First Trust Mortgage Income Fund (the "Fund") (NYSE: FMY) has decreased the Fund’s regularly scheduled monthly common share distribution to $0.14 per share from $0.16 per share. The distribution is payable on November 15, 2012 to shareholders of record as of November 5, 2012. The ex-dividend date is expected to be November 1, 2012. The monthly distribution information for the Fund appears below.
First Trust Mortgage Income Fund (FMY):
|Distribution per share:||$0.14|
|Distribution Rate based on the October 19, 2012 NAV of $17.91:||9.38%|
|Distribution Rate based on the October 19, 2012 closing market price of $20.17:||8.33%|
|Decrease from previous distribution of $0.16 per share:||-12.50%|
The majority, and possibly all, of this distribution will be paid out of net investment income earned by the Fund. A portion of this distribution may come from net short-term realized capital gains or return of capital. The final determination of the source and tax status of all distributions paid in 2012 will be made after the end of 2012.
The Fund is decreasing its distribution to bring it closer to its current actual earnings level, while at the same time maintaining a level to meet its distribution requirements as a regulated investment company under the Internal Revenue Code. More specifically, historically, certain of the Fund’s mortgage investments have experienced lower than expected defaults and/or, for securities purchased at a discount, generated higher than expected prepayments, reducing initially anticipated losses for the securities and resulting in higher than anticipated net income to the Fund. Therefore, the Fund has built a cushion of undistributed net investment income (“UNII”) on both a Generally Accepted Accounting Principles (“GAAP”) basis, as well as on a tax basis as illustrated in the table below. Over the past few years the Fund’s distributions have been set at a level that takes into account both the earnings of the Fund, as well as the increased UNII. It remains difficult to predict whether low default and high prepayments will continue to add to the Fund’s undistributed net income going forward.
|(Information in the table is per the Fund’s regulatory Form N-CSR Filings)|
|GAAP Basis||Tax Basis|
|Inception (5/17/05) to 10/31/05||$226,733||$226,733|
|Fiscal year-end 10/31/06||$267,904||$267,904|
|Fiscal year-end 10/31/07||$280,403||$395,888|
|Fiscal year-end 10/31/08||$1,678,984||$2,850,709|
|Fiscal year-end 10/31/09||$1,237,794||$4,334,592|
|Fiscal year-end 10/31/10||$4,493,077||$6,843,075|
|Fiscal year-end 10/31/11||$3,958,078||$7,646,720|
|Semi-annual period end 4/30/12||($519,014)||Not available|
The Fund is a diversified, closed-end management investment company that seeks to provide a high level of current income. As a secondary objective, the Fund seeks to preserve capital. The Fund pursues these investment objectives by investing primarily in mortgage-backed securities representing part ownership in a pool of either residential or commercial mortgage loans that, in the opinion of the Fund’s investment sub-advisor, offer an attractive combination of credit quality, yield and maturity.
First Trust Advisors L.P., the Fund’s investment advisor, along with its affiliate First Trust Portfolios L.P., are privately-held companies which provide a variety of investment services, including asset management and financial advisory services, with collective assets under management or supervision of approximately $61 billion as of September 30, 2012 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts.
Brookfield Investment Management Inc. (“Brookfield”) serves as the Fund’s Sub-Advisor. Brookfield is a wholly-owned subsidiary of Brookfield Asset Management, a global alternative asset manager with approximately $150 billion in assets under management as of June 30, 2012. Brookfield Asset Management has over a 100-year history of owning and operating assets with a focus on property, renewable power, infrastructure and private equity and also offers a range of public and private investment products and services. On behalf of its clients, Brookfield Asset Management is also an active investor in the public securities markets. The public market activities of Brookfield, an SEC-registered investment advisor, complement the firm’s core competencies as a direct investor. These activities encompass global listed real estate and infrastructure equities, corporate high-yield investments, opportunistic credit strategies and a dedicated insurance asset management division. Headquartered in New York, NY, Brookfield maintains offices and investment teams in Toronto, Chicago, Boston and London.
Past performance is no assurance of future results. Investment return and market value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost.
Principal Risk Factors: Investment in this Fund involves investment and market risk, management risk, credit risk, prepayment risk, reinvestment risk, interest rate risk, floating rate CMOs and inverse floating rate CMOs risk, bond market risk, economic sector risk, inflation risk, U.S. government securities risk, government agency risk, asset-backed securities risk, market discount risk, leverage risk, interest rate transactions risk, derivatives risk, market disruption risk, portfolio turnover risk, tax risk relating to investments in certain REMICs, and illiquid/restricted securities risk. The risks of investing in the Fund are spelled out in the prospectus, shareholder reports and other regulatory filings.
The Fund’s daily closing New York Stock Exchange price and net asset value per share as well as other information can be found at www.ftportfolios.com or by calling 1-800-988-5891.