THOMAS J. HERZFELD ADVISORS, INC.

ITEM 1 COVER PAGE Form ADV Part 2A Thomas J. Herzfeld Advisors, Inc. 119 Washington Avenue, Suite 504 Miami Beach, Florida 33139 Telephone: (305) 777-1660 Fax: (305) 777-1661 www.herzfeld.com info@herzfeld.com September 11, 2025 This brochure provides information about the qualifications and business practices of Thomas J. Herzfeld Advisors, Inc. If you have any questions about the contents of this brochure, please contact us at (305) 777-1660 and/or info@herzfeld.com. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission (“SEC”) or by any state securities authority. Additional information about Thomas J. Herzfeld Advisors, Inc. is also available on the SEC’s website at www.adviserinfo.sec.gov. Thomas J. Herzfeld Advisors, Inc. is an investment adviser registered with the SEC. Registration of an investment adviser does not imply any level of skill or training.  ITEM 2 MATERIAL CHANGES Form ADV Part 2 requires registered investment advisers to amend their brochure when information becomes materially inaccurate. If there are any material changes to an adviser’s disclosure brochure, the adviser is required to notify you and provide you with a description of the material changes. Generally, Thomas J. Herzfeld Advisors, Inc. (the “Firm” or “TJH”) will notify clients of material changes on an annual basis. However, where we determine that an interim notification is either meaningful or required, we will notify our clients promptly. In either case, we will notify our clients in a separate document. There have been the following material changes since the date of our annual amendment to the Form ADV filing on 27 March 2025: Item 4 has been updated to reflect a change to the Firm’s advisory business. On July 7, 2025, the Firm’s Registered Fund client, The Herzfeld Caribbean Basis Fund, Inc., officially changed its name to Herzfeld Credit Income Fund, Inc and began trading on NASDAQ under a new ticker symbol - “HERZ”. The Registered Fund also changed its investment strategy, which previously focused on investment in the Caribbean Basin. Under the new strategy, the Fund’s primary investment objective is a total return strategy with a secondary objective of generating high current income for stockholders. In accordance with the investment objective, the Registered Fund will focus on investing in equity and junior debt tranches of collateralized loan obligations, or “CLOs”. CLOs are portfolios of collateralized loans consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across various industry sectors. 2  TABLE OF CONTENTS ITEM 4 ADVISORY BUSINESS ............................................................................................................... 4 ITEM 5 FEES AND COMPENSATION ..................................................................................................... 8 ITEM 6 PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT ............................. 10 ITEM 7 TYPES OF CLIENTS .................................................................................................................. 11 ITEM 8 METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS ............... 12 ITEM 9 DISCIPLINARY INFORMATION ............................................................................................. 34 ITEM 10 OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS .............................. 34 ITEM 11 CODE OF ETHICS, PARTICIPATION OR INTEREST IN CLIENT TRANSACTIONS AND PERSONAL TRADING ..................................................................................................... 34 ITEM 12 BROKERAGE PRACTICES ..................................................................................................... 37 ITEM 13 REVIEW OF ACCOUNTS ........................................................................................................ 38 ITEM 14 CLIENT REFERRALS AND OTHER COMPENSATION ...................................................... 39 ITEM 15 CUSTODY ................................................................................................................................. 39 ITEM 16 INVESTMENT DISCRETION .................................................................................................. 40 ITEM 17 VOTING CLIENT SECURITIES .............................................................................................. 40 ITEM 18 FINANCIAL INFORMATION ................................................................................................. 41 3  ITEM 4 ADVISORY BUSINESS General Description of Adviser and Principal Owners Thomas J. Herzfeld Advisors, Inc. (the “Firm” or “TJH”) is a Florida corporation that was formed in 1984. TJH maintains its principal office at 119 Washington Avenue, Suite 504, Miami Beach, FL 33139. The Firm is owned by Thomas J. Herzfeld, who currently owns 100% of the voting stock of the Firm. TJH employs approximately 10 persons engaged in portfolio management or investment research, investment operations, trading, client service, legal and compliance activities. Types of Advisory Services TJH currently offers investment advisory services in two primary strategies: 1) investment in closed-end funds; and 2) investment in credit markets generally, including Collateralized Loan Obligations (CLOs) and CLO equity securities. Within the closed-end fund investment strategies, the advisor currently has eight (8) sub-strategies, all within its Managed (Composite) Portfolio Program: • Herzfeld Balanced & Flexible Composite • Herzfeld Fixed Income Composite • Herzfeld Foreign Equity & Fixed Income Composite • Herzfeld U.S. Equity Composite • Herzfeld Tax-Exempt (Municipal Bonds) Composite • Herzfeld Special Situations Composite • Herzfeld Preferred Composite • Herzfeld SPAC Portfolio The Firm also provides investment advisory services to a registered investment company (Herzfeld Credit Income Fund, Inc. or the “Regisered Fund”). The Registered Fund’s primary investment objective is a total return strategy with a secondary objective of generating high current income for stockholders. In accordance with the investment objective, the Registered Fund focuses on investing in equity and junior debt tranches of collateralized loan obligations, or “CLOs”. CLOs are portfolios of collateralized loans consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across various industry sectors. While the Firm does not currently provide investment advice regarding other types of investments, including other types of debt and equity investments, it may do so in the future. For additional information about these investment strategies please refer to Item 8. 4  TJH provides investment advisory services directly to registered investment companies, private funds, and separately managed accounts. Additional information about these advisory services and the type of clients we serve is described immediately below and in Item 7. Registered Investment Companies TJH provides investment advisory services to the following investment company registered under the Investment Company Act of 1940 (the “Company Act”): Herzfeld Credit Income Fund, Inc. (the “HERZ Fund”) (NASDAQ: HERZ), under an Investment Management Agreement between the HERZ Fund and the Firm. The HERZ Fund’s primary investment objective is maximizing risk adjusted total returns with a secondary objective of generating high current income for shareholders. The Herz Fund seeks to achieve its investment objectives by investing in equity and junior debt tranches of collateralized loan obligations, or CLOs. CLOs are portfolios of collateralized loans consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across various industry sectors. Private Funds (the “Private Funds”) TJH provides investment advisory services to series of private funds consisting of a “master feeder” structure that includes two master funds domiciled in the Cayman Islands (the “Master Fund”), an “offshore feeder fund” domiciled in the Cayman Islands, and an “onshore feeder fund” domiciled in Delaware, United States, and other related entities. TJH also manages (2) two Delaware private funds that were formed as special purpose vehicles to invest alongside the Master Fund. In addition, TJH manages two private funds formed for the purpose of investing in CLOs. Separately Managed Accounts (“SMAs”) TJH provides investment advisory services to a variety of separately managed account clients, including individuals, pension plans, high net worth individuals, charitable organizations, corporations, and institutional clients. Investment Strategies and Restrictions TJH manages the Registered Fund, Private Funds, and SMAs (together, “Clients”) based on each Client’s strategies, restrictions, and guidelines and does not tailor its advisory services to any particular Client except as described below. With respect to SMAs, TJH will consider each client’s risk tolerance, time horizon, tax status, liquidity needs, return objectives and preferences. TJH provides its investment advisory services in accordance with the specific investment objectives and restrictions of each client, in accordance with and subject to the directions, guidelines, and limitations imposed by the client through, as applicable, the investment 5  management agreement, prospectus and statement of additional information, private placement memorandum, and/or other governing documents (the “Governing Documents”). TJH’s investment discretion with respect to managing the Registered Fund is also subject to the parameters provided by and oversight of the Registered Fund’s governing body (e.g., board of directors/trustees). TJH’s investment discretion with respect to managing the Private Funds is also subject to the parameters provided by and oversight of the respective Private Fund’s governing body (e.g., board of directors/trustees, general partner, or managing member). Generally, the investment advice offered by the Firm is limited to the investment strategies described above. However, the Firm will manage other strategies at the specific request of a Client, subject to review and agreement on the type of strategy, applicable investment restrictions, minimum account size and agreement on fees. Wrap Fee Programs “Wrap arrangements,” “wrap fee programs,” and/or “wrap fee accounts” involve individually- managed accounts for individual or institutional clients. The wrap fee accounts are offered as part of a larger program by a “sponsor,” usually a brokerage, banking or investment advisory firm, and are managed by one or more investment advisers. TJH has arrangements with several brokerage, bank and/or investment advisory firms (sponsors) who sponsor “wrap fee” programs where TJH acts as adviser or sub-adviser to the wrap program and provides investment management services to those clients who select TJH as part of their investment program. The sponsor typically authorizes payment of a portion of its program fee to TJH for its services, which TJH receives directly from the wrap fee client. Generally, TJH’s management of wrap fee accounts and other accounts under the same investment strategy is consistent. Subject to our best execution policy when selecting brokers for trading for our wrap fee program accounts, TJH at its discretion may trade with different broker/dealers than for our other (non-Wrap) accounts or trade away with a single broker/dealer on a combined basis. Trades for wrap fee program accounts are typically directed to the wrap fee program sponsor (or its designated broker/dealer), since brokerage commissions are included in the wrap fee. In such situations, TJH may be required to trade a wrap fee program’s accounts separately from other accounts being managed within the same strategy. As described in “Item 12- Brokerage Practices”, while directed brokerage is designed to benefit the wrap fee program account through lower trading costs, there may be circumstances where directed trades do not receive the best price, or where dividing the trade into separate components may inhibit TJH’s ability to obtain the same level of or as timely an execution as it may otherwise have been able to obtain if it had been able to execute the entire trade with one broker/dealer. Operational limitations with these types of accounts make trading away from the sponsor difficult. To the extent that TJH trades away from the sponsor by placing trades with a different brokerage firm, the client will typically incur the costs associated with this trading, in addition to the wrap fees normally payable. Subject to these limitations, TJH continues to employ methods, such as trade rotation and periodic brokerage review, in an effort to reduce the impact of these issues. Clients who enroll in these programs should satisfy themselves that the sponsor is able to provide best price and execution of transactions. 6  TJH may engage in wrap programs involving both single-contract and dual-contract accounts. In a single contract, the sponsor typically provides a level of research and due diligence on TJH and often stands as a co-fiduciary with TJH. Customers execute one contract with the sponsor. Dual contract programs require a customer to execute two separate contracts: one covering services provided by the sponsor; and the other covering separate investment management services provided by TJH. With respect to single contract wrap fee program accounts, TJH may not be provided sufficient information by the wrap fee program sponsor to perform an assessment as to the suitability of TJH’s services and investment strategy for the client. In such cases, TJH will rely upon the wrap fee program sponsor who, as part of its fiduciary duty to each client, must determine not only the suitability of TJH’s services and investment strategies for the client, but also the suitability of the wrap fee program in general. In addition, TJH relies upon the wrap fee program sponsor to provide required disclosures to such clients, including delivery of this Form ADV Part 2A (Brochure) and, where applicable, Part 3 (CRS) to clients as required. Please see additional information regarding wrap fee programs in “Item 5 – Fees and Compensation.” Assets Under Management As of December 31, 2024, TJH managed assets of approximately $848 million. Of this amount, approximately $21 million was on a non-discretionary basis and approximately $827 million was on a discretionary basis. ITEM 5 FEES AND COMPENSATION Compensation earned by the Firm for the provision of investment advisory services to our clients is primarily comprised of management fees based on a percentage of assets under management during the investment period. In certain circumstances, the Firm charges performance fees for its services as further described herein. Fees and compensation are described within the Governing Documents for each client account that we manage. Except as noted below, all advisory fee invoices are sent to Clients at the end of each calendar quarter for services rendered in the prior quarter. Fees are deducted directly from Client custodial accounts if the Client has consented to such deductions in writing. Clients may request that fees not be automatically deducted and, depending upon the custodian used, the Firm seeks to accommodate those requests. For certain wrap fee program Clients, invoices related to advisory fees are sent directly to the wrap fee program sponsor and advisory fees are paid directly by the wrap fee program sponsor to the Firm. In such cases, no individual Client invoices are generated by the Firm. Note that management fees are generally calculated either by the custodian (in case of Registered Fund accounts) or by the Administrator or TJH as per the Governing Documents (in the case of 7  Private Funds or SMAs). TJH, through its Valuation Committee, oversees the valuation of securities. The Valuation Committee maintains procedures requiring, to the extent possible, pricing from an independent third party pricing vendor as determined by its approved pricing hierarchy. The Valuation Committee also looks to other observable inputs for its valuations. If a vendor price or other observable inputs are unavailable or deemed unreliable, the Valuation Committee makes a reasonable determination of a security’s fair value. The following is a general description of fees typically charged by TJH for each type of client. However, some fees fall outside of the stated ranges, and fees may be negotiated in certain circumstances. Investors and clients should refer to the Governing Documents for complete information on fees and compensation. Advisory Fees for the Registered Fund In its capacity as investment manager to the HERZ Fund, TJH is entitled to receive an investment management fee in the amount of 1.25% of the Fund’s net assets and an incentive fee of 10% of returns that surpass a 9% hurdle. Registered Fund fees and expenses are described in the Registered Fund’s proxy materials, prospectus and statement of additional information. Advisory Fees for Private Funds In its capacity as investment manager to the Private Funds, TJH typically receives an investment management fee that ranges from 0.75% to 1.50% of the respective Fund’s net assets, depending upon share class and other factors applicable to specific investors. In addition, TJH is entitled to receive from the Private Funds’ investors a performance-based fee (also known as an incentive allocation) equal to 10% of the appreciation in an investor’s capital balance during the year, subject to various contingencies such as a hurdle rate, high water mark and/or other conditions. TJH Private Fund fees are described in more detail in each Private Fund Offering Memorandum and/or respective Limited Partnership Agreement or other Governing Documents. See Section 6 below for a description of Performance Based Fees. Advisory Fees for SMAs The basic fee schedule for separately managed accounts ranges from 0.50% to 1.50% of assets under management depending on product, asset type, and size of account. Generally, the fee schedule for separately managed accounts is fixed after negotiation with the client or the applicable wrap fee program sponsor and may be lesser or greater than the range set forth above depending upon a client’s specific requirements. Fees are generally billed quarterly, in advance or in arrears, based on the market value of the account(s) as specified in the investment management agreement or other Governing Documents. In addition to securities, market values include cash, cash equivalents, accrued dividends and other income. If an account is opened or closed during a billing period, the advisory fees are pro-rated for that portion of the billing period during which the account was open. TJH may agree to certain fee reductions or waivers. Any such agreements are memorialized in writing. 8  General Information Fees may vary from the applicable schedules above based on factors such as client type, asset class, pre-existing relationship, service levels, portfolio complexity, number of accounts, account size or other special circumstances or requirements and are negotiable in some cases. Some existing clients pay higher or lower fees than new clients. Related accounts may be aggregated for fee calculation purposes in certain circumstances. TJH will manage some accounts of TJH’s employees, affiliate employees, former employees, or their family members without an advisory fee. When TJH calculates fees, unless otherwise provided in a Client’s investment management agreement, valuations of account assets are determined in accordance with TJH’s valuation procedures, which generally rely on third party pricing services, but may permit the use of other valuation methodologies in certain circumstances. TJH’s determinations may differ from valuations reflected in a client’s custodial statements. Other Fees and Expenses TJH may invest in closed-end funds, open-end funds, exchange traded funds (ETFs), exchange traded notes (ETNs), and other pooled investment vehicles on behalf of its clients. When TJH invests client assets in such vehicles, unless otherwise agreed and where permitted by law, the client will bear its proportionate share of fees and expenses as an investor in such vehicles in addition to TJH’s investment advisory fees. In addition, TJH has the authority to invest some clients’ assets in the Registered Fund to which TJH provides investment advisory services and receives advisory or other fees. It is the policy of TJH to adjust fees paid by clients in such circumstances so that client fees are waived with respect to the portion of client assets invested in the Registered Funds (and only the fees charged by TJH to the Registered Fund are deducted from client accounts). TJH’s clients generally will incur brokerage and other transaction costs (which, in the case of wrap fee program clients, may be included in total costs charged to clients by wrap fee program sponsors). For additional information about brokerage practices and brokerage costs, please refer to Item 12. Neither TJH nor any of its supervised persons accepts compensation for the sale of securities or other investment products (other than indirectly through the management fees charged for TJH’s advisory services generally). ITEM 6 PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT TJH may charge performance-based fees to its Clients on a case by case basis. With respect to the Master Fund, TJH receives a performance-based profit allocation (the “Incentive Allocation”) at the end of each year, or upon any redemption of shares of the Master Fund (or corresponding feeder funds), on the applicable redemption date. The Incentive Allocation is equal to ten percent (10%) of the annual net income allocated to the feeder fund’s shareholder with respect to each Incentive Allocation Period to the extent that such net income is (i) in excess of the cumulative 9  unrecovered losses carried forward from prior years or fiscal periods (this limitation is commonly referred to as a “high water mark”), and (ii) in excess of a 7% per annum annual hurdle rate of return. The Master Fund and corresponding feeder fund fees and expenses are described in each Private Fund’s Private Placement Memorandum. Other private funds may have similar performance fees that provide a profit-based allocation to TJH upon terms and conditions specific to those funds. The Registered Fund is charged a performance-based fee of 10%, subject to a 9% hurdle rate. The performance-based fees are described in detail in the HERZ Fund’s proxy materials, prospectus and statement of additional information. Performance-based fees may create an incentive for certain investment advisors to favor accounts having performance-based fees over asset-based fee accounts or make investments that are riskier or more speculative than would be the case in the absence of performance-based fee clients. Although the investment strategy for each Client may be separate and distinct from investment strategies used for other TJH Clients, TJH has an established review processes and other related procedures that are designed to ensure that all Clients and investors are treated fairly and equally and to prevent conflicts from influencing the allocation of investment opportunities among Clients. To mitigate potential conflicts of interest when managing performance-based fee clients side-by- side with asset-based fee clients, TJH has developed a policy in which portfolio managers attempt to allocate investment opportunities among eligible accounts on a pro rata basis if that is practical; or if a pro rata allocation is not practical, to allocate the investment opportunities among TJH advisory clients on a basis that over time is fair and equitable to each advisory client relative to other clients, taking into account relevant facts and circumstances, including, but not limited to: differences with respect to available capital and the size of a client; • differences in investment objectives or current investment strategies; • differences in risk profiles at the time an opportunity becomes available; • • the nature of the security or the transaction including minimum investment amounts and the source of the opportunity; and existing or prior positions in an issuer/security. • While the procedures described above are intended to allocate investment opportunities among advisory clients on a basis that is fair and equitable to all clients over time, the procedures could, in some circumstances, preclude an advisory client from participating in an investment opportunity, or otherwise result in certain allocations that favor one client over another. TJH will periodically review allocations of investment opportunities and sequencing of transactions and compare the performance of such accounts. Any exceptions or issues arising from these reviews shall be brought to the attention of TJH’s Chief Compliance Officer for possible corrective action. 10  ITEM 7 TYPES OF CLIENTS TJH provides advisory services to clients on a discretionary basis consisting of its Registered Fund, Private Funds, and SMAs. TJH’s SMA Clients include primarily individuals, investment companies, trusts, corporations and various types of retirement accounts. The minimum investment for opening an SMA is generally $1,000,000 for individuals and $5,000,000 for institutional clients, depending upon, among other things, the strategy for the particular SMA. TJH may waive these minimums at its discretion. Additional information about the minimum investments for each client and other investment qualifications and conditions are described in the applicable Governing Documents. ITEM 8 METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS Methods of Analysis In general, the Firm invests in a) closed-end investment companies that primarily invest in equity and income-producing securities and b) other securities consistent with strategies that seek risk adjusted total return and current income. The investment methodology utilizes a number of factors and consists of both a quantitative and qualitative approach to identify opportunities across the entire universe of closed-end funds. The overall investment philosophy is predicated on recognizing the recurring valuation patterns found in the closed-end fund industry and the general credit industry, capitalizing on opportunities in a systematic manner. The closed-end fund strategy seeks to exploit the discount and premium spreads (i.e. Share Price to Net Asset Value differences) associated with closed-end funds. The Firm may also allocate assets to other investment company structures, including exchange-traded funds (“ETFs”), equity securities, including common and preferred stocks (and with a particular emphasis on preferred stocks issued by registered investment companies), cash, and/or short-term cash equivalents. Once a security is identified for potential purchase or sale via both quantitative and qualitative analysis, approximately twenty other factors are analyzed (e.g. volatility, liquidity, yield, financial ratios, potential for dissident activity, portfolio earnings assessments, leverage and others). For our Caribbean Basin strategy, securities are evaluated based upon fundamental and technical analysis. In many cases, the analysis includes assessment of whether the issuer will benefit if there is an easing or lifting of the U.S. embargo against Cuba. Other strategies may be employed by the Firm from time to time. In all cases, we employ fundamental and technical analysis designed to identify investment opportunities that are consistent with the particular strategy or strategies desired by our Clients. Investment Strategies 11  General descriptions of TJH’s investment strategies are presented below. These descriptions are not intended to serve as specific guidelines. In addition, TJH may develop other investment strategies from time to time and manage portfolios according to a client’s specific investment guidelines, thus strategies may vary by client account. Closed-End Fund Strategies: The Firm invests in closed-end funds whose principal investment strategies include one or more of the following: Domestic Funds: • • • • • Municipal Bond, Build America Bond, Government Bond, Corporate Bond, High Yield Bond Equity—Sector Specific (such as Utilities, Real Estate, MLPs), Equity—Covered Call, Equity—General, Equity—Growth & Income, Equity—Dividend, Equity— Tax-Advantaged, Equity—Preferred, Equity—Convertible Bond Loan Participation Mortgage-Backed Multi-Strategy Non-U.S. Funds • • • Foreign Equity—Country Specific, Foreign Equity—Geographic Region, Global Equity—General, Global Equity—Growth & Income, Global Equity—Dividend Global Fixed Income Global Multi-Strategy The closed-end funds that invest in equity securities may or may not use a growth or value strategy and may include funds investing in securities of issuers of any market capitalization. Closed-end funds that invest in non-U.S. issuers may include issuers in emerging markets. Closed-end funds that invest in fixed income securities may invest in securities of any credit quality, including below investment grade (so-called “junk bonds”). Within the closed-end fund investment strategies, TJH currently has eight (8) sub-strategies, all within its Managed (Composite) Portfolio Program: Herzfeld Balanced & Flexible Composite: includes all portfolios that invest in closed-end funds with the goal of maximizing risk adjusted total return. There is no restriction on asset class weighting, although the goal is to have wide level of diversification across sectors. Herzfeld Fixed Income Composite: comprised of portfolios invested in closed-end funds which invest in U.S. Fixed Income Market funds with the goal of maximizing risk adjusted total return. Herzfeld Foreign Equity & Fixed Income Composite: comprised of portfolios which invest in non-U.S. Fixed Income & Equity closed-end funds with the goal maximizing risk adjusted total return. 12  Herzfeld US Equity Composite: comprised of portfolios which invest in U.S. Equity closed- end funds with the goal of maximizing risk adjusted total return. Herzfeld Municipal Bond Composite: comprised of portfolios which invest in closed-end funds of the U.S. Municipal Bond market with the goal of maximizing risk adjusted total return. Herzfeld Special Situations Composite: comprised of portfolios which invest in closed-end funds which may undergo a corporate action. Our objective is to maximize risk adjusted total return. Herzfeld Preferred Composite: comprised of portfolios which invest in preferred shares, baby bonds, and senior notes. Our objective is to maximize risk adjusted total return. Herzfeld SPAC Composite: comprised of portfolios which invest in Special Purpose Acquisition Companies (SPAC’s). Our objective is to maximize risk adjusted total return. Herzfeld Credit Income Strategy: The Firm’s credit income strategy is implemented through its management of the HERZ Fund. The primary investment objective of the HERZ Fund is maximizing risk adjusted total returns with a secondary objective of generating high current income for stockholders. The HERZ Fund seeks to achieve its investment objectives by investing primarily in equity and junior debt tranches of collateralized loan obligations, or “CLOs”. CLOs are portfolios of collateralized loans consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across various industry sectors. The HERZ Fund investment team utilizes a variety of methods to proactively source and analyze CLO investments, including leveraging its management team’s industry experience, using the investment team’s professional networks, performing due diligence on issuers and their management, and utilizing third party and, in some cases, proprietary financial and analytical models to aid in the selection and monitoring of investments. Potential investments undergo a detailed review by the Firm’s portfolio management and investment analyst personnel, which includes consideration of a number of factors, including competitive strengths/weaknesses of the CLO equity issuer, of the issuer’s financial performance (historical and projected), and overall business of the issuer, including products, services, management, sponsor, industry and competition. Investments that satisfy the Firm’s underwriting criteria are reviewed by the portfolio management team, which must approve the investment. Once an investment is acquired, it is reviewed on an ongoing basis as appropriate by the relevant portfolio manager(s). 13  Risk of Loss Principal Risks While TJH seeks to manage accounts so that risks are appropriate to the return potential for the strategy, it is often not possible to fully mitigate risks. As with any investment, loss of principal is a risk of investing in accordance with the investment strategies described above. The following summary of risk factors does not claim to be a complete account or explanation of the risks involved in an investment strategy nor do all risks apply to each strategy. Existing and prospective clients are encouraged to consult their own financial advisors and legal and tax professionals, and the investment guidelines, prospectuses or offering memorandum and other Governing Documents specific to each strategy before considering any services of TJH. In addition, due to the ever- changing nature of the markets, strategies may be subject to additional risk factors not mentioned below. Possibility of Losses. An investment in one of TJH’s strategies is speculative and involves a high degree of risk, including the risk that the entire amount invested may be lost. The value of interests in the Registered Fund, Private Funds or SMAs will fluctuate based upon a multitude of factors, including the financial condition, results of operations and prospects of the issuers of the underlying securities; governmental intervention; market conditions; and local, regional, national and global economic conditions. Therefore, investors may lose all or a portion of their principal invested if the trading strategies are not successful. Active trading can impact investment performance after factoring brokerage commissions, other transaction costs and taxes. Investment in Caribbean Basin securities involves risk of investment on foreign exchanges and, in some cases, currency risk. Closed-End Funds Risk. Investment in closed-end funds (“CEFs”) may expose the client to negative performance and additional expenses associated with investment in such funds, and increased volatility. CEFs frequently trade at a discount from their net asset value, which may affect whether the client will realize gain or loss upon its sale of the CEFs’ shares. CEFs may employ leverage, which also subjects the CEF to increased risks such as increased volatility. CEFs trade on the securities exchanges and are subject to some of the same risks associated with trading equity securities including market fluctuation. In addition, investments in CEFs carry certain principal risks attributable the particular CEFs, depending upon the specific strategy or investment objective of the respective CEF. Those risks may include: Commodity and Commodity-linked Instruments Risk. The risk that investments in commodities or commodity-linked notes will subject the CEF’s portfolio to greater volatility than investments in traditional securities, or that commodity-linked instruments will experience returns different from the commodities they attempt to track. Convertible Securities Risk. The risk that the value of a convertible security held by the CEF will decline as interest rates rise and/or vary with fluctuations in the market value of the underlying securities, or that the security will be called for redemption at a time and/or 14  price unfavorable to the CEF. Credit Risk. The risk that the issuer of a security will fail to pay interest or principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of the security to decline. Derivatives Risk. The risk that the CEF will incur a loss greater than the CEF’s investment in, or will experience greater share price volatility as a result of investing in, a derivative contract. Derivatives may include, among other things, futures, options, forwards and swap agreements and may be used in order to hedge portfolio risks, create leverage, or to attempt to increase yield. Emerging Market Investing Risk. The risk that prices of emerging markets securities will be more volatile, or will be more greatly affected by negative conditions, than those of their counterparts in more established foreign markets. Equity-Linked Instruments Risk. The risk that, in addition to market risk and other risks of the referenced equity security, the CEF may experience a return that is different from that of the referenced equity security. Equity-linked instruments also subject the CEF to counterparty risk, including the risk that the issuing entity may not be able to honor its financial commitment, which could result in a loss of all or part of the CEF’s investment. Equity Real Estate Investment Trust (REIT) Securities Risk. The risk that, in addition to the risks associated with investing in the real estate industry, the value of the CEF’s shares will be negatively affected by factors specific to investing through a pooled vehicle, such as through poor management of the REIT or REIT-like entity, concentration risk, or other risks typically associated with investing in small or medium market capitalization companies. Equity Securities Risk. The risk that events negatively affecting issuers, industries or financial markets in which the CEF invests will impact the value of the stocks held by the fund and, thus, the value of the CEF’s shares over short or extended periods. Investments in a particular style or in small or medium-sized companies may enhance that risk. Exchange-Traded Funds (ETFs) Risk. The risk that the value of an ETF will be more volatile than the underlying portfolio of securities the ETF is designed to track, or that the costs to the CEF of owning shares of the ETF will exceed those the CEF would incur by investing in such securities directly. Foreign Investing Risk. The risk that the prices of foreign securities in the CEF’s portfolio will be more volatile than those of domestic securities, or will be negatively affected by currency fluctuations, less regulated or liquid securities markets, or economic, political or other developments. Geographic Concentration Risk. The risk that events negatively affecting the geographic location where the CEF focuses its investments will cause the value of the CEF’s shares to decrease, perhaps significantly. 15  Growth Stocks Risk. The risk that the CEF’s investments in growth stocks will be more volatile than investments in other types of stocks, or will perform differently from the market as a whole and from other types of stocks. High-Yield/High-Risk Fixed Income Securities (Junk Bonds) Risk. The risk that the issuers of high-yield/high-risk securities in the CEF’s portfolio will default, that the prices of such securities will be volatile, and that the securities will not be liquid. Income Risk. The risk that income received from the CEF will vary widely over the short- and/or long-term and/or be less than anticipated if the proceeds from maturing securities in the CEF are reinvested in lower-yielding securities. Industry/Sector Concentration Risk. The risk that events negatively affecting an industry or market sector in which a CEF focuses its investments will cause the value of the CEF’s shares to decrease, perhaps significantly. To the extent that the CEF invests a significant portion of its portfolio in one or more industries (such as communications, consumer cyclicals and consumer non-cyclicals) or sectors, the CEF is more vulnerable to conditions that negatively affect such industries or sectors as compared to a fund that is not significantly invested in such industries or sector. Infrastructure-Related Investment Risk. The risk that the value of the CEF’s shares will decrease as a result of conditions, such as general or local economic conditions and political developments, changes in regulations, environmental problems, casualty losses, and changes in interest rates, negatively affecting the infrastructure companies in which the CEF invests. Interest Rate Risk. The risk that when interest rates rise, the values of the CEF’s debt securities, especially those with longer maturities, will fall. Limited Number of Investments Risk. The risk that the CEF’s portfolio will be more susceptible to factors adversely affecting issuers of securities in the CEF’s portfolio than would a fund holding a greater number of securities. Liquidity Risk. The risk that certain securities may be difficult or impossible to sell at the time and price beneficial to the CEF. Loan Risk. The risks that, in addition to the risks typically associated with high-yield/high- risk fixed income securities, loans (including floating rate loans) in which the CEF invests may be unsecured or not fully collateralized, may be subject to restrictions on resale, and/or some loans may trade infrequently on the secondary market. Loans settle on a delayed basis, potentially leading to the sale proceeds of loans not being available to meet redemptions for a substantial period of time after the sale of the loans. Market Volatility Risk. The risk that the value of the securities in which the CEF invests may go up or down in response to the prospects of individual issuers and/or general 16  economic conditions. Such price changes may be temporary or may last for extended periods. Master Limited Partnership (MLP) Risk. The risk that the CEF’s investments in MLP units will be negatively impacted by tax law changes, changes in interest rates, the failure of the MLP's parent or sponsor to make payments as expected, regulatory developments or other factors affecting the MLP’s underlying assets, which are typically in the natural resources and energy sectors. Mortgage-Backed and Asset-Backed Securities Risk. The risk that changes in interest rates will cause both extension and prepayment risks for mortgage-backed and asset-backed securities in which the CEF invests, or that an impairment of the value of collateral underlying such securities will cause the value of the securities to decrease. Municipal Bond Market Risk. The risk that events negatively impacting a particular municipal security, or the municipal bond market in general, will cause the value of the CEF’s shares to decrease, perhaps significantly. Preferred Stock Risk. The risk that a preferred stock will decline in price, fail to pay dividends when expected, or be illiquid. Sector Focused Investing Risk. The risk that events negatively affecting a particular market sector in which the CEF focuses its investments will cause the value of the CEF’s shares to decrease, perhaps significantly. Short Sales Risk. The risk that the CEF will experience a loss if the price of a borrowed security increases between the date of a short sale and the date on which the CEF replaces the security. Tax-Exempt Securities Risk. The risk that tax-exempt securities may not provide a higher after-tax return than taxable securities, or that the tax-exempt status of such securities may be lost or limited. Unrated Fixed Income Securities Risk. The risk that the CEF will be unable to accurately assess the quality of an unrated fixed income security, so that the CEF invests in a security with greater risk than intended, or that the liquidity of unrated fixed income securities in which the CEF invests will be hindered, making it difficult for the CEF to sell them. U.S. Government Securities Risk. The risk that U.S. Government securities in the CEF’s portfolio will be subject to price fluctuations, or that an agency or instrumentality will default on an obligation not backed by the full faith and credit of the United States. Value Stocks Risk. The risk that the CEF will underperform when value investing is out of favor or that the CEF’s investments will not appreciate in value as anticipated. 17  Special Purpose Acquisition Company Risk. A special purpose acquisition company (a “SPAC”) is a publicly traded company formed for the purpose of raising capital through an initial public offering to fund the acquisition, through a merger, capital stock exchange, asset acquisition or other similar business combination, of one or more undervalued operating businesses. Following the acquisition of a target company, a SPAC typically would exercise control over the management of such target company in an effort to increase the value of such target company. Capital raised through the initial public offering of securities of a SPAC is typically placed into a trust until the target company is acquired or a predetermined period of time elapses. Investors in a SPAC would receive a return on their investment in the event that a target company is acquired and such target company’s value increased. In the event that a SPAC is unable to locate and acquire target companies by the deadline, the SPAC would be forced to liquidate its assets, which may result in losses due to the expenses and liabilities of the SPAC. Investors in a SPAC are subject to the risk that, among other things, (i) such SPAC may not be able to locate or acquire target companies by the deadline, (ii) assets in the trust may be subject to third-party claims against such SPAC, which may reduce the per share liquidation price received by the investors in the SPAC, (iii) such SPAC may be exempt from the rules promulgated by the SEC to protect investors in “blank check” companies, such as Rule 419 promulgated under the Securities Act, so that investors in such SPAC may not be afforded the benefits or protections of those rules, (iv) such SPAC may only be able to complete one business combination, which may cause it to be solely dependent on a single business, (v) the value of any target company may decrease following its acquisition by such SPAC, (vi) the value of the funds invested and held in the trust decline, (vii) the inability to redeem due to the failure to hold the securities in the SPAC on the record date or the failure to vote against the acquisition and (viii) if the SPAC is unable to consummate a business combination, public stockholders will be forced to wait until the deadline before liquidating distributions are made. In addition, most SPACs are illiquid and have a concentrated shareholder base that tends to be comprised of hedge funds (at least at inception). The Firm may cause clients to invest in a SPAC that, at the time of investment, has not selected or approached any prospective target businesses with respect to a business combination. In such circumstances, there may be limited basis for the Firm to evaluate the possible merits or risks of such SPAC’s investment in any particular target business. To the extent that a SPAC completes a business transaction, it may be affected by numerous risks inherent in the business operations of the acquired company or companies. For these and additional reasons, investments in SPACs are speculative and involve a high degree of risk. Credit Strategy Risk: Risks of Investing in U.S. Senior Secured Loans. Client may obtain exposure to U.S. senior secured loans directly or indirectly through investments in CLOs, other debit securities or other securities of issuers who invest in such loans, or through other financial instruments. Such loans may become nonperforming or impaired for a variety of reasons. Nonperforming or impaired loans may require substantial workout negotiations or restructuring that may entail a substantial reduction in the interest rate and/or a substantial write-down of the principal of the loan. In addition, because of the unique and customized nature of a loan agreement and the private syndication of a loan, certain loans may not be purchased or sold as easily as publicly traded securities, and, historically, the trading volume in the loan market has been small relative to other markets. Loans may encounter trading delays due to their unique and customized nature, and transfers may require the 18  consent of an agent bank and/or borrower. Risks associated with senior secured loans also include the fact that prepayments generally may occur at any time without premium or penalty. Risks of Investing in CLOs. Investments in CLO securities and other related structured finance securities involve many risks. CLOs and structured finance securities are generally backed by an asset or a pool of assets (typically senior secured loans and other credit- related assets in the case of a CLO) which serve as collateral. Investors in CLOs and related structured finance securities ultimately bear the credit risk of the underlying collateral. In the case of most CLOs, the structured finance securities are issued in multiple tranches, offering investors various maturity and credit risk characteristics, often categorized as senior, mezzanine and subordinated/equity according to their degree of risk. If there are defaults or the relevant collateral otherwise underperforms, scheduled payments to senior tranches of such securities take precedence over those of mezzanine tranches, and scheduled payments to mezzanine tranches have a priority in right of payment to subordinated/equity tranches. In light of the above considerations, CLOs and other structured finance securities may present risks similar to those of other types of debt obligations and, in fact, such risks may be of greater significance in the case of CLOs and other structured finance securities. For example, investments in structured vehicles, including equity and junior debt securities issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. In addition to the general risks associated with investing in debt securities, CLO securities carry additional risks, including, but not limited to: (1) the possibility that distributions from collateral assets will not be adequate to make interest or other payments; (2) the quality of the collateral may decline in value or default; (3) the fact that investments in CLO equity and junior debt tranches will likely be subordinate in right of payment to other senior classes of CLO debt; and (4) the complex structure of a particular security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. Additionally, changes in the collateral held by a CLO may cause payments on the instruments held by a Client account to be reduced, either temporarily or permanently. Structured investments, particularly the subordinated interests in which a Client account may invest, are less liquid than many other types of securities and may be more volatile than the assets underlying the CLOs that a Client may hold. In addition, CLOs and other structured finance securities may be subject to prepayment risk. Further, the performance of a CLO or other structured finance security may be adversely affected by a variety of factors, including the security’s priority in the capital structure of the issuer thereof, the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans or other assets that are being securitized, remoteness of those assets from the originator or transferor, the adequacy of and ability to realize upon any related collateral and the capability of the servicer of the securitized assets. There are also the risks that the trustee of a CLO does not properly carry out its duties to the CLO, potentially resulting in loss to the CLO. In addition, the complex structure of the security may produce unexpected investment results, especially during times of market stress or volatility. Investments in structured finance securities may also be subject to liquidity risk. 19  Risks of Investing in Portfolio Debt Securities: Investing in debt securities generally (“Portfolio Debt Securities”), may involve a number of risks including: Dependence on Issuer Sponsors. The Firm may at times be dependent on relationships with sponsors of funds and investment vehicles to identify potential investment opportunities in Portfolio Debt Securities. If such sponsors find new sources of debt capital that are more advantageous to them, or if the Firm suffers reputational harm such that sponsors do not want to work with the Firm, the Firm could have difficulty finding and sourcing new investment opportunities. In addition, sponsors may experience financial distress, which may be related or unrelated to the issuers in which a Client account invests. Once in financial distress, such sponsors may be unable to provide the same level of managerial, operating or financial support to funds and investment vehicles, resulting in an increased risk of default or inability to repay remaining principal. Funding Defaults. Issuers of Portfolio Debt Securities may experience investor funding defaults, poor investment performance, financing limitations and other events that may impair their ability to meet their obligations under a Portfolio Debt Security. Such events could impair the Portfolio Debt Securities in which a Client account invests. Need for Follow-up Funding. A Client may be called upon to provide follow-up funding for or may have the opportunity to increase its exposure to an issuer of Portfolio Debt Securities or an underlying portfolio company thereof. There can be no assurance that a Client (or other Clients holding the same security) will wish to make such follow-on investments or have available capital to do so, and the inability to make such follow-on investments may have a substantial negative impact on such issuer or other issuer in need of capital or may diminish a Client’s ability to influence such issuer’s or other issuer’s future development. Ability to Extend Financing on Advantageous Terms; Competition and Supply. The success of any credit strategy depends in part on the ability of the Firm to obtain access to Portfolio Debt Securities on advantageous terms. In extending financing to borrowers, lenders will compete with a broad spectrum of competitors, some of which may be willing to lend money on terms more favorable to borrowers. Such competing lenders may include private investment funds, public funds, commercial and investment banks, commercial financing companies and other entities. Some competitors may have a lower cost of funds or access to additional funding sources. In addition, some competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships. Also, the Firm may ultimately choose not to compete for investment opportunities based on interest rates. Ultimately, increased competition for, or a diminution in the available supply of, qualifying borrowers may result in lower yields on financing extended to such borrowers, which could reduce returns to Clients. 20  Risk of Dependence on Issuer Management and Lack of Registered Investment Company Status. With respect to investments in CLOs, Portfolio Debt Securities, and certain other pooled investment vehicles, the Firm will rely on the issuer’s manager to administer and monitor the applicable portfolio of collateral. The actions (or inactions) of such managers may significantly affect the return on, or risk profile of, a Client’s investment. The Firm will also rely on issuer management to act in the best interests of the particular issuer that they manage. If any manager were to act in a manner that was not in the best interest of the issuer that it manages (e.g., acting with gross negligence, with reckless disregard or in bad faith), this could adversely impact the overall performance of a Client’s investments. In addition, certain pooled investment vehicles (including CLO securities and certain Portfolio Debt Security issuers) in which the Firm may invest are not registered as investment companies under the Investment Company Act or otherwise regulated under the Investment Company Act. As a result, investors in these issuers are not afforded the protections that shareholders in an investment company subject to regulation under the Investment Company Act would have. Interest Rate Risk The fair value of certain of a Client’s investments may be significantly affected by changes in interest rates. In general, rising interest rates will negatively affect the price of a fixed rate debt instrument and falling interest rates will have a positive effect on the price of a fixed rate instrument. In addition, the floating rate investments in which a Client invests (including CLOs and certain Portfolio Debt Securities) may be sensitive to fluctuations in interest rates due to a potential mismatch between the timing of interest rate resets on the issuer’s assets and liabilities. Furthermore, hedging interest rate risk may not be possible or desirable in such circumstances. In the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses that may adversely affect the cash flows from investments held in a Client account and/or such investments’ fair value. Although senior secured loans are generally floating rate instruments, certain investments in senior secured loans through investments in junior equity and debt tranches of CLOs are sensitive to interest rate levels and volatility. For example, because CLO debt securities are floating rate securities, a reduction in interest rates would generally result in a reduction in the coupon payment and cash flow received on the CLO debt investments. Further, in the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses that may adversely affect cash flow, fair value of the assets and operating results. Changing Interest Rate Environment. Over the past several years, interest rates in the U.S. have been at historic lows. As of the date of this Brochure, interest rates in the U.S. have increased from all-time lows, but remain below historic averages. There can be no guarantee that increases in interest rates in the U.S. will not continue, increasing a Client’s exposure to risks associated with rising interest rates. Generally, Client accounts should expect to have exposure, whether directly or indirectly (including through Portfolio Debt Securities and CLOs), to loans and other investments with floating interest rates. A rising interest rate environment may increase loan defaults, resulting in losses for such issuers. In addition, 21  increasing interest rates may lead to higher prepayment rates, as corporate borrowers look to avoid escalating interest payments or refinance floating rate loans. However, where the loans have interest rate floors, if the reference rate is below the average floor, there may not be corresponding increases in investment income which could result in the issuer not having adequate cash to make interest or other payments. Credit Risk. A CLO, Portfolio Debt Security, or their underlying assets, or any other type of credit investment in a Client’s portfolio may decline in price or fail to pay interest or principal when due because the issuer or debtor, as the case may be, experiences a decline in its financial status. Non-payment would result in a reduction of a Client’s income and potentially a decrease in the Client account’s NAV. With respect to investments secured by underlying collateral, there can be no assurance that liquidation of the collateral would satisfy the issuer’s obligation in the event of non-payment of scheduled dividends, interest or principal or that such collateral could be readily liquidated. In the event of bankruptcy of an issuer, a Client could experience delays or limitations with respect to its ability to realize the benefits of any collateral securing the security. To the extent that the credit rating assigned to a security in a Client’s portfolio is downgraded, the market price and liquidity of such security may be adversely affected. In addition, if a borrower triggers an event of default as a result of failing to make payments when due or for other reasons, a secured lender could force the borrower to liquidate its assets. This could result in full loss of value for investors that hold an unsecured or subordinated position in the borrower. Junior debt and equity investments are most likely to suffer a full loss of value in these circumstances. Prepayment Risk. Although the Firm’s valuations and projections take into account certain expected levels of prepayments for certain types of investments, the investments held by a Client account (or their underlying collateral) may be prepaid more quickly than expected. Prepayment rates are influenced by changes in interest rates and a variety of factors beyond the Firm’s control and consequently cannot be accurately predicted. Early prepayments give rise to increased reinvestment risk, as a Client account or the issuers in which it invests might realize excess cash from prepayments earlier than expected. If a Client or an issuer is unable to reinvest such cash in a new investment with an expected rate of return at least equal to that of the investment repaid, this may reduce a Client account’s net income and the fair value of that asset. In most CLO transactions where a Client may be a CLO debt investor, such Client is subject to prepayment risk in that the holders of a majority of the equity tranche can direct a call or refinancing of a CLO, which would cause such CLO’s outstanding CLO debt securities to be repaid at par. In addition, the reinvestment period for a CLO may terminate early, which may cause the holders of the CLO’s securities to receive principal payments earlier than anticipated. There can be no assurance that a Client account will be able to reinvest such amounts in an alternative investment that provides a comparable return relative to the credit risk assumed. 22  Leverage Risk. A Client account may incur, directly or indirectly, through one or more special purpose vehicles, indebtedness for borrowed money through the use of credit facilities or otherwise, as well as leverage in the form of repurchase and reverse agreements, total return swaps, preferred shares, derivative transactions and other structures and instruments, subject to the Client account’s governing documents and restrictions. Such leverage may be used for the acquisition and financing of investments, to pay fees and expenses and for other purposes. Such leverage may be secured and/or unsecured and senior and/or subordinated. Any such borrowings do not include embedded or inherent leverage in certain investment structures in which a Client may invest. CLOs and certain Portfolio Debt Securities are leveraged vehicles by their very nature. Accordingly, there may be a layering of leverage in a Client’s overall investment portfolio. The more leverage is employed, the more likely a substantial change will occur in an account’s NAV. Accordingly, any event that adversely affects the value of an investment would be magnified to the extent leverage is utilized. For instance, any decrease in an account’s income would cause net income to decline more sharply than it would have had an account not borrowed. Such a decline could also negatively affect a Client account’s ability to make distributions. Leverage is generally considered a speculative investment technique. The availability of, and costs associated with, incurring debt are subject to prevailing economic conditions and competitive pressures. A Client account’s ability to service any debt that an account incurs will depend largely on that account’s financial performance. The cumulative effect of the use of leverage with respect to any investments in a market that moves adversely to such investments could result in a substantial loss that would be greater than if an account’s investments were not leveraged. In addition, secured credit facilities pursuant to which certain Client accounts are borrowers are subject to financial and operating covenants that restrict an account’s business activities. These limitations could hinder a Client account’s ability to finance additional loans and investments or in the case of a Registered Fund to make the distributions required to maintain its status as a “regulated investment company” under Subchapter M of the Internal Revenue Code. Asset-Backed Securities Risk. Certain Client accounts may invest in asset-backed securities (“ABS”). ABS are securities that entitle the holders to receive payments that depend primarily on the cash flow from a specified pool of financial assets, either fixed or revolving, that by their terms convert — if paid in accordance with their tenor — into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the ABS. Holders of ABS, including certain Client accounts, bear various risks, including credit risks, liquidity risks, interest-rate risks, market risks, operations risks, structural risks and legal risks. Credit risk is an important issue in ABS because of the significant credit risks inherent in the underlying collateral and because issuers are primarily private entities. The structure of an ABS and the terms of the investors’ interest in the collateral can vary widely depending on the type of collateral, the desires of investors and the use of credit enhancements. Although the basic elements of all ABS are similar, individual transactions can differ markedly in both structure and execution. Important determinants of the risk associated with 23  issuing or holding the securities include the process by which principal and interest payments are allocated and distributed to investors, how credit losses affect the issuing vehicle and the return to investors in such ABS, whether collateral represents a fixed set of specific assets or accounts, whether the underlying collateral assets are revolving or closed-end, under what terms (including the maturity of the ABS itself) any remaining balance in the accounts may revert to the issuing entity and the extent to which the entity that is the actual source of the collateral assets is obligated to provide support to the issuing vehicle or to the investors in such ABS. Mortgage-Backed Securities Risk. Certain Client accounts may invest in mortgage- backed securities (“MBS”). Investing in MBS involves the risks typically associated with investing in traditional fixed-income securities (including interest rate and credit risk) as well as the risk of principal prepayment and exposure to real estate. The rate of prepayments on underlying mortgages affects the price and volatility of a MBS, and may have the effect of shortening or extending the effective maturity of such security. Different types of MBS are subject to varying degrees of prepayment risk. Residential MBS generally provide for prepayment of principal at any time due to, among other reasons, prepayments on the underlying mortgage loans. As a result of prepayments, a Client account may be required to reinvest assets at an inopportune time resulting in a lower return. The risks of investing in such instruments reflect the risks of the underlying obligors, as well as the real estate that secures the instruments. If a Client account purchases MBS that are “subordinated” to other interests in the same mortgage pool, the account as a holder of those securities may only receive payments after the pool’s obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the account as a holder of such subordinated securities, reducing the values of those securities or in some cases rendering them worthless; the risk of such defaults is generally higher in the case of mortgage pools that include so-called “sub-prime” mortgages. An unexpectedly high or low rate of prepayments on a pool’s underlying mortgages may have a similar effect on subordinated securities. A mortgage pool may issue securities subject to various levels of subordination; the risk of non-payment affects securities at each level, although the risk is greater in the case of more highly subordinated securities. Subordinated and Unsecured Investments Risk. Certain Client accounts invest in securities that are subordinate in right of payment to investors in parts of the issuer’s capital structure (including the junior and equity tranches of CLO securities). These securities are subject to additional risks that the cash flows of the issuer’s underlying obligors, and the value of such obligors’ collateral, may be insufficient to make scheduled payments of principal and interest to a Client account. Certain Client accounts also invest in unsecured debt obligations (including Portfolio Debt Securities), which are generally subject to a higher degree of credit, insolvency and liquidity risk than is typically associated with secured obligations. While unsecured debt ranks senior to common stock or preferred equity of an issuer, unsecured debt 24  effectively ranks subordinate in priority of payment to secured debt and may not have the benefit of financial covenants common for secured debt. Unlike secured debt, unsecured debt does not have the benefit of a lien with respect to specific collateral. In any liquidation, dissolution, bankruptcy or similar proceeding involving an issuer, the holders of the issuer’s secured debt may assert rights against the assets pledged to secure that debt in order to receive full payment of their debt before the assets may be used to pay other creditors of the issuer, including a Client account. Accordingly, unsecured debt typically involves a heightened level of risk of loss of principal. Secured Debt Investments Risk. The assets of the portfolio of certain Client accounts may include secured debt, which involve various degrees of risk of a loss of capital. The factors affecting an issuer’s secured debt, and its overall capital structure, are complex. Some secured loans may not necessarily have priority over all other debt of an issuer. For example, some secured loans may permit other secured obligations (such as overdrafts, swaps or other derivatives made available by members of the syndicate to the company) or involve secured loans only on specified assets of an issuer. Issuers of secured loans may have two tranches of secured debt outstanding each with secured debt on separate collateral. In the event of Chapter 11 filing by an issuer, the U.S. Bankruptcy Reform Act of 1978, as amended, authorizes the issuer to use a creditor’s collateral and to obtain additional credit by grant of a priority lien on its property, senior even to liens that were first in priority prior to the filing, as long as the issuer provides what the presiding bankruptcy judge considers to be “adequate protection” which may but need not always consist of the grant of replacement or additional liens or the making of cash payments to the affected secured creditor. The imposition of priority liens on an account’s collateral would adversely affect the priority of the liens and claims held by the account and could adversely affect the account’s recovery on the affected debt. Any secured debt is secured only to the extent of its lien and only to the extent of underlying assets or incremental proceeds on already secured assets. Moreover, underlying assets are subject to credit, liquidity, and interest rate risk. Investment Grade Debt Securities Investments Risk. Investments made by certain Client accounts are expected to be rated investment-grade (or otherwise exhibit characteristics similar to investment-grade rated fixed income debt securities). The credit ratings on investment grade debt securities are intended to reflect (but will not necessarily reflect) relatively less credit and liquidity risk than non-investment grade securities such as high-yield debt securities or mezzanine debt securities. Risks of investment grade debt securities may include (among others): (i) marketplace volatility resulting from changes in prevailing interest rates; (ii) the absence, in many instances, of collateral security; (iii) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause an account to reinvest premature redemption proceeds in lower- yielding debt obligations; and (iv) the declining creditworthiness and the greater potential for insolvency of the issuer of such debt securities during periods of rising credit spreads or interest rates or economic downturn. 25  High-Yield (or “Junk”) and Lower-Rated Investments Risk. In addition to exposure to senior secured loans, certain Client accounts may have limited exposure to other asset classes including unsecured loans, high yield bonds, emerging market loans or bonds and structured finance securities with underlying exposure to collateralized debt obligations (“CDO”) tranches, residential mortgage-backed securities, commercial mortgage backed securities, trust preferred securities and other types of securitizations. These investments, including certain senior secured loans, to which an account may obtain direct or indirect exposure may be lower rated securities. Securities rated lower than Baa by Moody’s or lower than BBB by S&P or Fitch are sometimes referred to as “high yield” or “junk.” High-yield debt securities have greater credit and liquidity risk than investment grade obligations. High-yield debt securities are generally unsecured and may be subordinated to certain other obligations of the issuer. The lower rating of high-yield debt securities and below investment grade loans reflect a greater possibility that adverse changes in the financial condition of an issuer, and/or general economic conditions, may impair the ability of the issuer to make payments of principal or interest. Risks of high-yield debt securities may include (among others): (i) limited liquidity and secondary market support; (ii) substantial marketplace volatility resulting from changes in prevailing interest rates; (iii) subordination to the prior claims of banks and other senior lenders; (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause an account to reinvest premature redemption proceeds in lower-yielding debt obligations; (v) the possibility that earnings of the high-yield debt security issuer may be insufficient to meet its debt service; (vi) the declining creditworthiness and potential for insolvency of the issuer of such high-yield debt securities during periods of rising interest rates and/or economic downturn; and (vii) greater susceptibility to losses and real or perceived adverse economic and competitive industry conditions than higher grade securities. An economic downturn or an increase in interest rates could severely disrupt the market for high-yield debt securities and adversely affect the value of outstanding high-yield debt securities and the ability of the issuers thereof to repay principal and interest. Issuers of high- yield debt securities may be highly leveraged and may not have available to them more traditional methods of financing. The risk associated with acquiring (directly or indirectly) the securities of such issuers generally is greater than is the case with highly rated securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers of high-yield debt securities may be more likely to experience financial stress, especially if such issuers are highly leveraged. During such periods, timely service of debt obligations also may be adversely affected by specific issuer developments, or the issuer’s inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by the issuer is significantly greater for the holders of high- yield debt securities because such securities may be unsecured and may be subordinated to obligations owed to other creditors of the issuer of such securities. In addition, an account may incur additional expenses to the extent it (or any investment manager) is required to seek recovery upon a default on a high yield bond (or any other debt obligation) or participates in the restructuring of such 26  obligation. As a result of the limited liquidity of high-yield debt securities, their prices have at times experienced significant and rapid decline when a substantial number of holders (or a few holders of a significantly large “block” of the bonds) decided to sell. In addition, a Client Account may have difficulty disposing of certain high yield debt securities because there may be a thin trading market for such securities. To the extent that a secondary trading market for non-investment grade high-yield debt securities does exist, it is generally not as liquid as the secondary market for highly rated securities. Reduced secondary market liquidity may have an adverse impact on an Account’s direct or indirect ability to dispose of particular issues in response to a specific economic event such as deterioration in the creditworthiness of the issuer of such securities. Mezzanine Debt Securities Investments Risk. Mezzanine debt securities are generally unrated or below investment grade rated investments that have greater credit and liquidity risk than more highly rated debt obligations. Mezzanine debt securities are typically issued in traditional private placements or in connection with acquisitions and other business combinations and have no trading market. Moreover, mezzanine debt securities are generally unsecured and subordinate to other obligations of the obligor and are subject to many of the same risks as those associated with high-yield debt securities. Adverse changes in the financial condition of the obligor of mezzanine debt securities or in general economic conditions (including, for example, a substantial period of rising interest rates or declining earnings) or both may impair the ability of the obligor to make payment of principal and interest. Issuers of mezzanine debt securities may be highly leveraged, and their relatively high debt-to-equity ratios create increased risks that their operations might not generate sufficient cash flow to service their debt obligations. Preferred Stock Risk. Preferred stocks are unique securities that combine some of the characteristics of both common stock and bonds. Some preferred securities offer a fixed rate of return with no maturity date. Because those preferred securities never mature, they act like long-term bonds, can be more volatile than other types of preferred securities and may have heightened sensitivity to changes in interest rates. Other preferred securities have a variable dividend, generally determined on a quarterly or other periodic basis, either according to a formula based upon a specified premium or discount to the yield on particular U.S. Treasury securities or based on an auction process, involving bids submitted by holders and prospective purchasers of such stocks. Because preferred securities represent an equity ownership interest in a company, and are typically subordinated to bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income, they are generally subject to greater credit risk than those debt instruments and, with respect to issuers that are subject to the provisions of the Investment Company Act, may be restricted from receiving dividend payments under certain circumstances. Accordingly, their value usually will react more strongly than bonds and other debt instruments to actual or perceived changes in a company’s financial condition or prospects or to fluctuations in the equity markets. Preferred security holders generally have no voting rights or their voting rights are limited to certain 27  extraordinary transactions or events. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer. Preferred stock also may be subject to optional or mandatory redemption provisions. Equity Securities Risk. Certain Client accounts, may invest in equity and equity- related securities, including securities that are convertible into equity securities. Equity securities in general fluctuate in value in response to many factors, including the activities, results of operations and financial condition of individual companies, the business market in which individual companies compete, industry market conditions, interest rates and general economic environments and movements in the equity markets in general. As a result, an account may suffer losses if it invests in equity instruments of issuers whose performance diverges from the Firm’s expectations or if equity markets generally move in a single direction. In addition, the shares of publicly-listed business development companies and registered closed-end investment companies have historically, on average, traded at a discount to their net asset value. As a result, it is possible that a Client account will not realize the net asset value per share of common stock in connection with any such investment in a publicly-listed business development company or registered closed- end investment company. Further, shares of publicly-listed business development companies and registered closed-end investment companies may be thinly traded, giving rise to liquidity risk. Convertible Securities Risk. Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar income risk quality. Convertible securities have both equity and fixed characteristics. Like all fixed income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock (or at all). Liquidity Risk. The investments that the Firm intends to acquire for Client accounts (and, in some cases, such investments’ underlying collateral) generally have limited liquidity. As a result, prices of such investments have at times experienced significant and rapid decline when a substantial number of holders (or a few holders of a significantly large “block” of the securities) decided to sell. In addition, a Client account (or the issuers in which an account invests) may have difficulty disposing of certain of such investments because there may be a thin trading market for such securities. Reduced secondary market liquidity would limit an account’s ability to dispose of particular securities (directly or indirectly) in response to a specific economic event such as deterioration in the creditworthiness of the issuer of such 28  securities. The securities issued by CLOs and Portfolio Debt Securities generally offer less liquidity than investment grade or high-yield debt securities issued by larger, traditional corporate borrowers. In addition, certain securities in which accounts invest are subject to transfer restrictions (including financial and other eligibility requirements on prospective transferees). Other investments an account may purchase in privately negotiated transactions may also be illiquid or subject to legal restrictions on their transfer. As a result of this illiquidity, an account’s ability to sell certain investments quickly, or at all, in response to changes in economic conditions and to receive a fair price when selling such investments may be limited, which could prevent an account from making sales to mitigate losses on such investments. Furthermore, illiquid or less liquid investments may be more difficult to fair value. Bankruptcy Risk. A Client account may hold investments in issuers that are experiencing, or are expected to experience, severe financial difficulties, which may never be overcome and may lead to uncertain outcomes. The bankruptcy courts of the various jurisdictions in which any such issuer may file bankruptcy would have broad discretion to control the terms of a reorganization. There are a number of significant risks inherent in the bankruptcy process. While creditors are generally given an opportunity to object to significant actions, there can be no assurance that a bankruptcy court would not approve actions that would be contrary to the interests of a Client account. Investments in issuers that enter bankruptcy may be adversely affected by laws related to, among other things, fraudulent conveyances, voidable preferences, lender liability or the bankruptcy court’s discretionary power to disallow, subordinate or disenfranchise particular claims or re-characterize investments made in the form of debt as equity contributions. Fraud Risk. Of paramount concern of investing in the primary market is the possibility of material misrepresentation or omission on the part of an issuer. Such inaccuracy or incompleteness may adversely affect the valuation of the assets supporting a Client account’s investment, and, in the case of secured financing, may adversely affect the ability to perfect or effectuate a lien on underlying collateral securing the financing. The Firm and Client accounts will rely upon the accuracy and completeness of representations made by the issuer to the extent reasonable, but cannot guarantee such accuracy or completeness. Specific CLO Equity Related Risks: Risk of Investing in CLOs. Investments in CLO securities involve certain risks. CLOs are generally backed by an asset or a pool of assets that serve as collateral. The Fund and other investors in CLO securities ultimately bear the credit risk of the underlying collateral. Most CLOs are issued in multiple tranches, offering investors various maturity and credit risk characteristics, often categorized as senior, mezzanine and subordinated/equity according to their degree of risk. If there are defaults or the relevant collateral otherwise underperforms, scheduled payments to senior tranches of such securities take precedence over those of junior tranches which are the focus of our investment strategy, and scheduled payments to junior 29  tranches have a priority in right of payment to subordinated/equity tranches. CLOs may present risks similar to those of the other types of debt obligations and, in fact, such risks may be of greater significance in the case of CLOs. For example, investments in junior debt and equity securities issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. In addition to the general risks associated with investing in debt securities, CLO securities carry additional risks, including: (1) the possibility that distributions from collateral assets will not be adequate to make interest or other payments; (2) the quality of the collateral may decline in value or default; (3) investments in CLO junior debt and equity tranches will likely be subordinate in right of payment to other senior classes of CLO debt; and (4) the complex structure of a particular security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. Changes in the collateral held by a CLO may cause payments on the instruments the Fund holds to be reduced, either temporarily or permanently. Dependence on CLO Managers Risk: The performance of the CLOs in which we invest is highly dependent on the quality of the respective CLO Managers. The CLO Manager’s responsibilities include managing insolvency proceedings, loan workouts and modifications, liquidations, and reporting on the performance of the loan pool to the trustee. Covenant-Lite Loans Risk: Covenant-lite loans may comprise a significant portion of the senior secured loans underlying the CLOs in which we invest. Over the past decade, the senior secured loan market has evolved from one in which covenant- lite loans represented a impact lender because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, to the extent that the CLOs that we invest in hold covenant- lite loans, our CLOs may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants. Interest Rate Risk: The price of certain of our investments may be significantly affected by changes in interest rates. In the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses which may adversely affect the Company’s cash flow, fair value of its assets and operating results. Credit Spread Risk: Credit spread risk is the risk that credit spreads (i.e., the difference in yield between securities that is due to differences in their credit quality) may increase when the market expects below-investment-grade bonds to default more frequently. Widening credit spreads may quickly reduce the market values of below-investment-grade and unrated securities. In recent years, the U.S. capital markets experienced extreme volatility and disruption following the spread of COVID-19, which increased the spread between yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. Central 30  banks and governments played a key role in reintroducing liquidity to parts of the capital markets. Future exits of these financial institutions from the market may reintroduce temporary illiquidity. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on the Fund’s business, financial condition, results of operations and cash flows. Market Risk: Political, regulatory, economic and social developments, and developments that impact specific economic sectors, industries, or segments of the market, can affect the value of our investments. A disruption or downturn in the capital markets and the credit markets could impair our ability to raise capital, reduce the availability of suitable investment opportunities for us, or adversely and materially affect the value of our investments, any of which would negatively affect our business. Credit Risk: Credit Risk: If (1) a CLO in which we invest, (2) an underlying asset of any such CLO, or (3) any other type of credit investment in our portfolio declines in value or fails to pay interest or principal when due because the issuer or debtor, as the case may be, experiences a decline in its financial status, our income, NAV, and/or market price would be adversely impacted. Subordinated Securities Risk: CLO equity securities that we may acquire are subordinated to more senior tranches of CLO debt. CLO equity securities are subject to increased risks of default relative to the holders of superior priority interests in the same CLO. High-Yield Investment Risk: The CLO equity securities that we hold and intend to acquire are typically unrated and are therefore considered speculative with respect to timely payment of interest and repayment of principal. The collateral of typically higher-yield, sub-investment grade underlying CLOs are also investments. Investing in CLO equity securities and other high-yield investments involves greater credit and liquidity risk than investment grade obligations, which may adversely impact our performance. Leverage Risk: The use of leverage, whether directly or indirectly through investments such as CLO equity securities that inherently involve leverage, may magnify our risk of loss. CLO equity securities are very highly leveraged (with CLO equity securities typically being leveraged nine to 13 times), and therefore the CLO securities that we hold and in which we intend to invest are subject to a higher degree of loss since the use of leverage magnifies losses. Liquidity Risk: The market for CLO securities is more limited than the market for other credit related investments. As such, we may not be able to sell such investments quickly, or at all. If we are able to sell such investments, the prices we receive may not reflect our assessment of their fair value or the amount paid for such investments by us. Volatility Risk: Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative 31  time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk. Prepayment Risk: The assets underlying the CLO securities in which we intend to invest are subject to prepayment by the underlying corporate borrowers. In addition, the CLO securities and related investments in which we invest are subject to prepayment risk. If we or a CLO collateral manager are unable to reinvest prepaid amounts in a new investment with an expected rate of return at least equal to that of the investment repaid, our investment performance will be adversely impacted. Reinvestment Risk: CLOs will typically generate cash from asset repayments and sales that may be reinvested in substitute assets, subject to compliance with applicable investment tests. If the CLO collateral manager causes the CLO to purchase substitute assets at a lower yield than those initially acquired (for example, during periods of loan compression or as may be required to satisfy a CLO’s covenants) or sale proceeds are maintained temporarily in cash, it would reduce the excess interest-related cash flow, thereby having a negative effect on the fair value of our assets and the market value of our securities. In addition, the reinvestment period for a CLO may terminate early, which would cause the holders of the CLO’s securities to receive principal payments earlier than anticipated. There can be no assurance that we will be able to reinvest such amounts in an alternative investment that provides a comparable return relative to the credit risk assumed. Counterparty Risk: We may be exposed to counterparty risk, which could make it difficult for us or the CLOs in which we invest to collect on obligations, thereby resulting in potentially significant losses. Default Risk: A default and any resulting loss, as well as other losses on an underlying asset held by a CLO may reduce the fair value of our corresponding CLO investment. A wide range of factors could adversely affect the ability of the borrower of an underlying asset to make interest or other payments on that asset. To the extent that actual defaults and losses on the collateral of an investment exceed the level of defaults and losses factored into its purchase price, the value of the anticipated return from the investment will be reduced. The more deeply subordinated the tranche of securities in which we invest, the greater the risk of loss upon a default. For example, CLO equity is the most subordinated tranche within a CLO and is therefore subject to the greatest risk of loss resulting from defaults on the CLO’s collateral, whether due to bankruptcy or otherwise. Any defaults and losses in excess of expected default rates and loss model inputs will have a negative impact on the fair value of our investments, will reduce the cash flows that the Fund receives from its investments, adversely affect the fair value of the Fund’s assets and could adversely impact the Fund’s ability to pay dividends. Furthermore, the holders of the junior equity and debt tranches typically have limited rights with respect to decisions made with respect to collateral following an event of default on a CLO. In some cases, the senior most class of notes can elect to liquidate the collateral even if the expected proceeds are not expected to be able to pay in full all 32  classes of notes. The Fund could experience a complete loss of its investment in such a scenario. In addition, the collateral of CLOs may require substantial workout negotiations or restructuring in the event of a default or liquidation. Any such workout or restructuring is likely to lead to a substantial reduction in the interest rate of such asset and/or a substantial write-down or write-off of all or a portion of the principal of such asset. Any such reduction in interest rates or principal will negatively affect the fair value of the Fund’s portfolio. CLO Warehouse Risk: The Company will invest in participations in CLO Warehouses provided for the purposes of enabling the borrowers to acquire assets (“Collateral”) which are ultimately intended to be used to collateralize securities to be issued pursuant to a CLO transaction. The Company’s participation in any CLO Warehouse may take the form of notes (“Warehouse Equity”) which are subordinated to the interests of one or more senior lenders under the CLO Warehouse. If the relevant CLO transaction does not proceed for any reason (which may include a decision on the part of the CLO Manager not to proceed with the closing of such transaction (“closing”)), the realized value of the Collateral may be insufficient to repay any outstanding amounts owing to the Company in respect of the Warehouse Equity, after payments have been made to the senior lenders under the terms of the CLO Warehouse, with the consequence that the Company may not receive back all or any of its investment in the CLO Warehouse. This shortfall may be attributable to, amongst other things, a fall in the value of the Collateral between the date of the Company’s participation in the CLO Warehouse and the date that the Collateral is realized. Reference Interest Rate Risk: The CLO debt securities in which we typically invest earn interest at, and obtain financing at, a floating rate, which has traditionally been based on the London Interbank Offered Rate (“LIBOR”). After June 30, 2023, all tenors of LIBOR have either ceased to be published or, in the case of 1-month, 3- month and 6-month U.S. dollar LIBOR settings, are no longer being published on a representative basis. As a result, the relevant credit markets have transitioned away from LIBOR to other benchmarks. The primary replacement rate for U.S. dollar LIBOR for loans and CLO debt securities is the Secured Overnight Financing Rate (“SOFR”), which measures the cost of overnight borrowings through repurchase agreement transactions collateralized by U.S. Treasury securities. As of January 1, 2022, all new issue CLO securities utilize SOFR as the LIBOR replacement rate. For CLOs issued prior to 2022, the use of LIBOR is being phased out as loan portfolios transition to utilizing the SOFR. The ongoing risks associated with transitioning from LIBOR to term SOFR or an alternative benchmark rate may be difficult to assess or predict. To the extent that the rate utilized for senior secured loans held by a CLO differs from the rate utilized in calculating interest on the debt securities issued by the CLO, there is a basis risk between the two rates (e.g., SOFR or another benchmark rate or the 1-month term SOFR rate and the 3-month term SOFR rate). This means the CLO could experience an interest rate mismatch between its assets and liabilities, which could have an adverse impact on the cash 33  flows distributed to CLO equity investors as well as our net investment income and portfolio returns until such mismatch is corrected or minimized, if at all, which would be expected to occur when both the underlying senior secured loans and the CLO securities utilize the same benchmark index rate. At this time, it is not possible to predict the full effects of the phasing out of LIBOR on U.S. senior secured loans, on CLO debt securities, and on the underlying assets of the specific CLOs in which we intend to invest. Fair Value of Portfolio Investments Risk: Generally, there is a more limited public market for the CLO investments we target. As a result, we value these securities at least quarterly, or more frequently as may be required from time to time, at fair value. Our determinations of the fair value of our investments have a material impact on our net earnings through the recording of unrealized appreciation or depreciation of investments and may cause our NAV on a given date to understate or overstate, possibly materially, the value that we may ultimately realize on one or more of our investments. Limited Investment Opportunities Risk: The market for CLO securities is more limited than the market for other credit related investments. We can offer no assurances that sufficient investment opportunities for our capital will be available. Potential Conflicts of Interest Risk – Allocation of Investment Opportunities: The Adviser has adopted allocation procedures that are intended to treat each fund they advise in a manner that, over a period of time, is fair and equitable. The Adviser currently provides investment advisory services and may provide in the future similar services to other entities (collectively, “Advised Funds”). Certain existing Advised Funds have, and future Advised Funds may have, investment objectives similar to those of the Fund, and such Advised Funds will invest in asset classes similar to those targeted by the Fund. Certain other existing Advised Funds do not, and future Advised Funds may not, have similar investment objectives, but such funds may from time to time invest in asset classes similar to those targeted by the Fund. The Adviser will endeavor to allocate investment opportunities in a fair and equitable manner, and in any event consistent with any fiduciary duties owed to the Fund and other clients and in an effort to avoid favoring one client over another and taking into account all relevant facts and circumstances, including (without limitation): (i) differences with respect to available capital, size of client, and remaining life of a client; (ii) differences with respect to investment objectives or current investment strategies, including regarding: (a) current and total return requirements, (b)emphasizing or limiting exposure to the security or type of security in question, (c) diversification, including industry or company exposure, currency and jurisdiction, or (d) rating agency ratings; (iii)differences in risk profile at the time an opportunity becomes available; (iv) the potential transaction and other costs of allocating an opportunity among various clients; (v) potential conflicts of interest, including whether a client has an existing investment in the security in question or the issuer of such security; (vi) the nature of the security or the transaction, including minimum investment amounts and the source of the opportunity; (vii) current and anticipated market and general economic conditions; 34  (viii) existing positions in a borrower/loan/security; and (ix) prior positions in borrower/loan/security. Nevertheless, it is possible that the Fund may not be given the opportunity to participate in certain investments made by investment funds managed by investment managers affiliated with the Adviser. Conflicts of Interest Risk: The Fund’s executive officers and trustees, other current and future principals of the Adviser and certain members of the Adviser’s investment committee may serve as officers, trustees or principals of other entities and affiliates of the Adviser and funds managed by the Fund’s affiliates that operate in the same or a related line of business as the Fund does. Currently, the Fund’s executive officers, as well as the other principals of the Adviser, manage other funds affiliated with the Adviser. In addition, the Adviser’s investment team has responsibilities for sourcing and managing private debt investments for certain other investment funds and accounts. Accordingly, they have obligations to investors in those entities, the fulfillment of which may not be in the best interests of, or may be adverse to the interests of, the Fund and its Shareholders. Although the professional staff of the Adviser will devote as much time to management of the Fund as appropriate to enable the Adviser to perform its duties in accordance with the Investment Advisory Agreement, the investment professionals of the Adviser may have conflicts in allocating their time and services among the Fund, on the one hand, and other investment vehicles managed by the Adviser or one or more of its affiliates on the other hand. Foreign Exchange Rate Risk: Although we intend to primarily make investments denominated in U.S. dollars, we may make investments denominated in other currencies. Our investments denominated in currencies other than U.S. dollars will be subject to the risk that the value of such currency will decrease in relation to the U.S. dollar. Hedging Risk: Hedging transactions seeking to reduce risks may result in poorer overall performance than if we had not engaged in such hedging transactions, and they may also not properly hedge our risks. To the extent that we use derivatives to hedge our investment risks, we will be subject to risks specific to derivatives transactions. Such risks include counterparty risk, correlation risk, liquidity risk, leverage risk, and volatility risk. Incentive Fee Risk: The Investment Advisory Agreement entitles the Adviser to receive incentive compensation on income regardless of any capital losses. In such case, the Fund may be required to pay the Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of the Fund’s portfolio or if the Fund incurs a net loss for that quarter. Any Incentive Fee payable by the Fund that relates to its net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If an investment defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the Incentive Fee will become uncollectible. The Adviser is not under any obligation to reimburse the Fund for any part of the Incentive Fee it received that was based on accrued income that the 35  increase the Fund never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in the Fund’s paying an Incentive Fee on income it never received. The Incentive Fee payable by the Fund to the Adviser may create an incentive for it to make investments on the Fund’s behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the Incentive Fee payable to the Adviser is determined may encourage it to use leverage to increase the return on the Fund’s investments. In addition, the fact that the Management Fee is payable based upon the Fund’s Managed Assets, which would include any borrowings for investment purposes, may encourage the Adviser to use leverage to make additional investments. Under certain circumstances, the use of likelihood of default, which would disfavor leverage may Shareholders. Such a practice could result in the Fund’s investing in more speculative securities than would otherwise be in its best interests, which could result in higher investment losses, particularly during cyclical economic downturns. Limited Prior Operating History Risk: We have not yet implemented the new investment strategy for the Company and have no prior track record of operating a similar investment strategy in any other registered investment company. We are therefore subject to all of the business risks and uncertainties associated with any new line of business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially. Refinancing Risk: If we incur debt financing and subsequently refinance such debt, the replacement debt may be at a higher cost and on less favorable terms and conditions. If we fail to extend, refinance, or replace such debt financings prior to their maturity on commercially reasonable terms, our liquidity will be lower than it would have been with the benefit of such financings, which would limit our ability to grow. Risks Related to the Reliance on Senior Management Personnel of the Adviser: Since the Fund has no employees, it depends on the investment expertise, skill and network of business contacts of the Adviser. The Adviser evaluates, negotiates, structures, executes, monitors and services the Fund’s investments. The Fund’s future success depends to a significant extent on the continued service and coordination of the Adviser and its senior management team. The departure of any members of the Adviser’s senior management team could have a material adverse effect on the Fund’s ability to achieve its investment objective. Regulatory Risk: Government regulation and/or intervention may change the way the Fund is regulated, affect the expenses incurred directly by the Fund, affect the value of its investments and limit the Fund’s ability to achieve its investment objective. Government regulation may change frequently and may have significant adverse consequences. Moreover, government regulation may have unpredictable and unintended effects. In addition to exposing the Fund to potential new costs and expenses, additional regulation or changes to existing regulation may also require changes to the Fund’s investment practices. 36  Cybersecurity Risk: Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. The Adviser faces various security threats on a regular basis, including ongoing cyber security threats to and attacks on its information technology infrastructure that are intended to gain access to its proprietary information, destroy data or disable, degrade or sabotage its systems. These security threats could originate from a wide variety of sources, including unknown third parties outside of the Adviser. Although the Adviser is not currently aware that it has been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, have materially affected its operations or financial condition, there can be no assurance that the various procedures and controls utilized to mitigate these threats will be sufficient to prevent disruptions to its systems. Tax Risk: In order to qualify as a RIC each year, the Company must satisfy both an annual income and asset diversification test. The Company intends to take certain positions regarding the qualification of CLO equity under the asset diversification test for which there is a lack of guidance. If the Internal Revenue Service were to disagree with the Company’s position and none of the applicable mitigation provisions are available, we could fail to qualify as a RIC. If we fail to qualify for tax treatment as a RIC under Subchapter M of the Code for any reason, or become subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, as well as the amount of income available for distributions, and the amount of such distributions, to the holders of our equity securities or obligations, and for payments to the holders of our equity securities or obligations. General Risks Risk of Failing to Adequately Address Conflicts of Interest: As TJH has expanded its investment operations, it increasingly confronts potential conflicts of interest relating to investment activities. For example, TJH’s strategies and clients within each strategy may have overlapping investment objectives and interests, and different fee structures. Potential conflicts may arise with respect to decisions regarding how to allocate investment opportunities among other possible conflicts. While TJH attempts to identify, mitigate and disclose all materials conflicts, any failure to appropriately address material conflicts of interest could expose TJH to regulatory and other risks that could adversely affect TJH’s business. Risk of Failing to Timely Execute Orders or Achieve Best Execution: Certain TJH investment strategies depend significantly on its ability to trade securities in a timely manner and to achieve best execution for client portfolios. Trade orders may not be executed in a timely and efficient manner due to various circumstances, including, for example, systems failures attributable to TJH, counterparties, brokers, dealers, agents or other service providers. Risk That Significant Cash Positions Could Affect Performance: TJH generally does not use an asset allocation model to specify the percentage of client portfolios that must be invested in any particular asset class or category of securities. Rather, TJH’s asset allocation for each client 37  portfolio is generally a function of the portfolio’s potential risk and reward compared with available opportunities in the marketplace. Consequently, TJH client portfolios may at any given time hold significant cash balances for an extended period of time, which could have a negative impact on the performance of those client portfolios. Cybersecurity: Clients and investors depend on the Firm to develop and implement appropriate systems for client activities. The Firm relies extensively on computer programs and systems (and may rely on new systems and technology in the future) for various purposes including, without limitation, trading, clearing and settling transactions, evaluating certain financial instruments, monitoring client portfolios and net capital, and generating risk management and other reports that are critical to oversight of client activities. The Firm’s operations will be dependent upon systems operated by third parties, including prime broker(s), the administrator, executing brokers, market counterparties and their sub-custodians and other service providers. The service providers may also depend on information technology systems and, notwithstanding the diligence that the Firm may perform on their service providers, the Firm may not be in a position to verify the risks or reliability of such information technology systems. Business Continuity and Disaster Recovery Risks: The Firm’s business operations may be vulnerable to disruption in the case of catastrophic events such as fires, natural disaster, terrorist attacks or other circumstances resulting in property damage, network interruption and/or prolong power outages. Although the Firm has implemented measures to manage risks relating to these types of events, there can be no assurances that all contingencies can be planned for. These risks of loss can be substantial and could have a material adverse effect on the Firm and investments therein. Epidemics, Pandemics and Public Health Emergencies: As seen and experienced with the outbreak of COVID-19, an epidemic, pandemic or public health emergency can adversely impact global commercial activity and can cause or contribute to significant volatility in certain equity and debt markets. Any public health emergency, including any outbreak of COVID-19, SARS, H1N1/09 flu, avian flu, other coronavirus, Ebola or other existing or new epidemic diseases, or the threat thereof, could have a significant adverse impact on the Firm, its Clients and its investments and could adversely affect the Firm’s ability to fulfill its Clients’ investment objectives. The extent of the impact of any epidemic, pandemic or public health emergency on the operational and financial performance of the Firm or any of its Clients will depend on many factors, including the duration and scope of emergency, the extent of any related travel advisories and restrictions implemented, the impact of such emergency on overall supply and demand, goods and services, investor liquidity, consumer confidence and levels of economic activity and the extent of its disruption to important global, regional and local supply chains and economic markets, all of which are highly uncertain and cannot be predicted. The effects of an epidemic, pandemic or public health emergency may materially and adversely impact the value and performance of the Firm’s and its Clients’ investments as well as the ability of the Firm to source, manage and divest investments and achieve its investment objectives, all of which could result in significant losses to the Client. In addition, the operations of each of the Firm, its Clients and investments may be 38  significantly impacted, or even halted, either temporarily or on a long-term basis, as a result of government quarantine and curfew measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a public health emergency, including its potential adverse impact on the health of any such entity’s personnel. International Risks Non-U.S. Securities Risk: The economies of some non-U.S. markets often do not compare favorably with that of the U.S. in areas such as growth of gross domestic product, reinvestment of capital, resources, and balance of payments. Some of these economies may rely heavily on particular industries or foreign capital. They may be more vulnerable to adverse diplomatic developments, the imposition of economic sanctions against a country, changes in international trading patterns, trade barriers and other protectionist or retaliatory measures. Governmental actions, such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes, may adversely affect investments in foreign markets. The governments of certain countries may prohibit or substantially restrict foreign investing in their capital markets or in certain industries. This could severely affect security prices. This could also impair the ability to purchase or sell foreign securities or transfer assets or income back to the U.S. or otherwise adversely affect the management of the portfolio. Other non-U.S. market risks include foreign exchange controls, difficulties in pricing securities, defaults on foreign government securities, difficulties in enforcing favorable legal judgments in foreign courts, and political and social instability. Legal remedies available to investors in some countries are less extensive than those available to investors in the U.S. Many foreign governments supervise and regulate stock exchanges, brokers and the sale of securities less than the U.S. government. Corporate governance may not be as robust as in more developed countries. As a result, protections for minority investors may not be strong, which could affect security prices. Accounting standards in other countries are not necessarily the same as in the U.S. If the accounting standards in another country do not require as much disclosure or detail as U.S. accounting standards, it may be harder to completely and accurately determine a company’s financial condition. Because there are usually fewer investors on foreign exchanges and smaller numbers of shares traded each day, it may be difficult to buy and sell securities on those exchanges. In addition, prices of foreign securities may go up and down more than prices of securities traded in the United States. Foreign markets may have different clearance and settlement procedures. In certain markets, settlements may not keep pace with the volume of securities transactions. If this occurs, settlement may be delayed, assets may be uninvested and may not be earning returns, or other investment opportunities may be missed. Changes in currency exchange rates will affect the value of foreign holdings or exposures. The costs of foreign securities transactions tend to be higher than those of U.S. transactions, increasing the transaction costs. International trade barriers or economic sanctions against foreign countries may adversely affect holdings or exposures. Certain Risks of Holding Fund Assets Outside the U. S.: Non-U.S. securities in which any client invests (and which are typical for the CUBA Fund) are generally held outside the U.S. in foreign banks and securities depositories. A client’s custodian is its “foreign custody manager.” The “foreign custody manager” is responsible for determining that a client’s directly-held foreign assets will be subject to reasonable care, based on standards applicable to custodians in relevant foreign markets. However, certain foreign banks and securities depositories may be recently 39  organized or new to the foreign custody business. They may also have operations subject to limited or no regulatory oversight. Also, the laws of certain countries may put limits on a client’s ability to recover its assets if a foreign bank or depository or issuer of a security or an agent of any of the foregoing goes bankrupt. In addition, it likely will be more expensive for a client to buy, sell and hold securities, or increase or decrease exposures thereto, in certain foreign markets than it is in the U.S. market due to higher brokerage, transaction, custody and/or other costs. The increased expense of investing in foreign markets reduces the amount a client can earn on its investments. Settlement and clearance procedures in certain foreign markets differ significantly from those in the U.S. Foreign settlement and clearance procedures and trade regulations also may involve certain risks (such as delays in payment for or delivery of securities) not typically involved with the settlement of U.S. investments. Communications between the U.S. and emerging market countries may be unreliable, increasing the risk of delayed settlements or losses of security certificates. Settlements in certain foreign countries at times have not kept pace with the number of securities transactions. These problems may make it difficult for the client to carry out transactions. If a client cannot settle or is delayed in settling a purchase of securities, a client may miss attractive investment opportunities, and certain of its assets may be uninvested with no return earned thereon for some period. If a client cannot settle or is delayed in settling a sale of securities, directly or indirectly, it may lose money if the value of the security then declines, or if it has contracted to sell the security to another party, a client could be liable to that party for any losses incurred. Currency Risk: Because the non-US securities in which certain accounts may invest, with the exception of depositary receipts, generally trade in currencies other than the U.S. dollar, changes in currency exchange rates will affect an account’s value, the value of dividends and interest earned, and gains and losses realized on the sale of securities. A strong U.S. dollar relative to these other currencies will adversely affect the value of an account. Depositary receipts are also subject to currency risk. Emerging / Frontier Market Risk: Investments in issuers in developing, emerging, o r frontier market countries may involve increased exposure to changes in economic, social and political factors. The economies of most emerging / frontier market countries are often in the early stage of capital market development and may be dependent on relatively fewer industries. As a result, their economic systems are still evolving, and their political systems are typically less stable than those in developed economies. Securities markets in these countries can also be smaller, and there may be increased settlement risks. Emerging / frontier market countries often suffer from currency devaluation and higher rates of inflation. Due to these risks, securities issued in these countries may be more volatile, less liquid, and harder to value than securities issued in more developed countries. Financial Institution Risk; Distress Events: Client accounts are subject to the risk that banks, brokers, hedging counterparties, lenders, administrators, or custodians of some or all of the Firm’s clients’ assets (each, a “Financial Institution”) fail to perform its obligations or experiences insolvency, closure, receivership or other financial distress or difficulty, similar to that experienced by Silicon Valley Bank and Signature Bank in March 2023 (each, a “Distress Event”). Distress Events can be caused by factors including eroding market sentiment, significant withdrawals, fraud, malfeasance, poor performance or accounting irregularities. In the event a Financial Institution experiences a Distress Event, the Firm may not be able to access deposits, borrowing 40  facilities or other services for an extended period of time or ever. Although assets held by regulated Financial Institutions in the United States frequently are insured up to stated balance amounts by organizations such as the Federal Deposit Insurance Corporation (“FDIC”), in the case of banks, or the Securities Investor Protection Corporation (“SIPC”), in the case of certain broker-dealers, amounts in excess of the relevant insurance are subject to risk of loss, and any non-U.S. Financial Institutions that are not subject to similar regimes pose increased risk of loss. Although in recent years governmental intervention has resulted in additional protections for depositors, there can be no assurance that governmental intervention will be successful or avoid the risk of loss, substantial delays or negative impact on banking or brokerage conditions or markets. Any Distress Event has a potentially adverse effect on the ability of the Firm to manage its Clients’ accounts, and on the ability of the Firm and/or its Fund Clients’ portfolios to maintain operations, which in each case could result in significant losses and unconsummated investment acquisitions and dispositions. Such losses have the potential to include fees and expenses required to be paid from client accounts in the event the client account is not able to close a transaction (whether due to the inability to draw capital on a credit line provided by a Financial Institution experiencing a Distress Event, the inability of client account to settle transactions or otherwise), as well the inability of the Firm to acquire or dispose of investments at prices that it believes reflect the fair value of such investments. Although the Firm expects to exercise contractual remedies under the agreements with Financial Institutions in the event of a Distress Event, there can be no assurance that such remedies will be successful or avoid losses or delays. Many Financial Institutions require, as a condition to using their services or otherwise, that the Firm and/or the client accounts maintain all or a set amount or percentage of their respective accounts or assets with custodians, which heightens the risks associated with a Distress Event with respect to such custodians. Although the Firm seeks to do business with custodians that it believes are creditworthy and capable of fulfilling their respective obligations to the Firm and its client accounts, the Firm is under no obligation to use a minimum number of custodians with respect to the client accounts, or to maintain account balances at or below the relevant insured amounts. ITEM 9 DISCIPLINARY INFORMATION There are no legal or disciplinary events that are material to a Client’s or a prospective client’s evaluation of TJH’s advisory business or the integrity of its management. ITEM 10 OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS TJH is parent company to a wholly owned subsidiary, HCM GP LLC, which is general partner to the onshore feeder fund that is a Private Fund Client. TJH is also the managing member (or voting control member) of four Private Fund special purpose vehicles formed as limited liability companies in Delaware. The Firm does not engage in other financial industry activities or have any other affiliates. ITEM 11 CODE OF ETHICS, PARTICIPATION OR INTEREST IN CLIENT 41  TRANSACTIONS AND PERSONAL TRADING TJH has adopted and implemented a Code of Ethics (the “Code”) in compliance with SEC Rule 204A-1 under the Advisers Act and Rule 17j-1 under the Company Act. The Code sets forth the standards of conduct expected of all employees, directors, and officers of the Firm (“Employees”). The Code requires certain business activity or conduct to be reported and monitored to avoid potential conflicts of interest. In addition, the Code also outlines policies and procedures designed to detect and prevent conflicts of interest relating to personal trading by all Employees and to ensure that TJH effects transactions for clients in a manner consistent with its fiduciary duty and in accordance with applicable laws. The Code prohibits TJH Employees from purchasing securities (with certain limited exceptions) that are held in any client account or are under active consideration for purchase or sale by any client account. Included in this prohibition are all equivalent and/or related securities, based on the issuer. In addition, all Employees are prohibited from trading, either personally or on behalf of others, on material nonpublic information or communicating material nonpublic information to others in violation of the law. Various procedures have been adopted under the Code including the requirement to pre-clear all applicable transactions. Additional restrictions relating to short-term trading and purchases of initial public offerings are also defined in the Code and applicable to all employees. Employees are required to comply with certain periodic reporting requirements and to certify they have read and will comply with the Code upon commencement of employment and annually thereafter. Employee reporting requirements and trading, as noted above, is monitored for adherence to the Code and any employee who violates the Code is subject to remedial actions. A copy of TJH’s Code is available upon request by contacting Thomas Morgan, TJH’s Chief Compliance Officer, at (305) 777-1660 and/or via electronic mail at tmorgan@herzfeld.com. Participation or Interest in Client Transactions Some officers and employees of the Firm have opened SMAs managed by the Firm that generally invest in the same securities and trade alongside other client accounts. In addition, certain officers and employees of the Firm have invested in the Registered Fund and the Private Funds. This creates a conflict if the Firm were to favor such employee or officer owned accounts or the Registered Fund or Private Funds in the allocation of investment opportunities. The Firm maintains policies and procedures designed to treat all clients, including the Registered Fund, Private Funds and SMAs, fairly when aggregating and allocating investment opportunities. Although some officers and employees of TJH may maintain a material position or percentage interest in Registered Fund and/or the Private Funds, the restrictions and/or prohibitions on securities transactions under the Code, as set forth above, do not apply to officer or employee accounts held in the Registered Fund or Private Funds. Instead, to address any conflict created or mitigate any associated risk under these circumstances, the Firm reviews allocations of investment 42  opportunities and sequencing of transactions across all accounts and compares the performance of such accounts to other client accounts to detect any favoritism. The Firm provides investment advisory services to various clients that at times will differ from the advice given, or the timing and nature of the actions taken with respect to any one account, including personal accounts, depending upon a variety of factors as discussed in Item 16. In addition, other factors such as market impact or liquidity constraints could result in one or more clients receiving less favorable trading results if the Firm were to implement an investment decision ahead of or contemporaneously with similar decisions for one set of clients ahead of other clients. As set forth above, the Firm maintains policies and procedures reasonably designed to ensure that all clients are treated fairly when aggregating and allocating investment opportunities. Similarly, there may be limited opportunity to sell an investment held by multiple accounts. In addition, different account guidelines and/or differences within investment strategies may lead to the use of different investment practices for portfolios with a similar investment strategy. The Firm will not necessarily purchase or sell the same securities at the same time, same direction, or in the same proportionate amounts for all eligible accounts, particularly if different accounts have materially different amounts of capital under management, different amounts of investable cash available, different strategies, or different risk tolerances. As a result, although the Firm manages numerous accounts and/or portfolios with similar or identical investment objectives, or may manage accounts with different objectives that trade in the same securities, the portfolio decisions relating to these accounts, and the performance resulting from such decisions, will differ from account to account. From time to time, the Firm may effect internal cross transactions among two or more client accounts if the Firm determines such transactions to be in the best interest of all clients involved, subject to limits imposed by ERISA and the Company Act. For example, this may happen in limited cases where the Firm is purchasing a security to be allocated to one or more clients, but at the same time is directed by a client to sell that same security (for example, for tax loss harvesting purposes). The Firm recognizes the conflicts of interest that cross trades or principal trades may create. To mitigate the conflicts of interest, the Firm will take steps to ensure that the crossing price in any such transaction is fair to both sides of the transactions (for example, by ensuring the trade is conducted through independent brokers), does not disadvantage any one client over the other client, and is in compliance with applicable law. Prior to affecting such transaction, approval from the Firm’s Compliance Department must be received, and if applicable, the trade will be subject to Registered Fund’s board of directors and/or Private Fund board of directors oversight. To the extent that the Firm’s controlling persons own more than a 25% interest in any one or more of the client accounts, the cross transaction will be deemed to be principal transactions and the Firm will comply with the principal trade provisions of the Advisers Act. Principal trades will not be effected when the trade involves an ERISA client or a client subject to the Company Act. Management of Multiple Accounts: Each of the portfolio managers is responsible for managing multiple accounts, including SMAs, the Private Funds, and the Registered Fund, as applicable. From time to time, a potential conflict of interest will arise as a result of the portfolio manager’s management of a number of accounts (including proprietary accounts) with similar investment strategies. Often, an investment opportunity may be suitable for a number of clients but may not be available in sufficient quantities for all eligible accounts to participate fully. The Firm has 43  adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time. Material Non-Public Information: The Firm may come into possession of material non-public information with respect to an issuer. Should this occur, the Firm would be restricted from buying or selling securities, derivatives or loans of the issuer on behalf of a Client until such time as the information became public or was no longer deemed material. Due to these restrictions, the Firm may not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell an investment that it otherwise might have sold. ITEM 12 BROKERAGE PRACTICES Selection of Broker-Dealers In determining the broker-dealers through which to place securities transactions for client accounts, the Firm’s policy is to seek the best execution of orders at the most favorable price in light of the overall quality of brokerage and research services provided. In selecting broker- dealers to execute transactions, the determination of what is expected to result in best execution at the most favorable price involves a number of factors, including, but not limited to, the nature of the security being traded, the size and timing of the transaction, the activity existing and expected in the market for the particular security, the likelihood of price improvement, the speed of execution, and the ability to minimize market impact. In addition, the Firm considers the broker-dealer’s financial responsibility, its responsiveness and operational capabilities, and its maintenance of the confidentiality of orders. The determinative factor is not the lowest possible commission cost, but whether the transaction represents the best qualitative execution under the circumstances. As a result of any or a combination of the above factors, transactions will not always be executed at the lowest available price, commission, and/or mark-up/mark-down. Fixed income securities may be purchased from the issuer or broker-dealer or primary market- maker acting as principal for the securities on a net basis, with no brokerage commissions being paid by the client, although the price usually includes certain undisclosed compensation to the dealer. Rather than purchasing from a broker-dealer on a principal basis, in certain circumstances consistent with its responsibilities in seeking best execution, the Firm may engage a broker-dealer to act as agent (for which such broker-dealer may be paid a negotiated commission or mark-up) in purchasing fixed-income securities for client accounts. Securities also may be purchased from underwriters at prices that include underwriting fees. The Firm has established a Senior Management Committee (the “Committee”) that has oversight responsibility for the Firm’s brokerage practices. The Committee meets quarterly or more frequently as needed. Research and Other Soft Dollar Benefits The Firm currently does not have soft dollar relationships and does not receive research services as a result of commissions paid to broker-dealers. 44  Brokerage for Client Referrals The Firm does not receive client referrals from executing broker-dealers in exchange for cash or other compensation, such as brokerage services or research. Note that the Firm does receive client referrals from certain third-party solicitors under written agreements with such firms. See Item 14 below. Directed Brokerage The Firm determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, certain clients limit the Firm’s selection of brokers or instruct the Firm to direct trades through a particular broker. In these cases, the Firm at times will place separate, non-simultaneous, transactions for its clients and a directed client account that could temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of all accounts. Directing clients at times will receive worse prices, and/or pay higher commissions than non-directing clients. Alternatively, from time to time, the Firm may endeavor to aggregate the directed brokerage order with non-directed brokerage orders for execution and then step out the trade to the directed broker for clearance and settlement. This arrangement facilitates two purposes. First, a step-out allows the directed broker to receive the commissions. Second, aggregation of directed brokerage orders with non-directed orders allows directed brokerage clients to participate on the same terms and conditions as other non-directed brokerage clients Aggregation of Trades The Firm may, in its discretion, aggregate orders being placed for execution at the same time for the accounts of two or more clients, which may include the Registered Fund, Private Funds and SMAs, where it believes such aggregation is appropriate and in the best interest of its clients. This practice may enable the Firm to seek more favorable executions and net prices for the combined order. However, the Firm is not obligated to aggregate orders or to include any particular account in an aggregated order if portfolio management decisions for different accounts are made separately or if the Firm determines that aggregating trades would be inconsistent with the Firm’s investment management duties or with any investment objectives, guidelines or restrictions applicable to a particular client. All orders placed for execution on an aggregated basis are subject to the Firm’s allocation policies and procedures. Firm employees will aggregate orders where appropriate for the participating clients and consistent with the Firm’s duty to seek best execution. Allocation of Partially Filled Orders If the Firm is unable to fill an aggregated transaction completely, it allocates the partially filled orders according to the Firm’s allocation policy among accounts participating in the order. The objective of the Firm’s allocation policy is to achieve fair treatment of all clients’ accounts through its trade allocation process. No preference is given with respect to portfolio size, or tenure of client. 45  ITEM 13 REVIEW OF ACCOUNTS The portfolio managers for each client account review those accounts on a regular basis. The Firm’s investment advisory accounts are under constant review because of the commonality of holdings among the relatively low number of accounts under management and the limited number of different portfolio securities. These factors facilitate the continual monitoring of client portfolios in relation to changes in market prices and available information (e.g. earnings and dividends). All reviews are conducted pursuant to the guidelines established by, or in connection with, the applicable account. The Firm provides reports to the Registered Fund and the Private Funds (and their respective investors) and to SMA Clients as required by the applicable Governing Documents. Investors in the Registered Fund and Private Funds should refer to the applicable Governing Documents for further information on the reports provided to a particular Registered Fund’s and Private Fund’s investors. ITEM 14 CLIENT REFERRALS AND OTHER COMPENSATION From time to time, the Firm enters into written solicitation agreements for the referral of the Firm’s investment advisory services under which persons and/or firms introducing new clients to the Firm (“Solicitors”) receive a referral fee. When entering such agreement, the Firm complies with all applicable securities requirements under the Advisers Act. In the event the Firm enters into such agreements, we require Solicitors to provide the prospective client or investor with a copy of this document (our Firm Disclosure Brochure) and a separate disclosure statement at the time of the referral. If you become a Client or invest in one of our Funds, the Solicitor that referred you to our Firm will either receive: a) a percentage of the advisory fee applicable to your investment for as long as you are a Client or investor with our Firm, or b) a onetime, flat referral fee upon your investing with our Firm, or c) other form of compensation as negotiated between our Firm and such Solicitor. You will not pay additional fees because of any such referral arrangement. Solicitors have a financial incentive to recommend our Firm and/or funds managed by the Firm. This creates a conflict of interest; however, you are not obligated to retain our Firm for advisory services or invest in any fund managed by our Firm. Comparable services and/or lower fees may be available through other firms. Some of the Firm’s clients and investors use consultants to evaluate and recommend investment advisers and their services, including the Firm and its related entities. The Firm is not affiliated with any consultant (although one consultant is a limited partner of a Private Fund managed by the Firm). These consultant firms represent multiple clients and prospects and, therefore, have frequent interactions with the Firm and related entities. The Firm may pay nominal fees to be listed and include information about our investment strategies in consultant registries or databases that describe services provided by investment managers including the Firm. 46  ITEM 15 CUSTODY The Firm does not maintain physical custody of the funds or securities of any Client. However, under Rule 206(4)-2 promulgated by the SEC under the Advisers Act, the Firm is deemed to have custody of certain assets held in its Private Funds as a result of acting as or having control over the Private Funds or a Private Fund’s general partner. As a result, those assets are administered in compliance with applicable rules and regulations related to the custody of client assets. The Private Funds generally undergo audits by independent accountants, and all audit reports are disclosed to investors in those Private Funds. ITEM 16 INVESTMENT DISCRETION The Firm has discretionary authority to manage securities accounts on behalf of its clients. The Firm’s discretionary authority is generally limited by the investment objectives, strategies, policies, and restrictions set forth in the Governing Documents. ITEM 17 VOTING CLIENT SECURITIES To the extent that the Firm holds securities that require it to vote proxies or in circumstances in which the Firm’s employees are serving on the board or other governing body and are required to vote on a matter, the Firm has a responsibility to vote the proxies in a manner in which it views to be in the best interests of its clients. In this regard, in accordance with Rule 206(4)-6 under the Advisers Act, the Firm has adopted written policies and procedures regarding the voting of client proxies that are designed to ensure that the Firm fulfills its fiduciary obligations to clients, including policies for addressing material conflicts that may arise between the Firm and its clients. In the event a proxy raises material conflicts involving the Firm employees, whether arising from any material business, personal or familiar relationship with employees at a portfolio company or a material arrangement with any such company, the Chief Compliance Officer will determine the manner in which such proxies should be voted so that the vote is in the best interests of clients. Under such policies and procedures, the Firm is authorized to vote proxies on behalf of its clients unless a client specifically retains or delegates this authority to another party in writing. The Firm has adopted written Proxy Voting Policies and Procedures that are designed to reasonably ensure that all proxy voting decisions are made in the best interests of advisory clients for whom the Firm has voting authority. The Firm will act in a prudent and diligent manner intended to enhance the value of the assets of the client’s account. TJH has contracted with Proxy Edge, a third party proxy voting administrator, to assist the Firm in the administration of its proxy voting responsibilities. The Firm will review proxy proposals for conflicts of interest as part of the overall vote review process. If material conflicts of interest arise between the Firm and its clients with respect to voting a proxy, the Firm will convene an internal group of senior employees who are independent from the conflict of interest at issue. The internal group will consider the proxy and the conflict and determine a course of action that is in the best interest of the client. 47  Clients may obtain a copy of the Firm’s Proxy Voting Policies and Procedures, as updated from time to time, as well as information on how the Firm voted their accounts’ securities upon written request to: Thomas J. Herzfeld Advisors, Inc. Attn: Compliance Department 119 Washington Avenue, Suite 504 Miami Beach, FL 33139 or by contacting Thomas K. Morgan, TJH’s Chief Compliance Officer, at (305)-777-1660 and/or via electronic mail to tmorgan@herzfeld.com. Class Action Lawsuits and Settlements Securities issuers are, on occasion, the subject of class action lawsuits where the class of potentially injured parties is defined to be purchasers of the issuer’s securities during a specific period of time. These cases may result in an award of damages or settlement proceeds to the class members who file claims with the settlement administrator. We do not determine if securities held in your account are the subject of a class action lawsuit or whether you are eligible to participate in class action settlements or litigation. Additionally, we do not initiate or participate in litigation to recover damages on your behalf for injuries as a result of actions, misconduct, or negligence by issuers of securities held in your account. In addition, we will not take any action or render any advice as to received materials relating to any class-action lawsuit. The Firm does not provide any legal advice to clients in connection with class action litigation. Other Legal Proceedings As a general matter, except as required by law, the Firm does not monitor, advise or act for a client in legal proceedings, including, but not limited to bankruptcies or other legal proceedings involving securities purchased or held in a client’s account. Clients should instruct their custodians to promptly forward any communications relating to legal proceedings involving such assets. ITEM 18 FINANCIAL INFORMATION The Firm does not require or solicit prepayment of fees by any client six months or more in advance, and thus has not included a balance sheet for its most recent fiscal year. The Firm is not aware of any financial condition that is reasonably likely to impair its ability to meet its contractual commitments to clients, nor has the Firm been the subject of a bankruptcy petition at any time. 48