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The Fundis a diversified, closed-end management investment company with a leveraged capital structure. The Fund's investment objective is to provide high current income, while seeking to preserve stockholders' capital, through investment in a professionally managed, diversified portfolio of "high yield" fixed-income securities, commonly known as "junk bonds." The Fund invests primarily in "high yield" fixed-income securities rated in the lower categories by established rating agencies, consisting principally of fixed income securities rated "BB" or lower by Standard & Poor's Corporation ("S&P") or "Ba" or lower by Moody's Investors Service, Inc. ("Moody's"), and subject to applicable rating agency guidelines ("Rating Agency Guidelines"), non-rated securities deemed by the Investment Adviser to be of comparable quality. The fixed-income securities in which the Fund invests are regarded by the rating agencies, on balance, as predominately speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. Such securities may also be subject to greater market price fluctuations than lower yielding, higher rated debt securities; credit ratings do not reflect this market risk. An investment in the Fund involves a number of significant risks, which are increased due to the Fund's leveraged capital structure. No assurance can be given that the Fund will achieve its investment objective.
The Fund has had a leveraged capital structure since its inception. The Fund is subject to various portfolio diversification and related asset coverage requirements under guidelines established by Moody's and Fitch Ratings ("Fitch") in connection with such rating agencies issuance of ratings of "aaa" and "AAA", respectively, with respect to the Fund's Auction Term Preferred Stock (the "ATP"). Compliance with these guidelines limits to some degree the Fund's flexibility to invest in certain types of portfolio securities, that might otherwise be attractive investments, including private placements.
As of June 30, 2010, the Fund’s leverage ratio (the ratio of the ATP divided by the value of the Fund’s assets less liabilities not including the ATP) was approximately 28%.
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