Wellesley, the Fund’s advisor, seeks to achieve maximum current income while remaining market neutral by achieving a low correlation to the fluctuations of the U.S. stock market.

The Fund’s primary investment vehicle is convertible bonds. The Fund seeks to hedge market risk in part by investing in convertible arbitrage opportunities by, for example, selling common stocks short against positions in which the Fund has invested in convertible securities. Convertible arbitrage positions may be incorporated into a total return swap with an investment bank counterparty to also hedge market risk. Further hedging of portfolio risks may utilize derivative instruments including but not limited to other types of swaps, options, warrants, future contracts, and exchange traded funds (“ETFs”). The Fund may enter into credit default swaps and interest rate swaps to hedge against fixed income market risk. The Fund may seek to generate income from option premiums by writing (selling) call options.

Secondarily, the fund may invest in, but is not limited to, government bonds such as zero-coupon bonds, corporate bonds, preferred securities, and equities. Some bonds, do not pay current interest but are sold at a discount from their face values.

Convertible bonds are generally obligations of a company that can be converted into a predetermined number of shares of common stock of the company issuing the security. Convertible bonds generally offer both defensive characteristics (i.e., may provide income during periods when the market price of the underlying common stock declines) and upside potential (i.e., may provide capital appreciation when the market price of the underlying common stock rises). The Fund is not restricted with respect to the credit quality of its holdings and invests in some convertible bonds that are rated less than investment grade or determined to be of comparable credit quality by Wellesley. There is no limit on the portion of the Fund’s portfolio that is allocated among convertible bonds. The Fund generally invests in securities that have been privately placed but are eligible for purchase and sale by certain qualified institutional buyers such as the Fund under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

Wellesley attempts to identify convertible bonds that are trading at attractive valuations relative to Wellesley’s evaluation of the issuer’s creditworthiness. Wellesley’s investment process includes the use of both quantitative and fundamental research on each issuer to analyze credit quality and the specific terms of each offering. In general, Wellesley sells securities when an issuer’s credit quality deteriorates, the security or strategy no longer meets our return criteria, to increase diversification, when there is deterioration in the fundamental prospects of the underlying company, or when Wellesley believes more attractive investments are available. Wellesley diversifies the Fund’s portfolio in terms by company, industry, sector and other factors in attempt to lower the risks of the portfolio.

In an effort to enhance income, the Fund may write call and put options. The Fund may write call options on individual equity securities and convertible bonds that are in the Fund’s portfolio. In addition, the Fund may write call options on ETFs and securities indexes.

In an effort to minimize the downside risk of individual equity security and convertible bond holdings or the Fund’s portfolio in its entirety, the Fund may purchase put options on individual securities, ETFs and securities indexes.

The Fund may employ leverage, in the form of borrowing, to increase the potential gain from attractive securities selection. Such borrowing can benefit the Fund if the net rate of return on its investments purchased with the proceeds of the loan exceeds the interest or fees payable thereon.

The Fund may trade all or a significant portion of the securities in its portfolio in connection with its investment strategy.