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 811-08795
BROOKFIELD HIGH INCOME FUND INC.
(Exact name of registrant as specified in charter)
BROOKFIELD PLACE
250 VESEY STREET
NEW YORK, NEW YORK 10281-1023
(Address of principal executive offices) (Zip code)
BRIAN F. HURLEY, PRESIDENT
BROOKFIELD HIGH INCOME FUND INC.
BROOKFIELD PLACE
250 VESEY STREET
NEW YORK, NEW YORK 10281-1023
(Name and address of agent for service)
Registrant’s telephone number, including area code: (855) 777-8001
Date of fiscal year end: September 30, 2016
Date of reporting period: September 30, 2016
Item 1. Reports to Shareholders.
Portfolio Characteristics (Unaudited)
PORTFOLIO STATISTICS | |
Annualized distribution rate1 | 9.84% |
Weighted average coupon | 6.41% |
Weighted average life | 5.64 years |
Percentage of leveraged assets | 26.57% |
Total number of holdings | 108 |
CREDIT QUALITY2 | |
BBB and Above | 4.6% |
BB | 33.9% |
B | 40.3% |
CCC and Below | 10.8% |
Securitized Products | 2.7% |
Equities | 3.3% |
Unrated | 2.6% |
Cash | 1.8% |
Total | 100.0% |
ASSET ALLOCATION3 | |
Residential Mortgage Related Holdings | 3.6% |
Corporate Bonds | 119.7% |
Term Loans | 4.2% |
Common Stocks | 2.9% |
Exchange Traded Fund | 1.4% |
Warrant | 0.2% |
Liabilities in Excess of Other Assets | (32.0%) |
Total | 100.0% |
Schedule of Investments
Interest Rate | Maturity | Principal Amount (000s) | Value | |||
RESIDENTIAL MORTGAGE RELATED HOLDINGS – 3.6% | ||||||
Non-Agency Mortgage-Backed Securities – 3.6% | ||||||
Alternative Loan Trust | ||||||
Series 2007-OA3, Class 1A1 1,2,3 | 0.67% | 04/25/47 | $ 1,380 | $ 1,175,647 | ||
GSAMP Trust | ||||||
Series 2006-HE8, Class A2C 2,3 | 0.70 | 01/25/37 | 1,388 | 1,147,951 | ||
Home Equity Asset Trust | ||||||
Series 2006-7, Class 2A3 2,3 | 0.68 | 01/25/37 | 1,934 | 1,404,484 | ||
Nomura Resecuritization Trust | ||||||
Series 2014-1R, Class 2A11 2,4 | 0.82 | 02/26/37 | 4,326 | 2,427,855 | ||
Securitized Asset Backed Receivables LLC Trust | ||||||
Series 2007-BR4, Class A2B 2,3 | 0.73 | 05/25/37 | 2,385 | 1,491,855 | ||
Total Non-Agency Mortgage-Backed Securities | 7,647,792 | |||||
Total RESIDENTIAL MORTGAGE RELATED HOLDINGS (Cost $8,025,243) | 7,647,792 | |||||
CORPORATE BONDS – 119.7% | ||||||
Automotive – 3.6% | ||||||
American Axle & Manufacturing, Inc. 1 | 6.25 | 03/15/21 | 3,190 | 3,333,550 | ||
American Axle & Manufacturing, Inc. 1 | 7.75 | 11/15/19 | 650 | 736,125 | ||
Ford Motor Co. 1 | 6.50 | 08/01/18 | 3,100 | 3,375,773 | ||
Motors Liquidation Co. 5,6 | 8.38 | 07/15/33 | 8,250 | 825 | ||
Total Automotive | 7,446,273 | |||||
Basic Industry – 9.2% | ||||||
AK Steel Corp. | 7.63 | 05/15/20 | 1,425 | 1,389,375 | ||
Alcoa, Inc. 1 | 5.55 | 02/01/17 | 1,000 | 1,012,590 | ||
Arch Coal, Inc. 1,6 | 7.25 | 06/15/21 | 6,100 | 289,750 | ||
Cascades, Inc. 1,4,7 | 5.50 | 07/15/22 | 3,000 | 3,048,750 | ||
Hexion, Inc. | 8.88 | 02/01/18 | 1,425 | 1,357,313 | ||
Hexion, Inc. 1 | 9.00 | 11/15/20 | 1,925 | 1,398,031 | ||
INEOS Group Holdings SA 4,7 | 5.63 | 08/01/24 | 4,300 | 4,219,375 | ||
Millar Western Forest Products Ltd. 7 | 8.50 | 04/01/21 | 1,575 | 828,844 | ||
PulteGroup, Inc. 1 | 6.38 | 05/15/33 | 2,350 | 2,447,917 | ||
USG Corp. 1 | 9.50 | 01/15/18 | 3,075 | 3,339,450 | ||
Total Basic Industry | 19,331,395 | |||||
Capital Goods – 3.9% | ||||||
Ardagh Packaging Finance PLC 1,4,7 | 6.75 | 01/31/21 | 3,625 | 3,742,813 | ||
Crown Cork & Seal Company, Inc. 1 | 7.38 | 12/15/26 | 3,950 | 4,419,062 | ||
Total Capital Goods | 8,161,875 | |||||
Consumer Goods – 2.4% | ||||||
ACCO Brands Corp. 1 | 6.75 | 04/30/20 | 3,575 | 3,771,625 | ||
Anheuser-Busch InBev Worldwide, Inc. 1 | 7.75 | 01/15/19 | 1,000 | 1,137,600 | ||
Total Consumer Goods | 4,909,225 | |||||
Energy – 26.9% | ||||||
AmeriGas Finance LLC 1 | 7.00 | 05/20/22 | 1,025 | 1,083,938 | ||
Blue Racer Midstream LLC 1,4 | 6.13 | 11/15/22 | 4,550 | 4,447,625 | ||
Concho Resources, Inc. | 5.50 | 04/01/23 | 2,725 | 2,810,156 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |||
CORPORATE BONDS (continued) | ||||||
Crestwood Midstream Partners LP | 6.25% | 04/01/23 | $ 2,950 | $ 2,986,875 | ||
Dynagas LNG Partners LP 1,7 | 6.25 | 10/30/19 | 2,825 | 2,620,188 | ||
EP Energy LLC 1 | 6.38 | 06/15/23 | 3,725 | 2,225,688 | ||
Ferrellgas Partners LP 1 | 8.63 | 06/15/20 | 3,375 | 3,315,937 | ||
Global Partners LP | 6.25 | 07/15/22 | 3,225 | 2,991,187 | ||
Holly Energy Partners LP | 6.50 | 03/01/20 | 3,000 | 3,093,750 | ||
ION Geophysical Corp. 4 | 9.13 | 12/15/21 | 1,975 | 1,204,750 | ||
LBC Tank Terminals Holding Netherlands BV 1,4,7 | 6.88 | 05/15/23 | 3,325 | 3,308,375 | ||
MPLX LP | 4.88 | 12/01/24 | 5,850 | 6,050,807 | ||
Pioneer Natural Resources Co. | 6.65 | 03/15/17 | 1,250 | 1,278,625 | ||
Precision Drilling Corp. 1,7 | 6.63 | 11/15/20 | 1,800 | 1,669,500 | ||
Puma International Financing SA 4,7 | 6.75 | 02/01/21 | 3,125 | 3,224,719 | ||
Suburban Propane Partners LP | 7.38 | 08/01/21 | 2,800 | 2,912,000 | ||
Targa Pipeline Partners LP 1 | 5.88 | 08/01/23 | 4,000 | 3,970,000 | ||
Tesoro Logistics LP 1 | 6.13 | 10/15/21 | 4,250 | 4,441,250 | ||
Trinidad Drilling Ltd. 1,4,7 | 7.88 | 01/15/19 | 2,865 | 2,664,450 | ||
Total Energy | 56,299,820 | |||||
Healthcare – 9.3% | ||||||
CHS/Community Health Systems, Inc. | 6.88 | 02/01/22 | 1,525 | 1,311,500 | ||
CHS/Community Health Systems, Inc. 1 | 7.13 | 07/15/20 | 3,050 | 2,834,975 | ||
HCA, Inc. 1 | 5.25 | 06/15/26 | 5,250 | 5,578,125 | ||
Kindred Healthcare, Inc. | 6.38 | 04/15/22 | 3,750 | 3,553,125 | ||
Quorum Health Corp. 4 | 11.63 | 04/15/23 | 1,850 | 1,535,500 | ||
Tenet Healthcare Corp. | 8.13 | 04/01/22 | 4,750 | 4,750,000 | ||
Total Healthcare | 19,563,225 | |||||
Media – 8.8% | ||||||
CCO Holdings LLC | 5.75 | 01/15/24 | 5,550 | 5,896,875 | ||
CSC Holdings LLC 4 | 10.88 | 10/15/25 | 4,125 | 4,826,250 | ||
Cumulus Media Holdings, Inc. 1 | 7.75 | 05/01/19 | 2,455 | 994,275 | ||
iHeart Communications, Inc. 1 | 9.00 | 03/01/21 | 3,550 | 2,644,750 | ||
Mediacom Broadband LLC | 6.38 | 04/01/23 | 3,950 | 4,167,250 | ||
Total Media | 18,529,400 | |||||
Real Estate – 5.7% | ||||||
Cedar Fair LP 1 | 5.25 | 03/15/21 | 4,200 | 4,347,000 | ||
Lamar Media Corp. | 5.38 | 01/15/24 | 4,150 | 4,357,500 | ||
New Albertsons, Inc. 1 | 7.75 | 06/15/26 | 3,300 | 3,300,000 | ||
Total Real Estate | 12,004,500 | |||||
Retail – 1.7% | ||||||
L Brands, Inc. 1 | 7.60 | 07/15/37 | 2,500 | 2,687,500 | ||
L Brands, Inc. | 8.50 | 06/15/19 | 800 | 934,000 | ||
Total Retail | 3,621,500 | |||||
Services – 14.7% | ||||||
Avis Budget Car Rental LLC 1 | 5.50 | 04/01/23 | 1,550 | 1,563,563 | ||
Boyd Gaming Corp. 4 | 6.38 | 04/01/26 | 2,600 | 2,788,500 | ||
Casella Waste Systems, Inc. 1 | 7.75 | 02/15/19 | 3,283 | 3,348,660 | ||
GLP Capital LP 1 | 5.38 | 11/01/23 | 4,525 | 4,875,687 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |||
CORPORATE BONDS (continued) | ||||||
H&E Equipment Services, Inc. 1 | 7.00% | 09/01/22 | $ 4,250 | $ 4,483,750 | ||
Isle of Capri Casinos, Inc. | 5.88 | 03/15/21 | 1,700 | 1,774,375 | ||
MGM Growth Properties Operating Partnership LP 4 | 5.63 | 05/01/24 | 2,550 | 2,765,985 | ||
Terex Corp. 1 | 6.00 | 05/15/21 | 3,000 | 3,067,500 | ||
Terex Corp. 1 | 6.50 | 04/01/20 | 1,100 | 1,127,500 | ||
United Rentals North America, Inc. 1 | 5.75 | 11/15/24 | 3,625 | 3,760,937 | ||
United Rentals North America, Inc. | 7.63 | 04/15/22 | 1,225 | 1,304,625 | ||
Total Services | 30,861,082 | |||||
Telecommunications – 22.0% | ||||||
CenturyLink, Inc. 1 | 7.65 | 03/15/42 | 5,950 | 5,131,875 | ||
CyrusOne LP 1 | 6.38 | 11/15/22 | 4,425 | 4,686,349 | ||
FairPoint Communications, Inc. 1,4 | 8.75 | 08/15/19 | 4,325 | 4,411,500 | ||
Frontier Communications Corp. 1 | 11.00 | 09/15/25 | 3,825 | 3,992,344 | ||
Intelsat Luxembourg SA 1,7 | 7.75 | 06/01/21 | 6,425 | 2,152,375 | ||
Level 3 Financing, Inc. 1 | 5.38 | 05/01/25 | 5,775 | 6,020,438 | ||
Qwest Capital Funding, Inc. 1 | 6.88 | 07/15/28 | 475 | 448,875 | ||
SBA Communications Corp. | 4.88 | 07/15/22 | 5,000 | 5,175,000 | ||
T-Mobile USA, Inc. 1 | 6.63 | 04/01/23 | 3,340 | 3,586,325 | ||
Tyco Electronics Group SA 1,7 | 6.55 | 10/01/17 | 500 | 525,338 | ||
Windstream Services LLC 1 | 7.50 | 06/01/22 | 5,950 | 5,712,000 | ||
Zayo Group LLC | 6.00 | 04/01/23 | 4,000 | 4,200,000 | ||
Total Telecommunications | 46,042,419 | |||||
Transportation – 3.4% | ||||||
DP World Ltd. 4,7 | 6.85 | 07/02/37 | 200 | 231,290 | ||
DP World Sukuk Ltd. 4,7 | 6.25 | 07/02/17 | 400 | 412,632 | ||
Teekay Offshore Partners LP 1,7 | 6.00 | 07/30/19 | 3,750 | 3,093,750 | ||
Watco Companies LLC 1,4 | 6.38 | 04/01/23 | 3,275 | 3,307,750 | ||
Total Transportation | 7,045,422 | |||||
Utility – 8.1% | ||||||
AES Corp. 1 | 4.88 | 05/15/23 | 4,250 | 4,313,750 | ||
Dynegy, Inc. | 6.75 | 11/01/19 | 4,075 | 4,176,875 | ||
NRG Energy, Inc. | 6.25 | 07/15/22 | 4,125 | 4,186,875 | ||
NRG Yield Operating LLC | 5.38 | 08/15/24 | 4,175 | 4,289,812 | ||
Total Utility | 16,967,312 | |||||
Total CORPORATE BONDS (Cost $259,917,245) | 250,783,448 | |||||
TERM LOANS – 4.2% | ||||||
FMG Resources August 2006 Property Ltd. 2,8 | 3.75 | 06/30/19 | 2,101 | 2,098,473 | ||
Four Seasons Holdings, Inc. 2,8 | 6.25 | 12/13/20 | 3,325 | 3,329,156 | ||
MEG Energy Corp. 2,8 | 3.75 | 03/31/20 | 3,114 | 2,898,966 | ||
Texas Competitive Electric Holdings Company LLC 2,8 | 5.00 | 10/10/17 | 16 | 4,577 | ||
Texas Competitive Electric Holdings Company LLC 2,8 | 5.00 | 10/10/17 | 1,550 | 445,973 | ||
Total TERM LOANS (Cost $9,353,418) | 8,777,145 |
Schedule of Investments (continued)
Shares | Value | |||||
COMMON STOCKS – 2.9% | ||||||
Automotive – 0.4% | ||||||
Ford Motor Co. | 61,300 | $ 739,891 | ||||
Basic Industry – 0.1% | ||||||
EnLink Midstream Partners LP | 7,800 | 138,138 | ||||
Capital Goods – 0.5% | ||||||
General Electric Co. | 37,450 | 1,109,269 | ||||
Consumer Discretionary – 0.3% | ||||||
General Motors Company | 22,276 | 707,709 | ||||
Consumer Staples – 0.3% | ||||||
B&G Foods, Inc. | 13,810 | 679,176 | ||||
Energy – 0.3% | ||||||
BreitBurn Energy Partners LP | 13,075 | 819 | ||||
EV Energy Partners LP | 7,900 | 18,960 | ||||
ION Geophysical Corp. 9 | 19,750 | 135,287 | ||||
Thunderbird Resources Equity, Inc. 5,9 | 11 | 425,422 | ||||
Total Energy | 580,488 | |||||
Telecommunications – 0.6% | ||||||
CenturyLink, Inc. | 33,160 | 909,579 | ||||
Verizon Communications, Inc. | 7,500 | 389,850 | ||||
Total Telecommunications | 1,299,429 | |||||
Utility – 0.4% | ||||||
AES Corp. | 66,250 | 851,313 | ||||
Total COMMON STOCKS (Cost $7,262,464) | 6,105,413 | |||||
EXCHANGE TRADED FUND – 1.4% | ||||||
Other – 1.4% | ||||||
SPDR® Barclays High Yield Bond ETF | 80,500 | 2,955,960 | ||||
Total EXCHANGE TRADED FUND (Cost $2,656,613) | 2,955,960 |
Shares | Value | |||||
WARRANT – 0.2% | ||||||
Automotive – 0.2% | ||||||
General Motors Co. 9 Expiration: July 2019 Exercise Price: $18.33 | 34,193 | $ 477,334 | ||||
Total WARRANT (Cost $854,740) | 477,334 | |||||
Total Investments – 132.0% (Cost $288,069,723) | 276,747,092 | |||||
Liabilities in Excess of Other Assets – (32.0)% | (67,154,436) | |||||
TOTAL NET ASSETS – 100.0% | $ 209,592,656 |
Schedule of Investments (continued)
The following notes should be read in conjunction with the accompanying Schedule of Investments. | |
1 | — All or a portion of this security is pledged as collateral for credit facility. |
2 | — Variable rate security – Interest rate shown is the rate in effect as of September 30, 2016. |
3 | — Security is a “step up” bond where the coupon increases or steps up at a predetermined date. |
4 | — Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2016, the total value of all such securities was $48,568,119 or 23.2% of net assets. |
5 | — Security fair valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of September 30, 2016, the total value of all such securities was $426,247 or 0.2% of net assets. |
6 | — Issuer is currently in default on its regularly scheduled interest payment. |
7 | — Foreign security or a U.S. security of a foreign company. |
8 | — Private Placement. |
9 | — Non-income producing security. |
Statement of Assets and Liabilities
Assets: | |
Investments in securities, at value (cost $288,069,723) | $276,747,092 |
Cash | 5,457,373 |
Interest and dividends receivable | 4,973,537 |
Prepaid expenses | 4,754 |
Total assets | 287,182,756 |
Liabilities: | |
Payable for credit facility (Note 6) | 76,316,860 |
Payable for credit facility interest (Note 6) | 8,885 |
Payable for investments purchased | 742,998 |
Investment advisory fee payable (Note 4) | 308,827 |
Administration fee payable (Note 4) | 71,268 |
Directors' fees payable | 7,502 |
Accrued expenses | 133,760 |
Total liabilities | 77,590,100 |
Commitments and contingencies (Note 9) | |
Net Assets | $209,592,656 |
Composition of Net Assets: | |
Capital stock, at par value ($0.001 par value, 1,000,000,000 shares authorized) (Note 7) | $ 25,532 |
Additional paid-in capital (Note 7) | 265,523,111 |
Distributions in excess of net investment income | (164,616) |
Accumulated net realized loss on investments, foreign currency transactions and forward currency contracts | (44,466,475) |
Net unrealized depreciation on investments and foreign currency translations | (11,324,896) |
Net assets applicable to capital stock outstanding | $209,592,656 |
Shares Outstanding and Net Asset Value Per Share: | |
Shares outstanding | 25,532,427 |
Net asset value per share | $ 8.21 |
Statement of Operations
Investment Income (Note 2): | |
Interest | $ 19,362,538 |
Dividends (net of foreign withholding tax of $349) | 336,660 |
Total investment income | 19,699,198 |
Expenses: | |
Investment advisory fees (Note 4) | 1,813,858 |
Administration fees (Note 4) | 418,583 |
Legal fees | 540,911 |
Directors' fees | 91,428 |
Reports to stockholders | 90,826 |
Fund accounting servicing fees | 72,914 |
Transfer agency fees | 34,356 |
Registration fees | 28,756 |
Audit and tax services | 23,009 |
Insurance | 18,036 |
Custodian fees | 16,364 |
Miscellaneous | 15,148 |
Total operating expenses | 3,164,189 |
Interest expense on credit facility (Note 6) | 1,459,973 |
Total expenses | 4,624,162 |
Net investment income | 15,075,036 |
Net Realized and Unrealized Gain (Loss) on Investments, Foreign Currency Transactions and Forward Currency Contracts (Note 2): | |
Net realized gain (loss) on: | |
Investments | (17,898,013) |
Foreign currency transactions | 3,263 |
Forward currency contracts | (48,059) |
Net realized loss | (17,942,809) |
Net change in unrealized appreciation on: | |
Investments | 22,854,105 |
Foreign currency translations | 3,167 |
Forward currency contracts | 67,110 |
Net change in unrealized appreciation | 22,924,382 |
Net realized and unrealized gain on investments | 4,981,573 |
Net increase in net assets resulting from operations | $ 20,056,609 |
Statements of Changes in Net Assets
For the Fiscal Year Ended September 30, 2016 | For the Fiscal Year Ended September 30, 2015 | ||
Increase (Decrease) in Net Assets Resulting from Operations: | |||
Net investment income | $ 15,075,036 | $ 19,405,117 | |
Net realized loss on investments, foreign currency transactions and forward currency contracts | (17,942,809) | (4,352,235) | |
Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and forward currency contracts | 22,924,382 | (39,575,693) | |
Net increase (decrease) in net assets resulting from operations | 20,056,609 | (24,522,811) | |
Distributions to Stockholders (Note 2): | |||
Net investment income | (15,085,223) | (19,844,487) | |
Return of capital | (6,362,016) | (4,002,800) | |
Total distributions | (21,447,239) | (23,847,287) | |
Total decrease in net assets | (1,390,630) | (48,370,098) | |
Net Assets: | |||
Beginning of year | 210,983,286 | 259,353,384 | |
End of year | $209,592,656 | $210,983,286 | |
(including distributions in excess of net investment income) | $ (164,616) | $ (41,670) |
Statement of Cash Flows
Increase (Decrease) in Cash: | |
Cash flows provided by (used for) operating activities: | |
Net increase in net assets resulting from operations | $ 20,056,609 |
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities | |
Purchases of long-term portfolio investments and principal payups | (79,168,500) |
Proceeds from disposition of long-term portfolio investments and principal paydowns | 96,308,295 |
Sales of short-term portfolio investments, net | 1,568,619 |
Return of capital distributions from portfolio investments | 34,238 |
Decrease in interest and dividends receivable | 1,119,649 |
Decrease in prepaid expenses | 3,935 |
Decrease in receivable for investments sold | 9,375 |
Decrease in payable to custodian | (8,410) |
Decrease in payable for open forward currency contracts | (67,110) |
Increase in payable for credit facility interest | 2,065 |
Decrease in payable for investments purchased | (1,580,884) |
Increase in investment advisory fee payable | 142,998 |
Increase in administration fee payable | 33,000 |
Decrease in directors' fee payable | (745) |
Decrease in accrued expenses | (42,124) |
Net amortization on investments and paydown gains or losses | (583,290) |
Net change in unrealized appreciation on investments | (22,854,105) |
Net realized loss on investments | 17,898,013 |
Net cash provided by operating activities | 32,871,628 |
Cash flows used for financing activities: | |
Net cash used for credit facility | (6,000,000) |
Distributions paid to stockholders | (21,447,239) |
Net cash used for financing activities | (27,447,239) |
Net increase in cash | 5,424,389 |
Cash at the beginning of year | 32,984 |
Cash at the end of year | $ 5,457,373 |
Supplemental Disclosure of Cash Flow Information: | |
Interest payments for the fiscal year ended September 30, 2016, totaled $1,457,908. |
Financial Highlights
For the Fiscal Years Ended September 30, | For the Three Months Ended September 30, | For the Fiscal Years Ended June 30, | |||||||||||
2016 | 2015 | 2014 2 | 2014 | 2013 | 2012 | ||||||||
Per Share Operating Performance: | |||||||||||||
Net asset value, beginning of period | $ 8.26 | $ 10.16 | $ 10.70 | $ 10.14 | $ 9.86 | $ 9.92 | |||||||
Net investment income1 | 0.59 | 0.76 | 0.21 | 0.88 | 0.92 | 0.91 | |||||||
Net realized and unrealized gain (loss) on investment transactions | 0.20 | (1.73) | (0.52) | 0.60 | 0.27 | (0.03) | |||||||
Net increase (decrease) in net asset value resulting from operations | 0.79 | (0.97) | (0.31) | 1.48 | 1.19 | 0.88 | |||||||
Distributions from net investment income | (0.59) | (0.77) | (0.23) | (0.91) | (0.91) | (0.94) | |||||||
Return of capital distributions | (0.25) | (0.16) | — | (0.01) | — | — | |||||||
Total distributions paid | (0.84) | (0.93) | (0.23) | (0.92) | (0.91) | (0.94) | |||||||
Net asset value, end of period | $ 8.21 | $ 8.26 | $ 10.16 | $ 10.70 | $ 10.14 | $ 9.86 | |||||||
Market price, end of period | $ 7.32 | $ 7.29 | $ 9.37 | $ 10.54 | $ 9.62 | $ 10.00 | |||||||
Total Investment Return† | 13.09% | -13.26% | -9.05% 4 | 20.13% | 5.12% | 11.37% | |||||||
Ratios to Average Net Assets/Supplementary Data: | |||||||||||||
Net assets, end of period (000s) | $209,593 | $210,983 | $259,353 | $73,260 | $69,463 | $67,491 | |||||||
Operating expenses | 1.57% | 1.41% | 1.82% 3 | 2.06% | 1.63% | 1.71% | |||||||
Interest expense | 0.73% | 0.51% | 0.45% 3 | 0.48% | 0.53% | 0.62% | |||||||
Total expenses | 2.30% | 1.92% | 2.27% 3 | 2.54% | 2.16% | 2.33% | |||||||
Net expenses, including fee waivers and reimbursement and excluding interest expense | 1.57% | 1.41% | 1.82% 3 | 1.95% | 1.52% | 1.59% | |||||||
Net investment income | 7.49% | 8.04% | 8.04% 3 | 8.47% | 8.87% | 9.45% | |||||||
Net investment income, excluding the effect of fee waivers and reimbursement | 7.49% | 8.04% | 8.04% 3 | 8.36% | 8.76% | 9.33% | |||||||
Portfolio turnover rate | 29% | 27% | 11% 4 | 28% | 28% | 24% | |||||||
Credit facility, end of period (000s) | $ 76,317 | $ 82,317 | $102,800 | $28,000 | $30,400 | $30,400 | |||||||
Asset coverage per $1,000 unit of senior indebtedness5 | $ 3,746 | $ 3,563 | $ 3,523 | $ 3,616 | $ 3,280 | $ 3,220 |
† | Total investment return based on market price is the combination of changes in the New York Stock Exchange market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The actual reinvestment for the last dividend declared in the period may take place over several days as described in the Fund’s dividend reinvestment plan, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total investment return excludes the effect of broker commissions. |
1 | Per share amounts presented are based on average shares outstanding throughout the period indicated. |
2 | Amounts shown are for the three months ended September 30, 2014 and are not necessarily indicative of a full year of operations. The Fund changed its fiscal year end from June 30 to September 30. |
3 | Annualized. |
4 | Not annualized. |
5 | Calculated by subtracting the Fund's total liabilities (not including borrowings) from the Fund's total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness. |
Notes to Financial Statements
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
Level 1 - | quoted prices in active markets for identical assets or liabilities |
Level 2 - | quoted prices in markets that are not active or other significant observable inputs (including, but not limited to: quoted prices for similar assets or liabilities, quoted prices based on recently executed transactions, interest rates, prepayment speeds, credit risk, etc.) |
Level 3 - | significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets or liabilities) |
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
Residential Mortgage Related Holdings | $ — | $ — | $ 7,647,792 | $ 7,647,792 | |||
Corporate Bonds | — | 250,782,623 | 825 | 250,783,448 | |||
Term Loans | — | 8,777,145 | — | 8,777,145 | |||
Common Stocks | 5,679,991 | — | 425,422 | 6,105,413 | |||
Exchange Traded Fund | 2,955,960 | — | — | 2,955,960 | |||
Warrant | 477,334 | — | — | 477,334 | |||
Total | $ 9,113,285 | $ 259,559,768 | $ 8,074,039 | $ 276,747,092 |
Notes to Financial Statements (continued)
Quantitative Information about Level 3 Fair Value Measurements(1) | ||||
Assets | Value as of September 30, 2016 | Valuation Methodology | Significant Unobservable Input | Range (Weighted Average) |
Corporate Bond: | ||||
Motors Liquidation Co. | $ 825 | Discounted Cash Flow | Anticipated Residual Value | $0.01 |
Common Stock: | ||||
Thunderbird Resources Equity, Inc. | 425,422 | Analysis of Enterprise Value | Various assumptions of value of assets and liabilities | $36,055-$43,539 ($39,750) |
Total | $426,247 |
Investments in Securities | Residential Mortgage Related Holdings | Corporate Bonds | Common Stocks | Total | |||
Balance as of September 30, 2015 | $8,079,848 | $ 4,120,625 | $399,350 | $12,599,823 | |||
Accrued Discounts (Premiums) | 404,320 | 20,002 | — | 424,322 | |||
Realized Gain (Loss) | 208,403 | — | — | 208,403 | |||
Change in Unrealized Appreciation (Depreciation) | (305,211) | (169,802) | 26,072 | (448,941) | |||
Purchases at cost | 63,668 | — | — | 63,668 | |||
Sales proceeds | (803,236) | — | — | (803,236) | |||
Transfers out of Level 3 | — | (3,970,000) | — | (3,970,000) (a) | |||
Balance as of September 30, 2016 | $7,647,792 | $ 825 | $425,422 | $ 8,074,039 | |||
Change in unrealized gains or losses relating to assets still held at reporting date | $ (305,211) | $ — | $ 26,072 | $ (279,139) |
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
Derivatives | Location of Gains (Losses) on Derivatives Recognized in Income | Net Realized Loss on Forward currency contracts | Net Change in Unrealized Appreciation on Forward currency contracts |
Forward contracts | Forward currency contracts | $(48,059) | $67,110 |
Notes to Financial Statements (continued)
Total line of credit amount available | $120,000,000 |
Line of credit outstanding at September 30, 2016 | 76,316,860 |
Line of credit amount unused at September 30, 2016 | 43,683,140 |
Average balance outstanding during the year | 77,684,346 |
Interest expense incurred on line of credit during the year | 1,459,973 |
Notes to Financial Statements (continued)
2016 | 2015 | ||
Ordinary income | $15,085,223 | $19,844,487 | |
Return of capital | 6,362,016 | 4,002,800 | |
Total | $21,447,239 | $23,847,287 |
Capital loss carryforward1 | $(44,654,010) |
Other accumulated losses | (166,881) |
Tax basis unrealized depreciation | (11,135,096) |
Total tax basis net accumulated losses | $(55,955,987) |
Expiring In: | |
2017 | $22,547,226 |
Infinite (Short-Term) | 2,651,657 |
Infinite (Long-Term) | 19,455,127 |
Cost of Investments | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Depreciation |
$287,882,188 | $10,519,332 | $(21,654,428) | $(11,135,096) |
Notes to Financial Statements (continued)
Additional paid-in capital | Distributions in excess of net investment income | Accumulated net realized loss |
$(3,361,935) | $(112,759) | $3,474,694 |
Notes to Financial Statements (continued)
Dividend Per Share | Record Date | Payable Date |
$0.06 | October 20, 2016 | October 27, 2016 |
$0.06 | November 17, 2016 | November 23, 2016 |
Report of Independent Registered Public Accounting Firm
Tax Information (Unaudited)
Compliance Certification (Unaudited)
Proxy Results (Unaudited)
Shares Voted For | Shares Voted Against | Shares Voted Abstain | ||
1. | To approve the agreement and plan of reorganization and the transactions contemplated thereby, including the transfer of all assets and liabilities of the Fund into the Brookfield Real Assets Income Fund Inc. | 13,467,009 | 2,054,456 | 433,569 |
Information Concerning Directors and Officers (Unaudited)
Name, Address and Year of Birth | Position(s) Held with Funds | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director | Number of Portfolios in Fund Complex | |||
Independent Directors Class I Director to serve until 2018 Annual Meeting of Stockholders: | ||||||
Stuart A. McFarland c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1947 | Director, Member of the Audit Committee, Member of the Nominating and Compensation Committee Elected since 2008 | Director/Trustee of several investment companies advised by the Adviser (2006-Present); Director of United Guaranty Corporation (2011-Present); Director of Brandywine Funds (2003-2013); Director of New Castle Investment Corp. (2000-Present); Managing Partner of Federal City Capital Advisors (1997-Present); Director of New America High Income Fund (2013-Present); Director of New Senior Investment Group, Inc. (2014-Present). | 10 | |||
Edward A. Kuczmarski c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1949 | Director, Chairman of the Board, Member of the Audit Committee, Chairman of the Nominating and Compensation Committee Elected since 2013 | Director/Trustee of several investment companies advised by the Adviser (2011-Present); Certified Public Accountant and Retired Partner of Crowe Horwath LLP (1980-2013); Trustee of the Empire Builder Tax Free Bond Fund (1984-2013); Director of ISI Funds (2007-2015); Trustee of the Daily Income Fund (2006-2015), Director of the California Daily Tax Free Income Fund, Inc. (2006-2015); Trustee of the Stralem Funds (2014-Present). | 10 | |||
Independent Director Class II Directors to serve until 2019 Annual Meeting of Stockholders: | ||||||
Heather Goldman c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1967 | Director, Member of the Audit Committee, Member of the Nominating and Compensation Committee Elected since 2013 | Director/Trustee of several investment companies advised by the Adviser (2013-Present); Global Head of Marketing and Business Development of the Adviser (2011-2013); Managing Partner of Brookfield Financial (2009-2011); Director and Board Chair of University Settlement House (2003-2013); Member of the Honorary Board of University Settlement House (2014-Present); Co-Founder & President of Capstak, Inc. (2014-Present); Chairman of Capstak, Inc. (2016-Present). | 10 | |||
Independent Director Class III Director to serve until 2017 Annual Meeting of Stockholders: | ||||||
Louis P. Salvatore c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1946 | Director, Chairman of the Audit Committee, Member of the Nominating and Compensation Committee Elected since 2008 | Director/Trustee of several investment companies advised by the Adviser (2005-Present); Director of SP Fiber Technologies, Inc. (2012-2015); Director of Gramercy Property Trust (2012-Present); Director of Turner Corp. (2003-Present); Director of Jackson Hewitt Tax Services, Inc. (2004-2011); Employee of Arthur Andersen LLP (2002-Present). | 10 |
Name, Address and Year of Birth | Position(s) Held with Funds | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director | Number of Portfolios in Fund Complex | |||
Interested Director Class III Director to serve until 2017 Annual Meeting of Stockholders: | ||||||
Jonathan C. Tyras c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1968 | Director Elected since 2014 | Managing Director and Chief Financial Officer of the Adviser (2010-Present); General Counsel and Secretary of the Adviser (2006-Present); Director/Trustee of several investment companies advised by the Adviser (2012-Present); Secretary of several investment companies advised by the Adviser (2006-2014); Vice President of Brookfield Investment Funds (2011-2014); Chief Financial Officer of Brookfield Investment Management (UK) Limited (2011-Present); Director of Brookfield Investment Management (UK) Limited (2013-Present); Chief Financial Officer of Brookfield Investment Management (Canada) Inc. (2011-Present); Director of Brookfield Investment Management (Canada) Inc. (2015-Present); Chief Executive Officer of Brookfield Investment Management (US) LLC (2011-Present); Managing Director of AMP Capital Brookfield Pty Limited (2011-2012); Chairman of Brookfield Soundvest Capital Management (2015-Present). | 10 |
Name, Address and Year of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years |
Brian F. Hurley* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1977 | President | Since 2014 | President of several investment companies advised by the Adviser (2014-Present); Managing Director (2014-Present) and Assistant General Counsel (2010-Present) of the Adviser; Director of the Adviser (2010-2014); Secretary of Brookfield Investment Funds (2011-2014); Director of Brookfield Soundvest Capital Management (2015-Present). |
Angela W. Ghantous* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1975 | Treasurer | Since 2013 | Treasurer of several investment companies advised by the Adviser (2012-Present); Director of the Adviser (2012-Present); Vice President of the Adviser (2009-2012). |
Alexis I. Rieger* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1980 | Secretary | Since 2014 | Secretary of several investment companies advised by the Adviser (2014-Present); Vice President and Associate General Counsel of the Adviser (2011-Present). |
Seth Gelman* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1975 | Chief Compliance Officer (“CCO”) | Since 2009 | CCO of several investment companies advised by the Adviser (2009-Present); CCO of the Adviser (2009-Present). |
Board Considerations Relating to the Investment Advisory Agreement (Unaudited)
Board Considerations Relating to the Investment Advisory Agreement (Unaudited) (continued)
Dividend Reinvestment Plan (Unaudited)
Joint Notice of Privacy Policy (Unaudited)
• | Information we receive from you in applications or other forms, correspondence or conversations, including but not limited to name, address, phone number, social security number, assets, income and date of birth. |
• | Information about transactions with us, our affiliates, or others, including but not limited to account number, balance and payment history, parties to transactions, cost basis information, and other financial information. |
• | Information we may receive from our due diligence, such as your creditworthiness and your credit history. |
• | Unaffiliated service providers (e.g. transfer agents, securities broker-dealers, administrators, investment advisors or other firms that assist us in maintaining and supporting financial products and services provided to you); |
• | Government agencies, other regulatory bodies and law enforcement officials (e.g. for reporting suspicious transactions); |
• | Other organizations, with your consent or as directed by you; and |
• | Other organizations, as permitted or required by law (e.g. for fraud protection) |
Item 2. Code of Ethics.
As of the end of the period covered by this report, the Registrant had adopted a Code of Ethics for Principal Executive and Principal Financial Officers (the “Code”). There were no amendments to or waivers from the Code during the period covered by this report. A copy of the Registrant’s Code will be provided upon request to any person without charge by contacting Investor Relations at (855) 777-8001 or by writing to Secretary, Brookfield High Income Fund Inc., Brookfield Place, 250 Vesey Street, 15th Floor, New York, NY 10281-1023.
Item 3. Audit Committee Financial Expert.
The Registrant’s Board of Directors has determined that four members serving on the Registrant’s audit committee are audit committee financial experts. Their names are Stuart A. McFarland, Edward A. Kuczmarski, Louis P. Salvatore and Heather S. Goldman. Messrs. McFarland, Kuczmarski, Salvatore and Mme. Goldman are each independent.
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees |
The aggregate fees billed by the Fund’s independent registered public accounting firm, BBD, LLP (“BBD”), to the Funds for the Fund’s two most recent fiscal years for professional services rendered for the audit of the Registrant’s annual financial statements and the review of financial statements that are included in the Registrant’s annual and semi-annual reports to shareholders (“Audit Fees”) were $25,000 and $37,500 for the fiscal years ended September 30, 2016 and September 30, 2015, respectively.
(b) | Audit-Related Fees |
There were no fees billed by BBD to the Fund in its two recent fiscal years for services rendered for assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements, but are not reported as Audit Fees (“Audit-Related Fees”).
For the Fund’s two most recent fiscal years, there were no Audit-Related Fees billed by BBD for engagements related directly to the operations and financial reporting of one or more Funds by a Fund Service Provider. A Fund Service Provider is (a) any investment adviser to the Fund (not including any Subadvisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) or (b) any entity that provides ongoing services to the Fund and is controlling, controlled by or under common control with a Fund investment adviser described in (a).
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(c) | Tax Fees |
For the fiscal years ended September 30, 2016 and September 30, 2015, BBD billed the Registrant aggregate fees of $3,500 and $3,500, respectively. The nature of the services for which Tax Fees were charged comprise all services performed by professional staff in BBD’s tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
For the Fund’s two most recent fiscal years, Tax Fees billed by BBD for engagements by Fund Service Providers that related directly to the operations and financial reporting of the Funds were $0 for the fiscal year ended September 30, 2016 and $0 for the fiscal year ended September 30, 2015, respectively.
The services for which Tax Fees were charged comprise all services performed by professional staff in BBD’s tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities
(d) | All Other Fees |
There were no other fees billed by BBD to the Fund for all other non-audit services (“Other Fees”) for the fiscal years ended September 30, 2016 and September 30, 2015. During the same period, there were no Other Fees billed by BBD for engagements by Fund Service Providers that related directly to the operations and financial reporting of the Fund.
(e) (1) According to policies adopted by the Audit Committee, services provided by BBD to the Funds must be pre-approved by the Audit Committee. On an annual basis, the Audit Committee reviews and pre-approves various types of services that BBD may perform for the Funds without specific approval of each engagement, subject to specified budget limitations. As contemplated by the Sarbanes-Oxley Act of 2002 and related SEC rules, the Audit Committee also pre-approves non-audit services provided by BBD to any Fund Service Provider for any engagement that relates directly to the operations and financial reporting of the Funds. Any engagement that is not already pre-approved or that will exceed a pre-approved budget must be submitted to the Audit Committee for pre-approval.
(e) (2) None.
(f) Not applicable.
(g) The aggregate fees billed by BBD for the fiscal years ended September 30, 2016 and September 30, 2015, for non-audit services rendered to the Fund and Fund Service Providers were $3,500 and $3,500, respectively. For the fiscal year ended September 30, 2016, this amount reflects the amounts disclosed above in Item 4(b),(c),(d), plus $0 in fees billed to the Fund Service Providers for non-audit services that did not relate directly to the operations and financial reporting of the Fund. For the fiscal year ended September 30, 2015, this amount reflects the amounts disclosed above in Item 4(b),(c),(d), plus $0 in fees billed to the Fund Service Providers for non-audit services that did not relate directly to the operations and financial reporting of the Fund.
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(h) The Fund’s Audit Committee has considered whether the provision of non-audit services by registrant’s independent registered public accounting firm to the registrant’s investment advisor, and any entity controlling, controlled, or under common control with the investment advisor that provided ongoing services to the registrant that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the registrant) was compatible with maintaining the independence of the independent registered public accounting firm.
Item 5. Audit Committee of Listed Registrants.
The Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Registrant’s Audit Committee members include Stuart A. McFarland, Edward A. Kuczmarski, Louis P. Salvatore and Heather S. Goldman.
Item 6. Schedule of Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
BROOKFIELD INVESTMENT MANAGEMENT INC.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES
May 2012
The Portfolio Proxy Voting Policies and Procedures (the “Policies and Procedures”) set forth the proxy voting policies, procedures and guidelines to be followed by Brookfield Investment Management Inc. and its subsidiaries and affiliates (collectively, “BIM”) in voting portfolio proxies relating to securities that are held in the portfolios of the investment companies or other clients (“Clients”) for which BIM has been delegated such proxy voting authority.
A. | Proxy Voting Committee |
BIM’s internal proxy voting committee (the “Committee”) is responsible for overseeing the proxy voting process and ensuring that BIM meets its regulatory and corporate governance obligations in voting of portfolio proxies.
The Committee shall oversee the proxy voting agent’s compliance with these Policies and Procedures, including any deviations by the proxy voting agent from the proxy voting guidelines (“Guidelines”).
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B. | Administration and Voting of Portfolio Proxies |
1. | Fiduciary Duty and Objective |
As an investment adviser that has been granted the authority to vote on portfolio proxies, BIM owes a fiduciary duty to its Clients to monitor corporate events and to vote portfolio proxies consistent with the best interests of its Clients. In this regard, BIM seeks to ensure that all votes are free from unwarranted and inappropriate influences. Accordingly, BIM generally votes portfolio proxies in a uniform manner for its Clients and in accordance with these Policies and Procedures and the Guidelines.
In meeting its fiduciary duty, BIM generally view proxy voting as a way to enhance the value of the company’s stock held by the Clients. Similarly, when voting on matters for which the Guidelines dictate a vote be decided on a case-by-case basis, BIM’s primary consideration is the economic interests its Clients.
2. | Proxy Voting Agent |
BIM may retain an independent third party proxy voting agent to assist BIM in its proxy voting responsibilities in accordance with these Policies and Procedures and in particular, with the Guidelines. As discussed above, the Committee is responsible for monitoring the proxy voting agent.
In general, BIM may consider the proxy voting agent’s research and analysis as part of BIM’s own review of a proxy proposal in which the Guidelines recommend that the vote be considered on a case-by-case basis. BIM bears ultimate responsibility for how portfolio proxies are voted. Unless instructed otherwise by BIM, the proxy voting agent, when retained, will vote each portfolio proxy in accordance with the Guidelines. The proxy voting agent also will assist BIM in maintaining records of BIM’s portfolio proxy votes, including the appropriate records necessary for registered investment companies to meet their regulatory obligations regarding the annual filing of proxy voting records on Form N-PX with the Securities and Exchange Commission (“SEC”).
3. | Material Conflicts of Interest |
BIM votes portfolio proxies without regard to any other business relationship between BIM and the company to which the portfolio proxy relates. To this end, BIM must identify material conflicts of interest that may arise between a Client and BIM, such as the following relationships:
● | BIM provides significant investment advisory or other services to a portfolio company or its affiliates (the “Company”) whose management is soliciting proxies or BIM is seeking to provide such services; |
● | BIM serves as an investment adviser to the pension or other investment account of the Company or BIM is seeking to serve in that capacity; or |
● | BIM and the Company have a lending or other financial-related relationship. |
In each of these situations, voting against the Company management’s recommendation may cause BIM a loss of revenue or other benefit.
5
BIM generally seeks to avoid such material conflicts of interest by maintaining separate investment decision-making and proxy voting decision-making processes. To further minimize possible conflicts of interest, BIM and the Committee employ the following procedures, as long as BIM determines that the course of action is consistent with the best interests of the Clients:
● | If the proposal that gives rise to a material conflict is specifically addressed in the Guidelines, BIM will vote the portfolio proxy in accordance with the Guidelines, provided that the Guidelines do not provide discretion to BIM on how to vote on the matter (i.e., case-by-case); or |
● | If the previous procedure does not provide an appropriate voting recommendation, BIM may retain an independent fiduciary for advice on how to vote the proposal or the Committee may direct BIM to abstain from voting because voting on the particular proposal is impracticable and/or is outweighed by the cost of voting. |
4. | Certain Foreign Securities |
Portfolio proxies relating to foreign securities held by Clients are subject to these Policies and Procedures. In certain foreign jurisdictions, however, the voting of portfolio proxies can result in additional restrictions that have an economic impact to the security, such as “share-blocking.” If BIM votes on the portfolio proxy, share-blocking may prevent BIM from selling the shares of the foreign security for a period of time. In determining whether to vote portfolio proxies subject to such restrictions, BIM, in consultation with the Committee, considers whether the vote, either in itself or together with the votes of other shareholders, is expected to affect the value of the security that outweighs the cost of voting. If BIM votes on a portfolio proxy and during the “share-blocking period,” BIM would like to sell the affected foreign security, BIM, in consultation with the Committee, will attempt to recall the shares (as allowable within the market time-frame and practices).
C. | Fund Board Reporting and Recordkeeping |
BIM will prepare periodic reports for submission to the Boards of Directors of its affiliated funds (the “Funds”) describing:
● | any issues arising under these Policies and Procedures since the last report to the Funds’ Boards of Directors/Trustees and the resolution of such issues, including but not limited to, information about conflicts of interest not addressed in the Policies and Procedures; and |
● | any proxy votes taken by BIM on behalf of the Funds since the last report to such Funds’ Boards of Directors/Trustees that deviated from these Policies and Procedures, with reasons for any such deviations. |
In addition, no less frequently than annually, BIM will provide the Boards of Directors/Trustees of the Funds with a written report of any recommended changes based upon BIM’s experience under these Policies and Procedures, evolving industry practices and developments in the applicable laws or regulations.
BIM will maintain all records that are required under, and in accordance with, all applicable regulations, including the Investment Company Act of 1940, as amended, and the Investment Advisers Act of 1940, which include, but not limited to:
● | these Policies and Procedures, as amended from time to time; |
● | records of votes cast with respect to portfolio proxies, reflecting the information required to be included in Form N-PX, as applicable; |
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● | records of written client requests for proxy voting information and any written responses of BIM to such requests; and |
● | any written materials prepared by BIM that were material to making a decision in how to vote, or that memorialized the basis for the decision. |
D. | Amendments to these Procedures |
The Committee shall periodically review and update these Policies and Procedures as necessary. Any amendments to these Procedures and Policies (including the Guidelines) shall be provided to the Board of Directors of BIM and to the Boards of Directors of the Funds for review and approval.
E. | Proxy Voting Guidelines |
Guidelines are available upon request.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Investment Team – Portfolio Managers
Mr. Dana Erikson, CFA – Managing Director and Portfolio Manager
Dana Erikson is a Portfolio Manager, Head of the Real Asset Debt team and has 30 years of investment experience. Prior to joining the Firm, he was with Evergreen Investments or one of its predecessor firms since 1996. He was a Senior Portfolio Manager and the Head of the High Yield team. Prior to that, he was Head of High Yield Research. Dana earned a Master of Business Administration degree, with honors, from Northeastern University and a Bachelor of Arts degree in Economics from Brown University. He holds the Chartered Financial Analyst® designation and is a member of the Boston Security Analysts Society, Inc.
Mark Shipley, CFA – Managing Director and Portfolio Manager
Mark Shipley is a Portfolio Manager on the Real Asset Debt team and has 26 years of investment experience. Prior to joining the Firm, he was with Evergreen Investments or one of its predecessor firms since 1991. He was a Senior Credit Analyst and Senior Trader on the High Yield Team. Mark earned a Bachelor of Arts degree in Finance from Northeastern University. He holds the Chartered Financial Analyst® designation and is a member of The Boston Security Analysts Society, Inc.
Mr. Erikson leads the management of the Fund and Mr. Shipley shares equally the day-to-day portfolio management responsibilities.
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Management of Other Accounts
Mr. Erikson manages other investment companies and/or investment vehicles and accounts in addition to the Registrant. The tables below show the number of other accounts managed by Mr. Erikson as of October 31, 2016 and the total assets in each of the following categories: (a) registered investment companies; (b) other pooled investment vehicles; and (c) other accounts. For each category, the table also shows the number of accounts and the total assets in the accounts with respect to which the advisory fee is based on account performance.
Name of Portfolio Manager | Type of Accounts | Total # of Other Accounts Managed | Total Assets | # of Accounts Managed with Advisory Fee Based on Performance | Total Assets with Advisory Fee Based on Performance | |||||||||||||
Dana Erikson | Other Registered Investment Company | 4 | $ | 214,208,247 | 0 | $ | 0 | |||||||||||
Other Pooled Investment Vehicles | 2 | $ | 47,950,288 | 1 | $ | 35,403,758 | ||||||||||||
Other Accounts | 3 | $ | 11,354,605 | 0 | $ | 0 |
Mr. Shipley manages other investment companies and/or investment vehicles and accounts in addition to the Registrant. The tables below show the number of other accounts managed by Mr. Shipley as of October 31, 2016 and the total assets in each of the following categories: (a) registered investment companies; (b) other pooled investment vehicles; and (c) other accounts. For each category, the table also shows the number of accounts and the total assets in the accounts with respect to which the advisory fee is based on account performance.
Name of Portfolio Manager | Type of Accounts | Total # of Other Accounts Managed | Total Assets | # of Accounts Managed with Advisory Fee Based on Performance | Total Assets with Advisory Fee Based on Performance | |||||||||||||
Mark Shipley | Other Registered Investment Company | 4 | $ | 214,208,247 | 0 | $ | 0 | |||||||||||
Other Pooled Investment Vehicles | 2 | $ | 47,950,288 | 1 | $ | 35,403,758 | ||||||||||||
Other Accounts | 3 | $ | 11,354,605 | 0 | $ | 0 |
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Share Ownership
The following table indicates the dollar range of securities of the Registrant owned by the Registrant’s portfolio managers as October 31, 2016.
Dollar Range of Securities Owned | ||
Dana Erikson | Over $100,000 | |
Mark Shipley | $10,001 – $50,000 |
Portfolio Manager Material Conflict of Interest
Potential conflicts of interest may arise when a fund’s portfolio manager has day-to-day management responsibilities with respect to one or more other funds or other accounts, as is the case for the portfolio managers of the Registrant.
These potential conflicts include:
Allocation of Limited Time and Attention. A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as the case may be if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.
Allocation of Limited Investment Opportunities. If a portfolio manager identifies a limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a fund’s ability to take full advantage of the investment opportunity.
Pursuit of Differing Strategies. At times, a portfolio manager may determine that an investment opportunity may be appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In these cases, the portfolio manager may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts.
Variation in Compensation. A conflict of interest may arise where the financial or other benefits available to the portfolio manager differ among the funds and/or accounts that he or she manages. If the structure of the investment adviser’s management fee and/or the portfolio manager’s compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the portfolio manager might be motivated to help certain funds and/or accounts over others. The portfolio manager might be motivated to favor funds and/or accounts in which he or she has an interest or in which the investment adviser and/or its affiliates have interests. Similarly, the desire to maintain or raise assets under management or to enhance the portfolio manager’s performance record or to derive other rewards, financial or otherwise, could influence the portfolio manager to lend preferential treatment to those funds and/or accounts that could most significantly benefit the portfolio manager.
Related Business Opportunities. The investment adviser or its affiliates may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of fund and/or accounts that provide greater overall returns to the investment manager and its affiliates.
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The Adviser and the Registrants have adopted compliance policies and procedures that are designed to address the various conflicts of interest that may arise for the Adviser and the individuals that it employs. For example, the Adviser seeks to minimize the effects of competing interests for the time and attention of portfolio managers by assigning portfolio managers to manage funds and accounts that share a similar investment style. The Adviser has also adopted trade allocation procedures that are designed to facilitate the fair allocation of limited investment opportunities among multiple funds and accounts. There is, however, no guarantee that such policies and procedures will be able to detect and prevent every situation in which an actual or potential conflict may appear.
Portfolio Manager Compensation
The Registrant’s portfolio manager is compensated by the Adviser. The compensation structure of the Adviser’s portfolio managers and other investment professionals has three primary components: (1) a base salary, (2) an annual cash bonus, and (3) if applicable, long-term stock-based compensation consisting generally of restricted stock units of the Adviser’s indirect parent company, Brookfield Asset Management, Inc. The portfolio managers also receive certain retirement, insurance and other benefits that are broadly available to all of the Adviser’s employees. Compensation of the portfolio managers is reviewed on an annual basis by senior management.
The Adviser compensates its portfolio managers based primarily on the scale and complexity of their portfolio responsibilities, the total return performance of funds and accounts managed by the portfolio manager on an absolute basis and versus appropriate peer groups of similar size and strategy, as well as the management skills displayed in managing their subordinates and the teamwork displayed in working with other members of the firm. Since the portfolio managers are responsible for multiple funds and accounts, investment performance is evaluated on an aggregate basis almost equally weighted among performance, management and teamwork. Base compensation for the Adviser’s portfolio managers varies in line with the portfolio manager’s seniority and position. The compensation of portfolio managers with other job responsibilities (such as acting as an executive officer of the Adviser and supervising various departments) will include consideration of the scope of such responsibilities and the portfolio manager’s performance in meeting them. The Adviser seeks to compensate portfolio managers commensurate with their responsibilities and performance, and competitive with other firms within the investment management industry. Salaries, bonuses and stock-based compensation are also influenced by the operating performance of the Adviser and its indirect parent. While the salaries of the Adviser’s portfolio managers are comparatively fixed, cash bonuses and stock-based compensation may fluctuate significantly from year to year, based on changes in the portfolio manager’s performance and other factors as described herein.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
None.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant’s nominating committee charter does not contain any procedure by which shareholders may recommend nominees to the registrant’s board of directors.
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Item 11. Controls and Procedures.
(a) The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s Disclosure Controls and Procedures are effective, based on their evaluation of such Disclosure Controls and Procedures as of a date within 90 days of the filing of this report on Form N-CSR.
(b) As of the date of filing this Form N-CSR, the Registrant’s principal executive officer and principal financial officer are aware of no changes in the Registrant’s internal control over financial reporting 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) None.
(2) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR.
(3) None.
(b) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(b) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR.
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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.
BROOKFIELD HIGH INCOME FUND INC.
By: | /s/ Brian F. Hurley | |
Brian F. Hurley | ||
President and Principal Executive Officer |
Date: December 9, 2016
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: | /s/ Brian F. Hurley | |
Brian F. Hurley | ||
President and Principal Executive Officer |
Date: December 9, 2016
By: | /s/ Angela W. Ghantous | |
Angela W. Ghantous | ||
Treasurer and Principal Financial Officer |
Date: December 9, 2016
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