IPOs and Secondary Offerings

Closed-end funds issue a fixed number of shares in an initial public offering or IPO. Later, there are mechanisms that a fundís Board of Trustees can use to raise additional capital such as a secondary offering or rights offering whereby new shares are offered at a predetermined set price. The investment manager can use the new capital to take advantage of additional investment opportunities. This can also benefit investors by reducing the relative level of expenses incurred by the fund in proportion to its size.

Subject to market conditions, such offerings may be made at a discount to NAV to encourage participation and may therefore have a dilutive impact on the value and common shareholder ownership in the fund.