HMS Income Fund Risk Factors
An investment in shares of our common stock may be considered speculative and involves a high degree of risk, including the risk of a substantial loss of investment. You should carefully consider the information found in “Risk Factors” before deciding to invest in shares of our common stock. The following are some of the risks you will take in investing in our shares:
- We may be unable to achieve our investment objectives.
- Deterioration in the economy and financial markets increases the likelihood of adverse effects on our financial position and results of operations. Such economic adversity could impair our portfolio companies’ financial positions and operating results and affect the industries in which we invest, which could, in turn, harm our operating results.
- The amount of our distributions to our stockholders is uncertain. Portions of the distributions that we pay may represent a return of capital to you for U.S. federal income tax purposes which will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets. A return of capital is a return of your investment rather than earnings or gains derived from our investment activities. We may not be able to pay you distributions, and our distributions may not grow over time. The Company may, for the foreseeable future, pay a portion of distributions from sources other than net realized income from operations, which may include proceeds of the Offering, borrowings, fee and expense waivers from our Advisers and support payments from the Adviser and returns of capital.
- We intend to seek a complete liquidity event within four to six years following the end of our offering period. However, there is no assurance that we will be able to complete a liquidity event.
- A significant portion of our investment portfolio is and will continue to be recorded at fair value as determined in good faith by our board of directors and, as a result, there is and will be uncertainty as to the ultimate market value of our portfolio investments.
- Our board of directors may change our operating policies and investment strategies without prior notice or stockholder approval, the effects of which may be adverse.
- Our Advisers and their respective affiliates, including our officers and certain of our directors, may have conflicts of interest as a result of compensation arrangements, time constraints and competition for investments, which they will attempt to resolve in a fair and equitable manner, but which may result in actions that are not in your best interests.
- The potential for our Advisers to earn incentive fees may create an incentive for the Advisers to invest our funds in securities that are riskier or more speculative than would otherwise be the case, and our Advisers may have an incentive to increase portfolio leverage in order to earn higher management fees.
- We have borrowed funds to make investments. As a result, we are exposed to the risks of borrowing, also known as leverage, which may be considered a speculative investment technique. Leverage magnifies the potential for gain or loss on amounts invested in us and may increase the risk of investing in us.
- Our investments tend to be senior secured term loans, second lien loans, mezzanine debt and selected equity investments, may be risky, and we could lose all or part of our investment.
- In the event that our Adviser collects a fee on an investment that provides for payment-in-kind (PIK) interest and such investment fails, our Adviser would not be required to repay the fee that it received with respect to that investment.
- Most loans in which we invest will not be rated by a rating agency or, if they were rated, would be rated below investment grade. Such below investment grade debt securities are commonly known as "junk" securities and are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
- We are subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on our investments.
- Changes in interest rates may have a substantial negative impact on our investments.
- Investors will not know the purchase price per share at the time they submit their subscription agreements and could receive fewer shares of common stock than anticipated if our Pricing Committee of the board of directors determines to increase the offering price to comply with the requirement that we are prohibited from selling shares below our net asset value.
- If we are unable to raise substantial funds in our ongoing, continuous “best efforts offering,” we will be limited in the number and type of investments we may make, and the value of your investment in us may be reduced in the event our assets underperform.
- Our shares of common stock are not listed on an exchange or quoted through a quotation system and will not be listed for the foreseeable future, if ever. Therefore, you will have limited liquidity and may not receive a full return of your invested capital if you sell your shares of common stock.
For more information, please read the prospectus, which you can download here or obtain by calling your financial advisor. You should read the prospectus carefully in order to fully understand the objectives, risks, sales charges, fees and expenses of HMS Income Fund before investing or sending money.