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 811-05820
BROOKFIELD TOTAL RETURN FUND INC.
(Exact name of registrant as specified in charter)
BROOKFIELD PLACE
250 VESEY STREET, 15TH FLOOR
NEW YORK, NEW YORK 10281-1023
(Address of principal executive offices) (Zip code)
BRIAN F. HURLEY, PRESIDENT
BROOFKIELD TOTAL RETURN FUND INC.
BROOKFIELD PLACE
250 VESEY STREET, 15TH FLOOR
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, 2014
Date of reporting period: September 30, 2014
Item 1. Reports to Shareholders.
Portfolio Characteristics (Unaudited)
PORTFOLIO STATISTICS | |
Annualized distribution yield1 | 9.13% |
Weighted average coupon | 3.25% |
Weighted average life | 7.76 years |
Average portfolio dollar price (excluding interest-only securities) | $ 89.62 |
Percentage of fixed securites (excluding cash, equities and interest-only securities) | 30.3% |
Percentage of floating securities (excluding cash, equities and interest-only securities) | 69.7% |
Percentage of leveraged assets | 29.77% |
Total number of holdings | 289 |
CREDIT QUALITY2 | |
AAA | 13.9% |
AA | 1.5% |
A | 8.1% |
BBB | 6.4% |
BB | 7.4% |
B | 21.2% |
Below B | 41.5% |
Total | 100.0% |
ASSET ALLOCATION | |
U.S. Government & Agency Obligations | 5.3% |
Asset-Backed Securities | 4.8% |
Residential Mortgage Related Holdings | 49.8% |
Commercial Mortgage Related Holdings | 59.1% |
Interest-Only Securities | 4.9% |
Corporate Bonds | 13.0% |
Preferred Stocks | 2.4% |
Liabilities in Excess of Other Assets | (39.3)% |
Total | 100.0% |
Schedule of Investments
Interest Rate | Maturity | Principal Amount (000s) | Value | |
U.S. GOVERNMENT & AGENCY OBLIGATIONS – 5.3% | ||||
U.S. Government Agency Collateralized Mortgage Obligations – 0.1% | ||||
Federal National Mortgage Association | ||||
Series 1997-79, Class PL 1 | 6.85% | 12/18/27 | $ 239 | $ 269,323 |
Total U.S. Government Agency Collateralized Mortgage Obligations | 269,323 | |||
U.S. Government Agency Pass-Through Certificates – 5.2% | ||||
Federal Home Loan Mortgage Corporation | ||||
Federal Home Loan Mortgage Corporation | 4.00 | TBA | 4,000 | 4,211,248 |
Pool Q03049 1 | 4.50 | 08/01/41 | 2,572 | 2,793,492 |
Pool C69047 1 | 7.00 | 06/01/32 | 354 | 404,073 |
Pool C53494 1 | 7.50 | 06/01/31 | 44 | 45,147 |
Pool C56878 1 | 8.00 | 08/01/31 | 99 | 108,113 |
Pool C58516 1 | 8.00 | 09/01/31 | 40 | 40,722 |
Pool C59641 1 | 8.00 | 10/01/31 | 214 | 249,055 |
Pool C55166 1 | 8.50 | 07/01/31 | 103 | 111,356 |
Pool C55167 1 | 8.50 | 07/01/31 | 65 | 68,062 |
Pool C55169 1 | 8.50 | 07/01/31 | 62 | 64,298 |
Pool G01466 1 | 9.50 | 12/01/22 | 375 | 413,480 |
Pool 555559 1 | 10.00 | 03/01/21 | 80 | 86,396 |
Pool 555538 1 | 10.00 | 03/01/21 | 117 | 126,018 |
Federal National Mortgage Association | ||||
Pool 753914 1 | 5.50 | 12/01/33 | 1,079 | 1,210,015 |
Pool 761836 1 | 6.00 | 06/01/33 | 567 | 645,143 |
Pool 948362 1 | 6.50 | 08/01/37 | 203 | 226,512 |
Pool 555933 1 | 7.00 | 06/01/32 | 1,708 | 2,002,012 |
Pool 645912 1 | 7.00 | 06/01/32 | 345 | 392,082 |
Pool 645913 1 | 7.00 | 06/01/32 | 585 | 672,771 |
Pool 650131 1 | 7.00 | 07/01/32 | 507 | 581,852 |
Pool 789284 1 | 7.50 | 05/01/17 | 21 | 21,142 |
Pool 827853 1 | 7.50 | 10/01/29 | 34 | 34,185 |
Pool 545990 1 | 7.50 | 04/01/31 | 636 | 725,619 |
Pool 255053 1 | 7.50 | 12/01/33 | 134 | 154,449 |
Pool 735576 1 | 7.50 | 11/01/34 | 776 | 935,178 |
Pool 896391 1 | 7.50 | 06/01/36 | 331 | 383,331 |
Pool 735800 1 | 8.00 | 01/01/35 | 484 | 586,723 |
Pool 636449 1 | 8.50 | 04/01/32 | 403 | 483,907 |
Pool 458132 1 | 8.96 | 03/15/31 | 734 | 853,629 |
Pool 852865 1 | 9.00 | 07/01/20 | 458 | 509,796 |
Pool 545436 1 | 9.00 | 10/01/31 | 310 | 382,670 |
Total U.S. Government Agency Pass-Through Certificates | 19,522,476 | |||
Total TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost $18,487,954) | 19,791,799 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
ASSET-BACKED SECURITIES – 4.8% | ||||
Housing Related Asset-Backed Securities – 4.8% | ||||
ACE Securities Corporation Manufactured Housing Trust | ||||
Series 2003-MH1, Class A4 2,3 | 6.50% | 08/15/30 | $ 1,643 | $ 1,739,548 |
Bayview Opportunity Master Fund IIA Trust | ||||
Series 2012-4NR2, Class A 1,2,3,4 | 3.95 | 01/28/34 | 1,764 | 1,773,069 |
Conseco Finance Securitizations Corp. | ||||
Series 2001-4, Class A4 | 7.36 | 08/01/32 | 274 | 302,933 |
Conseco Financial Corp. | ||||
Series 1998-3, Class A6 | 6.76 | 03/01/30 | 1,092 | 1,173,749 |
Series 1997-7, Class A7 | 6.96 | 07/15/28 | 947 | 988,963 |
Series 1997-2, Class A6 | 7.24 | 06/15/28 | 109 | 113,834 |
Series 1997-6, Class A9 | 7.55 | 01/15/29 | 899 | 953,814 |
Lehman ABS Manufactured Housing Contract Trust | ||||
Series 2001-B, Class A5 | 5.87 | 04/15/40 | 207 | 224,057 |
Series 2001-B, Class A6 | 6.47 | 04/15/40 | 179 | 195,592 |
Mid-State Capital Corp. | ||||
Series 2004-1, Class M1 | 6.50 | 08/15/37 | 4,450 | 4,773,340 |
Series 2004-1, Class M2 5 (Acquired 07/01/04, Cost $3,875,841, 1.1%) | 8.11 | 08/15/37 | 3,667 | 4,201,737 |
Origen Manufactured Housing Contract Trust | ||||
Series 2005-B, Class A4 | 5.91 | 01/15/37 | 1,668 | 1,765,923 |
Total Housing Related Asset-Backed Securities | 18,206,559 | |||
Total TOTAL ASSET-BACKED SECURITIES (Cost $17,823,801) | 18,206,559 | |||
RESIDENTIAL MORTGAGE RELATED HOLDINGS – 49.8% | ||||
Non-Agency Mortgage-Backed Securities – 49.8% | ||||
Alternative Loan Trust | ||||
Series 2007-OA3, Class 1A1 4,6 | 0.29 | 04/25/47 | 7,427 | 6,439,305 |
Series 2006-OA10, Class 3A1 1,4,6 | 0.34 | 08/25/46 | 7,593 | 5,841,961 |
Series 2005-51, Class 4A1 4,6 | 0.47 | 11/20/35 | 5,570 | 4,616,069 |
Series 2007-2CB, Class 1A15 | 5.75 | 03/25/37 | 1,014 | 870,351 |
Series 2007-12T1, Class A22 | 5.75 | 06/25/37 | 4,243 | 3,558,030 |
Series 2006-29T1, Class 2A5 | 6.00 | 10/25/36 | 3,736 | 3,352,741 |
Series 2006-41CB, Class 2A17 | 6.00 | 01/25/37 | 1,653 | 1,457,406 |
Series 2006-29T1, Class 3A3 6,7 | 76.84 | 10/25/36 | 1,057 | 3,402,443 |
Asset-Backed Securities Corporation Home Equity Loan Trust | ||||
Series 2007-HE1, Class A4 4,6 | 0.30 | 12/25/36 | 2,350 | 1,875,521 |
Banc of America Funding Corp. | ||||
Series 2003-3, Class B4 5 (Acquired 01/28/04, Cost $197,214, 0.0%) | 5.48 | 10/25/33 | 218 | 73,510 |
Series 2003-3, Class B5 5 (Acquired 01/28/04, Cost $115,526, 0.0%) | 5.48 | 10/25/33 | 154 | 34,595 |
BCAP LLC Trust | ||||
Series 2012-RR4, Class 5A6 2,3,6 | 2.37 | 05/26/36 | 4,634 | 3,270,094 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
RESIDENTIAL MORTGAGE RELATED HOLDINGS (continued) | ||||
Series 2009-RR13, Class 18A2 2,3,6 | 5.78% | 07/26/37 | $ 2,046 | $1,892,806 |
BNC Mortgage Loan Trust | ||||
Series 2007-2, Clas A5 4 | 0.46 | 05/25/37 | 6,351 | 4,638,992 |
Citicorp Mortgage Securities Trust | ||||
Series 2006-3, Class 1A4 2,3 | 6.00 | 06/25/36 | 2,130 | 2,210,816 |
Citigroup Mortgage Loan Trust | ||||
Series 2009-11, Class 8A2 2,3,6 | 2.20 | 04/25/45 | 3,244 | 2,726,070 |
Countrywide Home Loan Mortgage Pass-Through Trust | ||||
Series 2003-J13, Class B3 5 (Acquired 09/13/07, Cost $75,313, 0.0%) | 5.23 | 01/25/34 | 303 | 45,230 |
Series 2007-5, Class A29 | 5.50 | 05/25/37 | 833 | 802,843 |
Series 2006-21, Class A11 | 5.75 | 02/25/37 | 2,704 | 2,555,771 |
Series 2004-21, Class A10 | 6.00 | 11/25/34 | 361 | 381,775 |
Series 2007-18, Class 1A1 | 6.00 | 11/25/37 | 779 | 716,049 |
Series 2006-14, Class A4 | 6.25 | 09/25/36 | 5,263 | 4,891,074 |
CSMC | ||||
Series 2010-19R, Class 5A4 2,3 | 3.25 | 08/27/36 | 7,280 | 6,908,523 |
DSLA Mortgage Loan Trust | ||||
Series 2007-AR1, Class 2A1A 4,6 | 0.30 | 04/19/47 | 5,000 | 4,161,083 |
First Republic Mortgage Bank Mortgage Pass-Through Certificates | ||||
Series 2000-FRB1, Class B3 5,6 (Acquired 08/30/01, Cost $82,768, 0.0%) | 0.65 | 06/25/30 | 86 | 54,920 |
GMAC Mortgage Corporation Loan Trust | ||||
Series 2004-J5, Class M1 | 5.44 | 01/25/35 | 1,517 | 1,209,411 |
GSAMP Trust | ||||
Series 2006-HE5, Class A2C 4,6 | 0.30 | 08/25/36 | 4,880 | 4,122,582 |
Series 2006-HE8, Class A2C 4,6 | 0.32 | 01/25/37 | 6,277 | 5,016,604 |
GSR Mortgage Loan Trust | ||||
Series 2005-6F, Class 1A6 | 5.25 | 07/25/35 | 983 | 1,015,602 |
Indymac Index Mortgage Loan Trust | ||||
Series 2006-FLX1, Class A1 4,6 | 0.36 | 11/25/36 | 6,136 | 5,408,034 |
IXIS Real Estate Capital Trust | ||||
Series 2006-HE3, Class A2 4,6 | 0.25 | 01/25/37 | 1,030 | 571,798 |
Series 2006-HE2, Class A3 4,6 | 0.31 | 08/25/36 | 9,979 | 4,789,694 |
Series 2006-HE3, Class A4 4,6 | 0.38 | 01/25/37 | 795 | 459,035 |
JP Morgan Mortgage Acquisition Corp. | ||||
Series 2006-WMC1, Class A4 4,6 | 0.34 | 03/25/36 | 2,549 | 2,191,372 |
JP Morgan Mortgage Trust | ||||
Series 2003-A1, Class B4 5,6 (Acquired 10/29/04, Cost $201,093, 0.0%) | 2.11 | 10/25/33 | 235 | 79,158 |
Series 2003-A2, Class B4 5,6 (Acquired 10/29/04, Cost $131,375, 0.0%) | 2.39 | 11/25/33 | 154 | 57,851 |
Master Asset Backed Securities Trust | ||||
Series 2006-NC3, Class A3 4,6 | 0.25 | 10/25/36 | 2,743 | 1,721,827 |
Series 2006-NC2, Class A4 4,6 | 0.30 | 08/25/36 | 1,766 | 943,356 |
Series 2006-NC3, Class A4 4,6 | 0.31 | 10/25/36 | 2,929 | 1,856,691 |
Series 2006-HE5, Class A3 4,6 | 0.31 | 11/25/36 | 5,680 | 3,829,347 |
Series 2006-NC3, Class A5 4,6 | 0.36 | 10/25/36 | 4,516 | 2,885,264 |
Series 2006-HE5, Class A4 4,6 | 0.37 | 11/25/36 | 1,917 | 1,303,804 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
RESIDENTIAL MORTGAGE RELATED HOLDINGS (continued) | ||||
Series 2006-NC2, Class A5 4,6 | 0.39% | 08/25/36 | $ 656 | $ 356,025 |
Series 2005-NC2, Class A4 4,6 | 0.50 | 11/25/35 | 7,390 | 4,871,662 |
Mid-State Capital Corp. | ||||
Series 2004-1, Class B | 8.90 | 08/15/37 | 370 | 412,452 |
Mid-State Trust X | ||||
Series 10, Class B 5 (Acquired 01/05/04, Cost $1,672,752, 0.5%) | 7.54 | 02/15/36 | 1,757 | 1,933,227 |
Nationstar Home Equity Loan Trust | ||||
Series 2006-B, Class AV4 4,6 | 0.43 | 09/25/36 | 6,395 | 5,652,822 |
Nomura Resecuritization Trust | ||||
Series 2014-1R, Class 2A6 2,3,8 | 0.00 | 02/26/37 | 38 | 12 |
Series 2014-1R, Class 2A11 2,3,6 | 0.28 | 02/26/37 | 15,156 | 7,941,471 |
Series 2013-1R, Class 3A12 2,3,4,6 | 0.31 | 10/26/36 | 10,226 | 7,776,607 |
Series 2014-6R, Class 5A7 2,3 | 2.57 | 04/26/37 | 4,670 | 3,056,515 |
Oakwood Mortgage Investors, Inc. | ||||
Series 2001-E, Class A4 | 6.81 | 12/15/31 | 9,078 | 9,103,484 |
Series 2001-D, Class A4 | 6.93 | 09/15/31 | 1,195 | 1,104,129 |
RAAC Series | ||||
Series 2005-SP1, Class M3 5 (Acquired 08/02/07, Cost $44,577, 0.0%) | 5.47 | 09/25/34 | 115 | 1 |
RALI Trust | ||||
Series 2006-QO7, Class 2A1 6 | 0.97 | 09/25/46 | 12,696 | 8,961,107 |
RBSSP Resecuritization Trust | ||||
Series 2010-1, Class 3A2 2,3,6 | 5.21 | 08/26/35 | 2,607 | 2,563,475 |
RESI Finance LP | ||||
Series 2006-QO1, Class 2A1 4,6 | 0.42 | 02/25/46 | 4,556 | 2,625,392 |
Series 2006-QS14, Class A30 6,7 | 79.24 | 11/25/36 | 210 | 611,328 |
Residential Asset Securitization Trust | ||||
Series 2007-QS6, Class A2 6,7 | 54.30 | 04/25/37 | 330 | 749,806 |
Resix Finance Limited Credit-Linked Notes | ||||
Series 2004-C, Class B7 2,3,5,6,9 (Acquired 09/23/04, Cost $785,187, 0.1%) | 3.65 | 09/10/36 | 785 | 392,594 |
Series 2004-S1, Class B1 5 (Acquired 02/26/04, Cost $159,760, 0.0%) | 5.25 | 02/25/34 | 179 | 90,749 |
Series 2004-S1, Class B2 5 (Acquired 02/26/04, Cost $0, 0.0%) | 5.25 | 02/25/34 | 95 | 7,716 |
Series 2003-S7, Class B2 5 (Acquired 05/19/03, Cost $0, 0.0%) | 5.50 | 05/25/33 | 133 | 5,040 |
Series 2003-D, Class B7 2,3,5,6 (Acquired 11/19/03, Cost $434,423, 0.1%) | 5.90 | 12/10/35 | 434 | 210,798 |
Series 2003-CB1, Class B8 2,3,5,6 (Acquired 12/22/04, Cost $1,034,366, 0.1%) | 6.90 | 06/10/35 | 1,166 | 449,051 |
Series 2004-B, Class B9 2,3,5,6,9 (Acquired 05/21/04, Cost $319,161, 0.0%) | 8.40 | 02/10/36 | 319 | 137,241 |
Series 2004-A, Class B10 2,3,5,6,9 (Acquired 03/09/04, Cost $208,172, 0.0%) | 11.65 | 02/10/36 | 208 | 11,645 |
Saxon Asset Securities Trust | ||||
Series 2006-2, Class A3C 4,6 | 0.30 | 09/25/36 | 2,539 | 2,370,869 |
Securitized Asset Backed Receivables LLC | ||||
Series 2007-BR3, Class A2A 4,6 | 0.22 | 04/25/37 | 5,892 | 3,951,459 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
RESIDENTIAL MORTGAGE RELATED HOLDINGS (continued) | ||||
Series 2007-NC1, Class A2B 4,6 | 0.30% | 12/25/36 | $ 6,382 | $ 3,646,831 |
Series 2007-BR2, Class A2 4,6 | 0.38 | 02/25/37 | 4,113 | 2,451,534 |
Thornburg Mortgage Securities Trust | ||||
Series 2007-1, Class A2B 6 | 1.45 | 03/25/37 | 5,255 | 4,809,514 |
Washington Mutual Mortgage Pass-Through Certificates | ||||
Series 2006-AR12, Class 1A2 6 | 2.36 | 10/25/36 | 2,403 | 2,176,533 |
Series 2007-HY5, Class 3A1 6 | 4.61 | 05/25/37 | 1,674 | 1,599,372 |
Series 2003-S1, Class B4 2,3,5 (Acquired 10/25/07, Cost $16,475, 0.0%) | 5.50 | 04/25/33 | 111 | 1 |
Series 2007-5, Class A11 6,7 | 38.55 | 06/25/37 | 113 | 222,181 |
Series 2005-6, Class 2A3 6,7 | 49.45 | 08/25/35 | 165 | 293,971 |
Wells Fargo Mortgage Backed Securities Trust | ||||
Series 2004-6, Class B4 5 (Acquired 04/13/05, Cost $529,584, 0.0%) | 5.50 | 06/25/34 | 644 | 56,719 |
Series 2007-8, Class 1A22 | 6.00 | 07/25/37 | 523 | 521,706 |
Series 2007-8, Class 2A2 | 6.00 | 07/25/37 | 1,092 | 1,078,701 |
Series 2007-13, Class A7 | 6.00 | 09/25/37 | 420 | 417,579 |
Series 2005-18, Class 2A10 6,7 | 22.17 | 01/25/36 | 245 | 307,535 |
Total Non-Agency Mortgage-Backed Securities | 187,168,262 | |||
Total RESIDENTIAL MORTGAGE RELATED HOLDINGS (Cost $175,201,082) | 187,168,262 | |||
COMMERCIAL MORTGAGE RELATED HOLDINGS – 59.1% | ||||
Commercial Mortgage-Backed Securities – 57.2% | ||||
A10 Securitization LLC | ||||
Series 2014-1, Class B 2,3 | 3.87 | 04/15/33 | 2,112 | 2,109,989 |
Series 2013-2, Class B 2,3 | 4.38 | 11/15/27 | 2,927 | 2,966,043 |
Series 2014-1, Class C 2,3 | 4.57 | 04/15/33 | 1,171 | 1,171,632 |
Series 2014-1, Class D 2,3 | 5.08 | 04/15/33 | 328 | 328,957 |
Series 2013-2, Class C 2,3 | 5.12 | 11/15/27 | 2,000 | 2,045,106 |
Series 2013-2, Class D 2,3 | 6.23 | 11/15/27 | 501 | 523,738 |
ACRE Commercial Mortgage Trust | ||||
Series 2013-FL1, Class D 2,3,6 | 4.56 | 06/15/30 | 5,000 | 5,044,635 |
Banc of America Commercial Mortgage Trust | ||||
Series 2006-6, Class AJ | 5.42 | 10/10/45 | 13,150 | 13,602,031 |
Series 2007-3, Class AJ 1 | 5.56 | 06/10/49 | 14,670 | 15,189,890 |
Series 2007-2, Class A4 1 | 5.61 | 04/10/49 | 4,850 | 5,263,099 |
Bear Stearns Commercial Mortgage Securities Trust | ||||
Series 2006-PW11, Class H 2,3,5 (Acquired 03/08/06, Cost $1,701,033, 0.1%) | 5.43 | 03/11/39 | 1,729 | 278,710 |
Series 2007-PW16, Class B 2,3,5 (Acquired 09/22/10-03/03/11, Cost $4,262,304, 1.6%) | 5.71 | 06/11/40 | 6,000 | 5,909,544 |
Series 2007-PW16, Class C 2,3,5 (Acquired 09/22/10, Cost $2,945,212, 1.3%) | 5.71 | 06/11/40 | 5,000 | 4,760,000 |
Commercial Mortgage Lease-Backed Certificate | ||||
Series 2001-CMLB, Class A1 2,3,9 | 6.75 | 06/20/31 | 195 | 198,456 |
Commercial Mortgage Trust | ||||
Series 2007-C9, Class AJFL 1,2,3,6 | 0.84 | 12/10/49 | 9,277 | 8,836,343 |
Series 2007-GG7, Class AJ 1 | 5.82 | 07/10/38 | 3,830 | 3,980,963 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
COMMERCIAL MORTGAGE RELATED HOLDINGS (continued) | ||||
Series 2007-GG11, Class AJ 1 | 6.05% | 12/10/49 | $ 10,330 | $10,827,131 |
Series 2007-GG11, Class B | 6.15 | 12/10/49 | 3,568 | 3,186,756 |
Series 2007-GG11, Class C | 6.15 | 12/10/49 | 8,400 | 6,561,433 |
Credit Suisse Commercial Mortgage Trust | ||||
Series 2007-C2, Class AMFL 1,6 | 0.39 | 01/15/49 | 7,000 | 6,681,591 |
Series 2007-C2, Class A3 1 | 5.54 | 01/15/49 | 6,024 | 6,504,842 |
Series 2006-C1, Class K 2,3,5 (Acquired 03/07/06, Cost $7,020,099, 0.3%) | 5.64 | 02/15/39 | 7,073 | 955,435 |
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2005-C2, Class AMFX 1 | 4.88 | 04/15/37 | 10,800 | 10,888,733 |
GMAC Commercial Mortgage Securities, Inc. | ||||
Series 2004-C3, Class B 5 (Acquired 12/07/10, Cost $1,672,288, 0.5%) | 4.97 | 12/10/41 | 1,750 | 1,781,514 |
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||
Series 2003-LN1, Class G 2,3,5 (Acquired 09/24/03, Cost $361,186, 0.1%) | 5.32 | 10/15/37 | 362 | 361,214 |
Series 2007-CB20, Class AM | 5.88 | 02/12/51 | 1,180 | 1,310,200 |
Series 2009-IWST, Class D 1,2,3,5 (Acquired 06/28/07, Cost $7,726,719, 2.2%) | 7.45 | 12/05/27 | 7,000 | 8,448,811 |
LB-UBS Commercial Mortgage Trust | ||||
Series 2007-C1, Class AJ 1 | 5.48 | 02/15/40 | 7,460 | 7,731,096 |
Series 2007-C1, Class C 5 (Acquired 02/10/11, Cost $2,962,049, 0.9%) | 5.53 | 02/15/40 | 3,260 | 3,250,324 |
Series 2007-C1, Class D | 5.56 | 02/15/40 | 3,600 | 3,529,084 |
Series 2007-C7, Class AJ | 6.46 | 09/15/45 | 10,000 | 10,509,000 |
LNR CDO V Ltd. | ||||
Series 2007-1A, Class F 2,3,5,6 (Acquired 02/27/07, Cost $3,750,000, 0.0%) | 1.60 | 12/26/49 | 3,750 | — |
Morgan Stanley Capital I Trust | ||||
Series 2006-IQ11, Class J 2,3,5 (Acquired 05/24/06, Cost $12,702, 0.0%) | 5.53 | 10/15/42 | 175 | 3,767 |
Series 2007-HQ13, Class A3 1 | 5.57 | 12/15/44 | 6,108 | 6,517,609 |
Series 2007-T25, Class AJ 1 | 5.57 | 11/12/49 | 12,500 | 12,736,675 |
Series 2007-T27, Class AJ 1 | 5.65 | 06/11/42 | 3,757 | 4,074,467 |
Series 2007-IQ14, Class A4 1 | 5.69 | 04/15/49 | 6,690 | 7,266,865 |
Series 2004-HQ4, Class G 2,3,5 (Acquired 03/01/06, Cost $58,305, 0.0%) | 5.74 | 04/14/40 | 58 | 58,360 |
Morgan Stanley Dean Witter Capital I Trust | ||||
Series 2003-TOP9, Class F 2,3,5 (Acquired 07/08/10, Cost $2,844,531, 0.8%) | 5.64 | 11/13/36 | 2,877 | 2,875,629 |
Series 2003-TOP9, Class G 2,3,5 (Acquired 07/08/10, Cost $4,513,339, 1.2%) | 5.91 | 11/13/36 | 4,577 | 4,575,430 |
Vornado DP LLC Trust | ||||
Series 2010-VNO, Class D 2,3,5 (Acquired 08/08/10, Cost $919,828, 0.3%) | 6.36 | 09/13/28 | 920 | 1,056,418 |
Wachovia Bank Commercial Mortgage Trust | ||||
Series 2007-C31, Class L 2,3,5 (Acquired 05/11/07, Cost $0, 0.0%) | 5.13 | 04/15/47 | 1,788 | 358 |
Series 2007-C30, Class AJ | 5.41 | 12/15/43 | 6,500 | 6,697,580 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
COMMERCIAL MORTGAGE RELATED HOLDINGS (continued) | ||||
Series 2005-C20, Class F 2,3,5 (Acquired 10/15/10, Cost $2,883,842, 1.0%) | 5.43% | 07/15/42 | $ 4,000 | $ 3,852,364 |
Series 2007-C33, Class AJ | 6.14 | 02/15/51 | 10,000 | 10,466,800 |
Total Commercial Mortgage-Backed Securities | 214,918,622 | |||
Mezzanine Loan – 1.9% | ||||
BOCA Mezzanine | 8.17 | 08/15/15 | 7,107 | 7,106,803 |
Total Mezzanine Loan | 7,106,803 | |||
Total COMMERCIAL MORTGAGE RELATED HOLDINGS (Cost $211,667,367) | 222,025,425 | |||
INTEREST-ONLY SECURITIES – 4.9% | ||||
Commercial Mortgage Trust | ||||
Series 2001-J2A, Class EIO 2,3,6,10 | 3.85 | 07/16/34 | 10,000 | 720,960 |
Federal National Mortgage Association | ||||
Series 2012-125, Class MI 10 | 3.50 | 11/25/42 | 4,499 | 918,822 |
Series 2013-32, Class IG 10 | 3.50 | 04/25/33 | 7,621 | 1,348,378 |
Series 2011-46, Class BI 10 | 4.50 | 04/25/37 | 5,059 | 554,861 |
GMAC Commercial Mortgage Securities, Inc. | ||||
Series 2003-C1, Class X1 2,3,6,10 | 0.96 | 05/10/36 | 2,180 | 40,125 |
Government National Mortgage Association | ||||
Series 2005-76, Class IO 1,6,10 | 0.57 | 09/16/45 | 22,108 | 670,672 |
Series 2012-100, Class IO 1,6,10 | 0.83 | 08/16/52 | 33,149 | 2,174,307 |
Series 2012-70, Class IO 1,6,10 | 0.97 | 08/16/52 | 45,717 | 2,855,952 |
Series 2012-95, Class IO 1,6,10 | 0.98 | 02/16/53 | 11,040 | 848,491 |
Series 2012-78, Class IO 1,6,10 | 1.05 | 06/16/52 | 35,182 | 2,424,714 |
Series 2013-40, Class IO 1,6,10 | 1.08 | 06/16/54 | 19,524 | 1,313,938 |
Series 2010-132, Class IO 1,6,10 | 1.10 | 11/16/52 | 11,904 | 701,562 |
Series 2012-132, Class IO 1,6,10 | 1.13 | 06/16/54 | 23,626 | 1,611,282 |
Series 2012-89, Class IO 1,6,10 | 1.27 | 12/16/53 | 34,787 | 2,163,698 |
Vendee Mortgage Trust | ||||
Series 1997-2, Class IO 6,10 | 0.03 | 06/15/27 | 12,081 | 6,874 |
Wachovia Commercial Mortgage Pass-Through Certificates | ||||
Series 2002-C2, Class IO1 2,3,6,10 | 1.56 | 11/15/34 | 2,245 | 3,398 |
Total INTEREST-ONLY SECURITIES (Cost $18,761,436) | 18,358,034 | |||
CORPORATE BONDS – 13.0% | ||||
Automotive – 0.5% | ||||
American Axle & Manufacturing, Inc. 1 | 6.63 | 10/15/22 | 300 | 315,750 |
American Axle & Manufacturing, Inc. | 7.75 | 11/15/19 | 350 | 392,000 |
Chrysler Group LLC | 8.25 | 06/15/21 | 750 | 817,500 |
Jaguar Land Rover Automotive PLC 2,3,11 | 8.13 | 05/15/21 | 400 | 437,500 |
Total Automotive | 1,962,750 | |||
Basic Industry – 1.6% | ||||
Alpha Natural Resources, Inc. | 6.25 | 06/01/21 | 775 | 450,469 |
Arch Coal, Inc. | 7.25 | 06/15/21 | 925 | 446,312 |
Associated Materials LLC | 9.13 | 11/01/17 | 500 | 490,000 |
Cascades, Inc. 11 | 7.88 | 01/15/20 | 500 | 521,250 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
CORPORATE BONDS (continued) | ||||
FMG Resources August 2006 Property Ltd. 2,3,11 | 6.88% | 04/01/22 | $ 525 | $ 534,187 |
Hexion US Finance Corp. | 9.00 | 11/15/20 | 600 | 571,500 |
Ineos Finance PLC 1,2,3,11 | 7.50 | 05/01/20 | 425 | 452,625 |
Masonite International Corp. 2,3,11 | 8.25 | 04/15/21 | 600 | 642,000 |
Steel Dynamics, Inc. | 7.63 | 03/15/20 | 300 | 315,000 |
Trinseo Materials Operating SCA 11 | 8.75 | 02/01/19 | 517 | 544,143 |
United States Steel Corp. 1 | 7.00 | 02/01/18 | 325 | 354,250 |
Xerium Technologies, Inc. | 8.88 | 06/15/18 | 525 | 553,875 |
Total Basic Industry | 5,875,611 | |||
Capital Goods – 0.7% | ||||
AAR Corp. | 7.25 | 01/15/22 | 500 | 537,500 |
Crown Cork & Seal Company, Inc. | 7.38 | 12/15/26 | 350 | 385,000 |
Mueller Water Products, Inc. 1 | 8.75 | 09/01/20 | 281 | 302,075 |
Reynolds Group Issuer, Inc. 1 | 7.88 | 08/15/19 | 750 | 796,875 |
Terex Corp. | 6.50 | 04/01/20 | 600 | 628,500 |
Total Capital Goods | 2,649,950 | |||
Consumer Cyclical – 0.6% | ||||
ACCO Brands Corp. | 6.75 | 04/30/20 | 600 | 621,000 |
Levi Strauss & Co. | 7.63 | 05/15/20 | 600 | 633,000 |
Limited Brands, Inc. | 7.60 | 07/15/37 | 500 | 540,000 |
Roundy's Supermarkets, Inc. 2,3 | 10.25 | 12/15/20 | 500 | 462,500 |
Total Consumer Cyclical | 2,256,500 | |||
Consumer Non-Cyclical – 0.4% | ||||
Bumble Bee Holdings, Inc. 1,2,3 | 9.00 | 12/15/17 | 558 | 584,505 |
Jarden Corp. | 7.50 | 05/01/17 | 300 | 327,750 |
Post Holdings, Inc. | 7.38 | 02/15/22 | 500 | 495,000 |
Total Consumer Non-Cyclical | 1,407,255 | |||
Energy – 2.4% | ||||
Atlas Pipeline Partners LP | 5.88 | 08/01/23 | 600 | 586,500 |
Basic Energy Services, Inc. 1 | 7.75 | 02/15/19 | 550 | 569,250 |
BreitBurn Energy Partners LP 1 | 7.88 | 04/15/22 | 675 | 683,438 |
Calfrac Holdings LP 2,3 | 7.50 | 12/01/20 | 600 | 627,000 |
CGG SA 1,11 | 6.50 | 06/01/21 | 550 | 481,250 |
Crestwood Midstream Partners LP 1 | 6.00 | 12/15/20 | 600 | 603,000 |
EV Energy Partners LP | 8.00 | 04/15/19 | 800 | 828,000 |
Ferrellgas Partners LP | 8.63 | 06/15/20 | 500 | 520,000 |
Global Partners LP 2,3 | 6.25 | 07/15/22 | 400 | 398,000 |
Hilcorp Energy I LP 2,3 | 8.00 | 02/15/20 | 600 | 626,250 |
Key Energy Services, Inc. | 6.75 | 03/01/21 | 600 | 577,500 |
Linn Energy LLC | 7.75 | 02/01/21 | 300 | 302,250 |
Linn Energy LLC | 8.63 | 04/15/20 | 300 | 310,125 |
Precision Drilling Corp. 11 | 6.63 | 11/15/20 | 300 | 311,250 |
RKI Exploration & Production LLC 2,3 | 8.50 | 08/01/21 | 350 | 361,375 |
Trinidad Drilling Ltd. 2,3,11 | 7.88 | 01/15/19 | 600 | 620,625 |
W&T Offshore, Inc. | 8.50 | 06/15/19 | 600 | 621,000 |
Total Energy | 9,026,813 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
CORPORATE BONDS (continued) | ||||
Healthcare – 1.2% | ||||
CHS/Community Health Systems, Inc. | 7.13% | 07/15/20 | $ 700 | $ 742,000 |
Fresenius Medical Care U.S. Finance II, Inc. 1,2,3 | 5.88 | 01/31/22 | 300 | 318,000 |
HCA, Inc. | 5.88 | 05/01/23 | 150 | 153,375 |
HCA, Inc. | 8.00 | 10/01/18 | 600 | 682,500 |
Jaguar Holding Company II 2,3 | 9.50 | 12/01/19 | 600 | 643,500 |
Kindred Healthcare, Inc. 2,3 | 6.38 | 04/15/22 | 700 | 682,500 |
Polymer Group, Inc. | 7.75 | 02/01/19 | 450 | 465,750 |
Service Corporation International | 6.75 | 04/01/16 | 400 | 421,000 |
Service Corporation International 1 | 8.00 | 11/15/21 | 450 | 526,500 |
Total Healthcare | 4,635,125 | |||
Media – 1.1% | ||||
Cablevision Systems Corp. 1 | 5.88 | 09/15/22 | 100 | 96,750 |
Cablevision Systems Corp. | 8.63 | 09/15/17 | 500 | 555,625 |
CCO Holdings LLC 1 | 5.75 | 01/15/24 | 250 | 248,750 |
CCO Holdings LLC 1 | 6.63 | 01/31/22 | 300 | 315,000 |
Clear Channel Worldwide Holdings, Inc. 1 | 7.63 | 03/15/20 | 750 | 778,125 |
Gannett Company, Inc. 1 | 6.38 | 10/15/23 | 500 | 520,000 |
Lamar Media Corp. 2,3 | 5.38 | 01/15/24 | 550 | 551,375 |
Mediacom Broadband LLC | 6.38 | 04/01/23 | 550 | 561,000 |
National CineMedia LLC | 6.00 | 04/15/22 | 525 | 530,250 |
Total Media | 4,156,875 | |||
Services – 2.8% | ||||
Avis Budget Car Rental LLC | 5.50 | 04/01/23 | 550 | 545,875 |
Boyd Gaming Corp. | 9.00 | 07/01/20 | 600 | 630,000 |
Casella Waste Systems, Inc. | 7.75 | 02/15/19 | 550 | 551,375 |
Cedar Fair LP 1 | 5.25 | 03/15/21 | 200 | 197,000 |
Chester Downs & Marina LLC 2,3 | 9.25 | 02/01/20 | 825 | 775,500 |
H&E Equipment Services, Inc. 1 | 7.00 | 09/01/22 | 600 | 640,500 |
Iron Mountain, Inc. | 6.00 | 08/15/23 | 250 | 256,250 |
Iron Mountain, Inc. | 8.38 | 08/15/21 | 500 | 520,625 |
Isle of Capri Casinos, Inc. 1 | 7.75 | 03/15/19 | 600 | 625,500 |
Jurassic Holdings III, Inc. 2,3 | 6.88 | 02/15/21 | 100 | 100,000 |
MGM Resorts International | 7.63 | 01/15/17 | 350 | 380,625 |
MGM Resorts International 1 | 7.75 | 03/15/22 | 125 | 139,062 |
MGM Resorts International 1 | 8.63 | 02/01/19 | 275 | 310,090 |
MTR Gaming Group, Inc. | 11.50 | 08/01/19 | 621 | 677,614 |
Palace Entertainment Holdings LLC 2,3 | 8.88 | 04/15/17 | 525 | 543,375 |
PulteGroup, Inc. | 6.38 | 05/15/33 | 550 | 548,625 |
Scientific Games Corp. 1 | 8.13 | 09/15/18 | 450 | 433,125 |
Standard Pacific Corp. 1 | 8.38 | 05/15/18 | 300 | 340,500 |
Standard Pacific Corp. 1 | 8.38 | 01/15/21 | 450 | 515,250 |
The ADT Corp. 1 | 6.25 | 10/15/21 | 525 | 543,375 |
The Hertz Corp. 1 | 6.25 | 10/15/22 | 600 | 607,500 |
The Hertz Corp. 1 | 7.50 | 10/15/18 | 300 | 310,500 |
United Rentals North America, Inc. | 7.63 | 04/15/22 | 450 | 489,375 |
Total Services | 10,681,641 |
Schedule of Investments (continued)
Interest Rate | Maturity | Principal Amount (000s) | Value | |
CORPORATE BONDS (continued) | ||||
Technology & Electronics – 0.3% | ||||
First Data Corp. 1,2,3 | 7.38% | 06/15/19 | $ 750 | $ 789,450 |
ION Geophysical Corp. | 8.13 | 05/15/18 | 300 | 285,000 |
Total Technology & Electronics | 1,074,450 | |||
Telecommunications – 1.4% | ||||
Altice SA 2,3,11 | 7.75 | 05/15/22 | 200 | 206,500 |
CenturyLink, Inc. | 7.65 | 03/15/42 | 300 | 295,500 |
Cincinnati Bell, Inc. 1 | 8.38 | 10/15/20 | 414 | 436,770 |
Cincinnati Bell, Inc. | 8.75 | 03/15/18 | 132 | 136,950 |
Fairpoint Communications, Inc. 2,3 | 8.75 | 08/15/19 | 600 | 628,500 |
Frontier Communications Corp. | 7.13 | 03/15/19 | 600 | 648,000 |
Intelsat Jackson Holdings SA 1,11 | 5.50 | 08/01/23 | 600 | 573,000 |
Level 3 Financing, Inc. 1 | 8.63 | 07/15/20 | 525 | 568,312 |
Qwest Capital Funding, Inc. | 6.88 | 07/15/28 | 350 | 346,518 |
T-Mobile USA, Inc. | 6.63 | 04/01/23 | 550 | 562,375 |
Wind Acquisition Finance SA 2,3,11 | 7.38 | 04/23/21 | 250 | 251,250 |
Windstream Corp. | 7.50 | 06/01/22 | 525 | 552,563 |
Total Telecommunications | 5,206,238 | |||
Total CORPORATE BONDS (Cost $48,912,795) | 48,933,208 |
Shares | Value | |||
PREFERRED STOCKS – 2.4% | ||||
Finance & Investment – 2.4% | ||||
Ally Financial, Inc., 7.00% 2,3 | 5,000 | $ 5,004,688 | ||
Public Storage, 6.00% | 160,000 | 3,972,800 | ||
Total Finance & Investment | 8,977,488 | |||
Total PREFERRED STOCKS (Cost $9,031,250) | 8,977,488 | |||
Total Investments – 139.3% (Cost $499,885,685) | 523,460,775 | |||
Liabilities in Excess of Other Assets – (39.3)% | (147,548,040) | |||
TOTAL NET ASSETS – 100.0% | $ 375,912,735 |
Schedule of Investments (continued)
The following notes should be read in conjunction with the accompanying Schedule of Investments. | ||
1 | — Portion or entire principal amount delivered as collateral for reverse repurchase agreements. | |
2 | — 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, 2014, the total value of all such securities was $116,426,963 or 31.0% of net assets. | |
3 | — Private Placement. | |
4 | — Security is a “step up” bond where the coupon increases or steps up at a predetermined date. | |
5 | — Restricted Illiquid Securities - Securities that the Adviser has deemed illiquid pursuant to procedures adopted by the Fund's Board of Directors. The values in the parenthesis represent the acquisition date, cost and the percentage of net assets, respectively. As of September 30, 2014, the total value of all such securities was $46,009,661 or 12.2% of net assets. | |
6 | — Variable rate security – Interest rate shown is the rate in effect as of September 30, 2014. | |
7 | — Security is an inverse floating rate bond. | |
8 | — Zero-Coupon Note - Interest rate represents current yield to maturity. | |
9 | — Security fair valued in good faith pursuant to the fair value procedures adopted by the Board of Directors. As of September 30, 2014, the total value of all such securities was $739,936 or 0.2% of net assets. | |
10 | — Interest rate is based on the notional amount of the underlying mortgage pools. | |
11 | — Foreign security or a U.S. security of a foreign company. |
Statement of Assets and Liabilities
Assets: | |
Investments in securities, at value | $523,460,775 |
Cash | 12,247,668 |
Cash collateral for reverse repurchase agreements | 2,818,375 |
Interest receivable | 2,761,974 |
Receivable for investments sold | 1,282,818 |
Principal paydown receivable | 9,382 |
Prepaid expenses | 6,317 |
Total assets | 542,587,309 |
Liabilities: | |
Reverse repurchase agreements (Note 6) | 161,522,000 |
Interest payable for reverse repurchase agreements (Note 6) | 530,782 |
Payable for TBA transactions | 4,217,653 |
Investment advisory fee payable (Note 4) | 201,339 |
Administration fee payable (Note 4) | 61,951 |
Directors' fee payable | 10,058 |
Accrued expenses | 130,791 |
Total liabilities | 166,674,574 |
Commitments and contingencies (Note 10) | |
Net Assets | $375,912,735 |
Composition of Net Assets: | |
Capital stock, at par value ($0.01 par value, 50,000,000 shares authorized) (Note 7) | $ 139,607 |
Additional paid-in capital (Note 7) | 438,495,447 |
Accumulated net realized loss on investment transactions and futures transactions | (86,297,409) |
Net unrealized appreciation on investments | 23,575,090 |
Net assets applicable to capital stock outstanding | $375,912,735 |
Total investments at cost | $499,885,685 |
Shares Outstanding and Net Asset Value Per Share: | |
Common shares outstanding | 13,960,683 |
Net asset value per share | $ 26.93 |
Statements of Operations
For the Ten Months Ended September 30, 2014* | For the Fiscal Year Ended November 30, 2013 | ||
Investment Income (Note 2) | |||
Interest | $30,472,812 | $34,170,687 | |
Dividends | 165,500 | — | |
Total investment income | 30,638,312 | 34,170,687 | |
Expenses: | |||
Investment advisory fees (Note 4) | 2,014,265 | 2,321,859 | |
Administration fees (Note 4) | 619,774 | 714,418 | |
Reports to stockholders | 100,587 | 89,929 | |
Directors' fees | 89,433 | 108,370 | |
Legal fees | 88,703 | 107,172 | |
Fund accounting servicing fees | 73,197 | 86,310 | |
Audit and tax services | 64,822 | 65,000 | |
Insurance | 38,867 | 87,013 | |
Transfer agent fees | 26,013 | 47,268 | |
Custodian fees | 25,924 | 45,189 | |
Registration fees | 19,510 | 31,306 | |
Miscellaneous | 14,997 | 21,500 | |
Total operating expenses | 3,176,092 | 3,725,334 | |
Interest expense on reverse repurchase agreements (Note 6) | 1,708,559 | 1,401,310 | |
Total expenses | 4,884,651 | 5,126,644 | |
Net investment income | 25,753,661 | 29,044,043 | |
Realized and Unrealized Gain (Loss) on Investments (Note 2): | |||
Net realized gain (loss) on: | |||
Investments | 1,313,481 | (4,673,748) | |
Futures transactions | — | 26,415 | |
Net realized gain (loss) on investment transactions and futures transactions | 1,313,481 | (4,647,333) | |
Net change in unrealized appreciation on: | |||
Investments | 11,969,858 | 27,414,212 | |
Futures | — | 13,123 | |
Net change in unrealized appreciation on investments and futures | 11,969,858 | 27,427,335 | |
Net realized and unrealized gain on investments and futures | 13,283,339 | 22,780,002 | |
Net increase in net assets resulting from operations | $39,037,000 | $51,824,045 |
* | The Fund changed its fiscal year end from November 30 to September 30. |
Statements of Changes in Net Assets
For the Ten Months Ended September 30, 2014^ | For the Fiscal Year Ended November 30, 2013 | For the Fiscal Year Ended November 30, 2012 | |||
Increase (Decrease) in Net Assets Resulting from Operations: | |||||
Net investment income | $ 25,753,661 | $ 29,044,043 | $ 21,752,374 | ||
Net realized gain (loss) on investment transactions and futures transactions | 1,313,481 | (4,647,333) | (628,801) | ||
Net change in unrealized appreciation on investments and futures | 11,969,858 | 27,427,335 | 31,204,597 | ||
Net increase in net assets resulting from operations | 39,037,000 | 51,824,045 | 52,328,170 | ||
Distributions to Stockholders (Note 2): | |||||
Net investment income | (25,868,594) | (29,305,886) | (22,081,984) | ||
Return of capital | (656,704) | (2,523,318) | (413,975) | ||
Total distributions paid | (26,525,298) | (31,829,204) | (22,495,959) | ||
Capital Stock Transactions (Note 7): | |||||
Proceeds from rights offering, net of offering costs | — | 73,021 * | 72,097,601 | ||
Reinvestment of distributions | — | 29,572 | 254,361 | ||
Capital received as a result of shares issued due to fund merger | — | — | 64,656,398 | ||
Net increase in net assets from capital stock transactions | — | 102,593 | 137,008,360 | ||
Total increase in net assets | 12,511,702 | 20,097,434 | 166,840,571 | ||
Net Assets: | |||||
Beginning of period | 363,401,033 | 343,303,599 | 176,463,028 | ||
End of period | $375,912,735 | $363,401,033 | $343,303,599 | ||
(including distributions in excess of net investment income of) | $ — | $ — | $ — | ||
Share Transactions: | |||||
Shares issued or sold as result of rights offering | — | — | 3,500,000 | ||
Reinvested shares | — | 1,122 | 10,789 # | ||
Shares issued due to fund merger | — | — | 2,710,279 # | ||
Net increase in shares outstanding | — | 1,122 | 6,221,068 |
^ | The Fund changed its fiscal year end from November 30 to September 30. | ||
* | This amount represents an adjustment to paid-in capital in connection with the rights offering. | ||
# | Share amounts have been adjusted to reflect the 1:4 reverse stock split that occurred effective August 22, 2012. |
Statements of Cash Flows
Increase (Decrease) in Cash: | For the Ten Months Ended September 30, 2014* | For the Fiscal Year Ended November 30, 2013 | |||
Cash flows provided by (used for) operating activities: | |||||
Net increase in net assets resulting from operations | $ 39,037,000 | $ 51,824,045 | |||
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for) operating activities: | |||||
Purchases of long-term portfolio investments | (132,719,892) | (205,676,419) | |||
Proceeds from disposition of long-term portfolio investments and principal paydowns | 137,123,638 | 178,727,293 | |||
Sales of short-term portfolio investments, net | — | 30 | |||
Purchases of TBA transactions, net | (4,844) | (918,055) | |||
(Increase) Decrease in interest receivable | 214,478 | (153,151) | |||
(Increase) Decrease in receivable for investments sold | 1,451,553 | (2,734,371) | |||
(Increase) Decrease in principal paydown receivable | (1,115) | 74,343 | |||
Decrease in prepaid expenses | 31,354 | 90,807 | |||
Decrease in payable for investments purchased | (262,148) | (6,004,431) | |||
Increase in payable for TBA transactions | 144,389 | — | |||
Decrease in payable for variation margin | — | (6,344) | |||
Increase in interest payable for reverse repurchase agreements | 214,141 | 256,470 | |||
Increase in investment advisory fee payable | 7,780 | 13,757 | |||
Increase in administration fee payable | 2,394 | 4,237 | |||
Increase in directors' fee payable | 10,058 | — | |||
Decrease in payable due to rights offering | — | (561,774) | |||
Increase (Decrease) in accrued expenses | 6,591 | (81,919) | |||
Net accretion or amortization on investments and paydown gains or losses on investments | (12,946,530) | (12,661,201) | |||
Unrealized appreciation on investments | (11,969,858) | (27,414,212) | |||
Net realized (gain) loss on investment transactions | (1,313,481) | 4,673,748 | |||
Net cash provided by (used for) operating activities | 19,025,508 | (20,547,147) | |||
Cash flows provided by (used for) financing activities: | |||||
Net cash provided by (used for) reverse repurchase agreements | (2,017,840) | 60,049,512 | |||
Net cash provided by rights offering | — | 73,021 | |||
Distributions paid to stockholders, net of reinvestments | (26,525,298) | (31,799,632) | |||
Net cash provided by (used for) financing activities | (28,543,138) | 28,322,901 | |||
Net increase (decrease) in cash | (9,517,630) | 7,775,754 | |||
Cash at beginning of period | 24,583,673 | 16,807,919 | |||
Cash at end of period | $ 15,066,043 | $ 24,583,673 | |||
Supplemental Disclosure of Cash Flow Information: | |||||
Interest payments on the reverse repurchase agreements for the ten months ended September 30, 2014, and for the fiscal year ended November 30, 2013, totaled $1,494,418 and $1,144,840, respectively. | |||||
Non-cash financing activities included reinvestment of distributions for the ten months ended September 30, 2014 and for the fiscal year ended November 30, 2013 of $0 and $29,572, respectively. | |||||
Cash at September 30, 2014 and November 30, 2013 includes $2,818,375 and $315,448 for collateral for reverse repurchase agreements. |
* | The Fund changed its fiscal year end from November 30 to September 30. |
Financial Highlights
For the Ten Months Ended September 30 | For the Fiscal Year Ended November 30 | ||||||||||
2014 4 | 2013 | 2012 | 2011 6 | 2010 6 | 2009 6 | ||||||
Per Share Operating Performance: | |||||||||||
Net asset value, beginning of period | $ 26.03 | $ 24.59 | $ 22.80 | $ 24.80 | $ 21.84 | $ 19.48 | |||||
Net investment income | 1.85 | 2.08 | 2.24 | 1.68 | 2.12 | 2.04 | |||||
Net realized and unrealized gain (loss) on investments | 0.95 | 1.64 | 3.01 | (1.20) | 2.92 | 2.60 | |||||
Net increase in net asset value resulting from operations | 2.80 | 3.72 | 5.25 | 0.48 | 5.04 | 4.64 | |||||
Distributions from net investment income | (1.85) | (2.10) | (2.24) | (1.84) | (2.08) | (2.28) | |||||
Return of capital distributions | (0.05) | (0.18) | (0.04) | (0.64) | — | — | |||||
Total distributions paid | (1.90) | (2.28) | (2.28) | (2.48) | (2.08) | (2.28) | |||||
Change due to rights offering1 | — | — | (1.18) | — | — | — | |||||
Net asset value, end of period | $ 26.93 | $ 26.03 | $ 24.59 | $ 22.80 | $ 24.80 | $ 21.84 | |||||
Market price, end of period | $ 24.97 | $ 23.31 | $ 24.05 | $ 22.56 | $ 24.04 | $ 20.80 | |||||
Total Investment Return† | 15.72% 2 | 6.41% | 17.29% | 4.11% | 26.63% | 32.45% | |||||
Ratios to Average Net Assets/Supplementary Data: | |||||||||||
Net assets, end of period (000s) | $375,913 | $363,401 | $343,304 | $176,463 | $191,738 | $168,907 | |||||
Operating expenses | 1.03% 3 | 1.04% | 1.30% | 1.18% | 1.23% | 1.29% | |||||
Interest expense | 0.55% 3 | 0.39% | 0.41% | 0.53% | 0.31% | 0.14% | |||||
Total expenses | 1.58% 3 | 1.43% | 1.71% | 1.71% | 1.54% | 1.43% | |||||
Net investment income | 8.31% 3 | 8.13% | 9.19% | 6.83% | 9.34% | 10.01% | |||||
Portfolio turnover rate | 26% 2 | 38% | 75% | 43% | 204% | 73% | |||||
Reverse repurchase agreements, end of period (000s) | $161,522 | $163,540 | $103,490 | $ 80,751 | $ 81,513 | $ 9,213 | |||||
Asset Coverage per $1,000 unit of senior indebtedness5 | $ 3,327 | $ 3,222 | $ 4,317 | $ 3,185 | $ 3,352 | $ 19,333 |
† | Total investment return is computed based upon the New York Stock Exchange market price of the Fund's shares and excludes the effect of broker commissions. Distributions are assumed to be reinvested at the prices obtained under the Fund's dividend reinvestment plan. | |||||
1 | Effective as of the close of business on September 20, 2012, the Fund issued transferrable rights to its stockholders to subscribe for up to 3,500,000 shares of common stock at a rate of one share for every 3 rights held. The subscription price was set at 90% of the average closing price for the last 5 trading days of the offering period. The shares were subscribed at a price of $21.50 which was less than the NAV of $25.35 thus creating a dilutive effect on the NAV. | |||||
2 | Not annualized. | |||||
3 | Annualized. | |||||
4 | Amounts shown are for the ten months ended September 30, 2014 and are not necessarily indicative of a full year of operations. The Fund changed its fiscal year end from November 30 to September 30. | |||||
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. | |||||
6 | The Fund had a 1:4 reverse stock split with ex-dividend and payable dates of August 21, 2012 and August 22, 2012, respectively. Prior year net asset values and per share amounts have been restated to reflect the impact of the reverse stock split. The net asset value and market price reported at the original dates prior to the reverse stock split were as follows: |
For the Fiscal Years Ended November 30, | 2011 | 2010 | 2009 |
Net Asset Value (prior to reverse stock split) | $5.70 | $6.20 | $5.46 |
Market Price (prior to reverse stock split) | $5.64 | $6.01 | $5.20 |
Notes to Financial Statements
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) |
Notes to Financial Statements (continued)
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | |||
U.S. Government & Agency Obligations | $ — | $ 19,791,799 | $ — | $ 19,791,799 | |||
Asset-Backed Securities | — | 16,433,490 | 1,773,069 | 18,206,559 | |||
Residential Mortgage Related Holdings | — | 15,823,386 | 171,344,876 | 187,168,262 | |||
Commercial Mortgage Related Holdings | — | — | 222,025,425 | 222,025,425 | |||
Interest-Only Securities | — | — | 18,358,034 | 18,358,034 | |||
Corporate Bonds | — | 48,933,208 | — | 48,933,208 | |||
Preferred Stocks | 8,977,488 | — | — | 8,977,488 | |||
Total | $ 8,977,488 | $ 100,981,883 | $ 413,501,404 | $ 523,460,775 |
Quantitative Information about Level 3 Fair Value Measurements(1) | ||||
Assets | Value as of September 30, 2014 | Valuation Methodology | Significant Unobservable Input | Price |
Residential Mortgage Related Holdings | ||||
Resix Finance Limited Credit-Linked Notes, Series 2004-C, Class B7 | $392,594 | Discounted Cash Flow | Implied Spread to Index | $ 50.00 |
Resix Finance Limited Credit-Linked Notes, Series 2004-B, Class B9 | 137,241 | Discounted Cash Flow | Implied Spread to Index | $ 43.00 |
Resix Finance Limited Credit-Linked Notes, Series 2004-A, Class B10 | 11,645 | Discounted Cash Flow | Implied Spread to Index | $ 5.59 |
Commercial Mortgage Related Holdings | ||||
Commercial Mortgage Lease-Backed Certificate, Series 2001-CMLB, Class A1 | 198,456 | Discounted Cash Flow | Implied Spread to Index | $101.87 |
Total | $739,936 |
Notes to Financial Statements (continued)
Investments in Securities | U.S. Government & Agency Obligations | Asset- Backed Securities | Residential Mortgage Related Holdings | Commercial Mortgage Related Holdings | Interest-Only Securities | Total | |||||
Balance as of November 30, 2013 | $ 6,139 | $ 2,673,331 | $126,680,108 | $253,310,599 | $ 18,000,567 | $ 400,670,744 | |||||
Accrued Discounts (Premiums) | 45 | - | 1,315,793 | 5,797,486 | (1,280,911) | 5,832,413 | |||||
Realized Gain (Loss) | 34,310 | 96,213 | 12,333,451 | (1,262,612) | 19,418,701 | 30,620,063 | |||||
Change in Unrealized Appreciation (Depreciation) | 179,921 | (11,842) | 6,849,322 | 7,331,713 | (485,039) | 13,864,075 | |||||
Purchases at cost | — | 3,000,000 | 73,554,597 | 13,160,729 | 2,617,553 | 92,332,879 | |||||
Sales proceeds | (220,415) | (3,984,633) | (49,388,395) | (56,312,490) | (20,467,698) | (130,373,631) | |||||
Transfers into Level 3 | — | — | — | — | 554,861 | 554,861 (a) | |||||
Balance as of September 30, 2014 | $ — | $ 1,773,069 | $171,344,876 | $222,025,425 | $ 18,358,034 | $ 413,501,404 | |||||
Change in unrealized gains or losses relating to assets still held at reporting date: | $ — | $ 8,775 | $ 8,334,235 | $ 4,511,529 | $ (485,039) | $ 12,369,500 |
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
Security Name | Interest Rate | Principal Amount | Current Payable |
Federal Home Loan Mortgage Corporation | 4.00% | $4,000,000 | $4,217,653 |
Notes to Financial Statements (continued)
Notes to Financial Statements (continued)
Long-Term Securities (excluding U.S. Government Securities) | U.S. Government Securities | |||
Purchases | Sales | Purchases | Sales | |
$130,102,339 | $133,119,826 | $2,617,553 | $4,003,812 |
Notes to Financial Statements (continued)
Face Value | Description | Maturity Amount |
$ 700,000 | Credit Suisse, 0.37%, dated 08/05/14, maturity 11/05/14 | $ 700,662 |
8,365,000 | Goldman Sachs, 0.40%, dated 08/07/14, maturity 11/05/14 | 8,373,365 |
6,104,000 | JP Morgan Chase, 0.34%, dated 07/08/14, maturity 10/06/14 | 6,109,188 |
2,539,000 | JP Morgan Chase, 1.00%, dated 09/25/14, maturity 10/27/14 | 2,541,260 |
5,593,000 | JP Morgan Chase, 1.01%, dated 09/05/14, maturity 10/06/14 | 5,597,846 |
969,000 | JP Morgan Chase, 1.03%, dated 07/16/14, maturity 10/14/14 | 971,504 |
2,547,000 | JP Morgan Chase, 1.13%, dated 07/16/14, maturity 10/14/14 | 2,554,218 |
1,911,000 | JP Morgan Chase, 1.13%, dated 07/23/14, maturity 10/21/14 | 1,916,411 |
11,909,000 | JP Morgan Chase, 1.18%, dated 07/16/14, maturity 10/14/14 | 11,944,239 |
6,706,000 | JP Morgan Chase, 1.59%, dated 07/29/14, maturity 10/27/14 | 6,732,608 |
4,101,000 | RBC Capital Markets, 0.93%, dated 07/01/14, maturity 01/02/15 | 4,120,532 |
477,000 | RBC Capital Markets, 0.93%, dated 07/14/14, maturity 01/02/15 | 479,112 |
4,820,000 | RBC Capital Markets, 0.93%, dated 07/16/14, maturity 10/16/14 | 4,831,488 |
30,361,000 | RBC Capital Markets, 0.95%, dated 04/01/14, maturity 10/01/14 | 30,508,220 |
1,041,000 | RBC Capital Markets, 0.95%, dated 05/08/14, maturity 10/01/14 | 1,045,027 |
221,000 | RBC Capital Markets, 0.95%, dated 05/09/14, maturity 10/01/14 | 221,849 |
491,000 | RBC Capital Markets, 0.95%, dated 06/05/14, maturity 10/01/14 | 492,535 |
393,000 | RBC Capital Markets, 0.95%, dated 07/23/14, maturity 10/01/14 | 393,729 |
110,000 | RBC Capital Markets, 0.95%, dated 08/08/14, maturity 10/01/14 | 110,157 |
2,794,000 | RBC Capital Markets, 0.95%, dated 09/11/14, maturity 03/12/15 | 2,807,481 |
5,911,000 | RBC Capital Markets, 0.98%, dated 07/16/14, maturity 10/16/14 | 5,925,843 |
2,809,000 | RBC Capital Markets, 1.53%, dated 07/02/14, maturity 10/02/14 | 2,819,988 |
15,936,000 | RBC Capital Markets, 1.53%, dated 07/16/14, maturity 10/16/14 | 15,998,416 |
4,956,000 | RBC Capital Markets, 1.57%, dated 06/12/14, maturity 12/12/14 | 4,995,588 |
2,578,000 | RBC Capital Markets, 1.58%, dated 07/02/14, maturity 10/02/14 | 2,588,414 |
32,510,000 | RBC Capital Markets, 1.62%, dated 06/12/14, maturity 12/12/14 | 32,777,951 |
3,262,000 | RBC Capital Markets, 1.68%, dated 08/26/14, maturity 02/26/15 | 3,289,993 |
1,408,000 | Wells Fargo Advisors, 1.65%, dated 09/29/14, maturity 10/29/14 | 1,409,938 |
$161,522,000 | Maturity Amount, Including Interest Payable | $162,257,562 |
Market Value of Assets Pledged as Collateral for the Reverse Repurchase Agreements | $200,418,653 | |
Weighted Average Interest Rate | 1.20% |
Notes to Financial Statements (continued)
Gross Amounts not offset in the Statement of Assets and Liabilities | ||||||
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments | Collateral Pledged (Received) | Net Amount | |
Description | ||||||
Reverse Repurchase Agreements | $161,522,000 | $— | $161,522,000 | $161,522,000 | $— | $— |
Notes to Financial Statements (continued)
Capital Stock | Accumulated net investment loss | Accumulated net realized loss on investments | Net unrealized depreciation | Net Assets | |||||
Helios Strategic Mortgage Income Fund, Inc. | $135,113,490 | $(2,383,501) | $ (51,684,861)* | $(16,388,730) | $ 64,656,398 | ||||
Brookfield Total Return Fund Inc. | 277,545,747 | (3,345,197) | (65,951,948) | (23,549,900) | 184,698,702 | ||||
Total | $412,659,237 | $(5,728,698) | $(117,636,809) | $(39,938,630) | $249,355,100 |
Notes to Financial Statements (continued)
Ordinary income | $25,868,594 |
Return of capital | 656,704 |
Total distributions | $26,525,298 |
Fiscal Year Ended November 30, 2013 | Fiscal Year Ended November 30, 2012 | ||
Ordinary income | $29,305,886 | $22,081,984 | |
Return of capital | 2,523,318 | 413,975 | |
Total distributions | $31,829,204 | $22,495,959 |
Capital loss carryforward(1) | $(86,297,409) |
Tax basis unrealized appreciation on investments | 23,575,090 |
Total tax basis net accumulated losses | $(62,722,319) |
Expiring In: | |
2015 | $ 3,792,571 |
2016 | 7,710,904 |
2017 | 38,404,880 |
2018 | 18,161,948 |
2019 | 12,712,591 |
Infinite (Short-Term) | 374,985 |
Infinite (Long-Term) | 5,139,530 |
Cost of Investments | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation |
$499,885,685 | $42,073,325 | $(18,498,235) | $23,575,090 |
Notes to Financial Statements (continued)
Additional paid-in capital | Distributions in excess of net investment income | Accumulated net realized loss |
$(1,719,287) | $114,933 | $1,604,354 |
Dividend Per Share | Record Date | Payable Date |
$0.1900 | October 16, 2014 | October 30, 2014 |
$0.1900 | November 18, 2014 | November 25, 2014 |
Report of Independent Registered Public Accounting Firm
Tax Information (Unaudited)
Compliance Certification (Unaudited)
Information Concerning Directors and Officers (Unaudited)
Name, Address and Year of Birth | Position(s) Held with Fund and Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director | Number of Portfolios in Fund Complex Overseen by Director | |||
Independent Director Class I Director to serve until 2015 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 Since 2006 | Director/Trustee of several investment companies advised by the Adviser (2006- Present); Director of New America High Income Fund (2013-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). | 8 | |||
Interested Director Class I Director to serve until 2015 Annual Meeting of Stockholders: | ||||||
Heather S. Goldman* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1967 | Director 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, Brookfield Financial (2009- 2011); Head of Investor Relations of Starwood Capital Group Global (2007-2009); Director and immediate past Board Chair of University Settlement House (2003-2013); Member of the Honorary Board of University Settlement House (2014-Present). | 8 | |||
Independent Director Class II Director to serve until 2016 Annual Meeting of Stockholders: | ||||||
Edward A. Kuczmarski c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1949 | Director and Chairman of the Board, Member of the Audit Committee, Chairman of the Nominating and Compensation Committee Since 2014 | Director/Trustee of several investment companies advised by the Adviser (2011-Present); Certified Public Accountant and Retired Partner of Crowe Horwath LLP (formerly Hays & Company before merger in 2009) (1980-2013); Director of ISI Funds (2007-Present); Trustee of the Daily Income Fund (2006-Present); Director of the California Daily Tax Free Income Fund, Inc. (2006-Present); Trustee of the Stralem Funds (2014-Present). | 8 |
Name, Address and Year of Birth | Position(s) Held with Fund and Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Director | Number of Portfolios in Fund Complex Overseen by Director | |||
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 Since 2005 | Director/Trustee of several investment companies advised by the Adviser (2005-Present); Director of SP Fiber Technologies, Inc. (2012-Present); Director of Chambers Street Properties (2012- Present); Director of Crystal River Capital, Inc. (2005-2010); Director of Turner Corp. (2003- Present); Director of Jackson Hewitt Tax Services, Inc. (2004-2011); Employee of Arthur Andersen LLP (2002-Present). | 8 | |||
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 Since 2014 | Director/Trustee of several investment companies advised by the Adviser (2014-Present); Managing Director and Chief Financial Officer of the Adviser (2010-Present); General Counsel and Secretary of the Adviser (2006-Present); Vice President and General Counsel (2006-2010) and Secretary (2007-2010) of Crystal River Capital, Inc.; 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); Chief Executive Officer of Brookfield Investment Management (US) LLC (2011-Present); Managing Director of AMP Capital Brookfield Pty Limited (2011-2012). | 8 |
Name, Address and Year of Birth | Position(s) Held with Fund | 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 | 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); Associate at Paul, Hastings, Janofsky & Walker LLP (2002-2010). |
Michelle Russell-Dowe* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1971 | Vice President | Since 2009 | Portfolio Manager (2001-Present) and Managing Director (2005-Present) of the Adviser. |
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); Controller of Brookfield Redding LLC (2006-2009). |
Alexis I. Rieger* c/o Brookfield Place, 250 Vesey Street, New York, New York 10281-1023 Born: 1980 | Secretary | Since 2014 | Vice President and Associate General Counsel of the Adviser (2011-Present); Associate at Kleinberg, Kaplan, Wolff & Cohen P.C. (2009-2011); Associate at Alston & Bird LLP (2007-2009). |
Seth A. 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); Director and CCO of the Adviser (2009- Present); Vice President of Oppenheimer Funds, Inc. (2004-2009). |
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 Total Return 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 three members serving on the Registrant’s audit committee are audit committee financial experts. Their names are Edward A. Kuczmarski, Stuart A. McFarland and Louis P. Salvatore. Messrs. Kuczmarski, McFarland and Salvatore are each independent.
Item 4. Principal Accountant Fees and Services.
Audit Fees
For the fiscal years ended September 30, 2014 and November 30, 2013, BBD, LLP (“BBD”) billed the Registrant aggregate fees of $61,000 and $61,000, respectively. Each bill is 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 stockholders.
Tax Fees
For each of the fiscal years ended September 30, 2014 and November 30, 2013, BBD billed the Registrant aggregate fees of $4,000 and $4,000, respectively for professional services rendered for tax compliance, tax advice and tax planning. The nature of the services comprising the Tax Fees was the review of the Registrant’s income tax returns and tax distribution requirements.
Audit-Related Fees
For each of the fiscal years ended September 30, 2014 and November 30, 2013, there were no Audit-related fees.
All Other Fees
For each of the fiscal years ended September 30, 2014 and November 30, 2013, there were no Other Fees.
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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 Edward A. Kuczmarski, Stuart A. McFarland, and Louis P. Salvatore.
Item 6. Schedule of Investments.
Please see Item 1.
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”).
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.
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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.
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. |
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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; |
— | 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.
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Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Portfolio Manager
Ms. Michelle Russell-Dowe – Managing Director
Ms. Russell-Dowe is a Portfolio Manager and Head of the Securitized Products Investment Team. In her role, Ms. Russell-Dowe is responsible for the firm’s Securitized Products Strategies and exposures. Ms. Russell-Dowe leads the securities analysis committee and also oversees research for structured products. Ms. Russell-Dowe has 20 years of investment experience in securitized products, including 15 years with the firm. She earned a Bachelor of Arts degree in Economics from Princeton University and a Master of Business Administration Degree from the Columbia Business School at Columbia University where she graduated as valedictorian.
Management of Other Accounts
The portfolio manager listed below manages other investment companies and/or investment vehicles and accounts in addition to the Registrant. The table below shows the number of other accounts managed by Ms. Russell-Dowe as of October 31, 2014 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 Accounts Managed as of December 31, 2012 | Total Assets | # of Accounts Managed with Advisory Fee Based on Performance | Total Assets with Advisory Fee Based on Performance | |||||
Michelle Russell-Dowe | Registered Investment Company | 4 | $ 1,242 million | 0 | $ 0 | |||||
Other Pooled Investment Vehicles | 8 | $ 874 million | 1 | $ 35 million | ||||||
Other Accounts | 11 | $2,392 million | 1 | $ 739 million |
Share Ownership
The following table indicates the dollar range of securities of the Registrant owned by the Registrant’s portfolio manager as of October 31, 2014.
Dollar Range of Securities Owned | ||
Michelle Russell-Dowe | $ 50,001 - $ 100,000 |
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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 manager 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 advisor 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.
The Adviser and the Registrant 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,
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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.
None.
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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 TOTAL RETURN FUND INC. | ||
By: | /s/ Brian F. Hurley | |
Brian F. Hurley | ||
President and Principal Executive Officer |
Date: December 5, 2014
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 5, 2014 | |
By: | /s/ Angela W. Ghantous | |
Angela W. Ghantous | ||
Treasurer and Principal Financial Officer | ||
Date: | December 5, 2014 |
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