Borrowing
Money
The Fund may borrow
money up to the limits set forth in the Fund’s SAI under the section “Investment
Restrictions.”
Securities
Lending
The Fund may lend
its portfolio securities to brokers, dealers, and other financial institutions.
In connection with such loans, the Fund receives liquid collateral equal to at
least 102% (105% for international securities) of the value of the loaned
portfolio securities. This collateral is marked-to-market on a daily
basis.
Additional
Risks of Investing in the Fund
The Fund may also
be subject to certain other non-principal risks associated with its investments
and investment strategies. The following provides additional non-principal risk
information regarding investing in the Fund.
Cash
Transaction Risk. The Fund
generally expects to make in-kind redemptions to avoid being taxed at the fund
level on gains on the distributed portfolio securities. However, from time to
time, the Fund reserves the right to effect redemptions for cash, rather than
in-kind. In such circumstances, the Fund may be required to sell portfolio
securities to obtain the cash needed to distribute redemption proceeds.
Therefore, the Fund may recognize a capital gain on these sales that might not
have been incurred if the Fund had made a redemption in-kind. This may decrease
the tax efficiency of the Fund compared to utilizing an in-kind redemption
process.
Convertible
Securities Risk. A convertible
security generally is a preferred stock that may be converted within a specified
period of time into common stock. Convertible securities nevertheless remain
subject to the risks of both debt securities and equity securities. As with
other equity securities, the value of a convertible security tends to increase
as the price of the underlying stock goes up, and to decrease as the price of
the underlying stock goes down. Declining common stock values therefore also may
cause the value of the Fund’s investments to decline. Like a debt security, a
convertible security provides a fixed-income stream and also tends to decrease
in value when interest rates rise. Moreover, many convertible securities have
credit ratings that are below investment grade and are subject to the same risks
as lower-rated debt securities.
Cybersecurity
Risk.
With
the increased use of technologies such as the Internet to conduct business, the
Fund, like all companies, may be susceptible to operational,
information
security and related risks. Cybersecurity incidents involving the Fund and its
service providers (including,
without limitation,
the Adviser,
fund
accountant,
custodian,
transfer agent and
financial
intermediaries)
have the ability to cause disruptions and impact business operations,
potentially resulting in financial losses, impediments to trading, the inability
of Fund shareholders to transact business, violations of applicable privacy and
other laws, regulatory fines, penalties, reputational damage, reimbursement or
other compensation costs, and/or additional compliance costs. Similar adverse
consequences could result from cybersecurity incidents affecting issuers of
securities in which the Fund invests, counterparties with which the Fund
engages, governmental and other regulatory authorities, exchange and other
financial market operators, banks, brokers, dealers, insurance companies, other
financial institutions and other parties. The Fund and its shareholders could be
negatively impacted as a result.
Derivatives
Risk.
The Fund may invest in derivatives, such as futures contracts, options, and
options on futures contracts, as applicable. Derivatives are financial
instruments that derive their value from an underlying asset, such as a
security, index or exchange rate. Their use is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Derivatives may be riskier than
other types of investments and may be more volatile, less tax efficient and less
liquid than other securities.
Derivatives
may be used to create synthetic exposure to an underlying asset or to hedge a
portfolio risk. If the Fund uses derivatives to “hedge” a portfolio risk, the
change in value of a derivative may not correlate as
expected with the
underlying asset being hedged, and it is possible that the hedge therefore may
not succeed. In addition, given their complexity, derivatives may be difficult
to value.
Derivatives
are subject to a number of risks including credit risk, interest rate risk,
and market risk. Credit risk refers to the possibility that a counterparty will
be unable and/or unwilling to perform under the agreement. Interest rate risk
refers to fluctuations in the value of an asset resulting from changes in the
general level of interest rates. Over-the-counter (“OTC”) derivatives are also
subject to counterparty risk (sometimes referred to as “default risk”), which is
the risk that the other party to the contract will not fulfill its contractual
obligations.
Derivatives
may be especially sensitive to changes in economic and market conditions,
and their use may give rise to a form of leverage. Leverage may cause the
portfolio of the Fund to be more volatile than if the portfolio had not been
leveraged because leverage can exaggerate the effect of any increase or decrease
in the value of securities and other instruments held by the Fund. For some
derivatives, such leverage could result in losses that exceed the original
amount invested in the derivative. The Fund’s use of derivatives may be limited
by the requirements for taxation of the Fund as a regulated investment company,
as well as by regulatory changes.
Foreign
and Emerging Markets Investment Risk. Investments in
foreign securities involve risks that are beyond those associated with
investments in U.S. securities, and investments in securities of issuers in
emerging market countries involve risks not often associated with investments in
securities of issuers in developed countries. Fluctuations in the value of the
U.S. dollar relative to the values of other currencies may adversely affect
investments in foreign and emerging market securities. Foreign and emerging
markets may have greater concentration in a few industries, resulting in greater
vulnerability to regional and global trade conditions. Emerging market countries
may also have higher rates of inflation and more rapid and extreme fluctuations
in inflation rates and greater sensitivity to interest rate changes. Issuers in
emerging markets also may have relatively low market liquidity, decreased
publicly available and less reliable information, and inconsistent and less
stringent regulatory, disclosure, accounting, auditing and financial reporting
requirements and standards of practice, including recordkeeping standards,
comparable to those applicable to issuers in more developed markets. As a
result, the nature and quality of such information may vary. The ability to
conduct adequate due diligence in emerging markets may be limited.
In
addition,
certain emerging
market countries have material limitations on Public Company Accounting
Oversight Board
(“PCAOB”)
inspection,
investigation and
enforcement capabilities which hinder the ability to engage in independent
oversight or inspection of accounting
firms
located
in
or
operating in
certain emerging markets;
therefore,
there
is no guarantee
that
the quality of financial reporting or the audits conducted by audit firms of
emerging market issuers meet PCAOB standards.
Foreign and
emerging market securities also are subject to the risks of expropriation,
nationalization or other adverse political or economic developments and the
difficulty of enforcing obligations in other countries. Investments
in
foreign and
emerging market securities also
may be
subject to dividend withholding or confiscatory taxes, currency blockage and/or
transfer restrictions and higher transactional costs. Emerging markets are
subject to greater market volatility, lower trading volume, political, social
and economic instability, uncertainty regarding the existence of trading markets
and more governmental limitations on foreign investment than more developed
markets. In addition, securities in emerging markets may be subject to greater
price fluctuations than securities in more developed markets. Securities law in
many emerging market countries is relatively new and unsettled. Therefore, laws
regarding foreign investment in emerging market securities, securities
regulation, title to securities, and shareholder rights may change quickly and
unpredictably. The ability to bring and enforce actions in emerging market
countries, or to obtain information needed to pursue or enforce such actions,
may be limited, and shareholder