WASHINGTON, D. C. 20549
DWS Global High Income Fund, Inc.
April 30, 2014
Semiannual Report
to Shareholders
DWS Global High Income Fund, Inc.
(On August 11, 2014, DWS Global High Income Fund, Inc. will be renamed Deutsche Global High Income Fund, Inc.)
Ticker Symbol: LBF
Contents
28 Statement of Assets and Liabilities 30 Statement of Operations 32 Statement of Cash Flows 34 Statement of Changes in Net Assets 37 Notes to Financial Statements 51 Dividend Reinvestment and Cash Purchase Plan 55 Additional Information |
The fund's primary investment objective is to seek high current income; capital appreciation is a secondary investment objective.
Closed-end funds, unlike open-end funds, are not continuously offered. There is a one time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the fund's shares is determined by a number of factors, several of which are beyond the control of the fund. Therefore, the fund cannot predict whether its shares will trade at, below or above net asset value.
Bond and loan investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Floating rate loans tend to be rated below-investment grade and may be more vulnerable to economic or business changes than issuers with investment-grade credit. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Leverage results in additional risks and can magnify the effect of any gains or losses.
Deutsche Asset & Wealth Management represents the asset management and wealth management activities conducted by Deutsche Bank AG or any of its subsidiaries, including the Advisor and DWS Investments Distributors, Inc.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Performance Summary April 30, 2014 (Unaudited)
All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when sold, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit dws-investments.com for the Fund's most recent month-end performance.
Fund specific data and performance are provided for informational purposes only and are not intended for trading purposes.
Average Annual Return as of 4/30/14 |
| | 6-Month‡ | 1-Year | 5-Year | 10-Year |
Based on Net Asset Value(a) | 4.05% | 0.73% | 13.65% | 10.37% |
Based on Market Price(a) | 2.51% | –2.62% | 11.57% | 10.34% |
JPMorgan Emerging Markets Bond Global Diversified Index(b) | 3.75% | –1.08% | 10.77% | 8.87% |
Morningstar Closed-End Emerging Markets Bond Funds Category (based on Net Asset Value)(c) | 1.37% | –5.82% | 10.91% | 9.43% |
‡ Total returns shown for periods less than one year are not annualized.
a Total return based on net asset value reflects changes in the Fund's net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that dividend and capital gain distributions, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund's shares traded during the period. Expenses of the Fund include management fee, interest expense and other fund expenses. Total returns shown take into account these fees and expenses. The expense ratio of the Fund for the six months ended April 30, 2014 was 2.25%.
b The unmanaged, unleveraged JPMorgan Emerging Markets Bond Global Diversified Index tracks total returns for U.S.-dollar-denominated debt instruments issued by emerging-market sovereign entities, including Brady bonds, loans and Eurobonds, and quasi-sovereign entities. The index limits exposure to any one country.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
c Morningstar's Closed-End Emerging Markets Bond Funds category represents portfolios that invest more than 65% of their assets in foreign bonds from developing countries. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe. Africa, the Middle East and Asia make up the rest. Morningstar figures represent the average of the total returns based on net asset value reported by all of the closed-end funds designated by Morningstar, Inc. as falling into the Closed-End Emerging Markets Bond Funds category. Category returns assume reinvestment of all distributions. It is not possible to invest directly in a Morningstar category.
| Net Asset Value and Market Price | |
| | | As of 4/30/14 | | | As of 10/31/13 | |
| Net Asset Value | | $ | 9.36 | | | $ | 9.29 | |
| Market Price | | $ | 8.22 | | | $ | 8.29 | |
Prices and Net Asset Value fluctuate and are not guaranteed.
| Distribution Information | |
Six Months as of 4/30/14: Income Dividends | | $ | .27 | |
| April Income Dividend | | $ | .0450 | |
Current Annualized Distribution Rate (based on Net Asset Value) as of 4/30/14† | | | 5.77 | % |
Current Annualized Distribution Rate (based on Market Price) as of 4/30/14† | | | 6.57 | % |
† Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value/market price on April 30, 2014. Distribution rate simply measures the level of dividends and is not a complete measure of performance. Distribution rates are historical, not guaranteed and will fluctuate. Distributions do not include return of capital or other non-income sources.
Gary Russell, CFA, Managing Director
Portfolio Manager of the fund. Began managing the fund in 2011.
— Joined Deutsche Asset & Wealth Management in 1996. Served as the head of the High Yield group in Europe and as an Emerging Markets portfolio manager.
— Prior to that, he spent four years at Citicorp as a research analyst and structurer of collateralized mortgage obligations. Prior to Citicorp, he served as an officer in the US Army from 1988 to 1991.
— Head of US High Yield Bonds: New York.
— BS, United States Military Academy (West Point); MBA, New York University, Stern School of Business.
Portfolio Summary (Unaudited)
Investment Portfolio as of April 30, 2014 (Unaudited) | | | Principal Amount ($)(a) | | | Value ($) | |
| | | | |
| Bonds 127.2% | |
| Australia 0.7% | |
| FMG Resources (August 2006) Pty Ltd.: | |
| 144A, 6.0%, 4/1/2017 | | | | 340,000 | | | | 357,850 | |
| 144A, 6.875%, 4/1/2022 | | | | 70,000 | | | | 74,900 | |
| (Cost $410,000) | | | | 432,750 | |
| Austria 0.5% | |
| JBS Investments GmbH: | |
| 144A, 7.25%, 4/3/2024 | | | | 125,000 | | | | 126,719 | |
| 144A, 7.75%, 10/28/2020 | | | | 200,000 | | | | 212,750 | |
| (Cost $325,000) | | | | 339,469 | |
| Bermuda 4.0% | |
| Digicel Group Ltd.: | |
| 144A, 7.125%, 4/1/2022 | | | | 65,000 | | | | 65,325 | |
| 144A, 8.25%, 9/30/2020 | | | | 147,000 | | | | 156,555 | |
| Digicel Ltd., 144A, 8.25%, 9/1/2017 | | | | 2,200,000 | | | | 2,282,610 | |
| (Cost $2,477,253) | | | | 2,504,490 | |
| Brazil 12.6% | |
| Banco Bradesco SA: | |
| 144A, 5.75%, 3/1/2022 | | | | 425,000 | | | | 443,594 | |
| 144A, 5.9%, 1/16/2021 | | | | 2,000,000 | | | | 2,092,500 | |
| Banco do Brasil SA: | |
| 3.875%, 10/10/2022 | | | | 635,000 | | | | 588,169 | |
| 144A, 6.25%, 12/29/2049 | | | | 625,000 | | | | 531,250 | |
| Banco Santander Brasil SA, 144A, 8.0%, 3/18/2016 | BRL | | | 300,000 | | | | 123,713 | |
| Centrais Eletricas Brasileiras SA, 144A, 6.875%, 7/30/2019 | | | | 2,000,000 | | | | 2,162,500 | |
| Fibria Overseas Finance Ltd., 144A, 6.75%, 3/3/2021 | | | | 1,545,000 | | | | 1,695,637 | |
| Independencia International Ltd., REG S, 12.0%, 12/30/2016* | | | | 577,088 | | | | 0 | |
| Samarco Mineracao SA, 144A, 5.75%, 10/24/2023 | | | | 200,000 | | | | 203,000 | |
| (Cost $8,851,845) | | | | 7,840,363 | |
| Canada 9.6% | |
| AuRico Gold, Inc., 144A, 7.75%, 4/1/2020 | | | | 40,000 | | | | 39,100 | |
| Bombardier, Inc.: | |
| 144A, 4.75%, 4/15/2019 | | | | 35,000 | | | | 35,613 | |
| 144A, 5.75%, 3/15/2022 | | | | 485,000 | | | | 493,487 | |
| 144A, 6.0%, 10/15/2022 | | | | 65,000 | | | | 66,137 | |
| Cogeco Cable, Inc., 144A, 4.875%, 5/1/2020 | | | | 185,000 | | | | 185,925 | |
| First Quantum Minerals Ltd.: | |
| 144A, 6.75%, 2/15/2020 | | | | 84,000 | | | | 84,840 | |
| 144A, 7.0%, 2/15/2021 | | | | 84,000 | | | | 85,155 | |
| Garda World Security Corp., 144A, 7.25%, 11/15/2021 | | | | 50,000 | | | | 52,688 | |
| KGHM International Ltd., 144A, 7.75%, 6/15/2019 | | | | 1,250,000 | | | | 1,343,750 | |
| Kodiak Oil & Gas Corp., 5.5%, 1/15/2021 | | | | 70,000 | | | | 72,100 | |
| MDC Partners, Inc., 144A, 6.75%, 4/1/2020 | | | | 45,000 | | | | 47,588 | |
| MEG Energy Corp.: | |
| 144A, 6.5%, 3/15/2021 | | | | 675,000 | | | | 710,437 | |
| 144A, 7.0%, 3/31/2024 | | | | 95,000 | | | | 100,700 | |
| Novelis, Inc., 8.75%, 12/15/2020 | | | | 130,000 | | | | 144,950 | |
| Telesat Canada, 144A, 6.0%, 5/15/2017 | | | | 1,025,000 | | | | 1,059,594 | |
| Valeant Pharmaceuticals International, 144A, 6.75%, 8/15/2018 | | | | 1,115,000 | | | | 1,206,987 | |
| Videotron Ltd., 5.0%, 7/15/2022 | | | | 230,000 | | | | 231,725 | |
| (Cost $5,791,508) | | | | 5,960,776 | |
| Cayman Islands 5.9% | |
| IPIC GMTN Ltd., 144A, 5.5%, 3/1/2022 | | | | 500,000 | | | | 563,750 | |
| Offshore Group Investment Ltd.: | |
| 7.125%, 4/1/2023 | | | | 65,000 | | | | 64,025 | |
| 7.5%, 11/1/2019 | | | | 80,000 | | | | 83,200 | |
| Sable International Finance Ltd., 144A, 8.75%, 2/1/2020 | | | | 205,000 | | | | 229,600 | |
| Seagate HDD Cayman, 144A, 3.75%, 11/15/2018 | | | | 100,000 | | | | 103,500 | |
| UPCB Finance III Ltd., 144A, 6.625%, 7/1/2020 | | | | 2,055,000 | | | | 2,193,713 | |
| Wynn Macau Ltd., 144A, 5.25%, 10/15/2021 | | | | 425,000 | | | | 431,375 | |
| (Cost $3,551,909) | | | | 3,669,163 | |
| Chile 3.9% | |
| Corporacion Nacional del Cobre de Chile, REG S, 5.625%, 9/21/2035 | | | | 2,000,000 | | | | 2,157,206 | |
| Inversiones CMPC SA, 144A, 4.375%, 5/15/2023 | | | | 250,000 | | | | 243,219 | |
| (Cost $1,887,108) | | | | 2,400,425 | |
| Croatia 5.3% | |
| Republic of Croatia: | |
| 144A, 6.25%, 4/27/2017 | | | | 280,000 | | | | 300,650 | |
| 144A, 6.375%, 3/24/2021 | | | | 1,770,000 | | | | 1,902,750 | |
| REG S, 6.625%, 7/14/2020 | | | | 1,000,000 | | | | 1,090,000 | |
| (Cost $3,034,944) | | | | 3,293,400 | |
| Dominican Republic 1.8% | |
| Dominican Republic, 144A, 7.5%, 5/6/2021 (Cost $1,049,815) | | | | 1,000,000 | | | | 1,110,000 | |
| France 2.2% | |
| Autodis SA, 144A, 6.5%, 2/1/2019 | EUR | | | 150,000 | | | | 214,866 | |
| Credit Agricole SA, 144A, 7.875%, 1/29/2049 | | | | 130,000 | | | | 139,867 | |
| Financiere Gaillon 8 SAS, 144A, 7.0%, 9/30/2019 | EUR | | | 215,000 | | | | 301,263 | |
| Numericable Group SA: | |
| 144A, 4.875%, 5/15/2019 (b) | | | | 125,000 | | | | 126,250 | |
| 144A, 6.0%, 5/15/2022 (b) | | | | 200,000 | | | | 204,750 | |
| Societe Generale SA, 144A, 7.875%, 12/29/2049 | | | | 160,000 | | | | 167,264 | |
| SPCM SA, 144A, 6.0%, 1/15/2022 | | | | 185,000 | | | | 196,100 | |
| (Cost $1,303,472) | | | | 1,350,360 | |
| Germany 0.5% | |
| Techem GmbH, 144A, 6.125%, 10/1/2019 (Cost $260,750) | EUR | | | 200,000 | | | | 302,154 | |
| Ghana 1.2% | |
| Republic of Ghana, REG S, 8.5%, 10/4/2017 (Cost $726,659) | | | | 720,000 | | | | 733,500 | |
| Greece 0.2% | |
| FAGE Dairy Industry SA, 144A, 9.875%, 2/1/2020 (Cost $100,777) | | | | 100,000 | | | | 108,000 | |
| Hong Kong 0.8% | |
| CNOOC Finance 2012 Ltd., 144A, 3.875%, 5/2/2022 (Cost $529,306) | | | | 530,000 | | | | 523,801 | |
| Indonesia 0.8% | |
| Perusahaan Penerbit SBSN, 144A, 4.0%, 11/21/2018 (Cost $500,000) | | | | 500,000 | | | | 512,500 | |
| Ireland 0.8% | |
| Ardagh Packaging Finance PLC, 144A, 9.125%, 10/15/2020 | | | | 250,000 | | | | 278,125 | |
| MMC Finance Ltd., 144A, 5.55%, 10/28/2020 | | | | 200,000 | | | | 193,000 | |
| (Cost $468,387) | | | | 471,125 | |
| Israel 0.1% | |
| B Communications Ltd., 144A, 7.375%, 2/15/2021 (Cost $60,000) | | | | 60,000 | | | | 63,450 | |
| Italy 4.1% | |
| Astaldi SpA, 144A, 7.125%, 12/1/2020 | EUR | | | 880,000 | | | | 1,320,795 | |
| Enel SpA, 144A, 8.75%**, 9/24/2073 | | | | 450,000 | | | | 518,625 | |
| Snai SpA, 144A, 12.0%, 12/15/2018 | EUR | | | 440,000 | | | | 700,497 | |
| (Cost $2,243,019) | | | | 2,539,917 | |
| Japan 0.2% | |
| eAccess Ltd., 144A, 8.25%, 4/1/2018 (Cost $105,000) | | | | 105,000 | | | | 114,188 | |
| Kazakhstan 2.9% | |
| KazMunayGas National Co. JSC: | |
| 144A, 4.4%, 4/30/2023 | | | | 250,000 | | | | 235,938 | |
| 144A, 7.0%, 5/5/2020 | | | | 200,000 | | | | 224,750 | |
| Series 2, REG S, 9.125%, 7/2/2018 | | | | 1,150,000 | | | | 1,374,250 | |
| (Cost $1,564,501) | | | | 1,834,938 | |
| Lithuania 2.8% | |
| Republic of Lithuania: | |
| 144A, 6.125%, 3/9/2021 | | | | 1,000,000 | | | | 1,149,500 | |
| 144A, 7.375%, 2/11/2020 | | | | 500,000 | | | | 605,000 | |
| (Cost $1,526,054) | | | | 1,754,500 | |
| Luxembourg 10.7% | |
| Aguila 3 SA, 144A, 7.875%, 1/31/2018 | | | | 245,000 | | | | 259,394 | |
| Altice Financing SA, 144A, 7.875%, 12/15/2019 | | | | 200,000 | | | | 218,404 | |
| Altice Finco SA, 144A, 9.875%, 12/15/2020 | | | | 200,000 | | | | 229,300 | |
| Altice SA, 144A, 7.25%, 5/15/2022 (b) | EUR | | | 110,000 | | | | 158,885 | |
| CSN Resources SA, 144A, 6.5%, 7/21/2020 | | | | 1,170,000 | | | | 1,196,325 | |
| Empark Funding SA, 144A, 6.75%, 12/15/2019 | EUR | | | 210,000 | | | | 311,737 | |
| Intelsat Jackson Holdings SA: | |
| 144A, 5.5%, 8/1/2023 | | | | 565,000 | | | | 552,994 | |
| 7.25%, 10/15/2020 | | | | 260,000 | | | | 280,800 | |
| 7.5%, 4/1/2021 | | | | 850,000 | | | | 931,812 | |
| Intelsat Luxembourg SA: | |
| 7.75%, 6/1/2021 | | | | 120,000 | | | | 125,100 | |
| 8.125%, 6/1/2023 | | | | 15,000 | | | | 15,750 | |
| MHP SA, 144A, 8.25%, 4/2/2020 | | | | 645,000 | | | | 528,900 | |
| Millicom International Cellular SA, 144A, 4.75%, 5/22/2020 | | | | 200,000 | | | | 193,000 | |
| Minerva Luxembourg SA, 144A, 7.75%, 1/31/2023 | | | | 210,000 | | | | 216,038 | |
| Play Finance 1 SA, 144A, 6.5%, 8/1/2019 | EUR | | | 100,000 | | | | 147,406 | |
| Play Finance 2 SA, 144A, 5.25%, 2/1/2019 | EUR | | | 200,000 | | | | 286,488 | |
| Telenet Finance Luxembourg SCA, 144A, 6.375%, 11/15/2020 | EUR | | | 425,000 | | | | 632,267 | |
| Telenet Finance V Luxembourg SCA: | |
| 144A, 6.25%, 8/15/2022 | EUR | | | 110,000 | | | | 165,749 | |
| 144A, 6.75%, 8/15/2024 | EUR | | | 110,000 | | | | 167,869 | |
| Wind Acquisition Finance SA, 144A, 6.5%, 4/30/2020 | | | | 30,000 | | | | 32,175 | |
| (Cost $6,479,039) | | | | 6,650,393 | |
| Marshall Islands 0.2% | |
| Navios Maritime Holdings, Inc., 144A, 7.375%, 1/15/2022 (Cost $145,000) | | | | 145,000 | | | | 146,450 | |
| Mexico 0.5% | |
| America Movil SAB de CV, 8.46%, 12/18/2036 | MXN | | | 1,700,000 | | | | 122,236 | |
| Petroleos Mexicanos, 5.5%, 6/27/2044 | | | | 215,000 | | | | 210,700 | |
| (Cost $334,645) | | | | 332,936 | |
| Netherlands 2.8% | |
| Adria Bidco BV, 144A, 7.875%, 11/15/2020 | EUR | | | 270,000 | | | | 399,869 | |
| Ajecorp BV, 144A, 6.5%, 5/14/2022 | | | | 200,000 | | | | 188,000 | |
| Cable Communications Systems NV, 144A, 7.5%, 11/1/2020 | EUR | | | 100,000 | | | | 150,895 | |
| Lukoil International Finance BV, 144A, 6.656%, 6/7/2022 | | | | 1,000,000 | | | | 1,026,250 | |
| (Cost $1,761,274) | | | | 1,765,014 | |
| Peru 1.2% | |
| Ferreycorp SAA, 144A, 4.875%, 4/26/2020 | | | | 325,000 | | | | 315,250 | |
| Volcan Cia Minera SAA, 144A, 5.375%, 2/2/2022 | | | | 420,000 | | | | 414,750 | |
| (Cost $742,624) | | | | 730,000 | |
| Philippines 3.9% | |
| Bangko Sentral Ng Pilipinas, Series A, 8.6%, 6/15/2027 (Cost $1,915,785) | | | | 1,800,000 | | | | 2,445,750 | |
| Russia 10.1% | |
| Bank of Moscow, 144A, 6.699%, 3/11/2015 | | | | 1,000,000 | | | | 1,010,550 | |
| Rosneft Oil Co., 144A, 3.149%, 3/6/2017 | | | | 215,000 | | | | 203,712 | |
| Russian Agricultural Bank OJSC: | |
| 144A, 5.1%, 7/25/2018 | | | | 200,000 | | | | 186,250 | |
| REG S, 7.75%, 5/29/2018 | | | | 1,370,000 | | | | 1,390,550 | |
| Sberbank of Russia, 144A, 6.125%, 2/7/2022 | | | | 200,000 | | | | 194,000 | |
| Vimpel Communications, 144A, 6.493%, 2/2/2016 | | | | 1,500,000 | | | | 1,526,250 | |
| VTB Bank OJSC: | |
| 144A, 6.315%, 2/22/2018 | | | | 500,000 | | | | 499,250 | |
| 144A, 6.875%, 5/29/2018 | | | | 1,270,000 | | | | 1,270,000 | |
| (Cost $6,352,502) | | | | 6,280,562 | |
| Serbia 1.8% | |
| Republic of Serbia: | |
| REG S, 6.75%, 11/1/2024 | | | | 264,336 | | | | 267,640 | |
| 144A, 7.25%, 9/28/2021 | | | | 760,000 | | | | 844,550 | |
| (Cost $982,967) | | | | 1,112,190 | |
| Sweden 1.5% | |
| Ciech Group Financing AB, 144A, 9.5%, 11/30/2019 | EUR | | | 250,000 | | | | 400,510 | |
| Cyfrowy Polsat Finance AB, 144A, 7.125%, 5/20/2018 | EUR | | | 200,000 | | | | 292,731 | |
| Perstorp Holding AB, 144A, 8.75%, 5/15/2017 | | | | 210,000 | | | | 224,700 | |
| (Cost $847,505) | | | | 917,941 | |
| Turkey 3.3% | |
| Akbank TAS, 144A, 5.125%, 7/22/2015 | | | | 1,390,000 | | | | 1,426,140 | |
| Arcelik AS, 144A, 5.0%, 4/3/2023 | | | | 435,000 | | | | 408,683 | |
| Yapi ve Kredi Bankasi AS, 144A, 5.25%, 12/3/2018 | | | | 200,000 | | | | 201,040 | |
| (Cost $2,025,367) | | | | 2,035,863 | |
| United States 22.4% | |
| ACI Worldwide, Inc., 144A, 6.375%, 8/15/2020 | | | | 20,000 | | | | 21,050 | |
| Activision Blizzard, Inc., 144A, 5.625%, 9/15/2021 | | | | 160,000 | | | | 170,600 | |
| ADT Corp.: | |
| 4.125%, 4/15/2019 | | | | 10,000 | | | | 9,975 | |
| 144A, 6.25%, 10/15/2021 | | | | 30,000 | | | | 31,275 | |
| Air Lease Corp., 4.75%, 3/1/2020 | | | | 50,000 | | | | 53,250 | |
| Ally Financial, Inc., 3.5%, 1/27/2019 | | | | 165,000 | | | | 165,619 | |
| Alphabet Holding Co., Inc., 7.75%, 11/1/2017 (PIK) | | | | 55,000 | | | | 56,925 | |
| AMC Entertainment, Inc., 144A, 5.875%, 2/15/2022 | | | | 45,000 | | | | 46,013 | |
| AMC Networks, Inc., 7.75%, 7/15/2021 | | | | 10,000 | | | | 11,200 | |
| AmeriGas Finance LLC: | |
| 6.75%, 5/20/2020 | | | | 70,000 | | | | 76,125 | |
| 7.0%, 5/20/2022 | | | | 50,000 | | | | 55,000 | |
| Antero Resources Finance Corp., 144A, 5.375%, 11/1/2021 | | | | 20,000 | | | | 20,450 | |
| APX Group, Inc., 8.75%, 12/1/2020 | | | | 5,000 | | | | 5,100 | |
| Artesyn Escrow, Inc., 144A, 9.75%, 10/15/2020 | | | | 45,000 | | | | 41,850 | |
| Asbury Automotive Group, Inc., 8.375%, 11/15/2020 | | | | 10,000 | | | | 11,200 | |
| Ashland, Inc., 3.875%, 4/15/2018 | | | | 205,000 | | | | 210,637 | |
| Ashtead Capital, Inc., 144A, 6.5%, 7/15/2022 | | | | 160,000 | | | | 173,600 | |
| Audatex North America, Inc., 144A, 6.0%, 6/15/2021 | | | | 30,000 | | | | 32,175 | |
| Avis Budget Car Rental LLC, 5.5%, 4/1/2023 | | | | 35,000 | | | | 35,350 | |
| Aviv Healthcare Properties LP: | |
| 6.0%, 10/15/2021 | | | | 20,000 | | | | 21,000 | |
| 7.75%, 2/15/2019 | | | | 35,000 | | | | 37,538 | |
| BC Mountain LLC, 144A, 7.0%, 2/1/2021 | | | | 30,000 | | | | 29,175 | |
| Beazer Homes U.S.A., Inc., 144A, 5.75%, 6/15/2019 | | | | 150,000 | | | | 148,125 | |
| Berry Petroleum Co., LLC: | |
| 6.375%, 9/15/2022 | | | | 35,000 | | | | 35,875 | |
| 6.75%, 11/1/2020 | | | | 60,000 | | | | 63,375 | |
| BMC Software Finance, Inc., 144A, 8.125%, 7/15/2021 | | | | 95,000 | | | | 99,512 | |
| BOE Intermediate Holding Corp., 144A, 9.0%, 11/1/2017 (PIK) | | | | 52,275 | | | | 54,889 | |
| Boxer Parent Co., Inc., 144A, 9.0%, 10/15/2019 (PIK) | | | | 80,000 | | | | 78,400 | |
| BreitBurn Energy Partners LP, 7.875%, 4/15/2022 | | | | 100,000 | | | | 108,250 | |
| Cablevision Systems Corp., 5.875%, 9/15/2022 | | | | 25,000 | | | | 25,313 | |
| Calpine Corp., 144A, 7.875%, 7/31/2020 | | | | 171,000 | | | | 187,459 | |
| Century Intermediate Holding Co. 2, 144A, 9.75%, 2/15/2019 (PIK) | | | | 25,000 | | | | 26,625 | |
| CenturyLink, Inc.: | |
| Series V, 5.625%, 4/1/2020 | | | | 20,000 | | | | 21,025 | |
| Series W, 6.75%, 12/1/2023 | | | | 75,000 | | | | 80,437 | |
| Cequel Communications Holdings I LLC: | |
| 144A, 5.125%, 12/15/2021 | | | | 55,000 | | | | 53,625 | |
| 144A, 6.375%, 9/15/2020 | | | | 165,000 | | | | 172,837 | |
| Chaparral Energy, Inc., 7.625%, 11/15/2022 | | | | 10,000 | | | | 10,650 | |
| Chesapeake Energy Corp.: | |
| 3.25%, 3/15/2016 | | | | 90,000 | | | | 91,012 | |
| 3.467%, 4/15/2019 | | | | 75,000 | | | | 75,750 | |
| Chiquita Brands International, Inc., 7.875%, 2/1/2021 | | | | 20,000 | | | | 22,300 | |
| Cincinnati Bell, Inc.: | |
| 8.375%, 10/15/2020 | | | | 90,000 | | | | 99,000 | |
| 8.75%, 3/15/2018 | | | | 60,000 | | | | 63,000 | |
| CIT Group, Inc.: | |
| 3.875%, 2/19/2019 | | | | 235,000 | | | | 237,644 | |
| 4.25%, 8/15/2017 | | | | 925,000 | | | | 968,937 | |
| Clear Channel Communications, Inc., 9.0%, 12/15/2019 | | | | 125,000 | | | | 133,125 | |
| Clear Channel Worldwide Holdings, Inc.: | |
| Series A, 6.5%, 11/15/2022 | | | | 70,000 | | | | 74,550 | |
| Series B, 6.5%, 11/15/2022 | | | | 185,000 | | | | 197,950 | |
| CNH Capital LLC, 3.25%, 2/1/2017 | | | | 150,000 | | | | 153,000 | |
| Community Health Systems, Inc.: | |
| 144A, 5.125%, 8/1/2021 | | | | 10,000 | | | | 10,200 | |
| 144A, 6.875%, 2/1/2022 | | | | 45,000 | | | | 46,631 | |
| 7.125%, 7/15/2020 | | | | 35,000 | | | | 37,538 | |
| CONSOL Energy, Inc., 144A, 5.875%, 4/15/2022 | | | | 25,000 | | | | 25,750 | |
| Covanta Holding Corp., 5.875%, 3/1/2024 | | | | 45,000 | | | | 45,921 | |
| Crestwood Midstream Partners LP: | |
| 144A, 6.125%, 3/1/2022 | | | | 30,000 | | | | 31,350 | |
| 7.75%, 4/1/2019 | | | | 145,000 | | | | 156,962 | |
| Crown Media Holdings, Inc., 10.5%, 7/15/2019 | | | | 20,000 | | | | 22,700 | |
| CTP Transportation Products LLC, 144A, 8.25%, 12/15/2019 | | | | 55,000 | | | | 59,400 | |
| Darling International, Inc., 144A, 5.375%, 1/15/2022 | | | | 45,000 | | | | 46,238 | |
| Delphi Corp., 5.0%, 2/15/2023 | | | | 45,000 | | | | 47,700 | |
| Denbury Resources, Inc., 4.625%, 7/15/2023 | | | | 30,000 | | | | 28,538 | |
| DigitalGlobe, Inc., 5.25%, 2/1/2021 | | | | 25,000 | | | | 24,375 | |
| DISH DBS Corp.: | |
| 4.25%, 4/1/2018 | | | | 50,000 | | | | 52,250 | |
| 5.0%, 3/15/2023 | | | | 75,000 | | | | 76,500 | |
| Ducommun, Inc., 9.75%, 7/15/2018 | | | | 65,000 | | | | 72,475 | |
| E*TRADE Financial Corp.: | |
| 6.0%, 11/15/2017 | | | | 214,000 | | | | 224,432 | |
| 6.375%, 11/15/2019 | | | | 65,000 | | | | 70,606 | |
| EarthLink Holdings Corp., 7.375%, 6/1/2020 | | | | 40,000 | | | | 41,700 | |
| Endeavor Energy Resources LP, 144A, 7.0%, 8/15/2021 | | | | 115,000 | | | | 121,325 | |
| Endo Finance LLC, 144A, 5.75%, 1/15/2022 | | | | 40,000 | | | | 41,300 | |
| Energy Future Holdings Corp., Series Q, 6.5%, 11/15/2024* | | | | 25,000 | | | | 10,500 | |
| Entegris, Inc., 144A, 6.0%, 4/1/2022 | | | | 40,000 | | | | 40,500 | |
| EP Energy LLC, 7.75%, 9/1/2022 | | | | 25,000 | | | | 27,844 | |
| Equinix, Inc.: | |
| 5.375%, 4/1/2023 | | | | 120,000 | | | | 122,100 | |
| 7.0%, 7/15/2021 | | | | 35,000 | | | | 39,060 | |
| EXCO Resources, Inc., 8.5%, 4/15/2022 | | | | 35,000 | | | | 35,963 | |
| Exopack Holding Corp., 144A, 10.0%, 6/1/2018 | | | | 30,000 | | | | 32,250 | |
| First Data Corp.: | |
| 144A, 6.75%, 11/1/2020 | | | | 65,000 | | | | 69,387 | |
| 144A, 7.375%, 6/15/2019 | | | | 55,000 | | | | 58,987 | |
| 144A, 8.75%, 1/15/2022 (PIK) | | | | 65,000 | | | | 70,850 | |
| Florida East Coast Holdings Corp., 144A, 6.75%, 5/1/2019 | | | | 115,000 | | | | 118,162 | |
| Freescale Semiconductor, Inc., 144A, 6.0%, 1/15/2022 | | | | 50,000 | | | | 52,250 | |
| Fresenius Medical Care U.S. Finance, Inc., 144A, 6.5%, 9/15/2018 | | | | 20,000 | | | | 22,450 | |
| Frontier Communications Corp.: | |
| 7.125%, 1/15/2023 | | | | 160,000 | | | | 165,200 | |
| 7.625%, 4/15/2024 | | | | 20,000 | | | | 20,750 | |
| 8.125%, 10/1/2018 | | | | 600,000 | | | | 698,250 | |
| GenCorp, Inc., 7.125%, 3/15/2021 | | | | 70,000 | | | | 75,950 | |
| Halcon Resources Corp., 144A, 9.75%, 7/15/2020 | | | | 45,000 | | | | 48,037 | |
| Harron Communications LP, 144A, 9.125%, 4/1/2020 | | | | 90,000 | | | | 101,250 | |
| HCA, Inc.: | |
| 6.5%, 2/15/2020 | | | | 165,000 | | | | 183,975 | |
| 7.5%, 2/15/2022 | | | | 120,000 | | | | 136,860 | |
| Hexion U.S. Finance Corp., 6.625%, 4/15/2020 | | | | 95,000 | | | | 98,681 | |
| Hot Topic, Inc., 144A, 9.25%, 6/15/2021 | | | | 25,000 | | | | 27,313 | |
| Hughes Satellite Systems Corp.: | |
| 6.5%, 6/15/2019 | | | | 40,000 | | | | 44,000 | |
| 7.625%, 6/15/2021 | | | | 30,000 | | | | 33,825 | |
| Huntsman International LLC, 5.125%, 4/15/2021 | EUR | | | 210,000 | | | | 303,755 | |
| IAC/InterActiveCorp., 4.75%, 12/15/2022 | | | | 35,000 | | | | 34,388 | |
| IMS Health, Inc., 144A, 6.0%, 11/1/2020 | | | | 40,000 | | | | 42,200 | |
| Interactive Data Corp., 144A, 5.875%, 4/15/2019 (b) | | | | 65,000 | | | | 65,244 | |
| International Lease Finance Corp.: | |
| 3.875%, 4/15/2018 | | | | 100,000 | | | | 101,500 | |
| 5.75%, 5/15/2016 | | | | 15,000 | | | | 16,144 | |
| 6.25%, 5/15/2019 | | | | 35,000 | | | | 38,631 | |
| JBS U.S.A. LLC: | |
| 144A, 7.25%, 6/1/2021 | | | | 95,000 | | | | 102,481 | |
| 144A, 8.25%, 2/1/2020 | | | | 80,000 | | | | 87,560 | |
| Jo-Ann Stores Holdings, Inc., 144A, 9.75%, 10/15/2019 (PIK) | | | | 40,000 | | | | 41,700 | |
| Kenan Advantage Group, Inc., 144A, 8.375%, 12/15/2018 | | | | 30,000 | | | | 32,138 | |
| Level 3 Financing, Inc.: | |
| 144A, 6.125%, 1/15/2021 | | | | 30,000 | | | | 31,500 | |
| 8.125%, 7/1/2019 | | | | 25,000 | | | | 27,344 | |
| LifePoint Hospitals, Inc., 144A, 5.5%, 12/1/2021 | | | | 55,000 | | | | 57,200 | |
| Live Nation Entertainment, Inc., 144A, 7.0%, 9/1/2020 | | | | 70,000 | | | | 76,300 | |
| Mediacom Broadband LLC, 144A, 5.5%, 4/15/2021 | | | | 10,000 | | | | 9,975 | |
| Meritor, Inc.: | |
| 6.25%, 2/15/2024 | | | | 50,000 | | | | 49,875 | |
| 6.75%, 6/15/2021 | | | | 60,000 | | | | 63,450 | |
| MGM Resorts International, 7.625%, 1/15/2017 | | | | 55,000 | | | | 62,562 | |
| Micron Technology, Inc., 144A, 5.875%, 2/15/2022 | | | | 25,000 | | | | 26,375 | |
| Midstates Petroleum Co., Inc.: | |
| 9.25%, 6/1/2021 | | | | 125,000 | | | | 127,812 | |
| 10.75%, 10/1/2020 | | | | 70,000 | | | | 75,512 | |
| Morgan Stanley, Series H, 5.45%, 7/15/2019 | | | | 35,000 | | | | 35,306 | |
| MPT Operating Partnership LP, (REIT), 5.75%, 10/1/2020 | EUR | | | 185,000 | | | | 274,626 | |
| Murphy Oil U.S.A., Inc., 144A, 6.0%, 8/15/2023 | | | | 60,000 | | | | 61,950 | |
| NCR Corp.: | |
| 144A, 5.875%, 12/15/2021 | | | | 10,000 | | | | 10,600 | |
| 144A, 6.375%, 12/15/2023 | | | | 25,000 | | | | 26,750 | |
| Nortek, Inc., 8.5%, 4/15/2021 | | | | 70,000 | | | | 77,175 | |
| Northern Oil & Gas, Inc., 8.0%, 6/1/2020 | | | | 10,000 | | | | 10,625 | |
| NRG Energy, Inc., 144A, 6.25%, 5/1/2024 | | | | 185,000 | | | | 185,694 | |
| Oasis Petroleum, Inc.: | |
| 144A, 6.875%, 3/15/2022 | | | | 80,000 | | | | 86,800 | |
| 6.875%, 1/15/2023 | | | | 25,000 | | | | 27,063 | |
| 7.25%, 2/1/2019 | | | | 55,000 | | | | 58,712 | |
| Oshkosh Corp., 144A, 5.375%, 3/1/2022 | | | | 37,500 | | | | 38,344 | |
| Par Pharmaceutical Companies, Inc., 7.375%, 10/15/2020 | | | | 35,000 | | | | 37,975 | |
| Plastipak Holdings, Inc., 144A, 6.5%, 10/1/2021 | | | | 50,000 | | | | 52,000 | |
| Ply Gem Industries, Inc., 144A, 6.5%, 2/1/2022 | | | | 60,000 | | | | 60,000 | |
| PNK Finance Corp., 144A, 6.375%, 8/1/2021 | | | | 50,000 | | | | 52,500 | |
| Post Holdings, Inc., 144A, 6.75%, 12/1/2021 | | | | 105,000 | | | | 109,987 | |
| Regency Energy Partners LP, 5.875%, 3/1/2022 | | | | 5,000 | | | | 5,238 | |
| Reynolds Group Issuer, Inc., 5.75%, 10/15/2020 | | | | 130,000 | | | | 135,200 | |
| Roundy's Supermarkets, Inc., 144A, 10.25%, 12/15/2020 | | | | 40,000 | | | | 43,000 | |
| Sabine Pass Liquefaction LLC, 5.625%, 2/1/2021 | | | | 225,000 | | | | 232,312 | |
| Salix Pharmaceuticals Ltd., 144A, 6.0%, 1/15/2021 | | | | 30,000 | | | | 32,175 | |
| Samson Investment Co., 144A, 10.75%, 2/15/2020 | | | | 35,000 | | | | 36,925 | |
| SandRidge Energy, Inc., 7.5%, 3/15/2021 | | | | 65,000 | | | | 69,062 | |
| Seminole Hard Rock Entertainment, Inc., 144A, 5.875%, 5/15/2021 | | | | 20,000 | | | | 19,950 | |
| Signode Industrial Group Lux SA, 144A, 6.375%, 5/1/2022 | | | | 50,000 | | | | 50,500 | |
| Sirius XM Holdings, Inc., 144A, 5.875%, 10/1/2020 | | | | 40,000 | | | | 41,750 | |
| SIWF Merger Sub, Inc., 144A, 6.25%, 6/1/2021 | | | | 55,000 | | | | 57,200 | |
| Spirit AeroSystems, Inc., 144A, 5.25%, 3/15/2022 | | | | 65,000 | | | | 65,894 | |
| Sprint Communications, Inc., 6.0%, 11/15/2022 | | | | 60,000 | | | | 60,450 | |
| Sprint Corp., 144A, 7.125%, 6/15/2024 | | | | 55,000 | | | | 57,750 | |
| Starz LLC, 5.0%, 9/15/2019 | | | | 30,000 | | | | 31,088 | |
| T-Mobile U.S.A., Inc.: | |
| 6.125%, 1/15/2022 | | | | 20,000 | | | | 21,025 | |
| 6.464%, 4/28/2019 | | | | 60,000 | | | | 63,600 | |
| 6.5%, 1/15/2024 | | | | 20,000 | | | | 20,975 | |
| 6.625%, 4/1/2023 | | | | 40,000 | | | | 42,800 | |
| Taylor Morrison Communities, Inc., 144A, 5.25%, 4/15/2021 | | | | 40,000 | | | | 40,400 | |
| Tenet Healthcare Corp., 4.375%, 10/1/2021 | | | | 60,000 | | | | 57,525 | |
| The Goldman Sachs Group, Inc., Series L, 5.7%, 5/10/2019 | | | | 65,000 | | | | 66,381 | |
| Titan International, Inc., 144A, 6.875%, 10/1/2020 | | | | 115,000 | | | | 121,900 | |
| TransDigm, Inc., 7.5%, 7/15/2021 | | | | 80,000 | | | | 88,000 | |
| tw telecom holdings, Inc.: | |
| 5.375%, 10/1/2022 | | | | 10,000 | | | | 10,150 | |
| 6.375%, 9/1/2023 | | | | 50,000 | | | | 53,250 | |
| U.S. Coatings Acquisition Inc.2, 1.0%, 2/1/2020 | | | | 149,373 | | | | 149,224 | |
| U.S. Foods, Inc., 8.5%, 6/30/2019 | | | | 15,000 | | | | 16,163 | |
| United Rentals North America, Inc., 7.375%, 5/15/2020 | | | | 180,000 | | | | 199,350 | |
| Univision Communications, Inc., 144A, 8.5%, 5/15/2021 | | | | 10,000 | | | | 11,000 | |
| Visteon Corp., 6.75%, 4/15/2019 | | | | 44,000 | | | | 46,258 | |
| Whiting Petroleum Corp., 5.0%, 3/15/2019 | | | | 50,000 | | | | 52,625 | |
| Windstream Corp.: | |
| 6.375%, 8/1/2023 | | | | 45,000 | | | | 43,763 | |
| 7.75%, 10/1/2021 | | | | 720,000 | | | | 779,400 | |
| Woodbine Holdings LLC, 12.0%, 5/15/2016 | | | | 215,000 | | | | 228,975 | |
| Zayo Group LLC, 8.125%, 1/1/2020 | | | | 30,000 | | | | 32,925 | |
| (Cost $13,386,778) | | | | 13,979,993 | |
| Uruguay 6.2% | |
| Republic of Uruguay, 4.125%, 11/20/2045 (Cost $4,638,860) | | | | 4,685,716 | | | | 3,889,144 | |
| Venezuela 1.7% | |
| Petroleos de Venezuela SA, 144A, 8.5%, 11/2/2017 | | | | 410,000 | | | | 369,000 | |
| Republic of Venezuela, 7.65%, 4/21/2025 | | | | 900,000 | | | | 666,000 | |
| (Cost $971,795) | | | | 1,035,000 | |
Total Bonds (Cost $77,351,448) | | | | 79,180,505 | |
| | |
| Loan Participations and Assignments 7.8% | |
| Senior Loans*** | |
| Canada 0.7% | |
| Quebecor Media, Inc., Term Loan B1, 3.25%, 8/17/2020 | | | | 104,475 | | | | 103,887 | |
| Valeant Pharmaceuticals International, Inc.: | |
| Series C2, Term Loan B, 3.75%, 12/11/2019 | | | | 153,442 | | | | 153,347 | |
| Series D2, Term Loan B, 3.75%, 2/13/2019 | | | | 158,392 | | | | 158,570 | |
| (Cost $416,823) | | | | 415,804 | |
| United States 7.1% | |
| Albertson's LLC: | |
| Term Loan B1, 4.25%, 3/21/2016 | | | | 72,075 | | | | 72,278 | |
| Term Loan B2, 4.75%, 3/21/2019 | | | | 57,001 | | | | 57,243 | |
| Ardagh Holdings U.S.A, Inc., Term Loan B, 4.25%, 12/17/2019 | | | | 100,000 | | | | 99,958 | |
| Asurion LLC, Second Lien Term Loan, 8.50%, 3/3/2021 | | | | 70,000 | | | | 72,012 | |
| Avis Budget Car Rental LLC, Term Loan B, 3.0%, 3/15/2019 | | | | 89,548 | | | | 89,520 | |
| Burger King Corp., Term Loan B, 3.75%, 9/28/2019 | | | | 177,300 | | | | 178,358 | |
| Community Health Systems, Inc., Term Loan D, 4.25%, 1/27/2021 | | | | 49,875 | | | | 50,140 | |
| Del Monte Foods, Inc., First Lien Term Loan, 4.25%, 2/18/2021 | | | | 75,000 | | | | 74,789 | |
| DigitalGlobe, Inc., Term Loan B, 3.75%, 1/31/2020 | | | | 19,800 | | | | 19,864 | |
| First Data Corp., Term Loan, 4.152%, 3/24/2021 | | | | 85,000 | | | | 84,915 | |
| Freescale Semiconductor, Inc., Term Loan B4, 4.25%, 2/28/2020 | | | | 70,000 | | | | 70,066 | |
| Goodyear Tire & Rubber Co., Second Lien Term Loan, 4.75%, 4/30/2019 | | | | 665,000 | | | | 669,469 | |
| Hilton Worldwide Finance LLC, Term Loan B2, 3.5%, 10/26/2020 | | | | 106,842 | | | | 106,567 | |
| HJ Heinz Co., Term Loan B2, 3.5%, 6/5/2020 | | | | 307,675 | | | | 308,618 | |
| Level 3 Financing, Inc., Term Loan B, 4.0%, 1/15/2020 | | | | 135,000 | | | | 135,464 | |
| NRG Energy, Inc., Term Loan B, 2.75%, 7/2/2018 | | | | 314,775 | | | | 312,021 | |
| Par Pharmaceutical Companies, Inc., Term Loan B2, 4.0%, 9/30/2019 | | | | 307,976 | | | | 306,975 | |
| Pilot Travel Centers LLC: | |
| Term Loan B, 3.75%, 3/30/2018 | | | | 268,123 | | | | 268,795 | |
| Term Loan B2, 4.25%, 8/7/2019 | | | | 127,725 | | | | 128,283 | |
| Pinnacle Foods Finance LLC, Term Loan G, 3.25%, 4/29/2020 | | | | 133,650 | | | | 132,666 | |
| Ply Gem Industries, Inc., Term Loan, 4.0%, 2/1/2021 | | | | 70,000 | | | | 69,615 | |
| Polymer Group, Inc., First Lien Term Loan B, 5.25%, 12/19/2019 | | | | 99,750 | | | | 100,311 | |
| Ruby Western Pipeline Holdings LLC, Term Loan B, 3.5%, 3/27/2020 | | | | 31,163 | | | | 31,189 | |
| Samson Investment Co., Second Lien Term Loan, 5.0%, 9/25/2018 | | | | 530,000 | | | | 530,729 | |
| Spansion LLC, Term Loan, 4.0%, 12/19/2019 | | | | 45,000 | | | | 45,000 | |
| Syniverse Holdings, Inc., Term Loan B, 4.0%, 4/23/2019 | | | | 109,677 | | | | 109,636 | |
| Vogue International, Inc., Term Loan, 5.25%, 2/14/2020 | | | | 30,000 | | | | 30,000 | |
| Weight Watchers International, Inc., Term Loan B1, 3.16%, 4/2/2016 | | | | 129,347 | | | | 116,978 | |
| WP CPP Holdings LLC, First Lien Term Loan, 4.75%, 12/27/2019 | | | | 181,023 | | | | 181,702 | |
| (Cost $4,453,926) | | | | 4,453,161 | |
Total Loan Participations and Assignments (Cost $4,870,749) | | | | 4,868,965 | |
| | | Shares | | | Value ($) | |
| | | | |
| Preferred Stock 0.1% | |
| United States | |
| Ally Financial, Inc., Series G, 144A, 7.0% (Cost $46,589) | | | 47 | | | | 46,783 | |
| | | Contract Amount | | | Value ($) | |
| | | | |
| Call Options Purchased 0.0% | |
| Options on Interest Rate Swap Contracts | |
Pay Fixed Rate — 3.72% – Receive Floating — LIBOR, Swap Expiration Date 4/22/2026, Option Expiration Date 4/20/20161 (Cost $29,610) | | | 600,000 | | | | 19,068 | |
| | | % of Net Assets | | | Value ($) | |
| | | | |
Total Investment Portfolio (Cost $82,298,396)† | | | 135.1 | | | | 84,115,321 | |
| Notes Payable | | | (41.7 | ) | | | (26,000,000 | ) |
| Other Assets and Liabilities, Net | | | 6.6 | | | | 4,161,229 | |
| Net Assets | | | 100.0 | | | | 62,276,550 | |
The following table represents bonds that are in default:
| Security | | Coupon | | Maturity Date | | Principal Amount ($) | | | Cost ($) | | | Value ($) | |
| Independencia International Ltd.* | | | 12.0 | % | 12/30/2016 | | | 577,088 | | | | 1,014,646 | | | | 0 | |
| Energy Future Holdings Corp.* | | | 6.5 | % | 11/15/2024 | | | 25,000 | | | | 14,503 | | | | 10,500 | |
| | | | | | | | | | | | | 1,029,149 | | | | 10,500 | |
* Non-income producing security.
** Floating rate securities' yields vary with a designated market index or market rate, such as the coupon-equivalent of the U.S. Treasury Bill. These securities are shown at their current rate as of April 30, 2014.
*** Senior loans in the Fund's portfolio generally are subject to mandatory and/or optional payment. As a result, the actual remaining maturity of senior loans in the Fund's portfolio may be substantially less than the stated maturities shown in this report. Senior loans pay interest at rates which vary based on prevailing interest rates, such as the prime rate offered by a major U.S. bank or LIBOR, and are shown at their current rate as of April 30, 2014.
† The cost for federal income tax purposes was $82,298,476. At April 30, 2014, net unrealized appreciation for all securities based on tax cost was $1,816,845. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $4,170,030 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,353,185.
(a) Principal amount stated in U.S. dollars unless otherwise noted.
(b) When-issued security.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
LIBOR: London Interbank Offered Rate
PIK: Denotes that all or a portion of the income is paid in-kind in the form of additional principal.
REG S: Securities sold under Regulation S may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
REIT: Real Estate Investment Trust
At April 30, 2014, open written options contracts were as follows:
| Options on Interest Rate Swap Contracts | |
| | Swap Effective/ Expiration Date | | Contract Amount | | Option Expiration Date | | Premiums Received ($) | | | Value ($) (c) | |
Call Options Receive Fixed — 4.22% – Pay Floating — LIBOR | 4/22/2016 4/22/2026 | | | 600,000 | 1 | 4/20/2016 | | | 21,390 | | | | (11,043 | ) |
(c) Unrealized appreciation on written options on interest rate swap contracts at April 30, 2014 was $10,347.
At April 30, 2014, open credit default swap contracts sold were as follows:
| Bilateral Swaps | |
Effective/ Expiration Dates | | Notional Amount ($) (d) | | | Fixed Cash Flows Received | | Underlying Debt Obligation/ Quality Rating (e) | | Value ($) | | | Upfront Payments Paid/ (Received) ($) | | | Unrealized Appreciation ($) | |
6/20/2013 9/20/2018 | | | 50,000 | 2 | | | 5.0 | % | DISH DBS Corp., 6.75%, 6/1/2021, BB– | | | 7,629 | | | | 3,922 | | | | 3,707 | |
(d) The maximum potential amount of future undiscounted payments that the Fund could be required to make under a credit default swap contract would be the notional amount of the contract. These potential amounts would be partially offset by any recovery values of the referenced debt obligation or net amounts received from the settlement of buy protection credit default swap contracts entered into by the Fund for the same referenced debt obligation, if any.
(e) The quality ratings represent the higher of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings and are unaudited.
Counterparties:
1 Nomura International PLC
2 Credit Suisse
As of April 30, 2014, the Fund had the following open forward foreign currency exchange contracts:
| Contracts to Deliver | | In Exchange For | | Settlement Date | | Unrealized Appreciation ($) | | Counterparty |
| USD | | | 151,978 | | EUR | | | 110,000 | | 5/7/2014 | | | 628 | | Citigroup, Inc. |
| EUR | | | 4,705,000 | | USD | | | 6,537,971 | | 5/22/2014 | | | 10,838 | | Citigroup, Inc. |
| Total unrealized appreciation | | | | | 11,466 | |
| Contracts to Deliver | | In Exchange For | | Settlement Date | | Unrealized Depreciation ($) | | Counterparty |
| GBP | | | 25,000 | | USD | | | 41,834 | | 5/22/2014 | | | (369 | ) | JPMorgan Chase Securities, Inc. |
| Currency Abbreviations |
BRL Brazilian Real EUR Euro GBP British Pound MXN Mexican Peso USD United States Dollar |
For information on the Fund's policy and additional disclosures regarding options purchased, written option contracts, credit default swap contracts and forward foreign currency exchange contracts, please refer to Note B in the accompanying Notes to Financial Statements.
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of April 30, 2014 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments and other receivables, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | |
| Fixed Income Investments (f) | |
| Bonds | | $ | — | | | $ | 79,180,505 | | | $ | 0 | | | $ | 79,180,505 | |
| Loan Participations and Assignments | | | — | | | | 4,868,965 | | | | — | | | | 4,868,965 | |
| Preferred Stock (f) | | | — | | | | 46,783 | | | | — | | | | 46,783 | |
| Derivatives (g) | | | | | | | | | | | | | | | | |
| Purchased Options | | | — | | | | 19,068 | | | | — | | | | 19,068 | |
| Credit Default Swap Contracts | | | — | | | | 3,707 | | | | — | | | | 3,707 | |
| Forward Foreign Currency Exchange Contracts | | | — | | | | 11,466 | | | | — | | | | 11,466 | |
| Total | | $ | — | | | $ | 84,130,494 | | | $ | 0 | | | $ | 84,130,494 | |
| Liabilities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | |
| Derivatives (g) | | | | | | | | | | | | | | | | |
| Forward Foreign Currency Exchange Contracts | | $ | — | | | $ | (369 | ) | | $ | — | | | $ | (369 | ) |
| Written Options | | | — | | | | (11,403 | ) | | | — | | | | (11,403 | ) |
| Total | | $ | — | | | $ | (11,772 | ) | | $ | — | | | $ | (11,772 | ) |
(f) See Investment Portfolio for additional detailed categorizations.
(g) Derivatives include value of options purchased, value of written options and unrealized appreciation (depreciation) on credit default swap contracts and forward foreign currency exchange contracts.
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities | as of April 30, 2014 (Unaudited) | |
| Assets | |
| Investments in non-affiliated securities, at value (cost $82,298,396) | | $ | 84,115,321 | |
| Cash | | | 3,830,047 | |
| Foreign currency, at value (cost $258,023) | | | 246,078 | |
| Receivable for investments sold — when-issued securities | | | 95,219 | |
| Dividends receivable | | | 795 | |
| Interest receivable | | | 1,273,543 | |
| Unrealized appreciation on swap contracts | | | 3,707 | |
| Unrealized appreciation on forward foreign currency exchange contracts | | | 11,466 | |
| Upfront payments paid on swap contracts | | | 3,922 | |
| Foreign taxes recoverable | | | 20,193 | |
| Other asset | | | 1,809 | |
| Total assets | | | 89,602,100 | |
| Liabilities | |
| Payable for investments purchased | | | 481,331 | |
| Payable for investments purchased — when-issued securities | | | 638,274 | |
| Notes payable | | | 26,000,000 | |
| Interest on notes payable | | | 41,920 | |
| Options written, at value (premium received $21,390) | | | 11,043 | |
| Unrealized depreciation on forward foreign currency exchange contracts | | | 369 | |
| Accrued management fee | | | 50,800 | |
| Accrued Directors' fees | | | 280 | |
| Other accrued expenses and payables | | | 101,533 | |
| Total liabilities | | | 27,325,550 | |
| Net assets, at value | | $ | 62,276,550 | |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of April 30, 2014 (Unaudited) (continued) | |
| Net Assets Consist of | |
| Undistributed net investment income | | | 343,098 | |
Net unrealized appreciation (depreciation) on: Investments | | | 1,816,925 | |
| Swap contracts | | | 3,707 | |
| Foreign currency | | | (1,774 | ) |
| Written options | | | 10,347 | |
| Accumulated net realized gain (loss) | | | (2,632,091 | ) |
| Paid-in capital | | | 62,736,338 | |
| Net assets, at value | | $ | 62,276,550 | |
| Net Asset Value | |
Net asset value per share ($62,276,550 ÷ 6,657,025 shares of common stock issued and outstanding, $.01 par value, 100,000,000 shares authorized) | | $ | 9.36 | |
The accompanying notes are an integral part of the financial statements.
| for the six months ended April 30, 2014 (Unaudited) | |
| Investment Income | |
| Interest | | $ | 2,523,988 | |
| Dividends | | | 795 | |
| Total income | | | 2,524,783 | |
Expenses: Management fee | | | 306,597 | |
| Services to shareholders | | | 3,288 | |
| Custodian fees | | | 30,904 | |
| Accounting fees | | | 42,004 | |
| Audit fees | | | 44,406 | |
| Legal fees | | | 85,879 | |
| Reports to shareholders | | | 32,241 | |
| Directors' fees and expenses | | | 4,405 | |
| Interest expense | | | 146,847 | |
| Stock exchange listing fees | | | 11,778 | |
| Other | | | 20,638 | |
| Total expenses | | | 728,987 | |
| Net investment income | | | 1,795,796 | |
| Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) from: Investments | | | (175,630 | ) |
Other receivable**** | | | 317,400 | |
| Swap contracts | | | 814 | |
| Foreign currency | | | (129,578 | ) |
| | | | 13,006 | |
Change in net unrealized appreciation (depreciation) on: Investments | | | 538,706 | |
Other receivable**** | | | (281,369 | ) |
| Swap contracts | | | 1,603 | |
| Written options | | | 8,690 | |
| Foreign currency | | | (10,226 | ) |
| | | | 257,404 | |
| Net gain (loss) | | | 270,410 | |
| Net increase (decrease) in net assets resulting from operations | | $ | 2,066,206 | |
**** Lehman Brothers International issued a Claims Determination Deed for the Fund as a partial settlement for a loss written off by the Fund in 2008. During the period, the Fund received the final two payments.
The accompanying notes are an integral part of the financial statements.
| for the six months ended April 30, 2014 (Unaudited) | |
Increase (Decrease) in Cash: Cash Flows from Operating Activities | | | |
| Net increase (decrease) in net assets resulting from operations | | $ | 2,066,206 | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) by operating activities: Purchases of long-term investments | | | (14,994,982 | ) |
| Net amortization of premium/(accretion of discount) | | | 133,319 | |
| Proceeds from sales and maturities of long-term investments | | | 15,359,739 | |
| (Increase) decrease in interest receivable | | | 12,255 | |
| (Increase) decrease in dividends receivable | | | (795 | ) |
| (Increase) decrease in deferred loan costs | | | 76,823 | |
| (Increase) decrease in other assets | | | (14,713 | ) |
| Increase (decrease) in upfront payments paid/received on credit default swap contracts | | | 442 | |
| (Increase) decrease in receivable for investments and when-issued securities sold | | | 61,360 | |
| Increase (decrease) in interest on notes payable | | | 1,565 | |
| Increase (decrease) in payable for investments and when-issued securities purchased | | | (822,474 | ) |
| (Increase) decrease in written options, at value | | | (8,690 | ) |
| Increase (decrease) in other accrued expenses and payables | | | (57,250 | ) |
| Change in unrealized (appreciation) depreciation on investments and other receivable | | | (257,337 | ) |
| Change in unrealized (appreciation) depreciation on swaps | | | (1,603 | ) |
| Change in unrealized (appreciation) depreciation on forward foreign currency exchange contracts | | | 8,160 | |
| Net realized (gain) loss from investments and other receivable | | | (141,770 | ) |
| Cash provided (used) by operating activities | | | 1,420,255 | |
| Cash Flows from Financing Activities | | | | |
| Net increase (decrease) in notes payable | | | 3,000,000 | |
| Payment for shares repurchased | | | (1,315,528 | ) |
| Distributions paid | | | (1,825,160 | ) |
| Cash provided (used) for financing activities | | | (140,688 | ) |
| Increase (decrease) in cash | | | 1,279,567 | |
| Cash at beginning of period (including foreign currency) | | | 2,796,558 | |
| Cash at end of period (including foreign currency) | | $ | 4,076,125 | |
| Supplemental Disclosure | | | | |
| Interest paid on notes | | | (145,282 | ) |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | Increase (Decrease) in Net Assets | | Six Months Ended April 30, 2014 (Unaudited) | | | Year Ended October 31, 2013 | |
Operations: Net investment income | | $ | 1,795,796 | | | $ | 3,855,527 | |
Operations: Net investment income | | $ | 1,795,796 | | | $ | 3,855,527 | |
| Net realized gain (loss) | | | 13,006 | | | | 2,854,488 | |
| Change in net unrealized appreciation (depreciation) | | | 257,404 | | | | (6,811,690 | ) |
| Net increase (decrease) in net assets resulting from operations | | | 2,066,206 | | | | (101,675 | ) |
| Distributions to shareholders from net investment income | | | (1,825,160 | ) | | | (3,850,424 | ) |
Fund share transactions: Cost of shares repurchased | | | (1,248,682 | ) | | | (2,275,810 | ) |
| Net increase (decrease) in net assets from Fund share transactions | | | (1,248,682 | ) | | | (2,275,810 | ) |
| Increase (decrease) in net assets | | | (1,007,636 | ) | | | (6,227,909 | ) |
| Net assets at beginning of period | | | 63,284,186 | | | | 69,512,095 | |
| Net assets at end of period (including undistributed net investment income of $343,098 and $372,462, respectively) | | $ | 62,276,550 | | | $ | 63,284,186 | |
| Other Information | |
| Shares outstanding at beginning of period | | | 6,811,025 | | | | 7,091,818 | |
| Shares repurchased | | | (154,000 | ) | | | (280,793 | ) |
| Shares outstanding at end of period | | | 6,657,025 | | | | 6,811,025 | |
The accompanying notes are an integral part of the financial statements.
| | | | Years Ended October 31, | |
| | Six Months Ended 4/30/14 (Unaudited) | | | 2012 | | | 2011 | | | 2010 | | | 2009 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 9.29 | | | $ | 9.80 | | | $ | 8.62 | | | $ | 8.88 | | | $ | 8.04 | | | $ | 5.99 | |
Income (loss) from investment operations: Net investment incomea | | | .27 | | | | .55 | | | | .59 | | | | .50 | | | | .55 | | | | .55 | |
| Net realized and unrealized gain (loss) | | | .05 | | | | (.55 | ) | | | 1.08 | e | | | (.26 | ) | | | .79 | | | | 2.30 | |
| Total from investment operations | | | .32 | | | | (.00 | )*** | | | 1.67 | | | | .24 | | | | 1.34 | | | | 2.85 | |
Less distributions from: Net investment income | | | (.27 | ) | | | (.55 | ) | | | (.51 | ) | | | (.55 | ) | | | (.51 | ) | | | (.57 | ) |
| Return of capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | (.23 | ) |
| Total distributions | | | (.27 | ) | | | (.55 | ) | | | (.51 | ) | | | (.55 | ) | | | (.51 | ) | | | (.80 | ) |
NAV accretion resulting from repurchases of shares and shares tendered at a discount to NAVa | | | .02 | | | | .04 | | | | .02 | | | | .05 | | | | .01 | | | | — | |
| Net asset value, end of period | | $ | 9.36 | | | $ | 9.29 | | | $ | 9.80 | | | $ | 8.62 | | | $ | 8.88 | | | $ | 8.04 | |
| Market value, end of period | | $ | 8.22 | | | $ | 8.29 | | | $ | 8.82 | | | $ | 7.65 | | | $ | 8.44 | | | $ | 6.75 | |
| Total Return | |
Per share net asset value (%)b | | | 4.05 | ** | | | 1.06 | | | | 20.86 | e | | | 4.12 | | | | 18.08 | | | | 53.24 | |
Per share market value (%)b | | | 2.51 | ** | | | .20 | | | | 22.57 | | | | (2.78 | ) | | | 33.67 | | | | 53.20 | |
| Ratios to Average Net Assets and Supplemental Data | |
| Net assets, end of period ($ millions) | | | 62 | | | | 63 | | | | 70 | | | | 63 | | | | 88 | | | | 80 | |
| Ratio of expenses (including interest expense) (%) | | | 2.25 | * | | | 2.21 | | | | 2.36 | | | | 2.22 | | | | 1.68 | | | | 1.59 | |
| Ratio of expenses (excluding interest expense) (%) | | | 1.77 | * | | | 1.68 | | | | 1.67 | | | | 1.86 | | | | 1.68 | | | | 1.55 | |
| Ratio of net investment income (%) | | | 5.98 | * | | | 5.77 | | | | 6.54 | | | | 5.75 | | | | 6.53 | | | | 7.77 | |
| Portfolio turnover rate (%) | | | 18 | ** | | | 48 | | | | 25 | | | | 89 | | | | 31 | | | | 47 | c |
| Total debt outstanding, end of period ($ thousands) | | | 26,000 | | | | 23,000 | | | | 31,000 | | | | 26,000 | | | | — | | | | — | |
Asset coverage per $1,000 of debtd | | | 3,395 | | | | 3,751 | | | | 3,242 | | | | 3,410 | | | | — | | | | — | |
| | |
a Based on average shares outstanding during the period. b Total return based on net asset value reflects changes in the Fund's net asset value during the period. Total return based on market value reflects changes in market value. Each figure includes reinvestments of distributions. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund's shares trade during the period. c The portfolio turnover rate including reverse repurchase agreements was 87% for the year ended October 31, 2009. d Asset coverage equals the total net assets plus borrowings of the Fund divided by the borrowings outstanding at period end. e During the year ended October 31, 2012, Lehman Brothers International issued a Claims Determination Deed to the Fund as a partial settlement for a loss written off by the Fund in 2008. The impact of this claim amounted to $0.13 per share. Excluding this pending claim, total return would have been 1.39% lower. * Annualized ** Not annualized *** Amount is less than $.005. |
Notes to Financial Statements (Unaudited)
A. Organization and Significant Accounting Policies
DWS Global High Income Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end, diversified management investment company organized as a Maryland corporation.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Debt securities and loan participations and assignments are valued at prices supplied by independent pricing services approved by the Fund's Board. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers and loan participations and assignments are valued at the mean of the most recent bid and ask quotations or evaluated prices, as applicable, obtained from broker-dealers. These securities are generally categorized as Level 2.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.
Swap contracts are valued daily based upon prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer. Swap contracts are generally categorized as Level 2.
Exchange-traded options are valued at the last sale price or, in the absence of a sale, the mean between the closing bid and asked prices or at the most recent asked price (bid for purchased options) if no bid or asked price are available. Exchange-traded options are generally categorized as Level 1. Over-the-counter written or purchased options are valued at the price provided by the broker-dealer with which the option was traded and are generally categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security's disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company's or issuer's financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurement is included in a table following the Fund's Investment Portfolio.
Securities Lending. DWS Global High Income Fund, Inc. is approved to participate in securities lending, but had no securities on loan during the six months ended April 30, 2014. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains the benefits of owning the securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
Loan Participations and Assignments. Loan Participations and Assignments are portions of loans originated by banks and sold in pieces to investors. These floating-rate loans ("Loans") in which the Fund invests are arranged between the borrower and one or more financial institutions ("Lenders"). These Loans may take the form of Senior Loans, which are corporate obligations often issued in connection with recapitalizations, acquisitions, leveraged buy outs and refinancing. The Fund invests in such Loans in the form of participations in Loans ("Participations") or assignments of all or a portion of Loans from third parties ("Assignments"). Participations typically result in the Fund having a contractual relationship with only the Lender, not with the borrower. The Fund has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In connection with purchasing Participations, the Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, or any rights of set off against the borrower, and the Fund will not benefit directly from any collateral supporting the Loan in which it has purchased the Participation. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. Assignments typically result in the Fund having a direct contractual relationship with the borrower, and the Fund may enforce compliance by the borrower with the terms of the loan agreement. Loans held by the Fund are generally in the form of Assignments, but the Fund may also invest in Participations. All Loans involve interest rate risk, liquidity risk and credit risk, including the potential default or insolvency of the borrower.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.
When-Issued/Delayed Delivery Securities. The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction, it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery transactions from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
Additionally, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated. Estimated tax liabilities on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.
Under the Regulated Investment Company Modernization Act of 2010, net capital losses incurred post-enactment may be carried forward indefinitely, and their character is retained as short-term and/or long-term. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At October 31, 2013, the Fund had a net tax basis capital loss carryforward of $2,345,000 of pre-enactment losses, which may be applied against any realized net taxable capital gains until October 31, 2017, or until fully utilized, whichever occurs first.
The Fund has reviewed the tax positions for the open tax years as of October 31, 2013 and has determined that no provision for income tax and/or uncertain tax provisions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in forward currency contracts, recognition of certain currency gain (loss) as ordinary income (loss), foreign denominated securities and certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Statement of Cash Flows. Information on financial transactions which have been settled through the receipt and disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows represents the cash and foreign currency position at the Fund's custodian bank at April 30, 2014.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes with the exception of securities in default of principal. The Fund uses the specific identification method for determining realized gain or loss on investments. The value of additional securities received as an interest payment is recorded as income and as the cost basis of such securities.
B. Derivative Instruments
Swaps. A swap is a contract between two parties to exchange future cash flows at periodic intervals based on the notional amount of the swap. A bilateral swap is a transaction between the fund and a counterparty where cash flows are exchanged between the two parties. A centrally cleared swap is a transaction executed between the fund and a counterparty, then cleared by a clearing member through a central clearinghouse. The central clearinghouse serves as the counterparty, with whom the fund exchanges cash flows.
The value of a swap is adjusted daily, and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Statement of Assets and Liabilities. Gains or losses are realized when the swap expires or is closed. Certain risks may arise when entering into swap transactions including counterparty default; liquidity; or unfavorable changes in interest rates or the value of the underlying reference security, commodity or index. In connection with bilateral swaps, securities and/or cash may be identified as collateral in accordance with the terms of the swap agreement to provide assets of value and recourse in the event of default. The maximum counterparty credit risk is the net present value of the cash flows to be received from or paid to the counterparty over the term of the swap, to the extent that this amount is beneficial to the Fund, in addition to any related collateral posted to the counterparty by the Fund. This risk may be partially reduced by a master netting arrangement between the Fund and the counterparty. Upon entering into a centrally cleared swap, the Fund is required to deposit with a financial intermediary cash or securities ("initial margin") in an amount equal to a certain percentage of the notional amount of the swap. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the swap. In a cleared swap transaction, counterparty risk is minimized as the central clearinghouse acts as the counterparty.
An upfront payment, if any, made by the Fund is recorded as an asset in the Statement of Assets and Liabilities. An upfront payment, if any, received by the Fund is recorded as a liability in the Statement of Assets and Liabilities. Payments received or made at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations.
Credit default swaps are agreements between a buyer and a seller of protection against predefined credit events for the reference entity. The Fund may enter into credit default swaps to gain exposure to an underlying issuer's credit quality characteristics without directly investing in that issuer or to hedge against the risk of a credit event on debt securities. As a seller of a credit default swap, the Fund is required to pay the par (or other agreed-upon) value of the referenced entity to the counterparty with the occurrence of a credit event by a third party, such as a U.S. or foreign corporate issuer, on the reference entity, which would likely result in a loss to the Fund. In return, the Fund receives from the counterparty a periodic stream of payments over the term of the swap provided that no credit event has occurred. If no credit event occurs, the Fund keeps the stream of payments with no payment obligations. The Fund may also buy credit default swaps, in which case the Fund functions as the counterparty referenced above. This involves the risk that the swap may expire worthless. It also involves counterparty risk that the seller may fail to satisfy its payment obligations to the Fund with the occurrence of a credit event. When the Fund sells a credit default swap, it will cover its commitment. This may be achieved by, among other methods, maintaining cash or liquid assets equal to the aggregate notional value of the reference entities for all outstanding credit default swaps sold by the Fund. For the six months ended April 30, 2014, the Fund entered into credit default swap agreements to gain exposure to the underlying issuer's credit quality characteristics.
Under the terms of a credit default swap, the Fund receives or makes periodic payments based on a specified interest rate on a fixed notional amount. These payments are recorded as a realized gain or loss in the Statement of Operations. Payments received or made as a result of a credit event or termination of the swap are recognized, net of a proportional amount of the upfront payment, as realized gains or losses in the Statement of Operations.
A summary of the open credit default swap contracts as of April 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended April 30, 2014, the investment in credit default swap contracts sold had a total notional value of $50,000.
Options. An option contract is a contract in which the writer (seller) of the option grants the buyer of the option, upon payment of a premium, the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. Certain options, including options on indices and interest rate options, will require cash settlement by the Fund if exercised. For the six months ended April 30, 2014, the Fund entered into options on interest rate swaps in order to hedge against potential adverse interest rate movements of portfolio assets.
If the Fund writes a covered call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Fund writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. The Fund's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the Fund's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities or currencies hedged.
A summary of the open purchased option contracts as of April 30, 2014 is included in the Fund's Investment Portfolio. A summary of open written option contracts is included in the table following the Fund's Investment Portfolio. For the six months ended April 30, 2014, the investment in written option contracts had a total value generally indicative of a range from approximately $11,000 to $20,000, and purchased option contracts had a total value generally indicative of a range from approximately $19,000 to $29,000.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract (forward currency contract) is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. For the six months ended April 30, 2014, the Fund entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings and to facilitate transactions in foreign currency denominated securities.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. On the settlement date of the forward currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was closed. Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. The maximum counterparty credit risk to the Fund is measured by the unrealized gain on appreciated contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
A summary of the open forward currency contracts as of April 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended April 30, 2014, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from $2,220,000 to approximately $6,805,000 and the investment in forward currency contracts long vs. US dollars had a total contract value generally indicative of a range from $0 to approximately $152,000.
The following tables summarize the value of the Fund's derivative instruments held as of April 30, 2014 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
| Asset Derivatives | | Purchased Options | | | Swap Contracts | | | Forward Contracts | | | Total | |
| Interest Rate Contracts (a) | | $ | 19,068 | | | $ | — | | | $ | — | | | $ | 19,068 | |
| Credit Contracts (b) | | | — | | | | 3,707 | | | | — | | | | 3,707 | |
| Foreign Exchange Contracts (c) | | | — | | | | — | | | | 11,466 | | | | 11,466 | |
| | | $ | 19,068 | | | $ | 3,707 | | | $ | 11,466 | | | $ | 34,241 | |
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Investments in securities, at value (includes purchased options) (b) Unrealized appreciation on swap contracts (c) Unrealized appreciation on forward foreign currency exchange contracts | |
| Liability Derivatives | | Written Options | | | Forward Contracts | | | Total | |
| Interest Rate Contracts (a) | | $ | (11,043 | ) | | | — | | | | (11,043 | ) |
| Foreign Exchange Contracts (b) | | | — | | | | (369 | ) | | | (369 | ) |
| | | $ | (11,043 | ) | | $ | (369 | ) | | $ | (11,412 | ) |
The above derivative is located in the following Statement of Assets and Liabilities account: (a) Options written, at value (b) Unrealized appreciation on forward foreign currency exchange contracts | |
Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the six months ended April 30, 2014 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
| Realized Gain (Loss) | | Swap Contracts | | | Forward Contracts | | | Total | |
| Credit Contracts (a) | | $ | 814 | | | $ | — | | | $ | 814 | |
| Foreign Exchange Contracts (b) | | | — | | | | (78,176 | ) | | | (78,176 | ) |
| | | $ | 814 | | | $ | (78,176 | ) | | $ | (77,362 | ) |
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Net realized gain (loss) on swap contracts (b) Net realized gain (loss) from foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions) | |
| Change in Net Unrealized Appreciation (Depreciation) | | Purchased Options | | | Written Options | | | Swap Contracts | | | Forward Contracts | | | Total | |
| Interest Rate Contracts (a) | | $ | (10,355 | ) | | $ | 8,690 | | | $ | — | | | $ | — | | | $ | (1,665 | ) |
| Credit Contracts (b) | | | — | | | | — | | | | 1,603 | | | | — | | | | 1,603 | |
| Foreign Exchange Contracts (c) | | | — | | | | — | | | | — | | | | (8,160 | ) | | | (8,160 | ) |
| | | $ | (10,355 | ) | | $ | 8,690 | | | $ | 1,603 | | | $ | (8,160 | ) | | $ | (8,222 | ) |
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Change in net unrealized appreciation (depreciation) on investments (includes purchased options) and written options, respectively (b) Change in net unrealized appreciation (depreciation) on swap contracts (c) Change in net unrealized appreciation (depreciation) on foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions) | |
As of April 30, 2014, the Fund has transactions subject to enforceable master netting agreements. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by derivative type, including any collateral exposure, is included in the following tables:
| Counterparty | | Gross Amounts of Assets Presented in the Statement of Assets and Liabilities | | | Financial Instruments and Derivatives Available for Offset | | | Collateral Received | | | Net Amount of Derivative Assets | |
| Citigroup, Inc. | | $ | 11,466 | | | $ | — | | | $ | — | | | $ | 11,466 | |
| Credit Suisse | | | 3,707 | | | | — | | | | — | | | | 3,707 | |
| Nomura International PLC | | | 19,068 | | | | (11,043 | ) | | | — | | | | 8,025 | |
| | | $ | 34,241 | | | $ | (11,043 | ) | | $ | — | | | $ | 23,198 | |
| Counterparty | | Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities | | | Financial Instruments and Derivatives Available for Offset | | | Collateral Pledged | | | Net Amount of Derivative Liabilities | |
| JPMorgan Chase Securities, Inc. | | $ | 369 | | | $ | — | | | $ | — | | | $ | 369 | |
| Nomura International PLC | | | 11,043 | | | | (11,043 | ) | | | — | | | | — | |
| | | $ | 11,412 | | | $ | (11,043 | ) | | $ | — | | | $ | 369 | |
C. Purchases and Sales of Securities
During the six months ended April 30, 2014, purchases and sales of investment securities (excluding short-term investments) aggregated $14,994,982 and $15,359,739, respectively.
For the six months ended April 30, 2014, transactions for written options on interest rate swap contracts were as follows:
| | | Contracts | | | Premium | |
| Outstanding, beginning of period | | | 600,000 | | | $ | 21,390 | |
| Options closed | | | — | | | | — | |
| Outstanding, end of period | | | 600,000 | | | $ | 21,390 | |
D. Related Parties
Management Agreement. Under the Investment Advisory, Management and Administration Agreement ("Management Agreement") with Deutsche Investment Management Americas Inc. ("DIMA" or the "Manager"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Manager directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Manager determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. In addition to portfolio management services, the Manager provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 1.00% of the Fund's average weekly net assets, computed and accrued daily and payable monthly.
Service Provider Fees. DWS Investments Service Company ("DISC"), an affiliate of the Manager, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended April 30, 2014, the amount charged to the Fund by DISC aggregated $1,417, of which $230 is unpaid.
DIMA is responsible for determining the daily net asset value per share and maintaining the portfolio and general accounting records of the Fund. Pursuant to a sub-accounting agreement between DIMA and State Street Bank and Trust Company ("SSB"), DIMA has delegated all accounting functions to SSB. DIMA compensates SSB out of the accounting fee it receives from the Fund. For the six months ended April 30, 2014, the amount charged to the Fund by DIMA aggregated $42,004, of which $5,155 is unpaid.
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the six months ended April 30, 2014, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $7,421, all of which is unpaid.
Directors' Fees and Expenses. The Fund paid retainer fees to each Director not affiliated with the Advisor, plus specified amounts to the Board Chairperson and Vice Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicle. The Fund may invest uninvested cash balances in Central Cash Management Fund, which is managed by the Advisor. The Fund indirectly bears its proportionate share of the expenses of Central Cash Management Fund. Central Cash Management Fund does not pay the Advisor an investment management fee. Central Cash Management Fund seeks a high level of current income consistent with liquidity and the preservation of capital.
E. Investing in High-Yield Securities
The Fund's performance could be hurt if a security declines in credit quality or goes into default, or if an issuer does not make timely payments of interest or principal. Because the issuers of high-yield debt securities or junk bonds (debt securities rated below the fourth-highest category) may be in uncertain financial health, the risk of loss from default by the issuer is significantly greater. Prices and yields of high yield securities will fluctuate over time and, during periods of economic uncertainty, volatility of high yield securities may adversely affect a fund's net asset value. Because the Fund may invest in securities not paying current interest or in securities already in default, these risks may be more pronounced.
F. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not typically associated with investing in developed markets. These risks include revaluation of currencies, high rates of inflation or deflation, repatriation restrictions on income and capital, and future adverse political, social and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls or delayed settlements, and may have prices that are more volatile or less easily assessed than those of comparable securities of issuers in developed markets.
The Fund's investments in Russian securities may be affected by current events involving the Ukraine, Crimea and Russia. If the United States or other nations or international organizations impose additional economic or other sanctions or take other actions affecting Russian individuals, Russian issuers or the Russian economy, such sanctions or actions may materially adversely affect the value or liquidity of the Fund's Russia securities, as may any countermeasures or retaliatory measures that may be taken by Russia.
G. Share Repurchases
The Board of Directors previously authorized the Fund to effect periodic repurchases of its outstanding shares in the open market from time to time when the Fund's shares trade at a discount to their net asset value. During the six months ended April 30, 2014, the Fund purchased 154,000 shares of common stock on the open market at a total cost of $1,248,682. The average discount of these purchases, comparing the purchase price to the net asset value at the time of purchase, was approximately 11.70%.
H. Borrowings
The Fund has a secured line of credit with a commercial bank in an amount up to $30,000,000 ($34,000,000 prior to April 10, 2014), with a maturity date of April 8, 2015. Loans under the facility generally bear interest at the applicable LIBOR rate plus 0.85%. A commitment fee on any unused portion of the credit line is charged to the Fund and is included with "interest expense" in the Statement of Operations. An arrangement fee incurred by the Fund in connection with its loan was deferred and was amortized over a one-year period.
At April 30, 2014, the Fund had a notes payable outstanding of $26,000,000. The weighted average outstanding daily balance of all loans during the six months ended April 30, 2014 was approximately $25,930,000, with a weighted average borrowing cost of 1.14%. The borrowings were valued at cost, which approximates fair value.
Leverage involves risks and special considerations for the Fund's stockholders, including the likelihood of greater volatility of net asset value and market price of, and dividends on, the Fund's shares than a comparable portfolio without leverage; the risk that fluctuations in interest rates on such borrowings will reduce the return to stockholders; and the effect of leverage in a declining market, which is likely to cause a greater decline in the net asset value of the Fund's shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the Fund's shares.
Changes in the value of the Fund's portfolio will be borne by the stockholders. If there is a net decrease (or increase) in the value of the Fund's investment portfolio, leverage will decrease (or increase) the net asset value per share to a greater extent than if leverage were not used. It is also possible that the Fund will be required to sell assets at a time when it would otherwise not do so, possibly at a loss, in order to redeem or meet payment obligations on borrowings or to comply with asset coverage or other restrictions imposed by the lender. The Fund is subject to certain restrictions on its investments under the terms of its credit agreement. Moreover, certain covenants contained in the credit agreement impose asset coverage or portfolio composition requirements that are more stringent than those imposed on the Fund by the 1940 Act.
There is no assurance that the Fund's leveraging strategy will be successful.
I. Fund Name Change
Effective August 11, 2014, the "DWS Funds" will be rebranded "Deutsche Funds." As a result, DWS Global High Income Fund, Inc. will be renamed Deutsche Global High Income Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
A summary of the fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") is set forth below. You may obtain more detailed information by requesting a copy of the Plan from DWS Investments Service Company (the "Transfer Agent") by writing to DWS Global High Income Fund, Inc. Dividend Reinvestment and Cash Purchase Plan, c/o DWS Investments Service Company, P.O. Box 219066, Kansas City, MO 64121-9066, by calling (800) 294-4366 or by visiting the fund's Web site at dws-investments.com. The Transfer Agent maintains all participant accounts in the Plan and furnishes written confirmation of all transactions in the account, including information needed by participants for personal and tax records.
The Plan offers stockholders an automatic way to reinvest their dividends and capital gain distributions in shares of the fund. Each stockholder of record must enroll in the Plan by instructing the Transfer Agent in writing. Such a notice must be received by the Transfer Agent not less than 10 days prior to the record date for a dividend or distribution in order to be effective with respect to that dividend or distribution. A notice which is not received by that time will be effective only with respect to subsequent dividends and distributions. If your shares are held in the name of a broker or other nominee as the stockholder of record, please consult your broker or nominee to determine whether it is participating in the Plan on your behalf.
If the market price per share on the payment date for the dividend or distribution (the "Valuation Date") equals or exceeds net asset value per share, the fund will issue shares of common stock to participants at the greater of the following on the Valuation Date: (a) net asset value or (b) 95% of the market price. If the net asset value exceeds the market price of fund shares on the Valuation Date, the Plan Agent (currently, Computershare, Inc.) will use the dividend or distribution (less each participant's pro rata share of brokerage commissions) to buy fund shares in the open market for the participant's account. Such purchases will be made on or shortly after the Valuation Date, and in no event more than 45 days after the Valuation Date, except where temporary curtailment or suspension of purchase is necessary to comply with federal securities law. If the fund should declare an income dividend or net capital gain distribution payable only in cash, the Plan Agent will, as agent for the participants, buy fund shares in the open market for each participant's account on, or shortly after, the payment date.
The reinvestment of dividends and capital gain distributions does not relieve the participant of any tax that may be payable on such dividends and distributions. The Transfer Agent will report to each participant the taxable amount of dividends and distributions credited to his or her account. Participants will be treated as receiving the amount of the distributions made by the fund, which amount generally will be either equal to the amount of the cash distribution the shareholder would have received if the shareholder had elected to receive cash or, for shares issued by the fund, the fair market value of the shares issued to the participant.
Participants in the Plan also have the option of making additional cash payments to the Transfer Agent, semiannually, in any amount from $100 to $3,000, for investment in the fund's shares. The Plan Agent will use all such monies received from participants to purchase fund shares in the open market on or about February 15 and August 15. To avoid unnecessary cash accumulations, and also to allow ample time for receipt and processing by the Transfer Agent, it is suggested that participants send their voluntary cash payments to be received by the Transfer Agent approximately 10 days (but not more than 30 days) before February 15 or August 15, as the case may be. A participant may withdraw a voluntary cash payment by written notice if the notice is received by the Transfer Agent not less than 48 hours before such payment is to be invested.
There is no service fee charged to participants for reinvesting dividends or distributions from net realized capital gains. The Plan Agent's and/or Transfer Agent's fees for the handling of the reinvestment of dividends and capital gain distributions will be paid by the fund. There will be no brokerage commissions with respect to shares issued directly by the fund as a result of dividends or capital gain distributions payable either in stock or in cash. With respect to purchases of fund shares from voluntary cash payments, each participant will be charged $1.00 for each such purchase. Each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases of fund shares in connection with the reinvestment of any dividends or capital gain distributions, or voluntary cash payments made by the participant. Brokerage charges for purchasing small amounts of stock for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions, because the Plan Agent will be purchasing stock for all participants in blocks and pro-rating the lower commission thus attainable.
The fund reserves the right to terminate the Plan. Notice of the termination will be sent to the participants of the Plan at least 30 days before the record date for a dividend or distribution. The Plan also may be amended by the fund, but (except when necessary or appropriate to comply with applicable law, rules or policies of a regulatory authority) only by giving at least 30 days' written notice to participants in the Plan. A participant may terminate his account under the Plan by written notice to the Transfer Agent. If the written notice is received 10 days before the record day of any distribution, it will be effective immediately. If received after that date, it will be effective as soon as possible after the reinvestment of the dividend or distribution. If a participant elects to sell his shares before the Plan is terminated, the Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale transaction.
This page intentionally left blank.
| |
| Automated Information Lines | | DWS Investments Closed-End Fund Info Line (800) 349-4281 |
| Web Site | | dws-investments.com Obtain fact sheets, financial reports, press releases and webcasts when available. |
| Written Correspondence | | Deutsche Asset & Wealth Management Attn: Secretary of the DWS Funds One Beacon Street Boston, MA 02108 |
| Legal Counsel | | Vedder Price P.C. 222 North LaSalle Street Chicago, IL 60601 |
| Dividend Reinvestment Plan Agent | | Computershare Inc. P.O. Box 43078 Providence, RI 02940-3078 |
| Shareholder Service Agent and Transfer Agent | | DWS Investments Service Company P.O. Box 219066 Kansas City, MO 64121-9066 (800) 294-4366 |
| Custodian | | Brown Brothers Harriman & Company 50 Post Office Square Boston, MA 02110 |
| Independent Registered Public Accounting Firm | | PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110 |
| |
| Proxy Voting | | The fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our Web site — dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 728-3337. |
| Portfolio Holdings | | Following the fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form will be available on the SEC's Web site at sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. The fund's portfolio holdings as of the month-end are posted on dws-investments.com on or after the last day of the following month. More frequent posting of portfolio holdings information may be made from time to time on dws-investments.com. |
| Investment Management | | Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset & Wealth Management, is the investment advisor for the fund. DIMA and its predecessors have more than 80 years of experience managing mutual funds and DIMA provides a full range of investment advisory services to both institutional and retail clients. DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution engaged in a wide variety of financial services, including investment management, retail, private and commercial banking, investment banking and insurance. Deutsche Asset & Wealth Management is the retail brand name in the U.S. for the wealth management and asset management activities of Deutsche Bank AG and DIMA. Deutsche Asset & Wealth Management is committed to delivering the investing expertise, insight and resources of this global investment platform to American investors. |
| NYSE Symbol | | LBF |
| CUSIP Number | | 23338W104 |
| FACTS | | What Does Deutsche Asset & Wealth Management Do With Your Personal Information? |
| Why? | | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | | The types of personal information we collect and share can include: — Social Security number — Account balances — Purchase and transaction history — Bank account information — Contact information such as mailing address, e-mail address and telephone number |
| How? | | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information, the reasons Deutsche Asset & Wealth Management chooses to share and whether you can limit this sharing. |
| Reasons we can share your personal information | | Does Deutsche Asset & Wealth Management share? | Can you limit this sharing? |
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders or legal investigations | | Yes | No |
For our marketing purposes — to offer our products and services to you | | Yes | No |
| For joint marketing with other financial companies | | No | We do not share |
For our affiliates' everyday business purposes — information about your transactions and experiences | | No | We do not share |
For our affiliates' everyday business purposes — information about your creditworthiness | | No | We do not share |
| For non-affiliates to market to you | | No | We do not share |
| Questions? | | Call (800) 728-3337 or e-mail us at service@dws.com | |
| | | | | |
| Who we are |
| Who is providing this notice? | | DWS Investments Distributors, Inc.; Deutsche Investment Management Americas Inc.; DeAM Investor Services, Inc.; DWS Trust Company; the DWS Funds |
| What we do |
| How does Deutsche Asset & Wealth Management protect my personal information? | | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. |
| How does Deutsche Asset & Wealth Management collect my personal information? | | We collect your personal information, for example. When you: — open an account — give us your contact information — provide bank account information for ACH or wire transactions — tell us where to send money — seek advice about your investments |
| Why can't I limit all sharing? | | Federal law gives you the right to limit only — sharing for affiliates' everyday business purposes — information about your creditworthiness — affiliates from using your information to market to you — sharing for non-affiliates to market to you State laws and individual companies may give you additional rights to limit sharing. |
| Definitions |
| Affiliates | | Companies related by common ownership or control. They can be financial or non-financial companies. Our affiliates include financial companies with the DWS or Deutsche Bank ("DB") name, such as DB AG Frankfurt and DB Alex Brown. |
| Non-affiliates | | Companies not related by common ownership or control. They can be financial and non-financial companies. Non-affiliates we share with include account service providers, service quality monitoring services, mailing service providers and verification services to help in the fight against money laundering and fraud. |
| Joint marketing | | A formal agreement between non-affiliated financial companies that together market financial products or services to you. Deutsche Asset & Wealth Management does not jointly market. |
| | | | Rev. 09/2013 |
Notes
Notes
Notes
Notes
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.
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.
