UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21636
First Trust/Aberdeen Global Opportunity
Income Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
registrant’s telephone number, including area code: (630) 765-8000
Date of fiscal year end: December 31
Date of reporting period: December 31, 2018
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
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Performance | ||||
Average Annual Total Return | ||||
1 Year Ended 12/31/18 | 5 Years Ended 12/31/18 | 10 Years Ended 12/31/18 | Inception (11/23/04) to 12/31/18 | |
Fund Performance(3) | ||||
NAV | -6.85% | 2.48% | 8.40% | 5.77% |
Market Value | -12.42% | 0.86% | 8.75% | 4.19% |
Index Performance | ||||
Blended Index(4) | -3.89% | 1.39% | 4.19% | 4.59% |
Bloomberg Barclays Global Emerging Markets Index | -3.02% | 3.59% | 8.11% | 6.58% |
Bloomberg Barclays Global Aggregate Index | -1.20% | 1.08% | 2.48% | 3.04% |
(1) | Most recent distribution paid or declared through 12/31/2018. Subject to change in the future. |
(2) | Distribution rates are calculated by annualizing the most recent distribution paid or declared through the report date and then dividing by Common Share Price or NAV, as applicable, as of 12/31/2018. Subject to change in the future. |
(3) | Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(4) | Blended Index consists of the following: FTSE World Government Bond Index (40.0%); JPMorgan Emerging Markets Bond Index - Global Diversified (30.0%); JPMorgan Global Bond Index - Emerging Markets Diversified (30.0%). |
(5) | The credit quality and ratings information presented above reflects the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including Standard & Poor’s Ratings Group, a division of the McGraw Hill Companies, Inc., Moody’s Investors Service, Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and the ratings are not equivalent, the highest ratings are used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. |
(6) | Portfolio securities are included in a country based upon their underlying credit exposure as determined by Aberdeen Standard Investments Inc., the sub-advisor. |
1 | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
2 | Blended Index consists of the following: FTSE World Government Bond Index (40.0%); JPMorgan Emerging Markets Bond Index – Global Diversified (30.0%); JPMorgan Global Bond Index – Emerging Markets Diversified (30.0%). |
Principal Value (Local Currency) | Description | Stated Coupon | Stated Maturity | Value (US Dollars) | ||||
FOREIGN SOVEREIGN BONDS AND NOTES (a) – 100.2% | ||||||||
Angola – 0.9% | ||||||||
1,300,000 | Angolan Government International Bond (USD) (b) | 9.38% | 05/08/48 | $1,220,609 | ||||
Argentina – 2.8% | ||||||||
89,880,000 | Argentina POM Politica Monetaria, ARLLMONP (ARS) (c) | 65.51% | 06/21/20 | 2,553,993 | ||||
940,000 | Argentine Republic Government International Bond (USD) | 5.63% | 01/26/22 | 796,650 | ||||
715,039 | Argentine Republic Government International Bond (USD) | 8.28% | 12/31/33 | 554,156 | ||||
3,904,799 | ||||||||
Australia – 4.5% | ||||||||
7,945,000 | Treasury Corp. of Victoria (AUD) | 6.00% | 10/17/22 | 6,378,905 | ||||
Bahrain – 0.6% | ||||||||
800,000 | Bahrain Government International Bond (USD) | 7.00% | 01/26/26 | 821,588 | ||||
Brazil – 6.6% | ||||||||
20,700,000 | Brazil Notas do Tesouro Nacional, Series F (BRL) | 10.00% | 01/01/21 | 5,592,767 | ||||
13,800,000 | Brazil Notas do Tesouro Nacional, Series F (BRL) | 10.00% | 01/01/29 | 3,746,196 | ||||
9,338,963 | ||||||||
Canada – 4.2% | ||||||||
6,449,000 | Canadian Government Bond (CAD) | 8.00% | 06/01/23 | 5,934,053 | ||||
Costa Rica – 0.9% | ||||||||
720,000 | Costa Rica Government International Bond (USD) | 4.25% | 01/26/23 | 636,300 | ||||
219,000 | Costa Rica Government International Bond (USD) | 7.00% | 04/04/44 | 186,971 | ||||
511,000 | Costa Rica Government International Bond (USD) | 7.16% | 03/12/45 | 442,654 | ||||
1,265,925 | ||||||||
Czech Republic – 0.8% | ||||||||
20,910,000 | Czech Republic Government Bond (CZK) | 5.70% | 05/25/24 | 1,133,145 | ||||
Ecuador – 1.4% | ||||||||
2,180,000 | Ecuador Government International Bond (USD) (b) | 8.75% | 06/02/23 | 2,043,750 | ||||
Egypt – 0.9% | ||||||||
380,000 | Egypt Government International Bond (USD) (b) | 8.50% | 01/31/47 | 344,295 | ||||
1,050,000 | Egypt Government International Bond (USD) (b) | 7.90% | 02/21/48 | 907,360 | ||||
1,251,655 | ||||||||
El Salvador – 0.4% | ||||||||
580,000 | El Salvador Government International Bond (USD) | 7.65% | 06/15/35 | 551,290 | ||||
France – 0.6% | ||||||||
561,000 | French Republic Government Bond OAT (EUR) | 3.25% | 05/25/45 | 884,257 | ||||
Germany – 0.6% | ||||||||
508,000 | Bundesrepublik Deutschland Bundesanleihe (EUR) | 2.50% | 08/15/46 | 820,138 | ||||
Ghana – 2.8% | ||||||||
1,340,000 | Ghana Government International Bond (USD) | 8.13% | 01/18/26 | 1,283,814 | ||||
1,450,000 | Ghana Government International Bond (USD) (b) | 7.63% | 05/16/29 | 1,303,840 | ||||
6,200,000 | Republic of Ghana Government Bond (GHS) | 21.50% | 03/09/20 | 1,301,185 | ||||
3,888,839 | ||||||||
Indonesia – 2.5% | ||||||||
20,750,000,000 | Indonesia Treasury Bond (IDR) | 5.63% | 05/15/23 | 1,325,734 |
Principal Value (Local Currency) | Description | Stated Coupon | Stated Maturity | Value (US Dollars) | ||||
FOREIGN SOVEREIGN BONDS AND NOTES (a) (Continued) | ||||||||
Indonesia (Continued) | ||||||||
30,400,000,000 | Indonesia Treasury Bond (IDR) | 8.38% | 03/15/34 | $2,139,374 | ||||
3,465,108 | ||||||||
Iraq – 1.4% | ||||||||
428,000 | Iraq International Bond (USD) (b) | 6.75% | 03/09/23 | 408,696 | ||||
1,760,000 | Iraq International Bond (USD) | 5.80% | 01/15/28 | 1,582,944 | ||||
1,991,640 | ||||||||
Italy – 4.7% | ||||||||
2,762,000 | Italy Buoni Poliennali Del Tesoro (EUR) | 9.00% | 11/01/23 | 4,223,756 | ||||
1,600,000 | Italy Buoni Poliennali Del Tesoro (EUR) | 7.25% | 11/01/26 | 2,463,944 | ||||
6,687,700 | ||||||||
Japan – 10.2% | ||||||||
1,219,050,000 | Japan Government Ten Year Bond (JPY) | 0.10% | 06/20/27 | 11,300,367 | ||||
252,850,000 | Japan Government Thirty Year Bond (JPY) | 2.40% | 03/20/37 | 3,096,279 | ||||
14,396,646 | ||||||||
Kenya – 0.4% | ||||||||
590,000 | Kenya Government International Bond (USD) | 6.88% | 06/24/24 | 556,060 | ||||
Malaysia – 2.2% | ||||||||
13,000,000 | Malaysia Government Bond (MYR) | 3.89% | 03/15/27 | 3,079,888 | ||||
Mexico – 5.6% | ||||||||
26,500,000 | Mexican Bonos (MXN) | 6.50% | 06/09/22 | 1,266,870 | ||||
20,000,000 | Mexican Bonos (MXN) | 10.00% | 12/05/24 | 1,081,950 | ||||
27,000,000 | Mexican Bonos (MXN) | 5.75% | 03/05/26 | 1,161,941 | ||||
97,602,800 | Mexican Bonos (MXN) | 7.75% | 11/13/42 | 4,390,394 | ||||
7,901,155 | ||||||||
Nigeria – 2.6% | ||||||||
1,130,000,000 | Nigeria Government Bond (NGN) | 12.50% | 01/22/26 | 2,703,296 | ||||
663,000 | Nigeria Government International Bond (USD) (b) | 7.88% | 02/16/32 | 603,801 | ||||
513,000 | Nigeria Government International Bond (USD) (b) | 7.63% | 11/28/47 | 433,430 | ||||
3,740,527 | ||||||||
Norway – 0.6% | ||||||||
7,511,000 | Norway Government Bond (NOK) (b) | 1.75% | 02/17/27 | 872,765 | ||||
Oman – 0.5% | ||||||||
770,000 | Oman Government International Bond (USD) (b) | 6.75% | 01/17/48 | 637,471 | ||||
Peru – 3.6% | ||||||||
16,000,000 | Peruvian Government International Bond (PEN) | 6.90% | 08/12/37 | 5,096,939 | ||||
Poland – 8.1% | ||||||||
14,444,000 | Republic of Poland Government Bond (PLN) | 2.50% | 01/25/23 | 3,933,326 | ||||
17,100,000 | Republic of Poland Government Bond (PLN) | 4.00% | 10/25/23 | 4,957,028 | ||||
10,000,000 | Republic of Poland Government Bond (PLN) | 2.50% | 07/25/27 | 2,628,306 | ||||
11,518,660 | ||||||||
Portugal – 1.1% | ||||||||
1,088,000 | Portugal Obrigacoes do Tesouro OT (EUR) (b) | 5.65% | 02/15/24 | 1,562,032 | ||||
Russia – 5.9% | ||||||||
510,000,000 | Russian Federal Bond - OFZ (RUB) | 7.05% | 01/19/28 | 6,660,560 |
Principal Value (Local Currency) | Description | Stated Coupon | Stated Maturity | Value (US Dollars) | ||||
FOREIGN SOVEREIGN BONDS AND NOTES (a) (Continued) | ||||||||
Russia (Continued) | ||||||||
90,000,000 | Russian Federal Bond - OFZ (RUB) | 7.70% | 03/23/33 | $1,204,043 | ||||
400,000 | Russian Foreign Bond - Eurobond (USD) | 5.88% | 09/16/43 | 422,398 | ||||
8,287,001 | ||||||||
Rwanda – 1.0% | ||||||||
1,440,000 | Rwanda International Government Bond (USD) | 6.63% | 05/02/23 | 1,432,022 | ||||
South Africa – 6.1% | ||||||||
86,460,000 | Republic of South Africa Government Bond (ZAR) | 10.50% | 12/21/26 | 6,543,167 | ||||
2,200,000 | Republic of South Africa Government International Bond (USD) | 4.88% | 04/14/26 | 2,096,582 | ||||
8,639,749 | ||||||||
Spain – 2.4% | ||||||||
2,111,000 | Spain Government Bond (EUR) (b) | 5.90% | 07/30/26 | 3,274,160 | ||||
100,000 | Spain Government Bond (EUR) (b) | 5.15% | 10/31/44 | 173,226 | ||||
3,447,386 | ||||||||
Sri Lanka – 1.0% | ||||||||
1,500,000 | Sri Lanka Government International Bond (USD) (b) | 6.75% | 04/18/28 | 1,369,808 | ||||
Supranationals – 0.7% | ||||||||
8,550,000 | European Investment Bank (SEK) | 1.25% | 05/12/25 | 993,746 | ||||
Suriname – 0.5% | ||||||||
675,000 | Suriname Government International Bond (USD) (b) | 9.25% | 10/26/26 | 653,063 | ||||
Tanzania – 0.2% | ||||||||
290,006 | Tanzania Government International Bond, 6 Mo. LIBOR + 6.00% (USD) (c) | 8.54% | 03/09/20 | 296,308 | ||||
Tunisia – 1.0% | ||||||||
1,600,000 | Banque Centrale de Tunisie International Bond (USD) | 5.75% | 01/30/25 | 1,350,888 | ||||
Turkey – 6.2% | ||||||||
47,500,000 | Turkey Government Bond (TRY) | 8.80% | 09/27/23 | 6,605,574 | ||||
15,100,000 | Turkey Government Bond (TRY) | 10.40% | 03/20/24 | 2,222,560 | ||||
8,828,134 | ||||||||
Ukraine – 1.1% | ||||||||
1,370,000 | Ukraine Government International Bond (USD) (b) | 7.75% | 09/01/24 | 1,209,673 | ||||
716,000 | Ukraine Government International Bond (USD) (b) | (d) | 05/31/40 | 415,230 | ||||
1,624,903 | ||||||||
United Kingdom – 2.6% | ||||||||
754,000 | United Kingdom Gilt (GBP) | 4.25% | 12/07/27 | 1,212,011 | ||||
1,250,000 | United Kingdom Gilt (GBP) | 4.25% | 12/07/49 | 2,508,009 | ||||
3,720,020 | ||||||||
Total Foreign Sovereign Bonds and Notes | 141,587,535 | |||||||
(Cost $150,917,573) | ||||||||
FOREIGN CORPORATE BONDS AND NOTES (a) (e) – 23.9% | ||||||||
Argentina – 0.3% | ||||||||
525,000 | Genneia S.A. (USD) (b) | 8.75% | 01/20/22 | 477,094 | ||||
Bahrain – 0.5% | ||||||||
650,000 | Oil and Gas Holding Co. BSCC (The) (USD) (b) | 8.38% | 11/07/28 | 664,570 |
Principal Value (Local Currency) | Description | Stated Coupon | Stated Maturity | Value (US Dollars) | ||||
FOREIGN CORPORATE BONDS AND NOTES (a) (e) (Continued) | ||||||||
Barbados – 0.6% | ||||||||
750,000 | Sagicor Finance 2015 Ltd. (USD) (b) | 8.88% | 08/11/22 | $785,625 | ||||
Brazil – 3.5% | ||||||||
766,000 | Azul Investments LLP (USD) (b) | 5.88% | 10/26/24 | 718,133 | ||||
780,000 | CSN Resources S.A. (USD) (b) | 7.63% | 02/13/23 | 729,300 | ||||
850,000 | GTL Trade Finance, Inc. (USD) | 7.25% | 04/16/44 | 888,250 | ||||
1,550,000 | OAS Finance Ltd. (USD) (f) (g) (h) (i) | 8.88% | (j) | 23,250 | ||||
460,000 | OAS Investments GmbH (USD) (f) (g) (h) | 8.25% | 10/19/19 | 6,900 | ||||
620,000 | Odebrecht Drilling Norbe VIII/IX Ltd. (USD) | 6.35% | 12/01/21 | 598,610 | ||||
1,830,000 | Petrobras Global Finance BV (USD) | 8.75% | 05/23/26 | 2,053,260 | ||||
5,017,703 | ||||||||
China – 1.0% | ||||||||
765,000 | Shimao Property Holdings Ltd. (USD) | 8.38% | 02/10/22 | 796,317 | ||||
308,000 | Yingde Gases Investment Ltd. (USD) (b) | 6.25% | 01/19/23 | 290,293 | ||||
280,000 | Yingde Gases Investment Ltd. (USD) | 6.25% | 01/19/23 | 263,903 | ||||
1,350,513 | ||||||||
Colombia – 0.3% | ||||||||
429,000 | Banco GNB Sudameris S.A. (USD) (b) (i) | 6.50% | 04/03/27 | 423,101 | ||||
Congo – 0.5% | ||||||||
720,000 | HTA Group Ltd. (USD) | 9.13% | 03/08/22 | 734,040 | ||||
Dominican Republic – 1.3% | ||||||||
1,860,000 | AES Andres BV / Dominican Power Partners / Empresa Generadora de Electricidad Itabo (USD) (b) | 7.95% | 05/11/26 | 1,887,900 | ||||
El Salvador – 0.6% | ||||||||
800,000 | Grupo Unicomer Co., Ltd. (USD) (b) | 7.88% | 04/01/24 | 836,000 | ||||
Georgia – 1.1% | ||||||||
540,000 | Bank of Georgia JSC (USD) (b) | 6.00% | 07/26/23 | 526,543 | ||||
975,000 | Georgian Oil and Gas Corp. JSC (USD) (b) | 6.75% | 04/26/21 | 979,999 | ||||
1,506,542 | ||||||||
Guatemala – 0.5% | ||||||||
735,000 | Comunicaciones Celulares S.A. Via Comcel Trust (USD) (b) | 6.88% | 02/06/24 | 750,703 | ||||
Honduras – 0.3% | ||||||||
396,000 | Inversiones Atlantida S.A. (USD) (b) | 8.25% | 07/28/22 | 404,023 | ||||
India – 0.4% | ||||||||
756,000 | Vedanta Resources PLC (USD) (b) | 6.13% | 08/09/24 | 630,494 | ||||
Indonesia – 1.0% | ||||||||
970,000 | Jababeka International BV (USD) | 6.50% | 10/05/23 | 803,921 | ||||
760,000 | Medco Platinum Road Pte Ltd. (USD) (b) | 6.75% | 01/30/25 | 651,850 | ||||
1,455,771 | ||||||||
Kazakhstan – 0.5% | ||||||||
789,000 | Tengizchevroil Finance Co. International Ltd. (USD) (b) | 4.00% | 08/15/26 | 730,314 | ||||
Mexico – 1.4% | ||||||||
13,950,000 | Petroleos Mexicanos (MXN) | 7.19% | 09/12/24 | 555,466 | ||||
750,000 | Sixsigma Networks Mexico SA de CV (USD) (b) | 7.50% | 05/02/25 | 714,375 |
Principal Value (Local Currency) | Description | Stated Coupon | Stated Maturity | Value (US Dollars) | ||||
FOREIGN CORPORATE BONDS AND NOTES (a) (e) (Continued) | ||||||||
Mexico (Continued) | ||||||||
773,000 | Unifin Financiera SAB de CV SOFOM ENR (USD) (b) (i) | 8.88% | (j) | $641,590 | ||||
1,911,431 | ||||||||
Nigeria – 1.8% | ||||||||
730,000 | IHS Netherlands Holdco BV (USD) (b) | 9.50% | 10/27/21 | 737,220 | ||||
770,000 | SEPLAT Petroleum Development Co., PLC (USD) (b) | 9.25% | 04/01/23 | 765,357 | ||||
1,070,000 | United Bank for Africa PLC (USD) (b) | 7.75% | 06/08/22 | 1,061,923 | ||||
2,564,500 | ||||||||
Oman – 0.6% | ||||||||
892,000 | Oztel Holdings SPC Ltd. (USD) (b) | 6.63% | 04/24/28 | 824,498 | ||||
Russia – 1.9% | ||||||||
304,000 | Credit Bank of Moscow Via CBOM Finance PLC (USD) (i) | 7.50% | 10/05/27 | 230,976 | ||||
1,045,000 | Evraz Group S.A. (USD) (b) | 5.38% | 03/20/23 | 1,035,021 | ||||
790,000 | Gazprom OAO Via Gaz Capital S.A. (USD) | 4.95% | 03/23/27 | 755,413 | ||||
600,000 | GTH Finance BV (USD) (b) | 7.25% | 04/26/23 | 616,431 | ||||
2,637,841 | ||||||||
South Africa – 2.3% | ||||||||
48,000,000 | Eskom Holdings SOC Ltd. (ZAR) | 7.50% | 09/15/33 | 2,496,414 | ||||
690,000 | Liquid Telecommunications Financing PLC (USD) | 8.50% | 07/13/22 | 697,352 | ||||
3,193,766 | ||||||||
Turkey – 1.5% | ||||||||
920,000 | Hazine Mustesarligi Varlik Kiralama AS (USD) (b) | 5.00% | 04/06/23 | 876,526 | ||||
790,000 | Turkiye Garanti Bankasi AS (USD) (i) | 6.13% | 05/24/27 | 680,716 | ||||
744,000 | Turkiye Vakiflar Bankasi TAO (USD) | 6.00% | 11/01/22 | 633,970 | ||||
2,191,212 | ||||||||
Ukraine – 2.0% | ||||||||
770,000 | Metinvest BV (USD) (b) | 8.50% | 04/23/26 | 695,976 | ||||
860,000 | MHP Lux S.A. (USD) (b) | 6.95% | 04/03/26 | 743,556 | ||||
19,750,000 | Ukreximbank Via Biz Finance PLC (UAH) | 16.50% | 03/02/21 | 634,567 | ||||
735,000 | Ukreximbank Via Biz Finance PLC (USD) | 9.63% | 04/27/22 | 721,733 | ||||
2,795,832 | ||||||||
Total Foreign Corporate Bonds and Notes | 33,773,473 | |||||||
(Cost $37,397,355) | ||||||||
Principal Value | Description | Stated Coupon | Stated Maturity | Value | ||||
U.S. GOVERNMENT BONDS AND NOTES (a) – 13.7% | ||||||||
$5,816,000 | United States Treasury Note | 8.75% | 08/15/20 | $6,385,559 | ||||
5,613,000 | United States Treasury Note | 2.63% | 05/15/21 | 5,632,295 | ||||
2,919,000 | United States Treasury Note | 2.38% | 05/15/27 | 2,858,738 | ||||
4,002,000 | United States Treasury Note | 3.75% | 11/15/43 | 4,521,166 | ||||
Total U.S. Government Bonds and Notes | 19,397,758 | |||||||
(Cost $19,349,233) |
Total Investments – 137.8% |
194,758,766 | ||
(Cost $207,664,161) (k) | |||
Outstanding Loans – (43.0)% |
(60,798,703) | ||
Net Other Assets and Liabilities – 5.2% |
7,415,789 | ||
Net Assets – 100.0% |
$141,375,852 |
Forward Foreign Currency Contracts | ||||||||||||||
Settlement Date | Counterparty | Amount Purchased | Amount Sold | Purchase Value as of 12/31/2018 | Sale Value as of 12/31/2018 | Unrealized Appreciation/ (Depreciation) | ||||||||
01/10/19 | CIT | CAD | 2,844,000 | USD | 2,195,384 | $ 2,083,767 | $ 2,195,384 | $ (111,617) | ||||||
01/10/19 | BAR | PLN | 547,000 | USD | 145,158 | 146,193 | 145,158 | 1,035 | ||||||
01/10/19 | DB | USD | 5,274,076 | AUD | 7,456,000 | 5,274,076 | 5,252,739 | 21,337 | ||||||
02/21/19 | BAR | USD | 2,213,610 | BRL | 8,425,000 | 2,213,610 | 2,165,378 | 48,232 | ||||||
01/10/19 | UBS | USD | 7,347,339 | CAD | 9,479,000 | 7,347,339 | 6,945,160 | 402,179 | ||||||
01/10/19 | UBS | USD | 2,076,742 | MXN | 42,589,000 | 2,076,742 | 2,163,650 | (86,908) | ||||||
01/10/19 | GS | USD | 2,197,449 | PLN | 8,230,000 | 2,197,449 | 2,199,578 | (2,129) | ||||||
01/10/19 | UBS | USD | 2,513,460 | ZAR | 37,558,000 | 2,513,460 | 2,607,235 | (93,775) | ||||||
01/10/19 | BAR | USD | 2,568,399 | ZAR | 36,799,000 | 2,568,399 | 2,554,546 | 13,853 | ||||||
Net Unrealized Appreciation (Depreciation) | $192,207 |
Counterparty Abbreviations | |
BAR | Barclays Bank |
CIT | Citibank, NA |
DB | Deutsche Bank |
GS | Goldman Sachs |
UBS | UBS |
(a) | All of these securities are available to serve as collateral for the outstanding loans. |
(b) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be liquid by Aberdeen Standard Investments Inc. (the “Sub-Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At December 31, 2018, securities noted as such amounted to $37,631,624 or 26.6% of net assets. |
(c) | Floating rate security. |
(d) | Zero coupon bond. |
(e) | Portfolio securities are included in a country based upon their underlying credit exposure as determined by the Sub-Advisor. |
(f) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the 1933 Act, and may be resold in transactions exempt from registration, normally to qualified institutional buyers (see Note 2C - Restricted Securities in the Notes to Financial Statements). |
(g) | This issuer is in default and interest is not being accrued by the Fund, nor paid by the issuer. |
(h) | This issuer has filed for bankruptcy protection in a São Paulo state court. |
(i) | Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at December 31, 2018. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. |
(j) | Perpetual maturity. |
(k) | Aggregate cost for federal income tax purposes was $213,454,887. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $3,512,550 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $22,016,464. The net unrealized depreciation was $18,503,914. The amounts presented are inclusive of derivative contracts. |
ARLLMONP | Argentina Blended Historical Policy Rate |
LIBOR | London Interbank Offered Rate |
ASSETS TABLE | ||||
Total Value at 12/31/2018 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Foreign Sovereign Bonds and Notes* | $ 141,587,535 | $ — | $ 141,587,535 | $ — |
Foreign Corporate Bonds and Notes* | 33,773,473 | — | 33,773,473 | — |
U.S. Government Bonds and Notes | 19,397,758 | — | 19,397,758 | — |
Total Investments | 194,758,766 | — | 194,758,766 | — |
Forward Foreign Currency Contracts | 486,636 | — | 486,636 | — |
Total | $ 195,245,402 | $— | $ 195,245,402 | $— |
LIABILITIES TABLE | ||||
Total Value at 12/31/2018 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Forward Foreign Currency Contracts | $ (294,429) | $ — | $ (294,429) | $ — |
* | See Portfolio of Investments for country breakout. |
Currency Exposure Diversification | % of Total Investments† |
USD | 49.2% |
JPY | 7.4 |
EUR | 6.9 |
PLN | 4.9 |
TRY | 4.5 |
RUB | 4.0 |
BRL | 3.7 |
MXN | 3.2 |
PEN | 2.6 |
ZAR | 2.0 |
GBP | 1.9 |
IDR | 1.8 |
MYR | 1.6 |
NGN | 1.4 |
ARS | 1.3 |
GHS | 0.7 |
CZK | 0.6 |
AUD | 0.6 |
CAD | 0.5 |
SEK | 0.5 |
NOK | 0.4 |
UAH | 0.3 |
Total | 100.0% |
† | The weightings include the impact of forward foreign currency contracts. |
Currency Abbreviations | |
ARS | Argentine Peso |
AUD | Australian Dollar |
BRL | Brazilian Real |
CAD | Canadian Dollar |
CZK | Czech Republic Koruna |
EUR | Euro |
GBP | British Pound Sterling |
GHS | Ghanaian Cedis |
IDR | Indonesian Rupiah |
JPY | Japanese Yen |
MXN | Mexican Peso |
MYR | Malaysian Ringgit |
NGN | Nigerian Naira |
NOK | Norwegian Krone |
PEN | Peruvian Nuevo Sol |
PLN | Polish Zloty |
RUB | Russian Ruble |
SEK | Swedish Krona |
TRY | Turkish Lira |
UAH | Ukrainian Hryvnia |
USD | United States Dollar |
ZAR | South African Rand |
ASSETS: | |
Investments, at value (Cost $207,664,161) | $ 194,758,766 |
Cash | 3,702,538 |
Foreign currency (Cost $385,577) | 389,519 |
Unrealized appreciation on forward foreign currency contracts | 486,636 |
Receivables: | |
Interest | 3,573,242 |
Interest reclaims | 51,236 |
Prepaid expenses | 1,419 |
Total Assets | 202,963,356 |
LIABILITIES: | |
Outstanding loans | 60,798,703 |
Unrealized depreciation on forward foreign currency contracts | 294,429 |
Payables: | |
Investment advisory fees | 170,835 |
Custodian fees | 65,435 |
Due to broker | 59,082 |
Audit and tax fees | 58,405 |
Interest and fees on loans | 56,435 |
Shareholder reporting fees | 38,790 |
Administrative fees | 26,638 |
Legal fees | 8,761 |
Transfer agent fees | 6,429 |
Deferred foreign capital gains tax | 927 |
Financial reporting fees | 771 |
Trustees’ fees and expenses | 20 |
Other liabilities | 1,844 |
Total Liabilities | 61,587,504 |
NET ASSETS | $141,375,852 |
NET ASSETS consist of: | |
Paid-in capital | $ 167,478,260 |
Par value | 127,705 |
Accumulated distributable earnings (loss) | (26,230,113) |
NET ASSETS | $141,375,852 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) | $11.07 |
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) | 12,770,468 |
INVESTMENT INCOME: | ||
Interest (net of foreign withholding tax of $51,257) | $ 13,313,971 | |
Total investment income | 13,313,971 | |
EXPENSES: | ||
Investment advisory fees | 2,154,902 | |
Interest and fees on loans | 1,529,610 | |
Custodian fees | 213,402 | |
Administrative fees | 135,101 | |
Shareholder reporting fees | 74,810 | |
Audit and tax fees | 58,864 | |
Transfer agent fees | 36,045 | |
Legal fees | 31,043 | |
Listing expense | 21,250 | |
Trustees’ fees and expenses | 16,082 | |
Financial reporting fees | 9,250 | |
Other | 28,391 | |
Total expenses | 4,308,750 | |
NET INVESTMENT INCOME (LOSS) | 9,005,221 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments | (5,164,589) | |
Forward foreign currency contracts | 944,579 | |
Foreign currency transactions | (619,162) | |
Foreign capital gains tax | (56,167) | |
Net realized gain (loss) | (4,895,339) | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments | (18,625,690) | |
Forward foreign currency contracts | 680,139 | |
Foreign currency translation | 517,624 | |
Deferred foreign capital gains tax | 56,296 | |
Net change in unrealized appreciation (depreciation) | (17,371,631) | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | (22,266,970) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(13,261,749) |
Year Ended 12/31/2018 | Year Ended 12/31/2017 | ||
OPERATIONS: | |||
Net investment income (loss) | $ 9,005,221 | $ 11,109,128 | |
Net realized gain (loss) | (4,895,339) | (2,216,986) | |
Net change in unrealized appreciation (depreciation) | (17,371,631) | 18,077,333 | |
Net increase (decrease) in net assets resulting from operations | (13,261,749) | 26,969,475 | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations | (6,988,946) | ||
Net investment income | (5,641,828) | ||
Return of capital | (4,330,624) | (7,956,025) | |
Total distributions to shareholders | (11,319,570) | (13,597,853) | |
CAPITAL TRANSACTIONS: | |||
Purchase of Common Shares pursuant to a tender offer | — | (54,234,272) | |
Repurchase of Common Shares | (1,662,641) | — | |
Net increase (decrease) in net assets resulting from capital transactions | (1,662,641) | (54,234,272) | |
Total increase (decrease) in net assets | (26,243,960) | (40,862,650) | |
NET ASSETS: | |||
Beginning of period | 167,619,812 | 208,482,462 | |
End of period | $ 141,375,852 | $ 167,619,812 | |
Accumulated net investment income (loss) at end of period | $(2,667,570) | ||
CAPITAL TRANSACTIONS were as follows: | |||
Common Shares at beginning of period | 12,950,337 | 17,267,115 | |
Common Shares purchased pursuant to a tender offer (a) | — | (4,316,778) | |
Common Shares repurchased (b) | (179,869) | — | |
Common Shares at end of period | 12,770,468 | 12,950,337 |
(a) | On May 25, 2017, the Fund commenced a tender offer for up to 25% of its outstanding common shares for cash at a price per share equal to 98% of the net asset value per share determined on the expiration date. The Fund’s tender offer expired at 5:00 p.m. New York City time on Friday, June 23, 2017. Because the Fund’s tender offer was oversubscribed, the Fund repurchased 4,316,778 (25%) of its outstanding common shares on a pro-rata basis based on the number of shares properly tendered. |
(b) | On September 15, 2015, the Fund commenced a Share repurchase program. The program originally expired on March 15, 2016, but the Board of Trustees of the Fund has subsequently authorized the continuation of the Fund’s share repurchase program until March 15, 2019. For the fiscal year ended December 31, 2018, the Fund repurchased 179,869 shares at a weighted average discount of 15.45% from net asset value per share. The Fund did not repurchase any shares during the fiscal year ended December 31, 2017. The Fund expects to continue the share repurchase program until the earlier of (i) the repurchase of an additional 547,553 common shares (for an aggregate of 870,510) or (ii) March 15, 2019. |
Cash flows from operating activities: | ||
Net increase (decrease) in net assets resulting from operations | $(13,261,749) | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: | ||
Purchases of investments | (126,200,660) | |
Sales, maturities and paydown of investments | 131,867,072 | |
Net amortization/accretion of premiums/discounts on investments | 560,268 | |
Net realized gain/loss on investments | 5,164,589 | |
Net change in unrealized appreciation/depreciation on investments | 18,625,690 | |
Net change in unrealized appreciation/depreciation on forward foreign currency contracts | (680,139) | |
Changes in assets and liabilities: | ||
Decrease in interest receivable | 315,736 | |
Increase in interest reclaims receivable | (51,236) | |
Decrease in prepaid expenses | 198 | |
Increase in interest and fees payable on loans | 16,504 | |
Increase in due to broker | 52,325 | |
Decrease in investment advisory fees payable | (23,769) | |
Decrease in audit and tax fees payable | (119) | |
Increase in legal fees payable | 7,028 | |
Increase in shareholder reporting fees payable | 13,558 | |
Increase in administrative fees payable | 6,538 | |
Increase in custodian fees payable | 12,516 | |
Decrease in transfer agent fees payable | (293) | |
Decrease in Trustees’ fees and expenses payable | (6) | |
Decrease in deferred foreign capital gains tax | (56,296) | |
Increase in other liabilities payable | 1,297 | |
Cash provided by operating activities | $16,369,052 | |
Cash flows from financing activities: | ||
Repurchase of Common Shares | (1,662,641) | |
Distributions to Common Shareholders from investment operations | (6,988,946) | |
Distributions to Common Shareholders from return of capital | (4,330,624) | |
Repayment of borrowings | (2,000,000) | |
Effect of exchange rate changes on Euro Loans (a) | (509,850) | |
Cash used in financing activities | (15,492,061) | |
Increase in cash and foreign currency (b) | 876,991 | |
Cash and foreign currency at beginning of period | 3,215,066 | |
Cash and foreign currency at end of period | $4,092,057 | |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest and fees | $1,513,106 |
(a) | This amount is a component of net change in unrealized appreciation (depreciation) on foreign currency translation as shown on the Statement of Operations. |
(b) | Includes net change in unrealized appreciation (depreciation) on foreign currency of $7,774, which does not include the effect of exchange rate changes on Euro borrowings. |
Year Ended December 31, | |||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||
Net asset value, beginning of period | $ 12.94 | $ 12.07 | $ 11.66 | $ 13.77 | $ 15.32 | ||||
Income from investment operations: | |||||||||
Net investment income (loss) | 0.69 | 0.72 | 0.73 | 0.82 | 1.03 | ||||
Net realized and unrealized gain (loss) | (1.70) | 0.98 | 0.58 | (1.80) | (1.22) | ||||
Total from investment operations | (1.01) | 1.70 | 1.31 | (0.98) | (0.19) | ||||
Distributions paid to shareholders from: | |||||||||
Net investment income | (0.54) | (0.37) | (0.43) | — | (0.71) | ||||
Net realized gain | — | — | — | — | (0.13) | ||||
Return of capital | (0.34) | (0.53) | (0.47) | (1.14) | (0.52) | ||||
Total distributions paid to Common Shareholders | (0.88) | (0.90) | (0.90) | (1.14) | (1.36) | ||||
Common Share repurchases | 0.02 | — | — | 0.01 | — | ||||
Tender offer purchases | — | 0.07 | — | — | — | ||||
Net asset value, end of period | $11.07 | $12.94 | $12.07 | $11.66 | $13.77 | ||||
Market value, end of period | $9.38 | $11.66 | $11.16 | $10.13 | $12.04 | ||||
Total return based on net asset value (a) | (6.85)% | 15.91% | 12.39% | (6.03)% | (0.84)% | ||||
Total return based on market value (a) | (12.42)% | 12.88% | 19.61% | (6.63)% | (5.46)% | ||||
Ratios to average net assets/supplemental data: | |||||||||
Net assets, end of period (in 000’s) | $ 141,376 | $ 167,620 | $ 208,482 | $ 201,262 | $ 239,807 | ||||
Ratio of total expenses to average net assets | 2.81% | 2.52% | 2.19% | 2.10% | 2.16% | ||||
Ratio of total expenses to average net assets excluding interest expense | 1.82% | 1.84% | 1.71% | 1.71% | 1.76% | ||||
Ratio of net investment income (loss) to average net assets | 5.88% | 5.81% | 5.93% | 6.42% | 6.79% | ||||
Portfolio turnover rate | 58% | 54% | 64% | 61% | 61% | ||||
Indebtedness: | |||||||||
Total loans outstanding (in 000’s) | $ 60,799 | $ 63,309 | $ 82,421 | $ 86,243 | $ 97,405 | ||||
Asset coverage per $1,000 of indebtedness (b) | $ 3,325 | $ 3,648 | $ 3,529 | $ 3,334 | $ 3,462 |
(a) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(b) | Calculated by subtracting the Fund’s total liabilities (not including the loans outstanding) from the Fund’s total assets, and dividing by the outstanding loans balance in 000’s. |
1) | benchmark yields; |
2) | reported trades; |
3) | broker/dealer quotes; |
4) | issuer spreads; |
5) | benchmark securities; |
6) | bids and offers; and |
7) | reference data including market research publications. |
1) | the credit conditions in the relevant market and changes thereto; |
2) | the liquidity conditions in the relevant market and changes thereto; |
3) | the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); |
4) | issuer-specific conditions (such as significant credit deterioration); and |
5) | any other market-based data the Advisor’s Pricing Committee considers relevant. In this regard, the Advisor’s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. |
1) | the fundamental business data relating to the issuer, or economic data relating to the country of issue; |
2) | an evaluation of the forces which influence the market in which these securities are purchased and sold; |
3) | the type, size and cost of the security; |
4) | the financial statements of the issuer, or the financial condition of the country of issue; |
5) | the credit quality and cash flow of the issuer, or country of issue, based on Aberdeen Standard Investments Inc.’s (“ASII” or the “Sub-Advisor”) or external analysis; |
6) | the information as to any transactions in or offers for the security; |
7) | the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; |
8) | the coupon payments; |
9) | the quality, value and salability of collateral, if any, securing the security; |
10) | the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer’s management (for corporate debt only); |
11) | the economic, political and social prospects/developments of the country of issue and the assessment of the country’s governmental leaders/officials (for sovereign debt only); |
12) | the prospects for the issuer’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and |
13) | other relevant factors. |
• | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
o | Quoted prices for similar investments in active markets. |
o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
Security | Acquisition Date | Principal Value/Shares | Current Price | Carrying Cost | Value | % of Net Assets | ||
OAS Finance Ltd., 8.88% | 4/18/2013 | $1,550,000 | $1.50 | $1,550,000 | $23,250 | 0.02% | ||
OAS Investments GmbH, 8.25%, 10/19/19 | 10/12/2012 | 460,000 | 1.50 | 460,000 | 6,900 | 0.00 | ||
$2,010,000 | $30,150 | 0.02% |
Distributions paid from: | 2018 | 2017 |
Ordinary income | $6,988,946 | $5,641,828 |
Capital gains | — | — |
Return of capital | 4,330,624 | 7,956,025 |
Undistributed ordinary income | $— |
Undistributed capital gains | — |
Total undistributed earnings | — |
Accumulated capital and other losses | (10,731,017) |
Net unrealized appreciation (depreciation) | (15,422,387) |
Total accumulated earnings (losses) | (26,153,404) |
Other | (76,709) |
Paid-in capital | 167,605,965 |
Total net assets | $141,375,852 |
Gross
Amounts not Offset | |||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Assets Presented in the Statement of Assets and Liabilities | Financial Instruments | Collateral Amounts Received | Net Amount | ||||||
Forward Foreign Currency Contracts* | $ 486,636 | $ — | $ 486,636 | $ (180,683) | $ — | $ 305,953 | |||||
Gross
Amounts not Offset | |||||||||||
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | Financial Instruments | Collateral Amounts Pledged | Net Amount | ||||||
Forward Foreign Currency Contracts* | $ (294,429) | $ — | $ (294,429) | $ 180,683 | $ — | $ (113,746) |
Asset Derivatives | Liability Derivatives | |||||||||
Derivative Instrument | Risk Exposure | Statement of Assets and Liabilities Location | Value | Statement of Assets and Liabilities Location | Value | |||||
Forward foreign currency contracts | Currency Risk | Unrealized appreciation on forward foreign currency contracts | $ 486,636 | Unrealized depreciation on forward foreign currency contracts | $ 294,429 |
Statement of Operations Location | |
Currency Risk Exposure | |
Net realized gain (loss) on forward foreign currency contracts | $944,579 |
Net change in unrealized appreciation (depreciation) on forward foreign currency contracts | 680,139 |
Number of Shares Tendered | Number of Tendered Shares to be Purchased | Pro-Ration Factor | Purchase Price (98% of NAV on Expiration Date) | Number of Outstanding Shares after Tender Offer | ||||
8,693,400 | 4,316,778 | 49.66% | $ 12.5636 | 12,950,337 |
(1) | If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that date or (ii) 95% of the market price on that date. |
(2) | If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments. |
• | Issuer Risk. The value of fixed income securities may decline for a number of reasons which directly relate to the issuer, such as management performance, leverage and reduced demand for the issuer’s goods and services. |
• | Interest Rate Risk. Interest rate risk is the risk that fixed income securities will decline in value because of changes in market interest rates. When market interest rates rise, the market value of fixed rate securities generally will fall. Market value generally falls further for fixed rate securities with longer duration. During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected prepayments. This may lock in a below-market yield, increase the security’s duration and further reduce the value of the security. Investments in fixed rate securities with long-term maturities may experience significant price declines if long-term interest rates increase. |
• | Prepayment Risk. During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such prepayment in lower yielding securities, which may result in a decline in the Fund’s income and distributions to common shareholders. |
• | Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called securities at market interest rates that are below the Fund portfolio’s current earnings rate. Similarly, the yield-to-maturity of a security assumes that all coupons are reinvested at the prevailing rate. If rates fall, the actual yield realized on the security may be lower as the security’s coupons are reinvested at lower yields. |
Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INDEPENDENT TRUSTEES | ||||
Richard E. Erickson, Trustee (1951) | • Three Year Term • Since Fund Inception | Physician; Officer, Wheaton Orthopedics; Limited Partner, Gundersen Real Estate Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) | 161 | None |
Thomas R. Kadlec, Trustee (1957) | • Three Year Term • Since Fund Inception | President, ADM Investor Services, Inc. (Futures Commission Merchant) | 161 | Director of ADM Investor Services, Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association |
Robert F. Keith, Trustee (1956) | • Three Year Term • Since Fund Inception | President, Hibs Enterprises (Financial and Management Consulting) | 161 | Director of Trust Company of Illinois |
Niel B. Nielson, Trustee (1954) | • Three Year Term • Since Fund Inception | Senior Advisor (August 2018 to Present), Managing Director and Chief Operating Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Servant Interactive LLC (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Dew Learning LLC (Educational Products and Services) | 161 | Director of Covenant Transport, Inc. (May 2003 to May 2014) |
INTERESTED TRUSTEE | ||||
James A. Bowen(2), Trustee and Chairman of the Board (1955) | • Three Year Term • Since Fund Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 161 | None |
(1) | Currently, James A. Bowen and Niel B. Nielson, as Class III Trustees, are serving as trustees until the Fund’s 2019 annual meeting of shareholders. Robert F. Keith, as a Class I Trustee, is serving as a trustee until the Fund’s 2020 annual meeting of shareholders. Richard E. Erickson and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until the Fund’s 2021 annual meeting of shareholders. |
(2) | Mr. Bowen is deemed an “interested person” of the Fund due to his position as CEO of First Trust Advisors L.P., investment advisor of the Fund. |
Name and Year of Birth | Position and Offices with Fund | Term of Office and Length of Service | Principal Occupations During Past 5 Years |
OFFICERS(3) | |||
James M. Dykas (1966) | President and Chief Executive Officer | • Indefinite Term • Since January 2016 | Managing Director and Chief Financial Officer (January 2016 to Present), Controller (January 2011 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
Donald P. Swade (1972) | Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite Term • Since January 2016 | Senior Vice President (July 2016 to Present), Vice President (April 2012 to July 2016), First Trust Advisors L.P. and First Trust Portfolios L.P. |
W. Scott Jardine (1960) | Secretary and Chief Legal Officer | • Indefinite Term • Since Fund Inception | General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel J. Lindquist (1970) | Vice President | • Indefinite Term • Since December 2005 | Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi A. Maher (1966) | Chief Compliance Officer and Assistant Secretary | • Indefinite Term
• Assistant Secretary Since Fund Inception | Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
(3) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
• | Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; |
• | Information about your transactions with us, our affiliates or others; |
• | Information we receive from your inquiries by mail, e-mail or telephone; and |
• | Information we collect on our website through the use of “cookies”. For example, we may identify the pages on our website that your browser requests or visits. |
• | In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. |
• | We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). |
Item 2. Code of Ethics.
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
(d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
(e) | Not applicable. |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees (Registrant) — The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $53,000 for 2017 and $53,000 for 2018.
(b) Audit-Related Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years, for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2017 and $0 for 2018.
Audit-Related Fees (Investment Adviser) — The aggregate fees billed in each of the last two fiscal years of the registrant for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2017 and $0 for 2018.
(c) Tax Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $5,200 for 2017 and $5,200 for 2018.
Tax Fees (Investment Adviser) — The aggregate fees billed in each of the last two fiscal years of the registrant for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s adviser were $0 for 2017 and $0 for 2018.
(d) All Other Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2017 and $0 for 2018.
All Other Fees (Investment Adviser) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant’s investment adviser, other than services reported in paragraphs (a) through (c) of this Item were $0 for 2017 and $0 for 2018.
(e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s adviser (other than any sub-adviser whose role is primarily portfolio management and is sub-contracted with or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment adviser of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: |
(b) 0%
(c) 0%
(d) 0%
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for 2017 were $5,200 and $44,000 for the Registrant and the Registrant’s investment adviser, respectively and for 2018 were $5,200 and $48,190 for the Registrant and the Registrant’s investment adviser, respectively. |
(h) | The Registrant’s audit committee of its Board of Trustees determined that the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed registrants.
(a) | The registrant has a separately designated audit committee consisting of all the independent trustees of the Registrant. The members of the audit committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson and Robert F. Keith. |
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The Proxy Voting Policies are attached herewith.
Aberdeen U.S. Registered Advisers (the “Aberdeen Advisers”)
Proxy Voting Guidelines
Effective as of June 1, 2017
Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) requires the Aberdeen Advisers to vote proxies in a manner consistent with clients’ best interest and must not place its interests above those of its clients when doing so. It requires the Aberdeen Advisers to:
(i) adopt and implement written policies and procedures that are reasonably designed to ensure that the Aberdeen Advisers vote proxies in the best interest of the clients, and (ii) to disclose to the clients how they may obtain information on how the Aberdeen Advisers voted proxies. In addition, Rule 204-2 requires the Aberdeen Advisers to keep records of proxy voting and client requests for information.
As registered investment advisers, the Aberdeen Advisers have an obligation to vote proxies with respect to securities held in its client portfolios in the best economic interests of the clients for which it has proxy voting authority.
The Aberdeen Advisers invest for the clients’ portfolios in companies globally and actively target investment in those companies with sound corporate governance practices. The Aberdeen Advisers are committed to exercising responsible ownership with a conviction that companies adopting best practices in corporate governance will be more successful in their core activities and deliver enhanced returns to shareholders.
Aberdeen and its affiliated U.S. registered advisers (the “Aberdeen Advisers”) have adopted a proxy voting policy. The proxy voting policy is designed and implemented in a way that is reasonably expected to ensure that proxies are voted in the best interests of clients.
Voting decisions are made by the Aberdeen Advisers’ investment managers, and are based on their knowledge of the company and discussions with management – Aberdeen Advisers’ investment managers consider explanations from companies about their compliance with relevant corporate governance codes and may refer to independent research from voting advisory services in reaching a voting decision. Where contentious issues arise in relation to motions put before a shareholders’ meeting, Aberdeen Advisers will usually contact the management of the company to exchange views and give management the opportunity to articulate its position. The long term nature of the relationships that we develop with investee company boards should enable us to deal with any concerns that we may have over strategy, the management of risk or governance practices directly with the chairman or senior independent director. In circumstances where this approach is unsuccessful, Aberdeen Advisers are prepared to escalate their intervention by expressing their concerns through the company’s advisers, through interaction with other shareholders or attending and speaking at General Meetings.
As an independent asset manager, Aberdeen is free of many of the conflicts of interest that can compromise the implementation of a rigorous and objective proxy voting policy. However, in managing third party money on behalf of clients, there are a limited number of situations where potential conflicts of interest could arise in the context of proxy voting. One case is where funds are invested in companies that are either clients or related parties of clients. Another case is where one fund managed by Aberdeen invests in other funds managed by Aberdeen.
For cases involving potential conflicts of interest, Aberdeen Advisers have implemented procedures to ensure the appropriate handling of proxy voting decisions. The guiding principle of Aberdeen Advisers’ conflicts of interest policy is simple – to exercise our right to vote in the best interests of the clients on whose behalf we are managing funds.
The first step is to identify any significant potential conflicts of interest in advance by highlighting those stocks where a potential conflict may arise. These stocks are recorded in a conflicts of interest database.
The provisional voting decision made by a fund manager or other individual will be compared against any third party proxy voting research or recommendations. For those cases where there is a contentious issue, including among others those cases where there is a difference between the provisional voting decision and the third party voting recommendation, the rationale will need to be more detailed than in a standard case. The process for handling these cases will be overseen by the designated corporate governance specialist, but in active portfolios the final decision on contentious proxy voting matters rests with the respective regional head of equities.
This policy has been developed by the Aberdeen corporate governance working group. The implementation of this policy, along with the conflicts of interest database, will be reviewed periodically by the group. Aberdeen’s Corporate Governance Policy and Principles are published on our website:
http://www.aberdeenasset.com/doc.nsf/Lit/CorporateGovernanceGroupPrinciples
To the extent that an Aberdeen Adviser may rely on sub-advisers, whether affiliated or unaffiliated, to manage any client portfolio on a discretionary basis, the Aberdeen Adviser may delegate responsibility for voting proxies to the sub-adviser. However, such sub-advisers will be required either to follow these Policies and Procedures or to demonstrate that their proxy voting policies and procedures are consistent with these Policies and Procedures or otherwise implemented in the best interests of the Aberdeen Advisers’ clients.
Upon request, the Aberdeen Advisers will provide clients with a copy of these Policies and Procedures, as revised from time to time.
As disclosed in Part 2A of each Aberdeen Adviser’s Form ADV, a client may obtain information on how its proxies were voted by requesting such information from its Aberdeen Adviser. Unless specifically requested by a client in writing, and other than as required for the Funds, the Aberdeen Advisers do not generally disclose client-specific proxy votes to third parties.
Our proxy voting records are available per request and on the SEC’s website at SEC.gov. ERISA
The U.S. Department of Labor (“DOL”) has indicated that an investment adviser with a duty to vote proxies has an obligation to take reasonable steps under the circumstances to ensure that it receives the proxies. Failure to take any action to reconcile proxies would cause Aberdeen to fail to satisfy ERISA’s fiduciary responsibility provisions. Appropriate steps include informing the Plan sponsor and its trustees, bank custodian or broker/dealer custodian of the requirement that all proxies be forwarded to the adviser and making periodic reviews during the proxy season, including follow-up letters and phone calls if necessary. When voting proxies, an investment manager must consider proxies as a Plan asset and vote only in the best economic interests of the Plan participants, vote consistently among clients, and avoid specific client voting instructions about voting proxies.
DOL has provided investment managers with the following guidance about their ERISA responsibilities, including proxy voting, compliance with written statements of investment policy, and active monitoring of corporate management by Plan fiduciaries:
i. | Where the authority to manage Plan assets has been delegated to an investment manager, only the investment manager has authority to vote proxies, except when the named fiduciary has reserved to itself or to another named fiduciary (as authorized by the plan document) the right to direct a Plan trustee regarding the voting of proxies. |
ii. | Investment managers, as Plan fiduciaries, have a responsibility to vote proxies on foreign issues that may affect the value of the shares in the Plan’s portfolio and will vote such proxies unless the cost of doing so cannot be justified. |
iii. | An investment manager is required to comply with statements of investment policy, unless compliance with the guidelines in a given instance would be imprudent and therefore failure to follow the guidelines would not violate ERISA. ERISA does not shield the investment manager from liability for imprudent actions taken in compliance with a statement of investment policy. |
On occasions when it is deemed to be a fiduciary for an ERISA client’s assets, Aberdeen will vote the Plan assets in accordance with Aberdeen’s Proxy Voting Policy. Aberdeen will provide each ERISA client (upon request) with proxy voting records to demonstrate how proxies for securities held in the portfolio were voted.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members
Information provided as of March 7, 2019
Aberdeen Standard Investments Inc. (“ASII” or the “Sub-Advisor”) (formerly Aberdeen Asset Management Inc.), a Securities and Exchange Commission registered investment advisor, is an indirect wholly-owned subsidiary of Standard Life Aberdeen plc. Standard Life Aberdeen plc is a publicly-traded global provider of long-term savings and investments listed on the London Stock Exchange, managing assets for institutional and retail clients from offices around the world. Portfolio Management Team Investment decisions for the Fund are made by ASII using a team approach and not by any one individual. By making team decisions, ASII seeks to ensure that the investment process results in consistent returns across all portfolios with similar objectives. ASII does not employ separate research analysts. Instead, ASII’s investment managers combine analysis with portfolio management. Each member of the team has sector and portfolio responsibilities such as day-to-day monitoring of liquidity. The overall result of this matrix approach is a high degree of cross-coverage, leading to a deeper understanding of the securities in which ASII invests. Below are the members of the team with significant responsibility for the day-to-day management of the Fund’s portfolio.
Brett Diment
Head of Global Emerging Market Debt
Mr. Diment is Head of Global Emerging Market Debt and joined Aberdeen following the acquisition of Deutsche Asset Management (“Deutsche”) in 2005. He is responsible for the day-to-day management of the Emerging Market Debt Team and portfolios. Mr. Diment had been at Deutsche since 1991 as a member of the Fixed Income group and served as Head of the Emerging Debt Team there from 1999 until its acquisition by Aberdeen.
Max Wolman
Senior Investment Manager, Emerging Market Debt
Mr. Wolman is a Senior Investment Manager on the Emerging Market Debt Team and has been with Aberdeen since January 2001. Mr. Wolman originally specialized in currency and domestic debt analysis but is now responsible for a wide range of emerging debt analysis including external and corporate issuers. Mr. Wolman is a member of the Emerging Markets Debt Investment Committee at Aberdeen and is also responsible for the daily implementation of the investment process.
Edwin Gutierrez
Head of Emerging Market Sovereign Debt
Mr. Gutierrez is the Head of Emerging Market Sovereign Debt. Edwin joined Aberdeen via the acquisition of Deutsche Asset Management's London and Philadelphia fixed income businesses in 2005, where he held the same role since joining Deutsche in 2000.
James Athey
Senior Investment Manager, Fixed Income EMEA, Global & European Rates
Mr. Athey is a Senior Investment Manager on the Global Macro Team. James joined Aberdeen in 2001 through the Graduate Recruitment Program.
Patrick O’Donnell
Senior Investment Manager, Fixed Income EMEA, Global & European Rates
Mr. O’Donnell is a Senior Investment Manager on the Rates Management Team. Patrick Joined Aberdeen Standard Investments in 2005 through the Graduate Recruitment Program.
(a)(2) | Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest |
Other Accounts Managed by Portfolio Manager(s) or Management Team Member
Information provided as of December 31, 2017
(assets in millions).
Name of Portfolio Manager or Team Member |
Type of Accounts*** |
# of Accounts Managed |
Assets |
# of Accounts Managed for which Advisory Fee is Based on Performance |
Total Assets for which Advisory Fee is Based on Performance |
1. Brett Diment | Registered Investment Companies: | 4 | $320 | 0 | $0 |
Other Pooled Investment Vehicles: | 19 | $5,643 | 0 | $0 | |
Other Accounts: | 22 | $5,416 | 1 | $339.32 | |
2. Edwin Gutierrez | Registered Investment Companies: | 4 | $320 | 0 | $0 |
Other Pooled Investment Vehicles: | 19 | $5,643 | 0 | $0 | |
Other Accounts: | 22 | $5,416 | 1 | $339.32 | |
3. James Athey | Registered Investment Companies: | 2 | $112 | 0 | $0 |
Other Pooled Investment Vehicles: | 12 | $1,043 | 0 | $0 | |
Other Accounts: | 29 | $3,822 | 1 | $157.66 | |
4. Patrick O’Donnell | Registered Investment Companies: | 2 | $112 | 0 | $0 |
Other Pooled Investment Vehicles: | 12 | $1,043 | 0 | $0 | |
Other Accounts: | 29 | $3,822 | 1 | $157.66 | |
5. Max Wolman | Registered Investment Companies: | 4 | $320 | 0 | $0 |
Other Pooled Investment Vehicles: | 19 | $5,643 | 0 | $0 | |
Other Accounts: | 22 | $5,416 | 1 | $339.32 |
Potential Conflicts of Interests
As of December 31, 2018
Effective January 1, 2019, Aberdeen Asset Management Inc.’s ("AAMI") name was changed to Aberdeen Standard Investments Inc. (“ASII”) to align with our global brand. ASII is a wholly-owned subsidiary of Aberdeen Asset Management PLC (“Aberdeen PLC”). As of August 14, 2017, further to the merger with Standard Life plc, Aberdeen PLC is a wholly owned subsidiary of Standard Life Aberdeen plc, which acts as parent to existing Aberdeen and Standard Life business units. The asset management business of Standard Life Aberdeen plc operates under the name Aberdeen Standard Investments (“ASI”). In accordance with legal requirements in the various jurisdictions in which they operate, and their own Conflicts of Interest policies, all subsidiaries of have in place arrangements to identify and manage Conflicts of Interest that may arise between them and their clients or between their different clients. Where ASI does not consider that these arrangements are sufficient to manage a particular conflict, it will inform the relevant client(s) of the nature of the conflict so that the client(s) may decide how to proceed. The portfolio managers’ management of “other accounts” may give rise to potential conflicts of interest in connection with their management of the Fund’s investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. However, ASI believes that these risks are mitigated by the fact that: (i) accounts with like investment strategies managed by a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and similar factors; and (ii) portfolio manager personal trading is monitored to avoid potential conflicts. In addition, the Adviser has adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts. In some cases, another account managed by the same portfolio manager may compensate ASI based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities. Another potential conflict could include instances in which securities considered as investments for the Fund also may be appropriate for other investment accounts managed by ASI or its affiliates. Whenever decisions are made to buy or sell securities by the Fund and one or more of the other accounts simultaneously, ASI may aggregate the purchases and sales of the securities and will allocate the securities transactions in a manner that they believe to be equitable under the circumstances. As a result of the allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of ASI that the benefits achieved through economies of scale from the ASI organization outweigh any disadvantage that may arise from exposure to simultaneous transactions. ASI has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises or eliminate or minimize conflicts.
(a)(3) Compensation Structure of Portfolio Manager(s) or Management Team Members
Information provided as of December 31, 2018
ASI’s remuneration policies are designed to support its business strategy as a leading international asset manager. The objective is to attract, retain and reward talented individuals for the delivery of sustained, superior returns for ASI’s clients and shareholders. ASI operates in a highly competitive international employment market, and aims to maintain its strong track record of success in developing and retaining talent. ASI’s policy is to recognize corporate and individual achievements each year through an appropriate annual bonus scheme. The aggregate value of awards in any year is dependent on the Standard Life Aberdeen Group’s overall performance and profitability. Consideration is also given to the levels of bonuses paid in the market. Individual awards, which are payable to all members of staff, are determined by a rigorous assessment of achievement against defined objectives. A long-term incentive plan for key staff and senior employees comprises of a mixture of cash and deferred shares in Aberdeen Asset Management PLC, or, after August 14, 2017, Standard Life Aberdeen plc, or select ASI funds (where applicable). Overall compensation packages are designed to be competitive relative to the investment management industry.
Base Salary: ASI’s policy is to pay a fair salary commensurate with the individual’s role, responsibilities and experience, and having regard to the market rates being offered for similar roles in the asset management sector and other comparable companies. Any increase is generally to reflect inflation and is applied in a manner consistent with other ASI employees; any other increases must be justified by reference to promotion or changes in responsibilities.
Annual Bonus: The Remuneration Committee of ASI determines the key performance indicators that will be applied in considering the overall size of the bonus pool. In line with practice amongst other asset management companies, individual bonuses are not subject to an absolute cap. However, the aggregate size of the bonus pool is dependent on the Standard Life Aberdeen Group’s overall performance and profitability. Consideration is also given to the levels of bonuses paid in the market. Individual awards are determined by a rigorous assessment of achievement against defined objectives, and are reviewed and approved by the Remuneration Committee. ASI has a deferral policy which is intended to assist in the retention of talent and to create additional alignment of executives’ interests with ASI’s sustained performance and, in respect of the deferral into funds, managed by ASI, to align the interest of asset managers with our clients. Staff performance is reviewed formally at least once a year. The review process evaluates the various aspects that the individual has contributed to ASI, and specifically, in the case of portfolio managers, to the relevant investment team. Discretionary bonuses are based on client service, asset growth and the performance of the respective portfolio manager. Overall participation in team meetings, generation of original research ideas and contribution to presenting the team externally are also evaluated. In the calculation of a portfolio management team’s bonus, ASI takes into consideration investment matters (which include the performance of funds, adherence to the company investment process, and quality of company meetings) as well as more subjective issues such as team participation and effectiveness at client presentations. To the extent performance is factored in, such performance is not judged against any specific benchmark and is evaluated over the period of a year - January to December. The pre- or after-tax performance of an individual account is not considered in the determination of a portfolio manager’s discretionary bonus; rather the review process evaluates the overall performance of the team for all of the accounts the team manages. Portfolio manager performance on investment matters is judged over all of the accounts the portfolio manager contributes to and is documented in the appraisal process. A combination of the team’s and individual’s performance is considered and evaluated. Although performance is not a substantial portion of a portfolio manager’s compensation, ASI also recognizes that fund performance can often be driven by factors outside one’s control, such as (irrational) markets, and as such pays attention to the effort by portfolio managers to ensure integrity of our core process by sticking to disciplines and processes set, regardless of momentum and ‘hot’ themes. Short-terming is thus discouraged and trading oriented managers will thus find it difficult to thrive in the ASI environment. Additionally, if any of the aforementioned undue risks were to be taken by a portfolio manager, such trend would be identified via ASI’s dynamic compliance monitoring system.
(a)(4) Disclosure of Securities Ownership
The information below is as of December 31, 2017
Name of Portfolio Manager or Team Member |
Dollar ($) Range of Fund Shares Beneficially Owned | |
Patrick O’Donnell | $0 | |
Brett Diment | $0 | |
Edwin Guiterrez | $0 | |
Max Wolman | $0 | |
James Athey | $0 |
(b) | Not applicable. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
Month #1 (01/01/2018 – 01/31/2018) |
0 | 0 | 143,088 | 727,422 |
Month #2 (02/01/2018 – 02/28/2018) |
0 | 0 | 143,088 | 727,422 |
Month #3 (03/01/2018 – 03/31/2018) |
0 | 0 | 143,088 | 727,422 |
Month #4 (04/01/2018 – 04/30/2018) |
0 | 0 | 143,088 | 727,422 |
Month #5 (05/01/2018 – 05/31/2018) |
0 | 0 | 143,088 | 727,422 |
Month #6 (06/01/2018 – 06/30/2018 |
0 | 0 | 143,088 | 727,422 |
Month #7 (07/01/2018 – 07/31/2018 |
0 | 0 | 143,088 | 727,422 |
Month #8 (08/01/2018 – 08/31/2018 |
0 | 0 | 143,088 | 727,422 |
Month #9 (09/01/2018 – 09/31/2018 |
4,435 | $ 9.57 | 147,523 | 722,987 |
Month #10 (10/01/2018 – 10/31/2018 |
43,777 | $ 9.27 | 191,300 | 679,210 |
Month #11 (11/01/2018 – 11/30/2018) |
70,216 | $ 9.20 | 261,516 | 608,994 |
Month #12 (12/01/2018 – 12/31/2018) |
61,441 | $ 9.25 | 322,957 | 547,553 |
Total | 179,869 | $ 9.24 | 322,957 | 547,553 |
On September 15, 2015, the Fund commenced a Share repurchase program. The program originally expired on March 15, 2016, but the Board of Trustees of the Fund has subsequently authorized the continuation of the Fund’s share repurchase program until March 15, 2019. For the fiscal year ended December 31, 2018, the Fund repurchased 179,869 shares at a weighted average discount of 15.45% from net asset value per share. The Fund did not repurchase any shares during the fiscal year ended December 31, 2017. The Fund expects to continue the share repurchase program until the earlier of (i) the repurchase of an additional 547,553 common shares (for an aggregate of 870,510) or (ii) March 15, 2019.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) | First Trust/Aberdeen Global Opportunity Income Fund |
By (Signature and Title)* | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date | February 22, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date | February 22, 2019 |
By (Signature and Title)* | /s/ Donald P. Swade | |||
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date | February 22, 2019 |
* Print the name and title of each signing officer under his or her signature.
SENIOR FINANCIAL OFFICER
CODE OF CONDUCT
I. Introduction
This code of conduct is being adopted by the investment companies advised by First Trust Advisors L.P., from time to time, (the "FUNDS"). The reputation and integrity of the Funds are valuable assets that are vital to the Funds' success. Each officer of the Funds, and officers and employees of the investment adviser to the Funds who work on Fund matters, including each of the Funds' senior financial officers ("SFOS"), is responsible for conducting each Fund's business in a manner that demonstrates a commitment to the highest standards of integrity. SFOs include the Principal Executive Officer (who is the President), the Controller (who is the principal accounting officer), and the Treasurer (who is the principal financial officer), and any person who performs a similar function.
The Funds, First Trust Advisors L.P. and First Trust Portfolios have adopted Codes of Ethics under Rule 17j-1 under the Investment Company Act of 1940 (the "RULE 17J-1 CODE"). These Codes of Ethics are designed to prevent certain conflicts of interest that may arise when officers, employees, or directors of the Funds and the foregoing entities know about present or future Fund transactions and/or have the power to influence those transactions, and engage in transactions with respect to those same securities in their personal account(s) or otherwise take advantage of their position and knowledge with respect to those securities. In an effort to prevent these conflicts and in accordance with Rule 17j-1, the Funds adopted their Rule 17j-1 Code to prohibit transactions and conduct that create conflicts of interest, and to establish compliance procedures.
The Sarbanes-Oxley Act of 2002 was designed to address corporate malfeasance and to help assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under Section 406 of the Act, all public companies (including the Funds) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to prevent future situations (such as occurred in well-reported situations involving such companies as Enron and WorldCom) where a company creates an environment in which employees are afraid to express their opinions or to question unethical and potentially illegal business practices.
The Funds have chosen to adopt a senior financial officer Code of Conduct to encourage their SFOs, and other Fund officers and employees of First Trust Advisors or First Trust Portfolios to act ethically and to question potentially unethical or illegal practices, and to strive to ensure that the Funds' financial disclosures are complete, accurate, and understandable.
II. Purposes of This Code of Conduct
The purposes of this Code are:
A. To promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
B. To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Funds file with, or submits to, the SEC and in other public communications the Funds make;
C. To promote compliance with applicable governmental laws, rules and regulations;
D. To encourage the prompt internal reporting to an appropriate person of violations of the Code; and
E. To establish accountability for adherence to the Code.
III. Questions About This Code
The Funds' Boards of Trustees have designated W. Scott Jardine or other appropriate officer designated by the President of the respective Funds to be the Compliance Coordinator for the implementation and administration of the Code.
IV. Handling of Financial Information
The Funds have adopted guidelines under which its SFOs perform their duties. However, the Funds expect that all officers or employees of the adviser or distributor who participate in the preparation of any part of any Fund's financial statements follow these guidelines with respect to each Fund:
A. Act with honesty and integrity and avoid violations of this Code, including actual or apparent conflicts of interest with the Fund in personal and professional relationships.
B. Disclose to the Fund's Compliance Coordinator any material transaction or relationship that reasonably could be expected to give rise to any violations of the Code, including actual or apparent conflicts of interest with the Fund. You should disclose these transactions or relationships whether you are involved or have only observed the transaction or relationship. If it is not possible to disclose the matter to the Compliance Coordinator, it should be disclosed to the Fund's Principal Financial Officer or Principal Executive Officer.
C. Provide information to the Fund's other officers and appropriate employees of service providers (adviser, administrator, outside auditor, outside counsel, custodian, etc.) that is accurate, complete, objective, relevant, timely, and understandable.
D. Endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Fund's periodic reports.
E. Comply with the federal securities laws and other applicable laws and rules, such as the Internal Revenue Code.
F. Act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated.
G. Respect the confidentiality of information acquired in the course of your work except when you have Fund approval to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage.
H. Share and maintain skills important and relevant to the Fund's needs.
I. Proactively promote ethical behavior among peers in your work environment.
J. Responsibly use and control all assets and resources employed or entrusted to you.
K. Record or participate in the recording of entries in the Fund's books and records that are accurate to the best of your knowledge.
V. Waivers of This Code
SFOs and other parties subject to this Code may request a waiver of a provision of this Code (or certain provisions of the Fund's Rule 17j-1 Code) by submitting their request in writing to the Compliance Coordinator for appropriate review. An executive officer of the Fund or the Audit Committee will decide whether to grant a waiver. All waivers of this Code must be disclosed to the Fund's shareholders to the extent required by SEC rules. A good faith interpretation of the provisions of this Code, however, shall not constitute a waiver.
VI. Annual Certification
Each SFO will be asked to certify on an annual basis that he/she is in full compliance with the Code and any related policy statements.
VII. Reporting Suspected Violations
A. SFOs or other officers of the Funds or employees of the First Trust group who work on Fund matters who observe, learn of, or, in good faith, suspect a violation of the Code MUST immediately report the violation to the Compliance Coordinator, another member of the Funds' or First Trust's senior management, or to the Audit Committee of the Fund Board. An example of a possible Code violation is the preparation and filing of financial disclosure that omits material facts, or that is accurate but is written in a way that obscures its meaning.
B. Because service providers such as an administrator, outside accounting firm, and custodian provide much of the work relating to the Funds' financial statements, you should be alert for actions by service providers that may be illegal, or that could be viewed as dishonest or unethical conduct. You should report these actions to the Compliance Coordinator even if you know, or think, that the service provider has its own code of ethics for its SFOs or employees.
C. SFOs or other officers or employees who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible.
VIII. Violations of The Code
A. Dishonest, unethical or illegal conduct will constitute a violation of this Code, regardless of whether this Code specifically refers to that particular conduct. A violation of this Code may result in disciplinary action, up to and including termination of employment. A variety of laws apply to the Funds and their operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owed by Fund directors and officers, and criminal laws. The federal securities laws generally prohibit the Funds from making material misstatements in its prospectus and other documents filed with the SEC, or from omitting to state a material fact. These material misstatements and omissions include financial statements that are misleading or omit materials facts.
B. Examples of criminal violations of the law include stealing, embezzling, misapplying corporate or bank funds, making a payment for an expressed purpose on a Fund's behalf to an individual who intends to use it for a different purpose; or making payments, whether corporate or personal, of cash or other items of value that are intended to influence the judgment or actions of political candidates, government officials or businesses in connection with any of the Funds' activities. The Funds must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report, as appropriate, non-criminal violations.
Amended: June 1, 2009
Certification Pursuant to Rule 30a-2(a)
under the 1940 Act and Section 302 of the
Sarbanes-Oxley Act
I, James M. Dykas, certify that:
1. | I have reviewed this report on Form N-CSR of First Trust/Aberdeen Global Opportunity Income Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 22, 2019 | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Certification Pursuant to Rule 30a-2(a)
under the 1940 Act and Section 302 of the
Sarbanes-Oxley Act
I, Donald P. Swade, certify that:
1. | I have reviewed this report on Form N-CSR of First Trust/Aberdeen Global Opportunity Income Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 22, 2019 | /s/ Donald P. Swade | |||
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Certification Pursuant to Rule 30a-2(b) under
the 1940 Act and Section 906 of the
Sarbanes-Oxley Act
I, James M. Dykas, President and Chief Executive Officer of First Trust/Aberdeen Global Opportunity Income Fund (the “Registrant”), certify that:
1. | The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: | February 22, 2019 | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
I, James M. Dykas, Treasurer, Chief Financial Officer and Chief Accounting Officer of First Trust/Aberdeen Global Opportunity Income Fund (the “Registrant”), certify that:
1. | The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: | February 22, 2019 | /s/ Donald P. Swade | |||
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
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