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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Guggenheim Strategic Opportunities Fund | NYSE:GOF | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 14.73 | 14.74 | 14.68 | 14.69 | 487,336 | 22:55:00 |
PROSPECTUS SUPPLEMENT
(to Prospectus dated October 2, 2020) |
|
PROSPECTUS SUPPLEMENT SUMMARY
|
1
|
SUMMARY OF FUND EXPENSES
|
2
|
CAPITALIZATION
|
4
|
USE OF PROCEEDS
|
5
|
PLAN OF DISTRIBUTION
|
5
|
LEGAL MATTERS
|
6
|
ADDITIONAL INFORMATION
|
6
|
Shareholder Transaction Expenses
|
|
Sales load (as a percentage of offering price)
|
2.00%(1)
|
Offering expenses borne by the Fund (as a percentage of offering price)
|
0.60%(2)
|
Automatic Dividend Reinvestment Plan fees(3)
|
None
|
|
Percentage of Average Net Assets
|
Annual Expenses
|
Attributable to Common Shares(4)
|
Management fees(5)
|
1.09%
|
Interest expense(6)
|
0.19%
|
Acquired fund fees and expenses(7)
|
0.07%
|
Other expenses(8)
|
0.14%
|
Total annual expenses(9)
|
1.49%
|
(1)
|
Represents the estimated commission with respect to the Common Shares being sold in this offering. Cantor Fitzgerald will be entitled to compensation of up to 2.00% of the gross proceeds of the sale of any Common Shares under the Sales
Agreement, with the exact amount of such compensation to be mutually agreed upon
|
by the Fund and Cantor Fitzgerald from time to time. The Fund has assumed that Cantor Fitzgerald will receive a commission of 2.00% of the gross sale price of the Common Shares sold in this offering. | |
(2)
|
The Investment Adviser has incurred on behalf of the Fund all costs associated with the Fund’s registration statement and any offerings pursuant to such registration statement. The Fund has agreed, in connection with offerings under this
registration statement, to reimburse the Investment Adviser for offering expenses incurred by the Investment Adviser on the Fund’s behalf in an amount up to the lesser of the Fund’s actual offering costs or 0.60% of the total offering price
of the Common Shares sold in such offerings. Amounts in excess of 0.60% of the total offering price of shares sold pursuant to this registration statement will not be subject to recoupment from the Fund.
|
(3)
|
You will pay brokerage charges if you direct the Plan Agent to sell your Common Shares held in a dividend reinvestment account. See “Dividend Reinvestment Plan” in the accompanying Prospectus.
|
(4)
|
Based upon average net assets applicable to Common Shares during the period ended May 31, 2020 after giving effect to the anticipated net proceeds of the Common Shares offered by this Prospectus Supplement based on an assumed price per
share of $20.36 (the last reported sale price of the Fund’s Common Shares on the NYSE as of January 25, 2021). The price per share of any sale of Common Shares may be greater or less than the price assumed herein, depending on the market
price of the Common Shares at the time of any sale. There is no guarantee that there will be any sales of Common Shares pursuant to this Prospectus Supplement. The number of Common Shares actually sold pursuant to this Prospectus Supplement
may be less than as assumed herein.
|
(5)
|
The Fund pays an investment advisory fee to the Investment Adviser in an annual amount equal to 1.00% of the Fund’s average daily Managed Assets. Common Shareholders bear the portion of the
investment advisory fee attributable to the assets purchased with the proceeds of borrowing or the issuance of commercial paper or other forms of debt (“Borrowings”) or reverse
repurchase agreements, dollar rolls or similar transactions or through a combination of the foregoing (collectively “Financial Leverage”), which means that Common Shareholders effectively bear the entire advisory fee. The fee shown above is
based upon outstanding Financial Leverage of 8.7% of the Fund’s Managed Assets. If Financial Leverage of more than 8.7% of the Fund’s Managed Assets is used, the management fees shown would be higher.
|
(6)
|
Includes interest payments on borrowed funds and interest expense on reverse repurchase agreements. Interest payments on borrowed funds is based upon the Fund’s outstanding Borrowings as of May 31, 2020, which included Borrowings under the
Fund’s committed facility agreement in an amount equal to 2.7% of the Fund’s Managed Assets, at an average interest rate of 1.80%. Interest expenses on reverse repurchase agreements is based on the Fund’s outstanding reverse repurchase
agreements as of May 31, 2020, which included leverage in the form of reverse repurchase agreements in an amount equal to 6.0% of the Fund’s Managed Assets, at a weighted average interest rate cost to the Fund of 0.72%. The actual amount of
interest payments and expenses by the Fund will vary over time in accordance with the amount of Borrowings and reverse repurchase agreements and variations in market interest rates.
|
(7)
|
Acquired Fund Fees and Expenses are based on estimated amounts for the current fiscal year, reflecting the fees and expenses borne by the Fund as an investor in other investment companies during the
most recently completed fiscal year and the expected investment of the proceeds of this offering.
|
(8)
|
Other expenses are estimated based upon those incurred during the fiscal period ended May 31, 2020.
|
(9)
|
The Total Annual Fund Operating Expenses in this fee table may not correlate to the expense ratios in the Fund’s financial highlights and financial statements because the financial highlights and financial statements reflect only the
operating expenses of the Fund and do not include Acquired Fund Fees and Expenses, which are fees and expenses incurred indirectly by the Fund through its investments in certain underlying investment companies.
|
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
Total Expenses Incurred
|
$41
|
$72
|
$105
|
$199
|
*
|
The Example should not be considered a representation of future expenses or returns. Actual expenses may be higher or lower than those assumed. Moreover, the Fund’s actual
rate of return may be higher or lower than the hypothetical 5% return shown in the Example. The Example assumes that all dividends and distributions are reinvested at net asset value.
|
(i)
|
on an actual basis;
|
(ii)
|
on an as adjusted basis, as of January 25, 2021, to reflect the issuance of an aggregate of 353,779 Common Shares pursuant to the Fund’s Automatic Dividend Reinvestment Plan, and the
application of the net proceeds from such issuances of Common Shares; and the issuance and sale of 4,647,112 Common Shares issued and sold after May 31, 2020, but prior to the date of this Prospectus Supplement (less the commission paid and
offering expenses payable by the Fund in connection with the issuance and sale of such Common Shares); and an increase in outstanding Reverse Repurchase Agreements of $249,825,766 and an
increase in Borrowings of $16,200,690; and
|
(iii)
|
on an as further adjusted basis to reflect the assumed sale of 8,133,775 Common Shares at a price of $20.36 per share (the last reported sale price for the Fund’s Common Shares on the NYSE as of
January 25 , 2021), in an offering under this Prospectus Supplement and the accompanying Prospectus less the assumed commission of $3,312,073 (representing an estimated commission paid to Cantor Fitzgerald of 2.00% of the gross proceeds of
the sale of Common Shares effected by Cantor Fitzgerald in this offering) and estimated offering expenses payable by the Fund of $993,622.
|
|
|
|
|
|
Actual
|
As Adjusted
|
As Further Adjusted
|
|
(audited)
|
(unaudited)
|
(unaudited)
|
Short-Term Debt:
|
|||
Reverse Repurchase Agreements and Borrowings
|
$61,745,822
|
$327,772,278
|
$327,772,278
|
Common Shareholder’s Equity:
|
|
|
|
Common shares of beneficial interest, par value $0.01 per share; unlimited shares authorized, 42,426,020 shares issued and outstanding (actual), 47,426,911 shares issued and outstanding (as adjusted), and 55,560,686 shares issued and
outstanding (as further adjusted)
|
|
|
|
$424,260
|
$474,269
|
$555,607
|
|
Additional paid-in capital
|
749,269,831
|
838,550,870
|
999,767,496
|
Net unrealized appreciation on investments
|
--
|
--
|
|
Accumulated net realized gain on investments
|
--
|
--
|
|
Total distributable earnings (loss)
|
(100,802,020)
|
(100,802,020)
|
(100,802,020)
|
Net assets
|
$648,892,071
|
$738,223,119
|
$899,521,083
|
Page
|
|
Prospectus Summary
|
1
|
Summary of Fund Expenses
|
40
|
Financial Highlights
|
42
|
Senior Securities and Other Financial Leverage
|
44
|
The Fund
|
45
|
Use of Proceeds
|
45
|
Market and Net Asset Value Information
|
45
|
Investment Objective and Policies
|
46
|
The Fund’s Investments
|
48
|
Use of Financial Leverage
|
60
|
Risks
|
64
|
Management of the Fund
|
95
|
Net Asset Value
|
97
|
Distributions
|
100
|
Dividend Reinvestment Plan
|
101
|
Description of Capital Structure
|
102
|
Anti-Takeover and Other Provisions in the Fund’s Governing Documents
|
103
|
Closed-End Fund Structure
|
104
|
Repurchase of Common Shares; Conversion to Open-End Fund
|
105
|
U.S. Federal Income Tax Considerations
|
105
|
Plan of Distribution
|
109
|
Custodian, Administrator, Transfer Agent and Dividend Disbursing Agent
|
111
|
Legal Matters
|
111
|
Independent Registered Public Accounting Firm
|
111
|
Additional Information
|
111
|
Privacy Principles of the Fund
|
111
|
Incorporation By Reference
|
112
|
The Fund
|
Guggenheim Strategic Opportunities Fund (the “Fund”) is a diversified, closed-end management investment company that commenced operations on July 26, 2007. The Fund’s objective is to maximize total return through a combination of
current income and capital appreciation.
|
The Fund’s common shares of beneficial interest, par value $0.01 per share, are called “Common Shares” and the holders of Common Shares are called “Common Shareholders” throughout this Prospectus.
|
|
Guggenheim Funds Investment Advisors, LLC (the “Investment Adviser”) serves as the Fund’s investment adviser and is responsible for the management of the Fund. Guggenheim Partners Investment Management, LLC (the “Sub-Adviser”) is
responsible for the management of the Fund’s portfolio of securities. Each of the Investment Adviser and the Sub-Adviser are wholly-owned subsidiaries of Guggenheim Partners, LLC (“Guggenheim Partners”).
|
|
The Offering
|
The Fund may offer, from time to time, up to $350,000,000 aggregate initial offering price of Common Shares, on terms to be determined at the time of the offering. The Fund will offer Common Shares at prices and on terms to be set
forth in one or more supplements to this Prospectus (each a “Prospectus Supplement”). As of September 10, 2020, the Fund had sold 6,986,379 Common Shares in an at-the-market offering at an aggregate offering price of $126,435,045. As a
result, up to $223,564,955 aggregate offering price of Common Shares remained available for subsequent offerings under this Prospectus.
|
The Fund may offer Common Shares (1) directly to one or more purchasers, (2) through agents that the Fund may designate from time to time, or (3) to or through underwriters or dealers. The Prospectus Supplement relating to a
particular offering will identify any agents or underwriters involved in the sale of Common Shares, and will set forth any applicable purchase price, fee, commission or discount arrangement between the Fund and agents or underwriters or
among underwriters or the basis upon which such amount may be calculated. The Fund may not sell Common Shares through agents, underwriters or dealers without delivery of this Prospectus and a Prospectus Supplement describing the method
and terms of the offering of Common Shares. See “Plan of Distribution.”
|
|
Use of Proceeds
|
Unless otherwise specified in a Prospectus Supplement, the Fund intends to invest the net proceeds of an offering of Common Shares in accordance with its investment objective and policies as stated herein. It is currently anticipated
that the Fund will be able to invest substantially all of the net proceeds of an offering of Common Shares in accordance with its investment objective and policies within three months after the completion of such offering. Pending such
investment, it is anticipated that the proceeds will be invested in U.S. government securities or high quality, short-term money market securities. The Fund may also use the proceeds for working capital purposes, including the payment
of distributions, interest and operating expenses, although the Fund currently has no intent to issue Common Shares primarily for this purpose.
|
Investment Objective
|
The Fund’s investment objective is to maximize total return through a combination of current income and capital appreciation. The Fund cannot ensure investors that it will achieve its investment objective. The Fund’s investment
objective is considered fundamental and may not be changed without the approval of Common Shareholders. See “Investment Objective and Policies—Investment Philosophy and Investment Process.”
|
Investment Philosophy Process
|
The Fund will pursue a relative value-based investment philosophy, which utilizes quantitative and qualitative analysis to seek to identify securities or spreads between securities that deviate from their perceived fair value and/or
historical norms. The Sub-Adviser seeks to combine a credit managed fixed income portfolio with access to a diversified pool of alternative investments and equity strategies. The Fund’s investment philosophy is predicated upon the
belief that thorough research and independent thought are rewarded with performance that has the potential to outperform benchmark indexes with both lower volatility and lower correlation of returns as compared to such benchmark
indexes.
|
The Sub-Adviser’s process for determining whether to buy a security is a collaborative effort between various groups including: (i) economic research, which focus on key economic themes and trends, regional and country-specific
analysis, and assessments of event-risk and policy impacts on asset prices, (ii) the Portfolio Construction Group, which utilize proprietary portfolio construction and risk modeling tools to determine allocation of assets among a
variety of sectors, (iii) its Sector Specialists, who are responsible for identifying investment opportunities in particular securities within these sectors, including the structuring of certain securities directly with the issuers or
with investment banks and dealers involved in the origination of such securities, and (iv) portfolio managers, who determine which securities best fit the Fund based on the Fund’s investment objective and top-down sector allocations. In
managing the Fund, the Sub- Adviser uses a process for selecting securities for purchase and sale that is based on intensive credit research and involves extensive due diligence on each issuer, region and sector. The Sub-Adviser also
considers macroeconomic outlook and geopolitical issues.
|
|
Investment Portfolio
|
The Fund will seek to achieve its investment objective by investing in:
|
Income Securities. The Fund may invest in a wide range of fixed- income and other debt and senior equity securities (“Income Securities”) selected from a variety of sectors and credit
qualities. The Fund may invest in Income Securities of any credit quality, including, without limitation, Income Securities rated below-investment grade (commonly referred to as “high-yield” or “junk” bonds), which are considered
speculative with respect to the issuer’s capacity to pay interest and repay principal. The sectors and types of Income Securities in which the Fund may invest, include, but are not limited to:
|
|
• Corporate bonds;
|
|
• Loans and loan participations (including senior secured floating rate loans, “second lien”
secured floating rate loans, and other types of secured and unsecured loans with fixed and variable interest rates) (collectively, “Loans”);
|
|
• Structured finance investments (including residential and commercial mortgage-related
securities, asset- backed securities, collateralized debt obligations and risk-linked securities);
|
|
• U.S. government and agency securities;
|
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• Mezzanine and preferred securities; and
|
|
• Convertible securities.
|
|
Common Equity Securities and Covered Call Option Strategy. The Fund may invest in common stocks, limited liability company interests, trust certificates and other equity investments (“Common
Equity Securities”) that the Sub-Adviser believes offer attractive
|
yield and/or capital appreciation potential. As part of its Common Equity Securities strategy, the Fund currently intends to employ a strategy of writing (selling) covered call options and may, from time to time, buy or sell put options on individual Common Equity Securities and, to a lesser extent, on indices of securities and sectors of securities. This covered call option strategy is intended to generate current gains from option premiums as a means to enhance distributions payable to the Fund’s Common Shareholders. | |
Structured Finance Investments. The Fund may invest in structured finance investments, which are Income Securities and Common Equity Securities typically issued by special purpose vehicles
that hold income-producing securities (e.g., mortgage loans, consumer debt payment obligations and other receivables) and other financial assets. Structured finance investments are tailored, or packaged, to meet certain financial goals
of investors. Typically, these investments provide investors with capital protection, income generation and/or the opportunity to generate capital growth. The Sub-Adviser believes that structured finance investments provide attractive
risk-adjusted returns, frequent sector rotation opportunities and prospects for adding value through security selection. Structured finance investments include:
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|
Mortgage-Related Securities. Mortgage-related securities are a form of derivative collateralized by pools of commercial or residential mortgages. Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These securities may include complex instruments such as collateralized mortgage obligations, real estate investment trusts (“REITs”) (including debt and preferred
stock issued by REITs), and other real estate-related securities. The mortgage- related securities in which the Fund may invest include those with fixed, floating or variable interest rates, those with interest rates that change based
on multiples of changes in a specified index of interest rates, and those with interest rates that change inversely to changes in interest rates, as well as those that do not bear interest. The Fund may invest in residential and
commercial mortgage-related securities issued by governmental entities and private issuers, including subordinated mortgage-related securities. The underlying assets of certain mortgage-related securities may be subject to prepayments,
which shorten the weighted average maturity and may lower the return of such securities.
|
|
Asset-Backed Securities. Asset-backed securities (“ABS”) are a form of structured debt obligation. ABS are payment claims that are securitized in the form of negotiable paper that is issued by a financing company (generally
called a special purpose vehicle). Collateral assets brought into a pool according to specific diversification rules. A special purpose vehicle is founded for the purpose of securitizing these payment claims and the assets of the
special purpose vehicle are the diversified pool of collateral assets. The special purpose vehicle issues marketable securities which are intended to represent a lower level or risk than an underlying collateral asset individually, due
to the diversification in the pool. The redemption of the securities issued by the special purpose vehicle takes place out of the cash flow generated by the collected assets. A special purpose vehicle may issue multiple securities with
different priorities to the cash flows generated and the collateral assets. The collateral for ABS may include home equity loans, automobile and credit card receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Fund may invest in these and other types of ABS that may be developed in the future. There is the possibility that recoveries on the underlying collateral may not, in some
cases, be available to support payments on these securities.
|
|
Collateralized Debt Obligations. A collateralized debt obligation (“CDO”) is an asset-backed security whose underlying collateral is typically a portfolio of bonds, bank loans, other structured finance securities and/or
synthetic instruments. Where the underlying collateral is a portfolio of bonds, a CDO is referred to as a collateralized bond obligation (“CBO”). Where the underlying collateral is a portfolio of bank loans, a CDO is referred
|
to as a collateralized loan obligation (“CLO”). Investors in CLOs bear the credit risk of the underlying collateral. Multiple tranches of securities are issued by the CLO, offering investors various maturity and credit risk characteristics. Tranches are categorized as senior, mezzanine, and subordinated/equity, according to their degree of risk. If there are defaults or the CLO’s collateral otherwise underperforms, scheduled payments to senior tranches take precedence over those of mezzanine tranches, and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. This prioritization of the cash flows from a pool of securities among the several tranches of the CLO is a key feature of the CLO structure. If there are funds remaining after each tranche of debt receives its contractual interest rate and the CLO meets or exceeds required collateral coverage levels (or other similar covenants), the remaining funds may be paid to the subordinated (or residual) tranche (often referred to as the “equity” tranche). CLOs are subject to the same risk of prepayment described with respect to certain mortgage-related and asset-backed securities. | |
The Fund may invest in senior, rated tranches as well as mezzanine and subordinated tranches of CLOs. Investment in the subordinated tranche is subject to special risks. The subordinated tranche does not receive ratings and is
considered the riskiest portion of the capital structure of a CLO because it bears the bulk of defaults from the loans in the CLO and serves to protect the other, more senior tranches from default in all but the most severe
circumstances.
|
|
Risk-Linked Securities. Risk-linked securities (“RLS”) are a form of derivative issued by insurance companies and insurance-related special purpose vehicles that apply securitization techniques to catastrophic property and
casualty damages. RLS are typically debt obligations for which the return of principal and the payment of interest are contingent on the non-occurrence of a pre-defined “trigger event.” Depending on the specific terms and structure of
the RLS, this trigger could be the result of a hurricane, earthquake or some other catastrophic event.
|
|
Real Property Asset Companies. The Fund may invest in Income Securities and Common Equity Securities issued by companies that own, produce, refine, process, transport and market “real
property assets,” such as real estate and the natural resources upon or within real estate (“Real Property Asset Companies”).
|
|
Personal Property Asset Companies. The Fund may invest in Income Securities and Common Equity Securities issued by companies that seek to profit primarily from the ownership, rental, leasing,
financing or disposition of personal (as opposed to real) property assets (“Personal Property Asset Companies”). Personal (as opposed to real) property includes any tangible, movable property or asset. The Fund will typically seek to
invest in Income Securities and Common Equity Securities of Personal Property Asset Companies the investment performance of which is not expected to be highly correlated with traditional market indexes because the personal property
asset held by such company is non-correlated with traditional debt or equity markets. Such personal property assets include special situation transportation assets (e.g., railcars, airplanes and ships) and collectibles (e.g., antiques,
wine and fine art).
|
|
Private Securities. The Fund may invest in privately issued Income Securities and Common Equity Securities of both public and private companies (“Private Securities”). Private Securities have
additional risk considerations than comparable public securities, including availability of financial information about the issuer and valuation and liquidity issues.
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|
Investment Funds. As an alternative to holding investments directly, the Fund may also obtain investment exposure to Income Securities and Common Equity Securities by investing in other
investment companies, including registered investment companies, private investment funds and/or other pooled investment vehicles (collectively, “Investment Funds”). The Fund may invest up to 30% of its total assets in Investment Funds
that primarily hold (directly or indirectly) investments in which the Fund may
|
invest directly. The 1940 Act generally limits a registered investment company’s investments in other investment companies to 10% of its total assets. However, pursuant to exemptions set forth in rules and regulations promulgated under the 1940 Act, the Fund may invest in excess of this limitation provided that the conditions of such exemptions are met. In addition, the Fund may invest in certain ETFs in excess of the 10% limitation in reliance upon and in accordance with exemptive relief obtained by such ETFs. The Fund will invest in private investment funds, commonly referred to as “hedge funds,” only to the extent permitted by applicable rules, regulations and interpretations of the SEC and NYSE. The Fund has no current intention to invest in private investment funds. Investments in other Investment Funds involve operating expenses and fees at the Investment Fund level that are in addition to the expenses and fees borne by the Fund and are borne indirectly by holders of the Fund’s Common Shares. Further, on December 19, 2018, the SEC published a proposed rule that, if adopted, would change the regulation of investments in other investment companies. Such regulations could permit closed-end funds to invest in other investment companies in excess of the limits of the 1940 Act. | |
Synthetic Investments. As an alternative to holding investments directly, the Fund may also obtain investment exposure to Income Securities and Common Equity Securities through the use of
customized derivative instruments (including swaps, options, forwards, notional principal contracts or other financial instruments) to replicate, modify or replace the economic attributes associated with an investment in Income
Securities and Common Equity Securities (including interests in Investment Funds.
|
|
Derivative Transactions. The Fund may purchase and sell derivative instruments (which derive their value by reference to another instrument, security or index) for investment purposes, such
as obtaining investment exposure to an investment category; risk management purposes, such as hedging against fluctuations in securities prices or interest rates; diversification purposes; or to change the duration of the Fund. In order
to help protect the soundness of derivative transactions and outstanding derivative positions, the Sub-Adviser generally requires derivative counterparties to have a minimum credit rating of A from Moody’s Investors Service (or a
comparable rating from another nationally recognized statistical rating organization (“NRSRO”)) and monitors such rating on an ongoing basis. In addition, the Sub-Adviser seeks to allocate derivative transactions to limit exposure to
any single counterparty. The Fund has not adopted a maximum percentage limit with respect to derivative investments. However, the maximum level of and types of derivative transactions used by the Fund will be approved by the Board of
Trustees and the Board of Trustees will receive regular reports from the Investment Adviser and the Sub-Adviser regarding the Fund’s use of derivative instruments and the effect of derivative transactions on the management of the Fund’s
portfolio and the performance of the Fund. See “The Fund’s Investments—Derivative Transactions.”
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|
Investment Policies
|
The Fund may allocate its assets among a wide variety of Income Securities and Common Equity Securities.
|
The Fund may invest without limitation in below-investment grade securities (e.g., securities rated below Baa3 by Moody’s Investors Service, Inc., below BBB- by Standard & Poor’s Ratings Group or Fitch Ratings or comparably rated
by another nationally recognized statistical rating organization or, if unrated, determined by the Sub- Adviser to be of comparable quality). Below-investment grade securities are commonly referred to as “high-yield” or “junk” bonds and
are considered speculative with respect to the issuer’s capacity to pay interest and repay principal. The Fund’s investments in any of the sectors and types of Income Securities in which the Fund may invest may include, without
limitation, below investment grade securities. The Fund’s investments in below investment grade securities may include distressed and defaulted securities.
|
Under normal market conditions, the Fund will not invest more than:
|
|
• 50% of its total assets in Common Equity Securities consisting of common stock;
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|
• 30% of its total assets in Investment Funds;
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• 20% of its total assets in non-U.S. dollar-denominated Income
Securities of corporate and governmental issuers located outside the United States; and
|
|
• 10% of its total assets in Income Securities of issuers in emerging markets.
|
|
The percentage of the Fund’s total assets allocated to any category of investment may at any given time be significantly less than the maximum percentage permitted pursuant to the above referenced investment policies.
|
|
Unless otherwise stated in this Prospectus or the SAI, the Fund’s investment policies are considered non-fundamental and may be changed by the Board of Trustees of the Fund (the “Board of Trustees”) without Common Shareholder
approval. The Fund will provide investors with at least 60 days’ prior written notice of any change in the Fund’s investment policies. See “Investment Objective and Policies” in this Prospectus and in the SAI.
|
|
Financial Leverage
|
The Fund may seek to enhance the level of its current distributions by utilizing financial leverage through the issuance of preferred shares (“Preferred Shares”), through borrowing or the issuance of commercial paper or other forms
of debt (“Borrowings”), through reverse repurchase agreements, dollar rolls or similar transactions or through a combination of the foregoing (collectively “Financial Leverage”). The Fund may utilize Financial Leverage up to the limits
imposed by the 1940 Act; however, the aggregate amount of Financial Leverage is not currently expected to exceed 331/3% of the Fund’s Managed Assets (as defined herein) after such issuance and/or borrowing.
|
As of May 31, 2020, outstanding Borrowings under the committed facility agreement were $19.3 million, which represented approximately 2.7% of the Fund’s Managed Assets as of such date. In addition, as of May 31, 2020, the Fund had
reverse repurchase agreements outstanding representing Financial Leverage equal to approximately 6.0% of the Fund’s Managed Assets. As of May 31, 2020, the Fund’s total Financial Leverage represented approximately 8.7% of the Fund’s
Managed Assets. The Fund’s total Financial Leverage may vary significantly over time based on the Sub-Adviser’s assessment of market conditions, available investment opportunities and cost of Financial Leverage. The Fund has at times
used significantly greater levels of Financial Leverage than on May 31, 2020, including at times using Financial Leverage to the maximum extent permitted under the 1940 Act and the parameters set forth herein. The Fund may in the future
increase Financial Leverage up to the parameters set forth herein. The Fund maintains a committed facility agreement with BNP Paribas Prime Brokerage International, Ltd. (“BNP Paribas”) pursuant to which the Fund may borrow up to $80
million. On May 31, 2020, the Fund had $19.3 million in outstanding Borrowings under the committed facility agreement.
|
|
Although the use of Financial Leverage by the Fund may create an opportunity for increased total return for the Common Shares, it also results in additional risks and can magnify the effect of any losses. Financial Leverage involves
risks and special considerations for shareholders, including the likelihood of greater volatility of net asset value and market price of and dividends on the Common Share. To the extent the Fund increases its amount of Financial
Leverage outstanding, it will be more exposed to these risks. The cost of Financial Leverage, including the portion of the investment advisory fee attributable to the assets purchased with the proceeds of Financial Leverage, is borne by
Common Shareholders. To the extent the Fund increases its amount of Financial
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Leverage outstanding, the Fund’s annual expenses as a percentage of net assets attributable to Common Shares will increase. | |
Under the 1940 Act the Fund may not utilize Borrowings if, immediately after incurring such Borrowing, the Fund would have asset coverage (as defined in the 1940 Act) of less than 300% (i.e., for every dollar of Borrowings
outstanding, the Fund is required to have at least three dollars of assets). Under the 1940 Act, the Fund may not issue Preferred Shares if, immediately after issuance, the Fund would have asset coverage (as defined in the 1940 Act) of
less than 200% (i.e., for every dollar of Preferred Shares outstanding, the Fund is required to have at least two dollars of assets). The Fund has no present intention to issue Preferred Shares. The Fund may also borrow in excess of
such limit for temporary purposes such as the settlement of transactions.
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With respect to leverage incurred through investments in reverse repurchase agreements, dollar rolls and similar transactions, the Fund intends to earmark or segregate cash or liquid securities in accordance with applicable
interpretations of the staff of the Securities and Exchange Commission (the “SEC”). As a result of such segregation, the Fund’s obligations under such transactions will not be considered indebtedness for purposes of the 1940 Act and the
Fund’s use of leverage through reverse repurchase agreements, dollar rolls and similar transactions will not be limited by the 1940 Act. However, the Fund’s use of leverage through reverse repurchase agreements, dollar rolls and similar
transactions will be included when calculating the Fund’s Financial Leverage, and therefore is not currently expected to exceed 331/3% of the Fund’s Managed Assets, and may be further limited by the availability of cash or liquid
securities to earmark or segregate in connection with such transactions.
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In addition, the Fund may engage in certain derivatives transactions that have economic characteristics similar to leverage. To the extent the terms of such transactions obligate the Fund to make payments, the Fund intends to earmark
or segregate cash or liquid securities in an amount at least equal to the current value of the amount then payable by the Fund under the terms of such transactions or otherwise cover such transactions in accordance with applicable
interpretations of the staff of the SEC. As a result of such segregation or cover, the Fund’s obligations under such transactions will not be considered indebtedness for purposes of the 1940 Act and will not be included in calculating
the aggregate amount of the Fund’s Financial Leverage. To the extent that the Fund’s obligations under such transactions are not so segregated or covered, such obligations may be considered “senior securities representing indebtedness”
under the 1940 Act and therefore subject to the 300% asset coverage requirement described above.
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So long as the net rate of return on the Fund’s investments purchased with the proceeds of Financial Leverage exceeds the cost of such Financial Leverage, such excess amounts will be available to pay higher distributions to holders
of the Fund’s Common Shares. In connection with the Fund’s use of Financial Leverage, the Fund may seek to hedge the interest rate risks associated with the Financial Leverage through interest rate swaps, caps or other derivative
transactions. There can be no assurance that the Fund’s Financial Leverage strategy will be successful during any period during which it is employed. The costs associated with the issuance of Financial Leverage will be borne by Common
Shareholders, which will result in a reduction of net asset value of the Common Shares. The fee paid to the Investment Adviser will be calculated on the basis of the Fund’s Managed Assets, including proceeds from Financial Leverage, so
the fees paid to the Investment Adviser will be higher when Financial Leverage is utilized. Common Shareholders bear the portion of the investment advisory fee attributable to the assets purchased with the proceeds of Financial
Leverage, which means that Common Shareholders effectively bear the entire advisory fee. See “Use of Financial Leverage” and “Risks— Financial Leverage Risk.”
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Other Investment Practices
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Temporary Defensive Investments. At any time when a temporary defensive posture is believed by the Sub-Adviser to be warranted (a “temporary defensive period”), the Fund
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can expose the Fund to greater market risk than normal, possibly resulting in greatly reduced liquidity. Moreover, changing economic, political, social or financial market conditions in one country or geographic region could
adversely affect the value, yield and return of the investments held by the Fund in a different country or geographic region because of the increasingly interconnected global economies and financial markets. The Adviser potentially
could be prevented from considering, managing and executing investment decisions at an advantageous time or price or at all as a result of any domestic or global market or other disruptions, particularly disruptions causing heightened
market volatility and reduced market liquidity, such as the current conditions, which have also resulted in impediments to the normal functioning of workforces, including personnel and systems of the Fund’s service providers and market
intermediaries.
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At any point in time, your Common Shares may be worth less than your original investment, including the reinvestment of Fund dividends and distributions.
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Management Risk. The Fund is subject to management risk because it has an actively managed portfolio. The Sub-Adviser will apply investment techniques and risk analysis in making investment
decisions for the Fund, but there can be no guarantee that these will produce the desired results. The Fund’s allocation of its investments across various asset classes and sectors may vary significantly over time based on the Adviser’s
analysis and judgment. As a result, the particular risks most relevant to an investment in the Fund, as well as the overall risk profile of the Fund’s portfolio, may vary over time.
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Income Risk. The income investors receive from the Fund is based primarily on the interest it earns from its investments in Income Securities, which can vary widely over the short-and
long-term. If prevailing market interest rates drop, investors’ income from the Fund could drop as well. The Fund’s income could also be affected adversely when prevailing short-term interest rates increase and the Fund is utilizing
leverage, although this risk is mitigated to the extent the Fund invests in floating-rate obligations.
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Dividend Risk. Dividends on common stock and other Common Equity Securities which the Fund may hold are not fixed but are declared at the discretion of an issuer’s board of directors. There
is no guarantee that the issuers of the Common Equity Securities in which the Fund invests will declare dividends in the future or that, if declared, they will remain at current levels or increase over time. These circumstances may
result from issuer-specific events, adverse economic or market developments, or legislative or regulatory changes or other developments that limit an issuer’s ability to declare and pay dividends, which would affect the Fund’s
performance and ability to generate income. The dividend income from the Fund’s investment in Common Equity Securities will be influenced by both general economic activity and issuer-specific factors. In the event of adverse changes in
economic conditions or adverse events effecting a specific industry or issuer, the issuers of the Common Equity Securities held by the Fund may reduce the dividend paid on such securities.
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Income Securities Risk. In addition to the risks discussed above, Income Securities, including high-yield bonds, are subject to certain risks, including:
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Issuer Risk. The value of Income Securities may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage, reduced demand for the issuer’s goods and services,
historical and projected earnings, and the value of its assets.
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Spread Risk. Spread risk is the risk that the market price can change due to broad based movements in spreads, which is particularly relevant in the current low spread environment.
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Credit Risk. The Fund could lose money if the issuer or guarantor of a debt instrument or a counterparty to a derivatives transaction or other transaction (such as a repurchase agreement or a loan of portfolio securities or
other instruments) is unable or unwilling, or perceived to be unable or unwilling, to pay interest or repay principal on time or defaults. If an issuer fails to pay interest, the Fund’s income would likely be reduced, and if an issuer
fails to repay principal, the value of the instrument likely would fall and the Fund could lose money. This risk is especially acute with respect to below investment grade debt instruments (commonly referred to as “high-yield” or “junk”
bonds) and unrated high risk debt instruments, whose issuers are particularly susceptible to fail to meet principal or interest obligations under current conditions. Also, the issuer, guarantor or counterparty may suffer adverse changes
in its financial condition or be adversely affected by economic, political or social conditions that could lower the credit quality (or the market’s perception of the credit quality) of the issuer or instrument, leading to greater
volatility in the price of the instrument and in shares of the Fund. Although credit quality may not accurately reflect the true credit risk of an instrument, a change in the credit quality rating of an instrument or an issuer can have
a rapid, adverse effect on the instrument’s liquidity and make it more difficult for the Fund to sell at an advantageous price or time. The risk of the occurrence of these types of events is heightened under current conditions.
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The degree of credit risk depends on the particular instrument and the financial condition of the issuer, guarantor or counterparty, which are often reflected in its credit quality. Credit quality is a measure of the issuer’s expected ability to make all required interest and principal payments in a timely manner. An issuer with the highest credit rating has a very strong capacity with respect to making all payments. An issuer with the second-highest credit rating has a strong capacity to make all payments, but the degree of safety is somewhat less. An issuer with the lowest credit quality rating may be in default or have extremely poor prospects of making timely payment of interest and principal. Credit ratings assigned by rating agencies are based on a number of factors and subjective judgments and therefore do not necessarily represent an issuer’s actual financial condition or the volatility or liquidity of the security. Although higher-rated securities generally present lower credit risk as compared to lower-rated or unrated securities, an issuer with a high credit rating may in fact be exposed to heightened levels of credit or liquidity risk. | |
Interest Rate Risk. Fixed-income and other debt instruments are subject to the possibility that interest rates could change (or are expected to change). Changes in interest rates, including changes in reference rates used in
fixed-income and other debt instruments (such as the London Interbank Offer Rate), may adversely affect the Fund’s investments in these instruments, such as the value or liquidity of, and income generated by, the investments. In
addition, changes in interest rates, including rates that fall below zero, can have unpredictable effects on markets and can adversely affect the Fund’s yield, income and performance.
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The value of a debt instrument with a longer duration will generally be more sensitive to interest rate changes than a similar instrument with a shorter duration. Similarly, the longer the average duration (whether positive or
negative) of these instruments held by the Fund or to which the Fund is exposed (i.e., the longer the average portfolio duration of the Fund), the more the Fund’s NAV will likely fluctuate in
response to interest rate changes. Duration is a measure used to determine the sensitivity of a security’s price to changes in interest rates that incorporates a security’s yield, coupon, final maturity and call features, among other
characteristics. For example, the NAV per share of a bond fund with an average duration of eight years would be expected to fall approximately 8% if interest rates rose by one percentage point.
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However, measures such as duration may not accurately reflect the true interest rate sensitivity of instruments held by the Fund and, in turn, the Fund’s susceptibility to changes in interest rates. Certain fixed-income and debt
instruments are subject to the risk
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that the issuer may exercise its right to redeem (or call) the instrument earlier than anticipated. Although an issuer may call an instrument for a variety of reasons, if an issuer does so during a time of declining interest rates, the Fund might have to reinvest the proceeds in an investment offering a lower yield or other less favorable features, and therefore might not benefit from any increase in value as a result of declining interest rates. Interest only or principal only securities and inverse floaters are particularly sensitive to changes in interest rates, which may impact the income generated by the security and other features of the security. | |
Adjustable rate securities also react to interest rate changes in a similar manner as fixed-rate securities but generally to a lesser degree depending on the characteristics of the security, in particular its reset terms (i.e., the index chosen, frequency of reset and reset caps or floors). During periods of rising interest rates, because changes in interest rates on adjustable rate securities may lag behind changes
in market rates, the value of such securities may decline until their interest rates reset to market rates. These securities also may be subject to limits on the maximum increase in interest rates. During periods of declining interest
rates, because the interest rates on adjustable rate securities generally reset downward, their market value is unlikely to rise to the same extent as the value of comparable fixed rate securities. These securities may not be subject to
limits on downward adjustments of interest rates.
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During periods of rising interest rates, issuers of debt securities or asset-backed securities may pay principal later or more slowly than expected, which may reduce the value of a Fund’s investment in such securities and may prevent
the Fund from receiving higher interest rates on proceeds reinvested in other instruments. During periods of falling interest rates, issuers of debt securities or asset-backed securities may pay off debts more quickly or earlier than
expected, which could cause the Fund to be unable to recoup the full amount of its initial investment and/or cause the Fund to reinvest in lower-yielding securities, thereby reducing the Fund’s yield or otherwise adversely impacting the
Fund.
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Certain debt instruments, such as instruments with a negative duration or inverse instruments, are also subject to interest rate risk, although such instruments generally react differently to changes in interest rates than instruments with positive durations. The Fund’s investments in these instruments also may be adversely affected by changes in interest rates. For example, the value of instruments with negative durations, such as inverse floaters, generally decrease if interest rates decline. | |
The Fund’s use of leverage will tend to increase Common Share interest rate risk. The Fund may utilize certain strategies, including taking positions in futures or interest rate swaps, for the purpose of reducing the interest rate sensitivity of credit securities held by the Fund and decreasing the Fund’s exposure to interest rate risk. The Fund is not required to hedge its exposure to interest rate risk and may choose not to do so. In addition, there is no assurance that any attempts by the Fund to reduce interest rate risk will be successful or that any hedges that the Fund may establish will perfectly correlate with movements in interest rates. |
Current Fixed-Income and Debt Market Conditions. Fixed-income and debt market conditions are highly unpredictable and some parts of the market are subject to dislocations. In response to the crisis initially caused by the
outbreak of COVID-19, as with other serious economic disruptions, governmental authorities and regulators have enacted or are enacting significant fiscal and monetary policy changes, including providing direct capital infusions into
companies, creating new monetary programs and lowering interest rates considerably. These actions present heightened risks to fixed-income and debt instruments, and such risks could be even further heightened if these actions are
unexpectedly or suddenly reversed or are ineffective in achieving their desired outcomes. In light of these actions and current conditions, interest rates and bond yields in the United States and many other countries are at or near
historic lows, and in some cases, such rates and yields are negative. The current very low or negative interest rates are magnifying the Fund’s susceptibility to interest rate risk and diminishing yield and performance. In addition, the
current environment is exposing fixed-income and debt markets to significant volatility and reduced liquidity for Fund investments.
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Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called Income Securities at market interest rates that are below the Fund portfolio’s current earnings rate. A decline in income could affect the Common Shares’ market price or the overall return of the Fund. | |
Prepayment Risk. Certain debt instruments, including loans and mortgage- and other asset-backed securities, are subject to the risk that payments on principal may occur more quickly or earlier than expected (or an investment
is converted or redeemed prior to maturity). For example, an issuer may exercise its right to redeem outstanding debt securities prior to their maturity (known as a “call”) or otherwise pay principal earlier than expected for a number
of reasons (e.g., declining interest rates, changes in credit spreads and improvements in the issuer’s credit quality). If an issuer calls or “prepays” a security in which the Fund has invested,
the Fund may not recoup the full amount of its initial investment and may be required to reinvest in generally lower-yielding securities, securities with greater credit risks or securities with other, less favorable features or terms
than the security in which the Fund initially invested, thus potentially reducing the Fund’s yield. Income Securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity. Loans and
mortgage- and other asset-backed securities are particularly subject to prepayment risk, and offer less potential for gains, during periods of declining interest rates (or narrower spreads) as issuers of higher interest rate debt
instruments pay off debts earlier than expected. In addition, the Fund may lose any premiums paid to acquire the investment. Other factors, such as excess cash flows, may also contribute to prepayment risk. Thus, changes in interest
rates may cause volatility in the value of and income received from these types of debt instruments.
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Variable or floating rate investments may be less vulnerable to prepayment risk. Most floating rate loans and fixed-income securities allow for prepayment of principal without penalty. Accordingly, the potential for the value of a floating rate loan or security to increase in response to interest rate declines is limited. Corporate loans or fixed-income securities purchased to replace a prepaid corporate loan or security may have lower yields than the yield on the prepaid corporate loan or security. | |
Liquidity Risk. The Fund may invest without limitation in Income Securities for which there is no readily available trading market or which are otherwise illiquid, including certain high-yield bonds. The Fund may not be able
to readily dispose of illiquid securities and obligations at prices that approximate those at which the Fund could sell such securities and obligations if they were more widely traded and, as a result of such illiquidity, the Fund may
have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. In addition, limited liquidity could affect the market price of Income Securities, thereby adversely affecting the
Fund’s net asset value and ability to make distributions. Dislocations in certain parts of markets
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are resulting in reduced liquidity for certain investments. It is uncertain when financial markets will improve. Liquidity of financial markets may also be affected by government intervention. | |
Valuation of Certain Income Securities Risk. The Sub-Adviser may use the fair value method to value investments if market quotations for them are not readily available or are deemed unreliable, or if events occurring after the
close of a securities market and before the Fund values its assets would materially affect net asset value. Because the secondary markets for certain investments may be limited, they may be difficult to value. Where market quotations
are not readily available, valuation may require more research than for more liquid investments. In addition, elements of judgment may play a greater role in valuation in such cases than for investments with a more active secondary
market because there is less reliable objective data available. A security that is fair valued may be valued at a price higher or lower than the value determined by other funds using their own fair valuation procedures. Prices obtained
by the Fund upon the sale of such securities may not equal the value at which the Fund carried the investment on its books, which would adversely affect the net asset value of the Fund.
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Duration and Maturity Risk. The Fund has no set policy regarding portfolio maturity or duration. Holding long duration and long maturity investments will expose the Fund to certain magnified risks. These risks include interest
rate risk, credit risk and liquidity risks as discussed above. Generally speaking, the longer the duration of the Fund’s portfolio, the more exposure the Fund will have to interest rate risk described above.
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Below-Investment Grade Securities Risk. The Fund may invest in Income Securities rated below-investment grade or, if unrated, determined by the Sub-Adviser to be of comparable credit quality,
which are commonly referred to as “high-yield” or “junk” bonds. Investment in securities of below-investment grade quality involves substantial risk of loss, the risk of which is particularly acute under current conditions. Income
Securities of below-investment grade quality are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal when due and therefore involve a greater risk of default or decline in market value due
to adverse economic and issuer-specific developments. Securities of below investment grade quality may involve a greater risk of default or decline in market value due to adverse economic and issuer- specific developments. Issuers of
below investment grade securities are not perceived to be as strong financially as those with higher credit ratings. These issuers are more vulnerable to financial setbacks and recession than more creditworthy issuers, which may impair
their ability to make interest and principal payments. Income Securities of below-investment grade quality display increased price sensitivity to changing interest rates and to a deteriorating economic environment. The market values,
total return and yield for securities of below investment grade quality tend to be more volatile than the market values, total return and yield for higher quality bonds. Securities of below investment grade quality tend to be less
liquid than investment grade debt securities and therefore more difficult to value accurately and sell at an advantageous price or time and may involve greater transactions costs and wider bid/ask spreads, than higher-quality bonds. To
the extent that a secondary market does exist for certain below investment grade securities, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. Because of the
substantial risks associated with investments in below investment grade securities, you could have an increased risk of losing money on your investment in Common Shares, both in the short-term and the long-term. To the extent that the
Fund invests in securities that have not been rated by an NRSRO, the Fund’s ability to achieve its investment objectives will be more dependent on the Adviser’s credit analysis than would be the case when the Fund invests in rated
securities.
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Successful investment in lower-medium and lower-rated debt securities may involve greater investment risk and is highly dependent on the Adviser’s credit analysis. The value of securities of below investment grade quality is
particularly vulnerable to changes
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in interest rates and a real or perceived economic downturn or higher interest rates could cause a decline in prices of such securities by lessening the ability of issuers to make principal and interest payments. These securities are often thinly traded or subject to irregular trading and can be more difficult to sell and value accurately than higher-quality bonds because there tends to be less public information available about these securities. Because objective pricing data may be less available, judgment may play a greater role in the valuation process. In addition, the entire below investment grade market can experience sudden and sharp price swings due to a variety of factors, including changes in economic forecasts, stock market activity, large or sustained sales by major investors, a high- profile default, or a change in the market’s psychology. Adverse conditions could make it difficult at times for the Fund to sell certain securities or could result in lower prices than those used in calculating the Fund’s net asset value. | |
Structured Finance Investments Risk. The Fund’s structured finance investments may include residential and commercial mortgage-related and other asset-backed securities issued by governmental
entities and private issuers. Holders of structured finance investments bear risks of the underlying investments, index or reference obligation and are subject to counterparty risk. The Fund may have the right to receive payments only
from the structured product, and generally does not have direct rights against the issuer or the entity that sold the assets to be securitized. While certain structured finance investments enable the investor to acquire interests in a
pool of securities without the brokerage and other expenses associated with directly holding the same securities, investors in structured finance investments generally pay their share of the structured product’s administrative and other
expenses. Although it is difficult to predict whether the prices of indices and securities underlying structured finance investments will rise or fall, these prices (and, therefore, the prices of structured finance investments) will be
influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. If the issuer of a structured product uses shorter term financing to purchase longer term securities, the
issuer may be forced to sell its securities at below market prices if it experiences difficulty in obtaining short-term financing, which may adversely affect the value of the structured finance investment owned by the Fund.
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The Fund may invest in structured finance products collateralized by low grade or defaulted loans or securities. Investments in such structured finance products are subject to the risks associated with below investment grade
securities. Such securities are characterized by high risk. It is likely that an economic recession could severely disrupt the market for such securities and may have an adverse impact on the value of such securities.
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The Fund may invest in senior and subordinated classes issued by structured finance vehicles. The payment of cash flows from the underlying assets to senior classes take precedence over those of subordinated classes, and therefore
subordinated classes are subject to greater risk. Furthermore, the leveraged nature of subordinated classes may magnify the adverse impact on such class of changes in the value of the assets, changes in the distributions on the assets,
defaults and recoveries on the assets, capital gains and losses on the assets, prepayment on assets and availability, price and interest rates of assets.
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Structured finance securities are typically privately offered and sold, and thus are not registered under the securities laws. As a result, investments in structured finance securities may be characterized by the Fund as illiquid
securities; however, an active dealer market may exist which would allow such securities to be considered liquid in some circumstances.
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Mortgage-Backed Securities Risk. Mortgage-backed securities represent an interest in a pool of mortgages. The risks associated with mortgage-backed securities include: (1) credit risk
associated with the performance of the underlying mortgage properties and of
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the borrowers owning these properties; (2) adverse changes in economic conditions and circumstances, which are more likely to have an adverse impact on mortgage-backed securities secured by loans on certain types of commercial properties than on those secured by loans on residential properties; (3) prepayment risk, which can lead to significant fluctuations in the value of the mortgage-backed security; (4) loss of all or part of the premium, if any, paid; and (5) decline in the market value of the security, whether resulting from changes in interest rates, prepayments on the underlying mortgage collateral or perceptions of the credit risk associated with the underlying mortgage collateral. The value of mortgage-backed securities may be substantially dependent on the servicing of the underlying pool of mortgages. | |
When market interest rates decline, more mortgages are refinanced and the securities are paid off earlier than expected. Prepayments may also occur on a scheduled basis or due to foreclosure. When market interest rates increase, the
market values of mortgage-backed securities decline. At the same time, however, mortgage refinancings and prepayments slow, which lengthens the effective maturities of these securities. As a result, the negative effect of the rate
increase on the market value of mortgage-backed securities is usually more pronounced than it is for other types of debt securities. In addition, due to increased instability in the credit markets, the market for some mortgage-backed
securities has experienced reduced liquidity and greater volatility with respect to the value of such securities, making it more difficult to value such securities. The Fund may invest in sub- prime mortgages or mortgage-backed
securities that are backed by sub-prime mortgages.
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Moreover, the relationship between prepayments and interest rates may give some high-yielding mortgage-related and asset-backed securities less potential for growth in value than conventional bonds with comparable maturities. In
addition, in periods of falling interest rates, the rate of prepayments tends to increase. During such periods, the reinvestment of prepayment proceeds by the Fund will generally be at lower rates than the rates that were carried by the
obligations that have been prepaid. Because of these and other reasons, mortgage-related and asset-backed securities’ total return and maturity may be difficult to predict precisely. To the extent that the Fund purchases
mortgage-related and asset-backed securities at a premium, prepayments (which may be made without penalty) may result in loss of the Fund’s principal investment to the extent of premium paid.
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Mortgage-backed securities generally are classified as either commercial mortgage-backed securities (“CMBS”) or residential mortgage-backed securities (“RMBS”), each of which are subject to certain specific risks.
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Commercial Mortgage-Backed Securities Risk. The market for CMBS developed more recently and, in terms of total outstanding principal amount of issues, is relatively small compared to the market for residential single-family
mortgage-related securities. CMBS are subject to particular risks, including lack of standardized terms, have shorter maturities than residential mortgage loans and provide for payment of all or substantially all of the principal only
at maturity rather than regular amortization of principal. In addition, commercial lending generally is viewed as exposing the lender to a greater risk of loss than one-to-four family residential lending. Commercial lending typically
involves larger loans to single borrowers or groups of related borrowers than residential one-to-four family mortgage loans. In addition, the repayment of loans secured by income producing properties typically is dependent upon the
successful operation of the related real estate project and the cash flow generated therefrom. Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses,
property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expense or limit rents that may be charged, any need to address environmental
contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values,
declines in regional or local
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rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, change in governmental rules, regulations and fiscal policies, including environmental legislation, acts of God, terrorism, social unrest and civil disturbances. Consequently, adverse changes in economic conditions and circumstances are more likely to have an adverse impact on mortgage-related securities secured by loans on commercial properties than on those secured by loans on residential properties. Economic downturns and other events that limit the activities of and demand for commercial retail and office spaces (such as the current crisis) adversely impact the value of such securities. Additional risks may be presented by the type and use of a particular commercial property. Special risks are presented by hospitals, nursing homes, hospitality properties and certain other property types. Commercial property values and net operating income are subject to volatility, which may result in net operating income becoming insufficient to cover debt service on the related mortgage loan. The exercise of remedies and successful realization of liquidation proceeds relating to CMBS may be highly dependent on the performance of the servicer or special servicer. There may be a limited number of special servicers available, particularly those that do not have conflicts of interest. | |
Residential Mortgage-Backed Securities Risk. Credit-related risk on RMBS arises from losses due to delinquencies and defaults by the borrowers in payments on the underlying mortgage loans and breaches by originators and
servicers of their obligations under the underlying documentation pursuant to which the RMBS are issued. The rate of delinquencies and defaults on residential mortgage loans and the aggregate amount of the resulting losses will be
affected by a number of factors, including general economic conditions, particularly those in the area where the related mortgaged property is located, the level of the borrower’s equity in the mortgaged property and the individual
financial circumstances of the borrower. If a residential mortgage loan is in default, foreclosure on the related residential property may be a lengthy and difficult process involving significant legal and other expenses. The net
proceeds obtained by the holder on a residential mortgage loan following the foreclosure on the related property may be less than the total amount that remains due on the loan. The prospect of incurring a loss upon the foreclosure of
the related property may lead the holder of the residential mortgage loan to restructure the residential mortgage loan or otherwise delay the foreclosure process. These risks are elevated given the current distressed economic, market,
health and labor conditions, notably, increased levels of unemployment, delays and delinquencies in payments of mortgage and rent obligations, and uncertainty regarding the effects and extent of government intervention with respect to
mortgage payments and other economic matters.
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Sub-Prime Mortgage Market Risk. The residential mortgage market in the United States has experienced difficulties that may adversely affect the performance and market value of certain mortgages and mortgage-related securities.
Delinquencies and losses on residential mortgage loans (especially sub-prime and second-line mortgage loans) generally have increased recently and may continue to increase, and a decline in or flattening of housing values (as has
recently been experienced and may continue to be experienced in many housing markets) may exacerbate such delinquencies and losses. Borrowers with adjustable rate mortgage loans are more sensitive to changes in interest rates, which
affect their monthly mortgage payments, and may be unable to secure replacement mortgages at comparably low interest rates. Also, a number of residential mortgage loan originators have experienced serious financial difficulties or
bankruptcy. Largely due to the foregoing, reduced investor demand for mortgage loans and mortgage-related securities and increased investor yield requirements have caused limited liquidity in the secondary market for mortgage-related
securities, which can adversely affect the market value of mortgage-related securities. It is possible that such limited liquidity in such secondary markets could continue or worsen. If the economy of the United States deteriorates
further, the incidence of mortgage foreclosures, especially sub-prime
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mortgages, may increase, which may adversely affect the value of any mortgage-backed securities owned by the Fund. | |
The significance of the mortgage crisis and loan defaults in residential mortgage loan sectors led to the enactment of numerous pieces of legislation relating to the mortgage and housing markets. These actions, along with future
legislation or regulation, may have significant impacts on the mortgage market generally and may result in a reduction of available transactional opportunities for the Fund or an increase in the cost associated with such transactions
and may adversely impact the value of RMBS.
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During the mortgage crisis, a number of originators and servicers of residential and commercial mortgage loans, including some of the largest originators and servicers in the residential and commercial mortgage loan market,
experienced serious financial difficulties. Such difficulties may affect the performance of non-agency RMBS and CMBS. There can be no assurance that originators and servicers of mortgage loans will not continue to experience serious
financial difficulties or experience such difficulties in the future, including becoming subject to bankruptcy or insolvency proceedings, or that underwriting procedures and policies and protections against fraud will be sufficient in
the future to prevent such financial difficulties or significant levels of default or delinquency on mortgage loans.
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Asset-Backed Securities Risk. In addition to the general risks associated with credit securities discussed herein and the risks discussed under “Structured Finance Investments Risks,” ABS are
subject to additional risks. ABS involve certain risks in addition to those presented by MBS. ABS do not have the benefit of the same security interest in the underlying collateral as MBS and are more dependent on the borrower’s ability
to pay and may provide the Fund with a less effective security interest in the related collateral than do MBS. There is the possibility that recoveries on the underlying collateral may not, in some cases, be available to support
payments on these securities. The collateral underlying ABS may constitute assets related to a wide range of industries and sectors, such as credit card and automobile receivables or other assets derived from consumer, commercial or
corporate sectors.
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For example, ABS can be collateralized with credit card and automobile receivables. Credit card receivables are generally unsecured, and the debtors are entitled to the protection of a number of state and federal consumer credit
laws, many of which give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. These risks are elevated given the currently distressed economic, market, labor and health conditions.
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Most issuers of automobile receivables permit the servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a risk that the purchaser would acquire an
interest superior to that of the holders of the related automobile receivables. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders
of the automobile receivables may not have an effective security interest in all of the obligations backing such receivables. If the economy of the United States deteriorates, defaults on securities backed by credit card, automobile and
other receivables may increase, which may adversely affect the value of any ABS owned by the Fund. In recent years, certain automobile manufacturers have been granted access to emergency loans from the U.S. Government and have
experienced bankruptcy. As a result of these events, the value of securities backed by receivables from the sale or lease of automobiles may be adversely affected.
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If the economy of the United States deteriorates, defaults on securities backed by credit card, automobile and other receivables may increase, which may adversely affect the value of any ABS owned by the Fund. In addition, these
securities may provide the Fund with a less effective security interest in the related collateral than do mortgage- related
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securities. Therefore, there is the possibility that recoveries on the underlying collateral may not, in some cases, be available to support payments on these securities. | |
ABS collateralized by other types of assets are subject to risks associated with the underlying collateral.
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CLO, CDO and CBO Risk. In addition to the general risks associated with debt securities discussed herein, CLOs, collateralized debt obligations (“CDOs”), and collateralized bond obligations
(“CBOs”) are subject to additional risks. CLOs, CDOs and CBOs are subject to risks associated with the possibility that distributions from collateral securities will not be adequate to make interest or other payments; the quality of the
collateral may decline in value or default; and the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. The credit quality of
CLOs, CDOs and CBOs depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided. The underlying assets (e.g., debt obligations) of CLOs, CDOs and CBOs are subject to
prepayments, which shorten the weighted average maturity and may lower the return of the securities issued by the CLOs, CDOs and CBOs. If the credit support or enhancement is exhausted, losses or delays in payment may result if the
required payments of principal and interest are not made. The value of securities issued by CLOs, CDOs and CBOs also may change because of changes in market value; changes in the market’s perception of the creditworthiness of the
servicing agent for the pool, the originator of the pool, or the financial institution or fund providing the credit support or enhancement; loan performance and prices; broader sentiment and standing in the economic cycle, including
expectations regarding future loan defaults; liquidity conditions; and supply and demand at the various tranche levels. Finally, CLOs, CDOs and CBOs are limited recourse and may not be paid in full and may be subject to up to 100% loss.
See “Risks—CLO, CDO and CBO Risk.”
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The Fund may invest in any portion of the capital structure of CLOs (including the subordinated, residual and deep mezzanine debt tranches). Investment in the subordinated tranche is subject to special risks. The subordinated tranche
does not receive ratings and is considered the riskiest portion of the capital structure of a CLO. The subordinated tranche is junior in priority of payment to the more senior tranches of the CLO and is subject to certain payment
restrictions. As a result, the subordinated tranche bears the bulk of defaults from the loans in the CLO. In addition, the subordinated tranche generally has only limited voting rights and generally does not benefit from any creditors’
rights or ability to exercise remedies under the indenture governing the CLO notes. Certain mezzanine tranches in which the Fund may invest may also be subject to certain risks similar to risks associated with investment in the
subordinated tranche.
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The subordinated tranche is unsecured and ranks behind all of the secured creditors, known or unknown, of the CLO issuer, including the holders of the secured notes it has issued. Consequently, to the extent that the value of the
issuer’s portfolio of loan investments has been reduced as a result of conditions in the credit markets, defaulted loans, capital gains and losses on the underlying assets, prepayment or changes in interest rates, the value of the
subordinated tranche realized at redemption could be reduced. Accordingly, the subordinated tranche may not be paid in full and may be subject to up to 100% loss. The leveraged nature of subordinated notes may magnify the adverse impact
on the subordinated notes of changes in the market value of the investments held by the issuer, changes in the distributions on those investments, defaults and recoveries on those investments, capital gains and losses on those
investments, prepayments on those investments and availability, prices and interest rates of those investments. Investments in the subordinated tranche of a CLO are generally less liquid than CLO debt tranches and subject to extensive
transfer restrictions, and there may be no market for subordinated notes. Certain mezzanine tranches in which the Fund may invest may also be subject to
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certain risks similar to risks associated with investment in the subordinated tranche. See “Risks— CLO, CDO and CBO Risk—CLO Subordinated Notes Risk.” | |
Risks Associated with Risk-Linked Securities. RLS are a form of derivative issued by insurance companies and insurance-related special purpose vehicles that apply securitization techniques to
catastrophic property and casualty damages. Unlike other insurable low-severity, high-probability events (such as auto collision coverage), the insurance risk of which can be diversified by writing large numbers of similar policies, the
holders of a typical RLS are exposed to the risks from high-severity, low-probability events such as that posed by major earthquakes or hurricanes. RLS represent a method of reinsurance, by which insurance companies transfer their own
portfolio risk to other reinsurance companies and, in the case of RLS, to the capital markets. A typical RLS provides for income and return of capital similar to other fixed-income investments, but involves full or partial default if
losses resulting from a certain catastrophe exceeded a predetermined amount. In essence, investors invest funds in RLS and if a catastrophe occurs that “triggers” the RLS, investors may lose some or all of the capital invested. In the
case of an event, the funds are paid to the bond sponsor—an insurer, reinsurer or corporation—to cover losses. In return, the bond sponsors pay interest to investors for this catastrophe protection. RLS can be structured to pay-off on
three types of variables—insurance-industry catastrophe loss indices, insure-specific catastrophe losses and parametric indices based on the physical characteristics of catastrophic events. Such variables are difficult to predict or
model, and the risk and potential return profiles of RLS may be difficult to assess. Catastrophe-related RLS have been in use since the 1990s, and the securitization and risk-transfer aspects of such RLS are beginning to be employed in
other insurance and risk-related areas. No active trading market may exist for certain RLS, which may impair the ability of the Fund to realize full value in the event of the need to liquidate such assets.
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Risks Associated with Structured Notes. Investments in structured notes involve risks associated with the issuer of the note and the reference instrument. Where the Fund’s investments in
structured notes are based upon the movement of one or more factors, including currency exchange rates, interest rates, referenced bonds and stock indices, depending on the factor used and the use of multipliers or deflators, changes in
interest rates and movement of the factor may cause significant price fluctuations. Additionally, changes in the reference instrument or security may cause the interest rate on the structured note to be reduced to zero, and any further
changes in the reference instrument may then reduce the principal amount payable on maturity. Structured notes may be less liquid than other types of securities and more volatile than the reference instrument or security underlying the
note.
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Senior Loans Risk. The Fund may invest in senior secured floating rate Loans made to corporations and other non-governmental entities and issuers (“Senior Loans”). Senior Loans typically hold
the most senior position in the capital structure of the issuing entity, are typically secured with specific collateral and typically have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated
debt holders and stockholders of the borrower. The Fund’s investments in Senior Loans are typically below-investment grade and are considered speculative because of the credit risk of their issuers. The risks associated with Senior
Loans of below-investment grade quality are similar to the risks of other lower grade Income Securities, although Senior Loans are typically senior and secured in contrast to subordinated and unsecured Income Securities. Senior Loans’
higher standing has historically resulted in generally higher recoveries in the event of a corporate reorganization. In addition, because their interest payments are adjusted for changes in short-term interest rates, investments in
Senior Loans generally have less interest rate risk than other lower grade Income Securities, which may have fixed interest rates. See “Risks—Senior Loans Risk.”
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Second Lien Loans Risk. The Fund may invest in “second lien” secured floating rate Loans made by public and private corporations and other non-governmental entities and
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issuers for a variety of purposes (“Second Lien Loans”). Second Lien Loans are second in right of payment to one or more Senior Loans of the related borrower. Second Lien Loans are subject to the same risks associated with investment in Senior Loans and other lower grade Income Securities. However, Second Lien Loans are second in right of payment to Senior Loans and therefore are subject to the additional risk that the cash flow of the borrower and any property securing the Loan may be insufficient to meet scheduled payments after giving effect to the senior secured obligations of the borrower. Second Lien Loans are expected to have greater price volatility and exposure to losses upon default than Senior Loans and may be less liquid. There is also a possibility that originators will not be able to sell participations in Second Lien Loans, which would create greater credit risk exposure. | |
Subordinated Secured Loans Risk. Subordinated secured Loans generally are subject to similar risks as those associated with investment in Senior Loans, Second Lien Loans and below investment
grade securities. However, such loans may rank lower in right of payment than any outstanding Senior Loans, Second Lien Loans or other debt instruments with higher priority of the Borrower and therefore are subject to additional risk
that the cash flow of the Borrower and any property securing the loan may be insufficient to meet scheduled payments and repayment of principal in the event of default or bankruptcy after giving effect to the higher ranking secured
obligations of the Borrower. Subordinated secured Loans are expected to have greater price volatility than Senior Loans and Second Lien Loans and may be less liquid.
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Unsecured Loans Risk. Unsecured Loans generally are subject to similar risks as those associated with investment in Senior Loans, Second Lien Loans, subordinated secured Loans and below
investment grade securities. However, because unsecured Loans have lower priority in right of payment to any higher ranking obligations of the Borrower and are not backed by a security interest in any specific collateral, they are
subject to additional risk that the cash flow of the Borrower and available assets may be insufficient to meet scheduled payments and repayment of principal after giving effect to any higher ranking obligations of the Borrower.
Unsecured Loans are expected to have greater price volatility than Senior Loans, Second Lien Loans and subordinated secured Loans and may be less liquid.
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Loans and Loan Participations and Assignments Risk. The Fund may invest in loans directly or through participations or assignments. The
Fund may purchase Loans on a direct assignment basis from a participant in the original syndicate of lenders or from subsequent assignees of such interests. The Fund may also purchase, without limitation, participations in Loans. The
purchaser of an assignment typically succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect to the debt obligation; however, the purchaser’s rights can be
more restricted than those of the assigning institution, and, in any event, the Fund may not be able to unilaterally enforce all rights and remedies under the loan and with regard to any associated collateral. A participation typically
results in a contractual relationship only with the institution participating out the interest, not with the Borrower. In purchasing participations, the Fund generally will have no right to enforce compliance by the Borrower with the
terms of the loan agreement against the Borrower, and the Fund may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, the Fund will be exposed to the credit
risk of both the Borrower and the institution selling the participation. Further, in purchasing participations in lending syndicates, the Fund may not be able to conduct the same due diligence on the Borrower with respect to a Senior
Loan that the Fund would otherwise conduct. In addition, as a holder of the participations, the Fund may not have voting rights or inspection rights that the Fund would otherwise have if it were investing directly in the Senior Loan,
which may result in the Fund being exposed to greater credit or fraud risk with respect to the Borrower or the Senior Loan. Lenders selling a participation and other persons inter-positioned between the lender and the Fund with respect
to a
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participation will likely conduct their principal business activities in the banking, finance and financial services industries. Because the Fund may invest in participations, the Fund may be more susceptible to economic, political or regulatory occurrences affecting such industries. | |
Certain of the loan participations or assignments acquired by the Fund may involve unfunded commitments of the lenders, revolving credit facilities, delayed draw credit facilities or other investments under which a borrower may from
time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the Fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan documentation.
Such an obligation may have the effect of requiring the Fund to increase its investment in a company at a time when it might not be desirable to do so (including at a time when the company’s financial condition makes it unlikely that
such amounts will be repaid). These commitments are generally subject to the borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject to
commitment are comparable to the terms of other loans and related investments in the Fund’s portfolio.
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The Fund invests in or is exposed to loans and other similar debt obligations that are sometimes referred to as “covenant-lite” loans or obligations, which are generally subject to more risk than investments that contain traditional financial maintenance covenants and financial reporting requirements. | |
Mezzanine Investments Risk. The Fund may invest in certain lower grade securities known as “Mezzanine Investments,” which are subordinated debt securities that are generally issued in private
placements in connection with an equity security (e.g., with attached warrants) or may be convertible into equity securities. Mezzanine Investments are subject to the same risks associated with investment in Senior Loans, Second Lien
Loans and other lower grade Income Securities. However, Mezzanine Investments may rank lower in right of payment than any outstanding Senior Loans and Second Lien Loans of the borrower, or may be unsecured (i.e., not backed by a
security interest in any specific collateral), and are subject to the additional risk that the cash flow of the borrower and available assets may be insufficient to meet scheduled payments after giving effect to any higher ranking
obligations of the borrower. Mezzanine Investments are expected to have greater price volatility and exposure to losses upon default than Senior Loans and Second Lien Loans and may be less liquid.
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Distressed and Defaulted Securities Risk. Investments in the securities of financially distressed issuers involve substantial risks. These securities may present a substantial risk of default
or may be in default at the time of investment. The Fund may incur additional expenses to the extent it is required to seek recovery upon a default in the payment of principal or interest on its portfolio holdings. In any reorganization
or liquidation proceeding relating to a portfolio company, the Fund may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Among the risks inherent in investments
in a troubled entity is the fact that it frequently may be difficult to obtain information as to the true financial condition of such issuer. The Adviser’s judgment about the credit quality of the issuer and the relative value and
liquidity of its securities may prove to be wrong.
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Convertible Securities Risk. Convertible securities, debt or preferred equity securities convertible into, or exchangeable for, equity securities, are generally preferred stocks and other
securities, including fixed-income securities and warrants that are convertible into or exercisable for common stock. Convertible securities generally participate in the appreciation or depreciation of the underlying stock into which
they are convertible, but to a lesser degree and are subject to the risks associated with debt and equity securities, including interest rate, market and issuer risks. For example, if market interest rates rise, the value of a
convertible security usually falls. Certain convertible securities may
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combine higher or lower current income with options and other features. Warrants are options to buy a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally, two or more
years). Convertible securities may be lower-rated securities subject to greater levels of credit risk. A convertible security may be converted before it would otherwise be most appropriate, which may have an adverse effect on the Fund’s
ability to achieve its investment objective.
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“Synthetic” convertible securities are selected based on the similarity of their economic characteristics to those of a traditional convertible security due to the combination of separate securities that possess the two principal
characteristics of a traditional convertible security, i.e., an income-producing security (“income-producing component”) and the right to acquire an equity security (“convertible component”).
The income-producing component is achieved by investing in non-convertible, income-producing securities such as bonds, preferred stocks and money market instruments, which may be represented by derivative instruments.
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The convertible component is achieved by investing in securities or instruments such as warrants or options to buy common stock at a certain exercise price, or options on a stock index. A simple example of a synthetic convertible security is the combination of a traditional corporate bond with a warrant to purchase equity securities of the issuer of the bond. The income-producing and convertible components of a synthetic convertible security may be issued separately by different issuers and at different times. | |
Preferred Stock Risks. The Fund may invest in preferred stock. Preferred stock represents an equity interest in a company that generally entitles the holder to receive, in preference to the
holders of other stocks such as common stocks, dividends and a fixed share of the proceeds resulting from a liquidation of the company. Preferred stocks may pay fixed or adjustable rates of return. Preferred stock is subject to
issuer-specific and market risks applicable generally to equity securities. In addition, a company’s preferred stock generally pays dividends (if declared) only after the company makes required payments to holders of its bonds and other
debt. For this reason, the value of preferred stock will usually react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition or prospects.
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Preferred stock has properties of both an equity and a debt instrument and is generally considered a hybrid instrument. Preferred stock is senior to common stock, but is subordinate to bonds in terms of claims or rights to their share of the assets of the company. Preferred stocks may be significantly less liquid than many other securities, such as U.S. Government securities, corporate debt and common stock. See “Risks—Preferred Stock Risk.” | |
Foreign Securities Risk. The Fund may invest up to 20% of its total assets in non-U.S. dollar-denominated Income Securities of foreign issuers. Investing in foreign issuers may involve
certain risks not typically associated with investing in securities of U.S. issuers due to increased exposure to foreign economic, political and legal developments, including favorable or unfavorable changes in currency exchange rates,
exchange control regulations (including currency blockage), expropriation or nationalization of assets, imposition of withholding taxes on payments, and possible difficulty in obtaining and enforcing judgments against foreign entities.
Furthermore, issuers of foreign securities and obligations are subject to different, often less comprehensive, accounting, reporting and disclosure requirements than domestic issuers. The securities and obligations of some foreign
companies and foreign markets are less liquid and at times more volatile than comparable U.S. securities, obligations and markets. These risks may be more pronounced to the extent that the Fund invests a significant amount of its assets
in companies located in one region and to the extent that the Fund invests in securities of issuers in emerging markets. The Fund may also invest in U.S. dollar- denominated Income Securities of foreign issuers, which are subject to
many of the risks described above regarding Income Securities of foreign issuers denominated in foreign currencies.
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See “Risks— Foreign Securities Risk.” These risks are heightened under the current conditions. | |
Emerging Markets Risk. The Fund may invest up to 10% of its total assets in Income Securities the issuers of which are located in countries considered to be emerging markets. Investing in
securities in emerging countries generally entails greater risks than investing in securities in developed countries. Securities issued by governments or issuers in emerging market countries are more likely to have greater exposure to
the risks of investing in foreign securities. These risks are elevated under current conditions and include: (1) less social, political and economic stability; (2) the small size of the markets for such securities, limited access to
investments in the event of market closures and the low or nonexistent volume of trading, which result in a lack of liquidity, greater price volatility, and higher risk of failed trades or other trading issues; (3) certain national
policies that may restrict the Fund’s investment opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests; (4) foreign taxation; (5) inflation and rapid fluctuations in interest
rates; (6) currency devaluations; (7) dependence on a few key trading partners; and (8) the absence of developed structures governing private or foreign investment or allowing for judicial redress for investment losses or injury to
private property. Sovereign debt of emerging countries may be in default or present a greater risk of default, the risk of which is heightened given the current conditions. These risks are heightened for investments in frontier markets.
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The Sub-Adviser has broad discretion to identify countries that it considers to qualify as “emerging markets.” In determining whether a country is an emerging market, the Sub-Adviser may take into account specific or general factors that the Sub-Adviser deems to be relevant, including interest rates, inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances and/or legal, social and political developments, as well as whether the country is considered to be emerging or developing by supranational organizations such as the World Bank, the United Nations or other similar entities. Emerging market countries generally will include countries with low gross national product per capita and the potential for rapid economic growth and are likely to be located in Africa, Asia, the Middle East, Eastern and Central Europe and Central and South America. See “Risks—Emerging Markets Risk.” | |
Foreign Currency Risk. The value of securities denominated or quoted in foreign currencies may be adversely affected by fluctuations in the relative currency exchange rates and by exchange
control regulations. The Fund’s investment performance may be negatively affected by a devaluation of a currency in which the Fund’s investments are denominated or quoted. Further, the Fund’s investment performance may be significantly
affected, either positively or negatively, by currency exchange rates because the U.S. dollar value of securities denominated or quoted in another currency will increase or decrease in response to changes in the value of such currency
in relation to the U.S. dollar. See “Risks—Foreign Currency Risk.”
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Sovereign Debt Risk. Investments in sovereign debt involve special risks. Foreign governmental issuers of debt or the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or pay interest when due. In the event of default, there may be limited or no legal recourse in that, generally, remedies for defaults must be pursued in the courts of the defaulting party.
Political conditions, especially a sovereign entity’s willingness to meet the terms of its debt obligations, are of considerable significance. The ability of a foreign sovereign issuer, especially an emerging market country, to make
timely payments on its debt obligations will also be strongly influenced by the sovereign issuer’s balance of payments, including export performance, its access to international credit facilities and investments, fluctuations of
interest rates and the extent of its foreign reserves. See “Risks—Sovereign Debt Risk.”
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Common Equity Securities Risk. The Fund may invest up to 50% of its total assets in Common Equity Securities. Common Equity Securities’ prices fluctuate for a number of
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reasons, including changes in investors’ perceptions of the financial condition of an issuer, the general condition of the relevant stock market and broader domestic and international political and economic events. The prices of Common Equity Securities are also sensitive to general movements in the stock market, so a drop in the stock market may depress the prices of Common Equity Securities to which the Fund has exposure. While broad market measures of Common Equity Securities have historically generated higher average returns than Income Securities, Common Equity Securities have also experienced significantly more volatility in those returns. Equity securities are currently experiencing heightened volatility and therefore, the Fund’s investments in equity securities are subject to heightened risks related to volatility. Common Equity Securities in which the Fund may invest are structurally subordinated to preferred stock, bonds and other debt instruments in a company’s capital structure in terms of priority to corporate income and are therefore inherently more risky than preferred stock or debt instruments of such issuers. | |
Risks Associated with the Fund’s Covered Call Option Strategy. The ability of the Fund to achieve its investment objective is partially dependent on the successful implementation of its
covered call option strategy. There are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A
decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.
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The Fund may write call options on individual securities, securities indices, exchange-traded funds (“ETFs”) and baskets of securities. The buyer of an option acquires the right to buy (a call option) or sell (a put option) a certain
quantity of a security (the underlying security) or instrument, at a certain price up to a specified point in time or on expiration, depending on the terms. The seller or writer of an option is obligated to sell (a call option) or buy
(a put option) the underlying instrument. A call option is “covered” if the Fund owns the instrument underlying the call or has an absolute right to acquire the instrument without additional cash consideration (or, if additional cash
consideration is required, cash or cash equivalents in such amount are segregated by the Fund’s custodian). As a seller of covered call options, the Fund faces the risk that it will forgo the opportunity to profit from increases in the
market value of the security covering the call option during an option’s life. As the Fund writes covered calls over more of its portfolio, its ability to benefit from capital appreciation becomes more limited. For certain types of
options, the writer of the option will have no control over the time when it may be required to fulfill its obligation under the option. There can be no assurance that a liquid market will exist if and when the Fund seeks to close out
an option position. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver the underlying security at the exercise
price.
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The Fund may write exchange-listed and over-the-counter (“OTC”) options. Options written by the Fund with respect to non-U.S. securities, indices or sectors generally will be OTC options. OTC options differ from exchange-listed
options in that they are entered into directly with the buyer of the option and not through an exchange or clearing organization that is interposed between the Fund and the counterparty. In an OTC option transaction exercise price,
premium and other terms are negotiated between buyer and seller. OTC options are subject to heightened counterparty, credit, liquidity and valuation risks.
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Risks of Real Property Asset Companies. The Fund may invest in Income Securities and Common Equity Securities issued by Real Property Asset Companies. Because of the Fund’s ability to make
indirect investments in real estate and in the securities of companies in the real estate industry, it is subject to risks associated with the direct ownership of real estate, including declines in the value of real estate; general and
local
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economic conditions; increased competition; and changes in interest rates. Because of the Fund’s ability to make indirect investments in natural resources and physical commodities, and in Real Property Asset Companies engaged in oil and gas exploration and production, gold and other precious metals, steel and iron ore production, energy services, forest products, chemicals, coal, alternative energy sources and environmental services, as well as related transportation companies and equipment manufacturers, the Fund is subject to risks associated with such real property assets, including supply and demand risk, depletion risk, regulatory risk and commodity pricing risk. See “Risks—Risks of Real Property Asset Companies.” | |
Risks of Personal Property Asset Companies. The Fund may invest in Income Securities and Common Equity Securities issued by Personal Property Asset Companies which invest in personal property
such as special situation transportation assets (e.g., railcars, airplanes and ships) and collectibles (e.g., antiques, wine and fine art). The risks of special situation transportation assets include cyclicality of supply and demand
for transportation assets and risk of decline in the value of transportation assets and rental values. The risks of collectible assets include the difficulty in valuing collectible assets, the relative illiquidity of collectible assets,
the prospects of forgery or the inability to assess the authenticity of collectible assets and the high transaction and related costs of purchasing, selling and safekeeping collectible assets. See “Risks—Risks of Personal Property Asset
Companies.”
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Private Securities Risk. The Fund may invest in privately issued Income Securities and Common Equity Securities of both public and private companies. Private Securities have additional risk
considerations than investments in comparable public investments. Whenever the Fund invests in companies that do not publicly report financial and other material information, it assumes a greater degree of investment risk and reliance
upon the Sub-Adviser’s ability to obtain and evaluate applicable information concerning such companies’ creditworthiness and other investment considerations. Certain Private Securities may be illiquid. Because there is often no readily
available trading market for Private Securities, the Fund may not be able to readily dispose of such investments at prices that approximate those at which the Fund could sell them if they were more widely traded. Private Securities are
also more difficult to value. Private Securities that are debt securities generally are of below- investment grade quality, frequently are unrated and present many of the same risks as investing in below-investment grade public debt
securities.
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Investment Funds Risk. As an alternative to holding investments directly, the Fund may also obtain investment exposure to Income Securities and Common Equity Securities by investing up to 30%
of its total assets in Investment Funds. Investments in Investment Funds present certain special considerations and risks not present in making direct investments in Income Securities and Common Equity Securities. Investments in
Investment Funds involve operating expenses and fees that are in addition to the expenses and fees borne by the Fund. Such expenses and fees attributable to the Fund’s investment in another Investment Fund are borne indirectly by Common
Shareholders. Accordingly, investment in such entities involves expense and fee layering. To the extent management fees of Investment Funds are based on total gross assets, it may create an incentive for such entities’ managers to
employ financial leverage, thereby adding additional expense and increasing volatility and risk. A performance-based fee arrangement may create incentives for an adviser or manager to take greater investment risks in the hope of earning
a higher profit participation. Investments in Investment Funds frequently expose the Fund to an additional layer of financial leverage. See “Risks—Investment Funds Risk.”
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Synthetic Investments Risk. The Fund may be exposed to certain additional risks to the extent the Sub-Adviser uses derivatives as a means to synthetically implement the Fund’s investment
strategies. If the Fund enters into a derivative instrument whereby it agrees to receive the return of a security or financial instrument or a basket of securities or
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financial instruments, it will typically contract to receive such returns for a predetermined period of time. During such period, the Fund may not have the ability to increase or decrease its exposure. In addition, such customized derivative instruments will likely be highly illiquid, and it is possible that the Fund will not be able to terminate such derivative instruments prior to their expiration date or that the penalties associated with such a termination might impact the Fund’s performance in a material adverse manner. Furthermore, certain derivative instruments contain provisions giving the counterparty the right to terminate the contract upon the occurrence of certain events. If a termination were to occur, the Fund’s return could be adversely affected as it would lose the benefit of the indirect exposure to the reference securities and it may incur significant termination expenses. See “Risks—Synthetic Investments Risk.” | |
Inflation/Deflation Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As
inflation increases, the real value of the Common Shares and distributions can decline. In addition, during any periods of rising inflation, the dividend rates or borrowing costs associated with the Fund’s use of Financial Leverage
would likely increase, which would tend to further reduce returns to Common Shareholders. Deflation risk is the risk that prices throughout the economy decline over time—the opposite of inflation. Deflation may have an adverse effect on
the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Fund’s portfolio.
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Market Discount Risk. The Fund’s Common Shares have traded both at a premium and at a discount in relation to net asset value. The Fund cannot predict whether the Common Shares will trade in
the future at a premium or discount to net asset value. The Fund’s Common Shares have recently traded at a premium to net asset value per share, which may not be sustainable. If the Common Shares
are trading at a premium to net asset value at the time you purchase Common Shares, the net asset value per share of the Common Shares purchased will be less than the purchase price paid. Shares of closed-end investment companies
frequently trade at a discount from net asset value, but in some cases have traded above net asset value. The risk of the Common Shares trading at a discount is a risk separate from the risk of a decline in the Fund’s net asset value as
a result of the Fund’s investment activities. The Fund’s net asset value will be reduced immediately following an offering of the Common Shares due to the costs of such offering, which will be borne entirely by the Fund. The sale of
Common Shares by the Fund (or the perception that such sales may occur) may have an adverse effect on prices of Common Shares in the secondary market. An increase in the number of Common Shares available may put downward pressure on the
market price for Common Shares. The Fund may, from time to time, seek the consent of Common Shareholders to permit the issuance and sale by the Fund of Common Shares at a price below the Fund’s then current net asset value, subject to
certain conditions, and such sales of Common Shares at price below net asset value, if any, may increase downward pressure on the market price for Common Shares. These sales, if any, also might make it more difficult for the Fund to
sell additional Common Shares in the future at a time and price it deems appropriate.
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Whether a Common Shareholder will realize a gain or loss upon the sale of Common Shares depends upon whether the market value of the Common Shares at the time of sale is above or below the price the Common Shareholder paid, taking
into account transaction costs for the Common Shares, and is not directly dependent upon the Fund’s net asset value. Because the market value of the Common Shares will be determined by factors such as the relative demand for and supply
of the shares in the market, general market conditions and other factors outside the Fund’s control, the Fund cannot predict whether the Common Shares will trade at, below or above net asset value, or at, below or above the public
offering price for the Common Shares. Common Shares of the Fund are designed primarily for long-term investors; investors in Common Shares should not view the Fund as a vehicle for trading purposes.
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Dilution Risk. The voting power of current Common Shareholders will be diluted to the extent that current Common Shareholders do not purchase Common Shares in any future offerings of Common
Shares or do not purchase sufficient Common Shares to maintain their percentage interest. If the Fund is unable to invest the proceeds of such offering as intended, the Fund’s per Common Share distribution may decrease and the Fund may
not participate in market advances to the same extent as if such proceeds were fully invested as planned. If the Fund sells Common Shares at a price below net asset value pursuant to the consent of Common Shareholders, shareholders will
experience a dilution of the aggregate net asset value per Common Share because the sale price will be less than the Fund’s then-current net asset value per Common Share. Similarly, were the expenses of the offering to exceed the amount
by which the sale price exceeded the Fund’s then current net asset value per Common Share, shareholders would experience a dilution of the aggregate net asset value per Common Share. This dilution will be experienced by all
shareholders, irrespective of whether they purchase Common Shares in any such offering. See “Description of Capital Structure— Common Shares— Issuance of Additional Common Shares.”
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Financial Leverage Risk. Although the use of Financial Leverage by the Fund may create an opportunity for increased after-tax total return for the Common Shares, it also results in additional
risks and can magnify the effect of any losses. If the income and gains earned on securities purchased with Financial Leverage proceeds are greater than the cost of Financial Leverage, the Fund’s return will be greater than if Financial
Leverage had not been used. Conversely, if the income or gains from the securities purchased with such proceeds does not cover the cost of Financial Leverage, the return to the Fund will be less than if Financial Leverage had not been
used. There can be no assurance that a leveraging strategy will be implemented or that it will be successful during any period during which it is employed.
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Financial Leverage involves risks and special considerations for shareholders, including the likelihood of greater volatility of net asset value and market price of and dividends on the Common Shares than a comparable portfolio
without leverage; the risk that fluctuations in interest rates on Borrowings or in the dividend rate on any Preferred Shares that the Fund must pay will reduce the return to the Common Shareholders; and the effect of Financial Leverage
in a declining market, which is likely to cause a greater decline in the net asset value of the Common Shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the Common Shares.
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Because the fees received by the Investment Adviser and Sub-Adviser are based on the Managed Assets of the Fund (including the proceeds of any Financial Leverage), the Investment Adviser and Sub-Adviser have a financial incentive for
the Fund to utilize Financial Leverage, which may create a conflict of interest between the Investment Adviser and the Sub-Adviser on the one hand and the Common Shareholders on the other. Common Shareholders bear the portion of the
investment advisory fee attributable to the assets purchased with the proceeds of Financial Leverage, which means that Common Shareholders effectively bear the entire advisory fee. In order to manage this conflict of interest, the Board
of Trustees will receive regular reports from the Adviser regarding the Fund’s use of Financial Leverage and the effect of Financial Leverage on the management of the Fund’s portfolio and the performance of the Fund.
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Borrowings may subject the Fund to covenants in credit agreements relating to asset coverage and portfolio composition requirements. Borrowings by the Fund also may subject the Fund to certain restrictions on investments imposed by
guidelines of one or more rating agencies, which may issue ratings for such Indebtedness. Such guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act.
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Reverse repurchase agreements involve the risks that the interest income earned on the investment of the proceeds will be less than the interest expense and Fund expenses
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associated with the repurchase agreement, that the market value of the securities sold by the Fund may decline below the price at which the Fund is obligated to repurchase such securities and that the securities may not be returned to the Fund. There is no assurance that reverse repurchase agreements can be successfully employed. Dollar roll transactions involve the risk that the market value of the securities the Fund is required to purchase may decline below the agreed upon repurchase price of those securities. Successful use of dollar rolls may depend upon the Adviser’s ability to correctly predict interest rates and prepayments. There is no assurance that dollar rolls can be successfully employed. In connection with reverse repurchase agreements and dollar rolls, the Fund will also be subject to counterparty risk with respect to the purchaser of the securities. If the broker/dealer to whom the Fund sells securities becomes insolvent, the Fund’s right to purchase or repurchase securities may be restricted. | |
The Fund may engage in certain derivatives transactions that have economic characteristics similar to leverage. To the extent the terms of any such transaction obligate the Fund to make payments, the Fund intends to earmark or
segregate cash or liquid securities in an amount at least equal to the current value of the amount then payable by the Fund under the terms of such transaction or otherwise cover such transaction in accordance with applicable
interpretations of the staff of the SEC. To the extent the terms of any such transaction obligate the Fund to deliver particular securities to extinguish the Fund’s obligations under such transactions, the Fund may “cover” its
obligations under such transaction by either (i) owning the securities or collateral underlying such transactions or (ii) having an absolute and immediate right to acquire such securities or collateral without additional cash
consideration (or, if additional cash consideration is required, having earmarked or segregated cash or liquid securities). Securities so segregated or designated as “cover” will be unavailable for sale by the Adviser (unless replaced
by other securities qualifying for segregation or cover requirements), which may adversely affect the ability of the Fund to pursue its investment objective.
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Recent economic and market events have contributed to severe market volatility and caused severe liquidity strains in the credit markets. If dislocations in the credit markets continue, the Fund’s leverage costs may increase and
there is a risk that the Fund may not be able to renew or replace existing leverage on favorable terms or at all. If the cost of leverage is no longer favorable, or if the Fund is otherwise required to reduce its leverage, the Fund may
not be able to maintain distributions on Common Shares at historical levels and Common Shareholders will bear any costs associated with selling portfolio securities.
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The Fund’s total Financial Leverage may vary significantly over time. To the extent the Fund increases its amount of Financial Leverage outstanding, it will be more exposed to these risks. See “Risks— Leverage Risk.”
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Derivatives Transactions Risk. The Fund may engage in various derivatives transactions for hedging and risk management purposes, to facilitate portfolio management and to earn income or
enhance total return. The use of derivatives transactions to earn income or enhance total return may be particularly speculative. Derivatives transactions involve risks. There may be imperfect correlation between the value of derivative
instruments and the underlying assets. Derivatives transactions may be subject to risks associated with the possible default of the other party to the transaction. Derivative instruments may be illiquid. Certain derivatives transactions
may have economic characteristics similar to leverage, in that relatively small market movements may result in large changes in the value of an investment. Certain derivatives transactions that involve leverage can result in losses that
greatly exceed the amount originally invested. Furthermore, the Fund’s ability to successfully use derivatives transactions depends on the Adviser’s ability to predict pertinent securities prices, interest rates, currency exchange rates
and other economic factors, which cannot be assured. The use of derivatives transactions may result in losses greater than if they had not been used, may require the Fund to sell or purchase portfolio
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securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the Fund can realize on an investment or may cause the Fund to hold a security that it might otherwise sell. Derivatives transactions involve risks of mispricing or improper valuation. The documentation governing a derivative instrument or transaction may be unfavorable or ambiguous. Derivatives transactions may involve commissions and other costs, which may increase the Fund’s expenses and reduce its return. | |
Various legislative and regulatory initiatives may impact the availability, liquidity and cost of derivative instruments, limit or restrict the ability of the Fund to use certain derivative instruments or transact with certain
counterparties as a part of its investment strategy, increase the costs of using derivative instruments or make derivative instruments less effective. In connection with certain derivatives transactions, the Fund may be required to
segregate liquid assets or otherwise cover such transactions. The Fund may earn a lower return on its portfolio than it might otherwise earn if it did not have to segregate assets in respect of, or otherwise cover, its derivatives
transactions positions. Segregating assets and covering positions will not limit or offset losses on related positions.
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Swap Risk. The Fund may enter into swap transactions, including credit default swaps, total return swaps, index swaps, currency swaps, commodity swaps and interest rate swaps, as well as
options thereon, and may purchase or sell interest rate caps, floors and collars. If the Adviser is incorrect in its forecasts of market values, interest rates or currency exchange rates, the investment performance of the Fund may be
less favorable than it would have been if these investment techniques were not used. Such transactions are subject to market risk, risk of default by the other party to the transaction and risk of imperfect correlation between the value
of such instruments and the underlying assets and may involve commissions or other costs. Swaps generally do not involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to
swaps generally is limited to the net amount of payments that the Fund is contractually obligated to make, or in the case of the other party to a swap defaulting, the net amount of payments that the Fund is contractually entitled to
receive. Swaps may effectively add leverage to the Fund’s portfolio because the Fund would be subject to investment exposure on the full notional amount of the swap.
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When the Fund acts as a seller of a credit default swap agreement with respect to a debt security, it is subject to the risk that an adverse credit event may occur with respect to the issuer of the debt security and the Fund may be
required to pay the buyer the full notional value of the debt security under the swap net of any amounts owed to the Fund by the buyer under the swap (such as the buyer’s obligation to deliver the debt security to the Fund). As a
result, the Fund bears the entire risk of loss due to a decline in value of a referenced debt security on a credit default swap it has sold if there is a credit event with respect to the issuer of the security. If the Fund is a buyer of
a credit default swap and no credit event occurs, the Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the Fund generally may elect to receive the full notional value of the
swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased.
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The swap market has become more standardized in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation.
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As a result, some swaps have become relatively liquid. Although the swap market has become liquid, certain types of derivatives products, such as caps, floors and collars may be less liquid than swaps in general. Further regulatory
developments in the swap market may adversely impact the swap market generally or the Fund’s ability to use swaps.
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Counterparty Risk. Counterparty risk is the risk that a counterparty to a Fund transaction (e.g., prime brokerage or securities lending arrangement or
derivatives transaction) will be unable or unwilling to perform its contractual obligation to the Fund. The Fund is exposed to credit risks that the counterparty may be unwilling or unable to make timely payments or otherwise meet its
contractual obligations. If the counterparty becomes bankrupt or defaults on (or otherwise becomes unable or unwilling to perform, the risk of which is particularly acute under current conditions) its payment or other obligations to the
Fund, the Fund may not receive the full amount that it is entitled to receive or may experience delays in recovering the collateral or other assets held by, or on behalf of, the counterparty.
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The Fund bears the risk that counterparties may be adversely affected by legislative or regulatory changes, adverse market conditions (such as the current conditions), increased competition, and/or wide scale credit losses resulting
from financial difficulties of the counterparties’ other trading partners or borrowers.
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Portfolio Turnover Risk. The Fund’s annual portfolio turnover rate may vary greatly from year to year. Portfolio turnover rate is not considered a limiting factor in the execution of
investment decisions for the Fund. A higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional expenses that are borne by the Fund. High portfolio turnover may result in an increased
realization of net short-term capital gains by the Fund which, when distributed to Common Shareholders, will be taxable as ordinary income. Additionally, in a declining market, portfolio turnover may create realized capital losses.
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U.S. Government Securities Risk. Different types of U.S. government securities have different relative levels of credit risk depending on the nature of the particular government support for
that security. U.S. government securities may be supported by: (i) the full faith and credit of the United States government; (ii) the ability of the issuer to borrow from the U.S. Treasury; (iii) the credit of the issuing agency,
instrumentality or government-sponsored entity (“GSE”); (iv) pools of assets (e.g., mortgage-backed securities); or (v) the United States in some other way. The U.S. government and its agencies
and instrumentalities do not guarantee the market value of their securities, which may fluctuate in value and are subject to investment risks, and certain U.S. government securities may not be backed by the full faith and credit of the
United States government. Any downgrades of the U.S. credit rating could increase volatility in both stock and bond markets, result in higher interest rates and higher Treasury yields and increase the costs of all debt generally. The
value of U.S. government obligations may be adversely affected by changes in interest rates. It is possible that the issuers of some U.S. government securities will not have the funds to timely meet their payment obligations in the
future and there is a risk of default. For certain agency and GSE issued securities, there is no guarantee the U.S. government will support the agency or GSE if it is unable to meet its obligations.
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UK Departure from EU (“Brexit”) Risk. On January 31, 2020, the United Kingdom officially withdrew from the European Union (“EU”) and the two sides entered into a transition phase, scheduled
to conclude on December 31, 2020, where the United Kingdom effectively remains in the EU from an economic perspective, but no longer has any political representation in the EU parliament. During this transition phase, which could be
extended beyond December of 2020, the United Kingdom is expected to negotiate a new trade deal with the EU. Due to political uncertainty, it is not possible to anticipate whether the United Kingdom and the EU will be able to agree and
implement a new trade agreement or what the nature of such trade arrangement will be. Throughout the withdrawal process and afterward, the impact on the United Kingdom and Economic and Monetary Union and the broader global economy is
unknown but could be significant and could result in increased volatility and illiquidity and potentially lower economic growth. The political divisions surrounding Brexit within the United Kingdom, as well as those between the UK and
the EU, may also have a destabilizing impact on the
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economy and currency of the United Kingdom and the EU. Any further exits from member states of the EU, or the possibility of such exits, would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties. | |
In addition to the effects on the Fund’s investments in European issuers, the unavoidable uncertainties and events related to Brexit could negatively affect the value and liquidity of the Fund’s other investments, increase taxes and
costs of business and cause volatility in currency exchange rates and interest rates. Brexit could adversely affect the performance of contracts in existence at the date of Brexit and European, UK or worldwide political, regulatory,
economic or market conditions and could contribute to instability in political institutions, regulatory agencies and financial markets. Brexit could also lead to legal uncertainty and politically divergent national laws and regulations
as a new relationship between the UK and EU is defined and as the UK determines which EU laws to replace or replicate. In addition, Brexit could lead to further disintegration of the EU and related political stresses (including those
related to sentiment against cross border capital movements and activities of investors like the Fund), prejudice to financial services businesses that are conducting business in the EU and which are based in the UK, legal uncertainty
regarding achievement of compliance with applicable financial and commercial laws and regulations in view of the expected steps to be taken pursuant to or in contemplation of Brexit. Any of these effects of Brexit, and others that
cannot be anticipated, could adversely affect the Fund’s business, results of operations and financial condition.
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Redenomination Risk. The result of Brexit, the progression of the European debt crisis and the possibility of one or more Eurozone countries exiting the European Monetary Union (“EMU”), or
even the collapse of the euro as a common currency, has created significant volatility in currency and financial markets generally. The effects of the collapse of the euro, or of the exit of one or more countries from the EMU, on the
U.S. and global economies and securities markets are impossible to predict and any such events could have a significant adverse impact on the value and risk profile of the Fund’s portfolio. Any partial or complete dissolution of the EMU
could have significant adverse effects on currency and financial markets, and on the values of the Fund’s portfolio investments. If one or more EMU countries were to stop using the euro as its primary currency, the Fund’s investments in
such countries may be redenominated into a different or newly adopted currency. As a result, the value of those investments could decline significantly and unpredictably. In addition, securities or other investments that are
redenominated may be subject to foreign currency risk, liquidity risk and valuation risk to a greater extent than similar investments currently denominated in euros. To the extent a currency used for redenomination purposes is not
specified in respect of certain EMU- related investments, or should the euro cease to be used entirely, the currency in which such investments are denominated may be unclear, making such investments particularly difficult to value or
dispose of. The Fund may incur additional expenses to the extent it is required to seek judicial or other clarification of the denomination or value of such securities.
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Legislation and Regulation Risk. At any time after the date hereof, legislation may be enacted that could negatively affect the issuers in which the Fund invests. Changing approaches to
regulation may also have a negative impact on issuers in which the Fund invests. In addition, legislation or regulation may change the way in which the Fund is regulated. There can be no assurance that future legislation, regulation or
deregulation will not have a material adverse effect on the Fund or will not impair the ability of the Fund to achieve its investment objective.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law in July 2010, has resulted in significant revisions to the U.S. financial regulatory framework. The Dodd-Frank Act covers
a broad range of topics, including, among many others: a reorganization of federal financial regulators; the creation of a process designed to ensure financial system stability and the resolution of
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potentially insolvent financial firms; the enactment of new rules for derivatives trading; the creation of a consumer financial protection watchdog; the registration and regulation of managers of private funds; the regulation of rating agencies; and the enactment of new federal requirements for residential mortgage loans. The regulation of various types of derivative instruments pursuant to the Dodd-Frank Act may adversely affect the Fund or its counterparties. | |
In late November 2019, the SEC published a proposed rulemaking related to the use of derivatives and certain other transactions by registered investment companies that would, if adopted, for the most part rescind the SEC’s asset
segregation and coverage rules and guidance. Instead of complying with current requirements, funds would need to trade derivatives and other transactions that potentially create senior securities (except reverse repurchase agreements)
subject to a value-at-risk (“VaR”) leverage limit, certain other testing requirements and requirements related to board reporting. These new requirements would apply unless a fund qualified as a “limited derivatives user,” as defined in
the SEC’s proposal. Reverse repurchase agreements would be subject to asset coverage requirements, and a fund trading reverse repurchase agreements would need to aggregate the amount of indebtedness associated with the reverse
repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the fund’s asset coverage ratio. Reverse repurchase agreements would not be
included in the calculation of whether a fund is a limited derivatives user, but for funds subject to the VaR testing, reverse repurchase agreements and similar financing transactions would be included for purposes of such testing. The
Adviser cannot predict the effects of these regulations on the Fund’s portfolio. The Adviser intends to monitor developments and seeks to manage the Fund’s portfolio in a manner consistent with achieving the Fund’s investment objective,
but there can be no assurance that it will be successful in doing so.
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The current presidential administration has called for, and in certain instances has begun to implement, significant changes to U.S. fiscal, tax, trade, healthcare, immigration, foreign, and government regulatory policy. In this
regard, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels. Recent events have created a climate of heightened uncertainty and
introduced new and difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications. There has been a corresponding meaningful increase in the uncertainty surrounding interest rates, inflation, foreign
exchange rates, trade volumes and fiscal and monetary policy. To the extent the U.S. Congress or the current presidential administration implements changes to U.S. policy, those changes may impact, among other things, the U.S. and
global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation and other areas. Some particular areas identified as subject to potential change,
amendment or repeal include the Dodd-Frank Act, including the Volcker Rule and various swaps and derivatives regulations, credit risk retention requirements and the authorities of the Federal Reserve, the Financial Stability Oversight
Council and the SEC. Although the Fund cannot predict the impact, if any, of these changes to the Fund’s business, they could adversely affect the Fund’s business, financial condition, operating results and cash flows. Until the Fund
knows what policy changes are made and how those changes impact the Fund’s business and the business of the Fund’s competitors over the long term, the Fund will not know if, overall, the Fund will benefit from them or be negatively
affected by them.
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LIBOR Risk. The Fund’s investments and payment obligations may be based on floating rates, such as London Interbank Offer Rate (“LIBOR”), Euro Interbank Offered Rate and other similar types
of reference rates (each, a “Reference Rate”). On July 27, 2017, the Chief Executive of the UK Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that the FCA will no longer persuade nor require banks to submit rates
for the calculation of LIBOR and certain other Reference Rates after 2021. Such
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announcement indicates that the continuation of LIBOR and other Reference Rates on the current basis cannot and will not be guaranteed after 2021. This announcement and any additional regulatory or market changes may have an adverse impact on a Fund or its investments. | |
In advance of 2021, regulators and market participants are expected to work together to identify or develop successor Reference Rates. Additionally, prior to 2021, it is expected that market participants will focus on the transition
mechanisms by which the Reference Rates in existing contracts or instruments may be amended, whether through market wide protocols, fallback contractual provisions, bespoke negotiations or amendments or otherwise. Nonetheless, the
termination of certain Reference Rates presents risks to the Fund. At this time, it is not possible to completely identify or predict the effect of any such changes, any establishment of alternative Reference Rates or any other reforms
to Reference Rates that may be enacted in the UK or elsewhere. The elimination of a Reference Rate or any other changes or reforms to the determination or supervision of Reference Rates could have an adverse impact on the market for or
value of any securities or payments linked to those Reference Rates and other financial obligations held by the Fund or on its overall financial condition or results of operations. In addition, any substitute Reference Rate and any
pricing adjustments imposed by a regulator or by counterparties or otherwise may adversely affect the Fund’s performance and/or NAV.
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The transition process might lead to increased volatility and illiquidity in markets for instruments with terms tied to LIBOR. It could also lead to a reduction in the interest rates on, and the value of, some LIBOR-based investments
and reduce the effectiveness of hedges mitigating risk in connection with LIBOR-based investments. Although some LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative
rate-setting methodology and/or increased costs for certain LIBOR-related instruments or financing transactions, others may not have such provisions and there may be significant uncertainty regarding the effectiveness of any such
alternative methodologies. Additionally, because such provisions may differ across instruments (e.g., hedges versus cash positions hedged), LIBOR’s cessation may give rise to basis risk and render hedges less effective. As the
usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects and related adverse conditions could occur prior to the end of 2021. There also remains uncertainty and risk regarding the willingness and
ability of issuers to include enhanced provisions in new and existing contracts or instruments, notwithstanding significant efforts by the industry to develop robust LIBOR replacement clauses. The effect of any changes to, or
discontinuation of, LIBOR on the Fund will vary depending, among other things, on (1) existing fallback or termination provisions in individual contracts and the possible renegotiation of existing contracts and (2) whether, how, and
when industry participants develop and adopt new reference rates and fallbacks for both legacy and new products and instruments. Fund investments may also be tied to other interbank offered rates and currencies, which also will face
similar issues.
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Certain classes of instruments invested in by the Fund may be more sensitive to LIBOR cessation than others. For example, certain asset classes such as floating rate notes may not contemplate a LIBOR cessation and/or might freeze a
last-published or last-used LIBOR rate for all future payment dates upon a discontinuation of LIBOR. Also, for example, syndicated and other business loans tied to LIBOR may not provide a clear roadmap for LIBOR’s replacement, leaving
any future adjustments to the determination of a quantum of lenders. Securitizations and other asset-backed transactions may experience disruption as a result of inconsistencies between when collateral assets shift from LIBOR and what
rate those assets replace LIBOR with, on the one hand, and when the securitization notes shift from LIBOR and what rate the securitization notes replace LIBOR with.
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Recent Market Developments Risk. Periods of market volatility remain, and may continue to occur in the future, in response to various political, social and economic events both
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within and outside of the United States. These conditions have resulted in, and in many cases continue to result in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with many securities remaining illiquid and of uncertain value. Such market conditions may adversely affect the Fund, including by making valuation of some of the Fund’s securities uncertain and/or result in sudden and significant valuation increases or declines in the Fund’s holdings. If there is a significant decline in the value of the Fund’s portfolio, this may impact the asset coverage levels for the Fund’s outstanding leverage. | |
Risks resulting from any future debt or other economic crisis could also have a detrimental impact on the global economic recovery, the financial condition of financial institutions and the Fund’s business, financial condition and
results of operation. Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices,
among other factors. To the extent uncertainty regarding the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, the Fund’s business, financial condition and results of operations could be
significantly and adversely affected. Downgrades to the credit ratings of major banks could result in increased borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with
respect to certain interest rates, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. Market volatility, rising interest rates and/or unfavorable economic conditions could impair
the Fund’s ability to achieve its investment objective.
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The outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global
economies. As with other serious economic disruptions, governmental authorities and regulators are responding to this crisis with significant fiscal and monetary policy changes, including by providing direct capital infusions into
companies, introducing new monetary programs and considerably lowering interest rates, which, in some cases resulted in negative interest rates. These actions, including their possible unexpected or sudden reversal or potential
ineffectiveness, could further increase volatility in securities and other financial markets, reduce market liquidity, heighten investor uncertainty and adversely affect the value of the Fund’s investments and the performance of the
Fund.
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Increasing Government and other Public Debt Risk. Government and other public debt, including municipal obligations in which the Fund invests, can be adversely affected by large and sudden
changes in local and global economic conditions that result in increased debt levels. Although high levels of government and other public debt do not necessarily indicate or cause economic problems, high levels of debt may create
certain systemic risks if sound debt management practices are not implemented. A high debt level may increase market pressures to meet an issuer’s funding needs, which may increase borrowing costs and cause a government or public or
municipal entity to issue additional debt, thereby increasing the risk of refinancing. A high debt level also raises concerns that the issuer may be unable or unwilling to repay the principal or interest on its debt, which may adversely
impact instruments held by the Fund that rely on such payments. Governmental and quasigovernmental responses to the current economic situation are increasing government and other public debt, which heighten these risks. Unsustainable
debt levels can decline the valuation of currencies, and can prevent a government from implementing effective counter-cyclical fiscal policy during economic downturns or can generate or contribute to an economic downturn.
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When-Issued and Delayed Delivery Transactions Risk. Securities purchased on a when-issued or delayed delivery basis may expose the Fund to counterparty risk of default as well as the risk
that securities may experience fluctuations in value prior to their actual
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delivery. The Fund generally will not accrue income with respect to a when-issued or delayed delivery security prior to its stated delivery date. | |
Purchasing securities on a when-issued or delayed delivery basis can involve the additional risk that the price or yield available in the market when the delivery takes place may not be as favorable as that obtained in the
transaction itself.
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Short Sales Risk. The Fund may make short sales of securities. A short sale is a transaction in which the Fund sells a security it does not own. If the price of the security sold short
increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any
loss will be increased, by the transaction costs incurred by the Fund, including the costs associated with providing collateral to the broker-dealer (usually cash and liquid securities) and the maintenance of collateral with its
custodian. Although the Fund’s gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited. The Fund may have to pay a premium to borrow the securities and must pay any dividends or
interest payable on the securities until they are replaced, which will be expenses of the Fund.
|
|
Repurchase Agreement Risk. A repurchase agreement exposes the Fund to the risk that the party that sells the security may default on its obligation to repurchase it. The Fund may lose money
because it cannot sell the security at the agreed-upon time and price or the security loses value before it can be sold. The Fund may accept a wide variety of underlying securities as collateral for repurchase agreements entered into by
the Fund. Rule 5b-3 under the 1940 Act, stipulates that if a repurchase agreement entered into by a fund is “collateralized fully,” the repurchase agreement is deemed a transaction in the underlying securities and not a separate
security issued to the fund by the selling institution. In order for the repurchase agreement to qualify as “collateralized fully,” the collateral must consist solely of cash items, government securities, securities that are rated in
the highest rating category by at least two NRSROs (or one NRSRO, if that is the only such NRSRO which has issued a rating on the security) or unrated securities which the Adviser deems to be of comparable quality. However, the Fund may
accept collateral in respect of repurchase agreements which do not meet the above criteria, and in such event the repurchase agreement will not be considered “collateralized fully” for purposes of Rule 5b-3. Accepting collateral beyond
the criteria of Rule 5b-3 exposes the Fund to two categories of risks. First, because the Fund’s repurchase agreements which are secured by such collateral are not “collateralized fully” under Rule 5b-3, the repurchase agreement is
considered a separate security issued by the selling institution to the Fund. Accordingly, in addition to the risks of a default or bankruptcy of the selling institution, the Fund must include repurchase agreements that are not
“collateralized fully” under Rule 5b-3 in its calculations of securities issued by the selling institution held by the Fund for purposes of various diversification and concentration requirements applicable to the Fund. In particular, to
the extent a selling institution is a “securities related business” for purposes of Section 12(d)(3) of the 1940 Act and Rule 12d3-1 thereunder, the Fund would not be permitted to hold more than 5% of its total assets in securities
issued by the selling institution, including repurchase agreements that are not “collateralized fully” under Rule 5b-3. While this limitation (as well as other applicable limitations arising under concentration and diversification
requirements) limits the Fund’s exposure to each such selling institution, the Fund will be required to monitor its holdings of such securities and ensure that it complies with the applicable limitations. Second, the collateral
underlying a repurchase agreement that is not “collateralized fully” under Rule 5b-3 may not qualify as permitted or appropriate investments for the Fund under the Fund’s investment strategies and limitations. Accordingly, if a selling
institution defaults and the Fund takes possession of such collateral, the Fund may need to promptly dispose of such collateral (or other securities held by the Fund, if the Fund exceeds a limitation on a permitted investment by virtue
of taking possession of the collateral). In cases of market turmoil (which may be associated with a default or bankruptcy of a selling
|
institution), the Fund may have more difficulty than anticipated in selling such securities and/or in avoiding a loss on the sale of such securities. This risk may be more acute in the case of a selling institution’s insolvency or bankruptcy, which may restrict the Fund’s ability to dispose of collateral received from the selling institution. The Adviser follows various procedures to monitor the liquidity and quality of any collateral received under a repurchase agreement (as well as the credit quality of each selling institution) designed to minimize these risks, but there can be no assurance that the procedures will be successful in doing so. | |
Securities Lending Risk. The Fund may lend its portfolio securities to banks or dealers which meet the creditworthiness standards established by the Board of Trustees. Securities lending is
subject to the risk that loaned securities may not be available to the Fund on a timely basis and the Fund may therefore lose the opportunity to sell the securities at a desirable price. Any loss in the market price of securities loaned
by the Fund that occurs during the term of the loan would be borne by the Fund and would adversely affect the Fund’s performance. Also, there may be delays in recovery, or no recovery, of securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially while the loan is outstanding.
|
|
Risk of Failure to Qualify as a RIC. To qualify for the favorable U.S. federal income tax treatment generally accorded to RICs, the Fund must, among other things, derive in each taxable year
at least 90% of its gross income from certain prescribed sources, meet certain asset diversification tests and distribute for each taxable year at least 90% of its “investment company taxable income” (generally, ordinary income plus the
excess, if any, of net short-term capital gain over net long-term capital loss). If for any taxable year the Fund does not qualify as a RIC, all of its taxable income for that year (including its net capital gain) would be subject to
tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions would be taxable as ordinary dividends to the extent of the Fund’s current and accumulated earnings and profits.
|
|
Conflicts of Interest Risk. Guggenheim Partners is a global asset management and investment advisory organization. Guggenheim Partners and its affiliates advise clients in various markets and
transactions and purchase, sell, hold and recommend a broad array of investments for their own accounts and the accounts of clients and of their personnel and the relationships and products they sponsor, manage and advise. Accordingly,
Guggenheim Partners and its affiliates may have direct and indirect interests in a variety of global markets and the securities of issuers in which the Fund may directly or indirectly invest. These interests may cause the Fund to be
subject to regulatory limits, and in certain circumstances, these various activities may prevent the Fund from participating in an investment decision. As a result, activities and dealings of Guggenheim Partners and its affiliates may
affect the Fund in ways that may disadvantage or restrict the Fund or be deemed to benefit Guggenheim Partners and its affiliates. From time to time, conflicts of interest may arise between a portfolio manager’s management of the
investments of the Fund on the one hand and the management of other registered investment companies, pooled investment vehicles and other accounts (collectively, “other accounts”) on the other. The other accounts might have similar
investment objectives or strategies as the Fund or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. In certain circumstances, and subject to its fiduciary obligations under the
Investment Advisers Act of 1940 (the “Advisers Act”) and the requirements of the 1940 Act, the Adviser may have to allocate a limited investment opportunity among its clients. The other accounts might also have different investment
objectives or strategies than the Fund. In addition, the Fund may be limited in its ability to invest in, or hold securities of, any companies that the Adviser or its affiliates (or other accounts managed by the Adviser or its
affiliates) control, or companies in which the Adviser or its affiliates have interests or with whom they do business. For example, affiliates of the Adviser may act as underwriter, lead agent or administrative agent for loans or
otherwise participate in the market for loans.
|
Because of limitations imposed by applicable law, the presence of the Adviser’s affiliates in the markets for loans may restrict the Fund’s ability to acquire some loans or affect the timing or price of such acquisitions. To address these conflicts, the Fund and Guggenheim Partners and its affiliates have established various policies and procedures that are reasonably designed to detect and prevent such conflicts and prevent the Fund from being disadvantaged. For additional information about potential conflicts of interest, and the way in which the Adviser and its affiliates address such conflicts, please see “Management of the Fund—Potential Conflicts of Interest” in the SAI. | |
Market Disruption and Geopolitical Risk. The aftermath of the war in Iraq, instability in Afghanistan, Pakistan, Egypt, Libya, Syria, Russia, Ukraine and the Middle East, possible terrorist
attacks in the United States and around the world, growing social and political discord in the United States, the European debt crisis, the response of the international community—through economic sanctions and otherwise—to Russia’s
annexation of the Crimea region of Ukraine and posture vis-a-vis Ukraine, increasingly strained relations between the United States and a number of foreign countries, including traditional allies, such as certain European countries, and
historical adversaries, such as North Korea, Iran, China and Russia, and the international community generally, new and continued political unrest in various countries, such as Venezuela and Spain, the United Kingdom’s pending
withdrawal from the EU and the resulting profound and uncertain impacts on the economic and political future of the United Kingdom, the exit or potential exit of one or more countries from the EU or the EMU, the EU and global financial
markets, further downgrade of U.S. Government securities, the change in the U.S. president and the new administration and other similar events, may have long-term effects on the United States and worldwide financial markets and may
cause further economic uncertainties in the United States and worldwide. The Fund does not know and cannot predict how long the securities markets may be affected by these events and the effects of these and similar events in the future
on the U.S. economy and securities markets. The Fund may be adversely affected by abrogation of international agreements and national laws which have created the market instruments in which the Fund may invest, failure of the designated
national and international authorities to enforce compliance with the same laws and agreements, failure of local, national and international organization to carry out their duties prescribed to them under the relevant agreements,
revisions of these laws and agreements which dilute their effectiveness or conflicting interpretation of provisions of the same laws and agreements. The Fund may be adversely affected by uncertainties such as terrorism, international
political developments, and changes in government policies, taxation, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of the countries in which it is
invested and the risks associated with financial, economic, health, labor and other global market developments and disruptions.
|
|
The Fund and its service providers are currently impacted by quarantines and similar measures being enacted by governments in response to COVID-19, which are obstructing the regular functioning of business workforces (including
requiring employees to work from external locations and their homes). Accordingly, certain risks described above are heightened under current conditions.
|
|
Technology Risk. As the use of Internet technology has become more prevalent, the Fund and its service providers and markets generally have become more susceptible to potential operational
risks related to intentional and unintentional events that may cause the Fund or a service provider to lose proprietary information, suffer data corruption or lose operational capacity. There can be no guarantee that any risk management
systems established by the Fund, its service providers, or issuers of the securities in which the Fund invests to reduce technology and cyber security risks will succeed, and the Fund cannot control such systems put in place by service
providers, issuers or other third parties whose operations may affect the Fund.
|
Cyber Security Risk. The Fund and its service providers are susceptible to cyber security risks that include, among other things, theft, unauthorized monitoring, release, misuse, loss,
destruction or corruption of confidential and highly restricted data; denial of service attacks; unauthorized access to relevant systems, compromises to networks or devices that the Fund and its service providers use to service the
Fund’s operations; or operational disruption or failures in the physical infrastructure or operating systems that support the Fund and its service providers. Cyber attacks against or security breakdowns of the Fund or its service
providers may adversely impact the Fund and its stockholders, potentially resulting in, among other things, financial losses; the inability of Fund stockholders to transact business and the Fund to process transactions; inability to
calculate the Fund’s NAV; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation costs; and/or additional compliance costs. The Fund may incur additional
costs for cyber security risk management and remediation purposes. In addition, cyber security risks may also impact issuers of securities in which the Fund invests, which may cause the Fund’s investment in such issuers to lose value.
There can be no assurance that the Fund or its service providers will not suffer losses relating to cyber attacks or other information security breaches in the future.
|
|
Anti-Takeover Provisions in the Fund’s Governing Documents
|
The Fund’s Agreement and Declaration of Trust and Bylaws (collectively, the “Governing Documents”) include provisions that could limit the ability of other entities or persons to acquire control of the Fund or convert the Fund to an
open-end fund. These provisions could have the effect of depriving the Common Shareholders of opportunities to sell their Common Shares at a premium over the then-current market price of the Common Shares. See “Anti-Takeover and Other
Provisions in the Fund’s Governing Documents” and “Risks—Anti- Takeover Provisions.”
|
Administrator, Custodian, Transfer Agent and Dividend Disbursing Agent
|
The Bank of New York Mellon serves as the custodian of the Fund’s assets pursuant to a custody agreement. Under the custody agreement, the custodian holds the Fund’s assets in compliance with the 1940 Act. For its services, the
custodian will receive a monthly fee based upon, among other things, the average value of the total assets of the Fund, plus certain charges for securities transactions.
|
Computershare Inc. serves as the Fund’s dividend disbursing agent, transfer agent and registrar with respect to the Common Shares of the Fund, and Computershare Trust Company, N.A. serves as agent under the Fund’s Dividend
Reinvestment Plan (the “Plan Agent”).
|
|
MUFG Investor Services (US) LLC (formerly Rydex Fund Services, LLC) (“MUFG”) serves as the Fund’s administrator. Pursuant to an administration agreement with the Fund, MUFG provides certain administrative, bookkeeping and accounting
services to the Fund. MUFG also provides certain fund accounting services to the Fund pursuant to a fund accounting agreement.
|
|
Shareholder Transaction Expenses
|
|
Sales load (as a percentage of offering price)
|
—(1)
|
Offering expenses borne by the Fund (as a percentage of offering price)
|
0.60%(1),(2)
|
Dividend Reinvestment Plan fees(3)
|
None
|
Annual Expenses
|
Percentage of Average Net Assets Attributable to Common Shares(4)
|
Management fee(5)
|
1.00%
|
Interest expense(6)
|
0.04%
|
Acquired fund fees and expenses(7)
|
0.08%
|
Other expenses(8)
|
0.17%
|
Total annual expenses(9)
|
1.29%
|
(1) |
If Common Shares to which this Prospectus relates are sold to or through underwriters, the Prospectus Supplement will set forth any applicable sales load and the estimated offering expenses borne by the Fund.
|
(2) |
The Adviser has incurred on behalf of the Fund all costs associated with the Fund’s registration statement and any offerings pursuant to such registration statement. The Fund has agreed, in connection with offerings under this
registration statement, to reimburse the Adviser for offering expenses incurred by the Adviser on the Fund’s behalf in an amount up to the lesser of the Fund’s actual offering costs or 0.60% of the total offering price of the Common
Shares sold in such offerings. Amounts in excess of 0.60% of the total offering price of shares sold pursuant to this registration statement will not be subject to recoupment from the Fund. The expense limitation agreement will be in
effect for the life of the registration statement with respect to all Common Shares sold pursuant to the registration statement and may only be terminated by the Board of Trustees of the Fund.
|
(3) |
You will pay brokerage charges if you direct the Plan Agent to sell your Common Shares held in a dividend reinvestment account. See “Dividend Reinvestment Plan.”
|
(4) |
Based upon average net assets applicable to Common Shares during the year ended May 31, 2020.
|
(5) |
The Fund pays the Investment Adviser a fee, payable monthly in arrears at an annual rate equal to 1.00% of the Fund’s average daily Managed Assets (as defined herein). The fee shown above is
based upon outstanding Financial Leverage of 8.7% of the Fund’s Managed Assets. If Financial Leverage of more than 8.7% of the Fund’s Managed Assets is used, the management fees shown would be higher.
|
(6) |
Includes interest expense on borrowings under the Fund’s committed facility agreement and reverse repurchase agreements, based on the Fund’s outstanding Financial Leverage as of May
31, 2020. The Fund has entered into a committed facility agreement pursuant to which it may borrow up to $80 million. As of May 31, 2020, outstanding Borrowings under the committed facility agreement were $19.3 million, which
represented approximately 2.7% of the Fund’s Managed Assets as of such date. In addition, as of May 31, 2020, the Fund had reverse repurchase agreements outstanding representing Financial Leverage equal to approximately 6.0% of the
Fund’s Managed Assets. As of May 31, 2020, the Fund’s total Financial Leverage represented approximately 8.7% of the Fund’s Managed Assets. The cost of Financial Leverage, including the portion of the investment advisory fee
attributable to the assets purchased with the proceeds of Financial Leverage, is borne by Common Shareholders. The actual amount of interest payments on borrowed funds and interest expense on reverse repurchase agreements borne by the
Fund will vary over time in accordance with the level of the Fund’s use of Borrowings and reverse repurchase agreements and variations in market interest rates.
|
(7) |
Acquired Fund Fees and Expenses are based on estimated amounts for the current fiscal year, reflecting the fees and expenses borne by the Fund as an investor in other investment companies during the most recently completed fiscal
year and the expected investment of the proceeds of this offering.
|
(8) |
Other expenses are estimated based upon those incurred during the fiscal year ended May 31, 2020.
|
(9)
|
The Total Annual Fund Operating Expenses in this fee table may not correlate to the expense ratios in the Fund’s financial highlights and financial statements because the financial highlights and financial statements reflect only the
operating expenses of the Fund and do not include Acquired Fund Fees and Expenses, which are fees and expenses incurred indirectly by the Fund through its investments in certain underlying investment companies.
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
|
Total Expenses Incurred(1)
|
$13
|
$41
|
$71
|
$156
|
* |
The Example should not be considered a representation of future expenses or returns. Actual expenses may be higher or lower than those assumed. Moreover, the Fund’s actual rate of return may be higher
or lower than the hypothetical 5% return shown in the Example. The Example assumes that all dividends and distributions are reinvested at net asset value.
|
(1) |
The example above does not include sales loads or estimated offering costs. In connection with an offering of Common Shares, the Prospectus Supplement will set forth an Example including sales load and estimated offering costs.
|
Per share data
|
For the Year Ended
May 31, 2020
|
For the Year Ended
May 31, 2019
|
For the Year Ended
May 31, 2018 |
For the Year Ended
May 31, 2017
|
Net asset value, beginning of period
|
$17.91
|
$19.12
|
$19.78
|
$17.50
|
Income from investment operations
|
||||
Net investment income(a)
|
0.89
|
0.97
|
1.23
|
1.61
|
Net gain (loss) on investments (realized and unrealized)
|
(1.32)
|
0.01
|
0.30
|
2.86
|
Total from investment operations
|
(0.43)
|
0.98
|
1.53
|
4.47
|
Distributions to Common Shareholders
|
||||
From and in excess of net investment income
|
(0.86)
|
(1.12)
|
(2.01)
|
(2.18)
|
Return of capital
|
(1.33)
|
(0.91)
|
—
|
—
|
Capital gains
|
(0.16)
|
(0.18)
|
(0.01)
|
|
Total distributions
|
(2.19)
|
(2.19)
|
(2.19)
|
(2.19)
|
Net asset value, end of period
|
$15.29
|
17.91
|
19.12
|
19.78
|
Market value, end of period
|
$16.20
|
19.96
|
21.29
|
20.94
|
Total investment return(b)
|
||||
Net asset value
|
(2.79)%
|
5.43%
|
8.02%
|
26.76%
|
Market value
|
(7.96)%
|
4.94%
|
13.31%
|
33.33%
|
Ratios and supplemental data
|
||||
Net assets, end of period (in thousands)
|
$648,892
|
$641,825
|
$530,250
|
$410,465
|
Ratios to average net assets applicable to
|
||||
Common Shares:
|
||||
Total expenses, including interest expense(c), (d)
|
1.21%
|
1.17%
|
1.52%
|
2.35%
|
Net investment income, including interest expense
|
5.29%
|
5.26%
|
6.27%
|
8.55%
|
Portfolio turnover
|
41%
|
38%
|
48%
|
41%
|
Senior Indebtedness
|
||||
Borrowings – committed facility agreement (in thousands)
|
$19,300
|
N/A
|
N/A
|
$16,705
|
Asset coverage per $1,000 of borrowings(e)
|
$34,621
|
N/A
|
N/A
|
$25,571
|
Per share data
|
For the Year Ended
May 31, 2016
|
For the Year Ended
May 31, 2015
|
For the Year Ended
May 31, 2014
|
For the Year Ended
May 31, 2013
|
For the Year Ended
May 31, 2012
|
For the Year Ended May 31, 2011
|
Net asset value, beginning of period
|
$19.61
|
$20.56
|
$20.95
|
$19.00
|
$20.11
|
$17.56
|
Income from investment operations
|
||||||
Net investment income(a)
|
1.40
|
1.28
|
1.44
|
1.68
|
1.80
|
1.94
|
Net gain (loss) on investments (realized and unrealized)
|
(1.33)
|
(0.05)
|
0.35
|
2.22
|
(1.06)
|
2.49
|
Total from investment operations
|
0.07
|
1.23
|
1.79
|
3.90
|
0.74
|
4.43
|
Distributions to Common Shareholders
|
||||||
From and in excess of net investment income
|
(1.82)
|
(1.42)
|
(1.82)
|
(1.78)
|
(1.85)
|
(1.88)
|
Return of capital
|
—
|
—
|
—
|
—
|
—
|
—
|
Capital gains
|
(0.36)
|
(0.76)
|
(0.36)
|
(0.17)
|
—
|
—
|
Total distributions
|
(2.18)
|
(2.18)
|
(2.18)
|
(1.95)
|
(1.85)
|
(1.88)
|
Net asset value, end of period
|
17.50
|
19.61
|
20.56
|
20.95
|
19.00
|
20.11
|
Market value, end of period
|
17.61
|
21.21
|
21.83
|
21.91
|
21.08
|
22.32
|
Total investment return(b)
|
||||||
Net asset value
|
0.80%
|
6.39%
|
9.20%
|
21.37%
|
4.09%
|
26.14%
|
Market value
|
-6.07%
|
8.08%
|
10.71%
|
14.10%
|
3.81%
|
40.85%
|
Per share data
|
For the Year Ended
May 31, 2016
|
For the Year Ended
May 31, 2015
|
For the Year Ended
May 31, 2014
|
For the Year Ended
May 31, 2013
|
For the Year Ended
May 31, 2012
|
For the Year Ended May 31, 2011
|
Ratios and supplemental data
|
||||||
Net assets, end of period (in thousands)
|
$310,246
|
$342,988
|
$318,001
|
$286,471
|
$207,346
|
$187,333
|
Ratios to average net assets applicable to
|
||||||
Common Shares:
|
||||||
Total expenses, including interest expense(c), (d)
|
2.38%
|
2.16%
|
2.28%
|
2.47%
|
2.55%
|
2.69%
|
Net investment income, including interest expense
|
7.79%
|
6.44%
|
7.07%
|
8.30%
|
9.45%
|
10.20%
|
Portfolio turnover
|
116%
|
86%
|
95%
|
165%
|
112%
|
64%
|
Senior Indebtedness
|
||||||
Borrowings – committed facility agreement (in thousands)
|
$9,355
|
$45,489
|
$60,789
|
$56,099
|
$30,599
|
$22,433
|
Asset coverage per $1,000 of borrowings(e)
|
$34,164
|
$8,540
|
$6,231
|
$6,107
|
$7,776
|
$9,351
|
(a) |
Based on average shares outstanding.
|
(b) |
Total investment return is calculated assuming a purchase of a Common Share at the beginning of the period and a sale on the last day of the period reported either at net asset value or market price per share. Dividends and
distributions are assumed to be reinvested at net asset value for net asset value returns or the prices obtained under the Fund’s Dividend Reinvestment Plan for market value returns. Total investment return does not reflect brokerage
commissions. A return calculated for a period of less than one year is not annualized.
|
(c) |
The ratios of total expenses to average net assets applicable to common shares do not reflect fees and expenses incurred indirectly by the Fund as a result of its investment in shares of other investment companies. If these fees were
included in the expense ratios, the expense ratios would increase by 0.08%, 0.00%*, 0.00%*, 0.00%*, 0.02%, 0.03%, 0.03%, 0.05%, 0.04%, 0.03% and 0.05% for the years ended May 31, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012 and
2011, respectively.
|
(d) |
Excluding interest expense, the operating expense ratios for the periods ended May 31 would be:
|
2020
|
2019
|
2018
|
2017
|
2016
|
2015
|
2014
|
2013
|
2012
|
2011
|
1.17%
|
1.15%
|
1.33%
|
1.62%
|
1.74%
|
1.72%
|
1.78%
|
1.81%
|
1.78%
|
1.85%
|
(e) |
Calculated by subtracting the Fund’s total liabilities (not including the borrowings) from the Fund’s total assets and dividing by the borrowings.
|
* |
Less than 0.01%
|
Class and Fiscal
Period End
|
Total Principal
Amount Outstanding
|
Asset Coverage Per
Preferred Share/
$1,000 of Borrowings
|
Involuntary
Liquidating
Preference Per
Unit
|
Average
Market Value
Per Unit
|
Borrowings – Committed Facility Agreement
|
||||
May 31, 2020
|
$19,300,000
|
$34,621
|
N/A
|
N/A
|
May 31, 2019
|
$—
|
$—
|
N/A
|
N/A
|
May 31, 2018
|
$—
|
$—
|
N/A
|
N/A
|
May 31, 2017
|
$16,704,955
|
$25,571
|
N/A
|
N/A
|
May 31, 2016
|
$ 9,354,955
|
$34,164
|
N/A
|
N/A
|
May 31, 2015
|
$45,488,955
|
$8,540
|
N/A
|
N/A
|
May 31, 2014
|
$60,788,955
|
$6,231
|
N/A
|
N/A
|
May 31, 2013
|
$56,098,955
|
$6,107
|
N/A
|
N/A
|
May 31, 2012
|
$30,598,955
|
$7,776
|
N/A
|
N/A
|
May 31, 2011
|
$22,432,914
|
$9,351
|
N/A
|
N/A
|
Reverse Repurchase Agreements(1)
|
||||
May 31, 2020
|
$42,445,822
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2019
|
$—
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2018
|
$1,610,022
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2017
|
$91,424,819
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2016
|
$130,570,046
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2015
|
$114,758,163
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2014
|
$75,641,024
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2013
|
$59,473,742
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2012
|
$53,243,041
|
N/A(1)
|
N/A
|
N/A
|
May 31, 2011
|
$47,618,513
|
N/A(1)
|
N/A
|
N/A
|
TALF Program(1)
|
||||
May 31, 2011
|
$10,618,934
|
N/A(1)
|
N/A
|
N/A
|
(1) |
As a result of the Fund having earmarked or segregated cash or liquid securities to collateralize the transactions or otherwise having covered the transactions, in accordance with releases and interpretive letters issued by the SEC,
the Fund does not treat its obligations under such transactions as senior securities representing indebtedness for purposes of the 1940 Act.
|
During Quarter Ended
|
Market Price
|
NAV per Common
Share on Date of Market Price High and Low(1) |
Premium/(Discount) on
Date of Market Price High and Low(2) |
|||
High
|
Low
|
High
|
Low
|
High
|
Low
|
|
August 31, 2020
|
$18.46
|
$16.48
|
$16.15
|
$15.44
|
14.30%
|
6.74%
|
May 31, 2020
|
$18.01
|
$11.82
|
$17.00
|
$15.25
|
5.94%
|
(22.49)%
|
February 29, 2020
|
$19.47
|
$17.08
|
$17.14
|
$16.91
|
13.59%
|
1.01%
|
November 30, 2019
|
$19.77
|
$18.56
|
$17.63
|
$17.46
|
12.14%
|
6.30%
|
August 31, 2019
|
$20.88
|
$19.51
|
$17.81
|
$17.60
|
17.24%
|
10.85%
|
May 31, 2019
|
$20.26
|
$19.18
|
$17.95
|
$17.88
|
12.87%
|
7.27%
|
February 28, 2019
|
$20.46
|
$17.31
|
$18.02
|
$17.83
|
13.54%
|
(2.92%)
|
November 30, 2018
|
$22.21
|
$18.94
|
$19.09
|
$18.38
|
16.34%
|
3.05%
|
August 31, 2018
|
$22.31
|
$21.10
|
$19.14
|
$19.01
|
16.56%
|
10.99%
|
May 31, 2018
|
$21.30
|
$19.91
|
$19.10
|
$19.39
|
11.52%
|
2.68%
|
(1) |
Based on the Fund’s computations.
|
(2) |
Calculated based on the information presented. Percentages are rounded.
|
•
|
In the Sub-Adviser’s judgment, the relative value measure of the instrument no longer indicates that the instrument is cheap relative to similar instruments and a substitution of the instrument with a
similar but cheaper instrument enhances the risk-adjusted return potential of the portfolio.
|
•
|
The Sub-Adviser’s fundamental analysis suggests that the embedded credit risk in an instrument has increased and the instrument no longer properly compensates the holder for this increased risk.
|
•
|
The Sub-Adviser’s fundamental sector allocation decisions result in the rebalancing of existing positions to achieve the Sub-Adviser’s desired sector exposures.
|
•
|
50% of its total assets in Common Equity Securities consisting of common stock;
|
•
|
30% of its total assets in other investment companies, including registered investment companies, private investment funds and/or other pooled investment vehicles;
|
•
|
20% of its total assets in non-U.S. dollar-denominated Income Securities of corporate and governmental issuers located outside the United States; and
|
•
|
10% of its total assets in Income Securities of issuers in emerging markets.
|
•
|
Companies engaged in the ownership, construction, financing, management and/or sale of commercial, industrial and/or residential real estate (or that have assets primarily invested in such real estate),
including real estate investment trusts (“REITs”); and
|
•
|
Companies engaged in energy, natural resources and basic materials businesses and companies engaged in associated businesses. These companies include, but are not limited to, those engaged in businesses
such as oil and gas exploration and production, gold and other precious metals, steel and iron ore production, energy services, forest products, chemicals, coal, alternative energy sources and environmental services, as well as
related transportation companies and equipment manufacturers.
|
Assumed portfolio total return (net of expenses)
|
(10.00)%
|
(5.00)%
|
0.00%
|
5.00%
|
10.00%
|
Common Share total return
|
13.98%
|
6.48%
|
(1.02)%
|
(8.52)%
|
(16.02)%
|
•
|
declines in the value of real estate;
|
•
|
general and local economic conditions;
|
•
|
unavailability of mortgage funds;
|
•
|
overbuilding;
|
•
|
extended vacancies of properties;
|
•
|
increased competition;
|
•
|
increases in property taxes and operating expenses;
|
•
|
changes in zoning laws;
|
•
|
losses due to costs of cleaning up environmental problems and contamination;
|
•
|
limitations on, or unavailability of, insurance on economic terms;
|
•
|
liability to third parties for damages resulting from environmental problems;
|
•
|
casualty or condemnation losses;
|
•
|
limitations on rents;
|
•
|
changes in neighborhood values and the appeal of properties to tenants;
|
•
|
changes in valuation due to the impact of terrorist incidents on a particular property or area, or on a segment of the economy; and
|
•
|
changes in interest rates.
|
•
|
dependence on the Sub-Adviser’s ability to predict correctly movements in the direction of interest rates and securities prices;
|
•
|
imperfect correlation between the price of derivatives and movements in the prices of the securities being hedged;
|
•
|
the fact that skills needed to use these strategies are different from those needed to select portfolio securities;
|
•
|
the possible absence of a liquid secondary market for any particular instrument at any time;
|
•
|
the possible need to defer closing out certain hedged positions to avoid adverse tax consequences;
|
•
|
the possible inability of the Fund to purchase or sell a security at a time that otherwise would be favorable for it to do so, or the possible need for the Fund to sell a security at a disadvantageous
time due to a need for the Fund to maintain “cover” or to segregate securities in connection with the hedging techniques; and
|
•
|
the creditworthiness of counterparties.
|
•
|
no assurance that futures contracts or options on futures can be offset at favorable prices;
|
•
|
possible reduction of the return of the Fund due to their use for hedging;
|
•
|
possible reduction in value of both the securities hedged and the hedging instrument;
|
•
|
imperfect correlation between the contracts and the securities being hedged; and
|
•
|
losses from investing in futures transactions that are potentially unlimited and the segregation requirements for such transactions.
|
Title of Class
|
Amount
Authorized |
Amount Held by the
Fund or for its Account |
Amount Outstanding
|
Common shares of beneficial interest, par value $0.01 per share
|
Unlimited
|
—
|
42,426,020
|
•
|
the merger or consolidation of the Fund or any subsidiary of the Fund with or into any Principal Shareholder;
|
•
|
the issuance of any securities of the Fund to any Principal Shareholder for cash (other than pursuant of any automatic dividend reinvestment plan);
|
•
|
the sale, lease or exchange of all or any substantial part of the assets of the Fund to any Principal Shareholder, except assets having an aggregate fair market value of less than $1,000,000, aggregating
for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period; or
|
•
|
the sale, lease or exchange to the Fund or any subsidiary of the Fund, in exchange for securities of the Fund, of any assets of any Principal Shareholder, except assets having an aggregate fair market
value of less than $1,000,000, aggregating for purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period.
|
(i) |
The Fund must derive in each taxable year at least 90% of its gross income from the following sources: (a) dividends, interest (including tax-exempt interest), payments with respect to certain securities loans, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other income (including gain from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or foreign
currencies; and (b) interests in “qualified publicly traded partnerships” (as defined in the Code). Generally, a qualified publicly traded partnership includes a partnership the interests of which are traded on an established securities
market or readily tradable on a secondary market (or the substantial equivalent thereof).
|
(ii) |
The Fund must diversify its holdings so that, at the end of each quarter of each taxable year (a) at least 50% of the market value of the Fund’s total assets is represented by cash and cash items, U.S. government securities, the
securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets and not more than 10% of the outstanding voting
securities of such issuer and (b) not more than 25% of the market value of the Fund’s total assets is invested in the securities (other than U.S. government securities and the securities of other RICs) of (I) any one issuer, (II) any
two or more issuers that the Fund controls and that are determined to be engaged in the same business or similar or related trades or businesses or (III) any one or more “qualified publicly traded partnerships” (as defined in the Code).
|
(iii) |
The Fund must distribute in each taxable year at least 90% of its investment company taxable income (generally, its ordinary income and the excess of any net short-term capital gain over net long-term capital loss).
|
•
|
the names of any agents, underwriters or dealers;
|
•
|
any sales loads or other items constituting underwriters’ compensation;
|
•
|
any discounts, commissions, or fees allowed or paid to dealers or agents;
|
•
|
the public offering or purchase price of the offered Common Shares and the net proceeds the Fund will receive from the sale; and
|
•
|
any securities exchange on which the offered Common Shares may be listed.
|
•
|
An overallotment in connection with an offering creates a short position in the common stock for the underwriter’s own account.
|
•
|
An underwriter may place a stabilizing bid to purchase the Common Shares for the purpose of pegging, fixing, or maintaining the price of the Common Shares.
|
•
|
Underwriters may engage in syndicate covering transactions to cover overallotments or to stabilize the price of the Common Shares by bidding for, and purchasing, the Common Shares or any other securities
in the open market in order to reduce a short position created in connection with the offering.
|
•
|
The managing underwriter may impose a penalty bid on a syndicate member to reclaim a selling concession in connection with an offering when the Common Shares originally sold by the syndicate member is
purchased in syndicate covering transactions or otherwise.
|
Page
|
|
The Fund
|
S-2
|
Investment Objective and Policies
|
S-2
|
Investment Restrictions
|
S-16
|
Management of the Fund
|
S-17
|
Portfolio Transactions
|
S-37
|
U.S. Federal Income Tax Considerations
|
S-38
|
General Information
|
S-44
|
Financial Statements
|
S-45
|
Appendix A Description of Securities Ratings
|
A-1
|
Appendix B Guggenheim Partners Investment Management, LLC Proxy Voting Policy and Procedures
|
B-1
|
Term of
|
Number of
|
||||
Position(s)
|
Office and
|
Principal
|
Portfolios
|
||
Name,
|
Held
|
Length of
|
Occupation(s)
|
in Fund
|
|
Business Address
|
with the
|
Time
|
During Past Five
|
Complex
|
Other Directorships
|
and Year of Birth*
|
Fund
|
Served**
|
Years
|
Overseen
|
Held by Trustees***
|
INDEPENDENT TRUSTEES:
|
|||||
Randall C. Barnes
(1951)
|
Trustee and
Chair of the Valuation Oversight Committee
|
Since
2007
|
Current: Private Investor
(2001-present).
Former: Senior Vice President
and Treasurer, PepsiCo, Inc.
(1993-1997); President, Pizza
Hut International (1991-1993);
Senior Vice President,
Strategic Planning and New
Business Development,
PepsiCo, Inc. (1987-1990).
|
157
|
Current: Purpose
Investments Funds
(2013-present).
Former: Managed Duration
Investment Grade
Municipal Fund
(2003-2016).
|
Angela Brock-Kyle
(1959)
|
Trustee
|
Since
2019
|
Current: Found and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader TIAA (1987-2012).
|
156
|
Current: Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018).
|
Donald A. Chubb, Jr.
(1946)
|
Trustee
|
Since
2014
|
Current: Retired.
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017).
|
156
|
Current: Midland Care,
Inc. (2011-2016).
|
Jerry B. Farley
(1946)
|
Trustee
|
Since
2014
|
Current: President, Washburn
University (1997-present).
|
156
|
Current: CoreFirst Bank & Trust (2000-present).
Former Westar Energy,
|
Inc. (2004-2018).
|
|||||
Roman Friedrich
III
(1946)
|
Trustee
|
Since
2010
|
Current: Founder and
Managing Partner, Roman
Friedrich & Company
(1998-present).
|
156
|
Former: Zincore Metals,
Inc. (2009-2019).
|
Thomas F. Lydon, Jr.
(1960)
|
Trustee and Chair of the Contracts Review Committee
|
Since
2019
|
Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present).
|
156
|
Current: US Global Investors, Inc. (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019).
|
Term of
|
Number of
|
||||
Position(s)
|
Office and
|
Principal
|
Portfolios
|
||
Name,
|
Held
|
Length of
|
Occupation(s)
|
in Fund
|
|
Business Address
|
with the
|
Time
|
During Past Five
|
Complex
|
Other Directorships
|
and Year of Birth*
|
Fund
|
Served**
|
Years
|
Overseen
|
Held by Trustees***
|
Ronald A. Nyberg
(1953)
|
Trustee and
Chair of the
Nominating
And Governance
Committee
|
Since
2007
|
Current: Partner, Momkus
LLC (2016-present).
Former: Partner, Nyberg &
Cassioppi, LLC (2000-2016);
Executive Vice President,
General Counsel, and
Corporate Secretary, Van
Kampen Investments
(1982-1999)
|
157
|
Current: PPM Funds (9)
(2018-present);
Edward-Elmhurst
Healthcare System (2012-
present).
Former: Western Asset
Inflation-Linked
Opportunities Fund (2004-April 2020); Western Asset
Inflation-Linked Income
Fund (2003-April 2020).
Former: Managed Duration
Investment Grade
Municipal Fund
(2003-2016).
|
Sandra G. Sponem
(1958)
|
Trustee and Chair of the Audit Committee
|
Since 2019
|
Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017).
|
156
|
Current: SPDR Series Trust (78) 2018-present); SPDR Index Shares Funds (31) (2018-present); SSGA Active Trust (12) (2018-present); and SSGA Master Trust (1) (2018-present).
|
Ronald E. Toupin Jr.
|
Trustee,
|
Since
2007
|
Current: Portfolio Consultant (2010-present);
|
156
|
Former: Western Asset
|
(1958)
|
Chair of the Board and Chair of the Executive Committee |
Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive
Committee, Independent
Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset
Management (1998-1999); Vice President, Nuveen
Investment Advisory Corp.
(1992-1999); Vice President
and Manager, Nuveen Unit
Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen
Unit Investment Trusts
(1988-1999), each of John
Nuveen & Co., Inc. (1982-1999).
|
Inflation-Linked Opportunities & Income Fund )(2004-April 2020); Western Asset Inflation-Linked Income Fund (2003-April 2020);
Managed Duration Investment Grade Municipal Fund (2003-2016).
|
Term of
|
Number of
|
||||
Position(s)
|
Office and
|
Principal
|
Portfolios
|
||
Name,
|
Held
|
Length of
|
Occupation(s)
|
in Fund
|
|
Business Address
|
with the
|
Time
|
During Past Five
|
Complex
|
Other Directorships
|
and Year of Birth*
|
Fund
|
Served**
|
Years
|
Overseen
|
Held by Trustees***
|
Amy J. Lee****
(1961)
|
Trustee, Vice
President and
Chief Legal
Officer
|
Since
2018
(Trustee)
Since 2014 (Chief Legal Officer)
Since 2012 (Vice President)
|
Current: Interested Trustee,
certain other funds in the
Fund Complex (2018-
present); Chief Legal Officer, certain
other funds in the Fund
Complex (2014-present);
Vice
President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: President and Chief
Executive Officer,
certain other funds in the Fund Complex (2017-2019); Vice President, Associate
|
156
|
None.
|
General Counsel and Assistant
Secretary, Security Benefit
Life Insurance Company and Security Benefit Corporation (2004-2012).
|
|||||
* |
The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606.
|
** |
Each Trustee serves an indefinite term, until his or her successor is duly elected and qualified, subject to the Fund’s Independent Trustees Retirement Policy.
|
*** |
Each Trustee also serves on the boards of trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Managed
Duration Trust, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Funds and Transparent Value Trust. Messrs. Barnes
and Nyberg also serve on the board of trustees of Advent Convertible & Income Fund. Together with the Fund, these funds are referred to as the “Fund Complex.” Figures provided in parentheses after the name of a fund complex indicate
the number of funds overseen in that complex.
|
**** |
This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Adviser and/or the parent of the Investment Adviser.
|
+
|
Under the Fund’s Independent Trustees Retirement Policy, Messrs. Chubb, Farley and Friedrich are expected to retire in 2021 and are not expected to stand for re-election.
|
Name, Business
|
Term of Office(2) and
|
||
Address(1) and
|
Position(s) held
|
Length of Time
|
Principal Occupation
|
Year of Birth
|
with the Trust
|
Served
|
During the Past Five Years
|
Brian E. Binder
Year of Birth: 1972
|
President and
Chief Executive
Officer
|
Since 2018
|
Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC
(2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative
Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd.
(2010-2012).
|
Bryan Stone
Year of Birth: 1979 |
Vice President
|
Since 2014
|
Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009).
|
Joanna M. Catalucci
Year of Birth: 1966 |
Chief Compliance Officer
|
Since 2012
|
Current: Chief Compliance Officer, certain funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: Anti-Money Laundering Compliance Officer, certain funds in the Fund Complex (2016-2020); Chief Compliance Officer and Secretary, certain
|
other funds in the Fund Complex (2008-2012); Senior Vice President & Chief Compliance Officer, Security Investors, LLC and certain affiliates (2010-2012); Chief Compliance Officer and Senior Vice President, Rydex Advisers, LLC and certain affiliates (2010-2011). | |||
John L. Sullivan
Year of birth: 1955
|
Chief Financial
Officer, Chief
Accounting Officer
and Treasurer
|
Since 2010
|
Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and
Treasurer, Van Kampen Funds (1996-2004).
|
Name, Business
|
Term of Office(2) and
|
||
Address(1) and
|
Position(s) held
|
Length of Time
|
Principal Occupation
|
Year of Birth
|
with the Trust
|
Served
|
During the Past Five Years
|
Mark E. Mathiasen
Year of birth: 1978
|
Secretary
|
Since 2007
|
Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present).
|
Michael P. Megaris
Year of Birth: 1984
|
Assistant Secretary
|
Since 2014
|
Current: Assistant Secretary, certain other funds in the Fund Complex (2014- present); Associate, Guggenheim Investments (2012-present).
|
James M. Howley
Year of birth: 1972
|
Assistant Treasurer
|
Since 2007
|
Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager of Mutual Fund Administration, Van Kampen Investments, Inc. (1996-2004).
|
Kimberly J. Scott
Year of birth: 1974
|
Assistant Treasurer
|
Since 2012
|
Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley
|
Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). | |||
William Rehder
Year of Birth: 1969
|
Assistant Treasurer
|
Since 2019
|
Current: Managing Director, Guggenheim Investments (2002-present).
|
Glen McWhinnie
Year of Birth: 1969 |
Assistant Treasurer
|
Since 2016
|
Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present).
Former: Tax Compliance Manager, Ernst & Young LLP (1996-2009).
|
Jon Szafran
Year of birth: 1989
|
Assistant Treasurer
|
Since 2017
|
Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”) (2017); Senior Analyst of US Fund Administration, HGINA (2014-2017); Senior
Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013).
|
(1) |
The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606.
|
(2) |
Each officer serves at the pleasure of the Board and until his or her successor is appointed and qualified or until his or her resignation or removal.
|
Aggregate
|
Pension or Retirement
|
Total Compensation
|
||
Estimated
|
Benefits Accrued
|
Estimated Annual
|
from the Fund and
|
|
Compensation
|
as Part of
|
Benefits Upon
|
Fund Complex
|
|
Name(1)
|
from the Fund
|
Fund Expenses(2)
|
Retirement(2)
|
Paid to Trustee(3)
|
Independent Trustees:
|
||||
Randall C. Barnes
|
$14,625
|
None
|
None
|
$338,250
|
Angela Brock-Kyle
|
$6,684
|
None
|
None
|
$225,000
|
Donald A. Chubb, Jr.
|
$14,625
|
None
|
None
|
$256,000
|
Dr. Jerry B. Farley
|
$15,728
|
None
|
None
|
$276,000
|
Roman Friedrich III
|
$15,176
|
None
|
None
|
$266,000
|
Thomas Lydon, Jr.
|
$6,684
|
None
|
None
|
$234,000
|
Ronald A. Nyberg
|
$14,901
|
None
|
None
|
$341,000
|
Maynard F. Oliverius(4)
|
None
|
None
|
None
|
$125,000
|
Sandra G. Sponem
|
$7,355
|
None
|
None
|
$279,000
|
Ronald E. Toupin, Jr.
|
$18,626
|
None
|
None
|
$331,000
|
(1) |
Trustees not entitled to compensation are not included in the table.
|
(2) |
The Fund does not accrue or pay retirement or pension benefits to Trustees as of the date of this SAI.
|
(3) |
As of the date of this SAI, the “Fund Complex” consists of seven closed-end funds, including the Fund, and 150 open-end funds. Because the funds in the Fund Complex have different fiscal year ends, the amounts shown in this column
are presented on a calendar year basis.
|
(4) |
Mr. Oliverius retired from the Board of Trustees effective as of April 4, 2019 in accordance with the Independent Trustees Retirement Policy of the Fund.
|
Aggregate Dollar Range of Equity
|
||
Securities in All Registered Investment
|
||
Dollar Range of
|
Companies Overseen by Trustee in
|
|
Name
|
Equity Securities in the Fund
|
Fund Complex(1)
|
Independent Trustees:
|
||
Randall C. Barnes
|
Over $100,000
|
Over $100,000
|
Angela Brock-Kyle
|
None
|
$50,001-$100,000
|
Donald A. Chubb, Jr.
|
$10,001-$50,000
|
Over $100,000
|
Dr. Jerry B. Farley
|
None
|
Over $100,000
|
Roman Friedrich III
|
$50,001-$100,000
|
Over $100,000
|
Thomas Lydon, Jr.
|
None
|
Over $100,000
|
Ronald A. Nyberg
|
$10,001-$50,000
|
Over $100,000
|
Sandra G. Sponem
|
None
|
Over $100,000
|
Ronald E. Toupin, Jr.
|
$50,001-$100,000
|
Over $100,000
|
Interested Trustee:
|
||
Amy J. Lee
|
None
|
Over $100,000
|
(1) |
As of the date of this SAI, the “Fund Complex” consists of seven closed-end funds, including the Fund, and 150 open-end funds. The Fund Complex consists of U.S. registered investment companies
advised or serviced by Guggenheim Funds Investment Advisors, LLC or Guggenheim Funds Distributors, LLC and/or affiliates of such entities.
|
Fiscal Year Ended May 31,
|
|||
2020
|
2019
|
2018
|
|
The Investment Adviser received advisory fees of
|
$6,687,147
|
$5,844,005
|
$5,125,186
|
Fiscal Year Ended May 31,
|
|||
2020
|
2019
|
2018
|
|
The Sub-Adviser received sub-advisory fees of
|
$3,343,574
|
$2,922,003
|
$2,562,593
|
Fiscal Year Ended May 31,
|
|||
2020
|
2019
|
2018
|
|
MUFG received administration fees of
|
$140,307
|
$127,660
|
$116,697
|
Fiscal Year Ended May 31,
|
|||
2020
|
2019
|
2018
|
|
MUFG received fund accounting fees of
|
$140,927
|
$130,309
|
$122,133
|
•
|
The likelihood of payment—the capacity and willingness of the obligor to meet its financial commitments on an obligation in accordance with the terms of the obligation.
|
•
|
The nature of and provisions of the financial obligation, and the promise we impute; and
|
•
|
The protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting
creditors’ rights.
|
* |
Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.
|
•
|
Amortization schedule — the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and
|
•
|
Source of payment — the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.
|
•
|
Preliminary ratings may be assigned to obligations, most commonly structured and project finance issues, pending receipt of final documentation and legal opinions.
|
•
|
Preliminary ratings may be assigned to obligations that will likely be issued upon the obligor’s emergence from bankruptcy or similar reorganization, based on late-stage reorganization plans,
documentation, and discussions with the obligor. Preliminary ratings may also be assigned to the obligors. These ratings consider the anticipated general credit quality of the reorganized or post- bankruptcy issuer as well as
attributes of the anticipated obligation(s).
|
•
|
Preliminary ratings may be assigned to entities that are being formed or that are in the process of being independently established when, in S&P’s opinion, documentation is close to final.
Preliminary ratings may also be assigned to the obligations of these entities.
|
•
|
Preliminary ratings may be assigned when a previously unrated entity is undergoing a well- formulated restructuring, recapitalization, significant financing, or other transformative event, generally at
the point that investor or lender commitments are invited. The preliminary rating may be assigned to the entity and to its proposed obligation(s). These preliminary ratings consider the anticipated general credit quality of the
obligor, as well as attributes of the anticipated obligation(s), assuming successful completion of the transformative event. Should the transformative event not occur, S&P would likely withdraw these preliminary ratings.
|
•
|
A preliminary recovery rating may be assigned to an obligation that has a preliminary issue credit rating.
|
a. |
the issuer has entered into a grace or cure period following non-payment of a material financial obligation;
|
b. |
the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; or
|
c. |
the formal announcement by the issuer or their agent of a distressed debt exchange;
|
d. |
a closed financing vehicle where payment capacity is irrevocably impaired such that it is not expected to pay interest and/or principal in full during the life of the transaction, but where no payment default is imminent
|
a. |
an uncured payment default or distressed debt exchange on a bond, loan or other material financial obligation but
|
b. |
has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and
|
c. |
has not otherwise ceased operating.
|
i. |
the selective payment default on a specific class or currency of debt;
|
ii. |
the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation;
|
iii. |
the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations, either in series or in parallel; or
|
iv. |
execution of a distressed debt exchange on one or more material financial obligations.
|
•
|
Adopt and implement written policies and procedures reasonably designed to ensure that the adviser votes client securities in the best interest of clients; such policies and procedures
must address the manner in which the adviser will resolve material conflicts of interest that can arise during the proxy voting process;
|
•
|
Disclose to clients how they may obtain information from the adviser about how the adviser voted proxies with respect to their securities; and
|
•
|
Describe to clients the adviser’s proxy voting procedures and, upon request, furnish a copy of the policies and procedures.
|
•
|
Oversee GPIM’s proxy voting policies and procedures and ensure that a review of GPIM’s proxy voting policies and procedures is conducted no less frequently than annually;
|
•
|
Determine how GPIM should vote proxies on behalf of clients in certain conflict situations and evaluate recommendations, proposals and issues that may not be covered by the proxy
voting policies and procedures;
|
•
|
Review situations and documentation where Portfolio Managers/Investment Management has determined to override a voting recommendation contrary to the Guidelines; and
|
•
|
Oversee evaluation of GPIM’s third-party proxy advisory firm’s policies and procedures, due diligence and Guidelines on an annual basis.
|
•
|
Refer Proposal to the Client – GPIM may refer the proposal to the client and obtain instructions from the client on how to vote the proxy
relating to that proposal.
|
•
|
Obtain Client Ratification – If GPIM is in a position to disclose the conflict to the client (i.e.,
such information is not confidential), GPIM may determine how it proposes to vote the proposal on which it has a conflict, fully disclose the nature of the conflict to the client, and obtain the client’s consent for how GPIM will vote
on the proposal (or otherwise obtain instructions from the client on how the proxy on the proposal should be voted).
|
•
|
Abstain from Voting
|
•
|
Use another Independent Third Party for All Proposals – Subject to any client imposed proxy voting policies, GPIM may vote all proposals in a
single proxy according to the policies of an independent third party other than ISS (or have the third party vote such proxies).
|
•
|
Use another Independent Third Party to Vote Only the Specific Proposals that Involve a Conflict – Subject to any client imposed proxy voting
policies, GPIM may use an independent third party other than ISS to recommend how the proxy for specific proposals that involve a conflict should be voted (or have the third party vote such proxies).
|
•
|
a copy of this policy;
|
•
|
proxy statements received regarding client securities;
|
•
|
records of votes cast on behalf of clients;
|
•
|
records of how material conflicts were resolved;
|
•
|
any documents prepared by GPIM that were material to making a decision how to vote, or that memorialized the basis for the decision; and
|
•
|
records of client requests for proxy voting information and a copy of any written response by GPIM to any client request (regardless of whether such client request was written or
oral).
|
1 Year Guggenheim Strategic Opp... Chart |
1 Month Guggenheim Strategic Opp... Chart |
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