writing
call
options
tends
to
decrease
a
Fund’s
exposure
to
the
underlying
security.
The
writer
of
an
option
has
no
control
over
whether
the
underlying
security
may
be
bought
or
sold,
and
therefore
bears
the
market
risk
of
an
unfavorable
change
in
the
price
of
the
underlying
security.
The
counterparty
risk
for
purchased
options
arises
when
a
Fund
has
purchased
an
option,
exercises
that
option,
and
the
counterparty
doesn’t
buy
from
the
Fund
or
sell
to
the
Fund
the
underlying
asset
as
required.
In
the
case
where
a
Fund
has
written
an
option,
the
Fund
doesn’t
have
counterparty
risk.
Counterparty
risk
on
purchased
over-the-counter
options
is
partially
mitigated
by
the
Fund’s
collateral
posting
requirements.
As
the
option
increases
in
value
to
the
Fund,
the
Fund
receives
collateral
from
the
counterparty.
Risks
of
loss
may
exceed
amounts
recognized
on
the
Statement
of
Assets
and
Liabilities.
Futures
Contracts
— Certain
Funds may
use
futures
contracts
to
manage
the
exposure
to
interest
rate
and
market
or
currency
fluctuations.
Gains
or
losses
on
futures
contracts
can
offset
changes
in
the
yield
of
securities.
When
a
futures
contract
is
opened,
cash
or
other
investments
equal
to
the
required
“initial
margin
deposit”
are
held
on
deposit
with
and
pledged
to
the
broker.
Additional
securities
held
by
the
Funds
may
be
earmarked
to
cover
open
futures
contracts.
The
futures
contract’s
daily
change
in
value
(“variation
margin”)
is
either
paid
to
or
received
from
the
broker,
and
is
recorded
as
an
unrealized
gain
or
loss.
When
the
contract
is
closed,
realized
gain
or
loss
is
recorded
equal
to
the
difference
between
the
value
of
the
contract
when
opened
and
the
value
of
the
contract
when
closed.
Futures
contracts
involve,
to
varying
degrees,
risk
of
loss
in
excess
of
the
variation
margin
disclosed
in
the
Statement
of
Assets
and
Liabilities.
Exchange-traded
futures
have
no
significant
counterparty
risk
as
the
exchange
guarantees
the
contracts
against
default.
Foreign
Currency
Forward
Contracts
—
In
connection
with
purchases
and
sales
of
securities
denominated
in
foreign
currencies, certain
Funds
may
enter
into
foreign
currency
forward contracts.
Additionally,
the
Funds
may
enter
into
such
contracts
to mitigate
currency
and
counterparty
exposure
to other
foreign-currency-denominated
investments.
These
contracts
are
recorded
at
value
and
the realized-
and
change
in
unrealized-
foreign
exchange
gains
and
losses
are
included
in
the
Statement
of
Operations.
In
the
event
that
counterparties
fail
to
settle
these forward
contracts,
the
Funds
could
be
exposed
to
foreign
currency
fluctuations.
Foreign
currency
contracts
are
valued
daily
and
unrealized
appreciation
or
depreciation
is
recorded
daily
as
the
difference
between
the
contract
exchange
rate
and
the
closing
forward
rate
applied
to
the
face
amount
of
the
contract.
A
realized
gain
or
loss
is
recorded
at
the
time
a
forward
contract
is
closed.
These
contracts
are
over-the-
counter
and
the
Fund
is
exposed
to
counterparty
risk
equal
to
the
discounted
net
amount
of
payments
to
the
Fund.
Swap
Agreements
— Certain
Funds may enter
into
swap
transactions,
which
involve
swapping
one
or
more
investment
characteristics
of
a
security
or
a
basket
of
securities
with
another
party.
Such
transactions
include
market
risk,
risk
of
default
by
the
other
party
to
the
transaction,
risk
of
imperfect
correlation
and
manager
risk
and
may
involve
commissions
or
other
costs.
Swap
transactions
generally
do
not
involve
delivery
of
securities,
other
underlying
assets
or
principal.
Accordingly,
the
risk
of
loss
with
respect
to
swap
transactions
is
generally
limited
to
the
net
amount
of
payments
that
the
Fund
is
contractually
obligated
to
make,
or
in
the
case
of
the
counterparty
defaulting,
the
net
amount
of
payments
that
the
Fund
is
contractually
entitled
to
receive.
Risks
of
loss
may
exceed
amounts
recognized
on
the
Statement
of
Assets
and
Liabilities.
If
there
is
a
default
by
the
counterparty,
the
Fund
may
have
contractual
remedies
pursuant
to
the
agreements
related
to
the
transaction.
The
contracts
are
valued
daily
and
unrealized
appreciation
or
depreciation
is
recorded.
Swap
agreements
are
valued
at
the
clearinghouse
end
of
day
prices
as
furnished by
an
independent
pricing
service.
The
pricing
service
takes
into
account
such
factors
as
swap
curves,
default
probabilities,
recent
trades,
recovery
rates
and
other
factors
it
deems
relevant
in
determining
valuations.
Daily
fluctuations
in
the
value
of
the
centrally
cleared
credit
default
contracts
are
recorded
in
variation
margin
in
the
Statement
of
Assets
and
Liabilities
and
recorded
as
unrealized
gain
or
loss.
The
Fund
accrues
for
the
periodic
payment
and
amortizes
upfront
payments,
if
any,
on
swap
agreements
on
a
daily
basis
with
the
net
amount
recorded
as
realized
gains
or
losses
in
the
Statement
of
Operations.
Receipts
and
payments
received
or
made
as
a
result
of
a
credit
event
or
termination
of
the
contract
are
also
recognized
as
realized
gains
or
losses
in
the
Statement
of
Operations.
Collateral,
in
the
form
of
cash
or
securities,
may
be
required
to
be
held
with
the
Fund’s
custodian,
or
a
third
party,
in
connection
with
these
agreements.
Certain swap
agreements
are
over-the-counter
and
the
Fund
is
exposed
to
counterparty
risk,
which
is
the
discounted
net
amount
of
payments
owed
to
the
Fund.
This
risk
is
partially
mitigated
by
the
Fund’s
collateral
posting
requirements.
As
the
swap
increases
in
value
to
the
Fund,
the
Fund
receives
collateral
from
the
counterparty. Certain
interest
rate
and
credit
default
index
swaps
must
be
cleared
through
a
clearinghouse
or
central
counterparty.
Credit
Default
Swaps
—
A
credit
default
swap
is
a
swap
agreement
between
two
parties
to
exchange
the
credit
risk
of
a
particular
issuer,
basket
of
securities
or
reference
entity.
In
a
credit
default
swap
transaction,
a
buyer
pays
periodic
fees
in
return
for
payment
by
the
seller
which
is
contingent
upon
an
adverse
credit
event
occurring
in
the