NPORT-EX 2 JPMTRBF.htm EDGAR HTML
JPMorgan Total Return Fund
Schedule of Portfolio Investments as of May 31, 2025
(Unaudited) 
THE “UNAUDITED MUTUAL FUNDS HOLDINGS” LIST (“the
List”) IS TO BE USED FOR REPORTING PURPOSES ONLY. IT IS
NOT TO BE REPRODUCED FOR USE AS ADVERTISING OR
SALES LITERATURE WITH THE GENERAL PUBLIC. The list is
submitted for the general information of the shareholders of the Fund.
It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by a prospectus. The list has been
created from the books and records of the Fund. Holdings are
available 60 days after the fund’s fiscal quarter, using a trade date
accounting convention, by contacting the appropriate service center.
The list is subject to change without notice. The list is for
informational purposes only and is not intended as an offer or
solicitation with respect to the purchase or sale of any security.
JPMorgan Asset Management is the marketing name for the asset
management business of J.P. Morgan Chase & Co.
J.P. Morgan Distribution Services, Inc., member FINRA.
© J.P. Morgan Chase & Co., 2025.
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited)
 
INVESTMENTS
PRINCIPAL
AMOUNT
($000)
VALUE
($000)
Corporate Bonds — 5.1%
Aerospace & Defense — 0.0% ^
ICITII 6.00%, 1/31/2033 ‡ (a)
15
12
Banks — 3.2%
BNP Paribas SA (France) (SOFR + 2.07%), 2.22%, 6/9/2026 (a) (b)
500
500
Credit Agricole SA (France) (SOFR + 1.68%), 1.91%, 6/16/2026 (a) (b)
750
749
HSBC Holdings plc (United Kingdom) (SOFR + 1.93%), 2.10%, 6/4/2026 (b)
1,000
1,000
ING Groep NV (Netherlands) (US Treasury Yield Curve Rate T Note Constant Maturity 1 Year + 1.10%), 1.40%,
7/1/2026 (a) (b)
750
748
Societe Generale SA (France) 1.38%, 7/8/2025 (a)
1,000
997
Sumitomo Mitsui Financial Group, Inc. (Japan) 1.47%, 7/8/2025
500
498
 
4,492
Capital Markets — 0.3%
Nasdaq, Inc. 5.65%, 6/28/2025
400
400
Consumer Staples Distribution & Retail — 0.0% ^
Rite Aid Corp.
8.00%, 10/18/2024 ‡
7
—
7.50%, 7/1/2025 ‡ (c)
11
—
8.00%, 11/15/2026 ‡ (c)
13
—
(3-MONTH CME TERM SOFR + 7.00%), 11.32%, 8/30/2031 ‡ (a) (b) (c)
3
—
(d)
Series A, 15.00%, 8/30/2031 ‡ (c)
8
—
Series B, 15.00%, 8/30/2031 ‡ (c)
3
—
 
—
Health Care Equipment & Supplies — 0.2%
Stryker Corp. 1.15%, 6/15/2025
250
250
Insurance — 1.1%
Metropolitan Life Global Funding I 0.95%, 7/2/2025 (a)
750
748
Principal Life Global Funding II 1.25%, 6/23/2025 (a)
750
748
 
1,496
Personal Care Products — 0.0% ^
ESC SANCHEZ 8.88%, 3/15/2025 ‡ (c)
41
—
(d)
Specialized REITs — 0.3%
Crown Castle, Inc. 1.35%, 7/15/2025
500
498
Specialty Retail — 0.0% ^
Escrow Rite Aid 0.00%, 12/31/2049 ‡
2
—
(d)
Total Corporate Bonds
(Cost $7,205)
7,148
Loan Assignments — 0.2% (b) (e)
Specialty Retail — 0.2%
Claire's Stores, Inc., 1st Lien Term Loan B (6-MONTH CME TERM SOFR + 6.50%), 10.73%, 12/18/2026
(Cost $468)
483
307
 
SHARES
(000)
Common Stocks — 0.0% ^
Aerospace & Defense — 0.0% ^
Incora Top Holdco LLC ‡ *
—
1
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited) (continued)
INVESTMENTS 
SHARES
(000)
VALUE
($000)
Common Stocks — continued
Broadline Retail — 0.0% ^
NMG Parent LLC ‡ *
—
11
Distributors — 0.0% ^
Incora Intermediate II LLC ‡ *
1
14
Health Care Equipment & Supplies — 0.0% ^
New Evhc Physical Equity ‡ *
—
—
Pharmaceuticals — 0.0% ^
Mallinckrodt plc (Luxembourg) ‡ *
—
2
Specialty Retail — 0.0% ^
Claire's Stores, Inc. ‡ * (f)
—
—
(d)
NMG, Inc. ‡ *
—
11
Rite Aid ‡ *
—
—
 
11
Total Common Stocks
(Cost $243)
39
Convertible Preferred Stocks — 0.0% ^
Specialty Retail — 0.0% ^
Claire's Stores, Inc.  ‡ * (f)
(Cost $334)
—
—
(d)
 
PRINCIPAL
AMOUNT
($000)
Collateralized Mortgage Obligations — 0.0% ^
Alternative Loan Trust Series 2006-J2, Class A1, 4.94%, 4/25/2036 (g)
—
—
Banc of America Mortgage Trust Series 2007-3, Class 1A1, 6.00%, 9/25/2037
—
—
CHL Mortgage Pass-Through Trust Series 2007-5, Class A6, 4.79%, 5/25/2037 (g)
—
—
GSR Mortgage Loan Trust Series 2006-3F, Class 2A7, 5.75%, 3/25/2036
—
—
HarborView Mortgage Loan Trust Series 2006-9, Class 2A1A, 4.86%, 11/19/2036 (g)
—
—
Residential Asset Securitization Trust Series 2006-R1, Class A2, 4.84%, 1/25/2046 (g)
—
—
Washington Mutual Mortgage Pass-Through Certificates WMALT Trust Series 2005-7, Class 1A2, 4.89%, 9/25/2035 (g)
—
—
Total Collateralized Mortgage Obligations
(Cost $—)
—
 
SHARES
(000)
Short-Term Investments — 94.7%
Investment Companies — 94.3%
JPMorgan Prime Money Market Fund Class IM Shares, 4.38% (h) (i)
(Cost $132,712)
132,694
132,720
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited) (continued)
INVESTMENTS 
PRINCIPAL
AMOUNT
($000)
VALUE
($000)
U.S. Treasury Obligations — 0.4%
U.S. Treasury Bills, 4.23%, 6/26/2025 (j)
(Cost $516)
518
517
Total Short-Term Investments
(Cost $133,228)
133,237
Total Investments — 100.0%
(Cost $141,478)
140,731
Other Assets in Excess of Liabilities — 0.0% ^
1
NET ASSETS — 100.0%
140,732
 
Percentages indicated are based on net assets.
Amounts presented as a dash ("-") represent amounts that round to less than a thousand.
 
Abbreviations
 
CME
Chicago Mercantile Exchange
REIT
Real Estate Investment Trust
SOFR
Secured Overnight Financing Rate
 
^
Amount rounds to less than 0.1% of net assets.
‡
Value determined using significant unobservable inputs.
 
*
Non-income producing security.
 
(a)
Securities exempt from registration under Rule 144A or section 4(a)(2), of the Securities Act of 1933, as amended.
 
(b)
Variable or floating rate security, linked to the referenced benchmark. The interest rate shown is the current rate as of May 31, 2025.
 
(c)
Defaulted security.
 
(d)
Value is zero.
 
(e)
Loan assignments are presented by obligor. Each series or loan tranche underlying each obligor may have varying terms.
 
(f)
Fund is subject to legal or contractual restrictions on the resale of the security.
 
(g)
Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments
on the underlying pool of assets. The interest rate shown is the current rate as of May 31, 2025.
 
(h)
Investment in an affiliated fund, which is registered under the Investment Company Act of 1940, as amended, and is advised by J.P. Morgan
Investment Management Inc.
 
(i)
The rate shown is the current yield as of May 31, 2025.
 
(j)
The rate shown is the effective yield as of May 31, 2025.
 
Over-the-Counter ("OTC") Credit default swap contracts outstanding — buy protection (*) as of May 31, 2025 (amounts in thousands):
 
REFERENCE
OBLIGATION/INDEX
FINANCING
RATE PAID
BY THE FUND
(%)
PAYMENT
FREQUENCY
COUNTERPARTY
MATURITY
DATE
IMPLIED
CREDIT
SPREAD
(%)(a)
NOTIONAL
AMOUNT(b)
UPFRONT
PAYMENTS
(RECEIPTS)
($)(c)
UNREALIZED
APPRECIATION
(DEPRECIATION)
($)
VALUE
($)
ABX.HE.AAA.06-2
0.11
Monthly
Bank of America NA
5/25/2046
0.50
USD60
12
(11
)
1
ABX.HE.AAA.06-2
0.11
Monthly
Bank of America NA
5/25/2046
0.50
USD40
7
(7
)
—(d
)
ABX.HE.AAA.06-2
0.11
Monthly
Barclays Bank plc
5/25/2046
0.50
USD60
18
(17
)
1
CMBX.NA.BBB-.4
5.00
Monthly
Citibank, NA
2/17/2051
N/A
USD180
153
(153
)
—
CMBX.NA.BBB-.4
5.00
Monthly
Citibank, NA
2/17/2051
N/A
USD210
168
(168
)
—
 
 
 
 
 
358
(356
)
2
 
(*)
The Fund, as a buyer of credit protection, is generally obligated to make periodic payments and may also pay or receive an upfront premium
to or from the protection seller, in exchange for the right to receive a contingent payment, upon occurrence of a credit event with respect to
an underlying reference obligation, as defined under the terms of individual swap contracts.
 
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited) (continued)
(a)
Implied credit spreads are an indication of the seller's performance risk, related to the likelihood of a credit event occurring that would require a seller to
make payment to a buyer. Implied credit spreads are used to determine the value of swap contracts and reflect the cost of buying/selling protection, which
may include upfront payments made to enter into the contract. Therefore, higher spreads would indicate a greater likelihood that a seller will be obligated
to perform (i.e. make payment) under the swap contract. Increasing values, in absolute terms and relative to notional amounts, are also indicative of
greater performance risk. Implied credit spreads for credit default swaps on credit indices are linked to the weighted average spread across the underlying
reference obligations included in a particular index.
(b)
The notional amount is the maximum amount that a seller of credit protection would be obligated to pay and a buyer of credit protection would receive,
upon occurrence of a credit event.
(c)
Upfront payments and receipts generally represent premiums paid or received at the initiation of the agreement to compensate the differences between
the stated terms of the swap agreement and current market conditions (credit spreads, interest rates and other relevant factors).
(d)
Amount rounds to less than one thousand.
 
 
 
 
 
 
 
 
 
Abbreviations
 
ABX
Asset-Backed Securities Index
CMBX
Commercial Mortgage-Backed Securities Index
USD
United States Dollar
Centrally Cleared Credit default swap contracts outstanding — sell protection(**) as of May 31, 2025 (amounts in thousands):
 
REFERENCE
OBLIGATION/INDEX
FINANCING
RATE PAID
BY THE FUND
(%)
PAYMENT
FREQUENCY
MATURITY
DATE
IMPLIED
CREDIT
SPREAD
(%)(a)
NOTIONAL
AMOUNT(b)
UPFRONT
PAYMENTS
(RECEIPTS)
($)(c)
UNREALIZED
APPRECIATION
(DEPRECIATION)
($)
VALUE
($)
Federative Republic of Brazil, 3.75%,
09/12/2031
1.00
Quarterly
6/20/2025
0.42
USD390
—
(d)
1
1
 
(**)
The Fund, as a seller of credit protection, receives periodic payments and may also receive or pay an upfront premium from or to the protection buyer,
and is obligated to make a contingent payment, upon occurrence of a credit event with respect to an underlying reference obligation, as defined under the
terms of individual swap contracts.
(a)
Implied credit spreads are an indication of the seller's performance risk, related to the likelihood of a credit event occurring that would require a seller to
make payment to a buyer. Implied credit spreads are used to determine the value of swap contracts and reflect the cost of buying/selling protection, which
may include upfront payments made to enter into the contract. Therefore, higher spreads would indicate a greater likelihood that a seller will be obligated
to perform (i.e. make payment) under the swap contract. Increasing values, in absolute terms and relative to notional amounts, are also indicative of
greater performance risk. Implied credit spreads for credit default swaps on credit indices are linked to the weighted average spread across the underlying
reference obligations included in a particular index.
(b)
The notional amount is the maximum amount that a seller of credit protection would be obligated to pay and a buyer of credit protection would receive,
upon occurrence of a credit event.
(c)
Upfront payments and receipts generally represent premiums paid or received at the initiation of the agreement to compensate the differences between
the stated terms of the swap agreement and current market conditions (credit spreads, interest rates and other relevant factors).
 
(d)
Amount rounds to less than one thousand.
 
Abbreviations
 
USD
United States Dollar
Summary of total OTC swap contracts outstanding as of May 31, 2025 (amounts in thousands):
 
 
NET UPFRONT
PAYMENTS
(RECEIPTS)
($)
VALUE
($)
Assets
OTC Credit default swap contracts outstanding - buy protection
358
2
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited) (continued)
(Dollar values in thousands)
A. Valuation of Investments— Investments are valued in accordance with U.S. generally accepted accounting principles (“GAAP”) and the Fund's valuation policies set forth by, and under the supervision and responsibility of, the Board of Trustees of the Trust (the “Board”), which established the following approach to valuation, as described more fully below: (i) investments for which market quotations are readily available shall be valued at their market value and (ii) all other investments for which market quotations are not readily available shall be valued at their fair value as determined in good faith by the Board.
Under Section 2(a)(41) of the Investment Company Act of 1940, the Board is required to determine fair value for securities that do not have readily available market quotations. Under Securities and Exchange Commission Rule 2a-5 (Good Faith Determinations of Fair Value), the Board may designate the performance of these fair valuation determinations to a valuation designee. The Board has designated the Adviser as the “Valuation Designee” to perform fair valuation determinations for the Fund on behalf of the Board subject to appropriate oversight by the Board. The Adviser, as Valuation Designee, leverages the J.P. Morgan Asset Management Americas Valuation Committee (“AVC”) to help oversee and carry out the policies for the valuation of investments held in the Fund. The Adviser, as Valuation Designee, remains responsible for the valuation determinations.
This oversight by the AVC includes monitoring the appropriateness of fair values based on results of ongoing valuation oversight including, but not limited to, consideration of macro or security specific events, market events, and pricing vendor and broker due diligence. The Administrator is responsible for discussing and assessing the potential impacts to the fair values on an ongoing basis, and, at least on a quarterly basis, with the AVC and the Board.
A market-based approach is primarily used to value the Fund's investments. Investments for which market quotations are not readily available are fair valued using prices supplied by approved affiliated and/or unaffiliated pricing vendors or third party broker-dealers (collectively referred to as “Pricing Services”), or may be internally fair valued using methods set forth by the valuation policies approved by the Board. This may include the use of related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information for the investment. An income-based valuation approach may be used in which the anticipated future cash flows of the investment are discounted to calculate the fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry. It is possible that the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and such differences could be material.
Fixed income instruments are valued based on prices received from Pricing Services. The Pricing Services use multiple valuation techniques to determine the valuation of fixed income instruments. In instances where sufficient market activity exists, the Pricing Services may utilize a market-based approach through which trades or quotes from market makers are used to determine the valuation of these instruments. In instances where sufficient market activity may not exist, the Pricing Services also utilize proprietary valuation models which may consider market transactions in comparable securities and the various relationships between securities in determining fair value and/or market characteristics in order to estimate the relevant cash flows, which are then discounted to calculate the fair values.
Equities and other exchange-traded instruments are valued at the last sale price or official market closing price on the primary exchange on which the instrument is traded before the net asset values (“NAV”) of the Fund are calculated on a valuation date. Certain foreign equity instruments, as well as certain derivatives with foreign equity reference obligations, are valued by applying international fair value factors provided by approved Pricing Services. The factors seek to adjust the local closing price for movements of local markets post-closing, but prior to the time the NAVs are calculated.
Investments in open-end investment companies (“Underlying Funds”) are valued at each Underlying Fund’s NAV per share as of the report date.
Swaps are valued utilizing market quotations from approved Pricing Services.
Valuations reflected in this report are as of the report date. As a result, changes in valuation due to market events and/or issuer-related events after the report date and prior to issuance of the report are not reflected herein.
The various inputs that are used in determining the valuation of the Fund's investments are summarized into the three broad levels listed below.
•
Level 1 — Unadjusted inputs using quoted prices in active markets for identical investments.
•
Level 2 — Other significant observable inputs including, but not limited to, quoted prices for similar investments, inputs other than quoted prices that are observable for investments (such as interest rates, prepayment speeds, credit risk, etc.) or other market corroborated inputs.
•
Level 3 — Significant inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund's assumptions in determining the fair value of investments).
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited) (continued)
(Dollar values in thousands)
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input, both individually and in the aggregate, that is significant to the fair value measurement. The inputs or methodology used for valuing instruments are not necessarily an indication of the risk associated with investing in those instruments.
The following table represents each valuation input as presented on the Schedule of Portfolio Investments: 
 
 
 
 
 
 
Level 1
Quoted prices
Level 2
Other significant
observable inputs
Level 3
Significant
unobservable inputs
Total
Investments in Securities
Collateralized Mortgage Obligations
$—
$—
(a)
$—
$—
(a)
Common Stocks
—
—
39
39
Convertible Preferred Stocks
—
—
—(b
)
—(b
)
Corporate Bonds
Aerospace & Defense
—
—
12
12
Banks
—
4,492
—
4,492
Capital Markets
—
400
—
400
Consumer Staples Distribution & Retail
—
—
—(b
)
—(b
)
Health Care Equipment & Supplies
—
250
—
250
Insurance
—
1,496
—
1,496
Personal Care Products
—
—
—(b
)
—(b
)
Specialized REITs
—
498
—
498
Specialty Retail
—
—
—(b
)
—(b
)
Total Corporate Bonds
—
7,136
12
7,148
Loan Assignments
—
307
—
307
Short-Term Investments
Investment Companies
132,720
—
—
132,720
U.S. Treasury Obligations
—
517
—
517
Total Short-Term Investments
132,720
517
—
133,237
Total Investments in Securities
$132,720
$7,960
$51
$140,731
Appreciation in Other Financial Instruments
Swaps
$—
$1
$—
$1
Depreciation in Other Financial Instruments
Swaps
$—
$(356
)
$—
$(356
)
Total Net Appreciation/ Depreciation in Other
Financial Instruments
$—
$(355
)
$—
$(355
)
 
 
(a)
Amount rounds to less than one thousand.
(b)
Value is zero.
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited) (continued)
(Dollar values in thousands)
As of May 31, 2025, the Fund held restricted securities, other than securities sold to the Funds under Rule 144A and/or Regulation S under the Securities Act, as follows: 
Security
Acquisition
Date
Cost
Market
Value
Percentage
of Fund's
Net Assets
Claire's Stores, Inc. - Common Stocks
11/28/2018
$210
$—
(a)
0.0
%
Claire's Stores, Inc. - Convertible Preferred Stocks
10/3/2018
334
—
(a)
0.0
%
 
$544
$—
(a)
 
(a)
Value is zero.
B. Investment Transactions with Affiliates— The Fund invested in an Underlying Fund advised by the Adviser. An issuer which is under common control with the Fund may be considered an affiliate. The Fund assumes the issuer listed in the table below to be an affiliated issuer. The Underlying Fund's distributions may be reinvested into such Underlying Fund. Reinvestment amounts are included in the purchases at cost amounts in the table below. 
 
For the period ended May 31, 2025
Security Description
Value at
February 28,
2025
Purchases at
Cost
Proceeds from
Sales
Net Realized
Gain (Loss)
Change in
Unrealized
Appreciation/
(Depreciation)
Value at
May 31,
2025
Shares at
May 31,
2025
Dividend
Income
Capital Gain
Distributions
JPMorgan Prime Money Market Fund Class IM
Shares, 4.38%  (a) (b)
$46,353
$185,240
$98,871
$(2
)
$—
(c)
$132,720
132,694
$766
$—
 
 
(a)
Investment in an affiliated fund, which is registered under the Investment Company Act of 1940, as amended, and is advised by J.P. Morgan
Investment Management Inc.
(b)
The rate shown is the current yield as of May 31, 2025.
(c)
Amount rounds to less than one thousand.
C. Derivatives— The Fund used derivative instruments including options, futures contracts, forward foreign currency exchange contracts and swaps, in connection with its investment strategy. Derivative instruments may be used as substitutes for securities in which the Fund can invest, to hedge portfolio investments or to generate income or gain to the Fund. Derivatives may also be used to manage duration, sector and yield curve exposures and credit and spread volatility.
The Fund may be subject to various risks from the use of derivatives, including the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to derivatives counterparties’ failure to perform under contract terms; liquidity risk related to the potential lack of a liquid market for these contracts allowing a Fund to close out its position(s); and documentation risk relating to disagreement over contract terms. Investing in certain derivatives also results in a form of leverage and as such, the Fund's risk of loss associated with these instruments may exceed their value.
The Fund is party to various derivative contracts governed by International Swaps and Derivatives Association master agreements (“ISDA agreements”). The Fund's ISDA agreements, which are separately negotiated with each dealer counterparty, may contain provisions allowing, absent other considerations, a counterparty to exercise rights, to the extent not otherwise waived, against the Fund in the event the Fund's net assets decline over time by a pre-determined percentage or fall below a pre-determined floor. The ISDA agreements may also contain provisions allowing, absent other conditions, the Fund to exercise rights, to the extent not otherwise waived, against a counterparty (e.g., decline in a counterparty’s credit rating below a specified level). Such rights for both a counterparty and the Fund often include the ability to terminate (i.e., close out) open contracts at prices which may favor a counterparty, which could have an adverse effect on the Fund. The ISDA agreements give the Fund and a counterparty the right, upon an event of default, to close out all transactions traded under such agreements and to net amounts owed or due across all transactions and offset such net payable or receivable against collateral posted to a segregated account by one party for the benefit of the other.
Counterparty credit risk may be mitigated to the extent a counterparty posts additional collateral for mark to market gains to the Fund.
(1). Swaps — The Fund engaged in various swap transactions to manage credit, interest rate (e.g., duration, yield curve), currency, inflation and total return risks within its portfolio. The Fund also used swaps as alternatives to direct investments. Swap transactions are contracts negotiated over-the-counter (“OTC swaps”) between the Fund and a counterparty or are centrally cleared (“centrally cleared swaps”) through a central clearinghouse managed by a Futures Commission Merchant (“FCM”) that exchange investment cash flows, assets, foreign currencies or market-linked returns at specified, future intervals.
JPMorgan Total Return Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF May 31, 2025 (Unaudited) (continued)
(Dollar values in thousands)
Upfront payments made and/or received by the Fund are recorded as assets or liabilities, respectively, and amortized over the term of the swap. The value of an OTC swap agreement is recorded at the beginning of the measurement period. Upon entering into a centrally cleared swap, the Fund is required to deposit with the FCM cash or securities, which is referred to as initial margin deposit. Securities deposited as initial margin are designated on the Schedule of Investments, while cash deposited is considered restricted. The change in the value of swaps, including accruals of periodic amounts of interest to be paid or received on swaps, is reported as change in net unrealized appreciation/depreciation on swaps. A realized gain or loss is recorded upon payment or receipt of a periodic payment or payment made upon termination of a swap agreement.
The Fund may be required to post or receive collateral based on the net value of the Fund's outstanding OTC swap contracts with the counterparty in the form of cash or securities. Daily movement of cash collateral is subject to minimum threshold amounts. Collateral posted by the Fund is held in a segregated account at the Fund's custodian bank.
The central clearinghouse acts as the counterparty to each centrally cleared swap transaction; therefore credit risk is limited to the failure of the clearinghouse.
The Fund's swap contracts (excluding centrally cleared swaps) are subject to master netting arrangements.
Credit Default Swaps
The Fund entered into credit default swaps to simulate long and/or short bond positions or to take an active long and/or short position with respect to the likelihood of a default or credit event by the issuer of the underlying reference obligation.
The underlying reference obligation may be a single issuer of corporate or sovereign debt, a basket of issuers or a credit index. A credit index is a list of credit instruments or exposures that reference a fixed number of obligors with shared characteristics that represents some part of the credit market as a whole. Index credit default swaps have standardized terms including a fixed spread and standard maturity dates. The composition of the obligations within a particular index changes periodically.
Credit default swaps involve one party, the protection buyer, making a stream of payments to another party, the protection seller, in exchange for the right to receive a contingent payment if there is a credit event related to the underlying reference obligation. In the event that the reference obligation matures prior to the termination date of the contract, a similar security will be substituted for the duration of the contract term. Credit events are defined under individual swap agreements and generally include bankruptcy, failure to pay, restructuring, repudiation/moratorium, obligation acceleration and obligation default.
If a credit event occurs, the Fund, as a protection seller, would be obligated to make a payment, which may be either: (i) a net cash settlement equal to the notional amount of the swap less the auction value of the reference obligation or (ii) the notional amount of the swap in exchange for the delivery of the reference obligation. Selling protection effectively adds leverage to the Fund's portfolio up to the notional amount of swap agreements. The notional amount represents the maximum potential liability under a contract. Potential liabilities under these contracts may be reduced by: the auction rates of the underlying reference obligations; upfront payments received at the inception of a swap; and net amounts received from credit default swaps purchased with the identical reference obligation.