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Share Name | Share Symbol | Market | Type |
---|---|---|---|
First Trust Mortgage Income Fund | NYSE:FMY | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.06 | 0.52% | 11.62 | 11.711 | 11.59 | 11.65 | 15,489 | 21:00:04 |
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21727
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios
L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name
and address of agent for service)
Registrant’s telephone number, including area code: 630-765-8000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2023
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street NE, NW, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) The Report to Shareholders is attached herewith.
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3 |
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15 |
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16 |
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17 |
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26 |
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31 |
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37 |
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39 |
Performance | ||||
Average Annual Total Returns | ||||
1
Year Ended 10/31/23 |
5
Years Ended 10/31/23 |
10
Years Ended 10/31/23 |
Inception
(5/25/05) to 10/31/23 | |
Fund Performance(3) | ||||
NAV | 2.88% | 0.53% | 1.70% | 4.21% |
Market Value | 4.88% | 1.85% | 2.07% | 3.53% |
Index Performance | ||||
Bloomberg U.S. Mortgage Backed Securities (MBS) Index | -0.82% | -1.06% | 0.34% | 2.38% |
(1) | Most recent distribution paid through October 31, 2023. Subject to change in the future. |
(2) | Distribution rates are calculated by annualizing the most recent distribution paid through the report date and then dividing by Common Share Price or NAV, as applicable, as of October 31, 2023. Subject to change in the future. |
(3) | Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(4) | Includes variation margin on futures contracts. |
(5) | The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including S&P Global Ratings, Moody’s Investors Service, Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and the ratings are not equivalent, the highest rating is used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. U.S. Treasury, U.S. Agency and U.S. Agency mortgage-backed securities appear under “Government.” Credit ratings are subject to change. |
Average Annual Total Returns | ||||
1
Year Ended 10/31/23 |
5
Years Ended 10/31/23 |
10
Years Ended 10/31/23 |
Inception
(5/25/05) to 10/31/23 | |
Fund Performance(1) | ||||
NAV | 2.88% | 0.53% | 1.70% | 4.21% |
Market Value | 4.88% | 1.85% | 2.07% | 3.53% |
Index Performance | ||||
Bloomberg U.S. Mortgage Backed Securities (MBS) Index | -0.82% | -1.06% | 0.34% | 2.38% |
(1) | Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
MORTGAGE-BACKED SECURITIES – 56.8% | ||||||||
Collateralized Mortgage Obligations – 18.1% | ||||||||
Banc of America Mortgage Trust | ||||||||
$44,186 |
Series 2002-L, Class 1A1 (a) |
3.55% | 12/01/32 | $32,736 | ||||
Citigroup Mortgage Loan Trust | ||||||||
70,344 |
Series 2005-6, Class A1, US Treasury Yield Curve Rate T Note Constant Maturity 1 Year + 2.10% (b) |
6.15% | 09/01/35 | 69,175 | ||||
10,095 |
Series 2009-10, Class 1A1 (a) (c) |
5.68% | 09/01/33 | 9,870 | ||||
Connecticut Avenue Securities Trust | ||||||||
1,000,000 |
Series 2019-R01, Class 2B1, 30 Day Average SOFR + CSA + 4.35% (b) (c) |
9.79% | 07/25/31 | 1,066,505 | ||||
Countrywide Home Loan Mortgage Pass-Through Trust | ||||||||
238,040 |
Series 2006-HYB5, Class 3A1A (a) |
4.97% | 09/01/36 | 203,241 | ||||
DSLA Mortgage Loan Trust | ||||||||
235,042 |
Series 2004-AR3, Class 2A2A, 1 Mo. CME Term SOFR + CSA + 0.74% (b) |
6.19% | 07/19/44 | 210,947 | ||||
GSR Mortgage Loan Trust | ||||||||
2,350 |
Series 2003-10, Class 1A12 (a) |
5.71% | 10/01/33 | 2,208 | ||||
79,085 |
Series 2005-AR1, Class 4A1 (a) |
3.18% | 01/01/35 | 66,576 | ||||
JP Morgan Mortgage Trust | ||||||||
214,323 |
Series 2006-A2, Class 4A1 (a) |
5.59% | 08/01/34 | 210,378 | ||||
32,550 |
Series 2006-A2, Class 5A3 (a) |
5.74% | 11/01/33 | 31,006 | ||||
LHOME Mortgage Trust | ||||||||
1,000,000 |
Series 2023-RTL2, Class M (c) (d) |
9.00% | 06/25/28 | 899,804 | ||||
MASTR Alternative Loan Trust | ||||||||
3,544,974 |
Series 2006-2, Class 2A3, 1 Mo. CME Term SOFR + CSA + 0.35% (b) |
5.79% | 03/25/36 | 376,533 | ||||
MASTR Asset Securitization Trust | ||||||||
14,675 |
Series 2003-11, Class 6A16 |
5.25% | 12/01/33 | 13,668 | ||||
MortgageIT Trust | ||||||||
158,385 |
Series 2005-2, Class 2A, 1 Mo. CME Term SOFR + CSA + 1.65% (b) |
7.08% | 05/01/35 | 145,051 | ||||
Pretium Mortgage Credit Partners I LLC | ||||||||
1,000,000 |
Series 2021-NPL2, Class A2 (c) (d) |
3.84% | 06/27/60 | 778,515 | ||||
PRKCM Trust | ||||||||
1,000,000 |
Series 2021-AFC1, Class B2 (c) |
3.95% | 08/01/56 | 507,170 | ||||
Residential Accredit Loans, Inc. | ||||||||
72,609 |
Series 2006-QO1, Class 2A1, 1 Mo. CME Term SOFR + CSA + 0.54% (b) |
5.98% | 02/25/46 | 43,883 | ||||
673,459 |
Series 2006-QS6, Class 1AV, IO (a) |
0.77% | 06/01/36 | 14,008 | ||||
Residential Asset Securitization Trust | ||||||||
19,007 |
Series 2004-A3, Class A7 |
5.25% | 06/01/34 | 16,431 | ||||
Roc Mortgage Trust | ||||||||
1,000,000 |
Series 2021-RTL1, Class M (c) |
5.68% | 08/25/26 | 888,603 | ||||
RUN Trust | ||||||||
873,759 |
Series 2022-NQM1, Class A1 (c) |
4.00% | 03/01/67 | 790,056 | ||||
Starwood Mortgage Residential Trust | ||||||||
889,034 |
Series 2022-3, Class A1 (c) |
4.16% | 03/01/67 | 781,359 | ||||
Structured
Asset Securities Corp. Mortgage Pass-Through Certificates |
||||||||
7,318 |
Series 2001-SB1, Class A2 |
3.38% | 08/01/31 | 7,282 | ||||
VCAT LLC | ||||||||
1,000,000 |
Series 2021-NPL5, Class A2 (c) (d) |
3.84% | 08/25/51 | 778,846 | ||||
1,000,000 |
Series 2021-NPL6, Class A2 (c) (d) |
3.97% | 09/25/51 | 778,306 | ||||
Washington Mutual Alternative Mortgage Pass-Through Certificates | ||||||||
9,982 |
Series 2007-5, Class A11, (1 Mo. CME Term SOFR + CSA) x -6 + 39.48% (e) |
6.85% | 06/25/37 | 8,649 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
MORTGAGE-BACKED SECURITIES (Continued) | ||||||||
Collateralized Mortgage Obligations (Continued) | ||||||||
WinWater Mortgage Loan Trust | ||||||||
$213,378 |
Series 2015-3, Class B1 (a) (c) |
3.84% | 03/01/45 | $191,676 | ||||
8,922,482 | ||||||||
Commercial Mortgage-Backed Securities – 38.7% | ||||||||
1211 Avenue of the Americas Trust | ||||||||
935,000 |
Series 2015-1211, Class C (a) (c) |
4.14% | 08/01/35 | 841,716 | ||||
Aventura Mall Trust | ||||||||
1,250,000 |
Series 2018-AVM, Class D (a) (c) |
4.11% | 07/01/40 | 1,014,983 | ||||
BAMLL Commercial Mortgage Securities Trust | ||||||||
1,000,000 |
Series 2013-WBRK, Class A (a) (c) |
3.53% | 03/01/37 | 872,126 | ||||
BANK | ||||||||
22,342,755 |
Series 2017-BNK7, Class XA, IO (a) |
0.72% | 09/01/60 | 464,506 | ||||
2,160,500 |
Series 2020-BNK30, Class E (c) |
2.50% | 12/01/53 | 1,038,969 | ||||
BBCMS Mortgage Trust | ||||||||
1,000,000 |
Series 2018-TALL, Class B, 1 Mo. CME Term SOFR + CSA + 1.12% (b) (c) |
6.50% | 03/15/37 | 870,682 | ||||
Benchmark Mortgage Trust | ||||||||
1,000,000 |
Series 2020-IG2, Class UBRD (a) (c) |
3.51% | 09/01/48 | 848,005 | ||||
CCRE Commercial Mortgage Securities L.P. | ||||||||
7,919,618 |
CFCRE Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class XA, IO (a) |
1.48% | 06/01/50 | 307,017 | ||||
CD Mortgage Trust | ||||||||
8,622,086 |
Series 2018-CD7, Class XA, IO (a) |
0.64% | 08/01/51 | 220,659 | ||||
Citigroup Commercial Mortgage Trust | ||||||||
4,177,399 |
Series 2015-GC29, Class XA, IO (a) |
1.01% | 04/01/48 | 45,088 | ||||
8,608,812 |
Series 2016-GC37, Class XA, IO (a) |
1.65% | 04/01/49 | 249,455 | ||||
5,515,032 |
Series 2016-P4, Class XA, IO (a) |
1.89% | 07/01/49 | 204,890 | ||||
COMM Mortgage Trust | ||||||||
122,774,000 |
Series 2014-UBS6, Class XB, IO (a) (c) |
0.04% | 12/01/47 | 60,491 | ||||
3,829,000 |
Series 2015-CCRE26, Class XD, IO (a) (c) |
1.21% | 10/01/48 | 77,816 | ||||
14,711,211 |
Series 2015-LC21, Class XA, IO (a) |
0.64% | 07/01/48 | 114,016 | ||||
Credit Suisse Mortgage Capital Certificates | ||||||||
1,000,000 |
Series 2021-980M, Class G (a) (c) |
3.54% | 07/15/31 | 733,716 | ||||
Credit Suisse Mortgage Trust | ||||||||
1,000,000 |
Series 2022-CNTR, Class A, 1 Mo. CME Term SOFR + CSA + 3.94%, 4.09% Floor (b) (c) |
9.28% | 01/15/24 | 867,235 | ||||
CSAIL Commercial Mortgage Trust | ||||||||
5,883,588 |
Series 2020-C19, Class XA, IO (a) |
1.10% | 03/01/53 | 294,185 | ||||
FIVE Mortgage Trust | ||||||||
28,958,917 |
Series 2023-V1, Class XA, IO (b) |
0.83% | 02/01/56 | 852,336 | ||||
GS Mortgage Securities Corp Trust | ||||||||
1,000,000 |
Series 2018-3PCK, Class C, 1 Mo. CME Term SOFR + CSA + 3.50% (b) (c) |
8.95% | 09/15/31 | 967,384 | ||||
GS Mortgage Securities Trust | ||||||||
823,474 |
Series 2012-GCJ9, Class D (a) (c) |
4.60% | 11/01/45 | 745,214 | ||||
Houston Galleria Mall Trust | ||||||||
1,000,000 |
Series 2015-HGLR, Class D (c) |
3.98% | 03/01/37 | 914,007 | ||||
Hudsons Bay Simon JV Trust | ||||||||
156,152 |
Series 2015-HBFL, Class DFL, 1 Mo. CME Term SOFR + CSA + 3.90% (b) (c) |
9.34% | 08/05/34 | 132,646 | ||||
JP Morgan Chase Commercial Mortgage Securities Trust | ||||||||
20,237,120 |
Series 2016-JP4, Class XA, IO (a) |
0.58% | 12/01/49 | 269,111 | ||||
969,086 |
Series 2018-PHH, Class A, 1 Mo. CME Term SOFR + CSA + 1.21%, 2.71% Floor (b) (c) |
6.59% | 06/15/35 | 857,040 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
MORTGAGE-BACKED SECURITIES (Continued) | ||||||||
Commercial Mortgage-Backed Securities (Continued) | ||||||||
LSTAR Commercial Mortgage Trust | ||||||||
$1,500,000 |
Series 2017-5, Class D (a) (c) |
4.67% | 03/01/50 | $1,034,949 | ||||
23,596,467 |
Series 2017-5, Class X, IO (a) (c) |
0.80% | 03/01/50 | 405,998 | ||||
LUXE Trust | ||||||||
1,000,000 |
Series 2021-TRIP, Class F, 1 Mo. CME Term SOFR + CSA + 3.25% (b) (c) |
8.70% | 10/15/38 | 973,026 | ||||
Morgan Stanley Bank of America Merrill Lynch Trust | ||||||||
14,448,664 |
Series 2014-C16, Class XA, IO (a) |
0.87% | 06/01/47 | 20,368 | ||||
1,863,910 |
Series 2014-C19, Class XA, IO (a) |
0.95% | 12/01/47 | 9,691 | ||||
5,632,500 |
Series 2014-C19, Class XE, IO (a) (c) |
1.18% | 12/01/47 | 68,845 | ||||
429,743 |
Series 2016-C31, Class XA, IO (a) |
1.26% | 11/01/49 | 12,123 | ||||
Morgan Stanley Capital I Trust | ||||||||
2,180,000 |
Series 2016-UBS9, Class XD, IO (a) (c) |
1.59% | 03/01/49 | 71,016 | ||||
1,320,000 |
Series 2019-L2, Class C (a) |
4.97% | 03/01/52 | 978,146 | ||||
VMC Finance | ||||||||
820,463 |
Series 2021-HT1, Class A, 1 Mo. CME Term SOFR + CSA + 1.65% (b) (c) |
7.10% | 01/18/37 | 801,060 | ||||
Wells Fargo Commercial Mortgage Trust | ||||||||
1,255,060 |
Series 2015-C26, Class XA, IO (a) |
1.18% | 02/01/48 | 13,054 | ||||
1,034,000 |
Series 2016-NXS6, Class C (a) |
4.39% | 11/01/49 | 870,665 | ||||
19,122,234 | ||||||||
Total Mortgage-Backed Securities |
28,044,716 | |||||||
(Cost $31,793,510) | ||||||||
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES – 56.4% | ||||||||
Collateralized Mortgage Obligations – 19.3% | ||||||||
Federal Home Loan Mortgage Corp. | ||||||||
450 |
Series 2303, Class SW, IO, ECOFIN x -15.87 + 121.11%, Capped at 10.00% (e) |
10.00% | 03/01/24 | 5 | ||||
117,942 |
Series 2439, Class XI, IO, if 1 Mo. LIBOR x -1 + 7.74% is less than 7.50%, then 6.50%, otherwise 0.00% (e) |
6.50% | 03/01/32 | 15,859 | ||||
593,792 |
Series 2975, Class SJ, IO, (30 Day Average SOFR + CSA) x -1 + 6.65% (e) |
1.22% | 05/15/35 | 33,544 | ||||
14,051 |
Series 3451, Class SB, IO, (30 Day Average SOFR + CSA) x -1 + 6.03% (e) |
0.60% | 05/15/38 | 705 | ||||
208,187 |
Series 3471, Class SD, IO, (30 Day Average SOFR + CSA) x -1 + 6.08% (e) |
0.65% | 12/15/36 | 12,253 | ||||
9,670 |
Series 4021, Class IP, IO |
3.00% | 03/01/27 | 310 | ||||
169,972 |
Series 4057, Class YI, IO |
3.00% | 06/01/27 | 5,873 | ||||
337,638 |
Series 4082, Class PI, IO |
3.00% | 06/01/27 | 11,598 | ||||
229,423 |
Series 4206, Class IA, IO |
3.00% | 03/01/33 | 18,115 | ||||
Federal Home Loan Mortgage Corp. STACR REMIC Trust | ||||||||
1,000,000 |
Series 2020-DNA1, 30 Day Average SOFR + CSA + 5.25% (b) (c) |
10.69% | 01/25/50 | 1,016,062 | ||||
1,000,000 |
Series 2020-DNA2, Class B2, 30 Day Average SOFR + CSA + 4.80% (b) (c) |
10.24% | 02/25/50 | 1,003,031 | ||||
1,000,000 |
Series 2020-HQA1, 30 Day Average SOFR + CSA + 5.10% (b) (c) |
10.54% | 01/25/50 | 997,772 | ||||
1,000,000 |
Series 2020-HQA2, Class B2, 30 Day Average SOFR + CSA + 7.60% (b) (c) |
13.04% | 03/25/50 | 1,090,675 | ||||
Federal Home Loan Mortgage Corp. STACR Trust | ||||||||
1,000,000 |
Series 2019-DNA3, Class B2, 30 Day Average SOFR + CSA + 8.15% (b) (c) |
13.59% | 07/25/49 | 1,111,099 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Continued) | ||||||||
Collateralized Mortgage Obligations (Continued) | ||||||||
Federal Home Loan Mortgage Corp. STACR Trust (Continued) | ||||||||
$1,000,000 |
Series 2019-DNA4, Class B2, 30 Day Average SOFR + CSA + 6.25% (b) (c) |
11.69% | 10/25/49 | $1,065,983 | ||||
Federal
Home Loan Mortgage Corp. Structured Pass-Through Certificates |
||||||||
44,295 |
Series T-56, Class APO, PO |
(f) | 05/01/43 | 32,683 | ||||
Federal Home Loan Mortgage Corp., STRIPS | ||||||||
16,492 |
Series 177, IO |
7.00% | 07/01/26 | 985 | ||||
Federal National Mortgage Association | ||||||||
12,689 |
Series 1996-46, Class ZA |
7.50% | 11/01/26 | 12,690 | ||||
6,040 |
Series 1997-85, Class M, IO |
6.50% | 12/01/27 | 55 | ||||
16,328 |
Series 2002-80, Class IO, IO |
6.00% | 09/01/32 | 1,081 | ||||
43,808 |
Series 2003-15, Class MS, IO, (30 Day Average SOFR + CSA) x -1 + 8.00% (e) |
2.56% | 03/25/33 | 3,938 | ||||
50,753 |
Series 2003-44, Class IU, IO |
7.00% | 06/01/33 | 7,901 | ||||
51,222 |
Series 2005-6, Class SE, IO, (30 Day Average SOFR + CSA) x -1 + 6.70% (e) |
1.26% | 02/25/35 | 3,060 | ||||
26,477 |
Series 2007-100, Class SM, IO, (30 Day Average SOFR + CSA) x -1 + 6.45% (e) |
1.01% | 10/25/37 | 1,765 | ||||
153,017 |
Series 2007-37, Class SB, IO, (30 Day Average SOFR + CSA) x -1 + 6.75% (e) |
1.31% | 05/25/37 | 12,240 | ||||
294,177 |
Series 2008-17, Class BE |
5.50% | 10/01/37 | 275,627 | ||||
596,095 |
Series 2010-103, Class ID, IO |
5.00% | 09/01/40 | 96,382 | ||||
36,439 |
Series 2010-99, Class SG, (30 Day Average SOFR + CSA) x -5 + 25.00%, 0.00% Floor (b) (e) |
0.00% | 09/01/40 | 34,246 | ||||
313,231 |
Series 2011-81, Class PI, IO |
3.50% | 08/01/26 | 8,019 | ||||
208,010 |
Series 2012-112, Class BI, IO |
3.00% | 09/01/31 | 3,671 | ||||
1,275,563 |
Series 2012-125, Class MI, IO |
3.50% | 11/01/42 | 177,516 | ||||
16,897 |
Series 2013-132, Class SW, (30 Day Average SOFR + CSA) x -2.67 + 10.67%, 0.00% Floor (b) (e) |
0.00% | 01/01/44 | 9,719 | ||||
1,589,806 |
Series 2013-32, Class IG, IO |
3.50% | 04/01/33 | 165,218 | ||||
1,300,064 |
Series 2015-20, Class ES, IO, (30 Day Average SOFR + CSA) x -1 + 6.15% (e) |
0.71% | 04/25/45 | 114,947 | ||||
84,786 |
Series 2015-76, Class BI, IO |
4.00% | 10/01/39 | 1,796 | ||||
168,142 |
Series 2016-74, Class LI, IO |
3.50% | 09/01/46 | 41,857 | ||||
2,364,481 |
Series 2017-109, Class SJ, IO, (30 Day Average SOFR + CSA) x -1 + 6.20% (e) |
0.76% | 01/25/48 | 214,222 | ||||
1,939,915 |
Series 5179, Class GZ |
2.00% | 01/01/52 | 854,239 | ||||
Federal National Mortgage Association, STRIPS | ||||||||
15,947 |
Series 305, Class 12, IO (g) |
6.50% | 12/01/29 | 1,394 | ||||
31,057 |
Series 355, Class 18, IO |
7.50% | 11/01/33 | 4,321 | ||||
434,515 |
Series 406, Class 6, IO (g) |
4.00% | 01/01/41 | 71,876 | ||||
Government National Mortgage Association | ||||||||
108,661 |
Series 2005-33, Class AY |
5.50% | 04/01/35 | 107,540 | ||||
133,858 |
Series 2007-68, Class PI, IO, (1 Mo. CME Term SOFR + CSA) x -1 + 6.65% (e) |
1.20% | 11/20/37 | 3,176 | ||||
100,000 |
Series 2008-2, Class HB |
5.50% | 01/01/38 | 96,601 | ||||
110,129 |
Series 2008-73, Class SK, IO, (1 Mo. CME Term SOFR + CSA) x -1 + 6.74% (e) |
1.29% | 08/20/38 | 5,353 | ||||
210,067 |
Series 2013-104, Class YS, IO, (1 Mo. CME Term SOFR + CSA) x -1 + 6.15% (e) |
0.70% | 07/16/43 | 10,269 | ||||
3,543,476 |
Series 2015-158, Class KS, IO, (1 Mo. CME Term SOFR + CSA) x -1 + 6.25% (e) |
0.80% | 11/20/45 | 314,292 | ||||
76,284 |
Series 2016-139, Class MZ |
1.50% | 07/01/45 | 53,740 | ||||
161,588 |
Series 2017-4, Class CZ |
3.00% | 01/01/47 | 114,339 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Continued) | ||||||||
Collateralized Mortgage Obligations (Continued) | ||||||||
Government National Mortgage Association (Continued) | ||||||||
$132,257 |
Series 2017-H18, Class DZ (g) |
4.63% | 09/01/67 | $115,940 | ||||
9,996,077 |
Series 2020-13, Class BT, IO, (1 Mo. CME Term SOFR + CSA) x -1 + 6.20%, Capped at 0.50% (e) |
0.50% | 11/20/45 | 199,310 | ||||
9,554,892 | ||||||||
Commercial Mortgage-Backed Securities – 14.9% | ||||||||
Federal
Home Loan Mortgage Corp. Multifamily Structured Pass-Through Certificates |
||||||||
30,000,000 |
Series K043, Class X3, IO (a) |
1.63% | 02/01/43 | 550,479 | ||||
14,500,000 |
Series K071, Class X3, IO (a) |
2.01% | 11/01/45 | 1,020,382 | ||||
4,000,000 |
Series K110, Class X3, IO (a) |
3.40% | 06/01/48 | 663,421 | ||||
4,605,411 |
Series K115, Class X3, IO (a) |
2.96% | 09/01/48 | 680,819 | ||||
4,326,216 |
Series K118, Class X3, IO (a) |
2.69% | 10/25/48 | 594,308 | ||||
1,900,000 |
Series K122, Class X3, IO (a) |
2.63% | 01/01/49 | 259,838 | ||||
5,000,000 |
Series K124, Class X3, IO (a) |
2.62% | 02/01/49 | 693,239 | ||||
3,343,856 |
Series K128, Class X3, IO (a) |
2.78% | 04/01/31 | 501,017 | ||||
1,831,144 |
Series K739, Class X3, IO (a) |
2.81% | 11/25/48 | 160,151 | ||||
341,978,793 |
Series KBX1, Class X1, IO (a) |
0.09% | 01/01/26 | 444,299 | ||||
4,571,896 |
Series KG06, Class X3, IO (a) |
2.73% | 10/01/31 | 678,627 | ||||
Federal National Mortgage Association, ACES | ||||||||
13,100,000 |
Series 2019-M29, Class X4, IO |
0.70% | 03/01/29 | 362,596 | ||||
Freddie Mac Multiclass Certificates | ||||||||
5,782,630 |
Series 2021-P011, Class X1, IO (a) |
1.78% | 09/01/45 | 666,270 | ||||
Government National Mortgage Association | ||||||||
2,187,863 |
Series 2016-11, Class IO, IO (g) |
0.78% | 01/01/56 | 74,672 | ||||
7,350,118 | ||||||||
Pass-through Security – 22.2% | ||||||||
Fannie Mae or Freddie Mac | ||||||||
2,000,000 |
Pool TBA (h) |
3.50% | 11/01/53 | 1,665,573 | ||||
3,000,000 |
Pool TBA (h) |
5.00% | 11/01/53 | 2,765,859 | ||||
1,500,000 |
Pool TBA (h) |
5.50% | 11/01/53 | 1,422,774 | ||||
2,000,000 |
Pool TBA (h) |
3.50% | 12/01/53 | 1,667,448 | ||||
4,000,000 |
Pool TBA (h) |
4.00% | 12/01/53 | 3,458,125 | ||||
10,979,779 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities |
27,884,789 | |||||||
(Cost $31,647,281) | ||||||||
ASSET-BACKED SECURITIES – 4.2% | ||||||||
Adams Outdoor Advertising LP | ||||||||
1,000,000 |
Series 2023-1, Class B (c) |
8.81% | 07/15/53 | 994,988 | ||||
CoreVest American Finance Trust | ||||||||
8,938,703 |
Series 2021-3, Class XA, IO (a) (c) |
2.38% | 10/01/54 | 510,283 | ||||
Mid-State Capital Corp. Trust | ||||||||
116,540 |
Series 2005-1, Class A |
5.75% | 01/01/40 | 113,949 | ||||
PAGAYA AI Debt Trust | ||||||||
447,246 |
Series 2022-3, Class A (c) |
6.06% | 03/15/30 | 445,186 | ||||
Total Asset-Backed Securities |
2,064,406 | |||||||
(Cost $2,115,223) |
Shares | Description | Value | ||
MONEY MARKET FUNDS – 3.5% | ||||
1,748,885 |
Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 5.22% (i) |
$1,748,885 | ||
(Cost $1,748,885) |
Total Investments – 120.9% |
59,742,796 | ||||
(Cost $67,304,899) |
Number of Contracts | Description | Notional Amount | Exercise Price | Expiration Date | Value | |||||
PUT OPTIONS WRITTEN – (0.0)% | ||||||||||
(10) |
U.S. 10-Year Treasury Futures Put |
$(1,061,719) | $104.50 | 11/24/23 | (2,813) | |||||
(Premiums received $7,005) |
Net Other Assets and Liabilities – (20.9)% |
(10,341,562) | ||
Net Assets – 100.0% |
$49,398,421 |
Futures Contracts | Position | Number
of Contracts |
Expiration Date |
Notional Value |
Unrealized Appreciation (Depreciation)/ Value | |||||
US Treasury 10 Year Note Future | Long | 6 | Dec 2023 | $ 637,031 | $1,781 | |||||
US Treasury 2 Year Note Future | Long | 8 | Dec 2023 | 1,619,350 | (187) | |||||
US Treasury 5 Year Note Future | Long | 26 | Dec 2023 | 2,716,391 | (656) | |||||
US Treasury Bond Future | Long | 33 | Dec 2023 | 3,611,437 | 13,906 | |||||
US Treasury Ultra 10 Year Note Future | Long | 54 | Dec 2023 | 5,876,719 | (216,828) | |||||
$14,460,928 | $(201,984) |
(a) | Collateral Strip Rate security. Coupon is based on the weighted net interest rate of the investment’s underlying collateral. The interest rate resets periodically. |
(b) | Floating or variable rate security. |
(c) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund’s investment advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At October 31, 2023, securities noted as such amounted to $29,902,713 or 60.5% of net assets. |
(d) | Step-up security. A security where the coupon increases or steps up at a predetermined date. Interest rate shown reflects the rate in effect at October 31, 2023. |
(e) | Inverse floating rate security. |
(f) | Zero coupon security. |
(g) | Weighted Average Coupon security. Coupon is based on the blended interest rate of the underlying holdings, which may have different coupons. The coupon may change in any period. |
(h) | All or portion of this security is part of a mortgage dollar roll agreement (see Note 2I - Mortgage Dollar Rolls and TBA Transactions in the Notes to Financial Statements). |
(i) | Rate shown reflects yield as of October 31, 2023. |
Abbreviations throughout the Portfolio of Investments: | |
ACES | – Alternative Credit Enhancement Securities |
CME | – Chicago Mercantile Exchange |
CSA | – Credit Spread Adjustment |
ECOFIN | – Enterprise 11th District COFI Institutional Replacement Index |
IO | – Interest-Only Security - Principal amount shown represents par value on which interest payments are based. |
LIBOR | – London Interbank Offered Rate |
PO | – Principal-Only Security |
REMIC | – Real Estate Mortgage Investment Conduit |
SOFR | – Secured Overnight Financing Rate |
STACR | – Structured Agency Credit Risk |
STRIPS | – Separate Trading of Registered Interest and Principal of Securities |
TBA | – To-Be-Announced Security |
ASSETS TABLE | ||||
Total Value at 10/31/2023 |
Level
1 Quoted Prices |
Level
2 Significant Observable Inputs |
Level
3 Significant Unobservable Inputs | |
Mortgage-Backed Securities |
$ 28,044,716 | $ — | $ 28,044,716 | $ — |
U.S. Government Agency Mortgage-Backed Securities |
27,884,789 | — | 27,884,789 | — |
Asset-Backed Securities |
2,064,406 | — | 2,064,406 | — |
Money Market Funds |
1,748,885 | 1,748,885 | — | — |
Total Investments |
59,742,796 | 1,748,885 | 57,993,911 | — |
Futures Contracts* |
15,687 | 15,687 | — | — |
Total |
$ 59,758,483 | $ 1,764,572 | $ 57,993,911 | $— |
LIABILITIES TABLE | ||||
Total Value at 10/31/2023 |
Level
1 Quoted Prices |
Level
2 Significant Observable Inputs |
Level
3 Significant Unobservable Inputs | |
Futures Contracts* |
$ (217,671) | $ (217,671) | $ — | $ — |
Written Options |
(2,813) | (2,813) | — | — |
Total |
$ (220,484) | $ (220,484) | $— | $— |
* | Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day’s variation margin is presented on the Statement of Assets and Liabilities. |
ASSETS: | |
Investments, at value |
$ 59,742,796 |
Restricted Cash |
361,818 |
Receivables: | |
Interest |
490,599 |
Variation margin |
3,914 |
Prepaid expenses |
5,366 |
Total Assets |
60,604,493 |
LIABILITIES: | |
Options written, at value |
2,813 |
Payables: | |
Investment securities purchased |
11,053,668 |
Audit and tax fees |
74,188 |
Investment advisory fees |
35,878 |
Administrative fees |
15,673 |
Shareholder reporting fees |
7,438 |
Legal fees |
6,289 |
Custodian fees |
4,065 |
Transfer agent fees |
3,213 |
Trustees’ fees and expenses |
932 |
Financial reporting fees |
771 |
Other liabilities |
1,144 |
Total Liabilities |
11,206,072 |
NET ASSETS |
$49,398,421 |
NET ASSETS consist of: | |
Paid-in capital |
$ 63,705,638 |
Par value |
42,131 |
Accumulated distributable earnings (loss) |
(14,349,348) |
NET ASSETS |
$49,398,421 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) |
$11.72 |
Number of |
|
Investments, at cost |
$67,304,899 |
Premiums received on options written |
$7,005 |
INVESTMENT INCOME: | ||
Interest |
$ 3,876,178 | |
Other |
9,974 | |
Total investment income |
3,886,152 | |
EXPENSES: | ||
Investment advisory fees |
438,137 | |
Audit and tax fees |
74,811 | |
Administrative fees |
49,230 | |
Shareholder reporting fees |
28,090 | |
Listing expense |
23,750 | |
Transfer agent fees |
18,992 | |
Trustees’ fees and expenses |
18,707 | |
Legal fees |
13,242 | |
Financial reporting fees |
9,250 | |
Custodian fees |
8,070 | |
Other |
19,268 | |
Total expenses |
701,547 | |
NET INVESTMENT INCOME (LOSS) |
3,184,605 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments |
(1,335,140) | |
Purchased options contracts |
(44,617) | |
Written options contracts |
32,820 | |
Futures contracts |
(651,269) | |
Net realized gain (loss) |
(1,998,206) | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments |
276,494 | |
Written options contracts |
4,192 | |
Futures contracts |
(132,922) | |
Net change in unrealized appreciation (depreciation) |
147,764 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) |
(1,850,442) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ 1,334,163 |
Year Ended 10/31/2023 |
Year Ended 10/31/2022 | ||
OPERATIONS: | |||
Net investment income (loss) |
$ 3,184,605 | $ 2,122,909 | |
Net realized gain (loss) |
(1,998,206) | (1,419,227) | |
Net change in unrealized appreciation (depreciation) |
147,764 | (5,640,691) | |
Net increase (decrease) in net assets resulting from operations |
1,334,163 | (4,937,009) | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations |
(2,864,918) | (1,819,898) | |
Return of capital |
— | (960,758) | |
Total distributions to shareholders |
(2,864,918) | (2,780,656) | |
Total increase (decrease) in net assets |
(1,530,755) | (7,717,665) | |
NET ASSETS: | |||
Beginning of period |
50,929,176 | 58,646,841 | |
End of period |
$ 49,398,421 | $ 50,929,176 | |
COMMON SHARES: | |||
Common Shares at end of period |
4,213,115 | 4,213,115 |
Year Ended October 31, | |||||||||
2023 | 2022 | 2021 | 2020 | 2019 | |||||
Net asset value, beginning of period |
$ 12.09 | $ 13.92 | $ 14.45 | $ 14.91 | $ 14.96 | ||||
Income from investment operations: | |||||||||
Net investment income (loss) |
0.76 (a) | 0.50 | 0.44 | 0.44 | 0.34 | ||||
Net realized and unrealized gain (loss) |
(0.45) | (1.67) | (0.25) | (0.18) | 0.33 | ||||
Total from investment operations |
0.31 | (1.17) | 0.19 | 0.26 | 0.67 | ||||
Distributions paid to shareholders from: | |||||||||
Net investment income |
(0.68) | (0.43) | (0.35) | (0.63) | (0.50) | ||||
Return of capital |
— | (0.23) | (0.37) | (0.09) | (0.22) | ||||
Total distributions paid to Common Shareholders |
(0.68) | (0.66) | (0.72) | (0.72) | (0.72) | ||||
Net asset value, end of period |
$ | $12.09 | $13.92 | $14.45 | $14.91 | ||||
Market value, end of period |
$ | $11.01 | $13.70 | $13.40 | $13.99 | ||||
Total return based on net asset value (b) |
2.88% | (8.38)% | 1.51% | 2.12% | 5.08% | ||||
Total return based on market value (b) |
4.88% | (15.22)% | 7.74% | 0.93% | 13.37% | ||||
Ratios to average net assets/supplemental data: | |||||||||
Net assets, end of period (in 000’s) |
$ 49,398 | $ 50,929 | $ 58,647 | $ 60,878 | $ 62,832 | ||||
Ratio of total expenses to average net assets |
1.36% | 1.33% | 1.31% | 1.33% | 1.33% | ||||
Ratio of net investment income (loss) to average net assets |
6.18% | 3.86% | 3.11% | 3.03% | 2.29% | ||||
Portfolio turnover rate |
143% | 44% | 67% | 28% | 69% |
(a) | Based on average shares outstanding. |
(b) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
1) | benchmark yields; |
2) | reported trades; |
3) | broker/dealer quotes; |
4) | issuer spreads; |
5) | benchmark securities; |
6) | bids and offers; and |
7) | reference data including market research publications. |
1) | the credit conditions in the relevant market and changes thereto; |
2) | the liquidity conditions in the relevant market and changes thereto; |
3) | the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); |
4) | issuer-specific conditions (such as significant credit deterioration); and |
5) | any other market-based data the Advisor’s Pricing Committee considers relevant. In this regard, the Advisor’s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. |
1) | the fundamental business data relating to the issuer; |
2) | available market prices for the fixed-income security; |
3) | an evaluation of the forces which influence the market in which these securities are purchased and sold; |
4) | the type, size and cost of the security; |
5) | the financial statements of the issuer; |
6) | the credit quality and cash flow of the issuer, based on the Advisor’s or external analysis; |
7) | the information as to any transactions in or offers for the security; |
8) | the price and extent of public trading in similar securities (or equity securities) of the borrower/issuer, or comparable companies; |
9) | the coupon payments; |
10) | the quality, value and salability of collateral, if any, securing the security; |
11) | the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer’s management; |
12) | the prospects for the issuer’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; and |
13) | other relevant factors. |
• | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
o | Quoted prices for similar investments in active markets. |
o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
Distributions paid from: | 2023 | 2022 |
Ordinary income |
$2,864,918 | $1,819,898 |
Capital gains |
— | — |
Return of capital |
— | 960,758 |
Undistributed ordinary income |
$179,390 |
Undistributed capital gains |
— |
Total undistributed earnings |
179,390 |
Accumulated capital and other losses |
(3,670,720) |
Net unrealized appreciation (depreciation) |
(10,858,018) |
Total accumulated earnings (losses) |
(14,349,348) |
Other |
— |
Paid-in capital |
63,747,769 |
Total net assets |
$49,398,421 |
Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
Net
Unrealized Appreciation (Depreciation) | |||
$70,396,017 | $416,595 | $(11,274,613) | $(10,858,018) |
Asset Derivatives | Liability Derivatives | |||||||||
Derivative Instrument |
Risk Exposure |
Statement
of Assets and Liabilities Location |
Value | Statement
of Assets and Liabilities Location |
Value | |||||
Futures | Interest Rate Risk | Unrealized
appreciation on futures contracts* |
$ 15,687 | Unrealized
depreciation on futures contracts* |
$ 217,671 | |||||
Options | Interest Rate Risk | Options
contracts purchased, at value |
— | Options
contracts written, at value |
2,813 |
Statement of Operations Location | |
Interest Rate Risk Exposure | |
Net realized gain (loss) on purchased options contracts | $(44,617) |
Net realized gain (loss) on written options contracts | 32,820 |
Net change in unrealized appreciation (depreciation) on written options contracts | 4,192 |
Net realized gain (loss) on futures contracts | (651,269) |
Net change in unrealized appreciation (depreciation) on futures contracts | (132,922) |
(1) | If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that date or (ii) 95% of the market price on that date. |
(2) | If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments. |
• | The Fund invests at least 80% of its managed assets in mortgage-backed securities. Such MBS may include those with fixed, floating or variable interest rates, those with interest rates that change based on multiples of changes in a specified index of interest rates and those with interest rates that change inversely to changes in interest rates, as well as those that do not bear interest. The Fund may also invest in MBS through TBA Transactions. The Fund does not invest in corporate bonds other than those primarily secured by interests in real estate. |
• | The Fund may invest up to 35% of its managed assets in securities that, at the time of investment, are rated below investment grade (including securities that are unrated but judged to be of comparable quality by the Advisor). |
• | The Fund may invest up to 20% of its managed assets in U.S. government securities, or cash or other short-term instruments, and may invest up to 10% of its managed assets in real-estate related assets collateralized by pools of assets, such as home equity loans and lines of credit, and asset-backed securities, including non-mortgage asset-backed securities. |
• | The Fund may invest up to 10% of its managed assets in securities that, at the time of investment, are illiquid. |
• | Issuer Risk. The value of fixed-income securities may decline for a number of reasons which directly relate to the issuer, such as management performance, leverage and reduced demand for the issuer’s goods and services. In addition, an issuer of fixed-income securities may default on its obligation to pay interest and repay principal. |
• | Prepayment Risk. Prepayment risk is the risk that the issuer of a debt security will repay principal prior to the scheduled maturity date. During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such prepayment in lower yielding securities, which may result in a decline in the Fund’s income and distributions to common shareholders. |
• | Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called securities or loans at market interest rates that are below the Fund portfolio’s current earnings rate. |
NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal
Occupations During Past 5 Years |
Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INDEPENDENT TRUSTEES | ||||
Richard
E. Erickson, Trustee (1951) |
• Three Year Term• Since Fund Inception | Retired; Physician, Edward-Elmhurst Medical Group (2021 to September 2023); Physician and Officer, Wheaton Orthopedics (1990 to 2021) | 254 | None |
Thomas
R. Kadlec, Trustee (1957) |
• Three Year Term• Since Fund Inception | Retired; President, ADM Investor Services, Inc. (Futures Commission Merchant) (2010 to July 2022) | 254 | Director, National Futures Association and ADMIS Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association |
Denise
M. Keefe, Trustee (1964) |
• Three Year Term• Since 2021 | Executive Vice President, Advocate Aurora Health and President, Advocate Aurora Continuing Health Division (Integrated Healthcare System) | 254 | Director and Board Chair of Advocate Home Health Services, Advocate Home Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director of RML Long Term Acute Care Hospitals; Director of Senior Helpers (since 2021); and Director of MobileHelp (since 2022) |
Robert
F. Keith, Trustee (1956) |
• Three Year Term• Since June 2006 | President, Hibs Enterprises (Financial and Management Consulting) | 254 | Formerly, Director of Trust Company of Illinois |
Niel
B. Nielson, Trustee (1954) |
• Three Year Term• Since Fund Inception | Senior Advisor (2018 to Present), Managing Director and Chief Operating Officer (2015 to 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 254 | None |
Bronwyn
Wright, Trustee (1971) |
• Three Year Term• Since 2023 | Independent Director to a number of Irish collective investment funds (2009 to Present); Various roles at international affiliates of Citibank (1994 to 2009), including Managing Director, Citibank Europe plc and Head of Securities and Fund Services, Citi Ireland (2007 to 2009) | 229 | None |
(1) | Currently, Denise M. Keefe and Robert F. Keith, as Class I Trustees, are serving as trustees until the Fund’s 2026 annual meeting of shareholders. Richard E. Erickson and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until the Fund’s 2024 annual meeting of shareholders. James A. Bowen, Niel B. Nielson, and Bronwyn Wright, as Class III Trustees, are serving as trustees until the Fund’s 2025 annual meeting of shareholders. |
Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal
Occupations During Past 5 Years |
Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INTERESTED TRUSTEE | ||||
James
A. Bowen(2), Trustee and Chairman of the Board (1955) |
• Three Year Term• Since Fund Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 254 | None |
Name and Year of Birth | Position and Offices with Fund | Term of Office and Length of Service | Principal
Occupations During Past 5 Years |
OFFICERS(3) | |||
James
M. Dykas (1966) |
President and Chief Executive Officer | • Indefinite
Term • Since 2016 |
Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
Derek
D. Maltbie (1972) |
Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite
Term • Since 2023 |
Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., July 2021 to Present. Previously, Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., 2014 to 2021. |
W.
Scott Jardine (1960) |
Secretary and Chief Legal Officer | • Indefinite
Term • Since Fund Inception |
General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel
J. Lindquist (1970) |
Vice President | • Indefinite
Term • Since Fund Inception |
Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi
A. Maher (1966) |
Chief Compliance Officer and Assistant Secretary | •
Indefinite Term • Chief Compliance Officer Since January 2011• Assistant Secretary Since Fund Inception |
Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
(1) | Currently, Denise M. Keefe and Robert F. Keith, as Class I Trustees, are serving as trustees until the Fund’s 2026 annual meeting of shareholders. Richard E. Erickson and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until the Fund’s 2024 annual meeting of shareholders. James A. Bowen, Niel B. Nielson, and Bronwyn Wright, as Class III Trustees, are serving as trustees until the Fund’s 2025 annual meeting of shareholders. |
(2) | Mr. Bowen is deemed an “interested person” of the Fund due to his position as CEO of First Trust Advisors L.P., investment advisor of the Fund. |
(3) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
• | Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; |
• | Information about your transactions with us, our affiliates or others; |
• | Information we receive from your inquiries by mail, e-mail or telephone; and |
• | Information we collect on our website through the use of “cookies.” For example, we may identify the pages on our website that your browser requests or visits. |
• | In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. |
• | We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). |
(b) Not applicable.
Item 2. Code of Ethics.
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
(d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
(e) | Not applicable. |
(f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of trustees has determined that Thomas R. Kadlec, Robert F. Keith and Bronwyn Wright are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees (registrant) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $47,000 for the fiscal year ended October 31, 2022 and $47,000 for the fiscal year ended October 31, 2023. |
(b) | Audit-Related Fees (registrant) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023. |
Audit-Related Fees (Investment Advisor) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
(c) | Tax Fees (registrant) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $28,762 for the fiscal year ended October 31, 2022 and $33,120 for the fiscal year ended October 31, 2023. These fees were for tax consultation and/or tax return preparation. |
Tax Fees (Investment Advisor) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
(d) | All Other Fees (registrant) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023. |
All Other Fees (Investment Advisor) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
(e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment advisor and distributor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(C) or paragraph (C)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: |
Registrant: | Advisor and Distributor: | |
(b) 0% | (b) 0% | |
(c) 0% | (c) 0% | |
(d) 0% | (d) 0% |
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant for the registrant’s fiscal year ended October 31, 2022 were $28,762 for the registrant and $0 for the registrant’s investment advisor and for the registrant’s fiscal year ended October 31, 2023 were $33,120 for the registrant and $44,000 for the registrant’s investment advisor. |
(h) | The registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
(i) | Not applicable. |
(j) | Not applicable. |
Item 5. Audit Committee of Listed Registrants.
(a) | The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 consisting of all the independent directors of the registrant. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Denise M. Keefe, Robert F. Keith, Niel B. Nielson and Bronwyn Wright. |
(b) | Not applicable. |
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
A description of the policies and procedures used to vote proxies on behalf of the Fund is attached as an exhibit.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) | Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members. |
Information provided as of January 8, 2024.
The First Trust Government & Securitized Products Group of First Trust Advisors L.P. is responsible for the day–to-day management of the registrant’s portfolio. The First Trust Government & Securitized Products group has been led by James Snyder and Jeremiah Charles since 2013 and was previously known as the Mortgage Securities Team.
Jim Snyder. Mr. Snyder is a Senior Portfolio Manager and Co-head of the First Trust Government & Securitized Products Group. He has over 32 years of investment and portfolio management experience. At First Trust, he is responsible for the management of the firm’s mortgage and securitized product fund offerings. Prior to joining First Trust in 2013, Jim spent most of his career leading several mortgage trading and portfolio management groups at American Express Financial Advisors, where he managed the AXP Federal Income Fund, and at Deerfield Capital, where he managed Deerfield’s Mortgage REIT and Opportunity Fund. Additionally, he has held senior positions at Fort Sheridan Advisors and Spyglass Capital. Mr. Snyder holds a B.S. and M.A. in Economics from DePaul University and an MBA from the University of Chicago Booth School of Business.
Jeremiah Charles. Mr. Charles is a Senior Portfolio Manager and Co-head of the First Trust Government & Securitized Products Group. He has over 19 years of investment, trading and portfolio management experience. At First Trust, he is responsible for the management of the firm’s mortgage and securitized product fund offerings. Prior to joining First Trust in 2013, Jeremiah spent the majority of his career as a Senior Portfolio Manager at Deerfield Capital Management where he helped manage the Deerfield Mortgage REIT. In his career, he has also held positions at CRT Capital, where he worked as a Vice President in Securitized Products and at Piper Jaffray, where he began his career as an Analyst. Mr. Charles holds a B.S. in Finance from the Leeds School of Business at the University of Colorado, and a MS in Real Estate with honors from the Charles H. Kellstadt Graduate School of Business at DePaul University.
Owen Aronson. Mr. Aronson is a Senior Investment Analyst for the First Trust Government & Securitized Products Group. He has over 15 years of investment research and trading experience. At First Trust, he focuses primarily on the commercial mortgage-backed securities, CMBS, sector and contributes to the management of the non-agency sectors. Prior to joining First Trust in 2020, Owen spent the majority of his career in the Securitized Products team at Neuberger Berman where he was responsible for CMBS investments. He began his career at Lehman Brothers Asset Management as an Analyst. Mr. Aronson holds a B.A. in Economics from the University of Chicago.
(2) | Other Accounts Managed by Portfolio Managers or Management Team Member and Potential Conflicts of Interest |
Information provided as of October 31, 2023.
Name of Portfolio Manager or Team Member | Type of Accounts* | Total # of Accounts Managed |
Total Assets | # of Accounts Managed for which Advisory Fee is Based on Performance | Total Assets for which Advisory Fee is Based on Performance |
1. Jeremiah Charles | Registered Investment Companies: | 5 | $11,568,521,334 | 0 | $ 0 |
Other Pooled Investment Vehicles: | 0 | $ 0 | 0 | $ 0 | |
Other Accounts: | 0 | $ 0 | 0 | $ 0 | |
2. James Snyder | Registered Investment Companies: | 5 | $11,568,521,334 | 0 | $ 0 |
Other Pooled Investment Vehicles: | 0 | $ 0 | 0 | $ 0 | |
Other Accounts: | 0 | $ 0 | 0 | $ 0 | |
3. Owen Aronson | Registered Investment Companies: | 2 | $3,841,816,649 | 0 | $ 0 |
Other Pooled Investment Vehicles: | 0 | $ 0 | 0 | $ 0 | |
Other Accounts: | 0 | $ 0 | 0 | $ 0 |
*Information excludes the registrant.
Portfolio Manager Material Conflicts of Interest
Potential conflicts of interest may arise when a portfolio manager of the registrant has day-to-day management responsibilities with respect to one or more other funds or other accounts. The First Trust Securitized Products Group adheres to its trade allocation policy utilizing a pro-rata methodology to address this conflict.
First Trust and its affiliate, First Trust Portfolios L.P. (“FTP”), have in place a joint Code of Ethics and Insider Trading Policies and Procedures that are designed to (a) prevent First Trust personnel from trading securities based upon material inside information in the possession of such personnel and (b) ensure that First Trust personnel avoid actual or potential conflicts of interest or abuse of their positions of trust and responsibility that could occur through such activities as front running securities trades for the registrant. Personnel are required to have duplicate confirmations and account statements delivered to First Trust and FTP compliance personnel who then compare such trades to trading activity to detect any potential conflict situations.
(3) Compensation Structure of Portfolio Managers or Management Team Members
Portfolio Manager Compensation
Information provided as of October 31, 2023.
The compensation structure at First Trust is based on a fixed salary and discretionary bonus determined by First Trust management. Salaries are based on each individual’s position and overall value to First Trust. Bonuses are determined by First Trust management and are based on individual performance, the commitment to team performance and profitability, and the profitability of First Trust. Certain internal portfolio managers have an indirect ownership stake in the firm and will therefore receive their allocable share of ownership-related distributions.
(4)(a) Disclosure of Securities Ownership
Information provided as of October 31, 2023.
Name | Dollar Range of Fund Shares Beneficially Owned |
Jeremiah Charles | None |
James Snyder | None |
Owen Aronson | None |
(b) | Not applicable. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a) | Not applicable. |
(b) | Not applicable. |
Item 13. Exhibits.
(a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(a)(4) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(c) | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies as required by Item 7 is attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) | First Trust Mortgage Income Fund |
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | January 8, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | January 8, 2024 |
By (Signature and Title)* | /s/ Derek D. Maltbie | |
Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date: | January 8, 2024 |
* Print the name and title of each signing officer under his or her signature.
SENIOR FINANCIAL OFFICER
CODE OF CONDUCT
I. Introduction
This code of conduct is being adopted by the investment companies advised by First Trust Advisors L.P., from time to time, (the "FUNDS"). The reputation and integrity of the Funds are valuable assets that are vital to the Funds' success. Each officer of the Funds, and officers and employees of the investment adviser to the Funds who work on Fund matters, including each of the Funds' senior financial officers ("SFOS"), is responsible for conducting each Fund's business in a manner that demonstrates a commitment to the highest standards of integrity. SFOs include the Principal Executive Officer (who is the President), the Controller (who is the principal accounting officer), and the Treasurer (who is the principal financial officer), and any person who performs a similar function.
The Funds, First Trust Advisors L.P. and First Trust Portfolios have adopted Codes of Ethics under Rule 17j-1 under the Investment Company Act of 1940 (the "RULE 17J-1 CODE"). These Codes of Ethics are designed to prevent certain conflicts of interest that may arise when officers, employees, or directors of the Funds and the foregoing entities know about present or future Fund transactions and/or have the power to influence those transactions, and engage in transactions with respect to those same securities in their personal account(s) or otherwise take advantage of their position and knowledge with respect to those securities. In an effort to prevent these conflicts and in accordance with Rule 17j-1, the Funds adopted their Rule 17j-1 Code to prohibit transactions and conduct that create conflicts of interest, and to establish compliance procedures.
The Sarbanes-Oxley Act of 2002 was designed to address corporate malfeasance and to help assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under Section 406 of the Act, all public companies (including the Funds) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to prevent future situations (such as occurred in well-reported situations involving such companies as Enron and WorldCom) where a company creates an environment in which employees are afraid to express their opinions or to question unethical and potentially illegal business practices.
The Funds have chosen to adopt a senior financial officer Code of Conduct to encourage their SFOs, and other Fund officers and employees of First Trust Advisors or First Trust Portfolios to act ethically and to question potentially unethical or illegal practices, and to strive to ensure that the Funds' financial disclosures are complete, accurate, and understandable.
II. Purposes of This Code of Conduct
The purposes of this Code are:
A. To promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
B. To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Funds file with, or submits to, the SEC and in other public communications the Funds make;
C. To promote compliance with applicable governmental laws, rules and regulations;
D. To encourage the prompt internal reporting to an appropriate person of violations of the Code; and
E. To establish accountability for adherence to the Code.
III. Questions About This Code
The Funds' Boards of Trustees have designated W. Scott Jardine or other appropriate officer designated by the President of the respective Funds to be the Compliance Coordinator for the implementation and administration of the Code.
IV. Handling of Financial Information
The Funds have adopted guidelines under which its SFOs perform their duties. However, the Funds expect that all officers or employees of the adviser or distributor who participate in the preparation of any part of any Fund's financial statements follow these guidelines with respect to each Fund:
A. Act with honesty and integrity and avoid violations of this Code, including actual or apparent conflicts of interest with the Fund in personal and professional relationships.
B. Disclose to the Fund's Compliance Coordinator any material transaction or relationship that reasonably could be expected to give rise to any violations of the Code, including actual or apparent conflicts of interest with the Fund. You should disclose these transactions or relationships whether you are involved or have only observed the transaction or relationship. If it is not possible to disclose the matter to the Compliance Coordinator, it should be disclosed to the Fund's Principal Financial Officer or Principal Executive Officer.
C. Provide information to the Fund's other officers and appropriate employees of service providers (adviser, administrator, outside auditor, outside counsel, custodian, etc.) that is accurate, complete, objective, relevant, timely, and understandable.
D. Endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Fund's periodic reports.
E. Comply with the federal securities laws and other applicable laws and rules, such as the Internal Revenue Code.
F. Act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated.
G. Respect the confidentiality of information acquired in the course of your work except when you have Fund approval to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage.
H. Share and maintain skills important and relevant to the Fund's needs.
I. Proactively promote ethical behavior among peers in your work environment.
J. Responsibly use and control all assets and resources employed or entrusted to you.
K. Record or participate in the recording of entries in the Fund's books and records that are accurate to the best of your knowledge.
V. Waivers of This Code
SFOs and other parties subject to this Code may request a waiver of a provision of this Code (or certain provisions of the Fund's Rule 17j-1 Code) by submitting their request in writing to the Compliance Coordinator for appropriate review. An executive officer of the Fund or the Audit Committee will decide whether to grant a waiver. All waivers of this Code must be disclosed to the Fund's shareholders to the extent required by SEC rules. A good faith interpretation of the provisions of this Code, however, shall not constitute a waiver.
VI. Annual Certification
Each SFO will be asked to certify on an annual basis that he/she is in full compliance with the Code and any related policy statements.
VII. Reporting Suspected Violations
A. SFOs or other officers of the Funds or employees of the First Trust group who work on Fund matters who observe, learn of, or, in good faith, suspect a violation of the Code MUST immediately report the violation to the Compliance Coordinator, another member of the Funds' or First Trust's senior management, or to the Audit Committee of the Fund Board. An example of a possible Code violation is the preparation and filing of financial disclosure that omits material facts, or that is accurate but is written in a way that obscures its meaning.
B. Because service providers such as an administrator, outside accounting firm, and custodian provide much of the work relating to the Funds' financial statements, you should be alert for actions by service providers that may be illegal, or that could be viewed as dishonest or unethical conduct. You should report these actions to the Compliance Coordinator even if you know, or think, that the service provider has its own code of ethics for its SFOs or employees.
C. SFOs or other officers or employees who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible.
VIII. Violations of The Code
A. Dishonest, unethical or illegal conduct will constitute a violation of this Code, regardless of whether this Code specifically refers to that particular conduct. A violation of this Code may result in disciplinary action, up to and including termination of employment. A variety of laws apply to the Funds and their operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owed by Fund directors and officers, and criminal laws. The federal securities laws generally prohibit the Funds from making material misstatements in its prospectus and other documents filed with the SEC, or from omitting to state a material fact. These material misstatements and omissions include financial statements that are misleading or omit materials facts.
B. Examples of criminal violations of the law include stealing, embezzling, misapplying corporate or bank funds, making a payment for an expressed purpose on a Fund's behalf to an individual who intends to use it for a different purpose; or making payments, whether corporate or personal, of cash or other items of value that are intended to influence the judgment or actions of political candidates, government officials or businesses in connection with any of the Funds' activities. The Funds must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report, as appropriate, non-criminal violations.
Amended: June 1, 2009
Certification Pursuant to Rule 30a-2(a) under the
1940 Act and Section 302
of the Sarbanes-Oxley Act
I, James M. Dykas, certify that:
1. | I have reviewed this report on Form N-CSR of First Trust Mortgage Income Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | January 8, 2024 | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Certification Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302
of the Sarbanes-Oxley Act
I, Derek D. Maltbie, certify that:
1. | I have reviewed this report on Form N-CSR of First Trust Mortgage Income Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | January 8, 2024 | /s/ Derek D. Maltbie | |||
Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Certification Pursuant to Rule 30a-2(b) under the
1940 Act and Section 906
of the Sarbanes-Oxley Act
I, James M. Dykas, President and Chief Executive Officer of First Trust Mortgage Income Fund (the “registrant”), certify that:
1. | The Form N-CSR of the registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant. |
Date: | January 8, 2024 | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
I, Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer of First Trust Mortgage Income Fund (the “registrant”), certify that:
1. | The Form N-CSR of the registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant. |
Date: | January 8, 2024 | /s/ Derek D. Maltbie | |||
Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
FIRST TRUST ADVISORS L.P.
PROXY VOTING GUIDELINES
First Trust Advisors L.P. (“FTA” or the “Adviser”) serves as investment adviser to open- and closed-end investment companies, and other collective investments (“Funds”), as well as separately managed accounts (collectively,“Clients”). As part of these services, the Adviser has, in most cases, agreed to or been delegated proxy voting responsibility on such Clients’ behalf (“Proxy Clients”). FTA is required to adopt and implement policies and procedures reasonably designed to ensure proxy voting on behalf of Proxy Clients is conducted in a manner that is in their best interests and addresses how conflicts of interest between FTA’s interests and Proxy Clients’ interests are managed. FTA has adopted the following policies and procedures to comply with this requirement (the “Policy”).
1. It is the Adviser’s policy to seek and to ensure that proxies are voted consistently and in the best economic interests of the Proxy Client. The FTA Investment Committee is responsible for the implementation of the Policy.
2. The Adviser engaged Institutional Shareholder Services (“ISS”) to provide proxy research, recommendations, and voting services. ISS provides a password protected website which is accessible to authorized FTA personnel to download upcoming proxy meeting data, including research reports of companies held in Proxy Client portfolios. The website can be used to view proposed proxy votes and to enter votes for upcoming meetings for Proxy Client portfolio securities.
3. FTA will generally follow the ISS Proxy Voting Guidelines (the “Guidelines”) to vote proxies for Proxy Clients’ accounts, so long as such Guidelines are considered to be in the best interests of the Proxy Client, and there are no noted or perceived conflicts of interest. FTA’s use of the Guidelines is not intended to constrain FTA’s consideration of any proxy proposal, and there are times when FTA deviates from the Guidelines. This includes when required by Rule 12d1-4 agreements between Fund Proxy Clients and certain acquired funds, if applicable. Generally, FTA will not rely on ISS Proxy Voting Guidelines to withhold votes or vote against directors solely based on (i) quota criteria or (ii) the exclusion of certain climate-related disclosures, which may or may not relate to the company’s core business or may not materially impact shareholder value. In such cases, FTA will consider such proxy voting decisions in light of merit-based considerations which it believes may impact shareholder value. In addition, FTA will vote against shareholder proposals that are not related to a company’s core business and/or do not appear to be an appropriate use of a company’s resources to maximize shareholder value. FTA retains final authority and fiduciary responsibility for proxy voting.
In certain circumstances, where FTA has determined that it is consistent with Proxy Clients’ best interests, FTA will not vote a proxy on behalf of one or more Proxy Clients. Such circumstances include:
(a) Limited Value. Proxies will not be required to be voted on securities in a Proxy Client’s account if the value of the Proxy Client’s economic interest in the securities is indeterminable or insignificant (less than $1,000). Proxies will also not be required to be voted for any securities that are no longer held in Proxy Client’s account(s).
(b) Securities Lending Program. When Fund portfolio securities are out on loan, they are transferred into the borrower’s name and are voted by the borrower, in its discretion. In most cases, FTA will not recall securities on loan in order to vote a proxy. However, where FTA determines that a proxy vote, or other shareholder action, is materially important to the Fund Proxy Client’s account, FTA will make a good faith effort to recall the security for purposes of voting, understanding that in certain cases, the attempt to recall the security may not be effective in time to meet voting deadlines. In certain instances, in FTA’s discretion, disclosure regarding FTA’s process for determining whether or not to recall Fund portfolio securities on loan for proxy voting purposes may be provided as part of the Funds’ annual Form N-PX filing.
(c) Unjustifiable Costs. In certain circumstances, based on cost-benefit analysis, FTA may choose not to vote when the cost of voting on behalf of a Proxy Client would exceed any anticipated benefits of the proxy proposal to such Proxy Client (e.g. foreign securities).
(d) International Markets Share Blocking. Share blocking is the “freezing” of shares for trading purposes at the custodian/sub-custodian bank level in order to vote proxies. While shares are frozen, they may not be traded. Therefore, the potential exists for a pending trade to fail if trade settlement falls on a date during the blocking period. In international markets where share blocking applies, FTA typically will not, but reserves the right to, vote proxies due to the liquidity constraints associated with share blocking.
4. On a regular basis, FTA Research reviews ISS recommendations on matters determined to have a potential impact of shareholder value to decide whether to vote as the Guidelines recommend and advises the FTA Investment Committee of its determination.
5. FTA may determine voting in accordance with the Guidelines is not in the best interests of a Proxy Client. Whenever a conflict of interest arises between ISS and a target company subject to a proxy vote, the Adviser will consider the recommendation of the company and what the Adviser believes to be in the best interests of the Proxy Client and will vote the proxy without using the Guidelines. If FTA has knowledge of a material conflict of interest between itself and a Proxy Client, the Adviser shall vote the applicable proxy in accordance with the Guidelines to avoid such conflict of interest. If there is a decision to vote against the Guidelines, the FTA Investment Committee will document the reason and instruct ISS to change the vote to reflect this decision.
If there is a conflict of interest between a Fund Proxy Client and FTA or other Fund service providers, FTA will vote the proxy based on the Guidelines to avoid such conflict of interest.
6. If a Proxy Client requests the Adviser to follow specific voting guidelines or additional guidelines, the Adviser shall review the request and follow such guidelines, unless the Adviser determines that it is unable to do so. In such case, the Adviser shall inform the Proxy Client that it is not able to honor the Proxy Client’s request.
7. FTA periodically reviews proxy votes to ensure compliance with this Policy.
8. This Policy, the Guidelines and votes cast for Proxy Clients are available upon request and such Proxy Client requests must be forwarded to FTA Compliance for review and response. This Policy is also provided with each advisory contract and described and provided with the Form ADV, Part 2A.
Shareholders of Fund Proxy Clients can review the Policy and a Fund’s voted proxies (if any) during the most recent 12-month period ended June 30 on the First Trust website at www.ftportfolios.com or by accessing EDGAR on the SEC website at www.sec.gov.
9. FTA provides reasonable ongoing oversight of ISS. FTA, or ISS on behalf of FTA, maintains the following records relating to proxy voting:
(a) a copy of this Policy;
(b) a copy of each proxy form for which it is responsible to vote;
(c) a copy of each proxy solicitation, including proxy statements and related materials with regard to each proxy issue it votes;
(d) documents relating to the identification and resolution of conflicts of interest, if any;
(e) any documents created by FTA or ISS that were material to a proxy voting decision or that memorialized the basis for that decision; and
(f) a copy of each written request from any Proxy Client for information on how FTA voted proxies on the Proxy Client’s behalf, and a copy of any written response by FTA to any written or oral request for information by a Proxy Client on how FTA voted proxies for that Proxy Client’s account.
These records are either maintained at FTA’s office or are electronically available to FTA through access to the ISS Proxy Exchange portal.
Adopted: | September 15, 2003 |
Amended: | December 10, 2007 |
Amended: | September 21, 2009 |
Amended: | September 12, 2016 |
Amended: | March 9, 2020 |
Amended: | June 7, 2021 |
Amended: | January 19, 2022 |
Amended: | May 13, 2022 |
Amended: | September 22, 2022 |
Amended: | June 5, 2023 |
N-2 |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2023
$ / shares
shares
| |||||||||
Cover [Abstract] | |||||||||
Entity Central Index Key | 0001319183 | ||||||||
Amendment Flag | false | ||||||||
Entity Inv Company Type | N-2 | ||||||||
Document Type | N-CSR | ||||||||
Entity Registrant Name | First Trust Mortgage Income Fund | ||||||||
General Description of Registrant [Abstract] | |||||||||
Investment Objectives and Practices [Text Block] | Investment
Objectives
The
Fund’s primary investment objective is to seek a high level of current income. As a secondary objective the Fund seeks to preserve
capital.
Principal
Investment Policies
In
the pursuit of its investment objectives, under normal market conditions:
To
the extent the Fund enters into derivatives transactions, it will do so pursuant to Rule 18f-4 under the 1940 Act. Rule 18f-4 requires
the Fund to implement certain policies and procedures designed to manage its derivatives risks, dependent upon the Fund’s level
of exposure to derivative instruments.
The
Fund may engage in the use of leverage by issuing preferred shares of beneficial interest, entering into reverse repurchase agreements,
and/or issuing notes or other evidences of indebtedness including bank borrowings or commercial paper.
In
addition, the Fund may, but is not required to, use various strategic transactions to: (1) seek to reduce interest rate risks arising
from any use of leverage; (2) facilitate portfolio management; and (3) mitigate risks, including interest rate risk and credit risks.
The Fund generally seeks to use these instruments and transactions as portfolio management or hedging techniques to protect against possible
adverse changes in the market value of securities held in or to be purchased for the Fund’s portfolio, protect the value of the
Fund’s portfolio, facilitate the sale of certain securities for investment purposes, manage the effective interest rate exposure
of the Fund or establish positions in the derivative markets as a substitute for purchasing or selling particular securities.
Fundamental
Policies
The
Fund, as a fundamental policy, may not:
1.
With respect to 75% of its total assets, purchase any securities if, as a result (i) more than 5% of the Fund’s total assets
would then be invested in securities of any single issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities
of any single issuer; provided, that government securities (as defined in the 1940 Act), securities issued by other investment companies
and cash items (including receivables) shall not be counted for purposes of this limitation;
2.
Purchase any security if, as a result of the purchase, 25% or more of the Fund’s total assets (taken at current value) would
be invested in the securities of borrowers and other issuers having their principal business activities in the same industry; provided,
that this limitation shall not apply with respect to issuers of mortgage-backed securities or obligations issued or guaranteed by the
U.S. Government or by its agencies or instrumentalities;
3.
Borrow money, except as permitted by the 1940 Act, the rules thereunder and interpretations thereof or pursuant to a Securities
and Exchange Commission exemptive order; 4.
Issue senior securities, as defined in the 1940 Act, other than: (i) Preferred Shares which immediately after issuance will have
asset coverage of at least 200%; (ii) indebtedness which immediately after issuance will have asset coverage of at least 300%; (iii) the
borrowings permitted by investment restriction 3 set forth above; or (iv) pursuant to a Securities and Exchange Commission exemptive order;
5.
Make loans of funds or other assets, other than by entering into repurchase agreements, lending portfolio securities and through
the purchase of debt securities in accordance with its investment objectives, policies and limitations;
6.
Act as underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within
the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio securities;
7.
Purchase or sell real estate, but this shall not prevent the Fund from investing in securities of companies that deal in real estate
or are engaged in the real estate business, including real estate investment trusts, and securities secured by real estate or interests
therein and the Fund may hold and sell real estate or mortgages on real estate acquired through default, liquidation, or other distributions
of an interest in real estate as a result of the Fund’s ownership of such securities; and
8.
Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall
not prevent the Fund from purchasing or selling options, futures contracts or derivative instruments or from investing in securities or
other instruments backed by physical commodities).
For
the purpose of applying the limitation set forth in subparagraph 2 above, an issuer shall be deemed the sole issuer of a security when
its assets and revenues are separate from other governmental entities and its securities are backed only by its assets and revenues. Similarly,
in the case of a non-governmental issuer, such as an industrial corporation or a privately owned or operated hospital, if the security
is backed only by the assets and revenues of the non-governmental issuer, then such non-governmental issuer would be deemed to be the
sole issuer. Where a security is also backed by the enforceable obligation of a superior or unrelated governmental or other entity (other
than a bond insurer), it shall also be included in the computation of securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other facility, such as a bank guarantee or letter of credit, such a guarantee
or letter of credit would be considered a separate security and would be treated as an issue of such government, other entity or bank.
When a municipal bond is insured by bond insurance, it shall not be considered a security that is issued or guaranteed by the insurer;
instead, the issuer of such municipal bond will be determined in accordance with the principles set forth above.
Except
as noted above, the foregoing fundamental investment policies, together with the investment objectives of the Fund, cannot be changed
without approval by holders of a majority of the outstanding voting securities of the Fund, as defined in the 1940 Act, which includes
common shares of beneficial interest and preferred shares of beneficial interest (“Preferred Shares”), if any, voting together
as a single class, and of the holders of the outstanding Preferred Shares voting as a single class. Under the 1940 Act a “majority
of the outstanding voting securities” means the vote of: (A) 67% or more of the Fund’s shares present at a meeting, if the
holders of more than 50% of the Fund’s shares are present or represented by proxy; or (B) more than 50% of the Fund’s shares,
whichever is less.
|
||||||||
Risk Factors [Table Text Block] | Principal
Risks
The
Fund is a closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund
is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance
that the Fund will achieve its investment objectives. The following discussion summarizes the principal risks associated with investing
in the Fund, which includes the risk that you could lose some or all of your investment in the Fund. The Fund is subject to the
informational requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 and, in accordance therewith,
files reports, proxy statements and other information that is available for review.
Collateralized
Mortgage Obligations Risk. Collateralized mortgage obligations (“CMOs”) are debt obligations
collateralized by mortgage loans or mortgage pass-through securities and are a type of mortgage-backed security. CMOs are created
by dividing the principal and interest payments collected on a pool of mortgages into several revenue streams (tranches) with different
priority rights to portions of the underlying mortgage payments. CMO tranches are often specially structured in a manner that provides
a variety of investment characteristics, such as yield, effective maturity and interest rate sensitivity. A risk of CMOs is the uncertainty
of the timing of cash flows that results from the rate of prepayments on the underlying mortgages serving as collateral and from the structure
of the particular CMO transaction (that is, the priority of the individual tranches). An increase or decrease in prepayment rates (resulting
from a decrease or increase in mortgage interest rates) may cause the CMOs to be retired substantially earlier than their stated maturities
or final distribution dates and will affect the yield and price of CMOs. Certain classes of CMOs are structured in a manner that makes
them extremely sensitive to changes in prepayment rates. In addition, if the collateral securing CMOs or any third-party guarantees are
insufficient to make payments, the Fund could sustain a loss.
Credit
Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions of such
entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity
of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely
affect the credit ratings of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and,
as a result, may adversely affect those securities’ perceived or actual credit risk.
Credit
and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated
party of a debt security in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest
and/or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged to be of comparable
quality, are commonly referred to as high-yield securities or “junk” bonds and are considered speculative with respect to
the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline in market
value than investment grade securities due to adverse economic and business developments. High-yield securities are often unsecured and
subordinated to other creditors of the issuer. The market values for high-yield securities tend to be very volatile, and these securities
are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following specific
risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater risk of loss
due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make dividend,
interest and/or principal payments; (iv) negative perception of the high-yield market which may depress the price and liquidity of high-yield
securities; (v) volatility; and (vi) liquidity.
Current
Market Conditions Risk. Current market conditions risk is the risk that a particular investment, or
shares of the Fund in general, may fall in value due to current market conditions. As a means to fight inflation, which remains at elevated
levels, the Federal Reserve and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal
Reserve has announced that it intends to reverse previously implemented quantitative easing. U.S. regulators have proposed several changes
to market and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s
ability to achieve its investment strategies or make certain investments. Recent and potential future bank failures could result in disruption
to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole, which
may also heighten market volatility and reduce liquidity. The ongoing adversarial political climate in the United States, as well as political
and diplomatic events both domestic and abroad, have and may continue to have an adverse impact the U.S. regulatory landscape, markets
and investor behavior, which could have a negative impact on the Fund’s investments and operations. Other unexpected political,
regulatory and diplomatic events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial
markets and the broader economy. For example, in February 2022, Russia invaded Ukraine which has caused and could continue to cause significant
market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting
from those hostilities have and could continue to have a significant impact on certain Fund investments as well as Fund performance and
liquidity. The economies of the United States and its trading partners, as well as the financial markets generally, may be adversely impacted
by trade disputes and other matters. For example, the United States has imposed trade barriers and restrictions on China. In addition,
the Chinese government is engaged in a longstanding dispute with Taiwan, continually threatening an invasion. If the political climate
between the United States and China does not improve or continues to deteriorate, if China were to attempt invading Taiwan, or if other
geopolitical conflicts develop or worsen, economies, markets and individual securities may be adversely affected, and the value of the
Fund’s assets may go down. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by
governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets,
negatively impacting global growth prospects. While vaccines have been developed, there is no guarantee that vaccines will be effective
against emerging future variants of the disease. As this global pandemic illustrated, such events may affect certain geographic regions,
countries, sectors and industries more significantly than others. Advancements in technology may also adversely impact markets and the
overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced development and increased regulation
of artificial intelligence. These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s
portfolio investments and could result in disruptions in the trading markets.
Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber
security breaches. The Fund has established risk management systems designed to reduce the risks associated with cyber security. However,
there is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cyber security
systems of issuers or third party service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber
incidents in the future.
Extension
Risk. Extension risk is the risk that, when interest rates rise, certain obligations will be paid off
by the issuer (or other obligated party) more slowly than anticipated, causing the value of these debt securities to fall. Rising interest
rates tend to extend the duration of debt securities, making their market value more sensitive to changes in interest rates. The value
of longer-term debt securities generally changes more in response to changes in interest rates than shorter-term debt securities. As a
result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value.
Fixed-Income
Securities Risk. An investment in fixed-income securities is subject to certain risks, including:
Futures
Contracts Risk. The primary risks associated with the use of futures contracts are (a) the imperfect
correlation between the change in market value of the instruments or indices underlying the futures contracts and the price of the futures
contracts; (b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract
when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the investment adviser’s
inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors;
and (e) the possibility that the counterparty will default in the performance of its obligations.
Illiquid
and Restricted Securities Risk. The Fund may invest in securities that are restricted and/or illiquid
securities. Restricted securities are securities that cannot be offered for public resale unless registered under the applicable securities
laws or that have a contractual restriction that prohibits or limits their resale. Restricted securities may be illiquid as they generally
are not listed on an exchange and may have no active trading market. Investments in restricted securities could have the effect of increasing
the amount of the Fund’s assets invested in illiquid securities if qualified institutional buyers are unwilling to purchase these
securities. Illiquid and restricted securities may be difficult to dispose of at a fair price at the times when the Fund believes it is
desirable to do so. The market price of illiquid and restricted securities generally is more volatile than that of more liquid securities,
which may adversely affect the price that the Fund pays for or recovers upon the sale of such securities. Illiquid and restricted securities
are also more difficult to value, especially in challenging markets.
Inflation
Risk. The Fund invests in securities that are subject to inflation risk. Inflation risk is the risk
that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation
increases, the present value of the Fund’s assets and distributions may decline. This risk is more prevalent with respect to debt
securities. Inflation creates uncertainty over the future real value (after inflation) of an investment. Inflation rates may change frequently
and drastically as a result of various factors, including unexpected shifts in the domestic or global economy, and the Fund’s investments
may not keep pace with inflation, which may result in losses to Fund investors.
Interest
Rate and Duration Risk. Interest rate risk is the risk that securities will decline in value because
of changes in market interest rates. For fixed income securities, when market interest rates rise, the market value of such securities
generally will fall. During periods of rising interest rates, the average life of certain types of securities may be extended because
of slower than expected prepayments. This may lock in a below-market yield, increase the security’s duration and further reduce
the value of the security. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually
making them more volatile than securities with shorter durations. Investments in fixed rate securities with long-term maturities may experience
significant price declines if long-term interest rates increase.
The
interest rates payable on floating rate securities are not fixed and may fluctuate based upon changes in market rates. As short-term interest
rates decline, interest payable on floating rate securities typically decreases. Alternatively, during periods of rising interest rates,
interest payable on floating rate securities typically increases. Changes in interest rates on floating rate securities may lag behind
changes in market rates or may have limits on the maximum increases in interest rates. The value of floating rate securities may decline
if their interest rates do not rise as much, or as quickly, as interest rates in general. Many
financial instruments use or may use a floating rate based upon the LIBOR. The United Kingdom’s Financial Conduct Authority (the
“FCA”), which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31,
2022. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will
be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same
volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain Fund investments
and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition
away from LIBOR on the Fund or on certain instruments in which the Fund invests can be difficult to ascertain, and they may vary depending
on a variety of factors, and they could result in losses to the Fund.
In
general, income on inverse floating rate securities will decrease when interest rates increase and increase when interest rates decrease.
Inverse floating rate securities generally will underperform the market for fixed rate securities in a rising interest rate environment.
An inverse floating rate security’s price may be more volatile than that of a fixed rate security.
In
the case of stripped mortgage-backed securities, in general, when interest rates are falling and prepayment rates are increasing, the
value of a principal only security (“PO Security”) will rise and the value of an interest only security (“IO Security”)
will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, in general, the value of a PO Security will
fall and the value of an IO Security will rise. Yields on IOs and POs are very sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets.
Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without leverage;
the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result in fluctuations
in the dividends paid on the common shares; in a declining market, the use of leverage is likely to cause a greater decline in the net
asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the
common shares; and when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor will be higher than
if the Fund did not use leverage.
Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be
difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative
impact on the Fund.
Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
Market
Risk. Investments held by the Fund, as well as shares of the Fund itself, are subject to market fluctuations
caused by real or perceived economic conditions, political events, regulatory factors or market developments, changes in interest rates
and perceived trends in securities prices. Shares of the Fund could decline in value or underperform other investments as a result of
the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
market manipulation, government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition
of sanctions and other similar measures, spread of infectious diseases or other public health issues, recessions, or other events could
have a significant negative impact on the Fund and its investments. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any such events,
the Fund’s shares may trade at increased premiums or discounts to their net asset value, the bid/ask spread on the Fund’s
shares may widen and the returns on investment may fluctuate.
Mortgage-Backed
Securities Risk. The Fund invests in mortgage-backed securities, representing direct or indirect interests
in pools of underlying residential or commercial mortgage loans that are secured by real property. These securities provide investors
with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid. A mortgage-backed
security may be negatively affected by the quality of the mortgages underlying such security and the structure of its issuer. For example,
if a mortgage underlying a particular mortgage-backed security defaults, the value of that security may decrease. Moreover, a downturn
in the markets for residential or commercial real estate or a general economic downturn could negatively affect both the price and liquidity
of privately issued mortgage-backed securities. Mortgage-backed securities are subject to prepayment risk, which is the risk that the
borrowers under the mortgage loans underlying a Fund’s mortgage-backed securities might pay off their mortgage loans sooner than
expected, which could happen when interest rates fall or for other reasons, which could cause the value of the Fund’s mortgage-backed
securities to fall. Moreover, if the underlying mortgage loans are paid off sooner than expected, the Fund may have to reinvest the proceeds
in other securities that have lower yields. Mortgage-backed securities are also subject to extension risk, which is
the risk that rising interest rates could cause mortgages underlying the securities to be prepaid more slowly than expected, resulting
in slower prepayments of the securities. This would, in effect, convert a short or medium-duration mortgage-backed security into a longer-duration
security, increasing its sensitivity to interest rate changes and likely causing its price to decline. Mortgage-backed securities issued
by a private issuer, such as commercial mortgage-backed securities, generally entail greater risk than obligations directly or indirectly
guaranteed by the U.S. government or a government-sponsored entity.
A
portion of the Fund’s managed assets may be invested in subordinated classes of mortgage-backed securities. Such subordinated classes
are subject to a greater degree of non-payment risk than are senior classes of the same issuer or agency. In addition, under certain
market conditions, the market for subordinated classes of mortgage-backed securities may not be as liquid as the market for other fixed
income securities.
Given
its focus in mortgage-backed securities, the Fund may be more susceptible to adverse economic, political and regulatory events that affect
the value of real estate.
Non-Agency
Securities Risk. Investments in asset-backed or mortgage-backed securities offered by non-governmental
issuers, such as commercial banks, savings and loans, private mortgage insurance companies, mortgage bankers and other secondary market
issuers are subject to additional risks. There are no direct or indirect government or agency guarantees of payments in loan pools created
by non-government issuers. Securities issued by private issuers are subject to the credit risks of such issuers. An unexpectedly high
rate of defaults on the loan pool may adversely affect the value of a non-agency security and could result in losses to the Fund. The
risk of such defaults is generally higher in the case of pools that include subprime loans. Non-agency securities are typically traded
“over-the-counter” rather than on a securities exchange and there may be a limited market for the securities, especially when
there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, the non-agency mortgage-related
securities held by the Fund may be particularly difficult to value because of the complexities involved in assessing the value of the
underlying loans.
Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not limited
to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its
investment objective. Although the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there
is no way to completely protect against such risks.
Potential
Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict
with the interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or advise other investment
funds or accounts with the same or substantially similar investment objectives and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust for investment advisory and management services are higher than if the Fund
did not use leverage because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to
leverage the Fund.
TBA
Transactions Risk. The Fund may purchase securities via TBA (To Be Announced) Transactions. In such
a transaction, the purchase price of the securities is typically fixed at the time of the commitment, but delivery and payment can take
place a month or more after the date of the commitment. At the time of delivery of the securities, the value may be more or less than
the purchase or sale price. Purchasing securities in a TBA Transaction may give rise to investment leverage and may increase the Fund’s
volatility. Default by, or bankruptcy of, a counterparty to a TBA Transaction would expose the Fund to possible losses because of an adverse
market action, expenses or delays in connection with the purchase or sale of the pools specified in such transaction.
Valuation
Risk. The valuation of securitized assets may carry more risk than that of common stock. Uncertainties
in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and
processes may lead to inaccurate asset pricing. The Fund may hold investments in sizes smaller than institutionally-sized round lot positions
(sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized
round lots. If the Fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which
such securities have been held by the Fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance
that the Fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss
to the Fund.
|
||||||||
Share Price | $ 10.88 | ||||||||
NAV Per Share | $ 11.72 | ||||||||
Capital Stock, Long-Term Debt, and Other Securities [Abstract] | |||||||||
Outstanding Security, Title [Text Block] | Common Shares outstanding (unlimited number of Common Shares has been authorized) | ||||||||
Outstanding Security, Held [Shares] | shares | 4,213,115 | ||||||||
Collateralized Mortgage Obligations Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Collateralized
Mortgage Obligations Risk. Collateralized mortgage obligations (“CMOs”) are debt obligations
collateralized by mortgage loans or mortgage pass-through securities and are a type of mortgage-backed security. CMOs are created
by dividing the principal and interest payments collected on a pool of mortgages into several revenue streams (tranches) with different
priority rights to portions of the underlying mortgage payments. CMO tranches are often specially structured in a manner that provides
a variety of investment characteristics, such as yield, effective maturity and interest rate sensitivity. A risk of CMOs is the uncertainty
of the timing of cash flows that results from the rate of prepayments on the underlying mortgages serving as collateral and from the structure
of the particular CMO transaction (that is, the priority of the individual tranches). An increase or decrease in prepayment rates (resulting
from a decrease or increase in mortgage interest rates) may cause the CMOs to be retired substantially earlier than their stated maturities
or final distribution dates and will affect the yield and price of CMOs. Certain classes of CMOs are structured in a manner that makes
them extremely sensitive to changes in prepayment rates. In addition, if the collateral securing CMOs or any third-party guarantees are
insufficient to make payments, the Fund could sustain a loss.
|
||||||||
Credit Agency Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Credit
Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions of such
entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity
of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely
affect the credit ratings of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and,
as a result, may adversely affect those securities’ perceived or actual credit risk.
|
||||||||
Credit And Below Investment Grade Securities Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Credit
and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated
party of a debt security in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest
and/or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged to be of comparable
quality, are commonly referred to as high-yield securities or “junk” bonds and are considered speculative with respect to
the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline in market
value than investment grade securities due to adverse economic and business developments. High-yield securities are often unsecured and
subordinated to other creditors of the issuer. The market values for high-yield securities tend to be very volatile, and these securities
are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following specific
risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater risk of loss
due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make dividend,
interest and/or principal payments; (iv) negative perception of the high-yield market which may depress the price and liquidity of high-yield
securities; (v) volatility; and (vi) liquidity.
|
||||||||
Current Market Conditions Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Current
Market Conditions Risk. Current market conditions risk is the risk that a particular investment, or
shares of the Fund in general, may fall in value due to current market conditions. As a means to fight inflation, which remains at elevated
levels, the Federal Reserve and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal
Reserve has announced that it intends to reverse previously implemented quantitative easing. U.S. regulators have proposed several changes
to market and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s
ability to achieve its investment strategies or make certain investments. Recent and potential future bank failures could result in disruption
to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole, which
may also heighten market volatility and reduce liquidity. The ongoing adversarial political climate in the United States, as well as political
and diplomatic events both domestic and abroad, have and may continue to have an adverse impact the U.S. regulatory landscape, markets
and investor behavior, which could have a negative impact on the Fund’s investments and operations. Other unexpected political,
regulatory and diplomatic events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial
markets and the broader economy. For example, in February 2022, Russia invaded Ukraine which has caused and could continue to cause significant
market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting
from those hostilities have and could continue to have a significant impact on certain Fund investments as well as Fund performance and
liquidity. The economies of the United States and its trading partners, as well as the financial markets generally, may be adversely impacted
by trade disputes and other matters. For example, the United States has imposed trade barriers and restrictions on China. In addition,
the Chinese government is engaged in a longstanding dispute with Taiwan, continually threatening an invasion. If the political climate
between the United States and China does not improve or continues to deteriorate, if China were to attempt invading Taiwan, or if other
geopolitical conflicts develop or worsen, economies, markets and individual securities may be adversely affected, and the value of the
Fund’s assets may go down. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by
governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets,
negatively impacting global growth prospects. While vaccines have been developed, there is no guarantee that vaccines will be effective
against emerging future variants of the disease. As this global pandemic illustrated, such events may affect certain geographic regions,
countries, sectors and industries more significantly than others. Advancements in technology may also adversely impact markets and the
overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced development and increased regulation
of artificial intelligence. These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s
portfolio investments and could result in disruptions in the trading markets.
|
||||||||
Cyber Security Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber
security breaches. The Fund has established risk management systems designed to reduce the risks associated with cyber security. However,
there is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cyber security
systems of issuers or third party service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber
incidents in the future.
|
||||||||
Extension Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Extension
Risk. Extension risk is the risk that, when interest rates rise, certain obligations will be paid off
by the issuer (or other obligated party) more slowly than anticipated, causing the value of these debt securities to fall. Rising interest
rates tend to extend the duration of debt securities, making their market value more sensitive to changes in interest rates. The value
of longer-term debt securities generally changes more in response to changes in interest rates than shorter-term debt securities. As a
result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value.
|
||||||||
Fixed Income Securities Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Fixed-Income
Securities Risk. An investment in fixed-income securities is subject to certain risks, including:
|
||||||||
Futures Contracts Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Futures
Contracts Risk. The primary risks associated with the use of futures contracts are (a) the imperfect
correlation between the change in market value of the instruments or indices underlying the futures contracts and the price of the futures
contracts; (b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract
when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the investment adviser’s
inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors;
and (e) the possibility that the counterparty will default in the performance of its obligations.
|
||||||||
Illiquid And Restricted Securities Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Illiquid
and Restricted Securities Risk. The Fund may invest in securities that are restricted and/or illiquid
securities. Restricted securities are securities that cannot be offered for public resale unless registered under the applicable securities
laws or that have a contractual restriction that prohibits or limits their resale. Restricted securities may be illiquid as they generally
are not listed on an exchange and may have no active trading market. Investments in restricted securities could have the effect of increasing
the amount of the Fund’s assets invested in illiquid securities if qualified institutional buyers are unwilling to purchase these
securities. Illiquid and restricted securities may be difficult to dispose of at a fair price at the times when the Fund believes it is
desirable to do so. The market price of illiquid and restricted securities generally is more volatile than that of more liquid securities,
which may adversely affect the price that the Fund pays for or recovers upon the sale of such securities. Illiquid and restricted securities
are also more difficult to value, especially in challenging markets.
|
||||||||
Inflation Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Inflation
Risk. The Fund invests in securities that are subject to inflation risk. Inflation risk is the risk
that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation
increases, the present value of the Fund’s assets and distributions may decline. This risk is more prevalent with respect to debt
securities. Inflation creates uncertainty over the future real value (after inflation) of an investment. Inflation rates may change frequently
and drastically as a result of various factors, including unexpected shifts in the domestic or global economy, and the Fund’s investments
may not keep pace with inflation, which may result in losses to Fund investors.
|
||||||||
Interest Rate And Duration Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Interest
Rate and Duration Risk. Interest rate risk is the risk that securities will decline in value because
of changes in market interest rates. For fixed income securities, when market interest rates rise, the market value of such securities
generally will fall. During periods of rising interest rates, the average life of certain types of securities may be extended because
of slower than expected prepayments. This may lock in a below-market yield, increase the security’s duration and further reduce
the value of the security. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually
making them more volatile than securities with shorter durations. Investments in fixed rate securities with long-term maturities may experience
significant price declines if long-term interest rates increase.
The
interest rates payable on floating rate securities are not fixed and may fluctuate based upon changes in market rates. As short-term interest
rates decline, interest payable on floating rate securities typically decreases. Alternatively, during periods of rising interest rates,
interest payable on floating rate securities typically increases. Changes in interest rates on floating rate securities may lag behind
changes in market rates or may have limits on the maximum increases in interest rates. The value of floating rate securities may decline
if their interest rates do not rise as much, or as quickly, as interest rates in general. Many
financial instruments use or may use a floating rate based upon the LIBOR. The United Kingdom’s Financial Conduct Authority (the
“FCA”), which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31,
2022. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will
be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same
volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain Fund investments
and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition
away from LIBOR on the Fund or on certain instruments in which the Fund invests can be difficult to ascertain, and they may vary depending
on a variety of factors, and they could result in losses to the Fund.
In
general, income on inverse floating rate securities will decrease when interest rates increase and increase when interest rates decrease.
Inverse floating rate securities generally will underperform the market for fixed rate securities in a rising interest rate environment.
An inverse floating rate security’s price may be more volatile than that of a fixed rate security.
In
the case of stripped mortgage-backed securities, in general, when interest rates are falling and prepayment rates are increasing, the
value of a principal only security (“PO Security”) will rise and the value of an interest only security (“IO Security”)
will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, in general, the value of a PO Security will
fall and the value of an IO Security will rise. Yields on IOs and POs are very sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets.
|
||||||||
Leverage Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without leverage;
the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result in fluctuations
in the dividends paid on the common shares; in a declining market, the use of leverage is likely to cause a greater decline in the net
asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the
common shares; and when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor will be higher than
if the Fund did not use leverage.
|
||||||||
Management Risk And Reliance On Key Personnel [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be
difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative
impact on the Fund.
|
||||||||
Market Discount From Net Asset Value [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
|
||||||||
Market Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Market
Risk. Investments held by the Fund, as well as shares of the Fund itself, are subject to market fluctuations
caused by real or perceived economic conditions, political events, regulatory factors or market developments, changes in interest rates
and perceived trends in securities prices. Shares of the Fund could decline in value or underperform other investments as a result of
the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
market manipulation, government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition
of sanctions and other similar measures, spread of infectious diseases or other public health issues, recessions, or other events could
have a significant negative impact on the Fund and its investments. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any such events,
the Fund’s shares may trade at increased premiums or discounts to their net asset value, the bid/ask spread on the Fund’s
shares may widen and the returns on investment may fluctuate.
|
||||||||
Mortgage Backed Securities Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Mortgage-Backed
Securities Risk. The Fund invests in mortgage-backed securities, representing direct or indirect interests
in pools of underlying residential or commercial mortgage loans that are secured by real property. These securities provide investors
with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid. A mortgage-backed
security may be negatively affected by the quality of the mortgages underlying such security and the structure of its issuer. For example,
if a mortgage underlying a particular mortgage-backed security defaults, the value of that security may decrease. Moreover, a downturn
in the markets for residential or commercial real estate or a general economic downturn could negatively affect both the price and liquidity
of privately issued mortgage-backed securities. Mortgage-backed securities are subject to prepayment risk, which is the risk that the
borrowers under the mortgage loans underlying a Fund’s mortgage-backed securities might pay off their mortgage loans sooner than
expected, which could happen when interest rates fall or for other reasons, which could cause the value of the Fund’s mortgage-backed
securities to fall. Moreover, if the underlying mortgage loans are paid off sooner than expected, the Fund may have to reinvest the proceeds
in other securities that have lower yields. Mortgage-backed securities are also subject to extension risk, which is
the risk that rising interest rates could cause mortgages underlying the securities to be prepaid more slowly than expected, resulting
in slower prepayments of the securities. This would, in effect, convert a short or medium-duration mortgage-backed security into a longer-duration
security, increasing its sensitivity to interest rate changes and likely causing its price to decline. Mortgage-backed securities issued
by a private issuer, such as commercial mortgage-backed securities, generally entail greater risk than obligations directly or indirectly
guaranteed by the U.S. government or a government-sponsored entity.
A
portion of the Fund’s managed assets may be invested in subordinated classes of mortgage-backed securities. Such subordinated classes
are subject to a greater degree of non-payment risk than are senior classes of the same issuer or agency. In addition, under certain
market conditions, the market for subordinated classes of mortgage-backed securities may not be as liquid as the market for other fixed
income securities.
Given
its focus in mortgage-backed securities, the Fund may be more susceptible to adverse economic, political and regulatory events that affect
the value of real estate.
|
||||||||
Non Agency Securities Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Non-Agency
Securities Risk. Investments in asset-backed or mortgage-backed securities offered by non-governmental
issuers, such as commercial banks, savings and loans, private mortgage insurance companies, mortgage bankers and other secondary market
issuers are subject to additional risks. There are no direct or indirect government or agency guarantees of payments in loan pools created
by non-government issuers. Securities issued by private issuers are subject to the credit risks of such issuers. An unexpectedly high
rate of defaults on the loan pool may adversely affect the value of a non-agency security and could result in losses to the Fund. The
risk of such defaults is generally higher in the case of pools that include subprime loans. Non-agency securities are typically traded
“over-the-counter” rather than on a securities exchange and there may be a limited market for the securities, especially when
there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, the non-agency mortgage-related
securities held by the Fund may be particularly difficult to value because of the complexities involved in assessing the value of the
underlying loans.
|
||||||||
Operational Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not limited
to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its
investment objective. Although the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there
is no way to completely protect against such risks.
|
||||||||
Potential Conflicts Of Interest Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Potential
Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict
with the interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or advise other investment
funds or accounts with the same or substantially similar investment objectives and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust for investment advisory and management services are higher than if the Fund
did not use leverage because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to
leverage the Fund.
|
||||||||
T B A Transactions Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | TBA
Transactions Risk. The Fund may purchase securities via TBA (To Be Announced) Transactions. In such
a transaction, the purchase price of the securities is typically fixed at the time of the commitment, but delivery and payment can take
place a month or more after the date of the commitment. At the time of delivery of the securities, the value may be more or less than
the purchase or sale price. Purchasing securities in a TBA Transaction may give rise to investment leverage and may increase the Fund’s
volatility. Default by, or bankruptcy of, a counterparty to a TBA Transaction would expose the Fund to possible losses because of an adverse
market action, expenses or delays in connection with the purchase or sale of the pools specified in such transaction.
|
||||||||
Valuation Risk [Member] | |||||||||
General Description of Registrant [Abstract] | |||||||||
Risk [Text Block] | Valuation
Risk. The valuation of securitized assets may carry more risk than that of common stock. Uncertainties
in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and
processes may lead to inaccurate asset pricing. The Fund may hold investments in sizes smaller than institutionally-sized round lot positions
(sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized
round lots. If the Fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which
such securities have been held by the Fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance
that the Fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss
to the Fund.
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