NPORT-EX 2 NPORT_0508_95361914_0922.htm

 

FPA CRESCENT FUND

Portfolio of investments

September 30, 2022

(Unaudited)

 

COMMON STOCKS  Shares   Fair Value 
INTERNET MEDIA — 7.9%          
Alphabet, Inc. Class A(a)   2,408,380   $230,361,547 
Alphabet, Inc. Class C(a)   1,819,280    174,923,772 
Meta Platforms, Inc. Class A(a)   940,467    127,602,563 
Prosus NV (Netherlands)   2,258,811    117,518,242 
        $650,406,124 
SEMICONDUCTOR DEVICES — 5.8%          
Analog Devices, Inc.   1,605,334   $223,687,240 
Broadcom, Inc.   409,315    181,739,953 
NXP Semiconductors NV (Netherlands)   468,252    69,071,852 
        $474,499,045 
INDUSTRIAL DISTRIBUTION & RENTAL — 4.7%          
Ferguson PLC (Britain)   598,836   $61,638,190 
Howmet Aerospace, Inc.   2,850,165    88,155,603 
LG Corp. (South Korea)   1,476,300    75,726,317 
Safran SA (France)   938,989    85,438,363 
Univar Solutions, Inc.(a)   3,402,938    77,382,810 
        $388,341,283 
CABLE & SATELLITE — 4.0%          
Charter Communications, Inc. Class A(a)   393,387   $119,333,946 
Comcast Corp. Class A   7,087,694    207,882,065 
        $327,216,011 
CEMENT & AGGREGATES — 3.4%          
HeidelbergCement AG (Germany)   1,012,913   $40,014,258 
Holcim AG (Switzerland)   5,750,850    235,672,934 
        $275,687,192 
DIVERSIFIED BANKS — 2.9%          
Citigroup, Inc.   3,571,897   $148,840,948 
Flutter Entertainment PLC (Ireland)(a)   369,859    40,583,784 
Gulfport Energy Corp.(a)   526,060    46,445,838 
        $235,870,570 
E-COMMERCE DISCRETIONARY — 2.6%          
Alibaba Group Holding Ltd. (China)(a)   3,975,773   $39,675,573 
Amazon.com, Inc.(a)   1,346,173    152,117,549 
Delivery Hero SE (Germany)(a)(b)   551,839    20,157,108 
        $211,950,230 
ELECTRICAL COMPONENTS — 2.5%          
TE Connectivity Ltd. (Switzerland)   1,875,698   $207,002,031 
           
        $207,002,031 
P&C INSURANCE — 2.5%          
American International Group, Inc.   4,249,990   $201,789,525 
           
        $201,789,525 

 

 

 

 

FPA CRESCENT FUND

Portfolio of investments (Continued)

September 30, 2022

(Unaudited)

 

COMMON STOCKS - Continued  Shares   Fair Value 
APPLICATION SOFTWARE — 2.4%          
Activision Blizzard, Inc.   900,174   $66,918,935 
Entain PLC (Isle of Man)   3,178,600    38,004,794 
Epic Games, Inc.(c)(d)(e)   33,130    12,986,960 
Nexon Co. Ltd. (Japan)   1,965,397    34,724,101 
Nintendo Co. Ltd. (Japan)   1,056,160    42,599,447 
        $195,234,237 
BANKS — 2.1%          
Signature Bank   71,182   $10,748,482 
Wells Fargo & Co.   3,961,725    159,340,580 
        $170,089,062 
INSURANCE BROKERS — 2.0%          
Aon PLC Class A (Britain)   611,696   $163,855,008 
           
        $163,855,008 
BASE METALS — 2.0%          
Glencore PLC (Switzerland)   31,022,887   $163,025,649 
           
        $163,025,649 
CHEMICALS — 1.7%          
International Flavors & Fragrances, Inc.   1,574,557   $143,017,012 
           
        $143,017,012 
INSTITUTIONAL BROKERAGE — 1.7%          
Jefferies Financial Group, Inc.   4,697,583   $138,578,699 
           
        $138,578,699 
INVESTMENT COMPANIES — 1.7%          
Groupe Bruxelles Lambert SA (Belgium)   1,972,785   $137,966,969 
           
        $137,966,969 
FOOD SERVICES — 1.6%          
JDE Peet's NV (Netherlands)   4,041,690   $118,171,306 
Just Eat Takeaway.com NV (Netherlands)(a)(b)   965,437    14,975,614 
        $133,146,920 
INTEGRATED UTILITIES — 1.4%          
FirstEnergy Corp.   2,241,472   $82,934,464 
PG&E Corp.(a)   2,529,111    31,613,888 
        $114,548,352 
MARINE SHIPPING — 1.3%          
Sound Holding FP (Luxembourg)(c)(d)(e)(f)(g)   1,146,250   $109,222,092 
           
        $109,222,092 

 

 

 

 

FPA CRESCENT FUND

Portfolio of investments (Continued)

September 30, 2022

(Unaudited)

 

COMMON STOCKS - Continued  Shares   Fair Value 
WEALTH MANAGEMENT — 1.3%          
LPL Financial Holdings, Inc.   487,988   $106,615,618 
           
        $106,615,618 
MIDSTREAM - OIL & GAS — 1.1%          
Kinder Morgan, Inc.   5,262,897   $87,574,606 
           
        $87,574,606 
RAILROAD ROLLING STOCK — 1.1%          
Westinghouse Air Brake Technologies Corp.   1,065,725   $86,696,729 
           
        $86,696,729 
AUTOMOTIVE RETAILERS — 1.0%          
CarMax, Inc.(a)   1,238,879   $81,790,792 
           
        $81,790,792 
HOTELS, RESTAURANTS & LEISURE — 0.9%          
Marriott International, Inc. Class A   502,930   $70,480,610 
           
        $70,480,610 
APPAREL, FOOTWEAR & ACCESSORY DESIGN — 0.8%          
Cie Financiere Richemont SA Class A (Switzerland)   672,990   $63,527,177 
           
        $63,527,177 
ENTERTAINMENT CONTENT — 0.7%          
Netflix, Inc.(a)   238,704   $56,200,470 
           
        $56,200,470 
COMMERCIAL & RESIDENTIAL BUILDING EQUIPMENT & SYSTEMS — 0.6%          
Samsung C&T Corp. (South Korea)   702,330   $50,327,460 
           
        $50,327,460 
REAL ESTATE OWNERS & DEVELOPERS — 0.6%          
Swire Pacific Ltd. Class A (Hong Kong)   6,199,624   $46,339,280 
           
        $46,339,280 
INDUSTRIALS — 0.6%          
Uber Technologies, Inc.(a)   1,747,274   $46,302,761 
           
        $46,302,761 
HOME PRODUCTS STORES — 0.4%          
Herbalife Nutrition Ltd.(a)   1,628,225   $32,385,395 
           
        $32,385,395 

 

 

 

 

FPA CRESCENT FUND

Portfolio of investments (Continued)

September 30, 2022

(Unaudited)

 

COMMON STOCKS - Continued  Shares   Fair Value 
COMPUTER HARDWARE & STORAGE — 0.4%          
Dell Technologies, Inc. C Shares   862,607   $29,475,281 
           
        $29,475,281 
HEALTH CARE SERVICES — 0.3%          
ICON PLC (Ireland)(a)   114,967   $21,128,635 
           
        $21,128,635 
OIL & GAS SERVICES & EQUIPMENT — 0.2%          
McDermott International Ltd.(a)(f)(g)   46,782,420   $21,052,089 
        $21,052,089 
REAL ESTATE INVESTMENT TRUSTS — 0.2%          
Vornado Realty Trust   877,469   $20,322,182 
           
        $20,322,182 
           
TOTAL COMMON STOCKS — 64.4% (Cost $4,430,961,095)       $5,261,665,096 
           
CLOSED END FUND — 0.2%          
Altegrity, Inc.(c) (Cost $0)   4,756,180   $17,978,360 
           
LIMITED PARTNERSHIPS          
Footpath Ventures SpV IV LP (Private Credit)(c)(d)(e)   150,000   $12,243,930 
FPS LLC (Marine Shipping)(c)(d)(e)(f)(g)   2,073,734    229,388,939 
FPS Shelby Holding I LLC (Marine Shipping)(c)(d)(e)(f)(g)   107,799    8,876,468 
GACP II LP (Private Credit)(c)(d)(e)   958,312    22,951,371 
U.S. Farming Realty Trust II LP (Real Estate)(c)(d)(e)(f)   120,000    10,211,544 
U.S. Farming Realty Trust LP (Real Estate)(c)(d)(e)(f)   350,000    3,620,715 
           
TOTAL LIMITED PARTNERSHIPS — 3.5% (Cost $229,993,622)       $287,292,967 
           
PREFERRED STOCKS          
ENGINEERING SERVICES — 0.2%          
McDermott International, Inc. — 8.000%(c)(d)(e)(f)   22,591   $13,554,380 
           
        $13,554,380 
ENERGY — 0.0%          
Gulfport Energy Corp. — 10.000%(d)(e)   1,345   $803,638 
           
        $803,638 
           
TOTAL PREFERRED STOCKS — 0.2% (Cost $1,272,525)       $14,358,018 

 

 

 

 

FPA CRESCENT FUND

Portfolio of investments (Continued)

September 30, 2022

(Unaudited)

 

WARRANT — 0.0%  Shares   Fair Value 
ENERGY — 0.0%          
Cie Financiere Richemont SA 11/22/2023(a) (Cost $0)   2,521,536   $1,124,431 
           
        $1,124,431 
SPECIAL PURPOSE ACQUISITION COMPANIES(a)          
Accelerate Acquisition Corp.   1,824   $17,948 
African Gold Acquisition Corp.   175,509    1,741,049 
Agile Growth Corp.   972,411    9,646,317 
Alpha Partners Technology Merger Corp.   40,319    396,739 
Angel Pond Holdings Corp. Class A (Cayman Islands)   1,264,217    9,399,487 
Apollo Strategic Growth Capital II   206,968    2,042,774 
Ares Acquisition Corp.   494,451    4,904,954 
Atlantic Coastal Acquisition Corp. Class A   1,238,597    12,163,023 
Atlantic Coastal Acquisition Corp.   412,865    14,492 
Atlantic Coastal Acquisition Corp. II   320,872    3,221,555 
BigBear.ai Holdings, Inc.   266,952    40,043 
Biote Corp.   1,834    626 
Broadscale Acquisition Corp. Class A   1,046,401    8,254,285 
BurTech Acquisition Corp.   1,007,550    10,065,424 
C5 Acquisition Corp.   245,091    2,504,830 
Churchill Capital Corp. VII   616,422    6,071,818 
Colonnade Acquisition Corp. II Class A   1,032,132    10,238,749 
Colonnade Acquisition Corp. II   206,426    20,643 
COVA Acquisition Corp. Class A   502,327    3,332,960 
DHC Acquisition Corp. Class A   520,584    5,148,576 
DHC Acquisition Corp.   173,528    15,635 
Digital Transformation Opportunities Corp.   72,255    708,822 
Disruptive Acquisition Corp. I   1,032,135    10,228,458 
ESM Acquisition Corp.   157    1,557 
Flame Acquisition Corp.   1,032,145    10,197,593 
Forest Road Acquisition Corp. II   1,242,983    12,218,647 
Fortress Value Acquisition Corp. IV   493,906    4,855,096 
FTAC Hera Acquisition Corp.   124,395    1,232,754 
Fusion Acquisition Corp. II   173,927    1,709,702 
Glenfarne Merger Corp.   1,033,214    10,135,829 
Global Partner Acquisition Corp. II   387,688    3,857,496 
Golden Arrow Merger Corp.   1,032,132    10,166,500 
Gores Holdings VII, Inc.   4,846    47,685 
Gores Holdings VIII, Inc. Class A   264,894    2,351,329 
Gores Technology Partners II, Inc.   6,490    63,667 
GSR II Meteora Acquisition Corp. Class A   876    4,311 
GX Acquisition Corp. II Class A   864,261    6,379,351 
Heliogen, Inc.   98,835    21,744 

 

 

 

 

FPA CRESCENT FUND

Portfolio of investments (Continued)

September 30, 2022

(Unaudited)

 

SPECIAL PURPOSE ACQUISITION COMPANIES - Continued  Shares or
Principal
Amount		   Fair Value 
Hudson Executive Investment Corp. III   1,243,215   $12,220,803 
InterPrivate IV InfraTech Partners, Inc.   866,479    8,491,494 
Kismet Acquisition Three Corp.   1,032,132    10,218,107 
Landcadia Holdings IV, Inc.   1,243,001    12,255,990 
Lazard Growth Acquisition Corp. I   37,457    370,450 
Lead Edge Growth Opportunities Ltd.   111,893    1,111,097 
Macondray Capital Acquisition Corp. I   1,030,833    10,318,638 
Mason Industrial Technology, Inc.   760,239    7,442,740 
Metals Acquisition Corp. Class A   719,870    5,338,758 
Mission Advancement Corp.   613,285    6,016,326 
Monument Circle Acquisition Corp.   69,903    689,244 
Northern Star Investment Corp. III   550,747    5,419,350 
Northern Star Investment Corp. IV   425,470    4,173,861 
Orion Acquisition Corp.   252,217    2,479,293 
Peridot Acquisition Corp. II   582,407    5,781,088 
Pershing Square Tontine Holdings Ltd.(d)(e)   457,176    — 
Pine Technology Acquisition Corp. Class A   967,571    9,520,899 
Pine Technology Acquisition Corp.   322,523    12,901 
Plum Acquisition Corp. I   969,880    9,592,113 
PowerUp Acquisition Corp.   46,911    476,147 
Prenetics Global Ltd.   10,692    4,364 
Ross Acquisition Corp. II   231,224    2,296,054 
RXR Acquisition Corp.   9,883    96,952 
Silver Spike Acquisition Corp. II Class A   163,460    1,298,200 
Slam Corp.   714,327    7,078,981 
Stratim Cloud Acquisition Corp.   671,649    6,588,877 
Swvl Holdings Corp.   27,467    824 
TCW Special Purpose Acquisition Corp.   118,726    1,159,953 
Tio Tech A (Germany)   297,050    2,934,854 
TLG Acquisition One Corp.   1,242,983    12,255,812 
Twelve Seas Investment Co. II   990,015    9,741,748 
Viking Acquisition (Norway)(c)(d)(e)   9,562,500    5,854,801 
Virgin Orbit Holdings, Inc.   94,559    28,254 
           
TOTAL SPECIAL PURPOSE ACQUISITION COMPANIES — 4.0% (Cost $329,986,024)       $324,691,441 
           
BONDS & DEBENTURES          
           
CORPORATE BONDS & NOTES          
CONSUMER, NON-CYCLICAL — 0.0%          
Herbalife/HLF Financing Co. — 7.875% 9/1/2025(b)  $3,739,000   $3,380,617 
           
ENERGY — 0.0%          
Gulfport Energy Corp. — 6.000% 10/15/2024(d)(e)  $18,209,000   $— 
Gulfport Energy Corp. — 6.375% 5/15/2025(d)(e)   8,822,000    — 
Gulfport Energy Corp. — 6.375% 1/15/2026(d)(e)   9,128,000    — 
Gulfport Energy Corp. — 6.625% 5/1/2023(d)(e)   9,417,000    — 

 

 

 

 

FPA CRESCENT FUND

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2022

(Unaudited)

 

BONDS & DEBENTURES - Continued  Principal
Amount		   Fair Value 
Gulfport Energy Corp. — 8.000% 5/17/2026  $596,287   $593,305 
        $593,305 
           
TOTAL CORPORATE BONDS & NOTES — 0.0% (Cost $3,448,129)       $3,973,922 
           
CONVERTIBLE BONDS — 1.6%          
COMMUNICATIONS — 1.6%          
Delivery Hero SE — 1.000% 4/30/2026 (Germany)  $2,600,000   $1,808,383 
Delivery Hero SE — 1.000% 1/23/2027 (Germany)   86,200,000    64,672,390 
Wayfair, Inc. — 0.625% 10/1/2025   80,394,000    53,864,241 
Zillow Group, Inc. — 1.375% 9/1/2026   12,336,000    11,922,744 
Zillow Group, Inc. — 2.750% 5/15/2025   1,703,000    1,548,027 
        $133,815,785 
           
TOTAL CONVERTIBLE BONDS — 1.6% (Cost $146,424,678)       $133,815,785 
           
CORPORATE BANK DEBT          
Farfetch U.S. Holdings, Inc., 1M USD LIBOR + 6.250% — 9.290% 9/27/2027(c)(d)(h)(l)  $19,580,000   $18,356,250 
McDermott Intl Senior Exit LC — 3.000% 6/30/2024(f)(l)(m)   19,843,000    (8,929,350)
McDermott LC — 3.740% 12/31/2025(c)(d)(e)(f)(h)(i)(l)   28,718,370    18,167,706 
McDermott Technology Americas, Inc., 1M USD LIBOR + 1.000% — 4.115% 6/30/2025(c)(f)(h)(l)   33,930,812    15,947,482 
McDermott Technology Americas, Inc., 1M USD LIBOR + 3.000% — 6.115% 6/28/2024(c)(f)(h)(l)   1,074,102    644,461 
           
TOTAL CORPORATE BANK DEBT — 0.6% (Cost $108,544,995)       $44,186,549 
           
U.S. TREASURIES          
U.S. Treasury Bills — 2.284% 10/25/2022(j)  $50,000,000   $49,921,555 
U.S. Treasury Bills — 2.290% 10/11/2022(j)   25,000,000    24,986,265 
U.S. Treasury Bills — 2.293% 10/20/2022(j)   50,000,000    49,938,620 
U.S. Treasury Bills — 2.301% 10/6/2022(j)   58,000,000    57,987,576 
U.S. Treasury Bills — 2.335% 10/18/2022(j)   40,000,000    39,957,388 
U.S. Treasury Bills — 2.365% 10/27/2022(j)   63,000,000    62,890,827 
U.S. Treasury Bills — 2.367% 11/1/2022(j)   70,000,000    69,849,108 
U.S. Treasury Bills — 2.502% 11/3/2022(j)   36,000,000    35,915,933 
U.S. Treasury Bills — 2.527% 11/10/2022(j)   30,000,000    29,913,888 
U.S. Treasury Bills — 2.534% 11/8/2022(j)   44,000,000    43,877,777 
U.S. Treasury Bills — 2.772% 11/17/2022(j)   50,000,000    49,821,810 
U.S. Treasury Bills — 2.868% 11/29/2022(j)   73,000,000    72,647,739 
U.S. Treasury Bills — 2.920% 11/15/2022(j)   31,000,000    30,892,628 
U.S. Treasury Bills — 2.922% 12/1/2022(j)   20,000,000    19,904,538 
           
TOTAL U.S. TREASURIES — 7.8% (Cost $638,540,526)       $638,505,652 
           
TOTAL BONDS & DEBENTURES — 10.0% (Cost $896,958,328)       $820,481,908 
           
TOTAL INVESTMENT SECURITIES — 82.3% (Cost $5,889,171,594)       $6,727,592,221 

 

 

 

 

FPA CRESCENT FUND

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2022

(Unaudited)

 

SHORT-TERM INVESTMENTS  Principal
Amount		   Fair Value 
Amazon.com, Inc.          
—2.392%10/4/2022  $109,000,000   $108,978,654 
—2.392%10/7/2022   100,000,000    99,960,833 
—2.698%10/24/2022   60,000,000    59,898,417 
—2.699%10/28/2022   70,000,000    69,860,875 
—2.729%11/1/2022   38,000,000    37,912,304 
—2.749%11/2/2022   30,000,000    29,928,000 
—2.750%10/31/2022   40,000,000    39,910,000 
—2.852%11/10/2022   45,000,000    44,860,000 
—2.852%11/14/2022   50,000,000    49,828,889 
—3.005%11/14/2022   30,000,000    29,891,833 
—3.125%11/14/2022   25,000,000    24,906,195 
—3.211%11/21/2022   80,000,000    79,643,000 
—3.262%11/22/2022   35,000,000    34,838,222 
Apple, Inc.          
—2.338%10/6/2022   35,000,000    34,988,820 
—2.359%10/6/2022   17,000,000    16,994,522 
—2.371%10/5/2022   40,000,000    39,989,644 
—2.380%10/6/2022   61,000,000    60,980,175 
—2.381%10/11/2022   50,000,000    49,967,500 
—2.392%10/13/2022   31,000,000    30,975,717 
—2.392%10/14/2022   50,000,000    49,957,569 
—2.739%11/7/2022   37,000,000    36,897,705 
—2.790%11/9/2022   13,000,000    12,961,412 
—3.262%11/28/2022   27,000,000    26,860,800 
Nestle Finance International Ltd.          
—2.438%10/6/2022   30,000,000    29,990,000 
—2.595%10/20/2022   33,000,000    32,955,588 
Roche Holdings, Inc.          
—2.379%10/5/2022   20,000,000    19,994,800 
—2.381%10/12/2022   30,000,000    29,978,550 
—2.430%10/13/2022   50,000,000    49,960,167 
—2.830%11/4/2022   33,000,000    32,913,357 
—2.882%11/9/2022   35,000,000    34,892,696 
—3.047%10/17/2022   20,000,000    19,973,333 
Walmart, Inc.          
—2.471%10/12/2022   80,000,000    79,940,600 
—2.490%10/11/2022   33,000,000    32,977,542 
—2.824%10/11/2022   33,350,000    33,324,246 
—2.996%10/12/2022   20,000,000    19,981,972 
State Street Bank Repurchase Agreement — 0.83% 10/3/2022          
(Dated 09/30/2022, repurchase price of $38,354,653, collateralized by $39,875,200 principal amount U.S. Treasury Bill — 0.000% 2023, fair value $39,119,086)(k)   38,352,000    38,352,000 
TOTAL SHORT-TERM INVESTMENTS — 18.7% (Cost $1,526,225,937)       $1,526,225,937 
           
TOTAL INVESTMENTS — 101.0% (Cost $7,415,397,531)       $8,253,818,158 
Other Assets and Liabilities, net — (1.0)%        (77,913,937)
NET ASSETS — 100.0%       $8,175,904,221 

 

 

 

 

FPA CRESCENT FUND

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2022

(Unaudited)

 

(a) Non-income producing security.
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.
(c)

Restricted securities. These restricted securities constituted 6.87% of total net assets at September 30, 2022, most of which are considered liquid by the Adviser. These securities are not registered and may not be sold to the public. There are legal and/or contractual restrictions on resale. The Fund does not have the right to demand that such securities be registered. The values of these securities are determined by valuations provided by pricing services, brokers, dealers, market makers, or in good faith under policies adopted by authority of the Fund’s Board of Trustees.

(d) Investments categorized as a significant unobservable input (Level 3) (See Note 1 of the Notes to Financial Statements).
(e) These securities have been valued in good faith under policies adopted by authority of the Board of Trustees in accordance with the Fund's fair value procedures. These securities constituted 5.48% of total net assets at September 30, 2022.
(f) Affiliated Security.
(g) Controlled company.
(h) Variable/Floating Rate Security — The rate shown is based on the latest available information as of September 30, 2022. For Corporate Bank Debt, the rate shown may represent a weighted average interest rate. Certain variable rate securities are not based on a published rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description.
(i) As of September 30, 2022 the Fund had entered into commitments to fund various delayed draw debt-related investments. Such commitments are subject to the satisfaction of certain conditions set forth in the documents governing those investments and there can be no assurance that such conditions will be satisfied. At September 30, 2022, unfunded commitments totaled $2,598,066.
(j) Zero coupon bond. Coupon amount represents effective yield to maturity.
(k) Security pledged as collateral.
(l) For corporate bank debt, the rate shown may represent a weighted average interest rate.
(m) As of September 30, 2022, the Fund had entered into commitments to fund various delayed draw limited partnership and/debt-related investments. Such commitments are subject to the satisfaction of certain conditions set forth in the documents governing those investments and there can be no assurance that such conditions will be satisfied.

 

 

 

 

FPA CRESCENT FUND

PORTFOLIO OF INVESTMENTS (Continued)

September 30, 2022

(Unaudited)

 

Purchased Options

 

Description  Pay/
Receive
Floating
Rate		  Floating Rate
Index		  Exercise
Rate		   Expiration
Date		  Counterparty  Notional Amount   Premium   Fair Value 
Call — CMS Cap Swap(c),(d)  Receive  Maximum of [0, 30- Year — 3-Year — USD-ISDA Swap Rate — 0.04]   0.04%  2/15/2023  Goldman Sachs International  $9,204,500,000   $2,531,238   $7,317,578 
Call — CMS Cap Swap(c),(d)  Receive  Maximum of [0, 30- Year — 3-Year — USD-ISDA Swap Rate — 0.04]   0.04%  2/22/2023  Goldman Sachs International   9,204,500,000    2,531,238    7,658,144 
Call — CMS Cap Swap(c),(d)  Receive  Maximum of [0, 30- Year — 3-Year — USD-ISDA Swap Rate — 0.04]   0.04%  3/1/2023  Goldman Sachs International   9,204,500,000    2,531,237    8,072,346 
Call — CMS Cap Swap(c),(d)  Receive  Maximum of [0, 30- Year — 3-Year — USD-ISDA Swap Rate — 0.04]   0.04%  3/8/2023  Goldman Sachs International   9,204,500,000    2,531,237    8,523,367 
Call — CMS Cap Swap(c),(d)  Receive  Maximum of [0, 30- Year — 3-Year — USD-ISDA Swap Rate — 0.04]   0.04%  3/1/2023  Morgan Stanley   5,062,500,000    1,265,625    4,232,250 
Call — CMS Cap Swap(c),(d)  Receive  Maximum of [0, 30- Year — 3-Year — USD-ISDA Swap Rate — 0.04]   0.04%  3/8/2023  Morgan Stanley   5,062,500,000    1,265,625    4,455,000 
Call — OIS Cap Swap(c),(d)  Receive  3-Month USD-LIBOR   0.68%  1/11/2029  Morgan Stanley   130,030,907    3,519,114    23,298,548 
                         $16,175,314   $63,557,233 

 

 

 

 

FPA CRESCENT FUND

Portfolio of investments (Continued)

September 30, 2022

(Unaudited)

 

Written Options

 

Description  Pay/
Receive
Floating
Rate		  Floating Rate
Index		  Exercise
Rate		   Expiration
Date		  Counterparty  Notional
Amount		   Premium   Fair Value 
Put — OIS Cap Swap(c),(d)  Pay  3-Month USD-LIBOR   0.35%  1/11/2029  Morgan Stanley  $(130,030,907)  $(3,519,114)  $(1,037,777)

 

Forward Foreign Currency Contracts

 

Counterparty  Currency Purchased  Currency Sold  Settlement
Date		  Valuation at
September
30, 2022		   Unrealized
Appreciation		   Unrealized
Depreciation		 
Barclays Bank PLC  USD 16,381,014  JPY 2,188,700,000  11/17/2022  $15,188,053   $1,192,961   $— 

 

Total Return Swaps - Short

 

Receive  Pay  Payment
Frequency		  Counter
party		  Expiration
Date		  Notional
Amount		   Value   Upfront
Premiums
Paid
(Received)		   Unrealized
Appreciation
(Depreciation)		 
Green Thumb Industries, Inc.  OBFR + 1.500%  Annual  Barclays Capital, Inc.  8/7/2023  $346,240   $(438,381)                -   $(438,381)
Cresco Labs, Inc.  CDOR01M + 1.500%  Annual  Citibank N.A.  8/8/2023   514,474    (86,606)   -    (86,606)
Trulieve Cannabis Corp.  CDOR01M + 1.500%  Annual  Barclays Capital, Inc.  8/8/2023   144,289    (519,647)   -    (519,647)
Verano Holdings Corp.  CDOR01M + 1.500%  Annual  Citibank N.A.  8/8/2023   336,945    (90,221)   -    (90,221)
                    $(1,134,855)   -   $(1,134,855)

 

 

 

 

FPA CRESCENT FUND

PORTFOLIO OF INVESTMENTS – RESTRICTED SECURITIES

September 30, 2022

(Unaudited)

 

Issuer  Acquisition Date (s)  Cost   Fair Value   Fair Value as a %
of Net Assets		 
Altegrity, Inc.  09/01/2021, 03/15/2022   —   $17,978,360    0.22%
CMS CAP SWAPTION 4.000 FEB23 4.000 CALL Goldman Sachs International 4.000% 02/15/2023  02/26/2020  $2,531,238    7,317,578    0.09%
CMS CAP SWAPTION 4.000 FEB23 4.000 CALL Goldman Sachs International 4.000% 02/22/2023  02/26/2020   2,531,238    7,658,144    0.09%
CMS CAP SWAPTION 4.000 MAR23 4.000 CALL Goldman Sachs International 4.000% 03/01/2023  02/26/2020   2,531,237    8,072,346    0.10%
CMS CAP SWAPTION 4.000 MAR23 4.000 CALL Goldman Sachs International 4.000% 03/08/2023  02/26/2020   2,531,237    8,523,367    0.10%
CMS CAP SWAPTION 4.000 MAR23 4.000 CALL Morgan Stanley 4.000% 03/01/2023  02/26/2020   1,265,625    4,232,250    0.05%
CMS CAP SWAPTION 4.000 MAR23 4.000 CALL Morgan Stanley 4.000% 03/08/2023  02/26/2020   1,265,625    4,455,000    0.05%
Epic Games, Inc.  06/25/2020   19,049,750    12,986,960    0.16%
Farfetch U.S. Holdings, Inc., 1M USD LIBOR + 6.250% — 9.290% 9/27/2027  09/27/2022   18,307,300    18,356,250    0.22%
FPS LLC (Marine Shipping)  01/03/2022, 02/04/2022, 02/03/2022, 03/09/2022, 04/01/2022, 04/29/2022   188,848,513    229,388,939    2.81%
FPS Shelby Holding  I LLC (Marine Shipping)  02/04/2020, 03/26/2020,
 04/29/2020, 07/24/2020 		   10,191,935    8,876,468    0.11%
Footpath Ventures SpV IV LP (Private Credit)  09/24/2021   15,376,200    12,243,930    0.15%
GACP II LP (Private Credit)  01/17/2020   6,345,142    22,951,371    0.28%
McDermott International, Inc. — 8.000%  12/31/2020   —    13,554,380    0.17%
McDermott LC — 3.740% 12/31/2025  03/04/2021, 03/05/2021   35,777,645    18,167,706    0.22%
McDermott Technology Americas, Inc., 1M USD LIBOR + 1.000% — 4.115% 6/30/2025  12/31/2021, 01/31/2022
02/28/2022, 03/31/2022,
04/29/2022, 05/31/2022,
06/30/2022, 07/31/2022,
08/31/2022, 09/30/2022 		   62,017,654    15,947,482    0.20%
McDermott Technology Americas, Inc., 1M USD LIBOR + 3.000% — 6.115% 6/28/2024  07/01/2020   1,074,101    644,461    0.01%
OIS CAP SWAPTION 0.680 JAN29 0.680 CALL Morgan Stanley 0.680% 01/11/2029  10/19/2020   3,519,114    23,298,548    0.28%
OIS FLOOR SWAPTION 0.350 JAN29 0.350 PUT Morgan Stanley 0.350% 01/11/2029  10/19/2020   (3,519,114)   (1,037,777)   (0.01)%

 

 

 

 

FPA CRESCENT FUND

PORTFOLIO OF INVESTMENTS – RESTRICTED SECURITIES (Continued)

September 30, 2022

(Unaudited)

 

Issuer  Acquisition Date (s)  Cost   Fair Value   Fair Value as a % of
Net Assets		 
Sound Holding FP  10/07/2013   60,882,839    109,222,092    1.34%
U.S. Farming Realty Trust LP (Real Estate)  11/26/2010, 01/31/2011,
03/09/2011, 04/15/2011,
05/10/2011, 06/27/2011,
08/15/2011, 10/17/2011,
10/28/2011, 11/28/2011,
01/03/2012, 01/26/2012,
04/05/2012, 07/13/2012,
12/07/2012, 08/01/2013		   —   $3,620,715    0.04%
U.S. Farming Realty Trust II LP (Real Estate)  12/24/2012, 04/29/2013,
06/17/2013, 10/28/2013,
01/14/2014, 04/22/2014,
06/25/2014, 09/09/2014,
10/08/2014, 12/18/2014,
06/18/2015, 07/29/2015		  $9,231,833    10,211,544    0.12%
Viking Acquisition (Norway)  06/03/2021   7,607,534    5,854,801    0.07%
TOTAL RESTRICTED SECURITIES     $ 447,366,646   $562,524,915    6.87%

 

 

 

 

NOTE 1 — Disclosure of Fair Value Measurements

 

The Fund uses the following methods and inputs to establish the fair value of its assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.

 

Equity securities are generally valued each day at the official closing price of, or the last reported sale price on, the exchange or market on which such securities principally are traded, as of the close of business on that day. If there have been no sales that day, equity securities are generally valued at the last available bid price. Securities that are unlisted and fixed-income and convertible securities listed on a national securities exchange for which the over-the-counter ("OTC") market more accurately reflects the securities’ value in the judgment of the Fund's officers, are valued at the most recent bid price. Events occurring after the close of trading on non-U.S. exchanges may result in adjustments to the valuation of foreign securities to reflect their fair value as of the close of regular trading on the NYSE. The Fund may utilize an independent fair valuation service in adjusting the valuations of foreign securities. However, most fixed income securities are generally valued at prices obtained from pricing vendors and brokers. Vendors value such securities based on one or more of the following inputs: transactions, bids, offers quotations from dealers and trading systems, spreads and other relationships observed in the markets among comparable securities, benchmarks, underlying equity of the issuer, and proprietary pricing models such as cash flows, financial or collateral performance and other reference data (includes prepayments, defaults, collateral, credit enhancements, and interest rate volatility). Currency forwards are valued at the closing currency exchange rate which is not materially different from the forward rate. Short-term corporate notes with maturities of 60 days or less at the time of purchase are valued at amortized cost.

 

Securities for which representative market quotations are not readily available or are considered unreliable by the Adviser are valued as determined in good faith under procedures adopted by the authority of the Fund’s Board of Trustees. Various inputs may be reviewed in order to make a good faith determination of a security’s value. These inputs include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. Investments in limited partnerships are valued, as a practical expedient, utilizing the net asset valuations provided by the underlying limited partnerships in a manner consistent with U.S. GAAP for investment companies. The Fund applies the practical expedient to its investments in limited partnerships on an investment-by-investment basis, and consistently with the Fund’s entire position in a particular investment, unless it is probable that the Fund will sell a portion of an investment at an amount different from the net asset valuation. Investments in limited partnerships are included in Level 3 of the fair value hierarchy based on the limited rights of withdrawal by the Fund as specified in the respective agreements. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations of investments that would have been used had greater market activity occurred.

 

Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1. The investments in limited partnerships represent investments in private funds which are valued at their net asset value as a practical expedient. The net asset value of the limited partnerships has been estimated primarily based upon the pro-rata ownership of the fair value of the limited partnerships as reported by the management of the limited partnerships. Investments in private funds can never be redeemed. Instead, the nature of the investments in this category is that distributions are received through the liquidation of the underlying assets of the limited partnerships.

 

 

 

 

The Fund classifies its assets based on three valuation methodologies. Level 1 values are based on quoted market prices in active markets for identical assets. Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs as noted above including spreads, cash flows, financial performance, prepayments, defaults, collateral, credit enhancements, and interest rate volatility. Level 3 values are based on significant unobservable inputs that reflect the Fund’s determination of assumptions that market participants might reasonably use in valuing the assets. The valuation levels are not necessarily an indication of the risk associated with investing in those securities. The following table presents the valuation levels of the Fund's investments as of September 30, 2022:

 

Investments  Level 1   Level 2   Level 3   Total 
Common Stocks                    
Internet Media  $532,887,882   $117,518,242    —   $650,406,124 
Semiconductor Devices   474,499,045    —    —    474,499,045 
Industrial Distribution & Rental   227,176,603    161,164,680    —    388,341,283 
Cable & Satellite   327,216,011    —    —    327,216,011 
Cement & Aggregates   —    275,687,192    —    275,687,192 
Diversified Banks   195,286,786    40,583,784    —    235,870,570 
E-Commerce Discretionary   152,117,549    59,832,681    —    211,950,230 
Electrical Components   207,002,031    —    —    207,002,031 
P&C Insurance   201,789,525    —    —    201,789,525 
Application Software   66,918,935    115,328,342   $12,986,960    195,234,237 
Banks   170,089,062    —    —    170,089,062 
Insurance Brokers   163,855,008    —    —    163,855,008 
Base Metals   —    163,025,649    —    163,025,649 
Chemicals   143,017,012    —    —    143,017,012 
Institutional Brokerage   138,578,699    —    —    138,578,699 
Investment Companies   —    137,966,969    —    137,966,969 
Food Services   —    133,146,920    —    133,146,920 
Integrated Utilities   114,548,352    —    —    114,548,352 
Marine Shipping   —    —    109,222,092    109,222,092 
Wealth Management   106,615,618    —    —    106,615,618 
Midstream - Oil & Gas   87,574,606    —    —    87,574,606 
Railroad Rolling Stock   86,696,729    —    —    86,696,729 
Automotive Retailers   81,790,792    —    —    81,790,792 
Hotels, Restaurants & Leisure   70,480,610    —    —    70,480,610 
Apparel, Footwear & Accessory Design   —    63,527,177    —    63,527,177 
Entertainment Content   56,200,470    —    —    56,200,470 
Commercial & Residential Building Equipment & Systems   —    50,327,460    —    50,327,460 
Real Estate Owners & Developers   —    46,339,280    —    46,339,280 
Industrials   46,302,761    —    —    46,302,761 
Home Products Stores   32,385,395    —    —    32,385,395 
Computer Hardware & Storage   29,475,281    —    —    29,475,281 
Health Care Services   21,128,635    —    —    21,128,635 
Oil & Gas Services & Equipment   21,052,089    —    —    21,052,089 
Real Estate Investment Trusts   20,322,182    —    —    20,322,182 
Closed End Fund   —    17,978,360    —    17,978,360 
Limited Partnerships   —    —    287,292,967    287,292,967 
Preferred Stocks                    
Engineering Services   —    —    13,554,380    13,554,380 
Energy   —    —    803,638    803,638 
Warrant                    
Energy   1,124,431    —    —    1,124,431 
Special Purpose Acquisition Companies   318,360,493    476,147    5,854,801    324,691,441 
Corporate Bonds & Notes   —    3,973,922    —    3,973,922 
Convertible Bonds   —    133,815,785    —    133,815,785 
Corporate Bank Debt   —    7,662,593    36,523,956    44,186,549 
U.S. Treasuries   —    638,505,652    —    638,505,652 
Short-Term Investments   —    1,526,225,937    —    1,526,225,937 
   $4,094,492,592   $3,693,086,772   $466,238,794   $8,253,818,158 
Purchased Options (interest rate risk)   —    —   $63,557,233   $63,557,233 
Written Options (interest rate risk)   —    —    (1,037,777)   (1,037,777)
Forward Foreign Currency Contracts (currency risk)   —   $1,192,961    —    1,192,961 
Total Return Swaps   —    (1,134,855)   —    (1,134,855)
   $—   $58,106   $62,519,456   $62,577,562 

 

 

 

 

The following table summarizes the Fund’s Level 3 investment securities and related transactions during the period ended September 30, 2022:

 

Investments  Beginning
Value at
December 31,
2021		   Net Realized
and
Unrealized
Gains
(Losses)		   Purchases   (Sales)   Gross
Transfers
In/(Out)		   Ending Value
at September
30, 2022		   Net Change in
Unrealized
Appreciation
(Depreciation)
related to
Investments held
at September 30,
2022		 
Common Stocks  $84,884,430   $44,067,090    —   $(6,742,468)   —   $122,209,052   $44,987,808 
Limited Partnerships   151,633,431    58,247,705   $89,024,969    (11,613,138)   —    287,292,967    58,247,705 
Preferred Stocks   14,281,743    76,347    —    (72)   —    14,358,018    76,275 
Special Purpose Acquisition Companies   7,238,930    (1,384,129)   —    —    —    5,854,801    (1,384,129)
Corporate Bank Debt   7,815,830    1,074,616    18,307,300    —   $9,326,210    36,523,956    1,074,616 
Purchased Options (interest rate risk)   23,221,610    80,083,687    —    (39,748,064)   —    63,557,233    47,513,716 
Written Options (interest rate risk)   (3,501,472)   1,696,513    767,182    —    —    (1,037,777)   (1,055,418)
   $285,574,502   $183,861,829   $108,099,451   $(58,103,742)  $9,326,210   $528,758,250   $149,460,573 

 

Transfers of investments between different levels of the fair value hierarchy are recorded at fair value as of the end of the reporting period. There were transfers of $9,326,210 out of Level 3 into Level 2. Transfers out of Level 3 were due to change in valuation technique from recent trade activity to vendor priced.

 

The following table summarizes the quantitative inputs and assumptions used for items categorized as items categorized as Level 3 of the fair value hierarchy as of September 30, 2022.

 

Financial Assets  Fair Value at
September 30,
2022		   Valuation Technique(s)  Unobservable Inputs  Price/Range   Weighted Average 
Special Purpose Acquisition Companies  $5,854,801    Restricted Security (a)   Cost   $0.61   $0.61 
                      
Corporate Bank Debt  $36,523,956    Pricing Model (b)   Quotes/Prices   $55.00 - $93.75   $74.48 
                      
Preferred Stock  $14,358,018    Pricing Model (b)   Quotes/Prices   $597.50 - $600.00   $599.86 
                      
Purchased Options (interest rate risk)  $63,557,233    Third-Party Broker Quote (c)   Quotes/Prices    $0.00 - $0.18   $0.07 
                      
Written Options (interest rate risk)  $(1,037,777.00)   Third-Party Broker Quote (c)   Quotes/Prices   $0.01   $0.01 
                      
Common Stocks- Long  $109,222,092    Market Approach (d)   Shipping Broker Valuations   58%    58%
                      
    12,986,960    Most Recent Capitalization (Funding) (e)   Quotes/Prices   $392.00   $392.00 
            Discounts   40%    40%
                      
Limited Partnerships  $22,951,371    NAV as Practical Expedient (f)   Market Discount   15%    15%
                      
    238,265,407    Market Approach (d)   Shipping Broker Valuations   37% - 69%    38%
                      
    12,243,930    NAV as Practical Expedient (f)   Market Discount   20%    20%
                      
    13,832,259    Discounted NAV (g)   Market Discount   25%    25%

 

(a) The fair value of the investment is based on the initial purchase price. If the financial condition of the underlying assets were to deteriorate, or if the market comparables were to fall, the value of the investment could be lower.

(b)  The Pricing Model technique for Level 3 securities involves recently quoted funding prices of the security.

(c) The Third Party Broker Quote technique involves obtaining an third-party broker quote for the security.

(d) The fair value of the investment is based on the market approach, which involves obtaining broker quotes for the underlying vessels based on free and clear charter rates, and further discounting those quotes for vessel-specific contracted charter rates.

(e)  The fair value of the investment is based on capital funding terms.  If the financial condition of the underlying assets were to deteriorate, or if the market comparables were to fall, the value of the investment could be lower.    

(f)   No adjustmend were made to the NAV provided by the administrator of the Limited Partnerships. Adjustments to the NAV would be considered if the practical expedient NAV was not as of the Fund's measurement date; it was probably that the Limited Partnerships would be sold at a value materially different than the reported expedient NAV; or it was determined in accordance with the Fund's valuation procedures than the Limited Partnerships are not being reported at fair value.                

(g)   The NAV provided by the general partner has been discounted for the possible impact from various long-term exist strategies under consideration by the general partner.    

  

 

 

 

Options 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 premiums paid.

 

Forward foreign currency contracts: Forward foreign currency contracts are agreements to exchange one currency for another at a future date and at a specified price. The Funds’ transactions in forward foreign currency contracts are limited to transaction and portfolio hedging. The contractual amounts of forward foreign currency contracts do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered and could exceed the net unrealized value shown in the tables below. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movements in currency values. Forward foreign currency contracts are valued daily at the foreign exchange rates as of the close of the New York Stock Exchange. Unrealized appreciation or depreciation on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the foreign exchange rates at the end of the period is included in the Statement of Assets and Liabilities under the caption “Forward Foreign Currency Contracts.” Realized gains and losses and the net change in unrealized appreciation (depreciation) on forward foreign currency contracts for the year are included in the Statement of Operations under the caption “Forward Foreign Currency Contracts.”

 

Credit Default Swaps: The Fund enters into credit default swap contracts for investment purposes and to manage its credit risk. 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. The Fund may purchase or sell protection. A seller of protection generally receives an upfront payment or periodic payments throughout the term of the swap provided there is no credit event. Such periodic payments received are accrued daily and accounted for as realized gains. If a credit event occurs, as defined under the terms of the swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The buyer of protection generally pays an upfront premium or periodic payments throughout the term of the swap provided there is no credit event. Such periodic payments paid are accrued daily and accounted for as realized losses.

 

 

 

 

Entering into credit default swaps involves, to varying degrees, elements of credit, market and documentation risk in excess of the related amounts recognized in the Consolidated Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligations to perform or disagree as to the meaning of the contractual terms in the agreements, and that there will be unfavorable changes in net interest rates.

 

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.