UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-22039
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First Trust Specialty Finance and Financial Opportunities Fund
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: November 30
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Date of reporting period: May 31, 2016
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST
SPECIALTY FINANCE
AND FINANCIAL
OPPORTUNITIES FUND
(FGB)
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
MAY 31, 2016
FIRST TRUST
CONFLUENCE
INVESTMENT MANAGEMENT
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TABLE OF CONTENTS
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
SEMI-ANNUAL REPORT
MAY 31, 2016
Shareholder Letter.......................................................... 1
At a Glance................................................................. 2
Portfolio Commentary........................................................ 3
Portfolio of Investments.................................................... 5
Statement of Assets and Liabilities......................................... 7
Statement of Operations..................................................... 8
Statements of Changes in Net Assets......................................... 9
Statement of Cash Flows..................................................... 10
Financial Highlights........................................................ 11
Notes to Financial Statements............................................... 12
Additional Information...................................................... 17
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Confluence Investment Management LLC
("Confluence" or the "Sub-Advisor") and their respective representatives, taking
into account the information currently available to them. Forward-looking
statements include all statements that do not relate solely to current or
historical fact. For example, forward-looking statements include the use of
words such as "anticipate," "estimate," "intend," "expect," "believe," "plan,"
"may," "should," "would" or other words that convey uncertainty of future events
or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust Specialty Finance and Financial Opportunities Fund (the "Fund") to
be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. When evaluating the
information included in this report, you are cautioned not to place undue
reliance on these forward-looking statements, which reflect the judgment of the
Advisor and/or Sub-Advisor and their respective representatives only as of the
date hereof. We undertake no obligation to publicly revise or update these
forward-looking statements to reflect events and circumstances that arise after
the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money by investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other material
risks of investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about the Fund and presents data and analysis that provide
insight into the Fund's performance and investment approach.
By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of
Confluence are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
this report and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
MAY 31, 2016
Dear Shareholders:
Thank you for your investment in First Trust Specialty Finance and Financial
Opportunities Fund (the "Fund").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with the
semi-annual report which contains detailed information about your investment for
the six months ended May 31, 2016, including a market overview and a performance
analysis for the period. We encourage you to read this report and discuss it
with your financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember. First, the U.S. economy grew, despite the massive decline in
oil prices. Second, the tapering that began in 2014 by the Federal Reserve (the
"Fed") did not stop growth in the U.S. economy. Finally, the long-anticipated
rate hike by the Fed in December had little effect on the money supply, and the
stock market was not shocked by the hike. Early in 2016, many investors were
concerned that the volatility we saw in the market in 2015 would continue, and
it did. From December 31, 2015 through February 11, 2016, the S&P 500(R) Index
declined by 10.27%. Since then, the market has made a steady comeback, and as of
May 31, 2016, the S&P 500(R) Index was up 15.43%.
First Trust believes that having a long-term investment horizon and being
invested in quality products can help you reach your goals, regardless of how
the market behaves. We have always maintained perspective about the markets and
believe investors should as well. We will continue to strive to provide quality
investment opportunities each and every day, which has been one of the hallmarks
of our firm since its inception 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach your financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
"AT A GLANCE"
AS OF MAY 31, 2016 (UNAUDITED)
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PERFORMANCE
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Symbol on New York Stock Exchange FGB
Common Share Price $6.31
Common Share Net Asset Value ("NAV") $6.17
Premium (Discount) to NAV 2.27%
Net Assets Applicable to Common Shares $88,378,807
Current Quarterly Distribution per Common Share (1) $0.1750
Current Annualized Distribution per Common Share $0.7000
Current Distribution Rate on Closing Common Share Price (2) 11.09%
Current Distribution Rate on NAV (2) 11.35%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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Common Share Price NAV
5/15 $7.31 $7.20
7.20 6.99
7.20 7.05
6/15 7.11 6.74
6.99 6.50
6.96 6.50
7.05 6.59
6.60 6.13
7/15 6.75 6.17
6.70 6.00
6.82 6.19
6.44 5.86
8/15 6.51 6.14
6.46 6.35
6.43 6.04
6.30 6.16
9/15 6.30 6.17
6.07 6.06
6.39 6.22
6.38 6.30
6.45 6.37
10/15 6.26 5.87
6.47 6.40
6.35 6.32
6.30 6.14
11/15 6.47 6.23
6.48 6.19
5.95 5.96
6.03 5.59
6.27 5.81
12/15 6.07 5.57
5.95 5.66
5.42 5.00
5.52 5.02
1/16 5.59 5.43
5.52 5.15
5.24 4.92
5.42 5.20
2/16 5.45 5.15
5.81 5.66
5.91 5.61
6.13 5.99
3/16 6.13 5.92
6.34 6.20
6.29 5.89
6.35 6.00
6.38 6.04
4/16 6.42 6.14
6.24 6.20
6.28 6.25
6.06 6.02
6.19 6.28
5/16 6.17 6.31
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PERFORMANCE
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Average Annual Total Return
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Inception
6 Months Ended 1 Year Ended 5 Years Ended (5/25/07)
5/31/2016 5/31/2016 5/31/2016 to 5/31/2016
Fund Performance (3)
NAV 0.13% -5.35% 4.34% -1.90%
Market Value 8.54% -1.73% 5.51% -2.16%
Index Performance
Blended Index(4) 0.37% -2.09% 5.52% 2.24%
MSCI U.S. Investable Market Financials Index 0.15% -2.44% 7.70% -3.66%
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% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
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Ares Capital Corp. 9.9%
Golub Capital BDC, Inc. 8.0
THL Credit, Inc. 6.0
TCP Capital Corp. 5.7
New Mountain Finance Corp. 5.5
Hercules Capital, Inc. 5.3
CYS Investments, Inc. 5.1
Solar Capital Ltd. 5.1
Triangle Capital Corp. 5.0
Triplepoint Venture Growth BDC Corp. 4.6
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Total 60.2%
=====
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% OF TOTAL
INDUSTRY INVESTMENTS
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Capital Markets 87.6%
Real Estate Investment Trusts (REITs) 10.7
Diversified Financial Services 1.7
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Total 100.0%
======
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% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
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Common Stocks - Business Development Companies 87.6%
Real Estate Investment Trusts 10.7
Master Limited Partnerships 1.7
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Total 100.0%
======
(1) Most recent distribution paid or declared through 5/31/2016. Subject to
change in the future.
(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share price or NAV, as applicable, as of 5/31/2016. Subject to
change in the future.
(3) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in NAV per share for NAV
returns and changes in Common Share price for market value returns. Total
returns do not reflect sales load and are not annualized for periods less
than one year. Past performance is not indicative of future results.
(4) Blended index consists of the following:
Wells Fargo BDC Index (70%), FTSE NAREIT Mortgage REIT Index (20%)
and S&P SmallCap Financials Index (10%).
From 2009-2012, the blended index consisted of the following:
Red Rocks Global Listed Private Equity Index (70%),
FTSE NAREIT Mortgage REIT Index (20%) and
S&P SmallCap Financials Index (10%).
One of these indicies was discontinued during 2012, therefore the blended
index was changed. From 2007-2009, the blended index consisted of the
following:
Red Rocks Listed Private Equity Index (40%),
FTSE NAREIT Mortgage REIT Index (20%),
FTSE NAREIT Hybrid
REIT Index (20%),
Merrill Lynch Preferred Stock Hybrid Securities Index (10%) and
Russell 2000 Financial Services Index (10%).
Certain of these indices were discontinued during 2009, therefore the
blended index was changed.
Page 2
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PORTFOLIO COMMENTARY
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
SEMI-ANNUAL REPORT
MAY 31, 2016
SUB-ADVISOR
Confluence Investment Management LLC, a registered investment advisor
("Confluence" or the "Sub-Advisor"), located in St. Louis, Missouri, serves as
the Sub-Advisor to First Trust Specialty Finance and Financial Opportunities
Fund ("FGB" or the "Fund"). The investment professionals at Confluence have over
80 years of aggregate portfolio management experience. Confluence professionals
have invested in a wide range of specialty finance and other financial company
securities during various market cycles, working to provide attractive
risk-adjusted returns to clients.
CONFLUENCE PORTFOLIO MANAGEMENT TEAM
MARK KELLER, CFA
CHIEF EXECUTIVE OFFICER AND CHIEF INVESTMENT OFFICER
DAVID MIYAZAKI, CFA
SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER
DANIEL WINTER, CFA
SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
The primary investment objective of the Fund is to seek a high level of current
income. As a secondary objective, the Fund seeks an attractive total return. The
Fund pursues 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 the Fund's Sub-Advisor believes offer attractive opportunities
for income and capital appreciation. There can be no assurance that the Fund's
investment objectives will be achieved. The Fund may not be appropriate for all
investors.
MARKET RECAP
FGB is a financial sector fund with a particular focus on a niche called
business development companies ("BDCs"). BDCs lend to and invest in private
companies, oftentimes working with those not large enough to efficiently access
the public markets. Each BDC has a unique profile, determined by its respective
management team. Some specialize in particular industries, while others apply a
more generalized approach and maintain a diversified portfolio. Both approaches
can work effectively and offer shareholders a unique and differentiated return
opportunity derived from the private markets. During the six months ending May
31, 2016, the Fund had over 85% of its assets invested in 34 BDCs.
PERFORMANCE ANALYSIS
The six-month period ended May 31, 2016 followed the general pattern of the
broader equity markets. Notably, the equity markets ended calendar 2015
relatively flat, descended into a trough in February, and then recovered into
the spring. For the most part, BDCs followed a similar path, albeit with a bit
more volatility.
The Fund also maintained an allocation to MBS REITs. Although valuations remain
low for this industry, there has been some improvement in the first six months
of the Fund's fiscal year. In fact, when including the dividends, this group has
been one of the best performing industries in the financial sector. Still, we
temper this allocation, recognizing that the relatively high level of income
delivered by these companies can vary significantly as conditions in the bond
market change.
6 MONTHS
TOTAL RETURN
ENDED 5/31/16
FGB Market Value 8.54%
FGB NAV 0.13%
Blended Index* 0.37%
* Components of the Blended Index: Wells Fargo BDC Index (70%); FTSE/NAREIT
Mortgage REIT Index (20%); S&P SmallCap Financials Index (10%). Source:
Bloomberg, BNY Mellon
Page 3
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PORTFOLIO COMMENTARY (CONTINUED)
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
SEMI-ANNUAL REPORT
MAY 31, 2016
The Fund uses leverage because we believe that over time, leverage provides
opportunities for additional income and total return for common shareholders.
However, the use of leverage can also expose common shareholders to additional
volatility. For example, as the prices of securities held by the Fund decline,
the negative impact of valuation changes on Common Share NAV and common
shareholder total return is magnified by the use of leverage. Conversely,
leverage may enhance Common Share returns during periods when the prices of
securities held by the Fund generally are rising. For the six-months ended May
31, 2016, leverage had a negative impact on the Fund's performance.
The overall returns look fairly benign, but the point-to-point returns obscure
the rocky conditions that actually existed during the period. Specifically, the
equity markets became sharply focused on the Federal Reserve (the "Fed"), which
had raised rates in December. As we moved into January and February, widespread
concerns arose that the Fed might follow a pat--h of raising rates too far, or
too fast. Then, in the latter part of February, the Fed communicated its
intention to pursue a more moderate course in raising rates. Virtually all
higher risk asset classes, from equities to high-yield bonds, rallied sharply
after the announcement. Given that economic growth was not particularly strong,
investors expressed a great deal of relief when the Fed adjusted its policy.
For BDCs, Fed policy is an important factor. If the Fed were to raise rates too
quickly and cause a recession, this would create a business risk for BDCs
because they are lenders. During a recession or slow-growth environment, the
small and mid-sized businesses that borrow from BDCs may face challenges in
properly servicing their debt. In other words, the risk of default tends to rise
in BDC portfolios when the economy is weak. Fortunately, the relatively low rate
of economic growth we have experienced since the last recession has not created
widespread default problems in BDC loan portfolios. In fact, from a credit
perspective, BDC portfolios on the whole remain in good shape. This
characteristic allowed BDCs to earn attractive returns on their portfolios and
distribute significant income to shareholders, even as economic growth was below
average.
FGB has been positioned in such a way that the Fund's income has grown over the
past several years. Many BDCs, particularly the newer ones in the industry, were
able to grow their dividends as their businesses developed. In turn, this
allowed FGB to capture a rising level of income from its investments and
positioned the Fund to also have a growing dividend.
But as interest rates continue to move lower, we are beginning to see the yields
of BDC loan portfolios gradually decline and, as a result, some BDCs are
experiencing flat or even falling levels of income. Still, there are several
high-quality BDC managers that have been able to maintain their portfolio yields
through the strength of their underwriting platforms. We believe these companies
have resources that should enable them to continue earning attractive returns on
their portfolios. These companies have long formed the foundation of the Fund's
BDC allocation and we are optimistic that they can continue to perform well.
MARKET AND FUND OUTLOOK
The BDC industry has had to march through a myriad of challenges since the
financial crisis. It's a real 'everything but the kitchen sink' list, one that
includes a misplaced association with the European sovereign debt crisis, the
exclusion from important equity benchmark indices, ongoing low interest rates
and uncertainty around Fed policy. Yet through all of these issues, the industry
has grown and evolved.
One of the more interesting evolutionary events last year was the appearance of
activist investors in the BDC shareholder base. Generally speaking, we are fans
of the activists. We believe their efforts to improve governance and create more
equitable managerial fee structures can create important benefits to
shareholders. It's still early, but we've already seen changes at several of the
more poorly managed BDCs, ranging from lower base management fees to adjustments
to incentive fees. And, we've also seen one of the largest BDCs (American
Capital) bow to activists and agree to sell itself to the largest BDC (Ares
Capital). We believe this kind of consolidation should be helpful for the
industry to move forward with a higher proportion of BDCs that are well-managed
with shareholder-friendly fee structures.
It is our pleasure to manage FGB. We will continue our work to position the Fund
to participate in the income, growth and evolution of the BDC industry.
Page 4
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
PORTFOLIO OF INVESTMENTS
MAY 31, 2016 (UNAUDITED)
SHARES/
UNITS DESCRIPTION VALUE
----------- -------------------------------------------------------------------------------- --------------
COMMON STOCKS - BUSINESS DEVELOPMENT COMPANIES - 111.0%
CAPITAL MARKETS - 111.0%
134,877 Alcentra Capital Corp. (a)...................................................... $ 1,648,197
204,200 American Capital Ltd. (a) (b)................................................... 3,279,452
551,102 Apollo Investment Corp. (a)..................................................... 2,882,266
747,412 Ares Capital Corp. (a).......................................................... 11,091,594
103,900 BlackRock Capital Investment Corp. (a).......................................... 802,108
103,945 CM Finance, Inc. (a)............................................................ 853,388
195,000 FS Investment Corp. (a)......................................................... 1,725,750
99,045 Gladstone Capital Corp.......................................................... 718,076
142,533 Gladstone Investment Corp....................................................... 1,000,582
55,255 Goldman Sachs BDC, Inc. (a)..................................................... 1,095,154
514,730 Golub Capital BDC, Inc. (a)..................................................... 8,930,566
16,699 Harvest Capital Credit Corp..................................................... 217,755
479,198 Hercules Capital, Inc. (a)...................................................... 5,879,759
178,848 Horizon Technology Finance Corp. (a)............................................ 2,146,176
340,472 KCAP Financial, Inc............................................................. 1,208,676
49,107 Main Street Capital Corp. (a)................................................... 1,579,281
83,353 Medallion Financial Corp........................................................ 641,818
656,714 Medley Capital Corp. (a)........................................................ 4,268,641
489,164 New Mountain Finance Corp. (a).................................................. 6,153,683
152,084 OFS Capital Corp. (a)........................................................... 2,036,405
82,645 PennantPark Floating Rate Capital Ltd. (a)...................................... 992,571
745,081 PennantPark Investment Corp. (a)................................................ 4,835,576
307,809 Solar Capital Ltd. (a).......................................................... 5,666,764
204,529 Stellus Capital Investment Corp. (a)............................................ 2,045,290
433,728 TCP Capital Corp. (a)........................................................... 6,341,103
607,618 THL Credit, Inc. (a)............................................................ 6,677,722
159,951 TPG Specialty Lending, Inc. (a)................................................. 2,623,196
301,594 Triangle Capital Corp. (a)...................................................... 5,624,728
473,845 TriplePoint Venture Growth BDC Corp. (a)........................................ 5,108,049
--------------
TOTAL COMMON STOCKS - BUSINESS DEVELOPMENT COMPANIES............................ 98,074,326
(Cost $111,654,562) --------------
REAL ESTATE INVESTMENT TRUSTS - 13.6%
314,500 Annaly Capital Management, Inc. (a)............................................. 3,327,410
108,500 Capstead Mortgage Corp. (a)..................................................... 1,048,110
696,880 CYS Investments, Inc. (a)....................................................... 5,693,510
119,282 Hatteras Financial Corp......................................................... 1,919,247
--------------
TOTAL REAL ESTATE INVESTMENT TRUSTS............................................. 11,988,277
(Cost $16,839,088) --------------
MASTER LIMITED PARTNERSHIPS - 2.1%
DIVERSIFIED FINANCIAL SERVICES - 2.1%
118,200 Compass Diversified Holdings.................................................... 1,878,198
(Cost $205,011) --------------
TOTAL INVESTMENTS - 126.7%...................................................... 111,940,801
(Cost $128,698,661) (c)
OUTSTANDING LOAN - (28.3%)...................................................... (25,000,000)
NET OTHER ASSETS AND LIABILITIES - 1.6%......................................... 1,438,006
--------------
NET ASSETS - 100.0%............................................................. $ 88,378,807
==============
See Notes to Financial Statements Page 5
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2016 (UNAUDITED)
-----------------------------
(a) All or a portion of this security serves as collateral on the outstanding
loan.
(b) Non-income producing security.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of May 31, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $6,701,631 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $23,459,491.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of May 31, 2016
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
INVESTMENTS 5/31/2016 PRICES INPUTS INPUTS
------------------------------------------------------ ------------ ------------ ------------ ------------
Common Stocks - Business Development Companies*....... $ 98,074,326 $ 98,074,326 $ -- $ --
Real Estate Investment Trusts......................... 11,988,277 11,988,277 -- --
Master Limited Partnerships*.......................... 1,878,198 1,878,198 -- --
------------ ------------ ------------ ------------
Total Investments..................................... $111,940,801 $111,940,801 $ -- $ --
============ ============ ============ ============
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period, at their current value. There were no
transfers between Levels at May 31, 2016.
Page 6 See Notes to Financial Statements
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2016 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $128,698,661)....................................................................... $ 111,940,801
Cash.......................................................................................... 1,223,762
Foreign currency (Cost $26)................................................................... 19
Receivables:
Dividends................................................................................. 428,030
Prepaid expenses.............................................................................. 9,981
--------------
Total Assets.............................................................................. 113,602,593
--------------
LIABILITIES:
Outstanding loan.............................................................................. 25,000,000
Payables:
Investment advisory fees.................................................................. 96,829
Offering costs............................................................................ 63,461
Audit and tax fees........................................................................ 27,610
Printing fees............................................................................. 11,951
Transfer agent fees....................................................................... 6,415
Administrative fees....................................................................... 4,090
Interest and fees on loan................................................................. 3,902
Custodian fees............................................................................ 3,489
Trustees' fees and expenses............................................................... 3,121
Legal fees................................................................................ 1,505
Financial reporting fees.................................................................. 771
Other liabilities............................................................................. 642
--------------
Total Liabilities......................................................................... 25,223,786
--------------
NET ASSETS.................................................................................... $ 88,378,807
==============
NET ASSETS CONSIST OF:
Paid-in capital............................................................................... $ 260,240,172
Par value..................................................................................... 143,213
Accumulated net investment income (loss)...................................................... (3,193,442)
Accumulated net realized gain (loss) on investments........................................... (152,053,269)
Net unrealized appreciation (depreciation) on investments..................................... (16,757,867)
--------------
NET ASSETS.................................................................................... $ 88,378,807
==============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share).......................... $ 6.17
==============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized)... 14,321,269
==============
See Notes to Financial Statements Page 7
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 2016 (UNAUDITED)
INVESTMENT INCOME:
Dividends..................................................................................... $ 6,176,650
Interest...................................................................................... 82
--------------
Total investment income.................................................................... 6,176,732
--------------
EXPENSES:
Investment advisory fees...................................................................... 552,557
Interest and fees on loan..................................................................... 145,433
At the market offering costs.................................................................. 28,714
Printing fees................................................................................. 27,221
Administrative fees........................................................................... 24,022
Audit and tax fees............................................................................ 23,600
Transfer agent fees........................................................................... 17,085
Custodian fees................................................................................ 9,585
Trustees' fees and expenses................................................................... 8,984
Financial reporting fees...................................................................... 4,625
Legal fees.................................................................................... 2,375
Other......................................................................................... 20,295
--------------
Total expenses............................................................................. 864,496
--------------
NET INVESTMENT INCOME (LOSS).................................................................. 5,312,236
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments....................................................... (1,366,823)
Net change in unrealized appreciation (depreciation) on Investments........................... (4,212,683)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)....................................................... (5,579,506)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ (267,270)
==============
Page 8 See Notes to Financial Statements
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
5/31/2016 ENDED
(UNAUDITED) 11/30/2015
------------ ------------
OPERATIONS:
Net investment income (loss)........................................................ $ 5,312,236 $ 9,190,935
Net realized gain (loss)............................................................ (1,366,823) (2,962,120)
Net increase from payment by the Sub-Advisor........................................ -- 15
Net change in unrealized appreciation (depreciation)................................ (4,212,683) (13,218,040)
------------ ------------
Net increase (decrease) in net assets resulting from operations..................... (267,270) (6,989,210)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................... (5,012,444) (9,481,362)
Return of capital................................................................... -- (468,182)
------------ ------------
Total distributions to shareholders................................................. (5,012,444) (9,949,544)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from Common Shares sold through at the market offerings.................... -- 125,208
Proceeds from Common Shares reinvested.............................................. -- 77,326
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions........... -- 202,534
------------ ------------
Total increase (decrease) in net assets............................................. (5,279,714) (16,736,220)
NET ASSETS:
Beginning of period................................................................. 93,658,521 110,394,741
------------ ------------
End of period....................................................................... $ 88,378,807 $ 93,658,521
============ ============
Accumulated net investment income (loss) at end of period........................... $ (3,193,442) $ (3,493,234)
============ ============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period................................................ 14,321,269 14,294,917
Common Shares sold through at the market offerings.................................. -- 16,400
Common Shares issued as reinvestment under the Dividend Reinvestment Plan........... -- 9,952
------------ ------------
Common Shares at end of period...................................................... 14,321,269 14,321,269
============ ============
See Notes to Financial Statements Page 9
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 2016 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations .................... $ (267,270)
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash provided by operating activities:
Purchases of investments....................................................... (5,770,842)
Sales, maturities and paydowns of investments.................................. 5,977,350
Return of capital and realized gain distributions received from investments 99,504
Net realized gain/loss on investments.......................................... 1,366,823
Net change in unrealized appreciation/depreciation on investments.............. 4,212,683
CHANGES IN ASSETS AND LIABILITIES:
Increase in dividends receivable............................................... (60,571)
Decrease in prepaid expenses................................................... 23,661
Increase in interest and fees on loan payable.................................. 3,902
Increase in investment advisory fees payable................................... 952
Decrease in audit and tax fees payable......................................... (19,590)
Increase in legal fees payable................................................. 123
Decrease in printing fees payable.............................................. (7,115)
Decrease in administrative fees payable........................................ (569)
Increase in custodian fees payable............................................. 306
Increase in transfer agent fees payable........................................ 3,653
Increase in Trustees' fees and expenses payable................................ 276
Increase in other liabilities payable.......................................... 642
------------
CASH PROVIDED BY OPERATING ACTIVITIES............................................... $ 5,563,918
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Common Shareholders from net investment income................ (7,518,666)
------------
CASH USED IN FINANCING ACTIVITIES................................................... (7,518,666)
------------
Decrease in cash and foreign currency............................................... (1,954,748)
Cash and foreign currency at beginning of period.................................... 3,178,529
------------
CASH AND FOREIGN CURRENCY AT END OF PERIOD.......................................... $ 1,223,781
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees................................... $ 141,531
============
Page 10 See Notes to Financial Statements
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
5/31/2016 ------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period..... $ 6.54 $ 7.72 $ 8.61 $ 7.85 $ 6.98 $ 7.69
--------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.37 0.64 0.65 0.62 0.59 0.66
Net realized and unrealized gain (loss).. (0.39) (1.12) (a) (0.85) 0.81 0.93 (0.74)
--------- -------- -------- -------- -------- --------
Total from investment operations......... (0.02) (0.48) (0.20) 1.43 1.52 (0.08)
--------- -------- -------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.35) (0.67) (0.66) (0.67) (0.65) (0.63)
Return of capital........................ -- (0.03) (0.03) -- (0.00) (b) (0.00) (b)
--------- -------- -------- -------- -------- --------
Total distributions to Common
Shareholders.......................... (0.35) (0.70) (0.69) (0.67) (0.65) (0.63)
--------- -------- -------- -------- -------- --------
Premium from shares sold in at the
market offering....................... -- 0.00 (b) -- -- -- --
========= ======== ======== ======== ======== ========
Net asset value, end of period........... $ 6.17 $ 6.54 $ 7.72 $ 8.61 $ 7.85 $ 6.98
========= ======== ======== ======== ======== ========
Market value, end of period.............. $ 6.31 $ 6.17 $ 8.58 $ 8.19 $ 8.07 $ 6.20
========= ======== ======== ======== ======== ========
TOTAL RETURN BASED ON NET ASSET
VALUE (c)............................. 0.13% (6.25)% (a) (2.44)% 18.91% 22.48% (1.01)%
========= ======== ======== ======== ======== ========
TOTAL RETURN BASED ON MARKET VALUE (c)... 8.54% (20.42)% 14.00% 10.03% 41.76% (9.84)%
========= ======== ======== ======== ======== ========
-----------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $ 88,379 $ 93,659 $110,395 $123,081 $112,133 $ 99,697
Ratio of total expenses to average
net assets............................ 2.02% (d) 1.85% 1.71% 1.73% 1.83% 1.85%
Ratio of total expenses to average net
assets excluding interest expense...... 1.68% (d) 1.63% 1.52% 1.50% 1.55% 1.58%
Ratio of net investment income (loss)
to average net assets................. 12.42% (d) 9.14% 8.00% 7.51% 7.81% 8.32%
Portfolio turnover rate.................. 5% 10% 14% 13% 18% 11%
INDEBTEDNESS:
Total loan outstanding (in 000's)........ $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 23,000 $ 20,000
Asset coverage per $1,000 of
indebtedness (e)...................... $ 4,535 $ 4,746 $ 5,416 $ 5,923 $ 5,875 $ 5,985
-----------------------------
(a) The Fund received a payment from the sub-advisor in the amount of $15 in
connection with a trade error. The payment from the sub-advisor represents
less than $0.01 per share and had no effect on the Fund's 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 less than one year. Past performance is not
indicative of future results.
(d) Annualized.
(e) Calculated by taking the Fund's total assets less the Fund's total
liabilities (not including the loan outstanding) and dividing by the loan
outstanding in 000's.
See Notes to Financial Statements Page 11
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
1. ORGANIZATION
First Trust Specialty Finance and Financial Opportunities Fund (the "Fund") is a
non-diversified, closed-end management investment company organized as a
Massachusetts business trust on March 20, 2007, and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund trades under the ticker symbol "FGB" on the
New York Stock Exchange ("NYSE").
The Fund's primary investment objective is to seek a high level of current
income. The Fund seeks attractive total return as a secondary objective. Under
normal market conditions, the Fund invests at least 80% of its Managed Assets in
a portfolio of securities of specialty finance and other financial companies
that Confluence Investment Management LLC ("Confluence" or the "Sub-Advisor")
believes offer attractive opportunities for income and capital appreciation.
Under normal market conditions, the Fund concentrates its investments in
securities of companies within industries in the financial sector. "Managed
Assets" means the total asset value of the Fund minus the sum of the Fund's
liabilities other than the principal amount of borrowings. There can be no
assurance that the Fund will achieve its investment objectives. The Fund may not
be appropriate for all investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund, which is an investment company within the scope of Financial
Accounting Standards Update 2013-08, follows accounting and reporting guidance
under FASB Accounting Standards Codification Topic 946, "Financial Services -
Investment Companies." The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP") requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
The net asset value ("NAV") of the Common Shares of the Fund is determined daily
as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time,
on each day the NYSE is open for trading. If the NYSE closes early on a
valuation day, the NAV is determined as of that time. Foreign securities are
priced using data reflecting the earlier closing of the principal markets for
those securities. The NAV per Common Share is calculated by dividing the value
of all assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses, dividends declared but unpaid, and any
borrowings of the Fund) by the total number of Common Shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service, or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Fund's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. The Fund's investments are valued as follows:
Common stocks, real estate investment trusts ("REITs"), master limited
partnerships ("MLPs") and other equity securities listed on any national
or foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and
the London Stock Exchange Alternative Investment Market ("AIM")) are
valued at the last sale price on the exchange on which they are
principally traded or, for Nasdaq and AIM securities, the official closing
price. Securities traded on one or more than one securities exchange are
valued at the last sale price or official closing price, as applicable, at
the close of the securities exchange representing the principal market for
such securities.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Fund's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933. as amended (the "1933 Act")) for which a pricing service is unable to
provide a market price; securities whose trading has been formally suspended; a
security whose market or fair value price is not available from a
pre-established pricing source; a security with respect to which an event has
occurred that is likely to materially affect the value of the security after the
market has closed but before the calculation of the Fund's NAV or make it
difficult or impossible to obtain a reliable market quotation; and a security
whose price, as provided by the pricing service, does not reflect the security's
fair value. As a general principle, the current fair value of a security would
appear to be the amount which the owner might reasonably expect to receive for
the security upon its current sale. The use of fair value prices by the Fund
generally results in prices used by the Fund that may differ from current market
quotations or official closing prices on the applicable exchange. A variety of
factors may be considered in determining the fair value of such securities,
including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
Page 12
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of May 31, 2016, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded daily on the accrual basis, including the amortization of premiums and
accretion of discounts.
The Fund holds shares of business development companies ("BDCs") and may hold
shares of exchange-traded funds ("ETFs"). The tax character of distributions
received from these securities may vary when reported by the issuer after their
tax reporting periods conclude.
The Fund also holds shares of REITs. Distributions from such investments may be
comprised of return of capital, capital gains and income. The actual character
of amounts received during the year is not known until after the REIT's fiscal
year end. The Fund records the character of distributions received from the
REITs during the year based on estimates available. The REIT's characterization
of distributions received by the Fund may be subsequently revised based on
information received from the REITs after their tax reporting periods conclude.
For the six months ended May 31, 2016, distributions of $99,504 received from
investments have been reclassified as return of capital and realized gain. The
cost basis of applicable investments has been reduced accordingly.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of the Fund are declared and paid quarterly
or as the Board of Trustees may determine from time to time. Distributions of
any net realized capital gains earned by the Fund are distributed at least
annually. Distributions will automatically be reinvested into additional Common
Shares pursuant to the Fund's Dividend Reinvestment Plan unless cash
distributions are elected by the shareholder.
Page 13
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
Distributions from income and realized capital gains are determined in
accordance with income tax regulations, which may differ from U.S. GAAP. Certain
capital accounts in the financial statements are periodically adjusted for
permanent differences in order to reflect their tax character. These permanent
differences are primarily due to the varying treatment of income and gain/loss
on portfolio securities held by the Fund and have no impact on net assets or NAV
per share. Temporary differences, which arise from recognizing certain items of
income, expense and gain/loss in different periods for financial statement and
tax purposes, will reverse at some point in the future.
The tax character of distributions paid during the fiscal year ended November
30, 2015 was as follows:
Distributions paid from:
Ordinary income................................... $ 9,441,013
Return of capital................................. 468,182
As of November 30, 2015, the distributable earnings and net assets on a tax
basis were as follows:
Undistributed ordinary income..................... $ --
Undistributed capital gains....................... --
-------------
Total undistributed earnings...................... --
Accumulated capital and other losses.............. (148,309,980)
Net unrealized appreciation (depreciation)........ (15,908,662)
-------------
Total accumulated earnings (losses)............... (164,218,642)
Other............................................. (2,506,222)
Paid-in capital................................... 260,383,385
-------------
Net assets........................................ $ 93,658,521
=============
D. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years after December 22, 2010, may be
carried forward indefinitely, and their character is retained as short-term
and/or long-term losses. Previously, net capital losses were carried forward up
to eight years and treated as short-term losses. As a transition rule, the Act
requires that post-enactment net capital losses be used before pre-enactment net
capital losses. At November 30, 2015, the Fund had capital loss carryforwards
for federal income tax purposes of $148,195,448, expiring as follows:
EXPIRATION DATE AMOUNT
November 30, 2016 $ 62,747,095
November 30, 2017 55,647,845
November 30, 2018 14,556,882
November 30, 2019 5,452,015
Non-expiring 9,791,611
At the taxable year ended November 30, 2015, $5,166,354 of the Fund's capital
loss carryforward expired.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended November 30, 2015, the Fund
incurred and elected to defer capital losses of $114,532.
The Fund is subject to certain limitations under the U.S. tax rules on the use
of capital loss carryforwards and net unrealized built-in losses. These
limitations apply when there has been a 50% change in ownership.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ended 2012, 2013,
2014 and 2015 remain open to federal and state audit. As of May 31, 2016,
management has evaluated the application of these standards to the Fund and has
determined that no provision for income tax is required in the Fund's financial
statements for uncertain tax positions.
E. EXPENSES
The Fund will pay all expenses directly related to its operations.
Page 14
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the ongoing monitoring of the Fund's investment
portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund. For these
investment management services, First Trust is entitled to a monthly fee
calculated at an annual rate of 1.00% of the Fund's Managed Assets. First Trust
also provides fund reporting services to the Fund for a flat annual fee in the
amount of $9,250.
Confluence serves as the Fund's sub-advisor and manages the Fund's portfolio
subject to First Trust's supervision. The Sub-Advisor receives a monthly
portfolio management fee calculated at an annual rate of 0.50% of Managed Assets
that is paid by First Trust from its investment advisory fee.
BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as the Fund's
administrator, fund accountant and transfer agent in accordance with certain fee
arrangements. As administrator and fund accountant, BNYM IS is responsible for
providing certain administrative and accounting services to the Fund, including
maintaining the Fund's books of account, records of the Fund's securities
transactions, and certain other books and records. As transfer agent, BNYM IS is
responsible for maintaining shareholder records for the Fund. The Bank of New
York Mellon ("BNYM") serves as the Fund's custodian in accordance with certain
fee arrangements. As custodian, BNYM is responsible for custody of the Fund's
assets. BNYM IS and BNYM are subsidiaries of The Bank of New York Mellon
Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Prior to January 1, 2016, the fixed annual retainer was allocated pro
rata based on each Fund's net assets. Each Independent Trustee is also paid an
annual per fund fee that varies based on whether the fund is a closed-end or
other actively managed fund, or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Fund for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding short-term
investments, for the six months ended May 31, 2016, were $5,770,842 and
$5,887,692 respectively.
5. CREDIT AGREEMENT
The Fund has a committed facility agreement (the "BNP Facility") with BNP
Paribas Prime Brokerage, Inc. ("BNP"), which currently has a maximum commitment
amount of $25,000,000. Absent certain events of default or failure to maintain
certain collateral requirements, BNP may not terminate the BNP Facility except
upon 180 calendar days prior notice. The interest rate under the BNP Facility is
equal to the 1-month LIBOR plus 70 basis points. In addition, under the BNP
Facility, the Fund pays a commitment fee of 0.85% on the undrawn amount.
The average amount outstanding for the six months ended May 31, 2016 was
$25,000,000, with a weighted average interest rate of 1.12%. As of May 31, 2016,
the Fund had outstanding borrowings of $25,000,000 under the BNP Facility. The
high and low annual interest rates for the six months ended May 31, 2016 were
1.15% and 0.94%, respectively, and the interest rate at May 31, 2016 was 1.15%.
6. COMMON SHARE OFFERINGS
On February 23, 2015, the Fund and the Advisor entered into a sales agreement
with Jones Trading Institutional Services, LLC ("Jones Trading") whereby the
Fund may offer and sell up to 1,400,000 Common Shares from time to time through
Jones Trading as agent for the offer and sale of the Common Shares. Sales of
Common Shares pursuant to the sales agreement may be made in negotiated
transactions or transactions that are deemed to be "at the market" as defined in
Rule 415 under the 1933 Act, including sales made directly on the NYSE or sales
made through a market maker other than on an exchange, at an offering price
equal to or in excess of the net asset value per share of the Fund's Common
Shares at the time such Common Shares are initially sold. The Fund intends to
use the net proceeds from the sale of the Common Shares in accordance with its
investment objectives and policies. Sales of Common Shares made under the sales
agreement will be made pursuant to a "shelf" registration statement on Form N-2
(the "Registration Statement") that will require the Fund to obtain
Page 15
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
effectiveness from the SEC on an annual basis. The Registration Statement has
not been effective since August 2015, and therefore Common Shares have not been
offered under the sales agreement since that time. Any future sales of Common
Shares under the sales agreement will be made pursuant to an effective
Registration Statement. Transactions related to offerings under such sales
agreement are as follows:
NET PROCEEDS
COMMON NET NET ASSET RECEIVED IN
SHARES PROCEEDS VALUE OF EXCESS OF NET
SOLD RECEIVED SHARES SOLD ASSET VALUE
----------- ----------- ----------- -------------
2/23/15 through 11/30/15 16,400 $125,208 $124,110 $1,098
Additionally, offering costs of $123,300 related to this offering were recorded
as a prepaid asset and were amortized to expense by the Fund on a straight line
basis over a one year period.
7. INDEMNIFICATION
The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
8. FINANCIAL SECTOR CONCENTRATION RISK
Under normal market conditions, the Fund will invest at least 80% of its Managed
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. 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.
Leasing companies can be negatively impacted by changes in tax laws which affect
the types of transactions in which such companies engage.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there
were no subsequent events requiring recognition or disclosure in the financial
statements that have not already been disclosed.
Page 16
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ADDITIONAL INFORMATION
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
DIVIDEND REINVESTMENT PLAN
If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by BNY
Mellon Investment Servicing (US) Inc. (the "Plan Agent"), in additional Common
Shares under the Plan. If you elect to receive cash distributions, you will
receive all distributions in cash paid by check mailed directly to you by the
Plan Agent, as the dividend paying agent.
If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:
(1) If Common Shares are trading at or above net asset value ("NAV") at
the time of valuation, the Fund will issue new shares at a price
equal to the greater of (i) NAV per Common Share on that date or
(ii) 95% of the market price on that date.
(2) If Common Shares are trading below NAV at the time of valuation, the
Plan Agent will receive the dividend or distribution in cash and
will purchase Common Shares in the open market, on the NYSE or
elsewhere, for the participants' accounts. It is possible that the
market price for the Common Shares may increase before the Plan
Agent has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market price
at the time of valuation, resulting in the purchase of fewer shares
than if the dividend or distribution had been paid in Common Shares
issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open
market within 30 days of the valuation date except where temporary
curtailment or suspension of purchases is necessary to comply with
federal securities laws. Interest will not be paid on any uninvested
cash payments.
You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.
The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.
If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.
The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website located at
http://www.sec.gov.
Page 17
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Qs
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Joint Annual Meeting of Shareholders of the Common Shares of Macquarie/First
Trust Global Infrastructure/Utilities Dividend & Income Fund, First Trust Energy
Income and Growth Fund, First Trust Enhanced Equity Income Fund, First
Trust/Aberdeen Global Opportunity Income Fund, First Trust Mortgage Income Fund,
First Trust Strategic High Income Fund II, First Trust/Aberdeen Emerging
Opportunity Fund, First Trust Specialty Finance and Financial Opportunities
Fund, First Trust High Income Long/Short Fund, First Trust Energy Infrastructure
Fund, First Trust MLP and Energy Income Fund, First Trust Intermediate Duration
Preferred & Income Fund and First Trust New Opportunities MLP & Energy Fund was
held on April 22, 2016 (the "Annual Meeting"). At the Annual Meeting, James A.
Bowen and Niel B. Nielson were elected by the Common Shareholders of the First
Trust Specialty Finance and Financial Opportunities Fund as Class III Trustees
for a three-year term expiring at the Fund's annual meeting of shareholders in
2019. The number of votes cast in favor of Mr. Bowen was 12,286,519, the number
of votes against was 342,353 and the number of broker non-votes was 1,692,397.
The number of votes cast in favor of Mr. Nielson was 12,264,723, the number of
votes against was 364,149 and the number of broker non-votes was 1,692,397.
Richard E. Erickson, Thomas R. Kadlec and Robert F. Keith are the other current
and continuing Trustees.
RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some, but not all,
of the risks that should be considered for the Fund. For additional information
about the risks associated with investing in the Fund, please see the Fund's
prospectus and statement of additional information, as well as other Fund
regulatory filings.
BUSINESS DEVELOPMENT COMPANY ("BDC") RISK: Investments in closed-end funds that
elect to be treated as 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 rising. As a
result, 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 BDC's 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 BEC, 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
BDC's, together with other dividend paying stocks may be negatively affected by
a rise in interest rates. 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.
INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund. The value of these securities, like other
market investments, may move up or down, sometimes rapidly and unpredictably.
Common Shares at any point in time may be worth less than the original
investment, even after taking into account the reinvestment of Fund dividends
and distributions. Security prices can fluctuate for several reasons including
the general condition of the securities markets, or when political or economic
events affecting the issuers occur. When the Advisor or Sub-Advisor determines
that it is temporarily unable to follow the Fund's investment strategy or that
it is impractical to do so (such as when a market disruption event has occurred
and trading in the securities is extremely limited or absent), the Fund may take
temporary defensive positions.
FINANCIAL SECTOR CONCENTRATION RISK: Under normal market conditions, the Fund
will invest at least 80% of its managed 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. The
profitability of specialty finance and other financial companies is largely
Page 18
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND (FGB)
MAY 31, 2016 (UNAUDITED)
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. Leasing companies can be
negatively impacted by changes in tax laws which affect the types of
transactions in which such companies engage.
REIT, MORTAGE-RELATED AND ASSET-BACKED SECURITIES RISKS: 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 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.
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. 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 mortgagees 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.
LEVERAGE RISK: The use of leverage results in additional risks and can magnify
the effect of any losses. The funds borrowed pursuant to a leverage borrowing
program 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. If the Fund is not in compliance with certain credit facility
provisions, the Fund may not be permitted to declare dividends or other
distributions.
NON-DIVERSIFICATION RISK: Because the Fund is non-diversified, it is only
limited as to the percentage of its assets which may be invested in the
securities of any one issuer by the diversification requirements imposed by the
Internal Revenue Code of 1986, as amended. Because the Fund may invest a
relatively high percentage of its assets in a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence and to the financial conditions of the issuers in which it invests.
Page 19
This Page Left Blank Intentionally.
FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Confluence Investment Management LLC
20 Allen Avenue, Suite 300
St. Louis, MO 63119
ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
The Bank of New York Mellon
101 Barclay Street, 20th Floor
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) There has been no change, as of the date of this filing, in any of the
portfolio managers identified in response to paragraph (a)(1) of this Item
in the registrant's most recently filed annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Specialty Finance and Financial Opportunities Fund
--------------------------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: July 19, 2016
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: July 19, 2016
---------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: July 19, 2016
---------------
* Print the name and title of each signing officer under his or her signature.