VIRTUS Convertible & Income 2024 Target Term Fund
SCHEDULE OF INVESTMENTS (Unaudited)
October 31, 2022
($ reported in thousands)
Par Value | Value | ||
Convertible Bonds and Notes—60.3% | |||
Auto Manufacturers—5.7% | |||
NIO, Inc. 0.000%, 2/1/26 | $ 11,800 | $ 9,411 | |
Biotechnology—10.5% | |||
Insmed, Inc. 1.750%, 1/15/25(1) | 5,500 | 5,024 | |
Ionis Pharmaceuticals, Inc. 0.125%, 12/15/24(1) | 8,000 | 7,350 | |
Ligand Pharmaceuticals, Inc. 0.750%, 5/15/23 | 5,000 | 4,841 | |
17,215 | |||
Diversified Financial Services—2.4% | |||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. 0.000%, 8/15/23 | 4,220 | 4,001 | |
Equity Real Estate Investment Trusts (REITs)—2.6% | |||
Redwood Trust, Inc. 5.625%, 7/15/24 | 5,000 | 4,275 | |
Healthcare-Products—3.1% | |||
NanoString Technologies, Inc. 2.625%, 3/1/25 | 1,500 | 1,247 | |
NuVasive, Inc. 1.000%, 6/1/23(1) | 4,000 | 3,895 | |
5,142 | |||
Internet—6.2% | |||
Pinduoduo, Inc. 0.000%, 12/1/25 | 7,000 | 6,283 | |
Wayfair, Inc. 1.125%, 11/1/24 | 4,500 | 3,915 | |
10,198 | |||
Media—8.6% | |||
DISH Network Corp. 2.375%, 3/15/24(1) | 7,500 | 6,802 | |
Liberty Broadband Corp. 144A 2.750%, 9/30/50(1)(2) | 7,500 | 7,256 | |
14,058 | |||
Oil, Gas & Consumable Fuels—0.9% | |||
Oil States International, Inc. 1.500%, 2/15/23 | 1,500 | 1,440 | |
Pharmaceuticals—2.2% | |||
Jazz Investments I Ltd. 1.500%, 8/15/24(1) | 3,855 | 3,686 | |
Software—18.1% | |||
Alteryx, Inc. 0.500%, 8/1/24(1) | 7,000 | 6,326 | |
Benefitfocus, Inc. 1.250%, 12/15/23 | 3,000 | 2,892 | |
DocuSign, Inc. 0.000%, 1/15/24(1)(3) | 4,000 | 3,754 |
Par Value | Value | ||
Software—continued | |||
Everbridge, Inc. 0.125%, 12/15/24(1) | $ 4,000 | $ 3,495 | |
i3 Verticals LLC 1.000%, 2/15/25 | 9,000 | 7,807 | |
LivePerson, Inc. 0.750%, 3/1/24 | 1,000 | 926 | |
PROS Holdings, Inc. 1.000%, 5/15/24(3) | 4,000 | 3,686 | |
RingCentral, Inc. 0.000%, 3/1/25(1) | 1,160 | 965 | |
29,851 | |||
Total Convertible Bonds and Notes (Identified Cost $107,318) | 99,277 | ||
Corporate Bonds and Notes—45.7% | |||
Aerospace & Defense—2.1% | |||
Triumph Group, Inc. | |||
144A 8.875%, 6/1/24(1)(2) | 1,722 | 1,741 | |
144A 6.250%, 9/15/24(2) | 1,850 | 1,710 | |
3,451 | |||
Airlines—2.3% | |||
Delta Air Lines, Inc. 2.900%, 10/28/24(1)(3) | 4,000 | 3,780 | |
Auto Manufacturers—0.3% | |||
Ford Motor Credit Co. LLC 4.063%, 11/1/24(1)(3) | 500 | 479 | |
Building Materials—1.9% | |||
Koppers, Inc. 144A 6.000%, 2/15/25(1)(2) | 3,420 | 3,061 | |
Commercial Services—1.8% | |||
ADT Security Corp. (The) 4.125%, 6/15/23(1) | 3,000 | 2,970 | |
Containers & Packaging—3.1% | |||
Owens-Brockway Glass Container, Inc. | |||
144A 5.875%, 8/15/23(1)(2)(3) | 2,610 | 2,597 | |
144A 5.375%, 1/15/25(1)(2) | 2,610 | 2,466 | |
5,063 | |||
Diversified Financial Services—3.6% | |||
Navient Corp. 7.250%, 9/25/23(1) | 2,800 | 2,808 | |
OneMain Finance Corp. 8.250%, 10/1/23(1) | 3,000 | 3,048 | |
5,856 | |||
Entertainment—4.7% | |||
Live Nation Entertainment, Inc. 144A 4.875%, 11/1/24(1)(2) | 4,000 | 3,885 |
See Notes to Schedule of Investments
1
VIRTUS Convertible & Income 2024 Target Term Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
October 31, 2022
($ reported in thousands)
Par Value | Value | ||
Entertainment—continued | |||
Six Flags Entertainment Corp. 144A 4.875%, 7/31/24(1)(2)(3) | $ 4,000 | $ 3,873 | |
7,758 | |||
Equity Real Estate Investment Trusts (REITs)—2.3% | |||
Service Properties Trust 4.350%, 10/1/24(1) | 4,170 | 3,829 | |
Food & Beverage—2.4% | |||
Albertsons Cos., Inc. 144A 3.500%, 2/15/23(1)(2) | 4,000 | 3,970 | |
Healthcare-Services—4.0% | |||
HCA, Inc. 5.375%, 2/1/25(1) | 3,000 | 2,962 | |
Tenet Healthcare Corp. 4.625%, 7/15/24(1) | 3,716 | 3,623 | |
6,585 | |||
Internet—2.4% | |||
Netflix, Inc. 5.875%, 2/15/25(1) | 4,000 | 4,020 | |
Leisure Time—1.6% | |||
NCL Corp. Ltd. 144A 3.625%, 12/15/24(1)(2) | 3,000 | 2,603 | |
Lodging—2.0% | |||
Wynn Las Vegas LLC 144A 5.500%, 3/1/25(1)(2)(3) | 3,500 | 3,313 | |
Media—6.9% | |||
CCO Holdings LLC 144A 4.000%, 3/1/23(1)(2) | 4,000 | 3,970 | |
CSC Holdings LLC 5.250%, 6/1/24(1)(3) | 4,000 | 3,880 | |
DISH DBS Corp. 5.875%, 11/15/24(1) | 3,785 | 3,489 | |
11,339 | |||
Oil, Gas & Consumable Fuels—2.5% | |||
Occidental Petroleum Corp. 6.950%, 7/1/24(1) | 4,000 | 4,099 | |
Telecommunications—1.8% | |||
Sprint Corp. 7.125%, 6/15/24(1) | 3,000 | 3,033 | |
Total Corporate Bonds and Notes (Identified Cost $80,334) | 75,209 | ||
Leveraged Loans—32.8% | |||
Advertising—0.5% | |||
Advantage Sales & Marketing, Inc. Tranche B-1 (2-3 month LIBOR + 4.500%) 8.284%, 10/28/27 (4) | 982 | 852 |
Par Value | Value | ||
Airlines—0.3% | |||
Delta Air Lines, Inc. (3 month LIBOR + 3.750%) 7.993%, 10/20/27 (4) | $ 500 | $ 504 | |
Auto Components—1.2% | |||
Adient U.S. LLC Tranche B-1 (1 month LIBOR + 3.250%) 7.004%, 4/10/28 (4) | 988 | 953 | |
Tenneco, Inc. Tranche B (1 month LIBOR + 3.000%) 6.206%, 10/1/25 (4) | 982 | 977 | |
1,930 | |||
Chemicals—0.6% | |||
Ecovyst Catalyst Technologies LLC (3 month LIBOR + 2.500%) 6.915%, 6/9/28 (4) | 985 | 950 | |
Commercial Services—3.1% | |||
Allied Universal Holdco LLC (1 month LIBOR + 3.750%) 7.504%, 5/12/28 (4) | 990 | 897 | |
Hertz Corp. (The) | |||
Tranche B (1 month LIBOR + 3.250%) 7.010%, 6/30/28 (4) | 1,251 | 1,204 | |
Tranche C (1 month LIBOR + 3.250%) 7.010%, 6/30/28 (4) | 239 | 230 | |
R1 RCM, Inc. Tranche B (1 month Term SOFR + 3.000%) 6.729%, 6/21/29 (4) | 1,170 | 1,159 | |
Travelport Finance (Luxembourg) S.a.r.l. First Lien (3 month LIBOR + 5.000%) 5.220%, 5/29/26 (4)(5) | 970 | 727 | |
WEX, Inc. Tranche B (1 month LIBOR + 2.250%) 6.004%, 3/31/28 (4) | 985 | 964 | |
5,181 | |||
Computers—2.7% | |||
Conduent Business Services LLC Tranche B (1 month LIBOR + 4.250%) 8.004%, 10/16/28 (4) | 992 | 939 | |
KBR, Inc. Tranche B (1 month LIBOR + 2.750%) 6.504%, 2/5/27 (4) | 1,001 | 993 | |
McAfee Corp. Tranche B-1 (1 month Term SOFR + 3.750%) 6.870%, 3/1/29 (4) | 1,197 | 1,093 | |
NCR Corp. (3 month LIBOR + 2.500%) 6.920%, 8/28/26 (4) | 1,459 | 1,397 | |
4,422 | |||
Containers & Packaging—0.9% | |||
Pactiv Evergreen Group Holdings, Inc. Tranche B-3 (1 month LIBOR + 3.500%) 7.254%, 9/25/28 (4) | 1,487 | 1,441 | |
Cosmetics & Personal Care—0.6% | |||
Coty, Inc. Tranche B (1 month LIBOR + 2.250%) 5.448%, 4/7/25 (4) | 995 | 971 | |
Diversified Financial Services—0.4% | |||
Blucora, Inc. (3 month LIBOR + 4.000%) 7.674%, 5/22/24 (4) | 694 | 687 |
See Notes to Schedule of Investments
2
VIRTUS Convertible & Income 2024 Target Term Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
October 31, 2022
($ reported in thousands)
Par Value | Value | ||
Entertainment—1.4% | |||
AMC Entertainment Holdings, Inc. Tranche B-1 (1 month LIBOR + 3.000%) 6.314%, 4/22/26 (4) | $ 965 | $ 683 | |
Stars Group Holdings B.V. 2021 (3 month LIBOR + 2.250%) 5.892%, 7/21/26 (4) | 1,614 | 1,583 | |
2,266 | |||
Environmental Services—0.6% | |||
GFL Environmental, Inc. 2020 (3 month LIBOR + 3.000%) 7.415%, 5/30/25 (4) | 990 | 984 | |
Food Service—0.9% | |||
Aramark Services, Inc. Tranche B-5 (1 month LIBOR + 2.500%) 6.254%, 4/6/28 (4) | 1,500 | 1,475 | |
Internet—1.3% | |||
Go Daddy Operating Co. LLC Tranche B-2 (1 month LIBOR + 1.750%) 5.504%, 2/15/24 (4) | 1,192 | 1,183 | |
Match Group, Inc. Tranche B-1 (3 month LIBOR + 1.750%) 4.692%, 2/13/27 (4) | 1,000 | 978 | |
2,161 | |||
Leisure Time—1.1% | |||
Callaway Golf Co. (1 month LIBOR + 4.500%) 8.254%, 1/2/26 (4) | 905 | 902 | |
Carnival Corp. 2021, Tranche B (6 month LIBOR + 3.250%) 6.127%, 10/18/28 (4) | 995 | 910 | |
1,812 | |||
Lodging—2.0% | |||
Caesars Resort Collection LLC Tranche B (1 month LIBOR + 2.750%) 6.504%, 12/23/24 (4) | 1,169 | 1,155 | |
Hilton Grand Vacations Borrower LLC (1 month LIBOR + 3.000%) 6.754%, 8/2/28 (4) | 1,238 | 1,217 | |
Playa Resorts Holding B.V. (1 month LIBOR + 2.750%) 6.500%, 4/29/24 (4) | 899 | 875 | |
3,247 | |||
Machinery-Diversified—0.9% | |||
Gardner Denver, Inc. Tranche B-1 (1 month Term SOFR + 1.850%) 5.579%, 3/1/27 (4) | 1,585 | 1,548 | |
Media—3.9% | |||
Charter Communications Operating LLC Tranche B-2 (1 month LIBOR + 1.750%) 5.510%, 2/1/27 (4) | 987 | 969 | |
DIRECTV Financing LLC (1 month LIBOR + 5.000%) 8.754%, 8/2/27 (4) | 910 | 865 |
Par Value | Value | ||
Media—continued | |||
Gray Television, Inc. Tranche B-2 (1 month LIBOR + 2.500%) 5.615% - 5.628%, 2/7/24 (4) | $ 1,071 | $ 1,070 | |
Nexstar Broadcasting, Inc. Tranche B-4 (1 month LIBOR + 2.500%) 6.254%, 9/18/26 (4) | 853 | 843 | |
Sinclair Television Group, Inc. Tranche B-3 (1 month LIBOR + 3.000%) 6.760%, 4/1/28 (4) | 1,234 | 1,145 | |
Virgin Media Bristol LLC Tranche N (1 month LIBOR + 2.500%) 5.912%, 1/31/28 (4) | 1,500 | 1,468 | |
6,360 | |||
Metal Fabricate/Hardware—0.4% | |||
Advanced Drainage Systems, Inc. (1 month Term SOFR + 2.350%) 5.370%, 7/31/26 (4) | 613 | 613 | |
Miscellaneous Manufacturing—0.6% | |||
Gates Global LLC Tranche B-3 (1 month LIBOR + 2.500%) 6.254%, 3/31/27 (4) | 995 | 965 | |
Oil, Gas & Consumable Fuels—0.1% | |||
Lealand Finance Co. B.V. (1 month LIBOR + 4.000%) 7.754%, 6/30/25 (4) | 173 | 90 | |
Pharmaceuticals—1.4% | |||
Horizon Therapeutics USA, Inc. Tranche B-2 (1 month LIBOR + 1.750%) 5.375%, 3/15/28 (4) | 985 | 962 | |
Organon & Co. (3 month LIBOR + 3.000%) 6.188%, 6/2/28 (4) | 1,448 | 1,410 | |
2,372 | |||
Retail—3.4% | |||
Academy Ltd. (1 month LIBOR + 3.750%) 6.878%, 11/5/27 (4) | 993 | 977 | |
Burlington Coat Factory Warehouse Corp. Tranche B-6 (1 month LIBOR + 2.000%) 5.760%, 6/24/28 (4) | 1,347 | 1,293 | |
CWGS Group LLC (1 month LIBOR + 2.500%) 5.839% - 6.254%, 6/3/28 (4) | 983 | 873 | |
Petco Health & Wellness Co., Inc. First Lien (3 month LIBOR + 3.250%) 6.924%, 3/3/28 (4) | 1,162 | 1,113 | |
Restoration Hardware, Inc. (1 month LIBOR + 2.500%) 6.254%, 10/20/28 (4) | 1,485 | 1,386 | |
5,642 | |||
Semiconductors—0.3% | |||
Cohu, Inc. Tranche B (3 month LIBOR + 3.000%) 6.371%, 10/1/25 (4) | 429 | 424 | |
Software—1.7% | |||
BMC Software 2021 (1 month LIBOR + 3.750%) 7.504%, 10/2/25 (4) | 867 | 832 |
See Notes to Schedule of Investments
3
VIRTUS Convertible & Income 2024 Target Term Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
October 31, 2022
($ reported in thousands)
Par Value | Value | ||
Software—continued | |||
Camelot U.S. Acquisition I Co. (1 month LIBOR + 3.000%) 6.754%, 10/30/26 (4) | $ 1,061 | $ 1,041 | |
Ceridian HCM Holding, Inc. (1 month LIBOR + 2.500%) 6.254%, 4/30/25 (4) | 995 | 960 | |
2,833 | |||
Telecommunications—2.5% | |||
CenturyLink, Inc. Tranche B (1 month LIBOR + 2.250%) 6.004%, 3/15/27 (4) | 972 | 904 | |
Ciena Corp. 2020 (1 month LIBOR + 1.750%) 5.239%, 9/26/25 (4) | 985 | 978 | |
Commscope, Inc. (1 month LIBOR + 3.250%) 7.004%, 4/6/26 (4) | 1,459 | 1,388 | |
Frontier Communications Corp. Tranche B (3 month LIBOR + 3.750%) 7.438%, 5/1/28 (4) | 987 | 931 | |
4,201 | |||
Total Leveraged Loans (Identified Cost $56,296) | 53,931 |
Shares | ||
Common Stocks—0.3% | ||
Banks—0.3% | ||
CCF Holdings LLC (5)(6) | 1,369,231 | 315 |
CCF Holdings LLC Class M(5)(6) | 293,320 | 67 |
382 | ||
Construction & Engineering—0.0% | ||
McDermott International Ltd.(6) | 71,796 | 43 |
Total Common Stocks (Identified Cost $3,272) | 425 | |
Warrant—0.0% | ||
Banks—0.0% | ||
CCF Holdings LLC(5)(6) | 485,227 | 34 |
Total Warrant (Identified Cost $—) | 34 | |
Total Long-Term Investments—139.1% (Identified Cost $247,220) | 228,876 | |
Short-Term Investment—2.7% | ||
Money Market Mutual Fund—2.7% | ||
BlackRock Liquidity FedFund - Institutional Shares (seven-day effective yield 2.872%)(7) | 4,539,223 | 4,539 |
Total Short-Term Investment (Identified Cost $4,539) | 4,539 | |
Shares | Value | ||
Securities Lending Collateral—0.6% | |||
Dreyfus Government Cash Management Fund - Institutional Shares (seven-day effective yield 2.912%)(7)(8) | 1,009,716 | $ 1,010 | |
Total Securities Lending Collateral (Identified Cost $1,010) | 1,010 | ||
TOTAL INVESTMENTS—142.4% (Identified Cost $252,769) | $234,425 | ||
Other assets and liabilities, net—(42.4)% | (69,838) | ||
NET ASSETS—100.0% | $164,587 |
Abbreviations: | |
EV | Enterprise Value |
LIBOR | London Interbank Offered Rate |
LLC | Limited Liability Company |
REIT | Real Estate Investment Trust |
SOFR | Secured Overnight Financing Rate |
Footnote Legend: | |
(1) | All or a portion of securities is segregated as collateral for the Liquidity Facility. The value of securities segregated as collateral is $99,401. |
(2) | 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 October 31, 2022, these securities amounted to a value of $40,445 or 24.6% of net assets. |
(3) | All or a portion of security is on loan pursuant to the Liquidity Facility and/or securities lending. |
(4) | Variable rate security. Rate disclosed is as of October 31, 2022. Information in parenthesis represents benchmark and reference rate for each security. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions, or, for mortgage-backed securities, are impacted by the individual mortgages which are paying off over time. These securities do not indicate a reference rate and spread in their descriptions. |
(5) | The value of this security was determined using significant unobservable inputs and is reported as a Level 3 security in the Fair Value Hierarchy table located after the Schedule of Investments. |
(6) | Non-income producing. |
(7) | Shares of this fund are publicly offered, and its prospectus and annual report are publicly available. |
(8) | Represents security purchased with cash collateral received for securities on loan. |
Country Weightings† | |
United States | 88% |
Cayman Islands | 7 |
Bermuda | 3 |
Netherlands | 1 |
Luxembourg | 1 |
Total | 100% |
† % of total investments as of October 31, 2022. |
See Notes to Schedule of Investments
4
VIRTUS Convertible & Income 2024 Target Term Fund
SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
October 31, 2022
($ reported in thousands)
The following table summarizes the value of the Fund’s investments as of October 31, 2022, based on the inputs used to value them (See Security Valuation Note 1 in the Notes to Schedule of Investments):
Total Value at October 31, 2022 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
Assets: | |||||||
Debt Securities: | |||||||
Corporate Bonds and Notes | $75,209 | $— | $75,209 | $— | |||
Leveraged Loans | 53,931 | — | 53,204 | 727 | |||
Convertible Bonds and Notes | 99,277 | — | 99,277 | — | |||
Equity Securities: | |||||||
Common Stocks | 425 | 43 | — | 382 | |||
Warrant | 34 | — | — | 34 | |||
Money Market Mutual Fund | 4,539 | 4,539 | — | — | |||
Securities Lending Collateral | 1,010 | 1,010 | — | — | |||
Total Investments | $234,425 | $5,592 | $227,690 | $1,143 |
Security held by the Fund with an end of period value of $727 was transferred from Level 2 to Level 3 due to a decrease in trading activities at period end.
Some of the Fund’s investments that were categorized as Level 3 may have been valued utilizing third party pricing information without adjustment. If applicable, such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of Level 3 investments.
The following is a reconciliation of assets of the Fund for Level 3 investments for which significant unobservable inputs were used to determine fair value.
Total | Leveraged Loans | Common Stocks | Warrants | ||||
Investments in Securities | |||||||
Balance as of January 31, 2022: | $ 842 | $ — | $ 731 | $ 111 | |||
Change in unrealized appreciation (depreciation)(a) | (426) | — | (349) | (77) | |||
Transfers into Level 3(b) | 727 | 727 | — | — | |||
Balance as of October 31, 2022 | $ 1,143 | $ 727 | $ 382 | $ 34 |
(a) The change in unrealized appreciation (depreciation) on investments still held at October 31, 2022, was $(426).
(b)“Transfers into and/or from” represent the ending value as of October 31, 2022, for any investment security where a change in the pricing level occurred from the beginning to the end of the period.
The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 at October 31, 2022:
Investments in Securities – Assets | Ending Balance at October 31, 2022 | Valuation Technique Used | Unobservable Inputs | Input Values | ||||
Common Stocks: | ||||||||
CCF Holdings LLC | $315 | Market and Company Comparables | EV Multiples | 1.02x (0.67x - 1.41x) | ||||
0.60x (0.43x - 0.78x) | ||||||||
Illiquidity Discount | 20% | |||||||
CCF Holdings LLC Class M | $67 | Market and Company Comparables | EV Multiples | 1.02x (0.67x - 1.41x) | ||||
0.60x (0.43x - 0.78x) | ||||||||
Illiquidity Discount | 20% | |||||||
Warrant: | ||||||||
CCF Holdings LLC | $34 | Market and Company Comparables | EV Multiples | 1.02x (0.67x - 1.41x) | ||||
0.60x (0.43x - 0.78x) | ||||||||
Illiquidity Discount | 20% | |||||||
Black-Scholes Model | Volatility | 52.08% | ||||||
See Notes to Schedule of Investments
5
VIRTUS Convertible & Income 2024 Target Term Fund
NOTES TO SCHEDULE OF INVESTMENTS (Unaudited)
October 31, 2022
Note 1. Security Valuation
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.
• | Level 1 – quoted prices in active markets for identical securities (security types generally include listed equities). |
• | Level 2 – prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
• | Level 3 – prices determined using significant unobservable inputs (including the Valuation Committee’s own assumptions in determining the fair value of investments). |
A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:
Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded or, if no closing price is available, at the last bid price and are categorized as Level 1 in the hierarchy. Illiquid, restricted equity securities and illiquid private placements are internally fair valued by the Valuation Committee, and are generally categorized as Level 3 in the hierarchy.
Certain non-U.S. securities may be fair valued in cases where closing prices are not readily available or are deemed not reflective of readily available market prices. For example, significant events (such as movement in the U.S. securities market, or other regional and local developments) may occur between the time that non-U.S. markets close (where the security is principally traded) and the time that the Fund calculates its net asset value (“NAV”) at the close of regular trading on the New York Stock Exchange (“NYSE”) (generally 4 p.m. Eastern time) that may impact the value of securities traded in these non-U.S. markets. In such cases, the Fund fair values non-U.S. securities using an independent pricing service which considers the correlation of the trading patterns of the non-U.S. security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, exchange-traded funds (“ETFs”), and certain indexes, as well as prices for similar securities. Such fair valuations are categorized as Level 2 in the hierarchy. Because the frequency of significant events is not predictable, fair valuation of certain non-U.S. common stocks may occur on a frequent basis.
Debt instruments, including convertible bonds and restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing that considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, activity of the underlying equities, and current day trade information, as well as dealer supplied prices. These valuations are generally categorized as Level 2 in the hierarchy. Structured debt instruments, such as mortgage-backed and asset-backed securities, may also incorporate collateral analysis and utilize cash flow models for valuation and are generally categorized as Level 2 in the hierarchy. Pricing services do not provide pricing for all securities, and therefore indicative bids from dealers are utilized which are based on pricing models used by market makers in the security and are generally categorized as Level 2 in the hierarchy. Debt instruments that are internally fair valued by the Valuation Committee are generally categorized as Level 3 in the hierarchy.
Listed derivatives, such as options, that are actively traded are valued at the last posted settlement price from the exchange where they are principally traded and are categorized as Level 1 in the hierarchy. Over-the-counter derivative contracts, which include forward currency contracts and equity-linked instruments, do not require material subjectivity as pricing inputs are observed from actively quoted markets and are categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at NAV. Investments in closed-end funds and ETFs are valued as of the close of regular trading on the NYSE each business day. Each is categorized as Level 1 in the hierarchy.
A summary of the inputs used to value the Fund’s net assets by each major security type is disclosed at the end of the Schedule of Investments for the Fund. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
For additional information about significant accounting policies, refer to the Fund’s most recent semi or annual report.
6