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 811-22039
First Trust Specialty Finance and Financial Opportunities 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: November 30
Date of reporting period: November 30, 2020
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 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) The Report to Shareholders is attached herewith.
Opportunities Fund (FGB)
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Fund Statistics | |
Symbol on New York Stock Exchange | FGB |
Common Share Price | $3.28 |
Common Share Net Asset Value (“NAV”) | $3.44 |
Premium (Discount) to NAV | (4.65)% |
Net Assets Applicable to Common Shares | $49,437,346 |
Current Quarterly Distribution per Common Share(1) | $0.0825 |
Current Annualized Distribution per Common Share | $0.3300 |
Current Distribution Rate on Common Share Price(2) | 10.06% |
Current Distribution Rate on NAV(2) | 9.59% |
Performance | ||||
Average Annual Total Returns | ||||
1 Year Ended 11/30/20 | 5 Years Ended 11/30/20 | 10 Years Ended 11/30/20 | Inception (5/25/07) to 11/30/20 | |
Fund Performance(3) | ||||
NAV | -34.67% | -1.69% | 1.93% | -1.91% |
Market Value | -37.49% | -1.49% | 1.70% | -2.58% |
Index Performance | ||||
Blended Benchmark(4) | -12.82% | 4.68% | 6.43% | 3.55% |
MSCI U.S. Investable Market Financials Index | -8.51% | 6.35% | 8.41% | -0.01% |
Asset Classification | % of Total Investments |
Common Stocks - Business Development Companies | 93.8% |
Common Stocks | 3.3 |
Real Estate Investment Trusts (REITs) | 2.9 |
Total | 100.0% |
Industry Classification | % of Total Investments |
Capital Markets | 93.8% |
Mortgage Real Estate Investment Trusts | 2.9 |
Diversified Financial Services | 1.8 |
Insurance | 1.5 |
Total | 100.0% |
Top Ten Holdings | % of Total Investments |
Hercules Capital, Inc. | 8.4% |
New Mountain Finance Corp. | 8.1 |
Ares Capital Corp. | 7.4 |
BlackRock TCP Capital Corp. | 7.1 |
Golub Capital BDC, Inc. | 6.3 |
Solar Capital Ltd. | 6.2 |
Main Street Capital Corp. | 6.2 |
Stellus Capital Investment Corp. | 5.7 |
TriplePoint Venture Growth BDC Corp. | 5.5 |
Sixth Street Specialty Lending, Inc. | 5.4 |
Total | 66.3% |
(1) | Most recent distribution paid or declared through 11/30/2020. 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 11/30/2020. 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) | The Blended Benchmark returns are calculated by using the monthly return of the three indices during each period shown above. At the beginning of each month the three indices are rebalanced, to account for divergence from that ratio that occurred during the course of each month, to the following ratio: 70% Wells Fargo BDC Index, 20% FTSE NAREIT Mortgage REIT Index, and 10% S&P SmallCap Financials Index. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Benchmark for each period shown above. |
12 Months Total Return Ended 11/30/20 | ||
FGB Market Value Total Return | -37.49% |
FGB NAV Total Return | -34.67% |
Blended Benchmark* | -12.82% |
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. |
Shares | Description | Value | ||
COMMON STOCKS – BUSINESS DEVELOPMENT COMPANIES – 105.5% | ||||
Capital Markets – 105.5% | ||||
250,000 | Ares Capital Corp. (a) | $4,120,000 | ||
327,594 | Barings BDC, Inc. (a) | 2,840,240 | ||
331,863 | BlackRock TCP Capital Corp. (a) | 3,932,577 | ||
70,238 | Capital Southwest Corp. (a) | 1,213,713 | ||
25,408 | Crescent Capital BDC, Inc. (a) | 353,425 | ||
108,063 | Goldman Sachs BDC, Inc. (a) | 1,974,311 | ||
250,000 | Golub Capital BDC, Inc. (a) | 3,497,500 | ||
350,000 | Hercules Capital, Inc. (a) | 4,669,000 | ||
130,340 | Investcorp Credit Management BDC, Inc. (a) | 654,307 | ||
110,107 | Main Street Capital Corp. (a) | 3,429,833 | ||
23,335 | Medley Capital Corp. (b) | 602,043 | ||
377,564 | New Mountain Finance Corp. (a) | 4,526,992 | ||
287,084 | OFS Capital Corp. (a) | 1,920,592 | ||
150,000 | Owl Rock Capital Corp. (a) | 2,028,000 | ||
20,000 | PennantPark Floating Rate Capital Ltd. (a) | 208,600 | ||
655,081 | PennantPark Investment Corp. (a) | 2,941,314 | ||
340,472 | Portman Ridge Finance Corp. | 544,755 | ||
146,751 | Sixth Street Specialty Lending, Inc. (a) | 3,024,538 | ||
195,709 | Solar Capital Ltd. (a) | 3,446,435 | ||
286,126 | Stellus Capital Investment Corp. (a) | 3,181,721 | ||
238,845 | TriplePoint Venture Growth BDC Corp. (a) | 3,076,324 | ||
Total Common Stocks - Business Development Companies | 52,186,220 | |||
(Cost $67,347,519) | ||||
COMMON STOCKS – 3.8% | ||||
Diversified Financial Services – 2.1% | ||||
4,500 | Berkshire Hathaway, Inc., Class B (a) (b) | 1,030,095 | ||
Insurance – 1.7% | ||||
11,000 | Prudential Financial, Inc. (a) | 831,820 | ||
Total Common Stocks | 1,861,915 | |||
(Cost $1,706,771) | ||||
REAL ESTATE INVESTMENT TRUSTS – 3.3% | ||||
Mortgage Real Estate Investment Trusts – 3.3% | ||||
200,000 | Annaly Capital Management, Inc. (a) | 1,600,000 |
Shares | Description | Value | ||
Mortgage Real Estate Investment Trusts (Continued) | ||||
2,700 | Capstead Mortgage Corp. (a) | $15,201 | ||
Total Real Estate Investment Trusts | 1,615,201 | |||
(Cost $1,467,425) | ||||
Total Investments – 112.6% | 55,663,336 | |||
(Cost $70,521,715) (c) | ||||
Outstanding Loan – (13.1)% | (6,500,000) | |||
Net Other Assets and Liabilities – 0.5% | 274,010 | |||
Net Assets – 100.0% | $49,437,346 |
(a) | All or a portion of this security serves as collateral on the outstanding loan. |
(b) | Non-income producing security. |
(c) | Aggregate cost for federal income tax purposes was $70,950,335. As of November 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $6,729,029 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $22,016,028. The net unrealized depreciation was $15,286,999. |
Total Value at 11/30/2020 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks - Business Development Companies* | $ 52,186,220 | $ 52,186,220 | $ — | $ — |
Common Stocks* | 1,861,915 | 1,861,915 | — | — |
Real Estate Investment Trusts* | 1,615,201 | 1,615,201 | — | — |
Total Investments | $ 55,663,336 | $ 55,663,336 | $— | $— |
* | See Portfolio of Investments for industry breakout. |
ASSETS: | |
Investments, at value (Cost $70,521,715) | $ 55,663,336 |
Cash | 1,397,606 |
Foreign currency (Cost $26) | 20 |
Dividends receivable | 192,922 |
Prepaid expenses | 2,475 |
Total Assets | 57,256,359 |
LIABILITIES: | |
Outstanding loan | 6,500,000 |
Payables: | |
Distributions | 1,185,326 |
Audit and tax fees | 47,486 |
Investment advisory fees | 42,793 |
Shareholder reporting fees | 15,834 |
Interest and fees on loan | 13,676 |
Custodian fees | 4,511 |
Transfer agent fees | 2,714 |
Trustees’ fees and expenses | 2,591 |
Administrative fees | 1,605 |
Legal fees | 1,400 |
Financial reporting fees | 771 |
Other liabilities | 306 |
Total Liabilities | 7,819,013 |
NET ASSETS | $49,437,346 |
NET ASSETS consist of: | |
Paid-in capital | $ 113,973,226 |
Par value | 143,676 |
Accumulated distributable earnings (loss) | (64,679,556) |
NET ASSETS | $49,437,346 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) | $3.44 |
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) | 14,367,591 |
INVESTMENT INCOME: | ||
Dividends | $ 5,959,595 | |
Interest | 1,311 | |
Total investment income | 5,960,906 | |
EXPENSES: | ||
Investment advisory fees | 645,472 | |
Interest and fees on loan | 301,662 | |
Excise tax expense | 66,557 | |
Audit and tax fees | 49,274 | |
Shareholder reporting fees | 49,210 | |
Transfer agent fees | 31,016 | |
Administrative fees | 24,815 | |
Listing expense | 23,752 | |
Trustees’ fees and expenses | 15,746 | |
Custodian fees | 12,100 | |
Legal fees | 10,210 | |
Financial reporting fees | 9,250 | |
Other | 10,656 | |
Total expenses | 1,249,720 | |
NET INVESTMENT INCOME (LOSS) | 4,711,186 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on investments | (26,643,287) | |
Net change in unrealized appreciation (depreciation) on investments | (7,455,485) | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | (34,098,772) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(29,387,586) |
Year Ended 11/30/2020 | Year Ended 11/30/2019 | ||
OPERATIONS: | |||
Net investment income (loss) | $ 4,711,186 | $ 8,326,259 | |
Net realized gain (loss) | (26,643,287) | (4,080,290) | |
Net change in unrealized appreciation (depreciation) | (7,455,485) | 7,265,869 | |
Net increase (decrease) in net assets resulting from operations | (29,387,586) | 11,511,838 | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations | (6,248,450) | (5,694,198) | |
Return of capital | — | (3,782,021) | |
Total distributions to shareholders | (6,248,450) | (9,476,219) | |
CAPITAL TRANSACTIONS: | |||
Proceeds from Common Shares reinvested | 18,907 | 59,205 | |
Net increase (decrease) in net assets resulting from capital transactions | 18,907 | 59,205 | |
Total increase (decrease) in net assets | (35,617,129) | 2,094,824 | |
NET ASSETS: | |||
Beginning of period | 85,054,475 | 82,959,651 | |
End of period | $ 49,437,346 | $ 85,054,475 | |
CAPITAL TRANSACTIONS were as follows: | |||
Common Shares at beginning of period | 14,362,212 | 14,352,033 | |
Common Shares issued as reinvestment under the Dividend Reinvestment Plan | 5,379 | 10,179 | |
Common Shares at end of period | 14,367,591 | 14,362,212 |
Cash flows from operating activities: | ||
Net increase (decrease) in net assets resulting from operations | $(29,387,586) | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: | ||
Purchases of investments | (12,532,484) | |
Sales, maturities and paydown of investments | 31,220,715 | |
Return of capital and realized gain distributions received from investments | 1,374,399 | |
Net realized gain/loss on investments | 26,643,287 | |
Net change in unrealized appreciation/depreciation on investments | 7,455,485 | |
Changes in assets and liabilities: | ||
Decrease in dividends receivable | 62,489 | |
Decrease in prepaid expenses | 621 | |
Decrease in interest and fees payable on loan | (40,198) | |
Decrease in investment advisory fees payable | (47,824) | |
Decrease in audit and tax fees payable | (3,414) | |
Increase in legal fees payable | 679 | |
Increase in shareholder reporting fees payable | 2,854 | |
Decrease in administrative fees payable | (2,991) | |
Decrease in custodian fees payable | (975) | |
Decrease in transfer agent fees payable | (3,060) | |
Decrease in trustees’ fees and expenses payable | (4,226) | |
Decrease in other liabilities payable | (995) | |
Cash provided by operating activities | $24,736,776 | |
Cash flows from financing activities: | ||
Proceeds from Common Shares reinvested | 18,907 | |
Distributions to Common Shareholders from investment operations | (5,063,124) | |
Repayment of borrowing | (20,760,000) | |
Proceeds from borrowing | 2,260,000 | |
Cash used in financing activities | (23,544,217) | |
Increase in cash and foreign currency | 1,192,559 | |
Cash and foreign currency at beginning of period | 205,067 | |
Cash and foreign currency at end of period | $1,397,626 | |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest and fees | $341,860 |
Year Ended November 30, | |||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||
Net asset value, beginning of period | $ 5.92 | $ 5.78 | $ 6.42 | $ 6.82 | $ 6.54 | ||||
Income from investment operations: | |||||||||
Net investment income (loss) | 0.33 | 0.58 | 0.66 | 0.54 | 0.66 | ||||
Net realized and unrealized gain (loss) | (2.37) | 0.22 | (0.60) | (0.24) | 0.32 | ||||
Total from investment operations | (2.04) | 0.80 | 0.06 | 0.30 | 0.98 | ||||
Distributions paid to shareholders from: | |||||||||
Net investment income | (0.44) | (0.40) | (0.63) | (0.60) | (0.66) | ||||
Return of capital | — | (0.26) | (0.07) | (0.10) | (0.04) | ||||
Total distributions paid to Common Shareholders | (0.44) | (0.66) | (0.70) | (0.70) | (0.70) | ||||
Net asset value, end of period | $3.44 | $5.92 | $5.78 | $6.42 | $6.82 | ||||
Market value, end of period | $3.28 | $5.90 | $6.07 | $6.38 | $7.00 | ||||
Total return based on net asset value (a) | (34.67)% | 14.58% | 1.09% | 4.23% | 16.39% | ||||
Total return based on market value (a) | (37.49)% | 8.74% | 6.83% | 0.91% | 26.63% | ||||
Ratios to average net assets/supplemental data: | |||||||||
Net assets, end of period (in 000’s) | $ 49,437 | $ 85,054 | $ 82,960 | $ 92,165 | $ 97,753 | ||||
Ratio of total expenses to average net assets | 2.35% | 2.56% | 2.38% | 2.02% | 1.87% | ||||
Ratio of total expenses to average net assets excluding interest expense | 1.78% | 1.60% | 1.58% | 1.52% | 1.54% | ||||
Ratio of net investment income (loss) to average net assets | 8.87% | 9.95% | 10.79% | 7.66% | 10.42% | ||||
Portfolio turnover rate | 20% | 7% | 12% | 5% | 13% | ||||
Indebtedness: | |||||||||
Total loan outstanding (in 000’s) | $ 6,500 | $ 25,000 | $ 25,000 | $ 25,000 | $ 25,000 | ||||
Asset coverage per $1,000 of indebtedness (b) | $ 8,606 | $ 4,402 | $ 4,318 | $ 4,687 | $ 4,910 |
(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 loan outstanding) from the Fund’s total assets, and dividing by the outstanding loan balance in 000’s. |
1) | the type of security; |
2) | the size of the holding; |
3) | the initial cost of the security; |
4) | transactions in comparable securities; |
5) | price quotes from dealers and/or third-party pricing services; |
6) | relationships among various securities; |
7) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
8) | an analysis of the issuer’s financial statements; and |
9) | the existence of merger proposals or tender offers that might affect the value of the security. |
1) | the value of similar foreign securities traded on other foreign markets; |
2) | ADR trading of similar securities; |
3) | closed-end fund or exchange-traded fund trading of similar securities; |
4) | foreign currency exchange activity; |
5) | the trading prices of financial products that are tied to baskets of foreign securities; |
6) | factors relating to the event that precipitated the pricing problem; |
7) | whether the event is likely to recur; and |
8) | whether the effects of the event are isolated or whether they affect entire markets, countries or regions. |
• | 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. |
Distributions paid from: | 2020 | 2019 |
Ordinary income | $5,063,124 | $8,205,804 |
Capital gains | — | — |
Return of capital | — | 3,782,021 |
Undistributed ordinary income | $562,546 |
Undistributed capital gains | — |
Total undistributed earnings | 562,546 |
Accumulated capital and other losses | (48,769,770) |
Net unrealized appreciation (depreciation) | (15,287,006) |
Total accumulated earnings (losses) | (63,494,230) |
Other | (1,185,326) |
Paid-in capital | 114,116,902 |
Total net assets | $49,437,346 |
(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. |
• | The Fund will concentrate its investments in securities of companies within industries in the financial sector, which is comprised of specialty finance companies, banks, savings institutions, brokerage firms, investment management companies, insurance companies, holding companies of the foregoing and companies that provide related services to such companies. |
• | The Fund will not invest more than 20% of its Managed Assets in master limited partnerships. |
Assumed Portfolio Total Return (Net of Expenses) | -10% | -5% | 0% | 5% | 10% |
Common Share Total Return | -11.65% | -6.00% | -0.34% | 5.32% | 10.98% |
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) | 189 | None |
Thomas R. Kadlec, Trustee (1957) | • Three Year Term
• Since Fund Inception | President, ADM Investor Services, Inc. (Futures Commission Merchant) | 189 | 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) | 189 | 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) | 189 | None |
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) | 189 | None |
(1) | Currently, Richard E. Erickson and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until the Fund’s 2021 annual meeting of shareholders. James A. Bowen and Niel B. Nielson, as Class III Trustees, are serving as trustees until the Fund’s 2022 annual meeting of shareholders. Robert F. Keith, as a Class I Trustee, is serving as a trustee until the Fund’s 2023 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 Fund Inception | 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 professional 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). |
FUND ACCOUNTANT, AND
CUSTODIAN
PUBLIC ACCOUNTING FIRM
(b) Not applicable.
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. |
(f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
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 for those fiscal years were $42,000 for the fiscal year ended November 30, 2019 and $42,000 for the fiscal year ended November 30, 2020.
(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 the fiscal year ended November 30, 2019 and $0 for the fiscal year ended November 30, 2020.
Audit-Related Fees (Investment Adviser) -- 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 the fiscal year ended November 30, 2019 and $0 for the fiscal year ended November 30, 2020.
(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 the fiscal year ended November 30, 2019 and $5,200 for the fiscal year ended November 30, 2020. These fees were for tax consultation and/or tax preparation.
Tax Fees (Investment Adviser) -- 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’s adviser were $0 for the fiscal year ended November 30, 2019 and $0 for the fiscal year ended November 30, 2020.
(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 the fiscal year ended November 30, 2019 and $0 for the fiscal year ended November 30, 2020.
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 the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended November 30, 2019 and $0 for the fiscal year ended November 30, 2020.
(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 the fiscal year ended November 30, 2019, were $5,200 for the registrant and $75,670 for the registrant’s investment adviser; and for the fiscal year ended November 30, 2020, were $5,200 for the registrant and $23,200 for the registrant’s investment adviser.
(h) The registrant’s audit committee of its Board of Trustees has considered whether 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.
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.
CONFLUENCE INVESTMENT MANAGEMENT LLC
PROXY VOTING POLICY
1. Introduction
As a registered investment adviser, Confluence Investment Management LLC (“Confluence”) has a fiduciary duty to act solely in the best interests of its clients. If the client is a registered investment company under the Investment Company Act of 1940 or the client requests Confluence to do so in writing, Confluence will vote proxy materials for its clients.
In cases where the discretionary client has delegated proxy voting responsibility and authority to Confluence, Confluence has adopted and implemented the following policies and procedures, which it believes are reasonably designed to ensure that proxies are voted in the best interests of its clients. In pursuing this policy, proxies should be voted in a manner that is intended to maximize value to the client. In situations where Confluence accepts such delegation and agrees to vote proxies, Confluence will do so in accordance with these Policies and Procedures. Confluence may delegate its responsibilities under these Policies and Procedures to a third party, provided that no such delegation shall relieve Confluence of its responsibilities hereunder and Confluence shall retain final authority and fiduciary responsibility for such proxy voting.
Investment advisers registered with the SEC, and which exercise voting authority with respect to client securities, are required by Rule 206(4)-6 of the Advisers Act to (a) adopt and implement written policies and procedures that are reasonably designed to ensure that client securities are voted in the best interests of clients, which must include how an adviser addresses material conflicts that may arise between an adviser’s interests and those of its clients; (b) disclose to clients how they may obtain information from the adviser with respect to the voting of proxies for their securities; (c) describe to clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its clients; and (d) maintain certain records relating to the adviser’s proxy voting activities when the adviser does have proxy voting authority.
2. Voting Guidelines
Confluence has adopted the Broadridge Proxy Policies and Insights Shareholder Value (“Proxy Policies and Insights”) to determine how each issue on proxy ballots is to be voted. The Proxy Policies and Insights is incorporated herein by this reference, and a copy of the Proxy Policies and Insights, as may be revised from time to time, is maintained with Confluence’s proxy voting policy.
The Proxy Policies and Insights seeks to maximize shareholder value in proxy voting. While the Proxy Policies and Insights is created using voting trends of the top 10 fund families that also seek to maximize shareholder value, Confluence seeks to review the template no less frequently than annually (and make revisions when necessary) to better enhance the shareholder’s value maximization objective. Proxy statements will be voted in accordance with this template unless:
· | Confluence determines it has a conflict, |
· | Confluence investment team determines there is a valid reason not to follow the Proxy Policies and Insights recommendation, or |
· | No recommendation is provided by Proxy Policies and Insights, in which case Confluence will independently determine how a particular issue is to be voted and will document that determination for the record. |
In the event proxy ballots are received with respect to debt securities, Confluence will vote on a case by case basis in a manner it believes to be in the best economic interest of clients.
Any decision to override the PPI on a particular ballot issue must receive approval by the relevant CIO or his/her delegate (typically a Director of Research). The reason for not following the Proxy Policies and Insights must be documented for recordkeeping purposes.
Confluence may determine not to vote a particular proxy, if the costs and burdens exceed the benefits of voting (e.g., when securities are subject to loan or to share blocking restrictions) or if a determination is made that not voting is in the best interest of the client.
3. Responsibility
Confluence utilizes Broadridge Financial Solutions, Inc. (“Broadridge”), an outsourcing provider to the global financial services industry, to coordinate, process, manage and maintain electronic records of Confluence proxy votes.
Confluence has adopted the Broadridge Proxy Policy and Insights. It is the responsibility of the Proxy Committee to at least annually, review the Proxy Policies and Insights for continued relevancy. Confluence is responsible for responding to any corporate actions as well as address any proxy ballot issues for which a recommendation is not provided by Proxy Policy and Insights.
Confluence compliance is responsible for maintaining this policy, reviewing it at least annually, and updating it as required.
All client accounts are to be directed to Broadridge in order for proxy ballots to be listed and voted on Broadridge’s Proxy Edge system. Occasionally, however, proxy ballots are forwarded directly to Confluence, which must then vote the proxy ballots independent of the Proxy Edge system. Confluence is not responsible for voting proxies it does not receive, but will make reasonable efforts to obtain missing proxies.
4. Registered Investment Companies
In cases in which the client is a registered investment company under the Investment Company Act of 1940 and the client delegates proxy voting, Confluence will vote proxies pursuant to this policy. Where Confluence acts as a sub-adviser of a closed-end fund that invests in other investment company securities, Confluence (as required) will vote such proxies in the same proportion as the vote of all other shareholders of the fund (i.e. “echo vote” or ‘mirror vote”), unless otherwise required by law. When required by law, Confluence will also echo vote proxies of securities in unaffiliated investment vehicles. For example, section 12(d)(1)(F) of the Investment Company Act of 1940 requires echo voting of registered investment companies that sub-advise or manage securities of other registered investment companies.
5. Conflicts of Interest
In the event an employee determines that Confluence has a conflict of interest due to, for example, a relationship with a company or an affiliate of a company, or for any other reason which could influence the advice given, the employee will advise the Chief Compliance Officer and the Proxy Committee, and the Proxy Committee will decide whether Confluence should either (1) disclose to the client the conflict to enable the client to evaluate the advice in light of the conflict or (2) disclose to the client the conflict and decline to provide the advice.
Confluence shall use commercially reasonable efforts to determine whether a potential conflict may exist, and a potential conflict shall be deemed to exist only if one or more members of the Confluence Investment Committee (on which the Chief Investment Officer is a member) knows or should have known of the conflict. Confluence is sensitive to conflicts of interest that may arise in the proxy decision-making process and has identified the following potential conflicts of interest:
• | A principal of Confluence or any person involved in the proxy decision-making process currently serves on the Board of the portfolio company. |
• | An immediate family member of a principal of Confluence or any person involved in the proxy decision-making process currently serves as a director or executive officer of the portfolio company. |
• | Confluence or any affiliate holds a material ownership interest in the portfolio company. |
This list is not intended to be exclusive. All employees are obligated to disclose any potential conflict to Confluence’s Chief Compliance Officer.
If a material conflict is identified, Confluence management may (i) disclose the potential conflict to the client and obtain consent; or (ii) establish an ethical wall or other informational barriers between the person(s) that are involved in the conflict and the persons making the voting decisions.
Confluence will resolve identified conflicts of interest in the best interest of the client.
6. Oversight of Third Parties
Annually, the Proxy Policies and Insights will be reviewed by the Proxy Committee. Annually, Confluence compliance will request documents necessary to evaluate Broadridge’s continuing ability to adequately provide services to Confluence and its clients (e.g. SOC-1 report).
Confluence will perform periodic review of Broadridge through reports available on the Broadridge Proxy Edge site.
7. Client Requests for Information
All client requests for information regarding proxy votes, or policies and procedures, received by any employee should be forwarded to Confluence compliance. Confluence compliance will prepare a written response to the client with the information requested.
8. Disclosure
· | Confluence will provide required disclosures in response to Item 17 of Form ADV Part 2A summarizing this proxy voting policy and procedures, including a statement that clients may request information regarding how Confluence voted client’s proxies; |
· | Confluence will also disclose how clients may obtain a copy of the firm’s proxy voting policies and procedures, however Confluence will not disclose how proxies were voted to third-party non-clients, and; |
· | Confluence shall make known its proxy voting policy in its advisory agreement or along with its advisory agreement. |
9. Recordkeeping
The Chief Compliance Officer or his/her designate is responsible for maintaining the following records, however Confluence may rely on its third-party service provider to retain certain records:
• | proxy voting policies and procedures; |
• | proxy statements (provided, however, that Confluence may rely on the Securities and Exchange Commission’s EDGAR system if the issuer filed its proxy statements via EDGAR or may rely on a third party as long as the third party has provided Confluence with a copy of the proxy statement promptly upon request); |
• | records of electronic votes cast and abstentions; and |
• | any records prepared by Confluence that were material to a proxy voting decision or that memorialized a decision. |
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
Investment decisions for the registrant are made by the Portfolio Management Team of Confluence Investment Management LLC (“Confluence”). The members of the Confluence Portfolio Management Team are responsible for portfolio management, security selection, leverage management, trading, compliance, position reconciliation, communication and reporting to the registrant’s investment adviser.
Information provided as of February 8, 2021
Mark A. Keller, CFA – Chief Executive Officer and Chief Investment Officer
Mr. Keller has over 30 years of investment experience with a focus on value-oriented equity analysis and management. From 1994 to May 2008, he was the Chief Investment Officer of Gallatin Asset Management, Inc., and its predecessor organization, A.G. Edwards Asset Management, the investment management arm of A.G. Edwards, Inc. From 1999 to 2008, Mr. Keller was Chairman of A.G. Edwards’ Investment Strategy Committee, which set investment policy and established asset allocation models for the entire organization. Mr. Keller was a founding member of the A.G. Edwards Investment Strategy Committee, on which he served for over 20 years, the last ten of which as Chairman of the Committee. Mr. Keller began his career with A.G. Edwards in 1978, serving as an equity analyst for the firm’s Securities Research Department from 1979 to 1994. During his last five years in Securities Research, Mr. Keller was Equity Strategist and manager of the firm’s Focus List. Mr. Keller was a Senior Vice President of A.G. Edwards & Sons, Inc. and of Gallatin Asset Management, Inc., and was a member of the Board of Directors of both companies. Mr. Keller received a Bachelor of Arts from Wheaton College (Illinois) and is a CFA charterholder.
David B. Miyazaki, CFA – Senior Vice President and Senior Portfolio Manager
Prior to joining Confluence in May 2008, Mr. Miyazaki served as a Portfolio Manager and Analyst with Gallatin Asset Management, Inc., the investment management arm of A.G. Edwards, Inc. Mr. Miyazaki was responsible for equity investments in value-oriented separately managed accounts. He also co-managed the A.G. Edwards’ ETF-based asset allocation program. In addition to portfolio management, Mr. Miyazaki served as a member of the A.G. Edwards’ Investment Strategy Committee. As a strategist, he was responsible for the firm’s quantitative asset allocation models, including its Cyclical Asset Allocation program. Prior to joining A.G. Edwards in 1999, Mr. Miyazaki was a Portfolio Manager at Koch Industries in Wichita, Kansas. His previous experience includes working as an Investment Analyst at Prudential Capital Group in Dallas, Texas, and as a Bond Trader at Barre & Company, also in Dallas. Mr. Miyazaki received a Bachelor of Business Administration from Texas Christian University and is a CFA charterholder.
Daniel T. Winter, CFA – Senior Vice President and Chief Investment Officer – Value Equity
Prior to joining Confluence in May 2008, Mr. Winter served as a Portfolio Manager and Analyst with Gallatin Asset Management, Inc., the investment arm of A.G. Edwards, Inc. While at Gallatin, Mr. Winter chaired the portfolio management team responsible for the firm’s six value-oriented equity strategies. His responsibilities also included directing the strategy implementation and trading execution for the equity portfolios. Mr. Winter also served as a portfolio manager for the Cyclical Growth ETF Portfolio and the Cyclical Growth and Income ETF Portfolio which were offered through variable annuities. He was also a member of the firm’s Allocation Advisor Committee which oversaw the A.G. Edwards exchange-traded fund focused strategies. Prior to joining the firm’s Asset Management division in 1996, Mr. Winter served as a portfolio manager for A.G. Edwards Trust Company. Mr. Winter earned a Bachelor of Arts in business management from Eckerd College and a Master of Business Administration from Saint Louis University. Mr. Winter is a CFA charterholder.
(a)(2) | Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest |
Information provided as of November 30, 2020
Other Accounts Managed by Portfolio Manager(s) or Management Team Member
Name of Portfolio Manager or Team Member
| Type of Accounts
| Total No. of Accounts
| Total Assets
| No. of Accounts where Advisory Fee is
| Total Assets in Accounts where Advisory Fee is
|
1. Mark Keller | Registered Investment Companies: | 1 | $39,884,595 | 0 | $0 |
Other Pooled Investment Vehicles: | 0 | $0 | 0 | $0 | |
Other Accounts: | 19,348 | $6,874,416,092 | 0 | $0 | |
2. David Miyazaki | Registered Investment Companies: | 0 | $0 | 0 | $0 |
Other Pooled Investment Vehicles: | 0 | $0 | 0 | $0 | |
Other Accounts: | 659 | $165,490,535 | 0 | $0 | |
3. Daniel Winter
| Registered Investment Companies: | 1 | $39,884,595 | 0 | $0 |
Other Pooled Investment Vehicles: | 0 | $0 | 0 | $0 | |
Other Accounts: | 18,590 | $6,796,364,060 | 0 | $0 |
Potential Conflicts of Interests
As disclosed in the Confluence Form ADV Part 2A, from time to time, Confluence is presented, in connection with its discretionary portfolio management and investment advisory services, with an opportunity to participate in public offerings of securities. Certain of our clients, including those in certain Wrap Account Programs, may be prohibited from participating in such offerings by their respective Financial Institution. Certain of our other clients may be unable to participate in such offerings if their respective Financial Institution did not participate in the initial distribution of securities in such offering, depending on their particular Financial Institution or Custodian. Accordingly, Confluence’s policy is to not purchase shares in such public offerings for its clients. In contrast, the First Trust Specialty Finance and Financial Opportunities Fund and the First Trust Confluence Small Cap Value Fund, the open-end mutual fund and the closed-end fund for which we act as sub-adviser, and our institutional clients are not similarly restricted, and are therefore allowed to participate in public offerings.
(a)(3) Compensation Structure of Portfolio Manager(s) or Management Team Members
Information provided as of November 30, 2020
The Fund’s portfolio managers are compensated with an annual base salary and a discretionary bonus based on Confluence’s overall firm profits. The firm provides a 401k contribution and may make a discretionary additional contribution. In addition, the Firm’s portfolio managers are equity owners in the Firm, aligning their long-term interests with the Fund holder to strive to achieve superior investment performance over an appropriate time period. This ensures that the portfolio managers are incented to implement a consistent investment strategy for the Fund without incurring undue risk.
(a)(4) Disclosure of Securities Ownership
Information provided as of November 30, 2019
Name | Dollar Range of Registrant Shares Beneficially Owned |
Mark Keller | $10,001 - $50,000 |
David Miyazaki | $10,001 - $50,000 |
Brian Hansen | $10,001 - $50,000 |
Joseph Hanzlik | $10,001 - $50,000 |
Daniel Winter | None |
(b) | Not applicable. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
On October 19, 2020, after a thorough review, and consistent with the interests of the Fund, the Board of Trustees adopted Amended and Restated By-Laws, dated October 19, 2020 (the “Amended and Restated By-Laws”).
Among other changes, the Amended and Restated By-Laws contain new timelines for advance notice of nominees for Trustee to be brought before a meeting of shareholders. Further, the Amended and Restated By-Laws require compliance with certain procedural and informational requirements in connection with the advance notice of nominations, including a requirement to provide certain information about the nominee, and if requested, requires a nominee to sit for an interview with the Board to determine whether the nominee has the ability to critically review, evaluate, question and discuss information provided to the Board, and interact effectively with the other Trustees and management of the Fund, among other parties. Additionally, the Amended and Restated By-Laws include qualifications and eligibility requirements for Trustees. Any shareholder considering making a nomination should carefully review and comply with those provisions of the Amended and Restated By-Laws.
This discussion is only a high-level summary of certain aspects of the Amended and Restated By-Laws, and is qualified in its entirety by reference to the Amended and Restated By-Laws. Shareholders should refer to the Amended and Restated By-Laws for more information. A copy of the Amended and Restated By-Laws can be found in the Current Report on Form 8-K filed by the Fund with the Securities and Exchange Commission on October 20, 2020, which is available at www.sec.gov, and may also be obtained by writing to the Secretary of the Fund at the Fund’s principal executive office.
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 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a) | Not applicable. |
(b) | Not applicable. |
Item 13. 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. |
(a)(4) | 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 Specialty Finance and Financial Opportunities Fund |
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | February 8, 2021 |
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 8, 2021 |
By (Signature and Title)* | /s/ Donald P. Swade | |
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date: | February 8, 2021 |