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 811-21279
The Merger Fund® VL
(Exact name of registrant as specified in charter)
One Financial Plaza
Hartford, CT 06103-2608
(Address of principal executive offices) (Zip code)
Jennifer Fromm, Esq.
Vice President, Chief Legal Officer, Counsel and Secretary for Registrant
One Financial Plaza
Hartford, CT 06103-2608
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 367-5877
Date of fiscal year end: December 31
Date of reporting period: June 30, 2023
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, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) | The Report to Shareholders is attached herewith. |
(b) | Not applicable. |
The Merger Fund® VL |
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President, The Merger Fund® VL
August 2023
Beginning Account Value January 1, 2023 | Ending Account Value June 30, 2023 | Annualized Expense Ratio* | Expenses Paid During Period** | ||||
Class I | $ 1,000.00 | $ 991.40 | 1.51 % | $ 7.46 |
* | Annualized expense ratios include dividend and interest expense on securities sold short. |
** | Expenses are equal to the Fund’s annualized expense ratio, which is net of waived fees and reimbursed expenses, if applicable, multiplied by the average account value over the period, multiplied by the number of days (181) expenses were accrued in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. |
Beginning Account Value January 1, 2023 | Ending Account Value June 30, 2023 | Annualized Expense Ratio* | Expenses Paid During Period** | ||||
Class I | $ 1,000.00 | $ 1,017.31 | 1.51 % | $ 7.55 |
* | Annualized expense ratios include dividend and interest expense on securities sold short. |
** | Expenses are equal to the Fund’s annualized expense ratio, which is net of waived fees and reimbursed expenses, if applicable, multiplied by the average account value over the period, multiplied by the number of days (181) expenses were accrued in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. |
economy and currency stable. Governed by a seven-member board, the system includes 12 regional Federal Reserve Banks, 25
branches, and all national and state banks that are part of the system.
arranged by banks and other financial institutions to help companies finance acquisitions, recapitalizations, or other highly leveraged
transactions. Such loans may be especially vulnerable to adverse changes in economic or market conditions, although they are senior in
the capital structure which typically provides investors/lenders a degree of potential credit risk protection.
calculating interest rates on various loans throughout the world.
MLP, a partnership must derive most of its cash flows from real estate, natural resources and commodities.
shopping centers and other commercial properties.
through an initial public offering for the purpose of acquiring or merging with an existing company.
total return basis with dividends reinvested. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and it
is not available for direct investment.
Health Care | 34.9% |
Materials | 11.9 |
Information Technology | 11.1 |
Industrials | 10.8 |
Communication Services | 9.4 |
Consumer Discretionary | 8.1 |
Energy | 7.1 |
Real Estate | 2.4 |
Utilities | 2.3 |
Financials | 1.4 |
Consumer Staples | 0.6 |
Total | 100% |
Type of Buyer | Deal Terms* | ||
Strategic | 91.1% | Cash | 87.3% |
Financial | 8.9% | Cash and Stock | 7.7% |
Stock and Stub(1) | 0.0%** | ||
By Deal Type | Risk Reversal | 0.0%** | |
Friendly | 100.0% | Stock with Fixed Exchange Ratio | 4.9% |
Hostile | 0.0% | Undetermined (2) | 0.1% |
** Amount less than 0.005%.
(1) “Stub” includes assets other than cash and stock (e.g., escrow notes).
(2) The compensation is undetermined because the compensation to be received (e.g., stock, cash, escrow notes, other) will be determined at a later date, potentially at the option of the Fund’s investment adviser.
Par Value | Value | ||
Convertible Bonds and Notes—1.3% | |||
Health Care—1.3% | |||
Oak Street Health, Inc. 0.000%, 3/15/26 | $ 552 | $ 548 | |
Total Convertible Bonds and Notes (Identified Cost $530) | 548 | ||
Corporate Bonds and Notes—4.7% | |||
Communication Services—1.7% | |||
Connect Finco S.a.r.l. 144A 6.750%, 10/1/26(1) | 96 | 93 | |
GrubHub Holdings, Inc. 144A 5.500%, 7/1/27(1) | 184 | 106 | |
Lagardere S.A. | |||
RegS 2.125%, 10/16/26(2) | 200 EUR | 213 | |
RegS 1.750%, 10/7/27(2) | 200 EUR | 212 | |
TEGNA, Inc. | |||
4.625%, 3/15/28 | 20 | 18 | |
5.000%, 9/15/29 | 42 | 36 | |
678 | |||
Consumer Staples—0.7% | |||
Diamond BC B.V. 144A 4.625%, 10/1/29(1)(3) | 174 | 175 | |
TreeHouse Foods, Inc. 4.000%, 9/1/28 | 140 | 121 | |
296 | |||
Energy—0.7% | |||
PDC Energy, Inc. 5.750%, 5/15/26 | 306 | 305 | |
Financials—0.0% | |||
Mobius Merger Sub, Inc. 144A 9.000%, 6/1/30(1) | 25 | 22 | |
Health Care—0.4% | |||
Syneos Health, Inc. 144A 3.625%, 1/15/29(1) | 151 | 148 | |
Verscend Escrow Corp. 144A 9.750%, 8/15/26(1) | 21 | 21 | |
169 | |||
Information Technology—0.1% | |||
NCR Corp. | |||
144A 5.750%, 9/1/27(1) | 28 | 28 | |
144A 6.125%, 9/1/29(1) | 9 | 9 | |
37 | |||
Par Value | Value | ||
Materials—1.1% | |||
Arconic Corp. | |||
144A 6.000%, 5/15/25(1) | $ 231 | $ 233 | |
144A 6.125%, 2/15/28(1) | 197 | 199 | |
432 | |||
Total Corporate Bonds and Notes (Identified Cost $2,033) | 1,939 | ||
Leveraged Loans—1.8% | |||
Chemicals—1.1% | |||
Diamond BC B.V. Tranche B (3 month Term SOFR + 3.012%) 8.057%, 9/29/28(4) | 464 | 463 | |
Health Care—0.1% | |||
Verscend Holding Corp. Tranche B (1 month Term SOFR + 4.114%) 9.217%, 8/27/25(4) | 60 | 60 | |
Information Technology—0.2% | |||
RentPath LLC Tranche B-1, First Lien (3 month Prime + 3.750%) 12.000%, 4/25/24(5)(6) | 16 | — | |
Syniverse Holdings, Inc. (3 month Term SOFR + 7.000%) 12.242%, 5/13/27(4) | 69 | 63 | |
63 | |||
Service—0.4% | |||
Marnix Sas Tranche B (3 month Term SOFR + 3.750%) 0.000%, 8/4/28(4)(7) | 151 | 150 | |
Total Leveraged Loans (Identified Cost $756) | 736 |
Shares | ||
Preferred Stock—0.1% | ||
Information Technology—0.1% | ||
Babcock & Wilcox Enterprises, Inc., 6.500% | 1,365 | 29 |
Total Preferred Stock (Identified Cost $34) | 29 | |
Common Stocks—32.9% | ||
Communication Services—3.9% | ||
Activision Blizzard, Inc.(8) | 18,101 | 1,526 |
Shares | Value | ||
Communication Services—continued | |||
GCI Liberty, Inc. Escrow Share(8) | 1,015 | $ — (9) | |
Radius Global Infrastructure, Inc. Class A(8) | 4,831 | 72 | |
1,598 | |||
Consumer Discretionary—0.7% | |||
Cazoo Group Ltd.(8) | 327 | — (9) | |
Uni-Select, Inc.(8) | 7,923 | 282 | |
282 | |||
Consumer Staples—0.0% | |||
TPCO Holding Corp.(8) | 6,423 | 1 | |
Energy—1.0% | |||
PDC Energy, Inc.(10) | 5,918 | 421 | |
Financials—0.6% | |||
Argo Group International Holdings Ltd. | 2,511 | 74 | |
First Horizon Corp. | 8,126 | 92 | |
Focus Financial Partners, Inc. Class A(8) | 1,696 | 89 | |
Home Capital Group, Inc. Class B | 126 | 4 | |
MarketWise, Inc. | 565 | 1 | |
260 | |||
Health Care—13.8% | |||
ABIOMED, Inc.(5)(8) | 814 | 2 | |
Amedisys, Inc.(8) | 2,200 | 201 | |
Biote Corp. Class A(8) | 273 | 2 | |
Chinook Therapeutics, Inc.(8) | 5,437 | 209 | |
DICE Therapeutics, Inc.(8) | 9,202 | 428 | |
Horizon Therapeutics plc(8)(10) | 21,813 | 2,244 | |
IVERIC bio, Inc.(8) | 16,025 | 630 | |
NuVasive, Inc.(8) | 9,907 | 412 | |
Seagen, Inc.(8)(10) | 6,578 | 1,266 | |
Syneos Health, Inc. Class A(8) | 6,367 | 268 | |
5,662 | |||
Industrials—5.1% | |||
Aerojet Rocketdyne Holdings, Inc.(8) | 20,058 | 1,101 | |
Univar Solutions, Inc.(8)(10) | 27,832 | 997 | |
2,098 | |||
Information Technology—4.6% | |||
National Instruments Corp. | 3,474 | 199 | |
Tower Semiconductor Ltd.(8) | 4,481 | 168 |
Shares | Value | ||
Information Technology—continued | |||
VMware, Inc. Class A(8) | 10,513 | $ 1,511 | |
1,878 | |||
Materials—2.0% | |||
Arconic Corp.(8) | 9,604 | 284 | |
Newcrest Mining Ltd. | 2,534 | 45 | |
Teck Resources Ltd. Class B | 11,700 | 493 | |
822 | |||
Real Estate—1.2% | |||
Life Storage, Inc. | 3,247 | 432 | |
Urstadt Biddle Properties, Inc. Class A | 1,659 | 35 | |
467 | |||
Total Common Stocks (Identified Cost $13,519) | 13,489 | ||
Rights—0.0% | |||
Health Care—0.0% | |||
Akouos, Inc., 12/31/49(8) | 4,144 | 4 | |
Bristol Myers Squibb Co., 12/31/35(5)(8) | 6,945 | 9 | |
Total Rights (Identified Cost $—) | 13 | ||
Warrants—0.1% | |||
Communication Services—0.0% | |||
Akazoo S.A., 12/31/35(5)(8) | 2,642 | — | |
BuzzFeed, Inc., 12/01/26(8) | 1,643 | — (9) | |
— (9) | |||
Consumer Discretionary—0.0% | |||
Cazoo Group Ltd., 08/26/26(8) | 5,415 | — (9) | |
CEC Brands LLC, 12/31/25(5)(8) | 2,163 | 7 | |
ECARX Holdings, Inc., 12/21/27(8) | 1,150 | — (9) | |
Grove Collaborative Holdings, 03/13/26(8) | 1,063 | — (9) | |
7 | |||
Consumer Staples—0.0% | |||
Whole Earth Brands, Inc., 06/25/25(8) | 7,310 | 1 | |
Financials—0.1% | |||
26 Capital Acquisition Corp., 12/31/27(8) | 900 | — (9) | |
AltEnergy Acquisition Corp., 11/10/28(8) | 800 | — (9) | |
Altimar Acquisition Corp. III, 12/31/28(8) | 578 | — (9) | |
Ares Acquisition Corp., 12/31/27(8) | 390 | 1 |
Shares | Value | ||
Financials—continued | |||
Arrowroot Acquisition Corp., 03/02/26(8) | 6,162 | $ 2 | |
Athena Consumer Acquisition Corp., 07/31/28(8) | 535 | — (9) | |
Cartesian Growth Corp II, 07/12/28(8) | 873 | — (9) | |
CC Neuberger Principal Holdings III, 12/31/27(8) | 300 | — (9) | |
CF Acquisition Corp. VIII, 12/31/27(8) | 757 | — (9) | |
Compute Health Acquisition Corp. Class A, 12/31/27(8) | 1,422 | 1 | |
Corner Growth Acquisition Corp., 12/31/27(8) | 895 | — (9) | |
Elliott Opportunity II Corp., 03/02/26(8) | 279 | — (9) | |
ESGEN Acquisition Corp., 10/20/26(8) | 936 | — (9) | |
FTAC Emerald Acquisition Corp., 08/22/28(8) | 2,643 | — (9) | |
Fusion Acquisition Corp. II, 12/31/27(8) | 1,000 | — (9) | |
G Squared Ascend II, Inc., 12/31/26(5)(8) | 797 | — | |
GCM Grosvenor, Inc. Class A, 11/17/25(8) | 1,355 | 1 | |
Goal Acquisitions Corp., 02/11/26(8) | 8,032 | — (9) | |
Golden Falcon Acquisition Corp., 11/04/26(8) | 1,608 | — (9) | |
Infinite Acquisition Corp., 11/23/28(8) | 662 | — (9) | |
Israel Acquisitions Corp., 02/28/28(8) | 2,345 | 1 | |
Juniper II Corp., 12/31/28(8) | 1,245 | — (9) | |
Live Oak Crestview Climate Acquisition Corp., 03/12/26(8) | 1,979 | — (9) | |
Moneylion, Inc., 06/01/27(8) | 11,485 | — (9) | |
Newbury Street Acquisition Corp., 12/31/27(8) | 419 | — (9) | |
Newcourt Acquisition Corp., 04/12/28(8) | 1,097 | — (9) | |
Phoenix Biotech Acquisition Corp., 09/01/26(8) | 859 | — (9) | |
PROOF Acquisition Corp. I, 12/03/28(8) | 2,120 | — (9) | |
Prospector Capital Corp., 01/01/25(8) | 2,213 | — (9) | |
Pyrophyte Acquisition Corp., 12/17/23(8) | 1,066 | — (9) | |
RMG Acquisition Corp. III, 12/31/27(8) | 1,196 | — (9) | |
Screaming Eagle Acquisition Corp. Class A, 12/15/27(8) | 3,209 | 1 (9) | |
Semper Paratus Acquisition Corp., 11/04/26(8) | 1,068 | — | |
Slam Corp. Class A, 12/31/27(8) | 1,300 | — (9) | |
Spring Valley Acquisition Corp. II, 02/25/26(8) | 1,933 | — (9) |
Shares | Value | ||
Financials—continued | |||
Target Global Acquisition I Corp., 12/31/27(8) | 1,600 | $ —(9) | |
Thunder Bridge Capital Partners III, Inc., 02/15/28(8) | 1,095 | — (9) | |
Viscogliosi Brothers Acquisition Corp., 03/18/27(8) | 803 | — (9) | |
Zapp Electric Vehicles Group Ltd., 03/03/28(8) | 2,322 | — (9) | |
7 | |||
Health Care—0.0% | |||
Newamsterdam Pharma Co. N.V., 11/22/27(8) | 633 | 1 | |
Pear Therapeutics, Inc., 02/04/26(8) | 100 | �� — (9) | |
Quantum-Si, Inc., 09/30/27(8) | 7,060 | 2 | |
Talkspace, Inc., 06/21/25(8) | 17,327 | 1 | |
4 | |||
Industrials—0.0% | |||
Amprius Technologies, Inc., 03/02/27(8) | 4,149 | 2 | |
Bridger Aerospace Group Holdings, Inc., 12/31/27(8) | 750 | — (9) | |
Freightos Ltd., 01/23/28(8) | 739 | — (9) | |
Getaround, Inc., 12/31/28(8) | 179 | — (9) | |
2 | |||
Information Technology—0.0% | |||
Embark Technology, Inc., 12/31/27(8) | 66 | — (9) | |
Movella Holdings, Inc., 12/31/27(8) | 1,062 | — (9) | |
Near Intelligence, Inc., 07/08/27(8) | 1,500 | — (9) | |
— (9) | |||
Materials—0.0% | |||
Ginkgo Bioworks Holdings, Inc., 12/31/27(8) | 40 | — (9) | |
Total Warrants (Identified Cost $205) | 21 |
Shares/Units | ||
Special Purpose Acquisition Companies—38.1% | ||
A SPAC II Acquisition Corp.(8) | 4,750 | 50 |
Accretion Acquisition Corp.(8) | 11,530 | 120 |
AfterNext HealthTech Acquisition Corp. Class A(8) | 11,810 | 122 |
Alchemy Investments Acquisition Corp. 1(8) | 4,297 | 44 |
Shares/Units | Value | ||
Alpha Healthcare Acquisition Corp. III Class A(8) | 5,153 | $ 53 | |
Alpha Partners Technology Merger Corp. Class A(8) | 10,841 | 113 | |
Alpha Star Acquisition Corp.(8) | 4,216 | 45 | |
AltC Acquisition Corp. Class A(8) | 19,284 | 201 | |
Andretti Acquisition Corp. Class A(8) | 10,985 | 117 | |
AP Acquisition Corp. Class A(8) | 7,942 | 85 | |
Apollo Strategic Growth Capital Class B(5)(8) | 3,442 | — | |
Apollo Strategic Growth Capital II Class A(8) | 18,301 | 189 | |
APx Acquisition Corp. I(8) | 23,427 | 252 | |
Ares Acquisition Corp. Class A(8) | 54,854 | 580 | |
Ares Acquisition Corp. II(8) | 7,837 | 81 | |
Arisz Acquisition Corp.(8) | 4,036 | 43 | |
Arogo Capital Acquisition Corp. Class A(8) | 12,782 | 134 | |
Arrowroot Acquisition Corp. Class A(8) | 4,718 | 49 | |
Artemis Strategic Investment Corp. Class A(8) | 13,472 | 143 | |
ARYA Sciences Acquisition Corp. IV Class A(8) | 7,277 | 77 | |
ARYA Sciences Acquisition Corp. V Class A(8) | 7,886 | 82 | |
Aura FAT Projects Acquisition Corp. Class A(8) | 4,793 | 51 | |
AXIOS Sustainable Growth Acquisition Corp. Class A(8) | 1,678 | 18 | |
AxonPrime Infrastructure Acquisition Corp. Class A(8) | 3 | — (9) | |
Bannix Acquisition Corp.(8) | 250 | 3 | |
Battery Future Acquisition Corp. Class A(8) | 11,198 | 119 | |
Bilander Acquisition Corp. Class A(8) | 7,539 | 77 | |
BioPlus Acquisition Corp. Class A(8) | 39,856 | 424 | |
Black Mountain Acquisition Corp. Class A(8) | 1,655 | 18 | |
Blue Ocean Acquisition Corp. Class A(8) | 9,236 | 98 | |
Blue Whale Acquisition Corp. I Class A(8) | 8,717 | 88 | |
Blue World Acquisition Corp.(8) | 4,070 | 43 | |
Canna-Global Acquisition Corp. Class A(8) | 1,370 | 15 | |
Capitalworks Emerging Markets Acquisition Corp. Class A(8) | 2,418 | 26 |
Shares/Units | Value | ||
Cartesian Growth Corp. II Class A(8) | 4,671 | $ 50 | |
Cartica Acquisition Corp. Class A(8) | 15,331 | 163 | |
CC Neuberger Principal Holdings III Class A(8) | 1,500 | 16 | |
Cetus Capital Acquisition Corp.(8) | 2,008 | 21 | |
CF Acquisition Corp. IV Class A(8) | 5,356 | 56 | |
CF Acquisition Corp. VII Class A(8) | 5,516 | 59 | |
Chenghe Acquisition Co. Class A(8) | 1,990 | 21 | |
Churchill Capital Corp. V Class A(8) | 2,484 | 25 | |
Colombier Acquisition Corp. Class A(8) | 8,081 | 83 | |
Compass Digital Acquisition Corp.(8) | 8,451 | 88 | |
Concord Acquisition Corp. II Class A(8) | 30,621 | 314 | |
Consilium Acquisition Corp. I Ltd.(8) | 8,168 | 86 | |
Conyers Park III Acquisition Corp. Class A(8) | 11,278 | 115 | |
Corsair Partnering Corp. Class A(8) | 14,091 | 146 | |
DA32 Life Science Tech Acquisition Corp. Class A(8) | 1,996 | 20 | |
Data Knights Acquisition Corp. Class A(8) | 4,867 | 53 | |
DHC Acquisition Corp. Class A(8) | 2,222 | 23 | |
Direct Selling Acquisition Corp. Class A(8) | 2,172 | 23 | |
Distoken Acquisition Corp.(8) | 4,508 | 47 | |
DUET Acquisition Corp. Class A(8) | 2,344 | 25 | |
Dune Acquisition Corp. Class A(8) | 2,585 | 26 | |
EF Hutton Acquisition Corp. I(8) | 2,304 | 24 | |
Elliott Opportunity II Corp. Class A(8) | 33,633 | 348 | |
Embrace Change Acquisition Corp.(8) | 2,540 | 27 | |
Enphys Acquisition Corp.(8) | 16,538 | 172 | |
Enterprise 4.0 Technology Acquisition Corp.(8) | 8,028 | 86 | |
ESGEN Acquisition Corp. Class A(8) | 9,858 | 107 | |
ESH Acquisition Corp.(8) | 2,873 | 29 | |
EVe Mobility Acquisition Corp. Class A(8) | 11,064 | 116 | |
Everest Consolidator Acquisition Corp.(8) | 2,746 | 29 | |
ExcelFin Acquisition Corp. Class A(8) | 1,480 | 15 |
Shares/Units | Value | ||
FAST Acquisition Corp. II Class A(8) | 2,388 | $ 25 | |
Feutune Light Acquisition Corp. Class A(8) | 980 | 10 | |
Finnovate Acquisition Corp. Class A(8) | 25,949 | 275 | |
Focus Impact Acquisition Corp. Class A(8) | 4,547 | 48 | |
Forbion European Acquisition Corp. Class A(8) | 8,640 | 93 | |
Forum Merger IV Corp. Class A(8) | 5,562 | 57 | |
Freedom Acquisition I Corp. Class A(8) | 5,686 | 60 | |
FTAC Emerald Acquisition Corp. Class A(8) | 7,228 | 75 | |
FTAC Zeus Acquisition Corp. Class A(8) | 19,155 | 200 | |
Fusion Acquisition Corp. II Class A(8) | 3,920 | 41 | |
Galata Acquisition Corp. Class A(8) | 1,916 | 20 | |
Global Partner Acquisition Corp. II Class A(8) | 57 | 1 | |
Goal Acquisitions Corp.(8) | 4,298 | 45 | |
GoGreen Investments Corp.(8) | 5,916 | 63 | |
Golden Star Acquisition Corp.(8) | 2,398 | 25 | |
Gores Holdings IX, Inc. Class A(8) | 28,116 | 288 | |
Graf Acquisition Corp. IV(8) | 1,034 | 11 | |
Growth For Good Acquisition Corp.(8) | 25,714 | 268 | |
HCM Acquisition Corp. Class A(8) | 3,925 | 42 | |
Healthcare AI Acquisition Corp. Class A(8) | 1,200 | 13 | |
Healthwell Acquisition Corp. I Class A(8) | 1,203 | 12 | |
Heartland Media Acquisition Corp. Class A(8) | 7,153 | 75 | |
Hennessy Capital Investment Corp. VI Class A(8) | 5,775 | 59 | |
HH&L Acquisition Co. Class A(8) | 7,601 | 80 | |
Iconic Sports Acquisition Corp. Class A(8) | 8,160 | 87 | |
Infinite Acquisition Corp. Class A(8) | 22,151 | 234 | |
Inflection Point Acquisition Corp. II(8) | 3,438 | 35 | |
Integral Acquisition Corp. 1 Class A(8) | 1,454 | 15 | |
Integrated Rail & Resources Acquisition Corp. Class A(8) | 356 | 4 |
Shares/Units | Value | ||
Integrated Wellness Acquisition Corp. Class A(8) | 16,437 | $ 176 | |
Investcorp Europe Acquisition Corp. I Class A(8) | 23,890 | 255 | |
Investcorp India Acquisition Corp. Class A(8) | 29,051 | 311 | |
Israel Acquisitions Corp. Class A(8) | 2,345 | 24 | |
IX Acquisition Corp. Class A(8) | 19,919 | 210 | |
Jaguar Global Growth Corp. I Class A(8) | 42,662 | 451 | |
Jupiter Acquisition Corp. Class A(8) | 2,341 | 24 | |
Kensington Capital Acquisition Corp. V Class A(8) | 14,258 | 151 | |
Kernel Group Holdings, Inc. Class A(8) | 8,896 | 93 | |
Keyarch Acquisition Corp.(8) | 12,768 | 134 | |
LatAmGrowth SPAC(8) | 10,798 | 115 | |
LIV Capital Acquisition Corp. II Class A(8) | 2,664 | 28 | |
Live Oak Crestview Climate Acquisition Corp. Class A(8) | 7,168 | 73 | |
M3-Brigade Acquisition III Corp. Class A(8) | 10,793 | 113 | |
Magnum Opus Acquisition Ltd. Class A(8) | 5,436 | 57 | |
Maquia Capital Acquisition Corp. Class A(8) | 1,676 | 19 | |
Mars Acquisition Corp.(8) | 2,532 | 26 | |
Metal Sky Star Acquisition Corp.(8) | 9,486 | 115 | |
Monterey Capital Acquisition Corp. Class A(8) | 4,447 | 47 | |
Moringa Acquisition Corp. Class A(8) | 1,762 | 19 | |
Mountain & Co. I Acquisition Corp.(8) | 10,989 | 119 | |
Nabors Energy Transition Corp. Class A(8) | 14,851 | 158 | |
Newbury Street Acquisition Corp.(8) | 4,327 | 45 | |
Newcourt Acquisition Corp. Class A(8) | 2,194 | 24 | |
Nubia Brand International Corp. Class A(8) | 4,041 | 43 | |
Oak Woods Acquisition Corp. Class A(8) | 2,813 | 29 | |
OCA Acquisition Corp. Class A(8) | 7,103 | 74 | |
Papaya Growth Opportunity Corp. I Class A(8) | 7,405 | 78 |
Shares/Units | Value | ||
Patria Latin American Opportunity Acquisition Corp.(8) | 10,504 | $ 113 | |
Pegasus Digital Mobility Acquisition Corp. Class A(8) | 1,486 | 16 | |
Plum Acquisition Corp. I Class A(8) | 16,396 | 172 | |
Portage Fintech Acquisition Corp. Class A(8) | 11,203 | 116 | |
Power & Digital Infrastructure Acquisition II Corp. Class A(8) | 12,150 | 127 | |
Prime Number Acquisition I Corp. Class A(8) | 4,117 | 43 | |
Project Energy Reimagined Acquisition Corp.(8) | 8,637 | 89 | |
PROOF Acquisition Corp. I Class A(8) | 6,366 | 67 | |
Pyrophyte Acquisition Corp. Class A(8) | 6,981 | 74 | |
Quadro Acquisition One Corp. Class A(8) | 799 | 8 | |
RCF Acquisition Corp. Class A(8) | 11,344 | 121 | |
Redwoods Acquisition Corp.(8) | 4,137 | 43 | |
Rigel Resource Acquisition Corp. Class A(8) | 18,880 | 202 | |
Ross Acquisition Corp. II Class A(8) | 5,336 | 56 | |
Roth CH Acquisition V Co.(8) | 1,924 | 20 | |
Screaming Eagle Acquisition Corp. Class A(8) | 37,554 | 388 | |
SDCL EDGE Acquisition Corp. Class A(8) | 21,385 | 223 | |
SHUAA Partners Acquisition Corp. I Class A(8) | 1,841 | 20 | |
SilverBox Corp. III(8) | 1,127 | 11 | |
SILVERspac, Inc. Class A(8) | 9,234 | 96 | |
Sizzle Acquisition Corp.(8) | 5,451 | 58 | |
SK Growth Opportunities Corp. Class A(8) | 8,847 | 94 | |
Slam Corp. Class A(8) | 17,967 | 192 | |
Social Capital Suvretta Holdings Corp. II Class A(8) | 27,210 | 282 | |
Social Capital Suvretta Holdings Corp. IV Class A(8) | 19,796 | 205 | |
Southport Acquisition Corp.(8) | 13,703 | 144 | |
Spree Acquisition Corp. 1 Ltd.(8) | 737 | 8 | |
Spring Valley Acquisition Corp. II(8) | 3,867 | 1 | |
Spring Valley Acquisition Corp. II Class A(8) | 3,954 | 42 |
Shares/Units | Value | ||
Stratim Cloud Acquisition Corp.(8) | 1,923 | $ 20 | |
Target Global Acquisition I Corp. Class A(8) | 9,605 | 102 | |
TenX Keane Acquisition Class A(8) | 2,845 | 30 | |
Thunder Bridge Capital Partners IV, Inc. Class A(8) | 6,497 | 67 | |
TKB Critical Technologies 1 Class A(8) | 12,460 | 132 | |
TLGY Acquisition Corp. Class A(8) | 16,100 | 173 | |
TMT Acquisition Corp.(8) | 2,969 | 1 | |
TMT Acquisition Corp. Class A(8) | 3,930 | 40 | |
TortoiseEcofin Acquisition Corp. III Class A(8) | 10,164 | 105 | |
Twin Ridge Capital Acquisition Corp. Class A(8) | 6,127 | 66 | |
UTA Acquisition Corp. Class A(8) | 17,073 | 180 | |
Vahanna Tech Edge Acquisition I Corp. Class A(8) | 3,926 | 42 | |
Valuence Merger Corp. I Class A(8) | 9,978 | 107 | |
Viscogliosi Brothers Acquisition Corp.(8) | 1,606 | 17 | |
Waverley Capital Acquisition Corp. 1 Class A(8) | 10,420 | 108 | |
XPAC Acquisition Corp. Class A(8) | 10,991 | 114 | |
Zalatoris Acquisition Corp.(8) | 3,001 | 31 | |
Total Special Purpose Acquisition Companies (Identified Cost $15,116) | 15,611 |
Shares | ||
Purchased Options—0.2% | ||
(See open purchased options schedule) | ||
Total Purchased Options (Premiums Paid $74) | 80 | |
Escrow Notes—2.0% | ||
Financials—2.0% | ||
Altaba, Inc. Escrow(8) | 348,047 | 814 |
Pershing Square Escrow(8) | 7,392 | 2 |
816 | ||
Shares | Value | ||
Industrials—0.0% | |||
AMR Corp. Escrow(5)(8) | 7,668 | $ —(9) | |
Total Escrow Notes (Identified Cost $490) | 816 | ||
Master Limited Partnerships and Related Companies—1.7% | |||
Downstream/Other—1.7% | |||
Magellan Midstream Partners LP | 11,224 | 700 | |
Total Master Limited Partnerships and Related Companies (Identified Cost $684) | 700 | ||
Total Long-Term Investments—82.9% (Identified Cost $33,441) | 33,982 | ||
Short-Term Investments—16.6% | |||
Money Market Mutual Funds—16.6% | |||
Goldman Sachs Financial Square Funds - Treasury Instruments Fund - Standard Shares (seven-day effective yield 4.979%)(11) | 2,450,000 | 2,450 | |
Goldman Sachs Financial Square Government Fund - Standard Shares (seven-day effective yield 5.016%)(11) | 2,450,000 | 2,450 | |
Goldman Sachs Financial Square Treasury Solutions Fund - Standard Shares (seven-day effective yield 4.983%)(11) | 1,919,212 | 1,919 | |
Total Short-Term Investments (Identified Cost $6,819) | 6,819 | ||
Securities Lending Collateral—0.5% | |||
Dreyfus Government Cash Management Fund - Institutional Shares (seven-day effective yield 4.997%)(11)(12) | 179,046 | 179 | |
Total Securities Lending Collateral (Identified Cost $179) | 179 | ||
Shares | Value | ||
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT AND WRITTEN OPTIONS—100.0% (Identified Cost $40,439) | $ 40,980 | ||
Securities Sold Short—(5.6)% | |||
Common Stocks—(5.6)% | |||
Energy—(2.2)% | |||
Chevron Corp. | (2,745) | (432) | |
ONEOK, Inc. | (7,487) | (462) | |
(894) | |||
Financials—(0.2)% | |||
Aon plc Class A | (284) | (98) | |
Health Care—(1.1)% | |||
Globus Medical, Inc. Class A(8) | (7,430) | (442) | |
Information Technology—(0.5)% | |||
Broadcom, Inc. | (237) | (206) | |
Materials—(0.4)% | |||
Newmont Corp. | (4,164) | (178) | |
Real Estate—(1.2)% | |||
Extra Space Storage, Inc. | (2,906) | (432) | |
Regency Centers Corp. | (576) | (36) | |
(468) | |||
Total Securities Sold Short (Identified Proceeds $(2,180)) | (2,286) | ||
Written Options—(0.8)% | |||
(See open written options schedule) | |||
Total Written Options (Premiums Received $293) | (339) | ||
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT AND WRITTEN OPTIONS—93.6% (Identified Cost $37,966) | $ 38,355 | ||
Other assets and liabilities, net—6.4% | 2,641 | ||
NET ASSETS—100.0% | $ 40,996 |
Abbreviations: | |
ETF | Exchange-Traded Fund |
LLC | Limited Liability Company |
LP | Limited Partnership |
OBFR | Overnight Bank Funding Rate |
S&P | Standard & Poor’s |
SOFR | Secured Overnight Financing Rate |
SPAC | Special Purpose Acquisition Company |
SPDR | S&P Depositary Receipt |
Footnote Legend: | |
(1) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2023, these securities amounted to a value of $1,034 or 2.5% of net assets. |
(2) | Regulation S security. Security is offered and sold outside of the United States; therefore, it is exempt from registration with the SEC under Rules 903 and 904 of the Securities Act of 1933. |
(3) | All or a portion of security is on loan. |
(4) | Variable rate security. Rate disclosed is as of June 30, 2023. Information in parenthesis represents benchmark and reference rate for each security. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions, or, for mortgage-backed securities, are impacted by the individual mortgages which are paying off over time. These securities do not indicate a reference rate and spread in their descriptions. |
(5) | The value of this security was determined using significant unobservable inputs and is reported as a Level 3 security in the Fair Value Hierarchy table located after the Schedule of Investments. |
(6) | Security in default; no interest payments are being received during the bankruptcy proceedings. |
(7) | This loan will settle after June 30, 2023, at which time the interest rate, calculated on the base lending rate and the agreed upon spread on trade date, will be reflected. |
(8) | Non-income producing. |
(9) | Amount is less than $500 (not in thousands). |
(10) | All or a portion of the shares have been committed as collateral for open securities sold short and written option contracts. The value of securities segregated as collateral is $3,672. |
(11) | Shares of this fund are publicly offered, and its prospectus and annual report are publicly available. |
(12) | Represents security purchased with cash collateral received for securities on loan. |
Counterparties: | |
BAML | Bank of America-Merrill Lynch |
GS | Goldman Sachs & Co. |
JPM | JPMorgan Chase Bank N.A. |
Foreign Currencies: | |
AUD | Australian Dollar |
CAD | Canadian Dollar |
DKK | Danish Krone |
EUR | Euro |
GBP | United Kingdom Pound Sterling |
JPY | Japanese Yen |
USD | United States Dollar |
Country Weightings† | |
United States | 58% |
Cayman Islands | 30 |
Ireland | 6 |
Canada | 2 |
Netherlands | 2 |
France | 2 |
Total | 100% |
†% of total investments, net of securities sold short and written options, as of June 30, 2023. |
Open purchased options contracts as of June 30, 2023 were as follows: | |||||
Description of Options | Number of Contracts | Contract Notional Amount | Strike Price(1) | Expiration Date | Value |
Put Options(2) | |||||
DICE Therapeutics, Inc. | 1 | $ 4 | $ 35.00 | 01/19/24 | $— (3) |
Horizon Therapeutics plc | 4 | 40 | 100.00 | 08/18/23 | 1 |
IVERIC bio, Inc. | 50 | 150 | 30.00 | 09/15/23 | 1 |
Seagen, Inc. | 46 | 874 | 190.00 | 06/21/24 | 71 |
SPDR S&P 500® ETF Trust | 25 | 1,087 | 435.00 | 07/21/23 | 4 |
Teck Resources Ltd. | 10 | 35 | 35.00 | 07/21/23 | — (3) |
Teck Resources Ltd. | 31 | 115 | 37.00 | 07/21/23 | — (3) |
Teck Resources Ltd. | 15 | 57 | 38.00 | 07/21/23 | — (3) |
Teck Resources Ltd. | 10 | 37 | 37.00 | 08/18/23 | 1 |
Teck Resources Ltd. | 51 | 168 | 33.00 | 09/15/23 | 2 |
Total Purchased Options | $80 | ||||
Footnote Legend: | |||||
(1) Strike price not reported in thousands. | |||||
(2) Unless otherwise noted, options are exchange-traded. | |||||
(3) Amount is less than $500 (not in thousands). |
Open written options contracts as of June 30, 2023 were as follows: | |||||
Description of Options | Number of Contracts | Contract Notional Amount | Strike Price(1) | Expiration Date | Value |
Call Options(2) | |||||
Activision Blizzard, Inc. | (24) | $ (168) | $ 70.00 | 07/21/23 | $ (35) |
Activision Blizzard, Inc. | (69) | (483) | 70.00 | 08/18/23 | (104) |
Activision Blizzard, Inc. | (89) | (645) | 72.50 | 08/18/23 | (112) |
Amedisys, Inc. | (22) | (198) | 90.00 | 09/15/23 | (8) |
DICE Therapeutics, Inc. | (5) | (25) | 50.00 | 01/19/24 | (—) (3) |
Horizon Therapeutics plc | (4) | (42) | 105.00 | 07/21/23 | (—) (3) |
Horizon Therapeutics plc | (4) | (46) | 115.00 | 08/18/23 | (—) (3) |
IVERIC bio, Inc. | (88) | (352) | 40.00 | 09/15/23 | (1) |
Prometheus Biosciences, Inc. | (30) | (600) | 200.00 | 01/19/24 | — |
Radius Global Infrastructure, Inc. | (33) | (50) | 15.00 | 08/18/23 | (—) (3) |
Radius Global Infrastructure, Inc. | (4) | (6) | 15.00 | 01/19/24 | (—) (3) |
Seagen, Inc. | (5) | (95) | 190.00 | 07/21/23 | (3) |
Seagen, Inc. | (2) | (37) | 185.00 | 08/18/23 | (2) |
Seagen, Inc. | (4) | (76) | 190.00 | 08/18/23 | (3) |
SPDR S&P 500® ETF Trust | (10) | (440) | 440.00 | 07/21/23 | (7) |
Teck Resources Ltd. | (10) | (39) | 39.00 | 07/21/23 | (4) |
Teck Resources Ltd. | (15) | (63) | 42.00 | 07/21/23 | (2) |
Teck Resources Ltd. | (7) | (30) | 43.00 | 07/21/23 | (1) |
Teck Resources Ltd. | (10) | (41) | 41.00 | 08/18/23 | (3) |
Teck Resources Ltd. | (51) | (189) | 37.00 | 09/15/23 | (33) |
(318) |
Open written options contracts as of June 30, 2023 were as follows (continued): | |||||
Description of Options | Number of Contracts | Contract Notional Amount | Strike Price(1) | Expiration Date | Value |
Put Options(2) | |||||
Horizon Therapeutics plc | (4) | $ (32) | $ 80.00 | 08/18/23 | $ (—) (3) |
Seagen, Inc. | (46) | (667) | 145.00 | 06/21/24 | (20) |
SPDR S&P 500® ETF Trust | (25) | (1,050) | 420.00 | 07/21/23 | (1) |
(21) | |||||
Total Written Options | $ (339) |
Footnote Legend: | |
(1) Strike price not reported in thousands. | |
(2) Unless otherwise noted, options are exchange-traded. | |
(3) Amount is less than $500 (not in thousands). |
Forward foreign currency exchange contracts as of June 30, 2023 were as follows: | ||||||||
Currency Purchased | Currency Amount Purchased | Currency Sold | Currency Amount Sold | Counterparty | Settlement Date | Unrealized Appreciation | Unrealized Depreciation | |
USD | 4 | CAD | 6 | JPM | 09/07/23 | $— | $ — (1) | |
USD | 439 | EUR | 400 | JPM | 09/20/23 | 1 | — | |
USD | 51 | JPY | 6,626 | JPM | 09/21/23 | 4 | — | |
USD | 37 | DKK | 255 | GS | 10/04/23 | — | — (1) | |
USD | 94 | EUR | 86 | GS | 10/04/23 | — | (1) | |
USD | 282 | CAD | 380 | JPM | 10/13/23 | — | (5) | |
USD | 19 | EUR | 17 | GS | 10/19/23 | — (1) | — | |
USD | 26 | EUR | 24 | JPM | 10/19/23 | — | — (1) | |
USD | 305 | AUD | 454 | GS | 12/05/23 | 2 | — | |
USD | 179 | GBP | 144 | JPM | 12/06/23 | — | (4) | |
USD | 221 | JPY | 31,050 | GS | 12/26/23 | — | (1) | |
USD | 551 | GBP | 439 | GS | 12/27/23 | — | (6) | |
Total | $ 7 | $(17) |
Footnote Legend: | |
(1) | Amount is less than $500 (not in thousands). |
Over-the-counter total return swaps outstanding as of June 30, 2023 were as follows: | ||||||||||
Referenced Entity | Pay/Receive | Financing Rate(1) | Payment Frequency | Counterparty | Expiration Date | Notional Amount | Value (2) | Unrealized Appreciation | Unrealized Depreciation | |
Long Total Return Swap Contracts | ||||||||||
Bristol-Myers Squibb Co.(3),(4) | Pay | 5.820% (0.750% + OBFR) | 1 Month | BAML | 03/04/24 | $ —(5) | $ 7 | $ 7 | $ — | |
Brookfield Property Preferred LP | Pay | 5.810% (0.750% + OBFR) | 1 Month | BAML | 01/08/24 | 12 | — (5) | — | — (5) | |
Cazoo Group Ltd. | Pay | 5.820% (0.750% + OBFR) | 1 Month | BAML | 10/23/23 | 2 | (2) | — | (2) | |
Cazoo Group Ltd. | Pay | 5.820% (0.750% + OBFR) | 1 Month | BAML | 01/29/24 | — (5) | — (5) | — | — (5) | |
Chr. Hansen Holding A/S | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 02/19/24 | 168 | (9) | — | (9) | |
Chr. Hansen Holding A/S | Pay | 5.620% (0.550% + OBFR) | 3 Month | JPM | 08/05/24 | 3 | — (5) | — | — (5) | |
Dechra Pharmaceuticals plc | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 05/27/24 | 508 | 4 | 4 | — | |
Emis Group plc | Pay | 5.510% (0.450% + OBFR) | 3 Month | JPM | 09/18/23 | 11 | (2) | — | (2) | |
Emis Group plc | Pay | 5.510% (0.450% + OBFR) | 3 Month | JPM | 09/19/23 | 32 | (7) | — | (7) | |
Emis Group plc | Pay | 5.510% (0.450% + OBFR) | 3 Month | JPM | 09/22/23 | 4 | (1) | — | (1) | |
Emis Group plc | Pay | 5.510% (0.450% + OBFR) | 3 Month | JPM | 09/25/23 | 6 | — (5) | — | — (5) | |
Emis Group plc | Pay | 5.510% (0.450% + OBFR) | 3 Month | JPM | 09/26/23 | 1 | — (5) | — | — (5) | |
Emis Group plc | Pay | 5.510% (0.450% + OBFR) | 3 Month | JPM | 10/02/23 | 7 | (2) | — | (2) | |
Emis Group plc | Pay | 5.510% (0.450% + OBFR) | 3 Month | JPM | 10/05/23 | 103 | (18) | — | (18) | |
JSR Corp. | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 07/30/24 | 205 | (1) | — | (1) |
Over-the-counter total return swaps outstanding as of June 30, 2023 were as follows (continued): | ||||||||||||
Referenced Entity | Pay/Receive | Financing Rate(1) | Payment Frequency | Counterparty | Expiration Date | Notional Amount | Value (2) | Unrealized Appreciation | Unrealized Depreciation | |||
Majorel Group Luxembourg S.A. | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 07/22/24 | $ 17 | $ — (5) | $— (5) | $ — | |||
Majorel Group Luxembourg S.A. | Pay | 5.610% (0.550% + OBFR) | 3 Month | JPM | 07/29/24 | 2 | — (5) | — (5) | — | |||
Majorel Group Luxembourg S.A. | Pay | 5.610% (0.550% + OBFR) | 3 Month | JPM | 08/05/24 | 22 | — (5) | — (5) | — | |||
Newcrest Mining Ltd. | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 05/27/24 | 151 | (12) | — | (12) | |||
Origin Energy Ltd. | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 04/16/24 | 445 | 5 | 5 | — | |||
SimCorp A/S | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 07/29/24 | 36 | — (5) | — | — (5) | |||
Telenet Group Holding N.V. | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 04/24/24 | 89 | — (5) | — (5) | — | |||
Toshiba Corp. | Pay | 5.610% (0.550% + OBFR) | 3 Month | JPM | 07/22/24 | 39 | (1) | — | (1) | |||
Willis Towers Watson plc | Pay | 5.670% (0.610% + OBFR) | 1 Month | GS | 11/28/23 | 85 | 10 | 10 | — | |||
(29) | 26 | (55) | ||||||||||
Short Total Return Swap Contracts | ||||||||||||
Broadcom, Inc. | Receive | 4.660% ((0.400)% + OBFR) | 1 Month | BAML | 10/12/23 | (556) | (391) | — | (391) | |||
Novozymes A/S | Receive | 4.710% ((0.350)% + OBFR) | 1 Month | GS | 02/19/24 | (180) | 17 | 17 | — | |||
Novozymes A/S | Receive | 4.570% ((0.500)% + OBFR) | 3 Month | JPM | 08/05/24 | (3) | — (5) | — (5) | — | |||
(374) | 17 | (391) | ||||||||||
Total | $ (403) | $43 | $ (446) |
Footnote Legend: | |
(1) | The Fund pays the floating rate (+/- a spread) and receives the total return of the reference entity. |
(2) | There were no upfront premiums paid or received for the open swap contracts held. |
(3) | The value of this security was determined using significant unobservable inputs and is reported as a Level 3 security in the Fair Value Hierarchy table located after the Schedule of Investments. |
(4) | Security held is the direct result of a corporate action. There is no associated financing rate and the security is held with a zero cost basis. |
(5) | Amount is less than $500 (not in thousands). |
Total Value at June 30, 2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
Assets: | |||||||
Debt Instruments: | |||||||
Corporate Bonds and Notes | $ 1,939 | $ — | $1,939 | $— | |||
Leveraged Loans | 736 | — | 736 | — (1) | |||
Convertible Bonds and Notes | 548 | — | 548 | — | |||
Equity Securities: | |||||||
Common Stocks | 13,489 | 13,487 | — | 2 | |||
Master Limited Partnerships and Related Companies | 700 | 700 | — | — | |||
Escrow Notes | 816 | — | 816 | — (2) | |||
Warrants | 21 | 14 | — | 7 (1) | |||
Special Purpose Acquisition Companies | 15,611 | 15,119 | 492 | — (1) | |||
Preferred Stock | 29 | 29 | — | — | |||
Rights | 13 | — | 4 | 9 | |||
Money Market Mutual Funds | 6,819 | 6,819 | — | — | |||
Securities Lending Collateral | 179 | 179 | — | — | |||
Other Financial Instruments: | |||||||
Purchased Options | 80 | 77 | 3 | — | |||
Forward Foreign Currency Exchange Contracts | 7 | — | 7 | — | |||
Over-the-Counter Total Return Swaps | 43 | — | 36 | 7 | |||
Total Assets | 41,030 | 36,424 | 4,581 | 25 | |||
Liabilities: | |||||||
Securities Sold Short: | |||||||
Common Stocks | (2,286) | (2,286) | — | — | |||
Other Financial Instruments: | |||||||
Written Options | (339) | (241) | (98) | — | |||
Forward Foreign Currency Exchange Contracts | (17) | — | (17) | — | |||
Over-the-Counter Total Return Swaps | (446) | — | (446) | — | |||
Total Liabilities | (3,088) | (2,527) | (561) | — | |||
Total Investments, Net of Securities Sold Short and Written Options | $37,942 | $33,897 | $4,020 | $25 |
(1) | Includes internally fair valued securities currently priced at zero ($0). |
(2) | Amount is less than $500 (not in thousands). |
June 30, 2023
Assets | |
Investment in securities at value(1)(2) | $ 40,980 |
Cash | 552 |
Cash pledged as collateral for derivatives and securities sold short | 3,219 |
Due from broker | 2 |
Over-the-counter swaps at value | 43 |
Unrealized appreciation on forward foreign currency exchange contracts | 7 |
Receivables | |
Investment securities sold | 25 |
Fund shares sold | 2 |
Dividends and interest | 59 |
Tax reclaims | 4 |
Securities lending income | — (a) |
Prepaid Trustees’ retainer | 1 |
Prepaid expenses | 11 |
Other assets | 1 |
Total assets | 44,906 |
Liabilities | |
Written options at value(3) | 339 |
Securities sold short at value(4) | 2,286 |
Over-the-counter swaps at value | 446 |
Unrealized depreciation on forward foreign currency exchange contracts | 17 |
Payables | |
Fund shares repurchased | 29 |
Investment securities purchased | 545 |
Collateral on securities loaned | 179 |
Investment advisory fees | 33 |
Administration and accounting fees | 3 |
Transfer agent and sub-transfer agent fees and expenses | — (a) |
Professional fees | 32 |
Trustee deferred compensation plan | 1 |
Interest expense and/or commitment fees | — (a) |
Total liabilities | 3,910 |
Net Assets | $ 40,996 |
Net Assets Consist of: | |
Capital paid in on shares of beneficial interest | $ 38,606 |
Accumulated earnings (loss) | 2,390 |
Net Assets | $ 40,996 |
Net Assets: | |
Class I | $ 40,996 |
Shares Outstanding (unlimited number of shares authorized, no par value): | |
Class I | 3,537,988 |
Net Asset Value and Redemption Price Per Share:(b) | |
Class I | $ 11.59 |
(1) Investment in securities at cost | $ 40,439 |
(2) Market value of securities on loan | $ 172 |
(3) Written options premiums received | $ 293 |
(4) Securities sold short proceeds | $ 2,180 |
(a) | Amount is less than $500 (not in thousands). |
(b) | Net Asset Value and Redemption Price Per Share are calculated using unrounded net assets. |
SIX MONTHS ENDED June 30, 2023
Investment Income | |
Dividends | $ 53 |
Interest | 135 |
Securities lending, net of fees | 1 |
Foreign taxes withheld | (1) |
Total investment income | 188 |
Expenses | |
Investment advisory fees | 280 |
Administration and accounting fees | 27 |
Transfer agent fees and expenses | — (1) |
Custodian fees | 1 |
Printing fees and expenses | 9 |
Professional fees | 27 |
Interest expense and/or commitment fees | — (1) |
Trustees’ fees and expenses | 2 |
Miscellaneous expenses | 13 |
Total expenses | 359 |
Dividend and interest expense on securities sold short | 24 |
Total expenses, including dividend and interest expense on securities sold short | 383 |
Less net expenses reimbursed and/or waived by investment adviser(2) | (45) |
Net expenses | 338 |
Net investment income (loss) | (150) |
Net Realized and Unrealized Gain (Loss) on Investments | |
Net realized gain (loss) from: | |
Investments | 4 |
Securities sold short | (131) |
Foreign currency transactions | — (1) |
Forward foreign currency exchange contracts | (18) |
Written options | 57 |
Swaps | (185) |
Net change in unrealized appreciation (depreciation) on: | |
Investments | 598 |
Securities sold short | (94) |
Foreign currency transactions | — (1) |
Forward foreign currency exchange contracts | (7) |
Written options | (59) |
Swaps | (394) |
Net realized and unrealized gain (loss) on investments | (229) |
Net increase (decrease) in net assets resulting from operations | $(379) |
(1) | Amount is less than $500 (not in thousands). |
(2) | See Note 4D in the Notes to Financial Statements. |
Six Months Ended June 30, 2023 (Unaudited) | Year Ended December 31, 2022 | ||
Increase (Decrease) in Net Assets Resulting from Operations | |||
Net investment income (loss) | $ (150) | $ (74) | |
Net realized gain (loss) | (273) | 3,754 | |
Net change in unrealized appreciation (depreciation) | 44 | (3,255) | |
Increase (decrease) in net assets resulting from operations | (379) | 425 | |
Dividends and Distributions to Shareholders | |||
Net Investment Income and Net Realized Gains: | |||
Class I | — | (810) | |
Total dividends and distributions to investors | — | (810) | |
Change in Net Assets from Capital Transactions | |||
Shares sold and cross class conversions: | |||
Class I (76,915 and 1,257,427 shares, respectively) | 896 | 14,749 | |
Reinvestment of distributions: | |||
Class I (— and 69,468 shares, respectively) | — | 810 | |
Shares repurchased and cross class conversions: | |||
Class I ((696,495) and (1,768,273) shares, respectively) | (8,123) | (20,701) | |
Increase (decrease) in net assets from capital transactions | (7,227) | (5,142) | |
Net increase (decrease) in net assets | (7,606) | (5,527) | |
Net Assets | |||
Beginning of period | 48,602 | 54,129 | |
End of Period | $ 40,996 | $ 48,602 |
THROUGHOUT EACH PERIOD
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total from Investment Operations | Dividends from Net Investment Income | Distributions from Net Realized Gains | Total Distributions | Change in Net Asset Value | Net Asset Value, End of Period | Total Return(2)(3) | Net Assets, End of Period (in thousands) | Ratio of Net Expenses to Average Net Assets(4)(5) | Ratio of Gross Expenses to Average Net Assets(4)(5) | Ratio of Net Investment Income (Loss) to Average Net Assets(4) | Portfolio Turnover Rate(2) | |
Class I | |||||||||||||||
1/1/23 to 6/30/23(6) | $11.69 | (0.04) | (0.06) | (0.10) | — | — | — | (0.10) | $11.59 | (0.86) % | $40,996 | 1.51 % (7) | 1.71 % | (0.67) % | 106 % |
1/1/22 to 12/31/22 | 11.77 | (0.02) | 0.12 | 0.10 | (0.18) | — | (0.18) | (0.08) | 11.69 | 0.88 | 48,602 | 1.49 (7) | 1.65 | (0.14) | 191 |
1/1/21 to 12/31/21 | 12.21 | (0.07) | 0.20 | 0.13 | — | (0.57) | (0.57) | (0.44) | 11.77 | 1.08 | 54,129 | 1.51 (7) | 1.91 | (0.57) | 164 |
1/1/20 to 12/31/20 | 11.40 | (0.02) | 0.86 | 0.84 | — | (0.03) | (0.03) | 0.81 | 12.21 | 7.38 | 51,753 | 1.46 (7) | 1.91 | (0.19) | 189 |
1/1/19 to 12/31/19 | 11.36 | 0.06 | 0.64 | 0.70 | (0.12) | (0.54) | (0.66) | 0.04 | 11.40 | 6.17 | 47,963 | 1.91 (7)(8) | 2.43 (8) | 0.48 | 172 |
1/1/18 to 12/31/18 | 10.80 | 0.14 | 0.63 | 0.77 | (0.08) | (0.13) | (0.21) | 0.56 | 11.36 | 7.09 | 41,648 | 1.84 (7) | 2.57 | 1.20 | 154 |
Footnote Legend | |
(1) | Calculated using average shares outstanding. |
(2) | Not annualized for periods less than one year. |
(3) | The total return does not include the expenses associated with the annuity or life insurance policy through which you invest. |
(4) | Annualized for periods less than one year. |
(5) | The Fund will also indirectly bear its prorated share of expenses of any underlying funds in which it invests. Such expenses are not included in the calculation of this ratio. |
(6) | Unaudited. |
(7) | Ratios of net expenses excluding dividend expense and interest expense on securities sold short to average net assets were 1.40%. |
(8) | The amount for the year ended December 31, 2019 includes 0.05% of legal expenses related to the settlement of an appraisal right. |
June 30, 2023
A. | Security Valuation |
Trustees have designated the Investment Adviser as the valuation designee to perform fair valuations pursuant to Rule 2a-5 under the Investment Company Act of 1940. The Fund utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The Fund’s policy is to recognize transfers into or out of Level 3 at the end of the reporting period. |
B. | Security Transactions and Investment Income |
Security transactions are recorded on the trade date. Realized gains and losses from the sale of securities are determined on the identified cost basis. Dividend income and capital gain distributions are recognized on the ex-dividend date or, in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Fund amortizes premiums and accretes discounts using the effective interest method. Premiums on callable debt instruments are amortized to interest income to the earliest call date using the effective interest method. Conversion premium is not amortized. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds. | |
Dividend income from REIT and MLP investments is recorded using management’s estimate of the percentage of income included in distributions received from such investments based on historical information and other industry sources. The return of capital portion of the estimate is a reduction to investment income and a reduction in the cost basis of each investment which increases net realized gain (loss) and net change in unrealized appreciation (depreciation). If the return of capital distributions exceed their cost basis, the distributions are treated as realized gains. The Fund invests in MLPs that make distributions that are primarily attributable to return of capital. The actual amounts of income, return of capital, and capital gains are only determined by each REIT and MLP after its fiscal year-end, and may differ from the estimated amounts. | |
C. | Income Taxes |
It is the intention of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes or excise taxes has been made. | |
The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon current interpretations of the tax rules and regulations that exist in the markets in which it invests. | |
Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. The Fund’s U.S. federal income tax return is generally subject to examination by the Internal Revenue Service for a period of three years after it is filed. State, local and/or non-U.S. tax returns and/or other filings may be subject to examination for different periods, depending upon the tax rules of each applicable jurisdiction. | |
D. | Distributions to Shareholders |
Distributions are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. | |
E. | Expenses |
Expenses incurred together by the Fund and other affiliated mutual funds are allocated in proportion to the net assets of each such fund, except where allocation of direct expenses to each fund and each such other fund, or an alternative allocation method, can be more appropriately used. | |
In addition to the net annual operating expenses that the Fund bears directly, the shareholders of the Fund indirectly bear the pro-rata expenses of any underlying mutual funds in which the Fund invests. | |
F. | Foreign Currency Transactions |
Non-U.S. investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement date of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and the date it is paid is treated as a gain or loss on foreign currency. For fixed income instruments, the Fund bifurcates that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held and such fluctuations are included with the net realized and unrealized gain or loss on foreign currency transactions. For equity securities, the Fund does not isolate that portion of the results of operations arising from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held and such fluctuations are included with the net realized and unrealized gain or loss on investments. | |
G. | Short Sales |
The Fund may sell securities short. A short sale is a transaction in which the Fund sells a security it does not own in anticipation of a decline in market price. To sell a security short, the Fund must borrow the security. The Fund’s obligation to replace the security borrowed and sold short will be fully collateralized at all times by the proceeds from the short sale retained by the broker and by cash and securities deposited in a segregated account with the Fund’s custodian. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces |
the borrowed security, the Fund will realize a loss, and if the price declines during the period, the Fund will realize a gain. Any realized gain will be decreased, and any realized loss increased, by the amount of transaction costs. On ex-dividend date, dividends on short sales are recorded as an expense to the Fund. | |
In addition, in accordance with the terms of its prime brokerage agreement, the Fund may receive rebate income or be charged a fee on borrowed securities. Such income or fee is calculated on a daily basis based upon the market value of each borrowed security and a variable rate that is dependent upon the availability of such security. The dividends on short sales and rebate income/fees are recorded under “Dividend and interest expense on securities sold short” on the Statement of Operations. | |
H. | Convertible Securities |
The Fund may invest a portion of its assets in convertible securities. Although convertible securities derive part of their value from that of the securities into which they are convertible, they are not considered derivative financial instruments. However, certain of the Fund’s investments in convertible securities include features which render them sensitive to price changes in their underlying securities. The value of structured/synthetic convertible securities can be affected by interest rate changes and credit risks of the issuer. Such securities may be structured in ways that limit their potential for capital appreciation, and the entire value of the security may be at risk of loss depending on the performance of the underlying equity security. Consequently, the Fund is exposed to greater downside risk than traditional convertible securities, but typically still less than that of the underlying stock. | |
I. | Private Investment in a Public Equity (PIPE) with Special Purpose Acquisition Companies (SPAC) |
Special purpose acquisition companies (SPACs) are shell companies that have no operations but are formed to raise capital with the intention of merging with or acquiring a company with the proceeds of the SPAC’s initial public offering (IPO). The Fund may acquire equity securities of an issuer that are issued through a private investment in public equity (PIPE), including on a when-issued basis. PIPE transactions typically involve the purchase of securities directly from a publicly traded company or its affiliates in a private placement transaction, typically at a discount to the market price of the issuer’s common equity. Purchased PIPE shares will be restricted from trading until the registration statement for the shares is declared effective. Upon registration, the shares can be freely sold; however, in certain circumstances, the issuer may have the right to temporarily suspend trading of the shares in the first year after the merger or acquisition. The securities issued by a SPAC may be considered illiquid, more difficult to value, and/or be subject to restrictions on resale. PIPEs are valued based upon valuations of the underlying SPACs. | |
At six months ended June 30, 2023, the Fund had no commitments to purchase when-issued securities through PIPE transactions with SPACs. | |
J. | Leveraged Loans |
The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. Leveraged loans are generally non-investment grade and often involve borrowers that are highly leveraged. The Fund may invest in obligations of borrowers who are in bankruptcy proceedings. Leveraged loans are typically senior in the corporate capital structure of the borrower. A loan is often administered by a bank or other financial institution (the “lender”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the leveraged loan. The Fund’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. When investing in loan participations, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan participation and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the leveraged loan with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the leveraged loan. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. | |
The Fund may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. Leveraged loans may involve foreign borrowers and investments may be denominated in foreign currencies. Direct indebtedness of emerging countries involves a risk that the government entities responsible for the repayment of the debt may be unable, or unwilling, to pay the principal and interest when due. | |
The leveraged loans have floating rate loan interests which generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally LIBOR, SOFR, the prime rate offered by one or more U.S. banks or the certificate of deposit rate. When a leveraged loan is purchased the Fund may pay an assignment fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a leveraged loan. Prepayment penalty fees are received upon the prepayment of a leveraged loan by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid. | |
The Fund may invest in both secured loans and “covenant lite” loans which have few or no financial maintenance covenants that would require a borrower to maintain certain financial metrics. The lack of financial maintenance covenants in covenant lite loans increases the risk that the Fund will experience difficulty or delays in enforcing its rights on its holdings of such loans, which may result in losses, especially during a downturn in the credit cycle. | |
K. | Warrants |
The Fund may receive warrants. Warrants are securities that are usually issued together with a debt instrument or preferred stock and that give the holder the right to buy a proportionate amount of common stock at a specified price. Warrants may be freely transferable and are often traded on major exchanges. Warrants normally have a life that is measured in years and entitle the holder to buy common stock of a company at a price that is usually higher than the market price at the time the warrant is issued. Warrants may entail greater risks than certain other types of investments. Generally, warrants do not carry the right to receive dividends or exercise voting rights with respect to the underlying securities, and they do not represent any rights in the assets of the issuer. In addition, their value does not necessarily change with the value of the underlying securities, and |
they cease to have value if they are not exercised on or before their expiration date. If the market price of the underlying stock does not exceed the exercise price during the life of the warrant, the warrant will expire worthless. Warrants may increase the potential profit or loss to be realized from the investment as compared with investing the same amount in the underlying securities. Similarly, the percentage increase or decrease in the value of an equity security warrant may be greater than the percentage increase or decrease in the value of the underlying common stock. Warrants may relate to the purchase of equity or debt instruments. Debt obligations with warrants attached to purchase equity securities have many characteristics of convertible securities and their prices may, to some degree, reflect the performance of the underlying stock. Debt obligations also may be issued with warrants attached to purchase additional debt instruments at the same coupon rate. A decline in interest rates would permit a Fund to sell such warrants at a profit. If interest rates rise, these warrants would generally expire with no value. | |
L. | Securities Lending |
The Fund may loan securities to qualified brokers through a securities lending agency agreement with The Bank of New York Mellon (“BNYM”). Under the securities lending policy, when lending securities the Fund is required to maintain collateral with a market value not less than 100% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in the market value of securities on loan bringing the collateral market value in line with the required percent. Due to timing of collateral adjustments, the market value of collateral held with respect to a loaned security, may be more or less than the value of the security on loan. | |
Collateral may consist of cash and securities issued by the U.S. government or its agencies. Cash collateral is invested in a short-term money market fund. Dividends earned on the collateral and premiums paid by the broker are recorded as income by the Fund net of fees and rebates charged/paid by BNYM for its services as securities lending agent and in connection with this securities lending program. Lending portfolio securities involves a risk of delay in the recovery of the loaned securities or in the declining value of the collateral. | |
Securities lending transactions are entered into by the Fund under a Master Securities Lending Agreement (“MSLA”) which permits the Fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset amounts payable by the Fund to the same counterparty against amounts to be received and create one single net payment due to or from the Fund. | |
At June 30, 2023, the securities loaned were subject to a MSLA on a net payment basis as follows: |
Value of Securities on Loan | Cash Collateral Received(1) | Net Amount(2) | ||
$ 172 | $ 172 | $ — |
(1) | Collateral received in excess of the value of securities on loan is not presented in this table. The cash collateral received in connection with securities lending transactions has been used for the purchase of securities as disclosed in the Fund’s Schedule of Investments. |
(2) | Net amount represents the net amount receivable due from the counterparty in the event of default. |
Investment of Cash Collateral | Overnight and Continuous | |
Money Market Mutual Fund | $179 |
A. | Forward Foreign Currency Exchange Contracts |
A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Forward foreign currency exchange contracts, when used by the Fund, help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of forward foreign currency exchange contracts involves the risk that the value of the contract changes unfavorably due to movements in the value of the referenced foreign currencies. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in U.S. dollars without the delivery of foreign currency. Cash deposited is recorded on the Statement of Assets and Liabilities as “Cash pledged as collateral for derivatives and securities sold short.” |
During the six months ended June 30, 2023, the Fund entered into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). | |
Forward foreign currency contracts outstanding at period end, if any, are listed after the Fund’s Schedule of Investments. | |
B. | Options Contracts |
An options contract provides the purchaser with the right, but not the obligation, to buy (call option) or sell (put option) a financial instrument at an agreed upon price. The Fund may purchase or write both put and call options on portfolio securities. When doing so, the Fund is subject to equity price risk and/or foreign currency risk in the normal course of pursuing its investment objectives. | |
When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. Holdings of the Fund designated to cover outstanding written options are noted in the Schedule of Investments. Purchased options are reported as an asset within “Investment in securities at value” in the Statement of Assets and Liabilities. Written options are reported as a liability within “Written options at value.” Changes in value of the purchased option are included in “Net change in unrealized appreciation (depreciation) from investments” in the Statement of Operations. Changes in value of written options are included in “Net change in unrealized appreciation (depreciation) from written options” in the Statement of Operations. | |
If an option expires unexercised, the Fund realizes a gain or loss to the extent of the premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost basis of the purchase. The difference between the premium and the amount received or paid on effecting a closing purchase or sale transaction is also treated as a realized gain or loss. Gain or loss on purchased options is included in “Net realized gain (loss) on investments” in the Statement of Operations. Gain or loss on written options is presented separately as “Net realized gain (loss) from written options” in the Statement of Operations. | |
The risk in writing call options is that the Fund gives up the opportunity for profit if the market price/foreign currency rate of the referenced security/ currency increases and the option is exercised. The risk in writing put options is that the Fund may incur a loss if the market price/foreign currency rate of the referenced security/currency decreases and the option is exercised. The risk in buying options is that the Fund pays a premium whether or not the option is exercised. The use of such instruments may involve certain additional risks as a result of unanticipated movements in the market. Writers (sellers) of options are subject to unlimited risk of loss, as the seller will be obligated to deliver or take delivery of the security at a predetermined price which may, upon exercise of the option, be significantly different from the then-market value. As the writer of a covered call option, the Fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but retains the risk of loss should the price of the underlying security decline. | |
During the six months ended June 30, 2023, the Fund invested in writing put/call options and buying put/call options for various purposes, including for investment purposes and as a means to hedge other investments. | |
C. | Swaps |
The Fund may enter into swap agreements, in which the Fund and a counterparty agree either to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”). The value of the swap is reflected on the Statement of Assets and Liabilities as “Over-the-counter swap at value” for OTC swaps and as “variation margin receivable/payable on cleared swaps” for centrally cleared swaps. Swaps are marked-to-market daily and changes in value are recorded as “Net change in unrealized appreciation (depreciation) on swaps” in the Statement of Operations. | |
Any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown under “Over-the-counter swaps at value” in the Statement of Assets and Liabilities and are amortized over the term of the swap for OTC swaps. When a swap is terminated, the 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 basis in the contract, if any. Generally, the basis of the contracts is the unamortized premium received or paid. Cash settlements between the Fund and the counterparty are recognized as “Net realized gain (loss) on swaps” in the Statement of Operations. Swap contracts outstanding at period end, if any, are listed after the Fund’s Schedule of Investments. | |
In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is submitted to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through a clearing broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the clearing broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. | |
Securities deposited as margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities as “Cash pledged as collateral for derivatives and securities sold short.” | |
Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the 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 obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions. | |
Total return swaps – Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the |
Fund will receive a payment from or make a payment to the counterparty. The Fund may enter into total return swaps to obtain exposure to a security or market without owning such security or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity) (equity risk and/or interest rate risk). | |
The Fund may enter into equity basket swaps to obtain exposure to a portfolio of long and short securities. Under the terms of the agreement, the swap is designed to function as a portfolio of direct investments in long and short equity or fixed income positions. This means that the Fund has the ability to trade in and out of long and short positions within the swap and will receive all of the economic benefits and risks equivalent to direct investments in these positions such as: capital appreciation (depreciation), corporate actions, and dividends and interest received and paid, all of which are reflected in the swap value. The swap value also includes interest charges and credits related to the notional values of the long and short positions and cash balances within the swap. These interest charges and credits are based on defined market rates plus or minus a specified spread and are referred to herein as “financing costs”. Positions within the swap are reset periodically, and financing costs are reset monthly. | |
During a reset, any unrealized gains (losses) on positions and accrued financing costs become available for cash settlement between the Fund and the swap counterparty. Cash settlement in and out of the swap may occur at a reset date or any other date, at the discretion of the Fund and the counterparty, over the life of the agreement, and is generally determined based on limits and thresholds established as part of the ISDA Master Agreement (defined below in “Derivative Risks”) between the Fund and the counterparty. | |
The value of the swap is derived from a combination of (i) the net value of the underlying positions, which are valued daily using the last sale or closing prices on the principal exchange on which the securities are traded; (ii) financing costs; (iii) the value of dividends or accrued interest; (iv) cash balances within the swap; and (v) other factors, as applicable. The swap involves additional risks than if the Fund has invested in the underlying positions directly, including: the risk that changes in the swap may not correlate perfectly with the underlying long and short securities; credit risk related to the counterparty’s failure to perform under contract terms; and liquidity risk related to the lack of a liquid market for the swap contract, which may limit the ability of the Fund to close out its position(s). | |
During the six months ended June 30, 2023, the Fund utilized total return swaps to gain exposure to broad markets or to hedge the risk of individual securities within the portfolios, obtain long or short exposure to the underlying reference instrument, obtain leverage and gain exposure to restricted markets in order to avoid the operational burden of ownership filing requirements. At June 30, 2023, the Fund did not hold swap baskets. | |
The following is a summary of derivative instruments categorized by primary risk exposure, and location as presented in the Statement of Assets and Liabilities at six months ended June 30, 2023: |
Statement Line Description | Primary Risk | ||||
Asset Derivatives | |||||
Purchased options at value(1) | Equity contracts | $ 80 | |||
Over-the-counter swap at value (2) | Equity contracts | 43 | |||
Unrealized appreciation on forward foreign currency exchange contracts | Foreign currency contracts | 7 | |||
Total Assets | $ 130 | ||||
Liability Derivatives | |||||
Over-the-counter swap at value (2) | Equity contracts | $(446) | |||
Written options at value | Equity contracts | (339) | |||
Unrealized depreciation on forward foreign currency exchange contracts | Foreign currency contracts | (17) | |||
Total Liabilities | $(802) |
(1) | Amount included in Investment in securities at value. |
(2) | Represents cumulative appreciation (depreciation) on swap contracts as reported in the Schedule of Investments. Only current day’s variation margin is shown in the Statement of Assets and Liabilities for centrally cleared swap contracts. For OTC swap contracts, the value (including premiums) at June 30, 2023 is shown in the Statement of Assets and Liabilities. |
Statement Line Description | Primary Risk | ||||
Net Realized Gain (Loss) from | |||||
Purchased options(1) | Equity contracts | $ (67) | |||
Swaps | Equity contracts | (185) | |||
Written options | Equity contracts | 57 | |||
Forward foreign currency exchange contracts | Foreign currency contracts | (18) | |||
Total | $ (213) | ||||
Net Change in Unrealized Appreciation (Depreciation) on | |||||
Purchased options(2) | Equity contracts | $ 16 | |||
Swaps | Equity contracts | (394) | |||
Written options | Equity contracts | (59) | |||
Forward foreign currency exchange contracts | Foreign currency contracts | (7) | |||
Total | $ (444) |
(1) Amount included in Net realized gain (loss) on investments. |
(2) Amount included in Net change in unrealized appreciation (depreciation) on investments. |
Purchased Options(1) | $ 40 |
Written Options(1) | 170 |
Forward Foreign Currency Exchange Purchase Contracts(2) | 2,539 |
Forward Foreign Currency Exchange Sale Contracts(2) | 195 |
Long Total Return Swap Contracts(2) | 2,040 |
Short Total Return Swap Contracts(2) | 721 |
(1) Average premium amount. |
(2) Average notional amount. |
D. | Derivative Risks |
A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract. | |
The Fund’s risk of loss from counterparty credit risk on derivatives bought or sold OTC, rather than traded on a securities exchange, is generally limited to the aggregate unrealized gain netted against any collateral held by the Fund. For OTC purchased options, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by such Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund, and not the counterparty to perform. | |
With exchange traded purchased options and futures and centrally cleared swaps generally speaking, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro-rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund. | |
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, |
bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. | |
E. | Collateral Requirements and Master Netting Agreements (“MNA”) |
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty. | |
Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Typically, the Fund and counterparties are not permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor its obligations and by monitoring the financial stability of those counterparties. | |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities. | |
The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of June 30, 2023: |
At June 30, 2023, the Fund’s derivative assets and liabilities (by type) are as follows: | |||||
Assets | Liabilities | ||||
Derivative Financial Instruments: | |||||
Forward foreign currency exchange contracts | $ 7 | $ 17 | |||
OTC swaps | 43 | 446 | |||
Purchased options | 80 | — | |||
Written options | — | 339 | |||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | $ 130 | $ 802 | |||
Derivatives not subject to a MNA or similar agreement | (80) | (339) | |||
Total assets and liabilities subject to a MNA | $ 50 | $ 463 |
Counterparty | Derivative Assets Subject to a MNA by Counterparty | Derivatives Available for Offset | Non-Cash Collateral Received | Cash Collateral Received | Net Amount of Derivative Assets | |||||
Bank of America-Merrill Lynch | $ 7 | $ (7) | $— | $— | $— | |||||
Goldman Sachs & Co. | 38 | (30) | — | — | 8 | |||||
JPMorgan Chase Bank N.A. | 5 | (5) | — | — | — | |||||
Total | $50 | $(42) | $— | $— | $ 8 |
Counterparty | Gross Derivatives Liabilities Subject to a MNA by Counterparty | Derivatives Available for Offset | Non-cash Collateral Pledged | Cash Collateral Pledged(1) | Net Amount of Derivative Liabilities(1) | |||||
Bank of America-Merrill Lynch | $393 | $ (7) | $— | $(386) | $— | |||||
Goldman Sachs & Co. | 30 | (30) | — | — | — | |||||
JPMorgan Chase Bank N.A. | 40 | (5) | — | (35) | — | |||||
Total | $463 | $(42) | $— | $(421) | $— |
A. | Investment Adviser |
Virtus Investment Advisers, Inc. (the “Adviser”), an indirect, wholly-owned subsidiary of Virtus Investment Partners, Inc. (“Virtus”), is the investment adviser to the Fund. The Adviser manages the Fund’s investment programs and general operations of the Fund, including oversight of the Fund’s subadviser. | |
As compensation for its services to the Fund, the Adviser receives a fee at an annual rate of 1.25% of the Fund’s average daily net assets, which is calculated daily and paid monthly. | |
B. | Subadviser |
Westchester Capital Management, LLC (“Subadviser”), is the subadviser to the Fund. The Subadviser manages the investments of the Fund, for which it is paid a fee by the Adviser. | |
C. | Expense Limitation |
The Adviser has contractually agreed to limit the Fund’s annual total operating expenses, subject to the exceptions listed below, so that such expenses do not exceed, 1.40% of the Fund’s Class I average daily net assets on an annualized basis, through April 30, 2024. Following the contractual period, the Adviser may discontinue these expense limitation arrangements at any time. The waivers and reimbursements are accrued daily and received monthly. | |
The exclusions include taxes, leverage and borrowing expenses (such as commitment, amendment and renewal expenses on credit or redemption facilities), interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, unusual or infrequently occurring expenses (such as litigation), acquired fund fees and expenses, short dividends and interest expenses, if any. | |
D. | Expense Recapture |
Under certain conditions, the Adviser may recapture operating expenses reimbursed or fees waived under these arrangements within three years after the date on which such amounts were incurred or waived. The Fund must pay its ordinary operating expenses before the Adviser is entitled to any reimbursement and must remain in compliance with any applicable expense limitations or, if none, the expense limitation in effect at the time of the waiver or reimbursement. All or a portion of the following Adviser reimbursed expenses may be recaptured by the six months ending June 30: |
Expiration | |||||||||
2023 | 2024 | 2025 | 2026 | Total | |||||
Class I | $ 218 | $ 224 | $ 89 | $ 45 | $ 576 |
E. | Distributor |
VP Distributors, LLC (“VP Distributors”), an indirect, wholly-owned subsidiary of Virtus, serves as the distributor of the Fund’s shares. For the six months ended June 30, 2023, the Fund did not incur distribution fees. | |
F. | Administrator |
Virtus Fund Services, LLC, an indirect, wholly-owned subsidiary of Virtus, serves as administrator to the Fund. | |
For the six months ended June 30, 2023, the Fund incurred administration fees totaling $21, which are included in the Statement of Operations within the line item “Administration and accounting fees.” The fees are calculated daily and paid monthly. |
G. | Investments with Affiliates |
The Fund is permitted to purchase assets from or sell assets to certain related affiliates under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of assets by the Fund from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers comply with Rule 17a-7 under the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. | |
During the six months ended June 30, 2023, the Fund did not engage in any transactions pursuant to Rule 17a-7 under the 1940 Act. | |
H. | Trustee Deferred Compensation Plan |
The Fund provides a deferred compensation plan for its Trustees who receive compensation from the Fund. Under the deferred compensation plan, Trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund, and then, to the extent permitted by the 1940 Act, in turn, may be invested in the shares of affiliated or unaffiliated mutual funds selected by the participating Trustees. Investments in such instruments are included in “Other assets” in the Statement of Assets and Liabilities at June 30, 2023. |
Purchases | Sales | |
$43,189 | $52,316 |
% of Shares Outstanding | Number of Accounts* | |
80 % | 2 |
* | None of the accounts are affiliated. |
investments may be volatile. The consequences of political, social, or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as the Fund’s ability to repatriate such amounts.
Sector | Percentage of Total Investments | |
Health Care | 34.9% |
Federal Tax Cost | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||||
Including purchased options | $ 40,650 | $ 905 | $ (988) | $ (83) | ||||
Written options | (293) | 19 | (65) | (46) | ||||
Short sales | (2,180) | 42 | (148) | (106) |
Mutual Fund Services | 1-800-367-5877 |
Website | Virtus.com |
The Securities and Exchange Commission has modified mailing regulations for semiannual and annual shareholder fund reports to allow mutual fund companies to send a single copy of these reports to shareholders who share the same mailing address. If you would like additional copies, please call Mutual Fund Services at 1-800-367-5877.
please contact us at 1-800-367-5877, or visit Virtus.com.
8465 | 08-23 |
Item 2. Code of Ethics.
Response not required for semi-annual report.
Item 3. Audit Committee Financial Expert.
Response not required for semi-annual report.
Item 4. Principal Accountant Fees and Services.
Response not required for semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Response not required for semi-annual report.
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(a) 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 the shareholders may recommend nominees to the Registrant’s Board of Trustees that were implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective, based on an evaluation of those controls and procedures made as of a date within 90 days of the filing date of this report as required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Exchange Act. |
(b) | There has been no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) | Not applicable. | |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. | |
(a)(2)(1) | Not applicable. | |
(a)(2)(2) | There was no change in the Registrant’s independent public accountant during the period covered by the report. | |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | The Merger Fund® VL | |
By (Signature and Title)* | /s/ George R. Aylward | |
George R. Aylward, President and Chief Executive Officer | ||
(principal executive officer) |
Date | 8/31/2023 |
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 (Signature and Title)* | /s/ George R. Aylward | |
George R. Aylward, President and Chief Executive Officer | ||
(principal executive officer) |
Date | 8/31/2023 |
By (Signature and Title)* | /s/ W. Patrick Bradley | |
W. Patrick Bradley, Executive Vice President, | ||
Chief Financial Officer, and Treasurer | ||
(principal financial officer) |
Date | 8/31/2023 |
* | Print the name and title of each signing officer under his or her signature. |