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: 811-08188
AB HIGH INCOME FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2016
Date of reporting period: October 31, 2016
ITEM 1. | REPORTS TO STOCKHOLDERS. |
OCT 10.31.16
ANNUAL REPORT
AB HIGH INCOME FUND
Investment Products Offered
|
•Are Not FDIC Insured •May Lose Value •Are Not Bank Guaranteed |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
December 13, 2016
Annual Report
This report provides management’s discussion of fund performance for AB High Income Fund (the “Fund”) for the annual reporting period ended October 31, 2016.
On or about January 31, 2017, the Fund intends to change its broad based benchmark from the J.P. Morgan Emerging Markets Bond Index Global (“JPM EMBI Global”) to the Bloomberg Barclays Global High Yield Index (US dollar hedged).
Investment Objectives and Policies
The Fund’s investment objective is to seek to maximize total returns from price appreciation and income. The Fund pursues income opportunities from government, corporate, emerging-market and high-yield sources. It has the flexibility to invest in a broad range of fixed-income securities in both developed and emerging-market countries. The Fund’s investments may include US and non-US corporate debt securities and sovereign debt securities. The Fund may invest, without limitation, in either US dollar-denominated or non-US dollar-denominated fixed-income securities.
AllianceBernstein L.P. (the “Adviser”) selects securities for purchase or sale based on its assessment of the securities’ risk and return characteristics as well as the securities’ impact on the overall risk and return characteristics of
the Fund. In making this assessment, the Adviser takes into account various factors, including the credit quality and sensitivity to interest rates of the securities under consideration and of the Fund’s other holdings.
The Fund may invest in debt securities with a range of maturities from short- to long-term. Substantially all of the Fund’s assets may be invested in lower-rated securities, which may include securities having the lowest rating for non-subordinated debt instruments—i.e., rated C by Moody’s Investors Service or CCC+ or lower by Standard & Poor’s Ratings Services and Fitch Ratings—and unrated securities of equivalent investment quality. The Fund also may invest in investment-grade securities and unrated securities.
The Fund may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating, and inverse floating-rate instruments and preferred stock, and may use other investment techniques. The Fund may also make short sales of securities or maintain a short position. The Fund may use borrowings or other leverage for investment purposes. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures contracts, forwards or swap agreements.
Investment Results
The table on page 9 shows the Fund’s performance compared with its blended benchmark, which is composed of equal weightings of the JPM EMBI Global, the J.P. Morgan Government Bond Index-Emerging Markets (“JPM GBI-EM”) (local currency-denominated) and the Bloomberg Barclays US Corporate High Yield (“HY”) 2% Issuer Capped Index, for the six- and 12-month periods ended October 31, 2016. Individual performance for each of these indices is also included for both time periods. The Fund is also compared to its broad-based benchmark, the JPM EMBI Global, which tracks total returns for US dollar-denominated debt instruments issued by emerging-market sovereign and quasi-sovereign entities.
All share classes of the Fund underperformed the blended benchmark in the 12-month period, while all share classes outperformed in the six-month period, before sales charges. Performance drivers varied between the two periods. In the 12-month period, currency selection detracted from relative returns, primarily as a result of underweight positions in the South African rand and the Brazilian real (a notable outperformer through the period), and overweights in the US dollar and Swedish krona. These losses more than offset gains from underweight positions in the Mexican peso, euro and British pound. Industry allocation similarly weighed on performance, largely due to negative returns from an exposure to US Treasuries and overweights in
energy and financials. The Fund’s beneficial exposure to non-agency mortgages mitigated these losses. Yield-curve positioning also detracted, mainly because of positioning along the long end of the US yield curve. Security selection added to performance, helped most by selections within the energy, sovereigns, capital goods, media and technology sectors. Country allocation was a contributor as well, due to underweights in Poland, Mexico and South Africa and a lack of exposure to Malaysia, which more than offset losses from an underweight in Brazil and an allocation to the eurozone.
During the six-month period, security selection contributed most to relative returns, because of selections within the basic industries, sovereigns and technology sectors, which outweighed losses from consumer non-cyclical selections. Country allocation was similarly positive, because of an underweight position in Mexico, lack of exposure to Poland and overweight in the US. An underweight in Brazil and an exposure to the eurozone took back some of this performance. Currency selection detracted, largely due to underweights in the South African rand and Brazilian real (again a notable outperformer), as well as from overweight positions in the US dollar and Swedish krona; underweights in the Mexican peso and Malaysian ringgit helped returns in the period. Industry allocation detracted similarly, as profits
from an underweight in sovereigns and an exposure to non-agency mortgages were more than offset by losses from an allocation to US Treasuries. Yield-curve positioning did not have a meaningful impact on overall performance in the period.
During both periods, the Fund utilized currency forwards and both purchased and written currency options to hedge currency exposure as well as to manage active currency risk. Purchased and written equity options were used to hedge market exposure, and equity variance swaps were written for non-hedging purposes. Total return swaps and both single name and index credit default swaps were used to hedge credit risk as well as to take active credit and growth risk. Treasury futures and interest rate swaps were used to manage duration, country exposure and yield-curve positioning. Swaptions were used to take active risk in an effort to add alpha.
Market Review and Investment Strategy
Bond markets generally increased in absolute terms over the 12-month period ended October 31, 2016, as global growth trends and central bank action in the world’s largest economies continued to diverge. After declining through the end of 2015 and beginning of 2016, oil prices rebounded through much of the period on the back of decreased global supply—which contributed to a rally in emerging-market debt
sectors—though prices moved downward in October on the market’s rising skepticism that OPEC would reach a deal to limit crude production. Emerging-market sentiment was further boosted on positive political developments in Argentina and Brazil toward the end of the period.
In December 2015, the US Federal Reserve (the “Fed”) hiked rates for the first time in over nine years—a move that had been well-telegraphed and widely anticipated, and was generally accepted smoothly by bond investors. After some slower-than-expected US economic data through the first half of 2016, the Fed’s tone turned more hawkish in September (despite rates remaining unchanged) on the back of continued strengthening in the US labor market and growth in economic activity. In October, third quarter US GDP posted its best quarterly gain in two years (largely because of a surge in agricultural exports).
Central banks around the globe cut rates during the annual period, with some, including the Bank of Japan and the European Central Bank, dipping into negative rate territory. Volatility in Europe (and globally) spiked sharply in June after the UK voted to leave the European Union, a decision that was largely a surprise to investors. While investors initially responded by selling risk-sensitive assets, markets outside Europe quickly recovered. European markets
began to stabilize as well, helped by the Bank of England’s first rate cut in seven years—to an historic low—and an aggressive asset-purchase program. Elsewhere, central banks in Australia and New Zealand also moved rates to record lows, while fiscal and monetary policy developments in Japan disappointed investors, who were expecting rate cuts or additional quantitative easing.
Yields in most developed markets fell in the 12-month period, with UK yields reaching historic lows in the months following the Brexit referendum in June. At the end of the period, trillions of dollars’ worth of government debt around the world lingered in negative territory. Developed-market treasuries generally outperformed emerging-market local-currency government bonds and investment-grade credit
securities, but lagged the rally in global high yield. Energy and basics were among the top performing sectors in each period, largely due to positive oil price action, while consumer-related sectors lagged the rising market.
On November 8, 2016, Donald Trump was elected as the 45th president of the United States, and the Congressional election outcome resulted in the Republican Party maintaining control of both the House of Representatives and the Senate. The Adviser believes that it will take time before the world has a clearer picture of the short- and long-term impact of the elections on the US economy and markets in general. The Adviser continues to monitor the markets, including for potential market volatility.
DISCLOSURES AND RISKS
Benchmark Disclosure
The JPM® EMBI Global, the JPM® GBI-EM and the Bloomberg Barclays US Corporate HY 2% Issuer Capped Index are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The JPM EMBI Global (market-capitalization weighted) represents the performance of US dollar-denominated Brady bonds, Eurobonds, and trade loans issued by sovereign and quasi-sovereign entities. The JPM GBI-EM represents the performance of local currency government bonds issued by emerging markets. The Bloomberg Barclays US Corporate HY 2% Issuer Capped Index is the 2% Issuer Capped component of the US Corporate HY Index. The Bloomberg Barclays US Corporate HY Index represents the performance of fixed-income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $150 million and at least one year to maturity. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
Interest Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. The Fund may be subject to a greater risk of rising interest rates as the recent period of historically low rates is beginning to end and rates have begun rising. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment Grade Securities Risk: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its
(Disclosures, Risks and Note about Historical Performance continued on next page)
Disclosures and Risks
DISCLOSURES AND RISKS
(continued from previous page)
payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments, negative perceptions of the junk bond market generally and less secondary market liquidity.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater if the Fund invests a significant portion of its assets in fixed-income securities with longer maturities.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid, and because these investments may be subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Leverage Risk: To the extent the Fund uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Derivatives Risk: Derivatives may be illiquid, difficult to price and leveraged so that small changes may produce disproportionate losses for the Fund, and may be subject to counterparty risk to a greater degree than more traditional investments.
Liquidity Risk: Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of liquidity risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Over recent years liquidity risk has also increased because the capacity
(Disclosures, Risks and Note about Historical Performance continued on next page)
Disclosures and Risks
DISCLOSURES AND RISKS
(continued from previous page)
of dealers in the secondary market for fixed-income securities to make markets in these securities has decreased, even as the overall bond market has grown significantly, due to, among other things, structural changes, additional regulatory requirements and capital and risk restraints that have led to reduced inventories. Liquidity risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results.
The Fund may invest in mortgage-backed and/or other asset-backed securities, including securities backed by mortgages and assets with an international or emerging-markets origination and securities backed by non-performing loans at the time of investment. Investments in mortgage-backed and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that, in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by nongovernmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following pages represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.
(Disclosures, Risks and Note about Historical Performance continued on next page)
Disclosures and Risks
DISCLOSURES AND RISKS
(continued from previous page)
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares; the applicable contingent deferred sales charge for Class B shares (3% year 1, 2% year 2, 1% year 3); a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
Disclosures and Risks
HISTORICAL PERFORMANCE
| | | | | | | | | | | | |
| | | | | | | | | | | | |
THE FUND VS. ITS BENCHMARK PERIODS ENDED OCTOBER 31, 2016 (unaudited) | | NAV Returns | | | | |
| 6 Months | | | 12 Months | | | | |
AB High Income Fund* | | | | | | | | | | | | |
Class A | | | 6.25% | | | | 9.41% | | | | | |
| |
Class B† | | | 5.78% | | | | 8.48% | | | | | |
| |
Class C | | | 5.78% | | | | 8.50% | | | | | |
| |
Advisor Class‡ | | | 6.38% | | | | 9.69% | | | | | |
| |
Class R‡ | | | 5.92% | | | | 9.01% | | | | | |
| |
Class K‡ | | | 6.23% | | | | 9.41% | | | | | |
| |
Class I‡ | | | 6.40% | | | | 9.74% | | | | | |
| |
Class Z‡ | | | 6.41% | | | | 9.76% | | | | | |
| |
Blended benchmark: 33% JPM EMBI Global / 33% JPM GBI-EM / 33% Bloomberg Barclays US Corporate HY 2% Issuer Capped Index | | | 5.48% | | | | 11.60% | | | | | |
| |
JPM EMBI Global | | | 5.71% | | | | 11.59% | | | | | |
| |
JPM GBI-EM | | | 2.90% | | | | 12.59% | | | | | |
| |
Bloomberg Barclays US Corporate HY 2% Issuer Capped Index | | | 7.59% | | | | 10.16% | | | | | |
| |
* Includes the impact of proceeds received and credited to the Fund in connection with a residual distribution relating to regulatory settlements, which enhanced the performance of all share classes of the Fund for the six- and 12-month periods ended October 31, 2016, by 0.01% and 0.01%, respectively. † Effective January 31, 2009, Class B shares are no longer available for sale to new investors. Please see Note A for additional information. ‡ Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. | |
| | | | | | | | | | | | |
See Disclosures, Risks and Note about Historical Performance on pages 5-8.
(Historical Performance continued on next page)
Historical Performance
HISTORICAL PERFORMANCE
(continued from previous page)
GROWTH OF A $10,000 INVESTMENT IN THE FUND
10/31/06 TO 10/31/16 (unaudited)
![LOGO](https://capedge.com/proxy/N-CSR/0001193125-17-002696/g213702g10i02.jpg)
This chart illustrates the total value of an assumed $10,000 investment in AB High Income Fund Class A shares (from 10/31/06 to 10/31/16) as compared to the performance of the Fund’s blended benchmark and its broad-based benchmark, the JPM EMBI Global. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on pages 5-8.
(Historical Performance continued on next page)
Historical Performance
HISTORICAL PERFORMANCE
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| | | | | | | | | | | | |
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2016 (unaudited) | |
| | NAV Returns | | | SEC Returns (reflects applicable sales charges) | | | SEC Yields* | |
| | | | | | | | | | | | |
Class A Shares | | | | | | | | | | | 5.50 | % |
1 Year | | | 9.41 | % | | | 4.73 | % | | | | |
5 Years | | | 7.23 | % | | | 6.29 | % | | | | |
10 Years | | | 8.36 | % | | | 7.88 | % | | | | |
| | | | | | | | | | | | |
Class B Shares | | | | | | | | | | | 4.92 | % |
1 Year | | | 8.48 | % | | | 5.48 | % | | | | |
5 Years | | | 6.39 | % | | | 6.39 | % | | | | |
10 Years(a) | | | 7.85 | % | | | 7.85 | % | | | | |
| | | | | | | | | | | | |
Class C Shares | | | | | | | | | | | 4.93 | % |
1 Year | | | 8.50 | % | | | 7.50 | % | | | | |
5 Years | | | 6.39 | % | | | 6.39 | % | | | | |
10 Years | | | 7.50 | % | | | 7.50 | % | | | | |
| | | | | | | | | | | | |
Advisor Class Shares† | | | | | | | | | | | 5.99 | % |
1 Year | | | 9.69 | % | | | 9.69 | % | | | | |
5 Years | | | 7.54 | % | | | 7.54 | % | | | | |
Since Inception‡ | | | 8.65 | % | | | 8.65 | % | | | | |
| | | | | | | | | | | | |
Class R Shares† | | | | | | | | | | | 5.32 | % |
1 Year | | | 9.01 | % | | | 9.01 | % | | | | |
5 Years | | | 6.83 | % | | | 6.83 | % | | | | |
Since Inception‡ | | | 8.01 | % | | | 8.01 | % | | | | |
| | | | | | | | | | | | |
Class K Shares† | | | | | | | | | | | 5.78 | % |
1 Year | | | 9.41 | % | | | 9.41 | % | | | | |
5 Years | | | 7.22 | % | | | 7.22 | % | | | | |
Since Inception‡ | | | 8.36 | % | | | 8.36 | % | | | | |
| | | | | | | | | | | | |
Class I Shares† | | | | | | | | | | | 6.06 | % |
1 Year | | | 9.74 | % | | | 9.74 | % | | | | |
5 Years | | | 7.59 | % | | | 7.59 | % | | | | |
Since Inception‡ | | | 8.69 | % | | | 8.69 | % | | | | |
| | | | | | | | | | | | |
Class Z Shares† | | | | | | | | | | | 6.06 | % |
1 Year | | | 9.76 | % | | | 9.76 | % | | | | |
Since Inception‡ | | | 5.04 | % | | | 5.04 | % | | | | |
See Disclosures, Risks and Note about Historical Performance on pages 5-8.
(Historical Performance and footnotes continued on next page)
Historical Performance
HISTORICAL PERFORMANCE
(continued from previous page)
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 0.85%, 1.63%, 1.60%, 0.60%, 1.27%, 0.94%, 0.54% and 0.53% for Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights sections since they are based on different time periods.
* | | SEC yields are calculated based on SEC guidelines for the 30-day period ended October 31, 2016. |
(a) | | Assumes conversion of Class B shares into Class A shares after six years. |
† | | These share classes are offered at NAV to eligible investors and their SEC returns are the same as their NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of and certain other persons associated with, the Adviser and its affiliates or the Fund. |
‡ | | Inception dates: 1/28/2008 for Advisor Class, Class R, Class K and Class I shares; 10/15/2013 for Class Z shares. |
See Disclosures, Risks and Note about Historical Performance on pages 5-8.
(Historical Performance continued on next page)
Historical Performance
HISTORICAL PERFORMANCE
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| | | | |
SEC AVERAGE ANNUAL RETURNS AS OF THE MOST RECENT CALENDAR QUARTER-END SEPTEMBER 30, 2016 (unaudited) | |
| | SEC Returns (reflects applicable sales charges) | |
| | | | |
Class A Shares | | | | |
1 Year | | | 6.73 | % |
5 Years | | | 7.39 | % |
10 Years | | | 8.09 | % |
| | | | |
Class B Shares | | | | |
1 Year | | | 7.36 | % |
5 Years | | | 7.48 | % |
10 Years(a) | | | 8.05 | % |
| | | | |
Class C Shares | | | | |
1 Year | | | 9.50 | % |
5 Years | | | 7.50 | % |
10 Years | | | 7.69 | % |
| | | | |
Advisor Class Shares* | | | | |
1 Year | | | 11.73 | % |
5 Years | | | 8.64 | % |
Since Inception† | | | 8.70 | % |
| | | | |
Class R Shares* | �� | | | |
1 Year | | | 10.92 | % |
5 Years | | | 7.94 | % |
Since Inception† | | | 8.06 | % |
| | | | |
Class K Shares* | | | | |
1 Year | | | 11.45 | % |
5 Years | | | 8.33 | % |
Since Inception† | | | 8.40 | % |
| | | | |
Class I Shares* | | | | |
1 Year | | | 11.79 | % |
5 Years | | | 8.70 | % |
Since Inception† | | | 8.74 | % |
| | | | |
Class Z Shares* | | | | |
1 Year | | | 11.80 | % |
Since Inception† | | | 5.07 | % |
See Disclosures, Risks and Note about Historical Performance on pages 5-8.
(Historical Performance and footnotes continued on next page)
Historical Performance
HISTORICAL PERFORMANCE
(continued from previous page)
(a) | | Assumes conversion of Class B shares into Class A shares after six years. |
* | | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
† | | Inception dates: 1/28/2008 for Advisor Class, Class R, Class K and Class I shares; 10/15/2013 for Class Z shares. |
See Disclosures, Risks and Note about Historical Performance on pages 5-8.
Historical Performance
EXPENSE EXAMPLE
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Beginning Account Value 5/1/2016 | | | Ending Account Value 10/31/2016 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | | | Effective Expenses Paid During Period+ | | | Effective Annualized Expense Ratio+ | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,062.50 | | | $ | 4.20 | | | | 0.81 | % | | $ | 4.25 | | | | 0.82 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,021.06 | | | $ | 4.12 | | | | 0.81 | % | | $ | 4.17 | | | | 0.82 | % |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,057.80 | | | $ | 8.28 | | | | 1.60 | % | | $ | 8.33 | | | | 1.61 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,017.09 | | | $ | 8.11 | | | | 1.60 | % | | $ | 8.16 | | | | 1.61 | % |
Class C | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,057.80 | | | $ | 8.02 | | | | 1.55 | % | | $ | 8.07 | | | | 1.56 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,017.34 | | | $ | 7.86 | | | | 1.55 | % | | $ | 7.91 | | | | 1.56 | % |
Expense Example
EXPENSE EXAMPLE
(unaudited)
(continued from previous page)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Beginning Account Value 5/1/2016 | | | Ending Account Value 10/31/2016 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | | | Effective Expenses Paid During Period+ | | | Effective Annualized Expense Ratio+ | |
Advisor Class | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,063.80 | | | $ | 2.91 | | | | 0.56 | % | | $ | 2.96 | | | | 0.57 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,022.32 | | | $ | 2.85 | | | | 0.56 | % | | $ | 2.90 | | | | 0.57 | % |
Class R | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,059.20 | | | $ | 6.26 | | | | 1.21 | % | | $ | 6.31 | | | | 1.22 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,019.05 | | | $ | 6.14 | | | | 1.21 | % | | $ | 6.19 | | | | 1.22 | % |
Class K | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,062.30 | | | $ | 4.41 | | | | 0.85 | % | | $ | 4.46 | | | | 0.86 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,020.86 | | | $ | 4.32 | | | | 0.85 | % | | $ | 4.37 | | | | 0.86 | % |
Class I | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,064.00 | | | $ | 2.70 | | | | 0.52 | % | | $ | 2.75 | | | | 0.53 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,022.52 | | | $ | 2.64 | | | | 0.52 | % | | $ | 2.69 | | | | 0.53 | % |
Class Z | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,064.10 | | | $ | 2.59 | | | | 0.50 | % | | $ | 2.59 | | | | 0.50 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,022.62 | | | $ | 2.54 | | | | 0.50 | % | | $ | 2.54 | | | | 0.50 | % |
* | | Expenses are equal to the classes’ annualized expense ratios multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
** | | Assumes 5% annual return before expenses. |
+ | | The Fund’s investment in affiliated/unaffiliated underlying portfolios incur no direct expenses, but bears proportionate shares of the acquired fund fees (i.e., operating, administrative and investment advisory fee) of the affiliated/unaffiliated underlying portfolios. Currently the Adviser has voluntarily agreed to waive its investment advisory fee from the Fund in an amount equal to the Fund’s share of the advisory fees of the affiliated underlying portfolios, as borne indirectly by the Fund as an acquired fund fee and expense. The Fund’s effective expenses are equal to the classes’ annualized expense ratio plus the Fund’s pro-rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
Expense Example
PORTFOLIO SUMMARY
October 31, 2016 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $7,790.3
![LOGO](https://capedge.com/proxy/N-CSR/0001193125-17-002696/g213702g17f56.jpg)
* | | All data are as of October 31, 2016. The Fund’s security type breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). “Other” securities type weightings represents 0.5% or less in the following security types: Asset-Backed Securities, Governments – Sovereign Bonds, Inflation-Linked Securities, Investment Companies, Local Governments – Municipal Bonds, Local Governments – Regional Bonds, Options Purchased – Puts, Preferred Stocks and Warrants. |
Portfolio Summary
PORTFOLIO SUMMARY
October 31, 2016 (unaudited)
![LOGO](https://capedge.com/proxy/N-CSR/0001193125-17-002696/g213702g69m13.jpg)
* | | All data are as of October 31, 2016. The Fund’s country breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). “Other” country weightings represent 0.6% or less in the following countries or regions: Angola, Australia, Barbados, Bermuda, Cameroon, Cayman Islands, Chile, Croatia, Denmark, Ecuador, El Salvador, Ethiopia, Eurozone, Gabon, Germany, Ghana, Guatemala, Hong Kong, India, Iraq, Ireland, Israel, Italy, Ivory Coast, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Lebanon, Macau, Mongolia, Mozambique, New Zealand, Nigeria, Norway, Pakistan, Peru, Portugal, Romania, Serbia, Singapore, South Africa, Spain, Sri Lanka, Suriname, Switzerland, Trinidad & Tobago, Ukraine, United Arab Emirates, Venezuela and Zambia. |
Portfolio Summary
PORTFOLIO OF INVESTMENTS
October 31, 2016
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
CORPORATES – NON-INVESTMENT GRADE – 40.2% | | | | | | | | | | | | |
Industrial – 34.6% | | | | | | | | | | | | |
Basic – 3.4% | | | | | | | | | | | | |
AK Steel Corp. 7.625%, 10/01/21 | | | U.S.$ | | | | 7,490 | | | $ | 7,452,550 | |
Aleris International, Inc. 7.875%, 11/01/20 | | | | | | | 4,671 | | | | 4,671,000 | |
Anglo American Capital PLC 4.125%, 4/15/21(a) | | | | | | | 780 | | | | 788,483 | |
4.875%, 5/14/25(a) | | | | | | | 3,693 | | | | 3,757,628 | |
ArcelorMittal 6.125%, 6/01/25(b) | | | | | | | 3,896 | | | | 4,266,120 | |
7.75%, 3/01/41 | | | | | | | 2,090 | | | | 2,194,500 | |
8.00%, 10/15/39 | | | | | | | 10,123 | | | | 10,882,225 | |
Ashland LLC 4.75%, 8/15/22 | | | | | | | 1,800 | | | | 1,859,616 | |
Axalta Coating Systems LLC 4.875%, 8/15/24(a) | | | | | | | 2,893 | | | | 2,936,395 | |
CF Industries, Inc. 4.95%, 6/01/43 | | | | | | | 3,911 | | | | 3,244,710 | |
6.875%, 5/01/18 | | | | | | | 1,100 | | | | 1,162,487 | |
Cliffs Natural Resources, Inc. 7.75%, 3/31/20(a) | | | | | | | 5,351 | | | | 5,110,205 | |
8.00%, 9/30/20(a) | | | | | | | 1,294 | | | | 1,294,000 | |
8.25%, 3/31/20(a) | | | | | | | 6,486 | | | | 7,045,417 | |
Commercial Metals Co. 4.875%, 5/15/23 | | | | | | | 3,249 | | | | 3,216,510 | |
Consolidated Energy Finance SA 6.75%, 10/15/19(a) | | | | | | | 18,654 | | | | 18,654,000 | |
Constellium NV 5.75%, 5/15/24(a) | | | | | | | 9,890 | | | | 8,752,650 | |
First Quantum Minerals Ltd. 6.75%, 2/15/20(a) | | | | | | | 5,426 | | | | 5,195,395 | |
7.25%, 5/15/22(a) | | | | | | | 5,404 | | | | 5,113,535 | |
FMG Resources (August 2006) Pty Ltd. 9.75%, 3/01/22(a) | | | | | | | 3,420 | | | | 3,967,200 | |
Freeport-McMoran Oil & Gas LLC/FCX Oil & Gas, Inc. 6.125%, 6/15/19 | | | | | | | 1,298 | | | | 1,323,960 | |
6.50%, 11/15/20 | | | | | | | 3,362 | | | | 3,433,443 | |
6.625%, 5/01/21 | | | | | | | 649 | | | | 661,980 | |
6.75%, 2/01/22 | | | | | | | 1,566 | | | | 1,601,235 | |
Freeport-McMoRan, Inc. 5.40%, 11/14/34 | | | | | | | 3,333 | | | | 2,870,546 | |
5.45%, 3/15/43 | | | | | | | 8,300 | | | | 6,889,000 | |
Ineos Finance PLC 4.00%, 5/01/23(a) | | | EUR | | | | 5,160 | | | | 5,773,033 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
INEOS Group Holdings SA 5.75%, 2/15/19(a) | | | EUR | | | | 1,266 | | | $ | 1,424,384 | |
Joseph T Ryerson & Son, Inc. 11.00%, 5/15/22(a) | | | U.S.$ | | | | 20,167 | | | | 22,032,447 | |
Lecta SA 6.50%, 8/01/23(a) | | | EUR | | | | 1,106 | | | | 1,221,700 | |
Lundin Mining Corp. 7.50%, 11/01/20(a) | | | U.S.$ | | | | 2,459 | | | | 2,612,688 | |
7.875%, 11/01/22(a) | | | | | | | 4,001 | | | | 4,321,080 | |
Magnetation LLC/Mag Finance Corp. 11.00%, 5/15/18(c)(d)(e) | | | | | | | 16,121 | | | | 19,345 | |
Momentive Performance Materials, Inc. 3.88%, 10/24/21 | | | | | | | 22,931 | | | | 20,408,590 | |
8.875%, 10/15/20(d)(f)(g) | | | | | | | 22,931 | | | | – 0 | – |
Novelis Corp. 5.875%, 9/30/26(a) | | | | | | | 8,210 | | | | 8,312,625 | |
6.25%, 8/15/24(a) | | | | | | | 6,106 | | | | 6,350,240 | |
Peabody Energy Corp. 6.00%, 11/15/18(d)(e) | | | | | | | 33,849 | | | | 14,978,182 | |
PQ Corp. 6.75%, 11/15/22(a) | | | | | | | 4,402 | | | | 4,748,657 | |
Smurfit Kappa Acquisitions 4.875%, 9/15/18(a) | | | | | | | 4,234 | | | | 4,371,605 | |
Smurfit Kappa Treasury Funding Ltd. 7.50%, 11/20/25 | | | | | | | 1,073 | | | | 1,276,870 | |
SPCM SA 6.00%, 1/15/22(a) | | | | | | | 1,298 | | | | 1,343,196 | |
Steel Dynamics, Inc. 5.125%, 10/01/21 | | | | | | | 1,007 | | | | 1,049,798 | |
6.125%, 8/15/19 | | | | | | | 800 | | | | 828,000 | |
6.375%, 8/15/22 | | | | | | | 3,790 | | | | 3,951,075 | |
Teck Resources Ltd. 3.75%, 2/01/23 | | | | | | | 3,605 | | | | 3,408,978 | |
5.40%, 2/01/43 | | | | | | | 17,291 | | | | 15,605,127 | |
6.125%, 10/01/35 | | | | | | | 5,000 | | | | 4,975,000 | |
6.25%, 7/15/41 | | | | | | | 1,323 | | | | 1,309,770 | |
8.00%, 6/01/21(a) | | | | | | | 303 | | | | 331,028 | |
8.50%, 6/01/24(a)(b) | | | | | | | 445 | | | | 515,088 | |
Thompson Creek Metals Co., Inc. 9.75%, 12/01/17 | | | | | | | 5,195 | | | | 5,225,131 | |
United States Steel Corp. 8.375%, 7/01/21(a) | | | | | | | 5,453 | | | | 5,793,812 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 260,532,239 | |
| | | | | | | | | | | | |
Capital Goods – 2.8% | | | | | | | | | | | | |
Accudyne Industries Borrower/Accudyne Industries LLC 7.75%, 12/15/20(a) | | | | | | | 3,293 | | | | 2,617,935 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
American Builders & Contractors Supply Co., Inc. 5.75%, 12/15/23(a) | | | U.S.$ | | | | 3,425 | | | $ | 3,570,563 | |
Apex Tool Group LLC 7.00%, 2/01/21(a) | | | | | | | 7,737 | | | | 7,060,012 | |
ARD Finance SA 6.625% (6.625% Cash or 7.375% PIK), 9/15/23(a)(h) | | | EUR | | | | 5,106 | | | | 5,466,564 | |
7.125% (7.125% Cash or 7.875% PIK), 9/15/23(a)(h) | | | U.S.$ | | | | 5,738 | | | | 5,680,620 | |
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. 6.00%, 6/30/21(a) | | | | | | | 2,444 | | | | 2,505,100 | |
7.25%, 5/15/24(a) | | | | | | | 10,320 | | | | 10,887,600 | |
Ashtead Capital, Inc. 5.625%, 10/01/24(a) | | | | | | | 2,075 | | | | 2,183,938 | |
Berry Plastics Corp. 5.50%, 5/15/22 | | | | | | | 1,590 | | | | 1,653,600 | |
Bombardier, Inc. 5.75%, 3/15/22(a) | | | | | | | 4,685 | | | | 4,157,937 | |
6.125%, 1/15/23(a) | | | | | | | 1,823 | | | | 1,582,400 | |
7.50%, 3/15/25(a) | | | | | | | 5,805 | | | | 5,195,475 | |
7.75%, 3/15/20(a) | | | | | | | 2,558 | | | | 2,596,370 | |
Clean Harbors, Inc. 5.125%, 6/01/21 | | | | | | | 3,417 | | | | 3,498,154 | |
5.25%, 8/01/20 | | | | | | | 800 | | | | 816,000 | |
CNH Industrial Capital LLC 3.25%, 2/01/17 | | | | | | | 1,425 | | | | 1,426,781 | |
EnPro Industries, Inc. 5.875%, 9/15/22 | | | | | | | 5,800 | | | | 6,032,000 | |
Gardner Denver, Inc. 6.875%, 8/15/21(a) | | | | | | | 6,925 | | | | 6,786,500 | |
GCL Holdings SCA 9.375%, 4/15/18(a) | | | EUR | | | | 1,174 | | | | 1,320,977 | |
GFL Environmental, Inc. 7.875%, 4/01/20(a) | | | U.S.$ | | | | 1,770 | | | | 1,854,075 | |
9.875%, 2/01/21(a) | | | | | | | 16,383 | | | | 17,939,385 | |
Herc Rentals, Inc. 7.75%, 6/01/24(a) | | | | | | | 17,958 | | | | 18,047,790 | |
KLX, Inc. 5.875%, 12/01/22(a) | | | | | | | 7,050 | | | | 7,174,785 | |
Manitowoc Foodservice, Inc. 9.50%, 2/15/24 | | | | | | | 3,546 | | | | 4,073,468 | |
Masco Corp. 5.95%, 3/15/22 | | | | | | | 2,800 | | | | 3,186,764 | |
Pactiv LLC 7.95%, 12/15/25 | | | | | | | 6,261 | | | | 6,840,142 | |
Plastipak Holdings, Inc. 6.50%, 10/01/21(a) | | | | | | | 2,949 | | | | 3,052,215 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Lu 5.125%, 7/15/23(a) | | | U.S.$ | | | | 6,215 | | | $ | 6,380,070 | |
7.00%, 7/15/24(a) | | | | | | | 6,389 | | | | 6,828,244 | |
9.875%, 8/15/19 | | | | | | | 663 | | | | 679,575 | |
Sealed Air Corp. 6.875%, 7/15/33(a) | | | | | | | 14,904 | | | | 16,021,800 | |
SIG Combibloc Holdings SCA 7.75%, 2/15/23(a) | | | EUR | | | | 3,835 | | | | 4,446,676 | |
SPX FLOW, Inc. 5.625%, 8/15/24(a) | | | U.S.$ | | | | 2,158 | | | | 2,187,673 | |
5.875%, 8/15/26(a) | | | | | | | 2,341 | | | | 2,376,115 | |
Standard Industries, Inc./NJ 6.00%, 10/15/25(a) | | | | | | | 5,285 | | | | 5,628,525 | |
Terex Corp. 6.00%, 5/15/21 | | | | | | | 643 | | | | 654,253 | |
Textron Financial Corp. 6.00%, 2/15/67(a) | | | | | | | 125 | | | | 90,313 | |
TransDigm, Inc. 6.375%, 6/15/26(a) | | | | | | | 13,416 | | | | 13,719,202 | |
6.50%, 7/15/24 | | | | | | | 3,170 | | | | 3,336,425 | |
United Rentals North America, Inc. 5.50%, 7/15/25-5/15/27 | | | | | | | 7,591 | | | | 7,594,748 | |
5.75%, 11/15/24 | | | | | | | 6,833 | | | | 7,089,237 | |
5.875%, 9/15/26 | | | | | | | 4,150 | | | | 4,227,190 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 218,467,196 | |
| | | | | | | | | | | | |
Communications - Media – 4.3% | | | | | | | | | | | | |
Altice Financing SA 6.625%, 2/15/23(a) | | | | | | | 13,760 | | | | 14,172,800 | |
7.50%, 5/15/26(a) | | | | | | | 11,970 | | | | 12,329,100 | |
Arqiva Broadcast Finance PLC 9.50%, 3/31/20(a) | | | GBP | | | | 6,207 | | | | 8,186,164 | |
CCO Holdings LLC/CCO Holdings Capital Corp. 5.375%, 5/01/25(a) | | | U.S.$ | | | | 732 | | | | 752,130 | |
5.75%, 1/15/24 | | | | | | | 500 | | | | 528,750 | |
5.875%, 4/01/24-5/01/27(a) | | | | | | | 4,007 | | | | 4,208,723 | |
Cequel Communications Holdings I LLC/Cequel Capital Corp. 5.125%, 12/15/21(a) | | | | | | | 9,498 | | | | 9,355,530 | |
7.75%, 7/15/25(a) | | | | | | | 5,014 | | | | 5,364,980 | |
Clear Channel Worldwide Holdings, Inc. Series A 6.50%, 11/15/22 | | | | | | | 2,230 | | | | 2,241,150 | |
Series B 6.50%, 11/15/22 | | | | | | | 6,270 | | | | 6,385,995 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
CSC Holdings LLC 5.50%, 4/15/27(a) | | | U.S.$ | | | | 2,575 | | | $ | 2,612,016 | |
6.75%, 11/15/21 | | | | | | | 8,000 | | | | 8,420,000 | |
10.125%, 1/15/23(a) | | | | | | | 3,053 | | | | 3,442,257 | |
DISH DBS Corp. 5.00%, 3/15/23 | | | | | | | 2,925 | | | | 2,881,125 | |
5.875%, 11/15/24 | | | | | | | 11,172 | | | | 11,248,807 | |
6.75%, 6/01/21 | | | | | | | 1,500 | | | | 1,611,570 | |
7.75%, 7/01/26 | | | | | | | 2,115 | | | | 2,322,545 | |
7.875%, 9/01/19 | | | | | | | 520 | | | | 579,800 | |
Gray Television, Inc. 5.125%, 10/15/24(a) | | | | | | | 7,217 | | | | 7,000,490 | |
5.875%, 7/15/26(a) | | | | | | | 6,163 | | | | 6,132,185 | |
Hughes Satellite Systems Corp. 7.625%, 6/15/21 | | | | | | | 9,325 | | | | 10,222,531 | |
iHeartCommunications, Inc. 6.875%, 6/15/18 | | | | | | | 10,579 | | | | 8,198,725 | |
9.00%, 12/15/19-3/01/21 | | | | | | | 13,244 | | | | 9,671,147 | |
10.625%, 3/15/23 | | | | | | | 1,507 | | | | 1,086,924 | |
14.00% (12.00% Cash and 2.00% PIK), 2/01/21(h) | | | | | | | 2,737 | | | | 1,040,040 | |
Intelsat Jackson Holdings SA 5.50%, 8/01/23 | | | | | | | 7,443 | | | | 4,930,987 | |
8.00%, 2/15/24(a) | | | | | | | 1,212 | | | | 1,218,060 | |
9.50%, 9/30/22(a) | | | | | | | 2,861 | | | | 3,166,784 | |
Intelsat Luxembourg SA 7.75%, 6/01/21 | | | | | | | 10,782 | | | | 3,504,150 | |
LGE HoldCo VI BV 7.125%, 5/15/24(a) | | | EUR | | | | 3,158 | | | | 3,917,365 | |
Liberty Interactive LLC 3.75%, 2/15/30(i) | | | U.S.$ | | | | 2,235 | | | | 1,344,072 | |
McClatchy Co. (The) 9.00%, 12/15/22(b) | | | | | | | 5,524 | | | | 5,759,433 | |
McGraw-Hill Global Education Holdings LLC/McGraw-Hill Global Education Finance 7.875%, 5/15/24(a)(b) | | | | | | | 10,000 | | | | 10,825,000 | |
Mediacom Broadband LLC/Mediacom Broadband Corp. 6.375%, 4/01/23 | | | | | | | 11,794 | | | | 12,265,760 | |
Mediacom LLC/Mediacom Capital Corp. 7.25%, 2/15/22 | | | | | | | 965 | | | | 1,003,600 | |
Netflix, Inc. 4.375%, 11/15/26(a) | | | | | | | 10,284 | | | | 10,116,885 | |
Nexstar Broadcasting, Inc. 6.875%, 11/15/20 | | | | | | | 6,331 | | | | 6,560,499 | |
Nielsen Finance LLC/Nielsen Finance Co. 5.00%, 4/15/22(a) | | | | | | | 1,840 | | | | 1,876,800 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Outfront Media Capital LLC/Outfront Media Capital Corp. 5.25%, 2/15/22 | | | U.S.$ | | | | 2,935 | | | $ | 3,037,725 | |
Radio One, Inc. 7.375%, 4/15/22(a) | | | | | | | 7,700 | | | | 7,738,500 | |
9.25%, 2/15/20(a) | | | | | | | 9,972 | | | | 8,974,800 | |
Sinclair Television Group, Inc. 5.625%, 8/01/24(a) | | | | | | | 7,000 | | | | 7,087,500 | |
6.125%, 10/01/22 | | | | | | | 2,204 | | | | 2,328,063 | |
Starz LLC/Starz Finance Corp. 5.00%, 9/15/19 | | | | | | | 1,540 | | | | 1,559,250 | |
TEGNA, Inc. 4.875%, 9/15/21(a) | | | | | | | 1,071 | | | | 1,116,518 | |
5.50%, 9/15/24(a) | | | | | | | 719 | | | | 736,975 | |
6.375%, 10/15/23 | | | | | | | 3,966 | | | | 4,194,045 | |
Time, Inc. 5.75%, 4/15/22(a) | | | | | | | 7,772 | | | | 7,480,550 | |
Townsquare Media, Inc. 6.50%, 4/01/23(a) | | | | | | | 5,674 | | | | 5,681,092 | |
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH 5.50%, 9/15/22(a) | | | EUR | | | | 2,430 | | | | 2,807,978 | |
5.50%, 1/15/23(a) | | | U.S.$ | | | | 8,392 | | | | 8,696,210 | |
Univision Communications, Inc. 5.125%, 5/15/23-2/15/25(a) | | | | | | | 9,363 | | | | 9,428,320 | |
8.50%, 5/15/21(a) | | | | | | | 2,180 | | | | 2,246,538 | |
UPCB Finance IV Ltd. 5.375%, 1/15/25(a) | | | | | | | 5,668 | | | | 5,753,020 | |
Virgin Media Finance PLC 4.875%, 2/15/22 | | | | | | | 8,905 | | | | 7,661,684 | |
5.25%, 2/15/22 | | | | | | | 941 | | | | 842,195 | |
Virgin Media Secured Finance PLC 5.50%, 1/15/25(a) | | | GBP | | | | 2,070 | | | | 2,579,286 | |
Wave Holdco LLC/Wave Holdco Corp. 8.25% (8.25% Cash or 9.00% PIK), 7/15/19(a)(h) | | | U.S.$ | | | | 5,030 | | | | 5,067,591 | |
WideOpenWest Finance LLC/WideOpenWest Capital Corp. 10.25%, 7/15/19 | | | | | | | 18,619 | | | | 19,549,950 | |
13.375%, 10/15/19 | | | | | | | 709 | | | | 758,630 | |
Ziggo Bond Finance BV 5.875%, 1/15/25(a) | | | | | | | 6,178 | | | | 6,131,665 | |
Ziggo Secured Finance BV 5.50%, 1/15/27(a) | | | | | | | 8,360 | | | | 8,255,500 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 336,198,464 | |
| | | | | | | | | | | | |
Communications - Telecommunications – 3.3% | | | | | | | | | | | | |
Altice Luxembourg SA 7.25%, 5/15/22(a) | | | EUR | | | | 12,330 | | | | 14,347,373 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
CenturyLink, Inc. Series S 6.45%, 6/15/21 | | | U.S.$ | | | | 7,697 | | | $ | 8,216,547 | |
Series W 6.75%, 12/01/23 | | | | | | | 1,850 | | | | 1,900,875 | |
Cincinnati Bell, Inc. 7.00%, 7/15/24(a) | | | | | | | 7,528 | | | | 7,885,580 | |
Columbus Cable Barbados Ltd. 7.375%, 3/30/21(a) | | | | | | | 18,972 | | | | 20,300,040 | |
Communications Sales & Leasing, Inc./CSL Capital LLC 6.00%, 4/15/23(a) | | | | | | | 7,539 | | | | 7,821,712 | |
8.25%, 10/15/23 | | | | | | | 15,715 | | | | 16,579,325 | |
Embarq Corp. 7.995%, 6/01/36 | | | | | | | 12,200 | | | | 12,383,000 | |
Frontier Communications Corp. 6.25%, 9/15/21 | | | | | | | 5,502 | | | | 5,226,900 | |
7.125%, 1/15/23 | | | | | | | 100 | | | | 89,938 | |
7.625%, 4/15/24 | | | | | | | 7,921 | | | | 7,049,690 | |
7.875%, 1/15/27 | | | | | | | 4,058 | | | | 3,560,895 | |
9.00%, 8/15/31 | | | | | | | 4,350 | | | | 3,784,500 | |
10.50%, 9/15/22 | | | | | | | 22 | | | | 22,880 | |
11.00%, 9/15/25 | | | | | | | 1,772 | | | | 1,814,351 | |
InterXion Holding NV 6.00%, 7/15/20(a) | | | EUR | | | | 12,930 | | | | 14,821,278 | |
Level 3 Financing, Inc. 5.375%, 1/15/24 | | | U.S.$ | | | | 2,601 | | | | 2,653,020 | |
6.125%, 1/15/21 | | | | | | | 2,690 | | | | 2,777,425 | |
Millicom International Cellular SA 6.00%, 3/15/25(a) | | | | | | | 2,963 | | | | 2,977,815 | |
Sable International Finance Ltd. 6.875%, 8/01/22(a) | | | | | | | 2,219 | | | | 2,296,665 | |
SFR Group SA 5.375%, 5/15/22(a) | | | EUR | | | | 622 | | | | 712,018 | |
5.625%, 5/15/24(a) | | | | | | | 1,981 | | | | 2,280,657 | |
6.00%, 5/15/22(a) | | | U.S.$ | | | | 5,028 | | | | 5,155,309 | |
7.375%, 5/01/26(a) | | | | | | | 7,187 | | | | 7,258,870 | |
Sprint Capital Corp. 8.75%, 3/15/32 | | | | | | | 5,865 | | | | 5,952,975 | |
Sprint Corp. 7.125%, 6/15/24 | | | | | | | 8,710 | | | | 8,187,400 | |
7.625%, 2/15/25 | | | | | | | 4,820 | | | | 4,663,350 | |
7.875%, 9/15/23 | | | | | | | 2,752 | | | | 2,724,480 | |
T-Mobile USA, Inc. 6.00%, 3/01/23 | | | | | | | 3,547 | | | | 3,733,218 | |
6.125%, 1/15/22 | | | | | | | 1,460 | | | | 1,540,300 | |
6.625%, 11/15/20 | | | | | | | 1,488 | | | | 1,528,920 | |
6.731%, 4/28/22 | | | | | | | 607 | | | | 634,315 | |
6.836%, 4/28/23 | | | | | | | 4,673 | | | | 4,990,764 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Telecom Italia Capital SA 7.20%, 7/18/36 | | | U.S.$ | | | | 7,680 | | | $ | 8,294,400 | |
7.721%, 6/04/38 | | | | | | | 4,700 | | | | 5,181,750 | |
Telecom Italia SpA/Milano 5.303%, 5/30/24(a) | | | | | | | 5,639 | | | | 5,730,634 | |
WaveDivision Escrow LLC/WaveDivision Escrow Corp. 8.125%, 9/01/20(a) | | | | | | | 5,008 | | | | 5,220,840 | |
Wind Acquisition Finance SA 4.75%, 7/15/20(a) | | | | | | | 5,894 | | | | 5,923,470 | |
7.375%, 4/23/21(a) | | | | | | | 11,197 | | | | 11,504,917 | |
Windstream Services LLC 6.375%, 8/01/23 | | | | | | | 12,858 | | | | 11,379,330 | |
7.75%, 10/01/21(b) | | | | | | | 2,780 | | | | 2,755,675 | |
Zayo Group LLC/Zayo Capital, Inc. 6.00%, 4/01/23 | | | | | | | 6,199 | | | | 6,524,447 | |
6.375%, 5/15/25 | | | | | | | 8,198 | | | | 8,631,018 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 257,018,866 | |
| | | | | | | | | | | | |
Consumer Cyclical - Automotive – 1.7% | | | | | | | | | | | | |
Adient Global Holdings Ltd. 4.875%, 8/15/26(a) | | | | | | | 2,966 | | | | 2,917,358 | |
Allison Transmission, Inc. 5.00%, 10/01/24(a) | | | | | | | 2,003 | | | | 2,043,060 | |
BCD Acquisition, Inc. 9.625%, 9/15/23(a) | | | | | | | 14,012 | | | | 14,467,390 | |
Commercial Vehicle Group, Inc. 7.875%, 4/15/19 | | | | | | | 9,012 | | | | 8,876,820 | |
Cooper-Standard Automotive, Inc. 5.625%, 11/15/26(a) | | | | | | | 4,558 | | | | 4,580,790 | |
Dana Financing Luxembourg Sarl 6.50%, 6/01/26(a) | | | | | | | 10,848 | | | | 11,539,560 | |
Dana, Inc. 6.00%, 9/15/23 | | | | | | | 3,683 | | | | 3,844,131 | |
Exide Technologies Series AI 7.00%, 4/30/25(h)(i)(j) | | | | | | | 17,730 | | | | 9,574,220 | |
11.00%, 4/30/20(f)(h) | | | | | | | 23,120 | | | | 18,438,039 | |
Gates Global LLC/Gates Global Co. 5.75%, 7/15/22(a) | | | EUR | | | | 710 | | | | 742,771 | |
6.00%, 7/15/22(a) | | | U.S.$ | | | | 12,655 | | | | 11,958,975 | |
Goodyear Tire & Rubber Co. (The) 7.00%, 3/15/28 | | | | | | | 700 | | | | 752,500 | |
8.75%, 8/15/20 | | | | | | | 924 | | | | 1,106,490 | |
IHO Verwaltungs GmbH 4.125% (4.125% Cash or 4.875% PIK), 9/15/21(a)(h) | | | | | | | 5,807 | | | | 5,945,337 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Meritor, Inc. 6.25%, 2/15/24 | | | U.S.$ | | | | 11,724 | | | $ | 11,562,795 | |
6.75%, 6/15/21 | | | | | | | 4,325 | | | | 4,400,687 | |
Navistar International Corp. 8.25%, 11/01/21 | | | | | | | 14,684 | | | | 14,371,965 | |
ZF North America Capital, Inc. 4.75%, 4/29/25(a) | | | | | | | 6,260 | | | | 6,604,300 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 133,727,188 | |
| | | | | | | | | | | | |
Consumer Cyclical - Entertainment – 0.6% | | | | | | | | | | | | |
AMC Entertainment Holdings, Inc. 5.875%, 11/15/26(a) | | | | | | | 8,694 | | | | 8,737,470 | |
AMC Entertainment, Inc. 5.75%, 6/15/25 | | | | | | | 6,515 | | | | 6,531,288 | |
Carlson Travel Holdings, Inc. 7.50% (7.50% Cash or 8.25% PIK), 8/15/19(a)(h) | | | | | | | 7,910 | | | | 7,712,205 | |
Carlson Wagonlit BV 6.875%, 6/15/19(a) | | | | | | | 6,104 | | | | 6,309,448 | |
ClubCorp Club Operations, Inc. 8.25%, 12/15/23(a) | | | | | | | 2,963 | | | | 3,155,595 | |
Pinnacle Entertainment, Inc. 5.625%, 5/01/24(a) | | | | | | | 4,736 | | | | 4,771,520 | |
Regal Entertainment Group 5.75%, 6/15/23-2/01/25 | | | | | | | 4,356 | | | | 4,430,990 | |
Royal Caribbean Cruises Ltd. 7.25%, 3/15/18 | | | | | | | 1,000 | | | | 1,070,000 | |
7.50%, 10/15/27 | | | | | | | 3,000 | | | | 3,660,000 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 46,378,516 | |
| | | | | | | | | | | | |
Consumer Cyclical - Other – 2.7% | | | | | | | | | | | | |
Beazer Homes USA, Inc. 5.75%, 6/15/19 | | | | | | | 7,751 | | | | 8,002,907 | |
7.50%, 9/15/21 | | | | | | | 6,520 | | | | 6,585,200 | |
8.75%, 3/15/22(a) | | | | | | | 3,405 | | | | 3,617,813 | |
Caesars Entertainment Operating Co., Inc. 10.00%, 12/15/18(d)(e) | | | | | | | 1,935 | | | | 1,272,263 | |
Caesars Entertainment Resort Properties LLC/Caesars Entertainment Resort Prope 8.00%, 10/01/20 | | | | | | | 6,600 | | | | 6,847,500 | |
Caesars Growth Properties Holdings LLC/Caesars Growth Properties Finance, Inc. 9.375%, 5/01/22 | | | | | | | 5,320 | | | | 5,652,500 | |
CalAtlantic Group, Inc. 6.625%, 5/01/20 | | | | | | | 5,393 | | | | 6,026,677 | |
8.375%, 5/15/18 | | | | | | | 3,250 | | | | 3,542,500 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Cirsa Funding Luxembourg SA 5.75%, 5/15/21(a) | | | EUR | | | | 2,058 | | | $ | 2,383,943 | |
Diamond Resorts International, Inc. 7.75%, 9/01/23(a) | | | U.S.$ | | | | 7,479 | | | | 7,329,420 | |
Eldorado Resorts, Inc. 7.00%, 8/01/23 | | | | | | | 1,961 | | | | 2,083,563 | |
GLP Capital LP/GLP Financing II, Inc. 5.375%, 4/15/26 | | | | | | | 2,300 | | | | 2,443,750 | |
International Game Technology PLC 6.25%, 2/15/22(a) | | | | | | | 12,305 | | | | 13,043,300 | |
6.50%, 2/15/25(a) | | | | | | | 10,375 | | | | 11,228,862 | |
Isle of Capri Casinos, Inc. 5.875%, 3/15/21 | | | | | | | 266 | | | | 276,640 | |
K. Hovnanian Enterprises, Inc. 5.00%, 11/01/21 | | | | | | | 12,319 | | | | 8,623,300 | |
7.25%, 10/15/20(a) | | | | | | | 5,715 | | | | 5,143,500 | |
KB Home 4.75%, 5/15/19 | | | | | | | 3,513 | | | | 3,592,043 | |
7.00%, 12/15/21 | | | | | | | 6,936 | | | | 7,438,860 | |
7.25%, 6/15/18 | | | | | | | 1,000 | | | | 1,060,000 | |
7.50%, 9/15/22 | | | | | | | 2,741 | | | | 2,967,133 | |
9.10%, 9/15/17 | | | | | | | 1,300 | | | | 1,365,000 | |
Lennar Corp. 4.50%, 6/15/19 | | | | | | | 1,690 | | | | 1,770,275 | |
6.95%, 6/01/18 | | | | | | | 2,780 | | | | 2,960,700 | |
MCE Finance Ltd. 5.00%, 2/15/21(a) | | | | | | | 1,559 | | | | 1,549,256 | |
MDC Holdings, Inc. 5.50%, 1/15/24 | | | | | | | 4,397 | | | | 4,627,842 | |
6.00%, 1/15/43 | | | | | | | 17,203 | | | | 15,224,655 | |
Meritage Homes Corp. 6.00%, 6/01/25 | | | | | | | 4,696 | | | | 4,954,280 | |
7.00%, 4/01/22 | | | | | | | 7,207 | | | | 8,043,012 | |
7.15%, 4/15/20 | | | | | | | 2,500 | | | | 2,775,000 | |
MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc. 5.625%, 5/01/24(a) | | | | | | | 1,756 | | | | 1,869,086 | |
NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp. 5.00%, 8/01/18(a) | | | | | | | 1,806 | | | | 1,824,060 | |
PulteGroup, Inc. 5.00%, 1/15/27 | | | | | | | 1,470 | | | | 1,458,975 | |
6.00%, 2/15/35 | | | | | | | 932 | | | | 927,340 | |
6.375%, 5/15/33 | | | | | | | 2,695 | | | | 2,782,588 | |
7.875%, 6/15/32 | | | | | | | 7,600 | | | | 8,664,000 | |
Safari Holding Verwaltungs GmbH 8.25%, 2/15/21(a) | | | EUR | | | | 1,752 | | | | 2,024,229 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Shea Homes LP/Shea Homes Funding Corp. 5.875%, 4/01/23(a) | | | U.S.$ | | | | 6,743 | | | $ | 6,624,997 | |
6.125%, 4/01/25(a) | | | | | | | 4,677 | | | | 4,606,845 | |
Taylor Morrison Communities, Inc./Monarch Communities, Inc. 5.625%, 3/01/24(a) | | | | | | | 11,952 | | | | 12,400,200 | |
5.875%, 4/15/23(a) | | | | | | | 4,950 | | | | 5,222,250 | |
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp. 5.50%, 3/01/25(a) | | | | | | | 4,515 | | | | 4,526,288 | |
Wynn Macau Ltd. 5.25%, 10/15/21(a) | | | | | | | 8,100 | | | | 8,128,269 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 213,490,821 | |
| | | | | | | | | | | | |
Consumer Cyclical - Restaurants – 0.3% | | | | | | | | | | | | |
1011778 BC ULC/New Red Finance, Inc. 6.00%, 4/01/22(a) | | | | | | | 10,455 | | | | 10,925,475 | |
Landry’s, Inc. 6.75%, 10/15/24(a) | | | | | | | 2,549 | | | | 2,599,980 | |
Pizzaexpress Financing 1 PLC 8.625%, 8/01/22(a) | | | GBP | | | | 751 | | | | 850,589 | |
Pizzaexpress Financing 2 PLC 6.625%, 8/01/21(a) | | | | | | | 2,879 | | | | 3,463,475 | |
Stonegate Pub Co. Financing PLC 5.75%, 4/15/19(a)(b) | | | | | | | 2,206 | | | | 2,766,298 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 20,605,817 | |
| | | | | | | | | | | | |
Consumer Cyclical - Retailers – 1.5% | | | | | | | | | | | | |
American Tire Distributors, Inc. 10.25%, 3/01/22(a) | | | U.S.$ | | | | 8,983 | | | | 8,258,791 | |
Brighthouse Group PLC 7.875%, 5/15/18(a) | | | GBP | | | | 4,319 | | | | 3,158,657 | |
Group 1 Automotive, Inc. 5.00%, 6/01/22 | | | U.S.$ | | | | 2,143 | | | | 2,137,642 | |
JC Penney Corp., Inc. 5.875%, 7/01/23(a) | | | | | | | 371 | | | | 382,204 | |
6.375%, 10/15/36 | | | | | | | 1,169 | | | | 993,650 | |
7.40%, 4/01/37 | | | | | | | 4,492 | | | | 4,110,180 | |
L Brands, Inc. 6.875%, 11/01/35 | | | | | | | 11,730 | | | | 12,433,800 | |
6.95%, 3/01/33 | | | | | | | 3,500 | | | | 3,613,750 | |
Levi Strauss & Co. 5.00%, 5/01/25 | | | | | | | 7,819 | | | | 8,112,212 | |
Murphy Oil USA, Inc. 6.00%, 8/15/23 | | | | | | | 3,166 | | | | 3,332,215 | |
Neiman Marcus Group Ltd. LLC 8.75% (8.75% Cash or 9.50% PIK), 10/15/21(a)(h) | | | | | | | 14,099 | | | | 11,094,151 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
New Look Secured Issuer PLC 6.50%, 7/01/22(a) | | | GBP | | | | 1,404 | | | $ | 1,538,398 | |
PetSmart, Inc. 7.125%, 3/15/23(a) | | | U.S.$ | | | | 17,431 | | | | 18,237,184 | |
Rite Aid Corp. 6.125%, 4/01/23(a) | | | | | | | 10,011 | | | | 10,561,605 | |
Sally Holdings LLC/Sally Capital, Inc. 5.625%, 12/01/25 | | | | | | | 2,086 | | | | 2,226,805 | |
5.75%, 6/01/22 | | | | | | | 5,376 | | | | 5,591,040 | |
Serta Simmons Bedding LLC 8.125%, 10/01/20(a) | | | | | | | 8,047 | | | | 8,378,939 | |
Sonic Automotive, Inc. 5.00%, 5/15/23 | | | | | | | 8,953 | | | | 8,751,557 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 112,912,780 | |
| | | | | | | | | | | | |
Consumer Non-Cyclical – 5.4% | | | | | | | | | | | | |
Acadia Healthcare Co., Inc. 6.50%, 3/01/24 | | | | | | | 4,950 | | | | 5,049,000 | |
Air Medical Group Holdings, Inc. 6.375%, 5/15/23(a) | | | | | | | 11,200 | | | | 10,668,000 | |
Albertsons Cos. LLC/Safeway, Inc./New Albertson’s, Inc./Albertson’s LLC 5.75%, 3/15/25(a) | | | | | | | 3,777 | | | | 3,728,617 | |
6.625%, 6/15/24(a) | | | | | | | 9,979 | | | | 10,353,213 | |
Alere, Inc. 6.375%, 7/01/23(a) | | | | | | | 1,482 | | | | 1,526,460 | |
7.25%, 7/01/18 | | | | | | | 3,046 | | | | 3,099,305 | |
Amsurg Corp. 5.625%, 7/15/22 | | | | | | | 5,163 | | | | 5,266,260 | |
Aramark Services, Inc. 5.125%, 1/15/24 | | | | | | | 1,484 | | | | 1,554,490 | |
5.75%, 3/15/20 | | | | | | | 604 | | | | 621,365 | |
BI-LO LLC/BI-LO Finance Corp. 8.625% (8.625% Cash or 9.375% PIK), 9/15/18(a)(h) | | | | | | | 12,017 | | | | 7,570,710 | |
9.25%, 2/15/19(a) | | | | | | | 6,688 | | | | 5,801,840 | |
Boparan Finance PLC 5.25%, 7/15/19(a)(b) | | | GBP | | | | 5,799 | | | | 6,931,741 | |
5.50%, 7/15/21(a) | | | | | | | 9,185 | | | | 10,258,726 | |
Cerba European Lab SAS 7.00%, 2/01/20(a) | | | EUR | | | | 4,950 | | | | 5,614,484 | |
Cerberus Nightingale 1 SARL 8.25%, 2/01/20(a) | | | | | | | 1,000 | | | | 1,122,449 | |
CHS/Community Health Systems, Inc. 6.875%, 2/01/22 | | | U.S.$ | | | | 31,582 | | | | 24,081,275 | |
Concordia International Corp. 7.00%, 4/15/23(a) | | | | | | | 1,245 | | | | 715,875 | |
9.50%, 10/21/22(a) | | | | | | | 24,166 | | | | 14,862,090 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
DaVita, Inc. 5.00%, 5/01/25 | | | U.S.$ | | | | 9,884 | | | $ | 9,538,060 | |
Endo Finance LLC/Endo Finco, Inc. 7.25%, 1/15/22(a) | | | | | | | 3,035 | | | | 2,875,663 | |
Endo Ltd./Endo Finance LLC/Endo Finco, Inc. 6.00%, 7/15/23(a) | | | | | | | 5,038 | | | | 4,383,060 | |
6.50%, 2/01/25(a)(k) | | | | | | | 16,091 | | | | 13,556,667 | |
First Quality Finance Co., Inc. 4.625%, 5/15/21(a) | | | | | | | 16,738 | | | | 16,800,767 | |
Galaxy Bidco Ltd. 6.375%, 11/15/20(a) | | | GBP | | | | 4,512 | | | | 5,653,576 | |
HCA, Inc. 4.25%, 10/15/19 | | | U.S.$ | | | | 3,274 | | | | 3,396,775 | |
5.375%, 2/01/25 | | | | | | | 441 | | | | 450,129 | |
5.875%, 3/15/22-2/15/26 | | | | | | | 7,379 | | | | 7,870,450 | |
Hill-Rom Holdings, Inc. 5.75%, 9/01/23(a) | | | | | | | 1,473 | | | | 1,546,650 | |
Holding Medi-Partenaires SAS 7.00%, 5/15/20(a) | | | EUR | | | | 6,584 | | | | 7,585,876 | |
Horizon Pharma, Inc. 6.625%, 5/01/23(b) | | | U.S.$ | | | | 9,168 | | | | 8,652,300 | |
Horizon Pharma, Inc./Horizon Pharma USA, Inc. 8.75%, 11/01/24(a) | | | | | | | 4,526 | | | | 4,593,890 | |
HRG Group, Inc. 7.875%, 7/15/19 | | | | | | | 12,371 | | | | 12,958,622 | |
IASIS Healthcare LLC/IASIS Capital Corp. 8.375%, 5/15/19 | | | | | | | 12,035 | | | | 11,463,337 | |
Kinetic Concepts, Inc./KCI USA, Inc. 9.625%, 10/01/21(a) | | | | | | | 17,923 | | | | 17,318,099 | |
LifePoint Health, Inc. 5.875%, 12/01/23 | | | | | | | 7,809 | | | | 7,926,135 | |
Mallinckrodt International Finance SA/Mallinckrodt CB LLC 5.50%, 4/15/25(a) | | | | | | | 10,965 | | | | 10,142,625 | |
5.625%, 10/15/23(a) | | | | | | | 5,736 | | | | 5,391,840 | |
5.75%, 8/01/22(a) | | | | | | | 54 | | | | 51,165 | |
MEDNAX, Inc. 5.25%, 12/01/23(a) | | | | | | | 2,302 | | | | 2,405,590 | |
MPH Acquisition Holdings LLC 7.125%, 6/01/24(a) | | | | | | | 6,560 | | | | 7,018,544 | |
NBTY, Inc. 7.625%, 5/15/21(a) | | | | | | | 16,080 | | | | 15,718,200 | |
Post Holdings, Inc. 5.00%, 8/15/26(a) | | | | | | | 11,791 | | | | 11,437,270 | |
6.00%, 12/15/22(a) | | | | | | | 2,096 | | | | 2,211,280 | |
8.00%, 7/15/25(a) | | | | | | | 607 | | | | 691,980 | |
Revlon Consumer Products Corp. 6.25%, 8/01/24(a) | | | | | | | 3,601 | | | | 3,709,030 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
RSI Home Products, Inc. 6.50%, 3/15/23(a) | | | U.S.$ | | | | 14,852 | | | $ | 15,743,120 | |
Smithfield Foods, Inc. 5.25%, 8/01/18(a) | | | | | | | 1,589 | | | | 1,600,918 | |
5.875%, 8/01/21(a) | | | | | | | 5,820 | | | | 6,067,350 | |
6.625%, 8/15/22 | | | | | | | 1,516 | | | | 1,597,485 | |
Spectrum Brands, Inc. 4.00%, 10/01/26(a) | | | EUR | | | | 3,459 | | | | 3,892,045 | |
6.125%, 12/15/24 | | | U.S.$ | | | | 1,915 | | | | 2,096,925 | |
6.625%, 11/15/22 | | | | | | | 2,624 | | | | 2,812,613 | |
Surgical Care Affiliates, Inc. 6.00%, 4/01/23(a) | | | | | | | 2,748 | | | | 2,864,790 | |
Synlab Bondco PLC 6.25%, 7/01/22(a) | | | EUR | | | | 9,492 | | | | 11,254,472 | |
Synlab Unsecured Bondco PLC 8.25%, 7/01/23(a) | | | | | | | 3,869 | | | | 4,576,777 | |
Tenet Healthcare Corp. 6.75%, 6/15/23 | | | U.S.$ | | | | 8,125 | | | | 7,464,844 | |
6.875%, 11/15/31 | | | | | | | 16,407 | | | | 13,166,617 | |
8.125%, 4/01/22 | | | | | | | 4,631 | | | | 4,526,803 | |
Valeant Pharmaceuticals International 6.75%, 8/15/21(a) | | | | | | | 2,100 | | | | 1,816,500 | |
7.25%, 7/15/22(a) | | | | | | | 5,402 | | | | 4,699,740 | |
Valeant Pharmaceuticals International, Inc. 5.50%, 3/01/23(a) | | | | | | | 1,466 | | | | 1,150,810 | |
5.875%, 5/15/23(a) | | | | | | | 2,975 | | | | 2,350,250 | |
6.125%, 4/15/25(a) | | | | | | | 13,140 | | | | 10,380,600 | |
Valvoline, Inc. 5.50%, 7/15/24(a) | | | | | | | 1,738 | | | | 1,833,590 | |
Vizient, Inc. 10.375%, 3/01/24(a) | | | | | | | 2,066 | | | | 2,303,590 | |
Voyage Care Bondco PLC 6.50%, 8/01/18(a) | | | GBP | | | | 4,750 | | | | 5,840,744 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 422,214,063 | |
| | | | | | | | | | | | |
Energy – 4.4% | | | | | | | | | | | | |
Antero Resources Corp. 5.625%, 6/01/23 | | | U.S.$ | | | | 2,422 | | | | 2,470,440 | |
6.00%, 12/01/20 | | | | | | | 16 | | | | 16,460 | |
Berry Petroleum Co. LLC 6.50%, 9/15/22(d)(e) | | | | | | | 18,405 | | | | 10,122,750 | |
California Resources Corp. 5.00%, 1/15/20 | | | | | | | 1,806 | | | | 1,119,720 | |
5.50%, 9/15/21 | | | | | | | 1,846 | | | | 1,089,140 | |
6.00%, 11/15/24 | | | | | | | 1,594 | | | | 876,700 | |
8.00%, 12/15/22(a) | | | | | | | 5,980 | | | | 4,036,500 | |
Carrizo Oil & Gas, Inc. 7.50%, 9/15/20 | | | | | | | 1,394 | | | | 1,448,018 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Cenovus Energy, Inc. 3.00%, 8/15/22 | | | U.S.$ | | | | 495 | | | $ | 481,115 | |
3.80%, 9/15/23 | | | | | | | 280 | | | | 276,137 | |
4.45%, 9/15/42 | | | | | | | 4,289 | | | | 3,759,532 | |
5.70%, 10/15/19 | | | | | | | 6,360 | | | | 6,872,565 | |
6.75%, 11/15/39 | | | | | | | 373 | | | | 416,376 | |
CHC Helicopter SA 9.25%, 10/15/20(d)(e)(f) | | | | | | | 31,420 | | | | 15,474,301 | |
9.375%, 6/01/21(d)(e)(f) | | | | | | | 1,253 | | | | 366,561 | |
Cheniere Corpus Christi Holdings LLC 7.00%, 6/30/24(a) | | | | | | | 10,458 | | | | 11,085,480 | |
Chesapeake Energy Corp. 4.875%, 4/15/22(b) | | | | | | | 9,619 | | | | 8,176,150 | |
6.125%, 2/15/21 | | | | | | | 4,834 | | | | 4,423,110 | |
Cobalt International Energy, Inc. 2.625%, 12/01/19(i) | | | | | | | 4,083 | | | | 1,878,180 | |
Continental Resources, Inc./OK 3.80%, 6/01/24 | | | | | | | 517 | | | | 475,640 | |
4.90%, 6/01/44 | | | | | | | 2,314 | | | | 1,969,793 | |
5.00%, 9/15/22 | | | | | | | 715 | | | | 700,700 | |
DCP Midstream Operating LP 3.875%, 3/15/23 | | | | | | | 4,357 | | | | 4,237,182 | |
5.60%, 4/01/44 | | | | | | | 10,432 | | | | 9,780,000 | |
Denbury Resources, Inc. 4.625%, 7/15/23 | | | | | | | 2,703 | | | | 1,966,433 | |
5.50%, 5/01/22 | | | | | | | 1,295 | | | | 1,023,050 | |
Diamond Offshore Drilling, Inc. 4.875%, 11/01/43 | | | | | | | 8,521 | | | | 6,241,973 | |
5.70%, 10/15/39 | | | | | | | 3,966 | | | | 3,312,256 | |
Energy Transfer Equity LP 5.875%, 1/15/24 | | | | | | | 768 | | | | 780,576 | |
7.50%, 10/15/20 | | | | | | | 6,077 | | | | 6,623,930 | |
Ensco PLC 4.50%, 10/01/24 | | | | | | | 1,712 | | | | 1,369,600 | |
5.20%, 3/15/25 | | | | | | | 2,567 | | | | 2,088,100 | |
EP Energy LLC/Everest Acquisition Finance, Inc. 6.375%, 6/15/23 | | | | | | | 1,899 | | | | 1,291,320 | |
7.75%, 9/01/22 | | | | | | | 1,866 | | | | 1,268,880 | |
9.375%, 5/01/20 | | | | | | | 12,108 | | | | 9,504,780 | |
Global Partners LP/GLP Finance Corp. 6.25%, 7/15/22 | | | | | | | 16,442 | | | | 15,702,110 | |
Golden Energy Offshore Services AS 5.00%, 12/31/17(c) | | | NOK | | | | 33,602 | | | | 1,098,073 | |
Hilcorp Energy I LP/Hilcorp Finance Co. 5.75%, 10/01/25(a) | | | U.S.$ | | | | 2,366 | | | | 2,371,915 | |
Hornbeck Offshore Services, Inc. 5.00%, 3/01/21 | | | | | | | 5,000 | | | | 2,975,000 | |
5.875%, 4/01/20 | | | | | | | 4,695 | | | | 3,028,275 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Laredo Petroleum, Inc. 5.625%, 1/15/22 | | | U.S.$ | | | | 1,777 | | | $ | 1,732,575 | |
7.375%, 5/01/22 | | | | | | | 5,638 | | | | 5,807,140 | |
Linn Energy LLC/Linn Energy Finance Corp. 6.25%, 11/01/19(d)(e) | | | | | | | 2,788 | | | | 927,010 | |
6.50%, 9/15/21 | | | | | | | 655 | | | | 212,875 | |
8.625%, 4/15/20(d)(e) | | | | | | | 4,190 | | | | 1,372,225 | |
Murphy Oil Corp. 6.875%, 8/15/24 | | | | | | | 1,315 | | | | 1,387,266 | |
NGL Energy Partners LP/NGL Energy Finance Corp. 7.50%, 11/01/23(a) | | | | | | | 5,733 | | | | 5,747,332 | |
Noble Holding International Ltd. 3.95%, 3/15/22 | | | | | | | 5,106 | | | | 3,918,855 | |
5.25%, 3/15/42 | | | | | | | 1,180 | | | | 666,700 | |
7.20%, 4/01/25(l) | | | | | | | 2,289 | | | | 1,865,535 | |
8.20%, 4/01/45 | | | | | | | 2,932 | | | | 1,975,435 | |
Northern Oil and Gas, Inc. 8.00%, 6/01/20 | | | | | | | 3,075 | | | | 2,429,250 | |
Oasis Petroleum, Inc. 6.50%, 11/01/21 | | | | | | | 646 | | | | 641,963 | |
6.875%, 3/15/22-1/15/23(b) | | | | | | | 6,614 | | | | 6,538,960 | |
Pacific Drilling SA 5.375%, 6/01/20(a) | | | | | | | 12,449 | | | | 3,547,965 | |
Paragon Offshore PLC 6.75%, 7/15/22(a)(d)(e) | | | | | | | 17,781 | | | | 3,556,200 | |
7.25%, 8/15/24(a)(d)(e) | | | | | | | 6,607 | | | | 1,321,400 | |
PDC Energy, Inc. 6.125%, 9/15/24(a) | | | | | | | 3,203 | | | | 3,331,120 | |
PHI, Inc. 5.25%, 3/15/19 | | | | | | | 7,518 | | | | 7,236,075 | |
Precision Drilling Corp. 6.50%, 12/15/21 | | | | | | | 1,870 | | | | 1,806,888 | |
QEP Resources, Inc. 5.25%, 5/01/23 | | | | | | | 4,020 | | | | 3,949,650 | |
5.375%, 10/01/22 | | | | | | | 1,061 | | | | 1,050,390 | |
6.875%, 3/01/21 | | | | | | | 3,871 | | | | 4,074,227 | |
Range Resources Corp. 5.00%, 3/15/23(a)(b) | | | | | | | 5,789 | | | | 5,600,857 | |
Sabine Pass Liquefaction LLC 5.75%, 5/15/24 | | | | | | | 3,851 | | | | 4,072,432 | |
5.875%, 6/30/26(a) | | | | | | | 5,926 | | | | 6,386,450 | |
6.25%, 3/15/22 | | | | | | | 3,000 | | | | 3,285,000 | |
Sabine Pass LNG LP 6.50%, 11/01/20 | | | | | | | 2,949 | | | | 3,054,810 | |
Sanchez Energy Corp. 6.125%, 1/15/23 | | | | | | | 5,546 | | | | 4,741,830 | |
SandRidge Energy, Inc. Zero Coupon, 10/04/20(d)(i) | | | | | | | 1,072 | | | | 1,313,092 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
7.50%, 2/15/23(d) | | | U.S.$ | | | | 1,970 | | | $ | – 0 | – |
8.125%, 10/15/22(d) | | | | | | | 15,534 | | | | – 0 | – |
8.75%, 6/01/20(d) | | | | | | | 4,745 | | | | – 0 | – |
Seitel, Inc. 9.50%, 4/15/19 | | | | | | | 2,574 | | | | 2,287,643 | |
SM Energy Co. 5.00%, 1/15/24 | | | | | | | 2,390 | | | | 2,222,700 | |
5.625%, 6/01/25 | | | | | | | 3,563 | | | | 3,393,758 | |
6.50%, 1/01/23 | | | | | | | 2,737 | | | | 2,723,315 | |
6.75%, 9/15/26 | | | | | | | 3,935 | | | | 4,033,375 | |
Southern Star Central Corp. 5.125%, 7/15/22(a) | | | | | | | 6,100 | | | | 6,206,750 | |
Targa Resources Partners LP/Targa Resources Partners Finance Corp. 4.25%, 11/15/23 | | | | | | | 4,946 | | | | 4,649,240 | |
6.375%, 8/01/22 | | | | | | | 2,736 | | | | 2,818,080 | |
Tervita Corp. 8.00%, 11/15/18(a) | | | | | | | 12,243 | | | | 12,120,570 | |
9.75%, 11/01/19(a)(d)(e) | | | | | | | 6,510 | | | | 374,325 | |
10.875%, 2/15/18(a)(d)(e) | | | | | | | 23,005 | | | | 1,322,788 | |
Transocean Phoenix 2 Ltd. 7.75%, 10/15/24(a) | | | | | | | 8,000 | | | | 8,350,000 | |
Transocean, Inc. 5.05%, 10/15/22 | | | | | | | 2,466 | | | | 2,108,430 | |
6.80%, 3/15/38 | | | | | | | 13,720 | | | | 9,020,900 | |
7.50%, 4/15/31 | | | | | | | 1,800 | | | | 1,278,000 | |
9.00%, 7/15/23(a) | | | | | | | 6,110 | | | | 5,968,706 | |
Vantage Drilling International 7.125%, 4/01/23(d)(g)(j) | | | | | | | 8,325 | | | | – 0 | – |
7.50%, 11/01/19(d)(g)(j) | | | | | | | 8,860 | | | | – 0 | – |
10.00%, 12/31/20(j) | | | | | | | 521 | | | | 470,203 | |
10.00%, 12/31/20(c) | | | | | | | 431 | | | | 388,978 | |
Weatherford International Ltd. 4.50%, 4/15/22 | | | | | | | 672 | | | | 604,800 | |
5.95%, 4/15/42 | | | | | | | 2,757 | | | | 2,081,535 | |
6.50%, 8/01/36 | | | | | | | 4,003 | | | | 3,162,370 | |
6.75%, 9/15/40 | | | | | | | 4,691 | | | | 3,717,617 | |
7.00%, 3/15/38 | | | | | | | 4,190 | | | | 3,456,750 | |
Whiting Petroleum Corp. 1.25%, 4/01/20(i) | | | | | | | 2,925 | | | | 2,453,344 | |
5.00%, 3/15/19 | | | | | | | 1,768 | | | | 1,679,600 | |
WPX Energy, Inc. 5.25%, 9/15/24 | | | | | | | 6,542 | | | | 6,214,900 | |
8.25%, 8/01/23 | | | | | | | 1,315 | | | | 1,420,200 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 340,279,205 | |
| | | | | | | | | | | | |
Other Industrial – 0.5% | | | | | | | | | | | | |
Algeco Scotsman Global Finance PLC 8.50%, 10/15/18(a) | | | | | | | 7,510 | | | | 6,815,325 | |
9.00%, 10/15/18(a) | | | EUR | | | | 1,810 | | | | 1,812,594 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
B456 Systems, Inc. 3.75%, 4/15/16(d)(i)(j)(m) | | | U.S.$ | | | | 3,985 | | | $ | 159,400 | |
Briggs & Stratton Corp. 6.875%, 12/15/20 | | | | | | | 737 | | | | 816,228 | |
General Cable Corp. 5.75%, 10/01/22 | | | | | | | 9,213 | | | | 8,706,285 | |
Laureate Education, Inc. 10.00%, 9/01/19(a) | | | | | | | 17,457 | | | | 16,147,725 | |
Liberty Tire Recycling LLC 11.00%, 3/31/21(c)(g)(h) | | | | | | | 2,291 | | | | 1,669,556 | |
Modular Space Corp. 10.25%, 1/31/19(c)(d)(e) | | | | | | | 6,839 | | | | 2,940,770 | |
New Enterprise Stone & Lime Co., Inc. 11.00%, 9/01/18 | | | | | | | 2,884 | | | | 2,855,160 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 41,923,043 | |
| | | | | | | | | | | | |
Services – 0.9% | | | | | | | | | | | | |
APX Group, Inc. 6.375%, 12/01/19 | | | | | | | 2,625 | | | | 2,707,031 | |
7.875%, 12/01/22(b) | | | | | | | 8,405 | | | | 8,846,347 | |
8.75%, 12/01/20 | | | | | | | 7,221 | | | | 6,986,317 | |
eDreams ODIGEO SA 8.50%, 8/01/21(a) | | | EUR | | | | 10,411 | | | | 11,692,220 | |
GEO Group, Inc. (The) 5.125%, 4/01/23 | | | U.S.$ | | | | 1,054 | | | | 918,298 | |
5.875%, 1/15/22-10/15/24 | | | | | | | 4,401 | | | | 4,083,368 | |
6.00%, 4/15/26 | | | | | | | 1,318 | | | | 1,136,775 | |
IHS Markit Ltd. 5.00%, 11/01/22(a) | | | | | | | 3,524 | | | | 3,726,630 | |
Prime Security Services Borrower LLC/Prime Finance, Inc. 9.25%, 5/15/23(a) | | | | | | | 26,686 | | | | 28,353,875 | |
Service Corp. International/US 7.50%, 4/01/27 | | | | | | | 1,575 | | | | 1,842,750 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 70,293,611 | |
| | | | | | | | | | | | |
Technology – 2.0% | | | | | | | | | | | | |
Amkor Technology, Inc. 6.375%, 10/01/22 | | | | | | | 10,924 | | | | 11,265,375 | |
Avaya, Inc. 7.00%, 4/01/19(a) | | | | | | | 12,501 | | | | 10,157,062 | |
10.50%, 3/01/21(a) | | | | | | | 15,892 | | | | 5,244,360 | |
BMC Software Finance, Inc. 8.125%, 7/15/21(a) | | | | | | | 15,535 | | | | 14,214,525 | |
BMC Software, Inc. 7.25%, 6/01/18 | | | | | | | 337 | | | | 335,315 | |
Boxer Parent Co., Inc. 9.00% (9.00% Cash or 9.75% PIK), 10/15/19(a)(h) | | | | | | | 2,450 | | | | 2,254,000 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
CDW LLC/CDW Finance Corp. 5.50%, 12/01/24 | | | U.S.$ | | | | 1,272 | | | $ | 1,335,994 | |
Ceridian HCM Holding, Inc. 11.00%, 3/15/21(a) | | | | | | | 7,458 | | | | 7,849,545 | |
Compiler Finance Sub, Inc. 7.00%, 5/01/21(a) | | | | | | | 1,945 | | | | 904,425 | |
Dell, Inc. 6.50%, 4/15/38 | | | | | | | 8,083 | | | | 7,800,095 | |
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 7.125%, 6/15/24(a) | | | | | | | 3,997 | | | | 4,378,534 | |
Energizer Holdings, Inc. 5.50%, 6/15/25(a) | | | | | | | 6,119 | | | | 6,195,487 | |
First Data Corp. 6.75%, 11/01/20(a) | | | | | | | 1,058 | | | | 1,093,708 | |
General Cable Corp. 4.50%, 11/15/29(i)(k) | | | | | | | 5,909 | | | | 3,807,612 | |
Goodman Networks, Inc. 12.125%, 7/01/18 | | | | | | | 8,670 | | | | 3,706,425 | |
Infor Software Parent LLC/Infor Software Parent, Inc. 7.125% (7.125% Cash or 7.875% PIK), 5/01/21(a)(h) | | | | | | | 3,335 | | | | 3,376,688 | |
Infor US, Inc. 6.50%, 5/15/22 | | | | | | | 7,478 | | | | 7,730,382 | |
Iron Mountain, Inc. 5.75%, 8/15/24 | | | | | | | 3,155 | | | | 3,233,875 | |
Micron Technology, Inc. 5.25%, 8/01/23-1/15/24(a) | | | | | | | 5,769 | | | | 5,641,170 | |
5.50%, 2/01/25 | | | | | | | 14,490 | | | | 14,204,692 | |
NXP BV/NXP Funding LLC 5.75%, 2/15/21-3/15/23(a) | | | | | | | 8,374 | | | | 8,804,710 | |
Sabre GLBL, Inc. 5.25%, 11/15/23(a) | | | | | | | 1,648 | | | | 1,691,260 | |
5.375%, 4/15/23(a) | | | | | | | 4,041 | | | | 4,147,076 | |
Solera LLC/Solera Finance, Inc. 10.50%, 3/01/24(a) | | | | | | | 8,868 | | | | 9,912,828 | |
Sophia LP/Sophia Finance, Inc. 9.00%, 9/30/23(a) | | | | | | | 3,878 | | | | 4,071,900 | |
Syniverse Holdings, Inc. 9.125%, 1/15/19 | | | | | | | 1,598 | | | | 1,278,400 | |
Western Digital Corp. 10.50%, 4/01/24(a) | | | | | | | 10,757 | | | | 12,424,335 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 157,059,778 | |
| | | | | | | | | | | | |
Transportation - Airlines – 0.0% | | | | | | | | | | | | |
UAL Pass-Through Trust Series 2007-1A 6.636%, 7/02/22 | | | | | | | 1,528 | | | | 1,627,847 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Transportation - Services – 0.8% | | | | | | | | | | | | |
Avis Budget Car Rental LLC/Avis Budget Finance, Inc. 5.25%, 3/15/25(a) | | | U.S.$ | | | | 5,359 | | | $ | 5,091,050 | |
5.50%, 4/01/23 | | | | | | | 6,011 | | | | 5,950,890 | |
CEVA Group PLC 9.00%, 9/01/21(a) | | | | | | | 10,987 | | | | 7,127,816 | |
EC Finance PLC 5.125%, 7/15/21(a) | | | EUR | | | | 4,232 | | | | 4,838,474 | |
Europcar Groupe SA 5.75%, 6/15/22(a)(b) | | | | | | | 2,550 | | | | 2,922,822 | |
Hertz Corp. (The) 5.50%, 10/15/24(a)(b) | | | U.S.$ | | | | 22,897 | | | | 22,230,697 | |
XPO CNW, Inc. 6.70%, 5/01/34 | | | | | | | 13,854 | | | | 11,083,200 | |
XPO Logistics, Inc. 6.125%, 9/01/23(a) | | | | | | | 2,430 | | | | 2,499,862 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 61,744,811 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,694,474,245 | |
| | | | | | | | | | | | |
Financial Institutions – 4.5% | | | | | | | | | | | | |
Banking – 2.9% | | | | | | | | | | | | |
Ally Financial, Inc. 4.125%, 3/30/20 | | | | | | | 505 | | | | 513,206 | |
8.00%, 11/01/31 | | | | | | | 6,998 | | | | 8,378,790 | |
Banco Bilbao Vizcaya Argentaria SA 6.75%, 2/18/20(a)(n) | | | EUR | | | | 1,800 | | | | 1,904,322 | |
8.875%, 4/14/21(a)(n) | | | | | | | 2,800 | | | | 3,311,912 | |
Bank of America Corp. Series AA 6.10%, 3/17/25(n) | | | U.S.$ | | | | 7,966 | | | | 8,334,826 | |
Series X 6.25%, 9/05/24(n) | | | | | | | 521 | | | | 545,747 | |
Series Z 6.50%, 10/23/24(n) | | | | | | | 4,009 | | | | 4,349,765 | |
Bank of Ireland Series E 10.00%, 2/12/20(a) | | | EUR | | | | 2,270 | | | | 3,052,581 | |
Barclays Bank PLC 6.86%, 6/15/32(a)(n) | | | U.S.$ | | | | 838 | | | | 973,295 | |
7.625%, 11/21/22 | | | | | | | 6,508 | | | | 7,264,555 | |
7.70%, 4/25/18(a)(n) | | | | | | | 4,629 | | | | 4,831,338 | |
7.75%, 4/10/23 | | | | | | | 11,559 | | | | 12,136,950 | |
Barclays PLC 8.00%, 12/15/20(n) | | | EUR | | | | 622 | | | | 699,017 | |
BBVA International Preferred SAU 1.349% (EURIBOR 3 Month + 1.65%), 12/22/16(n)(o) | | | | | | | 3,030 | | | | 2,900,298 | |
1.649% (EURIBOR 3 Month + 1.95%), 12/20/16(a)(b)(n)(o) | | | | | | | 8,900 | | | | 8,939,117 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Citigroup, Inc. 5.95%, 1/30/23(n) | | | U.S.$ | | | | 14,778 | | | $ | 15,332,175 | |
Series M 6.30%, 5/15/24(n) | | | | | | | 7,000 | | | | 7,166,250 | |
Countrywide Capital III Series B 8.05%, 6/15/27 | | | | | | | 11,735 | | | | 14,709,470 | |
Credit Agricole SA 7.589%, 1/30/20(n) | | | GBP | | | | 4,950 | | | | 6,664,680 | |
8.125%, 12/23/25(a)(n) | | | U.S.$ | | | | 5,635 | | | | 6,085,800 | |
Credit Suisse Group AG 7.50%, 12/11/23(a)(n) | | | | | | | 22,644 | | | | 23,464,845 | |
Dresdner Funding Trust I 8.151%, 6/30/31(a) | | | | | | | 816 | | | | 970,020 | |
HT1 Funding GmbH 6.352%, 6/30/17(b)(n) | | | EUR | | | | 2,700 | | | | 2,938,732 | |
Intesa Sanpaolo SpA 5.017%, 6/26/24(a) | | | U.S.$ | | | | 3,834 | | | | 3,557,879 | |
5.71%, 1/15/26(a) | | | | | | | 5,445 | | | | 5,185,252 | |
Lloyds Banking Group PLC 6.413%, 10/01/35(a)(n) | | | | | | | 3,709 | | | | 4,093,809 | |
6.657%, 5/21/37(a)(n) | | | | | | | 1,801 | | | | 2,003,612 | |
7.50%, 6/27/24(n) | | | | | | | 3,535 | | | | 3,641,050 | |
Royal Bank of Scotland Group PLC 8.00%, 8/10/25(n) | | | | | | | 6,129 | | | | 5,822,550 | |
8.625%, 8/15/21(n) | | | | | | | 16,266 | | | | 16,184,670 | |
Series U 7.64%, 9/30/17(n) | | | | | | | 1,200 | | | | 1,164,000 | |
Royal Bank of Scotland PLC (The) 9.50%, 3/16/22(a) | | | | | | | 253 | | | | 259,641 | |
SNS Bank NV 11.25%, 12/31/99(d)(g)(j)(n) | | | EUR | | | | 1,001 | | | | – 0 | – |
Societe Generale SA 7.375%, 9/13/21(a)(n) | | | U.S.$ | | | | 9,852 | | | | 9,815,055 | |
8.00%, 9/29/25(a)(n) | | | | | | | 11,901 | | | | 12,020,010 | |
Standard Chartered PLC 6.409%, 1/30/17(a)(b)(n) | | | | | | | 3,500 | | | | 3,399,375 | |
UBS Group AG 7.00%, 2/19/25(a)(n) | | | | | | | 11,235 | | | | 11,993,362 | |
Zions Bancorporation 5.65%, 11/15/23 | | | | | | | 2,289 | | | | 2,342,334 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 226,950,290 | |
| | | | | | | | | | | | |
Brokerage – 0.0% | | | | | | | | | | | | |
Lehman Brothers Holdings, Inc. 6.875%, 5/02/18(d) | | | | | | | 1,600 | | | | 96,800 | |
Series G 4.80%, 3/13/14(d)(m) | | | | | | | 1,800 | | | | 106,020 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 202,820 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Finance – 0.7% | | | | | | | | | | | | |
Artsonig Pty Ltd. 11.50% (11.50% Cash or 12.00% PIK), 4/01/19(a)(h) | | | U.S.$ | | | | 16,073 | | | $ | 1,285,802 | |
Creditcorp 12.00%, 7/15/18(c) | | | | | | | 6,205 | | | | 2,947,375 | |
Enova International, Inc. 9.75%, 6/01/21 | | | | | | | 12,138 | | | | 11,379,375 | |
ILFC E-Capital Trust II 4.25%, 12/21/65(a)(o) | | | | | | | 1,500 | | | | 1,222,500 | |
Navient Corp. 4.875%, 6/17/19 | | | | | | | 5,837 | | | | 5,888,074 | |
5.50%, 1/15/19-1/25/23 | | | | | | | 2,213 | | | | 2,232,848 | |
5.875%, 3/25/21 | | | | | | | 3,619 | | | | 3,623,524 | |
6.125%, 3/25/24 | | | | | | | 1,255 | | | | 1,148,325 | |
6.625%, 7/26/21 | | | | | | | 4,403 | | | | 4,436,022 | |
7.25%, 1/25/22 | | | | | | | 1,638 | | | | 1,654,380 | |
8.00%, 3/25/20 | | | | | | | 7,546 | | | | 8,187,410 | |
Oxford Finance LLC/Oxford Finance Co-Issuer, Inc. 7.25%, 1/15/18(a) | | | | | | | 1,492 | | | | 1,506,920 | |
TMX Finance LLC/TitleMax Finance Corp. 8.50%, 9/15/18(a) | | | | | | | 14,675 | | �� | | 11,006,250 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 56,518,805 | |
| | | | | | | | | | | | |
Insurance – 0.4% | | | | | | | | | | | | |
American Equity Investment Life Holding Co. 6.625%, 7/15/21 | | | | | | | 3,087 | | | | 3,225,915 | |
Genworth Holdings, Inc. 6.15%, 11/15/66 | | | | | | | 809 | | | | 386,298 | |
7.625%, 9/24/21 | | | | | | | 4,725 | | | | 4,429,687 | |
Liberty Mutual Group, Inc. 7.80%, 3/15/37(a) | | | | | | | 14,759 | | | | 17,341,825 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 25,383,725 | |
| | | | | | | | | | | | |
Other Finance – 0.4% | | | | | | | | | | | | |
CNG Holdings, Inc. 9.375%, 5/15/20(a) | | | | | | | 3,774 | | | | 2,471,970 | |
iPayment, Inc. 9.50%, 12/15/19(c) | | | | | | | 10,368 | | | | 10,432,534 | |
Lincoln Finance Ltd. 6.875%, 4/15/21(a) | | | EUR | | | | 6,507 | | | | 7,760,219 | |
7.375%, 4/15/21(a) | | | U.S.$ | | | | 1,619 | | | | 1,740,425 | |
Speedy Cash Intermediate Holdings Corp. 10.75%, 5/15/18(c) | | | | | | | 4,591 | | | | 3,638,368 | |
Speedy Group Holdings Corp. 12.00%, 11/15/17(c) | | | | | | | 7,281 | | | | 3,604,095 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 29,647,611 | |
| | | | | | | | | | | | |
REITS – 0.1% | | | | | | | | | | | | |
FelCor Lodging LP 5.625%, 3/01/23 | | | | | | | 7,213 | | | | 7,443,744 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
VEREIT Operating Partnership LP 4.875%, 6/01/26 | | | U.S.$ | | | | 1,847 | | | $ | 1,941,326 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 9,385,070 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 348,088,321 | |
| | | | | | | | | | | | |
Utility – 1.1% | | | | | | | | | | | | |
Electric – 1.1% | | | | | | | | | | | | |
AES Corp./VA 4.875%, 5/15/23 | | | | | | | 826 | | | | 819,549 | |
Calpine Corp. 5.50%, 2/01/24 | | | | | | | 5,320 | | | | 5,187,000 | |
5.75%, 1/15/25 | | | | | | | 9,130 | | | | 8,878,925 | |
7.875%, 1/15/23(a) | | | | | | | 808 | | | | 847,390 | |
ContourGlobal Power Holdings SA 5.125%, 6/15/21(a) | | | EUR | | | | 8,608 | | | | 9,891,854 | |
DPL, Inc. 6.75%, 10/01/19 | | | U.S.$ | | | | 1,280 | | | | 1,328,000 | |
Dynegy, Inc. 7.375%, 11/01/22 | | | | | | | 5,633 | | | | 5,432,324 | |
7.625%, 11/01/24 | | | | | | | 5,105 | | | | 4,888,038 | |
Emera, Inc. Series 2016-A 6.75%, 6/15/76 | | | | | | | 6,938 | | | | 7,666,490 | |
FirstEnergy Corp. Series C 7.375%, 11/15/31 | | | | | | | 4,551 | | | | 5,917,310 | |
GenOn Energy, Inc. 7.875%, 6/15/17 | | | | | | | 825 | | | | 676,500 | |
9.50%, 10/15/18 | | | | | | | 8,571 | | | | 6,878,227 | |
NRG Energy, Inc. 6.25%, 7/15/22-5/01/24 | | | | | | | 5,426 | | | | 5,316,228 | |
6.625%, 3/15/23 | | | | | | | 5,121 | | | | 5,108,198 | |
NRG Yield Operating LLC 5.375%, 8/15/24 | | | | | | | 4,311 | | | | 4,397,220 | |
Talen Energy Supply LLC 4.60%, 12/15/21 | | | | | | | 8,074 | | | | 6,615,836 | |
Texas Competitive/tceh 11.50%, 10/01/20(a)(d)(m) | | | | | | | 2,679 | | | | – 0 | – |
Viridian Group FundCo II Ltd. 7.50%, 3/01/20(a) | | | EUR | | | | 7,830 | | | | 9,111,105 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 88,960,194 | |
| | | | | | | | | | | | |
Non Corporate Sectors – 0.0% | | | | | | | | | | | | |
Agencies - Not Government Guaranteed – 0.0% | | | | | | | | | | | | |
NOVA Chemicals Corp. 5.00%, 5/01/25(a) | | | U.S.$ | | | | 2,349 | | | | 2,357,809 | |
| | | | | | | | | | | | |
| | | |
Total Corporates – Non-Investment Grade (cost $3,221,965,041) | | | | | | | | | | | 3,133,880,569 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
GOVERNMENTS – TREASURIES – 18.4% | | | | | | | | | | | | |
Colombia – 0.5% | | | | | | | | | | | | |
Colombia Government International Bond 7.75%, 4/14/21 | | | COP | | | | 12,390,000 | | | $ | 4,347,201 | |
Colombian TES Series B 7.00%, 5/04/22 | | | | | | | 84,097,200 | | | | 28,096,310 | |
10.00%, 7/24/24 | | | | | | | 7,000,000 | | | | 2,735,838 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 35,179,349 | |
| | | | | | | | | | | | |
Mexico – 0.7% | | | | | | | | | | | | |
Mexican Bonos Series M 6.50%, 6/10/21 | | | MXN | | | | 1,003,500 | | | | 54,262,958 | |
| | | | | | | | | | | | |
| | | |
South Africa – 0.0% | | | | | | | | | | | | |
Republic of South Africa Government Bond Series R204 8.00%, 12/21/18 | | | ZAR | | | | 16,800 | | | | 1,250,654 | |
| | | | | | | | | | | | |
| | | |
United States – 17.2% | | | | | | | | | | | | |
U.S. Treasury Bonds 6.125%, 11/15/27(p)(q) | | | U.S.$ | | | | 78,500 | | | | 111,509,878 | |
U.S. Treasury Notes 0.875%, 3/31/18 | | | | | | | 554,000 | | | | 554,670,894 | |
0.875%, 4/15/19(q) | | | | | | | 382,180 | | | | 381,567,748 | |
1.25%, 3/31/21 | | | | | | | 259,848 | | | | 259,502,922 | |
1.625%, 8/31/19 | | | | | | | 7,012 | | | | 7,136,351 | |
2.125%, 8/31/20(q) | | | | | | | 11,300 | | | | 11,696,381 | |
2.50%, 8/15/23(q) | | | | | | | 16,550 | | | | 17,504,852 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,343,589,026 | |
| | | | | | | | | | | | |
Total Governments – Treasuries (cost $1,437,055,314) | | | | | | | | | | | 1,434,281,987 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
COLLATERALIZED MORTGAGE OBLIGATIONS – 9.6% | | | | | | | | | | | | |
Risk Share Floating Rate – 7.4% | | | | | | | | | | | | |
Bellemeade Re II Ltd. Series 2016-1A, Class B1 12.534% (LIBOR 1 Month + 12.00%), 4/25/26(c)(o) | | | | | | | 2,331 | | | | 2,346,179 | |
Series 2016-1A, Class M2B 7.034% (LIBOR 1 Month + 6.50%), 4/25/26(c)(o) | | | | | | | 21,264 | | | | 21,516,631 | |
Bellemeade Re Ltd. Series 2015-1A, Class M2 4.834% (LIBOR 1 Month + 4.30%), 7/25/25(c)(o) | | | | | | | 6,730 | | | | 6,830,950 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes Series 2013-DN1, Class M2 7.684% (LIBOR 1 Month + 7.15%), 7/25/23(o) | | | U.S.$ | | | | 8,995 | | | $ | 10,561,786 | |
Series 2013-DN2, Class M2 4.784% (LIBOR 1 Month + 4.25%), 11/25/23(o) | | | | | | | 7,100 | | | | 7,475,532 | |
Series 2014-DN1, Class M3 5.034% (LIBOR 1 Month + 4.50%), 2/25/24(o) | | | | | | | 13,021 | | | | 14,101,978 | |
Series 2014-DN2, Class M3 4.134% (LIBOR 1 Month + 3.60%), 4/25/24(o) | | | | | | | 5,376 | | | | 5,537,868 | |
Series 2014-DN3, Class M3 4.534% (LIBOR 1 Month + 4.00%), 8/25/24(o) | | | | | | | 10,000 | | | | 10,440,216 | |
Series 2014-DN4, Class M3 5.084% (LIBOR 1 Month + 4.55%), 10/25/24(o) | | | | | | | 1,900 | | | | 2,009,300 | |
Series 2014-HQ1, Class M3 4.634% (LIBOR 1 Month + 4.10%), 8/25/24(o) | | | | | | | 9,416 | | | | 9,765,838 | |
Series 2014-HQ2, Class M3 4.284% (LIBOR 1 Month + 3.75%), 9/25/24(o) | | | | | | | 3,045 | | | | 3,104,976 | |
Series 2014-HQ3, Class M3 5.284% (LIBOR 1 Month + 4.75%), 10/25/24(o) | | | | | | | 9,550 | | | | 10,065,214 | |
Series 2015-DN1, Class B 12.034% (LIBOR 1 Month + 11.50%), 1/25/25(o) | | | | | | | 2,443 | | | | 2,824,953 | |
Series 2015-DN1, Class M3 4.684% (LIBOR 1 Month + 4.15%), 1/25/25(o) | | | | | | | 8,572 | | | | 8,950,249 | |
Series 2015-DNA1, Class M3 3.834% (LIBOR 1 Month + 3.30%), 10/25/27(o) | | | | | | | 1,760 | | | | 1,804,227 | |
Series 2015-DNA2, Class B 8.084% (LIBOR 1 Month + 7.55%), 12/25/27(o) | | | | | | | 16,235 | | | | 16,590,133 | |
Series 2015-DNA3, Class B 9.884% (LIBOR 1 Month + 9.35%), 4/25/28(o) | | | | | | | 7,582 | | | | 8,118,631 | |
Series 2015-DNA3, Class M3 5.234% (LIBOR 1 Month + 4.70%), 4/25/28(o) | | | | | | | 3,021 | | | | 3,181,370 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Series 2015-HQ1, Class M3 4.334% (LIBOR 1 Month + 3.80%), 3/25/25(o) | | | U.S.$ | | | | 3,380 | | | $ | 3,545,279 | |
Series 2015-HQ2, Class B 8.484% (LIBOR 1 Month + 7.95%), 5/25/25(o) | | | | | | | 298 | | | | 311,055 | |
Series 2015-HQA1, Class B 9.334% (LIBOR 1 Month + 8.80%), 3/25/28(o) | | | | | | | 9,169 | | | | 9,253,028 | |
Series 2015-HQA1, Class M3 5.234% (LIBOR 1 Month + 4.70%), 3/25/28(o) | | | | | | | 8,335 | | | | 8,709,347 | |
Series 2015-HQA2, Class B 11.034% (LIBOR 1 Month + 10.50%), 5/25/28(o) | | | | | | | 6,993 | | | | 7,747,857 | |
Series 2015-HQA2, Class M3 5.334% (LIBOR 1 Month + 4.80%), 5/25/28(o) | | | | | | | 1,740 | | | | 1,846,988 | |
Series 2016-DNA1, Class M3 6.084% (LIBOR 1 Month + 5.55%), 7/25/28(o) | | | | | | | 7,042 | | | | 7,610,569 | |
Series 2016-DNA2, Class B 11.034% (LIBOR 1 Month + 10.50%), 10/25/28(o) | | | | | | | 5,076 | | | | 5,639,574 | |
Series 2016-DNA2, Class M3 5.184% (LIBOR 1 Month + 4.65%), 10/25/28(o) | | | | | | | 3,862 | | | | 4,027,190 | |
Series 2016-DNA3, Class B 11.784% (LIBOR 1 Month + 11.25%), 12/25/28(o) | | | | | | | 3,874 | | | | 4,454,025 | |
Series 2016-DNA3, Class M3 5.534% (LIBOR 1 Month + 5.00%), 12/25/28(o) | | | | | | | 16,998 | | | | 18,002,361 | |
Series 2016-DNA4, Class B 9.134% (LIBOR 1 Month + 8.60%), 3/25/29(o) | | | | | | | 1,836 | | | | 1,836,385 | |
Series 2016-DNA4, Class M3 4.334% (LIBOR 1 Month + 3.80%), 3/25/29(o) | | | | | | | 3,632 | | | | 3,587,630 | |
Series 2016-HQA1, Class B 13.284% (LIBOR 1 Month + 12.75%), 9/25/28(o) | | | | | | | 1,000 | | | | 1,223,103 | |
Series 2016-HQA1, Class M3 6.884% (LIBOR 1 Month + 6.35%), 9/25/28(o) | | | | | | | 18,443 | | | | 20,591,120 | |
Series 2016-HQA2, Class B 12.034% (LIBOR 1 Month + 11.50%), 11/25/28(o) | | | | | | | 2,957 | | | | 3,427,724 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Federal National Mortgage Association Connecticut Avenue Securities Series 2013-C01, Class M2 5.784% (LIBOR 1 Month + 5.25%), 10/25/23(o) | | | U.S.$ | | | | 7,285 | | | $ | 8,014,403 | |
Series 2014-C01, Class M2 4.934% (LIBOR 1 Month + 4.40%), 1/25/24(o) | | | | | | | 9,535 | | | | 10,101,006 | |
Series 2014-C02, Class 1M2 3.134% (LIBOR 1 Month + 2.60%), 5/25/24(o) | | | | | | | 3,410 | | | | 3,330,256 | |
Series 2014-C03, Class 1M2 3.534% (LIBOR 1 Month + 3.00%), 7/25/24(o) | | | | | | | 11,973 | | | | 11,990,030 | |
Series 2014-C04, Class 1M2 5.434% (LIBOR 1 Month + 4.90%), 11/25/24(o) | | | | | | | 23,605 | | | | 25,227,679 | |
Series 2014-C04, Class 2M2 5.534% (LIBOR 1 Month + 5.00%), 11/25/24(o) | | | | | | | 3,828 | | | | 4,094,031 | |
Series 2015-C01, Class 1M2 4.834% (LIBOR 1 Month + 4.30%), 2/25/25(o) | | | | | | | 22,959 | | | | 23,804,686 | |
Series 2015-C01, Class 2M2 5.084% (LIBOR 1 Month + 4.55%), 2/25/25(o) | | | | | | | 7,476 | | | | 7,774,883 | |
Series 2015-C02, Class 1M2 4.534% (LIBOR 1 Month + 4.00%), 5/25/25(o) | | | | | | | 5,881 | | | | 6,072,569 | |
Series 2015-C02, Class 2M2 4.534% (LIBOR 1 Month + 4.00%), 5/25/25(o) | | | | | | | 11,991 | | | | 12,368,056 | |
Series 2015-C03, Class 1M2 5.534% (LIBOR 1 Month + 5.00%), 7/25/25(o) | | | | | | | 20,384 | | | | 21,391,004 | |
Series 2015-C03, Class 2M2 5.534% (LIBOR 1 Month + 5.00%), 7/25/25(o) | | | | | | | 14,908 | | | | 15,819,507 | |
Series 2015-C04, Class 1M2 6.234% (LIBOR 1 Month + 5.70%), 4/25/28(o) | | | | | | | 13,295 | | | | 14,176,705 | |
Series 2015-C04, Class 2M2 6.084% (LIBOR 1 Month + 5.55%), 4/25/28(o) | | | | | | | 7,247 | | | | 7,712,179 | |
Series 2016-C01, Class 1B 12.284% (LIBOR 1 Month + 11.75%), 8/25/28(o) | | | | | | | 4,069 | | | | 4,834,961 | |
Series 2016-C01, Class 1M2 7.284% (LIBOR 1 Month + 6.75%), 8/25/28(o) | | | | | | | 11,933 | | | | 13,336,450 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Series 2016-C01, Class 2M2 7.484% (LIBOR 1 Month + 6.95%), 8/25/28(o) | | | U.S.$ | | | | 3,870 | | | $ | 4,339,008 | |
Series 2016-C02, Class 1B 12.784% (LIBOR 1 Month + 12.25%), 9/25/28(o) | | | | | | | 2,900 | | | | 3,616,722 | |
Series 2016-C02, Class 1M2 6.534% (LIBOR 1 Month + 6.00%), 9/25/28(o) | | | | | | | 22,977 | | | | 25,215,782 | |
Series 2016-C03, Class 1B 12.284% (LIBOR 1 Month + 11.75%), 10/25/28(o) | | | | | | | 7,144 | | | | 8,378,109 | |
Series 2016-C03, Class 1M2 5.834% (LIBOR 1 Month + 5.30%), 10/25/28(o) | | | | | | | 2,497 | | | | 2,668,475 | |
Series 2016-C03, Class 2B 13.284% (LIBOR 1 Month + 12.75%), 10/25/28(o) | | | | | | | 4,794 | | | | 5,905,647 | |
Series 2016-C03, Class 2M2 6.434% (LIBOR 1 Month + 5.90%), 10/25/28(o) | | | | | | | 22,833 | | | | 24,586,616 | |
Series 2016-C04, Class 1B 10.784% (LIBOR 1 Month + 10.25%), 1/25/29(o) | | | | | | | 10,779 | | | | 11,903,106 | |
Series 2016-C04, Class 1M2 4.784% (LIBOR 1 Month + 4.25%), 1/25/29(o) | | | | | | | 6,797 | | | | 6,898,904 | |
Series 2016-C05, Class 2B 11.244% (LIBOR 1 Month + 10.75%), 1/25/29(o) | | | | | | | 11,319 | | | | 12,613,232 | |
Series 2016-C05, Class 2M2 4.984% (LIBOR 1 Month + 4.45%), 1/25/29(o) | | | | | | | 15,479 | | | | 15,915,001 | |
JP Morgan Madison Avenue Securities Trust Series 2015-CH1, Class M2 6.034% (LIBOR 1 Month + 5.50%), 10/25/25(a)(o) | | | | | | | 7,778 | | | | 7,584,298 | |
Wells Fargo Credit Risk Transfer Securities Trust Series 2015-WF1, Class 1M2 5.784% (LIBOR 1 Month + 5.25%), 11/25/25(c)(o) | | | | | | | 6,022 | | | | 6,042,866 | |
Series 2015-WF1, Class 2M2 6.034% (LIBOR 1 Month + 5.50%), 11/25/25(c)(o) | | | | | | | 3,341 | | | | 3,341,668 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 576,097,105 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Non-Agency Fixed Rate – 1.9% | | | | | | | | | | | | |
Alternative Loan Trust Series 2005-11CB, Class 2A7 5.50%, 6/25/35 | | | U.S.$ | | | | 4,864 | | | $ | 4,631,083 | |
Series 2005-46CB, Class A2 5.50%, 10/25/35 | | | | | | | 268 | | | | 254,330 | |
Series 2005-46CB, Class A3 5.50%, 10/25/35 | | | | | | | 655 | | | | 621,385 | |
Series 2005-46CB, Class A4 5.25%, 10/25/35 | | | | | | | 288 | | | | 269,598 | |
Series 2005-46CB, Class A7 5.50%, 10/25/35 | | | | | | | 508 | | | | 481,793 | |
Series 2005-46CB, Class A20 5.50%, 10/25/35 | | | | | | | 210 | | | | 199,047 | |
Series 2005-J14, Class A8 5.50%, 12/25/35 | | | | | | | 3,884 | | | | 3,290,956 | |
Series 2006-2CB, Class A11 6.00%, 3/25/36 | | | | | | | 1,729 | | | | 1,436,960 | |
Series 2006-19CB, Class A15 6.00%, 8/25/36 | | | | | | | 640 | | | | 559,631 | |
Series 2006-19CB, Class A24
6.00%, 8/25/36 | | | | | | | 411 | | | | 359,738 | |
Series 2006-24CB, Class A15 5.75%, 6/25/36 | | | | | | | 4,477 | | | | 3,850,049 | |
Series 2006-24CB, Class A16 5.75%, 6/25/36 | | | | | | | 856 | | | | 736,103 | |
Series 2006-26CB, Class A6 6.25%, 9/25/36 | | | | | | | 375 | | | | 311,605 | |
Series 2006-26CB, Class A8 6.25%, 9/25/36 | | | | | | | 1,419 | | | | 1,177,523 | |
Series 2006-41CB, Class 2A13 5.75%, 1/25/37 | | | | | | | 3,870 | | | | 3,132,073 | |
Series 2006-42, Class 1A6 6.00%, 1/25/47 | | | | | | | 1,651 | | | | 1,404,693 | |
Series 2006-HY12, Class A5 2.957%, 8/25/36 | | | | | | | 8,019 | | | | 7,583,544 | |
Series 2006-J1, Class 1A10 5.50%, 2/25/36 | | | | | | | 2,135 | | | | 1,870,122 | |
Series 2006-J5, Class 1A1 6.50%, 9/25/36 | | | | | | | 1,455 | | | | 1,219,217 | |
Series 2007-13, Class A2 6.00%, 6/25/47 | | | | | | | 5,740 | | | | 4,656,369 | |
Series 2007-15CB, Class A19 5.75%, 7/25/37 | | | | | | | 875 | | | | 763,427 | |
Series 2007-16CB, Class 1A7 6.00%, 8/25/37 | | | | | | | 1,090 | | | | 974,416 | |
BCAP LLC Trust Series 2009-RR13, Class 17A3 5.931%, 4/26/37(a) | | | | | | | 3,196 | | | | 2,535,364 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Bear Stearns ARM Trust Series 2007-3, Class 1A1 3.163%, 5/25/47 | | | U.S.$ | | | | 1,603 | | | $ | 1,479,824 | |
Series 2007-4, Class 22A1 4.66%, 6/25/47 | | | | | | | 5,433 | | | | 4,940,936 | |
BNPP Mortgage Securities LLC Trust Series 2009-1, Class B1 6.00%, 8/27/37(a) | | | | | | | 4,623 | | | | 3,465,515 | |
ChaseFlex Trust Series 2007-1, Class 1A3 6.50%, 2/25/37 | | | | | | | 874 | | | | 623,998 | |
Citigroup Mortgage Loan Trust Series 2006-4, Class 2A1A 6.00%, 12/25/35 | | | | | | | 7,935 | | | | 7,385,870 | |
Series 2006-AR3, Class 1A2A 3.195%, 6/25/36 | | | | | | | 2,987 | | | | 2,845,567 | |
Series 2007-AR4, Class 1A1A 5.224%, 3/25/37 | | | | | | | 1,286 | | | | 1,142,383 | |
Series 2010-3, Class 2A2 7.063%, 8/25/37(a) | | | | | | | 2,704 | | | | 2,341,505 | |
CitiMortgage Alternative Loan Trust Series 2007-A3, Class 1A4 5.75%, 3/25/37 | | | | | | | 1,810 | | | | 1,558,769 | |
Countrywide Home Loan Mortgage Pass-Through Trust Series 2006-17, Class A2 6.00%, 12/25/36 | | | | | | | 3,802 | | | | 3,334,807 | |
Series 2007-4, Class 1A39 6.00%, 5/25/37 | | | | | | | 2,733 | | | | 2,318,038 | |
Series 2007-HY4, Class 1A1 3.134%, 9/25/47 | | | | | | | 1,726 | | | | 1,528,485 | |
Series 2007-HYB2, Class 3A1 2.995%, 2/25/47 | | | | | | | 1,881 | | | | 1,544,442 | |
Credit Suisse Mortgage Trust Series 2009-8R, Class 6A2 6.00%, 1/26/38(a) | | | | | | | 692 | | | | 490,266 | |
Series 2010-9R, Class 1A5 4.00%, 8/27/37(a) | | | | | | | 3,558 | | | | 3,490,449 | |
CSMC Mortgage-Backed Trust Series 2006-7, Class 3A12 6.25%, 8/25/36 | | | | | | | 2,688 | | | | 2,293,886 | |
First Horizon Alternative Mortgage Securities Trust Series 2005-AA3, Class 3A1 2.924%, 5/25/35 | | | | | | | 1,108 | | | | 995,878 | |
Series 2006-AA3, Class A1 2.817%, 6/25/36 | | | | | | | 1,405 | | | | 1,136,908 | |
Series 2006-AA5, Class A1 2.785%, 9/25/36 | | | | | | | 4,065 | | | | 3,288,117 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Series 2006-FA1, Class 1A3 5.75%, 4/25/36 | | | U.S.$ | | | | 2,232 | | | $ | 1,769,937 | |
Series 2006-FA3, Class A9 6.00%, 7/25/36 | | | | | | | 1,832 | | | | 1,492,724 | |
IndyMac Index Mortgage Loan Trust Series 2005-AR15, Class A1 3.021%, 9/25/35 | | | | | | | 3,314 | | | | 2,825,597 | |
Series 2006-AR37, Class 2A1 4.184%, 2/25/37 | | | | | | | 1,471 | | | | 1,160,454 | |
Series 2007-AR1, Class 2A1 3.04%, 4/25/37 | | | | | | | 4,319 | | | | 3,519,697 | |
Morgan Stanley Mortgage Loan Trust Series 2005-10, Class 4A1 5.50%, 12/25/35 | | | | | | | 1,936 | | | | 1,725,535 | |
Series 2007-12, Class 3A22 6.00%, 8/25/37 | | | | | | | 536 | | | | 464,068 | |
New Century Alternative Mortgage Loan Trust Series 2006-ALT2, Class AF6A 5.382%, 10/25/36 | | | | | | | 7,956 | | | | 4,776,254 | |
Nomura Resecuritization Trust Series 2010-5RA, Class 1A7 6.50%, 10/26/37(a) | | | | | | | 7,130 | | | | 5,667,459 | |
Residential Accredit Loans, Inc. Trust Series 2005-QA10, Class A31 4.013%, 9/25/35 | | | | | | | 3,841 | | | | 3,234,622 | |
Series 2005-QS14, Class 3A1 6.00%, 9/25/35 | | | | | | | 2,994 | | | | 2,844,815 | |
Residential Asset Securitization Trust Series 2006-A8, Class 3A4 6.00%, 8/25/36 | | | | | | | 1,035 | | | | 825,971 | |
Series 2007-A1, Class A8 6.00%, 3/25/37 | | | | | | | 1,339 | | | | 898,786 | |
Series 2007-A5, Class 2A3 6.00%, 5/25/37 | | | | | | | 463 | | | | 411,183 | |
Structured Adjustable Rate Mortgage Loan Trust Series 2005-18, Class 8A1 3.162%, 9/25/35 | | | | | | | 2,236 | | | | 2,055,323 | |
Series 2006-9, Class 4A1 3.097%, 10/25/36 | | | | | | | 1,555 | | | | 1,319,697 | |
Washington Mutual Mortgage Pass-Through Certificates Trust Series 2006-7, Class A4 4.458%, 9/25/36 | | | | | | | 2,316 | | | | 1,306,233 | |
Series 2006-9, Class A4 5.98%, 10/25/36 | | | | | | | 2,396 | | | | 1,247,777 | |
Series 2007-HY3, Class 4A1 2.79%, 3/25/37 | | | | | | | 3,784 | | | | 3,563,875 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Wells Fargo Alternative Loan Trust Series 2007-PA3, Class 3A1 6.25%, 7/25/37 | | | U.S.$ | | | | 1,843 | | | $ | 1,665,416 | |
Wells Fargo Mortgage Backed Securities Trust Series 2007-10, Class 1A8 6.00%, 7/25/37 | | | | | | | 1,788 | | | | 1,769,642 | |
Series 2007-AR7, Class A1 3.13%, 12/28/37 | | | | | | | 8,184 | | | | 7,504,606 | |
Series 2007-AR8, Class A1 3.133%, 11/25/37 | | | | | | | 3,305 | | | | 2,937,224 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 143,511,564 | |
| | | | | | | | | | | | |
Non-Agency Floating Rate – 0.2% | | | | | | | | | | | | |
Alternative Loan Trust Series 2005-82, Class A1 0.804% (LIBOR 1 Month + 0.27%), 2/25/36(o) | | | | | | | 696 | | | | 547,156 | |
Series 2007-7T2, Class A3 1.134% (LIBOR 1 Month + 0.60%), 4/25/37(o) | | | | | | | 3,433 | | | | 1,334,502 | |
Countrywide Home Loan Mortgage Pass-Through Trust Series 2007-13, Class A7 1.134% (LIBOR 1 Month + 0.60%), 8/25/37(o) | | | | | | | 907 | | | | 639,374 | |
First Horizon Alternative Mortgage Securities Trust Series 2007-FA2, Class 1A10 0.784% (LIBOR 1 Month + 0.25%), 4/25/37(o) | | | | | | | 2,155 | | | | 976,534 | |
Lehman Mortgage Trust Series 2007-1, Class 3A1 0.784% (LIBOR 1 Month + 0.25%), 2/25/37(o) | | | | | | | 3,060 | | | | 560,817 | |
Series 2007-1, Class 3A2 6.716% (7.25% - LIBOR 1 Month), 2/25/37(o)(r) | | | | | | | 3,060 | | | | 1,175,923 | |
Lehman XS Trust Series 2007-16N, Class 2A2 1.384% (LIBOR 1 Month + 0.85%), 9/25/47(o) | | | | | | | 1,242 | | | | 1,017,538 | |
Morgan Stanley Mortgage Loan Trust Series 2006-9AR, Class A2 0.684% (LIBOR 1 Month + 0.15%), 8/25/36(o) | | | | | | | 10,519 | | | | 5,438,261 | |
PHH Alternative Mortgage Trust Series 2007-1, Class 1A1 0.694% (LIBOR 1 Month + 0.16%), 2/25/37(o) | | | | | | | 1,279 | | | | 1,086,002 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Series 2007-2, Class 1A3 0.864% (LIBOR 1 Month + 0.33%), 5/25/37(o) | | | U.S.$ | | | | 1,448 | | | $ | 1,313,554 | |
Structured Asset Mortgage Investments II Trust Series 2007-AR6, Class A1 2.024% (12MTA + 1.50%), 8/25/47(o) | | | | | | | 2,979 | | | | 2,441,369 | |
Washington Mutual Mortgage Pass-Through Certificates Trust Series 2006-AR3, Class A1A 1.524% (12MTA + 1.00%), 2/25/46(o) | | | | | | | 1,220 | | | | 1,116,319 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 17,647,349 | |
| | | | | | | | | | | | |
Agency Floating Rate – 0.1% | | | | | | | | | | | | |
Federal Home Loan Mortgage Corp. REMICs Series 3311, Class IE 5.875% (6.41% – LIBOR 1 Month), 5/15/37(o)(r) | | | | | | | 7,957 | | | | 1,657,258 | |
Government National Mortgage Association Series 2016-120, Class NS 5.574% (6.10% – LIBOR 1 Month), 9/20/46(o)(r) | | | | | | | 17,194 | | | | 4,795,681 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,452,939 | |
| | | | | | | | | | | | |
Total Collateralized Mortgage Obligations (cost $716,415,345) | | | | | | | | | | | 743,708,957 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
CORPORATES – INVESTMENT GRADE – 6.1% | | | | | | | | | | | | |
Industrial – 2.9% | | | | | | | | | | | | |
Basic – 0.4% | | | | | | | | | | | | |
Braskem Finance Ltd. 6.45%, 2/03/24 | | | | | | | 4,037 | | | | 4,269,128 | |
Glencore Finance Canada Ltd. 6.00%, 11/15/41(a) | | | | | | | 1,464 | | | | 1,471,320 | |
Glencore Funding LLC 4.00%, 4/16/25(a) | | | | | | | 920 | | | | 906,200 | |
4.625%, 4/29/24(a) | | | | | | | 1,733 | | | | 1,761,941 | |
Minsur SA 6.25%, 2/07/24(a) | | | | | | | 10,297 | | | | 10,756,648 | |
Southern Copper Corp. 7.50%, 7/27/35 | | | | | | | 1,500 | | | | 1,764,884 | |
WestRock MWV LLC 8.20%, 1/15/30 | | | | | | | 2,940 | | | | 3,967,703 | |
Weyerhaeuser Co. 7.375%, 3/15/32 | | | | | | | 3,308 | | | | 4,376,745 | |
8.50%, 1/15/25 | | | | | | | 1,000 | | | | 1,348,663 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 30,623,232 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Capital Goods – 0.3% | | | | | | | | | | | | |
General Electric Co. Series D 5.00%, 1/21/21(n) | | | U.S.$ | | | | 12,108 | | | $ | 12,827,215 | |
Lafarge SA 7.125%, 7/15/36 | | | | | | | 2,640 | | | | 3,265,865 | |
Owens Corning 7.00%, 12/01/36(l)(o) | | | | | | | 4,450 | | | | 5,523,692 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 21,616,772 | |
| | | | | | | | | | | | |
Communications - Media – 0.4% | | | | | | | | | | | | |
Activision Blizzard, Inc. 6.125%, 9/15/23(a) | | | | | | | 2 | | | | 2,203 | |
Charter Communications Operating LLC/Charter Communications Operating Capital 4.464%, 7/23/22(a) | | | | | | | 5,865 | | | | 6,247,269 | |
4.908%, 7/23/25(a) | | | | | | | 6,755 | | | | 7,285,612 | |
6.484%, 10/23/45(a) | | | | | | | 2,993 | | | | 3,507,347 | |
Comcast Cable Communications Holdings, Inc. 9.455%, 11/15/22 | | | | | | | 2,500 | | | | 3,487,440 | |
Cox Communications, Inc. 4.50%, 6/30/43(a) | | | | | | | 882 | | | | 789,827 | |
4.70%, 12/15/42(a) | | | | | | | 1,692 | | | | 1,543,700 | |
NBCUniversal Enterprise, Inc. 5.25%, 3/19/21(a)(n) | | | | | | | 6,975 | | | | 7,430,467 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 30,293,865 | |
| | | | | | | | | | | | |
Communications - Telecommunications – 0.2% | | | | | | | | | | | | |
Qwest Corp. 6.75%, 12/01/21 | | | | | | | 1,000 | | | | 1,108,750 | |
Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC/Sprint Spectrum Co. III LLC 3.36%, 9/20/21(a) | | | | | | | 10,842 | | | | 10,869,105 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 11,977,855 | |
| | | | | | | | | | | | |
Consumer Cyclical - Automotive – 0.1% | | | | | | | | | | | | |
General Motors Financial Co., Inc. 3.20%, 7/06/21 | | | | | | | 7,463 | | | | 7,534,107 | |
3.45%, 4/10/22 | | | | | | | 4,031 | | | | 4,075,942 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 11,610,049 | |
| | | | | | | | | | | | |
Consumer Cyclical - Other – 0.1% | | | | | | | | | | | | |
DR Horton, Inc. 4.75%, 5/15/17 | | | | | | | 2,000 | | | | 2,030,000 | |
Seminole Tribe of Florida, Inc. 6.535%, 10/01/20(a) | | | | | | | 2,425 | | | | 2,437,125 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,467,125 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Consumer Cyclical - Retailers – 0.0% | | | | | | | | | | | | |
AutoNation, Inc. 6.75%, 4/15/18 | | | U.S.$ | | | | 349 | | | $ | 372,546 | |
| | | | | | | | | | | | |
| | | |
Consumer Non-Cyclical – 0.1% | | | | | | | | | | | | |
BRF SA 4.75%, 5/22/24(a) | | | | | | | 2,447 | | | | 2,490,067 | |
Bunge Ltd. Finance Corp. 8.50%, 6/15/19 | | | | | | | 332 | | | | 386,877 | |
Forest Laboratories LLC 5.00%, 12/15/21(a) | | | | | | | 3,997 | | | | 4,461,795 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 7,338,739 | |
| | | | | | | | | | | | |
Energy – 0.6% | | | | | | | | | | | | |
Anadarko Petroleum Corp. 8.70%, 3/15/19 | | | | | | | 2,000 | | | | 2,292,370 | |
Energy Transfer Partners LP 7.60%, 2/01/24 | | | | | | | 3,200 | | | | 3,583,162 | |
Enterprise Products Operating LLC Series A 4.46% (LIBOR 3 Month + 3.71%), 8/01/66(o) | | | | | | | 1,619 | | | | 1,540,074 | |
Husky Energy, Inc. 6.15%, 6/15/19 | | | | | | | 5,000 | | | | 5,499,570 | |
Kinder Morgan, Inc./DE 7.00%, 6/15/17 | | | | | | | 275 | | | | 284,069 | |
Series G 7.75%, 1/15/32 | | | | | | | 2,969 | | | | 3,630,802 | |
7.80%, 8/01/31 | | | | | | | 2,662 | | | | 3,299,488 | |
Marathon Petroleum Corp. 4.75%, 9/15/44 | | | | | | | 437 | | | | 386,515 | |
Regency Energy Partners LP/Regency Energy Finance Corp. 4.50%, 11/01/23 | | | | | | | 2,301 | | | | 2,350,241 | |
5.00%, 10/01/22 | | | | | | | 971 | | | | 1,041,926 | |
5.50%, 4/15/23 | | | | | | | 5,015 | | | | 5,164,688 | |
TransCanada PipeLines Ltd. 6.35%, 5/15/67 | | | | | | | 2,500 | | | | 2,000,000 | |
Williams Partners LP 3.35%, 8/15/22 | | | | | | | 7,338 | | | | 7,297,560 | |
5.10%, 9/15/45 | | | | | | | 4,227 | | | | 4,061,986 | |
Williams Partners LP/ACMP Finance Corp. 4.875%, 5/15/23 | | | | | | | 7,379 | | | | 7,473,200 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 49,905,651 | |
| | | | | | | | | | | | |
Other Industrial – 0.1% | | | | | | | | | | | | |
Fresnillo PLC 5.50%, 11/13/23(a) | | | | | | | 3,774 | | | | 4,118,377 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Technology – 0.6% | | | | | | | | | | | | |
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 6.02%, 6/15/26(a) | | | U.S.$ | | | | 5,975 | | | $ | 6,513,078 | |
8.35%, 7/15/46(a) | | | | | | | 2,793 | | | | 3,384,253 | |
Hewlett Packard Enterprise Co. 6.60%, 10/15/45(a) | | | | | | | 1,573 | | | | 1,626,911 | |
Micron Technology, Inc. 7.50%, 9/15/23(a) | | | | | | | 3,868 | | | | 4,269,305 | |
Seagate HDD Cayman 4.75%, 1/01/25 | | | | | | | 9,684 | | | | 9,228,852 | |
4.875%, 6/01/27 | | | | | | | 11,626 | | | | 10,504,161 | |
Verisk Analytics, Inc. 5.50%, 6/15/45 | | | | | | | 4,150 | | | | 4,357,380 | |
Western Digital Corp. 7.375%, 4/01/23(a) | | | | | | | 5,989 | | | | 6,550,469 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 46,434,409 | |
| | | | | | | | | | | | |
Transportation - Airlines – 0.0% | | | | | | | | | | | | |
America West Airlines Pass-Through Trust Series 1999-1G, Class G 7.93%, 1/02/19 | | | | | | | 864 | | | | 924,476 | |
Delta Air Lines Pass-Through Trust Series 2007-1A 6.821%, 8/10/22 | | | | | | | 776 | | | | 924,616 | |
Northwest Airlines Pass-Through Trust Series 2000-1, Class G 7.15%, 10/01/19 | | | | | | | 380 | | | | 403,291 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,252,383 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 221,011,003 | |
| | | | | | | | | | | | |
Financial Institutions – 2.7% | | | | | | | | | | | | |
Banking – 0.9% | | | | | | | | | | | | |
ABN AMRO Bank NV Series E 6.25%, 4/27/22(a) | | | | | | | 1,122 | | | | 1,270,931 | |
BNP Paribas SA 7.195%, 6/25/37(a)(n) | | | | | | | 6,900 | | | | 7,788,375 | |
7.625%, 3/30/21(a)(n) | | | | | | | 462 | | | | 482,790 | |
BPCE SA 5.70%, 10/22/23(a) | | | | | | | 241 | | | | 261,115 | |
Danske Bank A/S Series E 5.684%, 2/15/17(n) | | | GBP | | | | 5,500 | | | | 6,799,320 | |
HSBC Holdings PLC 3.60%, 5/25/23 | | | U.S.$ | | | | 3,652 | | | | 3,772,151 | |
ICICI Bank Ltd./Dubai 4.80%, 5/22/19(a) | | | | | | | 5,980 | | | | 6,341,706 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
JPMorgan Chase & Co. Series V 5.00%, 7/01/19(n) | | | U.S.$ | | | | 2,638 | | | $ | 2,585,240 | |
Morgan Stanley 4.10%, 5/22/23 | | | | | | | 10,912 | | | | 11,497,189 | |
MUFG Capital Finance 5 Ltd. 6.299%, 1/25/17(n) | | | GBP | | | | 1,225 | | | | 1,514,394 | |
Nationwide Building Society 4.00%, 9/14/26(a) | | | U.S.$ | | | | 15,300 | | | | 15,085,448 | |
PNC Financial Services Group, Inc. (The) Series R 4.85%, 6/01/23(n) | | | | | | | 3,888 | | | | 3,839,400 | |
Regions Bank/Birmingham AL 6.45%, 6/26/37 | | | | | | | 5,300 | | | | 6,184,761 | |
Santander Bank NA 8.75%, 5/30/18 | | | | | | | 3,800 | | | | 4,137,125 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 71,559,945 | |
| | | | | | | | | | | | |
Brokerage – 0.1% | | | | | | | | | | | | |
E*TRADE Financial Corp. 5.375%, 11/15/22 | | | | | | | 4,281 | | | | 4,575,768 | |
GFI Group, Inc. 8.375%, 7/19/18 | | | | | | | 2,367 | | | | 2,538,608 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 7,114,376 | |
| | | | | | | | | | | | |
Finance – 0.2% | | | | | | | | | | | | |
Aviation Capital Group Corp. 4.625%, 1/31/18(a) | | | | | | | 2,367 | | | | 2,446,910 | |
International Lease Finance Corp. 5.875%, 4/01/19 | | | | | | | 2,300 | | | | 2,471,764 | |
8.25%, 12/15/20 | | | | | | | 10,200 | | | | 12,138,000 | |
8.75%, 3/15/17 | | | | | | | 2,375 | | | | 2,433,995 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 19,490,669 | |
| | | | | | | | | | | | |
Insurance – 1.2% | | | | | | | | | | | | |
Allstate Corp. (The) 6.50%, 5/15/57 | | | | | | | 7,045 | | | | 8,277,875 | |
American International Group, Inc. 6.82%, 11/15/37 | | | | | | | 1,938 | | | | 2,498,656 | |
8.175%, 5/15/58 | | | | | | | 7,301 | | | | 9,778,937 | |
Aon Corp. 8.205%, 1/01/27 | | | | | | | 2,495 | | | | 3,293,400 | |
Assured Guaranty Municipal Holdings, Inc. 6.40%, 12/15/66(a) | | | | | | | 1,801 | | | | 1,484,024 | |
Coventry Health Care, Inc. 5.95%, 3/15/17 | | | | | | | 1,415 | | | | 1,439,438 | |
Lincoln National Corp. 8.75%, 7/01/19 | | | | | | | 604 | | | | 704,167 | |
MetLife Capital Trust IV 7.875%, 12/15/37(a) | | | | | | | 1,765 | | | | 2,259,200 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
MetLife, Inc. 6.40%, 12/15/36 | | | U.S.$ | | | | 9,700 | | | $ | 10,864,000 | |
10.75%, 8/01/39 | | | | | | | 3,495 | | | | 5,714,325 | |
Nationwide Mutual Insurance Co. 3.14% (LIBOR 3 Month + 2.29%), 12/15/24(a)(o) | | | | | | | 5,000 | | | | 4,919,345 | |
9.375%, 8/15/39(a) | | | | | | | 4,546 | | | | 6,950,007 | |
Pacific Life Insurance Co. 9.25%, 6/15/39(a) | | | | | | | 3,000 | | | | 4,587,678 | |
Prudential Financial, Inc. 5.625%, 6/15/43 | | | | | | | 13,000 | | | | 13,975,000 | |
Transatlantic Holdings, Inc. 8.00%, 11/30/39 | | | | | | | 2,836 | | | | 3,791,894 | |
XLIT Ltd. 5.50%, 3/31/45 | | | | | | | 7,198 | | | | 6,957,184 | |
Series E 6.50%, 4/15/17(n) | | | | | | | 8,561 | | | | 6,565,217 | |
ZFS Finance USA Trust V 6.50%, 5/09/37(a) | | | | | | | 3,010 | | | | 3,031,822 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 97,092,169 | |
| | | | | | | | | | | | |
Other Finance – 0.1% | | | | | | | | | | | | |
SUAM Finance BV 4.875%, 4/17/24(a) | | | | | | | 4,867 | | | | 5,122,517 | |
| | | | | | | | | | | | |
| | | |
REITS – 0.2% | | | | | | | | | | | | |
EPR Properties 5.75%, 8/15/22 | | | | | | | 3,445 | | | | 3,792,501 | |
7.75%, 7/15/20 | | | | | | | 3,036 | | | | 3,518,326 | |
Senior Housing Properties Trust 6.75%, 12/15/21 | | | | | | | 4,500 | | | | 5,133,627 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 12,444,454 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 212,824,130 | |
| | | | | | | | | | | | |
Utility – 0.5% | | | | | | | | | | | | |
Electric – 0.4% | | | | | | | | | | | | |
Consorcio Transmantaro SA 4.375%, 5/07/23(a) | | | | | | | 14,103 | | | | 14,420,317 | |
EDP Finance BV 4.90%, 10/01/19(a) | | | | | | | 416 | | | | 440,332 | |
6.00%, 2/02/18(a) | | | | | | | 10,232 | | | | 10,680,203 | |
PPL Capital Funding, Inc. Series A 6.70%, 3/30/67 | | | | | | | 5,125 | | | | 4,574,062 | |
Southern California Edison Co. Series E 6.25%, 2/01/22(n) | | | | | | | 3,300 | | | | 3,691,875 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 33,806,789 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Natural Gas – 0.1% | | | | | | | | | | | | |
Empresa de Energia de Bogota SA ESP 6.125%, 11/10/21(a) | | | U.S.$ | | | | 7,654 | | | $ | 7,925,074 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 41,731,863 | |
| | | | | | | | | | | | |
Total Corporates – Investment Grade (cost $436,491,445) | | | | | | | | | | | 475,566,996 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
EMERGING MARKETS – TREASURIES – 4.1% | | | | | | | | | | | | |
Argentina – 0.4% | | | | | | | | | | | | |
Argentine Bonos del Tesoro 15.50%, 10/17/26 | | | ARS | | | | 96,510 | | | | 6,393,870 | |
16.00%, 10/17/23 | | | | | | | 194,152 | | | | 12,867,752 | |
21.20%, 9/19/18 | | | | | | | 115,305 | | | | 7,804,594 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 27,066,216 | |
| | | | | | | | | | | | |
Brazil – 2.6% | | | | | | | | | | | | |
Brazil Letras do Tesouro Nacional Series LTN Zero Coupon, 1/01/19 | | | BRL | | | | 99,500 | | | | 24,716,149 | |
Brazil Notas do Tesouro Nacional Series B 6.00%, 5/15/45-8/15/50 | | | | | | | 44,500 | | | | 42,475,171 | |
Series F 10.00%, 1/01/21-1/01/27 | | | | | | | 452,740 | | | | 132,962,204 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 200,153,524 | |
| | | | | | | | | | | | |
Dominican Republic – 0.4% | | | | | | | | | | | | |
Dominican Republic International Bond 10.50%, 1/17/20(c) | | | DOP | | | | 347,740 | | | | 7,656,458 | |
12.00%, 1/20/22(c) | | | | | | | 347,740 | | | | 7,779,793 | |
15.95%, 6/04/21(c) | | | | | | | 52,700 | | | | 1,372,564 | |
16.00%, 7/10/20(c) | | | | | | | 563,400 | | | | 14,350,190 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 31,159,005 | |
| | | | | | | | | | | | |
Turkey – 0.7% | | | | | | | | | | | | |
Turkey Government Bond 8.30%, 6/20/18 | | | TRY | | | | 178,414 | | | | 57,083,130 | |
| | | | | | | | | | | | |
| | | |
Total Emerging Markets – Treasuries (cost $299,384,335) | | | | | | | | | | | 315,461,875 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
EMERGING MARKETS – SOVEREIGNS – 4.0% | | | | | | | | | | | | |
Angola – 0.2% | | | | | | | | | | | | |
Angolan Government International Bond 9.50%, 11/12/25(a) | | | U.S.$ | | | | 12,366 | | | | 12,108,004 | |
Republic of Angola Via Northern Lights III BV 7.00%, 8/16/19(a) | | | | | | | 4,015 | | | | 4,014,750 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 16,122,754 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Argentina – 0.8% | | | | | | | | | | | | |
Argentina Bonar Bonds 8.75%, 5/07/24 | | | U.S.$ | | | | 13,715 | | | $ | 15,861,016 | |
Argentine Republic Government International Bond 6.25%, 4/22/19(a) | | | | | | | 5,009 | | | | 5,312,045 | |
6.875%, 4/22/21(a) | | | | | | | 9,201 | | | | 9,937,080 | |
7.82%, 12/31/33 | | | EUR | | | | 24,935 | | | | 29,562,542 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 60,672,683 | |
| | | | | | | | | | | | |
Cameroon – 0.1% | | | | | | | | | | | | |
Republic of Cameroon International Bond 9.50%, 11/19/25(a) | | | U.S.$ | | | | 6,435 | | | | 7,160,997 | |
| | | | | | | | | | | | |
| | | |
Dominican Republic – 0.4% | | | | | | | | | | | | |
Dominican Republic International Bond 6.85%, 1/27/45(a) | | | | | | | 9,000 | | | | 9,360,000 | |
6.875%, 1/29/26(a) | | | | | | | 652 | | | | 722,090 | |
7.45%, 4/30/44(a) | | | | | | | 5,621 | | | | 6,267,415 | |
8.625%, 4/20/27(a) | | | | | | | 12,151 | | | | 14,277,425 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 30,626,930 | |
| | | | | | | | | | | | |
Ecuador – 0.1% | | | | | | | | | | | | |
Ecuador Government International Bond 7.95%, 6/20/24(a) | | | | | | | 4,350 | | | | 4,099,875 | |
10.75%, 3/28/22(a) | | | | | | | 3,700 | | | | 3,912,750 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 8,012,625 | |
| | | | | | | | | | | | |
El Salvador – 0.0% | | | | | | | | | | | | |
El Salvador Government International Bond 7.375%, 12/01/19(a) | | | | | | | 1,495 | | | | 1,576,223 | |
7.625%, 9/21/34(a) | | | | | | | 872 | | | | 935,220 | |
7.75%, 1/24/23(a) | | | | | | | 700 | | | | 764,750 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,276,193 | |
| | | | | | | | | | | | |
| | | |
Ethiopia – 0.0% | | | | | | | | | | | | |
Ethiopia International Bond 6.625%, 12/11/24(a) | | | | | | | 2,303 | | | | 2,178,868 | |
| | | | | | | | | | | | |
| | | |
Gabon – 0.2% | | | | | | | | | | | | |
Gabon Government International Bond 6.375%, 12/12/24(a) | | | | | | | 14,182 | | | | 13,021,886 | |
6.95%, 6/16/25(a) | | | | | | | 5,600 | | | | 5,165,272 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 18,187,158 | |
| | | | | | | | | | | | |
Ghana – 0.0% | | | | | | | | | | | | |
Ghana Government International Bond 10.75%, 10/14/30(a) | | | | | | | 1,396 | | | | 1,643,511 | |
| | | | | | | | | | | | |
| | | |
Iraq – 0.0% | | | | | | | | | | | | |
Iraq International Bond 5.80%, 1/15/28(a) | | | | | | | 533 | | | | 428,386 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Ivory Coast – 0.6% | | | | | | | | | | | | |
Ivory Coast Government International Bond 5.75%, 12/31/32(a) | | | U.S.$ | | | | 26,724 | | | $ | 26,177,820 | |
6.375%, 3/03/28(a) | | | | | | | 20,691 | | | | 21,585,472 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 47,763,292 | |
| | | | | | | | | | | | |
Jamaica – 0.2% | | | | | | | | | | | | |
Jamaica Government International Bond 7.625%, 7/09/25 | | | | | | | 2,302 | | | | 2,693,340 | |
7.875%, 7/28/45 | | | | | | | 7,519 | | | | 8,666,700 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 11,360,040 | |
| | | | | | | | | | | | |
Jordan – 0.1% | | | | | | | | | | | | |
Jordan Government International Bond 5.75%, 1/31/27(a) | | | | | | | 4,536 | | | | 4,513,320 | |
| | | | | | | | | | | | |
| | | |
Kenya – 0.0% | | | | | | | | | | | | |
Kenya Government International Bond 5.875%, 6/24/19(a) | | | | | | | 3,124 | | | | 3,231,653 | |
| | | | | | | | | | | | |
| | | |
Lebanon – 0.1% | | | | | | | | | | | | |
Lebanon Government International Bond Series G 6.60%, 11/27/26(a) | | | | | | | 3,840 | | | | 3,731,866 | |
| | | | | | | | | | | | |
| | | |
Mongolia – 0.2% | | | | | | | | | | | | |
Mongolia Government International Bond 5.125%, 12/05/22(a) | | | | | | | 14,564 | | | | 12,853,633 | |
| | | | | | | | | | | | |
| | | |
Mozambique – 0.1% | | | | | | | | | | | | |
Mozambique International Bond 10.50%, 1/18/23(a) | | | | | | | 9,000 | | | | 5,085,000 | |
| | | | | | | | | | | | |
| | | |
Pakistan – 0.1% | | | | | | | | | | | | |
Pakistan Government International Bond 7.25%, 4/15/19(a) | | | | | | | 7,468 | | | | 7,917,088 | |
| | | | | | | | | | | | |
| | | |
Serbia – 0.0% | | | | | | | | | | | | |
Serbia International Bond 6.75%, 11/01/24(a) | | | | | | | 549 | | | | 554,363 | |
| | | | | | | | | | | | |
| | | |
Sri Lanka – 0.1% | | | | | | | | | | | | |
Sri Lanka Government International Bond 6.00%, 1/14/19(a) | | | | | | | 3,825 | | | | 3,945,289 | |
6.125%, 6/03/25(a) | | | | | | | 2,800 | | | | 2,816,828 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,762,117 | |
| | | | | | | | | | | | |
Suriname – 0.0% | | | | | | | | | | | | |
Republic of Suriname 9.25%, 10/26/26(a) | | | | | | | 2,584 | | | | 2,700,280 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Turkey – 0.2% | | | | | | | | | | | | |
Turkey Government International Bond 4.875%, 10/09/26 | | | U.S.$ | | | | 7,550 | | | $ | 7,527,350 | |
5.625%, 3/30/21 | | | | | | | 6,615 | | | | 6,985,903 | |
7.375%, 2/05/25 | | | | | | | 1,649 | | | | 1,931,439 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 16,444,692 | |
| | | | | | | | | | | | |
Ukraine – 0.0% | | | | | | | | | | | | |
Ukraine Government International Bond 7.75%, 9/01/27(a) | | | | | | | 970 | | | | 921,597 | |
| | | | | | | | | | | | |
| | | |
Venezuela – 0.4% | | | | | | | | | | | | |
Venezuela Government International Bond 7.00%, 3/31/38(a) | | | | | | | 1,098 | | | | 459,513 | |
7.65%, 4/21/25(a) | | | | | | | 6,636 | | | | 2,866,752 | |
9.00%, 5/07/23(a) | | | | | | | 4,555 | | | | 2,090,791 | |
9.25%, 9/15/27 | | | | | | | 35,750 | | | | 17,910,750 | |
9.25%, 5/07/28(a) | | | | | | | 1,500 | | | | 695,250 | |
9.375%, 1/13/34 | | | | | | | 6,070 | | | | 2,816,480 | |
11.75%, 10/21/26(a) | | | | | | | 2,372 | | | | 1,310,585 | |
11.95%, 8/05/31(a) | | | | | | | 1,704 | | | | 937,090 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 29,087,211 | |
| | | | | | | | | | | | |
Zambia – 0.1% | | | | | | | | | | | | |
Zambia Government International Bond 8.50%, 4/14/24(a) | | | | | | | 9,236 | | | | 8,987,644 | |
| | | | | | | | | | | | |
| | | |
Total Emerging Markets – Sovereigns (cost $311,795,988) | | | | | | | | | | | 310,223,901 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
BANK LOANS – 3.3% | | | | | | | | | | | | |
Industrial – 3.1% | | | | | | | | | | | | |
Basic – 0.2% | | | | | | | | | | | | |
FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.) 3.75% (LIBOR 3 Month + 2.75%), 6/30/19(s) | | | | | | | 11,224 | | | | 11,213,313 | |
Magnetation LLC 12.00%, 12/31/16(e)(g)(h)(j) | | | | | | | 20,090 | | | | 2,611,719 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 13,825,032 | |
| | | | | | | | | | | | |
Capital Goods – 0.4% | | | | | | | | | | | | |
Berry Plastics Corporation 3.50% (LIBOR 3 Month + 2.50%), 1/06/21(s) | | | | | | | 5,056 | | | | 5,057,804 | |
GFL Environmental Inc. 3.75% (LIBOR 3 Month + 2.75%), 9/29/23(s) | | | | | | | 2,313 | | | | 2,310,756 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Serta Simmons Holdings LLC 4.25% (LIBOR 3 Month + 3.25%), 10/01/19(s) | | | U.S.$ | | | | 5,092 | | | $ | 5,076,890 | |
10/20/24(t) | | | | | | | 15,912 | | | | 16,021,475 | |
Transdigm Inc. 6/09/23(t) | | | | | | | 2,357 | | | | 2,346,929 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 30,813,854 | |
| | | | | | | | | | | | |
Consumer Cyclical - Automotive – 0.1% | | | | | | | | | | | | |
Navistar, Inc. 6.50% (LIBOR 3 Month + 5.50%), 8/07/20(s) | | | | | | | 3,569 | | | | 3,587,687 | |
| | | | | | | | | | | | |
| | | |
Consumer Cyclical - Entertainment – 0.1% | | | | | | | | | | | | |
ClubCorp Club Operations, Inc. 4.00% (LIBOR 3 Month + 3.00%), 12/15/22(s) | | | | | | | 2,348 | | | | 2,358,381 | |
Seaworld Parks & Entertainment, Inc. (fka SW Acquisitions Co., Inc.) 4.09% (LIBOR 3 Month + 3.25%), 5/14/20(s) | | | | | | | 4,958 | | | | 4,968,799 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 7,327,180 | |
| | | | | | | | | | | | |
Consumer Cyclical - Other – 0.3% | | | | | | | | | | | | |
Beazer Homes USA, Inc. 6.75% (LIBOR 6 Month + 5.50%), 3/11/18(j)(s) | | | | | | | 1,322 | | | | 1,308,745 | |
CityCenter Holdings, LLC 4.25% (LIBOR 3 Month + 3.25%), 10/16/20(s) | | | | | | | 7,670 | | | | 7,709,591 | |
La Quinta Intermediate Holdings L.L.C. 3.75% (LIBOR 3 Month + 2.75%), 4/14/21(s) | | | | | | | 8,252 | | | | 8,228,893 | |
Scientific Games International, Inc. 6.00% (LIBOR 3 Month + 5.00%), 9/17/21(s) | | | | | | | 6,401 | | | | 6,425,140 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 23,672,369 | |
| | | | | | | | | | | | |
Consumer Cyclical - Retailers – 0.4% | | | | | | | | | | | | |
Burlington Coat Factory Warehouse Corporation 3.50% (LIBOR 3 Month + 2.75%), 8/13/21(s) | | | | | | | 579 | | | | 583,298 | |
Dollar Tree, Inc. 3.06% (LIBOR 1 Month + 2.50%), 7/06/22(s) | | | | | | | 48 | | | | 48,039 | |
Harbor Freight Tools USA, Inc. 4.14% (LIBOR 3 Month + 3.25%), 8/18/23(s) | | | | | | | 2,055 | | | | 2,068,761 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
J.C. Penney Corp., Inc. 5.25% (LIBOR 3 Month + 4.25%), 6/23/23(s) | | | U.S.$ | | | | 6,946 | | | $ | 6,986,254 | |
Michaels Stores, Inc. 3.75% (LIBOR 3 Month + 2.75%), 1/27/23(s) | | | | | | | 2,512 | | | | 2,530,545 | |
Neiman Marcus Group Inc., The 4.25% (LIBOR 3 Month + 3.25%), 10/25/20(s) | | | | | | | 1,344 | | | | 1,234,467 | |
Petco Animal Supplies, Inc. 5.00% (LIBOR 3 Month + 4.00%), 1/26/23(s) | | | | | | | 16,376 | | | | 16,506,769 | |
Rite Aid Corporation 5.75% (LIBOR 3 Month + 4.75%), 8/21/20(s) | | | | | | | 3,000 | | | | 3,008,430 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 32,966,563 | |
| | | | | | | | | | | | |
Consumer Non-Cyclical – 0.5% | | | | | | | | | | | | |
Acadia Healthcare Company, Inc. 3.75% (LIBOR 3 Month + 3.00%), 2/11/22-2/04/23(s) | | | | | | | 3,088 | | | | 3,095,424 | |
Air Medical Group Holdings, Inc. 5.00% (LIBOR 3 Month + 4.00%), 4/28/22(s) | | | | | | | 3,771 | | | | 3,798,829 | |
Arbor Pharmaceuticals, LLC 6.00% (LIBOR 3 Month + 5.00%), 7/05/23(s) | | | | | | | 7,357 | | | | 7,415,267 | |
DJO Finance LLC 4.25% (LIBOR 3 Month + 3.25%), 6/24/20(s) | | | | | | | 4,962 | | | | 4,906,486 | |
Grifols Worldwide Operations Limited 3.46% (LIBOR 1 Week + 3.00%), 2/27/21(s) | | | | | | | 3,169 | | | | 3,193,942 | |
Immucor, Inc. (fka IVD Acquisition Corporation) 5.00% (LIBOR 3 Month + 3.75%), 8/17/18(s) | | | | | | | 5,274 | | | | 5,147,331 | |
Mallinckrodt International Finance S.A. 3.59% (LIBOR 3 Month + 2.75%), 3/19/21(s) | | | | | | | 6,731 | | | | 6,731,313 | |
Ortho-Clinical Diagnostics Holdings Luxembourg S.Ã R.L. 4.75% (LIBOR 3 Month + 3.75%), 6/30/21(s) | | | | | | | 3,940 | | | | 3,844,735 | |
Vizient, Inc. 5.00% (LIBOR 3 Month + 4.00%), 2/13/23(s) | | | | | | | 2,519 | | | | 2,544,546 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 40,677,873 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Energy – 0.2% | | | | | | | | | | | | |
California Resources Corporation 11.38% (LIBOR 3 Month + 10.38%), 12/31/21(s) | | | U.S.$ | | | | 12,618 | | | $ | 13,548,105 | |
Chesapeake Energy Corporation 8.50% (LIBOR 3 Month + 7.50%), 8/23/21(s) | | | | | | | 4,080 | | | | 4,357,970 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 17,906,075 | |
| | | | | | | | | | | | |
Other Industrial – 0.3% | | | | | | | | | | | | |
Gardner Denver, Inc. 4.25% (LIBOR 3 Month + 3.25%), 7/30/20(s) | | | | | | | 5,384 | | | | 5,220,757 | |
Manitowoc Foodservice, Inc. 5.75% (LIBOR 3 Month + 4.75%), 3/03/23(s) | | | | | | | 640 | | | | 648,240 | |
Sedgwick Claims Management Services, Inc. 3.75% (LIBOR 3 Month + 2.75%), 3/01/21(s) | | | | | | | 5,190 | | | | 5,149,542 | |
Travelport Finance (Luxembourg) S.Ã r.l. 5.00% (LIBOR 3 Month + 4.00%), 9/02/21(s) | | | | | | | 9,787 | | | | 9,840,662 | |
Unifrax Holding Co. 4.50% (EURIBOR 3 Month + 3.50%), 11/28/18(s) | | | EUR | | | | 2,685 | | | | 2,936,811 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 23,796,012 | |
| | | | | | | | | | | | |
Technology – 0.6% | | | | | | | | | | | | |
Avago Technologies Cayman Holdings Ltd. 3.53% (LIBOR 1 Month + 3.00%), 2/01/23(s) | | | U.S.$ | | | | 3,529 | | | | 3,563,576 | |
Avaya Inc. 6.25% (LIBOR 3 Month + 5.25%), 5/29/20(s) | | | | | | | 2,740 | | | | 2,242,070 | |
6.50% (LIBOR 3 Month + 5.50%), 3/31/18(s) | | | | | | | 371 | | | | 314,968 | |
BMC Software Finance Inc. 5.00% (LIBOR 3 Month + 4.00%), 9/10/20(s) | | | | | | | 14,049 | | | | 13,824,865 | |
Smart Modular Technologies (Global), Inc. 8.25% (LIBOR 3 Month + 7.00%), 8/26/17(j)(s) | | | | | | | 4,166 | | | | 3,124,506 | |
Solera, LLC (Solera Finance, Inc.) 5.75% (LIBOR 3 Month + 4.75%), 3/03/23(s) | | | | | | | 14,005 | | | | 14,151,254 | |
Veritas US Inc. 6.63% (LIBOR 3 Month + 5.63%), 1/27/23(s) | | | | | | | 12,189 | | | | 11,347,575 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 48,568,814 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 243,141,459 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Utility – 0.1% | | | | | | | | | | | | |
Natural Gas – 0.1% | | | | | | | | | | | | |
EP Energy LLC (fka Everest Acquisition LLC) 9.75% (LIBOR 3 Month + 8.75%), 6/30/21(s) | | | U.S.$ | | | | 8,000 | | | $ | 8,180,000 | |
| | | | | | | | | | | | |
| | | |
Financial Institutions – 0.1% | | | | | | | | | | | | |
Insurance – 0.1% | | | | | | | | | | | | |
Hub International Limited 4.00% (LIBOR 3 Month + 3.00%), 10/02/20(s) | | | | | | | 4,366 | | | | 4,362,550 | |
| | | | | | | | | | | | |
| | | |
Total Bank Loans (cost $267,164,499) | | | | | | | | | | | 255,684,009 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
COMMERCIAL MORTGAGE-BACKED SECURITIES – 2.0% | | | | | | | | | | | | |
Non-Agency Fixed Rate CMBS – 2.0% | | | | | | | | | | | | |
Banc of America Commercial Mortgage Trust Series 2007-3, Class AJ 5.552%, 6/10/49 | | | | | | | 9,741 | | | | 9,887,807 | |
Banc of America Re-REMIC Trust Series 2009-UB1, Class A4B 5.669%, 6/24/50(c)(g) | | | | | | | 3,500 | | | | 3,564,750 | |
Bear Stearns Commercial Mortgage Securities Trust Series 2006-PW13, Class AJ 5.611%, 9/11/41 | | | | | | | 452 | | | | 453,513 | |
Series 2007-T26, Class AJ 5.566%, 1/12/45 | | | | | | | 1,550 | | | | 1,491,029 | |
Citigroup Commercial Mortgage Trust Series 2013-GC11, Class XA 1.823%, 4/10/46(u) | | | | | | | 11,467 | | | | 666,244 | |
Series 2015-GC31, Class D 4.064%, 6/10/48 | | | | | | | 1,416 | | | | 1,018,344 | |
Commercial Mortgage Pass Through Certificates Series 2012-CR3, Class XA 2.079%, 10/15/45(u) | | | | | | | 57,676 | | | | 4,598,442 | |
Commercial Mortgage Trust Series 2012-CR1, Class XA 2.026%, 5/15/45(u) | | | | | | | 23,407 | | | | 1,774,513 | |
Series 2012-CR5, Class XA 1.745%, 12/10/45(u) | | | | | | | 11,576 | | | | 810,923 | |
Series 2012-LC4, Class XA 2.456%, 12/10/44(a)(u) | | | | | | | 32,648 | | | | 2,723,660 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Series 2013-LC6, Class XA 1.69%, 1/10/46(u) | | | U.S.$ | | | | 63,061 | | | $ | 3,660,331 | |
Series 2014-CR15, Class XA 1.298%, 2/10/47(u) | | | | | | | 12,910 | | | | 634,971 | |
Series 2014-CR20, Class XA 1.192%, 11/10/47(u) | | | | | | | 53,931 | | | | 3,468,780 | |
Series 2014-LC15, Class D 4.944%, 4/10/47(a) | | | | | | | 8,500 | | | | 6,990,062 | |
Series 2014-LC17, Class D 3.687%, 10/10/47(a) | | | | | | | 7,603 | | | | 5,879,555 | |
Series 2014-UBS5, Class D 3.495%, 9/10/47(a) | | | | | | | 3,542 | | | | 2,621,913 | |
Series 2015-DC1, Class D 4.353%, 2/10/48(a) | | | | | | | 4,500 | | | | 3,479,648 | |
Credit Suisse First Boston Mortgage Securities Corp. Series 2003-C5, Class J 5.226%, 12/15/36(a) | | | | | | | 1,766 | | | | 1,764,726 | |
DBUBS Mortgage Trust Series 2011-LC2A, Class D 5.543%, 7/10/44(a) | | | | | | | 2,500 | | | | 2,617,736 | |
GS Mortgage Securities Corp. II Series 2013-GC10, Class XA 1.599%, 2/10/46(u) | | | | | | | 4,890 | | | | 366,785 | |
GS Mortgage Securities Trust Series 2011-GC5, Class C 5.40%, 8/10/44(a) | | | | | | | 7,937 | | | | 8,637,245 | |
Series 2012-GCJ9, Class XA 2.292%, 11/10/45(u) | | | | | | | 8,834 | | | | 721,903 | |
Series 2013-GC13, Class D 4.065%, 7/10/46(a) | | | | | | | 1,500 | | | | 1,340,273 | |
Series 2014-GC18, Class D 4.945%, 1/10/47(a) | | | | | | | 4,503 | | | | 3,743,860 | |
Series 2014-GC20, Class D 4.867%, 4/10/47(a) | | | | | | | 995 | | | | 701,214 | |
JP Morgan Chase Commercial Mortgage Securities Trust Series 2012-CBX, Class D 5.215%, 6/15/45(a) | | | | | | | 5,000 | | | | 5,171,701 | |
Series 2012-CBX, Class E 5.215%, 6/15/45(a) | | | | | | | 6,521 | | | | 6,581,706 | |
JPMBB Commercial Mortgage Securities Trust Series 2014-C23, Class D 3.959%, 9/15/47(a) | | | | | | | 4,859 | | | | 3,826,236 | |
Series 2015-C32, Class C 4.668%, 11/15/48 | | | | | | | 5,050 | | | | 4,676,421 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
LB-UBS Commercial Mortgage Trust Series 2006-C1, Class AJ 5.276%, 2/15/41 | | | U.S.$ | | | | 1,690 | | | $ | 1,689,068 | |
Liberty Street Trust Series 2016-225L, Class E 4.649%, 2/10/36(a) | | | | | | | 5,344 | | | | 5,208,350 | |
Morgan Stanley Bank of America Merrill Lynch Trust Series 2012-C6, Class XA 2.033%, 11/15/45(a)(u) | | | | | | | 45,041 | | | | 2,811,186 | |
Series 2014-C19, Class D 3.25%, 12/15/47(a) | | | | | | | 8,153 | | | | 6,029,717 | |
UBS-Barclays Commercial Mortgage Trust Series 2012-C4, Class XA 1.767%, 12/10/45(a)(u) | | | | | | | 3,741 | | | | 281,054 | |
Wells Fargo Commercial Mortgage Trust Series 2014-LC18, Class D 3.957%, 12/15/47(a) | | | | | | | 5,000 | | | | 3,862,497 | |
Series 2015-LC20, Class D 4.365%, 4/15/50(a) | | | | | | | 2,643 | | | | 2,002,436 | |
WF-RBS Commercial Mortgage Trust Series 2011-C4, Class D 5.248%, 6/15/44(a)(l) | | | | | | | 2,576 | | | | 2,690,423 | |
Series 2012-C6, Class D 5.584%, 4/15/45(a) | | | | | | | 3,450 | | | | 3,454,547 | |
Series 2012-C7, Class XA 1.504%, 6/15/45(a)(u) | | | | | | | 7,639 | | | | 481,244 | |
Series 2012-C8, Class E 4.897%, 8/15/45(a) | | | | | | | 6,905 | | | | 6,650,314 | |
Series 2014-C20, Class D 3.986%, 5/15/47(a) | | | | | | | 10,906 | | | | 8,184,794 | |
Series 2014-C21, Class D 3.497%, 8/15/47(a) | | | | | | | 10,000 | | | | 7,309,326 | |
Series 2014-C23, Class D 3.992%, 10/15/57(a) | | | | | | | 13,722 | | | | 11,322,996 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 155,852,243 | |
| | | | | | | | | | | | |
Non-Agency Floating Rate CMBS – 0.0% | | | | | | | | | | | | |
Morgan Stanley Capital I Trust Series 2015-MS1, Class D 4.03%, 5/15/48(a)(l) | | | | | | | 2,790 | | | | 2,154,663 | |
| | | | | | | | | | | | |
| | | |
Total Commercial Mortgage-Backed Securities (cost $164,045,977) | | | | | | | | | | | 158,006,906 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
EMERGING MARKETS – CORPORATE BONDS – 1.6% | | | | | | | | | | | | |
Industrial – 1.4% | | | | | | | | | | | | |
Basic – 0.1% | | | | | | | | | | | | |
Elementia SAB de CV 5.50%, 1/15/25(a) | | | U.S.$ | | | | 2,208 | | | $ | 2,247,744 | |
Samarco Mineracao SA 4.125%, 11/01/22(a) | | | | | | | 4,228 | | | | 1,691,200 | |
5.375%, 9/26/24(a)(d)(e) | | | | | | | 900 | | | | 360,558 | |
5.75%, 10/24/23(a)(d)(e) | | | | | | | 7,963 | | | | 3,185,200 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 7,484,702 | |
| | | | | | | | | | | | |
Capital Goods – 0.3% | | | | | | | | | | | | |
Andrade Gutierrez International SA 4.00%, 4/30/18(a) | | | | | | | 2,481 | | | | 2,022,015 | |
Ferreycorp SAA 4.875%, 4/26/20(a) | | | | | | | 2,131 | | | | 2,146,714 | |
Grupo Cementos de Chihuahua SAB de CV 8.125%, 2/08/20(a) | | | | | | | 830 | | | | 873,575 | |
Grupo KUO SAB De CV 6.25%, 12/04/22(a) | | | | | | | 696 | | | | 704,700 | |
Odebrecht Finance Ltd. 4.375%, 4/25/25(a) | | | | | | | 537 | | | | 257,089 | |
5.25%, 6/27/29(a) | | | | | | | 9,173 | | | | 4,403,040 | |
7.125%, 6/26/42(a) | | | | | | | 10,042 | | | | 5,036,790 | |
8.25%, 4/25/18(a) | | | BRL | | | | 5,903 | | | | 906,162 | |
Servicios Corporativos Javer SAB de CV 9.875%, 4/06/21(a) | | | U.S.$ | | | | 2,594 | | | | 2,697,760 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 19,047,845 | |
| | | | | | | | | | | | |
Communications - Telecommunications – 0.4% | | | | | | | | | | | | |
Comcel Trust via Comunicaciones Celulares SA 6.875%, 2/06/24(a) | | | | | | | 6,131 | | | | 6,268,948 | |
Digicel Group Ltd. 8.25%, 9/30/20(a) | | | | | | | 9,000 | | | | 7,942,500 | |
Digicel Ltd. 6.00%, 4/15/21(a) | | | | | | | 3,750 | | | | 3,355,125 | |
6.75%, 3/01/23(a) | | | | | | | 3,270 | | | | 2,933,844 | |
Ihs Netherlands Holdco BV 9.50%, 10/27/21(a) | | | | | | | 4,200 | | | | 4,335,660 | |
MTN Mauritius Investment Ltd. 6.50%, 10/13/26(a) | | | | | | | 5,701 | | | | 5,786,515 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 30,622,592 | |
| | | | | | | | | | | | |
Consumer Cyclical - Retailers – 0.1% | | | | | | | | | | | | |
Edcon Ltd. 9.50%, 3/01/18(c)(d)(e) | | | EUR | | | | 5,250 | | | | 1,171,883 | |
9.50%, 3/01/18(c)(d)(e) | | | U.S.$ | | | | 2,820 | | | | 592,200 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Office Depot de Mexico SA de CV 6.875%, 9/20/20(a) | | | U.S.$ | | | | 5,741 | | | $ | 5,934,759 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 7,698,842 | |
| | | | | | | | | | | | |
Consumer Non-Cyclical – 0.3% | | | | | | | | | | | | |
Marfrig Holdings Europe BV 6.875%, 6/24/19(a) | | | | | | | 5,432 | | | | 5,608,540 | |
8.00%, 6/08/23(a) | | | | | | | 4,150 | | | | 4,284,875 | |
Minerva Luxembourg SA 6.50%, 9/20/26(a) | | | | | | | 10,492 | | | | 10,213,962 | |
Tonon Luxembourg SA 7.25%, 1/24/20(a)(d)(e)(h)(j) | | | | | | | 6,585 | | | | 1,251,220 | |
USJ Acucar e Alcool SA 9.875% (9.875% Cash or 12.00% PIK), 11/09/21(a)(h) | | | | | | | 1,338 | | | | 1,132,282 | |
Virgolino de Oliveira Finance SA 10.50%, 1/28/18(c)(d)(e) | | | | | | | 13,674 | | | | 964,017 | |
10.875%, 1/13/20(c)(d)(e) | | | | | | | 2,500 | | | | 650,000 | |
11.75%, 2/09/22(c)(d)(e) | | | | | | | 13,613 | | | | 884,845 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 24,989,741 | |
| | | | | | | | | | | | |
Transportation - Airlines – 0.2% | | | | | | | | | | | | |
Guanay Finance Ltd. 6.00%, 12/15/20(a) | | | | | | | 4,424 | | | | 4,518,040 | |
TAM Capital 3, Inc. 8.375%, 6/03/21(a) | | | | | | | 12,957 | | | | 13,235,576 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 17,753,616 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 107,597,338 | |
| | | | | | | | | | | | |
Financial Institutions – 0.2% | | | | | | | | | | | | |
Banking – 0.1% | | | | | | | | | | | | |
Turkiye Vakiflar Bankasi T.A.O. 6.00%, 11/01/22(a) | | | | | | | 12,500 | | | | 12,306,250 | |
| | | | | | | | | | | | |
| | | |
Finance – 0.1% | | | | | | | | | | | | |
CIMPOR Financial Operations BV 5.75%, 7/17/24(a) | | | | | | | 7,640 | | | | 6,599,356 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 18,905,606 | |
| | | | | | | | | | | | |
Utility – 0.0% | | | | | | | | | | | | |
Electric – 0.0% | | | | | | | | | | | | |
AES El Salvador Trust II 6.75%, 3/28/23(a) | | | | | | | 1,220 | | | | 1,134,600 | |
| | | | | | | | | | | | |
| | | |
Total Emerging Markets – Corporate Bonds (cost $174,307,411) | | | | | | | | | | | 127,637,544 | |
| | | | | | | | | | | | |
| | | |
| | | | | Shares | | | | |
COMMON STOCKS – 0.8% | | | | | | | | | | | | |
Consumer Discretionary – 0.1% | | | | | | | | | | | | |
Automobiles – 0.0% | | | | | | | | | | | | |
Liberty Tire Recycling LLC(d)(g)(j) | | | | | | | 128,591 | | | | – 0 | – |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
Company | | | | | Shares | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Internet & Direct Marketing Retail – 0.1% | | | | | | | | | | | | |
Travelport Worldwide Ltd. | | | | | | | 543,898 | | | $ | 7,679,840 | |
| | | | | | | | | | | | |
| | | |
Energy – 0.1% | | | | | | | | | | | | |
Oil, Gas & Consumable Fuels – 0.1% | | | | | | | | | | | | |
Halcon Resources Corp.(d) | | | | | | | 67,837 | | | | 607,141 | |
SandRidge Energy, Inc.(d) | | | | | | | 84,806 | | | | 1,953,082 | |
Vantage Drilling International(d)(j) | | | | | | | 30,215 | | | | 2,538,060 | |
Whiting Petroleum Corp.(d) | | | | | | | 323,999 | | | | 2,669,752 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 7,768,035 | |
| | | | | | | | | | | | |
Financials – 0.6% | | | | | | | | | | | | |
Diversified Financial Services – 0.0% | | | | | | | | | | | | |
iPayment, Inc.(d)(g)(j) | | | | | | | 576,195 | | | | 1,901,442 | |
| | | | | | | | | | | | |
| | | |
Insurance – 0.6% | | | | | | | | | | | | |
Mt. Logan Re Ltd. (Preference Shares)(d)(f)(v)(w) | | | | | | | 25,000 | | | | 25,651,030 | |
Mt. Logan Re Ltd. (Preference Shares)(d)(f)(v)(x) | | | | | | | 20,255 | | | | 20,968,189 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 46,619,219 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 48,520,661 | |
| | | | | | | | | | | | |
Industrials – 0.0% | | | | | | | | | | | | |
Building Products – 0.0% | | | | | | | | | | | | |
New Cotai LLC/New Cotai Capital Corp.(d)(g)(j) | | | | | | | 13 | | | | 31,395 | |
| | | | | | | | | | | | |
| | | |
Consumer Cyclical - Automotive – 0.0% | | | | | | | | | | | | |
Exide Corp.(d)(f) | | | | | | | 332,502 | | | | 498,753 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 530,148 | |
| | | | | | | | | | | | |
Materials – 0.0% | | | | | | | | | | | | |
Metals & Mining – 0.0% | | | | | | | | | | | | |
Neenah Enterprises, Inc.(d)(g)(j) | | | | | | | 49,578 | | | | 183,934 | |
| | | | | | | | | | | | |
| | | |
Total Common Stocks (cost $80,020,411) | | | | | | | | | | | 64,682,618 | |
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | | |
GOVERNMENTS – SOVEREIGN AGENCIES – 0.8% | | | | | | | | | | | | |
Brazil – 0.3% | | | | | | | | | | | | |
Petrobras Global Finance BV 4.875%, 3/17/20 | | | U.S.$ | | | | 7,385 | | | | 7,438,541 | |
5.375%, 1/27/21 | | | | | | | 8,624 | | | | 8,539,485 | |
5.75%, 1/20/20 | | | | | | | 1,011 | | | | 1,043,352 | |
6.85%, 6/05/15 | | | | | | | 2,958 | | | | 2,514,300 | |
8.375%, 5/23/21 | | | | | | | 5,310 | | | | 5,874,453 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 25,410,131 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Colombia – 0.1% | | | | | | | | | | | | |
Empresas Publicas de Medellin ESP 7.625%, 7/29/19(a) | | | U.S.$ | | | | 1,277 | | | $ | 1,449,395 | |
Ecopetrol SA 5.375%, 6/26/26 | | | | | | | 1,886 | | | | 1,902,974 | |
5.875%, 5/28/45 | | | | | | | 6,355 | | | | 5,608,288 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 8,960,657 | |
| | | | | | | | | | | | |
Israel – 0.1% | | | | | | | | | | | | |
Israel Electric Corp., Ltd. Series 6 5.00%, 11/12/24(a) | | | | | | | 5,373 | | | | 5,786,721 | |
| | | | | | | | | | | | |
| | | |
Turkey – 0.1% | | | | | | | | | | | | |
Turkiye Vakiflar Bankasi TAO 5.50%, 10/27/21(a) | | | | | | | 5,964 | | | | 5,907,103 | |
| | | | | | | | | | | | |
| | | |
United Arab Emirates – 0.2% | | | | | | | | | | | | |
Dubai Holding Commercial Operations MTN Ltd. Series E 6.00%, 2/01/17 | | | GBP | | | | 10,900 | | | | 13,406,707 | |
| | | | | | | | | | | | |
| | | |
United Kingdom – 0.0% | | | | | | | | | | | | |
Royal Bank of Scotland Group PLC 7.50%, 8/10/20(n) | | | U.S.$ | | | | 2,900 | | | | 2,660,750 | |
| | | | | | | | | | | | |
| | | |
Total Governments – Sovereign Agencies (cost $64,997,421) | | | | | | | | | | | 62,132,069 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
WHOLE LOAN TRUSTS – 0.8% | | | | | | | | | | | | |
Performing Asset – 0.8% | | | | | | | | | | | | |
Alpha Credit Debt Fund LLC 15.00%, 12/31/17(g)(j) | | | | | | | 945 | | | | 945,242 | |
16.00%, 1/01/21(g)(j) | | | MXN | | | | 112,935 | | | | 5,975,081 | |
AlphaCredit Capital, SA de CV 17.25%, 8/06/19(g)(j) | | | | | | | 40,068 | | | | 2,119,876 | |
Cara Aircraft Leasing 28548, Inc. 8.00%, 12/02/19(g)(j) | | | U.S.$ | | | | 500 | | | | 500,091 | |
Cara Aircraft Leasing 28563, Inc. 8.00%, 6/11/19(g)(j) | | | | | | | 1,324 | | | | 1,323,613 | |
Cara Aircraft Leasing 28868, Inc. 8.00%, 12/02/19(g)(j) | | | | | | | 580 | | | | 579,979 | |
Deutsche Bank Mexico SA 8.00%, 10/31/34(g)(j)(l) | | | MXN | | | | 43,143 | | | | 1,587,091 | |
8.00%, 10/31/34(g)(j) | | | | | | | 91,784 | | | | 3,376,395 | |
Flexpath Capital, Inc. 12.00%, 10/01/19(g)(j) | | | U.S.$ | | | | 5,522 | | | | 1,104,393 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Flexpath Wh I LLC Series B 11.00%, 4/01/21(g)(j) | | | U.S.$ | | | | 4,004 | | | $ | 3,361,592 | |
Series B2 11.00%, 1/01/22(g)(j) | | | | | | | 4,521 | | | | 4,211,922 | |
13.00%, 10/23/20(g)(j) | | | | | | | 5,436 | | | | 4,839,076 | |
Recife Funding Zero Coupon, 11/05/29(g)(j) | | | | | | | 9,586 | | | | 9,829,284 | |
Sheridan Auto Loan Holdings I LLC 10.00%, 12/31/20-9/30/21(g)(j) | | | | | | | 10,384 | | | | 9,749,767 | |
Sheridan Consumer Finance Trust 10.86%, 3/01/21(g)(j)(o) | | | | | | | 10,861 | | | | 10,274,869 | |
| | | | | | | | | | | | |
| | | |
Total Whole Loan Trusts (cost $69,463,408) | | | | | | | | | | | 59,778,271 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
QUASI-SOVEREIGNS – 0.7% | | | | | | | | | | | | |
Quasi-Sovereign Bonds – 0.7% | | | | | | | | | | | | |
Indonesia – 0.2% | | | | | | | | | | | | |
Majapahit Holding BV 7.875%, 6/29/37(a) | | | | | | | 5,600 | | | | 7,238,000 | |
Pertamina Persero PT 6.00%, 5/03/42(a) | | | | | | | 720 | | | | 756,900 | |
Perusahaan Listrik Negara PT 5.25%, 10/24/42(a) | | | | | | | 11,216 | | | | 11,154,312 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 19,149,212 | |
| | | | | | | | | | | | |
Kazakhstan – 0.1% | | | | | | | | | | | | |
KazMunayGas National Co. JSC 4.40%, 4/30/23(a) | | | | | | | 6,200 | | | | 6,277,500 | |
| | | | | | | | | | | | |
| | | |
Mexico – 0.2% | | | | | | | | | | | | |
Petroleos Mexicanos 4.625%, 9/21/23(a) | | | | | | | 11,061 | | | | 11,031,135 | |
5.50%, 1/21/21 | | | | | | | 4,910 | | | | 5,210,738 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 16,241,873 | |
| | | | | | | | | | | | |
South Africa – 0.1% | | | | | | | | | | | | |
Eskom Holdings SOC Ltd. 7.125%, 2/11/25(a) | | | | | | | 10,060 | | | | 10,408,478 | |
| | | | | | | | | | | | |
| | | |
Venezuela – 0.1% | | | | | | | | | | | | |
Petroleos de Venezuela SA 6.00%, 11/15/26(a) | | | | | | | 5,000 | | | | 1,857,350 | |
9.75%, 5/17/35(a) | | | | | | | 4,834 | | | | 2,108,940 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,966,290 | |
| | | | | | | | | | | | |
Total Quasi-Sovereigns (cost $53,988,193) | | | | | | | | | | | 56,043,353 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
ASSET-BACKED SECURITIES – 0.5% | | | | | | | | | | | | |
Other ABS - Floating Rate – 0.1% | | | | | | | | | | | | |
ALM XII Ltd. Series 2015-12A, Class D 6.17% (LIBOR 3 Month + 5.50%), 4/16/27(a)(o) | | | U.S.$ | | | | 5,985 | | | $ | 5,478,436 | |
Carlyle Global Market Strategies CLO Ltd. Series 2014-3A, Class D1 5.83% (LIBOR 3 Month + 5.10%), 7/27/26(a)(o) | | | | | | | 1,000 | | | | 900,473 | |
Series 2016-1A, Class C 5.56% (LIBOR 3 Month + 4.90%), 4/20/27(a)(o) | | | | | | | 1,800 | | | | 1,811,277 | |
OZLM VIII Ltd. Series 2014-8A, Class D 5.62% (LIBOR 3 Month + 4.95%), 10/17/26(a)(o) | | | | | | | 3,450 | | | | 2,990,939 | |
Tryon Park CLO Ltd. Series 2013-1A, Class D 5.08% (LIBOR 3 Month + 4.40%), 7/15/25(a)(o) | | | | | | | 2,750 | | | | 2,412,377 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 13,593,502 | |
| | | | | | | | | | | | |
Home Equity Loans - Fixed Rate – 0.1% | | | | | | | | | | | | |
CSAB Mortgage-Backed Trust Series 2006-2, Class A6A 5.72%, 9/25/36 | | | | | | | 1,104 | | | | 714,629 | |
GSAA Home Equity Trust Series 2005-12, Class AF5 5.659%, 9/25/35 | | | | | | | 2,007 | | | | 1,705,598 | |
Series 2006-10, Class AF3 5.985%, 6/25/36 | | | | | | | 1,748 | | | | 879,119 | |
Lehman XS Trust Series 2006-17, Class WF32 5.55%, 11/25/36 | | | | | | | 1,012 | | | | 942,624 | |
Morgan Stanley Mortgage Loan Trust Series 2006-15XS, Class A3 5.988%, 11/25/36 | | | | | | | 1,660 | | | | 806,258 | |
Series 2007-8XS, Class A2 6.00%, 4/25/37 | | | | | | | 5,231 | | | | 2,931,363 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 7,979,591 | |
| | | | | | | | | | | | |
Home Equity Loans - Floating Rate – 0.1% | | | | | | | | | | | | |
CWABS Asset-Backed Certificates Trust Series 2005-7, Class AF5W 5.054%, 10/25/35(o) | | | | | | | 2,108 | | | | 2,088,572 | |
GSAA Home Equity Trust Series 2006-6, Class AF4 6.121%, 3/25/36(o) | | | | | | | 4,303 | | | | 2,266,770 | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Series 2006-6, Class AF5 6.241%, 3/25/36(o) | | | U.S.$ | | | | 3,482 | | | $ | 1,777,063 | |
Lehman XS Trust Series 2007-6, Class 3A5 5.72%, 5/25/37(l) | | | | | | | 504 | | | | 698,407 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,830,812 | |
| | | | | | | | | | | | |
Other ABS - Fixed Rate – 0.1% | | | | | | | | | | | | |
Taco Bell Funding LLC Series 2016-1A, Class A23 4.97%, 5/25/46(a) | | | | | | | 4,751 | | | | 4,876,871 | |
| | | | | | | | | | | | |
| | | |
Autos - Fixed Rate – 0.1% | | | | | | | | | | | | |
Exeter Automobile Receivables Trust Series 2016-1A, Class D 8.20%, 2/15/23(a) | | | | | | | 3,890 | | | | 4,143,724 | |
| | | | | | | | | | | | |
| | | |
Total Asset-Backed Securities (cost $38,221,161) | | | | | | | | | | | 37,424,500 | |
| | | | | | | | | | | | |
| | | |
| | | | | Shares | | | | |
PREFERRED STOCKS – 0.4% | | | | | | | | | | | | |
Financial Institutions – 0.3% | | | | | | | | | | | | |
Banking – 0.1% | | | | | | | | | | | | |
GMAC Capital Trust I 6.602% | | | | | | | 120,575 | | | | 3,078,280 | |
Santander Finance Preferred SAU 6.80% | | | | | | | 67,000 | | | | 1,728,600 | |
US Bancorp Series F 6.50% | | | | | | | 175,125 | | | | 5,139,919 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 9,946,799 | |
| | | | | | | | | | | | |
Insurance – 0.1% | | | | | | | | | | | | |
Hartford Financial Services Group, Inc. (The) 7.875% | | | | | | | 102,401 | | | | 3,203,103 | |
XLIT Ltd. Series D 4.00%(o) | | | | | | | 3,750 | | | | 2,962,500 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,165,603 | |
| | | | | | | | | | | | |
REITS – 0.1% | | | | | | | | | | | | |
Hersha Hospitality Trust 6.875% | | | | | | | 64,000 | | | | 1,656,320 | |
Sovereign Real Estate Investment Trust 12.00%(a) | | | | | | | 501 | | | | 641,906 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,298,226 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 18,410,628 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
Company | | | | | Shares | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Industrial – 0.1% | | | | | | | | | | | | |
Communications - Telecommunications – 0.1% | | | | | | | | | | | | |
Centaur Funding Corp. 9.08%(a) | | | | | | | 6,280 | | | $ | 7,410,400 | |
| | | | | | | | | | | | |
| | | |
Utility – 0.0% | | | | | | | | | | | | |
Electric – 0.0% | | | | | | | | | | | | |
SCE Trust III 5.75% | | | | | | | 60,000 | | | | 1,722,000 | |
| | | | | | | | | | | | |
| | | |
Total Preferred Stocks (cost $24,952,060) | | | | | | | | | | | 27,543,028 | |
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | | |
GOVERNMENTS – SOVEREIGN BONDS – 0.3% | | | | | | | | | | | | |
Croatia – 0.1% | | | | | | | | | | | | |
Croatia Government International Bond 6.625%, 7/14/20(a) | | | U.S.$ | | | | 5,350 | | | | 5,934,220 | |
| | | | | | | | | | | | |
| | | |
Indonesia – 0.1% | | | | | | | | | | | | |
Indonesia Government International Bond 8.50%, 10/12/35(a) | | | | | | | 1,645 | | | | 2,433,427 | |
JPMorgan Chase Bank, NA 9.50%, 5/17/41(a) | | | IDR | | | | 68,280,000 | | | | 6,031,016 | |
Series E 10.00%, 7/18/17(a) | | | | | | | 63,808,000 | | | | 4,992,947 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 13,457,390 | |
| | | | | | | | | | | | |
Romania – 0.1% | | | | | | | | | | | | |
Romanian Government International Bond 4.875%, 1/22/24(a) | | | U.S.$ | | | | 6,000 | | | | 6,712,500 | |
| | | | | | | | | | | | |
| | | |
Total Governments – Sovereign Bonds (cost $28,778,378) | | | | | | | | | | | 26,104,110 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
LOCAL GOVERNMENTS – REGIONAL BONDS – 0.3% | | | | | | | | | | | | |
Argentina – 0.3% | | | | | | | | | | | | |
Provincia de Buenos Aires/Argentina 5.75%, 6/15/19(a) | | | | | | | 9,034 | | | | 9,259,850 | |
9.125%, 3/16/24(a) | | | | | | | 8,456 | | | | 9,365,020 | |
Provincia de Cordoba 7.125%, 6/10/21(a) | | | | | | | 4,503 | | | | 4,660,605 | |
12.375%, 8/17/17(a) | | | | | | | 2,185 | | | | 2,337,950 | |
| | | | | | | | | | | | |
| | | |
Total Local Governments – Regional Bonds (cost $23,807,941) | | | | | | | | | | | 25,623,425 | |
| | | | | | | | | | | | |
Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
INFLATION-LINKED SECURITIES – 0.2% | | | | | | | | | | | | |
Colombia – 0.2% | | | | | | | | | | | | |
Fideicomiso PA Costera 6.25%, 1/15/34(a) | | | COP | | | | 7,580,000 | | | $ | 2,417,181 | |
Fideicomiso PA Pacifico Tres 7.00%, 1/15/35(a) | | | | | | | 36,247,335 | | | | 11,964,786 | |
| | | | | | | | | | | | |
| | | |
Total Inflation-Linked Securities (cost $12,998,884) | | | | | | | | | | | 14,381,967 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
LOCAL GOVERNMENTS – MUNICIPAL BONDS – 0.2% | | | | | | | | | | | | |
United States – 0.2% | | | | | | | | | | | | |
State of California Series 2010 7.60%, 11/01/40 | | | U.S.$ | | | | 1,200 | | | | 1,885,452 | |
7.625%, 3/01/40 | | | | | | | 1,250 | | | | 1,925,575 | |
7.95%, 3/01/36 | | | | | | | 2,235 | | | | 2,659,494 | |
State of Illinois Series 2010 7.35%, 7/01/35 | | | | | | | 4,120 | | | | 4,619,674 | |
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| | | |
Total Local Governments – Municipal Bonds (cost $8,857,908) | | | | | | | | | | | 11,090,195 | |
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| | | | | Shares | | | | |
WARRANTS – 0.1% | | | | | | | | | | | | |
Encore Automotive Acceptance, expiring 7/05/31(d) | | | | | | | 44 | | | | – 0 | – |
FairPoint Communications, Inc., expiring 1/24/18(d)(j) | | | | | | | 6,740 | | | | 67 | |
Flexpath Capital, Inc., expiring 4/15/31(d) | | | | | | | 189,795 | | | | – 0 | – |
iPayment Holdings, Inc., expiring 12/29/22(d)(g)(j) | | | | | | | 1,515,784 | | | | 803,366 | |
Midstates Petroleum Co., Inc., expiring 4/21/20(d) | | | | | | | 259,925 | | | | 1,429,587 | |
SandRidge Energy, Inc., -A-CW22, expiring 10/04/22(d) | | | | | | | 302,868 | | | | 1,468,910 | |
SandRidge Energy, Inc., -B-CW22, expiring 10/04/22(d) | | | | | | | 130,363 | | | | 593,152 | |
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| | | |
Total Warrants (cost $4,527,301) | | | | | | | | | | | 4,295,082 | |
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INVESTMENT COMPANIES – 0.0% | | | | | | | | | | | | |
Funds and Investment Trusts – 0.0% | | | | | | | | | | | | |
OCL Opportunities Fund II(g)(j)(y) (cost $1,490,950) | | | | | | | 11,474 | | | | 1,965,137 | |
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Portfolio of Investments
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| | | |
| | | | | Notional Amount (000) | | | U.S. $ Value | |
| |
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OPTIONS PURCHASED – PUTS – 0.0% | | | | | | | | | | | | |
Swaptions – 0.0% | | | | | | | | | | | | |
IRS Swaption, Goldman Sachs International Expiration: Nov 2016 Exercise Rate: 4.85% (premium paid $842,528) | | | EUR | | | | 239,700 | | | $ | 1,658,157 | |
| | | | | | | | | | | | |
| | | |
| | | | | Shares | | | | |
SHORT-TERM INVESTMENTS – 6.2% | | | | | | | | | | | | |
Investment Companies – 5.6% | | | | | | | | | | | | |
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.26%(z)(aa) (cost $437,100,262) | | | | | | | 437,100,262 | | | | 437,100,262 | |
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| | | |
| | | | | Principal Amount (000) | | | | |
Time Deposits – 0.5% | | | | | | | | | | | | |
BBH Grand Cayman 0.05%, 11/01/16 | | | CAD | | | | – 0 | –** | | | 14 | |
6.30%, 11/01/16 | | | ZAR | | | | 69 | | | | 5,148 | |
BNP Paribas, Paris 0.005%, 11/01/16 | | | HKD | | | | 4,979 | | | | 641,963 | |
DNB, Oslo (0.568)%, 11/01/16 | | | EUR | | | | 11,708 | | | | 12,852,163 | |
0.478%, 11/01/16 | | | AUD | | | | 1,530 | | | | 1,164,147 | |
Nordea Bank Norge, Oslo 0.087%, 11/01/16 | | | NOK | | | | 439 | | | | 53,110 | |
Sumitomo, Tokyo (0.42)%, 11/01/16 | | | JPY | | | | 190,223 | | | | 1,813,897 | |
0.05%, 11/01/16 | | | GBP | | | | 8,542 | | | | 10,455,555 | |
0.15%, 11/01/16 | | | U.S.$ | | | | 13,606 | | | | 13,606,160 | |
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| | | |
Total Time Deposits (cost $40,539,170) | | | | | | | | | | | 40,592,157 | |
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| | | | | | | | | | | | |
Bank Loans – 0.1% | | | | | | | | | | | | |
Utility – 0.1% | | | | | | | | | | | | |
Electric – 0.1% | | | | | | | | | | | | |
Energy Future Intermediate Holding Company LLC (EFIH Finance Inc.) 4.25% (LIBOR 3 Month + 3.25%), 6/30/17(o)(s) (cost $9,316,149) | | | | | | | 9,316 | | | | 9,368,599 | |
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Portfolio of Investments
| | | | | | | | | | | | |
| | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| |
| | | | | | | | | | | | |
Emerging Markets – Sovereigns – 0.0% | | | | | | | | | | | | |
Argentina – 0.0% | | | | | | | | | | | | |
Argentina Bonar Bonds 6.00%, 12/29/16 (cost $2,374,330) | | | U.S.$ | | | | 2,377 | | | $ | 2,376,535 | |
| | | | | | | | | | | | |
| | | |
Total Short-Term Investments (cost $489,329,911) | | | | | | | | | | | 489,437,553 | |
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| | | |
Total Investments – 100.6% (cost $7,930,901,810) | | | | | | | | | | | 7,836,612,209 | |
Other assets less liabilities – (0.6)% | | | | | | | | | | | (46,280,244 | ) |
| | | | | | | | | | | | |
| | | |
Net Assets – 100.0% | | | | | | | | | | $ | 7,790,331,965 | |
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FUTURES (see Note D)
| | | | | | | | | | | | | | | | | | |
Type | | Number of Contracts | | | Expiration Month | | Original Value | | | Value at October 31, 2016 | | | Unrealized Appreciation/ (Depreciation) | |
Purchased Contracts | |
Euro STOXX 50 Index Futures | | | 556 | | | December 2016 | | $ | 18,277,510 | | | $ | 18,627,022 | | | $ | 349,512 | |
S&P 500 E-Mini Futures | | | 360 | | | December 2016 | | | 38,330,981 | | | | 38,161,800 | | | | (169,181 | ) |
U.S. T-Note 10 Yr (CBT) Futures | | | 977 | | | December 2016 | | | 127,421,969 | | | | 126,643,625 | | | | (778,344 | ) |
|
Sold Contracts | |
Euro-BOBL Futures | | | 2,350 | | | December 2016 | | | 340,171,115 | | | | 338,226,100 | | | | 1,945,015 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | $ | 1,347,002 | |
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FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
Australia and New Zealand Banking Group Ltd. | | | SGD | | | | 43,416 | | | | USD | | | | 31,891 | | | | 12/14/16 | | | $ | 675,955 | |
Bank of America, NA | | | BRL | | | | 140,008 | | | | USD | | | | 44,013 | | | | 11/03/16 | | | | 164,429 | |
Bank of America, NA | | | USD | | | | 44,377 | | | | BRL | | | | 140,008 | | | | 11/03/16 | | | | (528,527 | ) |
Bank of America, NA | | | CAD | | | | 148,312 | | | | USD | | | | 115,548 | | | | 11/10/16 | | | | 4,968,929 | |
Bank of America, NA | | | BRL | | | | 140,008 | | | | USD | | | | 43,997 | | | | 12/02/16 | | | | 543,481 | |
Barclays Bank PLC | | | USD | | | | 111,475 | | | | INR | | | | 7,547,945 | | | | 12/15/16 | | | | 995,526 | |
BNP Paribas SA | | | USD | | | | 890 | | | | ARS | | | | 15,483 | | | | 1/26/17 | | | | 80,134 | |
BNP Paribas SA | | | USD | | | | 890 | | | | ARS | | | | 15,572 | | | | 1/31/17 | | | | 82,663 | |
BNP Paribas SA | | | USD | | | | 890 | | | | ARS | | | | 15,661 | | | | 2/03/17 | | | | 86,756 | |
BNP Paribas SA | | | USD | | | | 3,581 | | | | ARS | | | | 63,112 | | | | 2/13/17 | | | | 335,163 | |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
BNP Paribas SA | | | USD | | | | 2,702 | | | | ARS | | | | 47,865 | | | | 2/16/17 | | | $ | 263,829 | |
BNP Paribas SA | | | USD | | | | 1,801 | | | | ARS | | | | 32,060 | | | | 2/17/17 | | | | 184,201 | |
BNP Paribas SA | | | USD | | | | 5,403 | | | | ARS | | | | 97,261 | | | | 2/21/17 | | | | 607,612 | |
BNP Paribas SA | | | USD | | | | 901 | | | | ARS | | | | 16,390 | | | | 2/23/17 | | | | 111,400 | |
BNP Paribas SA | | | USD | | | | 1,717 | | | | ARS | | | | 31,420 | | | | 2/24/17 | | | | 222,030 | |
BNP Paribas SA | | | USD | | | | 936 | | | | ARS | | | | 17,410 | | | | 2/27/17 | | | | 136,781 | |
BNP Paribas SA | | | USD | | | | 2,150 | | | | ARS | | | | 40,311 | | | | 2/28/17 | | | | 332,821 | |
BNP Paribas SA | | | USD | | | | 2,150 | | | | ARS | | | | 40,849 | | | | 3/01/17 | | | | 364,685 | |
BNP Paribas SA | | | USD | | | | 2,366 | | | | ARS | | | | 46,146 | | | | 3/02/17 | | | | 472,849 | |
BNP Paribas SA | | | USD | | | | 2,917 | | | | ARS | | | | 52,896 | | | | 7/05/17 | | | | 154,457 | |
Brown Brothers Harriman & Co. | | | EUR | | | | 755 | | | | USD | | | | 845 | | | | 11/15/16 | | | | 15,760 | |
Brown Brothers Harriman & Co. | | | EUR | | | | 143 | | | | USD | | | | 155 | | | | 11/15/16 | | | | (1,596 | ) |
Brown Brothers Harriman & Co. | | | USD | | | | 9,982 | | | | EUR | | | | 9,130 | | | | 11/15/16 | | | | 46,272 | |
Brown Brothers Harriman & Co. | | | USD | | | | 10,374 | | | | GBP | | | | 8,542 | | | | 11/16/16 | | | | 84,190 | |
Brown Brothers Harriman & Co. | | | USD | | | | 346 | | | | NOK | | | | 2,862 | | | | 12/07/16 | | | | 680 | |
Citibank, NA | | | EUR | | | | 362,541 | | | | USD | | | | 405,205 | | | | 11/15/16 | | | | 7,022,448 | |
Citibank, NA | | | GBP | | | | 9,442 | | | | USD | | | | 12,253 | | | | 11/16/16 | | | | 693,400 | |
Citibank, NA | | | JPY | | | | 3,974,306 | | | | USD | | | | 38,550 | | | | 12/09/16 | | | | 599,301 | |
Credit Suisse International | | | USD | | | | 16,940 | | | | ZAR | | | | 241,343 | | | | 11/14/16 | | | | 916,407 | |
Credit Suisse International | | | SEK | | | | 2,355,888 | | | | EUR | | | | 239,187 | | | | 11/15/16 | | | | 1,717,229 | |
Credit Suisse International | | | EUR | | | | 41,975 | | | | SEK | | | | 403,618 | | | | 12/07/16 | | | | (1,385,295 | ) |
Goldman Sachs Bank USA | | | MXN | | | | 238,922 | | | | USD | | | | 12,111 | | | | 11/22/16 | | | | (500,007 | ) |
Goldman Sachs Bank USA | | | USD | | | | 89,068 | | | | MXN | | | | 1,757,135 | | | | 11/22/16 | | | | 3,677,262 | |
Goldman Sachs Bank USA | | | USD | | | | 75,971 | | | | RUB | | | | 4,769,827 | | | | 11/22/16 | | | | (1,117,700 | ) |
Goldman Sachs Bank USA | | | BRL | | | | 273,317 | | | | USD | | | | 85,203 | | | | 12/02/16 | | | | 375,133 | |
Goldman Sachs Bank USA | | | USD | | | | 8,904 | | | | SEK | | | | 74,777 | | | | 12/07/16 | | | | (611,233 | ) |
HSBC Bank USA | | | EUR | | | | 17,140 | | | | USD | | | | 19,240 | | | | 11/15/16 | | | | 414,904 | |
HSBC Bank USA | | | MXN | | | | 12,036 | | | | USD | | | | 644 | | | | 11/22/16 | | | | 8,997 | |
JPMorgan Chase Bank, NA | | | GBP | | | | 29,095 | | | | JPY | | | | 3,826,135 | | | | 11/16/16 | | | | 879,123 | |
JPMorgan Chase Bank, NA | | | USD | | | | 12,215 | | | | MXN | | | | 238,777 | | | | 11/22/16 | | | | 387,987 | |
JPMorgan Chase Bank, NA | | | NOK | | | | 12,128 | | | | USD | | | | 1,483 | | | | 12/07/16 | | | | 15,290 | |
Morgan Stanley Capital Services LLC | | | ZAR | | | | 241,344 | | | | USD | | | | 16,940 | | | | 11/14/16 | | | | (916,463 | ) |
Morgan Stanley Capital Services LLC | | | USD | | | | 216,784 | | | | SEK | | | | 1,857,228 | | | | 12/07/16 | | | | (10,818,775 | ) |
Royal Bank of Scotland PLC | | | CAD | | | | 55,836 | | | | USD | | | | 42,398 | | | | 11/10/16 | | | | 766,789 | |
Royal Bank of Scotland PLC | | | GBP | | | | 29,741 | | | | USD | | | | 36,595 | | | | 11/16/16 | | | | 182,850 | |
Royal Bank of Scotland PLC | | | MXN | | | | 807,941 | | | | USD | | | | 41,795 | | | | 11/22/16 | | | | (849,821 | ) |
Standard Chartered Bank | | | BRL | | | | 140,008 | | | | USD | | | | 42,806 | | | | 11/03/16 | | | | (1,041,940 | ) |
Standard Chartered Bank | | | USD | | | | 44,013 | | | | BRL | | | | 140,008 | | | | 11/03/16 | | | | (164,429 | ) |
Standard Chartered Bank | | | CHF | | | | 31,421 | | | | USD | | | | 32,178 | | | | 11/22/16 | | | | 393,335 | |
Standard Chartered Bank | | | USD | | | | 14,821 | | | | TRY | | | | 44,674 | | | | 11/28/16 | | | | (462,323 | ) |
Standard Chartered Bank | | | USD | | | | 26,938 | | | | IDR | | | | 353,018,561 | | | | 12/15/16 | | | | (25,259 | ) |
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| | | $ | 10,557,690 | |
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Portfolio of Investments
CALL OPTIONS WRITTEN (see Note D)
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Description | | Contracts | | | Exercise Price | | Expiration Month | | | Premiums Received | | | U.S. $ Value | |
S&P 500 Index (ab) | | | 528 | | | $ 2,200.00 | | | December 2016 | | | $ | 811,515 | | | $ | (451,440 | ) |
CREDIT DEFAULT SWAPTIONS WRITTEN (see Note D)
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Description | | Counter- party | | | Buy/Sell Protection | | Strike Rate | | | Expiration Date | | | Notional Amount (000) | | | Premiums Received | | | Market Value | |
Call – CDX-NAHY Series 27, 5 Year Index | | | Citibank, NA | | | Sell | | | 104.00 | % | | | 11/16/16 | | | $ | 77,160 | | | $ | 408,948 | | | $ | (144,234 | ) |
Put – CDX-NAHY Series 27, 5 Year Index | | | Citibank, NA | | | Sell | | | 103.50 | | | | 11/16/16 | | | | 77,160 | | | | 401,232 | | | | (516,047 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | $ | 810,180 | | | $ | (660,281 | ) |
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CURRENCY OPTIONS WRITTEN (see Note D)
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Description | | Exercise Price | | | Expiration Date | | | Contracts (000) | | | Premiums Received | | | U.S. $ Value | |
AUD vs. NZD | | | NZD | | | | 1.080 | | | | 12/02/16 | | | | NZD | | | | 109,319 | | | $ | 635,323 | | | $ | (292,526 | ) |
EUR vs. NOK | | | NOK | | | | 9.150 | | | | 11/01/16 | | | | NOK | | | | 627,873 | | | | 314,415 | | | | (27,281 | ) |
EUR vs. TRY | | | TRY | | | | 3.811 | | | | 4/10/17 | | | | TRY | | | | 265,047 | | | | 1,299,839 | | | | (874,311 | ) |
NZD vs. CAD | | | CAD | | | | 0.970 | | | | 11/28/16 | | | | CAD | | | | 105,633 | | | | 404,246 | | | | (465,595 | ) |
USD vs. RUB | | | $ | | | | 77.620 | | | | 10/16/17 | | | | RUB | | | | 3,003,739 | | | | 1,196,217 | | | | (1,168,308 | ) |
USD vs. ZAR | | | | | | | 14.920 | | | | 11/10/16 | | | | ZAR | | | | 1,148,840 | | | | 754,600 | | | | (46,861 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | 4,604,640 | | | $ | (2,874,882 | ) |
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CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
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Clearing Broker/(Exchange) & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Unrealized Appreciation/ (Depreciation) | |
Buy Contracts | | | | | | | | | | | | | | | | | | | | | | |
Citigroup Global Markets, Inc./(INTRCONX) | | | | | | | | | | | | | | | | | | | | | | |
iTraxx Europe Crossover Series 23, 5 Year Index, 6/20/20* | | | (5.00 | )% | | | 2.56 | % | | EUR | | | 22,398 | | | $ | (2,182,555 | ) | | $ | (656,977 | ) |
Morgan Stanley & Co. LLC/(INTRCONX) | | | | | | | | | | | | | | | | | | | | | | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | $ | | | 37,123 | | | | (1,815,867 | ) | | | 84,881 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 18,181 | | | | (889,321 | ) | | | 66,018 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 23,634 | | | | (1,156,054 | ) | | | 64,254 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 18,562 | | | | (907,959 | ) | | | 61,664 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 45,058 | | | | (2,204,008 | ) | | | 55,388 | |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | | | |
Clearing Broker/(Exchange) & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Unrealized Appreciation/ (Depreciation) | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | )% | | | 3.93 | % | | $ | | | 18,181 | | | $ | (889,321 | ) | | $ | 48,878 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 27,312 | | | | (1,335,964 | ) | | | 35,058 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 13,635 | | | | (666,954 | ) | | | 29,891 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 17,272 | | | | (844,858 | ) | | | (26,139 | ) |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 17,817 | | | | (871,517 | ) | | | (50,730 | ) |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 38,179 | | | | (1,867,521 | ) | | | (63,898 | ) |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | (5.00 | ) | | | 3.93 | | | | | | 75,790 | | | | (3,707,260 | ) | | | (700,552 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | (5.00 | ) | | | 4.21 | | | | | | 69,410 | | | | (2,783,548 | ) | | | 5,230 | |
| | | | | | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | | | |
Citigroup Global Markets, Inc./(INTRCONX) | | | | | | | | | | | | | | | | | | | | | | |
CDX-NAHY Series 21, 5 Year Index, 12/20/18* | | | 5.00 | | | | 2.06 | | | | | | 28,272 | | | | 1,882,992 | | | | 980,791 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | 5.00 | | | | 3.93 | | | | | | 243,490 | | | | 11,910,287 | | | | 5,634,111 | |
CDX-NAIG Series 20, 5 Year Index, 6/20/18* | | | 1.00 | | | | 0.27 | | | | | | 51,660 | | | | 677,962 | | | | 362,188 | |
iTraxx Europe Crossover Series 21, 5 Year Index, 6/20/19* | | | 5.00 | | | | 1.21 | | | EUR | | | 4 | | | | 506 | | | | 97 | |
Morgan Stanley & Co. LLC/(INTRCONX) | | | | | | | | | | | | | | | | | | | | | | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | 5.00 | | | | 3.93 | | | $ | | | 31,464 | | | | 1,539,058 | | | | 479,424 | |
CDX-NAHY Series 26, 5 Year Index, 6/20/21* | | | 5.00 | | | | 3.93 | | | | | | 75,790 | | | | 3,707,260 | | | | (248,880 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 90,727 | | | | 3,638,422 | | | | 191,574 | |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 15,999 | | | | 641,607 | | | | 32,150 | |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 34,361 | | | | 1,377,978 | | | | 28,251 | |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 15,635 | | | | 627,011 | | | | 8,455 | |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 12,363 | | | | 495,794 | | | | (38,292 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 24,580 | | | | 985,731 | | | | (56,197 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 16,363 | | | | 656,205 | | | | (58,807 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | 14,107 | | | | 565,733 | | | | (59,239 | ) |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | | | | | |
Clearing Broker/(Exchange) & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Unrealized Appreciation/ (Depreciation) | |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | % | | | 4.21 | % | | | $ | | | | 16,363 | | | $ | 656,205 | | | $ | (74,245 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | | | 21,340 | | | | 855,797 | | | | (77,188 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | | | 40,539 | | | | 1,625,734 | | | | (86,211 | ) |
CDX-NAHY Series 27, 5 Year Index, 12/20/21* | | | 5.00 | | | | 4.21 | | | | | | | | 33,413 | | | | 1,339,960 | | | �� | (106,644 | ) |
iTraxx Europe Crossover Series 23, 5 Year Index, 6/20/20* | | | 5.00 | | | | 2.56 | | | | EUR | | | | 22,398 | | | | 2,185,970 | | | | 191,642 | |
iTraxx Europe Crossover Series 26, 5 Year Index, 12/20/21* | | | 5.00 | | | | 3.30 | | | | | | | | 12,160 | | | | 1,105,064 | | | | 137,316 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 14,352,569 | | | $ | 6,193,262 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums Paid (Received) | | | Unrealized Appreciation/ (Depreciation) | |
Buy Contracts | |
Barclays Bank PLC | | | | | | | | | | | | | | | | | | | | | | | | |
K. Hovnanian Enterprises, Inc., 8.625%, 1/15/17, 3/20/17* | | | (5.00 | )% | | | 4.26 | % | | $ | 16,829 | | | $ | (125,819 | ) | | $ | (131,640 | ) | | $ | 5,821 | |
Tenet Healthcare Corp., 6.875%, 11/15/31, 6/20/17* | | | (5.00 | ) | | | 0.78 | | | | 18,869 | | | | (621,746 | ) | | | (397,487 | ) | | | (224,259 | ) |
Citibank, NA | | | | | | | | | | | | | | | | | | | | | | | | |
Bombardier, Inc., 7.450%, 5/01/34, 3/20/17* | | | (5.00 | ) | | | 1.71 | | | | 9,416 | | | | (175,588 | ) | | | (127,452 | ) | | | (48,136 | ) |
Bombardier, Inc., 7.450%, 5/01/34, 3/20/17* | | | (5.00 | ) | | | 1.71 | | | | 9,474 | | | | (176,670 | ) | | | (124,195 | ) | | | (52,475 | ) |
United States Steel Corp., 6.650%, 6/01/37, 3/20/17* | | | (5.00 | ) | | | 0.58 | | | | 17,494 | | | | (385,807 | ) | | | (178,274 | ) | | | (207,533 | ) |
Deutsche Bank AG | | | | | | | | | | | | | | | | | | | | | | | | |
iHeartCommunications, Inc., 6.875%, 6/15/18, 6/20/18* | | | (5.00 | ) | | | 33.39 | | | | 977 | | | | 365,466 | | | | 44,179 | | | | 321,287 | |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums Paid (Received) | | | Unrealized Appreciation/ (Depreciation) | |
Goldman Sachs Bank USA | | | | | | | | | | | | | | | | | | | | | | | | |
Community Health Systems, Inc., 8.000%, 11/15/19, 3/20/17* | | | (5.00 | )% | | | 2.42 | % | | $ | 18,722 | | | $ | (292,256 | ) | | $ | (228,347 | ) | | $ | (63,909 | ) |
Dell, Inc., 7.100%, 4/15/28, 3/20/17* | | | (1.00 | ) | | | 0.47 | | | | 17,016 | | | | (55,169 | ) | | | 51,191 | | | | (106,360 | ) |
Nine West Holdings, Inc., 6.875%, 3/15/19, 3/20/17* | | | (5.00 | ) | | | 74.94 | | | | 17,442 | | | | 3,969,742 | | | | (191,568 | ) | | | 4,161,310 | |
Morgan Stanley Capital Services LLC | | | | | | | | | | | | | | | | | | | | | | | | |
iHeartCommunications, Inc., 6.875%, 6/15/18, 6/20/18* | | | (5.00 | ) | | | 33.39 | | | | 1,099 | | | | 411,192 | | | | 49,707 | | | | 361,485 | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | | | | | |
Bank of America, NA | | | | | | | | | | | | | | | | | | | | | | | | |
United States Steel Corp., 6.650%, 6/01/37, 9/20/19* | | | 5.00 | | | | 4.92 | | | | 2,700 | | | | 4,205 | | | | 71,246 | | | | (67,041 | ) |
Barclays Bank PLC | | | | | | | | | | | | | | | | | | | | | | | | |
CCO Holdings, LLC, 7.250%, 10/30/17, 6/20/19* | | | 5.00 | | | | 0.72 | | | | 6,192 | | | | 716,179 | | | | 365,754 | | | | 350,425 | |
iHeartCommunications, Inc., 6.875%, 6/15/18, 12/20/20* | | | 5.00 | | | | 38.40 | | | | 7,340 | | | | (4,839,817 | ) | | | (4,797,427 | ) | | | (42,390 | ) |
K. Hovnanian Enterprises, Inc., 8.625%, 1/15/17, 9/20/20* | | | 5.00 | | | | 23.01 | | | | 2,917 | | | | (1,301,593 | ) | | | (645,602 | ) | | | (655,991 | ) |
K. Hovnanian Enterprises, Inc., 8.625%, 1/15/17, 9/20/20* | | | 5.00 | | | | 23.01 | | | | 7,293 | | | | (3,254,207 | ) | | | (1,611,514 | ) | | | (1,642,693 | ) |
Tenet Healthcare Corp., 6.875%, 11/15/31, 6/20/19* | | | 5.00 | | | | 2.84 | | | | 12,770 | | | | 670,510 | | | | 573,326 | | | | 97,184 | |
Citibank, NA | | | | | | | | | | | | | | | | | | | | | | | | |
Advanced Micro Devices, Inc., 7.750%, 8/01/20, 3/20/19* | | | 5.00 | | | | 1.32 | | | | 3,720 | | | | 336,194 | | | | (454,806 | ) | | | 791,000 | |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums Paid (Received) | | | Unrealized Appreciation/ (Depreciation) | |
CDX-CMBX.NA.BBB Series 7, 1/17/47* | | | 3.00 | % | | | 4.48 | % | | $ | 5,000 | | | $ | (422,083 | ) | | $ | (60,882 | ) | | $ | (361,201 | ) |
CDX-CMBX.NA.BBB Series 7, 1/17/47* | | | 3.00 | | | | 4.48 | | | | 25,000 | | | | (2,110,417 | ) | | | (287,617 | ) | | | (1,822,800 | ) |
United States Steel Corp., 6.650%, 6/01/37, 3/20/19* | | | 5.00 | | | | 3.87 | | | | 12,590 | | | | 319,648 | | | | 199,270 | | | | 120,378 | |
Credit Suisse International | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 1,368 | | | | (209,889 | ) | | | (217,161 | ) | | | 7,272 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 547 | | | | (83,925 | ) | | | (86,833 | ) | | | 2,908 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 2,735 | | | | (420,765 | ) | | | (423,020 | ) | | | 2,255 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 1,368 | | | | (210,459 | ) | | | (211,796 | ) | | | 1,337 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 14,000 | | | | (2,147,988 | ) | | | (1,967,477 | ) | | | (180,511 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 15,000 | | | | (2,305,583 | ) | | | (1,882,976 | ) | | | (422,607 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 15,000 | | | | (2,301,417 | ) | | | (1,807,280 | ) | | | (494,137 | ) |
CDX-CMBX.NA.BBB Series 7, 1/17/47* | | | 3.00 | | | | 4.48 | | | | 5,000 | | | | (422,083 | ) | | | (113,187 | ) | | | (308,896 | ) |
CDX-CMBX.NA.BBB Series 7, 1/17/47* | | | 3.00 | | | | 4.48 | | | | 5,000 | | | | (422,083 | ) | | | (92,967 | ) | | | (329,116 | ) |
Goldman Sachs Bank USA | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-NAIG Series 9, 10 Year Index, 12/20/17* | | | 5.00 | | | | 0.54 | | | | 5,700 | | | | 324,237 | | | | (196,175 | ) | | | 520,412 | |
Community Health Systems, Inc., 8.000%, 11/15/19, 3/20/19* | | | 5.00 | | | | 8.56 | | | | 12,590 | | | | (914,219 | ) | | | 499,860 | | | | (1,414,079 | ) |
K. Hovnanian Enterprises, Inc., 8.625%, 1/15/17, 9/20/20* | | | 5.00 | | | | 23.01 | | | | 3,110 | | | | (1,387,712 | ) | | | (647,469 | ) | | | (740,243 | ) |
Nine West Holdings, Inc., 6.875%, 3/15/19, 3/20/19* | | | 5.00 | | | | 84.21 | | | | 12,590 | | | | (9,712,881 | ) | | | 199,270 | | | | (9,912,151 | ) |
Goldman Sachs International | | | | | | | | | | | | | | | | | | | | | | | | |
Avis Budget Car Rental LLC, 5.250%, 3/15/25, 12/20/21* | | | 5.00 | | | | 4.29 | | | | 1,607 | | | | 61,309 | | | | 64,942 | | | | (3,633 | ) |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums Paid (Received) | | | Unrealized Appreciation/ (Depreciation) | |
Avis Budget Car Rental LLC, 5.250%, 3/15/25, 12/20/21* | | | 5.00 | % | | | 4.29 | % | | $ | 2,067 | | | $ | 78,858 | | | $ | 83,554 | | | $ | (4,696 | ) |
Avis Budget Car Rental LLC, 5.250%, 3/15/25, 12/20/21* | | | 5.00 | | | | 4.29 | | | | 1,378 | | | | 52,572 | | | | 64,829 | | | | (12,257 | ) |
Avis Budget Car Rental LLC, 5.250%, 3/15/25, 12/20/21* | | | 5.00 | | | | 4.29 | | | | 2,296 | | | | 87,595 | | | | 107,934 | | | | (20,339 | ) |
Avis Budget Car Rental LLC, 5.250%, 3/15/25, 12/20/21* | | | 5.00 | | | | 4.29 | | | | 3,215 | | | | 122,656 | | | | 165,678 | | | | (43,022 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 17,700 | | | | (2,715,672 | ) | | | (3,697,970 | ) | | | 982,298 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 20,000 | | | | (3,068,555 | ) | | | (3,726,010 | ) | | | 657,455 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 12,300 | | | | (1,887,162 | ) | | | (2,161,326 | ) | | | 274,164 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 1,368 | | | | (210,459 | ) | | | (216,021 | ) | | | 5,562 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 1,368 | | | | (210,459 | ) | | | (216,021 | ) | | | 5,562 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 1,368 | | | | (210,459 | ) | | | (213,609 | ) | | | 3,150 | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 643 | | | | (98,922 | ) | | | (96,889 | ) | | | (2,033 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 5,000 | | | | (769,223 | ) | | | (702,053 | ) | | | (67,170 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 5,000 | | | | (769,222 | ) | | | (697,544 | ) | | | (71,678 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 5,000 | | | | (769,222 | ) | | | (693,029 | ) | | | (76,193 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 10,000 | | | | (1,538,445 | ) | | | (1,395,088 | ) | | | (143,357 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 8,871 | | | | (1,363,555 | ) | | | (1,113,619 | ) | | | (249,936 | ) |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at October 31, 2016 | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums Paid (Received) | | | Unrealized Appreciation/ (Depreciation) | |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | % | | | 8.47 | % | | $ | 5,000 | | | $ | (769,222 | ) | | $ | (120,909 | ) | | $ | (648,313 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 10,000 | | | | (1,538,445 | ) | | | (215,291 | ) | | | (1,323,154 | ) |
CDX-CMBX.NA.BB Series 6, 5/11/63* | | | 5.00 | | | | 8.47 | | | | 10,000 | | | | (1,538,445 | ) | | | (212,634 | ) | | | (1,325,811 | ) |
iHeartCommunications, Inc., 6.875%, 6/15/18, 6/20/21* | | | 5.00 | | | | 37.82 | | | | 3,258 | | | | (2,184,884 | ) | | | (1,962,290 | ) | | | (222,594 | ) |
Morgan Stanley Capital Services LLC | | | | | | | | | | | | | | | | | | | | | | | | |
Bombardier, Inc., 7.450%, 5/01/34, 6/20/21* | | | 5.00 | | | | 5.90 | | | | 5,000 | | | | (156,967 | ) | | | 233,139 | | | | (390,106 | ) |
United States Steel Corp., 6.650%, 6/01/37, 9/20/19* | | | 5.00 | | | | 4.92 | | | | 3,820 | | | | 5,951 | | | | 124,943 | | | | (118,992 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | (46,573,180 | ) | | $ | (31,424,633 | ) | | $ | (15,148,547 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
INTEREST RATE SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Rate Type | | | | |
Swap Counterparty | | Notional Amount (000) | | | Termination Date | | | Payments made by the Fund | | | Payments received by the Fund | | | Unrealized Appreciation/ (Depreciation) | |
Bank of America, NA | | | BRL 310,298 | | | | 1/02/19 | | | | CDI | | | | 11.260% | | | $ | (308,404 | ) |
Bank of America, NA | | | 155,352 | | | | 1/02/19 | | | | CDI | | | | 11.280% | | | | (135,706 | ) |
Bank of America, NA | | | 65,468 | | | | 1/02/25 | | | | 10.820% | | | | CDI | | | | 198,908 | |
Bank of America, NA | | | 32,599 | | | | 1/02/25 | | | | 10.837% | | | | CDI | | | | 93,023 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | $ | (152,179 | ) |
| | | | | | | | | | | | | | | | | | | | |
TOTAL RETURN SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Counterparty & Referenced Obligation | | # of Shares or Units | | | Rate Paid/ Received | | | Notional Amount (000) | | | Maturity Date | | | Unrealized Appreciation/ (Depreciation) | |
Receive Total Return on Reference Obligation | |
Bank of America, NA | |
iBoxx USD Liquid High Yield Index | | | 37,729 | | | | LIBOR | | | $ | 9,272 | | | | 12/20/16 | | | $ | 77,813 | |
iBoxx USD Liquid High Yield Index | | | 37,591 | | | | LIBOR | | | | 9,271 | | | | 12/20/16 | | | | 46,862 | |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | |
Counterparty & Referenced Obligation | | # of Shares or Units | | | Rate Paid/ Received | | | Notional Amount (000) | | | Maturity Date | | | Unrealized Appreciation/ (Depreciation) | |
Barclays Bank PLC | | | | | | | | | | | | | | | | | | | | |
Barclays Weekly Short Variance US Strategy | | | 255,358 | | | | — | | | $ | 41,190 | | | | 11/18/16 | | | $ | 254,021 | |
Citibank, NA | |
iBoxx USD Liquid High Yield Index | | | 94,319 | | | | LIBOR | | | | 23,179 | | | | 12/20/16 | | | | 194,524 | |
iBoxx USD Liquid High Yield Index | | | 59,598 | | | | LIBOR | | | | 14,661 | | | | 12/20/16 | | | | 107,991 | |
iBoxx USD Liquid High Yield Index | | | 34,618 | | | | LIBOR | | | | 8,516 | | | | 12/20/16 | | | | 63,646 | |
Goldman Sachs International | |
iBoxx $ High Yield Corporate Bond ETF | | | 457,531 | | | | LIBOR | | | | 39,407 | | | | 11/30/16 | | | | (574 | ) |
iBoxx USD Liquid High Yield Index | | | 94,415 | | | | LIBOR | | | | 23,179 | | | | 12/20/16 | | | | 224,055 | |
iBoxx USD Liquid High Yield Index | | | 93,929 | | | | LIBOR | | | | 23,177 | | | | 12/20/16 | | | | 99,643 | |
iBoxx USD Liquid High Yield Index | | | 93,550 | | | | LIBOR | | | | 23,177 | | | | 12/23/16 | | | | 5,545 | |
JPMorgan Chase Bank, NA | |
iBoxx USD Liquid High Yield Index | | | 94,512 | | | | LIBOR | | | | 23,179 | | | | 12/20/16 | | | | 247,943 | |
iBoxx USD Liquid High Yield Index | | | 94,080 | | | | LIBOR | | | | 23,179 | | | | 12/20/16 | | | | 135,139 | |
iBoxx USD Liquid High Yield Index | | | 47,158 | | | | LIBOR | | | | 11,589 | | | | 12/20/16 | | | | 97,258 | |
iBoxx USD Liquid High Yield Index | | | 47,058 | | | | LIBOR | | | | 11,588 | | | | 12/20/16 | | | | 73,486 | |
iBoxx USD Liquid High Yield Index | | | 27,959 | | | | LIBOR | | | | 6,885 | | | | 12/20/16 | | | | 43,662 | |
iBoxx USD Liquid High Yield Index | | | 46,972 | | | | LIBOR | | | | 11,588 | | | | 12/23/16 | | | | 52,182 | |
Morgan Stanley Capital Services LLC | | | | | | | | | | | | | | | | | | | | |
iBoxx USD Liquid High Yield Index | | | 47,029 | | | | LIBOR | | | | 11,588 | | | | 12/20/16 | | | | 66,376 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 1,789,572 | |
| | | | | | | | | | | | | | | | | | | | |
VARIANCE SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Volatility Strike Price | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums (Paid) Received | | | Unrealized Appreciation/ (Depreciation) | |
Sale Contracts | |
Bank of America, NA | | | | | | | | | | | | | | | | | | | | |
Euro STOXX 50 Index 11/18/16* | | | 19.40 | % | | EUR | 1,341 | | | $ | 399,034 | | | $ | – 0 | – | | $ | 399,034 | |
Barclays Bank PLC | | | | | | | | | | | | | | | | | | | | |
Russell 2000 Index 11/30/16* | | | 20.10 | | | U.S.$ | 606 | | | | (64,521 | ) | | | – 0 | – | | | (64,521 | ) |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Volatility Strike Price | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums (Paid) Received | | | Unrealized Appreciation/ (Depreciation) | |
Citibank, NA | | | | | | | | | | | | | | | | | | | | |
Nikkei 225 Index 11/25/16* | | | 17.80 | % | | JPY | 87,975 | | | $ | (67,451 | ) | | $ | – 0 | – | | $ | (67,451 | ) |
S&P 500 Index 11/4/16* | | | 12.85 | | | U.S.$ | 791 | | | | (323,595 | ) | | | – 0 | – | | | (323,595 | ) |
Goldman Sachs International | | | | | | | | | | | | | | | | | | | | |
Euro STOXX 50 Index 11/30/16* | | | 18.80 | | | EUR | 1,241 | | | | (314,255 | ) | | | – 0 | – | | | (314,255 | ) |
Hang Seng Index 11/29/16* | | | 18.10 | | | HKD | 6,297 | | | | (47,909 | ) | | | – 0 | – | | | (47,909 | ) |
NASDAQ 100 Index 11/30/16* | | | 17.14 | | | U.S.$ | 517 | | | | (70,901 | ) | | | – 0 | – | | | (70,901 | ) |
S&P 500 Index 12/16/16* | | | 24.00 | | | | 120 | | | | 85,205 | | | | – 0 | – | | | 85,205 | |
S&P/ASX 200 Index 11/30/16* | | | 15.51 | | | AUD | 1,710 | | | | 26,563 | | | | – 0 | – | | | 26,563 | |
HSBC Bank USA | | | | | | | | | | | | | | | | | | | | |
Hang Seng Index 11/29/16* | | | 19.50 | | | HKD | 5,346 | | | | 145,310 | | | | – 0 | – | | | 145,310 | |
Nikkei 225 Index 11/18/16* | | | 21.50 | | | JPY | 91,408 | | | | 433,113 | | | | – 0 | – | | | 433,113 | |
JPMorgan Chase Bank, NA | | | | | | | | | | | | | | | | | | | | |
S&P/ASX 200 Index 11/17/16* | | | 14.55 | | | AUD | 1,299 | | | | 81,125 | | | | – 0 | – | | | 81,125 | |
Morgan Stanley & Co. International PLC | | | | | | | | | | | | | | | | | | | | |
NASDAQ 100 Index 11/18/16* | | | 17.25 | | | U.S.$ | 471 | | | | 76,070 | | | | – 0 | – | | | 76,070 | |
Russell 2000 Index 11/18/16* | | | 20.10 | | | | 549 | | | | 100,085 | | | | – 0 | – | | | 100,085 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | $ | 457,873 | | | $ | – 0 | – | | $ | 457,873 | |
| | | | | | | | | | | | | | | | | | | | |
REVERSE REPURCHASE AGREEMENTS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Broker | | Principal Amount (000) | | | Currency | | | Interest Rate | | | Maturity | | | U.S. $ Value at October 31, 2016 | |
Barclays Capital, Inc. | | | 2,738 | | | | USD | | | | (3.50 | )%* | | | — | | | $ | 2,730,966 | |
Barclays Capital, Inc. | | | 880 | | | | USD | | | | (3.00 | )%* | | | — | | | | 878,521 | |
Barclays Capital, Inc. | | | 3,960 | | | | USD | | | | (2.00 | )%* | | | — | | | | 3,958,680 | |
Barclays Capital, Inc. | | | 3,465 | | | | USD | | | | (2.00 | )%* | | | — | | | | 3,463,652 | |
Barclays Capital, Inc. | | | 2,453 | | | | USD | | | | (2.00 | )%* | | | — | | | | 2,452,989 | |
Barclays Capital, Inc. | | | 1,975 | | | | USD | | | | (0.25 | )%* | | | — | | | | 1,974,151 | |
Barclays Capital, Inc. | | | 2,253 | | | | USD | | | | (0.25 | )%* | | | — | | | | 2,252,484 | |
Barclays Capital, Inc. | | | 6,487 | | | | USD | | | | (1.00 | )%* | | | — | | | | 6,485,739 | |
Barclays Capital, Inc. | | | 3,185 | | | | USD | | | | (0.25 | )%* | | | — | | | | 3,184,807 | |
Barclays Capital, Inc. | | | 1,920 | | | | USD | | | | (0.25 | )%* | | | — | | | | 1,919,715 | |
Barclays Capital, Inc. | | | 4,515 | | | | USD | | | | 0.00 | % | | | — | | | | 4,515,000 | |
Barclays Capital, Inc. | | | 3,430 | | | | USD | | | | (2.00 | )%* | | | — | | | | 3,426,380 | |
Portfolio of Investments
| | | | | | | | | | | | | | | | | | | | |
Broker | | Principal Amount (000) | | | Currency | | | Interest Rate | | | Maturity | | | U.S. $ Value at October 31, 2016 | |
Barclays Capital, Inc.† | | | 517 | | | | USD | | | | (2.25 | )%* | | | — | | | $ | 516,052 | |
Barclays Capital, Inc.† | | | 1,039 | | | | USD | | | | (2.00 | )%* | | | — | | | | 1,038,250 | |
Barclays Capital, Inc.† | | | 4,402 | | | | USD | | | | (1.50 | )%* | | | — | | | | 4,401,563 | |
Barclays Capital, Inc.† | | | 3,758 | | | | USD | | | | (0.50 | )%* | | | — | | | | 3,759,430 | |
Credit Suisse Securities (USA) LLC | | | 5,770 | | | | GBP | | | | (1.00 | )%* | | | — | | | | 7,042,749 | |
Credit Suisse Securities (USA) LLC† | | | 1,146 | | | | USD | | | | (3.50 | )% | | | — | | | | 1,138,172 | |
Credit Suisse Securities (USA) LLC† | | | 1,532 | | | | USD | | | | (3.50 | )%* | | | — | | | | 1,523,553 | |
Credit Suisse Securities (USA) LLC† | | | 6,388 | | | | EUR | | | | (1.50 | )%* | | | — | | | | 7,000,483 | |
Credit Suisse Securities (USA) LLC† | | | 2,652 | | | | EUR | | | | (1.25 | )%* | | | — | | | | 2,897,686 | |
Credit Suisse Securities (USA) LLC† | | | 2,727 | | | | EUR | | | | (1.20 | )%* | | | — | | | | 2,992,966 | |
Credit Suisse Securities (USA) LLC† | | | 2,783 | | | | USD | | | | 0.00 | % | | | — | | | | 2,783,475 | |
Credit Suisse Securities (USA) LLC† | | | 1,425 | | | | GBP | | | | 0.00 | % | | | — | | | | 1,743,588 | |
ING Financial Markets LLC† | | | 2,219 | | | | USD | | | | (2.00 | )%* | | | — | | | | 2,217,514 | |
Jefferies & Company, Inc.† | | | 3,889 | | | | USD | | | | (0.10 | )%* | | | — | | | | 3,887,614 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 80,186,179 | |
| | | | | | | | | | | | | | | | | | | | |
† | | The reverse repurchase agreement matures on demand. Interest rate resets daily and the rate shown is the rate in effect on October 31, 2016 |
* | | Interest payment due from counterparty. |
The type of underlying collateral and the remaining maturity of open reverse repurchase agreements is as follows:
Remaining Contracted Maturity of the Agreements
Reverse Repurchase Agreements
| | | | | | | | | | | | | | | | | | | | |
| | Overnight and Continuous | | | Up to 30 Days | | | 31-90 Days | | | Greater than 90 Days | | | Total | |
Corporates – Non-Investment Grade | | $ | 80,186,179 | | | $ | – 0 | – | | $ | – 0 | – | | $ | – 0 | – | | $ | 80,186,179 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 80,186,179 | | | $ | – 0 | – | | $ | – 0 | – | | $ | – 0 | – | | $ | 80,186,179 | |
| | | | | | | | | | | | | | | | | | | | |
** | | Principal amount less than 500. |
(a) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2016, the aggregate market value of these securities amounted to $2,459,434,781 or 31.6% of net assets. |
(b) | | Position, or a portion thereof, has been segregated to collateralize reverse repurchase agreements. |
Portfolio of Investments
(c) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 1.36% of net assets as of October 31, 2016, are considered illiquid and restricted. Additional information regarding such securities follows: |
| | | | | | | | | | | | | | | | |
144A/Restricted & Illiquid Securities | | Acquisition Date | | | Cost | | | Market Value | | | Percentage of Net Assets | |
Banc of America Re-REMIC Trust Series 2009-UB1, Class A4B 5.669%, 6/24/50 | | | 10/06/09 | | | $ | 2,738,983 | | | $ | 3,564,750 | | | | 0.05 | % |
Bellemeade Re II Ltd. Series 2016-1A, Class M2B 7.034%, 4/25/26 | | | 4/29/16 | | | | 21,264,120 | | | | 21,516,631 | | | | 0.28 | % |
Bellemeade Re II Ltd. Series 2016-1A, Class B1 12.534%, 4/25/26 | | | 4/29/16 | | | | 2,330,884 | | | | 2,346,179 | | | | 0.03 | % |
Bellemeade Re Ltd. Series 2015-1A, Class M2 4.834%, 7/25/25 | | | 7/27/15 | | | | 6,730,000 | | | | 6,830,950 | | | | 0.09 | % |
Creditcorp 12.00%, 7/15/18 | | | 6/28/13- 7/22/13 | | | | 6,186,913 | | | | 2,947,375 | | | | 0.04 | % |
Dominican Republic International Bond 16.00%, 7/10/20 | | | 12/08/10 | | | | 15,742,973 | | | | 14,350,190 | | | | 0.18 | % |
Dominican Republic International Bond 12.00%, 1/20/22 | | | 1/23/15 | | | | 7,889,405 | | | | 7,779,793 | | | | 0.10 | % |
Dominican Republic International Bond 10.50%, 1/17/20 | | | 1/23/15 | | | | 7,762,109 | | | | 7,656,458 | | | | 0.10 | % |
Dominican Republic International Bond 15.95%, 6/04/21 | | | 1/11/13 | | | | 1,482,668 | | | | 1,372,564 | | | | 0.02 | % |
Edcon Ltd. 9.50%, 3/01/18 | | | 2/08/13- 7/27/15 | | | | 7,973,425 | | | | 1,764,083 | | | | 0.02 | % |
Golden Energy Offshore Services AS 5.00%, 12/31/17 | | | 5/14/14 | | | | 5,163,675 | | | | 1,098,073 | | | | 0.01 | % |
iPayment, Inc. 9.50%, 12/15/19 | | | 2/27/15 | | | | 10,309,016 | | | | 10,432,534 | | | | 0.13 | % |
Liberty Tire Recycling LLC 11.00%, 3/31/21 | | | 9/23/10 | | | | 2,691,882 | | | | 1,669,556 | | | | 0.02 | % |
Magnetation LLC/Mag Finance Corp. 11.00%, 5/15/18 | | | 5/15/13 | | | | 12,955,187 | | | | 19,345 | | | | 0.00 | % |
Modular Space Corp. 10.25%, 1/31/19 | | | 2/19/14- 8/10/16 | | | | 6,036,267 | | | | 2,940,770 | | | | 0.04 | % |
Speedy Cash Intermediate Holdings Corp. 10.75%, 5/15/18 | | | 5/14/12- 2/05/13 | | | | 4,609,491 | | | | 3,638,368 | | | | 0.05 | % |
Speedy Group Holdings Corp. 12.00%, 11/15/17 | | | 2/11/13 | | | | 7,281,000 | | | | 3,604,095 | | | | 0.05 | % |
Vantage Drilling International 10.00%, 12/31/20 | | | 2/10/16 | | | | 405,925 | | | | 388,978 | | | | 0.01 | % |
Virgolino de Oliveira Finance SA 11.75%, 2/09/22 | | | 7/26/12 | | | | 11,383,331 | | | | 884,845 | | | | 0.01 | % |
Portfolio of Investments
| | | | | | | | | | | | | | | | |
144A/Restricted & Illiquid Securities | | Acquisition Date | | | Cost | | | Market Value | | | Percentage of Net Assets | |
Virgolino de Oliveira Finance SA 10.50%, 1/28/18 | | | 2/12/14 | | | $ | 5,618,897 | | | $ | 676,236 | | | | 0.01 | % |
Virgolino de Oliveira Finance SA 10.875%, 1/13/20 | | | 6/09/14 | | | | 2,486,550 | | | | 650,000 | | | | 0.01 | % |
Virgolino de Oliveira Finance SA 10.50%, 1/28/18 | | | 10/19/12 | | | | 2,931,444 | | | | 287,781 | | | | 0.00 | % |
Wells Fargo Credit Risk Transfer Securities Trust Series 2015-WF1, Class 1M2 5.784%, 11/25/25 | | | 9/06/16 | | | | 6,111,465 | | | | 6,042,866 | | | | 0.08 | % |
Wells Fargo Credit Risk Transfer Securities Trust Series 2015-WF1, Class 2M2 6.034%, 11/25/25 | | | 9/28/15 | | | | 3,340,751 | | | | 3,341,668 | | | | 0.04 | % |
(d) | | Non-income producing security. |
(f) | | Restricted and illiquid security. |
| | | | | | | | | | | | | | | | |
Restricted & Illiquid Securities | | Acquisition Date | | | Cost | | | Market Value | | | Percentage of Net Assets | |
CHC Helicopter SA 9.25%, 10/15/2020 | | | 10/02/12 | | | $ | 19,430,779 | | | $ | 15,474,301 | | | | 0.20 | % |
CHC Helicopter SA 9.375%, 06/01/2021 | | | 2/19/16 | | | | 79,324 | | | | 366,561 | | | | 0.00 | % |
Exide Corp.
| | | 4/30/15 | | | | 630,678 | | | | 498,753 | | | | 0.01 | % |
Exide Technologies Series AI 11.00%, 04/30/2020 | | | 4/30/15 | | | | 21,775,321 | | | | 18,438,039 | | | | 0.24 | % |
Momentive Performance Materials, Inc. 8.875%, 10/15/2020 | | | 10/11/12 | | | | 10 | | | | – 0 | – | | | 0.00 | % |
Mt. Logan Re Ltd. (Preference Shares) | | | 4/01/15 | | | | 25,000,000 | | | | 25,651,030 | | | | 0.33 | % |
Mt. Logan Re Ltd. (Preference Shares) | | | 12/30/14 | | | | 20,255,000 | | | | 20,968,189 | | | | 0.27 | % |
(g) | | Fair valued by the Adviser. |
(h) | | Pay-In-Kind Payments (PIK). The issuer may pay cash interest and/or interest in additional debt securities. Rates shown are the rates in effect at October 31, 2016. |
(i) | | Convertible security. |
(k) | | Coupon rate adjusts periodically based upon a predetermined schedule. Stated interest rate in effect at October 31, 2016. |
(l) | | Variable rate coupon, rate shown as of October 31, 2016. |
(m) | | Defaulted matured security. |
(n) | | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(o) | | Floating Rate Security. Stated interest/floor rate was in effect at October 31, 2016. |
(p) | | Position, or a portion thereof, has been segregated to collateralize margin requirements for open futures contracts. |
(q) | | Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. |
Portfolio of Investments
(r) | | Inverse interest only security. |
(s) | | The stated coupon rate represents the greater of the LIBOR or the LIBOR floor rate plus a spread at October 31, 2016. |
(t) | | This position or a portion of this position represents an unsettled loan purchase. The coupon rate will be determined at the time of settlement and will be based upon the London-Interbank Offered Rate (“LIBOR”) plus a premium which was determined at the time of purchase. |
(v) | | The security is subject to a 12 month lock-up period, after which semi-annual redemptions are permitted. |
(w) | | Effective prepayment date of December 2016. |
(x) | | Effective prepayment date of April 2017. |
(y) | | The company invests on a global basis in multiple asset classes including (but not limited to) private equity debt securities, property-related assets and private equity securities including warrants and preferred stock. |
(z) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
(aa) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
(ab) | | One contract relates to 1 share. |
Currency Abbreviations:
ARS – Argentine Peso
AUD – Australian Dollar
BRL – Brazilian Real
CAD – Canadian Dollar
CHF – Swiss Franc
COP – Colombian Peso
DOP – Dominican Peso
EUR – Euro
GBP – Great British Pound
HKD – Hong Kong Dollar
IDR – Indonesian Rupiah
INR – Indian Rupee
JPY – Japanese Yen
MXN – Mexican Peso
NOK – Norwegian Krone
NZD – New Zealand Dollar
RUB – Russian Ruble
SEK – Swedish Krona
SGD – Singapore Dollar
TRY – Turkish Lira
USD – United States Dollar
ZAR – South African Rand
Glossary:
12MTA – 12 Month Treasury Average
ABS – Asset-Backed Securities
ASX – Australian Stock Exchange
BOBL – Bundesobligationen
CBT – Chicago Board of Trade
CDI – Brazil CETIP Interbank Deposit Rate
CDX-CMBX.NA – North American Commercial Mortgage-Backed Index
CDX-NAHY – North American High Yield Credit Default Swap Index
Portfolio of Investments
CDX-NAIG – North American Investment Grade Credit Default Swap Index
CMBS – Commercial Mortgage-Backed Securities
ETF – Exchange Traded Fund
EURIBOR – Euro Interbank Offered Rate
INTRCONX – Inter-Continental Exchange
IRS – Interest Rate Swaption
JSC – Joint Stock Company
LIBOR – London Interbank Offered Rates
MTN – Medium Term Note
NASDAQ – National Association of Securities Dealers Automated Quotations
REIT – Real Estate Investment Trust
REMICs – Real Estate Mortgage Investment Conduits
See notes to financial statements.
Portfolio of Investments
STATEMENT OF ASSETS & LIABILITIES
October 31, 2016
| | | | |
Assets | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $7,493,801,548) | | $ | 7,399,511,947 | |
Affiliated issuers (cost $437,100,262) | | | 437,100,262 | |
Cash | | | 118,597 | |
Cash collateral due from broker | | | 21,688,812 | |
Foreign currencies, at value (cost $2,689,240) | | | 2,666,050 | |
Interest receivable | | | 98,688,298 | |
Receivable for capital stock sold | | | 35,168,445 | |
Unrealized appreciation on forward currency exchange contracts | | | 28,981,058 | |
Receivable for investment securities sold and foreign currency transactions | | | 20,131,254 | |
Unrealized appreciation on credit default swaps | | | 8,671,265 | |
Receivable for terminated variance swaps | | | 4,269,018 | |
Upfront premiums paid on credit default swaps | | | 2,898,822 | |
Unrealized appreciation of total return swaps | | | 1,790,146 | |
Unrealized appreciation on variance swaps | | | 1,346,505 | |
Unrealized appreciation on interest rate swaps | | | 291,931 | |
Affiliated dividends receivable | | | 97,218 | |
| | | | |
Total assets | | | 8,063,419,628 | |
| | | | |
Liabilities | | | | |
Options written, at value (premiums received $5,416,155) | | | 3,326,322 | |
Swaptions written, at value (premiums received of $810,180) | | | 660,281 | |
Payable for reverse repurchase agreements | | | 80,186,179 | |
Payable for investment securities purchased and foreign currency transactions | | | 57,866,077 | |
Payable for capital stock redeemed | | | 35,820,940 | |
Upfront premiums received on credit default swaps | | | 34,323,455 | |
Unrealized depreciation on credit default swaps | | | 23,819,812 | |
Unrealized depreciation on forward currency exchange contracts | | | 18,423,368 | |
Dividends payable | | | 5,116,634 | |
Payable for unsettled reverse repurchase agreements | | | 3,322,500 | |
Cash collateral received from broker | | | 3,254,000 | |
Advisory fee payable | | | 2,692,421 | |
Distribution fee payable | | | 1,497,863 | |
Unrealized depreciation on variance swaps | | | 888,632 | |
Unrealized depreciation on interest rate swaps | | | 444,110 | |
Payable for variation margin on exchange-traded derivatives | | | 233,984 | |
Transfer Agent fee payable | | | 160,819 | |
Administrative fee payable | | | 21,171 | |
Unrealized depreciation on total return swaps | | | 574 | |
Accrued expenses and other liabilities | | | 1,028,521 | |
| | | | |
Total liabilities | | | 273,087,663 | |
| | | | |
Net Assets | | $ | 7,790,331,965 | |
| | | | |
See notes to financial statements.
Statement of Assets & Liabilities
| | | | |
Composition of Net Assets | | | | |
Capital stock, at par | | $ | 898,570 | |
Additional paid-in capital | | | 8,034,769,429 | |
Distributions in excess of net investment income | | | (3,393,413 | ) |
Accumulated net realized loss on investment and foreign currency transactions | | | (155,377,728 | ) |
Net unrealized depreciation on investments and foreign currency denominated assets and liabilities | | | (86,564,893 | ) |
| | | | |
| | $ | 7,790,331,965 | |
| | | | |
Net Asset Value Per Share—24 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
| |
A | | $ | 2,061,176,557 | | | | 238,378,354 | | | $ | 8.65 | * |
| |
B | | $ | 2,356,668 | | | | 270,126 | | | $ | 8.72 | |
| |
C | | $ | 1,298,312,028 | | | | 148,415,935 | | | $ | 8.75 | |
| |
Advisor | | $ | 3,828,042,118 | | | | 442,132,466 | | | $ | 8.66 | |
| |
R | | $ | 86,059,379 | | | | 9,955,640 | | | $ | 8.64 | |
| |
K | | $ | 106,840,593 | | | | 12,353,685 | | | $ | 8.65 | |
| |
I | | $ | 294,693,042 | | | | 34,031,439 | | | $ | 8.66 | |
| |
Z | | $ | 112,851,580 | | | | 13,031,869 | | | $ | 8.66 | |
| |
* | | The maximum offering price per share for Class A shares was $9.03 which reflects a sales charge of 4.25%. |
See notes to financial statements.
Statement of Assets & Liabilities
STATEMENT OF OPERATIONS
Year Ended October 31, 2016
| | | | | | | | |
Investment Income | | | | | | | | |
Interest (net of foreign taxes withheld of $292,107) | | $ | 419,411,851 | | | | | |
Dividends | | | | | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $14,049) | | | 8,763,190 | | | | | |
Affiliated issuers | | | 1,411,322 | | | $ | 429,586,363 | |
| | | | | | | | |
Expenses | | | | | | | | |
Advisory fee (see Note B) | | | 30,115,930 | | | | | |
Distribution fee—Class A | | | 5,056,366 | | | | | |
Distribution fee—Class B | | | 28,328 | | | | | |
Distribution fee—Class C | | | 12,196,114 | | | | | |
Distribution fee—Class R | | | 419,699 | | | | | |
Distribution fee—Class K | | | 247,261 | | | | | |
Transfer agency—Class A | | | 1,840,613 | | | | | |
Transfer agency—Class B | | | 3,991 | | | | | |
Transfer agency—Class C | | | 1,157,277 | | | | | |
Transfer agency—Advisor Class | | | 2,676,268 | | | | | |
Transfer agency—Class R | | | 196,144 | | | | | |
Transfer agency—Class K | | | 111,744 | | | | | |
Transfer agency—Class I | | | 122,768 | | | | | |
Transfer agency—Class Z | | | 18,610 | | | | | |
Printing | | | 519,857 | | | | | |
Custodian | | | 469,376 | | | | | |
Registration fees | | | 456,805 | | | | | |
Audit and tax | | | 196,709 | | | | | |
Administrative | | | 62,397 | | | | | |
Legal | | | 42,912 | | | | | |
Directors’ fees | | | 23,242 | | | | | |
Miscellaneous | | | 221,432 | | | | | |
| | | | | | | | |
Total expenses before interest expense | | | 56,183,843 | | | | | |
Interest expense | | | 140,660 | | | | | |
| | | | | | | | |
Total expenses | | | 56,324,503 | | | | | |
Less: expenses waived and reimbursed by the Adviser (see Note B) | | | (277,019 | ) | | | | |
| | | | | | | | |
Net expenses | | | | | | | 56,047,484 | |
| | | | | | | | |
Net investment income | | | | | | | 373,538,879 | |
| | | | | | | | |
See notes to financial statements.
Statement of Operations
| | | | | | | | |
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | | | | | | | | |
Net realized gain (loss) on: | | | | | | | | |
Investment transactions | | | | | | $ | (99,812,648 | )(a) |
Swaps | | | | | | | 76,317,529 | |
Futures | | | | | | | (6,991,355 | ) |
Options written | | | | | | | 23,747,217 | |
Swaptions written | | | | | | | 3,649,255 | |
Foreign currency transactions | | | | | | | (36,864,268 | ) |
Net change in unrealized appreciation/depreciation on: | | | | | | | | |
Investments | | | | | | | 290,325,449 | |
Swaps | | | | | | | (11,081,121 | ) |
Futures | | | | | | | 1,347,002 | |
Options written | | | | | | | 2,089,833 | |
Swaptions written | | | | | | | 52,449 | |
Foreign currency denominated assets and liabilities | | | | | | | 14,333,925 | |
| | | | | | | | |
Net gain on investment and foreign currency transactions | | | | | | | 257,113,267 | |
| | | | | | | | |
Contributions from Affiliates (See Note B) | | | | | | | 7,328 | |
| | | | | | | | |
Net Increase in Net Assets from Operations | | | | | | $ | 630,659,474 | |
| | | | | | | | |
(a) | | Includes foreign capital gains taxes of $122,225. |
See notes to financial statements.
Statement of Operations
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | Year Ended October 31, 2016 | | | Year Ended October 31, 2015 | |
Increase (Decrease) in Net Assets from Operations | | | | | | | | |
Net investment income | | $ | 373,538,879 | | | $ | 379,158,672 | |
Net realized loss on investment and foreign currency transactions | | | (39,954,270 | ) | | | (7,390,189 | ) |
Net change in unrealized appreciation/depreciation on investments and foreign currency denominated assets and liabilities | | | 297,067,537 | | | | (513,282,163 | ) |
Contributions from Affiliates (See Note B) | | | 7,328 | | | | – 0 | – |
| | | | | | | | |
Net increase (decrease) in net assets from operations | | | 630,659,474 | | | | (141,513,680 | ) |
Dividends and Distributions to Shareholders from | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (139,212,546 | ) | | | (159,269,974 | ) |
Class B | | | (187,830 | ) | | | (355,001 | ) |
Class C | | | (78,131,802 | ) | | | (90,909,251 | ) |
Advisor Class | | | (204,670,690 | ) | | | (186,090,158 | ) |
Class R | | | (5,662,042 | ) | | | (5,436,719 | ) |
Class K | | | (7,086,782 | ) | | | (6,503,464 | ) |
Class I | | | (20,996,466 | ) | | | (20,536,101 | ) |
Class Z | | | (7,057,695 | ) | | | (4,202,430 | ) |
Net realized gain on investment and foreign currency transactions | | | | | | | | |
Class A | | | – 0 | – | | | (19,181,694 | ) |
Class B | | | – 0 | – | | | (56,650 | ) |
Class C | | | – 0 | – | | | (12,392,523 | ) |
Advisor Class | | | – 0 | – | | | (20,548,170 | ) |
Class R | | | – 0 | – | | | (660,870 | ) |
Class K | | | – 0 | – | | | (718,571 | ) |
Class I | | | – 0 | – | | | (1,998,684 | ) |
Class Z | | | – 0 | – | | | (393,422 | ) |
Capital Stock Transactions | | | | | | | | |
Net increase | | | 1,386,295,762 | | | | 277,283,670 | |
Proceeds from regulatory settlement (see Note E) | | | 722,706 | | | | – 0 | – |
| | | | | | | | |
Total increase (decrease) | | | 1,554,672,089 | | | | (393,483,692 | ) |
Net Assets | | | | | | | | |
Beginning of period | | | 6,235,659,876 | | | | 6,629,143,568 | |
| | | | | | | | |
End of period (including distributions in excess of net investment income of $(3,393,413) and undistributed net investment income of $47,476,132, respectively) | | $ | 7,790,331,965 | | | $ | 6,235,659,876 | |
| | | | | | | | |
See notes to financial statements.
Statement of Changes in Net Assets
NOTES TO FINANCIAL STATEMENTS
October 31, 2016
NOTE A
Significant Accounting Policies
AB High Income Fund, Inc. (the “Fund”), was incorporated in the State of Maryland on December 2, 1993, and is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund offers Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares. Effective October 15, 2013, the Fund commenced offering of Class Z shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 3% to zero depending on the period of time the shares are held. Effective January 31, 2009, sales of Class B shares of the Fund to new investors were suspended. Class B shares will only be issued (i) upon the exchange of Class B shares from another AllianceBernstein Mutual Fund, (ii) for purposes of dividend reinvestment, (iii) through the Fund’s Automatic Investment Program (the “Program”) for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional shares by Class B shareholders as of January 31, 2009. The ability to establish a new Program for accounts containing Class B shares was suspended as of January 31, 2009. Class B shares will automatically convert to Class A shares six years after the end of the calendar month of purchase. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase. Class R and Class K shares are sold without an initial or contingent deferred sales charge. Advisor Class, Class I and Class Z shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eight classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily
Notes to Financial Statements
available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures contracts are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short-term securities that have an original maturity of 60 days or less, as well as short-term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Notes to Financial Statements
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized
| | |
100 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which is then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the
| | | | |
AB HIGH INCOME FUND • | | | 101 | |
Notes to Financial Statements
option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.
Bank loan prices are provided by third party pricing services and consist of a composite of the quotes received by the vendor into a consensus price. Certain bank loans are classified as Level 3, as significant input used in the fair value measurement of these instruments is the market quotes that are received by the vendor and these inputs are not observable.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2016:
| | | | | | | | | | | | | | | | |
Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | | | | | | | | |
Corporates – Non-Investment Grade | | $ | – 0 | – | | $ | 3,095,341,056 | | | $ | 38,539,513 | # | | $ | 3,133,880,569 | |
Governments – Treasuries | | | – 0 | – | | | 1,434,281,987 | | | | – 0 | – | | | 1,434,281,987 | |
Collateralized Mortgage Obligations | | | – 0 | – | | | 713,015,196 | | | | 30,693,761 | | | | 743,708,957 | |
Corporates – Investment Grade | | | – 0 | – | | | 475,566,996 | | | | – 0 | – | | | 475,566,996 | |
Emerging Markets – Treasuries | | | – 0 | – | | | 315,461,875 | | | | – 0 | – | | | 315,461,875 | |
Emerging Markets – Sovereigns | | | – 0 | – | | | 310,223,901 | | | | – 0 | – | | | 310,223,901 | |
Bank Loans | | | – 0 | – | | | 228,122,457 | | | | 27,561,552 | | | | 255,684,009 | |
Commercial Mortgage-Backed Securities | | | – 0 | – | | | 23,000,035 | | | | 135,006,871 | | | | 158,006,906 | |
| | |
102 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
| | | | | | | | | | | | | | | | |
Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Emerging Markets – Corporate Bonds | | $ | – 0 | – | | $ | 126,386,324 | | | $ | 1,251,220 | | | $ | 127,637,544 | |
Common Stocks | | | 15,447,875 | | | | – 0 | – | | | 49,234,743 | | | | 64,682,618 | |
Governments – Sovereign Agencies | | | – 0 | – | | | 62,132,069 | | | | – 0 | – | | | 62,132,069 | |
Whole Loan Trusts | | | – 0 | – | | | – 0 | – | | | 59,778,271 | | | | 59,778,271 | |
Quasi-Sovereigns | | | – 0 | – | | | 56,043,353 | | | | – 0 | – | | | 56,043,353 | |
Asset-Backed Securities | | | – 0 | – | | | 6,855,474 | | | | 30,569,026 | | | | 37,424,500 | |
Preferred Stocks | | | 16,528,222 | | | | 11,014,806 | | | | – 0 | – | | | 27,543,028 | |
Governments – Sovereign Bonds | | | – 0 | – | | | 26,104,110 | | | | – 0 | – | | | 26,104,110 | |
Local Governments – Regional Bonds | | | – 0 | – | | | 25,623,425 | | | | – 0 | – | | | 25,623,425 | |
Inflation-Linked Securities | | | – 0 | – | | | 2,417,181 | | | | 11,964,786 | | | | 14,381,967 | |
Local Governments – Municipal Bonds | | | – 0 | – | | | 11,090,195 | | | | – 0 | – # | | | 11,090,195 | |
Warrants | | | 2,062,129 | | | | – 0 | – | | | 2,232,953 | | | | 4,295,082 | |
Options Purchased-Puts | | | – 0 | – | | | 1,658,157 | | | | – 0 | – | | | 1,658,157 | |
Short-Term Investments: | | | | | | | | | | | | | | | | |
Investment Companies | | | 437,100,262 | | | | – 0 | – | | | – 0 | – | | | 437,100,262 | |
Time Deposits | | | – 0 | – | | | 40,592,157 | | | | – 0 | – | | | 40,592,157 | |
Bank Loans | | | – 0 | – | | | – 0 | – | | | 9,368,599 | | | | 9,368,599 | |
Emerging Markets – Sovereigns | | | – 0 | – | | | 2,376,535 | | | | – 0 | – | | | 2,376,535 | |
| | | | | | | | | | | | | | | | |
Investments valued at NAV** | | | | | | | | | | | | | | | 1,965,137 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 471,138,488 | | | | 6,967,307,289 | | | | 396,201,295 | | | | 7,836,612,209 | |
Other Financial Instruments*: | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | |
Futures | | | 1,945,015 | | | | 349,512 | | | | – 0 | – | | | 2,294,527 | † |
Forward Currency Exchange Contracts | | | – 0 | – | | | 28,981,058 | | | | – 0 | – | | | 28,981,058 | |
Centrally Cleared Credit Default Swaps | | | – 0 | – | | | 8,497,261 | | | | – 0 | – | | | 8,497,261 | † |
Credit Default Swaps | | | – 0 | – | | | 8,671,265 | | | | – 0 | – | | | 8,671,265 | |
Interest Rate Swaps | | | – 0 | – | | | 291,931 | | | | – 0 | – | | | 291,931 | |
Total Return Swaps | | | – 0 | – | | | 1,790,146 | | | | – 0 | – | | | 1,790,146 | |
Variance Swaps | | | – 0 | – | | | 1,346,505 | | | | – 0 | – | | | 1,346,505 | |
Liabilities | | | | | | | | | | | | | | | | |
Futures | | | (947,525 | ) | | | – 0 | – | | | – 0 | – | | | (947,525 | )† |
Forward Currency Exchange Contracts | | | – 0 | – | | | (18,423,368 | ) | | | – 0 | – | | | (18,423,368 | ) |
Call Options Written | | | – 0 | – | | | (451,440 | ) | | | – 0 | – | | | (451,440 | ) |
| | | | |
AB HIGH INCOME FUND • | | | 103 | |
Notes to Financial Statements
| | | | | | | | | | | | | | | | |
Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Credit Default Swaptions Written | | $ | – 0 | – | | $ | (660,281 | ) | | $ | – 0 | – | | $ | (660,281 | ) |
Currency Options Written | | | – 0 | – | | | (2,874,882 | ) | | | – 0 | – | | | (2,874,882 | ) |
Centrally Cleared Credit Default Swaps | | | – 0 | – | | | (2,303,999 | ) | | | – 0 | – | | | (2,303,999 | )† |
Credit Default Swaps | | | – 0 | – | | | (23,819,812 | ) | | | – 0 | – | | | (23,819,812 | ) |
Interest Rate Swaps | | | – 0 | – | | | (444,110 | ) | | | – 0 | – | | | (444,110 | ) |
Total Return Swaps | | | – 0 | – | | | (574 | ) | | | – 0 | – | | | (574 | ) |
Variance Swaps | | | – 0 | – | | | (888,632 | ) | | | – 0 | – | | | (888,632 | ) |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 472,135,978 | | | $ | 6,967,367,869 | | | $ | 396,201,295 | | | $ | 7,837,670,279 | |
| | | | | | | | | | | | | | | | |
# | | The Fund held securities with zero market value at period end. |
* | | Other financial instruments are derivative instruments, such as futures, forwards and swap contracts which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include options written and swaptions written which are valued at market value. |
† | | Only variation margin receivable/payable at period end is reported within the statements of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
^ | | There were no transfers between Level 1 and Level 2 during the reporting period. |
** | | In May 2015, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2015-07 (the “ASU”) which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, with application of the amendments noted above retrospectively to all periods presented; however, earlier adoption was permitted. The retrospective approach requires that an investment for which fair value is measured using the net asset value per share practical expedient be removed from the fair value hierarchy in all periods presented herein. The Fund has elected to early adopt the ASU. Accordingly, the total investments with a fair value of $1,965,137 have not been categorized in the fair value hierarchy. |
The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instrument was transferred at the beginning of the reporting period.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.
| | | | | | | | | | | | | | | | |
| | Corporates - Non-Investment Grade# | | | Collateralized Mortgage Obligations | | | Emerging Markets - Treasuries | | | Bank Loans | |
Balance as of 10/31/15 | | $ | 55,876,964 | | | $ | 497,172,898 | | | $ | 32,003,898 | | | $ | 182,534,919 | |
Accrued discounts/ (premiums) | | | 629,926 | | | | 218,111 | | | | – 0 | – | | | 288,572 | |
Realized gain (loss) | | | (8,211,761 | ) | | | 888,751 | | | | – 0 | – | | | (5,195,345 | ) |
Change in unrealized appreciation/ depreciation | | | 1,822,295 | | | | (3,179,795 | ) | | | – 0 | – | | | (11,169,350 | ) |
Purchases | | | 6,144,408 | | | | 24,480,029 | | | | – 0 | – | | | 45,048,629 | |
| | |
104 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
| | | | | | | | | | | | | | | | |
| | Corporates - Non-Investment Grade# | | | Collateralized Mortgage Obligations | | | Emerging Markets - Treasuries | | | Bank Loans | |
Sales/Paydowns | | $ | (22,354,447 | ) | | $ | (84,508,010 | ) | | $ | – 0 | – | | $ | (104,876,130 | ) |
Reclassification | | | (277,147 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Transfers into level 3 | | | 4,909,275 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Transfers out of level 3 | | | – 0 | – | | | (404,378,223 | ) | | | (32,003,898 | ) | | | (69,701,144 | ) |
| | | | | | | | | | | | | | | | |
Balance as of 10/31/16 | | $ | 38,539,513 | | | $ | 30,693,761 | | | $ | – 0 | – | | $ | 36,930,151 | |
| | | | | | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from investments held as of 10/31/16** | | $ | (5,197,964 | ) | | $ | 419,232 | | | $ | – 0 | – | | $ | (16,074,068 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Commercial Mortgage- Backed Securities | | | Emerging Markets - Corporate Bonds | | | Common Stocks# | | | Whole Loan Trusts | |
Balance as of 10/31/15 | | $ | 177,839,338 | | | $ | – 0 | – | | $ | 61,819,451 | | | $ | 61,190,336 | |
Accrued discounts/ (premiums) | | | 498,308 | | | | (833 | ) | | | – 0 | – | | | 85,884 | |
Realized gain (loss) | | | 4,160,136 | | | | – 0 | – | | | (311,419 | ) | | | (3,674,917 | ) |
Change in unrealized appreciation/ depreciation | | | (8,985,499 | ) | | | (986,972 | ) | | | (3,118,174 | ) | | | (8,452,849 | ) |
Purchases | | | 9,970,510 | | | | – 0 | – | | | – 0 | – | | | 28,837,387 | |
Sales/Paydowns | | | (48,475,922 | ) | | | – 0 | – | | | (9,155,115 | ) | | | (18,484,717 | ) |
Reclassification | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | 277,147 | |
Transfers into level 3 | | | – 0 | – | | | 2,239,025 | | | | – 0 | – | | | – 0 | – |
Transfers out of level 3 | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | | | | | | | | | | | | | |
Balance as of 10/31/16 | | $ | 135,006,871 | | | $ | 1,251,220 | | | $ | 49,234,743 | | | $ | 59,778,271 | |
| | | | | | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from investments held as of 10/31/16** | | $ | (4,429,919 | ) | | $ | (986,972 | ) | | $ | (3,329,812 | ) | | $ | (8,448,174 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | |
AB HIGH INCOME FUND • | | | 105 | |
Notes to Financial Statements
| | | | | | | | | | | | | | | | |
| | Asset-Backed Securities | | | Inflation- Linked Securities | | | Warrants# | | | Total | |
Balance as of 10/31/15 | | $ | 17,365,070 | | | $ | – 0 | – | | $ | 1,515,784 | | | $ | 1,087,318,658 | |
Accrued discounts/ (premiums) | | | 512,846 | | | | 13,747 | | | | – 0 | – | | | 2,246,561 | |
Realized gain (loss) | | | 634,200 | | | | – 0 | – | | | – 0 | – | | | (11,710,355 | ) |
Change in unrealized appreciation/ depreciation | | | (564,810 | ) | | | 1,374,589 | | | | (972,343 | ) | | | (34,232,908 | ) |
Purchases | | | 15,022,175 | | | | 10,576,450 | | | | 1,689,512 | | | | 141,769,100 | |
Sales/Paydowns | | | (2,400,455 | ) | | | – 0 | – | | | – 0 | – | | | (290,254,796 | ) |
Reclassification | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Transfers into level 3 | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | 7,148,300 | |
Transfers out of level 3 | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | (506,083,265 | ) |
| | | | | | | | | | | | | | | | |
Balance as of 10/31/16 | | $ | 30,569,026 | | | $ | 11,964,786 | | | $ | 2,232,953 | | | $ | 396,201,295 | + |
| | | | | | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from investments held as of 10/31/16** | | $ | (564,810 | ) | | $ | 1,374,589 | | | $ | (972,343 | ) | | $ | (38,210,241 | ) |
| | | | | | | | | | | | | | | | |
# | | The Fund held securities with zero market value during the reporting period. |
** | | The unrealized appreciation/(depreciation) is included in net change in unrealized appreciation/(depreciation) of investments and other financial instruments in the accompanying statement of operations. |
+ | | An amount of $506,083,265 was transferred out of Level 3 into Level 2 as improved transparency of price inputs has increased the observability during the reporting period. There were de minimis transfers from Level 2 to Level 3 during the reporting period. |
The following presents information about significant unobservable inputs related to the Fund’s material categories of Level 3 investments at October 31, 2016. Securities by third party vendors and NAV equivalent are excluded from the following table.
Quantitative Information about Level 3 Fair Value Measurements
| | | | | | | | | | |
| | Fair Value at 10/31/2016 | | | Valuation Technique | | Unobservable Input | | Range / Weighted Average |
Corporates – Non-Investment Grade | | $ | 1,669,556 | | | Market Approach | | EBITDA* Projection | | $37 mm / N/A |
| | | | | | | | EBITDA* Multiples | | 6.6X-8.6X/7.6X |
| | $ | – 0 | – | | Qualitative Assessment | | | | $0.00 / N/A |
| | | | | | | | | | |
| | $ | 1,669,556 | | | | | | | |
| | | | | | | | | | |
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106 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
| | | | | | | | | | |
| | Fair Value at 10/31/2016 | | | Valuation Technique | | Unobservable Input | | Range / Weighted Average |
Bank Loans | | $ | 2,611,719 | | | Market Approach | | EBITDA* Projection | | $19 mm-$40mm / N/A |
| | | | | | | | EBITDA* Multiple | | 5X / N/A |
| | | | | | | | Scrap Value | | $110mm / N/A |
Common Stocks | | $ | 1,901,442 | | | Market Approach | | EBITDA* Projection | | $94mm / N/A |
| | | | | | | | EBITDA* Multiples | | 8.5X / N/A |
| | $ | 183,934 | | | Market Approach | | EBITDA* Projection | | $37mm / N/A |
| | | | | | | | EBITDA* Multiples | | 4.7X-6.7X/ 5.7X |
| | $ | 31,395 | | | Market Approach | | EBITDA* Projection | | $295mm / N/A |
| | | | | | | | EBITDA* Multiples | | 14X / N/A |
| | | | | | | | | | |
| | $ | 2,116,771 | | | | | | | |
| | | | | | | | | | |
| | | | |
Whole Loan Trusts | | $ | 10,274,869 | | | Discounted Cash Flow | | Level Yield | | 94.60% / N/A |
| | | | | | | | Discount Rate | | 7.47% / N/A |
| | $ | 9,829,284 | | | Market Approach | | Underlying NAV of the Collateral | | $102.54 / N/A |
| | $ | 7,077,827 | | | Recovery Analysis | | Cumulative Loss | | <20% / N/A |
| | $ | 5,975,081 | | | Recovery Analysis | | Delinquency Rate | | <4% / N/A |
| | $ | 4,963,486 | | | Discounted Cash Flow | | Cash Flow Yield | | 13.45% / N/A |
| | | | | | | | Discount Rate | | 13.45% / N/A |
| | $ | 4,839,076 | | | Discounted Cash Flow | | Cash Flow Yield | | 89.02% / N/A |
| | | | | | | | Discount Rate | | 13.70% / N/A |
| | $ | 4,211,922 | | | Discounted Cash Flow | | Cash Flow Yield | | 93.54% / N/A |
| | | | | | | | Discount Rate | | 10.11% / N/A |
| | $ | 3,361,592 | | | Discounted Cash Flow | | Cash Flow Yield | | 89.22% / N/A |
| | | | | | | | Discount Rate | | 12.99% / N/A |
| | $ | 2,671,940 | | | Recovery Analysis | | Cumulative Loss | | <22% / N/A |
| | $ | 2,119,876 | | | Recovery Analysis | | Delinquency Rate | | <5% / N/A |
| | | | | | | | Collateralization | | 1.1X / N/A |
| | $ | 1,323,613 | | | Recovery Analysis | | Pro-Rata Appraisal Value of Collateral | | $2.4mm / N/A |
| | $ | 1,104,393 | | | Market Approach | | Internal Rate of Return | | (59.21)% / N/A |
| | $ | 945,242 | | | Recovery Analysis | | Delinquency Rate | | <4% / N/A |
| | $ | 579,979 | | | Recovery Analysis | | Pro-Rata Appraisal Value of Collateral | | $1.5mm / N/A |
| | $ | 500,091 | | | Recovery Analysis | | Pro-Rata Appraisal Value ot Collateral | | $1.6mm / N/A |
| | | | | | | | | | |
| | $ | 59,778,271 | | | | | | | |
| | | | | | | | | | |
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AB HIGH INCOME FUND • | | | 107 | |
Notes to Financial Statements
| | | | | | | | | | |
| | Fair Value at 10/31/2016 | | | Valuation Technique | | Unobservable Input | | Range / Weighted Average |
Warrants | | $ | 803,366 | | | Option Pricing Model | | Exercise Price | | $6.64 / N/A |
| | | | | | | | Expiration Date | | June, 2019 / N/A |
| | | | | | | | EV Volatility % | | 50% / N/A |
* | | Earnings Before Interest, Taxes, Depreciation and Amortization. |
Generally, a change in the assumptions used in any input in isolation may be accompanied by a change in another input. Significant changes in any of the unobservable inputs may significantly impact the fair value measurement. Significant increases (decreases) in Scrap Value, Underlying NAV of the Collateral, Collateralization, Appraisal Value, Exercise Price, Expiration Date , EBITDA projections and EBITDA Multiple in isolation would be expected to result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in Level Yield, Discount Rate, Cumulative Loss, Delinquency Rate, Cash Flow Yield and EV Volatility % in isolation would be expected to result in a significant lower (higher) fair value measurement.
The Committee oversees the pricing and valuation of all securities held in the Portfolios. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including Pricing Policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the Pricing Policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the Pricing Policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the Pricing Policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments, process at vendors, 2) daily and monthly multi-source pricing compares, reviewed and submitted to the Committee, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
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108 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at the rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation and depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
| | | | |
AB HIGH INCOME FUND • | | | 109 | |
Notes to Financial Statements
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each settled class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Realized and unrealized gains and losses are allocated among the various share classes based on their respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .50% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Fund’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2016, such fee amounted to $62,397.
During the year ended October 31, 2016, the Adviser reimbursed the Fund in the amount of $7,328 for trading losses incurred due to trade entry errors.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to
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110 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
intermediaries that provide omnibus account services, sub-accounting services and/or networking services. The compensation retained by ABIS amounted to $1,736,106 for the year ended October 31, 2016.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $257,875 from the sale of Class A shares and received $17,602, $1,094 and $103,592 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the year ended October 31, 2016.
The AB Fixed-Income Shares, Inc.—Government STIF Portfolio (the “Government STIF Portfolio”), prior to June 1, 2016, was offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and was not available for direct purchase by members of the public. Prior to June 1, 2016, the Government STIF Portfolio paid no investment management fees but did bear its own expenses. As of June 1, 2016, the Government STIF Portfolio, which was renamed “AB Government Money Market Portfolio” (the “Government Money Market Portfolio”), has had a contractual investment management fee rate of .20% and continues to bear its own expenses. In connection with the investment by the Fund in the Government Money Market Portfolio, the Adviser has agreed to waive its investment advisory fee from the Fund in an amount equal to the Fund’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2016 such waiver amounted to $277,019. A summary of the Fund’s transactions in shares of the Government Money Market Portfolio for the year ended October 31, 2016 is as follows:
| | | | | | | | | | | | | | | | | | |
Market Value October 31, 2015 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value October 31, 2016 (000) | | | Dividend Income (000) | |
$ | 462,732 | | | $ | 2,595,936 | | | $ | 2,621,568 | | | $ | 437,100 | | | $ | 1,411 | |
Brokerage commissions paid on investment transactions for the six months ended October 31, 2016 amounted to $183,473, none of which was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, respectively, affiliates of the Adviser.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement the Fund pays distribution and
| | | | |
AB HIGH INCOME FUND • | | | 111 | |
Notes to Financial Statements
servicing fees to the Distributor at an annual rate of up to .30% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to both Class B and Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares and .25% of the Fund’s average daily net assets attributable to Class K shares. There are no distribution and servicing fees on Advisor Class, Class I and Class Z shares. Effective January 29, 2016, payments under the Agreement in respect of Class A shares are limited to an annual rate of .25% of Class A shares’ average daily net assets. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $5,733,136, $16,226,972, $722,879 and $666,172 for Class B, Class C, Class R, and Class K shares, respectively. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2016, were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 2,976,053,689 | | | $ | 2,789,607,937 | |
U.S. government securities | | | 1,191,470,642 | | | | – 0 | – |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency exchange contracts, futures, swaps, options written and swaptions written) are as follows:
| | | | |
Cost | | $ | 7,937,984,706 | |
| | | | |
Gross unrealized appreciation | | $ | 300,677,914 | |
Gross unrealized depreciation | | | (402,050,411 | ) |
| | | | |
Net unrealized depreciation | | $ | (101,372,497 | ) |
| | | | |
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain
| | |
112 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
| • | | Forward Currency Exchange Contracts |
The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund.
Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
During the year ended October 31, 2016, the Fund held foreign-currency exchange contracts for hedging and non-hedging purposes.
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into a future, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount
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AB HIGH INCOME FUND • | | | 113 | |
Notes to Financial Statements
of shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counter party to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Fund to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the future. Use of short futures subjects the Fund to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of a future can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended October 31, 2016, the Fund held futures for hedging and non-hedging purposes.
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid.
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114 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
The Fund may also invest in options on swap agreements, also called “swaptions”. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium”. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return on a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.
During the year ended October 31, 2016, the Fund held purchased options for hedging and non-hedging purposes.
During the year ended October 31, 2016, the Fund held written options for hedging and non-hedging purposes.
During the year ended October 31, 2016, the Fund held purchased swaptions for hedging and non-hedging purposes. During the year ended October 31, 2016, the Fund held written swaptions for hedging and non-hedging purposes.
| | | | |
AB HIGH INCOME FUND • | | | 115 | |
Notes to Financial Statements
For the year ended October 31, 2016, the Fund had the following transactions in written options:
| | | | | | | | |
| | Contracts | | | Premiums Received | |
Options written outstanding as of 10/31/15 | | | – 0 | – | | $ | – 0 | – |
Options written | | | 97,810,274,471 | | | | 31,197,649 | |
Options expired | | | (90,637,893,693 | ) | | | (21,644,600 | ) |
Options bought back | | | (1,911,929,334 | ) | | | (4,136,894 | ) |
Options exercised | | | – 0 | – | | | – 0 | – |
| | | | | | | | |
Options written outstanding as of 10/31/16 | | | 5,260,451,444 | | | $ | 5,416,155 | |
| | | | | | | | |
For the year ended October 31, 2016, the Fund had the following transactions in written swaptions:
| | | | | | | | |
| | Notional Amount | | | Premiums Received | |
Swaptions written outstanding as of 10/31/15 | | $ | 202,250,000 | | | $ | 182,025 | |
Swaptions written | | | 1,439,875,000 | | | | 7,384,363 | |
Swaptions expired | | | (908,535,000 | ) | | | (3,805,257 | ) |
Swaptions bought back | | | (579,270,000 | ) | | | (2,950,951 | ) |
Swaptions exercised | | | – 0 | – | | | – 0 | – |
| | | | | | | | |
Swaptions written outstanding as of 10/31/16 | | $ | 154,320,000 | | | $ | 810,180 | |
| | | | | | | | |
The Fund may enter into swaps to hedge its exposure to interest rates, credit risk, or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures including by making direct investments in foreign currencies, as described below under “Currency Transactions” or in order to take a “long” or “short” position with respect to an underlying referenced asset described below under “Total Return Swaps”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the
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116 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each
| | | | |
AB HIGH INCOME FUND • | | | 117 | |
Notes to Financial Statements
centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2016, the Fund held interest rate swaps for hedging and non-hedging purposes.
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap agreement, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon interest rate applied to the notional amount. If the Fund is a buyer/(seller) of protection
| | |
118 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
and a credit event occurs, as defined under the terms of the swap agreement, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap contract (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swap agreements entered into by the Fund for the same reference obligation with the same counterparty. As of October 31, 2016, the Fund had Buy Contracts outstanding with respect to the same referenced obligation and counterparty as certain Sale Contracts which may partially offset the Maximum Payout Amount in the amount of $237,414,000.
Credit default swaps may involve greater risks than if the Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterpart. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the market’s assessment of the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced entity’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation.
| | | | |
AB HIGH INCOME FUND • | | | 119 | |
Notes to Financial Statements
During the year ended October 31, 2016, the Fund held credit default swaps for hedging and non-hedging purposes.
Total Return Swaps:
The Fund may enter into total return swaps in order take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
During the year ended October 31, 2016, the Fund held total return swaps for hedging and non-hedging purposes.
Variance Swaps:
The Fund may enter into variance swaps to hedge equity market risk or adjust exposure to the equity markets. Variance swaps are contracts in which two parties agree to exchange cash payments based on the difference between the stated level of variance and the actual variance realized on underlying asset(s) or index(es). Actual “variance” as used here is defined as the sum of the square of the returns on the reference asset(s) or index(es) (which in effect is a measure of its “volatility”) over the length of the contract term. So the parties to a variance swap can be said to exchange actual volatility for a contractually stated rate of volatility.
During the year ended October 31, 2016, the Fund held variance swaps for non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements
| | |
120 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreement’s counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
During the year ended October 31, 2016 the Fund had entered into the following derivatives:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Interest rate contracts | | Unrealized appreciation on interest rate swaps | | $ | 291,931 | | | Unrealized depreciation on interest rate swaps | | $ | 444,110 | |
| | | | |
Interest rate contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 1,945,015 | * | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 778,344 | * |
| | | | |
Interest rate contracts | | Investments in securities, at value | | | 1,658,157 | | | | | | | |
| | | | |
Interest rate contracts | | Unrealized appreciation on total return swaps | | | 1,790,146 | | | Unrealized depreciation on total return swaps | | | 574 | |
| | | | |
AB HIGH INCOME FUND • | | | 121 | |
Notes to Financial Statements
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Foreign exchange contracts | | Unrealized appreciation on forward currency exchange contracts | | $ | 28,981,058 | | | Unrealized depreciation on forward currency exchange contracts | | $ | 18,423,368 | |
| | | | |
Foreign exchange contracts | | | | | | | | Options written, at value | | | 2,874,882 | |
| | | | |
Credit contracts | | Unrealized appreciation on credit default swaps | | | 8,671,265 | | | Unrealized depreciation on credit default swaps | | | 23,819,812 | |
| | | | |
Credit contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 8,497,261 | * | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 2,303,999 | * |
| | | | |
Credit contracts | | | | | | | | Swaptions written, at value | | | 660,281 | |
| | | | |
Equity contracts | | Unrealized appreciation on variance swaps | | | 1,346,505 | | | Unrealized depreciation on variance swaps | | | 888,632 | |
| | | | |
Equity contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 349,512 | * | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 169,181 | * |
| | | | |
Equity contracts | | | | | | | | Options written, at value | |
|
451,440 |
|
| | | | | | | | | | | | |
Total | | | | $ | 53,530,850 | | | | | $ | 50,814,623 | |
| | | | | | | | | | | | |
* | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) of exchange-traded derivative contracts as reported in the portfolio of investments. |
| | |
122 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives Within Statement of Operations | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Interest rate contracts | | Net realized gain/(loss) on swaps; Net change in unrealized appreciation/ depreciation on swaps | | $ | 15,089,417 | | | $ | 56,324 | |
| | | |
Interest rate contracts | | Net realized gain/(loss) on futures; Net change in unrealized appreciation/ depreciation on futures | | | (10,277,771 | ) | | | 1,166,671 | |
| | | |
Interest rate contracts | | Net realized gain/(loss) on investment transactions; Net change in unrealized appreciation/depreciation on investment transactions | | | (523,446 | ) | | | 815,629 | |
| | | |
Interest rate contracts | | Net realized gain/(loss) on swaptions written; Net change in unrealized appreciation/depreciation on swaptions written | | | (1,747,732 | ) | | | – 0 | – |
| | | |
Interest rate contracts | | Net realized gain/(loss) on options written; Net change in unrealized appreciation/depreciation on options written | | | 710,537 | | | | – 0 | – |
| | | |
Foreign exchange contracts | | Net realized gain/(loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation on foreign currency denominated assets and liabilities | | | 13,782,036 | | | | 13,603,126 | |
| | | |
Foreign exchange contracts | | Net realized gain/(loss) on investment transactions; Net change in unrealized appreciation/depreciation on investment transactions | | | (2,121,382 | ) | | | – 0 | – |
| | | |
Foreign exchange contracts | | Net realized gain/(loss) on options written; Net change in unrealized appreciation/depreciation on options written | | | 21,154,201 | | | | 1,729,758 | |
| | | | |
AB HIGH INCOME FUND • | | | 123 | |
Notes to Financial Statements
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives Within Statement of Operations | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Credit contracts | | Net realized gain/(loss) on investment transactions; Net change in unrealized appreciation/depreciation on investment transactions | | $ | (1,379,794 | ) | | $ | 458,187 | |
| | | |
Credit contracts | | Net realized gain/(loss) on swaps; Net change in unrealized appreciation/depreciation on swaps | | | 39,004,821 | | | | (11,595,318 | ) |
| | | |
Credit Contracts | | Net realized gain/(loss) on swaptions written; Net change in unrealized appreciation/depreciation on swaptions written | | | 5,396,987 | | | | 52,449 | |
| | | |
Equity contracts | | Net realized gain/(loss) on swaps; Net change in unrealized appreciation/depreciation on swaps | | | 22,223,291 | | | | 457,873 | |
| | | |
Equity contracts | | Net realized gain/(loss) on futures; Net change in unrealized appreciation/depreciation on futures | | | 3,286,416 | | | | 180,331 | |
| | | |
Equity contracts | | Net realized gain/(loss) on investment transactions; Net change in unrealized appreciation/depreciationon investment transactions | | | (3,130,992 | ) | | | – 0 | – |
| | | |
Equity contracts | | Net realized gain/(loss) on options written; Net change in unrealized appreciation/depreciationon options written | | | 1,882,479 | | | | 360,075 | |
| | | | | | | | | | |
Total | | | | $ | 103,349,068 | | | $ | 7,285,105 | |
| | | | | | | | | | |
| | |
124 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2016.
| | | | |
Centrally Cleared Credit Default Swaps: | | | | |
Average notional amount of buy contracts | | $ | 147,011,562 | |
Average notional amount of sale contracts | | $ | 585,033,407 | |
| |
Credit Default Swaps: | | | | |
Average notional amount of buy contracts | | $ | 197,956,156 | |
Average notional amount of sale contracts | | $ | 331,986,763 | |
| |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 901,311,972 | |
Average principal amount of sale contracts | | $ | 1,360,899,563 | |
| |
Futures: | | | | |
Average original value of buy contracts | | $ | 145,623,239 | (a) |
Average original value of buy contracts | | $ | 458,339,569 | (b) |
| |
Interest Rate Swaps: | | | | |
Average notional amount | | $ | 176,603,048 | (c) |
| |
Total Return Swaps: | | | | |
Average notional amount | | $ | 215,170,095 | |
| |
Variance Swaps: | | | | |
Average notional amount | | $ | 8,682,137 | (d) |
| |
Purchased Options Contracts: | | | | |
Average monthly cost. | | $ | 1,346,588 | (a) |
(a) | | Positions were open eleven months during the reporting period. |
(b) | | Positions were open six months during the reporting period. |
(c) | | Positions were open one month during the reporting period. |
(d) | | Positions were open ten months during the reporting period. |
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.
All derivatives held at year end were subject to netting arrangements. The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2016:
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to a MA | | | Derivatives Available for Offset | | | Cash Collateral Received* | | | Security Collateral Received* | | | Net Amount of Derivatives Assets | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Australia & New Zealand Bank Group Ltd. | | $ | 675,955 | | | $ | – 0 | – | | $ | – 0 | – | | $ | – 0 | – | | $ | 675,955 | |
| | | | |
AB HIGH INCOME FUND • | | | 125 | |
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to a MA | | | Derivatives Available for Offset | | | Cash Collateral Received* | | | Security Collateral Received* | | | Net Amount of Derivatives Assets | |
Bank of America, N.A. | | $ | 6,496,684 | | | $ | (972,637 | ) | | $ | – 0 | – | | $ | (1,593,772 | ) | | $ | 3,930,275 | |
Barclays Bank PLC | | | 2,636,236 | | | | (2,636,236 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
BNP Paribas | | | 3,435,381 | | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | 3,435,381 | |
Brown Brothers Harriman & Co. | | | 146,902 | | | | (1,596 | ) | | | – 0 | – | | | – 0 | – | | | 145,306 | |
Citibank, N.A. | | | 9,337,152 | | | | (5,490,200 | ) | | | – 0 | – | | | – 0 | – | | | 3,846,952 | |
Credit Suisse International | | | 2,633,636 | | | | (2,633,636 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Deutsche Bank AG | | | 365,466 | | | | (365,466 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Goldman Sachs Bank USA/ Goldman Sachs International | | | 10,848,532 | | | | (10,848,532 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
HSBC Bank USA | | | 1,002,324 | | | | – 0 | – | | | (653,370 | ) | | | (348,954 | ) | | | – 0 | – |
JPMorgan Chase Bank, N.A. | | | 2,013,195 | | | | (785,402 | ) | | | (1,020,000 | ) | | | – 0 | – | | | 207,793 | |
Morgan Stanley Capital Services LLC/ Morgan Stanley & Co. International PLC. | | | 659,674 | | | | (659,674 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Royal Bank of Scotland PLC | | | 949,639 | | | | (849,821 | ) | | | – 0 | – | | | – 0 | – | | | 99,818 | |
Standard Chartered Bank | | | 393,335 | | | | (393,335 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 41,594,111 | | | $ | (25,636,535 | ) | | $ | (1,673,370 | ) | | $ | (1,942,726 | ) | | $ | 12,341,480 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivatives Available for Offset | | | Cash Collateral Pledged* | | | Security Collateral Pledged* | | | Net Amount of Derivatives Liabilities | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Citibank, N.A ** | | $ | 30,518 | | | $ | – 0 | – | | $ | (30,518 | ) | | $ | – 0 | – | | $ | – 0 | – |
Goldman Sachs & Co.** | | | 195,871 | | | | – 0 | – | | | – 0 | – | | | (195,871 | ) | | | – 0 | – |
Morgan Stanley & Co. LLC** | | | 459,035 | | | | – 0 | – | | | (459,035 | ) | | | – 0 | – | | | – 0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 685,424 | | | $ | – 0 | – | | $ | (489,553 | ) | | $ | (195,871 | ) | | $ | – 0 | – |
| | | | | | | | | | | | | | | | | | | | |
| | |
126 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivatives Available for Offset | | | Cash Collateral Pledged* | | | Security Collateral Pledged* | | | Net Amount of Derivatives Liabilities | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Bank of America, N.A. | | $ | 972,637 | | | $ | (972,637 | ) | | $ | – 0 | – | | $ | – 0 | – | | $ | – 0 | – |
Barclays Bank PLC | | | 10,207,703 | | | | (2,636,236 | ) | | | – 0 | – | | | (7,571,467 | ) | | | – 0 | – |
Brown Brothers Harriman & Co. | | | 1,596 | | | | (1,596 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Citibank, N.A. | | | 5,490,200 | | | | (5,490,200 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Credit Suisse International | | | 9,909,487 | | | | (2,633,636 | ) | | | – 0 | – | | | (7,275,851 | ) | | | – 0 | – |
Deutsche Bank AG | | | 874,311 | | | | (365,466 | ) | | | – 0 | – | | | – 0 | – | | | 508,845 | |
Goldman Sachs Bank USA/ Goldman Sachs International | | | 34,667,167 | | | | (10,848,532 | ) | | | – 0 | – | | | (22,846,107 | ) | | | 972,528 | |
JPMorgan Chase Bank, N.A. | | | 785,402 | | | | (785,402 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Morgan Stanley Capital Services LLC/ Morgan Stanley & Co. International PLC | | | 11,939,066 | | | | (659,674 | ) | | | – 0 | – | | | (11,279,392 | ) | | | – 0 | – |
Royal Bank of Scotland PLC | | | 849,821 | | | | (849,821 | ) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Standard Chartered Bank | | | 1,693,951 | | | | (393,335 | ) | | | – 0 | – | | | – 0 | – | | | 1,300,616 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 77,391,341 | | | $ | (25,636,535 | ) | | $ | – 0 | – | | $ | (48,972,817 | ) | | $ | 2,781,989 | ^ |
| | | | | | | | | | | | | | | | | | | | |
* | | The actual collateral received/pledged may be more than the amount reported due to overcollateralization. |
** | | Cash and securities have been posted for initial margin requirements for exchange-traded derivatives outstanding at October 31, 2016. |
^ | | Net amount represents the net unrealized receivable/payable that would be due from/to the counterparty in the event of default or termination. The net from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
See Note D.3 for additional disclosure of netting arrangements regarding reverse repurchase agreements.
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value
| | | | |
AB HIGH INCOME FUND • | | | 127 | |
Notes to Financial Statements
but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
3. Reverse Repurchase Agreements
The Fund may enter into reverse repurchase transactions (“RVP”) in accordance with the terms of a Master Repurchase Agreement (“MRA”), under which the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value comparable to the repurchase price. Under the MRA and other Master Agreements, the Fund is permitted to offset payables and/or receivables with collateral held and/ or posted to the counterparty and create one single net payment due to or from the Fund in the event of a default. In the event of a default by a MRA counterparty, the Fund may be considered an unsecured creditor with respect to any excess collateral (collateral with a market value in excess of the repurchase price) held by and/or posted to the counterparty, and as such the return of such excess collateral may be delayed or denied. For the year ended October 31, 2016, the average amount of reverse repurchase agreements outstanding was $96,106,088 and the daily weighted average interest rate was (0.87)%. During the period, the Fund received net interest payments from counterparties. At October 31, 2016, the Fund had reverse repurchase agreements outstanding in the amount of $80,186,179 as reported in the statement of assets and liabilities.
The following table presents the Fund’s RVP liabilities by counterparty net of the related collateral pledged by the Fund as of October 31, 2016:
| | | | | | | | | | | | |
Counterparty | | RVP Liabilities Subject to a MRA | | | Securities Collateral Pledged†* | | | Net Amount of RVP Liabilities | |
Barclays Capital, Inc. | | $ | 46,958,379 | | | $ | (46,767,042 | ) | | $ | 191,337 | |
Credit Suisse Securities (USA) LLC | | | 27,122,672 | | | | (27,122,672 | ) | | | – 0 | – |
ING Financial Markets LLC | | | 2,217,514 | | | | (2,217,514 | ) | | | – 0 | – |
Jefferies & Company, Inc. | | | 3,887,614 | | | | (3,760,969 | ) | | | 126,645 | |
| | | | | | | | | | | | |
Total | | $ | 80,186,179 | | | $ | (79,868,197 | ) | | $ | 317,982 | |
| | | | | | | | | | | | |
† | | Including accrued interest. |
* | | The actual collateral pledged may be more than the amount reported due to overcollateralization. |
| | |
128 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
4. Loan Participations and Assignments
The Fund may invest in direct debt instruments which are interests in amounts owed to lenders or lending syndicates by corporate, governmental, or other borrowers, either in the form of participations at the time the loan is originated (“Participations”) or by buying an interest in the loan in the secondary market from a financial institution or institutional investor (“Assignments”). 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 loan agreement. When investing in Participations, the Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. In addition, when investing in Participations, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender and only upon receipt of payments by the Lender from the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the Lender. When the Fund purchases Assignments from Lenders, it will typically acquire direct rights against the borrower on the loan. These loans may include participations in “bridge loans”, which are loans taken out by borrowers for a short period (typically less than six months) pending arrangement of more permanent financing through, for example, the issuance of bonds, frequently high-yield bonds issued for the purpose of acquisitions. The Fund may also participate in unfunded loan commitments, which are contractual obligations for investing in future Participations, and may receive a commitment fee based on the amount of the commitment. Under these arrangements, the Fund may receive a fixed rate commitment fee and, if and to the extent the borrower borrows under the facility, the Fund may receive an additional funding fee.
Unfunded loan commitments and funded loans are marked to market daily.
As of October 31, 2016, the Fund had the following unfunded loan commitment which could be extended at the option of the borrower pursuant to the following loan agreement:
| | | | |
Borrower | | Unfunded Loan Commitment | |
Flexpath WH I LLC, Series B, 1/20/17 | | $ | 584,357 | |
As of October 31, 2016, the Fund had no bridge loan commitments outstanding.
During the year ended October 31, 2016, the Fund received no commitment fees or additional funding fees.
| | | | |
AB HIGH INCOME FUND • | | | 129 | |
Notes to Financial Statements
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares | | | | | | Amount | | | | |
| | Year Ended October 31, 2016 | | | Year Ended October 31, 2015 | | | | | | Year Ended October 31, 2016 | | | Year Ended October 31, 2015 | | | | |
| | | | | | | | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 92,509,470 | | | | 75,899,455 | | | | | | | $ | 764,584,475 | | | $ | 672,250,691 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 10,267,961 | | | | 12,577,261 | | | | | | | | 84,864,368 | | | | 112,089,171 | | | | | |
| | | | | |
Shares converted from Class B | | | 135,615 | | | | 367,530 | | | | | | | | 1,123,802 | | | | 3,292,669 | | | | | |
| | | | | |
Shares redeemed | | | (106,865,022 | ) | | | (93,300,211 | ) | | | | | | | (882,893,379 | ) | | | (826,787,579 | ) | | | | |
| | | | | |
Net decrease | | | (3,951,976 | ) | | | (4,455,965 | ) | | | | | | $ | (32,320,734 | ) | | $ | (39,155,048 | ) | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 26,545 | | | | 29,420 | | | | | | | $ | 221,766 | | | $ | 262,100 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 19,289 | | | | 37,071 | | | | | | | | 160,177 | | | | 334,527 | | | | | |
| | | | | |
Shares converted to Class A | | | (134,395 | ) | | | (364,292 | ) | | | | | | | (1,123,801 | ) | | | (3,292,669 | ) | | | | |
| | | | | |
Shares redeemed | | | (55,551 | ) | | | (81,362 | ) | | | | | | | (467,337 | ) | | | (731,686 | ) | | | | |
| | | | | |
Net decrease | | | (144,112 | ) | | | (379,163 | ) | | | | | | $ | (1,209,195 | ) | | $ | (3,427,728 | ) | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class C | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 30,428,390 | | | | 20,960,241 | | | | | | | $ | 255,668,922 | | | $ | 189,239,400 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 5,584,459 | | | | 7,206,215 | | | | | | | | 46,633,880 | | | | 64,986,365 | | | | | |
| | | | | |
Shares redeemed | | | (36,888,329 | ) | | | (37,067,012 | ) | | | | | | | (307,146,600 | ) | | | (332,193,487 | ) | | | | |
| | | | | |
Net decrease | | | (875,480 | ) | | | (8,900,556 | ) | | | | | | $ | (4,843,798 | ) | | $ | (77,967,722 | ) | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Advisor Class | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 289,929,303 | | | | 147,810,753 | | | | | | | $ | 2,399,740,979 | | | $ | 1,316,444,960 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 14,636,190 | | | | 14,534,688 | | | | | | | | 121,956,110 | | | | 129,624,171 | | | | | |
| | | | | |
Shares redeemed | | | (140,062,836 | ) | | | (147,422,070 | ) | | | | | | | (1,156,766,613 | ) | | | (1,302,335,697 | ) | | | | |
| | | | | |
Net increase | | | 164,502,657 | | | | 14,923,371 | | | | | | | $ | 1,364,930,476 | | | $ | 143,733,434 | | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class R | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 3,805,845 | | | | 2,820,487 | | | | | | | $ | 31,214,630 | | | $ | 25,140,859 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 674,021 | | | | 679,101 | | | | | | | | 5,565,632 | | | | 6,041,414 | | | | | |
| | | | | |
Shares redeemed | | | (3,574,022 | ) | | | (2,714,978 | ) | | | | | | | (29,857,922 | ) | | | (23,977,691 | ) | | | | |
| | | | | |
Net increase | | | 905,844 | | | | 784,610 | | | | | | | $ | 6,922,340 | | | $ | 7,204,582 | | | | | |
| | | | | |
| | |
130 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares | | | | | | Amount | | | | |
| | Year Ended October 31, 2016 | | | Year Ended October 31, 2015 | | | | | | Year Ended October 31, 2016 | | | Year Ended October 31, 2015 | | | | |
| | | | | | | | |
Class K | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 2,492,200 | | | | 2,922,954 | | | | | | | $ | 20,729,172 | | | $ | 26,116,852 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 855,500 | | | | 810,873 | | | | | | | | 7,069,521 | | | | 7,208,893 | | | | | |
| | | | | |
Shares redeemed | | | (2,206,560 | ) | | | (1,413,042 | ) | | | | | | | (18,374,792 | ) | | | (12,527,265 | ) | | | | |
| | | | | |
Net increase | | | 1,141,140 | | | | 2,320,785 | | | | | | | $ | 9,423,901 | | | $ | 20,798,480 | | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class I | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 9,768,594 | | | | 28,263,974 | | | | | | | $ | 79,219,657 | | | $ | 258,176,615 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 2,315,904 | | | | 2,327,495 | | | | | | | | 19,168,128 | | | | 20,698,998 | | | | | |
| | | | | |
Shares redeemed | | | (10,681,656 | ) | | | (10,131,179 | ) | | | | | | | (88,488,832 | ) | | | (88,980,740 | ) | | | | |
| | | | | |
Net increase | | | 1,402,842 | | | | 20,460,290 | | | | | | | $ | 9,898,953 | | | $ | 189,894,873 | | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class Z | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 9,472,128 | | | | 4,365,710 | | | | | | | $ | 79,652,387 | | | $ | 37,956,266 | | | | | |
| | | | | |
Shares issued in reinvestment of dividends | | | 850,531 | | | | 516,939 | | | | | | | | 7,041,249 | | | | 4,591,222 | | | | | |
| | | | | |
Shares redeemed | | | (6,447,045 | ) | | | (723,628 | ) | | | | | | | (53,199,817 | ) | | | (6,344,689 | ) | | | | |
| | | | | |
Net increase | | | 3,875,614 | | | | 4,159,021 | | | | | | | $ | 33,493,819 | | | $ | 36,202,799 | | | | | |
| | | | | |
For the year ended October 31, 2016, the Fund received proceeds of $722,706 in connection with a residual distribution from the Alliance Fair Fund relating to regulatory settlements in 2004. This amount is presented in the Fund’s statement of changes in net assets.
NOTE F
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk—Interest rate risk is the risk that changes in interest rates will affect the value of the Fund’s investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Fund’s investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as “junk bonds”) have speculative elements or are predominantly speculative risks.
| | | | |
AB HIGH INCOME FUND • | | | 131 | |
Notes to Financial Statements
Below Investment Grade Securities Risk—Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments, negative perceptions of the junk bond market generally and less secondary market liquidity.
Duration Risk—Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater if the Fund invests a significant portion of its assets in fixed-income securities with longer maturities.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid, and because these investments may be subject to increased economic, political, regulatory or other uncertainties.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures contracts or by borrowing money. The use of derivative instruments by the Fund, such as forwards, futures, options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
| | |
132 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
Liquidity Risk—Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of liquidity risk may include low trading volumes, large positions and heavy redemptions of Fund Shares. Over recent years, liquidity risk has also increased because the capacity of dealers in the secondary market for fixed-income securities to make markets in these securities has decreased, even as the overall bond market has grown significantly, due to, among other things, structural changes, additional regulatory requirements and capital and risk restraints that have led to reduced inventories. Liquidity risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $280 million revolving credit facility (the “Facility”) intended to provide short-term financing if necessary, subject to certain restrictions, in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2016.
| | | | |
AB HIGH INCOME FUND • | | | 133 | |
Notes to Financial Statements
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2016 and October 31, 2015 were as follows:
| | | | | | | | |
| | 2016 | | | 2015 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 463,005,853 | | | $ | 474,509,861 | |
Long-term capital gains | | | – 0 | – | | | 54,743,821 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 463,005,853 | | | $ | 529,253,682 | |
| | | | | | | | |
As of October 31, 2016, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 35,013,890 | |
Accumulated capital and other losses | | | (148,861,647 | )(a) |
Unrealized appreciation/(depreciation) | | | (99,402,440 | )(b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | (213,250,197 | )(c) |
| | | | |
(a) | | As of October 31, 2016, the Fund had a net capital loss carryforward of $148,861,647. |
(b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the difference between book and tax amortization methods for premium, the tax treatment of swaps, passive foreign investment companies (PFICs) and partnerships, and the realization for tax purposes of gains/losses on certain derivative instruments. |
(c) | | The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to the tax treatment of interest on defaulted securities and dividends payable. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2016, the Fund had a net short-term capital loss carryforward of $34,048,746 and a net long-term capital loss carryforward of $114,812,901 which may be carried forward for an indefinite period.
During the current fiscal year, permanent differences primarily due to reclassifications of foreign currency, and foreign capital gains tax, the tax treatment of swaps and options, reclassifications of paydown gains/losses, the tax treatment of proceeds from the sale of defaulted securities, contributions from the adviser, and the tax treatment of clearing fees resulted in a net decrease in distributions in excess of net investment income and a net increase in accumulated net realized loss on investment and foreign currency transactions, and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
| | |
134 | | • AB HIGH INCOME FUND |
Notes to Financial Statements
NOTE I
Other
In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the financial statements and related disclosures.
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
| | | | |
AB HIGH INCOME FUND • | | | 135 | |
Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | Class A | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.50 | | | | $ 9.40 | | | | $ 9.53 | | | | $ 9.38 | | | | $ 8.73 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .48 | (b) | | | .51 | | | | .55 | | | | .60 | | | | .56 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .27 | | | | (.69 | ) | | | (.03 | ) | | | .20 | | | | .70 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .75 | | | | (.18 | ) | | | .52 | | | | .80 | | | | 1.26 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.60 | ) | | | (.64 | ) | | | (.60 | ) | | | (.65 | ) | | | (.61 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.60 | ) | | | (.72 | ) | | | (.65 | ) | | | (.65 | ) | | | (.61 | ) |
| | | | |
Net asset value, end of period | | | $ 8.65 | | | | $ 8.50 | | | | $ 9.40 | | | | $ 9.53 | | | | $ 9.38 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 9.41 | %* | | | (1.98 | )% | | | 5.62 | % | | | 8.78 | %† | | | 15.03 | %* |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $2,061,177 | | | | $2,059,111 | | | | $2,320,748 | | | | $2,587,763 | | | | $2,464,634 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | .84 | % | | | .90 | % | | | .89 | % | | | .90 | % | | | .91 | % |
Expenses, before waivers/reimbursements(e) | | | .85 | % | | | .90 | % | | | .89 | % | | | .90 | % | | | .91 | % |
Net investment income | | | 5.75 | %(b) | | | 5.77 | % | | | 5.80 | % | | | 6.25 | % | | | 6.22 | % |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % | | | 42 | % |
See footnote summary on page 144.
| | |
136 | | • AB HIGH INCOME FUND |
Financial Highlights
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | Class B | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.57 | | | | $ 9.49 | | | | $ 9.62 | | | | $ 9.46 | | | | $ 8.80 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .42 | (b) | | | .45 | | | | .48 | | | | .53 | | | | .50 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .26 | | | | (.71 | ) | | | (.03 | ) | | | .21 | | | | .71 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .68 | | | | (.26 | ) | | | .45 | | | | .74 | | | | 1.21 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.53 | ) | | | (.58 | ) | | | (.53 | ) | | | (.58 | ) | | | (.55 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.53 | ) | | | (.66 | ) | | | (.58 | ) | | | (.58 | ) | | | (.55 | ) |
| | | | |
Net asset value, end of period | | | $ 8.72 | | | | $ 8.57 | | | | $ 9.49 | | | | $ 9.62 | | | | $ 9.46 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 8.48 | %* | | | (2.89 | )% | | | 4.82 | % | | | 8.06 | %† | | | 14.26 | %* |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $2,357 | | | | $3,551 | | | | $7,526 | | | | $13,008 | | | | $19,591 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | 1.63 | % | | | 1.63 | % | | | 1.60 | % | | | 1.61 | % | | | 1.64 | % |
Expenses, before waivers/reimbursements(e) | | | 1.63 | % | | | 1.63 | % | | | 1.60 | % | | | 1.61 | % | | | 1.64 | % |
Net investment income | | | 5.01 | %(b) | | | 4.95 | % | | | 5.05 | % | | | 5.50 | % | | | 5.51 | % |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % | | | 42 | % |
See footnote summary on page 144.
| | | | |
AB HIGH INCOME FUND • | | | 137 | |
Financial Highlights
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | Class C | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.60 | | | | $ 9.51 | | | | $ 9.64 | | | | $ 9.48 | | | | $ 8.83 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .42 | (b) | | | .45 | | | | .48 | | | | .53 | | | | .49 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .27 | | | | (.70 | ) | | | (.03 | ) | | | .21 | | | | .71 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .69 | | | | (.25 | ) | | | .45 | | | | .74 | | | | 1.20 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.54 | ) | | | (.58 | ) | | | (.53 | ) | | | (.58 | ) | | | (.55 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.54 | ) | | | (.66 | ) | | | (.58 | ) | | | (.58 | ) | | | (.55 | ) |
| | | | |
Net asset value, end of period | | | $ 8.75 | | | | $ 8.60 | | | | $ 9.51 | | | | $ 9.64 | | | | $ 9.48 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 8.50 | %* | | | (2.74 | )% | | | 4.82 | % | | | 8.04 | %† | | | 14.05 | %* |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $1,298,312 | | | | $1,283,192 | | | | $1,504,398 | | | | $1,379,727 | | | | $1,213,954 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | 1.58 | % | | | 1.60 | % | | | 1.58 | % | | | 1.60 | % | | | 1.61 | % |
Expenses, before waivers/reimbursements(e) | | | 1.58 | % | | | 1.60 | % | | | 1.58 | % | | | 1.60 | % | | | 1.61 | % |
Net investment income | | | 4.94 | %(b) | | | 5.00 | % | | | 5.03 | % | | | 5.48 | % | | | 5.42 | % |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % | | | 42 | % |
See footnote summary on page 144.
| | |
138 | | • AB HIGH INCOME FUND |
Financial Highlights
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | Advisor Class | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.51 | | | | $ 9.42 | | | | $ 9.55 | | | | $ 9.39 | | | | $ 8.74 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .49 | (b) | | | .54 | | | | .58 | | | | .62 | | | | .58 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .28 | | | | (.70 | ) | | | (.03 | ) | | | .22 | | | | .71 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .77 | | | | (.16 | ) | | | .55 | | | | .84 | | | | 1.29 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.62 | ) | | | (.67 | ) | | | (.63 | ) | | | (.68 | ) | | | (.64 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.62 | ) | | | (.75 | ) | | | (.68 | ) | | | (.68 | ) | | | (.64 | ) |
| | | | |
Net asset value, end of period | | | $ 8.66 | | | | $ 8.51 | | | | $ 9.42 | | | | $ 9.55 | | | | $ 9.39 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 9.69 | %* | | | (1.78 | )% | | | 5.93 | % | | | 9.23 | %† | | | 15.37 | %* |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $3,828,042 | | | | $2,362,066 | | | | $2,473,475 | | | | $1,754,585 | | | | $1,346,510 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | .58 | % | | | .60 | % | | | .58 | % | | | .61 | % | | | .60 | % |
Expenses, before waivers/reimbursements(e) | | | .58 | % | | | .60 | % | | | .58 | % | | | .61 | % | | | .60 | % |
Net investment income | | | 5.87 | %(b) | | | 6.05 | % | | | 6.06 | % | | | 6.54 | % | | | 6.46 | % |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % | | | 42 | % |
See footnote summary on page 144.
| | | | |
AB HIGH INCOME FUND • | | | 139 | |
Financial Highlights
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | Class R | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.49 | | | | $ 9.40 | | | | $ 9.53 | | | | $ 9.38 | | | | $ 8.73 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .45 | (b) | | | .48 | | | | .52 | | | | .56 | | | | .53 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .27 | | | | (.70 | ) | | | (.03 | ) | | | .21 | | | | .71 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .72 | | | | (.22 | ) | | | .49 | | | | .77 | | | | 1.24 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.57 | ) | | | (.61 | ) | | | (.57 | ) | | | (.62 | ) | | | (.59 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.57 | ) | | | (.69 | ) | | | (.62 | ) | | | (.62 | ) | | | (.59 | ) |
| | | | |
Net asset value, end of period | | | $ 8.64 | | | | $ 8.49 | | | | $ 9.40 | | | | $ 9.53 | | | | $ 9.38 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 9.01 | %* | | | (2.44 | )% | | | 5.27 | % | | | 8.42 | %† | | | 14.66 | %* |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $86,059 | | | | $76,876 | | | | $77,706 | | | | $65,429 | | | | $46,615 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | 1.22 | % | | | 1.27 | % | | | 1.23 | % | | | 1.25 | % | | | 1.24 | % |
Expenses, before waivers/reimbursements(e) | | | 1.22 | % | | | 1.27 | % | | | 1.23 | % | | | 1.25 | % | | | 1.26 | % |
Net investment income | | | 5.39 | %(b) | | | 5.41 | % | | | 5.46 | % | | | 5.92 | % | | | 5.87 | % |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % | | | 42 | % |
See footnote summary on page 144.
| | |
140 | | • AB HIGH INCOME FUND |
Financial Highlights
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | Class K | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.50 | | | | $ 9.41 | | | | $ 9.54 | | | | $ 9.38 | | | | $ 8.73 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .48 | (b) | | | .51 | | | | .55 | | | | .60 | | | | .55 | (b) |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .27 | | | | (.70 | ) | | | (.03 | ) | | | .22 | | | | .71 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .75 | | | | (.19 | ) | | | .52 | | | | .82 | | | | 1.26 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.60 | ) | | | (.64 | ) | | | (.60 | ) | | | (.66 | ) | | | (.61 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.60 | ) | | | (.72 | ) | | | (.65 | ) | | | (.66 | ) | | | (.61 | ) |
| | | | |
Net asset value, end of period | | | $ 8.65 | | | | $ 8.50 | | | | $ 9.41 | | | | $ 9.54 | | | | $ 9.38 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 9.41 | %* | | | (2.12 | )% | | | 5.63 | % | | | 8.93 | %† | | | 15.02 | %* |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $106,841 | | | | $95,294 | | | | $83,634 | | | | $52,132 | | | | $19,161 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | .85 | % | | | .94 | % | | | .88 | % | | | .89 | % | | | .91 | % |
Expenses, before waivers/reimbursements(e) | | | .85 | % | | | .94 | % | | | .88 | % | | | .89 | % | | | .93 | % |
Net investment income | | | 5.75 | %(b) | | | 5.74 | % | | | 5.79 | % | | | 6.28 | % | | | 6.09 | % |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % | | | 42 | % |
See footnote summary on page 144.
| | | | |
AB HIGH INCOME FUND • | | | 141 | |
Financial Highlights
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | Class I | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.51 | | | | $ 9.42 | | | | $ 9.55 | | | | $ 9.39 | | | | $ 8.74 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .50 | (b) | | | .54 | | | | .58 | | | | .63 | | | | .59 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .28 | | | | (.70 | ) | | | (.03 | ) | | | .22 | | | | .71 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .78 | | | | (.16 | ) | | | .55 | | | | .85 | | | | 1.30 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.63 | ) | | | (.67 | ) | | | (.63 | ) | | | (.69 | ) | | | (.65 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.63 | ) | | | (.75 | ) | | | (.68 | ) | | | (.69 | ) | | | (.65 | ) |
| | | | |
Net asset value, end of period | | | $ 8.66 | | | | $ 8.51 | | | | $ 9.42 | | | | $ 9.55 | | | | $ 9.39 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 9.74 | %* | | | (1.74 | )% | | | 5.97 | % | | | 9.30 | %† | | | 15.42 | %* |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $294,693 | | | | $277,654 | | | | $114,598 | | | | $104,128 | | | | $66,608 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | .53 | % | | | .54 | % | | | .54 | % | | | .53 | % | | | .56 | % |
Expenses, before waivers/reimbursements(e) | | | .53 | % | | | .54 | % | | | .54 | % | | | .53 | % | | | .56 | % |
Net investment income | | | 6.06 | %(b) | | | 6.11 | % | | | 6.08 | % | | | 6.61 | % | | | 6.55 | % |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % | | | 42 | % |
See footnote summary on page 144.
| | |
142 | | • AB HIGH INCOME FUND |
Financial Highlights
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | |
| | Class Z | |
| | Year Ended October 31, | | | October 15, 2013(f) to October 31, 2013 | |
| 2016 | | | 2015 | | | 2014 | | |
| | | | |
| | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 8.51 | | | | $ 9.42 | | | | $ 9.55 | | | | $ 9.43 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | |
Net investment income(a) | | | .50 | (b) | | | .55 | | | | .58 | | | | (.02 | ) |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .28 | | | | (.71 | ) | | | (.03 | ) | | | .17 | |
Contributions from Affiliates | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
Capital Contributions | | | .00 | (c) | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase (decrease) in net asset value from operations | | | .78 | | | | (.16 | ) | | | .55 | | | | .15 | |
| | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.63 | ) | | | (.67 | ) | | | (.63 | ) | | | (.03 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | – 0 | – | | | (.08 | ) | | | (.05 | ) | | | – 0 | – |
| | | | |
Total dividends and distributions | | | (.63 | ) | | | (.75 | ) | | | (.68 | ) | | | (.03 | ) |
| | | | |
Net asset value, end of period | | | $ 8.66 | | | | $ 8.51 | | | | $ 9.42 | | | | $ 9.55 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(d) | | | 9.76 | %* | | | (1.72 | )% | | | 6.00 | % | | | 1.59 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $112,852 | | | | $77,916 | | | | $47,059 | | | | $10 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(e) | | | .51 | % | | | .53 | % | | | .52 | % | | | .56 | %(g) |
Expenses, before waivers/reimbursements(e) | | | .51 | % | | | .53 | % | | | .52 | % | | | .56 | %(g) |
Net investment income | | | 6.07 | %(b) | | | 6.15 | % | | | 6.13 | % | | | (3.74 | )%(g) |
Portfolio turnover rate | | | 45 | % | | | 53 | % | | | 38 | % | | | 38 | % |
See footnote summary on page 144.
| | | | |
AB HIGH INCOME FUND • | | | 143 | |
Financial Highlights
(a) | | Based on average shares outstanding. |
(b) | | Net of expenses waived/reimbursed by the Adviser. |
(c) | | Amount less than $0.005. |
(d) | | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
(e) | | The expense ratios presented below exclude interest expense: |
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
Class A | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | .84 | % | | | .88 | % | | | .88 | % | | | .90 | % | | | .90 | % |
Before waivers/reimbursements | | | .85 | % | | | .88 | % | | | .88 | % | | | .90 | % | | | .90 | % |
Class B | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | 1.63 | % | | | 1.61 | % | | | 1.60 | % | | | 1.61 | % | | | 1.64 | % |
Before waivers/reimbursements | | | 1.63 | % | | | 1.61 | % | | | 1.60 | % | | | 1.61 | % | | | 1.64 | % |
Class C | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | 1.58 | % | | | 1.58 | % | | | 1.58 | % | | | 1.60 | % | | | 1.60 | % |
Before waivers/reimbursements | | | 1.58 | % | | | 1.58 | % | | | 1.58 | % | | | 1.60 | % | | | 1.60 | % |
Advisor Class | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | .58 | % | | | .58 | % | | | .58 | % | | | .60 | % | | | .60 | % |
Before waivers/reimbursements | | | .58 | % | | | .58 | % | | | .58 | % | | | .60 | % | | | .60 | % |
Class R | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | 1.22 | % | | | 1.25 | % | | | 1.23 | % | | | 1.25 | % | | | 1.24 | % |
Before waivers/reimbursements | | | 1.22 | % | | | 1.25 | % | | | 1.23 | % | | | 1.25 | % | | | 1.26 | % |
Class K | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | .85 | % | | | .92 | % | | | .88 | % | | | .89 | % | | | .91 | % |
Before waivers/reimbursements | | | .85 | % | | | .92 | % | | | .88 | % | | | .89 | % | | | .93 | % |
Class I | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | .53 | % | | | .52 | % | | | .54 | % | | | .53 | % | | | .56 | % |
Before waivers/reimbursements | | | .53 | % | | | .52 | % | | | .54 | % | | | .53 | % | | | .56 | % |
| | | | | | | | | | | | | | | | |
| | Year Ended October 31, | | | October 15, 2013(f) to October 31, 2013 | |
| | 2016 | | | 2015 | | | 2014 | | |
Class Z | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | .51 | % | | | .51 | % | | | .51 | % | | | .56 | %(g) |
Before waivers/reimbursements | | | .51 | % | | | .51 | % | | | .51 | % | | | .56 | %(g) |
(f) | | Commencement of distribution. |
† | | Includes the impact of proceeds received and credited to the Fund resulting from third party regulatory settlements, which enhanced the Fund’s performance for the year ended October 31, 2013 by 0.01%. |
* | | Includes the impact of proceeds received, and credited to the Fund resulting from class action settlements, which enhanced the performance of each share class, for the year ended October 31, 2012 by 0.06%. |
| | Includes the impact of proceeds received and credited to the Fund in connection with a residual distribution relating to regulatory settlements, which enhanced the Fund’s performance for the year ended October 31, 2016 by 0.01%. |
See notes to financial statements.
| | |
144 | | • AB HIGH INCOME FUND |
Financial Highlights
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AB High Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AB High Income Fund, Inc. (the “Fund”), as of October 31, 2016, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2016, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AB High Income Fund, Inc. at October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
![LOGO](https://capedge.com/proxy/N-CSR/0001193125-17-002696/g213702g91r55.jpg)
New York, New York
December 30, 2016
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AB HIGH INCOME FUND • | | | 145 | |
Report of Independent Registered Public Accounting Firm
2016 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended October 31, 2016.
For foreign shareholders, 53.13% of ordinary income dividends paid may be considered to be qualifying to be taxed as interest-related dividends.
For the taxable year ended October 31, 2016, the Fund designates $3,803,115 as the maximum amount that may be considered qualified dividend income for individual shareholders.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included with your Form 1099-DIV which will be sent to you separately in January 2017.
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146 | | • AB HIGH INCOME FUND |
BOARD OF DIRECTORS
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Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Carol C. McMullen(1) Earl D. Weiner(1) |
OFFICERS
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Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Paul J. DeNoon(2), Vice President Gershon M. Distenfeld(2), Vice President Douglas J. Peebles(2), Vice President Marco G. Santamaria(2), Vice President | | Matthew S. Sheridan(2) , Vice President Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Stephen M. Woetzel, Controller Vincent S. Noto, Chief Compliance Officer |
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Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 Custodian and Accounting Agent Brown Brothers Harriman & Co. 50 Post Office Square Boston, MA 02110 Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 | | Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036 |
(1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Global Fixed Income Team and Global Credit Investment Team. Messrs. DeNoon, Distenfeld, Peebles, Santamaria and Sheridan are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
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AB HIGH INCOME FUND • | | | 147 | |
Board of Directors
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
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NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
INTERESTED DIRECTOR | | | | | | |
Robert M. Keith, + 1345 Avenue of the Americas New York, NY 10105 56 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 108 | | | None |
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148 | | • AB HIGH INCOME FUND |
Management of the Fund
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NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
DISINTERESTED DIRECTORS | | | | | | |
Marshall C. Turner, Jr. ++ Chairman of the Board 75 (2014) | | Private Investor since prior to 2011. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semiconductor manufacturing). He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive nonprofit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | | | 108 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007 |
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John H. Dobkin, ++ 74 (1993) | | Independent Consultant since prior to 2011. Formerly, President of Save Venice, Inc. (preservation organization) from 2001-2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such AB Funds from 2001-2008. | | | 108 | | | None |
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AB HIGH INCOME FUND • | | | 149 | |
Management of the Fund
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NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
Michael J. Downey, ++ 72 (2005) | | Private Investor since prior to 2011. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition (financial services) Corp. from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 108 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2011 |
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William H. Foulk, Jr., ++ 84 (1993) | | Investment Adviser and an Independent Consultant since prior to 2011. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such AB Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 108 | | | None |
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150 | | • AB HIGH INCOME FUND |
Management of the Fund
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NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
D. James Guzy, ++ 80 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2011. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2011 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 108 | | | None |
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Nancy P. Jacklin, ++ 68 (2006) | | Private Investor since prior to 2011. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 108 | | | None |
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AB HIGH INCOME FUND • | | | 151 | |
Management of the Fund
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NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
Carol C. McMullen, ++
61 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014 and private investor; Director of Norfolk & Dedham Group (mutual property and casualty insurance) since 2011; and Director of Partners Community Physicians Organization (healthcare) since 2014. Formerly, Managing Director of The Crossland Group (consulting) from 2012 to 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Head of Global Investment Research). She has served on a number of private company and nonprofit boards, and as a director or trustee of the AB Funds since June 2016. | | | 108 | | | None |
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152 | | • AB HIGH INCOME FUND |
Management of the Fund
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
Garry L. Moody, ++ 64 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 108 | | | None |
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Earl D. Weiner, ++
77
(2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 108 | | | None |
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AB HIGH INCOME FUND • | | | 153 | |
Management of the Fund
* | | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | | There is no stated term of office for the Fund’s Directors. |
*** | | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
+ | | Mr. Keith is an “interested director of the Fund”, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
++ | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
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154 | | • AB HIGH INCOME FUND |
Management of the Fund
Officers of the Fund
Certain information concerning the Fund’s Officers is listed below.
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NAME, ADDRESS* AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith, 56 | | President and Chief Executive Officer | | See biography above. |
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Philip L. Kirstein, 71 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
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Paul J. DeNoon, 54 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2011. |
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Gershon Distenfeld, 41 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2011. |
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Douglas J. Peebles, 51 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2011. |
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Marco G. Santamaria, 51 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since 2011. |
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Matthew S. Sheridan, 41 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2011. |
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Emilie D. Wrapp, 61 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2011. |
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Joseph J. Mantineo, 57 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2011. |
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Stephen M. Woetzel, 45 | | Controller | | Vice President of ABIS**, with which he has been associated since prior to 2011. |
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Vincent S. Noto, 52 | | Chief Compliance Officer | | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2011. |
* | | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | | The Adviser, ABI and ABIS are affiliates of the Fund. |
| | The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.ABfunds.com, for a free prospectus or SAI. |
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AB HIGH INCOME FUND • | | | 155 | |
Management of the Fund
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB High Income Fund, Inc. (the “Fund”) unanimously approved the continuance of the Fund’s Advisory Agreement with the Adviser at a meeting held on November 3-5, 2015.
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed an independent evaluation prepared by the Fund’s Senior Officer (who is also the Fund’s Independent Compliance Officer) of the reasonableness of the advisory fee, in which the Senior Officer concluded that the contractual fee for the Fund was reasonable. The directors also discussed the proposed continuance in private sessions with counsel and the Fund’s Senior Officer.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they receive presentations from the Adviser on the investment results of the Fund and review extensive materials and information presented by the Adviser.
The directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the
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156 | | • AB HIGH INCOME FUND |
investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Fund’s Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s Senior Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2013 and 2014 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s Senior Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency and distribution services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors were satisfied that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Fund’s
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AB HIGH INCOME FUND • | | | 157 | |
principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year. At the November 2015 meeting, the directors reviewed information prepared by Broadridge showing the performance of the Class A Shares of the Fund as compared with that of a group of similar funds selected by Broadridge (the “Performance Group”) and as compared with that of a broad array of funds selected by Broadridge (the “Performance Universe”), and information prepared by the Adviser showing performance of the Class A Shares as compared with its composite benchmark (composed of equal weightings of the JP Morgan Emerging Markets Bond Index Global (JPM EMBI Global Index), the JP Morgan Government Bond Index—Emerging Markets and the Barclays U.S. High Yield 2% Issuer Capped Index (the “Barclays Index”), for the 1-, 3-, 5- and 10-year periods ended July 31, 2015 and (in the case of comparisons with the JPM EMBI Global Index) the period since inception (February 1994 inception). The directors noted that the Fund was in the 4th quintile of the Performance Group and the Performance Universe for the 1-year period, and in the 1st or 2nd quintile of the Performance Group and the Performance Universe for the 3-, 5- and 10-year periods. The Fund outperformed its composite benchmark in all periods. With respect to the individual indices the Fund lagged the Barclays Index in the 1- and 5-year periods and outperformed it in all other periods. The Fund also outperformed the other two individual indices in all periods. Based on their review and their discussion with the Adviser of the reasons for the Fund’s performance in the 1-year period, the directors concluded that the Fund’s performance over time was satisfactory.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Fund to the Adviser and information prepared by Broadridge concerning advisory fee rates paid by other funds in the same Broadridge category as the Fund at a common asset level. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors noted that, at the Fund’s current size, its contractual effective advisory fee rate
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158 | | • AB HIGH INCOME FUND |
of 45.7 basis points, plus the less than 1 basis point impact of the administrative expense reimbursement in the latest fiscal year, was lower than the Expense Group median.
The directors also considered the Adviser’s fee schedule for non-fund clients pursuing a similar investment style. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and the evaluation from the Fund’s Senior Officer. The directors noted that the institutional fee schedule and the Fund’s fee schedule started at different rates and that the institutional fee schedule had breakpoints at lower asset levels. The application of the institutional fee schedule to the Fund’s net assets would result in a fee rate lower than the rate at the same asset level provided in the Fund’s Advisory Agreement. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional clients. The Adviser also noted that because mutual funds are constantly issuing and redeeming shares, they are more difficult to manage than an institutional account, where the assets tend to be relatively stable. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds such as the Fund, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors also considered the total expense ratio of the Class A shares of the Fund in comparison to the fees and expenses of funds within two comparison groups created by Broadridge: an Expense Group and an Expense Universe. Broadridge described an Expense Group as a representative sample of funds similar to the Fund and an Expense Universe as a broader group than the Expense Group, consisting of all funds in the investment classification/objective with a similar load type as the Fund. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the information included the pro forma expense ratio to reflect a reduction in the 12b-1 fee effective February 1, 2016. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s Broadridge category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view the expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others.
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AB HIGH INCOME FUND • | | | 159 | |
The directors noted that the Fund’s pro forma total expense ratio was lower than the Expense Group and the Expense Universe medians. The directors concluded that the Fund’s pro forma expense ratio was satisfactory.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints and that the net assets of the Fund were in excess of the last breakpoint level in its fee schedule. Accordingly, the Fund’s current effective advisory fee rate reflected a reduction due to the breakpoint and would be further reduced to the extent the net assets of the Fund increase. The directors accepted the Adviser’s recommendation that an additional breakpoint not be added to the fee schedule for the Portfolio for the time being. The directors took into consideration prior presentations by an independent consultant discussing economies of scale in the mutual fund industry and for the AB Funds, and by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale at the May 2015 meetings. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s breakpoint arrangements were acceptable and provide a means for sharing of any economies of scale. The directors informed the Adviser that they would continue to monitor the Portfolio’s assets and its profitability to the Adviser and anticipated revisiting the issue of adding another breakpoint level in the future in the event of substantial additional asset growth.
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160 | | • AB HIGH INCOME FUND |
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
AB FAMILY OF FUNDS
US EQUITY
US Core
Core Opportunities Fund
Select US Equity Portfolio
US Growth
Concentrated Growth Fund
Discovery Growth Fund
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
US Value
Discovery Value Fund
Equity Income Fund
Growth & Income Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
International/Global Core
Global Core Equity Portfolio
Global Equity & Covered Call Strategy Fund
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund*
Tax-Managed International Portfolio
International/Global Growth
International Growth Fund
International/Global Value
Asia ex-Japan Equity Portfolio
International Value Fund
FIXED INCOME
Municipal
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
FIXED INCOME (continued)
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Portfolio
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
Taxable
Bond Inflation Strategy
Global Bond Fund
High Income Fund
High Yield Portfolio
Income Fund
Intermediate Bond Portfolio
Limited Duration High Income Portfolio
Short Duration Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Credit Long/Short Portfolio
Global Real Estate Investment Fund
Long/Short Multi-Manager Fund
Multi-Manager Alternative Strategies Fund
Select US Long/Short Portfolio
Unconstrained Bond Fund
MULTI-ASSET
All Market Income Portfolio
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
MULTI-ASSET (continued)
Target-Date
Multi-Manager Select Retirement Allocation Fund
Multi-Manager Select 2010 Fund
Multi-Manager Select 2015 Fund
Multi-Manager Select 2020 Fund
Multi-Manager Select 2025 Fund
Multi-Manager Select 2030 Fund
Multi-Manager Select 2035 Fund
Multi-Manager Select 2040 Fund
Multi-Manager Select 2045 Fund
Multi-Manager Select 2050 Fund
Multi-Manager Select 2055 Fund
Wealth Strategies
Balanced Wealth Strategy
Conservative Wealth Strategy
Wealth Appreciation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
CLOSED-END FUNDS
AB Multi-Manager Alternative Fund
Alliance California Municipal Income Fund
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Exchange Reserves, which serves as the money market fund exchange vehicle for the AB mutual funds. An investment in Government Exchange Reserves is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
* Prior to November 1, 2016, the Fund was named Global Thematic Growth Fund.
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AB Family of Funds
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![LOGO](https://capedge.com/proxy/N-CSR/0001193125-17-002696/g213702abcorplogo_40.jpg)
AB HIGH INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
800.221.5672
HI-0151-1016 ![LOGO](https://capedge.com/proxy/N-CSR/0001193125-17-002696/g213702g22c48.jpg)
(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant’s code of ethics is filed herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The registrant’s Board of Directors has determined that independent directors Garry L. Moody, William H. Foulk, Jr. and Marshall C. Turner, Jr. qualify as audit committee financial experts.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
(a) - (c) The following table sets forth the aggregate fees billed by the independent registered public accounting firm Ernst & Young LLP, for the Fund’s last two fiscal years for professional services rendered for: (i) the audit of the Fund’s annual financial statements included in the Fund’s annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Fund’s financial statements and are not reported under (i), which include advice and education related to accounting and auditing issues and quarterly press release review (for those Funds which issue press releases), and preferred stock maintenance testing (for those Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax return preparation.
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| | | | | Audit Fees | | | Audit-Related Fees | | | Tax Fees | |
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AB High Income | | | 2015 | | | $ | 156,542 | | | $ | — | | | $ | 41,046 | |
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| | | 2016 | | | $ | 161,146 | | | $ | 327 | | | $ | 30,845 | |
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Fund’s Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Fund by the Fund’s independent registered public accounting firm. The Fund’s Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in the table under Item 4 (a) – (c) are for services pre-approved by the Fund’s Audit Committee.
(g) The following table sets forth the aggregate non-audit services provided to the Fund, the Fund’s Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund:
| | | | | | | | | | | | |
| | | | | All Fees for Non-Audit Services Provided to the Portfolio, the Adviser and Service Affiliates | | | Total Amount of Foregoing Column Pre- approved by the Audit Committee (Portion Comprised of Audit Related Fees) (Portion Comprised of Tax Fees) | |
| | | |
AB High Income | | | 2015 | | | $ | 459,121 | | | $ | 41,046 | |
| | | | | | | | | | $ | — | |
| | | | | | | | | | $ | (41,046 | ) |
| | | |
| | | 2016 | | | $ | 466,991 | | | $ | 31,172 | |
| | | | | | | | | | $ | (327 | ) |
| | | | | | | | | | $ | (30,845 | ) |
(h) The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund’s independent registered public accounting firm to the Adviser and Service Affiliates is compatible with maintaining the auditor’s independence.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the registrant.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to 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, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
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EXHIBIT NO. | | DESCRIPTION OF EXHIBIT |
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12 (a) (1) | | Code of Ethics that is subject to the disclosure of Item 2 hereof |
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12 (b) (1) | | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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12 (b) (2) | | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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12 (c) | | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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(Registrant): AB High Income Fund, Inc. |
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By: | | /s/ Robert M. Keith |
| | Robert M. Keith |
| | President |
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Date: | | December 30, 2016 |
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.
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By: | | /s/ Robert M. Keith |
| | Robert M. Keith |
| | President |
| |
Date: | | December 30, 2016 |
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By: | | /s/ Joseph J. Mantineo |
| | Joseph J. Mantineo |
| | Treasurer and Chief Financial Officer |
| |
Date: | | December 30, 2016 |