As filed with the U.S. Securities and Exchange
Commission on December 12, 2023
Registration No. 333-275152
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
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Pre-Effective Amendment No. 1 |
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Post-Effective Amendment No. |
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(Check appropriate box or boxes) |
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abrdn
Total Dynamic Dividend Fund
(Exact Name of Registrant as Specified in Charter)
1900 Market Street, Suite 200
Philadelphia, PA 19103
(Address of Principal Executive Offices)
215-405-5700
(Registrant’s Telephone Number, Including Area Code)
Lucia Sitar, Esq.
c/o abrdn Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
215-405-5700
(Name and Address of Agent for Service)
Copies to:
Thomas C. Bogle, Esq.
William J. Bielefeld, Esq.
Dechert LLP
1900 K Street, NW
Washington, DC 20006
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
The Registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL
OPPORTUNITIES FUND
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(630) 765-8000
IMPORTANT SHAREHOLDER INFORMATION
We are pleased to enclose a notice, combined
proxy statement/prospectus (the “Proxy Statement/Prospectus”), and proxy card(s) for a special meeting of shareholders (the
“Special Meeting”) relating to First Trust Specialty Finance and Financial Opportunities Fund, a Massachusetts business trust
(the “Acquired Fund”). The Special Meeting is scheduled to be held at the offices of the Acquired Fund’s investment
adviser, First Trust Advisors L.P., located at 120 East Liberty Drive, Suite 400, Wheaton, IL 60187 on February 22, 2024, at 1:00 p.m.
Central Time, to vote on the approval of a proposed Agreement and Plan of Reorganization for the Acquired Fund, which contemplates
the reorganization of the Acquired Fund with and into abrdn Total Dynamic Dividend Fund (the “Acquiring Fund”), a Delaware
statutory trust (the “Reorganization”). The Acquiring Fund as it would exist after the Reorganization is referred to as the
“Combined Fund.”
After careful consideration, the Board
of Trustees of the Acquired Fund believes that the Reorganization is in the best interest of shareholders and therefore recommends that
you vote “FOR” the proposal. The Acquired Fund and the Acquiring Fund are managed by different investment advisers.
The Reorganization is anticipated to provide shareholders of the Acquired Fund with, among other things, exposure to a similar investment
objective but substantially different principal investment strategies and principal risks as the Acquired Fund invests in a portfolio
of specialty finance and other financial companies while the Acquiring Fund invests generally in equity securities, as discussed in the
enclosed Proxy Statement/Prospectus; a net total annual operating expense ratio (net of fee waivers and excluding interest expense) for
the Combined Fund that is expected to be lower than that of the Acquired Fund; and access to the Acquiring Fund’s investment adviser’s
and its affiliates’ asset management business, including its commitment to the closed-end fund business, and its investment management
experience.
It is expected that shareholders of the Acquired
Fund will not recognize any gain or loss for federal income tax purposes as a result of the exchange of their shares
in the Acquired Fund for shares of the Acquiring Fund in connection with the Reorganization (except with respect to cash
received in lieu of fractional shares). The Reorganization proposal is described in more detail, and a comparison of the strategies,
expenses and certain other features of the Acquired Fund and the Acquiring Fund is included, in the enclosed Proxy Statement/Prospectus.
We encourage you to review this information carefully.
As a shareholder of record as of the close
of business on October 23, 2023, the record date, you are entitled to notice of, and to vote at, the Special Meeting, therefore we are
asking that you please take the time to cast your vote prior to the February 22, 2024 Special Meeting. If you do not vote, you may receive
a phone call from the Acquired Fund’s proxy solicitor, EQ Fund Solutions LLC.
We appreciate your participation in this important Special Meeting.
Sincerely,
James A. Bowen
Chairman of the Board of Trustees, First Trust Specialty Finance
and Financial Opportunities Fund
It is important that
your shares be represented at the Special Meeting. In order to avoid delay and to ensure that your shares are represented, please
vote as promptly as possible. You may vote easily and quickly by mail, by telephone or via the Internet. You may also vote in person
by attending the Special Meeting (subject to certain requirements). To vote by mail, please complete and mail your proxy card in
the enclosed envelope. To vote by telephone or via the Internet, please follow the instructions on the proxy card. If you need any
assistance or have any questions regarding the proposal or how to vote your shares, please call the Acquired Fund’s proxy solicitor,
EQ Fund Solutions, LLC, at (866) 796-7172 weekdays from 9:00 a.m. to 10:00 p.m. Eastern Time. |
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL
OPPORTUNITIES FUND
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(630) 765-8000
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD February 22, 2024
Notice is hereby given that a special
meeting of shareholders (with any postponements or adjournments, the “Special Meeting”) of First Trust Specialty Finance
and Financial Opportunities Fund (the “Acquired Fund”), a Massachusetts business trust, is scheduled to be held at the
offices of the Acquired Fund’s investment adviser, First Trust Advisors L.P., located at 120 East Liberty Drive, Suite 400,
Wheaton, IL 60187, on February 22, 2024, at 1:00 p.m. Central Time. At the Special Meeting, shareholders will be asked to consider
and to vote on the below proposal (the “Proposal”).
To approve an Agreement and Plan of
Reorganization providing for the transfer of all of the assets of the Acquired Fund to abrdn Total Dynamic Dividend Fund (the “Acquiring
Fund”) (each a “Fund” and collectively, the “Funds”) in exchange solely for newly issued common shares
of beneficial interest of the Acquiring Fund (although cash may be distributed in lieu of fractional shares) and the assumption
by the Acquiring Fund of all liabilities of the Acquired Fund and the distribution of common shares of beneficial interest of the
Acquiring Fund to the shareholders of the Acquired Fund and complete liquidation of the Acquired Fund (the “Reorganization”)
Shareholders will also be asked to transact
such other business as may properly come before the Special Meeting.
Shareholders of record as of the close of business on October
23, 2023, the record date (the “Record Date”), are entitled to notice of, and to vote at, the Special Meeting.
The Reorganization is intended to be treated
as a tax-free reorganization for US federal income tax purposes.
Whether or not you are planning to attend
the Special Meeting, please vote prior to the Special Meeting on February 22, 2024. Voting is quick and easy. Voting by proxy will not prevent
you from voting your shares at the Special Meeting. You may revoke your proxy at any time before the Special Meeting by (i) written notice
delivered to the Secretary of the Acquired Fund prior to the exercise of the proxy; (ii) execution of a subsequent proxy; or (iii) attending
and voting at the Special Meeting. If you hold shares through a broker, bank or other nominee, you must follow the instructions you receive
from your nominee in order to revoke your voting instructions.
Please contact EQ Fund Solutions LLC (“EQ”)
at (866) 796-7172 with any questions regarding access to the Special Meeting, and an EQ representative will contact you to answer your
questions. Whether or not you plan to participate in the Special Meeting, we urge you to vote and submit your vote in advance of the
Special Meeting.
By order of the Board of Trustees of the Acquired Fund,
W. Scott Jardine, Esq.
Secretary, First Trust Specialty Finance and Financial Opportunities
Fund
Important Notice Regarding Internet Availability
of Proxy Materials for the Special Meeting to be Held on February 22, 2024:
The Proxy Statement/Prospectus, the Notice
of the Special Meeting, any accompanying materials and any amendments or supplements to the foregoing materials that are required to
be furnished to shareholders are available to you on the Internet at https://www.ftportfolios.com/LoadContent/gohdcqj3gy4y.
It is important that
your shares be represented at the Special Meeting. In order to avoid delay and to ensure that your shares are represented, please
vote as promptly as possible. You may vote easily and quickly by mail, by telephone or via the Internet. You may also vote in person
by attending the Special Meeting (subject to certain requirements). To vote by mail, please complete and mail your proxy card in
the enclosed envelope. To vote by telephone or via the Internet, please follow the instructions on the proxy card. If you need any
assistance or have any questions regarding the Proposal or how to vote your shares, please call the Acquired Fund’s proxy solicitor,
EQ Fund Solutions, LLC, at (866) 796-7172 weekdays from 9:00 a.m. to 10:00 p.m. Eastern Time. |
QUESTIONS & ANSWERS
The following is a summary of more complete
information appearing later in the attached combined proxy statement/prospectus (the “Proxy Statement/Prospectus”)
or incorporated by reference into the Proxy Statement/Prospectus. You should carefully read the entire Proxy Statement/Prospectus,
including the Agreement and Plan of Reorganization (the “Reorganization Agreement”), a form of which is attached as
Appendix A thereto, because it contains details that are not in the Questions & Answers.
Q: |
Why is a shareholder meeting being held?
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A: |
The shareholders of First Trust Specialty
Finance and Financial Opportunities Fund (the “Acquired Fund”), a Massachusetts business trust, are being asked to
approve a Reorganization Agreement providing for the transfer of all of the assets of their Fund to abrdn Total Dynamic Dividend
Fund (the “Acquiring Fund”) in exchange solely for newly issued common shares of beneficial interest of the Acquiring
Fund (although cash may be distributed in lieu of fractional shares of the Acquiring Fund) and the assumption by the Acquiring
Fund of all of the liabilities of the Acquired Fund and the distribution of common shares of beneficial interest of the Acquiring
Fund to the shareholders of the Acquired Fund and complete liquidation of the Acquired Fund (the “Reorganization”).
It is currently expected that the Reorganization will occur in the first quarter of 2024.
As summarized below and described
more fully in the Proxy Statement/Prospectus, the Acquired Fund and the Acquiring Fund (each, a “Fund” and collectively,
the “Funds”) are each a closed-end management investment company with a
similar investment objective but substantially different principal investment strategies and principal risks as the Acquired
Fund invests in a portfolio of specialty finance and other financial companies while the Acquiring Fund invests generally in
equity securities. Please see below and “Comparison of the Funds” in the Proxy Statement/Prospectus for additional
information. The Acquiring Fund would be the accounting and performance survivor of the Reorganization. The Acquiring Fund as
it would exist after the Reorganization is referred to as the “Combined Fund.”
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Q |
Why is the Reorganization being proposed?
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A |
On October 23, 2023, First Trust Advisors
L.P. (“First Trust”), abrdn Inc. and, for the purposes specified therein, abrdn plc. entered into a separate agreement
(the “Purchase Agreement”) pursuant to which abrdn Inc. will acquire certain assets related to First Trust’s
business of providing investment management services with respect to the assets of the Acquired Fund and certain other registered
investment companies (the “Business”) if the Reorganization is approved, and upon satisfaction or waiver of certain
other conditions. More specifically, under the Purchase Agreement, First Trust has agreed to transfer to abrdn Inc., for a cash
payment at the closing of the Asset Transfer (as defined below) and subject to certain exceptions, (i) all right, title and interest
of First Trust in and to the books and records relating to the Business of the Acquired Fund, and (ii) the goodwill of the Business
(the “Asset Transfer”).”
The Funds are not a party to the Purchase
Agreement; however, the completion of the Asset Transfer is subject to certain conditions, including shareholder approval of the
Reorganization described in the Proxy Statement/Prospectus for the Reorganization to proceed. Therefore, if Acquired Fund shareholders
do not approve the Reorganization or if the other conditions in the Purchase Agreement are not satisfied or waived, then the Asset
Transfer may not be completed, and the Purchase Agreement may be terminated with respect to the Acquired Fund.
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Q: |
Why is the Reorganization being recommended
by the Board of Trustees of the Acquired Fund?
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A: |
The Board of Trustees of the Acquired Fund
(the “Acquired Fund Board”) has determined that the Reorganization is in the best interests of the shareholders of
the Acquired Fund. In reaching its decision to approve the Reorganization, the Acquired Fund Board considered alternatives to the
Reorganization, including continuing to operate the Acquired Fund as a separate fund, and determined to recommend that shareholders
approve the Reorganization.
Please see “Background and
Reasons for the Proposed Reorganization” in the Proxy Statement/Prospectus for additional information on the Acquired Fund
Board’s considerations relating to the Reorganization. |
Q: |
What happens if the Proposal is not
approved by the shareholders?
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A: |
Completion of the Reorganization requires the approval of the Reorganization Agreement by the Acquired Fund shareholders. If the Reorganization Agreement is not approved by shareholders of the Acquired Fund, then the Acquired Fund will continue to operate as a separate fund in the manner in which it is currently managed. |
Q: |
How will the fees and expenses of the Combined Fund compare to those of the Acquired Fund?
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A: |
The contractual advisory fee of the Acquired
Fund is 1.00% of the Acquired Fund’s Managed Assets. “Managed Assets,” for the purpose of this calculation, means
the average daily gross asset value of the Acquired Fund (including assets attributable to the Acquired Fund’s Preferred
Shares (as such term is defined in the Acquired Fund’s prospectus), if any, and the principal amount of borrowings, if any),
minus the sum of the Acquired Fund’s accrued and unpaid dividends on any outstanding Preferred Shares and accrued liabilities
(other than the principal amount of any borrowings incurred, commercial paper or notes issued by the Acquired Fund).
The contractual advisory fee of the Combined
Fund will be 1.00% of the Combined Fund’s average daily Managed Assets. “Managed Assets” is defined as total
assets of the Combined Fund, including any form of investment leverage, minus all accrued expenses incurred in the normal course
of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness
of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance
of preferred stock or other similar preference securities,(iii) the reinvestment of collateral received for securities loaned in
accordance with the Combined Fund’s investment objectives and policies, and/or (iv) any other means.
Following the consummation of the Reorganization,
the total annual operating expense ratio of the Combined Fund is expected to be lower than the current total annual operating expense
ratio of the Acquired Fund.
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The gross total annual operating expense ratios, including interest
expense, of the Acquired Fund and the Acquiring Fund, and, following the consummation of the Reorganization, the gross total annual
operating expense ratio, including interest expense, of the Combined Fund is expected to be as follows: |
Current Expense
Ratio of Acquired Fund* | | |
Current Expense
Ratio of the Acquiring Fund** | | |
Pro Forma
Combined Fund** | |
| 2.71 | % | |
| 1.32 | % | |
| 1.31 | % |
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The net total annual operating expense ratios, including interest
expense, of the Acquired Fund and the Acquiring Fund and, following the consummation of the Reorganization, the net total annual
operating expense ratio, including interest expense, of the Combined Fund is expected to be as follows: |
Current Expense
Ratio of Acquired Fund*† | | |
Current Expense
Ratio of the Acquiring Fund** | | |
Pro Forma
Combined Fund**† | |
| 2.71 | % | |
| 1.25 | % | |
| 1.25 | % |
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* As of the Acquired Fund’s
most recent semi-annual period ended May 31, 2023, based on average daily net assets.
** Information for the Acquiring Fund and
Combined Fund is as of the semi-annual period ended April 30, 2023.
† The net total annual operating
expense ratio, excluding interest expense, of the Acquired Fund is 1.59%. The net total operating expense ratio, excluding interest expense, of the Acquiring Fund is 1.14%. Following the consummation of the Reorganization,
the net total annual operating expense ratio, excluding interest expense, of the Combined Fund is expected to be 1.14%.
The pro forma information for the
Combined Fund is as of April 30, 2023. The net total annual operating expense ratio excluding interest expense of the Acquiring
Fund and the pro forma Combined Fund reflect the application of the 1.14% expense limitation, described below. Pro forma Combined
Fund fees and expenses are estimated in good faith and are hypothetical. There can be no assurance that future expenses will not
increase or that any estimated expense savings will be realized.
abrdn Investments Limited (“aIL”),
the investment adviser of the Acquiring Fund, has entered into a written contract (the “Amended and Restated Expense Limitation
Agreement”) with the Acquiring Fund that is effective through June 30, 2024. In connection with the Reorganization, the Amended
and Restated Expense Limitation Agreement shall be extended through one year from the date of the closing of the Reorganization,
or June 30, 2025, whichever is later. The Amended and Restated Expense Limitation Agreement limits the total ordinary operating
expenses of the Acquiring Fund and following the consummation of the Reorganization, the Combined Fund (excluding any leverage
costs, interest, taxes, brokerage commissions, and any non-routine expenses), from exceeding 1.14% of the average daily net assets
of the Fund on an annualized basis.
aIL may request and receive reimbursement
from the Acquiring Fund or Combined Fund, as applicable, of the advisory fees waived and other expenses reimbursed pursuant to
the Amended and Restated Expense Limitation Agreement as of a date not more than three years after the date when aIL limited the
fees or reimbursed the expenses; provided that the following requirements are met: the reimbursements do not cause the Fund to
exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited or expenses are paid
or the applicable expense limitation in effect at the time the expenses are being recouped by aIL, and the payment of such reimbursement
is approved by the Board of the Fund on a quarterly basis. Except as provided for in the Amended and Restated Expense Limitation
Agreement, reimbursement of amounts previously waived or assumed by aIL is not permitted. |
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Please see “Fees and Expenses”
and “Management of the Funds” in the Proxy Statement/Prospectus for additional information. |
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Q: |
How different are the Funds?
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A: |
As summarized below and set forth more
fully in the Proxy Statement/Prospectus, there are some substantial differences between the Acquired Fund and the Acquiring Fund.
In particular, they have different investment advisers. First Trust is the investment adviser of the Acquired Fund, and Confluence
Investment Management LLC (“CIM”) is the investment sub-adviser of the Acquired Fund. aIL is the investment adviser
of the Acquiring Fund.
Each Fund is a closed-end management investment
company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Acquired Fund is a Massachusetts
business trust and a diversified closed-end management investment company. The Acquiring Fund is a Delaware statutory trust and
a diversified closed-end management investment company. Each Fund’s common shares are listed on the New York Stock Exchange.
The Funds have similar investment
objectives but substantially different principal investment strategies and principal risks as the Acquired Fund invests in a
portfolio of specialty finance and other financial companies while the Acquiring Fund invests generally in equity
securities.
The Acquired Fund’s primary investment
objective is to seek a high level of current income. As a secondary objective, the Acquired Fund seeks an attractive total return.
The Acquiring Fund’s principal investment objective is to seek high current dividend income with a secondary objective of
long-term growth of capital.
As set forth more fully in the Proxy
Statement/Prospectus, the Acquired Fund concentrates its investments in “specialty finance companies,” which generally
are companies that provide financing to borrowers with capital needs that are different relative to traditional borrowers, who
typically utilize commercial banks or public debt markets to meet their financing needs, whereas the Acquiring Fund invests in
a broad range of equity investments throughout the world. The Acquired Fund invests, under normal market conditions, at least
80% of its Managed Assets (as defined below) in a portfolio of securities of specialty finance and other financial companies
that CIM believes offer attractive opportunities for income and capital appreciation. For the Acquired Fund, “Managed Assets”
means the total asset value of the Fund minus the sum of its liabilities, other than the principal amount of borrowings. The
Acquiring Fund invests at least 80% of its net assets plus amounts borrowed for investment purposes in equity securities, primarily
common stocks, issued by domestic and foreign companies whose equity securities are readily traded on an established U.S. or
foreign securities market and pay dividends.
The Acquired Fund and Acquiring Fund both
currently use leverage. The Acquired Fund engages in leverage through borrowing from a committed facility agreement to seek to
enhance the level of its current distributions to common shareholders. The Acquiring Fund and Combined Fund intend to use leverage
through borrowing from a credit facility. The Acquiring Fund is permitted to engage in other transactions, such as reverse repurchase
agreements and issuance of debt securities or preferred securities, which have the effect of leverage, but currently has no intention
to do so. The Acquiring Fund may use leverage in an aggregate amount up to 33-1/3% of its total assets. The Funds’ strategies
relating to their use of leverage, if any, may not be successful, and the Funds’ use of leverage will cause the Funds’
NAV to be more volatile than it would otherwise be. There can be no guarantee that the Combined Fund will leverage its assets or,
to the extent the Combined Fund utilizes leverage, what percentage of its assets, within regulatory limits, such leverage will
represent. Depending on market conditions, the Combined Fund’s portfolio management team may choose not to use any leverage.
Although the use of leverage by a Fund may create an opportunity for increased after-tax total return for the common shares, it
also increases market exposure, results in additional risks and can magnify the effect of any losses.
The Acquiring Fund is subject to the
control share acquisition statute (the “Control Share Statute”) contained in Subchapter III of the Delaware Statutory
Trust Act (the “DSTA”), which became automatically applicable to listed closed-end funds, such as the Acquiring Fund.
The Acquired Fund is not subject to this type of limitation as Massachusetts does not currently have a control share statute
applicable to Massachusetts business trusts. Please see “Rights of Fund Shareholders” in the Proxy Statement/Prospectus
for additional information.
Please see “Comparison of
the Funds” in the Proxy Statement/Prospectus for additional information. |
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Q: |
How will the Reorganization be effected?
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A: |
Assuming Acquired Fund shareholders approve
the Reorganization, the Acquired Fund will transfer all of its assets to the Acquiring Fund in exchange for common shares of the
Acquiring Fund (although shareholders may receive cash for fractional shares of the Acquiring Fund), and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund. Following the Reorganization, the Acquired Fund will be dissolved
and terminated in accordance with its Declaration of Trust, Amended, Restated By-Laws and the 1940 Act. |
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Following the Reorganization, you, as an
Acquired Fund shareholder, will become a shareholder of the Combined Fund. Holders of common shares of the Acquired Fund will receive
newly issued common shares of the Acquiring Fund, no par value per share, the aggregate net asset value (“NAV”) (not
the market value) of which will equal the aggregate NAV (not the market value) of the common shares of the Acquired Fund you held
immediately prior to the Reorganization (although shareholders may receive cash for fractional shares of the Acquiring Fund).
Based on each Fund’s NAV as of September
29, 2023, the exchange ratio at which common shares of the Acquired Fund would have converted to common shares of the Combined
Fund is 0.4548 (i.e., assuming the Reorganization was consummated following the market close on September 29, 2023). An Acquired
Fund shareholder would have received 0.4548 shares of the Combined Fund for each Acquired Fund share held. |
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Q: |
How will the Reorganization affect the
value of my investment?
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A: |
At the closing of the Reorganization, the
Reorganization Agreement sets forth that the Acquired Fund assets will be valued in accordance with the Acquired Fund’s valuation
procedures as approved by the Board of Trustees of the Acquired Fund. Upon the consummation of the Reorganization, the assets transferred
to the Acquiring Fund will be valued pursuant to the Acquiring Fund’s valuation procedures as approved by the Board of Trustees
of the Acquiring Fund.
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Q: |
At what prices have common shares of
the Acquired Fund and common shares of the Acquiring Fund historically traded?
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A: |
Common shares of each Fund have from time
to time traded below their NAVs. As of September 29, 2023, the Acquired Fund common shares were trading at a 15.75% discount to
its NAV, and the Acquiring Fund common shares were trading at a 13.99% discount to its NAV. There can be no assurance that, after
the Reorganization, common shares of the Combined Fund will trade at, above or below NAV. The market value of the common shares
of the Combined Fund may be more or less than the market value of the common shares of either the Acquiring Fund or the Acquired
Fund prior to the Reorganization.
To the extent the Acquired Fund is
trading at a discount to its NAV and the Acquiring Fund is trading at a premium to its NAV at the time of the Reorganization,
Acquired Fund shareholders would have the potential for an economic benefit. To the extent the Acquired Fund is trading at a
premium to its NAV and the Acquiring Fund is trading at a discount to its NAV at the time of the Reorganization, the Acquired
Fund shareholders would lose the economic benefit. There can be no assurance that, after the Reorganization, common shares of
the Combined Fund will trade at, above or below NAV. The market value of the common shares of the Combined Fund may be less than
the market value of the common shares of the Acquiring Fund prior to the Reorganization. Additionally, among other potential
consequences of the Reorganization, portfolio transitioning due to the Reorganization may result in capital gains or losses,
which may have federal income tax consequences for shareholders of the Acquired Fund and the Combined Fund.
Please see “Share Price Data”
in the Proxy Statement/Prospectus for additional information.
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Q: |
Will the Reorganization impact Fund
distributions to shareholders?
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A: |
The Acquired Fund currently pays
a quarterly distribution of $0.0825 per share; based on the market price and NAV as of September 29, 2023, the Acquired Fund’s
annualized distribution rate is 9.79% and 8.25%, respectively. The Acquiring Fund currently pays a monthly distribution rate of
$0.0575 per share; based on the market price and NAV as of September 29, 2023, the Acquiring Fund’s annualized distribution
rate is 7.8% and 9.1%, respectively. The Combined Fund expects to pay a monthly distribution of $0.100 per share and would have
the same distribution yield as the Acquiring Fund. |
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Prior to the closing of the Reorganization,
the Acquired Fund expects to declare a distribution to its shareholders that, together with all previous distributions, will have
the effect of distributing to its shareholders all of its investment company taxable income (computed without regard to the deduction
for dividends paid) and net realized capital gains, if any, through the date of the Reorganization’s closing. All or a portion
of such distribution may be taxable to the Acquired Fund’s shareholders for US federal income tax purposes.
The Combined Fund intends to make its
first distribution to shareholders in the month immediately following the Reorganization. In addition, the Combined Fund expects
to follow the same frequency of payments as the Acquiring Fund and make monthly distributions to shareholders.
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Q: |
Who will manage the Combined Fund’s
portfolio?
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A: |
The Combined Fund will be advised by aIL, the Acquiring Fund’s current adviser. Furthermore, the Acquiring Fund’s current portfolio management team will be primarily responsible for the day-to-day management of the Combined Fund’s portfolio. |
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Q: |
Will there be any significant portfolio
transitioning in connection with the Reorganization?
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A: |
The Acquired Fund will be required
to pay back its outstanding leverage in connection with the closing of the Reorganization (the “Closing Date”). It
is anticipated that approximately 13% of the Acquired Fund’s holdings will
be sold by the Acquired Fund before the closing of the Reorganization in order to pay back its outstanding leverage. This portfolio
transition may take a significant amount of time and result in the Acquired Fund holding large amounts of uninvested cash prior
to the Closing Date, and there may be times when the Acquired Fund is not fully invested in accordance with its investment objective and strategies
during this transition period, which may cause the Acquired Fund to forgo any appreciation in value of portfolio investments, if any. This may impact the Acquired Fund’s performance.
As of September 21, 2023, the expected commissions, spread related and stamp duties/taxes costs to de-lever the portfolio would
be approximately $69,000 (or 0.12% of the Acquired Fund’s NAV as of September 21, 2023) or $0.005 per share. This breaks
down across commissions costs of roughly $5,885, spread related costs for international securities of approximately $62,930 and
stamp duties/taxes of $185. To the extent the Acquired Fund has holdings in France, Spain and/or Italy, such countries may impose
an additional foreign transfer tax on the transfer of such securities to the Acquiring Fund. These taxes are in addition to
the transaction costs disclosed above and would be borne by the Combined Fund. The foregoing estimates are subject to change
depending on the composition of Acquired Fund’s portfolio and market circumstances at the time any sales are made.
Following the Reorganization, the
Combined Fund expects to realign its portfolio in a manner consistent with its investment strategies and policies, which will be the
same as the Acquiring Fund’s strategies and policies. The Combined Fund may not be invested consistent with its investment
strategies or aIL’s investment approach while such realignment occurs. The realignment is anticipated to take approximately
two weeks following the closing of the Reorganization, based on current market conditions and assuming that the Acquired
Fund’s holdings are the same as of September 21, 2023. Sales and purchases of less liquid securities could take longer. Based
on the Acquired Fund’s holdings as of September 21, 2023, the Combined Fund expects to sell approximately 97% of the Acquired
Fund’s portfolio following the closing of the Reorganization. If the Reorganization was completed on September 21,
2023, the expected cost to sell 97% of the Acquired Fund’s holdings following the closing of the Reorganization, which is
estimated to equal 5.5% of the Combined Fund’s portfolio, would be approximately $523,000 (or 0.05% of the estimated NAV of
the Combined Fund as of September 21, 2023) or $0.004 per share of the Combined Fund. To the extent there are any transaction costs (including brokerage commissions,
transaction charges and related fees) associated with the sales and purchases made in connection with the Reorganization, these will
be borne by the Acquired Fund with respect to the portfolio transitioning conducted before the Reorganization and borne by the
Combined Fund with respect to the portfolio transitioning conducted after the Reorganization. The portfolio transitioning pre- and
post-Reorganization may result in capital gains or losses, which may have federal income tax consequences for shareholders of the
Acquired Fund and the Combined Fund. |
Q: |
Will I have to pay any sales load or
commission in connection with the Reorganization?
|
A: |
No. You will pay no sales load or commission
in connection with the Reorganization.
|
Q: |
Who will pay for the costs associated
with the Reorganization?
|
A: |
aIL and its affiliates and First Trust
and its affiliates will bear certain expenses, including portfolio transaction costs and certain taxes, incurred in connection with the Reorganization, except as otherwise disclosed in
the proxy statements to Acquired Fund shareholders, whether or not the
Reorganization is consummated. The expenses of the Reorganization expected to be borne by abrdn and First Trust are estimated
to be approximately $446,000. To the extent there are any transaction costs (including
brokerage commissions, transaction charges and related fees) associated with the sales and purchases of portfolio holdings made
in connection with the Reorganization, these will be borne by the Acquired Fund with respect to the portfolio transitioning and
de-levering conducted before the Reorganization and borne by the Combined Fund with respect to the portfolio transitioning conducted
after the Reorganization. In addition, to the extent an Acquired Fund has holdings in France, Spain and/or Italy, such countries
may impose an additional foreign transfer tax on the transfer of such securities to the Acquiring Fund. These taxes are in addition
to the transaction costs disclosed above and would be borne by the Combined Fund.
|
Q: |
Is the Reorganization expected to be
taxable to the shareholders of the Acquired Fund?
|
A: |
It is expected that shareholders of the
Acquired Fund will not recognize any gain or loss for federal income tax purposes as a result of the exchange of their shares in
the Acquired Fund for shares of the Acquiring Fund pursuant to the Reorganization Agreement (except with respect to cash received
in lieu of fractional shares of the Acquiring Fund).
As a condition to the Acquired Fund’s
obligation to consummate the Reorganization, the Acquired Fund and the Acquiring Fund will receive an opinion from legal counsel
to the effect that, on the basis of the existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”),
current administrative rules and court decisions, the transactions contemplated by the Reorganization Agreement constitute a tax-free
reorganization for federal income tax purposes (except with respect to cash received in lieu of fractional shares of the Acquiring
Fund). Despite this opinion, there can be no assurances that the U.S. Internal Revenue Service will deem the exchanges to be tax-free.
The portfolio transitioning discussed above
may result in capital gains or losses, which may have federal income tax consequences.
The pre-Reorganization portfolio transitioning
noted above will result in a net capital gain or loss depending on the securities sold. It is anticipated that the pre-Reorganization
portfolio transitioning will result in the realization of $824,192 or $0.057 per share in capital gains based on Acquired Fund
holdings as of September 21, 2023. However, it is anticipated that this would be offset by the Fund’s capital loss carryforwards.
Prior to the closing date of the Reorganization, the Acquired Fund will be required to declare a distribution to its shareholders
that, together with all previous distributions, will have the effect of distributing to the Acquired Fund’s shareholders
all of its investment company taxable income (computed without regard to the deduction for dividends paid), if any, through the
closing date (whether or not the Acquired Fund is required to make an actual distribution of cash (which will be dependent on
the amount and character of the Acquired Fund’s prior distributions)), all of its net capital gains, if any, through the
Closing Date, and all of its net tax-exempt interest income, if any, through the Closing Date. Such a distribution may be taxable
to the Acquired Fund’s shareholders for U.S. federal income tax purposes depending on each shareholder’s individual
tax situation, which cannot be determined by abrdn or First Trust. The actual tax consequences as a result of the sale of securities
in advance of the Reorganization are dependent on the portfolio composition of the Acquired Fund at the time such sales are made
and market conditions. |
|
|
|
In addition, following the Reorganization,
the Combined Fund may generate net capital gains or losses as a result of the portfolio realignment discussed further above. For example,
if the Reorganization was completed on September 21, 2023, it is estimated that approximately $6,866,343, or $0.061 per share, in capital
losses would have resulted from portfolio transitioning in the Combined Fund following the Reorganization.
The actual tax consequences as a result
of portfolio repositioning after the closing of the Reorganization are dependent on the portfolio composition of the Acquired Fund
at the time of closing and market conditions. Any net capital gain resulting from the realignment coupled with the results of the
Acquiring Fund’s normal operations during the tax year following the close of the Reorganization would be distributed to
the shareholder base of the Combined Fund post-Reorganization in connection with the annual distribution requirements under US
federal tax laws.
|
Q: |
How does the Acquired Fund Board suggest
that I vote?
|
A: |
The Acquired Fund Board recommends that
you vote “FOR” the Proposal.
|
Q: |
How do I vote my proxy?
|
A: |
You may vote in any one
of four ways:
•
by mail, by sending the enclosed proxy card, signed and dated, in the enclosed envelope;
• by
phone, by following the instructions set forth on your proxy card;
• via
the Internet, by following the instructions set forth on your proxy card; or
• in
person, by attending the Special Meeting. Please note that shareholders who intend to attend the Special Meeting will need to provide
valid identification and, if they hold shares through a bank, broker or other nominee, satisfactory proof of ownership of shares,
such as a voting instruction form (or a copy thereof) or a letter from their bank, broker or other nominee or broker’s statement
indicating ownership as of October 23, 2023 (the “Record Date”), to be admitted to the Special Meeting.
Broker-dealer firms holding shares in “street
name” for the benefit of their customers and clients may request voting instructions from such customers and clients. You
are encouraged to contact your broker-dealer and record your voting instructions.
|
Q: |
Whom do I contact for further information?
|
A: |
If you need any assistance or have any questions regarding the Proposal or how
to vote your shares, please call EQ Fund Solutions, LLC, the Acquired Fund’s proxy solicitor, at (866) 796-7172 weekdays from
9:00 a.m. to 10:00 p.m. Eastern Time. |
|
It
is important that your shares be represented at the Special Meeting. In order to avoid delay and to ensure that your shares are
represented, please vote as promptly as possible. |
The information in this Proxy
Statement/Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This Proxy Statement/Prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state where the offer of sale is not permitted.
Subject to Completion
December 12, 2023
PROXY STATEMENT FOR
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL
OPPORTUNITIES FUND
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
PROSPECTUS FOR
ABRDN TOTAL DYNAMIC INCOME FUND
1900 Market Street, Suite 200
Philadelphia, PA 19103
(215) 405-5700
[ ], 2023
This combined proxy statement/prospectus (the
“Proxy Statement/Prospectus”) is furnished to you as a common shareholder of the First Trust Specialty Finance and Financial
Opportunities Fund (the “Acquired Fund”), a Massachusetts business trust and a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the “1940 Act”). A special meeting (with any postponements or adjournments,
the “Special Meeting”) of shareholders of the Acquired Fund is scheduled to be held at the offices of the Acquired Fund’s
investment adviser, First Trust Advisors L.P. (“First Trust”), located at 120 East Liberty Drive, Suite 400, Wheaton, IL
60187, on February 22, 2024, at 1:00 p.m. Central Time. At the Special Meeting, shareholders will be asked to consider and to vote
on the below proposal (the “Proposal”). If you are unable to attend the Special Meeting, the Board of Trustees of the Acquired
Fund (the “Board”) requests that you vote your shares by completing and returning the enclosed proxy card or by recording
your voting instructions by telephone or via the Internet. The approximate mailing date of this Proxy Statement/Prospectus is [ ],
2023.
To approve an Agreement and Plan of
Reorganization providing for the transfer of all of the assets of the Acquired Fund to abrdn Total Dynamic Dividend Fund (the “Acquiring
Fund”) (each, a “Fund” and collectively, the “Funds”) in exchange solely for newly issued common
shares of beneficial interest of the Acquiring Fund (although cash may be distributed in lieu of fractional shares of the Acquiring
Fund) and the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund and the distribution of common shares
of beneficial interest of the Acquiring Fund to the shareholders of the Acquired Fund and complete liquidation of the Acquired
Fund (the “Reorganization”)
Shareholders of record as of the close of business on October
23, 2023, the record date (the “Record Date”), are entitled to notice of and to vote at the Special Meeting.
Shareholders of the Acquired Fund are being
asked to consider and vote on an Agreement and Plan of Reorganization (the “Reorganization Agreement”) pursuant to
which the Reorganization would be accomplished. The aggregate net asset value (“NAV”) (not the market value) of Acquiring
Fund common shares received by the shareholders of the Acquired Fund in the Reorganization would equal the aggregate NAV (not the
market value) of the Acquired Fund common shares held immediately prior to the Reorganization (although shareholders may receive
cash for fractional shares, which may be taxable).
At the closing of the Reorganization, the
Reorganization Agreement sets forth that the Acquired Fund assets will be valued in accordance with the Acquired Fund’s valuation
procedures as approved by the Board of the Acquired Fund. Upon the consummation of the Reorganization, the assets transferred to
the Acquiring Fund will be valued pursuant to the Acquiring Fund’s valuation procedures as approved by the Board of Trustees
of the Acquiring Fund.
There are some differences
between the Acquired Fund and the Acquiring Fund. In particular, they have different investment advisers. First Trust Advisors L.P. (previously
defined as “First Trust”) is the investment adviser of the Acquired Fund and Confluence Investment Management LLC (“CIM”)
is the investment sub-adviser of the Acquired Fund, and abrdn Investments Limited (“aIL”) is the investment adviser of the
Acquiring Fund. The Funds have similar investment objectives but substantially different principal investment strategies and principal
risks. The Acquired Fund invests in a portfolio of specialty finance and other financial companies while the Acquiring Fund invests generally
in equity securities, as discussed below.
Each Fund is a closed-end management investment
company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Acquired Fund is a Massachusetts
business trust and a diversified closed-end management investment company. The Acquiring Fund is a Delaware statutory trust and
a diversified closed-end management investment company. Each Fund’s common shares are listed on the New York Stock Exchange.
The Acquired Fund’s
primary investment objective is to seek a high level of current income. As a secondary objective, the Acquired Fund seeks an attractive
total return. The Acquiring Fund’s principal investment objective is to seek high current dividend income with a secondary
objective of long-term growth of capital.
The common shares of the Acquiring Fund
are listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “AOD” and will continue
to be so listed following the Reorganization. The common shares of the Acquired Fund are listed on the NYSE under the ticker symbol
“FGB” and would be delisted from the NYSE following the Reorganization. Shareholder reports, proxy statements and other
information concerning Funds can be inspected at the NYSE.
The following documents have been filed
with the Securities and Exchange Commission (“SEC”):
Additionally, copies of the foregoing and
any more recent reports filed after the date hereof may be obtained without charge:
for the Acquiring Fund:
By Phone: |
|
(800) 522-5465 |
By Mail: |
|
abrdn Total Dynamic Dividend Fund |
|
|
c/o abrdn Investments Limited
1900 Market Street, Suite 200 |
|
|
Philadelphia, PA 19103 |
By Internet: |
|
www.abrdnaod.com |
for the Acquired Fund:
By Phone: |
|
(630) 765-8000 |
By Mail: |
|
First Trust Specialty Finance and Financial Opportunities Fund |
|
|
120 East Liberty Drive, Suite 400 |
|
|
Wheaton, IL 60187 |
By Internet: |
|
https://www.ftportfolios.com |
The Funds are subject to the informational
requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, and, in accordance therewith,
file reports, proxy statements, proxy materials and other information with the SEC. You also may view or obtain the foregoing documents
from the SEC:
By e-mail: |
|
publicinfo@sec.gov (duplicating fee required) |
By Internet: |
|
www.sec.gov |
This Proxy Statement/Prospectus serves
as a prospectus of the Acquiring Fund. This Proxy Statement/Prospectus sets forth concisely the information that shareholders of
the Acquired Fund should know before voting on the Proposal. Please read it carefully and retain it for future reference. No person
has been authorized to give any information or make any representation not contained in this Proxy Statement/Prospectus and, if
so given or made, such information or representation must not be relied upon as having been authorized. This Proxy Statement/Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which, or to any
person to whom, it is unlawful to make such offer or solicitation.
THE SEC HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
TABLE
OF CONTENTS
PROPOSAL | 1 |
| |
COMPARISON
OF THE FUNDS |
8 |
|
|
MANAGEMENT
OF THE FUNDS |
31 |
|
|
AGREEMENT
BETWEEN FIRST TRUST AND ABRDN INC. |
34 |
|
|
ADDITIONAL INFORMATION ABOUT THE COMMON SHARES OF THE FUNDS |
36 |
|
|
NET ASSET
VALUE OF COMMON SHARES |
39 |
|
|
DIVIDEND
REINVESTMENT AND OPTIONAL CASH PURCHASE PLAN |
40 |
|
|
ANTI-TAKEOVER
AND CERTAIN PROVISIONS OF THE ACQUIRING FUND’S AGREEMENT AND DECLARATION OF TRUST AND BY-LAWS |
41 |
|
|
APPRAISAL
RIGHTS |
42 |
|
|
FINANCIAL
HIGHLIGHTS |
43 |
|
|
INFORMATION
ABOUT THE REORGANIZATION |
47 |
|
|
TERMS OF
THE REORGANIZATION AGREEMENT |
47 |
|
|
MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION |
49 |
|
|
VOTING INFORMATION
AND REQUIREMENTS |
51 |
|
|
SHAREHOLDER
INFORMATION |
53 |
|
|
SHAREHOLDER
PROPOSALS |
53 |
|
|
SOLICITATION
OF PROXIES |
54 |
|
|
OTHER BUSINESS |
54 |
|
|
APPENDIX
A - Form of Agreement and Plan of Reorganization |
A-1 |
|
|
PROPOSAL
To
approve a Reorganization Agreement providing for the transfer of all of the assets of the Acquired Fund to the Acquiring Fund
in exchange solely for newly issued common shares of beneficial interest of the Acquiring Fund (although cash may be distributed
in lieu of fractional shares of the Acquiring Fund) and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund and the distribution of common shares of beneficial interest of the Acquiring Fund to the shareholders of the Acquired
Fund and complete liquidation of the Acquired Fund.
Synopsis
The
Board of each Fund, including the Trustees who are not “interested persons” of each Fund (as defined in the 1940 Act)
(the “Independent Trustees”), has approved the Reorganization Agreement. The Acquiring Fund as it would exist after
the Reorganization is referred to as the “Combined Fund.”
Subject
to approval of the Reorganization Agreement by the shareholders of the Acquired Fund, the Reorganization Agreement provides for:
| • | the
transfer of all of the assets of the Acquired Fund to the Acquiring Fund, in exchange
solely for shares of the Acquiring Fund (although cash may be distributed in lieu of
fractional shares of the Acquiring Fund); |
| • | the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund; |
| • | the
distribution of common shares of the Acquiring Fund to the shareholders of the Acquired
Fund; and |
| • | the
complete liquidation of the Acquired Fund. |
It
is expected that the Reorganization will occur in the first quarter of 2024.
At
the closing of the Reorganization, the Reorganization Agreement sets forth that the Acquired Fund assets will be valued in accordance
with the Acquired Fund’s valuation procedures as approved by the Board of the Acquired Fund. Upon the consummation of the
Reorganization, the assets transferred to the Acquiring Fund will be valued pursuant to the Acquiring Fund’s valuation procedures
as approved by the Board of Trustees of the Acquiring Fund.
The
Acquired Fund will be required to pay back its outstanding leverage in connection with the closing of the Reorganization. It is
anticipated that approximately 13% of the Acquired Fund’s holdings will be sold by the Acquired Fund before the closing of the
Reorganization in order to pay back its outstanding leverage. This portfolio transition may take a significant amount of time and
result in the Acquired Fund holding large amounts of uninvested cash prior to the Closing Date, and there may be times when the
Acquired Fund is not fully invested in accordance with its investment objective and strategies during this transition period, which may cause the Acquired Fund to forgo any appreciation in value of portfolio investments, if any. This may impact the Acquired
Fund’s performance. As of September 21, 2023, the expected commissions, spread related and stamp duties/taxes costs to
de-lever the portfolio would be approximately $69,000 (or 0.12% of the Acquired Fund’s NAV as of September 21, 2023) or $0.005
per share. This breaks down across commissions costs of roughly $5,885, spread related costs for international securities of
approximately $62,930 and stamp duties/taxes of $185. To the extent the Acquired Fund has holdings in France, Spain and/or Italy,
such countries may impose an additional foreign transfer tax on the transfer of sech securities to the Acquiring Fund. These taxes
are in addition to the transaction costs disclosed above and would be borne by the Combined Fund. The foregoing estimates are
subject to change depending on the composition of Acquired Fund’s portfolio and market circumstances at the time any sales are
made.
The
portfolio de-leveraging discussed above may result in capital gains or losses, which may have federal income tax consequences
for shareholders of the Acquired Fund.
Following
the Reorganization, the Combined Fund expects to realign its portfolio in a manner consistent with its investment strategies and
policies, which will be the same as the Acquiring Fund’s strategies and policies. The Combined Fund may not be invested
consistent with its investment strategies or aIL’s investment approach while such realignment occurs. The realignment is
anticipated to take approximately two weeks following the closing of the Reorganization, based on current market conditions and
assuming that the Acquired Fund’s holdings are the same as on September 21, 2023. Sales and purchases of less liquid securities
could take longer.
Based
on the Acquired Fund’s holdings as of September 21, 2023, the Combined Fund expects to sell approximately 97% of the Acquired
Fund’s portfolio following the closing of the Reorganization. If the Reorganization was completed on September 21,
2023, the expected cost to sell 97% of the Acquired Fund’s holdings following the closing of the Reorganization, which is
estimated to equal 5.5% of the Combined Fund’s portfolio, would be approximately $523,000 (or 0.05% of the estimated NAV of
the Combined Fund as of September 21, 2023) or $0.004 per share of the Combined Fund. To the extent there are any transaction costs (including brokerage commissions,
transaction charges and related fees) associated with the sales and purchases made in connection with the Reorganization, these will
be borne by the Acquired Fund with respect to the portfolio transitioning conducted before the Reorganization and borne by the
Combined Fund with respect to the portfolio transitioning conducted after the Reorganization. The portfolio transitioning pre- and
post-Reorganization may result in capital gains or losses, which may have federal income tax consequences for shareholders of the
Acquired Fund and the Combined Fund.
The
pre-Reorganization transactions noted above will result in a net capital gain or loss depending on the securities sold. It is
anticipated that the pre-Reorganization portfolio transitioning will result in the realization of $824,192 or $0.057 per share in
capital gains based on Acquired Fund holdings as of September 21, 2023. However, it is anticipated that this would be offset by the
Fund’s capital loss carryforwards. Prior to the closing date of the Reorganization, the Acquired Fund will be required to
declare a distribution to its shareholders that, together with all previous distributions, will have the effect of distributing to
the Acquired Fund’s shareholders all of its investment company taxable income (computed without regard to the deduction for
dividends paid), if any, through the closing date (whether or not the Acquired Fund is required to make an actual distribution of
cash (which will be dependent on the amount and character of the Acquired Fund’s prior distributions)), all of its net capital
gains, if any, through the Closing Date, and all of its net tax-exempt interest income, if any, through the Closing Date. Such a
distribution may be taxable to the Acquired Fund’s shareholders for U.S. federal income tax purposes depending on each
shareholder’s individual tax situation, which cannot be determined by abrdn or First Trust. The actual tax consequences as a
result of the sale of securities in advance of the Reorganization are dependent on the portfolio composition of the Acquired Fund at
the time such sales are made and market conditions.
In
addition, following the Reorganization, the Combined Fund may generate net capital gains or losses as a result of the portfolio
realignment discussed further above. For example, if the Reorganization was completed on September 21, 2023, it is estimated that
approximately $6,866,343, or $0.061 per share, in capital losses would have resulted from portfolio transitioning in the Combined
Fund following the Reorganization.
The
actual tax consequences as a result of portfolio repositioning after the closing of the Reorganization are dependent on the portfolio
composition of the Acquired Fund at the time of closing and market conditions. Any net capital gain resulting from the realignment
coupled with the results of the Acquiring Fund’s normal operations during the tax year following the close of the Reorganization
would be distributed to the shareholder base of the Combined Fund post-Reorganization in connection with the annual distribution
requirements under US federal tax laws.
The
Acquired Fund’s primary investment objective is to seek a high level of current income. As a secondary objective, the Acquired
Fund seeks an attractive total return. The Acquiring Fund’s principal investment objective is to seek high current dividend
income with a secondary objective of long-term growth of capital.
The
Acquired Fund invests, under normal market conditions, at least 80% of its Managed Assets (as defined below) in a portfolio of
securities of specialty finance and other financial companies that CIM believes offer attractive opportunities for income and
capital appreciation. “Managed Assets” means the total asset value of the Fund minus the sum of its liabilities, other
than the principal amount of borrowings.
As
set forth more fully below, the Acquired Fund concentrates its investments in “specialty finance companies,” whereas
the Acquiring Fund invests in a broad range of equity investments throughout the world. The Acquiring Fund invests at least 80%
of its net assets plus amounts borrowed for investment purposes in equity securities, primarily common stocks, issued by domestic
and foreign companies whose equity securities are readily traded on an established U.S. or foreign securities market and pay dividends.
The Acquired Fund does not have any restrictions or prohibitions on investments in the securities of non-U.S. issuers. Although
it is not the Acquiring Fund’s current intent, the Acquiring Fund may invest up to 100% of its total assets in the securities
of non-U.S. issuers and is not restricted on how much may be invested in the issuers of any single country, provided the Acquiring
Fund limits its investments in countries that are considered emerging markets to no more than 35% of the Acquiring Fund’s
total assets at any one time. Under normal circumstances, however, the Acquiring Fund invests 35-80% of its total assets in the
securities of non-U.S. issuers and among the securities of issuers located in approximately 10 to 30 countries.
The
Acquired Fund and Acquiring Fund both currently use leverage. The Acquired Fund engages in leverage through borrowing from a committed
facility agreement to seek to enhance the level of its current distributions to common shareholders. The Acquiring Fund intends
to use leverage through borrowing from a credit facility. The Acquiring Fund is permitted to engage in other transactions, such
as reverse repurchase agreements and issuance of debt securities or preferred securities, which have the effect of leverage, but
currently has no intention to do so. The Acquiring Fund may use leverage in an aggregate amount up to 33-1/3% of its total assets.
The Funds’ strategies relating to their use of leverage, if any, may not be successful, and the Funds’ use of leverage
will cause the Funds’ NAV to be more volatile than it would otherwise be. There can be no guarantee that the Combined Fund
will leverage its assets or, to the extent the Combined Fund utilizes leverage, what percentage of its assets, within regulatory
limits, such leverage will represent. Depending on market conditions, the Acquiring Fund’s portfolio management team may
choose not to use any leverage. Although the use of leverage by a Fund may create an opportunity for increased after-tax total
return for the common shares, it also increases market exposure, results in additional risks and can magnify the effect of any
losses.
It
is expected that shareholders of the Acquired Fund will not recognize any gain or loss for federal income tax purposes as a result
of the exchange of their shares in the Acquired Fund for shares of the Acquiring Fund pursuant to the Reorganization Agreement
(except with respect to cash received in lieu of fractional shares of the Acquiring Fund). There can be no assurance that the
U.S. Internal Revenue Service (“IRS”) will deem the exchanges to be tax-free. You should consult your tax adviser
regarding the effect, if any, of the Reorganization in light of your individual circumstances. You should also consult your tax
adviser about other state and local tax consequences of the Reorganization, if any, because the information about tax consequences
in this document relates to the federal income tax consequences of the Reorganization only. For further information about the
federal income tax consequences of the Reorganization, see “Material Federal Income Tax Consequences” below.
As
a condition to the closing of the Reorganization, the Acquired Fund and the Acquiring Fund will receive an opinion from the Acquiring
Fund’s counsel Dechert LLP (based on certain facts, assumptions and representations) to the effect that, on the basis of
the existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), current administrative rules
and court decisions, the transactions contemplated by the Reorganization Agreement constitute a tax-free reorganization within
the meaning of section 368(a) of the Code (except with respect to cash received in lieu of fractional shares of the Acquiring
Fund). Despite this opinion, there can be no assurances that the IRS will deem the exchanges to be tax-free.
The
portfolio transitioning discussed above may result in capital gains or losses, which may have federal income tax consequences.
Prior
to the date of the Reorganization’s closing, the Acquired Fund may declare one or more distributions to its shareholders
that, together with all previous distributions, will have the effect of distributing to its shareholders all of its investment
company taxable income (computed without regard to the deduction for dividends paid) and net realized capital gains, if any, through
the date of the Reorganization’s closing.
Background
and Reasons for the Proposed Reorganization
Board Consideration of the Reorganization
On October 23, 2023, the Board of Trustees (the
“Board”) of the Acquired Fund approved the Reorganization of the Acquired Fund into the Acquiring Fund. For the reasons discussed
below, the Board determined that the proposed Reorganization would be in the overall best interests of the Acquired Fund.
The Board considered the Reorganization over
the course of meetings held in September and October 2023. At those meetings, First Trust discussed with the Board its reasons for proposing
the Reorganization. First Trust stated that it had conducted an evaluation of strategic alternatives for the Acquired Fund in light of
certain factors, including, among others, the Acquired Fund’s discount levels. First Trust reviewed its evaluation of the strategic
alternatives considered for the Acquired Fund, including maintaining the status quo, liquidation, conversion to an open-end fund, reorganization
with an affiliated fund and reorganization with a third-party fund, and advised that, based on its evaluation, First Trust had determined
that a reorganization with a third-party fund would be in the overall best interests of the Acquired Fund. First Trust reviewed its communications
with abrdn Investments Limited (“AIL”), the investment adviser for AOD, and its affiliate, abrdn Inc. (“AI” and
together with AIL, “abrdn”), and the due diligence it had conducted on abrdn, and informed the Board that First Trust was
in the process of negotiating an agreement with AI, pursuant to which AI would acquire certain assets related to First Trust’s
business of providing investment management services to the Acquired Fund and certain other closed-end funds in the First Trust Fund
Complex (the “Purchase Transaction”) and that the Reorganization was being proposed as part of the Purchase Transaction.
In connection with the meetings at which the Reorganization was discussed, First Trust and abrdn provided the Board with a variety of
materials relating to the Reorganization and the Purchase Transaction, including the rationale for and expected benefits and costs of
the Reorganization, comparative information about the Funds and information about the Purchase Transaction and abrdn. Based on all the
information reviewed, First Trust expressed its belief that the Reorganization was the best option for existing shareholders of the Acquired
Fund and that the Board should approve and recommend that shareholders of the Acquired Fund approve the Reorganization. First Trust highlighted
that the Reorganization would allow existing shareholders of the Acquired Fund to remain in a closed-end fund that seeks to provide high
current income, noting that, compared to the Acquired Fund , the Acquiring Fund trades at a similar discount, provides a similar above-market
distribution rate, has a lower total expense ratio and offers better overall liquidity in light of its larger size and higher average
daily trade volume. In addition, at the meetings, the Board received presentations from representatives of abrdn and was able to ask
questions about the Reorganization, the Purchase Transaction, abrdn and the Acquiring Fund. In connection with the meetings and prior
to approving the Reorganization, the Independent Trustees of the Acquired Fund met in private sessions and reviewed the information provided
and discussed the proposed Reorganization with their independent legal counsel.
Based upon all the information provided taken
as a whole and the discussions at the meetings, the Board, including all of the Independent Trustees, approved the Reorganization, and
determined that the Reorganization would be in the overall best interests of the Acquired Fund. Accordingly, the Board recommends that
shareholders of the Acquired Fund approve the Reorganization.
In determining to approve the
Reorganization and to recommend that shareholders of the Acquired Fund approve the Reorganization, the Board considered, among other things,
the following factors:
| · | Compatibility of Investment Objectives and Policies; Closed-End Fund Structure. The Board noted
that the Funds have similar primary investment objectives to seek to provide high current income, but that the Acquired Fund seeks an
attractive total return as a secondary investment objective while the Acquiring Fund focuses on long-term growth of capital as a secondary
investment objective. The Board considered differences between the Funds’ investment strategies, noting First Trust’s statement
that, overall, the Acquiring Fund provides more diversified exposure to the global equity market with less concentration in the financial
sector compared to the Acquired Fund. The Board considered that, unlike the Acquired Fund, the Acquiring Fund does not typically utilize
leverage and that the Acquired Fund would need to eliminate its leverage prior to the closing of the Reorganization, which would require
sales of portfolio securities and related transaction costs to the Acquired Fund. The Board also considered that substantially all of
the Acquired Fund’s remaining portfolio would be repositioned post-Reorganization, resulting in transaction costs, which would be
borne by the Acquiring Fund, including shareholders of the Acquired Fund who remain shareholders in the Acquiring Fund. In addition, the
Board noted that both Funds are structured as closed-end investment companies and considered the advantages of such structure, including
the ability to use leverage and hold less liquid and potentially higher yielding assets. |
| · | Investment Capabilities and Financial Condition of abrdn.
The Board considered information provided with respect to abrdn’s investment capabilities and products, including its closed-end
fund business, noting abrdn’s statements that it has managed and operated closed-end funds for nearly four decades, that its registered
closed-end fund business is the third largest globally and that it continues to view closed-end funds as a core area of growth for its
business. The Board also considered information regarding abrdn’s financial strength and resources and the services it provides
to the Acquiring Fund, noting abrdn’s representation that abrdn continues to review and provide the required resources to ensure
high quality and professional management services to the Acquiring Fund. In addition, the Board considered other information regarding
abrdn’s investment platform, including abrdn’s administration and investor support services, abrdn’s valuation process
and abrdn’s risk management infrastructure. The Board also considered the presentations from representatives of abrdn at the meetings
in September and October 2023. In evaluating the capabilities and resources of abrdn and the rationale for the Reorganization, the Board
also considered First Trust’s assessment of abrdn. The Board noted that the reorganizations of three other closed-end funds in
the First Trust Fund Complex into closed-end funds managed by abrdn are also contemplated by the Purchase Transaction. |
| · | Portfolio Management. The Board noted that, unlike the Acquired Fund, the Acquiring Fund does not
employ an adviser/sub-adviser management structure and that its portfolio is managed directly by AIL. The Board considered the background
and experience of the persons responsible for the management of the Acquiring Fund’s portfolio, including their tenure at abrdn
and their experience managing closed-end funds, as well as information regarding investment support resources at abrdn that are utilized
by the portfolio management team. |
| · | The Acquiring Fund Board Governance. The Board considered information provided by abrdn regarding
the governance structure of the Acquiring Fund’s Board, the compliance and risk program and the service providers rendering core
services to the Acquiring Fund. |
| · | Valuation of Portfolio Investments. The Board noted the information provided by abrdn regarding
the valuation procedures used to value the Acquiring Fund’s investments and considered the uncertain impact on the value of an Acquired
Fund shareholder’s investment immediately after the Reorganization as a result of differences in the Funds’ valuation procedures. |
| · | Comparison
of Fees and Expense Ratios; Expense Savings. The Board considered comparative expense
information for the Funds, including comparisons between the current advisory fee rates and
total expense ratios for the Funds and the estimated pro forma advisory fee rate and total
expense ratio of the combined fund. The Board noted that the Acquiring Fund, like the Acquired
Fund, has a stated advisory fee rate of 1.00% of managed assets, which would not change as
a result of the Reorganization. The Board considered that AIL has contractually agreed to
limit the Combined Fund’s total ordinary operating expenses (excluding any leverage
expenses, interest, taxes, brokerage fees and non-routine expenses) to 1.14% of net assets
and, in connection with the Reorganization, has proposed to extend this contractual expense
limitation for 12 months from the closing of the Reorganization or to June 30, 2025, whichever
is later. The Board considered that the estimated pro forma total expense ratio of the Acquiring
Fund post-Reorganization of 1.14% of net assets (reflecting the impact of the current expense
limitation) was lower than the total expense ratio of the Acquired Fund as of the end of
its most recent semi-annual fiscal period of 1.59% of net assets (excluding leverage costs)
and 2.71% of net assets (including leverage costs) and that shareholders of the Acquired
Fund were expected to benefit from significant cost savings as a result of the Reorganization.
The Board noted that the estimated pro forma total expense ratio for the Acquiring Fund post-Reorganization
assumes that the Acquiring Fund does not employ leverage and considered that, although the
Acquiring Fund does not typically use leverage, the Acquiring Fund currently uses leverage
to a modest extent through borrowings and that leverage costs are not subject to the contractual
expense limitation. The Board considered abrdn’s discussion of the Acquiring Fund’s
tactical use of leverage, noting abrdn’s statements that the Acquiring Fund will use
leverage through borrowing for investment purposes only when AIL believes that the potential
return on additional investments acquired with the proceeds of leverage is likely to exceed
the costs incurred in connection with the borrowings and that, depending on market conditions,
the Acquiring Fund’s portfolio management team may choose not to use any leverage.
The Board also noted the estimated pro forma total expense ratio for the Acquiring Fund post-Reorganization
with the impact of current leverage expenses for the Acquiring Fund of 0.11%. |
| · | Fund
Performance and Distribution Rates. The Board reviewed the performance of the Funds,
noting that the Acquired Fund had outperformed the Acquiring Fund on a NAV basis for the
one- and three-year periods ended September 30, 2023 while the Acquiring Fund had outperformed
the Acquired Fund on a NAV basis for the five-year period ended September 30, 2023. In reviewing
the Funds’ performance, the Board took into account the different investment strategies
of the Funds, noting abrdn’s explanation that, in light of the Acquired Fund’s
concentration in the financial sector, variability in the relative performance of the Funds
was based on the performance of the financial sector compared to that of the broader equity
markets. The Board also received information comparing the Funds’ distribution rates
and noted that although the Acquiring Fund’s distribution rate on NAV of 7.29% as of
the end of its most recent semi-annual fiscal period is lower than the Acquired Fund’s
distribution rate on NAV of 9.40% as of the end of its most recent semi-annual fiscal period,
distributions paid by the Acquiring Fund and the Acquired Fund over the past five fiscal
years have been comprised of 2% and 17% return of capital, respectively, and the Acquiring
Fund’s distribution rate is still meaningfully above market. |
| · | Anticipated Tax-Free Reorganization; Other Tax Impact. The Board noted First Trust’s representation
that the Reorganization will be structured with the intention that it qualify as a tax-free reorganization for federal income tax purposes
and that each Fund will obtain an opinion of counsel substantially to this effect (based on certain factual representations and certain
customary assumptions). In addition, the Board noted information indicating that the Acquired Fund’s capital loss carryforwards
would offset projected realized gains relating to pre-Reorganization portfolio sales in connection with the elimination of leverage for
the Acquired Fund and that post-Reorganization sales of the Acquired Fund’s portfolio securities were expected to result in capital
losses. |
| · | Potential for Improved Trading and Liquidity and Narrower Discounts. The Board considered the larger
asset size and higher average daily trading volume of the Acquiring Fund as compared to the Acquired Fund and that shareholders of the
Acquired Fund may benefit from becoming shareholders of a larger fund with higher trading volume, potentially resulting in improved liquidity
and narrower bid-ask spreads. The Board noted abrdn’s expectation that a larger fund should provide improved scale and liquidity
for shareholders with a larger free float and engender greater market visibility, analyst and media coverage attracting more buyers and
increased trading of fund shares. The Board considered that, in general, the Funds’ shares have historically traded at similar discounts
to NAV, although the Acquiring Fund’s shares had recently traded at a narrower discount than the Acquired Fund’s shares. The
Board noted abrdn’s expectation that the combination of the Funds should provide improved liquidity and tradability creating improved
potential for a narrower discount and lower discount volatility over time. |
| · | Expenses of the Reorganization. The Board noted that the direct costs of the Reorganization, including
legal costs and costs associated with proxy solicitation, would be borne by First Trust and abrdn. The Board noted the transaction costs
to be borne by the Acquired Fund in connection with the elimination of leverage pre-Reorganization and the transaction costs to be borne
by the Acquiring Fund (including shareholders of the Acquired Fund who remain in the Acquiring Fund) as a result of portfolio repositioning
post-Reorganization and considered estimates of such costs. |
| · | Alternatives to the Reorganization. The Board noted First Trust’s consideration of alternatives
to the Reorganization, including maintaining the status quo, liquidation, conversion to an open-end fund, reorganization with an affiliated
fund and reorganization with a third-party fund, and First Trust’s determination that the Reorganization was the best option for
existing shareholders of the Acquired Fund . |
| · | Terms and Conditions of the Reorganization. The Board considered the terms and conditions of the
Reorganization and whether the Reorganization would result in the dilution of the interests of existing shareholders of the Acquired Fund
in light of the basis on which shares of the Acquiring Fund would be issued to shareholders of the Acquired Fund. The Board noted abrdn’s
statement indicating that, although none of the reorganizations contemplated by the Purchase Transaction, including the Reorganization,
is contingent upon any other reorganization, if the reorganizations are not approved, or if the other conditions in the Purchase Transaction
agreement are not satisfied or waived, then the Purchase Transaction may not be completed, and the Purchase Transaction agreement and
the Reorganization may be terminated. |
In addition, the Board considered
the Reorganization in light of the increased focus by activist investors on the First Trust Fund Complex closed-end fund suite and the
significant costs that may be imposed on the Acquired Fund in connection with an activist campaign, including potential litigation costs.
The Board considered that the Reorganization may have the additional benefit of reducing the likelihood of an activist campaign against
the larger combined fund. The Board noted abrdn’s view that the Reorganization will help ensure the viability of the Funds for
the benefit of long-term shareholders by addressing risks arising from lack of scale, primarily liquidity, marketability challenges and
fund costs that lead to wider discounts over time giving investors a poorer outcome and resulting in increasing threats from activists.
In evaluating the Reorganization, the Board also considered that First Trust will receive compensation from abrdn in connection with
the Purchase Transaction.
Based upon on all of the foregoing
considerations, the Board, in the exercise of its business judgment, approved the Reorganization, including the proposed Agreement and
Plan of Reorganization and the Reorganization contemplated thereby, and determined that the Reorganization would be in the overall best
interests of the Acquired Fund. No single factor was determinative in the Board’s analysis and all factors were taken as a whole.
The Board, including the Independent Trustees, unanimously recommends that shareholders of the Acquired Fund approve the Reorganization.
On
October 23, 2023, First Trust, abrdn Inc. and, for the purposes specified therein, abrdn plc. entered into a separate agreement (the
“Purchase Agreement”) pursuant to which abrdn will acquire certain assets related to First Trust’s business of providing
investment management services relating to the assets of the Acquired Fund and certain other registered investment companies (the “Business”)
if the Reorganization is approved, and upon satisfaction or waiver of certain other conditions. More specifically, under the Purchase
Agreement, First Trust has agreed to transfer to abrdn Inc., for a cash payment at the closing of the Asset Transfer (as defined below)
and subject to certain exceptions, (i) all right, title and interest of First Trust in and to the books and records relating to the Business
and the Acquired Fund and (ii) all goodwill of the Business as a going concern (the “Asset Transfer”).
Vote
Required for the Proposal
The
Proposal will require the affirmative vote of a majority of the outstanding voting shares (as defined under the 1940 Act) of the
Acquired Fund. The 1940 Act defines a majority of the outstanding voting shares as the lesser of either (i) at least 67% of the
voting securities present at the Special Meeting, if at least 50% of such securities are present or represented by proxy, or (ii)
more than 50% of the outstanding voting shares. For additional information regarding voting requirements, see “Voting Information
and Requirements.”
COMPARISON
OF THE FUNDS
Investment
Objectives
The
Acquired Fund’s primary investment objective is to seek a high level of current income. As a secondary objective, the Acquired
Fund seeks an attractive total return. The Acquiring Fund’s principal investment objective is to seek high current dividend
income with a secondary objective of long-term growth of capital.
Both
Funds’ investment objectives are considered fundamental and may not be changed without shareholder approval.
Principal
Investment Strategies
The
Funds have similar principal investment strategies, with some substantial differences. As further described below, the Acquired
Fund concentrates its investments in “specialty finance companies,” whereas the Acquiring Fund invests in a broad
range of equity investments throughout the world.
The
Acquired Fund invests, under normal market conditions, at least 80% of its Managed Assets (as defined below) in a portfolio of
securities of specialty finance and other financial companies that CIM believes offer attractive opportunities for income and
capital appreciation. Under normal market conditions, the Acquired Fund will concentrate its investments in a group of industries
in the financial sector, which is comprised of specialty finance companies, banks, savings institutions, brokerage firms, investment
management companies, insurance companies, holding companies of the foregoing and companies that provide related services to such
companies. The Acquired Fund will not invest more than 20% of its Managed Assets in master limited partnerships. “Managed
Assets” means the total asset value of the Fund minus the sum of its liabilities, other than the principal amount of borrowings.
The
Acquiring Fund invests at least 80% of its net assets plus amounts borrowed for investment purposes in equity securities, primarily
common stocks, issued by domestic and foreign companies whose equity securities are readily traded on an established U.S. or foreign
securities market and pay dividends.
The
Acquired Fund does not have any restrictions or prohibitions on investments in the securities of non-U.S. issuers. Although it
is not the Acquiring Fund’s current intent, the Acquiring Fund may invest up to 100% of its total assets in the securities
of non-U.S. issuers and is not restricted on how much may be invested in the issuers of any single country, provided the Acquiring
Fund limits its investments in countries that are considered emerging markets to no more than 35% of the Acquiring Fund’s
total assets at any one time. Under normal circumstances, however, the Acquiring Fund invests 35-80% of its total assets in the
securities of non-U.S. issuers and among the securities of issuers located in approximately 10 to 30 countries.
The
Acquired Fund and Acquiring Fund both currently use leverage. The Acquired Fund engages in leverage through borrowing from a committed
facility agreement to seek to enhance the level of its current distributions to common shareholders. The Acquiring Fund and the
Combined Fund intend to use leverage through borrowing from a credit facility. The Acquiring Fund is permitted to engage in other
transactions, such as reverse repurchase agreements and issuance of debt securities or preferred securities, which have the effect
of leverage, but currently has no intention to do so. The Acquiring Fund may use leverage in an aggregate amount up to 33-1/3%
of its total assets. The Funds’ strategies relating to their use of leverage, if any, may not be successful, and the Funds’
use of leverage will cause the Funds’ NAV to be more volatile than it would otherwise be. There can be no guarantee that
the Combined Fund will leverage its assets or, to the extent the Combined Fund utilizes leverage, what percentage of its assets,
within regulatory limits, such leverage will represent. Depending on market conditions, the Acquiring Fund’s portfolio management
team may choose not to use any leverage. Although the use of leverage by a Fund may create an opportunity for increased after-tax
total return for the common shares, it also increases market exposure, results in additional risks and can magnify the effect
of any losses. Please see “Leverage” below for additional information regarding the Funds’ strategies with respect
to use of leverage.
The
following table shows the principal investment strategies of each Fund.
Acquired
Fund |
Acquiring
Fund |
Under
normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its Managed
Assets in a portfolio of securities of specialty finance and other financial companies that CIM believes offer attractive
opportunities for income and capital appreciation. Specialty finance companies are companies that provide financing to
borrowers with capital needs that are different relative to traditional borrowers, who typically utilize commercial banks
or public debt markets to meet their financing needs.
In
addition, under normal market conditions:
•
The Fund will concentrate its investments in securities of companies within industries in the financial sector, which
is comprised of specialty finance companies, banks, savings institutions, brokerage firms, investment management companies,
insurance companies, holding companies of the foregoing and companies that provide related services to such companies.
•
The Fund will not invest more than 20% of its Managed Assets in master limited partnerships.
|
The
Fund combines four research-driven investment strategies – growth, value, special dividends and dividend capture
rotation – to maximize the amount of distributed dividend income and to identify companies globally with the potential
for dividend increases and capital appreciation. The Fund uses a multi-cap, multi-sector, multi-style approach to invest
in the securities of issuers of any capitalization level (small, mid or large) and in any sector of industry.
The
Fund invests at least 80% of its net assets plus amounts borrowed for investment purposes in equity securities, primarily common
stocks, issued by domestic and foreign companies whose equity securities are readily traded on an established U.S. or foreign
securities market and pay dividends. The Board of Trustees may change this 80% policy on not less than 60 days' notice to shareholders.
The Fund seeks to provide dividend income without regard to whether the dividends qualify for the reduced federal income tax rates
applicable to qualified dividends under the Code. Although it is not the Fund's current intent, the Fund may invest up to 100%
of its total assets in the securities of non-U.S. issuers and is not restricted on how much may be invested in the issuers of
any single country, provided the Fund limits its investments in countries that are considered emerging markets to no more than
35% of the Fund's total assets at any one time. Under normal circumstances, however, the Fund invests 35-80% of its total assets
in the securities of non-U.S. issuers and among the securities of issuers located in approximately 10 to 30 countries. Allocation
of the Fund's assets to issuers outside of the U.S. and among countries outside of the U.S. is dependent on the economic outlook
of those countries and the dividend yields available in their markets. aIL believes that this flexibility will allow it to continuously
pursue high current dividend income in countries where aIL perceives the best opportunities to exist. |
Acquired
Fund |
Acquiring
Fund |
The
First Trust and CIM believe that specialty finance companies may be attractive for investors seeking high levels of current
income as many specialty finance companies are “pass-through” entities in which the income of the company
is treated as income to the shareholders (i.e., cash flow is not taxed at the entity level). One type of specialty finance
company, BDCs, has emerged as a significant alternative to traditional capital providers, such as commercial banks and
other financial institutions. BDCs are a type of closed-end fund regulated under the 1940 Act, whose shares are typically
listed for trading on a U.S. securities exchange. BDCs typically invest in and lend to small and medium-sized private
and certain public companies that may not have access to public equity markets for capital raising. Often times, the financing
a BDC provides includes an equity-like investment such as warrants or conversion rights, creating an opportunity for the
BDC to participate in capital appreciation in addition to the interest income earned through its debt investments. The
interest earned by a BDC flows through to investors in the form of a dividend, normally without being taxed at the BDC
entity level. Unlike corporations, BDCs are not taxed on income distributed to their shareholders provided they comply
with the applicable requirements of the Internal Revenue Code of 1986. BDCs are unique in that at least 70% of their investments
must be made in private and certain public U.S. businesses, and BDCs. are required to make available significant managerial
assistance to their portfolio companies. The securities of BDCs, which are required to distribute substantially all of
their income on an annual basis to investors in order to not be subject to entity level taxation, often offer a yield
advantage over securities of other issuers, such as corporations, that are taxed on income at the entity level and are
able to retain all of a portion of their income rather than distributing it to investors. The Fund invests primarily in
BDC shares which are trading in the secondary market on a U.S. securities exchange but may, in certain circumstances,
invest in an initial public offering of BDC shares or invest in certain debt instruments issued by BDCs. The Fund will
indirectly bear its proportionate share of any management and other expense, and of any performance based or incentive
fees, charged by the BDCs in which it invests, in addition to the expenses paid by the Fund. Other examples of specialty
finance companies include categories of REITs providing commercial or residential mortgage financing or lease financing.
The
Fund engages in the use of financial leverage to seek to enhance the level of its current distributions to common shareholders.
The Fund may use financial leverage through the issuance of preferred shares of beneficial interest and/or borrowings
by the Fund.
The
Fund does not intend to enter into derivative transactions as a principal part of its investment strategy. However, the
Fund may enter into derivative transactions to seek to manage the risks of the Fund’s portfolio securities or for
other purposes to the extent CIM determines that the use of derivative transactions is consistent with the Fund’s
investment objectives and policies and applicable regulatory requirements. Certain of the Fund’s derivative transactions,
if any, may provide investment leverage to the Fund’s portfolio. To the extent the Fund enters into derivatives
transactions, it will do so pursuant to Rule 18f-4 under the 1940 Act. Rule 18f-4 requires the Fund to implement certain
policies and procedures designed to manage its derivatives risks, dependent upon the Fund’s level of exposure to
derivative instruments. |
aIL
believes that dividend paying stocks have the potential for superior total return performance, as compared to non-dividend
paying stocks. aIL believes that global diversification may provide to investors in the Fund the benefit of generally
higher dividend yields in some countries outside the United States.
The
Fund invests in equity securities issued by U.S. issuers, and foreign issuers whose equity securities are readily traded
on an established U.S. or foreign securities market, that pay dividends. The Fund screens the U.S. and foreign companies
in which it considers investing using the same criteria, including, generally, high dividend yield, sufficiently liquid
trading in an established market, and also its judgment that the issuer may have good prospects for earnings growth or
may be undervalued. The equity securities in which the Fund invests include primarily common stocks. The Fund may, from
time to time, also invest a portion of its assets in depositary receipts, preferred stocks, real estate investment trusts
("REITs"), master limited partnerships ("MLPs", exchange-traded funds ("ETFs") and securities
convertible into or exchangeable for common stocks, such as convertible debt.
The
Fund may from time to time engage in short sales of securities, for investment or for hedging purposes. Short sales are
transactions in which the Fund sells a security it does not own. To complete the transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund is then obligated to replace the security borrowed by purchasing the
security at the market price at the time of replacement. In the event that the Fund elects to pursue such a strategy,
the Fund expects it would sell shares of portfolio securities short through a pair trade system, where it would maintain
a long position in a basket of dividend-paying stocks and a short position in a security or securities replicating an
index, which the Fund anticipates to be outperformed by the dividend-paying stocks it owns. The Fund may also sell short
individual stocks that the Fund expects to underperform other stocks which the Fund holds. For hedging purposes, the Fund
may purchase or sell short futures contracts on global equity indexes.
The
Fund anticipates that it will generally not make a short sale if, after giving effect to such sale, the market value of
all securities sold short by the Fund exceeds 20% of the value of its total assets.
|
Acquired
Fund |
Acquiring
Fund |
|
The
Fund intends to use leverage through borrowing from a credit facility. The Fund is permitted to engage in other transactions,
such as reverse repurchase agreements and issuance of debt securities or preferred securities, which have the effect of
leverage, but currently has no intention to do so. aIL believes that the use of leverage may provide positive absolute
return in the long term and potentially increased income and would thereby be beneficial to shareholders. The portfolio
management team anticipates using leverage in an aggregate amount up to 33 1/3% of its total assets (including the amount
obtained from leverage), under normal market conditions. The Fund's portfolio management team may use leverage opportunistically
and seek to reduce the Fund's leverage usage during times of heightened market volatility. Depending on market conditions,
the portfolio management team may choose not to use any leverage or may instead borrow up to 33 1/3% of the Fund's total
assets. The Fund also may borrow money as a temporary measure for extraordinary or emergency purposes, including the payment
of dividends and the settlement of securities transactions, which otherwise might require untimely dispositions of Fund
securities.
The
Fund may, from time to time, take temporary defensive positions that are inconsistent with the Fund's principal investment
strategies in attempting to respond to adverse market, economic, political or other conditions. During such times, the
Fund may temporarily invest up to 100% of its assets in cash or cash equivalents, including money market instruments,
prime commercial paper, repurchase agreements, Treasury bills and other short-term obligations of the U. S. Government,
its agencies or instrumentalities. In these and in other cases, the Fund may not achieve its investment objectives.
Generally,
securities are purchased or sold by the Fund on national securities exchanges and in the over-the-counter market. From
time to time, securities may be purchased or sold in private transactions, including securities that are not publicly
traded or that are otherwise illiquid. aIL does not expect investments in illiquid securities to comprise more than 10%
of the Fund's total assets (determined at the time the investment is made).
aIL
may invest the Fund's cash balances in any investments it deems appropriate, including, without limitation and as permitted under
the 1940 Act, money market funds, repurchase agreements, U.S. Treasury and U.S. agency securities, municipal bonds and bank accounts.
Any income earned from such investments is ordinarily reinvested by the Fund in accordance with its investment program. Many of
the considerations entering into aIL's recommendations and the portfolio managers' decisions are subjective. |
Acquired
Fund |
Acquiring
Fund |
|
Certain of the Fund's investment strategies may not qualify for the reduced federal income tax rates applicable to qualified dividend income under the Code. As a result, there can be no assurance as to what portion of the Fund's distributions will be designated as qualified dividend income. aIL considers and evaluates ESG factors as part of the investment analysis process for most long-term investments. aIL considers the most material potential ESG risks and opportunities impacting issuers, alongside other non-ESG factors. The relevance of ESG factors to the investment process varies across issuers and strategies. For instance, ESG factors may not be considered for securities that aIL intends to hold solely as part of the Fund’s dividend recapture strategy. |
Distribution
Information
The
Acquired Fund currently pays a quarterly distribution of $0.0825 per share; based on the market price and NAV as of September
29, 2023, the Acquired Fund’s annualized distribution rate is 9.79% and 8.25%, respectively. The Acquiring Fund currently
pays a monthly distribution rate of $0.0575 per share; based on the market price and NAV as of September 29, 2023, the Acquiring
Fund’s annualized distribution rate is 7.8% and 9.1%, respectively. The Combined Fund expects to pay a monthly distribution
of $0.100 per share and would have the same distribution yield as the Acquiring Fund.
The
Combined Fund intends to make its first distribution to shareholders in the month immediately following the Reorganization. In addition,
the Combined Fund expects to follow the same frequency of payments as the Acquiring Fund and make monthly distributions to shareholders.
Please
see “Description of Common Shares to be Issued by the Acquiring Fund; Comparison to the Acquired Fund” below for additional
information.
Leverage
The
Acquired Fund and Acquiring Fund both currently use leverage. The Acquired Fund engages in leverage through borrowing from a committed
facility agreement to seek to enhance the level of its current distributions to common shareholders. The Acquiring Fund intends
to use leverage through borrowing from a credit facility. The Acquiring Fund is permitted to engage in other transactions, such
as reverse repurchase agreements and issuance of debt securities or preferred securities, which have the effect of leverage, but
currently has no intention to do so. The Acquiring Fund may use leverage in an aggregate amount up to 33-1/3% of its total
assets.
The
Funds’ strategies relating to their use of leverage, if any, may not be successful, and the Funds’ use of leverage
will cause the Funds’ NAV to be more volatile than it would otherwise be. There can be no guarantee that the Combined Fund
will leverage its assets or, to the extent the Combined Fund utilizes leverage, what percentage of its assets, within regulatory
limits, such leverage will represent. Depending on market conditions, the Acquiring Fund’s portfolio management team may
choose not to use any leverage. Although the use of leverage by a Fund may create an opportunity for increased after-tax total
return for the common shares, it also increases market exposure, results in additional risks and can magnify the effect of any
losses. Depending on market conditions, the Acquiring Fund’s portfolio management team may choose not to use any leverage.
Although the use of leverage by a Fund may create an opportunity for increased after-tax total return for the common shares, it
also increases market exposure, results in additional risks and can magnify the effect of any losses.
The
Acquired Fund will be required to pay back its outstanding leverage in connection with the closing of the Reorganization. It is
anticipated that approximately 13% of the Acquired Fund’s holdings will be sold by the Acquired Fund before the closing of the
Reorganization in order to pay back its outstanding leverage. This portfolio transition may take a significant amount of time and
result in the Acquired Fund holding large amounts of uninvested cash prior to the Closing Date, and there may be times when the
Acquired Fund is not fully invested in accordance with its investment objective and strategies during this transition period, which
may cause the Acquired Fund to forgo any appreciation in value of portfolio investments, if any. As of September 21, 2023, and
assuming the sale of a pro rata slice of the portfolio, the expected commissions, spread related and stamp duties/taxes costs to
de-lever the portfolio would be approximately $69,000 (or 0.12% of the Acquired Fund’s NAV as of September 21, 2023) or less
than $0.005 per share. This breaks down across commissions costs of roughly $5,885, spread related costs for international
securities of approximately $62,930 and stamp duties/taxes of $185. To the extent the Acquired Fund has holdings in France, Spain
and/or Italy, such countries may impose an additional foreign transfer tax on the transfer of such securities to the Acquiring Fund.
These taxes are in addition to the transaction costs disclosed above and would be borne by the Combined Fund. Portfolio
transitioning after the Reorganization may result in capital gains or losses, which may have federal income tax consequences. For
example, if the Reorganization only was completed on September 21, 2023, it is estimated that approximately $6,866,343, or
$0.061 per share, in capital losses would have resulted from portfolio transitioning in the Combined Fund following the
Reorganization. The foregoing estimates are subject to change depending on the composition of Acquired Fund’s portfolio and
market circumstances at the time any sales are made.
The portfolio de-levering discussed above
may result in capital gains or losses, which may have federal income tax consequences. It is anticipated that the pre-Reorganization
portfolio transitioning will result in the realization of $824,192 or $0.057 per share in capital gains based on Acquired Fund holdings
as of September 21, 2023. However, it is anticipated that this would be offset by the Fund’s capital loss carryforwards. The actual
tax consequences as a result of portfolio repositioning are dependent on the portfolio composition of the Acquired Fund at the time and
market conditions.
As
of September 29, 2023, the Acquired Fund had aggregate leverage from borrowings, and as of April 30, 2023, the Acquiring Fund
had aggregate leverage from borrowings as a percentage of its total assets as follows:
| | |
Leverage Ratio |
|
Acquired Fund | | |
| 13.0 |
% |
Acquiring Fund | | |
| 6.13 |
% |
If
the Reorganization had occurred on April 30, 2023, the leverage ratio for the Combined Fund would have been as follows:
Pro Forma Combined Fund |
|
4.34 |
% |
Portfolio
Transitioning
Following
the Reorganization, the Combined Fund expects to realign its portfolio in a manner consistent with its investment strategies and
policies, which will be the same as the Acquiring Fund’s strategies and policies. The Combined Fund may not be invested
consistent with its investment strategies or aIL’s investment approach while such realignment occurs. The realignment is
anticipated to take approximately two weeks following the closing of the Reorganization, based on current market conditions and
assuming that the Acquired Fund’s holdings are the same as of September 21, 2023. Sales and purchases of less liquid
securities could take longer. Based on the Acquired Fund’s holdings as of September 21, 2023, the Combined Fund expects to
sell approximately 97% of the Acquired Fund’s portfolio following the closing of the Reorganization. If the Reorganization was completed on September 21, 2023, the expected cost to sell 97% of the Acquired Fund’s holdings following the
closing of the Reorganization, which is estimated to equal 5.5% of the Combined Fund’s portfolio, would be approximately
$523,000 (or 0.05% of the estimated NAV of the Combined Fund as of September 21, 2023) or $0.004 per share of the Combined Fund. To the extent there are any
transaction costs (including brokerage commissions, transaction charges and related fees) associated with the sales and purchases
made in connection with the Reorganization, these will be borne by the Acquired Fund with respect to the portfolio transitioning
conducted before the Reorganization and borne by the Combined Fund with respect to the portfolio transitioning conducted after the
Reorganization. The portfolio transitioning pre- and post-Reorganization may result in capital gains or losses, which may have
federal income tax consequences for shareholders of the Acquired Fund and the Combined Fund.
Fees
and Expenses
Below
is a comparison of the fees and expenses of the Funds before and after the Reorganization based on the expenses for the fiscal
period ended May 31, 2023, for the Acquired Fund and the fiscal period ended April 30, 2023, for the Acquiring Fund. The pro
forma information for the Combined Fund is as of April 30, 2023. Pro forma combined fees and expenses are estimated
in good faith and are hypothetical.
It
is important to note that following the Reorganization, shareholders of the Acquired Fund would be subject to the actual fees
and expenses of the Acquiring Fund, which may not be the same as the pro forma combined fees and expenses. Future
fees and expenses may be greater or lesser than those indicated below.
|
|
Acquired
Fund |
|
Acquiring
Fund |
|
Pro
Forma
Combined Fund |
Common Shareholder
Transaction Expenses |
|
|
|
|
|
|
Sales Load (as a percentage
of the offering price)(1) |
|
None |
|
None |
|
None |
Offering expenses (as
a percentage of offering price)(1) |
|
None |
|
None |
|
None |
Dividend reinvestment
and optional cash purchase plan fees (per share for open-market purchases of common shares) |
|
|
|
|
|
|
Fee
for Open Market Purchases of Common Shares |
|
None |
|
$0.02
(per share)(2) |
|
$0.02
(per share)(2) |
Fee
for Optional Shares Purchases |
|
None |
|
$5.00
(max)(2) |
|
$5.00
(max)(2) |
Sales
of Shares Held in a Dividend Reinvestment Account |
|
None |
|
$0.12
(per share) and $25.00 (max)(2) |
|
$0.12
(per share) and $25.00 (max)(2) |
|
|
|
|
|
|
|
Annual expenses
(as a percentage of net
assets attributable to Common Shares) |
|
|
|
|
|
|
Advisory fee(3) |
|
1.17% |
|
1.02% |
|
1.02% |
Interest expense(4) |
|
1.12% |
|
0.11% |
|
0.11% |
Other expenses |
|
0.42% |
|
0.19% |
|
0.18% |
Total annual expenses |
|
2.71% |
|
1.32% |
|
1.31% |
Less: expense reimbursement |
|
N/A |
|
0.07%(5) |
|
0.06%(5) |
|
|
|
|
|
|
|
Total annual expenses after expense reimbursement |
|
2.71% |
|
1.25%(5) |
|
1.25%(5) |
(1) |
No
sales load will be charged in connection with the issuance of Acquiring Fund common shares as part of the Reorganization.
Common shares are not available for purchase from the Funds but may be purchased on the NYSE through a broker-dealer subject
to individually negotiated commission rates. Common shares purchased in the secondary market may be subject to brokerage
commissions or other charges.
|
(2) |
Shareholders
who participate in the Acquiring Fund’s Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”)
may be subject to fees on certain transactions. Fees for Computershare Trust Company N.A. (the “Plan Agent”)
for the handling of the reinvestment of dividends will be paid by the Acquiring Fund; however, participating shareholders
will pay a $0.02 per share fee incurred in connection with open-market purchases in connection with the reinvestment of
dividends, capital gains distributions and voluntary cash payments made by the participant, which will be deducted from
the value of the dividend. Shareholders will be subject to $0.12 per share fee and either a $10.00 fee (for batch orders)
or $25.00 fee (for market orders) for sales of shares held in a dividend reinvestment account. Per share fees include
any applicable brokerage commissions the Plan Agent is required to pay.
|
(3) |
The
contractual advisory fee of the Acquired Fund is 1.00% of the Acquired Fund’s Managed Assets. For the purposes of
this calculation, “Managed Assets” means the average daily gross asset value of the Acquired Fund (including
assets attributable to the Acquired Fund's Preferred Shares (as such term is defined in the Acquired Fund's prospectus),
if any, and the principal amount of borrowings, if any), minus the sum of the Acquired Fund's accrued and unpaid dividends
on any outstanding Preferred Shares and accrued liabilities (other than the principal amount of any borrowings incurred,
commercial paper or notes issued by the Acquired Fund). For purposes of determining Managed Assets, the liquidation preference
of any outstanding Preferred Shares of the Acquired Fund is not treated as a liability.
The
contractual advisory fee of the Acquiring Fund and the Combined Fund is 1.00% of the Fund’s average daily Managed
Assets. “Managed Assets” is defined as total assets of the Fund, including any form of leverage, minus all
accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable
to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through
a credit facility or the usance of debt securities), (ii) the issuance of preferred stock or other similar preference
securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Fund’s investment
objectives and policies, and/or (iv) any other means.
|
(4) |
For
the Acquired Fund, the percentage in the table is based on total borrowings of $8,600,000 for the Acquired Fund (the balance
outstanding under the Acquired Fund’s credit facility as of May 31, 2023.
For
the Acquiring Fund, the percentage in the table is based on total borrowings of $19,643,538 for the Acquiring Fund.
|
|
For
the Combined Fund, the percentage in the table is based on estimated total average borrowings for the fiscal period ended
April 30, 2023 of $20,273,000 for the Combined Fund (the same percentage of borrowing as the Acquiring Fund for the period
ended April 30, 2023). |
|
|
|
There
can be no assurances that the Acquired Fund will be able obtain such level of borrowing or to maintain its current level of borrowing,
that the terms under which the Acquired Fund borrows will not change, or that the Acquired Fund’s use of leverage will be
profitable. |
|
|
(5) |
aIL,
the investment adviser of the Acquiring Fund, has entered into a written contract (the “Amended and Restated Expense Limitation
Agreement”) with the Acquiring Fund that is effective through June 30, 2024. In connection with the Reorganization, the Amended
and Restated Expense Limitation Agreement shall be extended through one year from the date of the closing of the Reorganizations,
or June 30, 2025, whichever is later. The Amended and Restated Expense Limitation Agreement limits the total ordinary operating expenses
of the Acquiring Fund and following the consummation of the Reorganization, the Combined Fund (excluding any leverage costs,
interest, taxes, brokerage commissions, and any non-routine expenses), from exceeding 1.14% of the average daily net assets of the
Fund on an annualized basis. The Acquiring Fund or Combined Fund, as applicable, may repay any such reimbursement from aIL within
three years of the reimbursement, provided that the following requirements are met: the reimbursements do not cause the Acquiring
Fund or Combined Fund, as applicable, to exceed the lesser of the applicable expense limitation in the contract at the time the fees
were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by aIL. |
|
|
Expense
Example
The
following example illustrates the expenses that a shareholder would pay on a $1,000 investment that is held for the time periods
provided in the table. The example set forth below assumes shares of each Fund were owned as of the completion of the Reorganization
and uses a 5% annual rate of return as mandated by SEC regulations.*
| | |
1 Year | | |
3 Years | | |
5 Years | | |
10 Years | |
Acquired Fund | | |
$ | 27 | | |
$ | 84 | | |
$ | 143 | | |
$ | 304 | |
Acquiring Fund | | |
$ | 13 | | |
$ | 41 | | |
$ | 72 | | |
$ | 158 | |
Pro Forma Combined Fund | | |
$ | 13 | | |
$ | 40 | | |
$ | 71 | | |
$ | 157 | |
*
The example should not be considered a representation of future expenses or rate of return and actual Combined Fund expenses may
be greater or less than those shown. The example assumes that (i) all dividends and other distributions are reinvested at NAV,
(ii) the percentage amounts listed under “Total annual expenses” above remain the same in the years shown and (iii)
the expense reimbursement agreement for the Combined Fund is only in effect until a year from the date of the closings of the
Reorganizations or June 30, 2025, whichever is later, as described in note (5) above.
Principal
Risks
The
principal risks of the Funds are similar, but include some substantial differences. Although the Funds are subject to similar risks in
connection with their investment objectives, their risks materially differ in certain ways on account of each Fund’s distinct investment
objectives and strategies. The Acquired Fund is subject to certain risks specific to its holdings in financial sector securities, and
the Acquiring Fund is subject to specific risks to its holdings in foreign countries. Therefore, in the chart below and principal risks
that follow, you will notice that the Acquired Fund is subject to certain risks stemming from its potential exposure to financial sector
securities to which the Acquiring Fund is not subject, and that the Acquiring Fund is subject to certain risks stemming from its potential
exposure to foreign securities to which the Acquired Fund is not subject. The Acquired Fund and the Acquiring Fund may share similar
risks but describe them differently or under a different risk heading. A chart showing the risks applicable to each Fund based on section
headings is included directly below. Because the chart categorizes risk heading titles only, it is possible that the descriptions of
the risks could encompass broader concepts for one Fund compared to the other or include multiple associated risks under a single heading.
Therefore, the description of the risks associated with each heading for each Fund is included below the chart to provide more descriptive
information of each risk.
Principal
Risks |
Acquiring
Fund |
Acquired
Fund |
Business
Development Company (“BDC”) Risk |
|
X |
Common
Stock Risk |
X |
|
Convertible
Securities Risk |
X |
|
Cyber
Security Risk |
X |
X |
Defensive
Positions |
X |
|
Deferred
Tax Risks of MLPs |
X |
|
Depositary
Receipts |
X |
|
Dividend
Strategy Risks |
X |
|
Emerging
Market Securities Risk |
X |
|
Financial
Sector Concentration Risk |
|
X |
Foreign
Securities Risk |
X |
|
Illiquid
Securities Risk |
X |
X |
Interest
Rate Risk; Income and Interest Rate Risk |
X |
X |
Inflation
Risk |
X |
|
Investment
and Market Risk |
X |
|
Investments
in Undervalued Securities |
X |
|
Issuer
Risk |
X |
|
Leverage
Risk |
X |
X |
Management
Risk; Management Risk and Reliance on Key Personnel |
X |
X |
Market
Discount from Net Asset Value |
|
X |
Market
Events Risk; Market Risk |
X |
X |
Market
Price of Shares |
X |
|
MLP
Risk |
X |
|
MLP
Tax Risk |
X |
|
Operational
Risk |
|
X |
Portfolio
Turnover Risk |
X |
|
Potential
Conflicts of Interest Risk |
|
X |
Preferred
Securities Risk |
X |
|
Qualified
Dividend Tax Risk |
X |
|
REIT
Risk; REIT, Mortgage-Related and Asset-Backed Securities Risk |
X |
X |
Risk
Characteristics of Options and Futures |
X |
|
Risks
of Derivative Investments |
X |
|
Short
Sale Risk |
X |
|
Small
and Medium Cap Company Risk |
X |
|
Special
Risks Associated with Foreign Currency Futures Contracts and Related Options |
X |
|
Special
Risks Associated with Foreign Currency Options |
X |
|
Specialty
Finance and Other Financial Companies Risks |
|
X |
Valuation
Risk |
|
X |
Principal
Risks of Investing in the Acquiring Fund
Investment
and Market Risk. An investment in common shares is subject to investment risk, including the possible loss of the entire principal
amount invested. An investment in common shares represents an indirect investment in the securities owned by the Fund, which are
generally traded on a securities exchange or in the over-the-counter markets. The value of these securities, like other market
investments, may move up or down, sometimes rapidly and unpredictably. The value of your common shares at any point in time may
be less than the value of your original investment, even after taking into account any reinvestment of dividends and distributions.
Issuer
Risk. The value of an issuer's securities that are held in the Fund's portfolio may decline for a number of reasons which
directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer's goods and
services.
Dividend
Strategy Risks. The Fund's pursuit of its investment objectives depends upon the Adviser's ability to anticipate the dividend
policies of the companies in which it chooses to invest. It is difficult to anticipate the level of dividends that companies will
pay in any given timeframe. The Fund's strategies require the Adviser to identify and exploit opportunities such as the announcement
of major corporate actions, such as restructuring initiatives or a special dividend, that may lead to high current dividend income.
These situations are typically not recurring in nature or frequency, may be difficult to predict and may not result in an opportunity
that allows the Adviser to fulfill the Fund's investment objective. In addition, the dividend policies of the Fund's target companies
are heavily influenced by the current economic climate and the favorable federal tax treatment afforded to dividends. Challenging
economic conditions, affecting either the market as a whole or a specific investment in the Fund's portfolio, may limit the opportunity
to benefit from the current dividend policies of the companies in which the Fund invests or may cause such companies to reduce
or eliminate their dividends. In addition, a change in the favorable provisions of the federal tax laws may limit your ability
to benefit from dividend increases or special dividends, may effect a widespread reduction in announced dividends and may adversely
impact the valuation of the shares of dividend-paying companies. The use of dividend capture strategies will expose the Fund to
increased trading costs and potential for capital loss or gain, particularly in the event of significant short-term price movements
of stocks subject to dividend capture trading.
Qualified
Dividend Tax Risk. There can be no assurance as to what portion of the distributions paid to the Fund's shareholders will
consist of tax-advantaged qualified dividend income or long-term capital gains or what the tax rates on various types of income
will be in future years. The favorable U.S. federal tax treatment may be adversely affected, changed or repealed by future changes
in tax laws at any time. In addition, it may be difficult to obtain information regarding whether distributions by non-U.S. entities
in which the Fund invests should be regarded as qualified dividend income. Furthermore, to receive qualified dividend income treatment,
the Fund must meet holding period and other requirements with respect to the dividend paying securities in its portfolio, and
the shareholder must meet holding period and other requirements with respect to the common shares of the Fund.
Common
Stock Risk. The Fund invests primarily in common stocks. Although common stocks have historically generated higher average
returns than fixed income securities over the long term, common stocks also have experienced significantly more volatility in
returns. Common stocks may be more susceptible to adverse changes in market value due to issuer specific events or general movements
in the equities markets. A drop in the stock market may depress the price of common stocks held by the Fund. Common stock prices
fluctuate for many reasons, including changes in investors' perceptions of the financial condition of an issuer or the general
condition of the relevant stock market, or the occurrence of political or economic events affecting issuers. For example, an adverse
event, such as an unfavorable earnings report, may depress the value of common stock in which the Fund has invested; the price
of common stock of an issuer may be particularly sensitive to general movements in the stock market; or a drop in the stock market
may depress the price of most or all of the common stocks held by the Fund. Also, common stock of an issuer in the Fund's portfolio
may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the
security experiences a decline in its financial condition. The common stocks in which the Fund invests are structurally subordinated
to preferred securities, bonds and other debt instruments in a company's capital structure, in terms of priority to corporate
income and assets, and therefore will be subject to greater risk than the preferred securities or debt instruments of such issuers.
In addition, common stock prices may be sensitive to rising interest rates, as the costs of capital rise and borrowing costs increase.
Foreign
Securities Risk. The Fund has substantial exposure to foreign securities. The Fund's investments in securities of foreign
issuers are subject to risks not usually associated with owning securities of U.S. issuers. These risks can include fluctuations
in foreign currencies, foreign currency exchange controls, social, political and economic instability, differences in securities
regulation and trading, expropriation or nationalization of assets, and foreign taxation issues. In addition, changes in government
administrations or economic or monetary policies in the United States or abroad could result in appreciation or depreciation of
the Fund's securities. It may also be more difficult to obtain and enforce a judgment against a foreign issuer. Any foreign investments
made by the Fund must be made in compliance with U.S. and foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments. The Fund has no other investment restrictions with respect to investing in foreign issuers. Dividends
paid on foreign securities may not qualify for the reduced federal income tax rates applicable to qualified dividends under the
Code. As a result, there can be no assurance as to what portion of the Fund's distributions attributable to foreign securities
will be designated as qualified dividend income.
Emerging
Market Securities Risk. The Fund may invest up to 35% of its total assets in securities of issuers located in "emerging
markets." Although there is no universally accepted definition, an emerging or developing country is generally considered
to be a country which is in the initial stages of industrialization. Investing in emerging markets can involve unique risks in
addition to and greater than those generally associated with investing in developed markets. The securities markets of emerging
countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the U.S. and developed
markets. The risks of investing in emerging markets include greater political and economic uncertainties than in developed markets,
the risk of the imposition of economic sanctions against a country, the risk of nationalization of industries and expropriation
of assets, social instability and war, currency transfer restrictions, risks that governments may substantially restrict foreign
investing in their capital markets or in certain industries, impose punitive taxes, trade barriers and other protectionist or
retaliatory measures. In the event of nationalization, default, debt restructuring, capital controls, expropriation or other confiscation,
the Fund could lose its entire investment in foreign securities. Adverse conditions in a certain region can adversely affect securities
of other countries whose economies appear to be unrelated. To the extent that the Fund invests a significant portion of its assets
in a specific geographic region, the Fund will generally have more exposure to regional economic risks associated with foreign
investments. Emerging market economies are often dependent upon a few commodities or natural resources that may be significantly
adversely affected by volatile price movements against those commodities or natural resources. Emerging market countries may experience
high levels of inflation and currency devaluation and have a more limited number of potential buyers for investments. A market
swing in one or more emerging market countries or regions where the Fund has invested a significant amount of its assets may have
a greater effect on the Fund's performance than it would in a more geographically diversified portfolio.
The
securities markets and legal systems in emerging market countries may only be in a developmental stage and may provide few, or
none, of the advantages and protections of markets or legal systems available in more developed countries. Legal remedies available
to investors in some foreign countries are less extensive than those available to investors in the U.S. There could be difficulties
in enforcing favorable legal judgments in foreign courts. Foreign markets may have different securities clearance and settlement
procedures. In certain securities markets, settlements may not keep pace with the volume of securities transactions. If this occurs,
settlement may be delayed and the Fund's assets may be uninvested and may not be earning returns. The Fund also may miss investment
opportunities or not be able to sell an investment because of these delays. Some investments in emerging markets can be considered
speculative, and the value of those investments can be more volatile than investments in more developed foreign markets.
Depositary
Receipts. Depositary receipts include American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”)
and Global Depositary Receipts (“GDRs”) or other securities convertible into securities of issuers based in foreign
countries. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted.
Generally, ADRs, in registered form, are denominated in U.S. Dollars and are designed for use in the U.S. securities markets,
GDRs, in bearer form, are issued and designed for use outside the United States and EDRs (also referred to as Continental Depositary
Receipts (“CDRs”)), in bearer form, may be denominated in other currencies and are designed for use in European securities
markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities.
EDRs are European receipts evidencing a similar arrangement. GDRs are receipts typically issued by non-U.S. banks and trust companies
that evidence ownership of either foreign or domestic securities. For purposes of a Fund's investment policies, ADRs, GDRs and
EDRs are deemed to have the same classification as the underlying securities they represent. Thus, an ADR, GDR or EDR representing
ownership of common stock will be treated as common stock.
The
Fund may invest in depositary receipts through “sponsored” or “unsponsored” facilities. While ADRs issued
under these two types of facilities are in some respects similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants.
A
depositary may establish an unsponsored facility without participation by (or even necessarily the acquiescence of) the issuer
of the deposited securities, although typically the depositary requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all the costs of such facilities. The depositary usually
charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. Dollars, the disposition
of non-cash distributions, and the performance of other services. The depositary of an unsponsored facility frequently is under
no obligation to pass through voting rights to ADR holders in respect of the deposited securities. In addition, an unsponsored
facility is generally not obligated to distribute communications received from the issuer of the deposited securities or to disclose
material information about such issuer in the U.S. and thus there may not be a correlation between such information and the market
value of the depositary receipts. Unsponsored ADRs tend to be less liquid than sponsored ADRs.
Sponsored
ADR facilities are created in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depositary. The deposit agreement sets out the rights and responsibilities of the issuer,
the depositary, and the ADR holders. With sponsored facilities, the issuer of the deposited securities generally will bear some
of the costs relating to the facility (such as dividend payment fees of the depositary), although ADR holders continue to bear
certain other costs (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositaries agree
to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information
to the ADR holders at the request of the issuer of the deposited securities.
In
addition, the issuers of depositary receipts may discontinue issuing new depositary receipts and withdraw existing depositary
receipts at any time, which may result in costs and delays in the distribution of the underlying assets to the Fund and may negatively
impact the Fund's performance.
Small
and Medium Cap Company Risk. Compared to investment companies that focus only on large capitalization companies, the Fund's
share price may be more volatile because it also invests in small and medium capitalization companies. Compared to large companies,
small and medium capitalization companies are more likely to have (i) less information publicly available, (ii) more limited product
lines or markets and less mature businesses, (iii) fewer capital resources, (iv) more limited management depth and (v) shorter
operating histories. Further, compared to large cap stocks, the securities of small and medium capitalization companies are more
likely to experience sharper swings in market values, be harder to sell at times and at prices that the Adviser believes appropriate,
and offer greater potential for gains and losses.
Portfolio
Turnover Risk. The techniques and strategies contemplated by the Fund might result in a high degree of portfolio turnover.
The Fund cannot accurately predict its securities portfolio turnover rate, but anticipates that its annual portfolio turnover
rate will likely exceed 100% under normal market conditions, although it could be materially higher under certain conditions.
Higher portfolio turnover rates could result in corresponding increases in brokerage commissions and may generate short-term capital
gains taxable as ordinary income.
Defensive
Positions. During periods of adverse market or economic conditions, the Fund may temporarily invest all or a substantial portion
of its assets in cash or cash equivalents. The Fund would not be pursuing its investment objectives in these circumstances and
could miss favorable market developments.
Market
Price of Shares. The shares of closed-end management investment companies often trade at a discount from their NAV, and the
Fund's common shares may likewise trade at a discount from NAV. The trading price of the Fund's common shares may be less than
the public offering price. The returns earned by the Fund's shareholders who sell their common shares below NAV will be reduced.
The Fund may utilize leverage, which magnifies the market risk.
Management
Risk. The Fund is subject to management risk because it is an actively managed portfolio. The Fund's successful pursuit of
its investment objectives depends upon the Adviser's ability to find and exploit market inefficiencies with respect to undervalued
securities and identify companies experiencing a change in dividend policy, including the announcement of restructuring initiatives
or special dividends. Such situations occur infrequently and sporadically and may be difficult to predict, and may not result
in a favorable pricing opportunity that allows the Adviser to fulfill the Fund's investment objectives. The Adviser's security
selections and other investment decisions might produce losses or cause the Fund to underperform when compared to other funds
with similar investment goals. If one or more key individuals leave the employ of the Adviser, the Adviser may not be able to
hire qualified replacements, or may require an extended time to do so. This could prevent the Fund from achieving its investment
objectives.
Leverage
Risk. Leverage creates three major types of risks for shareholders:
| • | the
likelihood of greater volatility of NAV and market price of common shares because changes
in value of the Fund's portfolio (including changes in the value of any interest rate
swap, if applicable) are borne entirely by the common shareholders; |
| • | the
possibility either that share income will fall if the interest rate on any borrowings
or the dividend rate on any preferred shares issued rises, or that share income and distributions
will fluctuate because the interest rate on any borrowings or the dividend rate on any
preferred shares issued varies; and |
| • | if
the Fund leverages through issuing preferred shares or borrowings, the Fund may not be
permitted to declare dividends or other distributions with respect to its common shares
or purchase its capital stock, unless at the time thereof the Fund meets certain asset
coverage requirements. |
Leverage
involves certain additional risks, including the risk that the cost of leverage may exceed the return earned by the Fund on the
proceeds of such leverage. The use of leverage will increase the volatility of changes in the Fund's NAV, market price and distributions.
In the event of a general market decline in the value of assets in which the Fund invests, the effect of that decline will be
magnified in the Fund because of the additional assets purchased with the proceeds of the leverage.
In
addition, funds borrowed pursuant a credit facility may constitute a substantial lien and burden by reason of their prior claim
against the income of the Fund and against the net assets of the Fund in liquidation. In the event of an event of default under
a loan facility, lenders may have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other
assets of the Fund) and, if any such default is not cured, the lenders may be able to control the liquidation as well. A leverage
facility agreement may include covenants that impose on the Fund asset coverage requirements, Fund composition requirements and
limits on certain investments, such as illiquid investments or derivatives, which are more stringent than those imposed on the
Fund by the 1940 Act. However, because the Fund's use of leverage is expected to be relatively modest and flexible in approach,
the Adviser currently does not believe that these restrictions would significantly impact its management of the Fund.
The
Adviser in its best judgment nevertheless may determine to maintain the Fund's leveraged position if it deems such action to be
appropriate in the circumstances. During periods in which the Fund is using leverage, the fees paid to the Adviser for investment
advisory services will be higher than if the Fund did not use leverage because the fees paid will be calculated on the basis of
the Fund's total assets, including proceeds from borrowings, which may create an incentive to leverage the Fund.
Short
Sale Risk. When transacting a short sale, the Fund must borrow the security sold to make delivery to the buyer. The Fund is
then obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The price at
such time may be higher or lower than the price at which the security was sold by the Fund.
A
short sale will be successful if the shorted security price decreases. However, if the underlying security goes up in price during
the period during which the short position is outstanding, the Fund will realize a loss. The risk on a short sale is unlimited
because the Fund must buy the shorted security at the higher price to complete the transaction. Therefore, short sales may be
subject to greater risks than investments in long positions. With a long position the maximum sustainable loss is limited to the
amount paid for the security plus the transaction costs, whereas there is no maximum attainable price of the security sold short.
The
Fund also incurs increased transaction costs associated with selling securities short.
REIT
Risk. If the Fund invests in REITs, such investment will subject the Fund to various risks. The first, real estate industry
risk, is the risk that the REIT share prices will decline because of adverse developments affecting the real estate industry and
real property values. In general, real estate values can be affected by a variety of factors, including supply and demand for
properties, the economic health of the country or of different regions, and the strength of specific industries that rent properties.
REITs often invest in highly leveraged properties. The second risk is the risk that returns from REITs, which typically are small
or medium capitalization stocks, will trail returns from the overall stock market. The third, interest rate risk, is the risk
that changes in interest rates may hurt real estate values or make REIT shares less attractive than other income producing investments.
Qualification
as a REIT under the Code in any particular year is a complex analysis that depends on a number of factors. There can be no assurance
that the entities in which the Fund invests with the expectation that they will be taxed as a REIT will qualify as a REIT. An
entity that fails to qualify as a REIT, would be subject to a corporate level tax, would not be entitled to a deduction for dividends
paid to its shareholders and would not pass through to its shareholders the character of income earned by the entity. If the Fund
were to invest in an entity that failed to qualify as a REIT, such failure could drastically reduce the Fund's yield on that investment.
Dividends
paid by REITs will not generally qualify for the reduced federal income tax rates applicable to qualified dividends under the
Code.
The
Fund does not expect to invest a significant portion of its assets in REITs, but does not have any investment restrictions with
respect to such investments.
MLP
Risk. An investment in MLP units involves some risks that differ from an investment in the common stock of a corporation.
Holders of MLP units have limited control and voting rights on matters affecting the partnership. Although common unitholders
are generally limited in their liability, similar to a corporation's shareholders, creditors typically have the right to seek
the return of distributions made to such unitholders if the liability in question arose before the distribution was paid. This
liability may stay attached to the common unitholder even after the units are sold. Investing in MLPs involves certain risks related
to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs holding credit-related
investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. MLPs that concentrate
in a particular industry or a particular geographic region are subject to risks associated with such industry or region. Investments
held by MLPs may be relatively illiquid, limiting the MLPs' ability to vary their portfolios promptly in response to changes in
economic or other conditions. MLPs may have limited financial resources, their securities may trade infrequently and in limited
volume, and they may be subject to more abrupt or erratic price movements than securities of larger or more broadly based companies.
MLP
Tax Risk. Certain diversification requirements imposed by the Code limits the Fund's ability to invest in MLP securities.
In addition, the Fund's ability to meet its investment objectives may depend in part on the level of taxable income and distributions
and dividends received from the MLP securities in which the Fund invests, a factor over which the Fund has no control. The benefit
derived from the Fund's investment in MLPs is largely dependent on the MLPs being treated as partnerships for federal income tax
purposes. If an MLP were classified as a corporation for federal income tax purposes, the amount of cash available for distribution
would be reduced and distributions received by us would be taxed entirely as dividend income. Sale of MLPs may result in the Fund
realizing significant amounts of taxable ordinary income even for MLP positions sold at an overall loss with such amounts of taxable
ordinary income being very difficult for the Fund to estimate or accrue for, and the tax reporting being significantly delayed,
subject to dramatic revisions, and depending on the MLP issuers so reporting.
Deferred
Tax Risks of MLPs. As a limited partner in the MLPs in which the Fund invests, the Fund receives a pro rata share of income,
gains, losses and deductions from those MLPs. Historically, a significant portion of income from such MLPs has been offset by
tax deductions. The Fund's common shareholders will incur a current tax liability on the portion of an MLP's income and gains
that is not offset by tax deductions and losses. The percentage of an MLP's income and gains that is offset by tax deductions
and losses will fluctuate over time for various reasons.
Investments
in Undervalued Securities. The Fund's investment strategy includes investing in securities, which, in the opinion of the Adviser,
are undervalued. The identification of investment opportunities in undervalued securities is a difficult task and there is no
assurance that such opportunities will be successfully recognized or acquired. While investments in undervalued securities offer
opportunities for above-average capital appreciation, these investments involve a high degree of financial risk and can result
in substantial losses.
Special
Risks Associated with Foreign Currency Options. Buyers and sellers of foreign currency options are subject to the same risks
that apply to options generally, as described below. In addition, there are certain additional risks associated with foreign currency
options. The Fund's ability to establish and close out positions on such options is subject to the maintenance of a liquid secondary
market. Although the Fund will not purchase or write such options unless and until, in the opinion of the Adviser, the market
for them has developed sufficiently to ensure that the risks in connection with such options are not greater than the risks in
connection with the underlying currency, there can be no assurance that a liquid secondary market will exist for a particular
option at any specific time. In addition, options on foreign currencies are affected by most of the same factors that influence
foreign exchange rates and investments generally.
The
value of a foreign currency option depends upon the value of the underlying currency relative to the U.S. dollar. As a result,
the price of the option position may vary with changes in the value of either or both currencies and may have no relationship
to the investment merits of a foreign security. Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of foreign currency options, investors may be disadvantaged
by having to deal in an odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There
is no systematic reporting of last sale information for foreign currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative
of very large transactions in the interbank market and thus may not reflect relatively smaller transactions (i.e., less than $1
million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. option markets are closed while the markets for the underlying currencies remain open, significant price
and rate movements may take place in the underlying markets that cannot be reflected in the options markets until they reopen.
Risk
Characteristics of Options and Futures. Options and futures transactions can be highly volatile investments. Successful hedging
strategies require the anticipation of future movements in securities prices, interest rates and other economic factors. When
a fund uses futures contracts and options as hedging devices, the prices of the securities subject to the futures contracts and
options may not correlate with the prices of the securities in a portfolio. This may cause the futures and options to react to
market changes differently than the portfolio securities. Even if expectations about the market and economic factors are correct,
a hedge could be unsuccessful if changes in the value of the portfolio securities do not correspond to changes in the value of
the futures contracts. The ability to establish and close out futures contracts and options on futures contracts positions depends
on the availability of a secondary market. If these positions cannot be closed out due to disruptions in the market or lack of
liquidity, losses may be sustained on the futures contract or option.
Special
Risks Associated with Foreign Currency Futures Contracts and Related Options. Buyers and sellers of foreign currency futures
contracts are subject to the same risks that apply to the use of futures generally, as described above. In addition, there are
risks associated with foreign currency futures contracts and their use as a hedging device similar to those associated with options
on foreign currencies, as described above.
Options
on foreign currency futures contracts may involve certain additional risks. The ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary market. To reduce this risk, the Fund will not purchase or write
options on foreign currency futures contracts unless and until, in the opinion of the Adviser, the market for such options has
developed sufficiently that the risks in connection with such options are not greater than the risks in connection with transactions
in the underlying foreign currency futures contracts. Compared to the purchase or sale of foreign currency futures contracts,
the purchase of call or put options on futures contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the option (plus transaction costs). However, there may be circumstances when the purchase of a call
or put option on a futures contract would result in a loss of up to the amount of the premium paid for the option, such as when
there is no movement in the price of the underlying currency or futures contract.
Preferred
Securities Risk. In addition to credit risk, investment in preferred securities carries risks including deferral risk, redemption
risk, limited voting rights, risk of subordination and lack of liquidity. Fully taxable or hybrid preferred securities typically
contain provisions that allow an issuer, at its discretion, to defer distributions for up to 20 consecutive quarters. Traditional
preferreds also contain provisions that allow an issuer, under certain conditions to skip (in the case of "noncumulative
preferreds") or defer (in the case of "cumulative preferreds"), dividend payments. If the Fund owns a preferred
security that is deferring its distributions, the Fund may be required to report income for tax purposes while it is not receiving
any distributions. Preferred securities typically contain provisions that allow for redemption in the event of tax or security
law changes in addition to call features at the option of the issuer. In the event of a redemption, the Fund may not be able to
reinvest the proceeds at comparable rates of return. Preferred securities typically do not provide any voting rights, except in
cases when dividends are in arrears beyond a certain time period, which varies by issue. Preferred securities are subordinated
to bonds and other debt instruments in a company's capital structure in terms of priority to corporate income and liquidation
payments, and therefore will be subject to greater credit risk than those debt instruments. Preferred securities may be substantially
less liquid than many other securities, such as U.S. government securities, corporate debt or common stocks. Dividends paid on
preferred securities will generally not qualify for the reduced federal income tax rates applicable to qualified dividends under
the Code.
Interest
Rate Risk. Interest rate risk is the risk that preferred stocks paying fixed dividend rates and fixed-rate debt securities
will decline in value because of changes in market interest rates. When interest rates rise, the market value of such securities
generally will fall. The Fund's investment in preferred stocks and fixed-rate debt securities means that the NAV and price of
the common shares may decline if market interest rates rise. Interest rates are currently low relative to historic levels. There
can be no assurance that rates will remain at these levels. During periods of declining interest rates, an issuer of preferred
stock or fixed-rate debt securities may exercise its option to redeem securities prior to maturity, forcing the Fund to reinvest
in lower yielding securities. This is known as call risk. During periods of rising interest rates, the average life of certain
types of securities may be extended because of slower than expected payments. This may lock in a below market yield, increase
the security's duration, and reduce the value of the security. This is known as extension risk.
The
value of the Fund's common stock investments may also be influenced by changes in interest rates.
Convertible
Securities Risk. The value of a convertible security is a function of its "investment value" (determined by its
yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege)
and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The
investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest
rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors may also have an
effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market
price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price,
the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally
will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.
A
convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security's
governing instrument. If a convertible security held by the Fund is called for redemption, the Fund will be required to permit
the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions
could have an adverse effect on the Fund's ability to achieve its investment objectives.
Illiquid
Securities Risk. Restricted securities and other illiquid investments of the Fund involve the risk that the securities will
not be able to be sold at the time desired by the Adviser or at prices approximating the value at which the Fund is carrying the
securities. Where registration is required to sell a security, the Fund may be obligated to pay all or part of the registration
expenses, and a considerable period may elapse between the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to sell. Restricted securities for which no market exists and other
illiquid investments are valued at fair value as determined in accordance with procedures approved and periodically reviewed by
the Board of Trustees of the Fund.
Inflation
Risk. Inflation risk is the risk that the purchasing power of assets or income from investment will be less in the future
as inflation decreases the value of money. To the extent that inflation occurs, it will reduce the real value of dividends paid
by the Fund and the Fund’s common shares. Most emerging market countries, in particular, have experienced substantial, and
in some periods extremely high and volatile, rates of inflation. Inflation and rapid fluctuations in inflation rates have had
and may continue to have very negative effects on economies and securities markets globally. In an attempt to control inflation,
wage and price controls have been imposed at times in certain countries.
Borrowing
Risk. If the Fund borrows money, it would experience greater volatility of NAV and market price of the common shares. If the
income from the securities purchased with such funds were not sufficient to cover the cost of any such borrowing, the return on
the Fund would be less than if borrowing had not been used, and therefore the amount available for distribution to the Fund's
shareholders as dividends and other distributions would be reduced and might not satisfy the level dividend rate distribution
policy set by the Board of Trustees.
Risks
of Derivative Investments. The Fund may invest in derivative instruments as described in the Fund's Prospectus and Statement
of Additional Information. Investments in derivative instruments may be for both investment and hedging purposes. Losses from
investments in derivative instruments can, among other things, result from a lack of correlation between changes in the value
of derivative instruments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative
instruments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin and settlement
payment requirements, related leverage factors or operational and legal issues associated with such transactions. The use of these
investment techniques also involves the risk of loss if the Adviser is incorrect in its expectation of the timing or level of
fluctuations in securities prices, interest rates or currency prices. Investments in derivative instruments may be harder to value,
subject to greater volatility and more likely subject to changes in tax treatment than other investments. For these reasons, the
Adviser's attempts to hedge portfolio risks through the use of derivative instruments may not be successful, and the Adviser may
choose not to hedge certain portfolio risks. The use of derivatives for investment purposes is considered a speculative practice
and presents even greater risk of loss.
In
October 2020, the SEC adopted Rule 18f-4 under the 1940 Act governing a registered investment company's use of derivatives, short
sales, reverse repurchase agreements, and certain other instruments.
Under
Rule 18f-4, a fund's derivatives exposure is limited through a value-at-risk test and requires the adoption and implementation
of a derivatives risk management program for certain derivatives users. However, subject to certain conditions, funds that do
not invest heavily in derivatives may be deemed limited derivatives users and would not be subject to the full requirements of
Rule 18f-4. Under the rule, when the Fund trades reverse repurchase agreements or similar financing transactions, including certain
tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar
financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the
Fund’s asset coverage ratio or treat all such transactions as derivatives transactions. In addition, under the rule, the
Fund is permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle,
and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided
that, (i) the Fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade
date (the “Delayed-Settlement Securities Provision”). The Fund may otherwise engage in when-issued, forward-settling
and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities
Provision so long as the Fund treats any such transaction as a “derivatives transaction” for purposes of compliance
with the rule. Furthermore, under the rule, the Fund is permitted to enter into an unfunded commitment agreement, and such unfunded
commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the Fund reasonably believes,
at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with
respect to all such agreements as they come due. These requirements may limit the ability of the Fund to use derivatives, and
reverse repurchase agreements and similar financing transactions as part of its investment strategies. These requirements may
increase the cost of the Fund’s investments and cost of doing business, which could adversely affect investors.
Anti-Takeover
Provisions. The Fund's Declaration of Trust includes provisions that could have the effect of inhibiting the Fund's possible
conversion to open-end status and limiting the ability of other entities or persons to acquire control of the Fund or the Board
of Trustees. In certain circumstances, these provisions might also inhibit the ability of shareholders to sell their shares at
a premium over prevailing market prices.
Market
Events Risk. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes
in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the US
Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments,
investor sentiment and other factors that may or may not be related to the issuer of the security or other asset. Economies and
financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff
arrangements, terrorism, natural disasters and other circumstances in one country or region could have profound impacts on global
economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure
to the countries directly affected, the value and liquidity of the Fund's investments may be negatively affected. In addition,
any spread of an infectious illness, public health threat or similar issue could reduce consumer demand or economic output, result
in market closures, travel restrictions or quarantines, and generally have a significant impact on the world economy, which in
turn could adversely affect the Fund's investments.
Cybersecurity
Risk. Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder
information), or proprietary information, or cause the Fund, the Adviser and/or its service providers (including, but not limited to,
Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data breaches, data corruption
or lose operational functionality.
Principal
Risks of Investing in the Acquired Fund
Business
Development Company (“BDC”) Risk. The Fund invests in closed-end funds that have elected to be treated as BDCs.
Investments in BDCs may be subject to a high degree of risk. BDCs typically invest in small and medium-sized private and certain
public companies that may not have access to public equity markets or capital raising, and investments in these companies present
a greater risk of loss due to the companies’ youth and limited track record. BDCs are also generally more susceptible to
competition and economic and market changes due to limited products and market shares. A BDC’s portfolio could include a
substantial amount of securities purchased in private placements, and its portfolio may carry risks similar to those of a private
equity or venture capital fund. Securities that are not publicly registered may be difficult to value and may be difficult to
sell at a price representative of their intrinsic value. Investments in BDCs are subject to various risks, including management’s
ability to meet the BDC’s investment objective, and to manage the BDC’s portfolio when the underlying securities are
redeemed or sold, during periods of market turmoil and as investors’ perceptions regarding a BDC or its underlying investments
change. Certain BDCs in which the Fund invests employ the use of leverage in their portfolios through borrowings or in the issuance
of preferred stock. While leverage often serves to increase the yield of a BDC, the leverage also subjects the BDC to increased
risks, including the likelihood of increased volatility and the possibility that the BDC’s common share income will fall
if the dividend rate on any preferred shares or the interest rate on any borrowings rises. In addition, the market price for BDCs,
together with other dividend paying stocks, may be negatively affected by a rise in interest rates. Alternatively, declining interest
rates could adversely impact the earnings of BDCs in which the Fund invests, as new loan originations would likely be made at
lower yields. BDC shares are not redeemable at the option of the BDC shareholder and, as with shares of other closed-end funds,
they may trade in the secondary market at a discount to their NAV.
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.
Financial
Sector Concentration Risk. Under normal market conditions, the Fund concentrates its investments (i.e., invests at least 25%
of its total assets) in securities of companies within industries in the financial sector. A fund concentrated in a single industry
or sector is likely to present more risks than a fund that is broadly diversified over several industries or groups of industries.
Compared to the broad market, an individual sector may be more strongly affected by changes in the economic climate, broad market
shifts, moves in a particular dominant stock, or regulatory changes. Specialty finance and other financial companies in general
are subject to extensive government regulation, which may change frequently and may have significant adverse consequences for
financial companies, including effects not intended by such regulation. The profitability of specialty finance and other financial
companies is largely dependent upon the availability and cost of capital funds, and may fluctuate significantly in response to
changes in interest rates, as well as changes in general economic conditions. From time to time, severe competition may also affect
the profitability of specialty finance and other financial companies. Financial companies can be highly dependent upon access
to capital markets and any impediments to such access, such as general economic conditions or a negative perception in the capital
markets of a company’s financial condition or prospects, could adversely affect its business. The impact of more stringent
capital requirements, or recent or future regulation in various countries, on any individual financial company or on financial
companies as a whole cannot be predicted. Certain risks may impact the value of investments in financial companies more severely
than those of investments in other issuers, including the risks associated with companies that operate with substantial financial
leverage. Financial companies may also be adversely affected by volatility in interest rates, loan losses and other customer defaults,
decreases in the availability of money or asset valuations, credit rating downgrades and adverse conditions in other related markets.
Financial companies are also a target for cyber attacks and may experience technology malfunctions and disruptions as a result.
Leasing companies may be negatively impacted by changes in tax laws which affect the types of transactions in which such companies
engage.
Illiquid
Securities Risk. The Fund may invest in securities that are considered to be illiquid securities. Illiquid 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
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 securities are also more difficult to value, especially in challenging
markets.
Income
and Interest Rate Risk. The income common shareholders receive from the Fund is based primarily on the dividends and interest
it earns from its investments, which can vary widely over the short and long-term. If prevailing market interest rates drop, distribution
rates of the Fund’s portfolio holdings may decline which then may adversely affect the Fund’s distributions on its
common shares as well. The Fund’s income also would likely be adversely affected when prevailing short-term interest rates
increase and the Fund is utilizing leverage.
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: (i) the likelihood
of greater volatility of net asset value and market price of the common shares than a comparable portfolio without leverage; (ii)
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; (iii) 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 (iv) when the Fund uses certain types of leverage, the investment advisory
fee payable to the Advisor and by the Advisor to the Sub-Advisor will be higher than if the Fund did not use leverage. To the
extent the Fund uses leverage and invests in BDCs that also use leverage, the risks associated with leverage will be magnified,
potentially significantly.
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 and Sub-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. Securities held by the Fund, as well as shares of the Fund itself, are subject to market fluctuations caused by factors
such as general economic conditions, political events, regulatory 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,
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. For example, the coronavirus (COVID-19) global pandemic and the aggressive responses taken by
many governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines
or similar restrictions, had negative impacts, and in many cases severe impacts, on markets worldwide. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of reasonably normal business activity in the United
States, many countries continue to impose lockdown measures in an attempt to slow the spread. Additionally, there is no guarantee
that vaccines will be effective against emerging variants of the disease. Also, in February 2022, Russia invaded Ukraine which
has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe and
the United States. These hostilities and sanctions resulting from these hostilities could have a significant impact on certain
Fund investments as well as Fund performance. As the global pandemic and conflict in Ukraine have illustrated such events may
affect certain geographic regions, countries, sectors and industries more significantly than others. 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. These events also may
adversely affect the prices and liquidity of the Fund’s portfolio securities or other instruments and could result in disruptions
in the trading markets. Any of such circumstances could have a materially negative impact on the value of the Fund’s shares
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 and the bid/ask spread on the Fund’s shares may widen.
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, Confluence and the portfolio managers have interests which may conflict with the
interests of the Fund. In particular, First Trust and Confluence currently manage and may in the future manage and/or advise other
investment funds or accounts with the same or substantially similar investment objective and strategies as the Fund. In addition,
while the Fund is using leverage, the amount of the fees paid to First Trust (and by First Trust to Confluence) 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 and Confluence have a financial incentive to leverage the Fund.
REIT,
Mortgage-Related and Asset-Backed Securities Risk. Investing in REITs involves certain unique risks in addition to investing
in the real estate industry in general. REITs are subject to interest rate risk (especially mortgage REITs) and the risk of default
by lessees or borrowers. An equity REIT may be affected by changes in the value of the underlying properties owned by the REIT.
A mortgage REIT may be affected by the ability of the issuers of its portfolio of mortgages to repay their obligations. REITs
whose underlying assets are concentrated in properties used by a particular industry are also subject to risks associated with
such industry. REITs may have limited diversification due to investment in a limited number of properties or a particular market
segment and are subject to the risks associated with obtaining financing for real property. REITs may have limited financial resources,
their securities may trade less frequently and in a limited volume, and their securities may be subject to more abrupt or erratic
price movements than larger company securities. Additionally, certain REITs charge management fees, which may result in layering
of management fees paid by the Fund.
In
addition to REITs, the Fund may invest in a variety of other mortgage-related securities, including commercial mortgage securities
and other mortgage-backed instruments. Mortgage-related securities are susceptible to adverse economic, political or regulatory
events that affect the value of real estate. Mortgage-related securities are also significantly affected by other factors such
as borrower defaults, delinquencies, realized or liquidation losses and other shortfalls. Rising interest rates tend to extend
the duration of mortgage-related securities, making them more sensitive to changes in interest rates, and may reduce the market
value of the securities. In addition, mortgage-related securities are subject to prepayment risk, the risk that borrowers may
pay off their mortgages sooner than expected, particularly when interest rates decline. This can reduce the Fund’s returns
because the Fund may have to reinvest that money at lower prevailing interest rates.
The
Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-backed
securities, as well as additional risks associated with the nature of the assets and the servicing of those assets. In general,
mortgage-related securities and asset-backed securities are subject to credit risk, extension risk, interest rate risk, liquidity
risk and valuation risk.
Specialty
Finance and Other Financial Companies Risks. The profitability of specialty finance and other financial companies in which
the Fund may invest is largely dependent upon the availability and cost of capital, and may fluctuate significantly in response
to changes in interest rates, as well as changes in general economic conditions. Any impediments to a specialty finance or other
financial company’s access to capital markets, such as those caused by general economic conditions or a negative perception
in the capital markets or the company’s financial condition or prospects, could adversely affect such company’s business.
From time to time, severe competition may also affect the profitability of specialty finance and other financial companies. Specialty
finance and other financial companies are subject to rapid business changes, significant competition, value fluctuations due to
the concentration of loans in particular industries significantly affected by economic conditions (such as real estate or energy)
and volatile performance based upon the availability and cost of capital and prevailing interest rates. In addition, credit and
other losses resulting from the financial difficulties of borrowers or other third parties potentially may have an adverse effect
on companies in these industries.
Valuation
Risk. The valuation of the Fund’s investments may carry more risk than that of traditional common stock. Uncertainties
in the conditions of the financial market, unreliable reference data, lack of transparency and inconsistency of valuation models
and processes may lead to inaccurate asset pricing.
Investment
Restrictions and Policies
The
following is a comparison of the fundamental investment restrictions of the Acquired Fund and the Acquiring Fund. The Funds’
fundamental investment restrictions are substantially similar in some respects and differ in other respects. The Acquired Fund
and Acquiring Fund are each diversified funds under the 1940 Act; however, only the Acquiring Fund has a fundamental investment
restriction with respect to diversification. Additionally, the Acquired Fund may invest 25% or more of its total assets in securities
of companies within industries in the financial sector. The Acquiring Fund does not make this representation.
Acquired
Fund |
Acquiring
Fund |
Differences |
|
The
Acquiring Fund may not, with respect to 75% of its total assets, invest more than 5% of its total assets in the securities
of a single issuer or purchase more than 10% of the outstanding voting securities of a single issuer, except obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and except securities of other investment companies. |
The
Acquired Fund does not have an equivalent fundamental restriction. |
The
Acquired Fund may not purchase any security if, as a result of the purchase, 25% or more of the Fund’s total assets
(taken at current value) would be invested in the securities of borrowers and other issuers having their principal business
activities in the same industry; provided, that this limitation shall not apply with respect to securities of companies within
industries in the financial sector or obligations issued or guaranteed by the U.S. government or by its agencies or instrumentalities. |
The
Acquiring Fund may not, with respect to 75% of its total assets, invest 25% or more of its total assets in any single
industry or group of industries (other than securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities).
|
The
Acquired Fund may invest 25% or more of its total assets in securities of companies within industries in the financial sector. |
The
Acquired Fund may not borrow money except as permitted by the 1940 Act, the rules thereunder and interpretations thereof or
pursuant to a Securities and Exchange Commission exemptive order. |
The
Acquiring Fund may not borrow money, except as permitted by the 1940 Act. The Fund may borrow money for investment purposes,
commonly referred to as leverage, and for extraordinary or emergency purposes, including the payment of dividends and the
settlement of securities transactions which otherwise might require untimely dispositions of Fund securities. The 1940 Act
currently requires that any indebtedness incurred by a closed-end investment company have an asset coverage of at least 300%.
The Fund may not pledge, mortgage, hypothecate or otherwise encumber its assets, except to secure permitted borrowings and
to implement collateral and similar arrangements incident to permitted investment practices. |
Substantially
similar. |
The
Acquired Fund may not issue senior securities, as defined in the 1940 Act, other than: (i) Preferred Shares which immediately
after issuance will have asset coverage of at least 200%; (ii) indebtedness which immediately after issuance will have asset
coverage of at least 300%; (iii) the borrowings permitted by investment restriction 2 above; or (iv) pursuant to a Securities
and Exchange Commission exemptive order. |
The
Acquiring Fund may not issue senior securities, as defined in the 1940 Act, other than (a) preferred shares which immediately
after issuance will have asset coverage of at least 200%, (b) indebtedness which immediately after issuance will have
asset coverage of at least 300% or (c) the borrowings permitted by investment restriction (1) above. |
Substantially
similar, except that the Acquired Fund also permits the issuance of senior securities if issued pursuant to a Securities and
Exchange Commission exemptive order. |
Acquired
Fund |
Acquiring
Fund |
Differences |
The
Acquired Fund may not make loans of funds or other assets, other than by entering into repurchase agreements, lending portfolio
securities and through the purchase of debt securities in accordance with its investment objectives, policies and limitations. |
The
Acquiring Fund may not make loans to other persons, except by (a) the acquisition of loan interests, debt securities
and other obligations in which the Fund is authorized to invest in accordance with its investment objectives and policies
and (b) entering into repurchase agreements. |
Substantially
similar. |
The
Acquired Fund may not act as underwriter of another issuer’s securities, except to the extent that the Fund may be deemed
to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio
securities. |
The
Acquiring Fund may not underwrite securities issued by other persons, except insofar as it may technically be deemed to be
an underwriter under the Securities Act in selling or disposing of a portfolio investment. |
Substantially
similar. |
The
Acquired Fund may not purchase or sell real estate, but this shall not prevent the Fund from investing in securities of companies
that deal in real estate or are engaged in the real estate business, including real estate investment trusts, and securities
secured by real estate or interests therein and the Fund may hold and sell real estate or mortgages on real estate acquired
through default, liquidation, or other distributions of an interest in real estate as a result of the Fund’s ownership
of such securities. |
The
Acquiring Fund may not purchase or sell real estate, although it may purchase and sell securities which are secured by interests
in real estate and securities of issuers which invest or deal in real estate. The Fund reserves the freedom of action to hold
and to sell real estate acquired as a result of the ownership of securities. |
Substantially
similar. |
The
Acquired Fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Fund from purchasing or selling options, futures contracts or derivative instruments
or from investing in securities or other instruments backed by physical commodities). |
The
Acquiring Fund may not Purchase or sell physical commodities or contracts for the purchase or sale of physical commodities.
Physical commodities do not include futures contracts with respect to securities, securities indices, currencies, interest
or other financial instruments. |
Substantially
similar. |
|
The
Acquiring Fund may not purchase securities on margin (but the Fund may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of securities). The purchase of investment assets with the proceeds of a permitted
borrowing or securities offering will not be deemed to be the purchase of securities on margin. |
The
Acquired Fund does not have a similar restriction. |
Rights
of Fund Shareholders
The
Acquired Fund was organized as a Massachusetts business trust on March 20, 2007. The Acquiring Fund was organized as a Delaware
statutory trust on October 27, 2006.
Summary of Certain Aspects of the Delaware
Control Share Statute
The
Acquiring Fund is subject to the control share acquisition statute (the “Control Share Statute”) contained in Subchapter
III of the Delaware Statutory Trust Act (the “DSTA”), which became automatically applicable to listed closed-end funds, such
as the Acquiring Fund. The Acquired Fund is not subject to this type of limitation as Massachusetts does not currently have a control
share statute applicable to Massachusetts business trusts. Accordingly, the Control Share Statute will have no impact on the Special
Meeting.
Following
the consummation of the Reorganization, the Combined Fund will be subject to the Control Share Statute. The Control Share Statute provides
for a series of voting power thresholds above which shares are considered “control beneficial interests” (referred to here
as “control shares”). Once a threshold is reached, an acquirer has no voting rights under the DSTA or the governing documents
of the Fund with respect to shares acquired in excess of that threshold (i.e., the “control shares”) unless approved by shareholders
of the Fund or exempted by the Board. The Control Share Statute provides procedures for an acquirer to request a shareholder meeting
for the purpose of considering whether voting rights shall be accorded to control shares.
Some
uncertainty around the general application under the 1940 Act of state control share statutes exists as a result of recent federal and
state court decisions that have found that certain control share by-laws adopted by Massachusetts business trusts violated the 1940 Act.
The
Acquired Fund is governed by its own Declaration of Trust and Amended and Restated By-laws. The Acquiring Fund is governed by
its own Agreement and Declaration of Trust and By-Laws. Copies of these documents are available to shareholders without charge
upon written request to the applicable Fund.
The
below table summarizes a number of provisions of the respective governing documents of the Acquired Fund and the Acquiring Fund, which
are in each case subject to any other applicable provision of the governing instruments of the relevant Fund and applicable law. The
governing instruments have certain similar provisions, however there are differences that might impact how each Fund is governed. There
are certain differences between the matters in which shareholders of the Funds have the right to vote, as highlighted below. Additionally,
the Funds are subject to different criteria regarding shareholder quorum and termination of the respective Trust (as defined subsequently).
The term “the Trust,” when used in the below table, refers to the applicable Fund.
|
Acquired
Fund |
Acquiring
Fund |
Voting
Rights |
Shareholders
shall not have the power to vote on any matter except: (i) for the election of Trustees under certain circumstances or the
removal of Trustees; (ii) with respect to a sale of assets or reorganization or similar transaction only if required applicable
law or as may be determined by the Trustees; (iii) with respect to the conversion of the Trust to an “open-end company”;
and (iv) with respect to such additional matters relating to the Trust as may be required by law, the Declaration of Trust
or as the Trustees may consider and determine necessary or desirable. |
Shareholders
shall have no power to vote on any matter except matters on which a vote of Shares is required by applicable law, the
Declaration of Trust or resolution of the Trustees. Any matter required to be submitted for approval of any of the Shares
and affecting one or more classes or series shall require approval by the required vote of Shares of the affected class
or classes and series voting together as a single class and, if such matter affects one or more classes or series thereof
differently from one or more other classes or series thereof or from one or more series of the same class, approval by
the required vote of Shares of such other class or classes or series or series voting as a separate class shall be required
in order to be approved with respect to such other class or classes or series or series; provided, however, that except
to the extent required by the 1940 Act, there shall be no separate class votes on the election or removal of Trustees
or the selection of auditors for the Trust. Shareholders of a particular class or series thereof shall not be entitled
to vote on any matter that affects the rights or interests of only one or more other classes or series of such other class
or classes or only one or more other series of the same class. There shall be no cumulative voting in the election or
removal of Trustees.
Subject
to any provision of applicable law, this Declaration or resolution of the Trustees specifying or requiring a greater or
lesser vote requirement for the transaction of any matter of business at any meeting of Shareholders, (i) the affirmative
vote of a plurality of the Shares entitled to vote for the election of any Trustee or Trustees shall be the act of such
Shareholders with respect to the election of such Trustee or Trustees, (ii) the affirmative vote of a majority of the
Shares present in person or represented by proxy and entitled to vote on any other matter shall be the act of the Shareholders
with respect to such matter, and (iii) where a separate vote of one or more classes or series is required on any matter,
the affirmative vote of a majority of the Shares of such class or classes or series or series present in person or represented
by proxy and entitled to vote on such matter shall be the act of the Shareholders of such class or classes or series or
series with respect to such matter.
|
|
Acquired
Fund |
Acquiring
Fund |
Shareholder
Quorum |
Thirty-three
and a third percent (33-1/3%) of the outstanding shares entitled to vote present in person or by proxy shall constitute a
quorum at any meeting of the shareholders. |
The
holders of a majority of the outstanding Shares of the Trust on the record date present in person or by proxy shall constitute
a quorum at any meeting of the Shareholders for purposes of conducting business on which a vote of all Shareholders of the
Trust is being taken. The holders of a majority of the outstanding Shares of a class or classes on the record date present
in person or by proxy shall constitute a quorum at any meeting of the Shareholders of such class or classes for purposes of
conducting business on which a vote of Shareholders of such class or classes is being taken. The holders of a majority of
the outstanding Shares of a series or series on the record date present in person or by proxy shall constitute a quorum at
any meeting of the Shareholders of such series or series for purposes of conducting business on which a vote of Shareholders
of such series or series is being taken. |
Election
of Trustees
|
A
plurality of shares voted at a meeting at which a quorum is present shall elect a Trustee, except in the case of a contested
election, where a majority of the outstanding shares entitled to vote is required. |
The
affirmative vote of a plurality of the Shares entitled to vote for the election of any Trustee or Trustees shall be the act
of such Shareholders with respect to the election of such Trustee or Trustees. |
Removal
of Trustees
|
Any
of the Trustees may be removed (i) by action of at least two-thirds of the outstanding shares, or (ii) by the action of
at least two-thirds of the remaining Trustees.
|
Any
Trustee may be removed (provided the aggregate number of Trustees after such removal shall not be less than the minimum
number required by Section 2.1 of the Declaration of Trust), for or without cause, at any time by a written instrument,
signed or adopted by two-thirds of the remaining Trustees, or by vote of Shares having not less than two-thirds of the
aggregate number of Shares entitled to vote in the election of such Trustee, specifying the date when such removal shall
become effective.
|
Approval
of a Consolidation or Reorganization |
In
the event that such a transaction is required by applicable law to be approved by shareholders of the Trust or otherwise determined
by the Trustees, such transaction shall require approval by the affirmative vote or consent of the holders of not less than
two-thirds of the outstanding shares of the Trust entitled to vote, provided, however, that if such merger, consolidation,
sale, lease or exchange has been previously approved by the affirmative vote of two-thirds of the Trustees, the vote of a
majority of the outstanding voting securities, as defined in the 1940 Act, is required. |
The
Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property or the property, including its goodwill, upon such terms and conditions
and for such consideration when and as authorized by two-thirds of the Trustees and approved by the affirmative vote of the
holders of not less than 75% of the affected Shares outstanding on the record date for the meeting of Shareholders to approve
such transaction, and any such merger, consolidation, sale, lease or exchange shall be determined for all purposes to have
been accomplished under and pursuant to the statutes of the State of Delaware. |
|
Acquired
Fund |
Acquiring
Fund |
Termination
of the Trust |
The
Trust may be terminated at any time by the Trustees by written notice to the shareholders of the Trust . |
The
Trust may be dissolved, after two thirds of the Trustees have approved a resolution therefor, upon approval by Shares having
at least 75% of the votes of all of the Shares outstanding on the record date for such meeting, voting as a single class,
except to the extent required by the 1940 Act. |
MANAGEMENT
OF THE FUNDS
The
Boards of the Funds
The
Board of each Fund is responsible for the overall supervision of the operations of the Fund and performs the various duties imposed
on the trustees of investment companies by the 1940 Act and under Delaware or Massachusetts law, as applicable.
The
Advisers of the Funds
First
Trust, located at 120 East Liberty Drive, Suite 400, Wheaton, IL 60187, serves as the investment adviser to the Acquired Fund
pursuant to an investment management agreement between the Acquired Fund and First Trust (the “Investment Management
Agreement”). In addition, First Trust is responsible for providing certain clerical, bookkeeping and other administrative
services to the Acquired Fund and also provides fund reporting services to the Acquired Fund for a flat annual fee. First Trust is
an investment adviser registered with the SEC under the Investment Advisers Act of 1940, as amended. First Trust is a limited
partnership with one limited partner, Grace Partners of DuPage L.P. (“Grace Partners”), and one general partner, The
Charger Corporation. Grace Partners is a limited partnership with one general partner, The Charger Corporation, and a number of
limited partners. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, the Chief Executive Officer of
First Trust and the sole Trustee of the Acquired Fund who is not an Independent Trustee. As of September 30, 2023, First Trust had
collective assets under management or supervision of approximately $195 billion through unit investment trusts, exchange-traded
funds, closed-end funds, mutual funds and separately managed accounts. Subject to the general supervision of the Acquired
Fund’s Board, and in accordance with the investment objective, policies, and restrictions of the Acquired Fund, First Trust is
responsible for the management and operation of the Acquired Fund and the investment of the Acquired Fund’s assets. First
Trust provides such services to the Acquired Fund pursuant to the Investment Management Agreement. The Investment Management
Agreement became effective for an initial two-year term and continues in effect from year to year provided such continuance is
specifically approved at least annually in the manner required by the 1940 Act. A discussion regarding the basis for the
Board’s renewal of the Investment Management Agreement is available in the Acquired Fund’s annual report to shareholders
for the period ended November 30, 2022. The Acquired Fund pays to First Trust an investment management fee in consideration of the
advisory and other services provided by First Trust to the Acquired Fund. Pursuant to the Investment Management Agreement, the
Acquired Fund has agreed to pay First Trust a management fee payable on a monthly basis at the annual rate of 1.00% of the Acquired
Fund’s Managed Assets. For purposes of this calculation, “Managed Assets” means the average daily gross asset
value of the Acquired Fund (including assets attributable to the Acquired Fund's Preferred Shares (as such term is defined in the
Acquired Fund's prospectus), if any, and the principal amount of borrowings, if any), minus the sum of the Acquired Fund's accrued
and unpaid dividends on any outstanding Preferred Shares and accrued liabilities (other than the principal amount of any borrowings
incurred, commercial paper or notes issued by the Acquired Fund). The Acquired Fund commenced investment operations on May 25,
2007.
CIM,
located at 20 Allen Avenue, Suite 300, Saint Louis, MO 63119, serves as the Acquired Fund’s sub-adviser and manages the
Acquired Fund’s portfolio subject to First Trust’s supervision.
abrdn
Investments Limited (“aIL”), a Scottish company, serves as the adviser to the Acquiring Fund. aIL’s registered
address is 10 Queen’s Terrace, Aberdeen, Aberdeenshire, United Kingdom, AB101XL. aIL is an indirect wholly-owned subsidiary
of abrdn plc, which manages or administers approximately $632.2 billion in assets as of June 30, 2023. The Acquiring Fund pays
aIL a monthly fee computed at the annual rate of 1.00% of the Acquiring Fund’s average daily Managed Assets. “Managed
Assets” is defined as total assets of the Fund, including any form of investment leverage, minus all accrued expenses incurred
in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained
through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt
securities), (ii) the issuance of preferred stock or other similar preference securities, (iii) the reinvestment of collateral
received for securities loaned in accordance with the Fund’s investment objectives and policies, and/or (iv) any other means.
The Acquiring Fund commenced operations on January 26, 2007.
aIL
has entered into a written contract (the “Amended and Restated Expense Limitation Agreement”) with the Acquiring Fund
that is effective through June 30, 2024. In connection with the Reorganization, the Amended and Restated Expense Limitation Agreement
shall be extended through one year from the date of the closing of the Reorganization, or June 30, 2025, whichever is later. The
Amended and Restated Expense Limitation Agreement limits the total ordinary operating expenses of the Acquiring Fund and following
the consummation of the Reorganization, the Combined Fund (excluding any leverage costs, interest, taxes, brokerage commissions,
and any non-routine expenses), from exceeding 1.14% of the average daily net assets of the Fund on an annualized basis.
aIL
may request and receive reimbursement from the Acquiring Fund or Combined Fund, as applicable, of the advisory fees waived and
other expenses reimbursed pursuant to the Amended and Restated Expense Limitation Agreement as of a date not more than three years
after the date when aIL limited the fees or reimbursed the expenses; provided that the following requirements are met: the reimbursements
do not cause the Fund to exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited
or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by aIL, and the
payment of such reimbursement is approved by the Fund Board on a quarterly basis. Except as provided for in the Amended and Restated
Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by aIL is not permitted.
Information
regarding the basis of the Board of the Acquiring Fund’s approval of the investment advisory agreement with aIL is available
in the Acquiring Fund’s annual shareholder report for the fiscal year ended October 31, 2022.
The
Advisory Agreement with aIL was effective for an initial term of two years and may be continued thereafter from year to year provided
such continuance is specifically approved at least annually in the manner required by the 1940 Act. The Advisory Agreement may
be terminated at any time without payment of penalty by the Acquiring Fund or by aIL upon 60 days’ written notice. The Advisory
Agreement will automatically terminate in the event of its assignment, as defined under the 1940 Act. Under the Advisory Agreement,
aIL is permitted to provide investment advisory services to other clients.
aIL
began managing the Acquiring Fund on May 7, 2018 pursuant to an Investment Advisory Agreement dated May 4, 2018. Prior to May
7, 2018, the Acquiring Fund was managed by another, unaffiliated investment adviser.
In
rendering investment advisory services to the Acquiring Fund, aIL may use the resources of subsidiaries owned by abrdn plc. The
abrdn plc affiliates have entered into a memorandum of understanding/personnel sharing procedures pursuant to which investment
professionals from the abrdn plc affiliates may render portfolio management, research and/or trade services to US clients of aIL.
Portfolio
Management of the Acquired Fund
The
portfolio managers having primary responsibility for the day-to-day management of the Acquired Fund’s portfolio are Mark
Keller, CFA, David Miyazaki, CFA, and Daniel Winter, CFA.
Listed
below is the biography for the member of the portfolio management team.
Mark
A. Keller, CFA – Chief Executive Officer and Chief Investment Officer
Mr.
Keller has over 30 years of investment experience with a focus on value-oriented equity analysis and management. From 1994 to
May 2008, he was the Chief Investment Officer of Gallatin Asset Management, Inc., and its predecessor organization, A.G. Edwards
Asset Management, the investment management arm of A.G. Edwards, Inc. From 1999 to 2008, Mr. Keller was Chairman of A.G. Edwards’
Investment Strategy Committee, which set investment policy and established asset allocation models for the entire organization.
Mr. Keller was a founding member of the A.G. Edwards Investment Strategy Committee, on which he served for over 20 years, the
last ten of which as Chairman of the Committee. Mr. Keller began his career with A.G. Edwards in 1978, serving as an equity analyst
for the firm’s Securities Research Department from 1979 to 1994. During his last five years in Securities Research, Mr.
Keller was Equity Strategist and manager of the firm’s Focus List. Mr. Keller was a Senior Vice President of A.G. Edwards
& Sons, Inc. and of Gallatin Asset Management, Inc., and was a member of the Board of Directors of both companies. Mr. Keller
received a Bachelor of Arts from Wheaton College (Illinois) and is a CFA charterholder.
David
B. Miyazaki, CFA – Senior Vice President and Portfolio Manager
Prior
to joining Confluence in May 2008, Mr. Miyazaki served as a Portfolio Manager and Analyst with Gallatin Asset Management, Inc.,
the investment management arm of A.G. Edwards, Inc. Mr. Miyazaki was responsible for equity investments in value-oriented separately
managed accounts. He also co-managed the A.G. Edwards’ ETF-based asset allocation program. In addition to portfolio management,
Mr. Miyazaki served as a member of the A.G. Edwards’ Investment Strategy Committee. As a strategist, he was responsible
for the firm’s quantitative asset allocation models, including its Cyclical Asset Allocation program. Prior to joining A.G.
Edwards in 1999, Mr. Miyazaki was a Portfolio Manager at Koch Industries in Wichita, Kansas. His previous experience includes
working as an Investment Analyst at Prudential Capital Group in Dallas, Texas, and as a Bond Trader at Barre & Company, also
in Dallas. Mr. Miyazaki received a Bachelor of Business Administration from Texas Christian University and is a CFA charterholder.
Daniel
T. Winter, CFA – Senior Vice President and Chief Investment Officer – Value Equity
Prior
to joining Confluence in May 2008, Mr. Winter served as a Portfolio Manager and Analyst with Gallatin Asset Management, Inc.,
the investment arm of A.G. Edwards, Inc. While at Gallatin, Mr. Winter chaired the portfolio management team responsible for the
firm’s six value-oriented equity strategies. His responsibilities also included directing the strategy implementation and
trading execution for the equity portfolios. Mr. Winter also served as a portfolio manager for the Cyclical Growth ETF Portfolio
and the Cyclical Growth and Income ETF Portfolio which were offered through variable annuities. He was also a member of the firm’s
Allocation Advisor Committee which oversaw the A.G. Edwards exchange-traded fund focused strategies. Prior to joining the firm’s
Asset Management division in 1996, Mr. Winter served as a portfolio manager for A.G. Edwards Trust Company. Mr. Winter earned
a Bachelor of Arts in business management from Eckerd College and a Master of Business Administration from Saint Louis University.
Mr. Winter is a CFA charterholder.
Portfolio
Management of the Acquiring Fund
The
Acquiring Fund is managed by abrdn’s Global Equity team, which is responsible for the Acquiring Fund’s public infrastructure
investments. The Global Equity team works in a truly collaborative fashion; all team members have both portfolio management and
research responsibilities. The team is responsible for the day-to-day management of the Acquiring Fund. As of the date of filing
this Proxy Statement/Prospectus, the following individuals have primary responsibility for the day-to-day management of the Acquiring
Fund’s portfolio:
Martin
Connaghan – Investment Director, Global Equities – Currently, an Investment Director on the Global Equity Team
at abrdn. Mr. Connaghan joined Murray Johnstone in 1998, which was subsequently acquired by abrdn in 2001. He has held a number
of roles, including Trader and ESG Analyst on the Global Equity Team; he also spent two years as a Portfolio Analyst on the Fixed
Income Team in London. He primarily focuses on global and global income mandates.
Josh
Duitz – Deputy Head of the Global Equities Team – Josh Duitz is Deputy Head of Global Equities and Head of Infrastructure
(public markets) at abrdn. He joined abrdn in 2018 from Alpine Woods Capital Investors LLC where he was a Portfolio Manager of
its Global Dynamic Dividend and Global Infrastructure strategies. The management contracts of the funds he managed at Alpine Woods
were acquired by abrdn in April 2018, which he continues to manage. Previously, Mr. Duitz worked for Bear Stearns where he was
a Managing Director, Principal and traded international equities. Prior to that, he worked for Arthur Andersen where he was a
senior auditor.
Ruairidh
Finlayson – Investment Director at abrdn – Mr. Finlayson joined the company in 2018 from Polar Capital Partners
where he worked as an Equity Analyst for the North America and Global Alpha funds. Previously, Mr. Finlayson worked as an Equity
Analyst for Brewin Dolphin after qualifying as a Chartered Accountant with Ernst & Young.
Other
Service Providers
The
other service providers for the Funds are as follows. The other service providers for the Acquiring Fund will be the service providers
to the Combined Fund.
|
Service
Providers to the Acquired Fund |
Service
Providers to the Acquiring Fund |
Administrator |
The
Bank of New York Mellon |
abrdn
Inc. |
Sub-Administrator |
N/A |
State
Street Bank and Trust Company |
Custodian |
The
Bank of New York Mellon |
State
Street Bank and Trust Company |
Transfer
Agent, Dividend
Paying
Agent and
Registrar |
Computershare,
Inc. |
Computershare
Trust Company, N.A. |
Fund
Accounting Services
Provider |
The
Bank of New York Mellon |
State
Street Bank and Trust Company |
Independent
Registered Public Accounting Firm |
Deloitte
& Touche LLP |
KPMG
LLP |
Fund
Counsel |
Chapman
and Cutler LLP |
Dechert
LLP |
Counsel
to the Independent
Trustees |
Vedder
Price P.C. |
Faegre
Drinker Biddle & Reath LLP |
Capitalization
The
table below sets forth the capitalization of the Acquired Fund and the Acquiring Fund as of September 29, 2023, and the pro
forma capitalization of the Combined Fund as if the Reorganization had occurred on that date. As shown below, it is anticipated
that the NAV of Acquiring Fund shareholders’ shares would remain the same and Acquiring Fund assets would increase.
| |
Acquired Fund | | |
Acquiring Fund | | |
Adjustments | | |
Pro
Forma Combined
Fund | |
Net Assets | |
$ | 57,434,116 | | |
$ | 927,237,048 | | |
| -- | | |
$ | 984,671,164 | |
Common Shares Outstanding(a) | |
| 14,367,591 | | |
| 105,430,999 | | |
| (7,833,562 | )(b) | |
| 111,965,028 | |
Net Asset Value Per Share | |
$ | 4.00 | | |
$ | 8.79 | | |
$ | (4.00 | )b) | |
$ | 8.79 | |
(a) |
Based on the number of outstanding common shares
as of September 29, 2023. |
(b) |
Reflects the exchange of Acquired Fund shares for
Acquiring Fund shares as a result of the Reorganization. |
AGREEMENT
BETWEEN FIRST TRUST ADVISORS L.P. AND ABRDN INC.
First
Trust and abrdn Inc. have entered into a separate agreement (the “Purchase Agreement”) pursuant to which abrdn Inc.
will acquire certain assets related to First Trust’s business of providing investment management services with respect to
the assets of the Acquired Fund and certain other registered investment companies (the “Business”) if the Reorganization
is approved, and upon satisfaction or waiver of certain other conditions. More specifically, under the Purchase Agreement, First
Trust has agreed to transfer to abrdn Inc., for a cash payment at the closing of the Asset Transfer (as defined below) and subject
to certain exceptions, (i) all right, title and interest of First Trust in and to the books and records relating to the Business
of the Acquired Fund and (ii) all goodwill of the Business as a going concern (the “Asset Transfer”).
Section
15(f) of the 1940 Act is a non-exclusive safe harbor provision that permits an investment adviser of a registered investment company
(or any affiliated persons of the investment adviser) to receive any amount or benefit in connection with a sale of securities
of, or a sale of any other interest in, the investment adviser that results in an “assignment” (as defined in the
1940 Act) of an investment advisory contract with such registered investment company, provided that two conditions are satisfied.
First, during the three-year period after such transaction, at least 75% of the members of the investment company’s board
of trustees may not be “interested persons” (as defined in the 1940 Act) of the investment adviser or its predecessor.
Second, an “unfair burden,” as the term is defined in Section 15(f), must not be imposed on such registered investment
company as a result of such transaction or any express or implied terms, conditions, or understandings relating to such transaction
during the two-year period after the date on which any such transaction occurs. The term “unfair burden,” as defined
in the 1940 Act, includes any arrangement during the two-year period after the sale whereby the investment adviser (or predecessor
or successor adviser), or any “interested person” of the adviser (as defined in the 1940 Act), receives or is entitled
to receive any compensation, directly or indirectly, from the investment company or its security holders (other than fees for
bona fide investment advisory or other services), or from any person in connection with the purchase or sale of securities or
other property to, from or on behalf of the investment company (other than ordinary fees for bona fide principal underwriting
services).
First
Trust intends to qualify for the “safe harbor” provided by Section 15(f), and consequently: (i) for a period of three
years after the Closing Date, at least 75% of the trustees of the Combined Fund will not be “interested persons” (as
defined in the 1940 Act) of abrdn Inc., aIL or First Trust, and (ii) for a period of two years after the Closing Date, no “unfair
burden,” as defined in the 1940 Act, will be imposed on the Combined Fund as a result of the Reorganization or any express
or implied terms, conditions, or understandings applicable thereto.
ADDITIONAL
INFORMATION ABOUT THE COMMON SHARES OF THE FUNDS
Description
of Common Shares to be Issued by the Acquiring Fund; Comparison to the Acquired Fund
General.
Both Funds offer one class of shares: common shares. As a general matter, with respect to the Acquiring Fund and the Acquired
Fund, the common shares have equal voting rights and equal rights with respect to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up of the affairs of their respective Fund and have no preemptive, conversion
or exchange rights or rights to cumulative voting. Holders of whole common shares of each Fund are entitled to one vote per share
on any matter on which the shares are entitled to vote, while each fractional share is entitled to a proportional fractional vote.
The
Acquiring Fund’s Agreement and Declaration of Trust authorizes an unlimited number of transferable shares, no par value.
If the Reorganization is consummated, the Acquiring Fund will issue common shares to the shareholders of common shares of the
Acquired Fund based on the relative per share NAV of the Acquiring Fund and the NAV of the assets of the Acquired Fund, in each
case as of the date of the Reorganization. The Acquiring Fund common shares, when issued, will be fully paid and non-assessable.
Preferred
Shares and Other Securities. Currently, neither the Acquired Fund nor the Acquiring Fund have issued preferred shares.
Under
the Acquired Fund’s Declaration of Trust, the Board of the Acquired Fund may authorize the issuance of preferred shares
and debt instruments as provided therein.
The
Acquiring Fund’s Declaration of Trust provides that the Board of the Fund may, subject to the fundamental policies of the
Fund and the requirements of the 1940 Act, authorize and issue such other securities (or series thereof) of the Fund as they determine
to be necessary, desirable or appropriate, having such terms, rights, preferences, privileges, limitations and restrictions as
the Trustees see fit, including preferred shares of beneficial interest, debt securities or other senior securities.
Under
the requirements of the 1940 Act, the Acquiring Fund must, immediately after the issuance of any preferred shares, have an “asset
coverage” of at least 200%. Asset coverage means the ratio by which the value of the total assets of the Acquiring Fund,
less all liabilities and indebtedness not represented by senior securities (as defined in the 1940 Act), bears to the aggregate
amount of senior securities representing indebtedness of the Acquiring Fund, if any, plus the aggregate liquidation preference
of the preferred shares.
The
1940 Act requires, among other things, that (i) immediately after issuance of preferred shares and before any distribution is
made with respect to the shares and before any purchase of shares is made, the aggregate involuntary liquidation preference of
such preferred shares together with the aggregate involuntary liquidation preference or aggregate value of all other senior securities
must not exceed an amount equal to 50% of the Acquiring Fund’s total assets after deducting the amount of such distribution
or purchase price, as the case may be; and (ii) the holders of preferred shares, if any are issued, must be entitled as a class
to elect two Trustees at all times and to elect a majority of the Trustees if distributions on such preferred shares are in arrears
by two years or more. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding
preferred shares.
The
rights of any existing or future lenders to receive payments of interest on and repayments of principal of any borrowings under
any credit agreements in which the Acquiring Fund has entered or may enter are or will be senior to the rights of holders of preferred
shares with respect to the payment of dividends and other distributions and upon liquidation. Under such borrowing programs, the
Acquiring Fund would not be permitted to declare dividends and other distributions with respect to preferred phares or redeem
preferred shares unless, at such time, the Acquiring Fund met certain asset coverage requirements and no event of default or other
circumstance existed under the credit agreement that would limit or otherwise block payments on the preferred shares.
Immediately
after the issuance of any preferred shares, the preferred shares will rank equally with all the Acquiring Fund’s other preferred
shares that might be issued in the future as to payment of dividends and the distribution of Fund assets upon dissolution, liquidation
or winding-up of the Acquiring Fund’s affairs. Any preferred shares that the Acquiring Fund may issue in the future will
be, senior as to dividends and distributions to the Acquiring Fund’s common shares.
Distributions.
The Funds have different dividend policies with respect to the payment of dividends on their shares. Distributions of
investment company taxable income for the Acquiring Fund are declared and paid on a monthly basis, whereas distributions of investment
company taxable income for the Acquired Fund are declared and paid on a quarterly basis. Capital gains distributions, if any,
are paid at least annually by both Funds.
Outstanding
Common Shares as of the Record Date
| | |
| Outstanding
Shares | |
Acquired
Fund | | |
| 14,367,111 | |
Acquiring
Fund | | |
| 105,430,999 | |
Purchase
and Sale
Each
Fund’s common shares are listed on the NYSE. The common shares of the Acquiring Fund are listed on the NYSE under the ticker
symbol “AOD” and will continue to be so listed following the Reorganization. The common shares of the Acquired Fund
are listed on the NYSE under the ticker symbol “FGB” and would be delisted from the NYSE following the Reorganization.
Purchase
and sale procedures for the common shares of each of the Funds are similar. Investors typically purchase and sell common shares
of the Funds through a registered broker-dealer on the NYSE, thereby incurring a brokerage commission set by the broker-dealer.
Alternatively, investors may purchase or sell common shares of the Funds through privately negotiated transactions with existing
shareholders.
Share
Price Data
The
Funds’ common shares have traded both at a premium and at a discount to the Funds’ NAV per common share. There can
be no assurance that the Funds’ common shares will not trade at a discount in the future. Shares of closed-end investment
companies frequently trade at a discount to NAV. It is not possible to state whether Combined Fund shares will trade at a discount
or premium to NAV, or what the extent of any such discount or premium might be.
The
following table sets forth for the fiscal quarters indicated the highest and lowest daily prices during the applicable quarter
at the close of market on the NYSE per common share along with (i) the net asset value calculated on the day of the highest and
lowest closing market prices at the close of the market on the NYSE and (ii) the highest and lowest premium or discount from
NAV represented by such prices at the close of the market on the NYSE.
Acquired
Fund
| |
Market
Price ($)(1) | | |
NAV
($)(2) | | |
Premium/discount
to NAV (%)(3) | |
Quarter Ended | |
High | | |
Low | | |
High | | |
Low | | |
High | | |
Low | |
November 30, 2023 | |
| 3.44 | | |
| 3.00 | | |
| 4.00 | | |
| 3.71 | | |
| -14.00 | | |
| -19.14 | |
August 31, 2023 | |
| 3.48 | | |
| 2.97 | | |
| 4.07 | | |
| 3.55 | | |
| -14.50 | | |
| -16.34 | |
May 31, 2023 | |
| 3.43 | | |
| 2.84 | | |
| 3.82 | | |
| 3.38 | | |
| -10.21 | | |
| -15.98 | |
Feb 28, 2023 | |
| 3.44 | | |
| 3.02 | | |
| 3.90 | | |
| 3.52 | | |
| -11.79 | | |
| -14.20 | |
November 30, 2022 | |
| 3.60 | | |
| 2.80 | | |
| 3.77 | | |
| 3.30 | | |
| -4.51 | | |
| -15.15 | |
August 31, 2022 | |
| 3.77 | | |
| 3.06 | | |
| 4.17 | | |
| 3.54 | | |
| -9.59 | | |
| -13.56 | |
May 31, 2022 | |
| 4.24 | | |
| 3.38 | | |
| 4.60 | | |
| 3.81 | | |
| -7.83 | | |
| -11.29 | |
February 28, 2022 | |
| 4.18 | | |
| 3.83 | | |
| 4.51 | | |
| 4.27 | | |
| -7.32 | | |
| -10.30 | |
November 30, 2021 | |
| 4.26 | | |
| 3.88 | | |
| 4.61 | | |
| 4.21 | | |
| -7.59 | | |
| -7.84 | |
August 31, 2021 | |
| 4.36 | | |
| 3.99 | | |
| 4.34 | | |
| 4.21 | | |
| 0.46 | | |
| -5.23 | |
May 31, 2021 | |
| 4.26 | | |
| 3.69 | | |
| 4.28 | | |
| 3.90 | | |
| -0.47 | | |
| -5.38 | |
(1)
Based on high and low closing market price for the respective quarter.
(2)
Based on the net asset value calculated on the day of the high and low closing market prices, as applicable, as of the close of
regular trading on the NYSE (normally 4:00 p.m. eastern time).
(3)
Calculated based on the information presented.
Acquiring
Fund
| | |
Market Price ($)(1) | | |
NAV ($)(2) | | |
Premium/discount to NAV (%)(3) | |
Quarter Ended | | |
High | | |
Low | | |
High | | |
Low | | |
High | | |
Low | |
October 31, 2023 | | |
8.33 | | |
7.02 | | |
9.63 | | |
8.47 | | |
-13.50 | | |
-17.12 | |
July 31, 2023 | | |
| 8.41 | | |
| 7.91 | | |
| 9.70 | | |
| 9.19 | | |
| -13.30 | | |
| -14.21 | |
April 30, 2023 | | |
| 8.54 | | |
| 7.69 | | |
| 9.72 | | |
| 8.99 | | |
| -12.14 | | |
| -14.46 | |
January 31, 2023 | | |
| 8.41 | | |
| 7.35 | | |
| 9.60 | | |
| 8.42 | | |
| -11.57 | | |
| -12.71 | |
October 31, 2022 | | |
| 8.67 | | |
| 7.00 | | |
| 9.81 | | |
| 8.09 | | |
| -11.62 | | |
| -13.79 | |
July 31, 2022 | | |
| 9.02 | | |
| 7.91 | | |
| 10.13 | | |
| 8.99 | | |
| -10.96 | | |
| -13.17 | |
April 30, 2022 | | |
| 10.09 | | |
| 8.84 | | |
| 11.01 | | |
| 9.84 | | |
| -8.36 | | |
| -11.51 | |
January 31, 2022 | | |
| 10.45 | | |
| 9.59 | | |
| 11.26 | | |
| 10.59 | | |
| -7.19 | | |
| -9.70 | |
October 31, 2021 | | |
| 10.49 | | |
| 9.69 | | |
| 11.28 | | |
| 10.53 | | |
| -7.00 | | |
| -7.98 | |
July 31, 2021 | | |
| 10.40 | | |
| 9.62 | | |
| 11.30 | | |
| 10.87 | | |
| 7.64 | | |
| -11.50 | |
April 30, 3021 | | |
| 9.81 | | |
| 9.01 | | |
| 11.07 | | |
| 10.26 | | |
| -11.38 | | |
| -13.11 | |
(1)
Based on high and low closing market price for the respective quarter.
(2)
Based on the net asset value calculated on the day of the high and low closing market prices, as applicable, as of the close of
regular trading on the NYSE (normally 4:00 p.m. eastern time).
(3)
Calculated based on the information presented.
On
December 6, 2023, the Acquired Fund’s NAV per share was $3.91 and the last reported sale price of a common share
on the NYSE was $3.30, representing a discount to NAV of 15.60%. On November 30, 2023, the
Acquiring Fund’s NAV per share was $9.19 and the last reported sale price of a common share on the NYSE was $7.82, representing
a discount to NAV of 14.90%.
Performance
Information
The
performance table below illustrates the past performance of an investment in shares of the Acquired Fund and Acquiring Fund by
setting forth the average total returns for the Acquired Fund for the fiscal year ended November 30, 2022, and for the Acquiring
Fund for the fiscal year ended October 31, 2022. A Fund’s past performance does not necessarily indicate how its shares
will perform in the future and the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares
is not reflected in the below.
| | |
| Average
Annual Total Return on NAV | | |
| Average
Annual Total Return on Market Value | | |
|
| | |
| Ten
Years | | |
| Five
Years | | |
| One
Year | | |
| Since
Inception | | |
| Ten
Years | | |
| Five
Years | | |
| One
Year | | |
| Since
Inception | | |
Inception
Date |
Acquired
Fund | | |
| 2.55 | % | |
| -0.50 | % | |
| -5.60 | % | |
| -0.04 | % | |
| 1.59 | % | |
| -1.70 | % | |
| -4.39 | % | |
| -0.77 | % | |
May
25, 2007 |
Acquiring
Fund | | |
| 7.89 | % | |
| 5.19 | % | |
| -15.15 | % | |
| 1.81 | % | |
| 7.36 | % | |
| 4.35 | % | |
| -19.25 | % | |
| 0.62 | % | |
January
26, 2007 |
For
the Acquired Fund, Total Return is based on the combination of reinvested dividend, capital gain, and return of capital distributions,
if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common
Share Price for market value returns. Total Returns do not reflect sales load and are not annualized for periods of less than
one year. Past performance is not indicative of future results.
For
the Acquiring Fund, Average Annual Total Return on NAV is the combination of changes in common share NAV, reinvested dividend
income at NAV and reinvested capital gains distributions at NAV, if any. The last dividend declared in the period is assumed to
be reinvested at the ending NAV. The actual reinvestment price for the last dividend declared in the period may often be based
on a Fund’s market price (and not its NAV), and therefore may be different from the price used in the calculation. Average
Annual Total Return on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend
income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The
last dividend declared in the period is assumed to be reinvested at the ending market price. The actual reinvestment for the last
dividend declared in the period may take place over several days, and in some instances it may not be based on the market price,
so the actual reinvestment price may be different from the price used in the calculation.
NET
ASSET VALUE OF COMMON SHARES OF THE ACQUIRING FUND
Common
shares of the Acquiring Fund are listed on the NYSE. The NAV of the common shares of the Acquiring Fund is computed based upon
the value of the Fund’s total assets. NAV is generally determined daily by the Acquiring Fund’s custodian as of the
close of the regular trading session on each day that the NYSE is open for business. The NAV of the common shares of the Acquiring
Fund is determined by calculating the total value of the Fund’s assets (the value of the securities, plus cash or other
assets, including interest accrued but not yet received), deducting its total liabilities (including accrued expenses or dividends),
and dividing the result by the number of common shares outstanding of the Fund. The Acquiring Fund reserves the right to calculate
the NAV more frequently if deemed desirable.
The
Acquiring Fund values its securities at current market value or fair value, consistent with regulatory requirements. Equity securities
that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded
at the “Valuation Time”, subject to application, when appropriate, of the valuation factors described in the paragraph
below. Under normal circumstances, the Valuation Time is as of the close of regular trading on the NYSE (usually 4:00pm ET). In
the absence of a sale price, the security is valued at the mean of the bid/ask quoted at the close on the principal exchange on
which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Open end mutual funds
are valued at the respective NAV as reported by such company. The prospectuses for the registered open-end management investment
companies in which the Fund invests explain the circumstances under which those companies will use fair value pricing and the
effects of using fair value pricing. Closed-end funds and ETFs are valued at the market price of the security at the Valuation
Time.
Foreign
equity securities that are traded on foreign exchanges that close prior to the Valuation Time are valued by applying valuation
factors to the last sale price or the mean price as noted above. Valuation factors are provided by an independent pricing service
provider. These valuation factors are used when pricing the Fund’s portfolio holdings to estimate market movements between
the time foreign markets close and the time the Fund values such foreign securities. These valuation factors are based on inputs
such as depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices
of each security. When prices with the application of valuation factors are utilized, the value assigned to the foreign securities
may not be the same as quoted or published prices of the securities on their primary markets. Valuation factors are not utilized
if the independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined
confidence threshold.
Derivative
instruments are generally valued according to the following procedures. Forward currency exchange contracts are generally valued
based on the current spot exchange rates and the forward exchange rate points (ex. 1-month, 3-month) that are obtained from an
approved pricing agent. Based on the actual settlement dates of the forward contracts held, an interpolated value of the forward
points is combined with the spot exchange rate to derive the valuation. Futures contracts are generally valued at the most recent
settlement price as of NAV determination. Swap agreements are generally valued by an approved pricing agent based on the terms
of the swap agreement (including future cash flows). When market quotations or exchange rates are not readily available, or if
the Adviser concludes that such market quotations do not accurately reflect fair value, the fair value of a Fund’s assets
are determined in good faith in accordance with the Valuation Procedures.
Pursuant
to Rule 2a-5 under the 1940 Act, the Acquiring Fund Board designated aIL as the valuation designee ("Valuation Designee")
for the Acquiring Fund to perform the fair value determinations relating to Acquiring Fund investments for which market quotations
are not readily available. In the event that a security’s market quotations are not readily available or are deemed unreliable
(for reasons other than because the foreign exchange on which it trades closed before the Valuation Time), the security is valued
at fair value as determined by the Valuation Designee, taking into account the relevant factors and surrounding circumstances
using valuation policies and procedures approved by the Acquiring Fund’s Board of Trustees.
If
events materially affecting the price of foreign portfolio securities occur between the time when their price was last determined
on such foreign securities exchange or market and the time when the Acquiring Fund’s NAV was last calculated (for example,
movements in certain US securities indices which demonstrate strong correlation to movements in certain foreign securities markets),
such securities may be valued at their fair value as determined in good faith in accordance with procedures established by the
Board. For purposes of calculating NAV, all assets and liabilities initially expressed in foreign currencies will be converted
into US dollars at the mean of the bid price and ask price of such currencies against the US dollar, as quoted by a major bank.
When
an Acquiring Fund common shareholder sells common shares, he or she will typically receive the market price for such common shares,
which may be less than the NAV of such common shares.
DIVIDEND
REINVESTMENT AND OPTIONAL CASH PURCHASE PLAN
The
dividend reinvestment plan (the “Plan”) of the Acquiring Fund, described below, will be the dividend reinvestment
plan of the Combined Fund.
The
Acquiring Fund intends to distribute to shareholders substantially all of its net investment income and to distribute any net
realized capital gains at least annually. Net investment income for this purpose is income other than net realized long-term and
short-term capital gains net of expenses. Pursuant to the Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”),
shareholders whose shares of common stock are registered in their own names will be deemed to have elected to have all distributions
automatically reinvested by Computershare Trust Company N.A. (the “Plan Agent” or “Computershare”) in
the Acquiring Fund shares pursuant to the Plan, unless such shareholders elect to receive distributions in cash. Shareholders
who elect to receive distributions in cash will receive such distributions paid by check in US dollars mailed directly to the
shareholder by the Plan Agent, as dividend paying agent. In the case of shareholders such as banks, brokers or nominees that hold
shares for others who are beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified
from time to time by the shareholders as representing the total amount registered in such shareholders’ names and held for
the account of beneficial owners that have not elected to receive distributions in cash. Investors that own shares registered
in the name of a bank, broker or other nominee should consult with such nominee as to participation in the Plan through such nominee
and may be required to have their shares registered in their own names in order to participate in the Plan. Please note that the
Acquiring Fund does not issue certificates so all shares will be registered in book entry form. The Plan Agent serves as agent
for the shareholders in administering the Plan. If the Trustees of the Acquiring Fund declare an income dividend or a capital
gains distribution payable either in the Acquiring Fund’s common stock or in cash, nonparticipants in the Plan will receive
cash and participants in the Plan will receive common stock, to be issued by the Acquiring Fund or purchased by the Plan Agent
in the open market, as provided below. If the market price per share (plus expected per share fees) on the valuation date equals
or exceeds NAV per share on that date, the Acquiring Fund will issue new shares to participants at NAV; provided, however, that
if the NAV is less than 95% of the market price on the valuation date, then such shares will be issued at 95% of the market price.
The valuation date will be the payable date for such distribution or dividend or, if that date is not a trading day on the NYSE,
the immediately preceding trading date. If NAV exceeds the market price of Acquiring Fund shares at such time, or if the Acquiring
Fund should declare an income dividend or capital gains distribution payable only in cash, the Plan Agent will, as agent for the
participants, buy Acquiring Fund shares in the open market, on the NYSE or elsewhere, for the participants’ accounts on,
or shortly after, the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the NAV of
an Acquiring Fund share, the average per share purchase price paid by the Plan Agent may exceed the NAV of the Acquiring Fund’s
shares, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Acquiring
Fund on the dividend payment date. Because of the foregoing difficulty with respect to open-market purchases, the Plan provides
that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if
the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases
and will receive the uninvested portion of the dividend amount in newly issued shares at the close of business on the last purchase
date.
Participants
have the option of making additional cash payments of a minimum of $50 per investment (by check, one-time online bank debit or
recurring automatic monthly ACH debit) to the Plan Agent for investment in the Acquiring Fund’s common stock, with an annual
maximum contribution of $250,000. The Plan Agent will wait up to three business days after receipt of a check or electronic funds
transfer to ensure it receives good funds. Following confirmation of receipt of good funds, the Plan Agent will use all such funds
received from participants to purchase Acquiring Fund shares in the open market on the 25th day of each month or the
next trading day if the 25th is not a trading day.
If
the participant sets up recurring automatic monthly ACH debits, funds will be withdrawn from his or her US bank account on the
20th of each month or the next business day if the 20th is not a banking business day and invested on the
next investment date. The Plan Agent maintains all shareholder accounts in the Plan and furnishes written confirmations of all
transactions in an account, including information needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the participant, and each shareholder’s proxy will include
those shares purchased pursuant to the Plan. There will be no brokerage charges with respect to common shares issued directly
by the Acquiring Fund. However, each participant will pay a per share fee of $0.02 incurred with respect to the Plan Agent’s
open market purchases in connection with the reinvestment of dividends, capital gains distributions and voluntary cash payments
made by the participant. Per share fees include any applicable brokerage commissions the Plan Agent is required to pay.
Participants
also have the option of selling their shares through the Plan. The Plan supports two types of sales orders. Batch order sales
are submitted on each market day and will be grouped with other sale requests to be sold. The price will be the average sale price
obtained by Computershare’s broker, net of fees, for each batch order and will be sold generally within 2 business days
of the request during regular open market hours. Please note that all written sales requests are always processed by Batch Order.
($10 and $0.12 per share). Market Order sales will sell at the next available trade. The shares are sold real time when they hit
the market, however an available trade must be presented to complete this transaction. Market Order sales may only be requested
by phone at 1-800-647-0584 or using Investor Center through www.computershare.com/buyaberdeen. ($25 and $0.12 per share).
The
receipt of dividends and distributions under the Plan will not relieve participants of any income tax that may be payable on such
dividends or distributions. The Acquiring Fund or the Plan Agent may terminate the Plan as applied to any voluntary cash payments
made and any dividend or distribution paid subsequent to notice of the termination sent to members of the Plan at least 30 days
prior to the record date for such dividend or distribution. The Plan also may be amended by the Acquiring Fund or the Plan Agent,
but (except when necessary or appropriate to comply with applicable law or the rules or policies of the SEC or any other regulatory
authority) only by mailing a written notice at least 30 days’ prior to the effective date to the participants in the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent by phone at 1-800-647-0584, using Investor Center
through www.computershare.com/buyaberdeen or in writing to Computershare Trust Company N.A., P.O. Box 43006, Providence, RI 02940-3078.
ANTI-TAKEOVER
AND CERTAIN PROVISIONS OF THE ACQUIRING FUND’S AGREEMENT AND DECLARATION OF TRUST AND BY-LAWS
The
Agreement and Declaration of Trust and By-Laws of the Acquiring Fund contain provisions, which are described below in this section,
that could have the effect of limiting (i) the ability of other entities or persons to acquire control of the Acquiring Fund;
(ii) the Acquiring Fund’s freedom to engage in certain transactions or (iii) the ability of the Acquiring Fund’s
trustees or shareholders to amend the Agreement and Declaration of Trust and By-Laws or effectuate changes in the Acquiring Fund’s
management. These provisions of the Agreement and Declaration of Trust and By-Laws of the Acquiring Fund may be regarded as “anti-takeover”
provisions.
The
Board of the Acquiring Fund is divided into three (3) classes, with the terms of one (1) class expiring at each annual
meeting of shareholders or special meeting in lieu thereof. At each annual meeting, one class of trustees is elected to a three-year
term. This provision could delay for up to two (2) years the replacement of a majority of the Board of the Acquiring Fund.
A Trustee may be removed from office without cause only by a written instrument signed or adopted by two-thirds of the remaining
Trustees or by a vote of the holders of at least two-thirds of the class of shares of the Acquiring Fund that are entitled to
elect a Trustee and that are entitled to vote on the matter.
In
addition, the Declaration of Trust requires the favorable vote of the holders of at least 80% of the outstanding shares of each
class of the Acquiring Fund, voting as a class, then entitled to vote to approve, adopt or authorize certain transactions with
5%-or-greater holders of the Acquiring Fund’s outstanding shares and their affiliates or associates, unless two-thirds of
the Board of Trustees have approved by resolution a memorandum of understanding with such holders, in which case normal voting
requirements would be in effect. For purposes of these provisions, a 5%-or-greater holder of outstanding shares (a “Principal
Shareholder”) refers to any person who, whether directly or indirectly and whether alone or together with its affiliates
and associates, beneficially owns 5% or more of the outstanding shares of beneficial interest of the Acquiring Fund. The transactions
subject to these special approval requirements are: (i) the merger or consolidation of the Acquiring Fund or any subsidiary
of the Acquiring Fund with or into any Principal Shareholder; (ii) the issuance of any securities of the Acquiring Fund to
any Principal Shareholder for cash (other than pursuant to any automatic dividend reinvestment plan or pursuant to any offering
in which such Principal Shareholder acquires securities that represent no greater a percentage of any class or series of securities
being offered than the percentage of any class of shares beneficially owned by such Principal Shareholder immediately prior to
such offering or, in the case of securities, offered in respect of another class or series, the percentage of such other class
or series beneficially owned by such Principal Shareholder immediately prior to such offering); (iii) the sale, lease or
exchange of all or any substantial part of the assets of the Acquiring Fund to any Principal Shareholder (except assets having
an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased
or exchanged in any series of similar transactions within a twelve-month period); (iv) the sale, lease or exchange to the
Acquiring Fund or any subsidiary thereof, in exchange for securities of the Acquiring Fund, of any assets of any Principal Shareholder
(except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation
all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period); or (v) the purchase
by the Acquiring Fund, or any entity controlled by the Acquiring Fund, of any common shares from any Principal Shareholder or
any person to whom any Principal Shareholder transferred common shares.
The
overall effect of these provisions is to render more difficult the accomplishment of a merger or the assumption of control by
a third party. These provisions also provide, however, the advantage of potentially requiring persons seeking control of the Acquiring
Fund to negotiate with its management regarding the price to be paid and facilitating the continuity of the Fund’s investment
objectives and policies. The provisions of the Agreement and Declaration of Trust and By-Laws described above could have the effect
of discouraging a third party from seeking to obtain control of the Acquiring Fund in a tender offer or similar transaction.
The
Board of the Acquiring Fund has determined that provisions with respect to the Board of the Acquiring Fund and the shareholder
voting requirements are in the best interests of the shareholders generally. Reference should be made to the Agreement and Declaration
of Trust on file with the SEC for the full text of these provisions.
The
Agreement and Declaration of Trust provides that the Acquiring Fund will fully indemnify (except in the case of certain disabling
conduct) each of its trustees, officers and employees, and any investment adviser or sub-adviser in connection with their service
with the Acquiring Fund. The Agreement and Declaration of Trust also provides for advancement of expenses (including counsel fees)
to such indemnified persons subject to certain conditions set forth in the Agreement and Declaration of Trust.
APPRAISAL
RIGHTS
Shareholders
of the Acquired Fund and the Acquiring Fund do not have appraisal rights in connection with the proposed transactions.
FINANCIAL
HIGHLIGHTS
The
Acquired Fund
The
information for the six months ended May 31, 2023, is unaudited. The information for the other periods shown has been audited by Deloitte
& Touche LLP, the Acquired Fund’s independent registered public accounting firm, unless identified as unaudited. Financial
statements for the fiscal year ended November 30, 2022, and the Report of the Independent Registered Public Accounting Firm thereon appear
in the Acquired Fund’s Annual Report for the fiscal year ended November 30, 2022, which is available at https://www.ftportfolios.com
and upon request.
| |
| Six
Months | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| Ended
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 5/31/2023
| | |
Year
Ended November 30, | |
| |
| (Unaudited) | | |
| 2022 | | |
| 2021 | | |
| 2020 | | |
| 2019 | | |
| 2018 | |
Net asset
value, beginning of period | |
$ | 3.73 | | |
$ | 4.33 | | |
$ | 3.44 | | |
$ | 5.92 | | |
$ | 5.78 | | |
$ | 6.42 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Income
from investment operations: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income
(loss) | |
| 0.18 | | |
| 0.26 | | |
| 0.26 | | |
| 0.33 | | |
| 0.58 | | |
| 0.66 | |
Net
realized and unrealized gain (loss) | |
| (0.23 | ) | |
| (0.53 | ) | |
| 0.96 | | |
| (2.37 | ) | |
| 0.22 | | |
| (0.60 | ) |
Total
from investment operations | |
| (0.05 | ) | |
| (0.27 | ) | |
| 1.22 | | |
| (2.04 | ) | |
| 0.80 | | |
| 0.06 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Distributions
paid to shareholders from: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income | |
| (0.17 | ) | |
| (0.28 | ) | |
| (0.30 | ) | |
| (0.44 | ) | |
| (0.40 | ) | |
| (0.63 | ) |
Return of capital | |
| — | | |
| (0.05 | ) | |
| (0.03 | ) | |
| | | |
| (0.26 | ) | |
| (0.07 | ) |
Total
distributions paid to Common Shareholders | |
| (0.17 | ) | |
| (0.33 | ) | |
| (0.33 | ) | |
| (0.44 | ) | |
| (0.66 | ) | |
| (0.70 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net asset value,
end of period | |
$ | 3.51 | | |
$ | 3.73 | | |
$ | 4.33 | | |
$ | 3.44 | | |
$ | 5.92 | | |
$ | 5.78 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Market value, end
of period | |
$ | 2.95 | | |
$ | 3.49 | | |
$ | 4.00 | | |
$ | 3.28 | | |
$ | 5.90 | | |
$ | 6.07 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
return based on net asset value(a) | |
| (0.96 | )% | |
| (5.60 | )% | |
| 36.49 | % | |
| (34.67 | )% | |
| 14.58 | % | |
| 1.09 | % |
Total
return based on market value(a) | |
| (11.04 | )% | |
| (4.39 | )% | |
| 32.23 | % | |
| (37.49 | )% | |
| 8.74 | % | |
| 6.83 | % |
Ratios
to average net assets/supplemental data: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net assets, end of period
(in 000’s) | |
$ | 50,420 | | |
$ | 53,604 | | |
$ | 62,197 | | |
$ | 49,437 | | |
$ | 85,054 | | |
$ | 82,960 | |
Ratio of total expenses
to average net assets | |
| 2.71 | %(b) | |
| 2.02 | % | |
| 1.78 | % | |
| 2.35 | % | |
| 2.56 | % | |
| 2.38 | % |
Ratio of total expenses
to average net assets excluding interest expense | |
| 1.59 | %(b) | |
| 1.53 | % | |
| 1.49 | % | |
| 1.78 | % | |
| 1.60 | % | |
| 1.58 | % |
Ratio of net investment
income (loss) to average net assets | |
| 9.84 | %(b) | |
| 6.44 | % | |
| 6.35 | % | |
| 8.87 | % | |
| 9.95 | % | |
| 10.79 | % |
Portfolio turnover rate | |
| 7 | % | |
| 5 | % | |
| 8 | % | |
| 20 | % | |
| 7 | % | |
| 12 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Indebtedness: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total loan outstanding
(in 000’s) | |
$ | 8,600 | | |
$ | 8,600 | | |
$ | 8,600 | | |
$ | 6,500 | | |
$ | 25,000 | | |
$ | 25,000 | |
Asset coverage per $1,000 of indebtedness(c) | |
$ | 6,863 | | |
$ | 7,233 | | |
$ | 8,232 | | |
$ | 8,606 | | |
$ | 4,402 | | |
$ | 4,318 | |
| (a) | Total
return is based on the combination of reinvested dividend, capital gain and return of
capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan,
and changes in net asset value per share for net asset value returns and changes in Common
Share Price for market value returns. Total returns do not reflect sales load and are
not annualized for periods of less than one year. Past performance is not indicative
of future results. |
| (c) | Calculated
by subtracting the Fund’s total liabilities (not including the loan outstanding)
from the Fund’s total assets, and dividing by the outstanding loan balance in 000’s. |
| |
Year
Ended November 30, | |
| |
2017 | | |
2016 | | |
2015 | | |
2014 | | |
2013 | |
Net asset value, beginning of period | |
$ | 6.82 | | |
$ | 6.54 | | |
$ | 7.72 | | |
$ | 8.61 | | |
$ | 7.85 | |
Income from investment operations: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income (loss) | |
| 0.54 | | |
| 0.66 | | |
| 0.64 | | |
| 0.65 | | |
| 0.62 | |
Net realized and unrealized gain (loss) | |
| (0.24 | ) | |
| 0.32 | | |
| (1.12 | )(a) | |
| (0.85 | ) | |
| 0.81 | |
Total from investment operations | |
| 0.30 | | |
| 0.98 | | |
| (0.48 | ) | |
| (0.20 | ) | |
| 1.43 | |
Distributions paid to shareholders from: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income | |
| (0.60 | ) | |
| (0.66 | ) | |
| (0.67 | ) | |
| (0.66 | ) | |
| (0.67 | ) |
Return of capital | |
| (0.10 | ) | |
| (0.04 | ) | |
| (0.03 | ) | |
| (0.03 | ) | |
| — | |
Total distributions paid to Common
Shareholders | |
| (0.70 | ) | |
| (0.70 | ) | |
| (0.70 | ) | |
| (0.69 | ) | |
| (0.67 | ) |
Premiums from shares sold in at the
market offering | |
| — | | |
| — | | |
| 0.00 | (b) | |
| — | | |
| — | |
Net asset value, end of period | |
$ | 6.42 | | |
$ | 6.82 | | |
$ | 6.54 | (a) | |
$ | 7.72 | | |
$ | 8.61 | |
Market value, end of period | |
$ | 6.38 | | |
$ | 7.00 | | |
$ | 6.17 | | |
$ | 8.58 | | |
$ | 8.19 | |
Total return based on net asset value (c) | |
| 4.23 | % | |
| 16.39 | % | |
| (6.25 | )%(a) | |
| (2.44 | )% | |
| 18.91 | % |
Total return based on market value (c) | |
| 0.91 | % | |
| 26.63 | % | |
| (20.42 | )% | |
| 14.00 | % | |
| 10.03 | % |
Ratios to average net assets/supplemental data: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net assets, end of period (in 000’s) | |
$ | 92,165 | | |
$ | 97,753 | | |
$ | 93,659 | | |
$ | 110,395 | | |
$ | 123,081 | |
Ratio of total expenses to average net assets | |
| 2.02 | % | |
| 1.87 | % | |
| 1.85 | % | |
| 1.71 | % | |
| 1.73 | % |
Ratio of
total expenses to average net assets excluding interest expense | |
| 1.52 | % | |
| 1.54 | % | |
| 1.63 | % | |
| 1.52 | % | |
| 1.50 | % |
Ratio of
net investment income (loss) to average net assets | |
| 7.66 | % | |
| 10.42 | % | |
| 9.14 | % | |
| 8.00 | % | |
| 7.51 | % |
Portfolio turnover rate | |
| 5 | % | |
| 13 | % | |
| 10 | % | |
| 14 | % | |
| 13 | % |
Indebtedness: | |
| | | |
| | | |
| | | |
| | | |
| | |
Total loan outstanding (in 000’s) | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
Asset coverage per $1,000 of indebtedness (d) | |
$ | 4,687 | | |
$ | 4,910 | | |
$ | 4,746 | | |
$ | 5,416 | | |
$ | 5,923 | |
(a) |
The Fund
received a reimbursement from the sub-advisor in the amount of $15 in connection with a trade error, which represents less than $0.01
per share. Since the sub-advisor reimbursed the Fund, there was no effect on the total return. |
(b) |
Amount
represents less than $0.01 per share. |
(c) |
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. |
(d) |
Calculated
by subtracting the Fund’s total liabilities (not including the loan outstanding) from the Fund’s total assets, and dividing
by the outstanding loan balance in 000’s. |
The
Acquiring Fund
The
information for the six months ended April 30, 2023 and for the fiscal years ended October 31, 2017 through October 31, 2013, is unaudited.
The information for the other periods shown has been audited by KPMG LLP, the Acquiring Fund’s independent registered public accounting
firm, unless identified as unaudited. Financial statements for the fiscal year ended October 31, 2022, and the Report of the Independent
Registered Public Accounting Firm thereon appear in the Acquiring Fund’s Annual Report for the fiscal year ended October 31, 2022,
which is available at www.abrdnaod.com and upon request.
| |
For the Six-
Months
Ended
April 30, | | |
For the Fiscal Years Ended October 31, | |
| |
2023 | | |
| | |
| | |
| | |
| | |
| |
| |
(unaudited) | | |
2022 | | |
2021 | | |
2020 | | |
2019 | | |
2018 | |
PER SHARE OPERATING PERFORMANCE(a): | |
| | |
| | |
| | |
| | |
| | |
| |
Net asset value per common share beginning of period | |
$ | 8.61 | | |
$ | 10.98 | | |
$ | 8.76 | | |
$ | 9.56 | | |
$ | 9.33 | | |
$ | 9.95 | |
Net investment income | |
| 0.29 | | |
| 0.63 | | |
| 0.66 | | |
| 0.63 | | |
| 0.64 | | |
| 0.64 | |
Net realized and unrealized gains/(losses) on investments, forward foreign currency exchange contracts and foreign currency transactions | |
| 1.00 | | |
| (2.31 | ) | |
| 2.25 | | |
| (0.74 | ) | |
| 0.27 | | |
| (0.58 | ) |
Total from investment operations applicable to common shareholders | |
| 1.29 | | |
| (1.68 | ) | |
| 2.91 | | |
| (0.11 | ) | |
| 0.91 | | |
| 0.06 | |
Distributions to common shareholders from: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income | |
| (0.35 | ) | |
| (0.69 | ) | |
| (0.69 | ) | |
| (0.67 | ) | |
| (0.65 | ) | |
| (0.67 | ) |
Return of capital | |
| – | | |
| – | | |
| – | | |
| (0.02 | ) | |
| (0.04 | ) | |
| (0.02 | ) |
Total distributions | |
| (0.35 | ) | |
| (0.69 | ) | |
| (0.69 | ) | |
| (0.69 | ) | |
| (0.69 | ) | |
| (0.69 | ) |
Capital Share Transactions: Anti-Dilutive effect of share repurchase program | |
| – | | |
| – | | |
| – | | |
| – | | |
| 0.01 | | |
| 0.01 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net asset value per common share, end of period | |
$ | 9.55 | | |
$ | 8.61 | | |
$ | 10.98 | | |
$ | 8.76 | | |
$ | 9.56 | | |
$ | 9.33 | |
Market price, end of period | |
$ | 8.26 | | |
$ | 7.50 | | |
$ | 10.05 | | |
$ | 7.31 | | |
$ | 8.44 | | |
$ | 7.94 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Investment Return Based on(b): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Market price | |
| 14.82 | % | |
| (19.25 | )% | |
| 47.64 | % | |
| (5.47 | )% | |
| 15.55 | % | |
| (4.96 | )% |
Net asset value | |
| 15.63 | % | |
| (15.15 | )% | |
| 34.60 | %(c) | |
| 0.00 | %(c) | |
| 11.39 | % | |
| 1.24 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ratio to Average Net Assets Applicable to Common | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shareholders/Supplementary Data: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net assets applicable to common shareholders, end of period (000 omitted) | |
$ | 1,006,391 | | |
$ | 908,039 | | |
$ | 1,157,523 | | |
$ | 924,011 | | |
$ | 1,007,850 | | |
$ | 994,556 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Average net assets applicable to common shareholders (000 omitted) | |
$ | 979,873 | | |
$ | 1,049,849 | | |
$ | 1,129,413 | | |
$ | 964,667 | | |
$ | 981,093 | | |
$ | 1,082,514 | |
Net operating expenses, net of fee waivers | |
| 1.25 | %(d) | |
| 1.16 | % | |
| 1.16 | % | |
| 1.15 | % | |
| 1.22 | % | |
| 1.18 | % |
Net operating expenses, excluding fee waivers | |
| 1.32 | %(d) | |
| 1.21 | % | |
| 1.20 | % | |
| 1.18 | % | |
| 1.24 | % | |
| 1.19 | % |
Net operating expenses, net of fee waivers | |
| 1.14 | %(d) | |
| 1.14 | % | |
| 1.14 | % | |
| 1.14 | % | |
| 1.18 | % | |
| 1.14 | % |
and excluding interest expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Investment income | |
| 6.37 | %(d) | |
| 6.36 | % | |
| 6.14 | % | |
| 6.93 | % | |
| 6.94 | % | |
| 6.32 | % |
Portfolio turnover | |
| 36 | %(e) | |
| 83 | % | |
| 72 | % | |
| 115 | % | |
| 135 | % | |
| 77 | % |
Line of credit payable outstanding (000 omitted) | |
$ | 45,679 | | |
$ | 12,250 | | |
$ | 4,092 | | |
$ | – | | |
$ | – | | |
$ | 15,401 | |
| (a) | Based
on average shares outstanding. |
| (b) | Total
investment return is calculated assuming a purchase of common stock on the first day
and a sale on the last day of each reporting period. Dividends and distributions, if
any, are assumed, for purposes of this calculation, to be reinvested at prices obtained
under the Fund’s dividend reinvestment plan. Total investment return does not reflect
brokerage commissions. |
| (c) | The
total return shown above includes the impact of financial statement rounding of the NAV
per share and/or financial statement adjustments. |
| (f) | Asset
coverage ratio is calculated by dividing net assets plus the amount of any borrowings,
for investment purposes by the amount of the Line of Credit. |
| |
Years
Ended October 31, | |
| |
2017 | | |
2016 | | |
2015† | | |
2014† | | |
2013†(a) | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
PER COMMON SHARE OPERATING PERFORMANCE: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net asset value per share, beginning of
year | |
$ | 8.69 | | |
$ | 9.56 | | |
$ | 9.92 | | |
$ | 9.82 | (a) | |
$ | 9.22 | |
Income from investment operations: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income | |
| 0.68 | | |
| 0.65 | | |
| 0.69 | | |
| 0.64 | | |
| 0.68 | |
Net realized
and unrealized gain (loss) | |
| 1.27 | | |
| (0.83 | ) | |
| (0.38 | ) | |
| 0.13 | | |
| 0.74 | |
Total from investment operations | |
| 1.95 | | |
| (0.18 | ) | |
| 0.31 | | |
| 0.77 | | |
| 1.42 | |
LESS DISTRIBUTIONS: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income | |
| (0.68 | ) | |
| (0.66 | ) | |
| (0.68 | ) | |
| (0.67 | ) | |
| (0.82 | ) |
Tax return of capital | |
| (0.01 | ) | |
| (0.03 | ) | |
| (0.00 | )(b) | |
| — | | |
| — | |
Total distributions | |
| (0.69 | ) | |
| (0.69 | ) | |
| (0.68 | ) | |
| (0.67 | ) | |
| (0.82 | ) |
Anti-Dilutive effect of share repurchase
program | |
| — | | |
| — | | |
| 0.01 | | |
| — | | |
| — | |
Net asset value per share, end of year | |
$ | 9.95 | | |
$ | 8.69 | | |
$ | 9.56 | | |
$ | 9.92 | | |
$ | 9.82 | |
Per share market value, end of year | |
$ | 9.02 | | |
$ | 7.37 | | |
$ | 8.01 | | |
$ | 8.67 | | |
$ | 8.34 | |
Total return based on: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
Asset Value(c) | |
| 24.22 | % | |
| (0.40 | )% | |
| 4.39 | % | |
| 9.26 | % | |
| 17.60 | % |
Market
Value(c) | |
| 32.78 | % | |
| 0.81 | % | |
| 0.07 | % | |
| 12.44 | % | |
| 9.11 | % |
RATIOS/SUPPLEMENTAL DATA: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Assets at end of year (000) | |
$ | 1,070,253 | | |
$ | 934,580 | | |
$ | 1,028,225 | | |
$ | 1,077,053 | | |
$ | 1,067,171 | |
Ratio
of total expenses to average net assets(d) | |
| 1.19 | % | |
| 1.15 | % | |
| 1.16 | % | |
| 1.14 | % | |
| 1.19 | % |
Ratio of net investment income to average net assets | |
| 7.03 | % | |
| 7.31 | % | |
| 6.74 | % | |
| 6.47 | % | |
| 7.24 | % |
Portfolio turnover | |
| 94 | % | |
| 98 | % | |
| 127 | % | |
| 99 | % | |
| 192 | % |
Borrowing at End of year | |
| | | |
| | | |
| | | |
| | | |
| | |
Aggregate Amount Outstanding (000) | |
$ | 33,239 | | |
| N/A | | |
| N/A | | |
$ | 8,301 | | |
$ | 5,897 | |
Asset Coverage Per $1,000 (000) | |
$ | 31,199 | | |
| N/A | | |
| N/A | | |
$ | 130,757 | | |
$ | 181,979 | |
† |
Beginning
with the year ended October 31, 2015, the Fund was audited by Ernst & Young LLP. The previous years were audited by
another independent registered public accounting firm. |
(a) |
On January 21,
2014, the Fund implemented a 1 for 2 reverse stock split. Net asset value and per share information through January 20, 2014
have been updated to reflect the effect of the split. Shareholders received 1 share for every 2 shares owned and net asset value
per share increased correspondingly. |
(b) |
The
amount is less than $0.005 per share. |
(c) |
Total
investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at closing on the
last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested
at prices obtained under the Fund’s dividend reinvestment plan. Total investment returns do not reflect brokerage commissions
paid directly by the Fund’s common shareholders. Past performance is not a guarantee of future results. |
(d) |
Ratio
of total expenses to average net assets excluding interest expense was 1.15%, 1.15%, 1.15%, 1.13% and 1.18% for the years ended October 31,
2017, 2016, 2015, 2014 and 2013, respectively. |
INFORMATION
ABOUT THE REORGANIZATION
Pursuant
to the Reorganization Agreement (a form of which is attached as Appendix A to this Proxy Statement/Prospectus), the Acquired Fund
will transfer all of its assets to the Acquiring Fund and the Acquiring Fund will assume all of the Acquired Fund’s liabilities
and obligations in exchange solely for newly issued common shares of the Acquiring Fund, which will be distributed by the Acquired
Fund to its shareholders in the form of a liquidating distribution. Acquiring Fund common shares issued to the Acquired Fund shareholders
will have an aggregate NAV equal to the aggregate NAV of the Acquired Fund’s outstanding common shares immediately prior
to the Reorganization. Each shareholder of the Acquired Fund will receive the number of Acquiring Fund common shares corresponding
to his or her proportionate interest in the common shares of the Acquired Fund (with cash in lieu of fractional shares of the
Acquiring Fund, which may be taxable). The Reorganization, together with related acts necessary to consummate the same, shall
occur at the principal office of the Acquiring Fund or via electronic exchange of documents in the first quarter of 2024 and
after satisfaction or waiver of the conditions precedent to the Closing, immediately after the close of regular trading on the
NYSE, or at such other place and/or on such other date as to which the parties may agree. As soon as practicable after the Closing
Date for the Reorganization, the Acquired Fund will dissolve pursuant to Massachusetts law.
The
distribution of Acquiring Fund common shares to the Acquired Fund’s shareholders will be accomplished by opening new accounts
on the books of the Acquiring Fund in the names of the shareholders of the Acquired Fund and transferring to those shareholder
accounts Acquiring Fund common shares. Each newly-opened account on the books of the Acquiring Fund for the former shareholders
of the Acquired Fund will represent the respective pro rata number of Acquiring Fund common shares due to such shareholder.
TERMS
OF THE REORGANIZATION AGREEMENT
The
following is a summary of the significant terms of the Reorganization Agreement. The form of Reorganization Agreement is attached
as Appendix A to the Proxy Statement/Prospectus.
Valuation
of Common Shares
The
NAV per Acquiring Fund share shall be computed as of the time at which the Acquired Fund and the Acquiring Fund calculate their
NAVs as set forth in their respective prospectuses (normally the close of regular trading on the NYSE) on the Closing Date (the
“Effective Time”), after the declaration and payment of any dividends and/or other distributions on that date. At
the closing of the Reorganization, the Reorganization Agreement sets forth that the Acquired Fund assets will be valued in accordance
with the Acquired Fund’s valuation procedures as approved by the Board of the Acquired Fund. Upon the consummation of the
Reorganization, the assets transferred to the Acquiring Fund will be valued pursuant to the Acquiring Fund’s valuation procedures
as approved by the Board of Trustees of the Acquiring Fund. Please see “Synopsis” above for further information regarding
the Funds’ valuation procedures.
Calculation
of Number of Acquiring Fund Shares
As
of the Effective Time, the Acquired Fund shares outstanding immediately prior to the Effective Time shall be exchanged for Acquiring
Fund shares in an amount equal to the ratio of the NAV per share of the Acquired Fund to the NAV per share of the Acquiring Fund.
Cash may be issued in lieu of fractional shares of the Acquiring Fund. In the event Acquired Fund shareholders would be entitled
to receive fractional Acquiring Fund shares, the Acquiring Fund’s transfer agent will aggregate such fractional shares and
sell the resulting whole shares on the exchange on which such shares are listed for the account of all such Acquired Fund shareholders,
and each such Acquired Fund shareholder will be entitled to a pro rata share of the proceeds from such sale. With respect to the
aggregation and sale of fractional Acquiring Fund shares, the Acquiring Fund’s transfer agent will act directly on behalf
of the Acquired Fund shareholders entitled to receive fractional shares and will accumulate such fractional shares, sell the shares
and distribute the cash proceeds net of brokerage commissions, if any, directly to Acquired Fund shareholders entitled to receive
the fractional shares (without interest and subject to withholding taxes).
Conditions
Under
the terms of the Reorganization Agreement, the Reorganization is conditioned upon, among other things, approval of the Proposal
by the shareholders of the Acquired Fund and each Fund’s receipt of certain routine certificates and legal opinions.
Termination
The
Reorganization Agreement may be terminated (i) by mutual agreement of the parties at any time prior to the Effective Time, if
circumstances should develop that, in the opinion of such Board of the Acquiring Fund and the Board of the Acquired Fund, make
proceeding with the Reorganization Agreement inadvisable; (ii) if one party breaches any representation, warranty or agreement
contained in the Reorganization to be performed at or before the Closing Date, which breach would give rise to the failure of
a condition precedent to the obligation of a party as set forth in the Reorganization Agreement and it is not cured within 30
days after being provided notice by the non-breaching party; or (iii) if the Agreement referred to in “AGREEMENT BETWEEN
FIRST TRUST ADVISORS L.P. AND ABRDN INC.” above is validly terminated.
Expenses
of the Reorganization
aIL
and its affiliates and First Trust and its affiliates will bear certain expenses, including portfolio transaction costs and certain
taxes, incurred in connection with the Reorganization, except as otherwise disclosed in the proxy statements to Acquired Fund
shareholders, whether or not the Reorganization is consummated. The expenses of the Reorganization expected to be borne by abrdn and
First Trust are estimated to be approximately $446,000. To the extent there are any transaction costs (including brokerage
commissions, transaction charges and related fees) associated with the sales and purchases made in connection with the
Reorganization, these will be borne by the Acquired Fund with respect to the portfolio transitioning and de-levering conducted
before the Reorganization and borne by the Combined Fund with respect to the portfolio transitioning conducted after the
Reorganization.
MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Treatment
as a Tax Free Reorganization
The
Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes under section 368(a) of the
Code. As a condition to the closing of the Reorganization, the Acquired Fund and the Acquiring Fund each will receive an opinion
from Dechert LLP, dated as of the Closing Date, regarding the characterization of the Reorganization as a “reorganization”
within the meaning of section 368(a) of the Code. The opinion of Dechert LLP will be based on US federal income tax law in effect
on the Closing Date. In rendering its opinion, Dechert LLP will also rely upon certain representations of the management of the
Acquired Fund and the Acquiring Fund and assume, among other things, that the Reorganization will be consummated in accordance
with the Reorganization Agreement and other operative documents and as described herein.
As
a reorganization, the US federal income tax consequences of the Reorganization can be summarized as follows:
| • | The
transfer of the Acquired Fund assets in exchange solely for Acquiring Fund shares and
the assumption by the Acquiring Fund of all liabilities of the Acquired Fund followed
by the distribution by the Acquired Fund of Acquiring Fund shares to the Acquired Fund
shareholders in exchange for their Acquired Fund shares in liquidation of the Acquired
Fund pursuant to and in accordance with the terms of the Reorganization Agreement will
constitute a “reorganization” within the meaning of section 368(a)(1) of
the Code; |
| • | No
gain or loss will be recognized by the Acquiring Fund upon the receipt of the Acquired
Fund assets solely in exchange for the Acquiring Fund shares and the assumption by the
Acquiring Fund of all liabilities of the Acquired Fund; |
| • | No
gain or loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange solely for Acquiring Fund shares and the
assumption by the Acquiring Fund of all liabilities or upon the distribution of the Acquiring
Fund shares to the Acquired Fund shareholders in exchange for their Acquired Fund shares,
except that the Acquired Fund may be required to recognize gain or loss with respect
to contracts described in section 1256(b) of the Code or stock in a passive foreign investment
company, as defined in section 1297(a) of the Code; |
| • | No
gain or loss will be recognized by the Acquired Fund shareholders upon the exchange of
the Acquired Fund shares for Acquiring Fund shares (except with respect to cash received
in lieu of fractional shares of the Acquiring Fund); |
| • | The
aggregate tax basis for the Acquiring Fund shares received by each Acquired Fund shareholder
pursuant to the Reorganization will be the same as the aggregate tax basis of the Acquired
Fund shares held by each such Acquired Fund shareholder immediately prior to the Reorganization
(reduced by any amount of tax basis allocable to fractional shares of the Acquiring Fund
for which cash is received); |
| • | The
holding period of the Acquiring Fund shares to be received by each Acquired Fund shareholder
will include the period during which the Acquired Fund shares surrendered in exchange
therefor were held (provided such Acquired Fund shares were held as capital assets on
the date of the Reorganization); |
| • | Except
for assets which may be marked to market for federal income tax purposes as a consequence
of a termination of Acquired Fund’s taxable year, the tax basis of the Acquired
Fund assets acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund in exchange therefor; and |
| • | The
holding period of the Acquired Fund assets in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund (except where the
investment activities of the Acquiring Fund have the effect of reducing or eliminating
such periods with respect to an Acquired Fund asset). |
The
Funds have not sought a tax ruling from the IRS. Opinions of counsel are not binding upon the IRS or the courts. If the Reorganization
is consummated but does not qualify as a tax free reorganization under the Code, and thus is taxable, the Acquired Fund would
recognize gain or loss on the transfer of its assets to the Acquiring Fund and each shareholder of the Acquired Fund would recognize
a taxable gain or loss equal to the difference between its tax basis in the Acquired Fund shares and the fair market value of
the shares of the Acquiring Fund it received.
Capital
Loss Carryforwards
As
of the fiscal year ended November 30, 2022, the Acquired Fund had $49,410,705 of non-expiring capital loss carryforwards. As of
the fiscal year ended October 31, 2022, the Acquiring Fund had $161,117,918 of non-expiring capital loss carryforwards. The
Acquiring Fund’s ability to carry forward and use the Acquired Fund or its own pre-Reorganization capital losses may be
limited following the Reorganization under the loss limitation rules of sections 382, 383 and 384 of the Code. Either Fund’s
“pre-acquisition losses” (including capital loss carryforwards, net current-year capital losses, and unrealized losses
that exceed certain thresholds) cannot be used to offset unrealized gains in another Fund that are “built in” (unrealized)
at the time of the Reorganization and that exceed certain thresholds (“non-de minimis built-in gains”) for five calendar
years. Further, a portion of a Fund’s pre-acquisition losses may become subject to an annual limitation on the amount that
may be used to offset future gain. Any remaining pre-acquisition losses will offset capital gains realized after the Reorganization
and this will reduce subsequent capital gain distributions to a broader group of shareholders than would have been the case absent
such Reorganization. Therefore, in certain circumstances, shareholders of a Fund may be subject to tax sooner, or incur more taxes
as a result of the transactions that would take place as part of the Reorganization, than they would have had the Reorganization
not occurred.
The
impact of the rules described above will depend on the relative sizes of, and the losses and gains (both realized and unrealized)
in, each of the Acquired Fund and the Acquiring Fund at the time of the Reorganization and thus cannot be calculated precisely
at this time.
Cash
in lieu of Fractional Shares of the Acquiring Fund
If
an Acquired Fund shareholder receives cash in lieu of a fractional share of the Acquiring Fund, the Acquired Fund shareholder
will be treated as having received the fractional share of Acquiring Fund pursuant to the Reorganization and then as having sold
that fractional share of Acquiring Fund for cash. As a result, each such Acquired Fund shareholder generally will recognize gain
or loss equal to the difference between the amount of cash received and the tax basis in his, her or its fractional share of Acquiring
Fund. This gain or loss generally will be a capital gain or loss and will be long-term capital gain or loss if, as of the date
of Reorganization, the holding period for the shares (including the holding period of Acquired Fund shares surrendered therefor)
is greater than one year. The deductibility of capital losses is subject to limitations.
Distribution
of Income and Gains
The
Acquired Fund’s tax year is expected to end as a result of the Reorganization. The Acquired Fund generally will be required
to declare to its shareholders of record one or more distributions of all of its previously undistributed investment company taxable
income and net realized capital gain (if any), including capital gain realized on any securities disposed of in connection with
the Reorganization, in order to maintain its treatment as a registered investment company during its tax year ending with the
date of the Reorganization and to eliminate any US federal income tax on its taxable income in respect of such tax year.
The
pre-Reorganization portfolio transitioning is anticipated to result in net capital gains of $824,192, or $0.057 per share based on Acquired
Fund holdings as of September 21, 2023. However, it is anticipated that the Acquired Fund’s capital loss carryforwards would offset
projected realized gains. The actual tax consequences as a result of portfolio repositioning are dependent on the portfolio composition
of the Acquired Fund at the time and market conditions.
Moreover,
if the Acquiring Fund has investment company taxable income or net realized capital gain, but has not distributed such income
or gain prior to the Reorganization and you acquire shares of the Acquiring Fund in the Reorganization, a portion of your subsequent
distributions from the Combined Fund may, in effect, be a taxable return of part of your investment. Similarly, if you acquire
Acquiring Fund shares in the Reorganization when the Acquiring Fund holds appreciated securities, you may receive a taxable return
of part of your investment if and when the Combined Fund sells the appreciated securities and distributes the realized gain.
Tracking
Your Basis and Holding Period; State and Local Taxes
After
the Reorganization of the Acquired Fund, you will continue to be responsible for tracking the adjusted tax basis and holding period
for your shares of the Combined Fund for federal income tax purposes. You should consult your tax adviser regarding the effect,
if any, of the Reorganization in light of your individual circumstances. You should also consult your tax adviser about the state
and local tax consequences, if any, of the Reorganization because the discussion above only relates to the federal income tax
consequences.
Portfolio
Transitioning
Portfolio
transitioning after the Reorganization may result in capital gains or losses, which may have federal income tax consequences. For example,
if the Reorganization was completed on September 21, 2023, it is estimated that approximately $6,866,343, or $0.061 per share, in
capital losses would have resulted from portfolio transitioning in the Combined Fund following the Reorganization.
VOTING
INFORMATION AND REQUIREMENTS
Record
Date
Shareholders
of record of the Acquired Fund as of the close of business on October 23, 2023, the record date (previously defined as the “Record
Date”), are entitled to notice of and to vote at the Special Meeting. Shareholders on the Record Date will be entitled to
one vote for each share held, and each fractional share held shall be entitled to a proportionate fractional vote.
Proxies
Shareholders
of record as of the Record Date may vote by attending the Special Meeting or, prior to the Special Meeting, may vote their shares
by returning the enclosed proxy card or by casting their vote via telephone or the Internet using the instructions provided on
the enclosed proxy card. The giving of such a proxy will not affect your right to vote should you decide to attend the Special
Meeting. If your shares are held in “street name” by a broker or bank, you will receive information regarding how
to instruct your bank or broker to cast your votes. For more information on attending the Special Meeting, see “ Additional
Information about Attending the Special Meeting” below.
You
may revoke your proxy at any time before the Special Meeting by (i) written notice delivered to the Secretary of the Acquired
Fund prior to the exercise of the proxy; (ii) execution of a subsequent proxy; or (iii) attending and voting at the Special
Meeting.
If
you hold shares through a broker, bank or other nominee, you must follow the instructions you receive from your nominee in order
to revoke your voting instructions.
If
you hold your shares directly (not through a broker-dealer, bank or other financial institution) and if you return a properly
executed proxy card that does not specify how you wish to vote on the Proposal, your shares will be voted “FOR” the
Proposal.
Quorum
A
quorum of shareholders must be present for any business to be conducted at the Special Meeting. Thirty-three and one-third
percent (33-1/3%) of the shares outstanding of the Acquired Fund entitled to vote present in person or represented by proxy at
the Acquired Fund’s Special Meeting shall constitute a quorum for that meeting.
Broker
Non-Votes and Abstentions
Broker
non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker holding
the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial
owner of the shares is entitled to give voting instructions to the broker holding the shares. If the beneficial owner does not
provide voting instructions, the broker can still vote the shares with respect to matters that are considered to be “routine,”
but cannot vote the shares with respect to “non-routine” matters. The Proposal is considered ”non-routine,” so
brokers will not have discretionary voting power with respect to the Proposal, and the Acquired Fund does not expect to receive
any broker non-votes.
Abstentions, if any, will be included for purposes of determining whether a quorum for the Acquired Fund is present at the Special Meeting and will
be treated as shares present at the Special Meeting, but will not be treated as votes cast.
Adjournments
Any
meeting of shareholders may, by action of the chair of the meeting, be adjourned from time to time with respect to one or more
matters to a date that may be more than one hundred and twenty (120) days after the date set for the original meeting, whether
or not a quorum is present with respect to such matter or matters; upon motion of the chair of the meeting, the question of adjournment
may be submitted to a vote of the shareholders, and in that case, any adjournment with respect to one or more matters must be
approved by the vote of holders of a majority of the shares present and entitled to vote with respect to the matter or matters
adjourned, and without further notice. Unless a proxy is otherwise limited in this regard, any shares present and entitled to
vote at a meeting, including those that are represented by broker non-votes, may, at the discretion of the proxies named therein,
be voted in favor of such an adjournment or adjournments. Any adjourned meeting may be held as adjourned without further notice
if the new date, time and place of the meeting was announced at the meeting that was adjourned. Unless otherwise specifically
limited by their terms, proxies shall entitle the holder thereof to vote at any postponements or adjournments of a meeting, and
no proxy shall be valid after eleven months from its date unless a longer period is expressly provided in the appointment.
Additional
Information about Attending the Special Meeting
As
stated earlier in this Proxy Statement/Prospectus, the Special Meeting is scheduled to be held on February 22, 2024, at 1:00 p.m.
Central Time at the offices of First Trust, located at 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. Please note
that shareholders who intend to attend the Special Meeting will need to provide valid identification and, if they hold shares
through a bank, broker or other nominee, satisfactory proof of ownership of shares, such as a voting instruction form (or a copy
thereof) or a letter from their bank, broker or other nominee or broker’s statement indicating ownership as of the Record Date
to be admitted to the Special Meeting. You may call toll-free (866) 796-7172 for information on how to obtain directions to be able
to attend the Special Meeting and vote in person.
List
of Acquired Fund Shareholders
A
list of shareholders of record of the Acquired Fund entitled to notice of the Special Meeting will be available at First Trust’s
offices, located at 120 East Liberty Drive, Suite 400, Wheaton, IL 60187, for inspection by any shareholder during regular business
hours beginning on the second business day after notice is given of the Special Meeting, subject to restrictions that may be imposed
on a requesting shareholder on the copying, use or distribution of the information contained in the list. Shareholders will need
to provide advance written notice to the Acquired Fund to inspect the list of shareholders and will also need to show valid identification
and proof of share ownership to inspect such list.
Householding
Please
note that only one copy of shareholder documents, including annual or semi-annual reports and proxy materials may be delivered
to two or more shareholders of the Acquired Fund who share an address, unless the Acquired Fund has received instructions to the
contrary. This practice is commonly called “householding” and it is intended to reduce expenses and eliminate duplicate
mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct
the Acquired Fund otherwise. To request a separate copy of any shareholder document, or for instructions as to how to request
a separate copy of these documents or as to how to request a single copy if multiple copies of these documents are received, shareholders
should contact the Acquired Fund at the address and phone number set forth above.
Shareholder
Communications
Shareholders
of the Acquired Fund who want to communicate with the Board of the Acquired Fund or any individual Trustee should write the Acquired
Fund to the attention of the Acquired Fund Secretary, W. Scott Jardine, at 120 East Liberty Drive, Suite 400, Wheaton, IL 60187.
The letter should indicate that you are a shareholder of the Acquired Fund. If the communication is intended for a specific Trustee
and so indicates, it will be sent only to that Trustee. If a communication does not indicate a specific Trustee, it will be sent
to the Chair of the Nominating and Governance Committee of the Board of the Acquired Fund and the independent legal counsel to
the Independent Trustees for further distribution as deemed appropriate by such persons.
Vote
Required for the Proposal
The
Proposal will require the affirmative vote of a majority of the outstanding voting shares (as defined under the 1940 Act) of the
Acquired Fund. The 1940 Act defines a majority of the outstanding voting shares as the lesser of either (i) at least 67% of the
voting securities present at the Special Meeting, if at least 50% of such securities are present or represented by proxy, or (ii)
more than 50% of the outstanding voting shares.
SHAREHOLDER
INFORMATION
As
of November 30, 2023, to each Fund’s knowledge, no single shareholder or “group” (as that term is used in Section 13(d)
of the Exchange Act) beneficially owned more than 5% of either Fund’s outstanding common shares, except as described in the following
tables. A control person is one who owns, either directly or indirectly, more than 25% of the voting securities of a Fund or acknowledges
the existence of control. A party that controls a Fund may be able to significantly affect the outcome of any item presented to shareholders
for approval. Information as to beneficial ownership of common shares, including percentage of common shares beneficially owned, is based
on, among other things, reports filed with the SEC by such holders.
The
Acquired Fund
Shareholder
Name and Address | |
Class
of Shares /
Beneficial or Record
Owner | |
Share
Holdings | | |
Percentage
Owned | | |
Estimated
Pro Forma
Percentage of Ownership of
Combined Fund | |
Charles Schwab & Co., Inc. 2423 E Lincoln
Drive Phoenix, Arizona 85016 | |
Common Shares/Record Owner | |
| 2,939,294 | | |
| 20.46 | % | |
1.19 | % |
LPL Financial LLC * 1055 LPL Way Fort Mill, South
Carolina 29715 | |
Common Shares/Record and Beneficial Owner | |
| Record:
858,718
Beneficial: 889,332 | | |
| Record:
5.97
Beneficial: 6.20 | %
%* | |
Record:
0.35
Beneficial: 0.36 | %
% |
National Financial Services LLC 499 Washington Boulevard
Jersey City, New Jersey 07310 | |
Common Shares/Record Owner | |
| 1,713,684 | | |
| 11.93 | % | |
0.70 | % |
Wells Fargo Clearing Services, LLC 2801 Market Street
H0006-09B St. Louis, Missouri 63103 | |
Common Shares/Record Owner | |
| 1,670,901 | | |
| 11.63 | % | |
0.68 | % |
Morgan Stanley Smith Barney LLC 1300 Thames St 6th
Floor Baltimore, Maryland 21231 | |
Common Shares/Record Owner | |
| 1,482,711 | | |
| 10.32 | % | |
0.60 | % |
Pershing LLC One Pershing Plaza Jersey City, New
Jersey 07399 | |
Common Shares/Record Owner | |
| 805,631 | | |
| 5.61 | % | |
0.33 | % |
* For the beneficial share holdings, based solely upon information
presented in a Schedule 13G filed February 3, 2023 by LPL Financial LLC.
The
Acquiring Fund
Shareholder
Name and Address | |
Class of
Shares /
Beneficial or Record
Owner | |
Share
Holdings | | |
Percentage
Owned | | |
Estimated
Pro Forma
Percentage of Ownership of
Combined Fund | |
Allspring Global Investment Holdings, et al.*
525 Market St, 10th Fl San Francisco, CA 94105 | |
Common Shares/Beneficial Owner | |
| 7,347,241 | * | |
| 6.97 | %* | |
6.56 | % |
Parametric Portfolio Associates, LLC** 800 Fifth Avenue,
Suite 2800 Seattle, WA 98104 | |
Common Shares/Beneficial Owner | |
| 8,108,906 | ** | |
| 7.7 | %** | |
7.24 | % |
* Based solely on information presented in
a Schedule 13G/A filed December 31, 2022, jointly by Allspring Global Investments Holdings, LLC, Allspring Global Investments, LLC
and Allspring Funds Management, LLC.
** Based solely on information presented in
a Schedule 13G/A filed December 30, 2022 by Parametric Portfolio Associates, LLC.
Security
Ownership of Management
As
of November 30, 2023, the officers and Trustees of the Acquired Fund, in the aggregate, owned less than 1% of the outstanding shares of the Acquired
Fund. As of November 30, 2023, the officers and Trustees of the Acquiring Fund, in the aggregate, owned less than 1% of the outstanding
shares of the Acquiring Fund.
SHAREHOLDER
PROPOSALS
In
order to nominate persons to the Board of the Acquired Fund or to present any other permitted proposal for action by shareholders
at an annual meeting of shareholders of the Acquired Fund, a shareholder must comply with any requirements under applicable law
(including without limitation the proxy rules under the Exchange Act) and the requirements of the Acquired Fund’s Amended
and Restated By-Laws (the “By-Laws”). The By-Laws provide, among other requirements, that a proposing shareholder
be entitled to vote on the proposal and that timely written notice which includes the information required by the By-Laws must
be provided to the Secretary of the Acquired Fund. In order to be considered timely, unless a greater or lesser period is required
under applicable law, the shareholder notice must be delivered to or mailed and received at the Acquired Fund’s principal
executive offices, Attn: W. Scott Jardine, Secretary, not less than one hundred and five (105) days nor more than one hundred
and twenty (120) days prior to the first anniversary date of the date the Acquired Fund’s proxy statement was released to
shareholders for the preceding year’s annual meeting. However, if and only if an annual meeting is not scheduled to be held
within a period that commences thirty (30) days before the first anniversary date of the annual meeting for the preceding year
and ends thirty (30) days after such anniversary date (an annual meeting date outside such period being referred to herein as
an “Other Annual Meeting Date”), such shareholder notice must be given as described above not more than one hundred
and twenty (120) days prior to such Other Annual Meeting Date and not less than the close of business on the later of (i) the
date one hundred and five (105) days prior to such Other Annual Meeting Date or (ii) the tenth (10th) business day following the
date such Other Annual Meeting Date is first publicly announced or disclosed. Timely submission of a proposal does not mean that
such proposal will be included in the Acquired Fund’s proxy statement. The Acquired Fund’s proxy materials for its
2023 annual meeting were mailed to shareholders on or about March 14, 2023, and such annual meeting was held on April 17, 2023.
Shareholders should consult the Acquired Fund’s By-Laws for more information about the requirements for shareholder proposals.
Copies of the By-Laws can be found in the Current Report on Form 8-K filed by the Acquired Fund with the SEC on June 23, 2023,
which is available at www.sec.gov, and may also be obtained by writing to the Secretary of the Acquired Fund at such Fund’s
principal executive offices.
To
be considered for presentation at the Acquired Fund’s 2024 annual meeting, if any, a shareholder proposal submitted pursuant
to Rule 14a-8 of the Exchange Act, must have been received at the offices of the Acquired Fund at 120 East Liberty Drive, Suite
400, Wheaton, IL 60187, no later than November 15, 2023. However, if the Reorganization is approved and will be consummated, the
Acquired Fund will be dissolved and will no longer hold annual meetings of shareholders.
In
addition, the By-Laws of the Acquired Fund provide that, unless required by applicable law, no matter shall be considered at or
brought before any annual or special meeting unless such matter has been deemed a proper matter for shareholder action by at least
sixty-six and two-thirds percent (66-2/3%) of the Trustees. Timely submission of a proposal does not mean that such proposal will
be brought before a meeting.
SOLICITATION
OF PROXIES
Solicitation
of proxies is being made primarily by the mailing of the Notice and this Proxy Statement/Prospectus with its enclosures on or
about [ ], 2023. Proxy solicitations may also be made by telephone or personal interviews conducted by officers and service providers
of the Acquired Funds, including any agents or affiliates of such service providers. In addition, as noted above, a proxy solicitation
firm, EQ Fund Solutions, LLC, has been engaged to assist in the solicitation of proxies. Shareholders of the Acquired Fund whose
shares are held by nominees such as brokers can vote their proxies by contacting their respective nominee.
OTHER
BUSINESS
The
Board knows of no other business to be presented for action at the Special Meeting. If any matters do come before the Special
Meeting on which action can properly be taken in accordance with the Acquired Fund’s By-Laws, it is intended that the proxies
shall vote in accordance with the judgment of the person or persons exercising the authority conferred by the proxy at the Special
Meeting. The submission of a proposal does not guarantee its inclusion in the proxy statement or presentation at the Special Meeting
unless certain securities law requirements are met.
If
you need any assistance or have any questions regarding the Proposal or how to vote your shares, please call the Acquired Fund’s
Proxy Solicitor, EQ Fund Solutions, LLC, at (866) 796-7172 weekdays from 9:00 a.m. to 10:00 p.m. Eastern Time. |
APPENDIX
A
FORM
OF AGREEMENT AND PLAN OF REORGANIZATION
THIS
AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of [March 15, 2024], by and between abrdn
Total Dynamic Dividend Fund, a Delaware statutory trust (the “Acquiring Fund”), and First Trust Specialty Finance and Financial
Opportunities Fund, a Massachusetts business trust (the “Acquired Fund” and, together with the Acquiring Fund, the “Funds”).
First Trust Advisors L.P., an Illinois limited partnership and the investment adviser to
the Acquired Fund (the “Seller”), joins this Agreement solely for purposes of paragraphs 8.2, 11.1, 11.2 and 11.3, and abrdn
Inc., a Delaware corporation registered under the Investment Advisers Act of 1940 (the “Purchaser”), joins this Agreement
solely for purposes of paragraphs 5.12, 5.13, 8.2, 11.1, 11.2 and 11.3.
The reorganization will
consist of the transfer of all of the Assets (as defined in paragraph 1.2) of the Acquired Fund to the Acquiring Fund in exchange solely
for newly issued common shares of beneficial interest of the Acquiring Fund, no par value per share (the “Acquiring Fund Shares”),
the assumption by the Acquiring Fund of Liabilities (as defined in paragraph 1.3) of the Acquired Fund, and the distribution of the Acquiring
Fund Shares to the shareholders of the Acquired Fund as part of the complete liquidation of the Acquired Fund, all upon the terms and
conditions hereinafter set forth in this Agreement (the “Reorganization”).
WHEREAS,
the Acquiring Fund and the Acquired Fund are each registered closed-end management investment companies, and the Acquired Fund owns securities
which are assets of the character in which the Acquiring Fund is permitted to invest; and
WHEREAS,
both the Acquired Fund and the Acquiring Fund are authorized to issue their shares of beneficial interest; and
WHEREAS,
the Board of Trustees of the Acquiring Fund and the Board of Trustees of the Acquired Fund have authorized and approved the Reorganization;
and
WHEREAS,
each of the Seller and the Purchaser have entered into a purchase agreement (the “Purchase Agreement”) pursuant to which
Purchaser agreed to acquire, and Seller agreed to sell, certain assets relating to the Seller’s business with respect to the Acquired
Fund; and
WHEREAS,
it is intended that, for United States federal income tax purposes, (i) the transactions contemplated by this Agreement shall qualify
as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”), and (ii) that the Agreement shall constitute a “plan of reorganization” for purposes of the Code.
NOW,
THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, intending to be legally
bound hereby, the parties hereto covenant and agree as follows:
| 1. | THE
REORGANIZATION AND FUND TRANSACTIONS |
1.1. The
Reorganization. Subject to the requisite approvals and other terms and conditions herein set forth and on the basis of the representations
and warranties contained herein, at the Effective Time (as defined in paragraph 2.4), the Acquired Fund shall assign, deliver and otherwise
transfer the Assets (as defined in paragraph 1.2) of the Acquired Fund to the Acquiring Fund, and the Acquiring Fund shall assume the
Liabilities (as defined in paragraph 1.3) of the Acquired Fund. In consideration of the foregoing, at the Effective Time, the Acquiring
Fund shall issue Acquiring Fund Shares to the Acquired Fund. The number of Acquiring Fund Shares to be delivered shall be determined
as set forth in paragraph 2.3.
1.2. Assets
of the Acquired Fund. The assets of the Acquired Fund to be acquired by the Acquiring Fund shall consist of all assets and property
that can legally be transferred whether accrued or contingent, known or unknown, including, without limitation, all cash, cash equivalents,
securities, receivables (including securities, interests and dividends receivable), commodities and futures interests, rights to register
shares under applicable securities laws, any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund at the
Effective Time (as defined in paragraph 2.4), books and records of the Acquired Fund, and any other property owned by the Acquired Fund
at the Effective Time (collectively, the “Assets”). For the avoidance of doubt, Assets shall not include any assets or property
that cannot be transferred to the Acquiring Fund pursuant to applicable law or regulation.
1.3. Liabilities
of the Acquired Fund. The Acquired Fund will use commercially reasonable efforts to discharge all of its known liabilities and
obligations prior to the Effective Time consistent with its obligation to continue its operations and to pursue its investment objective
and strategies in accordance with the terms as presented in the Proxy Statement/Prospectus (as defined in paragraph 5.6) in connection
with the Reorganization. The Acquiring Fund will assume all liabilities of the Acquired Fund whether accrued or contingent, known or
unknown (collectively, the “Liabilities”). At and after the Effective Time, the Liabilities of the Acquired Fund shall become
and be the liabilities of the Acquiring Fund and may be enforced against the Acquiring Fund to the extent as if the same had been incurred
by the Acquiring Fund.
1.4. Distribution
of Acquiring Fund Shares. At the Effective Time (or as soon thereafter as is reasonably practicable), the Acquired Fund will
distribute the Acquiring Fund Shares received from the Acquiring Fund pursuant to paragraph 1.1 (cash may be distributed in lieu of fractional
Acquiring Fund Shares, as set forth in paragraph 2.3), pro rata to the record holders of the shares of the Acquired Fund determined as
of the Effective Time (the “Acquired Fund Shareholders”) in complete liquidation of the Acquired Fund. Such distribution
and liquidation will be accomplished by the transfer of the Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund Shareholders.
The aggregate net asset value of the Acquiring Fund Shares to be so credited to Acquired Fund Shareholders shall be equal to the aggregate
net asset value of the then outstanding shares of beneficial interest of the Acquired Fund (the “Acquired Fund Shares”) owned
by Acquired Fund Shareholders at the Effective Time other than with respect to any fractional Acquiring Fund Shares for which cash may
be distributed in lieu thereof, pursuant to paragraph 2.3. All issued and outstanding shares of the Acquired Fund will be canceled on
the books of the Acquired Fund. The Acquiring Fund shall not issue share certificates representing the Acquiring Fund Shares in connection
with such transfer, except for any global certificate or certificates required by a securities depository in connection with the establishment
of book-entry ownership of the Acquiring Fund Shares.
1.5. Recorded
Ownership of Acquiring Fund Shares. Ownership by Acquired Fund Shareholders of Acquiring Fund Shares will be shown on the books
of the Acquiring Fund’s transfer agent.
1.6. Filing
Responsibilities of Acquired Fund. Any reporting responsibility of the Acquired Fund, including, but not limited to, the responsibility
for filing regulatory reports, tax returns, or other documents with the Securities and Exchange Commission (the “Commission”),
the exchange on which the Acquired Fund’s shares are listed, any state securities commission, any state corporate registry, and
any Federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the
Acquired Fund.
1.7. Transfer
Taxes. Any transfer taxes payable upon issuance of the Acquiring Fund Shares in a name other than the registered holder of the
Acquired Fund Shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by
the person to whom such Acquiring Fund Shares are to be issued and transferred.
1.8 Termination.
Promptly after the distribution of Acquiring Fund Shares pursuant to paragraph 1.4, the Acquired Fund shall take, in accordance with
Massachusetts law and the Investment Company Act of 1940, as amended (the “1940 Act”), all steps as may be necessary or appropriate
to effect a complete deregistration, liquidation, dissolution and termination of the Acquired Fund.
2.1. Net
Asset Value per Acquired Fund Share. The net asset value per Acquired Fund Share shall be computed as of the Effective Time,
after the declaration and payment of any dividends and/or other distributions on that date, using the valuation procedures of the Acquired
Fund adopted by the Acquired Fund’s Board of Trustees.
2.2. Net
Asset Value per Acquiring Fund Share. The net asset value per Acquiring Fund Share shall be computed as of the Effective Time,
after the declaration and payment of any dividends and/or other distributions on that date, using the valuation procedures of the Acquiring
Fund adopted by the Acquiring Fund’s Board of Trustees.
2.3. Calculation
of Number of Acquiring Fund Shares. As of the Effective Time, each Acquired Fund Share outstanding immediately prior to the Effective
Time shall be exchanged for Acquiring Fund Shares in an amount equal to the ratio of the net asset value per share of the Acquired Fund
determined in accordance with paragraph 2.1 to the net asset value per share of the Acquiring Fund determined in accordance with paragraph
2.2. No fractional Acquiring Fund Shares will be distributed unless such shares are to be held in a Dividend Reinvestment Plan account.
In the event Acquired Fund Shareholders would be entitled to receive fractional Acquiring Fund Shares, the Acquiring Fund’s transfer
agent will aggregate such fractional shares and sell the resulting whole shares on the exchange on which such shares are listed for the
account of all such Acquired Fund Shareholders, and each such Acquired Fund Shareholder will be entitled to a pro rata share of the proceeds
from such sale. With respect to the aggregation and sale of fractional Acquiring Fund Shares, the Acquiring Fund’s transfer agent
will act directly on behalf of the Acquired Fund Shareholders entitled to receive fractional shares and will accumulate such fractional
shares, sell the shares and distribute the cash proceeds net of brokerage commissions, if any, directly to Acquired Fund Shareholders
entitled to receive the fractional shares (without interest and subject to withholding taxes).
2.4. Effective
Time. The Effective Time shall be the time at which the Funds calculate their net asset values as set forth in their respective
valuation procedures (normally the close of regular trading on the New York Stock Exchange) on the Closing Date (as defined in paragraph
3.1) (the “Effective Time”).
3.1. Closing.
The Reorganization, together with related acts necessary to consummate the same (“Closing”), shall occur at the principal
office of the Acquiring Fund or via the electronic exchange of documents on the Closing Date (as defined in the Purchase Agreement) applicable
to the Acquired Fund, or such other date or place as an officer of the Acquiring Fund and an officer of the Acquired Fund may agree in
writing and after satisfaction or waiver (to the extent permitted by applicable law) of the conditions precedent to the Closing set forth
in Section 6 of this Agreement (other than those conditions that by their terms are to be satisfied by actions taken at the Closing,
but subject to the satisfaction or, to the extent permitted, waiver of those conditions at the Closing), immediately after the close
of regular trading on the New York Stock Exchange (the “Closing Date”). All acts taking place at the Closing shall be deemed
to take place simultaneously as of the Effective Time.
3.2. Transfer
and Delivery of Assets. The Acquired Fund shall direct The Bank of New York Mellon (“BNY”), as custodian for the
Acquired Fund, to deliver, at the Closing, a certificate of an authorized officer stating that the Assets were delivered in proper form
to the Acquiring Fund at the Effective Time. The Acquired Fund’s portfolio securities represented by a certificate or other written
instrument, if any, shall be presented by BNY, on behalf of the Acquired Fund, to State Street Bank and Trust Company (“State Street”),
as custodian for the Acquiring Fund. Such presentation shall be made for examination as soon as reasonably practicable following the
Effective Time and shall be transferred and delivered by the Acquired Fund as soon as reasonably practicable following the Effective
Time for the account of the Acquiring Fund duly endorsed in proper form for transfer in such condition as to constitute good delivery
thereof. BNY, on behalf of the Acquired Fund, shall deliver to State Street, as custodian of the Acquiring Fund, as of the Effective
Time by book entry, in accordance with the customary practices of BNY and of each securities depository, as defined in Rule 17f-4
under the 1940 Act, in which the Assets are deposited, the Assets deposited with such depositories. The cash to be transferred by the
Acquired Fund shall be delivered by wire transfer of Federal funds at the Effective Time or by such other manner as State Street, as
custodian of the Acquiring Fund, deems appropriate.
3.3. Share
Records. The Acquired Fund shall direct Computershare Inc., in its capacity as transfer agent for the Acquired Fund (the “Transfer
Agent”), to deliver at the Closing a certificate of an authorized officer stating that its records contain the names and addresses
of the Acquired Fund Shareholders and the number and percentage ownership of outstanding Acquired Fund Shares owned by each such Acquired
Fund Shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver to the Secretary of the Acquired Fund a
confirmation evidencing that the Transfer Agent has been instructed to credit an appropriate number of Acquiring Fund Shares to the Acquired
Fund as of the Effective Time, or provide other evidence satisfactory to the Acquired Fund as of the Effective Time that such Acquiring
Fund Shares will be credited to the Acquired Fund’s accounts on the books of the Acquiring Fund.
3.4. Postponement
of Effective Time. In the event that at the Effective Time, the primary trading market for portfolio securities of the Acquiring
Fund or the Acquired Fund (the “Market”) shall be closed to trading or trading thereupon shall be restricted, or trading
or the reporting of trading on such Market or elsewhere shall be disrupted so that, in the mutual judgment of the Boards of Trustees
or officers of the Acquired Fund and the Acquiring Fund, accurate appraisal of the value of the net assets of the Acquired Fund or the
Acquiring Fund, respectively, is impracticable, the Effective Time shall be postponed until the first business day, or other mutually
agreed business day, after the day when trading shall have been fully resumed and reporting shall have been restored.
3.5. Failure
To Deliver Assets. If the Acquired Fund is unable to make delivery pursuant to paragraph 3.2 to the custodian for the Acquiring
Fund of any of the Assets of the Acquired Fund for the reason that any of such Assets have not yet been delivered to it by the Acquired
Fund’s broker, dealer or other counterparty, then, in lieu of such delivery, the Acquired Fund shall deliver, with respect to said
Assets, executed copies of an agreement of assignment and due bills executed on behalf of said broker, dealer or other counterparty,
together with such other documents as may be required by the Acquiring Fund or its custodian, including brokers’ confirmation slips,
and shall use its reasonable best efforts to deliver any such Assets to the custodian as soon as reasonably practicable. In addition,
with respect to any Asset that requires additional documentation by an Asset’s issuer or other third party in order to effect a
transfer of such Asset, the Acquired Fund will identify each such asset to the Acquiring Fund on a mutually agreed upon date prior to
the Closing Date and will engage with the Acquiring Fund to complete such documentation as necessary to transfer such Assets to the Acquiring
Fund’s custodian as soon as reasonably practicable.
| 4. | REPRESENTATIONS
AND WARRANTIES |
4.1. Representations
and Warranties of the Acquired Fund. Except as has been fully disclosed to the Acquiring Fund as of the date hereof in a written
instrument executed by an officer of the Acquired Fund, the Acquired Fund represents and warrants to the Acquiring Fund as follows:
(a) The
Acquired Fund is a business trust duly organized, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts
with power under its Declaration of Trust and Amended and Restated By-Laws, each as amended from time-to-time, to own all of its properties
and assets and to carry on its business as it is presently conducted.
(b) The
Acquired Fund is registered with the Commission as a closed-end management investment company under the 1940 Act, and the Acquired Fund
Shares have been registered under the Securities Act of 1933, as amended (the “1933 Act”).
(c) At
the Effective Time, the Acquired Fund will have good and marketable title to the Assets and full right, power, and authority to sell,
assign, transfer and deliver such Assets hereunder free of any liens or other encumbrances except as otherwise disclosed to the Acquiring
Fund, and upon delivery and payment for such Assets, the Acquiring Fund will acquire all rights of the Acquired Fund thereto, subject
to no restrictions on the full transfer thereof other than such restrictions as might arise under the 1933 Act or as otherwise disclosed
to the Acquiring Fund.
(d) No
consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Acquired Fund
of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the Securities Exchange Act of 1934, as
amended (the “1934 Act”), and the 1940 Act, and such as may be required under state securities laws.
(e) The
shareholder reports, marketing and other related materials of the Acquired Fund and each prospectus and statement of additional information
of the Acquired Fund used for a period of six (6) years prior to the date of this Agreement conform or conformed at the time of
their use in all material respects to the applicable requirements of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not or did not at the time of their use include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not materially misleading.
(f) The
Acquired Fund is not engaged currently, and the execution, delivery and performance of this Agreement will not result, in: (i) a
violation of federal securities laws (including the 1940 Act) or of Massachusetts law in any material respect or a material violation
of its Declaration of Trust and Amended and Restated By-Laws, each as amended from time-to-time, or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Fund is a party or by which it is bound, or (ii) the acceleration of
any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to
which the Acquired Fund is a party or by which it is bound.
(g) All
material contracts or other commitments of the Acquired Fund (other than this Agreement and investment contracts, including options,
futures, forward contracts and other similar instruments) will terminate without liability or obligation to the Acquired Fund on or prior
to the Effective Time.
(h) Except
as otherwise disclosed to and accepted by the Acquiring Fund in writing, no litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or, to the Acquired Fund’s knowledge, threatened against the Acquired
Fund or any of the Acquired Fund’s properties or assets that, if adversely determined, is reasonably likely to materially and adversely
affect the Acquired Fund’s financial condition or the conduct of its business. The Acquired Fund knows of no facts which are reasonably
likely to form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body that materially and adversely affects the Acquired Fund’s business or its ability
to consummate the transactions herein contemplated.
(i) The
financial statements and financial highlights of the Acquired Fund at [November 30, 2023], have been audited by Deloitte &
Touche LLP, independent registered public accounting firm, and are in accordance with accounting principles generally accepted in the
United States of America (“GAAP”), and such statements present fairly, in all material respects, the financial position of
the Acquired Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Acquired Fund required
to be reflected on the statement of assets and liabilities (including the notes thereto) in accordance with GAAP as of such date not
disclosed therein.
(j) Since
[November 30, 2023], there has not been any material adverse change in the Acquired Fund’s financial condition, assets, liabilities
or business, other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness,
except as otherwise disclosed to the Acquiring Fund. For the purposes of this subparagraph (j), a decline in net asset value per share
of Acquired Fund Shares due to declines in market values of securities held by the Acquired Fund, the discharge of the Acquired Fund’s
liabilities, or the redemption of the Acquired Fund’s shares by shareholders of the Acquired Fund shall not constitute a material
adverse change.
(k) At
the Effective Time, all material Federal and other tax returns, dividend reporting forms, and other tax-related reports of the Acquired
Fund required by law to have been filed by such date (including any extensions, if any) shall have been filed and are or will be correct
in all material respects, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and no such return is currently under audit, and no assessment
has been asserted, in writing, with respect to such returns.
(l) The
Acquired Fund has not taken any action and does not know of any fact or circumstance that could reasonably be expected to prevent the
Reorganization from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(m) The
Acquired Fund has elected to be treated as a “regulated investment company” under Subchapter M of the Code. For each taxable
year since its commencement of operations (including the taxable year ending on the Closing Date), the Acquired Fund has met the requirements
of Subchapter M of the Code for qualification and treatment as a regulated investment company within the meaning of Section 851
et seq. of the Code and has been eligible to and has computed its federal income tax under Section 852 of the Code in respect of
each taxable year since its commencement of operations (including the taxable year ending on the Closing Date) and expects to continue
to meet such requirements at all times through the Closing Date. The Acquired Fund has not at any time since its inception been liable
for, nor is now liable for, any material income or excise tax pursuant to Sections 852 or 4982 of the Code. There is no other material
tax liability (including any foreign, state or local tax liability) of the Acquired Fund except as set forth and accrued on the Acquired
Fund’s books. The Acquired Fund has no earnings or profits accumulated with respect to any taxable year in which the provisions
of Subchapter M of the Code did not apply. The Acquired Fund will not be subject to corporate-level taxation on the sale of any assets
currently held by it as a result of the application of Section 337(d) of the Code and the regulations thereunder.
(n) The
Acquired Fund is in compliance in all material respects with applicable regulations of the Internal Revenue Service pertaining to the
reporting of dividends and other distributions on and redemptions of its shares of beneficial interest. To the knowledge of its officers,
the Acquired Fund has complied with the requirements for collection and maintenance of Forms W-9 and/or Forms W-8 and has withheld in
respect of dividends and other distributions and paid to the proper taxing authorities all taxes required to be withheld and is not liable
for any penalties which could be imposed thereunder. The Acquired Fund is not under audit by any federal, state or local taxing authority,
and there are no actual or proposed tax deficiencies with respect to the Acquired Fund that have been presented to the Acquired Fund
in writing.
(o) All
of the issued and outstanding shares of the Acquired Fund will, at the time of Closing, be held by the persons and in the amounts set
forth in the records of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or purchase any of the shares of the Acquired Fund, nor is there
outstanding any security convertible into any of the Acquired Fund’s shares.
(p) The
execution, delivery and performance of this Agreement have been duly authorized by all necessary action, if any, on the part of the Trustees
of the Acquired Fund, and, subject to the approval of the shareholders of the Acquired Fund, this Agreement will constitute a valid and
binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles.
(q) The
Proxy Statement/Prospectus (as defined in paragraph 5.6), insofar as it relates to information provided by the Acquired Fund for the
use therein, will, as of the effective time of the Acquiring Fund’s registration statement on Form N-14 (the “Registration
Statement”) in which it is included and any time prior to the Effective Time: (i) not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not materially misleading and (ii) comply in all material respects with the provisions of
the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations of the Commission thereunder; provided, however, that
the representations and warranties of this subparagraph (q) shall not apply to statements in or omissions from the Proxy Statement/Prospectus
made in reliance upon and in conformity with information that was furnished by the Acquiring Fund for use therein.
4.2. Representations
and Warranties of the Acquiring Fund. Except as has been fully disclosed to the Acquired Fund as of the date hereof in a written
instrument executed by an officer of the Acquiring Fund, Acquiring Fund represents and warrants to the Acquired Fund as follows:
(a) The
Acquiring Fund is a statutory trust duly organized, validly existing, and in good standing under the laws of the State of Delaware with
power under its Agreement and Declaration of Trust and Amended and Restated By-Laws, each as amended from time-to-time, to own all of
its properties and assets and to carry on its business as it is presently conducted.
(b) The
Acquiring Fund is registered with the Commission as a closed-end management investment company under the 1940 Act, and the Acquiring
Fund Shares have been registered under the 1933 Act.
(c) The
Acquiring Fund has not taken any action and does not know of any fact or circumstance that could reasonably be expected to prevent the
Reorganization from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(d) At
the Effective Time, all material Federal and other tax returns, dividend reporting forms, and other tax-related reports of the Acquiring
Fund required by law to have been filed by such date (including any extensions, if any) shall have been filed and are or will be correct
in all material respects, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof, and no such return is currently under audit, and no assessment
has been asserted, in writing, with respect to such returns.
(e) The
Acquiring Fund has elected to be treated as a “regulated investment company” under Subchapter M of the Code. For each taxable
year since its commencement of operations (including the period through the Closing Date), the Acquiring Fund has met the requirements
of Subchapter M of the Code for qualification and treatment as a regulated investment company within the meaning of Section 851
et seq. of the Code and has been eligible to and has computed its federal income tax under Section 852 of the Code and expects
to continue to meet such requirements at all times through the Closing Date. The Acquiring Fund has not at any time since its inception
been liable for, nor is now liable for, any material income or excise tax pursuant to Sections 852 or 4982 of the Code. There is no other
material tax liability (including any foreign, state or local tax liability) of the Acquiring Fund except as set forth and accrued on
the Acquiring Fund’s books. The Acquiring Fund has no earnings or profits accumulated with respect to any taxable year in which
the provisions of Subchapter M of the Code did not apply. The Acquiring Fund will not be subject to corporate-level taxation on the sale
of any assets currently held by it as a result of the application of Section 337(d) of the Code and the regulations thereunder.
(f) The
Acquiring Fund is in compliance in all material respects with applicable regulations of the Internal Revenue Service pertaining to the
reporting of dividends and other distributions on and redemptions of its common shares of beneficial interest. To the actual knowledge
of its officers, the Acquiring Fund has complied with the requirements for collection and maintenance of Forms W-9 and/or Forms W-8 and
has withheld in respect of dividends and other distributions and paid to the proper taxing authorities all taxes required to be withheld
and is not liable for any penalties which could be imposed thereunder. The Acquiring Fund is not under audit by any federal, state or
local taxing authority, and there are no actual or proposed tax deficiencies with respect to the Acquiring Fund that have been presented
to the Acquiring Fund in writing.
(g) No
consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Acquiring Fund
of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such
as may be required under state securities laws.
(h) The
shareholder reports, marketing and other related materials of the Acquiring Fund and each prospectus and statement of additional information
of the Acquiring Fund used at all times prior to the date of this Agreement conform or conformed at the time of their use in all material
respects to the applicable requirements of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not or did not at the time of their use include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,
not materially misleading.
(i) The
Acquiring Fund is not engaged currently, and the execution, delivery and performance of this Agreement will not result, in: (i) a
violation of federal securities laws (including the 1940 Act) or of Delaware law in any material respect or a material violation of its
Agreement and Declaration of Trust and Amended and Restated By-Laws, each as amended from time-to-time, or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring Fund is a party or by which it is bound, or (ii) the acceleration
of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree
to which the Acquiring Fund is a party or by which it is bound.
(j) Except
as otherwise disclosed to and accepted by the Acquired Fund in writing, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or, to the Acquiring Fund’s knowledge, threatened against the Acquiring
Fund or any of the Acquiring Fund’s properties or assets that, if adversely determined, is reasonably likely to materially and
adversely affect the Acquiring Fund’s financial condition or the conduct of its business. The Acquiring Fund knows of no facts
which are reasonably likely to form the basis for the institution of such proceedings and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body that materially and adversely affects the Acquiring Fund’s business
or its ability to consummate the transactions herein contemplated.
(k) The
Statement of Assets and Liabilities, Statement of Operations, Statements of Changes in Net Assets, and Schedule of Investments of the
Acquiring Fund at [October 31, 2023], have been audited by KPMG LLP, independent registered public accounting firm, and are in
accordance with GAAP consistently applied, and such statements present fairly, in all material respects, the financial condition of the
Acquiring Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Acquiring Fund required
to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date not disclosed therein.
(l) Since
[October 31, 2023], there has not been any material adverse change in the Acquiring Fund’s financial condition, assets, liabilities
or business, other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness,
except as otherwise disclosed to the Acquired Fund. For the purposes of this subparagraph (l), a decline in net asset value per share
of Acquiring Fund shares due to declines in market values of securities held by the Acquiring Fund, the discharge of the Acquiring Fund’s
liabilities, or the redemption of the Acquiring Fund’s shares by shareholders of the Acquiring Fund shall not constitute a material
adverse change.
(m) The
execution, delivery and performance of this Agreement have been duly authorized by all necessary action, if any, on the part of the Trustees
of the Acquiring Fund, and this Agreement will constitute a valid and binding obligation of the Acquiring Fund, enforceable in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting
creditors’ rights and to general equity principles.
(n) The
Acquiring Fund Shares to be issued and delivered to the Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, will at the Effective Time have been duly authorized and, when so issued and delivered, will be duly and
validly issued Acquiring Fund Shares, will be fully paid and non-assessable by the Acquiring Fund and will have been issued in every
jurisdiction in compliance in all material respects with applicable registration requirements and applicable securities laws. The Acquiring
Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the shares of the Acquiring
Fund, nor is there outstanding any security convertible into any of the Acquiring Fund’s shares.
(o) The
Proxy Statement/Prospectus (as defined in paragraph 5.6), insofar as it relates to the Acquiring Fund, will, as of the effective time
of the Registration Statement in which it is included and any time prior to the Effective Time: (i) not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which such statements were made, not materially misleading and (ii) comply in all material respects
with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations of the Commission thereunder;
provided, however, that the representations and warranties of this subparagraph (o) shall not apply to statements in or omissions
from the Proxy Statement/Prospectus made in reliance upon and in conformity with information that was furnished by the Acquired Fund
for use therein.
| 5. | COVENANTS
AND AGREEMENTS |
5.1. Conduct
of Business. The Acquiring Fund and the Acquired Fund each will operate its business in the ordinary course consistent with prior
practice between the date hereof and the Effective Time, it being understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution that may be advisable. Notwithstanding the forgoing,
the Acquired Fund will manage its portfolio with the same approximate level of trading, turnover and leverage consistent with past practice,
except as set forth in the Proxy Statement/Prospectus or to the extent agreed in advance with the Acquiring Fund.
5.2. No
Distribution of Acquiring Fund Shares. The Acquired Fund covenants that the Acquiring Fund Shares to be issued hereunder are
not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Agreement.
5.3. Information.
The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Acquired Fund Shares.
5.4. Other
Necessary Action. Subject to the provisions of this Agreement, the Acquiring Fund and the Acquired Fund will each take, or cause
to be taken, all action, and do or cause to be done all things, reasonably necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement.
5.5. Shareholder
Meeting. The Acquired Fund has called or will call a meeting of its shareholders to consider and act upon this Agreement and
to take such other action under applicable federal and state law to obtain approval of the transactions contemplated herein.
5.6. Proxy
Statement/Prospectus. The Acquired Fund has provided the Acquiring Fund with information regarding the Acquired Fund, and the
Acquiring Fund has provided the Acquired Fund with information regarding the Acquiring Fund, reasonably necessary for the preparation
by the Acquiring Fund of a Proxy Statement/Prospectus to be included in the Registration Statement (the “Proxy Statement/Prospectus”)
in compliance with the 1933 Act, the 1934 Act and the 1940 Act. If at any time prior to the Closing, the Acquired Fund or the Acquiring
Fund becomes aware of any untrue statement of material fact or omission to state a material fact required to be stated therein or necessary
to make the statements made not misleading in light of the circumstances under which they were made, the party discovering the item will
notify the other party and the parties will cooperate in promptly preparing, filing and clearing with the Commission and, if appropriate,
distributing to shareholders appropriate disclosure with respect to the item.
5.7. Liquidating
Distribution. As soon as is reasonably practicable after the Closing, the Acquired Fund will make a liquidating distribution
to its shareholders consisting of the Acquiring Fund Shares received at the Closing.
5.8. Efforts.
The Acquiring Fund and the Acquired Fund shall each use their reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent set forth in Article 6 to effect the transactions contemplated by this Agreement as promptly as reasonably practicable;
provided, that neither the Acquiring Fund nor the Acquired Fund shall be obligated to waive any condition precedent.
5.9. Other
Instruments. Each of the Acquired Fund and the Acquiring Fund covenants that it will, from time-to-time, execute and deliver
or cause to be executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action
as the other party may reasonably deem necessary or desirable in order to vest in and confirm: (a) to the Acquired Fund, title
to and possession of the Acquiring Fund Shares to be delivered hereunder, and (b) to the Acquiring Fund, title to and possession
of all the Assets and assumption of the Liabilities assumed hereunder and otherwise to carry out the intent and purpose of this Agreement.
5.10. Regulatory
Approvals. The Acquiring Fund will use all reasonable efforts to obtain the approvals and authorizations required by the 1933
Act, the 1934 Act, the 1940 Act and such of the state blue sky or securities laws as may be necessary in order to continue its operations
after the Effective Time.
5.11. Final
Tax Distribution. To the extent necessary to avoid entity-level income or excise tax, the Acquired Fund will declare one
or more dividends payable prior to the time of Closing to its shareholders.
5.12. Section 15(f).
The Acquiring Fund and Purchaser shall from and after the Effective Time comply in all material respects with Section 15(f) of
the 1940 Act and any rules and regulations of the Commission thereunder.
5.13. Fee
Limitation. The Purchaser covenants that the Amended and Restated Expense Limitation Agreement (as such term is defined
in the Registration Statement) shall be extended through one year from the date of the Closing, or June 30, 2025, whichever is
later.
5.14 Supplemental
Listing Application. The Acquiring Fund shall file a Supplemental Listing Application with the New York Stock Exchange for the
authorization of the listing of the number of additional Acquiring Fund Shares to be exchanged in the Reorganization as set forth in
Section 1.4 of this Agreement.
6.1. Conditions
Precedent to Obligations of Acquired Fund. The obligations of the Acquired Fund to complete the transactions provided for herein
shall be subject, at the Acquired Fund’s election, to the following conditions:
(a) All
representations and warranties of the Acquiring Fund contained in this Agreement shall be true and correct in all material respects as
of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Effective Time,
with the same force and effect as if made on and as of the Effective Time.
(b) The
Acquiring Fund shall have delivered to the Acquired Fund a certificate executed in the name of the Acquiring Fund by its President or
Vice President and its Treasurer, in a form reasonably satisfactory to the Acquired Fund, and dated as of the Effective Time, to the
effect that the representations and warranties of the Acquiring Fund made in this Agreement are true and correct in all material respects
at and as of the Effective Time, except as they may be affected by the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
(c) The
Acquiring Fund shall have performed in all material respects all of the covenants and complied in all material respects with all of the
provisions required by this Agreement to be performed or complied with by the Acquiring Fund, on or before the Effective Time.
(d) The
Acquired Fund and the Acquiring Fund shall have agreed on the number of Acquiring Fund Shares to be issued in connection with the Reorganization
after such number has been calculated in accordance with paragraph 2.3.
(e) The
Acquired Fund shall have received on the Closing Date the opinion of Dechert LLP, counsel to the Acquiring Fund (which may reasonably
rely as to matters governed by the laws of the State of Delaware on an opinion of Delaware counsel and/or certificates of officers or
Trustees of the Acquiring Fund) dated as of the Closing Date, covering the following points:
(i) The
Acquiring Fund is a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware and
has the power to own all of its properties and assets and to carry on its business including as a registered investment company, and
the Acquiring Fund has all necessary federal, state and local authorizations to carry on its business as now being conducted;
(ii) The
Agreement has been duly authorized, executed and delivered by the Acquiring Fund and, assuming due authorization, execution and delivery
of the Agreement by the Acquired Fund, is a valid and binding obligation of the Acquiring Fund enforceable against the Acquiring Fund
in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors’ rights generally and to general equity principles;
(iii) The
Acquiring Fund Shares to be issued to the Acquired Fund Shareholders as provided by this Agreement are duly authorized, upon such delivery
will be validly issued and outstanding, and are fully paid and non-assessable by the Acquiring Fund, and no shareholder of the Acquiring
Fund has any preemptive rights to subscription or purchase in respect thereof;
(iv) The
execution and delivery of the Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation
of the Acquiring Fund’s Agreement and Declaration of Trust or its Amended and Restated By-Laws, each as amended from time-to-time,
or a material violation of any provision of any agreement (known to such counsel) to which the Acquiring Fund is a party or by which
it is bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under
any agreement not disclosed to the Acquired Fund, judgment or decree to which the Acquiring Fund is a party or by which it is bound;
(v) To
the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States
or the State of Delaware is required to be obtained by the Acquiring Fund in order to consummate the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required under state securities
or blue sky laws (other than those of the State of Delaware);
(vi) The
Acquiring Fund is a registered investment company classified as a management company of the closed-end type under the 1940 Act, and its
registration with the Commission as an investment company under the 1940 Act is in full force and effect; and
(vii) To
the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body
is presently pending or threatened as to the Acquiring Fund or any of its properties or assets and the Acquiring Fund is not a party
to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects
its business.
6.2. Conditions
Precedent to Obligations of Acquiring Fund. The obligations of the Acquiring Fund to complete the transactions provided for herein
shall be subject, at the Acquiring Fund’s election, to the following conditions:
(a) All
representations and warranties of the Acquired Fund contained in this Agreement shall be true and correct in all material respects as
of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Effective Time,
with the same force and effect as if made on and as of the Effective Time.
(b) The
Acquired Fund shall have delivered to the Acquiring Fund a certificate executed in the name of the Acquired Fund by its President or
Vice President and its Treasurer, in a form reasonably satisfactory to the Acquiring Fund and dated as of the Effective Time, to the
effect that the representations and warranties of the Acquired Fund made in this Agreement are true and correct in all material respects
at and as of the Effective Time, except as they may be affected by the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
(c) The
Acquired Fund shall have performed in all material respects all of the covenants and complied in all material respects with all of the
provisions required by this Agreement to be performed or complied with by the Acquired Fund, on or before the Effective Time.
(d) The
Acquired Fund and the Acquiring Fund shall have agreed on the number of Acquiring Fund Shares to be issued in connection with the Reorganization
after such number has been calculated in accordance with paragraph 2.3.
(e) The
Acquiring Fund shall have received on the Closing Date the opinion of Chapman and Cutler LLP, counsel to the Acquired Fund (which may
reasonably rely as to matters governed by the laws of the Commonwealth of Massachusetts on an opinion of Massachusetts counsel and/or
certificates of officers of the Acquired Fund) dated as of the Closing Date, covering the following points:
(i) The
Acquired Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts
and has the power to own all of its properties and assets and to carry on its business as so described in the Proxy Statement/Prospectus,
including as a registered investment company, and the Acquired Fund has all necessary federal, state and local authorizations to carry
on its business as now being conducted and as so described in the Proxy Statement/Prospectus;
(ii) The
Agreement has been duly authorized, executed and delivered by the Acquired Fund and, assuming due authorization, execution and delivery
of the Agreement by the Acquiring Fund is a valid and binding obligation of the Acquired Fund enforceable against the Acquired Fund in
accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors’ rights generally and to general equity principles;
(iii) The
execution and delivery of the Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation
of the Acquired Fund’s Declaration of Trust or its Amended and Restated By-Laws, each as amended from time-to-time, or a material
violation of any provision of any agreement (known to such counsel) to which the Acquired Fund is a party or by which it is bound or,
to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any agreement not
disclosed to the Acquiring Fund, judgment or decree to which the Acquired Fund is a party or by which it is bound;
(iv) To
the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States
or the Commonwealth of Massachusetts is required to be obtained by the Acquired Fund in order to consummate the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required under state
securities or blue sky laws;
(v) The
Acquired Fund is a registered investment company classified as a management company of the closed-end type under the 1940 Act, and its
registration with the Commission as an investment company under the 1940 Act is in full force and effect;
(vi) The
outstanding shares of the Acquired Fund have been registered under the 1933 Act; and
(vii) To
the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body
is presently pending or threatened as to the Acquired Fund or any of its properties or assets and the Acquired Fund is not a party to
or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects
its business.
6.3. Other
Conditions Precedent. If any of the conditions set forth in this paragraph 6.3 have not been satisfied on or before the Effective
Time, the Acquired Fund or the Acquiring Fund shall, at its option, not be required to consummate the transactions contemplated by this
Agreement.
(a) The
Agreement and the transactions contemplated herein shall have been approved by (i) the Board of Trustees of the Acquired Fund and
(ii) the requisite shareholders of the Acquired Fund, and certified copies of the resolutions of the Board of Trustees of the Acquired
Fund evidencing such approvals shall have been delivered to the Acquiring Fund.
(b) Each
of the conditions to Closing (as defined in the Purchase Agreement) set forth in Section 7 of the Purchase Agreement have been
satisfied and the transactions contemplated by the Purchase Agreement will close concurrently with the Closing.
(c) Certified
copies of the resolutions evidencing the approval of the Agreement and the transactions contemplated herein by the Board of Trustees
of the Acquiring Fund shall have been delivered to the Acquired Fund, and certified copies of the resolutions evidencing the approval
of the Agreement and the transactions contemplated herein by the Board of Trustees of the Acquired Fund shall have been delivered to
the Acquiring Fund.
(d) The
Registration Statement of the Acquiring Fund shall have become effective under the 1933 Act, and no stop orders suspending the effectiveness
thereof shall have been issued.
(e) On
the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act or instituted
any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of
the 1940 Act.
(f) At
the Effective Time, no action, suit or other proceeding shall be pending or, to the knowledge of the Acquired Fund or the Acquiring Fund,
threatened before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated herein.
(g) All
consents of other parties and all other consents, orders and permits of Federal, state and local regulatory authorities deemed necessary
by the parties to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except
where failure to obtain any such consent, order or permit would not reasonably be expected to have a material adverse effect on the assets
or properties of the Acquiring Fund or the Acquired Fund, provided that either party hereto may for itself waive any such conditions.
(h) BNY
shall have delivered such certificates or other documents as set forth in paragraph 3.2.
(i) The
Transfer Agent shall have delivered a certificate of its authorized officer as set forth in paragraph 3.3.
(j) The
Acquiring Fund shall have issued and delivered to the Secretary of the Acquired Fund the confirmation as set forth in paragraph 3.3.
(k) The
New York Stock Exchange shall have authorized the listing of the number of additional Acquiring Fund Shares exchanged in the Reorganization
as set forth in Section 1.4 of this Agreement.
(l) The
parties hereto shall have received the opinion of the law firm of Dechert LLP (based on certain facts, assumptions and representations),
addressed to the Acquiring Fund and the Acquired Fund, substantially to the effect that, for federal income tax purposes:
(i) The
transfer of the Acquired Fund’s Assets in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of
the Liabilities of the Acquired Fund followed by the distribution by the Acquired Fund of Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their Acquired Fund Shares in liquidation of the Acquired Fund pursuant to and in accordance with the terms
of this Agreement will constitute a “reorganization” within the meaning of Section 368(a)(1) of the Code;
(ii) No
gain or loss will be recognized by the Acquiring Fund upon the receipt of the Acquired Fund Assets solely in exchange for Acquiring Fund
Shares and the assumption by the Acquiring Fund of the Liabilities of the Acquired Fund;
(iii) No
gain or loss will be recognized by the Acquired Fund upon the transfer of the Acquired Fund Assets to the Acquiring Fund in exchange
solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of the Liabilities of the Acquired Fund or upon the distribution
of Acquiring Fund Shares to the Acquired Fund Shareholders in exchange for their Acquired Fund Shares, except that the Acquired Fund
may be required to recognize gain or loss with respect to contracts described in Section 1256(b) of the Code or stock in
a passive foreign investment company, as defined in Section 1297(a) of the Code;
(iv) No
gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of the Acquired Fund Shares for Acquiring Fund Shares
(except with respect to cash received in lieu of fractional shares);
(v) The
aggregate tax basis for Acquiring Fund Shares received by each Acquired Fund Shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the Acquired Fund Shares held by each such Acquired Fund Shareholder immediately prior to the Reorganization
(reduced by any amount of tax basis allocable to fractional shares for which cash is received);
(vi) The
holding period of Acquiring Fund Shares to be received by each Acquired Fund Shareholder will include the period during which the Acquired
Fund Shares surrendered in exchange therefor were held (provided such Acquired Fund Shares were held as capital assets on the date of
the Reorganization);
(vii) Except
for assets which may be marked to market for federal income tax purposes as a consequence of a termination of the Acquired Fund’s
taxable year, the tax basis of the Acquired Fund Assets acquired by the Acquiring Fund will be the same as the tax basis of such assets
to the Acquired Fund in exchange therefor; and
(viii) The
holding period of the Acquired Fund Assets in the hands of the Acquiring Fund will include the period during which those assets were
held by the Acquired Fund (except where the investment activities of the Acquiring Fund have the effect of reducing or eliminating such
periods with respect to an Acquired Fund Asset).
(ix) The
Acquiring Fund will succeed to and take into account the items of the Acquired Fund described in Section 381(c) of the Code,
subject to the provisions and limitations specified in Sections 381, 382, 383, and 384 of the Code and the United States Treasury regulations
promulgated thereunder.
Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund, may waive the conditions set forth in this paragraph
6.3(l).
7.1. Indemnification
by the Acquiring Fund. The Acquiring Fund, solely out of its assets and property, agrees to indemnify and hold harmless the Acquired
Fund, and its Trustees, officers, employees and agents (the “Acquired Fund Indemnified Parties”) from and against any and
all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable
costs of investigation) to which the Acquired Fund Indemnified Parties may become subject, insofar as such loss, claim, damage, liability
or expense (or actions with respect thereto) arises out of or is based on: (a) any breach by the Acquiring Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement or (b) any act, error, omission, neglect, misstatement, materially
misleading statement, breach of duty or other act wrongfully done or attempted to be committed by the Acquiring Fund or the Acquiring
Fund’s Trustees, officers, employees or agents prior to the Closing Date, provided that this indemnification shall not apply to
the extent such loss, claim, damage, liability or expense (or actions with respect thereto) shall be due to any negligent, intentional
or fraudulent act, omission or error of the Acquired Fund Indemnified Parties.
7.2. Indemnification
by the Acquired Fund. The Acquired Fund, solely out of its assets and property, agrees to indemnify and hold harmless the Acquiring
Fund, and its Trustees, officers, employees and agents (the “Acquiring Fund Indemnified Parties”) from and against any and
all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable
costs of investigation) to which the Acquiring Fund Indemnified Parties may become subject, insofar as such loss, claim, damage, liability
or expense (or actions with respect thereto) arises out of or is based on: (a) any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement or (b) any act, error, omission, neglect, misstatement, materially
misleading statement, breach of duty or other act wrongfully done or attempted to be committed by the Acquired Fund or the Acquired Fund’s
Trustees, officers, employees or agents prior to the Closing Date, provided that this indemnification shall not apply to the extent such
loss, claim, damage, liability or expense (or actions with respect thereto) shall be due to any negligent, intentional or fraudulent
act, omission or error of the Acquiring Fund Indemnified Parties.
7.3. Liability
of the Acquired Fund. The parties understand and agree that the obligations of the Acquired Fund under this Agreement shall not
be binding upon any Trustee, shareholder, nominee, officer, agent or employee of or adviser to the Acquired Fund personally, but bind
only the Acquired Fund’s property. Moreover, all persons shall look only to the assets of the Acquired Fund to satisfy the obligations
of the Acquired Fund hereunder. The parties represent that they each have notice of the provisions of the Declaration of Trust of the
Acquired Fund, which is on file with the Secretary of the Commonwealth of Massachusetts, disclaiming such shareholder and Trustee liability
for acts or obligations of the Acquired Fund.
7.4. Liability
of the Acquiring Fund. The parties understand and agree that the obligations of the Acquiring Fund under this Agreement shall
not be binding upon any Trustee, shareholder, nominee, officer, agent or employee of or adviser to the Acquiring Fund personally, but
bind only the Acquiring Fund’s property. Moreover, all persons shall look only to the assets of the Acquiring Fund to satisfy the
obligations of the Acquiring Fund hereunder. The parties represent that they each have notice of the provisions of the Agreement and
Declaration of Trust of the Acquiring Fund disclaiming such shareholder and Trustee liability for acts or obligations of the Acquiring
Fund.
7.5. Remedies
Exclusive. From and after the Closing Date, except in the case of fraud, the remedies provided for in this Section 7 shall
constitute the sole and exclusive remedies for any claims made for breach of this Agreement. Each party hereby waives any provision of
applicable law to the extent that it would limit or restrict this paragraph 7.5.
| 8. | BROKERAGE
FEES AND EXPENSES |
8.1. No
Broker or Finder Fees. The Acquiring Fund and the Acquired Fund represent and warrant to each other that there are no brokers
or finders entitled to receive any payments in connection with the transactions provided for herein,
8.2. Expenses
of Reorganization. All fees and expenses incurred directly in connection with the consummation of the Reorganization and the
transactions contemplated by this Agreement will be borne by the Purchaser and the Seller as agreed between them, without regard to whether
the Reorganization is consummated, as set forth in the Purchase Agreement or otherwise agreed in writing. Notwithstanding the foregoing,
to the extent there are any transaction costs (including brokerage commissions, transaction charges and related fees) associated with
the sales and purchases made in connection with the Reorganization, these will be borne by the Acquired Fund with respect to the portfolio
transitioning conducted before the Reorganization and borne by the Acquiring Fund with respect to the portfolio transitioning conducted
after the Reorganization.
| 9. | AMENDMENTS
AND TERMINATION |
9.1. Amendments.
This Agreement may be amended, modified or supplemented in a signed writing in such manner as may be deemed necessary or advisable by
the authorized officers of each party, on behalf of either the Acquired Fund and the Acquiring Fund, subject to the authorization of
each such Fund’s Board of Trustees; provided, however, that following a meeting of the shareholders of the Acquired Fund called
by the Board of Trustees of the Acquired Fund pursuant to paragraph 5.5 of this Agreement, no such amendment may have the effect of changing
the provisions for determining the number of Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement
to the detriment of the shareholders of the Acquired Fund without the approval of the Board of Trustees of the Acquired Fund and the
Board of Trustees of the Acquiring Fund and the Acquired Fund Shareholders and, further provided, that the officers of the Acquired Fund
and the Acquiring Fund may change the Effective Time and Closing Date through an agreement in writing without additional specific authorization
by their respective Board of Trustees.
9.2. Termination.
This Agreement may be terminated and the transactions contemplated hereby may be abandoned by mutual agreement of the parties, at any
time prior to the Effective Time, if circumstances should develop that, in the opinion of the Board of Trustees of the Acquiring Fund
and the Board of Trustees of the Acquired Fund, make proceeding with the Agreement inadvisable. In addition, either the Acquiring Fund
or the Acquired Fund may at its option terminate this Agreement at or before the Closing Date due to: a breach by the other of any representation,
warranty, or agreement contained herein to be performed at or before the Closing Date, if not cured within 30 days after being provided
notice by the non-breaching party, or the failure of a condition set forth in paragraphs 6.1, 6.2 or 6.3, if it reasonably appears that
the condition will not or cannot be met, unless such condition is waived by the applicable party or parties (if applicable). Notwithstanding
the foregoing, if Purchaser validly terminates the Purchase Agreement, the Acquiring Fund shall be entitled to terminate this Agreement
by providing written notice to the Acquired Fund, and if Seller validly terminates the Purchase Agreement, the Acquired Fund shall be
entitled to terminate this Agreement by providing written notice to the Acquiring Fund. In the event of any such termination, in the
absence of willful default or breach, there shall be no liability for damages on the part of any of the Acquiring Fund, the Acquired
Fund or their respective Trustees or officers, to the other party or its Trustees or officers.
Any notice, report, statement
or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by facsimile, electronic delivery
(i.e., e-mail), personal service or prepaid or certified mail addressed as follows:
If to the Acquired Fund:
First Trust Specialty Finance and Financial Opportunities
Fund
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
Attention: W. Scott Jardine, Esq.
With copies (which shall not constitute notice) to:
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
Attention: Jonathan A. Koff, Esq.
If to the Acquiring Fund:
abrdn Total Dynamic Dividend Fund
1900 Market Street, Suite 200
Philadelphia, PA 19103
Attention: Lucia Sitar, Esq.
With copies (which shall not constitute notice) to:
abrdn Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
Attn: Legal Department / Alan Goodson / Lucia Sitar / Katherine
Corey / Benjamin Brust
Dechert LLP
1900 K Street NW
Washington, D.C. 20006
Attention: Thomas C. Bogle, Esq. and William J. Bielefeld, Esq.
| 11. | PUBLICITY
AND CONFIDENTIALITY |
11.1. Any
public announcements or similar publicity with respect to this Agreement or the transactions contemplated herein will be made at such
time and in such manner as the Acquired Fund, the Acquiring Fund, Purchaser and Seller mutually shall agree, provided that nothing herein
shall prevent either party from making such public announcements as may be required by law, in which case the party issuing such statement
or communication shall advise the other party prior to such issuance.
11.2. The
Acquired Fund, Acquiring Fund, Purchaser and Seller (for purposes of the paragraph 11.2, the “Protected Persons”) will hold,
and will cause their board members, officers, employees, representatives, agents and affiliates to hold, in strict confidence, and not
disclose to any other person, and not use in any way except in connection with the transactions herein contemplated, without the prior
written consent of the other Protected Persons, all non-public, confidential or proprietary information obtained from the other Protected
Persons in connection with the transactions contemplated by this Agreement, except such information may be disclosed: (i) to governmental
or regulatory bodies, and, where necessary, to any other person in connection with the obtaining of consents or waivers as contemplated
by this Agreement; (ii) if required by court order or decree or applicable law; (iii) if it is publicly available through
no act or failure to act of such party; (iv) if it was already known to such party on a non-confidential basis on the date of receipt;
(v) during the course of or in connection with any litigation, government investigation, arbitration, or other proceedings based
upon or in connection with the subject matter of this Agreement, including, without limitation, the failure of the transactions contemplated
hereby to be consummated; or (vi) if it is otherwise expressly provided for herein.
11.3. In
the event of a termination of this Agreement, the Acquiring Fund, the Acquired Fund Purchaser and Seller agree that they along with their
board members, employees, representative agents and affiliates shall, and shall cause their affiliates to, except with the prior written
consent of the other Protected Persons, keep secret and retain in strict confidence, and not use for the benefit of itself or themselves,
nor disclose to any other persons, any and all non-public, confidential or proprietary information relating to the other Protected Persons
and their affiliates, whether obtained through their due diligence investigation, this Agreement or otherwise, except such information
may be disclosed: (i) if required by court order or decree or applicable law; (ii) if it is publicly available through no
act or failure to act of such party; (iii) if it was already known to such party on a non-confidential basis on the date of receipt;
(iv) during the course of or in connection with any litigation, government investigation, arbitration, or other proceedings based
upon or in connection with the subject matter of this Agreement, including, without limitation, the failure of the transactions contemplated
hereby to be consummated; or (v) if it is otherwise expressly provided for herein.
12.1. Entire
Agreement. The parties agree that neither party has made any representation, warranty or covenant not set forth herein, and that
this Agreement constitutes the entire agreement between the parties.
12.2. Survival.
The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection
herewith, and the obligations with respect to indemnification of the Acquired Fund and Acquiring Fund contained in paragraphs 7.1 and
7.2, shall survive the Closing.
12.3. Headings.
The Article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.4. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of laws.
12.5. Assignment.
This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than
the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
12.6. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all taken together shall constitute
one agreement.
12.7. Waiver.
At any time before the Closing Date, any of the terms or conditions of this Agreement may be waived by either the Acquired Fund Board
or the Acquiring Fund Board (whichever is entitled to the benefit thereof), if, in the judgment of such board after consultation with
fund counsel, such action or waiver will not have a material adverse effect on the benefits intended in this Agreement to the shareholders
of their respective fund, on behalf of which such action is taken.
IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written.
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First
Trust Specialty Finance and Financial Opportunities Fund |
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ABRDN TOTAL DYNAMIC DIVIDEND FUND |
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By: |
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By: |
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Name: |
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Name: |
Title: |
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Title: |
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First
Trust Advisors L.P. agrees to the provisions of paragraphs 8.2, 11.1, 11.2 and 11.3 herein: |
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abrdn
INC. agrees to the provisions of paragraphs 5.12, 5.13, 8.2, 11.1, 11.2 and 11.3 herein: |
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By: |
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By: |
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Name: |
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Title: |
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Title: |
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328859-1_n148c004.jpg)
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[PROXY ID NUMBER HERE] [BAR CODE HERE] [CUSIP HERE]
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 22, 2024
The undersigned holder of shares of the First Trust Specialty Finance and Financial Opportunities Fund (“FGB” or the “Fund”), a Massachusetts business trust, hereby appoints W.
Scott Jardine, Kristi A. Maher, James M. Dykas, Derek Maltbie and Erin E. Klassman or any one of them, as attorneys and proxies for the undersigned, with full powers of substitution
and revocation, to represent the undersigned and to vote on behalf of the undersigned all shares of the Fund that the undersigned is entitled to vote at the Special Meeting of
Shareholders (the “Meeting”) which is expected to be held at the offices of First Trust Advisors L.P., 120 East Liberty Drive, Suite 400, Wheaton, IL 60187, on February 22, 2024, at
1:00 p.m. Central time, and any adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting of Shareholders and Proxy Statement/Prospectus dated [ ], 2023 (the “Proxy
Statement/Prospectus”), and hereby instructs said attorneys and proxies to vote said shares as indicated hereon. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting and any other adjournments or postponements thereof not set forth in the Proposal for the Fund (set forth on the
reverse side of this proxy card) (including, but not limited to, any questions as to adjournments or postponements of the Meeting). A majority of the proxies present and acting at
the Meeting in person or by substitute (or, if only one shall be so present, then that one) shall have and may exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given. This proxy, if properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction
is made, this proxy will be voted FOR the Fund’s Proposal set forth on the reverse side of this proxy card.
This proxy is solicited on behalf of the Board of Trustees, and the Proposal for the Fund (set forth on the reverse side of this proxy card) has been approved by the Board of
Trustees and recommended for approval by shareholders.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendation
of the Board of Trustees.
Do you have questions? If you have any questions about how to vote your proxy or about the Meeting in general, please call toll-free 1-866-796-
7172. Representatives are available to assist you Monday through Friday 9 a.m. to 10 p.m. Eastern Time. Important Notice Regarding the Availability of Proxy
Materials for the Special Meeting of Shareholders to be held on February 22, 2024. The proxy statement of the Fund is available at:
https://www.ftportfolios.com/LoadContent/gohdcqj3gy4y
1. MAIL your signed and voted proxy back in
the postage paid envelope provided
2. ONLINE at vote.proxyonline.com using your
proxy control number found below
3. By PHONE when you dial toll-free 1-866-
796-7172 to reach an automated touchtone
voting line
4. By PHONE with a live operator when you call
toll-free 1-866-796-7172 Monday through
Friday 9 a.m. to 10 p.m. Eastern time
SHAREHOLDER NAME
AND ADDRESS HERE
PROXY VOTING OPTIONS
CONTROL
PLEASE CAST YOUR PROXY VOTE TODAY! NUMBER
SIGN, DATE AND VOTE ON THE REVERSE SIDE
PROXY CARD
YOUR VOTE IS IMPORTANT NO
MATTER HOW MANY SHARES
YOU OWN. PLEASE CAST YOUR
PROXY VOTE TODAY! |
![GRAPHIC](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328859-1_n148c003.jpg)
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[PROXY ID NUMBER HERE] [BAR CODE HERE] [CUSIP HERE]
First Trust Specialty Finance and Financial
Opportunities Fund
IF YOU VOTE ONLINE OR BY PHONE, YOU NEED NOT RETURN THIS PROXY CARD.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE PROPOSAL SET
FORTH BELOW.
TO VOTE, MARK ONE CIRCLE BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example:●
THE BOARD OF TRUSTEES RECOMMENDS A VOTE “FOR” THE FUND’S PROPOSAL SET FORTH BELOW.
FOR AGAINST ABSTAIN
1.
To approve the Agreement and Plan of Reorganization providing for the transfer
of all of the assets of FGB to abrdn Total Dynamic Dividend Fund (the “Acquiring
Fund”) in exchange solely for newly issued common shares of beneficial interest
of the Acquiring Fund (although cash may be distributed in lieu of fractional shares
of the Acquiring Fund) and the assumption by the Acquiring Fund of all of the
liabilities of FGB and the distribution of common shares of beneficial interest of
the Acquiring Fund to the shareholders of FGB and complete liquidation of FGB
○ ○ ○
THANK YOU FOR VOTING
YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE
COUNTED. The signer(s) acknowledges receipt of the Proxy Statement
of the Fund. Your signature(s) on this Proxy should be exactly as your
name(s) appear on this Proxy (reverse side). If the shares are held jointly,
each holder should sign this Proxy. Attorneys-in-fact, executors,
administrators, trustees or guardians should indicate the full title and
capacity in which they are signing.
_______________________________________________________________
SIGNATURE (AND TITLE IF APPLICABLE) DATE
_______________________________________________________________
SIGNATURE (IF HELD JOINTLY) DATE
PROXY CARD |
The
information in this Statement of Additional Information is not complete and may be changed. The Fund may not sell these securities
until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional
Information is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
Subject
to Completion
December
12, 2023
STATEMENT OF ADDITIONAL INFORMATION
RELATING
TO THE REORGANIZATION OF
FIRST
TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND
WITH
AND INTO
ABRDN
TOTAL DYNAMIC DIVIDEND FUND
[
], 2023
This Statement of Additional Information (“SAI”)
is available to shareholders of abrdn Total Dynamic Dividend Fund (the “Fund”) and First Trust Specialty Finance and Financial
Opportunities Fund (the “Acquired Fund”) in connection with the proposed reorganization of the Acquired Fund into the Fund.
With respect to the reorganization, the Agreement and Plan of Reorganization provides for: (1) the transfer of all of the assets of the
Acquired Fund to the Fund, in exchange solely for shares of the Fund (although cash may be
distributed in lieu of fractional shares); (2) the assumption by the Fund of all liabilities of the Acquired Fund; (3) the
distribution of common shares of the Fund to the shareholders of the Acquired Fund; and (4) the complete liquidation of the Acquired
Fund (the “Reorganization”). The Fund as it would exist after the Reorganization is referred to as the “Combined Fund.”
This
SAI is not a prospectus and should be read in conjunction with the Proxy Statement/Prospectus dated [ ], 2023, and filed on Form
N-14 with the Securities and Exchange Commission (“SEC”) relating to the proposed Reorganization (the “Proxy
Statement/Prospectus”). A copy of the Proxy Statement/Prospectus and other information may be obtained without charge by
writing to the Fund c/o abrdn Inc., 1900 Market Street, Suite 200, Philadelphia, PA 19103, by calling 1-800-522-5465. You may
also obtain a copy of the Proxy Statement/Prospectus on the website of the SEC (http://www.sec.gov). Capitalized terms used but
not defined in this SAI have the meanings assigned to them in the Proxy Statement/Prospectus.
TABLE
OF CONTENTS
General |
3 |
Investment Objectives, Policies And Risks of the Fund |
3 |
Investment Restrictions of the Fund |
13 |
Management of the Fund |
13 |
Portfolio transactions and brokerage allocation |
23 |
Repurchase of Common Shares |
25 |
Material U.S. federal income tax considerations |
25 |
Proxy voting policy and proxy voting record |
33 |
Incorporation by reference |
34 |
Financial statements and supplemental financial information |
35 |
Legal counsel |
37 |
Additional information |
37 |
Appendix A—Description of securities ratings |
A-1 |
Appendix B—Proxy voting guidelines |
B-1 |
General
Prior
to June 10, 2022, abrdn Total Dynamic Dividend Fund was known as Aberdeen Total Dynamic Dividend Fund.
Investment
Objectives, Policies and Risks of the Fund
The
following information supplements the information contained in the Proxy Statement/Prospectus concerning the investment objectives
and policies of the Fund. The investment policies described below, except as set forth under “Investment Restrictions”
or as otherwise noted, are not fundamental policies and may be changed by the Fund’s Board of Trustees (the “Board”),
without the approval of shareholders.
The
following information supplements the discussion of the Fund’s investment objectives, principal investment strategies and
principal risks that appears in the Proxy Statement/Prospectus and does not, by itself, present a complete or accurate explanation
of the matters disclosed. Readers must refer also to the Proxy Statement/Prospectus for a complete presentation of the matters
disclosed below. The following is not meant to be an exclusive list of all the securities and instruments in which the Fund may
invest or investment strategies in which it may engage, and the Fund may invest in instruments and securities and engage in strategies
other than those listed below.
Common
Stocks
The
Fund invests primarily in common stocks. Common stocks represent an ownership interest in an issuer. While offering greater potential
for long-term growth, common stocks are more volatile and riskier than some other forms of investment. Common stock prices fluctuate
for many reasons, including adverse events, such as an unfavorable earnings report, changes in investors' perceptions of the financial
condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting the
issuers occur. In addition, common stock prices may be sensitive to rising interest rates as the costs of capital rise and borrowing
costs increase.
Preferred
Stocks
Preferred
stock, like common stock, represents an equity ownership in an issuer. Generally, preferred stock has a priority of claim over
common stock in dividend payments and upon liquidation of the issuer. Unlike common stock, preferred stock does not usually have
voting rights. Preferred stock in some instances is convertible into common stock. Although they are equity securities, preferred
stocks have characteristics of both debt and common stock. Like debt, their promised income is contractually fixed. Like common
stock, they do not have rights to precipitate bankruptcy proceedings or collection activities in the event of missed payments.
Other equity characteristics are their subordinated position in an issuer's capital structure and that their quality and value
are heavily dependent on the profitability of the issuer rather than on any legal claims to specific assets or cash flows.
Distributions
on preferred stock must be declared by the board of directors of the issuer and may be subject to deferral, and thus they may
not be automatically payable. Income payments on preferred stock may be cumulative, causing dividends and distributions to accrue
even if not declared by the issuer's board of directors or otherwise made payable, or they may be non-cumulative, so that skipped
dividends and distributions do not continue to accrue. There is no assurance that dividends on preferred stocks in which the Fund
invests will be declared or otherwise made payable. The Fund may invest in non-cumulative preferred stock, although the Adviser
would consider, among other factors, their non-cumulative nature in making any decision to purchase or sell such securities.
Shares
of preferred stock have a liquidation value that generally equals the original purchase price at the date of issuance. The market
values of preferred stock may be affected by favorable and unfavorable changes impacting the issuers' industries or sectors, including
companies in the utilities and financial services sectors, which are prominent issuers of preferred stock. They may also be affected
by actual and anticipated changes or ambiguities in the tax status of the security and by actual and anticipated changes or ambiguities
in tax laws, such as changes in corporate and individual income tax rates, and in the dividends received deduction for corporate
taxpayers or the lower rates applicable to certain dividends.
Because
the claim on an issuer's earnings represented by preferred stock may become onerous when interest rates fall below the rate payable
on the stock or for other reasons, the issuer may redeem preferred stock, generally after an initial period of call protection
in which the stock is not redeemable. Thus, in declining interest rate environments in particular, the Fund's holdings of higher
dividend-paying preferred stocks may be reduced and the Fund may be unable to acquire securities paying comparable rates with
the redemption proceeds.
Foreign
Securities
Although
it is not required to, under normal circumstances, the Fund invests 35-80% of its total assets in securities of issuers located
in foreign countries. The Fund invests in foreign securities, including direct investments in securities of foreign issuers and
investments in depository receipts (such as American Depositary Receipts ("ADRs")) that represent indirect interests
in securities of foreign issuers. The Fund is not limited in the amount of assets it may invest in such foreign securities. These
investments involve risks not associated with investments in the United States, including the risk of fluctuations in foreign
currency exchange rates, unreliable and untimely information about the issuers and political and economic instability. These risks
could result in the Adviser's misjudging the value of certain securities or in a significant loss in the value of those securities.
The
value of foreign securities is affected by changes in currency rates, foreign tax laws (including withholding tax), government
policies (in the United States or abroad), relations between nations and trading, settlement, and custodial and other operational
risks. In addition, the costs of investing abroad are generally higher than in the United States, and foreign securities markets
may be less liquid, more volatile and less subject to governmental supervision than markets in the United States. As an alternative
to holding foreign-traded securities, the Fund may invest in dollar-denominated securities of foreign companies that trade on
U.S. exchanges or in the U.S. over-the-counter market (including depositary receipts as described below, which evidence ownership
in underlying foreign securities, and ETFs as described above).
Because
foreign companies are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly available information about a foreign company than
about a domestic company. Volume and liquidity in most foreign debt markets are less than in the United States and securities
of some foreign companies are less liquid and more volatile than securities of comparable U.S. companies. There is generally less
government supervision and regulation of securities exchanges, broker-dealers and listed companies than in the United States.
Mail service between the United States and foreign countries may be slower or less reliable than within the United States, thus
increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. Payment
for securities before delivery may be required. In addition, with respect to certain foreign countries, there is the possibility
of expropriation or confiscatory taxation, political or social instability, or diplomatic developments which could affect investments
in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects
as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments
position. Foreign securities markets, while growing in volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those located in developing countries) may be less liquid
and more volatile than securities of comparable U.S. companies.
The
Fund may purchase ADRs, European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which
are certificates evidencing ownership of shares of foreign issuers and are alternatives to purchasing directly the underlying
foreign securities in their national markets and currencies. However, such depository receipts continue to be subject to many
of the risks associated with investing directly in foreign securities. These risks include foreign exchange risk as well as the
political and economic risks associated with the underlying issuer's country. ADRs, EDRs and GDRs may be sponsored or unsponsored.
Unsponsored receipts are established without the participation of the issuer. Unsponsored receipts may involve higher expenses,
they may not pass-through voting or other shareholder rights, and they may be less liquid. Less information is normally available
on unsponsored receipts.
Dividends
paid on foreign securities may not qualify for the reduced federal income tax rates applicable to qualified dividends under the
Code. As a result, there can be no assurance as to what portion of the Fund's distributions attributable to foreign securities
will be designated as qualified dividend income.
Emerging
Market Securities
The
Fund may invest up to 35% of its assets in securities of issuers located in emerging markets. The Fund uses the MSCI Emerging
Markets Index methodology to determine which countries are considered emerging markets. The risks of foreign investments described
above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally
smaller, less developed, less liquid, and more volatile than the securities markets of the United States and developed foreign
markets. Disclosure and regulatory standards in many respects are less stringent than in the United States and developed foreign
markets. There also may be a lower level of monitoring and regulation of securities markets in emerging market countries and the
activities of investors in such markets and enforcement of existing regulations has been extremely limited. Many emerging countries
have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations
in inflation rates have had and may continue to have very negative effects on the economies and securities markets of certain
emerging countries. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency
values, and other protectionist measures imposed or negotiated by the countries with which they trade. The economies of these
countries also have been and may continue to be adversely affected by economic conditions in the countries in which they trade.
The economies of countries with emerging markets may also be predominantly based on only a few industries or dependent on revenues
from particular commodities. In addition, custodial services and other costs relating to investment in foreign markets may be
more expensive in emerging markets than in many developed foreign markets, which could reduce the Fund's income from such securities.
In
many cases, governments of emerging countries continue to exercise significant control over their economies, and government actions
relative to the economy, as well as economic developments generally, may affect the Fund's investments in those countries. In
addition, there is a heightened possibility of expropriation or confiscatory taxation, imposition of withholding taxes on interest
payments, or other similar developments that could affect investments in those countries. There can be no assurance that adverse
political changes will not cause the Fund to suffer a loss of any or all of its investments.
Dividends
paid by issuers in emerging market countries will generally not qualify for the reduced federal income tax rates applicable to
qualified dividends under the Code.
Real
Estate Investment Trusts
The
Fund may invest in REITs. REITs are financial vehicles that pool investors' capital to purchase or finance real estate. The market
value of REIT shares and the ability of REITs to distribute income may be adversely affected by numerous factors, including rising
interest rates, changes in the national, state and local economic climate and real estate conditions, perceptions of prospective
tenants of the safety, convenience and attractiveness of the properties, the ability of the owners to provide adequate management,
maintenance and insurance, the cost of complying with the Americans with Disabilities Act, increasing competition and compliance
with environmental laws, changes in real estate taxes and other operating expenses, adverse changes in governmental rules and
fiscal policies, adverse changes in zoning laws, and other factors beyond the control of the issuers. In addition, distributions
received by the Fund from REITs may consist of dividends, capital gains and/or return of capital. As REITs generally pay a higher
rate of dividends than most other operating companies, to the extent application of the Fund's investment strategy results in
the Fund investing in REIT shares, the percentage of the Fund's dividend income received from REIT shares will likely exceed the
percentage of the Fund's portfolio that is comprised of REIT shares.
Dividends
paid by REITs will generally not qualify for the reduced federal income tax rates applicable to qualified dividends under the
Code.
Master
Limited Partnerships
A
master limited partnership ("MLP") is a publicly traded company organized as a limited partnership or limited liability
company and treated as a partnership for federal income tax purposes. MLPs may derive income and gains from the exploration, development,
mining or production, processing, refining, transportation (including pipelines transporting gas, oil, or products thereof), or
the marketing of any mineral or natural resources. MLPs generally have two classes of owners, the general partner and limited
partners. When investing in an MLP, the Fund intends to purchase publicly traded common units issued to limited partners of the
MLP. The general partner of an MLP is typically owned by one or more of the following: a major energy company, an investment fund,
or the direct management of the MLP. The general partner may be structured as a private or publicly traded corporation or other
entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in
the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership,
through ownership of common units, and have a limited role in the partnership's operations and management.
MLPs
combine the tax advantages of a partnership with the liquidity of a publicly traded stock. MLP income is generally not subject
to entity-level tax. Instead, an MLP's income, gain, loss, deductions and other tax items pass through to common unitholders.
MLPs
are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions
up to an established minimum amount ("minimum quarterly distributions" or "MQD"). Common and general partner
interests also accrue arrearages in distributions to the extent the MQD is not paid. Once common and general partner interests
have been paid, subordinated units receive distributions of up to the MQD; however, subordinated units do not accrue arrearages.
Distributable cash in excess of the MQD paid to both common and subordinated units is distributed to both common and subordinated
units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner
operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the
general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage
of the incremental cash distributions. A common arrangement provides that the general partner can reach a tier where it receives
50% of every incremental dollar paid to common and subordinated unit holders. These incentive distributions encourage the general
partner to streamline costs, increase capital expenditures and acquire assets in order to increase the partnership's cash flow
and raise the quarterly cash distribution in order to reach higher tiers. Such results benefit all security holders of the MLP.
MLP
common units represent limited partnership interests in the MLP. Common units are listed and traded on U.S. securities exchanges,
with their value fluctuating predominantly based on prevailing market conditions and the success of the MLP. The Fund intends
to purchase common units in market transactions. Unlike owners of common stock of a corporation, owners of common units have limited
voting rights and have no ability annually to elect directors. In the event of liquidation, common units have preference over
subordinated units, but not debt or preferred units, to the remaining assets of the MLP. The Fund intends to invest in MLPs only
to an extent and in a manner consistent with the Fund's qualification as a regulated investment company under the Code.
Exchange
Traded Funds
The
Fund may invest in ETFs, which are investment companies that seek to track or replicate a desired index, such as a sector, market
or global segment. ETF shares are traded on a national exchange. ETFs do not sell individual shares directly to investors and
only issue their shares in large blocks known as "creation units." The investor purchasing a creation unit may sell
the individual shares on a secondary market.
Therefore,
the liquidity of ETFs depends on the adequacy of the secondary market. There can be no assurance that an ETF's investment objective
will be achieved, as ETFs based on an index may not replicate and maintain exactly the composition and relative weightings of
securities in the index. ETFs are subject to the risks of investing in the underlying securities. The Fund, as a holder of the
securities of the ETF, will bear its pro rata portion of the ETF's expenses, including advisory fees. These expenses are in addition
to the direct expenses of the Fund's own operations.
Convertible
Securities
The
Fund may invest in convertible securities. Convertible securities include fixed income securities that may be exchanged or converted
into a predetermined number of shares of the issuer's underlying common stock at the option of the holder during a specified period.
Convertible securities may take the form of convertible preferred stock, convertible bonds or debentures, units consisting of
"usable" bonds and warrants or a combination of the features of several of these securities. The investment characteristics
of each convertible security vary widely, which allows convertible securities to be employed for a variety of investment strategies.
The
Fund will exchange or convert convertible securities into shares of underlying common stock when, in the opinion of the Adviser,
the investment characteristics of the underlying common shares will assist the Fund in achieving its investment objectives. The
Fund may also elect to hold or trade convertible securities. In selecting convertible securities, the Adviser evaluates the investment
characteristics of the convertible security as a fixed income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a particular convertible security, the Adviser
considers numerous factors, including the economic and political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the issuer's management capability and practices.
Corporate
Bonds, Government Debt Securities and Other Debt Securities
The
Fund may invest in corporate bonds, debentures and other debt securities. Debt securities in which the Fund may invest may pay
fixed or variable rates of interest. Bonds and other debt securities generally are issued by corporations and other issuers to
borrow money from investors. The issuer pays the investor a fixed or variable rate of interest and normally must repay the amount
borrowed on or before maturity. Certain debt securities are "perpetual" in that they have no maturity date.
The
Fund invests in government debt securities, including those of U.S. issuers, emerging market issuers and of other non-U.S. issuers.
These securities may be U.S. dollar-denominated or non-U.S. dollar-denominated and include: (i) debt obligations issued or guaranteed
by foreign national, provincial, state, municipal or other governments with taxing authority or by their agencies or instrumentalities;
and (ii) debt obligations of supranational entities. Government debt securities include: debt securities issued or guaranteed
by governments, government agencies or instrumentalities and political subdivisions; debt securities issued by government owned,
controlled or sponsored entities; interests in entities organized and operated for the purpose of restructuring the investment
characteristics issued by the above-noted issuers; or debt securities issued by supranational entities such as the World Bank
or the European Union. The Fund may also invest in securities denominated in currencies of emerging market countries. Emerging
market debt securities generally are rated in the lower rating categories of recognized credit rating agencies or are unrated
and considered to be of comparable quality to lower rated debt securities. A non-U.S. issuer of debt or the non-U.S. governmental
authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the
Fund may have limited resources in the event of a default. Some of these risks do not apply to issuers in large, more developed
countries. These risks are more pronounced in investments in issuers in emerging markets or if the Fund invests significantly
in one country.
The
Fund will not invest more than 20% of its total assets in debt securities rated below investment grade (i.e., securities rated
lower than Baa by Moody's Investors Service, Inc. ("Moody's") or lower than BBB by Standard & Poor's Rating Services,
a division of The McGraw-Hill Companies, Inc. ("S&P")), or their equivalent as determined by the Adviser. These
securities are commonly referred to as "junk bonds." The foregoing credit quality policy applies only at the time a
security is purchased, and the Fund is not required to dispose of securities already owned by the Fund in the event of a change
in assessment of credit quality or the removal of a rating.
Illiquid
Securities
Illiquid
securities are securities that are not readily marketable. Illiquid securities include securities that have legal or contractual
restrictions on resale, and repurchase agreements maturing in more than seven days. Illiquid securities involve the risk that
the securities will not be able to be sold at the time desired or at prices approximating the value at which the Fund is carrying
the securities. Where registration is required to sell a security, the Fund may be obligated to pay all or part of the registration
expenses, and a considerable period may elapse between the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to sell. The Fund may invest up to 10% of the value of its net assets
in illiquid securities. Restricted securities for which no market exists and other illiquid investments are valued at fair value
as determined in accordance with procedures approved and periodically reviewed by the Board of Trustees.
Rule
144A Securities
The
Fund may invest in restricted securities that are eligible for resale pursuant to Rule 144A under the Securities Act of 1933,
as amended, (the "1933 Act"). Generally, Rule 144A establishes a safe harbor from the registration requirements of the
1933 Act for resale by large institutional investors of securities that are not publicly traded. The Adviser determines the liquidity
of the Rule 144A securities according to guidelines adopted by the Board of Trustees. The Board of Trustees monitors the application
of those guidelines and procedures. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are
not subject to the Fund's 10% limit on investments in illiquid securities.
Warrants
The
Fund may invest in equity and index warrants of domestic and international issuers. Equity warrants are securities that give the
holder the right, but not the obligation, to subscribe for equity issues of the issuing company or a related company at a fixed
price either on a certain date or during a set period. Changes in the value of a warrant do not necessarily correspond to changes
in the value of its underlying security. The price of a warrant may be more volatile than the price of its underlying security,
and a warrant may offer greater potential for capital appreciation as well as capital loss.
Warrants
do not entitle a holder to dividends or voting rights with respect to the underlying security and do not represent any rights
in the assets of the issuing company. A warrant ceases to have value if it is not exercised prior to its expiration date. These
factors can make warrants more speculative than other types of investments. The sale of a warrant results in a long- or short-term
capital gain or loss depending on the period for which the warrant is held.
Other
Investments
The
Fund may use a variety of other investment instruments in pursuing its investment objectives. The investments of the Fund may
include fixed income securities, sovereign debt, options on foreign currencies and forward foreign currency contracts.
Investment
Techniques
The
Fund may, but is under no obligation to, from time to time employ a variety of investment techniques, including those described
below, to hedge against fluctuations in the price of portfolio securities, to enhance total return or to provide a substitute
for the purchase or sale of securities. Some of these techniques, such as purchases of put and call options, options on stock
indices and stock index futures and entry into certain credit derivative transactions, may be used as hedges against or substitutes
for investments in equity securities. Other techniques such as the purchase of interest rate futures and entry into transactions
involving interest rate swaps, options on interest rate swaps and certain credit derivatives are hedges against or substitutes
for investments in debt securities. The Fund's ability to utilize any of the techniques described below may be limited by restrictions
imposed on its operations in connection with obtaining and maintaining its qualification as a regulated investment company under
the Code. Additionally, other factors (such as cost) may make it impractical or undesirable to use any of these investment techniques
from time to time.
Short
Sales
The
Fund may from time to time engage in short sales of securities, for investment or for hedging purposes. Short sales are transactions
in which the Fund sells a security it does not own. To complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is then obligated to replace the security borrowed by purchasing the security at the market price at the
time of replacement. The Fund may be required to pay a fee to borrow particular securities and is often obligated to pay over
any payments received on such borrowed securities. In the event that the Fund elects to pursue such a strategy, the Fund expects
it would sell shares of portfolio securities short through a pair trade system, where it would maintain a long position in a basket
of dividend-paying stocks and a short position in a security or securities replicating an index, which the Fund expects to be
outperformed by the dividend-paying stocks it owns.
The
Fund may also sell short individual stocks that the Fund expects to underperform other stocks which the Fund holds. For hedging
purposes, the Fund may purchase or sell short futures contracts on global equity indexes.
The
Fund's obligation to replace the borrowed security will be secured by collateral deposited with the broker-dealer, usually cash,
U.S. government securities or other liquid securities. The Fund will also be required to designate on its books and records similar
collateral with its custodian to the extent, if any, necessary so that the aggregate collateral value is at all times at least
equal to the current market value of the security sold short. Depending on arrangements made with the broker-dealer from which
it borrowed the security regarding payment over of any payments received by the Fund on such security, the Fund may not receive
any payments (including interest) on its collateral deposited with such broker-dealer.
If
the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a gain. Any gain will be decreased,
and any loss increased, by the transaction costs described above. Although the Fund's gain is limited to the price at which it
sold the security short, its potential loss is unlimited.
The
Fund may also sell a security short if it owns at least an equal amount of the security sold short or another security convertible
or exchangeable for an equal amount of the security sold short without payment of further compensation (a short sale against-the-box).
In a short sale against-the-box, the short seller is exposed to the risk of being forced to deliver stock that it holds to close
the position if the borrowed stock is called in by the lender, which would cause gain or loss to be recognized on the delivered
stock. The Fund expects normally to close its short sales against-the-box by delivering newly acquired stock.
Purchasing
securities to close out the short position can itself cause the price of the securities to rise further, thereby exacerbating
the loss. Short-selling exposes the Fund to unlimited risk with respect to that security due to the lack of an upper limit on
the price to which an instrument can rise. Although the Fund reserves the right to utilize short sales, and currently intends
to utilize short sales, the Adviser is under no obligation to utilize short sales at all. The Fund currently intends to close
out each short position prior to the underlying issuer's ex-dividend date, if any, to avoid the Fund incurring any dividend expense
in connection with such short position.
The
Fund anticipates that it will generally not make a short sale if, after giving effect to such sale, the market value of all securities
sold short by the Fund exceeds 20% of the value of its total assets.
Options
on Securities
In
order to hedge against adverse market shifts, the Fund may utilize up to 10% of its total assets (in addition to the 10% limit
applicable to options on stock indices described below) to purchase put and call options on securities. The Fund will also, in
certain situations, augment its investment positions by purchasing call options, both on specific equity securities, as well as
securities representing exposure to equity sectors or indices and fixed income indices. In addition, the Fund may seek to increase
its income or may hedge a portion of its portfolio investments through writing (i.e., selling) covered put and call options. A
put option embodies the right of its purchaser to compel the writer of the option to purchase from the option holder an underlying
security or its equivalent at a specified price at any time during the option period. In contrast, a call option gives the purchaser
the right to buy the underlying security or its equivalent covered by the option or its equivalent from the writer of the option
at the stated exercise price. Under interpretations of the SEC currently in effect, which may change from time to time, a "covered"
call option means that so long as the Fund is obligated as the writer of the option, it will own (1) the underlying instruments
subject to the option, (2) instruments convertible or exchangeable into the instruments subject to the option or (3) a call option
on the relevant instruments with an exercise price no higher than the exercise price on the call option written.
The
Fund will receive a premium when it writes put and call options, which increases the Fund's return on the underlying security
in the event the option expires unexercised or is closed out at a profit. By writing a call, the Fund will limit its opportunity
to profit from an increase in the market value of the underlying security above the exercise price of the option for as long as
the Fund's obligation as the writer of the option continues. Upon the exercise of a put option written by the Fund, the Fund may
suffer an economic loss equal to the difference between the price at which the Fund is required to purchase the underlying security
and its market value at the time of the option exercise, less the premium received for writing the option. Upon the exercise of
a call option written by the Fund, the Fund may suffer an economic loss equal to the excess of the security's market value at
the time of the option exercise over the price at which the Fund is required to sell the underlying security less the premium
received for writing the option. Thus, in some periods the Fund might receive less total return and in other periods greater total
return from its hedged positions than it would have received from leaving its underlying securities unhedged.
The
Fund may purchase and write options on securities that are listed on national securities exchanges or are traded over the counter,
although it expects, under normal circumstances, to effect such transactions on national securities exchanges.
As
a holder of a put option, the Fund will have the right to sell the securities underlying the option and as the holder of a call
option, the Fund will have the right to purchase the securities underlying the option, in each case at their exercise price at
any time prior to the option's expiration date. The Fund may choose to exercise the options it holds, permit them to expire or
terminate them prior to their expiration by entering into closing sale transactions. In entering into a closing sale transaction,
the Fund would sell an option of the same series as the one it has purchased. The ability of the Fund to enter into a closing
sale transaction with respect to options purchased and to enter into a closing purchase transaction with respect to options sold
depends on the existence of a liquid secondary market. There can be no assurance that a closing purchase or sale transaction can
be effected when the Fund so desires. The Fund's ability to terminate option positions established in the over-the-counter market
may be more limited than in the case of exchange-traded options and may also involve the risk that securities dealers participating
in such transactions would fail to meet their obligations to the Fund.
In
purchasing a put option, the Fund will seek to benefit from a decline in the market price of the underlying security, while in
purchasing a call option, the Fund will seek to benefit from an increase in the market price of the underlying security. If an
option purchased is not sold or exercised when it has remaining value, or if the market price of the underlying security remains
equal to or greater than the exercise price, in the case of a put, or remains equal to or below the exercise price, in the case
of a call, during the life of the option, the option will expire worthless. For the purchase of an option to be profitable, the
market price of the underlying security must decline sufficiently below the exercise price, in the case of a put, and must increase
sufficiently above the exercise price, in the case of a call, to cover the premium and transaction costs. Because option premiums
paid by the Fund are small in relation to the market value of the instruments underlying the options, buying options can result
in large amounts of leverage. The leverage offered by trading in options could cause the Fund's net asset value ("NAV")
to be subject to more frequent and wider fluctuation than would be the case if the Fund did not invest in options.
Options
on Stock Indices
The
Fund may utilize up to 10% of its total assets (in addition to the 10% limit applicable to options on securities) to purchase
put and call options on domestic stock indices to hedge against risks of market-wide price movements affecting its assets. The
Fund will also, in certain situations, augment its investment positions by purchasing call options, both on specific equity securities,
as well as securities representing exposure to equity sectors or indices and fixed income indices. In addition, the Fund may write
covered put and call options on stock indices. A stock index measures the movement of a certain group of stocks by assigning relative
values to the common stocks included in the index. Options on stock indices are similar to options on securities. Because no underlying
security can be delivered, however, the option represents the holder's right to obtain from the writer, in cash, a fixed multiple
of the amount by which the exercise price exceeds (in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the exercise date. The advisability of using stock index options to hedge against the risk of market-wide
movements will depend on the extent of diversification of the Fund's investments and the sensitivity of its investments to factors
influencing the underlying index. The effectiveness of purchasing or writing stock index options as a hedging technique will depend
upon the extent to which price movements in the Fund's securities investments correlate with price movements in the stock index
selected. In addition, successful use by the Fund of options on stock indices will be subject to the ability of the Adviser to
predict correctly changes in the relationship of the underlying index to the Fund's portfolio holdings. No assurance can be given
that the Adviser's judgment in this respect will be correct.
Portfolio
Turnover
The
Fund may engage in short-term trading strategies, and securities may be sold without regard to the length of time held when, in
the opinion of the Adviser, investment considerations warrant such action. These policies, together with the ability of the Fund
to effect short sales of securities and to engage in transactions in options and futures, may have the effect of increasing the
Fund's annual rate of portfolio turnover. It is expected that the annual portfolio turnover rate of the Fund will likely exceed
100%. A high turnover rate (100% or more) necessarily involves greater trading costs to the Fund and may result in the realization
of net short term capital gains. If securities are not held for the applicable holding periods, dividends paid on them will not
qualify for the advantageous federal tax rates.
Foreign
Currency Transactions
The
Fund may engage in foreign currency exchange transactions in connection with its investments in foreign securities. The Fund will
conduct its foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market or through forward contracts to purchase or sell foreign currencies, including the payment of dividends
and the settlement of securities transactions which otherwise might require untimely dispositions of Fund securities.
Forward
Foreign Currency Exchange Contracts
The
Fund may enter into forward foreign currency exchange contracts in order to protect against possible losses on foreign investments
resulting from adverse changes in the relationship between the U.S. dollar and foreign currencies. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number
of days (usually less than one year) from the date of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has a deposit requirement, and no commissions are charged at any stage
for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference
(the spread) between the price at which they are buying and selling various currencies. However, forward foreign currency exchange
contracts may limit potential gains which could result from a positive change in such currency relationships. The Fund does not
speculate in foreign currency.
Except
for cross-hedges, the Fund will not enter into forward foreign currency exchange contracts or maintain a net exposure in such
contracts when it would be obligated to deliver an amount of foreign currency in excess of the value of its portfolio securities
or other assets denominated in that currency or, in the case of a "cross-hedge," denominated in a currency or currencies
that the Adviser believes will tend to be closely correlated with that currency with regard to price movements. At the consummation
of a forward contract, the Fund may either make delivery of the foreign currency or terminate their contractual obligation to
deliver the foreign currency by purchasing an offsetting contract obligating it to purchase, at the same maturity date, the same
amount of such foreign currency. If the Fund chooses to make delivery of the foreign currency, it may be required to obtain such
currency through the sale of portfolio securities denominated in such currency or through conversion of other assets of the Fund
into such currency. If the Fund engages in an offsetting transaction, the Fund will incur a gain or loss to the extent that there
has been a change in forward contract prices.
It
should be realized that this method of protecting the value of the Fund's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange
which can be achieved at some future point in time. Additionally, although such contracts tend to minimize the risk of loss due
to a decline in the value of the hedged currency, at the same time they tend to limit any potential gain which might result should
the value of such currency increase. Generally, the Fund will not enter into a forward foreign currency exchange contract with
a term longer than one year.
Foreign
Currency Options
The
Fund may purchase and write options on foreign currencies to protect against declines in the U.S. dollar value of foreign securities
or in the U.S. dollar value of dividends or interest expected to be received on these securities. These transactions may also
be used to protect against increases in the U.S. dollar cost of foreign securities to be acquired by the Fund. Writing an option
on foreign currency is only a partial hedge, up to the amount of the premium received, and the Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The Fund may not purchase a foreign currency
option if, as a result, premiums paid on foreign currency options then held by the Fund would represent more than 10% of the Fund's
total assets.
A
foreign currency option provides the option buyer with the right to buy or sell a stated amount of foreign currency at the exercise
price on a specified date or during the option period. The owner of a call option has the right, but not the obligation, to buy
the currency. Conversely, the owner of a put option has the right, but not the obligation, to sell the currency. When the option
is exercised, the seller (i.e., writer) of the option is obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position during the option period at any time prior to expiration.
A
call option on a foreign currency generally rises in value if the underlying currency appreciates in value, and a put option on
a foreign currency generally rises in value if the underlying currency depreciates in value. Although purchasing a foreign currency
option can protect the Fund against an adverse movement in the value of a foreign currency, the option will not limit the movement
in the value of such currency. For example, if the Fund was holding securities denominated in a foreign currency that was appreciating
and had purchased a foreign currency put to hedge against a decline in the value of the currency, the Fund would not have to exercise
its put option. Likewise, if the Fund were to enter into a contract to purchase a security denominated in foreign currency and,
in conjunction with that purchase, were to purchase a foreign currency call option to hedge against a rise in value of the currency,
and if the value of the currency instead depreciated between the date of purchase and the settlement date, the Fund would not
have to exercise its call. Instead, the Fund could acquire in the spot market the amount of foreign currency needed for settlement.
Futures
Contracts and Options on Futures Contracts
Futures
contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument
or currency at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer
of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period
of time. A futures contract may be based on particular securities, foreign currencies, securities indices and other financial
instruments and indices. By using foreign currency futures contracts and options on such contracts, the Fund may be able to achieve
many of the same objectives as it would through the use of forward foreign currency exchange contracts and may be able to achieve
these objectives more effectively and at a lower cost by using futures transactions instead of forward foreign currency exchange
contracts. The Fund may engage in futures transactions on U.S. and foreign exchanges.
The
Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, to increase total
return or to hedge against changes in interest rates, securities prices, currency exchange rates, or to otherwise manage its term
structure, sector selection and duration in accordance with its investment objectives and policies. The Fund may also enter into
closing purchase and sale transactions with respect to such contracts and options. The Adviser has claimed an exclusion from the
definition of the term "commodity pool operator" under the Commodity Exchange Act (the "CEA") pursuant to
Rule 4.5 under the CEA with respect to the Fund. The Adviser is not subject to registration or regulation as a commodity pool
operator under the CEA.
Defensive
Positions
During
periods of adverse market or economic conditions, the Fund may temporarily invest all or a substantial portion of its assets in
cash or cash equivalents. The Fund will not be pursuing its investment objectives in these circumstances. Cash equivalents are
highly liquid, short-term securities such as commercial paper, time deposits, certificates of deposit, short-term notes and short-term
U.S. government obligations.
Equity-Linked
Securities
The
Fund may invest in equity-linked securities, including, but not limited to, participation notes, certificates, and equity swaps.
Equity-linked securities are privately issued securities whose investment results are designed to correspond generally to the
performance of a specified stock index or "basket" of stocks, or a single stock. To the extent that the Fund invests
in equity-linked securities whose return corresponds to the performance of a foreign security index or one or more foreign stocks,
investing in equity-linked securities will involve risks similar to the risks of investing in foreign securities. See "Investment
Objectives & Policies – Portfolio Investments – Foreign Securities" and "Risk Factors – Foreign
Securities Risk." In addition, the Fund bears the risk that the counterparty of an equity-linked security may default on
its obligations under the security. If the underlying security is determined to be illiquid, the equity-linked security would
also be considered illiquid and thus subject to the Fund's restrictions on investments in illiquid securities.
Participation
notes, also known as participation certificates, are issued by banks or broker-dealers and are designed to replicate the performance
of foreign companies or foreign securities markets and can be used by the Fund as an alternative means to access the securities
market of a country. The performance results of participation notes will not replicate exactly the performance of the foreign
companies or foreign securities markets that they seek to replicate due to transaction and other expenses. Investments in participation
notes involve the same risks associated with a direct investment in the underlying foreign companies or foreign securities markets
that they seek to replicate. There can be no assurance that the trading price of participation notes will equal the underlying
value of the foreign companies or foreign securities markets that they seek to replicate. Participation notes are generally traded
over-the-counter. Participation notes are subject to counterparty risk, which is the risk that the broker-dealer or bank that
issues them will not fulfill its contractual obligation to complete the transaction with the Fund. Participation notes constitute
general unsecured contractual obligations of the banks or broker-dealers that issue them, the counterparty, and the Fund is relying
on the creditworthiness of such counterparty and has no rights under a participation note against the issuer of the underlying
security. Participation notes involve transaction cost. If the underlying security is determined to be illiquid, participation
notes may be illiquid and therefore subject to the Fund's percentage limitation for investments in illiquid securities. Participation
notes offer a return linked to a particular underlying equity, debt or currency.
Equity
swaps allow the parties to a swap agreement to exchange the dividend income or other components of return on an equity investment
(for example, a group of equity securities or an index) for a component of return on another non-equity or equity investment.
An equity swap may be used by the Fund to invest in a market without owning or taking physical custody of securities in circumstances
in which direct investment may be restricted for legal reasons or is otherwise deemed impractical or disadvantageous. Equity swaps
may also be used for hedging purposes or to seek to increase total return. The Fund's ability to enter into certain swap transactions
may be limited by tax considerations. The counterparty to an equity swap contract will typically be a bank, investment banking
firm or broker/dealer.
Equity
swap contracts may be structured in different ways. For example, a counterparty may agree to pay the Fund the amount, if any,
by which the notional amount of the equity swap contract would have increased in value had it been invested in particular stocks
(or an index of stocks), plus the dividends that would have been received on those stocks. In these cases, the Fund may agree
to pay to the counterparty a floating rate of interest on the notional amount of the equity swap contract plus the amount, if
any, by which that notional amount would have decreased in value had it been invested in such stocks. Therefore, the return to
the Fund on the equity swap contract should be the gain or loss on the notional amount plus dividends on the stocks less the interest
paid by the Fund on the notional amount. In other cases, the counterparty and the Fund may each agree to pay the other the difference
between the relative investment performances that would have been achieved if the notional amount of the equity swap contract
had been invested in different stocks (or indices of stocks). The Fund will generally enter into equity swaps on a net basis,
which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount
of the two payments. Payments may be made at the conclusion of an equity swap contract or periodically during its term.
Equity
swaps are derivatives and their value can be very volatile. Equity swaps normally do not involve the delivery of securities or
other underlying assets. Accordingly, the risk of loss with respect to equity swaps is normally limited to the net amount of payments
that the Fund is contractually obligated to make. If the counterparty to an equity swap defaults, the Fund's risk of loss consists
of the net amount of payments that the Fund is contractually entitled to receive. Because some swap agreements have a leverage
component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially
greater than the amount invested in the underlying asset without the use of leverage. In addition, the value of some components
of an equity swap (such as the dividends on a common stock) may also be sensitive to changes in interest rates. To the extent
that the Adviser does not accurately analyze and predict the potential relative fluctuation of the components swapped with another
party, the Fund may suffer a loss. Because equity swaps are normally illiquid, the Fund may be unable to terminate its obligations
when desired.
Investment
Restrictions of the Fund
The
following investment restrictions of the Fund are designated as fundamental policies and as such may not be changed without the
approval of a majority of the Fund’s outstanding common shares, which as used in this SAI means the lesser of (a) 67% of
the shares of the Fund present or represented by proxy at a meeting if the holders of more than 50% of the outstanding shares
are present or represented at the meeting or (b) more than 50% of outstanding shares of the Fund. As a matter of fundamental policy,
the Fund may not:
| 1. | Borrow
money, except as permitted by the 1940 Act. The Fund may borrow money for investment
purposes, commonly referred to as leverage, and for extraordinary or emergency purposes,
including the payment of dividends and the settlement of securities transactions which
otherwise might require untimely dispositions of Fund securities. The 1940 Act currently
requires that any indebtedness incurred by a closed-end investment company have an asset
coverage of at least 300%. The Fund may not pledge, mortgage, hypothecate or otherwise
encumber its assets, except to secure permitted borrowings and to implement collateral
and similar arrangements incident to permitted investment practices; |
| 2. | Issue
senior securities, as defined in the 1940 Act, other than (a) preferred shares which
immediately after issuance will have asset coverage of at least 200%, (b) indebtedness
which immediately after issuance will have asset coverage of at least 300% or (c) the
borrowings permitted by investment restriction (1) above. The 1940 Act currently defines
"senior security" as any bond, debenture, note or similar obligation or instrument
constituting a security and evidencing indebtedness, and any stock of a class having
priority over any other class as to distribution of assets or payment of dividends. Debt
and equity securities issued by a closed-end investment company meeting the foregoing
asset coverage provisions are excluded from the general 1940 Act prohibition on the issuance
of senior securities; |
| 3. | Purchase
securities on margin (but the Fund may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of securities). The purchase of investment assets
with the proceeds of a permitted borrowing or securities offering will not be deemed
to be the purchase of securities on margin; |
| 4. | Underwrite
securities issued by other persons, except insofar as it may technically be deemed to
be an underwriter under the Securities Act in selling or disposing of a portfolio investment; |
| 5. | Make
loans to other persons, except by (a) the acquisition of loan interests, debt securities
and other obligations in which the Fund is authorized to invest in accordance with its
investment objectives and policies and (b) entering into repurchase agreements; |
| 6. | Purchase
or sell real estate, although it may purchase and sell securities which are secured by
interests in real estate and securities of issuers which invest or deal in real estate.
The Fund reserves the freedom of action to hold and to sell real estate acquired as a
result of the ownership of securities; |
| 7. | Purchase
or sell physical commodities or contracts for the purchase or sale of physical commodities.
Physical commodities do not include futures contracts with respect to securities, securities
indices, currencies, interest or other financial instruments; and |
| 8. | With
respect to 75% of its total assets, invest more than 5% of its total assets in the securities
of a single issuer or purchase more than 10% of the outstanding voting securities of
a single issuer, except obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities and except securities of other investment companies; or
invest 25% or more of its total assets in any single industry or group of industries
(other than securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities). |
Management
of the Fund
Trustees
and Officers
The
business and affairs of the Fund are managed under the direction of the Board and the Fund’s officers appointed by the Board.
The tables below list the trustees and officers of the Fund and their present positions and principal occupations during the past
five years. The business address of the Fund, its Board members and officers and the Adviser is 1900 Market Street, Suite 200,
Philadelphia, PA 19103, unless specified otherwise below. The term “Fund Complex” includes each of the registered
investment companies advised by the Adviser or their affiliates as of the date of this SAI. Trustees serve three-year terms or
until their successors are duly elected and qualified. Officers are annually elected by the Trustees.
Trustees
Name,
Address
and
Age |
|
Position(s)
Held with
Fund(s) |
|
Term
of
Office
and
Length
of
Time
Served |
|
Principal Occupation(s)
During the Past Five Years |
|
Number
of
Registered
Investment
Companies
(“Registrants”)
consisting of
Investment
Portfolios
(“Portfolios”)
in Fund |
|
Other
Directorships
Held by
Trustee**
During the
Past
Five Years |
|
|
|
|
|
|
|
|
|
|
|
Interested
Trustee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Bird†
c/o
abrdn Inc.
1900
Market Street,
Suite
200
Philadelphia,
PA 19103
Year
of Birth: 1967 |
|
Class III Trustee |
|
Term expires 2026; Trustee since 2021 |
|
Mr. Bird joined the Board of abrdn plc in July
2020 as Chief Executive-Designate, and was formally appointed Chief Executive Officer in September 2020. Previously, Mr. Bird
served as chief executive officer of global consumer banking at Citigroup from 2015, retiring from the role in November 2019.
His responsibilities encompassed all consumer and commercial banking businesses in 19 countries, including retail banking
and wealth management, credit cards, mortgages, and operations and technology supporting these businesses. Prior to this,
Mr. Bird was chief executive for all of Citigroup’s Asia Pacific business lines across 17 markets in the region, including
India and China. Mr. Bird joined Citigroup in 1998, and during his 21 years with the company he held a number of leadership
roles in banking, operations and technology across its Asian and Latin American businesses. Before this, he held management
positions in the UK at GE Capital – where he was director of UK operations from 1996 to 1998 – and at British
Steel. |
|
10 Registrants (28
Portfolios) |
|
None. |
|
|
|
|
|
|
|
|
|
Independent
Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.
Gerald Malone
c/o abrdn Inc.
1900
Market Street,
Suite
200
Philadelphia,
PA 19103
Year
of Birth: 1950 |
|
Chair of the Board; Class II Trustee |
|
Term expires 2025; Trustee since 2018 |
|
Mr. Malone is, by profession, a lawyer of over
40 years. Currently, he is a non-executive director of a number of U.S. companies, including Medality Medical (medical technology
company) and Bionik Laboratories Corp. (US healthcare company) since 2018. He is also Chairman of many of the open and closed
end funds in the Fund Complex. He previously served as Independent Chairman of UK companies Crescent OTC Ltd (pharmaceutical
services) until February 2018; and fluidOil Ltd. (oil services) until June 2018; U.S. company Rejuvenan llc (wellbeing services)
until September 2017 and as chairman of UK company Ultrasis plc (healthcare software services company) until October 2014.
Mr. Malone was previously a Member of Parliament in the U.K. from 1983 to 1997 and served as Minister of State for Health
in the U.K. government from 1994 to 1997. |
|
9 Registrants (27
Portfolios) |
|
None. |
Name,
Address
and
Age |
|
Position(s)
Held with
Fund(s) |
|
Term
of
Office
and
Length
of
Time
Served |
|
Principal Occupation(s)
During the Past Five Years |
|
Number
of
Registered
Investment
Companies
(“Registrants”)
consisting of
Investment
Portfolios
(“Portfolios”)
in Fund |
|
Other
Directorships
Held by
Trustee**
During the
Past
Five Years |
Nancy
Yao
c/o abrdn Inc.
1900
Market Street,
Suite
200
Philadelphia,
PA 19103
Year
of Birth: 1972 |
|
Class III Trustee |
|
Term expires 2026; Trustee since 2018 |
|
Ms. Yao is a strategic consultant. Ms. Yao was the
President of the Museum of Chinese in America from 2015 until 2023. Prior to that, she served as the executive director
of the Yale-China Association and managing director of the corporate program at the Council on Foreign Relations. Prior to her work
in non-profit, Ms. Yao launched the Asia coverage at the Center for Financial Research and Analysis, served as the inaugural director
of policy research of Goldman Sachs’ Global Markets Institute, and was an investment banker at Goldman Sachs (Asia) L.L.C.
Ms. Yao is a board member of the National Committee of U.S.-China Relations, a member of the Council on Foreign Relations, and a
lecturer on accounting and governance at Yale University. |
|
8 Registrants (8 Portfolios) |
|
None. |
|
|
|
|
|
|
|
|
|
|
|
Todd
Reit
c/o
abrdn Inc.,
1900
Market Street,
Suite
200
Philadelphia,
PA 19103
Year
of Birth: 1968 |
|
Class II Trustee |
|
Term expires 2025; Trustee since 2023 |
|
Mr. Reit is a Managing Member of Cross Brook Partners
LLC, a real estate investment and management company since 2017. Mr. Reit is also Director and Financial Officer of Shelter Our Soldiers,
a charity to support military veterans, since 2016. Mr. Reit was formerly a Managing Director and Global Head of Asset Management
Investment Banking for UBS AG, where he was responsible for overseeing all the bank’s asset management client relationships
globally, including all corporate security transactions, mergers and acquisitions. Mr. Reit retired from UBS in 2017 after an over
25-year career at the company and its predecessor company, PaineWebber Incorporated (merged with UBS AG in 2000). |
|
5 Registrants (5 Portfolios) |
|
None. |
Name,
Address
and
Age |
|
Position(s)
Held with
Fund(s) |
|
Term
of
Office
and
Length
of
Time
Served |
|
Principal Occupation(s)
During the Past Five Years |
|
Number
of
Registered
Investment
Companies
(“Registrants”)
consisting of
Investment
Portfolios
(“Portfolios”)
in Fund |
|
Other
Directorships
Held by
Trustee**
During the
Past
Five Years |
John
Sievwright
c/o abrdn Inc
1900
Market Street,
Suite
200
Philadelphia,
PA 19103
Year
of Birth: 1955 |
|
Class I Trustee |
|
Term
expires 2024;
Trustee
since 2018
|
|
Mr. Sievwright is a Non-Executive Director of
Burford Capital Ltd (since May 2020) (provider of legal, finance, complex strategies, post-settlement finance and asset management
services and products) and Revolut Limited, a UK-based digital banking firm (since August 2021); and Chair of the Board of
LoopFX (fin-tech start-up operating in large foreign currency institutional transactions) (since Sept. 2022). Previously,
he was a Non-Executive Director for the following UK companies: Firstgroup PLC, NEX Group plc (2017 - 2018) (financial);
ICAP PLC (2009 - 2016) (financial). |
|
6 Registrants (8 Portfolios) |
|
Non-Executive Director of Burford Capital Ltd
since May 2020. |
*
As of September 30, 2023, the Fund Complex has a total of 14 Registrants with each Board member serving on the Boards of the number
of Registrants listed. Each Registrant in the Fund Complex has one Portfolio except for two Registrants that are open-end funds,
abrdn Funds and abrdn ETFs, which each have multiple Portfolios. The Registrants in the Fund Complex are as follows: abrdn Asia-Pacific
Income Fund, Inc., abrdn Global Income Fund, Inc., abrdn Australia Equity Fund, Inc., abrdn Emerging Markets Equity Income Fund,
Inc., The India Fund, Inc., abrdn Japan Equity Fund, Inc., abrdn Income Credit Strategies Fund, abrdn Global Dynamic Dividend
Fund, abrdn Global Premier Properties Fund, abrdn Total Dynamic Dividend Fund, abrdn Global Infrastructure Income Fund, abrdn
National Municipal Income Fund, abrdn Funds (19 Portfolios), and abrdn ETFs (3 Portfolios).
**
Current directorships (excluding Fund Complex) as of September 30, 2023 held in (1) any other investment companies registered
under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended (the “1934 Act”) or (3) any company subject to the requirements of Section 15(d) of the Exchange
Act.
†
Mr. Bird is considered to be an “interested person” of the Fund as defined in the 1940 Act as a result of his
role with the Adviser.
Officers
The
information contained under the heading “OFFICERS” in the Fund’s definitive proxy statement on Schedule
14A for its 2023 annual meeting of shareholders, filed with the SEC on April 14, 2023 (“Proxy Statement”)
is incorporated herein by reference.
Experience
of Trustees
The
information contained under the heading “Additional Information About the Trustees”
in the Fund’s Proxy
Statement is incorporated herein by reference.
Compensation
The
following table sets forth information regarding compensation of Trustees by the Fund and by the Fund Complex of which the Fund
is a part for the fiscal year ended October 31, 2022. Officers of the Fund do not receive any compensation directly from
the Fund or any other fund in the Fund Complex for performing their duties as officers. The Fund does not have any bonus, profit
sharing, pension or retirement plans.
Name of Trustee | |
Aggregate Compensation from Fund for Fiscal Year Ended October 31, 2022 | | |
Total Compensation From Fund and Fund Complex Paid To Trustees* | |
Nancy Yao | |
$ | 30,761 | | |
$ | 287,685 | |
P. Gerald Malone | |
$ | 36,542 | | |
$ | 583,729 | |
Todd Reit | |
$ | 0 | ** | |
$ | 54,755 | |
John Sievwright | |
$ | 32,949 | | |
$ | 231,196 | |
Stephen Bird | |
| N/A | | |
| N/A | |
| * | See
the “Trustees” table for the number of Funds within the Fund Complex that each Trustee services. |
| ** | Mr.
Reit was appointed to the Fund’s Board effective June 13, 2023 and did not receive
any compensation from the Fund during the fiscal year ended October 31, 2022. |
Board
and Committee Structure
The
Board is currently composed of three trustees who are not “interested persons” of the Fund (as defined in the 1940
Act) (the “Independent Trustees”), and one Interested Trustee, Stephen Bird. The Fund’s Charter provides that
the Board shall be divided into three classes: Class I, Class II and Class III. The terms of office of the Trustees of the Fund
in each class expire at the annual meeting of shareholders in the year indicated or thereafter in each case when their respective
successors are elected and qualified: Class I in 2024, Class II in 2025 and Class III in 2026.
The
Board has appointed Mr. Malone, an Independent Trustee, as Chair. The Chair presides at meetings of the Trustees, participates
in the preparation of the agenda for meetings of the Board, and acts as a liaison between the Trustees and management between
Board meetings. Except for any duties specified herein, the designation of the Chair does not impose on such Trustee any duties,
obligations or liability that is greater than the duties, obligations or liability imposed on such person as a member of the Board,
generally.
The
Board holds regular quarterly meetings each year to consider and address matters involving the Fund. The Board also may hold special
meetings to address matters arising between regular meetings. The Independent Trustees also meet outside the presence of management
in executive session at least quarterly and have engaged separate, independent legal counsel to assist them in performing their
oversight responsibilities.
The
Board has established a committee structure that includes an Audit Committee and a Nominating and Corporate Governance Committee
(each discussed in more detail below) to assist the Board in the oversight and direction of the business affairs of the Fund,
and from time to time may establish informal ad hoc committees or working groups to review and address the practices of the Fund
with respect to specific matters. The Committee system facilitates the timely and efficient consideration of matters by the Trustees,
and facilitates effective oversight of compliance with legal and regulatory requirements and of the Fund’s activities and
associated risks. The standing Committees currently conduct an annual review of their charters, which includes a review of their
responsibilities and operations.
The
Nominating and Corporate Governance Committee and the Board as a whole also conduct an annual self-assessment of the performance
of the Board, including consideration of the effectiveness of the Board’s Committee structure. The Committee is comprised
entirely of Independent Trustees. Each Committee member is also “independent” within the meaning of the NYSE listing
standards. The Board reviews its structure regularly and believes that its leadership structure, including having a super-majority
of Independent Trustees, coupled with an Independent Trustee as Chair, is appropriate because it allows the Board to exercise
informed and independent judgment over the matters under its purview and it allocates areas of responsibility among the Committees
and the full Board in a manner that enhances efficient and effective oversight.
Audit
Committee
The
Board has an Audit Committee consisting of all the Independent Trustees. In addition, the members of the Audit Committee are also
"independent," as defined in the Fund’s written Audit Committee Charter. The members of the Audit Committee are
Ms. Maasbach, Mr. Malone and Mr. Sievwright. Mr. Sievwright serves as the Chair of the Audit Committee and is the Audit Committee
Financial Expert.
The
Audit Committee has adopted an Audit Committee Charter that provides that the Audit Committee shall annually select, retain or
terminate, and recommend to the Audit Committee members of the Board and ratified by the entire Board, who are not “interested
persons” (as that term is defined in Section 2(a)(19) of the 1940 Act), of the Fund for their ratification, the selection,
retention or termination, the Fund’s independent auditor and, in connection therewith, evaluate the terms of the engagements
(including compensation of the auditor) and the qualifications and independence of the independent auditor, including whether
the independent auditor provides any consulting, auditing or tax services to the aIL and receives the independent auditor’s
specific representations as to its independence, delineating all relationships between the independent auditor and the Fund, consistent
with the Independent Standards Board ("ISB") Standard No. 1. The Audit Committee Charter also provides that the Committee
shall review in advance, and consider approval of, any and all proposals by the Fund’s management or aIL, or their affiliated
persons, to employ the independent auditor to render “permissible non-audit services” to the Fund and to consider
whether such services are consistent with the independent auditor's independence. The written Charter for the Audit Committee
is available at the Fund’s websites at https://www.abrdnaod.com. During the fiscal year ended October 31, 2022, the Audit
Committee met 5 times.
Nominating
and Corporate Governance Committee; Consideration of Potential Trustee Nominees
The
Board has a Nominating Committee consisting of all the Independent Trustees. The members of the Nominating Committee are Ms. Maasbach,
Mr. Malone and Mr. Sievwright. Mr. Malone serves as the Chair of the Nominating Committee.
The
Nominating Committee is responsible for overseeing Board governance and related Trustee practices, including selecting and recommending
candidates to fill vacancies on the Board. The Nominating Committee will consider Trustee candidates recommended by shareholders
of the Fund. Recommendations for consideration by a Nominating Committee should be sent to the Chair of the Nominating Committee
in writing together with the appropriate biographical information concerning each such recommended nominee. In addition, shareholders
may themselves nominate individuals for election to the Board for the Fund if they follow the advance notice provisions in the
Fund’s By-Laws.
In
identifying and evaluating nominees for Trustees, the Nominating Committee seeks to ensure that the Board possesses, in the aggregate,
the strategic, managerial and financial skills and experience necessary to fulfill its duties and to achieve its objectives, and
also seeks to ensure that the Board is comprised of trustees who have broad and diverse backgrounds. The Nominating Committee
looks at each nominee on a case-by-case basis. In looking at the qualification of each candidate to determine if his or her election
would further the goals described above, the Nominating Committee takes into account all factors it considers appropriate, which
may include strength of character, mature judgment, career specialization, relevant technical skills or financial acumen, diversity
of viewpoint and industry knowledge. However, the Board believes that to be recommended as a nominee, whether by the Nominating
Committee or at the suggestion of a shareholder, each candidate must: (1) display the highest personal and professional ethics,
integrity and values; (2) have the ability to exercise sound business judgment; (3) be highly accomplished in his or her respective
field; (4) have relevant expertise and experience; (5) be able to represent all shareholders and be committed to enhancing long-term
shareholder value; and (6) have sufficient time available to devote to activities of the Board and enhance his or her knowledge
of the Fund's business. The Nominating Committees met one time during the fiscal year ended October 31, 2022.
Board
and Committee Meetings in Fiscal Year 2022
During
the Fund’s fiscal year ended October 31, 2022, the Board held five meetings. During such fiscal year, based on available
records, the Trustees serving during that fiscal year attended at least 75% of the aggregate number of meetings of the Board and
of the Committees of the Board on which they served.
Risk
Oversight
The
information contained under the heading “BOARD AND COMMITTEE STRUCTURE—Board Oversight of Risk Management” in
the Fund’s Proxy Statement
is incorporated herein by reference.
Shareholder
Communications
Shareholders
who wish to communicate with Trustees with respect to matters relating to the Fund may address their written correspondence to
the Board as a whole or to individual Trustees c/o abrdn Inc. (the “Administrator”), the Fund’s administrator,
at 1900 Market Street, Suite 200, Philadelphia, PA 19103, or via e-mail to the Trustee(s) c/o abrdn Inc. at Investor.relations@abrdn.com.
Trustee
Beneficial Ownership of Securities
As
of November 30, 2023, the Fund’s trustees and executive officers, as a group, owned less than 1% of the Fund’s outstanding
Common Shares. The information as to ownership of securities which appears below is based on statements furnished to the Fund by
its trustees and executive officers.
As
of December 31, 2022, the dollar range of equity securities owned beneficially by each Trustee in the Fund and in all registered
investment companies overseen by the trustee within the same family of investment companies as the Fund appears in the chart below. The
following key relates to the dollar ranges in the chart:
A.
None
B. $1 — $10,000
C. $10,001 — $50,000
D. $50,001 — $100,000
E. over $100,000
Name of Trustee |
|
Dollar Range of Equity
Securities Owned(1) |
|
Aggregate Dollar Range of Equity
Securities in All Funds Overseen by
Trustee in the Family of
Investment Companies(2) |
|
Independent Trustees: |
|
|
|
|
|
Nancy Yao |
|
B |
|
D |
|
P. Gerald Malone |
|
B |
|
E |
|
Todd Reit |
|
A |
|
C |
|
John Sievwright |
|
B |
|
D |
|
Interested Trustee: |
|
|
|
|
|
Stephen Bird |
|
B |
|
D |
|
(1) “Beneficial
ownership” is determined in accordance with Rule 16a-1(a)(2) promulgated under the Exchange Act.
(2) ”Family
of Investment Companies” means those registered investment companies that are advised by the Adviser or an affiliate and that hold
themselves out to investors as related companies for purposes of investment and investor services.
As
of December 31, 2022, none of the Independent Trustees or their immediate family members owned any shares of the Adviser or principal
underwriter of the Fund or of any person (other than a registered investment company) directly or indirectly controlling, controlled
by, or under common control with the Adviser or principal underwriter.
Codes
of Ethics
The
Fund and the Adviser have each adopted a code of ethics under Rule 17j-1 of the 1940 Act governing the personal securities transactions
of their respective personnel. Under each code of ethics, personnel may invest in securities for their personal accounts (including
securities that may be purchased or held by the Fund), subject to certain general restrictions and procedures. Copies of these
Codes of Ethics are on the EDGAR Database on the SEC’s internet site at www.sec.gov and may be obtained, after paying a
duplicating fee, by electronic request to publicinfo@sec.gov.
Beneficial
Ownership
As
of November 30, 2023, to the Fund’s knowledge, no single shareholder or “group” (as that term is used in Section 13(d)
of the Exchange Act) beneficially owned more than 5% of the Fund’s outstanding common shares, except as described in the following
table. A control person is one who owns, either directly or indirectly, more than 25% of the voting securities of the Fund or acknowledges
the existence of control. A party that controls the Fund may be able to significantly affect the outcome of any item presented to shareholders
for approval. Information as to beneficial ownership of common shares, including percentage of common shares beneficially owned, is based
on, among other things, reports filed with the SEC by such holders.
Shareholder
Name and Address | |
Class of
Shares /
Beneficial or Record
Owner | |
Share
Holdings | | |
Percentage
Owned | | |
Estimated
Pro Forma
Percentage of Ownership of
Combined Fund | |
Allspring Global Investment Holdings, et al.*
525 Market St, 10th Fl San Francisco, CA 94105 | |
Common Shares/Beneficial Owner | |
| 7,347,241 | * | |
| 6.97 | %* | |
6.56 | % |
Parametric Portfolio Associates, LLC** 800 Fifth Avenue,
Suite 2800 Seattle, WA 98104 | |
Common Shares/Beneficial Owner | |
| 8,108,906 | ** | |
| 7.7 | %** | |
7.24 | % |
* Based solely on information presented in
a Schedule 13G/A filed December 31, 2022, jointly by Allspring Global Investments Holdings, LLC, Allspring Global Investments, LLC
and Allspring Funds Management, LLC.
** Based solely on information presented in
a Schedule 13G/A filed December 30, 2022 by Parametric Portfolio Associates, LLC.
The
Adviser
abrdn
Investments Limited (“aIL” or the “Adviser”), a Scottish Company, serves as the Adviser to the Fund. aIL’s
registered address is 10 Queen’s Terrace, Aberdeen, Aberdeenshire, United Kingdom, AB101XL. The Adviser is an indirect wholly-owned
subsidiary of abrdn plc, which manages or administers approximately $632.2 billion in assets as of June 30, 2023. abrdn plc and
its affiliates (collectively, “abrdn”) provide asset management and investment solutions for clients and customers
worldwide and also have a strong position in the pensions and savings market.
Advisory
Agreement
The
Fund and the Adviser are parties to an advisory agreement (the “Advisory Agreement”). Under the Advisory Agreement,
the Fund retains the Adviser to act as the investment adviser for and to manage the investment and reinvestment of the assets
of the Fund in accordance with the Fund’s investment objectives and policies and limitations, and to manage the day-to-day
business and affairs of the Fund (except with respect to matters in the charge of the Fund’s chief compliance officer or
other service providers retained by the Fund), for the period and on the terms set forth in the Advisory Agreement.
Under
the terms of the Advisory Agreement, the Adviser shall (i) have overall supervisory responsibility for the general management
and investment of the Fund’s assets; (ii) determine the allocation of assets among the Subadvisers, if any; (iii)
have full investment discretion to make all determinations with respect to the investment of Fund assets not otherwise assigned
to a Subadviser; (iv) research and evaluate each Subadviser, if any, including (a) performing initial due diligence on prospective
Subadvisers and monitoring each Subadviser's ongoing performance, (b) communicating performance expectations and evaluations to
the Subadvisers, and (c) recommending to the Fund’s Board whether a Subadviser's contract should be renewed, modified or
terminated; and (v) provide to the Fund’s Board such periodic reports concerning the Fund’s business and investments
as the Board shall reasonably request.
In
rendering investment advisory services, the Adviser may use the resources of investment advisor subsidiaries of abrdn plc. These
affiliates have entered into a memorandum of understanding / personnel sharing procedures (“MOU”) pursuant to which
investment professionals from each affiliate may render portfolio management, research or trading services to U.S. clients of
the abrdn plc affiliates, including the Fund, as associated persons of the Adviser. Each investment professional who renders portfolio
management, research or trading services under a MOU or personnel sharing arrangement must comply with the provisions of the Investment
Adviser Act of 1940, as amended, the 1940 Act, the 1933 Act, as amended, the Exchange Act, and the Employee Retirement Income
Security Act of 1974, and the laws of states or countries in which the Adviser do business or has clients. No remuneration is
paid by the Fund with regards to the MOU/personnel sharing arrangements.
The
Fund will pay all of its expenses, including, among others, legal fees and expenses of counsel to the Fund and the Fund’s
independent trustees; insurance (including trustees’ and officers’ errors and omissions insurance); auditing and accounting
expenses; taxes and governmental fees; listing fees; dues and expenses incurred in connection with membership in investment company
organizations; fees and expenses of the Fund’s custodians, administrators, transfer agents, registrars and other service
providers; expenses for portfolio pricing services by a pricing agent, if any; other expenses in connection with the issuance,
offering and underwriting of shares or debt instruments issued by the Fund or with the securing of any credit facility or other
loans for the Fund; expenses relating to investor and public relations; expenses of registering or qualifying securities of the
Fund for public sale; brokerage commissions and other costs of acquiring or disposing of any portfolio holding of the Fund; expenses
of preparation and distribution of reports, notices and dividends to shareholders; expenses of the dividend reinvestment and optional
cash purchase plan (except for brokerage expenses paid by participants in such plan); compensation and expenses of trustees; costs
of stationery; any litigation expenses; and costs of shareholders’ and other meetings.
For
services under the Advisory Agreement, the Adviser is paid a fee computed daily and payable monthly at an annual rate of 1.00%
of the Fund’s average daily Managed Assets. Managed Assets means the total assets of the Fund, including any form of
investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities
or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation,
borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other similar
preference securities,(iii) the reinvestment of collateral received for securities loaned in accordance with the Fund’s
investment objectives and policies, and/or (iv) any other means. During periods when the Fund is using leverage, the fee paid
to the Adviser will be higher than if the Fund did not use leverage because the fees paid are calculated on the basis of the Fund’s
Managed Assets, which includes the assets purchased through leverage.
The
Adviser has entered into a written contract (the “Expense Limitation Agreement”) with the Fund that is effective through
June 30, 2024. In connection with the Reorganization, the Expense Limitation Agreement shall be extended through one year from
the date of the closing of the Reorganizations, or June 30, 2025, whichever is later. The Expense Limitation Agreement limits
the total ordinary operating expenses of the Acquiring Fund and following the consummation of one or both Reorganizations, the
Combined Fund (excluding any leverage costs, interest, taxes, brokerage commissions, and any non-routine expenses), from exceeding
1.14% of the average daily net assets of the Fund on an annualized basis
The
Adviser may request and receive reimbursement from the Fund or Combined Fund, as applicable, of the advisory fees waived and other
expenses reimbursed pursuant to the Expense Limitation Agreement as of a date not more than three years after the date when the
Adviser limited the fees or reimbursed the expenses; provided that the following requirements are met: the reimbursements do not
cause the Fund or Combined Fund, as applicable, to exceed the lesser of the applicable expense limitation in the contract at the
time the fees were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being
recouped by the Adviser, and the payment of such reimbursement is approved by the Board of the Fund or Combined Fund, as applicable,
on a quarterly basis. Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or
assumed by the Adviser is not permitted.
The
Advisory Agreement continues for an initial term of two (2) years and may be continued thereafter from year to year provided
such continuance is specifically approved at least annually in the manner required by the 1940 Act. The Advisory Agreement may
be terminated at any time without payment of penalty by the Fund or by the Adviser upon 60 days’ written notice. The Advisory
Agreement will automatically terminate in the event of its assignment, as defined under the 1940 Act. Under the Advisory Agreement,
the Adviser is permitted to provide investment advisory services to other clients.
For
the fiscal years ended October 31, 2020, 2021 and 2022, the Adviser earned gross advisory fees of $9,673,831, $11,466,07 and $10,570,856,
respectively.
The
Advisory Agreement provides that the Adviser will not be liable to the Fund for any act or omission in the case of, or connected
with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of Fund assets in
the absence of willful misfeasance, bad faith or gross negligence on the par of the Adviser or a reckless disregard of its duties,
provided, however, that nothing in the Agreement shall relieve the Adviser from any of its obligations under applicable law, including,
without limitation, the federal and state securities law. The Agreement also states that the Adviser shall indemnify the Fund
and is officers and Trustees, for any liability and expenses, including attorneys’ fees, which may be sustained as a result
of the Adviser’s willful misfeasance, bad faith, gross negligence, reckless disregard of its duties under the Agreement
or violation of applicable law, including, without limitation, the federal and state securities laws.
The
Administrator
abrdn
Inc., located at 1900 Market Street, Suite 200, Philadelphia, PA 19103, serves as administrator to the Fund. Under the administration
agreement, abrdn Inc. is generally responsible for managing the administrative affairs of the Fund.
For
administration related services, abrdn Inc. is entitled to receive a fee that is computed monthly and paid quarterly at an annual
rate of 0.08% of the Fund’s average daily net assets.
For
the fiscal period from November 1, 2022 to April 30, 2023, and the fiscal year ended October 31, 2022, abrdn Inc. earned $388,728
and $839,879, respectively from the Fund for administration services.
State
Street Bank and Trust Company (“State Street”) serves as sub-administrator of the Fund and is paid by abrdn Inc. out
of the fees it receives as the Fund’s administrator.
Custodian,
Dividend Paying Agent, Transfer Agent and Registrar
State
Street serves as custodian (the “Custodian”) for the Fund. State Street also provides accounting services to the Fund.
State Street serves as the Fund’s dividend paying agent, transfer agent and registrar.
Independent
Registered Public Accountant
KPMG
LLP is the Fund’s independent registered public accountant. KPMG provides audit services and consultation with respect to
the preparation of filings with the SEC.
Investor
Relations Provider
Under
the terms of the Investor Relations Services Agreement, abrdn Inc. provides and/or engages third parties to provide investor relations
services to the Fund and certain other funds advised by the Adviser or its affiliates as part of an Investor Relations Program.
Under the Investor Relations Services Agreement, the Fund owes a portion of the fees related to the Investor Relations Program
(the “Fund’s Portion”). However, investor relations services fees are limited by abrdn Inc. so that the Fund
will only pay up to an annual rate of 0.05% of the Fund’s average weekly net assets. Any difference between the capped rate
of 0.05% of the Fund’s average weekly net assets and the Fund’s Portion is paid for by abrdn Inc.
Pursuant
to the terms of the Investor Relations Services Agreement, abrdn Inc. (or third parties engaged by abrdn Inc.), among other things,
provides objective and timely information to shareholders based on publicly available information; provides information efficiently
through the use of technology while offering shareholders immediate access to knowledgeable investor relations representatives;
develops and maintains effective communications with investment professionals from a wide variety of firms; creates and maintains
investor relations communication materials such as fund manager interviews, films and webcasts, published white papers, magazine
articles and other relevant materials discussing the Fund’s investment results, portfolio positioning and outlook; develops
and maintains effective communications with large institutional shareholders; responds to specific shareholder questions; and
reports activities and results to the Board and management detailing insight into general shareholder sentiment.
Portfolio
Management
The
information contained under “Item 8. Portfolio Managers of Closed-End Management Investment Companies” of the Fund’s
Form N-CSR, which contains the Annual
Report for the fiscal year ended October 31, 2022, is incorporated herein by reference.
Potential
Conflicts of Interest of the Adviser
The
portfolio managers’ management of “other accounts” may give rise to potential conflicts of interest in connection
with their management of the Fund’s investments, on the one hand, and the investments of the other accounts, on the other.
The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as
a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. However,
the Adviser believes that these risks are mitigated by the fact that: (i) accounts with like investment strategies managed by
a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment
restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and similar factors;
and (ii) portfolio manager personal trading is monitored to avoid potential conflicts. In addition, the Adviser has adopted trade
allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts.
In
some cases, another account managed by the same portfolio manager may compensate abrdn based on the performance of the portfolio
held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio
manager in the allocation of management time, resources and investment opportunities.
Another
potential conflict could include instances in which securities considered as investments for the Fund also may be appropriate
for other investment accounts managed by the Adviser or its affiliates. Whenever decisions are made to buy or sell securities
by the Fund and one or more of the other accounts simultaneously, the Adviser may aggregate the purchases and sales of the securities
and will allocate the securities transactions in a manner that it believes to be equitable under the circumstances. As a result
of the allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other
accounts. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities
available to the Fund from time to time, it is the opinion of the Adviser that the benefits from the policies outweigh any disadvantage
that may arise from exposure to simultaneous transactions. The Trust has adopted policies that are designed to eliminate or minimize
conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation
in which a conflict arises.
From
time to time, the Adviser may seed proprietary accounts for the purpose of evaluating a new investment strategy that eventually
may be available to clients through one or more product structures. Such accounts also may serve the purpose of establishing a
performance record for the strategy. The management by the Adviser of accounts with proprietary interests and nonproprietary client
accounts may create an incentive to favor the proprietary accounts in the allocation of investment opportunities, and the timing
and aggregation of investments. The Adviser’s proprietary seed accounts may include long-short strategies, and certain client
strategies may permit short sales. A conflict of interest arises if a security is sold short at the same time as a long position,
and continuous short selling in a security may adversely affect the stock price of the same security held long in client accounts.
The Adviser has adopted various policies to mitigate these conflicts.
In
addition, the 1940 Act limits the Fund’s ability to enter into certain transactions with certain affiliates of the Adviser.
As a result of these restrictions, the Fund may be prohibited from buying or selling any security directly from or to any portfolio
company of a fund managed by the Advisers or one of its affiliates. Nonetheless, the Fund may under certain circumstances purchase
any such portfolio company’s loans or securities in the secondary market, which could create a conflict for the Adviser
between the interests of the Fund and the portfolio company, in that the ability of the Adviser to recommend actions in the best
interest of the Fund might be impaired. The 1940 Act also prohibits certain “joint” transactions with certain of the
Fund’s affiliates (which could include other abrdn-managed Funds), which could be deemed to include certain types of investments,
or restructuring of investments, in the same portfolio company (whether at the same or different times). These limitations may
limit the scope of investment opportunities that would otherwise be available to the Fund. The Board has approved policies and
procedures reasonably designed to monitor potential conflicts of interest. The Board will review these procedures and any conflicts
that may arise.
The
Adviser or its respective members, officers, directors, employees, principals or affiliates may come into possession of material,
non-public information. The possession of such information may limit the ability of the Fund to buy or sell a security or otherwise
to participate in an investment opportunity. Situations may occur where the Fund could be disadvantaged because of the investment
activities conducted by the Adviser for other clients, and the Adviser will not employ information barriers with regard to its
operations on behalf of its registered and private funds, or other accounts. In certain circumstances, employees of the Adviser
may serve as board members or in other capacities for portfolio or potential portfolio companies, which could restrict the Fund’s
ability to trade in the securities of such companies.
Portfolio
transactions and brokerage allocation
The
Adviser is responsible for decisions to buy and sell securities and other investments for the Fund, the selection of brokers and
dealers to effect the transactions and the negotiation of brokerage commissions, if any. In transactions on stock and commodity
exchanges in the United States, these commissions are negotiated, whereas on foreign stock and commodity exchanges these commissions
are generally fixed and are generally higher than brokerage commissions in the United States. In the case of securities traded
on the OTC markets or for securities traded on a principal basis, there is generally no commission, but the price includes a spread
between the dealer’s purchase and sale price. This spread is the dealer’s profit. In underwritten offerings, the price
includes a disclosed, fixed commission or discount. Most short term obligations are normally traded on a “principal”
rather than agency basis. This may be done through a dealer (e.g., a securities firm or bank) who buys or sells for its own account
rather than as an agent for another client, or directly with the issuer.
Except
as described below, the primary consideration in portfolio security transactions is best execution of the transaction (i.e., execution
at a favorable price and in the most effective manner possible). “Best execution” encompasses many factors affecting
the overall benefit obtained by the client account in the transaction including, but not necessarily limited to, the price paid
or received for a security, the commission charged, the promptness, available liquidity and reliability of execution, the confidentiality
and placement accorded the order, and customer service. Therefore, “best execution” does not necessarily mean obtaining
the best price alone but is evaluated in the context of all the execution services provided. The Adviser has freedom as to the
markets in and the broker-dealers through which they seek this result, except where mandates have restrictions in place.
Subject
to the primary consideration of seeking best execution and as discussed below, securities may be bought or sold through broker-dealers
who have furnished statistical, research, corporate access, and other information or services to the Adviser. SEC regulations
provide a “safe harbor” that allows an investment adviser to pay for research and brokerage services with commission
dollars generated by client transactions. Effective with the implementation of Markets in Financial Instruments Directive II (“MiFID
II”), the Adviser absorbs all research costs and will generally no longer rely on the “safe harbor” under Section
28(e) of the Securities Exchange Act of 1934, as amended.
There
may be occasions when portfolio transactions for the Fund are executed as part of concurrent authorizations to purchase or sell
the same security for trusts or other accounts (including other mutual funds) served by the Adviser or by an affiliated company
thereof. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to the Fund, they
are affected only when the Adviser believes that to do so is in the interest of the Fund. When such concurrent authorizations
occur, the executions will be allocated in an equitable manner in accordance with the Adviser’s trade allocation policies
and procedures.
In
purchasing and selling investments for the Fund, it is the policy of the Adviser to seek best execution through responsible broker-dealers.
The determination of what may constitute best execution in a securities transaction by a broker involves a number of considerations,
including the overall direct net economic result to the Fund (involving both price paid or received and any commissions and other
costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction at all when a large
block is involved, the availability of the broker to stand ready to execute possibly difficult transactions in the future, the
professionalism of the broker, and the financial strength and stability of the broker. These considerations are judgmental and
are weighed by the Adviser in determining the overall reasonableness of securities executions and commissions paid. In selecting
broker-dealers, the Adviser will consider various relevant factors, including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security or asset to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker dealer’s firm; the broker-dealer’s execution services, rendered
on a continuing basis; and the reasonableness of any commissions.
With
respect to foreign exchange (“FX”) transactions, different considerations or circumstances may apply, particularly
with respect to Restricted Market FX. FX transactions executed for the Fund are divided into two main categories: (1) Restricted
Market FX and (2) Unrestricted Market FX. Restricted Market FX are required to be executed by a local bank in the applicable market.
Unrestricted Market FX are not required to be executed by a local bank. The Adviser or third-party agent execute Unrestricted
Market FX relating to trading decisions. The Fund’s custodian executes all Restricted Market FX because it has local banks
or relationships with local banks in each of the restricted markets where custodial client accounts hold securities. Unrestricted
Market FX relating to the repatriation of dividends and/or income/expense items not directly relating to trading may be executed
by the Adviser or by the Fund’s custodian due to the small currency amount and lower volume of such transactions. The Fund
and the Adviser have limited ability to negotiate prices at which certain FX transactions are customarily executed by the Fund’s
custodian, i.e., transactions in Restricted Market FX and repatriation transactions. The Adviser may cause the Fund to pay a broker-dealer
a commission that is in excess of the commission another broker-dealer would have received for executing the transaction if it
is determined to be consistent with the Adviser’s obligation to seek best-execution pursuant to the standards described
above.
Under
the 1940 Act, “affiliated persons” of the Fund are prohibited from dealing with it as a principal in the purchase
and sale of securities unless an exemptive order allowing such transactions is obtained from the SEC. However, the Fund may purchase
securities from underwriting syndicates of which any of its affiliates, as defined in the 1940 Act, is a member under certain
conditions, in accordance with Rule 10f-3 under the 1940 Act.
The
Fund contemplates that, consistent with the policy of seeking to obtain best execution, brokerage transactions may be conducted
through “affiliated brokers or dealers,” as defined in rules under the 1940 Act. Under the 1940 Act, commissions paid
by the Fund to an “affiliated broker or dealer” in connection with a purchase or sale of securities offered on a securities
exchange may not exceed the usual and customary broker’s commission. Accordingly, it is the Fund’s policy that the
commissions to be paid to an affiliated broker-dealer must, in the judgment of the Adviser be (1) at least as favorable as those
that would be charged by other brokers having comparable execution capability and (2) at least as favorable as commissions contemporaneously
charged by such broker or dealer on comparable transactions for the broker’s or dealer’s unaffiliated customers. The
Adviser does not necessarily deem it practicable or in the Fund’s best interest to solicit competitive bids for commissions
on each transaction. However, consideration regularly is given to information concerning the prevailing level of commissions charged
on comparable transactions by other brokers during comparable periods of time.
Neither
the Fund not the Adviser have an agreement or understanding with a broker-dealer, or other arrangements to direct the Fund’s
brokerage transactions to a broker-dealer because of the research services such broker provides to the Fund or the Adviser. While
the Adviser does not have arrangements with any broker-dealers to direct such brokerage transactions to them because of research
services provided, the Adviser may receive research services from such broker-dealers. The dollar amount of transactions and related
commissions for transactions paid to a broker from which the Adviser also received research services for the fiscal year ended
October 31, 2022 are in the table below:
Total Dollar Amount of
Transactions |
|
Total Commissions Paid on
Such Transactions |
|
$ |
1,443,442,391
|
|
$
|
536,778
|
|
During the fiscal years ended October 31, 2022, 2021 and 2020, the following brokerage commissions were paid by the Fund:
Year ended October 31, | |
($000 omitted) | |
2022 | | |
2021 | | |
2020 | |
$ | 668 | | |
$ | 641 | | |
$ | 837 | |
| | | |
| | | |
| | |
During
the fiscal year ended October 31, 2022, the Fund did not hold any investments in securities of its regular broker-dealers
(as defined in Rule 10b-1 under the 1940 Act).
Portfolio
Turnover
The
Fund may engage in short-term trading strategies, and securities may be sold without regard to the length of time held when, in
the opinion of the Adviser, investment considerations warrant such action. These policies, together with the ability of the Fund
to effect short sales of securities and to engage in transactions in options and futures, may have the effect of increasing the
Fund’s annual rate of portfolio turnover. It is expected that the annual portfolio turnover rate of the Fund will likely
exceed 100%. A high turnover rate (100% or more) necessarily involves greater trading costs to the Fund and may result in the
realization of net short term capital gains. If securities are not held for the applicable holding periods, dividends paid on
them will not qualify for the advantageous federal tax rates.
The
rate of portfolio turnover in the fiscal years ended October 31, 2022, and October 31, 2021 was 83% and 72%, respectively.
Repurchase
of Common Shares
On
June 13, 2018, the Board approved a share repurchase program (“Program”) for the Fund. The Program allows the Fund
to purchase, in the open market, its outstanding common shares, with the amount and timing of any repurchase determined at the
discretion of the Fund’s investment adviser and subject to market conditions and investment considerations. The Fund reports
repurchase activity on the Fund’s website on a monthly basis. For the fiscal year ended October 31, 2022, the Fund did not
repurchase any shares through the Program.
Material
U.S. federal income tax considerations
The
following discussion is a general summary of material U.S. federal income tax considerations affecting the Fund and its shareholders.
The discussion reflects applicable U.S. federal income tax laws as of the date of this statement of additional information, which
tax laws may be changed or subject to new interpretations by the courts or the Internal Revenue Service (the “IRS”),
possibly with retroactive effect. No attempt is made to present a
detailed explanation of all U.S. federal income, estate, gift, state, local or foreign tax considerations affecting the Fund and
its shareholders (including shareholders owning large positions in the Fund). The discussion set forth herein does not constitute
tax advice. Investors are urged to consult their own tax advisers to determine the specific tax consequences to them of investing
in the Fund, including applicable federal, state, local and foreign tax consequences to them or the effect of possible changes
in tax laws.
In
addition, no attempt is made to address tax considerations applicable to an investor with a special tax status, such as a financial
institution, REIT, insurance company, RIC, individual retirement account, other tax-exempt organization, dealer in securities
or currencies, person holding shares of the Fund as part of a hedging, integrated, conversion or straddle transaction or constructive
sale, trader in securities that has elected the mark-to-market method of accounting for its securities, U.S. holder (as defined
below) whose functional currency is not the U.S. dollar, or investor with “applicable financial statements” within
the meaning of section 451(b) of the Code. Furthermore, this discussion does not reflect possible application of the
alternative minimum tax. Unless otherwise noted, this discussion assumes the Fund’s shares are held by
U.S. persons and that such shares are held as capital assets.
A
“U.S. holder” is a beneficial owner that is for U.S. federal income tax purposes:
•
a citizen or individual resident of the United States (including certain former citizens and former long-term residents);
•
a corporation or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under
the laws of the United States or any state thereof or the District of Columbia;
•
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
•
a trust with respect to which a court within the United States is able to exercise primary supervision over its administration
and one or more U.S. persons have the authority to control all of its substantial decisions or the trust has made a valid election
in effect under applicable U.S. Department of the Treasury (“Treasury”) regulations to be treated as a U.S. person.
A
“Non-U.S. holder” is a beneficial owner of shares of the Fund that is an individual, corporation, trust or estate
and is not a U.S. holder. If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes)
holds shares of the Fund, the tax treatment of a partner in the partnership generally will depend upon the status of the partner
and the activities of the partnership.
Taxation
as a RIC
The
Fund has elected to be treated as, and intends to qualify each year for the special tax treatment afforded a RIC under Subchapter
M of the Code. As long as the Fund meets certain requirements that govern the Fund’s source of income, diversification of
assets and distribution of earnings to shareholders, the Fund will not be subject to U.S. federal income tax on income distributed
(or treated as distributed, as described below) to its shareholders. With respect to the source of income requirement, the Fund
must derive in each taxable year at least 90% of its gross
income (including tax-exempt interest) from (1) dividends, interest, payments with respect to certain
securities loans, gains from the sale or other disposition of stock, securities or foreign currencies or other income (including,
but not limited to, gains from options, futures and forward contracts) derived with respect to its business of investing in such
stock, securities or currencies and (2) net income derived from interests in qualified publicly traded partnerships.
A qualified publicly traded partnership is generally defined as a publicly traded partnership under section 7704 of the Code but
does not include a publicly traded partnership if 90% or more of its gross income is described in (1) above.
With
respect to the diversification of assets requirement, the Fund must diversify its holdings so that, at the end of each quarter
of each taxable year, (1) at least 50% of the value of the Fund’s total assets is represented by cash and cash items,
U.S. government securities, the securities of other RICs and other securities, with such other securities limited for purposes
of such calculation, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets
and not more than 10% of the outstanding voting securities of such issuer and (2) not more than 25% of the value of the Fund’s
total assets is invested in the securities (other than U.S. government securities or the securities of other RICs) of any one
issuer, the securities (other than the securities of other RICs) of two or more issuers that the Fund controls and that are determined
to be engaged in the same, similar or related trades or businesses or the securities of one or more qualified publicly traded
partnerships.
For
purposes of the income test, the character and source of the Fund’s distributive share of items of income, gain and loss
derived through any entity properly treated as a partnership for U.S. federal income tax purposes (other than qualified publicly
traded partnerships), including, in general, any unregistered fund, generally will be determined as if the Fund realized its distributive
share of such tax items directly. Similarly, for the purpose of the asset diversification test, the Fund, in appropriate circumstances,
will “look through” to the assets held by any such partnership.
If
the Fund qualifies as a RIC and distributes to its shareholders at least 90% of the sum of (1) its “investment
company taxable income,” as that term is defined in the Code (which includes, among other items, dividends, taxable interest
and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses)
without regard to the deduction for dividends paid and (2) the excess of its gross tax-exempt interest, if any, over certain
deductions attributable to such interest that are otherwise disallowed, the Fund will be relieved of U.S. federal income tax on
any income of the Fund, including long-term capital gains, distributed to shareholders. However, if the Fund retains any investment
company taxable income or “net capital gain” (i.e., the excess of net long-term capital gain over net short-term capital
loss), it will be subject to U.S. federal income tax at regular corporate federal income tax rates on the amount retained. The
Fund intends to distribute at least annually substantially all of its investment company taxable income, net tax-exempt interest
and net capital gain. Under the Code, the Fund generally will also be subject to a nondeductible 4% federal excise tax on the
undistributed portion of its ordinary income and capital gains if it fails to meet certain distribution requirements with respect
to each calendar year. In order to avoid the 4% federal excise tax, the required minimum distribution is generally equal
to the sum of (1) 98% of the Fund’s ordinary income (computed on a calendar
year basis), (2) 98.2% of the Fund’s capital gain net income (generally computed for the one-year period ending on
October 31), and (3) certain amounts from previous years to the extent such amounts have not been treated as distributed
or been subject to tax under Subchapter M of the Code. The Fund generally intends to make distributions in a timely manner in
an amount at least equal to the required minimum distribution and therefore, under normal conditions, does not currently expect
to be subject to this excise tax.
Failure
to Qualify as a RIC
If
the Fund fails to qualify as a RIC in any taxable year, it will be taxed in the same manner as an ordinary corporation on all
of its taxable income and gains, and distributions to the Fund’s shareholders will not be deductible by the Fund in computing
its taxable income. In such event, the Fund’s distributions, to the extent derived from the Fund’s current or accumulated
earnings and profits, would be taxed to shareholders as dividend income. Such distributions would generally be eligible for the
dividends received deduction available to corporate shareholders, and non-corporate shareholders would generally be able
to treat such distributions as “qualified dividend income” eligible for reduced
rates of U.S. federal income taxation, provided in each case that certain holding period and other requirements are satisfied.
Distributions in excess of the Fund’s current and accumulated earnings and profits would be treated first as a return of
capital to the extent of the shareholders’ tax basis in their Fund shares, and any remaining distributions would be treated
as a capital gain. Current earnings and profits are generally treated, for federal income tax purposes, as first being used to
pay distributions on preferred shares and then to the extent remaining, if any, to pay distributions on common shares. To qualify
as a RIC in a subsequent taxable year, the Fund would be required to satisfy the source-of-income, the asset diversification and
the annual distribution requirements for that year and distribute any earnings and profits from any year in which the Fund failed
to qualify as a RIC. Subject to a limited exception applicable to a RIC that qualified as such under the Code for at least one
year prior to disqualification and that requalifies as a RIC no later than the second year following the nonqualifying year, the
Fund would be subject to tax on any unrealized built-in gains in the assets held by it at the time the Fund requalified as a RIC
that are recognized within the subsequent five years, unless the Fund made an election to pay corporate-level tax on such built-in
gain at the time of its requalification as a RIC. The remainder of this discussion assumes the Fund will qualify for taxation
as a RIC.
Taxation
of Certain Fund Investments
Investments
in Partnerships
The
Fund may invest in unregistered funds and other entities properly treated as partnerships for U.S. federal income tax purposes
(other than qualified publicly traded partnerships). An entity that is properly classified as a partnership (and not an
association or publicly traded partnership taxable as a corporation) is generally not itself subject to federal income tax. Instead,
each partner of the partnership is required to take into account its distributive share of the partnership’s net capital
gain or loss, net short-term capital gain or loss, and its other items of ordinary income or loss (including all items of income,
gain, loss and deduction allocable to that partnership from investments in other partnerships) for each taxable year of the partnership
ending with or within the partner’s taxable year. Each such item will have the same character to a partner and will generally
have the same source (either United States or foreign), as though the partner realized the item directly. Partners of a partnership
must report these items regardless of the extent to which, or whether, the partners receive cash distributions with respect to
such items. Accordingly, the Fund may be required to recognize items of taxable income and gain prior to the time that any corresponding
cash distributions are made to the Fund (including in circumstances where investments by an underlying partnership, such as investments
in debt instrument with “original issue discount,” generate income prior to a corresponding receipt of cash). In such
case, the Fund may have to dispose of assets that it would otherwise have continued to hold in order to generate cash for distributions
to Fund shareholders. In addition, the Fund may have to dispose of an investment in a partnership or devise other methods
of cure (such as holding the investment through a taxable subsidiary), to the extent the partnership earns income of a type that
is not qualifying income for purposes of the gross income test or holds assets that could cause the Fund not to satisfy the RIC
asset diversification tests.
Any
distribution by a partnership to the Fund in excess of the Fund’s allocable share of the partnership’s net taxable
income will decrease the Fund's tax basis in its partnership interest and will therefore increase the amount of gain (or decrease
the amount of loss) that will be recognized by the Fund on the disposition of its partnership interest.
A
portion of any gain or loss recognized by the Fund on a disposition of a partnership interest (or by a partnership on a disposition
of an underlying asset) may be separately computed and treated as ordinary income or loss under the Code to the extent attributable
to assets of the partnership that give rise to depreciation recapture, intangible drilling and development cost recapture, or
other “unrealized receivables” or “inventory items” under the Code. Any such gain may exceed net taxable
gain realized on the disposition and will be recognized even if there is a net taxable loss on the disposition. The Fund’s
net capital losses may only be used to offset capital gains and therefore cannot be used to offset gains that are treated as ordinary
income. Thus, the Fund could recognize both gain that is treated as ordinary income and a capital loss on a disposition of a partnership
interest (or on a partnership’s disposition of an underlying asset) and would not be able to use the capital loss to offset
that gain. Any capital losses that the Fund recognizes on a disposition of a partnership interest can only be used to offset capital
gains that the Fund recognizes. Any capital losses that the Fund is unable to use may be carried forward to reduce its capital
gains in later years.
Other
Considerations
The
application of certain requirements for qualification as a RIC and the application of certain other federal income tax rules may
be unclear in some respects in connection with certain investments. As a result, the Fund may be required to limit the extent
to which it invests in such investments and it is also possible that the IRS may not agree with the Fund’s treatment of
such investments. In addition, the tax treatment of certain investments may be affected by future legislation, Treasury regulations
and guidance issued by the IRS (which could apply retroactively) that could affect the timing, character and amount of the Fund’s
income and gains and distributions to shareholders, affect whether the Fund has made sufficient distributions and
otherwise satisfied the requirements to maintain its qualification as a RIC and avoid federal income and excise taxes
or limit the extent to which the Fund may invest in certain investments in the future.
Certain
of the Fund’s investment practices are subject to special and complex federal income tax provisions that may, among other
things, (1) convert distributions that would otherwise constitute qualified dividend income into ordinary income taxed at
the higher rate applicable to ordinary income; (2) treat distributions that would otherwise be eligible for the corporate
dividends received deduction as ineligible for such treatment; (3) disallow, suspend or otherwise limit the allowance of
certain losses or deductions; (4) convert long-term capital gain into short-term capital gain or ordinary income; (5) convert
an ordinary loss or deduction into a capital loss (the deductibility of which is more limited); (6) cause the Fund to recognize
income or gain without a corresponding receipt of cash; (7) adversely affect the time as to when a purchase or sale of stock
or securities is deemed to occur; (8) adversely alter the characterization of certain complex financial transactions; and
(9) produce income that will not be included in the sources of income from which a RIC must derive at least 90% of its gross
income each year. While it may not always be successful in doing so, the Fund will seek to avoid or minimize any adverse tax consequences
of its investment practices.
Some
of the investments that the Fund is expected to make, such as investments in debt securities that are treated as issued with original
issue discount, will cause the Fund to recognize income or gain for U.S. federal income tax purposes prior to the receipt of any
corresponding cash or other property. Because the distribution requirements described above will apply to this income, the Fund
may be required to borrow money or dispose of other securities at disadvantageous times in order to make the relevant distributions.
The
Fund may be subject to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital
gains with respect to its investments in those countries, which would, if imposed, reduce the yield on or return from those investments.
Tax treaties between certain countries and the United States may reduce or eliminate such taxes in some cases. If, at the close
of its taxable year, more than 50% of the value of the Fund’s total assets consists of securities of foreign corporations,
including for this purpose foreign governments, the Fund will be permitted to make an election under the Code that will allow
shareholders a deduction or credit for foreign taxes paid by the Fund. In such a case, shareholders will include in gross income
from foreign sources their pro rata shares of such taxes. A shareholder’s ability to claim an offsetting foreign tax credit
or deduction in respect of such foreign taxes is subject to certain limitations imposed by the Code, which may result in the shareholder’s
not receiving a full credit or deduction (if any) for the amount of such taxes. Shareholders who do not itemize on their U.S.
federal income tax returns may claim a credit (but not a deduction) for such foreign taxes. If the Fund does not qualify for or
chooses not to make such an election, shareholders will not be entitled separately to claim a credit or deduction for U.S. federal
income tax purposes with respect to foreign taxes paid by the Fund; in that case the foreign tax will nonetheless reduce the Fund’s
taxable income. Even if the Fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders
and those who invest in the Fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction.
Foreign
exchange gains and losses realized by the Fund in connection with certain transactions involving foreign currency-denominated
debt securities, certain options and futures contracts relating to foreign currency, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency are subject to section 988 of the Code, which generally
causes such gain and loss to be treated as ordinary income or loss.
If
a Fund acquires any equity interest in certain foreign investment entities (i) that receive at least 75% of their annual gross
income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or (ii) where at least
50% of the corporation’s assets (computed based on average fair market value) either produce or are held for the production
of passive income (“passive foreign investment companies” or “PFICs”), the Fund will generally be subject
to one of the following special tax regimes: (i) the Fund may be liable for U.S. federal income tax, and an additional interest
charge, on a portion of any “excess distribution” from such foreign entity or any gain from the disposition of such
shares, even if the entire distribution or gain is paid out by the Fund as a dividend to its shareholders; (ii) if the Fund were
able and elected to treat a PFIC as a “qualified electing fund” or “QEF,” the Fund would be required each
year to include in income, and distribute to shareholders in accordance with the distribution requirements set forth above, the
Fund's pro rata share of the ordinary earnings and net capital gains of the PFIC, whether or not such earnings or gains are distributed
to the Fund; or (iii) the Fund may be entitled to mark-to-market annually shares of the PFIC, and in such event would be required
to distribute to shareholders any such mark-to-market gains in accordance with the distribution requirements set forth above.
Each Fund intends to make the appropriate tax elections, if possible, and take any additional steps that are necessary to mitigate
the effect of these rules. A Fund may limit and/or manage its holdings in PFICs to limit its tax liability or maximize its return
from these investments. Amounts included in income each year by a Fund arising from a QEF election will be qualifying income for
purposes of the income test described above even if not distributed to the Fund, if the Fund derives such income from its business
of investing in stock, securities or currencies.
Section 163(j) of
the Code limits the deductibility of business interest. Generally, the provision limits the deduction for net business interest
expenses to 30% of a taxpayer’s adjusted taxable income (50% for taxable years beginning in 2019 or 2020). The deduction
for interest expenses is not limited to the extent of any business interest income, which is interest income attributable to a
trade or business and not investment income. Under applicable Treasury regulations, all interest expense and interest income of
a RIC is treated as properly allocable to a trade or business for purposes of the limitation on the deductibility of business
interest. As a result, this limitation may impact the Fund’s ability to use leverage (e.g., borrow money, issue debt
securities, etc.).
In
determining its net capital gain, including in connection with determining the amount available to support a capital gain dividend,
its taxable income and its earnings and profits, the Fund generally may elect to treat part or all of any post-October capital
loss (defined as any net capital loss attributable to the portion, if any, of the taxable year after October 31 or, if there is
no such loss, the net long-term capital loss or net short-term capital loss attributable to any such portion of the taxable year)
or late-year ordinary loss (generally, the sum of its (i) net ordinary loss, if any, from the sale, exchange or other taxable
disposition of property, attributable to the portion, if any, of the taxable year after October 31, and its (ii) other net ordinary
loss, if any, attributable to the portion, if any, of the taxable year after December 31) as if incurred in the succeeding taxable
year.
The
Fund is generally permitted to carry forward a net capital loss in any taxable year to offset its own capital gains, if any. These
amounts are available to be carried forward to offset future capital gains to the extent permitted by the Code and applicable
tax regulations. Any such loss carryforwards will retain their character as short-term or long-term. In the event that the Fund
were to experience an ownership change as defined under the Code, the capital loss carryforwards and other favorable tax attributes
of the Fund, if any, may be subject to limitation.
The
Fund may invest in certain options, futures or forward currency contracts to hedge the Fund’s portfolio or for any other
permissible purposes consistent with the Fund’s investment objective. If the Fund makes these investments, it could be required
to mark-to-market these contracts and realize any unrealized gains and losses at its fiscal year end even though it continues
to hold the contracts. Under these rules, gains or losses on the contracts generally would be treated as 60% long-term and 40%
short-term gains or losses, but gains or losses on certain foreign currency contracts would be treated as ordinary income or losses.
In determining its net income for excise tax purposes, the Fund also would be required to mark-to-market these contracts annually
as of October 31 (for capital gain net income and ordinary income arising from certain foreign currency contracts), and to realize
and distribute any resulting income and gains.
The
Fund’s entry into a short sale transaction or an option or other contract could be treated as the “constructive sale”
of an “appreciated financial position,” causing it to realize gain, but not loss, on the position. Additionally, the
Fund’s entry into securities lending transactions may cause the replacement income earned on the loaned securities to fall
outside of the definition of qualified dividend income and to fail to qualify for the dividends received deduction. This replacement
income generally will not be eligible for reduced rates of taxation on qualified dividend income, and, to the extent that debt
securities are loaned, will generally not qualify as qualified interest income for foreign withholding tax purposes.
Convertible
debt is ordinarily treated as a “single property” consisting of a pure debt interest until conversion, after which
the investment becomes an equity interest. If the security is issued at a premium (i.e., for cash in excess of the face amount
payable on retirement), the creditor-holder may amortize the premium over the life of the bond. If the security is issued for
cash at a price below its face amount, the creditor-holder must accrue original issue discount in income over the life of the
debt.
Taxation
for U.S. Shareholders
Distributions
paid to you by the Fund from its investment company taxable income generally will be taxable to you as ordinary income to the
extent of the Fund’s earnings and profits, whether paid in cash or reinvested in additional shares. A portion of such distributions
(if properly reported by the Fund) may qualify (1) in the case of corporate shareholders, for the dividends received deduction
under section 243 of the Code to the extent that the Fund’s income consists of dividend income from U.S. corporations, excluding
distributions from certain entities, such as REITs, or (2) in the case of individual shareholders, as qualified dividend
income eligible to be taxed at the federal income tax rates applicable to net capital gain under section 1(h)(11) of the Code
to the extent that the Fund receives qualified dividend income, and provided in each case that certain holding period and other
requirements are met at both the Fund and shareholder levels. Qualified dividend income is, in general, dividend income from taxable
domestic corporations and qualified foreign corporations (for example, generally, if the issuer is incorporated in a possession
of the United States or in a country with a qualified comprehensive income tax treaty with the United States, or if the shares
with respect to which such dividend is paid are readily tradable on an established securities market in the United States). To
be treated as qualified dividend income, the shareholder must hold the shares paying otherwise qualifying dividend income more
than 60 days during the 121-day period beginning 60 days before the ex-dividend date (or, in the case of certain preferred shares,
more than 90 days during the 181-day period beginning 90 days before the ex-dividend date). A shareholder’s holding period
may be reduced for purposes of this rule if the shareholder engages in certain risk reduction transactions with respect to
the shares. A qualified foreign corporation generally excludes any foreign corporation that, for the taxable year of the corporation
in which the dividend was paid or the preceding taxable year, is a passive foreign investment company. Distributions made to you
from an excess of net long-term capital gain over net short-term capital losses (“capital gain dividends”), including
capital gain dividends credited to you but retained by the Fund (as described below), will be taxable to you as long-term capital
gain if they have been properly designated by the Fund, regardless of the length of time you have owned the Fund’s shares.
Distributions
in excess of the Fund’s earnings and profits will be treated by you, first, as a tax-free return of capital, which is applied
against and will reduce the adjusted basis of your shares and, after such adjusted basis is reduced to zero, generally will constitute
capital gain to you. After the close of its taxable year, the Fund will provide you with information on the federal income tax
status of the dividends and distributions you received from the Fund during the year.
For
taxable years beginning before January 1, 2026, qualified REIT dividends (i.e., REIT dividends other than capital gain dividends
and portions of REIT dividends designated as qualified dividend income) are generally eligible for a 20% federal income tax deduction
in the case of individuals, trusts and estates, provided certain holding period requirements are met with respect to the REIT
stock. If the Fund receives qualified REIT dividends, it may elect to pass the special character of this income through to its
shareholders. To be eligible to treat distributions from the Fund as qualified REIT dividends, a shareholder must hold shares
of the Fund for more than 45 days during the 91-day period beginning on the date that is 45 days before the date on which the
shares become ex-dividend with respect to such dividend and the shareholder must not be under an obligation (whether pursuant
to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.
If the Fund does not elect to pass the special character of this income through to shareholders or if a shareholder does not satisfy
the above holding period requirements, the shareholder will not be entitled to the 20% deduction for the shareholder’s share
of the Fund’s qualified REIT dividend income while direct investors in REITs may be entitled to the deduction. Subject to
any future regulatory guidance to the contrary, any distribution of income attributable to the Fund’s investments in a qualified
publicly traded partnership will currently not qualify for the deduction that would be available to a non-corporate shareholder
were the shareholder to own such qualified publicly traded partnership directly. As a result, it is possible that a non-corporate
shareholder will be subject to a higher effective tax rate on any such distributions received from the Fund compared to the effective
rate applicable to any qualified publicly traded partnership income the shareholder would derive if the shareholder invested directly
in the qualified publicly traded partnership.
Certain
distributions reported by the Fund as Section 163(j) interest dividends may be treated as interest income by shareholders for
purposes of the tax rules applicable to interest expense limitations under Section 163(j) of the Code. Such treatment by the shareholder
is generally subject to holding period requirements and other potential limitations, although the holding period requirements
are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily
and pay such dividends on a monthly or more frequent basis. The amount that the Fund is eligible to report as a Section 163(j)
dividend for a tax year is generally limited to the excess of the Fund’s business interest income over the sum of the Fund’s
(i) business interest expense and (ii) other deductions properly allocable to the Fund’s business interest income.
Sales
and other dispositions of the Fund’s shares (including upon a termination of the Fund) generally are taxable events. You
should consult your own tax adviser with reference to your individual circumstances to determine whether any particular transaction
in the Fund’s shares is properly treated as a sale or exchange for federal income tax purposes and the tax treatment of
any gains or losses recognized in such transactions. The sale or other disposition of shares of the Fund generally will result
in capital gain or loss to you, equal to the difference between the amount realized and your adjusted basis in the shares sold
or exchanged (taking into account any reductions in such basis resulting from prior returns of capital), and will be long-term
capital gain or loss if your holding period for the shares is more than one year at the time of sale. Different tax consequences
may apply for tendering and non-tendering shareholders in connection with a repurchase offer. For example, if a shareholder does
not tender all of his or her shares, such repurchase may not be treated as a sale or exchange for U.S. federal income tax purposes,
and may result in deemed distributions to non-tendering shareholders. On the other hand, shareholders holding shares as capital
assets who tender all of their shares (including shares deemed owned by shareholders under constructive ownership rules) will
be treated as having sold their shares and generally will recognize capital gain or loss.
Any
loss upon the sale or exchange of shares held for six months or less will be treated as long-term capital loss to the extent of
any capital gain dividends you received (including amounts credited as an undistributed capital gain dividend) with respect to
such shares. A loss you realize on a sale or exchange of shares of the Fund generally will be disallowed if you acquire other
shares of the Fund (whether through the automatic reinvestment of dividends or otherwise) or other substantially identical shares
within a 61-day period beginning 30 days before and ending 30 days after the date that you dispose of the shares. In such case,
the basis of the shares acquired will be adjusted to reflect the disallowed loss. Present law taxes both long-term and short-term
capital gain of corporations at the same rate applicable to ordinary income of corporations. For non-corporate taxpayers, short-term
capital gain will currently be taxed at the rate applicable to ordinary income, while long-term capital gain generally will be
taxed at the long-term capital gain rates. Capital losses are subject to certain limitations.
For
purpose of determining (1) whether the annual distribution requirement to maintain RIC status is satisfied for any year and
(2) the amount of capital gain dividends paid for that year, the Fund may, under certain circumstances, elect to treat a
distribution that is paid during the following taxable year as if it had been paid during the taxable year in question. If the
Fund makes such an election, the U.S. shareholder will still be treated as receiving the distribution in the taxable year in which
the distribution is made. However, if the Fund pays you a distribution in January that was declared in the previous October,
November or December to shareholders of record on a specified date in one of such months, then such distribution will
be treated for federal income tax purposes as being paid by the Fund and received by you on December 31 of the year in which
the distribution was declared. A shareholder may elect not to have all distributions automatically reinvested in Fund shares pursuant
to the Plan. If a shareholder elects not to participate in the Plan, such shareholder will receive distributions in cash. For
taxpayers subject to U.S. federal income tax, all distributions generally will be taxable, as discussed above, regardless of whether
a shareholder takes them in cash or they are reinvested pursuant to the Plan in additional shares of the Fund.
If
a shareholder’s distributions are automatically reinvested pursuant to the Plan, for U.S. federal income tax purposes, the
shareholder generally will be treated as having received a taxable distribution in the amount of the cash dividend that the shareholder
would have received if the shareholder had elected to receive cash. Under certain circumstances, however, if a shareholder’s
distributions are automatically reinvested pursuant to the Plan and the Plan Agent invests the distribution in newly issued shares
of the Fund, the shareholder may be treated as receiving a taxable distribution equal to the fair market value of the shares the
shareholder receives.
The
Fund intends to distribute substantially all realized capital gains, if any, at least annually. If, however, the Fund were to
retain any net capital gain, the Fund may designate the retained amount as undistributed capital gains in a notice to shareholders
who, if subject to U.S. federal income tax on long-term capital gains, (1) will be required to include in income as long-term
capital gain, their proportionate shares of such undistributed amount and (2) will be entitled to credit their proportionate
shares of the federal income tax paid by the Fund on the undistributed amount against their U.S. federal income tax liabilities,
if any, and to claim refunds to the extent the credit exceeds such liabilities. If such an event occurs, the basis of the shares
owned by a shareholder of the Fund will, for U.S. federal income tax purposes, generally be increased by the difference between
the amount of undistributed net capital gain included in the shareholder’s gross income and the tax deemed paid by the shareholder.
Backup
Withholding
The
Fund is required in certain circumstances to backup withhold at a current rate of 24% on distributions and certain other payments
paid to certain holders of the Fund’s shares who do not furnish the Fund with their correct taxpayer identification number
(in the case of individuals, their social security number) and certain certifications or who are otherwise subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld from payments made to you may be refunded or credited against
your U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.
Medicare
Tax
An
additional 3.8% tax is imposed on the net investment income of certain individuals with a modified adjusted gross income of over
$200,000 ($250,000 in the case of joint filers) and on the undistributed net investment income of certain estates and trusts.
For these purposes, “net investment income” generally will include interest, dividends, annuities, royalties, rent,
net gain attributable to the disposition of property not held in a trade or business (including net gain from the sale, exchange
or other taxable disposition of shares of the Fund) and certain other income, but will be reduced by any deductions properly allocable
to such income or net gain. Thus, certain of the Fund’s taxable distributions and gains on the sale of Fund shares to shareholders
may be subject to this additional tax.
U.S.
Federal Income Tax Considerations for Non-U.S. Shareholders
The
following discussion is a general summary of the material U.S. federal income tax considerations applicable to a Non-U.S. holder
of Fund shares.
This
summary does not purport to be a complete description of the income tax considerations for a Non-U.S. holder. For example, the
following does not describe income tax consequences that are assumed to be generally known by investors or certain considerations
that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws. This summary
does not discuss any aspects of U.S. estate or gift tax or state or local tax. In addition, this summary assumes that at all times
the Fund’s common shares will be “regularly traded” for purposes of section 897 of the Code and does not address
(1) any Non-U.S. holder that holds, at any time, more than 5% of the Fund’s shares, directly or under ownership attribution
rules applicable for purposes of section 897 of the Code (a “5% holder”), or (2) any Non-U.S. holder whose
ownership of shares of the Fund is effectively connected with the conduct of a trade or business in the United States. A 5% holder
may be subject to adverse consequences, including obligations to file U.S. tax returns and to pay tax at the rates applicable
to U.S. persons, with respect to Fund distributions that are attributable to USRPIs (as defined below) or gain on the disposition
of Fund shares. Such holders should consult their tax advisors regarding an investment in the Fund.
As
indicated above, the Fund has elected to be treated, and intends to qualify each year, as a RIC for U.S. federal income tax purposes.
This summary is based on the assumption that the Fund will qualify as a RIC in each of its taxable years. Distributions of the
Fund’s investment company taxable income to Non-U.S. holders will, except as discussed below, generally be subject to withholding
of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable income tax treaty) to the extent of the Fund’s
current and accumulated earnings and profits. In order to obtain a reduced rate of withholding, a Non-U.S. holder will be required
to provide the Fund with the applicable IRS Form W-8 certifying its entitlement to benefits under a treaty. The Fund generally
will not be required to withhold tax on any amounts paid to a Non-U.S. holder with respect to dividends attributable to “qualified
short-term gain” (i.e., the excess of net short-term capital gain over net long-term capital loss) and dividends attributable
to certain U.S. source interest income that would not be subject to federal withholding tax if earned directly by a non-U.S. person,
provided in each case that such amounts are properly reported by the Fund and the shareholder complies with applicable certification
requirements relating to its non-U.S. status. The Fund may choose not to report such amounts.
Actual
or deemed distributions of the Fund’s net capital gains to a Non-U.S. holder, and gains realized by a Non-U.S. holder upon
the sale of the Fund’s shares, will, except as described below, generally not be subject to U.S. federal income or withholding
tax unless the Non-U.S. holder is an individual, has been present in the United States for 183 days or more during the taxable
year and certain other conditions are satisfied.
If
the Fund distributes its net capital gains in the form of deemed rather than actual distributions (which the Fund may do in the
future), a Non-U.S. holder may be entitled to a federal income tax credit or tax refund equal to the shareholder’s allocable
share of the tax the Fund paid on the capital gains deemed to have been distributed. In order to obtain the refund, the Non-U.S.
holder must obtain a U.S. taxpayer identification number and file a federal income tax return even if the Non-U.S. holder would
not otherwise be required to obtain a U.S. taxpayer identification number or file a federal income tax return.
A
Non-U.S. holder who is a non-resident alien individual, and who is otherwise subject to withholding of federal income tax, may
be subject to information reporting and backup withholding of federal income tax on dividends unless the Non-U.S. holder provides
the Fund or the dividend paying agent with an IRS Form W-8BEN (or an acceptable substitute form) or otherwise meets documentary
evidence requirements for establishing that it is a Non-U.S. holder or otherwise establishes an exemption from backup withholding.
The amount of any backup withholding from a payment to a Non-U.S. holder will be allowed as a credit against such Non-U.S. holder’s
U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished
to the IRS.
Special
rules may apply to Non-U.S. holders who receive distributions from the Fund that are attributable to gain from “United
States real property interests” (“USRPIs”). The Code defines USRPIs to include direct holdings of U.S. real
property and, subject to certain exceptions, any interest (other than an interest solely as a creditor) in a “United States
real property holding corporation” or a former United States real property holding corporation. The Code defines a United
States real property holding corporation as any corporation whose USRPIs make up 50% or more of the fair market value of its USRPIs,
its interests in real property located outside the United States, plus any other assets it uses in a trade
or business. Certain of the Fund’s investments may constitute interests in United States real property holding corporations
or other USRPIs. In general, if the Fund is a United States real property
holding corporation (determined without regard to certain exceptions), distributions (including capital gain dividends)
by the Fund that are attributable to (1) gains realized on the disposition of USPRIs by the Fund and (2) distributions
received by the Fund from a lower-tier RIC or REIT that the Fund is required to treat as USRPI gain in its hands will generally
be subject to U.S. federal withholding tax as an ordinary income dividend (i.e., subject to withholding tax at a 30% rate (or
lower treaty rate)).
Non-U.S.
persons should consult their own tax advisers with respect to the U.S. federal income tax and withholding tax and state, local
and foreign tax consequences of an investment in the shares.
Foreign
Account Tax Compliance Act
The
Fund generally must obtain information sufficient to identify the status of each of its shareholders under sections 1471-1474
of the Code and the Treasury and IRS guidance issued thereunder (collectively, “FATCA”) or under an applicable intergovernmental
agreement (an “IGA”) entered into by the United States and a foreign jurisdiction to implement FATCA. If a shareholder
fails to provide this information or otherwise fails to comply with FATCA or an IGA, the Fund may be required to withhold 30%
of ordinary dividends the Fund pays to that shareholder. If a payment by the Fund is subject to FATCA withholding, the Fund or
its agent is required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable
to foreign shareholders described above. The IRS and the Treasury have issued proposed regulations, on which taxpayers may currently
rely, providing that the gross proceeds of share redemptions or exchanges and capital gain dividends the Fund pays will not be
subject to FATCA withholding. You are encouraged to consult with your own tax adviser regarding the possible implications of FATCA
on your investment in Fund shares, including investments through an intermediary. In addition, some foreign countries have implemented
and others are considering, and may implement, laws similar in purpose and scope to FATCA.
The
foregoing is a general and abbreviated summary of the provisions of the Code and the Treasury regulations in effect as they directly
govern the taxation of the Fund and its shareholders. These provisions are subject to change by legislative and administrative
action, and any such change may be retroactive. Shareholders are urged to consult their own tax advisers regarding specific questions
as to U.S. federal, foreign, state, local income or other taxes based on their particular circumstances.
Proxy
voting policy and proxy voting record
The
Board has delegated the day-to-day responsibility to the Adviser to vote the Fund’s proxies. Proxies are voted by the Adviser
pursuant to the Board approved proxy guidelines, a copy of which as currently in effect as of the date of this SAI is attached
hereto as Appendix B. Also attached hereto in Appendix B is the Adviser’s Listed
Company Stewardship Guidelines, which among other things, expands upon how the Adviser approaches environmental, social and governance
issues when engaging with company management and voting proxies.
Information
on how the Fund voted proxies (if any) relating to portfolio securities during the most recent 12 month period ending June 30
is available: (i) upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465, or (ii) on
the SEC’s website at http://www.sec.gov.
Incorporation
by reference
This
SAI is part of a registration statement that the Fund
has filed with the SEC. The Fund is permitted
to “incorporate by reference” the information that it files with the SEC, which means that the Fund can
disclose important information to you by referring you to those documents. The information incorporated by reference is
an important part of this SAI.
The
documents listed below are incorporated by reference into this SAI and deemed to be part of this SAI from the date of the filing
of such reports and documents:
| • | the description of common shares on Form
8-A (Investment Company Act
File No. 001-33218; Accession No. 0001104659-06-082473) filed with the SEC on December
19, 2006. |
Additionally,
copies of the foregoing and any more recent reports filed after the date hereof may be obtained without charge:
for
the Fund:
By Phone: |
|
(800) 522-5465 |
By Mail: |
|
abrdn Total Dynamic Dividend Fund |
|
|
c/o
abrdn Investments Limited
1900
Market Street, Suite 200 |
|
|
Philadelphia, PA 19103 |
By Internet: |
|
www.abrdnaod.com. |
for
the Acquired Fund:
By Phone: |
|
(630) 765-8000 |
By Mail: |
|
First Trust Specialty Finance and Financial
Opportunities Fund |
|
|
120 East Liberty Drive, Suite 400 |
|
|
Wheaton, IL 60187 |
By Internet: |
|
https://www.ftportfolios.com |
The
Funds are subject to the informational requirements of the Exchange Act, and, in accordance therewith, file reports, proxy statements,
proxy materials and other information with the SEC. You also may view or obtain the foregoing documents from the SEC:
By e-mail: |
|
publicinfo@sec.gov (duplicating
fee required) |
By Internet: |
|
www.sec.gov |
Financial
statements and supplemental financial information
The
financial statements of the Fund as of October 31, 2022 have been incorporated by reference herein in reliance upon the report
of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm
as experts in accounting and auditing.
The
Fund shall be the accounting and performance survivor in the Reorganization.
A
table showing the fees and expenses of the Fund and Acquired Fund and the fees and expenses of the Fund on a pro forma basis after
giving effect to the proposed Reorganization is included in the section titled “Fees and Expenses” of the Proxy Statement/
Prospectus.
It
is anticipated that approximately 13% of the Acquired Fund’s holdings will be sold by the Acquired Fund before the closing
of the Reorganization in order to pay back its outstanding leverage. Based on the Acquired Fund’s holdings as of September
21, 2023, the Combined Fund expects to sell approximately 97% of the Acquired Fund’s portfolio following the closing of
the Reorganization. The resulting proceeds of sales made by the Combined Fund after the Reorganization will be invested in accordance
with the Combined Fund’s principal investment strategies (which are those of the Acquiring Fund). A schedule of investments
of the Acquired Fund as of May 31, 2023 is included below and is annotated to reflect the anticipated sale of a portion of the
Acquired Fund’s portfolio holdings in connection with the Reorganization. Notwithstanding the foregoing, changes may be
made to the Acquired Fund’s portfolio in advance of the Reorganization and/or to the Combined Fund’s portfolio following
the Reorganization.
For
purposes of determining a Fund’s net asset value, in certain circumstances, foreign equity securities that trade on a market
that closes prior to the Fund’s valuation time are valued by applying valuation factors to the last quoted sale price.
It is expected that this difference will not impact the value of an Acquired Fund shareholder’s investment immediately after
the Reorganization is consummated since the Acquired Fund, at this time, does not hold foreign equity securities that close prior
to the Fund’s valuation time.
Schedule
of investments
First Trust Specialty Finance and Financial Opportunities
Fund (FGB)
Portfolio of Investments
May 31, 2023 (Unaudited)
Shares | | |
Description | |
Value | |
| | |
| |
| |
COMMON STOCKS – BUSINESS DEVELOPMENT COMPANIES - 104.2% | |
| | | |
Capital Markets - 104.2% | |
| | |
| 250,000 | | |
Ares Capital Corp. (a) (c) | |
$ | 4,685,000 | |
| 390,000 | | |
Barings BDC, Inc. (a) (c) | |
| 3,096,600 | |
| 332,000 | | |
BlackRock TCP Capital Corp. (a) (c) | |
| 3,439,520 | |
| 160,000 | | |
Blackstone Secured Lending Fund (a) (c) | |
| 4,100,800 | |
| 71,000 | | |
Capital Southwest Corp. (a) (c) | |
| 1,299,300 | |
| 42,565 | | |
Crescent Capital BDC, Inc. (a) (c) | |
| 573,776 | |
| 38,500 | | |
FS KKR Capital Corp. (a) (c) | |
| 744,975 | |
| 135,000 | | |
Goldman Sachs BDC, Inc. (a) (c) | |
| 1,776,600 | |
| 250,000 | | |
Golub Capital BDC, Inc. (a) (c) | |
| 3,315,000 | |
| 340,000 | | |
Hercules Capital, Inc. (a) (c) | |
| 4,916,400 | |
| 111,000 | | |
Main Street Capital Corp. (a) (c) | |
| 4,402,260 | |
| 328,000 | | |
New Mountain Finance Corp. (a) (c) | |
| 3,926,160 | |
| 10,000 | | |
Oaktree Specialty Lending Corp. (c) | |
| 187,100 | |
| 208,000 | | |
OFS Capital Corp. (a) (c) | |
| 1,924,000 | |
| 150,000 | | |
Owl Rock Capital Corp. (a) (c) | |
| 2,014,500 | |
| 656,000 | | |
PennantPark Investment Corp. (a) (c) | |
| 3,621,120 | |
| 14,551 | | |
PhenixFIN Corp. (c) | |
| 496,189 | |
| 44,000 | | |
Portman Ridge Finance Corp. (c) | |
| 844,800 | |
| 177,000 | | |
Sixth Street Specialty Lending, Inc. (a) (c) | |
| 3,221,400 | |
| 161,000 | | |
SLR Investment Corp. (a) (c) | |
| 2,239,510 | |
| 48,000 | | |
Trinity Capital, Inc. (c) | |
| 606,720 | |
| 105,000 | | |
TriplePoint Venture Growth BDC Corp. (a) (c) | |
| 1,107,750 | |
| | | |
Total Common Stocks - Business Development Companies | |
| | |
| | | |
(Cost $63,463,351) | |
| 52,539,480 | |
COMMON STOCKS – 6.2% | |
| | |
| | | |
Banks – 1.1% | |
| | |
| 20,000 | | |
Bank of America Corp. (d) | |
| 555,800 | |
| | | |
Capital Markets – 1.9% | |
| | |
| 11,000 | | |
Blackstone, Inc. (d) | |
| 942,040 | |
| | | |
Financial Services – 2.8% | |
| | |
| 4,500 | | |
Berkshire Hathaway, Inc., Class B (a) (b) (c) | |
| 1,444,860 | |
| | | |
Insurance – 0.4% | |
| | |
| 150 | | |
Markel Corp. (b) (c) | |
| 197,210 | |
| | | |
Total Common Stocks | |
| | |
| | | |
(Cost $2,798,007) | |
| 3,139,910 | |
REAL ESTATE INVESTMENT TRUSTS – 3.6% | |
| | |
| | | |
Mortgage Real Estate Investment Trusts – 3.6% | |
| | |
| 110,000 | | |
AGNC Investment Corp. (a) (c) | |
| 1,010,900 | |
| 41,250 | | |
Annaly Capital Management, Inc. (a) (c) | |
| 778,800 | |
| | | |
Total Real Estate Investment Trusts | |
| | |
| | | |
(Cost $2,812,871) | |
| 1,789,700 | |
| | | |
Total Investments – 114.0% | |
| | |
| | | |
(Cost $69,074,229) | |
| 57,469,090 | |
| | | |
Outstanding Loan – (17.1)% | |
| (8,600,000 | ) |
| | | |
Net Other Assets and Liabilities – 3.1% | |
| 1,551,142 | |
| | | |
Net Assets – 100.0% | |
$ | 50.420.232 | |
| (a) | All or a portion of this security serves as collateral on the outstanding loan. At May 31, 2023, the segregated value of these
securities amounts to $36,817,193. |
| (b) | Non-income producing security. |
| (c) | Position currently expected to be disposed of in connection with the Reorganization. |
| (d) | Position currently expected to be partially disposed of in connection with the Reorganization. |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments
as of May 31, 2023 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| |
Total Value at 5/31/2023 | | |
Level 1 Quoted Prices | | |
Level 2 Significant Observable Unobservable Inputs | | |
Level 3 Significant Inputs | |
Common Stocks - Business Development Companies* | |
$ | 52,539,480 | | |
$ | 52,539,480 | | |
$ | — | | |
$ | — | |
Common Stocks* | |
| 3,139,910 | | |
| 3,139,910 | | |
| — | | |
| — | |
Real Estate Investment Trusts* | |
| 1,789,700 | | |
| 1,789,700 | | |
| — | | |
| — | |
Total Investments | |
$ | 57,469,090 | | |
$ | 57,469,090 | | |
$ | — | | |
$ | — | |
* See Portfolio of Investments for industry breakout.
Legal
counsel
Counsel
to the Fund is Dechert LLP.
Additional
information
The
Proxy Statement/Prospectus and this SAI do not contain all of the information set forth in the registration statement, including
any exhibits and schedules thereto. The Fund will
provide without charge to each person, upon written or oral request, a copy of any and all of the information that has been incorporated
by reference in this SAI or the Prospectus. Information contained on the Fund’s website at http:/www.abrdnaod.com
or the Acquired Fund’s website at https://www.ftportfolios.com is not incorporated by reference into this SAI
or the Proxy Statement/Prospectus and should not be considered to be part of this
SAI or the Proxy Statement/Prospectus.
Appendix
A—Description of securities ratings
S&P
GLOBAL RATINGS DEBT RATINGS
An
S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect
to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings
on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers,
or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
The opinion reflects S&P Global Ratings’ view of the obligor’s capacity and willingness to meet its financial
commitments as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect
ultimate payment in the event of default.
Issue
credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect
to put features on long-term obligations. Medium-term notes are assigned long-term ratings.
| 1. | Long-Term
Issue Credit Ratings |
Issue
credit ratings are based, in varying degrees, on S&P Global Ratings’ analysis of the following considerations:
| • | The
likelihood of payment—the capacity and willingness of the obligor to meet its financial
commitments on an obligation in accordance with the terms of the obligation; |
| • | The
nature and provisions of the financial obligation, and the promise we impute; and |
| • | The
protection afforded by, and relative position of, the financial obligation in the event
of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and
other laws affecting creditors’ rights. |
Issue
ratings are an assessment of default risk but may incorporate an assessment of relative seniority or ultimate recovery in the
event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy,
as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured
obligations, or operating company and holding company obligations.)
Long-Term
Issue Credit Ratings*
AAA
- An obligor rated ‘AAA’ has extremely strong capacity to meet its financial commitments. ‘AAA’ is the
highest issuer credit rating assigned by S&P Global Ratings. AA - An obligor rated ‘AA’ has very strong capacity
to meet its financial commitments. It differs from the highest-rated obligors only to a small degree.
AA-
An obligor rated ‘AA’ has very strong capacity to meet its financial commitments. It differs from the highest rated
obligors only in small degree.
A
- An obligor rated ‘A’ has strong capacity to meet its financial commitments but is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
BBB
- An obligor rated ‘BBB’ has adequate capacity to meet its financial commitments. However, adverse economic conditions
or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments.
Obligors
rated ‘BB’, ‘B’, ‘CCC’, and ‘CC’ are regarded as having significant speculative
characteristics. ‘BB’ indicates the least degree of speculation and ‘CC’ the highest. While such obligors
will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposure
to adverse conditions.BB - An obligor rated ‘BB’ is less vulnerable in the near term than other lower-rated obligors.
However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions that could lead
to the obligor’s inadequate capacity to meet its financial commitments.
B
- An obligor rated ‘B’ is more vulnerable than the obligors rated ‘BB’, but the obligor currently has
the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor’s
capacity or willingness to meet its financial commitments.
CCC
- An obligor rated ‘CCC’ is currently vulnerable and is dependent upon favorable business, financial, and economic
conditions to meet its financial commitments.
CC
- An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when
a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated
time to default.
C
– A subordinated debt or preferred stock obligation rated ‘C’ is currently highly vulnerable to nonpayment.
The ‘C’ rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken,
but payments on this obligation are being continued. A ‘C’ also will be assigned to a preferred stock issue in arrears
on dividends or sinking fund payments, but that is currently paying.
R
- An obligor rated ‘R’ is under regulatory supervision owing to its financial condition. During the pendency of the
regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations
and not others.
SD
and D - An obligor is rated ‘SD’ (selective default) or ‘D’ has failed to pay one or more of its financial
obligations (rated or unrated) when it came due. A ‘D’ rating is assigned when Standard & Poor’s believes
that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as
they come due. An ‘SD’ rating is assigned when Standard & Poor’s believes that the obligor has selectively
defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or
classes of obligations in a timely manner.
NR
- Indicates that a rating has not been assigned or is no longer assigned.
*
The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show
relative standing within the major rating categories.
| 2. | Short-Term
Issue Credit Ratings |
Short-Term
Issue Credit Ratings
A-1
- An obligor rated ‘A-1’ has strong capacity to meet its financial commitments. It is rated in the highest category
by S&P Global Ratings. Within this category, certain obligors are designated with a plus sign (+). This indicates that the
obligor’s capacity to meet its financial commitments is extremely strong.
A-2
- An obligor rated ‘A-2’ has satisfactory capacity to meet its financial commitments. However, it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in the highest rating category.
A-3
- An obligor rated ‘A-3’ has adequate capacity to meet its financial obligations. However, adverse economic conditions
or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments.
B
- An obligor rated ‘B’ is regarded as having significant speculative characteristics. Ratings of ‘B-1’,
‘B-2’, and ‘B-3’ may be assigned to indicate finer distinctions within the ‘B’ category. The
obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B-1
– A short-term obligation rated ‘B-1’ is regarded as having significant speculative characteristics, but the
obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade
obligors.
B-2
– A short-term obligation rated ‘B-2’ is regarded as having significant speculative characteristics, and the
obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade
obligors.
B-3
– A short-term obligation rated ‘B-3’ is regarded as having significant speculative characteristics, and the
obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade
obligors.
C
- An obligor rated ‘C’ is currently highly vulnerable to nonpayment. The ‘C’ rating may be used to cover
a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued.
A ‘C’ also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that
is currently paying.
R
- An obligor rated ‘R’ is under regulatory supervision owing to its financial condition. During the pendency of the
regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations
and not others.
SD
and D - An obligor is rated ‘SD’ (selective default) or ‘D’ has failed to pay one or more of its financial
obligations (rated or unrated) when it came due. A ‘D’ rating is assigned when Standard & Poor’s believes
that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as
they come due. An ‘SD’ rating is assigned when Standard & Poor’s believes that the obligor has selectively
defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or
classes of obligations in a timely manner.
NR
- Indicates that a rating has not been assigned or is no longer assigned.
| B. | Municipal
Short-Term Note Ratings |
An
S&P Global Ratings U.S. municipal note rating reflects S&P Global Ratings’ opinion about the liquidity factors and
market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original
maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any,
to assign, S&P Global Ratings’ analysis will review the following considerations:
| • | Amortization
schedule—the larger the final maturity relative to other maturities, the more likely
it will be treated as a note; and |
| • | Source
of payment—the more dependent the issue is on the market for its refinancing, the
more likely it will be treated as a note. |
Municipal
Short-Term Note Ratings
SP-1
- Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is
given a plus (+) designation.
SP-2
- Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over
the term of the notes.
SP-3
- Speculative capacity to pay principal and interest.
D
- ‘D’ is assigned upon failure to pay the note when due, completion of a distressed exchange offer, or the filing
of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example
due to automatic stay provisions.
MOODY’S
INVESTORS SERVICE INC. (“Moody’s”) LONG-TERM DEBT RATINGS*
Aaa
— Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa
—Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A
— Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
Baa
— Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain
speculative characteristics.
Ba
— Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B
— Obligations rated B are considered speculative and are subject to high credit risk.
Caa
— Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca
— Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of
principal and interest.
C
— Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal
and interest.
*
Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier
1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates a ranking in the lower end of that generic rating category.
STATE
AND MUNICIPAL NOTES
Excerpts
from Moody’s description of state and municipal note ratings:
MIG
1 This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable
liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG
2 This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.
MIG
3 This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for
refinancing is likely to be less well-established.
SG
This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
FITCH, INC.
BOND RATINGS
Fitch’s
credit ratings relating to issuers are an opinion on the relative ability of an entity to meet financial commitments, such as
interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Credit ratings relating to
securities and obligations of an issuer can include a recovery expectation. Credit ratings are used by investors as indications
of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. The agency’s
credit ratings cover the global spectrum of corporate, sovereign financial, bank, insurance, and public finance entities (including
supranational and sub-national entities) and the securities or other obligations they issue, as well as structured finance securities
backed by receivables or other financial assets. AAA’ ratings denote the lowest expectation of default risk. They are assigned
only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events. ‘AA’ ratings denote expectations of very low default risk. They indicate very strong
capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. ‘A’
ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
‘BBB’ ratings indicate that expectations of default risk are currently low. The capacity for payment of financial
commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity. ‘BB’
ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic
conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments.
‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments
are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
CCC - Default is a real possibility. CC - Default of some kind appears probable.
C
- A default or default-like process has begun, or the issuer is in standstill, or for a closed funding vehicle, payment capacity
is irrevocably impaired. ‘RD’ ratings indicate an issuer that in Fitch’s opinion has experienced: a) an uncured
payment default or distressed debt exchange on a bond, loan or other material financial obligation, but b) has not entered into
bankruptcy filings, administration, receivership, liquidation, or other formal winding-up procedure, and c) has not otherwise
ceased operating.
‘D’
ratings indicate an issuer that in Fitch’s opinion has entered into bankruptcy filings, administration, receivership, liquidation
or other formal winding-up procedure or that has otherwise ceased business.
MOODY’S
Ratings
assigned on Moody’s global long-term and short-term rating scales are forward-looking opinions of the relative credit risks
of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance
vehicles, and public sector entities. Long-term ratings are assigned to issuers or obligations with an original maturity of one
year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss
suffered in the event of default. Short-term ratings are assigned to obligations with an original maturity of thirteen months
or less and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered
in the event of default.
Moody’s
differentiates structured finance ratings from fundamental ratings (i.e., ratings on nonfinancial corporate, financial
institution, and public sector entities) on the global long-term scale by adding (sf) to all structured finance ratings. The addition
of (sf ) to structured finance ratings should eliminate any presumption that such ratings and fundamental ratings at the same
letter grade level will behave the same. The (sf) indicator for structured finance security ratings indicates that otherwise similarly
rated structured finance and fundamental securities may have different risk characteristics. Through its current methodologies,
however, Moody’s aspires to achieve broad expected equivalence in structured finance and fundamental rating performance
when measured over a long period of time.
GLOBAL
SHORT-TERM RATING SCALE
P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
U.S.
MUNICIPAL SHORT-TERM DEBT AND DEMAND OBLIGATION RATINGS
SHORT-TERM
OBLIGATION RATINGS
While
the global short-term ‘prime’ rating scale is applied to US municipal tax-exempt commercial paper, these programs
are typically backed by external letters of credit or liquidity facilities and their short-term prime ratings usually map to the
long-term rating of the enhancing bank or financial institution and not to the municipality’s rating. Other short-term municipal
obligations, which generally have different funding sources for repayment, are rated using two additional short-term rating scales
(i.e., the MIG and VMIG scales discussed below).
The
Municipal Investment Grade (MIG) scale is used to rate US municipal bond anticipation notes of up to three years maturity. Municipal
notes rated on the MIG scale may be secured by either pledged revenues or proceeds of a take-out financing received prior to note
maturity. MIG ratings expire at the maturity of the obligation, and the issuer’s long-term rating is only one consideration
in assigning the MIG rating. MIG ratings are divided into three levels—MIG 1 through MIG 3—while speculative grade
short-term obligations are designated SG.
MIG
1 This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable
liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG
2 This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.
MIG
3 This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for
refinancing is likely to be less well-established.
SG
This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
FITCH’S
SHORT-TERM RATINGS
A
short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity and
relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation.
Short-term deposit ratings may be adjusted for loss severity. Short-Term Ratings are assigned to obligations whose initial maturity
is viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, sovereign,
and structured obligations and up to 36 months for obligations in U.S. public finance markets.
F1
- Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to
denote any exceptionally strong credit feature.
F2
- Good intrinsic capacity for timely payment of financial commitments.
F3
- The intrinsic capacity for timely payment of financial commitments is adequate.
B
- Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in
financial and economic conditions.
C
— Default is a real possibility.
RD
— Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other
financial obligations. Typically applicable to entity ratings only.
D
— Indicates a broad-based default event for an entity, or the default of a short-term obligation.
Appendix
B—Proxy voting guidelines
U.S.
Registered Advisers (the “abrdn Advisers”)
Proxy Voting Guidelines
Effective as of October 26, 2022
Rule
206(4)-6 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) requires the abrdn Advisers to
vote proxies in a manner consistent with clients’ best interest and must not place its interests above those of its clients
when doing so. It requires the abrdn Advisers to: (i) adopt and implement written policies and procedures that are reasonably
designed to ensure that the abrdn Advisers vote proxies in the best interest of the clients, and (ii) to disclose to the clients
how they may obtain information on how the abrdn Advisers voted proxies. In addition, Rule 204-2 requires the abrdn Advisers to
keep records of proxy voting and client requests for information.
As
registered investment advisers, the abrdn Advisers have an obligation to vote proxies with respect to securities held in its client
portfolios in the best interests of the clients for which it has proxy voting authority.
The
abrdn Advisers are committed to exercising responsible ownership with a conviction that companies adopting best practices in corporate
governance will be more successful in their core activities and deliver enhanced returns to shareholders.
The
abrdn Advisers have adopted a proxy voting policy. The proxy voting policy is designed and implemented in a way that is reasonably
expected to ensure that proxies are voted in the best interests of clients.
Resolutions
are analysed by a member of our regional investment teams or our Active Ownership Team and votes instructed following consideration
of our policies, our views of the company and our investment insights. To enhance our analysis, we will often engage with a company
prior to voting to understand additional context and explanations, particularly where there is a deviation from what we believe
to be best practice.
Where
contentious issues arise in relation to motions put before a shareholders’ meeting, abrdn Advisers will usually contact
the management of the company to exchange views and give management the opportunity to articulate its position. The long-term
nature of the relationships that we develop with investee company boards should enable us to deal with any concerns that we may
have over strategy, the management of risk or governance practices directly with the chairman or senior independent director.
In circumstances where this approach is unsuccessful, abrdn Advisers are prepared to escalate their intervention by expressing
their concerns through the company’s advisers, through interaction with other shareholders or attending and speaking at
General Meetings.
In
managing third party money on behalf of clients, there are a limited number of situations where potential conflicts of interest
could arise in the context of proxy voting. One case is where funds are invested in companies that are either clients or related
parties of clients. Another case is where one fund managed by abrdn invests in other funds managed by abrdn.
For
cases involving potential conflicts of interest, abrdn Advisers have implemented procedures to ensure the appropriate handling
of proxy voting decisions. The guiding principle of abrdn Advisers’ conflicts of interest policy is simple – to exercise
our right to vote in the best interests of the clients on whose behalf we are managing funds.
We
employ ISS as a service provider to facilitate electronic voting. We require ISS to provide recommendations based on our own set
of parameters to tailored abrdn’s assessment and approach but remain conscious always that all voting decisions are our
own on behalf of our clients. We consider ISS’s recommendations and those based on our custom parameters as input to our
voting decisions. We make use of the ISS standard research and recommendations and those based on our own custom policy as input
to our voting decisions. Where our analysts make a voting decision that is different from the recommendations based on our custom
policy they will provide a rationale for such decisions which will be made publicly available in our voting disclosures.
In
order to make proxy voting decisions, an abrdn analyst will assess the resolutions at general meetings in our active investment
portfolios. This analysis will be based on our knowledge of the company, but will also make use of the custom and standard recommendations
provided by ISS as described above. The product of this analysis will be final voting decision instructed through ISS applied
to all funds for which abrdn have been appointed to vote. For funds managed by a sub-adviser, we may delegate to the sub-adviser
the authority to vote proxies; however, the sub-adviser will be required to either follow our policies and procedures or to demonstrate
that their policies and procedures are consistent with ours, or otherwise implemented in the best interest of clients.
There
may be certain circumstances where abrdn may take a more limited role in voting proxies. We will not vote proxies for client accounts
in which the client contract specifies that abrdn will not vote. We may abstain from voting a client proxy if the voting is uneconomic
or otherwise not in clients’ best interests. For companies held only in passively managed portfolios the abrdn custom recommendations
provided by ISS will be used to automatically apply our voting approach; we have scope to intervene to test that this delivers
appropriate results, and will on occasions intrude to apply a vote more fully in clients’ best interests. If voting securities
are part of a securities lending program, we may be unable to vote while the securities are on loan. However, we have the ability
to recall shares on loan or to restrict lending when required, in order to ensure all shares have voted. In addition, certain
jurisdictions may impose share-blocking restrictions at various times which may prevent abrdn from exercising our voting authority.
We
recognize that there may be situations in which we vote at a company meeting where we encounter a conflict of interest. Such situations
include:
| • | where
a portfolio manager owns the holding in a personal account |
| • | An
investee company that is also a segregated client |
| • | An
investee company where an executive director or officer of our company is also a director
of that company |
| • | An
investee company where an employee of abrdn is a director of that company |
| • | A
significant distributor of our products |
| • | Any
other companies which may be relevant from time to time |
In
order to manage such conflicts of interests, we have established procedures to escalate decision-making so as to ensure that our
voting decisions are based on our clients’ best interests and are not impacted by any conflict.
The
implementation of this policy, along with conflicts of interest, will be reviewed periodically by the Active Ownership team. abrdn’s
Global ESG Principles & Voting Policies are published on our website.
To
the extent that an abrdn Adviser may rely on sub-advisers, whether affiliated or unaffiliated, to manage any client portfolio
on a discretionary basis, the abrdn Adviser may delegate responsibility for voting proxies to the sub-adviser. However, such sub-advisers
will be required either to follow these Policies and Procedures or to demonstrate that their proxy voting policies and procedures
are consistent with these Policies and Procedures or otherwise implemented in the best interests of the abrdn Advisers’
clients. Clients that have not granted abrdn voting authority over securities held in their accounts will receive their proxies
in accordance with the arrangements they have made with their service providers.
As
disclosed in Part 2A of each abrdn Adviser’s Form ADV, a client may obtain information on how its proxies were voted by
requesting such information from its abrdn Adviser. Unless specifically requested by a client in writing, and other than as required
for the Funds, the abrdn Advisers do not generally disclose client-specific proxy votes to third parties.
Our
proxy voting records are available per request and on the SEC’s website at SEC.gov.
On
occasions when it is deemed to be a fiduciary for an ERISA client’s assets, abrdn will vote the Plan assets in accordance
with abrdn’s Proxy Voting Policy and in line with DOL guidance.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp8img001.jpg)
Contents
Introduction |
3 |
|
Dividends |
14 |
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp8img002.jpg) |
Our
expectations |
3 |
|
Share
Capital |
14 |
Our
approach to stewardship |
3 |
|
Share
Issuance |
15 |
Engagement |
4 |
|
Buyback |
15 |
Proxy
Voting |
5 |
|
Related
Party Transactions |
15 |
Voting
Process |
5 |
|
Article/Bylaw
amendments |
15 |
Governance |
6 |
|
Anti-Takeover
Defences |
15 |
Strategy |
7 |
|
Voting
Rights |
16 |
Board
of Directors |
7 |
|
General
Meetings |
16 |
Board
Composition |
7 |
|
Sustainability |
17 |
Leadership |
7 |
|
The
Environment |
18 |
Independence |
8 |
|
Labour
and employment |
19 |
Succession
Planning & Refreshment |
8 |
|
Human
rights |
19 |
Diversity |
8 |
|
Business
ethics |
20 |
Directors'
Time Commitment |
9 |
|
Environmental &
Social Resolutions |
21 |
Board
Committees |
9 |
|
Management
Proposals |
22 |
Director
Accountability |
10 |
|
Shareholder
Proposals |
22 |
Reporting |
11 |
|
Climate
Change |
23 |
Political
Donations & Lobbying |
11 |
|
Diversity &
Inclusion |
23 |
Risk &
Audit |
12 |
|
Human
Rights |
24 |
Remuneration |
12 |
|
Corporate
Lobbying & Political Contributions |
24 |
Investor
Rights |
14 |
|
Nuclear
Energy |
24 |
Corporate
Transactions |
14 |
|
|
|
Listed Company ESG Principles & Voting Policies | 2 |
Introduction
Active
Ownership and Environmental, Social & Governance (ESG) considerations are a driver of our investment process, our investment activity,
our client journey and our corporate influence.
Through
engagement with the companies in which we invest, and by exercising votes on behalf of our clients, we seek to improve the financial
resilience and performance of our clients’ investments. Where we believe change is needed , we endeavour to catalyse this through
our stewardship capabilities.
|
Our
expectations
As
global investors, we are particularly aware that ESG structures and frameworks vary across regions. Furthermore, what we expect of the
companies in which we invest varies between different stages of business development and the underlying history and nature of the company
in question. We seek to understand each company's individual circumstances and so evaluate how it can best be governed and overseen.
As such, we strive to apply the principles and policies set out on these pages in response to the needs of that individual company
at that particular time. Our heritage as a predominantly active fund manager helps drive this bespoke approach to understanding good
governance and risk management.
We
have a clear perception of what we consider to be best practice globally - as set out in this document. However we will reflect the nature
of the business, our close understanding of individual companies and regional considerations, where
appropriate, in our approach to applying these policies, which are not exhaustive.
This
document has received approval from the Head of Public Markets and the Investment Vector's Chief Sustainability Officer following consultation
with various internal stakeholders.
Our
approach to stewardship
We
seek to integrate and appraise environmental, social and governance factors in our investment process. Our aim is to generate the best
long- term outcomes for our clients and we will actively take steps as stewards and owners to protect and enhance the value of our clients'
assets.
Stewardship
is a reflection of this bespoke approach to good governance and risk management. We seek to understand each company's specific approach
to governance, how value is created through business success and how investors' interests are protected through the management of risks
that materially impact business success. This requires us to play our part in the governance process by being active stewards of companies,
involved in dialogue with management and non-executive directors where appropriate, understanding the material risks and opportunities
- including those relating to environmental and social factors and helping to shape the future success of the business.
|
Listed Company ESG Principles & Voting Policies | 3 |
We
will:
▪ | Take
into consideration, in our investment process, the policies and practices on environmental,
social and governance matters of the companies in which we invest. |
| |
▪ | Seek
to enhance long-term shareholder value through constructive engagement with the companies
in which we invest. |
| |
▪ | Actively
engage with the companies and assets in which we invest where we believe we can influence
or gain insight. |
| |
▪ |
Seek to exercise voting rights,
where held, in a manner consistent with our clients’ long-term best interests. |
|
|
▪ |
Seek to influence the development
of high standards of corporate governance and corporate responsibility in relation to environmental and social factors for the benefit
of our clients. |
|
|
▪ |
Communicate our Listed Company
ESG Principles and Voting Policies to clients, companies and other interested parties. |
|
|
▪ |
Be
accountable to clients within the constraints of professional confidentiality and legislative and regulatory requirements. |
|
|
▪ |
Be transparent in reporting
our engagement and voting activities. |
abrdn
is committed to exercising responsible ownership with a conviction that companies adopting improving practices in corporate governance
and risk management will be more successful in their core activities and deliver enhanced returns to shareholders. As owners of companies,
the process of stewardship is a natural part of our investment approach as we seek to benefit from their long-term success on our clients’
behalf.
Engagement
It
is a central tenet of our active investment approach that we strive to meet with the management and directors of our investee companies
on a regular basis. The discussions we have cover a wide range of topics, including: strategic, operational, and ESG issues and consider
the long-term drivers of value. Engagement with companies on ESG risks and opportunities is a fundamental part of our investment process.
It is a process by which we can discuss how a company identifies, prioritises and mitigates its key risks and optimises its most significant
opportunities. As such, we regard engagement as:
▪ |
Important
to understanding investee companies as a whole. |
▪ |
Helpful
when conducting proper ESG analysis. |
▪ |
Useful
to maintaining open dialogue and solid relationships with companies. |
▪ |
An opportunity
to inflect positive change on a company's holistic risk management programme - be active with our holdings rather than activist. |
Listed Company ESG Principles & Voting Policies | 4 |
Proxy
Voting
Proxy
voting is an integral part of our active stewardship approach and we seek to exercise voting rights in a manner in line with our clients'
best interests. We seek to ensure that voting reflects our understanding of the companies in which we invest on behalf of our clients.
We believe that voting is a vital mechanism for holding boards and management teams to account, and is an important tool for escalation
and shareholder action.
This
document includes our process and overarching policy guidelines which we apply when voting at general meetings. These policies are
not exhaustive and we evaluate our voting on a case by case basis. As a global investment firm we recognise the importance of
adopting a regional approach, taking into account differing and developing market practices. Where a policy is specific to one
region this is denoted.
We
endeavour to engage with companies regarding our voting decisions to maintain a dialogue on matters of concern.
Voting
Process
In
line with our active ownership approach, we review the majority of general meeting agendas convened by companies which are held in our
active equity portfolios.
Analysis
is undertaken by a member of our regional investment teams or our Active Ownership team and votes instructed following consideration
of our policies, our views of the company and our investment insights. To enhance our analysis we may engage with a company prior to
voting to understand additional context and explanations, particularly where there is deviation from what we believe to be best practice.
To
supplement our own analysis we make use of the benchmark research and recommendations provided by ISS, a provider of proxy voting services.
In the UK we also make use of the Investment Association's (IA) Institutional
Voting Information Service. We have implemented regional
voting policy guidelines with ISS which ISS applies to all meetings in order to produce customised vote recommendations. These custom
recommendations help identify resolutions which deviate from our expectations. They are also used to determine votes where a company
is held only in passive funds. Within our custom policies, however, we do specify numerous resolutions which should be referred to us
for active review. For example we will analyse all proposals marked by ISS as environmental or social proposals.
While
it is most common for us to vote in line with a board's voting recommendation we will vote our clients' shares against resolutions which
are not consistent with their best interests. We may also vote against resolutions which conflict with local governance guidelines,
such as the IA in the UK. Although we seek to vote either in favour or against a resolution we do make use of an abstain vote where this
is considered appropriate. For example we may use an abstention to acknowledge some improvement, but as a means to reserve our position
in expectation that further improvement is needed before we can vote in favour.
Where
we vote against a resolution we endeavour to inform companies of our rationale.
In
exceptional circumstances we may attend and speak at a shareholder meeting to reinforce our views to the company's board.
We
endeavour to vote all shares for which we have voting authority. We may not vote when there are obstacles to do so, for example those
impacting liquidity, such as share-blocking, or where there is a significant conflict of interest. We use the voting platform of ISS
to instruct our votes.
Where
we lend stock on behalf of clients, and subject to the terms of client agreements, we hold the right to recall shares where it is in
clients' interests and we take the view that it will impact the final vote to maintain full voting weight on a particular meeting or
resolution.
Our
votes are disclosed publicly on our website one day after a general meeting has taken place.
Listed Company ESG Principles & Voting Policies | 5 |
Listed Company ESG Principles & Voting Policies | 6 |
Governance |
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp8img008.jpg) |
Strategy
We
invest in companies to create the best outcome for our clients. Companies must be clear about the drivers of their business success
and their strategy for maintaining and enhancing it. Investment is a forward-looking process; we seek to understand the opportunity
for a business and its scope for future value-creation over the long term. In order to do this, we need clarity on past
business delivery and its drivers, and on the effective track record of management; we require honest and open reporting to build
confidence in that track record. We seek confidence that companies and their management can maintain their competitive positioning
and operational performance and subsequently enhance returns for investors. A clear strategy and clarity about the drivers of
operational success provides the lens through which we will consider most corporate issues, not least assessing performance and risk
management.
▪ |
We will consider voting against executive or non-executive
directors if we have serious concerns regarding the oversight or implementation of strategy. |
Board
of Directors
We
believe effective board governance promotes the long-term success and value creation of the company.
The
board should be responsible for establishing the company's purpose and strategy, overseeing management in their
implementation of strategy and performance against objectives. The board should ensure a strong framework of control and risk
oversight, including material ESG risks. The board should assess and monitor culture and be engaged with the workforce, shareholders
and wider society.
Board
Composition
Effective
decision making requires a mix of skills around the table and constructive debate between diverse and different-minded individuals. A
range of skills, experience and perspectives should be drawn together on the board.
These
include industry knowledge, experience from other sectors and relevant geographical knowledge. Independence of thought plays a
crucial role in the ability of a board to generate the debate and discussion that will challenge management, help enhance business
performance and improve decision-making. Board assessments will help the board ensure it has the necessary mix of skills,
diversity and quality of individuals to address the current risks and opportunities the company faces. Unitary boards should
comprise an appropriate combination of executive and non-executive directors such that no group of individuals dominates decision-making. We expect the size of the board to reflect the
size, nature and complexity of the business. We also expect regular internal and external board evaluations which include an
assessment of board composition and effectiveness.
Leadership
Running
businesses effectively for the long term requires effective collaboration and cooperation, with no individual or small group having unfettered
powers. Nor should they have dominant influence over the way a business is run or over major decisions about its operations or
future. There should be a division of responsibility between board leadership and executive leadership of the business.
We
believe that there should be a division of roles at the top of the organisation, typically between a Chief Executive Officer (CEO) and
an independent Chair.
▪ |
We will consider supporting the re-election of an existing
Chair & CEO role combination, recognising that this remains common in certain geographies. In reviewing on a case by case
basis we will take account of the particular circumstances of the company and consider what checks and balances are in place, such
as the presence of a strong Senior Independent Director with a clear scope of responsibility. |
▪ |
We will generally oppose any re-combination of the
roles of CEO and Chair, unless the move is on a temporary basis due to exceptional circumstances or other mitigating factors. |
▪ |
We will generally oppose any move of a retiring
CEO to the role of Chair. |
Listed Company ESG Principles & Voting Policies | 7 |
Governance
Independence
Companies
should be led and overseen by genuinely independent boards. When looking at board composition we generally expect to see a majority of
independent directors, with boards identifying their independence classifications in the Annual Report. It is preferable to see an identified
Senior Independent Director (SID) on the board, who will lead the appraisal of and succession planning for the Chair. We expect SIDs
to meet with investors and be a point of contact for escalating concerns if required.
In
assessing a director's independence we will have due regard for whether a director:
i. |
Has been an employee of the company within the last
five years. |
ii. |
Has had within the last three years a material business
relationship with the company. |
iii. |
Has received remuneration in addition to director fees
or participates in the company's option or variable incentive schemes, or is a member of the company's pension scheme. |
iv. |
Has close family ties with any of the company's advisers,
directors or senior employees. |
v. |
Holds cross- directorships or has significant links
with other directors through involvement in other companies or bodies. |
vi. |
Represents a significant shareholder. |
vii. |
Has served on the board for more than 12 years (or
9 for UK companies). |
▪ |
We will consider voting
against the re-election of non-independent
directors if the board is not majority independent (excluding employee representatives). In
doing so we will have regard for whether a company is controlled and the nature of the non-independence - for example, we are unlikely
to vote against shareholder representatives unless their representation is disproportionate to their shareholding. |
Succession
Planning & Refreshment
Regular
refreshment of the non-executive portion of a board helps draw in fresh perspectives, not least in the context of changes to business
and emerging opportunities and risks. It also helps limit the danger of group- think. Thoughtful and proactive succession planning is
therefore needed for board continuity, to ensure that a board is populated by individuals with an appropriate mix of skills, experience
and perspective.
We
expect the board to implement a formal process for the recruitment and appointment of new directors, and to provide transparency of this
in the Annual Report.
| ▪ | We will
vote against non-executive directors where there are concerns regarding board refreshment or excessive tenure. Where there are
directors who have served for over 12 years on a board which has seen no refreshment in 3 years (2 in UK), we will generally vote
against their re-election. If a director has served for over 15 years we will generally vote against their re- election. We will,
however, consider the impact on board continuity and the company's succession planning efforts prior to doing so. We may not apply
the tenure limit to directors who are founders or shareholder representatives. |
Diversity
We
believe that companies that make progress in diversity and inclusion (D&I) are better positioned for long-term sustainability and
outperformance. Diversity of thought, paired with a culture of inclusion, can help companies to tackle increasingly complex challenges
and markets. We expect boards to report on how they promote D&I throughout the business and believe that setting targets is important
to addressing imbalances. We recognise the importance of adopting a regional approach to diversity and inclusion, allowing us to press
for progress with appropriate consideration for the starting point. We have for several years, actively encouraged progress in gender
diversity at all levels, and have expanded our scope in relation to diversity and inclusion across geographies. In respect of ethnic
diversity, this is coming increasingly into focus as we encourage boards to progress in ensuring that their composition reflects their
employee and customer bases.
Listed Company ESG Principles & Voting Policies | 8 |
Governance |
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp8img009.jpg) |
Our
regional specific policies are below. In determining our votes we will take account of mitigating factors, such as the sudden departure
of a female board member.
We
will also consider any clear progress being made by the company on diversity and any assurance that diversity shortfalls will soon be
addressed.
Gender
Diversity
▪ |
UK:
We will generally vote against the Nomination Committee Chair of FTSE 350 companies if the board is not comprised of at least one third
female directors. For smaller companies, we will take this action if the board does not include at least one female director. |
|
|
▪ |
Europe: We will generally vote
against the Nomination Committee Chair of LargeCap companies if the supervisory board is not comprised of at least 30% female directors,
or is not in line with the local standard if higher. For smaller companies, we will take this action if the supervisory board does
not include at least one female director. |
▪ |
Australia: We will generally
vote against the Nomination Committee Chair of ASX300 companies if the board is not comprised of at least 30% female directors. |
|
|
▪ |
North
America: We will generally vote against the Nomination Committee Chair of LargeCap companies if the board is not comprised of at least
30% female directors. For smaller companies, we will take this action if the board does not include at least one female director |
|
|
Ethnic
Diversity |
|
|
▪ |
UK:
We will generally vote against the Nomination Committee Chair at the boards of FTSE 100 companies, if the board does not include at least
one member from an ethnic minority background. This is in line with targets set up by the Parker Review. |
|
|
▪ |
US:
We will generally vote against the Nomination Committee Chair at the boards of S&P 1500 & Russell 3000 companies if the
board does not include at least one member from a racial or ethnic minority background. |
Directors'
Time Commitment
Individual
directors need sufficient time to carry out their role effectively and therefore we seek to ensure that all directors maintain an appropriate
level of overall commitments such that allows them to be properly diligent.
▪ |
We will consider opposing the
election or re-election of any director where there is a concern regarding their ability to dedicate sufficient time to the role.
In making this assessment we will have regard for the ISS classification of 'overboarding'. |
▪ |
We will
generally oppose the re-election of any director who has attended fewer than 75% of board meetings in two consecutive years. |
Board
Committees
Boards
should establish committees, populated by independent and appropriately skilled non-executive directors, to oversee (as a minimum) the
nomination, audit and remuneration processes. It may also be appropriate for additional committees to be established, such as a risk
or sustainability committee. These committees should report openly on an annual basis about their activities and key decisions taken.
▪ |
We will consider voting against
committee members if we have concerns regarding the composition of a committee. |
Nomination
Committee
This
committee has responsibility for leading the process for orderly non-executive and senior management succession planning and recruitment,
and for overseeing the composition of the board including skillset, experience and diversity. We expect the committee to be comprised
of a majority of independent directors with an independent Chair.
▪ |
We will consider voting against
the re-election of the Nomination Committee Chair if we have concerns regarding the composition of the board or concerns regarding
poor succession planning. |
Listed Company ESG Principles & Voting Policies | 9 |
Governance
Audit Committee
This committee has
responsibility for monitoring the integrity of the financial statements, reviewing the company's internal financial controls and
risk management systems, reviewing the effectiveness of the company's internal audit function and appointing auditors. While we
prefer the committee to be wholly independent, at minimum we expect the committee to be comprised of a majority of independent
directors with an independent Chair and at least one member having recent and relevant financial experience.
| ▪ | We will generally vote against the re-election of the Audit Committee Chair if at least one member
of the Committee does not have recent and relevant financial experience. |
Remuneration Committee
This committee is responsible for determining the policy and setting
remuneration for executive and non-executive directors. The committee should ensure that remuneration is aligned with strategy and company
performance and should clearly demonstrate regard for the company's employees, for wider society and be cognisant of the company's licence
to operate when considering policy and the overall level of remuneration. We expect remuneration committees to be robust in their approach
to developing and implementing remuneration policies, with formal and transparent procedures for developing policies and for determining
remuneration packages. Remuneration committees should be comprised of a majority of independent directors with an independent Chair and
we expect members to have appropriate experience and knowledge of the business. No executive should be involved in setting their own
remuneration.
▪ |
Where
we have significant concerns regarding the company's remuneration policy or reward outcomes we may escalate these concerns through
a vote against the Chair or members of the Remuneration Committee. |
Director Accountability
We expect to be able to hold boards to account through engagement
and regular director re-elections and directors should feel that they are accountable to investors. We encourage individual, rather
than bundled, director elections. While our preference is for directors to be subject to re-election annually, we expect
re-elections to take place at least every three years. Lengthier board mandates, while not uncommon in some markets, risk divorcing
directors from an appropriate sense of accountability. Directors and management should make themselves available for discussions
with major shareholders as we expect to have open dialogue to share our perspectives and gain confidence that the individuals are
carrying out their roles with appropriate vigour and diligence. A further important element of director accountability to
shareholders is that investors should have the right, both formal and informal, to propose and promote individual directors to be
considered for election to the board by all shareholders.
▪ |
We
will generally oppose the re-election of non-independent NEDs who are proposed for a term exceeding three years. We may not apply
this to directors who are shareholder representatives. |
▪ |
Where
we have significant concerns regarding a board member's performance, actions or inaction to address issues raised we may vote against
their re-election. |
▪ |
We may
vote against directors who decline appropriate requests for meeting without a clear justification. |
▪ |
Where
a director has held a position of responsibility at a company which has suffered a material governance failure, we will consider
whether we are comfortable to support their re-election at other listed companies. |
▪ |
We will
generally support resolutions to discharge the supervisory board or management board members unless we have serious concerns regarding
actions taken during the year under review. Where there is insufficient information
regarding allegations of misconduct, we may prefer to abstain. In exceptional circumstances we may vote against the discharge
resolution to reflect serious ESG concerns if there is not another appropriate resolution. |
▪ |
We will
not support the election of directors who are not personally identified but are proposed as corporations. |
Listed Company ESG Principles & Voting Policies | 10 |
Governance
Reporting
A company's board should present a fair, balanced and understandable
assessment of the company's position and prospects - financial and non-financial - and of how it has fulfilled its responsibilities.
We support the principle of full disclosure of relevant and useful information, subject to issues of commercial confidentiality and prejudice.
Boilerplate disclosure should be avoided. We encourage companies to consider using the appropriate globally developed standards and would
particularly encourage the use of those created by the Taskforce for Climate related Financial Disclosures (TCFD), the International Integrated
Reporting Council (IIRC), the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI). Audited reporting
and financial numbers should be published ahead of any relevant shareholder meetings. We continue to monitor the evolving reporting landscape
and consider new reporting developments as they emerge, either voluntary or regulatory.
▪ |
We
may consider voting against a company's Annual Report & Accounts if we have concerns regarding timely provision or disclosure. |
Political Donations & Lobbying
Companies should be consistent in their
public statements and not undermine these in private commentary to market participants or to politicians and regulators. We welcome
transparency from companies about their lobbying activities and believe that good companies have nothing to hide in this respect.
Similarly we encourage transparency of any political donations that companies deem appropriate - and we expect a clear explanation
of why such donations are an appropriate use of corporate funds.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp8img010.jpg)
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Listed Company ESG Principles & Voting Policies | 11 |
Governance
|
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_n148c-img01.jpg) |
Risk & Audit
The board is responsible for determining the company's risk appetite,
establishing procedures to manage risk and for monitoring the company's internal controls. We expect boards to conduct robust assessments
of the company's material risks and report to shareholders on risks, controls and effectiveness. The introduction of global accounting
standards has led to much greater investor confidence in the accounts produced by companies around the world. It has also assisted in
creating consistency of reporting across companies, enabling fairer comparisons between different operating businesses. We therefore
encourage companies seeking international investment to report under International Financial Reporting Standards (IFRS) or US GAAP. As
a firm abrdn supports the continued development of high quality global accounting standards.
An independent audit, delivered by a respected audit firm, is a
required element for investor confidence in reporting by companies. We strongly favour meaningful, transparent and informative
auditor reports, giving us additional insights into the audit process and accounting outcomes. Audit fees must be sufficient to pay
for an appropriately in-depth assurance process. We would be concerned if a company sought to make savings in this respect as the
cost in terms of damage to audit effectiveness and confidence in the company's accounts would be much more substantial.
The independence of the auditor and the
standard of their work, particularly in challenging management, should be subject to regular assessment that is appropriately disclosed.
Even when individuals carrying out the audit are refreshed, we believe that the independence of the audit firm erodes over time and we
will encourage a tender process and change of audit firm where an engagement has lasted for an extended period. In order to demonstrate
the level of independence, companies should not have the same audit firm in place for more than 20 years.
The relationship with the auditor should be mediated through the audit
committee. Where we are significant shareholders, we expect to be consulted on plans to tender and replace auditors.
▪ |
We will generally vote against the re-election of an
auditor which has a tenure of 20 years or over, if there are no plans for rotation in the near term. |
▪ |
We
will consider voting against the auditors if we have concerns regarding the accounts presented or the audit procedures used. |
▪ |
We will vote against the approval of auditor fees if
we have concerns regarding the level of fees or the balance of non-audit and audit fees. |
Remuneration
Remuneration policies and the overall levels
of pay should be aligned with strategy, attracting and retaining talent and incentivising the decisions and behaviours needed to create
long-term value. The component parts of remuneration should be structured so as to link rewards to corporate and individual performance
and they should be considered in the context of the remuneration policies when taken as a whole. We recognise the benefits of simplicity
in forming the policy, which should clearly link outcomes and expectations for those receiving the remuneration, as well as external
stakeholders. The structure should be transparent and understandable.
A company's annual report should contain an informative statement of
remuneration policy which communicates clearly to stakeholders how it has developed and evolved. This should include details of any stress
testing that may have been undertaken to understand the policy outcomes for different business scenarios. The remuneration committee
should provide a clear description of the application of policy and the outcomes achieved.
Listed Company ESG Principles & Voting Policies | 12 |
Governance
|
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp8img013.jpg) |
Base salary should be set at a level appropriate for the role and
responsibility of the executive. We discourage increases which are driven by peer benchmarking, and expect increases to be aligned
with the wider workforce. Consideration should also be given to the knock on impact to variable remuneration potential. Pension
arrangements and benefits should be clearly disclosed. We generally expect pension structures to be aligned with the wider
workforce.
A company should structure variable, performance-related pay to
incentivise and reward management in a manner that is aligned with the company's sustainable performance and risk appetite over the
long term. We expect all variable pay to be capped, preferably as a proportion of base salary. In the UK we expect variable pay to
be capped as a proportion of salary. In other markets, if variable pay is capped at a number of shares, we expect the value of
grants to be kept under review annually to ensure the value remains appropriate and is not excessive.
Performance metrics used to determine
variable pay should be clearly disclosed and aligned with the company's strategy. A significant portion of performance metrics
should seek to measure significant improvements in the underlying financial performance of the company. We also encourage the
inclusion of non-financial metrics linked to targets which are aligned with the company's progress on its ESG strategy. Where
possible we expect these targets to be quantifiable and disclosed.
Variable pay arrangements should incentivise participants to
achieve above-average performance through the use of challenging targets. We encourage sliding-scale performance measures and expect
performance target ranges to be disclosed to enable shareholders to assess the level of challenge and pay for performance alignment.
We expect annual bonus targets to be disclosed retrospectively and encourage the disclosure of long term incentive (LTI) targets at
the beginning of the performance period, but at minimum we expect retrospective disclosure. Where bonus or LTI targets are not
disclosed due to commercial sensitivity we expect an explanation of why the targets continue to be considered sensitive
retrospectively and expect some detail regarding the level of achievement vs target. Where a share price metric is being used, we
expect this to be underpinned by a challenging measure of underlying performance.
We encourage settlement of a portion of the annual bonus in shares
which are deferred for at least one year.
We expect settlement of long term incentives to be in shares,
with rationale provided for any awards settled in cash. Long term incentives should have a performance period of no less than three years.
In the UK we expect a further holding period of two years to be applied, and we encourage this in other markets.
We do not generally support restricted share schemes or value creation
plans. We will consider supporting the use of restricted share plans which have been structured consistent with the guidelines of the
Investment Association.
We expect appropriate malus and clawback provisions to be applied
to variable remuneration plans.
We expect shareholding guidelines to be adopted for executive directors
and encourage the adoption of post-departure shareholding guidelines.
We expect details of any use of discretion to be disclosed and its
use should be justifiable, appropriate and clearly explained. We would expect policies to be sufficiently robust so that discretion is
only necessary in exceptional circumstances. We do not generally support exceptional awards, and are particularly sensitive to such awards
being granted to reward a corporate transaction.
We expect executive service contracts to provide for a maximum notice
period of 12 months. We will consider local best practice provisions related to severance arrangements when voting.
Non-executive fees should reflect the role's level of responsibility
and time commitment. We do not support NED's participation in option or performance-related arrangements. However we do support the payment
of fees in shares, particularly where conservation of cash is an issue.
In the UK our expectations of companies
are aligned with the Investment Association's Principles of Remuneration.
Where significant changes to remuneration arrangements are being considered, we would expect remuneration committees to consult with their
largest shareholders prior to finalising any changes. Where any increase to variable remuneration is proposed, we would expect this to
be accompanied by a demonstrable increase in the stretch of the targets. Furthermore we expect any increases to remuneration to be subject
to shareholder approval.
Listed Company ESG Principles & Voting Policies | 13 |
Governance
In response to the issues arising from the cost of living
crisis being experienced by many people in the UK, we expect companies to focus any additional help towards those members of the workforce
who need it most. We expect Remuneration Committees to take into account factors arising from the cost of living crisis when deliberating
over executive pay outcomes. We would be concerned by reputational issues arising from decisions made in these unusual circumstances and
may make this a factor in our voting decisions at relevant AGMs.
In
line with the expectations set out above we will generally vote against the appropriate resolution(s) where:
▪ | We consider the overall reward
potential or outcome to be excessive. |
| |
▪ |
A
significant increase to salary has been granted which is not aligned with the workforce or is not sufficiently justified. |
|
|
▪ |
A
significant increase to performance-related pay has been granted which is not sufficiently justified, is not accompanied by an increase
in the level of stretch required for achievement or results in the potential for excessive reward. |
|
|
▪ | There is no appropriate cap on
variable incentive schemes. |
| |
▪ | Performance targets for annual
bonus awards are not disclosed retrospectively and the absence of disclosure is not explained. |
| |
▪ |
Performance
targets for long term incentive awards are not disclosed up front and there is no compelling explanation regarding the absence of
disclosure or a commitment to disclose retrospectively. |
|
|
▪ |
Performance
targets are not considered sufficiently challenging, either at threshold, target or maximum. |
|
|
▪ | Relative performance targets allow
vesting of awards for below median performance. |
| |
▪ | Retesting provisions
apply. |
| |
▪ | Incentives that have been
conditionally awarded have been repriced or performance conditions changed part way through a performance period. |
| |
▪ |
We
have concerns regarding the use of discretion or the grant of exceptional awards. |
|
|
▪ |
Pension
arrangements are excessive. |
|
|
▪ |
Pension
arrangements are not aligned with the wider workforce (UK). |
Investor Rights
The interests of minority shareholders
must be protected and any major, or majority, investor should not enjoy preferential treatment. The structure of ownership or control
should minimise the potential for abuse of public shareholders.
Corporate Transactions
Companies should not make significant
changes to their structure or nature without being fully transparent to their investors. Shareholders should have the opportunity to
vote on significant corporate activity, such as mergers and acquisitions. Where a transaction is with a related party, only independent
shareholders should have a vote. Even in markets where no vote is given to shareholders in these circumstances, investors need transparent
disclosure of the reasons for any such major change. Companies should expect that shareholders may want to discuss and debate proposed
developments
Diversification
beyond the core skills of the business needs to be justified as it is more often than not a distraction from operational performance.
All major deals need to be clearly explained and justified in the context of the pre-existing strategy and be subject to shareholder
approval.
▪ |
We
will vote on corporate transactions on a case by case basis. |
Dividends
We will generally support the payment
of dividends but will scrutinise the proposed level where it appears excessive given the company's financial position.
Share Capital
The board carries responsibility for
prudent capital management and allocation.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_n148c-img02.jpg)
Listed Company ESG Principles & Voting Policies | 14 |
| Governance | ![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp8img014.jpg) |
Share Issuance
We will consider capital raises which
are proposed for a specific purpose on a case by case basis but recognise that it can be beneficial for companies to have some
general flexibility to issue shares to raise capital. However we expect issuances to be limited to the needs of the business and
companies should not issue significant portions of shares unless offering these on a pro-rata basis to existing shareholders to
protect against inappropriate dilution of investments.
| ▪ | Where a company seeks a general authority to issue shares we generally expect this to be limited to
25% of the company's share capital for pre-emptive issuances. In the UK we are aligned with the guidance of the Investment
Association Share Capital Management Guidelines. |
▪ |
Where a company seeks a general authority to issue
shares we generally expect this to be limited to 10% of the company's share capital for non-pre-emptive issuances. In
the UK we are aligned with the guidance of the Investment Association Share Capital Management Guidelines and those of the Pre-Emption
Group. |
▪ |
We will not generally support share issuances at investment
trusts unless there is a commitment that shares would only be issued at a price at or above net asset value. |
When considering our votes we will, however, take account of the company's
circumstances and any further detail regarding proposed capital issuance authorities prior to voting.
Following changes to the UK’s Pre-Emption Group Guidelines in November 2022, which reflect an increase on previous limits, we will
hold the Chair of the company accountable for any perceived misuse of the increased flexibility through a vote against their re-election.
Buyback
We recognise that share buybacks can be a flexible means of returning
cash to shareholders.
▪ We
will generally support buyback authorities of up to 10% of the issued share capital.
Related Party Transactions
The nature of relations - particularly any related party transactions
(RPTs)- with parent or related companies, or other major investors, must be disclosed fully.
Related party transactions must be agreed on arm's length terms and
be made fully transparent. Where they are material, they should be subject to the approval of independent shareholders.
|
▪ |
We will vote against RPTs where there is insufficient
transparency of the nature of the transaction, the rationale, the terms or the views
and assessment of directors and advisors. |
Article/Bylaw amendments
While it is standard to see proposals from companies to amend their
articles of association or bylaws, we will review these on a case by case basis. When doing so we expect full transparency of the proposed
changes to be disclosed.
|
▪ |
We will vote against amendments which will reduce shareholder
rights. |
Anti-Takeover Defences
There should be no artificial structures
put in place to entrench management and protect companies from takeover. The best defence from hostile takeover is strong operational
delivery.
|
▪ |
We will generally vote against anti-takeover/’poison
pill' proposals. |
Listed Company ESG Principles & Voting Policies | 15 |
Governance
|
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp9img001.jpg) |
Voting
Rights
We are strong supporters of the principle of 'one share, one vote' and therefore favour equal voting rights for all shareholders.
| ▪ | We will generally vote against proposals which seek to introduce or continue capital structures
with multiple voting rights. |
|
▪ |
We will consider voting
against proposals to raise new capital at companies with multiple share classes and voting rights. |
General
Meetings
Shareholder meetings provide an
important opportunity to hold boards to account not only through voting on the proposed resolutions but also by enabling investors
the opportunity to raise questions, express views and emphasise concerns to the entire board. We may make a statement at a company's
AGM as a means of escalation to reinforce our views to a company's board.
We welcome the opportunity to attend
meetings virtually, being of the view that this can increase participation given obstacles such as location or meeting
concentration. However we are not supportive of companies adopting virtual-only meetings as we believe this format reduces
accountability. Our preference is for a hybrid meeting format to balance the flexibility of remote attendance with the
accountability of an in-person meeting.
▪ |
We will generally support resolutions seeking approval
to shorten the EGM notice period to minimum 14 days, unless we have concerns regarding previous inappropriate use of this flexibility. |
▪ |
We will generally support proposals to enable virtual
meetings to take place as long as there is confirmation that the format will be hybrid, with physical meetings continuing to take
place (unless prohibited by law). |
We expect virtual attendees to have the same rights to
speak and raise questions as those attending in-person.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp9img002.jpg)
Listed Company ESG Principles & Voting Policies | 16 |
Listed Company ESG Principles & Voting Policies | 17 |
Sustainability
As
part of strategic planning, boards need to have oversight of, and clearly articulate, the key opportunities and risks affecting the sustainability
of the business model. This includes having a process for, and transparent disclosure of, potential and emerging opportunities and risks
and the actions being taken to address them.
The
effective management of risks extends to long- term issues that are hard to measure and whose timeframe is uncertain and will include
the management of environmental and social issues. We use the UN Global Compact's four areas of focus in assessing how companies are
performing in this area.
Specifically
we expect companies to be able to demonstrate how they manage their exposures under the following headings.
The
Environment
It
is generally accepted that companies are responsible for the effects of their operations and products on the environment. The steps
they take to assess and reduce those impacts can lead to cost savings and reduce potential reputational damage. Companies are responsible
for their impact on the climate and they face increased regulation from world governments on activities that contribute to climate change.
We
expect that companies will:
▪ |
Identify,
manage and reduce their environmental impacts. |
▪ |
Understand
the impact of climate change along the company value chain. |
▪ |
Develop
group-level climate policies and, where relevant, set targets to manage the impact, report on policies, practices and actions taken
to reduce carbon and other environmental risks within their operations. |
▪ |
Comply
with all environmental laws and regulations, or recognised international best practice as a minimum. |
Where we have serious concerns regarding a board’s actions, or inaction, in relation to the environment we will consider taking
voting action on an appropriate resolution. We will use the indicators within the Carbon Disclosure Project to identify companies which
are not fulfilling their climate commitments. Where appropriate we will take voting action to encourage better practice among companies
which we deem to be laggards.
Listed Company ESG Principles & Voting Policies | 18 |
Sustainability
Labour
and employment
Companies that respect internationally
recognised labour rights and provide safe and healthy working environments for employees are likely to reap the benefits. This approach
is likely to foster a more committed and productive workforce, and help reduce damage to reputation and a company's license to operate.
We expect companies to comply with all employment laws and regulations and adopt practices in line with the International Labour Organization's
core labour standards. a minimum.
In particular, companies will:
▪ |
Take
affirmative steps to ensure that they uphold decent labour standards. |
|
|
▪ |
Adopt
strong health and safety policies and programmes to implement such policies. |
▪ |
Adopt
equal employment opportunity and diversity policies and a programme for ensuring compliance with such policies. |
|
|
▪ |
Adopt
policies and programmes for investing in employee training and development. |
|
|
▪ |
Adopt
initiatives to attract and retain talented employees, foster higher productivity and quality, and encourage in their workforce a
commitment to achieving the company's purpose. |
|
|
▪ |
Ensure
policies are in place for a company's suppliers that promote decent labour standards, and programmes are in place to ensure high
standards of labour along supply chains. |
|
|
▪ |
Report
regularly on its policy and implementation of managing human capital. |
Where
we have serious concerns regarding a board's actions, or inaction, in relation to labour and employment we will consider taking voting
action on an appropriate resolution.
Human
rights
We
recognise the impact that human-rights issues can have on our investments and the role we can play in stimulating progress. We draw upon
a number of international, legal and voluntary agreements for guidance on human-rights responsibilities
and compliance.
Our
primary sources are the International Bill of Rights and the core conventions of the International Labour Organisation (ILO), which form
the list of internationally agreed human rights, and the UN Guiding Principles on Business and Human Rights (UNGPs), which clarifies
the roles of states and businesses. We encourage companies to use the UNGPs Reporting Framework and encourage disclosure in line with
this guidance.
We
expect companies to:
▪ |
Continually
work to understand their actual and potential impacts on human rights. |
▪ |
Establish
systems that actively ensure respect for human rights. |
▪ |
Take
appropriate action to remedy any infringements on human rights. |
Where
we have serious concerns regarding a board's actions, or inaction, in relation to human rights we will consider taking voting action
on an appropriate resolution.
|
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp9img005.jpg) |
Listed Company ESG Principles & Voting Policies | 19 |
Sustainability
Business
ethics
As
institutions of
wealth and influence, companies
have a significant impact on
the prosperity
of their local communities
and the wider world. Having
a robust code of ethics and ensuring
professional conduct mean companies operate more effectively, particularly when it
comes to ethical principles governing
decision-making. A company's failure to
conform to internationally recognised
standards of business ethics on matters
such as bribery and corruption, can increase
its risk of facing
investigation, litigation and fines.
This could undermine
its license
to operate, and affect its
reputation and image.
We
expect companies to have policies
in place
to support the following:
▪ | Ethics
at
the heart of the organisation's
governance. |
| |
▪ | A zero-tolerance policy on bribery and corruption. |
| |
▪ | How people
are rewarded,
as pay can influence
behaviour. |
| |
▪ | Respect for
human rights. |
| |
▪ | Tax transparency. |
| |
▪ | Ethical training
for employees. |
Where
we have serious concerns regarding a board's
actions, or
inaction, related to
business ethics we will consider taking voting action on an appropriate resolution.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp9img006.jpg)
Listed Company ESG Principles & Voting Policies | 20 |
Listed Company ESG Principles & Voting Policies | 21 |
Environmental
& Social
Resolutions
We
will review any resolution at company meetings which ISS has identified as covering environmental and social factors. The following will
detail our overarching approach and expectations.
Our
approach to vote analysis is consistent across active and quantitative
investment strategies:
▪ | Review
the resolution, proponent
and board statements, existing disclosures, and external research. |
▪ | Engage with
the company, proponents, and other stakeholders as required. |
▪ | Involve thematic
experts, regional specialists, and investment analysts in decision-making
to harness a wide range of expertise and include
all material factors in our
analysis. |
▪ | Ensure consistency
by using our own in-house
guidance to frame case-by-case
analysis. |
▪ | Monitor the
outcomes of votes. |
▪ | Follow-up with on-going
engagement as required. |
Given
the nature of the topics covered by these
resolutions we do not apply binary voting policies. We
adopt a nuanced approach to our voting research
and outcomes and will consider the specific
circumstances of the company concerned. Our objective is
not to vote in favour of all
shareholder resolutions but to determine the
best outcome for the company
in the context of the best outcome for our clients. There
are instances where we are supportive
of the spirit of a resolution
however there may be a reason
which prevents our support for the proposal.
For example, where the purpose of the
resolution is unclear, where the wording is overly
prescriptive, when suggested implementation is overly burdensome
or where the proposal strays too closely to
the board's responsibility for
setting the company's strategy.
Management
Proposals
We are
supportive of the steps being
taken by companies to provide transparent, detailed reporting of their ESG
strategies and targets. While shareholder proposals on environmental and social topics have
been common on AGM agendas for several years, an increasing number
of companies are presenting management proposals, such as so called 'say
on climate' votes, for shareholder approval. While we welcome the intention of
accountability behind these votes, we have reservations about
the potential for them to
limit the scope for subsequent investor
challenge and diminish the direct responsibility and
accountability of the board and individual directors. We believe
it is the role of the board
and the executive to develop and apply strategy, including
ESG strategies, and we will continue to use existing voting items
to hold boards to account
on the implementation of these strategies. As active investors
we also regularly engage with investee
companies on ESG topics and
find this dialogue to
be the best opportunity to
provide feedback.
We will review the appropriateness of ‘say on climate’ votes and consider if other voting mechanisms should be applied to
ensure both Boards and Executives apply the appropriate rigour to initiate and deliver strategies to support the climate transition.
Shareholder
Proposals
The number
of resolutions focused on environmental and social (E&S) issues filed
by shareholders continues to
grow rapidly. The following
provides an overview of some of the factors we consider when assessing the most
prevalent themes for shareholder proposals.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp9img008.jpg)
Listed Company ESG Principles & Voting Policies | 22 |
Environmental
& Social
Resolutions
Climate
Change
We are
members of the Net Zero Asset
Managers Initiatives and this is reflected in our Active
Ownership approach. We encourage the companies in which
we invest to demonstrate a robust
methodology underpinning Paris aligned goals and targets and
are supportive of resolutions that will help companies
to achieve this. Once a credible climate strategy is
in place, we prioritise evidence of implementation over requests to re-draft strategies
and targets after only a year
or two.
A growing number
of resolutions call on companies
to increase the transparency of their
reporting on climate-related lobbying. These proposals
typically encompass direct lobbying
undertaken by the company and indirect lobbying undertaken by
trade associations and other organisations of which it is
a member or supporter.
Lobbying
contrary to the objectives of
the Paris Agreement is effective in creating climate
policy inertia and impeding
the transition to net zero economies.
We do not
evaluate resolutions
in isolation. Our approach recognises
the links between corporate governance, strategy and climate approach. Where a company's operational
response to climate change is
inadequate, the effectiveness of board oversight and corporate governance may also be called into
question.
We expect and encourage
companies to:
▪ | Demonstrate that a
robust methodology underpins Paris aligned,
net zero goals and targets. |
▪ | Set targets
for absolute emission reduction, not
just carbon intensity,
to show a clear pathway to
net zero. |
▪ | Report in alignment
with the TCFD framework. |
▪ | Link
targets to remuneration and ensure
they are
reflected in capital
expenditure and R&D plans. |
▪ | Carefully manage
climate-related lobbying by
ensuring appropriate oversight, transparent disclosure
of activities, and alignment of activities with the company's
strategy and publicly stated positions. |
Diversity & Inclusion
Diversity
& Inclusion (D&I)
is an important and growing theme for shareholder resolutions.
In recent years resolutions
have focussed on racial equity
audits, pay gap reporting, transparent disclosure of
D&I metrics and assessments of the
efficacy of D&I programmes.
A
racial equity audit is an independent
analysis of a company's business practices designed to identify
practices that may have a discriminatory
effect.
We
are supportive of racial equity audits in
relation to internal and external D&I programmes.
It is appropriate that these
programmes should have KPIs
and audit mechanisms in place
to measure and evaluate
outcomes. Some proposals request racial
equity audits of provision of services. We are aware that measuring provision
of service is challenging and gathering racial data on customers
can be difficult and inappropriate. There are
also multiple different factors
that can influence service
provision and which could be misconstrued
as being racially motivated. We will
however, support resolutions
which are not unduly prescriptive
and allow companies to carry out audits within a reasonable
timeframe, at a reasonable cost, and excluding
confidential or proprietary information.
We
consider standardised gender pay gap disclosure to be an important tool for
assessing how companies are addressing gender inequality.
Reporting on gender pay gaps across global operations can help companies to remain ahead of
the regulatory curve. It also
enables them to offer better opportunities and remuneration for
women around the world. We are therefore
supportive of resolutions which are likely to deliver
these benefits.
Proposals
must be carefully drafted to achieve these outcomes. For
instance, in the past we have
been unable to
support resolutions which
called for global median gender and racial pay
gap reporting as it
was unclear how
this would reveal potential pay disparities at a local level and
how it could be implemented
by companies with operations in
jurisdictions where collection of racial identity
data is illegal.
Listed Company ESG Principles & Voting Policies | 23 |
Environmental
& Social
Resolutions
In the US market we
support public disclosure of EEO-1 forms by companies. The
EEO-1 form details a
comprehensive breakdown of workforce by race and gender
according to ten employment categories. The
form is submitted privately to the US
Equal Employment Opportunity Commission on an annual basis. When
publicly disclosed, it offers investors and
other stakeholders data in a standardised and comparable
form. We have used our engagement programme to ask the companies in which
we invest to disclose this
form for their US operations
while making it central to our D&I voting
approach and supporting resolutions
that request it.
Human Rights
As
a supporter of the UN Guiding Principles
on Business and Human
Rights (UNGPs), we expect companies to demonstrate
how human rights due diligence is
conducted across operations, services, product use and
the supply chain. Companies
can have a significant impact
on human rights directly through
operations and provision of services, and indirectly through product
use and the supply
chain. In recent years the sale and end-use of controversial technologies, such as facial recognition
software, has emerged as a
prominent theme.
We expect and encourage companies
to:
| ▪ | Have
robust due diligence processes to
assess the actual and potential
human rights impacts of their operations, services, product use
and supply chain. |
| ▪ | Conduct customer and supplier vetting
processes commensurate with the
risk of human rights abuse. |
| ▪ | Publicly disclose
information about the operation
of these processes and utilise
the UNGPs' Reporting Framework. This will
improve the standard and consistency of human
rights reporting and enable more informed
investment decision making. |
Corporate Lobbying
& Political Contributions
Corporate lobbying
and political contributions are a recurrent theme of
shareholder resolutions, particularly in the US. These proposals
typically encompass direct lobbying
undertaken by the company
and indirect lobbying undertaken by trade
associations and other organisations of which it is a
member or supporter.
Proposals may
also request the disclosure of more information
regarding the process and rationale for
political contributions. We expect companies to make transparent,
consolidated disclosures of direct and indirect lobbying and political
expenditure. This disclosure should be underpinned
by a coherent policy that: explains public policy priorities
and the rationale for associated
expenditure, identifies
the management positions responsible
for public policy engagement, and provides appropriate mechanisms for board oversight.
These measures
should mitigate the risks associated with corporate lobbying
and political contributions, protecting the interest of
shareholders and other stakeholders.
Nuclear Energy
In the Japanese market
nuclear energy is a
recurrent theme of shareholder
resolutions. The Japanese government
is seeking to
reduce the nation's reliance
on coal and its energy
strategy presents safe
nuclear power generation as an important
source of base-load power. In
this context, resolutions which seek to
limit or cease the nuclear
operations of an individual
company do not appear to
be in the best interests of shareholders and
other stakeholders. The
health & safety risks associated with nuclear energy are high,
must be managed carefully across the industry,
and are an important
consideration in our
voting.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328854d1_sp9img009.jpg)
Listed Company ESG Principles & Voting Policies | 24 |
Important Information
This document is strictly for information purposes only
and should not be considered as an offer, investment recommendation, or solicitation, to deal in any of the investments or funds mentioned
herein and does not constitute investment research. abrdn does not warrant the accuracy, adequacy or completeness of the information and
materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials.
Any research or analysis used in the preparation of
this document has been procured by abrdn for its own use and may have been acted on for its own purpose. The results thus obtained are
made available only coincidentally and the information is not guaranteed as to its accuracy. Some of the information in this document
may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets
or companies. These statements are only predictions and actual events or results may differ materially. The reader must make their own
assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigations,
as they may consider necessary or appropriate for the purpose of such assessment. This material serves to provide general information
and is not meant to be investment, legal or tax advice for any particular investor. No warranty whatsoever is given and no liability
whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons
acting on any information, opinion or estimate contained in this document. abrdn reserves the right to make changes and corrections to
any information in this document at any time, without notice. This material is not to be reproduced in whole or in part without the prior
written consent of abrdn.
Applying ESG and sustainability criteria in the investment
process may result in the exclusion of securities within the universe of potential investments. The interpretation of ESG and sustainability
criteria is subjective meaning that products may invest in companies which similar products do not (and thus perform differently) and
which do not align with the personal views of any individual investor. Furthermore, the lack of common or harmonized definitions and
labels regarding ESG and sustainability criteria may result in different approaches by managers when integrating ESG and sustainability
criteria into investment decisions. This means that it may be difficult to compare strategies within ostensibly similar objectives
and that these strategies will employ different security selection and exclusion criteria. Consequently, the
performance profile of otherwise similar vehicles may deviate more substantially than might otherwise be expected. Additionally, in the
absence of common or harmonized definitions and labels, a degree of subjectivity is required and this will mean that a product
may invest in a security that another manager or an investor would not.
abrdn plc is registered in Scotland (SC286832) at 1 George
Street, Edinburgh EH2 2LL.
Listed Company ESG Principles & Voting Policies | 25 |
For
more information
visit abrdn.com
GB-070223-187536-4
abrdn.com | |
STA0223824336-001 |
PART C
Other Information
Item 15. Indemnification
Article IV of the Registrant's Agreement
and Declaration of Trust provides as follows:
4.1 No
Personal Liability of Shareholders, Trustees, etc.
No Shareholder of the Trust shall be subject in
such capacity to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. Shareholders shall have the same limitation of personal liability as is extended to stockholders of a private corporation
for profit incorporated under the general corporation law of the State of Delaware. No Trustee or officer of the Trust shall be subject
in such capacity to any personal liability whatsoever to any Person in connection with Trust Property or the affairs of the Trust, save
only liability to the Trust or its Shareholders arising from bad faith, willful misfeasance, gross negligence or reckless disregard for
his duty to such Person; and, subject to the foregoing exception, all Persons shall look solely to the Trust Property for satisfaction
of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee or officer of the Trust, as such,
is made a party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, he shall not, on account
thereof, be held to any personal liability.
4.2 Mandatory
Indemnification.
(a) The Trust shall indemnify
the Trustees and officers of the Trust (each such person being an "indemnitee") against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and reasonable counsel fees reasonably incurred by
such indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before
any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise (other than, except
as authorized by the Trustees, as the plaintiff or complainant) or with which he may be or may have been threatened, while acting in any
capacity set forth above in this Section 4.2 by reason of his having acted in any such capacity, except with respect to any matter
as to which he shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or, in
the case of any criminal proceeding, as to which he shall have had reasonable cause to believe that the conduct was unlawful, provided,
however, that no indemnitee shall be indemnified hereunder against any liability to any person or any expense of such indemnitee arising
by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence (negligence in the case of Affiliated Indemnitees),
or (iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i)
through (iv) being sometimes referred to herein as "disabling conduct"). Notwithstanding the foregoing, with respect to any
action, suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such indemnitee was authorized by a majority of the Trustees.
(b) Notwithstanding the foregoing,
no indemnification shall be made hereunder unless there has been a determination (1) by a final decision on the merits by a court
or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee
is entitled to indemnification hereunder or, (2) in the absence of such a decision, by (i) a majority vote of a quorum of those
Trustees who are neither Interested Persons of the Trust nor parties to the proceeding ("Disinterested Non-Party Trustees"),
that the indemnitee is entitled to indemnification hereunder, or (ii) if such quorum is not obtainable or even if obtainable, if
such majority so directs, independent legal counsel in a written opinion conclude that the indemnitee should be entitled to indemnification
hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding shall be authorized
and made in accordance with the immediately succeeding paragraph (c) below.
(c) The Trust shall make
advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought
hereunder if the Trust receives a written affirmation by the indemnitee of the indemnitee's good faith belief that the standards of
conduct necessary for indemnification have been met and a written undertaking to reimburse the Trust unless it is subsequently
determined that he is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of
conduct necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met:
(1) the indemnitee shall provide adequate security for his undertaking, (2) the Trust shall be insured against losses
arising by reason of any lawful advances, or (3) a majority of a quorum of the Disinterested Non-Party Trustees, or if a
majority vote of such quorum so direct, independent legal counsel in a written opinion, shall conclude, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
(d) The rights accruing to any
indemnitee under these provisions shall not exclude any other right to which he may be lawfully entitled.
(e) Notwithstanding the foregoing,
subject to any limitations provided by the 1940 Act and this Declaration, the Trust shall have the power and authority to indemnify Persons
providing services to the Trust to the full extent provided by law provided that such indemnification has been approved by a majority
of the Trustees.
Insofar as indemnification for liability arising
under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the Fund pursuant
to the foregoing provisions, or otherwise, the Fund has been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Fund of expenses incurred or paid by a director, officer or controlling person
of the Fund in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Fund will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
4.3 No Duty of Investigation;
Notice in Trust Instruments, etc.
No purchaser, lender, transfer agent or other
person dealing with the Trustees or with any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation,
contract, undertaking, instrument, certificate, Share, other security of the Trust, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively taken to have been executed or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall
deem adequate to cover possible liability, and such other insurance as the Trustees in their sole judgment shall deem advisable or is
required by the 1940 Act.
4.4 Reliance
on Experts, etc.
Each Trustee and officer or employee of the
Trust shall, in the performance of its duties, be fully and completely justified and protected with regard to any act or any failure
to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel or
upon reports made to the Trust by any of the Trust's officers or employees or by any advisor, administrator, manager, distributor,
selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or
employees of the Trust, regardless of whether such counsel or other person may also be a Trustee.
Reference is also made to:
Section 7(b) of the Investment
Advisory Agreement between the Registrant and abrdn Investments Limited (formerly, Aberdeen Asset Managers Limited).
| (3) | Voting Trust Agreement – Inapplicable. |
| (4) | Agreement of Reorganization |
| a. | Form of Agreement and Plan of Reorganization – Filed herewith as Appendix A to the Proxy Statement/Prospectus. |
| (5) | Instruments Defining the Rights of Holders of the Securities being Registered |
| (6) | Investment Advisory Contract |
| (7) | Distribution Contracts |
| (8) | Bonus or Profit Sharing Contracts – Inapplicable. |
| (13) | Other Material Contracts |
| (15) | Omitted Financial Statements – Inapplicable. |
| (17) | Additional Exhibits – Inapplicable. |
(2) |
Previously filed as an exhibit to the Registrant's Registration Statement filed on Form N-2 (File No. 333-138664) as filed on November 13, 2006 and incorporated herein by reference. |
(3) |
Previously filed as an exhibit to the Registrant’s Form N-2 (File No. 333-138664) as filed on January 22, 2007 and incorporated herein by reference. |
(4) |
Previously filed as an exhibit to the Registrant's Form 8-K (File No. 811-21980) as filed on October 4, 2017 and incorporated herein by reference. |
(5) |
Previously filed as an exhibit to the Registrant's Form N-CEN (File No. 811-21980) as filed on June 3, 2019 and incorporated herein by reference. |
(6) |
Previously filed as an exhibit to the Registrant's Form N-CEN (File No. 811-21980) as filed on January 13, 2023 and incorporated herein by reference. |
(7) |
Previously filed as an exhibit to the Registrant’s Form N-14 (File No. 333-275152) as filed on October 24, 2023 and incorporated herein by reference. |
Item 17. Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus
which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c)
of the Securities Act of 1933 [17 CFR 230.145c], the reoffering prospectus will contain the information called for by the applicable registration
form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the
applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability
under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
(3) The
undersigned registrant agrees to file, by post-effective amendment, opinion of counsel supporting the tax consequences of the Reorganization
within a reasonably prompt time after receipt of such opinion.
SIGNATURES
As required by the Securities Act of 1933,
this registration statement has been signed on behalf of the registrant, in the City of Philadelphia and Commonwealth of Pennsylvania,
on the 12th day of December, 2023.
|
ABRDN TOTAL DYNAMIC
DIVIDEND FUND |
|
|
|
|
By: |
/s/ Christian Pittard |
|
|
Christian Pittard, President and Chief Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities
and on the date indicated.
Name |
|
Title |
|
Date |
/s/ P. Gerald Malone* |
|
Trustee |
|
December 12, 2023 |
P. Gerald Malone |
|
|
|
|
/s/ Stephen Bird* |
|
Trustee |
|
December 12, 2023 |
Stephen Bird |
|
|
|
|
/s/ Nancy Yao* |
|
Trustee |
|
December 12, 2023 |
Nancy Yao |
|
|
|
|
/s/ Todd Reit* |
|
Trustee |
|
December 12, 2023 |
Todd Reit |
|
|
|
|
/s/ John Sievwright* |
|
Trustee |
|
December 12, 2023 |
John Sievwright |
|
|
|
|
|
|
|
|
|
/s/ Christian Pittard |
|
President and Chief Executive Officer (Principal Executive Officer) |
|
December 12, 2023 |
Christian Pittard |
|
|
|
|
|
|
|
|
|
/s/ Sharon Ferrari |
|
Treasurer and Chief Financial Officer (Principal Financial Officer/Principal Accounting Officer) |
|
December 12, 2023 |
Sharon Ferrari |
|
|
|
|
*This filing has been signed by each of the persons so indicated by
the undersigned Attorney-in-Fact pursuant to powers of attorney filed as Exhibit 16 to the Registrant’s registration statement on
Form N-14 filed on October 24, 2023 (File No. 333-275152).
*By: |
/s/ Lucia Sitar |
|
|
Lucia Sitar |
|
|
Attorney-in-Fact pursuant to |
|
|
Powers of Attorney |
|
EXHIBIT LIST
Exhibit 99.9(a)
MASTER
CUSTODIAN AGREEMENT
This
Agreement is made as of November 18th, 2010 by and among each management investment company identified on Appendix
A hereto (each such investment company and each management investment company made subject to this Agreement in accordance with
Section 18.5 below, shall hereinafter be referred to as (a “Fund”), and State
Street Bank and Trust Company, a Massachusetts
trust company (the “Custodian”).
Whereas,
each Fund may or may not be authorized to issue shares of common
stock or shares of beneficial interest in separate series (“Shares”),
with each such series representing interests in a separate portfolio of securities and other assets;
Whereas,
each Fund so authorized intends that this
Agreement be applicable to each of its series set forth on Appendix A hereto, if any (such series together with all other series
subsequently established by the Fund and made subject to this Agreement in accordance with Section 18.6 below, shall hereinafter
be referred to as the “Portfolio(s)”);
and
Whereas,
each Fund not so authorized intends that
this Agreement be applicable to it and all references
hereinafter to one or more “Portfolio(s)” shall be deemed to refer to such Fund(s).
Now,
Therefore, in consideration of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as follows:
| Section
1. | Employment
of custodian and property
to be held by it. |
Each
Fund hereby employs the Custodian as a custodian of assets of the Portfolios, including securities which the Fund, on behalf of
the applicable Portfolio, desires to be held in places within the United States (“domestic
securities”) and
securities it desires to be held outside the United States (“foreign
securities”). Each Fund, on behalf
of its Portfolio(s), agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time
to time, and the cash consideration received by it for such Shares as may be issued or sold from time to time. The Custodian shall
not be responsible for any property of a Portfolio which is not received by it or which is delivered out in accordance with Proper
Instructions (as such term is defined in Section 7 hereof) including, without limitation, Portfolio property (i) held by brokers,
private bankers or other entities on behalf of the Portfolio (each a “Local
Agent”), (ii) held by Special Sub-Custodians (as such term is defined in Section 5 hereof), (iii)
held by entities which have advanced monies to or on behalf of the Portfolio and which have received Portfolio property as security
for such advance(s) (each a “Pledgee”),
or (iv) delivered or otherwise removed from the custody of the Custodian (a) in connection with any Free Trade (as
such term is defined in Sections 2.2(14) and 2.6(7) hereof) or (b) pursuant to Special Instructions (as such term is defined in
Section 7 hereof). With respect to uncertificated shares (the “Underlying
Shares”) of registered “investment companies” (as defined
in Section 3(a)(1) of the Investment Company Act of 1940, as amended from time to time (the “1940
Act”)), whether in the same “group of investment companies” (as defined in Section 12(d)(l)(G)(ii)
of the 1940 Act) or otherwise, including pursuant to Section 12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as
the “Underlying Portfolios”)
the holding of confirmation statements that identify the shares as being recorded in the Custodian’s name
on behalf of the Portfolios will be deemed custody for purposes hereof.
Upon
receipt of Proper Instructions, the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more
sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees or the Board
of Directors of the Fund (as appropriate, and in each case, the “Board”)
on behalf of the applicable Portfolio(s), and provided that the Custodian shall have no more or less responsibility
or liability to any Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has
to the Custodian. The Custodian may place and maintain each Fund’s foreign securities with foreign banking institution sub-custodians
employed by the Custodian and/or foreign securities depositories, all as designated in Schedules A and B hereto, but only in accordance
with the applicable provisions of Sections 3 and 4 hereof.
| Section
2. | Duties
of the custodian with respect
to property of the portfolios
to be held in the united
states. |
Section
2.1
Holding Securities. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash
property, to be held by it in the United States, including all domestic securities owned by such Portfolio other than (a) securities
which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury
(each, a “U.S. Securities System”)
and (b) Underlying Shares owned by each Fund which are maintained pursuant to Section 2.10 hereof in an account
with State Street Bank and Trust Company or such other entity which may from time to time act as a transfer agent for the Underlying
Portfolios and with respect to which the Custodian is provided with Proper Instructions (the “Underlying
Transfer Agent”).
Section
2.2 Delivery
of Securities. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian,
in a U.S. Securities System account of the Custodian
or in an account at the Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
| 1) | Upon
sale of such securities for the account of the Portfolio and receipt of payment therefor; |
| 2) | Upon
the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio; |
| 3) | In
the case of a sale effected through a U.S. Securities System, in accordance with the
provisions of Section 2.8 hereof; |
| 4) | To
the depository agent in connection with tender or other similar offers for securities
of the Portfolio; |
Securities
Exchange Act of 1934 (the “Exchange Act”) and
a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”,
formerly known as The National Association of Securities Dealers, Inc.), relating to compliance with the rules
of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the Fund on behalf of a Portfolio;
| 13) | For
delivery in accordance with the provisions of any agreement among a Fund on behalf of
the Portfolio, the Custodian, and a futures commission merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures
Trading Commission (the “CFTC”)
and/or any contract market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the Fund on behalf of a
Portfolio; |
| 14) | Upon
the sale or other delivery of such investments (including, without limitation, to one
or more (a) Special Sub-Custodians or (b) additional custodians appointed by the Fund,
and communicated to the Custodian from time to time via a writing duly executed by an
authorized officer of the Fund, for the purpose of engaging in repurchase agreement transactions(s),
each a “Repo Custodian”),
and prior to receipt of payment therefor, as set forth in written Proper
Instructions (such delivery in advance of payment, along with payment in advance of delivery
made in accordance with Section 2.6(7), as applicable, shall each be referred to herein
as a “Free Trade”),
provided that such Proper Instructions shall set forth (a) the securities
of the Portfolio to be delivered and (b) the person(s) to whom delivery of such securities
shall be made; |
| 15) | Upon
receipt of instructions from the Fund’s transfer agent (the “Transfer
Agent”) for delivery to such Transfer Agent or to the holders
of Shares in connection with distributions in kind, as may be described from time to
time in the currently effective prospectus and statement of additional information of
the Fund related to the Portfolio (the “Prospectus”),
in satisfaction of requests by holders of Shares for repurchase or redemption; |
| 16) | In
the case of a sale processed through the Underlying Transfer Agent of Underlying Shares,
in accordance with Section 2.10 hereof; |
| 17) | For
delivery as initial or variation margin in connection with futures or options on futures
contracts entered into by the Fund on behalf of the Portfolio; and |
| 18) | For
any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf
of the applicable Portfolio specifying (a) the securities of the Portfolio to be delivered
and (b) the person or persons to whom delivery of such securities shall be made. |
Section
2.3 Registration
of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the
name of the Portfolio or in the name of any nominee of a Fund on behalf of the Portfolio or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered management investment companies having the same investment adviser as the Portfolio,
or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian
appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Agreement
shall be in “street name” or other good delivery form. If, however, a Fund directs the Custodian to maintain securities
in “street name”, the Custodian shall utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency
of calls, maturities, tender or exchange offers.
Section
2.4 Bank
Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name
of each Portfolio of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement,
and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account
of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3
under the 1940 Act. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the banking
department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that
each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable
Portfolio be approved by vote of a majority of the Board. Such funds shall be deposited by the Custodian in its capacity as Custodian
and shall be withdrawable by the Custodian only in that capacity.
Section
2.5 Collection
of Income. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14) or purchased
pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income
and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either
by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with
respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such Portfolio’s custodian account. Without limiting the generality
of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation
as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the applicable Fund. The Custodian will have
no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary
to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.
Section
2.6 Payment
of Fund Monies. Upon receipt of Proper Instructions on
behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
| 1) | Upon
the purchase of domestic securities, options, futures contracts or options, on futures
contracts for the account of the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the 1940 Act to act as a custodian
and has been designated by the Custodian as its agent for this purpose) registered in
the name of the Portfolio or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected
through a U.S. Securities System, in accordance with the conditions set forth in Section
2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance with the
conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements
entered into between the applicable Fund on behalf of a Portfolio and the Custodian,
or another bank, or a broker-dealer which is a member of FINRA, (i) against delivery
of the securities either in certificate form or through an entry crediting the Custodian’s
account at the Federal Reserve Bank with such securities or (ii) against delivery of
the receipt evidencing purchase by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the Custodian to repurchase such securities
from the Portfolio; or (e) for transfer to a time deposit account of the Fund in any
bank, whether domestic or foreign; such transfer may be effected prior to receipt of
a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as defined herein; |
| 2) | In
connection with conversion, exchange or surrender of securities owned by the Portfolio
as set forth in Section 2.2 hereof; |
| 3) | For
the redemption or repurchase of Shares issued as set forth in Section 6
hereof; |
| 4) | For
the payment of any expense or liability incurred by the Portfolio, including but not
limited to the following payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole or part capitalized or treated as
deferred expenses; |
| 5) | For
the payment of any dividends on Shares declared pursuant to the Fund’s articles
of incorporation or organization and by-laws or agreement or declaration of trust, as
applicable, and Prospectus (collectively, “Governing
Documents”); |
| 6) | For
payment of the amount of dividends received in respect of securities sold short; |
| 7) | Upon
the purchase of domestic investments including, without limitation, repurchase agreement
transactions involving delivery of Portfolio monies to Repo Custodian(s), and prior to
receipt of such investments, as set forth in written Proper Instructions (such payment
in advance of delivery, along with delivery in advance of payment made in accordance
with Section 2.2(14), as applicable, shall each be referred to herein as a “Free
Trade”), provided that
such Proper Instructions shall also set forth (a) the amount of such payment and (b)
the person(s) to whom such payment is made; |
| 8) | For
payment as initial or variation margin in connection with futures or options on futures
contracts entered into by the Fund on behalf of the Portfolio; and |
| 9) | For
any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf
of the Portfolio specifying (a) the amount of such payment and (b) the person or persons
to whom such payment is to be made. |
Section
2.7 Appointment
of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the
provisions of this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent
shall not relieve the Custodian of its responsibilities or liabilities hereunder. The Underlying Transfer Agent shall not be deemed
an agent or sub-custodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.
Section
2.8 Deposit of Fund Assets in U.S.
Securities
Systems. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System in compliance with the conditions
of Rule 17f-4 under the 1940 Act, as amended from time to time.
Section
2.9 Segregated
Account. The Custodian shall upon receipt of Proper Instructions on behalf of each applicable Portfolio, establish
and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts maybe transferred
cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (a) in
accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the FINRA (or any futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or
the CFTC or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Portfolio, (b) for purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by
the Portfolio, (c) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the “SEC”),
or interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered management
investment companies, and (d) for any other purpose in accordance with Proper Instructions.
Section
2.10 Deposit of Fund Assets with the Underlying Transfer Agent. Underlying
Shares beneficially owned by the Fund, on behalf of a Portfolio, shall be deposited and/or maintained in an account or accounts
maintained with an Underlying Transfer Agent and the Custodian’s only responsibilities with respect thereto shall be limited
to the following:
| 1) | Upon
receipt of a confirmation or statement from an Underlying Transfer Agent that such Underlying
Transfer Agent is holding or maintaining Underlying Shares in the name of the Custodian
(or a nominee of the Custodian) for the benefit of a Portfolio, the Custodian shall identify
by book-entry that such Underlying Shares are being held by it as custodian for the benefit
of such Portfolio. |
| 2) | In
respect of the purchase of Underlying Shares for the account of a Portfolio, upon receipt
of Proper Instructions, the Custodian shall pay out monies of such Portfolio as so directed,
and record such payment from the account of such Portfolio on the Custodian’s books
and records. |
| 3) | In
respect of the sale or redemption of Underlying Shares for the account of a Portfolio,
upon receipt of Proper Instructions, the Custodian shall transfer such Underlying Shares
as so directed, record such transfer from the account of such Portfolio on the Custodian’s
books and records and, upon the Custodian’s receipt of the proceeds therefor, record
such payment for the account of such Portfolio on the Custodian’s books and records. |
The
Custodian shall not be liable to the Fund for any loss or damage to the Fund or any Portfolio resulting from the maintenance of
Underlying Shares with an Underlying Transfer Agent except for losses resulting directly from the fraud, negligence or willful
misconduct of the Custodian or any of its agents or of any of its or their employees.
Section
2.11 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with
receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers
of securities.
Section
2.12 Proxies.
Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to
Section 2.6(7), the Custodian shall, with, respect to the domestic securities held hereunder, cause to be promptly executed by
the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee
of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver
to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities.
Section 2.13 Communications
Relating to Portfolio Securities. Except with respect to Portfolio property released and delivered pursuant to
Section 2.2(14), or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall
transmit promptly to the applicable Fund for each Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold
by the Fund on behalf of the Portfolio) received by the Custodian from issuers of the securities being held for the
Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund all
written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the
party (or its agents) making the tender or exchange offer. The Custodian shall not he liable for any untimely exercise of any
tender, exchange or other right or power in connection with domestic securities or other property of the Portfolios at any
time held by it unless (i) the Custodian is in actual possession of such domestic securities or property and (ii) the
Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at
least three business days prior to the date on which the Custodian is to take action to exercise such right or power. The
Custodian shall also transmit promptly to the applicable Fund for each Portfolio all written information received by the
Custodian regarding any class action or other litigation in connection with Portfolio securities or other assets issued in
the United States and then held, or previously held, during the term of this Agreement by the Custodian for the account of
the Fund for such Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. For avoidance of
doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as
may be applicable, the Custodian shall have no responsibility to so transmit any information under this Section
2.13.
| Section
3. | Provisions
Relating to Rules 17f-5 and 17f-7. |
Section
3.1. Definitions.
As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
“Country
Risk”
means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not
limited to, such country’s political environment, economic and financial infrastructure (including any Eligible Securities
Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable
to the safekeeping and recovery of Foreign Assets held in custody in that country.
“Eligible
Foreign Custodian”
has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule
17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act)
meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities
Depository.
“Eligible
Securities Depository” has the meaning
set forth in section (b)(1) of Rule 17f-7.
“Foreign
Assets”
means any of the Portfolios’ investments (including foreign currencies) for which the
primary market, is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios’
transactions in such investments.
“Foreign
Custody Manager” has the meaning
set forth in section (a)(3) of Rule 17f-5.
“Rule
17f-5” means Rule 17f-5 promulgated under the 1940 Act.
“Rule
17f-7” means Rule 17f-7 promulgated
under the 1940 Act.
Section
3.2. The
Custodian as Foreign Custody Manager.
3.2.1 Delegation
to the Custodian as Foreign Custody Manager. Each Fund, by resolution adopted by its Board, hereby delegates to the
Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets
of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager
with respect to the Portfolios.
3.2.2 Countries
Covered. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below
only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which
list of countries may be amended from time to time by any Fund with the agreement of the Foreign Custody Manager. The Foreign
Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the
assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of
the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section
3.2.5 hereof.
Upon
the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in
a country listed on Schedule A, and the fulfillment by each Fund, on behalf of the applicable Portfolio(s), of the applicable
account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by such Fund’s
Board on behalf of such Portfolio(s) responsibility as Foreign Custody Manager with respect to that country and to have accepted
such delegation. Execution of this Agreement by each Fund shall be deemed to be a Proper Instruction to open an account, or to
place or maintain Foreign Assets, in each country listed on Schedule A. Following the receipt of Proper Instructions directing
the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board on behalf of such Portfolio to the Custodian as Foreign Custody Manager
for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager
with respect to such Portfolio with respect to that country.
The
Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written
notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice
by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect
to the country as to which the Custodian’s acceptance of delegation is withdrawn.
3.2.3 Scope
of Delegated Responsibilities:
(a) Selection
of Eligible Foreign Custodians. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each
country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager
to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign
Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign
Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(l).
(b) Contracts
With Eligible Foreign Custodians. The Foreign Custody Manager shall determine that the contract governing the foreign
custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements
of Rule 17f-5(c)(2).
(c) Monitoring.
In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected
by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining
the Foreign Assets with such Eligible Foreign Custodian and (ii) the performance of the contract governing the custody arrangements
established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines
that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody
Manager shall notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4 Guidelines for the Exercise of Delegated Authority.
For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk
as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody
Manager of the Portfolios.
3.2.5 Reporting Requirements.
The Foreign Custody Manager shall report the
withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible
Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to
such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change
in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change.
3.2.6 Standard of Care as Foreign Custody Manager of a
Portfolio.
In performing the responsibilities delegated
to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility
for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
3.2.7 Representations with Respect to Rule 17f-5.
The Foreign Custody Manager represents to each
Fund that it is a U.S. Bank as defined in section (a)(7) of Rule
17f-5. Each Fund represents to the Custodian that its Board has determined that it is reasonable for such Board to rely
on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody
Manager of the Portfolios.
3.2.8 Effective Date and Termination of the Custodian as
Foreign Custody Manager. Each Board’s delegation to the Custodian as Foreign Custody Manager of the Portfolios
shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written
notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt
by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination
of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.
Section
3.3 Eligible Securities Depositories.
3.3.1 Analysis
and Monitoring. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser)
with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on
Schedule B hereto in accordance with section (a)(l)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and
promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks,
in accordance with section (a)(l)(i)(B) of Rule 17f-7.
3.3.2 Standard
of Care. The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth
in Section 3.3.1.
| Section
4. | Duties
of the Custodian with Respect to Property of the Portfolios to be Held
Outside the United States. |
Section
4.1 Definitions.
As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
“Foreign
Securities System”
means an Eligible Securities Depository listed on Schedule B hereto.
“Foreign
Sub-Custodian” means a foreign banking
institution serving as an Eligible Foreign Custodian.
Section 4.2. Holding
Securities. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held
by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its
customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign
securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian
shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign
Sub-Custodian or of other customers of such Foreign Sub-Custodian.
Section
4.3. Foreign
Securities Systems. Foreign securities shall be maintained in a Foreign Securities System in a designated country through
arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.
Section
4.4. Transactions
in Foreign Custody Account.
4.4.1.
Delivery of Foreign Assets. The Custodian or a Foreign Sub-Custodian
shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate
by the parties, and only in the following cases:
| (i) | Upon
the sale of such foreign securities for the Portfolio in accordance with commercially
reasonable market practice in the country where such foreign securities are held or traded,
including, without limitation: (A) delivery against expectation of receiving later payment;
or (B) in the case of a sale effected through a Foreign Securities System, in accordance
with the rules governing the operation of the Foreign Securities System; |
| (ii) | In
connection with any repurchase agreement related to foreign securities; |
| (iii) | To
the depository agent in connection with tender or other similar offers for foreign securities
of the Portfolios; |
| (iv) | To
the issuer thereof or its agent when such foreign securities are called, redeemed, retired
or otherwise become payable; |
| (v) | To
the issuer thereof, or its agent, for transfer into the name of the Custodian (or the
name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face amount or number of units; |
| (vi) | To
brokers, clearing banks or other clearing agents for examination or trade execution in
accordance with market custom; provided that in any such case, the Foreign Sub-Custodian
shall have no responsibility or liability for any loss arising from the delivery of such
foreign securities prior to receiving payment for such foreign securities except as may
arise from the Foreign Sub-Custodian’s own negligence or willful misconduct; |
| (vii) | For
exchange or conversion pursuant to any plan of merger, consolidation, recapitalization,
reorganization or readjustment of the securities of the issuer of such securities,
or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; |
| (viii) | In
the case of warrants, rights or similar foreign securities, the surrender thereof in
the exercise of such warrants, rights or similar securities or the surrender of interim
receipts or temporary securities for definitive securities; |
| (ix) | For
delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio
requiring a pledge of assets by the Fund on behalf of such Portfolio; |
| (x) | In
connection with trading in options and futures contracts, including delivery as original
margin and variation margin; |
| (xi) | Upon
the sale or other delivery of such foreign securities (including, without limitation,
to one or more Special Sub-Custodians or Repo Custodians) as a Free Trade, provided that
applicable Proper Instructions shall set forth (A) the foreign securities to be delivered
and (B) the person or persons to whom delivery shall be made; |
| (xii) | In
connection with the lending of foreign securities; and |
| (xiii) | For
any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign
securities to be delivered and (B) the person or persons to whom delivery of such securities
shall be made. |
4.4.2.
Payment of Portfolio Monies. Upon receipt
of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out,
or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in
the following cases only:
| (i) | Upon
the purchase of foreign securities for the Portfolio, unless otherwise directed by
Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer)
against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through
a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; |
| (ii) | In
connection with the conversion, exchange or surrender of foreign securities of the Portfolio; |
| (iii) | For
the payment of any expense or liability of the Portfolio, including but not limited to
the following payments: interest, taxes, investment advisory fees, transfer agency fees,
fees under this Agreement, legal fees, accounting fees, and other operating expenses; |
| (iv) | For
the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio,
including transactions executed with or through the Custodian or its Foreign Sub-Custodians; |
| (v) | In
connection with trading in options and futures contracts, including delivery as original
margin and variation margin; |
| (vi) | Upon
the purchase of foreign investments including, without limitation, repurchase agreement
transactions involving delivery of Portfolio monies to Repo Custodian(s), as a Free Trade, provided that applicable Proper Instructions
shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made; |
| (vii) | For
payment of part or all of the dividends received in respect of securities sold short; |
| (viii) | In
connection with the borrowing or lending of foreign securities; and |
| (ix) | For
any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount
of such payment and (B) the person or persons to whom such payment is to be made. |
4.4.3.
Market Conditions.
Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account
of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with
the customary established securities trading or processing practices and procedures in the country or market in which the transaction
occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent
for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
The
Custodian shall provide to each Board the information with respect to custody and settlement practices in countries in which the
Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The
Custodian may revise Schedule C from time to time, provided that no such revision shall result in a Board being provided with
substantively less information than had been previously provided hereunder.
Section 4.5. Registration
of Foreign Securities. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than
bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name
of any Foreign Sub- Custodian or in the name of any nominee of the foregoing, and the applicable Fund on behalf of such
Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The
Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of
this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
Section
4.6 Bank Accounts. The Custodian shall
identify on its hooks as belonging to the applicable
Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain,
or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts
shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-custodian. All accounts
referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian)
acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained
on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained
in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.
Section
4.7. Collection
of Income. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect
to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to
the applicable Portfolio. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian
shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.
Section
4.8
Shareholder Rights. With respect to the foreign securities held pursuant to this Section 4, the Custodian shall
use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws,
regulations and practical constraints that may exist in the country where such securities are issued. Each Fund acknowledges that
local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the
effect of severely limiting the ability of such Fund to exercise shareholder rights.
Section 4.9. Communications
Relating to Foreign Securities. The Custodian shall transmit promptly to the applicable Fund written information
with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall
transmit promptly to the applicable Fund written information with respect to materials so received by the Custodian from
issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or
exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power
in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian
receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least
three business days prior to the date on which the Custodian is to take action to exercise such right or power. The Custodian
shall also transmit promptly to the applicable Fund all written in formation received by the Custodian via the Foreign
Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios regarding any class action
or other litigation in connection with Portfolio foreign securities or other assets issued outside the United States and then
held, or previously held, during the term of this Agreement by the Custodian via a Foreign Sub-Custodian for the account of
the Fund for such Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. For avoidance of doubt,
upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as maybe
applicable, the Custodian shall have no responsibility to so transmit any information under this Section 4.9.
Section
4.10. Liability
of Foreign Sub-Custodians.
Each agreement pursuant to which the Custodian
employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in
the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the Foreign Sub-Custodian’s performance of such obligations. At
a Fund’s election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any
claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to
the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
Section
4.11 Tax
Law. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on any Fund,
the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political
subdivision thereof. It shall be the responsibility of each Fund to notify the Custodian of the obligations imposed on such Fund
with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned
in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications
and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts
to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which such Fund has provided
such information.
Section
4.12. Liability
of Custodian. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent
as set forth with respect to sub-custodians generally in this Agreement and, regardless of whether assets are maintained in the
custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost,
expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism,
or any other loss where the Foreign Sub-Custodian has otherwise acted with reasonable care.
| Section
5. | Special
Sub-Custodians. |
Upon
receipt of Special Instructions (as such term is defined in Section 7 hereof), the Custodian shall, on behalf of one or more Portfolios,
appoint one or more banks, trust companies or other entities designated in such Special Instructions to act as a sub-custodian
for the purposes of effecting such transaction(s) as may be designated by a Fund in Special Instructions. Each such designated
sub-custodian is referred to herein as a “Special Sub-Custodian.”
Each such duly appointed Special Sub-Custodian shall be listed on Schedule D hereto, as it may be amended from time
to time by a Fund, with the acknowledgment of the Custodian. In connection with the appointment of any Special Sub-Custodian,
and in accordance with Special Instructions, the Custodian shall enter into a sub-custodian agreement with the Fund and the Special
Sub-Custodian in form and substance approved by such Fund, provided that such agreement shall in all events comply with the provisions
of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement.
| Section
6. | Payments
for Sales or Repurchases or Redemptions of Shares. |
The
Custodian shall receive from the distributor of the Shares or from the Transfer Agent and deposit into the account of the appropriate
Portfolio such payments as are received for Shares thereof issued or sold from time to time by the applicable Fund. The Custodian
will provide timely notification to such Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From
such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make
funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection
with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by a Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time between such Fund and the Custodian.
| Section
7. | Proper
Instructions and Special instructions. |
“Proper
Instructions,” which may also be
standing instructions, as such term is used throughout this Agreement shall mean instructions received by the Custodian from a
Fund, a Fund’s duly authorized investment manager or investment adviser, or a person or entity duly authorized by either
of them. Such instructions may be in writing signed by the authorized person or persons or may be in a tested communication or
in a communication utilizing access codes effected between electro-mechanical or electronic devices or may be by such other means
and utilizing such intermediary systems and utilities as may be agreed from time to time by the Custodian and the person(s) or
entity giving such instruction, provided that the Fund has followed any security procedures agreed to from time to time by the
applicable Fund and the Custodian including, but not limited to, the security procedures selected by the Fund via the form of
Funds Transfer Addendum hereto, the terms of which are hereby agreed to. Oral instructions will be considered Proper Instructions
if the Custodian reasonably believes them to have been given by a person authorized to provide such instructions with respect
to the transaction involved; the Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section,
Proper Instructions shall include instructions received by the Custodian pursuant to any multi-party agreement which requires
a segregated asset account in accordance with Section 2.9 hereof.
“Special
Instructions,” as such term is used throughout this Agreement, means Proper Instructions countersigned or confirmed
in writing by the Treasurer or any Assistant Treasurer of the applicable Fund or any other person designated in writing by the
Treasurer of such Fund, which countersignature or confirmation shall be (a) included on the same instrument containing the Proper
Instructions or on a separate instrument clearly relating thereto and (b) delivered by hand, by facsimile transmission, or in
such other manner as the Fund and the Custodian agree in writing.
Concurrently
with the execution of this Agreement, and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian,
duly certified by such Fund’s Treasurer or Assistant Treasurer, a certificate setting forth: (i) the names, titles, signatures
and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Fund and (ii) the names, titles and signatures of those persons authorized to give
Special Instructions. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect until receipt by the Custodian of a similar certificate to
the contrary.
| Section
8. | Evidence
of Authority. |
The
Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly executed by or on behalf of the applicable Fund. The Custodian may receive
and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of any Fund as conclusive evidence (a)
of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the applicable
Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
| Section
9. | Actions
Permitted without Express Authority. |
The
Custodian may in its discretion, without express authority from the applicable Fund on behalf of each applicable Portfolio:
| 1) | Make
payments to itself or others for minor expenses of handling securities or other similar
items relating to its duties under this Agreement; provided that all such payments shall
be accounted for to the Fund on behalf of the Portfolio; |
| 2) | Surrender
securities in temporary form for securities in definitive form; |
| 3) | Endorse
for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments;
and |
| 4) | In
general, attend to all non-discretionary details in connection with the sale, exchange,
substitution, purchase, transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the applicable Board. |
| Section
10. | Duties
of Custodian with Respect to the Books of Account and Calculation of Net Asset Value
and Net Income. |
The
Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the applicable Board to
keep the books of account of each Portfolio and/or compute the net asset value per Share of the outstanding Shares or, if directed
in writing to do so by a Fund on behalf of a Portfolio, shall itself keep such books of account and/or compute such net asset
value per Share. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the
Prospectus and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among
its various components. Each Fund acknowledges and agrees that, with respect to investments maintained with the Underlying Transfer
Agent, the Underlying Transfer Agent is the sole source of information on the number of shares of a fund held by it on behalf
of a Portfolio and that the Custodian has the right to rely on holdings information furnished by the Underlying Transfer Agent
to the Custodian in performing its duties under this Agreement, including without limitation, the duties set forth in this Section
10 and in Section 11 hereof; provided, however, that the Custodian shall be obligated to reconcile information as to purchases
and sales of Underlying Shares contained in trade instructions and confirmations received by the Custodian and to report promptly
any discrepancies to the Underlying Transfer Agent. The calculations of the net asset value per Share and the daily income of
each Portfolio shall be made at the time or times described from, time to time in the Prospectus. Each Fund acknowledges that,
in keeping the books of account of the Portfolio and/or making the calculations described herein with respect to Portfolio property
released and delivered pursuant to Section 2.2(14),
or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided
to it by the Fund, the Fund’s counterparty(ies), or the agents of either of them.
The
Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations
under this Agreement in such manner as will meet the obligations of each Fund under the 1940 Act, with particular attention
to section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at
all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or
agents of such Fund and employees and agents of the SEC. The Custodian shall, at a Fund’s request, supply the Fund with
a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund
and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such
tabulations. Each Fund acknowledges that, in creating and maintaining the records as set forth herein with respect to
Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the
Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund’s
counterparty(ies), or the agents of either of them.
Section 12. Opinion of Fund’s Independent Accountant.
The Custodian shall take all
reasonable action, as a Fund with respect to a Portfolio may from time to time request, to obtain from year to year favorable opinions
from the Fund’s independent accountants with respect to its activities hereunder in connection with the preparation of the
Fund’s Form N-l A or Form N-2, as applicable, and Form N-SAR or other annual reports to the SEC and with respect to any other
requirements thereof.
Section
13. Reports to Fund by Independent Public Accountants.
The Custodian shall
provide the applicable Fund, on behalf of each of the Portfolios at such times as such Fund may reasonably require, with reports
by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System
or a Foreign Securities System (either, a “Securities
System”), relating to the services provided by the Custodian under
this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund
to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
Section
14. Compensation of Custodian.
The Custodian shall be entitled
to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between each Fund on behalf
of each applicable Portfolio and the Custodian.
Section
15. Responsibility of Custodian.
So long as and to the extent
that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless
in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of
this Agreement, but shall be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by
it in good faith without negligence, including, without limitation, acting in accordance with any Proper Instruction. It shall
be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be without liability to any Fund
or Portfolio for any loss, liability, claim or expense resulting from or caused by anything that is part of Country Risk (as defined
in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, insolvency of a Foreign
Sub-custodian, acts of war, revolution, riots or terrorism.
Except as may
arise from the Custodian’s own negligence or willful misconduct or the negligence or willful misconduct of a
sub-custodian or agent, the Custodian shall be without liability to any Fund for any loss, liability, claim or expense
resulting from or caused by; (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian
or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption,
suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other
similar events or acts; (ii) errors by any Fund or its duly authorized investment manager or investment adviser in their
instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of
or acts or omissions by a Securities System; (iv) any act or omission of a Special Sub-Custodian including, without
limitation, reliance on reports prepared by a Special Sub-Custodian; (v) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian’s
sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (vi) any
delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name
of the Custodian, any Fund, the Custodian’s sub-custodians, nominees or agents or any consequential losses arising out
of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vii) delays or inability to perform its duties due to any disorder in market infrastructure with
respect to any particular security or Securities System; and (viii) any provision of any present or future law or regulation
or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of
any court of competent jurisdiction. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to
the same extent as set forth with respect to sub-custodians generally in this Agreement.
If a Fund on behalf of a Portfolio
requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action
may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable
for the payment of money or incurring liability of some other form, such Fund on behalf of the Portfolio, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If a Fund requires the Custodian,
its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities
settlements, foreign exchange contracts and assumed settlement), or in the event that the Custodian or its nominee shall incur
or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement,
except such as may arise from its or its nominee’s own negligent action, negligent failure to act or willful misconduct,
or if a Fund fails to compensate the Custodian pursuant to Section 14 hereof, any property at any time held for the account of
the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall
be entitled to utilize available cash and to dispose of such Portfolio’s assets to the extent necessary to obtain reimbursement.
Except as may arise from the
Custodian’s own negligence or willful misconduct, each Fund shall indemnify and hold the Custodian harmless from and against
any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities which may be asserted against the
Custodian (a) acting in accordance with any Proper Instruction or Special Instruction including, without limitation, any Proper
Instruction with respect to Free Trades including, but not limited to, cost, expense, loss, damage, liability, tax, charge, assessment
or claim resulting from (i) the failure of the applicable Fund to receive income with respect to purchased investments, (ii) the
failure of the applicable Fund to recover amounts invested on maturity of purchased investments, (iii) the failure of the Custodian
to respond to or be aware of notices or other corporate communications with respect to purchased investments, or (iv) the Custodian’s
reliance upon information provided by the applicable Fund, such Fund’s counterparty(ies) or the agents of either of them
with respect to Fund property released, delivered or purchased pursuant to either of Section 2.2(14) or Section 2.6(7) hereof;
(b) for the acts or omissions of any Special Sub-Custodian; or (c) for the acts or omissions of any Local Agent or Pledgee.
In no event shall the Custodian
be liable for indirect, special or consequential damages.
Section
16. Effective Period, Termination and Amendment.
This Agreement shall
remain in full force and effect for an initial term ending November __, 2013 (the “Initial
Term”). After the expiration of the Initial Term, this Agreement
shall automatically renew for successive one-year terms (each, a “Renewal
Term”) unless a written notice of non-renewal is delivered by the
non-renewing party no later than ninety (90) days prior to the expiration of the Initial Term. During a Renewal Term, a party
may terminate this Agreement by delivering a written notice of termination to the other party, such termination to take effect
not sooner than sixty (60) days after the date of such delivery or mailing. During the Initial Term and thereafter, either party
may terminate this Agreement: (i) by mutual written agreement of the parties, (ii) in the event of the other party’s material
breach of a material provision of this Agreement that the other party has either (a) failed to cure or (b) failed to establish
a remedial plan to cure that is reasonably acceptable, within 60 days’ written notice of such breach, or (iii) in the event
of the appointment of a conservator or receiver for the other party or upon the happening of a like event to the other party at
the direction of an appropriate agency or court of competent jurisdiction. Upon termination of this Agreement pursuant to this
paragraph with respect to any Fund or Portfolio, the applicable Fund shall pay Custodian its compensation due and shall reimburse
Custodian for its costs, expenses and disbursements.
In the event of: (i) any
Fund’s termination of this Agreement with respect to such Fund or its Portfolio(s) for any reason other than as set forth in
the immediately preceding paragraph or (ii) a transaction not in the ordinary course of business pursuant to which the
Custodian is not retained to continue providing services hereunder to a Fund or Portfolio (or its respective successor), the
applicable Fund shall pay the Custodian its compensation due through the end of the then-current term (based upon the average
monthly compensation previously earned by Custodian with respect to such Fund or Portfolio) and shall reimburse the Custodian
for its costs, expenses and disbursements. Upon receipt of such payment and reimbursement, the Custodian will deliver such
Fund’s or Portfolio’s securities and cash as set forth hereinbelow. For the avoidance of doubt, no payment will be
required pursuant to clause (ii) of this paragraph in the event of any transaction such as a merger of a Fund or Portfolio
into, or the consolidation of a Fund or Portfolio with, another entity, the sale by a Fund or Portfolio of all, or
substantially all, of its assets to another entity, in each case where the Custodian is retained to continue providing
services to such Fund or Portfolio (or its respective successor) on substantially the same terms as this Agreement, or the
liquidation or dissolution of a Fund or Portfolio and distribution of such Fund’s or Portfolio’s
assets.
Termination of this Agreement
with respect to any one particular Fund or Portfolio shall in no way affect the rights and duties under this Agreement with respect
to any other Fund or Portfolio. The provisions of Sections 4.11,14 and 15 of this Agreement shall survive termination of this Agreement
for any reason.
This Agreement may be amended
at any time in writing by mutual agreement of the parties hereto.
Section
17. Successor
Custodian.
If a successor custodian for
one or more Portfolios shall be appointed by the applicable Board, the Custodian shall, upon termination and receipt of Proper
Instructions, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all
of the securities of each such Portfolio held in a Securities System or at the Underlying Transfer Agent.
If no such successor custodian
shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian
and transfer such securities, funds and other properties in accordance with such resolution.
In the event that no Proper Instructions
designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which
is a “bank” as defined in the 1940 Act, doing business in Boston, Massachusetts or New York, New York, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held
by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio,
and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System
or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this
Agreement.
In the event that securities,
funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of any
Fund to provide Proper Instructions as aforesaid, the Custodian shall be entitled to fair compensation for its services during
such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall remain in full force and effect.
Section
18. General.
Section 18.1 Massachusetts
Law to Apply. This
Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
Section
18.2 Prior
Agreements. This Agreement supersedes and terminates, as of the date hereof, all prior Agreements between each Fund
on behalf of each of the Portfolios and the Custodian relating to the custody of such Fund’s assets.
Section
18.3 Assignment.
This Agreement may not be assigned by (a) any Fund without the written consent of the Custodian or (b) by the Custodian
without the written consent of each applicable Fund, except that the Custodian may assign this Agreement to a successor of all
or a substantial portion of its business, or to a party controlling, controlled by or under common control with the Custodian.
Section 18.4 Interpretive
and Additional Provisions. In connection with the operation of this Agreement, the Custodian and each Fund on
behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the
provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by all parties and shall be annexed hereto, provided that
no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision
of a Fund’s Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
Section
18.5 Additional
Funds. In the event that any management investment company in addition to those listed on Appendix A hereto desires
to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if
the Custodian agrees in writing to provide such services, such management investment company shall become a Fund hereunder and
be bound by all terms and conditions and provisions hereof including, without limitation, the representations and warranties set
forth in Section 18.7 below.
Section
18.6 Additional
Portfolios. In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix
A hereto with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
Section
18.7 The Parties. All references herein to the “Fund” are to each of the management investment
companies listed on Appendix A hereto, and each management investment company made subject to this Agreement in accordance
with Section 18.5 above,
individually, as if this Agreement were between such individual Fund and the Custodian. In the case of a series corporation,
trust or other entity, all references herein to the “Portfolio” are to the individual series or portfolio of such
corporation, trust or other entity, or to such corporation, trust or other entity on behalf of the individual series or
portfolio, as appropriate. Any reference in this Agreement to “the parties” shall mean the Custodian and such
other individual Fund as to which the matter pertains. Each Fund hereby represents and warrants that (a) it is duly
incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b)
it has the requisite power and authority under applicable law and its Governing Documents to enter into and perform this
Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this
Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) its entrance into this Agreement shall not
cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or
regulation applicable to it. The Custodian hereby represents and warrants that (a) it is duly organized and is validly
existing in good standing in its jurisdiction of organization; (b) it has the requisite power and authority under applicable
law and its charter and by-laws to enter into and perform this Agreement; (c) all requisite proceedings have been taken to
authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and
enforceable agreement; and (e) its entrance into this Agreement shall not cause a material breach or be in material conflict
with any other agreement or obligation of the Custodian or any law or regulation applicable to it.
Section
18.8 Remote
Access Services Addendum.
The Custodian and each Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.
Section
18.9 Business
Continuity. The Custodian shall establish and maintain a disaster recovery plan reasonably designed to enable
the Custodian to provide services hereunder in the event of a disaster, including periodic back-up of files and data with respect
to the Funds.
Section
18.10 Notices.
Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties
as set forth herein during normal business hours or delivered prepaid registered mail or by telex,
cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party
from time to time.
To any Fund: |
Alpine Woods Capital Investors, LLC
2500 Westchester Ave. |
|
Purchase, NY 10577 |
|
Attention: Arleen Baez, Chief Operating Officer |
|
Telephone: ________________ |
|
Telecopy: _________________ |
|
|
To the Custodian: |
State Street Bank and Trust Company |
|
John Hancock Tower |
|
200 Clarendon Street, 17th Floor - JHT |
|
Boston, Massachusetts 02116 |
|
Attention: Michael A. Foutes, Vice President |
|
Telephone; 617-937-8660 |
|
Telecopy: 617-937-0269 |
Such notice, instruction or other
instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after
posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours
commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was
properly addressed, stamped and put into the post shall be conclusive evidence of posting.
Section
18.11 Counterparts.
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts
taken together shall constitute one and the same Agreement.
Section
18.12 Severability.
If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
Section
18.13 Confidentiality.
The parties hereto agree that each shall treat confidentially all information provided by each party to the other party regarding
its business and operations. All confidential information provided by a party hereto shall be used by any other party hereto solely
for the purpose of rendering or receiving services pursuant to this Agreement and, except as may be required in carrying out this
Agreement, shall not be disclosed to any third party. The foregoing shall not be applicable to any information (i) that is publicly
available when provided or thereafter becomes publicly available, other than through a breach of this Agreement, or that is independently
derived by any party hereto without the use of any information provided by the other party hereto in connection with this Agreement,
(ii) that is required in any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative
demand or other similar process, or by operation of law or regulation, or (iii) where the party seeking to disclose has received
the prior written consent of the party providing the information, which consent shall not be unreasonably withheld. Notwithstanding
anything herein to the contrary, the Custodian and its affiliates may report and use nonpublic portfolio holdings information
of its clients, including a Fund or Portfolio, on an aggregated basis with all or substantially all other client information and
without specific reference to any Fund or Portfolio.
Section
18.14 Reproduction
of Documents. This
Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each
agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
Section
18.15 Regulation
GG.
Each Fund hereby represents and warrants that it does not engage in an “Internet gambling business,” as such term
is defined in Section 233.2(r) of Federal Reserve Regulation GG (12 CFR 233) (“Regulation
GG”). Each Fund hereby covenants and agrees that it shall not engage in an Internet gambling
business. In accordance with Regulation GG, each Fund is hereby notified that “restricted transactions,” as such term
is defined in Section 233.2(y) of Regulation GG, are prohibited in any dealings with the Custodian pursuant to this Agreement
or otherwise between or among any party hereto.
Section
18.16 Data Privacy. The Custodian will implement and maintain a written information security program that contains
appropriate security measures to safeguard the personal information of the Funds’ shareholders, employees, directors and/or
officers that the Custodian receives, stores, maintains, processes or otherwise accesses in connection with the provision of services
hereunder. For these purposes, “personal information” shall mean (i) an individual’s name (first initial and
last name or first name and last name), address or telephone number plus
(a) social security number, (b) drivers license number, (c) state identification card number, (d) debit or credit card
number, (e) financial account number or (f) personal identification number or password that would permit access to a person’s
account or (ii) any combination of the foregoing that would allow a person to log onto or access an individual’s account. Notwithstanding
the foregoing “personal information” shall not include information that is lawfully obtained from publicly available
information, or from federal, state or local government records lawfully made available to the general public.
Section
18.16 Shareholder
Communications Election. SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond
to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held
by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the
rule, the Custodian needs each Fund to indicate whether it authorizes the Custodian to provide such Fund’s name, address,
and share position to requesting companies whose securities the Fund owns. If a Fund tells the Custodian “no,” the
Custodian will not provide this information to requesting companies. If a Fund tells the Custodian “yes” or does not
check either “yes” or “no” below, the Custodian is required by the rule to treat the Fund as consenting
to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For a
Fund’s protection, the Rule prohibits the requesting company from using die Fund’s name and address for any purpose
other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives
below.
| YES [ ] | The Custodian is authorized to release the Fund’s
name, address, and share positions. |
| NO [X] | The Custodian is not authorized to release the Fund’s
name, address, and share positions. |
Signature
Page
In
Witness Whereof, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized
representative under seal as of the date first
above-written.
EACH OF THE ENTITIES |
|
SET FORTH ON APPENDIX A HERETO |
|
|
|
|
By: |
/s/ Arleen Baez |
|
|
Name: Arleen Baez |
|
|
Title: COO |
|
STATE STREET BANK AND TRUST COMPANY |
|
|
|
|
By: |
/s/ Michael F. Rogers |
|
|
Michael F. Rogers |
|
|
Executive Vice President |
|
Master Custodian
Agreement
Exhibit 99.9(b)
AMENDMENT TO MASTER CUSTODIAN AGREEMENT
THIS
AMENDMENT TO MASTER CUSTODIAN AGREEMENT (the “Amendment”) is made and entered into as of May 4, 2018 by and between
each Aberdeen (formerly Alpine) management investment company identified on Appendix A hereto (each, a “Fund” and
collectively, the “Funds”), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company (the “Custodian”).
WITNESSETH:
WHEREAS,
each Fund and the Custodian are parties to that certain Master Custodian Agreement dated as of November 18, 2010 (as amended,
modified or supplemented from time to time, the “Agreement”); and
WHEREAS,
each Fund and the Custodian desire to amend and supplement the Agreement upon the following terms and conditions.
NOW
THEREFORE, for and in consideration of the mutual promises contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Fund and the Custodian hereby agree that the Agreement is amended
and supplemented as follows:
| 1. | Amendment
to Agreement. |
(a) Appendix A to the Agreement is hereby deleted in its entirety and replaced with Appendix A attached hereto.
(b) A new section 6A is hereby added to the Agreement as follows:
“Section
6A. Foreign Exchange.
Section
6A.1. Generally.
Upon receipt of Proper Instructions, which for purposes of this section may also include security trade advices, the Custodian
shall facilitate the processing and settlement of foreign exchange transactions. Such foreign exchange transactions do not
constitute part of the services provided by the Custodian under this Agreement.
Section
6A.2. Fund Elections.
Each Fund (or its Investment Advisor acting on its behalf) may elect to enter into and execute foreign exchange transactions
with third parties that are not affiliated with the Custodian, with State Street Global Markets, which is the foreign exchange
division of State Street Bank and Trust Company and its affiliated companies (“SSGM”),
or with a sub-custodian. Where the Fund or its Investment Advisor gives Proper Instructions for the execution of a foreign exchange
transaction using an indirect foreign exchange service described in the Client Publications (as defined below), the Fund (or its
Investment Advisor) instructs the Custodian, on behalf of the Fund, to direct the execution of such foreign exchange transaction
to SSGM or, when the relevant currency is not traded by SSGM, to the applicable sub-custodian. The Custodian shall not have any
agency (except as contemplated in preceding sentence), trust or fiduciary obligation to the Fund, its Investment Advisor or any
other person in connection with the execution of any foreign exchange transaction. The Custodian shall have no responsibility
under this Agreement for the selection of the counterparty to, or the method of execution of, any foreign exchange transaction
entered into by the Fund (or its Investment Advisor acting on its behalf) or the reasonableness of the execution rate on any such
transaction.
Information
Classification: Limited Access
“Client
Publications” means the general client publications of State Street Bank and Trust Company available
from time to time to clients and their investment managers.
“Investment
Advisor” means, in relation to a Fund, the investment manager or investment advisor of such Fund.
Section
6A.3. Fund Acknowledgement Each
Fund acknowledges that in connection with all foreign exchange transactions entered into by the Fund (or its Investment Advisor
acting on its behalf) with SSGM or any sub-custodian, SSGM and each such sub-custodian:
| (i) | shall be acting in a principal capacity and not as broker,
agent or fiduciary to the Fund or its Investment Advisor; |
| (ii) | shall
seek to profit from such foreign exchange transactions, and are entitled to retain and
not disclose any such profit to the Fund or its Investment Advisor; and |
| (iii) | shall enter into such foreign exchange transactions pursuant
to the terms and conditions, including pricing or pricing methodology, (a) agreed with the Fund or its Investment Advisor from
time to time or (b) in the case of an indirect foreign exchange service, (i) as established by SSGM and set forth in the Client
Publications with respect to the particular foreign exchange execution services selected by the Fund or the Investment Advisor
or (ii) as established by the sub-custodian from time to time. |
Section
6A.4. Transactions by State Street.
The Custodian or
its affiliates, including SSGM, may trade based upon information that is not available to the Fund (or its Investment Advisor
acting on its behalf), and may enter into transactions for its own account or the account of clients in the same or opposite direction
to the transactions entered into with the Fund (or its Investment Manager), and shall have no obligation, under this Agreement,
to share such information with or consider the interests of their respective counterparties, including, where applicable, the
Fund or the Investment Advisor.”
(c) Section
18.3 of the Agreement is hereby deleted in its entirety and replaced with the following Section 18.3.
“Section
18.3 Assignment; Delegation. This Agreement may not be assigned by (a) any Fund without the written consent of the
Custodian or (b) the Custodian without the written consent of each applicable Fund. The Custodian shall retain the right to employ
agents, subcontractors, consultants or other third parties, including, without limitation, affiliates (each, a “Delegate”
and collectively, the “Delegates”)
to provide or assist it in the provision of any part of the non-custodial services described herein or the discharge of any other
non-custodial obligations or duties under this Agreement without the consent or approval of any Fund. Except as otherwise provided
below, the Custodian shall be responsible for the acts and omissions of any such Delegate so employed as if the Custodian had
committed such acts and omissions itself. The Custodian shall be responsible for the compensation of its Delegates. Notwithstanding
the foregoing, in no event shall the term Delegate include sub-custodians, Eligible Foreign Custodians, U.S. Securities Systems
and Foreign Securities Systems, and the Custodian shall have no liability for the acts or omissions of sub-custodians, Eligible
Foreign Custodians, U.S. Securities Systems and Foreign Securities Systems except as otherwise expressly provided elsewhere in
this Agreement. The liability of the Custodian for the acts and omissions of sub-custodians, Eligible Foreign Custodians, and
Securities Systems shall be as set forth in Section 16 above.
Information
Classification: Limited Access
(d) Section 18.10 of the Agreement is hereby modified to update the parties’ contact information as follows:
|
“To any Fund: |
Aberdeen Asset Management Inc. |
|
|
1735 Market Street, 32nd Floor |
|
|
Philadelphia, PA 19103 |
|
|
|
|
|
Attention: Legal Department |
|
|
Facsimile: 866-291-5760 |
|
|
Telephone: 215-405-5700 |
|
|
|
|
To the Custodian: |
State Street Bank and Trust Company |
|
|
One Heritage Drive, 3rd Floor |
|
|
North Quincy, MA 02171 |
|
|
|
|
|
Attention: Clint Garran |
|
|
Facsimile: 617 537-7562 |
|
|
Telephone: 617-451-4767” |
(e) Section
18.13 of the Agreement is hereby deleted in its entirety and replaced with “Reserved” and the following new
Sections 18.17, 18.18, 18.19 and 18.20 are hereby added as follows.
“Section
19.17 Confidentiality.
All information provided under this Agreement by a party (the “Disclosing Party”) to the other party (the “Receiving
Party”) regarding the Disclosing Party’s business and operations shall be treated as confidential. Subject to Section
18.18 below, all confidential information provided under this Agreement by Disclosing Party shall be used, including disclosure
to third parties, by the Receiving Party, or its agents or service providers, solely for the purpose of performing or receiving
the services and discharging the Receiving Party’s other obligations under the Agreement or managing the business of the
Receiving Party and its affiliates, including financial and operational management and reporting, risk management, legal and regulatory
compliance and client service management. The foregoing shall not be applicable to any information (a) that is publicly available
when provided or thereafter becomes publicly available, other than through a breach of this Agreement, (b) that is independently
derived by the Receiving Party without the use of any information provided by the Disclosing Party in connection with this Agreement,
(c) that is disclosed to comply with any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative
demand or other similar process, (d) that is disclosed as required by operation of law or regulation or as required to comply
with the requirements of any market infrastructure that the Disclosing Party or its agents direct the Custodian or its affiliates
to employ (or which is required in connection with the holding or settlement of instruments included in the assets subject to
this Agreement), or (e) where the
party seeking to disclose has received the prior written consent of the party providing the information, which consent shall not
be unreasonably withheld.
Information
Classification: Limited Access
Section
18.18 Use of Data.
(a) In
connection with the provision of the services and the discharge of its other obligations under this Agreement, the Custodian (which
term for purposes of this Section 18.18 includes
each of its parent company, branches and affiliates (“Affiliates”))
may collect and store information regarding a Fund and share such information with its Affiliates, agents and service providers
in order and to the extent reasonably necessary (i) to carry out the provision of services contemplated under this Agreement and
other agreements between the Fund and the Custodian or any of its Affiliates and (ii) to carry out management of its businesses,
including, but not limited to, financial and operational management and reporting, risk management, legal and regulatory compliance
and client service management.
(b) Subject
to paragraph (c) below, the Custodian and/or its Affiliates (except those Affiliates or business divisions principally engaged
in the business of asset management) may use any data or other information (“Data”)
obtained by such entities in the performance of their services under this Agreement or any other agreement between the Fund and
the Custodian or one of its Affiliates, including Data regarding transactions and portfolio holdings relating to the Fund, and
publish, sell, distribute or otherwise commercialize the Data; provided that, unless the Fund otherwise consents, Data is combined
or aggregated with information relating to (i) other customers of the Custodian and/or its Affiliates or (ii) information derived
from other sources, in each case such that any published information will be displayed in a manner designed to prevent attribution
to or identification of such Data with the Fund. The Fund agrees that Custodian and/or its Affiliates may seek to profit and realize
economic benefit from the commercialization and use of the Data, that such benefit will constitute part of the Custodian’s
compensation for services under this Agreement or such other agreement, and the Custodian and/or its Affiliates shall be entitled
to retain and not be required to disclose the amount of such economic benefit and profit to the Fund.
(c) Except
as expressly contemplated by this Agreement, nothing in this Section 18.18
shall limit the confidentiality and data-protection obligations of the Custodian and its Affiliates under this Agreement
and applicable law. The Custodian shall cause any Affiliate, agent or service provider to which it has disclosed Data
pursuant to this Section 18.18 to
comply at all times with confidentiality and data-protection obligations as if it were a party to this Agreement.
Section
18.19. Corporate Information Security Program.
The Custodian shall be subject at all times during the term of this Agreement to a corporate information security program
(the “CIS
Program”) established and maintained by State Street Corporation. The CIS Program shall, at a minimum, be
reasonably designed to provide physical and electronic information security safeguards against the loss, theft, damage, compromise
and unauthorized disclosure of Fund data in the possession of the Custodian. Upon a Fund’s reasonable request, which in
no event shall be more than once annually, the Custodian shall furnish to the Fund a summary description of the CIS Program and
arrange for staff to be available to the Fund to discuss the CIS Program.
Section
18.20. Insurance.
The Custodian will maintain, at all times during the term of this Agreement, insurance of the types and in the amounts
as the Custodian shall, in its discretion, deem reasonable and appropriate taking into account the nature of its business, the
associated risks and the cost and availability of insurance. The Custodian agrees to provide the Funds with certificates of its
applicable insurance coverage, and shall provide an update at the Funds’ written request, but no more frequently than annually.
In the event that the Custodian does not provide certificates of its applicable insurance coverage or an update at the Funds’ written request, this may be considered
a material breach of a material provision of this Agreement for the purposes of terminating the Agreement.”
Information Classification:
Limited Access
2. Miscellaneous.
Except as amended hereby, the Agreement shall remain in full force and effect. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Counterparts may be executed in either original or electronically transmitted form (e.g., faxes or emailed
portable document format (PDF) form), and the parties hereby adopt as original any signatures received via electronically
transmitted form.
[Remainder of Page Intentionally Left Blank]
Information Classification:
Limited Access
IN WITNESS WHEREOF,
the parties have caused this Amendment to be executed by their duly authorized officers to be effective as of the date first
above written.
EACH OF THE ENTITIES SET FORTH ON |
|
APPENDIX A HERETO |
|
|
|
|
By: |
/s/ Lucia Sitar |
|
Name: Lucia Sitar |
|
Title: V.P. |
|
STATE STREET BANK AND TRUST COMPANY |
|
|
|
|
By: |
/s/ Andrew Erickson |
|
Name: Andrew Erickson |
|
Title: Executive Vice President |
|
Information Classification:
Limited Access
APPENDIX
A
to
Master
Custodian Agreement
Aberdeen Total Dynamic Dividend Fund
Aberdeen Global
Dynamic Dividend Fund
Aberdeen Global Premier Properties Fund
Information Classification:
Limited Access
Exhibit 99.11
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328859_ex99-11img001.jpg) |
1900 K Street, N.W.
Washington, DC 20006
+1 202 261 3300 Main
+1 202 261 3333 Fax
www.dechert.com |
December 12, 2023
abrdn Total Dynamic Dividend Fund
1900 Market Street, Suite 200
Philadelphia, PA 19103
Dear Ladies and Gentlemen:
We have acted as counsel
for abrdn Total Dynamic Dividend Fund (the “Acquiring Fund”), a trust duly organized and validly existing under the laws of
the State of Delaware, in connection with the Acquiring Fund’s Registration Statement on Form N-14 (the “Registration Statement”)
under the Securities Act of 1933, as amended (the “1933 Act”), relating to the transfer of all of the assets of First Trust
Specialty Finance and Financial Opportunities Fund (the “Target Fund”) into the Acquiring Fund in exchange solely for newly
issued common shares of beneficial interest of the Acquiring Fund (although cash may be distributed in lieu of fractional shares) and
the assumption by the Acquiring Fund of all liabilities of the Target Fund. We have examined such governmental and corporate certificates
and records as we deemed necessary to render this opinion, and we are familiar with the Acquiring Fund’s Agreement and Declaration
of Trust (“Declaration of Trust”) and Amended and Restated By-Laws, each as amended to date.
Based upon the foregoing,
we are of the opinion that the Acquiring Fund’s shares to be registered pursuant to the Registration Statement, when it is made
effective, will have been validly authorized and legally and validly issued and, subject to the qualifications set forth in the Declaration
of Trust, will be fully paid and non-assessable by the Acquiring Fund.
The opinions expressed
herein are limited to the laws of the State of Delaware. We express no opinion herein with respect to the effect or applicability of the
law of any other jurisdiction. We express no opinion as to any other matter other than as expressly set forth above and no other opinion
is intended or may be inferred herefrom. The opinions expressed herein are given as of the date hereof.
In rendering this opinion
we have assumed, without independent verification: (i) the due authority of all individuals signing in representative capacities and the
genuineness of signatures; (ii) the authenticity, completeness and continued effectiveness of all documents or copies furnished to us;
(iii) that any resolutions provided have been duly adopted by the Board of Trustees of the Acquiring Fund (the “Trustees”);
(iv) that the facts contained in the instruments and certificates or statements of public officials, officers and representatives of the
Acquiring Fund on which we have relied for the purposes of this opinion are true and correct; and (v) that no amendments, agreements,
resolutions or actions have been approved, executed or adopted that would limit, supersede or modify the items described above. Where
documents are referred to in resolutions approved by the Trustees, or in the Registration Statement, we assume such documents are the
same as in the most recent form provided to us, whether as an exhibit to the Registration Statement or otherwise.
![](https://www.sec.gov/Archives/edgar/data/1379400/000110465923125329/tm2328859_ex99-11img001.jpg) |
1900 K Street, N.W.
Washington, DC 20006
+1 202 261 3300 Main
+1 202 261 3333 Fax
www.dechert.com |
We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement, to be filed with the Securities and Exchange Commission, and to
the use of our name in the Acquiring Fund’s Registration Statement to be dated on or about December 12, 2023, and in any revised
or amended versions thereof, unless and until we revoke such consent. In giving such consent, however, we do not admit that we are within
the category of persons whose consent is required by Section 7 of the 1933 Act and the rules and regulations thereunder.
Very truly yours,
/s/ Dechert
LLP |
|
Dechert LLP |
|
Exhibit 99.13(a)
Transfer Agency and Service Agreement
Between
Each of the Aberdeen Closed-End Funds
Listed on Schedule A
and
Computershare Trust Company, N.A.
and
Computershare Inc.
THIS AGREEMENT effective as of the 23rd day of July, 2010 by and
between each of the Aberdeen Closed-End Funds listed herein on Schedule A attached hereto, which Schedule may be amended from time to
time, each a corporation having its principal office and place of business at 1735 Market Street, 32nd Floor, Philadelphia, PA 19103
(each a “Company” and collectively, the “Companies”), and Computershare Inc., a Delaware corporation, and its
fully owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, having its principal office and place of
business at 250 Royall Street, Canton, Massachusetts 02021 (collectively, the “Transfer Agent” or individually, “Computershare”
and the “Trust Company”, respectively).
WHEREAS, each Company desires to appoint Trust
Company as sole transfer agent and registrar, and administrator of its dividend reinvestment plan or direct stock purchase plan, and Computershare
as processor of all payments received or made by the Company under this Agreement;
WHEREAS, Trust Company and Computershare will each
separately provide specified services covered by this Agreement and, in addition, Trust Company may arrange for Computershare to act on
behalf of Trust Company in providing certain of its services covered by this Agreement; and
WHEREAS, Trust Company and Computershare desire
to accept such respective appointments and perform the services related to such appointments;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. CERTAIN
DEFINITIONS.
1.1 “Account”
shall mean the account of each Shareholder which reflects any full or fractional Shares held by such Shareholder, outstanding funds, or
reportable tax information.
1.2 “Agreement”
shall mean this agreement and any and all exhibits or schedules attached hereto and any and all amendments or modifications which may
from time to time be executed.
1.3 “Plans”
shall mean any Dividend Reinvestment, Direct Stock Purchase, or other investment programs administered for a Company.
1.4 “Services”
shall mean all services performed or made available by Transfer Agent pursuant to this Agreement.
1.5 “Share”
shall mean a Company’s common stock, par value $0.001 per share for Aberdeen Global Income Fund, Inc., and par value $0.01
per share for the Aberdeen Australia Equity Fund, Inc. and Aberdeen Asia-Pacific Income Fund, Inc., authorized by the Company’s
Articles of Incorporation, and other classes of the Company’s stock to be designated by the Company in writing and which Transfer
Agent agrees to service under this Agreement.
1.6 “Shareholder”
shall mean the holder of record of Shares of a Company.
1.7 “Shareholder
Data” shall mean all information maintained on the records database of Transfer Agent concerning Shareholders.
2. APPOINTMENT
OF AGENT.
2.1 Appointments.
Each Company hereby appoints Trust Company to act as sole transfer agent and registrar for all Shares and as administrator of Plans in
accordance with the terms and conditions hereof and appoints Computershare as the service provider to Trust Company and as processor of
all payments received or made by or on behalf of the Company under this Agreement, and Trust Company and Computershare accept the respective
appointments. Transfer Agent is engaged in an independent business and will perform its obligations under this Agreement as an agent
of the Company.
2.2 Documents.
In connection with the appointments herein, each Company has provided or will provide the following appointment and corporate authority
documents to Transfer Agent:
(a) Copies
of resolutions appointing Trust Company as the transfer agent;
(b) Specimens
of all forms of outstanding Share certificates, in forms approved by the Board of Directors of the Company, with a certificate of the
Secretary of Company as to such approval;
(c) Specimens
of the signatures of the officers of the Company authorized to sign stock certificates and authorized to sign written instructions and
requests;
(d) An
opinion of counsel for the Company addressed to both Trust Company and Computershare with respect to the following:
(i) Company’s
organization and existence under the laws of its state of organization;
(ii) The
status of all Shares of the Company covered by the appointment under the Securities Act of 1933, as amended (the “1933 Act”),
and any other applicable federal or state statute; and
(iii) That
all issued Shares are, and all unissued Shares will be, when issued, validly issued, fully paid and non-assessable; and
(e) A
certificate of the Company as to the Shares authorized, issued and outstanding, as well as a description of all reserves of unissued Shares
relating to the exercise of options.
2.3 Records.
Transfer Agent may adopt as part of its records all Shareholders lists, Share ledgers, records, books, and documents which have been employed
by a Company or any of its agents and which are certified to be true, authentic and complete. Transfer Agent shall keep records
relating to the Services, in the form and manner it deems advisable. Transfer Agent agrees that all such records prepared or maintained
by it relating to the Services are the property of the Company and will be preserved, maintained and made available in accordance with
the requirements of law, and will be surrendered promptly to the Company in accordance with its request.
2.4 Company
Audit. Transfer Agent shall, upon reasonable written notice and at mutually agreed times, allow a Company, its auditors
and/or its regulators, to inspect, examine, test and audit (each, an “Audit”) Transfer Agent’s operations,
procedures and business records that are relevant to the Services provided hereunder by Transfer Agent. Notwithstanding the
foregoing, Transfer Agent may, in its sole discretion, prohibit a Company from entering certain areas of its facilities for security
reasons, in which case Transfer Agent will provide the Company with alternative access to the records, documents, other information
or personnel in such restricted area, to the extent reasonably possible. Transfer Agent shall cooperate reasonably and in good faith
with the Company’s auditors to ensure a prompt and accurate Audit. Each Company acknowledges that Transfer Agent may require
any such auditors and/or regulators of the Company to agree to confidentiality provisions relating to Transfer Agent’s
proprietary and confidential information that such auditors and/or regulators may have access to during any such Audit. Each Company
agrees to compensate Transfer Agent for all reasonable out of pocket expenses incurred in connection with any Audit, and also agrees
to compensate Transfer Agent, in accordance with the Transfer Agent fee schedule in effect at the time such Audit, for the time of
each Transfer Agent employee required to assist such Audit; provided, however, that in no event shall the Company be charged for the
time incurred by Transfer Agent’s Relationship Management employees required to assist such Audit.
2.5 Shares.
Each Company shall, if applicable, inform Transfer Agent as soon as possible in advance as to (i) the existence or termination of
any restrictions on the transfer of Shares, the application to or removal from any stock certificate of any legend restricting the transfer
of such Shares, or the substitution for such certificate of a certificate without such legend; (ii) any authorized but unissued Shares
reserved for specific purposes; (iii) any outstanding Shares which are exchangeable for Shares and the basis for exchange; (iv) reserved
Shares subject to option and the details of such reservation; (v) any stock split or stock dividend; (vi) any other relevant
event or special instructions which may affect the Shares; and (vii) any bankruptcy, insolvency or other proceeding regarding the
Company affecting the enforcement of creditors’ rights.
2.6 Certificates.
Each Company shall provide Transfer Agent with (i) documentation required to print on demand stock certificates, or (ii) an
appropriate supply of stock certificates which contain a signature panel for use by an authorized signor of Transfer Agent and state that
such certificates are only valid after being countersigned and registered, whichever is applicable.
2.7 Company
Responsibility. Each Company shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, documents, instruments and assurances as may be reasonably required by Transfer Agent for
the carrying out or performing by Transfer Agent of the provisions of this Agreement.
3. STANDARD
SERVICES.
3.1 Share
Services. Transfer Agent shall perform the Share Services set forth in the Fee and Service Schedule (“Fee and Service
Schedule”) attached hereto and incorporated herein. Further, Transfer Agent shall issue and record Shares as authorized, hold
Shares in the appropriate Shareholder Account, and effect transfers of Shares upon receipt of appropriate documentation.
3.2 Replacement
Shares. Transfer Agent shall issue replacement Shares for those certificates alleged to have been lost, stolen or destroyed,
upon receipt by Transfer Agent of an open penalty surety bond satisfactory to it and holding it and the applicable Company harmless, absent
notice to Transfer Agent that such certificates have been acquired by a bona fide purchaser. Transfer Agent may, at its option,
issue replacement Shares for mutilated stock certificates upon presentation thereof without such indemnity. Transfer Agent may,
at its sole option, accept indemnification from the Company to issue replacement Shares for those certificates alleged to have been lost,
stolen or destroyed in lieu of an open penalty bond.
3.3 Internet
Services. Transfer Agent shall make available to the Companies and Shareholders, through www.computershare.com (“Web
Site”), online access to certain Account and Shareholder information and certain transaction capabilities (“Internet
Services”), subject to Transfer Agent’s security procedures and the terms and conditions set forth herein and on the Web
Site. Transfer Agent provides Internet Services “as is,” on an “as available” basis, and hereby
specifically disclaims any and all representations or warranties, express or implied, regarding such Internet Services, including
any implied warranty of merchantability or fitness for a particular purpose and implied warranties arising from course of dealing or
course of performance.
3.4 Proprietary
Information. Each Company agrees that the databases, programs, screen and report formats, interactive design techniques, software
(including methods or concepts used therein, source code, object code, or related technical information) and documentation manuals furnished
to the Company by Transfer Agent as part of the Services are under the control and ownership of Transfer Agent or a third party (including
its affiliates) and constitutes copyrighted, trade secret, or other proprietary information (collectively, “Proprietary Information”).
In no event shall Proprietary Information be deemed Shareholder Data. Each Company agrees that Proprietary Information is of substantial
value to Transfer Agent or other third party and will treat all Proprietary Information as confidential in accordance with Section 10
of this Agreement. Each Company shall take reasonable efforts to advise its employees and agents of its obligations pursuant to
this Section 3.4.
3.5 Third
Party Content. Transfer Agent may obtain certain data included in the Services from third parties, which were selected by the
Transfer Agent in good faith and in the absence of negligence or willful misconduct. Such third parties are solely responsible for the
contents of such data and each Company agrees to make no claim against Transfer Agent arising out of the contents of such data, including,
but not limited to, the accuracy thereof.
3.6 Compliance
with Laws. Transfer Agent is obligated and agrees to comply with all applicable U.S. federal, state and local laws and regulations,
codes, orders and government rules in the performance of its duties under this Agreement.
4. DIVIDEND
REINVESTMENT PLAN SERVICES.
4.1 The
Trust Company shall perform all services under the Plans, as the administrator of such Plans, with the exception of payment processing
for which Computershare has been appointed as agent by a Company, and certain other services that the Trust Company may subcontract to
Computershare as permitted by applicable law (e.g. ministerial services).
4.2 The
Transfer Agent shall act as agent for Shareholders pursuant to the Plans in accordance with the terms and conditions of such Plans.
5. COMPUTERSHARE
DIVIDEND DISBURSING AND PAYMENT SERVICES.
5.1 Declaration
of Dividends. Upon receipt of written notice from the President, any Vice President, Secretary, Assistant Secretary, Treasurer
or Assistant Treasurer of a Company declaring the payment of a dividend, Computershare shall disburse such dividend payments provided
that in advance of the applicable check mailing date, the Company furnishes Computershare with sufficient funds. The payment of
such funds to Computershare for the purpose of being available for the payment of dividends from time to time is not intended by the Companies
to confer any rights in such funds on Shareholders whether in trust, contract, or otherwise.
5.2 Stop
Payments. Each Company hereby authorizes Computershare to stop payment of checks issued in payment of dividends or for
sales proceeds, but not presented for payment, when the payees thereof allege either that they have not received the checks or that
such checks have been mislaid, lost, stolen, destroyed or, through no fault of theirs, are otherwise beyond their control and cannot
be produced by them for presentation and collection, and Computershare shall issue and deliver duplicate checks in replacement
thereof, and Company shall indemnify Transfer Agent against any loss or damage resulting from reissuance of the checks so long as
Transfer Agent has acted in accordance with the terms of this Agreement with respect to Section 8.3.
5.3 Tax
Withholding. Each Company hereby authorizes Computershare to deduct from all dividends declared by the Company and disbursed
by Computershare, as dividend disbursing agent, the tax required to be withheld pursuant to Sections 1441, 1442 and 3406 of the Internal
Revenue Code of 1986, as amended, or by any federal or state statutes subsequently enacted, and to make the necessary return and payment
of such tax in connection therewith.
5.4 Plan
Payments. Each Company hereby authorizes Computershare to receive all payments made to the Company (i.e. optional cash purchases)
or the Transfer Agent under the Plans and make all payments required to be made under such Plans, including all payments required to be
made to the Company.
5.5 Bank
Accounts. Any money deposited in bank accounts maintained by Computershare in connection with the Services shall be held in
segregated accounts held solely for the benefit of each Company and the money shall not be commingled with the money, assets or properties
of Computershare or any other person, firm or corporation. Accrued interest on a Company’s cash held in such an account will
be used to offset any bank fees associated with the account.
6. FEES
AND EXPENSES.
6.1 Fee
and Service Schedules. Each Company agrees to pay Transfer Agent the fees and out-of-pocket expenses for Services performed
pursuant to this Agreement as set forth in the Fee and Service Schedule, for the initial term of the Agreement (the “Initial Term”).
Such fees and reimbursable expenses may be changed from time to time subject to mutual written agreement between the a Company and Transfer
Agent.
6.2 Conversion
Funds. If applicable, conversion funding required by any out of proof condition caused by a prior agent’s services shall
be advanced to Transfer Agent prior to the commencement of Services.
6.3 Invoices.
Each Company agrees to pay all fees and reimbursable expenses within 30 days of the date of the respective billing notice, except for
any fees or expenses that are subject to good faith dispute. In the event of such dispute, the Company must promptly notify Transfer Agent
of such dispute and may only withhold that portion of the fee or expense subject to such dispute. The Company shall settle such
disputed amounts within five (5) business days of the date on which the parties agree on the amount to be paid by payment of the
agreed amount. If no agreement is reached, then such disputed amounts shall be settled as may be required by law or legal process.
6.4 Late
Payments.
(a) If
any undisputed amount in an invoice of Transfer Agent (for fees or reimbursable expenses) is not paid within 30 days after receipt of
such invoice, the applicable Company shall pay Transfer Agent interest thereon (from the due date to the date of payment) at a per annum
rate equal to eighteen percent (18%). Notwithstanding any other provision hereof, such interest rate shall be no greater than permitted
under applicable law.
(b) The
failure by a Company to pay an invoice within 90 days after receipt of such invoice, except with respect to any amount subject to a good
faith dispute, shall constitute a material breach pursuant to Section 11.4 below. Transfer Agent may terminate this Agreement
with respect to the applicable Company for such material breach upon 10 business days’ written notice of such proposed termination
to the Company.
7. REPRESENTATIONS
AND WARRANTIES.
7.1 Transfer
Agent. Transfer Agent represents and warrants to Company that:
(a) Governance.
Trust Company is a federally chartered trust company duly organized, validly existing, and in good standing under the laws of the United
States and Computershare is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware
and each has full power, authority and legal right to execute, deliver and perform this Agreement; and
(b) Compliance
with Laws. The execution, delivery and performance of this Agreement by Transfer Agent has been duly authorized by all necessary
action and constitutes the legal, valid and binding obligation of Transfer Agent enforceable against Transfer Agent in accordance with
its terms and will not violate, conflict with or result in the breach of any material term, condition or provision of, or require the
consent of any other party to (i) any existing law, ordinance, or governmental rule or regulation to which Transfer Agent is
subject, (ii) any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official,
body or authority applicable to Transfer Agent, (iii) Transfer Agent’s incorporation documents or by-laws, or (iv) any
material agreement to which Transfer Agent is a party.
7.2 Company.
Each Company represents and warrants to Transfer Agent that:
(a) Governance.
It is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, and it has full power,
authority and legal right to enter into and perform this Agreement;
(b) Compliance
with Laws. The execution, delivery and performance of this Agreement by a Company has been duly authorized by all necessary
action and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms
and will not violate, conflict with or result in the breach of any material term, condition or provision of, or require the consent of
any other party to (i) any existing law, ordinance, or governmental rule or regulation to which Company is subject, (ii) any
judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority
applicable to Company, (iii) Company’s incorporation documents or by-laws, (iv) any material agreement to which Company
is a party, or (v) exchange rules; and
(c) Securities
Act of 1933. A registration statement under the 1933 Act was filed and became effective, or will be effective prior to the sale
of any Shares, and will remain so effective, and a II appropriate state securities law filings have been made with respect to all
Shares being offered for sale except for any Shares which are offered in a transaction or series of transactions which are exempt from
the registration requirements of the 1933 Act and state securities laws; a Company will immediately notify Transfer Agent of any information
to the contrary.
8. INDEMNIFICATION
AND LIMITATION OF LIABILITY.
8.1 Company
Indemnity. Each Company, severally and not jointly, shall indemnify and hold Transfer Agent harmless from and against, and Transfer
Agent shall not be responsible for, any and all losses, claims, damages, costs, charges, counsel fees and expenses, payments, expenses
and liability relating to that Company (collectively, “Losses”) arising out of or attributable to:
(a) all
actions of Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement provided such actions are taken
in good faith and without negligence or willful misconduct;
(b) the
Company’s lack of good faith, negligence or willful misconduct or the breach of any representation or warranty of Company hereunder;
(c) The
reliance on or use by Transfer Agent or its agents or subcontractors of any (i) information, records, data, and documents which have
been prepared and/or maintained by a Company or any other person or firm on behalf of the Company, including any former transfer agent
or registrar, and provided to Transfer Agent or its agents or subcontractors; (ii) paper or document reasonably believed to be genuine
and to have been signed by the proper person or persons, including Shareholders and their authorized agents or representatives (e.g. power
of attorney); and (iii) electronic instructions from a Company or Shareholders and their authorized agents or representatives (e.g.
power of attorney) submitted through Internet Services or any other electronic means pursuant to security procedures established by Transfer
Agent.
(d) The
negotiation and processing of all checks, including checks that are tendered to Transfer Agent for the purchase of Shares, provided such
actions are taken in good faith and without negligence or willful misconduct; and
(e) The
recognition, acceptance, or processing by Transfer Agent of stock certificates which are reasonably believed to bear the proper manual
or facsimile signatures of officers of Company, and the proper countersignature of any former transfer agent or former registrar, or of
a co-transfer agent or co-registrar, provided such actions are taken in good faith and without negligence or willful misconduct.
Transfer Agent agrees that it will look only to the assets and property
of a particular Company in asserting any rights or claims under this Agreement with respect to Services rendered with respect to that
Company and will not seek to obtain settlement of such rights or claims from the assets and property of any other Company.
8.2 Instructions.
From time to time, a Company may provide Transfer Agent with instructions concerning the Services. In addition, at any time Transfer Agent
may apply to any officer of a Company for instruction, and may consult with legal counsel for the Company with respect to any matter arising
in connection with the Services to be performed by the Transfer Agent under this Agreement. Transfer Agent and its agents and subcontractors
shall not be liable and shall be indemnified by the Company for any action taken or omitted by Transfer Agent in good faith and in reliance
upon any Company instructions or upon the advice or opinion of such counsel. Transfer Agent shall not be held to have notice of any change
of authority of any person, until receipt of written notice thereof from the Company.
8.3 Transfer
Agent Indemnification/Limitation of Liability. Transfer Agent shall be responsible for and shall indemnify and hold each
Company harmless from and against any and all Losses arising out of or attributable to: (a) Transfer Agent’s or its
agents’ refusal or failure to comply with the terms of this Agreement, (b) Transfer Agent’s bad faith, negligence or
willful misconduct, or (c) Transfer Agent’s, or its agents’, breach of any representation or warranty hereunder, in each
case for which Transfer Agent is not entitled to indemnification under this Agreement; provided, however, that excluding Transfer
Agent’s gross negligence, bad faith and willful misconduct Transfer Agent’s aggregate liability during any term of this
Agreement with respect to, arising from, or arising in connection with this Agreement, or from all Services provided or omitted to
be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, three (3)
times the amounts paid hereunder by all Companies to Transfer Agent as fees and charges, but not including reimbursable expenses of
any Company, during the twelve (12) months immediately preceding the event for which recovery from Transfer Agent is being
sought.
8.4 Notice.
In order that the indemnification provisions contained in this Section 8 shall apply, upon the assertion of a claim for which one party
may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning such claim. The indemnifying party shall have the option
to participate with the indemnified party in the defense of such claim or to defend against said claim in its own name or the name of
the indemnified party. The indemnified party shall in no case confess any claim or make any compromise in any case in which the indemnifying
party may be required to indemnify it except with the indemnifying party’s prior written consent.
9. DAMAGES.
No party shall be liable for any incidental, indirect, special or consequential damages of any nature whatsoever, including, but not limited
to, loss of anticipated profits, occasioned by a breach of any provision of this Agreement even if apprised of the possibility of such
damages.
10. CONFIDENTIALITY.
10.1 Definition.
“Confidential Information” shall mean any and all technical or business information relating to a party, including, without
limitation, financial, marketing and product development information, Shareholder information (including any non-public information of
such Shareholder), Proprietary Information, and the terms and conditions (but not the existence) of this Agreement, that is disclosed
or otherwise becomes known to the other party or its affiliates, agents or representatives before or during the term of this Agreement.
Confidential Information constitutes trade secrets and is of great value to the owner (or its affiliates). Confidential Information
shall not include any information that is: (a) already known to the other party or its affiliates at the time of the disclosure; (b) publicly
known at the time of the disclosure or becomes publicly known through no wrongful act or failure of the other party; (c) subsequently
disclosed to the other party or its affiliates on a non-confidential basis by a third party not having a confidential relationship with
the owner and which rightfully acquired such information; or (d) independently developed by one party without access to the Confidential
Information of the other.
10.2 Use
and Disclosure. All Confidential Information of a party will be held in confidence by the other party with at least the same
degree of care as such party protects its own confidential or proprietary information of like kind and import, but not less than a reasonable
degree of care. Neither party will disclose in any manner Confidential Information of the other party in any form to any person
or entity without the other party’s prior consent. However, each party may disclose relevant aspects of the other party’s
Confidential Information to its officers, affiliates, agents, subcontractors and employees to the extent reasonably necessary to perform
its duties and obligations under this Agreement and such disclosure is not prohibited by applicable law. Without limiting the foregoing,
each party will implement such physical and other security measures and controls as are necessary to protect (a) the security and confidentiality
of Confidential Information; (b) against any threats or hazards to the security and integrity of Confidential Information; and (c) against
any unauthorized access to or use of Confidential Information. To the extent that a party delegates any duties and responsibilities under
this Agreement to an agent or other subcontractor, the party ensures that such agent and subcontractor are contractually bound to confidentiality
terms consistent with the terms of this Section 10.
10.3 Required
or Permitted Disclosure. In the event that any requests or demands are made for the disclosure of Confidential Information,
other than requests to Transfer Agent for Shareholder records pursuant to standard subpoenas from state or federal government authorities
(e.g., divorce and criminal actions), the party receiving such request will promptly notify the other party to secure instructions from
an authorized officer of such party as to such request and to enable the other party the opportunity to obtain a protective order or other
confidential treatment, unless such notification is otherwise prohibited by law or court order. Each party expressly reserves the
right, however, to disclose Confidential Information to any person whenever it is advised by counsel that it may be held liable for the
failure to disclose such Confidential Information or if required by law or court order.
10.4 Unauthorized
Disclosure. As may be required by law and without limiting any party’s rights in respect of a breach of this Section 10,
each party will promptly:
(a) notify,
the other party in writing of any unauthorized possession, use or disclosure of the other party’s Confidential Information by any
person or entity that may become known to such party;
(b) furnish
to the other party full details of the unauthorized possession, use or disclosure; and
(c) use
commercially reasonable efforts to prevent a recurrence of any such unauthorized possession, use or disclosure of Confidential Information.
10.5 Costs.
Each party will bear the costs it incurs as a result of compliance with this Section 10.
11. TERM
AND TERMINATION.
11.1 Term.
The Initial Term of this Agreement shall be one (1) year from the date first stated above unless terminated pursuant to the provisions
of this Section 11. This Agreement will renew automatically from year to year (each a “Renewal Term”), unless terminating
party gives written notice to the other party not less than ninety (90) days before the expiration of the Initial Term or Renewal Term,
whichever is in effect, or the Agreement is otherwise terminated pursuant to the provisions of this Section 11.
11.2 Early
Termination. Notwithstanding anything herein to the contrary, should a Company terminate this Agreement prior to the expiration
of the then current Initial or Renewal Term, for any reason, including but not limited to, its liquidation, acquisition, merger or restructuring,
the Company shall pay to Transfer Agent (a) the fees and expenses incurred as of the termination date, and (b) conversion costs and expenses
in accordance with Section 11.3 of this Agreement. If a Company does not provide notice at least ninety (90) days prior to termination,
Transfer Agent shall make a good faith effort, but cannot guarantee, to convert the Company’s records on the date requested by Company.
This Section 11.2 shall not apply if Transfer Agent is terminated pursuant to Sections 11.4 or 12 of this Agreement.
11.3 Costs
and Expenses. In the event of the expiration or termination of this Agreement by either party, Company agrees to pay all reasonable
out-of-pocket costs and expenses associated with the movement of records and materials to a Company or the successor agent.
11.4 Termination.
This Agreement may be terminated at any time by any party upon a material breach of a representation, covenant or term of this Agreement
by any other party provided that, except with respect to a payment breach as described in Section 6.4, the non-breaching party gives written
notice of such breach to the breaching party and the breaching party does not cure such violation within a period not to exceed ninety
(90) days after the date of written notice thereof by one of the other parties.
12. ASSIGNMENT.
Neither this Agreement nor any rights or obligations hereunder may he assigned by a Company or Transfer Agent without the written consent
of the other party; provided, however, that Transfer Agent may, without further consent of the Companies, assign any of its rights and
obligations hereunder to any affiliated transfer agent registered under Rule 17Ac2-1 promulgated under the Securities Exchange Act of
1934, as amended. Transfer Agent shall provide a Company with written notice of such an assignment and, upon receipt of such notice,
the Company may terminate the Agreement upon sixty (60) days written notice. The provisions of Section 11.2 shall not apply to such
a termination.
13. SUBCONTRACTORS
AND UNAFFILIATED THIRD PARTIES.
13.1 Subcontractors.
Transfer Agent may, without further consent of a Company, subcontract with (a) any affiliates, or (b) unaffiliated subcontractors for
such services as may be required from time to time (e.g. lost shareholder searches, escheatment, telephone and mailing services); provided,
however, that Transfer Agent shall be as fully responsible to the Company for the acts and omissions of any subcontractor as it is for
its own acts and omissions. Transfer Agent shall provide Company each year, upon request, and otherwise upon reasonable request,
with a list of its unaffiliated subcontractors who have access to Company’s Shareholder Data.
13.2 Unaffiliated
Third Parties. Nothing herein shall impose any duty upon Transfer Agent in connection with or make Transfer Agent liable for
the actions or omissions to act of unaffiliated third parties (other than subcontractors referenced in Section 13.1 of this Agreement)
such as, by way of example and not limitation, airborne services, delivery services, the U.S. mails, and telecommunication companies,
provided, if Transfer Agent selected such company, Transfer Agent exercised due care in selecting the same.
14. MISCELLANEOUS.
14.1 Notices.
Any notice or communication by Transfer Agent or a Company to the other pursuant to this Agreement is duly given if in writing and delivered
in person or sent by overnight delivery service or first class mail, postage prepaid, to the other’s address:
If to Company: |
Aberdeen Asset Management Inc. |
|
1735 Market Street |
|
32nd Floor |
|
Philadelphia, PA 19103 |
|
Attention: Legal Department |
|
|
If to Transfer Agent: |
Computershare Trust Company, N.A. |
|
250 Royall Street |
|
Canton, MA 02021 |
|
Attn: General Counsel |
14.2 No
Expenditure of Funds. No provision of this Agreement shall require Transfer Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it
shall believe in good faith that repayment of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
14.3 Successors.
All the covenants and provisions of this Agreement by or for the benefit of a Company or Transfer Agent shall bind and inure to the benefit
of their respective permitted successors and assigns hereunder.
14.4 Amendments.
This Agreement may be amended or modified by a written amendment executed by the parties hereto and, to the extent required, authorized
by a resolution of the Board of Directors of a Company.
14.5 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provision, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
14.6 Governing
Law. This Agreement shall be governed by the laws of the Commonwealth of Massachusetts.
14.7 Force
Maieure. Notwithstanding anything to the contrary contained herein, Transfer Agent shall not be liable for any delays or failures
in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage
of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical
difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest; provided however, that Transfer
Agent shall have taken commercially reasonable efforts to minimize the likelihood of occurrence of such circumstances or to mitigate any
loss or damage to a Company caused by such circumstances.
14.8 Third
Party Beneficiaries. The provisions of this Agreement are intended to benefit only Transfer Agent, the Companies and their respective
permitted successors and assigns. No rights shall be granted to any other person by virtue of this Agreement, and there are no third
party beneficiaries hereof.
14.9 Survival.
All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and protection of proprietary rights
and trade secrets shall survive the termination or expiration of this Agreement.
14.10 Priorities.
In the event of any conflict, discrepancy, or ambiguity between the terms and conditions contained in this Agreement and any schedules
or attachments hereto, the terms and conditions contained in this Agreement shall take precedence.
14.11 Merger
of Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement
with respect to the subject matter hereof, whether oral or written.
14.12 No
Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the
event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by all parties
hereto, and no presumption or burden or proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
14.13 Descriptive
Headings. Descriptive headings contained in this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
14.14 Counterparts.
This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same instrument. A signature to this Agreement transmitted electronically
shall have the same authority, effect, and enforceability as an original signature.
(The remainder of page intentionally left blank.]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by one of its officers thereunto duly authorized, all as of the date first written above.
|
|
Aberdeen Australia Equity Fund, Inc. |
Computershare Inc. |
|
Aberdeen Asia-Pacific Income Fund, Inc. |
Computershare Trust Company, N. A. |
|
Aberdeen Global Income Fund, Inc. |
|
|
|
On Behalf of Both Entities: |
|
|
|
|
|
|
|
|
By: |
/s/ Dennis V. Moccia |
|
By: |
/s/ Jennifer A. Nichols |
|
|
|
|
Name: |
Dennis V. Moccia |
|
Name: |
Jennifer Nichols |
|
|
|
|
Title: |
Manager, contract Administration |
|
Title: |
Vice President |
[SIGNATURE PAGE TO TRANSFER AGENCY AND SERVICE
AGREEMENT]
SCHEDULE A
Aberdeen Australia Equity Fund, Inc.
Aberdeen Asia-Pacific Income Fund, Inc.
Aberdeen Global Income Fund, Inc.
Exhibit 99.13(b)
Ninth Amendment
to Transfer Agency and Service Agreement
THIS
NINTH AMENDMENT (“Amendment”), effective after market close on October 27, 2023 (“Effective
Date”), is to the Transfer Agency and Service Agreement made as of July 23, 2010, as amended, (the “Agreement”)
by and between each of the abrdn Australia Equity Fund, Inc., abrdn Asia-Pacific Income Fund, Inc., abrdn Global Income Fund, Inc., abrdn
Japan Equity Fund, Inc., abrdn Income Credit Strategies Fund, The India Fund, Inc., abrdn Global Dynamic Dividend Fund, abrdn Global Premier
Properties Fund, abrdn Total Dynamic Dividend Fund, abrdn Standard Global Infrastructure Income Fund, abrdn National Municipal Income
Fund, , (each, a “Company” and collectively, the “Companies”) and Computershare Trust Company, N.A.
and its affiliate, Computershare Inc., (collectively, the “Transfer Agent”). Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Agreement.
WHEREAS, each Company and the Transfer
Agent are parties to the Agreement; and
WHEREAS, each
Company and the Transfer Agent desire to amend the Agreement upon the terms and conditions set forth herein;
NOW THEREFORE, for
good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Addition of Parties and Amendment
to Schedule A of the Agreement. Schedule A of the Agreement is hereby amended to include the following: abrdn Healthcare Investors,
abrdn Life Sciences Investors, abrdn Healthcare Opportunities Fund, and abrdn World Healthcare Fund, each added to the Agreement as a
“Company” for all purposes.
2. Limited Effect. Except
as expressly modified herein, the Agreement shall continue to be and shall remain, in full force and effect and the valid and binding
obligation of the parties thereto in accordance with its terms.
3. Counterparts. This Amendment
may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument. A signature to this Amendment executed and/or transmitted
electronically shall have the same authority, effect, and enforceability as an original signature.
[The remainder
of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be executed by their respective officers, hereunto duly agreed and authorized, as of the Effective Date.
Computershare Trust Company, N.A.
Computershare Inc. |
|
|
|
On Behalf of Both
Entities |
|
|
|
|
|
By: |
/s/ Dennis V. Moccia |
|
Name: |
Dennis V. Moccia |
|
Title: |
Senior Manager, Contract Operations |
|
abrdn Asia-Pacific Income Fund, Inc.
abrdn Australia Equity Fund, Inc.
abrdn Global Income Fund, Inc.
The India Fund, Inc.
abrdn Japan Fund,
Inc.
abrdn Income Credit Strategies Fund
abrdn Global Dynamic Dividend Fund
abrdn Global Premier Properties Fund
abrdn Total Dynamic Dividend Fund
abrdn Standard Global Infrastructure
Income Fund
abrdn Income Credit Strategies Fund –
Preferred Shares
abrdn National Municipal Income Fund*
abrdn Healthcare Investors*
abrdn Life Sciences Investors*
abrdn Healthcare Opportunities Fund*
abrdn World Healthcare Fund*
By: |
/s/ Lucia Sitar |
|
Name: |
Lucia Sitar |
|
Title: |
Vice President |
|
*The Fund is governed by a Declaration of Trust, as amended from time
to time, which is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that no trustee, officer,
employee, agent, employee or shareholder of the Fund shall have any personal liability under this Agreement, and that this Agreement is
binding only upon the assets and property of the applicable Fund, individually and not jointly with any other Fund, person or entity.
SCHEDULE
A
abrdn Asia-Pacific Income Fund,
Inc.
abrdn Australia Equity Fund, Inc.
abrdn Global Income Fund, Inc.
The India Fund, Inc.
abrdn Japan Equity Fund, Inc.
abrdn Income
Credit Strategies Fund
abrdn Global Dynamic Dividend Fund
abrdn Global Premier Properties Fund
abrdn Total Dynamic Dividend Fund
abrdn Global Infrastructure Income
Fund
abrdn Income Credit Strategies
Fund – Preferred Shares
abrdn National Municipal Income Fund
abrdn Healthcare Investors
abrdn Life Sciences Investors
abrdn Healthcare Opportunities Fund
abrdn World Healthcare Fund
Exhibit 99.13(c)
AMENDED & RESTATED
ADMINISTRATION AGREEMENT
Agreement made as of this 19th day of
June 2020, by and among the Funds included in Appendix A (each, a “Fund”, and together, the “Funds”), severally
and not jointly, and Aberdeen Standard Investments Inc., a Delaware corporation (the “Administrator”) (this “Agreement”).
WHEREAS, each Fund operates as a closed-end management
investment company, and is so registered under the Investment Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS, the Funds desire to retain the Administrator
to provide certain administrative services to the Funds, under the terms and conditions stated below, and the Administrator is willing
to provide such services for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises
and mutual covenants contained herein, the parties agree as follows:
| 1. | Appointment. The Funds hereby appoint the Administrator as administrator of the Funds on the terms set forth in this Agreement,
subject to the overall supervision of the Funds’ Boards of Trustees (the “Boards”), and the Administrator accepts such
appointment and agrees that it will be responsible for the provision of the services set forth in paragraph 2 below. |
| 2. | Services and Duties of the Administrator. Subject to the supervision of the Boards, the Administrator will, on a continuing
basis, be responsible for the provision of facilities for meetings of the Boards and shareholders of the Funds and personnel and office
facilities sufficient for the provision of the following services to the Funds: |
| (a) | preparation for review by an officer of the Funds and filing with the Securities and Exchange Commission (the “SEC”) and
the New York Stock Exchange the Funds’ annual, semi-annual and quarterly reports and periodic reports to shareholders, preparation
for review by an officer of the Funds of information and reports as may be required by the New York Stock Exchange and assisting in the
preparation of the financial information relating to the Funds for the Funds’ proxy material and earnings press releases. |
| (b) | preparation of all other reports and statements required to be filed by the Funds with the SEC based on information provided to it
by the Funds or an agent of the Funds, and the filing of such completed reports and statements with the SEC. |
| (c) | coordinating with the Funds’ independent accountants and any sub-administrator in providing the information necessary for such
accountants to complete and audit the Funds’ financial statements and such other reports as may be necessary and to prepare and
file the Fund’s federal income and excise tax returns and the Funds’ state and local tax returns and any other required tax
returns. |
| (d) | arrangement for the printing and dissemination to shareholders of the Funds’ proxy materials and supervision of the tabulation
of proxies by the Funds’ transfer agent. |
| (e) | negotiation of contractual arrangements with the Funds’ agents, including the custodians, transfer agents, dividend paying agents,
accounting agents, independent accountants, any sub-administrators and printing companies, and monitoring the performance of such agents
pursuant to such arrangements including making such reports and recommendations to the Board concerning the performance and fees of such
agents as the Board may reasonably request or deems appropriate. |
| (f) | overseeing of the calculation of the Funds’ net asset value in accordance with the Funds’ registration statement under
the 1940 Act and Securities Act of 1933, as amended, and the Funds’ current policies as adopted from time to time by the Funds’
accounting agent and monitoring the performance of such agent in making the Funds’ net asset value available for public dissemination. |
| (g) | overseeing of the maintenance of the Funds’ books and records under Rule 31a-1 under the 1940 Act by the custodian and accounting
agent, as applicable. |
| (h) | establishment of the accounting policies of the Funds, establishment of and monitoring of the Funds’ operating expense budgets,
processing the payment of bills that have been approved by an authorized officer of the Funds and reporting to the Funds’ management
monthly the amount of expenses incurred and paid during the prior month. |
| (i) | advising the Boards as to the amounts available for distribution of any periodic dividends and annual distributions that are to be
declared and paid by the Funds to its shareholders; preparation and arrangement for the printing of dividend notices to shareholders;
and providing the transfer and dividend disbursing agent and custodian with such information as is required for such parties to effect
the payment of dividends and distributions and to implement the Funds’ dividend reinvestment plan. |
| (j) | if requested by the Boards, make available to the Funds one or more of its employees to serve as treasurer and/or assistant treasurers
and/or chief financial officer of the Funds. |
| (k) | forwarding promptly to the Funds’ counsel any communications (including notices received under any agreement to which one or
more of the Funds are a party) received by the Administrator or its agents on behalf of the Funds. |
| (l) | assisting the Funds in responding to requests for information concerning the Funds made by representatives of regulatory entities
having jurisdiction over the Funds. |
| (m) | assisting the Funds in responding to requests for information concerning the Funds made by shareholders of the Funds and assisting
the Funds in developing a shareholder relationship program. |
| (n) | assisting the Funds’ investment adviser, custodian, counsel, auditors and other agents as generally may be required to properly
carry on the business and operations of the Funds. |
| (o) | if requested by the Boards, make available to the Funds the services of an employee of the Administrator qualified to serve as the
chief compliance officer of the Funds (the “CCO”) to perform the duties required of such CCO in accordance with the requirements
of Rule 38a-1 under the 1940 Act. |
| (p) | organize, attend and keep minutes of shareholder meetings of the Funds. |
| (q) | furnishing corporate secretarial services, including assisting in the preparation of a timeline and materials for Boards of Trustees
meetings and distributing those materials. |
| (r) | monitoring and developing compliance procedures for the Funds, which will include, without limitation, procedures to monitor compliance
with the Funds’ investment objective, policies and limitations, tax matters and applicable laws and regulations. |
| (s) | prepare such financial information and reports as may be required by any banks from which the Funds borrow money. |
| (t) | prepare reports related to the Funds’ preferred stock, if any, as required by rating agencies. |
The Administrator will, as applicable, provide
the foregoing services and duties in conjunction with the Funds’ accountants, custodian, legal counsel and other agents and professionals
retained by the Funds.
| 3. | Public Inquiries. Except as otherwise provided herein, the Administrator will not be responsible for replying to requests for
information concerning the Funds from shareholders, brokers or the public. The Funds shall notify the Administrator of the appropriate
party to whom such requests should be directed, and the Administrator will refer such requests to the party designated by the Funds. |
| 4. | Services Not Exclusive. The Administrator’s services hereunder are not deemed to be exclusive, and the Administrator
is free to render administrative or other services to other funds or clients so long as the Administrator’s services under this
Agreement are not impaired thereby. |
| 5. | Administrative Expenses. During the term of this Agreement, the Administrator will assume all expenses incurred by it in connection
with its services under this Agreement. For the avoidance of doubt, except as noted above, the Administrator shall pay all salaries and
fees of the Funds’ Trustees and officers who are employees of the Administrator. |
| 6. | Employment of Sub-Administrator. Upon the prior approval of the Board, the Administrator may employ the services of third parties
in connection with the performances of its obligations under this Agreement. Without limitation of any of the foregoing, the Administrator
may retain, at its own expense, one or more parties to serve as sub-administrators and may subcontract with such sub-administrators on
such terms and conditions as may be agreed to by the Administrator and such sub-administrator(s) with respect to the performance of the
Administrator’s obligations hereunder. |
| 7. | Compensation. For the services provided and expenses assumed by the Administrator under this Agreement, the Funds will pay
the Administrator a fee that is computed daily and payable monthly at an annual rate of 0.08% based on the aggregate amount of each Fund’s
average daily net assets. |
| 8. | Representations and Warranties of the Administrator. The Administrator represents and warrants to the Funds that: |
| (a) | it is a corporation duly organized and existing under the laws of Delaware; |
| (b) | it is duly qualified to carry on its business in Pennsylvania; |
| (c) | it is empowered under applicable laws and by its articles of incorporation and by-laws to enter into and perform its duties and obligations
under this Agreement; |
| (d) | all requisite corporate proceedings have been taken to authorize it to enter into and perform its duties and obligations under this
Agreement; and |
| (e) | it has or will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations
under this Agreement. |
| 9. | Representations and Warranties of each Fund. The Funds represent and warrant to the Administrator that: |
| (a) | each is a statutory trust duly organized and existing and in good standing under the laws of Delaware; |
| (b) | each is empowered under applicable laws and by its amended and restated declaration of trust and by-laws to enter into and perform
this Agreement; |
| (c) | all requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; and |
| (d) | each is currently, and will use commercially reasonable efforts to continue to be, in compliance in all material respects with all
U.S. federal securities laws applicable to it. |
| 10. | Limitation of Liability. The Administrator will not be liable for any error of judgment or mistake of law or for any loss suffered
by a Fund or its shareholders in connection with the performance of its duties under this Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its duties
under this Agreement (“disabling conduct”). The Funds agree to indemnify and hold harmless the Administrator and its shareholders,
officers, directors, employees and agents against any liability for any damages, expenses (including the reasonable value of time spent
by the Administrator employees) or direct losses reasonably incurred as a result of any failure of the Fund to comply with the 1940 Act,
the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, and other legal requirements, and
with its investment policies and limitations as in effect, or as a result of the Administrator’s acting as an administrator pursuant
to this Agreement, and not resulting from disabling conduct; provided that nothing herein shall constitute a waiver or limitation of any
rights which the Funds may have under applicable securities or other laws; and provided further that the Administrator and its shareholders,
officers, directors, employees and agents shall only be entitled to indemnification hereunder to the extent consistent with the 1940 Act. |
The Administrator shall indemnify and hold
harmless the Funds and their Trustees, officers and agents from and against all damages, liabilities, costs and expenses (including reasonable
attorneys' fees and amounts reasonably paid in settlement) incurred by the Funds in or by reason of any claim, demand, action, suit, investigation
or other proceeding (including an action or suit by or in the right of the Funds or their shareholders) arising out of or otherwise based
upon the Administrator's (including for this purpose any person to whom the Administrator has delegated any duties or obligations hereunder)
disabling conduct.
| 11. | Duration and Termination. This Agreement will become effective the date first above written, and shall continue in effect thereafter
(subject to requisite approvals) until termination by the Administrator on 90 days’ written notice to the Fund or the Fund upon
60 days’ written notice to the Administrator without payment of any penalty. This Agreement shall automatically terminate upon its
assignment by the Administrator to any entity. |
| 12. | Amendment of this Agreement; Additional Funds. No provision of this Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination
is sought. Changes to Appendix A to add or remove a Fund will not require consent of all parties. |
| (a) | The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. |
| (b) | If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. |
| (c) | This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors. |
| (d) | This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts
shall, together, constitute only one instrument. |
| (e) | All books, records, dates and other information pertaining to the Funds shall be maintained as confidential by the Administrator and
the Administrator shall not disclose or turn over any of such information to any other person or entity unless required by law or requested
by the Funds to do so; provided, that the Administrator shall have no liability for disclosure after the termination of this Agreement
of information concerning the Funds which has already been disclosed through no fault of the Administrator. |
| (f) | This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware; provided, however, that nothing
herein shall be construed as being inconsistent with the 1940 Act. |
[Remainder of the page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be executed by their officers designated below as of the day and year first above written.
|
EACH FUND SET FORTH IN APPENDIX A,
severally and not jointly |
|
|
|
By: |
/s/ Lucia Sitar |
|
|
Name: Lucia Sitar |
|
|
Title: V.P. |
|
|
|
|
|
ABERDEEN STANDARD INVESTMENTS INC. |
|
|
|
By: |
/s/ Lucia Sitar |
|
|
Name: Lucia Sitar |
|
|
Title: V.P. |
Appendix
A
to the
AMENDED & RESTATED
ADMINISTRATION AGREEMENT
dated June 19, 2020
Aberdeen Global Dynamic Dividend Fund
Aberdeen Global Premier Properties Fund
Aberdeen Total Dynamic Dividend Fund
Aberdeen Standard Global Infrastructure Income Fund
Exhibit 99.13(d)
AMENDED and RESTATED
INVESTOR RELATIONS
SERVICES AGREEMENT
Amended and Restated Investor Relations Agreement
(the “AGREEMENT”) effective as of the date of approval by each Fund’s Board of Directors/Trustees and amends and restates,
in its entirety, the Amended and Restated Investor Relations Services Agreement dated September 5, 2018 between the registered closed-end
investment companies listed on Schedule A (hereinafter referred to collectively as the “Funds” and, individually, as a “Fund”)
and abrdn Inc. (hereinafter referred to as “AI”).
| 1. | AI agrees, during the term of this Agreement, to provide or arrange for a third party to provide investor relations and secondary
market support services for the Funds. These services may from time to time include the following or other services, as AI in its discretion
considers appropriate, to enhance the visibility of the Funds and encourage investment in the Funds by retail and institutional investors: |
Core Service: Plan Participation and Promotion
| · | Product specific literature promoting closed-end funds, to seek to drive traffic to website and increase fund awareness; |
| · | Attendance at industry conferences; |
| · | Coordinate and promote investor/analyst roadshows; |
| · | Develop and maintain an Educational Thought Leadership Program via whitepapers or podcasts; |
| · | Develop and distribute press releases to shareholders on special issues and post to the respective Fund’s website; |
| · | Coordinate the preparation and distribution of the quarterly investor relations Board reports; |
| · | Coordinate the preparation of semi-annual Board reports on the strategic plan and delivery of the marketing activities, including
such information as the Board of Directors/Trustees may reasonably request; |
| · | Produce advertising campaigns; |
| · | Build and maintain a database of targeted email lists for distribution of Fund information and related education to enhance visibility
of the Funds. |
Closed-End Fund Distribution and Investor Relations
| · | Prepare and distribute quarterly manager commentary reports and monthly factsheets; |
| · | Participate in industry closed-end fund forums; |
| · | Coordinate and participate in regional roadshows to brokers with the portfolio managers and/or client service representatives; |
| · | Coordinate meetings with members of relevant associations and/or membership organizations; |
| · | Distribute to media sources: |
| · | Periodic dividend releases; |
| · | Fund data factsheets: daily closed-end fund metrics uploaded to the Funds’ websites; |
| · | Releases on extraordinary topics, including, but not limited to, results of annual meetings, market events, and major factors affecting
the Funds; |
| · | Manage shareholder and broker toll-free telephone services and electronic mail communications for the Funds; |
| · | Provide third-party news and information services with monthly updates on price, net asset value, total assets, holdings and dividend
information; |
| · | Conduct statistical analysis and research on closed-end funds and investor perception and implement findings into investor communications
and market planning strategies. |
| · | Create and maintain targeted websites. |
| 2. | The Funds agree, during the term of this Agreement, to pay into an account overseen by AI, on a quarterly basis in arrears, the fees
reflected in the fee schedule included at Schedule B (the “Investor Relations Account”). Fees under the Agreement may be changed
upon mutual agreement of the parties to the Agreement. Amounts in the Investor Relations Account may be used by AI solely to compensate
third parties who provide or assist AI with providing one or more of the services detailed in Section 1 of this Agreement. AI does
not receive compensation for its services under this Agreement and shall not be entitled to retain any amount in the Investor Relations
Account. |
| 3. | In coordinating the services with third parties under this Agreement, AI may enter into written agreements with such third parties
and pay the third parties out of the Investor Relations Account. AI shall be responsible for monitoring and overseeing the performance
by such third parties of their obligations under any such written agreement. |
| 4. | AI shall provide quarterly reports to the Funds’ Boards. At least annually, AI shall provide a report of services provided hereunder.
At the request of the Boards, AI shall provide a report showing payments made to third parties under this Agreement, as well as the services
provided by such third parties and a summary of contributions and expenditures out of the Investor Relations Account. |
| 5. | AI agrees to preserve the confidentiality of all non-public information provided to AI by the Funds or their agents, or information
developed by AI based upon such non- public information. AI shall not disclose such information except when required to do so pursuant
to court order, subpoena, or other judicial process. Non-public information shall not include information which (a) was or becomes
generally available to the public other than as a result of a disclosure by AI or its directors, officers, employees, agents or advisors;
(b) was available to the public prior to its disclosure to AI by the Funds or their representatives; (c) becomes available to
AI on a non-confidential basis from a source other than the Funds or their representatives, provided that such source is not known by
AI (i) to be subject to a confidentiality agreement with the Funds or another party with respect to the information or (ii) to
be subject to an obligation, by statute or common law, to maintain
the confidentiality of the information; or (d) is independently developed by AI. |
| 6. | For each Fund, the Agreement shall continue in effect for a Fund from year to year, provided such continuance is approved annually
by the Board of Directors/Trustees of the Fund. |
| 7. | This Agreement may be terminated by either party on sixty (60) days’ written notice, without payment of penalty, provided that
such termination by a Fund shall be approved by the vote of a majority of the Directors/Trustees of the Fund. During said sixty (60) day
notice period, the parties shall continue to perform all of their obligations under this Agreement. In addition, the Agreement may be
terminated at any time upon a material breach by the other party hereto. The termination of this Agreement by any one Fund shall not affect
the continuation of the Agreement for any other Fund. |
| 8. | Each Fund hereby acknowledges that AI shall rely upon the accuracy of all information provided by the Fund or its agents to it. Each
Fund assumes full and complete responsibility and liability for the financial and other information furnished to AI for its use on the
Fund’s behalf under this Agreement (other than information provided by AI, any AI affiliate or agent) and each Fund shall indemnify
and hold harmless AI from and against any demands, claims, or liability relating thereto. Each Fund shall pay AI any amounts payable by
AI in settlement of any claims or in satisfaction of any judgments resulting from AI’s use of any financial or other information
furnished by the Fund in connection with the services rendered by AI hereunder (other than information provided by AI, any AI affiliate
or agent), together with all costs and expenses incurred in connection therewith, including, without limitation, reasonable attorney’s
fees and costs of litigation. Without limiting the foregoing, each Fund shall reimburse AI for all costs and expenses, including reasonable
attorney’s fees, incurred in responding to any subpoena or other court process in any action or proceeding or investigation in which
the Fund or its affiliates are a party or are otherwise involved. Notwithstanding the above, a Fund shall not be liable for, and shall
be indemnified by AI against, any loss, claim, damage or liability which was the direct result of AI’s or its affiliates’
or agent’s wilful misfeasance, bad faith, negligence or reckless disregard of its duties under this Agreement. The provisions of
this paragraph shall survive the expiration or termination of this Agreement. |
| 9. | This Agreement may be amended with respect to a Fund only on the written consent of all parties. Changes to Schedule A to add or remove
a Fund and recalculations of Schedule B to determine fees payments will not require written consent of all parties. |
| 10. | This Agreement shall be interpreted according to and governed by the laws of the State of Pennsylvania. |
| 11. | A waiver by either party of any breach, act or omission of the other party is not deemed to be a waiver of any subsequent similar
breach, act or omission. |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized officers as of the date first set forth above.
|
|
|
ON BEHALF OF THE FUNDS INCLUDED IN
SCHEDULE A |
|
|
|
By: |
/s/ Lucia Sitar |
|
|
Name: Lucia Sitar |
|
|
Title: Vice President |
|
|
|
|
|
ABRDN INC. |
|
|
|
By: |
/s/ Lucia Sitar |
|
|
Name: Lucia Sitar |
|
|
Title: Vice President |
Schedule A
Participating Funds
abrdn Asia-Pacific Income Fund, Inc. (FAX)
abrdn Australia Equity Fund, Inc. (IAF)
abrdn Global Income Fund, Inc.
(FCO)
abrdn Emerging Markets Equity Income Fund, Inc. (AEF)
The India Fund, Inc. (IFN)
abrdn Japan Equity Fund, Inc. (JEQ)
abrdn Income Credit Strategies Fund (ACP)
abrdn Global Premier Properties
Fund (AWP)
abrdn Global Dynamic Dividend Fund (AGD)
abrdn Total Dynamic Dividend Fund (AOD)
abrdn Global Infrastructure Income Fund (ASGI)
abrdn National Municipal Income Fund (VFL)
Schedule B
Estimated Fees
Each Fund pays its quarterly fee, effective January 1, 2023 through
December 31, 2024, based on a combination of a fixed fee and variable fee (based on the Fund’s net assets and number of accounts)
as detailed below. Net Assets and Number of Accounts are updated annually. The following amounts represent the anticipated annual contribution
amounts per Fund for the 2023 calendar year:
Ticker | | |
Name | |
Net
Assets
12/31/22
(USD) | | |
%
of Net
Assets | | |
Number
of
Accounts* | | |
%
of Total
Accounts | | |
Fixed
fee | | |
Variable
fee | | |
Total
Contribution | |
FAX | | |
abrdn Asia- Pacific
Income Fund Inc | |
| 771,943,530.00 | | |
| 21.39 | % | |
| 57,724 | | |
| 22.88 | % | |
$ | 40,000.00 | | |
$ | 194,791.64 | | |
$ | 234,791.64 | |
IAF | | |
abrdn Australian Equity Fund
Inc | |
| 123,959,447.97 | | |
| 3.43 | % | |
| 10,626 | | |
| 4.21 | % | |
$ | 40,000.00 | | |
$ | 33,646.30 | | |
$ | 73,646.30 | |
FCO | | |
abrdn Global Income Fund Inc | |
| 48,417,801.74 | | |
| 1.34 | % | |
| 7,084 | | |
| 2.81 | % | |
$ | 40,000.00 | | |
$ | 18,259.25 | | |
$ | 58,259.25 | |
AEF | | |
abrdn Emerging Markets Equity
Income Fund Inc | |
| 293,174,531.67 | | |
| 8.12 | % | |
| 14,733 | | |
| 5.84 | % | |
$ | 40,000.00 | | |
$ | 61,437.62 | | |
$ | 101,437.62 | |
IFN | | |
The India Fund, Inc. | |
| 477,302,517.30 | | |
| 13.22 | % | |
| 27,242 | | |
| 10.80 | % | |
$ | 40,000.00 | | |
$ | 105,703.06 | | |
$ | 145,703.06 | |
JEQ | | |
abrdn Japan Equity Fund, Inc. | |
| 84,499,520.96 | | |
| 2.34 | % | |
| 4,214 | | |
| 1.67 | % | |
$ | 40,000.00 | | |
$ | 17,651.22 | | |
$ | 57,651.22 | |
ACP | | |
abrdn Income Credit Strategies
Fund | |
| 170,048,763.17 | | |
| 4.71 | % | |
| 18,790 | | |
| 7.45 | % | |
$ | 40,000.00 | | |
$ | 53,505.64 | | |
$ | 93,505.64 | |
AOD | | |
abrdn Total Dynamic Dividend
Fund | |
| 957,589,502.64 | | |
| 26.53 | % | |
| 53,807 | | |
| 21.33 | % | |
$ | 40,000.00 | | |
$ | 210,588.99 | | |
$ | 250,588.99 | |
AGD | | |
abrdn Global Dynamic Dividend
Fund | |
| 132,831,142.98 | | |
| 3.68 | % | |
| 11,954 | | |
| 4.74 | % | |
$ | 40,000.00 | | |
$ | 37,044.28 | | |
$ | 77,044.28 | |
AWP | | |
abrdn Global Premier Properties
Fund | |
| 369,289,459.80 | | |
| 10.23 | % | |
| 39,403 | | |
| 15.62 | % | |
$ | 40,000.00 | | |
$ | 113,749.75 | | |
$ | 153,749.75 | |
ASGI | | |
abrdn Global Infrastructure Income
Fund | |
| 180,487,085.93 | | |
| 5.00 | % | |
| 6,662 | | |
| 2.64 | % | |
$ | 40,000.00 | | |
$ | 33,622.25 | | |
$ | 73,622.25 | |
VFL | | |
abrdn National Municipal Income
Fund | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 40,000.00 | | |
| - | | |
$ | 40,000.00 | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| Total | | |
$ | 1,360,000.00 | |
* Number of shareholder accounts are as of each Fund's FYE.
Exhibit 99.(13)(e)
Abrdn
Total Dynamic Dividend Fund
AMENDED AND RESTATED EXPENSE LIMITATION AGREEMENT
Agreement,
dated October 23, 2023, between abrdn Total Dynamic Dividend Fund (formerly, Aberdeen Total Dynamic Dividend Fund) (the
“Fund”), a Delaware statutory trust, and abrdn Investments Limited (formerly, Aberdeen Asset Managers Limited), a Scottish
company (the “Adviser”).
Whereas,
the Fund is a closed-end fund registered under the Investment Company Act of 1940, as amended (the “1940 Act”) with the Securities
and Exchange Commission; and
Whereas,
the Adviser and the Fund are parties to an investment advisory agreement (the “Advisory Agreement”), pursuant to which the
Adviser provides investment advisory services to the Fund in consideration of compensation at an annual rate based on the Fund’s
average daily Managed Assets (as defined in the Advisory Agreement) of the Fund (the “Advisory Fee”); and
Whereas,
the Adviser and the Fund are parties to an Expense Limitation Agreement dated as of September 5, 2018 (the “Expense Limitation
Agreement”), pursuant to which the Adviser limits certain expenses of the Fund; and
Whereas,
the Fund and the Adviser have determined that it is appropriate and in the best interests of the Fund and its shareholders to amend and
restate the Expense Limitation Agreement effective upon the Closing Date, as defined in the Agreement and Plan of Reorganization providing
for the reorganization of the First Trust Specialty Finance and Financial Opportunities Fund into the Fund.
Now,
Therefore, in consideration of the premises and mutual covenants herein contained, the parties agree as follows:
1. Expense
Limitation.
1.1. Applicable
Expense Limit. To the extent that the aggregate expenses incurred by the Fund in any fiscal year, including but not limited to investment
advisory fees of the Adviser (but excluding leverage costs, taxes, interest, brokerage commissions, and any non-routine expenses) (“Fund
Operating Expenses”), exceed the Operating Expense Limit, as defined in Section 1.2 below, such excess amount (the “Excess
Amount”) shall be the liability of the Adviser.
1.2. Operating
Expense Limit. The Operating Expense Limit in any fiscal year shall be an amount that is a percentage of the fiscal year to date average
daily net assets of the Fund at an annual rate as described in Exhibit A, or such other annual rate as may be agreed to in writing
by the parties. The parties hereby agree that the Operating Expense Limit described in Exhibit A will not be increased before the
expiration date listed on Exhibit A.
1.3. Method
of Computation. To determine the Adviser’s liability with respect to the Excess Amount, each month the Fund Operating Expenses
shall be annualized as of the last day of the month. If the annualized Fund Operating Expenses for any month exceed the Operating Expense
Limit of the Fund, the Adviser shall first waive or reduce its Advisory Fee for such month by an amount sufficient to reduce the annualized
Fund Operating Expenses to an amount no higher than the Operating Expense Limit. If the amount of the waived or reduced Advisory Fee for
any such month is insufficient to pay the Excess Amount, the Adviser shall also remit to the Fund an amount that, together with the waived
or reduced Advisory Fee, is sufficient to pay the Excess Amount.
2. Reimbursement
of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement.
If the Advisory Agreement is still in effect and the Fund Operating Expenses are less than the Operating Expense Limit on the computation
date to determine reimbursements, then the Adviser may be reimbursed by the Fund, in whole or in part, for the advisory fees waived or
reduced and other payments remitted by the Adviser to the Fund pursuant to Section 1 hereof provided that the reimbursements do not
cause the Fund to exceed the lesser of the applicable expense limitation contractually agreed to by the Adviser at the time the fees were
limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by the Adviser.
Payment of any reimbursements is subject to quarterly approval by the Fund’s Board of Trustees as provided in Section 2.2 below.
Reimbursements, if any, will be paid no less frequently than quarterly. The total amount of reimbursement to which the Adviser may be
entitled (the “Reimbursement Amount”) shall equal, at any time, the sum of all advisory fees previously waived or reduced
by the Adviser and all other payments remitted by the Adviser to the Fund, pursuant to Section 1 hereof, less any reimbursement previously
paid by the Fund to the Adviser, pursuant to Section 2 hereof, with respect to such waivers, reductions, and payments; provided,
however, that no Reimbursement Amount shall be paid at a date more than three (3) years after the date when the Adviser waived investment
advisory fees or reimbursed other expenses to the Fund for the corresponding Excess Amount pursuant to Section 1. The Reimbursement
Amount shall not include any additional charges or fees whatsoever, including, but not limited to, interest accruable on the Reimbursement
Amount.
2.2. Board
Approval. No reimbursement shall be paid to the Adviser pursuant to this provision unless the Fund’s Board of Trustees has determined
that the payment of such reimbursement is appropriate in light of the terms of this Agreement. The Fund’s Board of Trustees shall
determine quarterly whether any portion of the Reimbursement Amount may be paid to the Adviser for the most recent completed fiscal quarter
or any earlier period.
2.3. Year-End
Adjustment. If necessary, on or before the last day of the first month of each fiscal year, one or more adjustment payments shall
be made by the appropriate party in order that the actual Fund Operating Expenses for the prior fiscal year or portion thereof (including
any reimbursement payments hereunder with respect to such fiscal year) do not exceed the Operating Expense Limit.
2.4 Change
in Waiver Amounts. If the Board approves any changes in the waiver terms or limitations as detailed in Exhibit A, reimbursements
are only permitted to the extent that the terms of the Operating Expense Limit that were in effect at the time of the waiver are met at
the time that reimbursement is approved.
3. Term
and Termination of Agreement. This Agreement shall continue in effect for the period listed on Exhibit A for the Fund and, unless
this Agreement is terminated earlier as provided below, from year to year thereafter provided such continuance is specifically approved
by a majority of the Trustees of the Fund who (i) are not “interested persons” of the Fund or any other party to this
Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect financial interest in the operation of this Agreement
(“Non-Interested Trustees”), provided however, that the reimbursements described in Section 2.1 will not continue to
accrue for more than three (3) years after the date when the Adviser waived investment advisory fees or reimbursed other expenses
to the Fund for the corresponding Excess Amount pursuant to Section 1. This Agreement is not terminable by the Adviser prior to the
end of the period listed on Exhibit A. In order to terminate the Agreement, the terminating party must give at least 30 days’
prior written notice to the other party prior to the end of the period listed on Exhibit A or the end of the annual renewal period,
as applicable. Regardless of any other termination provisions, the provisions contained in Section 2 of this Agreement relating to
the reimbursement of the Adviser for fee waivers and expense reimbursements previously made by the Adviser on behalf of the Fund shall
survive the termination of the Agreement. This Agreement shall automatically terminate upon the termination of the Advisory Agreement.
Termination of this Agreement shall not eliminate the obligation of the Adviser under this Agreement with respect to any period prior
to the date of termination.
4. Miscellaneous.
4.1. Captions.
The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
4.2. Interpretation.
Nothing herein contained shall be deemed to require the Fund to take any action contrary to the Fund’s Agreement and Declaration
of Trust or Amended and Restated By-Laws, or any applicable statutory or regulatory requirement to which it is subject or by which it
is bound, or to relieve or deprive the Fund’s Board of Trustees of its responsibility for and control of the conduct of the affairs
of the Fund.
4.3. Definitions.
Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment advisory fee, the
computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions
of the Advisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Advisory Agreement or the
1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized, as of the day and year first above written.
abrdn Total Dynamic Dividend Fund |
|
abrdn Investments Limited |
|
|
|
/s/ Katherine Corey |
|
/s/ Jan Buchan |
Name: Katherine Corey |
|
Name: Jan Buchan |
Title: Vice President |
|
Title: Authorised Signatory |
EXHIBIT A*
to the Amended and Restated Expense Limitation
Agreement between
ABRDN TOTAL DYNAMIC DIVIDEND FUND and
ABRDN INVESTMENTS LIMITED
Operating Expense Limit |
|
Expiration Date |
1.14 |
% |
One year after the Closing Date, as defined in the Agreement and Plan of Reorganization providing for the reorganization of First Trust Specialty Finance and Financial Opportunities Fund into abrdn Total Dynamic Dividend Fund or June 30, 2025, whichever is later. |
*Effective
upon the Closing Date, as defined in the Agreement and Plan of Reorganization providing for the reorganization of First Trust Specialty
Finance and Financial Opportunities Fund into abrdn Total Dynamic Dividend Fund.
Exhibit 99.14(a)
Consent
of Independent Registered Public Accounting Firm
We consent to
the use of our report dated December 29, 2022, with respect to the financial statements of abrdn Total Dynamic Dividend Fund,
incorporated herein by reference, and to the references to our firm under the heading “Financial Highlights” in the Combined
Proxy Statement/Prospectus and under the heading “Financial statements and supplemental financial information” in the Statement
of Additional Information.
Philadelphia,
Pennsylvania
December 11, 2023
Exhibit 99.14(b)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement
on Form N-14 of our report dated January 24, 2023, relating to the financial statements and financial highlights of First Trust Specialty
Finance and Financial Opportunities Fund, appearing in the Annual Report on Form N-CSR of First Trust Specialty Finance and Financial
Opportunities Fund for the year ended November 30, 2022, and to the references to us under the headings “Financial Highlights”
and “Other Service Providers” in the Proxy Statement/Prospectus, and “Representations and Warranties” in the Form
of Agreement and Plan of Reorganization, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
December 11, 2023
EX-FILING FEES
FEE TABLE FOR
FORM N-14
Calculation of Filing Fee Tables
N-14
8C/A
(Form Type)
abrdn
Total Dynamic Dividend Fund
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
|
Security
Type |
Security
Class
Title |
Fee
Calculation
Rule |
Amount
Registered |
Proposed
Maximum
Offering
Price
Per Unit |
Maximum
Aggregate
Offering Price |
Fee
Rate |
Amount
of
Registration
Fee |
Carry
Forward
Form
Type |
Carry
Forward
File
Number |
Carry
Forward
Initial
effective date |
Filing
Fee
Previously
Paid
In
Connection
with Unsold
Securities
to be Carried
Forward |
Newly
Registered Securities |
Fees
to Be Paid |
Equity |
Common
shares of beneficial interest, no par value per share |
457(c) |
|
|
$47,484,888.26 |
0.0001476 |
$7,008.77 |
|
|
|
|
Fees
Previously Paid |
Equity |
Common
shares of beneficial interest, no par value per share |
457(o) |
|
|
$1,000,000(1) |
0.0001476 |
$147.60 |
|
|
|
|
|
Total
Offering Amounts |
|
$48,484,888.26(2) |
|
$7,156.37 |
|
|
|
|
|
Total
Fees Previously Paid |
|
|
|
$147.60(3) |
|
|
|
|
|
Total
Fee Offsets |
|
|
|
$0.00 |
|
|
|
|
|
Net
Fee Due |
|
|
|
$7,008.77 |
|
|
|
|
| (1) | Estimated pursuant to Rule 457(o) under the Securities
Act of 1933 solely for the purpose of determining the registration fee. |
| (2) | Estimated solely for the purpose of calculating the registration
fee pursuant to Rules 457(c) and 457(f)(1) promulgated under the Securities Act of 1933, the proposed maximum aggregate
offering price is an amount equal to the product of 14,367,591 common shares of First Trust Specialty Finance and Financial Opportunities
Fund, the estimated maximum number of common shares of First Trust Specialty Finance and Financial Opportunities Fund that may be cancelled
in the merger and exchanged for common shares of the Registrant, and $3.305, the average of the high and low trading price of common
shares of First Trust Specialty Finance and Financial Opportunities Fund on December 7, 2023 (within five business days prior to
the date of filing of this Registration Statement). |
| (3) | A registration fee of $147.60 was previously paid in connection
with the initial filing on October 24, 2023. |
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