SEC Company Response from PROSPECT STREET HIGH INCOME PORTFOLIO INC (CIK 0000832904) — Apr 7, 2005
PROSPECT STREET HIGH INCOME PORTFOLIO INC (CIK 0000832904)
Date: April 7, 2005 · CIK: 0000832904 · Accession: 0000899681-05-000294
AI Filing Summary & Sentiment
File numbers found in text: 811-5557
Letter
PROSPECTUS
[LOGO]
2,700,000 SHARES OF COMMON STOCK
PROSPECT STREET(R) HIGH INCOME PORTFOLIO INC.
NEW YORK STOCK EXCHANGE SYMBOL: PHY
Prospect Street(R) High Income Portfolio Inc. (the "Fund") is a diversified, closed-end management investment company. The Fund's investment objective is to provide high current income, while seeking to preserve stockholders' capital, through investment in a professionally managed, diversified portfolio of high yield, high risk securities (commonly referred to as "junk" bonds). The Fund's investment adviser is Highland Capital Management, L.P.
THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS AND SPECIAL CONSIDERATIONS, INCLUDING RISKS ASSOCIATED WITH THE FUND'S USE OF LEVERAGE. AN INVESTMENT IN THE FUND IS NOT APPROPRIATE FOR ALL INVESTORS. SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS" BEGINNING ON PAGE 23 OF THIS PROSPECTUS.
This Prospectus applies to 2,700,000 shares of the Fund's Common Stock which may be issued and sold from time to time through its designated agents. The Common Stock will be sold at-the-market through trading transactions on the New York Stock Exchange (the "NYSE"), subject to a minimum price to be established each day by the Fund. The minimum price on any day will not be less than the current net asset value per share of Common Stock plus any sales commission to be paid for the purchase of such shares. The Fund has engaged B. Riley & Co., Inc. (the "Distributor") to act as Distributor of the Common Stock pursuant to a distribution agreement. The Fund and the Distributor each have the right to terminate the distribution agreement in its discretion at any time.
The Distributor, as agent, generally will charge a fixed commission rate of $0.05 per share of Common Stock sold pursuant to this Prospectus and will receive additional compensation from the Fund in the time and manner described under "Plan of Distribution." Assuming that all shares of the Common Stock are sold, the Fund will pay additional compensation at a rate of $0.04 per share to the Distributor and will incur offering expenses of approximately $0.08 per share. As of March 24, 2005, the last reported sales price of a share of the Fund's Common Stock on the NYSE was $3.30. At a price of $3.30 (and assuming that all shares of the Common Stock are sold), the Fund's effective proceeds would be the equivalent of $3.13 per share after deduction of the $0.05 per share commission and the Fund's payment of the additional $0.04 per share to the Distributor, and assuming that the Fund incurs offering expenses that are estimated to be $0.08 per share. The Fund's stockholders directly and indirectly bear the expense of the Fund's commission and additional compensation payments to the Distributor, as such payments become due, as well as the Fund's offering expenses, as described in this paragraph.
This Prospectus sets forth concisely information you should know before investing, including information about risks. You should read this Prospectus before you invest in the Fund and keep it for future reference. The Fund's Statement of Additional Information ("SAI"), dated April 12, 2005, contains additional information about the Fund and is incorporated by reference into (which means it is considered to be a part of) this Prospectus. You may obtain a free copy of the SAI by calling 877-532-2834 or by writing to the Fund at 13455 Noel Road, Suite 1300, Dallas, Texas 75240. A table of contents to the SAI is located at page 47 of this Prospectus. The SAI is available along with other Fund-related materials at the Securities and Exchange Commission's internet web site (http://www.sec.gov). The Fund's file number under the Investment Company Act of 1940, as amended, is 811-5557.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
B. RILEY & Co., Inc.
The date of this Prospectus is April 12, 2005
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary.................................................... 1 Fund Expenses......................................................... 9 Financial Highlights.................................................. 11 The Fund.............................................................. 15 Use of Proceeds....................................................... 15 Portfolio Composition................................................. 15 Trading and Net Asset Value Information............................... 16 Investment Objective and Policies..................................... 17 Risk Factors and Special Considerations............................... 23 Management of the Fund................................................ 32 Federal Taxation...................................................... 34 Description of Capital Structure...................................... 37 Plan of Distribution.................................................. 43 Custodian, Transfer Agent, Dividend Paying Agent and Registrar........ 44 Legal Opinions........................................................ 45 Independent Registered Public Accounting Firm......................... 45 Further Information................................................... 46 Table of Contents to the Statement of Additional Information.......... 47
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION INCLUDED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"). TO UNDERSTAND THE OFFERING OF THE COMMON STOCK, YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS.
The Fund......................... Prospect Street(R) High Income Portfolio Inc. (the "Fund") is a diversified, closed-end management investment company. The Fund was incorporated in Maryland on May 13, 1988 and commenced investment operations on December 5, 1988. The Fund's principal office is located at 13455 Noel Road, Suite 1300, Dallas, Texas 75240, and its telephone number is 1-877-532-2834.
Investment Adviser............... Highland Capital Management, L.P. (the "Adviser") is the Fund's investment adviser. The Adviser has managed the Fund since January 21, 2000 and is responsible for investment advisory and management of the Fund, as well as managing and supervising all aspects of the general day-to-day business activities and operations of the Fund. As of December 31, 2004, the Adviser managed approximately $10.8 billion on behalf of institutional investors and retail clients around the world. The Adviser also is the investment adviser to another closed-end, management investment company with a leveraged capital structure - Prospect Street(R)Income Shares Inc. - with net assets of approximately $66.3 million as of December 31, 2004. See "Management of the Fund."
The Adviser currently receives from the Fund a management fee calculated at 0.65% (on an annual basis) of the Fund's average weekly net asset value defined as total assets of the Fund less accrued liabilities (excluding the principal amount of any bank loan, notes and the liquidation preference of preferred stock and including accrued and unpaid dividends on any shares of preferred stock), up to and including $175 million of net assets, 0.55% on the next $50 million of net assets and 0.50% of the excess of net assets over $225 million. The definition of net assets includes the assets acquired through the Fund's use of leverage. See "Investment Objective and Policies-Certain Investment Strategies-Leverage and Borrowing."
NYSE Listed...................... The Fund's common stock, par value $0.03 per share ("Common Stock"), is listed on the New York Stock Exchange (the "NYSE") under the symbol "PHY." As of March 24, 2005, the Fund had 30,795,151 shares of Common Stock outstanding. As of March 24, 2005, the last reported sale price of a share of the Fund's Common Stock on the NYSE was $3.30.
[Portion of Prospectus omitted]
o Restrictions" in the SAI and changes in the Fund's subclassification as a closed-end investment company; and to amend, alter or repeal any of the authorized preferences, rights or powers of the holders of Preferred Shares.
The affirmative vote of holders of Preferred Shares and other classes of preferred stock, if any, is required to effect any of the foregoing matters, regardless of whether the holders of the Common Stock have approved such matters.
Each share of Common Stock, each Preferred Share, and each share of any other series of preferred stock of the Fund is entitled to one vote per share.
Plan of Distribution.............. Shares of the Fund's Common Stock may be issued and sold from time to time by the Fund through its designated agents, including B. Riley & Co., Inc. (the "Distributor") as distributor and principal underwriter (the "Offering"). The Common Stock will be sold at-the-market through trading transactions on the NYSE, subject to a minimum price to be established each day by the Fund. The minimum price on any day will not be less than the current net asset value ("NAV") per share of Common Stock plus any sales commission to be paid for the purchase of such shares. Any shares of Common Stock sold pursuant to this Prospectus will generally be subject to a fixed commission rate of $0.05 per share, or $0.03 per share if sold to the Adviser. The Adviser currently does not intend to purchase shares of Common Stock in the Offering. The Fund will pay additional compensation to the Distributor at a rate of $0.04 per share, except for shares purchased by the Adviser, if all shares of the Common Stock are sold. The Fund will incur offering expenses of approximately $0.08 per share. The Fund's stockholders directly and indirectly bear the expense of the Fund's commission and additional compensation payments to the Distributor, as such payments becomes due, as well as the Fund's offering expenses. See "Plan of Distribution."
Principal Investment Risks........ Risk is inherent in all investing. The primary risks of investing in shares of the Fund's Common Stock are described below:
CREDIT RISK. The Fund invests in lower-rated securities ("junk" securities) and unrated securities of comparable quality, which involve greater risk than higher rated securities. As of the date of this Prospectus, virtually all of the Fund's assets are invested in lower-rated securities. These securities generally offer a higher return potential than higher rated securities, but also involve greater volatility of price and risk of loss of income and principal,
[Portion of Prospectus omitted]
if used), can adversely affect the yield on the Fund's Common Stock. To the extent the Fund is unable to invest the proceeds from the use of leverage in assets which pay interest at a rate which exceeds the rate paid in connection with the leverage, the yield on the Fund's Common Stock will decrease. The effect of a general market decline in the value of assets such as those in which the Fund invests, would be magnified in the Fund because of the leverage. In
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PROSPECTUS
[LOGO]
2,700,000 SHARES OF COMMON STOCK
PROSPECT STREET(R) HIGH INCOME PORTFOLIO INC.
NEW YORK STOCK EXCHANGE SYMBOL: PHY
Prospect Street(R) High Income Portfolio Inc. (the "Fund") is a
diversified, closed-end management investment company. The Fund's investment
objective is to provide high current income, while seeking to preserve
stockholders' capital, through investment in a professionally managed,
diversified portfolio of high yield, high risk securities (commonly referred to
as "junk" bonds). The Fund's investment adviser is Highland Capital
Management, L.P.
THERE IS NO GUARANTEE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS AND SPECIAL CONSIDERATIONS,
INCLUDING RISKS ASSOCIATED WITH THE FUND'S USE OF LEVERAGE. AN INVESTMENT IN THE
FUND IS NOT APPROPRIATE FOR ALL INVESTORS. SEE "RISK FACTORS AND SPECIAL
CONSIDERATIONS" BEGINNING ON PAGE 23 OF THIS PROSPECTUS.
This Prospectus applies to 2,700,000 shares of the Fund's Common Stock
which may be issued and sold from time to time through its designated agents.
The Common Stock will be sold at-the-market through trading transactions on the
New York Stock Exchange (the "NYSE"), subject to a minimum price to be
established each day by the Fund. The minimum price on any day will not be less
than the current net asset value per share of Common Stock plus any sales
commission to be paid for the purchase of such shares. The Fund has engaged B.
Riley & Co., Inc. (the "Distributor") to act as Distributor of the Common
Stock pursuant to a distribution agreement. The Fund and the Distributor each
have the right to terminate the distribution agreement in its discretion at any
time.
The Distributor, as agent, generally will charge a fixed commission rate of
$0.05 per share of Common Stock sold pursuant to this Prospectus and will
receive additional compensation from the Fund in the time and manner described
under "Plan of Distribution." Assuming that all shares of the Common Stock are
sold, the Fund will pay additional compensation at a rate of $0.04 per share to
the Distributor and will incur offering expenses of approximately $0.08 per
share. As of March 24, 2005, the last reported sales price of a share of the
Fund's Common Stock on the NYSE was $3.30. At a price of $3.30 (and assuming
that all shares of the Common Stock are sold), the Fund's effective proceeds
would be the equivalent of $3.13 per share after deduction of the $0.05 per
share commission and the Fund's payment of the additional $0.04 per share to the
Distributor, and assuming that the Fund incurs offering expenses that are
estimated to be $0.08 per share. The Fund's stockholders directly and indirectly
bear the expense of the Fund's commission and additional compensation payments
to the Distributor, as such payments become due, as well as the Fund's offering
expenses, as described in this paragraph.
This Prospectus sets forth concisely information you should know before
investing, including information about risks. You should read this Prospectus
before you invest in the Fund and keep it for future reference. The Fund's
Statement of Additional Information ("SAI"), dated April 12, 2005, contains
additional information about the Fund and is incorporated by reference into
(which means it is considered to be a part of) this Prospectus. You may obtain a
free copy of the SAI by calling 877-532-2834 or by writing to the Fund at 13455
Noel Road, Suite 1300, Dallas, Texas 75240. A table of contents to the SAI is
located at page 47 of this Prospectus. The SAI is available along with other
Fund-related materials at the Securities and Exchange Commission's internet web
site (http://www.sec.gov). The Fund's file number under the Investment Company
Act of 1940, as amended, is 811-5557.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
B. RILEY & Co., Inc.
The date of this Prospectus is April 12, 2005
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary.................................................... 1
Fund Expenses......................................................... 9
Financial Highlights.................................................. 11
The Fund.............................................................. 15
Use of Proceeds....................................................... 15
Portfolio Composition................................................. 15
Trading and Net Asset Value Information............................... 16
Investment Objective and Policies..................................... 17
Risk Factors and Special Considerations............................... 23
Management of the Fund................................................ 32
Federal Taxation...................................................... 34
Description of Capital Structure...................................... 37
Plan of Distribution.................................................. 43
Custodian, Transfer Agent, Dividend Paying Agent and Registrar........ 44
Legal Opinions........................................................ 45
Independent Registered Public Accounting Firm......................... 45
Further Information................................................... 46
Table of Contents to the Statement of Additional Information.......... 47
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION INCLUDED IN
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"). TO
UNDERSTAND THE OFFERING OF THE COMMON STOCK, YOU SHOULD READ THIS ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS.
The Fund......................... Prospect Street(R) High Income Portfolio Inc.
(the "Fund") is a diversified, closed-end
management investment company. The Fund was
incorporated in Maryland on May 13, 1988 and
commenced investment operations on December
5, 1988. The Fund's principal office is
located at 13455 Noel Road, Suite 1300,
Dallas, Texas 75240, and its telephone number
is 1-877-532-2834.
Investment Adviser............... Highland Capital Management, L.P. (the
"Adviser") is the Fund's investment adviser.
The Adviser has managed the Fund since
January 21, 2000 and is responsible for
investment advisory and management of the
Fund, as well as managing and supervising all
aspects of the general day-to-day business
activities and operations of the Fund. As of
December 31, 2004, the Adviser managed
approximately $10.8 billion on behalf of
institutional investors and retail clients
around the world. The Adviser also is the
investment adviser to another closed-end,
management investment company with a
leveraged capital structure - Prospect
Street(R)Income Shares Inc. - with net assets
of approximately $66.3 million as of December
31, 2004. See "Management of the Fund."
The Adviser currently receives from the Fund
a management fee calculated at 0.65% (on an
annual basis) of the Fund's average weekly
net asset value defined as total assets of
the Fund less accrued liabilities (excluding
the principal amount of any bank loan, notes
and the liquidation preference of preferred
stock and including accrued and unpaid
dividends on any shares of preferred stock),
up to and including $175 million of net
assets, 0.55% on the next $50 million of net
assets and 0.50% of the excess of net assets
over $225 million. The definition of net
assets includes the assets acquired through
the Fund's use of leverage. See "Investment
Objective and Policies-Certain
Investment Strategies-Leverage and
Borrowing."
NYSE Listed...................... The Fund's common stock, par value $0.03 per
share ("Common Stock"), is listed on the New
York Stock Exchange (the "NYSE") under the
symbol "PHY." As of March 24, 2005, the Fund
had 30,795,151 shares of Common Stock
outstanding. As of March 24, 2005, the last
reported sale price of a share of the Fund's
Common Stock on the NYSE was $3.30.
[Portion of Prospectus omitted]
o Restrictions" in the SAI and changes in the
Fund's subclassification as a closed-end
investment company; and to amend, alter or
repeal any of the authorized preferences,
rights or powers of the holders of
Preferred Shares.
The affirmative vote of holders of Preferred
Shares and other classes of preferred stock,
if any, is required to effect any of the
foregoing matters, regardless of whether the
holders of the Common Stock have approved
such matters.
Each share of Common Stock, each Preferred
Share, and each share of any other series of
preferred stock of the Fund is entitled to
one vote per share.
Plan of Distribution.............. Shares of the Fund's Common Stock may be
issued and sold from time to time by the Fund
through its designated agents, including B.
Riley & Co., Inc. (the "Distributor") as
distributor and principal underwriter (the
"Offering"). The Common Stock will be sold
at-the-market through trading transactions on
the NYSE, subject to a minimum price to be
established each day by the Fund. The minimum
price on any day will not be less than the
current net asset value ("NAV") per share of
Common Stock plus any sales commission to be
paid for the purchase of such shares. Any
shares of Common Stock sold pursuant to this
Prospectus will generally be subject to a
fixed commission rate of $0.05 per share, or
$0.03 per share if sold to the Adviser. The
Adviser currently does not intend to purchase
shares of Common Stock in the Offering. The
Fund will pay additional compensation to the
Distributor at a rate of $0.04 per share,
except for shares purchased by the Adviser,
if all shares of the Common Stock are sold.
The Fund will incur offering expenses of
approximately $0.08 per share. The Fund's
stockholders directly and indirectly bear
the expense of the Fund's commission and
additional compensation payments to the
Distributor, as such payments becomes due, as
well as the Fund's offering expenses. See
"Plan of Distribution."
Principal Investment Risks........ Risk is inherent in all investing. The
primary risks of investing in shares of the
Fund's Common Stock are described below:
CREDIT RISK. The Fund invests in lower-rated
securities ("junk" securities) and unrated
securities of comparable quality, which
involve greater risk than higher rated
securities. As of the date of this
Prospectus, virtually all of the Fund's
assets are invested in lower-rated
securities. These securities generally offer
a higher return potential than higher rated
securities, but also involve greater
volatility of price and risk of loss of
income and principal,
[Portion of Prospectus omitted]
if used), can adversely affect the yield on
the Fund's Common Stock. To the extent the
Fund is unable to invest the proceeds from
the use of leverage in assets which pay
interest at a rate which exceeds the rate
paid in connection with the leverage, the
yield on the Fund's Common Stock will
decrease. The effect of a general market
decline in the value of assets such as those
in which the Fund invests, would be magnified
in the Fund because of the leverage. In