WHEATON, Ill.--(BUSINESS WIRE)--First Trust Dynamic Europe Equity Income Fund (the "Fund") (NYSE: FDEU) is significantly reducing its regularly scheduled monthly distribution per share to the amount of $0.06 per share from $0.121 per share. The distribution is payable on May 15, 2020, to shareholders of record as of May 4, 2020. The ex-dividend date is expected to be May 1, 2020. The monthly distribution information for the Fund appears below.
First Trust Dynamic Europe Equity Income Fund (FDEU): |
|
Distribution per share: |
$0.06 |
Distribution Rate based on the April 17, 2020 NAV of $10.89: |
6.61% |
Distribution Rate based on the April 17, 2020 closing market price of $9.82: |
7.33% |
Decrease from previous distribution of $0.121 |
-50.41% |
The distribution reduction results from three factors that will lower the Fund’s distributable cash flow: 1) reduced dividend payments from portfolio companies, 2) a reduction in Fund assets as a result of market decline and 3) anticipated reductions to income from the option writing strategy. The world is experiencing an unprecedented economic collapse as a result of the sudden, unanticipated, exogenous shock that is the COVID-19 pandemic. While we all hope the impact of this tragic event is as short lived as possible, it is ongoing and has a number of implications for the Fund’s income generation. First, in the current environment there is intense regulatory and political pressure on companies, particularly European ones, to withhold or reduce their dividend payments until the impact of the pandemic is clear. We do expect many of the companies to return to paying dividends in due course, but for this year the outlook is uncertain. Second, lower prevailing market levels have reduced the ability of the portfolio to utilize leverage to the same extent as before the market decline, which reduces the assets under management of the Fund. Third, to allow the Fund’s value to potentially recover with the markets after such a sharp decline, the option writing strategy has been moderated. As a result of these factors, we believe it is prudent to reduce the distribution of the Fund for the foreseeable future, until the impact of the pandemic is more clear.
The Fund's Board of Trustees has approved a managed distribution policy for the Fund (the "Plan") in reliance on exemptive relief received from the Securities and Exchange Commission which permits the Fund to make periodic distributions of long-term capital gains more frequently than otherwise permitted with respect to its common shares subject to certain conditions. Under the Plan, the Fund intends to pay a monthly distribution in the amount of $0.06 per share. A portion of this monthly distribution may include long-term capital gains. This may result in a reduction of the long-term capital gain distribution necessary at year end by distributing long-term capital gains throughout the year. The annual distribution rate is independent of the Fund's performance during any particular period. Accordingly, you should not draw any conclusions about the Fund's investment performance from the amount of any distribution or from the terms of the Plan.
This distribution may consist of net investment income earned by the Fund, net short-term and long-term capital gains and/or tax deferred return of capital. The final determination of the source and tax status of all distributions paid in 2020 will be made after the end of 2020 and will be provided on Form 1099-DIV.
The Fund is a non-diversified, closed-end management investment company that seeks to provide a high level of current income. As a secondary objective, the Fund seeks to focus on capital appreciation. The Fund will seek to achieve its investment objective by investing at least 80% of its Managed Assets in a portfolio of equity securities of European companies of any market capitalization, including, but not limited to, common and preferred stocks that pay dividends, depositary receipts and real estate investment trusts. The Fund will seek to focus its equity investments on income-producing securities. The Fund will also seek to utilize a dynamic currency hedging process, which will include, at the discretion of the portfolio managers, the use of forward foreign currency exchange contracts to hedge a portion of the Fund's currency exposure. To generate additional income, the Fund will write (or sell) call options on portfolio equity securities and certain broad-based securities indices in an amount up to 40% of the value of its Managed Assets.
First Trust Advisors L.P. ("FTA") is a federally registered investment advisor and serves as each Fund's investment advisor. FTA and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA registered broker-dealer, are privately-held companies that provide a variety of investment services. FTA has collective assets under management or supervision of approximately $115 billion as of March 31, 2020 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. FTA is the supervisor of the First Trust unit investment trusts, while FTP is the sponsor. FTP is also a distributor of mutual fund shares and exchange-traded fund creation units. FTA and FTP are based in Wheaton, Illinois.
Janus Capital Management LLC, a legal entity of Janus Henderson Investors, serves as the Fund's investment sub-advisor. Janus Henderson Investors is headquartered in London and is a global investment management firm that provides a full spectrum of investment products and services to clients around the world. With offices in 28 cities with more than 2,000 employees, Janus Henderson Investors managed approximately $374.8 billion in assets as of December 31, 2019.
Past performance is no assurance of future results. Investment return and market value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. There can be no assurance that the Fund’s investment objectives will be achieved. The Fund may not be appropriate for all investors.
Principal Risk Factors: The Fund is subject to risks, including the fact that it is a non-diversified closed-end management investment company.
Securities held by a fund, as well as shares of a 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 a 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 a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
Because the Fund will invest primarily in securities of non-U.S. issuers, which are generally denominated in non-U.S. currencies, there are risks not typically associated with investing in securities of U.S. issuers. Non-U.S. issuers are subject to higher volatility than securities of U.S. issuers. An investor may lose money if the local currency of a non-U.S. market depreciates against the U.S. dollar.
Investments in securities of issuers located in emerging market countries are considered speculative and there is a heightened risk of investing in emerging markets securities.
On June 23, 2016, the United Kingdom voted via referendum to leave the EU, an event commonly referred to as "Brexit." Brexit immediately led to significant market volatility around the world, as well as political, economic, and legal uncertainty. On January 31, 2020, the United Kingdom officially left the EU, which started a transition period for the United Kingdom and the EU to negotiate a wide variety of agreements, including a trade agreement. There is uncertainty relating to the precise terms of many of these agreements. At this time, it is also difficult to predict what the longer term ramifications and political, economic, and legal implications will be as a result of Brexit, including the impact on the Fund's portfolio holdings. The impact on not only the United Kingdom and European economies, but the broader global economy, could be significant, potentially resulting in increased volatility and illiquidity and lower economic growth for companies that rely significantly on Europe for their business activities and revenues.
The Fund will engage in practices and strategies that will result in exposure to fluctuations in foreign exchange rates, thus subjecting it to foreign currency risk.
The Fund's use of derivatives may result in losses greater than if they had not been used, may require the Fund to sell or purchase portfolio securities at inopportune times, may limit the amount of appreciation the Fund can realize on an investment, or may cause the Fund to hold a security that it might otherwise sell.
Use of leverage can result in additional risk and cost, and can magnify the effect of any losses.
In the event of conversion to an open-end management investment company, the Common Shares would cease to be listed on the NYSE or other national securities exchange, and such Common Shares would thereafter be redeemable at NAV at the option of the Common Shareholder, rather than traded in the secondary market at market price, which, for closed-end fund shares, may at times be at a premium to NAV. Any Borrowings or Preferred Shares of the Fund would need to be repaid or redeemed upon conversion and, accordingly, a portion of the Fund's portfolio may need to be liquidated, potentially resulting in, among other things, lower current income.
The risks of investing in the Fund are spelled out in the shareholder reports and other regulatory filings.
This release contains forward-looking statements which can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “target,” “going forward,” “outlook” and similar statements. Such statements are based upon each Fund's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and may cause a Fund's actual results, performance or distributions to differ materially from those expressed or implied in the forward-looking statements.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
The Fund's daily closing New York Stock Exchange price and net asset value per share as well as other information can be found at www.ftportfolios.com or by calling 1-800-988-5891.
