| |
INVESTMENT OBJECTIVES AND POLICIES
The Fund’s primary investment objective of providing a high level of income is fundamental and may not be changed without shareholder approval. The Fund is also subject to certain investment restrictions, set forth below, that are fundamental and cannot be changed without shareholder approval. The Fund’s secondary investment objective of capital appreciation and all other investment policies, unless otherwise stated, are not fundamental and may be changed by the Board of Directors without shareholder approval. Notice to shareholders of any change in the Fund’s secondary investment objective will be provided as required by law. The Fund currently pursues its investment objectives by investing primarily in closed end funds that invest significantly in income producing securities and a global portfolio of investment grade fixed income securities.
As noted above, the Fund may pursue its investment objectives by investing in shares of closed end funds, also known as closed end management investment companies ("Portfolio Funds"), selected by CEF Advisers, Inc. (the "Investment Manager") that invest significantly in income producing securities. This strategy will be limited by provisions of the Investment Company Act of 1940, as amended (the "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 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. Under this strategy, the Fund may own shares of open end management investment companies ("open end funds") as a result of a Portfolio Fund's conversion from a closed end fund or for short term liquidity. The Fund will not own open end funds as a strategic investment over the long term, and the Investment Manager will generally redeem its investment in open end funds within a time period deemed reasonable by the Investment Manager taking into account the circumstances surrounding each such fund (excepting investments in short term liquidity funds).
Securities of other investment companies, including shares of closed-end investment companies, unit investment trusts, and open-end investment companies, represent interests in professionally managed portfolios that may invest in any type of instrument. Investing in other investment companies involves substantially the same risks as investing directly in the underlying instruments, but may involve additional expenses at the investment company-level, such as portfolio management fees and operating expenses, which are duplicative of similar expenses of the Fund. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange or over-the-counter at a premium or a discount to their NAV per share. Others are continuously offered at NAV, but may also be traded in the secondary market.
The Fund also may pursue its investment objectives by investing in investment grade fixed income securities which are rated, at the time of purchase, BBB or better by Standard & Poor's Ratings Group ("S&P"), Baa or better by Moody's Investors Service, Inc. ("Moody's") or, if unrated, are determined by the Investment Manager to be of comparable quality. The Fund may also invest up to 35% of its assets in fixed income securities rated BB, B, or CCC by S&P or Ba, B, or Caa by Moody's or, if unrated, securities determined by the Investment Manager to be of comparable quality and may invest in other securities (including common stocks, warrants, options and securities convertible into common stock), when such investments are consistent with its investment objectives or are acquired as part of a unit consisting of a combination of fixed income securities and other securities.
The Fund will normally invest in at least three different countries, but may invest in fixed income securities of only one country for temporary defensive purposes. The Fund may use leverage from time to time to purchase or carry securities. Such leverage is speculative and increases both investment opportunity and investment risk.
INVESTMENT RESTRICTIONS
The following fundamental investment restrictions may not be changed without the approval of the lesser of (a) 67% or more of the voting securities of the Fund present at a meeting if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy or (b) more than 50% of the outstanding voting securities of the Fund. Except for investment restriction No. 6 appearing below, any investment restriction which involves a maximum percentage of securities or assets will not be considered to be violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition of securities or assets of, the Fund. The Fund may not:
(1) Purchase a security, if as a result, 25% or more of the value of the Fund's total assets would be invested in the securities of issuers in a single industry, provided that this limitation does not apply to securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
(2) Purchase or sell real estate (although it may purchase securities of companies whose business involves the purchase or sale of real estate);
(3) Invest in commodities or commodities futures contracts, although it may enter into financial and foreign currency futures contracts and options thereon, options on foreign currencies, and forward contracts on foreign currencies;
(4) Lend its assets, except as permitted by applicable law;
(5) Underwrite the securities of other issuers except to the extent the Fund may be deemed to be an underwriter under the federal securities laws in connection with the disposition of the Fund's authorized investments; or
(6) Issue senior securities as defined in the Investment Company Act of 1940, as amended (the "1940 Act") (including borrowing money), except as permitted by applicable law.
With respect to (4) above, the Fund may lend its portfolio securities, enter into repurchase agreements and invest in loan assignments and participation interests and debt obligations (none of which would be considered loans for the purpose of this restriction). Also with respect to (4) above, the Fund will not lend more than 1/3rd of its total assets. With respect to (6) above, the 1940 Act currently requires that the Fund maintain 300% asset coverage with respect to all borrowings other than temporary borrowings of up to 5% of the value of its total assets, and that the Fund maintain 200% asset coverage with respect to any class of preferred stock it offers. The Fund, notwithstanding any other investment policy or restriction (whether or not fundamental), may invest all of its assets in the securities or beneficial interests of a single pooled investment fund having substantially the same investment objectives, policies and restrictions as the Fund. |
