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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 | |
---|---|---|---|---|---|---|---|---|
-0.02 | -0.17% | 12.01 | 12.03 | 12.01 | 12.03 | 815 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21727
(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:
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. 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. |
1
|
|
2
|
|
4
|
|
7
|
|
14
|
|
15
|
|
16
|
|
17
|
|
18
|
|
26
|
Fund Statistics
|
|
Symbol on New York Stock Exchange
|
FMY
|
Common Share Price
|
$11.81
|
Common Share Net Asset Value (“NAV”)
|
$12.36
|
Premium (Discount) to NAV
|
(
)%
|
Net Assets Applicable to Common Shares
|
$52,093,172
|
Current Distribution per Common Share(1)
|
$0.0825
|
Current Annualized Distribution per Common Share
|
$0.9900
|
Current Distribution Rate on Common Share Price(2)
|
8.38
%
|
Current Distribution Rate on NAV(2)
|
8.01
%
|
Performance
|
|
|
|
|
|
|
|
|
Average Annual Total Returns
|
||
|
6 Months Ended
4/30/24
|
1 Year Ended
4/30/24
|
5 Years Ended
4/30/24
|
10 Years Ended
4/30/24
|
Inception
(5/25/05)
to 4/30/24
|
Fund Performance(3)
|
|
|
|
|
|
NAV
|
9.85
%
|
6.32
%
|
1.83
%
|
2.37
%
|
4.61
%
|
Market Value
|
13.07
%
|
10.33
%
|
3.04
%
|
2.90
%
|
4.11
%
|
Index Performance
|
|
|
|
|
|
Bloomberg U.S. Mortgage Backed Securities
(MBS) Index
|
5.32
%
|
-2.19
%
|
-0.98
%
|
0.72
%
|
2.60
%
|
Portfolio Characteristics
|
|
Weighted Average Effective Long Duration
|
6.2 Years
|
Weighted Average Effective Short Duration
|
0.2 Years
|
Fund Allocation
|
% of Net Assets
|
Mortgage-Backed Securities
|
57.4%
|
U.S. Government Agency Mortgage-Backed
Securities
|
38.4
|
Asset-Backed Securities
|
8.4
|
Money Market Funds
|
4.1
|
Put Options Written
|
(0.1)
|
Net Other Assets and Liabilities(4)
|
(8.2)
|
Total
|
100.0%
|
Credit Quality(5)
|
% of Total
Investments
|
AAA
|
16.5%
|
AA+
|
0.1
|
AA
|
0.2
|
A+
|
3.7
|
A
|
2.0
|
BBB+
|
1.3
|
BBB
|
3.7
|
BBB-
|
7.5
|
BB
|
3.1
|
BB-
|
4.0
|
B+
|
0.6
|
B
|
1.1
|
B-
|
1.4
|
CCC
|
0.0*
|
CCC-
|
0.0*
|
CC
|
0.7
|
Not Rated
|
19.7
|
Agency
|
30.6
|
Cash & Cash Equivalents
|
3.8
|
Total
|
100.0%
|
*
|
Amount is less than 0.1%.
|
Performance
|
|
|
|
|
|
|
|
Average Annual Total Returns
|
|||
|
6 Months Ended
4/30/24
|
1 Year Ended
4/30/24
|
5 Years Ended
4/30/24
|
10 Years Ended
4/30/24
|
Inception
(5/25/05)
to 4/30/24
|
Fund Performance(1)
|
|
|
|
|
|
NAV
|
9.85
%
|
6.32
%
|
1.83
%
|
2.37
%
|
4.61
%
|
Market Value
|
13.07
%
|
10.33
%
|
3.04
%
|
2.90
%
|
4.11
%
|
Index Performance
|
|
|
|
|
|
Bloomberg U.S. Mortgage Backed Securities
(MBS) Index
|
5.32
%
|
-2.19
%
|
-0.98
%
|
0.72
%
|
2.60
%
|
Principal
Value
|
Description
|
Stated
Coupon
|
Stated
Maturity
|
Value
|
MORTGAGE-BACKED SECURITIES – 57.4%
|
||||
|
Collateralized Mortgage Obligations – 26.3%
|
|
|
|
|
Banc of America Mortgage Trust
|
|
|
|
$27,520
|
Series 2002-L, Class 1A1 (a)
|
3.21
%
|
12/01/32
|
$20,647
|
|
Citigroup Mortgage Loan Trust
|
|
|
|
60,559
|
Series 2005-6, Class A1, US Treasury Yield Curve Rate T
Note Constant Maturity 1 Year + 2.10% (b)
|
7.56
%
|
09/01/35
|
59,722
|
9,069
|
Series 2009-10, Class 1A1 (a) (c)
|
5.68
%
|
09/01/33
|
8,933
|
|
Connecticut Avenue Securities Trust
|
|
|
|
1,000,000
|
Series 2024-R02, Class 1B2, 30 Day Average SOFR +
3.70% (b) (c)
|
9.03
%
|
02/25/44
|
1,007,491
|
|
Countrywide Home Loan Mortgage Pass-Through Trust
|
|
|
|
173,963
|
Series 2006-HYB5, Class 3A1A (a)
|
5.01
%
|
09/01/36
|
151,769
|
|
GSR Mortgage Loan Trust
|
|
|
|
1,958
|
Series 2003-10, Class 1A12 (a)
|
5.63
%
|
10/01/33
|
1,854
|
77,908
|
Series 2005-AR1, Class 4A1 (a)
|
3.67
%
|
01/01/35
|
66,129
|
|
JP Morgan Mortgage Trust
|
|
|
|
23,889
|
Series 2006-A2, Class 5A3 (a)
|
6.09
%
|
11/01/33
|
22,935
|
352,808
|
Series 2015-IVR2, Class A5 (a) (c)
|
6.90
%
|
01/01/45
|
351,825
|
|
LHOME Mortgage Trust
|
|
|
|
1,000,000
|
Series 2023-RTL2, Class M, steps up to 11.00% on
1/25/2026 (c) (d)
|
9.00
%
|
06/25/28
|
936,477
|
1,000,000
|
Series 2024-RTL1, Class M, steps up to 13.45% on
8/25/2026 (c) (d)
|
11.95
%
|
01/25/29
|
991,833
|
800,000
|
Series 2024-RTL2, Class M, steps up to 13.08% on
10/25/2026 (c) (d)
|
11.58
%
|
03/25/29
|
800,154
|
|
MASTR Alternative Loan Trust
|
|
|
|
3,544,967
|
Series 2006-2, Class 2A3, 1 Mo. CME Term SOFR + CSA +
0.35% (b)
|
5.78
%
|
03/25/36
|
374,644
|
|
NYMT Loan Trust
|
|
|
|
1,000,000
|
Series 2024-BPL1, Class A2, steps up to 10.12% on
7/25/2026 (c) (d)
|
8.62
%
|
02/25/29
|
983,945
|
|
Onslow Bay Mortgage Loan Trust
|
|
|
|
1,189,691
|
Series 2021-NQM4, Class A1 (c)
|
1.96
%
|
10/01/61
|
971,421
|
|
Pretium Mortgage Credit Partners I LLC
|
|
|
|
1,000,000
|
Series 2021-NPL2, Class A2, steps up to 7.84% on
6/27/2025 (c) (d)
|
3.84
%
|
06/27/60
|
877,162
|
|
PRKCM Trust
|
|
|
|
1,000,000
|
Series 2021-AFC1, Class B2 (c)
|
3.95
%
|
08/01/56
|
624,159
|
|
PRPM Trust
|
|
|
|
259,139
|
Series 2020-6, Class A2, steps up to 8.70% on 11/25/2024 (c) (d)
|
7.70
%
|
11/25/25
|
246,034
|
725,000
|
Series 2024-NQM1, Class M1 (a) (c)
|
6.71
%
|
12/01/68
|
713,407
|
|
Residential Accredit Loans, Inc.
|
|
|
|
66,710
|
Series 2006-QO1, Class 2A1, 1 Mo. CME Term SOFR + CSA +
0.54% (b)
|
5.97
%
|
02/25/46
|
37,048
|
649,590
|
Series 2006-QS6, Class 1AV, IO (a)
|
0.77
%
|
06/01/36
|
13,301
|
|
Residential Asset Securitization Trust
|
|
|
|
18,603
|
Series 2004-A3, Class A7
|
5.25
%
|
06/01/34
|
17,264
|
|
Roc Mortgage Trust
|
|
|
|
1,000,000
|
Series 2021-RTL1, Class M (c)
|
6.68
%
|
08/25/26
|
922,708
|
|
Starwood Mortgage Residential Trust
|
|
|
|
857,823
|
Series 2022-3, Class A1 (c)
|
4.16
%
|
03/01/67
|
806,918
|
|
Structured Asset Securities Corp. Mortgage Pass-Through
Certificates
|
|
|
|
5,061
|
Series 2001-SB1, Class A2
|
3.38
%
|
08/01/31
|
5,043
|
Principal
Value
|
Description
|
Stated
Coupon
|
Stated
Maturity
|
Value
|
MORTGAGE-BACKED SECURITIES (Continued)
|
||||
|
Collateralized Mortgage Obligations (Continued)
|
|
|
|
|
VCAT LLC
|
|
|
|
$1,000,000
|
Series 2021-NPL5, Class A2, steps up to 7.84% on
8/25/2025 (c) (d)
|
3.84
%
|
08/25/51
|
$917,553
|
1,000,000
|
Series 2021-NPL6, Class A2, steps up to 7.97% on
9/25/2025 (c) (d)
|
3.97
%
|
09/25/51
|
920,982
|
|
Verus Securitization Trust
|
|
|
|
533,000
|
Series 2021-5, Class B2 (c)
|
3.94
%
|
09/01/66
|
352,387
|
425,000
|
Series 2021-R2, Class B2 (c)
|
4.26
%
|
02/01/64
|
301,938
|
|
Washington Mutual Alternative Mortgage Pass-Through Certificates
|
|
|
|
9,822
|
Series 2007-5, Class A11, (1 Mo. CME Term SOFR + CSA) x -6
+ 39.48% (e)
|
6.89
%
|
06/25/37
|
9,024
|
|
WinWater Mortgage Loan Trust
|
|
|
|
208,064
|
Series 2015-3, Class B1 (a) (c)
|
3.84
%
|
03/01/45
|
187,916
|
|
|
13,702,623
|
||
|
Commercial Mortgage-Backed Securities – 31.1%
|
|
|
|
|
Aventura Mall Trust
|
|
|
|
1,250,000
|
Series 2018-AVM, Class D (a) (c)
|
4.25
%
|
07/01/40
|
1,064,226
|
|
BAMLL Commercial Mortgage Securities Trust
|
|
|
|
1,000,000
|
Series 2013-WBRK, Class A (a) (c)
|
3.65
%
|
03/01/37
|
927,693
|
|
BANK
|
|
|
|
22,179,257
|
Series 2017-BNK7, Class XA, IO (a)
|
0.85
%
|
09/01/60
|
394,791
|
|
BBCMS Mortgage Trust
|
|
|
|
1,000,000
|
Series 2018-TALL, Class A, 1 Mo. CME Term SOFR + CSA +
0.87% (b) (c)
|
6.24
%
|
03/15/37
|
951,312
|
|
Benchmark Mortgage Trust
|
|
|
|
21,149,030
|
Series 2018-B5, Class XA, IO (a)
|
0.61
%
|
07/01/51
|
324,166
|
|
CCRE Commercial Mortgage Securities L.P.
|
|
|
|
7,827,095
|
CFCRE Mortgage Trust Commercial Mortgage Pass-Through
Certificates, Series 2017-C8, Class XA, IO (a)
|
1.64
%
|
06/01/50
|
262,981
|
|
CD Commercial Mortgage Trust
|
|
|
|
8,571,104
|
Series 2018-CD7, Class XA, IO (a)
|
0.80
%
|
08/01/51
|
201,312
|
|
Citigroup Commercial Mortgage Trust
|
|
|
|
4,133,148
|
Series 2015-GC29, Class XA, IO (a)
|
1.15
%
|
04/01/48
|
25,075
|
8,499,676
|
Series 2016-GC37, Class XA, IO (a)
|
1.81
%
|
04/01/49
|
186,764
|
5,686,083
|
Series 2016-P4, Class XA, IO (a)
|
2.05
%
|
07/01/49
|
167,967
|
|
COMM Mortgage Trust
|
|
|
|
122,774,000
|
Series 2014-UBS6, Class XB, IO (a) (c)
|
0.11
%
|
12/01/47
|
24,162
|
3,829,000
|
Series 2015-CCRE26, Class XD, IO (a) (c)
|
1.36
%
|
10/01/48
|
57,296
|
13,810,440
|
Series 2015-LC21, Class XA, IO (a)
|
0.76
%
|
07/01/48
|
62,299
|
|
Credit Suisse Mortgage Trust
|
|
|
|
1,000,000
|
Series 2022-CNTR, Class A, 1 Mo. CME Term SOFR + 3.94%,
4.09% Floor (b) (c)
|
9.27
%
|
01/25/25
|
918,428
|
|
CSAIL Commercial Mortgage Trust
|
|
|
|
5,860,204
|
Series 2020-C19, Class XA, IO (a)
|
1.22
%
|
03/01/53
|
279,958
|
|
FIVE Mortgage Trust
|
|
|
|
25,827,115
|
Series 2023-V1, Class XA, IO
|
0.89
%
|
02/01/56
|
576,113
|
|
Great Wolf Trust
|
|
|
|
1,000,000
|
Series 2024-WOLF, Class E, 1 Mo. CME Term SOFR +
3.64% (b) (c)
|
8.96
%
|
03/15/39
|
1,002,245
|
|
GS Mortgage Securities Corp Trust
|
|
|
|
1,000,000
|
Series 2018-3PCK, Class C, 1 Mo. CME Term SOFR + CSA +
3.50% (b) (c)
|
8.94
%
|
09/15/31
|
979,795
|
|
GS Mortgage Securities Trust
|
|
|
|
823,474
|
Series 2012-GCJ9, Class D (a) (c)
|
4.75
%
|
11/01/45
|
752,470
|
Principal
Value
|
Description
|
Stated
Coupon
|
Stated
Maturity
|
Value
|
MORTGAGE-BACKED SECURITIES (Continued)
|
||||
|
Commercial Mortgage-Backed Securities (Continued)
|
|
|
|
|
Houston Galleria Mall Trust
|
|
|
|
$1,000,000
|
Series 2015-HGLR, Class D (c)
|
3.98
%
|
03/01/37
|
$948,378
|
|
JP Morgan Chase Commercial Mortgage Securities Trust
|
|
|
|
20,046,135
|
Series 2016-JP4, Class XA, IO (a)
|
0.71
%
|
12/01/49
|
222,935
|
969,086
|
Series 2018-PHH, Class A, 1 Mo. CME Term SOFR + CSA +
1.21%, 2.71% Floor (b) (c)
|
6.58
%
|
06/15/35
|
907,907
|
|
Life Mortgage Trust
|
|
|
|
614,356
|
Series 2021-BMR, Class F, 1 Mo. CME Term SOFR + CSA +
2.35% (b) (c)
|
7.79
%
|
03/15/38
|
593,941
|
489,519
|
Series 2021-BMR, Class G, 1 Mo. CME Term SOFR + CSA +
2.95% (b) (c)
|
8.39
%
|
03/15/38
|
470,908
|
|
LSTAR Commercial Mortgage Trust
|
|
|
|
23,356,410
|
Series 2017-5, Class X, IO (a) (c)
|
0.98
%
|
03/01/50
|
337,832
|
|
Morgan Stanley Bank of America Merrill Lynch Trust
|
|
|
|
6,807,009
|
Series 2014-C16, Class XA, IO (a)
|
0.98
%
|
06/01/47
|
172
|
1,681,760
|
Series 2014-C19, Class XA, IO (a)
|
1.03
%
|
12/01/47
|
1,719
|
5,632,500
|
Series 2014-C19, Class XE, IO (a) (c)
|
1.28
%
|
12/01/47
|
38,411
|
423,147
|
Series 2016-C31, Class XA, IO (a)
|
1.40
%
|
11/01/49
|
9,705
|
|
Morgan Stanley Capital I Trust
|
|
|
|
2,180,000
|
Series 2016-UBS9, Class XD, IO (a) (c)
|
1.75
%
|
03/01/49
|
55,299
|
1,320,000
|
Series 2019-L2, Class C (a)
|
5.14
%
|
03/01/52
|
1,107,586
|
|
VMC Finance
|
|
|
|
493,001
|
Series 2021-HT1, Class A, 1 Mo. CME Term SOFR + CSA +
1.65% (b) (c)
|
7.08
%
|
01/18/37
|
484,452
|
|
Wells Fargo Commercial Mortgage Trust
|
|
|
|
1,119,120
|
Series 2015-C26, Class XA, IO (a)
|
1.29
%
|
02/01/48
|
5,344
|
1,034,000
|
Series 2016-NXS6, Class C (a)
|
4.54
%
|
11/01/49
|
934,465
|
|
WFLD Mortgage Trust
|
|
|
|
1,000,000
|
Series 2014-MONT, Class A (a) (c)
|
3.88
%
|
08/01/31
|
909,875
|
|
|
16,187,982
|
||
|
Total Mortgage-Backed Securities
|
29,890,605
|
||
|
(Cost $31,950,372)
|
|
|
|
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES – 38.4%
|
||||
|
Collateralized Mortgage Obligations – 17.4%
|
|
|
|
|
Federal Home Loan Mortgage Corp.
|
|
|
|
105,785
|
Series 2439, Class XI, IO, if (30 Day Average SOFR + CSA) x -1
+ 7.74% is less than 7.50%, then 6.50%, otherwise 0.00% (e)
|
6.50
%
|
03/01/32
|
13,424
|
531,921
|
Series 2975, Class SJ, IO, (30 Day Average SOFR + CSA) x -1 +
6.65% (e)
|
1.21
%
|
05/15/35
|
31,967
|
13,580
|
Series 3451, Class SB, IO, (30 Day Average SOFR + CSA) x -1 +
6.03% (e)
|
0.59
%
|
05/15/38
|
747
|
193,448
|
Series 3471, Class SD, IO, (30 Day Average SOFR + CSA) x -1 +
6.08% (e)
|
0.64
%
|
12/15/36
|
12,423
|
7,590
|
Series 4021, Class IP, IO
|
3.00
%
|
03/01/27
|
206
|
136,475
|
Series 4057, Class YI, IO
|
3.00
%
|
06/01/27
|
4,021
|
268,760
|
Series 4082, Class PI, IO
|
3.00
%
|
06/01/27
|
7,849
|
211,678
|
Series 4206, Class IA, IO
|
3.00
%
|
03/01/33
|
14,901
|
1,012,166
|
Series 4959, Class JF, 30 Day Average SOFR + CSA + 0.45% (b)
|
5.89
%
|
03/25/50
|
988,632
|
1,055,967
|
Series 4990, Class AF, 30 Day Average SOFR + CSA +
0.40% (b)
|
5.84
%
|
07/25/50
|
1,028,630
|
998,589
|
Series 5004, Class FG, 30 Day Average SOFR + CSA +
0.40% (b)
|
5.84
%
|
08/25/50
|
963,442
|
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 REMIC Trust
|
|
|
|
$1,000,000
|
Series 2020-DNA1, Class B2, 30 Day Average SOFR + CSA +
5.25% (b) (c)
|
10.69
%
|
01/25/50
|
$1,087,411
|
1,000,000
|
Series 2020-HQA2, Class B2, 30 Day Average SOFR + CSA +
7.60% (b) (c)
|
13.04
%
|
03/25/50
|
1,180,420
|
500,000
|
Series 2024-HQA1, M2, 30 Day Average SOFR + 2.00% (b) (c)
|
7.33
%
|
03/25/44
|
501,064
|
|
Federal Home Loan Mortgage Corp. Structured Pass-Through
Certificates
|
|
|
|
43,933
|
Series T-56, Class APO, PO
|
(f)
|
05/01/43
|
33,301
|
|
Federal Home Loan Mortgage Corp., STRIPS
|
|
|
|
11,563
|
Series 177, IO
|
7.00
%
|
07/01/26
|
552
|
|
Federal National Mortgage Association
|
|
|
|
8,248
|
Series 1996-46, Class ZA
|
7.50
%
|
11/01/26
|
8,253
|
35
|
Series 1997-85, Class M, IO
|
6.50
%
|
12/01/27
|
0
|
14,083
|
Series 2002-80, Class IO, IO
|
6.00
%
|
09/01/32
|
772
|
39,861
|
Series 2003-15, Class MS, IO, (30 Day Average SOFR + CSA) x
-1 + 8.00% (e)
|
2.56
%
|
03/25/33
|
3,645
|
45,771
|
Series 2003-44, Class IU, IO
|
7.00
%
|
06/01/33
|
6,470
|
44,897
|
Series 2005-6, Class SE, IO, (30 Day Average SOFR + CSA) x -1
+ 6.70% (e)
|
1.26
%
|
02/25/35
|
2,893
|
25,676
|
Series 2007-100, Class SM, IO, (30 Day Average SOFR + CSA) x
-1 + 6.45% (e)
|
1.01
%
|
10/25/37
|
1,749
|
139,897
|
Series 2007-37, Class SB, IO, (30 Day Average SOFR + CSA) x
-1 + 6.75% (e)
|
1.31
%
|
05/25/37
|
12,227
|
294,177
|
Series 2008-17, Class BE
|
5.50
%
|
10/01/37
|
280,852
|
562,567
|
Series 2010-103, Class ID, IO
|
5.00
%
|
09/01/40
|
86,494
|
33,734
|
Series 2010-99, Class SG, (30 Day Average SOFR + CSA) x -5 +
25.00%, 0.00% Floor (b) (e)
|
|
09/01/40
|
30,925
|
213,854
|
Series 2011-81, Class PI, IO
|
3.50
%
|
08/01/26
|
4,040
|
144,197
|
Series 2012-112, Class BI, IO
|
3.00
%
|
09/01/31
|
1,773
|
1,226,848
|
Series 2012-125, Class MI, IO
|
3.50
%
|
11/01/42
|
167,292
|
16,897
|
Series 2013-132, Class SW, (30 Day Average SOFR + CSA) x
-2.67 + 10.67%, 0.00% Floor (b) (e)
|
|
01/01/44
|
11,055
|
1,463,961
|
Series 2013-32, Class IG, IO
|
3.50
%
|
04/01/33
|
124,633
|
1,228,435
|
Series 2015-20, Class ES, IO, (30 Day Average SOFR + CSA) x
-1 + 6.15% (e)
|
0.71
%
|
04/25/45
|
123,877
|
48,293
|
Series 2015-76, Class BI, IO
|
4.00
%
|
10/01/39
|
508
|
168,142
|
Series 2016-74, Class LI, IO
|
3.50
%
|
09/01/46
|
41,170
|
2,267,551
|
Series 2017-109, Class SJ, IO, (30 Day Average SOFR + CSA) x
-1 + 6.20% (e)
|
0.76
%
|
01/25/48
|
221,835
|
1,959,395
|
Series 5179, Class GZ
|
2.00
%
|
01/01/52
|
955,617
|
|
Federal National Mortgage Association, STRIPS
|
|
|
|
12,877
|
Series 305, Class 12, IO (g)
|
6.50
%
|
12/01/29
|
995
|
27,080
|
Series 355, Class 18, IO
|
7.50
%
|
11/01/33
|
3,406
|
410,391
|
Series 406, Class 6, IO (g)
|
4.00
%
|
01/01/41
|
66,047
|
|
Government National Mortgage Association
|
|
|
|
99,262
|
Series 2005-33, Class AY
|
5.50
%
|
04/01/35
|
98,958
|
122,491
|
Series 2007-68, Class PI, IO, (1 Mo. CME Term SOFR + CSA) x
-1 + 6.65% (e)
|
1.22
%
|
11/20/37
|
2,711
|
100,000
|
Series 2008-2, Class HB
|
5.50
%
|
01/01/38
|
97,194
|
104,803
|
Series 2008-73, Class SK, IO, (1 Mo. CME Term SOFR + CSA) x
-1 + 6.74% (e)
|
1.31
%
|
08/20/38
|
4,521
|
193,936
|
Series 2013-104, Class YS, IO, (1 Mo. CME Term SOFR + CSA)
x -1 + 6.15% (e)
|
0.72
%
|
07/16/43
|
10,775
|
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)
|
|
|
|
$3,401,602
|
Series 2015-158, Class KS, IO, (1 Mo. CME Term SOFR + CSA)
x -1 + 6.25% (e)
|
0.82
%
|
11/20/45
|
$341,595
|
76,858
|
Series 2016-139, Class MZ
|
1.50
%
|
07/01/45
|
56,334
|
164,027
|
Series 2017-4, Class CZ
|
3.00
%
|
01/01/47
|
122,421
|
135,347
|
Series 2017-H18, Class DZ (g)
|
4.63
%
|
09/01/67
|
121,557
|
9,500,534
|
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
|
187,653
|
|
|
9,069,237
|
||
|
Commercial Mortgage-Backed Securities – 11.4%
|
|
|
|
|
Federal Home Loan Mortgage Corp. Multifamily Structured
Pass-Through Certificates
|
|
|
|
30,000,000
|
Series K043, Class X3, IO (a)
|
1.69
%
|
02/01/43
|
322,431
|
14,500,000
|
Series K071, Class X3, IO (a)
|
2.08
%
|
11/01/45
|
912,088
|
4,000,000
|
Series K110, Class X3, IO (a)
|
3.52
%
|
06/01/48
|
637,160
|
4,326,216
|
Series K118, Class X3, IO (a)
|
2.79
%
|
10/25/48
|
574,795
|
1,900,000
|
Series K122, Class X3, IO (a)
|
2.72
%
|
01/01/49
|
252,019
|
3,343,856
|
Series K128, Class X3, IO (a)
|
2.88
%
|
04/01/31
|
488,464
|
1,831,144
|
Series K739, Class X3, IO (a)
|
2.90
%
|
11/25/48
|
141,876
|
2,454,000
|
Series K755, Class X3, IO (a)
|
5.64
%
|
02/01/59
|
712,195
|
322,855,755
|
Series KBX1, Class X1, IO (a)
|
0.24
%
|
01/01/26
|
209,501
|
4,571,896
|
Series KG06, Class X3, IO (a)
|
2.83
%
|
10/01/31
|
669,551
|
|
Federal National Mortgage Association, ACES
|
|
|
|
15,150,000
|
Series 2019-M29, Class X4, IO
|
0.70
%
|
03/01/29
|
366,295
|
|
Freddie Mac Multiclass Certificates
|
|
|
|
5,732,127
|
Series 2021-P011, Class X1, IO (a)
|
1.78
%
|
09/01/45
|
655,526
|
|
|
5,941,901
|
||
|
Pass-through Security – 9.6%
|
|
|
|
|
Fannie Mae or Freddie Mac
|
|
|
|
2,500,000
|
Pool TBA (h)
|
3.50
%
|
06/01/54
|
2,156,550
|
3,000,000
|
Pool TBA (h)
|
5.00
%
|
06/01/54
|
2,842,640
|
|
|
4,999,190
|
||
|
Total U.S. Government Agency Mortgage-Backed Securities
|
20,010,328
|
||
|
(Cost $23,091,982)
|
|
|
|
ASSET-BACKED SECURITIES – 8.4%
|
||||
|
Adams Outdoor Advertising LP
|
|
|
|
1,000,000
|
Series 2023-1, Class B (c)
|
8.81
%
|
07/15/53
|
1,017,713
|
|
CoreVest American Finance Trust
|
|
|
|
284,812
|
Series 2021-1, Class A (c)
|
1.57
%
|
04/01/53
|
262,073
|
8,736,742
|
Series 2021-3, Class XA, IO (a) (c)
|
2.53
%
|
10/01/54
|
382,246
|
|
Exeter Automobile Receivables Trust
|
|
|
|
750,000
|
Series 2024-1A, Class E (c)
|
7.89
%
|
08/15/31
|
737,140
|
|
Gracie Point International Funding LLC
|
|
|
|
692,000
|
Series 2024-1A, Class D, 90 Day Average SOFR + 7.15% (b) (c)
|
12.51
%
|
03/01/28
|
693,193
|
|
Mid-State Capital Corp. Trust
|
|
|
|
99,466
|
Series 2005-1, Class A
|
5.75
%
|
01/01/40
|
97,727
|
|
PAGAYA AI Debt Trust
|
|
|
|
218,168
|
Series 2022-3, Class A (c)
|
6.06
%
|
03/15/30
|
218,053
|
1,000,000
|
Series 2024-3, Class D (c)
|
9.00
%
|
10/15/31
|
959,510
|
|
Total Asset-Backed Securities
|
4,367,655
|
||
|
(Cost $4,393,285)
|
|
|
|
Shares
|
Description
|
Value
|
MONEY MARKET FUNDS – 4.1%
|
||
2,156,587
|
Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional
Class - 5.15% (i)
|
$2,156,587
|
|
(Cost $2,156,587)
|
|
|
Total Investments – 108.3%
|
56,425,175
|
||
|
(Cost $61,592,226)
|
|
|
|
Number of
Contracts
|
Description
|
Notional
Amount
|
Exercise
Price
|
Expiration
Date
|
Value
|
PUT OPTIONS WRITTEN – (0.1)%
|
|||||
(10
)
|
U.S. 10-Year Treasury Futures Put
|
$(1,074,375
)
|
$109.00
|
08/23/24
|
(24,062
)
|
(10
)
|
U.S. 5-Year Treasury Futures Put
|
(1,047,422
)
|
105.25
|
08/23/24
|
(12,422
)
|
(10
)
|
U.S. Treasury Long Bond Futures Put
|
(1,138,125
)
|
108.00
|
08/23/24
|
(11,719
)
|
|
Total Put Options Written
|
(48,203
)
|
|||
|
(Premiums received $21,015)
|
|
|
|
|
|
Net Other Assets and Liabilities – (8.2)%
|
(4,283,800
)
|
|
Net Assets – 100.0%
|
$52,093,172
|
Futures Contracts
|
Position
|
Number of
Contracts
|
Expiration
Date
|
Notional
Value
|
Unrealized
Appreciation
(Depreciation)/
Value
|
10-Year U.S. Treasury Note Futures
|
Long
|
48
|
Jun 2024
|
$5,157,000
|
$(136,641)
|
CME Ultra Long Term U.S. Treasury Bond Future
|
Long
|
1
|
Jun 2024
|
119,562
|
(719)
|
Ultra 10-Year U.S. Treasury Note Futures
|
Long
|
52
|
Jun 2024
|
5,731,375
|
(174,547)
|
US Treasury 2 Year Note Futures
|
Long
|
20
|
Jun 2024
|
4,053,125
|
(35,836)
|
US Treasury 5 Year Note Futures
|
Long
|
24
|
Jun 2024
|
2,513,813
|
(54,296)
|
US Treasury Bond Futures
|
Long
|
22
|
Jun 2024
|
2,503,875
|
(78,156)
|
|
|
|
|
$20,078,750
|
$(480,195)
|
(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 April 30, 2024, securities noted as such amounted
to $31,386,696 or 60.3% 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 April 30, 2024.
|
(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 April 30, 2024.
|
Abbreviations throughout the Portfolio of Investments:
|
|
ACES
|
– Alternative Credit Enhancement Securities
|
CME
|
– Chicago Mercantile Exchange
|
CSA
|
– Credit Spread Adjustment
|
IO
|
– Interest-Only Security - Principal amount shown represents par value on which interest payments are based.
|
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
4/30/2024
|
Level 1
Quoted
Prices
|
Level 2
Significant
Observable
Inputs
|
Level 3
Significant
Unobservable
Inputs
|
Mortgage-Backed Securities
|
$29,890,605
|
$—
|
$29,890,605
|
$—
|
U.S. Government Agency Mortgage-Backed Securities
|
20,010,328
|
—
|
20,010,328
|
—
|
Asset-Backed Securities
|
4,367,655
|
—
|
4,367,655
|
—
|
Money Market Funds
|
2,156,587
|
2,156,587
|
—
|
—
|
Total Investments
|
$56,425,175
|
$2,156,587
|
$54,268,588
|
$—
|
|
||||
LIABILITIES TABLE
|
||||
|
Total
Value at
4/30/2024
|
Level 1
Quoted
Prices
|
Level 2
Significant
Observable
Inputs
|
Level 3
Significant
Unobservable
Inputs
|
Futures Contracts*
|
$(480,195
)
|
$(480,195
)
|
$—
|
$—
|
Written Options
|
(48,203
)
|
(48,203
)
|
—
|
—
|
Total
|
$(528,398
)
|
$(528,398
)
|
$—
|
$—
|
*
|
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
|
$ 56,425,175
|
Restricted Cash
|
498,605
|
Receivables:
|
|
Investment securities sold
|
5,013,092
|
Interest
|
552,564
|
Prepaid expenses
|
34,312
|
Total Assets
|
62,523,748
|
LIABILITIES:
|
|
Options contracts written, at value
|
48,203
|
Payables:
|
|
Investment securities purchased
|
10,187,445
|
Variation margin
|
89,531
|
Audit and tax fees
|
44,611
|
Investment advisory fees
|
36,481
|
Administrative fees
|
11,099
|
Custodian fees
|
6,657
|
Shareholder reporting fees
|
4,309
|
Transfer agent fees
|
1,494
|
Financial reporting fees
|
746
|
Total Liabilities
|
10,430,576
|
NET ASSETS
|
$52,093,172
|
NET ASSETS consist of:
|
|
Paid-in capital
|
$ 63,705,638
|
Par value
|
42,131
|
Accumulated distributable earnings (loss)
|
(11,654,597
)
|
NET ASSETS
|
$52,093,172
|
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)
|
$12.36
|
Number of
|
|
Investments, at cost
|
$61,592,226
|
Premiums received on options contracts written
|
$21,015
|
INVESTMENT INCOME:
|
|
|
Interest
|
$ 2,350,805
|
|
Other
|
10,307
|
|
Total investment income
|
2,361,112
|
|
EXPENSES:
|
|
|
Investment advisory fees
|
221,816
|
|
Audit and tax fees
|
36,501
|
|
Administrative fees
|
24,008
|
|
Shareholder reporting fees
|
14,008
|
|
Listing expense
|
12,077
|
|
Trustees’ fees and expenses
|
12,053
|
|
Transfer agent fees
|
9,545
|
|
Legal fees
|
9,218
|
|
Financial reporting fees
|
4,600
|
|
Custodian fees
|
4,067
|
|
Other
|
7,581
|
|
Total expenses
|
355,474
|
|
NET INVESTMENT INCOME (LOSS)
|
2,005,638
|
|
NET REALIZED AND UNREALIZED GAIN (LOSS):
|
|
|
Net realized gain (loss) on:
|
|
|
Investments
|
88,728
|
|
Purchased options contracts
|
(5,525
)
|
|
Written options contracts
|
23,826
|
|
Futures contracts
|
529,451
|
|
Net realized gain (loss)
|
636,480
|
|
Net change in unrealized appreciation (depreciation) on:
|
|
|
Investments
|
2,395,052
|
|
Written options contracts
|
(31,380
)
|
|
Futures contracts
|
(278,211
)
|
|
Net change in unrealized appreciation (depreciation)
|
2,085,461
|
|
NET REALIZED AND UNREALIZED GAIN (LOSS)
|
2,721,941
|
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
|
$ 4,727,579
|
|
Six Months
Ended
4/30/2024
(Unaudited)
|
Year
Ended
10/31/2023
|
OPERATIONS:
|
|
|
Net investment income (loss)
|
$ 2,005,638
|
$ 3,184,605
|
Net realized gain (loss)
|
636,480
|
(1,998,206
)
|
Net change in unrealized appreciation (depreciation)
|
2,085,461
|
147,764
|
Net increase (decrease) in net assets resulting from operations
|
4,727,579
|
1,334,163
|
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
|
|
Investment operations
|
(2,032,828
)
|
(2,864,918
)
|
Total increase (decrease) in net assets
|
2,694,751
|
(1,530,755
)
|
NET ASSETS:
|
|
|
Beginning of period
|
49,398,421
|
50,929,176
|
End of period
|
$ 52,093,172
|
$ 49,398,421
|
COMMON SHARES:
|
|
|
Common Shares at end of period
|
4,213,115
|
4,213,115
|
|
Six Months
Ended
4/30/2024
(Unaudited)
|
Year Ended October 31,
|
||||
2023
|
2022
|
2021
|
2020
|
2019
|
||
Net asset value, beginning of period
|
$ 11.72
|
$ 12.09
|
$ 13.92
|
$ 14.45
|
$ 14.91
|
$ 14.96
|
Income from investment operations:
|
|
|
|
|
|
|
Net investment income (loss)
|
0.48
(a)
|
0.76
(a)
|
0.50
|
0.44
|
0.44
|
0.34
|
Net realized and unrealized gain (loss)
|
0.64
|
(0.45
)
|
(1.67
)
|
(0.25
)
|
(0.18
)
|
0.33
|
Total from investment operations
|
1.12
|
0.31
|
(1.17
)
|
0.19
|
0.26
|
0.67
|
Distributions paid to shareholders from:
|
|
|
|
|
|
|
Net investment income
|
(0.48
)
|
(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
|
(0.48
)
|
(0.68
)
|
(0.66
)
|
(0.72
)
|
(0.72
)
|
(0.72
)
|
Net asset value, end of period
|
$
|
$11.72
|
$12.09
|
$13.92
|
$14.45
|
$14.91
|
Market value, end of period
|
$
|
$10.88
|
$11.01
|
$13.70
|
$13.40
|
$13.99
|
Total return based on net asset value (b)
|
9.85
%
|
2.88
%
|
(8.38
)%
|
1.51
%
|
2.12
%
|
5.08
%
|
Total return based on market value (b)
|
13.07
%
|
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)
|
$ 52,093
|
$ 49,398
|
$ 50,929
|
$ 58,647
|
$ 60,878
|
$ 62,832
|
Ratio of total expenses to average net assets
|
1.36
% (c)
|
1.36
%
|
1.33
%
|
1.31
%
|
1.33
%
|
1.33
%
|
Ratio of net investment income (loss) to average
net assets
|
7.69
% (c)
|
6.18
%
|
3.86
%
|
3.11
%
|
3.03
%
|
2.29
%
|
Portfolio turnover rate
|
149
%
|
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.
|
(c)
|
Annualized.
|
Distributions paid from:
|
|
Ordinary income
|
$2,864,918
|
Capital gains
|
—
|
Return of capital
|
—
|
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)
|
$61,571,211
|
$534,783
|
$(6,209,217)
|
$(5,674,434)
|
|
|
Asset Derivatives
|
Liability Derivatives
|
||
Derivative
Instrument
|
Risk
Exposure
|
Statement of Assets and
Liabilities Location
|
Value
|
Statement of Assets and
Liabilities Location
|
Value
|
Futures contracts
|
Interest Rate Risk
|
Unrealized appreciation
on futures contracts*
|
$ —
|
Unrealized depreciation
on futures contracts*
|
$ 480,195
|
Options contracts
|
Interest Rate Risk
|
Options contracts
purchased, at value
|
—
|
Options contracts
written, at value
|
48,203
|
Statement of Operations Location
|
|
Interest Rate Risk Exposure
|
|
Net realized gain (loss) on purchased options contracts
|
$(5,525
)
|
Net realized gain (loss) on written options contracts
|
23,826
|
Net change in unrealized appreciation (depreciation) on written options contracts
|
(31,380
)
|
Net realized gain (loss) on futures contracts
|
529,451
|
Net change in unrealized appreciation (depreciation) on futures contracts
|
(278,211
)
|
NOT FDIC INSURED
|
NOT BANK GUARANTEED
|
MAY LOSE VALUE
|
(b) Not applicable.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
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.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a) Not applicable.
(b) There has been no change, as of the date of this filing, in any of the portfolios managers identified in response to paragraph (a)(1) of this Item in the registrant’s most recently filed annual report on Form N-CSR.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
(a) Not applicable for this reporting period.
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 [18.]. Recovery of Erroneously Awarded Compensation.
Not applicable.
Item 14. Exhibits.
(a)(1) | Not applicable. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(a)(4) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) |
First Trust Mortgage Income Fund |
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | July 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: | July 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: | July 8, 2024 |
* Print the name and title of each signing officer under his or her signature.
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: | July 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: | July 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: | July 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: | July 8, 2024 | /s/ Derek D. Maltbie | |||
Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
N-2 |
6 Months Ended |
---|---|
Apr. 30, 2024
$ / shares
shares
| |
Cover [Abstract] | |
Entity Central Index Key | 0001319183 |
Amendment Flag | false |
Entity Inv Company Type | N-2 |
Document Type | N-CSRS |
Entity Registrant Name | First Trust Mortgage Income Fund |
General Description of Registrant [Abstract] | |
Investment Objectives and Practices [Text Block] | 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. The Fund pursues its objectives by investing primarily in mortgage-backed securities (“MBS”) representing part ownership in a pool of either residential or commercial mortgage loans that, in the opinion of First Trust Advisors L.P. (“First Trust” or the “Advisor”), offer an attractive combination of credit quality, yield and maturity. There can be no assurance the Fund will achieve its investment objectives. The Fund may not be appropriate for all investors. |
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, ongoing
armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle
East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe,
the Middle East 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:
•
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.
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. 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 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. Investments in fixed rate securities with long-term maturities may experience significant
price declines if long-term interest rates increase. 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. The duration of a security will
be expected to change over time with changes in market factors and time to maturity.
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 | $ 11.81 |
NAV Per Share | $ 12.36 |
Latest Premium (Discount) to NAV [Percent] | (4.45%) |
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 |
Document Period End Date | Apr. 30, 2024 |
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, ongoing
armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle
East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe,
the Middle East 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:
•
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.
|
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. 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 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. Investments in fixed rate securities with long-term maturities may experience significant
price declines if long-term interest rates increase. 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. The duration of a security will
be expected to change over time with changes in market factors and time to maturity.
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 Assets [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.
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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.
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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.
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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.
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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.
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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.
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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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