Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Cohen & Steers Closed-End Opportunity Fund, Inc. (the “Fund”) as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net
assets for each of the two years in the period ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2021, the results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period ended December 31, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and
transfer agent. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
New York, New York
February 25,
2022
We have served as the auditor of one or more investment companies in the Cohen & Steers family of mutual funds since 1991.
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(The following pages are unaudited)
TAX INFORMATION—2021
For the calendar year ended December 31, 2021, for individual taxpayers, the Fund designates $4,465,897 as qualified dividend
income eligible for reduced tax rates, long-term capital gain distributions of $13,160,450 taxable at the maximum 20% rate, and short-term capital gain distributions of $5,229,262, tax-exempt income distributions of $1,075,355 and $83,384 as
qualified business income eligible for the 20% deduction. In addition, for corporate taxpayers, 16.48% of the ordinary dividends paid qualified for the dividends received deduction (DRD).
REINVESTMENT PLAN
The Fund has a dividend reinvestment plan commonly referred to as an “opt-out” plan (the Reinvestment Plan). Each common shareholder who participates in the Reinvestment Plan will have all distributions of dividends and
capital gains (Dividends) automatically reinvested in additional common shares by Computershare as agent (the Plan Agent). Shareholders who elect not to participate in the Reinvestment Plan will receive all Dividends in cash paid by check mailed
directly to the shareholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Shareholders whose common shares are held in the name of a broker or nominee
should contact the broker or nominee to determine whether and how they may participate in the Reinvestment Plan.
The
Plan Agent serves as agent for the shareholders in administering the Reinvestment Plan. After the Fund declares a Dividend, the Plan Agent will, as agent for the shareholders, either: (i) receive the cash payment and use it to buy common shares in
the open market, on the NYSE or elsewhere, for the participants’ accounts or (ii) distribute newly issued common shares of the Fund on behalf of the participants.
The Plan Agent will receive cash from the Fund with which to buy common shares in the open market if, on the Dividend payment date,
the NAV per share exceeds the market price per share plus estimated brokerage commissions on that date. The Plan Agent will receive the Dividend in newly issued common shares of the Fund if, on the Dividend payment date, the market price per share
plus estimated brokerage commissions equals or exceeds the NAV per share of the Fund on that date. The number of shares to be issued will be computed at a per share rate equal to the greater of (i) the NAV or (ii) 95% of the closing market price per
share on the payment date.
If the market price per share is less than the NAV on a Dividend payment date, the Plan
Agent will have until the last business day before the next ex-dividend date for the common stock, but in no event more than 30 days after the Dividend payment date (as the case may be, the Purchase Period), to invest the Dividend amount in shares
acquired in open market purchases. If at the close of business on any day during the Purchase Period on which NAV is calculated the NAV equals or is less than the market price per share plus estimated brokerage commissions, the Plan Agent will cease
making open market purchases and the uninvested portion of such Dividends shall be filled through the issuance of new shares of common stock from the Fund at the price set forth in the immediately preceding paragraph.
Participants in the Reinvestment Plan may withdraw from the Reinvestment Plan upon notice to the Plan Agent. Such withdrawal will
be effective immediately if received not less than ten days prior to a Dividend record date; otherwise, it will be effective for all subsequent Dividends. If any participant elects
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to have the Plan Agent sell all or part of his or her shares
and remit the proceeds, the Plan Agent is authorized to deduct a $15.00 fee plus $0.10 per share brokerage commissions.
The Plan Agent’s fees for the handling of reinvestment of Dividends will be paid by the Fund. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of Dividends. The automatic reinvestments of Dividends will not relieve participants of any income
tax that may be payable or required to be withheld on such Dividends.
The Fund reserves the right to amend or terminate
the Reinvestment Plan. All correspondence concerning the Reinvestment Plan should be directed to the Plan Agent at 800-432-8224.
OTHER INFORMATION
A description of the policies and procedures that the Fund uses to determine how to
vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 866-227-0757, (ii) on our website at cohenandsteers.com
or (iii) on the U.S. Securities and Exchange Commission’s (SEC) website at http://www.sec.gov. In addition, the Fund’s proxy voting record for the most recent 12-month period ended June 30
is available by August 31 of each year (i) without charge, upon request, by calling 866-227-0757 or (ii) on the SEC’s website at http://www.sec.gov.
Disclosures of the Fund’s complete holdings are required to be made monthly on Form N-PORT, with every third month
made available to the public by the SEC 60 days after the end of the Fund’s fiscal quarter. The Fund’s Form N-PORT is available (i) without charge, upon request, by calling
866-227-0757 or (ii) on the SEC’s website at http://www.sec.gov.
Please note that distributions paid by the Fund to shareholders are subject to recharacterization for tax purposes and are taxable
up to the amount of the Fund’s investment company taxable income and net realized gains. Distributions in excess of the Fund’s net investment company taxable income and realized gains are a return of capital distributed from the
Fund’s assets. To the extent this occurs, the Fund’s shareholders of record will be notified of the estimated amount of capital returned to shareholders for each such distribution and this information will also be available at
cohenandsteers.com. The final tax treatment of all distributions is reported to shareholders on their 1099-DIV forms, which are mailed after the close of each calendar year. Distributions of capital decrease the Fund’s total assets and,
therefore, could have the effect of increasing the Fund’s expense ratio. In addition, in order to make these Paige distributions, the Fund may have to sell portfolio securities at a less than opportune time.
Notice is hereby given in accordance with Rule 23c-1 under the 1940 Act that the
Fund may purchase, from time to time, shares of its common stock in the open market.
The following information in this annual
shareholder report is a summary of certain changes since the Fund’s most recent annual shareholder report. This information may not reflect all of the changes that have occurred since you purchased the Fund.
Changes to the Board of Directors and Officers
On March 8, 2021, the Board of Directors voted to set the number of directors on the Fund’s Board of Directors to ten. In
addition, the Board of Directors elected Ms. Ramona Rogers-Windsor as a Director of the Fund.
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Effective December 7, 2021, Director and
Chairman Robert H. Steers resigned from the Fund’s Board of Directors. The Board of Directors has appointed Director Joseph M. Harvey to succeed Mr. Steers as Chairman. In addition, effective March 1, 2022, Mr. Harvey, Cohen & Steers,
Inc.’s (CNS) current President and a member of CNS’ board of directors, will succeed Mr. Steers as Chief Executive Officer of CNS and Cohen & Steers Capital Management, Inc., the Fund’s investment manager (the investment manager).
At that time, Mr. Steers will assume the role of Executive Chairman of CNS and continue on as a member of CNS’ board of directors.
On December 7, 2021, the Board of Directors elected Adam M. Derechin, President and Chief Executive Officer of the Fund, as a Director of the Fund. Concurrent with his election, Mr. Derechin resigned as President and Chief Executive
Officer of the Fund. Mr. Derechin currently serves as the Chief Operating Officer of CNS and the investment manager since 2004 and 2003, respectively. Effective December 7, 2021, James Giallanza, previously Chief Financial Officer of the Fund,
succeeded Mr. Derechin as President and Chief Executive Officer of the Fund and Albert Laskaj, Treasurer of the Fund, succeeded Mr. Giallanza as Chief Financial Officer of the Fund.
In addition, also on December 7, 2021, the Board of Directors voted to set the number of directors on the Fund’s Board of
Directors to nine, effective January 1, 2022. Director C. Edward Ward, Jr. retired from the Board of Directors on December 31, 2021 pursuant to the Fund’s mandatory retirement policy.
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CURRENT INVESTMENT OBJECTIVES, PRINCIPAL
INVESTMENT POLICIES AND PRINCIPAL RISKS OF THE FUND
The information contained herein is provided for informational
purposes only and does not constitute a solicitation of an offer to buy or sell Fund shares.
Investment Objectives
Cohen & Steers Closed-End Opportunity Fund, Inc. (the Fund) is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The Fund’s investment objective is to achieve total return, consisting of high current
income and potential capital appreciation.
Investment Strategies
The Fund seeks to achieve its objective by investing in the common stock of closed-end
management investment companies (Portfolio Funds) selected by the Fund’s investment manager that invest significantly in equity or income-producing securities. Portfolio Funds generally focus on equity or income-producing securities, sectors or
strategies, such as dividend strategies, covered call option strategies, total return strategies, balanced strategies, general equities (including both dividend and non-dividend paying equities), limited
duration strategies, convertible securities, preferred securities, high yield securities and real estate, energy, utility and other equity or income-oriented strategies. Shares of Portfolio Funds in which the Fund invests will be traded on a
national securities exchange.
Dividend strategies typically focus on investments in dividend-paying equity securities
or equity-related securities, such as common stock, preferred securities, convertible securities and/or warrants. A covered call option strategy is designed to produce income from premiums received from writing (selling) call options on single
securities and/or indices and to offset a portion of a market decline in the underlying securities. Total return strategies typically pursue both income and capital appreciation, and may invest in a wide variety of equity and fixed income securities
and other instruments that vary from fund to fund. A balanced strategy typically invests at least 25% of its assets in fixed income senior securities and at least 25% of its assets in equities. Limited duration strategies typically focus on fixed
income securities of intermediate duration (a measure of the price volatility of a debt instrument as a result of changes in market interest rates, based on the weighted average timing of the instrument’s expected principal and interest
payments), and may include high yield securities, senior loans and mortgage-related securities. Securities and other investments in which Portfolio Funds pursuing these strategies are expected to focus their investments, along with equity,
convertible, preferred and high yield securities and the real estate, energy and utilities sectors, are described with their accompanying risks, under “Principal Risks of the Fund—Portfolio Fund Investment Risk.”
Under normal circumstances, at least 80% of the Fund’s net assets will be invested in common stock issued by Portfolio
Funds. The Fund is not required to invest in Portfolio Funds focusing on U.S. or foreign securities, or equity or fixed income securities, in any specific proportion, and allocation of the Fund’s portfolio between Portfolio Funds focusing
on U.S. and foreign securities, and between equity and fixed income securities, will vary over time, perhaps significantly. The Fund also has the ability to invest directly in income-producing securities and instruments relating to closed-end funds.
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In selecting Portfolio Funds, the investment
manager seeks to identify closed-end funds that meet one or more of the following characteristics:
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• |
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strong fundamentals, including ability to meet current and projected future dividend payments out of
current income or a combination of current income and realized and unrealized gains, and leverage/risk management, as the investment manager believes that a conservative approach to leverage has the potential to help mitigate the effects of changes
in interest rates; |
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• |
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relatively high current income; |
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share prices at a discount to net asset value; |
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• |
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undervalued funds where recent total return on market price trails recent total return on net asset
value; |
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• |
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well-regarded asset managers with strong track records managing the asset class(es) in which a
Portfolio Fund invests; |
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• |
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diversification of sectors and asset classes among the Portfolio Funds; |
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• |
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market capitalization generally greater than $200 million; and |
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• |
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average daily trading volumes generally greater than $750,000 per day. |
There is no requirement that any Portfolio Fund in the Fund’s portfolio satisfy all the criteria set forth above, and the
investment manager will use its discretion in selecting a portfolio of Portfolio Funds that the investment manager believes will help the Fund achieve its investment objective.
In addition to the criteria set forth above, the investment manager also may invest opportunistically in one or more Portfolio
Funds when the investment manager believes a Portfolio Fund’s shares are not appropriately priced relative to other comparable funds or the Portfolio Fund’s share price does not properly reflect the impact of a corporate event or
conditions in the overall securities markets that the investment manager believes will have a positive influence on the Portfolio Fund’s share price.
The Fund will be limited by provisions of the 1940 Act, that limit the amount the Fund can invest in any one Portfolio Fund to 3%
of the Portfolio Fund’s total outstanding stock. As a result, the Fund may hold a smaller position in a Portfolio Fund than if it were not subject to this restriction. To comply with provisions of the 1940 Act, on any matter upon which
Portfolio Fund stockholders are solicited to vote the investment manager will vote Portfolio Fund shares in the same general proportion as shares held by other stockholders of the Portfolio Fund. The Fund will not invest in any closed-end funds managed by the investment manager.
The Fund may invest in securities
of other closed-end or open-end funds, including exchange traded funds (ETFs), in accordance with Section 12(d)(1) of the 1940 Act and the rules thereunder, or any
exemption granted under the 1940 Act.
The Fund may, but is not required to, use, without limit, various derivatives
transactions to seek to generate return, facilitate portfolio management and mitigate risks. Although the Fund’s investment adviser may seek to use these kinds of transactions to further the Fund’s investment objectives, no assurance can
be given that they will achieve this result. The Fund may enter into (buy or sell) exchange-listed and over-the-counter put and call options on securities (including
securities of investment companies and baskets of securities), indices, and other financial instruments; purchase and sell financial futures contracts and options thereon; enter into various interest rate transactions,
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such as swaps, caps, floors or collars or credit
transactions; equity index, total return and credit default swaps; forward contracts; and structured investments. In addition, the Fund may enter into various currency transactions, such as forward currency contracts, currency futures contracts,
currency swaps or options on currency or currency futures. The Fund also may purchase and sell derivative instruments that combine features of these instruments. The Fund may invest in other types of derivatives, structured and similar instruments
which are not currently available but which may be developed in the future.
The Fund may buy and sell shares of
Portfolio Funds to take advantage of potential short-term trading opportunities, but short-term trading will not be used as the primary means of achieving the Fund’s investment objective.
Temporary Defensive Positions. When the investment manager believes that market or general economic conditions justify a
temporary defensive position, the Fund may deviate from its investment objectives and invest all or any portion of its assets in investment grade debt securities. In such a case, the Fund may not pursue or achieve its investment objective.
Principal Risks of the Fund
The Fund is a diversified, closed-end management investment company designed primarily as a
long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objective.
Risks of investing in the Fund include risks associated with (1) investments in
closed-end funds generally, including both your investment in Common Shares and the Fund’s investment in Portfolio Fund shares; (2) the risks of the Portfolio Funds’ investments; and
(3) any direct investments in income-producing securities and derivative, structured and other instruments related to closed-end funds including derivatives, which are the same risks as described below
for Portfolio Fund investments in such securities and instruments. Since the Fund pursues its investment objective by investing in Portfolio Funds, it is subject to particular risks associated with investing in other
closed-end funds that are separate from risks associated with the investments held by the Portfolio Funds.
Both the Fund, and the Portfolio Funds, have management fees. In addition, the Portfolio Funds typically incur operating expenses
that are borne by their investors, including the Fund. As a result, Fund investors will bear not only the Fund’s management fees and any operating expenses not paid by the investment manager, but also the fees and expenses of the Portfolio
Funds attributable to the Fund’s investments. Investors would bear less expenses if they invested directly in the Portfolio Funds.
Risks of Investing in Closed-End Funds
Market Price Discount from Net Asset Value Risk. Shares of closed-end investment
companies frequently trade at a discount from their net asset value (NAV). This characteristic is a risk separate and distinct from the risk that NAV could decrease as a result of investment activities. Whether investors will realize gains or losses
upon the sale of the shares will depend not upon the Fund’s NAV but entirely upon whether the market price of the shares at the time of sale is above or below the investor’s purchase price or adjusted basis for the shares. Because the
market price of the shares is determined by factors such as relative supply of and demand for shares in the market, general market and economic conditions, and other factors beyond the control of the Fund, the shares may trade at, above or below
NAV.
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Market Risk. Your investment in the
Fund represents an indirect investment in the securities owned by the Fund. The value of these securities, like other investments, may move up or down, sometimes rapidly and unpredictably. The Fund and the Portfolio Funds may utilize leverage, which
magnifies this risk. Your shares at any point in time may be worth less than what you invested, even after taking into account the reinvestment of Fund dividends and distributions. See “Leverage Risk” below.
Investment Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire
principal amount that you invest.
Risks of Investing in Other Investment Companies. Since the Fund concentrates
its assets in closed-end management investment companies, risks of investing in the Fund include the risks associated with the purchased closed-end investment
companies’ portfolio securities, and a shareholder in the Fund will bear not only his or her proportionate share of the Fund’s expenses, but also indirectly the expenses of the Portfolio Funds. Shareholders will therefore be subject to
duplicative expenses to the extent the Fund invests in other investment companies. Risks associated with investments in closed-end funds generally include market risk, leverage risk, risk of market price
discount from NAV, risk of anti-takeover provisions and non-diversification.
To
the extent the Fund invests a portion of its assets in other investment companies, including ETFs and other types of pooled investment funds, those assets will be subject to the risks of the purchased investment fund’s portfolio securities, and
a shareholder in the Fund will bear not only his or her proportionate share of the Fund’s expenses, but also indirectly the expenses of the purchased investment funds. In addition, restrictions under the 1940 Act may limit the Fund’s
ability to invest in other investment companies to the extent desired.
The SEC has adopted Rule 12d1-4 permitting fund of fund arrangements subject to various conditions, and rescinding the present rule and certain exemptive relief previously granted. Once in effect, Rule
12d1-4 may adversely affect the Fund’s ability to invest in other investment companies and could also significantly affect the Fund’s ability to redeem its investments in other investment companies,
making such investments less attractive. The effects of rule and other regulatory changes are not known as of the date of this report, but they could impact the Fund’s ability to achieve its desired investment strategies or cause the Fund to
incur losses, realize taxable gains distributable to shareholders, incur greater or unexpected expenses or experience other adverse consequences.
Manager Risk. The success of the Fund’s strategy is subject to the ability of the investment manager to achieve
the Fund’s investment objective. Similarly, the Fund’s investments in Portfolio Funds is subject to the ability of the Portfolio Funds’ managers to achieve the Portfolio Fund’s investment objectives.
Dividend Risk. Common Shares, as well as shares issued by the Portfolio Funds, do not assure dividend payments.
Dividends are paid only when declared by the Board of Directors of the Fund or the boards of directors of the Portfolio Funds, as the case may be, and the level of dividends may vary over time. If a Portfolio Fund reduces or eliminates the level of
its regular dividends, this may reduce the level of dividends paid by the Fund, and may cause the market prices of the Portfolio Fund’s shares and the Common Shares to fall.
Inflation 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 shares of Portfolio Funds and distributions can decline.
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Risk of Anti-Takeover
Provisions. Certain provisions of the Fund’s Charter and By-Laws could limit the ability of other entities or persons to acquire control of the Fund or change the Fund’s structure. The
provisions may have the effect of depriving common stockholders of an opportunity to sell their shares at a premium over prevailing market prices or have the effect of inhibiting conversion of the Fund to
an open-end fund. Portfolio Funds also may have similar provisions in their organizational documents, which would have a similar effect on the Fund’s investments.
Dilution Risk. Strategies may be employed by a Portfolio Fund that, under certain circumstances, have the effect of
reducing its share price and the Fund’s proportionate interest. These include rights offerings in which the Fund does not subscribe. However, the Fund would not subscribe only when the investment manager believes participation is not consistent
with pursuing the Fund’s investment objective.
Portfolio Turnover Risk. The Fund may engage in
portfolio trading when considered appropriate. There are no limits on the rate of portfolio turnover. Portfolio Funds also may not be limited in their portfolio trading activity. Higher turnover rates result in correspondingly greater brokerage
commissions and other transactional expenses which are borne by the Fund, directly or through its investment in Portfolio Funds. Higher turnover rates also may be more likely to generate capital gains that must be distributed to Common Shareholders,
either as a result of the Fund’s receipt of capital gains from Portfolio Fund transactions or from the Fund’s trading in Portfolio Funds or other investments.
Derivatives Transactions Risk. The Fund or certain Portfolio Fund’s may use of derivatives, which presents risks
different from, and possibly greater than, the risks associated with investing directly in traditional securities. In certain types of derivatives transactions the Fund or a Portfolio Fund could lose the entire amount of its investment; in other
types of derivatives transactions the potential loss is theoretically unlimited. Although both OTC and exchange-traded derivatives markets may experience lack of liquidity, OTC non-standardized derivatives
transactions are generally less liquid than exchange-traded instruments. In addition, the liquidity of a secondary market in an exchange-traded derivative contract may be adversely affected by “daily price fluctuation limits” established
by the exchanges which once reached, would prevent the liquidation of open positions. If it is not possible to close an open derivative position entered into by the Fund or a Portfolio Fund, the Fund or the Portfolio Fund may be required to make
cash payments of variation (or mark-to-market) margin and, if the Fund has insufficient cash, it may have to sell portfolio securities to meet variation margin
requirements at a time when it may be disadvantageous to do so. The inability to close derivatives transactions positions also could have an adverse impact on the Fund’s or a Portfolio Fund’s ability to effectively hedge its portfolio.
Derivatives transactions entered into to seek to manage the risks of the Fund’s or a Portfolio Fund’s portfolio of securities may have the effect of limiting gains from otherwise favorable market movements. The use of derivatives
transactions may result in losses greater than if they had not been used. The Fund or a Portfolio Fund may enter into swap, cap or other transactions to attempt to protect itself from increasing interest or dividend expenses resulting from
increasing short-term interest rates on any leverage it incurs or increasing interest rates on securities held in its portfolio. A decline in interest rates may result in a decline in the value of the transaction, which may result in a decline in
the NAV of the Fund or a Portfolio Fund. In the event the Fund or a Portfolio Fund enters into forward currency contracts for hedging purposes, the Fund or the Portfolio Fund will be subject to currency exchange rates risk. Currency exchange rates
may fluctuate significantly over short periods of time and also can be affected unpredictably by intervention of U.S. or foreign governments or central banks, or the failure to intervene,
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or by currency controls or political developments in the
United States or abroad. Furthermore, the ability to successfully use derivative instruments depends on the ability of the relevant investment manager to predict pertinent market movements, which cannot be assured. Structured notes and other related
instruments carry risks similar to those of more traditional derivatives such as futures, forward and option contracts. However, structured instruments may entail a greater degree of market risk and volatility than other types of debt obligations.
The Fund or a Portfolio Fund will be subject to credit risk with respect to the counterparties to certain derivatives transactions entered into by the Fund or the Portfolio Fund and may experience losses in the event a counterparty fails to perform
its obligations under a derivative contract.
The Investment Manager is registered with the Commodity Futures Trading
Commission as a commodity pool operator (“CPO”). However, with respect to the Fund, the Investment Manager has claimed an exclusion from the definition of the CPO under the Commodity Exchange Act, as amended (the “CEA”).
Accordingly, the Investment Manager, with respect to the Fund, is not subject to registration or regulation as a CPO under the CEA.
Active Management Risk. As an actively managed portfolio, the value of the Fund’s investments could decline because the financial condition of an issuer may change (due to such factors as management performance, reduced
demand or overall market changes), financial markets may fluctuate or overall prices may decline, or the investment manager’s investment techniques could fail to achieve the Fund’s investment objectives or negatively affect the Fund’s
investment performance.
Cyber Security Risk. With the increased use of technologies such as the Internet and the
dependence on computer systems to perform necessary business functions, the Fund and its service providers (including the investment manager) may be susceptible to operational and information security risks resulting from cyber-attacks and/or other
technological malfunctions. In general, cyber-attacks are deliberate, but unintentional events may have similar effects. Cyber-attacks include, among others, stealing or corrupting data maintained online or digitally, preventing legitimate users
from accessing information or services on a website, releasing confidential information without authorization, gaining unauthorized access to digital systems for purposes of misappropriating assets and causing operational disruption. Cyber-attacks
may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service. Successful cyber-attacks against, or security
breakdowns of, the Fund, the investment manager, or a custodian, transfer agent, or other affiliated or third-party service provider may adversely affect the Fund or its shareholders. For instance, cyber-attacks may interfere with the processing of
shareholder transactions, affect the Fund’s ability to calculate its NAV, cause the release of private shareholder information or confidential Fund information, impede trading, cause reputational damage, and subject the Fund to regulatory
fines, penalties or financial losses, reimbursement or other compensation costs, and additional compliance costs. Furthermore, as a result of breaches in cyber security or other operational and technology disruptions or failures, an exchange or
market may close or issue trading halts on specific securities or an entire market, which may result in the Fund being, among other things, unable to buy or sell certain securities or financial instruments or unable to accurately price its
investments. While the Fund has established business continuity plans and systems designed to prevent cyber-attacks, there are inherent limitations in such plans and systems including the possibility that certain risks have not been identified.
Similar types of cyber security risks also are present for issuers of securities in which the Fund invests, which could result in material adverse consequences for such issuers, and may cause the Fund’s investment in such securities to lose
value.
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Each of the Fund and the investment manager
may have limited ability to prevent or mitigate cyber-attacks or security or technology breakdowns affecting the Fund’s third-party service providers. While the Fund has established business continuity plans and systems designed to prevent or
reduce the impact of cyber-attacks, such plans and systems are subject to inherent limitations.
Geopolitical
Risk. Occurrence of global events similar to those in recent years, such as war, terrorist attacks, natural or environmental disasters, country instability, infectious disease epidemics, such as that caused by the COVID-19 virus, market
instability, debt crises and downgrades, embargoes, tariffs, sanctions and other trade barriers and other governmental trade or market control programs, the potential exit of a country from its respective union and related geopolitical events, may
result in market volatility and may have long-lasting impacts on both the U.S. and global financial markets. Additionally, those events, as well as other changes in foreign and domestic political and economic conditions, could adversely affect
individual issuers or related groups of issuers, securities markets, interest rates, secondary trading, credit ratings, inflation, investor sentiment and other factors affecting the value of the Fund’s investments.
The outbreak of COVID-19 and efforts to contain its spread have resulted in, among other things, extreme volatility in the
financial markets and severe losses, reduced liquidity of many instruments, significant travel restrictions, significant disruptions to business operations, supply chains and customer activity, lower consumer demand for goods and services, service
and event cancellations, reductions and other changes, strained healthcare systems, as well as general concern and uncertainty. The impact of the COVID-19 outbreak has negatively affected the global economy, the economies of individual countries,
and the financial performance of individual issuers, sectors, industries, asset classes, and markets in significant and unforeseen ways. Pandemics may also exacerbate other pre-existing political, social, economic, market and financial risks. The
effects of the outbreak in developing or emerging market countries may be greater due to generally less established health care systems and supply chains. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty. The foregoing could impair the Fund’s ability to maintain operational standards
(such as with respect to satisfying redemption requests), disrupt the operations of the Fund’s service providers, adversely affect the value and liquidity of the Fund’s investments, and negatively impact the Fund’s performance and
your investment in the Fund.
On January 31, 2020, the United Kingdom (UK) withdrew from the European Union (EU)
(referred to as Brexit), commencing a transition period that ended on December 31, 2020. The EU-UK Trade and Cooperation Agreement, a bilateral trade and cooperation deal governing the future relationship between the UK and the EU (TCA),
provisionally went into effect on January 1, 2021, and entered into force officially on May 1, 2021. Notwithstanding the TCA, following the transition period, there is likely to be considerable uncertainty as to the UK’s post-transition
framework, including how the financial markets will react. As this process unfolds, markets may be further disrupted. Given the size and importance of the UK’s economy, uncertainty about its legal, political and economic relationship with the
remaining member states of the EU may continue to be a source of instability.
Growing tensions, including trade
disputes, between the United States and other nations, or among foreign powers, and possible diplomatic, trade or other sanctions could adversely impact the global economy, financial markets and the Fund. The strengthening or weakening of the U.S.
dollar relative to other currencies may, among other things, adversely affect the Fund’s investments
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denominated in non-U.S. dollar currencies. It is difficult
to predict when similar events affecting the U.S. or global financial markets may occur, the effects that such events may have, and the duration of those effects.
Regulatory Risk. The U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on
the Fund and on the mutual fund industry in general. The SEC’s final rules, related requirements and amendments to modernize reporting and disclosure, along with other potential upcoming regulations, could, among other things, restrict the
Fund’s ability to engage in transactions, and/or increase overall expenses of the Fund. In addition, the SEC, Congress, various exchanges and regulatory and self-regulatory authorities, both domestic and foreign, have undertaken reviews of the
use of derivatives by registered investment companies, which could affect the nature and extent of instruments used by the Fund. While the full extent of all of these regulations is still unclear, these regulations and actions may adversely affect
both the Fund and the instruments in which the Fund invests and its ability to execute its investment strategy. Similarly, regulatory developments in other countries may have an unpredictable and adverse impact on the Fund.
The SEC recently adopted Rule 18f-4 under the 1940 Act relating to a registered investment company’s use of derivatives and
certain financing transactions (such as reverse repurchase transactions) that could potentially require the Fund to observe more stringent requirements than are currently imposed by the 1940 Act. Among other things, Rule 18f-4 will require funds
that invest in derivative instruments beyond a specified limited amount to apply a value-at-risk based limit to their use of certain derivative instruments and financing transactions and to adopt and implement a derivatives risk management program.
A fund that uses derivative instruments in a limited amount will not be subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, funds will no longer be required to comply with the asset segregation framework
arising from prior SEC guidance for covering certain derivative instruments and related transactions. Rule 18f-4 may substantially curtail the Fund’s ability to use derivative instruments as part of the Fund’s investment strategy and could
ultimately prevent the Fund from being able to achieve its investment goals. Compliance with Rule 18f-4 will not be required until approximately August 2022. As the Fund comes into compliance, the Fund’s approach to asset segregation and
coverage requirements will be impacted.
Portfolio Fund Investment Risk
Interest Rate Risk. Interest rate risk is the risk that the value of fixed income securities will fall if interest
rates increase. These securities typically fall in value when interest rates rise and rise in value when interest rates fall. Fixed income securities with longer periods before maturity are often more sensitive to interest rate changes. If a
Portfolio Fund is leveraged (i.e., borrows for investment purposes) it may be expected to have greater interest rate sensitivity.
Credit Risk; High Yield Securities. Credit risk is the risk that a borrower is unable to meet its obligation to pay principal or interest on a fixed income security. To the extent that a Portfolio Fund invests in
companies with lower-than-average credit quality, the Portfolio Fund can be expected to experience a higher rate of defaults within its portfolio than if it invested in higher quality securities. Securities rated at the time of purchase to be below BBB- by S&P Global Ratings (S&P) or Baa3 by Moody’s Investors Services, Inc. (Moody’s) (or the unrated equivalent as determined by the investment manager) are considered “high yield”
securities, sometimes known as “junk” bonds. High yield, lower quality securities are considered speculative and, compared to certain lower yielding, higher quality
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securities, tend to have more volatile prices and increased
price sensitivity to changing interest rates and to adverse economic and business developments, greater risk of loss due to default or declining credit quality, greater likelihood that adverse economic or company specific events will make the issuer
unable to make interest and/or principal payments, and greater susceptibility to negative market sentiments leading to depressed prices and decrease in liquidity. It is reasonable to expect that any adverse economic conditions could disrupt the
market for lower-rated securities, have an adverse impact on the value of those securities and adversely affect the ability of the issuers of those securities to repay principal and interest on those securities.
Nationally recognized statistical rating organizations (NRSROs) are private services that provide ratings of the credit quality of
debt obligations, including convertible securities. Ratings assigned by an NRSRO are not absolute standards of credit quality and do not evaluate market risks or the liquidity of securities. NRSROs may fail to make timely changes in credit ratings
and an issuer’s current financial condition may be better or worse than a rating indicates.
Unrated securities may
be less liquid than comparable rated securities and involve the risk that the investment manager may not accurately evaluate the security’s comparative credit rating. If a security is unrated, the investment manager will assign a rating using
its own analysis of issuer quality.
Leverage Risk. Portfolio Funds may employ the use of leverage. The use of
leverage is a speculative technique and there are special risks and costs associated with leverage. The NAV of the Portfolio Fund’s shares may be reduced by the issuance and ongoing costs of leverage. So long as the Portfolio Fund is able to
invest in securities that produce an investment yield that is greater than the total cost of leverage, the leverage strategy will produce higher current net investment income for the shareholders, including the Fund. On the other hand, to the extent
that the total cost of leverage exceeds the incremental income gained from employing such leverage, shareholders, including the Fund, would realize lower net investment income. In addition to the impact on net income, the use of leverage will have
an effect of magnifying capital appreciation or depreciation for shareholders. Specifically, in an up market, leverage will typically generate greater capital appreciation than if the Portfolio Fund were not employing leverage. Conversely, in down
markets, the use of leverage will generally result in greater capital depreciation than if the Portfolio Fund had been unlevered. To the extent that the Portfolio Fund is required or elects to reduce its leverage, the Portfolio Fund may need to
liquidate investments, including under adverse economic conditions which may result in capital losses potentially reducing returns to shareholders. The use of leverage also results in the investment management fees payable to the investment manager
being higher than if the Fund did not use leverage and can increase operating costs, which may reduce total return. In some market conditions, a Portfolio Fund may not be able to employ leverage to the extent or at the cost desired. This could
prevent a Portfolio Fund from executing its portfolio strategies or could otherwise depress shareholder returns. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed.
Senior Loans Risk. The Fund may invest in Portfolio Funds that invest in senior loans. The risks associated with senior
loans are similar to the risks of junk bonds, although senior loans are typically senior and secured, whereas junk bonds are often subordinated and unsecured. Investments in senior loans are typically below investment grade and are considered
speculative because of the credit risk of their issuers. Such companies are more likely to default on their payments of interest and principal owed, and such defaults could reduce a Portfolio Fund’s NAV and income distributions. An economic
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downturn generally leads to a higher non-payment rate, and a senior loan may lose significant value before a default occurs. There is no assurance that the liquidation of the collateral would satisfy the claims of the borrower’s obligations in the
event of the nonpayment of scheduled interest or principal, or that the collateral could be readily liquidated. Economic and other events (whether real or perceived) can reduce the demand for certain senior loans or senior loans generally, which may
reduce market prices. Senior loans and other debt securities are also subject to the risk of price declines and to increases in prevailing interest rates, although floating-rate debt instruments such as senior loans in which certain Portfolio Funds
may be expected to invest are substantially less exposed to this risk than fixed-rate debt instruments.
Convertible
Securities Risk. Convertible securities are bonds, debentures, notes, preferred securities or other securities that may be converted or exchanged (by the holder or the issuer) into shares of the underlying common stock (or cash or securities of
equivalent value), either at a stated price or stated rate. Convertible securities have characteristics similar to both fixed income and equity securities. Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to
common stock, of the same issuer. Because of the subordination feature, however, convertible securities typically are considered to be lower quality than similar non-convertible securities.
Preferred Securities Risk. The Fund may invest in Portfolio Funds that invest in preferred securities. Preferred securities
are subject to credit risk, which is the risk that a security will decline in price, or the issuer of the security will fail to make dividend, interest or principal payments when due, because the issuer experiences a decline in its financial status.
Preferred securities are also subject to interest rate risk and may decline in value because of changes in market interest rates. Portfolio Funds may be subject to a greater risk of rising interest rates than would normally be the case in an
environment of low interest rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. In addition, an issuer may be permitted to defer or omit distributions. Preferred securities are
also generally subordinated to bonds and other debt instruments in a company’s capital structure. During periods of declining interest rates, an issuer may be able to exercise an option to redeem (call) its issue at par earlier than scheduled,
and the Portfolio Fund may be forced to reinvest in lower yielding securities. Certain preferred securities may be substantially less liquid than many other securities, such as common stocks. Generally, preferred security holders have no voting
rights with respect to the issuing company unless certain events occur. Certain preferred securities may give the issuers special redemption rights allowing the securities to be redeemed prior to a specified date if certain events occur, such as
changes to tax or securities laws.
Mortgage- and Asset-Backed Securities Risk. The Fund may invest in Portfolio
Funds that invest in mortgage- and asset-backed securities. The risks associated with mortgage-related securities include: (1) credit risk associated with the performance of the underlying mortgage properties and of the borrowers owning these
properties; (2) adverse changes in economic conditions and circumstances, which are more likely to have an adverse impact on mortgage-related 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 value of the mortgage-related 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 or prepayments on the underlying mortgage collateral.
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Asset-backed securities involve certain risks in addition to
those presented by mortgage-related securities: (1) primarily, these securities do not have the benefit of the same security interest in the underlying collateral as mortgage-related securities and are more dependent on the borrower’s
ability to pay; (2) 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; and (3) most issuers of automobile receivables permit the servicers to retain possession of the underlying obligations.
Master Limited Partnerships Risk. The Fund may invest in Portfolio Funds that invest in master limited partnerships (MLPs).
An investment in MLP units involves some risks that differ from an investment in the common stock of a corporation. Holders of MLP units have limited control on matters affecting the partnership. Investing in MLPs involves certain risks related to
investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. MLPs that
concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the Fund’s investment in MLPs is largely dependent on the MLPs being treated as
partnerships for federal income tax purposes. Weakening energy market fundamentals may increase counterparty risk and impact MLP profitability. Specifically, energy companies suffering financial distress may be able to abrogate contracts with MLPs,
decreasing or eliminating sources of revenue.
Call Risk. Call risk is the risk that the issuer of a bond
exercises rights it may have to redeem (or “call”) the bond, in whole or in part, prior to the stated maturity date. Bonds may be subject to greater call risk when interest rates are declining. In a declining interest rate environment,
Portfolio Funds will likely receive a lower interest rate upon the reinvestment of proceeds.
Equity Securities
Risk. Common stock holds the lowest priority in the capital structure of a company, and therefore takes the largest share of the company’s risk and its accompanying volatility. An adverse event, such as an unfavorable earnings report, may
depress the value of a particular common stock. Also, prices of common stocks are sensitive to general market movements.
Sector Concentration Risk. Some Portfolio Funds invest substantially, or even exclusively, in one sector or industry group
and therefore carry risk of the particular sector or industry group. To the extent a Portfolio Fund focuses its investments in a specific sector, such as real estate, energy or utilities, the Portfolio Fund will be susceptible to adverse conditions
and economic or regulatory occurrences affecting the sector or industry group, which tends to increase volatility and result in higher risk.
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Real Estate. Real property investments, including investments in real estate investment trusts
(REITs), are subject to varying degrees of risk. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments. The price of real estate company shares also may drop
because of the failure of borrowers to pay their loans and poor management. Many real estate companies utilize leverage, which increases investment risk and could adversely affect a company’s operations and market value in periods of rising
interest rates, as well as risks normally associated with debt financing. The yields available from investments in real estate depend on the amount of income and capital appreciation generated by the related properties. Income and real estate values
also may be adversely affected by such factors as applicable laws, interest rate levels and the availability of financing. If the properties do not generate sufficient income to meet
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operating expenses, including, where applicable, debt service, ground lease payments, tenant improvements, third-party leasing commissions and other capital expenditures, the income and ability of the real
estate company to make payments of any interest and principal on its debt securities will be adversely affected. In addition, real property may be subject to the quality of credit extended to and defaults by borrowers and tenants.
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Energy. The energy industry can be significantly affected by the supply of and demand for
specific products and services, the supply and demand for oil and gas, the price of oil and gas, exploration and production spending, government regulation, world events and economic conditions. The natural resources industry can be significantly
affected by events relating to international political developments, energy conservation, the success of exploration projects, commodity prices, and tax and government regulations. At times, the performance of securities of companies in the energy
and natural resources industry will lag the performance of other industries or the broader market as a whole. Other risks inherent in investing in the energy and natural resources industry include those associated with the volatility of commodity
prices; a decrease in the production of natural gas, natural gas liquids, crude oil, coal or other energy commodities or a decrease in the volume of such commodities available for transportation, mining, processing, storage or distribution; a
decline in demand for such commodities; the inability to cost-effectively acquire additional reserves sufficient to replace depletion in resources used by energy and natural resources companies; and stricter laws, regulations or enforcement
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Utilities. Issuers in the utility industry are subject to a variety of factors that may
adversely affect their business or operations, including: high interest costs in connection with capital construction and improvement programs; difficulty in raising capital in adequate amounts on reasonable terms in periods of high inflation and
unsettled capital markets; governmental regulation of rates charged to customers; costs associated with compliance with and changes in environmental and other regulations; effects of economic slowdowns and surplus capacity; increased competition
from other providers of utility services; inexperience with and potential losses resulting from a developing deregulatory environment; and costs associated with the reduced availability of certain types of fuel, occasionally reduced availability and
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Covered
Call Writing Risk. The Fund may invest in Portfolio Funds that engage in a strategy known as “covered call option writing,” which is designed to produce income from option premiums and offset a portion of a market decline in the
underlying security. The writer (seller) of a covered call option forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the
strike price of the call, but has retained the risk of loss should the price of the underlying security decline. The writer of an option has no control over the time when it may be required to fulfill its obligation as a writer of the option. 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.
Foreign (Non-U.S.) and Emerging Market Securities Risk. Some of the securities held
by certain of the Portfolio Funds may be issued by foreign issuers. Risks of investing in foreign securities, which can be expected to be greater for investments in emerging markets, include currency risks, future political and economic developments
and possible imposition of foreign withholding or other taxes on income or
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proceeds payable on the securities. In addition, there may
be less publicly available information about a foreign issuer than about a domestic issuer, and foreign issuers may not be subject to the same accounting, auditing and financial recordkeeping standards and requirements as domestic issuers. Moreover,
securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S. issuers.
Investing in securities of companies in emerging markets may entail special risks relating to potential economic, political or
social instability and the risks of expropriation, nationalization, confiscation, trade sanctions or embargoes or the imposition of restrictions on foreign investment, the lack of hedging instruments, and repatriation of capital invested. The
securities and real estate markets of some emerging market countries have in the past experienced substantial market disruptions and may do so in the future.
REITs Risk. REITs are characterized as equity REITs, mortgage REITs and hybrid REITs. Equity REITs, which may include
operating or finance companies, own real estate directly, and the value of, and income earned by, the REITs depends upon the income of the underlying properties and the rental income they earn. An equity REIT may be affected by changes in the value
of the underlying properties owned by the REIT. Mortgage REITs can make construction, development or long-term mortgage loans and are sensitive to the credit quality of the borrower. Hybrid REITs combine the characteristics of both equity and
mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general.
Municipal Bond Risk. The Fund may invest in Portfolio Funds that invest in municipal bonds. Municipal bonds are
debt obligations issued by states or by political subdivisions or authorities of states. Municipal bonds are typically designated as general obligation bonds, which are general obligations of a governmental entity that are backed by the taxing power
of such entity, or revenue bonds, which are payable from the income of a specific project or authority and are not supported by the issuer’s power to levy taxes. Municipal bonds are long-term fixed rate debt obligations that generally decline
in value with increases in interest rates, when an issuer’s financial condition worsens or when the rating on a bond is decreased. Many municipal bonds may be called or redeemed prior to their stated maturity. Lower quality revenue bonds and
other credit-sensitive municipal securities carry higher risks of default than general obligation bonds.
Restricted
and Illiquid Securities Risk. The Fund may invest in Portfolio Funds that invest in illiquid securities (i.e., securities that may be difficult to sell at a desirable time or price). Illiquid securities are securities that are not readily
marketable and may include some restricted securities, which are securities that may not be resold to the public without an effective registration statement under the Securities Act or, if they are unregistered, may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. Illiquid investments involve the risk that the securities will not be able to be sold at the time desired by the Portfolio Fund or at prices approximating the value at which the
Portfolio Fund is carrying the securities on its books. Restricted securities and illiquid securities are often more difficult to value and the sale of such securities often requires more time and results in higher brokerage charges or dealer
discounts and other selling expenses than does the sale of liquid securities trading on national securities exchanges or in the OTC markets. Contractual restrictions on the resale of securities result from negotiations between the issuer and
purchaser of such securities and therefore vary substantially in length and scope. To dispose of a restricted security that the Portfolio
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Fund has a contractual right to sell, the Portfolio Fund may
first be required to cause the security to be registered. A considerable period may elapse between a decision to sell the securities and the time when the Portfolio Fund would be permitted to sell, during which time the Portfolio Fund would bear
market risks.
Investment Restrictions
Fundamental Investment Restrictions
The Fund has adopted certain investment limitations
limiting the following activities except as specifically authorized. Under these limitations, the Fund may not:
1.
Issue senior securities (including borrowing money for other than temporary purposes) except in conformity with the limits set forth in the 1940 Act or pursuant to exemptive relief therefrom; or pledge, mortgage or hypothecate its assets other than
to secure such issuances or borrowings or in connection with permitted investment strategies; provided that, notwithstanding the foregoing, the Fund may borrow up to an additional 5% of its total assets for temporary purposes;
2. Act as an underwriter of securities issued by other persons, except insofar as the Fund may be deemed an underwriter in
connection with the disposition of securities;
3. Purchase or sell real estate or mortgages on real estate, except that
Portfolio Funds may invest in securities of companies that deal in real estate or are engaged in the real estate business, including REITs and securities secured by real estate or interests therein, and a Portfolio Fund may hold and sell real estate
or mortgages on real estate acquired through default, liquidation, or other distributions of an interest in real estate as a result of the Portfolio Fund’s ownership of such securities;
4. Purchase or sell commodities or commodity futures contracts, except that the Portfolio Funds may invest in financial futures
contracts, forward contracts and options thereon, and currency options and such similar instruments;
5. Make loans to
other persons except through the lending of securities held by it (but not to exceed a value of one-third of total assets), through the use of repurchase agreements, and by the purchase of debt securities; or
6. Invest more than 25% of its total assets in securities of issuers in any one industry; provided, however, that such
limitation shall not apply to obligations issued or guaranteed by the United States Government or by its agencies or instrumentalities.
The investment restrictions above have been adopted as fundamental policies of the Fund. Under the 1940 Act, a fundamental policy may not be changed without the approval of the holders of a “majority of the outstanding”
voting securities of the Fund.
Additional Non-Fundamental Investment Restrictions
Non-fundamental policies may be changed by the Fund’s Board
without shareholder approval. Currently, the Fund may not:
1. Acquire or retain securities of any investment company
other than (a) in accordance with the limits permitted by Section 12(d)(1) of the 1940 Act, or any exemption granted under the 1940 Act and the rules thereunder, and (b) through the acquisition of securities of any investment company
as part of a merger, consolidation or similar transaction.
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MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the Board of Directors. The Board of Directors approves all
significant agreements between the Fund and persons or companies furnishing services to it, including the Fund’s agreements with its investment manager, administrator, co-administrator, custodian and
transfer agent. The management of the Fund’s day-to-day operations is delegated to its officers, the investment manager, administrator and co-administrator, subject always to the investment objective and policies of the Fund and to the general supervision of the Board of Directors.
The Board of Directors and officers of the Fund and their principal occupations during at least the past five years are set forth
below.