UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
THIS DOCUMENT IS A TECHNICAL ILLUSTRATION OF HOW CERTAIN DISCLOSURES IN SEC FILINGS ARE TO BE TAGGED. IT DOES NOT INDICATE WHICH PARTICULAR DISCLOSURES MUST BE INCLUDED AND/OR TAGGED IN COMMISSION FILINGS, AND IT DOES NOT CONSTITUTE LEGAL GUIDANCE OF ANY SORT.
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-12345
XYZ Income Fund
(Exact name of registrant as specified in charter)
Date of fiscal year end: June 30
Date of reporting period:
Item 1. |
Reports to Shareholders. |
The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 459.51e-1).
Annual Report
June 30, 2022
XYZ Income Fund | XYZIF
XYZ Growth Fund | XYZGF
Important Information About the Funds |
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Information regarding each Fund’s principal investment strategies, principal risks and risk management strategies, the effects of each Fund’s leverage, and each Fund’s fundamental investment restrictions, including a summary of certain changes thereto during the most recent fiscal year, can be found within the relevant sections of this report. Please refer to the Table of Contents for further information.
* * *
On each applicable Fund Summary page in this Shareholder Report, the Average Annual Total Return table measures performance assuming that any dividend and capital gain distributions were reinvested. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions. Total return for a period of more than one year represents the average annual total return. Performance at market price will differ from results at NAV. Although market price returns tend to reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about a Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends. Performance shown is net of fees and expenses. Historical NAV performance for a Fund may have been positively impacted by fee waivers or expense limitations in place during some or all of the periods shown, if applicable. Future performance (including total return or yield) and distributions may be negatively impacted by the expiration or reduction of any such fee waivers or expense limitations.
XYZ Income Fund
Investment Objective and Strategy Overview
XYZ Income Fund’s investment objective is to seek maximum income with capital preservation as a secondary objective.
* * *
Average Annual Total Return (1) for the period ended June 30, 2022 |
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1 Year | 5 Year | 10 Year | Commencement of Operations (12/27/02) | |||||||||||||||
Market Price | (30.68)% | 4.21% | 8.08% | 11.54% | ||||||||||||||
NAV | (13.53)% | 5.97% | 10.47% | 12.28% | ||||||||||||||
ICE BofAML US High Yield Index | (12.66)% | 1.95% | 4.40% | 7.13% |
All Fund returns are net of fees and expenses and include applicable fee waivers and/or expense limitations. Absent any applicable fee waivers and/or expense limitations, performance would have been lower and there can be no assurance that any such waivers or limitations will continue in the future.
Average annual total return since 12/31/2002.
The average annual total returns shown above have been restated from previous reports to shareholders to align with the Fund’s change from a July 31 to a June 30 fiscal year end. For the period August 1, 2021 through June 30, 2022, the Fund’s total return was -33.71% and -14.19% on a market price and NAV basis, respectively.
It is not possible to invest directly in an unmanaged index.
(1)
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Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the sale of Fund shares. Total return, market price, NAV, market price distribution rate, and NAV distribution rate will fluctuate with changes in market conditions. The NAV presented may differ from the NAV reported for the same period in other Fund materials. Performance current to the most recent month-end is available at www.example.net or via (415) 999-XYZIF. Performance is calculated assuming all dividends and distributions are reinvested at prices obtained under the Fund’s dividend reinvestment plan. Performance does not reflect any brokerage commissions in connection with the purchase or sale of Fund shares. Performance of an index is shown in light of a requirement by the Securities and Exchange Commission that the performance of an appropriate broad-based securities market index be disclosed. However, the Fund is not managed to an index nor should the index be viewed as a “benchmark” for the Fund’s performance. The index is not intended to be indicative of the Fund’s investment strategies, portfolio components or past or future performance. Please see Additional Information Regarding the Funds for a description of the Fund’s principal investment strategies. |
(2)
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Distribution rates are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or market price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (‘‘ROC’’) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.example.net for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January. |
(3)
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Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage). |
Fund Information (as of June 30, 2022) (1)
Market Price | $ |
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NAV | $ |
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Premium/(Discount) to NAV | ||||
Market Price Distribution Rate (2) |
11.40% | |||
NAV Distribution Rate (2) |
12.72% | |||
Total Effective Leverage (3) |
47.93% |
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Market and Net Asset Value Information |
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The following table, presented in conformance with annual reporting requirements for funds that have filed a Short Form N-2, sets forth, for each of the periods indicated, the high and low closing market prices of the Fund’s Common Shares on the NYSE, the high and low NAV per Common Share and the high and low premium/discount to NAV per Common Share. See Note 3, Investment Valuation and Fair Value Measurements in the Notes to Financial Statements for information as to how the Fund’s NAV is determined.
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Common share market price (1) |
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Common share net asset value |
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Premium (discount) as a % of net asset value |
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Quarter |
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High |
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Low |
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Low |
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Low |
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Quarter ended June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended September 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended June 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended March 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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( |
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Quarter ended December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
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Quarter ended September 30, 2019 |
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$ |
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$ |
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$ |
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$ |
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1 |
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The following information is presented in conformance with annual reporting requirements for funds that have filed a Short Form N-2.
Summary of Fund Expenses
The following table is intended to assist investors in understanding the fees and expenses (annualized) that an investor in Common Shares of the Fund would bear, directly or indirectly, as a result of an offering. The table reflects the use of leverage attributable to the Fund’s outstanding Preferred Shares and reverse repurchase agreements averaged over the fiscal year ended June 30, 2022 in an amount equal to 70.84% of the Fund’s total average managed assets (including assets attributable to such leverage), and shows Fund expenses as a percentage of net assets attributable to Common Shares. The percentage above does not reflect the Fund’s use of other forms of economic leverage, such as credit default swaps or other derivative instruments. The table and example below are based on the Fund’s capital structure as of June 30, 2022. The extent of the Fund’s assets attributable to leverage following an offering, and the Fund’s associated expenses, are likely to vary (perhaps significantly) from these assumptions.
Shareholder Transaction Expense
Sales
load ( |
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[ ]% |
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Offering
Expenses Borne by Common Shareholders ( |
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[ ]% |
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Dividend Reinvestment Plan Fees (3) |
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1 |
In the event that the Common Shares to which this relates are sold to or through underwriters or dealer managers, a corresponding supplement will disclose the applicable sale load and/or commission. |
2 |
The related supplement will disclose the estimated amount of offering expense, the offering price and the offering expenses borne by the Fund and indirectly by all of its Common Shareholders as a percentage of the offering price. |
3 |
You will pay broker chargers if you direct your broker or the plan agent to sell your Common Shares that you acquired pursuant to a dividend reinvestment plan. You may also pay a pro rata share of brokerage commissions incurred in connection with open market purchase pursuant to the Fund’s Dividend Reinvestment Plan. |
Annual Fund Operating Expenses
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Percentage of Net Assets Attributable to Common Shares (reflecting leverage attributable to ARPS and reverse repurchase agreements) |
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Management Fees (1) |
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Dividend Cost on Preferred Shares (2) |
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Interest Payments on Borrowed Funds (3) |
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Other Expenses (4) |
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Total Annual Fund Operating Expenses (5) |
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1. |
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2. |
Reflects the Fund’s outstanding Preferred Shares averaged over the fiscal year ended June 30, 2022, which represented 13.29% of the Fund’s total average managed assets (including the liquidation preference of outstanding Preferred Shares and assets attributable to reverse repurchase agreements), at an estimated annual dividend rate to the Fund of 0.82% (based on the weighted average Preferred Share dividend rate during the fiscal year ended June 30, 2022) and assumes the Fund will continue to pay Preferred Share dividends at the “maximum applicable rate” called for under the Fund’s Bylaws due to the ongoing failure of auctions for the ARPS. The actual dividend rate paid on the ARPS will vary over time in accordance with variations in market interest rates. |
3. |
Reflects the Fund’s use of leverage in the form of reverse repurchase agreements averaged over the fiscal year ended June 30, 2022, which represented 57.55% of the Fund’s total average managed assets (including assets attributable to reverse repurchase agreements), at an annual interest rate cost to the Fund of 0.83%, which is the weighted average interest rate cost during the fiscal year ended June 30, 2022. The actual amount of interest expense borne by the Fund will vary over time in accordance with the level of the Fund’s use of reverse repurchase agreements, dollar rolls and/or borrowings and variations in market interest rates. Borrowing expense is required to be treated as an expense of the Fund for accounting purposes. Any associated income or gains (or losses) realized from leverage obtained through such instruments is not reflected in the Annual Fund Operating Expenses table above, but would be reflected in the Fund’s performance results. |
4. |
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5. |
“Dividend Cost on Preferred Shares”, including distributions on Preferred Shares, and “Interest Payments on Borrowed Funds” are borne by the Fund separately from management fees paid to XYZ. Excluding these expenses, Total Annual Fund Operating Expenses are 1.31%. Excluding only distributions on Preferred Shares of 0.12%, Total Annual Fund Operating Expenses are 1.92%. |
Example
The following example illustrates the expenses that you would pay on a $1,000 investment in Common Shares of the Fund, assuming (1) that the Fund’s net assets do not increase or decrease, (2) that the Fund incurs total annual expenses of 2.04% of net assets attributable to Common Shares in years 1 through 10 (assuming assets attributable to Preferred Shares and reverse repurchase agreements representing 70.84% of the Fund’s total managed assets) and (3) a 5% annual return (1):
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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Total Expenses Incurred |
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$ |
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$ |
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$ |
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$ |
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(1) |
The example above should not be considered a representation of future expenses. Actual expenses may be higher or lower than those shown. The example assumes that the estimated Interest Payments on Borrowed Funds, Dividend Cost on Preferred Shares and Other Expenses set forth in the Annual Fund Operating Expenses table are accurate, that the rate listed under Total Annual Fund Operating Expenses remains the same each year and that all dividends and distributions are reinvested at NAV. Actual expenses may be greater or less than those assumed. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5% annual return shown in the example. The example does not include commissions or estimated offering expenses, which would cause the expenses shown in the example to increase. |
XYZ Growth Fund
***
Investment Objective and Strategy Overview
XYZ Growth Fund’s primary investment objective is to seek high growth.
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Market and Net Asset Value Information |
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The following table, presented in conformance with annual reporting requirements for funds that have filed a Short Form N-2, sets forth, for each of the periods indicated, the high and low closing market prices of the Fund’s Common Shares on the NYSE, the high and low NAV per Common Share and the high and low premium/discount to NAV per Common Share. See Note 3, Investment Valuation and Fair Value Measurements in the Notes to Financial Statements for information as to how the Fund’s NAV is determined.
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Common share (1) |
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Common share |
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Premium (discount) as |
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Quarter |
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High |
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Low |
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High |
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Low |
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High |
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Low |
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Quarter ended June 30, 2022 |
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$ |
27.23 |
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$ |
21.06 |
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$ |
22.83 |
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$ |
19.72 |
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32.79% |
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7.45% |
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Quarter ended March 31, 2022 |
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$ |
27.52 |
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$ |
24.11 |
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$ |
23.83 |
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$ |
22.24 |
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31.09% |
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13.87% |
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Quarter ended December 31, 2021 |
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$ |
31.93 |
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$ |
26.25 |
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$ |
24.70 |
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$ |
23.75 |
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49.88% |
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17.07% |
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Quarter ended September 30, 2021 |
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$ |
33.03 |
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$ |
29.97 |
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$ |
24.96 |
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$ |
24.41 |
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59.38% |
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35.43% |
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Quarter ended June 30, 2021 |
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$ |
32.28 |
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$ |
29.31 |
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$ |
24.75 |
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$ |
24.26 |
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52.68% |
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35.38% |
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Quarter ended March 31, 2021 |
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$ |
30.65 |
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$ |
28.78 |
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$ |
24.70 |
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$ |
24.17 |
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42.26% |
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31.69% |
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Quarter ended December 31, 2020 |
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$ |
29.51 |
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$ |
26.66 |
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$ |
24.46 |
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$ |
22.13 |
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39.81% |
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31.55% |
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Quarter ended September 30, 2020 |
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$ |
27.83 |
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$ |
25.87 |
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$ |
22.27 |
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$ |
21.68 |
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47.19% |
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28.88% |
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Quarter ended June 30, 2020 |
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$ |
28.46 |
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$ |
24.22 |
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$ |
21.66 |
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$ |
19.67 |
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57.66% |
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33.15% |
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Quarter ended March 31, 2020 |
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$ |
34.34 |
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$ |
16.97 |
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$ |
25.57 |
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$ |
18.72 |
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59.70% |
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(27.80)% |
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Quarter ended December 31, 2019 |
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$ |
33.76 |
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$ |
31.59 |
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$ |
25.33 |
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$ |
24.48 |
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60.06% |
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44.95% |
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Quarter ended September 30, 2019 |
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$ |
32.47 |
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$ |
27.88 |
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$ |
25.41 |
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$ |
24.53 |
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53.62% |
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22.93% |
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1 |
Such prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. |
The following information is presented in conformance with annual reporting requirements for funds that have filed a Short Form N-2.
Summary of Fund Expenses
The following table is intended to assist investors in understanding the fees and expenses (annualized) that an investor in Common Shares of the Fund would bear, directly or indirectly, as a result of an offering. The table reflects the use of leverage attributable to the Fund’s outstanding Preferred Shares and reverse repurchase agreements averaged over the fiscal year ended June 30, 2022 in an amount equal to 64.24% of the Fund’s total average managed assets (including assets attributable to such leverage), and shows Fund expenses as a percentage of net assets attributable to Common Shares. The percentage above does not reflect the Fund’s use of other forms of economic leverage, such as credit default swaps or other derivative instruments. The table and example below are based on the Fund’s capital structure as of June 30, 2022. The extent of the Fund’s assets attributable to leverage following an offering, and the Fund’s associated expenses, are likely to vary (perhaps significantly) from these assumptions.
Shareholder Transaction Expense
Sales load (as a percentage of offering price) (1) |
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[ ]% |
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Offering Expenses Borne by Common Shareholders (as a percentage of offering price) (2) |
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[ ]% |
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Dividend Reinvestment Plan Fees (3) |
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None |
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1. |
In the event that the Common Shares to which this relates are sold to or through underwriters or dealer managers, a corresponding supplement will disclose the applicable sale load and/or commission. |
2. |
The related supplement will disclose the estimated amount of offering expense, the offering price and the offering expenses borne by the Fund and indirectly by all of its Common Shareholders as a percentage of the offering price. |
3. |
You will pay broker chargers if you direct your broker or the plan agent to sell your Common Shares that you acquired pursuant to a dividend reinvestment plan. You may also pay a pro rata share of brokerage commissions incurred in connection with open market purchase pursuant to the Fund’s Dividend Reinvestment Plan. |
Annual Fund Operating Expenses
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Percentage of |
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Management Fees (1) |
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1.43% |
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Dividend Cost on Preferred Shares (2) |
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0.03% |
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Interest Payments on Borrowed Funds (3) |
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0.58% |
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Other Expenses (4) |
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0.07% |
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Total Annual Fund Operating Expenses (5) |
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2.11% |
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1. |
Management fees include fees payable to the Investment Manager for advisory services and for supervisory, administrative and other services. The Fund pays for the advisory, supervisory and administrative services it requires under what is essentially an all-in fee structure. Pursuant to an investment management agreement, XYZ is paid a Management Fee of 1.38% of the Fund’s average daily net assets (including daily net assets attributable to any preferred shares of the Fund that may be outstanding). The Fund (and not XYZ) will be responsible for certain fees and expenses which are, reflected in the table above, that are not covered by the management fee under the investment management agreement. Please see Note 9, Fees and Expenses in the Notes to Financial Statements for an explanation of the management fee. |
2. |
Reflects the Fund’s outstanding Preferred Shares averaged over the fiscal year ended June 30, 2022, which represented 4.25% of the Fund’s total average managed assets (including the liquidation preference of outstanding Preferred Shares and assets attributable to reverse repurchase agreements), at an estimated annual dividend rate to the Fund of 0.66% (based on the weighted average Preferred Share dividend rate during the fiscal year ended June 30, 2022) and assumes the Fund will continue to pay Preferred Share dividends at the “maximum applicable rate” called for under the Fund’s Bylaws due to the ongoing failure of auctions for the ARPS. The actual dividend rate paid on the ARPS will vary over time in accordance with variations in market interest rates. |
3. |
Reflects the Fund’s use of leverage in the form of reverse repurchase agreements averaged over the fiscal year ended June 30, 2022, which represented 59.99% of the Fund’s total average managed assets (including assets attributable to reverse repurchase agreements), at an annual interest rate cost to the Fund of 0.80%, which is the weighted average interest rate cost during the fiscal year ended June 30, 2022. The actual amount of interest expense borne by the Fund will vary over time in accordance with the level of the Fund’s use of reverse repurchase agreements, dollar rolls and/or borrowings and variations in market interest rates. Borrowing expense is required to be treated as an expense of the Fund for accounting purposes. Any associated income or gains (or losses) realized from leverage obtained through such instruments is not reflected in the Annual Fund Operating Expenses table above, but would be reflected in the Fund’s performance results. |
4. |
Other expenses are estimated for the Fund’s fiscal year ending June 30, 2023. |
5. |
“Dividend Cost on Preferred Shares”, including distributions on Preferred Shares, and “Interest Payments on Borrowed Funds” are borne by the Fund separately from management fees paid to XYZ. Excluding these expenses, Total Annual Fund Operating Expenses are 1.50%. Excluding only distributions on Preferred Shares of 0.03%, Total Annual Fund Operating Expenses are 2.07%. |
Example
The following example illustrates the expenses that you would pay on a $1,000 investment in Common Shares of the Fund, assuming (1) that the Fund’s net assets do not increase or decrease, (2) that the Fund incurs total annual expenses of 2.11% of net assets attributable to Common Shares in years 1 through 10 (assuming assets attributable to Preferred Shares and reverse repurchase agreements representing 64.24% of the Fund’s total managed assets) and (3) a 5% annual return (1):
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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Total Expenses Incurred |
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$ |
13 |
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$ |
39 |
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$ |
68 |
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$ |
150 |
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(1) |
The example above should not be considered a representation of future expenses. Actual expenses may be higher or lower than those shown. The example assumes that the estimated Interest Payments on Borrowed Funds, Dividend Cost on Preferred Shares and Other Expenses set forth in the Annual Fund Operating Expenses table are accurate, that the rate listed under Total Annual Fund Operating Expenses remains the same each year and that all dividends and distributions are reinvested at NAV. Actual expenses may be greater or less than those assumed. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5% annual return shown in the example. The example does not include commissions or estimated offering expenses, which would cause the expenses shown in the example to increase. |
Financial Highlights |
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Investment Operations |
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Less Distributions to ARPS (c) |
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Less Distributions to Common Shareholders (d) |
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|
|
|
|
|
|
|
|
|
|
|
||||||||||
Selected Per Share Data for the Year or Period Ended: |
|
Net Asset (a) |
|
|
Net (b) |
|
|
Net |
|
|
From Net |
|
|
From Net Realized Capital Gains |
|
|
Net Increase Shareholders Resulting from Operations |
|
|
From Net |
|
|
From Net |
|
|
Tax Basis |
|
|
Total |
|
||||||||||
XYZ Income Fund |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
6/30/2022 (i) |
|
$ |
24.48 |
|
|
$ |
2.06 |
|
|
$ |
(5.47 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.00 |
|
|
$ |
(3.43 |
) |
|
$ |
(2.24 |
) |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
(2.24 |
)(j) |
6/30/2021 |
|
|
21.15 |
|
|
|
2.24 |
|
|
|
3.03 |
|
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
5.27 |
|
|
|
(2.07 |
) |
|
|
0.00 |
|
|
|
(0.58 |
) |
|
|
(2.65 |
) |
6/30/2020 |
|
|
24.92 |
|
|
|
2.31 |
|
|
|
(4.10 |
) |
|
|
(0.09 |
) |
|
|
0.00 |
|
|
|
(1.87 |
) |
|
|
(2.70 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(2.70 |
) |
6/30/2019 |
|
|
25.16 |
(h) |
|
|
2.31 |
|
|
|
0.15 |
|
|
|
(0.22 |
) |
|
|
0.00 |
|
|
|
2.24 |
|
|
|
(2.77 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(2.77 |
) |
6/30/2018 |
|
|
25.28 |
|
|
|
2.21 |
|
|
|
0.27 |
|
|
|
(0.15 |
) |
|
|
0.00 |
|
|
|
2.33 |
|
|
|
(2.65 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(2.65 |
) |
6/30/2017 |
|
|
22.56 |
|
|
|
2.06 |
|
|
|
3.50 |
|
|
|
(0.07 |
) |
|
|
0.00 |
|
|
|
5.49 |
|
|
|
(2.70 |
) |
|
|
0.00 |
|
|
|
(0.24 |
) |
|
|
(2.94 |
) |
XXXYZ Growth Fund |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
6/30/2022 |
|
$ |
24.72 |
|
|
$ |
1.89 |
|
|
$ |
(4.98 |
) |
|
$ |
(0.00 |
) |
|
$ |
0.00 |
|
|
$ |
(3.09 |
) |
|
$ |
(2.11 |
) |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
(2.11 |
)(j) |
6/30/2021 |
|
|
21.69 |
|
|
|
2.11 |
|
|
|
3.01 |
|
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
5.12 |
|
|
|
(2.29 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(2.29 |
) |
6/30/2020 |
|
|
25.40 |
|
|
|
2.23 |
|
|
|
(3.52 |
) |
|
|
(0.02 |
) |
|
|
0.00 |
|
|
|
(1.31 |
) |
|
|
(2.40 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(2.40 |
) |
6/30/2019 |
|
|
25.33 |
(h) |
|
|
2.07 |
|
|
|
0.34 |
|
|
|
(0.09 |
) |
|
|
0.00 |
|
|
|
2.33 |
|
|
|
(2.43 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(2.43 |
) |
6/30/2018 |
|
|
26.04 |
|
|
|
2.04 |
|
|
|
(0.41 |
) |
|
|
(0.05 |
) |
|
|
0.00 |
|
|
|
1.58 |
|
|
|
(2.29 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(2.29 |
) |
6/30/2017 |
|
|
24.28 |
|
|
|
1.90 |
|
|
|
2.89 |
|
|
|
(0.02 |
) |
|
|
0.00 |
|
|
|
4.78 |
|
|
|
(2.98 |
) |
|
|
0.00 |
|
|
|
(0.03 |
) |
|
|
(3.01 |
) |
=== | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Common Share |
|
|
Ratios/Supplemental Data |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets (f) |
|
|
|
|
|||||||||||||||||||||||||||||||
Increase |
|
|
Offering |
|
|
Increase |
|
|
Net
Asset |
|
|
Market Price |
|
|
Total |
|
|
Net Assets Applicable to Common (000s) |
|
|
Expenses (g) |
|
|
Expenses (g) |
|
|
Expenses |
|
|
Excluding Interest Expense and Waivers |
|
|
Net |
|
|
Portfolio |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
$ |
0.26 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
19.06 |
|
|
$ |
21.27 |
|
|
|
(57.31 |
)% |
|
$ |
1,361,439 |
|
|
|
1.92 |
%* |
|
|
1.92 |
%* |
|
|
1.31 |
%* |
|
|
1.31 |
%* |
|
|
16.76 |
%* |
|
|
58 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.71 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
24.48 |
|
|
|
34.95 |
|
|
|
79.47 |
|
|
|
1,643,538 |
|
|
|
1.80 |
|
|
|
1.80 |
|
|
|
1.29 |
|
|
|
1.29 |
|
|
|
16.32 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.80 |
|
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
21.15 |
|
|
|
26.08 |
|
|
|
(14.91 |
) |
|
|
1,248,837 |
|
|
|
2.21 |
|
|
|
2.21 |
|
|
|
1.39 |
|
|
|
1.39 |
|
|
|
17.34 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.26 |
|
|
|
0.00 |
|
|
|
0.03 |
|
|
|
24.92 |
|
|
|
31.62 |
|
|
|
24.62 |
|
|
|
1,291,233 |
|
|
|
2.29 |
|
|
|
2.29 |
|
|
|
1.36 |
|
|
|
1.36 |
|
|
|
16.05 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.20 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
25.16 |
(h) |
|
|
30.51 |
|
|
|
28.53 |
|
|
|
1,219,515 |
|
|
|
2.14 |
|
|
|
2.14 |
|
|
|
1.38 |
|
|
|
1.38 |
|
|
|
14.84 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.17 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
25.28 |
|
|
|
28.76 |
|
|
|
49.61 |
|
|
|
1,140,768 |
|
|
|
1.84 |
|
|
|
1.84 |
|
|
|
1.41 |
|
|
|
1.41 |
|
|
|
14.76 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
$ |
0.20 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
19.72 |
|
|
$ |
21.50 |
|
|
|
(46.90 |
)% |
|
$ |
509,542 |
|
|
|
2.07 |
%* |
|
|
2.07 |
%* |
|
|
1.50 |
%* |
|
|
1.50 |
%* |
|
|
15.11 |
%* |
|
|
47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.20 |
|
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
24.72 |
|
|
|
32.18 |
|
|
|
58.50 |
|
|
|
605,830 |
|
|
|
1.95 |
|
|
|
1.95 |
|
|
|
1.48 |
|
|
|
1.48 |
|
|
|
15.21 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
21.69 |
|
|
|
25.99 |
|
|
|
(13.12 |
) |
|
|
509,488 |
|
|
|
2.67 |
|
|
|
2.67 |
|
|
|
1.48 |
|
|
|
1.48 |
|
|
|
16.27 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.17 |
|
|
|
25.40 |
|
|
|
30.74 |
|
|
|
15.64 |
|
|
|
591,931 |
|
|
|
2.72 |
|
|
|
2.72 |
|
|
|
1.60 |
|
|
|
1.60 |
|
|
|
14.26 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
25.33 |
(h) |
|
|
30.75 |
|
|
|
16.34 |
|
|
|
586,592 |
|
|
|
2.31 |
|
|
|
2.31 |
|
|
|
1.60 |
|
|
|
1.60 |
|
|
|
13.55 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
26.04 |
|
|
|
30.46 |
|
|
|
52.07 |
|
|
|
599,266 |
|
|
|
1.99 |
|
|
|
1.99 |
|
|
|
1.58 |
|
|
|
1.58 |
|
|
|
13.01 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
8.02 |
|
|
$ |
8.79 |
|
|
|
(31.26 |
)% |
|
$ |
640,448 |
|
|
|
2.01 |
%* |
|
|
2.01 |
%* |
|
|
1.46 |
%* |
|
|
1.46 |
%* |
|
|
15.81 |
%* |
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
10.06 |
|
|
|
11.81 |
|
|
|
81.29 |
|
|
|
792,773 |
|
|
|
1.94 |
|
|
|
1.94 |
|
|
|
1.46 |
|
|
|
1.46 |
|
|
|
16.93 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
8.52 |
|
|
|
8.81 |
|
|
|
(46.84 |
) |
|
|
664,144 |
|
|
|
2.94 |
|
|
|
2.94 |
|
|
|
1.46 |
|
|
|
1.46 |
|
|
|
19.41 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.07 |
|
|
|
10.85 |
|
|
|
13.65 |
|
|
|
6.07 |
|
|
|
835,988 |
|
|
|
3.16 |
|
|
|
3.16 |
|
|
|
1.55 |
|
|
|
1.55 |
|
|
|
16.56 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
11.12 |
(h) |
|
|
14.74 |
|
|
|
22.32 |
|
|
|
847,052 |
|
|
|
2.52 |
|
|
|
2.52 |
|
|
|
1.53 |
|
|
|
1.53 |
|
|
|
15.81 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
11.73 |
|
|
|
14.81 |
|
|
|
(2.46 |
) |
|
|
884,912 |
|
|
|
2.12 |
|
|
|
2.12 |
|
|
|
1.53 |
|
|
|
1.53 |
|
|
|
17.14 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
14.26 |
|
|
$ |
15.28 |
|
|
|
(35.97 |
)% |
|
$ |
297,796 |
|
|
|
2.79 |
%* |
|
|
2.79 |
%* |
|
|
2.33 |
%* |
|
|
2.33 |
%* |
|
|
14.13 |
%* |
|
|
47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.12 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
18.12 |
|
|
|
21.20 |
|
|
|
65.13 |
|
|
|
365,580 |
|
|
|
2.75 |
|
|
|
2.75 |
|
|
|
2.31 |
|
|
|
2.31 |
|
|
|
14.98 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.15 |
|
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
16.08 |
|
|
|
16.91 |
|
|
|
(13.01 |
) |
|
|
295,167 |
|
|
|
2.87 |
|
|
|
2.87 |
|
|
|
2.06 |
|
|
|
2.06 |
|
|
|
17.05 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.10 |
|
|
|
0.00 |
|
|
|
0.05 |
|
|
|
18.70 |
|
|
|
20.38 |
|
|
|
13.77 |
|
|
|
305,453 |
|
|
|
2.87 |
|
|
|
2.87 |
|
|
|
2.01 |
|
|
|
2.01 |
|
|
|
14.26 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
18.94 |
(h) |
|
|
20.79 |
|
|
|
17.63 |
|
|
|
284,677 |
|
|
|
2.52 |
|
|
|
2.52 |
|
|
|
1.99 |
|
|
|
1.99 |
|
|
|
13.04 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
19.72 |
|
|
|
20.69 |
|
|
|
47.79 |
|
|
|
294,525 |
|
|
|
2.29 |
|
|
|
2.29 |
|
|
|
1.99 |
|
|
|
1.99 |
|
|
|
13.62 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
12.55 |
|
|
$ |
13.46 |
|
|
|
(36.23 |
)% |
|
$ |
581,955 |
|
|
|
2.62 |
%* |
|
|
2.62 |
%* |
|
|
2.19 |
%* |
|
|
2.19 |
%* |
|
|
14.14 |
%* |
|
|
45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.07 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
16.01 |
|
|
|
18.72 |
|
|
|
62.95 |
|
|
|
723,617 |
|
|
|
2.62 |
|
|
|
2.62 |
|
|
|
2.19 |
|
|
|
2.19 |
|
|
|
14.59 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.12 |
|
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
14.50 |
|
|
|
15.10 |
|
|
|
(13.17 |
) |
|
|
605,851 |
|
|
|
2.75 |
|
|
|
2.75 |
|
|
|
1.95 |
|
|
|
1.95 |
|
|
|
16.13 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
0.07 |
|
|
|
0.00 |
|
|
|
0.02 |
|
|
|
16.85 |
|
|
|
18.19 |
|
|
|
18.75 |
|
|
|
632,927 |
|
|
|
2.82 |
|
|
|
2.82 |
|
|
|
1.90 |
|
|
|
1.90 |
|
|
|
14.57 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
17.12 |
(h) |
|
|
18.19 |
|
|
|
15.62 |
|
|
|
600,890 |
|
|
|
2.40 |
|
|
|
2.40 |
|
|
|
1.87 |
|
|
|
1.87 |
|
|
|
13.24 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
|
|
0.00 |
|
|
|
17.56 |
|
|
|
18.29 |
|
|
|
44.74 |
|
|
|
612,310 |
|
|
|
2.14 |
|
|
|
2.14 |
|
|
|
1.85 |
|
|
|
1.85 |
|
|
|
13.86 |
|
|
|
26 |
|
Financial Highlights |
(Cont.) |
|
Ratios/Supplemental Data
Selected Per Share Data for the Year or Period Ended: |
|
Total Amount |
|
|
Asset Coverage per (1) |
|
|
Involuntary (2) |
|
|
Average (3) |
|
||||
XYZ Income Fund |
|
|
|
|
||||||||||||
6/30/2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
N/A |
|
6/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
6/30/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XYZ Growth Fund |
|
|
|
|
||||||||||||
6/30/2022 |
|
$ |
23,525,000 |
|
|
$ |
566,333 |
|
|
$ |
25,000 |
|
|
|
N/A |
|
6/30/2021 |
|
|
23,525,000 |
|
|
|
668,805 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2020 |
|
|
23,525,000 |
|
|
|
566,423 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2019 |
|
|
23,525,000 |
|
|
|
653,838 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2018 |
|
|
55,525,000 |
|
|
|
289,023 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2017 |
|
|
55,525,000 |
|
|
|
294,755 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2016 |
|
|
55,525,000 |
|
|
|
274,223 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2015 |
|
|
169,000,000 |
|
|
|
109,336 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2014 |
|
|
169,000,000 |
|
|
|
113,753 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2013 |
|
|
169,000,000 |
|
|
|
115,565 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2012 |
|
|
169,000,000 |
|
|
|
114,270 |
|
|
|
25,000 |
|
|
|
N/A |
|
6/30/2011 |
|
|
169,000,000 |
|
|
|
101,188 |
|
|
|
25,000 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A zero balance may reflect actual amounts rounding to less than $0.02 or 0.02%. |
* |
Annualized, except for organizational expense, if any. |
(a) |
Includes adjustments required by U.S. GAAP and may differ from net asset values and performance reported elsewhere by the Funds. |
(b) |
Per share amounts based on average number of common shares outstanding during the year or period. |
(c) |
Auction Rate Preferred Shareholders (“ARPS”). See Note 14, Auction Rate Preferred Shares, in the Notes to Financial Statements for more information. |
(d) |
The tax characterization of distributions is determined in accordance with Federal income tax regulations. The actual tax characterization of distributions paid is determined at the end of the fiscal year. See Note 2, Distributions — Common Shares, in the Notes to Financial Statements for more information. |
(e) |
Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each year or period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds’ dividend reinvestment plan. Total investment return does not reflect brokerage commissions in connection with the purchase or sale of Fund shares. |
(f) |
Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders. The expense ratio and net investment income do not reflect the effects of dividend payments to preferred shareholders. |
(g) |
Ratio includes interest expense which primarily relates to participation in borrowing and financing transactions. See Note 5, Borrowings and Other Financing Transactions, in the Notes to Financial Statements for more information. |
(h) |
The NAV presented may differ from the NAV reported for the same period in other Fund materials. |
(j) |
Total distributions for the period ended June 30, 2022 may be lower than prior fiscal years due to fiscal year end change resulting in a reduction of the amount of days in the period ended June 30, 2022. |
1 |
“Asset Coverage per Preferred Share” means the ratio that the value of the total assets of the Fund, less all liabilities and indebtedness not represented by ARPS, bears to the aggregate of the involuntary liquidation preference of ARPS, expressed as a dollar amount per ARPS. |
2 |
“Involuntary Liquidating Preference” means the amount to which a holder of ARPS would be entitled upon the involuntary liquidation of the Fund in preference to the Common Shareholders, expressed as a dollar amount per Preferred Share. |
3 |
The ARPS have no readily ascertainable market value. Auctions for the ARPS have failed since February 2008, there is currently no active trading market for the ARPS and the Fund is not able to reliably estimate what their value would be in a third-party market sale. The liquidation value of the ARPS represents its liquidation preference, which approximates fair value of the shares less any accumulated unpaid dividends. See Note 14, Auction-Rate Preferred Shares, in the notes to Financial Statements for more information. |
Statement of Assets and Liabilities |
|
|
|
June 30, 2022 |
== | ||||||||
(Amounts in thousands, except per share amounts) |
|
XYZ Income Fund |
|
|
XYZ Growth Fund |
|
||
Assets: |
|
|
||||||
Investments, at value |
|
|
|
|
|
|
|
|
Investments in securities* |
|
$ |
2,262,494 |
|
|
$ |
769,105 |
|
Financial Derivative Instruments |
|
|
|
|
|
|
|
|
Exchange-traded or centrally cleared |
|
|
9,222 |
|
|
|
4,026 |
|
Over the counter |
|
|
9,395 |
|
|
|
1,812 |
|
Cash |
|
|
2,326 |
|
|
|
769 |
|
Deposits with counterparty |
|
|
99,017 |
|
|
|
41,578 |
|
Foreign currency, at value |
|
|
7,596 |
|
|
|
1,348 |
|
Receivable for investments sold |
|
|
84,808 |
|
|
|
27,110 |
|
Receivable for NMP investments sold |
|
|
0 |
|
|
|
0 |
|
Receivable for Fund shares sold |
|
|
0 |
|
|
|
0 |
|
Interest and/or dividends receivable |
|
|
33,857 |
|
|
|
11,217 |
|
Other assets |
|
|
704 |
|
|
|
635 |
|
Total Assets |
|
|
2,509,419 |
|
|
|
857,600 |
|
Liabilities: |
|
|
||||||
Borrowings & Other Financing Transactions |
|
|
|
|
|
|
|
|
Payable for reverse repurchase agreements |
|
$ |
765,703 |
|
|
$ |
277,357 |
|
Payable for short sales |
|
|
382 |
|
|
|
0 |
|
Financial Derivative Instruments |
|
|
|
|
|
|
|
|
Exchange-traded or centrally cleared |
|
|
11,091 |
|
|
|
4,820 |
|
Over the counter |
|
|
14,454 |
|
|
|
260 |
|
Payable for investments purchased |
|
|
91,776 |
|
|
|
26,768 |
|
Payable for NMP investments purchased |
|
|
0 |
|
|
|
0 |
|
Payable for unfunded loan commitments |
|
|
28,507 |
|
|
|
4,600 |
|
Deposits from counterparty |
|
|
7,875 |
|
|
|
5,352 |
|
Distributions payable to common shareholders |
|
|
14,409 |
|
|
|
4,934 |
|
Distributions payable to auction rate preferred shareholders |
|
|
91 |
|
|
|
7 |
|
Accrued management fees |
|
|
882 |
|
|
|
370 |
|
Other liabilities |
|
|
160 |
|
|
|
65 |
|
Total Liabilities |
|
|
935,330 |
|
|
|
324,533 |
|
Auction Rate Preferred Shares |
|
|
212,650 |
|
|
|
23,525 |
|
Net Assets Applicable to Common Shareholders |
|
$ |
1,361,439 |
|
|
$ |
509,542 |
|
Net Assets Applicable to Common Shareholders Consist of: |
|
|
||||||
Par value |
|
$ |
1 |
|
|
$ |
0 |
|
Paid in capital in excess of par |
|
|
1,833,912 |
|
|
|
659,750 |
|
Distributable earnings (accumulated loss) |
|
|
(472,474 |
) |
|
|
(150,208 |
) |
Net Assets Applicable to Common Shareholders |
|
$ |
1,361,439 |
|
|
$ |
509,542 |
|
Net Asset Value Per Common Share (a) |
|
$ |
19.06 |
|
|
$ |
19.72 |
|
Common Shares Outstanding |
|
|
121,468 |
|
|
|
43,942 |
|
Principal Investment Strategies |
|
|
|
(Unaudited) |
The term “invest” includes both direct investing and indirect investing and the term “investments” includes both direct investments and indirect investments. For example, a Fund may invest indirectly by investing in derivatives or through wholly-owned subsidiaries (“Subsidiaries”), if applicable. The allocation of a Fund’s assets to a Subsidiary, if applicable, will vary over time and will likely not include all of the different types of investments described herein at any given time.
XYZ Income Fund (“XYZIF”)
The Fund seeks to achieve its investment objective by utilizing a dynamic asset allocation strategy among multiple fixed income sectors in the global credit markets, including corporate debt (including, among other things, fixed-, variable- and floating-rate bonds, bank loans, convertible securities and stressed debt securities issued by U.S. or foreign (non-U.S.) corporations or other business entities, including emerging market issuers), mortgage-related and other asset-backed securities, government and sovereign debt, taxable municipal bonds and other fixed-, variable- and floating-rate income-producing securities of U.S. and foreign issuers, including emerging market issuers. The Fund may invest in investment grade debt securities and below investment grade debt securities (commonly referred to as “high yield” securities or “junk bonds”), including securities of stressed, distressed and defaulted issuers. The Fund cannot assure you that it will achieve its investment objective, and you could lose all of your investment in the Fund.
Portfolio Management Strategies
Dynamic Allocation Strategy.
In managing the Fund, the Fund’s investment manager, XYZ Investment Management Company LLC (“XYZ” or the “Investment Manager”), employs an active approach to allocation among multiple fixed income sectors based on, among other things, market conditions, valuation assessments, economic outlook, credit market trends and other economic factors. With XYZ’s macroeconomic analysis as the basis for top-down investment decisions, including geographic and credit sector emphasis, XYZ manages the Fund with a focus on seeking income generating investment ideas across multiple fixed income sectors, with an emphasis on seeking opportunities in developed and emerging global credit markets. XYZ may choose to focus on particular countries/regions, asset classes, industries and sectors to the exclusion of others at any time and from time to time based on market conditions and other factors. The relative value assessment within fixed income sectors draws on XYZ’s regional and sector specialist insights. The Fund will observe various investment guidelines as summarized below.
Investment Selection Strategies.
Once the Fund’s top-down, portfolio positioning decisions have been made as described above,
XYZ selects particular investments for the Fund by employing a bottom-up, disciplined credit approach which is driven by fundamental, independent research within each sector/asset class represented in the Fund, with a focus on identifying securities and other instruments with solid and/or improving fundamentals.
XYZ utilizes strategies that focus on credit quality analysis, duration management and other risk management techniques. XYZ attempts to identify, through fundamental research driven by independent credit analysis and proprietary analytical tools, debt obligations and other income-producing securities that provide current income and/or opportunities for capital appreciation based on its analysis of the issuer’s credit characteristics and the position of the security in the issuer’s capital structure.
Consideration of yield is only one component of the portfolio managers’ approach in managing the Fund. XYZ also attempts to identify investments that may appreciate in value based on XYZ’s assessment of the issuer’s credit characteristics, forecast for interest rates and outlook for particular countries/regions, currencies, industries, sectors and the global economy and bond markets generally.
Credit Quality.
The Fund may invest in debt instruments that are, at the time of purchase, rated below investment grade, or that are unrated but determined by XYZ to be of comparable quality. The Fund will not normally invest more than 20% of its total assets in debt instruments, other than mortgage-related and other asset-backed securities, that are, at the time of purchase, rated CCC or lower by S&P Global Ratings (“S&P”) and Fitch, Inc. (“Fitch”) and Caa1 or lower by Moody’s Investors Services Inc. (“Moody’s”), or that are unrated but determined by XYZ to be of comparable quality. The Fund may invest without limit in mortgage-related and other asset-backed securities regardless of rating (i.e., of any credit quality). Subject to this 20% restriction, the Fund may invest in issuers of any credit quality (including bonds in the lowest ratings categories) if XYZ determines that the particular obligation is undervalued or offers an attractive yield relative to its risk profile. The Fund may also invest up to 5% of its total assets in defaulted bonds when XYZ believes that the issuer’s potential revenues and prospects for recovery are favorable, except that the Fund may invest in mortgage-related and other asset-backed securities without regard to this limit, subject to the Fund’s other investment policies. For purposes of applying the foregoing policies, in the case of securities with split ratings (i.e., a security receiving two different ratings from two different rating agencies), the Fund will apply the higher of the applicable ratings. Subject to the aforementioned investment restrictions, the Fund may invest in securities of stressed issuers, which include securities at risk of being in default as to the repayment of principal and/or interest at the time of acquisition by the Fund or that are rated in the lower rating categories by one or more nationally recognized statistical rating organizations (for example, Ca or lower by Moody’s or CC or lower by S&P or Fitch) or, if unrated, are determined by XYZ to be of comparable quality. Debt instruments of below investment grade quality are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and to repay principal, and are commonly referred to as “high yield” securities or “junk bonds.” Debt instruments in the lowest investment grade category also may be considered to possess some speculative characteristics. The Fund may, for hedging, investment or leveraging purposes, make use of credit default swaps, which are contracts whereby one party makes periodic payments to a counterparty in exchange for the right to receive from the counterparty a payment equal to the par (or other agreed-upon) value of a referenced debt obligation in the event of a default or other credit event by the issuer of the debt obligation.
Independent Credit Analysis.
XYZ relies primarily on its own analysis of the credit quality and risks associated with individual debt instruments considered for the Fund, rather than relying exclusively on rating agencies or third-party research. The Fund’s portfolio managers utilize this information in an attempt to manage credit risk and/or to identify issuers, industries or sectors that are undervalued and/or offer attractive yields relative to XYZ’s assessment of their credit characteristics. This aspect of XYZ’s capabilities will be particularly important to the extent that the Fund invests in high yield securities and in securities of emerging market issuers.
Duration Management.
It is expected that the Fund normally will have a short to intermediate average portfolio duration (i.e., within a zero to eight year (0 to 8) range), as calculated by XYZ, although it may be shorter or longer at any time or from time to time depending on market conditions and other factors. While the Fund seeks to maintain a short to intermediate average portfolio duration, there is no limit on the maturity or duration of any individual security in which the Fund may invest. Duration is a measure used to determine the sensitivity of a security’s price to changes in interest rates. The Fund’s duration strategy may entail maintaining a negative average portfolio duration from time to time, which would potentially benefit the portfolio in an environment of rising market interest rates, but would generally adversely impact the portfolio in an environment of falling or neutral market interest rates. XYZ may also utilize certain strategies, including without limit investments in structured notes or interest rate futures contracts or swap, cap, floor or collar transactions, for the purpose of reducing the interest rate sensitivity of the Fund’s portfolio, although there is no assurance that it will do so or that such strategies will be successful.
Portfolio Contents
Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets plus borrowings for investment purposes in a combination of corporate debt obligations of varying maturities, other corporate income-producing securities, and income-producing securities of non-corporate issuers, such as U.S. Government securities, municipal securities and mortgage-backed and other asset-backed securities issued on a public or private basis (the “80% Policy”).
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The Fund may engage in frequent and active trading of portfolio securities to achieve its investment objective, particularly during periods of volatile market movements.
In connection with rating the Fund’s outstanding auction rate preferred shares of beneficial interest (“ARPS” and, together with any other preferred shares the Fund may have outstanding, “Preferred Shares”), Moody’s imposes asset coverage tests and other restrictions that may limit the Fund’s ability to engage in certain of the transactions described above.
Temporary defensive investments.
Upon XYZ’s recommendation, for temporary defensive purposes and in order to keep the Fund’s cash fully invested, the Fund may deviate from its investment objective and policies and invest some or all of its net assets in investments of non-corporate issuers, including high quality, short-term debt securities. The Fund may not achieve its investment objective when it does so.
Use of Leverage
The Fund currently utilizes leverage principally through its outstanding Preferred Shares and reverse repurchase agreements and may also obtain additional leverage through dollar rolls or borrowings, such as through bank loans or commercial paper and/or other credit facilities. The amount of leverage the Fund utilizes may vary, but the Fund will not incur leverage (including Preferred Shares and other forms of leverage) in an amount exceeding 50% of its total assets.
The Fund may also enter into transactions other than those noted above that may give rise to a form of leverage including, among others, futures and forward contracts (including foreign currency exchange contracts), total return swaps and other derivative transactions, loans of portfolio securities, short sales, when-issued, delayed delivery and forward commitment transactions and selling credit default swaps. The Fund may also determine to issue other types of preferred shares.
The Fund utilizes certain kinds of leverage, such as reverse repurchase agreements and selling credit default swaps, opportunistically and may choose to increase or decrease, or eliminate entirely, its use of such leverage over time and from time to time based on XYZ’s assessment of the yield curve environment, interest rate trends, market conditions and other factors. The Fund may also determine to decrease the leverage it currently maintains through its outstanding Preferred Shares through Preferred Shares redemptions or tender offers and may or may not determine to replace such leverage through other sources.
The Fund also may borrow money for temporary administrative purposes, to add leverage to the portfolio or for the settlement of securities transactions which otherwise might require untimely dispositions of portfolio securities held by the Fund.
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XYZ Growth Fund (“XYZGF”)
The Fund seeks to achieve its investment objectives by utilizing a dynamic asset allocation strategy among multiple fixed income sectors in the global credit markets, including corporate debt (including, among other things, fixed-, variable- and floating-rate bonds, bank loans, convertible securities and stressed debt securities issued by U.S. or foreign (non-U.S.) corporations or other business entities, including emerging market issuers), mortgage-related and other asset-backed securities, government and sovereign debt, taxable municipal bonds and other fixed-, variable- and floating-rate income-producing securities of U.S. and foreign issuers, including emerging market issuers. The Fund may invest in investment grade debt securities and below investment grade debt securities (commonly referred to as “high yield” securities or “junk bonds”), including securities of stressed, distressed and defaulted issuers. The Fund cannot assure you that it will achieve its investment objectives, and you could lose all of your investment in the Fund.
Portfolio Management Strategies
Dynamic Allocation Strategy.
In managing the Fund, the Fund’s investment manager, XYZ employs an active approach to allocation among multiple fixed income sectors based on, among other things, market conditions, valuation assessments, economic outlook, credit market trends and other economic factors. With XYZ’s macroeconomic analysis as the basis for top-down investment decisions, including geographic and credit sector emphasis, XYZ manages the Fund with a focus on seeking income generating investment ideas across multiple fixed income sectors, with an emphasis on seeking opportunities in developed and emerging global credit markets. XYZ may choose to focus on particular countries/regions, asset classes, industries and sectors to the exclusion of others at any time and from time to time based on market conditions and other factors. For example, subject to the Fund’s investment policies and limitations, the Fund may invest a substantial portion of its total assets in mortgage-related and other asset-backed securities, which investments XYZ may choose to increase or decrease, or eliminate entirely, over time and from time to time. The relative value assessment within fixed income sectors draws on XYZ’s regional and sector specialist insights. The Fund will observe various investment guidelines as summarized below.
Investment Selection Strategies.
Once the Fund’s top-down, portfolio positioning decisions have been made as described above, XYZ selects particular investments for the Fund by employing a bottom-up, disciplined credit approach which is driven by fundamental, independent research within each sector/asset class represented in the Fund, with a focus on identifying securities and other instruments with solid and/or improving fundamentals.
XYZ utilizes strategies that focus on credit quality analysis, duration management and other risk management techniques. XYZ attempts to identify, through fundamental research driven by independent credit analysis and proprietary analytical tools, debt obligations and other income-producing securities that provide current income and/or opportunities for capital appreciation based on its analysis of the issuer’s credit characteristics and the position of the security in the issuer’s capital structure.
Consideration of yield is only one component of the portfolio managers’ approach in managing the Fund. XYZ also attempts to identify investments that may appreciate in value based on XYZ’s assessment of the issuer’s credit characteristics, forecast for interest rates and outlook for particular countries/regions, currencies, industries, sectors and the global economy and bond markets generally.
Credit Quality.
The Fund may invest in debt instruments that are, at the time of purchase, rated below investment grade, or that are unrated but determined by XYZ to be of comparable quality. The Fund will not normally invest more than 20% of its total assets in debt instruments, other than mortgage-related and other asset-backed securities, that are, at the time of purchase, rated CCC or lower by S&P and Fitch and Caa1 or lower by Moody’s, or that are unrated but determined by XYZ to be of comparable quality. The Fund may invest without limit in mortgage-related and other asset-backed securities regardless of rating (i.e., of any credit quality). Subject to this 20% restriction, the Fund may invest in issuers of any credit quality (including bonds in the lowest ratings categories) if XYZ determines that the particular obligation is undervalued or offers an attractive yield relative to its risk profile. The Fund may also invest up to 5% of its total assets in defaulted bonds when XYZ believes that the issuer’s potential revenues and prospects for recovery are favorable, except that the Fund may invest in mortgage-related and other asset-backed securities without regard to this limit, subject to the Fund’s other investment policies. For purposes of applying the foregoing policies, in the case of securities with split ratings (i.e., a security receiving two different ratings from two different rating agencies), the Fund will apply the higher of the applicable ratings. Subject to the aforementioned investment restrictions, the Fund may invest in securities of stressed issuers, which include securities at risk of being in default as to the repayment of principal and/or interest at the time of acquisition by the Fund or that are rated in the lower rating categories by one or more nationally recognized statistical rating organizations (for example, Ca or lower by Moody’s or CC or lower by S&P or Fitch) or, if unrated, are determined by XYZ to be of comparable quality. Debt instruments of below investment grade quality are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and to repay principal, and are commonly referred to as “high yield” securities or “junk bonds.” Debt instruments in the lowest investment grade category also may be considered to possess some speculative characteristics. The Fund may, for hedging, investment or leveraging purposes, make use of credit default swaps, which are contracts whereby one party makes periodic payments to a counterparty in exchange for the right to receive from the counterparty a payment equal to the par (or other agreed-upon) value of a referenced debt obligation in the event of a default or other credit event by the issuer of the debt obligation.
Independent Credit Analysis.
XYZ relies primarily on its own analysis of the credit quality and risks associated with individual debt instruments considered for the Fund, rather than relying exclusively on rating agencies or third-party research. The Fund’s portfolio managers utilize this information in an attempt to manage credit risk and/or to identify issuers, industries or sectors that are undervalued and/or offer attractive yields relative to XYZ’s assessment of their credit characteristics. This aspect of XYZ’s capabilities will be particularly important to the extent that the Fund invests in high yield securities and in securities of emerging market issuers.
Duration Management.
It is expected that the Fund normally will have a short to intermediate average portfolio duration (i.e., within a zero to eight year (0 to 8) range), as calculated by XYZ, although it may be shorter or longer at any time or from time to time depending on market conditions and other factors. While the Fund seeks to maintain a short to intermediate average portfolio duration, there is no limit on the maturity or duration of any individual security in which the Fund may invest. Duration is a measure used to determine the sensitivity of a security’s price to changes in interest rates. The Fund’s duration strategy may entail maintaining a negative average portfolio duration from time to time, which would potentially benefit the portfolio in an environment of rising market interest rates, but would generally adversely impact the portfolio in an environment of falling or neutral market interest rates. XYZ may also utilize certain strategies, including without limit investments in structured notes or interest rate futures contracts or swap, cap, floor or collar transactions, for the purpose of reducing the interest rate sensitivity of the Fund’s portfolio, although there is no assurance that it will do so or that such strategies will be successful.
Portfolio Contents
Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its net assets plus borrowings for investment purposes in a combination of corporate debt obligations of varying maturities, other corporate income-producing securities, and income-producing securities of non-corporate issuers, such as U.S. Government securities, municipal securities and mortgage-backed and other asset-backed securities issued on a public or private basis (the “80% Policy”). The Fund’s investments in derivatives and other synthetic instruments that have economic characteristics similar to corporate debt obligations of varying maturities, other corporate income-producing securities, and income-producing securities of non-corporate issuers will be counted toward satisfaction of this 80% Policy. The Fund will normally invest at least 25% of its total assets in corporate debt obligations and other corporate income-producing securities. Corporate income-producing securities include fixed-, variable- and floating-rate bonds, debentures, notes and other similar types of corporate debt instruments, such as preferred shares, convertible securities, bank loans and loan participations and assignments, payment-in-kind securities, step-ups, zero-coupon bonds, bank capital securities, bank certificates of deposit, fixed time deposits and bankers’ acceptances, stressed debt securities, structured notes and other hybrid instruments. Certain corporate income-producing securities, such as convertible bonds, also may include the right to participate in equity appreciation, and XYZ will generally evaluate those instruments based primarily on their debt characteristics. In satisfying the Fund’s 80% Policy, the Fund may invest in mortgage-related securities, including mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial or residential mortgage-backed securities, mortgage dollar rolls, CMO residuals, adjustable rate mortgage-backed securities, stripped mortgage-backed securities and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property, debt instruments, including, without limitation, bonds, debentures, notes, and other debt securities of U.S. and foreign (non-U.S.) corporate and other issuers, including commercial paper; obligations of foreign governments or their sub-divisions, agencies and government sponsored enterprises and obligations of international agencies and supranational entities; municipal securities and other debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises, including taxable municipal securities (such as Build America Bonds); inflation-indexed bonds issued by both governments and corporations; structured notes, including hybrid or indexed securities; catastrophe bonds and other event-linked bonds; credit-linked notes; credit-linked trust certificates; structured credit products; bank loans (including, among others, senior loans, delayed funding loans, revolving credit facilities and loan participations and assignments); covenant-lite obligations; preferred securities and convertible debt securities (i.e., debt securities that may be converted at either a stated price or stated rate into underlying shares of common stock), including synthetic convertible debt securities (i.e., instruments created through a combination of separate securities that possess the two principal characteristics of a traditional convertible security, such as an income-producing security and the right to acquire an equity security) and contingent convertible securities. The Fund may invest in debt securities of stressed, distressed and defaulted issuers. Subject to the investment limitations described above, at any given time and from time to time, substantially all of the Fund’s portfolio may consist of below investment grade securities. The Fund may invest in various levels of the capital structure of an issuer of mortgage-backed or asset-backed securities (including collateralized bond obligations, collateralized loan obligations and other collateralized debt obligations), including the equity or “first loss” tranche. For the avoidance of doubt, equity or “first loss” tranches of mortgage-backed or asset-backed securities do not constitute equity interests for purposes of the Fund’s 20% limit on investments in equity interests described below. The Fund may also invest, as a third party purchaser, in risk retention tranches of CMBS or other eligible securitizations, which are eligible residual interests held by the sponsors of such securitizations pursuant to the final rules implementing the credit risk retention requirements of Section 941 of the Dodd-Frank Act. The rate of interest on an income-producing security may be fixed, floating or variable, and may move in the opposite direction to interest rates generally or the interest rate on another security or index (i.e., inverse floaters).
Subject to the limitations set forth in the Fund’s prospectus, including the limit on investments in emerging market securities and instruments, the Fund may invest without limit in non-U.S. dollar denominated securities (of both developed and “emerging market” countries), including obligations of non-U.S. governments and their respective sub-divisions, agencies and government-sponsored enterprises. The Fund may invest without limit in investment grade sovereign debt denominated in the relevant country’s local currency with less than 1 year remaining to maturity (“short-term investment grade sovereign debt”), including short-term investment grade sovereign debt issued by emerging market issuers. The Fund may invest up to 40% of its total assets in securities and instruments that are economically tied to “emerging market” countries other than investments in short-term investment grade sovereign debt issued by emerging market issuers, where as noted above there is no limit. The Fund may also invest directly in foreign currencies, including local emerging market currencies.
The Fund may, but is not required to, utilize various derivative strategies (both long and short positions) involving the purchase or sale of futures and forward contracts (including foreign currency exchange contracts), call and put options, credit default swaps, total return swaps, basis swaps and other swap agreements and other derivative instruments for investment purposes, leveraging purposes or in an attempt to hedge against market, credit, interest rate, currency and other risks in the portfolio. The Fund may purchase and sell securities on a when-issued, delayed delivery or forward commitment basis and may engage in short sales.
The Fund may invest up to 20% of its total assets in common stocks and other equity securities from time to time, including those it has received through the conversion of a convertible security held by the Fund or in connection with the restructuring of a debt security.
Common stocks include common shares and other common equity interest issued by public or private issuers.
The Fund may invest in securities that have not been registered for public sale in the U.S. or relevant non-U.S. jurisdictions, including without limit securities eligible for purchase and sale pursuant to Rule 144A under the Securities Act of 1933, or relevant provisions of applicable non-U.S. law, and other securities issued in private placements. The Fund may invest in securities of other open- or closed-end investment companies (including those advised by XYZ), including, without limitation, ETFs, to the extent that such investments are consistent with the Fund’s investment objectives, strategies and policies and permissible under the 1940 Act. The Fund may invest in other investment companies to gain broad market or sector exposure or for cash management purposes, including during periods when it has large amounts of uninvested cash or when XYZ believes share prices of other investment companies offer attractive values. The Fund may invest in certain money market funds and/or short-term bond funds (“Central Funds”), to the extent permitted by the 1940 Act, the rules thereunder or exemptive relief therefrom. The Central Funds are registered investment companies created for use by certain registered investment companies advised by XYZ in connection with their cash management activities. The Fund treats its investments in other investment companies that invest primarily in types of securities in which the Fund may invest directly as investments in such types of securities for purposes of the Fund’s investment policies (e.g., the Fund’s investment in an investment company that invests primarily in debt securities will be treated by the Fund as an investment in a debt security). As a shareholder in an investment company, the Fund would bear its ratable share of that investment company’s expenses and would remain subject to payment of the Fund’s management fees and other expenses with respect to assets so invested. Common Shareholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. The securities of other investment companies may be leveraged, in which case the NAV and/or market value of the investment company’s shares will be more volatile than unleveraged investments. The Fund may invest in real estate investment trusts. The Fund may invest in securities of companies with any market capitalization, including small and medium capitalizations.
The Fund may invest up to 15% of its total assets in illiquid investments (i.e., investments that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the security).
The Fund may enter into repurchase agreements, in which the Fund purchases a security from a bank or broker-dealer and the bank or broker-dealer agrees to repurchase the security at the Fund’s cost plus interest within a specified time.
The Fund may lend its portfolio securities to brokers, dealers or other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized.
The length of time the Fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the Fund is known as “portfolio turnover.” The Fund may engage in frequent and active trading of portfolio securities to achieve its investment objectives, particularly during periods of volatile market movements.
There have been no significant changes in the Fund’s portfolio turnover rates over the last two fiscal years, and no significant change to the portfolio turnover rates of the Fund described in the Financial Highlights can currently be predicted.
In connection with rating the Fund’s outstanding auction rate preferred shares of beneficial interest (“ARPS” and, together with any other preferred shares the Fund may have outstanding, “Preferred Shares”), Moody’s and Fitch impose asset coverage tests and other restrictions that may limit the Fund’s ability to engage in certain of the transactions described above.
Temporary defensive investments.
Upon XYZ’s recommendation, for temporary defensive purposes and in order to keep the Fund’s cash fully invested, the Fund may deviate from its investment objectives and policies and invest some or all of its net assets in investments of non-corporate issuers, including high quality, short-term debt securities. The Fund may not achieve its investment objectives when it does so.
Use of Leverage
The Fund currently utilizes leverage principally through its outstanding Preferred Shares and reverse repurchase agreements and may also obtain additional leverage through dollar rolls or borrowings, such as through bank loans or commercial paper and/or other credit facilities. The amount of leverage the Fund utilizes may vary but total leverage resulting from the issuance of Preferred Shares and senior securities representing indebtedness of the Fund will not exceed 50% of the Fund’s total assets less all liabilities and indebtedness not represented by senior securities.
The Fund may also enter into transactions other than those noted above that may give rise to a form of leverage including, among others, futures and forward contracts (including foreign currency exchange contracts), total return swaps and other derivative transactions, loans of portfolio securities, short sales, when-issued, delayed delivery and forward commitment transactions and selling credit default swaps. The Fund may also determine to issue other types of preferred shares.
The Fund utilizes certain kinds of leverage, such as reverse repurchase agreements and credit default swaps, opportunistically and may choose to increase or decrease, or eliminate entirely, its use of such leverage over time and from time to time based on XYZ’s assessment of the yield curve environment, interest rate trends, market conditions and other factors. The Fund may also determine to decrease the leverage it currently maintains through its outstanding Preferred Shares through Preferred Shares redemptions or tender offers and may or may not determine to replace such leverage through other sources.
The Fund also may borrow money for temporary administrative purposes, to add leverage to the portfolio or for the settlement of securities transactions which otherwise might require untimely dispositions of portfolio securities held by the Fund.
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Principal Risks of the Funds |
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The factors that are most likely to have a material effect on a particular Fund’s portfolio as a whole are called “principal risks.” Unless otherwise indicated, each Fund is subject to the principal risks indicated below, whether through direct investments, investments by a subsidiary (if applicable) or derivative positions. Each Fund may be subject to additional risks other than those described below because the types of investments made by a Fund can change over time.
Anti-Takeover Provisions
The Fund’s Amended and Restated Agreement and Declaration of Trust or Articles of Incorporation (collectively, the “Organizational Documents”), as applicable, includes provisions that could limit the ability of other entities or persons to acquire control of the Fund or to convert the Fund to open-end status.
These provisions in the Organizational Documents could have the effect of depriving the holders (“Common Shareholders”) of the Fund’s common shares of beneficial interest (“Common Shares”) of opportunities to sell their Common Shares at a premium over the then-current market price of the Common Shares or at NAV.
Asset Allocation Risk
The Fund’s investment performance depends upon how its assets are allocated and reallocated. A principal risk of investing in the Fund is that XYZ may make less than optimal or poor asset allocation decisions. XYZ employs an active approach to allocation among multiple fixed-income sectors, but there is no guarantee that such allocation techniques will produce the desired results. It is possible that XYZ will focus on an investment that performs poorly or underperforms other investments under various market conditions. You could lose money on your investment in the Fund as a result of these allocation decisions.
Call Risk
Call risk refers to the possibility that an issuer may exercise its right to redeem a fixed income security earlier than expected (a call). Issuers may call outstanding securities prior to their maturity for a number of reasons (e.g., declining interest rates, changes in credit spreads and improvements in the issuer’s credit quality). If an issuer calls a security in which the Fund has invested, the Fund may not recoup the full amount of its initial investment and may be forced to reinvest in lower-yielding securities, securities with greater credit risks or securities with other, less favorable features.
Certain Affiliations
Certain broker-dealers may be considered to be affiliated persons of the Fund and/or the Investment Manager due to their possible affiliations with Allianz SE, the ultimate parent of the Investment Manager. Absent an exemption from the SEC or other regulatory relief, the Fund is generally precluded from effecting certain principal transactions with affiliated brokers, and its ability to purchase securities being underwritten by an affiliated broker or a syndicate including an affiliated broker, or to utilize affiliated brokers for agency transactions, is subject to restrictions. This could limit the Fund’s ability to engage in securities transactions and take advantage of market opportunities.
XYZ has applied for exemptive relief from the SEC that, if granted, would permit the Fund to, among other things, co-invest with certain other persons, including certain affiliates of XYZ and certain public or private funds managed by XYZ and its affiliates, subject to certain terms and conditions. However, there is no assurance that such relief will be granted.
Risk of Investing in China
Investments in securities of companies domiciled in the People’s Republic of China (“China” or the “PRC”) involve a high degree of risk and special considerations not typically associated with investing in the U.S. securities markets. Such heightened risks include, among others, an authoritarian government, popular unrest associated with demands for improved political, economic and social conditions, the impact of regional conflict on the economy and hostile relations with neighboring countries.
Military conflicts, either in response to internal social unrest or conflicts with other countries, could disrupt economic development. The Chinese economy is vulnerable to the long-running disagreements with Hong Kong related to integration. China has a complex territorial dispute regarding the sovereignty of Taiwan; Taiwan-based companies and individuals are significant investors in China. Potential military conflict between China and Taiwan may adversely affect securities of Chinese and Taiwan issuers. In addition, China has strained international relations with Japan, India, Russia and other neighbors due to territorial disputes, historical animosities and other defense concerns. China could be affected by military events on the Korean peninsula or internal instability within North Korea. These situations may cause uncertainty in the Chinese market and may adversely affect the performance of the Chinese economy.
The Chinese government has implemented significant economic reforms in order to liberalize trade policy, promote foreign investment in the economy, reduce government control of the economy and develop market mechanisms. But there can be no assurance that these reforms will continue or that they will be effective. Despite reforms and privatizations of companies in certain sectors, the Chinese government still exercises substantial influence over many aspects of the private sector and may own or control many companies. The Chinese government continues to maintain a major role in economic policy making and investing in China involves risks of losses due to expropriation, nationalization, confiscation of assets and property, and the imposition of restrictions on foreign investments and on repatriation of capital invested.
The Chinese government may intervene in the Chinese financial markets, such as by the imposition of trading restrictions, a ban on “naked” short selling or the suspension of short selling for certain stocks. This may affect market price and liquidity of these stocks, and may have an unpredictable impact on the investment activities of the Fund. Furthermore, such market interventions may have a negative impact on market sentiment which may in turn affect the performance of the securities markets and as a result the performance of the Fund.
In addition, there is less regulation and monitoring of the securities markets and the activities of investors, brokers and other participants in China than in the United States. Accordingly, issuers of securities in China are not subject to the same degree of regulation as those in the United States with respect to such matters as insider trading rules, tender offer regulation, stockholder proxy requirements and the requirements mandating timely and accurate disclosure of information. Stock markets in China are in the process of change and further development. This may lead to trading volatility, and difficulties in the settlement and recording of transactions and interpretation and application of the relevant regulations. Custodians may not be able to offer the level of service and safe-keeping in relation to the settlement and administration of securities in China that is customary in more developed markets. In particular, there is a risk that the Fund may not be recognized as the owner of securities that are held on behalf of the Fund by a sub-custodian.
The Renminbi (“RMB”) is currently not a freely convertible currency and is subject to foreign exchange control policies and repatriation restrictions imposed by the Chinese government. The imposition of currency controls may negatively impact performance and liquidity of the Fund as capital may become trapped in the PRC. The Fund could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the Fund of any restrictions on investments. Investing in entities either in, or which have a substantial portion of their operations in, the PRC may require the Fund to adopt special procedures, seek local government approvals or take other actions, each of which may involve additional costs and delays to the Fund.
While the Chinese economy has grown rapidly in recent years, there is no assurance that this growth rate will be maintained. China may experience substantial rates of inflation or economic recessions, causing a negative effect on the economy and securities market. China’s economy is heavily dependent on export growth. Reduction in spending on Chinese products and services, institution of tariffs or other trade barriers or a downturn in any of the economies of China’s
key trading partners may have an adverse impact on the securities of Chinese issuers.
The tax laws and regulations in the PRC are subject to change, including the issuance of authoritative guidance or enforcement, possibly with retroactive effect. The interpretation, applicability and enforcement of such laws by the PRC tax authorities are not as consistent and transparent as those of more developed nations, and may vary over time and from region to region. The application and enforcement of the PRC tax rules could have a significant adverse effect on the Fund and its investors, particularly in relation to capital gains withholding tax imposed upon non-residents. In addition, the accounting, auditing and financial reporting standards and practices applicable to Chinese companies may be less rigorous, and may result in significant differences between financial statements prepared in accordance with PRC accounting standards and practices and those prepared in accordance with international accounting standards.
From time to time and as recently as January 2020, China has experienced outbreaks of infectious illnesses, and the country may be subject to other public health threats, infectious illnesses, diseases or similar issues in the future. Any spread of an infectious illness, public health threat or similar issue could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on the Chinese economy, which in turn could adversely affect the Fund’s investments and could result in increased premiums or discounts to the Fund’s NAV.
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Tax Risk
The Fund has elected to be treated as a “regulated investment company” (a “RIC”) under the Code and intends each year to qualify and be eligible to be treated as such, so that it generally will not be subject to U.S. federal income tax on its net investment income or net short-term or long-term capital gains, that are distributed (or deemed distributed, as described below) to shareholders. In order to qualify and be eligible for such treatment, the Fund must meet certain asset diversification tests, derive at least 90% of its gross income for such year from certain types of qualifying income, and distribute to its shareholders at least 90% of its “investment company taxable income” as that term is defined in the Code (which includes, among other things, dividends, taxable interest and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses).
The Fund’s investment strategy will potentially be limited by its intention to continue qualifying for treatment as a RIC, and can limit the Fund’s ability to continue qualifying as such. The tax treatment of certain of the Fund’s investments under one or more of the qualification or distribution tests applicable to regulated investment companies is uncertain. An adverse determination or future guidance by the IRS or a change in law might affect the Fund’s ability to qualify or be eligible for such treatment.
If, in any year, the Fund were to fail to qualify for treatment as a RIC under the Code and were ineligible to or did not otherwise cure such failure, the Fund would be subject to tax on its taxable income at corporate rates and, when such income is distributed, shareholders would be subject to further tax on such distributions to the extent of the Fund’s current or accumulated earnings and profits.
U.S. Government Securities Risk
Certain U.S. Government Securities such as U.S. Treasury bills, notes and bonds and mortgage-related securities guaranteed by the GNMA, are supported by the full faith and credit of the United States; others, such as those of Federal Home Loan Banks (“FHLBs”) or the Federal Home Loan Mortgage Corporation (“FHLMC”), are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the FNMA, are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; and still others are supported only by the credit of the agency, instrumentality or corporation. Although legislation has been enacted to support certain government sponsored entities, including the FHLBs, FHLMC and FNMA, there is no assurance that the obligations of such entities will be satisfied in full, or that such obligations will not decrease in value or default. It is difficult, if not impossible, to predict the future political, regulatory or economic changes that could impact the government sponsored entities and the values of their related securities or obligations. In addition, certain governmental entities, including FNMA and FHLMC, have been subject to regulatory scrutiny regarding their accounting policies and practices and other concerns that may result in legislation, changes in regulatory oversight and/or other consequences that could adversely affect the credit quality, availability or investment character of securities issued by these entities. Yields available from U.S. Government debt securities are generally lower than the yields available from such other securities. The values of U.S. Government Securities change as interest rates fluctuate.
Valuation Risk
Certain securities in which the Fund invests may be less liquid and more difficult to value than other types of securities. When market quotations or pricing service prices are not readily available or are deemed to be unreliable, the Fund values its investments at fair value as determined in good faith pursuant to policies and procedures approved by the Board. Fair value pricing may require subjective determinations about the value of a security or other asset. As a result, there can be no assurance that fair value pricing will result in adjustments to the prices of securities or other assets or that fair value pricing will reflect actual market value, and it is possible that the fair value determined for a security or other asset will be materially different from quoted or published prices, from the prices used by others for the same security or other asset and/or from the value that actually could be or is realized upon the sale of that security or other asset.
Zero-Coupon Bond, Step-Ups and Payment-In-Kind Securities Risk
The market prices of zero-coupon, step-ups and payment-in-kind securities are generally more volatile than the prices of securities that pay interest periodically and in cash and are likely to respond to changes in interest rates to a greater degree than other types of debt securities with similar maturities and credit quality. Because zero-coupon securities bear no interest, their prices are especially volatile. And because zero-coupon bondholders do not receive interest payments, the prices of zero-coupon securities generally fall more dramatically than those of bonds that pay interest on a current basis when interest rates rise. The market for zero-coupon and payment-in-kind securities may suffer decreased liquidity. In addition, as these securities may not pay cash interest, the Fund’s investment exposure to these securities and their risks, including credit risk, will increase during the time these securities are held in the Fund’s portfolio. Further, to maintain its qualification for treatment as a RIC and to avoid Fund-level U.S. federal income and/or excise taxes, the Fund is required to distribute to its shareholders any income it is deemed to have received in respect of such investments, notwithstanding that cash has not been received currently, and the value of paid-in-kind interest. Consequently, the Fund may have to dispose of portfolio securities under disadvantageous circumstances to generate the cash or may have to leverage itself by borrowing the cash to satisfy this distribution requirement. The required distributions, if any, would result in an increase in the Fund’s exposure to these securities. Zero coupon bonds, step-ups and payment-in-kind securities allow an issuer to avoid or delay the need to generate cash to meet current interest payments and, as a result, may involve greater credit risk than bonds that pay interest currently or in cash. The Fund would be required to distribute the income on these instruments as it accrues, even though the Fund will not receive the income on a current basis or in cash. Thus, the Fund may sell other investments, including when it may not be advisable to do so, to make income distributions to its shareholders.
Risk Management Strategies |
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A Fund may (but is not required to) use various investment strategies to attempt to hedge exposure to reduce the risk of price fluctuations of its portfolio securities, the risk of loss, and to preserve capital. Derivatives strategies and instruments that a Fund may use include, among others, reverse repurchase agreements; interest rate swaps; total return swaps; credit default swaps; basis swaps; other types of swap agreements or options thereon; dollar rolls; futures and forward contracts (including foreign currency exchange contracts); short sales; options on financial futures; options based on either an index of municipal securities or taxable debt securities whose prices, XYZ believes, correlate with the prices of the Fund’s investments; other derivative transactions; loans of portfolio securities and when-issued, delayed delivery and forward commitment transactions. Income earned by a Fund from its hedging and related transactions may be subject to one or more special U.S. federal income tax rules that can affect the amount, timing and/or character of distributions to holders of the Fund’s Common Shares. For instance, many hedging activities will be treated as capital gain and, if not offset by net realized capital loss, will be distributed to shareholders in taxable distributions. If effectively used, hedging strategies will offset in varying percentages losses incurred on a Fund’s investments due to adverse interest rate changes. There is no assurance that these hedging strategies will be available at any time or that XYZ will determine to use them for a Fund or, if used, that the strategies will be successful. XYZ may determine not to engage in hedging strategies or to do so only in unusual circumstances or market conditions. In addition, a Fund may be subject to certain restrictions on its use of hedging strategies imposed by guidelines of one or more ratings agencies that may issue ratings on any preferred shares issued by the Fund.
A Fund may take certain actions if short-term interest rates increase or market conditions otherwise change (or the Fund anticipates such an increase or change) and the Fund’s leverage begins (or is expected) to adversely affect holders of its Common Shares. In order to attempt to offset such a negative impact of leverage on holders of Common Shares, a Fund may shorten the average maturity or duration of its investment portfolio (by investing in short-term, high quality securities or implementing certain hedging strategies). Should a Fund issue preferred shares, the Fund also may attempt to reduce leverage by redeeming or otherwise purchasing preferred shares or by reducing any holdings in other instruments that create leverage. The success of any such attempt to limit leverage risk depends on XYZ’s ability to accurately predict interest rate or other market changes. Because of the difficulty of making such predictions, a Fund may not be successful in managing its interest rate exposure in the manner described above.
In addition, each Fund has adopted certain investment limitations designed to limit investment risk. See “Fundamental Investment Restrictions” below for a description of these limitations.
Effects of Leverage |
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The following table is furnished in response to requirements of the SEC. It is designed, among other things, to illustrate the effects of leverage through the use of senior securities, as that term is defined under Section 18 of the 1940 Act, on Common Share total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in a Fund’s portfolio) of -10%, -5%, 0%, 5% and 10%. Although reverse repurchase agreements are not senior securities under the 1940 Act, the table below assumes each Fund’s continued use of Preferred Shares and reverse repurchase agreements, as applicable, averaged over the fiscal year ended June 30, 2022 as a percentage of total average managed assets (including assets attributable to such leverage), the estimated annual effective Preferred Share dividend rate and interest expense rate payable by the Fund on such instruments (based on market conditions as of June 30, 2022, and the annual return that the Fund’s portfolio must experience (net of expenses) in order to cover such costs. The information below does not reflect any Fund’s use of certain other forms of economic leverage achieved through the use of other instruments or transactions not considered to be senior securities under the 1940 Act, such as covered credit default swaps or other derivative instruments.
The assumed investment portfolio returns in the table below are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below. In addition, actual borrowing expenses associated with reverse repurchase agreements (or dollar rolls or borrowings, if any) used by the Fund may vary frequently and may be significantly higher or lower than the rate used for the example below.
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XYZ |
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XYZ |
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Preferred Shares as a Percentage of Total Average Managed Assets (Including Assets Attributable to Preferred Shares and Reverse Repurchase Agreements) |
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13.29 |
% |
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4.25 |
% |
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Estimated Annual Effective Preferred Share Dividend Rate |
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0.82 |
% |
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0.65 |
% |
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Reverse Repurchase Agreements as a Percentage of Total Average Managed Assets (Including Assets Attributable to Preferred Shares and Reverse Repurchase Agreements) |
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57.55 |
% |
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59.99 |
% |
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Estimated Annual Effective Interest Expense Rate Payable by Fund on Reverse Repurchase Agreements |
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% |
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0.80 |
% |
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Annual Return Fund Portfolio Must Experience (net of expenses) to Cover Estimated Annual Effective Preferred Share Dividend Rate and Interest Expense Rate on Reverse Repurchase Agreements |
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% |
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0.31 |
% |
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Common Share Total Return for (10.00)% Assumed Portfolio Total Return |
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( |
)% |
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(27.81 |
)% |
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Common Share Total Return for (5.00)% Assumed Portfolio Total Return |
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( |
)% |
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(14.14 |
)% |
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Common Share Total Return for 0.00% Assumed Portfolio Total Return |
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( |
)% |
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(0.48 |
)% |
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Common Share Total Return for 5.0% Assumed Portfolio Total Return |
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% |
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13.17 |
% |
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Common Share Total Return for 10.00% Assumed Portfolio Total Return |
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% |
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26.84 |
% |
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