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, such as
operating results and outlook
and to real or perceived adverse economic and competitive industry
conditions. Generally, the
risks associated with high yield securities are heightened during
times of weakening economic
conditions or rising interest rates (particularly for issuers that
are highly leveraged) and are
therefore heightened under current conditions. If the Fund is
unable to sell an investment at its
desired time, the Fund may miss other investment opportunities
while it holds investments it
would prefer to sell, which could adversely affect the Fund’s
performance. In addition, the
liquidity of any Fund investment may change significantly over time
as a result of market,
economic, trading, issuer-specific and other factors. Accordingly,
the performance of the Fund
and a shareholder’s investment in the Fund may be adversely
affected if an issuer is unable to
pay interest and repay principal, either on time or at all. 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
recessions or other adverse
economic developments 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 securities. 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.