First Trust Mortgage Income Fund (the "Fund") (NYSE: FMY) has decreased the Fund’s regularly scheduled monthly common share distribution to $0.10 per share from $0.14 per share. The distribution will be payable on February 15, 2013 to shareholders of record as of February 5, 2013. The ex-dividend date is expected to be February 1, 2013. The monthly distribution information for the Fund appears below.
First Trust Mortgage Income Fund (FMY):
|Distribution per share:||$0.10|
|Distribution Rate based on the January 18, 2013 NAV of $17.92:||6.70%|
|Distribution Rate based on the January 18, 2013 closing market price of $18.51:||6.48%|
|Decrease from previous distribution of $0.14:||-28.57%|
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 2013 will be made after the end of 2013.
The Fund is decreasing its distribution to bring it in line with its current earnings level. Historically, certain of the Fund’s mortgage investments have experienced lower than expected defaults and for securities purchased at a discount, generated higher than expected prepayments, reducing initially anticipated losses on those investments and resulting in higher than anticipated net income to the Fund. As a result, the Fund 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.
(Information in the below tables 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-ended 10/31/06||$267,904||$267,904|
|Fiscal year-ended 10/31/07||$280,403||$395,888|
|Fiscal year-ended 10/31/08||$1,678,984||$2,850,709|
|Fiscal year-ended 10/31/09||$1,237,794||$4,334,592|
|Fiscal year-ended 10/31/10||$4,493,077||$6,843,075|
|Fiscal year-ended 10/31/11||$3,958,078||$7,646,720|
|Fiscal year-ended 10/31/12||($1,191,667||)||$1,006,840|
The Fund’s distributions over the past few years have been set at levels that took into account both the earnings of the Fund, as well as the built up cushion of UNII, as illustrated in the table below.
|GAAP Basis||Per Share|
|Net Inv Inc||Dist From||Per Share|
Net Inv Inc
|Inception (5/17/05 to 10/31/05)||$0.36||($0.31||)||$0.05|
|Fiscal year-ended 10/31/06||$1.03||($1.06||)||($0.03||)|
|Fiscal year-ended 10/31/07||$1.04||($1.02||)||$0.02|
|Fiscal year-ended 10/31/08||$1.49||($1.12||)||$0.37|
|Fiscal year-ended 10/31/09||$1.57||($1.37||)||$0.20|
|Fiscal year-ended 10/31/10||$2.06||($1.65||)||$0.41|
|Fiscal year-ended 10/31/11||$1.69||($2.03||)||($0.34||)|
|Fiscal year-ended 10/31/12||$1.28||($2.03||)||($0.75||)|
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 $63 billion as of December 31, 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 over $168 billion in assets under management as of September 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.