SEC Company Response from Lord Abbett Floating Rate High Income Fund (CIK 0001802293) — May 1, 2020
Lord Abbett Floating Rate High Income Fund (CIK 0001802293)
Date: May 1, 2020 · CIK: 0001802293 · Accession: 0000930413-20-001351
AI Filing Summary & Sentiment
File numbers found in text: 333-236544, 811-23510
Letter
VIA EDGAR Division of Investment Management 100 F Street, NE Washington, D.C. 20549 Re: Lord Abbett Floating Rate High Income Fund (the “Fund”) File Nos. 333-236544 and 811-23510
Dear Ms. Hahn,
Reference is made to the Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (the “Registration Statement”) filed on February 20, 2020 with the U.S. Securities and Exchange Commission (the “Commission”) via EDGAR pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, on behalf of the Fund (formerly named Lord Abbett Enhanced Floating Rate Fund).
This letter responds to comments provided via email by Jaea Hahn on March 20, 2020 to Pamela P. Chen regarding Pre-Effective Amendment No. 1 to the Registration Statement. Pre-Effective Amendment No. 2 to the Registration Statement, which is expected to be filed with the Commission in May 2020 (the “Amendment”), will reflect the changes made in response to your comments.
Capitalized terms used but not defined herein have the meanings given to them in the Registration Statement.
Front Cover Page
1. Please disclose the amount of securities to be registered. See Item 1.c of Form N-2.
Response: The amount of securities to be registered by the Fund will be included on the front cover page of the prospectus.
Prospectus Cover Page
Investment Strategy (p. 1)
2. Please briefly explain what a floating rate of income means in Plain English.
Response: The disclosure on page 1 will be revised to add the following sentence: “A floating rate of income means a level of income that generally varies with changing interest rates.”
Ms. Jaea Hahn
May 1, 2020
Page 2
3. If accurate, please state that the issuers of the floating or adjustable rate instruments in which the Fund invests may be located within, and outside the US, including in emerging market countries.
Response: The requested disclosure will be added.
Leverage (pp. 1-2)
4. In addition to the Fund’s use of leverage to purchase portfolio securities, please consider disclosing whether a significant percentage of the debt securities held by the Fund will be leveraged loans or securities issued by highly leveraged borrowers.
Response: In response to this comment, disclosure will be added to the “Investment Strategies” section of the Prospectus as follows:
In addition, a significant amount of the Fund’s investments may consist of loans to highly indebted companies (so called “leveraged loans”).
Additionally, disclosure will be added to Loans, Participations and Assignments Risk in the “Principal Risks of the Fund” section of the Prospectus as follows:
At any given time and from time to time substantially all of the Fund’s portfolio may consist of loans to highly indebted companies (so called “leveraged loans”).
Interval Fund/Repurchase Offers (p. 1)
5. Please clarify that because the Fund’s shares are not listed on an exchange, no secondary market will develop for the shares and the only source of liquidity for shareholders will be the Fund’s periodic repurchase offers.
Response: The requested clarification will be added.
6. Please disclose, if applicable, the timing of the initial repurchase offer. See Guide 10 to Form N-2.
Response: The requested disclosure will be added regarding the timing of the Fund’s initial repurchase offer.
Investment Risks (pp. 2-3)
7. We note that significant market events from the coronavirus have occurred since the registration statement was filed. Please consider whether the Fund’s disclosures, including its risk disclosures (e.g., related to interest rate, credit, liquidity, and global market risks), should be revised based on how these events are effecting the markets for floating rate investments. If the Fund believes that no additional disclosures are warranted, please explain supplementally why not.
Ms. Jaea Hahn
May 1, 2020
Page 3
Response: In response to the Staff’s comment and developments since the filing of the Registration Statement, the Fund has enhanced its disclosures under the “Prospectus Summary—Principal Risks of the Fund” and “Principal Risks of the Fund” sections of the Prospectus and the “Investment Objective, Policies, and Risks” sections of the SAI as shown (in relevant part) below.
Prospectus: Prospectus Summary—Principal Risks of the Fund
Market Disruption and Geopolitical Risk: Geopolitical and other events (e.g., wars, terrorism, or natural disasters, epidemics or pandemics) may disrupt securities markets and adversely affect global economies and markets, thereby decreasing the value of the Fund’s investments. Sudden or significant changes in the supply or prices of commodities or other economic inputs may have material and unexpected effects on both global securities markets and individual countries, regions, sectors, companies, or industries, which could significantly reduce the value of the Fund’s investments. Securities markets also may be susceptible to market manipulation (e.g., the manipulation of the LIBOR) or other fraudulent trading practices, which could disrupt the orderly functioning of markets, increase overall market volatility or reduce the value of investments traded in them, including investments of the Fund. Instances of fraud and other deceptive practices committed by senior management of certain companies in which the Fund invests may undermine Lord Abbett’s due diligence efforts with respect to such companies, and if such fraud is discovered, negatively affect the value of the Fund’s investments. Financial fraud also may impact the rates or indices underlying the Fund’s investments.
An outbreak of a respiratory disease caused by a novel coronavirus (known as COVID-19) has resulted in a global pandemic and major disruptions to economies and markets around the world, including the United States. The COVID-19 pandemic and its effects could disrupt the operations of the Fund and its service providers, adversely affect the value and liquidity of the Fund’s investments, and negatively impact the Fund’s performance and your investment in the Fund.
Prospectus: Principal Risks of the Fund
Market Disruption and Geopolitical Risk: Geopolitical and other events (e.g., wars, terrorism or natural disasters) may disrupt securities markets and adversely affect global economies and markets, thereby decreasing the value of the Fund’s investments. Sudden or significant changes in the supply or prices of commodities or other economic inputs (e.g., the marked decline in oil prices that began in late 2014) may have material and unexpected effects on both global securities markets and individual countries, regions, sectors, companies, or industries, which could significantly reduce the value of the Fund’s investments. Terrorist attacks, or natural disasters, epidemics or pandemics could result in unplanned or significant securities market closures or declines. Securities markets also may be susceptible to market manipulation (e.g., the manipulation of the LIBOR) or other fraudulent trading practices, which could disrupt the orderly functioning of markets, increase overall market volatility or reduce the value of investments traded in them, including investments of the Fund. Instances of fraud and other deceptive practices committed by senior management of certain companies in which the Fund invests may undermine Lord Abbett’s due diligence efforts with respect to such companies, and if such fraud is
Ms. Jaea Hahn
May 1, 2020
Page 4
discovered, negatively affect the value of the Fund’s investments. Financial fraud also may impact the rates or indices underlying the Fund’s investments.
…
Substantial government interventions (e.g., currency controls) also could adversely affect the Fund. War, terrorism, economic uncertainty, and related geopolitical events have led, and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. Likewise, natural and environmental disasters, such as the earthquake and tsunami in Japan in early 2011, epidemics or pandemics, such as the COVID-19 outbreak which began in late 2019, and systemic market dislocations of the kind surrounding the insolvency of Lehman Brothers in 2008, if repeated, would have been highly disruptive to economies and markets, adversely affecting individual companies and industries, securities markets, interest rates, credit ratings, inflation, investor sentiment, and other factors affecting the value of the Fund’s investments. During such market disruptions, the Fund’s exposure to the risks described elsewhere in the “Principal Risks” section of the prospectus will likely increase. Market disruptions, including sudden government interventions, can also prevent the Fund from implementing its investment strategies and achieving its investment objective. To the extent the Fund has focused its investments in the stock index of a particular region, adverse geopolitical and other events in that region could have a disproportionate impact on the Fund.
The transmission of COVID-19 and efforts to contain its spread have resulted in, among other things, border closings and other significant travel restrictions and disruptions, significant disruptions to business operations, supply chains and customer activity, lower consumer demand for goods and services, event cancellations and restrictions, service cancellations, reductions and other changes, significant challenges in healthcare service preparation and delivery, and prolonged quarantines, as well as general concern and uncertainty. The impact of the COVID-19 outbreak could negatively affect the global economy, the economies of individual countries, and the financial performance of individual issuers, sectors, industries, asset classes, and markets in significant and unforeseen ways. The COVID-19 pandemic and its effects may be short term or may last for an extended period of time, and in either case could result in significant market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, and a substantial economic downturn or recession. The foregoing could disrupt the operations of the Fund and its service providers, adversely affect the value and liquidity of the Fund’s investments, and negatively impact the Fund’s performance and your investment in the Fund.
8. We note that the Fund intends to pay distributions monthly and may implement a stable distribution policy. If so, please add a bullet point that discloses that the Fund may pay distributions in significant part from sources that may not be available in the future and that are unrelated to the Fund’s performance, such as from offering proceeds, borrowings, and, if applicable, amounts from the Fund’s affiliates that are subject to repayment by investors.
Response: The requested disclosure will be added.
Ms. Jaea Hahn
May 1, 2020
Page 5
Prospectus Summary
Investment Strategy (pp. 8-9)
9. With respect to the last sentence of the first paragraph, please confirm supplementally that any derivatives counted towards the Fund’s 80% policy will be valued on a mark-to-market basis.
Response: The Fund supplementally confirms that any derivatives counted towards the Fund’s 80% policy will be valued on a mark-to-market basis.
10. Supplementally, please clarify whether floating rate loans include loans on lending platforms. If so, we may have additional comments.
Response: The Fund supplementally confirms that floating rate loans are not expected to include loans on lending platforms.
11. Please state whether there are any guidelines to determine how much of the Fund’s portfolio the Adviser may invest in senior, subordinated, or covenant lite loans.
Response: The Fund may invest in senior, subordinated, and covenant lite loans to pursue its investment objective, as described in its investment strategy. The Fund does not have specific guidelines to determine how much of the Fund’s portfolio the Adviser may invest in senior, subordinated, or covenant lite loans.
12. Please clarify whether there are any limitations on the total amount of lower tranches of the CLOs and other structured debt instruments that the Fund may hold in its portfolio.
Response: The Fund invests in lower tranches of the CLOs and other structured debt instruments to pursue its investment objective, as described in its investment strategy. The Fund does not have any limitations on the total amount of lower tranches of the CLOs and other structured debt instruments that the Fund may hold in its portfolio.
13. In the first full paragraph on page 9, you state the Fund may invest in emerging market countries. Please disclose how the Fund will determine whether a country is an “emerging market.”
Response: The referenced disclosure is intended to convey that the Fund will be invested across a broad range of foreign securities and markets, rather than constrain the Fund’s ability to invest in certain markets, including in emerging markets. Because we believe the referenced disclosure is accurate, helpful to investors, and compliant with Form N-2, we respectfully decline to define “emerging markets.”
14. Where appropriate, please add that the Fund is non-diversified and briefly explain what it means to be a non-diversified fund.
Ms. Jaea Hahn
May 1, 2020
Page 6
Response: The Fund respectfully submits that it believes the existing disclosure provides sufficient information about the Fund’s non-diversified status. We note that the disclosure in the section “The Fund” on pages 1, 7 and 25 of the Prospectus states that the Fund is non-diversified. In addition, the Fund’s Principal Risks include “Non-Diversification Risk” disclosure which appears on pages 22 and 53 of the Prospectus. Further, in response to Comment 21, the Fund will move “Non-Diversification Risk” so it appears before “Cyber Security Risk.”
Distributions (p. 10)
15. Please move the second sentence of the second paragraph (“The Fund may pay distributions from sources …”) to the discussion of Distribution Risk Factors.
Response: The sentence will be moved as requested.
Principal Risks of the Fund (pp. 10-22)
Interest Rate Risk (pp. 13-14)
16. Please clarify that interest rate risk differs for fixed and floating rate instruments. In doing so, consider adding a risk factor related to floating/adjustable interest rate risk (e.g., risk of increased defaults if interest rates rise).
Response: In response to this comment, disclosure will be added to the “Principal Risks of the Fund” sections of the Prospectus. Language will be added to Interest Rate Risk as follows:
Interest rate changes generally have a more pronounced effect on the market value of fixed-rate instruments, such as corporate bonds, than they have on floating rate instruments, and typically have a greater effect on the price of fixed income securities with longer durations.
In addition, a new risk factor will be added as follows:
Floating Rate Interest Risk: Changes in short-term market interest rates may affect the yield on the Fund’s investments in floating rate debt. If short-term market interest rates fall, the yield on the Fund’s shares will also fall. Conversely, when short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on the floating rate debt in the Fund’s portfolio, the impact of rising rates may be delayed. Substantial increases in interest rates may cause an increase in issuer defaults, as issuers may lack resources to meet higher debt service requirements.
Collateralized Loan Obligations and Other Collateralized Obligations Risk (p. 14)
17. Please
Show Raw Text
CORRESP
1
filename1.htm
LORD ABBETT FLOATING RATE HIGH INCOME
FUND
90 Hudson Street
Jersey City, NJ 07302
May 1, 2020
VIA EDGAR
Ms. Jaea F. Hahn
U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street, NE
Washington, D.C. 20549
Re:
Lord Abbett Floating Rate High Income Fund (the “Fund”)
File Nos. 333-236544 and 811-23510
Dear Ms. Hahn,
Reference is made to the Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-2 (the “Registration Statement”) filed on February 20, 2020
with the U.S. Securities and Exchange Commission (the “Commission”) via EDGAR pursuant to the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, on behalf of the Fund (formerly named Lord Abbett Enhanced Floating Rate Fund).
This letter responds to comments provided
via email by Jaea Hahn on March 20, 2020 to Pamela P. Chen regarding Pre-Effective Amendment No. 1 to the Registration Statement.
Pre-Effective Amendment No. 2 to the Registration Statement, which is expected to be filed with the Commission in May 2020 (the
“Amendment”), will reflect the changes made in response to your comments.
Capitalized terms used but not defined
herein have the meanings given to them in the Registration Statement.
Front Cover Page
1. Please disclose the amount of securities to be registered. See Item 1.c of Form N-2.
Response: The amount of securities to be registered
by the Fund will be included on the front cover page of the prospectus.
Prospectus Cover Page
Investment Strategy (p. 1)
2. Please briefly explain what a floating rate of income means in Plain English.
Response: The disclosure on page 1 will be revised
to add the following sentence: “A floating rate of income means a level of income that generally varies with changing interest
rates.”
Ms. Jaea Hahn
May 1, 2020
Page 2
3. If accurate, please state that the issuers of the floating or adjustable rate instruments in which the Fund invests may
be located within, and outside the US, including in emerging market countries.
Response: The requested disclosure will be added.
Leverage (pp. 1-2)
4. In addition to the Fund’s use of leverage to purchase portfolio securities, please consider disclosing whether a significant
percentage of the debt securities held by the Fund will be leveraged loans or securities issued by highly leveraged borrowers.
Response: In response to this comment, disclosure will
be added to the “Investment Strategies” section of the Prospectus as follows:
In addition, a significant amount of the Fund’s
investments may consist of loans to highly indebted companies (so called “leveraged loans”).
Additionally, disclosure will be added to Loans, Participations
and Assignments Risk in the “Principal Risks of the Fund” section of the Prospectus as follows:
At any given time and from time to time substantially
all of the Fund’s portfolio may consist of loans to highly indebted companies (so called “leveraged loans”).
Interval Fund/Repurchase Offers (p. 1)
5. Please clarify that because the Fund’s shares are not listed on an exchange, no secondary market will develop for
the shares and the only source of liquidity for shareholders will be the Fund’s periodic repurchase offers.
Response: The requested clarification will be added.
6. Please disclose, if applicable, the timing of the initial repurchase offer. See Guide 10 to Form N-2.
Response: The requested disclosure will be added regarding
the timing of the Fund’s initial repurchase offer.
Investment Risks (pp. 2-3)
7. We note that significant market events from the coronavirus have occurred since the registration statement was filed. Please
consider whether the Fund’s disclosures, including its risk disclosures (e.g., related to interest rate, credit, liquidity,
and global market risks), should be revised based on how these events are effecting the markets for floating rate investments.
If the Fund believes that no additional disclosures are warranted, please explain supplementally why not.
Ms. Jaea Hahn
May 1, 2020
Page 3
Response: In response to the Staff’s comment
and developments since the filing of the Registration Statement, the Fund has enhanced its disclosures under the “Prospectus
Summary—Principal Risks of the Fund” and “Principal Risks of the Fund” sections of the Prospectus and the
“Investment Objective, Policies, and Risks” sections of the SAI as shown (in relevant part) below.
Prospectus: Prospectus Summary—Principal
Risks of the Fund
Market Disruption and Geopolitical Risk: Geopolitical
and other events (e.g., wars, terrorism, or natural
disasters, epidemics or pandemics) may disrupt securities markets and adversely affect
global economies and markets, thereby decreasing the value of the Fund’s investments. Sudden or significant changes in the
supply or prices of commodities or other economic inputs may have material and unexpected effects on both global securities markets
and individual countries, regions, sectors, companies, or industries, which could significantly reduce the value of the Fund’s
investments. Securities markets also may be susceptible to market manipulation (e.g., the manipulation of the LIBOR) or other fraudulent
trading practices, which could disrupt the orderly functioning of markets, increase overall market volatility or reduce the value
of investments traded in them, including investments of the Fund. Instances of fraud and other deceptive practices committed by
senior management of certain companies in which the Fund invests may undermine Lord Abbett’s due diligence efforts with respect
to such companies, and if such fraud is discovered, negatively affect the value of the Fund’s investments. Financial fraud
also may impact the rates or indices underlying the Fund’s investments.
An outbreak of a respiratory disease
caused by a novel coronavirus (known as COVID-19) has resulted in a global pandemic and major disruptions to economies and markets
around the world, including the United States. The COVID-19 pandemic and its effects could disrupt the operations of the Fund and
its service providers, adversely affect the value and liquidity of the Fund’s investments, and negatively impact the Fund’s
performance and your investment in the Fund.
Prospectus: Principal Risks of the Fund
Market Disruption and Geopolitical Risk: Geopolitical
and other events (e.g., wars, terrorism or natural disasters) may disrupt securities markets and adversely affect global economies
and markets, thereby decreasing the value of the Fund’s investments. Sudden or significant changes in the supply or prices
of commodities or other economic inputs (e.g., the marked decline in oil prices that began in late 2014) may have material and
unexpected effects on both global securities markets and individual countries, regions, sectors, companies, or industries, which
could significantly reduce the value of the Fund’s investments. Terrorist attacks, or natural disasters, epidemics or pandemics
could result in unplanned or significant securities market closures or declines. Securities
markets also may be susceptible to market manipulation (e.g., the manipulation of the LIBOR) or other fraudulent trading practices,
which could disrupt the orderly functioning of markets, increase overall market volatility or reduce the value of investments traded
in them, including investments of the Fund. Instances of fraud and other deceptive practices committed by senior management of
certain companies in which the Fund invests may undermine Lord Abbett’s due diligence efforts with respect to such companies,
and if such fraud is
Ms. Jaea Hahn
May 1, 2020
Page 4
discovered, negatively affect the value of the Fund’s
investments. Financial fraud also may impact the rates or indices underlying the Fund’s investments.
…
Substantial government interventions (e.g., currency
controls) also could adversely affect the Fund. War, terrorism, economic uncertainty, and related geopolitical events have led,
and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world
economies and markets generally. Likewise, natural and environmental disasters, such as the earthquake and tsunami in Japan in
early 2011, epidemics or pandemics, such as the COVID-19 outbreak which began in late 2019,
and systemic market dislocations of the kind surrounding the insolvency of Lehman Brothers in 2008, if
repeated, would have been highly disruptive to economies and markets, adversely
affecting individual companies and industries, securities markets, interest rates, credit ratings, inflation, investor sentiment,
and other factors affecting the value of the Fund’s investments. During such market disruptions, the Fund’s exposure
to the risks described elsewhere in the “Principal Risks” section of the prospectus will likely increase. Market disruptions,
including sudden government interventions, can also prevent the Fund from implementing its investment strategies and achieving
its investment objective. To the extent the Fund has focused its investments in the stock index of a particular region, adverse
geopolitical and other events in that region could have a disproportionate impact on the Fund.
The transmission of COVID-19 and
efforts to contain its spread have resulted in, among other things, border closings and other significant travel restrictions and
disruptions, significant disruptions to business operations, supply chains and customer activity, lower consumer demand for goods
and services, event cancellations and restrictions, service cancellations, reductions and other changes, significant challenges
in healthcare service preparation and delivery, and prolonged quarantines, as well as general concern and uncertainty. The impact
of the COVID-19 outbreak could negatively affect the global economy, the economies of individual countries, and the financial performance
of individual issuers, sectors, industries, asset classes, and markets in significant and unforeseen ways. The COVID-19 pandemic
and its effects may be short term or may last for an extended period of time, and in either case could result in significant market
volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, and a substantial
economic downturn or recession. The foregoing could disrupt the operations of the Fund and its service providers, adversely affect
the value and liquidity of the Fund’s investments, and negatively impact the Fund’s performance and your investment
in the Fund.
8. We note that the Fund intends to pay distributions monthly and may implement a stable distribution policy. If so, please
add a bullet point that discloses that the Fund may pay distributions in significant part from sources that may not be available
in the future and that are unrelated to the Fund’s performance, such as from offering proceeds, borrowings, and, if applicable,
amounts from the Fund’s affiliates that are subject to repayment by investors.
Response: The requested disclosure will be added.
Ms. Jaea Hahn
May 1, 2020
Page 5
Prospectus Summary
Investment Strategy (pp. 8-9)
9. With respect to the last sentence of the first paragraph, please confirm supplementally that any derivatives counted towards
the Fund’s 80% policy will be valued on a mark-to-market basis.
Response: The Fund supplementally confirms that any
derivatives counted towards the Fund’s 80% policy will be valued on a mark-to-market basis.
10. Supplementally, please clarify whether floating rate loans include loans on lending platforms. If so, we may have additional
comments.
Response: The Fund supplementally confirms that floating
rate loans are not expected to include loans on lending platforms.
11. Please state whether there are any guidelines to determine how much of the Fund’s portfolio the Adviser may invest
in senior, subordinated, or covenant lite loans.
Response: The
Fund may invest in senior, subordinated, and covenant lite loans to pursue its investment
objective, as described in its investment strategy. The Fund does not have specific guidelines to determine how much of
the Fund’s portfolio the Adviser may invest in senior, subordinated, or covenant lite loans.
12. Please clarify whether there are any limitations on the total amount of lower tranches of the CLOs and other structured
debt instruments that the Fund may hold in its portfolio.
Response: The
Fund invests in lower tranches of the CLOs and other structured debt instruments to pursue its investment objective, as described
in its investment strategy. The Fund does not have any limitations on the total amount of lower tranches of the CLOs and
other structured debt instruments that the Fund may hold in its portfolio.
13. In the first full paragraph on page 9, you state the Fund may invest in emerging market countries. Please disclose how the
Fund will determine whether a country is an “emerging market.”
Response: The referenced disclosure is intended to
convey that the Fund will be invested across a broad range of foreign securities and markets, rather than constrain the Fund’s
ability to invest in certain markets, including in emerging markets. Because we believe the referenced disclosure is accurate,
helpful to investors, and compliant with Form N-2, we respectfully decline to define “emerging markets.”
14. Where appropriate, please add that the Fund is non-diversified and briefly explain what it means to be a non-diversified
fund.
Ms. Jaea Hahn
May 1, 2020
Page 6
Response: The Fund respectfully submits that it believes
the existing disclosure provides sufficient information about the Fund’s non-diversified status. We note that the disclosure
in the section “The Fund” on pages 1, 7 and 25 of the Prospectus states that the Fund is non-diversified. In addition,
the Fund’s Principal Risks include “Non-Diversification Risk” disclosure which appears on pages 22 and 53 of
the Prospectus. Further, in response to Comment 21, the Fund will move “Non-Diversification Risk” so it appears before
“Cyber Security Risk.”
Distributions (p. 10)
15. Please move the second sentence of the second paragraph (“The Fund may pay distributions from sources …”)
to the discussion of Distribution Risk Factors.
Response: The sentence will be moved as requested.
Principal Risks of the Fund (pp. 10-22)
Interest Rate Risk (pp. 13-14)
16. Please clarify that interest rate risk differs for fixed and floating rate instruments. In doing so, consider adding a risk
factor related to floating/adjustable interest rate risk (e.g., risk of increased defaults if interest rates rise).
Response: In response to this comment, disclosure will
be added to the “Principal Risks of the Fund” sections of the Prospectus. Language will be added to Interest Rate
Risk as follows:
Interest rate changes generally
have a more pronounced effect on the market value of fixed-rate instruments, such as corporate bonds, than they have on floating
rate instruments, and typically have a greater effect on the price of fixed income securities with longer durations.
In addition, a new risk factor will be added as follows:
Floating Rate Interest Risk: Changes in short-term
market interest rates may affect the yield on the Fund’s investments in floating rate debt. If short-term market interest
rates fall, the yield on the Fund’s shares will also fall. Conversely, when short-term market interest rates rise, because
of the lag between changes in such short-term rates and the resetting of the floating rates on the floating rate debt in the Fund’s
portfolio, the impact of rising rates may be delayed. Substantial increases in interest rates may cause an increase in issuer defaults,
as issuers may lack resources to meet higher debt service requirements.
Collateralized Loan Obligations and Other Collateralized
Obligations Risk (p. 14)
17. Please