JOHN HANCOCK PREMIUM DIVIDEND FUND
 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Base Prospectus Dated April [11], 2025
2,000,000 Shares

John Hancock Premium Dividend Fund

Common Shares
John Hancock Premium Dividend Fund (the “Fund” or “fund”) is a diversified, closed-end management investment company. The fund commenced
operations in December 1989 following an initial public offering.
Investment Objectives.
 
The fund’s investment objective is to provide high current income, consistent with modest growth of capital for holders of its
Common Shares. The fund will pursue its objective by investing in a diversified portfolio comprised primarily of dividend-paying preferred securities
and common equity securities. There can be no assurance that the fund will achieve its investment objective.
The Offering.
 
The fund may offer, from time to time, in one or more offerings, the fund’s common shares of beneficial interest, no par value (“Common
Shares”). Common Shares may be offered at prices and on terms to be set forth in one or more supplements to this Prospectus (each, a “Prospectus
Supplement”). You should read this Prospectus and the applicable Prospectus Supplement carefully before you invest in Common Shares.
Common Shares may be offered directly to one or more purchasers, through agents designated from time to time by the fund, or to or through
underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents, underwriters or dealers involved in the offer or
sale of Common Shares, and will set forth any applicable offering price, sales, load, fee, commission or discount arrangement between the fund and
its agents or underwriters, or among its underwriters, or the basis upon which such amount may be calculated, net proceeds and use of proceeds, and
the terms of any sale. The fund may not sell any Common Shares through agents, underwriters or dealers without delivery of a Prospectus Supplement
describing the method and terms of the particular offering of the Common Shares.
Investment Strategy.
 
Under normal circumstances, the fund will invest at least 80% (plus any borrowings for investment purposes) of its net assets
in dividend-paying securities. The fund will focus on common stocks of those issuers which, in the opinion of the Advisor (as defined below), have
strong fundamental characteristics, large market capitalizations, favorable credit quality and current dividend yields generally higher than the
currently available dividend yield quoted on the Standard & Poor’s 500 Index. The Advisor intends to manage the fund’s portfolio to generate income
qualifying for the dividends received deduction (the “Dividends Received Deduction”) allowed corporations under Section 243(a) (1) of the Internal
Revenue Code of 1986, as amended (the “Code”).
Investment Advisor and Subadvisor.
 
The fund’s investment advisor is John Hancock Investment Management LLC (the “Advisor” or “JHIM”) and its
subadvisor is Manulife Investment Management (US) LLC (the “Subadvisor” or “subadvisor”).
Exchange listing.
 
The fund’s currently outstanding Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “PDT.” Any
new Common Shares offered and sold hereby are expected to be listed on the NYSE and trade under this symbol. As of March [26], 2025, the last
reported sale price for the Common Shares was $[TBU-TPS].
Leverage.
 
The fund may use leverage to the extent permitted by the Investment Company Act of 1940 (the “1940 Act”), this Prospectus, and a
liquidity agreement dated December 2, 2015 (the “LA”). See “—Other Investment Policies—Borrowing.” The LA includes a line of credit and may utilize
securities lending and reverse repurchase agreements. The fund’s leverage strategy may not be successful. See “Hedging, Derivative and Other
Strategic Transactions Risk” for additional information.
The Common Shares have traded both at a premium and a discount to net asset value (“NAV”). The fund cannot predict whether
Common Shares will trade in the future at a premium or discount to NAV. The provisions of the 1940 Act generally require that the
public offering price of common shares (less any underwriting commissions and discounts) must equal or exceed the NAV per share of
a company’s common stock (calculated within 48 hours of pricing). The fund’s issuance of Common Shares may have an adverse effect
on prices in the secondary market for the fund’s Common Shares by increasing the number of Common Shares available, which may
Manulife, Manulife Investments, Stylized M Design, and Manulife Investments & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and John
Hancock, and the Stylized John Hancock Design are trademarks of John Hancock Life Insurance Company (U.S.A.). Each are used by it and by its affiliates under license.
put downward pressure on the market price for the fund’s Common Shares. Shares of common stock of closed-end investment
companies frequently trade at a discount from NAV, which may increase investors’ risk of loss.
Investing in the fund’s Common Shares involves certain risks. You could lose all or some of your investment. You should consider
carefully these risks together with all of the other information contained in this Prospectus before making a decision to purchase the
fund’s securities. See “Risk Factors” beginning on page
19
.
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of
these securities or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
This Prospectus, together with any applicable Prospectus Supplement, sets forth concisely the information about the fund that a prospective investor
should know before investing. You should read this Prospectus and the applicable Prospectus Supplement, which contain important information,
before deciding whether to invest in the Common Shares. You should retain the Prospectus and Prospectus Supplement for future reference. A
Statement of Additional Information (“SAI”), dated April [11], 2025, containing additional information about the fund, has been filed with the SEC and
is incorporated by reference in its entirety into this Prospectus. A copy of the SAI may be obtained without charge by calling 800-225-6020 (toll-free)
or from the SEC’s website at sec.gov. Copies of the fund’s annual report and semi-annual report and other information about the fund may be obtained
upon request by writing to the fund, by calling 800-225-6020, or by visiting the fund’s website https://www.jhinvestments.com/resources/all-resources/fund-documents/annual-reports/john-hancock-premium-dividend-fund-annual-report.
You also may obtain a copy of any information
regarding the fund filed with the SEC from the SEC’s website (sec.gov).
The fund’s Common Shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
Prospectus dated April [11], 2025
You should rely only on the information contained in, or incorporated by reference into, this Prospectus, any related Prospectus
Supplement and the SAI in making your investment decisions. The fund has not authorized any person to provide you with different
information. If anyone provides you with different or inconsistent information, you should not rely on it. The fund is not making an offer
to sell the Common Shares in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this
Prospectus and any Prospectus Supplement is accurate only as of the dates on their covers. The fund’s business, financial condition
and prospects may have changed since the date of its description in this Prospectus or the date of its description in any Prospectus
Supplement.
Prospectus Summary
This is only a summary. You should review the more detailed information elsewhere in this prospectus (“Prospectus”), in any related supplement to this
Prospectus (each, a “Prospectus Supplement”), and in the Statement of Additional Information (the “SAI”) prior to making an investment in the fund. See
“Risk Factors.”
The Fund
John Hancock Premium Dividend Fund (the “Fund” or “fund”) is a diversified, closed-end management investment company. The fund commenced
operations in December 1989 following an initial public offering.
The fund’s investment objective is to provide high current income, consistent with modest growth of capital for holders of its Common Shares. The fund
will pursue its objective by investing in a diversified portfolio comprised primarily of dividend-paying preferred securities and common equity securities.
There can be no assurance that the fund will achieve its investment objective. The fund’s investment objective is not fundamental and may be changed
without shareholder approval.
The Offering
The fund may offer, from time to time, in one or more offerings, up to 2,000,000 of the fund’s common shares of beneficial interest, no par value
(“Common Shares”), on terms to be determined at the time of the offering. The Common Shares may be offered at prices and on terms to be set forth in
one or more Prospectus Supplements. You should read this Prospectus and the applicable Prospectus Supplement carefully before you invest in
Common Shares. Common Shares may be offered directly to one or more purchasers, through agents designated from time to time by the fund, or to or
through underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents, underwriters or dealers involved in the
offer or sale of Common Shares, and will set forth any applicable offering price, sales load, fee, commission or discount arrangement between the fund
and its agents or underwriters, or among its underwriters, or the basis upon which such amount may be calculated, net proceeds and use of proceeds,
and the terms of any sale. See “Plan of Distribution.” The fund may not sell any Common Shares through agents, underwriters or dealers without delivery
of a Prospectus Supplement describing the method and terms of the particular offering of Common Shares.
Listing and Symbol
The fund’s currently outstanding Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “PDT.” Any new Common Shares
offered and sold hereby will be listed on the NYSE and trade under this symbol. As of March [26], 2025, the last reported sale price for the Common
Shares was $[TBU-TPS].
Investment Strategy
Under normal circumstances, the fund will invest at least 80% of its net assets (plus borrowings for investment purposes) in dividend-paying securities.
This is a non-fundamental policy and may be changed by the Board of Trustees of the fund provided that shareholders are provided with at least 60 days
prior written notice of any change as required by the rules under the 1940 Act. The fund will focus on common stocks of those issuers which, in the
opinion of the Advisor (as defined below), have strong fundamental characteristics, large market capitalizations, favorable credit quality and current
dividend yields generally higher than the currently available dividend yield quoted on the Standard & Poor’s 500 Index. The Advisor intends to manage
the fund’s portfolio to generate income qualifying for the dividends received deduction (the “Dividends Received Deduction”) allowed corporations under
Section 243(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”).
The fund may invest in floating-rate, fixed-to-floating rate, and fixed-rate preferred securities and debt obligations rated investment grade (at least
“BBB” by S&P Global Ratings (“S&P”) or “Baa” by Moody’s Investors Service, Inc. (“Moody’s”) at the time of investment or that are preferred securities of
issuers of investment grade senior debt, some of which may have speculative characteristics, or, if not rated, will be of comparable quality as
determined by the Advisor. The fund will invest in common stocks of issuers whose senior debt is rated investment grade or, in the case of issuers that
have no rated senior debt outstanding, whose senior debt is considered by the Advisor to be of comparable quality.
The fund may invest in money market instruments, which include short-term U.S. Government securities, investment grade commercial paper
(unsecured promissory notes issued by corporations to finance their short-term credit needs), certificates of deposit and bankers’ acceptances.
The fund may invest up to 10% of the value of its total assets in dividend-paying securities of registered investment companies that invest primarily in
investment grade securities. The investment companies in which the fund intends to invest include those open- and closed-end investment companies
whose distributions qualify for the Dividends Received Deduction.
The fund concentrates its investments in securities of issuers primarily engaged in the utilities industry. The fund may also invest in derivatives such as
futures contracts, options, interest rate swaps and reverse repurchase agreements. The fund intends to use reverse repurchase agreements to obtain
investment leverage either alone and/or in combination with other forms of investment leverage or for temporary purposes. The fund also utilizes a
liquidity agreement to increase its assets available for investments. The fund may seek to obtain additional income or portfolio leverage by making
secured loans of its portfolio securities with a value of up to 33 1/3% of its total assets.
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The fund may invest up to 20% of its net assets in restricted securities purchased in direct (private) placements.
The manager may consider environmental, social, and/or governance (ESG) factors, alongside other relevant factors, as part of its investment process.
ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and human rights policies.
The ESG characteristics utilized in the fund’s investment process may change over time and one or more characteristics may not be relevant with
respect to all issuers that are eligible fund investments. Because ESG factors are considered alongside other relevant factors, the manager may
determine that an investment is appropriate notwithstanding its relative ESG characteristics.
Investment Advisor and Subadvisor
The fund’s investment advisor is John Hancock Investment Management LLC (the “Advisor” or “JHIM”) and its subadvisor is Manulife Investment
Management (US) LLC (the “Subadvisor” or “subadvisor”).
JHIM, the fund’s investment advisor, is an indirect principally owned subsidiary of Manulife Financial Corporation. The Advisor is responsible for
overseeing the management of the fund, including its day-to-day business operations and monitoring the subadvisor. As of December 31, 2024, the
Advisor had total assets under management of approximately $165.2 billion.
The subadvisor handles the fund’s portfolio management activity, subject to oversight by the Advisor. The subadvisor is a wholly owned subsidiary of
John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial Corporation). As of December 31, 2024, the subadvisor had total
assets under management of approximately $[TBU] billion.
See “Management of the Fund—The Advisor” and “—The Subadvisor.”
Distributions
The fund makes regular monthly distributions to holders of Common Shares (the “Common Shareholders”) sourced from the fund’s cash available for
distribution. “Cash available for distribution” consists of the fund’s (i) investment company taxable income, which includes among other things, dividend,
and ordinary income after payment of fund expenses, the excess of net short-term capital gain over net long-term capital loss, and income from certain
hedging and interest rate transactions, and (ii) net long-term capital gain (gain from the sale of capital assets held longer than one year). The Board of
Trustees of the fund (the “Board”) may modify this distribution policy at any time without obtaining the approval of Common Shareholders.
Pursuant to the requirements of the 1940 Act, in the event the fund makes distributions from sources other than income, a notice will accompany each
monthly distribution with respect to the estimated sources of the distribution made. Such notices will describe the portion, if any, of the monthly
dividend which, in the fund’s good faith judgment, constitutes long-term capital gain, short-term capital gain, net investment income or a return of
capital. The actual character of such dividend distributions for U.S. federal income tax purposes, however, will only be determined finally by the fund at
the close of its fiscal year, based on the fund’s full year performance and its actual net investment company taxable income and net capital gain for the
year, which may result in a recharacterization of amounts distributed during such fiscal year from the characterization in the monthly estimates.
If, for any calendar year, as discussed above, the total distributions made exceed the fund’s net investment taxable income and net capital gain, the
excess generally will be treated as a return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her
Common Shares) and thereafter as gain from the sale of Common Shares. The amount treated as a return of capital reduces the Common Shareholder’s
adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale of
his or her Common Shares. Distributions in any year may include a substantial return of capital component.
Distribution rates are based on projected monthly cash available for distribution, which may result in fluctuations in monthly rates. As a result, the
distributions paid by the fund for any particular month may be more or less than the amount of cash available for distribution from that monthly period.
In certain circumstances, the fund may be required to sell a portion of its investment portfolio to fund distributions. Distributions will reduce the
Common Shares’ net asset value (“NAV”).
The fund has adopted a managed distribution plan (Plan). Under the Plan, the fund makes monthly distributions of an amount equal to [$0.0975] per
share, which will be paid monthly until further notice. The fund may make additional distributions: (i) for purposes of not incurring federal income tax at
the fund level of investment company taxable income and net capital gain, if any, not included in such regular distributions; and (ii) for purposes of not
incurring federal excise tax on ordinary income and capital gain net income, if any, not included in such regular distributions. The Plan provides that the
Board of Trustees of the fund may amend the terms of the Plan or terminate the Plan at any time without prior notice to the fund’s shareholders. The Plan
is subject to periodic review by the fund’s Board of Trustees.
Dividend Reinvestment Plan
The fund has established an automatic dividend reinvestment plan (the “Plan”). Under the Plan, distributions of dividends and capital gain are
automatically reinvested in Common Shares of the fund by Computershare Trust Company, N.A. Every shareholder who became a shareholder of the
fund after June 30, 2011 and holds at least one full share of the fund will be automatically enrolled in the Plan. Shareholders who do not participate in
the Plan will receive all distributions in cash. Common Shareholders who intend to hold their Common Shares through a broker or nominee should
contact such broker or nominee regarding the Plan. See “Dividend Reinvestment Plan.”
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Closed-End Fund Structure
Closed-end funds differ from open-end management investment companies (which generally are referred to as “mutual funds”) in that closed-end funds
generally list their shares for trading on a securities exchange and do not redeem their shares at the option of the shareholder. Mutual funds do not
trade on securities exchanges and issue securities redeemable at the option of the shareholder. The continuous outflows of assets in a mutual fund can
make it difficult to manage the fund’s investments. Closed-end funds generally are able to stay more fully invested in securities that are consistent with
their investment objectives and also have greater flexibility to make certain types of investments and to use certain investment strategies, such as
financial leverage and investments in illiquid securities. The fund’s Common Shares are designed primarily for long-term investors; you should not
purchase Common Shares if you intend to sell them shortly after purchase.
Common shares of closed-end funds frequently trade at prices lower than their NAV. Since inception, the market price of the Common Shares has
fluctuated and at times has traded below the fund’s NAV and at times has traded above the fund’s NAV. The fund cannot predict whether in the future the
Common Shares will trade at, above or below NAV. In addition to NAV, the market price of the fund’s Common Shares may be affected by such factors as
the fund’s dividend stability, dividend levels, which are in turn affected by expenses, and market supply and demand.
In recognition of the possibility that the Common Shares may trade at a discount from their NAV, and that any such discount may not be in the best
interest of Common Shareholders, the Board, in consultation with the Advisor, from time to time may review possible actions to reduce any such
discount. There can be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result in the
Common Shares trading at a price equal to or close to NAV per Common Share. In the event that the fund conducts an offering of new Common Shares
and such offering constitutes a “distribution” under Regulation M, the fund and certain of its affiliates may be subject to an applicable restricted period
that could limit the timing of any repurchases by the fund.
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Summary of Risks
The fund’s principal risk factors are listed below by general risks and strategy risks. The fund’s main risks are listed below in alphabetical order, not in
order of importance. Before investing, be sure to read the additional descriptions of these risks beginning on page
19
of this Prospectus.
General Risks
Anti-takeover Provisions.
 
The fund’s Declaration of Trust includes provisions that could limit the ability of other persons or entities to acquire control
of the fund or to change the composition of its Board. These provisions may deprive shareholders of opportunities to sell their Common Shares at a
premium over the then current market price of the Common Shares. See “Certain Provisions in the Declaration of Trust and By-Laws—Anti-takeover
provisions.”
Defensive Positions Risk.
 
During periods of adverse market or economic conditions, the fund may temporarily invest all or a substantial portion of its
total assets in short-term money market instruments, securities with remaining maturities of less than one year, cash or cash equivalents. The fund will
not be pursuing its investment objective in these circumstances and could miss favorable market developments.
Distribution Risk.
 
There can be no assurance that distributions paid by the fund to shareholders will be maintained at current levels or increase over
time. The distributions shareholders receive from the fund are derived from the fund’s dividends and interest income after payment of fund expenses.
The fund’s cash available for distribution may vary widely over the short- and long-term. If, for any calendar year, the total distributions made exceed the
fund’s net investment taxable income and net capital gain, the excess generally will be treated as a return of capital to each Common Shareholder (up to
the amount of the Common Shareholder’s basis in his or her Common Shares) and thereafter as gain from the sale of Common Shares. The amount
treated as a return of capital reduces the Common Shareholder’s adjusted basis in his or her Common Shares, thereby increasing his or her potential
gain or reducing his or her potential loss on the subsequent sale of his or her Common Shares. Distributions in any year may include a substantial return
of capital component.
Economic and market events risk.
 
Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign
central banks to stimulate or stabilize economic growth, may at times result in unusually high market volatility, which could negatively impact
performance. Reduced liquidity in credit and fixed-income markets could adversely affect issuers worldwide. Banks and financial services companies
could suffer losses if interest rates rise or economic conditions deteriorate.
ESG integration risk.
 
The manager considers ESG factors that it deems relevant or additive, along with other material factors and analysis, when
managing the fund. ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and
human rights policies. The manager may consider these ESG factors on all or a meaningful portion of the fund’s investments. Incorporating ESG criteria
and making investment decisions based on certain ESG characteristics, as determined by the manager, carries the risk that the fund may perform
differently, including underperforming, funds that do not utilize ESG criteria, or funds that utilize different ESG criteria.
Industry or sector investing risk.
 
The performance of a fund that focuses on a single industry or sector of the economy depends in large part on the
performance of that industry or sector. As a result, the value of an investment may fluctuate more widely since it is more susceptible to market,
economic, political, regulatory, and other conditions and risks affecting that industry or sector than a fund that invests more broadly across industries
and sectors.
Leverage Risk.
 
The fund is authorized to utilize leverage through borrowings, reinvestment of securities lending collateral or reverse repurchase
agreement proceeds, and/or the issuance of preferred shares, including the issuance of debt securities. The fund is party to the LA as described in
“—Description of Capital Structure—Liquidity Facility.”
The fund utilizes the LA to increase its assets available for investment. When the fund leverages its assets, Common Shareholders bear the fees
associated with the LA and have the potential to benefit or be disadvantaged from the use of leverage. In addition, the fee paid to the Advisor is
calculated on the basis of the fund’s average daily managed assets, including proceeds from borrowings and/or the issuance of any preferred shares, so
the fee will be higher when leverage is utilized, which may create an incentive for the Advisor to employ financial leverage. Consequently, the fund and
the Advisor may have differing interests in determining whether to leverage the fund’s assets. Leverage creates risks that may adversely affect the return
for the Common Shareholders, including:
●
the likelihood of greater volatility of NAV and market price of Common Shares;
●
fluctuations in the interest rate paid for the use of the LA;
●
increased operating costs, which may reduce the fund’s total return;
●
the potential for a decline in the value of an investment acquired through leverage, while the fund’s obligations under such leverage remains fixed;
and
●
the fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements.
To the
extent the returns derived from securities purchased with proceeds received from leverage exceeds the cost of leverage, the fund’s distributions
may be greater than if leverage had not been used. Conversely, if the returns from the securities purchased with such proceeds are not sufficient to
cover the cost of leverage, the amount available for distribution to Common Shareholders will be less than if leverage had not been used. In the
4
latter case, the Advisor, in its best judgment, may nevertheless determine to maintain the fund’s leveraged position if it deems such action to be
appropriate. The costs of a borrowing program and/or an offering of preferred shares would be borne by Common Shareholders and consequently
would result in a reduction of the NAV of Common Shares.
In addition to the risks created by the fund’s use of leverage, the fund is subject to the
risk that it would be unable to timely, or at all, obtain replacement financing if the LA is terminated. For more information regarding termination,
see “—Description of Capital Structure—Liquidity Facility.”
LIBOR discontinuation risk.
 
The official publication of the London Interbank Offered Rate (LIBOR), which many debt securities, derivatives and other
financial instruments traditionally utilized as the reference or benchmark rate for interest rate calculations, was discontinued as of June 30, 2023.
However, a subset of LIBOR settings was published on a “synthetic” basis until September 30, 2024. The discontinuation of LIBOR and a transition to
replacement rates may lead to volatility and illiquidity in markets and may adversely affect the fund’s performance.
Liquidity risk.
 
The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be
impaired by reduced market activity or participation, legal restrictions, or other economic and market impediments.
Market Discount Risk.
 
The fund’s Common Shares will be offered only when Common Shares of the fund are trading at a price equal to or above the
fund’s NAV per Common Share plus the per Common Share amount of commissions. As with any security, the market value of the Common Shares may
increase or decrease from the amount initially paid for the Common Shares. The fund’s Common Shares have traded at both a premium and at a
discount to NAV. The shares of closed-end management investment companies frequently trade at a discount from their NAV. This characteristic is a risk
separate and distinct from the risk that the fund’s NAV could decrease as a result of investment activities. Investors bear a risk of loss to the extent that
the price at which they sell their shares is lower in relation to the fund’s NAV than at the time of purchase, assuming a stable NAV.
Operational and cybersecurity risk.
 
Cybersecurity breaches may allow an unauthorized party to gain access to fund assets, customer data, or
proprietary information, or cause a fund or its service providers to suffer data corruption or lose operational functionality. Similar incidents affecting
issuers of a fund’s securities may negatively impact performance. Operational risk may arise from human error, error by third parties, communication
errors, or technology failures, among other causes.
Secondary Market for the Common Shares.
 
The issuance of new Common Shares may have an adverse effect on the secondary market for the
Common Shares. When Common Shares are trading at a premium, the fund may issue new Common Shares of the fund. The increase in the amount of
the fund’s outstanding Common Shares resulting from the offering of new Common Shares may put downward pressure on the market price for the
Common Shares of the fund. Common Shares will not be issued at any time when Common Shares are trading at a price lower than a price equal to the
fund’s NAV per Common Share plus the per Common Share amount of commissions.
The fund also issues Common Shares through its dividend reinvestment plan. Common Shares may be issued under the plan at a discount to the market
price for such Common Shares, which may put downward pressure on the market price for Common Shares of the fund.
The voting power of current Common Shareholders will be diluted to the extent that such shareholders do not purchase shares in any future Common
Share offerings or do not purchase sufficient shares to maintain their percentage interest. In addition, if the proceeds of such offering are unable to be
invested as intended, the fund’s per Common Share distribution may decrease (or may consist of return of capital) and the fund may not participate in
market advances to the same extent as if such proceeds were fully invested as planned.
Tax Risk.
 
To qualify for the special tax treatment available to regulated investment companies, the fund must: (i) derive at least 90% of its annual gross
income from certain kinds of investment income; (ii) meet certain asset diversification requirements at the end of each quarter; and (iii) distribute in
each taxable year at least 90% of its net investment income (including net interest income and net short-term capital gain). If the fund failed to meet any
of these requirements, subject to the opportunity to cure such failures under applicable provisions of the Internal Revenue Code of 1986, as amended
(the “Code”), the fund would be subject to U.S. federal income tax at regular corporate rates on its taxable income, including its net capital gain, even if
such income were distributed to its shareholders. All distributions by the fund from earnings and profits, including distributions of net capital gain (if
any), would be taxable to the shareholders as ordinary income. To the extent designated by the fund, such distributions generally would be eligible (i) to
be treated as qualified dividend income in the case of individual and other non-corporate shareholders and (ii) for the dividends received deduction in
the case of corporate shareholders, provided that in each case the shareholder meets applicable holding period requirements. In addition, in order to
requalify for taxation as a regulated investment company, the fund might be required to recognize unrealized gain, pay substantial taxes and interest,
and make certain distributions. See “U.S. Federal Income Tax Matters.”
The tax treatment and characterization of the fund’s distributions may vary significantly from time to time due to the nature of the fund’s investments.
The ultimate tax characterization of the fund’s distributions in a calendar year may not finally be determined until after the end of that calendar year. The
fund may make distributions during a calendar year that exceed the fund’s net investment income and net realized capital gain for that year. In such a
situation, the amount by which the fund’s total distributions exceed net investment income and net realized capital gain generally would be treated as a
return of capital up to the amount of the Common Shareholder’s tax basis in his or her Common Shares, with any amounts exceeding such basis treated
as gain from the sale of his or her Common Shares. The fund’s income distributions that qualify for favorable tax treatment may be affected by Internal
Revenue Service (“IRS”) interpretations of the Code and future changes in tax laws and regulations all of which may apply with retroactive effect. See
“U.S. Federal Income Tax Matters.”
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No assurance can be given as to what percentage of the distributions paid on the Common Shares, if any, will consist of long-term capital gain or what
the tax rates on various types of income will be in future years.
Strategy Risks
Concentration risk.
 
Because the fund may focus on one or more industries or sectors of the economy, its performance depends in large part on the
performance of those industries or sectors. As a result, the value of an investment may fluctuate more widely since it is more susceptible to market,
economic, political, regulatory, and other conditions and risks affecting those industries or sectors than a fund that invests more broadly across
industries and sectors.
Credit and counterparty risk.
 
The issuer or guarantor of a fixed-income security, the counterparty to an over-the-counter derivatives contract, or a
borrower of fund securities may not make timely payments or otherwise honor its obligations. U.S. government securities are subject to varying degrees
of credit risk depending upon the nature of their support. A downgrade or default affecting any of the fund’s securities could affect the fund’s
performance.
Dividend Strategy Risk.
 
The Subadvisor may not be able to anticipate the level of dividends that companies will pay in any given timeframe. In
accordance with the fund’s strategies, the Subadvisor attempts to identify and take advantage of opportunities such as the announcement of major
corporate actions that may lead to high current dividend income. These situations typically are non-recurring or infrequent, may be difficult to predict
and may not result in an opportunity that allows the Subadvisor to fulfill the fund’s investment objective. In addition, the dividend policies of the fund’s
target companies are heavily influenced by the current economic climate and the favorable U.S. federal tax treatment afforded to dividends.
Equity securities risk.
 
The price of equity securities may decline due to changes in a company’s financial condition or overall market conditions.
Fixed-income securities risk.
 
A rise in interest rates typically causes bond prices to fall. The longer the average maturity or duration of the bonds
held by a fund, the more sensitive it will likely be to interest-rate fluctuations. An issuer may not make all interest payments or repay all or any of the
principal borrowed. Changes in a security’s credit quality may adversely affect fund performance.
Foreign securities risk.
 
Less information may be publicly available regarding foreign issuers, including foreign government issuers. Foreign securities
may be subject to foreign taxes and may be more volatile than U.S. securities. Currency fluctuations and political and economic developments may
adversely impact the value of foreign securities.
Hedging, derivatives, and other strategic transactions risk.
 
Hedging, derivatives, and other strategic transactions may increase the fund’s
volatility and could produce disproportionate losses, potentially more than the fund’s principal investment. Risks of these transactions are different from
and possibly greater than risks of investing directly in securities and other traditional instruments. Under certain market conditions, derivatives could
become harder to value or sell and may become subject to liquidity risk (i.e., the inability to enter into closing transactions). Derivatives and other
strategic transactions that the fund intends to utilize include: foreign currency forward contracts, futures contracts, interest-rate swaps and options.
Foreign currency forward contracts, futures contracts, swaps and options generally are subject to counterparty risk. In addition, swaps may be subject
to interest-rate and settlement risk, and the risk of default of the underlying reference obligation. Derivatives associated with foreign currency
transactions are subject to currency risk.
Illiquid and Restricted Securities Risk.
 
The fund may invest without limit in securities for which there is no readily available trading market or which
are otherwise illiquid (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 investment). The fund may have significant exposure to
restricted securities. Restricted securities are securities with restrictions on public resale, such as securities offered in accordance with an exemption
under Rule 144A under the Securities Act of 1933 (the “1933 Act”), or commercial paper issued under Section 4(a)(2) of the 1933 Act. Restricted
securities are often required to be sold in private sales to institutional buyers, markets for restricted securities may or may not be well developed, and
restricted securities can be illiquid.
Illiquid and restricted securities may be difficult to value and may involve greater risks than liquid securities. Illiquidity may have an adverse impact on a
particular security’s market price and the fund’s ability to see the security. Illiquid investments may become harder to value, especially in changing
markets. The fund’s investments in illiquid securities may reduce the returns of the fund because it may be unable to sell the illiquid investments at an
advantageous time or price or possibly require the fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations,
which could prevent the fund from taking advantage of other investment opportunities. Additionally, the market for certain investments may become
illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer.
The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be impaired by
reduced market activity or participation, legal restrictions, or other economic and market impediments. Liquidity risk may be magnified in rising
interest rate environments due to higher than normal redemption rates. Widespread selling of fixed income securities to satisfy obligations during
periods of reduced demand may adversely impact the price or salability of such securities. Periods of heavy redemption could cause the fund to sell
assets at a loss or depressed value, which could negatively affect performance.
6
In addition, limited liquidity could affect the market price of the investments, thereby adversely affecting the fund’s NAV and ability to make dividend
distributions. The financial markets in general have in recent years experienced periods of extreme secondary market supply and demand imbalance,
resulting in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value. During such
periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market dislocation may occur again at any
time. The fund has no limitation on the amount of its assets which may be invested in investments which are not readily marketable or are subject to
restrictions on resale.
Investment company securities risk.
 
Fund shareholders indirectly bear their proportionate share of the expenses of any investment company in
which the fund invests. The total return on such investments will be reduced by the operating expenses and fees of such other investment companies,
including advisory fees.
Large company risk.
 
Larger companies may grow more slowly than smaller companies or be slower to respond to business developments.
Large-capitalization securities may underperform the market as a whole.
Preferred and convertible securities risk.
 
Preferred stock dividends are payable only if declared by the issuer’s board. Preferred stock may be
subject to redemption provisions. The market values of convertible securities tend to fall as interest rates rise and rise as interest rates fall. Convertible
preferred stock’s value can depend heavily upon the underlying common stock’s value.
Reverse Repurchase Agreement Risk.
 
Reverse repurchase agreement transactions involve the risk that the market value of the securities that the
fund is obligated to repurchase under such agreements may decline below the repurchase price. Any fluctuations in the market value of either the
securities transferred to the other party or the securities in which the proceeds may be invested would affect the market value of the fund’s assets,
thereby potentially increasing fluctuations in the market value of the fund’s assets. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the fund’s use of proceeds received under the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce the fund’s obligation to repurchase the securities. An event of default of
insolvency of the counterparty to a reverse repurchase agreement could result in delays or restrictions with respect to the fund’s ability to dispose of the
underlying securities, in addition, a reverse repurchase agreement may be considered a form of leverage and may, therefore, increase fluctuations in
the fund’s net asset value per share (NAV).
Sector risk.
 
When a fund focuses its investments in certain sectors of the economy, its performance may be driven largely by sector performance and
could fluctuate more widely than if the fund were invested more evenly across sectors. To the extent that a fund invests in securities of companies in the
financial services sector, the fund may be significantly affected by economic, market, and business developments, borrowing costs, interest-rate
fluctuations, competition, and government regulation, among other factors, impacting that sector.
U.S. government agency securities risk.
 
No assurance can be given that the U.S. government will provide financial support in the future to
U.S. government agencies, authorities or instrumentalities that are not supported by the full faith and credit of the U.S. Securities guaranteed as to
principal and interest by the United States government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of
principal and interest is backed by an irrevocable letter of credit issued by the U.S. government or any of its agencies, authorities or instrumentalities;
and (ii) participations in loans made to non-U.S. governments or other entities that are so guaranteed. The secondary market for certain of these
participations is limited and therefore may be regarded as illiquid.
Utilities sector risk.
 
Issuers in the utilities sector are subject to many risks, including the following: increases in fuel and other operating costs;
restrictions on operations; increased costs and delays as a result of environmental and safety regulations; coping with the impact of energy
conservation and other factors reducing the demand for services; technological innovations that may render existing plants, equipment or products
obsolete; the potential impact of natural or man-made disasters; difficulty in obtaining adequate returns on invested capital; difficulty in obtaining
approval for rate increases; the high cost of obtaining financing, particularly during periods of inflation; increased competition resulting from
deregulation, overcapacity and pricing pressures; and the negative impact of regulation. Because utility companies are faced with the same obstacles,
issues and regulatory burdens, their securities may react similarly and more in unison to these or other market conditions.
Given the risks described above, an investment in Common Shares may not be appropriate for all investors. You should carefully
consider your ability to assume these risks before making an investment in the fund.
Summary of Fund Expenses
The purpose of the table below is to help you understand a
ll f
ees and expenses that you, as a Common Shareholder, would bear directly or indirectly. In
accordance with SEC requirements, the table below shows the fund’s expenses as a percentage of its average net assets as of October 31, 2024, and
not as a percentage of total assets. By showing expenses as a percentage of average net assets, expenses are not expressed as a percentage of all of
the assets in which the fund invests. The offering costs to be paid or reimbursed by the fund are not included in the Annual Expenses table below.
However, these expenses will be borne by Common Shareholders and may result in a reduction in the NAV of the Common Shares. See “Management of
the Fund” and “Dividend Reinvest
men
t Plan.” The table and example are based on the fund’s capital structure as of October 31, 2024.
 
7
Shareholder Transaction Expenses (%)
Sales load (as a percentage of offering price)
1
Offering expenses (as a percentage of offering price)
1
Dividend Reinvestment Plan fees
2
None
 
Annual Expenses (Percentage of Net Assets Attributable to Common Shares) (%)
 
Management fees
3
1.29
Interest Payments on Borrowed Funds
4
3.72
Other expenses
0.25
Total Annual Operating Expenses
5.26
Contractual Expense Reimbursement
5
(0.01
)
Total Annual Fund Operating Expenses After Expense Reimbursements
5.25
1
If Common Shares are sold to or through underwriters, the Prospectus Supplement will set forth any applicable sales load and the estimated offering expenses.
2
Participants in the fund’s dividend reinvestment plan do not pay brokerage charges with respect to Common Shares issued directly by the fund. However, whenever
Common Shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently
$0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested. Shareholders participating in the Plan may buy additional
Common Shares of the fund through the Plan at any time and will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. See
“Distribution Policy” and “Dividend Reinvestment Plan.”
3
See “Management of the Fund—The Advisor.”
4
The Fund uses leverage by borrowing under the LA. See “Other Investment Policies – Borrowing” and “Use of Leverage by the Fund.”
5
The Advisor contractually agrees to waive a portion of its management fee and/or reimburse expenses for the fund and certain other John Hancock funds according to
an asset level breakpoint schedule that is based on the aggregate net assets of all the funds participating in the waiver or reimbursement, including the fund (the
participating portfolios). This waiver equals, on an annualized basis, 0.0100% of that portion of the aggregate net assets of all the participating portfolios that
exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds
$125 billion but is less than or equal to $150 billion; 0.0150% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion
but is less than or equal to $175 billion; 0.0175% of that portion of the aggregate net assets of all the participating portfolios that exceeds $175 billion but is less
than or equal to $200 billion; 0.0200% of that portion of the aggregate net assets of all the participating portfolios that exceeds $200 billion but is less than or equal
to $225 billion; and 0.0225% of that portion of the aggregate net assets of all the participating portfolios that exceeds $225 billion. The amount of the
reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each participating portfolio. During its
most recent fiscal year, the fund’s reimbursement amounted to 0.01% of the fund’s average daily net assets. This agreement expires on July 31, 2026, unless renewed
by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
Expense example
The following example illustrates the expenses that Common Shareholders would pay on a $1,000 investment in Common Shares, assuming (i) total
annual expenses set forth above, including any reimbursements through their current expiration date; (ii) a 5% annual return; and (iii) all distributions
are reinvested at NAV:
 
 
1 Year
3 Years
5 Years
10 Years
Total Expenses
$52
$157
$261
$519
The above table and example and the assumption in the example of a 5% annual return are required by regulations of the SEC that are applicable to all
investment companies; the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the fund’s
Common Shares. For more complete descriptions of certain of the fund’s costs and expenses, see “Management of the Fund.” In addition, while the
example assumes reinvestment of all dividends and distributions at NAV, participants in the fund’s dividend reinvestment plan may receive Common
Shares purchased or issued at a price or value different from NAV. See “Distribution Policy” and “Dividend Reinvestment Plan.” The example does not
include sales load or estimated offering costs, which would cause the expenses shown in the example to increase.
The example should not be considered a representation of past or future expenses, and the fund’s actual expenses may be greater or less
than those shown. Moreover, the fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the
example.
8
Financial Highlights
This table details the financial performance of the Common Shares, including total return information showing how much an investment in the fund has
increased or decreased each period (assuming reinvestment of all dividends and distributions).
The financial statements of the fund as of October 31, 2024, 2023, 2022, 2021, and 2020 have been audited by [TBU], the fund's independent
registered public accounting firm. The report of [TBU], along with the fund's financial statements in the fund’s annual report for the fiscal period ended
October 31, 2024, has been incorporated by reference into the SAI. Copies of the fund’s most recent annual report are available upon request.
Common Shares
 
Period ended
10-31-24
10-31-23
10-31-22
10-31-21
10-31-20
Per share operating performance
Net asset value, beginning of period
$10.58
$12.60
$14.88
$12.84
$15.74
Net investment income
1
0.52
0.48
0.72
0.83
0.83
Net realized and unrealized gain (loss) on investments
3.48
(1.39
)
(1.83
)
2.40
(2.53
)
Total from investment operations
4.00
(0.91
)
(1.11
)
3.23
(1.70
)
Less distributions
From net investment income
(0.99
)
(0.98
)
(1.17
)
(1.17
)
(1.17
)
From net realized gain
—
—
—
(0.02
)
(0.03
)
From tax return of capital
—
(0.13
)
—
—
—
Total distributions
(0.99
)
(1.11
)
(1.17
)
(1.19
)
(1.20
)
Premium from shares sold through shelf offering
—
—
2
—
2
—
—
Net asset value, end of period
$13.59
$10.58
$12.60
$14.88
$12.84
Per share market value, end of period
$12.83
$9.57
$13.99
$17.27
$12.55
Total return at net asset value (%)
3,4
39.63
(7.65
)
(8.30
)
25.56
(10.89
)
Total return at market value (%)
3
45.73
(24.77
)
(12.28
)
49.09
(22.55
)
Ratios and supplemental data
Net assets, end of period (in millions)
$668
$521
$619
$726
$625
Ratios (as a percentage of average net assets):
Expenses before reductions
5.26
5.07
2.42
1.82
2.32
Expenses including reductions
5
5.25
5.06
2.41
1.81
2.31
Net investment income
4.17
3.93
5.08
5.78
6.07
Portfolio turnover (%)
27
26
16
17
24
Senior securities
Total debt outstanding end of period (in millions)
$374
$374
$374
$374
$374
Asset coverage per $1,000 of debt
6
$2,789
$2,393
$2,655
$2,943
$2,672
1
Based on average daily shares outstanding.
2
Less than $0.005 per share.
3
Total return based on net asset value reflects changes in the fund’s net asset value during each period. Total return based on market value reflects changes in market
value. Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested.
4
Total returns would have been lower had certain expenses not been reduced during the applicable periods.
5
Expenses including reductions excluding interest expense were 1.52%, 1.54%, 1.39%, 1.41% and 1.48% for the periods ended 10-31-24, 10-31-23, 10-31-22,
10-31-21 and 10-31-20, respectively.
6
Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 8). As debt outstanding changes, the
level of invested assets may change accordingly. Asset coverage ratio provides a measure of leverage.




9
 
Period ended
10-31-19
10-31-18
10-31-17
10-31-16
10-31-15
Per share operating performance
Net asset value, beginning of period
$14.33
$15.95
$16.17
$15.14
$15.43
Net investment income
1
0.72
0.85
1.11
0.98
0.97
Net realized and unrealized gain (loss) on investments
1.89
(0.77
)
0.14
1.16
(0.21
)
Total from investment operations
2.61
0.08
1.25
2.14
0.76
Less distributions
From net investment income
(1.17
)
(1.17
)
(1.17
)
(0.97
)
(0.89
)
From net realized gain
(0.03
)
(0.53
)
(0.30
)
(0.14
)
(0.20
)
Total distributions
(1.20
)
(1.70
)
(1.47
)
(1.11
)
(1.09
)
Anti-dilutive impact of repurchase plan
—
—
—
—
2,3
0.043
Net asset value, end of period
$15.74
$14.33
$15.95
$16.17
$15.14
Per share market value, end of period
$17.69
$15.65
$16.97
$14.96
$13.68
Total return at net asset value (%)
4,5
18.52
0.19
8.26
14.83
6.18
Total return at market value (%)
4
22.04
2.84
24.50
17.58
8.29
Ratios and supplemental data
Net assets, end of period (in millions)
$764
$695
$771
$781
$733
Ratios (as a percentage of average net assets):
Expenses before reductions
3.01
2.80
2.28
1.95
1.86
Expenses including reductions
6
3.00
2.79
2.27
1.94
1.85
Net investment income
4.79
5.75
7.00
6.14
6.38
Portfolio turnover (%)
18
24
14
19
15
Senior securities
Total debt outstanding end of period (in millions)
$384
$384
$384
$384
$384
Asset coverage per $1,000 of debt
7
$2,992
$2,811
$3,009
$3,035
$2,909
1
Based on average daily shares outstanding.
2
Less than $0.005 per share.
3
The repurchase plan was completed at an average repurchase price of $13.27 and $13.41 for 105,700 and 1,218,436 shares for the periods ended 10-31-16 and
10-31-15, respectively.
4
Total return based on net asset value reflects changes in the fund’s net asset value during each period. Total return based on market value reflects changes in market
value. Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested.
5
Total returns would have been lower had certain expenses not been reduced during the applicable periods.
6
Expenses including reductions excluding interest expense were 1.41%, 1.44%, 1.45, 1.40% and 1.41% for the periods ended 10-31-19, 10-31-18, 10-31-17,
10-31-16 and 10-31-15, respectively.
7
Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 8). As debt outstanding changes, the
level of invested assets may change accordingly. Asset coverage ratio provides a measure of leverage.
10
Market and Net Asset Value Information
The fund’s currently outstanding Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “PDT” and commenced trading
on the NYSE in 1989.
The fund’s Common Shares have traded both at a premium and at a discount to its net asset value (“NAV”). The fund cannot predict whether its shares
will trade in the future at a premium or discount to NAV. The provisions of the 1940 Act generally require that the public offering price of common shares
(less any underwriting commissions and discounts) must equal or exceed the NAV per share of a company’s common stock (calculated within 48 hours
of pricing). The fund’s issuance of Common Shares may have an adverse effect on prices in the secondary market for Common Shares by increasing the
number of Common Shares available, which may put downward pressure on the market price for Common Shares. Shares of common stock of
closed-end investment companies frequently trade at a discount from NAV. See “Risk Factors—General Risks—Market Discount Risk” and “—Secondary
Market for the Common Shares.”
The following table sets forth for each of the periods indicated the high and low closing market prices for Common Shares on the NYSE, and the
corresponding NAV per share and the premium or discount to NAV per share at which the fund’s Common Shares were trading as of such date. NAV is
determined once daily as of the close of regular trading of the NYSE (typically 4:00
 
p.m.
, Eastern Time). See “Determination of Net Asset Value” for
information as to the determination of the fund’s NAV.
 
 
Market Price
NAV per Share on
Date of Market Price
High and Low
Premium/(Discount) on
Date of Market Price
High and Low
Fiscal Quarter Ended
High ($)
Low ($)
High ($)
Low ($)
High (%)
Low (%)
January 31, 2023
14.2
12.72
12.95
12.84
9.65
-0.93
April 30, 2023
13.39
11.81
13.69
11.31
-2.19
4.42
July 31, 2023
12.57
11.10
12.13
11.25
3.63
-1.33
October 31, 2023
11.14
8.97
11.94
10.41
-6.70
-13.83
January 31, 2024
11.08
9.83
11.69
10.67
-5.22
-7.87
April 30, 2024
11.84
10.71
12.08
11.51
-1.99
-6.95
July 31, 2024
12.37
11.23
12.92
12.33
-4.26
-8.92
October 31, 2024
13.54
11.87
13.83
12.61
-2.10
-5.87
January 31, 2025
[
TBU
]
[
TBU
]
[
TBU
]
[
TBU
]
[
TBU
]
[
TBU
]
The last reported sale price, NAV per share and percentage discount to NAV per share of the Common Shares as of March [26], 2025 were $[
TBU-TPS
],
$[
TBU-TPS
] and [
TBU-TPS
]%, respectively. As of March [26], 2025, the fund had [TBU-TPS] Common Shares outstanding and net assets of the fund
were $[TBU-TPS].
The Fund
The fund is a diversified, closed-end management investment company registered under the 1940 Act. The fund was organized on September 26, 1989
as a Massachusetts business trust pursuant to an Agreement and Declaration of Trust (as amended and restated from time to time, the “Declaration of
Trust”). The fund commenced operations following an initial public offering on December 15, 1989, pursuant to which the fund issued an aggregate of
13,000,000 Common Shares of beneficial interest. The fund issues an additional 41,176,463.295 shares in aggregate in connection with
reorganizations of certain acquired funds into the fund on May 29, 2007, June 4, 2007, June 25, 2007, and October 10, 2007. The fund’s principal
office is located at 200 Berkeley Street, Boston, Massachusetts 02116 and its phone number is 800-225-6020.
The following provides information about the fund’s outstanding securities as of October 31, 2024.
 
Title of Class
Amount
Authorized
Amount Held by
the Fund or for
its Account
Amount
Outstanding
Common Shares
Unlimited
0
49,185,225
Use of Proceeds
Subject to the remainder of this section, and unless otherwise specified in a Prospectus Supplement, the fund currently intends to invest substantially
all of the net proceeds of any sales of Common Shares pursuant to this Prospectus in accordance with its investment objective and policies as described
under “Investment Objective” and “Investment Strategies” within three months of receipt of such proceeds. Such investments may be delayed up to
three months if suitable investments are unavailable at the time or for other reasons, such as market volatility and lack of liquidity in the markets of
suitable investments. Pending such investment, the fund anticipates that it will invest the proceeds in short-term money market instruments, securities
11
with remaining maturities of less than one year, cash or cash equivalents. A delay in the anticipated use of proceeds could lower returns and reduce the
fund’s distribution to Common Shareholders or result in a distribution consisting principally of a return of capital.
Investment Objective
The fund’s investment objective is to provide high current income, consistent with modest growth of capital for holders of its Common Shares. The fund
will pursue its objective by investing in a diversified portfolio comprised primarily of dividend-paying preferred securities and common equity securities.
There can be no assurance that the fund will achieve its investment objective. The fund’s investment objective is not a fundamental policy and may be
changed without the approval of a majority of the outstanding voting securities (as defined in the 1940 Act) of the fund.
Principal investment strategies
Under normal circumstances, the fund will invest at least 80% of its net assets (plus borrowings for investment purposes) in dividend-paying securities.
This is a non-fundamental policy and may be changed by the Board of Trustees of the fund provided that shareholders are provided with at least 60 days
prior written notice of any change as required by the rules under the 1940 Act. The fund will focus on common stocks of those issuers which, in the
opinion of the Advisor, have strong fundamental characteristics, large market capitalizations, favorable credit quality and current dividend yields
generally higher than the currently available dividend yield quoted on the Standard & Poor’s 500 Index. The Advisor intends to manage the fund’s
portfolio to generate income qualifying for the dividends received deduction (the “Dividends Received Deduction”) allowed corporations under
Section 243(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”).
The fund may invest in floating-rate, fixed-to-floating rate, and fixed-rate preferred securities and debt obligations rated investment grade (at least
“BBB” by S&P or “Baa” by Moody’s) at the time of investment or that are preferred securities of issuers of investment grade senior debt, some of which
may have speculative characteristics, or, if not rated, will be of comparable quality as determined by the Advisor. In selecting preferred securities, the
Advisor will consider current yield, price stability and the underlying fundamental characteristics of the issuer, with particular emphasis on debt and
dividend coverage and the potential for timely payment of dividends. The fund will invest in common stocks of issuers whose senior debt is rated
investment grade or, in the case of issuers that have no rated senior debt outstanding, whose senior debt is considered by the Advisor to be of
comparable quality.
The fund may invest in money market instruments, which include short-term U.S. Government securities, investment grade commercial paper
(unsecured promissory notes issued by corporations to finance their short-term credit needs), certificates of deposit and bankers’ acceptances.
The fund may invest up to 10% of the value of its total assets in dividend-paying securities of registered investment companies that invest primarily in
investment grade securities. The investment companies in which the fund intends to invest include those open- and closed-end investment companies
whose distributions qualify for the Dividends Received Deduction.
The fund concentrates its investments in securities of issuers primarily engaged in the utilities industry. Companies in the utilities industry generally
include companies engaged in the generation, transmission, or distribution of electric energy, gas, water, or telecommunications. Certain segments of
the industry and individual companies within such segments may not perform as well as the industry as a whole. Many utility companies, especially
electric and gas and other energy-related utility companies, historically have been subject to risks of increases in fuel and other operating costs, high
interest costs on borrowings needed for capital improvement programs and costs associated with compliance with and changes in environmental and
other governmental regulations. In particular, regulatory changes with respect to nuclear and conventionally fueled power generating facilities could
increase costs or impair the ability of the utility companies to operate such facilities, thus reducing the utility companies’ earnings or resulting in losses.
Rates of return on investment of certain utility companies are subject to review by government regulators. There can be no assurance that changes in
regulatory policies or accounting standards will not negatively affect utility companies’ earnings or dividends. Certain utilities, especially gas and
telephone utilities, have in recent years been affected by increased competition, which could adversely affect the profitability of such utilities.
The fund may also invest in derivatives such as futures contracts, options, interest rate swaps and reverse repurchase agreements. The fund intends to
use reverse repurchase agreements to obtain investment leverage either alone and/or in combination with other forms of investment leverage or for
temporary purposes. The fund also utilizes a liquidity agreement to increase its assets available for investments. The fund may seek to obtain additional
income or portfolio leverage by making secured loans of its portfolio securities with a value of up to 33 1/3% of its total assets.
The fund may invest up to 20% of its net assets in restricted securities purchased in direct (private) placements.
The manager may consider environmental, social, and/or governance (ESG) factors, alongside other relevant factors, as part of its investment process.
ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and human rights policies.
The ESG characteristics utilized in the fund’s investment process may change over time and one or more characteristics may not be relevant with
respect to all issuers that are eligible fund investments. Because ESG factors are considered alongside other relevant factors, the manager may
determine that an investment is appropriate notwithstanding its relative ESG characteristics.
12
Portfolio Investments
Common stocks
Common stocks are shares of a corporation or other entity that entitle the holder to a pro rata share of the profits, if any, of the corporation without
preference over any other shareholder or class of shareholders, including holders of such entity’s preferred securities and other senior equity securities.
Common stock usually carries with it the right to vote and frequently an exclusive right to do so. In selecting common stocks for investment, the fund
expects generally to focus more on the security’s dividend paying capacity than on its potential for capital appreciation.
Preferred securities
The fund may invest in preferred securities. Preferred securities, like common stock, represent an equity ownership in an issuer. Generally, preferred
securities have a priority of claim over common stock in dividend payments and upon liquidation of the issuer. Unlike common stock, preferred
securities do not usually have voting rights. Preferred securities in some instances are convertible into common stock. Although they are equity
securities, preferred securities have characteristics of both debt and common stock. Like debt, their promised income is contractually fixed. Like
common stock, they do not have rights to precipitate bankruptcy proceedings or collection activities in the event of missed payments. Other equity
characteristics are their subordinated position in an issuer’s capital structure and that their quality and value are heavily dependent on the profitability
of the issuer rather than on any legal claims to specific assets or cash flows.
Distributions on preferred securities must be declared by the board of directors and may be subject to deferral, and thus they may not be automatically
payable. Income payments on preferred securities may be cumulative, causing dividends and distributions to accrue even if not declared by the board
or otherwise made payable, or they may be non-cumulative, so that skipped dividends and distributions do not continue to accrue. There is no
assurance that dividends on preferred securities in which the fund invests will be declared or otherwise made payable. The fund may invest in
non-cumulative preferred securities, although the subadvisor (the “Subadvisor” or “subadvisor”) would consider, among other factors, their
non-cumulative nature in making any decision to purchase or sell such securities.
Shares of preferred securities have a liquidation value that generally equals the original purchase price at the date of issuance. The market values of
preferred securities may be affected by favorable and unfavorable changes impacting the issuers’ industries or sectors, including companies in the
utilities and financial services sectors, which are prominent issuers of preferred securities. They also may be affected by actual and anticipated changes
or ambiguities in the tax status of the security and by actual and anticipated changes or ambiguities in tax laws, such as changes in corporate and
individual income tax rates, and in the dividends received deduction for corporate taxpayers or the characterization of dividends as tax-advantaged as
described herein.
Because the claim on an issuer’s earnings represented by preferred securities may become onerous when interest rates fall below the rate payable on
the security or for other reasons, the issuer may redeem preferred securities, generally after an initial period of call protection during which the security
is not redeemable. Thus, in declining interest rate environments in particular, the fund’s holdings of higher dividend-paying preferred securities may be
reduced and the fund may be unable to acquire securities paying comparable rates with the redemption proceeds. For the fund to receive
tax-advantaged dividend income on preferred securities, the fund must hold securities paying an otherwise tax-advantaged dividend for more than
90 days during the associated 180-day period. In addition, as is the case for Common Shares the fund cannot be obligated to make related payments
(pursuant to a short sale or otherwise) with respect to substantially similar or related property. Similar provisions apply to each Common Shareholder’s
investment in the fund as discussed herein.
Convertible Securities
The fund may invest in convertible securities, which are bonds, debentures, notes, preferred stock or other securities that may be converted into or
exchanged for a specified amount of equity securities of the same or a different issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest generally paid or accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Convertible securities have unique investment characteristics in that they generally: (i) have
higher yields than common stocks, but lower yields than comparable non-convertible securities; (ii) are less subject to fluctuation in value than the
underlying stock because they have fixed income characteristics; and (iii) provide the potential for capital appreciation if the market price of the
underlying common stock increases.
The value of a convertible security is a function of its “investment value” (determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its “conversion value” (the security's worth, at market value, if converted
into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value
declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect
on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its
investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its
13
conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right
to acquire the underlying common stock while holding a fixed income security.
A convertible security might be subject to redemption at the option of the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the fund is called for redemption, the fund will be required to permit the issuer to redeem the security,
convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on the fund's ability to achieve its
investment objective. In evaluating a convertible security, the Adviser will give primary emphasis to the attractiveness of the underlying equity security. .
Direct (Private) Placements
The fund may invest in securities that are sold in private placement transactions between their issuers and their purchasers and that are neither listed
on an exchange nor traded in the over-the-counter secondary market. However, the fund will not invest more than 20% of its total assets in privately
placed securities. In many cases, privately placed securities will be subject to contractual or legal restrictions on transfer. As a result of the absence of a
public trading market, privately placed securities may in turn be less liquid and more difficult to value than publicly traded securities. Although privately
placed securities may be resold in privately negotiated transactions, the prices realized from the sales could, due to illiquidity, be less than if such
securities were more widely traded. In addition, issuers whose securities are not publicly traded may not be subject to the disclosure and other investor
protection requirements that may be applicable if their securities were publicly traded.
Debt Securities
The fund may invest in U.S. and foreign debt securities including, but not limited to, bonds, notes, bills and debentures. Capital appreciation in debt
securities in which the fund invests may arise as a result of favorable changes in relative interest rate levels and/or in the creditworthiness of issuers.
The fund may also earn income on such debt securities. There is no requirement with respect to the maturity or duration of debt securities in which the
fund may invest. Debt securities in which the fund may invest are subject to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to price volatility due to such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk). Particular debt securities will be selected based upon credit risk analysis of
potential issuers, the characteristics of the security and interest rate sensitivity of the various debt issues available with respect to a particular issuer
and analysis of the anticipated volatility and liquidity of the particular debt instruments.
Illiquid securities
The fund may invest without limit in illiquid securities (i.e., securities that are not readily marketable). For this purpose, “illiquid securities” may include
certain securities that are not registered (“restricted securities”) under the Securities Act of 1933, as amended (the “1933 Act”), including commercial
paper issued in reliance on Section 4(a)(2) of the 1933 Act and securities offered and sold to “qualified institutional buyers” under Rule 144A under the
1933 Act. The Board of Trustees (the “Board”) has adopted guidelines and delegated to the Advisor the daily function of determining the monitoring and
liquidity of restricted securities. The Board will, however, retain sufficient oversight and be ultimately responsible for these determinations. The Board
will carefully monitor the fund’s investments in these securities, focusing on such important factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the level of illiquidity in the fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
Repurchase agreements maturing in more than seven days are considered illiquid, unless an agreement can be terminated after a notice period of
seven days or less.
As long as the SEC maintains the position that most swap contracts, caps, floors, and collars are illiquid, the fund will continue to designate these
instruments as illiquid unless the instrument includes a termination clause or has been determined to be liquid based on a case-by-case analysis
pursuant to procedures approved by the Board.
Temporary Investments
The fund may invest its assets in cash and temporary investments (as defined below) for cash management purposes, pending investment in
accordance with the fund's investment objective and polices, to pay distributions to shareholders and to meet its operating expenses and obligations
under any tender offer or share repurchases. In addition, as described below, the fund may take a temporary defensive posture and invest without
limitation in Temporary Investments. To the extent that the fund invests in Temporary Investments, it may not achieve its investment objective.
Temporary Investments are debt securities including: (i) short-term (less than 12 months to maturity) and medium-term (not greater than five to seven
years to maturity) obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities; (ii) finance company obligations,
corporate commercial paper and other short-term commercial obligations, in each case rated, or issued by companies with similar securities
outstanding that are rated, Prime-1 or A or better by Moody's or A-1 or A or better by S&P or, if unrated, of comparable quality as determined by the
Adviser, (iii) obligations (including certificates of deposit, time deposits, demand deposits and bankers' acceptances) of banks and (iv) repurchase
agreement with respect to securities in which the fund may invest.
14
Temporary Defensive Strategies
There may be times when, in the subadvisor’s judgment, conditions in the securities markets would make pursuit of the fund’s investment strategy
inconsistent with achievement of the fund’s investment objective. At such times, the subadvisor may employ alternative strategies primarily to seek to
reduce fluctuations in the value of the fund’s assets. In implementing these temporary defensive strategies, depending on the circumstances, the fund
may invest an unlimited portion of its portfolio in short-term money market instruments, securities with remaining maturities of less than one year, cash
or cash equivalents. It is impossible to predict when, or for how long, the fund may use these alternative strategies.
Additional Portfolio Investments
When-Issued and Forward Commitment Securities
The fund may make contracts to purchase securities on a “when-issued” or “delayed delivery” basis. Pursuant to such contracts, delivery and payment
for the securities occurs at a date later than the customary settlement date. The payment obligation and the interest rate on the securities will be fixed
at the time the fund enters into the commitment, but interest will not accrue to the fund until delivery of and payment for the securities. Although the
fund would generally purchase securities on a when-issued or delayed delivery basis with the intention of actually acquiring the securities for its
portfolio (or for delivery pursuant to options or futures contracts it has entered into) and not for leverage purposes, the fund could dispose of a security
prior to settlement if the Adviser deemed it advisable. The purchase of securities on a when-issued or delayed delivery basis involves a risk of loss if the
value of the security to be purchased declines prior to the settlement date. This risk is in addition to the risk of a decline in value of the fund's other
assets. Furthermore, when such purchases are made through a dealer, the dealer's failure to consummate the sale may result in the loss to the fund of
an advantageous yield or price.
Short Sales
The fund may from time to time sell securities short, provided that the amount of such short sales does not exceed 5% of the fund's total assets. The
foregoing limitation does not apply to “short-sales against the box” where at all times a short position is open the fund owns an equal amount of such
securities or securities convertible or exchangeable into such securities without payment of additional consideration. A short sale is a transaction in
which the fund would sell securities it does not own (but has borrowed) in anticipation of a decline in the market price of the securities. When the fund
makes a short sale, the proceeds it receives from the sale will be held on behalf of a broker until the fund replaces the borrowed securities. To deliver the
securities to the buyer, the fund will need to arrange through a broker to borrow the securities and, in so doing, the fund will become obligated to replace
the securities borrowed at their market price at the time of replacement, whatever the price may be. The fund may have to pay a premium to borrow the
securities and must pay any dividends or interest payable on the securities until they are replaced.
The fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that
consists of cash or liquid, high grade debt securities. Short sales by the fund involve certain risks and special considerations. Possible losses from short
sales differ from losses that could be incurred from a purchase of a security, because losses from short sales may be unlimited, whereas losses from
purchases can equal only the total amount invested.
Options on Securities and Securities Indices
The fund may write and purchase call and put options on securities and securities indices. The fund typically will limit notional exposure of the options to
5% of the value of the fund’s portfolio securities, although this amount is expected to vary over time based upon U.S. equity market conditions and other
factors. A call option written by the fund obligates the fund to sell specified securities to the holder of the option at a specified price if the option is
exercised before the expiration date. All call options written by the fund will be covered, which means that the fund will own the securities subject to the
option so long as the option is outstanding. The purpose of writing covered call options is to realize greater income than would be realized on portfolio
securities transactions alone. However, in writing covered call options for additional income, the fund may forego the opportunity to profit from an
increase in the market price of the underlying security. A put written by the fund would obligate the fund to purchase specified securities from the option
holder at a specified price if the option is exercised at any time before the expiration date. The purpose of writing such options is to generate additional
income for the fund. However, in return for the option premium, the fund accepts the risk that it may be required to purchase the underlying securities at
a price in excess of the market value at the time of purchase. The fund may terminate its obligations under an exchange traded call or put option written
by the fund by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering
into an offsetting transaction with the counter party to such option. Such purchases are referred to as “closing purchase transactions.”
The fund may also write (sell) covered call and put options on any securities index composed of securities in which it may invest. Options on securities
indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual
purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the
securities market rather than price fluctuations in a single security.
The fund may purchase put and call options on any securities in which it may invest or options on any securities index based on securities in which it may
invest. The fund will purchase such options on securities that are listed on securities exchanges or traded in the over-the-counter market. The fund
would also be able to enter into closing sale transactions in order to realize gains or minimize losses on options it has purchased. The fund would
normally purchase call options in anticipation of an increase in the market value of securities of the type in which it may invest. The purchase of a call
15
option would entitle the fund, in return for the premium paid, to purchase specified securities at a specified price at any time during the option period.
The fund would ordinarily realize a gain if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium
paid and transaction costs. Otherwise, the fund would realize either no gain or a loss on the purchase of the call option. The fund would normally
purchase put options in anticipation of a decline in the market value of securities in its portfolio (“protective puts”) or in securities in which it may invest.
The purchase of a put option would entitle the fund, in exchange for the premium paid, to sell specified securities at a specified price during the option
period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the fund's securities. Put options may also
be purchased by the fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. The fund would
ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to more than
cover the premium and transaction costs. Otherwise, the fund would realize either no gain or a loss on the purchase of the put option. Gains and losses
on the purchase of protective put options would tend to be offset by countervailing changes in the value of underlying portfolio securities.
Other investment companies
The fund may invest in the securities of other investment companies to the extent that such investments are consistent with the fund’s investment
objectives and policies and permissible under the 1940 Act. As a stockholder in an investment company, the fund will bear its ratable share of that
investment company’s expenses, and would remain subject to payment of the fund’s investment management fees and other expenses with respect to
the assets so invested. Common Shareholders would therefore be subject to duplicative expenses to the extent the fund invests in other investment
companies. In addition, these other investment companies may utilize leverage, in which case an investment would subject the fund to additional risks
associated with leverage. See “Risk Factors—Leverage Risk.” The fund, as a holder of the securities of other investment companies, will bear its pro rata
portion of the other investment companies’ expenses, including advisory fees. These expenses are in addition to the direct expenses of the fund’s own
operations.
Other Investment Policies
Borrowing
The fund may use leverage to the extent permitted by the 1940 Act, this Prospectus, and the LA. The fund is authorized to utilize leverage through
borrowings, reinvestment of securities lending collateral or reverse repurchase agreement proceeds, and/or the issuance of preferred shares, including
the issuance of debt securities. The fund is party to the LA as described in “—Description of Capital Structure—Liquidity Facility.” Borrowings, together
with the issuance of preferred shares, or other “senior securities” as that term is defined in the 1940 Act, may not be in an aggregate amount that
would, immediately after giving effect to the drawdown, exceed 33
 1
∕
3
% of the fund’s total assets (including any assets attributable to financial leverage
from senior securities) minus the sum of accrued liabilities (other than liabilities from senior securities).
Portfolio turnover
In general, the fund intends to purchase and hold securities for long-term capital appreciation and not to trade in securities for short-term gain. The
fund's portfolio turnover rate is calculated by dividing the lesser of sales or purchases of portfolio securities by the average monthly value of the fund's
portfolio securities. For purposes of this calculation, portfolio securities exclude securities having a maturity when purchased of one year or less.
Notwithstanding the foregoing, the Adviser may, from time to time, make short-term investments when it believes such investments are in the best
interest of the fund. The portfolio turnover rate for the fund for the fiscal years ended October 31, 2024 and October 31, 2023 was 27% and 26%,
respectively.
Securities loans
The fund is party to the LA as described in “—Description of Capital Structure—Liquidity Facility.” The fund may seek to obtain additional income or
portfolio leverage by making secured loans of its portfolio securities with a value of up to 33
 1
∕
3
% of total assets. In such transactions, the borrower pays
to the fund an amount equal to any dividends or interest received on loaned securities. The fund retains all or a portion of the dividends, interest, capital
gains, and/or other distributions received on investment of cash collateral in short-term obligations of the U.S. government, cash equivalents (including
shares of a fund managed by the fund’s investment adviser or an affiliate thereof), or other investments consistent with the fund’s investment objective,
policies, and restrictions, or receives a fee from the borrower. If the fund receives a fee in lieu of dividends with respect to securities on loan pursuant to
a securities lending transaction, such income will not be eligible for the dividends-received deduction for corporate shareholders. As a result of
investing such cash collateral in such investments, the fund will receive the benefit of any gains and bear any losses generated by such investments. All
securities loans will be made pursuant to agreements requiring that the loans be continuously secured by collateral in cash or short-term debt
obligations at least equal at all times to the market value of the loaned securities. The fund may pay reasonable finders’, administrative and custodial
fees in connection with loans of its portfolio securities. Although voting rights or rights to consent accompanying loaned securities pass to the borrower,
the fund retains the right to call the loans at any time on reasonable notice, and it will do so in order that the securities may be voted by the fund with
respect to matters materially affecting the fund’s investment. The fund may also call a loan in order to sell the securities involved. Lending portfolio
securities involves risks of delay in recovery of the loaned securities or, in some cases, loss of rights in the collateral should the borrower commence an
action relating to bankruptcy, insolvency or reorganization. The use of securities lending collateral to obtain leverage in the fund’s investment portfolio
16
may subject the fund to greater risk of loss than the use of traditional securities lending to earn incremental income via investing collateral solely in
short-term U.S. government securities or cash equivalents.
Foreign currency transactions
The value of non-U.S. assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in foreign currency rates and exchange
control regulations. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks, or the
failure to intervene, or by currency controls or political developments in the U.S. or abroad. The fund may (but is not required to) engage in transactions
to hedge against changes in foreign currencies, and will use such hedging techniques when the Advisor or the subadvisor deems appropriate. Foreign
currency exchange transactions may be conducted on a spot (
i.e.
, cash) basis at the spot rate prevailing in the foreign currency exchange market or
through entering into derivative currency transactions. Currency futures contracts are exchange-traded and change in value to reflect movements of a
currency or a basket of currencies. Settlement must be made in a designated currency.
Forward foreign currency exchange contracts are individually negotiated and privately traded so they are dependent upon the creditworthiness of the
counterparty. Such contracts may be used when a security denominated in a foreign currency is purchased or sold, or when the receipt in a foreign
currency of dividend or interest payments on such a security is anticipated. A forward contract can then “lock in” the U.S. dollar price of the security or
the U.S. dollar equivalent of such dividend or interest payment, as the case may be.
Additionally, when the Advisor or the subadvisor believes that the currency of a particular foreign country may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract to sell, for a fixed amount of dollars, the amount of foreign currency approximating the value of some or
all of the securities held that are denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the
securities involved generally will not be possible. In addition, it may not be possible to hedge against long-term currency changes. Cross-hedging may be
performed by using forward contracts in one currency (or basket of currencies) to hedge against fluctuations in the value of securities denominated in a
different currency if the Advisor or the subadvisor determines that there is an established historical pattern of correlation between the two currencies
(or the basket of currencies and the underlying currency). Use of a different foreign currency magnifies exposure to foreign currency exchange rate
fluctuations. Forward contracts also may be used to shift exposure to foreign currency exchange rate changes from one currency to another. Short-term
hedging provides a means of fixing the dollar value of only a portion of portfolio assets. Income or gain earned on any of the fund’s foreign currency
transactions generally will be treated as fully taxable income (
i.e.
, income other than tax-advantaged dividends).
Currency transactions are subject to the risk of a number of complex political and economic factors applicable to the countries issuing the underlying
currencies. Furthermore, unlike trading in most other types of instruments, there is no systematic reporting of last sale information with respect to the
foreign currencies underlying the derivative currency transactions. As a result, available information may not be complete. In an over-the-counter
trading environment, there are no daily price fluctuation limits. There may be no liquid secondary market to close out options purchased or written, or
forward contracts entered into, until their exercise, expiration or maturity. There also is the risk of default by, or the bankruptcy of, the financial
institution serving as counterparty.
Use of Leverage by the Fund
The fund may use leverage to the extent permitted by the 1940 Act, this Prospectus, and the LA. The fund is authorized to utilize leverage through
borrowings, reinvestment of securities lending collateral or reverse repurchase agreement proceeds, and/or the issuance of preferred shares, including
the issuance of debt securities. See “—Other Investment Policies—Borrowing.” The fund is party to the LA as described in “—Description of Capital
Structure—Liquidity Facility.”
The fund’s leverage strategy may not be successful. By leveraging its investment portfolio, the fund creates an opportunity for increased net income or
capital appreciation. However, the use of leverage also involves risks, which can be significant. These risks include the possibility that the value of the
assets acquired with such borrowing decreases although the fund’s liability is fixed, greater volatility in the fund’s NAV and the market price of the fund’s
Common Shares and higher expenses. Because the Advisor’s fee is based upon a percentage of the fund’s managed assets, the Advisor’s fee will be
higher if the fund is leveraged and the Advisor will have an incentive to leverage the fund. The Advisor intends only to leverage the fund when it believes
that the potential return on the additional investments acquired through the use of leverage is likely to exceed the costs incurred in connection with the
offering.
At October 31, 2024, the fund had borrowings under the LA of $373,700,000. The average daily loan balance, weighted average interest rate and
maximum daily loan outstanding for the year ended October 31, 2024, were as follows:
 
Average Daily Loan Balance ($)
Weighted Average Interest Rate (%)
Maximum Daily Loan Outstanding ($)
373,700,000
6.06
383,700,000
The fund’s borrowings under the LA as of October 31, 2024 equaled approximately 35.78% of the fund’s total assets (including the proceeds of such
leverage). The fund’s asset coverage ratio as of October 31, 2024 was 279%. See “—Other Investment Policies—Borrowing” for a brief description of
the fund’s liquid facility agreement.
17
Assuming the utilization of leverage in the amount of 35.78% of the fund’s total assets and an annual interest rate of 5.53% payable on such leverage
based on market rates as of October 31, 2024, the additional income that the fund must earn (net of expenses) in order to cover such leverage is
approximately $20,665,610. Actual costs of leverage may be higher or lower than that assumed in the previous example. Under normal market
conditions, interest charged under the LA is at the rate of the one-month Overnight Bank Funding Rate (OBFR) plus 0.700%.
Following an offering of additional Common Shares from time to time, the fund may increase the amount of leverage outstanding. The fund may engage
in additional borrowings, securities lending, and reverse repurchase agreements in order to maintain the fund’s desired leverage ratio. Leverage creates
a greater risk of loss, as well as a potential for more gain, for the Common Shares than if leverage was not used. Interest on borrowings may be at a fixed
or floating rate and generally will be based on short-term rates. The costs associated with the fund’s use of leverage, including the issuance of such
leverage and the payment of dividends or interest on such leverage, will be borne entirely by the Common Shareholders. As long as the rate of return, net
of applicable fund expenses, on the fund’s investment portfolio investments purchased with leverage exceeds the costs associated with such leverage,
the fund will generate more return or income than will be needed to pay such costs. In this event, the excess will be available to pay higher dividends to
Common Shareholders. Conversely, if the fund’s return on such assets is less than the cost of leverage and other fund expenses, the return to the
Common Shareholders will diminish. To the extent that the fund uses leverage, the NAV and market price of the Common Shares and the yield to
Common Shareholders will be more volatile. The fund’s leveraging strategy may not be successful. See “Risk Factors—Leverage Risk.”
The following table is designed to illustrate the effect on the return to a holder of the fund’s Common Shares of leverage in the amount of approximately
35.78% of the fund’s total assets, assuming hypothetical annual returns of the fund’s investment portfolio of minus 10% to plus 10%. As the table
shows, leverage generally increases the return to Common Shareholders when portfolio return is positive and greater than the cost of leverage and
decreases the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical. Actual
returns may be greater or less than those appearing in the table.
 
Assumed Portfolio Return (%)
-10.00
-5.00
0.00
5.00
10.00
Corresponding Common Shares Total Return (%)
-17.14
-10.56
-3.97
2.62
9.21
18
Risk Factors
The principal risks of investing in the fund are summarized in the Prospectus Summary above. Below are descriptions of the principal factors that may
play a role in shaping the fund’s overall risk profile. The descriptions appear in alphabetical order by general risks, equity strategy risks, and options
strategy risks, not in order of importance. For further details about the fund’s risks, including additional risk factors that are not discussed in this
Prospectus because they are considered non-principal factors, see the fund’s SAI.
General Risks
Anti-Takeover Provisions
The fund’s Declaration of Trust includes provisions that could limit the ability of other persons or entities to acquire control of the fund or to change the
composition of its Board. These provisions may deprive shareholders of opportunities to sell their Common Shares at a premium over the then current
market price of the Common Shares. See “Certain Provisions in the Declaration of Trust and By-Laws—Anti-takeover provisions.”
Defensive Positions Risk
During periods of adverse market or economic conditions, the fund may temporarily invest all or a substantial portion of its total assets in short-term
money market instruments, securities with remaining maturities of less than one year, cash or cash equivalents. The fund will not be pursuing its
investment objectives in these circumstances and could miss favorable market developments.
Distribution Risk
There can be no assurance that distributions paid by the fund to shareholders will be maintained at current levels or increase over time. The
distributions shareholders receive from the fund are derived from the fund’s dividends and interest income after payment of fund expenses, net option
premiums and net realized gain on equity securities investments. If stock market volatility and/or stock prices decline, the premiums available from
writing call options and writing put options on individual stocks likely will decrease as well. Payments to purchase put options and to close written call
and put options will reduce amounts available for distribution. Net realized gain on the fund’s stock investments will be determined primarily by the
direction and movement of the stock market and the equity securities held. The fund’s cash available for distribution may vary widely over the short- and
long-term. If, for any calendar year, the total distributions made exceed the fund’s net investment taxable income and net capital gain, the excess
generally will be treated as a return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her Common
Shares) and thereafter as gain from the sale of Common Shares. The amount treated as a return of capital reduces the Common Shareholder’s adjusted
basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale of his or her
Common Shares. Distributions in any year may include a substantial return of capital component. Dividends on common stocks are not fixed but are
declared at the discretion of the issuer’s board of directors.
Economic and market events risk
Events in certain sectors historically have resulted, and may in the future result, in an unusually high degree of volatility in the financial markets, both
domestic and foreign. These events have included, but are not limited to: bankruptcies, corporate restructurings, and other similar events; bank
failures; governmental efforts to limit short selling and high frequency trading; measures to address U.S. federal and state budget deficits; social,
political, and economic instability in Europe; economic stimulus by the Japanese central bank; dramatic changes in energy prices and currency
exchange rates; and China’s economic slowdown. Interconnected global economies and financial markets increase the possibility that conditions in one
country or region might adversely impact issuers in a different country or region. Both domestic and foreign equity markets have experienced increased
volatility and turmoil, with issuers that have exposure to the real estate, mortgage, and credit markets particularly affected. Financial institutions could
suffer losses as interest rates rise or economic conditions deteriorate.
In addition, relatively high market volatility and reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide.
Actions taken by the U.S. Federal Reserve (Fed) or foreign central banks to stimulate or stabilize economic growth, such as interventions in currency
markets, could cause high volatility in the equity and fixed-income markets. Reduced liquidity may result in less money being available to purchase raw
materials, goods, and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also result in
emerging-market issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their securities prices.
In response to certain economic conditions, including periods of high inflation, governmental authorities and regulators may respond with significant
fiscal and monetary policy changes such as raising interest rates. The fund may be subject to heightened interest rate risk when the Federal Reserve
Board (Fed) raises interest rates. Recent and potential future changes in government monetary policy may affect interest rates. It is difficult to
accurately predict the timing, frequency or magnitude of potential interest rate increases or decreases by the Fed and the evaluation of
macro-economic and other conditions that could cause a change in approach in the future. If the Fed and other central banks increase the federal funds
rate and equivalent rates, such increases generally will cause market interest rates to rise and could cause the value of a fund’s investments, and the
fund’s net asset value (NAV), to decline, potentially suddenly and significantly.
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In addition, as the Fed increases the target Fed funds rate, any such rate increases, among other factors, could cause markets to experience continuing
high volatility. A significant increase in interest rates may cause a decline in the market for equity securities. These events and the possible resulting
market volatility may have an adverse effect on the fund.
Political turmoil within the United States and abroad may also impact the fund. Although the U.S. government has honored its credit obligations, it
remains possible that the United States could default on its obligations. While it is impossible to predict the consequences of such an unprecedented
event, it is likely that a default by the United States would be highly disruptive to the U.S. and global securities markets and could significantly impair the
value of the fund’s investments. Similarly, political events within the United States at times have resulted, and may in the future result, in a shutdown of
government services, which could negatively affect the U.S. economy, decrease the value of many fund investments, and increase uncertainty in or
impair the operation of the U.S. or other securities markets. In recent years, the U.S. renegotiated many of its global trade relationships and imposed or
threatened to impose significant import tariffs. These actions could lead to price volatility and overall declines in U.S. and global investment markets.
Uncertainties surrounding the sovereign debt of a number of European Union (EU) countries and the viability of the EU have disrupted and may in the
future disrupt markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, the global securities
markets likely will be significantly disrupted. On January 31, 2020, the United Kingdom (UK) left the EU, commonly referred to as “Brexit,” the UK
ceased to be a member of the EU, and the UK and EU entered into a Trade and Cooperation Agreement. While the full impact of Brexit is unknown, Brexit
has already resulted in volatility in European and global markets. There remains significant market uncertainty regarding Brexit’s ramifications, and the
range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict.
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, which may
lead to less liquidity in certain instruments, industries, sectors or the markets generally, and may ultimately affect fund performance. For example, the
coronavirus (COVID-19) pandemic has resulted and may continue to result in significant disruptions to global business activity and market volatility due
to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption, among
others. While many countries have lifted some or all restrictions related to the coronavirus (COVID-19) and the United States ended the public health
emergency and national emergency declarations relating to the coronavirus (COVID-19) pandemic on May 11, 2023, the continued impact of
coronavirus (COVID-19) and related variants is uncertain. The impact of a health crisis and other epidemics and pandemics that may arise in the future,
could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing
political, social and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.
Political and military events, including in Ukraine, North Korea, Russia, Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest
in Europe and South America, also may cause market disruptions.
As a result of continued political tensions and armed conflicts, including the Russian invasion of Ukraine commencing in February of 2022, the extent
and ultimate result of which are unknown at this time, the United States and the EU, along with the regulatory bodies of a number of countries, have
imposed economic sanctions on certain Russian corporate entities and individuals, and certain sectors of Russia’s economy, which may result in, among
other things, the continued devaluation of Russian currency, a downgrade in the country’s credit rating, and/or a decline in the value and liquidity of
Russian securities, property or interests. These sanctions could also result in the immediate freeze of Russian securities and/or funds invested in
prohibited assets, impairing the ability of a fund to buy, sell, receive or deliver those securities and/or assets. These sanctions or the threat of additional
sanctions could also result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian
securities. The United States and other nations or international organizations may also impose additional economic sanctions or take other actions that
may adversely affect Russia-exposed issuers and companies in various sectors of the Russian economy. Any or all of these potential results could lead
Russia’s economy into a recession. Economic sanctions and other actions against Russian institutions, companies, and individuals resulting from the
ongoing conflict may also have a substantial negative impact on other economies and securities markets both regionally and globally, as well as on
companies with operations in the conflict region, the extent to which is unknown at this time. The United States and the EU have also imposed similar
sanctions on Belarus for its support of Russia’s invasion of Ukraine. Additional sanctions may be imposed on Belarus and other countries that support
Russia. Any such sanctions could present substantially similar risks as those resulting from the sanctions imposed on Russia, including substantial
negative impacts on the regional and global economies and securities markets.
In addition, there is a risk that the prices of goods and services in the United States and many foreign economies may decline over time, known as
deflation. Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely. If a country’s economy
slips into a deflationary pattern, it could last for a prolonged period and may be difficult to reverse. Further, there is a risk that the present value of
assets or income from investments will be less in the future, known as inflation. Inflation rates may change frequently and drastically as a result of
various factors, including unexpected shifts in the domestic or global economy, and a fund’s investments may be affected, which may reduce a fund’s
performance. Further, inflation may lead to the rise in interest rates, which may negatively affect the value of debt instruments held by the fund,
resulting in a negative impact on a fund’s performance. Generally, securities issued in emerging markets are subject to a greater risk of inflationary or
deflationary forces, and more developed markets are better able to use monetary policy to normalize markets.
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ESG integration risk
The manager considers ESG factors that it deems relevant or additive, along with other material factors and analysis, when managing the fund. The
manager may consider these ESG factors on all or a meaningful portion of the fund’s investments. In certain situations, the extent to which these ESG
factors may be applied according to the manager’s integrated investment process may not include U.S. Treasuries, government securities, or other
asset classes. ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and human
rights policies. Incorporating ESG criteria and making investment decisions based on certain ESG characteristics, as determined by the manager,
carries the risk that the fund may perform differently, including underperforming, funds that do not utilize ESG criteria, or funds that utilize different ESG
criteria. Integration of ESG factors into the fund’s investment process may result in a manager making different investments for the fund than for a fund
with a similar investment universe and/or investment style that does not incorporate such considerations in its investment strategy or processes, and
the fund’s investment performance may be affected. Because ESG factors are one of many considerations for the fund, the manager may nonetheless
include companies with low ESG characteristics or exclude companies with high ESG characteristics in the fund’s investments.
The ESG characteristics utilized in the fund’s investment process may change over time, and different ESG characteristics may be relevant to different
investments. Although the manager has established its own structure to oversee ESG integration in accordance with the fund’s investment objective and
strategies, successful integration of ESG factors will depend on the manager’s skill in researching, identifying, and applying these factors, as well as on
the availability of relevant data. The method of evaluating ESG factors and subsequent impact on portfolio composition, performance, proxy voting
decisions and other factors, is subject to the interpretation of the manager in accordance with the fund’s investment objective and strategies. ESG
factors may be evaluated differently by different managers, and may not carry the same meaning to all investors and managers. The manager may
employ active shareowner engagement to raise ESG issues with the management of select portfolio companies. The regulatory landscape with respect
to ESG investing in the United States is evolving and any future rules or regulations may require the fund to change its investment process with respect
to ESG integration.
Leverage risk
By leveraging its investment portfolio, the fund creates an opportunity for increased net income or capital appreciation. However, the use of leverage
also involves risks, which can be significant. These risks include the possibility that the value of the assets acquired with such borrowing decreases
although the fund’s liability is fixed, greater volatility in the fund’s NAV and the market price of the fund’s Common Shares and higher expenses. Since the
Advisor’s fee is based upon a percentage of the fund’s managed assets, the Advisor’s fee will be higher if the fund is leveraged and the Advisor will have
an incentive to leverage the fund. The Board will monitor this potential conflict. The Advisor intends to leverage the fund only when it believes that the
potential return on the additional investments acquired through the use of leverage is likely to exceed the costs incurred in connection with the offering.
The fund is authorized to utilize leverage through borrowings, reinvestment of securities lending collateral or reverse repurchase agreement proceeds,
and/or the issuance of preferred shares, including the issuance of debt securities. The fund is party to the LA as described in “—Description of Capital
Structure—Liquidity Facility.”
The fund utilizes the LA to increase its assets available for investment. When the fund leverages its assets, Common Shareholders bear the fees
associated with the liquidity facility and have the potential to benefit or be disadvantaged from the use of leverage. In addition, the fee paid to the
Advisor is calculated on the basis of the fund’s average daily managed assets, including proceeds from borrowings and/or the issuance of preferred
shares, so the fee will be higher when leverage is utilized, which may create an incentive for the Advisor to employ financial leverage. Consequently, the
fund and the Advisor may have differing interests in determining whether to leverage the fund’s assets. Leverage creates risks that may adversely affect
the return for the Common Shareholders, including:
●
the likelihood of greater volatility of NAV and market price of Common Shares;
●
fluctuations in the interest rate paid for the use of the LA;
●
increased operating costs, which may reduce the fund’s total return;
●
the potential for a decline in the value of an investment acquired through leverage, while the fund’s obligations under such leverage remains fixed;
and
●
the fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements.
To the extent the returns derived from securities purchased with proceeds received from leverage exceed the cost of leverage, the fund’s distributions
may be greater than if leverage had not been used. Conversely, if the returns from the securities purchased with such proceeds are not sufficient to
cover the cost of leverage, the amount available for distribution to Common Shareholders will be less than if leverage had not been used. In the latter
case, the Advisor, in its best judgment, may nevertheless determine to maintain the fund’s leveraged position if it deems such action to be appropriate.
The costs of a borrowing program and/or an offering of preferred shares would be borne by Common Shareholders and consequently would result in a
reduction of the NAV of Common Shares.
In addition to the risks created by the fund’s use of leverage, the fund is subject to the risk that the liquidity facility agreement is terminated due to the
occurrence of one or more events of default under the LA. If the LA is terminated in such circumstances, the fund would be subject to additional risk that
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it would be unable to timely, or at all, obtain replacement financing. The fund might also be required to de-leverage, selling securities at a potentially
inopportune time and incurring tax consequences. Further, the fund’s ability to generate income from the use of leverage would be adversely affected.
The fund may be required to maintain minimum average balances in connection with borrowings or to pay a commitment or other fee to maintain a
liquidity facility; either of these requirements will increase the cost of borrowing over the stated interest rate. To the extent that the fund borrows
through the use of reverse repurchase agreements, it would be subject to a risk that the value of the portfolio securities transferred may substantially
exceed the purchase price received by the fund under the reverse repurchase agreement transaction. Alternatively, during the life of any reverse
repurchase agreement transaction, the fund may be required to transfer additional securities if the market value of those securities initially transferred
declines. In addition, capital raised through borrowing or the issuance of preferred shares will be subject to interest costs or dividend payments that
may or may not exceed the income and appreciation on the assets purchased. The issuance of additional classes of preferred shares involves offering
expenses and other costs, which will be borne by the Common Shareholders, and may limit the fund’s freedom to pay dividends on Common Shares or to
engage in other activities.
The fund may be subject to certain restrictions on investments imposed by guidelines of one or more nationally recognized statistical rating
organizations which may issue ratings for the preferred shares or short-term debt instruments issued by the fund. These guidelines may impose asset
coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. Certain types of borrowings may result in
the fund being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition
requirements and additional covenants that may affect the fund’s ability to pay dividends and distributions on Common Shares in certain instances. The
fund also may be required to pledge its assets to the lenders in connection with certain types of borrowing. Under the current LA, the fund is subject to
covenants that include, but are not limited to, certain minimum net asset value and collateral requirements, as well as a requirement to provide timely
certain financial information to the lender. The Advisor does not anticipate that these covenants or restrictions will adversely affect its ability to manage
the fund’s portfolio in accordance with the fund’s investment objectives and principal investment strategies. Due to these covenants or restrictions, the
fund may be forced to liquidate investments at times and at prices that are not favorable to the fund, or the fund may be forced to forego investments
that the Advisor otherwise views as favorable.
The extent that the fund employs leverage, if any, will depend on many factors, the most important of which are investment outlook, market conditions
and interest rates. Successful use of a leveraging strategy depends on the Advisor’s ability to predict correctly interest rates and market movements.
There is no assurance that a leveraging strategy will be successful during any period in which it is employed.
LIBOR discontinuation risk
Certain debt securities, derivatives and other financial instruments have traditionally utilized LIBOR as the reference or benchmark rate for interest rate
calculations. However, following allegations of manipulation and concerns regarding liquidity, the U.K. Financial Conduct Authority (UK FCA) announced
that LIBOR would be discontinued on June 30, 2023. The UK FCA elected to require the ICE Benchmark Administration Limited, the administrator of
LIBOR, to continue publishing a subset of LIBOR settings on a “synthetic” basis until September 30, 2024.
Although the transition process away from LIBOR has become increasingly well-defined in advance of the discontinuation dates, the impact on certain
debt securities, derivatives and other financial instruments remains uncertain. Market participants have adopted alternative rates such as Secured
Overnight Financing Rate (SOFR) or otherwise amended financial instruments referencing LIBOR to include fallback provisions and other measures that
contemplated the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor the viability of
such measures is known. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International Swaps and Derivatives
Association, Inc. launched a protocol to incorporate fallback provisions. However, there are obstacles to converting certain longer term securities and
transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus multiple alternative reference rates in
new or existing financial instruments and products has not been determined. Certain replacement rates to LIBOR, such as SOFR, which is a broad
measure of secured overnight U.S. Treasury repo rates, are materially different from LIBOR, necessitating changes in the applicable spread for financial
instruments transitioning away from LIBOR to accommodate the differences.
The utilization of an alternative reference rate, or the transition process to an alternative reference rate, may adversely affect the fund’s performance.
Alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace LIBOR or another interbank offered rate
(IBOR) with a new reference rate could result in a taxable exchange and the realization of income and gain/loss for U.S. federal income tax purposes.
The IRS has issued final regulations regarding the tax consequences of the transition from IBOR to a new reference rate in debt instruments and
non-debt contracts. Under the final regulations, alteration or modification of the terms of a debt instrument to replace an operative rate that uses a
discontinued IBOR with a qualified rate (as defined in the final regulations) including true up payments equalizing the fair market value of contracts
before and after such IBOR transition, to add a qualified rate as a fallback rate to a contract whose operative rate uses a discontinued IBOR or to replace
a fallback rate that uses a discontinued IBOR with a qualified rate would not be taxable. The IRS may provide additional guidance, with potential
retroactive effect.
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Liquidity risk
The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be impaired by
reduced market activity or participation, legal restrictions, or other economic and market impediments. Funds with principal investment strategies that
involve investments in securities of companies with smaller market capitalizations, foreign securities, derivatives, or securities with substantial market
and/or credit risk tend to have the greatest exposure to liquidity risk. Exposure to liquidity risk may be heightened for funds that invest in securities of
emerging markets and related derivatives that are not widely traded, and that may be subject to purchase and sale restrictions.
The capacity of traditional dealers to engage in fixed-income trading has not kept pace with the bond market’s growth. As a result, dealer inventories of
corporate bonds, which indicate the ability to “make markets,” i.e., buy or sell a security at the quoted bid and ask price, respectively, are at or near
historic lows relative to market size. Because market makers provide stability to fixed-income markets, the significant reduction in dealer inventories
could lead to decreased liquidity and increased volatility, which may become exacerbated during periods of economic or political stress.
Market Discount Risk
The fund’s Common Shares will be offered only when Common Shares of the fund are trading at a price equal to or above the fund’s NAV per Common
Share plus the per Common Share amount of commissions. As with any security, the market value of the Common Shares may increase or decrease
from the amount initially paid for the Common Shares. The fund’s Common Shares have traded at both a premium and at a discount to NAV. The shares
of closed-end management investment companies frequently trade at a discount from their NAV. This characteristic is a risk separate and distinct from
the risk that the fund’s NAV could decrease as a result of investment activities. Investors bear a risk of loss to the extent that the price at which they sell
their shares is lower in relation to the fund’s NAV than at the time of purchase, assuming a stable NAV.
Operational and cybersecurity risk
With the increased use of technologies, such as mobile devices and “cloud”-based service offerings and the dependence on the internet and computer
systems to perform necessary business functions, the fund’s service providers are susceptible to operational and information or cybersecurity risks that
could result in losses to the fund and its shareholders. Intentional cybersecurity breaches include unauthorized access to systems, networks, or devices
(such as through “hacking” activity or “phishing”); infection from computer viruses or other malicious software code; and attacks that shut down,
disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. Cyber-attacks can also be carried out in a manner
that does not require gaining unauthorized access, such as causing denial-of-service attacks on the service providers’ systems or websites rendering
them unavailable to intended users or via “ransomware” that renders the systems inoperable until appropriate actions are taken. In addition,
unintentional incidents can occur, such as the inadvertent release of confidential information (possibly resulting in the violation of applicable privacy
laws).
A cybersecurity breach could result in the loss or theft of customer data or funds, loss or theft of proprietary information or corporate data, physical
damage to a computer or network system, or costs associated with system repairs. Such incidents could cause a fund, the advisor, a manager, or other
service providers to incur regulatory penalties, reputational damage, additional compliance costs, litigation costs or financial loss. In addition, such
incidents could affect issuers in which a fund invests, and thereby cause the fund’s investments to lose value.
Cyber-events have the potential to materially affect the fund and the advisor’s relationships with accounts, shareholders, clients, customers,
employees, products, and service providers. The fund has established risk management systems reasonably designed to seek to reduce the risks
associated with cyber-events. There is no guarantee that the fund will be able to prevent or mitigate the impact of any or all cyber-events.
The fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication
errors, errors of the fund’s service providers, counterparties, or other third parties, failed or inadequate processes and technology or system failures.
In addition, other disruptive events, including (but not limited to) natural disasters and public health crises may adversely affect the fund’s ability to
conduct business, in particular if the fund’s employees or the employees of its service providers are unable or unwilling to perform their responsibilities
as a result of any such event. Even if the fund’s employees and the employees of its service providers are able to work remotely, those remote work
arrangements could result in the fund’s business operations being less efficient than under normal circumstances, could lead to delays in its processing
of transactions, and could increase the risk of cyber-events.
Secondary Market for the Common Shares
The issuance of new Common Shares may have an adverse effect on the secondary market for the Common Shares. When Common Shares are trading
at a premium, the fund may issue new Common Shares of the fund. The increase in the amount of the fund’s outstanding Common Shares resulting from
the offering of new Common Shares may put downward pressure on the market price for the Common Shares of the fund. Common Shares will not be
issued at any time when Common Shares are trading at a price lower than a price equal to the fund’s NAV per Common Share plus the per Common
Share amount of commissions.
The fund also issues Common Shares through its dividend reinvestment plan. Common Shares may be issued under the plan at a discount to the market
price for such Common Shares, which may put downward pressure on the market price for Common Shares of the fund.
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The voting power of current Common Shareholders will be diluted to the extent that such shareholders do not purchase shares in any future Common
Share offerings or do not purchase sufficient shares to maintain their percentage interest. In addition, if the proceeds of such offering are unable to be
invested as intended, the fund’s per Common Share distribution may decrease (or may consist of return of capital) and the fund may not participate in
market advances to the same extent as if such proceeds were fully invested as planned.
Tax Risk
To qualify
f
or the special tax treatment available to regulated investment companies, the fund must: (i) derive at least 90% of its annual gross income
from certain kinds of investment income; (ii) meet certain asset diversification requirements at the end of each quarter; and (iii) distribute in each
taxable year at least 90% of its net investment income (including net interest income and net short term capital gain). If the fund failed to meet any of
these requirements, subject to the opportunity to cure such failures under applicable provisions of the Code, the fund would be subject to U.S. federal
income tax at regular corporate rates on its taxable income, including its net capital gain, even if such income were distributed to its shareholders. All
distributions by the fund from earnings and profits, including distributions of net capital gain (if any), would be taxable to the shareholders as ordinary
income. To the extent designated by the fund, such distributions generally would be eligible (i) to be treated as qualified dividend income in the case of
individual and other non-corporate shareholders and (ii) for the dividends received deduction in the case of corporate shareholders, provided that in
each case the shareholder meets applicable holding period requirements. In addition, in order to requalify for taxation as a regulated investment
company, the fund might be required to recognize unrealized gain, pay substantial taxes and interest, and make certain distributions. See “U.S. Federal
Income Tax Matters.”
The tax treatment and characterization of the fund’s distributions may vary significantly from time to time due to the nature of the fund’s investments.
The ultimate tax characterization of the fund’s distributions in a calendar year may not finally be determined until after the end of that calendar year. The
fund may make distributions during a calendar year that exceed the fund’s net investment income and net realized capital gain for that year. In such a
situation, the amount by which the fund’s total distributions exceed net investment income and net realized capital gain generally would be treated as a
return of capital up to the amount of the Common Shareholder’s tax basis in his or her Common Shares, with any amounts exceeding such basis treated
as gain from the sale of his or her Common Shares. The fund’s income distributions that qualify for favorable tax treatment may be affected by the
Internal Revenue Service’s (“IRS”) interpretations of the Code and future changes in tax laws and regulations. See “U.S. Federal Income Tax Matters.”
No assurance can be given as to what percentage of the distributions paid on Common Shares, if any, will consist of long-term capital gain or what the
tax rates on various types of income will be in future years. See “U.S. Federal Income Tax Matters.”
Strategy Risks
Concentration risk
When a fund’s investments are focused in one or more industries or sectors of the economy, they are less broadly invested across industries or sectors
than other funds. This means that concentrated funds tend to be more volatile than other funds, and the values of their investments tend to go up and
down more rapidly. In addition, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic,
political, regulatory, and other conditions and risks affecting those industries or sectors. From time to time, a small number of companies may
represent a large portion of a single industry or sector or a group of related industries or sectors as a whole.
Credit and counterparty risk
This is the risk that an issuer of a U.S. government security, the issuer or guarantor of a fixed-income security, the counterparty to an over-the-counter
(OTC) derivatives contract (see “Hedging, derivatives, and other strategic transactions risk”), or a borrower of a fund’s securities will be unable or
unwilling to make timely principal, interest, or settlement payments, or otherwise honor its obligations. Credit risk associated with investments in
fixed-income securities relates to the ability of the issuer to make scheduled payments of principal and interest on an obligation. A fund that invests in
fixed-income securities is subject to varying degrees of risk that the issuers of the securities will have their credit ratings downgraded or will default,
potentially reducing the fund’s share price and income level. Nearly all fixed-income securities are subject to some credit risk, which may vary
depending upon whether the issuers of the securities are corporations, domestic or foreign governments, or their subdivisions or instrumentalities.
U.S. government securities are subject to varying degrees of credit risk depending upon whether the securities are supported by the full faith and credit
of the United States; supported by the ability to borrow from the U.S. Treasury; supported only by the credit of the issuing U.S. government agency,
instrumentality, or corporation; or otherwise supported by the United States. For example, issuers of many types of U.S. government securities (e.g., the
Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Banks),
although chartered or sponsored by Congress, are not funded by congressional appropriations, and their fixed-income securities, including
asset-backed and mortgage-backed securities, are neither guaranteed nor insured by the U.S. government. An agency of the U.S. government has
placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations.
It is unclear what effect this conservatorship will have on the securities issued or guaranteed by Fannie Mae or Freddie Mac. As a result, these securities
are subject to more credit risk than U.S. government securities that are supported by the full faith and credit of the United States (e.g., U.S. Treasury
bonds). When a fixed-income security is not rated, a manager may have to assess the risk of the security itself. Asset-backed securities, whose principal
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and interest payments are supported by pools of other assets, such as credit card receivables and automobile loans, are subject to further risks,
including the risk that the obligors of the underlying assets default on payment of those assets.
Funds that invest in below-investment-grade securities, also called junk bonds (e.g., fixed-income securities rated Ba or lower by Moody’s Investors
Service, Inc. or BB or lower by S&P Global Ratings or Fitch Ratings, as applicable, at the time of investment, or determined by a manager to be of
comparable quality to securities so rated) are subject to increased credit risk. The sovereign debt of many foreign governments, including their
subdivisions and instrumentalities, falls into this category. Below-investment-grade securities offer the potential for higher investment returns than
higher-rated securities, but they carry greater credit risk: their issuers’ continuing ability to meet principal and interest payments is considered
speculative, they are more susceptible to real or perceived adverse economic and competitive industry conditions, and they may be less liquid than
higher-rated securities.
In addition, a fund is exposed to credit risk to the extent that it makes use of OTC derivatives (such as forward foreign currency contracts and/or swap
contracts) and engages to a significant extent in the lending of fund securities or the use of repurchase agreements. OTC derivatives transactions can
be closed out with the other party to the transaction. If the counterparty defaults, a fund will have contractual remedies, but there is no assurance that
the counterparty will be able to meet its contractual obligations or that, in the event of default, a fund will succeed in enforcing them. A fund, therefore,
assumes the risk that it may be unable to obtain payments owed to it under OTC derivatives contracts or that those payments may be delayed or made
only after the fund has incurred the costs of litigation. While the manager intends to monitor the creditworthiness of contract counterparties, there can
be no assurance that the counterparty will be in a position to meet its obligations, especially during unusually adverse market conditions.
Dividend strategy risk
The Subadvisor may not be able to anticipate the level of dividends that companies will pay in any given timeframe. In accordance with the fund’s
strategies, the Subadvisor attempts to identify and exploit opportunities such as the announcement of major corporate actions that may lead to high
current dividend income. These situations typically are non-recurring or infrequent, may be difficult to predict and may not result in an opportunity that
allows the Subadvisor to fulfill the fund’s investment objective. In addition, the dividend policies of the fund’s target companies are heavily influenced by
the current economic climate and the favorable U.S. federal tax treatment afforded to dividends.
Equity securities risk
Common and preferred stocks represent equity ownership in a company. Stock markets are volatile. The price of equity securities will fluctuate, and can
decline and reduce the value of a fund investing in equities. The price of equity securities fluctuates based on changes in a company’s financial condition
and overall market and economic conditions. The value of equity securities purchased by a fund could decline if the financial condition of the companies
in which the fund is invested declines, or if overall market and economic conditions deteriorate. An issuer’s financial condition could decline as a result
of poor management decisions, competitive pressures, technological obsolescence, undue reliance on suppliers, labor issues, shortages, corporate
restructurings, fraudulent disclosures, irregular and/or unexpected trading activity among retail investors, or other factors. Changes in the financial
condition of a single issuer can impact the market as a whole.
Even a fund that invests in high-quality, or blue chip, equity securities, or securities of established companies with large market capitalizations (which
generally have strong financial characteristics), can be negatively impacted by poor overall market and economic conditions. Companies with large
market capitalizations may also have less growth potential than smaller companies and may be less able to react quickly to changes in the marketplace.
The fund generally does not attempt to time the market. Because of its exposure to equities, the possibility that stock market prices in general will
decline over short or extended periods subjects the fund to unpredictable declines in the value of its investments, as well as periods of poor
performance.
Financial services sector risk
A fund investing principally in securities of companies in the financial services sector is particularly vulnerable to events affecting that sector.
Companies in the financial services sector may include, but are not limited to, commercial and industrial banks, savings and loan associations and their
holding companies, consumer and industrial finance companies, diversified financial services companies, investment banking, securities brokerage
and investment advisory companies, leasing companies, and insurance companies. The types of companies that compose the financial services sector
may change over time. These companies are all subject to extensive regulation, rapid business changes, volatile performance dependent upon the
availability and cost of capital, prevailing interest rates, and significant competition. General economic conditions significantly affect these companies.
Credit and other losses resulting from the financial difficulty of borrowers or other third parties have a potentially adverse effect on companies in this
sector. Investment banking, securities brokerage, and investment advisory companies are particularly subject to government regulation and the risks
inherent in securities trading and underwriting activities. In addition, certain financial services companies face shrinking profit margins due to new
competitors, the cost of new technology, and the pressure to compete globally.
Fixed-income securities risk
Fixed-income securities are generally subject to two principal types of risk, as well as other risks described below: (1) interest-rate risk and (2) credit
quality risk.
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Credit quality risk.
 
Fixed-income securities are subject to the risk that the issuer of the security will not repay all or a portion of the principal
borrowed and will not make all interest payments. If the credit quality of a fixed-income security deteriorates after a fund has purchased the security,
the market value of the security may decrease and lead to a decrease in the value of the fund’s investments. An issuer’s credit quality could
deteriorate as a result of poor management decisions, competitive pressures, technological obsolescence, undue reliance on suppliers, labor
issues, shortages, corporate restructurings, fraudulent disclosures, or other factors. Funds that may invest in lower-rated fixed-income securities,
commonly referred to as junk securities, are riskier than funds that may invest in higher-rated fixed-income securities.
Interest-rate risk.
 
Fixed-income securities are affected by changes in interest rates. When interest rates decline, the market value of fixed-income
securities generally can be expected to rise. Conversely, when interest rates rise, the market value of fixed-income securities generally can be
expected to decline. The longer the duration or maturity of a fixed-income security, the more susceptible it is to interest-rate risk. Duration is a
measure of the price sensitivity of a debt security, or a fund that invests in a portfolio of debt securities, to changes in interest rates, whereas the
maturity of a security measures the time until final payment is due. Duration measures sensitivity more accurately than maturity because it takes
into account the time value of cash flows generated over the life of a debt security.
In response to certain economic conditions, including periods of high inflation, governmental authorities and regulators may respond with significant
fiscal and monetary policy changes such as raising interest rates. The fund may be subject to heightened interest rate risk when the Federal Reserve
Board (Fed) raises interest rates. Recent and potential future changes in government monetary policy may affect interest rates. It is difficult to
accurately predict the timing, frequency or magnitude of potential interest rate increases or decreases by the Fed and the evaluation of
macro-economic and other conditions that could cause a change in approach in the future. If the Fed and other central banks increase the federal
funds rate and equivalent rates, such increases generally will cause market interest rates to rise and could cause the value of a fund’s investments,
and the fund’s net asset value (NAV), to decline, potentially suddenly and significantly.
In certain market conditions, governmental authorities and regulators may considerably lower interest rates, which, in some cases could result in
negative interest rates. These actions, including their reversal or potential ineffectiveness, could further increase volatility in securities and other
financial markets and reduce market liquidity. To the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to
maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar
cash management products could lead to losses on investments, including on investments of the fund’s uninvested cash.
Investment-grade fixed-income securities in the lowest rating category risk.
 
Investment-grade fixed-income securities in the lowest rating
category (such as Baa by Moody’s Investors Service, Inc. or BBB by S&P Global Ratings or Fitch Ratings, as applicable, and comparable unrated
securities) involve a higher degree of risk than fixed-income securities in the higher rating categories. While such securities are considered
investment-grade quality and are deemed to have adequate capacity for payment of principal and interest, such securities lack outstanding
investment characteristics and have speculative characteristics as well. For example, changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher-grade securities.
Prepayment of principal risk.
 
Many types of debt securities, including floating-rate loans, are subject to prepayment risk. Prepayment risk is the
risk that, when interest rates fall, certain types of obligations will be paid off by the borrower more quickly than originally anticipated and the fund
may have to invest the proceeds in securities with lower yields. Securities subject to prepayment risk can offer less potential for gains when the
credit quality of the issuer improves.
Foreign securities risk
Funds that invest in securities traded principally in securities markets outside the United States are subject to additional and more varied risks, as the
value of foreign securities may change more rapidly and extremely than the value of U.S. securities. Less information may be publicly available
regarding foreign issuers, including foreign government issuers. Foreign securities may be subject to foreign taxes and may be more volatile than
U.S. securities. Currency fluctuations and political and economic developments may adversely impact the value of foreign securities. The securities
markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Additionally,
issuers of foreign securities may not be subject to the same degree of regulation as U.S. issuers. Reporting, accounting, and auditing standards of
foreign countries differ, in some cases significantly, from U.S. standards. There are generally higher commission rates on foreign portfolio transactions,
transfer taxes, higher custodial costs, and the possibility that foreign taxes will be charged on dividends and interest payable on foreign securities,
some or all of which may not be reclaimable. Also, adverse changes in investment or exchange control regulations (which may include suspension of the
ability to transfer currency or assets from a country); political changes; or diplomatic developments could adversely affect a fund’s investments. In the
event of nationalization, expropriation, confiscatory taxation, or other confiscation, the fund could lose a substantial portion of, or its entire investment
in, a foreign security. Some of the foreign securities risks are also applicable to funds that invest a material portion of their assets in securities of foreign
issuers traded in the United States.
Currency risk.
 
Currency risk is the risk that fluctuations in exchange rates may adversely affect the U.S. dollar value of a fund’s investments.
Currency risk includes both the risk that currencies in which a fund’s investments are traded, or currencies in which a fund has taken an active
investment position, will decline in value relative to the U.S. dollar and, in the case of hedging positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly for a number of reasons, including the forces of
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supply and demand in the foreign exchange markets, actual or perceived changes in interest rates, intervention (or the failure to intervene) by U.S. or
foreign governments or central banks, or currency controls or political developments in the United States or abroad. Certain funds may engage in
proxy hedging of currencies by entering into derivative transactions with respect to a currency whose value is expected to correlate to the value of a
currency the fund owns or wants to own. This presents the risk that the two currencies may not move in relation to one another as expected. In that
case, the fund could lose money on its investment and also lose money on the position designed to act as a proxy hedge. Certain funds may also take
active currency positions and may cross-hedge currency exposure represented by their securities into another foreign currency. This may result in a
fund’s currency exposure being substantially different than that suggested by its securities investments. All funds with foreign currency holdings
and/or that invest or trade in securities denominated in foreign currencies or related derivative instruments may be adversely affected by changes in
foreign currency exchange rates. Derivative foreign currency transactions (such as futures, forwards, and swaps) may also involve leveraging risk, in
addition to currency risk. Leverage may disproportionately increase a fund’s portfolio losses and reduce opportunities for gain when interest rates,
stock prices, or currency rates are changing.
Hedging, derivatives, and o
th
er strategic transactions risk
The ability of the fund to utilize hedging, derivatives, and other strategic transactions to benefit the fund will depend in part on its manager’s ability to
predict pertinent market movements and market risk, counterparty risk, credit risk, interest-rate risk, and other risk factors, none of which can be
assured. The skills required to utilize hedging and other strategic transactions are different from those needed to select the fund’s securities. Even if the
manager only uses hedging and other strategic transactions in the fund primarily for hedging purposes or to gain exposure to a particular securities
market, if the transaction does not have the desired outcome, it could result in a significant loss to the fund. The amount of loss could be more than the
principal amount invested. These transactions may also increase the volatility of the fund and may involve a small investment of cash relative to the
magnitude of the risks assumed, thereby magnifying the impact of any resulting gain or loss. For example, the potential loss from the use of futures can
exceed the fund’s initial investment in such contracts. In addition, these transactions could result in a loss to a fund if the counterparty to the
transaction does not perform as promised.
The fund may invest in derivatives, which are financial contracts with a value that depends on, or is derived from, the value of underlying assets,
reference rates, or indexes. Derivatives may relate to stocks, bonds, interest rates, currencies or currency exchange rates, and related indexes. The
fund may use derivatives for many purposes, including for hedging and as a substitute for direct investment in securities or other assets. Derivatives
may be used in a way to efficiently adjust the exposure of the fund to various securities, markets, and currencies without the fund actually having to sell
existing investments and make new investments. This generally will be done when the adjustment is expected to be relatively temporary or in
anticipation of effecting the sale of fund assets and making new investments over time. Further, since many derivatives have a leverage component,
adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested
in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. When the fund uses
derivatives for leverage, investments in the fund will tend to be more volatile, resulting in larger gains or losses in response to market changes. To limit
risks associated with leverage, a fund is required to comply with Rule 18f-4 under the Investment Company Act of 1940, as amended (the Derivatives
Rule) as outlined below. For a description of the various derivative instruments the fund may utilize, refer to the SAI.
The regulation of the U.S. and non-U.S. derivatives markets has undergone substantial change in recent years and such change may continue. In
particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulations promulgated or proposed thereunder require many
derivatives to be cleared and traded on an exchange, expand entity registration requirements, impose business conduct requirements on dealers that
enter into swaps with a pension plan, endowment, retirement plan or government entity, and required banks to move some derivatives trading units to a
non-guaranteed affiliate separate from the deposit-taking bank or divest them altogether. Although the Commodity Futures Trading Commission (CFTC)
has released final rules relating to clearing, reporting, recordkeeping and registration requirements under the legislation, many of the provisions are
subject to further final rule making, and thus its ultimate impact remains unclear. New regulations could, among other things, restrict the fund’s ability
to engage in derivatives transactions (for example, by making certain types of derivatives transactions no longer available to the fund) and/or increase
the costs of such derivatives transactions (for example, by increasing margin or capital requirements), and the fund may be unable to fully execute its
investment strategies as a result. Limits or restrictions applicable to the counterparties with which the fund engages in derivative transactions also
could prevent the fund from using these instruments or affect the pricing or other factors relating to these instruments, or may change the availability of
certain investments.
The Derivatives Rule mandates that a fund adopt and/or implement: (i) value-at-risk limitations (VaR); (ii) a written derivatives risk management
program; (iii) new Board oversight responsibilities; and (iv) new reporting and recordkeeping requirements. In the event that a fund’s derivative exposure
is 10% or less of its net assets, excluding certain currency and interest rate hedging transactions, it can elect to be classified as a limited derivatives
user (Limited Derivatives User) under the Derivatives Rule, in which case the fund is not subject to the full requirements of the Derivatives Rule. Limited
Derivatives Users are excepted from VaR testing, implementing a derivatives risk management program, and certain Board oversight and reporting
requirements mandated by the Derivatives Rule. However, a Limited Derivatives User is still required to implement written compliance policies and
procedures reasonably designed to manage its derivatives risks.
The Derivatives Rule also provides special treatment for reverse repurchase agreements, similar financing transactions and unfunded commitment
agreements. Specifically, a fund may elect whether to treat reverse repurchase agreements and similar financing transactions as “derivatives
27
transactions” subject to the requirements of the Derivatives Rule or as senior securities equivalent to bank borrowings for purposes of Section 18 of the
Investment Company Act of 1940. In addition, when-issued or forward settling securities transactions that physically settle within 35-days are deemed
not to involve a senior security.
At any time after the date of this prospectus, legislation may be enacted that could negatively affect the assets of the fund. Legislation or regulation may
change the way in which the fund itself is regulated. The advisor cannot predict the effects of any new governmental regulation that may be
implemented, and there can be no assurance that any new governmental regulation will not adversely affect the fund’s ability to achieve its investment
objectives.
The use of derivative instruments may involve risks different from, or potentially greater than, the risks associated with investing directly in securities
and other, more traditional assets. In particular, the use of derivative instruments exposes the fund to the risk that the counterparty to an OTC
derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions
typically can only be closed out with the other party to the transaction, although either party may engage in an offsetting transaction that puts that party
in the same economic position as if it had closed out the transaction with the counterparty or may obtain the other party’s consent to assign the
transaction to a third party. If the counterparty defaults, the fund will have contractual remedies, but there is no assurance that the counterparty will
meet its contractual obligations or that, in the event of default, the fund will succeed in enforcing them. For example, because the contract for each OTC
derivatives transaction is individually negotiated with a specific counterparty, the fund is subject to the risk that a counterparty may interpret
contractual terms (e.g., the definition of default) differently than the fund when the fund seeks to enforce its contractual rights. If that occurs, the cost
and unpredictability of the legal proceedings required for the fund to enforce its contractual rights may lead it to decide not to pursue its claims against
the counterparty. The fund, therefore, assumes the risk that it may be unable to obtain payments owed to it under OTC derivatives contracts or that
those payments may be delayed or made only after the fund has incurred the costs of litigation. While a manager intends to monitor the
creditworthiness of counterparties, there can be no assurance that a counterparty will meet its obligations, especially during unusually adverse market
conditions. To the extent the fund contracts with a limited number of counterparties, the fund’s risk will be concentrated and events that affect the
creditworthiness of any of those counterparties may have a pronounced effect on the fund. Derivatives are also subject to a number of other risks,
including market risk, liquidity risk and operational risk. Since the value of derivatives is calculated and derived from the value of other assets,
instruments, or references, there is a risk that they will be improperly valued. Derivatives also involve the risk that changes in their value may not
correlate perfectly with the assets, rates, or indexes they are designed to hedge or closely track. Suitable derivatives transactions may not be available
in all circumstances. The fund is also subject to the risk that the counterparty closes out the derivatives transactions upon the occurrence of certain
triggering events. In addition, a manager may determine not to use derivatives to hedge or otherwise reduce risk exposure. Government legislation or
regulation could affect the use of derivatives transactions and could limit the fund’s ability to pursue its investment strategies.
A detailed discussion of various hedging and other strategic transactions appears in the SAI. To the extent that the fund utilizes the following list of
certain derivatives and other strategic transactions, it will be subject to associated risks. The main risks of each appear below.
●
Foreign currency forward contracts
. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), foreign currency risk,
and risk of disproportionate loss are the principal risks of engaging in transactions involving foreign currency forward contracts.
●
Futures contracts.
Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions) and risk of disproportionate loss are the
principal risks of engaging in transactions involving futures contracts.
●
Interest-rate swaps
. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), interest-rate risk and risk of
disproportionate loss are the principal risks of engaging in transactions involving interest-rate swaps.
●
Options.
Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), and risk of disproportionate loss are the principal risks
of engaging in transactions involving options. Counterparty risk does not apply to exchange-traded options.
Illiquid and Restricted Securities Risk
The fund may invest without limit in securities for which there is no readily available trading market or which are otherwise illiquid (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 investment). The fund may have significant exposure to restricted securities. Restricted securities are
securities with restrictions on public resale, such as securities offered in accordance with an exemption under Rule 144A under the Securities Act of
1933 (the “1933 Act”), or commercial paper issued under Section 4(a)(2) of the 1933 Act. Restricted securities are often required to be sold in private
sales to institutional buyers, markets for restricted securities may or may not be well developed, and restricted securities can be illiquid.
Illiquid and restricted securities may be difficult to value and may involve greater risks than liquid securities. Illiquidity may have an adverse impact on a
particular security’s market price and the fund’s ability to see the security. Illiquid investments may become harder to value, especially in changing
markets. The fund’s investments in illiquid securities may reduce the returns of the fund because it may be unable to sell the illiquid investments at an
advantageous time or price or possibly require the fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations,
which could prevent the fund from taking advantage of other investment opportunities. Additionally, the market for certain investments may become
illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer.
28
The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be impaired by
reduced market activity or participation, legal restrictions or other economic and market impediments. funds with principal investment strategies that
involve investments in securities of companies with smaller market capitalizations, foreign securities, derivatives, or securities with substantial market
and/or credit risk tend to have the greatest exposure to liquidity risk. Exposure to liquidity risk may be heightened for funds that invest in securities of
emerging markets and related derivatives that are not widely traded, and that may be subject to purchase and sale restrictions.
The capacity of traditional dealers to engage in fixed-income trading has not kept pace with the bond market’s growth. As a result, dealer inventories of
corporate bonds, which indicate the ability to “make markets,” i.e., buy or sell a security at the quoted bid and ask price, respectively, are at or near
historic lows relative to market size. Because market makers provide stability to fixed-income markets, the significant reduction in dealer inventories
could lead to decreased liquidity and increased volatility, which may become exacerbated during periods of economic or political stress.
In addition, limited liquidity could affect the market price of the investments, thereby adversely affecting the fund’s NAV and ability to make dividend
distributions. The financial markets in general have in recent years experienced periods of extreme secondary market supply and demand imbalance,
resulting in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value. During such
periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market dislocation may occur again at any
time. The fund has no limitation on the amount of its assets which may be invested in investments which are not readily marketable or are subject to
restrictions on resale.
Investment company securities risk
Fund shareholders indirectly bear their proportionate share of the expenses of any investment company in which the fund invests. The total return on
such investments will be reduced by the operating expenses and fees of such other investment companies, including advisory fees. Investments in
closed-end funds may involve the payment of substantial premiums above the value of such investment companies’ portfolio securities.
Large company risk
Larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer
tastes. Many larger companies also may not be able to attain the high growth rate of successful smaller companies, especially during extended periods
of economic expansion. For purposes of the fund’s investment policies, the market capitalization of a company is based on its capitalization at the time
the fund purchases the company’s securities. Market capitalizations of companies change over time. The fund is not obligated to sell a company’s
security simply because, subsequent to its purchase, the company’s market capitalization has changed to be outside the capitalization range, if any, in
effect for the fund.
Preferred and convertible securities risk
Unlike interest on debt securities, preferred stock dividends are payable only if declared by the issuer’s board. Also, preferred stock may be subject to
optional or mandatory redemption provisions. The market values of convertible securities tend to fall as interest rates rise and rise as interest rates fall.
The value of convertible preferred stock can depend heavily upon the value of the security into which such convertible preferred stock is converted,
depending on whether the market price of the underlying security exceeds the conversion price.
Reverse Repurchase Agreement Risk
Reverse repurchase agreement transactions involve the risk that the market value of the securities that the Fund is obligated to repurchase under such
agreements may decline below the repurchase price. Any fluctuations in the market value of either the securities transferred to the other party or the
securities in which the proceeds may be invested would affect the market value of the fund’s assets, thereby potentially increasing fluctuations in the
market value of the fund’s assets. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent,
the fund’s use of proceeds received under the agreement may be restricted pending a determination by the other party, or its trustee or receiver,
whether to enforce the fund’s obligation to repurchase the securities.
Sector risk
When a fund’s investments are focused in one or more sectors of the economy, they are less broadly invested across industries or sectors than other
funds. This means that focused funds tend to be more volatile than other funds, and the values of their investments tend to go up and down more rapidly.
In addition, a fund that invests in particular sectors is particularly susceptible to the impact of market, economic, political, regulatory, and other
conditions and risks affecting those sectors. From time to time, a small number of companies may represent a large portion of a single sector or a group
of related sectors as a whole.
U.S. government securities risk
The fund may invest in U.S. government securities issued or guaranteed by the U.S. government or by an agency or instrumentality of the
U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are supported only by the credit of
the issuing agency or instrumentality, which depends entirely on its own resources to repay the debt. U.S. government securities that are backed by the
full faith and credit of the United States include U.S. Treasuries and mortgage-backed securities guaranteed by the Government National Mortgage
29
Association. Securities that are only supported by the credit of the issuing agency or instrumentality include Fannie Mae, FHLBs and Freddie Mac. See
“Credit and counterparty risk” for additional information on Fannie Mae and Freddie Mac securities.
Utilities sector risk
Companies in the utilities sector may be affected by general economic conditions, supply and demand, financing and operating costs, rate caps,
interest rates, liabilities arising from governmental or civil actions, consumer confidence and spending, competition, technological progress, energy
prices, resource conservation and depletion, man-made or natural disasters, geopolitical events, and environmental and other government regulations.
The value of securities issued by companies in the utilities sector may be negatively impacted by variations in exchange rates, domestic and
international competition, energy conservation and governmental limitations on rates charged to customers. Although rate changes of a regulated
utility usually vary in approximate correlation with financing costs, due to political and regulatory factors rate changes usually happen only after a delay
after the changes in financing costs. Deregulation may subject utility companies to increased competition and can negatively affect their profitability as
it permits utility companies to diversify outside of their original geographic regions and customary lines of business, causing them to engage in more
uncertain ventures. Deregulation can also eliminate restrictions on the profits of certain utility companies, but can simultaneously expose these
companies to an increased risk of loss. Although opportunities may permit certain utility companies to earn more than their traditional regulated rates
of return, companies in the utilities industry may have difficulty obtaining an adequate return on invested capital, raising capital, or financing large
construction projects during periods of inflation or unsettled capital markets. Utility companies may also be subject to increased costs because of the
effects of man-made or natural disasters. Current and future regulations or legislation can make it more difficult for utility companies to operate
profitably. Government regulators monitor and control utility revenues and costs, and thus may restrict utility profits. There is no assurance that
regulatory authorities will grant rate increases in the future, or that those increases will be adequate to permit the payment of dividends on stocks
issued by a utility company. Because utility companies are faced with the same obstacles, issues and regulatory burdens, their securities may react
similarly and more in unison to these or other market conditions.
Given the risks described above, an investment in Common Shares may not be appropriate for all investors. You should carefully
consider your a
bil
ity to assume these risks before making an investment in the fund.
Management of the Fund
Trustees
The overall management of the fund, including supervision of the duties performed by the Advisor and the subadvisor, is the responsibility of the Board
of Trustees, under the laws of The Commonwealth of Massachusetts and the 1940 Act. The Board of Trustees is responsible for the fund’s overall
management, including adopting the investment and other policies of the fund, electing and replacing officers and selecting and supervising the fund’s
Advisor and subadvisor. The names and business addresses of the Trustees and officers of the fund and their principal occupations and other affiliations
during the past five years, as well as a description of committees of the Board, are set forth under “Those Responsible for Management” in the SAI.
A discussion regarding the basis for the Trustees’ approval of the Advisory Agreement and the Subadvisory Agreement (each, as defined below) is
available in the fund’s most recent annual shareholder report for the period ended October 31.
The Advisor
The advisor is a Delaware limited liability company whose principal offices are located at 200 Berkeley Street, Boston, Massachusetts 02116 and
serves as the fund’s investment advisor. The advisor is registered with the SEC as an investment advisor under the Investment Advisers Act of 1940, as
amended (the “Advisers Act”).
Founded in 1968, the advisor is an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), a subsidiary of Manulife
Financial Corporation (“Manulife Financial” or the “Company”). Manulife Financial is the holding company of The Manufacturers Life Insurance Company
(the “Life Company”) and its subsidiaries. John Hancock Life Insurance Company (U.S.A.) and its subsidiaries (“John Hancock”) today offer a broad
range of financial products and services, including whole, term, variable, and universal life insurance, as well as college savings products, mutual funds,
fixed and variable annuities, long-term care insurance and various forms of business insurance.
The advisor’s parent company has been helping individuals and institutions work toward their financial goals since 1862. The advisor offers investment
solutions managed by institutional money managers, taking a disciplined team approach to portfolio management and research, leveraging the
expertise of seasoned investment professionals. The advisor has been managing closed-end funds since 1971. As of December 31, 2024, the Advisor
had total assets under management of approximately $165.2 billion.
Subject to general oversight by the Board of Trustees, the advisor manages and supervises the investment operations and business affairs of the fund.
The advisor selects, contracts with and compensates one or more subadvisors to manage all or a portion of the fund’s portfolio assets, subject to
oversight by the advisor. In this role, the advisor has supervisory responsibility for managing the investment and reinvestment of the fund, as described
in further detail below. In this role, the advisor has supervisory responsibility for managing the investment and reinvestment of the fund as described in
further detail below. The advisor is responsible for developing overall investment strategies for the fund and overseeing and implementing the fund’s
continuous investment program and provides a variety of advisory oversight and investment research services. The advisor also provides management
30
and transition services associated with certain fund events (e.g., strategy, portfolio manager or subadvisor changes) and coordinates and oversees
services provided under other agreements.
The advisor has ultimate responsibility to oversee a subadvisor and recommended to the Board of Trustees its hiring, termination, and replacement. In
this capacity, the advisor, among other things: (i) monitors on a daily basis the compliance of the subadvisor with the investment objective and related
policies of the fund; (ii) monitors significant changes that may impact the subadvisor’s overall business and regularly performs due diligence reviews of
the subadvisor; (iii) reviews the performance of the subadvisor; and (iv) reports periodically on such performance to the Board of Trustees. The advisor
employs a team of investment professionals who provide these ongoing research and monitoring services.
The advisor contractually agrees to waive a portion of its management fee and/or reimburse expenses for the fund and certain other John Hancock
funds according to an asset level breakpoint schedule that is based on the aggregate net assets of all the funds participating in the waiver or
reimbursement, including the fund (the participating portfolios). This waiver equals, on an annualized basis, 0.0100% of that portion of the aggregate
net assets of all the participating portfolios that exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate
net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; 0.0150% of that portion of the aggregate
net assets of all the participating portfolios that exceeds $150 billion but is less than or equal to $175 billion; 0.0175% of that portion of the aggregate
net assets of all the participating portfolios that exceeds $175 billion but is less than or equal to $200 billion; 0.0200% of that portion of the aggregate
net assets of all the participating portfolios that exceeds $200 billion but is less than or equal to $225 billion; and 0.0225% of that portion of the
aggregate net assets of all the participating portfolios that exceeds $225 billion. The amount of the reimbursement is calculated daily and allocated
among all the participating portfolios in proportion to the daily net assets of each participating portfolio. During its most recent fiscal year, the fund's
reimbursement amounted to 0.01% of the fund’s average daily net assets. This agreement expires on July 31, 2026, unless renewed by mutual
agreement of the fund and the advisor based upon a determination that this is appropriate under the circumstances at that time.
Manulife Financial Corporation is a leading international financial services group with principal operations in Asia, Canada and the United States.
Operating primarily as John Hancock in the United States and Manulife elsewhere, it provides financial protection products and advice, insurance, as
well as wealth and asset management services through its extensive network of solutions for individuals, groups and institutions.
Advisory Agreement.
 
he fund entered into an amended and restated investment management contract dated June 30, 2020 (the “Advisory
Agreement”) with the Advisor. As compensation for its advisory services under the Advisory Agreement, the Advisor receives a fee from the fund,
calculated and paid daily, at an annual rate of the fund’s average daily managed assets. “Managed assets” means, for the purposes of calculating the
advisory fee, the total assets of the fund (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities
(other than liabilities representing financial leverage). The liquidation preference of any preferred shares is not a liability.
Pursuant to the Advisory Agreement and subject to the general supervision of the Trustees, the Advisor selects, contracts with, and compensates the
Subadvisor to manage the investments and determine the composition of the assets of the fund. The Advisor does not itself manage any of the fund’s
portfolio assets but has ultimate responsibility to oversee the Subadvisor and recommend its hiring, termination and replacement. In this capacity, the
Advisor monitors the Subadvisor’s management of the fund’s investment operations in accordance with the investment objective and related investment
policies of the fund, reviews the performance of the Subadvisor and reports periodically on such performance to the Board.
Administration Agreement.
 
The fund entered into an administration contract dated May 6, 1992 (the “Administration Agreement”) with JHIM, under
which the fund receives Non-Advisory Services. These “Non-Advisory Services” include, but are not limited to, preparing tax returns, preparing and
transmitting periodic reports to shareholders, preparing and submitting filings with the SEC and other regulatory authorities, maintaining fund records,
providing personnel and clerical services, and other services that are not investment advisory in nature. The fund pays a monthly fee to JHIM equal to
0.10% of the fund’s average weekly managed assets for such Non-Advisory Services under the Administration Agreement.
The Subadvisor
Subadvisory Agreement.
 
The Advisor entered into a Subadvisory Agreement dated December 31, 2005 with the subadvisor (the “Subadvisory
Agreement”). The subadvisor handles the fund’s portfolio management activities, subject to oversight by the Advisor. The subadvisor is a wholly owned
subsidiary of John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial Corporation). As of December 31, 2024, the
subadvisor had total assets under management of approximately $[TBU] billion. The subadvisor is located at 197 Clarendon Street, Boston, MA
02116.
Under the terms of the Subadvisory Agreement, the subadvisor is responsible for managing the investment and reinvestment of the assets of the fund,
subject to the supervision and control of the Board and the Advisor. For services rendered by the subadvisor under the Subadvisory Agreement, the
Advisor (and not the fund) pays the subadvisor a fee.
Portfolio Managers
Below is a list of the fund’s investment management team at the subadvisor, listed in alphabetical order, which includes a brief summary of their
business careers during the past five years. These managers are jointly and primarily responsible for the day-to-day management of the fund’s portfolio.
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These managers are employed by the subadvisor. For more details about these individuals, including information about their compensation, other
accounts they manage and any investments they may have in the fund, see the SAI.
Joseph H. Bozoyan, CFA
●
Managing Director and Portfolio Manager
●
Manulife Investment Management (US) LLC since 2015
●
Managed the fund since 2015
●
Began business career in 1993
James Gearhart, CFA
●
Managing Director and Portfolio Manager
●
Manulife Investment Management (US) LLC since 2022
●
Managed the Fund since 2022
●
Began business career in 2011
Jonas Grazulis, CFA
●
Managing Director and Portfolio Manager
●
Manulife Investment Management (US) LLC since 2022
●
Managed the Fund since 2022
●
Began business career in 2011
Caryn E. Rothman, CFA
●
Managing Director and Portfolio Manager
●
Manulife Investment Management (US) LLC since 1996
●
Managed the fund since 2022
●
Began business career in 1996
Custodian and Transfer Agent
The fund’s portfolio securities are held pursuant to a custodian agreement between the fund and State Street Bank and Trust Company (“State Street” or
the “Custodian”), One Congress Street, Suite 1, Boston, Massachusetts 02114. Under the custodian agreement, State Street performs custody, foreign
custody manager and fund accounting services.
Computershare Shareowner Services LLC, P.O. Box 43006, Providence, RI 02940-3078, is the transfer agent and dividend disbursing agent of the
fund.
Determination of Net Asset Value
The fund’s net asset value per Common Share (“NAV”) is normally determined each business day at the close of regular trading on the NYSE (typically
4:00
 
p.m.
Eastern Time, on each business day that the NYSE is open) by dividing the fund’s net assets by the number of Common Shares outstanding. In
case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled
close, the NAV may be determined as of the regularly scheduled close of the NYSE pursuant to the Advisor's Valuation Policies and Procedures. The time
at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange
Commission and applicable regulations. On holidays or other days when the NYSE is closed, the NAV is not calculated. Trading of securities that are
primarily listed on foreign exchanges may take place on weekends and U.S. business holidays on which the fund’s NAV is not calculated. Consequently,
the fund’s portfolio securities may trade and the NAV of the fund’s Common Shares may be significantly affected on days when a shareholder will not be
able to purchase or sell the fund’s Common Shares.
The Board has designated the fund’s Advisor as the valuation designee to perform fair value functions for the fund in accordance with the Advisor's
valuation policies and procedures. As valuation designee, the Advisor will determine the fair value, in good faith, of securities and other assets held by
the fund for which market quotations are not readily available and, among other things, will assess and manage material risks associated with fair value
determinations, select, apply and test fair value methodologies, and oversee and evaluate pricing services and other valuation agents used in valuing
the fund's investments. The Advisor is subject to Board oversight and reports to the Board information regarding the fair valuation process and related
material matters. The Advisor carries out its responsibilities as valuation designee through its Pricing Committee.
Portfolio securities are valued by various methods that are generally described below. Portfolio securities also may be fair valued by the Advisor’s
Pricing Committee in certain instances pursuant to procedures established by the Advisor and adopted by the Board. Equity securities are generally
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valued at the last sale price or, for certain markets, the official closing price as of the close of the relevant exchange. Securities not traded on a
particular day are valued using last available bid prices. A security that is listed or traded on more than one exchange is typically valued at the price on
the exchange where the security was acquired or most likely will be sold. In certain instances, the Pricing Committee may determine to value equity
securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not
open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market. Equity
securities traded principally in foreign markets are typically valued using the last sale price or official closing price in the relevant exchange or market,
as adjusted by an independent pricing vendor to reflect fair value as of the close of the NYSE. On any day a foreign market is closed and the NYSE is
open, any foreign securities will typically be valued using the last price or official closing price obtained from the relevant exchange on the prior
business day adjusted based on information provided by an independent pricing vendor to reflect fair value as of the close of the NYSE. Debt obligations
are typically valued based on evaluated prices provided by an independent pricing vendor. The value of securities denominated in foreign currencies is
converted into U.S. dollars at the exchange rate supplied by an independent pricing vendor. Forward foreign currency contracts are valued at the
prevailing forward rates which are based on foreign currency exchange spot rates and forward points supplied by an independent pricing vendor.
Exchange-traded options are valued at the mid-price of the last quoted bid and ask prices. Futures contracts whose settlement prices are determined as
of the close of the NYSE are typically valued based on the settlement price, while other futures contracts are typically valued at the last traded price on
the exchange on which they trade as of the close of the NYSE. Foreign equity index futures that trade in the electronic trading market subsequent to the
close of regular trading may be valued at the last traded price in the electronic trading market as of the close of the NYSE, or may be fair valued based
on fair value adjustment factors provided by an independent pricing vendor in order to adjust for events that may occur between the close of foreign
exchanges or markets and the close of the NYSE. Swaps and unlisted options are generally valued using evaluated prices obtained from an independent
pricing vendor. Shares of open-end investment companies that are not exchange-traded funds (“ETFs”) held by the fund are valued based on the NAVs of
such other investment companies.
Pricing vendors may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data,
broker-dealer quotations, credit quality information, general market conditions, news, and other factors and assumptions. The fund may receive
different prices when it sells odd-lot positions than it would receive for sales of institutional round lot positions. Pricing vendors generally value
securities assuming orderly transactions of institutional round lot sizes, but the fund may hold or transact in such securities in smaller, odd lot sizes.
The Pricing Committee engages in oversight activities with respect to the fund’s pricing vendors, which includes, among other things, monitoring
significant or unusual price fluctuations above predetermined tolerance levels from the prior day, back-testing of pricing vendor prices against actual
trades, conducting periodic due diligence meetings and reviews, and periodically reviewing the inputs, assumptions and methodologies used by these
vendors. Nevertheless, market quotations, official closing prices, or information furnished by a pricing vendor could be inaccurate, which could lead to a
security being valued incorrectly.
If market quotations, official closing prices, or information furnished by a pricing vendor are not readily available or are otherwise deemed unreliable or
not representative of the fair value of such security because of market- or issuer-specific events, a security will be valued at its fair value as determined
in good faith by the Board’s valuation designee, the Advisor. In certain instances, therefore, the Pricing Committee may determine that a reported
valuation does not reflect fair value, based on additional information available or other factors, and may accordingly determine in good faith the fair
value of the assets, which may differ from the reported valuation.
Fair value pricing of securities is intended to help ensure that the fund’s NAV reflects the fair market value of the fund’s portfolio securities as of the close
of regular trading on the NYSE (as opposed to a value that no longer reflects market value as of such close). The use of fair value pricing has the effect of
valuing a security based upon the price the fund might reasonably expect to receive if it sold that security in an orderly transaction between market
participants, but does not guarantee that the security can be sold at the fair value price. Further, because of the inherent uncertainty and subjective
nature of fair valuation, a fair valuation price may differ significantly from the value that would have been used had a readily available market price for
the investment existed and these differences could be material.
Regarding the fund’s investment in an open-end investment company that is not an ETF, which (as noted above) is valued at such investment company’s
NAV, the prospectus for such investment company explains the circumstances and effects of fair value pricing for that investment company.
Distribution Policy
The fund makes regular monthly distributions to Common Shareholders sourced from the fund’s cash available for distribution. “Cash available for
distribution” consists of the fund’s (i) investment company taxable income, which includes among other things, dividend and ordinary income after
payment of fund expenses, the excess of net short-term capital gain over net long-term capital loss, and income from certain hedging and interest rate
transactions and (ii) net long-term capital gain (gain from the sale of capital assets held longer than one year). The Board may modify this distribution
policy at any time without obtaining the approval of Common Shareholders.
Expenses of the fund are accrued each day. To the extent that the fund’s net investment income for any year exceeds the total monthly distributions paid
during the year, the fund may make a special distribution at or near year-end of such excess amount as may be required. If it does, over time, all of the
fund’s investment company taxable income will be distributed.
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If, for any calendar year, as discussed above, the total distributions made exceed the fund’s net investment taxable income and net capital gain, the
excess generally will be treated as a return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her
Common Shares) and thereafter as gain from the sale of Common Shares. The amount treated as a return of capital reduces the Common Shareholder’s
adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale of
his or her Common Shares. Distributions in any year may include a substantial return of capital component.
Pursuant to the requirements of the 1940 Act, in the event the fund makes distributions from sources other than income, a notice will accompany each
monthly distribution with respect to the estimated source of the distribution made. Such notices will describe the portion, if any, of the monthly dividend
which, in the fund’s good faith judgment, constitutes long-term capital gain, short-term capital gain, net investment income or a return of capital. The
actual character of such dividend distributions for U.S. federal income tax purposes, however, will only be determined finally by the fund at the close of
its fiscal year, based on the fund’s full year performance and its actual net investment company taxable income and net capital gain for the year, which
may result in a recharacterization of amounts distributed during such fiscal year from the characterization in the monthly estimates.
At least annually, the fund intends to distribute any net capital gain (which is the excess of net long-term capital gain over net short-term capital loss) or,
alternatively, to retain all or a portion of the year’s net capital gain and pay U.S. federal income tax on the retained gain. As provided under U.S. federal
tax law, Common Shareholders of record as of the end of the fund’s taxable year will include their attributable share of the retained gain in their income
for the year as a long-term capital gain, and will be entitled to a tax credit or refund for the tax deemed paid on their behalf by the fund. The fund may
treat the cash value of tax credit and refund amounts in connection with retained capital gain as a substitute for equivalent cash distributions.
The tax treatment and characterization of the fund’s distributions may vary substantially from time to time because of the varied nature of the fund’s
investments. If the fund’s total monthly distributions in any year exceed the amount of its net investment taxable income for the year, any such excess
would be characterized as a return of capital for U.S. federal income tax purposes to the extent not designated as a capital gain dividend. Distributions
in any year may include a substantial return of capital component. Under the 1940 Act, for any distribution that includes amounts from sources other
than net income (calculated on a book basis), the fund is required to provide Common Shareholders a written statement regarding the components of
such distribution. Such a statement will be provided at the time of any distribution believed to include any such amounts. A return of capital is a
distribution to Common Shareholders that is not attributable to the fund’s earnings but, represents a return of part of the Common Shareholder’s
investment. If the fund’s distributions exceed the fund’s current and accumulated earnings and profits, such excess will be treated first as a return of
capital to the extent of the shareholder’s tax basis in Common Shares (thus reducing a shareholder’s adjusted tax basis in his or her Common Shares),
and thereafter as capital gain assuming Common Shares are held as a capital asset. Upon the sale of Common Shares, a shareholder generally will
recognize capital gain or loss equal to the difference between the amount realized on the sale and the shareholder’s adjusted tax basis in Common
Shares sold. For example, in year one, a Common Shareholder purchased 100 shares of the fund at $10 per Share. In year two, the Common
Shareholder received a $1-per-share return of capital distribution, which reduced the basis in each share by $1, to give the Common Shareholder an
adjusted basis of $9 per share. In year three, the Common Shareholder sells the 100 shares for $15 per Share. Assuming no other transactions during
this period, a Common Shareholder would have a capital gain in year three of $6 per share ($15 minus $9) for a total capital gain of $600.
The fund has adopted a managed distribution plan (Plan). Under the Plan, the fund makes monthly distributions of an amount equal to $0.0975 per
share, which will be paid monthly until further notice. The fund may make additional distributions: (i) for purposes of not incurring federal income tax at
the fund level of investment company taxable income and net capital gain, if any, not included in such regular distributions; and (ii) for purposes of not
incurring federal excise tax on ordinary income and capital gain net income, if any, not included in such regular distributions. The Plan provides that the
Board of Trustees of the fund may amend the terms of the Plan or terminate the Plan at any time without prior notice to the fund’s shareholders. The Plan
is subject to periodic review by the fund’s Board of Trustees.
Distribution rates are based on projected monthly cash available for distribution, which may result in fluctuations in monthly rates. As a result, the
distributions paid by the fund for any particular month may be more or less than the amount of cash available for distribution from that monthly period.
In certain circumstances, the fund may be required to sell a portion of its investment portfolio to fund distributions. Distributions will reduce the
Common Shares’ NAV.
Common Shareholders may automatically reinvest some or all of their distributions in additional Common Shares under the fund’s dividend
reinvestment plan. See “Dividend Reinvestment Plan.”
Dividend Reinvestment Plan
Pursuant to the fund’s Dividend Reinvestment Plan (the “Plan”), distributions of dividends and capital gain are automatically reinvested in Common
Shares by Computershare Trust Company, N.A. (the “Plan Agent”). Every shareholder who became a shareholder of the fund after June 30, 2011 and
holds at least one full share of the fund will be automatically enrolled in the Plan. Shareholders who do not participate in the Plan will receive all
distributions in cash.
If the fund declares a dividend or distribution payable either in cash or in Common Shares and the market price of shares on the payment date for the
distribution or dividend equals or exceeds the fund’s NAV per share, the fund will issue Common Shares to participants at a value equal to the higher of
NAV or 95% of the market price. The number of additional Common Shares to be credited to each participant’s account will be determined by dividing
34
the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If the market price is lower than NAV, or if dividends or
distributions are payable only in cash, then participants will receive Common Shares purchased by the Plan Agent on participants’ behalf on the NYSE or
otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed its purchases, the average per share purchase
price may exceed NAV, resulting in fewer Common Shares being acquired than if the fund had issued new Common Shares.
There are no brokerage charges with respect to Common Shares issued directly by the fund. However, whenever shares are purchased or sold on the
NYSE or otherwise on the open market, each participant will pay per share fees, currently $0.05 per share purchased or sold. Per share fees will be
deducted from amounts to be invested. All per share fees include any applicable brokerage commissions the Plan Agent is required to pay.
The reinvestment of dividends and net capital gain distributions does not relieve participants of any income tax that may be payable on such dividends
or distributions even though cash is not received by the participant.
Shareholders participating in the Plan may buy additional Common Shares of the fund through the Plan at any time in amounts of at least $50 per
investment, up to a maximum of $10,000, with a total calendar year limit of $100,000. The Plan Agent will wait up to three business days after receipt
of the check or electronic funds transfer to ensure it receives good funds and will then seek to purchase shares from additional cash investments
promptly on the investment date. Shareholders will be charged a $5 transaction fee plus $0.05 per share fee for each order. Purchases of additional
shares of the fund will be made on the open market. Shareholders who elect to utilize monthly electronic fund transfers to buy additional shares of the
fund will be charged a $2 transaction fee plus $0.05 per share fee for each automatic purchase. Shareholders also can sell fund shares held in the Plan
account at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website a www.computershare.com/investor The
Plan Agent will mail a check (less applicable fees) on settlement date (one business day after the shares have been sold). If shareholders choose to sell
shares through their stockbroker, they will need to request that the Plan Agent electronically transfer those shares to their stockbroker through the
Direct Registration System.
Shareholders participating in the Plan may elect to receive all distributions in cash by withdrawing from the Plan at any time by contacting the Plan
Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor. Such termination will be effective
immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on
the first trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. If you withdraw,
your shares will be credited to your account; or, if you wish, the Plan Agent will sell your full and fractional shares and send you the proceeds, less a
transaction fee of $5.00 and less per share fees of $0.05 per share. If a shareholder does not maintain at least one whole share of common stock in the
Plan account, the Plan Agent may terminate such shareholder’s participation in the Plan after written notice. Upon termination, shareholders will be
sent a check for the cash value of any fractional share in the Plan account, less any applicable fees and taxes.
Shareholders who hold at least one full share of the fund may join the Plan by notifying the Plan Agent by telephone, in writing or by visiting the Plan
Agent’s website at
www.computershare.com/investor
. If received in proper form by the Plan Agent before the record date of a dividend, the election will
be effective with respect to all dividends paid after such record date. If you wish to participate in the Plan and your shares are held in the name of a
brokerage firm, bank or other nominee, please contact your nominee to see if it will participate in the Plan for you. If you wish to participate in the Plan,
but your brokerage firm, bank or other nominee is unable to participate on your behalf, you will need to request that your shares be re-registered in your
own name, or you will not be able to participate. The Plan Agent will administer the Plan on the basis of the number of shares certified from time to time
by you as representing the total amount registered in your name and held for your account by your nominee.
Experience under the Plan may indicate that changes are desirable. Accordingly, the fund and the Plan Agent reserve the right to amend or terminate
the Plan. Participants generally will receive written notice at least 30 days before the effective date of any amendment. In the case of termination,
participants will receive written notice at least 30 days before the record date for the payment of any dividend or distribution by the fund.
All correspondence or additional information about the Plan should be directed to Computershare Trust Company, N.A. (Telephone: 800-852-0218
(within the U.S. and Canada), 201-680-6578 (International Telephone Inquiries), and 201-368-0328 (For the Hearing Impaired (TDD)).
Closed-End Fund Structure
Closed-end funds differ from open-end management investment companies (which generally are referred to as “mutual funds”) in that closed-end funds
generally list their shares for trading on a securities exchange and do not redeem their shares at the option of the shareholder. Mutual funds do not
trade on securities exchanges and issue securities redeemable at the option of the shareholder. The continuous outflows of assets in a mutual fund can
make it difficult to manage the fund’s investments. Closed-end funds generally are able to stay more fully invested in securities that are consistent with
their investment objectives and also have greater flexibility to make certain types of investments and to use certain investment strategies, such as
financial leverage and investments in illiquid securities. The fund’s Common Shares are designed primarily for long-term investors; you should not
purchase Common Shares if you intend to sell them shortly after purchase.
Common shares of closed-end funds frequently trade at prices lower than their NAV. Since inception, the market price of the Common Shares has
fluctuated and at times has traded below the fund’s NAV and at times has traded above the fund’s NAV. The fund cannot predict whether in the future the
35
Common Shares will trade at, above or below NAV. In addition to NAV, the market price of the fund’s Common Shares may be affected by such factors as
the fund’s dividend stability, dividend levels, which are in turn affected by expenses, and market supply and demand.
In recognition of the possibility that Common Shares may trade at a discount from their NAV, and that any such discount may not be in the best interest
of Common Shareholders, the Board, in consultation with the Advisor, from time to time may review possible actions to reduce any such discount. There
can be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result in Common Shares
trading at a price equal to or close to NAV per Common Share. In the event that the fund conducts an offering of new Common Shares and such offering
constitutes a “distribution” under Regulation M, the fund and certain of its affiliates may be subject to an applicable restricted period that could limit the
timing of any repurchases by the fund.
U.S. Federal Income Tax Matters
The following discussion of U.S. federal income tax matters is based on the advice of K&L Gates LLP. The fund has elected to be treated and to qualify
each year as a regulated investment company (a “RIC”) under the Code. Accordingly, the fund intends to satisfy certain requirements relating to sources
of its income and diversification of its total assets and to distribute substantially all of its net income and net short-term capital gain (after reduction by
net long-term capital loss and any available capital loss carryforwards) in accordance with the timing requirements imposed by the Code, so as to
maintain its RIC status and to avoid paying U.S. federal income or excise tax thereon. To the extent it qualifies for treatment as a RIC and satisfies the
above-mentioned distribution requirements, the fund will not be subject to U.S. federal income tax on income paid to its shareholders in the form of
dividends or capital gain distributions.
For U.S. federal income tax purposes, distributions paid out of the fund's current or accumulated earnings and profits will, except in the case of
distributions of qualified dividend income and capital gain dividends described below, be taxable as ordinary dividend income. Certain income
distributions paid by the fund (whether paid in cash or reinvested in additional fund shares) to individual taxpayers that are attributable to the fund's
qualified dividend income and capital gain are taxed at rates applicable to net long-term capital gains (maximum rates of 20% 15%, or 0% for
individuals depending on the amount of their taxable income for the year). This tax treatment applies only if certain holding period requirements and
other requirements are satisfied by the shareholder and the dividends are attributable to qualified dividend income received by the fund itself. For this
purpose, “qualified dividend income” means dividends received by the fund from United States corporations and “qualified foreign corporations,”
provided that the fund satisfies certain holding period and other requirements in respect of the stock of such corporations. An additional 3.8% Medicare
tax will also apply in the case of some individuals.
At least annually, the fund intends to distribute any net capital gain (which is the excess of net long-term capital gain over net short-term capital loss) or,
alternatively, to retain all or a portion of the year’s net capital gain and pay U.S. federal income tax on the retained gain. As provided under U.S. federal
tax law, if the fund retains net capital gain, Common Shareholders of record as of the end of the fund’s taxable year will include their attributable share of
the retained gain in their income for the year as long-term capital gain (regardless of holding period in Common Shares), and will be entitled to a tax
credit or refund for the tax paid on their behalf by the fund. Common Shareholders of record for the retained capital gain also will be entitled to increase
their tax basis in their Common Shares by an amount equal to the deemed distribution less the tax credit. Distributions of the fund’s net capital gain
(“capital gain distributions”), if any, are taxable to Common Shareholders as long-term capital gain, regardless of their holding period in Common
Shares. Distributions of the fund’s net realized short-term capital gain will be taxable as ordinary income.
If, for any calendar year, the fund’s total distributions exceed the fund’s current and accumulated earnings and profits, the excess will be treated as a
return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her Common Shares) and thereafter as
gain from the sale of Common Shares (assuming Common Shares are held as a capital asset). The amount treated as a return of capital reduces the
Common Shareholder’s adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss on
the subsequent sale or other disposition of his or her Common Shares. See below for a summary of the current maximum tax rates applicable to
long-term capital gain (including capital gain distributions).
For federal income tax purposes, the fund is generally permitted to carry forward a net capital loss incurred in any taxable year, for an unlimited period
to offset net capital gains, if any, during its taxable years following the year of the loss. Capital losses carried forward will retain their character as either
short-term or long-term capital losses. To the extent subsequent net capital gains are offset by such losses, they would not result in federal income tax
liability to the fund and would not be distributed as such to shareholders.
To qualify as a RIC for income tax purposes, the fund must derive at least 90% of its annual gross income from dividends, interest, payments with
respect to securities loans, gain from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited
to, gain from options, futures or forward contracts) derived with respect to its business of investing in stock, securities and currencies, and net income
derived from an interest in a qualified publicly traded partnership. A “qualified publicly traded partnership” is a publicly traded partnership that meets
certain requirements with respect to the nature of its income. To qualify as a RIC, the fund must also satisfy certain requirements with respect to the
diversification of its assets. The fund must have, at the close of each quarter of the taxable year, at least 50% of the value of its total assets represented
by cash, cash items, U.S. government securities, securities of other regulated investment companies, and other securities that, in respect of any one
issuer, do not represent more than 5% of the value of the assets of the fund nor more than 10% of the voting securities of that issuer. In addition, at
36
those times not more than 25% of the value of the fund’s assets can be invested in securities (other than U.S. government securities or the securities of
other regulated investment companies) of any one issuer, or of two or more issuers, which the fund controls and which are engaged in the same or
similar trades or businesses or related trades or businesses, or of one or more qualified publicly traded partnerships. If the fund fails to meet the annual
gross income test described above, the fund will nevertheless be considered to have satisfied the test if (i) (a) such failure is due to reasonable cause
and not due to willful neglect and (b) the fund reports the failure, and (ii) the fund pays an excise tax equal to the excess non-qualifying income. If the
fund fails to meet the asset diversification test described above with respect to any quarter, the fund will nevertheless be considered to have satisfied
the requirements for such quarter if the fund cures such failure within 6 months and either (i) such failure is de minimis or (ii) (a) such failure is due to
reasonable cause and not due to willful neglect and (b) the fund reports the failure and pays an excise tax.
As a RIC, the fund generally will not be subject to federal income tax on its investment company taxable income (as that term is defined in the Code, but
without regard to the deductions for dividend paid) and net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any,
that it distributes in each taxable year to its shareholders, provided that it distributes at least the sum of 90% of its investment company taxable income
and 90% of its net tax-exempt interest income for such taxable year. The fund intends to distribute to its shareholders, at least annually, substantially all
of its investment company taxable income, net tax-exempt income and net capital gain. In order to avoid incurring a nondeductible 4% federal excise tax
obligation, the Code requires that the fund distribute (or be deemed to have distributed) by December 31 of each calendar year an amount at least
equal to the sum of (i) 98% of its ordinary income for such year, (ii) 98.2% of its capital gain net income (which is the excess of its realized net long-term
capital gain over its realized net short-term capital loss), generally computed on the basis of the one-year period ending on October 31 of such year,
after reduction by any available capital loss carryforwards and (iii) 100% of any ordinary income and capital gain net income from the prior year (as
previously computed) that were not paid out during such year and on which the fund paid no U.S. federal income tax.
If the fund does not qualify as a RIC for any taxable year, the fund’s taxable income will be subject to corporate income taxes, and all distributions from
earnings and profits, including distributions of net capital gain (if any), will be taxable to the shareholder as ordinary income. Such distributions
generally would be eligible (i) to be treated as qualified dividend income in the case of individual and other non-corporate shareholders and (ii) for the
dividends received deduction (“DRD”) in the case of corporate shareholders. In addition, in order to requalify for taxation as a RIC, the fund may be
required to recognize unrealized gain, pay substantial taxes and interest, and make certain distributions.
Certain of the fund’s investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (i)
convert dividends that would otherwise constitute qualified dividend income into ordinary income, (ii) treat dividends that would otherwise be eligible
for the corporate DRD as ineligible for such treatment, (iii) disallow, suspend or otherwise limit the allowance of certain loss or deductions, (iv) convert
long-term capital gain into short-term capital gain or ordinary income, (v) convert an ordinary loss or deduction into a capital loss (the deductibility of
which is more limited), (vi) cause the fund to recognize income or gain without a corresponding receipt of cash, (vii) adversely affect when a purchase or
sale of stock or securities is deemed to occur, (viii) adversely alter the characterization of certain complex financial transactions, and (ix) produce
income that will not qualify as good income for purposes of the income requirement that applies to RICs. While it may not always be successful in doing
so, the fund will seek to avoid or minimize the adverse tax consequences of its investment practices.
The fund may recognize gain (but not loss) from a constructive sale of certain “appreciated financial positions” if the fund enters into a short sale,
offsetting notional principal contract, or forward contract transaction with respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment include interests (including options and forward contracts and short sales) in
stock and certain other instruments. Constructive sale treatment does not apply if the transaction is closed out not later than thirty days after the end of
the taxable year in which the transaction was initiated, and the underlying appreciated securities position is held unhedged for at least the next sixty
days after the hedging transaction is closed.
Gain or loss from a short sale of property generally is considered as capital gain or loss to the extent the property used to close the short sale
constitutes a capital asset in the fund’s hands. Except with respect to certain situations where the property used to close a short sale has a long-term
holding period on the date the short sale is entered into, gain on short sales generally are short-term capital gain. A loss on a short sale will be treated as
a long-term capital loss if, on the date of the short sale, “substantially identical property” has been held by the fund for more than one year. In addition,
entering into a short sale may result in suspension of the holding period of “substantially identical property” held by the fund.
Gain or loss on a short sale generally will not be realized until such time as the short sale is closed. However, as described above in the discussion of
constructive sales, if the fund holds a short sale position with respect to securities that have appreciated in value, and it then acquires property that is
the same as or substantially identical to the property sold short, the fund generally will recognize gain on the date it acquires such property as if the
short sale were closed on such date with such property. Similarly, if the fund holds an appreciated financial position with respect to securities and then
enters into a short sale with respect to the same or substantially identical property, the fund generally will recognize gain as if the appreciated financial
position were sold at its fair market value on the date it enters into the short sale. The subsequent holding period for any appreciated financial position
that is subject to these constructive sale rules will be determined as if such position were acquired on the date of the constructive sale.
The fund will inform Common Shareholders of the source and tax status of all distributions promptly after the close of each calendar year.
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Selling Common Shareholders generally will recognize gain or loss in an amount equal to the difference between the amount realized on the sale and the
Common Shareholder’s adjusted tax basis in the Common Shares sold. If Common Shares are held as a capital asset, the gain or loss will be a capital
gain or loss. The maximum tax rate applicable to net capital gain recognized by individuals and other non-corporate taxpayers is (i) the same as the
maximum ordinary income tax rate for gain recognized on the sale of capital assets held for one year or less (currently 37%), or (ii) for gain recognized
on the sale of capital assets held for more than one year (as well as any capital gain distributions), 20%, 15%, or 0% for individuals depending on the
amount of their taxable income for the year. An additional 3.8% Medicare tax will also apply in the case of some individuals.
Any loss on a disposition of Common Shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain
distributions received with respect to those Common Shares. For purposes of determining whether Common Shares have been held for six months or
less, the holding period is suspended for any periods during which the Common Shareholder’s risk of loss is diminished as a result of holding one or
more other positions in substantially similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of
Common Shares will be disallowed to the extent those Common Shares are replaced by other Common Shares within a period of 61 days beginning
30 days before and ending 30 days after the date of disposition of Common Shares (whether through the reinvestment of distributions or otherwise). In
that event, the basis of the replacement Common Shares will be adjusted to reflect the disallowed loss.
An investor should be aware that, if Common Shares are purchased shortly before the record date for any taxable distribution (including a capital gain
distribution), the purchase price likely will reflect the value of the distribution and the investor then would receive a taxable distribution that is likely to
reduce the trading value of such Common Shares, in effect resulting in a taxable return of some of the purchase price.
Taxable distributions to certain individuals and certain other non-corporate Common Shareholders, including those who have not provided their correct
taxpayer identification number and other required certifications, may be subject to “backup” U.S. federal income tax withholding at the fourth lowest
rate of tax applicable to a single individual (24%). Backup withholding is not an additional tax. Any amounts withheld may be refunded or credited
against such shareholder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the Internal Revenue Service.
An investor also should be aware that the benefits of the reduced tax rate applicable to long-term capital gain and qualified dividend income may be
impacted by the application of the alternative minimum tax to individual shareholders.
The fund’s investments in non-U.S. securities may be subject to foreign withholding taxes on dividends, interest, or capital gain, which will decrease the
fund’s yield. Foreign withholding taxes may be reduced under income tax treaties between the U.S. and certain foreign jurisdictions.
Depending on the number of non-U.S. shareholders in the fund, however, such reduced foreign withholding tax rates may not be available for
investments in certain jurisdictions.
The foregoing briefly summarizes some of the important U.S. federal income tax consequences to Common Shareholders of investing in Common
Shares, reflects the U.S. federal tax law as of the date of this Prospectus, and does not address special tax rules applicable to certain types of investors,
such as corporate and non-U.S. investors. A more complete discussion of the tax rules applicable to the fund and the Common Shareholders can be
found in the SAI that is incorporated by reference into this Prospectus. Unless otherwise noted, this discussion assumes that an investor is a
U.S. person and holds Common Shares as a capital asset. This discussion is based upon current provisions of the Code, the regulations promulgated
thereunder, and judicial and administrative ruling authorities, all of which are subject to change or differing interpretations by the courts or the IRS
retroactively or prospectively. Investors should consult their tax advisors regarding other U.S. federal, state or local tax considerations that may be
applicable in their particular circumstances, as well as any proposed tax law changes.
Plan of Distribution
The fund may sell the Common Shares being offered under this Prospectus in any one or more of the following ways: (i) directly to purchasers; (ii)
through agents; (iii) to or through underwriters; or (iv) through dealers. The Prospectus Supplement relating to the offering will identify any agents,
underwriters or dealers involved in the offer or sale of Common Shares, and will set forth any applicable offering price, sales load, fee, commission or
discount arrangement between the fund and its agents or underwriters, or among its underwriters, or the basis upon which such amount may be
calculated, net proceeds and use of proceeds, and the terms of any sale.
The fund may distribute Common Shares from time to time in one or more transactions at: (i) a fixed price or prices, which may be changed; (ii) market
prices prevailing at the time of sale; (iii) prices related to prevailing market prices; or (iv) negotiated prices; provided, however, that in each case the
offering price per Common Share (less any underwriting commission or discount) must equal or exceed the NAV per Common Share.
The fund from time to time may offer its Common Shares through or to certain broker-dealers, including [________], that have entered into selected
dealer agreements relating to at-the-market offerings.
The fund may directly solicit offers to purchase Common Shares, or the fund may designate agents to solicit such offers. The fund will, in a Prospectus
Supplement relating to such offering, name any agent that could be viewed as an underwriter under the Securities Act of 1933, as amended (the
“Securities Act”), and describe any commissions the fund must pay. Any such agent will be acting on a best efforts basis for the period of its
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appointment or, if indicated in the applicable Prospectus Supplement or other offering materials, on a firm commitment basis. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform services for the fund in the ordinary course of business.
If any underwriters or agents are used in the sale of Common Shares in respect of which this Prospectus is delivered, the fund will enter into an
underwriting agreement or other agreement with them at the time of sale to them, and the fund will set forth in the Prospectus Supplement relating to
such offering their names and the terms of the fund’s agreement with them.
If a dealer is utilized in the sale of Common Shares in respect of which this Prospectus is delivered, the fund will sell such Common Shares to the dealer,
as principal. The dealer may then resell such Common Shares to the public at varying prices to be determined by such dealer at the time of resale.
The fund may engage in at-the-market offerings to or through a market maker or into an existing trading market, on an exchange or otherwise, in
accordance with Rule 415(a)(4) under the Securities Act. An at-the-market offering may be through an underwriter or underwriters acting as principal
or agent for the fund.
Agents, underwriters and dealers may be entitled under agreements which they may enter into with the fund to indemnification by the fund against
certain civil liabilities, including liabilities under the Securities Act, and may be customers of, engage in transactions with or perform services for the
fund in the ordinary course of business.
In order to facilitate the offering of Common Shares, any underwriters may engage in transactions that stabilize, maintain or otherwise affect the price
of Common Shares or any other Common Shares the prices of which may be used to determine payments on the Common Shares. Specifically, any
underwriters may over-allot in connection with the offering, creating a short position for their own accounts. In addition, to cover over-allotments or to
stabilize the price of Common Shares or of any such other Common Shares, the underwriters may bid for, and purchase, Common Shares or any such
other Common Shares in the open market. Finally, in any offering of Common Shares through a syndicate of underwriters, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for distributing Common Shares in the offering if the syndicate repurchases
previously distributed Common Shares in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of Common Shares above independent market levels. Any such underwriters are not required to
engage in these activities and may end any of these activities at any time.
The fund may enter into derivative transactions with third parties, or sell Common Shares not covered by this Prospectus to third parties in privately
negotiated transactions. If the applicable Prospectus Supplement indicates, in connection with those derivatives, the third parties may sell Common
Shares covered by this Prospectus and the applicable Prospectus Supplement or other offering materials, including in short sale transactions. If so, the
third parties may use Common Shares pledged by the fund or borrowed from the fund or others to settle those sales or to close out any related open
borrowings of securities, and may use Common Shares received from the fund in settlement of those derivatives to close out any related open
borrowings of securities. The third parties in such sale transactions will be underwriters and, if not identified in this Prospectus, will be identified in the
applicable Prospectus Supplement or other offering materials (or a post-effective amendment).
The fund or one of the fund’s affiliates may loan or pledge Common Shares to a financial institution or other third party that in turn may sell Common
Shares using this Prospectus. Such financial institution or third party may transfer its short position to investors in Common Shares or in connection
with a simultaneous offering of other Common Shares offered by this Prospectus or otherwise.
The maximum amount of compensation to be received by any member of the Financial Industry Regulatory Authority, Inc. will not exceed 8% of the
initial gross proceeds from the sale of any security being sold with respect to each particular offering of Common Shares made under a single
Prospectus Supplement.
Any underwriter, agent or dealer utilized in the initial offering of Common Shares will not confirm sales to accounts over which it exercises discretionary
authority without the prior specific written approval of its customer.
Description of Capital Structure
The fund is a business trust established under the laws of The Commonwealth of Massachusetts by the Declaration of Trust. The Declaration of Trust
provides that the Board may authorize separate classes of shares of beneficial interest. The Board has authorized an unlimited number of Common
Shares. The fund holds annual meetings of Common Shareholders in compliance with the requirements of the NYSE.
Common Shares
The Declaration of Trust permits the fund to issue an unlimited number of full and fractional Common Shares of beneficial interest, with or without par
value. Each Common Share represents an equal proportionate interest in the assets of the fund with each other Common Share in the fund. Common
Shareholders will be entitled to the payment of distributions when, and if declared by the fund. The 1940 Act or the terms of any future borrowings or
issuance of preferred shares may limit the payment of distributions to the Common Shareholders. Each whole Common Share is entitled to one vote and
each fractional Common Share is entitled to a proportionate fractional vote as to matters on which it is entitled to vote pursuant to the terms of the
Declaration of Trust. Upon termination of the fund, after paying or adequately providing for the payment of all liabilities of the fund and the liquidation
preference with respect to any outstanding preferred shares, and upon receipt of such releases, indemnities and refunding agreements as the Trustees
39
deem necessary , the Trustees may distribute the remaining assets of the fund among the Common Shareholders. The Declaration of Trust provides that
Common Shareholders are not liable for any liabilities of the fund, and indemnifies shareholders against any such liability. Although shareholders of a
business trust established under Massachusetts law, in certain limited circumstances, may be held personally liable for the obligations of the business
trust as though they were general partners, the provisions of the Declaration of Trust described in the foregoing sentence make the likelihood of such
personal liability remote. The fund will not issue Common Share certificates.
The fund has no current intention to issue preferred shares. However, if at some future time there are any preferred shares outstanding, subject to
certain exceptions, the fund might not be permitted to declare any cash distribution on its Common Shares, unless at the time of such declaration, (i) all
accrued distributions on preferred shares and any accrued interest on borrowings, if any, have been paid and (ii) the value of the fund’s total assets
(determined after deducting the amount of such distribution), less all liabilities and indebtedness of the fund not represented by senior securities, is at
least 300% of the aggregate amount of any securities representing indebtedness and at least 200% of the aggregate amount of any securities
representing indebtedness plus the aggregate liquidation value of the outstanding preferred shares. In addition to the requirements of the 1940 Act,
the fund may be required to comply with other asset coverage requirements under a liquidity facility or as a condition of the fund obtaining a rating of
preferred shares from a nationally recognized statistical rating organization (a “Rating Agency”). These requirements may include an asset coverage
test more stringent than under the 1940 Act. This limitation on the fund’s ability to make distributions on its Common Shares could in certain
circumstances impair the ability of the fund to maintain its qualification for taxation as a RIC for U.S. federal income tax purposes. If the fund were in the
future to issue preferred shares, it would intend, however, to the extent possible, to purchase or redeem preferred shares from time to time to maintain
compliance with such asset coverage requirements and may pay special distributions to the holders of the preferred shares in certain circumstances in
connection with any potential impairment of the fund’s status as a RIC. Depending on the timing of any such redemption or repayment, the fund may be
required to pay a premium in addition to the liquidation preference of the preferred shares to the holders thereof.
The fund has no present intention of offering additional Common Shares, except as described herein. Other offerings of its Common Shares, if made,
will require approval of the Board. Any additional offering will not be sold at a price per Common Share below the then current NAV (exclusive of
underwriting discounts and commissions) except in connection with an offering to existing Common Shareholders or with the consent of a majority of
the fund’s outstanding Common Shares. Common Shares have no preemptive rights.
Liquidity Facility
The fund has entered into the LA with State Street Bank and Trust Company (“SSB”) that allows it to borrow or otherwise access funds through a line of
credit, securities lending and reverse repurchase agreements. The fund pledges its assets as collateral to secure obligations under the LA. The fund
retains the risks and rewards of the ownership of assets pledged to secure obligations under the LA and makes these assets available for securities
lending and reverse repurchase transactions with SSB acting as the fund's authorized agent for these transactions. All transactions initiated through
SSB are required to be secured with cash collateral received from the securities borrower or cash is received from the reverse repurchase agreement
counterparties. Securities lending transactions will be secured with cash collateral in amounts at least equal to 100% of the market value of the
securities utilized in these transactions. Cash received by SSB from securities lending or reverse repurchase transactions is credited against the
amounts borrowed under the line of credit.
Upon return of securities by the borrower or reverse repurchase counterparty, SSB will return the cash collateral to the borrower or proceeds from the
reverse repurchase transaction, as applicable, which will eliminate the credit against the line of credit and will cause the drawdowns under the line of
credit to increase by the amounts returned. Income earned on the loaned securities is retained by SSB, and any interest due on the reverse repurchase
agreements is paid by SSB.
SSB has indemnified the fund for certain losses that may arise if the borrower or a reverse repurchase counterparty fails to return securities when due.
With respect to securities lending transactions, upon a default of the securities borrower, SSB uses the collateral received from the borrower to
purchase replacement securities of the same issue, type, class and series. If the value of the collateral is less than the purchase cost of replacement
securities, SSB is responsible for satisfying the shortfall, but only to the extent that the shortfall is not due to any of the fund's losses on the reinvested
cash collateral. Although the risk of the loss of the securities is mitigated by receiving collateral from the borrower or proceeds from the reverse
repurchase counterparty and through SSB indemnification, the fund could experience a delay in recovering securities or could experience a lower than
expected return if the borrower or reverse repurchase counterparty fails to return the securities on a timely basis.
Under normal circumstances, interest charged is at the rate of one month OBFR plus 0.700%, and is payable monthly on the aggregate balance of the
drawdowns outstanding under the LA. As of October 31, 2024, the fund had an average daily loan balance of $373,700,000 at an average interest rate
of 6.06%.
After the six month anniversary of the effective date of the agreement, the fund may terminate the LA with 60 days' notice. If certain asset coverage and
collateral requirements, or other covenants are not met, the LA could be deemed in default and result in termination. The fund’s asset coverage ratio is a
minimum of 220% with a two-day cure period. Absent a default or facility termination event, SSB is required to provide the fund with 360 days' notice
prior to terminating the LA.
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By leveraging its investment portfolio, the fund creates an opportunity for increased net income or capital appreciation. However, the use of leverage
also involves risks, which can be significant. See “Leverage Risk.“
Repurchase of Shares and Other Discount Measures
In recognition of the possibility that Common Shares might trade at a discount to NAV and that any such discount may not be in the interest of the fund’s
shareholders, the Board, in consultation with the Advisor, from time to time may review possible actions to help reduce any such discount. The Board, in
consultation with the Advisor, may review the possibility of open market repurchases and/or tender offers for the Common Shares and consider such
factors as the market price of the Common Shares, the NAV of the Common Shares, the liquidity of the assets of the fund, effect on the fund’s expenses,
whether such transactions would impair the fund’s status as a RIC or result in a failure to comply with applicable asset coverage requirements, general
economic conditions and such other events or conditions, which may have a material effect on the fund’s ability to consummate such transactions.
There are no assurances that the Board will, in fact, decide to undertake either of these actions or, if undertaken, that such actions will result in the
fund’s Common Shares trading at a price which is equal to or approximates their NAV.
In the event that the fund conducts an offering of new Common Shares and such offering constitutes a “distribution” under Regulation M, the fund and
certain of its affiliates may be subject to an applicable restricted period that could limit the timing of any repurchases by the fund.
Preferred Shares
The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest with preference rights, including preferred
shares (“Preferred Shares”), having no par value per share or such other amount as the Board may establish, in one or more series, with rights as
determined by the Board, by action of the Board without the approval of the Common Shareholders. The Board has no current intention to issue
Preferred Shares.
Under the requirements of the 1940 Act, the fund must, immediately after the issuance of any Preferred Shares, have an “asset coverage” of at least
200%. Asset coverage means the ratio which the value of the total assets of the fund, less all liability and indebtedness not represented by senior
securities (as defined in the 1940 Act), bears to the aggregate amount of senior securities representing indebtedness of the fund, if any, plus the
aggregate liquidation preference of the Preferred Shares. If the fund seeks a rating of the Preferred Shares, asset coverage requirements, in addition to
those set forth in the 1940 Act, may be imposed. The liquidation value of the Preferred Shares is expected to equal their aggregate original purchase
price plus redemption premium, if any, together with any accrued and unpaid dividends thereon (on a cumulative basis), whether or not earned or
declared. The terms of the Preferred Shares, including their dividend rate, voting rights, liquidation preference and redemption provisions, will be
determined by the Board (subject to applicable law and the Declaration of Trust) if and when it authorizes the Preferred Shares. The fund may issue
Preferred Shares that provide for the periodic redetermination of the dividend rate at relatively short intervals through an auction or remarketing
procedure, although the terms of the Preferred Shares also may enable the fund to lengthen such intervals. At times, the dividend rate as redetermined
on the fund’s Preferred Shares may approach or exceed the fund’s return after expenses on the investment of proceeds from the Preferred Shares and
the fund’s leveraged capital structure would result in a lower rate of return to Common Shareholders than if the fund were not so structured.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the fund, the terms of any Preferred Shares may entitle the holders of
Preferred Shares to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus redemption premium, if
any, together with accrued and unpaid dividends, whether or not earned or declared and on a cumulative basis) before any distribution of assets is made
to Common Shareholders. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of Preferred Shares
would not be entitled to any further participation in any distribution of assets by the fund.
Under the 1940 Act, if at any time dividends on the Preferred Shares are unpaid in an amount equal to two full years’ dividends thereon, the holders of
all outstanding Preferred Shares, voting as a class, will be allowed to elect a majority of the fund’s Trustees until all dividends in default have been paid
or declared and set apart for payment. In addition, if required by the Rating Agency rating the Preferred Shares or if the Board determines it to be in the
best interests of the Common Shareholders, issuance of the Preferred Shares may result in more restrictive provisions than required by the 1940 Act
being imposed. In this regard, holders of the Preferred Shares may be entitled to elect a majority of the Board in other circumstances, for example, if
one payment on the Preferred Shares is in arrears.
If the fund were to issue Preferred Shares, it is expected that the fund would seek a credit rating for the Preferred Shares from a Rating Agency. In that
case, as long as Preferred Shares are outstanding, the composition of its portfolio would reflect guidelines established by such Rating Agency.
Although, as of the date hereof, no such Rating Agency has established guidelines relating to any such Preferred Shares, based on previous guidelines
established by such Rating Agencies for the securities of other issuers, the fund anticipates that the guidelines with respect to the Preferred Shares
would establish a set of tests for portfolio composition and asset coverage that supplement (and in some cases are more restrictive than) the applicable
requirements under the 1940 Act. Although, at this time, no assurance can be given as to the nature or extent of the guidelines, which may be imposed
in connection with obtaining a rating of the Preferred Shares, the fund currently anticipates that such guidelines will include asset coverage
requirements, which are more restrictive than those under the 1940 Act, restrictions on certain portfolio investments and investment practices,
requirements that the fund maintain a portion of its total assets in short-term, high-quality, fixed-income securities and certain mandatory redemption
41
requirements relating to the Preferred Shares. No assurance can be given that the guidelines actually imposed with respect to the Preferred Shares by
such Rating Agency will be more or less restrictive than as described in this Prospectus.
Certain Provisions in the Declaration of Trust and By-Laws
Under Massachusetts law, shareholders, in certain circumstances, could be held personally liable for the obligations of the fund. However, the
Declaration of Trust contains an express disclaimer of shareholder liability in connection with fund property or the acts, obligations or affairs of the fund
and provides for indemnification out of the assets of the fund for all loss and expense of any shareholder held personally liable for the obligations of the
fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund would be
unable to meet its obligations. The fund believes that the likelihood of such circumstances is remote.
The Declaration of Trust provides that the Trustees may amend the Declaration of Trust without Common Shareholder approval to change the name of
the fund or to supply any omission, clear any ambiguity or correct or supplement a defective or inconsistent provision. The Declaration of Trust does not
permit amendments that impair the exemption from personal liability of the shareholders, Trustees, officers, employees and agents of the fund or
permit assessments upon shareholders.
The By-laws provide that the Trustees have the power, to the exclusion of shareholders, to adopt, alter, amend or repeal any of the By-laws, except for
any By-law that requires a vote of the shareholders to be amended, adopted or repealed by the terms of the Declaration of Trust, By-laws or applicable
law.
Anti-Takeover Provisions
The Declaration of Trust and By-laws include provisions that could have the effect of limiting the ability of other entities or persons to acquire control of
the fund or to change the composition of its Board and could have the effect of depriving Common Shareholders of an opportunity to sell their Common
Shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the fund. These provisions may have
the effect of discouraging attempts to acquire control of the fund, which attempts could have the effect of increasing the expenses of the fund and
interfering with the normal operation of the fund. They provide, however, the advantage of potentially requiring persons seeking control of the fund to
negotiate with its management regarding the price to be paid and facilitating the continuity of the fund’s investment objectives and policies. The Board
has considered and approved the following anti-takeover provisions. The following is only a summary and is qualified in its entirety by reference to the
Declaration of Trust and By-laws on file with the SEC.
The number of Trustees is currently twelve, but by action of a majority of the Trustees, the Board may from time to time be increased or decreased. If the
fund issues Preferred Shares, the fund may establish a separate class for the Trustees elected by the holders of the Preferred Shares. Subject to
applicable provisions of the 1940 Act, vacancies on the Board may be filled by a majority action of the remaining Trustees. Such provisions may work to
delay a change in the majority of the Board.
Generally, the shareholders have power to vote only: (a) for the election of Trustees; (b) with respect to any investment advisory or management
contract; (c) with respect to a termination of the fund; (d) with respect to an amendment of the Declaration of Trust; (e) with respect to a merger,
consolidation or sale of assets of the fund; (f) with respect to incorporation of the fund; (g) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class
action on behalf of the fund or the shareholders; and (h) with respect to such additional matters relating to the fund as may be required by the
Declaration of Trust or the By-Laws or by reason of the registration of the fund or the shares with the SEC or any state or by any applicable law or any
regulation or order of the SEC or any state or as the Trustees may consider necessary or desirable. On any matter required or permitted to be voted on
by the shareholders, all shares then entitled to vote shall be voted in the aggregate as a single class without regard to class, except (i) when required by
the Declaration of Trust, the By-Laws, the 1940 Act, or when the Trustees have determined that any matter to be submitted to a vote of the shareholders
affects the rights or interests of the shareholders of one or more classes, if any, materially differently, shares shall be voted by each such affected class
individually; and (ii) when the Trustees shall have determined that the matter affects only the interests of one or more classes, then only the
shareholders of such affected class shall be entitled to vote thereon.
Additionally, the fund’s By-laws contain certain provisions that may tend to make a change of control of the fund more difficult. For example, the By-laws
(i) require a shareholder to give written advance notice and other information to the fund of the shareholder’s nominees for Trustees and proposals for
other business to be considered at annual shareholders’ meetings, or in the event a shareholder proposes to seek a shareholder action by written
consent or requests a special meeting of shareholders; (ii) require any such notice by a shareholder to be accompanied by certain information as
provided in the By-laws; (iii) provide that Trustees may be nominated by shareholders only at an annual meeting of the fund or special meeting in lieu of
an annual meeting; and (iv) reserve to the Trustees the exclusive power to alter, amend or repeal any provision of the By-laws or to make new By-laws,
except where the Declaration of Trust, By-laws or applicable law would also require a shareholder vote to effect such alteration, amendment or repeal.
The foregoing description of the By-laws is qualified in its entirety by the full text of the Amended and Restated By-laws effective as of September 27,
2013, last amended March 10, 2016.
42
Potential Conversion to Open-End Fund
Conversion of the fund to an open-end management investment company would require an amendment to the fund’s Declaration of Trust. Such
amendment would require approval by each of the following: (i) a majority of the Trustees then in office, (ii) a majority of the outstanding voting
securities, and (iii) by such vote or votes of the holders of any class or classes or series of shares as may be required by the 1940 Act. In the event of
conversion, the Common Shares would cease to be listed on the NYSE or other national securities exchange or market system. The Board believes,
however, that the closed-end structure is desirable, given the fund’s investment objective and policies. Investors should assume, therefore, that it is
unlikely that the Board would vote to convert the fund to an open-end management investment company. Shareholders of an open-end management
investment company may require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the 1940
Act) at their NAV, less such redemption charge, if any, as might be in effect at the time of a redemption. The fund would expect to pay all such
redemption requests in cash, but intends to reserve the right to pay redemption requests in a combination of cash or securities. If such partial payment
in securities were made, investors may incur brokerage costs in converting such securities to cash. If the fund were converted to an open-end fund, it is
likely that new Common Shares would be sold at NAV plus a sales load.
Reports to Shareholders
The fund sends to its shareholders unaudited semi-annual and audited annual reports, including a list of investments held.
Independent Registered Public Accounting Firm
[TBU], who has offices at [TBU], is the independent registered public accounting firm for the fund and audits the fund’s
financial statements
.
Legal and Regulatory Matters
There are no legal proceedings to which the fund, the Advisor, or any of its affiliates is a party that are likely to have a material adverse effect on the fund,
or the ability of the Advisor to perform its contract with the fund.
Incorporation by Reference
As noted above, this Prospectus is part of a registration statement filed with the SEC. Pursuant to General Instruction A.2 of Form N-2, the fund is
permitted to “incorporate by reference” the information filed with the SEC, which means that the fund can disclose important information to you by
referring you to those documents. The information incorporated by reference is considered to be part of this Prospectus, and later information that the
fund files with the SEC will automatically update and supersede this information.
The documents listed below, and any reports and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the 1940 Act and
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), prior to the termination of the offering will
be incorporated by reference into this Prospectus and deemed to be part of this Prospectus from the date of the filing of such reports and documents:
●
The fund’s Statement of Additional Information, dated [April 11, 2025], filed with this Prospectus;
●
The fund’s
Annual Report
on Form N-CSR, filed on December 26, 2024;
●
The fund’s description of Common Shares on Form 8-A, filed on September 26, 1989.
You may obtain copies of any information incorporated by reference into this Prospectus, at no charge, by calling 800-225-6020 (toll-free), from the
fund’s website https://www.jhinvestments.com/investments/closed-end-fund/us-equity-funds/premium-dividend-fund-ce-pdt. The fund’s periodic
reports filed pursuant to Section 30(b)(2) of the 1940 Act and Sections 13 and 15(d) of the Exchange Act, as well as this Prospectus and the Statement
of Additional Information, are available on the fund’s website https://www.jhinvestments.com/investments/closed-end-fund/us-equity-funds/premium-dividend-fund-ce-pdt.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC, and you also may obtain a copy of any information regarding the fund filed with the SEC from the SEC’s
website (sec.gov).
Additional Information
The fund has entered into contractual arrangements with various parties that provide services to the fund, which may include, among others, the
Advisor, subadvisor, Custodian, and transfer agent, as described above and in the SAI. Fund shareholders are not parties to, or intended or “third-party”
beneficiaries of, any of these contractual arrangements. These contractual arrangements are not intended to, nor do they, create in any individual
shareholder or group of shareholders any right, either directly or on behalf of the fund, to either: (a) enforce such contracts against the service
providers; or (b) seek any remedy under such contracts against the service providers.
This Prospectus provides information concerning the fund that you should consider in determining whether to purchase shares of the fund. Each of this
prospectus, the SAI, or any contract that is an exhibit to the fund’s registration statement, is not intended to, nor does it, give rise to an agreement or
43
contract between the fund and any investor. Each such document also does not give rise to any contract or create rights in any individual shareholder,
group of shareholders, or other person. The foregoing disclosure should not be read to suggest any waiver of any rights conferred by federal or state
securities laws.
This Prospectus and the SAI do not contain all of the information set forth in the Registration Statement that the fund has filed with the SEC (file No.
811-05908; 333-). The complete Registration Statement may be obtained from the SEC at sec.gov. See the cover page of this Prospectus for
information about how to obtain a paper copy of the Registration Statement or SAI without charge.
The Fund’s Privacy Policy
The fund is committed to maintaining the privacy of its shareholders and to safeguarding their non-public personal information. The following
information is provided to help you understand what personal information the fund collects, how the fund protects that information and why, in certain
cases, the fund may share information with select other parties.
Generally, the fund does not receive any non-public personal information relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the fund. The fund does not disclose any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). The fund may share
information with unaffiliated third parties that perform various required services, such as transfer agents, custodians and broker/dealers.
The fund restricts access to non-public personal information about its shareholders to employees of the fund’s investment advisor and its affiliates with
a legitimate business need for the information. The fund maintains physical, electronic and procedural safeguards designed to protect the non-public
personal information of its shareholders.
44
 
2,000,000 Shares
John Hancock Premium Dividend Fund
Common Shares
PROSPECTUS
April [11], 2025
P2PN 4/[11]/25