Dividends from net investment income, if any, are declared and paid either quarterly or monthly, depending on the Fund. For Funds on a quarterly dividend payment cycle, the dividend ex-date is generally the third Friday of each March, June, September and December, payable the last business day of the month. For Funds on a monthly dividend payment cycle, the dividend ex-date is generally the 15th of each month, payable the last business day of the month.
The fund distributes its net realized capital gains, if any, to shareholders annually. Prior to paying a distribution of net investment income, the fund has the ability to invest cash generated from investment income into additional securities or money market instruments.
Distributions in cash may be reinvested automatically in additional whole shares of the fund only if the broker through whom you purchased shares makes such option available. Shareholders of the fund may contact their broker to determine the availability and costs of the service and the details of participation. Brokers may require shareholders to adhere to specific procedures and timetables. If this service is available and used, dividend distributions of both income and realized gains will be automatically reinvested in additional whole shares of the fund purchased in the secondary market.Taxes on Distributions
In general, your distributions are subject to federal income tax when they are paid, whether you take them in cash or reinvest them in the Fund. Dividends paid out of the Fund’s income and net short-term gains, if any, are taxable as ordinary income. Distributions of net long-term capital gains, if any, in excess of net short-term capital losses are taxable as long-term capital gains, regardless of how long you have held the Shares. Dividends from net investment income, if any, are declared and paid quarterly. The Fund may also pay a special distribution at the end of the calendar year to comply with federal tax requirements.
Under the provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “2003 Tax Act”), long-term capital gains tax rates have generally been reduced for individuals to a maximum of 15% for taxable years beginning before January 1, 2009. In addition, some ordinary dividends declared and paid by the Fund to individual shareholders may qualify for taxation at the lower reduced tax rates applicable to long-term capital gains, provided that holding period and other requirements are met by the Fund and the shareholder.
Distributions in excess of the Fund’s current and accumulated earnings and profits are treated as a tax-free return of capital to the extent of your basis in the Shares, and as capital gain thereafter. A distribution will reduce the Fund’s net asset value per Share and may be taxable to you as ordinary income or capital gain even though, from an investment standpoint, the distribution may constitute a return of capital.
By law, the Fund must withhold a percentage of your distributions and proceeds if you have not provided a taxpayer identification number or social security number. The backup withholding rate is currently 28%.
Senior loans (also called leveraged loans, syndicated loans, bank loans or floating rate loans) are privately arranged debt instruments that provide capital to a company (usually with a below-investment-grade rating) and are issued by a bank or financial institution and syndicated by a group of banks and institutional investors.
Senior loans are typically issued in conjunction with leveraged buyouts, mergers or acquisitions. A company's payment of interest and repayment of principal on its loan is usually contractually senior to any other form of debt or equity.
Within a company's capital structure, senior loans are typically:
- Senior to the claims of other creditors.
- Protected by performance and leverage based covenants.
- Secured by collateral, such as property, inventory, equipment and intangibles.
Senior loans offer the potential to diversify a fixed-income portfolio through both their distinct structure and their historically low correlation to other fixed-income investments.
Senior Loans: Relationship to Other Segments of the Fixed-Income Market
(S&P/LSTA Leveraged Loan Index)
|10 Years Ended March 31, 2015||Correlation to||Beta vs.|
|Barclays U.S. Aggregate||0.02||0.05|
|Barclays U.S. Government: Intermediate||-0.42||-1.25|
|Barclays Capital U.S. Municipal Bond||0.30||0.56|
|Barclays U.S. Treasury: U.S. TIPS||0.24||0.30|
|Barclays U.S. Corporate||0.41||0.56|
|Consumer Price Index||0.19||0.01|
|S&P 500 Index||0.61||0.34|
Source: Bloomberg L.P., as of March 31, 2015. As of the Fund's inception, the index had approximately 28 months of live history. The S&P/LSTA Leveraged Loan Index had more historical data and was used in order to provide more meaningful longer term comparisons.