Income (formerly named PL Limited Duration High Income) | A-19 | |||
| Pacific FundsSM High Income (formerly named PL High Income) | A-20 |
We appreciate your confidence in the Trust and look forward to serving your financial needs in the years to come.
Sincerely,
|
| |
| James T. Morris | Mary Ann Brown | |
| Chairman of the Board | Chief Executive Officer | |
| Pacific Funds Series Trust | Pacific Funds Series Trust |
A-1
PACIFIC FUNDS PERFORMANCE DISCUSSION
This Annual Report is provided for the general information of investors with beneficial interests in the Trust. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current Trust prospectus, as supplemented, which contains information about the Trust and each of its funds, including their investment objectives, risks, charges and expenses. You should read the prospectus carefully before investing. There is no assurance that a fund will achieve its investment objective. Each fund is subject to market risk. The net asset value (NAV) of a fund changes as the value of its assets go up or down. The value of a fund’s shares will fluctuate, and when redeemed, may be worth more or less than their original cost. The total return for each fund includes reinvestment of all dividends and capital gain distributions, if any, and does not include deductions of any applicable sales charges. Past performance is not predictive of future performance.
This report shows you the performance of the funds compared to benchmark indices. Index performance is provided for illustrative and comparative purposes only and does not predict or depict the performance of the funds. Indices are unmanaged, do not incur transaction costs and cannot be purchased directly by investors. Index returns include reinvested dividends.
The composite benchmarks for the Portfolio Optimization Funds are composed of up to four broad-based indices. The percentage amounts of each broad-based index within each composite benchmark are based on each fund’s target asset class allocations in effect during the reporting period. The percentages attributed to a broad-based index within a composite benchmark will change if a fund’s target asset class allocations change.
PLFA has written the general market conditions commentary which expresses PLFA’s opinions and views on how the market generally performed for the year ended March 31, 2015. PLFA does business under the name “Pacific Asset Management” and manages the Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income, Pacific Funds High Income funds under that name.
All views are subject to change at any time based upon market or other conditions, and the Trust, its Adviser and Pacific Asset Management disclaim any responsibility to update such views. Any references to “we”, “I”, or “ours” are references to the Adviser or Pacific Asset Management. The Adviser and Pacific Asset Management may include statements that constitute “forward-looking statements” under the United States (U.S.) securities laws. Forward-looking statements include information concerning possible or assumed future results of the Trust’s investment operations, asset levels, earnings, expenses, industry or market conditions, regulatory developments and other aspects of the Trust’s operations or general economic conditions. In addition, when used in this report, predictive verbs such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “projects” and future or conditional verbs such as “will”, “may”, “could”, “should”, and “would”, or any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees of performance or economic results. They involve risks, uncertainties and assumptions. Although such statements are based on expectations that the Adviser or Pacific Asset Management believe to be reasonable, actual results may differ materially from expectations. Investors must not rely on any forward-looking statements.
In connection with any forward-looking statements and any investment in the Trust, investors should carefully consider the investment objectives, policies and risks described in the Trust’s current prospectus, as supplemented, and Statement of Additional Information, as supplemented, as filed with the Securities and Exchange Commission (SEC), which may be obtained from the SEC’s website at www.sec.gov.
Market Conditions (for the year ended March 31, 2015)
Executive Summary
Over the reporting period, markets around the world began to diverge as major central banks veered in different paths. The Federal Reserve (Fed) led by the newly appointed Chairperson, Janet Yellen, continued to unwind its third quantitative easing program (QE3) and finally ended the bond-buying stimulus program in the fourth quarter of 2014. The Fed opted to end QE3 based on signs of stabilizing economic growth, improving employment conditions, and contained inflation expectations.
While economic fundamentals seemed relatively upbeat in the U.S., many other nations did not share in America’s good fortunes. The European Central Bank (ECB) and the Bank of Japan (BoJ) continued to aggressively provide stimulus to boost the recovery of their struggling economies. Over the summer of 2014, the ECB lowered the deposit rate for banks into negative territory for the first time. This effectively penalized banks for keeping funds with the ECB and thus, incentivized them to lend to each other so that capital would eventually flow throughout the economy. The BoJ also stepped up its commitment to boost the economy through Japanese bond and stock purchases to channel cash into the markets. Additional Japanese policies sought to further depreciate the yen in an attempt to boost exports.
Emerging market countries faced numerous challenges throughout the reporting period. Several Asian countries felt the squeeze from the weakening yen, which gave an advantage to Japanese exporters at the expense of other Asian exporters. Looking eastward, Russia felt the most pressure throughout the reporting period, starting with its altercations with Ukraine that led to increased international sanctions. Subsequently, oil prices plunged as supply started outstripping demand in large part due to the shale boom in the U.S. Since Russia’s economy depends on energy revenue, tumbling oil prices had devastating effects and led to the collapse of the ruble. Low oil prices also affected other emerging market economies. Net energy exporting countries in Latin America suffered heavily as oil lost approximately half its value over the second half of 2014.
In general, these global developments fueled the supranormal U.S. dollar rally over the second half of 2014. Tensions and negative economic developments outside the U.S. led to further downward pressure on foreign investments, while domestic assets appreciated due to a healthier U.S. economy. Improving economic growth and hiring activity in the U.S. helped shelter domestic markets from problems around the world. The following sections highlight how specific market segments responded to the events that unfolded over the reporting period.
See benchmark definitions on page A-21
A-2
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Fixed Income
Bond yields fell despite the Fed reducing its bond purchases, which would typically be expected to have downward pressure on bond prices and push up interest rates. The yield on the 10-year Treasury started the reporting period at 2.72% and finished at 1.97%. Low inflationary expectations contributed to falling yields as inflation remained tame in the U.S. while Europe and Japan confronted deflationary conditions. Furthermore, nominal yields on German bunds and Japanese bonds remained well below those of comparable Treasury bonds. This made Treasuries more attractive on a relative basis, which further contributed to falling interest rates. Other factors that further reduced Treasury yields included geopolitical tensions in Ukraine and the Middle East that led investors to seek safe haven assets like U.S. Treasury bonds.
For the reporting period, the broad fixed income market (as measured by the Barclays U.S. Aggregate Bond Index) gained 5.72%. Long-term Treasuries were among the top performers within the fixed income market as they benefited from investors seeking safety and yield. The investment-grade credit category also delivered solid gains and outperformed the high yield group over the reporting period. A sizable portion of high yield issuers is in energy-related industries; and thus, they were negatively affected by the slump in oil prices. The emerging markets debt category had mixed results. U.S. dollar-denominated emerging markets debt performed well. On the other hand, local currency-denominated instruments were negatively affected by the surge in the U.S. dollar and faced losses over the reporting period. The Treasury Inflation-Protected Securities (TIPS) category earned modest gains but underperformed the broad fixed income market due to low inflation expectations. Short duration bonds (e.g. short-term credit and bank loans) have less sensitivity to interest rates; therefore, they did not benefit from falling yields and lagged the broad fixed income market.
Domestic Equity
The U.S. equity market had its sixth consecutive positive calendar year performance, and the S&P 500 Index returned 12.73% over the reporting period. The broad domestic equity market generally maintained its upward momentum. Large- and mid-capitalization stocks outperformed small-capitalization stocks. From a valuation perspective, small-capitalization stocks were relatively overvalued compared to their larger counterparts. With respect to style, growth outpaced value. Over the reporting period, healthy mergers & acquisitions (M&A) activity helped several sectors, particularly health care. Responses to the Affordable Care Act primarily fueled the M&A activity in the sector as industry participants resorted to consolidation to help offset the expense of covering and treating the increase in insured patients. Real estate investment trusts (REITs), which tend to have relatively high dividend payouts, also performed very well. The Financial Times Stock Exchange National Association of Real Estate Investment Trust (FTSE NAREIT) Equity REITs Index surged 23.95% over the reporting period. On the other end of the spectrum, the energy sector was the only sector to have losses over the reporting period, which was driven by plunging oil prices.
International Equity
The foreign equity market struggled over the reporting period as several key central banks tried to stave off further economic woes while other nations struggled with geopolitical issues and/or crashing oil prices. The Morgan Stanley Capital International Europe, Australasia, and Far East (MSCI EAFE) Index and the MSCI Emerging Markets Index returned -0.92% and 0.44%, respectively. Actions by the BoJ helped lift Japanese stocks higher, which primarily contributed to the performance of the MSCI EAFE Index. However, the United Kingdom (U.K.) offset much of that contribution. Regarding the U.K., approximately one-quarter of its companies represented in the MSCI EAFE Index are linked to commodities. Commodities, especially energy, experienced a sharp decline over the reporting period. A slowdown in China and other parts of the world, as well as an excess supply of oil, contributed to falling commodity prices. Among the countries represented in the MSCI Emerging Markets Index, Russia, South Korea and Brazil were the top detractors from performance. Russia and Brazil felt the pain caused by the impact of falling commodities; whereas, South Korea was hurt by the softer demand from China and a weaker yen, which made Japanese goods relatively cheaper than Korean goods. While the Chinese economy has been decelerating, a flood of credit jolted its equity market higher, which offset some of the detractors.
Commodities
The global slowdown created a challenging condition for commodities over the reporting period. Among the various commodity groups, the energy category experienced the deepest hardship, losing nearly half its value over the reporting period. A global reduction in demand in conjunction with an oversupply of oil contributed to slumping energy prices. Although the metals category (which includes precious and industrial metals) had moderately negative returns, they fared better than other major commodity categories. Nevertheless, precious metals fell as the U.S. dollar rallied sharply over the second half of 2014.
Concluding Remarks
The Fed is expected to begin hiking rates in the second half of 2015, as the U.S. economy remains relatively healthy. It should be noted that equity markets typically have not experienced a correction during the earlier stage of monetary tightening. This is generally due to central banks raising rates when their respective economies are doing well. Sound economic conditions and a revival in M&A activity should help the domestic equity market stay afloat. Valuations of domestic equities may appear relatively elevated, but they are not at bubble levels as seen during the “tech boom” period. Current valuations may be justified by solid earnings as well as low inflation and interest rates (i.e. cost of capital). Stable economic conditions should also keep default levels benign, which justify tighter bond spreads. However, energy and related sectors may continue to face challenges if oil prices fall further or remain stagnant.
Overseas, the ECB and BoJ are anticipated to either continue or expand their quantitative easing programs. These efforts may improve their respective economic growth potential and boost their equity markets. Reviving economic growth should translate into improvements in earnings, which have lagged in recent periods. The divergence in monetary policies between the U.S. and many other major nations may also keep the U.S. dollar at elevated levels. This may benefit those that export to the U.S. since their goods and services will be relatively cheaper.
| See benchmark definitions on page A-21 |
A-3
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Continued deceleration of growth in China will likely affect several developing nations that have depended on its rapid expansion. In the past, Chinese regulators have responded to signs of a slowdown by implementing various stimulus plans to rejuvenate the economy. Recently, China has been the driving force behind the Asian Infrastructure Investment Bank (AIIB). While this entity could stimulate infrastructure development and complement China’s New Silk Road initiative, much of these efforts are still in very early stages with many challenges ahead, and are unlikely to have an immediate impact on economic activity. China’s New Silk Road envisions a region where currency exchanges are fluid and easy, a kind of economic trade route that will represent China’s visions for an interdependent economic and political community stretching from East Asia to Western Europe.
Global financial markets will continue to face hurdles and deal with uncertainties of geopolitical risks. Europe continues to deal with a potential ousting of Greece from the European Union, which could elevate short-term volatility. Additionally, the energy sector continues to deal with a supply glut that has suppressed oil prices. This helps oil consumers but hurts producers. Despite many of these risks, there are potential opportunities to monitor and seek to capitalize down the road.
Performance of the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives
The performance of the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives are composites of the performance of each of the PF Underlying Funds in which each invests (which may include bonds, domestic and/or international equities). The Portfolio Optimization Funds and Pacific Funds Diversified Alternatives are compared to a single broad-based industry index; however, because these funds are a composite of various asset classes, there is no one broad-based industry index to use as a complete comparison with these funds. To assist in performance comparisons, composite benchmarks were constructed for the Portfolio Optimization Funds. Each composite benchmark is comprised of up to four broad-based indices shown below. The composite benchmarks were constructed with allocations to each asset class that correspond to the target allocations for Portfolio Optimization Funds. However, the actual allocations of any Portfolio Optimization Fund will naturally vary from these targets as a result of market performance over time. Pacific Funds Diversified Alternatives does not have a composite benchmark. The one-year performance for these broad-based indices is shown in the following table.
| Broad Based Indices |
One Year (as of 3-31-15) |
|||
| S&P 500 Index (U.S. Stocks) |
12.73% | |||
| Morgan Stanley Capital International (MSCI) EAFE Index (Net) (International Stocks) |
(0.92% | ) | ||
| Barclays U.S. Aggregate Bond Index (Fixed Income) |
5.72% | |||
| BofA Merrill Lynch U.S. 3-Month T-Bill Index (Cash) |
0.03% | |||
| See benchmark definitions on page A-21 |
A-4
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Portfolio Optimization Conservative (managed by Pacific Life Fund Advisors LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Portfolio Optimization Conservative’s Class A (without sales charge) returned 3.71%, compared to a 5.72% return for the Barclays U.S. Aggregate Bond Index, and a 6.07% return for the Pacific Funds Portfolio Optimization Conservative Composite Benchmark.
The following graph compares the performance of a hypothetical $10,000 investment in Class A shares of the fund to its benchmarks for the ten-year period ended March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class B, C, R and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
| See benchmark definitions on page A-21 |
A-5
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class A underperformed the Pacific Funds Portfolio Optimization Conservative Composite Benchmark. The fund was primarily comprised of various fixed income strategies, with a small allocation to equity and alternative funds, during the reporting period. Fixed income investments included PF Underlying Funds comprised of intermediate-term bonds, short duration securities, inflation-protected bonds, emerging markets bonds, and floating rate loans. The equity segment mainly encompassed domestic and foreign large-capitalization funds. Alternatives included two absolute return strategies and a precious metals fund.
From the broad asset class perspective, the fund’s fixed income group underperformed the Barclays U.S. Aggregate Bond Index and was the primary detractor from performance. The domestic equity group underperformed the S&P 500 Index, while the international equity group was in-line with MSCI EAFE Index. The alternative funds had mixed results and detracted from performance as a group.
With interest rates falling, short duration bonds struggled over the reporting period. Among the underlying fixed income holdings of the fund, the PF Short Duration Bond Fund was one of the largest detractors. The PF Emerging Markets Debt Fund also dragged performance. Its allocation and security selection in Russia and Ukraine was unfavorable as the conflict between the two countries continued. The surging U.S. dollar also negatively affected the fund’s local currency-denominated holdings. On the other hand, the PF Managed Bond Fund contributed positively to performance. The co-sub-advised fund benefited from duration positioning in Western Asset Management Company’s (“Western Asset”) portion of the fund.
Among the fund’s domestic equities group, growth strategies generally fared better than their value counterparts. Exposure to large-capitalization value funds (i.e. PF Comstock and PF Large-Cap Value Funds) were among the primary detractors within the domestic equity group. Within the foreign equity group, the PF International Large-Cap Fund outperformed the MSCI EAFE Index, but its contribution was offset by the underperformance that stemmed from the PF International Value Fund.
The underlying alternative funds, which generally have a low correlation to the broad equity and fixed income markets, had varying impacts on performance. The PF Global Absolute Return Fund contributed to performance as several of the strategy’s short and long positions benefited from geopolitical events as well as divergent actions taken by various central banks around the globe. The PF Currency Strategies Fund also earned positive returns over the reporting period. However, the PF Precious Metals Fund struggled as the U.S. dollar rallied and inflationary expectations fell.
| See benchmark definitions on page A-21 |
A-6
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Portfolio Optimization Moderate-Conservative (managed by Pacific Life Fund Advisors LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Portfolio Optimization Moderate-Conservative’s Class A (without sales charge) returned 4.69%, compared to a 5.72% return for the Barclays U.S. Aggregate Bond Index, and a 6.91% return for the Pacific Funds Portfolio Optimization Moderate-Conservative Composite Benchmark.
The following graph compares the performance of a hypothetical $10,000 investment in Class A shares of the fund to its benchmarks for the ten-year period ended March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class B, C, R and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
| See benchmark definitions on page A-21 |
A-7
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class A underperformed the Pacific Funds Portfolio Optimization Moderate-Conservative Composite Benchmark. The fund maintained a diversified allocation mix that was modestly tilted toward fixed income during the reporting period. Fixed income investments included PF Underlying Funds that consisted of intermediate-term bonds as well as short duration securities, inflation-protected bonds, emerging markets bonds, and floating rate loans. The equity exposure was diversified across style (growth/value), market capitalization and region (including an allocation to foreign small-capitalization and emerging markets strategies). Alternatives included two absolute return strategies and a precious metals fund.
From the broad asset class perspective, the fund’s fixed income group underperformed the Barclays U.S. Aggregate Bond Index and was the primary detractor from performance. The domestic equity group underperformed the S&P 500 Index, while the international equity group contributed to performance. The alternative funds had mixed results over the reporting period.
With interest rates falling, short duration bonds struggled over the reporting period. Among the underlying fixed income holdings of the fund, the PF Short Duration Bond Fund was one of the largest detractors. The PF Emerging Markets Debt Fund also dragged performance. Its allocation and security selection in Russia and Ukraine was unfavorable as the conflict between the two countries continued. The surging U.S. dollar also negatively affected the fund’s local currency-denominated holdings. On the other hand, the PF Managed Bond Fund contributed positively to performance. The co-sub-advised fund benefited from duration positioning in Western Asset’s portion of the fund.
Among the fund’s domestic equities group, growth strategies generally fared better than their value counterparts. Exposure to large-capitalization value funds (i.e. PF Comstock and PF Large-Cap Value Funds) were among the primary detractors within the domestic equity group. Within the foreign equity group, the PF International Large-Cap Fund outperformed the MSCI EAFE Index, but its contribution was offset by the underperformance that stemmed from the PF International Value Fund. The PF International Small-Cap Fund performed well and helped returns.
The underlying alternative funds, which generally have a low correlation to the broad equity and fixed income markets, had varying impacts on performance. The PF Global Absolute Return Fund contributed to performance as several of the strategy’s short and long positions benefited from geopolitical events as well as divergent actions taken by various central banks around the globe. The PF Currency Strategies Fund also earned positive returns over the reporting period. However, the PF Precious Metals Fund struggled as the U.S. dollar rallied and inflationary expectations fell.
| See benchmark definitions on page A-21 |
A-8
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Portfolio Optimization Moderate (managed by Pacific Life Fund Advisors LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Portfolio Optimization Moderate’s Class A (without sales charge) returned 5.30%, compared to a 12.73% return for the S&P 500 Index, and a 7.79% return for the Pacific Funds Portfolio Optimization Moderate Composite Benchmark.
The following graph compares the performance of a hypothetical $10,000 investment in Class A shares of the fund to its benchmarks for the ten-year period ended March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class B, C, R and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
| See benchmark definitions on page A-21 |
A-9
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class A underperformed the Pacific Funds Portfolio Optimization Moderate Composite Benchmark. The fund maintained a mix of equity and fixed income funds. The equity exposure was diversified across style (growth/value), market capitalization and region (including allocations to foreign small-capitalization and emerging markets stocks). The fund also maintained exposure to select market sectors such as publicly traded REITs. Fixed income investments included intermediate-term bonds, short duration securities, inflation-protected bonds, emerging markets bonds, and floating rate loans. Alternatives consisted of two absolute return strategies and a precious metals fund.
From the broad asset class perspective, the domestic equity group underperformed the S&P 500 Index, while the international equity group was roughly in-line with the MSCI EAFE Index. The fund’s fixed income group underperformed the Barclays U.S. Aggregate Bond Index and detracted from performance. The alternative funds had mixed results but detracted from the performance overall.
Among the fund’s domestic equities group, growth strategies generally fared better than their value counterparts. Exposure to large-capitalization value funds (i.e. PF Comstock and PF Large-Cap Value Funds) were among the primary detractors within the domestic equity group. Within the foreign equity group, the PF International Large-Cap Fund outperformed the MSCI EAFE Index, but its contribution was offset by the underperformance that stemmed from the PF International Value and PF Emerging Markets Funds. The PF International Small-Cap Fund performed well and helped returns.
With interest rates falling, short duration bonds struggled over the reporting period. Among the underlying fixed income holdings of the fund, the PF Short Duration Bond Fund was among the top detractors. The PF Emerging Markets Debt Fund also dragged performance. Its allocation and security selection in Russia and Ukraine was unfavorable as the conflict between the two countries continued. The surging U.S. dollar also negatively affected the fund’s local currency-denominated holdings. On the other hand, the PF Managed Bond Fund contributed positively to performance. The co-sub-advised fund benefited from duration positioning in Western Asset’s portion of the fund.
The underlying alternative funds, which generally have a low correlation to the broad equity and fixed income markets, had varying impacts on performance. The PF Global Absolute Return Fund contributed to performance as several of the strategy’s short and long positions benefited from geopolitical events as well as divergent actions taken by various central banks around the globe. The PF Currency Strategies Fund also earned positive returns over the reporting period. However, the PF Precious Metals Fund struggled as the U.S. dollar rallied and inflationary expectations fell.
| See benchmark definitions on page A-21 |
A-10
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Portfolio Optimization Growth (managed by Pacific Life Fund Advisors LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Portfolio Optimization Growth’s Class A (without sales charge) returned 6.36%, compared to a 12.73% return for the S&P 500 Index, and a 8.58% return for the Pacific Funds Portfolio Optimization Growth Composite Benchmark.
The following graph compares the performance of a hypothetical $10,000 investment in Class A shares of the fund to its benchmarks for the ten-year period ended March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class B, C, R and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
| See benchmark definitions on page A-21 |
A-11
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class A underperformed the Pacific Funds Portfolio Optimization Growth Composite Benchmark. The fund maintained a diversified allocation mix that was tilted toward equity. The equity exposure was diversified across style (growth/value), market capitalization and region (including allocations to foreign small-capitalization and emerging markets stocks). The fund also maintained exposure to select market sectors such as publicly traded REITs. Fixed income investments included intermediate-term bonds as well as specific strategies such as short duration, inflation-protected bonds and emerging markets bonds. Alternatives included two absolute return strategies and a precious metals fund.
From the broad asset class perspective, the domestic equity group underperformed the S&P 500 Index, while the international equity group was roughly in-line with the MSCI EAFE Index. The fund’s fixed income group underperformed the Barclays U.S. Aggregate Bond Index and modestly detracted from performance. The alternative funds had mixed results and modestly detracted from performance as a group.
Among the fund’s domestic equities group, growth strategies generally fared better than their value counterparts. Exposure to large-capitalization value funds (i.e. PF Comstock and PF Large-Cap Value Funds) were among the primary detractors within the domestic equity group. Within the foreign equity group, the PF International Large-Cap Fund outperformed the MSCI EAFE Index, but its contribution was offset by the underperformance that stemmed from the PF International Value and PF Emerging Markets Funds. The PF International Small-Cap Fund performed well and helped returns.
With interest rates falling, short duration bonds struggled over the reporting period and the PF Short Duration Bond Fund detracted from performance. The PF Emerging Markets Debt Fund also dragged performance. Its allocation and security selection in Russia and Ukraine was unfavorable as the conflict between the two countries continued. The surging U.S. dollar also negatively affected the fund’s local currency-denominated holdings. On the other hand, the PF Managed Bond Fund contributed positively to performance. The co-sub-advised fund benefited from duration positioning in Western Asset’s portion of the fund.
The underlying alternative funds, which generally have a low correlation to the broad equity and fixed income markets, had varying impacts on performance. The PF Global Absolute Return Fund contributed to performance as several of the strategy’s short and long positions benefited from geopolitical events as well as divergent actions taken by various central banks around the globe. The PF Currency Strategies Fund also earned positive returns over the reporting period. However, the PF Precious Metals Fund struggled as the U.S. dollar rallied and inflationary expectations fell.
| See benchmark definitions on page A-21 |
A-12
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Portfolio Optimization Aggressive-Growth (managed by Pacific Life Fund Advisors LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Portfolio Optimization Aggressive-Growth’s Class A (without sales charge) returned 6.18%, compared to a 12.73% return for the S&P 500 Index, and a 8.56% return for the Pacific Funds Portfolio Optimization Aggressive-Growth Composite Benchmark.
The following graph compares the performance of a hypothetical $10,000 investment in Class A shares of the fund to its benchmarks for the ten-year period ended March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class B, C, R and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
| See benchmark definitions on page A-21 |
A-13
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class A underperformed the Pacific Funds Portfolio Optimization Aggressive-Growth Composite Benchmark. The fund was primarily allocated to domestic and international equity funds that are diversified across style (growth/value), market capitalization and region (which included allocations to foreign small-capitalization and emerging markets stocks). The fund also maintained exposure to select sectors, such as publicly traded REITs, as well as a small allocation to intermediate-term fixed income securities. Alternatives included two absolute return strategies and a precious metals fund.
From the broad asset class perspective, the domestic equity group underperformed the S&P 500 Index, while the international equity group was relatively mixed. The fund’s fixed income group underperformed the Barclays U.S. Aggregate Bond Index and modestly detracted from performance. The alternative funds had mixed results and detracted from performance as a group.
Among the fund’s domestic equities group, growth strategies generally fared better than their value counterparts. Exposure to large-capitalization value funds (i.e. PF Comstock and PF Large-Cap Value Funds) were among the primary detractors within the domestic equity group. The PF Mid-Cap Equity Fund lagged behind its respective benchmark and hurt performance. On the other hand, the allocation to the PF Real Estate Fund added to performance. Within the foreign equity group, the PF International Large-Cap Fund outperformed the MSCI EAFE Index, but its contribution was offset by the underperformance that stemmed from the PF International Value and PF Emerging Markets Funds. The PF International Small-Cap Fund performed well and helped returns.
Among the fixed income funds, the PF Emerging Markets Debt Fund primarily dragged performance. Its allocation and security selection in Russia and Ukraine was unfavorable as the conflict between the two countries continued. The surging U.S. dollar also negatively affected the fund’s local currency-denominated holdings. On the other hand, the PF Managed Bond Fund contributed positively to performance. The co-sub-advised fund benefited from duration positioning in Western Asset’s portion of the fund.
The underlying alternative funds, which generally have a low correlation to the broad equity and fixed income markets, had varying impacts on performance. The PF Global Absolute Return Fund contributed to performance as several of the strategy’s short and long positions benefited from geopolitical events as well as divergent actions taken by various central banks around the globe. The PF Currency Strategies Fund also earned positive returns over the reporting period. However, the PF Precious Metals Fund struggled as the U.S. dollar rallied and inflationary expectations fell.
Pacific Funds Diversified Alternatives (managed by Pacific Life Fund Advisors LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Diversified Alternatives’ Class A (without sales charge) returned 3.19%, compared to a 0.02% return for its benchmark, the Citigroup 1-Month U.S. T-Bill Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class A shares of the fund to its benchmark for the period from inception through March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class C and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. | ||
| See benchmark definitions on page A-21 |
A-14
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class A outperformed the benchmark. The fund was primarily comprised of PF Underlying Funds that invest in various non-traditional asset classes and investment strategies. The allocations include precious metals equities, currencies, and global absolute return strategies. The fund also maintained exposure to inflation-protected bonds, floating rate loan, real estate, emerging markets equity and emerging markets debt strategies.
The fund’s allocations to the PF Global Absolute Return, PF Currency Strategies, and PF Real Estate Fund were the top contributors to the fund’s performance. The PF Global Absolute Return and the PF Currency Strategies Funds’ short and long positions benefited from geopolitical events as well as divergent actions taken by various central banks around the globe. REITs continued to perform well as investors sought yields in the falling interest rate environment.
Among the detractors over the reporting period, the PF Precious Metals Fund primarily held back performance. The PF Precious Metals Fund invests primarily in gold mining stocks, which tend to be sensitive to movements in gold prices. Over the reporting period, gold prices fell as the U.S. dollar continued to appreciate and inflationary expectations were contained. Both PF Emerging Markets and PF Emerging Markets Debt Funds also suppressed fund performance as many developing regions were hurt by the sharp decline in oil prices and a slowdown in China.
Pacific Funds Short Duration Income (managed by Pacific Asset Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Short Duration Income’s Class I (without sales charge) returned 1.70%, compared to a 1.12% return for its benchmark, the Barclays 1-3 Year U.S. Government/Credit Bond Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class I shares of the fund to its benchmark for the period from inception through March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class A, C and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class I outperformed the benchmark. We at Pacific Asset Management managed the fund by focusing on short maturity investment grade corporate bonds. The fund maintained a flexibility to incorporate floating rate loans and high yield bonds. Individual investment selection was based on our fundamental research process. Sector allocations were determined based on our assessment of risk/return opportunities relative to the fund’s investment goal and benchmark weightings. We also performed a credit analysis on each potential issuer and a relative value analysis on each potential investment and invest in instruments that we believe to have the potential for capital appreciation.
The fund’s outperformance relative to the benchmark was primarily due to the fund’s focus on corporate debt securities versus government bonds. The outperformance was primarily driven by the income advantages of short duration corporate bonds versus the government bonds. The fund’s allocation to high yield and floating rate loans also benefited to its performance due to high income advantages versus the benchmark. The duration of the fund was generally in-line with the benchmark and neutral to performance. However, the fund’s underweighting in Treasuries versus the benchmark contributed to underperformance.
| See benchmark definitions on page A-21 |
A-15
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Core Income (managed by Pacific Asset Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Core Income’s Class I (without sales charge) returned 4.46%, compared to a 5.72% return for its benchmark, the Barclays U.S. Aggregate Bond Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class I shares of the fund to its benchmark for the period from inception through March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class A, C and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class I underperformed the benchmark. We at Pacific Asset Management managed the fund as an investment grade corporate bond fund invested principally in income producing debt instruments. Individual investment selection was based on our fundamental research process. Sector allocations were determined based on our assessment of risk/return opportunities. We performed a credit analysis on each potential issuer and a relative value analysis on each potential investment and invested in instruments that we believed to have the potential for capital appreciation.
For the reporting period, the fund’s underperformance compared to the benchmark was due to the fund’s structural focus on investment grade corporate debt versus other areas of the bond market, notably low quality investment grade and high yield. We pared back overweights to higher yielding assets in favor of higher quality names and cash. During the reporting period, the Treasury yields decreased significantly which led to the outperformance of duration risk versus credit risk. As a result, the fund’s focus on BBB-rated corporate bonds led to the fund’s underperformance as higher-quality bonds outperformed lower-quality bonds.
Overall risk was reduced during the reporting period given the sharp decline in commodity prices — led by oil — and a reduction in bid side liquidity. The fund’s asset allocation on corporate debt was the primary detractor from fund performance. The fund held a relatively consistent mix of investment grade securities and high yield and bank loan instruments during the reporting period. The asset allocation to high yield and bank loan instruments was a negative to fund performance as those sectors lack of duration risk led to underperformance versus higher-quality, more interest rate-sensitive instruments. The fund’s duration was below the benchmark for the reporting period, also a negative to relative fund performance. While the fund benefited from security selection and a higher average yield than the benchmark, the decrease in Treasury yields led to government bond outperformance.
| See benchmark definitions on page A-21 |
A-16
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Strategic Income (managed by Pacific Asset Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Strategic Income’s Class I (without sales charge) returned 1.13%, compared to a 5.72% return for its benchmark, the Barclays U.S. Aggregate Bond Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class I shares of the fund to its benchmark for the period from inception through March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class A, C and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class I underperformed the benchmark. We at Pacific Asset Management managed the fund with a non-investment grade credit-focused strategy, with the flexibility to invest across various asset classes, including high yield bonds, bank loans, and investment grade corporate bonds. Individual investment selection is based on our fundamental research process. Sector allocations were determined based on our assessment of risk/return opportunities relative to the fund’s investment goal and benchmark weightings. We also performed a credit analysis on each potential issuer and a relative value analysis on each potential investment and invest in instruments that we believed to have the potential for capital appreciation.
The fund’s underperformance relative to the benchmark was due to the fund’s structural focus on non-investment grade corporate debt versus other areas of the bond market, notably government bonds. During the reporting period, Treasury yields decreased significantly, which led to the outperformance of duration risk versus credit risk. As a result, the fund’s focus on high yield bonds led to the fund’s underperformance as high quality bonds outperformed lower quality bonds.
The fund’s asset allocation varied during the reporting period as the fund has broad flexibility to invest across credit markets. The fund held between 42-51% in high yield bonds, which provided the core allocation of the fund. Bank loans accounted for between 14-25% of the allocation and investment grade corporate bonds accounted for a steady 24% of the allocation during the reporting period. The fund’s duration was below the benchmark during the reporting period, a negative to relative performance given the strong drop in Treasury yields. While the fund benefited from a higher average yield than the benchmark, the decrease in Treasury yields as seen in the U.S. Treasury Index, which underperformed the benchmark during the reporting period, led to government bond outperformance and thus, fund underperformance.
| See benchmark definitions on page A-21 |
A-17
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Floating Rate Income (managed by Pacific Asset Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Floating Rate Income’s Class I (without sales charge) returned 0.55%, compared to a 2.83% return for its benchmark, the Credit Suisse Leveraged Loan Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class I shares of the fund to its benchmark for the period from inception through March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class A, C, P and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class I underperformed the benchmark. We at Pacific Asset Management managed the fund by investing primarily in non-investment grade floating rate loans and debt securities. We managed the strategy in a selective approach, focusing on the larger issuers. Individual investment selection was based on our fundamental research process and an assessment of the investment’s relative value. We also performed a credit analysis on each potential investment.
The fund’s underperformance relative to the benchmark for the reporting period was due to three factors: focus on large-capitalization issuers, overweight to B- versus BB-rated loans, and the fund’s security selection in metals/mining and energy. During the reporting period, large-capitalization issuers, which we define as greater than $300 million in loan/facility size, underperformed smaller-capitalization issuers. While delivering lower overall credit risk compared to the benchmark, the fund’s quality bias delivered lower coupon income compared to the benchmark. The benchmark’s yield advantage thus served as a headwind in terms of the fund’s relative performance. For the reporting period, the significant drop in base metal and oil prices contributed to sharp drops in the valuations for energy and mining companies, which hurt performance. The fund’s overweight positions in retail, food and drug, housing, and forest products/containers and its underweight positions in media/telecommunications and utility sectors benefited performance. The fund’s overweighting in energy and underweighting in information technology detracted from performance. Overall, credit selection was a detractor from performance.
| See benchmark definitions on page A-21 |
A-18
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds Limited Duration High Income (managed by Pacific Asset Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds Limited Duration High Income’s Class I (without sales charge) returned -0.89%, compared to a 0.49% return for its benchmark, the Barclays U.S. 1–5 Year High-Yield Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class I shares of the fund to its benchmark for the period from inception through March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class A, C and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class I underperformed the benchmark. We at Pacific Asset Management managed the fund by focusing on non-investment grade high yield bonds and floating rate loans. The fund is designed to provide a flexible approach to investing in non-investment grade credit focused sectors. Individual investment selection was based on our fundamental research process. Sector allocations were determined based on our assessment of risk/return opportunities relative to the fund’s investment goal and benchmark weightings. We also performed a credit analysis on each potential issuer and a relative value analysis on each potential investment and invest in instruments that we believed to have the potential for capital appreciation.
The fund underperformed the benchmark for the reporting period due to security selection and overweights to energy related issuers. During the reporting period, BB-rated bonds outperformed lower-quality bonds given the sharp drop in Treasury yields which led to outperformance of duration risk versus credit risk. As a result, the fund’s overweight to CCC- and B-rated issuers detracted from performance. During the reporting period, the sharp drop in oil prices led to selling pressure, weakened valuations, and negative performance for energy related companies. The fund’s overweight to packaging benefited performance. Overall, credit selection was a detractor from performance.
| See benchmark definitions on page A-21 |
A-19
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Pacific Funds High Income (managed by Pacific Asset Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, Pacific Funds High Income’s Class I (without sales charge) returned -0.30%, compared to a 2.00% return for its benchmark, the Barclays U.S. High-Yield 2% Issuer Capped Bond Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class I shares of the fund to its benchmark for the period from inception through March 31, 2015. For comparison purposes, the performance of all classes for the periods ended March 31, 2015 are also shown in the table below. Performance data for Class A, C, P and Advisor Class shares will vary due to differences in fees and sales charges. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
|
Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. |
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class I underperformed the benchmark. We at Pacific Asset Management managed the fund by focusing on non-investment grade securities, primarily high yield bonds. Individual investment selection was based on our fundamental research process. Sector allocations were determined based on our assessment of risk/return opportunities relative to the fund’s investment goal and benchmark weightings. We also performed a credit analysis on each potential issuer and a relative value analysis on each potential investment.
The fund underperformed the benchmark due to security selection and credit quality allocation. During the reporting period, BB-rated bonds outperformed lower-quality bonds given the sharp drop in Treasury yields, which led to outperformance of duration risk versus credit risk. As a result, credit quality allocation negatively contributed to performance as the fund was overweight B-rated and CCC-rated securities. A sizable overweight in bonds with zero- to two-year durations detracted from performance, as this was the weakest duration segment in the benchmark. Underweights in bonds with durations of five- to ten-years and ten or more years also hurt, as longer-duration bonds outperformed. The fund’s security selection in energy detracted from performance. Additionally, the significant drop in oil prices during the reporting period led to selling pressure and negative returns from energy related companies, and was a detractor from fund performance. The fund’s overweight to building materials and gaming contributed to performance.
| See benchmark definitions on page A-21 |
A-20
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Benchmark Definitions
Barclays 1-3 Year U.S. Government/Credit Bond Index measures performance of U.S. dollar-denominated U.S. Treasuries, government-related, and investment grade U.S. corporate securities with maturities of one to three years.
Barclays U.S. 1-5 Year High-Yield Index is an index that covers the universe of fixed-rate, non-investment-grade debt with maturities between one and five years.
Barclays U.S. Aggregate Bond Index measures the performance of the U.S. investment grade bonds market, which includes investment grade U.S. government bonds, investment grade corporate bonds, mortgage pass-through securities and asset-backed securities that are publicly offered for sale in the United States. The securities in the index must have at least 1 year remaining to maturity. In addition, the securities must be denominated in U.S. dollars and must be fixed rate, non-convertible, and taxable.
Barclays U.S. High-Yield 2% Issuer Capped Bond Index is an index that is an issuer-constrained version for the U.S. Corporate High-Yield Index that covers the U.S. dollar-denominated, non-investment grade fixed-rate taxable corporate bond market and limits issuer exposures to a maximum of 2% and redistributes the excess market value index-wide on a pro-rata basis. The total return is equal to the change in price plus the coupon return.
BofA Merrill Lynch U.S. 3-Month Treasury Bill (T-Bill) Index is an index comprised of a single Treasury bill issue purchased at the beginning of the month and held for a full month, then sold and rolled into a newly selected Treasury bill issue. Results include the reinvestment of all distributions.
Citigroup 1-Month U.S. Treasury Bill (T-Bill) Index is a market value-weighted index of public obligations of the U.S. Treasury with maturities of one month.
Credit Suisse Leveraged Loan Index tracks the investable market of the U.S. dollar-denominated leveraged loan market. It consists of issues rated “5B” or lower, meaning that the highest rated issues included in this index are Moody’s/S&P ratings of Baa1/BB+ or Ba1/BBB+. All loans are funded term loans with a tenor of at least one year and are made by issuers domiciled in developed countries.
Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index (Net) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. As of March 31, 2015, the MSCI EAFE Index (Net) consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The word “(Net)” in the index name means the net total return for the index, which includes the reinvestment of dividends after the deduction of withholding tax, applying the tax rate to non-resident individuals who do not benefit from double taxation treaties.
Pacific Funds Portfolio Optimization Conservative Composite Benchmark (formerly named PL Portfolio Optimization Conservative Composite Benchmark) is 73% Barclays U.S. Aggregate Bond; 15% S&P 500; 7% BofA Merrill Lynch U.S. 3-Month Treasury Bill; and 5% MSCI EAFE (Net) Indices as of March 31, 2015.
Pacific Funds Portfolio Optimization Moderate-Conservative Composite Benchmark (formerly named PL Portfolio Optimization Moderate-Conservative Composite Benchmark) is 55% Barclays U.S. Aggregate Bond; 30% S&P 500; 10% MSCI EAFE (Net), and 5% BofA Merrill Lynch U.S. 3-Month Treasury Bill Indices as of March 31, 2015.
Pacific Funds Portfolio Optimization Moderate Composite Benchmark (formerly named PL Portfolio Optimization Moderate Composite Benchmark) is 45% S&P 500; 38% Barclays U.S. Aggregate Bond; 15% MSCI EAFE (Net), and 2% BofA Merrill Lynch U.S. 3-Month Treasury Bill Indices as of March 31, 2015.
Pacific Funds Portfolio Optimization Growth Composite Benchmark (formerly named PL Portfolio Optimization Moderate-Aggressive Composite Benchmark) is 60% S&P 500; 20% Barclays U.S. Aggregate Bond; and 20% MSCI EAFE (Net) Indices as of March 31, 2015.
Pacific Funds Portfolio Optimization Aggressive-Growth Composite Benchmark (formerly named PL Portfolio Optimization Aggressive Composite Benchmark) is 65% S&P 500; 25% MSCI EAFE (Net); and 10% Barclays U.S. Aggregate Bond Indices as of March 31, 2015.
S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
A-21
| (b) | The funds’ investments are affiliated mutual funds (See Note 7C in Notes to Financial Statements). |
| (c) | Fair Value Measurements |
The following is a summary of the funds’ investments as categorized under the three-tier hierarchy of inputs used in valuing the funds’ assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Pacific Funds Portfolio Optimization Conservative |
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| Assets |
Affiliated Mutual Funds | $419,876,334 | $419,876,334 | $— | $— | |||||||||||||
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|
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| Pacific Funds Portfolio Optimization Moderate-Conservative |
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| Assets |
Affiliated Mutual Funds | $581,512,326 | $581,512,326 | $— | $— | |||||||||||||
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| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-1
| (b) | The funds’ investments are affiliated mutual funds (See Note 7C in Notes to Financial Statements). |
| (c) | Fair Value Measurements |
The following is a summary of the funds’ investments as categorized under the three-tier hierarchy of inputs used in valuing the funds’ assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||
| Pacific Funds Portfolio Optimization Moderate |
||||||||||||||||
| Assets |
Affiliated Mutual Funds | $1,657,571,301 | $1,657,571,301 | $— | $— | |||||||||||
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| Pacific Funds Portfolio Optimization Growth |
||||||||||||||||
| Assets |
Affiliated Mutual Funds | $1,157,876,266 | $1,157,876,266 | $— | $— | |||||||||||
|
|
|
|
|
|
|
|
||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-2
| (b) | The funds’ investments are affiliated mutual funds (See Note 7C in Notes to Financial Statements). |
| (c) | Fair Value Measurements |
The following is a summary of the funds’ investments as categorized under the three-tier hierarchy of inputs used in valuing the funds’ assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
||||||||||||||||||
| Assets |
Affiliated Mutual Funds | $339,201,859 | $339,201,859 | $— | $— | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Pacific Funds Diversified Alternatives |
||||||||||||||||||
| Assets |
Affiliated Mutual Funds | $5,775,468 | $5,775,468 | $— | $— | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-3
PACIFIC FUNDS **
PACIFIC FUNDSSM SHORT DURATION INCOME **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-4
PACIFIC FUNDS **
PACIFIC FUNDS SHORT DURATION INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-5
PACIFIC FUNDS **
PACIFIC FUNDS SHORT DURATION INCOME **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Corporate Bonds & Notes |
$104,034,583 | $— | $104,034,583 | $— | |||||||||||||
| Senior Loan Notes |
22,877,755 | — | 22,877,755 | — | ||||||||||||||
| Mortgage-Backed Securities |
497,481 | — | 497,481 | — | ||||||||||||||
| Asset-Backed Securities |
1,499,901 | — | 1,499,901 | — | ||||||||||||||
| U.S. Treasury Obligations |
176,148 | — | 176,148 | — | ||||||||||||||
| Short-Term Investment |
4,556,767 | 4,556,767 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$133,642,635 | $4,556,767 | $129,085,868 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-6
PACIFIC FUNDS **
PACIFIC FUNDSSM CORE INCOME **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-7
PACIFIC FUNDS **
PACIFIC FUNDS CORE INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-8
PACIFIC FUNDS **
PACIFIC FUNDS CORE INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-9
PACIFIC FUNDS **
PACIFIC FUNDS CORE INCOME **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Corporate Bonds & Notes |
$392,440,542 | $— | $392,440,542 | $— | |||||||||||||
| Senior Loan Notes |
118,818,150 | — | 118,818,150 | — | ||||||||||||||
| Mortgage-Backed Securities |
3,038,132 | — | 3,038,132 | — | ||||||||||||||
| Asset-Backed Securities |
8,487,608 | — | 8,487,608 | — | ||||||||||||||
| U.S. Government Agency Issue |
5,126,505 | — | 5,126,505 | — | ||||||||||||||
| U.S. Treasury Obligations |
60,452,573 | — | 60,452,573 | — | ||||||||||||||
| Foreign Government Bonds & Notes |
15,623,550 | — | 15,623,550 | — | ||||||||||||||
| Short-Term Investment |
26,971,968 | 26,971,968 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$630,959,028 | $26,971,968 | $603,987,060 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-10
PACIFIC FUNDS **
PACIFIC FUNDSSM STRATEGIC INCOME **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-11
PACIFIC FUNDS **
PACIFIC FUNDS STRATEGIC INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-12
PACIFIC FUNDS **
PACIFIC FUNDS STRATEGIC INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-13
PACIFIC FUNDS **
PACIFIC FUNDS STRATEGIC INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-14
PACIFIC FUNDS **
PACIFIC FUNDS STRATEGIC INCOME **
Schedule of Investments (Continued)
March 31, 2015
| (c) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Convertible Preferred Stocks (1) |
$59,839 | $— | $59,839 | $— | |||||||||||||
| Common Stocks (1) |
5,382,716 | 5,382,716 | — | — | ||||||||||||||
| Closed-End Mutual Funds |
2,822,065 | 2,822,065 | — | — | ||||||||||||||
| Corporate Bonds & Notes |
118,857,862 | — | 118,857,862 | — | ||||||||||||||
| Senior Loan Notes |
21,213,467 | — | 21,213,467 | — | ||||||||||||||
| Mortgage-Backed Securities |
246,980 | — | 246,980 | — | ||||||||||||||
| Asset-Backed Securities |
1,493,431 | — | 1,493,431 | — | ||||||||||||||
| Short-Term Investment |
11,721,147 | 11,721,147 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$161,797,507 | $19,925,928 | $141,871,579 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further industry breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-15
PACIFIC FUNDS **
PACIFIC FUNDSSM FLOATING RATE INCOME **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-16
PACIFIC FUNDS **
PACIFIC FUNDS FLOATING RATE INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-17
PACIFIC FUNDS **
PACIFIC FUNDS FLOATING RATE INCOME **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Corporate Bonds & Notes |
$3,220,090 | $— | $3,220,090 | $— | |||||||||||||
| Senior Loan Notes |
743,603,775 | — | 740,043,775 | 3,560,000 | ||||||||||||||
| Short-Term Investment |
27,520,077 | 27,520,077 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$774,343,942 | $27,520,077 | $743,263,865 | $3,560,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-18
PACIFIC FUNDS **
PACIFIC FUNDSSM LIMITED DURATION HIGH INCOME **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-19
PACIFIC FUNDS **
PACIFIC FUNDS LIMITED DURATION HIGH INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-20
PACIFIC FUNDS **
PACIFIC FUNDS LIMITED DURATION HIGH INCOME **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant |
Level 3 Significant |
|||||||||||||||
| Assets |
Corporate Bonds & Notes |
$20,621,446 | $— | $20,621,446 | $— | |||||||||||||
| Senior Loan Notes |
16,826,795 | — | 16,826,795 | — | ||||||||||||||
| Short-Term Investment |
837,702 | 837,702 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$38,285,943 | $837,702 | $37,448,241 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-21
PACIFIC FUNDS **
PACIFIC FUNDSSM HIGH INCOME **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-22
PACIFIC FUNDS **
PACIFIC FUNDS HIGH INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-23
PACIFIC FUNDS **
PACIFIC FUNDS HIGH INCOME **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-24
PACIFIC FUNDS **
PACIFIC FUNDS HIGH INCOME **
Schedule of Investments (Continued)
March 31, 2015
| (c) | Swap agreements outstanding as of March 31, 2015 were as follows: |
Total Return Swaps
| Receive Total Return | Pay | Counter- party |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||
| IBOXX USD Liquid High Yield Index |
3-Month USD LIBOR | JPM | 06/25/15 | $2,500,000 | $59,301 | $— | $59,301 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-25
PACIFIC FUNDS **
PACIFIC FUNDS HIGH INCOME **
Schedule of Investments (Continued)
March 31, 2015
| (d) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant |
Level 3 Significant |
|||||||||||||||
| Assets |
Common Stocks (1) |
$966,242 | $966,242 | $— | $— | |||||||||||||
| Closed-End Mutual Funds |
1,142,752 | 1,142,752 | — | — | ||||||||||||||
| Corporate Bonds & Notes |
45,871,775 | — | 45,871,775 | — | ||||||||||||||
| Senior Loan Notes |
3,172,622 | — | 3,172,622 | — | ||||||||||||||
| Short-Term Investment |
2,741,811 | 2,741,811 | — | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Swaps |
59,301 | — | 59,301 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$53,954,503 | $4,850,805 | $49,103,698 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further industry breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-27 |
B-26
PACIFIC FUNDS **
Schedule of Investments (Continued)
Explanation of Symbols and Terms
March 31, 2015
| See Notes to Financial Statements |
B-27
PACIFIC FUNDS (1)
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2015
| Pacific Funds Portfolio Optimization | ||||||||||||||||||||||||||||
| Conservative | Moderate- Conservative |
Moderate | Growth | Aggressive- Growth |
Pacific Funds Diversified Alternatives |
|||||||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||||||
| Investments in affiliated mutual funds, at cost |
$389,157,185 | $519,834,149 | $1,420,026,738 | $948,863,035 | $262,529,220 | $5,858,448 | ||||||||||||||||||||||
| Investments in affiliated mutual funds, at value |
$419,876,334 | $581,512,326 | $1,657,571,301 | $1,157,876,266 | $339,201,859 | $5,775,468 | ||||||||||||||||||||||
| Receivables: |
||||||||||||||||||||||||||||
| Dividends and interest |
— | — | 71,600 | 98,797 | — | 2,580 | ||||||||||||||||||||||
| Fund shares sold |
1,050,504 | 1,199,618 | 3,311,220 | 2,452,684 | 456,702 | 30,630 | ||||||||||||||||||||||
| Securities sold |
297,852 | 17,755 | — | — | — | — | ||||||||||||||||||||||
| Due from adviser |
18,555 | 29,346 | 75,140 | 54,341 | 15,893 | — | ||||||||||||||||||||||
| Prepaid expenses and other assets |
20,303 | 21,692 | 30,661 | 32,077 | 19,986 | 9,312 | ||||||||||||||||||||||
| Total Assets |
421,263,548 | 582,780,737 | 1,661,059,922 | 1,160,514,165 | 339,694,440 | 5,817,990 | ||||||||||||||||||||||
| LIABILITIES |
||||||||||||||||||||||||||||
| Payables: |
||||||||||||||||||||||||||||
| Fund shares redeemed |
1,438,057 | 1,053,509 | 2,717,322 | 2,255,660 | 856,327 | 1,179 | ||||||||||||||||||||||
| Securities purchased |
— | — | 808,466 | 784,653 | 11,656 | 17,219 | ||||||||||||||||||||||
| Due to adviser |
— | — | — | — | — | 1,807 | ||||||||||||||||||||||
| Accrued advisory fees |
71,703 | 98,704 | 281,926 | 197,036 | 57,384 | 944 | ||||||||||||||||||||||
| Accrued administration fees |
53,777 | 74,028 | 211,444 | 147,777 | 43,038 | 708 | ||||||||||||||||||||||
| Accrued support service expenses |
13,940 | 18,965 | 53,654 | 37,120 | 10,698 | 162 | ||||||||||||||||||||||
| Accrued transfer agency out-of-pocket expenses |
7,182 | 9,722 | 27,549 | 18,930 | 5,457 | 85 | ||||||||||||||||||||||
| Accrued legal, audit and tax service fees |
39,446 | 53,665 | 151,821 | 105,037 | 30,272 | 459 | ||||||||||||||||||||||
| Accrued trustees’ fees and expenses and deferred compensation |
2,549 | 2,640 | 6,718 | 4,416 | 1,201 | 1 | ||||||||||||||||||||||
| Accrued distribution and/or service fees |
45,893 | 59,868 | 161,959 | 111,687 | 31,848 | 152 | ||||||||||||||||||||||
| Accrued other |
27,519 | 36,486 | 98,361 | 68,146 | 21,087 | 1,719 | ||||||||||||||||||||||
| Total Liabilities |
1,700,066 | 1,407,587 | 4,519,220 | 3,730,462 | 1,068,968 | 24,435 | ||||||||||||||||||||||
| NET ASSETS |
$419,563,482 | $581,373,150 | $1,656,540,702 | $1,156,783,703 | $338,625,472 | $5,793,555 | ||||||||||||||||||||||
| NET ASSETS CONSIST OF: |
||||||||||||||||||||||||||||
| Paid-in capital |
$391,752,974 | $511,939,359 | $1,376,838,108 | $909,895,070 | $269,149,020 | $5,901,495 | ||||||||||||||||||||||
| Undistributed/accumulated net investment income (loss) |
(667,199 | ) | (1,398,171 | ) | (3,653,078 | ) | (906,281 | ) | 1,366,929 | — | ||||||||||||||||||
| Undistributed/accumulated net realized gain (loss) |
(2,241,442 | ) | 9,153,785 | 45,811,109 | 38,781,683 | (8,563,116 | ) | (24,960 | ) | |||||||||||||||||||
| Net unrealized appreciation (depreciation) on investments |
30,719,149 | 61,678,177 | 237,544,563 | 209,013,231 | 76,672,639 | (82,980 | ) | |||||||||||||||||||||
| NET ASSETS |
$419,563,482 | $581,373,150 | $1,656,540,702 | $1,156,783,703 | $338,625,472 | $5,793,555 | ||||||||||||||||||||||
| Class A Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$169,945,469 | $276,897,924 | $844,758,661 | $607,360,163 | $177,170,854 | $1,464,856 | ||||||||||||||||||||||
| Shares of beneficial interest outstanding |
15,146,271 | 21,958,536 | 59,503,625 | 39,600,947 | 11,180,714 | 146,536 | ||||||||||||||||||||||
| Net Asset Value per share* |
$11.22 | $12.61 | $14.20 | $15.34 | $15.85 | $10.00 | ||||||||||||||||||||||
| Sales Charge (2) |
0.65 | 0.73 | 0.83 | 0.89 | 0.92 | 0.58 | ||||||||||||||||||||||
| Maximum offering price per share |
$11.87 | $13.34 | $15.03 | $16.23 | $16.77 | $10.58 | ||||||||||||||||||||||
| Class B Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$37,978,878 | $51,223,454 | $159,975,001 | $119,159,464 | $35,840,281 | |||||||||||||||||||||||
| Shares of beneficial interest outstanding |
3,436,883 | 4,110,368 | 11,344,118 | 7,829,390 | 2,302,140 | |||||||||||||||||||||||
| Net Asset Value per share * |
$11.05 | $12.46 | $14.10 | $15.22 | $15.57 | |||||||||||||||||||||||
| Class C Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$191,946,325 | $240,803,273 | $601,814,116 | $398,716,416 | $110,240,772 | $557,917 | ||||||||||||||||||||||
| Shares of beneficial interest outstanding |
17,377,797 | 19,334,445 | 42,739,143 | 26,263,498 | 7,089,451 | 56,250 | ||||||||||||||||||||||
| Net Asset Value per share * |
$11.05 | $12.45 | $14.08 | $15.18 | $15.55 | $9.92 | ||||||||||||||||||||||
| Class R Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$11,820,481 | $6,880,671 | $28,096,695 | $21,383,044 | $8,893,491 | |||||||||||||||||||||||
| Shares of beneficial interest outstanding |
1,059,101 | 547,818 | 1,981,585 | 1,395,676 | 564,057 | |||||||||||||||||||||||
| Net Asset Value per share |
$11.16 | $12.56 | $14.18 | $15.32 | $15.77 | |||||||||||||||||||||||
| Advisor Class: |
||||||||||||||||||||||||||||
| Net Assets |
$7,872,329 | $5,567,828 | $21,896,229 | $10,164,616 | $6,480,074 | $3,770,782 | ||||||||||||||||||||||
| Shares of beneficial interest outstanding |
700,990 | 441,084 | 1,542,047 | 662,319 | 408,691 | 376,537 | ||||||||||||||||||||||
| Net Asset Value per share |
$11.23 | $12.62 | $14.20 | $15.35 | $15.86 | $10.01 | ||||||||||||||||||||||
| * | Redemption price per share is equal to the Net Asset Value per share less any applicable contingent deferred sales charge. |
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | The Class A shares of the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives are subject to a maximum 5.50% front-end sales charge. |
See Notes to Financial Statements
C-1
PACIFIC FUNDS (1)
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
MARCH 31, 2015
| Pacific Funds Short Duration Income |
Pacific Funds Core Income |
Pacific Funds Strategic Income |
Pacific Funds Floating Rate Income |
Pacific Funds Limited Duration High Income |
Pacific Funds High Income |
|||||||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||||||
| Investments, at cost |
$133,427,595 | $621,215,763 | $165,496,275 | $799,352,685 | $39,781,104 | $54,146,896 | ||||||||||||||||||||||
| Investments, at value |
$133,642,635 | $630,959,028 | $161,797,507 | $774,343,942 | $38,285,943 | $53,895,202 | ||||||||||||||||||||||
| Foreign currency held, at value (2) |
— | — | 5,260 | — | — | 657 | ||||||||||||||||||||||
| Receivables: |
||||||||||||||||||||||||||||
| Dividends and interest |
705,055 | 5,221,303 | 2,229,771 | 2,820,991 | 488,007 | 933,821 | ||||||||||||||||||||||
| Fund shares sold |
421,255 | 2,668,080 | 2,207,757 | 2,855,752 | 48,700 | 13,812 | ||||||||||||||||||||||
| Securities sold |
— | — | 2,999,961 | 17,660,459 | 248,418 | — | ||||||||||||||||||||||
| Due from adviser |
30,588 | 97,411 | 30,334 | 40,740 | — | 23,437 | ||||||||||||||||||||||
| Swap agreements, at value |
— | — | — | — | — | 59,301 | ||||||||||||||||||||||
| Prepaid expenses and other assets |
13,475 | 46,847 | 13,443 | 42,617 | 12,526 | 12,758 | ||||||||||||||||||||||
| Total Assets |
134,813,008 | 638,992,669 | 169,284,033 | 797,764,501 | 39,083,594 | 54,938,988 | ||||||||||||||||||||||
| LIABILITIES |
||||||||||||||||||||||||||||
| Payables: |
||||||||||||||||||||||||||||
| Fund shares redeemed |
489,598 | 2,540,192 | 342,975 | 2,864,976 | 169,339 | 81,353 | ||||||||||||||||||||||
| Securities purchased |
504,375 | 10,123,017 | 7,257,673 | 39,271,875 | 503,750 | 508,072 | ||||||||||||||||||||||
| Income distributions |
30,941 | 182,486 | 56,908 | 240,998 | 5,895 | 1,500 | ||||||||||||||||||||||
| Accrued advisory fees |
44,562 | 261,511 | 78,513 | 418,593 | 20,668 | 27,709 | ||||||||||||||||||||||
| Accrued administration fees |
33,235 | 156,413 | 39,079 | 181,484 | 7,053 | 8,862 | ||||||||||||||||||||||
| Accrued support service expenses |
4,215 | 19,452 | 4,863 | 24,639 | 1,297 | 1,621 | ||||||||||||||||||||||
| Accrued custodian fees and expenses |
1,458 | 5,194 | 1,648 | 9,385 | 1,028 | 328 | ||||||||||||||||||||||
| Accrued transfer agency out-of-pocket expenses |
2,197 | 10,095 | 2,535 | 12,844 | 676 | 845 | ||||||||||||||||||||||
| Accrued legal, audit and tax service fees |
11,926 | 55,041 | 13,760 | 69,718 | 3,669 | 4,587 | ||||||||||||||||||||||
| Accrued trustees’ fees and expenses and deferred compensation |
39 | 180 | 45 | 228 | 12 | 15 | ||||||||||||||||||||||
| Accrued distribution and/or service fees |
7,165 | 39,068 | 9,056 | 38,466 | 901 | 1,134 | ||||||||||||||||||||||
| Accrued other |
12,440 | 37,774 | 14,199 | 90,730 | 20,643 | 17,269 | ||||||||||||||||||||||
| Total Liabilities |
1,142,151 | 13,430,423 | 7,821,254 | 43,223,936 | 734,931 | 653,295 | ||||||||||||||||||||||
| NET ASSETS |
$133,670,857 | $625,562,246 | $161,462,779 | $754,540,565 | $38,348,663 | $54,285,693 | ||||||||||||||||||||||
| NET ASSETS CONSIST OF: |
||||||||||||||||||||||||||||
| Paid-in capital |
$133,607,281 | $618,909,326 | $166,239,418 | $789,227,637 | $40,125,428 | $54,783,101 | ||||||||||||||||||||||
| Undistributed/accumulated net investment income (loss) |
15,907 | 120,106 | 35,443 | 211,843 | 13,298 | 6,650 | ||||||||||||||||||||||
| Undistributed/accumulated net realized gain (loss) |
(167,371 | ) | (3,210,451 | ) | (1,111,934 | ) | (9,890,172 | ) | (294,902 | ) | (311,534 | ) | ||||||||||||||||
| Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies |
215,040 | 9,743,265 | (3,700,148 | ) | (25,008,743 | ) | (1,495,161 | ) | (192,524 | ) | ||||||||||||||||||
| NET ASSETS |
$133,670,857 | $625,562,246 | $161,462,779 | $754,540,565 | $38,348,663 | $54,285,693 | ||||||||||||||||||||||
| Class A Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$48,685,232 | $218,368,166 | $51,174,964 | $215,160,431 | $7,094,398 | $5,899,688 | ||||||||||||||||||||||
| Shares of beneficial interest outstanding |
4,678,679 | 20,239,885 | 4,758,815 | 21,345,550 | 738,720 | 562,927 | ||||||||||||||||||||||
| Net Asset Value per share* |
$10.41 | $10.79 | $10.75 | $10.08 | $9.60 | $10.48 | ||||||||||||||||||||||
| Sales Charge (3) |
0.32 | 0.48 | 0.48 | 0.31 | 0.30 | 0.47 | ||||||||||||||||||||||
| Maximum offering price per share |
$10.73 | $11.27 | $11.23 | $10.39 | $9.90 | $10.95 | ||||||||||||||||||||||
| Class C Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$31,568,866 | $183,951,725 | $42,683,603 | $179,797,716 | $3,663,988 | $5,418,912 | ||||||||||||||||||||||
| Shares of beneficial interest outstanding |
3,039,333 | 17,049,183 | 3,976,280 | 17,866,268 | 382,326 | 517,586 | ||||||||||||||||||||||
| Net Asset Value per share * |
$10.39 | $10.79 | $10.73 | $10.06 | $9.58 | $10.47 | ||||||||||||||||||||||
| Class I Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$1,516,081 | $3,805,838 | $1,381,489 | $88,507,842 | $21,921,435 | $241,227 | ||||||||||||||||||||||
| Shares of beneficial interest outstanding |
145,895 | 352,452 | 129,145 | 8,768,481 | 2,283,057 | 23,164 | ||||||||||||||||||||||
| Net Asset Value per share |
$10.39 | $10.80 | $10.70 | $10.09 | $9.60 | $10.41 | ||||||||||||||||||||||
| Class P Shares: |
||||||||||||||||||||||||||||
| Net Assets |
$691,191 | $38,918,924 | ||||||||||||||||||||||||||
| Shares of beneficial interest outstanding |
68,507 | 3,742,299 | ||||||||||||||||||||||||||
| Net Asset Value per share |
$10.09 | $10.40 | ||||||||||||||||||||||||||
| Advisor Class: |
||||||||||||||||||||||||||||
| Net Assets |
$51,900,678 | $219,436,517 | $66,222,723 | $270,383,385 | $5,668,842 | $3,806,942 | ||||||||||||||||||||||
| Shares of beneficial interest outstanding |
4,987,783 | 20,296,488 | 6,156,898 | 26,744,813 | 590,732 | 363,028 | ||||||||||||||||||||||
| Net Asset Value per share |
$10.41 | $10.81 | $10.76 | $10.11 | $9.60 | $10.49 | ||||||||||||||||||||||
| * | Redemption price per share is equal to the Net Asset Value per share less any applicable contingent deferred sales charge. |
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | The cost of foreign currency for Pacific Funds Strategic Income and Pacific Funds High Income was $6,640 and $788, respectively. |
| (3) | Class A shares of Pacific Funds Short Duration Income, Pacific Funds Floating Rate Income, and Pacific Funds Limited Duration High Income are subject to a maximum 3.00% front-end sales charge. Class A shares of Pacific Funds Core Income, Pacific Funds Strategic Income, and Pacific Funds High Income are subject to a maximum 4.25% front-end sales charge. |
See Notes to Financial Statements
C-2
PACIFIC FUNDS (1)
FOR THE YEAR ENDED MARCH 31, 2015
| Pacific Funds Portfolio Optimization | ||||||||||||||||||||||||||||
| Conservative | Moderate- Conservative |
Moderate | Growth | Aggressive- Growth |
Pacific Funds Diversified Alternatives |
|||||||||||||||||||||||
| INVESTMENT INCOME |
||||||||||||||||||||||||||||
| Dividends from affiliated mutual fund investments |
$8,860,358 | $11,539,665 | $30,651,986 | $18,720,438 | $5,129,944 | $170,809 | ||||||||||||||||||||||
| Dividends from mutual fund investments |
— | 319 | 3,193 | — | — | — | ||||||||||||||||||||||
| Total Investment Income |
8,860,358 | 11,539,984 | 30,655,179 | 18,720,438 | 5,129,944 | 170,809 | ||||||||||||||||||||||
| EXPENSES |
||||||||||||||||||||||||||||
| Advisory fees |
867,261 | 1,155,130 | 3,269,061 | 2,241,394 | 651,733 | 7,390 | ||||||||||||||||||||||
| Administration fees |
650,446 | 866,347 | 2,451,796 | 1,681,045 | 488,800 | 5,543 | ||||||||||||||||||||||
| Support services expenses |
73,852 | 92,078 | 256,419 | 173,139 | 50,130 | 445 | ||||||||||||||||||||||
| Custodian fees and expenses |
85 | 85 | 85 | 85 | 85 | 85 | ||||||||||||||||||||||
| Shareholder report expenses |
47,865 | 60,748 | 167,817 | 114,096 | 34,203 | 545 | ||||||||||||||||||||||
| Distribution and/or service fees (2) |
||||||||||||||||||||||||||||
| Class A |
445,171 | 689,598 | 2,084,360 | 1,453,353 | 423,346 | 1,690 | ||||||||||||||||||||||
| Class B |
384,485 | 521,192 | 1,585,968 | 1,196,110 | 368,298 | |||||||||||||||||||||||
| Class C |
1,975,832 | 2,376,027 | 5,898,089 | 3,903,578 | 1,063,712 | 2,448 | ||||||||||||||||||||||
| Class R |
59,355 | 35,148 | 145,963 | 107,413 | 43,019 | |||||||||||||||||||||||
| Transfer agency out-of-pocket expenses |
31,849 | 40,194 | 114,192 | 75,727 | 20,915 | 277 | ||||||||||||||||||||||
| Registration fees |
89,011 | 91,869 | 147,951 | 118,635 | 79,124 | 758 | ||||||||||||||||||||||
| Legal, audit and tax service fees |
59,567 | 79,019 | 222,687 | 152,220 | 43,785 | 559 | ||||||||||||||||||||||
| Trustees’ fees and expenses |
19,827 | 25,178 | 70,363 | 47,561 | 13,750 | 129 | ||||||||||||||||||||||
| Offering expenses |
— | — | — | — | — | 78,050 | ||||||||||||||||||||||
| Recoupment of adviser reimbursement (3) |
— | — | — | — | — | 5,103 | ||||||||||||||||||||||
| Other |
19,179 | 23,797 | 59,734 | 41,489 | 13,611 | 1,616 | ||||||||||||||||||||||
| Total Expenses |
4,723,785 | 6,056,410 | 16,474,485 | 11,305,845 | 3,294,511 | 104,638 | ||||||||||||||||||||||
| Adviser Expense Reimbursement (3) |
(341,046 | ) | (412,969 | ) | (1,039,248 | ) | (722,497 | ) | (255,368 | ) | (78,329 | ) | ||||||||||||||||
| Net Expenses |
4,382,739 | 5,643,441 | 15,435,237 | 10,583,348 | 3,039,143 | 26,309 | ||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) |
4,477,619 | 5,896,543 | 15,219,942 | 8,137,090 | 2,090,801 | 144,500 | ||||||||||||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||||||||||||||||||
| Net Realized Gain (Loss) On: |
||||||||||||||||||||||||||||
| Investment security transactions in affiliated mutual funds |
2,833,065 | 1,453,008 | (431,517 | ) | (1,838,031 | ) | (102,809 | ) | (36,012 | ) | ||||||||||||||||||
| Investment security transactions |
90 | 122 | 346 | 239 | 69 | — | ||||||||||||||||||||||
| Capital gains distributions from affiliated mutual fund investments |
7,966,068 | 19,371,451 | 75,715,000 | 72,098,427 | 23,751,257 | 21,291 | ||||||||||||||||||||||
| Net Realized Gain (Loss) |
10,799,223 | 20,824,581 | 75,283,829 | 70,260,635 | 23,648,517 | (14,721 | ) | |||||||||||||||||||||
| Change In Net Unrealized Appreciation (Depreciation) On: |
||||||||||||||||||||||||||||
| Investment securities in affiliated mutual funds |
(859,050 | ) | (2,549,050 | ) | (12,216,526 | ) | (12,970,340 | ) | (7,113,846 | ) | (81,547 | ) | ||||||||||||||||
| Change in Net Unrealized Appreciation (Depreciation) |
(859,050 | ) | (2,549,050 | ) | (12,216,526 | ) | (12,970,340 | ) | (7,113,846 | ) | (81,547 | ) | ||||||||||||||||
| NET GAIN (LOSS) |
9,940,173 | 18,275,531 | 63,067,303 | 57,290,295 | 16,534,671 | (96,268 | ) | |||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET
ASSETS |
$14,417,792 | $24,172,074 | $78,287,245 | $65,427,385 | $18,625,472 | $48,232 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | The Advisor Class shares are not subject to distribution and service fees (See Notes 1 and 6 in Notes to Financial Statements). |
| (3) | See Note 7B in Notes to Financial Statements. |
See Notes to Financial Statements
C-3
PACIFIC FUNDS (1)
STATEMENTS OF OPERATIONS (Continued)
FOR THE YEAR ENDED MARCH 31, 2015
| Pacific Funds Short Duration Income |
Pacific Funds Core Income |
Pacific
Funds Strategic Income |
Pacific Funds Floating Rate Income |
Pacific Funds Limited Duration High Income |
Pacific Funds High Income |
|||||||||||||||||||||||
| INVESTMENT INCOME |
||||||||||||||||||||||||||||
| Dividends |
$614 | $3,601 | $267,006 | $59,479 | $276 | $51,095 | ||||||||||||||||||||||
| Interest |
3,229,188 | 19,414,322 | 6,469,131 | 50,546,092 | 2,134,451 | 1,937,556 | ||||||||||||||||||||||
| Other |
— | — | — | 29,356 | — | — | ||||||||||||||||||||||
| Total Investment Income |
3,229,802 | 19,417,923 | 6,736,137 | 50,634,927 | 2,134,727 | 1,988,651 | ||||||||||||||||||||||
| EXPENSES |
||||||||||||||||||||||||||||
| Advisory fees |
492,574 | 2,514,677 | 772,935 | 6,245,493 | 248,148 | 200,436 | ||||||||||||||||||||||
| Administration fees |
367,626 | 1,505,664 | 383,876 | 2,714,278 | 81,347 | 76,558 | ||||||||||||||||||||||
| Support services expenses |
17,079 | 77,427 | 13,280 | 150,397 | 5,695 | 4,674 | ||||||||||||||||||||||
| Custodian fees and expenses |
5,372 | 18,529 | 6,315 | 42,472 | 4,492 | 1,293 | ||||||||||||||||||||||
| Shareholder report expenses |
12,238 | 50,043 | 8,709 | 100,811 | 4,459 | 12,775 | ||||||||||||||||||||||
| Distribution and/or service fees (2) |
||||||||||||||||||||||||||||
| Class A |
134,474 | 531,088 | 120,035 | 729,277 | 23,452 | 18,497 | ||||||||||||||||||||||
| Class C |
288,059 | 1,527,380 | 354,629 | 2,079,279 | 37,240 | 56,922 | ||||||||||||||||||||||
| Transfer agency out-of-pocket expenses |
9,128 | 36,404 | 6,608 | 69,710 | 3,231 | 2,615 | ||||||||||||||||||||||
| Registration fees |
74,829 | 110,715 | 74,975 | 132,363 | 7,011 | 53,442 | ||||||||||||||||||||||
| Legal, audit and tax service fees |
17,323 | 74,080 | 16,688 | 137,717 | 5,306 | 5,704 | ||||||||||||||||||||||
| Trustees’ fees and expenses |
4,781 | 20,931 | 3,959 | 40,425 | 1,590 | 1,350 | ||||||||||||||||||||||
| Interest expense and commitment fee |
— | — | — | 94,692 | — | — | ||||||||||||||||||||||
| Offering expenses |
— | — | — | — | 52,850 | — | ||||||||||||||||||||||
| Other |
25,519 | 45,152 | 37,351 | 66,321 | 23,024 | 30,914 | ||||||||||||||||||||||
| Total Expenses |
1,449,002 | 6,512,090 | 1,799,360 | 12,603,235 | 497,845 | 465,180 | ||||||||||||||||||||||
| Advisory Fee Waiver (3) |
— | — | — | — | (7,635 | ) | — | |||||||||||||||||||||
| Adviser Expense Reimbursement (4) |
(287,988 | ) | (1,007,441 | ) | (294,682 | ) | (1,908,310 | ) | (119,970 | ) | (124,757 | ) | ||||||||||||||||
| Net Expenses |
1,161,014 | 5,504,649 | 1,504,678 | 10,694,925 | 370,240 | 340,423 | ||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) |
2,068,788 | 13,913,274 | 5,231,459 | 39,940,002 | 1,764,487 | 1,648,228 | ||||||||||||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||||||||||||||||||
| Net Realized Gain (Loss) On: |
||||||||||||||||||||||||||||
| Investment security transactions |
(41,337 | ) | (414,889 | ) | (158,485 | ) | (9,871,223 | ) | (205,536 | ) | (40,210 | ) | ||||||||||||||||
| Swap transactions |
— | — | — | — | — | (967 | ) | |||||||||||||||||||||
| Net Realized Gain (Loss) |
(41,337 | ) | (414,889 | ) | (158,485 | ) | (9,871,223 | ) | (205,536 | ) | (41,177 | ) | ||||||||||||||||
| Change In Net Unrealized Appreciation (Depreciation) On: |
||||||||||||||||||||||||||||
| Investment securities |
(474,354 | ) | 6,159,452 | (5,320,271 | ) | (29,617,572 | ) | (1,984,190 | ) | (1,098,165 | ) | |||||||||||||||||
| Unfunded loan commitments |
— | — | — | 651 | — | — | ||||||||||||||||||||||
| Swaps |
— | — | — | — | — | 59,301 | ||||||||||||||||||||||
| Foreign currencies |
— | — | (766 | ) | — | — | (96 | ) | ||||||||||||||||||||
| Change in Net Unrealized Appreciation (Depreciation) |
(474,354 | ) | 6,159,452 | (5,321,037 | ) | (29,616,921 | ) | (1,984,190 | ) | (1,038,960 | ) | |||||||||||||||||
| NET GAIN (LOSS) |
(515,691 | ) | 5,744,563 | (5,479,522 | ) | (39,488,144 | ) | (2,189,726 | ) | (1,080,137 | ) | |||||||||||||||||
| NET INCREASE (DECREASE) IN NET
ASSETS |
$1,553,097 | $19,657,837 | ($248,063 | ) | $451,858 | ($425,239 | ) | $568,091 | ||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | Class I, Class P, and Advisor Class shares are not subject to distribution and service fees (See Notes 1 and 6 in Notes to Financial Statements). |
| (3) | See Note 6 in Notes to Financial Statements. |
| (4) | See Note 7B in Notes to Financial Statements. |
See Notes to Financial Statements
C-4
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS
| Pacific Funds Portfolio Optimization Conservative |
Pacific Funds
Portfolio Optimization Moderate-Conservative |
Pacific Funds Portfolio Optimization Moderate |
||||||||||||||||||||||||||
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
|||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||
| Net investment income (loss) |
$4,477,619 | $2,463,914 | $5,896,543 | $2,804,598 | $15,219,942 | $7,140,163 | ||||||||||||||||||||||
| Net realized gain (loss) |
10,799,223 | 6,544,561 | 20,824,581 | 9,641,778 | 75,283,829 | 32,529,810 | ||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(859,050 | ) | (2,987,428 | ) | (2,549,050 | ) | 13,147,640 | (12,216,526 | ) | 75,023,699 | ||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
14,417,792 | 6,021,047 | 24,172,074 | 25,594,016 | 78,287,245 | 114,693,672 | ||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||
| Net investment income |
||||||||||||||||||||||||||||
| Class A |
(3,454,200 | ) | (2,821,820 | ) | (5,469,373 | ) | (3,999,190 | ) | (19,048,743 | ) | (10,766,370 | ) | ||||||||||||||||
| Class B |
(551,909 | ) | (335,519 | ) | (748,105 | ) | (489,170 | ) | (2,475,913 | ) | (1,031,195 | ) | ||||||||||||||||
| Class C |
(2,836,796 | ) | (1,696,575 | ) | (3,539,176 | ) | (2,137,597 | ) | (9,326,320 | ) | (3,965,320 | ) | ||||||||||||||||
| Class R |
(231,328 | ) | (132,566 | ) | (124,908 | ) | (90,263 | ) | (552,031 | ) | (338,045 | ) | ||||||||||||||||
| Advisor Class |
(180,858 | ) | (41,725 | ) | (123,283 | ) | (27,190 | ) | (590,308 | ) | (225,940 | ) | ||||||||||||||||
| Net realized gains |
||||||||||||||||||||||||||||
| Class A |
(3,847,918 | ) | (2,841,954 | ) | (4,251,615 | ) | (1,059,221 | ) | (10,959,626 | ) | — | |||||||||||||||||
| Class B |
(858,598 | ) | (567,167 | ) | (813,848 | ) | (204,669 | ) | (2,103,854 | ) | — | |||||||||||||||||
| Class C |
(4,437,897 | ) | (2,969,193 | ) | (3,769,105 | ) | (871,913 | ) | (7,871,227 | ) | — | |||||||||||||||||
| Class R |
(277,370 | ) | (152,847 | ) | (106,079 | ) | (26,951 | ) | (364,076 | ) | — | |||||||||||||||||
| Advisor Class |
(189,503 | ) | (35,601 | ) | (84,413 | ) | (5,813 | ) | (311,818 | ) | — | |||||||||||||||||
| Net Decrease from Dividends
and |
(16,866,377 | ) | (11,594,967 | ) | (19,029,905 | ) | (8,911,977 | ) | (53,603,916 | ) | (16,326,870 | ) | ||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||
| Proceeds from sale of shares |
||||||||||||||||||||||||||||
| Class A |
39,424,777 | 56,099,357 | 57,136,981 | 84,205,586 | 161,286,327 | 230,306,253 | ||||||||||||||||||||||
| Class B |
5,275,231 | 6,725,512 | 5,813,297 | 9,180,820 | 18,369,022 | 27,723,360 | ||||||||||||||||||||||
| Class C |
42,394,356 | 61,470,324 | 48,443,966 | 69,603,848 | 114,956,328 | 166,802,069 | ||||||||||||||||||||||
| Class R |
2,826,989 | 2,805,147 | 2,453,292 | 2,226,939 | 7,304,490 | 8,823,907 | ||||||||||||||||||||||
| Advisor Class |
8,408,322 | 4,309,203 | 5,267,750 | 2,821,072 | 18,681,701 | 18,550,650 | ||||||||||||||||||||||
| Dividends and distribution reinvestments |
||||||||||||||||||||||||||||
| Class A |
6,963,735 | 5,121,877 | 9,515,668 | 4,784,115 | 29,629,842 | 10,353,302 | ||||||||||||||||||||||
| Class B |
1,311,259 | 817,013 | 1,516,125 | 659,049 | 4,487,672 | 992,538 | ||||||||||||||||||||||
| Class C |
6,918,706 | 4,318,768 | 7,038,176 | 2,816,292 | 16,585,274 | 3,718,287 | ||||||||||||||||||||||
| Class R |
508,698 | 285,413 | 230,987 | 117,214 | 914,621 | 337,635 | ||||||||||||||||||||||
| Advisor Class |
256,778 | 62,286 | 150,779 | 27,852 | 757,402 | 194,129 | ||||||||||||||||||||||
| Cost of shares repurchased |
||||||||||||||||||||||||||||
| Class A |
(66,336,969 | ) | (99,110,423 | ) | (67,483,303 | ) | (69,175,234 | ) | (173,568,973 | ) | (130,906,364 | ) | ||||||||||||||||
| Class B |
(7,501,235 | ) | (9,861,099 | ) | (8,834,053 | ) | (8,452,444 | ) | (21,763,033 | ) | (18,763,657 | ) | ||||||||||||||||
| Class C |
(60,180,762 | ) | (79,650,854 | ) | (44,903,331 | ) | (46,521,305 | ) | (104,739,176 | ) | (84,984,280 | ) | ||||||||||||||||
| Class R |
(2,537,604 | ) | (4,193,617 | ) | (2,886,897 | ) | (2,035,531 | ) | (12,304,519 | ) | (9,294,082 | ) | ||||||||||||||||
| Advisor Class |
(4,551,008 | ) | (1,849,334 | ) | (2,749,236 | ) | (884,737 | ) | (17,739,998 | ) | (2,832,202 | ) | ||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
(26,818,727 | ) | (52,650,427 | ) | 10,710,201 | 49,373,536 | 42,856,980 | 221,021,545 | ||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
(29,267,312 | ) | (58,224,347 | ) | 15,852,370 | 66,055,575 | 67,540,309 | 319,388,347 | ||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||
| Beginning of Year |
448,830,794 | 507,055,141 | 565,520,780 | 499,465,205 | 1,589,000,393 | 1,269,612,046 | ||||||||||||||||||||||
| End of Year |
$419,563,482 | $448,830,794 | $581,373,150 | $565,520,780 | $1,656,540,702 | $1,589,000,393 | ||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
($667,199 | ) | ($757,446 | ) | ($1,398,171 | ) | ($1,349,043 | ) | ($3,653,078 | ) | $337,930 | |||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
See Notes to Financial Statements
C-5
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| Pacific Funds Portfolio Optimization Growth |
Pacific Funds
Portfolio Optimization Aggressive-Growth |
Pacific Funds Diversified Alternatives (2) |
||||||||||||||||||||||||||
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Period Ended March 31, 2014 |
|||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||
| Net investment income (loss) |
$8,137,090 | $3,010,788 | $2,090,801 | $673,899 | $144,500 | ($491 | ) | |||||||||||||||||||||
| Net realized gain (loss) |
70,260,635 | 27,407,795 | 23,648,517 | 10,110,306 | (14,721 | ) | (44 | ) | ||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(12,970,340 | ) | 75,931,305 | (7,113,846 | ) | 24,646,040 | (81,547 | ) | (1,433 | ) | ||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
65,427,385 | 106,349,888 | 18,625,472 | 35,430,245 | 48,232 | (1,968 | ) | |||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||
| Net investment income |
||||||||||||||||||||||||||||
| Class A |
(12,802,326 | ) | (6,852,993 | ) | (3,417,354 | ) | (1,222,515 | ) | (33,830 | ) | — | |||||||||||||||||
| Class B |
(1,696,168 | ) | (705,770 | ) | (463,722 | ) | (38,870 | ) | ||||||||||||||||||||
| Class C |
(5,812,228 | ) | (2,318,010 | ) | (1,415,231 | ) | (159,249 | ) | (11,976 | ) | — | |||||||||||||||||
| Class R |
(413,678 | ) | (215,223 | ) | (149,889 | ) | (47,300 | ) | ||||||||||||||||||||
| Advisor Class |
(200,361 | ) | (63,384 | ) | (131,420 | ) | (23,745 | ) | (108,736 | ) | — | |||||||||||||||||
| Net realized gains |
||||||||||||||||||||||||||||
| Class A |
— | — | — | — | (2,139 | ) | — | |||||||||||||||||||||
| Class B |
— | — | — | — | ||||||||||||||||||||||||
| Class C |
— | — | — | — | (807 | ) | — | |||||||||||||||||||||
| Class R |
— | — | — | — | ||||||||||||||||||||||||
| Advisor Class |
— | — | — | — | (6,673 | ) | — | |||||||||||||||||||||
| Net Decrease from Dividends
and |
(20,924,761 | ) | (10,155,380 | ) | (5,577,616 | ) | (1,491,679 | ) | (164,161 | ) | — | |||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||
| Proceeds from sale of shares |
||||||||||||||||||||||||||||
| Class A |
110,958,304 | 142,919,612 | 34,237,966 | 37,868,091 | 1,625,520 | 10,000 | ||||||||||||||||||||||
| Class B |
13,329,240 | 17,876,001 | 4,208,529 | 5,257,576 | ||||||||||||||||||||||||
| Class C |
67,260,544 | 95,240,806 | 29,878,462 | 28,881,008 | 893,601 | 10,000 | ||||||||||||||||||||||
| Class R |
5,867,487 | 5,451,413 | 2,503,562 | 2,126,736 | ||||||||||||||||||||||||
| Advisor Class |
9,050,980 | 3,519,711 | 4,554,186 | 2,403,459 | 2,277,040 | 1,980,000 | ||||||||||||||||||||||
| Dividends and distribution reinvestments |
||||||||||||||||||||||||||||
| Class A |
12,642,428 | 6,645,318 | 3,370,198 | 1,189,737 | 33,151 | — | ||||||||||||||||||||||
| Class B |
1,647,341 | 677,807 | 455,352 | 37,645 | ||||||||||||||||||||||||
| Class C |
5,630,979 | 2,196,647 | 1,363,502 | 151,641 | 12,783 | — | ||||||||||||||||||||||
| Class R |
413,678 | 215,223 | 149,889 | 47,300 | ||||||||||||||||||||||||
| Advisor Class |
138,194 | 50,235 | 112,694 | 9,062 | 115,409 | — | ||||||||||||||||||||||
| Cost of shares repurchased |
||||||||||||||||||||||||||||
| Class A |
(94,405,382 | ) | (79,611,259 | ) | (29,088,540 | ) | (28,010,608 | ) | (157,665 | ) | — | |||||||||||||||||
| Class B |
(20,163,774 | ) | (16,085,991 | ) | (8,060,413 | ) | (4,908,415 | ) | ||||||||||||||||||||
| Class C |
(65,174,978 | ) | (50,975,201 | ) | (27,114,900 | ) | (19,891,624 | ) | (340,442 | ) | — | |||||||||||||||||
| Class R |
(6,069,366 | ) | (5,149,547 | ) | (2,250,245 | ) | (2,171,356 | ) | ||||||||||||||||||||
| Advisor Class |
(4,474,665 | ) | (1,276,510 | ) | (1,063,634 | ) | (113,114 | ) | (547,945 | ) | — | |||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
36,651,010 | 121,694,265 | 13,256,608 | 22,877,138 | 3,911,452 | 2,000,000 | ||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
81,153,634 | 217,888,773 | 26,304,464 | 56,815,704 | 3,795,523 | 1,998,032 | ||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||
| Beginning of Year or Period |
1,075,630,069 | 857,741,296 | 312,321,008 | 255,505,304 | 1,998,032 | — | ||||||||||||||||||||||
| End of Year or Period |
$1,156,783,703 | $1,075,630,069 | $338,625,472 | $312,321,008 | $5,793,555 | $1,998,032 | ||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
($906,281 | ) | $755,470 | $1,366,929 | $1,417,095 | $— | $723 | |||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | Operations commenced on December 31, 2013. |
See Notes to Financial Statements
C-6
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| Pacific Funds Short Duration Income |
Pacific Funds Core Income |
Pacific Funds Strategic Income |
||||||||||||||||||||||||||
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
|||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||
| Net investment income (loss) |
$2,068,788 | $1,000,706 | $13,913,274 | $14,379,066 | $5,231,459 | $2,097,951 | ||||||||||||||||||||||
| Net realized gain (loss) |
(41,337 | ) | 256,313 | (414,889 | ) | (2,687,733 | ) | (158,485 | ) | 1,167,960 | ||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(474,354 | ) | 155,859 | 6,159,452 | (6,584,699 | ) | (5,321,037 | ) | 188,366 | |||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
1,553,097 | 1,412,878 | 19,657,837 | 5,106,634 | (248,063 | ) | 3,454,277 | |||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||
| Net investment income |
||||||||||||||||||||||||||||
| Class A |
(921,923 | ) | (684,938 | ) | (6,103,604 | ) | (8,489,456 | ) | (1,935,936 | ) | (1,207,790 | ) | ||||||||||||||||
| Class C |
(297,655 | ) | (178,171 | ) | (3,306,524 | ) | (3,262,361 | ) | (1,195,002 | ) | (536,688 | ) | ||||||||||||||||
| Class I |
(24,460 | ) | (30,286 | ) | (68,112 | ) | (44,760 | ) | (72,586 | ) | (191,586 | ) | ||||||||||||||||
| Advisor Class |
(817,824 | ) | (113,349 | ) | (4,398,333 | ) | (2,717,868 | ) | (1,994,352 | ) | (178,520 | ) | ||||||||||||||||
| Net realized gains |
||||||||||||||||||||||||||||
| Class A |
(124,939 | ) | (151,735 | ) | — | (3,751,195 | ) | (481,859 | ) | (889,933 | ) | |||||||||||||||||
| Class C |
(75,249 | ) | (68,653 | ) | — | (1,925,110 | ) | (391,679 | ) | (453,293 | ) | |||||||||||||||||
| Class I |
(2,655 | ) | (2,555 | ) | — | (17,465 | ) | (18,329 | ) | (29,936 | ) | |||||||||||||||||
| Advisor Class |
(120,604 | ) | (18,328 | ) | — | (1,139,508 | ) | (680,224 | ) | (120,178 | ) | |||||||||||||||||
| Net Decrease from Dividends
and |
(2,385,309 | ) | (1,248,015 | ) | (13,876,573 | ) | (21,347,723 | ) | (6,769,967 | ) | (3,607,924 | ) | ||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||
| Proceeds from sale of shares |
||||||||||||||||||||||||||||
| Class A |
40,962,087 | 60,289,931 | 78,759,630 | 83,208,862 | 39,361,105 | 30,152,055 | ||||||||||||||||||||||
| Class C |
18,412,180 | 19,934,678 | 89,090,031 | 30,713,477 | 27,647,819 | 17,364,212 | ||||||||||||||||||||||
| Class I |
1,099,458 | 722,595 | 3,503,148 | 81,865 | 428,123 | 1,056,697 | ||||||||||||||||||||||
| Advisor Class |
98,991,225 | 8,970,832 | 195,687,916 | 40,811,461 | 97,600,567 | 8,662,380 | ||||||||||||||||||||||
| Dividends and distribution reinvestments |
||||||||||||||||||||||||||||
| Class A |
901,978 | 700,454 | 5,645,816 | 10,479,851 | 2,282,659 | 1,908,436 | ||||||||||||||||||||||
| Class C |
358,020 | 222,558 | 3,027,883 | 4,431,014 | 1,525,454 | 899,882 | ||||||||||||||||||||||
| Class I |
25,161 | 32,841 | 67,987 | 40,842 | 87,714 | 211,631 | ||||||||||||||||||||||
| Advisor Class |
792,572 | 109,388 | 3,647,082 | 2,984,004 | 2,109,031 | 254,303 | ||||||||||||||||||||||
| Cost of shares repurchased |
||||||||||||||||||||||||||||
| Class A |
(52,934,068 | ) | (23,652,874 | ) | (89,896,818 | ) | (197,526,408 | ) | (26,173,927 | ) | (14,992,646 | ) | ||||||||||||||||
| Class C |
(10,786,625 | ) | (6,726,584 | ) | (32,922,963 | ) | (68,363,424 | ) | (8,222,460 | ) | (2,796,525 | ) | ||||||||||||||||
| Class I |
(582,486 | ) | (13,090,925 | ) | (972,802 | ) | (677,903 | ) | (728,314 | ) | (21,610,465 | ) | ||||||||||||||||
| Advisor Class |
(57,091,123 | ) | (2,647,261 | ) | (50,564,507 | ) | (65,453,132 | ) | (39,772,549 | ) | (1,205,737 | ) | ||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
40,148,379 | 44,865,633 | 205,072,403 | (159,269,491 | ) | 96,145,222 | 19,904,223 | |||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
39,316,167 | 45,030,496 | 210,853,667 | (175,510,580 | ) | 89,127,192 | 19,750,576 | |||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||
| Beginning of Year |
94,354,690 | 49,324,194 | 414,708,579 | 590,219,159 | 72,335,587 | 52,585,011 | ||||||||||||||||||||||
| End of Year |
$133,670,857 | $94,354,690 | $625,562,246 | $414,708,579 | $161,462,779 | $72,335,587 | ||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
$15,907 | $9,096 | $120,106 | $83,405 | $35,443 | $12,900 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
See Notes to Financial Statements
C-7
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| Pacific Funds Floating Rate Income |
Pacific Funds Limited Duration High Income (2) |
Pacific Funds High Income (3) |
||||||||||||||||||||||||||
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Period Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
|||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||
| Net investment income (loss) |
$39,940,002 | $25,774,667 | $1,764,487 | $754,728 | $1,648,228 | $909,068 | ||||||||||||||||||||||
| Net realized gain (loss) |
(9,871,223 | ) | 2,616,647 | (205,536 | ) | 102,649 | (41,177 | ) | 232,591 | |||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(29,616,921 | ) | 1,321,157 | (1,984,190 | ) | 489,029 | (1,038,960 | ) | 217,539 | |||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
451,858 | 29,712,471 | (425,239 | ) | 1,346,406 | 568,091 | 1,359,198 | |||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||
| Net investment income |
||||||||||||||||||||||||||||
| Class A |
(12,127,562 | ) | (10,667,801 | ) | (423,413 | ) | (121,106 | ) | (353,304 | ) | (250,119 | ) | ||||||||||||||||
| Class C |
(7,355,422 | ) | (4,611,876 | ) | (144,206 | ) | (22,580 | ) | (232,457 | ) | (155,578 | ) | ||||||||||||||||
| Class I |
(5,054,910 | ) | (1,835,602 | ) | (1,064,169 | ) | (563,742 | ) | (379,218 | ) | (470,338 | ) | ||||||||||||||||
| Class P |
(22,232 | ) | (2,898 | ) | (446,705 | ) | ||||||||||||||||||||||
| Advisor Class |
(15,444,787 | ) | (8,489,969 | ) | (143,013 | ) | (30,089 | ) | (236,773 | ) | (32,777 | ) | ||||||||||||||||
| Net realized gains |
||||||||||||||||||||||||||||
| Class A |
(649,099 | ) | (545,857 | ) | (46,119 | ) | (2,486 | ) | (103,589 | ) | (92,025 | ) | ||||||||||||||||
| Class C |
(522,838 | ) | (286,495 | ) | (18,602 | ) | (566 | ) | (87,190 | ) | (67,572 | ) | ||||||||||||||||
| Class I |
(428,173 | ) | (79,308 | ) | (98,118 | ) | (16,212 | ) | (143,010 | ) | (163,127 | ) | ||||||||||||||||
| Class P |
(1,780 | ) | (16 | ) | — | |||||||||||||||||||||||
| Advisor Class |
(747,931 | ) | (422,461 | ) | (9,217 | ) | (835 | ) | (65,262 | ) | (6,092 | ) | ||||||||||||||||
| Net Decrease from Dividends
and |
(42,354,734 | ) | (26,942,283 | ) | (1,946,857 | ) | (757,616 | ) | (2,047,508 | ) | (1,237,628 | ) | ||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||
| Proceeds from sale of shares |
||||||||||||||||||||||||||||
| Class A |
84,228,276 | 331,268,389 | 4,088,773 | 9,423,359 | 5,033,954 | 4,221,962 | ||||||||||||||||||||||
| Class C |
57,551,269 | 173,621,430 | 2,586,718 | 2,466,423 | 2,097,278 | 3,477,530 | ||||||||||||||||||||||
| Class I |
98,998,416 | 87,451,805 | 17,400 | 21,183,762 | 9,150 | 28,526 | ||||||||||||||||||||||
| Class P |
524,364 | 252,683 | 38,271,086 | |||||||||||||||||||||||||
| Advisor Class |
205,301,412 | 377,225,355 | 4,776,545 | 2,023,583 | 8,799,370 | 3,093,923 | ||||||||||||||||||||||
| Dividends and distribution reinvestments |
||||||||||||||||||||||||||||
| Class A |
11,852,624 | 9,791,691 | 423,408 | 112,297 | 445,733 | 313,467 | ||||||||||||||||||||||
| Class C |
7,078,030 | 4,090,137 | 157,493 | 20,564 | 314,637 | 199,720 | ||||||||||||||||||||||
| Class I |
5,315,410 | 1,717,126 | 1,162,287 | 579,954 | 522,188 | 633,465 | ||||||||||||||||||||||
| Class P |
24,012 | 2,914 | 446,706 | |||||||||||||||||||||||||
| Advisor Class |
13,801,533 | 6,522,226 | 148,906 | 29,698 | 264,192 | 32,514 | ||||||||||||||||||||||
| Cost of shares repurchased |
||||||||||||||||||||||||||||
| Class A |
(245,143,310 | ) | (91,687,943 | ) | (5,462,415 | ) | (947,758 | ) | (5,476,880 | ) | (1,621,656 | ) | ||||||||||||||||
| Class C |
(90,101,400 | ) | (27,061,176 | ) | (1,267,105 | ) | (60,304 | ) | (1,836,091 | ) | (657,069 | ) | ||||||||||||||||
| Class I |
(105,822,602 | ) | (3,370,949 | ) | (113,000 | ) | — | (8,980,068 | ) | (27,933 | ) | |||||||||||||||||
| Class P |
(82,233 | ) | (21,132 | ) | (470,826 | ) | ||||||||||||||||||||||
| Advisor Class |
(302,300,704 | ) | (51,794,600 | ) | (1,004,771 | ) | (213,848 | ) | (7,918,952 | ) | (361,997 | ) | ||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
(258,774,903 | ) | 818,007,956 | 5,514,239 | 34,617,730 | 31,521,477 | 9,332,452 | |||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
(300,677,779 | ) | 820,778,144 | 3,142,143 | 35,206,520 | 30,042,060 | 9,454,022 | |||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||
| Beginning of Year or Period |
1,055,218,344 | 234,440,200 | 35,206,520 | — | 24,243,633 | 14,789,611 | ||||||||||||||||||||||
| End of Year or Period |
$754,540,565 | $1,055,218,344 | $38,348,663 | $35,206,520 | $54,285,693 | $24,243,633 | ||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
$211,843 | $277,766 | $13,298 | $23,752 | $6,650 | $8,678 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | Operations commenced on July 31, 2013. |
| (3) | Class P of Pacific Funds High Income commenced operations on January 14, 2015. |
See Notes to Financial Statements
C-8
PACIFIC FUNDS**
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
|
Selected Per Share Data |
|
Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (1) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (2) | Expenses After Reductions (2), (3) | Net Investment Income (Loss) (2) | Total Returns (4) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Conservative |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.29 | $0.16 | $0.26 | $0.42 | ($0.23 | ) | ($0.26 | ) | ($0.49 | ) | $11.22 | 0.68% | 0.60% | 1.44% | 3.71 | % | $169,945 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.40 | 0.10 | 0.10 | 0.20 | (0.15 | ) | (0.16 | ) | (0.31 | ) | 11.29 | 0.70% | 0.60% | 0.90% | 1.78 | % | 190,492 | 11 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.07 | 0.23 | 0.49 | 0.72 | (0.34 | ) | (0.05 | ) | (0.39 | ) | 11.40 | 0.71% | 0.60% | 2.01% | 6.57 | % | 230,646 | 27 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.87 | 0.22 | 0.29 | 0.51 | (0.28 | ) | (0.03 | ) | (0.31 | ) | 11.07 | 0.73% | 0.60% | 1.99% | 4.80 | % | 182,912 | 10 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.41 | 0.15 | 0.63 | 0.78 | (0.32 | ) | — | (0.32 | ) | 10.87 | 0.78% | 0.53% | 1.43% | 7.60 | % | 130,249 | 18 | % | ||||||||||||||||||||||||||||||||
| Class B |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.14 | $0.08 | $0.25 | $0.33 | ($0.16 | ) | ($0.26 | ) | ($0.42 | ) | $11.05 | 1.43% | 1.35% | 0.69% | 3.00 | % | $37,979 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.27 | 0.02 | 0.10 | 0.12 | (0.09 | ) | (0.16 | ) | (0.25 | ) | 11.14 | 1.45% | 1.35% | 0.15% | 1.06 | % | 39,160 | 11 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.96 | 0.14 | 0.50 | 0.64 | (0.28 | ) | |
(0.05 |
) |
(0.33 | ) | 11.27 | 1.46% | 1.35% | 1.27% | 5.89 | % | 41,999 | 27 | % | ||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.78 | 0.13 | 0.29 | 0.42 | (0.21 | ) | (0.03 | ) | (0.24 | ) | 10.96 | 1.48% | 1.35% | 1.24% | 4.02 | % | 33,122 | 10 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.34 | 0.07 | 0.63 | 0.70 | (0.26 | ) | — | (0.26 | ) | 10.78 | 1.53% | 1.27% | 0.68% | 6.80 | % | 22,282 | 18 | % | ||||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.13 | $0.08 | $0.26 | $0.34 | ($0.16 | ) | ($0.26 | ) | ($0.42 | ) | $11.05 | 1.43% | 1.35% | 0.69% | 3.09 | % | $191,946 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.26 | 0.02 | 0.10 | 0.12 | (0.09 | ) | (0.16 | ) | (0.25 | ) | 11.13 | 1.45% | 1.35% | 0.15% | 1.04 | % | 204,180 | 11 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.96 | 0.14 | 0.49 | 0.63 | (0.28 | ) | (0.05 | ) | (0.33 | ) | 11.26 | 1.46% | 1.35% | 1.22% | 5.84 | % | 220,688 | 27 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.77 | 0.13 | 0.30 | 0.43 | (0.21 | ) | (0.03 | ) | (0.24 | ) | 10.96 | 1.48% | 1.35% | 1.24% | 4.08 | % | 158,748 | 10 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.33 | 0.07 | 0.63 | 0.70 | (0.26 | ) | — | (0.26 | ) | 10.77 | 1.53% | 1.27% | 0.68% | 6.81 | % | 117,458 | 18 | % | ||||||||||||||||||||||||||||||||
| Class R |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.24 | $0.14 | $0.25 | $0.39 | ($0.21 | ) | ($0.26 | ) | ($0.47 | ) | $11.16 | 0.93% | 0.85% | 1.19% | 3.48 | % | $11,820 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.36 | 0.07 | 0.10 | 0.17 | (0.13 | ) | (0.16 | ) | (0.29 | ) | 11.24 | 0.95% | 0.85% | 0.65% | 1.52 | % | 11,132 | 11 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.03 | 0.20 | 0.50 | 0.70 | (0.32 | ) | (0.05 | ) | (0.37 | ) | 11.36 | 0.96% | 0.85% | 1.79% | 6.38 | % | 12,357 | 27 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.83 | 0.19 | 0.29 | 0.48 | (0.25 | ) | (0.03 | ) | (0.28 | ) | 11.03 | 0.98% | 0.85% | 1.74% | 4.58 | % | 10,522 | 10 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.38 | 0.13 | 0.61 | 0.74 | (0.29 | ) | — | (0.29 | ) | 10.83 | 1.03% | 0.75% | 1.20% | 7.25 | % | 8,881 | 18 | % | ||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.29 | $0.19 | $0.26 | $0.45 | ($0.25 | ) | ($0.26 | ) | ($0.51 | ) | $11.23 | 0.43% | 0.35% | 1.69% | 4.01 | % | $7,872 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.41 | 0.12 | 0.09 | 0.21 | (0.17 | ) | (0.16 | ) | (0.33 | ) | 11.29 | 0.45% | 0.40% | 1.10% | 1.87 | % | 3,867 | 11 | % | |||||||||||||||||||||||||||||||
| 12/31/2012 - 3/31/2013 | 11.18 | (0.01 | ) | 0.24 | 0.23 | — | — | — | 11.41 | 0.48% | 0.40% | (0.40%) | 2.06 | % | 1,366 | 27 | % | |||||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $12.48 | $0.18 | $0.40 | $0.58 | ($0.25 | ) | ($0.20 | ) | ($0.45 | ) | $12.61 | 0.67% | 0.60% | 1.40% | 4.69 | % | $276,898 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 12.10 | 0.11 | 0.50 | 0.61 | (0.18 | ) | (0.05 | ) | (0.23 | ) | 12.48 | 0.69% | 0.60% | 0.89% | 5.08 | % | 274,899 | 5 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.56 | 0.18 | 0.64 | 0.82 | (0.28 | ) | — | (0.28 | ) | 12.10 | 0.71% | 0.60% | 1.58% | 7.22 | % | 246,609 | 24 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.25 | 0.18 | 0.35 | 0.53 | (0.22 | ) | — | (0.22 | ) | 11.56 | 0.73% | 0.60% | 1.62% | 4.87 | % | 188,660 | 10 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.54 | 0.12 | 0.87 | 0.99 | (0.28 | ) | — | (0.28 | ) | 11.25 | 0.78% | 0.52% | 1.16% | 9.53 | % | 132,919 | 10 | % | ||||||||||||||||||||||||||||||||
| Class B |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $12.36 | $0.08 | $0.40 | $0.48 | ($0.18 | ) | ($0.20 | ) | ($0.38 | ) | $12.46 | 1.42% | 1.35% | 0.65% | 3.91 | % | $51,223 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.99 | 0.02 | 0.51 | 0.53 | (0.11 | ) | (0.05 | ) | (0.16 | ) | 12.36 | 1.44% | 1.35% | 0.14% | 4.47 | % | 52,285 | 5 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.46 | 0.10 | 0.63 | 0.73 | (0.20 | ) | — | (0.20 | ) | 11.99 | 1.46% | 1.35% | 0.85% | 6.46 | % | 49,372 | 24 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.17 | 0.10 | 0.35 | 0.45 | (0.16 | ) | — | (0.16 | ) | 11.46 | 1.48% | 1.35% | 0.87% | 4.07 | % | 40,812 | 10 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.47 | 0.04 | 0.87 | 0.91 | (0.21 | ) | — | (0.21 | ) | 11.17 | 1.53% | 1.27% | 0.41% | 8.78 | % | 28,411 | 10 | % | ||||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $12.35 | $0.08 | $0.40 | $0.48 | ($0.18 | ) | ($0.20 | ) | ($0.38 | ) | $12.45 | 1.42% | 1.35% | 0.65% | 3.93 | % | $240,803 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.99 | 0.02 | 0.51 | 0.53 | (0.12 | ) | (0.05 | ) | (0.17 | ) | 12.35 | 1.44% | 1.35% | 0.14% | 4.41 | % | 228,445 | 5 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.47 | 0.09 | 0.64 | 0.73 | (0.21 | ) | — | (0.21 | ) | 11.99 | 1.46% | 1.35% | 0.81% | 6.41 | % | 196,123 | 24 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.16 | 0.10 | 0.36 | 0.46 | (0.15 | ) | — | (0.15 | ) | 11.47 | 1.48% | 1.35% | 0.87% | 4.20 | % | 144,900 | 10 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.47 | 0.04 | 0.86 | 0.90 | (0.21 | ) | — | (0.21 | ) | 11.16 | 1.53% | 1.27% | 0.41% | 8.71 | % | 107,411 | 10 | % | ||||||||||||||||||||||||||||||||
| Class R |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $12.44 | $0.14 | $0.41 | $0.55 | ($0.23 | ) | ($0.20 | ) | ($0.43 | ) | $12.56 | 0.92% | 0.85% | 1.15% | 4.43 | % | $6,881 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 12.06 | 0.08 | 0.51 | 0.59 | (0.16 | ) | (0.05 | ) | (0.21 | ) | 12.44 | 0.94% | 0.85% | 0.64% | 4.91 | % | 7,000 | 5 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.52 | 0.16 | 0.63 | 0.79 | (0.25 | ) | — | (0.25 | ) | 12.06 | 0.96% | 0.85% | 1.39% | 6.92 | % | 6,482 | 24 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.22 | 0.15 | 0.35 | 0.50 | (0.20 | ) | — | (0.20 | ) | 11.52 | 0.98% | 0.85% | 1.37% | 4.53 | % | 6,301 | 10 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.51 | 0.10 | 0.86 | 0.96 | (0.25 | ) | — | (0.25 | ) | 11.22 | 1.03% | 0.76% | 0.91% | 9.32 | % | 15,236 | 10 | % | ||||||||||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of references and symbol on C-14 |
C-9
PACIFIC FUNDS**
FINANCIAL HIGHLIGHTS (Continued)
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
|
Selected Per Share Data |
|
Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (1) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (2) | Expenses After Reductions (2), (3) | Net Investment Income (Loss) (2) | Total Returns (4) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative (Continued) |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $12.49 | $0.21 | $0.40 | $0.61 | ($0.28 | ) | ($0.20 | ) | ($0.48 | ) | $12.62 | 0.42% | 0.35% | 1.65% | 4.89 | % | $5,568 | 17 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 12.10 | 0.13 | 0.51 | 0.64 | (0.20 | ) | (0.05 | ) | (0.25 | ) | 12.49 | 0.44% | 0.40% | 1.09% | 5.32 | % | 2,892 | 5 | % | |||||||||||||||||||||||||||||||
| 12/31/2012 - 3/31/2013 | 11.68 | (0.01 | ) | 0.43 | 0.42 | — | — | — | 12.10 | 0.46% | 0.40% | (0.40%) | 3.60 | % | 880 | 24 | % | |||||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $13.98 | $0.18 | $0.55 | $0.73 | ($0.32 | ) | ($0.19 | ) | ($0.51 | ) | $14.20 | 0.66% | 0.60% | 1.28% | 5.30 | % | $844,759 | 19 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.06 | 0.11 | 1.00 | 1.11 | (0.19 | ) | — | (0.19 | ) | 13.98 | 0.69% | 0.60% | 0.84% | 8.51 | % | 814,707 | 1 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.26 | 0.15 | 0.86 | 1.01 | (0.21 | ) | — | (0.21 | ) | 13.06 | 0.70% | 0.60% | 1.20% | 8.36 | % | 654,158 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.88 | 0.14 | 0.42 | 0.56 | (0.18 | ) | — | (0.18 | ) | 12.26 | 0.72% | 0.60% | 1.18% | 4.82 | % | 517,945 | 7 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.81 | 0.10 | 1.19 | 1.29 | (0.22 | ) | — | (0.22 | ) | 11.88 | 0.77% | 0.52% | 0.91% | 12.10 | % | 384,999 | 9 | % | ||||||||||||||||||||||||||||||||
| Class B |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $13.89 | $0.07 | $0.55 | $0.62 | ($0.22 | ) | ($0.19 | ) | ($0.41 | ) | $14.10 | 1.41% | 1.35% | 0.53% | 4.49 | % | $159,975 | 19 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 12.96 | 0.01 | 1.01 | 1.02 | (0.09 | ) | — | (0.09 | ) | 13.89 | 1.44% | 1.35% | 0.09% | 7.90 | % | 156,450 | 1 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.18 | 0.06 | 0.85 | 0.91 | (0.13 | ) | — | (0.13 | ) | 12.96 | 1.45% | 1.35% | 0.47% | 7.49 | % | 136,411 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.80 | 0.05 | 0.43 | 0.48 | (0.10 | ) | — | (0.10 | ) | 12.18 | 1.47% | 1.35% | 0.43% | 4.13 | % | 115,513 | 7 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.74 | 0.02 | 1.18 | 1.20 | (0.14 | ) | — | (0.14 | ) | 11.80 | 1.52% | 1.26% | 0.17% | 11.33 | % | 92,064 | 9 | % | ||||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $13.87 | $0.07 | $0.55 | $0.62 | ($0.22 | ) | ($0.19 | ) | ($0.41 | ) | $14.08 | 1.41% | 1.35% | 0.53% | 4.51 | % | $601,814 | 19 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 12.95 | 0.01 | 1.01 | 1.02 | (0.10 | ) | — | (0.10 | ) | 13.87 | 1.44% | 1.35% | 0.09% | 7.89 | % | 566,257 | 1 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.17 | 0.06 | 0.85 | 0.91 | (0.13 | ) | — | (0.13 | ) | 12.95 | 1.45% | 1.35% | 0.46% | 7.50 | % | 445,932 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.78 | 0.05 | 0.43 | 0.48 | (0.09 | ) | — | (0.09 | ) | 12.17 | 1.47% | 1.35% | 0.43% | 4.18 | % | 366,753 | 7 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.73 | 0.02 | 1.17 | 1.19 | (0.14 | ) | — | (0.14 | ) | 11.78 | 1.52% | 1.26% | 0.17% | 11.26 | % | 308,449 | 9 | % | ||||||||||||||||||||||||||||||||
| Class R |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $13.96 | $0.15 | $0.54 | $0.69 | ($0.28 | ) | ($0.19 | ) | ($0.47 | ) | $14.18 | 0.91% | 0.85% | 1.03% | 5.00 | % | $28,097 | 19 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.03 | 0.08 | 1.00 | 1.08 | (0.15 | ) | — | (0.15 | ) | 13.96 | 0.94% | 0.85% | 0.59% | 8.33 | % | 31,641 | 1 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.24 | 0.11 | 0.86 | 0.97 | (0.18 | ) | — | (0.18 | ) | 13.03 | 0.95% | 0.85% | 0.93% | 8.02 | % | 29,715 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.84 | 0.11 | 0.43 | 0.54 | (0.14 | ) | — | (0.14 | ) | 12.24 | 0.97% | 0.85% | 0.93% | 4.67 | % | 23,321 | 7 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.77 | 0.07 | 1.18 | 1.25 | (0.18 | ) | — | (0.18 | ) | 11.84 | 1.02% | 0.75% | 0.68% | 11.82 | % | 23,658 | 9 | % | ||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $13.98 | $0.22 | $0.55 | $0.77 | ($0.36 | ) | ($0.19 | ) | ($0.55 | ) | $14.20 | 0.41% | 0.35% | 1.53% | 5.54 | % | $21,896 | 19 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.06 | 0.14 | 1.00 | 1.14 | (0.22 | ) | — | (0.22 | ) | 13.98 | 0.44% | 0.40% | 1.04% | 8.73 | % | 19,945 | 1 | % | ||||||||||||||||||||||||||||||||
| 12/31/2012 - 3/31/2013 | 12.41 | (0.01 | ) | 0.66 | 0.65 | — | — | — | 13.06 | 0.45% | 0.40% | (0.40%) | 5.24 | % | 3,396 | 25 | % | |||||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Growth |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.74 | $0.16 | $0.77 | $0.93 | ($0.33 | ) | $— | ($0.33 | ) | $15.34 | 0.66% | 0.60% | 1.07% | 6.36 | % | $607,360 | 21 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.33 | 0.09 | 1.51 | 1.60 | (0.19 | ) | — | (0.19 | ) | 14.74 | 0.69% | 0.60% | 0.66% | 12.01 | % | 555,319 | 1 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.41 | 0.10 | 0.96 | 1.06 | (0.14 | ) | — | (0.14 | ) | 13.33 | 0.71% | 0.60% | 0.83% | 8.62 | % | 436,055 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.05 | 0.10 | 0.38 | 0.48 | (0.12 | ) | — | (0.12 | ) | 12.41 | 0.72% | 0.60% | 0.82% | 4.13 | % | 365,426 | 8 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.68 | 0.07 | 1.44 | 1.51 | (0.14 | ) | — | (0.14 | ) | 12.05 | 0.77% | 0.51% | 0.62% | 14.36 | % | 301,232 | 13 | % | ||||||||||||||||||||||||||||||||
| Class B |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.62 | $0.05 | $0.77 | $0.82 | ($0.22 | ) | $— | ($0.22 | ) | $15.22 | 1.41% | 1.35% | 0.32% | 5.61 | % | $119,159 | 21 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.22 | (0.01 | ) | 1.50 | 1.49 | (0.09 | ) | — | (0.09 | ) | 14.62 | 1.44% | 1.35% | (0.09%) | 11.25 | % | 119,506 | 1 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.30 | 0.01 | 0.96 | 0.97 | (0.05 | ) | — | (0.05 | ) | 13.22 | 1.46% | 1.35% | 0.09% | 7.92 | % | 105,757 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.93 | 0.01 | 0.40 | 0.41 | (0.04 | ) | — | (0.04 | ) | 12.30 | 1.47% | 1.35% | 0.07% | 3.50 | % | 95,937 | 8 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.57 | (0.01 | ) | 1.43 | 1.42 | (0.06 | ) | — | (0.06 | ) | 11.93 | 1.52% | 1.26% | (0.13%) | 13.59 | % | 83,812 | 13 | % | |||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.59 | $0.05 | $0.76 | $0.81 | ($0.22 | ) | $— | ($0.22 | ) | $15.18 | 1.41% | 1.35% | 0.32% | 5.59 | % | $398,716 | 21 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.19 | (0.01 | ) | 1.50 | 1.49 | (0.09 | ) | — | (0.09 | ) | 14.59 | 1.44% | 1.35% | (0.09%) | 11.33 | % | 375,368 | 1 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.27 | 0.01 | 0.96 | 0.97 | (0.05 | ) | — | (0.05 | ) | 13.19 | 1.46% | 1.35% | 0.09% | 7.95 | % | 295,615 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.91 | 0.01 | 0.39 | 0.40 | (0.04 | ) | — | (0.04 | ) | 12.27 | 1.47% | 1.35% | 0.07% | 3.39 | % | 257,114 | 8 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.55 | (0.01 | ) | 1.43 | 1.42 | (0.06 | ) | — | (0.06 | ) | 11.91 | 1.52% | 1.26% | (0.13%) | 13.64 | % | 230,964 | 13 | % | |||||||||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of references and symbol on C-14 |
C-10
PACIFIC FUNDS**
FINANCIAL HIGHLIGHTS (Continued)
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
|
Selected Per Share Data |
|
Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (1) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (2) | Expenses After Reductions (2), (3) | Net Investment Income (Loss) (2) | Total Returns (4) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Growth (Continued) |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.72 | $0.12 | $0.77 | $0.89 | ($0.29 | ) | $— | ($0.29 | ) | $15.32 | 0.91% | 0.85% | 0.82% | 6.10 | % | $21,383 | 21 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.32 | 0.06 | 1.49 | 1.55 | (0.15 | ) | — | (0.15 | ) | 14.72 | 0.94% | 0.85% | 0.41% | 11.67 | % | 20,326 | 1 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.40 | 0.07 | 0.96 | 1.03 | (0.11 | ) | — | (0.11 | ) | 13.32 | 0.96% | 0.85% | 0.55% | 8.38 | % | 17,844 | 25 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.03 | 0.07 | 0.40 | 0.47 | (0.10 | ) | — | (0.10 | ) | 12.40 | 0.97% | 0.85% | 0.57% | 3.97 | % | 14,710 | 8 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.67 | 0.04 | 1.44 | 1.48 | (0.12 | ) | — | (0.12 | ) | 12.03 | 1.02% | 0.76% | 0.37% | 14.00 | % | 17,265 | 13 | % | ||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.75 | $0.19 | $0.78 | $0.97 | ($0.37 | ) | $— | ($0.37 | ) | $15.35 | 0.41% | 0.35% | 1.32% | 6.61 | % | $10,165 | 21 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.34 | 0.12 | 1.51 | 1.63 | (0.22 | ) | — | (0.22 | ) | 14.75 | 0.44% | 0.40% | 0.86% | 12.21 | % | 5,111 | 1 | % | ||||||||||||||||||||||||||||||||
| 12/31/2012 - 3/31/2013 | 12.50 | (0.01 | ) | 0.85 | 0.84 | — | — | — | 13.34 | 0.45% | 0.40% | (0.40%) | 6.72 | % | 2,470 | 25 | % | |||||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $15.23 | $0.15 | $0.79 | $0.94 | ($0.32 | ) | $— | ($0.32 | ) | $15.85 | 0.68% | 0.60% | 0.97% | 6.18 | % | $177,171 | 20 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.50 | 0.08 | 1.77 | 1.85 | (0.12 | ) | — | (0.12 | ) | 15.23 | 0.71% | 0.60% | 0.58% | 13.70 | % | 161,858 | 5 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.56 | 0.07 | 0.96 | 1.03 | (0.09 | ) | — | (0.09 | ) | 13.50 | 0.73% | 0.60% | 0.57% | 8.30 | % | 133,265 | 30 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.29 | 0.06 | 0.27 | 0.33 | (0.06 | ) | — | (0.06 | ) | 12.56 | 0.74% | 0.60% | 0.52% | 2.73 | % | 122,397 | 13 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.66 | 0.05 | 1.65 | 1.70 | (0.07 | ) | — | (0.07 | ) | 12.29 | 0.80% | 0.51% | 0.44% | 16.11 | % | 114,246 | 26 | % | ||||||||||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.94 | $0.03 | $0.80 | $0.83 | ($0.20 | ) | $— | ($0.20 | ) | $15.57 | 1.43% | 1.35% | 0.22% | 5.55 | % | $35,840 | 20 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.22 | (0.02 | ) | 1.76 | 1.74 | (0.02 | ) | — | (0.02 | ) | 14.94 | 1.46% | 1.35% | (0.17%) | 13.13 | % | 37,704 | 5 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.28 | (0.02 | ) | 0.96 | 0.94 | (0.00 | )(5) | — | (0.00 | )(5) | 13.22 | 1.48% | 1.35% | (0.17%) | 7.69 | % | 33,013 | 30 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.03 | (0.03 | ) | 0.28 | 0.25 | — | — | — | 12.28 | 1.49% | 1.35% | (0.23%) | 2.08 | % | 31,969 | 13 | % | |||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.46 | (0.03 | ) | 1.65 | 1.62 | (0.05 | ) | — | (0.05 | ) | 12.03 | 1.55% | 1.25% | (0.31%) | 15.62 | % | 30,693 | 26 | % | |||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.93 | $0.03 | $0.79 | $0.82 | ($0.20 | ) | $— | ($0.20 | ) | $15.55 | 1.43% | 1.35% | 0.22% | 5.54 | % | $110,241 | 20 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.22 | (0.02 | ) | 1.75 | 1.73 | (0.02 | ) | — | (0.02 | ) | 14.93 | 1.46% | 1.35% | (0.17%) | 13.12 | % | 101,888 | 5 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.28 | (0.02 | ) | 0.97 | 0.95 | (0.01 | ) | — | (0.01 | ) | 13.22 | 1.48% | 1.35% | (0.18%) | 7.71 | % | 81,754 | 30 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.03 | (0.03 | ) | 0.28 | 0.25 | — | — | — | 12.28 | 1.49% | 1.35% | (0.23%) | 2.08 | % | 76,613 | 13 | % | |||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.46 | (0.03 | ) | 1.65 | 1.62 | (0.05 | ) | — | (0.05 | ) | 12.03 | 1.55% | 1.25% | (0.31%) | 15.61 | % | 75,607 | 26 | % | |||||||||||||||||||||||||||||||
| Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $15.15 | $0.11 | $0.79 | $0.90 | ($0.28 | ) | $— | ($0.28 | ) | $15.77 | 0.93% | 0.85% | 0.72% | 5.94 | % | $8,893 | 20 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.43 | 0.05 | 1.75 | 1.80 | (0.08 | ) | — | (0.08 | ) | 15.15 | 0.96% | 0.85% | 0.33% | 13.45 | % | 8,151 | 5 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.48 | 0.04 | 0.97 | 1.01 | (0.06 | ) | — | (0.06 | ) | 13.43 | 0.98% | 0.85% | 0.33% | 8.17 | % | 7,251 | 30 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.22 | 0.03 | 0.26 | 0.29 | (0.03 | ) | — | (0.03 | ) | 12.48 | 0.99% | 0.85% | 0.27% | 2.43 | % | 6,662 | 13 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.61 | 0.02 | 1.65 | 1.67 | (0.06 | ) | — | (0.06 | ) | 12.22 | 1.05% | 0.76% | 0.19% | 16.02 | % | 5,553 | 26 | % | ||||||||||||||||||||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $15.23 | $0.19 | $0.79 | $0.98 | ($0.35 | ) | $— | ($0.35 | ) | $15.86 | 0.43% | 0.35% | 1.22% | 6.50 | % | $6,480 | 20 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.51 | 0.11 | 1.76 | 1.87 | (0.15 | ) | — | (0.15 | ) | 15.23 | 0.46% | 0.40% | 0.78% | 13.84 | % | 2,719 | 5 | % | ||||||||||||||||||||||||||||||||
| 12/31/2012 - 3/31/2013 | 12.56 | (0.01 | ) | 0.96 | 0.95 | — | — | — | 13.51 | 0.48% | 0.40% | (0.40%) | 7.56 | % | 222 | 30 | % | |||||||||||||||||||||||||||||||||
| Pacific Funds Diversified Alternatives |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $9.99 | $0.38 | ($0.06 | ) | $0.32 | ($0.29 | ) | ($0.02 | ) | ($0.31 | ) | $10.00 | 2.83% | 0.85% | 3.77% | 3.19 | % | $1,465 | 23 | % | ||||||||||||||||||||||||||||||
| 12/31/2013 - 3/31/2014 | 10.00 | (0.01 | ) | (0.00 | )(5) | (0.01 | ) | — | — | — | 9.99 | 3.36% | 0.85% | (0.34%) | (0.10 | %) | 10 | 1 | % | |||||||||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $9.97 | $0.30 | ($0.06 | ) | $0.24 | ($0.27 | ) | ($0.02 | ) | ($0.29 | ) | $9.92 | 3.58% | 1.60% | 3.02% | 2.39 | % | $558 | 23 | % | ||||||||||||||||||||||||||||||
| 12/31/2013 - 3/31/2014 | 10.00 | (0.03 | ) | (0.00 | )(5) | (0.03 | ) | — | — | — | 9.97 | 4.11% | 1.60% | (1.09%) | (0.30 | %) | 10 | 1 | % | |||||||||||||||||||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $9.99 | $0.41 | ($0.08 | ) | $0.33 | ($0.29 | ) | ($0.02 | ) | ($0.31 | ) | $10.01 | 2.58% | 0.60% | 4.02% | 3.37 | % | $3,771 | 23 | % | ||||||||||||||||||||||||||||||
| 12/31/2013 - 3/31/2014 | 10.00 | (0.00 | )(5) | (0.01 | ) | (0.01 | ) | — | — | — | 9.99 | 3.11% | 0.60% | (0.09%) | (0.10 | %) | 1,978 | 1 | % | |||||||||||||||||||||||||||||||
| Pacific Funds Short Duration Income |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.46 | $0.19 | ($0.03 | ) | $0.16 | ($0.18 | ) | ($0.03 | ) | ($0.21 | ) | $10.41 | 1.09% | 0.85% | 1.77% | 1.51 | % | $48,685 | 78 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.46 | 0.17 | 0.04 | 0.21 | (0.18 | ) | (0.03 | ) | (0.21 | ) | 10.46 | 1.14% | 0.85% | 1.68% | 2.00 | % | 60,012 | 98 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.20 | 0.16 | 0.32 | 0.48 | (0.15 | ) | (0.07 | ) | (0.22 | ) | 10.46 | 1.24% | 0.85% | 2.02% | 4.78 | % | 22,589 | 146 | % | |||||||||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of references and symbol on C-14 |
C-11
PACIFIC FUNDS**
FINANCIAL HIGHLIGHTS (Continued)
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
|
Selected Per Share Data |
|
Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (1) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (2) | Expenses After Reductions (2), (3) | Net Investment Income (Loss) (2) | Total Returns (4) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| Pacific Funds Short Duration Income (Continued) |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.45 | $0.11 | ($0.03 | ) | $0.08 | ($0.11 | ) | ($0.03 | ) | ($0.14 | ) | $10.39 | 1.84% | 1.60% | 1.02% | 0.68 | % | $31,569 | 78 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.45 | 0.10 | 0.03 | 0.13 | (0.10 | ) | (0.03 | ) | (0.13 | ) | 10.45 | 1.89% | 1.60% | 0.93% | 1.28 | % | 23,769 | 98 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.20 | 0.10 | 0.33 | 0.43 | (0.11 | ) | (0.07 | ) | (0.18 | ) | 10.45 | 1.99% | 1.60% | 1.27% | 4.28 | % | 10,307 | 146 | % | |||||||||||||||||||||||||||||||
| Class I |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.45 | $0.21 | ($0.03 | ) | $0.18 | ($0.21 | ) | ($0.03 | ) | ($0.24 | ) | $10.39 | 0.69% | 0.57% | 2.05% | 1.70 | % | $1,516 | 78 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.45 | 0.21 | 0.02 | 0.23 | (0.20 | ) | (0.03 | ) | (0.23 | ) | 10.45 | 0.74% | 0.60% | 1.93% | 2.20 | % | 979 | 98 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.14 | 0.23 | 0.38 | 0.61 | (0.23 | ) | (0.07 | ) | (0.30 | ) | 10.45 | 1.08% | 0.60% | 2.27% | 6.10 | % | 13,280 | 146 | % | |||||||||||||||||||||||||||||||
| 12/19/2011 - 3/31/2012 | 10.00 | 0.06 | 0.15 | 0.21 | (0.07 | ) | — | (0.07 | ) | 10.14 | 2.04% | 0.60% | 2.06% | 2.10 | % | 12,251 | 73 | % | ||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.46 | $0.21 | ($0.02 | ) | $0.19 | ($0.21 | ) | ($0.03 | ) | ($0.24 | ) | $10.41 | 0.83% | 0.60% | 2.02% | 1.78 | % | $51,901 | 78 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.46 | 0.20 | 0.03 | 0.23 | (0.20 | ) | (0.03 | ) | (0.23 | ) | 10.46 | 0.89% | 0.60% | 1.93% | 2.25 | % | 9,595 | 98 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.20 | 0.18 | 0.31 | 0.49 | (0.16 | ) | (0.07 | ) | (0.23 | ) | 10.46 | 0.99% | 0.60% | 2.27% | 4.85 | % | 3,148 | 146 | % | |||||||||||||||||||||||||||||||
| Pacific Funds Core Income |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.66 | $0.31 | $0.13 | $0.44 | ($0.31 | ) | $— | ($0.31 | ) | $10.79 | 1.14% | 0.93% | 2.93% | 4.17 | % | $218,368 | 53 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.92 | 0.32 | (0.09 | ) | 0.23 | (0.33 | ) | (0.16 | ) | (0.49 | ) | 10.66 | 1.16% | 0.90% | 3.03% | 2.27 | % | 221,086 | 120 | % | ||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.61 | 0.30 | 0.55 | 0.85 | (0.29 | ) | (0.25 | ) | (0.54 | ) | 10.92 | 1.17% | 0.90% | 2.76% | 8.13 | % | 333,987 | 171 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.16 | 0.30 | 0.48 | 0.78 | (0.30 | ) | (0.03 | ) | (0.33 | ) | 10.61 | 1.35% | 0.90% | 2.94% | 7.79 | % | 247,522 | 199 | % | |||||||||||||||||||||||||||||||
| 12/31/2010 - 3/31/2011 | 10.00 | 0.09 | 0.16 | 0.25 | (0.09 | ) | — | (0.09 | ) | 10.16 | 1.77% | 0.90% | 3.62% | 2.46 | % | 5,300 | 142 | % | ||||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.66 | $0.23 | $0.13 | $0.36 | ($0.23 | ) | $— | ($0.23 | ) | $10.79 | 1.89% | 1.68% | 2.18% | 3.42 | % | $183,952 | 53 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.93 | 0.24 | (0.10 | ) | 0.14 | (0.25 | ) | (0.16 | ) | (0.41 | ) | 10.66 | 1.91% | 1.65% | 2.28% | 1.41 | % | 122,946 | 120 | % | ||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.62 | 0.22 | 0.55 | 0.77 | (0.21 | ) | (0.25 | ) | (0.46 | ) | 10.93 | 1.92% | 1.65% | 2.01% | 7.37 | % | 160,472 | 171 | % | |||||||||||||||||||||||||||||||
| 6/30/2011 - 3/31/2012 | 10.32 | 0.17 | 0.33 | 0.50 | (0.17 | ) | (0.03 | ) | (0.20 | ) | 10.62 | 2.07% | 1.65% | 2.17% | 4.89 | % | 76,726 | 199 | % | |||||||||||||||||||||||||||||||
| Class I |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.67 | $0.34 | $0.13 | $0.47 | ($0.34 | ) | $— | ($0.34 | ) | $10.80 | 0.73% | 0.65% | 3.21% | 4.46 | % | $3,806 | 53 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.93 | 0.35 | (0.09 | ) | 0.26 | (0.36 | ) | (0.16 | ) | (0.52 | ) | 10.67 | 0.76% | 0.65% | 3.28% | 2.53 | % | 1,187 | 120 | % | ||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.62 | 0.33 | 0.55 | 0.88 | (0.32 | ) | (0.25 | ) | (0.57 | ) | 10.93 | 0.77% | 0.65% | 3.01% | 8.39 | % | 1,794 | 171 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.16 | 0.36 | 0.44 | 0.80 | (0.31 | ) | (0.03 | ) | (0.34 | ) | 10.62 | 0.95% | 0.65% | 3.42% | 7.95 | % | 1,292 | 199 | % | |||||||||||||||||||||||||||||||
| 12/31/2010 - 3/31/2011 | 10.00 | 0.10 | 0.15 | 0.25 | (0.09 | ) | — | (0.09 | ) | 10.16 | 1.37% | 0.65% | 3.87% | 2.48 | % | 51,231 | 142 | % | ||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.68 | $0.34 | $0.13 | $0.47 | ($0.34 | ) | $— | ($0.34 | ) | $10.81 | 0.88% | 0.69% | 3.17% | 4.43 | % | $219,437 | 53 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.95 | 0.35 | (0.10 | ) | 0.25 | (0.36 | ) | (0.16 | ) | (0.52 | ) | 10.68 | 0.91% | 0.65% | 3.28% | 2.53 | % | 69,489 | 120 | % | ||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.79 | 0.24 | 0.41 | 0.65 | (0.24 | ) | (0.25 | ) | (0.49 | ) | 10.95 | 0.94% | 0.67% | 2.99% | 5.97 | % | 93,966 | 171 | % | |||||||||||||||||||||||||||||||
| Pacific Funds Strategic Income |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.20 | $0.46 | ($0.37 | ) | $0.09 | ($0.44 | ) | ($0.10 | ) | ($0.54 | ) | $10.75 | 1.28% | 1.05% | 4.18% | 0.84 | % | $51,175 | 157 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.23 | 0.48 | 0.30 | 0.78 | (0.49 | ) | (0.32 | ) | (0.81 | ) | 11.20 | 1.43% | 1.05% | 4.34% | 7.25 | % | 37,896 | 190 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.53 | 0.38 | 0.98 | 1.36 | (0.36 | ) | (0.30 | ) | (0.66 | ) | 11.23 | 1.47% | 1.05% | 4.55% | 13.12 | % | 20,963 | 353 | % | |||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.19 | $0.38 | ($0.38 | ) | $— | ($0.36 | ) | ($0.10 | ) | ($0.46 | ) | $10.73 | 2.03% | 1.80% | 3.43% | 0.03 | % | $42,684 | 157 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.22 | 0.40 | 0.30 | 0.70 | (0.41 | ) | (0.32 | ) | (0.73 | ) | 11.19 | 2.18% | 1.80% | 3.59% | 6.51 | % | 23,451 | 190 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.53 | 0.32 | 0.98 | 1.30 | (0.31 | ) | (0.30 | ) | (0.61 | ) | 11.22 | 2.22% | 1.80% | 3.80% | 12.52 | % | 7,948 | 353 | % | |||||||||||||||||||||||||||||||
| Class I |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.15 | $0.49 | ($0.37 | ) | $0.12 | ($0.47 | ) | ($0.10 | ) | ($0.57 | ) | $10.70 | 0.88% | 0.77% | 4.46% | 1.13 | % | $1,381 | 157 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.18 | 0.52 | 0.28 | 0.80 | (0.51 | ) | (0.32 | ) | (0.83 | ) | 11.15 | 1.03% | 0.80% | 4.59% | 7.51 | % | 1,686 | 190 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.40 | 0.52 | 1.09 | 1.61 | (0.53 | ) | (0.30 | ) | (0.83 | ) | 11.18 | 1.22% | 0.80% | 4.80% | 15.94 | % | 22,099 | 353 | % | |||||||||||||||||||||||||||||||
| 12/19/2011 - 3/31/2012 | 10.00 | 0.14 | 0.38 | 0.52 | (0.12 | ) | — | (0.12 | ) | 10.40 | 1.78% | 0.80% | 4.84% | 5.22 | % | 17,796 | 156 | % | ||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.20 | $0.48 | ($0.35 | ) | $0.13 | ($0.47 | ) | ($0.10 | ) | ($0.57 | ) | $10.76 | 1.03% | 0.80% | 4.43% | 1.20 | % | $66,223 | 157 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.24 | 0.51 | 0.29 | 0.80 | (0.52 | ) | (0.32 | ) | (0.84 | ) | 11.20 | 1.18% | 0.80% | 4.59% | 7.42 | % | 9,302 | 190 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.53 | 0.40 | 0.97 | 1.37 | (0.36 | ) | (0.30 | ) | (0.66 | ) | 11.24 | 1.24% | 0.82% | 4.78% | 13.31 | % | 1,575 | 353 | % | |||||||||||||||||||||||||||||||
| See Notes to Financial Statements |
See explanation of references and symbol on C-14 |
C-12
PACIFIC FUNDS**
FINANCIAL HIGHLIGHTS (Continued)
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
|
Selected Per Share Data |
|
Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (1) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (2) | Expenses After Reductions (2), (3) | Net Investment Income (Loss) (2) | Total Returns (4) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| Pacific Funds Floating Rate Income |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.51 | $0.44 | ($0.40 | ) | $0.04 | ($0.44 | ) | ($0.03 | ) | ($0.47 | ) | $10.08 | 1.29% | 1.07% | 4.20% | 0.38 | % | $215,160 | 80 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.46 | 0.40 | 0.04 | 0.44 | (0.37 | ) | (0.02 | ) | (0.39 | ) | 10.51 | 1.30% | 1.05% | 3.86% | 4.30 | % | 375,848 | 123 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.07 | 0.46 | 0.46 | 0.92 | (0.43 | ) | (0.10 | ) | (0.53 | ) | 10.46 | 1.43% | 1.05% | 4.46% | 9.36 | % | 125,007 | 186 | % | |||||||||||||||||||||||||||||||
| 12/30/2011 - 3/31/2012 | 9.81 | 0.13 | 0.24 | 0.37 | (0.11 | ) | — | (0.11 | ) | 10.07 | 1.55% | 1.05% | 5.33% | 3.79 | % | 12,071 | 139 | % | ||||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.50 | $0.36 | ($0.40 | ) | ($0.04 | ) | ($0.37 | ) | ($0.03 | ) | ($0.40 | ) | $10.06 | 2.04% | 1.82% | 3.45% | (0.46 | %) | $179,798 | 80 | % | |||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.45 | 0.33 | 0.04 | 0.37 | (0.30 | ) | (0.02 | ) | (0.32 | ) | 10.50 | 2.05% | 1.80% | 3.11% | 3.57 | % | 214,365 | 123 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.07 | 0.38 | 0.46 | 0.84 | (0.36 | ) | (0.10 | ) | (0.46 | ) | 10.45 | 2.18% | 1.80% | 3.71% | 8.56 | % | 63,045 | 186 | % | |||||||||||||||||||||||||||||||
| 12/30/2011 - 3/31/2012 | 9.81 | 0.11 | 0.25 | 0.36 | (0.10 | ) | — | (0.10 | ) | 10.07 | 2.30% | 1.80% | 4.61% | 3.68 | % | 3,372 | 139 | % | ||||||||||||||||||||||||||||||||
| Class I |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.53 | $0.46 | ($0.40 | ) | $0.06 | ($0.47 | ) | ($0.03 | ) | ($0.50 | ) | $10.09 | 0.89% | 0.81% | 4.46% | 0.55 | % | $88,508 | 80 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.47 | 0.43 | 0.05 | 0.48 | (0.40 | ) | (0.02 | ) | (0.42 | ) | 10.53 | 0.90% | 0.80% | 4.11% | 4.65 | % | 96,635 | 123 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.08 | 0.48 | 0.46 | 0.94 | (0.45 | ) | (0.10 | ) | (0.55 | ) | 10.47 | 1.03% | 0.80% | 4.71% | 9.56 | % | 10,726 | 186 | % | |||||||||||||||||||||||||||||||
| 6/30/2011 - 3/31/2012 | 10.00 | 0.34 | 0.06 | 0.40 | (0.32 | ) | — | (0.32 | ) | 10.08 | 1.24% | 0.80% | 4.60% | 4.11 | % | 41,834 | 139 | % | ||||||||||||||||||||||||||||||||
| Class P |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.52 | $0.45 | ($0.38 | ) | $0.07 | ($0.47 | ) | ($0.03 | ) | ($0.50 | ) | $10.09 | 0.89% | 0.83% | 4.44% | 0.64 | % | $691 | 80 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.47 | 0.43 | 0.04 | 0.47 | (0.40 | ) | (0.02 | ) | (0.42 | ) | 10.52 | 0.90% | 0.80% | 4.11% | 4.53 | % | 249 | 123 | % | |||||||||||||||||||||||||||||||
| 12/31/2012 - 3/31/2013 | 10.29 | 0.12 | 0.16 | 0.28 | (0.10 | ) | — | (0.10 | ) | 10.47 | 0.99% | 0.80% | 4.70% | 2.74 | % | 14 | 186 | % | ||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.54 | $0.46 | ($0.39 | ) | $0.07 | ($0.47 | ) | ($0.03 | ) | ($0.50 | ) | $10.11 | 1.04% | 0.82% | 4.45% | 0.63 | % | $270,383 | 80 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.49 | 0.43 | 0.04 | 0.47 | (0.40 | ) | (0.02 | ) | (0.42 | ) | 10.54 | 1.05% | 0.80% | 4.11% | 4.54 | % | 368,122 | 123 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.12 | 0.36 | 0.45 | 0.81 | (0.34 | ) | (0.10 | ) | (0.44 | ) | 10.49 | 1.15% | 0.80% | 4.70% | 8.13 | % | 35,648 | 186 | % | |||||||||||||||||||||||||||||||
| Pacific Funds Limited Duration High Income |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.22 | $0.45 | ($0.58 | ) | ($0.13 | ) | ($0.45 | ) | ($0.04 | ) | ($0.49 | ) | $9.60 | 1.49% | 1.08% | 4.51% | (1.27 | %) | $7,094 | 49 | % | |||||||||||||||||||||||||||||
| 7/31/2013 - 3/31/2014 | 10.00 | 0.26 | 0.22 | 0.48 | (0.25 | ) | (0.01 | ) | (0.26 | ) | 10.22 | 1.67% | 1.08% | 3.94% | 4.85 | % | 8,677 | 53 | % | |||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.20 | $0.37 | ($0.57 | ) | ($0.20 | ) | ($0.38 | ) | ($0.04 | ) | ($0.42 | ) | $9.58 | 2.21% | 1.83% | 3.76% | (1.99 | %) | $3,664 | 49 | % | |||||||||||||||||||||||||||||
| 7/31/2013 - 3/31/2014 | 10.00 | 0.21 | 0.22 | 0.43 | (0.22 | ) | (0.01 | ) | (0.23 | ) | 10.20 | 2.42% | 1.83% | 3.19% | 4.28 | % | 2,442 | 53 | % | |||||||||||||||||||||||||||||||
| Class I |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.22 | $0.48 | ($0.58 | ) | ($0.10 | ) | ($0.48 | ) | ($0.04 | ) | ($0.52 | ) | $9.60 | 1.09% | 0.80% | 4.79% | (0.89 | %) | $21,921 | 49 | % | |||||||||||||||||||||||||||||
| 7/31/2013 - 3/31/2014 | 10.00 | 0.28 | 0.21 | 0.49 | (0.26 | ) | (0.01 | ) | (0.27 | ) | 10.22 | 1.27% | 0.83% | 4.19% | 4.87 | % | 22,227 | 53 | % | |||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.21 | $0.46 | ($0.55 | ) | ($0.09 | ) | ($0.48 | ) | ($0.04 | ) | ($0.52 | ) | $9.60 | 1.18% | 0.83% | 4.76% | (0.92 | %) | $5,669 | 49 | % | |||||||||||||||||||||||||||||
| 7/31/2013 - 3/31/2014 | 10.00 | 0.28 | 0.21 | 0.49 | (0.27 | ) | (0.01 | ) | (0.28 | ) | 10.21 | 1.42% | 0.83% | 4.19% | 4.89 | % | 1,860 | 53 | % | |||||||||||||||||||||||||||||||
| Pacific Funds High Income (6) |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Class A |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.22 | $0.54 | ($0.60 | ) | ($0.06 | ) | ($0.52 | ) | ($0.16 | ) | ($0.68 | ) | $10.48 | 1.50% | 1.05% | 4.90% | (0.49 | %) | $5,900 | 60 | % | |||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.16 | 0.56 | 0.25 | 0.81 | (0.55 | ) | (0.20 | ) | (0.75 | ) | 11.22 | 1.67% | 1.05% | 5.03% | 7.50 | % | 6,441 | 99 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.57 | 0.46 | 0.84 | 1.30 | (0.44 | ) | (0.27 | ) | (0.71 | ) | 11.16 | 1.87% | 1.05% | 5.57% | 12.59 | % | 3,497 | 154 | % | |||||||||||||||||||||||||||||||
| Class C |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.21 | $0.45 | ($0.59 | ) | ($0.14 | ) | ($0.44 | ) | ($0.16 | ) | ($0.60 | ) | $10.47 | 2.24% | 1.80% | 4.15% | (1.22 | %) | $5,419 | 60 | % | |||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.16 | 0.47 | 0.25 | 0.72 | (0.47 | ) | (0.20 | ) | (0.67 | ) | 11.21 | 2.42% | 1.80% | 4.28% | 6.65 | % | 5,245 | 99 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.57 | 0.40 | 0.85 | 1.25 | (0.39 | ) | (0.27 | ) | (0.66 | ) | 11.16 | 2.62% | 1.80% | 4.82% | 12.11 | % | 2,203 | 154 | % | |||||||||||||||||||||||||||||||
| Class I |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.14 | $0.57 | ($0.61 | ) | ($0.04 | ) | ($0.53 | ) | ($0.16 | ) | ($0.69 | ) | $10.41 | 1.10% | 0.77% | 5.18% | (0.30 | %) | $241 | 60 | % | |||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.09 | 0.58 | 0.24 | 0.82 | (0.57 | ) | (0.20 | ) | (0.77 | ) | 11.14 | 1.27% | 0.80% | 5.28% | 7.72 | % | 9,493 | 99 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.58 | 0.63 | 0.82 | 1.45 | (0.67 | ) | (0.27 | ) | (0.94 | ) | 11.09 | 1.78% | 0.80% | 5.82% | 14.21 | % | 8,810 | 154 | % | |||||||||||||||||||||||||||||||
| 12/19/2011 - 3/31/2012 | 10.00 | 0.20 | 0.55 | 0.75 | (0.17 | ) | — | (0.17 | ) | 10.58 | 2.82% | 0.80% | 6.73% | 7.50 | % | 7,523 | 93 | % | ||||||||||||||||||||||||||||||||
| Class P |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 1/14/2015 - 3/31/2015 | $10.22 | $0.11 | $0.19 | $0.30 | ($0.12 | ) | $— | ($0.12 | ) | $10.40 | 1.06% | 0.80% | 5.15% | 2.94 | % | $38,919 | 60 | % | ||||||||||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of references and symbol on C-14 |
C-13
PACIFIC FUNDS**
FINANCIAL HIGHLIGHTS (Continued)
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
|
Selected Per Share Data |
|
Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (1) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (2) | Expenses After Reductions (2), (3) | Net Investment Income (Loss) (2) | Total Returns (4) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| Pacific Funds High Income (Continued) |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Advisor Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $11.23 | $0.57 | ($0.60 | ) | ($0.03 | ) | ($0.55 | ) | ($0.16 | ) | ($0.71 | ) | $10.49 | 1.24% | 0.80% | 5.15% | (0.23 | %) | $3,807 | 60 | % | |||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.18 | 0.58 | 0.24 | 0.82 | (0.57 | ) | (0.20 | ) | (0.77 | ) | 11.23 | 1.42% | 0.80% | 5.28% | 7.67 | % | 3,064 | 99 | % | |||||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.57 | 0.48 | 0.85 | 1.33 | (0.45 | ) | (0.27 | ) | (0.72 | ) | 11.18 | 1.63% | 0.81% | 5.81% | 12.87 | % | 279 | 154 | % | |||||||||||||||||||||||||||||||
| ** | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (1) | Net investment income (loss) per share has been calculated using the average shares method. |
| (2) | The ratios are annualized for periods of less than one full year. |
| (3) | The ratios of expenses after expense reductions to average net assets are after any advisory fee waivers and adviser expense reimbursements, as discussed in Notes 6 and 7B in Notes to Financial Statements. The expense ratios for all the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives do not include fees and expenses of the underlying funds (see Note 1 in Notes to Financial Statements) in which the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives invest. |
| (4) | The total returns include reinvestment of all dividends and capital gains distributions, if any, and do not include deductions of any applicable sales charges. Total returns are not annualized for periods less than one full year. |
| (5) | Amount represents less than $0.005 per share. |
| (6) | Class P of Pacific Funds High Income commenced operations on January 14, 2015. |
| See Notes to Financial Statements |
C-14
PACIFIC FUNDS
1. ORGANIZATION
The Pacific Funds Series Trust (formerly Pacific Life Funds) (which may be referred to as “Pacific Funds” or the “Trust”) is a Delaware statutory trust, which was formed on May 21, 2001, and is registered under the Investment Company Act of 1940 (“1940 Act”), as amended, as an open-end management investment company. Pacific Life Fund Advisors LLC (“PLFA” or “Adviser”) serves as investment adviser to the Trust. As of March 31, 2015, the Trust was comprised of thirty-four separate funds, twelve of which are presented in these financial statements (each individually, a “Fund”, and collectively the “Funds”):
| Current Name | Former Name | |
| Pacific FundsSM Portfolio Optimization Conservative* | PL Portfolio Optimization Conservative Fund | |
| Pacific FundsSM Portfolio Optimization Moderate-Conservative* | PL Portfolio Optimization Moderate-Conservative Fund | |
| Pacific FundsSM Portfolio Optimization Moderate* | PL Portfolio Optimization Moderate Fund | |
| Pacific FundsSM Portfolio Optimization Growth* | PL Portfolio Optimization Moderate-Aggressive Fund | |
| Pacific FundsSM Portfolio Optimization Aggressive-Growth* | PL Portfolio Optimization Aggressive Fund | |
| Pacific FundsSM Diversified Alternatives | PL Diversified Alternatives Fund | |
| Pacific FundsSM Short Duration Income | PL Short Duration Income Fund | |
| Pacific FundsSM Core Income | PL Income Fund | |
| Pacific FundsSM Strategic Income | PL Strategic Income Fund | |
| Pacific FundsSM Floating Rate Income | PL Floating Rate Income Fund | |
| Pacific FundsSM Limited Duration High Income | PL Limited Duration High Income Fund | |
| Pacific FundsSM High Income | PL High Income Fund |
| * | These Funds are collectively known as the “Portfolio Optimization Funds.” |
The Portfolio Optimization Funds offer Class A, Class B, Class C, Class R, and Advisor Class shares. Pacific Funds Diversified Alternatives offers Class A, Class C, and Advisor Class shares. Each class is distinguished by its applicable sales charges and level of distribution and/or service fees (see Note 6) and in general: (i) Class A shares are subject to a maximum 5.50% front-end sales charge; (ii) Class B shares are subject to a maximum 5.00% contingent deferred sales charge (“CDSC”); (iii) Class C shares are subject to a maximum 1.00% CDSC; and (iv) Class R shares and Advisor Class shares are sold at net asset value (“NAV”) without a sales charge. The sales charge for Class A shares is reduced for purchases of $50,000 or more and may be waived in certain circumstances. There is no sales charge for Class A shares for purchases of $1 million or more, although there is a CDSC of 1.00% on redemptions of such Class A shares within one year of purchase, which may be waived in certain circumstances.
Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income, and Pacific Funds High Income offer Class A, Class C, Class I, and Advisor Class shares. Additionally, Pacific Funds Floating Rate Income and Pacific Funds High Income offer Class P shares. Each class is distinguished by its applicable sales charges and level of distribution and/or service fees (see Note 6) and in general: (i) Class A shares of Pacific Funds Short Duration Income, Pacific Funds Floating Rate Income, and Pacific Funds Limited Duration High Income are subject to a maximum 3.00% front-end sales charge, and Class A shares of Pacific Funds Core Income, Pacific Funds Strategic Income, and Pacific Funds High Income are subject to a maximum 4.25% front-end sales charge; (ii) Class C shares are subject to a maximum 1.00% CDSC; and (iii) Class I, Class P, and Advisor Class shares are sold at NAV without a sales charge. The sales charge for Class A shares is reduced for purchases of $100,000 or more and may be waived in certain circumstances. There is no sales charge for Class A shares for purchases of $500,000 or more, although there is a CDSC of 1.00% of such Class A shares within one year of purchase, which may be waived in certain circumstances.
The Trust’s distributor receives all net commissions (front-end sales charges and CDSCs) from the sales of all applicable share classes (see Note 6).
The Portfolio Optimization Funds invest their assets in Class P shares of other funds of the Trust (collectively, the “PF Underlying Funds”) and Class P shares of Pacific Funds High Income. Pacific Funds Diversified Alternatives invests all of its assets in the PF Underlying Funds and Class P shares of Pacific Funds Floating Rate Income.
There is a separate annual report containing the financial statements for the PF Underlying Funds, which is available without charge. For information on how to obtain the annual report for the PF Underlying Funds, see the Where to Go for More Information section of this report on page F-19.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by the Trust in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund qualifies as an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to the Investment Companies Topic of U.S. GAAP.
D-1
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
A. INVESTMENT TRANSACTIONS AND INCOME
Investment transactions are recorded on a trade date basis. Securities purchased or sold on a when-issued or delayed-delivery basis as well as certain loan transactions and mortgage securities (such as Government National Mortgage Association (“GNMA”) securities) may be settled a month or more after the trade date. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities, which are recorded as soon as a Fund is informed of the ex-dividend date or upon receipt of the dividend. A Fund’s estimated components of distributions received from real estate investment trusts may be considered income, return of capital distributions or capital gain distributions. Return of capital distributions are recorded as a reduction of cost of the related investments. Interest income, adjusted for amortization of premium and accretion of discount, is recorded daily on an accrual basis. Investment income is recorded net of foreign taxes withheld, if any. A Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. A Fund will accrue such taxes and reclaims as applicable, based upon the current interpretation of tax rules and regulations that exist in the markets in which a Fund invests. Facility fees and other fees (such as origination fees) received from senior loans purchased (see Note 4) by a Fund are amortized over the expected term of each applicable senior loan. Commitment fees received by a Fund relating to unfunded senior loan commitments are amortized to income over the period of the commitment. Consent fees, which are compensation for agreeing to changes in the terms of debt instruments, are recorded as interest income when received. Realized gains and losses from investment transactions are recorded on the basis of identified cost, which is also used for Federal income tax purposes. Gains and losses realized on principal paydowns from mortgage-backed and asset-backed securities are recorded as interest income.
B. DISTRIBUTIONS TO SHAREHOLDERS
For the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives, dividends on net investment income, if any, are generally declared and paid annually. For Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income, and Pacific Funds High Income, dividends on net investment income, if any, are generally declared and paid monthly. Dividends may be declared more or less frequently if advantageous to the specific Fund and its shareholders.
All realized capital gains are distributed at least annually for each Fund. Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
C. FOREIGN CURRENCY TRANSLATION
The Trust’s accounting records are maintained in U.S. dollars. The market value of investments and other assets and liabilities, denominated in non-U.S. currencies, are translated into U.S. dollars based on the applicable exchange rates at the end of each business day. Purchases and sales of investments and income and expenses, denominated in foreign currencies, are translated into U.S. dollars at the exchange rates in effect on the transaction date.
None of the Funds separately report the effect of changes in foreign exchange rates from changes in market prices of investments held. Such changes are included with the net realized gain or loss and change in net unrealized appreciation or depreciation on investments. Other foreign currency transactions resulting in realized and unrealized gain or loss, if any, are reported separately as net realized gain or loss on foreign currency transactions and change in net unrealized appreciation or depreciation on foreign currencies.
D. ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES
Income, non-class specific expenses, and realized and unrealized gains and losses are allocated on a daily basis to each class of shares based upon the relative portion of net assets of each class. Certain Trust expenses directly attributable to a particular Fund are charged to that Fund (such as Fund-specific transactional fees, proxies, liquidations, litigation, and organizational/start-up costs) and class-specific fees and expenses are charged directly to the respective share class within each Fund. Generally, other Trust expenses are allocated proportionately among all the Funds in relation to the net assets of each Fund.
E. OFFERING COSTS
A new Fund bears all costs (or the applicable pro-rata share if there is more than one new Fund) associated with the offering expenses of the Fund including legal, printing, and support services (see Notes 6 and 7A). All such costs are amortized as an expense of the new Fund on a straight-line basis over twelve months from commencement of operations.
F. RECENT ACCOUNTING PRONOUNCEMENT
In June 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. This ASU is effective for interim and annual reporting periods beginning on or after December 15, 2014. Management is currently evaluating the impact that the implementation of this ASU will have on the Trust’s financial statement disclosures.
3. VALUATION AND FAIR VALUE MEASUREMENTS
A. VALUATION POLICY
The Trust’s Board of Trustees (the “Board”) has adopted a policy (“Valuation Policy”) for determining the value of the Trust’s investments each business day. Under the Valuation Policy, the Board has delegated certain functions to the Trustee Valuation Committee (“TVC”) and/or the Valuation Oversight Committee (“VOC”) or its delegate to determine the fair value of certain investments, which includes using third party pricing services. Each valuation committee that values the Funds’ investments does so in accordance with the Valuation Policy. Notes 3B and 3C below describe in greater detail the methodologies used to value each Fund’s investments.
D-2
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
B. NET ASSET VALUE
Each Fund of the Trust presented in these financial statements is divided into shares and share classes. The price per share of each class of a Fund’s shares is called the NAV. The NAV forms the basis for all transactions involving buying, selling, exchanging or reinvesting shares. Each Fund’s NAV is calculated by taking the total value of a Fund’s assets, subtracting a Fund’s liabilities, and dividing by the total number of shares outstanding.
Each Fund’s NAV is calculated once per day, every day the New York Stock Exchange (“NYSE”) is open, including days when foreign markets and/or bond markets are closed. For purposes of calculating the NAV, the value of investments held by each Fund is generally determined as of the time of the close of the NYSE, which is usually 4:00 p.m. Eastern Time. Information that becomes known to the Trust or its agents after the close of the NYSE on a particular day will not normally be used to retroactively adjust the price of an investment for that same business day. Such information may include late dividend notifications, legal or regulatory matters, corporate actions, and corrected/adjusted last sales prices or official closing prices from an exchange.
Each Fund’s NAV will not be calculated on days when the NYSE is closed. There may be a delay in calculating the NAV if: (i) the NYSE is closed on a day other than a regular holiday or weekend, (ii) trading on the NYSE is restricted, (iii) an emergency exists (as determined by the Securities and Exchange Commission (“SEC”)), making the sale of investments or determinations of NAV not practicable, or (iv) the SEC permits a delay for the protection of shareholders.
Certain Funds may hold investments that are primarily listed on foreign exchanges. Because those investments trade on weekends and other days when the Funds do not calculate their NAVs, the value of those investments may change on days when a shareholder will not be able to purchase or redeem shares of those Funds.
C. INVESTMENT VALUATION
The value of each security or other investment is the amount which a Fund might reasonably expect to receive for the investment upon its current sale in the ordinary course of business. For purposes of calculating the NAV, the value of investments held by each Fund is based primarily on pricing data obtained from various sources approved by the Board.
Domestic Equity Investments
For domestic equity investments (including exchange-traded funds), the Trust uses the official closing price or last reported sale price from an exchange as of the time of the NYSE close and does not normally take into account trading, clearances or settlements that take place after the NYSE close. Investments, for which no official closing price or last reported sales price are reported, are generally valued at the mean between the most recent bid and ask prices obtained from approved pricing services, established market makers, or from broker-dealers.
Domestic and Foreign Debt Investments
Debt investments are generally valued using the mean between bid and ask prices provided by approved pricing and quotation services, which are based upon evaluated prices determined from various observable market and other factors. Certain debt investments are valued by using a benchmark, matrix, or other pricing methodologies approved pursuant to the Valuation Policy.
Portfolio Optimization Funds
The investments of each Portfolio Optimization Fund consist of Class P shares of the applicable PF Underlying Funds and Pacific Funds High Income they hold, which are valued at their respective NAVs.
Pacific Funds Diversified Alternatives
The investments of Pacific Funds Diversified Alternatives consist of Class P shares of Pacific Funds Floating Rate Income and the applicable PF Underlying Funds it holds, which are valued at their respective NAVs.
Investments in other Investment Companies
Fund investments in other investment companies are valued at their respect NAVs.
Investment Values Determined by a Valuation Committee
The Trust’s Valuation Policy includes methodologies approved for valuing investments in circumstances where market quotations are not readily available. In such circumstances, the Valuation Policy provides that the value of such investments may be determined in accordance with Board approved formulas and methodologies (“Alternate Valuation Methodologies”). Under the Valuation Policy these Alternate Valuation Methodologies may include, among others, amortized cost, the use of broker quotes, the use of purchase prices, and benchmark and matrix pricing. In the event market quotations or Alternate Valuation Methodologies are not readily available or are determined to be unreliable, the value of the investments will be determined in good faith by the TVC or determined by the VOC or its delegate pursuant to the Valuation Policy and then subsequently submitted for approval or ratification to either the TVC, or the Board. Valuations determined by the TVC or the VOC or its delegate may require subjective inputs about the value of such investments. While these valuations are intended to estimate the value a Fund might reasonably expect to receive upon the current sale of the investments in the ordinary course of business, such values may differ from the value that a Fund would actually realize if the investments were sold or values that would be obtained if a different valuation methodology had been used.
Market quotations are considered not readily available if: (i) the market quotations received are deemed unreliable or inaccurate, (ii) approved pricing services do not provide a valuation for a particular investment, or (iii) material events occur after the close of the principal market for a particular investment but prior to the close of the NYSE.
D. FAIR VALUE MEASUREMENTS AND DISCLOSURES
The Trust characterizes its investments as Level 1, Level 2 or Level 3 based upon the various inputs or methodologies used to value the investments. Under the Valuation Policy, the VOC determines the level in which each Fund’s investments are characterized. The VOC includes
D-3
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
investment, legal, and compliance members of the Trust’s Adviser, accounting members of the Trust’s Administrator (see Note 6), and the Trust’s Chief Compliance Officer (“CCO”). The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
| Ÿ Level 1 - | Quoted prices (unadjusted) in active markets for identical investments |
| Ÿ Level 2 - | Significant observable market-based inputs, other than Level 1 quoted prices, or unobservable inputs that are corroborated by market data |
| Ÿ Level 3 - | Significant unobservable inputs that are not corroborated by observable market data |
The VOC reviews the Valuation Policy periodically (at least annually) to determine the appropriateness of the pricing methodologies used to value each Fund’s investments. The VOC also periodically evaluates how the Trust’s investments are characterized within the three-tier hierarchy and the appropriateness of third party pricing sources. The VOC also periodically (at least annually) conducts back-testing of the value of various Level 2 and Level 3 investments to evaluate the effectiveness of the pricing methodologies including the unobservable inputs used to value those investments. Such back-testing includes comparing Level 2 and Level 3 investment values to subsequently available exchange-traded prices, transaction prices, and/or observable vendor prices. All changes to the Valuation Policy are reported to the Board on a quarterly basis with material changes, as determined by the Trust’s CCO, requiring approval by the Board.
The inputs or methodologies used for characterizing each Fund’s investments within the three-tier hierarchy are not necessarily an indication of the relative risks associated with investing in those investments. For fair valuations using significant unobservable inputs, the Trust presents a reconciliation of the beginning to ending balances for reported market values that presents changes attributable to total realized and unrealized gains or losses, purchase and sales, and transfers in and out of Level 3 during the period. Transfers in and out between levels are based on values at the end of the period. The Trust also discloses the amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. A reconciliation of Level 3 investments is presented only when a Fund had an amount of Level 3 investments at the beginning and/or end of the reporting period that was meaningful in relation to its net assets. The amounts and reasons for all transfers in and out of each level within the three-tier hierarchy are disclosed only when a Fund had an amount of total transfers during the reporting period that was meaningful in relation to its net assets as of the end of the reporting period. A summary of each Fund’s investments as of March 31, 2015 as categorized under the three-tier hierarchy of inputs, and the reconciliation of Level 3 investments and information on transfers in and out of each level, if applicable, can be found in the Notes to Schedule of Investments section of each Fund’s Schedule of Investments.
The following is a description of valuation inputs and techniques that the Trust currently utilizes to fair value each major category of assets and liabilities:
Equity Securities (Common and Preferred Stock) and Mutual Funds
Equity securities that are actively traded on a securities exchange are fair valued based on quoted prices from the applicable exchange, and to the extent valuation adjustments are not applied to these securities, they are categorized as Level 1. Equity securities traded on inactive markets are fair valued using significant other observable inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from pricing vendors that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable and timely, the fair values of these securities would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Investments in registered mutual funds, including affiliated registered mutual funds, are valued at their respective NAV and are categorized as Level 1.
U.S. Treasury Obligations
U.S. Treasuries are fair valued based on pricing models that evaluate the mean between the most recently published bid and ask price from market data sources. The models also take into consideration yield curves and data received from active market makers and inter-dealer brokers. Yield curves change daily in response to market conditions and are generally obtained from the new issue market and broker-dealer sources. To the extent that these inputs are observable and timely, the fair values of U.S. Treasury obligations would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Mortgage-Backed Securities and Asset-Backed Securities
Mortgage-backed securities, including government sponsored enterprises, are fair valued using pricing models based on inputs that include issuer type, coupon, and cash flows, mortgage prepayment projection tables and adjustable rate mortgage evaluations that incorporate index data, periodic, and life caps, the next coupon reset date, and the convertibility of the bond. To the extent that these inputs are observable and timely, the fair values of mortgage-backed securities would be categorized as Level 2; otherwise the fair value would be categorized as Level 3.
Asset-backed securities and collateralized mortgage obligations are fair valued using pricing models based on a security’s average life volatility. The models also take into account tranche characteristics such as coupon average life, collateral types, ratings, the issuer and tranche type, underlying collateral and performance of the collateral, and discount margin for certain floating rate issues. To the extent that these inputs are observable and timely, the fair values of asset-backed securities and collateralized mortgage obligations would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Foreign Government Bonds and Notes
Foreign government bonds and notes are fair valued based on discounted cash flow models that incorporate option adjusted spreads along with benchmark curves and credit spreads. In addition, international bond markets are monitored daily for information pertaining to the issuer and/or the specific issue. To the extent that these inputs are observable and timely, the fair values of foreign government bonds and notes would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
D-4
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Corporate Bonds and Notes and U.S. Government Agency Issues
Corporate bonds held by a Fund are generally comprised of two main categories: investment grade bonds and high yield bonds. Investment grade bonds are reported at fair value using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, issuer credit information, and option-adjusted spread models where applicable. Fair values for high yield bonds are based primarily on broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds, and sector-specific trends. To the extent that these inputs are observable and timely, the fair values of corporate bonds would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
U.S. Government Agency Issues are reported at fair value using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer, issuer credit information, and option-adjusted spread models where applicable. To the extent that these inputs are observable and timely, the fair values of U.S. Government Agency Issues would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Swaps
Total Return Swaps – Total return swaps that are actively traded and cleared on a securities exchange or swap execution facility are fair valued based on quoted prices from the applicable exchange and are categorized as Level 2. Total Return swaps traded over-the-counter are fair valued using pricing models that take into account among other factors, index spread curves, nominal values, modified duration values and cash flows. To the extent that these inputs are observable and timely, the fair values of total return swaps would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Senior Loan Notes
Floating rate senior loans (“Senior Loans”) are fair valued based on a quoted price received from a single broker-dealer or an average of quoted prices received from multiple broker-dealers or valued relative to other benchmark securities when broker-dealer quotes are unavailable. To the extent that these inputs are observable, the fair values of Senior Loans would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Short-Term Investments
Short-term investments maturing within 60 days are valued using amortized cost, which is used if it approximates market value, and are categorized as Level 2.
4. INVESTMENTS AND RISKS
General Investment Risks
An investment in each Fund represents an indirect investment in the assets owned by that Fund. As with any mutual fund, the value of the assets owned by each Fund may move up or down, and as a result, an investment in a Fund at any point in time may be worth more or less than the original amount invested.
Market and Regulatory Risks
Events in the financial markets and economy may cause volatility and uncertainty and affect Fund performance. Market events may affect a single issuer, industry, sector, or the market as a whole. In addition, because of interdependencies between markets, events in one market may adversely impact other markets or issuers in which a Fund invests in unforeseen ways. Traditionally liquid investments may experience periods of diminished liquidity. During a general downturn in the financial markets, multiple asset classes may decline in value and a Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests. Governmental and regulatory actions, including tax law changes, may also impair Fund management and have unexpected or adverse consequences on particular markets, strategies, or investments. Future market or regulatory events may impact a Fund in unforeseen ways, such as causing the Fund to alter its existing strategies or potentially, to liquidate and close.
Fund of Funds Investments
The Portfolio Optimization Funds are exposed to the same risks as the PF Underlying Funds and Pacific Funds High Income in direct proportion to the allocation of assets among those funds. This annual report contains information about the risks associated with investing in Pacific Funds High Income. The annual report for the PF Underlying Funds contains information about the risks associated with investing in the PF Underlying Funds. Allocations among the PF Underlying Funds and Pacific Funds High Income are determined using an asset allocation process, which seeks to optimize returns by allocating among different asset classes given various levels of risk tolerance. The allocations of the Portfolio Optimization Funds may not effectively decrease risk or increase returns for investors, and the selection and weighting of allocations to asset classes and/or PF Underlying Funds and Pacific Funds High Income may cause them to underperform other mutual funds with a similar investment objective. Although the Portfolio Optimization Funds seek to provide diversification across major asset classes, they may invest a significant portion of their assets in any one or several PF Underlying Funds and Pacific Funds High Income (See Note 7C).
Pacific Funds Diversified Alternatives is exposed to the same risks as the PF Underlying Funds and Pacific Funds Floating Rate Income in direct proportion to the allocation of assets among those funds. This annual report contains information about the risks associated with investing in Pacific Funds Floating Rate Income. The annual report for the PF Underlying Funds contains information about the risks associated with investing in the PF Underlying Funds. Allocations among the PF Underlying Funds and Pacific Funds Floating Rate Income are determined using an asset allocation process, which seeks to provide performance that has a low to moderate correlation with the performance of traditional equity and fixed income asset classes over long-term periods. The allocations of Pacific Funds Diversified Alternatives may not effectively
D-5
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
decrease risk or increase returns for investors, and the selection and weighting of allocations to asset classes and/or the PF Underlying Funds and Pacific Funds Floating Rate Income may cause them to underperform other mutual funds with a similar investment objective. Pacific Funds Diversified Alternatives may invest a significant portion of its assets in any one or several PF Underlying Funds and Pacific Funds Floating Rate Income (See Note 7C).
Equity Investments
Stock markets are volatile. Equity investments tend to go up or down in value, sometimes rapidly and unpredictably, in response to many factors, including a company’s historical and prospective earnings, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. Due to the complexities of markets, events in one market or sector may adversely impact other markets or sectors.
Debt Investments
Debt investments are subject to many risks, including, but not limited to, interest rate risk, credit risk, market and regulatory risk, and liquidity risk, which may affect their value. There is a risk that an issuer or guarantor of a debt investment might be unable or unwilling to meet its financial obligations and might not make interest or principal payments on an instrument when those payments are due (“default”). Defaults may potentially reduce a Fund’s income or ability to recover amounts due and may reduce the value of the debt investment, sometimes dramatically. High Yield or “junk” securities may be more volatile than higher rated securities. High yield securities (including loans) are typically issued by companies that are highly leveraged, less creditworthy or financially distressed and are considered to be mostly speculative in nature (high risk), subject to greater liquidity risk, and subject to a greater risk of default than higher rated securities, especially during periods of economic uncertainty or during economic downturns. Debt investments, including bonds, fixed rate loans, and short-term instruments may be affected by changes in interest rates. Debt investments with longer durations tend to be more sensitive to changes in interest rates, making them more volatile than debt investments with shorter durations or floating or adjustable interest rates. The value of debt investments may fall when interest rates rise. Certain debt investments may be difficult to value, purchase, and sell, particularly during adverse market conditions, because there is a limited market for the investment or there are restrictions on resale.
Given the historically low interest rate environment in the U.S., risks associated with rising interest rates are heightened. It is possible that there will be less governmental action in the near future to maintain low interest rates, or that governmental actions will be less effective in maintaining low interest rates. The Federal Reserve’s termination or tapering of its monetary stimulus quantitative easing program, by gradually winding down its bond purchases, may result in periods of dramatic market volatility and may negatively impact the value of debt securities. The negative impact on debt investments from resulting rate increases for that and other reasons could be swift and significant, including declining market values, increased redemptions and reduced liquidity. Substantial redemptions from bond and other income funds may worsen that impact. Additionally, new regulations applicable to and changing business practices of broker-dealers that make markets in debt investments may result in those broker-dealers restricting their market making activities for certain debt investments, which may reduce the liquidity and increase the volatility of such debt investments.
Certain asset-backed instruments, such as collateralized debt obligations, collateralized mortgage obligations, and other mortgage-related securities, structured investment vehicles, and other debt investments may have exposure to subprime loans or subprime mortgages, which are loans to persons with lower credit ratings. These instruments may present credit risk that is not transparent and that is greater than indicated by their ratings. The value of these instruments may be more acutely affected by downturns in the credit markets or the real estate market than certain other investments, and it may be difficult to value these instruments because of a thin secondary market.
Foreign Investments
Exposure to foreign markets can involve additional risks relating to market, economic, political, regulatory, geopolitical, or other conditions. These factors can make foreign investments more volatile and less liquid than U.S. investments. In addition, foreign markets can react differently to these conditions than the U.S. market. Markets and economies throughout the world are becoming increasingly interconnected, and conditions or events in one market, country or region may adversely impact investments or issuers in another market, country or region. Investments in or exposure to investments in emerging market countries may be riskier than investments in or exposure to investments in U.S. and certain developed markets.
Senior Loan Participations and Assignments
Certain Funds may invest in Senior Loans of domestic or foreign corporations, partnerships, and other entities (“Borrowers”), the interest rates of which float or adjust periodically based upon a specified adjustment schedule, benchmark indicator, or prevailing interest rates. Senior Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates generally include prime rates of one or more major U.S. banks, London Interbank Offered Rates (“LIBOR”) or certificates of deposit rates. Senior Loans often require prepayments from excess cash flow or permit the Borrower to repay at its election. The degree to which Borrowers repay cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturities. Senior Loans are exempt from registration under the Securities Act of 1933, may contain certain restrictions on resale, and cannot be sold publicly. A Fund’s investments in Senior Loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties.
When a Fund purchases assignments, it acquires all the rights and obligations under the loan agreement of the assigning lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than those held by the assigning lender.
When a Fund purchases a participation of a Senior Loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation. A participation interest in Senior Loans includes the right to receive payments of principal, interest, and any fees to which it is entitled from the lender and only upon receipt by the lender of payments from the Borrower, but not from the Borrower
D-6
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
directly. When investing in a participation interest, if a Borrower is unable to meet its obligations under a loan agreement, a Fund generally has no right to enforce compliance with the terms of the loan agreement. As a result, the Fund assumes the credit risk of the Borrower, the selling participant, and any other persons that are interpositioned between the Fund and the Borrower. If the lead lender in a typical lending syndicate becomes insolvent, enters Federal Deposit Insurance Corporation (“FDIC”) receivership or, if not FDIC insured, enters into bankruptcy, the Fund may incur certain costs and delays in receiving payment or may suffer a loss of principal and/or interest. As of March 31, 2015, no participation interest in Senior Loans was held by any of the Funds presented in these financial statements.
U.S. Government Agencies or Government-Sponsored Enterprises
Certain Funds may invest in U.S. Government agencies or government-sponsored enterprises. U.S. Government securities are obligations of, and in certain cases, guaranteed by the U.S. Government, its agencies or instrumentalities. The U.S. Government does not guarantee the NAV of each Fund’s shares. Some U.S. Government securities, such as Treasury Bills, Treasury Notes, Treasury Bonds, and securities guaranteed by GNMA (or “Ginnie Mae”), are supported by the full faith and credit of the U.S. Government; others, such as those of the Federal Home Loan Bank, are supported by the right of the issuer to borrow from the U.S. Department of the Treasury (the “U.S. Treasury”); others, such as those of the Federal National Mortgage Association (“FNMA” or “Fannie Mae”), are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations. Securities not backed by the full faith and credit of the U.S. Government may be subject to a greater risk of default. U.S. Government securities may include zero coupon securities, which do not distribute interest on a current basis and tend to be subject to greater risk than interest-paying securities of similar maturities.
Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. Government) include FNMA and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”). FNMA and FHLMC are government-sponsored corporations, the common stocks of which are owned entirely by private stockholders. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions, and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC issues Participation Certificates (“PCs”), which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. Government.
Segregation and Collateral
If a Fund engages in certain transactions such as derivative investments or repurchase agreements, it may require collateral in the form of cash or investments to be held in segregated accounts at the Trust’s custodian, with an exchange or clearing member firm, or segregated on the Fund’s books and records maintained by the custodian and/or the fund manager. In each instance that segregation of collateral is required, it is done so in accordance with the 1940 Act and/or any interpretive guidance issued by the SEC. There is a possibility that a Fund could experience a delay in selling investments that are segregated as collateral.
5. DERIVATIVE INVESTMENTS AND RISKS, AND ENFORCEABLE MASTER NETTING ARRANGEMENTS
A. PRINCIPAL MARKET RISKS MANAGED BY INVESTING IN DERIVATIVES
Derivative instruments are investments whose values are tied to the value of an underlying security or asset, a group of assets, interest rates, exchange rates, currency or an index. Certain Funds are permitted to invest in derivative instruments, including, but not limited to, futures contracts, option contracts, forward foreign currency contracts and swap agreements. Derivatives may have little or no initial cash investment value relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This is sometimes referred to as leverage. Leverage can magnify a Fund’s gains and losses and therefore increase its volatility. A Fund’s investments in derivatives may increase, decrease or change the level or types of exposure to certain risk factors. The primary risks a Fund may attempt to manage through investing in derivative instruments include, but are not limited to, interest rate, foreign investments and currency, price volatility, and credit (including counterparty) risks.
Interest rate risk – A Fund may be exposed to interest rate risk through investments in debt securities. Interest rate risk is the risk that debt securities will decline in value as a result of changes in interest rates. For example, the value of bonds, fixed rate loans and short-term money market instruments may decline in value when interest rates rise. In a low interest rate environment, the risks associated with rising interest rates are heightened. Debt securities with longer durations tend to be more sensitive to changes in interest rates, making them more volatile than debt securities with shorter durations or money market instruments. Therefore, duration is a potentially useful tool to measure the sensitivity of a debt security’s yield (market price to interest rate movement). To manage these risks, certain Funds may invest in derivative instruments tied to interest rates.
Foreign investments and currency risk – A Fund may be exposed to foreign investments and/or currency risk through direct investment in securities or through options, futures or currency transactions. The prices of foreign securities that are denominated in foreign currencies are affected by the value of the U.S. dollar. With respect to securities denominated in foreign currencies, in general, as the value of the U.S. dollar rises, the U.S. dollar price of a foreign security will fall. As the value of the U.S. dollar falls, the U.S. dollar value of the foreign security will rise. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons. Foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate and timely company information, differences in the way securities markets operate, relatively lower market liquidity, less stringent financial reporting and accounting guidance and controls, less secure foreign banks or securities depositories than those in the U.S., foreign taxation issues, and foreign controls on investments. As a result, a Fund’s investments in foreign currency-denominated securities and other foreign investments may reduce the returns of the Fund. To manage these risks, certain Funds may invest in derivative instruments tied to foreign investments and/or currencies.
D-7
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Price volatility risk – Derivatives tied to equity and debt securities are exposed to potential price volatility. Debt securities are affected by many factors, including prevailing interest rates, market conditions, and market liquidity. Volatility of below investment grade debt securities (including loans) may be relatively greater than for investment grade debt securities. Equity securities tend to go up or down in value, sometimes rapidly and unpredictably. The prices of equity securities change in response to many factors, including a company’s historical and prospective earnings, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. Due to the complexities of markets, events in one market or sector may adversely impact other markets or sectors. To manage these risks, certain Funds may invest in various derivative instruments. Derivative instruments may be used to manage a Fund’s exposure to price volatility risk but may also be subject to greater price volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political, and regulatory developments.
Credit and Counterparty risk – Credit risk is the risk that a debt security’s issuer (or borrower or counterparty) will be unable or unwilling to meet its financial obligations (e.g., may not be able to make principal and/or interest payments when they are due or otherwise default on other financial terms) and/or may go bankrupt. This is also sometimes described as counterparty risk. A Fund may lose money if the issuer or guarantor of debt security, or counterparty of a derivative contract, repurchase or reverse repurchase agreement, or a loan of Fund securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. A Fund may attempt to minimize concentrations of credit risk by undertaking transactions with a large number of borrowers or counterparties on recognized and reputable exchanges. A Fund’s investments in debt investments may range in quality from those rated in the lowest category in which it is permitted to invest to those rated in the highest category by a rating agency, or if unrated, determined by the manager to be of comparable quality.
Similar to credit risk, a Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which a Fund has unsettled or open transactions will default. Financial assets of counterparties, which potentially expose a Fund to counterparty risk, consist mainly of cash due from counterparties and investments. Certain managers may attempt to minimize credit risks to a Fund by performing extensive reviews of each counterparty, entering into transactions with counterparties that the manager believes to be creditworthy at the time of the transaction and requiring the posting of collateral in applicable transactions. To manage these risks, certain Funds may invest in derivative instruments tied to a security issuers’ financial strength.
A Fund’s transactions in listed securities are settled/paid for upon delivery with their counterparties. Therefore, the risk of counterparty default for listed securities is considered minimal, as delivery of securities sold is only made once a Fund has received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligations.
B. DERIVATIVE INVESTMENTS
In addition to managing the market risks described above, certain Funds, if permitted by their investment objectives, may also invest in derivatives for purposes of hedging, duration management, to gain exposure to specific investment opportunities, as a substitute for securities, to enhance returns, or to otherwise help achieve a Fund’s investment goal. Each derivative instrument and the reasons a Fund invested in derivatives during the reporting period are discussed in further detail below.
Swap Agreements – Swap agreements are bilaterally negotiated agreements between the Funds and their counterparties to exchange swap investment cash flows, assets, foreign currencies or market-linked returns at specified intervals. Swap agreements are privately negotiated in the OTC market or may be executed in a multilateral or other execution facility platform, such as a registered commodities exchange (“centrally cleared swaps”). In connection with these agreements, securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency. Swaps are marked-to-market daily based upon values received from third party vendors or quotations from market makers. Market values greater than zero are recorded as an asset and market values less than zero are recorded as a liability. The change in value of swaps, including accruals of periodic amounts of interest to be paid or received on swaps, is recorded as unrealized appreciation or depreciation. Daily changes in valuation of centrally cleared swaps, if any, are recorded as variation margin receivable or payable. OTC swap payments received or made at the beginning of the measurement period are recorded as an asset or liability and represent payments made or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gain or loss when the swap is closed. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss. Net periodic payments received by a Fund are recorded as realized gain.
Total Return Swaps – A Fund investing in total return swaps is subject to the risk that there is no liquid market for these agreements, that the counterparties may default on their obligations to perform or that there may be unfavorable changes in the value of the underlying index or reference instrument (generally caused by changes in interest rates or declines in credit quality). A total return swap agreement is one in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying index or reference instrument, which includes both the income it generates and any capital gains. To the extent the total return of the index or reference instrument underlying the transaction exceeds or falls short of the offsetting interest rate obligation, a Fund will receive a payment from or make a payment to the counterparty. A Fund’s maximum risk of loss from counterparty credit risk related to total return swaps is the discounted net value of the cash flows to be received from or paid to the counterparty over the contract’s remaining life, to the extent that the amount is positive. The risk may be mitigated to some extent if a master netting arrangement between a Fund and the counterparty is in place and to the extent a Fund obtains collateral to cover a Fund’s exposure to the counterparty.
A Fund may enter into fully funded total return swaps which involves one party making an initial payment equal to the estimated value of the reference instrument. The parties to the swap then exchange respective commitments to pay or receive a net amount based on the change in the fair value of a reference instrument and a specified notional amount.
D-8
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
During the reporting period, Pacific Funds High Income entered into total return swaps on high yield credit indices to obtain long exposure to the broader high yield market.
The following is a summary of the location of fair value amounts of derivative investments, if any, disclosed in the Trust’s Statements of Assets and Liabilities:
| Location on the Statements of Assets and Liabilities | ||||
| Derivative Investments Risk Type | Asset Derivative Investments | Liability Derivative Investments | ||
| Interest rate contracts |
Swap agreements, at value | Swap agreements, at value | ||
The following is a summary of fair values of derivative investments disclosed in Pacific Funds High Income’s Statement of Assets and Liabilities, categorized by primary risk exposure as of March 31, 2015:
| Derivative Investments Risk Type | Total Value at March 31, 2015 |
|||
| Interest rate contracts (Asset) |
$59,301 | |||
The following is a summary of the location of realized gains and losses and changes in net unrealized appreciation and depreciation of derivative investments, if any, disclosed in the Trust’s Statements of Operations:
| Derivative Investments Risk Type | Location of Gain (Loss) on Derivative Investments Recognized in the Statements of Operations | |
| Interest rate contracts |
Net realized gain (loss) on swap transactions Change in net unrealized appreciation (depreciation) on swaps |
The following is a summary of Pacific Funds High Income’s net realized gain or loss and change in net unrealized appreciation or depreciation on derivative investments recognized in its Statement of Operations categorized by primary risk exposure for the year ended March 31, 2015:
| Derivative Investments Risk Type | Realized Gain (Loss) |
Change in Net Unrealized Appreciation (Depreciation) |
||||||
| Interest rate contracts |
($967 | ) | $59,301 | |||||
For financial reporting purposes, the Trust does not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral (receivables) or the obligation to return cash collateral (payables) arising from derivative instruments recognized at fair value executed with the same counterparty under a master netting arrangement.
The average value of derivative investments in interest rate contracts held by Pacific Funds High Income for the year ended March 31, 2015 was $11,860. Such average value of derivative investments and the amounts of net realized gain or loss and changes in net unrealized appreciation or depreciation on derivative investments as disclosed in its Statement of Operations serve as indicators of volume of financial derivative activity for Pacific Funds High Income for the year ended March 31, 2015.
C. ENFORCEABLE MASTER NETTING ARRANGEMENTS
Master Agreements and Netting Arrangements – Certain Funds are parties to various agreements, including but not limited to International Swaps and Derivatives Association Agreements and related Credit Support Annex, Master Repurchase Agreements, and Master Securities Forward Transactions Agreements (collectively “Master Agreements”), which govern the terms of certain transactions with select counterparties. These Master Agreements generally include provisions for general obligations, representations, agreements, collateral, and certain events of default or termination. These Master Agreements also include provisions for netting arrangements that help reduce credit and counterparty risk associated with relevant transactions. The netting arrangements are generally tied to credit related events that if triggered, would cause an event of default or termination giving a Fund or counterparty the right to terminate early and cause settlement, on a net basis, of all transactions under the applicable Master Agreement. In the event of an early termination as a result of an event of default under the Master Agreement, the total value exposure of all transactions will be offset against collateral exchanged to date, which would result in a net receivable or payable that would be due from or to the counterparty. Credit related events include, but are not limited to, bankruptcy, failure to make timely payments, restructuring, obligation acceleration, obligation default, a material decline in net assets, decline in credit rating or repudiation/moratorium. Any election made by a counterparty to early terminate the transactions under a Master Agreement could have a material adverse impact on a Fund’s financial statements. A Fund’s overall exposure to credit risk, subject to netting arrangements can change substantially within a short period, as it is affected by each transaction subject to the arrangement.
Master Agreements can also help limit counterparty risk by specifying collateral posting arrangements at pre-arranged exposure levels. Under the Master Agreements, collateral is routinely transferred if the total net exposure to certain transactions under the relevant Master Agreement with a counterparty in a given Fund exceeds a specified threshold, net of collateral already in place, which typically ranges from $0 to $250,000 depending on the counterparty and the type of Master Agreement. Collateral under the Master Agreements is usually in the form of cash or U.S. Treasury Bills but could include other types of securities. The value of all derivative transactions outstanding under a Master Agreement is calculated daily to determine the amount of collateral to be received or pledged by the counterparty. Posting of collateral for OTC derivative transactions are covered under tri-party collateral agreements between the Trust, the Trust’s Custodian and each counterparty. Collateral for centrally cleared derivatives transactions are posted with the applicable derivatives clearing organization.
D-9
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The following is a summary of financial and derivative instruments that are subject to enforceable master netting agreements (or similar arrangements) and collateral received and pledged in connection with the master netting agreements (or similar arrangements) for Pacific Funds High Income as of March 31, 2015:
| Gross Amounts Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset in the Statements of Assets and Liabilities |
Gross Amounts Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset in the Statements of Assets and Liabilities |
|||||||||||||||||||||||||||||||
| Description | Financial Instruments |
Collateral Received |
Net Amount |
Financial Instruments |
Collateral Pledged |
Net Amount |
||||||||||||||||||||||||||||
| Assets | Liabilities | |||||||||||||||||||||||||||||||||
| Swaps |
$59,301 | $— | $— | $59,301 | $— | $— | $— | $— | ||||||||||||||||||||||||||
6. INVESTMENT ADVISORY, ADMINISTRATION AND SHAREHOLDER SERVICES, SUPPORT SERVICES, AND DISTRIBUTION AGREEMENTS
Pursuant to an Investment Advisory Agreement, PLFA, a wholly-owned subsidiary of Pacific Life Insurance Company (“Pacific Life”), serves as Adviser to the Trust. PLFA manages the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives. PLFA also manages Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income, and Pacific Funds High Income under the name Pacific Asset Management. PLFA receives investment advisory fees from each Fund based on the following advisory fee rates, which are based on an annual percentage of average daily net assets of each Fund:
| Fund | Advisory Fee Rate | |
| Pacific Funds Portfolio Optimization Conservative Pacific Funds Portfolio Optimization Moderate-Conservative Pacific Funds Portfolio Optimization Moderate Pacific Funds Portfolio Optimization Growth Pacific Funds Portfolio Optimization Aggressive-Growth Pacific Funds Diversified Alternatives |
0.20% | |
| Pacific Funds Short Duration Income | 0.40% | |
| Pacific Funds Core Income | 0.50% | |
| Pacific Funds Strategic Income Pacific Funds High Income |
0.60% | |
| Pacific Funds Floating Rate Income Pacific Funds Limited Duration High Income (1) |
0.65% |
| (1) | PLFA agreed to waive 0.02% of its advisory fee through July 31, 2015 for the Pacific Funds Limited Duration High Income. The agreement will terminate if the investment advisory agreement is terminated or upon approval by the Board. There is no guarantee that PLFA will continue such waivers after that date. |
Pursuant to an Administration and Shareholder Services Agreement (the “Administration Agreement”), Pacific Life serves as administrator (the “Administrator”) to the Trust. The administration fee is for procuring or providing administrative, transfer agency, and shareholder services. In addition, Pacific Life and PLFA provide support services to the Trust that are outside the scope of the Administrator’s and Adviser’s responsibilities under the Administration Agreement and Investment Advisory Agreement. Under the Support Services Agreement, the Trust compensates Pacific Life and PLFA for their expenses in providing support services to the Trust in connection with various matters, some of which include the time spent by legal, accounting, and compliance personnel of Pacific Life and PLFA (including individuals who may be officers or Trustees of the Trust), to attend meetings of the Board and to provide assistance with the coordination and supervision in connection with the services procured for the Trust under the Administration Agreement. Support services do not include services for which PLFA is responsible pursuant to the Investment Advisory Agreement. The Trust reimburses Pacific Life and PLFA for these support services on an approximate cost basis.
Pacific Life receives an administration fee from each Fund and share class presented in these financial statements based on the following administration fee rates, which are based on an annual percentage of average daily net assets of each Fund:
| Fund | Share Class | Administration Fee Rate | ||
| Portfolio Optimization Funds | A, B, C, R, and Advisor Class |
0.15% | ||
| Pacific Funds Diversified Alternatives | A, C, and Advisor Class |
0.15% | ||
| Pacific Funds Short Duration Income Pacific Funds Core Income |
A, C, and Advisor Class |
0.30% | ||
| Pacific Funds
Strategic Income Pacific Funds Limited Duration High Income |
I | 0.15% | ||
|
Pacific Funds Floating Rate Income Pacific Funds High Income |
A, C, and Advisor Class |
0.30% | ||
| I and P | 0.15% |
D-10
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Pursuant to a Distribution Agreement, Pacific Select Distributors, LLC (the “Distributor”), a wholly-owned subsidiary of Pacific Life, serves as distributor of the Trust’s shares. Under the Distribution Agreement, the Distributor bears all expenses of providing services, including costs of sales presentations, mailings, advertisements, and other marketing efforts by the Distributor in connection with the distribution or sale of the Trust’s shares and makes distribution and/or service payments to selling groups in connection with the sale of certain of the Trust’s shares and subsequent servicing needs of shareholders provided by selling groups. The Distributor receives distribution and service fees pursuant to class-specific distribution and service plans, each adopted in accordance with Rule 12b-1 (12b-1) under the 1940 Act (together the “12b-1 Plans”) for Class B, C, and R shares. The Distributor also receives service fees pursuant to a non-12b-1 Class A Service Plan (“Class A Plan”). The Distributor receives distribution and/or service fees from each Fund and applicable share class presented in these financial statements based on the following distribution and service fee rates, which are based on an annual percentage of average daily net assets:
| Plan | Share Class | Distribution Fee Rate |
Service
Fee Rate | |||
| 12b-1 Plans |
B and C | 0.75% | 0.25% | |||
| R | 0.25% | 0.25% | ||||
| Class A Plan |
A | 0.25% |
There are no distribution and service fees for Class I, Class P, and Advisor Class shares. The distribution and service fees are accrued daily. For the year ended March 31, 2015, the Distributor, acting as underwriter, received net commissions (front-end sales charges) of $15,738,260 from the sale of Class A shares and received $565,023 in CDSC from redemptions of Class A, B, and C shares.
7. TRANSACTIONS WITH AFFILIATES
A. ADVISORY FEES, ADMINISTRATION FEES, DISTRIBUTION AND/OR SERVICE FEES, AND EXPENSES FOR SUPPORT SERVICES
The Adviser, the Distributor, and Pacific Life are related parties. The advisory fees earned by the Adviser, the administration fees earned by Pacific Life, the distribution and/or service fees earned by the Distributor, and expenses for support services recovered by PLFA and Pacific Life (see Note 6) from each Fund presented in these financial statements for the year ended March 31, 2015 are presented in the Statements of Operations. The amounts of each of these fees that remained payable as of March 31, 2015 are presented in the Statements of Assets and Liabilities.
B. EXPENSE LIMITATION AGREEMENTS
To help limit the Trust’s expenses, PLFA has entered into expense limitation agreements with the Trust and has contractually agreed to reimburse each Fund presented in these financial statements for certain operating expenses that exceed an annual rate based on a percentage of a Fund’s average daily net assets. These operating expenses include, but are not limited to: administration fees; organizational expenses; custody expenses; expenses for audit, tax, and certain legal services; preparation, printing, filing, and distribution to existing shareholders of proxies, prospectuses and shareholder reports, and other regulatory documents, as applicable; independent trustees’ fees; and establishing, overseeing and administering the Trust’s compliance program. These operating expenses do not include: investment advisory fees; distribution and/or service fees; dividends on securities sold short; acquired fund fees and expenses; interest (including commitment fees, if any); taxes (including foreign taxes on dividends, interest or gains); brokerage commissions and other transactional expenses, and extraordinary expenses such as litigation expenses and other expenses not incurred in the ordinary course of each Fund’s business. The expense caps for each Fund and share class presented in these financial statements are as follows:
| Fund | Share Class | Expense Caps | ||
| Portfolio Optimization Funds | A, B, C, R and Advisor Class | 0.15% through 7/31/2016 and 0.30% thereafter through 7/31/2023 | ||
| Pacific Funds Diversified Alternatives | A, C, and Advisor Class |
0.40% through 7/31/2017 | ||
| Pacific Funds Short Duration Income Pacific Funds Strategic Income |
A, C, and Advisor Class |
0.20% through 7/31/2016 | ||
| I | 0.20% through 7/31/2014 and 0.15% from 8/1/2014 through 7/31/2016 | |||
| Pacific Funds Core Income | A, C, and Advisor Class |
0.15% through 7/31/2014 and 0.20% from 8/1/2014 through 7/31/2016 | ||
| I | 0.15% through 7/31/2016 | |||
| Pacific Funds Floating Rate Income | A, C, P, and Advisor Class |
0.15% through 12/31/2014 and 0.20% from 1/1/2015 through 7/31/2016 | ||
| I | 0.15% through 7/31/2016 | |||
| Pacific Funds High Income | A, C, P, and Advisor Class |
0.20% through 7/31/2016 | ||
| I | 0.20% through 7/31/2014 and 0.15% from 8/1/2014 through 7/31/2016 |
There is no guarantee that PLFA will continue to reimburse expenses upon the expiration of the applicable expense limitation agreements. Any expense reimbursements are subject to recoupment by PLFA for a period of time as permitted under regulatory and accounting guidance (currently 3 years from the end of the fiscal year in which the reimbursement took place), to the extent that the recoupment would not cause the Fund to exceed the expense cap that was in effect at the time of the reimbursement. Any amounts repaid to PLFA will have the effect of increasing such expenses of the Fund, but not above the expense cap.
The Adviser’s expense reimbursement and the advisory fee waiver, if any, of each of the applicable Funds presented in these financial statements for the year ended March 31, 2015 are presented in the Statements of Operations. Any amounts that remained due from the Adviser as of March 31, 2015 are presented in the Statements of Assets and Liabilities.
D-11
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The cumulative expense reimbursement amounts, if any, as of March 31, 2015 that are subject to recoupment by PLFA from each Fund presented in these financial statements are as follows:
| Funds | 3/31/2016 | 3/31/2017 | 3/31/2018 | |||||||||||
| Pacific Funds Portfolio Optimization Conservative |
$504,164 | $485,486 | $341,046 | |||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
475,646 | 509,594 | 412,969 | |||||||||||
| Pacific Funds Portfolio Optimization Moderate |
1,124,770 | 1,236,620 | 1,039,248 | |||||||||||
| Pacific Funds Portfolio Optimization Growth |
814,333 | 857,348 | 722,497 | |||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
306,272 | 297,159 | 255,368 | |||||||||||
| Pacific Funds Diversified Alternatives |
7,432 | 78,329 | ||||||||||||
| Pacific Funds Short Duration Income |
97,734 | 192,031 | 287,988 | |||||||||||
| Pacific Funds Core Income |
1,323,370 | 1,326,276 | 1,007,441 | |||||||||||
| Pacific Funds Strategic Income |
118,217 | 181,996 | 294,682 | |||||||||||
| Pacific Funds Floating Rate Income |
347,661 | 1,642,470 | 1,908,310 | |||||||||||
| Pacific Funds Limited Duration High Income |
82,357 | 119,970 | ||||||||||||
| Pacific Funds High Income |
97,325 | 98,786 | 124,757 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| $5,209,492 | $6,917,555 | $6,592,605 | ||||||||||||
|
|
|
|
|
|
|
|||||||||
During the year ended March 31, 2015, PLFA recouped $5,103 from Pacific Funds Diversified Alternatives. There was no recoupment of expense reimbursement by PLFA from any other Funds presented in these financial statements for the year ended March 31, 2015.
C. INVESTMENTS IN AFFILIATED FUNDS
As of March 31, 2015, each of the Portfolio Optimization Funds and Pacific Funds Diversified Alternatives (aggregate of all share classes) owned Class P shares in each of the applicable affiliated PF Underlying Funds, Pacific Funds Floating Rate Income, and Pacific Funds High Income. A summary of holdings and transactions with affiliated mutual fund investments as of and for the year ended March 31, 2015 is as follows:
| Fund/Underlying Fund |
Beginning Value as of |
Purchase |
Distributions Received and |
Sales |
Net Realized |
Change in Appreciation |
As of March 31, 2015 | |||||||||||||||||||||||||
| Ending Value |
Shares Balance |
|||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Conservative | ||||||||||||||||||||||||||||||||
| PF Floating Rate Loan |
$28,543,030 | $3,050,669 | $958,924 | $4,766,724 | ($24,096 | ) | ($452,122 | ) | $27,309,681 | 2,766,938 | ||||||||||||||||||||||
| PF Inflation Managed |
40,774,922 | 4,311,822 | 892,030 | 14,125,826 | (2,077,400 | ) | 2,127,401 | 31,902,949 | 3,625,335 | |||||||||||||||||||||||
| PF Managed Bond |
150,635,060 | 13,094,320 | 2,361,532 | 27,232,983 | 2,652,257 | 4,212,093 | 145,722,279 | 13,175,613 | ||||||||||||||||||||||||
| PF Short Duration Bond |
65,138,502 | 2,600,816 | 749,640 | 10,263,368 | (44,132 | ) | (166,478 | ) | 58,014,980 | 5,795,702 | ||||||||||||||||||||||
| PF Emerging Markets Debt |
26,376,381 | 9,354,525 | 1,076,155 | 4,992,234 | (227,277 | ) | (2,372,252 | ) | 29,215,298 | 3,286,310 | ||||||||||||||||||||||
| PF Comstock |
20,375,831 | 867,290 | 318,536 | 7,684,627 | 3,635,664 | (2,716,705 | ) | 14,795,989 | 866,783 | |||||||||||||||||||||||
| PF Growth |
4,599,951 | 2,327,215 | 44,846 | 1,163,789 | 80,245 | 634,978 | 6,523,446 | 338,002 | ||||||||||||||||||||||||
| PF Large-Cap Growth |
10,634,553 | 126,874 | — | 3,256,772 | 970,158 | 264,343 | 8,739,156 | 815,981 | ||||||||||||||||||||||||
| PF Large-Cap Value |
24,012,664 | 619,282 | 486,167 | 5,566,261 | 3,407,466 | (1,868,863 | ) | 21,090,455 | 1,281,316 | |||||||||||||||||||||||
| PF Main Street Core |
8,086,162 | 2,294,512 | 43,405 | 4,652,620 | 2,226,169 | (1,573,637 | ) | 6,423,991 | 450,490 | |||||||||||||||||||||||
| PF Mid-Cap Equity |
8,535,989 | 469,678 | 16,799 | 2,766,926 | 1,370,821 | (935,005 | ) | 6,691,356 | 550,729 | |||||||||||||||||||||||
| PF Mid-Cap Growth |
4,950,986 | — | 3,987 | 1,034,471 | 196,904 | 273,616 | 4,391,022 | 504,136 | ||||||||||||||||||||||||
| PF International Large-Cap |
11,283,090 | 7,423,347 | 199,138 | 4,093,621 | 706,628 | (587,821 | ) | 14,930,761 | 807,068 | |||||||||||||||||||||||
| PF International Value |
6,876,810 | 3,520,759 | 329,673 | 1,239,045 | 28,422 | (583,351 | ) | 8,933,268 | 939,355 | |||||||||||||||||||||||
| PF Currency Strategies |
11,470,557 | 2,452,247 | 270,801 | 2,579,164 | (40,422 | ) | 672,097 | 12,246,116 | 1,234,488 | |||||||||||||||||||||||
| PF Global Absolute Return |
25,024,799 | 744,581 | 1,108,725 | 6,512,637 | (35,764 | ) | 904,270 | 21,233,974 | 2,117,046 | |||||||||||||||||||||||
| PF Precious Metals |
3,254,088 | 2,313,028 | — | 3,137,379 | (2,026,510 | ) | 1,308,386 | 1,711,613 | 380,359 | |||||||||||||||||||||||
| $450,573,375 | $55,570,965 | $8,860,358 | $105,068,447 | $10,799,133 | ($859,050 | ) | $419,876,334 | |||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative | ||||||||||||||||||||||||||||||||
| PF Floating Rate Loan |
$34,464,021 | $2,094,292 | $1,203,693 | $2,512,675 | ($72,862 | ) | ($521,351 | ) | $34,655,118 | 3,511,157 | ||||||||||||||||||||||
| PF Inflation Managed |
42,474,816 | 5,213,964 | 1,122,719 | 7,579,165 | (1,298,280 | ) | 1,159,067 | 41,093,121 | 4,669,673 | |||||||||||||||||||||||
| PF Managed Bond |
117,716,374 | 25,378,002 | 2,234,067 | 12,613,472 | 2,419,042 | 3,606,111 | 138,740,124 | 12,544,315 | ||||||||||||||||||||||||
| PF Short Duration Bond |
59,644,245 | 3,028,141 | 735,101 | 5,602,531 | (34,785 | ) | (186,516 | ) | 57,583,655 | 5,752,613 | ||||||||||||||||||||||
| PF Emerging Markets Debt |
24,888,885 | 7,194,432 | 1,021,402 | 1,932,753 | (156,341 | ) | (2,258,953 | ) | 28,756,672 | 3,234,721 | ||||||||||||||||||||||
| PF Comstock |
35,779,162 | 996,380 | 626,749 | 10,055,475 | 5,197,157 | (3,545,435 | ) | 28,998,538 | 1,698,801 | |||||||||||||||||||||||
| PF Growth |
11,681,696 | 3,933,035 | 109,840 | 1,312,496 | 149,813 | 1,601,774 | 16,163,662 | 837,495 | ||||||||||||||||||||||||
| PF Large-Cap Growth |
21,227,796 | 247,877 | — | 4,350,672 | 2,048,619 | 676,542 | 19,850,162 | 1,853,423 | ||||||||||||||||||||||||
| PF Large-Cap Value |
46,967,490 | 776,625 | 1,005,992 | 8,379,400 | 5,334,469 | (2,281,887 | ) | 43,423,289 | 2,638,110 | |||||||||||||||||||||||
| PF Main Street Core |
30,375,809 | 445,100 | 302,139 | 4,515,471 | 4,753,999 | (1,855,772 | ) | 29,505,804 | 2,069,131 | |||||||||||||||||||||||
| PF Mid-Cap Equity |
12,488,118 | 5,624,083 | 46,462 | 1,017,842 | 1,997,123 | (714,809 | ) | 18,423,135 | 1,516,307 | |||||||||||||||||||||||
| PF Mid-Cap Growth |
7,317,129 | 192,491 | 5,473 | 2,097,039 | 125,241 | 501,107 | 6,044,402 | 693,961 | ||||||||||||||||||||||||
| PF Small-Cap Growth |
7,708,132 | — | — | 1,796,963 | 1,023,705 | (660,880 | ) | 6,273,994 | 423,919 | |||||||||||||||||||||||
| PF Small-Cap Value |
5,856,536 | 51,783 | 81,402 | 436,770 | 1,736,466 | (1,169,646 | ) | 6,119,771 | 585,624 | |||||||||||||||||||||||
| PF Emerging Markets |
10,334,687 | 2,454,493 | 146,410 | 773,101 | 251,779 | (854,031 | ) | 11,560,237 | 851,269 | |||||||||||||||||||||||
| PF International Large-Cap |
23,126,609 | 3,990,722 | 328,416 | 10,078,515 | 833,072 | (1,216,381 | ) | 16,983,923 | 918,050 | |||||||||||||||||||||||
| PF International Small-Cap |
— | 11,443,250 | — | 203,371 | 9,030 | 776,174 | 12,025,083 | 1,124,891 | ||||||||||||||||||||||||
| PF International Value |
16,712,529 | 984,353 | 556,035 | 5,807,449 | 486,805 | (1,809,002 | ) | 11,123,271 | 1,169,639 | |||||||||||||||||||||||
| PF Currency Strategies |
14,608,220 | 8,917,871 | 495,015 | 2,482,229 | (47,242 | ) | 966,925 | 22,458,560 | 2,263,968 | |||||||||||||||||||||||
| PF Global Absolute Return |
31,927,755 | 1,282,513 | 1,518,750 | 6,588,964 | (59,908 | ) | 1,200,886 | 29,281,032 | 2,919,345 | |||||||||||||||||||||||
| PF Precious Metals |
10,411,233 | 1,412,242 | — | 9,539,286 | (3,872,443 | ) | 4,037,027 | 2,448,773 | 544,172 | |||||||||||||||||||||||
| $565,711,242 | $85,661,649 | $11,539,665 | $99,675,639 | $20,824,459 | ($2,549,050 | ) | $581,512,326 | |||||||||||||||||||||||||
D-12
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
| Fund/Underlying Fund |
Beginning Value as of |
Purchase |
Distributions Received and |
Sales |
Net Realized |
Change in Appreciation |
As of March 31, 2015 | |||||||||||||||||||||||||
| Ending Value |
Shares Balance |
|||||||||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate | ||||||||||||||||||||||||||||||||
| PF Floating Rate Loan |
$60,152,863 | $7,256,030 | $2,262,970 | $3,425,820 | ($128,279 | ) | ($1,022,111 | ) | $65,095,653 | 6,595,304 | ||||||||||||||||||||||
| PF Inflation Managed |
73,375,793 | 4,375,498 | 1,140,170 | 38,027,985 | (3,644,202 | ) | 4,539,316 | 41,758,590 | 4,745,294 | |||||||||||||||||||||||
| PF Managed Bond |
221,932,405 | 43,482,376 | 4,194,499 | 22,222,338 | 4,428,865 | 6,938,612 | 258,754,419 | 23,395,517 | ||||||||||||||||||||||||
| PF Short Duration Bond |
90,643,911 | 17,925,919 | 1,319,281 | 22,589,946 | (225,306 | ) | (285,170 | ) | 86,788,689 | 8,670,199 | ||||||||||||||||||||||
| Pacific Funds High Income |
— | 16,114,996 | 187,704 | 231,813 | 1,320 | 281,811 | 16,354,018 | 1,572,502 | ||||||||||||||||||||||||
| PF Emerging Markets Debt |
59,512,117 | 30,409,578 | 2,879,227 | 3,950,624 | (356,088 | ) | (6,942,342 | ) | 81,551,868 | 9,173,438 | ||||||||||||||||||||||
| PF Comstock |
127,436,455 | 2,873,018 | 2,478,805 | 23,504,952 | 14,823,837 | (8,790,992 | ) | 115,316,171 | 6,755,487 | |||||||||||||||||||||||
| PF Growth |
43,505,083 | 11,829,218 | 369,347 | 2,685,304 | 455,014 | 5,766,087 | 59,239,445 | 3,069,401 | ||||||||||||||||||||||||
| PF Large-Cap Growth |
67,576,645 | 2,453,920 | — | 3,555,085 | 7,091,137 | 2,972,663 | 76,539,280 | 7,146,525 | ||||||||||||||||||||||||
| PF Large-Cap Value |
156,336,657 | 1,720,118 | 3,400,388 | 23,809,017 | 16,838,201 | (6,592,202 | ) | 147,894,145 | 8,985,063 | |||||||||||||||||||||||
| PF Main Street Core |
100,178,462 | 916,729 | 1,022,594 | 11,427,183 | 14,924,849 | (5,193,777 | ) | 100,421,674 | 7,042,193 | |||||||||||||||||||||||
| PF Mid-Cap Equity |
64,045,760 | 3,809,747 | 175,454 | 3,220,063 | 7,563,766 | (2,879,592 | ) | 69,495,072 | 5,719,759 | |||||||||||||||||||||||
| PF Mid-Cap Growth |
36,488,229 | 1,664,317 | 31,273 | 7,580,355 | (48,262 | ) | 3,645,211 | 34,200,413 | 3,926,569 | |||||||||||||||||||||||
| PF Small-Cap Growth |
18,542,720 | 7,668,554 | — | 2,267,962 | 3,115,510 | (423,509 | ) | 26,635,313 | 1,799,683 | |||||||||||||||||||||||
| PF Small-Cap Value |
53,908,924 | 1,563,502 | 701,581 | 8,974,399 | 15,462,446 | (10,717,085 | ) | 51,944,969 | 4,970,810 | |||||||||||||||||||||||
| PF Real Estate |
30,326,737 | 912,079 | 324,767 | 19,081,863 | 4,068,577 | (376,567 | ) | 16,173,730 | 958,727 | |||||||||||||||||||||||
| PF Emerging Markets |
60,927,866 | 3,854,820 | 824,835 | 4,879,152 | 1,533,486 | (4,756,240 | ) | 57,505,615 | 4,234,581 | |||||||||||||||||||||||
| PF International Large-Cap |
96,425,278 | 28,864,751 | 1,619,411 | 39,463,301 | (1,045,600 | ) | (899,068 | ) | 85,501,471 | 4,621,701 | ||||||||||||||||||||||
| PF International Small-Cap |
— | 48,447,438 | — | 695,439 | 26,639 | 3,296,726 | 51,075,364 | 4,777,864 | ||||||||||||||||||||||||
| PF International Value |
67,830,686 | 11,849,498 | 2,503,027 | 20,854,631 | (66,667 | ) | (5,353,796 | ) | 55,908,117 | 5,878,877 | ||||||||||||||||||||||
| PF Currency Strategies |
56,028,832 | 26,635,830 | 1,758,496 | 8,590,533 | (303,335 | ) | 3,769,854 | 79,299,144 | 7,993,865 | |||||||||||||||||||||||
| PF Global Absolute Return |
75,451,004 | 2,716,254 | 3,458,157 | 18,031,684 | (222,295 | ) | 2,886,822 | 66,258,258 | 6,606,008 | |||||||||||||||||||||||
| PF Precious Metals |
29,920,389 | 4,371,015 | — | 19,340,214 | (9,010,130 | ) | 7,918,823 | 13,859,883 | 3,079,974 | |||||||||||||||||||||||
| $1,590,546,816 | $281,715,205 | $30,651,986 | $308,409,663 | $75,283,483 | ($12,216,526 | ) | $1,657,571,301 | |||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Growth | ||||||||||||||||||||||||||||||||
| PF Inflation Managed |
$29,080,686 | $1,485,406 | $442,129 | $20,347,712 | ($1,046,257 | ) | $1,436,180 | $11,050,432 | 1,255,731 | |||||||||||||||||||||||
| PF Managed Bond |
81,963,576 | 9,297,416 | 1,446,426 | 6,512,781 | 1,533,817 | 2,472,326 | 90,200,780 | 8,155,586 | ||||||||||||||||||||||||
| PF Short Duration Bond |
13,859,207 | 8,796,804 | 281,362 | 11,755,966 | (130,237 | ) | (23,673 | ) | 11,027,497 | 1,101,648 | ||||||||||||||||||||||
| Pacific Funds High Income |
— | 22,156,089 | 259,002 | 239,012 | 962 | 388,853 | 22,565,894 | 2,169,798 | ||||||||||||||||||||||||
| PF Emerging Markets Debt |
19,561,822 | 2,982,371 | 788,514 | 4,579,206 | (530,880 | ) | (1,381,652 | ) | 16,840,969 | 1,894,372 | ||||||||||||||||||||||
| PF Comstock |
96,793,197 | 2,369,849 | 1,827,924 | 19,991,644 | 11,670,503 | (7,131,210 | ) | 85,538,619 | 5,011,050 | |||||||||||||||||||||||
| PF Growth |
29,775,712 | 18,629,191 | 319,061 | 1,469,214 | 368,258 | 4,888,867 | 52,511,875 | 2,720,823 | ||||||||||||||||||||||||
| PF Large-Cap Growth |
55,513,637 | 11,147,380 | — | 2,165,428 | 6,535,320 | 2,831,774 | 73,862,683 | 6,896,609 | ||||||||||||||||||||||||
| PF Large-Cap Value |
118,883,548 | 1,878,232 | 2,344,143 | 28,272,893 | 14,754,081 | (7,325,850 | ) | 102,261,261 | 6,212,713 | |||||||||||||||||||||||
| PF Main Street Core |
91,206,723 | 11,093,264 | 937,358 | 8,498,754 | 13,818,347 | (4,403,128 | ) | 104,153,810 | 7,303,914 | |||||||||||||||||||||||
| PF Mid-Cap Equity |
65,828,519 | 24,826,181 | 239,814 | 2,790,833 | 10,284,940 | (3,746,515 | ) | 94,642,106 | 7,789,474 | |||||||||||||||||||||||
| PF Mid-Cap Growth |
30,497,324 | 1,169,104 | 26,947 | 5,309,851 | 1,112,159 | 1,981,116 | 29,476,799 | 3,384,248 | ||||||||||||||||||||||||
| PF Small-Cap Growth |
20,923,750 | 14,457,701 | — | 2,705,334 | 4,269,303 | (211,955 | ) | 36,733,465 | 2,481,991 | |||||||||||||||||||||||
| PF Small-Cap Value |
63,459,665 | 1,880,337 | 853,807 | 8,660,731 | 18,184,285 | (12,408,780 | ) | 63,308,583 | 6,058,238 | |||||||||||||||||||||||
| PF Real Estate |
31,125,430 | 948,435 | 458,306 | 14,758,033 | 3,347,796 | 1,439,501 | 22,561,435 | 1,337,370 | ||||||||||||||||||||||||
| PF Emerging Markets |
61,141,922 | 4,265,152 | 856,257 | 17,413,069 | 297,671 | (3,850,116 | ) | 45,297,817 | 3,335,627 | |||||||||||||||||||||||
| PF International Large-Cap |
82,766,866 | 22,255,498 | 1,439,918 | 24,484,551 | (1,633,864 | ) | 195,121 | 80,538,988 | 4,353,459 | |||||||||||||||||||||||
| PF International Small-Cap |
— | 44,718,708 | — | 478,025 | 19,311 | 3,053,940 | 47,313,934 | 4,425,999 | ||||||||||||||||||||||||
| PF International Value |
65,543,418 | 9,429,176 | 2,600,842 | 18,717,677 | (2,554,974 | ) | (3,508,776 | ) | 52,792,009 | 5,551,210 | ||||||||||||||||||||||
| PF Currency Strategies |
37,488,997 | 19,018,093 | 1,212,240 | 5,156,342 | (112,307 | ) | 2,468,325 | 54,919,006 | 5,536,190 | |||||||||||||||||||||||
| PF Global Absolute Return |
50,726,886 | 2,369,200 | 2,386,388 | 11,376,166 | (112,587 | ) | 1,914,972 | 45,908,693 | 4,577,138 | |||||||||||||||||||||||
| PF Precious Metals |
29,497,205 | 6,114,354 | — | 19,377,037 | (9,815,251 | ) | 7,950,340 | 14,369,611 | 3,193,247 | |||||||||||||||||||||||
| $1,075,638,090 | $241,287,941 | $18,720,438 | $235,060,259 | $70,260,396 | ($12,970,340 | ) | $1,157,876,266 | |||||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Aggressive Growth | ||||||||||||||||||||||||||||||||
| PF Managed Bond |
$7,502,689 | $3,329,736 | $160,764 | $882,887 | $176,591 | $244,592 | $10,531,485 | 952,214 | ||||||||||||||||||||||||
| PF Emerging Markets Debt |
— | 5,349,312 | 172,029 | 168,656 | (14,413 | ) | (484,929 | ) | 4,853,343 | 545,933 | ||||||||||||||||||||||
| PF Comstock |
28,218,083 | 1,310,660 | 530,895 | 6,365,722 | 3,615,635 | (2,308,756 | ) | 25,000,795 | 1,464,604 | |||||||||||||||||||||||
| PF Growth |
11,725,315 | 1,225,286 | 91,188 | 1,116,249 | 128,398 | 1,366,944 | 13,420,882 | 695,383 | ||||||||||||||||||||||||
| PF Large-Cap Growth |
17,663,593 | 1,804,112 | — | 1,972,131 | 1,857,607 | 873,154 | 20,226,335 | 1,888,547 | ||||||||||||||||||||||||
| PF Large-Cap Value |
34,093,324 | 1,191,277 | 678,437 | 8,257,322 | 4,281,433 | (2,149,780 | ) | 29,837,369 | 1,812,720 | |||||||||||||||||||||||
| PF Main Street Core |
27,670,854 | 1,589,372 | 303,925 | 2,126,335 | 3,931,640 | (1,096,434 | ) | 30,273,022 | 2,122,933 | |||||||||||||||||||||||
| PF Mid-Cap Equity |
20,497,114 | 8,043,999 | 73,951 | 1,687,243 | 3,126,260 | (1,136,681 | ) | 28,917,400 | 2,380,033 | |||||||||||||||||||||||
| PF Mid-Cap Growth |
11,514,373 | 155,816 | 10,850 | 1,080,002 | 537,708 | 718,917 | 11,857,662 | 1,361,385 | ||||||||||||||||||||||||
| PF Small-Cap Growth |
12,743,130 | 1,440,773 | — | 1,297,365 | 1,661,802 | (478,936 | ) | 14,069,404 | 950,635 | |||||||||||||||||||||||
| PF Small-Cap Value |
24,482,429 | 1,857,146 | 328,015 | 4,515,782 | 7,023,003 | (4,810,400 | ) | 24,364,411 | 2,331,523 | |||||||||||||||||||||||
| PF Real Estate |
12,226,245 | 1,113,923 | 200,310 | 5,215,707 | 1,313,515 | 741,481 | 10,379,767 | 615,280 | ||||||||||||||||||||||||
| PF Emerging Markets |
20,755,394 | 5,106,119 | 293,135 | 1,731,190 | 503,651 | (1,656,963 | ) | 23,270,146 | 1,713,560 | |||||||||||||||||||||||
| PF International Large-Cap |
26,957,722 | 4,087,677 | 419,692 | 8,104,560 | (183,353 | ) | (247,703 | ) | 22,929,475 | 1,239,431 | ||||||||||||||||||||||
| PF International Small-Cap |
— | 16,268,678 | — | 284,099 | 9,133 | 1,103,566 | 17,097,278 | 1,599,371 | ||||||||||||||||||||||||
| PF International Value |
19,625,384 | 3,418,718 | 826,369 | 7,756,693 | (587,888 | ) | (1,573,930 | ) | 13,951,960 | 1,467,083 | ||||||||||||||||||||||
| PF Currency Strategies |
10,936,568 | 7,143,304 | 348,225 | 1,843,212 | (36,357 | ) | 751,560 | 17,300,088 | 1,743,960 | |||||||||||||||||||||||
| PF Global Absolute Return |
14,730,829 | 1,495,340 | 692,159 | 3,942,805 | (24,906 | ) | 555,501 | 13,506,118 | 1,346,572 | |||||||||||||||||||||||
| PF Precious Metals |
11,228,703 | 4,155,124 | — | 6,772,849 | (3,671,010 | ) | 2,474,951 | 7,414,919 | 1,647,760 | |||||||||||||||||||||||
| $312,571,749 | $70,086,372 | $5,129,944 | $65,120,809 | $23,648,449 | ($7,113,846 | ) | $339,201,859 | |||||||||||||||||||||||||
D-13
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
| Fund/Underlying Fund |
Beginning Value as of |
Purchase |
Distributions Received and |
Sales |
Net Realized |
Change in Appreciation |
As of March 31, 2015 | |||||||||||||||||||||||||
| Ending Value |
Shares Balance |
|||||||||||||||||||||||||||||||
| Pacific Funds Diversified Alternatives | ||||||||||||||||||||||||||||||||
| PF Inflation Managed |
$100,246 | $255,283 | $7,629 | $34,316 | ($1,202 | ) | ($5,254 | ) | $322,386 | 36,635 | ||||||||||||||||||||||
| Pacific Funds Floating Rate Income |
249,066 | 524,365 | 22,232 | 82,233 | (1,399 | ) | (20,792 | ) | 691,239 | 68,507 | ||||||||||||||||||||||
| PF Emerging Markets Debt |
249,595 | 658,076 | 24,892 | 85,963 | (9,125 | ) | (55,726 | ) | 781,749 | 87,936 | ||||||||||||||||||||||
| PF Real Estate |
160,966 | 269,372 | 5,769 | 120,362 | 7,251 | 37,690 | 360,686 | 21,380 | ||||||||||||||||||||||||
| PF Emerging Markets |
145,367 | 545,552 | 6,794 | 65,674 | 3,908 | (50,285 | ) | 585,662 | 43,127 | |||||||||||||||||||||||
| PF Currency Strategies |
459,503 | 1,052,777 | 28,505 | 164,466 | (9,360 | ) | 23,271 | 1,390,230 | 140,144 | |||||||||||||||||||||||
| PF Global Absolute Return |
495,091 | 1,067,444 | 74,988 | 176,164 | (3,250 | ) | 18,602 | 1,476,711 | 147,229 | |||||||||||||||||||||||
| PF Precious Metals |
111,484 | 196,650 | — | 110,732 | (1,544 | ) | (29,053 | ) | 166,805 | 37,068 | ||||||||||||||||||||||
| $1,971,318 | $4,569,519 | $170,809 | $839,910 | ($14,721 | ) | ($81,547 | ) | $5,775,468 | ||||||||||||||||||||||||
| (1) | Purchase cost excludes distributions received and reinvested, if any. |
| (2) | Distributions received include distributions from net investment income, if any, from the PF Underlying Funds, Pacific Funds High Income (for the Portfolio Optimization Funds only), and Pacific Funds Floating Rate Income (for Pacific Funds Diversified Alternatives only). |
| (3) | Net realized gain (loss) includes distributions from capital gains, if any, from the PF Underlying Funds, Pacific Funds High Income (for the Portfolio Optimization Funds only), and Pacific Funds Floating Rate Income (for Pacific Funds Diversified Alternatives only). |
As of March 31, 2015, Pacific Life owned the following percentages of the total shares outstanding (aggregate of all share classes) of each of the following Funds:
| Fund | Ownership Percentage |
|||
| Pacific Funds Diversified Alternatives |
35.61% | |||
| Pacific Funds Limited Duration High Income |
56.83% | |||
D. INDEPENDENT TRUSTEES
The Trust pays each independent trustee of the Board retainer fees and specified amounts for various Board and committee services and for chairing those committees. The fees and expenses of the independent trustees of the Board are presented in the Statements of Operations. Each independent trustee of the Board is eligible to participate in the Trust’s Deferred Compensation Plan (the “Plan”). The Plan allows each independent trustee to voluntarily defer receipt of all or a percentage of fees, which otherwise would be payable for services performed. Amounts in the deferral account are obligations of each Fund at the time of such deferral and are payable in accordance with the Plan. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of certain Funds. An independent trustee who defers compensation has the option to select credit rate options that track the performance, at NAV without a sales load, of Class A shares of the Portfolio Optimization Funds, Pacific Funds Diversified Alternatives, Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income, and/or Pacific Funds High Income, and/or Class P shares of the PF Underlying Funds. The obligation of each Fund under the Plan (the “DCP Liability”) is recorded as a liability (accrued trustees’ fees and expenses and deferred compensation). Accordingly, the market value appreciation or depreciation on a Fund’s DCP Liability account will cause the expenses of that Fund to increase or decrease due to market fluctuation. The change in net unrealized appreciation or depreciation on a Fund’s DCP Liability account is recorded as an increase or decrease to expenses (trustees’ fees and expenses).
For the year ended March 31, 2015, such expenses increased by $3,598 for all applicable Funds presented in these financial statements as a result of the market value appreciation on such accounts. As of March 31, 2015, the total amount in the DCP Liability accounts for all applicable Funds presented in these financial statements was $16,016.
E. OFFICERS OF THE TRUST
None of the officers of the Trust received compensation from the Trust.
F. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of performance of their duties to the Trust. In addition, the Trust entered into an agreement with each of the trustees which provides that the Trust will indemnify and hold harmless each trustee against any expenses actually and reasonably incurred by any trustee in any proceeding arising out of or in connection with the trustee’s services to the Trust, to the fullest extent permitted by the Trust’s Declaration of Trust and By-Laws, the general trust law of the State of Delaware, the Securities Act of 1933, and the 1940 Act, each as now or hereinafter in force. In the normal course of business, the Trust enters into contracts with service providers and others that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements and agreements is dependent on future claims that may be made against the Trust and/or the trustees and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
8. UNFUNDED SENIOR LOAN COMMITMENTS
Unfunded loan commitments on senior loan participations and assignments (Note 4), if any, are marked to market daily and valued according to the Trust’s valuation policies and procedures. Any outstanding unfunded loan commitments are presented in the Notes to Schedules of Investments section of each applicable Fund’s Schedule of Investments. Any applicable net unrealized appreciation or depreciation at the end of the reporting period is recorded as an asset (unfunded loan commitment appreciation) or a liability (unfunded loan commitment depreciation) and any change in net unrealized appreciation or depreciation for the reporting period is recorded as a change in net unrealized appreciation or depreciation on unfunded loan commitment. As of March 31, 2015, no unfunded loan commitments were held by any Funds presented in these financial statements.
D-14
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
9. COMMITTED LINE OF CREDIT
Effective August 8, 2014, the Trust has an unsecured $75,000,000 committed revolving line of credit agreement with The Bank of New York Mellon (the “Bank”), which will be renewed annually. The committed line of credit will expire on August 7, 2015, unless renewed and applies to Pacific Funds Floating Rate Income only. The interest rate on borrowing is the higher of the Federal funds effective rate or the overnight Eurodollar rate, plus 1.20%. Pacific Funds Floating Rate Income pays the Bank a commitment fee equal to 0.18% per annum on the daily unused portion of the committed line up to a maximum of $135,000. As of March 31, 2015, the actual interest rate on borrowing by the Trust was 1.31%. The commitment fees and interest incurred by Pacific Funds Floating Rate Income are recorded as an expense. During the reporting period, the weighted average interest rate and the average dollar amount of borrowings on the days that Pacific Funds Floating Rate Income had loans outstanding were 1.32% and $15,000,000, respectively. As of March 31, 2015, Pacific Funds Floating Rate Income had no loans outstanding in connection with this line of credit.
10. PURCHASES AND SALES OF INVESTMENTS
The cost of purchases and proceeds from sales of investments (excluding short-term investments) for the year ended March 31, 2015, are summarized in the following table:
| U.S. Government Securities | Other Securities | |||||||||||||||
| Fund | Purchases | Sales | Purchases | Sales | ||||||||||||
| Pacific Funds Portfolio Optimization Conservative |
$— | $— | $72,397,391 | $105,068,447 | ||||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
— | — | 116,572,765 | 99,675,639 | ||||||||||||
| Pacific Funds Portfolio Optimization Moderate |
— | — | 388,082,191 | 308,409,663 | ||||||||||||
| Pacific Funds Portfolio Optimization Growth |
— | — | 332,106,806 | 235,060,259 | ||||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
— | — | 98,967,571 | 65,120,809 | ||||||||||||
| Pacific Funds Diversified Alternatives |
— | — | 4,761,619 | 839,910 | ||||||||||||
| Pacific Funds Short Duration Income |
4,492,988 | 4,900,762 | 127,216,018 | 86,934,070 | ||||||||||||
| Pacific Funds Core Income |
30,808,320 | 5,002,930 | 421,835,285 | 254,256,103 | ||||||||||||
| Pacific Funds Strategic Income |
— | — | 279,373,677 | 192,075,132 | ||||||||||||
| Pacific Funds Floating Rate Income |
— | — | 749,305,019 | 995,103,320 | ||||||||||||
| Pacific Funds Limited Duration High Income |
— | — | 23,387,761 | 18,170,880 | ||||||||||||
| Pacific Funds High Income |
— | — | 48,551,222 | 18,873,374 | ||||||||||||
11. FEDERAL INCOME TAX INFORMATION
Each Fund intends to qualify each year as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code (the “Code”). A Fund that qualifies as a RIC does not have to pay income tax as long as it distributes sufficient taxable income and net capital gains. Each Fund declared and paid sufficient dividends on net investment income and capital gains distributions during the year or period ended March 31, 2015, to qualify as a RIC and is not required to pay Federal income tax under the Code. Accordingly, no provision for Federal income taxes is required in the financial statements. Required distributions are based on net investment income and net realized gains determined in accordance with income tax regulations, which may differ from U.S. GAAP for financial reporting purposes. These differences are primarily due to differing treatments for short-term capital gain distributions received, late year ordinary and post-October capital losses, capital loss carryforwards, and losses deferred due to wash sales. Permanent book and tax differences relating to shareholder distributions will result in reclassifications of capital accounts. In addition, the year in which amounts are distributed may differ from the year in which the net investment income is earned and the net gains are realized by each Fund.
The following table shows the accumulated capital losses and components of distributable earnings on a tax basis, and late year ordinary losses and post-October capital losses deferred, if any, for tax purposes as of March 31, 2015:
| Distributable Earnings | Late-Year Ordinary and Post-October Losses Deferrals |
|||||||||||||||||||||||||||||
| Fund | Accumulated Capital Losses |
Undistributed Ordinary Income |
Undistributed Long-Term Capital Gains |
Late-Year Ordinary Losses |
Short-Term Capital Losses |
Long-Term Capital Losses |
Total | |||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Conservative |
$— | $26,270 | $3,692,720 | $664,881 | $101,082 | $— | $765,963 | |||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
— | — | 15,556,423 | 1,395,844 | — | — | 1,395,844 | |||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate |
— | — | 60,451,871 | 3,647,249 | — | — | 3,647,249 | |||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Growth |
— | — | 54,815,418 | 902,480 | — | — | 902,480 | |||||||||||||||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
— | 1,367,953 | 3,936,767 | — | — | — | — | |||||||||||||||||||||||
| Pacific Funds Diversified Alternatives |
— | — | 17,498 | — | — | — | — | |||||||||||||||||||||||
| Pacific Funds Short Duration Income |
— | 46,847 | — | — | 171,334 | (5,295 | ) | 166,039 | ||||||||||||||||||||||
| Pacific Funds Core Income |
(3,210,301 | ) | 302,592 | — | — | — | — | — | ||||||||||||||||||||||
| Pacific Funds Strategic Income |
— | 92,351 | — | — | 515,197 | 609,691 | 1,124,888 | |||||||||||||||||||||||
| Pacific Funds Floating Rate Income |
(9,880,291 | ) | 452,841 | — | — | — | — | — | ||||||||||||||||||||||
| Pacific Funds Limited Duration High Income |
— | 25,391 | — | — | 196,210 | 98,683 | 294,893 | |||||||||||||||||||||||
| Pacific Funds High Income |
— | 67,451 | — | — | 102,501 | 207,157 | 309,658 | |||||||||||||||||||||||
D-15
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Accumulated capital losses represent net capital loss carryovers as of March 31, 2015 that may be available to offset future realized capital gains and thereby reduce future capital gains distributions. The following table shows the amounts of capital loss carryover, if any, by each of the applicable Funds as of March 31, 2015 and capital loss carryover from prior years utilized during the year ended March 31, 2015:
| Unlimited Period of Net Capital Loss Carryover |
Accumulated |
Capital Loss Carryover Utilized During |
||||||||||||||
| Fund | Short- Term |
Long- Term |
||||||||||||||
| Pacific Funds Portfolio Optimization Growth |
$— | $— | $— | $5,747,574 | ||||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
— | — | — | 16,342,075 | ||||||||||||
| Pacific Funds Diversified Alternatives |
— | — | — | 44 | ||||||||||||
| Pacific Funds Core Income |
(1,947,374 | ) | (1,262,927 | ) | (3,210,301 | ) | 848,068 | |||||||||
| Pacific Funds Floating Rate Income |
(6,719,153 | ) | (3,161,138 | ) | (9,880,291 | ) | — | |||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation on investments for Federal income tax purposes as of March 31, 2015, were as follows:
| Net | ||||||||||||||||
| Fund | Total Cost of Investments on Tax Basis (1) |
Gross Unrealized Appreciation on Investments |
Gross Unrealized Depreciation on Investments |
Unrealized Appreciation (Depreciation) on Investments |
||||||||||||
| Pacific Funds Portfolio Optimization Conservative |
$395,016,535 | $37,009,945 | ($12,150,146 | ) | $24,859,799 | |||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
526,236,787 | 68,823,632 | (13,548,093 | ) | 55,275,539 | |||||||||||
| Pacific Funds Portfolio Optimization Moderate |
1,434,667,500 | 251,473,113 | (28,569,312 | ) | 222,903,801 | |||||||||||
| Pacific Funds Portfolio Optimization Growth |
964,896,770 | 214,178,150 | (21,198,654 | ) | 192,979,496 | |||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
275,029,103 | 78,858,176 | (14,685,420 | ) | 64,172,756 | |||||||||||
| Pacific Funds Diversified Alternatives |
5,900,906 | 71,891 | (197,329 | ) | (125,438 | ) | ||||||||||
| Pacific Funds Short Duration Income |
133,428,927 | 1,248,726 | (1,035,018 | ) | 213,708 | |||||||||||
| Pacific Funds Core Income |
621,215,913 | 15,470,767 | (5,727,652 | ) | 9,743,115 | |||||||||||
| Pacific Funds Strategic Income |
165,483,321 | 2,216,652 | (5,902,466 | ) | (3,685,814 | ) | ||||||||||
| Pacific Funds Floating Rate Income |
799,362,566 | 2,622,248 | (27,640,872 | ) | (25,018,624 | ) | ||||||||||
| Pacific Funds Limited Duration High Income |
39,781,113 | 270,747 | (1,765,917 | ) | (1,495,170 | ) | ||||||||||
| Pacific Funds High Income |
54,148,772 | 880,173 | (1,133,743 | ) | (253,570 | ) | ||||||||||
| (1) | The difference between the total cost of investments on tax basis and total investments, at cost, as presented in the Schedules of Investments is primarily due to wash sale loss deferrals. |
Each Fund recognizes the financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax liability for unrecognized tax benefits with a corresponding income tax expense. Management has analyzed all open tax years, as defined by the statute of limitations, for all major jurisdictions and has determined that no provision for income tax is required in the financial statements. Each Fund remains subject to examination by Federal and State tax authorities for the returns filed for tax years ended after March 31, 2011.
12. TAX CHARACTER OF DISTRIBUTIONS
The tax character of income and capital gains distributions to shareholders during the years or periods ended March 31, 2015 and 2014, were as follows:
| For the Year or Period Ended March 31, 2015 | For the Year or Period Ended March 31, 2014 | |||||||||||||||||||||||||
| Fund | Ordinary Income |
Long-Term Capital Gains |
Total Distributions |
Ordinary Income |
Long-Term Capital Gains |
Total Distributions |
||||||||||||||||||||
| Pacific Funds Portfolio Optimization Conservative |
$7,338,787 | $9,527,590 | $16,866,377 | $5,460,595 | $6,134,372 | $11,594,967 | ||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
10,004,845 | 9,025,060 | 19,029,905 | 6,743,410 | 2,168,567 | 8,911,977 | ||||||||||||||||||||
| Pacific Funds Portfolio Optimization Moderate |
31,993,315 | 21,610,601 | 53,603,916 | 16,326,870 | — | 16,326,870 | ||||||||||||||||||||
| Pacific Funds Portfolio Optimization Growth |
20,924,761 | — | 20,924,761 | 10,155,380 | — | 10,155,380 | ||||||||||||||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
5,577,616 | — | 5,577,616 | 1,491,679 | — | 1,491,679 | ||||||||||||||||||||
| Pacific Funds Diversified Alternatives |
163,758 | 403 | 164,161 | — | — | — | ||||||||||||||||||||
| Pacific Funds Short Duration Income |
2,221,977 | 140,319 | 2,362,296 | 1,139,922 | 106,700 | 1,246,622 | ||||||||||||||||||||
| Pacific Funds Core Income |
13,788,833 | — | 13,788,833 | 19,930,857 | 1,554,717 | 21,485,574 | ||||||||||||||||||||
| Pacific Funds Strategic Income |
6,132,667 | 586,980 | 6,719,647 | 3,181,001 | 431,207 | 3,612,208 | ||||||||||||||||||||
| Pacific Funds Floating Rate Income |
42,313,767 | 257,129 | 42,570,896 | 26,416,987 | 203,021 | 26,620,008 | ||||||||||||||||||||
| Pacific Funds Limited Duration High Income |
1,942,957 | — | 1,942,957 | 755,621 | — | 755,621 | ||||||||||||||||||||
| Pacific Funds High Income |
1,787,150 | 260,279 | 2,047,429 | 1,087,466 | 151,149 | 1,238,615 | ||||||||||||||||||||
13. RECLASSIFICATION OF ACCOUNTS
During the year ended March 31, 2015, reclassifications as shown in the following table have been made in each Fund’s capital accounts to report these balances on a tax basis, excluding certain temporary differences, as of March 31, 2015. Additional adjustments may be required in subsequent reporting periods. These reclassifications, which have no impact on the NAV of the Funds, are primarily attributable to
D-16
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
non-deductible expenses, swap income, redesignation of dividends paid, and short term capital gains received under Federal tax rules versus U.S. GAAP. The calculation of net investment income per share in the financial highlights excludes these adjustments.
| Fund | Paid-In Capital | Undistributed/ Accumulated Net Investment Income (Loss) |
Undistributed/ Accumulated Net Realized Gain (Loss) |
|||||||||
| Pacific Funds Portfolio Optimization Conservative |
$— | $2,867,719 | ($2,867,719 | ) | ||||||||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
— | 4,059,174 | (4,059,174 | ) | ||||||||
| Pacific Funds Portfolio Optimization Moderate |
— | 12,782,365 | (12,782,365 | ) | ||||||||
| Pacific Funds Portfolio Optimization Growth |
— | 11,125,920 | (11,125,920 | ) | ||||||||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
— | 3,436,649 | (3,436,649 | ) | ||||||||
| Pacific Funds Diversified Alternatives |
(8,743 | ) | 9,319 | (576 | ) | |||||||
| Pacific Funds Short Duration Income |
— | (115 | ) | 115 | ||||||||
| Pacific Funds Strategic Income |
— | (11,040 | ) | 11,040 | ||||||||
| Pacific Funds Floating Rate Income |
— | (1,012 | ) | 1,012 | ||||||||
| Pacific Funds Limited Duration High Income |
— | (140 | ) | 140 | ||||||||
| Pacific Funds High Income |
— | (1,799 | ) | 1,799 | ||||||||
14. SHARES OF BENEFICIAL INTEREST
Each Fund is authorized to issue an unlimited number of shares of beneficial interest with no par value. Changes in shares of beneficial interest of each Fund for the year or period ended March 31, 2015 and 2014, were as follows:
| Pacific Funds Portfolio Optimization Conservative |
Pacific Funds Portfolio Optimization Moderate-Conservative |
Pacific Funds Portfolio Optimization Moderate |
Pacific Funds Portfolio Optimization Growth |
|||||||||||||||||||||||||||||||||||
| Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
|||||||||||||||||||||||||||||||
| Class A |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
3,466,839 | 4,942,877 | 4,511,260 | 6,879,857 | 11,346,310 | 17,055,382 | 7,344,971 | 10,167,433 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
622,256 | 454,671 | 757,388 | 385,490 | 2,098,409 | 745,915 | 840,587 | 454,847 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(5,817,823 | ) | (8,753,448 | ) | (5,328,482 | ) | (5,631,263 | ) | (12,205,209 | ) | (9,643,856 | ) | (6,259,190 | ) | (5,647,809 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
(1,728,728 | ) | (3,355,900 | ) | (59,834 | ) | 1,634,084 | 1,239,510 | 8,157,441 | 1,926,368 | 4,974,471 | |||||||||||||||||||||||||||
| Beginning shares outstanding |
16,874,999 | 20,230,899 | 22,018,370 | 20,384,286 | 58,264,115 | 50,106,674 | 37,674,579 | 32,700,108 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
15,146,271 | 16,874,999 | 21,958,536 | 22,018,370 | 59,503,625 | 58,264,115 | 39,600,947 | 37,674,579 | ||||||||||||||||||||||||||||||
| Class B |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
472,427 | 600,047 | 464,335 | 756,807 | 1,304,004 | 2,072,525 | 891,716 | 1,283,068 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
118,848 | 73,528 | 121,983 | 53,633 | 319,592 | 71,875 | 110,190 | 46,681 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(670,159 | ) | (883,916 | ) | (706,515 | ) | (695,998 | ) | (1,543,812 | ) | (1,401,567 | ) | (1,347,223 | ) | (1,157,375 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
(78,884 | ) | (210,341 | ) | (120,197 | ) | 114,442 | 79,784 | 742,833 | (345,317 | ) | 172,374 | ||||||||||||||||||||||||||
| Beginning shares outstanding |
3,515,767 | 3,726,108 | 4,230,565 | 4,116,123 | 11,264,334 | 10,521,501 | 8,174,707 | 8,002,333 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
3,436,883 | 3,515,767 | 4,110,368 | 4,230,565 | 11,344,118 | 11,264,334 | 7,829,390 | 8,174,707 | ||||||||||||||||||||||||||||||
| Class C |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
3,788,707 | 5,496,261 | 3,870,804 | 5,730,743 | 8,169,466 | 12,449,379 | 4,516,157 | 6,832,110 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
627,274 | 388,883 | 566,755 | 229,207 | 1,182,463 | 269,646 | 377,665 | 151,707 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(5,377,695 | ) | (7,137,458 | ) | (3,593,542 | ) | (3,821,553 | ) | (7,439,579 | ) | (6,319,924 | ) | (4,363,712 | ) | (3,660,260 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
(961,714 | ) | (1,252,314 | ) | 844,017 | 2,138,397 | 1,912,350 | 6,399,101 | 530,110 | 3,323,557 | ||||||||||||||||||||||||||||
| Beginning shares outstanding |
18,339,511 | 19,591,825 | 18,490,428 | 16,352,031 | 40,826,793 | 34,427,692 | 25,733,388 | 22,409,831 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
17,377,797 | 18,339,511 | 19,334,445 | 18,490,428 | 42,739,143 | 40,826,793 | 26,263,498 | 25,733,388 | ||||||||||||||||||||||||||||||
| Class R |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
248,444 | 247,915 | 194,385 | 180,943 | 513,876 | 654,585 | 388,812 | 389,822 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
45,682 | 25,454 | 18,454 | 9,476 | 64,834 | 24,360 | 27,523 | 14,741 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(225,527 | ) | (370,686 | ) | (227,585 | ) | (165,137 | ) | (863,813 | ) | (692,933 | ) | (401,135 | ) | (363,968 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
68,599 | (97,317 | ) | (14,746 | ) | 25,282 | (285,103 | ) | (13,988 | ) | 15,200 | 40,595 | ||||||||||||||||||||||||||
| Beginning shares outstanding |
990,502 | 1,087,819 | 562,564 | 537,282 | 2,266,688 | 2,280,676 | 1,380,476 | 1,339,881 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
1,059,101 | 990,502 | 547,818 | 562,564 | 1,981,585 | 2,266,688 | 1,395,676 | 1,380,476 | ||||||||||||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
734,195 | 380,137 | 414,065 | 228,282 | 1,307,013 | 1,358,108 | 602,354 | 247,651 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
22,922 | 5,529 | 11,994 | 2,244 | 53,648 | 13,996 | 9,189 | 3,438 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(398,554 | ) | (162,986 | ) | (216,504 | ) | (71,691 | ) | (1,244,886 | ) | (205,909 | ) | (295,816 | ) | (89,654 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
358,563 | 222,680 | 209,555 | 158,835 | 115,775 | 1,166,195 | 315,727 | 161,435 | ||||||||||||||||||||||||||||||
| Beginning shares outstanding |
342,427 | 119,747 | 231,529 | 72,694 | 1,426,272 | 260,077 | 346,592 | 185,157 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
700,990 | 342,427 | 441,084 | 231,529 | 1,542,047 | 1,426,272 | 662,319 | 346,592 | ||||||||||||||||||||||||||||||
D-17
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
| Pacific Funds Portfolio Aggressive-Growth |
Pacific Funds Diversified Alternatives (1) |
Pacific Funds Short Duration Income |
Pacific Funds Core Income |
|||||||||||||||||||||||||||||||||||
| Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
Year Ended 3/31/2015 |
Period Ended 3/31/2014 |
Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
|||||||||||||||||||||||||||||||
| Class A |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
2,201,261 | 2,624,015 | 157,611 | 1,000 | 3,918,230 | 5,786,475 | 7,322,424 | 7,742,757 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
216,733 | 78,895 | 3,341 | — | 86,530 | 67,184 | 524,939 | 988,608 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(1,867,373 | ) | (1,941,985 | ) | (15,416 | ) | — | (5,061,616 | ) | (2,277,091 | ) | (8,341,806 | ) | (18,571,752 | ) | |||||||||||||||||||||||
| Net increase (decrease) |
550,621 | 760,925 | 145,536 | 1,000 | (1,056,856 | ) | 3,576,568 | (494,443 | ) | (9,840,387 | ) | |||||||||||||||||||||||||||
| Beginning shares outstanding |
10,630,093 | 9,869,168 | 1,000 | — | 5,735,535 | 2,158,967 | 20,734,328 | 30,574,715 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
11,180,714 | 10,630,093 | 146,536 | 1,000 | 4,678,679 | 5,735,535 | 20,239,885 | 20,734,328 | ||||||||||||||||||||||||||||||
| Class B |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
276,076 | 372,637 | ||||||||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
29,761 | 2,540 | ||||||||||||||||||||||||||||||||||||
| Shares repurchased |
(526,825 | ) | (348,813 | ) | ||||||||||||||||||||||||||||||||||
| Net increase (decrease) |
(220,988 | ) | 26,364 | |||||||||||||||||||||||||||||||||||
| Beginning shares outstanding |
2,523,128 | 2,496,764 | ||||||||||||||||||||||||||||||||||||
| Ending shares outstanding |
2,302,140 | 2,523,128 | ||||||||||||||||||||||||||||||||||||
| Class C |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
1,957,244 | 2,046,521 | 87,119 | 1,000 | 1,766,299 | 1,914,770 | 8,301,714 | 2,860,533 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
89,177 | 10,244 | 1,296 | — | 34,464 | 21,400 | 281,557 | 418,451 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(1,780,108 | ) | (1,417,993 | ) | (33,165 | ) | — | (1,036,872 | ) | (647,286 | ) | (3,062,232 | ) | (6,439,014 | ) | |||||||||||||||||||||||
| Net increase (decrease) |
266,313 | 638,772 | 55,250 | 1,000 | 763,891 | 1,288,884 | 5,521,039 | (3,160,030 | ) | |||||||||||||||||||||||||||||
| Beginning shares outstanding |
6,823,138 | 6,184,366 | 1,000 | — | 2,275,442 | 986,558 | 11,528,144 | 14,688,174 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
7,089,451 | 6,823,138 | 56,250 | 1,000 | 3,039,333 | 2,275,442 | 17,049,183 | 11,528,144 | ||||||||||||||||||||||||||||||
| Class I |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
105,386 | 69,394 | 325,300 | 7,553 | ||||||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
2,418 | 3,152 | 6,319 | 3,838 | ||||||||||||||||||||||||||||||||||
| Shares repurchased |
(55,548 | ) | (1,250,216 | ) | (90,359 | ) | (64,268 | ) | ||||||||||||||||||||||||||||||
| Net increase (decrease) |
52,256 | (1,177,670 | ) | 241,260 | (52,877 | ) | ||||||||||||||||||||||||||||||||
| Beginning shares outstanding |
93,639 | 1,271,309 | 111,192 | 164,069 | ||||||||||||||||||||||||||||||||||
| Ending shares outstanding |
145,895 | 93,639 | 352,452 | 111,192 | ||||||||||||||||||||||||||||||||||
| Class R |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
161,755 | 148,506 | ||||||||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
9,683 | 3,151 | ||||||||||||||||||||||||||||||||||||
| Shares repurchased |
(145,571 | ) | (153,544 | ) | ||||||||||||||||||||||||||||||||||
| Net increase (decrease) |
25,867 | (1,887 | ) | |||||||||||||||||||||||||||||||||||
| Beginning shares outstanding |
538,190 | 540,077 | ||||||||||||||||||||||||||||||||||||
| Ending shares outstanding |
564,057 | 538,190 | ||||||||||||||||||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
290,948 | 169,158 | 221,961 | 198,000 | 9,479,480 | 859,736 | 18,154,740 | 3,789,797 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
7,247 | 601 | 11,619 | — | 76,163 | 10,497 | 338,574 | 280,917 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(67,997 | ) | (7,729 | ) | (55,043 | ) | — | (5,484,758 | ) | (254,264 | ) | (4,700,822 | ) | (6,151,943 | ) | |||||||||||||||||||||||
| Net increase (decrease) |
230,198 | 162,030 | 178,537 | 198,000 | 4,070,885 | 615,969 | 13,792,492 | (2,081,229 | ) | |||||||||||||||||||||||||||||
| Beginning shares outstanding |
178,493 | 16,463 | 198,000 | — | 916,898 | 300,929 | 6,503,996 | 8,585,225 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
408,691 | 178,493 | 376,537 | 198,000 | 4,987,783 | 916,898 | 20,296,488 | 6,503,996 | ||||||||||||||||||||||||||||||
D-18
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
| Pacific Funds Strategic Income |
Pacific Funds Floating Rate Income |
Pacific Funds Limited Duration High Income (2) |
Pacific Funds |
|||||||||||||||||||||||||||||||||||
| Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
Year Ended 3/31/2015 |
Year Ended 3/31/2014 |
Year Ended 3/31/2015 |
Period Ended 3/31/2014 |
Year or Period Ended 3/31/2015 |
Year Ended 3/31/2014 |
|||||||||||||||||||||||||||||||
| Class A |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
3,534,856 | 2,697,775 | 8,110,113 | 31,588,833 | 405,840 | 930,896 | 458,964 | 379,146 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
208,390 | 172,744 | 1,150,085 | 933,803 | 42,690 | 11,050 | 41,249 | 28,309 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(2,367,604 | ) | (1,353,615 | ) | (23,664,874 | ) | (8,726,398 | ) | (558,876 | ) | (92,880 | ) | (511,372 | ) | (146,646 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
1,375,642 | 1,516,904 | (14,404,676 | ) | 23,796,238 | (110,346 | ) | 849,066 | (11,159 | ) | 260,809 | |||||||||||||||||||||||||||
| Beginning shares outstanding |
3,383,173 | 1,866,269 | 35,750,226 | 11,953,988 | 849,066 | — | 574,086 | 313,277 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
4,758,815 | 3,383,173 | 21,345,550 | 35,750,226 | 738,720 | 849,066 | 562,927 | 574,086 | ||||||||||||||||||||||||||||||
| Class C |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
2,496,412 | 1,559,053 | 5,548,363 | 16,574,203 | 256,137 | 243,306 | 191,835 | 311,844 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
139,977 | 81,611 | 689,369 | 390,478 | 15,995 | 2,026 | 29,261 | 18,049 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(756,671 | ) | (252,338 | ) | (8,792,080 | ) | (2,579,027 | ) | (129,219 | ) | (5,919 | ) | (171,371 | ) | (59,549 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
1,879,718 | 1,388,326 | (2,554,348 | ) | 14,385,654 | 142,913 | 239,413 | 49,725 | 270,344 | |||||||||||||||||||||||||||||
| Beginning shares outstanding |
2,096,562 | 708,236 | 20,420,616 | 6,034,962 | 239,413 | — | 467,861 | 197,517 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
3,976,280 | 2,096,562 | 17,866,268 | 20,420,616 | 382,326 | 239,413 | 517,586 | 467,861 | ||||||||||||||||||||||||||||||
| Class I |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
38,888 | 95,502 | 9,568,161 | 8,310,603 | 1,764 | 2,118,229 | 842 | 2,602 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
8,031 | 19,010 | 516,742 | 163,281 | 117,558 | 57,291 | 48,549 | 57,640 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(68,999 | ) | (1,940,671 | ) | (10,493,871 | ) | (320,615 | ) | (11,785 | ) | — | (878,631 | ) | (2,538 | ) | |||||||||||||||||||||||
| Net increase (decrease) |
(22,080 | ) | (1,826,159 | ) | (408,968 | ) | 8,153,269 | 107,537 | 2,175,520 | (829,240 | ) | 57,704 | ||||||||||||||||||||||||||
| Beginning shares outstanding |
151,225 | 1,977,384 | 9,177,449 | 1,024,180 | 2,175,520 | — | 852,404 | 794,700 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
129,145 | 151,225 | 8,768,481 | 9,177,449 | 2,283,057 | 2,175,520 | 23,164 | 852,404 | ||||||||||||||||||||||||||||||
| Class P |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
50,628 | 24,043 | 3,744,725 | |||||||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
2,348 | 277 | 42,964 | |||||||||||||||||||||||||||||||||||
| Shares repurchased |
(8,145 | ) | (2,007 | ) | (45,390 | ) | ||||||||||||||||||||||||||||||||
| Net increase (decrease) |
44,831 | 22,313 | 3,742,299 | |||||||||||||||||||||||||||||||||||
| Beginning shares outstanding |
23,676 | 1,363 | — | |||||||||||||||||||||||||||||||||||
| Ending shares outstanding |
68,507 | 23,676 | 3,742,299 | |||||||||||||||||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
8,799,280 | 776,150 | 19,718,929 | 35,812,859 | 495,955 | 200,332 | 784,324 | 277,344 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvested |
193,732 | 23,008 | 1,335,612 | 620,036 | 15,223 | 2,926 | 24,534 | 2,914 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(3,666,388 | ) | (109,035 | ) | (29,226,022 | ) | (4,916,250 | ) | (102,640 | ) | (21,064 | ) | (718,744 | ) | (32,328 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
5,326,624 | 690,123 | (8,171,481 | ) | 31,516,645 | 408,538 | 182,194 | 90,114 | 247,930 | |||||||||||||||||||||||||||||
| Beginning shares outstanding |
830,274 | 140,151 | 34,916,294 | 3,399,649 | 182,194 | — | 272,914 | 24,984 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
6,156,898 | 830,274 | 26,744,813 | 34,916,294 | 590,732 | 182,194 | 363,028 | 272,914 | ||||||||||||||||||||||||||||||
| (1) | Pacific Funds Diversified Alternatives commenced operations on December 31, 2013. |
| (2) | Pacific Funds Limited Duration High Income commenced operations on July 31, 2013. |
| (3) | Class P shares of Pacific Funds High Income commenced operations on January 14, 2015. |
D-19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Pacific Funds Series Trust:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Pacific FundsSM Portfolio Optimization Conservative (formerly PL Portfolio Optimization Conservative Fund), Pacific FundsSM Portfolio Optimization Moderate-Conservative (formerly PL Portfolio Optimization Moderate-Conservative Fund), Pacific FundsSM Portfolio Optimization Moderate (formerly PL Portfolio Optimization Moderate Fund), Pacific FundsSM Portfolio Optimization Growth (formerly PL Portfolio Optimization Moderate-Aggressive Fund), Pacific FundsSM Portfolio Optimization Aggressive-Growth (formerly PL Portfolio Optimization Aggressive Fund), Pacific FundsSM Diversified Alternatives (formerly PL Diversified Alternatives Fund), Pacific FundsSM Short Duration Income (formerly PL Short Duration Income Fund), Pacific FundsSM Core Income (formerly PL Income Fund), Pacific FundsSM Strategic Income (formerly PL Strategic Income Fund), Pacific FundsSM Floating Rate Income (formerly PL Floating Rate Income Fund), Pacific FundsSM Limited Duration High Income (formerly PL Limited Duration High Income Fund) and Pacific FundsSM High Income (formerly PL High Income Fund) (collectively the “Funds”) (twelve of thirty-four funds comprising Pacific Funds Series Trust (formerly Pacific Life Funds)) as of March 31, 2015, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended (as to Pacific FundsSM Diversified Alternatives, for the year ended March 31, 2015 and the period from December 31, 2013 (commencement of operations) through March 31, 2014; as to Pacific FundsSM Limited Duration High Income, for the year ended March 31, 2015 and the period from July 31, 2013 (commencement of operations) through March 31, 2014), and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of investments owned as of March 31, 2015, by correspondence with the custodian, agent banks, transfer agent, and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds as of March 31, 2015, and the results of their operations, the changes in their net assets, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Philadelphia, Pennsylvania
May 28, 2015
E-1
PACIFIC FUNDS
(Unaudited)
For corporate shareholders, the percentage of investment income (dividend income and short-term gains, if any) for each of the Funds that qualify for the dividends-received deductions for the year ended March 31, 2015 is as follows:
| Fund | Percentage | |||
| Pacific Funds Portfolio Optimization Conservative |
11.93% | |||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
21.96% | |||
| Pacific Funds Portfolio Optimization Moderate |
26.57% | |||
| Pacific Funds Portfolio Optimization Growth |
35.92% | |||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
45.04% | |||
| Pacific Funds Diversified Alternatives |
0.28% | |||
| Pacific Funds Strategic Income |
1.63% | |||
| Pacific Funds High Income |
0.51% | |||
For the year ended March 31, 2015, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions made by the following Funds, the corresponding percentages represent the amount of each distribution which may qualify for the 15% dividend income tax rate.
| Fund | Percentage | |||
| Pacific Funds Portfolio Optimization Conservative |
20.38% | |||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
34.24% | |||
| Pacific Funds Portfolio Optimization Moderate |
44.48% | |||
| Pacific Funds Portfolio Optimization Growth |
63.06% | |||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
77.16% | |||
| Pacific Funds Diversified Alternatives |
3.47% | |||
| Pacific Funds Strategic Income |
1.74% | |||
| Pacific Funds High Income |
0.48% | |||
Shareholders should not use the above tax information to prepare their tax returns. The information will be included with your Form 1099 DIV which will be sent to you separately in January 2016. The Funds intend to pass through the maximum allowable percentages to shareholders.
The following Funds designated the listed amounts as long-term capital gains distributions during the year ended March 31, 2015. Distributable long-term gains are based on net realized long-term gains determined on a tax basis and may differ from such amounts for financial reporting purposes.
| Fund | Amount | |||
| Pacific Funds Portfolio Optimization Conservative |
$9,527,590 | |||
| Pacific Funds Portfolio Optimization Moderate-Conservative |
17,734,982 | |||
| Pacific Funds Portfolio Optimization Moderate |
64,873,775 | |||
| Pacific Funds Portfolio Optimization Growth |
54,815,418 | |||
| Pacific Funds Portfolio Optimization Aggressive-Growth |
3,936,767 | |||
| Pacific Funds Diversified Alternatives |
17,901 | |||
| Pacific Funds Short Duration Income |
140,319 | |||
| Pacific Funds Strategic Income |
586,980 | |||
| Pacific Funds Floating Rate Income |
257,129 | |||
| Pacific Funds High Income |
260,279 | |||
F-1
PACIFIC FUNDS (1)
(Unaudited)
See explanation of references on page F-3
F-2
PACIFIC FUNDS (1)
DISCLOSURE OF FUND EXPENSES (Continued)
(Unaudited)
F-3
PACIFIC FUNDS
TRUSTEES AND OFFICERS INFORMATION
(Unaudited)
The business and affairs of the Pacific Funds Series Trust (which may be referred to as “Pacific Funds” or the “Trust”) are managed under the direction of the Board of Trustees under the Declaration of Trust. Information pertaining to the trustees and officers of the Trust is set forth below, effective April 1, 2015. Trustees who are not deemed to be “interested persons” of the Trust, as defined in the 1940 Act, are referred to as “Independent Trustees.” Certain trustees and officers are deemed to be “interested persons” of the Trust and thus are referred to as “Interested Persons”, because of their positions with Pacific Life Insurance Company (“Pacific Life”) and Pacific Life Fund Advisors LLC, a wholly-owned subsidiary of Pacific Life. The Trust’s Statement of Additional Information includes additional information about the trustees. For information on availability of the Trust’s Statement of Additional Information, refer to the WHERE TO GO FOR MORE INFORMATION section of this report.
The address of each trustee and officer is c/o Pacific Funds, 700 Newport Center Drive, Newport Beach, CA 92660.
| Name and Age |
Position(s) with the Fund and Length of Time Served* |
Current Directorship(s) Held and Principal Occupation(s) (and certain additional occupation information) During Past 5 years |
Number of Portfolios in Fund Complex Overseen** | |||
| INDEPENDENT TRUSTEES | ||||||
| Frederick L. Blackmon Year of birth 1952 |
Trustee since 9/13/05 | Trustee (1/05 to present) of Pacific Select Fund; Director (2005 to present) of Trustmark Mutual Holding Company; Former Executive Vice President and Chief Financial Officer (1995 to 2003) of Zurich Life; Former Executive Vice President and Chief Financial Officer (1989 to 1995) of Alexander Hamilton Life Insurance Company (subsidiary of Household International); Member of Board of Trustees (2010 to present) of Cranbrook Educational Community; Former Member of Board of Governors (1994 to 1999) of Cranbrook Schools; and Former Member of Board of Regents (1993 to 1996) Eastern Michigan University. | 90 | |||
| Gale K. Caruso Year of birth 1957 |
Trustee since 1/01/06 | Trustee (1/06 to present) of Pacific Select Fund; Independent Trustee (2015 to present) of Matthews Asia Funds; Former Member of the Board of Directors (2005 to 2009) of LandAmerica Financial Group, Inc.; Former President and Chief Executive Officer (1999 to 2003) of Zurich Life; Former Chairman, President and Chief Executive Officer of Scudder Canada Investor Services, Ltd. (1994 to 1999) and Managing Director of Scudder Kemper Investments (1986 to 1999); Former Member of the Advisory Council of the Trust for Public Land in Maine (2006 to 2009); and Former Member of the Board of Directors of Make-A-Wish of Maine (2005 to 2012). | 90 | |||
| Lucie H. Moore Year of birth 1956 |
Trustee since 6/13/01 | Trustee (10/98 to present) of Pacific Select Fund; Former Partner (1984 to 1994) with Gibson, Dunn & Crutcher (Law); Member of Board of Trustees (2014 to present) of Azusa Pacific University; Former Member of the Board of Trustees (2007 to 2011) of Sage Hill School; Former Member (2000 to 2009) of the Board of Trustees of The Pegasus School; Former Member of the Board of Directors (2005 to 2010) of HomeWord; and Former Member of the Advisory Board (1993 to 2004) of Court Appointed Special Advocates (CASA) of Orange County. | 90 | |||
| Nooruddin (Rudy) S. Veerjee Year of birth 1958 |
Trustee since 9/13/05 | Trustee (1/05 to present) of Pacific Select Fund; Former President (1997 to 2000) of Transamerica Insurance and Investment Group; Former President (1994 to 1997) of Transamerica Asset Management; Former Chairman and Chief Executive Officer (1995 to 2000) of Transamerica Premier Funds (Mutual Fund); and Former Director (1994 to 2000) of various Transamerica Life Companies. | 90 | |||
| G. Thomas Willis Year of birth 1942 |
Trustee since 2/24/04 | Trustee (11/03 to present) of Pacific Select Fund; Certified Public Accountant in California (1967 to present); Former Partner (Audit) (1976 to 2002) of PricewaterhouseCoopers LLP (Accounting and Auditing). | 90 | |||
F-4
PACIFIC FUNDS
TRUSTEES AND OFFICERS INFORMATION (Continued)
(Unaudited)
| Name and Age |
Position(s) with the Fund and Length of Time Served* |
Current Directorship(s) Held and Principal Occupation(s) (and certain additional occupation information) During Past 5 years |
Number of Portfolios in Fund Complex Overseen** | |||
| INTERESTED PERSONS |
||||||
| James T. Morris Year of birth 1960 |
Chairman of the Board and Trustee since 1/11/07, (Chief Executive Officer 1/11/07 to 12/31/09) | Director (4/07 to present), Chairman (5/08 to present), Chief Executive Officer (4/07 to present) and President (4/07 to 3/12) of Pacific Mutual Holding Company and Pacific LifeCorp; Director (4/07 to present), Chairman (5/08 to present), Chief Executive Officer (4/07 to present) and President (4/07 to 3/12) of Pacific Life; Chief Executive Officer (5/07 to present) and President (5/07 to 3/12) of Pacific Life Fund Advisors LLC; and Chairman of the Board and Trustee (1/07 to present) and Chief Executive Officer (1/07 to 12/09) of Pacific Select Fund. | 90 | |||
| Mary Ann Brown Year of birth 1951 |
Chief Executive Officer since 1/01/10, (President 1/11/07 to 12/31/09) | Executive Vice President (4/10 to present) and Senior Vice President (5/06 to 3/10) of Pacific LifeCorp; Executive Vice President (4/10 to present) and Senior Vice President (3/05 to 3/10) of Pacific Life; Executive Vice President (4/10 to present) and Senior Vice President (5/07 to 3/10) of Pacific Life Fund Advisors LLC; and Chief Executive Officer (1/10 to present) and President (1/07 to 12/09) of Pacific Select Fund. | 90 | |||
| Howard T. Hirakawa Year of birth 1962 |
Senior Vice President since 12/10/14 (Vice President since 06/20/06 to 12/09/14) | Senior Vice President (4/14 to present), Vice President (5/07 to 3/14) of Pacific Life Fund Advisors LLC; and Senior Vice President (12/14 to present) and Vice President (6/06 to 12/14) of Pacific Select Fund. | 90 | |||
| Robin S. Yonis Year of birth 1954 |
Vice President and General Counsel since 6/13/01 | Vice President, Fund Advisor General Counsel, and Assistant Secretary (5/07 to present) of Pacific Life Fund Advisors LLC; and Vice President and General Counsel (4/05 to present) of Pacific Select Fund. | 90 | |||
| Brian D. Klemens Year of birth 1956 |
Vice President and Treasurer since 6/13/01 | Vice President and Controller (10/07 to present) of Pacific Mutual Holding Company and Pacific LifeCorp; Vice President and Controller (10/07 to present) of Pacific Life; Vice President and Controller (10/07 to present) of Pacific Life Fund Advisors LLC; Vice President (5/00 to present) and Controller (10/07 to present) of Pacific Select Distributors, Inc.; and Vice President and Treasurer (4/96 to present) of Pacific Select Fund. | 90 | |||
| Sharon E. Pacheco Year of birth 1957 |
Vice President and Chief Compliance Officer since 6/04/04 | Vice President and Chief Compliance Officer (11/03 to present) of Pacific Mutual Holding Company and Pacific LifeCorp; Vice President (2/00 to present) and Chief Compliance Officer (1/03 to present) of Pacific Life; Vice President and Chief Compliance Officer (5/07 to present) of Pacific Life Fund Advisors LLC; and Vice President and Chief Compliance Officer (6/04 to present) of Pacific Select Fund. | 90 | |||
| Eddie D. Tung Year of birth 1957 |
Vice President and Assistant Treasurer since 11/14/05 | Vice President (4/15 to present) and Assistant Vice President (4/03 to 3/15) of Pacific Life; Vice President (4/15 to present) and Assistant Vice President (5/07 to 3/15) of Pacific Life Fund Advisors LLC; and Assistant Vice President and Assistant Treasurer (11/05 to present) of Pacific Select Fund. | 90 | |||
| Jane M. Guon Year of birth 1964 |
Vice President and Secretary since 1/01/11 | Vice President and Secretary (1/11 to present), Assistant Vice President (4/06 to 12/10) and Assistant Secretary (6/98 to 12/10) of Pacific Mutual Holding Company and Pacific LifeCorp; Director, Vice President, and Secretary (1/11 to present), Assistant Vice President (4/06 to 12/10) and Assistant Secretary (2/95 to 12/10) of Pacific Life; Vice President and Secretary (1/11 to present) and Assistant Vice President and Assistant Secretary (05/07 to 12/10) of Pacific Life Fund Advisors LLC; Vice President and Secretary (1/11 to present), Assistant Vice President (5/06 to 12/10) and Assistant Secretary (5/99 to 12/10) of Pacific Select Distributors, Inc.; and Vice President and Secretary (1/11 to present) of Pacific Select Fund. | 90 | |||
F-5
PACIFIC FUNDS
TRUSTEES AND OFFICERS INFORMATION (Continued)
(Unaudited)
| Name and Age |
Position(s) with the Fund and Length of Time Served* |
Current Directorship(s) Held and Principal Occupation(s) (and certain additional occupation information) During Past 5 years |
Number of Portfolios in Fund Complex Overseen** | |||
| INTERESTED PERSONS (Continued) | ||||||
| Laurene E. MacElwee Year of birth 1966 |
Vice President since 4/04/05 and Assistant Secretary since 6/13/01 | Vice President (4/11 to present), Assistant Secretary (5/07 to present) and Assistant Vice President (5/07 to 3/11) of Pacific Life Fund Advisors LLC; and Vice President (12/11 to present), Assistant Secretary (4/05 to present) and Assistant Vice President (4/05 to 12/11) of Pacific Select Fund. | 90 | |||
| Carleton J. Muench Year of birth 1973 |
Vice President since 11/30/06 | Vice President (4/14 to present), Assistant Vice President (5/07 to 3/14) of Pacific Life Fund Advisors LLC; and Vice President (12/14 to present) and Assistant Vice President (11/06 to 12/14) of Pacific Select Fund. | 90 | |||
| Kevin W. Steiner Year of birth 1975 |
Vice President since 1/01/13 | Assistant Vice President (4/12 to present), Mutual Funds Compliance Director (4/08 to 3/12) and Mutual Funds Compliance Manager (10/06 to 3/08) of Pacific Life Fund Advisors LLC; and Assistant Vice President (1/13 to present) of Pacific Select Fund. | 90 | |||
| Audrey L. Cheng Year of birth 1975 |
Vice President since 12/11/13 | Assistant Vice President (9/11 to present) of Pacific Life; Vice President and Attorney (6/08 to 8/11) of Pacific Investment Management Company LLC (“PIMCO”); and Assistant Vice President (12/13 to present) of Pacific Select Funds. | 90 | |||
| * | A trustee serves until he or she resigns, retires, or his or her successor is elected and qualified. |
| ** | As of March 31, 2015, the “Fund Complex” consisted of Pacific Select Fund (56 portfolios) and Pacific Funds (34 funds). |
F-6
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS
(Unaudited)
I. Introduction and Background
The Board of Trustees (the “Trustees” or “Board”) of Pacific Funds Series Trust (“Pacific Funds” or the “Trust”) oversees the management of each of the separate funds of the Trust (each a “Fund” and collectively, the “Funds”) and, as required by Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), initially approves and determines annually whether to renew the investment advisory agreement (the “Advisory Agreement”) with Pacific Life Fund Advisors LLC (“PLFA”) and each sub-advisory agreement (the “Sub-Advisory Agreements,” together with the Advisory Agreement, the “Agreements”) with the various sub-advisers (“Sub-Advisers”). PLFA serves as the investment adviser for all of the Funds and directly manages Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income, and Pacific Funds High Income (the “PAM Managed Funds”) under the name Pacific Asset Management (“PAM”); Pacific Funds Portfolio Optimization Conservative, Pacific Funds Portfolio Optimization Moderate-Conservative, Pacific Funds Portfolio Optimization Moderate, Pacific Funds Portfolio Optimization Growth, and Pacific Funds Portfolio Optimization Aggressive-Growth (the “Portfolio Optimization Funds”); and Pacific Funds Diversified Alternatives (together with the Portfolio Optimization Funds and PAM Managed Funds, the “Directly Managed Funds”). For all other Funds, PLFA has retained other firms to serve as Sub-Advisers under PLFA’s supervision. The Board, including all of the Trustees who are not “interested persons,” as that term is defined in the 1940 Act (“Independent Trustees”), last renewed the Agreements at an in-person meeting of the Trustees held on December 9-10, 2014.1
At this meeting and other meetings, the Board considered information (both written and oral) provided to assist it in its review of the Agreements and made assessments with respect to each Agreement. The Board requested, received and reviewed written materials from PLFA and each Sub-Adviser that were submitted in response to requests from the Independent Trustees and supporting materials relating to those questions and responses. In addition, the Board received in-person presentations about the Funds throughout the year, and the Independent Trustees were advised by independent legal counsel with respect to these and other relevant matters. The Board reviewed a variety of factors and considered a significant amount of information, including information received on an ongoing basis at Board and committee meetings, including reports on Fund performance, expenses, fee comparisons, investment advisory, compliance, and other services provided to the Funds by PLFA and the Sub-Advisers. The Board also reviewed financial and profitability information regarding PLFA and the Sub-Advisers and information regarding the organization and operations of each entity, such as their compliance monitoring, portfolio trading and brokerage practices and the personnel providing investment management and administrative services to each Fund. The Board reviewed data provided by PLFA that was gathered from various independent providers of investment company data to provide the Board with information concerning the Funds’ investment performance, management fees and expense information. Additionally, the Independent Trustees retained an independent consultant (“Independent Consultant”) to assist the Trustees with certain of their analyses and to provide other relevant information. In connection with the analysis, the Independent Consultant utilized and provided the Independent Trustees with data obtained from independent service providers as well as from other sources.
The Trustees’ determinations were made on the basis of each Trustee’s business judgment after consideration of all the information presented. In reviewing the materials presented and in considering the information in the management presentations, the Trustees did not identify any single issue or particular information that, in isolation, would be a controlling factor in making a final decision regarding the proposed Agreements. Individual Trustees may have given different weights to certain factors and assigned various degrees of materiality to information received in connection with the approval process. The following summary describes the most important, but not all, of the factors considered by the Trustees in approving the Agreements, and in the case of the Independent Trustees, certain factors were considered in light of the legal advice furnished to them by independent legal counsel and information from the Independent Consultant that they had retained. This discussion is not intended to be all-inclusive.
II. Annual Consideration and Approval of Investment Advisory and Sub-Advisory Agreements
In evaluating the Advisory Agreement and each Sub-Advisory Agreement, the Board, including all the Independent Trustees, considered the following factors, among others:
1. Nature, Extent and Quality of Services
PLFA. The Trustees considered the depth and quality of PLFA’s investment management process, including its monitoring and oversight of the Sub-Advisers and PAM, and the benefits to shareholders of retaining PLFA and continuing the Advisory Agreement in light of the nature, extent, and quality of the services that have been provided by PLFA, including PAM. The Trustees considered the overall financial strength and stability of PLFA and its ability to provide a high level and quality of services to the Funds. They also considered PLFA’s responsiveness to questions or concerns raised by the Trustees, including PLFA’s willingness to consider and implement investment and operational changes designed to improve investment results and the services provided to the Funds and their shareholders.
The Trustees noted that PLFA makes its officers and employees available to the Board for consultation and discussion regarding the investment management services provided to the Funds. The Trustees considered the experience, capability and integrity of PLFA’s senior management and other personnel and the low turnover rates of its key personnel. The Trustees noted that the investment, legal, compliance and accounting professionals of PLFA and its affiliates have access to and utilize a variety of resources and systems relating to investment management, compliance, trading, performance and risk analysis, security valuation and fund accounting. The Trustees further considered
| 1 | At the December 9-10 meeting, the Board did not consider the continuance of the Sub-Advisory Agreements relating to the PF Small-Cap Growth and PF Small-Cap Value Funds, the Sub-Advisory Agreements with Western Asset Management Company relating to the PF Managed Bond and PF Inflation Managed Funds, and the Sub-Advisory Agreement with Principal Global Investors, LLC, doing business as Macro Currency Group, relating to the PF Currency Strategies Fund, as those agreements were not up for renewal at that time. |
F-7
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PLFA’s continuing need and ability to attract and retain qualified personnel and to maintain and enhance its resources and systems to provide appropriate investment management, compliance and monitoring services for the Funds. The Trustees also considered the additional resources that PLFA has invested to enhance its management and oversight of the Funds, including the addition of experienced personnel with asset allocation and risk management expertise.
Directly Managed Funds – The Trustees considered the services provided by PLFA, including PAM, in rendering investment management services to each Directly Managed Fund. The Trustees considered that PLFA, including PAM, is responsible for identifying investments for each Directly Managed Fund and determining when to purchase, retain, or sell securities, cash and/or other investments for each Directly Managed Fund. The Trustees also considered that PLFA, including PAM, is responsible for the valuation of portfolio securities and evaluating and voting proxies for portfolio holdings of the Directly Managed Funds. With respect to the Asset Allocation Funds, the Trustees also considered, among other things, PLFA’s experience, resources and expertise in analyzing the composition of the various PF Underlying Funds that serve as investment options for the Asset Allocation Funds and in developing asset allocation models appropriate to each Asset Allocation Fund’s investment objectives and risk profile. The Trustees considered, in this regard, the tools and resources used by PLFA in constructing the asset allocation models, including the role and costs of consultants engaged by PLFA for assistance in the construction of these models. With respect to the PAM Managed Funds, the Trustees also considered the investment oversight and monitoring of PAM discussed below under “Sub-Advised Funds.”
The Trustees considered PLFA’s policies, procedures and systems to ensure compliance with applicable laws and regulations with respect to the Directly Managed Funds, and its attention to matters that may involve conflicts of interest between itself and a Fund. In this regard, the Trustees reviewed information provided throughout the year on PLFA’s compliance policies and procedures, its compliance history, and reports from the Trust’s Chief Compliance Officer (“CCO”) on compliance by PLFA with applicable laws and regulations. The Trustees also reviewed information on any responses by PLFA to regulatory and compliance developments throughout the year. The Trustees further noted the compliance monitoring conducted by PLFA and PAM on an ongoing basis and also noted the development of procedures and systems necessary to maintain compliance with applicable laws and regulations as well as the resources that PLFA dedicates to these programs. The Trustees considered that the CCO has in place a systematic process for periodically reviewing PLFA’s written compliance policies and procedures, including the assessment of PLFA’s compliance program as required under Rule 38a-1 of the 1940 Act and PLFA’s code of ethics. The Trustees also considered that PLFA continues to cooperate with the CCO in reviewing its compliance operations.
Sub-Advised Funds – The Trustees considered PLFA’s responsibilities in rendering services to the Sub-Advised Funds and the fact that PLFA monitors and evaluates the performance of the Sub-Advisers in comparison to each Fund’s investment objective as well as to appropriate benchmark indices and peer funds. The Trustees also considered that PLFA monitors the Sub-Advised Funds for adherence to the investment objectives and policies of each Fund. The Trustees noted that PLFA provides the Board with periodic and special reports related to such performance and investment monitoring and evaluation. The Trustees also considered PLFA’s process in analyzing and recommending for consideration by the Board, the termination of a Sub-Advisory Agreement with a Sub-Adviser and the replacement of a Sub-Adviser.
The Trustees considered the high quality of the products and services provided by PLFA to the Funds, including risk analysis, preparation of periodic performance and other reports, and coordination and oversight of other service providers to the Trust. The Trustees also noted that PLFA regularly informs the Trustees about matters relevant to the Trust and its shareholders, including relationships with financial intermediaries.
The Trustees considered the depth and quality of PLFA’s monitoring and oversight of the Sub-Advisers and PAM. The Board noted that PLFA monitors numerous investment, performance, and risk metrics for the Funds. The Trustees considered PLFA’s continued investment in, and development of, its research and analytical capabilities, including investments in personnel and enhanced analytical tools for assessing Fund performance and the performance of the Sub-Advisers, including analytical tools relating to risk analysis, Fund performance attribution and reporting on such matters to the Trustees. The Trustees noted that PLFA uses these tools to analyze a Fund’s performance and risk profile and identify Funds that are underperforming. The Board considered that PLFA also conducts various analyses to try to assess the sources of and reasons for underperformance. The Trustees noted that PLFA has developed, and continues to enhance, processes to oversee and monitor the performance of Sub-Advisers, including the use of analytical methods to review Fund performance and execution of investment strategies. The Board noted that PLFA provides the Board with analysis of this data over rolling periods to assist the Board in identifying trends in Fund performance and other areas, and periodically provides the Trustees with information on economic and market trends to provide a context for assessing recent performance. The Trustees also noted that PLFA has developed effective methods for monitoring the Sub-Advisers’ investment style consistency and for analyzing the use of derivatives by Sub-Advisers. With respect to the PAM Managed Funds, the Board considered that PLFA provides oversight, diligence and reporting with regard to its PAM unit that is similar to the process it employs with regard to the Sub-Advisers. In making their assessments, the Trustees considered that PLFA has historically exercised diligence in monitoring the performance of the Sub-Advisers and PAM, and has recommended and taken measures to attempt to remedy relative underperformance by a Fund when PLFA and the Trustees believed it to be appropriate. The Trustees also considered the significant work performed by PLFA in conducting searches for new Sub-Advisers to replace existing Sub-Advisers where appropriate or to manage new Funds in the Trust.
The Board also noted that PLFA conducts periodic due diligence on Sub-Advisers involving onsite visits, in-person meetings and telephonic meetings to gather information that PLFA uses to gain an in-depth understanding of a Sub-Adviser’s investment process and to seek to identify issues that may be relevant to a Sub-Adviser’s services to a Fund or a Fund’s performance, including, but not limited to, the financial strength of a Sub-Adviser, significant staffing changes that could affect a Fund, material changes in a Sub-Adviser’s assets under management, compliance and regulatory concerns, best execution review and portfolio security valuation support.
F-8
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
The Trustees considered the time and attention paid by PLFA to matters involving the valuation of Fund securities. The Trustees considered that PLFA has established a Valuation Oversight Committee that is responsible for, among other things, researching and evaluating information concerning securities that are not actively or publicly traded, valuing securities subject to a trading halt or for which a market quotation is not readily available, the valuation of equity securities traded on foreign exchanges, oversight of and due diligence on pricing vendors and the development of alternate valuation methodologies.
The Trustees considered PLFA’s oversight, review and analysis of trade execution reports and trends in trade execution for the Funds. The Trustees noted that PLFA oversees a third-party transaction cost analysis consultant that provides statistical analysis on portfolio trading and that PLFA presents information about the Funds’ portfolio trading costs to the Board annually. The Board also noted that PLFA conducts regular review and analysis of each Sub-Adviser’s use of soft dollars and presents information about the Sub-Advisers’ use of soft dollars to the Board annually.
The Trustees also considered PLFA’s implementation of transition management programs when handling significant changes in the Funds, such as cash movements between the Funds arising from reallocations by funds of funds and the transition of Fund assets from one Sub-Adviser to another, including steps taken by PLFA to reduce transaction costs associated with a Fund transition. The Trustees considered that PLFA coordinates the onboarding process for new Sub-Advisers and oversees the establishment of necessary accounts and documentation for the Sub-Advisers to begin managing Fund assets.
In addition to the services described above, the Trustees also considered the compliance monitoring that PLFA and its affiliates conduct on the Sub-Advisers and the commitment of PLFA and its affiliates to those programs and PLFA’s efforts to keep the Trustees informed about the compliance programs of Sub-Advisers. In this regard, the Trustees reviewed information and reports from the Trust’s CCO on compliance by the Sub-Advisers with applicable laws and regulations. The Trustees considered that the CCO has in place a systematic process for periodically reviewing each Sub-Adviser’s written compliance policies and procedures, including the assessment of each Sub-Adviser’s compliance program as required under Rule 38a-1 of the 1940 Act and each Sub-Adviser’s code of ethics. The Trustees also considered that each Sub-Adviser continues to cooperate with the CCO in reviewing its compliance operations.
Sub-Advisers. The Trustees considered the benefits to shareholders of retaining each Sub-Adviser and continuing the Sub-Advisory Agreements particularly in light of the nature, extent, and quality of the services that have been provided by the Sub-Advisers. The Trustees considered the services provided by each Sub-Adviser in rendering investment management services to a Sub-Advised Fund. The Trustees considered that each Sub-Adviser is responsible for identifying investments for a Sub-Advised Fund and determining when to purchase, retain, or sell securities, cash and/or other investments for a Sub-Advised Fund. The Trustees also considered that each Sub-Adviser is responsible for evaluating and voting proxies for portfolio holdings of a Sub-Advised Fund. The Trustees considered the quality of the portfolio management services which have benefited and should continue to benefit the Sub-Advised Funds and their shareholders, the organizational depth and resources of the Sub-Advisers, including the background and experience of each Sub-Adviser’s management personnel, and the expertise of each Sub-Adviser’s portfolio management team, as well as the investment methodology used by the Sub-Adviser.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PLFA and the Sub-Advisers.
2. Investment Results
The Trustees considered the investment results of each Fund in light of its objective, strategies and market conditions. The Trustees compared each Fund’s total returns with the total returns of each Fund’s primary benchmark index and the total returns of appropriate peer funds. The peer funds for each Fund were selected by an Independent Consultant using data from Morningstar (each a “Selected Performance Peer Group”), and the Trustees reviewed a description of the Independent Consultant’s methodology for selecting the peer funds in each Selected Performance Peer Group. The information provided to the Trustees included each Fund’s performance record for the one-, three-, five- and ten-year or since inception periods ended September 30, 2014, as available, compared to the applicable primary benchmark and Selected Performance Peer Group.
The Trustees considered the performance of each Fund on a case-by-case basis and noted that some Funds had outperformed their Selected Performance Peer Group over certain periods and/or exceeded the return of their respective primary benchmark while others underperformed their Selected Performance Peer Group over certain periods and/or trailed the return of their respective primary benchmark. In considering each Fund’s investment results, the Board placed greater emphasis on each Fund’s long-term performance track record rather than shorter-term performance. The Board also took into account that each Fund’s track record is measured as of a specific date, and that track records can vary as of different measurement dates. Therefore, in reviewing Funds that are currently underperforming, the Trustees also considered the broader perspective of the Fund’s performance over varying time periods, the market conditions experienced during the periods under review, as well as the outlook for the Fund going forward in light of expected future market conditions. The Board also considered the performance of the current Sub-Adviser to each Fund where there has been a change in Sub-Adviser. The Trustees discussed with PLFA the fact that certain periods of underperformance may be transitory while other periods of underperformance may be reflective of broader issues that may warrant consideration of corrective action. The Trustees discussed these Funds with representatives of PLFA, including an assessment of the approach used by the Sub-Advisers, and the approach used by PLFA and PAM with respect to the Directly Managed Funds, as well as the oversight and monitoring by PLFA as the investment adviser, to gain an understanding of underperformance and to assess whether any actions would be appropriate. In addition, the Board considered any specific actions that PLFA, PAM or a Sub-Adviser have taken, or agreed to take, to enhance the investment performance of a Fund, and the results of those actions. In reviewing the performance of each Fund, the Board took into account, among other things, each Fund’s performance track record. A summary of each Fund’s track record is provided below.
F-9
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PF Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five-, and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one- and three-year periods and the fifth quintile for the five- and ten-year periods. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013, that PLFA had advised that the Fund’s one-year underperformance had resulted from the Sub-Adviser’s investment style, and that PLFA has advised that it will continue to closely monitor the Fund and would advise the Board in early 2015 what remedial actions, if any, it believed were necessary or appropriate.
PF Large-Cap Value Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods and underperformed for the ten-year period; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one- and three-year periods and the third quintile for the five- and ten-year periods.
PF Comstock Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods and underperformed for the ten-year period; (2) underperformed its primary benchmark for the one-, five- and ten-year periods and outperformed for the three-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-, three- and five-year periods and the fourth quintile for the ten-year period.
PF Large-Cap Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and ten-year periods and outperformed for the three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and ten-year periods and outperformed for the five-year period; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-year period, the third quintile for the three-year period, the first quintile for the five-year period and the fifth quintile for the ten-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013.
PF Main Street Core Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-, three- and five-year periods.
PF Mid-Cap Equity Fund
The Fund: (1) performed in line with the median of its Selected Performance Peer Group for the one-year period and underperformed for the three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-year period and the fourth quintile for the three- and five-year periods. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013.
PF Mid-Cap Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three- and five-year periods and outperformed for the ten-year period; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, three- and five-year periods and the second quintile for the ten-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013.
PF Small-Cap Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, three-, five- and ten-year periods. In evaluating the performance of the Fund, the Board considered that the prior Sub-Adviser had been replaced and the current Sub-Adviser has managed the Fund since May 2014, and, therefore, the Sub-Advisory Agreement was not up for renewal at this time.
PF Small-Cap Value Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and three-year periods and outperformed for the five-year period; (2) underperformed its primary benchmark for the one- and three-year periods and outperformed for the five-year period; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one- and three-year periods and the third quintile for the five-year period. In evaluating the performance of the Fund, the Board considered that the prior Sub-Adviser had been replaced and the current Sub-Adviser has managed the Fund since May 2014, and, therefore, the Sub-Advisory Agreement was not up for renewal at this time.
PF Currency Strategies Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) underperformed its primary benchmark for the one-year period; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Board considered that the Fund had not been in operation for a sufficient time period to establish a meaningful track record. The Board also considered that a co-Sub-Adviser was added in May 2014, and, therefore, the Sub-Advisory Agreement with respect to that co-Sub-Adviser was not up for renewal at this time.
F-10
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
Pacific Funds Diversified Alternatives
The Board considered that the Fund had not yet been in operation for a full year and did not have a performance track record.
PF Global Absolute Return Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Board considered that the Fund had not been in operation for a sufficient time period to establish a meaningful track record and that the Selected Performance Peer Group was of limited usefulness due to the diversity of investment approaches in the peer group.
PF Precious Metals Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Board considered that the Fund had not been in operation for a sufficient time period to establish a meaningful track record.
PF Real Estate Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one- and three-year periods and underperformed for the five-year period; (2) outperformed its primary benchmark for the one-year period and underperformed for the three- and five-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period, the third quintile for the three-year period and the fourth quintile for the five-year period.
PF Emerging Markets Debt Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period; (2) underperformed its primary benchmark for the one-year period; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-year period.
PF Emerging Markets Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods; (2) outperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period and the first quintile for the three- and five-year periods.
PF International Large-Cap Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period and outperformed for the three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-year period and outperformed for the three-, five- and ten-year periods; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-, five- and ten-year periods and the second quintile for the three-year period.
PF International Value Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, five- and ten-year periods and the third quintile for the three-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2011, that PLFA had advised that the Fund’s underperformance in 2014 had resulted from the Sub-Adviser’s investment style, and that PLFA has advised that it will continue to closely monitor the Fund to determine if future remedial actions are necessary or appropriate.
Pacific Funds Floating Rate Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one- and three-year periods; (2) underperformed its primary benchmark for the one-year period and outperformed for the three-year period; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period and the first quintile for the three-year period.
PF Floating Rate Loan Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, three- and five-year periods. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2010, that PLFA had advised that the Fund’s underperformance had resulted from the Sub-Adviser’s investment style in the recent market environment, and that PLFA has advised that it will continue to closely monitor the Fund to determine if future remedial actions are necessary or appropriate.
Pacific Funds High Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) underperformed its primary benchmark for the one-year period; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period.
F-11
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
Pacific Funds Core Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one- and three-year periods; (2) outperformed its primary benchmark for the one- and three-year periods; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one- and three-year periods.
PF Inflation Managed Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) outperformed its primary benchmark for the one-, three- and five-year periods and underperformed for the ten-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-, five- and ten-year periods and the second quintile for the three-year period. In evaluating the performance of the Fund, the Trustees considered that the Board had approved an additional Sub-Adviser for the Fund effective December 31, 2014.
Pacific Funds Limited Duration High Income
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Trustees considered that the Fund had not been in operation for a sufficient time period to establish a meaningful track record.
PF Managed Bond Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and five-year periods and outperformed for the three- and ten-year periods; (2) underperformed its primary benchmark for the one-year period and outperformed for the three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-year period, the second quintile for the three-year period, the fourth quintile for the five-year period and the first quintile for the ten-year period. In evaluating the performance of the Fund, the Board considered that a co-Sub-Adviser was added in August 2014, and, therefore, the Sub-Advisory Agreement with respect to that co-Sub-Adviser was not up for renewal at this time.
PF Short Duration Bond Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) outperformed its primary benchmark for the one-, three- and five-year periods and underperformed for the ten-year period; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-, three- and ten-year periods and the fifth quintile for the five-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2011.
Pacific Funds Short Duration Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-year period.
Pacific Funds Strategic Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-year period.
Pacific Funds Portfolio Optimization Aggressive-Growth
The Fund: (1) underperformed its Selected Performance Peer Group for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-year period and the third quintile for the three-, five- and ten-year periods. In evaluating the performance of the Fund, the Trustees considered PLFA’s rationale for underperformance in the recent period, the actions PLFA has taken and the actions PLFA plans to take to enhance performance.
Pacific Funds Portfolio Optimization Conservative
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, five- and ten-year periods and outperformed for the three-year period; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one- and five-year periods and the fourth quintile for the three- and ten-year periods.
Pacific Funds Portfolio Optimization Growth
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one- and three-year periods, the fourth quintile for the five-year period and the third quintile for the ten-year period. In evaluating the performance of the Fund, the Trustees considered PLFA’s views that the Fund’s underperformance was caused largely by the underperformance of certain “alternative” asset classes in 2013 as well as fewer investment alternatives than some of its competitors. The Trustees also considered the actions PLFA has taken and the actions PLFA plans to take to enhance performance, including increasing the breadth of the investment options available for investment by the Fund.
F-12
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
Pacific Funds Portfolio Optimization Moderate-Conservative
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and five-year periods, outperformed for the three-year period and performed in line with its median for the ten-year period; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-year period and the third quintile for the three-, five- and ten-year periods.
Pacific Funds Portfolio Optimization Moderate
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-year period, the fourth quintile for the three- and five-year periods and the third quintile for the ten-year period. In evaluating the performance of the Fund, the Trustees considered PLFA’s rationale for underperformance in the recent period, the actions PLFA has taken and the actions PLFA plans to take to enhance performance.
The Trustees reviewed the monitoring of each Sub-Advisers’ investment results by PLFA, including PLFA’s historical practice of recommending to the Trustees the use of a new sub-adviser if performance lagged and could not be improved within a reasonable timeframe, and reviewed the monitoring of the PAM unit’s investment results by PLFA. Generally, the Trustees noted that there continues to be a strong record of well-managed Funds that work well in the Asset Allocation Funds and that the Asset Allocation Funds provide a range of professionally managed asset allocation investment options. The Trustees considered the steps PLFA has taken to seek to improve performance of the Asset Allocation Funds, including diversifying asset class investment options by adding additional PF Underlying Funds and adding or changing Sub-Advisers to the PF Underlying Funds. The Trustees also noted that the Funds continue to deliver the investment style as disclosed to shareholders. The Trustees also noted the use by investors of the Asset Allocation Funds and the benefits the Asset Allocation Funds provide for shareholders generally.
The Board concluded that PLFA continues to have a long record of effectively managing a multi-manager fund group and asset allocation funds designed to give shareholders a reasonable array of choices through which to implement their investment programs. The Board further concluded that PLFA was implementing each Fund’s investment objective either directly or through the selection of Sub-Advisers and that PLFA’s record in managing each Fund indicates that its continued management, as well as the continuation of the respective Sub-Advisory Agreements, will benefit each Fund and its shareholders.
3. Advisory Fees and Total Expense Ratios
The Trustees requested, received and reviewed information from PLFA relating to the advisory fees and the sub-advisory fees, including the portion of the advisory fees paid to each Sub-Adviser as compared to the portion retained by PLFA. The Trustees considered the nature and quality of the services provided by PLFA and also considered the nature and quality of services provided by each Sub-Adviser. The Independent Trustees also requested and reviewed information from the Independent Consultant along with the Independent Consultant’s analysis of advisory fees, sub-advisory fees and certain combined expenses, excluding any applicable service or distribution fees that were selected by the Independent Consultant for purposes of the peer group expense comparisons (“Operating Expenses”). The Trustees reviewed the advisory fees, sub-advisory fees and Operating Expenses of each Fund and compared such amounts with the average fee and expense levels of applicable peer funds identified by the Independent Consultant (each a “Selected Expense Peer Group”). The Trustees reviewed a description of the Independent Consultant’s methodology for selecting peer funds in each Selected Expense Peer Group and the fact that the Selected Expense Peer Groups were constructed using a universe of funds that included both sub-advised and directly managed funds. With respect to the Portfolio Optimization Funds, the Trustees also compared the net expense ratio with the average net expense ratio of funds in the Morningstar Category that PLFA determined to be similar to the relevant Portfolio Optimization Fund (“Comparable Peer Fund Average”). A summary of some of the comparative fee and expense information considered by the Trustees for each Fund is provided below.
PF Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Large-Cap Value Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Comstock Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are in line with the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.015% of its advisory fee.
F-13
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PF Large-Cap Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.045% of its advisory fee.
PF Main Street Core Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Mid-Cap Equity Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Mid-Cap Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.05% of its advisory fee.
PF Small-Cap Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Small-Cap Value Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Currency Strategies Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Diversified Alternatives
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fifth quintile of its Selected Expense Peer Group. The Trustees noted that PLFA had advised that it did not consider the Selected Expense Peer Group to be an appropriate category for the Fund and that, when compared to what PLFA considers to be the appropriate category, the Operating Expenses for the Fund are below the category average.
PF Global Absolute Return Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Precious Metals Fund
The Trustees considered that (a) the advisory fee for the Fund is lower than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.07% of its advisory fee.
F-14
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PF Real Estate Fund
The Trustees considered that (a) the advisory fee for the Fund is in line with the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Emerging Markets Debt Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Emerging Markets Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF International Large-Cap Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF International Value Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
Pacific Funds Floating Rate Income
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Floating Rate Loan Fund
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.10% of its advisory fee.
Pacific Funds High Income
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
Pacific Funds Core Income
The Trustees considered that (a) the advisory fee for the Fund is in line with the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Inflation Managed Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Limited Duration High Income
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.02% of its advisory fee.
F-15
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PF Managed Bond Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Short Duration Bond Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
Pacific Funds Short Duration Income
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Strategic Income
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are in line with the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Portfolio Optimization Aggressive-Growth
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Conservative
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Growth
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Moderate-Conservative
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Moderate
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
During their review, the Trustees noted that all of the Funds were subject to contractual expense limitations on certain operating expenses agreed to by PLFA.
The Trustees also considered information from the Sub-Advisers regarding the comparative sub-advisory fees charged under other investment advisory contracts for similarly managed accounts, such as contracts of each Sub-Adviser with other similarly managed registered investment companies or other types of clients. The Trustees noted that in many cases there were differences in the level of services provided to the Funds by the Sub-Advisers and that the level of services provided by these Sub-Advisers on these other accounts differed due to the nature of the accounts or because there were other reasons to support the difference in fees, such as an affiliation between the Sub-Adviser and the account. These differences often explained variations in fee schedules. The Trustees were mindful that, with regard to the Sub-Advised Funds, the fee rates were the result of arms’-length negotiations between PLFA and the Sub-Advisers, and that any sub-advisory fees are paid by PLFA and are not paid directly by a Fund.
F-16
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
The Board concluded that the advisory fees, sub-advisory fees and total expenses of each Fund were fair and reasonable.
4. Costs, Level of Profits and Economies of Scale
The Trustees reviewed information provided by PLFA and the Sub-Advisers regarding PLFA’s costs of sponsoring the Funds and information regarding the profitability of PLFA and the Sub-Advisers.
PLFA and the Sub-Advisers’ Costs and Profitability. The Trustees noted that, based on the data available, PLFA appears to be providing products that are competitively priced with other funds, especially multi-manager and asset allocation funds. The Trustees noted PLFA’s willingness to sponsor new funds that PLFA believed would benefit the Asset Allocation Funds, despite the potential subsidies required by PLFA during a new fund’s start-up phase. The Trustees also noted that the analysis of the Trust’s profitability to PLFA supported a conclusion that PLFA’s costs and profitability are reasonable, whether considered inclusive or exclusive of distribution costs.
The Trustees also reviewed information provided regarding the structure and manner in which PLFA’s and the Sub-Advisers’ investment professionals were compensated and their respective views of the relationship of such compensation to the attraction and retention of quality personnel. The Trustees considered PLFA’s willingness to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements.
With respect to the Sub-Advisers, the Trustees noted that it was difficult in many cases to accurately determine or evaluate the profitability of the Sub-Advisory Agreements to the Sub-Advisers because of, among other things, the differences in the types of information provided by the Sub-Advisers, the fact that many Sub-Advisers manage substantial assets other than the Funds and, further, that any such assessment would involve assumptions regarding the Sub-Advisers’ expense allocation policies, capital structure, cost of capital, business mix and other factors.
Accordingly, in the case of the Sub-Advisers, the Trustees focused greater consideration on the data described above in light of the arms’-length nature of the relationship (for the Sub-Advised Funds) between PLFA and such Sub-Advisers with respect to the negotiation of fund sub-advisory fees and the fact that such fees are paid by PLFA.
Economies of Scale. The Trustees noted and considered the extent to which economies of scale are realized as each Fund grows and whether advisory fee levels reflect economies of scale if the Funds grow in size. The Trustees noted PLFA’s commitment to competitive total expenses of the Funds through expense limitation agreements, its and its affiliates’ consistent reinvestment in the business in the form of improvements in technology, product innovations and customer service. The Trustees considered information relating to economies of scale provided by PLFA, and PLFA’s willingness to discuss and evaluate the topic of economies of scale with the Trustees.
With respect to the Asset Allocation Funds, the Trustees noted that the advisory fee was set at an amount that takes into account the current size of the Funds and that PLFA and the Trustees have had discussions about adding breakpoints when appropriate. The Trustees also considered PLFA’s willingness to reduce its own fees through certain advisory fee waivers and expense limitation agreements, whereby PLFA will reimburse the Funds for certain expenses that exceed stated expense caps.
The Trustees noted that PLFA and its affiliates had consistently reinvested in the business in the form of improvements in technology, product innovations, personnel and resources. In particular, the Trustees noted that PLFA had created new positions responsible for asset allocation and risk management during the prior year and had hired experienced personnel to fill these positions.
The Trustees additionally noted that economies of scale were difficult to measure with precision particularly on a Fund by Fund basis. This analysis is complicated by the additional services and content provided by PLFA and its affiliates through reinvestment in the business, as discussed above. The Trustees considered that the Funds are well managed, and provide shareholders with sophisticated asset allocation investment options at reasonable fee levels. The Board noted that PLFA had taken steps to ensure that shareholders benefit by negotiating favorable terms with service providers, and to provide certain support services to the Funds on an approximate cost basis as opposed to an asset-based charge.
The Board determined that PLFA and its affiliates are sharing economies of scale given its commitment to competitive total expenses of the Funds, and the consistent reinvestment in the business in the form of improvements in technology and other resources and investments in personnel. The Board considered that it will continue to review whether there are additional economies of scale that will be realized as the Funds grow that can be shared with shareholders. The Board concluded that the Funds’ cost structures were reasonable and that overall profitability appeared reasonable at the current time. The Board further concluded that PLFA was sharing economies of scale with each Fund and its shareholders to their benefit.
5. Ancillary Benefits
The Trustees requested and received from PLFA and the Sub-Advisers information concerning other benefits received by PLFA, Pacific Life, the Sub-Advisers, and their affiliates as a result of their respective relationship with the Funds, including various service arrangements with PLFA affiliates and reimbursement at an approximate cost basis for support services in the case of PLFA, as well as commissions paid to broker-dealers affiliated with certain Sub-Advisers and the use of soft-dollars by certain of the Sub-Advisers. The Trustees also considered ancillary benefits received by Pacific Life and its affiliates from the Funds. The Trustees considered information concerning other significant economic relations between the Sub-Advisers and their affiliates and with PLFA and its affiliates and noted PLFA’s processes and procedures to identify and disclose such relationships to the Board. The Trustees also considered PLFA’s and each Sub-Adviser’s strong practices and procedures with regard to managing conflicts of interest and ensuring that such conflicts do not prevent PLFA or the Sub-Advisers from acting in the best interests of the Funds and their shareholders.
F-17
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
The Board concluded that such benefits were consistent with those generally derived by investment advisers to mutual funds or were otherwise not unusual.
6. Conclusion
Based on their review, including their consideration of each of the factors referred to above, and assisted by the advice of the Independent Consultant and independent counsel to the Independent Trustees, the Board, including the Independent Trustees, concluded that the Advisory Agreement and each applicable Sub-Advisory Agreement are fair and reasonable with respect to each Fund and its shareholders, and that the renewal of the Advisory Agreement and each applicable Sub-Advisory Agreement would be in the best interests of the Funds and their shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Advisory Agreement and each applicable Sub-Advisory Agreement, but indicated that the Board based its determination on the total mix of information available to it.
F-18
PACIFIC FUNDS
WHERE TO GO FOR MORE INFORMATION
(Unaudited)
Availability of Quarterly Holdings
The Trust files Form N-Q (complete schedules of fund holdings) with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year not later than 60 days after the close of the applicable quarter end. The Trust’s Form N-Q, (when required) is filed pursuant to applicable regulations and is available after filing (i) on the SEC’s Website at http://www.sec.gov; (ii) for review and copying at the SEC’s Public Reference Room in Washington, D.C. (information on the operations of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330); and (iii) on the Trust’s Webpage at https://www.pacificlife.com/pacificfunds.html. The SEC may charge you a fee for this information.
Availability of Proxy Voting Record
By August 31 of each year, the Trust files information regarding how the Trust’s fund managers voted proxies relating to fund securities during the most recent twelve-month period ended June 30. Such information is available after filing on the Trust’s’ Website and on the SEC’s Website noted below.
Information Relating to Investments Held by the Trust
For complete descriptions of the various securities and other instruments held by the Trust and their risks, please see the Trust’s prospectus and Statement of Additional Information (“SAI”). For a description of bond ratings, please see the Trust’s SAI. The prospectus and SAI are available as noted below.
Availability of Proxy Voting Policies
A description of the Proxy Voting Policies and Procedures that the Trust uses to determine how to vote proxies relating to fund securities is described in the Trust’s SAI.
How to obtain Information
The Trust’s prospectus, SAI (including Proxy Voting Policies) and the PF Underlying Funds’ annual and semi-annual reports are available:
| • | On the Trust’s Website at https://www.pacificlife.com/pacificfunds.html |
| • | On the SEC’s Website at http://www.sec.gov |
| • | Upon request by calling, without charge, 1-800-722-2333, 7 a.m. through 5 p.m. Pacific Time |
F-19
PF Underlying Funds
Annual Report
As of March 31, 2015
PACIFIC FUNDS
ANNUAL REPORT
AS OF MARCH 31, 2015
| A-2 | ||
| B-1 | ||
| Financial Statements: |
||
| C-1 | ||
| C-5 | ||
| C-9 | ||
| C-13 | ||
| C-14 | ||
| D-1 | ||
| E-1 | ||
| F-1 | ||
| F-2 | ||
| F-4 | ||
| Approval of Investment Advisory Agreement and Sub-Advisory Agreements |
F-7 | |
| F-21 | ||
Pacific Funds Series Trust, which is a Delaware statutory trust, may be referred to as “Pacific Funds” (formerly named Pacific Life Funds) or the “Trust”.
PACIFIC FUNDS
| Sub-Adviser | Pacific Funds Underlying Fund | Page Number | ||
| Eaton Vance Investment Managers (Eaton Vance) | PF Floating Rate Loan (formerly named PL Floating Rate Loan) | A-4 | ||
| Pacific Investment Management Company LLC (PIMCO)/ Western Asset Management Company (Western Asset) | PF Inflation Managed (formerly named PL Inflation Managed) | A-5 | ||
| Pacific Investment Management Company LLC (PIMCO)/ Western Asset Management Company (Western Asset) |
PF Managed Bond (formerly named PL Managed Bond) | A-7 | ||
| T. Rowe Price Associates, Inc. (T. Rowe Price) | PF Short Duration Bond (formerly named PL Short Duration Bond) | A-9 | ||
| Ashmore Investment Management Limited (Ashmore) | PF Emerging Markets Debt (formerly named PL Emerging Markets Debt) | A-10 | ||
| Invesco Advisers, Inc. (Invesco) | PF Comstock (formerly named PL Comstock) | A-11 | ||
| MFS Investment Management (MFS) | PF Growth (formerly named PL Growth) | A-12 | ||
| BlackRock Investment Management, LLC (BlackRock) | PF Large-Cap Growth (formerly named PL Large-Cap Growth) | A-13 | ||
| ClearBridge Investments, LLC (ClearBridge) | PF Large-Cap Value (formerly named PL Large-Cap Value) | A-14 | ||
| OppenheimerFunds, Inc. (Oppenheimer) | PF Main Street® Core (formerly named PL Main Street® Core) | A-15 | ||
| Scout Investments, Inc. (Scout) | PF Mid-Cap Equity (formerly named PL Mid-Cap Equity) | A-16 | ||
| Ivy Investment Management Company (Ivy) | PF Mid-Cap Growth (formerly named PL Mid-Cap Growth) | A-18 | ||
| Lord, Abbett & Co. LLC (Lord Abbett) | PF Small-Cap Growth (formerly named PL Small-Cap Growth) | A-19 | ||
| AllianceBernstein L.P. (AB) | PF Small-Cap Value (formerly named PL Small-Cap Value) | A-20 | ||
| Morgan Stanley Investment Management Inc. (Morgan Stanley) |
PF Real Estate (formerly named PL Real Estate) | A-21 | ||
| OppenheimerFunds, Inc. (Oppenheimer) | PF Emerging Markets (formerly named PL Emerging Markets) | A-22 | ||
| MFS Investment Management (MFS) | PF International Large-Cap (formerly named PL International Large-Cap) | A-23 | ||
| QS Batterymarch Financial Management, Inc. (QS Batterymarch) | PF International Small-Cap | A-24 | ||
| J.P. Morgan Investment Management Inc. (JPMorgan) | PF International Value (formerly named PL International Value) | A-25 | ||
| Macro Currency Group (MCG)/ UBS Global Asset Management (Americas) Inc. (UBS) |
PF Currency Strategies (formerly named PL Currency Strategies) | A-26 | ||
| Eaton Vance Investment Managers (Eaton Vance) | PF Global Absolute Return (formerly named PL Global Absolute Return) | A-27 | ||
| Wells Capital Management Incorporated (Wells Capital Management) | PF Precious Metals (formerly named PL Precious Metals) | A-28 |
A-1
PACIFIC FUNDS PERFORMANCE DISCUSSION
This Annual Report is provided for the general information of investors with beneficial interests in Pacific Funds Series Trust (Trust), formerly called Pacific Life Funds. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current Trust prospectus, as supplemented, which contains information about the Trust and each of its funds, including their investment objectives, risks, charges and expenses. You should read the prospectus carefully before investing. There is no assurance that a fund will achieve its investment objective. Each fund is subject to market risk. The net asset value (NAV) of a fund changes as the value of its assets go up or down. The value of a fund’s shares will fluctuate, and when redeemed, may be worth more or less than original cost. The total return for each fund includes reinvestment of all dividends and capital gain distributions, if any, and does not include deductions of any applicable sales charges. Past performance is not predictive of future performance.
This report shows you the performance of the funds compared to benchmark indices. Index performance is provided for illustrative and comparative purposes only and does not predict or depict the performance of the funds. Indices are unmanaged, do not incur transaction costs and cannot be purchased directly by investors. Index returns include reinvested dividends.
Pacific Life Fund Advisors LLC (PLFA/Adviser) supervises the management of all of the funds above, subject to the oversight of the Trust’s Board of Trustees (Board). PLFA has written the general market conditions commentary, which expresses PLFA’s opinions and views on how the market generally performed for the year ended March 31, 2015. All views are subject to change at any time based upon market or other conditions, and the Trust, its Adviser and the fund sub-advisers disclaim any responsibility to update such views. Any references to “we”, “I”, or “ours” are references to the Adviser or the applicable fund sub-adviser. The Adviser and fund sub-advisers may include statements that constitute “forward-looking statements” under the United States (U.S.) securities laws. Forward-looking statements include information concerning possible or assumed future results of the Trust’s investment operations, asset levels, earnings, expenses, industry or market conditions, regulatory developments and other aspects of the Trust’s operations or general economic conditions. In addition, when used in this report, predictive verbs such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “projects” and future or conditional verbs such as “will”, “may”, “could”, “should” and “would” or any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees of performance or economic results. They involve risks, uncertainties and assumptions. Although such statements are based on expectations that the Adviser or fund sub-adviser believes to be reasonable, actual results may differ materially from expectations. Investors must not rely on any forward-looking statements.
In connection with any forward-looking statements and any investment in the Trust, investors should carefully consider the investment objectives, policies and risks described in the Trust’s current prospectus, as supplemented, and Statement of Additional Information, as supplemented, as filed with the Securities and Exchange Commission (SEC), which may be obtained from the SEC’s website at www.sec.gov.
Market Conditions (for the year ended March 31, 2015)
Executive Summary
Over the reporting period, markets around the world began to diverge as major central banks veered in different paths. The Federal Reserve (Fed), led by the newly appointed Chairperson, Janet Yellen, continued to unwind its third quantitative easing program (QE3) and finally ended the bond-buying stimulus program in the fourth quarter of 2014. The Fed opted to end QE3 based on signs of stabilizing economic growth, improving employment conditions, and contained inflation expectations.
While economic fundamentals seemed relatively upbeat in the U.S., many other nations did not share in America’s good fortunes. The European Central Bank (ECB) and the Bank of Japan (BoJ) continued to aggressively provide stimulus to boost the recovery of their struggling economies. Over the summer of 2014, the ECB lowered the deposit rate for banks into negative territory for the first time. This effectively penalized banks for keeping funds with the ECB and thus, incentivized them to lend to each other so that capital would eventually flow throughout the economy. The BoJ also stepped up its commitment to boost the economy through Japanese bond and stock purchases to channel cash into the markets. Additional Japanese policies sought to further depreciate the yen in an attempt to boost exports.
Emerging market countries faced numerous challenges throughout the reporting period. Several Asian countries felt the squeeze from the weakening yen, which gave an advantage to Japanese exporters at the expense of other Asian exporters. Looking eastward, Russia felt the most pressure throughout the reporting period, starting with its altercations with Ukraine that led to increased international sanctions. Subsequently, oil prices plunged as supply started outstripping demand in large part due to the shale boom in the U.S. Since Russia’s economy depends on energy revenue, tumbling oil prices had devastating effects and led to the collapse of the ruble. Low oil prices also affected other emerging market economies. Net energy exporting countries in Latin America suffered heavily as oil lost approximately half its value over the second half of 2014.
In general, these global developments fueled the supranormal U.S. dollar rally over the second half of 2014. Tensions and negative economic developments outside the U.S. led to further downward pressure on foreign investments, while domestic assets appreciated due to a healthier U.S. economy. Improving economic growth and hiring activity in the U.S. helped shelter domestic markets from problems around the world. The following sections highlight how specific market segments responded to the events that unfolded over the reporting period.
Fixed Income
Bond yields fell despite the Fed reducing its bond purchases, which would typically be expected to have downward pressure on bond prices and push up interest rates. The yield on the 10-year Treasury started the reporting period at 2.72% and finished at 1.97%. Low inflationary expectations contributed to falling yields as inflation remained tame in the U.S. while Europe and Japan confronted deflationary conditions. Furthermore, nominal yields on German bunds and Japanese bonds remained well below those of comparable U.S. Treasury (Treasury) bonds. This made Treasuries more attractive on a relative basis, which further contributed to falling interest rates. Other factors
| See benchmark definitions on pages A-29 through A-31 |
A-2
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
that further reduced Treasury yields included geopolitical tensions in Ukraine and the Middle East that led investors to seek safe haven assets like U.S. Treasury bonds.
For the reporting period, the broad fixed income market (as measured by the Barclays U.S. Aggregate Bond Index) gained 5.72%. Long-term Treasuries were among the top performers within the fixed income market as they benefited from investors seeking safety and yield. The investment-grade credit category also delivered solid gains and outperformed the high yield group over the reporting period. A sizable portion of high yield issuers is in energy-related industries; and thus, they were negatively affected by the slump in oil prices. The emerging markets debt category had mixed results. U.S. dollar-denominated emerging markets debt performed well. On the other hand, local currency-denominated instruments were negatively affected by the surge in the U.S. dollar and faced losses over the reporting period. The Treasury Inflation-Protected Securities (TIPS) category earned modest gains but underperformed the broad fixed income market due to low inflation expectations. Short duration bonds (e.g. short-term credit and bank loans) have less sensitivity to interest rates; therefore, they did not benefit from falling yields and lagged the broad fixed income market.
Domestic Equity
The U.S. equity market had its sixth consecutive positive calendar year performance, and the S&P 500 Index returned 12.73% over the reporting period. The broad domestic equity market generally maintained its upward momentum. Large- and mid-capitalization stocks outperformed small-capitalization stocks. From a valuation perspective, small-capitalization stocks were relatively overvalued compared to their larger counterparts. With respect to style, growth outpaced value. Over the reporting period, healthy mergers & acquisitions (M&A) activity helped several sectors, particularly health care. Responses to the Affordable Care Act primarily fueled the M&A activity in the sector as industry participants resorted to consolidation to help offset the expense of covering and treating the increase in insured patients. Real estate investment trusts (REITs), which tend to have relatively high dividend payouts, also performed very well. The Financial Times Stock Exchange National Association of Real Estate Investment Trust (FTSE NAREIT) Equity REITs Index surged 23.95% over the reporting period. On the other end of the spectrum, the energy sector was the only sector to have losses over the reporting period, which was driven by plunging oil prices.
International Equity
The foreign equity market struggled over the reporting period as several key central banks tried to stave off further economic woes while other nations struggled with geopolitical issues and/or crashing oil prices. The Morgan Stanley Capital International Europe, Australasia, and Far East (MSCI EAFE) Index and the MSCI Emerging Markets Index returned -0.92% and 0.44%, respectively. Actions by the BoJ helped lift Japanese stocks higher, which primarily contributed to the performance of the MSCI EAFE Index. However, the United Kingdom (U.K.) offset much of that contribution. Regarding the U.K., approximately one-quarter of its companies represented in the MSCI EAFE Index are linked to commodities. Commodities, especially energy, experienced a sharp decline over the reporting period. A slowdown in China and other parts of the world, as well as an excess supply of oil, contributed to falling commodity prices. Among the countries represented in the MSCI Emerging Markets Index, Russia, South Korea and Brazil were the top detractors from performance. Russia and Brazil felt the pain caused by the impact of falling commodities; whereas, South Korea was hurt by the softer demand from China and a weaker yen, which made Japanese goods relatively cheaper than Korean goods. While the Chinese economy has been decelerating, a flood of credit jolted its equity market higher, which offset some of the detractors.
Commodities
The global slowdown created a challenging condition for commodities over the reporting period. Among the various commodity groups, the energy category experienced the deepest hardship, losing nearly half its value over the reporting period. A global reduction in demand in conjunction with an oversupply of oil contributed to slumping energy prices. Although the metals category (which includes precious and industrial metals) had moderately negative returns, it fared better than other major commodity categories. Nevertheless, precious metals fell as the U.S. dollar rallied sharply over the second half of 2014.
Concluding Remarks
The Fed is expected to begin hiking rates in the second half of 2015, as the U.S. economy remains relatively healthy. It should be noted that equity markets typically have not experienced a correction during the earlier stage of monetary tightening. This is generally due to central banks raising rates when their respective economies are doing well. Sound economic conditions and a revival in M&A activity should help the domestic equity market stay afloat. Valuations of domestic equities may appear relatively elevated, but they are not at bubble levels as seen during the “tech boom” period. Current valuations may be justified by solid earnings as well as low inflation and interest rates (i.e. cost of capital). Stable economic conditions should also keep default levels benign, which justify tighter bond spreads. However, energy and related sectors may continue to face challenges if oil prices fall further or remain stagnant.
Overseas, the ECB and BoJ are anticipated to either continue or expand their quantitative easing programs. These efforts may improve their respective economic growth potential and boost their equity markets. Reviving economic growth should translate into improvements in earnings, which have lagged in recent periods. The divergence in monetary policies between the U.S. and many other major nations may also keep the U.S. dollar at elevated levels. This may benefit those nations that export to the U.S. since their goods and services will be relatively cheaper.
Continued deceleration of growth in China will likely affect several developing nations that have depended on its rapid expansion. In the past, Chinese regulators have responded to signs of a slowdown by implementing various stimulus plans to rejuvenate the economy. Recently, China has been the driving force behind the Asian Infrastructure Investment Bank (AIIB). While this entity could stimulate infrastructure development and complement China’s New Silk Road initiative, much of these efforts are still in very early stages with many challenges ahead, and are unlikely to have an immediate impact on economic activity. China’s New Silk Road envisions a region where currency exchanges are fluid and easy, a kind of economic trade route that will represent China’s visions for an interdependent economic and political community stretching from East Asia to Western Europe.
| See benchmark definitions on pages A-29 through A-31 |
A-3
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Global financial markets will continue to face hurdles and deal with uncertainties of geopolitical risks. Europe continues to deal with a potential ousting of Greece from the European Union, which could elevate short-term volatility. Additionally, the energy sector continues to deal with a supply glut that has suppressed oil prices. This helps oil consumers but hurts producers. Despite many of these risks, there are potential opportunities to monitor and to seek to capitalize down the road.
PF Floating Rate Loan Fund (sub-advised by Eaton Vance Investment Managers)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Floating Rate Loan Fund’s Class P returned 1.78%, compared to a 2.53% return for its benchmark, the S&P/LSTA Leveraged Loan Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Eaton Vance Investment Managers began managing the fund on August 1, 2013. Eaton Vance Management, an affiliate of Eaton Vance Investment Managers, managed the fund from July 1, 2010 to July 31, 2013. Another firm managed the fund before July 1, 2010, and some investment policies changed at that time. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at Eaton Vance maintained the fund’s strategy by investing primarily in non-investment grade instruments. The cornerstones of the strategy’s investment philosophy are intense, internal credit research and broad diversification. Relative to the benchmark, however, the fund maintained a greater focus on higher-quality loans. During the reporting period, lower quality CCC-rated loans were the strongest-performing loan group by a meaningful margin, outperforming the broader leveraged loan market, 4.28% vs. 2.53%. The fund’s consistent underweight to this loan group detracted from its relative performance. While delivering lower overall credit risk compared to the benchmark, the fund’s higher-quality exposure also served as a headwind, resulting in lower coupon income compared to the overall benchmark. Contributing to relative performance results were an overweight exposure to the BB-rated loan segment, which outpaced the broader loan market with a 3.31% return, and an underexposure to defaulted loans, which fell 17.34% as a group during the reporting period.
During the reporting period, all of the industries in the benchmark posted positive returns with the exception of three industries, oil & gas, nonferrous metals/minerals, and utilities. The fund employs a rigorous, bottom-up credit research process where loan selection drives fund performance. That said, with performance results separated by industry, underweight exposures to the lodging & casino and telecommunications industries, which outperformed the broader loan market, weighed on fund relative performance. Among the top detractors at the individual loan level were positions in post-secondary education provider Education Management, L.L.C. and weight management services company Weight Watchers International, Inc.
Contributing to the fund’s relative performance was an underweight to the underperforming utilities industries, namely avoiding the industry’s largest constituent, the defaulted loan of Energy Future Intermediate Holdings Co. L.L.C.
From a positioning standpoint, the fund held 244 issuer positions across 32 industries as of March 31, 2015. As of the end of the reporting period, the fund maintained an overweight position in BB-rated loans and minimal exposure to the more distressed loan categories rated below B. Given the floating-rate nature of the asset class, the fund was exposed to minimal interest rate risk as the loans in the fund reset their coupons every 59 days on average as of March 31, 2015, which resulted in portfolio duration of roughly 0.16 years.
| See benchmark definitions on pages A-29 through A-31 |
A-4
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Inflation Managed Fund (co-sub-advised by Pacific Investment Management Company LLC and Western Asset Management Company)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Inflation Managed Fund’s Class P returned 2.38%, compared to a 3.11% return for its benchmark, the Barclays U.S. TIPS Index. Western Asset assumed management of a portion of the PF Inflation Managed Fund on January 15, 2015.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Western Asset Management Company became co-sub-adviser to the fund on January 15, 2015, and some investment policies changed at that time. Pacific Investment Management Company LLC was the sole sub-adviser to the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. The fund is co-sub-advised by PIMCO and Western Asset. The following are separate discussions from each co-sub-adviser.
PIMCO
We at PIMCO maintained a portion of the fund’s investment strategy by investing in bonds and derivative instruments. Tactical positioning in real interest rates along the belly of the yield curve, through the use of TIPS and interest rate swaps, was positive for the fund’s performance as rates fell during the reporting period. Tactical use of pay-fixed interest rate swaps on the long end of the U.S. nominal yield curve detracted from fund performance, as long nominal rates rallied. Modest positioning and favorable selection within the investment grade corporate sector contributed to fund performance despite overall spread widening. A defensive posture on core European rates detracted from fund performance as rates fell, however this was more-than-offset by allocations to securities in peripheral countries, such as Spanish nominal bonds and Italian inflation-linked bonds. Within currencies, the fund’s U.S. dollar bias, namely positions against the euro and yen, contributed to the fund’s positive returns, as these currencies depreciated relative to the U.S. dollar. An allocation to non-Agency mortgage-backed securities (MBS) was positive for fund performance as the sector continued to benefit from the ongoing housing recovery. Lastly, exposure to Australian interest rates was positive for fund returns as yields fell.
PIMCO expects global growth to accelerate modestly to an estimated +2.75% within the next twelve months from around +2.5% last year. A wave of monetary policy accommodation and a near cessation of fiscal austerity will underpin global growth, while still sizeable economic slack should keep inflationary pressures well contained. The roughly 40% oil price cut will further buoy these trends—by transferring wealth from producers to consumers and by keeping headline inflation subdued.
It is our expectation that the U.S. is on track for a modest, above-trend growth of an estimated 2.5-3.0% for the next twelve months, with inflation only gradually approaching the Fed’s 2% target. A robust outlook for growth of personal consumption forms the foundation of our outlook. We believe consumer spending will be supported by a still healthy pace of job gains and real incomes boosted by lower energy prices. We also expect both housing and business investment to contribute to growth, but to a lesser degree. We expect home prices to rise gradually and sales trends to continue, but expect housing to remain a small portion of economic growth. Business investment should continue to expand as demand improves and capacity utilization rates rise, though capital expenditure plans in the energy sector are likely to be scaled back. Importantly, our expectations for moderate growth, lower energy prices and a still strong U.S. dollar suggest inflationary pressures will build only gradually, allowing the Fed to begin reducing its policy accommodation at a very measured pace.
We have upgraded our eurozone growth forecast to an estimated 1.25%-1.75% for the next twelve months, though we expect inflation to remain low. In our view, a trifecta of tailwinds—lower oil prices, a weaker euro, and the ECB’s new quantitative easing (QE) program—will
| See benchmark definitions on pages A-29 through A-31 |
A-5
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
buoy European growth this year. The benefits of a weaker currency are evident in the trade accounts with imports weaker and exports stronger, while the terms of trade for energy is also showing marked improvement. Going forward, we believe the ECB’s QE program will be a substantial source of liquidity and will also serve to anchor interest rates across member states. Yet despite these supports, we believe that growth will remain modest and substantial slack will keep inflation low. With the unemployment rate still high at 11.3% and wages rising at only 1% over the past year, it is easy to see why consumer credit continues to contract and domestic demand remains sluggish. Given this backdrop, we expect the ECB to have plenty of justification for continuing – or even expanding – its asset purchase program in the year ahead.
We have modestly downgraded our already below-consensus forecast for China. It is our opinion that growth in China is estimated to be in the low 6% range for the next twelve months. As China addresses the ongoing slowdown in its property sector and deleveraging in the shadow-banking system, we expect additional easing from the People’s Bank of China (PBOC) as lower real rates will be required to successfully achieve a soft landing. Our outlook for Japan has not changed, and we expect growth to recover from last year’s technical recession throughout 2015. The decisions in the latter part of 2014 to delay the next value-added tax (VAT) hike and increase the size of the BoJ’s easing program will provide needed support. Japan will also benefit from the further decline in oil prices and past depreciation of the yen.
We expect growing dispersion in emerging markets, especially given the recent moves in commodity markets. Differences across emerging markets countries in initial conditions (which refers to the state of an emerging nation as it plans to transition to a market-oriented economy), commodity reliance, and sensitivity to the Fed and U.S. dollar moves suggest we are likely to see further divergence in economic outcomes over the next few quarters of 2015. It is also our opinion that for the next twelve months, there will be an estimated 1.5-2.5% forecast for Brazil, Russia, India and Mexico (BRIM) economies, which reflects improved growth prospects in Mexico and India offset by expected recessions in both Russia and Brazil.
Western Asset
For the period from inception (January 15, 2015) through March 31, 2015, we at Western Asset maintained a portion of the fund’s strategy by holding a mixture of U.S. TIPS and derivatives, including bond futures, options and interest rate futures. These positions were utilized to achieve desired levels of interest rate risk and yield curve exposures, or to capture relative value opportunities; however, they detracted from performance during the reporting period. Western Asset uses fundamental investment techniques to select investments. When selecting investments, we determine what duration to maintain, and decide how to allocate among short, intermediate and long duration issuers and how much should be invested in various types of instruments. The fund’s investments are debt securities (with a focus on inflation-indexed debt) and frequent use of derivatives (including futures and options). The fund’s underperformance as compared to the benchmark was primarily due to the fund’s underweight TIPS exposure, mainly due to the subdued inflation outlook. During the reporting period, the fund remained largely U.S.-oriented with exposures to foreign currencies via currency forwards, particularly the yen and Canadian dollar. These positions also detracted from performance.
We used the weakness post payrolls to go long tactically, which paid off and benefited fund performance. However, we remain cautious at the low level of bond yields given the strong likelihood of “lift off” by the Fed this year. However, we recognize that the benign inflation environment will temper any rise in yields, and the high level of U.S. yields, relative to the rest of the world, will encourage inflows that further temper any rise. The key risks to the global economy, specifically Ukraine and Greece, look likely to remain in the background through the summer, though playing a diminished role and unlikely to disrupt the global recovery. We continue to prefer holding a moderate exposure to the yen as a balance to those risks. Finally, we now enter the normal seasonal “positive inflation accrual” period which should support TIPS, but would caution that crude and gasoline inventory levels continue to grow, and may threaten further substantial weakness in pump prices which would temper this inflation accrual, even if crude oil prices remain in the $40-60 preferred range.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Managed Bond Fund (co-sub-advised by Pacific Investment Management Company LLC and Western Asset Management Company)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Managed Bond Fund’s Class P returned 6.32%, compared to a 5.72% return for its benchmark, the Barclays U.S. Aggregate Bond Index. Western Asset assumed management of a portion of the PF Managed Bond Fund on August 1, 2014.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Western Asset Management Company became co-sub-adviser to the fund on August 1, 2014, and some investment policies changed at that time. Pacific Investment Management Company LLC was the sole sub-adviser to the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P outperformed the benchmark. The fund is co-sub-advised by PIMCO and Western Asset. The following are separate discussions from each co-sub-adviser.
PIMCO
We at PIMCO maintained a portion of the fund’s investment strategy by investing in bonds and derivative instruments. Tactical U.S. interest rate positioning with a focus on the intermediate portion of the yield curve, implemented through the use of cash bonds and tactical use of interest rate swaps, contributed to fund performance as rates rallied. However, this was more-than-offset by an underweight to longer-dated maturities, where yields also fell, but to a greater magnitude. An underweight to investment-grade corporate securities during the year was positive for relative returns, as spreads widened. An allocation to non-Agency MBS was positive for fund performance as the sector continued to benefit from the ongoing housing recovery.
Beyond core sectors, exposure to high yield financial bonds added to fund performance as they posted strong positive returns during the reporting period. A defensive posture on core European rates detracted from fund performance as rates fell, however this was more-than-offset by allocations to peripheral countries such as Italy and Spain, where rates also continued to rally. Exposure to TIPS was negative for fund returns relative to nominal Treasuries as breakeven inflation levels (the difference between nominal and real yields) narrowed during the reporting period. In emerging markets, an allocation to local Mexican interest rates was positive for returns as yields fell. U.S. dollar-denominated emerging market debt, however, detracted from performance as spreads on these securities widened relative to Treasuries. Lastly, the fund’s U.S. dollar bias, namely positions against the euro and yen, contributed to positive returns, as these currencies depreciated relative to the U.S. dollar.
PIMCO expects global growth to accelerate modestly to an estimated +2.75% within the next twelve months from around +2.5% last year. A wave of monetary policy accommodation and a near cessation of fiscal austerity will underpin global growth, while still sizeable economic slack should keep inflationary pressures well contained. The roughly 40% oil price cut will further buoy these trends—by transferring wealth from producers to consumers and by keeping headline inflation subdued.
It is our expectation that the U.S. is on track for a modest, above-trend growth of an estimated 2.5-3.0% for the next twelve months, with inflation only gradually approaching the Fed’s 2% target. A robust outlook for personal consumption growth forms the foundation of our outlook. We believe consumer spending will be supported by a still healthy pace of job gains and real incomes boosted by lower energy prices. We also expect both housing and business investment to contribute to growth but to a lesser degree. We expect home prices to rise gradually and sales trends to continue, but expect housing to remain a small portion of economic growth. Business investment should continue to expand as demand improves and capacity utilization rates rise, though capital expenditure plans in the energy sector are likely to be scaled back. Importantly, our expectations for moderate growth, lower energy prices and a still strong U.S. dollar suggest inflationary pressures will build only gradually, allowing the Fed to begin reducing its policy accommodation at a very measured pace.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
We have upgraded our eurozone growth forecast to an estimated 1.25%-1.75% for the next twelve months, though we expect inflation to remain low. In our view, a trifecta of tailwinds—lower oil prices, a weaker euro, and the ECB’s new QE program—will buoy European growth this year. The benefits of a weaker currency are evident in the trade accounts with imports weaker and exports stronger, while the terms of trade for energy is also showing marked improvement. Going forward, we believe the ECB’s QE program will be a substantial source of liquidity and will also serve to anchor interest rates across member states. Yet despite these supports, we believe growth will remain modest and substantial slack will keep inflation low. With the unemployment rate still high at 11.3% and wages rising at only 1% over the past year, it is easy to see why consumer credit continues to contract and domestic demand remains sluggish. Given this backdrop, we expect the ECB to have plenty of justification for continuing—or even expanding—its asset purchase program in the year ahead.
We have modestly downgraded our already below-consensus forecast for China. It is our opinion that growth in China is estimated to be in the low 6% range for the next twelve months. As China addresses the ongoing slowdown in its property sector and deleveraging in the shadow-banking system, we expect additional easing from the PBOC as lower real rates will be required to successfully achieve a soft landing. Our outlook for Japan has not changed, and we expect growth to recover from last year’s technical recession. The decisions in the latter part of 2014 to delay the next VAT hike and increase the size of the BoJ’s easing program will provide needed support. Japan will also benefit from the further decline in oil prices and past depreciation of the yen.
We expect growing dispersion in emerging markets, especially given the recent moves in commodity markets. Differences across emerging markets countries in initial conditions (which refers to the state of an emerging nation as it plans to transition to a market-oriented economy), commodity reliance, and sensitivity to the Fed and U.S. dollar moves suggest there will likely be further divergence in economic outcomes over the next few quarters of 2015. It is also our opinion that for the next twelve months, there will be an estimated 1.5-2.5% forecast for BRIM economies which reflects improved growth prospects in Mexico and India offset by expected recessions in both Russia and Brazil.
Western Asset
For the period from inception (August 1, 2014) through March 31, 2015, we at Western Asset maintained a portion of the fund’s strategy by employing sector allocation, issue selection, duration exposure, term structure weighting and country/currency allocations. We then seek sectors within the market which provide relative opportunities for outperformance. In selecting issuers, we use a bottom-up process which seeks to find undervalued securities. Western Asset assesses relevant credit characteristics at the issuer and industry levels. In assessing these characteristics, Western Asset may consider earnings and cash flow projections and/or credit scenario analyses, and often meets with management of specific issuers.
Non-Agency mortgage exposure added meaningfully to fund performance as both an improved housing market and non-Agency MBS fundamentals contributed to improved pricing in the sector. An overweight to investment grade credit, particularly to the financial subsector, added to fund performance as spreads tightened for that subsector on mildly positive economic data and continued improvements in banking fundamentals. The allocation to Agency mortgages also contributed to fund performance during the reporting period. However, TIPS, high yield and emerging markets all negatively impacted the fund performance, as worries over global growth, declines in commodity prices, and U.S. dollar strength hurt these sectors. However, the fund’s tactical duration positioning had a positive effect on performance, as it was largely overweight duration during the periods when yields declined significantly. Curve positioning, with an overweight to long-dated bonds, was a large contributor to performance as the long-end of the curve generally flattened during the reporting period. The fund’s short positions in the Japanese yen and the euro also contributed significantly to fund performance.
Economic data continue to support our expectation for modest growth. We anticipate growth of about 2.5% in 2015. We expect to remain overweight to certain spread sectors that have demonstrated strong fundamentals. Importantly, the Fed remains highly accommodative. However, given likely the Fed’s normalization at some point in 2015, we will continue to be active in adjusting portfolio interest rate sensitivity. Corporate balance sheets remain generally strong but the surging U.S. dollar is negatively affecting U.S. corporate earnings. Overseas, we anticipate that the European economy will avoid recession largely due to aggressive action from the ECB. We are keeping a close eye on geopolitical tensions in various hotspots, such as Ukraine and the Middle East. We expect the soft-landing scenario in China to continue to unfold. Emerging markets remain volatile, but select country fundamentals are generally sound. Looking ahead, we will determine whether to adjust our risk positions by weighing the much-improved valuations, which in certain cases may now be fair, against a still-favorable backdrop of mild economic expansion and accommodative policy.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Short Duration Bond Fund (sub-advised by T. Rowe Price Associates, Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Short Duration Bond Fund’s Class P returned 0.88%, compared to a 1.12% return for its benchmark, the Barclays 1-3 Year U.S. Government/Credit Bond Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | T. Rowe Price Associates, Inc. began managing the fund on July 1, 2011, and some investment policies changed at that time. Another firm managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at T.Rowe Price maintained the fund’s strategy by investing the fund’s assets in debt securities (including derivatives on such securities). Normally, the fund will focus on high quality, investment grade securities. In addition to making active sector allocation and security selection decisions, we monitored fund duration as a part of management of the fund. The primary detractor from relative performance was the fund’s out-of-benchmark allocation to TIPS. TIPS performed poorly as headline inflation turned lower, driven by a strong dollar and declining energy prices.
Also negatively impacting performance was an allocation to a local denominated Mexican government bond as the U.S. dollar strengthened relative to the peso, and the position was unhedged for part of the year. However, we fully hedged the position by the end of the reporting period.
Moreover, some of the fund’s energy-related holdings in the investment-grade corporate sector weighed on relative performance as oil prices decreased dramatically during the reporting period. Despite starting 2015 with a firmer tone, the oil market remained relatively unstable—further adding uncertainty for energy-related companies.
The primary driver of relative performance was yield curve positioning; specifically, non-benchmark exposure to the 5- and 10-year maturity buckets. Treasury yields were volatile during the reporting period but trended downward. Aside from a dramatic drop in Treasury yields in mid-October and again in late January into early February, Treasury yields have followed a divergent course over the twelve-month period ended March 31, 2015. Yields have risen incrementally higher on shorter-dated Treasuries while meaningfully decreasing on longer-dated bonds, flattening the yield curve throughout the year. Given this rise in short-term Treasury yields, our Treasury underweight in the front end of the curve was a meaningful contributor.
The fund’s significant overweight to corporates provided a meaningful contribution to relative results during the reporting period, as solid demand from duration-minded investors looking for incremental yield provided a strong bid for the front part of the high-grade corporate curve. U.S. domiciled corporates also received additional demand from eurozone investors looking for higher-yielding securities as a new round of quantitative easing from the ECB sent eurozone yields lower.
The fund’s out-of-benchmark exposure to MBS was an additional contributor to relative results for the year. The Fed reduced the amount of its monthly purchases of Treasuries and Agency MBS in $10 billion increments throughout the year and concluded its purchases in October. The Fed announced it will continue to reinvest the interest and principal payments from its balance sheet until after rate hikes begin, thus easing worries that post-quantitative easing actions could add near-term supply pressure in the market.
As of the end of the reporting period, the fund held currency forwards and interest rate futures which generated a net exposure equivalent to approximately 3% of net assets. The products were held at various points throughout the reporting period. As of March 31, 2015, currency forwards decreased exposure to base currency and interest rate futures decreased duration. The estimated return impact from employing currency forwards was negligible and futures returned -3 basis points (bps) for the reporting period.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Emerging Markets Debt Fund (sub-advised by Ashmore Investment Management Limited)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Emerging Markets Debt Fund’s Class P returned -4.73%, compared to a 5.65% return for its benchmark, the J.P. Morgan Emerging Markets Bond Index (EMBI) Global Diversified Index and a -2.67% return for the Emerging Markets Debt Composite Benchmark.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmarks for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmarks. We at Ashmore tactically managed the fund’s exposure to emerging market sovereign external debt, local currency sovereign debt and corporate debt. The fund invested its assets in debt instruments that are economically tied to emerging market countries, which are issued by governments (sovereigns), government-guaranteed or majority government-owned entities (quasi-sovereigns), government agencies and instrumentalities, and corporate issuers, and may be denominated in any currency, including the local currency of the issuer.
Over the course of the reporting period, the fund’s allocation to external debt increased, starting the reporting period at 31% and ending at around 50% of the fund’s net assets. During the same reporting period, the fund’s exposure to corporate debt decreased, starting the reporting period at 29% and ending at around 21% of the fund’s net assets. Finally, the fund’s exposure to local currency debt decreased, starting the reporting period at 48% and ending at around 39% of the fund’s net assets.
The fund’s underweight position in local currency sovereign debt was a contributor to the fund’s performance while the overweight position in corporate debt detracted from the fund’s performance over the reporting period.
The largest country detractors over the reporting period were Ukraine, Colombia and Venezuela. Asset allocation in Ukraine and Venezuela were negative relative to the fund’s benchmark, which was a drag on performance. Security selection in Colombia was also negative relative to the fund’s benchmark. Brazil and Colombia were the largest country detractors in the benchmark over the same reporting period. The largest country contributors to fund performance over the reporting period were Singapore, Malaysia, Hungary, and Turkey.
While Russia was one of the larger detractors from overall performance for the first nine months of the reporting period, it was a net contributor to fund performance for the last three months of the reporting period. For the full reporting year, Russia was a net detractor of 1.3%. Over the fourth quarter of 2014, the hard currency sovereign bonds as compared to the fund’s benchmark were up over 11% and local currency denominated sovereign bonds (per the JPMorgan Government Bond Index-Emerging Markets (GBI-EM)) were up 15.5%. During the reporting period, hard currency sovereign bonds were up 1.7% and local currency denominated sovereign bonds were down 42.1%.
Ukrainian bonds fell over 51% during the reporting period, with a 31% decline in the first nine months of the reporting period and a 29% decline in the last three months of the reporting period as the economic situation continued to deteriorate. Ukraine’s total stock of public and private guaranteed debt was approximately $69.8 billion or 72.3% of estimated gross domestic product (GDP) at the end of 2014. The conflict in Eastern Ukraine has exacerbated a severe recession that continues to plague the country. Moody’s lowered Ukraine’s long-term foreign currency credit rating to Caa3.
Venezuelan bonds fell over 35% over the reporting period, with a 30% decline in the first nine months of the reporting period and 6% decline in the last three months of the reporting period. The Venezuelan government ratified a three-tiered foreign transaction regime
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
(“SIMADI”); however, due to the low supply of the U.S. dollar being channeled through the SIMADI, the regime has, so far, failed to converge towards a rate closer to the parallel market.
PF Comstock Fund (sub-advised by Invesco Advisers, Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Comstock Fund’s Class P returned 7.22%, compared to a 9.33% return for its benchmark, the Russell 1000 Value Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Invesco Advisers, Inc. began managing the fund on June 1, 2010. Another firm managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at Invesco maintained the fund’s strategy by focusing primarily on the security’s potential for capital growth and income, emphasizing a value style of investing, seeking well-established undervalued companies, which may be medium- or large-capitalization companies. As financial markets tend to focus on short-term factors, stock prices often fail to reflect the intrinsic value of companies. We believe that longer-term investors can take advantage of pricing anomalies in financial markets by purchasing stocks of companies that are currently underpriced. The fund aims to exploit these market inefficiencies by focusing primarily on a security’s potential for capital growth and income, emphasizing a value style of investing, and seeking well-established, undervalued companies. Ultimately, we believe that the market will recognize the value in these companies and will sell them as their stock price begins to reflect their intrinsic value.
The investment team employs truly active management by staying benchmark agnostic. Additionally, the fund’s construction and risk mitigation is based solely on bottom-up stock selection as opposed to utilizing macro or top-down factors.
On the positive side of sector performance, strong stock selection in, and underweight exposure to, the materials sector contributed to relative fund performance. Notably, International Paper Co. had a large positive impact on absolute and relative fund performance during the reporting period. In addition, having no exposure to mining stocks boosted fund performance, as many mining companies’ margins and earnings were negatively affected by declines in the price of gold and other metals during 2014. Stock selection within consumer staples acted as a contributor to relative performance. Exposure to ConAgra Foods, Inc., and not owning The Proctor & Gamble Co., were two large contributors to fund performance for the reporting period. Having a material overweight to consumer discretionary and underweight to industrials also enhanced fund relative performance for the reporting period. We used currency forward contracts during the reporting period for the purpose of hedging currency exposure of non-U.S.-based companies held in the fund. Derivatives were used solely for the purpose of hedging and not for speculative purposes or leverage. The use of currency forward contracts had a large positive impact on the fund’s performance relative to its benchmark for the reporting period. This was mainly due to the strength of the U.S. dollar compared to the foreign currencies in which the fund’s non-U.S. holdings were denominated.
On the negative side, stock selection in and overweight exposure to the energy sector were large detractors from fund performance for the reporting period, with most of the underperformance occurring from mid-September through calendar year end due to a sharp decline in the price of oil. In the oil services and equipment industry, Weatherford International P.L.C. was the largest absolute and relative detractor for the reporting period, after being a large contributor during the first half of 2014. Also, not owning Exxon Mobil Corp. was a large detractor from fund performance as the company posted relatively better returns than the sector as a whole. Weak stock selection in the health care sector also detracted from relative fund performance. This was particularly true of fund holdings in the pharmaceutical and biotech industries. Sanofi posted a negative return and was an absolute and relative detractor from fund performance for the reporting
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
period. Stock selection in the financials sector also hurt fund relative performance. One of the largest detractors within the sector and the fund was from having no exposure to REITs. In addition, gains in holdings such as Allstate were offset by negative returns from Fifth Third Bancorp.
PF Growth Fund (sub-advised by MFS Investment Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Growth Fund’s Class P returned 12.96%, compared to a 16.09% return for its benchmark, the Russell 1000 Growth Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | MFS Investment Management began managing the fund on May 1, 2013, and some investment policies changed at that time. Another firm managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We, the MFS investment team, maintained the fund’s growth strategy by focusing on companies we believe to have above-average earnings growth potential compared to other companies.
Stock selection in the technology sector detracted from fund performance relative to the benchmark. An underweight position in strong-performing computer and personal electronics maker Apple, Inc. and overweight positions in poor-performing data storage systems provider EMC Corp. and internet search giant Google, Inc. held back the fund’s relative returns.
Stock selection in the leisure sector also weakened fund relative performance. Within this sector, overweight positions in casino resorts operators Wynn Resorts Ltd. and Las Vegas Sands Corp. hindered relative results as both stocks lagged the benchmark during the reporting period.
Elsewhere, overweight positions in oil and natural gas exploration and production company Noble Energy, Inc. and aerospace industry complex metal parts manufacturer Precision Castparts Corp. detracted from fund relative performance. Not owning shares of strong-performing home improvement retailer The Home Depot, Inc. and eye and skin care products company Allergan, Inc. further weighed on its relative returns.
The fund’s cash and/or cash equivalents position during the reporting period was another detractor from fund relative performance. The fund strives to be fully invested and generally holds cash to buy new holdings and to provide liquidity. During the reporting period when equity markets rose, as measured by the fund’s benchmark, holding cash hurt performance versus the benchmark, which has no cash position.
An overweight position in the health care sector contributed positively to relative performance as the sector outperformed the benchmark. Owning shares of medical device and supply products manufacturer Covidien P.L.C. (not a benchmark constituent and not held at reporting period end) and development-stage biopharmaceutical company Puma Biotechnology, Inc. (not held at reporting period end) strengthened the fund’s relative returns as both stocks significantly outperformed the benchmark. Overweight positions in integrated specialty pharmaceutical company Actavis P.L.C. and biopharmaceutical company Regeneron Pharmaceuticals, Inc. also helped fund performance.
An overweight position and, to a lesser extent, stock selection in the retail sector further supported relative results. Stock selection in the retail sector was a relative detractor overall; however, certain overweight positions in off-price retail apparel and home accessories store operator Ross Stores, Inc. and specialty retailer L Brands, Inc. bolstered the fund’s relative returns as both stocks posted strong results over the reporting period.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
In other sectors, the fund’s avoidance of diversified technology products and services company International Business Machines Corp. (IBM) and software giant Microsoft Corp. also benefited relative fund performance. Overweight positions in paint and coatings company, Sherwin Williams Co., and hotel operator, Marriott International, Inc. were also among the fund’s top relative contributors.
PF Large-Cap Growth Fund (sub-advised by BlackRock Investment Management, LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Large-Cap Growth Fund’s Class P returned 14.84%, compared to a 16.09% return for its benchmark, the Russell 1000 Growth Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | BlackRock Investment Management, LLC began managing the fund on May 1, 2013, and some investment policies changed at that time. Other firms managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at BlackRock maintained the fund’s strategy by investing primarily in large-capitalization companies that possess dominant market positions or franchises, a major technological edge, or a unique competitive advantage, and in order to achieve this goal, we consider a company’s earnings revision trends, expected earnings growth rates, sales acceleration, price earnings multiples and positive stock price momentum.
At the sector level, consumer discretionary was the prime detractor from relative performance, with hotels, restaurant & leisure and the internet & catalog retail segments accounting for the majority of the disappointment in performance. Industrials (aerospace & defense) and telecommunication services also weighed on fund performance.
In stock specifics, an underweight position in Apple, Inc. was the top individual detractor from fund performance as the stock recorded strong gains following solid earnings reports earlier in 2014. Notably, the fund’s position in Apple was increased given the confidence around upcoming product cycles, emerging markets penetration and gross margin stabilization. We are closely watching market uptake of the Apple Watch to determine the future earnings potential for Apple.
Fund holdings Wynn Resorts Ltd., Precision Castparts Corp. and VMware, Inc. also hindered the fund’s relative returns. Shares of the casinos & gaming company, Wynn Resorts Ltd., underperformed as China’s anti-corruption campaign intensified causing gaming revenues in Macau to fall below expectations which in turn, led to negative earnings revisions for the company. We exited the position by the end of the reporting period. Industrial holding Precision Castparts missed earnings expectations in three of four quarters in 2014, a function of poor guidance and communication from the company and perennially optimistic sell-side analyst estimates. Further, following several years of expanding aerospace industry backlogs, the question of “cycle duration” came into play, limiting multiple expansions for Precision Castparts and the entire aerospace complex. The fund’s position in VMware also weighed on the fund’s performance results. Despite new product launches, growth estimates are expected to be down considerably from 2014. As a result, we sold those positions and swapped into other technology companies that we believed had better growth prospects.
On the positive side, in sector terms, health care accounted for the majority of positive fund performance relative to the benchmark, with strength most notable in pharmaceuticals and biotechnology.
At the stock level, health care holdings United Therapeutics Corp., Valeant Pharmaceuticals International, Inc. and Regeneron Pharmaceuticals, Inc. were the largest contributors to fund performance.
United Therapeutics rose after receiving a favorable ruling in its patent infringement lawsuit against competitor Sandoz. Furthermore, there was greater investor appreciation for principal drivers of United Therapeutics’ revenue and earnings, which have much longer life spans than the market assumes. Shares also gained on disappointing results for competing pulmonary arterial hypertension drug
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Selexipag (by Actelion). While we believe Selexipag will most likely still be approved and compete with United Therapeutics’ drug, Orenitram, we do not expect it to be as competitive as many investors hoped.
Shares of Valeant Pharmaceuticals soared on news of its plan to acquire Salix Pharmaceuticals Ltd., establishing its presence in the gastrointestinal therapeutics market.
Regeneron Pharmaceuticals climbed after the Food and Drug Administration (FDA) approved drug Eylea for a second indication, the treatment of diabetic macular edema. Shares also got a boost following Sanofi’s increased stake in the company, as well as positive clinical results for several drugs, including treatments for high cholesterol and atopic dermatitis. We remain confident the company can maintain its high-growth trajectory given both continued success with Eylea and a rich pipeline of promising late- and early-stage products/therapies.
Overall, we maintain a positive view on U.S. equities, with continued economic and corporate earnings growth as the catalyst to drive markets higher in 2015. During the last three months of the reporting period, economic data was weaker-than-expected and could dampen the near-term earnings outlook, but we believe it will be short-lived, setting the stage for a rebound for the rest of the 2015. The underlying trends for the U.S. remain favorable, most notably in the labor market, where the improvements are starting to filter through to higher wages, and housing, where home prices are rising, and activity is picking up due to the favorable mortgage rate environment and added support from government initiatives. Additionally, the consumer picture appears to be brighter as the combination of better employment and wage prospects, wealth effects from improved housing and a tailwind of lower fuel costs are lifting confidence, which should ultimately feed through to higher spending. At the same time, the corporate sector continues to be strong, with cash and profit margins near record highs.
This backdrop, combined with benign inflation and still-low interest rates, should allow U.S. stocks to post positive, if more moderate, returns for the remainder of 2015. We are mindful that an environment of slower global growth, a diverging monetary policy (as the Fed prepares to normalize rates), and the ever-present geopolitical risks will presumably lead to greater volatility and intermittent pullbacks. However, that volatility should yield more opportunities for active sub-advisers as we are emphasizing companies with best-in-class business models, visible and sustainable earnings streams, strong free cash flow conversion and long runways for growth. We believe companies exhibiting these characteristics will be able to execute regardless of macro forces and, as such, should eventually be re-rated higher.
PF Large-Cap Value Fund (sub-advised by ClearBridge Investments, LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Large-Cap Value Fund’s Class P returned 9.40%, compared to a 9.33% return for its benchmark, the Russell 1000 Value Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | ClearBridge Advisors, LLC assumed management of the fund on October 1, 2006. Salomon Brothers Asset Management Inc., an affiliate of ClearBridge, managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P outperformed the benchmark. We at ClearBridge maintained the fund’s strategy by looking for companies we believe are undervalued or expected to grow. Undervalued companies may be fundamentally strong, but not fully recognized by investors. Their shares could be good investments because their prices do not reflect the true value of the company. We employ fundamental analysis to analyze each company in detail, evaluating its management, strategy and competitive market position. We utilize an interactive, research-driven approach to identify companies with strong business franchises and attractive valuations and look for companies with proven business models and sustainable competitive advantages capable of generating superior returns over time across
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
a range of potential scenarios. We place a heavy emphasis on higher certainty of near- and medium-term cash flows, while discounting earnings from emerging business models or products. We consider valuations relative to normalized earnings power.
On an absolute basis, the fund had positive returns in eight out of the ten economic sectors in which it was invested during the reporting period. The greatest contributions to the fund’s performance return came from the consumer discretionary, consumer staples and health care sectors. Relative to the benchmark, the fund’s overall sector allocation contributed to the fund’s performance for the reporting period. An overweight in consumer discretionary and an underweight position in the energy sector positively impacted the fund’s relative performance for the reporting period. Furthermore, security selection within the consumer staples and materials sectors added to the fund’s relative performance. In terms of individual holdings, the leading contributors to fund performance included positions in CVS Caremark Corp., Time Warner, Inc., Anthem, Inc., The Home Depot, Inc. and Target Corp.
Relative to the benchmark, overall security selection detracted from the fund’s performance for the reporting period. Security selection within information technology and financials had negative impacts on the fund’s performance. Additionally, an underweight position in health care detracted from fund performance for the reporting period. On an individual holding basis, the leading detractors from fund performance included positions in National Oilwell Varco, Inc., Halliburton Co., American Express Co., Exxon Mobil Corp. and International Business Machines Corp. (IBM).
During the reporting period, we opportunistically added to the fund’s existing holdings and established new fund positions in Amgen, Inc., Freeport-McMoRan Copper & Gold, Inc., National Oilwell, Precision Castparts Corp. and Synchrony Financial. We also sold the fund’s full positions in Loews Corp., Pfizer, Inc. and Verizon Communications, Inc. The proceeds were reinvested in areas where we believed there to be better risk-adjusted return opportunities.
PF Main Street Core Fund (sub-advised by OppenheimerFunds, Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Main Street Core Fund’s Class P returned 11.36%, compared to a 12.73% return for its benchmark, the S&P 500 Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. The fund’s underperformance versus the benchmark was primarily within the consumer staples, financials, energy and industrials sectors, due to weaker relative stock selection. The fund, however, outperformed the benchmark in the health care, information technology and materials sectors, as a result of stronger relative stock selection. We at Oppenheimer maintained the fund’s strategy by using fundamental research and quantitative models to select securities for the fund, which was comprised during the reporting period of both growth and value stocks. This generally includes a fundamental approach in analyzing issuers on factors such as a company’s financial performance and prospects, position in the industry, and strength of business model and management. We may also consider an industry’s outlook, market trends and general economic conditions. In addition, quantitative models are used to rank securities within each sector to identify potential buy and sell candidates for further fundamental analysis. A number of company-specific factors are analyzed in constructing the models, including valuation, fundamentals and momentum.
During the reporting period, the top contributors to performance included Apple, Inc. (information technology), Allergan, Inc. (health care), Actavis P.L.C. (health care), Gilead Sciences, Inc. (health care) and The Home Depot, Inc. (consumer discretionary). Apple benefited from the introduction of two new iPhones and the expected launch of a new Apple Watch product. The company also rallied in late January 2015 on the back of record iPhone sales.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Allergan’s stock price jumped last spring when pharmaceutical firm Valeant Pharmaceuticals International, Inc., in conjunction with activist investor Bill Ackman of Pershing Square, announced their intention to acquire Allergan. Allergan’s management resisted the takeover—maintaining the stock at higher price levels as investors remained convinced that eventually the stock would be acquired. In fact, specialty pharmaceutical company Actavis acquired Allergan in a friendly takeover completed late in the first quarter of 2015. Actavis, with exposure to both generic and branded drugs, continues to augment its growth potential with the closure of the acquisition. The value of debt issued upon completion of the acquisition was less-than-expected and this, in combination with a strong quarterly result from Allergan, resulted in rising earnings expectations—leading Actavis’ stock higher. The fund continues to own Actavis based on strong execution, a favorable growth outlook, and reasonable valuation. The launch of Gilead’s Hepatitis C drug—Solvadi—was among the best performing stocks in the pharmaceutical industry, leading to an earnings outcome for the company that significantly beat expectations. In addition, management’s ongoing share repurchase program helped propel the stock higher. Home Depot, the home improvement retailer, benefited from strength in the housing market.
The most significant detractors from performance included Noble Energy, Inc. (energy), Genworth Financial, Inc. (financials), National Oilwell Varco, Inc. (energy), Pfizer, Inc. (health care) and Diageo P.L.C. (consumer staples). The precipitous decline in the price of oil significantly impacted energy stocks, including Noble Energy and National Oilwell Varco. Noble has a high sensitivity to oil price changes as it has significant exploration and production operations globally. Growth projections are expected to decline as the company adjusts both its cash flow expectations and balance sheet to reflect a diminished outlook for global energy prices. We maintained the fund’s position and continued to have confidence in management’s ability to execute well at reporting period end. National Oilwell Varco provides equipment and services to the oil and gas industry worldwide. Additionally, rising expectations of a deeper downturn in new rig equipment orders and lower spending on oilfield consumables negatively affected the stock. We have lowered our risk by lowering the position size in the stock. Genworth, which provides insurance for the life, mortgage, and long-term care markets, disappointed investors when it reported third quarter 2014 results. Management announced a larger-than-projected charge to reflect a step-up in claims from holders of its long-term care policies. Additionally, the company disclosed that it would conduct a comprehensive review of all policies, adding to investor concerns. We believe the company is currently undervalued by the market—especially given the sell-off in the stock—so we have maintained the fund’s position. Pfizer, Inc. reported a sharp drop in first quarter 2014 profit due to generic competition. We exited our position in Pfizer during the reporting period. Diageo is a producer of alcoholic beverages, including spirits, beer and wine. Weakness in the emerging markets negatively impacted the company in 2014.
At reporting period end, the fund’s largest relative overweight positions were in industrials, consumer staples and financials, and the fund was primarily underweight in energy, health care and consumer discretionary.
PF Mid-Cap Equity Fund (sub-advised by Scout Investments, Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Mid-Cap Equity Fund’s Class P returned 7.44%, compared to a 13.68% return for its benchmark, the Russell Midcap Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Scout Investments, Inc. began managing the fund on January 1, 2013, and some investment policies changed at that time. Another firm managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at Scout maintained the fund’s strategy by seeking to invest in the securities of companies that are expected to benefit from macroeconomic or company-specific factors, and that are attractively
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
priced relative to their fundamentals. In making investment decisions, we consider fundamental factors such as cash flow, financial strength, profitability, statistical valuation measures, potential or actual catalysts that could move the share price, accounting practices, management quality, risk factors such as litigation, the estimated fair value of the company, general economic and industry conditions, and additional information as appropriate.
The fund’s negative relative performance was attributed to stock selection within the financials and energy sectors, in addition to being overweight in the energy sector. The fund benefited from solid stock selection within consumer discretionary, consumer staples, materials and utilities sectors.
The energy sector was the only negative performing sector within the benchmark during the reporting period. The sector was hit hard as oil plunged late in 2014 and continued to drift lower during the last three months of the reporting period. The fund held a significant overweight position in energy, on average, during the reporting period. The overweight position coupled with disappointing stock selection resulted in nearly half of the fund’s underperformance. Oasis Petroleum, Inc., Antero Resources Corp., and Gulfport Energy Corp. suffered as oil and natural gas realized significant price declines from the peak levels seen earlier in the year. U.S. Silica Holdings, Inc. and FMSA Holdings, Inc. were also hurt, due to fears of pricing and volume declines in the sand proppant market due to the energy downturn. A proppant is a material, typically treated sand or man-made ceramic materials, designed to keep an induced hydraulic fracture open, during or following a fracturing treatment.
Within the financials sector, REITs and regional banks provided the most drag on relative fund performance with the former benefiting from, and the latter suffering from, lower long-term interest rates. Regional banks within the fund, including KeyCorp and Regions Financial Corp. sold off on the prospect of continued low interest rates hampering profit margins. Regions Financial was further hurt by concern regarding their energy loan exposure. A relative underweight in REITs coupled with selecting underperformers in the industry, including American Capital Agency Corp. and Host Hotels & Resorts, Inc. also negatively impacted the sector as well as the fund’s performance. American Capital Agency was a relative underperformer due to investor concerns over potential regulatory changes and concerns over profit margins should the Fed begin to raise interest rates. Host Hotels & Resorts, Inc., an owner of luxury hotels suffered from weaker foreign currencies which hurt travel demand to key U.S. gateway cities such as Washington D.C. and New York City.
Stock selection and an overweight allocation in consumer discretionary provided the greatest positive contribution to relative fund performance. Within the sector, standouts included TRW Automotive Holdings Corp., Ross Stores, Inc., Dollar Tree, Inc. and Lululemon Athletica, Inc. TRW Automotive surged on the September 2014 announcement that German car parts maker ZF Friedrichshafen would acquire the company. Discount retailers, Ross Stores and Dollar Tree, benefited from lower gasoline prices and providing low-income consumers with more discretionary income. Lululemon Athletica, an athletic apparel retailer, continued its ascent as analysts touted signs of the company’s turnaround, noting positive traffic and demand trends.
The fund’s holdings in consumer staples and materials provided modestly positive contributions to relative fund performance. The consumer staples sector was the second strongest performing sector over the reporting period and the fund held an overweight position. Monster Beverage Corp. was the standout performer for the fund as it benefited from the announcement that The Coca Cola Co. was making a significant investment in the organization and expanding Monster’s distribution. Within materials, Westlake Chemical Corp. and Compass Minerals International, Inc. provided the strongest positive contributions to fund performance.
We expect interest rate volatility to continue to persist in 2015 and anticipate that the U.S. dollar will continue to strengthen as a spillover effect of QE programs in other parts of the world. Against this backdrop, we prefer companies whose revenues are tied more to U.S. sales, rather than sales overseas. We have found several of these opportunities in the health care sector. The health care sector is particularly attractive from a longer-term perspective due to the aging of populations in both the U.S. and the more developed economies. We are overweight the energy sector and are taking the longer-term view anticipating that a reduced count in the horizontal drilling rigs coupled with rapid shale decline rates will eventually result in lower energy production. A reduction in supply combined with improving demand due to lower fuel prices should help the oil market find a floor.
The fund maintains an asset-sensitive bias at the moment, meaning it should benefit if interest rates rise due to falling unemployment and rising wages in the U.S. and actions by the Fed in response to this gradual economic improvement. However, given the likelihood of interest rate volatility for the foreseeable future as major economic powers around the world continue to execute large QE programs and deal with high levels of financial leverage and aging populations in major developed economies, we are hesitant to add aggressively to asset-sensitive issues. Rather, we are utilizing prudent portfolio construction to net out interest rate exposures—combining asset-sensitive financials and utilities, which tend to trade higher when rates move down, to achieve an attractive balance within the fund.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Mid-Cap Growth Fund (sub-advised by Ivy Investment Management Company)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Mid-Cap Growth Fund’s Class P returned 11.57%, compared to a 15.56% return for its benchmark, the Russell Midcap Growth Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Ivy Investment Management Company began managing the fund on November 1, 2013, and some investment policies changed at that time. Other firms managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We, the Ivy mid-capitalization growth team, maintained the fund’s strategy by primarily emphasizing a bottom-up approach and may look at a number of factors in its consideration of a company, such as: new or innovative products or services; adaptive or creative management; strong financial and operational capabilities to sustain growth; stable and consistent revenue, earnings, and cash flow; strong balance sheet; market and profit potential.
Consistent with the strategy’s philosophy and process, the majority of performance during the reporting period was driven by individual stock selection as opposed to sector bets versus the benchmark. The primary factors in the fund’s relative underperformance were stock selection issues in three main areas: energy, financials and industrials.
The fund’s energy names were weak across the board, due to the swift decline in the price of oil since last June; however, most notably was the final quarter of calendar year 2014, which became a woodshed moment for the group generally, and the fund’s names, specifically. The performance of the fund’s financial stocks was also weak relative to the benchmark, primarily due to the lack of exposure to the strongly performing REIT stocks, which continued to be favored by investors because of their healthy dividends and access to inexpensive capital to run their businesses. The fund had many weak names in industrials, but the weakest with the most negative impact were those that were associated with customers in the energy and other commodities industries. Cash holdings and equity options were the final detractors from performance during the reporting period, accounting for approximately 45 bps of underperformance. Cash represented 17 bps of the drag, as the average cash position of about 1% during the reporting period was an opportunity cost in a strong positive market. Equity options, used primarily for hedging purposes, or building or exiting positions, were 28 bps to the negative for fund relative performance.
The top three securities detracting from fund performance for the reporting period were Southwestern Energy Co., Mattel, Inc. and Oasis Petroleum, Inc.
Strong stock selection in the fund’s consumer discretionary and consumer staples sectors contributed to fund performance during the reporting period. A healthy overweight position in health care more than compensated for some stock picking issues among the fund’s names. Health care stocks performed generally well, but the fund’s less-than-benchmark exposure to the higher octane biotechnology space was an opportunity cost, as that sector within the benchmark had strong returns. The fund’s strong overweight position made a difference, however, as the health care exposure made a solid positive relative contribution to the fund’s performance return for the reporting period.
The top three securities contributing to the fund’s performance for the reporting period were Electronic Arts, Inc., BioMarin Pharmaceutical, Inc. and Medivation, Inc.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Small-Cap Growth Fund (sub-advised by Lord, Abbett & Co. LLC)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Small-Cap Growth Fund’s Class P returned 8.36%, compared to a 12.06% return for its benchmark, the Russell 2000 Growth Index. Lord Abbett assumed management of the PF Small-Cap Growth Fund on May 1, 2014.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Lord, Abbett & Co. LLC began managing the fund on May 1, 2014, and some investment policies changed at that time. Other firms managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at Lord Abbett maintained the strategy of the fund by investing primarily in common stocks of companies demonstrating above-average, long-term growth potential. We seek to identify companies that we believe are strongly positioned in the developing growth phase, which we define as the period of swift development after a company’s start-up phase when growth occurs at a typically much more rapid rate than that of established companies in their mature years. The leading detractor from fund performance relative to the benchmark during the reporting period was stock selection within the information technology sector. Within this sector, the fund’s holdings of FireEye, Inc. detracted from its performance. Shares of FireEye, the developer of a security platform that provides real-time protection against cyber-attacks for governments and enterprises worldwide, faced weakness in mid-2014 after the company reported mixed earnings that saw accelerating billings growth overshadowed by an accounting change and some internal restructuring following several acquisitions. Also detracting from fund performance within the sector were holdings of Demandware, Inc., a provider of cloud-based digital commerce solutions. The firm reported mixed quarterly earnings in early August of 2014, with a shortfall in new customer bookings overshadowing solid quarterly revenue.
The leading individual detractor from relative fund performance during the reporting period was its position in Intercept Pharmaceuticals, Inc., a biotechnology company specializing in the treatment of chronic liver diseases. In late 2014, shares of Intercept faced some weakness following the publication of clinical trial data that suggested there may be greater regulatory hurdles than anticipated prior to the treatments’ approval. DXP Enterprises, Inc., a distributor of maintenance, repair, and operating products and equipment, was another large detractor from fund performance during the reporting period. The firm reported a poor first quarter in early May of 2014, with sales and earnings-per-share trailing consensus estimates due to underperforming acquisitions and the adverse effects of harsh weather.
Also detracting from fund performance during the reporting period was the fund’s position in zulily, Inc., an e-commerce company. zulily beat consensus expectations when it reported third quarter earnings in November, 2014, but lowered its forward guidance due to marketing execution challenges.
The leading contributor to the fund’s relative performance during the period was security selection within the financials sector. Within this sector, Springleaf Holdings, Inc., a consumer finance company, contributed most to the fund’s performance. In March 2015, Springleaf announced the acquisition of its largest competitor in a deal that investors expected would be highly accretive and that would position Springleaf as a market leader. Also contributing within the sector were holdings in WisdomTree Investments, Inc., an asset management firm focusing on exchange-traded funds (ETFs). The firm saw strong organic growth in the last three months of the reporting period, driven primarily by asset flows into two of its flagship ETFs.
The health care sector was another contributor to fund relative performance during the reporting period. Within this sector, Receptos, Inc., a biopharmaceutical company, contributed most to the fund’s performance. In October 2014, Receptos received highly positive data from a phase II clinical trial, and the drug showed potential to be the preferred treatment for afflicted patients. Also contributing within health
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
care was the fund’s position in another biopharmaceutical company, Agios Pharmaceuticals, Inc. Agios is focused on the treatments of cancer and inborn errors of metabolism. Agios announced that phase I data from a cancer clinical trial would be presented earlier-than-expected, which we believe encouraged investors, who observed the pre-announcement, to view the trial as valid.
PF Small-Cap Value Fund (sub-advised by AllianceBernstein L.P.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Small-Cap Value Fund’s Class P returned 11.55%, compared to a 4.43% return for its benchmark, the Russell 2000 Value Index. AB assumed management of the PF Small-Cap Value Fund on May 1, 2014.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | AllianceBernstein L.P. began managing the fund on May 1, 2014 and some investment policies changed at that time. Another firm managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P outperformed the benchmark. We at AB maintained the fund’s strategy by seeking to identify small-capitalization companies that are undervalued versus their long-term earnings potential in selecting investments. We consider selling a holding when any of the factors leading to its purchase materially changes or when a more attractive candidate is identified, including when an alternative stock with strong fundamentals demonstrates a lower price-to-longer term earnings ratio, a higher dividend yield or other favorable qualitative metrics. Security selection was the main source of the fund’s outperformance, with particular strength in the financials, industrial resources and transportation sectors. Sector selection also added to fund returns, as the fund was overweight in consumer cyclicals and underweight in energy.
The top contributors to fund performance included Spansion, Inc. Office Depot, Inc. and Hawaiian Corp Holdings, Inc. Spansion shares rallied after the company announced it had entered a “merger of equals” with Cypress Semiconductor. Office superstore chain, Office Depot outperformed on the back of better-than-expected cost savings from the integration of OfficeMax, Inc., and the first quarter 2015 announcement by Staples, Inc. that it intended to acquire Office Depot. Hawaiian Airlines’ performance benefited from its operator, Hawaiian Holdings’ decision to restrict new capacity and trim some underperforming international routes, such as services to Taipei and Fukuoka.
In contrast, stock selection in the capital-equipment and energy sectors and an underweight in the consumer growth sector detracted from fund performance. Individual detractors from fund performance included energy holdings: Bill Barrett Corp., Rosetta Resources, Inc. and Stone Energy Corp. All three of these oil exploration and production companies were caught up in investor anxiety over falling oil prices and were negatively affected as the sharp decline in crude oil price forced the companies to cut their capital expenditure and production growth outlook.
We believe the dramatic increase in the U.S. dollar, the collapse in oil prices and a sharp decline in U.S. government bond yields have weighed on investors’ minds. As a result, they have aggressively bid-up shares in sectors with higher yields or where earnings are perceived to be more certain. We believe that this has created a compelling investment opportunity in stocks across a number of industries which have been passed over by investors as they lack the higher yield and stable growth characteristics that the market currently favors. Accordingly, we are adding stocks that have greater exposure to more cyclical sectors and that meet our deeper-value style of investing. We will continue to seek companies that have an attractive combination of compelling valuation, strong free cash flows and significant company-level catalysts.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Real Estate Fund (sub-advised by Morgan Stanley Investment Management Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Real Estate Fund’s Class P returned 23.69%, compared to a 12.73% return for the broad-based S&P 500 Index and a 23.95% return for the sector-specific FTSE NAREIT Equity REITs Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmarks for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Morgan Stanley Investment Inc. manages the fund and formerly did business in certain instances under the name Van Kampen, and managed the PF Real Estate Fund under the Van Kampen name from fund’s inception until May 31, 2010. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P outperformed the broad-based S&P 500 Index and underperformed the sector-specific, FTSE NAREIT Equity REITs (FTSE NAREIT) Index. From a bottom-up perspective stock selection modestly detracted from relative fund performance. The fund achieved favorable relative stock selection in the net lease, shopping center and mall sectors, which positively impacted relative performance. This was more than offset by stock selection in the hotel, health care and storage sectors, which detracted from fund relative performance.
From a top-down perspective, sector allocation contributed to relative fund performance. The underweight to the net lease and secondary central business district (CBD)/suburban office sectors, and the overweight to the apartment and mall sectors contributed to fund relative performance. This was partially offset by relative losses from the underweight to the specialty office sector. Cash held in the fund also detracted from fund relative performance.
REITs significantly outperformed the broader equity markets, as measured by the FTSE NAREIT Equity REITs Index and S&P 500 Index, respectively.
We at Morgan Stanley have maintained the management team’s core investment philosophy as a real estate value investor resulting in the ownership of stocks whose share prices we believe provide real estate exposure at the best valuation relative to their underlying asset values. Our company-specific research has led us to an overweighting in the fund to a group of companies that are focused in the ownership of high-quality malls, apartments, CBD office assets, upscale hotels, and a number of out-of-favor companies and an underweighting to companies concentrated in the ownership of health care, net lease, and specialty office assets.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Emerging Markets Fund (sub-advised by OppenheimerFunds, Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Emerging Markets Fund’s Class P returned -4.15%, compared to a 0.44% return for its benchmark, the MSCI Emerging Markets Index (Net).
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at Oppenheimer maintained the fund’s strategy by investing in emerging and developing market stocks. Our investment team invests in emerging market businesses that we believe to appear likely to have a high growth potential. Within this framework, the investment team relies on fundamental analysis of a company’s financial statements, management structure, operations, product development and competitive position in its industry, and considers the special factors and risks of the country in which the issuer operates.
The fund’s underperformance compared to the benchmark was primarily within the consumer staples, energy and consumer discretionary sectors, due to weaker relative stock selection. The fund outperformed the benchmark in materials due to an underweight position and stock selection, as well as an overweight position in health care and stronger relative stock selection in industrials. On a country basis, relative to the benchmark, the fund underperformed in China due to weaker relative stock selection and an underweight position. An overweight position in the U.K. detracted from fund performance as well as an underweight position in Taiwan. The fund outperformed the benchmark in India due to an overweight position and stock selection, and in South Korea and Greece where underweight positions benefited the fund performance.
During the reporting period, top individual contributors to fund performance included information technology stocks Baidu, Inc. (China), Tencent Holdings Ltd. (China), Infosys Ltd. (India), and Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan). Indian Financials stock Housing Development Finance Corp. Ltd. (HDFC) also benefited fund performance. Baidu is the leading internet search provider in China, and it continued to narrow the monetization gap between mobile and desktop and the transition from being primarily a search driven advertising platform to an integrated mobile internet ecosystem. Tencent Holdings, a Chinese internet social networking company, has an online community nearly the size of Facebook’s. Users can access Tencent offerings through desktop and mobile devices. This platform, with its extensive size and ease of access, enables Tencent to offer an increasing number of services. The company monetizes some of the services by selling accompanying advertising space and by offering subscription services to users. Shares of Tencent reported strong fourth quarter 2014 earnings, buoyed by sales from online games. Infosys is an international information technology consulting and software company with a global footprint, making almost all of its sales outside of India. During the summer of 2014, a new CEO joined the firm and investors reacted positively; however, at the same time the Indian rupee had weakened. This benefited Infosys with its foreign currency revenues and Indian rupee costs.
HDFC, the leading provider of housing loans in India, is a public company with no state ownership and, we at Oppenheimer believe it is well capitalized, soundly managed and well positioned for growth as India continues to develop. The company released strong earnings results over its fiscal third quarter, which helped boost its stock. Taiwan Semiconductor Manufacturing is an integrated circuit and semiconductor company and reported strong financial results.
The most significant detractors from fund performance during the reporting period included energy stocks Petroleo Brasileiro S.A. (Brazil), Tullow Oil P.L.C. (U.K.), Novatek O.A.O. (Russia) and Tenaris S.A. (Italy), along with information technology stock Yandex N.V. (Russia). In a difficult reporting period for energy and Russian stocks, these holdings experienced declines. The energy sector fell amid
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
declining oil prices. While the situation in Russia was volatile for much of the reporting period, equities in the country performed positively during the last three months of the reporting period. We continue to monitor the situation. We exited our position in Petroleo Brasileiro.
At the end of the reporting period, the fund’s most significant overweight positions relative to the benchmark were in the consumer discretionary, consumer staples and health care sectors. The fund had roughly an even weighting with the benchmark to information technology and was underweight all other sectors of the benchmark. On a country basis, the fund had its largest overweight positions in India, Hong Kong, the U.K. and France, and its most significant underweights in South Korea, Taiwan, South Africa and China.
We believe that the near-term backdrop for emerging market economic growth will be challenging. Worldwide demand continues to be weak, and there is very little growth, with the exception of the U.S. and China. As a result, global trade is flat, and companies in the emerging world that rely on exports to generate earnings are challenged. Commodity prices have also declined, and many of the larger markets and areas in the developing world are commodity resource producers. We believe it is unlikely that commodity prices will recover in the near-term until worldwide growth picks up.
PF International Large-Cap Fund (sub-advised by MFS Investment Management)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF International Large-Cap Fund’s Class P returned 1.70%, compared to a -0.92% return for its benchmark, the MSCI EAFE Index (Net).
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P outperformed the benchmark. We at MFS maintained the fund’s strategy by using a bottom-up investment style, involving the research of the fundamentals of each individual opportunity and analyzing certain aspects of a company such as earnings, cash flows, growth potential and management abilities. The fund’s overweight position in the technology sector benefited the fund’s performance relative to the fund’s benchmark. Within this sector, the fund’s overweight position in medical technology company HOYA Corp. (Japan) and exposure to semiconductor firm Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) both of which were not benchmark constituents, aided the fund’s relative results as both stocks outperformed during the reporting period.
Strong stock selection in the leisure, basic materials, and health care sectors also boosted the fund’s relative returns. Within leisure, the fund’s overweight position in strong performing British broadcasting firm WPP P.L.C. helped the fund’s relative performance. In basic materials, avoiding Australian mining company BHP Billiton P.L.C. supported the fund’s relative performance results as the stock declined during the reporting period. Overweight exposures to strong performing pharmaceutical firms Valeant Pharmaceuticals International, Inc. (Canada), not a benchmark constituent, Merck KGaA (Germany), and Bayer A.G. (Germany) also boosted the fund’s relative returns.
The fund continued to hold an underweight position in the energy sector throughout the reporting period which positively impacted its relative performance during the oil price declines that occurred in the reporting period.
In other sectors, the fund’s exposure to Canadian National Railway Co. (Canada), not a benchmark constituent, overweight position in food and support services company Compass Group P.L.C. (U.K.) and insurer AIA Group Ltd. (Hong Kong) benefited the fund’s relative performance as all three stocks performed well during the reporting period.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
During the reporting period, the fund’s currency exposure was another contributor to the fund’s relative performance, resulting primarily from differences between the fund and benchmark exposures to holdings of securities denominated in foreign currencies. All of our investment decisions are driven by the fundamentals of each individual opportunity and as such, it is common for the fund to have different currency exposure than the benchmark.
Stock selection in the autos & housing sector was the primary factor that detracted from relative performance. Within this sector, not holding automaker Toyota Motor Corp. (Japan) hurt the fund’s relative returns as the stock traded higher during the reporting period.
Individual stocks that detracted from fund relative results included the timing in the fund’s ownership of pharmaceutical company Novartis A.G. (Switzerland). Overweight positions in British banking firm Standard Chartered P.L.C., natural gas company BG Group P.L.C. (U.K.), apparel distributor Li & Fung Ltd. (Hong Kong), oil service company Saipem S.P.A. (Italy) (not held at reporting period end), natural gas and electricity supplier GDF Suez (France), technology company Smith’s Group P.L.C. (U.K.), and electricity distributor Schneider Electric S.E. (France) weighed on the fund’s relative returns as these stocks performed poorly during the reporting period. Holding Sberbank of Russia (Russia) also negatively impacted the fund’s relative performance.
PF International Small-Cap Fund (sub-advised by QS Batterymarch Financial Management, Inc.)
Q. How did the fund perform for the period ended March 31, 2015?
A. The PF International Small-Cap Fund commenced operations on January 14, 2015. For the period from inception through March 31, 2015, the PF International Small-Cap Fund’s Class P returned 6.90%, compared to a 6.36% return for its benchmark, the S&P Developed Ex-U.S. SmallCap Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the period, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the period from inception through March 31, 2015, the fund’s Class P outperformed the benchmark. We at QS Batterymarch maintained a well-diversified, style neutral fund strategy with modest region and sector allocations versus the benchmark through the combination of bottom-up stock selection based on fundamentals and implemented with quantitative tools, risk controls and cost efficient trading.
Stock selection results contributed to fund performance from the fund’s inception (January 14, 2015) through March 31, 2015. Positive results were largely driven by stock selection in continental Europe, particularly in information technology and industrial stocks. Stock selection also added significantly to fund relative return in the commodity-sensitive countries of Australia, New Zealand and Canada and in the U.K., especially in the consumer discretionary sector.
At the security level, an overweight to Italian oil refinery Saras S.P.A. was the primary contributor to fund relative performance. It represents 15% of refining capacity in Italy and is expanding its production of alternative energy sources, particularly in the field of wind energy. An overweight to Spanish manufacturing company Gamesa Corporacion Tecnologica S.A. also contributed. The firm is involved with the fabrication of wind turbines and the construction of wind farms. The Italian financial firm ANIMA Holding S.P.A. also contributed to fund performance, enjoying positive net inflows in 2014 and higher assets under management.
Stock selection in Japanese industrials was the biggest detractor from fund relative performance followed by stock selection in Asia ex-Japan. The primary detractor at the stock level was not holding Goldin Financial Holdings Ltd., as the Hong Kong investment holding company returned over 157% in the benchmark, largely as a result of fair value gains on a commercial building. Other detractors were an overweight to U.K.’s Soco International P.L.C., which had a negative return of almost 40% for the period held, and an underweight to Adecco S.A. which had a double digit return in the benchmark.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Region and sector allocation also detracted from fund performance, primarily due to an underweight in continental Europe financials which outperformed the benchmark overall for the reporting period. The impact of a small holding in cash also detracted from fund performance in the rising market.
PF International Value Fund (sub-advised by J.P. Morgan Investment Management Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF International Value Fund’s Class P returned -4.07%, compared to a -0.92% return for its benchmark, the MSCI EAFE Index (Net).
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the ten-year period ended March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | J.P. Morgan Investment Management, Inc. began managing the fund on January 1, 2011, and some investment policies changed at that time. Another firm managed the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||||||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the benchmark. We at JPMorgan maintained the fund’s strategy by seeking to add value by capitalizing on mis-valuations that arise within and across the world’s equity markets. We do this by using fundamental research to identify companies whose long-term earnings power we believe is not reflected in the current market price of the securities.
From a sector perspective, stock selection in basic industries, utilities and health care had a negative impact on fund performance, while stock selection in industrial cyclical and technology-software aided relative returns to performance. An underweight to technology-software also helped. Regionally, stock selection in Continental Europe, Japan and Canada detracted from fund performance, while exposure to the emerging markets was the only contributor.
At the stock level, GDF Suez, the international French gas and electric utility company with worldwide operations, detracted from performance as the company faced short-term pressure due to lower commodities prices and a milder winter. However, in spite of these headwinds, we believe that the company remains relatively attractively valued, as it is geographically diversified (more so than pure European utilities). The fund continues to hold this stock. Medium-term, GDF Suez’s incoming CEO (April 2016) could drive upside performance in two ways. First, we have identified a conglomerate discount that could be addressed through a change in corporate structure. This could be helped by changes at the senior management and board levels. Second, we believe GDF Suez has a stronger-than-peers leverage to capital allocation. Given our team’s percentage numbers, we believe GDF Suez’s return on investment could grow from average to best-in-class by 2018. The new leadership will have to arbitrage between business lines (more differences in returns, risks and maturities than peers) and decide whether to increase merger-and-acquisition (M&A) activity.
On the upside, Electrolux A.B., a Swedish appliance maker, was a strong performer. The company boosted earnings for a third straight quarter during the reporting period. Operating income, excluding one-off items, rose higher than expected in the third quarter of the reporting period, which was fueled by strong demand in the U.S., ongoing cost cuts that were boosting margins in Europe, and a better product mix. Electrolux has spent a decade restructuring its business, enabling it to improve margins and cash flow despite the weak demand environment in Europe. A deal with The Home Depot, Inc. also has allowed it to expand its presence in the U.S., taking advantage of a stronger U.S. economy. The company is in the midst of acquiring General Electric Co.’s appliance business which, in addition to being a good fit for Electrolux, we believe will generate significant synergies and tax advantages for the company.
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
PF Currency Strategies Fund (co-sub-advised by Macro Currency Group and UBS Global Asset Management (Americas) Inc.)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Currency Strategies Fund’s Class P returned 7.69%, compared to a 0.02% return for its benchmark, the Citigroup 1-Month U.S. T-Bill Index. MCG assumed management of a portion of the PF Currency Strategies Fund on May 1, 2014.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Macro Currency Group became co-sub-adviser to the fund on May 1, 2014, and some investment policies changed at that time. UBS Global Asset Management (Americas) Inc. was the sole sub-adviser to the fund before that date. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P outperformed the benchmark. The fund is co-sub-advised by MCG and UBS. The following are separate discussions from each of the co-sub-advisers.
MCG
We at MCG maintained a portion of the fund’s strategy by seeking to gain positive exposures to currencies that we believe are undervalued and have negative exposures to currencies that are believed to be overvalued. We identified investment opportunities through the application of both quantitative and qualitative approaches. We managed a part of the fund under a quantitative approach that is used for its longer-term “systematic” strategy. We used this systematic strategy to seek to capture longer-term fundamental shifts in currency movements (typically a twelve-month time horizon). We managed the other part of the fund by applying a qualitative approach that is used for its shorter-term “discretionary” investment strategy. We used this discretionary strategy to seek to identify and take advantage of macroeconomic themes that influence exchange rates over the shorter-term (typically a two week to six-month horizon), a shorter time horizon than the systematic strategy. Both the quantitative and qualitative approaches utilize non-deliverable currency forwards as part of the fund’s investment strategy, which contributed to the fund’s performance during the reporting period.
For the reporting period, the discretionary sub-component generated a positive return contributing to our portion of fund performance, while the systematic component detracted overall. February of 2015 was the fund’s strongest month while January of 2015 was the fund’s weakest month. During the reporting period, the discretionary sub-component both contributed and detracted from the fund’s performance on a monthly basis, as did the systematic subcomponent, but the cumulative effect on the fund’s return was positive.
The fund held various positions, both long and short, across the G10 universe primarily through the use of derivatives, including non-deliverable forwards. The main contributors were from the fund’s non-deliverable forward positions in the Swiss franc, Swedish krona and Norwegian krone. The Swiss franc and Norwegian krone were mostly held short by both subcomponents at various points throughout the reporting period. Despite the Swiss National Bank (SNB) decision in January to remove the currency floor vs. the euro which was in place since 2011 and the volatility associated with it, the overall contribution from the Swiss franc was positive to fund performance. Holdings in the Swedish krona were also primarily focused on the short side.
The main detractors from fund performance during the reporting period were from the fund’s non-deliverable forward positions in the Canadian dollar, Japanese yen and New Zealand dollar versus the U.S. dollar. Losses in the Japanese yen were primarily a function of the systematic sub-component holding the currency long on a mean-reversion basis, and therefore; the currency’s continued weakness throughout 2014 became a drag on performance. Losses in the Canadian dollar were related to our overall positive view of the currency which did not perform according to our expectations; this theme remained in place during the last three months of the reporting period, which we believe will continue throughout the remainder of 2015. The New Zealand dollar suffered during the reporting period, particularly
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
in the second half of the reporting period, with the strength of the U.S. dollar versus a number of other G10 currencies pushing the New Zealand dollar lower.
UBS
We at UBS maintained a portion of the fund’s strategy by seeking to gain positive exposures to currencies that we believe are undervalued and have negative exposures to currencies that are believed to be overvalued. For the reporting period, derivatives, including non-deliverable forwards, had a positive impact on our portion of the fund’s performance.
We retain conviction in our short position in New Zealand dollar versus the U.S. dollar given favorable valuation, the improving U.S. economy and vulnerabilities in the New Zealand economy. We also have high conviction in our short Swiss franc (CHF) position against the euro (EUR) and U.S. dollar as the currency appears to have overshot following actions from the central bank.
Over the reporting period, commodity prices broadly fell, causing the Australian dollar and New Zealand dollar short positions against the U.S. dollar to positively impact the fund’s performance.
The fund held a short CHF position against the EUR throughout the reporting period which was one of the largest detractors from performance following the SNB’s removal of the 1.20 EUR/CHF floor. However, we took this opportunity to add to the underweight CHF position of the fund after concluding that the exchange rate had overshot, resulting in a stronger valuation case for the position. Moreover, deterioration in the Swiss balance of payment surplus indicates that this CHF strength is unlikely to be sustainable. The additions to the CHF underweight were against the EUR and U.S. dollar and these marginal position increases have contributed positively to fund performance.
Elsewhere in Europe, the fund benefited from overweight positions in Polish zloty and Hungarian forint against the EUR. However, our strategy in Scandinavian currencies detracted—both our short Norwegian krone versus Swedish krona and long Swedish krona versus Great British pound (GBP) positions were small detractors from fund performance. Other GBP trades we put on made money. The fund profited from a long GBP position versus the EUR and a short one versus the U.S. dollar.
The fund also held a long position in the Japanese yen given its attractive valuation which against the U.S. dollar detracted, but against the euro, contributed positively.
In addition, given Mexico’s close link to the U.S. and its relative competitiveness as a manufacturing location versus Asia, the prospects for growth surprises seem favorable, and thus, one of our preferred relative emerging market trades is Mexican peso against the Malaysian ringgit. Although so far it has modestly detracted from fund performance, we remain confident in the investment thesis.
PF Global Absolute Return Fund (sub-advised by Eaton Vance Investment Managers)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Global Absolute Return Fund’s Class P returned 9.13%, compared to a 0.03% return for its benchmark, the BofA Merrill Lynch U.S. 3-Month T-Bill Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmark for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| (1) | Eaton Vance Investment Managers assumed management of the fund on August 1, 2013. Eaton Vance Management, an affiliate of Eaton Vance Investment Managers, managed the fund from the fund’s inception to July 31, 2013. |
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P outperformed the benchmark. We at Eaton Vance maintained the fund’s strategy by investing in securities, derivatives and other instruments to establish long and short investment exposures around the world, typically seeking to establish such investment exposures to individual countries based on the Eaton Vance portfolio management team’s view of the
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
investment merits of a country. In addition to gaining exposure to a country or market, derivatives can also be utilized for hedging purposes. The fund typically employs significant use of derivative instruments both to gain exposure as well as hedge. The fund primarily uses foreign exchange forward contracts and credit default swaps. It may also use interest rate swaps, interest rate futures, bond futures, equity index futures and options, among other derivatives instruments.
Nearly every region posted gains during the reporting period. Western Europe, the Dollar Bloc, Eastern Europe, Asia, Sub-Saharan Africa, and Middle East and North Africa contributed positive regional returns to fund performance. Latin America was the lone detractor.
In Western Europe, short currency positions, notably driven by euro and Swiss franc trades, led regional gains. A long German real estate sector equity position also contributed to fund performance. Regional performance was muted by a short Spanish credit position and short U.K. rates.
Two positions drove gains for the fund in the Dollar Bloc, namely short Australian dollar and long New Zealand rates. The fund’s short positions in the New Zealand dollar and Canadian dollar also contributed positively to its performance.
Both long and short currency positions led to positive performance for Eastern Europe. The fund’s short Russian ruble position led gains and was supported by a long position in the Serbian dinar versus the euro as well as a long position in Poland’s zloty versus the euro. Credit positions also contributed to regional gains led by a long Slovenian credit investment and a short Russian credit position. The region suffered losses on its short Hungarian rates trade and a short currency position in the Hungarian forint vs. the euro. Short Croatian credit hurt fund performance as well.
In Asia, currency positions, notably a short position in the Japanese yen as well as long positions in the Sri Lankan rupee, Indian rupee, and Philippine peso contributed to regional performance. Equity investments in India and Japan also contributed. Rates trades detracted from regional performance, predominantly driven by losses on short Japanese duration. Myanmar equity investments also detracted.
In Sub-Saharan Africa, a short South African rand currency position was the top contributor to the region. The fund’s long credit positions led by Tanzania and Zambia also contributed to fund performance. The fund’s long currency position in the Ugandan schilling hurt its performance.
A long currency position in the Lebanese pound contributed positively in the Middle East and North Africa region. Primary detractors in the region included a long Iraqi credit and a short credit position in Lebanon.
Latin America detracted as a whole from fund performance. Losses were derived from currency, interest rate and credit positions. Long positions in the Mexican peso and Chilean peso detracted from fund performance. Long Colombian rates and long credit positions in Ecuador also hurt fund performance. Long credit positions in the region were contributors, including a long credit position in Argentina.
Regarding exposure, the fund’s net short currency position remained during the reporting period. The fund’s credit spread duration ended the reporting period above one year as attractive country-by-country credit opportunities presented themselves. Additionally, the fund’s global interest rate duration ended the reporting period fairly close to two years, while U.S. duration was pushed more negative with short exposure at the front-end of the U.S. yield curve, which is most sensitive to the Fed policy on interest rate duration.
PF Precious Metals Fund (sub-advised by Wells Capital Management Incorporated)
Q. How did the fund perform for the year ended March 31, 2015?
A. For the year ended March 31, 2015, the PF Precious Metals Fund’s Class P returned -21.33%, compared to a 12.73% return for the broad-based S&P 500 Index and a -22.57% return for the sector-specific FTSE Gold Mines Index.
The following graph compares the performance of a hypothetical $10,000 investment in Class P shares of the fund to its benchmarks for the period from inception through March 31, 2015. The fund’s performance reflects reinvestments of all dividends and capital gains distributions, if any.
Performance Comparison
| Performance data shown represents past performance. Investment return and principal value will fluctuate so that shares of the fund when redeemed may be worth more or less than their original cost. Past performance is not predictive of future performance. | ||
| See benchmark definitions on pages A-29 through A-31 |
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PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
Q. Discuss both positive and negative factors that materially affected the fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.
A. For the reporting period, the fund’s Class P underperformed the broad-based S&P 500 Index and outperformed the sector-specific FTSE Gold Mines Index. We, the team at Wells Capital Management, maintained the fund’s strategy by investing in equity companies involved in the exploration, development, mining, processing, or dealing of gold, precious metals, and minerals, which tend to have relatively high correlation to underlying commodity prices and relatively low correlation to the prices of other stocks and bonds. We take a disciplined approach to risk management through top-down analysis and bottom-up stock selection, while investing across market capitalizations, production profiles, and geographies, and focusing on a long-term investment horizon, looking for companies that have lower-than-average cost structures, are well managed, and are likely to improve their relative values over time.
The negative performance seen by both the fund and the FTSE Gold Mines Index was primarily the result of an 8% drop in the price of gold over the reporting period. Gold prices were relatively stable during mid-2014 as a weaker-than-expected economic start to the reporting period caused the Fed to defer a decision on when to begin raising interest rates.
Sales of gold ETFs accelerated during the third quarter of the reporting period. Investors reduced their ETF gold holdings because of better-than-expected U.S. economic data, along with the strength of the U.S. dollar and falling energy prices. ETF purchases resumed temporarily during the last three months of the reporting period as investor concerns about a Greek default and weaker-than-expected economic growth in the U.S. caused a renewed interest in gold.
The fund’s top contributor to relative results was Barrick Gold Corp. The fund maintained an underweight position in Barrick Gold due to the company’s high debt levels. That position enhanced the fund’s relative performance results during the reporting period as Barrick Gold significantly underperformed the total return of the FTSE Gold Mines Index. Randgold Resources Ltd. was another top contributor to fund relative results. The company, which has mining operations in West Africa, benefited from its low cost operations and debt-free balance sheet. Other contributors included Royal Gold, Inc. and Franco-Nevada Corp. Both Royal Gold and Franco-Nevada benefited from their collection of royalties in politically stable geographies, strong management teams and cash-rich balance sheets.
Relative to the S&P 500 Index, Osisko Mining Corp. was the top contributor to the fund during the reporting period. Osisko’s strong absolute performance was the result of it being acquired early in 2014 in a joint bid from Agnico Eagle Mines Ltd. and Yamana Gold, Inc. Gold-mining stocks underperformed relative to the price of gold. The prices of gold-mining stocks typically rose or fell farther than the price of gold. During the reporting period, smaller-capitalization exploration and development names fared the worst. Even a few of the more financially levered larger-capitalization companies also underperformed. One of the most noteworthy detractors relative to both the FTSE Gold Mines Index and the S&P 500 Index was Tahoe Resources, Inc. Tahoe Resources declined on news that the Guatemalan government would be imposing a higher-than-expected royalty on the company’s silver production. The stock came under further pressure early in 2015 after announcing it had agreed to acquire Peruvian gold miner Rio Alto Mining Ltd.
The fund’s underweight positions relative to the FTSE Gold Mines Index in Newmont Mining Corp. and Newcrest Mining Ltd. also detracted from performance, as both stocks outperformed.
Additionally, relative underperformance versus the S&P 500 Index was the result of the fund’s concentration in gold equities, most of which (with one exception-Newmont Mining Corp.) are not in the S&P 500 Index. As mentioned above, gold prices dropped during the reporting period, pressuring gold company profits lower and causing gold equities to decline. In contrast, the S&P 500 Index rose as stronger economic growth in the U.S. and rising corporate profits provided the catalyst to move stocks higher in 2014. Also relative to the S&P 500 Index, Yamana Gold, Inc. was the most significant detractor to relative performance during the year. Yamana underperformed as the expected production and cost benefit from its new mines being developed in Brazil did not unfold as expected in 2014. Kinross Gold Corp. also detracted from relative performance during the reporting period. The stock dropped on concerns that the company would not be able to finance the expansion of its Tasiast mine in Mauritania.
Benchmark Definitions
Barclays 1-3 Year U.S. Government/Credit Bond Index measures performance of U.S. dollar-denominated U.S. Treasuries, government-related, and investment grade U.S. corporate securities with maturities of one to three years.
Barclays U.S. Aggregate Bond Index measures the performance of the U.S. investment grade bond market, which includes investment grade U.S. government bonds, investment grade corporate bonds, mortgage pass-through securities and asset-backed securities that are publicly offered for sale in the United States. The securities in the Index must have at least 1 year remaining to maturity. In addition, the securities must be denominated in U.S. dollars and must be fixed rate, non-convertible, and taxable.
Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index is an index of all outstanding treasury inflation protected securities issued by the U.S. government. The total return is equal to the change in price plus the coupon return.
BofA Merrill Lynch U.S. 3-Month Treasury Bill (T-Bill) Index is an index comprised of a single Treasury bill issue purchased at the beginning of the month and held for a full month, then sold and rolled into a newly selected Treasury bill issue. Results include the reinvestment of all distributions.
Citigroup 1-Month U.S. Treasury Bill (T-Bill) Index is a market-value-weighted index of public obligations of the U.S. Treasury with maturities of one month.
Emerging Markets Debt Composite Benchmark is a composite benchmark combining three emerging markets indices as follows: 50% J.P. Morgan EMBI Global Diversified, 25% J.P. Morgan ELMI+ and 25% J.P. Morgan GBI-EM Global Diversified.
FTSE Gold Mines Index represents an accurate reflection and comprehensive coverage of the global gold markets. The index includes all gold mining companies that have a sustainable and attributable gold production of at least 300,000 ounces a year and that derive 51% or more of their revenue from mined gold.
A-29
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
FTSE National Association of Real Estate Investment Trusts (NAREIT) Equity Real Estate Investment Trusts (REITs) Index is one index of a series of indices represented in the FTSE NAREIT U.S. Real Estate Index Series and represents tax-qualified REITs listed on the New York Stock Exchange (NYSE), American Stock Exchange and National Association of Securities Dealers Automated Quotations (NASDAQ). Results include reinvested dividends.
J.P. Morgan Emerging Local Markets Index Plus (ELMI+) is a performance benchmark for emerging markets money market instruments and tracks total returns for local-currency-denominated money market instruments. The benchmark was introduced in June 1996 and consists of foreign exchange forward contracts laddered with maturities ranging from one to three months. Country weights are based on a trade-weighted allocation, with maximum weight of 10% for countries with convertible currencies and 2% for countries with non-convertible currencies.
J.P. Morgan Emerging Markets Bond Index (EMBI) Global Diversified tracks total returns of U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds. The diversified index limits the exposure of some of the larger countries.
J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) Global Diversified tracks total returns of emerging markets local currency denominated fixed income instruments. The benchmark instruments of the index are regularly traded, fixed rate local sovereign bonds to which international investors can gain exposure. Country weights are based on a trade-weighted allocation, with maximum weight of 10% for countries.
Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index (Net) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. As of March 31, 2015, the MSCI EAFE Index (Net) consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The word “(Net)” in the index name means the net total return for the index, which includes the reinvestment of dividends after the deduction of withholding tax, applying the tax rate to non-resident individuals who do not benefit from double taxation treaties.
MSCI Emerging Markets Index (Net) is a free float-adjusted market capitalization index that is designed to measure equity market performance of large and mid-capitalization securities in emerging markets. As of March 31, 2015, the MSCI Emerging Markets Index (Net) consists of the following 23 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates. The word “(Net)” in the index name means the net total return for the index, which includes the reinvestment of dividends after the deduction of withholding tax, applying the tax rate to non-resident individuals who do not benefit from double taxation treaties.
Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the large-cap growth segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics. Results include reinvested dividends.
Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values. The Russell 1000 Value Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics. Results include reinvested dividends.
Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 Index companies with higher price-to-value ratios and higher forecasted growth values. The Russell 2000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Results include reinvested dividends.
Russell 2000 Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Value Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect value characteristics. Results include reinvested dividends.
Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap Growth Index is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap growth market. Results include reinvested dividends.
Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies. The Russell Midcap Index is constructed to provide a comprehensive and unbiased barometer for the mid-cap segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap opportunity set. Results include reinvested dividends.
S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
A-30
PACIFIC FUNDS PERFORMANCE DISCUSSION (Continued)
S&P Developed Ex-U.S. SmallCap Index comprises the stocks representing the lowest 15% of float-adjusted market cap in each developed country, excluding the United States. It is a subset of the S&P Global BMI, a comprehensive, rules-based index measuring global stock market performance.
S&P/LSTA Leveraged Loan Index is a daily total return index that uses Loan Syndications & Trading Association/Loan Pricing Corp. (LSTA/LPC) mark-to-market pricing to calculate market value change. On a real-time basis, the leveraged loan index (LLI) tracks the current outstanding balance and spread over London Interbank Offered Rate (LIBOR) for fully funded term loans. The facilities included in the LLI represent a broad cross section of leveraged loans syndicated in the U.S., including dollar-denominated loans to overseas issuers.
A-31
PF FLOATING RATE LOAN FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-1
PACIFIC FUNDS **
PF FLOATING RATE LOAN FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-2
PACIFIC FUNDS **
PF FLOATING RATE LOAN FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-3
PACIFIC FUNDS **
PF FLOATING RATE LOAN FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-4
PACIFIC FUNDS **
PF FLOATING RATE LOAN FUND **
Schedule of Investments (Continued)
March 31, 2015
| (d) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Convertible Preferred Stocks (1) |
$137,110 | $— | $137,110 | $— | |||||||||||||
| Senior Loan Notes |
121,699,417 | — | 121,396,747 | 302,670 | ||||||||||||||
| Short-Term Investment |
5,680,411 | 5,680,411 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$127,516,938 | $5,680,411 | $121,533,857 | $302,670 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further industry breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-5
PACIFIC FUNDS **
PF INFLATION MANAGED FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-6
PACIFIC FUNDS **
PF INFLATION MANAGED FUND **
Schedule of Investments (Continued)
March 31, 2015
| (g) | A reverse repurchase agreement outstanding as of March 31, 2015 was as follows: |
| Counter- party |
Collateral Pledged | Interest Rate |
Trade Date |
Maturity Date |
Repurchase Amount |
Principal Amount |
Value | |||||||||||||||||
| BNS | U.S. Treasury Inflation Protected Securities 0.125% due 04/15/18 |
0.210% | 02/25/15 | 04/13/15 | ($2,984,176 | ) | $2,983,375 | ($2,983,375 | ) | |||||||||||||||
|
|
|
|||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-7
PACIFIC FUNDS **
PF INFLATION MANAGED FUND **
Schedule of Investments (Continued)
March 31, 2015
| (i) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Unrealized | ||||||||||||||||||
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Appreciation |
||||||||||||||
| BRL | 1,026,460 | USD | 340,000 | 04/15 | JPM | ($18,553 | ) | |||||||||||
| CAD | 324,000 | USD | 255,880 | 04/15 | CIT | (72 | ) | |||||||||||
| CAD | 1,580,000 | USD | 1,268,401 | 05/15 | BOA | (21,621 | ) | |||||||||||
| EUR | 75,000 | USD | 81,526 | 04/15 | BRC | (880 | ) | |||||||||||
| EUR | 56,000 | USD | 59,415 | 04/15 | BRC | 801 | ||||||||||||
| EUR | 9,628,826 | USD | 10,525,650 | 04/15 | CIT | (172,007 | ) | |||||||||||
| EUR | 66,000 | USD | 70,931 | 04/15 | DUB | 37 | ||||||||||||
| EUR | 200,000 | USD | 226,711 | 04/15 | GSC | (11,655 | ) | |||||||||||
| EUR | 88,000 | USD | 93,364 | 04/15 | JPM | 1,260 | ||||||||||||
| GBP | 44,000 | USD | 67,486 | 04/15 | GSC | (2,217 | ) | |||||||||||
| GBP | 2,126,000 | USD | 3,156,306 | 04/15 | RBC | (2,655 | ) | |||||||||||
| INR | 157,578,680 | USD | 2,473,763 | 04/15 | JPM | 37,095 | ||||||||||||
| INR | 157,578,680 | USD | 2,477,847 | 06/15 | BRC | (6,635 | ) | |||||||||||
| JPY | 159,913,910 | USD | 1,340,042 | 04/15 | CIT | (6,661 | ) | |||||||||||
| JPY | 150,350,000 | USD | 1,281,155 | 05/15 | BOA | (26,778 | ) | |||||||||||
| MXN | 2,450,000 | USD | 157,520 | 05/15 | JPM | 2,713 | ||||||||||||
| MXN | 7,227,346 | USD | 492,477 | 05/15 | UBS | (19,800 | ) | |||||||||||
| MXN | 2,625,000 | USD | 174,529 | 05/15 | WBC | (2,851 | ) | |||||||||||
| MYR | 2,630,467 | USD | 733,088 | 04/15 | UBS | (23,715 | ) | |||||||||||
| NZD | 1,580,141 | USD | 1,208,608 | 04/15 | CIT | (27,535 | ) | |||||||||||
| USD | 363,524 | BRL | 1,043,615 | 04/15 | JPM | 36,705 | ||||||||||||
| USD | 340,000 | BRL | 1,133,560 | 04/16 | JPM | 20,719 | ||||||||||||
| USD | 494,265 | CAD | 618,000 | 04/15 | CIT | 6,337 | ||||||||||||
| USD | 197,128 | EUR | 185,000 | 04/15 | GSC | (1,798 | ) | |||||||||||
| USD | 11,162,590 | EUR | 9,814,826 | 04/15 | GSC | 608,946 | ||||||||||||
| USD | 128,055 | EUR | 114,000 | 04/15 | JPM | 5,474 | ||||||||||||
| USD | 10,530,242 | EUR | 9,628,826 | 05/15 | CIT | 171,729 | ||||||||||||
| USD | 95,481 | EUR | 88,000 | 05/15 | GSC | 812 | ||||||||||||
| USD | 3,232,492 | GBP | 2,084,000 | 04/15 | DUB | 141,143 | ||||||||||||
| USD | 126,985 | GBP | 86,000 | 04/15 | GSC | (585 | ) | |||||||||||
| USD | 3,155,666 | GBP | 2,126,000 | 05/15 | RBC | 2,753 | ||||||||||||
| USD | 2,512,816 | INR | 157,578,680 | 04/15 | BRC | 1,959 | ||||||||||||
| USD | 1,251,010 | INR | 79,101,370 | 06/15 | GSC | 10,511 | ||||||||||||
| USD | 1,338,246 | JPY | 159,913,910 | 04/15 | DUB | 4,866 | ||||||||||||
| USD | 1,340,619 | JPY | 159,913,910 | 05/15 | CIT | 6,523 | ||||||||||||
| USD | 1,560,690 | MXN | 22,967,187 | 04/15 | JPM | 57,245 | ||||||||||||
| USD | 67,525 | MXN | 1,050,000 | 05/15 | BRC | (1,147 | ) | |||||||||||
| USD | 244,087 | MXN | 3,647,000 | 05/15 | BRC | 5,568 | ||||||||||||
| USD | 35,077 | MXN | 538,000 | 05/15 | CIT | (108 | ) | |||||||||||
| USD | 121,055 | MXN | 1,811,819 | 05/15 | CIT | 2,559 | ||||||||||||
| USD | 20,000 | MXN | 300,470 | 05/15 | DUB | 349 | ||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-8
PACIFIC FUNDS **
PF INFLATION MANAGED FUND **
Schedule of Investments (Continued)
March 31, 2015
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||
| USD | 84,000 | MXN | 1,255,010 | 05/15 | GSC | $1,921 | ||||||||||||
| USD | 97,269 | MXN | 1,476,000 | 05/15 | JPM | 737 | ||||||||||||
| USD | 126,525 | MXN | 1,900,000 | 05/15 | RBC | 2,262 | ||||||||||||
| USD | 717,908 | MYR | 2,625,032 | 04/15 | BRC | 10,001 | ||||||||||||
| USD | 1,172,100 | NZD | 1,580,141 | 04/15 | GSC | (8,973 | ) | |||||||||||
| USD | 1,204,664 | NZD | 1,580,141 | 05/15 | CIT | 27,684 | ||||||||||||
|
|
|
|||||||||||||||||
| Total Forward Foreign Currency Contracts |
|
$812,463 | ||||||||||||||||
|
|
|
|||||||||||||||||
| (j) | Purchased options outstanding as of March 31, 2015 were as follows: |
Interest Rate Swaptions
| Description | Pay/Receive Floating Rate |
Floating Rate Index |
Exercise Rate |
Expiration Date |
Counter- party |
Notional Amount |
Cost | Value | ||||||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 0.800% | 01/19/16 | MSC | $2,800,000 | $4,480 | $3,333 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
|
Put - 30-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 2.683% | 12/11/17 | MSC | 1,000,000 | 140,000 | 101,171 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Total Purchased Options |
$144,480 | $104,504 | ||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| (k) | Transactions in written options for the year ended March 31, 2015 were as follows: |
| Number of Contracts |
Notional Amount in EUR |
Notional Amount in $ |
Premium | |||||||||||||
| Outstanding, March 31, 2014 |
24 | 4,200,000 | 33,535,000 | $235,686 | ||||||||||||
| Call Options Written |
120 | 600,000 | 27,030,634 | 206,337 | ||||||||||||
| Put Options Written |
25 | 15,992,000 | 23,790,368 | 325,289 | ||||||||||||
| Call Options Closed |
(119 | ) | (3,800,000 | ) | (6,910,481 | ) | (134,156 | ) | ||||||||
| Put Options Closed |
— | — | (24,650,242 | ) | (84,141 | ) | ||||||||||
| Call Options Expired |
(25 | ) | (4,200,000 | ) | (9,420,171 | ) | (94,503 | ) | ||||||||
| Put Options Expired |
(25 | ) | (10,800,000 | ) | (27,625,108 | ) | (220,707 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Outstanding, March 31, 2015 |
— | 1,992,000 | 15,750,000 | $233,805 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (l) | Premiums received and value of written options outstanding as of March 31, 2015 were as follows: |
Credit Default Swaptions on Credit Indices – Sell Protection
| Description | Exercise Price |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | ||||||||||||||
| Put - CDX IG 23 5Y |
1.000% | 04/15/15 | BRC | $600,000 | $902 | ($1 | ) | |||||||||||||
|
|
|
|
|
|||||||||||||||||
Foreign Currency Options
| Description | Exercise Price |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | ||||||||||||||||
| Call - BRL versus USD |
BRL 2.68 | 07/01/15 | DUB | $250,000 | $5,958 | ($45,656 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Put - EUR versus USD |
$1.06 | 04/08/15 | CIT | EUR 630,000 | 3,215 | (2,961 | ) | |||||||||||||||
| Put - EUR versus USD |
1.03 | 04/16/15 | DUB | 162,000 | 1,019 | (275 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| 4,234 | (3,236 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| $10,192 | ($48,892 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
Inflation Floor/Cap Options
| Description | Initial Index |
Floating Rate | Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | |||||||||||||||||
| Floor - U.S. CPI Urban Consumers NSA |
0.00 | Maximum of [(1+0.00%)10 - Inflation Adjustment] or $0 |
03/24/20 | JPM | $700,000 | $7,910 | ($9,647 | ) | ||||||||||||||||
| Floor - U.S. CPI Urban Consumers NSA |
0.00 | Maximum of [(1+0.00%)10 - Inflation Adjustment] or $0 |
04/07/20 | CIT | 2,000,000 | 17,720 | (1,179 | ) | ||||||||||||||||
| Floor - U.S. CPI Urban Consumers NSA |
0.00 | Maximum of [(1+0.00%)10 - Inflation Adjustment] or $0 |
09/29/20 | CIT | 300,000 | 3,870 | (183 | ) | ||||||||||||||||
| Cap - U.S. CPI Urban Consumers NSA |
0.00 | Maximum of [(1+0.00%)10 - Inflation Adjustment] or $0 |
04/22/24 | JPM | 1,900,000 | 13,822 | (5,241 | ) | ||||||||||||||||
| Cap - U.S. CPI Urban Consumers NSA |
0.00 | Maximum of [(1+0.00%)10 - Inflation Adjustment] or $0 |
05/16/24 | JPM | 200,000 | 1,390 | (569 | ) | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| $44,712 | ($16,819 | ) | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-9
PACIFIC FUNDS **
PF INFLATION MANAGED FUND **
Schedule of Investments (Continued)
March 31, 2015
Interest Rate Swaptions
| Description | Pay/Receive Floating Rate |
Floating Rate Index |
Exercise Rate |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | ||||||||||||||||||
| Call - 30-Year Interest Rate Swap |
Receive | 3-Month EUR-LIBOR | 0.750% | 09/11/15 | GSC | EUR 600,000 | $16,127 | ($28,357 | ) | |||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.520% | 01/19/16 | MSC | $2,800,000 | 1,680 | (1,058 | ) | |||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.660% | 01/19/16 | MSC | 2,800,000 | 2,800 | (1,988 | ) | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| 20,607 | (31,403 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Put - 30-Year Interest Rate Swap |
Pay | 3-Month EUR-LIBOR | 1.300% | 09/11/15 | GSC | EUR 600,000 | 17,392 | (8,284 | ) | |||||||||||||||||
| Put - 5-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 2.500% | 12/11/17 | MSC | $4,200,000 | 140,000 | (104,389 | ) | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| 157,392 | (112,673 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| $177,999 | ($144,076 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Total Written Options |
$233,805 | ($209,788 | ) | |||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| (m) | Swap agreements outstanding as of March 31, 2015 were as follows: |
Credit Default Swaps on Corporate and Sovereign Issues – Sell Protection (1)
| Referenced Obligation | Fixed Deal Receive Rate |
Expiration Date |
Counter- party |
Implied Credit Spread at 03/31/15 (2) |
Notional Amount (3) |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||
| Greek Government |
1.000% | 06/20/15 | MSC | 43.611% | EUR 100,000 | ($9,483 | ) | ($4,702 | ) | ($4,781 | ) | |||||||||||||||||||
| Gazprom OAO |
1.000% | 03/20/16 | GSC | 4.937% | $150,000 | (5,574 | ) | (8,916 | ) | 3,342 | ||||||||||||||||||||
| Gazprom OAO |
1.000% | 03/20/16 | JPM | 4.937% | 150,000 | (5,573 | ) | (11,205 | ) | 5,632 | ||||||||||||||||||||
| Greek Government |
1.000% | 12/20/16 | GSC | 42.746% | 50,000 | (19,620 | ) | (3,750 | ) | (15,870 | ) | |||||||||||||||||||
| Italian Government |
1.000% | 03/20/19 | DUB | 0.832% | 950,000 | 6,483 | (16,437 | ) | 22,920 | |||||||||||||||||||||
| Spain Government |
1.000% | 03/20/19 | HSB | 0.651% | 200,000 | 2,774 | (1,509 | ) | 4,283 | |||||||||||||||||||||
| Spain Government |
1.000% | 03/20/19 | MSC | 0.651% | 100,000 | 1,387 | (614 | ) | 2,001 | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| ($29,606 | ) | ($47,133 | ) | $17,527 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| (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 investments comprising the referenced index or (ii) pay a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index. |
| (2) | An implied credit spread is the spread in yield between a U.S. Treasury security and the referenced obligation or underlying investment that are identical in all respects except for the quality rating. Implied credit spreads, represented in absolute terms, utilized in determining the value of credit default swap agreements on corporate and sovereign issues of an emerging country as of year end serve as an indicator of the current status of the payment/performance risk and represent the likelihood of 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, in comparison to narrower credit spreads, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation. |
| (3) | The maximum potential amount the fund could be required to pay 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. |
Interest Rate Swaps – Pay Floating Rate
| Floating Rate Index | Counterparty | Fixed Rate |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BRL - CDI Compounded |
UBS | 12.360% | 01/02/18 | BRL 400,000 | ($1,499 | ) | ($1,149 | ) | ($350 | ) | ||||||||||||||||||
| GBP Retail Price |
GSC | 3.125% | 12/10/24 | GBP 50,000 | 2,522 | 66 | 2,456 | |||||||||||||||||||||
| GBP Retail Price |
UBS | 2.945% | 01/12/25 | 150,000 | 1,944 | — | 1,944 | |||||||||||||||||||||
| GBP Retail Price |
GSC | 3.140% | 01/14/30 | 950,000 | 9,614 | — | 9,614 | |||||||||||||||||||||
| GBP Retail Price |
JPM | 3.528% | 09/23/44 | 50,000 | 7,644 | 75 | 7,569 | |||||||||||||||||||||
| GBP Retail Price |
MSC | 3.500% | 10/15/44 | 250,000 | 33,382 | (1,552 | ) | 34,934 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| $53,607 | ($2,560 | ) | $56,167 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-10
PACIFIC FUNDS **
PF INFLATION MANAGED FUND **
Schedule of Investments (Continued)
March 31, 2015
Interest Rate Swaps – Receive Floating Rate
| Floating Rate Index |
Counterparty | Fixed Rate |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| 1-Month EUR-CPTFEMU |
JPM | 0.700% | 12/15/18 | EUR 150,000 | ($284 | ) | ($151 | ) | ($133 | ) | ||||||||||||||||||
| 1-Month EUR-CPTFEMU |
GSC | 0.900% | 11/15/19 | 50,000 | (230 | ) | 65 | (295 | ) | |||||||||||||||||||
| 1-Month EUR-CPTFEMU |
BOA | 0.750% | 12/10/19 | 50,000 | 137 | 32 | 105 | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (377 | ) | (54 | ) | (323 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Exchange | ||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| 28-day MXN TIIE |
CME | 4.035% | 02/03/17 | MXN 10,000,000 | 1,800 | 2,410 | (610 | ) | ||||||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 1.500% | 09/16/17 | GBP 2,400,000 | (34,107 | ) | (23,859 | ) | (10,248 | ) | ||||||||||||||||||
| 3-Month CAD-LIBOR |
CME | 1.250% | 09/18/17 | CAD 400,000 | (2,085 | ) | (2,027 | ) | (58 | ) | ||||||||||||||||||
| 6-Month EUR-LIBOR |
CME | 2.000% | 01/29/24 | EUR 800,000 | (116,329 | ) | — | (116,329 | ) | |||||||||||||||||||
| 6-Month EUR-LIBOR |
CME | 1.000% | 12/17/24 | 650,000 | (32,552 | ) | — | (32,552 | ) | |||||||||||||||||||
| 3-Month USD-LIBOR |
CME | 3.000% | 12/17/24 | $1,700,000 | (165,618 | ) | (157,323 | ) | (8,295 | ) | ||||||||||||||||||
| 3-Month USD-LIBOR |
CME | 2.750% | 06/17/25 | 6,900,000 | (423,344 | ) | (459,820 | ) | 36,476 | |||||||||||||||||||
| 6-Month EUR-LIBOR |
CME | 0.750% | 09/16/25 | EUR 1,950,000 | (31,965 | ) | (23,648 | ) | (8,317 | ) | ||||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 2.000% | 09/16/25 | GBP 950,000 | (37,268 | ) | (42,728 | ) | 5,460 | |||||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 2.000% | 09/16/45 | 560,000 | (6,091 | ) | (1,865 | ) | (4,226 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (847,559 | ) | (708,860 | ) | (138,699 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| ($847,936 | ) | ($708,914 | ) | ($139,022 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| ($794,329 | ) | ($711,474 | ) | ($82,855 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
Volatility Swaps – Pay Volatility
| Referenced Entity |
Volatility Exercise Rate |
Expiration Date |
Counterparty | Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| EUR versus CAD 1-Month Implied Volatility |
10.600% | 04/21/15 | BOA | EUR 220 | $15 | $— | $15 | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total Swap Agreements |
|
($823,920 | ) | ($758,607 | ) | ($65,313 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-11
PACIFIC FUNDS **
PF INFLATION MANAGED FUND **
Schedule of Investments (Continued)
March 31, 2015
| (n) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| |
Total Value at March 31, 2015 |
|
|
Level 1 Quoted Price |
|
|
Level 2 Significant Observable Inputs |
|
|
Level 3 Significant Unobservable Inputs |
| |||||||
| Assets |
Corporate Bonds & Notes |
$1,354,822 | $— | $1,354,822 | $— | |||||||||||||
| Mortgage-Backed Securities |
2,739,217 | — | 2,739,217 | — | ||||||||||||||
| Asset-Backed Securities |
2,921,895 | — | 2,921,895 | — | ||||||||||||||
| U.S. Treasury Obligations |
135,997,929 | — | 135,997,929 | — | ||||||||||||||
| Foreign Government Bonds & Notes |
12,490,634 | — | 12,490,634 | — | ||||||||||||||
| Short-Term Investments |
912,169 | 398,103 | 514,066 | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Credit Contracts |
||||||||||||||||||
| Swaps |
10,644 | — | 10,644 | — | ||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
1,168,709 | — | 1,168,709 | — | ||||||||||||||
| Swaps |
15 | — | 15 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Foreign Currency Contracts |
1,168,724 | — | 1,168,724 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Futures |
113,337 | 113,337 | — | — | ||||||||||||||
| Purchased Options |
104,504 | — | 104,504 | — | ||||||||||||||
| Swaps |
57,043 | — | 57,043 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Interest Rate Contracts |
274,884 | 113,337 | 161,547 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets - Derivatives |
1,454,252 | 113,337 | 1,340,915 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
157,870,918 | 511,440 | 157,359,478 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Credit Contracts |
||||||||||||||||||
| Written Options |
(1 | ) | — | (1 | ) | — | ||||||||||||
| Swaps |
(40,250 | ) | — | (40,250 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Credit Contracts |
(40,251 | ) | — | (40,251 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
(356,246 | ) | — | (356,246 | ) | — | ||||||||||||
| Written Options |
(48,892 | ) | — | (48,892 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Foreign Currency Contracts |
(405,138 | ) | — | (405,138 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Futures |
(232,948 | ) | (232,948 | ) | — | — | ||||||||||||
| Written Options |
(160,895 | ) | — | (160,895 | ) | — | ||||||||||||
| Swaps |
(851,372 | ) | — | (851,372 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Interest Rate Contracts |
(1,245,215 | ) | (232,948 | ) | (1,012,267 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities - Derivatives |
(1,690,604 | ) | (232,948 | ) | (1,457,656 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(1,690,604 | ) | (232,948 | ) | (1,457,656 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$156,180,314 | $278,492 | $155,901,822 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of March 31, 2015, such liabilities are categorized within the three-tier hierarchy of inputs as follows:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Liabilities |
Reverse Repurchase Agreement |
($2,983,375 | ) | $— | ($2,983,375 | ) | $— | |||||||||||
| Sale-buyback Financing Transactions |
(28,166,940 | ) | — | (28,166,940 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
($31,150,315 | ) | $— | ($31,150,315 | ) | $— | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-12
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-13
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-14
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-15
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-16
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-17
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-18
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-19
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| (e) | A reverse repurchase agreement outstanding as of March 31, 2015 was as follows: |
| Counter- party |
Collateral Pledged | Interest Rate |
Trade Date |
Maturity Date |
Repurchase Amount |
Principal Amount |
Value | |||||||||||||||||||
| TDB | U.S. Treasury Bonds 6.250% due 05/15/30 |
0.300% | 03/30/15 | 04/06/15 | ($617,536 | ) | $617,500 | ($617,500 | ) | |||||||||||||||||
|
|
|
|||||||||||||||||||||||||
| (f) | Open futures contracts outstanding as of March 31, 2015 were as follows: |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-20
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| (g) | The average amount of borrowings by the fund on reverse repurchase agreements outstanding during the year ended March 31, 2015 was $764,438 at a weighted average interest rate of 0.279%. The average amount of borrowings by the fund on sale-buyback financing transactions (See Note 4 in Notes to Financial Statements) outstanding during the year ended March 31, 2015 was $2,144,491 at a weighted average interest rate of 0.100%. |
| (h) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| AUD | 1,105,000 | USD | 838,908 | 04/15 | CIT | $2,612 | ||||||||||||||
| BRL | 6,331,390 | USD | 2,155,000 | 04/15 | HSB | (172,254 | ) | |||||||||||||
| EUR | 2,307,692 | USD | 2,621,266 | 05/15 | BOA | (138,465 | ) | |||||||||||||
| EUR | 118,000 | USD | 134,323 | 05/15 | CIT | (7,359 | ) | |||||||||||||
| EUR | 1,102,000 | USD | 1,250,730 | 05/15 | GSC | (65,017 | ) | |||||||||||||
| EUR | 200,000 | USD | 224,755 | 05/15 | HSB | (9,562 | ) | |||||||||||||
| EUR | 381,000 | USD | 409,457 | 05/15 | HSB | 486 | ||||||||||||||
| EUR | 178,000 | USD | 198,898 | 05/15 | UBS | (7,377 | ) | |||||||||||||
| GBP | 693,000 | USD | 1,028,684 | 05/15 | UBS | — | ||||||||||||||
| INR | 45,300,000 | USD | 715,976 | 04/15 | BOA | 5,363 | ||||||||||||||
| INR | 25,600,000 | USD | 404,347 | 04/15 | BRC | 3,297 | ||||||||||||||
| INR | 164,800,000 | USD | 2,604,276 | 04/15 | CIT | 19,931 | ||||||||||||||
| INR | 41,591,760 | USD | 663,345 | 04/15 | UBS | (623 | ) | |||||||||||||
| INR | 64,630,360 | USD | 1,022,147 | 06/15 | GSC | (8,588 | ) | |||||||||||||
| JPY | 1,203,093,434 | USD | 10,081,648 | 04/15 | CIT | (50,115 | ) | |||||||||||||
| JPY | 45,800,000 | USD | 383,685 | 04/15 | GSC | (1,799 | ) | |||||||||||||
| JPY | 199,200,000 | USD | 1,661,279 | 04/15 | UBS | (326 | ) | |||||||||||||
| JPY | 62,100,000 | USD | 513,050 | 04/15 | UBS | 4,747 | ||||||||||||||
| JPY | 65,800,000 | USD | 549,157 | 05/15 | UBS | (214 | ) | |||||||||||||
| MXN | 10,052,321 | USD | 671,094 | 04/15 | GSC | (12,077 | ) | |||||||||||||
| MXN | 2,652,696 | USD | 180,259 | 04/15 | JPM | (6,612 | ) | |||||||||||||
| MXN | 1,781,000 | USD | 119,064 | 05/15 | BRC | (2,584 | ) | |||||||||||||
| MXN | 1,622,000 | USD | 108,297 | 05/15 | CIT | (2,216 | ) | |||||||||||||
| MXN | 3,582,000 | USD | 233,056 | 05/15 | CIT | 1,211 | ||||||||||||||
| MXN | 437,108 | USD | 28,000 | 05/15 | HSB | 587 | ||||||||||||||
| MXN | 8,082,000 | USD | 550,714 | 05/15 | UBS | (22,141 | ) | |||||||||||||
| USD | 1,017,090 | AUD | 1,308,000 | 04/15 | CIT | 20,913 | ||||||||||||||
| USD | 901,000 | BRL | 2,821,084 | 04/15 | DUB | 17,545 | ||||||||||||||
| USD | 1,153,000 | BRL | 3,547,690 | 04/15 | JPM | 42,001 | ||||||||||||||
| USD | 782,186 | CAD | 978,000 | 04/15 | CIT | 10,029 | ||||||||||||||
| USD | 454,630 | EUR | 420,000 | 05/15 | BOA | 2,761 | ||||||||||||||
| USD | 1,532,700 | EUR | 1,410,000 | 05/15 | BRC | 15,589 | ||||||||||||||
| USD | 3,009,126 | EUR | 2,823,000 | 05/15 | CIT | (28,325 | ) | |||||||||||||
| USD | 2,501,440 | EUR | 2,301,000 | 05/15 | CIT | 25,644 | ||||||||||||||
| USD | 340,423 | EUR | 322,000 | 05/15 | GSC | (6,038 | ) | |||||||||||||
| USD | 19,871,630 | EUR | 17,367,876 | 05/15 | GSC | 1,184,402 | ||||||||||||||
| USD | 558,162 | EUR | 510,000 | 05/15 | JPM | 9,420 | ||||||||||||||
| USD | 897,009 | EUR | 842,000 | 05/15 | UBS | (8,954 | ) | |||||||||||||
| USD | 133,793 | EUR | 100,000 | 08/15 | DUB | 26,060 | ||||||||||||||
| USD | 1,386,744 | GBP | 901,000 | 04/15 | HSB | 50,225 | ||||||||||||||
| USD | 652,932 | INR | 41,591,760 | 04/15 | JPM | (9,791 | ) | |||||||||||||
| USD | 654,319 | INR | 41,591,760 | 06/15 | UBS | 2,060 | ||||||||||||||
| USD | 12,543,552 | JPY | 1,498,893,434 | 04/15 | DUB | 45,605 | ||||||||||||||
| USD | 93,703 | JPY | 11,300,000 | 04/15 | JPM | (517 | ) | |||||||||||||
| USD | 10,085,990 | JPY | 1,203,093,434 | 05/15 | CIT | 49,076 | ||||||||||||||
| USD | 1,000,000 | JPY | 101,968,500 | 08/15 | HSB | 148,123 | ||||||||||||||
| USD | 2,286,559 | MXN | 35,234,929 | 04/15 | BRC | (20,881 | ) | |||||||||||||
| USD | 347,000 | MXN | 5,246,640 | 04/15 | GSC | 3,060 | ||||||||||||||
| USD | 311,000 | MXN | 4,805,681 | 04/15 | JPM | (4,033 | ) | |||||||||||||
| USD | 248,332 | MXN | 3,870,000 | 05/15 | BRC | (4,771 | ) | |||||||||||||
| USD | 419,327 | MXN | 6,338,096 | 05/15 | CIT | 4,808 | ||||||||||||||
| USD | 669,664 | MXN | 10,052,321 | 05/15 | GSC | 12,230 | ||||||||||||||
| USD | 218,208 | MXN | 3,248,000 | 05/15 | HSB | 5,785 | ||||||||||||||
| USD | 214,550 | MXN | 3,244,000 | 05/15 | UBS | 2,389 | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total Forward Foreign Currency Contracts |
|
$1,125,320 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-21
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| (i) | Purchased options outstanding as of March 31, 2015 were as follows: |
Interest Rate Swaptions
| Description | Pay/Receive Floating Rate |
Floating Rate Index |
Exercise Rate |
Expiration Date |
Counter- party |
Notional Amount |
Cost | Value | ||||||||||||||||||
| Call - 3-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 1.150% | 07/20/15 | GSC | $2,700,000 | $12,555 | $8,200 | ||||||||||||||||||
| Call - 10-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 1.750% | 07/30/15 | CIT | 700,000 | 9,800 | 4,464 | ||||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 0.800% | 01/19/16 | MSC | 8,000,000 | 13,330 | 9,523 | ||||||||||||||||||
| Call - 2-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 1.100% | 01/19/16 | GSC | 2,700,000 | 11,340 | 8,451 | ||||||||||||||||||
| Call - 5-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 1.500% | 01/29/16 | MSC | 1,300,000 | 11,700 | 9,883 | ||||||||||||||||||
| Call - 10-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 1.750% | 01/29/16 | MSC | 1,300,000 | 20,150 | 15,434 | ||||||||||||||||||
| Call - 2-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 2.100% | 01/30/18 | JPM | 2,700,000 | 38,340 | 31,140 | ||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| 117,215 | 87,095 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Put - 2-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 3.205% | 01/16/20 | GSC | 1,300,000 | 19,273 | 13,245 | ||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| $136,488 | $100,340 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
Options on Futures
| Description | Exercise Price |
Expiration Date |
Exchange | Number of Contracts |
Cost | Value | ||||||||||||||||
| Call - EUR FX (04/15) |
$1.12 | 04/02/15 | CME | 6 | $7,170 | $38 | ||||||||||||||||
| Call - EUR FX (04/15) |
1.13 | 04/02/15 | CME | 4 | 5,013 | 25 | ||||||||||||||||
| Call - Euro-Bund (05/15) |
EUR 160.00 | 05/22/15 | CME | 14 | 8,911 | 5,871 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| 21,094 | 5,934 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Put - U.S. Treasury 10-Year Notes (04/15) |
$128.00 | 04/24/15 | CME | 13 | 7,339 | 4,469 | ||||||||||||||||
| Put - Euro-Bund (05/15) |
EUR 157.00 | 05/22/15 | CME | 9 | 4,086 | 3,677 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| 11,425 | 8,146 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| $32,519 | $14,080 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
Options on Securities
| Description | Exercise Price |
Expiration Date |
Counter- party |
Notional Amount |
Cost | Value | ||||||||||||||||
| Put - Fannie Mae 4.500% due 06/11/45 |
$84.00 | 06/04/15 | JPM | $3,000,000 | $117 | $— | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Total Purchased Options |
$169,124 | $114,420 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| (j) | Transactions in written options for the year ended March 31, 2015 were as follows: |
| Number of Contracts |
Notional Amount in AUD |
Notional Amount in EUR |
Notional Amount in $ |
Premium | ||||||||||||||||
| Outstanding, March 31, 2014 |
— | — | — | 113,600,000 | $729,142 | |||||||||||||||
| Call Options Written |
957 | 300,000 | 12,700,000 | 99,700,000 | 1,745,557 | |||||||||||||||
| Put Options Written |
624 | 400,000 | 9,700,000 | 93,600,000 | 1,740,795 | |||||||||||||||
| Call Options Closed |
(45 | ) | — | — | (10,000,000 | ) | (247,128 | ) | ||||||||||||
| Put Options Closed |
(39 | ) | — | — | (37,500,000 | ) | (394,766 | ) | ||||||||||||
| Call Options Expired |
(766 | ) | (300,000 | ) | (12,700,000 | ) | (108,300,000 | ) | (1,449,673 | ) | ||||||||||
| Put Options Expired |
(341 | ) | (400,000 | ) | (9,700,000 | ) | (91,700,000 | ) | (1,586,953 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Outstanding, March 31, 2015 |
390 | — | — | 59,400,000 | $536,974 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (k) | Premiums received and value of written options outstanding as of March 31, 2015 were as follows: |
Foreign Currency Options
| Description | Exercise Price |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | ||||||||||||||||
| Call - INR versus USD |
INR 65.90 | 05/12/15 | JPM | $1,600,000 | $13,120 | ($1,180 | ) | |||||||||||||||
| Call - INR versus USD |
65.00 | 06/05/15 | JPM | 300,000 | 1,515 | (1,041 | ) | |||||||||||||||
| Call - INR versus USD |
65.00 | 07/15/15 | JPM | 300,000 | 2,616 | (2,423 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| 17,251 | (4,644 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Put - BRL versus USD |
BRL 3.04 | 04/23/15 | DUB | 300,000 | 2,730 | (1,496 | ) | |||||||||||||||
| Put - JPY versus USD |
JPY 110.00 | 05/12/15 | UBS | 700,000 | 8,120 | (127 | ) | |||||||||||||||
| Put - JPY versus USD |
112.00 | 05/15/15 | CIT | 200,000 | 3,420 | (104 | ) | |||||||||||||||
| Put - JPY versus USD |
112.00 | 05/15/15 | JPM | 100,000 | 1,695 | (52 | ) | |||||||||||||||
| Put - BRL versus USD |
BRL 3.02 | 05/22/15 | DUB | 200,000 | 2,040 | (1,594 | ) | |||||||||||||||
| Put - JPY versus USD |
JPY 112.50 | 05/22/15 | DUB | 200,000 | 2,270 | (170 | ) | |||||||||||||||
| Put - INR versus USD |
INR 62.00 | 06/05/15 | JPM | 300,000 | 1,830 | (1,453 | ) | |||||||||||||||
| Put - JPY versus USD |
JPY 100.00 | 07/03/15 | UBS | 300,000 | 1,740 | (22 | ) | |||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-22
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| Description | Exercise Price |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | ||||||||||||||||
| Put - INR versus USD |
INR 61.50 | 07/15/15 | JPM | $300,000 | $1,584 | ($1,221 | ) | |||||||||||||||
| Put - JPY versus USD |
JPY 99.00 | 09/30/15 | CIT | 400,000 | 4,360 | (208 | ) | |||||||||||||||
| Put - JPY versus USD |
109.00 | 11/10/15 | JPM | 600,000 | 11,475 | (2,972 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| 41,264 | (9,419 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| $58,515 | ($14,063 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
Inflation Floor/Cap Options
| Description | Initial Index |
Floating Rate |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | |||||||||||||||||
| Floor - U.S. CPI Urban Consumers NSA |
0.00 | Maximum of ((1 + 0.00%)10 |
03/12/20 | CIT | $1,200,000 | $10,320 | ($676 | ) | ||||||||||||||||
| Floor - U.S. CPI Urban Consumers NSA |
0.00 | Maximum of ((1 + 0.00%)10 |
09/29/20 | CIT | 600,000 | 7,740 | (367 | ) | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| $18,060 | ($1,043 | ) | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
Interest Rate Swaptions
| Description | Pay/Receive Floating Rate |
Floating Rate Index |
Exercise Rate |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | ||||||||||||||||||
| Call - 3-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.850% | 07/20/15 | GSC | $2,700,000 | $4,590 | ($1,888 | ) | |||||||||||||||||
| Call - 3-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.000% | 07/20/15 | GSC | 2,700,000 | 8,100 | (4,273 | ) | |||||||||||||||||
| Call - 10-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.430% | 07/30/15 | CIT | 700,000 | 4,182 | (1,583 | ) | |||||||||||||||||
| Call - 10-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.590% | 07/30/15 | CIT | 700,000 | 6,510 | (2,692 | ) | |||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.500% | 01/19/16 | MSC | 5,300,000 | 3,180 | (1,810 | ) | |||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.520% | 01/19/16 | MSC | 2,700,000 | 1,620 | (1,020 | ) | |||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.650% | 01/19/16 | MSC | 5,300,000 | 5,830 | (3,612 | ) | |||||||||||||||||
| Call - 1-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.660% | 01/19/16 | MSC | 2,700,000 | 2,700 | (1,917 | ) | |||||||||||||||||
| Call - 2-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.700% | 01/19/16 | GSC | 2,700,000 | 4,050 | (2,290 | ) | |||||||||||||||||
| Call - 2-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 0.900% | 01/19/16 | GSC | 2,700,000 | 7,290 | (4,753 | ) | |||||||||||||||||
| Call - 5-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.100% | 01/29/16 | MSC | 1,300,000 | 4,940 | (3,839 | ) | |||||||||||||||||
| Call - 5-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.300% | 01/29/16 | MSC | 1,300,000 | 7,540 | (6,354 | ) | |||||||||||||||||
| Call - 10-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.330% | 01/29/16 | MSC | 1,300,000 | 8,255 | (5,984 | ) | |||||||||||||||||
| Call - 10-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.540% | 01/29/16 | MSC | 1,300,000 | 13,000 | (9,828 | ) | |||||||||||||||||
| Call - 2-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.100% | 01/30/18 | JPM | 2,700,000 | 14,040 | (10,645 | ) | |||||||||||||||||
| Call - 2-Year Interest Rate Swap |
Receive | 3-Month USD-LIBOR | 1.600% | 01/30/18 | JPM | 2,700,000 | 24,435 | (19,313 | ) | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| 120,262 | (81,801 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Put - 5-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 2.600% | 09/14/15 | MSC | 3,400,000 | 44,625 | (3,710 | ) | |||||||||||||||||
| Put - 5-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 2.520% | 09/18/15 | MSC | 8,300,000 | 72,625 | (12,657 | ) | |||||||||||||||||
| Put - 2-Year Interest Rate Swap |
Pay | 3-Month USD-LIBOR | 2.800% | 01/16/18 | GSC | 1,300,000 | 16,250 | (9,486 | ) | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| 133,500 | (25,853 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| $253,762 | ($107,654 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
Options on Futures
| Description | Exercise Price |
Expiration Date |
Exchange | Number of Contracts |
Premium | Value | ||||||||||||||||
| Call - U.S. Treasury 10-Year Notes (05/15) |
$128.00 | 04/24/15 | CME | 7 | $2,477 | ($8,750 | ) | |||||||||||||||
| Call - U.S. Treasury 10-Year Notes (05/15) |
129.00 | 04/24/15 | CME | 3 | 1,396 | (2,063 | ) | |||||||||||||||
| Call - U.S. Treasury 10-Year Notes (05/15) |
130.00 | 04/24/15 | CME | 11 | 3,652 | (3,609 | ) | |||||||||||||||
| Call - U.S. Treasury 30-Year Bonds (05/15) |
165.00 | 04/24/15 | CME | 3 | 3,600 | (4,594 | ) | |||||||||||||||
| Call - U.S. Treasury 30-Year Bonds (05/15) |
166.00 | 04/24/15 | CME | 10 | 14,655 | (11,719 | ) | |||||||||||||||
| Call - EUR FX (05/15) |
1.12 | 05/08/15 | CME | 2 | 2,494 | (850 | ) | |||||||||||||||
| Call - U.S. Treasury 10-Year Notes (06/15) |
129.00 | 05/22/15 | CME | 14 | 10,892 | (14,875 | ) | |||||||||||||||
| Call - U.S. Treasury 10-Year Notes (06/15) |
129.50 | 05/22/15 | CME | 14 | 9,798 | (11,813 | ) | |||||||||||||||
| Call - U.S. Treasury 10-Year Notes (06/15) |
130.00 | 05/22/15 | CME | 42 | 27,301 | (28,219 | ) | |||||||||||||||
| Call - Euro-Bund (06/15) |
160.00 | 05/22/15 | CME | 28 | 12,744 | (11,742 | ) | |||||||||||||||
| Call - Euro-Bund (06/15) |
161.00 | 05/22/15 | CME | 2 | 610 | (366 | ) | |||||||||||||||
| Call - U.S. Treasury 30-Year Bonds (06/15) |
170.00 | 05/22/15 | CME | 6 | 8,184 | (6,188 | ) | |||||||||||||||
| Call - EUR FX (06/15) |
1.14 | 06/05/15 | CME | 4 | 1,987 | (1,500 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| 99,790 | (106,288 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Put - U.S. Treasury 5-Year Notes (05/15) |
119.50 | 04/24/15 | CME | 17 | 3,390 | (2,922 | ) | |||||||||||||||
| Put - U.S. Treasury 10-Year Notes (05/15) |
127.00 | 04/24/15 | CME | 18 | 7,020 | (2,250 | ) | |||||||||||||||
| Put - U.S. Treasury 10-Year Notes (05/15) |
127.50 | 04/24/15 | CME | 46 | 13,366 | (10,062 | ) | |||||||||||||||
| Put - U.S. Treasury 30-Year Bonds (05/15) |
160.00 | 04/24/15 | CME | 12 | 10,555 | (7,500 | ) | |||||||||||||||
| Put - U.S. Treasury 30-Year Bonds (05/15) |
162.00 | 04/24/15 | CME | 6 | 5,512 | (7,219 | ) | |||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-23
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| Description | Exercise Price |
Expiration Date |
Exchange | Number of Contracts |
Premium | Value | ||||||||||||||||||
| Put - EUR FX (05/15) |
$1.05 | 05/08/15 | CME | 2 | $2,268 | ($2,200 | ) | |||||||||||||||||
| Put - EUR FX (05/15) |
1.06 | 05/08/15 | CME | 4 | 4,137 | (13,550 | ) | |||||||||||||||||
| Put - U.S. Treasury 10-Year Notes (06/15) |
127.00 | 05/22/15 | CME | 39 | 28,201 | (15,234 | ) | |||||||||||||||||
| Put - Euro-Bund (06/15) |
154.00 | 05/22/15 | CME | 28 | 5,616 | (2,107 | ) | |||||||||||||||||
| Put - Euro-Bund (06/15) |
155.00 | 05/22/15 | CME | 2 | 610 | (280 | ) | |||||||||||||||||
| Put - U.S. Treasury 30-Year Bonds (06/15) |
155.00 | 05/22/15 | CME | 6 | 3,918 | (2,437 | ) | |||||||||||||||||
| Put - Eurodollar Midcurve (06/15) |
98.50 | 06/12/15 | CME | 26 | 10,503 | (812 | ) | |||||||||||||||||
| Put - Eurodollar Midcurve (06/15) |
98.75 | 06/12/15 | CME | 38 | 11,751 | (4,513 | ) | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| 106,847 | (71,086 | ) | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| $206,637 | ($177,374 | ) | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total Written Options |
$536,974 | ($300,134 | ) | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| (l) | Swap agreements outstanding as of March 31, 2015 were as follows: |
Credit Default Swaps on Sovereign Issues – Buy Protection (1)
| Referenced Obligation |
Fixed Deal Pay Rate |
|
Expiration Date |
|
Counter- party |
Implied Credit Spread at 03/31/15 (3) |
|
Notional Amount (4) |
|
Value |
|
Upfront Premiums Paid (Received) |
|
|
Unrealized Appreciation (Depreciation) |
| ||||||||||
| Venezuela Government |
5.000% | 06/20/15 | BRC | 35.002% | $100,000 | $6,281 | $12,999 | ($6,718 | ) | |||||||||||||||||
| Venezuela Government |
5.000% | 06/20/15 | GSC | 35.002% | 200,000 | 12,562 | 23,100 | (10,538 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| $18,843 | $36,099 | ($17,256 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Credit Default Swaps on Corporate and Sovereign Issues – Sell Protection (2)
|
| |||||||||||||||||||||||||
| Referenced Obligation |
Fixed Deal Receive Rate |
|
Expiration Date |
|
Counter- party |
Implied Credit Spread at 03/31/15 (3) |
|
Notional Amount (4) |
|
Value |
|
Upfront Premiums Paid (Received) |
|
|
Unrealized Appreciation (Depreciation) |
| ||||||||||
| Brazilian Government |
1.000% | 06/20/15 | DUB | 1.024% | $1,000,000 | $280 | ($10,975 | ) | $11,255 | |||||||||||||||||
| United Kingdom Index-Linked Treasury Gilt |
1.000% | 06/20/15 | GSC | 0.043% | 1,100,000 | 2,734 | 10,164 | (7,430 | ) | |||||||||||||||||
| Brazilian Government |
1.000% | 06/20/15 | HSB | 1.024% | 1,000,000 | 280 | (10,975 | ) | 11,255 | |||||||||||||||||
| Brazilian Government |
1.000% | 09/20/15 | BRC | 1.024% | 1,000,000 | 211 | (7,735 | ) | 7,946 | |||||||||||||||||
| Mexico Government |
1.000% | 09/20/15 | BRC | 0.460% | 1,000,000 | 2,915 | (7,735 | ) | 10,650 | |||||||||||||||||
| Brazilian Government |
1.000% | 09/20/15 | HSB | 1.024% | 600,000 | 127 | (5,961 | ) | 6,088 | |||||||||||||||||
| Brazilian Government |
1.000% | 09/20/15 | UBS | 1.024% | 500,000 | 106 | (4,731 | ) | 4,837 | |||||||||||||||||
| General Electric Capital Corp |
1.000% | 12/20/15 | MSC | 0.224% | 500,000 | 2,998 | (9,796 | ) | 12,794 | |||||||||||||||||
| Brazilian Government |
1.000% | 03/20/16 | CIT | 1.195% | 2,200,000 | (3,459 | ) | (15,567 | ) | 12,108 | ||||||||||||||||
| Mexico Government |
1.000% | 03/20/16 | CIT | 0.535% | 1,100,000 | 5,364 | (8,978 | ) | 14,342 | |||||||||||||||||
| Mexico Government |
1.000% | 03/20/16 | DUB | 0.535% | 700,000 | 3,414 | (5,135 | ) | 8,549 | |||||||||||||||||
| General Electric Capital Corp |
1.000% | 06/20/16 | BRC | 0.285% | 1,800,000 | 16,448 | 26,736 | (10,288 | ) | |||||||||||||||||
| Brazilian Government |
1.000% | 06/20/16 | CIT | 1.296% | 700,000 | (2,309 | ) | (2,363 | ) | 54 | ||||||||||||||||
| Brazilian Government |
1.000% | 09/20/16 | GSC | 1.584% | 200,000 | (1,652 | ) | (1,217 | ) | (435 | ) | |||||||||||||||
| Mexico Government |
1.000% | 09/20/16 | JPM | 0.662% | 100,000 | 534 | 577 | (43 | ) | |||||||||||||||||
| Indonesia Government |
1.000% | 06/20/17 | DUB | 0.628% | 200,000 | 1,715 | (5,884 | ) | 7,599 | |||||||||||||||||
| Indonesia Government |
1.000% | 06/20/17 | UBS | 0.628% | 800,000 | 6,859 | (24,192 | ) | 31,051 | |||||||||||||||||
| MetLife Inc |
1.000% | 03/20/19 | BRC | 0.561% | 2,700,000 | 47,053 | 30,101 | 16,952 | ||||||||||||||||||
| Prudential Financial Inc |
1.000% | 03/20/19 | BRC | 0.570% | 3,100,000 | 52,931 | 49,794 | 3,137 | ||||||||||||||||||
| JPMorgan Chase & Co |
1.000% | 03/20/19 | DUB | 0.486% | 2,300,000 | 46,802 | 42,061 | 4,741 | ||||||||||||||||||
| American International Group Inc |
1.000% | 03/20/19 | GSC | 0.433% | 2,100,000 | 47,097 | 31,661 | 15,436 | ||||||||||||||||||
| Colombia Government |
1.000% | 03/20/19 | GSC | 1.343% | 1,800,000 | (23,024 | ) | (16,452 | ) | (6,572 | ) | |||||||||||||||
| Colombia Government |
1.000% | 03/20/19 | HSB | 1.343% | 7,700,000 | (98,493 | ) | (63,012 | ) | (35,481 | ) | |||||||||||||||
| General Electric Capital Corp |
1.000% | 03/20/19 | JPM | 0.466% | 1,800,000 | 37,972 | 28,913 | 9,059 | ||||||||||||||||||
| AT&T Inc |
1.000% | 03/20/19 | MSC | 0.433% | 2,800,000 | 62,894 | 43,594 | 19,300 | ||||||||||||||||||
| Petrobras International Co SA |
1.000% | 12/20/19 | BRC | 6.138% | 100,000 | (19,731 | ) | (10,916 | ) | (8,815 | ) | |||||||||||||||
| Petrobras International Co SA |
1.000% | 12/20/19 | GSC | 6.138% | 300,000 | (59,194 | ) | (32,995 | ) | (26,199 | ) | |||||||||||||||
| Petrobras International Co SA |
1.000% | 12/20/19 | JPM | 6.138% | 200,000 | (39,463 | ) | (22,568 | ) | (16,895 | ) | |||||||||||||||
| Telstra Corp Ltd |
1.000% | 06/20/21 | DUB | 0.621% | 1,400,000 | 31,947 | 19,630 | 12,317 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| $123,356 | $16,044 | $107,312 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-24
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
Credit Default Swaps on Credit Indices – Sell Protection (2)
| Referenced Obligation |
Fixed Deal Receive Rate |
|
Expiration Date |
|
Counter- party |
|
Notional Amount (4) |
|
Value (5) |
|
Upfront Premiums Paid (Received) |
|
|
Unrealized Appreciation (Depreciation) |
| |||||||||||
| CDX EM 13 5Y |
5.000% | 06/20/15 | BRC | $1,598,000 | ($6,838 | ) | $93,483 | ($100,321 | ) | |||||||||||||||||
| CDX EM 13 5Y |
5.000% | 06/20/15 | DUB | 658,000 | (2,816 | ) | 86,040 | (88,856 | ) | |||||||||||||||||
| CDX EM 13 5Y |
5.000% | 06/20/15 | HSB | 1,128,000 | (4,827 | ) | 127,126 | (131,953 | ) | |||||||||||||||||
| CDX EM 13 5Y |
5.000% | 06/20/15 | MSC | 658,000 | (2,816 | ) | 74,025 | (76,841 | ) | |||||||||||||||||
| CDX IG 9 10Y |
0.548% | 12/20/17 | GSC | 96,450 | 1,245 | 0.00 | 1,245 | |||||||||||||||||||
| ABX HE AAA |
0.110% | 05/25/46 | BRC | 2,421,520 | (478,321 | ) | (493,793 | ) | 15,472 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| (494,373 | ) | (113,119 | ) | (381,254 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Exchange | ||||||||||||||||||||||||||
| CDX IG 22 5Y |
1.000% | 06/20/19 | CME | 2,710,000 | 50,534 | 40,171 | 10,363 | |||||||||||||||||||
| CDX HY 22 5Y |
5.000% | 06/20/19 | CME | 9,700 | 857 | 587 | 270 | |||||||||||||||||||
| CDX IG 23 5Y |
1.000% | 12/20/19 | CME | 1,710,000 | 29,179 | 23,233 | 5,946 | |||||||||||||||||||
| CDX HY 23 5Y |
5.000% | 12/20/19 | CME | 3,792,600 | 316,592 | 255,960 | 60,632 | |||||||||||||||||||
| iTraxx MAIN 23 5Y |
1.000% | 06/20/20 | ICE | EUR 1,400,000 | (34,031 | ) | (34,317 | ) | 286 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 363,131 | 285,634 | 77,497 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| ($131,242 | ) | $172,515 | ($303,757 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| $10,957 | $224,658 | ($213,701 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| (1) | If the fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying investments comprising the referenced index or (ii) receive a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index. |
| (2) | 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 investments comprising the referenced index or (ii) pay a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index. |
| (3) | An implied credit spread is the spread in yield between a U.S. Treasury security and the referenced obligation or underlying investment that are identical in all respects except for the quality rating. Implied credit spreads, represented in absolute terms, utilized in determining the value of credit default swap agreements on corporate and sovereign issues of an emerging country as of year end serve as an indicator of the current status of the payment/performance risk and represent the likelihood of 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, in comparison to narrower credit spreads, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation. |
| (4) | The maximum potential amount the fund could be required to pay 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. |
| (5) | The quoted market prices and resulting values for credit default swap agreements on credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of year end. Increasing 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 of risk of default or other credit event occurring as defined under the terms of the agreement. |
Interest Rate Swaps – Pay Floating Rate
| Floating Rate Index |
Counter- party |
Fixed Rate |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
| 28-Day MXN TIIE |
DUB | 5.700% | 01/18/19 | MXN 10,000,000 | $2,284 | ($4,168 | ) | $6,452 | ||||||||||||||||||
| 28-Day MXN TIIE |
JPM | 5.700% | 01/18/19 | 3,000,000 | 685 | (1,022 | ) | 1,707 | ||||||||||||||||||
| 28-Day MXN TIIE |
CIT | 6.915% | 09/10/29 | 18,600,000 | 60,200 | 24,406 | 35,794 | |||||||||||||||||||
| 28-Day MXN TIIE |
DUB | 6.810% | 06/19/34 | 7,000,000 | 4,948 | 6,791 | (1,843 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 68,117 | 26,007 | 42,110 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Exchange |
||||||||||||||||||||||||||
| 28-Day MXN TIIE |
CME | 5.700% | 01/18/19 | 3,000,000 | 2,891 | 7,181 | (4,290 | ) | ||||||||||||||||||
| 28-Day MXN TIIE |
CME | 5.270% | 02/05/20 | 8,000,000 | 491 | — | 491 | |||||||||||||||||||
| 28-Day MXN TIIE |
CME | 5.840% | 09/14/21 | 2,400,000 | 2,104 | (3,045 | ) | 5,149 | ||||||||||||||||||
| 28-Day MXN TIIE |
CME | 5.430% | 11/17/21 | 117,900,000 | (98,599 | ) | 12,767 | (111,366 | ) | |||||||||||||||||
| 28-Day MXN TIIE |
CME | 6.000% | 09/02/22 | 25,800,000 | 18,010 | (82,100 | ) | 100,110 | ||||||||||||||||||
| 28-Day MXN TIIE |
CME | 5.980% | 08/26/24 | 7,900,000 | 254 | (9,209 | ) | 9,463 | ||||||||||||||||||
| 28-Day MXN TIIE |
CME | 6.710% | 09/20/29 | 20,100,000 | 54,999 | 17,070 | 37,929 | |||||||||||||||||||
| 28-Day MXN TIIE |
CME | 5.990% | 01/08/30 | 2,900,000 | 7,015 | (5,875 | ) | 12,890 | ||||||||||||||||||
| 28-Day MXN TIIE |
CME | 6.620% | 02/18/30 | 8,900,000 | 18,541 | 298 | 18,243 | |||||||||||||||||||
| 28-Day MXN TIIE |
CME | 6.810% | 06/19/34 | 6,200,000 | 13,578 | 4,626 | 8,952 | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 19,284 | (58,287 | ) | 77,571 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| $87,401 | ($32,280 | ) | $119,681 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-25
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
Interest Rate Swaps – Receive Floating Rate
| Floating Rate Index |
Exchange | Fixed Rate |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
| 3-Month USD-LIBOR |
CME | 0.665% | 04/17/16 | $29,500,000 | ($52,866 | ) | $3,461 | ($56,327 | ) | |||||||||||||||||
| 3-Month USD-LIBOR |
CME | 0.750% | 06/17/16 | 13,500,000 | (22,396 | ) | (14,599 | ) | (7,797 | ) | ||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 1.500% | 09/18/16 | GBP 200,000 | (3,229 | ) | (3,095 | ) | (134 | ) | ||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 1.590% | 10/05/16 | 5,700,000 | (27,518 | ) | 114 | (27,632 | ) | |||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 1.510% | 10/07/16 | 1,300,000 | (12,898 | ) | (11,975 | ) | (923 | ) | ||||||||||||||||
| 3-Month USD-LIBOR |
CME | 1.050% | 10/19/16 | $15,400,000 | (34,341 | ) | (2,618 | ) | (31,723 | ) | ||||||||||||||||
| 3-Month USD-LIBOR |
CME | 1.000% | 04/17/17 | 33,200,000 | (111,400 | ) | 93,869 | (205,269 | ) | |||||||||||||||||
| 3-Month USD-LIBOR |
CME | 1.250% | 06/17/17 | 7,500,000 | (46,592 | ) | (34,050 | ) | (12,542 | ) | ||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 1.500% | 09/16/17 | GBP 5,600,000 | (79,584 | ) | (63,445 | ) | (16,139 | ) | ||||||||||||||||
| 6-Month GBP-LIBOR |
CME | 1.880% | 10/05/17 | 2,600,000 | (64,511 | ) | (163,969 | ) | 99,458 | |||||||||||||||||
| 3-Month USD-LIBOR |
CME | 1.750% | 03/19/20 | $13,400,000 | (150,938 | ) | (116,530 | ) | (34,408 | ) | ||||||||||||||||
| 3-Month USD-LIBOR |
CME | 2.000% | 06/15/22 | 5,000,000 | 45,741 | 33,863 | 11,878 | |||||||||||||||||||
| 3-Month USD-LIBOR |
CME | 2.550% | 09/04/24 | 200,000 | (9,718 | ) | (394 | ) | (9,324 | ) | ||||||||||||||||
| 6-Month EUR-LIBOR |
CME | 1.200% | 01/22/25 | EUR 500,000 | (35,522 | ) | — | (35,522 | ) | |||||||||||||||||
| 6-Month EUR-LIBOR |
CME | 0.950% | 03/25/25 | 800,000 | (34,113 | ) | — | (34,113 | ) | |||||||||||||||||
| 3-Month USD-LIBOR |
CME | 2.110% | 05/15/30 | $18,327,000 | 307,607 | — | 307,607 | |||||||||||||||||||
| 3-Month USD-LIBOR |
CME | 3.000% | 06/19/43 | 16,500,000 | (2,305,807 | ) | 906,848 | (3,212,655 | ) | |||||||||||||||||
| 3-Month USD-LIBOR |
CME | 2.800% | 12/18/43 | 4,900,000 | (475,054 | ) | (503,742 | ) | 28,688 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| (3,113,139 | ) | 123,738 | (3,236,877 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| ($3,025,738 | ) | $91,458 | ($3,117,196 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Swap Agreements |
($3,014,781 | ) | $316,116 | ($3,330,897 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-26
PACIFIC FUNDS **
PF MANAGED BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| (m) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant |
Level 3 Significant |
|||||||||||||||
| Assets |
Corporate Bonds & Notes |
$171,655,846 | $— | $171,655,846 | $— | |||||||||||||
| Senior Loan Notes |
1,638,778 | — | 1,638,778 | — | ||||||||||||||
| Mortgage-Backed Securities |
213,168,040 | — | 210,301,239 | 2,866,801 | ||||||||||||||
| Asset-Backed Securities |
52,761,184 | — | 52,315,610 | 445,574 | ||||||||||||||
| U.S. Government Agency Issues |
6,783,085 | — | 6,783,085 | — | ||||||||||||||
| U.S. Treasury Obligations |
173,723,444 | — | 173,723,444 | — | ||||||||||||||
| Foreign Government Bonds & Notes |
28,042,359 | — | 28,042,359 | — | ||||||||||||||
| Municipal Bonds |
13,292,168 | — | 13,292,168 | — | ||||||||||||||
| Short-Term Investments |
55,970,442 | 46,309,416 | 9,661,026 | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Credit Contracts |
||||||||||||||||||
| Swaps |
787,931 | — | 787,931 | — | ||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Futures |
218,975 | 218,975 | — | — | ||||||||||||||
| Forward Foreign Currency Contracts |
1,715,959 | — | 1,715,959 | — | ||||||||||||||
| Purchased options |
63 | — | 63 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Foreign Currency Contracts |
1,934,997 | 218,975 | 1,716,022 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Futures |
1,371,493 | 1,371,493 | — | — | ||||||||||||||
| Purchased Options |
114,357 | 14,017 | 100,340 | — | ||||||||||||||
| Swaps |
539,348 | — | 539,348 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Interest Rate Contracts |
2,025,198 | 1,385,510 | 639,688 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets - Derivatives |
4,748,126 | 1,604,485 | 3,143,641 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
721,783,472 | 47,913,901 | 670,557,196 | 3,312,375 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Credit Contracts |
||||||||||||||||||
| Swaps |
(776,974 | ) | — | (776,974 | ) | — | ||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Futures |
(447 | ) | (447 | ) | — | — | ||||||||||||
| Forward Foreign Currency Contracts |
(590,639 | ) | — | (590,639 | ) | — | ||||||||||||
| Written Options |
(32,163 | ) | (18,100 | ) | (14,063 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Foreign Currency Contracts |
(623,249 | ) | (18,547 | ) | (604,702 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Futures |
(778,917 | ) | (778,917 | ) | — | — | ||||||||||||
| Written Options |
(267,971 | ) | (159,274 | ) | (108,697 | ) | — | |||||||||||
| Swaps |
(3,565,086 | ) | — | (3,565,086 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Interest Rate Contracts |
(4,611,974 | ) | (938,191 | ) | (3,673,783 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities - Derivatives |
(6,012,197 | ) | (956,738 | ) | (5,055,459 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(6,012,197 | ) | (956,738 | ) | (5,055,459 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$715,771,275 | $46,957,163 | $665,501,737 | $3,312,375 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of March 31, 2015, such liabilities are categorized within the three-tier hierarchy of inputs as follows:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant |
Level 3 Significant |
|||||||||||||||
| Liabilities |
Reverse Repurchase Agreement |
($617,500 | ) | $— | ($617,500 | ) | $— | |||||||||||
| Sale-buyback Financing Transactions |
(6,093,639 | ) | — | (6,093,639 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
($6,711,139 | ) | $— | ($6,711,139 | ) | $— | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-27
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-28
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-29
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-30
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-31
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-32
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-33
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| (e) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| USD | 493,767 | MXN | 7,680,000 | 05/15 | BRC | ($8,478 | ) | |||||||||||||
| USD | 1,314,714 | MXN | 19,630,000 | 05/15 | BRC | 30,981 | ||||||||||||||
| USD | 495,957 | MXN | 7,465,000 | 05/15 | JPM | 7,772 | ||||||||||||||
| USD | 541,520 | MXN | 8,295,000 | 05/15 | RBS | (944 | ) | |||||||||||||
|
|
|
|||||||||||||||||||
| Total Forward Foreign Currency Contracts |
|
$29,331 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-34
PACIFIC FUNDS **
PF SHORT DURATION BOND FUND **
Schedule of Investments (Continued)
March 31, 2015
| (f) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Corporate Bonds & Notes |
$100,268,270 | $— | $100,268,270 | $— | |||||||||||||
| Mortgage-Backed Securities |
46,006,201 | — | 46,006,201 | — | ||||||||||||||
| Asset-Backed Securities |
39,853,120 | — | 39,853,120 | — | ||||||||||||||
| U.S. Government Agency Issues |
1,045,288 | — | 1,045,288 | — | ||||||||||||||
| U.S. Treasury Obligations |
16,015,481 | — | 16,015,481 | — | ||||||||||||||
| Foreign Government Bonds & Notes |
3,798,687 | — | 3,798,687 | — | ||||||||||||||
| Municipal Bonds |
774,303 | — | 774,303 | — | ||||||||||||||
| Short-Term Investments |
6,429,802 | 5,379,802 | 1,050,000 | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
38,753 | — | 38,753 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets - Derivatives |
38,753 | — | 38,753 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
214,229,905 | 5,379,802 | 208,850,103 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
(9,422 | ) | — | (9,422 | ) | — | ||||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Futures |
(8,581 | ) | (8,581 | ) | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities - Derivatives |
(18,003 | ) | (8,581 | ) | (9,422 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(18,003 | ) | (8,581 | ) | (9,422 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$214,211,902 | $5,371,221 | $208,840,681 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-35
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-36
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-37
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-38
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-39
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-40
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-41
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| (e) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Currency Purchased |
Currency Sold |
Expiration |
Counterparty |
Unrealized (Depreciation) |
||||||||||||||||
| BRL | 3,489,644 | USD | 1,131,701 | 04/15 | BNP | ($38,880 | ) | |||||||||||||
| BRL | 1,577,000 | USD | 489,397 | 04/15 | BNP | 4,458 | ||||||||||||||
| BRL | 2,667,000 | USD | 866,979 | 04/15 | CIT | (31,778 | ) | |||||||||||||
| BRL | 1,667,707 | USD | 523,449 | 04/15 | GSC | (1,187 | ) | |||||||||||||
| BRL | 650,351 | USD | 210,534 | 04/15 | HSB | (6,870 | ) | |||||||||||||
| BRL | 1,392,602 | USD | 438,201 | 04/15 | MSC | (2,092 | ) | |||||||||||||
| BRL | 1,674,951 | USD | 520,000 | 05/15 | HSB | (165 | ) | |||||||||||||
| CLP | 124,500,000 | USD | 200,000 | 04/15 | BNP | (1,150 | ) | |||||||||||||
| CLP | 999,350,720 | USD | 1,600,000 | 04/15 | CSF | (3,440 | ) | |||||||||||||
| CLP | 352,168,174 | USD | 559,441 | 04/15 | HSB | 3,038 | ||||||||||||||
| CLP | 404,532,050 | USD | 637,159 | 04/15 | MSC | 8,955 | ||||||||||||||
| CNH | 12,427,231 | USD | 1,950,616 | 03/17 | HSB | (73,549 | ) | |||||||||||||
| CNH | 5,705,178 | USD | 894,579 | 03/17 | SCB | (33,832 | ) | |||||||||||||
| CNY | 13,192,805 | USD | 2,130,449 | 04/15 | HSB | (10,561 | ) | |||||||||||||
| CNY | 5,857,436 | USD | 948,266 | 05/15 | HSB | (9,796 | ) | |||||||||||||
| COP | 578,577,783 | USD | 221,359 | 04/15 | CIT | 324 | ||||||||||||||
| COP | 4,199,003,200 | USD | 1,660,000 | 04/15 | DUB | (50,528 | ) | |||||||||||||
| COP | 622,960,000 | USD | 236,014 | 04/15 | GSC | 2,674 | ||||||||||||||
| COP | 36,217,092 | USD | 13,850 | 04/15 | HSB | 27 | ||||||||||||||
| COP | 1,283,121,000 | USD | 484,819 | 04/15 | JPM | 6,813 | ||||||||||||||
| COP | 912,529,827 | USD | 369,617 | 04/15 | SCB | (19,979 | ) | |||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-42
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| Currency Purchased |
Currency Sold |
Expiration |
Counterparty |
Unrealized (Depreciation) |
||||||||||||||||
| CZK | 30,713,404 | USD | 1,255,530 | 04/15 | BNP | ($56,976 | ) | |||||||||||||
| EUR | 2,674,004 | USD | 3,030,548 | 04/15 | CIT | (154,130 | ) | |||||||||||||
| EUR | 726,843 | USD | 776,441 | 04/15 | CIT | 5,422 | ||||||||||||||
| EUR | 1,065,223 | USD | 1,143,553 | 04/15 | DUB | 2,304 | ||||||||||||||
| EUR | 1,170,034 | USD | 1,331,334 | 04/15 | GSC | (72,733 | ) | |||||||||||||
| EUR | 1,455,722 | USD | 1,590,397 | 04/15 | HSB | (24,481 | ) | |||||||||||||
| EUR | 1,210,000 | USD | 1,377,464 | 04/15 | MER | (75,871 | ) | |||||||||||||
| EUR | 74,106 | USD | 78,775 | 04/15 | MSC | 926 | ||||||||||||||
| HUF | 362,224,051 | USD | 1,316,700 | 04/15 | BRC | (21,332 | ) | |||||||||||||
| HUF | 362,224,051 | USD | 1,282,050 | 04/15 | BRC | 13,318 | ||||||||||||||
| ILS | 1,992,618 | USD | 495,400 | 04/15 | DUB | 5,330 | ||||||||||||||
| INR | 9,998,400 | USD | 159,084 | 04/15 | GSC | (357 | ) | |||||||||||||
| INR | 89,155,498 | USD | 1,410,790 | 05/15 | CIT | (4,758 | ) | |||||||||||||
| INR | 35,559,869 | USD | 565,250 | 05/15 | MER | (4,451 | ) | |||||||||||||
| KRW | 4,209,535,262 | USD | 3,785,213 | 04/15 | BNP | 5,112 | ||||||||||||||
| KRW | 1,845,161,290 | USD | 1,670,000 | 04/15 | DUB | (8,591 | ) | |||||||||||||
| MXN | 35,763,652 | USD | 2,432,523 | 04/15 | BNP | (92,689 | ) | |||||||||||||
| MXN | 10,898,351 | USD | 700,580 | 04/15 | BNP | 12,443 | ||||||||||||||
| MXN | 15,960,071 | USD | 1,086,404 | 04/15 | CIT | (42,218 | ) | |||||||||||||
| MXN | 22,454,685 | USD | 1,500,000 | 04/15 | JPM | (30,904 | ) | |||||||||||||
| MXN | 14,907,705 | USD | 1,013,596 | 04/15 | MER | (38,261 | ) | |||||||||||||
| MXN | 15,570,521 | USD | 1,029,783 | 04/15 | MSC | (11,083 | ) | |||||||||||||
| MXN | 39,433,252 | USD | 2,680,984 | 04/15 | UBS | (101,067 | ) | |||||||||||||
| MYR | 9,378,066 | USD | 2,530,304 | 04/15 | DUB | (5,416 | ) | |||||||||||||
| PEN | 1,250,097 | USD | 408,929 | 04/15 | JPM | (7,550 | ) | |||||||||||||
| PEN | 989,581 | USD | 316,666 | 05/15 | CSF | (37 | ) | |||||||||||||
| PEN | 986,734 | USD | 316,667 | 05/15 | DUB | (949 | ) | |||||||||||||
| PEN | 981,668 | USD | 313,132 | 05/15 | SCB | 966 | ||||||||||||||
| PLN | 1,450,469 | USD | 390,000 | 04/15 | DUB | (7,652 | ) | |||||||||||||
| PLN | 9,230,443 | USD | 2,473,125 | 04/15 | UBS | (39,950 | ) | |||||||||||||
| PLN | 4,615,221 | USD | 1,214,692 | 06/15 | HSB | (483 | ) | |||||||||||||
| PLN | 4,615,221 | USD | 1,197,359 | 06/15 | JPM | 16,849 | ||||||||||||||
| RON | 4,600,700 | USD | 1,158,842 | 04/15 | ING | (38,725 | ) | |||||||||||||
| RON | 1,140,557 | USD | 285,897 | 04/15 | JPM | (8,209 | ) | |||||||||||||
| RUB | 14,034,110 | USD | 205,000 | 04/15 | BRC | 33,621 | ||||||||||||||
| RUB | 34,582,086 | USD | 540,000 | 04/15 | CIT | 45,381 | ||||||||||||||
| RUB | 35,666,655 | USD | 575,176 | 04/15 | HSB | 28,563 | ||||||||||||||
| RUB | 88,893,408 | USD | 1,538,481 | 04/15 | MSC | (33,757 | ) | |||||||||||||
| RUB | 24,313,590 | USD | 360,000 | 05/15 | CIT | 48,933 | ||||||||||||||
| RUB | 35,666,655 | USD | 568,529 | 05/15 | MSC | 29,019 | ||||||||||||||
| RUB | 59,038,714 | USD | 921,760 | 06/15 | MSC | 55,587 | ||||||||||||||
| SGD | 1,585,998 | USD | 1,164,548 | 04/15 | BRC | (9,718 | ) | |||||||||||||
| THB | 22,435,242 | USD | 684,314 | 04/15 | BNP | 4,147 | ||||||||||||||
| THB | 27,375,942 | USD | 835,345 | 04/15 | JPM | 4,729 | ||||||||||||||
| THB | 26,013,774 | USD | 793,587 | 04/15 | SCB | 4,688 | ||||||||||||||
| THB | 26,758,789 | USD | 817,312 | 05/15 | ANZ | 2,949 | ||||||||||||||
| THB | 8,124,049 | USD | 248,518 | 05/15 | DUB | 516 | ||||||||||||||
| TRY | 3,242,178 | USD | 1,256,123 | 04/15 | DUB | (19,502 | ) | |||||||||||||
| TRY | 1,606,761 | USD | 641,414 | 04/15 | HSB | (28,568 | ) | |||||||||||||
| TRY | 1,138,168 | USD | 426,564 | 04/15 | HSB | 7,553 | ||||||||||||||
| TWD | 14,521,726 | USD | 463,864 | 04/15 | BNP | 259 | ||||||||||||||
| TWD | 31,464,458 | USD | 1,004,655 | 04/15 | HSB | 969 | ||||||||||||||
| TWD | 30,520,429 | USD | 971,802 | 04/15 | MER | 3,649 | ||||||||||||||
| TWD | 62,442,308 | USD | 1,974,667 | 04/15 | SCB | 21,028 | ||||||||||||||
| USD | 1,445,425 | BRL | 4,441,713 | 04/15 | CSF | 54,453 | ||||||||||||||
| USD | 1,005,642 | BRL | 3,150,756 | 04/15 | GSC | 18,948 | ||||||||||||||
| USD | 500,000 | BRL | 1,568,800 | 04/15 | HSB | 8,713 | ||||||||||||||
| USD | 178,858 | BRL | 522,373 | 04/15 | MSC | 15,271 | ||||||||||||||
| USD | 610,737 | BRL | 1,760,663 | 04/15 | SCB | 59,366 | ||||||||||||||
| USD | 519,106 | BRL | 1,667,707 | 05/15 | GSC | 1,520 | ||||||||||||||
| USD | 88,936 | BRL | 286,151 | 05/15 | HSB | 127 | ||||||||||||||
| USD | 434,564 | BRL | 1,392,602 | 05/15 | MSC | 2,358 | ||||||||||||||
| USD | 80,000 | CLP | 50,800,000 | 04/15 | BNP | (1,137 | ) | |||||||||||||
| USD | 660,000 | CLP | 411,173,400 | 04/15 | CSF | 3,278 | ||||||||||||||
| USD | 280,000 | CLP | 175,084,000 | 04/15 | HSB | 358 | ||||||||||||||
| USD | 164,890 | CNH | 1,042,355 | 04/15 | HSB | (2,601 | ) | |||||||||||||
| USD | 1,963,192 | CNH | 12,427,231 | 03/17 | HSB | 86,124 | ||||||||||||||
| USD | 903,413 | CNH | 5,705,177 | 03/17 | SCB | 42,666 | ||||||||||||||
| USD | 700,000 | COP | 1,753,500,000 | 04/15 | CIT | 28,142 | ||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-43
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
| Currency Purchased |
Currency Sold |
Expiration |
Counterparty |
Unrealized (Depreciation) |
||||||||||||||||
| USD | 360,000 | COP | 951,300,000 | 04/15 | SCB | ($4,493 | ) | |||||||||||||
| USD | 761,132 | COP | 1,818,496,736 | 04/15 | SCB | 64,370 | ||||||||||||||
| USD | 240,000 | CZK | 5,796,000 | 04/15 | BNP | 13,818 | ||||||||||||||
| USD | 120,000 | CZK | 3,035,400 | 04/15 | HSB | 1,547 | ||||||||||||||
| USD | 1,168,493 | EUR | 1,102,414 | 04/15 | BRC | (17,155 | ) | |||||||||||||
| USD | 2,040,273 | EUR | 1,841,835 | 04/15 | DUB | 59,017 | ||||||||||||||
| USD | 5,251,391 | EUR | 4,660,033 | 04/15 | GSC | 238,609 | ||||||||||||||
| USD | 2,052,098 | EUR | 1,828,154 | 04/15 | HSB | 85,559 | ||||||||||||||
| USD | 660,769 | GBP | 441,874 | 04/15 | HSB | 5,374 | ||||||||||||||
| USD | 260,000 | HUF | 74,227,400 | 04/15 | JPM | (5,448 | ) | |||||||||||||
| USD | 270,000 | HUF | 73,115,460 | 04/15 | MSC | 8,528 | ||||||||||||||
| USD | 466,230 | IDR | 6,081,035,728 | 04/15 | DUB | 4,321 | ||||||||||||||
| USD | 70,000 | ILS | 281,668 | 04/15 | BRC | (781 | ) | |||||||||||||
| USD | 380,000 | KRW | 421,838,000 | 04/15 | BRC | 171 | ||||||||||||||
| USD | 410,000 | KRW | 461,906,000 | 04/15 | HSB | (5,907 | ) | |||||||||||||
| USD | 1,612,098 | KRW | 1,787,360,000 | 04/15 | SCB | 2,733 | ||||||||||||||
| USD | 135,029 | MXN | 2,011,411 | 04/15 | BNP | 3,433 | ||||||||||||||
| USD | 600,000 | MXN | 9,325,020 | 04/15 | CIT | (10,089 | ) | |||||||||||||
| USD | 915,192 | MXN | 13,762,468 | 04/15 | CIT | 14,783 | ||||||||||||||
| USD | 1,323,301 | MXN | 19,955,445 | 04/15 | DUB | 17,718 | ||||||||||||||
| USD | 280,440 | MXN | 4,121,260 | 04/15 | HSB | 10,807 | ||||||||||||||
| USD | 1,160,000 | MXN | 17,562,980 | 04/15 | JPM | 10,944 | ||||||||||||||
| USD | 276,699 | MXN | 4,141,859 | 04/15 | MER | 5,718 | ||||||||||||||
| USD | 195,476 | MXN | 2,959,500 | 04/15 | MSC | 1,851 | ||||||||||||||
| USD | 420,000 | PEN | 1,313,040 | 04/15 | BNP | (1,589 | ) | |||||||||||||
| USD | 343,304 | PEN | 1,077,494 | 05/15 | MSC | (1,454 | ) | |||||||||||||
| USD | 336,696 | PEN | 1,059,818 | 05/15 | SCB | (2,406 | ) | |||||||||||||
| USD | 7,309 | PHP | 324,125 | 04/15 | BNP | 72 | ||||||||||||||
| USD | 90,000 | PHP | 4,003,200 | 04/15 | BRC | 616 | ||||||||||||||
| USD | 520,000 | PLN | 1,995,786 | 04/15 | HSB | (6,096 | ) | |||||||||||||
| USD | 170,000 | PLN | 647,692 | 04/15 | MER | (734 | ) | |||||||||||||
| USD | 660,000 | PLN | 2,440,614 | 04/15 | MER | 16,646 | ||||||||||||||
| USD | 160,000 | RON | 628,192 | 04/15 | BNP | 7,056 | ||||||||||||||
| USD | 120,000 | RON | 496,620 | 04/15 | ING | (910 | ) | |||||||||||||
| USD | 1,310,000 | RUB | 80,341,121 | 04/15 | CSF | (49,956 | ) | |||||||||||||
| USD | 850,000 | RUB | 55,326,500 | 04/15 | HSB | (86,527 | ) | |||||||||||||
| USD | 890,000 | RUB | 55,046,500 | 04/15 | MSC | (41,787 | ) | |||||||||||||
| USD | 280,000 | RUB | 16,640,400 | 05/15 | CIT | — | ||||||||||||||
| USD | 150,000 | SGD | 204,285 | 04/15 | DUB | 1,252 | ||||||||||||||
| USD | 130,000 | SGD | 180,544 | 04/15 | JPM | (1,462 | ) | |||||||||||||
| USD | 590,000 | TRY | 1,484,853 | 04/15 | GSC | 23,652 | ||||||||||||||
| USD | 230,000 | TRY | 615,430 | 04/15 | MER | (4,735 | ) | |||||||||||||
| USD | 211,213 | TRY | 505,518 | 04/15 | SCB | 18,400 | ||||||||||||||
| USD | 2,060,000 | TWD | 65,158,212 | 04/15 | HSB | (22,497 | ) | |||||||||||||
| USD | 323,255 | ZAR | 3,928,418 | 04/15 | BNP | 1,058 | ||||||||||||||
| USD | 320,000 | ZAR | 3,951,213 | 04/15 | CIT | (4,066 | ) | |||||||||||||
| USD | 370,000 | ZAR | 4,344,355 | 04/15 | GSC | 13,689 | ||||||||||||||
| USD | 316,849 | ZAR | 3,752,596 | 04/15 | HSB | 9,072 | ||||||||||||||
| ZAR | 9,855,768 | USD | 827,423 | 04/15 | HSB | (19,083 | ) | |||||||||||||
| ZAR | 5,791,180 | USD | 468,428 | 04/15 | JPM | 6,547 | ||||||||||||||
| ZAR | 20,290,999 | USD | 1,706,375 | 04/15 | MER | (42,173 | ) | |||||||||||||
|
|
|
|||||||||||||||||||
| Total Forward Foreign Currency Contracts |
|
($208,076 | ) | |||||||||||||||||
|
|
|
|||||||||||||||||||
| (f) | Swap agreements outstanding as of March 31, 2015 were as follows: |
Interest Rate Swaps – Pay Floating Rate
| Floating Rate Index | Counter- party |
Fixed Rate |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 11.525% | 01/02/17 | BRL 3,169,137 | ($19,998 | ) | $— | ($19,998 | ) | |||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 12.285% | 01/02/17 | 731,495 | (9,723 | ) | — | (9,723 | ) | |||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 12.303% | 01/02/17 | 3,251,816 | (43,352 | ) | — | (43,352 | ) | |||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 12.490% | 01/02/17 | 1,587,981 | (18,756 | ) | — | (18,756 | ) | |||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 12.645% | 01/02/17 | 2,251,166 | (2,292 | ) | — | (2,292 | ) | |||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 11.990% | 01/02/18 | 1,505,927 | (7,813 | ) | — | (7,813 | ) | |||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 12.123% | 01/02/18 | 1,070,938 | (4,410 | ) | — | (4,410 | ) | |||||||||||||||||||
| Brazil CETIP Interbank |
HSB | 12.140% | 01/02/18 | 1,356,544 | (5,401 | ) | — | (5,401 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| ($111,745 | ) | $— | ($111,745 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-44
PACIFIC FUNDS **
PF EMERGING MARKETS DEBT FUND **
Schedule of Investments (Continued)
March 31, 2015
Total Return Swaps
| Receive Total Return | Counter- party |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||
| Indonesia Treasury 7.875% due 04/15/19 |
ANZ | 04/15/19 | IDR 7,900,000,000 | $640,638 | $674,760 | ($34,122 | ) | |||||||||||||||||
| Indonesia Treasury 12.800% due 06/15/21 |
SCB | 06/15/21 | 3,600,000,000 | 360,514 | 423,433 | (62,919 | ) | |||||||||||||||||
| Indonesia Treasury 8.375% due 03/15/24 |
ANZ | 03/15/24 | 1,200,000,000 | 98,123 | 104,528 | (6,405 | ) | |||||||||||||||||
| Indonesia Treasury 8.375% due 03/15/24 |
SCB | 03/15/24 | 7,841,000,000 | 641,145 | 681,300 | (40,155 | ) | |||||||||||||||||
| Power Finance Corp Ltd 8.650% due 12/28/24 |
SCB | 12/28/24 | INR 19,000,000 | 316,897 | 315,327 | 1,570 | ||||||||||||||||||
| Indonesia Treasury 11.000% due 09/15/25 |
SCB | 09/15/25 | IDR 800,000,000 | 76,857 | 95,221 | (18,364 | ) | |||||||||||||||||
| Indonesia Treasury 8.375% due 09/15/26 |
SCB | 09/15/26 | 2,200,000,000 | 180,808 | 198,473 | (17,665 | ) | |||||||||||||||||
| Indonesia Treasury 7.000% due 05/15/27 |
SCB | 05/15/27 | 1,800,000,000 | 135,838 | 162,637 | (26,799 | ) | |||||||||||||||||
| Indonesia Treasury 9.000% due 03/15/29 |
ANZ | 03/15/29 | 2,800,000,000 | 241,843 | 248,807 | (6,964 | ) | |||||||||||||||||
| Indonesia Treasury 10.500% due 08/15/30 |
SCB | 08/15/30 | 1,500,000,000 | 145,874 | 177,610 | (31,736 | ) | |||||||||||||||||
| Indonesia Treasury 6.625% due 05/15/33 |
SCB | 05/15/33 | 270,000,000 | 18,914 | 22,891 | (3,977 | ) | |||||||||||||||||
| Indonesia Treasury 8.375% due 03/15/34 |
ANZ | 03/15/34 | 2,600,000,000 | 212,779 | 215,282 | (2,503 | ) | |||||||||||||||||
| Indonesia Treasury 8.375% due 03/15/34 |
HSB | 03/15/34 | 584,000,000 | 47,794 | 49,751 | (1,957 | ) | |||||||||||||||||
| Indonesia Treasury 8.375% due 03/15/34 |
SCB | 03/15/34 | 2,242,000,000 | 183,481 | 183,812 | (331 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| $3,301,505 | $3,553,832 | ($252,327 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Total Swap Agreements |
$3,189,760 | $3,553,832 | ($364,072 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| (g) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Corporate Bonds & Notes |
$54,248,807 | $— | $54,248,807 | $— | |||||||||||||
| Convertible Corporate Bonds & Notes |
30,941 | — | 30,941 | — | ||||||||||||||
| Senior Loan Notes |
981,774 | — | 981,774 | — | ||||||||||||||
| Foreign Government Bonds & Notes |
80,413,044 | — | 80,413,044 | — | ||||||||||||||
| Short-Term Investment |
19,280,015 | 19,280,015 | — | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
1,349,235 | — | 1,349,235 | — | ||||||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Swaps |
3,301,505 | — | 3,301,505 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets - Derivatives |
4,650,740 | — | 4,650,740 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
159,605,321 | 19,280,015 | 140,325,306 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
(1,557,311 | ) | — | (1,557,311 | ) | — | ||||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Swaps |
(111,745 | ) | — | (111,745 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities - Derivatives |
(1,669,056 | ) | — | (1,669,056 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(1,669,056 | ) | — | (1,669,056 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$157,936,265 | $19,280,015 | $138,656,250 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-45
PACIFIC FUNDS **
PF COMSTOCK FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-46
PACIFIC FUNDS **
PF COMSTOCK FUND **
Schedule of Investments (Continued)
March 31, 2015
Notes to Schedule of Investments
| (a) | As of March 31, 2015, the fund was diversified as a percentage of net assets as follows: |
| (b) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| CAD | 440,945 | USD | 347,759 | 04/15 | CIB | $332 | ||||||||||||||
| EUR | 729,452 | USD | 774,897 | 04/15 | GSC | 9,586 | ||||||||||||||
| GBP | 161,867 | USD | 241,283 | 04/15 | BRC | (1,192 | ) | |||||||||||||
| USD | 1,271,710 | CAD | 1,623,980 | 04/15 | BRC | (10,294 | ) | |||||||||||||
| USD | 1,271,675 | CAD | 1,623,929 | 04/15 | CIB | (10,288 | ) | |||||||||||||
| USD | 1,271,795 | CAD | 1,623,980 | 04/15 | DUB | (10,209 | ) | |||||||||||||
| USD | 1,271,597 | CAD | 1,623,979 | 04/15 | GSC | (10,406 | ) | |||||||||||||
| USD | 1,364,416 | CHF | 1,374,131 | 04/15 | BRC | (50,362 | ) | |||||||||||||
| USD | 1,365,026 | CHF | 1,374,172 | 04/15 | CIB | (49,794 | ) | |||||||||||||
| USD | 1,551,505 | CHF | 1,560,812 | 04/15 | DUB | (55,476 | ) | |||||||||||||
| USD | 1,364,952 | CHF | 1,374,131 | 04/15 | GSC | (49,826 | ) | |||||||||||||
| USD | 2,048,654 | EUR | 1,936,243 | 04/15 | BRC | (33,662 | ) | |||||||||||||
| USD | 2,048,585 | EUR | 1,936,272 | 04/15 | CIB | (33,761 | ) | |||||||||||||
| USD | 2,047,868 | EUR | 1,936,243 | 04/15 | DUB | (34,448 | ) | |||||||||||||
| USD | 2,047,717 | EUR | 1,936,243 | 04/15 | GSC | (34,599 | ) | |||||||||||||
| USD | 2,047,925 | EUR | 1,936,242 | 04/15 | RBC | (34,390 | ) | |||||||||||||
| USD | 1,286,222 | GBP | 860,758 | 04/15 | BRC | 9,494 | ||||||||||||||
| USD | 1,286,146 | GBP | 860,759 | 04/15 | CIB | 9,417 | ||||||||||||||
| USD | 1,286,291 | GBP | 860,758 | 04/15 | DUB | 9,563 | ||||||||||||||
| USD | 1,286,049 | GBP | 860,758 | 04/15 | GSC | 9,321 | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total Forward Foreign Currency Contracts | ($370,994 | ) | ||||||||||||||||||
|
|
|
|||||||||||||||||||
| (c) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks |
|||||||||||||||||
| Consumer Discretionary |
$45,632,224 | $45,632,224 | $— | $— | ||||||||||||||
| Consumer Staples |
11,262,931 | 11,262,931 | — | — | ||||||||||||||
| Energy |
40,608,242 | 40,608,242 | — | — | ||||||||||||||
| Financials |
66,490,526 | 66,490,526 | — | — | ||||||||||||||
| Health Care |
33,403,382 | 28,719,893 | 4,683,489 | — | ||||||||||||||
| Industrials |
18,906,927 | 18,906,927 | — | — | ||||||||||||||
| Information Technology |
32,759,112 | 32,759,112 | — | — | ||||||||||||||
| Materials |
4,409,944 | 4,409,944 | — | — | ||||||||||||||
| Telecommunication Services |
779,596 | 779,596 | — | — | ||||||||||||||
| Utilities |
2,277,181 | 2,277,181 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 256,530,065 | 251,846,576 | 4,683,489 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
13,630,045 | 13,630,045 | — | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
47,713 | — | 47,713 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
270,207,823 | 265,476,621 | 4,731,202 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
(418,707 | ) | — | (418,707 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(418,707 | ) | — | (418,707 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$269,789,116 | $265,476,621 | $4,312,495 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-47
PACIFIC FUNDS **
PF GROWTH FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-48
PACIFIC FUNDS **
PF GROWTH FUND **
Schedule of Investments (Continued)
March 31, 2015
| (c) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant |
Level 3 Significant |
|||||||||||||||
| Assets |
Common Stocks |
|||||||||||||||||
| Consumer Discretionary |
$30,922,827 | $29,977,593 | $945,234 | $— | ||||||||||||||
| Consumer Staples |
11,151,662 | 9,715,399 | 1,436,263 | — | ||||||||||||||
| Energy |
2,941,309 | 2,941,309 | — | — | ||||||||||||||
| Financials |
9,730,375 | 9,730,375 | — | — | ||||||||||||||
| Health Care |
30,215,186 | 30,215,186 | — | — | ||||||||||||||
| Industrials |
13,610,793 | 13,610,793 | — | — | ||||||||||||||
| Information Technology |
41,821,696 | 41,821,696 | — | — | ||||||||||||||
| Materials |
4,918,854 | 4,918,854 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 145,312,702 | 142,931,205 | 2,381,497 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investments |
2,651,152 | 2,017,152 | 634,000 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$147,963,854 | $144,948,357 | $3,015,497 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-49
PACIFIC FUNDS **
PF LARGE-CAP GROWTH FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-50
PACIFIC FUNDS **
PF LARGE-CAP GROWTH FUND **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks |
|||||||||||||||||
| Consumer Discretionary |
$40,449,522 | $40,449,522 | $— | $— | ||||||||||||||
| Consumer Staples |
7,878,679 | 7,878,679 | — | — | ||||||||||||||
| Energy |
5,518,439 | 5,518,439 | — | — | ||||||||||||||
| Financials |
12,630,792 | 12,630,792 | — | — | ||||||||||||||
| Health Care |
45,795,673 | 45,795,673 | — | — | ||||||||||||||
| Industrials |
10,739,487 | 10,739,487 | — | — | ||||||||||||||
| Information Technology |
73,446,137 | 69,841,023 | 3,605,114 | — | ||||||||||||||
| Materials |
1,270,419 | 1,270,419 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 197,729,148 | 194,124,034 | 3,605,114 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
1,559,750 | 1,559,750 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$199,288,898 | $195,683,784 | $3,605,114 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-51
PACIFIC FUNDS **
PF LARGE-CAP VALUE FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-52
PACIFIC FUNDS **
PF LARGE-CAP VALUE FUND **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks |
|||||||||||||||||
| Consumer Discretionary |
$56,115,690 | $52,704,143 | $3,411,547 | $— | ||||||||||||||
| Consumer Staples |
38,949,259 | 38,949,259 | — | — | ||||||||||||||
| Energy |
32,360,420 | 32,360,420 | — | — | ||||||||||||||
| Financials |
85,641,678 | 85,641,678 | — | — | ||||||||||||||
| Health Care |
35,549,837 | 35,549,837 | — | — | ||||||||||||||
| Industrials |
33,598,283 | 33,598,283 | — | — | ||||||||||||||
| Information Technology |
33,089,156 | 33,089,156 | — | — | ||||||||||||||
| Materials |
18,584,308 | 18,584,308 | — | — | ||||||||||||||
| Telecommunication Services |
3,265,255 | 3,265,255 | — | — | ||||||||||||||
| Utilities |
5,842,273 | 5,842,273 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 342,996,159 | 339,584,612 | 3,411,547 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
890,436 | 890,436 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$343,886,595 | $340,475,048 | $3,411,547 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-53
PACIFIC FUNDS **
PF MAIN STREET® CORE FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-54
PACIFIC FUNDS **
PF MAIN STREET CORE FUND **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks |
|||||||||||||||||
| Consumer Discretionary |
$31,313,400 | $31,313,400 | $— | $— | ||||||||||||||
| Consumer Staples |
30,053,505 | 19,337,699 | 10,715,806 | — | ||||||||||||||
| Energy |
14,587,204 | 14,587,204 | — | — | ||||||||||||||
| Financials |
46,197,108 | 46,197,108 | — | — | ||||||||||||||
| Health Care |
36,953,797 | 36,953,797 | — | — | ||||||||||||||
| Industrials |
32,702,819 | 32,702,819 | — | — | ||||||||||||||
| Information Technology |
52,870,026 | 52,870,026 | — | — | ||||||||||||||
| Materials |
6,439,123 | 6,439,123 | — | — | ||||||||||||||
| Telecommunication Services |
4,493,412 | 4,493,412 | — | — | ||||||||||||||
| Utilities |
8,217,656 | 8,217,656 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 263,828,050 | 253,112,244 | 10,715,806 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
6,151,134 | 6,151,134 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$269,979,184 | $259,263,378 | $10,715,806 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-55
PACIFIC FUNDS **
PF MID-CAP EQUITY FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-56
PACIFIC FUNDS **
PF MID-CAP EQUITY FUND **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks (1) |
$215,559,831 | $215,559,831 | $— | $— | |||||||||||||
| Short-Term Investment |
3,739,580 | 3,739,580 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$219,299,411 | $219,299,411 | $— | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further industry breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-57
PACIFIC FUNDS **
PF MID-CAP GROWTH FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-58
PACIFIC FUNDS **
PF MID-CAP GROWTH FUND **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Transactions in written options for the year ended March 31, 2015 were as follows: |
| (c) | Premium received and value of written options outstanding as of March 31, 2015 were as follows: |
Options on Securities
| Description | Exercise Price |
Expiration Date |
Counter- Party |
Number of Contracts |
Premium | Value | ||||||||||||||||
| Call - Dril-Quip Inc |
$70.00 | 04/17/15 | CIT | 49 | $5,880 | ($4,533 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Put - ACADIA Pharmaceuticals Inc |
28.00 | 05/15/15 | GSC | 91 | 11,284 | (6,643 | ) | |||||||||||||||
| Put - Pacira Pharmaceuticals Inc |
85.00 | 05/15/15 | GSC | 48 | 16,790 | (22,560 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| 28,074 | (29,203 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Total Written Options |
$33,954 | ($33,736 | ) | |||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| (d) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks |
|||||||||||||||||
| Consumer Discretionary |
$17,150,706 | $16,146,392 | $1,004,314 | $— | ||||||||||||||
| Consumer Staples |
6,407,918 | 6,407,918 | — | — | ||||||||||||||
| Energy |
5,812,083 | 5,812,083 | — | — | ||||||||||||||
| Financials |
8,648,728 | 8,648,728 | — | — | ||||||||||||||
| Health Care |
15,792,887 | 15,792,887 | — | — | ||||||||||||||
| Industrials |
12,909,553 | 12,909,553 | — | — | ||||||||||||||
| Information Technology |
16,159,732 | 16,159,732 | — | — | ||||||||||||||
| Materials |
1,780,283 | 1,780,283 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 84,661,890 | 83,657,576 | 1,004,314 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
1,312,616 | 1,312,616 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
85,974,506 | 84,970,192 | 1,004,314 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Equity Contracts |
||||||||||||||||||
| Written Options |
(33,736 | ) | (6,643 | ) | (27,093 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(33,736 | ) | (6,643 | ) | (27,093 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$85,940,770 | $84,963,549 | $977,221 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-59
PACIFIC FUNDS **
PF SMALL-CAP GROWTH FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-60
PACIFIC FUNDS **
PF SMALL-CAP GROWTH FUND **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Input |
Level 3 Significant Unobservable Input |
|||||||||||||||
| Assets |
Warrants (1) |
$9,051 | $— | $9,051 | $— | |||||||||||||
| Common Stocks (1) |
81,905,254 | 81,905,254 | — | — | ||||||||||||||
| Short-Term Investment |
1,910,740 | 1,910,740 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$83,825,045 | $83,815,994 | $9,051 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further industry breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-61
PACIFIC FUNDS **
PF SMALL-CAP VALUE FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-62
PACIFIC FUNDS **
PF SMALL-CAP VALUE FUND **
Schedule of Investments (Continued)
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks (1) |
$143,721,810 | $143,721,810 | $— | $— | |||||||||||||
| Short-Term Investment |
3,229,431 | 3,229,431 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$146,951,241 | $146,951,241 | $— | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further industry breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-63
PACIFIC FUNDS **
PF REAL ESTATE FUND **
Schedule of Investments
March 31, 2015
| (b) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks (1) |
$48,307,082 | $48,307,082 | $— | $— | |||||||||||||
| Short-Term Investment |
962,878 | 962,878 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$49,269,960 | $49,269,960 | $— | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further industry breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-64
PACIFIC FUNDS **
PF EMERGING MARKETS FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-65
PACIFIC FUNDS **
PF EMERGING MARKETS FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-66
PACIFIC FUNDS **
PF EMERGING MARKETS FUND **
Schedule of Investments (Continued)
March 31, 2015
| (d) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant |
|||||||||||||||
| Assets |
Warrants (1) |
$68,066 | $68,066 | $— | $— | |||||||||||||
| Preferred Stocks (1) |
3,680,307 | 3,680,307 | — | — | ||||||||||||||
| Common Stocks |
||||||||||||||||||
| Bermuda |
1,477,176 | — | 1,477,176 | — | ||||||||||||||
| Brazil |
8,798,504 | 8,798,504 | — | — | ||||||||||||||
| Canada |
16,071 | 16,071 | — | — | ||||||||||||||
| Cayman |
20,632,398 | 13,563,466 | 7,068,932 | — | ||||||||||||||
| China |
4,874,012 | — | 4,874,012 | — | ||||||||||||||
| Colombia |
2,752,624 | 2,334,535 | 418,089 | — | ||||||||||||||
| Egypt |
764,110 | — | 764,110 | — | ||||||||||||||
| France |
4,823,547 | — | 4,823,547 | — | ||||||||||||||
| Hong Kong |
6,514,821 | — | 6,514,821 | — | ||||||||||||||
| India |
21,885,475 | 2,160,682 | 19,724,793 | — | ||||||||||||||
| Indonesia |
4,015,559 | — | 4,015,559 | — | ||||||||||||||
| Italy |
2,753,165 | — | 2,753,165 | — | ||||||||||||||
| Luxembourg |
1,184,400 | 1,184,400 | — | — | ||||||||||||||
| Malaysia |
1,503,854 | — | 1,503,854 | — | ||||||||||||||
| Mexico |
10,288,324 | 10,288,324 | — | — | ||||||||||||||
| Netherlands |
1,601,576 | 1,601,576 | — | — | ||||||||||||||
| Nigeria |
1,492,506 | 1,492,506 | — | — | ||||||||||||||
| Philippines |
3,332,638 | — | 3,332,638 | — | ||||||||||||||
| Russia |
7,385,412 | — | 7,385,412 | — | ||||||||||||||
| South Africa |
1,206,558 | — | 1,206,558 | — | ||||||||||||||
| South Korea |
1,441,156 | — | 1,441,156 | — | ||||||||||||||
| Switzerland |
1,648,587 | — | 1,648,587 | — | ||||||||||||||
| Taiwan |
4,708,243 | — | 4,708,243 | — | ||||||||||||||
| Thailand |
1,601,807 | 1,601,807 | — | — | ||||||||||||||
| Turkey |
2,638,214 | — | 2,638,214 | — | ||||||||||||||
| United Arab Emirates |
1,649,937 | 1,649,937 | — | — | ||||||||||||||
| United Kingdom |
6,148,391 | — | 6,148,391 | — | ||||||||||||||
| United States |
1,257,055 | 1,257,055 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 128,396,120 | 45,948,863 | 82,447,257 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
5,889,925 | 5,889,925 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$138,034,418 | $55,587,161 | $82,447,257 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
During the year ended March 31, 2015, investments with a total aggregate value of $3,278,794 were transferred from Level 1 to Level 2 due to valuation adjustments made to exchange-traded prices as a result of market movements following the close of local trading. Also during the same year, investments with a total aggregate value of $1,601,807 were transferred from Level 2 to Level 1 due to the removal of valuation adjustments made to exchange-traded prices as a result of market movements following the close of local trading.
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further geographical region breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-67
PACIFIC FUNDS **
PF INTERNATIONAL LARGE-CAP FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-68
PACIFIC FUNDS **
PF INTERNATIONAL LARGE-CAP FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-69
PACIFIC FUNDS **
PF INTERNATIONAL LARGE-CAP FUND **
Schedule of Investments (Continued)
March 31, 2015
| (e) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Preferred Stocks (1) |
$1,186,307 | $1,186,307 | $— | $— | |||||||||||||
| Common Stocks |
||||||||||||||||||
| Australia |
920,959 | — | 920,959 | — | ||||||||||||||
| Belgium |
1,208,867 | — | 1,208,867 | — | ||||||||||||||
| Bermuda |
3,233,081 | — | 3,233,081 | — | ||||||||||||||
| Canada |
8,747,633 | 8,747,633 | — | — | ||||||||||||||
| Cayman |
325,801 | 325,801 | — | — | ||||||||||||||
| Denmark |
1,337,205 | — | 1,337,205 | — | ||||||||||||||
| France |
29,531,678 | — | 29,531,678 | — | ||||||||||||||
| Germany |
28,508,992 | — | 28,508,992 | — | ||||||||||||||
| Hong Kong |
4,530,541 | — | 4,530,541 | — | ||||||||||||||
| India |
3,678,537 | — | 3,678,537 | — | ||||||||||||||
| Israel |
754,944 | 754,944 | — | — | ||||||||||||||
| Japan |
28,409,259 | — | 28,409,259 | — | ||||||||||||||
| Netherlands |
14,040,448 | — | 14,040,448 | — | ||||||||||||||
| Russia |
514,808 | 514,808 | — | — | ||||||||||||||
| Singapore |
4,452,388 | — | 4,452,388 | — | ||||||||||||||
| South Korea |
1,992,417 | — | 1,992,417 | — | ||||||||||||||
| Spain |
2,367,318 | — | 2,367,318 | — | ||||||||||||||
| Sweden |
2,864,448 | — | 2,864,448 | — | ||||||||||||||
| Switzerland |
24,972,337 | — | 24,972,337 | — | ||||||||||||||
| Taiwan |
6,007,142 | 4,789,709 | 1,217,433 | — | ||||||||||||||
| Thailand |
693,732 | — | 693,732 | — | ||||||||||||||
| United Kingdom |
44,886,192 | 1,952,035 | 42,934,157 | — | ||||||||||||||
| United States |
4,227,259 | 4,227,259 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 218,205,986 | 21,312,189 | 196,893,797 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investments |
894,264 | 27,264 | 867,000 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$220,286,557 | $22,525,760 | $197,760,797 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further geographical region breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-70
PACIFIC FUNDS **
PF INTERNATIONAL SMALL-CAP FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-71
PACIFIC FUNDS **
PF INTERNATIONAL SMALL-CAP FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-72
PACIFIC FUNDS **
PF INTERNATIONAL SMALL-CAP FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-73
PACIFIC FUNDS **
PF INTERNATIONAL SMALL-CAP FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-74
PACIFIC FUNDS **
PF INTERNATIONAL SMALL-CAP FUND **
Schedule of Investments (Continued)
March 31, 2015
| (e) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Preferred Stocks (1) |
$315,580 | $— | $315,580 | $— | |||||||||||||
| Common Stocks |
||||||||||||||||||
| Australia |
8,518,628 | — | 8,147,475 | 371,153 | ||||||||||||||
| Austria |
719,940 | — | 719,940 | — | ||||||||||||||
| Belgium |
1,795,932 | — | 1,795,932 | — | ||||||||||||||
| Bermuda |
1,677,108 | — | 1,677,108 | — | ||||||||||||||
| Canada |
8,257,311 | 8,257,311 | — | — | ||||||||||||||
| Cayman |
1,433,141 | — | 1,433,141 | — | ||||||||||||||
| Denmark |
1,836,624 | — | 1,836,624 | — | ||||||||||||||
| Finland |
336,535 | — | 336,535 | — | ||||||||||||||
| France |
8,162,013 | 431,772 | 7,730,241 | — | ||||||||||||||
| Germany |
6,159,750 | — | 6,159,750 | — | ||||||||||||||
| Hong Kong |
757,280 | — | 757,280 | — | ||||||||||||||
| Ireland |
750,438 | — | 750,438 | — | ||||||||||||||
| Israel |
1,171,583 | 473,419 | 698,164 | — | ||||||||||||||
| Italy |
4,101,737 | — | 4,101,737 | — | ||||||||||||||
| Japan |
26,838,900 | — | 26,838,900 | — | ||||||||||||||
| Multi National |
380,340 | — | 380,340 | — | ||||||||||||||
| Netherlands |
3,360,484 | 335,575 | 3,024,909 | — | ||||||||||||||
| Norway |
286,261 | — | 286,261 | — | ||||||||||||||
| Portugal |
806,609 | — | 806,609 | — | ||||||||||||||
| Singapore |
1,841,065 | — | 1,841,065 | — | ||||||||||||||
| South Korea |
4,333,503 | — | 4,333,503 | — | ||||||||||||||
| Spain |
3,738,777 | — | 3,738,777 | — | ||||||||||||||
| Sweden |
3,671,184 | — | 3,671,184 | — | ||||||||||||||
| Switzerland |
8,866,052 | — | 8,866,052 | — | ||||||||||||||
| United Kingdom |
23,624,755 | — | 23,624,755 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 123,425,950 | 9,498,077 | 113,556,720 | 371,153 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
3,030,424 | 3,030,424 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$126,771,954 | $12,528,501 | $113,872,300 | $371,153 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further geographical region breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-75
PACIFIC FUNDS **
PF INTERNATIONAL VALUE FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-76
PACIFIC FUNDS **
PF INTERNATIONAL VALUE FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-77
PACIFIC FUNDS **
PF INTERNATIONAL VALUE FUND **
Schedule of Investments (Continued)
March 31, 2015
| (e) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| AUD | 605,249 | EUR | 418,121 | 05/15 | CIT | $10,187 | ||||||||||||||
| AUD | 7,444,910 | USD | 5,727,987 | 05/15 | ANZ | (69,792 | ) | |||||||||||||
| CAD | 569,292 | GBP | 298,999 | 05/15 | DUB | 5,853 | ||||||||||||||
| CHF | 705,728 | GBP | 481,194 | 05/15 | BRC | 13,673 | ||||||||||||||
| CHF | 469,500 | USD | 497,322 | 05/15 | CIT | (13,474 | ) | |||||||||||||
| CHF | 328,007 | USD | 345,814 | 05/15 | SGN | (7,783 | ) | |||||||||||||
| CHF | 4,814,279 | USD | 5,232,716 | 05/15 | UBS | (271,311 | ) | |||||||||||||
| CHF | 674,565 | USD | 709,762 | 05/15 | WBC | (14,582 | ) | |||||||||||||
| DKK | 3,048,556 | USD | 469,921 | 05/15 | ANZ | (30,622 | ) | |||||||||||||
| DKK | 2,749,394 | USD | 391,610 | 05/15 | ANZ | 4,580 | ||||||||||||||
| DKK | 5,399,297 | USD | 825,328 | 05/15 | HSB | (47,284 | ) | |||||||||||||
| EUR | 1,050,102 | USD | 1,115,238 | 05/15 | ANZ | 14,443 | ||||||||||||||
| EUR | 336,007 | USD | 368,369 | 05/15 | HSB | (6,899 | ) | |||||||||||||
| EUR | 926,665 | USD | 1,048,211 | 05/15 | SCB | (51,323 | ) | |||||||||||||
| GBP | 225,422 | USD | 338,194 | 05/15 | ANZ | (3,888 | ) | |||||||||||||
| GBP | 477,656 | USD | 718,346 | 05/15 | CIT | (9,970 | ) | |||||||||||||
| GBP | 217,399 | USD | 332,905 | 05/15 | DUB | (10,497 | ) | |||||||||||||
| GBP | 214,682 | USD | 327,379 | 05/15 | GSC | (9,000 | ) | |||||||||||||
| HKD | 4,402,999 | USD | 567,566 | 05/15 | ANZ | 315 | ||||||||||||||
| HKD | 4,033,840 | USD | 520,003 | 05/15 | DUB | 265 | ||||||||||||||
| HKD | 4,022,249 | USD | 518,851 | 05/15 | UBS | (78 | ) | |||||||||||||
| JPY | 100,335,904 | USD | 849,426 | 05/15 | ANZ | (12,374 | ) | |||||||||||||
| JPY | 77,442,813 | USD | 639,761 | 05/15 | CIT | 6,305 | ||||||||||||||
| JPY | 46,721,678 | USD | 394,741 | 05/15 | SGN | (4,965 | ) | |||||||||||||
| JPY | 70,000,000 | USD | 597,051 | 05/15 | UBS | (13,076 | ) | |||||||||||||
| SEK | 15,450,558 | USD | 1,873,012 | 05/15 | GSC | (77,975 | ) | |||||||||||||
| SGD | 1,824,124 | USD | 1,346,572 | 05/15 | SSB | (18,565 | ) | |||||||||||||
| USD | 355,729 | CAD | 450,669 | 05/15 | CSF | 68 | ||||||||||||||
| USD | 375,195 | CHF | 375,625 | 05/15 | ANZ | (11,909 | ) | |||||||||||||
| USD | 380,017 | CHF | 381,219 | 05/15 | CSF | (12,853 | ) | |||||||||||||
| USD | 704,113 | CHF | 649,171 | 05/15 | CSF | 35,102 | ||||||||||||||
| USD | 510,163 | EUR | 453,264 | 05/15 | BRC | 22,549 | ||||||||||||||
| USD | 487,588 | EUR | 428,294 | 05/15 | CSF | 26,837 | ||||||||||||||
| USD | 923,894 | EUR | 818,950 | 05/15 | DUB | 42,884 | ||||||||||||||
| USD | 700,462 | EUR | 615,570 | 05/15 | GSC | 38,244 | ||||||||||||||
| USD | 338,490 | EUR | 297,306 | 05/15 | HSB | 18,654 | ||||||||||||||
| USD | 919,587 | EUR | 809,809 | 05/15 | MSC | 48,409 | ||||||||||||||
| USD | 6,274,527 | EUR | 5,522,262 | 05/15 | RBC | 333,780 | ||||||||||||||
| USD | 1,337,814 | EUR | 1,171,180 | 05/15 | RBS | 77,881 | ||||||||||||||
| USD | 1,814,369 | EUR | 1,617,341 | 05/15 | WBC | 74,464 | ||||||||||||||
| USD | 403,662 | GBP | 269,787 | 05/15 | DUB | 3,560 | ||||||||||||||
| USD | 427,640 | GBP | 290,177 | 05/15 | GSC | (2,700 | ) | |||||||||||||
| USD | 336,898 | GBP | 224,101 | 05/15 | GSC | 4,550 | ||||||||||||||
| USD | 715,168 | GBP | 480,539 | 05/15 | HSB | 2,516 | ||||||||||||||
| USD | 382,569 | GBP | 257,489 | 05/15 | SGN | 706 | ||||||||||||||
| USD | 834,598 | GBP | 541,789 | 05/15 | UBS | 31,112 | ||||||||||||||
| USD | 307,638 | HKD | 2,385,280 | 05/15 | CIT | (5 | ) | |||||||||||||
| USD | 2,982,845 | JPY | 351,370,123 | 05/15 | BRC | 51,538 | ||||||||||||||
| USD | 296,134 | JPY | 34,757,795 | 05/15 | CIT | 6,167 | ||||||||||||||
| USD | 595,690 | JPY | 71,792,954 | 05/15 | SGN | (3,243 | ) | |||||||||||||
| USD | 1,401,974 | NOK | 10,916,523 | 05/15 | SSB | 48,300 | ||||||||||||||
| USD | 383,266 | SGD | 529,771 | 05/15 | TDB | (2,420 | ) | |||||||||||||
|
|
|
|||||||||||||||||||
| Total Forward Foreign Currency Contracts |
|
$216,354 | ||||||||||||||||||
|
|
|
|||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-78
PACIFIC FUNDS **
PF INTERNATIONAL VALUE FUND **
Schedule of Investments (Continued)
March 31, 2015
| (f) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Input |
Level 3 Significant Unobservable Input |
|||||||||||||||
| Assets |
Preferred Stocks (1) |
$1,763,102 | $— | $1,763,102 | $— | |||||||||||||
| Common Stocks |
||||||||||||||||||
| Australia |
3,610,356 | — | 3,610,356 | — | ||||||||||||||
| Belgium |
2,850,625 | — | 2,850,625 | — | ||||||||||||||
| China |
1,478,574 | — | 1,478,574 | — | ||||||||||||||
| Finland |
1,361,665 | — | 1,361,665 | — | ||||||||||||||
| France |
19,021,966 | — | 19,021,966 | — | ||||||||||||||
| Germany |
10,422,728 | — | 10,422,728 | — | ||||||||||||||
| Hong Kong |
1,272,620 | — | 1,272,620 | — | ||||||||||||||
| India |
866,160 | 866,160 | — | — | ||||||||||||||
| Ireland |
1,185,301 | 1,185,301 | — | — | ||||||||||||||
| Italy |
7,034,994 | — | 7,034,994 | — | ||||||||||||||
| Japan |
32,221,524 | — | 32,221,524 | — | ||||||||||||||
| Luxembourg |
1,014,619 | — | 1,014,619 | — | ||||||||||||||
| Netherlands |
6,166,195 | — | 6,166,195 | — | ||||||||||||||
| Norway |
2,708,796 | — | 2,708,796 | — | ||||||||||||||
| Papua New Guinea |
910,336 | — | 910,336 | — | ||||||||||||||
| Singapore |
1,182,327 | — | 1,182,327 | — | ||||||||||||||
| South Korea |
2,299,641 | — | 2,299,641 | — | ||||||||||||||
| Spain |
4,286,196 | — | 4,286,196 | — | ||||||||||||||
| Sweden |
1,311,279 | — | 1,311,279 | — | ||||||||||||||
| Switzerland |
6,939,095 | — | 6,939,095 | — | ||||||||||||||
| United Kingdom |
29,292,334 | — | 29,292,334 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 137,437,331 | 2,051,461 | 135,385,870 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
1,408,208 | 1,408,208 | — | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Equity Contracts |
||||||||||||||||||
| Futures |
7,800 | 7,800 | — | — | ||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
922,942 | — | 922,942 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets - Derivatives |
930,742 | 7,800 | 922,942 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
141,539,383 | 3,467,469 | 138,071,914 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Equity Contracts |
||||||||||||||||||
| Futures |
(18,414 | ) | (18,414 | ) | — | — | ||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
(706,588 | ) | — | (706,588 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities - Derivatives |
(725,002 | ) | (18,414 | ) | (706,588 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(725,002 | ) | (18,414 | ) | (706,588 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$140,814,381 | $3,449,055 | $137,365,326 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further geographical region breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-79
PACIFIC FUNDS **
PF CURRENCY STRATEGIES FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-80
PACIFIC FUNDS **
PF CURRENCY STRATEGIES FUND **
Schedule of Investments (Continued)
March 31, 2015
| (d) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| AUD | 5,944,000 | USD | 4,537,382 | 04/15 | ANZ | ($16,772 | ) | |||||||||||||
| AUD | 7,575,320 | USD | 5,743,215 | 04/15 | BRC | 18,421 | ||||||||||||||
| AUD | 10,374,000 | USD | 7,930,207 | 04/15 | GSC | (40,434 | ) | |||||||||||||
| AUD | 5,944,000 | USD | 4,516,328 | 04/15 | GSC | 4,282 | ||||||||||||||
| CAD | 31,221,000 | USD | 25,007,289 | 04/15 | ANZ | (364,098 | ) | |||||||||||||
| CAD | 9,554,486 | USD | 7,634,080 | 04/15 | GSC | (92,585 | ) | |||||||||||||
| CAD | 30,390,294 | USD | 24,319,960 | 04/15 | RBC | (332,459 | ) | |||||||||||||
| CHF | 22,190,647 | USD | 23,335,030 | 04/15 | BRC | (477,414 | ) | |||||||||||||
| CHF | 7,097,810 | USD | 7,412,527 | 04/15 | GSC | (101,603 | ) | |||||||||||||
| CHF | 12,328,963 | USD | 12,680,131 | 04/15 | GSC | 19,394 | ||||||||||||||
| CHF | 5,440,084 | USD | 5,578,315 | 04/15 | RBC | 25,278 | ||||||||||||||
| CHF | 975,000 | USD | 987,992 | 04/15 | SEB | 16,270 | ||||||||||||||
| EUR | 10,075,202 | USD | 11,167,449 | 04/15 | ANZ | (330,496 | ) | |||||||||||||
| EUR | 7,650,000 | USD | 8,327,767 | 04/15 | BRC | (99,377 | ) | |||||||||||||
| EUR | 5,744,737 | USD | 6,356,947 | 04/15 | GSC | (177,870 | ) | |||||||||||||
| EUR | 13,531,162 | USD | 14,440,453 | 04/15 | GSC | 113,554 | ||||||||||||||
| EUR | 9,625,000 | USD | 10,148,118 | 04/15 | JPM | 204,450 | ||||||||||||||
| EUR | 18,692,100 | USD | 20,284,074 | 04/15 | RBC | (178,729 | ) | |||||||||||||
| EUR | 8,544,050 | USD | 9,256,095 | 04/15 | SCB | (66,059 | ) | |||||||||||||
| EUR | 13,427,333 | USD | 15,303,668 | 04/15 | SEB | (861,141 | ) | |||||||||||||
| GBP | 14,146,973 | USD | 21,814,560 | 04/15 | GSC | (832,520 | ) | |||||||||||||
| GBP | 5,624,200 | USD | 8,686,071 | 04/15 | RBC | (344,556 | ) | |||||||||||||
| HUF | 4,008,000,000 | USD | 13,848,865 | 04/15 | CSF | 486,320 | ||||||||||||||
| INR | 1,832,990,000 | USD | 28,943,471 | 04/15 | CSF | 199,911 | ||||||||||||||
| JPY | 393,380,003 | USD | 3,284,610 | 04/15 | BRC | (3,408 | ) | |||||||||||||
| JPY | 4,018,796,234 | USD | 33,817,718 | 04/15 | GSC | (296,743 | ) | |||||||||||||
| JPY | 1,754,500,000 | USD | 14,464,139 | 04/15 | SEB | 169,998 | ||||||||||||||
| MXN | 452,820,000 | USD | 29,280,310 | 04/15 | CSF | 359,511 | ||||||||||||||
| NOK | 7,225,676 | USD | 900,000 | 04/15 | BRC | (3,691 | ) | |||||||||||||
| NOK | 29,777,348 | USD | 3,700,000 | 04/15 | SEB | (6,267 | ) | |||||||||||||
| NOK | 68,065,599 | USD | 8,355,193 | 04/15 | SEB | 88,008 | ||||||||||||||
| NZD | 55,815,000 | USD | 41,799,492 | 04/15 | ANZ | (175,596 | ) | |||||||||||||
| NZD | 12,425,364 | USD | 9,300,000 | 04/15 | BRC | (33,816 | ) | |||||||||||||
| NZD | 5,365,000 | USD | 4,085,703 | 04/15 | GSC | (84,352 | ) | |||||||||||||
| NZD | 19,732,490 | USD | 14,745,695 | 04/15 | RBC | (30,240 | ) | |||||||||||||
| PHP | 611,850,000 | USD | 13,750,211 | 04/15 | GSC | (82,568 | ) | |||||||||||||
| SEK | 71,482,521 | USD | 8,568,041 | 04/15 | BRC | (264,788 | ) | |||||||||||||
| SEK | 146,831,614 | USD | 17,595,653 | 04/15 | SEB | (540,015 | ) | |||||||||||||
| USD | 8,676,909 | AUD | 11,140,000 | 04/15 | ANZ | 204,567 | ||||||||||||||
| USD | 9,300,000 | AUD | 12,045,836 | 04/15 | BRC | 138,739 | ||||||||||||||
| USD | 13,514,598 | AUD | 17,705,000 | 04/15 | DUB | 48,531 | ||||||||||||||
| USD | 36,979,107 | AUD | 47,605,143 | 04/15 | GSC | 773,806 | ||||||||||||||
| USD | 4,191,273 | CAD | 5,234,875 | 04/15 | ANZ | 59,310 | ||||||||||||||
| USD | 2,257,605 | CAD | 2,812,299 | 04/15 | GSC | 37,817 | ||||||||||||||
| USD | 11,822,946 | CAD | 15,125,000 | 04/15 | JPM | (115,583 | ) | |||||||||||||
| USD | 16,377,831 | CAD | 20,585,727 | 04/15 | RBC | 129,216 | ||||||||||||||
| USD | 13,586,017 | CHF | 12,972,677 | 04/15 | ANZ | 223,431 | ||||||||||||||
| USD | 28,210,709 | CHF | 26,951,870 | 04/15 | BRC | 448,769 | ||||||||||||||
| USD | 73,878,483 | CHF | 74,075,000 | 04/15 | GSC | (2,419,724 | ) | |||||||||||||
| USD | 25,528,621 | CHF | 24,183,688 | 04/15 | GSC | 618,063 | ||||||||||||||
| USD | 69,771,280 | CHF | 65,952,000 | 04/15 | RBC | 1,837,012 | ||||||||||||||
| USD | 9,172,000 | CHF | 8,983,699 | 04/15 | SCB | (81,715 | ) | |||||||||||||
| USD | 40,459,377 | EUR | 36,156,000 | 04/15 | GSC | 1,569,747 | ||||||||||||||
| USD | 1,183,943 | EUR | 1,085,000 | 04/15 | JPM | 16,926 | ||||||||||||||
| USD | 4,612,069 | EUR | 4,309,000 | 04/15 | SCB | (22,719 | ) | |||||||||||||
| USD | 19,950,228 | EUR | 17,504,193 | 04/15 | SEB | 1,122,604 | ||||||||||||||
| USD | 4,606,560 | GBP | 3,043,388 | 04/15 | ANZ | 92,769 | ||||||||||||||
| USD | 13,703,683 | GBP | 9,010,374 | 04/15 | BRC | 339,975 | ||||||||||||||
| USD | 11,143,700 | GBP | 7,535,000 | 04/15 | GSC | (31,890 | ) | |||||||||||||
| USD | 6,224,952 | GBP | 4,084,861 | 04/15 | GSC | 166,503 | ||||||||||||||
| USD | 5,583,710 | GBP | 3,634,000 | 04/15 | RBC | 193,954 | ||||||||||||||
| USD | 1,210,894 | GBP | 820,000 | 04/15 | SEB | (5,295 | ) | |||||||||||||
| USD | 14,072,714 | HUF | 4,008,000,000 | 04/15 | GSC | (262,470 | ) | |||||||||||||
| USD | 4,586,062 | JPY | 553,462,006 | 04/15 | RBC | (30,392 | ) | |||||||||||||
| USD | 6,460,000 | JPY | 769,201,890 | 04/15 | RBC | 44,049 | ||||||||||||||
| USD | 9,253,206 | JPY | 1,104,433,983 | 04/15 | SCB | 41,068 | ||||||||||||||
| USD | 28,550,122 | KRW | 32,351,000,000 | 04/15 | BRC | (586,217 | ) | |||||||||||||
| USD | 1,183,543 | MXN | 17,720,000 | 04/15 | DUB | 23,661 | ||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-81
PACIFIC FUNDS **
PF CURRENCY STRATEGIES FUND **
Schedule of Investments (Continued)
March 31, 2015
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| USD | 28,974,304 | MYR | 107,683,000 | 04/15 | JPM | ($37,150 | ) | |||||||||||||
| USD | 13,700,000 | NOK | 105,147,322 | 04/15 | SEB | 656,995 | ||||||||||||||
| USD | 9,434,975 | NZD | 12,377,000 | 04/15 | BRC | 204,858 | ||||||||||||||
| USD | 59,192,974 | NZD | 80,690,000 | 04/15 | GSC | (987,629 | ) | |||||||||||||
| USD | 11,189 | NZD | 14,973 | 04/15 | RBC | 23 | ||||||||||||||
| USD | 9,195,949 | NZD | 12,032,173 | 04/15 | SCB | 222,986 | ||||||||||||||
| USD | 5,170,000 | SEK | 43,548,580 | 04/15 | BRC | 111,492 | ||||||||||||||
| USD | 20,512,933 | SEK | 174,657,690 | 04/15 | SEB | 225,079 | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total Forward Foreign Currency Contracts |
$838,966 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| (e) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
U.S. Treasury Obligations |
$12,214,282 | $— | $12,214,282 | $— | |||||||||||||
| Foreign Government Bonds & Notes |
42,612,805 | — | 42,612,805 | — | ||||||||||||||
| Short-Term Investments |
132,995,339 | 83,012,935 | 49,982,404 | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
11,257,347 | — | 11,257,347 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
199,079,773 | 83,012,935 | 116,066,838 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Derivatives: |
|||||||||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
(10,418,381 | ) | — | (10,418,381 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(10,418,381 | ) | — | (10,418,381 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$188,661,392 | $83,012,935 | $105,648,457 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-82
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-83
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-84
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-85
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| (i) | A reverse repurchase agreement outstanding as of March 31, 2015 was as follows: |
| Counter- party |
Collateral Pledged | Interest Rate |
Trade Date |
Maturity Date |
Repurchase Amount |
Principal Amount |
Value | |||||||||||||||||
| JPM | Argentina Bonar 8.750% due 05/07/24 |
(3.000%) | 03/27/15 | 04/10/15 | ($1,710,331 | ) | $1,711,900 | ($1,711,900 | ) | |||||||||||||||
|
|
|
|||||||||||||||||||||||
| (j) | The average amount of borrowings by the fund on reverse repurchase agreements while outstanding during the year ended March 31, 2015 was $606,528 at a weighted average interest rate of (1.318%). |
| (k) | Open futures contracts outstanding as of March 31, 2015 were as follows: |
| (l) | Forward Bonds outstanding as of March 31, 2015 were as follows: |
| Description | Principal Amount |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||
| Republic of Colombia 10.000% due 07/24/24 + |
COP 8,246,300,000 | 05/15 | DUB | ($52,646 | ) | |||||||
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-86
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| (m) | Forward foreign currency contracts outstanding as of March 31, 2015 were as follows: |
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| CLP | 1,242,650,000 | USD | 1,985,698 | 05/15 | BNP | ($4,719 | ) | |||||||||||||
| CLP | 844,844,000 | USD | 1,310,648 | 06/15 | BNP | 32,588 | ||||||||||||||
| CNY | 7,364,000 | USD | 1,153,057 | 03/16 | BNP | 1,306 | ||||||||||||||
| CNY | 15,189,000 | USD | 2,378,395 | 03/16 | JPM | 3,382 | ||||||||||||||
| CNY | 23,057,000 | USD | 3,610,442 | 03/16 | SCB | 4,702 | ||||||||||||||
| CNY | 11,080,000 | USD | 1,773,084 | 09/15 | DUB | (16,988 | ) | |||||||||||||
| CNY | 10,820,000 | USD | 1,729,678 | 09/15 | JPM | (15,353 | ) | |||||||||||||
| CNY | 22,360,000 | USD | 3,575,585 | 09/15 | SCB | (32,283 | ) | |||||||||||||
| EUR | 3,320,425 | HUF | 1,066,739,000 | 04/15 | BNP | (244,799 | ) | |||||||||||||
| EUR | 733,114 | HUF | 232,468,000 | 06/15 | BNP | (41,237 | ) | |||||||||||||
| EUR | 3,305,654 | HUF | 1,013,168,000 | 06/15 | JPM | (61,298 | ) | |||||||||||||
| EUR | 3,769,138 | HUF | 1,161,452,000 | 06/15 | SCB | (92,933 | ) | |||||||||||||
| EUR | 539,516 | HUF | 165,475,000 | 07/15 | DUB | (9,978 | ) | |||||||||||||
| EUR | 305,100 | HUF | 98,236,000 | 07/15 | MSC | (22,280 | ) | |||||||||||||
| EUR | 2,568,516 | SEK | 24,599,000 | 04/15 | GSC | (94,596 | ) | |||||||||||||
| EUR | 2,119,577 | SEK | 20,231,000 | 05/15 | BNP | (70,211 | ) | |||||||||||||
| EUR | 1,319,000 | USD | 1,519,950 | 04/15 | DUB | (101,383 | ) | |||||||||||||
| EUR | 1,054,242 | USD | 1,244,228 | 04/15 | GSC | (110,563 | ) | |||||||||||||
| EUR | 1,223,930 | USD | 1,315,847 | 04/15 | GSC | 197 | ||||||||||||||
| EUR | 15,081,224 | USD | 16,753,415 | 04/15 | SCB | (536,771 | ) | |||||||||||||
| EUR | 644,788 | USD | 694,785 | 05/15 | GSC | (943 | ) | |||||||||||||
| EUR | 2,864,341 | USD | 3,243,448 | 05/15 | JPM | (162,026 | ) | |||||||||||||
| EUR | 130,125 | USD | 137,250 | 06/15 | GSC | 2,816 | ||||||||||||||
| EUR | 80,252 | USD | 87,261 | 06/15 | JPM | (886 | ) | |||||||||||||
| IDR | 7,703,400,000 | USD | 596,885 | 04/15 | JPM | (11,743 | ) | |||||||||||||
| IDR | 7,325,850,000 | USD | 567,719 | 04/15 | SCB | (10,239 | ) | |||||||||||||
| IDR | 23,224,595,000 | USD | 1,786,507 | 05/15 | SCB | (28,899 | ) | |||||||||||||
| INR | 62,917,000 | USD | 1,011,661 | 04/15 | CIT | (8,268 | ) | |||||||||||||
| INR | 76,560,000 | USD | 1,219,238 | 04/15 | DUB | (1,189 | ) | |||||||||||||
| INR | 98,020,000 | USD | 1,562,794 | 04/15 | JPM | (3,321 | ) | |||||||||||||
| INR | 91,770,000 | USD | 1,463,030 | 04/15 | SCB | (2,993 | ) | |||||||||||||
| INR | 19,607,000 | USD | 308,918 | 05/15 | BNP | 1,000 | ||||||||||||||
| INR | 331,838,000 | USD | 5,253,511 | 05/15 | DUB | (16,671 | ) | |||||||||||||
| MXN | 21,221,000 | USD | 1,440,401 | 04/15 | CIT | (51,830 | ) | |||||||||||||
| MXN | 21,280,000 | USD | 1,445,358 | 04/15 | MSC | (52,926 | ) | |||||||||||||
| MXN | 102,091,000 | USD | 6,827,003 | 05/15 | HSB | (153,508 | ) | |||||||||||||
| MXN | 40,889,000 | USD | 2,736,972 | 05/15 | JPM | (65,489 | ) | |||||||||||||
| MXN | 40,139,000 | USD | 2,685,781 | 05/15 | MSC | (63,299 | ) | |||||||||||||
| NZD | 5,737,600 | USD | 4,383,279 | 04/15 | BNP | (103,147 | ) | |||||||||||||
| NZD | 1,736,400 | USD | 1,322,998 | 04/15 | GSC | (27,679 | ) | |||||||||||||
| NZD | 1,068,000 | USD | 781,349 | 04/15 | JPM | 14,615 | ||||||||||||||
| NZD | 4,748,000 | USD | 3,628,497 | 04/15 | SCB | (86,587 | ) | |||||||||||||
| PHP | 69,655,000 | USD | 1,539,099 | 04/15 | BNP | 18,475 | ||||||||||||||
| PHP | 4,041,000 | USD | 91,104 | 04/15 | CIT | (742 | ) | |||||||||||||
| PHP | 160,822,000 | USD | 3,551,958 | 04/15 | CIT | 44,226 | ||||||||||||||
| PHP | 13,723,000 | USD | 303,875 | 04/15 | SCB | 2,969 | ||||||||||||||
| PLN | 13,059,096 | EUR | 3,030,046 | 04/15 | BNP | 185,073 | ||||||||||||||
| PLN | 3,044,000 | EUR | 728,615 | 04/15 | GSC | 19,474 | ||||||||||||||
| PLN | 7,270,286 | EUR | 1,688,644 | 04/15 | MSC | 101,321 | ||||||||||||||
| RSD | 33,786,000 | EUR | 276,936 | 04/15 | CIT | 3,374 | ||||||||||||||
| RSD | 253,330,000 | EUR | 1,935,294 | 10/15 | CIT | 113,311 | ||||||||||||||
| RSD | 30,943,000 | EUR | 237,111 | 10/15 | DUB | 13,059 | ||||||||||||||
| RUB | 18,471,000 | USD | 271,632 | 04/15 | DUB | 41,186 | ||||||||||||||
| RUB | 74,799,000 | USD | 1,106,824 | 04/15 | JPM | 159,946 | ||||||||||||||
| SEK | 14,303,000 | EUR | 1,509,567 | 04/15 | SCB | 37,673 | ||||||||||||||
| SEK | 15,422,000 | EUR | 1,604,760 | 05/15 | BNP | 65,412 | ||||||||||||||
| SEK | 8,075,000 | EUR | 858,472 | 05/15 | MSC | 14,615 | ||||||||||||||
| SEK | 7,030,000 | EUR | 748,008 | 05/15 | SCB | 12,044 | ||||||||||||||
| TRY | 613,620 | USD | 235,058 | 04/15 | SSB | — | ||||||||||||||
| TRY | 9,994,834 | USD | 4,191,499 | 05/15 | BNP | (398,363 | ) | |||||||||||||
| TRY | 662,268 | USD | 284,923 | 05/15 | DUB | (33,586 | ) | |||||||||||||
| TRY | 6,857,870 | USD | 2,988,048 | 05/15 | MSC | (385,420 | ) | |||||||||||||
| TRY | 799,028 | USD | 329,768 | 05/15 | SCB | (26,529 | ) | |||||||||||||
| TRY | 2,690,000 | ZAR | 13,410,995 | 01/16 | SCB | (84,209 | ) | |||||||||||||
| USD | 7,888,601 | AUD | 9,858,326 | 04/15 | GSC | 389,186 | ||||||||||||||
| USD | 5,647,872 | AUD | 7,281,000 | 05/15 | MSC | 114,250 | ||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-87
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| Currency Purchased |
Currency Sold |
Expiration | Counterparty | Unrealized Appreciation (Depreciation) |
||||||||||||||||
| USD | 1,480,961 | AUD | 1,938,000 | 06/15 | GSC | $11,300 | ||||||||||||||
| USD | 4,506,855 | CAD | 5,634,000 | 06/15 | BNP | 63,629 | ||||||||||||||
| USD | 696,721 | CAD | 871,000 | 06/15 | DUB | 9,811 | ||||||||||||||
| USD | 1,562,643 | CAD | 1,960,000 | 06/15 | GSC | 16,899 | ||||||||||||||
| USD | 3,934,881 | CAD | 4,928,000 | 06/15 | SCB | 48,438 | ||||||||||||||
| USD | 2,738,904 | EUR | 2,329,000 | 04/15 | DUB | 234,097 | ||||||||||||||
| USD | 3,543,781 | EUR | 2,955,717 | 04/15 | GSC | 365,098 | ||||||||||||||
| USD | 23,242,345 | EUR | 20,097,224 | 04/15 | SCB | 1,630,467 | ||||||||||||||
| USD | 7,128,968 | EUR | 6,322,154 | 05/15 | GSC | 326,424 | ||||||||||||||
| USD | 3,318,370 | EUR | 2,864,341 | 05/15 | JPM | 236,947 | ||||||||||||||
| USD | 726,613 | EUR | 684,851 | 05/15 | SCB | (10,340 | ) | |||||||||||||
| USD | 12,476,978 | EUR | 11,077,681 | 05/15 | SCB | 556,529 | ||||||||||||||
| USD | 1,488,688 | EUR | 1,378,300 | 06/15 | CIT | 4,883 | ||||||||||||||
| USD | 743,057 | EUR | 689,100 | 06/15 | DUB | 1,208 | ||||||||||||||
| USD | 138,978 | EUR | 130,125 | 06/15 | GSC | (1,089 | ) | |||||||||||||
| USD | 4,015,487 | EUR | 3,706,600 | 06/15 | GSC | 25,279 | ||||||||||||||
| USD | 2,411,117 | EUR | 2,143,958 | 06/15 | JPM | 103,574 | ||||||||||||||
| USD | 1,317,512 | EUR | 1,223,930 | 07/15 | GSC | (231 | ) | |||||||||||||
| USD | 5,081,116 | EUR | 4,666,112 | 07/15 | SCB | 57,353 | ||||||||||||||
| USD | 268,684 | GBP | 174,748 | 05/15 | BNP | 9,549 | ||||||||||||||
| USD | 3,604,662 | GBP | 2,430,000 | 06/15 | SCB | 2,087 | ||||||||||||||
| USD | 110,376 | IDR | 1,433,455,000 | 04/15 | JPM | 1,318 | ||||||||||||||
| USD | 204,604 | IDR | 2,699,347,000 | 05/15 | GSC | 1,072 | ||||||||||||||
| USD | 2,431,562 | JPY | 284,270,000 | 04/15 | GSC | 60,755 | ||||||||||||||
| USD | 137,857 | JPY | 16,401,000 | 04/15 | SCB | 1,095 | ||||||||||||||
| USD | 6,991,003 | JPY | 831,223,253 | 05/15 | GSC | 55,679 | ||||||||||||||
| USD | 184,828 | JPY | 22,320,000 | 06/15 | GSC | (1,461 | ) | |||||||||||||
| USD | 192,516 | JPY | 23,268,000 | 06/15 | SCB | (1,685 | ) | |||||||||||||
| USD | 7,283,106 | MXN | 114,253,000 | 05/15 | BNP | (185,396 | ) | |||||||||||||
| USD | 569,854 | MXN | 8,894,000 | 05/15 | SCB | (11,530 | ) | |||||||||||||
| USD | 4,728,837 | NZD | 6,125,000 | 04/15 | GSC | 159,713 | ||||||||||||||
| USD | 2,840,064 | NZD | 3,825,930 | 04/15 | JPM | (11,341 | ) | |||||||||||||
| USD | 4,730,644 | NZD | 6,125,000 | 04/15 | SCB | 161,520 | ||||||||||||||
| USD | 5,057,416 | NZD | 7,018,000 | 05/15 | JPM | (170,989 | ) | |||||||||||||
| USD | 2,525,756 | NZD | 3,435,000 | 06/15 | JPM | (22,990 | ) | |||||||||||||
| USD | 2,296,948 | OMR | 888,000 | 04/16 | BNP | (1,482 | ) | |||||||||||||
| USD | 2,296,392 | OMR | 891,000 | 03/17 | BNP | (9,658 | ) | |||||||||||||
| USD | 1,123,568 | RON | 4,404,500 | 05/15 | JPM | 51,626 | ||||||||||||||
| USD | 2,093,133 | RUB | 93,270,000 | 04/15 | JPM | 513,545 | ||||||||||||||
| USD | 1,013,713 | SGD | 1,375,000 | 06/15 | SCB | 13,392 | ||||||||||||||
| USD | 1,376,642 | THB | 45,563,000 | 06/15 | DUB | (19,018 | ) | |||||||||||||
| USD | 855,090 | THB | 27,846,000 | 06/15 | DUB | 1,832 | ||||||||||||||
| USD | 132,198 | THB | 4,348,000 | 06/15 | JPM | (1,013 | ) | |||||||||||||
| USD | 504,961 | THB | 16,439,000 | 06/15 | SCB | 1,236 | ||||||||||||||
| USD | 325,472 | TRY | 886,000 | 01/16 | BNP | 6,945 | ||||||||||||||
| USD | 662,257 | TRY | 1,804,000 | 01/16 | SCB | 13,698 | ||||||||||||||
| USD | 4,999,914 | TRY | 11,862,000 | 05/15 | BNP | 498,170 | ||||||||||||||
| USD | 3,662,884 | TRY | 9,618,000 | 05/15 | GSC | 12,759 | ||||||||||||||
| USD | 1,947,907 | TRY | 4,641,000 | 05/15 | SCB | 186,601 | ||||||||||||||
| USD | 936,199 | TWD | 29,949,000 | 04/15 | GSC | (20,964 | ) | |||||||||||||
| USD | 840,707 | TWD | 26,890,000 | 04/15 | JPM | (18,691 | ) | |||||||||||||
| USD | 982,071 | TWD | 30,893,000 | 05/15 | CIT | (5,306 | ) | |||||||||||||
| USD | 2,815,792 | TWD | 88,826,000 | 05/15 | DUB | (23,377 | ) | |||||||||||||
| USD | 2,201,737 | TWD | 69,454,000 | 05/15 | GSC | (18,227 | ) | |||||||||||||
| USD | 3,691,940 | TWD | 116,374,000 | 05/15 | JPM | (27,635 | ) | |||||||||||||
| USD | 1,127,340 | TWD | 35,651,000 | 05/15 | SCB | (12,229 | ) | |||||||||||||
| USD | 934,839 | TWD | 29,396,000 | 06/15 | BNP | (4,819 | ) | |||||||||||||
| USD | 890,433 | TWD | 27,997,000 | 06/15 | JPM | (4,504 | ) | |||||||||||||
| USD | 626 | UYU | 16,202 | 04/15 | CIT | (5 | ) | |||||||||||||
| USD | 270,479 | UYU | 7,000,000 | 04/15 | CIT | 385 | ||||||||||||||
| USD | 1,419,779 | ZAR | 16,889,694 | 04/15 | BNP | 28,976 | ||||||||||||||
| USD | 1,420,934 | ZAR | 16,889,693 | 04/15 | DUB | 30,131 | ||||||||||||||
| USD | 1,343,221 | ZAR | 16,627,000 | 06/15 | BNP | (8,445 | ) | |||||||||||||
| USD | 1,389,806 | ZAR | 16,651,405 | 06/15 | BNP | 32,659 | ||||||||||||||
| USD | 2,724,100 | ZAR | 33,779,387 | 07/15 | JPM | — | ||||||||||||||
| UYU | 14,000,000 | USD | 552,923 | 04/15 | CIT | (12,733 | ) | |||||||||||||
| ZAR | 33,779,387 | USD | 2,763,140 | 04/15 | JPM | — | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total Forward Foreign Currency Contracts | $3,091,837 | |||||||||||||||||||
|
|
|
|||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-88
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| (n) | Purchased options outstanding as of March 31, 2015 were as follows: |
Foreign Currency Options
| Description | Exercise Price |
Expiration Date |
Counter- party |
Notional Amount |
Cost | Value | ||||||||||||||||
| Call - AUD versus USD |
$0.81 | 04/29/15 | CIT | $4,241,000 | $115,713 | $261,504 | ||||||||||||||||
| Call - AUD versus USD |
0.81 | 04/29/15 | JPM | 3,273,000 | 88,872 | 201,816 | ||||||||||||||||
| Call - AUD versus USD |
0.85 | 04/29/15 | CIT | 4,512,410 | 84,924 | 463,876 | ||||||||||||||||
| Call - AUD versus USD |
0.85 | 04/29/15 | JPM | 3,473,582 | 65,871 | 357,084 | ||||||||||||||||
| Call - EUR versus USD |
1.38 | 04/29/15 | CIT | 3,998,190 | 113,019 | 887,598 | ||||||||||||||||
| Call - JPY versus USD |
JPY 105.00 | 06/22/15 | CIT | 2,988,000 | 54,382 | 369,675 | ||||||||||||||||
| Call - JPY versus USD |
105.00 | 06/22/15 | DUB | 5,976,000 | 107,807 | 739,351 | ||||||||||||||||
| Call - JPY versus USD |
105.00 | 06/22/15 | GSC | 2,933,000 | 53,073 | 362,871 | ||||||||||||||||
| Call - JPY versus USD |
110.00 | 06/22/15 | GSC | 3,557,000 | 61,785 | 294,160 | ||||||||||||||||
| Call - EUR versus USD |
$1.15 | 07/30/15 | CIT | 7,111,000 | 141,118 | 483,434 | ||||||||||||||||
| Call - EUR versus USD |
1.21 | 07/30/15 | CIT | 7,114,000 | 80,643 | 787,164 | ||||||||||||||||
| Call - EUR versus USD |
1.30 | 07/30/15 | CIT | 5,857,000 | 175,417 | 995,339 | ||||||||||||||||
| Call - EUR versus USD |
1.35 | 07/30/15 | CIT | 5,857,000 | 168,330 | 1,175,149 | ||||||||||||||||
| Call - GBP versus USD |
1.52 | 11/10/15 | BNP | 1,404,000 | 48,508 | 65,257 | ||||||||||||||||
| Call - GBP versus USD |
1.52 | 11/10/15 | GSC | 5,748,000 | 202,186 | 267,161 | ||||||||||||||||
| Call - JPY versus USD |
JPY 120.00 | 11/11/15 | GSC | 2,490,000 | 87,312 | 70,950 | ||||||||||||||||
| Call - JPY versus USD |
120.00 | 11/11/15 | JPM | 2,880,000 | 101,376 | 82,063 | ||||||||||||||||
| Call - EUR versus USD |
$1.10 | 11/01/16 | DUB | 5,440,000 | 268,138 | 311,271 | ||||||||||||||||
| Call - EUR versus USD |
1.18 | 11/01/16 | DUB | 5,337,000 | 288,831 | 501,710 | ||||||||||||||||
| Call - EUR versus USD |
1.28 | 11/01/16 | DUB | 5,446,000 | 228,623 | 808,023 | ||||||||||||||||
| Call - EUR versus USD |
1.19 | 10/29/19 | GSC | 5,440,000 | 435,131 | 518,165 | ||||||||||||||||
| Call - EUR versus USD |
1.38 | 10/29/19 | GSC | 5,446,000 | 403,167 | 923,206 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| $3,374,226 | $10,926,827 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Options on Indices | ||||||||||||||||||||||
| Description | Exercise Price |
Expiration Date |
Counter- party |
Number of Contracts |
Cost | Value | ||||||||||||||||
| Call - Nikkei 225 (05/16) |
16,000.00 | 05/13/16 | GSC | 28 | $242,383 | $827,864 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Put - IBEX 35 Mini (12/15) |
9,000.00 | 12/18/15 | CIT | 351 | 170,810 | 65,751 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| $413,193 | $893,615 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Total Purchased Options |
$3,787,419 | $11,820,442 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| (o) | Transactions in written options for the year ended March 31, 2015 were as follows: |
| Number of Contracts |
Notional Amount in $ |
Premium | ||||||||||
| Outstanding, March 31, 2014 |
— | 10,791,867 | $196,345 | |||||||||
| Call Options Written |
28 | 92,237,874 | 5,414,408 | |||||||||
| Put Options Written |
— | 27,000 | 82,927 | |||||||||
| Call Options Expired |
— | (25,909,559 | ) | (603,875 | ) | |||||||
| Put Options Expired |
— | (27,000 | ) | (82,927 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Outstanding, March 31, 2015 |
28 | 77,120,182 | $5,006,878 | |||||||||
|
|
|
|
|
|
|
|||||||
| (p) | Premiums received and value of written options outstanding as of March 31, 2015 were as follows: |
Foreign Currency Options
| Description | Exercise Price |
Expiration Date |
Counter- party |
Notional Amount |
Premium | Value | ||||||||||||||||
| Call - AUD versus USD |
$0.81 | 04/29/15 | CIT | $4,241,000 | $237,254 | ($261,504 | ) | |||||||||||||||
| Call - AUD versus USD |
0.81 | 04/29/15 | JPM | 3,273,000 | 183,484 | (201,816 | ) | |||||||||||||||
| Call - AUD versus USD |
0.85 | 04/29/15 | CIT | 4,512,410 | 251,247 | (463,876 | ) | |||||||||||||||
| Call - AUD versus USD |
0.85 | 04/29/15 | JPM | 3,473,582 | 193,576 | (357,084 | ) | |||||||||||||||
| Call - EUR versus USD |
1.38 | 04/29/15 | CIT | 3,998,190 | 154,898 | (887,598 | ) | |||||||||||||||
| Call - JPY versus USD |
JPY 105.00 | 06/22/15 | DUB | 5,976,000 | 222,307 | (739,351 | ) | |||||||||||||||
| Call - JPY versus USD |
105.00 | 06/22/15 | GSC | 5,921,000 | 221,919 | (732,546 | ) | |||||||||||||||
| Call - JPY versus USD |
110.00 | 06/22/15 | GSC | 3,557,000 | 211,464 | (294,160 | ) | |||||||||||||||
| Call - EUR versus USD |
$1.15 | 07/30/15 | CIT | 7,111,000 | 203,161 | (483,434 | ) | |||||||||||||||
| Call - EUR versus USD |
1.21 | 07/30/15 | CIT | 7,114,000 | 295,487 | (787,164 | ) | |||||||||||||||
| Call - EUR versus USD |
1.30 | 07/30/15 | CIT | 5,857,000 | 217,154 | (995,339 | ) | |||||||||||||||
| Call - EUR versus USD |
1.35 | 07/30/15 | CIT | 5,857,000 | 294,994 | (1,175,149 | ) | |||||||||||||||
| Call - EUR versus USD |
1.18 | 11/01/16 | DUB | 5,337,000 | 443,665 | (501,710 | ) | |||||||||||||||
| Call - EUR versus USD |
1.28 | 11/01/16 | DUB | 5,446,000 | 513,846 | (808,023 | ) | |||||||||||||||
| Call - EUR versus USD |
1.38 | 10/29/19 | GSC | 5,446,000 | 818,512 | (923,206 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| $4,462,968 | ($9,611,960 | ) | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-89
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| Options on Indices | ||||||||||||||||||||||
| Description | Exercise Price | Expiration Date |
Counter- party |
Number of Contracts |
Premium | Value | ||||||||||||||||
| Call - Nikkei 225 (05/16) |
16,000.00 | 05/13/16 | GSC | 28 | $543,910 | ($827,864 | ) | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| Total Written Options |
$5,006,878 | ($10,439,824 | ) | |||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||
| (q) | Swap agreements outstanding as of March 31, 2015 were as follows: |
Credit Default Swaps on Sovereign Issues – Buy Protection (1)
| Referenced Obligation | Fixed Deal Pay Rate |
Expiration Date |
Counter- party |
Implied Credit Spread at 03/31/15 (3) |
Notional Amount (4) |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||
| Croatia Government |
1.000% | 12/20/16 | MSC | 1.493% | $198,000 | $1,607 | $10,568 | ($8,961 | ) | |||||||||||||||||||||
| China Government |
1.000% | 12/20/17 | JPM | 0.473% | 3,100,000 | (45,320 | ) | (59,131 | ) | 13,811 | ||||||||||||||||||||
| Croatia Government |
1.000% | 03/20/18 | CIT | 1.992% | 1,200,000 | 33,869 | 83,001 | (49,132 | ) | |||||||||||||||||||||
| Thailand Government |
1.000% | 03/20/18 | CIT | 0.566% | 1,930,000 | (25,249 | ) | (9,603 | ) | (15,646 | ) | |||||||||||||||||||
| Croatia Government |
1.000% | 03/20/18 | HSB | 1.992% | 313,000 | 8,834 | 29,013 | (20,179 | ) | |||||||||||||||||||||
| Banque Centrale de Tunisie SA |
1.000% | 03/20/18 | JPM | 2.273% | 375,000 | 13,678 | 40,581 | (26,903 | ) | |||||||||||||||||||||
| China Government |
1.000% | 03/20/18 | JPM | 0.505% | 1,100,000 | (16,399 | ) | (17,332 | ) | 933 | ||||||||||||||||||||
| Croatia Government |
1.000% | 03/20/18 | MSC | 1.992% | 2,262,000 | 63,841 | 194,313 | (130,472 | ) | |||||||||||||||||||||
| Lebanon Government |
5.000% | 03/20/18 | JPM | 3.147% | 689,000 | (37,238 | ) | (29,027 | ) | (8,211 | ) | |||||||||||||||||||
| Croatia Government |
1.000% | 06/20/18 | CIT | 2.069% | 800,000 | 26,295 | 76,719 | (50,424 | ) | |||||||||||||||||||||
| Lebanon Government |
1.000% | 06/20/18 | GSC | 3.259% | 5,166,000 | 353,254 | 715,241 | (361,987 | ) | |||||||||||||||||||||
| Russia Government |
1.000% | 06/20/18 | JPM | 4.096% | 1,290,000 | 117,653 | 21,470 | 96,183 | ||||||||||||||||||||||
| Croatia Government |
1.000% | 06/20/18 | MSC | 2.069% | 921,000 | 30,273 | 92,071 | (61,798 | ) | |||||||||||||||||||||
| Bulgaria Government |
1.000% | 12/20/18 | GSC | 1.354% | 1,000,000 | 12,436 | 11,641 | 795 | ||||||||||||||||||||||
| Qatar Government |
1.000% | 12/20/18 | JPM | 0.580% | 1,838,000 | (28,885 | ) | (31,386 | ) | 2,501 | ||||||||||||||||||||
| Lebanon Government |
5.000% | 12/20/18 | GSC | 3.458% | 663,000 | (36,425 | ) | (39,103 | ) | 2,678 | ||||||||||||||||||||
| Croatia Government |
1.000% | 03/20/19 | GSC | 2.307% | 400,000 | 19,520 | 24,108 | (4,588 | ) | |||||||||||||||||||||
| Qatar Government |
1.000% | 03/20/19 | GSC | 0.612% | 490,000 | (7,570 | ) | (8,606 | ) | 1,036 | ||||||||||||||||||||
| Qatar Government |
1.000% | 03/20/19 | JPM | 0.612% | 160,000 | (2,472 | ) | (3,076 | ) | 604 | ||||||||||||||||||||
| Qatar Government |
1.000% | 06/20/19 | CIT | 0.640% | 1,210,000 | (18,373 | ) | (28,206 | ) | 9,833 | ||||||||||||||||||||
| Qatar Government |
1.000% | 06/20/19 | JPM | 0.640% | 806,000 | (12,235 | ) | (17,605 | ) | 5,370 | ||||||||||||||||||||
| Poland Government |
1.000% | 09/20/19 | CIT | 0.484% | 817,000 | (18,754 | ) | (15,311 | ) | (3,443 | ) | |||||||||||||||||||
| Poland Government |
1.000% | 09/20/19 | DUB | 0.484% | 902,000 | (20,706 | ) | (17,267 | ) | (3,439 | ) | |||||||||||||||||||
| Croatia Government |
1.000% | 03/20/20 | BNP | 2.602% | 2,280,000 | 166,184 | 179,316 | (13,132 | ) | |||||||||||||||||||||
| Croatia Government |
1.000% | 03/20/20 | CIT | 2.602% | 1,750,000 | 127,657 | 126,470 | 1,187 | ||||||||||||||||||||||
| Croatia Government |
1.000% | 03/20/20 | GSC | 2.602% | 2,560,000 | 186,697 | 191,925 | (5,228 | ) | |||||||||||||||||||||
| Croatia Government |
1.000% | 06/20/20 | CIT | 2.665% | 400,000 | 31,666 | 30,938 | 728 | ||||||||||||||||||||||
| Croatia Government |
1.000% | 06/20/20 | GSC | 2.665% | 700,000 | 55,496 | 54,114 | 1,382 | ||||||||||||||||||||||
| Qatar Government |
1.000% | 03/20/22 | GSC | 1.039% | 1,040,000 | 2,546 | (11,099 | ) | 13,645 | |||||||||||||||||||||
| Russia Government |
1.000% | 12/20/22 | GSC | 4.228% | 5,240,000 | 1,016,841 | 413,671 | 603,170 | ||||||||||||||||||||||
| Mexico Government |
1.000% | 12/20/22 | HSB | 1.578% | 3,624,000 | 144,122 | 121,153 | 22,969 | ||||||||||||||||||||||
| South Africa Government |
1.000% | 12/20/22 | HSB | 2.462% | 22,560,000 | 2,196,956 | 1,985,816 | 211,140 | ||||||||||||||||||||||
| Spain Government |
1.000% | 12/20/22 | HSB | 1.008% | 3,830,000 | 1,001 | 711,227 | (710,226 | ) | |||||||||||||||||||||
| Qatar Government |
1.000% | 12/20/23 | GSC | 1.109% | 874,000 | 7,209 | 285 | 6,924 | ||||||||||||||||||||||
| Qatar Government |
1.000% | 09/20/24 | GSC | 1.152% | 290,000 | 3,602 | (622 | ) | 4,224 | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| $4,351,611 | $4,826,267 | ($474,656 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-90
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
Credit Default Swaps on Sovereign Issues – Sell Protection (2)
| Referenced Obligation | Fixed Deal Receive Rate |
Expiration Date |
Counter- party |
Implied Credit Spread at 03/31/15 (3) |
Notional Amount (4) |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||
| Croatia Government |
1.000% | 03/20/17 | CIT | 1.584% | $290,000 | ($3,204 | ) | ($4,056 | ) | $852 | ||||||||||||||||||||
| South Africa Government |
1.000% | 12/20/17 | HSB | 1.405% | 22,560,000 | (237,072 | ) | (463,220 | ) | 226,148 | ||||||||||||||||||||
| Turkey Government |
1.000% | 09/20/18 | CIT | 1.694% | 2,980,000 | (68,358 | ) | (55,873 | ) | (12,485 | ) | |||||||||||||||||||
| Turkey Government |
1.000% | 09/20/18 | GSC | 1.694% | 4,830,000 | (110,796 | ) | (91,425 | ) | (19,371 | ) | |||||||||||||||||||
| Turkey Government |
1.000% | 09/20/18 | MSC | 1.694% | 5,157,031 | (118,296 | ) | (98,208 | ) | (20,088 | ) | |||||||||||||||||||
| Slovenia Government |
1.000% | 12/20/19 | GSC | 1.015% | 545,000 | (226 | ) | (6,832 | ) | 6,606 | ||||||||||||||||||||
| Colombia Government |
1.000% | 03/20/20 | BNP | 1.546% | 1,890,000 | (47,887 | ) | (57,438 | ) | 9,551 | ||||||||||||||||||||
| Colombia Government |
1.000% | 03/20/20 | GSC | 1.546% | 338,000 | (8,556 | ) | (10,915 | ) | 2,359 | ||||||||||||||||||||
| Slovenia Government |
1.000% | 03/20/20 | GSC | 1.069% | 2,455,000 | (7,277 | ) | (29,929 | ) | 22,652 | ||||||||||||||||||||
| Colombia Government |
1.000% | 03/20/20 | JPM | 1.546% | 370,000 | (9,394 | ) | (11,450 | ) | 2,056 | ||||||||||||||||||||
| Turkey Government |
1.000% | 12/20/22 | GSC | 2.487% | 2,367,000 | (233,721 | ) | (156,302 | ) | (77,419 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| ($844,787 | ) | ($985,648 | ) | $140,861 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| $3,506,824 | $3,840,619 | ($333,795 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| (1) | If the fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying investments comprising the referenced index or (ii) receive a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index. |
| (2) | 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 investments comprising the referenced index or (ii) pay a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index. |
| (3) | An implied credit spread is the spread in yield between a U.S. Treasury security and the referenced obligation or underlying investment that are identical in all respects except for the quality rating. Implied credit spreads, represented in absolute terms, utilized in determining the value of credit default swap agreements on sovereign issues of an emerging country as of year end serve as an indicator of the current status of the payment/performance risk and represent the likelihood of 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, in comparison to narrower credit spreads, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation. |
| (4) | The maximum potential amount the fund could be required to pay 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. |
Cross Currency Swaps – Pay Floating Rate
| Notional Amount on Fixed Rate (Currency Delivered) |
Notional Amount on Floating Rate (Currency Received) |
Floating Rate Index |
Counter- party |
Fixed Rate |
Expiration Date |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||
| TRY 4,247,000 | $1,993,897 | 3-Month USD-LIBOR | JPM | 10.757% | 04/08/16 | $534,416 | $— | $534,416 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Cross Currency Swaps – Receive Floating Rate | ||||||||||||||||||||||||||||||||
| |
Notional Amount on Fixed Rate (Currency Received) |
|
|
Notional Amount on Floating Rate (Currency Delivered) |
|
Floating Rate Index |
Counter- party |
|
Fixed Rate |
|
|
Expiration Date |
|
Value | |
Upfront Premiums Paid (Received) |
|
|
Unrealized Appreciation (Depreciation) |
| ||||||||||||
| TRY 11,627,055 | $6,521,063 | 3-Month USD-LIBOR | MSC | 5.370% | 04/01/20 | $2,364,244 | $— | $2,364,244 | ||||||||||||||||||||||||
| 2,145,966 | 1,120,609 | 3-Month USD-LIBOR | JPM | 7.860% | 07/21/21 | 282,639 | — | 282,639 | ||||||||||||||||||||||||
| 1,169,919 | 611,243 | 3-Month USD-LIBOR | HSB | 7.850% | 02/23/22 | 180,236 | — | 180,236 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $2,827,119 | $— | $2,827,119 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $3,361,535 | $— | $3,361,535 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-91
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
Interest Rate Swaps – Pay Floating Rate
| Floating Rate Index | Counter- party |
Fixed Rate |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.870% | 01/04/16 | BRL 53,371,074 | ($35,118 | ) | $— | ($35,118 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.873% | 01/04/16 | 113,891,138 | (74,939 | ) | — | (74,939 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 13.350% | 01/04/16 | 25,982,000 | 21,166 | — | 21,166 | |||||||||||||||||||
| 7-Day CNY-CNRR07 |
GSC | 3.460% | 04/01/16 | CNY 15,765,000 | — | — | — | |||||||||||||||||||
| 7-Day CNY-CNRR07 |
DUB | 3.484% | 04/01/16 | 23,593,000 | — | — | — | |||||||||||||||||||
| 1-Day COP-IBR |
MSC | 4.485% | 11/10/16 | COP 3,638,946,354 | (3,079 | ) | — | (3,079 | ) | |||||||||||||||||
| 1-Day COP-IBR |
MSC | 4.460% | 11/15/16 | 3,654,485,915 | (3,795 | ) | — | (3,795 | ) | |||||||||||||||||
| 1-Day COP-IBR |
HSB | 4.370% | 11/21/16 | 4,392,511,149 | (7,265 | ) | — | (7,265 | ) | |||||||||||||||||
| 1-Day COP-IBR |
CIT | 4.280% | 11/28/16 | 5,524,580,000 | (12,537 | ) | — | (12,537 | ) | |||||||||||||||||
| 1-Day COP-IBR |
CIT | 4.290% | 12/01/16 | 5,524,580,000 | (12,112 | ) | — | (12,112 | ) | |||||||||||||||||
| 1-Day COP-IBR |
MSC | 4.230% | 12/05/16 | 13,957,940,000 | (36,505 | ) | — | (36,505 | ) | |||||||||||||||||
| 1-Day COP-IBR |
CIT | 4.250% | 12/05/16 | 19,736,570,000 | (49,341 | ) | — | (49,341 | ) | |||||||||||||||||
| 1-Day COP-IBR |
CIT | 4.270% | 12/05/16 | 16,767,000,000 | (39,338 | ) | — | (39,338 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
DUB | 11.807% | 01/02/17 | BRL 32,497,276 | (248,448 | ) | — | (248,448 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.023% | 01/02/17 | 19,815,847 | (126,660 | ) | — | (126,660 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
DUB | 12.030% | 01/02/17 | 1,913,040 | (11,808 | ) | — | (11,808 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.080% | 01/02/17 | 22,867,890 | (136,854 | ) | — | (136,854 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.144% | 01/02/17 | 19,172,346 | (103,925 | ) | — | (103,925 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
DUB | 12.190% | 01/02/17 | 9,289,725 | (46,863 | ) | — | (46,863 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.200% | 01/02/17 | 23,019,183 | (115,401 | ) | — | (115,401 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
DUB | 12.310% | 01/02/17 | 19,696,239 | (91,336 | ) | — | (91,336 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.330% | 01/02/17 | 9,844,355 | (44,417 | ) | — | (44,417 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 12.331% | 01/02/17 | 22,219,652 | (100,949 | ) | — | (100,949 | ) | |||||||||||||||||
| 1-Day BRL CETIP |
GSC | 13.650% | 01/02/17 | 62,406,250 | 117,322 | — | 117,322 | |||||||||||||||||||
| 6-Month PLN-WIBOR |
HSB | 3.430% | 12/12/17 | PLN 60,000,000 | 789,124 | — | 789,124 | |||||||||||||||||||
| 1-Day BRL CETIP |
GSC | 13.262% | 01/02/18 | BRL 29,651,838 | 45,525 | — | 45,525 | |||||||||||||||||||
| 1-Day BRL CETIP |
GSC | 13.274% | 01/02/18 | 10,665,445 | 17,377 | — | 17,377 | |||||||||||||||||||
| Sinacofi Chile Interbank |
DUB | 1.000% | 08/07/18 | CLP 61,854 | 83,499 | — | 83,499 | |||||||||||||||||||
| Sinacofi Chile Interbank |
DUB | 0.950% | 08/08/18 | 64,431 | 82,353 | — | 82,353 | |||||||||||||||||||
| 3-Month MYR KLIBOR |
GSC | 3.920% | 11/24/19 | MYR 1,410,000 | 2,350 | — | 2,350 | |||||||||||||||||||
| Sinacofi Chile Interbank |
GSC | 1.030% | 11/25/19 | CLP 21,735 | 2,124 | — | 2,124 | |||||||||||||||||||
| 3-Month MYR KLIBOR |
SCB | 3.925% | 11/25/19 | MYR 4,552,000 | 7,725 | — | 7,725 | |||||||||||||||||||
| Sinacofi Chile Interbank |
GSC | 1.010% | 11/26/19 | CLP 14,686 | 679 | — | 679 | |||||||||||||||||||
| 3-Month MYR KLIBOR |
JPM | 3.903% | 11/27/19 | MYR 4,650,000 | 6,649 | — | 6,649 | |||||||||||||||||||
| 3-Month MYR KLIBOR |
DUB | 3.887% | 11/28/19 | 5,078,000 | 6,475 | — | 6,475 | |||||||||||||||||||
| Sinacofi Chile Interbank |
GSC | 1.085% | 12/03/19 | CLP 29,371 | 3,265 | — | 3,265 | |||||||||||||||||||
| Sinacofi Chile Interbank |
GSC | 1.170% | 12/09/19 | 71,051 | 14,751 | — | 14,751 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
JPM | 4.060% | 06/04/23 | NZD 810,000 | 21,067 | — | 21,067 | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| (79,239) | — | (79,239) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Exchange | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 4.203% | 10/24/17 | 1,000,000 | 21,300 | 3 | 21,297 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 4.150% | 10/25/17 | 1,000,000 | 19,997 | 4 | 19,993 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 4.036% | 10/30/17 | 2,000,000 | 35,548 | — | 35,548 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 4.035% | 10/31/17 | 1,417,000 | 24,764 | 5 | 24,759 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 4.028% | 11/26/17 | 11,610,000 | 203,028 | — | 203,028 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 4.015% | 11/27/17 | 4,350,000 | 74,103 | — | 74,103 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 3.961% | 11/28/17 | 8,140,000 | 67,574 | — | 67,574 | |||||||||||||||||||
| 6-Month PLN-WIBOR |
LCH | 1.970% | 10/27/19 | PLN 27,269,000 | 35,744 | — | 35,744 | |||||||||||||||||||
| 6-Month PLN-WIBOR |
LCH | 1.722% | 02/27/20 | 5,554,000 | (9,596 | ) | — | (9,596 | ) | |||||||||||||||||
| 6-Month PLN-WIBOR |
LCH | 1.775% | 02/27/20 | 3,549,000 | (3,650 | ) | (3,650 | ) | ||||||||||||||||||
| 6-Month PLN-WIBOR |
LCH | 1.778% | 02/27/20 | 16,587,000 | (16,459 | ) | (16,459 | ) | ||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 4.960% | 04/29/24 | NZD 5,271,000 | 379,790 | — | 379,790 | |||||||||||||||||||
| 3-Month NZD Bank Bills |
LCH | 3.770% | 03/05/25 | 803,000 | 2,695 | — | 2,695 | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 834,838 | 12 | 834,826 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| $755,599 | $12 | $755,587 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-92
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
Interest Rate Swaps – Receive Floating Rate
| Floating Rate Index | Counterparty | Fixed Rate |
Expiration Date |
Notional Amount |
Value | Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
| 6-Month PLN-WIBOR |
HSB | 3.356% | 12/12/17 | PLN 6,880,000 | ($86,548 | ) | $— | ($86,548 | ) | |||||||||||||||||
| 6-Month PLN-WIBOR |
HSB | 3.620% | 12/12/17 | 13,000,000 | (190,075 | ) | — | (190,075 | ) | |||||||||||||||||
| 6-Month CLP-CLICP |
DUB | 3.704% | 08/07/18 | CLP 1,578,105,120 | 2,647 | — | 2,647 | |||||||||||||||||||
| 6-Month CLP-CLICP |
DUB | 3.603% | 08/08/18 | 1,610,651,000 | 11,370 | — | 11,370 | |||||||||||||||||||
| 6-Month CLP-CLICP |
GSC | 3.790% | 11/25/19 | 551,310,000 | 5,387 | — | 5,387 | |||||||||||||||||||
| 3-Month CLP-CLICP |
GSC | 3.770% | 11/26/19 | 358,351,000 | 4,061 | — | 4,061 | |||||||||||||||||||
| 6-Month CLP-CLICP |
GSC | 3.690% | 12/03/19 | 744,268,000 | 13,250 | — | 13,250 | |||||||||||||||||||
| 6-Month CLP-CLICP |
GSC | 3.760% | 12/09/19 | 1,819,774,000 | 23,740 | — | 23,740 | |||||||||||||||||||
| 1-Day BRL CETIP |
GSC | 11.505% | 01/02/23 | BRL 5,406,016 | 140,929 | — | 140,929 | |||||||||||||||||||
| 1-Day BRL CETIP |
GSC | 11.635% | 01/02/23 | 4,673,571 | 106,166 | — | 106,166 | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 30,927 | — | 30,927 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Exchange | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||
| 6-Month JPY LIBOR |
LCH | 0.753% | 06/12/24 | JPY 266,080,000 | (48,686 | ) | — | (48,686 | ) | |||||||||||||||||
| 6-Month JPY LIBOR |
LCH | 0.512% | 01/07/25 | 110,536,000 | 4,129 | — | 4,129 | |||||||||||||||||||
| 6-Month JPY LIBOR |
LCH | 0.464% | 01/09/25 | 1,684,300,000 | 126,086 | — | 126,086 | |||||||||||||||||||
| 3-Month USD-LIBOR |
LCH | 2.750% | 06/17/25 | $1,250,000 | (76,761 | ) | (63,825 | ) | (12,936 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| 4,768 | (63,825 | ) | 68,593 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| $35,695 | ($63,825 | ) | $99,520 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| $791,294 | ($63,813 | ) | $855,107 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Receive Total Return | Pay | Counter- party |
Expiration Date |
Notional Amount |
Value |
Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
| Sri Lanka Government |
3-Month USD-LIBOR + 100 bps | CIT | 06/17/15 | LKR 68,840,000 | $493 | ($1,970 | ) | $2,463 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Swap Agreements |
$7,660,146 | $3,774,836 | $3,885,310 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-93
PACIFIC FUNDS **
PF GLOBAL ABSOLUTE RETURN FUND **
Schedule of Investments (Continued)
March 31, 2015
| (r) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks (1) |
$2,990,627 | $— | $2,990,627 | $— | |||||||||||||
| Closed-End Mutual Fund |
986,784 | — | 986,784 | — | ||||||||||||||
| Corporate Bonds & Notes |
2,718,666 | — | 2,718,666 | — | ||||||||||||||
| Senior Loan Notes |
290,575 | — | 290,575 | — | ||||||||||||||
| Mortgage-Backed Securities |
2,526,725 | — | 2,526,725 | — | ||||||||||||||
| Foreign Government Bonds & Notes |
127,312,147 | — | 126,209,697 | 1,102,450 | ||||||||||||||
| Short-Term Investments |
31,861,029 | 7,435,109 | 24,425,920 | — | ||||||||||||||
| Derivatives: |
||||||||||||||||||
| Credit Contracts |
||||||||||||||||||
| Swaps |
4,621,237 | — | 4,621,237 | — | ||||||||||||||
| Equity Contracts |
||||||||||||||||||
| Futures |
25,664 | 25,664 | — | — | ||||||||||||||
| Purchased Options |
893,615 | — | 893,615 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Equity Contracts |
919,279 | 25,664 | 893,615 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
6,932,879 | — | 6,932,879 | — | ||||||||||||||
| Purchased Options |
10,926,827 | — | 10,926,827 | — | ||||||||||||||
| Swaps |
3,361,535 | — | 3,361,535 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Foreign Currency Contracts |
21,221,241 | — | 21,221,241 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Swaps |
2,524,252 | — | 2,524,252 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets - Derivatives |
29,286,009 | 25,664 | 29,260,345 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Assets |
197,972,562 | 7,460,773 | 189,409,339 | 1,102,450 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Liabilities |
Unfunded Loan Commitment |
(5,635 | ) | — | (5,635 | ) | — | |||||||||||
| Securities Sold Short |
||||||||||||||||||
| Foreign Government Bonds & Notes |
(1,044,819 | ) | — | (1,044,819 | ) | — | ||||||||||||
| Derivatives: |
||||||||||||||||||
| Credit Contracts |
||||||||||||||||||
| Swaps |
(1,114,413 | ) | — | (1,114,413 | ) | — | ||||||||||||
| Equity Contracts |
||||||||||||||||||
| Futures |
(71,775 | ) | (71,775 | ) | — | — | ||||||||||||
| Written Options |
(827,864 | ) | — | (827,864 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Equity Contracts |
(899,639 | ) | (71,775 | ) | (827,864 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Foreign Currency Contracts |
||||||||||||||||||
| Forward Foreign Currency Contracts |
(3,841,042 | ) | — | (3,841,042 | ) | — | ||||||||||||
| Written Options |
(9,611,960 | ) | — | (9,611,960 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Foreign Currency Contracts |
(13,453,002 | ) | — | (13,453,002 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Interest Rate Contracts |
||||||||||||||||||
| Futures |
(939,815 | ) | (939,815 | ) | — | — | ||||||||||||
| Forward Bonds |
(52,646 | ) | — | (52,646 | ) | |||||||||||||
| Swaps |
(1,732,465 | ) | — | (1,732,465 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Interest Rate Contracts |
(2,724,926 | ) | (939,815 | ) | (1,785,111 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities - Derivatives |
(18,191,980 | ) | (1,011,590 | ) | (17,180,390 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Liabilities |
(19,242,434 | ) | (1,011,590 | ) | (18,230,844 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$178,730,128 | $6,449,183 | $171,178,495 | $1,102,450 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of March 31, 2015, such liabilities are categorized within the three-tier hierarchy of inputs as follows:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Liabilities |
Reverse Repurchase Agreement |
($1,711,900 | ) | $— | ($1,711,900 | ) | $— | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | For equity investments categorized in a single level, refer to the schedule of investments for further geographical region breakout. |
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-94
PACIFIC FUNDS **
PF PRECIOUS METALS FUND **
Schedule of Investments
March 31, 2015
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-95
PACIFIC FUNDS **
PF PRECIOUS METALS FUND **
Schedule of Investments (Continued)
March 31, 2015
| (d) | Fair Value Measurements |
The following is a summary of the fund’s investments as categorized under the three-tier hierarchy of inputs used in valuing the fund’s assets and liabilities (See Note 3D in Notes to Financial Statements) as of March 31, 2015:
| Total Value at March 31, 2015 |
Level 1 Quoted Price |
Level 2 Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
|||||||||||||||
| Assets |
Common Stocks |
|||||||||||||||||
| Australia |
$1,116,993 | $— | $1,116,993 | $— | ||||||||||||||
| Bermuda |
53,562 | 53,562 | — | — | ||||||||||||||
| Canada |
25,252,366 | 25,022,462 | 229,904 | — | ||||||||||||||
| Peru |
250,758 | 250,758 | — | — | ||||||||||||||
| South Africa |
479,606 | 377,868 | 101,738 | — | ||||||||||||||
| United Kingdom |
5,876,073 | 4,176,427 | 1,699,646 | — | ||||||||||||||
| United States |
4,023,764 | 4,023,764 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 37,053,122 | 33,904,841 | 3,148,281 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-Term Investment |
2,637,526 | 2,637,526 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$39,690,648 | $36,542,367 | $3,148,281 | $— | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| See Notes to Financial Statements | See explanation of symbols and terms, if any, on page B-97 |
B-96
PACIFIC FUNDS **
Schedule of Investments (Continued)
Explanation of Symbols and Terms
March 31, 2015
| See Notes to Financial Statements |
B-97
PACIFIC FUNDS (1)
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2015
| PF Floating Rate Loan Fund |
PF Inflation Managed Fund |
PF Managed Bond Fund |
PF Short Duration Bond Fund |
PF Emerging Markets Debt Fund |
PF Comstock Fund |
|||||||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||||||
| Investments, at cost |
$128,380,128 | $156,720,084 | $707,310,058 | $213,717,363 | $165,330,219 | $184,687,686 | ||||||||||||||||||||||
| Investments, at value |
$127,516,938 | $156,521,170 | $717,149,766 | $214,191,152 | $154,954,581 | $270,160,110 | ||||||||||||||||||||||
| Cash (2) |
— | 396,027 | 5,413,852 | — | 1,318,020 | — | ||||||||||||||||||||||
| Foreign currency held, at value (3) |
— | 140,631 | 1,097,544 | — | 175,318 | 82,510 | ||||||||||||||||||||||
| Receivables: |
||||||||||||||||||||||||||||
| Dividends and interest |
374,546 | 324,882 | 3,981,969 | 1,004,157 | 2,580,560 | 526,347 | ||||||||||||||||||||||
| Fund shares sold |
63,683 | 49,725 | 464,859 | 115,956 | 57,235 | 63,977 | ||||||||||||||||||||||
| Securities sold |
769 | — | 107,881,450 | — | 865,667 | 237,414 | ||||||||||||||||||||||
| Securities sold short |
— | — | 6,807,000 | — | — | — | ||||||||||||||||||||||
| Variation margin |
— | — | 963,928 | — | — | — | ||||||||||||||||||||||
| Due from adviser |
16,942 | 12,359 | 55,897 | 24,056 | 27,711 | 18,966 | ||||||||||||||||||||||
| Forward foreign currency contracts appreciation |
— | 1,168,709 | 1,715,959 | 38,753 | 1,349,235 | 47,713 | ||||||||||||||||||||||
| Swap agreements, at value |
— | 65,902 | 458,886 | — | 3,301,505 | — | ||||||||||||||||||||||
| Prepaid expenses and other assets |
1,188 | 2,090 | 6,002 | 2,282 | 1,503 | 2,433 | ||||||||||||||||||||||
| Total Assets |
127,974,066 | 158,681,495 | 845,997,112 | 215,376,356 | 164,631,335 | 271,139,470 | ||||||||||||||||||||||
| LIABILITIES |
||||||||||||||||||||||||||||
| Payables: |
||||||||||||||||||||||||||||
| Fund shares redeemed |
20,426 | 24,213 | 108,545 | 43,492 | 21,737 | 11,313 | ||||||||||||||||||||||
| Securities purchased |
697,526 | — | 185,236,927 | 1,824,705 | 741,176 | 736,937 | ||||||||||||||||||||||
| Securities covering shorts |
— | — | 6,835,527 | — | — | — | ||||||||||||||||||||||
| Variation margin |
— | 5,989 | — | 4,266 | — | — | ||||||||||||||||||||||
| Reverse repurchase agreement |
— | 2,983,375 | 617,500 | — | — | — | ||||||||||||||||||||||
| Sale-buyback financing transactions |
— | 28,166,940 | 6,093,639 | — | — | — | ||||||||||||||||||||||
| Swap agreements |
— | 28,616 | — | — | — | — | ||||||||||||||||||||||
| Due to brokers (4) |
— | 612,000 | 1,121,000 | — | — | — | ||||||||||||||||||||||
| Accrued advisory fees |
70,204 | 40,657 | 218,100 | 72,461 | 107,626 | 169,395 | ||||||||||||||||||||||
| Accrued administration fees |
16,201 | 16,049 | 81,787 | 27,173 | 20,566 | 34,570 | ||||||||||||||||||||||
| Accrued support service expenses |
4,215 | 4,215 | 21,073 | 7,132 | 5,511 | 8,753 | ||||||||||||||||||||||
| Accrued custodian fees and expenses |
8,015 | 4,083 | 9,842 | 2,756 | 22,919 | 4,668 | ||||||||||||||||||||||
| Accrued transfer agency out-of-pocket expenses |
2,197 | 2,197 | 10,985 | 3,718 | 2,873 | 4,563 | ||||||||||||||||||||||
| Accrued legal, audit and tax service fees |
11,926 | 11,926 | 59,628 | 20,182 | 15,595 | 24,768 | ||||||||||||||||||||||
| Accrued trustees’ fees and expenses and deferred compensation |
555 | 2,102 | 9,662 | 1,296 | 51 | 3,324 | ||||||||||||||||||||||
| Accrued interest |
— | 579 | 10 | — | — | — | ||||||||||||||||||||||
| Accrued other |
18,551 | 16,083 | 57,632 | 25,631 | 13,545 | 17,326 | ||||||||||||||||||||||
| Forward foreign currency contracts depreciation |
— | 356,246 | 590,639 | 9,422 | 1,557,311 | 418,707 | ||||||||||||||||||||||
| Outstanding options written, at value (premiums received $233,805 and $536,974) |
— | 209,788 | 300,134 | — | — | — | ||||||||||||||||||||||
| Swap agreements, at value |
— | 42,263 | 742,943 | — | 111,745 | — | ||||||||||||||||||||||
| Total Liabilities |
849,816 | 32,527,321 | 202,115,573 | 2,042,234 | 2,620,655 | 1,434,324 | ||||||||||||||||||||||
| NET ASSETS |
$127,124,250 | $126,154,174 | $643,881,539 | $213,334,122 | $162,010,680 | $269,705,146 | ||||||||||||||||||||||
| NET ASSETS CONSIST OF: |
||||||||||||||||||||||||||||
| Paid-in capital |
$128,177,244 | $135,326,215 | $624,286,473 | $214,014,507 | $180,267,681 | $173,326,477 | ||||||||||||||||||||||
| Undistributed/accumulated net investment income (loss) |
1,135,367 | (1,757,012 | ) | 2,039,566 | 321,587 | (2,847,523 | ) | 3,878,599 | ||||||||||||||||||||
| Undistributed/accumulated net realized gain (loss) |
(1,325,171 | ) | (7,860,202 | ) | 8,891,128 | (1,495,267 | ) | (4,428,083 | ) | 7,399,318 | ||||||||||||||||||
| Net unrealized appreciation (depreciation) on
investments |
(863,190 | ) | 445,173 | 8,664,372 | 493,295 | (10,981,395 | ) | 85,100,752 | ||||||||||||||||||||
| NET ASSETS |
$127,124,250 | $126,154,174 | $643,881,539 | $213,334,122 | $162,010,680 | $269,705,146 | ||||||||||||||||||||||
| Class P Shares: |
||||||||||||||||||||||||||||
| Shares of beneficial interest outstanding |
12,873,399 | 14,332,668 | 58,223,245 | 21,320,162 | 18,222,711 | 15,796,726 | ||||||||||||||||||||||
| Net Asset Value Per Share |
$9.87 | $8.80 | $11.06 | $10.01 | $8.89 | $17.07 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | Includes cash collateral segregated for certain derivative instruments (see Notes to Schedules of Investments) in the PF Inflation Managed, PF Managed Bond, and PF Emerging Markets Debt Funds of $396,027, $5,413,852 and $878,020, respectively. |
| (3) | The cost of foreign currency for the PF Inflation Managed, PF Managed Bond, PF Emerging Markets Debt, and PF Comstock Funds was $140,972, $1,101,652, $174,022, and $79,539, respectively. |
| (4) | The PF Inflation Managed and PF Managed Bond Funds received cash collateral to mitigate risk of loss to certain counterparties, which will be repaid based on master netting arrangements between the Funds and the respective counterparties. The Funds invest such cash collateral in investment securities (See Note 5 in Notes to Financial Statements). |
See Notes to Financial Statements
C-1
PACIFIC FUNDS (1)
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
March 31, 2015
| PF Growth Fund |
PF Large-Cap Growth Fund |
PF Large-Cap Value Fund |
PF Main Street Core Fund |
PF Mid-Cap Equity Fund |
PF Mid-Cap Growth Fund |
|||||||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||||||
| Investments, at cost |
$114,796,318 | $161,867,300 | $207,704,853 | $208,653,666 | $189,416,297 | $74,698,742 | ||||||||||||||||||||||
| Investments, at value |
$147,963,854 | $199,288,898 | $343,886,595 | $269,979,184 | $219,299,411 | $85,974,506 | ||||||||||||||||||||||
| Foreign currency held, at value (2) |
— | 32 | — | — | — | — | ||||||||||||||||||||||
| Receivables: | ||||||||||||||||||||||||||||
| Dividends and interest |
83,471 | 36,821 | 765,009 | 381,301 | 181,092 | 41,197 | ||||||||||||||||||||||
| Fund shares sold |
— | — | 61,027 | — | — | — | ||||||||||||||||||||||
| Securities sold |
369,392 | — | — | 1,984,700 | 1,664,100 | 369,075 | ||||||||||||||||||||||
| Due from adviser |
9,998 | 9,658 | 18,578 | 15,479 | 12,163 | 3,504 | ||||||||||||||||||||||
| Prepaid expenses and other assets |
1,191 | 1,656 | 3,119 | 2,263 | 1,840 | 742 | ||||||||||||||||||||||
| Total Assets |
148,427,906 | 199,337,065 | 344,734,328 | 272,362,927 | 221,158,606 | 86,389,024 | ||||||||||||||||||||||
| LIABILITIES |
||||||||||||||||||||||||||||
| Payables: |
||||||||||||||||||||||||||||
| Fund shares redeemed |
4,947 | 6,543 | 16,224 | 5,356 | 5,000 | 3,156 | ||||||||||||||||||||||
| Securities purchased |
403,344 | — | — | 1,347,694 | 2,821,203 | 283,817 | ||||||||||||||||||||||
| Accrued advisory fees |
69,884 | 120,513 | 192,170 | 104,507 | 119,605 | 47,499 | ||||||||||||||||||||||
| Accrued administration fees |
19,059 | 25,641 | 44,347 | 34,836 | 27,601 | 10,961 | ||||||||||||||||||||||
| Accrued support service expenses |
4,863 | 6,160 | 11,347 | 8,753 | 6,808 | 2,594 | ||||||||||||||||||||||
| Accrued custodian fees and expenses |
1,426 | 1,469 | 2,442 | 2,494 | 1,376 | 643 | ||||||||||||||||||||||
| Accrued transfer agency out-of-pocket expenses |
2,535 | 3,211 | 5,915 | 4,563 | 3,549 | 1,352 | ||||||||||||||||||||||
| Accrued legal, audit and tax service fees |
13,760 | 17,430 | 32,107 | 24,768 | 19,264 | 7,339 | ||||||||||||||||||||||
| Accrued trustees’ fees and expenses and deferred compensation |
2,806 | 6,862 | 5,349 | 1,182 | 797 | 2,891 | ||||||||||||||||||||||
| Accrued other |
12,257 | 11,454 | 21,380 | 16,018 | 12,550 | 5,820 | ||||||||||||||||||||||
| Outstanding options written, at value (premiums received $33,954) |
— | — | — | — | — | 33,736 | ||||||||||||||||||||||
| Total Liabilities |
534,881 | 199,283 | 331,281 | 1,550,171 | 3,017,753 | 399,808 | ||||||||||||||||||||||
| NET ASSETS |
$147,893,025 | $199,137,782 | $344,403,047 | $270,812,756 | $218,140,853 | $85,989,216 | ||||||||||||||||||||||
| NET ASSETS CONSIST OF: |
||||||||||||||||||||||||||||
| Paid-in capital |
$114,572,759 | $152,500,051 | $201,688,321 | $196,330,695 | $184,097,416 | $72,162,842 | ||||||||||||||||||||||
| Undistributed/accumulated net investment income (loss) |
813 | (132,121 | ) | 1,220,834 | 682,846 | 193,773 | 81,890 | |||||||||||||||||||||
| Undistributed/accumulated net realized gain (loss) |
152,236 | 9,348,360 | 5,312,150 | 12,478,017 | 3,966,550 | 2,468,727 | ||||||||||||||||||||||
| Net unrealized appreciation (depreciation) on
investments |
33,167,217 | 37,421,492 | 136,181,742 | 61,321,198 | 29,883,114 | 11,275,757 | ||||||||||||||||||||||
| NET ASSETS |
$147,893,025 | $199,137,782 | $344,403,047 | $270,812,756 | $218,140,853 | $85,989,216 | ||||||||||||||||||||||
| Class P Shares: |
||||||||||||||||||||||||||||
| Shares of beneficial interest outstanding |
7,661,104 | 18,601,085 | 20,929,922 | 18,988,660 | 17,956,302 | 9,870,298 | ||||||||||||||||||||||
| Net Asset Value Per Share |
$19.30 | $10.71 | $16.46 | $14.26 | $12.15 | $8.71 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | The cost of foreign currency for the PF Large-Cap Growth Fund was $32. |
See Notes to Financial Statements
C-2
PACIFIC FUNDS (1)
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
March 31, 2015
| PF Small-Cap Growth Fund |
PF Small-Cap Value Fund |
PF Real Estate Fund |
PF Emerging Markets Fund |
PF International Large-Cap Fund |
PF International Small-Cap Fund |
|||||||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||||||
| Investments, at cost |
$68,370,002 | $134,253,239 | $26,157,329 | $118,206,383 | $152,990,601 | $120,249,540 | ||||||||||||||||||||||
| Investments, at value |
$83,825,045 | $146,951,241 | $49,269,960 | $138,034,418 | $220,286,557 | $126,771,954 | ||||||||||||||||||||||
| Foreign currency held, at value (2) |
— | — | — | 412,157 | 99,941 | 564,173 | ||||||||||||||||||||||
| Receivables: |
||||||||||||||||||||||||||||
| Dividends and interest |
3,056 | 167,171 | 151,993 | 310,269 | 1,026,911 | 415,209 | ||||||||||||||||||||||
| Fund shares sold |
— | — | 74,296 | 5,110 | — | — | ||||||||||||||||||||||
| Securities sold |
2,250,423 | 346,082 | 125,358 | 21,250 | 251,743 | 366,739 | ||||||||||||||||||||||
| Due from adviser |
4,381 | 8,596 | 2,773 | 59,095 | 27,732 | 35,754 | ||||||||||||||||||||||
| Prepaid expenses and other assets |
683 | 1,228 | 712 | 1,498 | 2,098 | — | ||||||||||||||||||||||
| Total Assets |
86,083,588 | 147,474,318 | 49,625,092 | 138,843,797 | 221,694,982 | 128,153,829 | ||||||||||||||||||||||
| LIABILITIES |
||||||||||||||||||||||||||||
| Payables: |
||||||||||||||||||||||||||||
| Fund shares redeemed |
178 | 177 | — | 355 | 10,309 | 355 | ||||||||||||||||||||||
| Securities purchased |
2,279,853 | 1,532,221 | 83,965 | 181,166 | 509,904 | 494,151 | ||||||||||||||||||||||
| Accrued advisory fees |
42,517 | 91,678 | 36,858 | 93,815 | 160,747 | 89,979 | ||||||||||||||||||||||
| Accrued administration fees |
10,629 | 18,336 | 6,143 | 17,590 | 28,367 | 16,261 | ||||||||||||||||||||||
| Accrued support service expenses |
2,594 | 4,539 | 1,621 | 4,539 | 7,132 | 3,890 | ||||||||||||||||||||||
| Accrued custodian fees and expenses |
573 | 952 | 381 | 87,660 | 28,997 | 28,692 | ||||||||||||||||||||||
| Accrued transfer agency out-of-pocket expenses |
1,352 | 2,366 | 845 | 2,366 | 3,718 | 2,028 | ||||||||||||||||||||||
| Accrued legal, audit and tax service fees |
7,339 | 12,843 | 4,587 | 12,843 | 20,181 | 11,008 | ||||||||||||||||||||||
| Accrued trustees’ fees and expenses and deferred compensation |
1,832 | 365 | 277 | 618 | 2,540 | 36 | ||||||||||||||||||||||
| Accrued foreign capital gains tax |
— | — | — | 180,913 | — | — | ||||||||||||||||||||||
| Accrued other |
5,799 | 9,465 | 4,241 | 20,319 | 24,620 | 14,266 | ||||||||||||||||||||||
| Total Liabilities |
2,352,666 | 1,672,942 | 138,918 | 602,184 | 796,515 | 660,666 | ||||||||||||||||||||||
| NET ASSETS |
$83,730,922 | $145,801,376 | $49,486,174 | $138,241,613 | $220,898,467 | $127,493,163 | ||||||||||||||||||||||
| NET ASSETS CONSIST OF: |
||||||||||||||||||||||||||||
| Paid-in capital |
$68,373,286 | $131,958,422 | $23,844,459 | $124,125,569 | $160,973,806 | $119,212,832 | ||||||||||||||||||||||
| Undistributed/accumulated net investment income (loss) |
(1,789 | ) | 254,878 | (250 | ) | (1,286,535 | ) | 1,129,417 | 1,460,836 | |||||||||||||||||||
| Undistributed/accumulated net realized gain (loss) |
(95,618 | ) | 890,074 | 2,529,334 | (4,219,944 | ) | (8,448,729 | ) | 301,975 | |||||||||||||||||||
| Net unrealized appreciation (depreciation) on
investments |
15,455,043 | 12,698,002 | 23,112,631 | 19,622,523 | 67,243,973 | 6,517,520 | ||||||||||||||||||||||
| NET ASSETS |
$83,730,922 | $145,801,376 | $49,486,174 | $138,241,613 | $220,898,467 | $127,493,163 | ||||||||||||||||||||||
| Class P Shares: |
||||||||||||||||||||||||||||
| Shares of beneficial interest outstanding |
5,656,228 | 13,946,195 | 2,932,758 | 10,178,165 | 11,939,709 | 11,928,125 | ||||||||||||||||||||||
| Net Asset Value Per Share |
$14.80 | $10.45 | $16.87 | $13.58 | $18.50 | $10.69 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | The cost of foreign currency for the PF Emerging Markets, PF International Large-Cap, and PF International Small-Cap Funds were $431,237, $100,977, and $566,229 respectively. |
See Notes to Financial Statements
C-3
PACIFIC FUNDS (1)
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
March 31, 2015
| PF International Value Fund |
PF Currency Strategies Fund |
PF Global Absolute Return Fund |
PF Precious Metals Fund |
|||||||||||||||||
| ASSETS |
||||||||||||||||||||
| Investments and repurchase agreement, at cost |
$126,699,626 | $190,526,852 | $181,772,273 | $48,528,285 | ||||||||||||||||
| Investments, at value |
$140,608,641 | $187,822,426 | $179,426,317 | $39,690,648 | ||||||||||||||||
| Repurchase agreement, at value |
— | — | 1,080,678 | — | ||||||||||||||||
| Cash (2) |
105,000 | 2,440,000 | — | — | ||||||||||||||||
| Foreign currency held, at value (3) |
1,148,031 | 8,141 | 1,918,314 | 152,382 | ||||||||||||||||
| Receivables: |
||||||||||||||||||||
| Dividends and interest |
767,316 | 660,218 | 3,133,063 | 137,481 | ||||||||||||||||
| Fund shares sold |
— | 435,423 | 799 | 56,929 | ||||||||||||||||
| Securities sold |
111,899 | — | 3,745,466 | — | ||||||||||||||||
| Variation margin |
— | — | 660,239 | — | ||||||||||||||||
| Swap agreement |
— | — | 14,477 | — | ||||||||||||||||
| Due from adviser |
5,495 | 564 | — | 1,485 | ||||||||||||||||
| Forward foreign currency contracts appreciation |
922,942 | 11,257,347 | 6,932,879 | — | ||||||||||||||||
| Swap agreements, at value |
— | — | 9,512,266 | — | ||||||||||||||||
| Prepaid expenses and other assets |
1,458 | 1,727 | 1,582 | 535 | ||||||||||||||||
| Total Assets |
143,670,782 | 202,625,846 | 206,426,080 | 40,039,460 | ||||||||||||||||
| LIABILITIES |
||||||||||||||||||||
| Payables: |
||||||||||||||||||||
| Fund shares redeemed |
6,281 | 9,646 | 15,780 | 1,578 | ||||||||||||||||
| Securities purchased |
132,183 | — | 4,183,902 | — | ||||||||||||||||
| Securities sold short, at value (proceeds $990,815) |
— | — | 1,044,819 | — | ||||||||||||||||
| Variation margin |
15,635 | — | — | — | ||||||||||||||||
| Reverse repurchase agreement |
— | — | 1,711,900 | — | ||||||||||||||||
| Due to brokers (4) |
— | 4,460,000 | 4,523,215 | — | ||||||||||||||||
| Accrued advisory fees |
79,578 | 102,906 | 121,281 | 23,874 | ||||||||||||||||
| Accrued administration fees |
18,364 | 23,748 | 22,740 | 5,266 | ||||||||||||||||
| Accrued support service expenses |
4,539 | 5,835 | 5,835 | 1,621 | ||||||||||||||||
| Accrued custodian fees and expenses |
20,965 | 4,511 | 59,436 | 3,164 | ||||||||||||||||
| Accrued transfer agency out-of-pocket expenses |
2,366 | 3,042 | 3,042 | 845 | ||||||||||||||||
| Accrued legal, audit and tax service fees |
12,843 | 16,512 | 16,513 | 4,587 | ||||||||||||||||
| Accrued trustees’ fees and expenses and deferred compensation |
3,455 | 54 | 54 | 15 | ||||||||||||||||
| Accrued interest |
— | — | 6,904 | — | ||||||||||||||||
| Accrued other |
14,929 | 9,019 | 24,277 | 6,155 | ||||||||||||||||
| Forward foreign currency contracts depreciation |
706,588 | 10,418,381 | 3,841,042 | — | ||||||||||||||||
| Unfunded loan commitment depreciation |
— | — | 5,635 | — | ||||||||||||||||
| Forward bonds depreciation |
— | — | 52,646 | — | ||||||||||||||||
| Outstanding options written, at value (premiums received $5,006,878) |
— | — | 10,439,824 | — | ||||||||||||||||
| Swap agreements, at value |
— | — | 2,691,726 | — | ||||||||||||||||
| Total Liabilities |
1,017,726 | 15,053,654 | 28,770,571 | 47,105 | ||||||||||||||||
| NET ASSETS |
$142,653,056 | $187,572,192 | $177,655,509 | $39,992,355 | ||||||||||||||||
| NET ASSETS CONSIST OF: |
||||||||||||||||||||
| Paid-in capital |
$174,146,635 | $187,784,427 | $172,803,951 | $79,122,599 | ||||||||||||||||
| Undistributed/accumulated net investment income (loss) |
451,382 | 1,708,297 | 6,815,142 | (15,509 | ) | |||||||||||||||
| Undistributed/accumulated net realized gain (loss) |
(46,034,099 | ) | (5,937 | ) | (1,020,933 | ) | (30,269,015 | ) | ||||||||||||
| Net unrealized appreciation (depreciation) on
investments |
14,089,138 | (1,914,595 | ) | (942,651 | ) | (8,845,720 | ) | |||||||||||||
| NET ASSETS |
$142,653,056 | $187,572,192 | $177,655,509 | $39,992,355 | ||||||||||||||||
| Class P Shares: |
||||||||||||||||||||
| Shares of beneficial interest outstanding |
15,006,164 | 18,912,615 | 17,713,339 | 8,882,579 | ||||||||||||||||
| Net Asset Value Per Share |
$9.51 | $9.92 | $10.03 | $4.50 | ||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | Includes cash collateral segregated for certain derivative instruments (see Notes to Schedule of Investments) in the PF International Value and PF Currency Strategies Funds of $105,000 and $2,440,000, respectively. |
| (3) | The cost of foreign currency for the PF International Value, PF Currency Strategies, PF Global Absolute Return, and PF Precious Metals Funds was $1,139,453, $8,098, $1,926,788, and $152,295 respectively. |
| (4) | The PF Currency Strategies and PF Global Absolute Return Funds received cash collateral to mitigate risk of loss to certain counterparties, which will be repaid based on master netting arrangements between the Funds and the respective counterparties. The Funds invest such cash collateral in investment securities (See Note 5 in Notes to Financial Statements). |
See Notes to Financial Statements
C-4
PACIFIC FUNDS (1)
MARCH 31, 2015
| PF Floating Rate Loan Fund |
PF Inflation Managed Fund |
PF Managed Fund |
PF Short Duration Fund |
PF Emerging Markets Debt Fund |
PF Comstock Fund |
|||||||||||||||||||||||
| INVESTMENT INCOME |
||||||||||||||||||||||||||||
| Dividends, net of foreign taxes withheld |
$1,473 | $259 | $— | $657 | $— | $6,059,540 | ||||||||||||||||||||||
| Interest, net of foreign taxes withheld |
5,485,104 | 1,985,640 | 12,123,754 | 3,886,998 | 9,397,420 | — | ||||||||||||||||||||||
| Other |
11,015 | — | 3,195 | — | — | — | ||||||||||||||||||||||
| Total Investment Income |
5,497,592 | 1,985,899 | 12,126,949 | 3,887,655 | 9,397,420 | 6,059,540 | ||||||||||||||||||||||
| EXPENSES |
||||||||||||||||||||||||||||
| Advisory fees |
947,708 | 626,963 | 2,522,176 | 935,634 | 1,202,409 | 2,124,354 | ||||||||||||||||||||||
| Administration fees |
189,542 | 235,111 | 945,816 | 350,863 | 229,760 | 424,871 | ||||||||||||||||||||||
| Support services expenses |
20,306 | 27,377 | 100,736 | 37,972 | 23,183 | 46,327 | ||||||||||||||||||||||
| Custodian fees and expenses |
26,302 | 18,704 | 47,633 | 10,266 | 103,172 | 12,407 | ||||||||||||||||||||||
| Shareholder report expenses |
5,155 | 7,176 | 27,651 | 9,176 | 5,898 | 11,992 | ||||||||||||||||||||||
| Transfer agency out-of-pocket expenses |
11,914 | 15,764 | 59,149 | 22,015 | 13,829 | 26,919 | ||||||||||||||||||||||
| Registration fees |
2,463 | 2,548 | 12,381 | 4,440 | 3,215 | 5,114 | ||||||||||||||||||||||
| Legal, audit and tax service fees |
17,532 | 20,026 | 87,763 | 31,825 | 21,986 | 37,471 | ||||||||||||||||||||||
| Trustees’ fees and expenses |
5,574 | 7,411 | 28,159 | 10,289 | 6,423 | 12,537 | ||||||||||||||||||||||
| Interest expense |
— | 59,122 | 2,219 | — | — | — | ||||||||||||||||||||||
| Other |
69,857 | 51,767 | 149,504 | 88,274 | 41,473 | 21,393 | ||||||||||||||||||||||
| Total Expenses |
1,296,353 | 1,071,969 | 3,983,187 | 1,500,754 | 1,651,348 | 2,723,385 | ||||||||||||||||||||||
| Advisory Fee Waiver (2) |
(126,361 | ) | (5,288 | ) | — | — | — | (42,487 | ) | |||||||||||||||||||
| Adviser Expense Reimbursement (3) |
(159,103 | ) | (150,774 | ) | (512,975 | ) | (214,257 | ) | (219,179 | ) | (174,160 | ) | ||||||||||||||||
| Net Expenses |
1,010,889 | 915,907 | 3,470,212 | 1,286,497 | 1,432,169 | 2,506,738 | ||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) |
4,486,703 | 1,069,992 | 8,656,737 | 2,601,158 | 7,965,251 | 3,552,802 | ||||||||||||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||||||||||||||||||
| Net Realized Gain (Loss) On: |
||||||||||||||||||||||||||||
| Investment security transactions |
(1,323,615 | ) | (398,625 | ) | 10,171,913 | 222,130 | 184,162 | 36,216,937 | ||||||||||||||||||||
| Closed short positions |
— | 24,331 | (34,410 | ) | — | — | — | |||||||||||||||||||||
| Futures contract transactions |
— | (195,046 | ) | 9,425,370 | (66,479 | ) | — | — | ||||||||||||||||||||
| Swap transactions |
— | (3,058,080 | ) | (1,188,013 | ) | — | 237,681 | — | ||||||||||||||||||||
| Written option transactions |
— | 99,517 | 3,311,106 | — | — | — | ||||||||||||||||||||||
| Foreign currency transactions |
— | 2,664,877 | 2,900,476 | (300,037 | ) | (7,062,507 | ) | 4,573,178 | ||||||||||||||||||||
| Net Realized Gain (Loss) |
(1,323,615 | ) | (863,026 | ) | 24,586,442 | (144,386 | ) | (6,640,664 | ) | 40,790,115 | ||||||||||||||||||
| Change In Net Unrealized Appreciation (Depreciation) On: |
||||||||||||||||||||||||||||
| Investment securities |
(850,541 | ) | 3,178,173 | 6,488,724 | (464,166 | ) | (9,384,419 | ) | (23,828,051 | ) | ||||||||||||||||||
| Futures contracts |
— | (17,028 | ) | 1,900,080 | (14,078 | ) | — | — | ||||||||||||||||||||
| Swaps |
— | 774,067 | (3,423,031 | ) | — | (223,734 | ) | — | ||||||||||||||||||||
| Written options |
— | (122,903 | ) | 38,347 | — | — | — | |||||||||||||||||||||
| Foreign currencies |
— | 843,407 | 763,897 | 27,030 | (460,562 | ) | (222,304 | ) | ||||||||||||||||||||
| Change in Net Unrealized Appreciation (Depreciation) |
(850,541 | ) | 4,655,716 | 5,768,017 | (451,214 | ) | (10,068,715 | ) | (24,050,355 | ) | ||||||||||||||||||
| NET GAIN (LOSS) |
(2,174,156 | ) | 3,792,690 | 30,354,459 | (595,600 | ) | (16,709,379 | ) | 16,739,760 | |||||||||||||||||||
| NET INCREASE (DECREASE) IN NET
ASSETS |
$2,312,547 | $4,862,682 | $39,011,196 | $2,005,558 | ($8,744,128 | ) | $20,292,562 | |||||||||||||||||||||
| Foreign taxes withheld on dividends and interest |
$— | $21,542 | $39,521 | $— | $69,384 | $170,396 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | See Note 6 in Notes to Financial Statements. |
| (3) | See Note 7B in Notes to Financial Statements. |
See Notes to Financial Statements
C-5
PACIFIC FUNDS (1)
STATEMENTS OF OPERATIONS (Continued)
MARCH 31, 2015
| PF Growth Fund |
PF Large-Cap Fund |
PF Large-Cap Fund |
PF Main Street Fund |
PF Mid-Cap Fund |
PF Mid-Cap Growth Fund |
|||||||||||||||||||||||
| INVESTMENT INCOME |
||||||||||||||||||||||||||||
| Dividends, net of foreign taxes withheld |
$1,264,862 | $1,288,372 | $7,796,649 | $4,330,010 | $2,335,554 | $762,280 | ||||||||||||||||||||||
| Interest, net of foreign taxes withheld |
2,079 | — | — | — | — | — | ||||||||||||||||||||||
| Total Investment Income |
1,266,941 | 1,288,372 | 7,796,649 | 4,330,010 | 2,335,554 | 762,280 | ||||||||||||||||||||||
| EXPENSES |
||||||||||||||||||||||||||||
| Advisory fees |
699,661 | 1,388,480 | 2,340,099 | 1,171,843 | 1,261,085 | 608,144 | ||||||||||||||||||||||
| Administration fees |
190,817 | 277,696 | 540,023 | 390,614 | 291,019 | 130,316 | ||||||||||||||||||||||
| Support services expenses |
18,352 | 29,189 | 58,379 | 40,800 | 29,549 | 13,411 | ||||||||||||||||||||||
| Custodian fees and expenses |
4,471 | 7,205 | 10,064 | 9,521 | 5,150 | 2,506 | ||||||||||||||||||||||
| Shareholder report expenses |
4,511 | 7,397 | 14,962 | 10,589 | 7,244 | 3,436 | ||||||||||||||||||||||
| Transfer agency out-of-pocket expenses |
11,030 | 17,117 | 33,977 | 24,012 | 17,477 | 7,817 | ||||||||||||||||||||||
| Registration fees |
2,825 | 3,733 | 6,744 | 4,954 | 4,041 | 1,508 | ||||||||||||||||||||||
| Legal, audit and tax service fees |
18,637 | 25,973 | 48,553 | 35,255 | 27,610 | 10,979 | ||||||||||||||||||||||
| Trustees’ fees and expenses |
5,395 | 8,349 | 15,922 | 11,188 | 8,243 | 3,783 | ||||||||||||||||||||||
| Other |
16,231 | 14,072 | 23,279 | 17,985 | 17,104 | 10,496 | ||||||||||||||||||||||
| Total Expenses |
971,930 | 1,779,211 | 3,092,002 | 1,716,761 | 1,668,522 | 792,396 | ||||||||||||||||||||||
| Advisory Fee Waiver (2) |
— | (83,309 | ) | — | — | — | (43,439 | ) | ||||||||||||||||||||
| Adviser Expense Reimbursement (3) |
(81,452 | ) | (113,036 | ) | (211,881 | ) | (154,305 | ) | (116,418 | ) | (53,935 | ) | ||||||||||||||||
| Net Expenses |
890,478 | 1,582,866 | 2,880,121 | 1,562,456 | 1,552,104 | 695,022 | ||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) |
376,463 | (294,494 | ) | 4,916,528 | 2,767,554 | 783,450 | 67,258 | |||||||||||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||||||||||||||||||
| Net Realized Gain (Loss) On: |
||||||||||||||||||||||||||||
| Investment security transactions |
2,015,578 | 19,647,787 | 30,890,745 | 30,069,039 | 15,534,514 | 3,113,844 | ||||||||||||||||||||||
| Written option transactions |
— | — | — | — | — | 151,098 | ||||||||||||||||||||||
| Foreign currency transactions |
(807 | ) | (8,715 | ) | (225 | ) | (6,272 | ) | — | (563 | ) | |||||||||||||||||
| Net Realized Gain (Loss) |
2,014,771 | 19,639,072 | 30,890,520 | 30,062,767 | 15,534,514 | 3,264,379 | ||||||||||||||||||||||
| Change In Net Unrealized Appreciation (Depreciation) On: |
||||||||||||||||||||||||||||
| Investment securities |
14,020,688 | 6,728,692 | (3,677,051 | ) | (4,706,324 | ) | (824,794 | ) | 5,779,095 | |||||||||||||||||||
| Written options |
— | — | — | — | — | (4,891 | ) | |||||||||||||||||||||
| Foreign currencies |
(435 | ) | (28,897 | ) | — | (4,854 | ) | — | (356 | ) | ||||||||||||||||||
| Change in Net Unrealized Appreciation (Depreciation) |
14,020,253 | 6,699,795 | (3,677,051 | ) | (4,711,178 | ) | (824,794 | ) | 5,773,848 | |||||||||||||||||||
| NET GAIN (LOSS) |
16,035,024 | 26,338,867 | 27,213,469 | 25,351,589 | 14,709,720 | 9,038,227 | ||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET
ASSETS |
$16,411,487 | $26,044,373 | $32,129,997 | $28,119,143 | $15,493,170 | $9,105,485 | ||||||||||||||||||||||
| Foreign taxes withheld on dividends and interest |
$16,500 | $386 | $142,737 | $33,471 | $734 | $— | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | See Note 6 in Notes to Financial Statements. |
| (3) | See Note 7B in Notes to Financial Statements. |
See Notes to Financial Statements
C-6
PACIFIC FUNDS (1)
STATEMENTS OF OPERATIONS (Continued)
MARCH 31, 2015
|
PF Small-Cap Fund |
PF Small-Cap Fund |
PF Real Estate Fund |
PF Emerging Markets Fund |
PF International Large-Cap Fund |
PF International Fund (2) |
|||||||||||||||||||||||
| INVESTMENT INCOME |
||||||||||||||||||||||||||||
| Dividends, net of foreign taxes withheld |
$287,713 | $2,064,709 | $1,562,129 | $2,754,975 | $6,305,043 | $632,830 | ||||||||||||||||||||||
| Interest, net of foreign taxes withheld |
— | — | — | — | 1,040 | — | ||||||||||||||||||||||
| Total Investment Income |
287,713 | 2,064,709 | 1,562,129 | 2,754,975 | 6,306,083 | 632,830 | ||||||||||||||||||||||
| EXPENSES |
||||||||||||||||||||||||||||
| Advisory fees |
432,583 | 1,066,782 | 571,341 | 1,254,372 | 2,097,638 | 222,444 | ||||||||||||||||||||||
| Administration fees |
108,146 | 213,356 | 95,224 | 235,195 | 370,171 | 39,255 | ||||||||||||||||||||||
| Support services expenses |
10,560 | 22,534 | 10,572 | 24,486 | 37,875 | 3,890 | ||||||||||||||||||||||
| Custodian fees and expenses |
2,078 | 4,134 | 1,854 | 302,465 | 105,813 | 28,692 | ||||||||||||||||||||||
| Shareholder report expenses |
3,355 | 6,579 | 2,668 | 6,170 | 9,586 | 1,125 | ||||||||||||||||||||||
| Transfer agency out-of-pocket expenses |
6,301 | 13,171 | 6,096 | 14,260 | 21,996 | 2,919 | ||||||||||||||||||||||
| Registration fees |
1,418 | 2,588 | 1,007 | 2,732 | 4,288 | 2,142 | ||||||||||||||||||||||
| Legal, audit and tax service fees |
9,809 | 18,741 | 7,868 | 19,996 | 31,082 | 11,060 | ||||||||||||||||||||||
| Trustees’ fees and expenses |
3,090 | 6,091 | 2,887 | 6,688 | 10,280 | 1,290 | ||||||||||||||||||||||
| Offering expenses |
— | — | — | — | — | 10,411 | ||||||||||||||||||||||
| Other |
13,719 | 16,323 | 7,680 | 69,023 | 32,668 | 1,730 | ||||||||||||||||||||||
| Total Expenses |
591,059 | 1,370,299 | 707,197 | 1,935,387 | 2,721,397 | 324,958 | ||||||||||||||||||||||
| Advisory Fee Waiver (3) |
— | — | — | — | — | (5,234 | ) | |||||||||||||||||||||
| Adviser Expense Reimbursement (4) |
(50,330 | ) | (90,161 | ) | (40,632 | ) | (445,820 | ) | (253,588 | ) | (37,089 | ) | ||||||||||||||||
| Net Expenses |
540,729 | 1,280,138 | 666,565 | 1,489,567 | 2,467,809 | 282,635 | ||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) |
(253,016 | ) | 784,571 | 895,564 | 1,265,408 | 3,838,274 | 350,195 | |||||||||||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||||||||||||||||||
| Net Realized Gain (Loss) On: |
||||||||||||||||||||||||||||
| Investment security transactions |
6,392,830 | 37,398,618 | 10,839,909 | (779,924 | ) | 3,914,854 | (104,502 | ) | ||||||||||||||||||||
| Futures contract transactions |
— | (26,949 | ) | — | — | (292,389 | ) | 406,477 | ||||||||||||||||||||
| Foreign currency transactions |
— | (1,149 | ) | — | (33,136 | ) | (33,516 | ) | 1,106,334 | |||||||||||||||||||
| Net Realized Gain (Loss) |
6,392,830 | 37,370,520 | 10,839,909 | (813,060 | ) | 3,588,949 | 1,408,309 | |||||||||||||||||||||
| Change In Net Unrealized Appreciation (Depreciation) On: |
||||||||||||||||||||||||||||
| Investment securities (5) |
2,170,370 | (22,820,974 | ) | (144,708 | ) | (6,869,999 | ) | (7,384,399 | ) | 6,522,414 | ||||||||||||||||||
| Foreign currencies |
— | (83 | ) | — | (37,307 | ) | (63,953 | ) | (4,894 | ) | ||||||||||||||||||
| Change in Net Unrealized Appreciation (Depreciation) |
2,170,370 | (22,821,057 | ) | (144,708 | ) | (6,907,306 | ) | (7,448,352 | ) | 6,517,520 | ||||||||||||||||||
| NET GAIN (LOSS) |
8,563,200 | 14,549,463 | 10,695,201 | (7,720,366 | ) | (3,859,403 | ) | 7,925,829 | ||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$8,310,184 | $15,334,034 | $11,590,765 | ($6,454,958 | ) | ($21,129 | ) | $8,276,024 | ||||||||||||||||||||
| Foreign taxes withheld on dividends and interest |
$— | $8,070 | $— | $272,367 | $658,486 | $72,734 | ||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | PF International Small-Cap commenced operations on January 14, 2015. |
| (3) | See Note 6 in Notes to Financial Statements. |
| (4) | See Note 7B in Notes to Financial Statements. |
| (5) | Change in net unrealized appreciation (depreciation) on investment securities for the PF Emerging Markets Fund was net of increase in deferred foreign capital gains tax of $88,765. |
See Notes to Financial Statements
C-7
PACIFIC FUNDS (1)
STATEMENTS OF OPERATIONS (Continued)
MARCH 31, 2015
| PF International Value Fund |
PF Currency Strategies Fund |
PF Global Absolute Fund |
PF Precious Fund |
|||||||||||||||||
| INVESTMENT INCOME |
||||||||||||||||||||
| Dividends, net of foreign taxes withheld |
$4,937,939 | $— | $— | $454,139 | ||||||||||||||||
| Interest, net of foreign taxes withheld |
— | 162,461 | 11,048,570 | 122 | ||||||||||||||||
| Total Investment Income |
4,937,939 | 162,461 | 11,048,570 | 454,261 | ||||||||||||||||
| EXPENSES |
||||||||||||||||||||
| Advisory fees |
1,074,559 | 1,123,413 | 1,493,278 | 455,076 | ||||||||||||||||
| Administration fees |
247,975 | 259,249 | 279,990 | 91,015 | ||||||||||||||||
| Support services expenses |
26,620 | 24,850 | 29,660 | 10,734 | ||||||||||||||||
| Custodian fees and expenses |
82,134 | 17,056 | 234,976 | 13,666 | ||||||||||||||||
| Shareholder report expenses |
6,692 | 6,852 | 7,660 | 2,826 | ||||||||||||||||
| Transfer agency out-of-pocket expenses |
15,340 | 14,803 | 17,300 | 6,141 | ||||||||||||||||
| Registration fees |
2,651 | 3,251 | 3,395 | 999 | ||||||||||||||||
| Legal, audit and tax service fees |
20,156 | 22,767 | 24,595 | 7,785 | ||||||||||||||||
| Trustees’ fees and expenses |
7,246 | 6,929 | 7,817 | 2,738 | ||||||||||||||||
| Interest expense |
— | — | 120,691 | — | ||||||||||||||||
| Other |
21,866 | 8,797 | 38,135 | 10,258 | ||||||||||||||||
| Total Expenses |
1,505,239 | 1,487,967 | 2,257,497 | 601,238 | ||||||||||||||||
| Advisory Fee Waiver (2) |
— | — | — | (42,474 | ) | |||||||||||||||
| Adviser Expense Reimbursement (3) |
(182,705 | ) | (4,400 | ) | (210,688 | ) | (9,648 | ) | ||||||||||||
| Net Expenses |
1,322,534 | 1,483,567 | 2,046,809 | 549,116 | ||||||||||||||||
| NET INVESTMENT INCOME (LOSS) |
3,615,405 | (1,321,106 | ) | 9,001,761 | (94,855 | ) | ||||||||||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||||||||||
| Net Realized Gain (Loss) On: |
||||||||||||||||||||
| Investment security transactions |
2,113,372 | (2,089 | ) | 3,330,790 | (19,695,655 | ) | ||||||||||||||
| Closed short positions |
— | — | (174,868 | ) | — | |||||||||||||||
| Futures contract transactions |
32,260 | — | (2,953,138 | ) | — | |||||||||||||||
| Swap transactions |
— | — | (545,093 | ) | — | |||||||||||||||
| Written option transactions |
— | — | 686,802 | — | ||||||||||||||||
| Foreign currency transactions |
1,270,023 | 11,945,634 | 8,099,101 | (56,109 | ) | |||||||||||||||
| Net Realized Gain (Loss) |
3,415,655 | 11,943,545 | 8,443,594 | (19,751,764 | ) | |||||||||||||||
| Change In Net Unrealized Appreciation (Depreciation) On: |
||||||||||||||||||||
| Investment securities |
(15,288,955 | ) | (4,422,343 | ) | (1,048,345 | ) | 15,159,841 | |||||||||||||
| Unfunded loan commitments |
— | — | (5,635 | ) | — | |||||||||||||||
| Short positions |
— | — | 183,459 | — | ||||||||||||||||
| Futures contracts |
(10,614 | ) | — | (955,516 | ) | — | ||||||||||||||
| Swaps |
— | — | 2,015,028 | — | ||||||||||||||||
| Written options |
— | — | (5,603,711 | ) | — | |||||||||||||||
| Foreign currencies |
(446,318 | ) | 5,944,808 | 4,270,814 | (8,025 | ) | ||||||||||||||
| Forward bonds |
— | — | (52,646 | ) | — | |||||||||||||||
| Change in Net Unrealized Appreciation (Depreciation) |
(15,745,887 | ) | 1,522,465 | (1,196,552 | ) | 15,151,816 | ||||||||||||||
| NET GAIN (LOSS) |
(12,330,232 | ) | 13,466,010 | 7,247,042 | (4,599,948 | ) | ||||||||||||||
| NET INCREASE (DECREASE) IN NET
ASSETS |
($8,714,827 | ) | $12,144,904 | $16,248,803 | ($4,694,803 | ) | ||||||||||||||
| Foreign taxes withheld on dividends and interest |
$514,836 | $— | $139,315 | $91,152 | ||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | See Note 6 in Notes to Financial Statements. |
| (3) | See Note 7B in Notes to Financial Statements. |
See Notes to Financial Statements
C-8
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
|||||||||||||||||||||||||||
| PF Floating Rate Loan Fund |
PF Inflation Managed Fund |
PF Managed Bond Fund |
||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
$4,486,703 | $4,410,889 | $1,069,992 | $1,403,593 | $8,656,737 | $6,745,366 | ||||||||||||||||||||||||||
| Net realized gain (loss) |
(1,323,615 | ) | 1,130,734 | (863,026 | ) | (1,712,382 | ) | 24,586,442 | 544,477 | |||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(850,541 | ) | (1,632,529 | ) | 4,655,716 | (11,666,272 | ) | 5,768,017 | (14,411,217 | ) | ||||||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
2,312,547 | 3,909,094 | 4,862,682 | (11,975,061 | ) | 39,011,196 | (7,121,374 | ) | ||||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
(4,425,588 | ) | (4,512,660 | ) | (3,604,677 | ) | (755,842 | ) | (10,397,287 | ) | (8,368,504 | ) | ||||||||||||||||||||
| Net realized gains - Class P |
(17,189 | ) | (1,669,705 | ) | — | (2,707,398 | ) | (11,648,530 | ) | (2,998,837 | ) | |||||||||||||||||||||
| Net Decrease from Dividends
and |
(4,442,777 | ) | (6,182,365 | ) | (3,604,677 | ) | (3,463,240 | ) | (22,045,817 | ) | (11,367,341 | ) | ||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
12,400,990 | 17,705,946 | 15,641,976 | 46,018,666 | 94,581,849 | 63,781,929 | ||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
4,442,777 | 6,182,365 | 3,604,677 | 3,463,240 | 22,045,817 | 11,367,341 | ||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(10,705,218 | ) | (8,703,442 | ) | (80,115,002 | ) | (12,560,393 | ) | (69,464,458 | ) | (42,192,868 | ) | ||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
6,138,549 | 15,184,869 | (60,868,349 | ) | 36,921,513 | 47,163,208 | 32,956,402 | |||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
4,008,319 | 12,911,598 | (59,610,344 | ) | 21,483,212 | 64,128,587 | 14,467,687 | |||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year |
123,115,931 | 110,204,333 | 185,764,518 | 164,281,306 | 579,752,952 | 565,285,265 | ||||||||||||||||||||||||||
| End of Year |
$127,124,250 | $123,115,931 | $126,154,174 | $185,764,518 | $643,881,539 | $579,752,952 | ||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
$1,135,367 | $1,074,359 | ($1,757,012 | ) | ($966,992 | ) | $2,039,566 | $659,846 | ||||||||||||||||||||||||
| PF Short Duration Bond Fund |
PF Emerging Markets Debt Fund |
PF Comstock Fund | ||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
$2,601,158 | $2,354,102 | $7,965,251 | $5,037,344 | $3,552,802 | $4,378,442 | ||||||||||||||||||||||||||
| Net realized gain (loss) |
(144,386 | ) | (122,598 | ) | (6,640,664 | ) | (4,722,575 | ) | 40,790,115 | 11,515,551 | ||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(451,214 | ) | (893,294 | ) | (10,068,715 | ) | (3,163,830 | ) | (24,050,355 | ) | 43,949,715 | |||||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
2,005,558 | 1,338,210 | (8,744,128 | ) | (2,849,061 | ) | 20,292,562 | 59,843,708 | ||||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
(3,085,384 | ) | (3,024,235 | ) | (5,962,219 | ) | (3,887,073 | ) | (5,782,909 | ) | (2,637,092 | ) | ||||||||||||||||||||
| Net realized gains - Class P |
— | — | — | (1,122,666 | ) | (20,835,136 | ) | — | ||||||||||||||||||||||||
| Net Decrease from Dividends
and |
(3,085,384 | ) | (3,024,235 | ) | (5,962,219 | ) | (5,009,739 | ) | (26,618,045 | ) | (2,637,092 | ) | ||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
32,351,679 | 24,100,375 | 55,948,293 | 55,566,570 | 8,417,197 | — | ||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
3,085,384 | 3,024,235 | 5,962,219 | 5,009,739 | 26,618,045 | 2,637,092 | ||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(50,211,811 | ) | (19,850,587 | ) | (15,709,434 | ) | (8,047,397 | ) | (67,602,421 | ) | (12,917,286 | ) | ||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
(14,774,748 | ) | 7,274,023 | 46,201,078 | 52,528,912 | (32,567,179 | ) | (10,280,194 | ) | |||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
(15,854,574 | ) | 5,587,998 | 31,494,731 | 44,670,112 | (38,892,662 | ) | 46,926,422 | ||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year |
229,188,696 | 223,600,698 | 130,515,949 | 85,845,837 | 308,597,808 | 261,671,386 | ||||||||||||||||||||||||||
| End of Year |
$213,334,122 | $229,188,696 | $162,010,680 | $130,515,949 | $269,705,146 | $308,597,808 | ||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
$321,587 | $649,544 | ($2,847,523 | ) | $999,908 | $3,878,599 | $1,535,528 | |||||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
See Notes to Financial Statements
C-9
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
|||||||||||||||||||||||||||
| PF Growth Fund | PF Large-Cap Growth Fund |
PF Large-Cap Value Fund |
||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
$376,463 | $150,031 | ($294,494 | ) | ($103,987 | ) | $4,916,528 | $8,203,641 | ||||||||||||||||||||||||
| Net realized gain (loss) |
2,014,771 | 8,246,940 | 19,639,072 | 24,228,027 | 30,890,520 | 15,301,085 | ||||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
14,020,253 | 7,367,677 | 6,699,795 | 9,193,870 | (3,677,051 | ) | 44,822,644 | |||||||||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
16,411,487 | 15,764,648 | 26,044,373 | 33,317,910 | 32,129,997 | 68,327,370 | ||||||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
(934,282 | ) | (573,668 | ) | — | (299,083 | ) | (7,915,128 | ) | (5,289,219 | ) | |||||||||||||||||||||
| Net realized gains - Class P |
(1,038,567 | ) | — | (18,093,817 | ) | (33,866,205 | ) | (28,296,928 | ) | — | ||||||||||||||||||||||
| Net Decrease from Dividends
and |
(1,972,849 | ) | (573,668 | ) | (18,093,817 | ) | (34,165,288 | ) | (36,212,056 | ) | (5,289,219 | ) | ||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
37,943,943 | 39,665,244 | 15,780,162 | 1,187,092 | 6,185,532 | — | ||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
1,972,849 | 573,668 | 18,093,817 | 34,165,288 | 36,212,056 | 5,289,219 | ||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(7,747,052 | ) | (2,756,202 | ) | (15,300,089 | ) | (4,289,678 | ) | (74,284,892 | ) | (12,039,570 | ) | ||||||||||||||||||||
| Net Increase (Decrease) in Net Assets from
|
32,169,740 | 37,482,710 | 18,573,890 | 31,062,702 | (31,887,304 | ) | (6,750,351 | ) | ||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
46,608,378 | 52,673,690 | 26,524,446 | 30,215,324 | (35,969,363 | ) | 56,287,800 | |||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year |
101,284,647 | 48,610,957 | 172,613,336 | 142,398,012 | 380,372,410 | 324,084,610 | ||||||||||||||||||||||||||
| End of Year |
$147,893,025 | $101,284,647 | $199,137,782 | $172,613,336 | $344,403,047 | $380,372,410 | ||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
$813 | $141,842 | ($132,121 | ) | ($35,116 | ) | $1,220,834 | $4,219,659 | ||||||||||||||||||||||||
| PF Main Street Core Fund |
PF Mid-Cap Equity Fund |
PF Mid-Cap Growth Fund |
||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
$2,767,554 | $2,335,231 | $783,450 | $553,452 | $67,258 | ($65,397 | ) | |||||||||||||||||||||||||
| Net realized gain (loss) |
30,062,767 | 32,445,487 | 15,534,514 | 16,313,197 | 3,264,379 | 22,500,834 | ||||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(4,711,178 | ) | 13,569,441 | (824,794 | ) | 19,772,101 | 5,773,848 | (7,212,354 | ) | |||||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
|
28,119,143 | 48,350,159 | 15,493,170 | 36,638,750 | 9,105,485 | 15,223,083 | ||||||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
(2,609,422 | ) | (2,316,456 | ) | (552,479 | ) | (833,404 | ) | (78,530 | ) | (152,439 | ) | ||||||||||||||||||||
| Net realized gains - Class P |
(33,766,232 | ) | — | (23,955,351 | ) | (12,097,077 | ) | (3,795,355 | ) | (19,078,154 | ) | |||||||||||||||||||||
| Net Decrease from Dividends
and |
(36,375,654 | ) | (2,316,456 | ) | (24,507,830 | ) | (12,930,481 | ) | (3,873,885 | ) | (19,230,593 | ) | ||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
16,338,975 | 1,444,719 | 42,773,692 | — | 3,181,727 | 16,183,178 | ||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
36,375,654 | 2,316,456 | 24,507,830 | 12,930,481 | 3,873,885 | 19,230,593 | ||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(31,220,364 | ) | (4,648,182 | ) | (11,482,907 | ) | (3,697,469 | ) | (17,101,717 | ) | (2,159,393 | ) | ||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
21,494,265 | (887,007 | ) | 55,798,615 | 9,233,012 | (10,046,105 | ) | 33,254,378 | ||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
13,237,754 | 45,146,696 | 46,783,955 | 32,941,281 | (4,814,505 | ) | 29,246,868 | |||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year |
257,575,002 | 212,428,306 | 171,356,898 | 138,415,617 | 90,803,721 | 61,556,853 | ||||||||||||||||||||||||||
| End of Year |
$270,812,756 | $257,575,002 | $218,140,853 | $171,356,898 | $85,989,216 | $90,803,721 | ||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
$682,846 | $530,986 | $193,773 | ($516 | ) | $81,890 | $30,482 | |||||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
See Notes to Financial Statements
C-10
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year/ Period Ended March 31, 2015 |
Year Ended March 31, 2014 |
|||||||||||||||||||||||||||
| PF Small-Cap Growth Fund |
PF Small-Cap Value Fund |
PF Real Estate Fund |
||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
($253,016 | ) | ($156,785 | ) | $784,571 | $2,065,670 | $895,564 | $975,804 | ||||||||||||||||||||||||
| Net realized gain (loss) |
6,392,830 | 7,918,947 | 37,370,520 | 13,048,909 | 10,839,909 | 1,621,422 | ||||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
2,170,370 | 2,291,721 | (22,821,057 | ) | 7,490,389 | (144,708 | ) | 1,468,596 | ||||||||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
8,310,184 | 10,053,883 | 15,334,034 | 22,604,968 | 11,590,765 | 4,065,822 | ||||||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
— | (98,659 | ) | (1,964,806 | ) | (1,780,478 | ) | (989,152 | ) | (1,118,697 | ) | |||||||||||||||||||||
| Net realized gains - Class P |
(9,980,804 | ) | (1,357,600 | ) | (42,372,312 | ) | (6,305,462 | ) | (1,049,057 | ) | — | |||||||||||||||||||||
| Net Decrease from Dividends
and |
(9,980,804 | ) | (1,456,259 | ) | (44,337,118 | ) | (8,085,940 | ) | (2,038,209 | ) | (1,118,697 | ) | ||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
23,567,029 | — | 5,352,768 | 1,624,962 | 3,243,808 | 10,629,608 | ||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
9,980,804 | 1,456,259 | 44,337,117 | 8,085,940 | 2,038,209 | 1,118,697 | ||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(8,067,624 | ) | (1,030,591 | ) | (22,587,682 | ) | (2,174,457 | ) | (39,175,965 | ) | (1,006,216 | ) | ||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
25,480,209 | 425,668 | 27,102,203 | 7,536,445 | (33,893,948 | ) | 10,742,089 | |||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
23,809,589 | 9,023,292 | (1,900,881 | ) | 22,055,473 | (24,341,392 | ) | 13,689,214 | ||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year |
59,921,333 | 50,898,041 | 147,702,257 | 125,646,784 | 73,827,566 | 60,138,352 | ||||||||||||||||||||||||||
| End of Year |
$83,730,922 | $59,921,333 | $145,801,376 | $147,702,257 | $49,486,174 | $73,827,566 | ||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
($1,789 | ) | $5,115 | $254,878 | $1,310,047 | ($250 | ) | $64,702 | ||||||||||||||||||||||||
| PF Emerging Markets Fund |
PF International Large-Cap Fund |
PF International Small-Cap Fund (2) |
||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
$1,265,408 | $783,231 | $3,838,274 | $2,741,883 | $350,195 | |||||||||||||||||||||||||||
| Net realized gain (loss) |
(813,060 | ) | 4,504,312 | 3,588,949 | 3,556,669 | 1,408,309 | ||||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(6,907,306 | ) | 3,487,389 | (7,448,352 | ) | 21,548,202 | 6,517,520 | |||||||||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
(6,454,958 | ) | 8,774,932 | (21,129 | ) | 27,846,754 | 8,276,024 | |||||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
(2,127,430 | ) | (903,956 | ) | (4,006,574 | ) | (2,672,165 | ) | — | |||||||||||||||||||||||
| Net realized gains - Class P |
(4,072,435 | ) | (2,799,145 | ) | — | — | — | |||||||||||||||||||||||||
| Net Decrease from Dividends
and |
(6,199,865 | ) | (3,703,101 | ) | (4,006,574 | ) | (2,672,165 | ) | — | |||||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
16,226,138 | 35,981,890 | 66,621,995 | 19,090,781 | 120,878,084 | |||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
6,199,865 | 3,703,101 | 4,006,574 | 2,672,165 | — | |||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(24,862,187 | ) | (2,234,325 | ) | (86,224,547 | ) | (5,378,260 | ) | (1,660,945 | ) | ||||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
(2,436,184 | ) | 37,450,666 | (15,595,978 | ) | 16,384,686 | 119,217,139 | |||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
(15,091,007 | ) | 42,522,497 | (19,623,681 | ) | 41,559,275 | 127,493,163 | |||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year or Period |
153,332,620 | 110,810,123 | 240,522,148 | 198,962,873 | — | |||||||||||||||||||||||||||
| End of Year or Period |
$138,241,613 | $153,332,620 | $220,898,467 | $240,522,148 | $127,493,163 | |||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
($1,286,535 | ) | ($538,825 | ) | $1,129,417 | $1,259,430 | $1,460,836 | |||||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | PF International Small-Cap Fund commenced operations on January 14, 2015. |
See Notes to Financial Statements
C-11
PACIFIC FUNDS (1)
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
|||||||||||||||||||||||||||
| PF International Value Fund |
PF Currency Strategies Fund |
PF Global Absolute Return Fund |
||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
$3,615,405 | $6,527,844 | ($1,321,106 | ) | ($882,585 | ) | $9,001,761 | $6,710,785 | ||||||||||||||||||||||||
| Net realized gain (loss) |
3,415,655 | 8,728,123 | 11,943,545 | (5,197,176 | ) | 8,443,594 | (10,735,110 | ) | ||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
(15,745,887 | ) | 9,297,780 | 1,522,465 | (2,107,085 | ) | (1,196,552 | ) | (864,055 | ) | ||||||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
(8,714,827 | ) | 24,553,747 | 12,144,904 | (8,186,846 | ) | 16,248,803 | (4,888,380 | ) | |||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
(6,815,945 | ) | (4,102,104 | ) | (4,113,282 | ) | (4,034,980 | ) | (9,239,168 | ) | (3,863,039 | ) | ||||||||||||||||||||
| Net realized gains - Class P |
— | — | — | — | — | (269,888 | ) | |||||||||||||||||||||||||
| Net Decrease from Dividends
and |
(6,815,945 | ) | (4,102,104 | ) | (4,113,282 | ) | (4,034,980 | ) | (9,239,168 | ) | (4,132,927 | ) | ||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
29,202,505 | 9,339,592 | 65,220,121 | 25,560,571 | 9,675,333 | 40,317,659 | ||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
6,815,945 | 4,102,104 | 4,113,282 | 4,034,980 | 9,239,168 | 4,132,927 | ||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(54,375,493 | ) | (3,902,120 | ) | (20,815,948 | ) | (4,993,288 | ) | (46,628,422 | ) | (8,994,814 | ) | ||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
(18,357,043 | ) | 9,539,576 | 48,517,455 | 24,602,263 | (27,713,921 | ) | 35,455,772 | ||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
(33,887,815 | ) | 29,991,219 | 56,549,077 | 12,380,437 | (20,704,286 | ) | 26,434,465 | ||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year |
176,540,871 | 146,549,652 | 131,023,115 | 118,642,678 | 198,359,795 | 171,925,330 | ||||||||||||||||||||||||||
| End of Year |
$142,653,056 | $176,540,871 | $187,572,192 | $131,023,115 | $177,655,509 | $198,359,795 | ||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
$451,382 | $2,216,343 | $1,708,297 | ($4,802,949 | ) | $6,815,142 | ($1,487,328 | ) | ||||||||||||||||||||||||
| PF Precious |
||||||||||||||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||||||||||||||
| Net investment income (loss) |
($94,855 | ) | $226,549 | |||||||||||||||||||||||||||||
| Net realized gain (loss) |
(19,751,764 | ) | (10,458,973 | ) | ||||||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) |
15,151,816 | (11,762,894 | ) | |||||||||||||||||||||||||||||
| Net Increase (Decrease) in Net
Assets |
(4,694,803 | ) | (21,995,318 | ) | ||||||||||||||||||||||||||||
| DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
||||||||||||||||||||||||||||||||
| Net investment income - Class P |
— | (451,925 | ) | |||||||||||||||||||||||||||||
| Net realized gains - Class P |
— | — | ||||||||||||||||||||||||||||||
| Net Decrease from Dividends
and |
— | (451,925 | ) | |||||||||||||||||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||||||||||||||
| Proceeds from sale of shares - Class P |
18,562,410 | 42,913,086 | ||||||||||||||||||||||||||||||
| Dividends and distribution reinvestments - Class P |
— | 451,925 | ||||||||||||||||||||||||||||||
| Cost of shares repurchased - Class P |
(58,277,497 | ) | (2,466,278 | ) | ||||||||||||||||||||||||||||
| Net Increase (Decrease) in Net Assets
from |
(39,715,087 | ) | 40,898,733 | |||||||||||||||||||||||||||||
| NET INCREASE (DECREASE) IN NET ASSETS |
(44,409,890 | ) | 18,451,490 | |||||||||||||||||||||||||||||
| NET ASSETS |
||||||||||||||||||||||||||||||||
| Beginning of Year |
84,402,245 | 65,950,755 | ||||||||||||||||||||||||||||||
| End of Year |
$39,992,355 | $84,402,245 | ||||||||||||||||||||||||||||||
| Undistributed/Accumulated Net Investment Income (Loss) |
($15,509 | ) | ($186,874 | ) | ||||||||||||||||||||||||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
See Notes to Financial Statements
C-12
PACIFIC FUNDS (1)
FOR THE YEAR ENDED MARCH 31, 2015
| PF Inflation Managed Fund |
||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net increase (decrease) in net assets from operations |
$4,862,682 | |||||||
| Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by (used in) operating activities: |
||||||||
| Purchases of long-term securities |
(248,539,630 | ) | ||||||
| Proceeds from disposition of long-term securities |
290,707,628 | |||||||
| Proceeds from securities sold short |
15,538,998 | |||||||
| Purchases to cover securities sold short |
(15,514,667 | ) | ||||||
| Proceeds of short-term securities, net |
6,979,853 | |||||||
| (Increase) decrease in dividends and interest receivable |
252,173 | |||||||
| (Increase) decrease in receivable due from adviser |
(1,840 | ) | ||||||
| (Increase) decrease in prepaid expenses and other assets |
232 | |||||||
| (Increase) decrease in variation margin |
58,910 | |||||||
| Increase (decrease) in receivable for swap premiums |
1,385,318 | |||||||
| Increase (decrease) in payable for swap agreements |
28,616 | |||||||
| Increase (decrease) in payable due to brokers |
562,000 | |||||||
| Increase (decrease) in accrued advisory fees |
(21,932 | ) | ||||||
| Increase (decrease) in accrued administration fees |
(7,422 | ) | ||||||
| Increase (decrease) in accrued support services expenses |
(271 | ) | ||||||
| Increase (decrease) in accrued custodian fees and expenses |
(2,345 | ) | ||||||
| Increase (decrease) in accrued transfer agency out-of-pocket expenses |
(4,121 | ) | ||||||
| Increase (decrease) in accrued legal, audit and tax service fees |
(5,229 | ) | ||||||
| Increase (decrease) in accrued trustees’ fees and expenses and deferred compensation |
278 | |||||||
| Increase (decrease) in accrued other payables |
(3,343 | ) | ||||||
| Increase (decrease) in accrued interest expenses (3) |
579 | |||||||
| Change in net unrealized (appreciation) depreciation on investment securities |
(3,178,173 | ) | ||||||
| Change in net unrealized (appreciation) depreciation on swaps |
(774,067 | ) | ||||||
| Change in net unrealized (appreciation) depreciation on written options |
122,903 | |||||||
| Change in net unrealized (appreciation) depreciation on foreign currencies |
(843,407 | ) | ||||||
| Net realized (gain) loss on investment securities |
398,625 | |||||||
| Net realized (gain) loss on closed short positions |
(24,331 | ) | ||||||
| Net realized (gain) loss on swaps |
3,058,080 | |||||||
| Net realized (gain) loss on written options |
(99,517 | ) | ||||||
| Net realized (gain) loss on foreign currency |
(2,664,877 | ) | ||||||
| Net amortization on investments |
989,343 | |||||||
| Net cash provided by (used in) operating activities |
53,261,046 | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from shares sold |
15,993,811 | |||||||
| Payment of shares redeemed |
(80,108,493 | ) | ||||||
| Increase (decrease) in payable for reverse repurchase agreement |
2,983,375 | |||||||
| Increase (decrease) in payable for sale-buyback financing transactions |
7,598,053 | |||||||
| Net cash provided by (used in) financing activities |
(53,533,254 | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND FOREIGN CURRENCY |
(272,208 | ) | ||||||
| CASH AND FOREIGN CURRENCY: |
||||||||
| Beginning of Year |
808,866 | |||||||
| End of Year |
$536,658 | |||||||
| (1) | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (2) | Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amounts shown in the Statement of Cash Flows are the amounts included within the Statements of Assets and Liabilities and include cash and foreign currency, if any, on hand at the custodian bank and do not include any short-term investments. The PF Inflation Managed Fund has not met the exemption criteria under the Financial Accounting Standards Board Accounting Standards Codification Topic 230, Statement of Cash Flows, and therefore includes a Statement of Cash Flows. All other funds have met the exemption criteria. |
| (3) | Interest paid by the PF Inflation Managed Fund was $59,122. |
See Notes to Financial Statements
C-13
PACIFIC FUNDS**
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
Selected Per Share Data | Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (2) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (3) | Expenses After Reductions (3), (4) | Net Investment Income (Loss) (3) | Total Returns (5) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| PF Floating Rate Loan Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.05 | $0.36 | ($0.19 | ) | $0.17 | ($0.35 | ) | ($0.00 | )(6) | ($0.35 | ) | $9.87 | 1.03% | 0.80% | 3.55% | 1.78 | % | $127,124 | 69 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.24 | 0.38 | (0.04 | ) | 0.34 | (0.38 | ) | (0.15 | ) | (0.53 | ) | 10.05 | 1.02% | 0.80% | 3.73% | 3.39 | % | 123,116 | 73 | % | ||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.10 | 0.46 | 0.18 | 0.64 | (0.47 | ) | (0.03 | ) | (0.50 | ) | 10.24 | 1.03% | 0.80% | 4.45% | 6.40 | % | 110,204 | 94 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.12 | 0.43 | (0.06 | ) | 0.37 | (0.39 | ) | — | (0.39 | ) | 10.10 | 1.04% | 0.80% | 4.33% | 3.80 | % | 112,088 | 45 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 9.88 | 0.34 | 0.19 | 0.53 | (0.29 | ) | — | (0.29 | ) | 10.12 | 1.22% | 0.90% | 4.29% | 5.51 | % | 86,066 | 92 | % | ||||||||||||||||||||||||||||||||
| PF Inflation Managed Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $8.84 | $0.06 | $0.15 | $0.21 | ($0.25 | ) | $— | ($0.25 | ) | $8.80 | 0.68% | 0.58% | 0.68% | 2.38 | % | $126,154 | 139 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 9.73 | 0.07 | (0.78 | ) | (0.71 | ) | (0.04 | ) | (0.14 | ) | (0.18 | ) | 8.84 | 0.64% | 0.56% | 0.83% | (7.40 | %) | 185,765 | 36 | % | |||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.79 | 0.21 | 0.52 | 0.73 | (0.51 | ) | (1.28 | ) | (1.79 | ) | 9.73 | 0.69% | 0.58% | 1.95% | 6.79 | % | 164,281 | 111 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.53 | 0.31 | 0.85 | 1.16 | (0.40 | ) | (0.50 | ) | (0.90 | ) | 10.79 | 0.67% | 0.56% | 2.83% | 11.11 | % | 287,956 | 372 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.10 | 0.24 | 0.61 | 0.85 | (0.21 | ) | (0.21 | ) | (0.42 | ) | 10.53 | 0.82% | 0.64% | 2.31% | 8.56 | % | 229,356 | 323 | % | |||||||||||||||||||||||||||||||
| PF Managed Bond Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.76 | $0.15 | $0.52 | $0.67 | ($0.17 | ) | ($0.20 | ) | ($0.37 | ) | $11.06 | 0.63% | 0.55% | 1.37% | 6.32 | % | $643,882 | 578 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.11 | 0.13 | (0.27 | ) | (0.14 | ) | (0.15 | ) | (0.06 | ) | (0.21 | ) | 10.76 | 0.63% | 0.55% | 1.16% | (1.22 | %) | 579,753 | 530 | % | |||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.86 | 0.20 | 0.55 | 0.75 | (0.35 | ) | (0.15 | ) | (0.50 | ) | 11.11 | 0.66% | 0.56% | 1.75% | 6.85 | % | 565,285 | 495 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.75 | 0.25 | 0.15 | 0.40 | (0.29 | ) | — | (0.29 | ) | 10.86 | 0.67% | 0.55% | 2.33% | 4.02 | % | 486,215 | 519 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.75 | 0.24 | 0.43 | 0.67 | (0.30 | ) | (0.37 | ) | (0.67 | ) | 10.75 | 0.82% | 0.63% | 2.16% | 6.31 | % | 378,982 | 502 | % | |||||||||||||||||||||||||||||||
| PF Short Duration Bond Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.05 | $0.11 | ($0.02 | ) | $0.09 | ($0.13 | ) | $— | ($0.13 | ) | $10.01 | 0.64% | 0.55% | 1.11% | 0.88 | % | $213,334 | 60 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.12 | 0.10 | (0.04 | ) | 0.06 | (0.13 | ) | — | (0.13 | ) | 10.05 | 0.64% | 0.55% | 1.02% | 0.64 | % | 229,189 | 43 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.07 | 0.11 | 0.08 | 0.19 | (0.14 | ) | (0.00 | )(6) | (0.14 | ) | 10.12 | 0.65% | 0.55% | 1.08% | 1.86 | % | 223,601 | 63 | % | |||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.04 | 0.11 | 0.05 | 0.16 | (0.12 | ) | (0.01 | ) | (0.13 | ) | 10.07 | 0.68% | 0.55% | 1.14% | 1.62 | % | 155,368 | 150 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.00 | 0.10 | 0.06 | 0.16 | (0.08 | ) | (0.04 | ) | (0.12 | ) | 10.04 | 0.81% | 0.64% | 1.00% | 1.57 | % | 121,133 | 196 | % | |||||||||||||||||||||||||||||||
| PF Emerging Markets Debt Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $9.69 | $0.50 | ($0.95 | ) | ($0.45 | ) | ($0.35 | ) | $— | ($0.35 | ) | $8.89 | 1.08% | 0.94% | 5.20% | (4.73 | %) | $162,011 | 105 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.53 | 0.47 | (0.90 | ) | (0.43 | ) | (0.32 | ) | (0.09 | ) | (0.41 | ) | 9.69 | 1.06% | 0.94% | 4.71% | (3.92 | %) | 130,516 | 116 | % | |||||||||||||||||||||||||||||
| 6/29/2012 - 3/31/2013 | 10.00 | 0.37 | 0.46 | 0.83 | (0.27 | ) | (0.03 | ) | (0.30 | ) | 10.53 | 1.17% | 0.94% | 4.67% | 8.24 | % | 85,846 | 61 | % | |||||||||||||||||||||||||||||||
| PF Comstock Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $17.61 | $0.22 | $1.07 | $1.29 | ($0.37 | ) | ($1.46 | ) | ($1.83 | ) | $17.07 | 0.96% | 0.89% | 1.25% | 7.22 | % | $269,705 | 21 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 14.40 | 0.25 | 3.11 | 3.36 | (0.15 | ) | — | (0.15 | ) | 17.61 | 0.97% | 0.89% | 1.53% | 23.36 | % | 308,598 | 14 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.47 | 0.19 | 1.91 | 2.10 | (0.17 | ) | — | (0.17 | ) | 14.40 | 0.97% | 0.89% | 1.51% | 16.96 | % | 261,671 | 35 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.13 | 0.17 | 0.32 | 0.49 | (0.15 | ) | — | (0.15 | ) | 12.47 | 0.99% | 0.89% | 1.47% | 4.22 | % | 207,330 | 24 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.69 | 0.13 | 1.41 | 1.54 | (0.10 | ) | — | (0.10 | ) | 12.13 | 1.13% | 0.99% | 1.16% | 14.55 | % | 166,465 | 31 | % | ||||||||||||||||||||||||||||||||
| PF Growth Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $17.33 | $0.05 | $2.19 | $2.24 | ($0.13 | ) | ($0.14 | ) | ($0.27 | ) | $19.30 | 0.76% | 0.70% | 0.30% | 12.96 | % | $147,893 | 39 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.93 | 0.03 | 3.47 | 3.50 | (0.10 | ) | — | (0.10 | ) | 17.33 | 0.79% | 0.70% | 0.20% | 25.15 | % | 101,285 | 76 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 13.12 | 0.08 | 0.90 | 0.98 | (0.17 | ) | — | (0.17 | ) | 13.93 | 0.86% | 0.70% | 0.63% | 7.53 | % | 48,611 | 72 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 12.42 | 0.06 | 0.71 | 0.77 | (0.07 | ) | — | (0.07 | ) | 13.12 | 0.85% | 0.70% | 0.54% | 6.26 | % | 108,340 | 84 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 11.21 | 0.07 | 1.14 | 1.21 | — | — | — | 12.42 | 0.95% | 0.79% | 0.58% | 10.79 | % | 115,576 | 83 | % | ||||||||||||||||||||||||||||||||||
| PF Large-Cap Growth Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.28 | ($0.02 | ) | $1.51 | $1.49 | $— | ($1.06 | ) | ($1.06 | ) | $10.71 | 0.96% | 0.86% | (0.16%) | 14.84 | % | $199,138 | 100 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.40 | (0.01 | ) | 2.41 | 2.40 | (0.02 | ) | (2.50 | ) | (2.52 | ) | 10.28 | 0.97% | 0.84% | (0.06%) | 23.58 | % | 172,613 | 163 | % | ||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.30 | 0.03 | 0.70 | 0.73 | — | (0.63 | ) | (0.63 | ) | 10.40 | 0.99% | 0.81% | 0.31% | 7.66 | % | 142,398 | 131 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 9.23 | (0.02 | ) | 1.25 | 1.23 | — | (0.16 | ) | (0.16 | ) | 10.30 | 1.00% | 0.88% | (0.26%) | 13.65 | % | 129,222 | 76 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 7.71 | (0.01 | ) | 1.53 | 1.52 | — | — | — | 9.23 | 1.12% | 0.95% | (0.11%) | 19.72 | % | 99,101 | 102 | % | |||||||||||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of references and symbol, if any, on page C-16 |
C-14
PACIFIC FUNDS**
FINANCIAL HIGHLIGHTS (1) (Continued)
Selected per share, ratios and supplemental data for each year ended March 31, were as follows:
|
|
Selected Per Share Data | Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year Ended |
Net Asset Value, Beginning of Year |
Net Investment Income (Loss) (2) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year |
Expenses Before Reductions (3) | Expenses After Reductions (3), (4) | Net Investment Income (Loss) (3) | Total Returns (5) | Net Assets, End of Year (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| PF Large-Cap Value Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $16.71 | $0.23 | $1.36 | $1.59 | ($0.38 | ) | ($1.46 | ) | ($1.84 | ) | $16.46 | 0.86% | 0.80% | 1.37% | 9.40 | % | $344,403 | 13 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.96 | 0.36 | 2.62 | 2.98 | (0.23 | ) | — | (0.23 | ) | 16.71 | 0.86% | 0.80% | 2.33% | 21.41 | % | 380,372 | 13 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.31 | 0.23 | 1.66 | 1.89 | (0.24 | ) | — | (0.24 | ) | 13.96 | 0.87% | 0.80% | 1.80% | 15.54 | % | 324,085 | 26 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.59 | 0.22 | 0.71 | 0.93 | (0.21 | ) | — | (0.21 | ) | 12.31 | 0.89% | 0.80% | 1.96% | 8.21 | % | 262,917 | 20 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 10.42 | 0.16 | 1.15 | 1.31 | (0.14 | ) | — | (0.14 | ) | 11.59 | 1.01% | 0.89% | 1.56% | 12.69 | % | 228,436 | 19 | % | ||||||||||||||||||||||||||||||||
| PF Main Street Core Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.85 | $0.16 | $1.51 | $1.67 | ($0.14 | ) | ($2.12 | ) | ($2.26 | ) | $14.26 | 0.66% | 0.60% | 1.06% | 11.36 | % | $270,813 | 46 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 12.20 | 0.13 | 2.65 | 2.78 | (0.13 | ) | — | (0.13 | ) | 14.85 | 0.67% | 0.60% | 0.99% | 22.84 | % | 257,575 | 66 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.26 | 0.14 | 0.96 | 1.10 | (0.16 | ) | — | (0.16 | ) | 12.20 | 0.68% | 0.60% | 1.21% | 9.93 | % | 212,428 | 60 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.13 | 0.10 | 1.11 | 1.21 | (0.08 | ) | — | (0.08 | ) | 11.26 | 0.70% | 0.60% | 1.00% | 12.12 | % | 193,538 | 48 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 9.00 | 0.09 | 1.10 | 1.19 | (0.06 | ) | — | (0.06 | ) | 10.13 | 0.83% | 0.70% | 0.93% | 13.28 | % | 157,890 | 58 | % | ||||||||||||||||||||||||||||||||
| PF Mid-Cap Equity Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $12.84 | $0.05 | $0.80 | $0.85 | ($0.03 | ) | ($1.51 | ) | ($1.54 | ) | $12.15 | 0.86% | 0.80% | 0.40% | 7.44 | % | $218,141 | 172 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 11.00 | 0.04 | 2.84 | 2.88 | (0.06 | ) | (0.98 | ) | (1.04 | ) | 12.84 | 0.87% | 0.80% | 0.36% | 26.82 | % | 171,357 | 114 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.29 | 0.06 | 0.72 | 0.78 | (0.07 | ) | — | (0.07 | ) | 11.00 | 0.90% | 0.80% | 0.65% | 7.63 | % | 138,416 | 191 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.46 | 0.05 | (0.18 | ) | (0.13 | ) | (0.04 | ) | — | (0.04 | ) | 10.29 | 0.89% | 0.80% | 0.51% | (1.17 | %) | 165,168 | 102 | % | ||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 8.66 | 0.08 | 1.79 | 1.87 | (0.07 | ) | — | (0.07 | ) | 10.46 | 1.02% | 0.89% | 0.87% | 21.70 | % | 135,755 | 87 | % | ||||||||||||||||||||||||||||||||
| PF Mid-Cap Growth Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $8.17 | $0.01 | $0.92 | $0.93 | ($0.01 | ) | ($0.38 | ) | ($0.39 | ) | $8.71 | 0.91% | 0.80% | 0.08% | 11.57 | % | $85,989 | 35 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 8.58 | (0.01 | ) | 1.93 | 1.92 | (0.01 | ) | (2.32 | ) | (2.33 | ) | 8.17 | 0.93% | 0.83% | (0.09%) | 23.39 | % | 90,804 | 135 | % | ||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 8.87 | 0.05 | (0.03 | ) | 0.02 | (0.02 | ) | (0.29 | ) | (0.31 | ) | 8.58 | 1.00% | 0.85% | 0.60% | 0.61 | % | 61,557 | 48 | % | ||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.28 | (0.02 | ) | (0.28 | ) | (0.30 | ) | (0.05 | ) | (1.06 | ) | (1.11 | ) | 8.87 | 0.98% | 0.85% | (0.21%) | (1.08 | %) | 73,586 | 27 | % | ||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 8.41 | 0.02 | 2.83 | 2.85 | (0.02 | ) | (0.96 | ) | (0.98 | ) | 10.28 | 1.17% | 0.95% | 0.24% | 35.16 | % | 64,476 | 44 | % | |||||||||||||||||||||||||||||||
| PF Small-Cap Growth Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $15.54 | ($0.05 | ) | $1.20 | $1.15 | $— | ($1.89 | ) | ($1.89 | ) | $14.80 | 0.82% | 0.75% | (0.35%) | 8.36 | % | $83,731 | 264 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.29 | (0.04 | ) | 2.67 | 2.63 | (0.02 | ) | (0.36 | ) | (0.38 | ) | 15.54 | 0.83% | 0.75% | (0.28%) | 19.90 | % | 59,921 | 84 | % | ||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 11.86 | 0.03 | 1.40 | 1.43 | — | — | — | 13.29 | 0.90% | 0.75% | 0.21% | 12.06 | % | 50,898 | 92 | % | ||||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.90 | (0.03 | ) | (0.01 | ) | (0.04 | ) | — | — | — | 11.86 | 0.93% | 0.75% | (0.31%) | (0.34 | %) | 36,370 | 67 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 9.41 | (0.06 | ) | 2.55 | 2.49 | — | — | — | 11.90 | 1.11% | 0.84% | (0.63%) | 26.46 | % | 32,355 | 86 | % | |||||||||||||||||||||||||||||||||
| PF Small-Cap Value Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $13.55 | $0.07 | $1.17 | $1.24 | ($0.14 | ) | ($4.20 | ) | ($4.34 | ) | $10.45 | 0.96% | 0.90% | 0.55% | 11.55 | % | $145,801 | 140 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 12.15 | 0.20 | 1.98 | 2.18 | (0.16 | ) | (0.62 | ) | (0.78 | ) | 13.55 | 0.97% | 0.90% | 1.52% | 18.13 | % | 147,702 | 41 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 10.58 | 0.22 | 1.52 | 1.74 | (0.17 | ) | — | (0.17 | ) | 12.15 | 1.00% | 0.90% | 2.08% | 16.72 | % | 125,647 | 38 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 10.60 | 0.16 | (0.05 | ) | 0.11 | (0.13 | ) | — | (0.13 | ) | 10.58 | 1.02% | 0.90% | 1.59% | 1.19 | % | 86,152 | 21 | % | |||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 8.57 | 0.16 | 1.98 | 2.14 | (0.11 | ) | — | (0.11 | ) | 10.60 | 1.13% | 0.97% | 1.71% | 25.11 | % | 76,247 | 31 | % | ||||||||||||||||||||||||||||||||
| PF Real Estate Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.19 | $0.22 | $3.11 | $3.33 | ($0.31 | ) | ($0.34) | ($0.65 | ) | $16.87 | 1.11% | 1.05% | 1.41% | 23.69 | % | $49,486 | 34 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 13.67 | 0.21 | 0.54 | 0.75 | (0.23 | ) | — | (0.23 | ) | 14.19 | 1.12% | 1.05% | 1.52% | 5.61 | % | 73,828 | 18 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 12.59 | 0.17 | 1.08 | 1.25 | (0.17 | ) | — | (0.17 | ) | 13.67 | 1.16% | 1.05% | 1.35% | 9.98 | % | 60,138 | 23 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 11.46 | 0.13 | 1.08 | 1.21 | (0.08 | ) | — | (0.08 | ) | 12.59 | 1.18% | 1.05% | 1.13% | 10.62 | % | 52,679 | 24 | % | ||||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 9.24 | 0.08 | 2.23 | 2.31 | (0.09 | ) | — | (0.09 | ) | 11.46 | 1.34% | 1.14% | 0.77% | 25.16 | % | 41,860 | 32 | % | ||||||||||||||||||||||||||||||||
| PF Emerging Markets Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $14.75 | $0.12 | ($0.71 | ) | ($0.59 | ) | ($0.19 | ) | ($0.39 | ) | ($0.58 | ) | $13.58 | 1.23% | 0.95% | 0.81% | (4.15 | %) | $138,242 | 40 | % | |||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 14.22 | 0.09 | 0.83 | 0.92 | (0.10 | ) | (0.29 | ) | (0.39 | ) | 14.75 | 1.27% | 0.95% | 0.59% | 6.43 | % | 153,333 | 31 | % | |||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 13.55 | 0.08 | 0.68 | 0.76 | (0.09 | ) | — | (0.09 | ) | 14.22 | 1.36% | 0.95% | 0.62% | 5.60 | % | 110,810 | 40 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 14.68 | 0.14 | (0.95 | ) | (0.81 | ) | (0.07 | ) | (0.25 | ) | (0.32 | ) | 13.55 | 1.49% | 0.95% | 1.09% | (5.15 | %) | 85,483 | 30 | % | |||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 12.19 | 0.11 | 2.64 | 2.75 | (0.26 | ) | — | (0.26 | ) | 14.68 | 1.56% | 1.04% | 0.80% | 22.53 | % | 64,270 | 46 | % | ||||||||||||||||||||||||||||||||
| See Notes to Financial Statements | See explanation of references and symbol, if any, on page C-16 |
C-15
PACIFIC FUNDS**
FINANCIAL HIGHLIGHTS (1) (Continued)
Selected per share, ratios and supplemental data for each year or period ended March 31, were as follows:
|
|
Selected Per Share Data | Ratios to Average Net Assets | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment Operations | Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year or Period Ended |
Net Asset Value, Beginning of Year or Period |
Net Investment Income (Loss) (2) | Net Realized and Unrealized Gain (Loss) |
Total | Net Investment Income | Capital Gains | Total | Net Asset Value, End of Year or Period |
Expenses Before Reductions (3) | Expenses After Reductions (3), (4) | Net Investment Income (Loss) (3) | Total Returns (5) | Net Assets, End of Year or Period (in thousands) |
Portfolio Turnover Rates | ||||||||||||||||||||||||||||||||||||
| PF International Large-Cap Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $18.46 | $0.29 | $0.01 | $0.30 | ($0.26 | ) | $— | ($0.26 | ) | $18.50 | 1.10% | 1.00% | 1.56% | 1.70 | % | $220,898 | 41 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 16.48 | 0.22 | 1.97 | 2.19 | (0.21 | ) | — | (0.21 | ) | 18.46 | 1.10% | 1.00% | 1.23% | 13.28 | % | 240,522 | 14 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 15.12 | 0.23 | 1.40 | 1.63 | (0.27 | ) | — | (0.27 | ) | 16.48 | 1.13% | 1.00% | 1.55% | 10.88 | % | 198,963 | 28 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 15.37 | 0.22 | (0.30 | ) | (0.08 | ) | (0.17 | ) | — | (0.17 | ) | 15.12 | 1.17% | 1.00% | 1.52% | (0.32 | %) | 203,944 | 24 | % | ||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 13.83 | 0.16 | 1.52 | 1.68 | (0.14 | ) | — | (0.14 | ) | 15.37 | 1.30% | 1.09% | 1.16% | 12.36 | % | 138,033 | 34 | % | ||||||||||||||||||||||||||||||||
| PF International Small-Cap Fund (7) |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 1/14/2015 - 3/31/2015 | $10.00 | $0.03 | $0.66 | $0.69 | $— | $— | $— | $10.69 | 1.24% | 1.08% | 1.34% | 6.90 | % | $127,493 | 8 | % | ||||||||||||||||||||||||||||||||||
| PF International Value Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $10.33 | $0.22 | ($0.65 | ) | ($0.43 | ) | ($0.39 | ) | $— | ($0.39 | ) | $9.51 | 0.91% | 0.80% | 2.19% | (4.07 | %) | $142,653 | 87 | % | ||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 9.10 | 0.39 | 1.08 | 1.47 | (0.24 | ) | — | (0.24 | ) | 10.33 | 0.91% | 0.80% | 3.89% | 16.15 | % | 176,541 | 54 | % | ||||||||||||||||||||||||||||||||
| 4/1/2012 - 3/31/2013 | 8.62 | 0.20 | 0.51 | 0.71 | (0.23 | ) | — | (0.23 | ) | 9.10 | 0.94% | 0.80% | 2.30% | 8.26 | % | 146,550 | 66 | % | ||||||||||||||||||||||||||||||||
| 4/1/2011 - 3/31/2012 | 9.51 | 0.26 | (0.89 | ) | (0.63 | ) | (0.26 | ) | — | (0.26 | ) | 8.62 | 1.02% | 0.80% | 3.06% | (6.20 | %) | 111,119 | 63 | % | ||||||||||||||||||||||||||||||
| 4/1/2010 - 3/31/2011 | 9.19 | 0.18 | 0.35 | 0.53 | (0.21 | ) | — | (0.21 | ) | 9.51 | 1.14% | 0.90% | 2.01% | 5.99 | % | 90,242 | 150 | % | ||||||||||||||||||||||||||||||||
| PF Currency Strategies Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $9.41 | ($0.07 | ) | $0.79 | $0.72 | ($0.21 | ) | $— | ($0.21 | ) | $9.92 | 0.86% | 0.86% | (0.76%) | 7.69 | % | $187,572 | 141 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.32 | (0.07 | ) | (0.52 | ) | (0.59 | ) | (0.32 | ) | — | (0.32 | ) | 9.41 | 0.89% | 0.85% | (0.68%) | (5.98 | %) | 131,023 | 49 | % | |||||||||||||||||||||||||||||
| 12/7/2012 - 3/31/2013 | 10.00 | (0.02 | ) | 0.34 | 0.32 | — | — | — | 10.32 | 0.94% | 0.85% | (0.69%) | 3.20 | % | 118,643 | 49 | % | |||||||||||||||||||||||||||||||||
| PF Global Absolute Return Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $9.69 | $0.48 | $0.39 | $0.87 | ($0.53 | ) | $— | ($0.53 | ) | $10.03 | 1.21% | 1.10% | 4.82% | 9.13 | % | $177,656 | 132 | % | ||||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 10.19 | 0.36 | (0.65 | ) | (0.29 | ) | (0.20 | ) | (0.01 | ) | (0.21 | ) | 9.69 | 1.36% | 1.18% | 3.64% | (2.80 | %) | 198,360 | 115 | % | |||||||||||||||||||||||||||||
| 12/7/2012 - 3/31/2013 | 10.00 | 0.07 | 0.13 | 0.20 | (0.01 | ) | — | (0.01 | ) | 10.19 | 1.20% | 1.06% | 2.25% | 1.96 | % | 171,925 | 38 | % | ||||||||||||||||||||||||||||||||
| PF Precious Metals Fund |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/2014 - 3/31/2015 | $5.72 | ($0.01 | ) | ($1.21 | ) | ($1.22 | ) | $— | $— | $— | $4.50 | 0.99% | 0.90% | (0.16%) | (21.33 | %) | $39,992 | 51 | % | |||||||||||||||||||||||||||||||
| 4/1/2013 - 3/31/2014 | 8.22 | 0.02 | (2.49 | ) | (2.47 | ) | (0.03 | ) | — | (0.03 | ) | 5.72 | 0.99% | 0.88% | 0.30% | (29.98 | %) | 84,402 | 12 | % | ||||||||||||||||||||||||||||||
| 12/7/2012 - 3/31/2013 | 10.00 | 0.01 | (1.79 | ) | (1.78 | ) | (0.00 | )(6) | — | (0.00 | )(6) | 8.22 | 1.12% | 0.88% | 0.31% | (17.79 | %) | 65,951 | 3 | % | ||||||||||||||||||||||||||||||
| ** | See Note 1 in Notes to Financial Statements regarding name changes that occurred during the year ended March 31, 2015. |
| (1) | All the funds presented in these financial statements currently offer Class P shares only. Effective July 2, 2010, all Class A shares of those funds that commenced operations prior to that date were converted to Class P shares. Performance information prior to the conversion for these funds pertains to Class A shares and reflects the fees and expenses associated with that share class. |
| (2) | Net investment income (loss) per share has been calculated using the average shares method. |
| (3) | The ratios are annualized for periods of less than one full year. |
| (4) | The ratios of expenses after expense reductions to average net assets are after any advisory fee waivers and adviser expense reimbursements as discussed in Note 6 and Note 7B, respectively, in Notes to the Financial Statements. |
| (5) | The total returns include reinvestment of all dividends and capital gains distributions, if any, and do not include deductions of any applicable sales charges. Total returns are not annualized for periods less than one full year. |
| (6) | Amount represents less than $0.005 per share. |
| (7) | PF International Small-Cap Fund commenced operations on January 14, 2015. |
| See Notes to Financial Statements |
C-16
PACIFIC FUNDS
1. ORGANIZATION
The Pacific Funds Series Trust (formerly Pacific Life Funds) (which may be referred to as “Pacific Funds” or the “Trust”) is a Delaware statutory trust, which was formed on May 21, 2001, and is registered under the Investment Company Act of 1940 (“1940 Act”), as amended, as an open-end, management investment company. Pacific Life Fund Advisors LLC (“PLFA” or “Adviser”) serves as investment adviser to the Trust. As of March 31, 2015, the Trust was comprised of thirty-four separate funds, twenty-two of which are presented in these financial statements (each individually, a “Fund”, and collectively the “Funds”):
| Current Name* | Former Name | |
| PF Floating Rate Loan Fund | PL Floating Rate Loan Fund | |
| PF Inflation Managed Fund | PL Inflation Managed Fund | |
| PF Managed Bond Fund | PL Managed Bond Fund | |
| PF Short Duration Bond Fund | PL Short Duration Bond Fund | |
| PF Emerging Markets Debt Fund | PL Emerging Markets Debt Fund | |
| PF Comstock Fund | PL Comstock Fund | |
| PF Growth Fund | PL Growth Fund | |
| PF Large-Cap Growth Fund | PL Large-Cap Growth Fund | |
| PF Large-Cap Value Fund | PL Large-Cap Value Fund | |
| PF Main Street® Core Fund | PL Main Street® Core Fund | |
| PF Mid-Cap Equity Fund | PL Mid-Cap Equity Fund | |
| PF Mid-Cap Growth Fund | PL Mid-Cap Growth Fund | |
| PF Small-Cap Growth Fund | PL Small-Cap Growth Fund | |
| PF Small-Cap Value Fund | PL Small-Cap Value Fund | |
| PF Real Estate Fund | PL Real Estate Fund | |
| PF Emerging Markets Fund | PL Emerging Markets Fund | |
| PF International Large-Cap Fund | PL International Large-Cap Fund | |
| PF International Small-Cap Fund (commenced operations January 14, 2015) | ||
| PF International Value Fund | PL International Value Fund | |
| PF Currency Strategies Fund | PL Currency Strategies Fund | |
| PF Global Absolute Return Fund | PL Global Absolute Return Fund | |
| PF Precious Metals Fund | PL Precious Metals Fund |
| * | These Funds are collectively known as the “PF Underlying Funds.” |
The PF Underlying Funds offer Class P shares only, which are sold at Net Asset Value (“NAV”). Presently, only the following Funds, the Adviser, and certain of its affiliates can invest in Class P shares of the PF Underlying Funds, Pacific FundsSM Floating Rate Income (formerly named PL Floating Rate Income Fund), and Pacific FundsSM High Income (formerly named PL High Income Fund).
| Current Name | Former Name | |
| Pacific FundsSM Portfolio Optimization Conservative** | PL Portfolio Optimization Conservative Fund | |
| Pacific FundsSM Portfolio Optimization Moderate-Conservative** | PL Portfolio Optimization Moderate-Conservative Fund | |
| Pacific FundsSM Portfolio Optimization Moderate** | PL Portfolio Optimization Moderate Fund | |
| Pacific FundsSM Portfolio Optimization Growth** | PL Portfolio Optimization Moderate-Aggressive Fund | |
| Pacific FundsSM Portfolio Optimization Aggressive-Growth** | PL Portfolio Optimization Aggressive Fund | |
| Pacific FundsSM Diversified Alternatives | PL Diversified Alternatives Fund |
| ** | These Funds are collectively known as the “Portfolio Optimization Funds.” |
There is a separate annual report containing the financial statements for the Portfolio Optimization Funds, Pacific Funds Diversified Alternatives, Pacific Funds Floating Rate Income, and Pacific Funds High Income, which is available without charge. For information on how to obtain the annual report for the Portfolio Optimization Funds, Pacific Funds Diversified Alternatives, Pacific Funds Floating Rate Income, and Pacific Funds High Income, see the Where to Go for More information section of this report on page F-21.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by the Trust in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund qualifies as an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to the Investment Companies Topic of U.S. GAAP.
D-1
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
A. INVESTMENT TRANSACTIONS AND INCOME
Investment transactions are recorded on a trade date basis. Securities purchased or sold on a when-issued or delayed-delivery basis as well as certain loan transactions and mortgage securities (such as Government National Mortgage Association (“GNMA”) securities) may be settled a month or more after the trade date. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities, which are recorded as soon as a Fund is informed of the ex-dividend date or upon receipt of the dividend. A Fund’s estimated components of distributions received from real estate investment trusts may be considered income, return of capital distributions or capital gain distributions. Return of capital distributions are recorded as a reduction of cost of the related investments. Interest income, adjusted for amortization of premium and accretion of discount, is recorded daily on an accrual basis. Investment income is recorded net of foreign taxes withheld, if any. A Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. A Fund will accrue such taxes and reclaims as applicable, based upon the current interpretation of tax rules and regulations that exist in the markets in which a Fund invests. Facility fees and other fees (such as origination fees) received from senior loans purchased (see Note 4) by a Fund are amortized over the expected term of each applicable senior loan. Commitment fees received by a Fund relating to unfunded senior loan commitments are amortized to income over the period of the commitment. Consent fees, which are compensation for agreeing to changes in the terms of debt instruments, are recorded as interest income when received. Realized gains and losses from investment transactions are recorded on the basis of identified cost, which is also used for Federal income tax purposes. Gains and losses realized on principal paydowns from mortgage-backed and asset-backed securities are recorded as interest income.
B. DISTRIBUTIONS TO SHAREHOLDERS
Each Fund presented in these financial statements distributes all of its net investment income and realized capital gains, if any, to shareholders at least annually, although distributions could occur more often if advantageous to the applicable Fund and its shareholders. Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
C. FOREIGN CURRENCY TRANSLATION
The Trust’s accounting records are maintained in U.S. dollars. The market value of investments and other assets and liabilities, denominated in non-U.S. currencies, are translated into U.S. dollars based on the applicable exchange rates at the end of each business day. Purchases and sales of investments and income and expenses, denominated in foreign currencies, are translated into U.S. dollars at the exchange rates in effect on the transaction date.
None of the Funds separately report the effect of changes in foreign exchange rates from changes in market prices of investments held. Such changes are included with the net realized gain or loss and change in net unrealized appreciation or depreciation on investments. Other foreign currency transactions resulting in realized and unrealized gain or loss, if any, are reported separately as net realized gain or loss on foreign currency transactions and change in net unrealized appreciation or depreciation on foreign currencies.
D. ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES
Certain Trust expenses directly attributable to a particular Fund are charged to that Fund (such as Fund-specific transactional fees, proxies, liquidations, litigation, and organizational/start-up costs). Generally, other Trust expenses are allocated proportionately among all the Funds in relation to the net assets of each Fund.
E. OFFERING COSTS
A new Fund bears all costs (or the applicable pro-rata share if there is more than one new Fund) associated with the offering expenses of the Fund including legal, printing, and support services (see Notes 6 and 7A). All such costs are amortized as an expense of the new Fund on a straight-line basis over twelve months from commencement of operations.
F. RECENT ACCOUNTING PRONOUNCEMENT
In June 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. This ASU is effective for interim and annual reporting periods beginning on or after December 15, 2014. Management is currently evaluating the impact that the implementation of this ASU will have on the Trust’s financial statement disclosures.
3. VALUATION AND FAIR VALUE MEASUREMENTS
A. VALUATION POLICY
The Trust’s Board of Trustees (the “Board”) has adopted a policy (“Valuation Policy”) for determining the value of the Trust’s investments each business day. Under the Valuation Policy, the Board has delegated certain functions to the Trustee Valuation Committee (“TVC”) and/or the Valuation Oversight Committee (“VOC”) or its delegate to determine the fair value of certain investments. Each valuation committee that values the Funds’ investments, which includes using third party pricing services, does so in accordance with the Valuation Policy. Notes 3B and 3C below describe in greater detail the methodologies used to value each Fund’s investments.
B. NET ASSET VALUE
Each Fund of the Trust presented in these financial statements is divided into shares. The price per share of a Fund’s shares is called the NAV. The NAV forms the basis for all transactions involving buying, selling, exchanging or reinvesting shares. Each Fund’s NAV is calculated by taking the total value of a Fund’s assets, subtracting a Fund’s liabilities, and dividing by the total number of shares outstanding.
D-2
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Each Fund’s NAV is calculated once per day, every day the New York Stock Exchange (“NYSE”) is open, including days when foreign markets and/or bond markets are closed. For purposes of calculating the NAV, the value of investments held by each Fund is generally determined as of the time of the close of the NYSE, which is usually 4:00 p.m. Eastern Time. Information that becomes known to the Trust or its agents after the close of the NYSE on a particular day will not normally be used to retroactively adjust the price of an investment for that same business day. Such information may include late dividend notifications, legal or regulatory matters, corporate actions, and corrected/adjusted last sales prices or official closing prices from an exchange.
Each Fund’s NAV will not be calculated on days when the NYSE is closed. There may be a delay in calculating the NAV if: (i) the NYSE is closed on a day other than a regular holiday or weekend, (ii) trading on the NYSE is restricted, (iii) an emergency exists (as determined by the Securities and Exchange Commission (“SEC”)), making the sale of investments or determinations of NAV not practicable, or (iv) the SEC permits a delay for the protection of shareholders.
Certain Funds may hold investments that are primarily listed on foreign exchanges. Because those investments trade on weekends and other days when the Funds do not calculate their NAVs, the value of those investments may change on days when a shareholder will not be able to purchase or redeem shares of those Funds.
C. INVESTMENT VALUATION
The value of each security or other investment is the amount which a Fund might reasonably expect to receive for the investment upon its current sale in the ordinary course of business. For purposes of calculating the NAV, the value of investments held by each Fund is based primarily on pricing data obtained from various sources approved by the Board.
Domestic Equity Investments
For domestic equity investments (including exchange-traded funds), the Trust uses the official closing price or last reported sale price from an exchange as of the time of the NYSE close and does not normally take into account trading, clearances or settlements that take place after the NYSE close. Investments, for which no official closing price or last reported sales price are reported, are generally valued at the mean between the most recent bid and ask prices obtained from approved pricing services, established market makers, or from broker-dealers.
Foreign Equity Investments
For foreign equity investments, the Trust generally uses the official closing price or last reported sale price from the principal foreign exchanges, which may be earlier than the NYSE close. The Trust then may adjust for market events occurring between the close of certain foreign exchanges and the NYSE close. The Trust has retained an independent statistical analysis service approved by the Board to assist in determining the value of certain foreign equity investments. This service utilizes proprietary computer models based on historical performance of markets and other considerations to determine adjustments for market events. Quotations of foreign investments in foreign currencies and those valued using forward currency rates are converted into U.S. dollar equivalents using a foreign exchange quotation from an approved source.
Exchange Traded Futures, Options, and Swaps
Exchange traded futures, options, and swaps are generally valued using the settlement price determined by the relevant exchange. Exchange traded futures, options, and swaps for which no settlement price is reported, are generally valued at the mean between the most recent bid and ask prices obtained from approved pricing services, established market makers, or from broker-dealers.
Over-the-Counter (“OTC”) Investments
OTC investments (including swaps and options) are generally valued by approved pricing services that use evaluated prices from various observable market and other factors. Certain OTC swap agreements are generally valued using industry pricing models, broker quotes or other methodologies pursuant to the Valuation Policy. Forward foreign currency contracts are generally valued using the mean between broker-dealer bid and ask quotations, and foreign currency exchange rates gathered from leading market makers.
Domestic and Foreign Debt Investments
Debt investments are generally valued using the mean between bid and ask prices provided by approved pricing and quotation services, which are based upon evaluated prices determined from various observable market and other factors. Certain debt investments are valued by using a benchmark, matrix, or other pricing methodologies approved pursuant to the Valuation Policy.
Investments in other Investment Companies
Fund investments in other investment companies are valued at their respect NAVs.
Investment Values Determined by a Valuation Committee
The Trust’s Valuation Policy includes methodologies approved for valuing investments in circumstances where market quotations are not readily available. In such circumstances, the Valuation Policy provides that the value of such investments may be determined in accordance with Board approved formulas and methodologies (“Alternate Valuation Methodologies”). Under the Valuation Policy these Alternate Valuation Methodologies may include, among others, amortized cost, the use of broker quotes, the use of purchase prices for initial public offerings, and benchmark and matrix pricing. In the event market quotations or Alternate Valuation Methodologies are not readily available or are determined to be unreliable, the value of the investments will be determined in good faith by the TVC, or determined by the VOC or its delegate pursuant to the Valuation Policy and then subsequently submitted for approval or ratification to either the TVC, or the Board. Valuations determined by the TVC or the VOC or its delegate may require subjective inputs about the value of such investments. While these valuations are intended to estimate the value a Fund might reasonably expect to receive upon the current sale of the investments in the ordinary course of business, such values may differ from the value that a Fund would actually realize if the investments were sold or values that would be obtained if a different valuation methodology had been used.
D-3
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Market quotations are considered not readily available if: (i) the market quotations received are deemed unreliable or inaccurate, (ii) approved pricing services do not provide a valuation for a particular investment, or (iii) material events occur after the close of the principal market for a particular investment but prior to the close of the NYSE.
D. FAIR VALUE MEASUREMENTS AND DISCLOSURES
The Trust characterizes its investments as Level 1, Level 2 or Level 3 based upon the various inputs or methodologies used to value the investments. Under the Valuation Policy, the VOC determines the level in which each Fund’s investments are characterized. The VOC includes investment, legal, and compliance members of the Trust’s Adviser, accounting members of the Trust’s Administrator (see Note 6), and the Trust’s Chief Compliance Officer (“CCO”). The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
| • Level 1 - | Quoted prices (unadjusted) in active markets for identical investments |
| • Level 2 - | Significant observable market-based inputs, other than Level 1 quoted prices, or unobservable inputs that are corroborated by market data |
| • Level 3 - | Significant unobservable inputs that are not corroborated by observable market data |
The VOC reviews the Valuation Policy periodically (at least annually) to determine the appropriateness of the pricing methodologies used to value each Fund’s investments. The VOC also periodically evaluates how the Trust’s investments are characterized within the three-tier hierarchy and the appropriateness of third party pricing sources. The VOC also periodically (at least annually) conducts back-testing of the value of various Level 2 and Level 3 investments to evaluate the effectiveness of the pricing methodologies including the unobservable inputs used to value those investments. Such back-testing includes comparing Level 2 and Level 3 investment values to subsequently available exchange-traded prices, transaction prices, and/or observable vendor prices. All changes to the Valuation Policy are reported to the Board on a quarterly basis with material changes, as determined by the Trust’s CCO, requiring approval by the Board.
The inputs or methodologies used for characterizing each Fund’s investments within the three-tier hierarchy are not necessarily an indication of the relative risks associated with investing in those investments. Foreign equity investments that are valued with the assistance of a statistical research service approved by the Board and based on significant observable inputs (as described in Note 3C) are reflected as Level 2. For fair valuations using significant unobservable inputs, the Trust presents a reconciliation of the beginning to ending balances for reported market values that presents changes attributable to total realized and unrealized gains or losses, purchase and sales, and transfers in and out of Level 3 during the period. Transfers in and out between levels are based on values at the end of the period. The Trust also discloses the amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. A reconciliation of Level 3 investments is presented only when a Fund had an amount of Level 3 investments at the beginning and/or end of the reporting period that was meaningful in relation to its net assets. The amounts and reasons for all transfers in and out of each level within the three-tier hierarchy are disclosed only when a Fund had an amount of total transfers during the reporting period that was meaningful in relation to its net assets as of the end of the reporting period. A summary of each Fund’s investments as of March 31, 2015 as categorized under the three-tier hierarchy of inputs, and the reconciliation of Level 3 investments and information on transfers in and out of each level, if applicable, can be found in the Notes to Schedule of Investments section of each Fund’s Schedule of Investments.
The following is a description of valuation inputs and techniques that the Trust currently utilizes to fair value each major category of assets and liabilities:
Equity Securities (Common and Preferred Stock) and Mutual Funds
Equity securities (foreign or domestic) that are actively traded on a securities exchange are fair valued based on quoted prices from the applicable exchange, and to the extent valuation adjustments are not applied to these securities, they are categorized as Level 1. Equity securities traded on inactive markets and certain foreign equity securities are fair valued using significant other observable inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from pricing vendors that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable and timely, the fair values of these securities would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Investments in registered mutual funds, including affiliated registered mutual funds, are valued at their respective NAV and are categorized as Level 1.
U.S. Treasury Obligations
U.S. Treasuries are fair valued based on pricing models that evaluate the mean between the most recently published bid and ask price from market data sources. The models also take into consideration yield curves and data received from active market makers and inter-dealer brokers. Yield curves change daily in response to market conditions and are generally obtained from the new issue market and broker-dealer sources. To the extent that these inputs are observable and timely, the fair values of U.S. Treasury obligations would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Mortgage-Backed Securities and Asset-Backed Securities
Mortgage-backed securities, including government sponsored enterprises, are fair valued using pricing models based on inputs that include issuer type, coupon, and cash flows, mortgage prepayment projection tables and adjustable rate mortgage evaluations that incorporate index data, periodic and life caps, the next coupon reset date, and the convertibility of the bond. To the extent that these inputs are observable and timely, the fair values of mortgage-backed securities would be categorized as Level 2; otherwise the fair value would be categorized as Level 3.
Asset-backed securities and collateralized mortgage obligations are fair valued using pricing models based on a security’s average life volatility. The models also take into account tranche characteristics such as coupon average life, collateral types, ratings, the issuer and tranche type, underlying collateral and performance of the collateral, and discount margin for certain floating rate issues. To the extent that these inputs
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are observable and timely, the fair values of asset-backed securities and collateralized mortgage obligations would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Municipal Bonds
Municipal bonds are fair valued based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable and timely, the fair values of municipal bonds would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Foreign Government Bonds and Notes
Foreign government bonds and notes are fair valued based on discounted cash flow models that incorporate option adjusted spreads along with benchmark curves and credit spreads. In addition, international bond markets are monitored daily for information pertaining to the issuer and/or the specific issue. To the extent that these inputs are observable and timely, the fair values of foreign government bonds and notes would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Corporate Bonds and Notes and U.S. Government Agency Issues
Corporate bonds held by a Fund are generally comprised of two main categories: investment grade bonds and high yield bonds. Investment grade bonds are reported at fair value using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, issuer credit information, and option-adjusted spread models where applicable. Fair values for high yield bonds are based primarily on broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds, and sector-specific trends. To the extent that these inputs are observable and timely, the fair values of corporate bonds would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
U.S. Government Agency Issues are reported at fair value using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer, issuer credit information, and option-adjusted spread models where applicable. To the extent that these inputs are observable and timely, the fair values of U.S. Government Agency Issues would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Futures Contracts
Futures contracts and options on futures contracts that are actively traded on commodity exchanges are fair valued based on quoted prices from the applicable exchange, and to the extent valuation adjustments are not applied to futures contracts, they are categorized as Level 1. To the extent that valuation adjustments are observable and timely, the fair values of futures contracts would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Option Contracts
Exchange listed option contracts that are actively traded on securities exchanges are fair valued based on quoted prices from the applicable exchange, and to the extent valuation adjustments are not applied to exchange listed option contracts, they are categorized as Level 1. If valuation adjustments are applied and such adjustments are observable and timely, the fair values of exchange listed option contracts would be categorized as Level 2; otherwise the fair values would be categorized as Level 3. OTC option contracts are fair valued based on either broker-dealer quotations or pricing models that incorporate various inputs such as interest rates, credit spreads, currency exchange rates and volatility measurements for in-the-money, at-the-money, and out-of-the-money contracts based on a given strike price. To the extent that these inputs are observable and timely, the fair values of OTC option contracts would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Forward Foreign Currency Contracts
Forward foreign currency contracts are fair valued using various inputs and techniques, which include broker-dealer quotations and foreign currency exchange rates gathered from leading market makers. To the extent that these inputs are observable and timely, the fair values of forward foreign currency contracts would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Swaps
Interest Rate Swaps – Interest rate swaps that are actively traded and cleared on a securities exchange or swap execution facility are fair valued based on quoted prices from the applicable exchange and are categorized as Level 2. Interest rate swaps traded over-the-counter are fair valued using pricing models that are based on real-time snap shots of relevant interest rate curves that are built using the most actively traded securities for a given maturity. The pricing models also incorporate cash and money market rates. In addition, market data pertaining to interest rate swaps are monitored regularly to ensure that interest rates are properly depicting the current market rate. To the extent that these inputs are observable and timely, the fair values of interest rate swaps would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Credit Default Swaps – Credit default swaps that are actively traded and cleared on a securities exchange or swap execution facility are fair valued based on quoted prices from the applicable exchange and are categorized as Level 2. Credit default swaps traded over-the-counter are fair valued using pricing models that take into account, among other factors, information received from market makers and broker-dealers, default probabilities from index specific credit spread curves, recovery rates, and cash flows. To the extent that these inputs are observable and timely, the fair values of credit default swaps would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
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Total Return Swaps – Total return swaps that are actively traded and cleared on a securities exchange or swap execution facility are fair valued based on quoted prices from the applicable exchange and are categorized as Level 2. Total Return swaps traded over-the-counter are fair valued using pricing models that take into account among other factors, index spread curves, nominal values, modified duration values and cash flows. To the extent that these inputs are observable and timely, the fair values of total return swaps would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Volatility Swaps – Volatility swaps traded over-the-counter are fair valued using pricing models that are based on real-time snap shots of relevant discount interest rate curves, volatility inputs, and present value, which are observable from the market and built using the most actively traded securities for a given maturity. In addition, market data pertaining to volatility swaps are monitored regularly to ensure that volatility rates are properly depicting the current volatility rate. To the extent that these inputs are observable and timely, the fair values of volatility swaps would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Senior Loan Notes
Floating rate senior loans (“Senior Loans”) are fair valued based on a quoted price received from a single broker-dealer or an average of quoted prices received from multiple broker-dealers or valued relative to other benchmark securities when broker-dealer quotes are unavailable. To the extent that these inputs are observable, the fair values of Senior Loans would be categorized as Level 2; otherwise the fair values would be categorized as Level 3.
Short-Term Investments
Short-term investments maturing within 60 days are valued using amortized cost, which is used if it approximates market value, and are categorized as Level 2.
Credit-Oriented Investments
For non-publicly traded instruments that represent debt to the Trust, the carrying amount approximates fair value due to the relatively short-term maturity of these financial instruments. The Trust may use market transactions for identical or similar instruments or a market yield approach, which utilizes expected future cash flows that are discounted using estimated current market rates. Discounted cash flow calculations may be adjusted to reflect current market conditions and/or the perceived credit risk of each Fund as applicable. Consideration may also include an evaluation of collateral. To the extent that these inputs are observable and timely, the fair values for credit-oriented investments are categorized as Level 2; otherwise the fair values would be categorized as Level 3.
4. INVESTMENTS AND RISKS
General Investment Risks
An investment in each Fund represents an indirect investment in the assets owned by that Fund. As with any mutual fund, the value of the assets owned by each Fund may move up or down, and as a result, an investment in a Fund at any point in time may be worth more or less than the original amount invested.
Market and Regulatory Risks
Events in the financial markets and economy may cause volatility and uncertainty and affect Fund performance. Market events may affect a single issuer, industry, sector, or the market as a whole. In addition, because of interdependencies between markets, events in one market may adversely impact other markets or issuers in which a Fund invests in unforeseen ways. Traditionally liquid investments may experience periods of diminished liquidity. During a general downturn in the financial markets, multiple asset classes may decline in value and a Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests. Governmental and regulatory actions, including tax law changes, may also impair Fund management and have unexpected or adverse consequences on particular markets, strategies, or investments. Future market or regulatory events may impact a Fund in unforeseen ways, such as causing the Fund to alter its existing strategies or potentially, to liquidate and close.
Equity Investments
Stock markets are volatile. Equity investments tend to go up or down in value, sometimes rapidly and unpredictably, in response to many factors, including a company’s historical and prospective earnings, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Due to the complexities of markets, events in one market or sector may adversely impact other markets or sectors.
Debt Investments
Debt investments are subject to many risks, including, but not limited to, interest rate risk, credit risk, market and regulatory risk, and liquidity risk, which may affect their value. There is a risk that an issuer or guarantor of a debt investment might be unable or unwilling to meet its financial obligations and might not make interest or principal payments on an instrument when those payments are due (“default”). Defaults may potentially reduce a Fund’s income or ability to recover amounts due and may reduce the value of the debt investment, sometimes dramatically. High Yield or “junk” securities may be more volatile than higher rated securities. High yield securities (including loans) are typically issued by companies that are highly leveraged, less creditworthy or financially distressed and are considered to be mostly speculative in nature (high risk), subject to greater liquidity risk, and subject to a greater risk of default than higher rated securities, especially during periods of economic uncertainty or during economic downturns. Debt investments, including bonds, fixed rate loans, and short-term instruments may be affected by changes in interest rates. Debt investments with longer durations tend to be more sensitive to changes in interest rates, making them more volatile than debt investments with shorter durations or floating or adjustable interest rates. The value of debt investments may fall when interest rates rise. Certain debt investments may be difficult to value, purchase, and sell, particularly during adverse market conditions, because there is a limited market for the investment or there are restrictions on resale.
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Given the historically low interest rate environment in the U.S., risks associated with rising interest rates are heightened. It is possible that there will be less governmental action in the near future to maintain low interest rates, or that governmental actions will be less effective in maintaining low interest rates. The Federal Reserve’s termination or tapering of its monetary stimulus quantitative easing program, by gradually winding down its bond purchases, may result in periods of dramatic market volatility and may negatively impact the value of debt securities. The negative impact on debt investments from resulting rate increases for that and other reasons could be swift and significant, including declining market values, increased redemptions and reduced liquidity. Substantial redemptions from bond and other income funds may worsen that impact. Additionally, new regulations applicable to and changing business practices of broker-dealers that make markets in debt investments may result in those broker-dealers restricting their market making activities for certain debt investments, which may reduce the liquidity and increase the volatility of such debt investments.
Certain asset-backed instruments, such as collateralized debt obligations, collateralized mortgage obligations and other mortgage-related securities, structured investment vehicles, and other debt investments may have exposure to subprime loans or subprime mortgages, which are loans to persons with lower credit ratings. These instruments may present credit risk that is not transparent and that is greater than indicated by their ratings. The value of these instruments may be more acutely affected by downturns in the credit markets or the real estate market than certain other investments, and it may be difficult to value these instruments because of a thin secondary market.
Foreign Investments
Exposure to foreign markets can involve additional risks relating to market, economic, political, regulatory, geopolitical, or other conditions. These factors can make foreign investments more volatile and less liquid than U.S. investments. In addition, foreign markets can react differently to these conditions than the U.S. market. Markets and economies throughout the world are becoming increasingly interconnected, and conditions or events in one market, country or region may adversely impact investments or issuers in another market, country or region. Investments in or exposure to investments in emerging market countries may be riskier than investments in or exposure to investments in U.S. and certain developed markets.
Senior Loan Participations and Assignments
Certain Funds may invest in Senior Loans of domestic or foreign corporations, partnerships and other entities (“Borrowers”), the interest rates of which float or adjust periodically based upon a specified adjustment schedule, benchmark indicator, or prevailing interest rates. Senior Loans generally pay interest at rates which are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates generally include prime rates of one or more major U.S. banks, London Interbank Offered Rates (“LIBOR”) or certificates of deposit rates. Senior Loans often require prepayments from excess cash flow or permit the Borrower to repay at its election. The degree to which Borrowers repay cannot be predicted with accuracy. As a result, the actual maturity may be substantially less than the stated maturities. Senior Loans are exempt from registration under the Securities Act of 1933, may contain certain restrictions on resale, and cannot be sold publicly. A Fund’s investments in Senior Loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties.
When a Fund purchases assignments, it acquires all the rights and obligations under the loan agreement of the assigning lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than those held by the assigning lender.
When a Fund purchases a participation of a Senior Loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation. A participation interest in Senior Loans includes the right to receive payments of principal, interest, and any fees to which it is entitled from the lender and only upon receipt by the lender of payments from the Borrower, but not from the Borrower directly. When investing in a participation interest, if a Borrower is unable to meet its obligations under a loan agreement, a Fund generally has no right to enforce compliance with the terms of the loan agreement. As a result, the Fund assumes the credit risk of the Borrower, the selling participant, and any other persons that are interpositioned between the Fund and the Borrower. If the lead lender in a typical lending syndicate becomes insolvent, enters Federal Deposit Insurance Corporation (“FDIC”) receivership or, if not FDIC insured, enters into bankruptcy, the Fund may incur certain costs and delays in receiving payment or may suffer a loss of principal and/or interest. As of March 31, 2015, no participation interest in Senior Loans was held by any of the Funds presented in these financial statements.
Inflation-Indexed Bonds
Certain Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are debt securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will result in an adjustment to interest income.
Mortgage-Related and Other Asset-Backed Securities
Certain Funds may invest in mortgage-related and other asset-backed securities. These securities include mortgage pass- through securities, collateralized mortgage obligations (“CMOs”), collateralized loan obligations (“CLOs”), mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBS”), and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans secured by real property. Mortgage-related and other asset-backed securities are debt securities issued by a corporation, trust or custodian, or by a U.S. Government agency or instrumentality, that are collateralized by a pool of mortgages, mortgage pass-through securities, U.S. Government securities or other assets. The value of some mortgage-related and asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Trust to a lower rate of return upon reinvestment of principal. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. Additionally, although mortgage and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or issuers will meet their obligations.
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SMBS represent a participation in, or are secured by and payable from, mortgage loans on real property, and may be structured in classes with rights to receive varying proportions of principal and interest. SMBS include interest-only securities (“IOs”), which receive all of the interest, and principal-only securities (“POs”), which receive the entire principal. The cash flows and yields on IOs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans. If the underlying mortgages experience higher than anticipated prepayments, an investor in IOs of SMBS may fail to recoup fully its initial investment, even if the IOs are highly rated or are derived from securities guaranteed by the U.S. Government. Unlike other debt and other mortgage-backed securities, the market value of IOs tends to move in the same direction as interest rates. As prepayments on the underlying mortgages of POs increase, the yields on POs increase. Payments received from IOs are recorded as interest income. Because principal will not be received at the maturity of an IO, adjustments are made to the book value of the security on the coupon date until maturity. These adjustments are included in interest income. Payments received from POs are treated as reductions to the cost and par value of the securities. Any excess principal paydown gains or losses associated with the payments received are recorded as interest income.
U.S. Government Agencies or Government-Sponsored Enterprises
Certain Funds may invest in U.S. Government agencies or government-sponsored enterprises. U.S. Government securities are obligations of, and in certain cases, guaranteed by the U.S. Government, its agencies or instrumentalities. The U.S. Government does not guarantee the NAV of each Fund’s shares. Some U.S. Government securities, such as Treasury Bills, Treasury Notes, Treasury Bonds, and securities guaranteed by GNMA (or “Ginnie Mae”), are supported by the full faith and credit of the U.S. Government; others, such as those of the Federal Home Loan Bank, are supported by the right of the issuer to borrow from the U.S. Department of the Treasury (the “U.S. Treasury”); others, such as those of the Federal National Mortgage Association (“FNMA” or “Fannie Mae”), are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations. Securities not backed by the full faith and credit of the U.S. Government may be subject to a greater risk of default. U.S. Government securities may include zero coupon securities, which do not distribute interest on a current basis and tend to be subject to greater risk than interest-paying securities of similar maturities.
Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. Government) include FNMA and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”). FNMA and FHLMC are government-sponsored corporations, the common stocks of which are owned entirely by private stockholders. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions, and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC issues Participation Certificates (“PCs”), which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. Government.
When-Issued Securities
Certain Funds may purchase and sell securities on a when-issued basis. These transactions are made conditionally because a security, although authorized, has not yet been issued in the market. A commitment by a Fund is made regarding these transactions to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. A Fund may sell when-issued securities before they are delivered, which may result in a capital gain or loss. Risk may arise upon entering these contracts from the potential inability of a counterparty to meet the terms of their contracts, or if the issuer does not issue the securities due to political, economic, or other factors.
Delayed-Delivery Transactions
Certain Funds may purchase or sell securities on a delayed-delivery basis. Payment and delivery may take place after the customary settlement period for that security. The price or yield of the underlying securities is fixed at the time the transaction is negotiated. When delayed-delivery purchases are outstanding, a Fund will set aside, and maintain until the settlement date in a segregated account, liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed- delivery basis, a Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its NAV. A Fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell delayed-delivery securities before they are delivered, which may result in a capital gain or loss. When a Fund has sold a security on a delayed-delivery basis, the Fund does not participate in future gains and losses with respect to the security.
Repurchase Agreements
Certain Funds may enter into repurchase agreements with institutions that the Adviser or sub-adviser has determined are creditworthy. Under the terms of a typical repurchase agreement, a Fund takes possession of an underlying security (collateral) subject to an obligation of the seller to repurchase, and a Fund to resell the security at an agreed upon price and time. Repurchase agreements permit a Fund to maintain liquidity and potentially earn income over periods of time that may be as short as overnight. The collateral for all repurchase agreements are held in safekeeping for the benefit of the Funds at the Trust’s custodian, or broker-dealer, or a designated sub-custodian under a tri-party repurchase agreement. All repurchase agreements entered into by a Fund are collateralized with cash or securities of a type that a Fund is permitted to hold. The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the repurchase agreements, including accrued interest, except in the case of a repurchase agreement entered into for the purposes of selling a security short, where the value of the collateral delivered to a Fund must equal or exceed 95% of the value of the repurchase price during the term of the repurchase agreement. The terms of a repurchase agreement entered into for the purposes of selling a security short may provide that the cash purchase price paid by a Fund is more than the value of the collateral received that it is obligated to return to the counterparty under the repurchase agreement. Since in such a transaction, a Fund normally will have used the collateral received to settle the short sale, a Fund will segregate
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liquid assets equal to the marked to market value of the collateral received that it is obligated to return to the counterparty under the repurchase agreement.
In the event of default on the obligation to repurchase a security held by a Fund as collateral, the Fund has the right to liquidate the security and apply the proceeds to the counterparty’s obligations to a Fund under the repurchase agreement. Upon an event of default under the repurchase agreement, if the seller defaults and the value of the collateral declines or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed, limited or wholly denied.
Borrowings and Other Financing Transactions
The following disclosures contain information on a Fund’s ability to lend or borrow cash or securities to the extent permitted under the 1940 Act, which may be viewed as borrowing or financing transactions by a Fund. The location and fair value amounts of these instruments are described below. For a detailed description of credit and counterparty risks that can be associated with borrowings and other financing transactions see Note 5.
Reverse Repurchase Agreements – Certain Funds may enter into reverse repurchase agreements. In a reverse repurchase agreement, a Fund sells to a financial institution a security that it holds with an agreement to repurchase the same security at the agreed-upon price and date. Securities sold under reverse repurchase agreements are recorded as a liability. Interest payments made are recorded as a component of interest expense. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to the Fund. A reverse repurchase agreement involves the risk that the market value of the security sold by a Fund may decline below the repurchase price of the security. A Fund will segregate assets determined to be liquid by the fund manager or otherwise cover its obligations under reverse repurchase agreements.
Sale-Buybacks Financing Transactions – Certain Funds may enter into transactions referred to as sale-buybacks. A sale-buyback transaction consists of a sale of a security by a Fund to a financial institution, the counterparty, with a simultaneous agreement to repurchase the same or substantially the same security at an agreed-upon price and date. Such transactions are recorded as secured borrowings. A Fund is not entitled to receive principal and interest payments, if any, made on the security sold to the counterparty during the term of the agreement. The agreed-upon proceeds for securities to be repurchased by a Fund are recorded as a liability. A Fund will recognize net income represented by the price differential between the price received for the transferred security and the agreed-upon repurchase price. This is commonly referred to as the price drop. A price drop consists of (i) the foregone interest and inflationary income adjustments, if any, a Fund would have otherwise received had the security not been sold and (ii) the negotiated financing terms between a Fund and counterparty. Foregone interest and inflationary income adjustments, if any, are recorded as components of interest income. Interest payments based upon negotiated financing terms made by the Fund to counterparties are recorded as a component of interest expense. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to a Fund. A Fund will segregate assets determined to be liquid or otherwise cover its obligations under sale-buyback transactions.
Short Sales – Certain Funds may enter into short sales. A short sale is a transaction in which a Fund sells securities it does not own. A Fund’s use of short sales involves the risk that the price of the security in the open market may be higher when purchased to close out the Fund’s short position, resulting in a loss to the Fund. Such a loss is theoretically unlimited because there is no limit on the potential increase in the price of a security or guarantee as to the price at which the manager would be able to purchase the security in the open market.
When a Fund sells securities short, it must borrow those securities to make delivery to the buyer. The Fund incurs an expense for such borrowing. The Fund may be required to pledge a portion of its assets to the broker as collateral for the borrowed securities. The Fund may not be able to purchase a security that it needs to deliver to close out a short position at an acceptable price. This may result in losses and/or require the Fund to sell long positions before the manager had intended. A Fund may not be able to successfully implement its short sale strategy, which may limit its ability to achieve its investment goal, due to limited availability of desired or eligible securities, the cost of borrowing securities, regulatory changes limiting or barring short sales, or for other reasons. Securities sold in short sale transactions and the interest and dividends payable on such securities, if any, are recorded as a liability.
The use of proceeds received from selling short to purchase additional securities (long positions) results in leverage, which may increase a Fund’s exposure to long positions. Leverage could magnify gains and losses and, therefore, increases a Fund’s volatility.
Segregation and Collateral
If a Fund engages in certain transactions such as derivative investments or repurchase agreements, it may require collateral in the form of cash or investments to be held in segregated accounts at the Trust’s custodian, with an exchange or clearing member firm, or segregated on the Fund’s books and records maintained by the custodian and/or the fund manager. In each instance that segregation of collateral is required, it is done so in accordance with the 1940 Act and/or any interpretive guidance issued by the SEC. There is a possibility that a Fund could experience a delay in selling investments that are segregated as collateral.
5. DERIVATIVE INVESTMENTS AND RISKS, AND ENFORCEABLE MASTER NETTING ARRANGEMENTS
A. PRINCIPAL MARKET RISKS MANAGED BY INVESTING IN DERIVATIVES
Derivative instruments are investments whose values are tied to the value of an underlying security or asset a group of assets, interest rates, exchange rates, currency or an index. Certain Funds are permitted to invest in derivative instruments, including, but not limited to, futures contracts, option contracts, forward foreign currency contracts and swap agreements. Derivatives may have little or no initial cash investment value relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This is sometimes referred to as leverage. Leverage can magnify a Fund’s gains and losses and therefore increase its volatility. A Fund’s investments in derivatives may increase, decrease or change the level or types of exposure to certain risk factors. The primary risks a Fund may attempt to
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manage through investing in derivative instruments include, but are not limited to, interest rate, foreign investments and currency, price volatility, and credit (including counterparty) risks.
Interest rate risk – A Fund may be exposed to interest rate risk through investments in debt securities. Interest rate risk is the risk that debt securities will decline in value as a result of changes in interest rates. For example, the value of bonds, fixed rate loans and short-term money market instruments may decline in value when interest rates rise. In a low interest rate environment, the risks associated with rising interest rates are heightened. Debt securities with longer durations tend to be more sensitive to changes in interest rates, making them more volatile than debt securities with shorter durations or money market instruments. Therefore, duration is a potentially useful tool to measure the sensitivity of a debt security’s yield (market price to interest rate movement). To manage these risks, certain Funds may invest in derivative instruments tied to interest rates.
Foreign investments and currency risk – A Fund may be exposed to foreign investments and/or currency risk through direct investment in securities or through options, futures or currency transactions. The prices of foreign securities that are denominated in foreign currencies are affected by the value of the U.S. dollar. With respect to securities denominated in foreign currencies, in general, as the value of the U.S. dollar rises, the U.S. dollar price of a foreign security will fall. As the value of the U.S. dollar falls, the U.S. dollar value of the foreign security will rise. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons. Foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate and timely company information, differences in the way securities markets operate, relatively lower market liquidity, less stringent financial reporting and accounting guidance and controls, less secure foreign banks or securities depositories than those in the U.S., foreign taxation issues, and foreign controls on investments. As a result, a Fund’s investments in foreign currency-denominated securities and other foreign investments may reduce the returns of the Fund. To manage these risks, certain Funds may invest in derivative instruments tied to foreign investments and/or currencies.
Price volatility risk – Derivatives tied to equity and debt securities are exposed to potential price volatility. Debt securities are affected by many factors, including prevailing interest rates, market conditions, and market liquidity. Volatility of below investment grade debt securities (including loans) may be relatively greater than for investment grade debt securities. Equity securities tend to go up or down in value, sometimes rapidly and unpredictably. The prices of equity securities change in response to many factors, including a company’s historical and prospective earnings, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. Due to the complexities of markets, events in one market or sector may adversely impact other markets or sectors. To manage these risks, certain Funds may invest in various derivative instruments. Derivative instruments may be used to manage a Fund’s exposure to price volatility risk but may also be subject to greater price volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought floods, weather, livestock disease, embargoes, tariffs, and international economic, political, and regulatory developments.
Credit and Counterparty risk – Credit risk is the risk that a debt security’s issuer (or borrower or counterparty) will be unable or unwilling to meet its financial obligations (e.g., may not be able to make principal and/or interest payments when they are due or otherwise default on other financial terms) and/or may go bankrupt. This is also sometimes described as counterparty risk. A Fund may lose money if the issuer or guarantor of debt security, or counterparty of a derivative contract, repurchase or reverse repurchase agreement or a loan of Fund securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. A Fund may attempt to minimize concentrations of credit risk by undertaking transactions with a large number of borrowers or counterparties on recognized and reputable exchanges. A Fund’s investments in debt investments may range in quality from those rated in the lowest category in which it is permitted to invest to those rated in the highest category by a rating agency, or if unrated, determined by the manager to be of comparable quality.
Similar to credit risk, a Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which a Fund has unsettled or open transactions will default Financial assets of counterparties, which potentially expose a Fund to counterparty risk, consist mainly of cash due from counterparties and investments. Certain managers may attempt to minimize credit risks to a Fund by performing extensive reviews of each counterparty, entering into transactions with counterparties that the manager believes to be creditworthy at the time of the transaction and requiring the posting of collateral in applicable transactions. To manage these risks, certain Funds may invest in derivative instruments tied to a security issuers’ financial strength.
A Fund’s transactions in listed securities are settled/paid for upon delivery with their counterparties. Therefore, the risk of counterparty default for listed securities is considered minimal, as delivery of securities sold is only made once a Fund has received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligations.
B. DERIVATIVE INVESTMENTS
In addition to managing the market risks described above, certain Funds, if permitted by their investment objectives, may also invest in derivatives for purposes of hedging, duration management, to gain exposure to specific investment opportunities, as a substitute for securities, to enhance returns, or to otherwise help achieve a Fund’s investment goal. Each derivative instrument and the reasons a Fund invested in derivatives during the reporting period are discussed in further detail below.
Futures Contracts – A futures contract is a commitment to buy or sell a specific amount of a financial instrument or commodity at a negotiated price on a specified future date. Futures contracts are subject to the possibility of illiquid markets, and the possibility of an imperfect correlation between the value of the instruments and the underlying securities. Initial margin deposits are made upon entering into futures contracts and can be funded with either cash or securities. During the period a futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking-to- market on a daily basis to reflect the market value of the contract at the end of each day’s trading. Variation margin receivables or payables represent the difference between the change in unrealized appreciation and depreciation on
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NOTES TO FINANCIAL STATEMENTS (Continued)
the open contracts and the cash deposits made on the margin accounts. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s cost of the contract. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.
During the reporting period, the Funds entered into futures contracts for the following reasons: The PF Inflation Managed Fund used futures to manage interest rate risk and yield curve exposures, to capture relative value opportunities, as a substitute for cash bond exposure, and for purposes of liquidity. The PF Managed Bond Fund used futures contracts to manage interest rate risk and yield curve exposures, to manage foreign currency exposure, as a substitute for cash bond exposure, for purposes of liquidity, and to manage duration and currency exposure. The PF Short Duration Bond Fund entered into interest rate futures to manage duration. The PF Small-Cap Value Fund entered into futures contracts to maintain full exposure to the equity markets. The PF International Large-Cap, PF International Small-Cap, and PF International Value Funds utilized futures to gain market exposure with the cash generated during PLFA’s allocation of assets related to the Portfolio Optimization Funds. The PF Global Absolute Return Fund entered into futures contracts to manage duration and interest rate risk, to maintain full exposure to the equity markets, to manage exposure to various securities markets, to provide daily liquidity for the Fund’s inflows and outflows, and as a part of the Fund’s investment strategy.
Option Contracts – An option contract is a commitment that gives the purchaser of the contract the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a specified future date. On the other hand, the writer of an option contract is obligated, upon the exercise of the option, to buy or sell an underlying asset at a specific price on or before a specified future date. A swaption is an option contract granting the owner the right to enter into an underlying swap. Inflation-capped options are options on U.S. inflation rates at a stated strike price. The seller of an inflation-capped option receives an upfront premium and in return the buyer receives the right to receive a payment at the expiration of the option if the cumulative annualized inflation rate over the life of the option is above (for caps) or below (for floors) the stated strike price. The purpose of inflation-capped options is to protect the buyer from inflation erosion above a certain rate on a given notional exposure. A floor can be used to give downside protection to investments in inflation-linked products below a certain rate on a given notional exposure. Writing put options or purchasing call options tends to increase a Fund’s exposure to the underlying instrument. Writing call options or purchasing put options tends to decrease a Fund’s exposure to the underlying instrument. When a Fund writes or purchases a call, put, or inflation-capped option, an amount equal to the premium received or paid by the Fund is recorded as a liability or an investment, respectively, and subsequently adjusted to the current market value, based on the quoted daily settlement price of the option written or purchased. Certain options may be written or purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. Premiums received or paid from writing or purchasing options, which expire unexercised, are treated by a Fund on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or realized is added to the cost of the purchase or proceeds from the sale in determining whether the Fund has realized a gain or loss on investment transactions. A Fund, as a writer of an option, may have no control over whether the underlying instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the underlying written option. In addition, an illiquid market may make it difficult for a fund to close out an option contract.
The maximum risk of loss associated with writing put options is limited to the exercised fair value of the option contract. The maximum risk of loss associated with writing call options is potentially unlimited. Listed option contracts present minimal counterparty credit risk since they are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange-traded options, guarantees the options against default. A Fund’s maximum risk of loss from counterparty credit risk related to OTC option contracts is limited to the premium paid.
During the reporting period, the Funds entered into option contracts for the following reasons: The PF Inflation Managed and PF Managed Bond Funds wrote and purchased options and swaptions on futures, volatility and swaps, as a means of capitalizing on anticipated changes in market volatility, to generate income, to manage interest rate risk and yield curve exposures, and to capture relative value opportunities. Both Funds also wrote inflation caps and floors to hedge duration. The PF Mid-Cap Growth Fund purchased and wrote options to establish, increase or gain exposure to an underlying security, to generate income, and to hedge market risk on equity investments. The PF Global Absolute Return Fund purchased and wrote options for purposes of risk management to protect gains and to enhance returns.
Forward Foreign Currency Contracts – A forward foreign currency contract (“Forward Contract”) is a commitment to buy or sell a specific amount of a foreign currency at a negotiated price on a specified future date. Forward Contracts can help a Fund manage the risk of changes in currency exchange rates. These contracts are marked-to-market daily at the applicable forward currency translation rates. A Fund records realized gains or losses at the time the Forward Contract is closed. A Forward Contract is extinguished through a closing transaction or upon delivery of the currency or entering an offsetting contract. A Fund’s maximum risk of loss from counterparty credit risk related to Forward Contracts is the fair value of the contract. The risk may be mitigated to some extent if a master netting arrangement between a Fund and the counterparty is in place and to the extent a Fund obtains collateral to cover the Fund’s exposure to the counterparty.
During the reporting period, the Funds entered into Forward Contracts for the following reasons: The PF Inflation Managed and PF Managed Bond Funds entered into Forward Contracts in connection with settling planned purchases or sales of investments, to hedge the currency exposure associated with some or all of the Funds’ investments, to manage interest rate risk and yield curve exposures, to capture relative value opportunities, or as part of these Funds’ investment strategy. The PF Short Duration Bond Fund entered into Forward Contracts to manage base currency exposure. The PF Emerging Markets Debt Fund entered into Forward Contracts to gain exposure to various currency markets. The PF Comstock Fund entered into Forward Contracts for risk management purposes to mitigate currency risk and isolate securities selection as the primary driver of performance. The PF Large-Cap Growth Fund entered into Forward Contracts to hedge against a specific security or investment, and to establish or hedge exposure away from foreign currencies. The PF International Value Fund entered into Forward Contracts for risk management purposes to manage currency deviations relative to the benchmark. The PF Currency Strategies Fund purchased and sold non-deliverable Forward Contracts to gain or increase exposure to various currencies (both long and short positions) for
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NOTES TO FINANCIAL STATEMENTS (Continued)
hedging purposes to protect the Fund’s returns against adverse currency movements and as a part of the Fund’s investment strategy. The PF Global Absolute Return Fund entered into Forward Contracts to hedge against currency exposure associated with the Fund’s investments, to shift foreign currency exposure back to U.S. dollars, to shift investment exposure from one currency to another, to increase returns, and as a substitute for securities.
Swap Agreements – Swap agreements are bilaterally negotiated agreements between the Funds and their counterparties to exchange swap investment cash flows, assets, foreign currencies or market-linked returns at specified intervals. Swap agreements are privately negotiated in the OTC market or may be executed in a multilateral or other execution facility platform, such as a registered commodities exchange (“centrally cleared swaps”). In connection with these agreements, securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency. Swaps are marked-to-market daily based upon values received from third party vendors or quotations from market makers. Market values greater than zero are recorded as an asset and market values less than zero are recorded as a liability. The change in value of swaps, including accruals of periodic amounts of interest to be paid or received on swaps, is recorded as unrealized appreciation or depreciation. Daily changes in valuation of centrally cleared swaps, if any, are recorded as variation margin receivable or payable. OTC swap payments received or made at the beginning of the measurement period are recorded as an asset or liability and represent payments made or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gain or loss when the swap is closed. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss. Net periodic payments received by a Fund are recorded as realized gain.
Interest Rate Swaps – Interest rate swap agreements involve the exchange by a Fund with another party of their respective commitments to pay or receive interest with respect to the notional amount of principal. Certain forms of interest rate swap agreements may include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or “cap”, (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or “floor”, (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels, (iv) callable interest rate swaps, under which the counterparty may terminate the swap transaction in whole at zero cost by a predetermined date and time prior to the maturity date, (v) spreadlocks, which allow the interest rate swap users to lock in the forward differential (or spread) between the interest rate swap rate and a specified benchmark, or (vi) basis swaps, under which two parties can exchange variable interest rates based on different money markets.
A Fund investing in interest rate swaps is subject to the risk that there is no liquid market for these agreements, that the counterparties may default on their obligations to perform or disagree as to the meaning of the contractual terms in the agreements, or that there may be unfavorable changes in interest rates. A Fund’s maximum risk of loss from counterparty credit risk related to interest rate swaps is the discounted net value of the cash flows to be received from/paid to the counterparty over the contract’s remaining life, to the extent that the amount is positive. The risk may be mitigated to some extent if a master netting arrangement between a Fund and the counterparty is in place and to the extent a Fund obtains collateral to cover the Fund’s exposure to the counterparty.
Cross-currency swaps are interest rate swaps in which interest cash flows are exchanged between two parties based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the inception of the trade. Cross-currency swaps also involve the exchange of the notional amounts at the start of the contract at the current spot rate with an agreement to re-exchange such amounts at a later date at either the same exchange rate, a specified rate or the then current spot rate. The entire principal value of a cross-currency swap is subject to the risk that the counterparty to the swap will default on its contractual delivery obligations.
During the reporting period, the Funds entered into interest rate swap agreements for the following reasons: The PF Inflation Managed and PF Managed Bond Funds entered into interest rate swaps to manage nominal or real interest rate risk in various global markets and as a substitute for cash bond exposure. The PF Emerging Markets Debt Fund entered into interest rate swaps to gain exposure to various markets. The PF Global Absolute Return Fund entered into interest rate swaps for hedging purposes to manage interest rate risk, to gain or mitigate currency exposure and exposure to various securities markets, and to increase returns.
Credit Default Swaps – Credit default swap agreements involve one party making a stream of payments (referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a default or other credit event for the referenced entity, obligation or index. As a seller of protection, a Fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap provided there is no credit event. As the seller, a Fund would effectively add leverage to its Fund because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap.
A Fund investing in credit default swaps is subject to the risk that there is no liquid market for these agreements, that the counterparties may default on their obligations to perform or disagree as to the meaning of the contractual terms in the agreements, or that there may be unfavorable changes in interest rates.
If a Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, a 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, other deliverable obligations 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. If a Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, a Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to
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NOTES TO FINANCIAL STATEMENTS (Continued)
the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are assumed by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value.
Credit default swap agreements on corporate issues, sovereign issues of an emerging country or U.S. Treasury obligation issues involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection’s right to choose the deliverable obligation with the lowest value following a credit event).
Credit default swap agreements on asset-backed securities involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. Unlike credit default swaps on corporate and sovereign issues of an emerging country, deliverable obligations in most instances would be limited to the specific referenced obligation as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedowns or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap agreement will be adjusted by corresponding amounts.
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. Credit default swap agreements on indices are benchmarks for protecting investors owning bonds against default. A credit index is a list of a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index.
An implied credit spread is the spread in yield between a U.S. Treasury security and the referenced obligation or underlying investment that are identical in all respects except for the quality rating. Wider credit spreads, 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. Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues, sovereign issues of an emerging country or U.S. Treasury obligation issues as of period end, are disclosed in the Notes to Schedules of Investments and 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. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk.
A Fund may use pair trades of credit default swaps. Pair trades attempt to match a long position with a short position of two securities in the same market sector for hedging purposes. Pair trades of credit default swaps attempt to gain exposure to credit risk while hedging or offsetting the effects of overall market movements. For example, a Fund may purchase protection through a credit default swap referenced to the debt of an issuer, and simultaneously selling protection through a credit default swap referenced to the debt of a different issuer with the intent to realize gains from the pricing differences of the two issuers who are expected to have similar market risks.
A Fund may use spread curve trades by simultaneously purchasing and selling protection through credit default swaps referenced to the same issuer but with different maturities. Spread curves attempt to gain exposure to credit risk on a forward basis by realizing gains on the expected differences in spreads.
A Fund’s maximum risk of loss from counterparty credit risk related to credit default swaps, either as the buyer or seller of protection, is the fair value of the contract. The risk may be mitigated to some extent if a master netting arrangement between a Fund and the counterparty is in place and to the extent a Fund obtains collateral to cover the Fund’s exposure to the counterparty.
The aggregate fair value of credit default swaps in a net liability position is reflected as unrealized depreciation and is disclosed in the Notes to Schedules of Investments. The collateral posted, net of assets received as collateral, for swap agreements is also disclosed in the Notes to Schedules of Investments. The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement is an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of March 31, 2015 for which a Fund is the seller of protection are disclosed in the Notes to Schedules of Investments. These potential amounts are partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a Fund for the same referenced entity or entities.
During the reporting period, the Funds entered into credit default swap agreements for the following reasons: The PF Inflation Managed Fund entered into credit default swaps on credit indices to obtain exposure to the credit risk of individual securities or to the broader investment grade sector. The PF Managed Bond Fund entered into credit default swaps on credit indices to manage exposure to and within the credit sector, to obtain exposure to the credit risk of individual securities or to the broader investment grade, high yield, or emerging markets sectors. The PF
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NOTES TO FINANCIAL STATEMENTS (Continued)
Global Absolute Return Fund entered into credit default swaps to increase or decrease credit exposure to individual issuers of debt securities or to a specific debt security or basket of debt securities, and to increase returns.
Total Return Swaps – A Fund investing in total return swaps is subject to the risk that there is no liquid market for these agreements, that the counterparties may default on their obligations to perform or that there may be unfavorable changes in the value of the underlying index or reference instrument (generally caused by changes in interest rates or declines in credit quality). A total return swap agreement is one in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying index or reference instrument which includes both the income it generates and any capital gains. To the extent the total return of the index or reference instrument underlying the transaction exceeds or falls short of the offsetting interest rate obligation, a Fund will receive a payment from or make a payment to the counterparty. A Fund’s maximum risk of loss from counterparty credit risk related to total return swaps is the discounted net value of the cash flows to be received from or paid to the counterparty over the contract’s remaining life, to the extent that the amount is positive. The risk may be mitigated to some extent if a master netting arrangement between a Fund and the counterparty is in place and to the extent a Fund obtains collateral to cover a Fund’s exposure to the counterparty.
A Fund may enter into fully funded total return swaps which involves one party making an initial payment equal to the estimated value of the reference instrument. The parties to the swap then exchange respective commitments to pay or receive a net amount based on the change in the fair value of a reference instrument and a specified notional amount.
During the reporting period, the Funds entered into total return swaps for the following reasons: The PF Emerging Markets Debt Fund entered into total return swaps to gain exposure to the various markets. The PF Global Absolute Return Fund entered into total return swaps to gain currency exposure in various markets, to increase or decrease credit exposure to individual issuers of debt securities, to increase or decrease credit exposure to a specific debt security or basket of debt securities, and to increase returns.
Volatility Swaps – Volatility swap agreements involve two parties agreeing to exchange cash flows based on the measured variance (or square of volatility) of a specified underlying asset. One party agrees to exchange a “fixed rate” or strike price payment for the “floating rate” or realized price variance on the underlying asset with respect to the notional amount. At inception, the strike price is generally chosen such that the fair value of the swap is zero.
At the maturity date, a net cash flow is exchanged, where the payoff amount is equivalent to the difference between the realized price variance of the underlying asset and the strike price multiplied by the notional amount. As a receiver of the realized price variance, the Fund would receive the payoff amount when the realized price variance of the underlying asset is greater than the strike price and would owe the payoff amount when the variance is less than the strike. As a payer of the realized price variance, the Fund would owe the payoff amount when the realized price variance of the underlying asset is greater than the strike price and would receive the payoff amount when the variance is less than the strike. This type of agreement is essentially a forward contract on the future realized price variance of the underlying asset.
During the reporting period, the PF Inflation Managed Fund used volatility swaps to tactically increase returns by taking small positions on the volatility of currencies.
The following is a summary of the location of fair value amounts of derivative investments, if any, disclosed in the Trust’s Statements of Assets and Liabilities:
| Location on the Statements of Assets and Liabilities | ||||||
| Derivative Investments Risk Type | Asset Derivative Investments | Liability Derivative Investments | ||||
| Credit contracts | Investments, at value |
Outstanding options written, at value | ||||
| Equity contracts | Receivable: Variation margin | Payable: Variation margin | ||||
| Interest rate contracts | Swap agreements, at value | Swap agreements, at value | ||||
| Forward bonds appreciation | Forward bonds depreciation | |||||
| Foreign currency contracts | Investments, at value |
Outstanding options written, at value | ||||
| Receivable: Variation margin |
Payable: Variation margin | |||||
| Forward foreign currency contracts appreciation |
Forward foreign currency contracts depreciation | |||||
| Swap agreements, at value |
Swap agreements, at value | |||||
The following is a summary of fair values of derivative investments disclosed in the Trust’s Statements of Assets and Liabilities, categorized by primary risk exposure as of March 31, 2015:
| Asset Derivative Investments Value |
||||||||||||||||||||
| Fund | Total Value at March 31, 2015 |
Credit Contracts |
Equity Contracts |
Foreign Currency Contracts |
Interest Rate Contracts |
|||||||||||||||
| PF Inflation Managed |
$1,454,252 | $10,644 | $— | $1,168,724 | $274,884 | * | ||||||||||||||
| PF Managed Bond |
4,748,126 | 787,931 | * | — | 1,934,997 | * | 2,025,198 | * | ||||||||||||
| PF Short Duration Bond |
38,753 | — | — | 38,753 | — | |||||||||||||||
| PF Emerging Markets Debt |
4,650,740 | — | — | 1,349,235 | 3,301,505 | |||||||||||||||
| PF Comstock |
47,713 | — | — | 47,713 | — | |||||||||||||||
| PF International Value |
930,742 | — | 7,800 | * | 922,942 | — | ||||||||||||||
| PF Currency Strategies |
11,257,347 | — | — | 11,257,347 | — | |||||||||||||||
| PF Global Absolute Return |
29,286,009 | 4,621,237 | 919,279 | * | 21,221,241 | 2,524,252 | * | |||||||||||||
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NOTES TO FINANCIAL STATEMENTS (Continued)
| Liability Derivative Investments Value |
||||||||||||||||||||
| Fund | Total Value at March 31, 2015 |
Credit Contracts |
Equity Contracts |
Foreign Currency Contracts |
Interest Rate Contracts |
|||||||||||||||
| PF Inflation Managed |
($1,690,604 | ) | ($40,251 | ) | $— | ($405,138 | ) | ($1,245,215 | )* | |||||||||||
| PF Managed Bond |
(6,012,197 | ) | (776,974 | )* | — | (623,249 | )* | (4,611,974 | )* | |||||||||||
| PF Short Duration Bond |
(18,003 | ) | — | — | (9,422 | ) | (8,581 | )* | ||||||||||||
| PF Emerging Markets Debt |
(1,669,056 | ) | — | — | (1,557,311 | ) | (111,745 | ) | ||||||||||||
| PF Comstock |
(418,707 | ) | — | — | (418,707 | ) | — | |||||||||||||
| PF Mid-Cap Growth |
(33,736 | ) | — | (33,736 | ) | — | — | |||||||||||||
| PF International Value |
(725,002 | ) | — | (18,414 | )* | (706,588 | ) | — | ||||||||||||
| PF Currency Strategies |
(10,418,381 | ) | — | — | (10,418,381 | ) | — | |||||||||||||
| PF Global Absolute Return |
(18,191,980 | ) | (1,114,413 | ) | (899,639 | )* | (13,453,002 | ) | (2,724,926 | )* | ||||||||||
| * | Includes cumulative appreciation and depreciation of futures contracts and centrally cleared options and swaps as reported in the Notes to Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of realized gains and losses and changes in net unrealized appreciation and depreciation of derivative investments, if any, disclosed in the Trust’s Statements of Operations:
| Derivative Investments Risk Type | Location of Gain (Loss) on Derivative Investments Recognized in the Statements of Operations | |||
| Credit contracts |
Net realized gain (loss) on investment security transactions | |||
| Equity contracts | Net realized gain (loss) on futures contract transactions | |||
| Interest rate contracts |
Net realized gain (loss) on swap transactions | |||
| Net realized gain (loss) on written option transactions | ||||
| Change in net unrealized appreciation (depreciation) on investment securities | ||||
| Change in net unrealized appreciation (depreciation) on futures contracts | ||||
| Change in net unrealized appreciation (depreciation) on swaps | ||||
| Change in net unrealized appreciation (depreciation) on written options | ||||
| Change in net unrealized appreciation (depreciation) on forward bonds | ||||
| Foreign currency contracts | Net realized gain (loss) on investment security transactions | |||
| Net realized gain (loss) on futures contract transactions | ||||
| Net realized gain (loss) on swap transactions | ||||
| Net realized gain (loss) on written option transactions | ||||
| Net realized gain (loss) on foreign currency transactions | ||||
| Change in net unrealized appreciation (depreciation) on investment securities | ||||
| Change in net unrealized appreciation (depreciation) on futures contracts | ||||
| Change in net unrealized appreciation (depreciation) on swaps | ||||
| Change in net unrealized appreciation (depreciation) on written options | ||||
| Change in net unrealized appreciation (depreciation) on foreign currencies |
The following is a summary of each Fund’s realized gain and/or loss and change in net unrealized appreciation and/or depreciation on derivative investments recognized in the Trust’s Statements of Operations categorized by primary risk exposure for the year ended March 31, 2015:
| Realized Gain (Loss) on Derivative Investments Recognized in the Statements of Operations | ||||||||||||||||||||
| Fund | Total | Credit Contracts |
Equity Contracts |
Foreign Currency Contracts |
Interest Rate |
|||||||||||||||
| PF Inflation Managed |
$1,702,157 | $193,648 | $— | $4,978,803 | ($3,470,294 | ) | ||||||||||||||
| PF Managed Bond |
22,162,178 | 824,171 | — | 10,911,001 | 10,427,006 | |||||||||||||||
| PF Short Duration Bond |
(98,267 | ) | — | — | (31,788 | ) | (66,479 | ) | ||||||||||||
| PF Emerging Markets Debt |
(1,331,555 | ) | — | — | (1,569,236 | ) | 237,681 | |||||||||||||
| PF Comstock |
4,582,583 | — | — | 4,582,583 | — | |||||||||||||||
| PF Large-Cap Growth |
(11,973 | ) | — | — | (11,973 | ) | — | |||||||||||||
| PF Mid-Cap Growth |
(217,028 | ) | — | (217,028 | ) | — | — | |||||||||||||
| PF Small-Cap Value |
(26,949 | ) | — | (26,949 | ) | — | — | |||||||||||||
| PF International Large-Cap |
(292,389 | ) | — | (292,389 | ) | — | — | |||||||||||||
| PF International Small-Cap |
406,477 | — | 406,477 | — | — | |||||||||||||||
| PF International Value |
1,178,830 | — | 32,260 | 1,146,570 | — | |||||||||||||||
| PF Currency Strategies |
15,349,834 | — | — | 15,349,834 | — | |||||||||||||||
| PF Global Absolute Return |
9,620,792 | (514,775 | ) | — | 12,473,361 | (2,337,794 | ) | |||||||||||||
| Change in Net Unrealized Appreciation (Depreciation)
on Derivative Investments Recognized in the Statements of Operations |
||||||||||||||||||||
| Fund | Total | Credit Contracts |
Equity Contracts |
Foreign Currency Contracts |
Interest Rate Contracts |
|||||||||||||||
| PF Inflation Managed |
$1,534,107 | ($46,236 | ) | $— | $786,003 | $794,340 | ||||||||||||||
| PF Managed Bond |
(752,250 | ) | (678,358 | ) | — | 1,030,704 | (1,104,596 | ) | ||||||||||||
| PF Short Duration Bond |
15,253 | — | — | 29,331 | (14,078 | ) | ||||||||||||||
| PF Emerging Markets Debt |
(647,511 | ) | — | — | (423,777 | ) | (223,734 | ) | ||||||||||||
| PF Comstock |
(220,429 | ) | — | — | (220,429 | ) | — | |||||||||||||
| PF Large-Cap Growth |
(28,895 | ) | — | — | (28,895 | ) | — | |||||||||||||
| PF Mid-Cap Growth |
(4,891 | ) | — | (4,891 | ) | — | — | |||||||||||||
| PF International Value |
(431,859 | ) | — | (10,614 | ) | (421,245 | ) | — | ||||||||||||
| PF Currency Strategies |
6,006,497 | — | — | 6,006,497 | — | |||||||||||||||
| PF Global Absolute Return |
7,821,631 | 668,213 | 252,786 | 7,752,658 | (852,026 | ) | ||||||||||||||
D-15
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
For financial reporting purposes, the Trust does not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral (receivables) or the obligation to return cash collateral (payables) arising from derivative instruments recognized at fair value executed with the same counterparty under a master netting arrangement.
| Average Values of Derivative Investments By Risk Exposure for the Year Ended March 31, 2015 |
||||||||||||||||||
| Fund | Credit Contracts |
Equity Contracts |
Foreign Currency Contracts |
Interest Rate Contracts |
||||||||||||||
| PF Inflation Managed |
$49,338 | $— | $497,603 | ($957,818 | ) | |||||||||||||
| PF Managed Bond |
886,817 | — | 1,322,183 | (390,033 | ) | |||||||||||||
| PF Short Duration Bond |
— | — | (2,581 | ) | (728 | ) | ||||||||||||
| PF Emerging Markets Debt |
— | — | (236,790 | ) | 2,643,256 | |||||||||||||
| PF Comstock |
— | — | (10,422 | ) | — | |||||||||||||
| PF Large-Cap Growth |
— | — | 14,579 | — | ||||||||||||||
| PF Mid-Cap Growth |
— | 14 | — | — | ||||||||||||||
| PF International Value |
— | 6,606 | 182,862 | — | ||||||||||||||
| PF Currency Strategies |
— | — | (491,492 | ) | — | |||||||||||||
| PF Global Absolute Return |
3,141,018 | (93,011 | ) | 5,455,465 | (47,937 | ) | ||||||||||||
The Average Values of Derivative Investments By Risk Exposure table shown above, and the amounts of net realized gains and losses and changes in net unrealized appreciation and depreciation on derivative investments as disclosed in the Statements of Operations serve as indicators of volume of financial derivative activity for each applicable Fund for the year ended March 31, 2015.
C. ENFORCEABLE MASTER NETTING ARRANGEMENTS
Master Agreements and Netting Arrangements – Certain Funds are parties to various agreements, including but not limited to International Swaps and Derivatives Association Agreements and related Credit Support Annex, Master Repurchase Agreements, and Master Securities Forward Transactions Agreements (collectively “Master Agreements”), which govern the terms of certain transactions with select counterparties. These Master Agreements generally include provisions for general obligations, representations, agreements, collateral, and certain events of default or termination. These Master Agreements also include provisions for netting arrangements that help reduce credit and counterparty risk associated with relevant transactions. The netting arrangements are generally tied to credit related events that if triggered, would cause an event of default or termination giving a Fund or counterparty the right to terminate early and cause settlement, on a net basis, of all transactions under the applicable Master Agreement. In the event of an early termination as a result of an event of default under the Master Agreement, the total value exposure of all transactions will be offset against collateral exchanged to date, which would result in a net receivable or payable that would be due from or to the counterparty. Credit related events include, but are not limited to, bankruptcy, failure to make timely payments, restructuring, obligation acceleration, obligation default, a material decline in net assets, decline in credit rating or repudiation/moratorium. Any election made by a counterparty to early terminate the transactions under a Master Agreement could have a material adverse impact on a Fund’s financial statements. A Fund’s overall exposure to credit risk, subject to netting arrangements can change substantially within a short period, as it is affected by each transaction subject to the arrangement.
Master Agreements can also help limit counterparty risk by specifying collateral posting arrangements at pre-arranged exposure levels. Under the Master Agreements, collateral is routinely transferred if the total net exposure to certain transactions under the relevant Master Agreement with a counterparty in a given Fund exceeds a specified threshold, net of collateral already in place, which typically ranges from $0 to $250,000 depending on the counterparty and the type of Master Agreement. Collateral under the Master Agreements is usually in the form of cash or U.S. Treasury Bills but could include other types of securities. The value of all derivative transactions outstanding under a Master Agreement is calculated daily to determine the amount of collateral to be received or pledged by the counterparty. Posting of collateral for OTC derivative transactions are covered under tri-party collateral agreements between the Trust, the Trust’s Custodian, and each counterparty. Collateral for centrally cleared derivatives transactions are posted with the applicable derivatives clearing organization.
D-16
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The following is a summary of financial and derivative instruments that are subject to enforceable master netting agreements (or similar arrangements) and collateral received and pledged in connection with the master netting agreements (or similar arrangements) as of March 31, 2015:
| Gross Amounts Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset
|
Gross Amounts Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset
|
|||||||||||||||||||||||||||||||
| Description | Financial Instruments |
Collateral Received |
Net Amount |
Financial Instruments |
Collateral Pledged |
Net Amount |
||||||||||||||||||||||||||||
| Assets | Liabilities | |||||||||||||||||||||||||||||||||
| PF Inflation Managed |
||||||||||||||||||||||||||||||||||
| Swaps |
$65,902 | ($28,975 | ) | ($27,211 | ) | $9,716 | ($42,263 | ) | $28,975 | $— | ($13,288 | ) | ||||||||||||||||||||||
| Options |
104,504 | (104,504 | ) | — | — | (209,788 | ) | 104,504 | — | (105,284 | ) | |||||||||||||||||||||||
| Foreign currency contracts |
1,168,709 | (261,481 | ) | (353,789 | ) | 553,439 | (356,246 | ) | 261,481 | — | (94,765 | ) | ||||||||||||||||||||||
| Reverse repurchase agreements |
(2,983,375 | ) | — | 2,983,375 | — | |||||||||||||||||||||||||||||
| Sale-buyback financing |
(28,166,940 | ) | 28,166,940 | — | — | |||||||||||||||||||||||||||||
| PF Managed Bond |
||||||||||||||||||||||||||||||||||
| Swaps |
458,886 | (240,475 | ) | (154,217 | ) | 64,194 | (742,943 | ) | 240,475 | 56,902 | (445,566 | ) | ||||||||||||||||||||||
| Options |
100,340 | (93,134 | ) | (4,599 | ) | 2,607 | (122,760 | ) | 93,134 | 3,355 | (26,271 | ) | ||||||||||||||||||||||
| Foreign currency contracts |
1,715,959 | (420,509 | ) | (826,708 | ) | 468,742 | (590,639 | ) | 420,509 | 19,266 | (150,864 | ) | ||||||||||||||||||||||
| Reverse repurchase agreements |
(617,500 | ) | — | 608,031 | (9,469 | ) | ||||||||||||||||||||||||||||
| Sale-buyback financing |
(6,093,639 | ) | 6,080,312 | — | (13,327 | ) | ||||||||||||||||||||||||||||
| PF Short Duration Bond |
||||||||||||||||||||||||||||||||||
| Foreign currency contracts |
38,753 | (8,478 | ) | — | 30,275 | (9,422 | ) | 8,478 | — | (944 | ) | |||||||||||||||||||||||
| PF Emerging Markets Debt |
||||||||||||||||||||||||||||||||||
| Swaps |
3,301,505 | (47,794 | ) | — | 3,253,711 | (111,745 | ) | 47,794 | — | (63,951 | ) | |||||||||||||||||||||||
| Foreign currency contracts |
1,349,235 | (931,344 | ) | — | 417,891 | (1,557,311 | ) | 931,344 | 140,236 | (485,731 | ) | |||||||||||||||||||||||
| PF Comstock |
||||||||||||||||||||||||||||||||||
| Foreign currency contracts |
47,713 | (47,713 | ) | — | — | (418,707 | ) | 47,713 | — | (370,994 | ) | |||||||||||||||||||||||
| PF Mid-Cap Growth |
||||||||||||||||||||||||||||||||||
| Options |
— | — | — | — | (33,736 | ) | — | — | (33,736 | ) | ||||||||||||||||||||||||
| PF International Value |
||||||||||||||||||||||||||||||||||
| Foreign currency contracts |
922,942 | (194,276 | ) | — | 728,666 | (706,588 | ) | 194,276 | — | (512,312 | ) | |||||||||||||||||||||||
| PF Currency Strategies |
||||||||||||||||||||||||||||||||||
| Foreign currency contracts |
11,257,347 | (7,797,817 | ) | (2,798,226 | ) | 661,304 | (10,418,381 | ) | 7,797,817 | — | (2,620,564 | ) | ||||||||||||||||||||||
| PF Global Absolute Return |
||||||||||||||||||||||||||||||||||
| Swaps |
9,512,266 | (2,431,623 | ) | (5,248,618 | ) | 1,832,025 | (2,691,726 | ) | 2,431,623 | — | (260,103 | ) | ||||||||||||||||||||||
| Options |
11,820,442 | (10,439,824 | ) | (1,023,401 | ) | 357,217 | (10,439,824 | ) | 10,439,824 | — | — | |||||||||||||||||||||||
| Foreign currency contracts |
6,932,879 | (3,265,301 | ) | (2,718,640 | ) | 948,938 | (3,841,042 | ) | 3,265,301 | — | (575,741 | ) | ||||||||||||||||||||||
| Forward bonds |
(52,646 | ) | — | — | (52,646 | ) | ||||||||||||||||||||||||||||
| Reverse repurchase agreements |
(1,711,900 | ) | — | 1,711,900 | — | |||||||||||||||||||||||||||||
As of March 31, 2015, certain Funds had investments in repurchase agreements. The gross value and related collateral received for these investments are presented in each applicable Fund’s Schedule of Investments and the value of these investments is also presented in the Statements of Assets and Liabilities. The value of the related collateral held by each applicable Fund presented in these financial statements, except for the PF Global Absolute Return Fund, exceeded the value of the repurchase agreements as of March 31, 2015. For the PF Global Absolute Return Fund (see page B-85), the value of the related collateral (Spain Government) of $1,051,670 held by the Fund for a repurchase agreement (JPMorgan Chase & Co), which was entered into by the Fund for the purpose of selling a security short, exceeded 95% of the value of the repurchase price of the repurchase agreement ($1,080,624) as of March 31, 2015. As discussed in Note 4 on page D-8, in the case of a repurchase agreement entered into by a Fund for the purposes of selling a security short, the value of the collateral delivered to a Fund must be equal to or exceed 95% of the value of the repurchase price during the term of the repurchase agreement.
6. INVESTMENT ADVISORY, ADMINISTRATION AND SHAREHOLDER SERVICES, SUPPORT SERVICES, AND DISTRIBUTION AGREEMENTS
Pursuant to an Investment Advisory Agreement, PLFA, a wholly-owned subsidiary of Pacific Life Insurance Company (‘‘Pacific Life”), serves as Adviser to the Trust. For the PF Underlying Funds, PLFA has retained other investment management firms to sub-advise each Fund, as
D-17
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
discussed later in this section. PLFA receives investment advisory fees from each Fund based on the following advisory fee rates, which are based on an annual percentage of average daily net assets of each Fund:
| PF Floating Rate Loan (1) |
0.75% | PF Large-Cap Value |
0.65% |
PF International Large-Cap |
0.85% | |||||
| PF Inflation Managed (1) |
0.40% | PF Main Street Core |
0.45% |
PF International Small-Cap (1) |
0.85% | |||||
| PF Managed Bond |
0.40% | PF Mid-Cap Equity |
0.65% |
PF International Value |
0.65% | |||||
| PF Short Duration Bond |
0.40% | PF Mid-Cap Growth (1) |
0.70% |
PF Currency Strategies |
0.65% | |||||
| PF Emerging Markets Debt |
0.785% | PF Small-Cap Growth |
0.60% |
PF Global Absolute Return |
0.80% | |||||
| PF Comstock (1) |
0.75% | PF Small-Cap Value |
0.75% |
PF Precious Metals (1) |
0.75% | |||||
| PF Growth |
0.55% | PF Real Estate |
0.90% |
|||||||
| PF Large-Cap Growth (1) |
0.75% | PF Emerging Markets |
0.80% |
| (1) | PLFA agreed to waive 0.10%, 0.015%, 0.045%, 0.05%, and 0.07% of its advisory fee through July 31, 2015 for the PF Floating Rate Loan, PF Comstock, PF Large-Cap Growth, PF Mid-Cap Growth, and PF Precious Metals Funds, respectively. PLFA agreed to waive 0.02% of its advisory fee through July 31, 2016 for the PF Inflation Managed and PF International Small-Cap Funds. The agreements will terminate if the investment advisory agreement is terminated or upon approval by the Board and prior written notice to the Adviser. There is no guarantee that PLFA will continue such waivers after those dates. |
Pursuant to Fund Management Agreements, as of March 31, 2015, the Trust and PLFA engage various investment management firms under PLFA’s supervision for the PF Underlying Funds. As of March 31, 2015, the following firms serve as sub-advisers for their respective Fund(s): Eaton Vance Investment Managers for the PF Floating Rate Loan and PF Global Absolute Return Funds; Pacific Investment Management Company LLC and Western Asset Management Company (co-sub-advisers) for the PF Inflation Managed and PF Managed Bond Funds; T. Rowe Price Associates, Inc. for the PF Short Duration Bond Fund; Ashmore Investment Management Limited for the PF Emerging Markets Debt Fund; Invesco Advisers, Inc. for the PF Comstock Fund; MFS Investment Management for the PF Growth and PF International Large-Cap Funds; BlackRock Investment Management, LLC for the PF Large-Cap Growth Fund; ClearBridge Investments, LLC for the PF Large-Cap Value Fund; OppenheimerFunds, Inc. for the PF Main Street Core and PF Emerging Markets Funds; Scout Investments, Inc. for the PF Mid- Cap Equity Fund; Ivy Investment Management Company for the PF Mid-Cap Growth Fund; Lord, Abbett & Co. LLC for the PF Small-Cap Growth Fund; AllianceBernstein L.P. for the PF Small-Cap Value Fund; Morgan Stanley Investment Management Inc. for the PF Real Estate Fund; QS Batterymarch Financial Management, Inc. for the PF International Small-Cap Fund; J.P. Morgan Investment Management Inc. for the PF International Value Fund; Macro Currency Group and UBS Global Asset Management (Americas) Inc. (co-sub-advisers) for the PF Currency Strategies Fund; and Wells Capital Management Incorporated for the PF Precious Metals Fund. PLFA, as Adviser to each Fund of the Trust, pays the related management fees to these sub-advisers as compensation for their sub-advisory services provided to their respective Fund.
Pursuant to an Administration and Shareholder Services Agreement (the “Administration Agreement”), Pacific Life serves as administrator (the “Administrator”) to the Trust. The Trust paid the Administrator an administration fee at an annual rate of 0.15% for each of the PF Underlying Funds. The administration fee is for procuring or providing administrative, transfer agency, and shareholder services. In addition, Pacific Life and PLFA provide support services to the Trust that are outside the scope of the Administrator’s and Adviser’s responsibilities under the Administration Agreement and Investment Advisory Agreement. Under the Support Services Agreement, the Trust compensates Pacific Life and PLFA for their expenses in providing support services to the Trust in connection with various matters, some of which include the time spent by legal, accounting, and compliance personnel of Pacific Life and PLFA (including individuals who may be officers or Trustees of the Trust) to attend meetings of the Board and to provide assistance with the coordination and supervision in connection with the services procured for the Trust under the Administration Agreement. Support services do not include any services for which PLFA is responsible pursuant to the Investment Advisory Agreement. The Trust reimburses Pacific Life and PLFA for these support services on an approximate cost basis.
Pursuant to a Distribution Agreement, Pacific Select Distributors, LLC (the “Distributor”), a wholly-owned subsidiary of Pacific Life, serves as distributor of the Trust’s shares. Under the Distribution Agreement, the Distributor bears all expenses of providing services, including costs of sales presentations, mailings, advertisements, and other marketing efforts by the Distributor in connection with the distribution or sale of the Trust’s shares and makes distribution and/or service payments to selling groups in connection with the sale of certain of the Trust’s shares and subsequent servicing needs of shareholders provided by selling groups. The Class P shares of the PF Underlying Funds presented in these financial statements are not subject to a distribution and/or service fee.
7. TRANSACTIONS WITH AFFILIATES
A. ADVISORY FEES, ADMINISTRATION FEES AND EXPENSES FOR SUPPORT SERVICES
The Adviser, the Distributor, and Pacific Life are related parties. The advisory fees earned by the Adviser, including any advisory fee waiver, the administration fees earned by Pacific Life, and expenses for support services recovered by PLFA and Pacific Life (see Note 6) from each Fund presented in these financial statements for the year ended March 31, 2015 are presented in the Statements of Operations. The amounts of each of these fees that remained payable as of March 31, 2015 are presented in the Statements of Assets and Liabilities.
B. EXPENSE LIMITATION AGREEMENTS
To help limit the Trust’s expenses, PLFA has entered into expense limitation agreements with the Trust and has contractually agreed to reimburse each Fund presented in these financial statements for certain operating expenses that exceed an annual rate based on a percentage of a Fund’s average daily net assets. These operating expenses include, but are not limited to: administration fees; organizational expenses;
D-18
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
custody expenses; expenses for audit, tax, and certain legal services; preparation, printing, filing, and distribution to existing shareholders of proxies, prospectuses and shareholder reports, and other regulatory documents, as applicable; independent trustees’ fees; and establishing, overseeing, and administering the Trust’s compliance program. These operating expenses do not include: investment advisory fees; distribution and/or service fees, if any; interest; taxes (including foreign taxes on dividends, interest or gains); brokerage commissions and other transactional expenses; dividends on securities sold short; acquired fund fees and expenses; and extraordinary expenses such as litigation expenses and other expenses not incurred in the ordinary course of each Fund’s business. The current expense cap for the PF Underlying Funds, except the PF international Small-Cap, PF Currency Strategies, PF Global Absolute Return, and PF Precious Metals Funds, is 0.15% through July 31, 2016 and 0.30% thereafter through July 31, 2022. The expense cap for the PF International Small-Cap Fund is 0.25% through December 31, 2015. The expense cap for the PF Currency Strategies, PF Global Absolute Return, and PF Precious Metals Funds was 0.20% through July 31, 2014 and is currently 0.25% through July 31, 2016. There is no guarantee that PLFA will continue to cap expenses upon the expiration of the applicable expense limitation agreements.
Any expense reimbursements are subject to recoupment by PLFA for a period of time as permitted under regulatory and accounting guidance (currently 3 years from the end of the fiscal year in which the reimbursement took place), to the extent that the recoupment would not cause the Fund to exceed the expense cap that was in effect at the time of the reimbursement. Any amounts repaid to PLFA will have the effect of increasing such expenses of the Fund, but not above the expense cap. There was no recoupment of expense reimbursement by PLFA from any Funds presented in these financial statements during the year ended March 31, 2015.
The Adviser’s expense reimbursement and the advisory fee waiver, if any, of each of the applicable Funds presented in these financial statements for the year March 31, 2015 are presented in the Statements of Operations. Any amounts that remained due from the Adviser as of March 31, 2015 are presented in the Statements of Assets and Liabilities.
The cumulative expense reimbursement amounts, if any, as of March 31, 2015 that are subject to recoupment by PLFA from each Fund presented in these financial statements are as follows:
| Expiration Date | ||||||||||||
| Fund | 3/31/2016 | 3/31/2017 | 3/31/2018 | |||||||||
| PF Floating Rate Loan |
$138,319 | $145,911 | $159,103 | |||||||||
| PF Inflation Managed |
210,150 | 147,422 | 150,774 | |||||||||
| PF Managed Bond |
511,150 | 474,658 | 512,975 | |||||||||
| PF Short Duration Bond |
200,776 | 214,263 | 214,257 | |||||||||
| PF Emerging Markets Debt |
149,277 | 136,611 | 219,179 | |||||||||
| PF Comstock |
179,416 | 188,193 | 174,160 | |||||||||
| PF Growth |
95,666 | 66,117 | 81,452 | |||||||||
| PF Large-Cap Growth |
120,927 | 108,743 | 113,036 | |||||||||
| PF Large-Cap Value |
217,662 | 225,998 | 211,881 | |||||||||
| PF Main Street Core |
167,926 | 158,976 | 154,305 | |||||||||
| PF Mid-Cap Equity |
137,581 | 101,037 | 116,418 | |||||||||
| PF Mid-Cap Growth |
95,060 | 60,241 | 53,935 | |||||||||
| PF Small-Cap Growth |
63,952 | 45,628 | 50,330 | |||||||||
| PF Small-Cap Value |
101,068 | 99,142 | 90,161 | |||||||||
| PF Real Estate |
60,947 | 42,886 | 40,632 | |||||||||
| PF Emerging Markets |
408,692 | 425,076 | 445,820 | |||||||||
| PF International Large-Cap |
257,028 | 225,808 | 253,588 | |||||||||
| PF International Small-Cap |
37,089 | |||||||||||
| PF International Value |
187,506 | 180,640 | 182,705 | |||||||||
| PF Currency Strategies |
31,042 | 49,987 | 4,400 | |||||||||
| PF Global Absolute Return |
68,978 | 319,375 | 210,688 | |||||||||
| PF Precious Metals |
33,601 | 33,735 | 9,648 | |||||||||
|
|
|
|
|
|
|
|||||||
| $3,436,724 | $3,450,447 | $3,486,536 | ||||||||||
|
|
|
|
|
|
|
|||||||
C. INDEPENDENT TRUSTEES
The Trust pays each independent trustee of the Board retainer fees and specified amounts for various Board and committee services and for chairing those committees. The fees and expenses of the independent trustees of the Board are presented in the Statements of Operations. Each independent trustee of the Board is eligible to participate in the Trust’s Deferred Compensation Plan (the “Plan”). The Plan allows each independent trustee to voluntarily defer receipt of all or a percentage of fees which otherwise would be payable for services performed. Amounts in the deferral account are obligations of each Fund at the time of such deferral and are payable in accordance with the Plan. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of certain Funds. An independent trustee who defers compensation has the option to select credit rate options that track the performance, at NAV without a sales load, of Class A shares of the Portfolio Optimization Funds, Pacific Funds Diversified Alternatives, Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income and/or Pacific Funds High Income, and/or Class P shares of the PF Underlying Funds. The obligation of each Fund under the Plan (the “DCP Liability”) is recorded as a liability (accrued trustees’ fees and expenses and deferred compensation). Accordingly, the market value appreciation or depreciation on a Fund’s DCP Liability account will cause the expenses of that Fund to increase or decrease due to market fluctuation. The change in net unrealized appreciation or depreciation on a Fund’s DCP Liability account is recorded as an increase or decrease to expenses (trustees’ fees and expenses). For the year ended March 31, 2015, such expenses were increased by $3,082 for all applicable Funds presented in these financial statements as a result of the market value appreciation on such accounts. As of March 31, 2015, the total amount in the DCP Liability accounts was $44,669 for all applicable Funds presented in these financial statements.
D-19
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
D. OFFICERS OF THE TRUST
None of the officers of the Trust received compensation from the Trust.
E. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of performance of their duties to the Trust. In addition, the Trust entered into an agreement with each of the trustees which provides that the Trust will indemnify and hold harmless each trustee against any expenses actually and reasonably incurred by any trustee in any proceeding arising out of or in connection with the trustee’s services to the Trust, to the fullest extent permitted by the Trust’s Declaration of Trust and By-Laws, the general trust law of the State of Delaware, the Securities Act of 1933, and the 1940 Act, each as now or hereinafter in force. In the normal course of business, the Trust enters into contracts with service providers and others that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements and agreements is dependent on future claims that may be made against the Trust and/or the trustees and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
8. UNFUNDED SENIOR LOAN COMMITMENTS
Unfunded loan commitments on senior loan participations and assignments (Note 4), if any, are marked to market daily and valued according to the Trust’s valuation policies and procedures. Any outstanding unfunded loan commitments are presented in the Notes to Schedules of Investments section of each applicable Fund’s Schedule of Investments. Any applicable net unrealized appreciation or depreciation at the end of the reporting period is recorded as an asset (unfunded loan commitment appreciation) or a liability (unfunded loan commitment depreciation) and any change in net unrealized appreciation or depreciation for the reporting period is recorded as a change in net unrealized appreciation or depreciation on unfunded loan commitment. As of March 31, 2015, the PF Global Absolute Return Fund had an unfunded loan commitment of $90,020 (see details in the Notes to Schedule of Investments).
9. PURCHASES AND SALES OF INVESTMENTS
The cost of purchases and proceeds from sales of investments (excluding short-term investments) for the year ended March 31, 2015, are summarized in the following table:
| U.S. Government Securities | Other Securities | |||||||||||||||
| Fund | Purchases | Sales | Purchases | Sales | ||||||||||||
| PF Floating Rate Loan |
$— | $— | $89,222,236 | $82,893,301 | ||||||||||||
| PF Inflation Managed |
210,949,031 | 231,934,530 | 28,130,127 | 30,866,822 | ||||||||||||
| PF Managed Bond |
3,015,013,231 | 3,170,955,035 | 425,052,552 | 275,366,180 | ||||||||||||
| PF Short Duration Bond |
44,170,560 | 49,506,331 | 89,772,366 | 94,042,563 | ||||||||||||
| PF Emerging Markets Debt |
— | — | 174,862,088 | 133,918,835 | ||||||||||||
| PF Comstock |
— | — | 58,693,417 | 112,733,838 | ||||||||||||
| PF Growth |
— | — | 79,267,435 | 48,573,474 | ||||||||||||
| PF Large-Cap Growth |
— | — | 188,111,434 | 183,811,313 | ||||||||||||
| PF Large-Cap Value |
— | — | 47,423,740 | 106,257,648 | ||||||||||||
| PF Main Street Core |
— | — | 117,853,021 | 133,237,792 | ||||||||||||
| PF Mid-Cap Equity |
— | — | 356,119,049 | 323,180,668 | ||||||||||||
| PF Mid-Cap Growth |
— | — | 29,903,111 | 44,002,133 | ||||||||||||
| PF Small-Cap Growth |
— | — | 200,411,974 | 184,980,421 | ||||||||||||
| PF Small-Cap Value |
— | — | 195,396,737 | 204,998,620 | ||||||||||||
| PF Real Estate |
— | — | 20,412,896 | 53,168,932 | ||||||||||||
| PF Emerging Markets |
— | — | 58,521,694 | 62,454,450 | ||||||||||||
| PF International Large-Cap |
— | — | 99,793,767 | 114,826,643 | ||||||||||||
| PF International Small-Cap |
— | — | 124,516,058 | 7,192,440 | ||||||||||||
| PF International Value |
— | — | 141,546,546 | 161,799,342 | ||||||||||||
| PF Currency Strategies |
— | 16,519,375 | 16,510,692 | 25,609,946 | ||||||||||||
| PF Global Absolute Return |
43,029,313 | 43,495,765 | 167,684,726 | 143,003,876 | ||||||||||||
| PF Precious Metals |
— | — | 27,587,586 | 66,425,115 | ||||||||||||
10. FEDERAL INCOME TAX INFORMATION
Each Fund intends to qualify each year as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code (the “Code”). A Fund that qualifies as a RIC does not have to pay income tax as long as it distributes sufficient taxable income and net capital gains. Each Fund declared and paid sufficient dividends on net investment income and capital gains distributions during the year or period ended March 31, 2015, to qualify as a RIC and is not required to pay Federal income tax under the Code. Accordingly, no provision for Federal income taxes is required in the financial statements. Required distributions are based on net investment income and net realized gains determined in accordance with income tax regulations, which may differ from U.S. GAAP for financial reporting purposes. These differences are primarily due to differing treatments for sale-buyback financing transactions, futures and options, swap income, paydown gain/loss, partnership income, foreign currency transactions, passive foreign investment companies, late year ordinary and post-October capital losses, capital loss carryforwards, and losses deferred due to wash sales. Permanent book and tax differences relating to shareholder distributions will result in reclassifications of capital accounts. In addition, the year in which amounts are distributed may differ from the year in which the net investment income is earned and the net gains are realized by each Fund.
D-20
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The following table shows the accumulated capital losses and components of distributable earnings on a tax basis, and late year ordinary losses and post-October capital losses deferred, if any, as of March 31, 2015:
| Distributable Earnings | Late-Year Ordinary and Post-October Losses Deferral | |||||||||||||||||||||||||||||
| Fund | Accumulated Capital Losses |
Undistributed Ordinary Income |
Undistributed Long-Term Capital Gains |
Late-Year Ordinary Losses |
Short-Term Capital Losses |
Long-Term Capital Losses |
Total | |||||||||||||||||||||||
| PF Floating Rate Loan |
($1,308,857 | ) | $1,135,851 | $— | $— | $— | $— | $— | ||||||||||||||||||||||
| PF Inflation Managed |
(4,319,485 | ) | — | — | 26,353 | — | — | 26,353 | ||||||||||||||||||||||
| PF Managed Bond |
— | 10,217,524 | 4,606,718 | — | — | — | — | |||||||||||||||||||||||
| PF Short Duration Bond |
(1,449,748 | ) | 362,742 | — | — | — | — | — | ||||||||||||||||||||||
| PF Emerging Markets Debt |
(3,864,326 | ) | — | — | 2,876,604 | — | — | 2,876,604 | ||||||||||||||||||||||
| PF Comstock |
— | 3,510,782 | 12,100,220 | — | — | — | — | |||||||||||||||||||||||
| PF Growth |
— | — | 474,198 | — | — | — | — | |||||||||||||||||||||||
| PF Large-Cap Growth |
— | — | 10,226,878 | 125,361 | 717,919 | — | 843,280 | |||||||||||||||||||||||
| PF Large-Cap Value |
— | 1,472,537 | 6,774,779 | — | — | — | — | |||||||||||||||||||||||
| PF Main Street Core |
— | 1,663,653 | 11,965,948 | — | — | — | — | |||||||||||||||||||||||
| PF Mid-Cap Equity |
— | 410,785 | 5,635,134 | — | — | — | — | |||||||||||||||||||||||
| PF Mid-Cap Growth |
— | 995,471 | 1,563,635 | — | — | — | — | |||||||||||||||||||||||
| PF Small-Cap Growth |
— | — | 1,452,396 | — | — | — | — | |||||||||||||||||||||||
| PF Small-Cap Value |
— | 814,372 | 537,129 | — | — | — | — | |||||||||||||||||||||||
| PF Real Estate |
— | — | 3,736,141 | — | — | — | — | |||||||||||||||||||||||
| PF Emerging Markets |
— | 849,552 | — | — | 1,575,487 | — | 1,575,487 | |||||||||||||||||||||||
| PF International Large-Cap |
(5,151,117 | ) | 1,837,377 | — | — | — | — | — | ||||||||||||||||||||||
| PF International Small-Cap |
— | 2,087,295 | 40,950 | — | — | — | — | |||||||||||||||||||||||
| PF International Value |
(44,175,460 | ) | 1,170,057 | — | — | — | — | — | ||||||||||||||||||||||
| PF Currency Strategies |
(5,937 | ) | 2,681,451 | — | — | — | — | — | ||||||||||||||||||||||
| PF Global Absolute Return |
(2,014,962 | ) | 11,761,492 | — | — | — | — | — | ||||||||||||||||||||||
| PF Precious Metals |
(26,823,805 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
Accumulated capital losses represent net capital loss carryovers as of March 31, 2015 that may be available to offset future realized capital gains and thereby reduce future capital gains distributions. The following table shows the expiration dates and the amounts of capital loss carryover, if any, by each of the applicable Funds as of March 31, 2015 and capital loss carryover from prior years utilized during the year ended March 31, 2015:
| Net Capital Loss Carryover Expiring In | Unlimited Period of Net Capital Loss Carryover |
Accumulated Capital Loss Carryover |
Capital Loss Carryover Utilized 2015 |
|||||||||||||||||||||||||||
| Fund | 2017 | 2018 | 2019 | Short-Term | Long-Term | |||||||||||||||||||||||||
| PF Floating Rate Loan |
$— | $— | $— | ($363,201 | ) | ($945,656 | ) | ($1,308,857 | ) | $— | ||||||||||||||||||||
| PF Inflation Managed |
— | — | — | — | (4,319,485 | ) | (4,319,485 | ) | — | |||||||||||||||||||||
| PF Short Duration Bond |
— | — | — | (830,548 | ) | (619,200 | ) | (1,449,748 | ) | — | ||||||||||||||||||||
| PF Emerging Markets Debt |
— | — | — | (2,149,196 | ) | (1,715,130 | ) | (3,864,326 | ) | — | ||||||||||||||||||||
| PF Comstock |
— | — | — | — | — | — | 2,589,476 | |||||||||||||||||||||||
| PF Growth |
— | — | — | — | — | — | 64,515 | |||||||||||||||||||||||
| PF Real Estate |
— | — | — | — | — | — | 5,601,478 | |||||||||||||||||||||||
| PF International Large-Cap |
— | (2,498,954 | ) | (2,652,163 | ) | — | — | (5,151,117 | ) | 3,329,854 | ||||||||||||||||||||
| PF International Value |
(5,634,042 | ) | (38,541,418 | ) | — | — | — | (44,175,460 | ) | 2,549,353 | ||||||||||||||||||||
| PF Currency Strategies |
— | — | — | (5,937 | ) | — | (5,937 | ) | — | |||||||||||||||||||||
| PF Global Absolute Return |
— | — | — | (188,154 | ) | (1,826,808 | ) | (2,014,962 | ) | — | ||||||||||||||||||||
| PF Precious Metals |
— | — | — | (7,196,166 | ) | (19,627,639 | ) | (26,823,805 | ) | — | ||||||||||||||||||||
D-21
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The aggregate cost of investments and the composition of unrealized appreciation and depreciation on investments for Federal income tax purposes as of March 31, 2015, were as follows:
| Gross | Gross | Net Unrealized | ||||||||||||||
| Fund | Total Cost of Investments on Tax Basis (1) |
Unrealized Appreciation on Investments |
Unrealized Depreciation on Investments |
Appreciation (Depreciation) on Investments |
||||||||||||
| PF Floating Rate Loan |
$128,396,442 | $964,584 | ($1,844,088 | ) | ($879,504 | ) | ||||||||||
| PF Inflation Managed |
161,279,460 | 3,165,232 | (7,923,522 | ) | (4,758,290 | ) | ||||||||||
| PF Managed Bond |
712,173,294 | 16,463,701 | (11,487,229 | ) | 4,976,472 | |||||||||||
| PF Short Duration Bond |
213,782,060 | 1,334,942 | (925,850 | ) | 409,092 | |||||||||||
| PF Emerging Markets Debt |
165,920,024 | 2,345,941 | (13,311,384 | ) | (10,965,443 | ) | ||||||||||
| PF Comstock |
189,388,588 | 88,728,230 | (7,956,708 | ) | 80,771,522 | |||||||||||
| PF Growth |
115,114,743 | 33,949,595 | (1,100,484 | ) | 32,849,111 | |||||||||||
| PF Large-Cap Growth |
162,027,899 | 38,159,959 | (898,960 | ) | 37,260,999 | |||||||||||
| PF Large-Cap Value |
209,414,024 | 140,647,127 | (6,174,556 | ) | 134,472,571 | |||||||||||
| PF Main Street Core |
209,121,367 | 64,976,895 | (4,119,078 | ) | 60,857,817 | |||||||||||
| PF Mid-Cap Equity |
191,301,209 | 32,786,490 | (4,788,288 | ) | 27,998,202 | |||||||||||
| PF Mid-Cap Growth |
74,704,383 | 16,594,292 | (5,324,169 | ) | 11,270,123 | |||||||||||
| PF Small Cap Growth |
69,918,016 | 16,366,557 | (2,459,528 | ) | 13,907,029 | |||||||||||
| PF Small Cap Value |
134,459,498 | 18,329,643 | (5,837,900 | ) | 12,491,743 | |||||||||||
| PF Real Estate |
27,364,136 | 23,135,412 | (1,229,588 | ) | 21,905,824 | |||||||||||
| PF Emerging Markets |
122,986,375 | 30,024,153 | (14,976,110 | ) | 15,048,043 | |||||||||||
| PF International Large-Cap |
156,994,444 | 73,429,858 | (10,137,745 | ) | 63,292,113 | |||||||||||
| PF International Small-Cap |
120,614,150 | 9,703,671 | (3,545,867 | ) | 6,157,804 | |||||||||||
| PF International Value |
128,976,873 | 18,144,508 | (6,512,740 | ) | 11,631,768 | |||||||||||
| PF Currency Strategies |
190,526,852 | 339,859 | (3,044,285 | ) | (2,704,426 | ) | ||||||||||
| PF Global Absolute Return |
181,912,509 | 11,379,268 | (12,784,782 | ) | (1,405,514 | ) | ||||||||||
| PF Precious Metals |
51,989,004 | 1,130,681 | (13,429,037 | ) | (12,298,356 | ) | ||||||||||
| (1) | The difference between tax cost of investments on tax basis and total investments, at cost, as presented in the Statements of Assets and Liabilities is primarily due to wash sale deferrals, investments in passive foreign investment companies, straddle loss deferrals, and differing treatments for sale-buyback financing transactions and U.S. Treasury Inflation-Protected Securities. |
Each Fund recognizes the financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax liability for unrecognized tax benefits with a corresponding income tax expense. Management has analyzed all open tax years, as defined by the statute of limitations, for all major jurisdictions and has determined that no provision for income tax is required in the financial statements. Each Fund remains subject to examination by Federal and State tax authorities for the returns filed for tax years ended after March 31, 2011.
11. TAX CHARACTER OF DISTRIBUTIONS
The tax character of income and capital gains distributions to shareholders during the years or periods ended March 31, 2015 and 2014, were as follows:
| For the Year or Period Ended March 31, 2015 | For the Year or Period Ended March 31, 2014 | |||||||||||||||||||||||||
| Fund | Ordinary Income |
Long-Term Capital Gains |
Total Distributions |
Ordinary Income |
Long-Term Capital Gains |
Total Distributions |
||||||||||||||||||||
| PF Floating Rate Loan |
$4,425,695 | $17,082 | $4,442,777 | $4,669,660 | $1,512,705 | $6,182,365 | ||||||||||||||||||||
| PF Inflation Managed |
3,604,677 | — | 3,604,677 | 1,675,821 | 1,787,419 | 3,463,240 | ||||||||||||||||||||
| PF Managed Bond |
19,686,964 | 2,358,853 | 22,045,817 | 9,129,156 | 2,238,185 | 11,367,341 | ||||||||||||||||||||
| PF Short Duration Bond |
3,085,384 | — | 3,085,384 | 3,024,235 | — | 3,024,235 | ||||||||||||||||||||
| PF Emerging Markets Debt |
5,962,219 | — | 5,962,219 | 5,009,739 | — | 5,009,739 | ||||||||||||||||||||
| PF Comstock |
5,782,909 | 20,835,136 | 26,618,045 | 2,637,092 | — | 2,637,092 | ||||||||||||||||||||
| PF Growth |
516,621 | 1,456,228 | 1,972,849 | 573,668 | — | 573,668 | ||||||||||||||||||||
| PF Large-Cap Growth |
7,264,938 | 10,828,879 | 18,093,817 | 11,277,943 | 22,887,345 | 34,165,288 | ||||||||||||||||||||
| PF Large-Cap Value |
7,915,128 | 28,296,928 | 36,212,056 | 5,289,219 | — | 5,289,219 | ||||||||||||||||||||
| PF Main Street Core |
4,972,594 | 31,403,060 | 36,375,654 | 2,316,456 | — | 2,316,456 | ||||||||||||||||||||
| PF Mid-Cap Equity |
7,669,254 | 16,838,576 | 24,507,830 | 4,132,303 | 8,798,178 | 12,930,481 | ||||||||||||||||||||
| PF Mid-Cap Growth |
3,048,287 | 825,598 | 3,873,885 | 4,267,256 | 14,963,337 | 19,230,593 | ||||||||||||||||||||
| PF Small Cap Growth |
— | 9,980,804 | 9,980,804 | 98,333 | 1,357,926 | 1,456,259 | ||||||||||||||||||||
| PF Small Cap Value |
7,232,658 | 37,104,460 | 44,337,118 | 1,895,573 | 6,190,367 | 8,085,940 | ||||||||||||||||||||
| PF Real Estate |
962,640 | 1,075,569 | 2,038,209 | 1,118,697 | — | 1,118,697 | ||||||||||||||||||||
| PF Emerging Markets |
2,127,430 | 4,072,435 | 6,199,865 | 903,956 | 2,799,145 | 3,703,101 | ||||||||||||||||||||
| PF International Large-Cap |
4,006,574 | — | 4,006,574 | 2,672,165 | — | 2,672,165 | ||||||||||||||||||||
| PF International Value |
6,815,945 | — | 6,815,945 | 4,102,104 | — | 4,102,104 | ||||||||||||||||||||
| PF Currency Strategies |
4,113,282 | — | 4,113,282 | 4,034,980 | — | 4,034,980 | ||||||||||||||||||||
| PF Global Absolute Return |
9,239,168 | — | 9,239,168 | 4,132,927 | — | 4,132,927 | ||||||||||||||||||||
| PF Precious Metals |
— | — | — | 451,925 | — | 451,925 | ||||||||||||||||||||
12. RECLASSIFICATION OF ACCOUNTS
During the year ended March 31, 2015, reclassifications as shown in the following table have been made in each Fund’s capital accounts to report these balances on a tax basis, excluding certain temporary differences, as of March 31, 2015. Additional adjustments may be required in subsequent reporting periods. These reclassifications, which have no impact on the NAV of the Funds, are primarily attributable to
D-22
PACIFIC FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
reclassifications of sale-buyback financing transactions, foreign currency transactions, non-deductible expenses, swap income, redesignation of dividends paid, treatment of net operating losses and capital gains under Federal tax rules versus U.S. GAAP. The calculation of net investment income per share in the financial highlights excludes these adjustments.
| Fund | Paid-In Capital | Undistributed/ Accumulated Net Investment Income (Loss) |
Undistributed/ Accumulated Net Realized Gain (Loss) |
|||||||||
| PF Floating Rate Loan |
$— | ($107 | ) | $107 | ||||||||
| PF Inflation Managed |
— | 1,744,665 | (1,744,665 | ) | ||||||||
| PF Managed Bond |
— | 3,120,270 | (3,120,270 | ) | ||||||||
| PF Short Duration Bond |
— | 156,269 | (156,269 | ) | ||||||||
| PF Emerging Markets Debt |
— | (5,850,463 | ) | 5,850,463 | ||||||||
| PF Comstock |
— | 4,573,178 | (4,573,178 | ) | ||||||||
| PF Growth |
— | 416,790 | (416,790 | ) | ||||||||
| PF Large-Cap Growth |
— | 197,489 | (197,489 | ) | ||||||||
| PF Large-Cap Value |
— | (225 | ) | 225 | ||||||||
| PF Main Street Core |
— | (6,272 | ) | 6,272 | ||||||||
| PF Mid-Cap Equity |
— | (36,682 | ) | 36,682 | ||||||||
| PF Mid-Cap Growth |
— | 62,680 | (62,680 | ) | ||||||||
| PF Small-Cap Growth |
(245,954 | ) | 246,112 | (158 | ) | |||||||
| PF Small-Cap Value |
(4,488 | ) | 125,066 | (120,578 | ) | |||||||
| PF Real Estate |
— | 28,636 | (28,636 | ) | ||||||||
| PF Emerging Markets |
— | 114,312 | (114,312 | ) | ||||||||
| PF International Large-Cap |
— | 38,287 | (38,287 | ) | ||||||||
| PF International Small-Cap |
(4,307 | ) | 1,110,641 | (1,106,334 | ) | |||||||
| PF International Value |
— | 1,435,579 | (1,435,579 | ) | ||||||||
| PF Currency Strategies |
— | 11,945,634 | (11,945,634 | ) | ||||||||
| PF Global Absolute Return |
— | 8,539,877 | (8,539,877 | ) | ||||||||
| PF Precious Metals |
(296,534 | ) | 266,220 | 30,314 | ||||||||
13. SHARES OF BENEFICIAL INTEREST
Each Fund is authorized to issue an unlimited number of shares of beneficial interest with no par value. Changes in shares of beneficial interest of each Fund for the year or period ended March 31, 2015 and 2014, were as follows:
| PF Floating Rate Loan Fund |
PF Inflation Managed Fund |
PF Managed Bond Fund |
PF Short Duration Bond Fund |
|||||||||||||||||||||||||||||||||||
| Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2014 |
Year ended 3/31/2014 |
|||||||||||||||||||||||||||||||
| Class P |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
1,230,881 | 1,725,341 | 1,729,290 | 5,151,327 | 8,641,636 | 5,828,905 | 3,208,915 | 2,385,913 | ||||||||||||||||||||||||||||||
| Dividends and distributions reinvested |
458,889 | 613,198 | 415,764 | 397,051 | 2,024,643 | 1,061,403 | 310,401 | 302,423 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(1,071,089 | ) | (848,303 | ) | (8,831,217 | ) | (1,405,615 | ) | (6,323,155 | ) | (3,896,449 | ) | (5,013,668 | ) | (1,968,936 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
618,681 | 1,490,236 | (6,686,163 | ) | 4,142,763 | 4,343,124 | 2,993,859 | (1,494,352 | ) | 719,400 | ||||||||||||||||||||||||||||
| Beginning shares outstanding |
12,254,718 | 10,764,482 | 21,018,831 | 16,876,068 | 53,880,121 | 50,886,262 | 22,814,514 | 22,095,114 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
12,873,399 | 12,254,718 | 14,332,668 | 21,018,831 | 58,223,245 | 53,880,121 | 21,320,162 | 22,814,514 | ||||||||||||||||||||||||||||||
| PF Emerging Markets Debt Fund |
PF Comstock Fund |
PF Growth Fund |
PF Large-Cap Growth Fund |
|||||||||||||||||||||||||||||||||||
| Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
|||||||||||||||||||||||||||||||
| Class P |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
5,766,262 | 5,607,316 | 482,602 | — | 2,136,098 | 2,489,857 | 1,522,605 | 101,415 | ||||||||||||||||||||||||||||||
| Dividends and distributions reinvested |
671,421 | 520,381 | 1,516,836 | 153,052 | 104,361 | 33,256 | 1,746,507 | 3,391,672 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(1,677,735 | ) | (820,900 | ) | (3,727,001 | ) | (798,055 | ) | (424,003 | ) | (169,158 | ) | (1,459,489 | ) | (388,536 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
4,759,948 | 5,306,797 | (1,727,563 | ) | (645,003 | ) | 1,816,456 | 2,353,955 | 1,809,623 | 3,104,551 | ||||||||||||||||||||||||||||
| Beginning shares outstanding |
13,462,763 | 8,155,966 | 17,524,289 | 18,169,292 | 5,844,648 | 3,490,693 | 16,791,462 | 13,686,911 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
18,222,711 | 13,462,763 | 15,796,726 | 17,524,289 | 7,661,104 | 5,844,648 | 18,601,085 | 16,791,462 | ||||||||||||||||||||||||||||||
| PF Large-Cap Value Fund |
PF Main Street Core Fund |
PF Mid-Cap Equity Fund |
PF Mid-Cap Growth Fund |
|||||||||||||||||||||||||||||||||||
| Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
|||||||||||||||||||||||||||||||
| Class P |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
361,636 | — | 1,174,490 | 106,404 | 3,392,520 | — | 391,121 | 1,744,846 | ||||||||||||||||||||||||||||||
| Dividends and distributions reinvested |
2,135,114 | 323,698 | 2,539,706 | 158,444 | 2,143,418 | 1,071,334 | 461,649 | 2,433,940 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(4,325,277 | ) | (780,279 | ) | (2,066,816 | ) | (339,403 | ) | (928,195 | ) | (302,329 | ) | (2,092,392 | ) | (241,182 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
(1,828,527 | ) | (456,581 | ) | 1,647,380 | (74,555 | ) | 4,607,743 | 769,005 | (1,239,622 | ) | 3,937,604 | ||||||||||||||||||||||||||
| Beginning shares outstanding |
22,758,449 | 23,215,030 | 17,341,280 | 17,415,835 | 13,348,559 | 12,579,554 | 11,109,920 | 7,172,316 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
20,929,922 | 22,758,449 | 18,988,660 | 17,341,280 | 17,956,302 | 13,348,559 | 9,870,298 | 11,109,920 | ||||||||||||||||||||||||||||||
D-23
| PF Small-Cap Growth Fund |
PF Small-Cap Value Fund |
PF Real Estate Fund |
PF Emerging Markets Fund |
|||||||||||||||||||||||||||||||||||
| Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
|||||||||||||||||||||||||||||||
| Class P |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
1,647,600 | — | 408,539 | 121,843 | 206,512 | 793,474 | 1,127,924 | 2,507,794 | ||||||||||||||||||||||||||||||
| Dividends and distributions reinvested |
727,464 | 96,170 | 4,505,238 | 606,473 | 124,971 | 85,987 | 434,908 | 248,156 | ||||||||||||||||||||||||||||||
| Shares repurchased |
(574,546 | ) | (69,764 | ) | (1,868,509 | ) | (167,437 | ) | (2,602,346 | ) | (74,154 | ) | (1,778,242 | ) | (153,903 | ) | ||||||||||||||||||||||
| Net increase (decrease) |
1,800,518 | 26,406 | 3,045,268 | 560,879 | (2,270,863 | ) | 805,307 | (215,410 | ) | 2,602,047 | ||||||||||||||||||||||||||||
| Beginning shares outstanding |
3,855,710 | 3,829,304 | 10,900,927 | 10,340,048 | 5,203,621 | 4,398,314 | 10,393,575 | 7,791,528 | ||||||||||||||||||||||||||||||
| Ending shares outstanding |
5,656,228 | 3,855,710 | 13,946,195 | 10,900,927 | 2,932,758 | 5,203,621 | 10,178,165 | 10,393,575 | ||||||||||||||||||||||||||||||
| PF International Large-Cap Fund |
PF International Small-Cap Fund (1) |
PF International Value Fund |
PF Currency Strategies Fund |
|||||||||||||||||||||||||||||||||||
| Year ended 3/31/2015 |
Year ended 3/31/2014 |
Period ended 3/31/2015 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
||||||||||||||||||||||||||||||||
| Class P |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
3,601,288 | 1,116,678 | 12,087,220 | 2,933,931 | 991,838 | 6,658,387 | 2,512,806 | |||||||||||||||||||||||||||||||
| Dividends and distributions reinvested |
226,488 | 143,974 | — | 736,859 | 389,934 | 416,746 | 397,535 | |||||||||||||||||||||||||||||||
| Shares repurchased |
(4,919,463 | ) | (303,219 | ) | (159,095 | ) | (5,759,382 | ) | (387,458 | ) | (2,083,100 | ) | (484,579 | ) | ||||||||||||||||||||||||
| Net increase (decrease) |
(1,091,687 | ) | 957,433 | 11,928,125 | (2,088,592 | ) | 994,314 | 4,992,033 | 2,425,762 | |||||||||||||||||||||||||||||
| Beginning shares outstanding |
13,031,396 | 12,073,963 | — | 17,094,756 | 16,100,442 | 13,920,582 | 11,494,820 | |||||||||||||||||||||||||||||||
| Ending shares outstanding |
11,939,709 | 13,031,396 | 11,928,125 | 15,006,164 | 17,094,756 | 18,912,615 | 13,920,582 | |||||||||||||||||||||||||||||||
| PF Global Absolute Return Fund |
PF Precious Metals Fund |
|||||||||||||||||||||||||||||||||||||
| Year ended 3/31/2015 |
Year ended 3/31/2014 |
Year ended 3/31/2015 |
Year ended 3/31/2014 |
|||||||||||||||||||||||||||||||||||
| Class P |
||||||||||||||||||||||||||||||||||||||
| Shares sold |
979,298 | 4,082,609 | 3,557,922 | 7,061,450 | ||||||||||||||||||||||||||||||||||
| Dividends and distributions reinvested |
952,492 | 427,882 | — | 87,413 | ||||||||||||||||||||||||||||||||||
| Shares repurchased |
(4,688,664 | ) | (920,196 | ) | (9,434,627 | ) | (413,167 | ) | ||||||||||||||||||||||||||||||
| Net increase (decrease) |
(2,756,874 | ) | 3,590,295 | (5,876,705 | ) | 6,735,696 | ||||||||||||||||||||||||||||||||
| Beginning shares outstanding |
20,470,213 | 16,879,918 | 14,759,284 | 8,023,588 | ||||||||||||||||||||||||||||||||||
| Ending shares outstanding |
17,713,339 | 20,470,213 | 8,882,579 | 14,759,284 | ||||||||||||||||||||||||||||||||||
| (1) | PF International Small-Cap Fund commenced operations on January 14, 2015. |
14. SUBSEQUENT EVENT
On March 25, 2015, the Board approved the Plan of Liquidation of the PF Precious Metals Fund, and the Fund was liquidated as of the close of business on April 27, 2015.
D-24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Trustees and Shareholders of
Pacific Funds Series Trust:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of PF Floating Rate Loan Fund (formerly PL Floating Rate Loan Fund), PF Inflation Managed Fund (formerly PL Inflation Managed Fund), PF Managed Bond Fund (formerly
PL Managed Bond Fund), PF Short Duration Bond Fund (formerly PL Short Duration Bond Fund), PF Emerging Markets Debt Fund (formerly
PL Emerging Markets Debt Fund), PF Comstock Fund (formerly PL Comstock Fund), PF Growth Fund (formerly PL Growth Fund), PF Large-Cap Growth Fund (formerly PL Large-Cap Growth Fund), PF Large-Cap Value Fund (formerly PL Large-Cap Value Fund), PF Main Street® Core Fund (formerly PL Main Street® Core Fund), PF Mid-Cap Equity Fund (formerly PL Mid-Cap Equity Fund), PF Mid-Cap Growth Fund (formerly PL Mid-Cap Growth Fund), PF Small-Cap Growth Fund (formerly PL Small-Cap Growth Fund), PF Small-Cap Value Fund (formerly PL Small-Cap Value Fund), PF Real Estate Fund (formerly PL Real Estate Fund), PF Emerging Markets Fund (formerly PL Emerging Markets Fund), PF International Large-Cap Fund (formerly PL International Large-Cap Fund), PF International Small-Cap Fund, PF International Value Fund (formerly
PL International Value Fund), PF Currency Strategies Fund (formerly PL Currency Strategies Fund), PF Global Absolute Return Fund (formerly PL Global Absolute Return Fund), and PF Precious Metals Fund (formerly PL Precious Metals Fund) (collectively the “Funds”) (twenty-two of thirty-four funds comprising Pacific Funds Series Trust (formerly Pacific Life Funds)) as of March 31, 2015, the related statements of operations for the year then ended (as to the PF International Small-Cap Fund, for the period from January 14, 2015 (commencement of operations) through March 31, 2015), the statements of changes in net assets for each of the two years in the period then ended (as to the PF International Small-Cap Fund, for the period from January 14, 2015 (commencement of operations) through March 31, 2015), the statement of cash flows for the year then ended for the PF Inflation Managed Fund, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of investments owned as of March 31, 2015, by correspondence with the custodian, agent banks, transfer agent, and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds as of March 31, 2015, and the results of their operations, the changes in their net assets, the cash flows for the
PF Inflation Managed Fund, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Philadelphia, Pennsylvania
May 28, 2015
E-1
PACIFIC FUNDS
(Unaudited)
For corporate shareholders, the percentage of investment income (dividend income and short-term gains, if any) for each of the Funds that qualify for the dividends-received deductions for the year ended March 31, 2015 is as follows:
| Fund | Percentage | |||
| PF Comstock |
67.90% | |||
| PF Growth |
100.00% | |||
| PF Large-Cap Growth |
10.78% | |||
| PF Large-Cap Value |
93.77% | |||
| PF Main Street Core |
64.84% | |||
| PF Mid-Cap Equity |
19.77% | |||
| PF Mid-Cap Growth |
13.76% | |||
| PF Small-Cap Value |
33.17% | |||
| PF Real Estate |
7.63% | |||
| PF Emerging Markets |
0.36% | |||
| PF International Large-Cap |
1.60% | |||
For the year ended March 31, 2015 certain dividends paid by the Funds may be subject to a maximum tax rate of 15% as provided by the Jobs and Growth Relief Reconciliation Act of 2003. Of the distributions made by the following Funds, the corresponding percentages represent the amount of each distribution which may qualify for the 15% dividend income tax rate.
| Fund | Percentage | |||
| PF Comstock |
83.63% | |||
| PF Growth |
100.00% | |||
| PF Large-Cap Growth |
11.45% | |||
| PF Large-Cap Value |
100.00% | |||
| PF Main Street Core |
73.20% | |||
| PF Mid-Cap Equity |
20.62% | |||
| PF Mid-Cap Growth |
15.67% | |||
| PF Small-Cap Value |
37.35% | |||
| PF Real Estate |
7.23% | |||
| PF Emerging Markets |
75.44% | |||
| PF International Large-Cap |
100.00% | |||
| PF International Value |
100.00% | |||
| PF Global Absolute Return |
0.18% | |||
Shareholders should not use the above tax information to prepare their tax returns. The information will be included in your Form 1099 DIV, which will be sent to you separately in January 2016. The Funds intend to pass through the maximum allowable percentages to shareholders.
The following Funds designated the listed amounts as long-term capital gain dividends during the year ended March 31, 2015. Distributable long-term gains are based on net realized long-term gains determined on a tax basis and may differ from such amounts for financial reporting purposes.
| Fund | Amount | |||
| PF Floating Rate Loan |
$17,082 | |||
| PF Managed Bond |
6,965,571 | |||
| PF Comstock |
32,935,356 | |||
| PF Growth |
1,930,426 | |||
| PF Large-Cap Growth |
19,851,965 | |||
| PF Large-Cap Value |
31,046,131 | |||
| PF Main Street Core |
31,403,060 | |||
| PF Mid-Cap Equity |
16,900,132 | |||
| PF Mid-Cap Growth |
1,752,168 | |||
| PF Small-Cap Growth |
9,980,804 | |||
| PF Small-Cap Value |
37,104,460 | |||
| PF Real Estate |
4,811,710 | |||
| PF Emerging Markets |
4,072,435 | |||
| PF International Small-Cap |
40,950 | |||
F-1
PACIFIC FUNDS (1)
See explanation of references on page F-3
F-2
PACIFIC FUNDS (1)
DISCLOSURE OF FUND EXPENSES (Continued)
F-3
PACIFIC FUNDS
TRUSTEES AND OFFICERS INFORMATION
The business and affairs of the Pacific Funds Series Trust (which may be referred to as “Pacific Funds” or the “Trust”) are managed under the direction of the Board of Trustees under the Declaration of Trust. Information pertaining to the trustees and officers of the Trust is set forth below, effective April 1, 2015. Trustees who are not deemed to be “interested persons” of the Trust, as defined in the 1940 Act, are referred to as “Independent Trustees.” Certain trustees and officers are deemed to be “interested persons” of the Trust and thus are referred to as “Interested Persons”, because of their positions with Pacific Life Insurance Company (“Pacific Life”) and Pacific Life Fund Advisors LLC, a wholly-owned subsidiary of Pacific Life. The Trust’s Statement of Additional Information includes additional information about the trustees. For information on availability of the Trust’s Statement of Additional Information, refer to the WHERE TO GO FOR MORE INFORMATION section of this report.
The address of each trustee and officer is c/o Pacific Funds, 700 Newport Center Drive, Newport Beach, CA 92660.
| Name and Age |
Position(s) with the Fund and Length of Time Served* |
Current Directorship(s) Held and Principal Occupation(s) (and certain additional occupation information) During Past 5 years |
Number of Portfolios in Fund Complex Overseen** | |||
| INDEPENDENT TRUSTEES | ||||||
| Frederick L. Blackmon Year of birth 1952 |
Trustee since 9/13/05 | Trustee (1/05 to present) of Pacific Select Fund; Director (2005 to present) of Trustmark Mutual Holding Company; Former Executive Vice President and Chief Financial Officer (1995 to 2003) of Zurich Life; Former Executive Vice President and Chief Financial Officer (1989 to 1995) of Alexander Hamilton Life Insurance Company (subsidiary of Household International); Member of Board of Trustees (2010 to present) of Cranbrook Educational Community; Former Member of Board of Governors (1994 to 1999) of Cranbrook Schools; and Former Member of Board of Regents (1993 to 1996) Eastern Michigan University. | 90 | |||
| Gale K. Caruso Year of birth 1957 |
Trustee since 1/01/06 | Trustee (1/06 to present) of Pacific Select Fund; Independent Trustee (2015 to present) of Matthews Asia Funds; Former Member of the Board of Directors (2005 to 2009) of LandAmerica Financial Group, Inc.; Former President and Chief Executive Officer (1999 to 2003) of Zurich Life; Former Chairman, President and Chief Executive Officer of Scudder Canada Investor Services, Ltd. (1994 to 1999) and Managing Director of Scudder Kemper Investments (1986 to 1999); Former Member of the Advisory Council of the Trust for Public Land in Maine (2006 to 2009); and Former Member of the Board of Directors of Make-A-Wish of Maine (2005 to 2012). | 90 | |||
| Lucie H. Moore Year of birth 1956 |
Trustee since 6/13/01 | Trustee (10/98 to present) of Pacific Select Fund; Former Partner (1984 to 1994) with Gibson, Dunn & Crutcher (Law); Member of Board of Trustee (2014 to present) of Azusa Pacific University; Former Member of the Board of Trustees (2007 to 2011) of Sage Hill School; Former Member (2000 to 2009) of the Board of Trustees of The Pegasus School; Former Member of the Board of Directors (2005 to 2010) of HomeWord; and Former Member of the Advisory Board (1993 to 2004) of Court Appointed Special Advocates (CASA) of Orange County. | 90 | |||
| Nooruddin (Rudy) S. Veerjee Year of birth 1958 |
Trustee since 9/13/05 | Trustee (1/05 to present) of Pacific Select Fund; Former President (1997 to 2000) of Transamerica Insurance and Investment Group; Former President (1994 to 1997) of Transamerica Asset Management; Former Chairman and Chief Executive Officer (1995 to 2000) of Transamerica Premier Funds (Mutual Fund); and Former Director (1994 to 2000) of various Transamerica Life Companies. | 90 | |||
| G. Thomas Willis Year of birth 1942 |
Trustee since 2/24/04 | Trustee (11/03 to present) of Pacific Select Fund; Certified Public Accountant in California (1967 to present); Former Partner (Audit) (1976 to 2002) of PricewaterhouseCoopers LLP (Accounting and Auditing). | 90 | |||
F-4
PACIFIC FUNDS
TRUSTEES AND OFFICERS INFORMATION (Continued)
| Name and Age |
Position(s) with the Fund and Length of Time Served* |
Current Directorship(s) Held and Principal Occupation(s) (and certain additional occupation information) During Past 5 years |
Number of Portfolios in Fund Complex Overseen** | |||
| INTERESTED PERSONS |
||||||
| James T. Morris Year of birth 1960 |
Chairman of the Board and Trustee since 1/11/07, (Chief Executive Officer 1/11/07 to 12/31/09) | Director (4/07 to present), Chairman (5/08 to present), Chief Executive Officer (4/07 to present) and President (4/07 to 3/12) of Pacific Mutual Holding Company and Pacific LifeCorp; Director (4/07 to present), Chairman (5/08 to present), Chief Executive Officer (4/07 to present) and President (4/07 to 3/12) of Pacific Life; Chief Executive Officer (5/07 to present) and President (5/07 to 3/12) of Pacific Life Fund Advisors LLC; and Chairman of the Board and Trustee (1/07 to present) and Chief Executive Officer (1/07 to 12/09) of Pacific Select Fund. | 90 | |||
| Mary Ann Brown Year of birth 1951 |
Chief Executive Officer since 1/01/10, (President 1/11/07 to 12/31/09) | Executive Vice President (4/10 to present) and Senior Vice President (5/06 to 3/10) of Pacific LifeCorp; Executive Vice President (4/10 to present) and Senior Vice President (3/05 to 3/10) of Pacific Life; Executive Vice President (4/10 to present) and Senior Vice President (5/07 to 3/10) of Pacific Life Fund Advisors LLC; and Chief Executive Officer (1/10 to present) and President (1/07 to 12/09) of Pacific Select Fund. | 90 | |||
| Howard T. Hirakawa Year of birth 1962 |
Senior Vice President since 12/10/14 (Vice President since 06/20/06 to 12/09/14) | Senior Vice President (4/14 to present), Vice President (5/07 to 3/14) of Pacific Life Fund Advisors LLC; and Senior Vice President 6/12/14 to present) and Vice President (6/06 to 12/14) of Pacific Select Fund. | 90 | |||
| Robin S. Yonis Year of birth 1954 |
Vice President and General Counsel since 6/13/01 | Vice President, Fund Advisor General Counsel, and Assistant Secretary (5/07 to present) of Pacific Life Fund Advisors LLC; and Vice President and General Counsel (4/05 to present) of Pacific Select Fund. | 90 | |||
| Brian D. Klemens Year of birth 1956 |
Vice President and Treasurer since 6/13/01 | Vice President and Controller (10/07 to present) of Pacific Mutual Holding Company and Pacific LifeCorp; Vice President and Controller (10/07 to present) of Pacific Life; Vice President and Controller (10/07 to present) of Pacific Life Fund Advisors LLC; Vice President (5/00 to present) and Controller (10/07 to present) of Pacific Select Distributors, Inc.; and Vice President and Treasurer (4/96 to present) of Pacific Select Fund. | 90 | |||
| Sharon E. Pacheco Year of birth 1957 |
Vice President and Chief Compliance Officer since 6/04/04 | Vice President and Chief Compliance Officer (11/03 to present) of Pacific Mutual Holding Company and Pacific LifeCorp; Vice President (2/00 to present) and Chief Compliance Officer (1/03 to present) of Pacific Life; Vice President and Chief Compliance Officer (5/07 to present) of Pacific Life Fund Advisors LLC; and Vice President and Chief Compliance Officer (6/04 to present) of Pacific Select Fund. | 90 | |||
| Eddie D. Tung Year of birth 1957 |
Vice President and Assistant Treasurer since 11/14/05 | Vice President (4/15 to present) and Assistant Vice President (4/03 to 3/15) of Pacific Life; Vice President (4/15 to present) and Assistant Vice President (5/07 to 3/15) of Pacific Life Fund Advisors LLC; and Assistant Vice President and Assistant Treasurer (11/05 to present) of Pacific Select Fund. | 90 | |||
| Jane M. Guon Year of birth 1964 |
Vice President and Secretary since 1/01/11 | Vice President and Secretary (1/11 to present), Assistant Vice President (4/06 to 12/10) and Assistant Secretary (6/98 to 12/10) of Pacific Mutual Holding Company and Pacific LifeCorp; Director, Vice President, and Secretary (1/11 to present), Assistant Vice President (4/06 to 12/10) and Assistant Secretary (2/95 to 12/10) of Pacific Life; Vice President and Secretary (1/11 to present) and Assistant Vice President and Assistant Secretary (05/07 to 12/10) of Pacific Life Fund Advisors LLC; Vice President and Secretary (1/11 to present), Assistant Vice President (5/06 to 12/10) and Assistant Secretary (5/99 to 12/10) of Pacific Select Distributors, Inc.; and Vice President and Secretary (1/11 to present) of Pacific Select Fund. | 90 | |||
F-5
PACIFIC FUNDS
TRUSTEES AND OFFICERS INFORMATION (Continued)
| Name and Age |
Position(s) with the Fund and Length of Time Served* |
Current Directorship(s) Held and Principal Occupation(s) (and certain additional occupation information) During Past 5 years |
Number of Portfolios in Fund Complex Overseen** | |||
| INTERESTED PERSONS (Continued) | ||||||
| Laurene E. MacElwee Year of birth 1966 |
Vice President since 4/04/05 and Assistant Secretary since 6/13/01 | Vice President (4/11 to present), Assistant Secretary (5/07 to present) and Assistant Vice President (5/07 to 3/11) of Pacific Life Fund Advisors LLC; and Vice President (12/11 to present), Assistant Secretary (4/05 to present) and Assistant Vice President (4/05 to 12/11) of Pacific Select Fund. | 90 | |||
| Carleton J. Muench Year of birth 1973 |
Vice President since 11/30/06 | Vice President (4/14 to present), Assistant Vice President (5/07 to 3/14) of Pacific Life Fund Advisors LLC; and Vice President (12/14 to present) and Assistant Vice President (11/06 to 12/14) of Pacific Select Fund. | 90 | |||
| Kevin W. Steiner Year of birth 1975 |
Vice President since 1/01/13 | Assistant Vice President (4/12 to present), Mutual Funds Compliance Director (4/08 to 3/12) and Mutual Funds Compliance Manager (10/06 to 3/08) of Pacific Life Fund Advisors LLC; and Assistant Vice President (1/13 to present) of Pacific Select Fund. | 90 | |||
| Audrey L. Cheng Year of birth 1975 |
Vice President since 12/11/13 | Assistant Vice President (9/11 to present) of Pacific Life; Vice President and Attorney (6/08 to 8/11) of Pacific Investment Management Company LLC (“PIMCO”); and Assistant Vice President (12/13 to present) of Pacific Select Funds. | 90 | |||
| * | A trustee serves until he or she resigns, retires, or his or her successor is elected and qualified. |
| ** | As of March 31, 2015, the “Fund Complex” consisted of Pacific Select Fund (56 portfolios) and Pacific Funds (34 funds). |
F-6
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS
(Unaudited)
I. Introduction and Background
The Board of Trustees (the “Trustees” or “Board”) of Pacific Funds Series Trust (“Pacific Funds” or the “Trust”) oversees the management of each of the separate funds of the Trust (each a “Fund” and collectively, the “Funds”) and, as required by Section 15(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), initially approves and determines annually whether to renew the investment advisory agreement (the “Advisory Agreement”) with Pacific Life Fund Advisors LLC (“PLFA”) and each sub-advisory agreement (the “Sub-Advisory Agreements,” together with the Advisory Agreement, the “Agreements”) with the various sub-advisers (“Sub-Advisers”). PLFA serves as the investment adviser for all of the Funds and directly manages Pacific Funds Short Duration Income, Pacific Funds Core Income, Pacific Funds Strategic Income, Pacific Funds Floating Rate Income, Pacific Funds Limited Duration High Income, and Pacific Funds High Income (the “PAM Managed Funds”) under the name Pacific Asset Management (“PAM”); Pacific Funds Portfolio Optimization Conservative, Pacific Funds Portfolio Optimization Moderate-Conservative, Pacific Funds Portfolio Optimization Moderate, Pacific Funds Portfolio Optimization Growth, and Pacific Funds Portfolio Optimization Aggressive-Growth (the “Portfolio Optimization Funds”); and Pacific Funds Diversified Alternatives (together with the Portfolio Optimization Funds and PAM Managed Funds, the “Directly Managed Funds”). For all other Funds, PLFA has retained other firms to serve as Sub-Advisers under PLFA’s supervision. The Board, including all of the Trustees who are not “interested persons,” as that term is defined in the 1940 Act (“Independent Trustees”), last renewed the Agreements at an in-person meeting of the Trustees held on December 9-10, 2014.1
At this meeting and other meetings, the Board considered information (both written and oral) provided to assist it in its review of the Agreements and made assessments with respect to each Agreement. The Board requested, received and reviewed written materials from PLFA and each Sub-Adviser that were submitted in response to requests from the Independent Trustees and supporting materials relating to those questions and responses. In addition, the Board received in-person presentations about the Funds throughout the year, and the Independent Trustees were advised by independent legal counsel with respect to these and other relevant matters. The Board reviewed a variety of factors and considered a significant amount of information, including information received on an ongoing basis at Board and committee meetings, including reports on Fund performance, expenses, fee comparisons, investment advisory, compliance, and other services provided to the Funds by PLFA and the Sub-Advisers. The Board also reviewed financial and profitability information regarding PLFA and the Sub-Advisers and information regarding the organization and operations of each entity, such as their compliance monitoring, portfolio trading and brokerage practices and the personnel providing investment management and administrative services to each Fund. The Board reviewed data provided by PLFA that was gathered from various independent providers of investment company data to provide the Board with information concerning the Funds’ investment performance, management fees and expense information. Additionally, the Independent Trustees retained an independent consultant (“Independent Consultant”) to assist the Trustees with certain of their analyses and to provide other relevant information. In connection with the analysis, the Independent Consultant utilized and provided the Independent Trustees with data obtained from independent service providers as well as from other sources.
The Trustees’ determinations were made on the basis of each Trustee’s business judgment after consideration of all the information presented. In reviewing the materials presented and in considering the information in the management presentations, the Trustees did not identify any single issue or particular information that, in isolation, would be a controlling factor in making a final decision regarding the proposed Agreements. Individual Trustees may have given different weights to certain factors and assigned various degrees of materiality to information received in connection with the approval process. The following summary describes the most important, but not all, of the factors considered by the Trustees in approving the Agreements, and in the case of the Independent Trustees, certain factors were considered in light of the legal advice furnished to them by independent legal counsel and information from the Independent Consultant that they had retained. This discussion is not intended to be all-inclusive.
II. Annual Consideration and Approval of Investment Advisory and Sub-Advisory Agreements
In evaluating the Advisory Agreement and each Sub-Advisory Agreement, the Board, including all the Independent Trustees, considered the following factors, among others:
1. Nature, Extent and Quality of Services
PLFA – The Trustees considered the depth and quality of PLFA’s investment management process, including its monitoring and oversight of the Sub-Advisers and PAM, and the benefits to shareholders of retaining PLFA and continuing the Advisory Agreement in light of the nature, extent, and quality of the services that have been provided by PLFA, including PAM. The Trustees considered the overall financial strength and stability of PLFA and its ability to provide a high level and quality of services to the Funds. They also considered PLFA’s responsiveness to questions or concerns raised by the Trustees, including PLFA’s willingness to consider and implement investment and operational changes designed to improve investment results and the services provided to the Funds and their shareholders.
The Trustees noted that PLFA makes its officers and employees available to the Board for consultation and discussion regarding the investment management services provided to the Funds. The Trustees considered the experience, capability and integrity of PLFA’s senior management and other personnel and the low turnover rates of its key personnel. The Trustees noted that the investment, legal, compliance and accounting professionals of PLFA and its affiliates have access to and utilize a variety of resources and systems relating to investment management, compliance, trading, performance and risk analysis, security valuation and fund accounting. The Trustees further considered
| 1 | At the December 9-10 meeting, the Board did not consider the continuance of the Sub-Advisory Agreements relating to the PF Small-Cap Growth and PF Small-Cap Value Funds, the Sub-Advisory Agreements with Western Asset Management Company relating to the PF Managed Bond and PF Inflation Managed Funds, and the Sub-Advisory Agreement with Principal Global Investors, LLC, doing business as Macro Currency Group, relating to the PF Currency Strategies Fund, as those agreements were not up for renewal at that time. |
F-7
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PLFA’s continuing need and ability to attract and retain qualified personnel and to maintain and enhance its resources and systems to provide appropriate investment management, compliance and monitoring services for the Funds. The Trustees also considered the additional resources that PLFA has invested to enhance its management and oversight of the Funds, including the addition of experienced personnel with asset allocation and risk management expertise.
Directly Managed Funds – The Trustees considered the services provided by PLFA, including PAM, in rendering investment management services to each Directly Managed Fund. The Trustees considered that PLFA, including PAM, is responsible for identifying investments for each Directly Managed Fund and determining when to purchase, retain, or sell securities, cash and/or other investments for each Directly Managed Fund. The Trustees also considered that PLFA, including PAM, is responsible for the valuation of portfolio securities and evaluating and voting proxies for portfolio holdings of the Directly Managed Funds. With respect to the Asset Allocation Funds, the Trustees also considered, among other things, PLFA’s experience, resources and expertise in analyzing the composition of the various PF Underlying Funds that serve as investment options for the Asset Allocation Funds and in developing asset allocation models appropriate to each Asset Allocation Fund’s investment objectives and risk profile. The Trustees considered, in this regard, the tools and resources used by PLFA in constructing the asset allocation models, including the role and costs of consultants engaged by PLFA for assistance in the construction of these models. With respect to the PAM Managed Funds, the Trustees also considered the investment oversight and monitoring of PAM discussed below under “Sub-Advised Funds.”
The Trustees considered PLFA’s policies, procedures and systems to ensure compliance with applicable laws and regulations with respect to the Directly Managed Funds, and its attention to matters that may involve conflicts of interest between itself and a Fund. In this regard, the Trustees reviewed information provided throughout the year on PLFA’s compliance policies and procedures, its compliance history, and reports from the Trust’s Chief Compliance Officer (“CCO”) on compliance by PLFA with applicable laws and regulations. The Trustees also reviewed information on any responses by PLFA to regulatory and compliance developments throughout the year. The Trustees further noted the compliance monitoring conducted by PLFA and PAM on an ongoing basis and also noted the development of procedures and systems necessary to maintain compliance with applicable laws and regulations as well as the resources that PLFA dedicates to these programs. The Trustees considered that the CCO has in place a systematic process for periodically reviewing PLFA’s written compliance policies and procedures, including the assessment of PLFA’s compliance program as required under Rule 38a-1 of the 1940 Act and PLFA’s code of ethics. The Trustees also considered that PLFA continues to cooperate with the CCO in reviewing its compliance operations.
Sub-Advised Funds – The Trustees considered PLFA’s responsibilities in rendering services to the Sub-Advised Funds and the fact that PLFA monitors and evaluates the performance of the Sub-Advisers in comparison to each Fund’s investment objective as well as to appropriate benchmark indices and peer funds. The Trustees also considered that PLFA monitors the Sub-Advised Funds for adherence to the investment objectives and policies of each Fund. The Trustees noted that PLFA provides the Board with periodic and special reports related to such performance and investment monitoring and evaluation. The Trustees also considered PLFA’s process in analyzing and recommending for consideration by the Board, the termination of a Sub-Advisory Agreement with a Sub-Adviser and the replacement of a Sub-Adviser.
The Trustees considered the high quality of the products and services provided by PLFA to the Funds, including risk analysis, preparation of periodic performance and other reports, and coordination and oversight of other service providers to the Trust. The Trustees also noted that PLFA regularly informs the Trustees about matters relevant to the Trust and its shareholders, including relationships with financial intermediaries.
The Trustees considered the depth and quality of PLFA’s monitoring and oversight of the Sub-Advisers and PAM. The Board noted that PLFA monitors numerous investment, performance, and risk metrics for the Funds. The Trustees considered PLFA’s continued investment in, and development of, its research and analytical capabilities, including investments in personnel and enhanced analytical tools for assessing Fund performance and the performance of the Sub-Advisers, including analytical tools relating to risk analysis, Fund performance attribution and reporting on such matters to the Trustees. The Trustees noted that PLFA uses these tools to analyze a Fund’s performance and risk profile and identify Funds that are underperforming. The Board considered that PLFA also conducts various analyses to try to assess the sources of and reasons for underperformance. The Trustees noted that PLFA has developed, and continues to enhance, processes to oversee and monitor the performance of Sub-Advisers, including the use of analytical methods to review Fund performance and execution of investment strategies. The Board noted that PLFA provides the Board with analysis of this data over rolling periods to assist the Board in identifying trends in Fund performance and other areas, and periodically provides the Trustees with information on economic and market trends to provide a context for assessing recent performance. The Trustees also noted that PLFA has developed effective methods for monitoring the Sub-Advisers’ investment style consistency and for analyzing the use of derivatives by Sub-Advisers. With respect to the PAM Managed Funds, the Board considered that PLFA provides oversight, diligence and reporting with regard to its PAM unit that is similar to the process it employs with regard to the Sub-Advisers. In making their assessments, the Trustees considered that PLFA has historically exercised diligence in monitoring the performance of the Sub-Advisers and PAM, and has recommended and taken measures to attempt to remedy relative underperformance by a Fund when PLFA and the Trustees believed it to be appropriate. The Trustees also considered the significant work performed by PLFA in conducting searches for new Sub-Advisers to replace existing Sub-Advisers where appropriate or to manage new Funds in the Trust.
The Board also noted that PLFA conducts periodic due diligence on Sub-Advisers involving onsite visits, in-person meetings and telephonic meetings to gather information that PLFA uses to gain an in-depth understanding of a Sub-Adviser’s investment process and to seek to identify issues that may be relevant to a Sub-Adviser’s services to a Fund or a Fund’s performance, including, but not limited to, the financial strength of a Sub-Adviser, significant staffing changes that could affect a Fund, material changes in a Sub-Adviser’s assets under management, compliance and regulatory concerns, best execution review and portfolio security valuation support.
F-8
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
The Trustees considered the time and attention paid by PLFA to matters involving the valuation of Fund securities. The Trustees considered that PLFA has established a Valuation Oversight Committee that is responsible for, among other things, researching and evaluating information concerning securities that are not actively or publicly traded, valuing securities subject to a trading halt or for which a market quotation is not readily available, the valuation of equity securities traded on foreign exchanges, oversight of and due diligence on pricing vendors and the development of alternate valuation methodologies.
The Trustees considered PLFA’s oversight, review and analysis of trade execution reports and trends in trade execution for the Funds. The Trustees noted that PLFA oversees a third-party transaction cost analysis consultant that provides statistical analysis on portfolio trading and that PLFA presents information about the Funds’ portfolio trading costs to the Board annually. The Board also noted that PLFA conducts regular review and analysis of each Sub-Adviser’s use of soft dollars and presents information about the Sub-Advisers’ use of soft dollars to the Board annually.
The Trustees also considered PLFA’s implementation of transition management programs when handling significant changes in the Funds, such as cash movements between the Funds arising from reallocations by funds of funds and the transition of Fund assets from one Sub-Adviser to another, including steps taken by PLFA to reduce transaction costs associated with a Fund transition. The Trustees considered that PLFA coordinates the onboarding process for new Sub-Advisers and oversees the establishment of necessary accounts and documentation for the Sub-Advisers to begin managing Fund assets.
In addition to the services described above, the Trustees also considered the compliance monitoring that PLFA and its affiliates conduct on the Sub-Advisers and the commitment of PLFA and its affiliates to those programs and PLFA’s efforts to keep the Trustees informed about the compliance programs of Sub-Advisers. In this regard, the Trustees reviewed information and reports from the Trust’s CCO on compliance by the Sub-Advisers with applicable laws and regulations. The Trustees considered that the CCO has in place a systematic process for periodically reviewing each Sub-Adviser’s written compliance policies and procedures, including the assessment of each Sub-Adviser’s compliance program as required under Rule 38a-1 of the 1940 Act and each Sub-Adviser’s code of ethics. The Trustees also considered that each Sub-Adviser continues to cooperate with the CCO in reviewing its compliance operations.
Sub-Advisers. The Trustees considered the benefits to shareholders of retaining each Sub-Adviser and continuing the Sub-Advisory Agreements particularly in light of the nature, extent, and quality of the services that have been provided by the Sub-Advisers. The Trustees considered the services provided by each Sub-Adviser in rendering investment management services to a Sub-Advised Fund. The Trustees considered that each Sub-Adviser is responsible for identifying investments for a Sub-Advised Fund and determining when to purchase, retain, or sell securities, cash and/or other investments for a Sub-Advised Fund. The Trustees also considered that each Sub-Adviser is responsible for evaluating and voting proxies for portfolio holdings of a Sub-Advised Fund. The Trustees considered the quality of the portfolio management services which have benefited and should continue to benefit the Sub-Advised Funds and their shareholders, the organizational depth and resources of the Sub-Advisers, including the background and experience of each Sub-Adviser’s management personnel, and the expertise of each Sub-Adviser’s portfolio management team, as well as the investment methodology used by the Sub-Adviser.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PLFA and the Sub-Advisers.
2. Investment Results
The Trustees considered the investment results of each Fund in light of its objective, strategies and market conditions. The Trustees compared each Fund’s total returns with the total returns of each Fund’s primary benchmark index and the total returns of appropriate peer funds. The peer funds for each Fund were selected by an Independent Consultant using data from Morningstar (each a “Selected Performance Peer Group”), and the Trustees reviewed a description of the Independent Consultant’s methodology for selecting the peer funds in each Selected Performance Peer Group. The information provided to the Trustees included each Fund’s performance record for the one-, three-, five- and ten-year or since inception periods ended September 30, 2014, as available, compared to the applicable primary benchmark and Selected Performance Peer Group.
The Trustees considered the performance of each Fund on a case-by-case basis and noted that some Funds had outperformed their Selected Performance Peer Group over certain periods and/or exceeded the return of their respective primary benchmark while others underperformed their Selected Performance Peer Group over certain periods and/or trailed the return of their respective primary benchmark. In considering each Fund’s investment results, the Board placed greater emphasis on each Fund’s long-term performance track record rather than shorter-term performance. The Board also took into account that each Fund’s track record is measured as of a specific date, and that track records can vary as of different measurement dates. Therefore, in reviewing Funds that are currently underperforming, the Trustees also considered the broader perspective of the Fund’s performance over varying time periods, the market conditions experienced during the periods under review, as well as the outlook for the Fund going forward in light of expected future market conditions. The Board also considered the performance of the current Sub-Adviser to each Fund where there has been a change in Sub-Adviser. The Trustees discussed with PLFA the fact that certain periods of underperformance may be transitory while other periods of underperformance may be reflective of broader issues that may warrant consideration of corrective action. The Trustees discussed these Funds with representatives of PLFA, including an assessment of the approach used by the Sub-Advisers, and the approach used by PLFA and PAM with respect to the Directly Managed Funds, as well as the oversight and monitoring by PLFA as the investment adviser, to gain an understanding of underperformance and to assess whether any actions would be appropriate. In addition, the Board considered any specific actions that PLFA, PAM or a Sub-Adviser have taken, or agreed to take, to enhance the investment performance of a Fund, and the results of those actions. In reviewing the performance of each
F-9
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
Fund, the Board took into account, among other things, each Fund’s performance track record. A summary of each Fund’s track record is provided below.
PF Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five-, and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one- and three-year periods and the fifth quintile for the five- and ten-year periods. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013, that PLFA had advised that the Fund’s one-year underperformance had resulted from the Sub-Adviser’s investment style, and that PLFA has advised that it will continue to closely monitor the Fund and would advise the Board in early 2015 what remedial actions, if any, it believed were necessary or appropriate.
PF Large-Cap Value Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods and underperformed for the ten-year period; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one- and three-year periods and the third quintile for the five- and ten-year periods.
PF Comstock Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods and underperformed for the ten-year period; (2) underperformed its primary benchmark for the one-, five- and ten-year periods and outperformed for the three-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-, three- and five-year periods and the fourth quintile for the ten-year period.
PF Large-Cap Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and ten-year periods and outperformed for the three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and ten-year periods and outperformed for the five-year period; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-year period, the third quintile for the three-year period, the first quintile for the five-year period and the fifth quintile for the ten-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013.
PF Main Street Core Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-, three- and five-year periods.
PF Mid-Cap Equity Fund
The Fund: (1) performed in line with the median of its Selected Performance Peer Group for the one-year period and underperformed for the three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-year period and the fourth quintile for the three- and five-year periods. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013.
PF Mid-Cap Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three- and five-year periods and outperformed for the ten-year period; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, three- and five-year periods and the second quintile for the ten-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2013.
PF Small-Cap Growth Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, three-, five- and ten-year periods. In evaluating the performance of the Fund, the Board considered that the prior Sub-Adviser had been replaced and the current Sub-Adviser has managed the Fund since May 2014, and, therefore, the Sub-Advisory Agreement was not up for renewal at this time.
PF Small-Cap Value Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and three-year periods and outperformed for the five-year period; (2) underperformed its primary benchmark for the one- and three-year periods and outperformed for the five-year period; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one- and three-year periods and the third quintile for the five-year period. In evaluating the performance of the Fund, the Board considered that the prior Sub-Adviser had been replaced and the current Sub-Adviser has managed the Fund since May 2014, and, therefore, the Sub-Advisory Agreement was not up for renewal at this time.
PF Currency Strategies Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) underperformed its primary benchmark for the one-year period; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Board considered that the Fund had not been in operation for a sufficient time period to establish a meaningful
F-10
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
track record. The Board also considered that a co-Sub-Adviser was added in May 2014, and, therefore, the Sub-Advisory Agreement with respect to that co-Sub-Adviser was not up for renewal at this time.
Pacific Funds Diversified Alternatives
The Board considered that the Fund had not yet been in operation for a full year and did not have a performance track record.
PF Global Absolute Return Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Board considered that the Fund had not been in operation for a sufficient time period to establish a meaningful track record and that the Selected Performance Peer Group was of limited usefulness due to the diversity of investment approaches in the peer group.
PF Precious Metals Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Board considered that the Fund had not been in operation for a sufficient time period to establish a meaningful track record.
PF Real Estate Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one- and three-year periods and underperformed for the five-year period; (2) outperformed its primary benchmark for the one-year period and underperformed for the three- and five-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period, the third quintile for the three-year period and the fourth quintile for the five-year period.
PF Emerging Markets Debt Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period; (2) underperformed its primary benchmark for the one-year period; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-year period.
PF Emerging Markets Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three- and five-year periods; (2) outperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period and the first quintile for the three- and five-year periods.
PF International Large-Cap Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period and outperformed for the three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-year period and outperformed for the three-, five- and ten-year periods; and (3) is ranked in the third quintile of its Selected Performance Peer Group for the one-, five- and ten-year periods and the second quintile for the three-year period.
PF International Value Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, five- and ten-year periods and the third quintile for the three-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2011, that PLFA had advised that the Fund’s underperformance in 2014 had resulted from the Sub-Adviser’s investment style, and that PLFA has advised that it will continue to closely monitor the Fund to determine if future remedial actions are necessary or appropriate.
Pacific Funds Floating Rate Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one- and three-year periods; (2) underperformed its primary benchmark for the one-year period and outperformed for the three-year period; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period and the first quintile for the three-year period.
PF Floating Rate Loan Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three- and five-year periods; (2) underperformed its primary benchmark for the one-, three- and five-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-, three- and five-year periods. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2010, that PLFA had advised that the Fund’s underperformance had resulted from the Sub-Adviser’s investment style in the recent market environment, and that PLFA has advised that it will continue to closely monitor the Fund to determine if future remedial actions are necessary or appropriate.
Pacific Funds High Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) underperformed its primary benchmark for the one-year period; and (3) is ranked in the second quintile of its Selected Performance Peer Group for the one-year period.
F-11
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
Pacific Funds Core Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one- and three-year periods; (2) outperformed its primary benchmark for the one- and three-year periods; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one- and three-year periods.
PF Inflation Managed Fund
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) outperformed its primary benchmark for the one-, three- and five-year periods and underperformed for the ten-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-, five- and ten-year periods and the second quintile for the three-year period. In evaluating the performance of the Fund, the Trustees considered that the Board had approved an additional Sub-Adviser for the Fund effective December 31, 2014.
Pacific Funds Limited Duration High Income
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-year period. In evaluating the performance of the Fund, the Trustees considered that the Fund had not been in operation for a sufficient time period to establish a meaningful track record.
PF Managed Bond Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and five-year periods and outperformed for the three- and ten-year periods; (2) underperformed its primary benchmark for the one-year period and outperformed for the three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-year period, the second quintile for the three-year period, the fourth quintile for the five-year period and the first quintile for the ten-year period. In evaluating the performance of the Fund, the Board considered that a co-Sub-Adviser was added in August 2014, and, therefore, the Sub-Advisory Agreement with respect to that co-Sub-Adviser was not up for renewal at this time.
PF Short Duration Bond Fund
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) outperformed its primary benchmark for the one-, three- and five-year periods and underperformed for the ten-year period; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-, three- and ten-year periods and the fifth quintile for the five-year period. In evaluating performance of the Fund, the Board considered that the current Sub-Adviser has managed the Fund since 2011.
Pacific Funds Short Duration Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-year period.
Pacific Funds Strategic Income
The Fund: (1) outperformed its Selected Performance Peer Group median for the one-year period; (2) outperformed its primary benchmark for the one-year period; and (3) is ranked in the first quintile of its Selected Performance Peer Group for the one-year period.
Pacific Funds Portfolio Optimization Aggressive-Growth
The Fund: (1) underperformed its Selected Performance Peer Group for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-year period and the third quintile for the three-, five- and ten-year periods. In evaluating the performance of the Fund, the Trustees considered PLFA’s rationale for underperformance in the recent period, the actions PLFA has taken and the actions PLFA plans to take to enhance performance.
Pacific Funds Portfolio Optimization Conservative
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, five- and ten-year periods and outperformed for the three-year period; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one- and five-year periods and the fourth quintile for the three- and ten-year periods.
Pacific Funds Portfolio Optimization Growth
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one- and three-year periods, the fourth quintile for the five-year period and the third quintile for the ten-year period. In evaluating the performance of the Fund, the Trustees considered PLFA’s views that the Fund’s underperformance was caused largely by the underperformance of certain “alternative” asset classes in 2013 as well as fewer investment alternatives than some of its competitors. The Trustees also considered the actions PLFA has taken and the actions PLFA plans to take to enhance performance, including increasing the breadth of the investment options available for investment by the Fund.
F-12
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
Pacific Funds Portfolio Optimization Moderate-Conservative
The Fund: (1) underperformed its Selected Performance Peer Group median for the one- and five-year periods, outperformed for the three-year period and performed in line with its median for the ten-year period; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fourth quintile of its Selected Performance Peer Group for the one-year period and the third quintile for the three-, five- and ten-year periods.
Pacific Funds Portfolio Optimization Moderate
The Fund: (1) underperformed its Selected Performance Peer Group median for the one-, three-, five- and ten-year periods; (2) underperformed its primary benchmark for the one-, three-, five- and ten-year periods; and (3) is ranked in the fifth quintile of its Selected Performance Peer Group for the one-year period, the fourth quintile for the three- and five-year periods and the third quintile for the ten-year period. In evaluating the performance of the Fund, the Trustees considered PLFA’s rationale for underperformance in the recent period, the actions PLFA has taken and the actions PLFA plans to take to enhance performance.
The Trustees reviewed the monitoring of each Sub-Advisers’ investment results by PLFA, including PLFA’s historical practice of recommending to the Trustees the use of a new sub-adviser if performance lagged and could not be improved within a reasonable timeframe, and reviewed the monitoring of the PAM unit’s investment results by PLFA. Generally, the Trustees noted that there continues to be a strong record of well-managed Funds that work well in the Asset Allocation Funds and that the Asset Allocation Funds provide a range of professionally managed asset allocation investment options. The Trustees considered the steps PLFA has taken to seek to improve performance of the Asset Allocation Funds, including diversifying asset class investment options by adding additional PF Underlying Funds and adding or changing Sub-Advisers to the PF Underlying Funds. The Trustees also noted that the Funds continue to deliver the investment style as disclosed to shareholders. The Trustees also noted the use by investors of the Asset Allocation Funds and the benefits the Asset Allocation Funds provide for shareholders generally.
The Board concluded that PLFA continues to have a long record of effectively managing a multi-manager fund group and asset allocation funds designed to give shareholders a reasonable array of choices through which to implement their investment programs. The Board further concluded that PLFA was implementing each Fund’s investment objective either directly or through the selection of Sub-Advisers and that PLFA’s record in managing each Fund indicates that its continued management, as well as the continuation of the respective Sub-Advisory Agreements, will benefit each Fund and its shareholders.
3. Advisory Fees and Total Expense Ratios
The Trustees requested, received and reviewed information from PLFA relating to the advisory fees and the sub-advisory fees, including the portion of the advisory fees paid to each Sub-Adviser as compared to the portion retained by PLFA. The Trustees considered the nature and quality of the services provided by PLFA and also considered the nature and quality of services provided by each Sub-Adviser. The Independent Trustees also requested and reviewed information from the Independent Consultant along with the Independent Consultant’s analysis of advisory fees, sub-advisory fees and certain combined expenses, excluding any applicable service or distribution fees that were selected by the Independent Consultant for purposes of the peer group expense comparisons (“Operating Expenses”). The Trustees reviewed the advisory fees, sub-advisory fees and Operating Expenses of each Fund and compared such amounts with the average fee and expense levels of applicable peer funds identified by the Independent Consultant (each a “Selected Expense Peer Group”). The Trustees reviewed a description of the Independent Consultant’s methodology for selecting peer funds in each Selected Expense Peer Group and the fact that the Selected Expense Peer Groups were constructed using a universe of funds that included both sub-advised and directly managed funds. With respect to the Portfolio Optimization Funds, the Trustees also compared the net expense ratio with the average net expense ratio of funds in the Morningstar Category that PLFA determined to be similar to the relevant Portfolio Optimization Fund (“Comparable Peer Fund Average”). A summary of some of the comparative fee and expense information considered by the Trustees for each Fund is provided below.
PF Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Large-Cap Value Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Comstock Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are in line with the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.015% of its advisory fee.
F-13
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PF Large-Cap Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.045% of its advisory fee.
PF Main Street Core Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Mid-Cap Equity Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Mid-Cap Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.05% of its advisory fee.
PF Small-Cap Growth Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Small-Cap Value Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Currency Strategies Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Diversified Alternatives
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fifth quintile of its Selected Expense Peer Group. The Trustees noted that PLFA had advised that it did not consider the Selected Expense Peer Group to be an appropriate category for the Fund and that, when compared to what PLFA considers to be the appropriate category, the Operating Expenses for the Fund are below the category average.
PF Global Absolute Return Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Precious Metals Fund
The Trustees considered that (a) the advisory fee for the Fund is lower than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.07% of its advisory fee.
F-14
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PF Real Estate Fund
The Trustees considered that (a) the advisory fee for the Fund is in line with the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Emerging Markets Debt Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF Emerging Markets Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF International Large-Cap Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
PF International Value Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
Pacific Funds Floating Rate Income
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Floating Rate Loan Fund
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.10% of its advisory fee.
Pacific Funds High Income
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group.
Pacific Funds Core Income
The Trustees considered that (a) the advisory fee for the Fund is in line with the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Inflation Managed Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Limited Duration High Income
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group. The Trustees noted that PLFA currently has contractually agreed to waive 0.02% of its advisory fee.
F-15
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
PF Managed Bond Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
PF Short Duration Bond Fund
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are less than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the second quintile of its Selected Expense Peer Group.
Pacific Funds Short Duration Income
The Trustees considered that (a) the advisory fee for the Fund is less than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the first quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Strategic Income
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (b) the Operating Expenses for the Fund are in line with the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group.
Pacific Funds Portfolio Optimization Aggressive-Growth
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Conservative
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Growth
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Moderate-Conservative
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
Pacific Funds Portfolio Optimization Moderate
The Trustees considered that (a) the advisory fee for the Fund is greater than the median advisory fee rate of the funds in its Selected Expense Peer Group and ranked in the third quintile of its Selected Expense Peer Group; (b) the Operating Expenses for the Fund are greater than the median Operating Expenses of the funds in its Selected Expense Peer Group and ranked in the fourth quintile of its Selected Expense Peer Group; and (c) the net expense ratio was lower than the Comparable Peer Fund Average.
During their review, the Trustees noted that all of the Funds were subject to contractual expense limitations on certain operating expenses agreed to by PLFA.
The Trustees also considered information from the Sub-Advisers regarding the comparative sub-advisory fees charged under other investment advisory contracts for similarly managed accounts, such as contracts of each Sub-Adviser with other similarly managed registered investment companies or other types of clients. The Trustees noted that in many cases there were differences in the level of services provided to the Funds by the Sub-Advisers and that the level of services provided by these Sub-Advisers on these other accounts differed due to the nature of the accounts or because there were other reasons to support the difference in fees, such as an affiliation between the Sub-Adviser and the account. These differences often explained variations in fee schedules. The Trustees were mindful that, with regard to the Sub-Advised Funds, the fee rates were the result of arms’-length negotiations between PLFA and the Sub-Advisers, and that any sub-advisory fees are paid by PLFA and are not paid directly by a Fund.
F-16
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
The Board concluded that the advisory fees, sub-advisory fees and total expenses of each Fund were fair and reasonable.
4. Costs, Level of Profits and Economies of Scale
The Trustees reviewed information provided by PLFA and the Sub-Advisers regarding PLFA’s costs of sponsoring the Funds and information regarding the profitability of PLFA and the Sub-Advisers.
PLFA and the Sub-Advisers’ Costs and Profitability. The Trustees noted that, based on the data available, PLFA appears to be providing products that are competitively priced with other funds, especially multi-manager and asset allocation funds. The Trustees noted PLFA’s willingness to sponsor new funds that PLFA believed would benefit the Asset Allocation Funds, despite the potential subsidies required by PLFA during a new fund’s start-up phase. The Trustees also noted that the analysis of the Trust’s profitability to PLFA supported a conclusion that PLFA’s costs and profitability are reasonable, whether considered inclusive or exclusive of distribution costs.
The Trustees also reviewed information provided regarding the structure and manner in which PLFA’s and the Sub-Advisers’ investment professionals were compensated and their respective views of the relationship of such compensation to the attraction and retention of quality personnel. The Trustees considered PLFA’s willingness to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements.
With respect to the Sub-Advisers, the Trustees noted that it was difficult in many cases to accurately determine or evaluate the profitability of the Sub-Advisory Agreements to the Sub-Advisers because of, among other things, the differences in the types of information provided by the Sub-Advisers, the fact that many Sub-Advisers manage substantial assets other than the Funds and, further, that any such assessment would involve assumptions regarding the Sub-Advisers’ expense allocation policies, capital structure, cost of capital, business mix and other factors.
Accordingly, in the case of the Sub-Advisers, the Trustees focused greater consideration on the data described above in light of the arms’-length nature of the relationship (for the Sub-Advised Funds) between PLFA and such Sub-Advisers with respect to the negotiation of fund sub-advisory fees and the fact that such fees are paid by PLFA.
Economies of Scale. The Trustees noted and considered the extent to which economies of scale are realized as each Fund grows and whether advisory fee levels reflect economies of scale if the Funds grow in size. The Trustees noted PLFA’s commitment to competitive total expenses of the Funds through expense limitation agreements, its and its affiliates’ consistent reinvestment in the business in the form of improvements in technology, product innovations and customer service. The Trustees considered information relating to economies of scale provided by PLFA, and PLFA’s willingness to discuss and evaluate the topic of economies of scale with the Trustees.
With respect to the Asset Allocation Funds, the Trustees noted that the advisory fee was set at an amount that takes into account the current size of the Funds and that PLFA and the Trustees have had discussions about adding breakpoints when appropriate. The Trustees also considered PLFA’s willingness to reduce its own fees through certain advisory fee waivers and expense limitation agreements, whereby PLFA will reimburse the Funds for certain expenses that exceed stated expense caps.
The Trustees noted that PLFA and its affiliates had consistently reinvested in the business in the form of improvements in technology, product innovations, personnel and resources. In particular, the Trustees noted that PLFA had created new positions responsible for asset allocation and risk management during the prior year and had hired experienced personnel to fill these positions.
The Trustees additionally noted that economies of scale were difficult to measure with precision particularly on a Fund by Fund basis. This analysis is complicated by the additional services and content provided by PLFA and its affiliates through reinvestment in the business, as discussed above. The Trustees considered that the Funds are well managed, and provide shareholders with sophisticated asset allocation investment options at reasonable fee levels. The Board noted that PLFA had taken steps to ensure that shareholders benefit by negotiating favorable terms with service providers, and to provide certain support services to the Funds on an approximate cost basis as opposed to an asset-based charge.
The Board determined that PLFA and its affiliates are sharing economies of scale given its commitment to competitive total expenses of the Funds, and the consistent reinvestment in the business in the form of improvements in technology and other resources and investments in personnel. The Board considered that it will continue to review whether there are additional economies of scale that will be realized as the Funds grow that can be shared with shareholders. The Board concluded that the Funds’ cost structures were reasonable and that overall profitability appeared reasonable at the current time. The Board further concluded that PLFA was sharing economies of scale with each Fund and its shareholders to their benefit.
5. Ancillary Benefits
The Trustees requested and received from PLFA and the Sub-Advisers information concerning other benefits received by PLFA, Pacific Life, the Sub-Advisers, and their affiliates as a result of their respective relationship with the Funds, including various service arrangements with PLFA affiliates and reimbursement at an approximate cost basis for support services in the case of PLFA, as well as commissions paid to broker-dealers affiliated with certain Sub-Advisers and the use of soft-dollars by certain of the Sub-Advisers. The Trustees also considered ancillary benefits received by Pacific Life and its affiliates from the Funds. The Trustees considered information concerning other significant economic relations between the Sub-Advisers and their affiliates and with PLFA and its affiliates and noted PLFA’s processes and procedures to identify and disclose such relationships to the Board. The Trustees also considered PLFA’s and each Sub-Adviser’s strong practices and procedures with regard to managing conflicts of interest and ensuring that such conflicts do not prevent PLFA or the Sub-Advisers from acting in the best interests of the Funds and their shareholders.
The Board concluded that such benefits were consistent with those generally derived by investment advisers to mutual funds or were otherwise not unusual.
F-17
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
6. Conclusion
Based on their review, including their consideration of each of the factors referred to above, and assisted by the advice of the Independent Consultant and independent counsel to the Independent Trustees, the Board, including the Independent Trustees, concluded that the Advisory Agreement and each applicable Sub-Advisory Agreement are fair and reasonable with respect to each Fund and its shareholders, and that the renewal of the Advisory Agreement and each applicable Sub-Advisory Agreement would be in the best interests of the Funds and their shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Advisory Agreement and each applicable Sub-Advisory Agreement, but indicated that the Board based its determination on the total mix of information available to it.
III. Other Advisory Agreement and Sub-Advisory Agreement Approvals
In addition to considering the renewal of the Advisory Agreement and existing Sub-Advisory Agreements during the period, the Board considered and approved the Advisory Agreement and Sub-Advisory Agreement with respect to a new Fund as discussed below.
PF International Small-Cap Fund
At an in-person meeting on September 16-17, 2014, the Board, including all of the Independent Trustees, approved the establishment and designation, effective December 31, 2014, of a newly-organized Fund of the Trust, the PF International Small-Cap Fund. In connection with the approval of the PF International Small-Cap Fund, the Board also approved, effective December 31, 2014, the Advisory Agreement with PLFA (the “PF International Small-Cap Advisory Agreement”) the Sub-Advisory Agreement with QS Batterymarch Financial Management, Inc. (“QS Batterymarch”) (the “QS Batterymarch Sub-Advisory Agreement”).
In evaluating the PF International Small-Cap Advisory Agreement and QS Batterymarch Sub-Advisory Agreement, the Board, including all the Independent Trustees, considered the following factors, among others:
1. Nature, Extent and Quality of Services to be Provided
Fund Oversight and Supervision – PLFA, its personnel and its resources. The Trustees considered the depth and quality of PLFA’s investment management process, including its sophisticated monitoring and oversight of Sub-Advisers; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; and the overall financial strength and stability of its organization. The Trustees considered the high quality of the products and services provided by PLFA and its affiliates, such as the many educational services and tools offered to assist intermediaries in effectively understanding and meeting shareholder needs. The Trustees also noted that PLFA regularly informs them about matters relevant to the Trust, its shareholders and investing.
The Trustees also considered that PLFA’s investment, legal, compliance and accounting professionals have access to and utilize a variety of resources and systems relating to investment management, compliance, trading, performance analysis, security valuation and portfolio accounting. The Trustees further considered PLFA’s continuing need to attract and retain qualified personnel and to maintain and enhance its resources and systems.
The Trustees considered the benefits to shareholders of retaining PLFA to serve as the investment adviser to the PF International Small-Cap Fund in light of the nature, extent, and quality of services expected to be provided by PLFA. The Trustees considered PLFA’s ability to provide an appropriate level of support and resources to the PF International Small-Cap Fund, and that PLFA has sufficiently qualified personnel to provide the appropriate investment management, compliance and monitoring services required for the Fund. The Trustees based this review on information and materials provided to them throughout the year by PLFA. The Trustees considered PLFA’s continued development and use of analytical tools for assessing fund performance and the performance of Sub-Advisers, conducting an attribution analysis on performance and reporting on performance to the Trustees. The Trustees noted that PLFA uses these tools to monitor and identify underperformance relative to applicable benchmarks or peer groups, and then conducts various analyses to try to assess the sources of and reasons for underperformance. The Trustees noted that PLFA has developed processes to oversee and monitor a Sub-Adviser’s execution of investment strategies. The Trustees noted that PLFA provides the Board with analysis of this data over rolling periods to assist the Board in identifying trends in Fund performance and other areas, and periodically provides the Trustees with information on economic and market trends to provide a context for assessing recent performance.
The Trustees also noted that PLFA conducts periodic due diligence on Sub-Advisers involving on-site visits, in-person meetings and telephonic meetings to gather information that PLFA uses to attempt to gain an in-depth understanding of a Sub-Adviser’s investment process and to seek to identify issues that may be relevant to a Sub-Adviser’s services to a fund or a fund’s performance. The Trustees also considered the background and experience of PLFA’s senior management, and the experience of and amount of attention expected to be given to the PF International Small-Cap Fund by PLFA’s management and staff. The Trustees considered that the PF International Small-Cap Fund will serve only as an underlying fund option for the Portfolio Optimization Funds and not as a stand-alone investment option, and that the Fund is intended to diversify the international equity component of the Portfolio Optimization Funds and reduce the concentration risk of the Portfolio Optimization Funds.
The Trustees also considered PLFA’s compliance operations with respect to the Trust, including the measures taken by PLFA to assist the Trust in complying with Rule 38a-1 under the 1940 Act. The Trustees further considered the monitoring and additional services that would be provided by PLFA to the PF International Small-Cap Fund, including assistance with performance evaluation, risk management oversight, preparation of periodic performance and financial reports, review of trade execution and coordination of the services of other service providers to the Trust.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services to be provided by PLFA to the PF International Small-Cap Fund under the PF International Small-Cap Advisory Agreement.
F-18
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
QS Batterymarch. The Trustees considered the benefits to shareholders of retaining QS Batterymarch as Sub-Adviser to the PF International Small-Cap Fund, particularly in light of the nature, extent, and quality of the services expected to be provided by QS Batterymarch. In this regard, the Trustees considered various materials relating to the proposed Sub-Adviser, including copies of the proposed QS Batterymarch Sub-Advisory Agreement; copies of QS Batterymarch’s Form ADV; financial information; and other information deemed relevant to the Trustees’ evaluation, including comprehensive assessments from senior management of PLFA.
The Trustees considered that under the QS Batterymarch Sub-Advisory Agreement, QS Batterymarch would be responsible for providing the investment management services for the PF International Small-Cap Fund’s assets, including investment research, advice and supervision, and determining which securities would be purchased or sold by the Fund. The Trustees considered the quality of the management services expected to be provided to the PF International Small-Cap Fund over both the short- and long-term, the organizational depth and resources of QS Batterymarch, including the background and experience of QS Batterymarch’s management and the expertise of the portfolio management team, as well as the investment strategies, processes and philosophy to be used with respect to the investment strategy.
In addition, the Trustees considered that the Trust’s CCO had reviewed the written compliance policies and procedures of QS Batterymarch, including the assessment of its compliance program as required under Rule 38a-1 of the 1940 Act and its code of ethics, prior to the effectiveness of the QS Batterymarch Sub-Advisory Agreement.
In making these assessments, the Trustees took note of the due diligence PLFA conducted with respect to QS Batterymarch, their prior knowledge of QS Batterymarch, including the fact that QS Batterymarch currently manages the proposed strategy for a series of Pacific Select Fund, and were aided by the assessment and recommendation of PLFA and the in-person presentation and materials provided by QS Batterymarch.
The Board concluded it was satisfied with the nature, extent and quality of the investment management services anticipated to be provided to the PF International Small-Cap Fund by PLFA under the PF International Small-Cap Advisory Agreement and QS Batterymarch under the QS Batterymarch Sub-Advisory Agreement.
2. Performance
The Trustees considered PLFA’s efforts to identify advisory firms that are qualified to manage an international small-capitalization strategy and PLFA’s identification of QS Batterymarch to serve as Sub-Adviser with regard to the PF International Small-Cap Fund’s day-to-day investment activities. Because this consideration related to a newly-organized fund, no actual performance record for the PF International Small-Cap Fund was available. However, the Trustees considered the investment process and techniques to be used by QS Batterymarch for the Fund and QS Batterymarch’s experience managing the International Small-Cap Portfolio of Pacific Select Fund, as well as other factors concerning performance in connection with their consideration of this matter and in connection with approval of the QS Batterymarch Sub-Advisory Agreement, including the factors described below.
The Trustees considered that QS Batterymarch would be managing the PF International Small-Cap Fund in the same style it uses to manage the International Small-Cap Portfolio of Pacific Select Fund, and that the same QS Batterymarch portfolio management team that currently manages the International Small-Cap Portfolio would manage the PF International Small-Cap Fund. The Trustees considered information about the performance of the International Small-Cap Portfolio (the “Comparable Performance”). The Trustees considered the Comparable Performance against a pertinent benchmark and against the applicable peer group for the year-to-date, one-, three- and five-year periods as of June 30, 2014. The Trustees also considered the Comparable Performance against a pertinent benchmark and an applicable peer group for the previous seven calendar years. Additionally, the Trustees considered the International Small-Cap Portfolio’s standard deviation and information ratio for the three- and five-year periods as of June 30, 2014.
The Trustees considered additional information about the historical performance of a fund managed by QS Batterymarch using similar investment strategies as those proposed for the PF International Small-Cap Fund against a pertinent benchmark for the one-, three-, five- and ten-year periods as of June 30, 2014. In addition, the Trustees considered the need for QS Batterymarch to adhere to the PF International Small-Cap Fund’s general investment mandate in order to function appropriately in the Portfolio Optimization Funds.
The Board determined that QS Batterymarch’s performance record with respect to similarly managed accounts was acceptable.
3. Advisory and Sub-Advisory Fees
PLFA. The Trustees requested, received and reviewed information from PLFA relating to the proposed advisory fee and total operating expenses for the PF International Small-Cap Fund. The Trustees reviewed the proposed advisory fee compared with the average fees of other funds in an applicable peer group. The Trustees also noted that the Fund would be subject to a contractual fee waiver agreed to by PLFA. The Trustees considered that the proposed advisory fee was in line with industry averages for similar investment products based on the data presented to the Board.
The Board concluded that the compensation payable to PLFA under the PF International Small-Cap Advisory Agreement is fair and reasonable.
QS Batterymarch. The Trustees considered information regarding the comparative advisory fees charged under other investment advisory contracts of the Sub-Adviser with regard to other accounts with substantially similar investment strategies as the PF International Small-Cap Fund. The Trustees also considered that the proposed sub-advisory fees payable to QS Batterymarch under the Sub-Advisory Agreement contain breakpoints, and that the sub-advisory fees will be based on the combined net assets of the International Small-Cap Portfolio of Pacific Select Fund and the PF International Small-Cap Fund.
F-19
PACIFIC FUNDS
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENTS (Continued)
(Unaudited)
In comparing the proposed sub-advisory fees to be paid by the PF International Small-Cap Fund to fees charged by QS Batterymarch for other similarly managed accounts, the Trustees noted that there were differences in the nature of the accounts. These differences explained differences in fee schedules.
The Trustees noted that the fee rates were the result of arms’-length negotiations between PLFA and QS Batterymarch, and that the PF International Small-Cap Fund’s sub-advisory fees are paid by PLFA and are not paid directly by the PF International Small-Cap Fund.
The Board concluded that the compensation payable under the QS Batterymarch Sub-Advisory Agreement is fair and reasonable.
4. Costs, Level of Profits and Economies of Scale
Costs and Profitability. The Trustees reviewed information regarding PLFA’s projected costs of sponsoring the PF International Small-Cap Fund and information regarding the anticipated projected profitability of the proposed Fund to PLFA. The Trustees considered the projected cost of services to be provided and projected profits to be realized by PLFA from the relationship with the PF International Small-Cap Fund based on the projected assets, income and expenses of PLFA in its relationship with the Fund. The Trustees noted that this projected information contains estimates because there is no actual operating history for the PF International Small-Cap Fund. The Trustees also considered the overall financial soundness of PLFA.
The Trustees considered information regarding the costs to QS Batterymarch of sub-advising the PF International Small-Cap Fund and the projected profitability of the QS Batterymarch Sub-Advisory Agreement to QS Batterymarch, to the extent practicable based on the financial information provided by QS Batterymarch. The Trustees noted that any assessment of projected profitability would involve assumptions regarding expense allocations and other factors. The Trustees focused their consideration on other information provided in connection with this matter, given the arms’-length nature of the relationship between PLFA and QS Batterymarch with respect to the negotiation of Fund sub-advisory fees, the fact that such fees are paid by PLFA and the fact that the projected profitability of the QS Batterymarch Sub-Advisory Agreement to QS Batterymarch is an estimate.
Economies of Scale. The Trustees considered the extent to which economies of scale may be realized by the PF International Small-Cap Fund as assets grow. The Trustees considered the estimated initial allocations to the PF International Small-Cap Fund by the Portfolio Optimization Funds and that although the advisory fee schedule for the Fund does not contain breakpoints, there would be an advisory fee waiver agreement in place for the Fund through July 31, 2016.
The Board concluded that the PF International Small-Cap Fund’s fee structure reflected in the PF International Small-Cap Advisory Agreement and QS Batterymarch Sub-Advisory Agreement is fair and reasonable.
5. Ancillary Benefits
The Trustees received information from PLFA and QS Batterymarch concerning other benefits that may be received by PLFA and QS Batterymarch and their affiliates as a result of their relationship with the PF International Small-Cap Fund, including commissions that may be paid to broker-dealers affiliated with QS Batterymarch and the anticipated use of soft-dollars by QS Batterymarch. In this regard, the Trustees noted that QS Batterymarch represented that it does not anticipate utilizing an affiliated broker-dealer and that it does not anticipate using soft dollar credits generated by Fund commissions to pay for research services. With respect to PLFA, the Trustees considered that the potential benefits that may be derived by PLFA from its relationship with the PF International Small-Cap Fund could include larger assets under management and reputational benefits, which are consistent with those generally derived by investment advisers to mutual funds. The Trustees also considered benefits that may be derived by affiliates of PLFA, including Pacific Life. The Trustees also considered potential benefits to be derived by QS Batterymarch and that such benefits were consistent with those generally derived by sub-advisers to mutual funds or were otherwise not unusual.
6. Conclusion
Based on their review, including the consideration of each of the factors referred to above, the Board found that: (i) the PF International Small-Cap Advisory Agreement and QS Batterymarch Sub-Advisory Agreement are in the best interests of the PF International Small-Cap Fund and its shareholders; and (ii) the compensation payable under the PF International Small-Cap Advisory Agreement and QS Batterymarch Sub-Advisory Agreement is fair and reasonable. No single factor was determinative of the Board’s findings, but rather the Trustees based their determination on the total mix of information available to them.
F-20
PACIFIC FUNDS
WHERE TO GO FOR MORE INFORMATION
Availability of Quarterly Holdings
The Trust files Form N-Q (complete schedules of fund holdings) with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year not later than 60 days after the close of the applicable quarter end. The Trust’s Form N-Q, (when required) is filed pursuant to applicable regulations and is available after filing (i) on the SEC’s Website at http://www.sec.gov; (ii) for review and copying at the SEC’s Public Reference Room in Washington, D.C. (information on the operations of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330); and (iii) on the Trust’s Webpage at https://www.pacificlife.com/pacificfunds.html. The SEC may charge you a fee for this information.
Availability of Proxy Voting Record
By August 31 of each year, the Trust files information regarding how the Trust’s fund managers voted proxies relating to fund securities during the most recent twelve-month period ended June 30. Such information is available after filing on the Trust’s’ Website and on the SEC’s Website noted below.
Information Relating to Investments Held by the Trust
For complete descriptions of the various securities and other instruments held by the Trust and their risks, please see the Trust’s Prospectus and Statement of Additional Information (“SAI”). For a description of bond ratings, please see the Trust’s SAI. The Prospectus and SAI are available as noted below.
Availability of Proxy Voting Policies
A description of the Proxy Voting Policies and Procedures that the Trust uses to determine how to vote proxies relating to fund securities is described in the Trust’s SAI.
How to obtain Information
The Trust’s Prospectus, SAI (including Proxy Voting Policies) and the Portfolio Optimization Funds’ annual and semi-annual reports are available:
| • | On the Trust’s Website at https://www.pacificlife.com/pacificfunds.html |
| • | On the SEC’s Website at http://www.sec.gov |
| • | Upon request by calling, without charge, 1-800-722-2333, 7 a.m. through 5 p.m. Pacific Time |
F-21
Item 2. Code of Ethics.
As of the end of the period covered by this report, the Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There were no substantive amendments or waivers to the Code of Ethics during the period covered by this report.
A copy of this Code of Ethics is filed as Exhibit 99 to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The Registrant’s Board has determined that G. Thomas Willis, a member of the Registrant’s Audit Committee, is an “audit committee financial expert” and “independent,” as such terms are defined in this Item. This designation does not increase the designee’s duties, obligations or liability as compared to his duties, obligations and liability as a member of the Audit Committee and of the Board; nor does it reduce the responsibility of the other Audit Committee members. There may be other individuals who, through education or experience, would qualify as “audit committee financial experts” if the Board had designated them as such. Most importantly, the Board believes each member of the Audit Committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition. Mr. Willis is a retired partner of PricewaterhouseCoopers LLP.
Item 4. Principal Accountant Fees and Services.
Audit Fees
| (a) | The aggregate fees billed for the fiscal years ended March 31, 2015 and 2014 for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $743,688 and $700,636, respectively. |
Audit-Related Fees
| (b) | There were no aggregate fees billed for the fiscal years ended March 31, 2015 and 2014 for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item. |
Tax Fees
| (c) | The aggregate fees billed for the fiscal years ended March 31, 2015 and 2014 for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $134,810 and $132,150, respectively. The nature of the services comprising the fees was the review of income tax returns and excise tax. |
All Other Fees
| (d) | There were no aggregate fees billed for the fiscal years ended March 31, 2015 and 2014 for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. |
| (e)(1) | The Audit Committee is required to pre-approve audit and non-audit services performed for the Registrant by the independent auditor as outlined below in order to assure that the provision of such services does not impair the auditor’s independence: |
Pre-Approval Requirements for Services to Registrant. Before the Auditor is engaged by the Registrant to render audit related or permissible non-audit services, either:
(i) The Audit Committee shall pre-approve such engagement; or
(ii) Such engagement shall be entered into pursuant to pre-approval policies and procedures established by the Audit committee. Any such policies and procedures must (1) be detailed as to the particular service and (2) not involve any delegation of the Audit Committee’s responsibilities to the Adviser. The Audit Committee may delegate to one or more of its members the authority to grant pre-approvals. The pre-approval policies and procedures shall include the requirement that the decisions of any member to whom authority is delegated under this Section shall be presented to the full Audit Committee at its next scheduled meeting.
(iii) De Minimis Exceptions to Pre-Approval Requirements. Pre-approval for a service provided to the Registrant other than audit, review or attest services is not required if: (1) the aggregate amount of all such non-audit services provided to the Registrant constitutes not more than 5 percent of the total amount of revenues paid by the Registrant to the Auditor during the fiscal year in which the non-audit services are provided; (2) such services were not recognized by the Registrant at the time of the engagement to be non-audit services; and (3) such services are promptly brought to the attention of the Audit Committee and are approved by the Audit Committee or by one or more members of the Audit Committee to whom authority to grant such approvals has been delegated by the Audit Committee.
Pre-Approval of Non-Audit Services Provided to the Adviser and Others. The Audit Committee shall pre-approve any non-audit services proposed to be provided by the Auditor to (i) the Adviser and (ii) any entity in the investment company complex (see note 4), if the nature of the services provided relate directly to the operations or financial reporting of the Registrant.
Application of De Minimis Exception: The De Minimis exceptions set forth above apply to pre-approvals under this Section as well, except that the “total amount of revenues” calculation for this Section’s services is based on the total amount of revenues paid to the Auditor by the Registrant and any other entity that has its services approved under this Section (i.e., the Adviser or any control person).
| (e)(2) | No services included in (b)-(d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
| (f) | Not applicable. |
| (g) | The aggregate fees billed for the years ended March 31, 2015 and 2014 by the Registrant’s principal accountant for non-audit services rendered to the Registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant were $275,170 and $226,032, respectively. |
| (h) | The Registrant’s Audit Committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant which were not pre-approved (not requiring pre-approval) is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Directors.
Item 11. Controls and Procedures.
| (a) | The Chief Executive Officer and Treasurer have concluded that Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) and internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) provide reasonable assurances that material information relating to Registrant is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing of this report. |
| (b) | There were no changes in Registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. Exhibits.
| (a)(1) | Code of Ethics, subject to the disclosure of Item 2 hereof is attached hereto as Exhibit 99.CODE ETH. |
| (a)(2) | Separate certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is attached hereto as Exhibit 99.CERT. |
| (a)(3) | Not applicable. |
| (b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is attached hereto as Exhibit 99.906 CERT pursuant to Section 906 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.
| Pacific Funds Series Trust | ||
| By: | /s/ Mary Ann Brown | |
| Mary Ann Brown | ||
| Chief Executive Officer | ||
| Date: | June 4, 2015 | |
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/ Mary Ann Brown | |
| Mary Ann Brown | ||
| Chief Executive Officer | ||
| Date: | June 4, 2015 | |
| By: | /s/ Brian D. Klemens | |
| Brian D. Klemens | ||
| Treasurer (Principal Financial and Accounting Officer) | ||
| Date: | June 4, 2015 | |