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 811-21636
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First Trust/Aberdeen Global Opportunity Income 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: December 31
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Date of reporting period: December 31, 2010
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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.
[LOGO OMITTED]
First Trust
ANNUAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 2010
First Trust/Aberdeen
Global Opportunity
Income Fund
[LOGO OMITTED]
ABERDEEN
ASSET MANAGEMENT
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TABLE OF CONTENTS
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FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND (FAM)
ANNUAL REPORT
DECEMBER 31, 2010
Shareholder Letter....................................................... 1
At A Glance.............................................................. 2
Portfolio Commentary..................................................... 3
Portfolio of Investments................................................. 7
Schedule of Forward Foreign Currency Contracts...........................13
Statement of Assets and Liabilities......................................14
Statement of Operations..................................................15
Statements of Changes in Net Assets......................................16
Statement of Cash Flows..................................................17
Financial Highlights.....................................................18
Notes to Financial Statements............................................19
Report of Independent Registered Public Accounting Firm..................26
Additional Information...................................................27
Trustees and Officers....................................................31
Privacy Policy...........................................................33
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 Aberdeen Asset Management Inc. ("Aberdeen" 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
the First Trust/Aberdeen Global Opportunity Income 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
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 Notes to
Financial Statements for a discussion of certain other 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.
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
Aberdeen 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 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/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND (FAM)
ANNUAL LETTER FROM THE PRESIDENT
DECEMBER 31, 2010
Dear Shareholders:
I am pleased to present you with the annual report for your investment in First
Trust/Aberdeen Global Opportunity Income Fund (the "Fund").
First Trust Advisors L.P. ("First Trust") has always believed that staying
invested in quality products and having a long-term horizon can help investors
reach their financial goals. While the past two years have been challenging,
successful investors understand that having a long-term investment perspective
through all kinds of markets can help them reach their investing goals. While
the markets showed improvement throughout 2010, First Trust is a long-term
investor and investment manager, and we will continue to bring investments we
believe fit investors with long-term goals.
The report you hold contains detailed information about your investment; a
portfolio commentary from the Fund's management team that provides a recap of
the period; a performance analysis and a market and Fund outlook. Additionally,
you will find the Fund's financial statements for the twelve months this report
covers. I encourage you to read this document and discuss it with your financial
advisor.
First Trust offers a variety of products that can fit many financial plans to
help those investors who are seeking long-term financial success and we remain
committed to bringing you quality investment solutions regardless of the
inevitable volatility the market experiences. In addition to going over your
investment plan, you may want to talk to your advisor about the investments
First Trust offers that might also fit your financial goals.
At First Trust we continue to be committed to making available up-to-date
information about your investments so you and your financial advisor have
current information on your portfolio. We value our relationship with you, and
we thank you for the opportunity to assist you in achieving your financial
goals. I look forward to 2011 and to the next edition of your Fund's report.
Sincerely,
/s/ James A. Bowen
James A. Bowen
President of First Trust/Aberdeen Global Opportunity Income Fund
Page 1
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
"AT A GLANCE"
AS OF DECEMBER 31, 2010 (UNAUDITED)
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FUND STATISTICS
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Symbol on New York Stock Exchange FAM
Common Share Price $17.36
Common Share Net Asset Value ("NAV") $17.80
Premium (Discount) to NAV (2.47)%
Net Assets Applicable to Common Shares $309,342,098
Current Monthly Distribution per Common Share (1) $0.130
Current Annualized Distribution per Common Share $1.560
Current Distribution Rate on Closing Common Share Price (2) 8.99%
Current Distribution Rate on NAV (2) 8.76%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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Common Share Price NAV
12/31/2009 16.03 16.58
1/8/2010 16.16 16.77
1/15/2010 16.39 16.82
1/22/2010 16.42 16.72
1/29/2010 16.47 16.66
2/5/2010 15.16 16.44
2/12/2010 15.44 16.52
2/19/2010 15.69 16.58
2/26/2010 16 16.73
3/5/2010 16.06 16.85
3/12/2010 16.17 17.02
3/19/2010 15.92 17.14
3/26/2010 16.34 17.08
4/1/2010 16.32 17.08
4/9/2010 16.36 17.16
4/16/2010 16.54 17.30
4/23/2010 16.89 17.33
4/30/2010 16.89 17.27
5/7/2010 15 16.60
5/14/2010 15.71 16.82
5/21/2010 14.76 16.43
5/28/2010 15.66 16.56
6/4/2010 15.06 16.35
6/11/2010 15.62 16.47
6/18/2010 15.90 16.79
6/25/2010 16.05 16.85
7/2/2010 15.70 16.60
7/9/2010 16.14 16.89
7/16/2010 16.26 16.97
7/23/2010 16.75 17.18
7/30/2010 16.96 17.42
8/6/2010 17.04 17.52
8/13/2010 17.11 17.52
8/20/2010 17.44 17.72
8/27/2010 17.29 17.67
9/3/2010 17.28 17.61
9/10/2010 17.61 17.58
9/17/2010 17.73 17.67
9/24/2010 18.03 17.92
10/1/2010 18.02 17.96
10/8/2010 18.11 18.29
10/15/2010 18.49 18.35
10/22/2010 18.03 18.19
10/29/2010 18.10 18.20
11/5/2010 17.97 18.35
11/12/2010 17.13 18.04
11/19/2010 17.38 17.86
11/26/2010 17.48 17.66
12/3/2010 17.20 17.71
12/10/2010 16.57 17.60
12/17/2010 16.50 17.54
12/23/2010 16.73 17.64
12/31/2010 17.36 17.80
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PERFORMANCE
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Average Annual Total Return
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1 Year Ended 5 Years Ended Inception (11/23/2004)
12/31/2010 12/31/2010 to 12/31/2010
Fund Performance (3)
NAV 17.90% 9.61% 9.22%
Market Value 18.93% 12.06% 7.96%
Index Performance
Blended Benchmark (4) 9.76% 8.83% 7.84%
Barclays Capital Global Emerging Markets Index 10.93% 8.21% 8.63%
Barclays Capital Global Aggregate Index 5.54% 6.66% 4.99%
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% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
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Asian Development Bank, 5.50%, 2/15/16 4.6%
European Investment Bank, 6.50%, 9/10/14 4.0
New Zealand Government Bond, 6.00%, 12/15/17 4.0
Province of Manitoba, 6.38%, 9/1/15 3.2
Australian Government, 6.00%, 2/15/17 3.0
Instituto de Credito Oficial, 5.50%, 10/11/12 2.9
South Africa Government Bond, 8.25%, 9/15/17 2.6
Indonesia Government Bond, 10.50%, 8/15/30 2.5
Turkey Government Bond, 16.00%, 3/7/12 2.4
United Kingdom Treasury, 6.00%, 12/7/28 2.3
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Total 31.5%
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% OF TOTAL
CREDIT QUALITY (6) INVESTMENTS
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AAA 27.1%
AA+ 2.9
AA 6.3
A 5.5
A- 6.0
BBB+ 1.2
BBB 3.0
BBB- 11.8
BB+ 7.0
BB 7.9
BB- 4.1
B+ 7.6
B 5.6
B- 2.8
CC 0.1
NR 1.1
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Total 100.0%
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% OF TOTAL
TOP 10 COUNTRIES (5) INVESTMENTS
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Multinational 9.0%
Canada 7.3
Indonesia 7.2
Brazil 7.1
South Africa 6.3
Mexico 6.2
United Kingdom 6.1
Australia 5.2
Turkey 4.7
Venezuela 4.6
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Total 63.7%
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% OF TOTAL
INDUSTRY CLASSIFICATION INVESTMENTS
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Government Bonds and Notes 63.8%
Supranational Bank 9.0
Special Purpose Banks 4.2
Oil, Gas & Consumable Fuels 4.0
Electric Utilities 2.0
Diversified Telecommunication Services 1.9
Commercial Banks 1.8
Household Durables 1.7
Diversified Financial Services 1.7
Import/Export Bank 1.6
Metals & Mining 1.4
Diversified Operations 1.2
Construction Materials 0.9
Paper & Forest Products 0.7
Real Estate Management & Development 0.7
Multi-Utilities 0.7
Transportation Infrastructure 0.7
Food Products 0.6
Beverages 0.4
Hotels, Restaurants & Leisure 0.4
Road & Rail 0.3
Construction & Engineering 0.3
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Total 100.0%
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(1) Most recent distribution paid or declared through 12/31/2010. 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 12/31/2010. 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 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.
(4) Blended benchmark consists of the following: Citigroup World Government
Bond Index (40.0%); JPMorgan Emerging Markets Bond Index - Global
Diversified (30.0%); JPMorgan Global Bond Index - Emerging Markets
Diversified (30.0%).
(5) Portfolio securities are included in a country based upon their underlying
credit exposure as determined by Aberdeen Asset Management Inc., the
investment sub-advisor.
(6) The credit quality information represented reflects the ratings assigned by
one or more nationally recognized statistical rating organizations
(NRSROs). For situations in which a security is rated by one or more NRSROs
and ratings are not equivalent, the ratings are averaged.
Page 2
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PORTFOLIO COMMENTARY
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SUB-ADVISOR
Aberdeen Asset Management Inc. ("Aberdeen" or the "Sub-Advisor"), a Securities
and Exchange Commission registered investment advisor, is a wholly-owned
subsidiary of Aberdeen Asset Management PLC ("Aberdeen Group"). Aberdeen Group
is a publicly-traded international investment management group listed on the
London Stock Exchange, managing assets for both institutional and retail clients
from offices around the world.
PORTFOLIO MANAGEMENT TEAM
Investment decisions for the First Trust/Aberdeen Global Opportunity Income Fund
(the "Fund") are made by Aberdeen using a team approach and not by any one
individual. By making team decisions, Aberdeen seeks to ensure that the
investment process results in consistent returns across all portfolios with
similar objectives. Aberdeen does not employ separate research analysts.
Instead, Aberdeen's investment managers combine the roles of analysis with
portfolio management. Each member of the team has sector and portfolio
responsibilities such as day-to-day monitoring of liquidity. The overall result
of this matrix approach is a high degree of cross-coverage, leading to a deeper
understanding of the securities in which Aberdeen invests.
JOHN MURPHY
Portfolio Manager, Global Bonds
Mr. Murphy joined Aberdeen with the acquisition of the Deutsche Asset Management
Group Limited ("Deutsche") fixed-income business in 2005. Mr. Murphy was also a
portfolio manager at Deutsche, and previously at Morgan Grenfell Asset
Management, which he joined in 1984.
BRETT DIMENT
Head of Emerging Market Debt
Mr. Diment joined Deutsche in 1991 as a member of the fixed-income group and
became head of the Emerging Market Debt team at Deutsche in 1999. Mr. Diment
joined Aberdeen following the Deutsche acquisition in 2005 and is now
responsible for the day-to-day management of the Emerging Market Debt team and
portfolios.
KEVIN DALY
Portfolio Manager, Emerging Market Debt
Mr. Daly joined the Emerging Market Debt team at Aberdeen in April 2007 as a
portfolio manager, having spent the previous 10 years at Standard & Poor's in
London and Singapore as a credit market analyst covering global emerging market
debt, and was head of marketing for Global Sovereign Ratings at Standard &
Poor's. Mr. Daly was a regular participant on the Global Sovereign Committee,
served as a member of the Sovereign Ratings Review Board, and was one of the
initial members of the Emerging Market Council, formed in 2006 to advise senior
management on business and market developments in emerging markets.
EDWIN GUTIERREZ
Portfolio Manager, Emerging Market Debt
Mr. Gutierrez has served as an economist specializing in Latin America at LGT
Asset Management, and more recently as a portfolio manager specializing in
emerging market fixed-income at Invesco Asset Management. He joined Deutsche in
2000 and Aberdeen in 2005.
MAX WOLMAN
Portfolio Manager, Emerging Market Debt
Mr. Wolman joined Aberdeen in January 2001 and is portfolio manager on the
Emerging Market Debt mandates. Mr. Wolman originally specialized in currency and
domestic debt analysis; however, he is now responsible for wider emerging debt
analysis, including external and corporate issuers. He is a member of the
Emerging Market Debt investment committee at Aberdeen and is also responsible
for the daily implementation of the investment process.
ESTHER CHAN
Portfolio Manager, Emerging Market Debt
Ms. Chan joined Aberdeen in Singapore in 2005 where she started as a corporate
credit analyst and trader working across investment-grade and high-yield assets
in the region. She has 6 years of experience in the asset class, and now serves
as a portfolio manager in Aberdeen London with specialization in analysis,
management and trading of external Asian debt and Emerging Market corporates.
Prior to joining Aberdeen, Ms. Chan worked as a corporate finance analyst at
John Moore, assisting in various deals focused on the debt restructuring in
Indonesian firms facing creditor holdout situations, post-Asian crisis.
COMMENTARY
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
The primary investment objective of the Fund is to seek a high level of current
income. As a secondary objective, the Fund seeks capital appreciation. The Fund
pursues its investment objectives by investing in the world bond markets through
a diversified portfolio of investment-grade and below investment-grade
government and corporate debt securities. There can be no assurance that the
Fund's investment objectives will be achieved, and the Fund may not be
appropriate for all investors.
Page 3
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PORTFOLIO COMMENTARY - (CONTINUED)
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MARKET RECAP - DEVELOPED MARKETS
Global fixed-income markets were volatile throughout 2010. Peripheral Eurozone
countries came under severe pressure from bond investors concerned over levels
of indebtedness. Yields on peripheral sovereign debt rose significantly as
investors shunned the bond market. Greece was the first peripheral nation to
undergo a crisis, followed by Ireland in the final quarter. An (euro)85 billion
bailout package for Ireland in November failed to calm the markets, as expected,
and fears about the fiscal situation in other Eurozone countries kept yield
spreads versus German bunds at record high levels. Against this backdrop, UK
gilts and German bunds performed well over the year as investors sought to find
quality.
In the U.S., after much speculation, the Federal Reserve announced further
quantitative easing ("QE2") measures. It will purchase USD600 billion in
Treasury securities by June 2011. The size of the program is more than the
market expected but the pace (USD75 billion per month) is somewhat slower.
In the UK, the year was dominated by the General Election in May, followed by
the coalition government's spending review announced in October. The spending
review outlined (pound)81 billion of spending cuts as the government tried to
reassure the bond markets that it is serious about eliminating the structural
deficit by 2015.
Over the past six months, inflation continued to disappoint to the upside, with
one Bank of England's Monetary Policy committee ("MPC") member advocating a
gradual rise in interest rates to combat higher inflation. His views were not
shared by other MPC members. Interest rates were kept steady at 0.5% in December
where they have now remained for the past 20 months. The size of the Asset
Purchase Programme also remained stable at (pound)200 billion despite MPC member
Adam Posen voting for a (pound)50 billion increase.
MARKET RECAP - EMERGING MARKETS
Emerging market debt posted healthy gains in 2010, supported by a rebound in
global growth, declining U.S. Treasury yields and robust inflows into the asset
class. Emerging market debt also benefited from the expectation of renewed QE2
by the U.S. Federal Reserve, although the market sold off after confirmation of
the news in November amid rising U.S. Treasury yields. Concerns about the
Eurozone peripheral countries weighed on emerging market debt at times, with the
Greek crisis prompting a selloff in May while the Irish crisis resulted in a
similar decline in November. For the twelve-month period, the JPMorgan Emerging
Markets Bond Index-Global Diversified ("JPM EMBI Global") gained 12.26%, while
its spread tightened 12 basis points ("bps") to 287 bps over U.S. Treasuries.
Local currency debt outperformed hard currency debt in 2010, aided by the sharp
rally in December on the back of a stronger euro, with the JPMorgan Government
Bond Index-Emerging Markets ("JPM GBI-EM") gaining 13.43%.
The notable outperformers in hard currency debt included Argentina, which posted
a gain of over 35%, while Ukraine gained over 34% and Iraq gained over 25%.
Venezuela endured several bouts of weakness but gained just over 16%. Lithuania
was the top performer in the Eastern Europe, Middle East and Africa ("EEMEA")
region with a gain of just under 16%, while Indonesia was the best performer in
Asia with a gain of 13.6%. High-grade Latin American sovereigns underperformed,
along with Turkey, Russia and the Philippines. Colombia was the top performer in
local currency debt with a gain of over 32%, while South Africa gained over 27%.
Brazil and Mexico also outperformed with gains of around 19%, while
off-benchmark countries such as Argentina, Uruguay and Indonesia also posted
strong returns. Hungary was the notable underperformer, reflecting concerns
about the policy framework of the new government and contagion risk from the
Eurozone peripheral countries.
FUND RECAP
The Fund had a net asset value ("NAV") total return1 of 17.90% and a market
value total return1 of 18.93% for the twelve months ended December 31, 2010,
compared to the blended benchmark total return2 of 9.76% over the same period.
In addition to this blended benchmark, the Fund currently uses other indexes for
comparative purposes. The total returns for the twelve months ended December 31,
2010 for these indexes were as follows: the Barclays Capital Global Emerging
Markets Index was 10.93% and the Barclays Capital Global Aggregate Index was
5.54%.
PERFORMANCE ANALYSIS - DEVELOPED MARKETS
Over the course of 2010, the Fund's developed market portfolio outperformed its
benchmark. This portion of the Fund's portfolio returned 14.13% in 2010 versus
5.17% for this part of the blended benchmark. The portfolio's investments were
concentrated in markets such as Australia, New Zealand, Canada and the UK
relative to underweight positions in Europe and Japan. This strategy produced a
positive contribution to overall returns. The Fund's overweight position in the
Australian dollar was the main contributor to outperformance during 2010 with
the currency appreciating approximately 14% versus the U.S. dollar. The Fund
also benefited from an underweight position in the Euro, which declined by 6.5%
versus the U.S. dollar.
__________________
(1) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in 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. Past performance
is not indicative of future results.
(2) The Fund's blended benchmark consists of the following: 40% Citigroup
World Government Bond Index; 30% JPMorgan Emerging Markets Bond
Index-Global Diversified; and 30% JPMorgan Global Bond Index-Emerging
Markets Diversified.
Page 4
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PORTFOLIO COMMENTARY - (CONTINUED)
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PERFORMANCE ANALYSIS - EMERGING MARKETS
The Fund outperformed in 2010 with Argentina being the top performer during the
period, benefiting from a successful reopening of the 2005 debt exchange and an
improving financing outlook. Other outperformers were Mexico local rates and
external debt, Indonesia and Uruguay inflation-linked bonds.
Ivory Coast was the top underperformer, reflecting concerns about the political
outlook following the presidential election at the end of November, and the
increased risk of default after non-payment of the USD28.75 million coupon
payment due December 31. Ivory Coast has a 30-day grace period to pay the coupon
before a default is declared. Underweight positions in Thailand and Malaysian
local bonds also detracted from performance.
There were a number of changes to the portfolio during the twelve-month period.
The Fund's portfolio reduced most of its exposure to less liquid sovereign
credits in the early part of the year, reflecting our concerns about tighter
U.S. monetary policy. The Fund's overweight exposure was reduced on Argentina
ahead of the closing of the debt exchange in June, and the Fund initiated a
small position in inflation-linked peso bonds in the third quarter. The
portfolio remained overweight Mexico, Brazil and Uruguay during the twelve-month
period, holding both hard and local currency bonds, and had an increased
overweight on Venezuela in the second half of the year. It held an overweight
position on Indonesia throughout much of the year, taking profits on hard
currency sovereign and quasi-sovereign bonds in the second quarter.
In the EEMEA region, the portfolio remained overweight Lithuania during the
period, and after selling Croatia in the first quarter, it was added back in the
third quarter. The Fund continued to invest in selective hard currency corporate
bonds across all regions, which added to performance given their higher yield
than sovereigns.
COUNTRY NEWS - EMERGING MARKETS
Argentina completed its debt exchange in June with the overall participation
reaching just over 70%, higher than the government's goal of at least 60%. Fitch
and Standard & Poor's upgraded Argentina after completion of the debt exchange,
which resulted in an exchange of default bonds that were not tendered in the
2005 debt exchange. Robust growth and relatively manageable public sector
financing needs, which have been effectively covered by Anses, the national
social security fund, further enhanced an improving credit story. In addition,
Argentine bonds were boosted by the unexpected passing of former President
Nestor Kirchner in October, reflecting the expectation of a more market-friendly
outcome in the October 2011 presidential election. Heading into year-end,
Argentine officials made positive noises on addressing an estimated USD7 billion
arrears owned to Paris Club creditors, which could bode well for country risk in
2011.
Brazil Finance Minister Mantega voiced concerns about a "currency war" amid
surging capital inflows into the country in September, and followed up the
rhetoric by increasing the IOF tax on portfolio inflows into fixed-income
instruments in October. The IOF is a tax levied on financial flows arising from
foreign exchange ("FX") spot transactions. While the market barely reacted after
the first increase from 2% to 4%, with BRL continuing to appreciate, the move to
6% (IOF on equities remained at 2%, and FDI at 0.38%) had the desired effect on
USD/BRL, which backed off its year-to-date high of 1.65 to 1.70. Unfortunately,
it also resulted in a steepening of the yield curve, as offshore investors have
been the main participants in the long end of the curve. Meanwhile, the macro
outlook remained strong over the course of the year, with growth coming in
around 7.5%, while unemployment fell to an all-time low below 7%. Inflation and
inflation expectations moved well beyond the 4.5% mid-target level, prompting
the central bank to increase the policy rate 200 bps to 10.75%. There were no
surprises on the political front, with President Lula's hand-picked successor
Dilma Rouseff winning the presidential election by a comfortable margin. As
expected, Central Bank Governor Meirelles stepped aside from his post, replaced
by Deputy Governor Tombini in December.
Venezuela bonds underperformed during the early part of 2010 due to a
deteriorating macro outlook and concerns about the regulatory environment after
the government introduced new FX trading rules, intervening on local brokerage
houses to stem the continued depreciation of the parallel exchange rate.
Concerns about the risk of new supply also weighed on Venezuela at times, but
there was a strong rally in August after the USD3 billion, 10-year issue was not
upsized. Venezuelan bonds surged after President Chavez suffered an important
electoral defeat in the congressional elections in September, with Chavismo
losing the popular vote and falling short of its objective to control two-thirds
of the 165 seats in the National Assembly (which would have given the regime
unrestricted support for the most controversial government initiatives).
Indonesia's macro outlook remained on an improving track in 2010, further
enhancing the prospects for investment-grade rating over the next several years.
Growth is expected to come in around 6% following 4.5% in 2009, with inflation
still within the official 4-6% target, albeit at the high end of the range.
Indonesian assets have also been supported by a healthy fiscal position, with a
deficit of around 1.5%, among the lowest in the world. The debt/GDP ratio has
continued to decline to around 30%, while FX reserves have increased to a record
high of just under USD100 billion.
The Central Bank of Turkey defied orthodox monetary policy by reducing its key
lending rate 50bps to 6.5% in December, despite signs of an overheating economy,
which prompted a 3% selloff on the Turkish lira. The rate cut decision was,
however, not a big surprise after Deputy Governor Basci had floated the idea a
few days earlier of reducing the policy rate, and increasing the required
reserve ratio ("RRR") in order to moderate lira appreciation and the current
account deficit. The rationale behind hiking the RRR for banks is that it should
stem credit creation, which has contributed to strong import growth and the
widening of the current account deficit (now approaching 6%). While these policy
changes are highly experimental, and are too early to judge on their potential
effectiveness, they could gain much "currency" with other emerging market policy
makers facing similar inflow pressures.
Page 5
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY - (CONTINUED)
--------------------------------------------------------------------------------
South Africa's Medium-Term Budget Policy Statement was largely in-line with
expectations, with modest growth targets over the next three years, while
inflation expectations were forecast to fall below 6%. As expected, Foreign
Minister Gordhan also announced an extensive liberalization of exchange controls
for individuals and companies, which officials hope may stem the upside pressure
on the ZAR. Meanwhile, the South Africa Reserve Bank reduced the repo rate 50bps
to a record low of 5.5%, after third quarter GDP surprised on the downside at
2.6%, with inflation remaining at the low end of the 3-6% target.
Hungarian rates were fairly volatile in the second half of the year, reflecting
concerns about contagion from the Eurozone peripheral countries, and the policy
framework of the new Fidesz government. Following a big selloff in the third
quarter, Hungarian bonds rebounded after the government agreed to adhere to the
3% fiscal deficit target under the current IMF/EU agreement. The backing came
after EU officials delivered a tough message to Hungary at the Council of the
European Union (Economic and Financial Affairs) meeting, also called "ECOFIN",
regarding the fiscal policy commitment of the previous government. While the
Fidesz government has vowed not to extend its IMF agreement when it concludes in
October, the market has been seeking clarity on whether the new regime would
maintain the fiscal deficit target, which is an important signal given that
Hungary's debt/GDP of 80% is among the highest in emerging markets.
The political landscape went through several changes in Ukraine at the start of
the year, with the election of President Yanukovich and the ousting of Prime
Minister Tymoshenko in a no-confidence vote, who was replaced by a Yanukovich
ally. Meanwhile, Ukraine agreed to an extension of financial support with the
IMF, the fiscal deficit and the 2010 budget the key areas of contention.
Ukrainian Eurobonds have posted strong gains on the year, reflecting an improved
political outlook. The political backdrop also prompted S&P to upgrade the
sovereign rating to B- from CCC+, with a positive outlook.
Ivory Coast Eurobonds sold off sharply late in the year, reflecting concerns
about the political crisis following the second round presidential election at
the end of November. After the election commission released the results showing
opposition leader Alassane Ouattara had beaten incumbent President Gbagbo,
gaining 54% of the vote, the Constitutional Court (CC), headed by an ally of
Gbagbo, overturned the election result and named Gbagbo the winner. The EU,
U.S., African leaders and the Central Bank of West African States (BCEAO) have
all recognized Ouattara as the winner while calling for Gbagbo to step down.
Despite external pressures, the impasse is showing no sign of abating, which
complicates the debt servicing of the 2032 Eurobond over the short term. While
default risk will remain elevated in the short term, we think a resolution of
the political crisis is likely, which will be positive for bond prices. Debt
servicing remains minimal and the overall debt burden is manageable, supported
by high cocoa and oil prices.
MARKET AND FUND OUTLOOK - DEVELOPED MARKETS
In the U.S., the new fiscal stimulus package and continued easy monetary
stimulus means that growth will more than likely continue to improve in the
first quarter of 2011, but whether this means an improvement in the number of
people out of work or prices increasing remains to be seen. January may see the
return of overseas buyers of Treasuries and this may halt the rise in yields.
However, after a 100 basis points increase since QE2 was announced, fresh
balance sheets may see some consolidation even if they remain absent.
European credit markets have started 2011 on a strong tone driven by positive
economic data from the U.S. However, the issue of peripheral European government
finances has not gone away and will likely come to a head in 2011. Refinancing
requirements are high across Europe and the ability of both governments and
banks to roll over debt during the year will be key to market direction.
Since the release of stronger third quarter 2010 GDP data in the UK, speculation
about the need for further monetary stimulus in the form of more quantitative
easing asset purchases has somewhat subsided. In the short term, we believe that
the market is likely to focus on inflation, inflation expectations and, in turn,
the credibility of the Bank of England. However, there are clearly some
headwinds on the horizon that may temper the economic recovery. We continue to
believe that rates will be held at historic lows for the some time.
MARKET AND FUND OUTLOOK - EMERGING MARKETS
Looking ahead to 2011, we think risk appetite should improve following a period
of weakness at the end of 2010, which was driven by concerns about Eurozone
peripheral countries, the U.S. Treasury selloff, and the usual lack of liquidity
at year-end. The latter conditions should improve as investors look to redeploy
cash, with market technicals supportive for hard currency debt. Europe will
remain a risk factor for local currency debt, as question marks around some of
the heavily-indebted, fiscally-challenged, growth-starved countries may at times
weigh on EUR/USD. Another U.S. Treasury sell-off is unlikely in the short term,
hence the backdrop for emerging market debt heading into the year remains
constructive, albeit one with more risks on the horizon compared to one year
ago.
Page 6
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) (b)
DECEMBER 31, 2010
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
------------ --------------------------------------------- ---------- ------------- --------------
BONDS AND NOTES (c) - 124.3%
ARGENTINA - 4.0%
10,551,764 Republic of Argentina (ARS) (d)............... 5.20% 02/04/18 $ 6,157,709
6,950,000 Republic of Argentina (USD) .................. 7.00% 04/17/17 6,224,661
--------------
12,382,370
--------------
AUSTRALIA - 6.5%
11,000,000 Australian Government (AUD) .................. 6.00% 02/15/17 11,586,209
8,100,000 Queensland Treasury (AUD) .................... 6.00% 10/14/15 8,388,702
--------------
19,974,911
--------------
BELARUS - 0.4%
1,150,000 Republic of Belarus (USD) .................... 8.75% 08/03/15 1,180,475
--------------
BRAZIL - 8.9%
13,600,000 Brazil Notas do Tesouro Nacional
Series F (BRL) ............................ 10.00% 01/01/13 7,882,289
11,370,000 Brazil Notas do Tesouro Nacional
Series F (BRL) ............................ 10.00% 01/01/17 6,280,377
8,380,000 Brazil Notas do Tesouro Nacional
Series F (BRL) ............................ 10.00% 01/01/21 4,449,866
2,000,000 Gerdau Trade Inc. (USD) ...................... 5.75% 01/30/21 2,015,000
2,280,000 Globo Communicacaos Participacoes
S.A. (USD) ................................ 6.25% 12/01/49 2,405,400
1,150,000 Odebrecht Finance Ltd. (USD) ................. 7.50% 09/14/15 1,165,410
630,000 Petrobras International Finance Co. (USD) .... 7.88% 03/15/19 748,125
2,350,000 Rearden G Holdings Eins GmbH (USD) ........... 7.88% 03/30/20 2,491,000
--------------
27,437,467
--------------
CANADA - 9.1%
4,840,000 Canadian Government (CAD) .................... 8.50% 06/01/11 5,014,168
1,700,000 Canadian Government (CAD) .................... 5.25% 06/01/13 1,849,038
15,000,000 Province of Manitoba (NZD) ................... 6.38% 09/01/15 12,256,033
10,965,000 Province of Ontario (NZD) .................... 6.25% 06/16/15 8,923,489
--------------
28,042,728
--------------
CHINA - 3.2%
2,600,000 China Forestry Holdings Ltd. (USD) ........... 7.75% 11/17/15 2,619,500
2,650,000 China Overseas Finance Cayman II Ltd. (USD) .. 5.50% 11/10/20 2,592,124
4,800,000 Sinochem Overseas Capital Co. Ltd. (USD) ..... 4.50% 11/12/20 4,733,520
--------------
9,945,144
--------------
COLOMBIA - 1.5%
3,230,000,000 Republic of Colombia (COP) ................... 7.75% 04/14/21 2,006,133
2,200,000 TGI International Ltd. (USD) ................. 9.50% 10/03/17 2,480,500
--------------
4,486,633
--------------
See Notes to Financial Statements Page 7
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
DECEMBER 31, 2010
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
------------ --------------------------------------------- ---------- ------------- --------------
BONDS AND NOTES (c) - (CONTINUED)
DOMINICAN REPUBLIC - 1.7%
1,350,000 AES Andres Dominicana/Itabo
Dominicana (USD) .......................... 9.50% 11/12/20 $ 1,410,750
1,770,000 Cerveceria Nacional Dominicana (USD) (d)...... 16.00% 03/27/12 1,654,950
2,066,000 Dominican Republic (USD) ..................... 8.63% 04/20/27 2,324,250
--------------
5,389,950
--------------
EGYPT - 2.5%
31,000,000 Egypt Treasury Bills (EGP) ................... (e) 01/11/11 5,332,587
14,700,000 Egypt Treasury Bills (EGP) ................... (e) 02/08/11 2,511,282
--------------
7,843,869
--------------
EL SALVADOR - 2.1%
700,000 Republic of El Salvador (USD) ................ 8.25% 04/10/32 780,500
3,230,000 Republic of El Salvador (USD) ................ 7.65% 06/15/35 3,431,875
2,300,000 Telemovil Finance Co. Ltd. (USD) ............. 8.00% 10/01/17 2,380,500
--------------
6,592,875
--------------
GERMANY - 1.3%
3,650,000 KfW International Finance (CAD) .............. 4.95% 10/14/14 3,970,556
--------------
HONG KONG - 0.8%
2,290,000 CFG Investment S.A.C. (USD) .................. 9.25% 12/19/13 2,410,225
--------------
HUNGARY - 1.6%
771,070,000 Hungary Government Bond (HUF) ................ 6.00% 10/24/12 3,641,524
328,000,000 Hungary Government Bond (HUF) ................ 5.50% 02/12/16 1,423,497
--------------
5,065,021
--------------
INDONESIA - 9.0%
14,000,000,000 Indonesian Government Bond (IDR) ............. 12.50% 03/15/13 1,758,209
42,200,000,000 Indonesian Government Bond (IDR) ............. 10.75% 05/15/16 5,460,895
77,400,000,000 Indonesian Government Bond (IDR) ............. 10.50% 08/15/30 9,537,613
3,200,000,000 Indonesian Government Bond (IDR) ............. 9.50% 07/15/31 361,506
7,170,000,000 Indonesian Recapitalization Bond (IDR) ....... 13.40% 02/15/11 802,818
14,200,000,000 Indonesian Recapitalization Bond (IDR) ....... 13.45% 08/15/11 1,651,818
1,000,000 Indosat Palapa Co. B.V. (USD) ................ 7.38% 07/29/20 1,110,000
3,220,000 Majapahit Holding B.V. (USD) ................. 7.75% 10/17/16 3,738,867
700,000 PT Adaro Indonesia (USD) ..................... 7.63% 10/22/19 768,250
2,200,000 Star Energy Geothermal (Wayang Windu)
Ltd. (USD) ................................ 11.50% 02/12/15 2,513,500
--------------
27,703,476
--------------
IVORY COAST - 1.2%
8,350,000 Ivory Coast Government Bond (USD) ............ 2.50% 12/31/32 3,757,500
--------------
KAZAKHSTAN - 2.6%
1,743,160 BTA Bank JSC (USD) (f) ....................... 10.75% 07/01/18 1,889,150
Page 8 See Notes to Financial Statements
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
DECEMBER 31, 2010
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
------------ --------------------------------------------- ---------- ------------- --------------
BONDS AND NOTES (c) - (CONTINUED)
KAZAKHSTAN - (CONTINUED)
5,501,197 BTA Bank JSC (USD) (d) (g).................... 0.00% 07/01/20 $ 436,426
394,970 BTA Bank JSC (USD) ........................... 7.20% 07/01/25 285,366
800,000 Develoment Bank of Kazakhstan
(USD) ..................................... 5.50% 12/20/15 809,000
450,000 Kazakhstan Temir Zholy (USD) ................. 6.38% 10/06/20 471,960
1,710,000 KazMunaiGaz Finance Sub B.V. (USD) ........... 7.00% 05/05/20 1,786,950
2,450,000 Kazmunaygas National Co. (USD) ............... 6.38% 04/09/21 2,425,500
--------------
8,104,352
--------------
LITHUANIA - 1.6%
2,390,000 Republic of Lithuania (USD) .................. 6.75% 01/15/15 2,602,113
1,980,000 Republic of Lithuania (USD) .................. 7.38% 02/11/20 2,200,275
--------------
4,802,388
--------------
MALAYSIA - 0.6%
1,400,000 Petronas Capital Ltd. (USD) .................. 7.88% 05/22/22 1,799,175
--------------
MEXICO - 7.7%
1,610,000 Axtel S.A.B. de C.V. (USD) ................... 9.00% 09/22/19 1,537,550
2,320,000 Corp. Geo S.A. de C.V. (USD) ................. 8.88% 09/25/14 2,615,800
1,150,000 Corp. Geo S.A. de C.V. (USD) ................. 9.25% 06/30/20 1,308,125
1,020,000 Cororativo Javer S.A. de C.V. (USD) .......... 13.00% 08/04/14 1,157,700
2,400,000 Desarrolladora Homex S.A. (USD) .............. 9.50% 12/11/19 2,760,000
1,600,000 Grupo Posadas S.A.B. de C.V. (USD) ........... 9.25% 01/15/15 1,480,000
87,800,000 Mexican Bonos Desarr Fixed Rate
Bond (MXN) ................................ 8.00% 06/11/20 7,649,620
32,950,000 Mexican Bonos Desarr Fixed Rate
Bond (MXN) ................................ 10.00% 11/20/36 3,313,409
25,900,000 Mexico Cetes (MXN) ........................... (e) 03/10/11 2,079,340
--------------
23,901,544
--------------
MULTINATIONAL - 11.2%
17,600,000 Asian Development Bank (AUD) ................. 5.50% 02/15/16 17,563,383
18,800,000 European Investment Bank (NZD) ............... 6.50% 09/10/14 15,435,721
1,500,000 Nordic Investment Bank (AUD) ................. 5.38% 01/18/11 1,534,053
--------------
34,533,157
--------------
NEW ZEALAND - 5.0%
19,150,000 New Zealand Government Bond (NZD) ............ 6.00% 12/15/17 15,408,495
--------------
NIGERIA - 0.8%
2,350,000 GTB Finance B.V. (USD) ....................... 8.50% 01/29/12 2,405,930
--------------
PHILIPPINES - 0.3%
1,000,000 Alliance Global Group, Inc. (USD) ............ 6.50% 08/18/17 987,200
--------------
POLAND - 1.7%
15,770,000 Poland Government Bond (PLN) ................. 5.75% 09/23/22 5,192,162
--------------
See Notes to Financial Statements Page 9
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
DECEMBER 31, 2010
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
------------ --------------------------------------------- ---------- ------------- --------------
BONDS AND NOTES (c) - (CONTINUED)
QATAR - 0.9%
2,630,000 State of Qatar (USD) ......................... 6.40% 01/20/40 $ 2,866,700
--------------
RUSSIA - 3.1%
1,750,000 Alfa Bank (USD) .............................. 7.88% 09/25/17 1,789,375
1,200,000 Alrosa Finance S.A. (USD) .................... 7.75% 11/03/20 1,266,000
1,200,000 LUKOIL International Finance B.V. (USD) ...... 7.25% 11/05/19 1,295,520
700,000 Russian Railways (USD) ....................... 5.74% 04/03/17 730,065
2,000,000 Severstal Steel Capital (USD) ................ 6.70% 10/25/17 1,977,500
2,500,000 Vnesheconombank (USD) ........................ 6.90% 07/09/20 2,628,750
--------------
9,687,210
--------------
SOUTH AFRICA - 7.8%
64,400,000 Republic of South Africa (ZAR) ............... 8.25% 09/15/17 9,954,075
61,000,000 Republic of South Africa (ZAR) ............... 7.25% 01/15/20 8,760,637
29,900,000 Republic of South Africa (ZAR) ............... 10.50% 12/21/26 5,417,721
--------------
24,132,433
--------------
SPAIN - 3.6%
11,500,000 Instituto de Credito Oficial (AUD) ........... 5.50% 10/11/12 11,264,249
--------------
TURKEY - 5.8%
12,645,000 Turkey Government Bond (TRY) ................. 16.00% 03/07/12 9,045,843
5,400,000 Turkey Government Bond (TRY) ................. (e) 04/25/12 3,210,132
3,700,000 Turkey Government Bond (USD) ................. 5.63% 03/30/21 3,887,405
1,700,000 Yasar Holdings (USD) ......................... 9.63% 10/07/15 1,754,825
--------------
17,898,205
--------------
UKRAINE - 2.3%
6,043,000 EX-IM Bank of Ukraine (USD) .................. 7.65% 09/07/11 6,148,753
1,000,000 Ukraine Government Bond (USD) ................ 6.39% 06/26/12 1,024,800
--------------
7,173,553
--------------
UNITED ARAB EMIRATES - 0.8%
2,680,000 Dubai Electricity & Water Authority (USD) .... 7.38% 10/21/20 2,510,750
--------------
UNITED KINGDOM - 7.6%
5,060,000 United Kingdom Treasury (GBP) ................ 9.00% 07/12/11 8,237,186
1,200,000 United Kingdom Treasury (GBP) ................ 8.00% 12/07/15 2,375,468
4,600,000 United Kingdom Treasury (GBP) ................ 6.00% 12/07/28 8,975,412
2,520,000 United Kingdom Treasury (GBP) ................ 4.25% 12/07/49 4,013,195
--------------
23,601,261
--------------
URUGUAY - 1.4%
54,430,000 Republic Orient Uruguay, Inflation Adjusted
Bond (UYU) (h)............................. 5.00% 09/14/18 4,236,344
--------------
Page 10 See Notes to Financial Statements
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
DECEMBER 31, 2010
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
------------ --------------------------------------------- ---------- ------------- --------------
BONDS AND NOTES (c) - (CONTINUED)
VENEZUELA - 5.7%
11,400,000 Petroleos de Venezuela S.A. (USD) ............ 8.50% 11/02/17 $ 7,723,500
3,300,000 Republic of Venezuela (USD) .................. 8.50% 10/08/14 2,805,000
9,720,000 Republic of Venezuela (USD) .................. 5.75% 02/26/16 6,901,200
400,000 Republic of Venezuela (USD) .................. 7.75% 10/13/19 273,000
---------------
17,702,700
---------------
TOTAL INVESTMENTS (i) - 124.3% ............................ 384,391,008
(Cost $349,835,831)
OUTSTANDING LOANS - (28.7%) ............................... (88,594,711)
NET OTHER ASSETS AND LIABILITIES - 4.4% ................... 13,545,801
---------------
NET ASSETS - 100.0% ....................................... $ 309,342,098
---------------
---------------------------------------------------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) All portfolio securities serve as collateral for the outstanding loans.
(c) Portfolio securities are included in a country based upon their underlying
credit exposure as determined by Aberdeen Asset Management Inc., the Fund's
sub-advisor.
(d) Variable rate security. The interest rate shown reflects the rate in effect
at December 31, 2010.
(e) Zero coupon bond.
(f) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date. The interest rate shown reflects the rate in effect at
December 31, 2010.
(g) Recovery units issued under BTA Bank's restructuring plan. Recovery
payments are dependent on future performance.
(h) Security whose principal value is adjusted in accordance with changes to
the country's Consumer Price Index. Interest is calculated on the basis of
the current adjusted principal value.
(i) Aggregate cost for federal income tax purposes is $364,180,081. As of
December 31, 2010, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$25,719,379 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$5,508,452.
Currency Abbreviations:
ARS Argentine Peso
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
COP Colombian Peso
EGP Egyptian Pound
GBP British Pound Sterling
HUF Hungarian Forint
IDR Indonesian Rupiah
MXN Mexican Peso
NZD New Zealand Dollar
PLN Polish Zloty
TRY Turkish Lira
USD United States Dollar
UYU Uruguayan Peso
ZAR South African Rand
See Notes to Financial Statements Page 11
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
PORTFOLIO OF INVESTMENTS (A) (B) - (CONTINUED)
DECEMBER 31, 2010
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2010 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2010 PRICES INPUTS INPUTS
------------ -------------- -------------- -------------
Foreign Corporate Bonds and Notes*................ $138,986,453 $ -- $ 138,986,453 $ --
Foreign Sovereign Bonds and Notes*................ 245,404,555 -- 245,404,555 --
------------ -------------- -------------- -------------
Total Investments................................. 384,391,008 -- 384,391,008 --
Forward Foreign Currency Contracts**.............. 1,041,415 -- 1,041,415 --
------------ -------------- -------------- -------------
Total ............................................ $385,432,423 $ -- $ 385,432,423 $ --
============ ============== ============== =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2010 PRICES INPUTS INPUTS
------------ -------------- -------------- -------------
Forward Foreign Currency Contracts**.............. $ (3,054,089) $ -- $ (3,054,089) $ --
============ ============== ============== =============
* See the Portfolio of Investments for country breakout.
** See the Schedule of Forward Foreign Currency Contracts for contract and
currency detail.
Page 12 See Notes to Financial Statements
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
DECEMBER 31, 2010
FORWARD FOREIGN CURRENCY CONTRACTS
-----------------------------------------------------------------------
PURCHASE SALE
VALUE AS OF VALUE AS OF UNREALIZED
SETTLEMENT COUNTER- AMOUNT AMOUNT DECEMBER 31, DECEMBER 31, APPRECIATION
DATE PARTY PURCHASED (A) SOLD (A) 2010 2010 (DEPRECIATION)
------------ --------- --------------------- ------------------- ---------------- ---------------- -------------
01/21/11 MOR GBP 3,998,000 USD 6,300,718 $ 6,232,218 $ 6,300,718 $ (68,500)
01/21/11 CIT HUF 1,156,620,000 USD 5,785,993 5,547,430 5,785,993 (238,563)
01/21/11 CIT NZD 1,223,000 USD 932,048 951,262 932,048 19,214
01/21/11 MOR NZD 443,000 USD 330,824 344,570 330,824 13,746
01/21/11 CIT PLN 749,000 USD 272,330 252,659 272,330 (19,671)
03/03/11 JPM USD 8,479,297 BRL 14,949,000 8,479,297 8,883,849 (404,552)
01/21/11 DUB USD 10,498,419 CAD 10,676,000 10,498,419 10,732,857 (234,438)
01/21/11 CIT USD 904,329 GBP 570,000 904,329 888,535 15,794
01/21/11 MOR USD 29,395,474 GBP 18,514,000 29,395,474 28,860,251 535,223
01/21/11 JPM USD 5,908,312 HUF 1,189,241,000 5,908,312 5,703,889 204,423
03/03/11 JPM USD 2,828,241 IDR 25,708,706,000 2,828,241 2,826,551 1,690
01/21/11 DUB USD 258,220 NZD 345,000 258,220 268,344 (10,124)
01/21/11 GSI USD 51,388,328 NZD 68,463,000 51,388,328 53,251,234 (1,862,906)
01/21/11 CIT USD 5,688,371 PLN 16,118,000 5,688,371 5,437,046 251,325
01/21/11 CIT USD 2,588,909 ZAR 17,806,000 2,588,909 2,694,280 (105,371)
01/21/11 JPM USD 1,989,051 ZAR 13,872,000 1,989,051 2,099,015 (109,964)
--------------
Net Unrealized Appreciation (Depreciation)............................................................... $ (2,012,674)
==============
(a) Please see page 11 for currency descriptions.
Counterparty Abbreviations:
CIT Citibank, NA
DUB Deutsche Bank
GSI Goldman Sachs International
JPM JPMorgan Chase
MOR Morgan Stanley
See Notes to Financial Statements Page 13
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2010
ASSETS:
Investments, at value
(Cost $349,835,831).......................................................................... $ 384,391,008
Cash .......................................................................................... 6,976,145
Foreign currency (Cost $1,704,398)............................................................. 1,740,581
Unrealized appreciation on forward foreign currency contracts.................................. 1,041,415
Prepaid expenses............................................................................... 18,388
Interest receivable............................................................................ 7,429,712
_______________
Total Assets............................................................................ 401,597,249
_______________
LIABILITIES:
Outstanding loans.............................................................................. 88,594,711
Unrealized depreciation on forward foreign currency contracts.................................. 3,054,089
Payables:
Investment advisory fees..................................................................... 334,958
Interest and fees on loans................................................................... 75,334
Custodian fees............................................................................... 56,242
Audit and tax fees........................................................................... 54,200
Printing fees................................................................................ 34,884
Administrative fees.......................................................................... 28,457
Legal fees................................................................................... 15,202
Transfer agent fees.......................................................................... 3,428
Trustees' fees and expenses.................................................................. 34
Other liabilities.............................................................................. 3,612
_______________
Total Liabilities....................................................................... 92,255,151
_______________
NET ASSETS..................................................................................... $ 309,342,098
===============
NET ASSETS CONSIST OF:
Paid-in capital................................................................................ $ 296,847,215
Par value...................................................................................... 173,768
Accumulated net investment income (loss)....................................................... (11,669,678)
Accumulated net realized gain (loss) on investments, forward foreign currency
contracts and
foreign currency transactions................................................................ (9,975,234)
Net unrealized appreciation (depreciation) on investments, forward foreign
currency contracts and
foreign currency translation................................................................. 33,966,027
_______________
NET ASSETS..................................................................................... $ 309,342,098
===============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)........................... $ 17.80
===============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).... 17,376,792
===============
Page 14 See Notes to Financial Statements
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
INVESTMENT INCOME:
Interest (net of foreign withholding tax of $110,306).......................................... $ 28,535,986
Other.......................................................................................... 10,313
_____________
Total investment income................................................................. 28,546,299
_____________
EXPENSES:
Investment advisory fees....................................................................... 3,879,473
Interest and fees on loans..................................................................... 1,434,627
Administrative fees............................................................................ 330,836
Custodian fees................................................................................. 271,030
Printing fees.................................................................................. 115,642
Legal fees..................................................................................... 94,893
Audit and tax fees............................................................................. 54,215
Trustees' fees and expenses.................................................................... 39,662
Transfer agent fees............................................................................ 38,472
Other.......................................................................................... 110,110
_____________
Total expenses.......................................................................... 6,368,960
_____________
NET INVESTMENT INCOME (LOSS)................................................................... 22,177,339
_____________
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................................................. 23,741,182
Forward foreign currency contracts........................................................... (3,561,944)
Foreign currency transactions................................................................ (1,300,952)
_____________
Net realized gain (loss)....................................................................... 18,878,286
_____________
Net change in unrealized appreciation (depreciation) on:
Investments.................................................................................. 9,275,717
Forward foreign currency contracts........................................................... (3,055,340)
Foreign currency translation................................................................. 985,435
_____________
Net change in unrealized appreciation (depreciation)........................................... 7,205,812
_____________
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ 26,084,098
_____________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 48,261,437
=============
See Notes to Financial Statements Page 15
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
12/31/2010 12/31/2009
______________ ______________
OPERATIONS:
Net investment income (loss)...................................................... $ 22,177,339 $ 25,417,705
Net realized gain (loss).......................................................... 18,878,286 (22,871,032)
Net change in unrealized appreciation (depreciation).............................. 7,205,812 92,218,536
_____________ ______________
Net increase (decrease) in net assets resulting from operations................... 48,261,437 94,765,209
_____________ ______________
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................. (27,092,773) (11,723,220)
Net realized gain................................................................. -- --
Return of capital................................................................. -- (15,366,548)
_____________ ______________
Total distributions to shareholders............................................... (27,092,773) (27,089,768)
_____________ ______________
CAPITAL TRANSACTIONS:
Proceeds from Common Shares reinvested............................................ 212,053 --
_____________ ______________
Net increase (decrease) in net assets resulting from capital transactions......... 212,053 --
_____________ ______________
Total increase (decrease) in net assets........................................... 21,380,717 67,675,441
NET ASSETS:
Beginning of period............................................................... 287,961,381 220,285,940
_____________ ______________
End of period..................................................................... $309,342,098 $ 287,961,381
============= ==============
Accumulated net investment income (loss) at end of period......................... $(11,669,678) $ (13,259,486)
============= ==============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period.............................................. 17,365,236 17,365,236
Common Shares issued as reinvestment under the Dividend Reinvestment Plan......... 11,556 --
_____________ ______________
Common Shares at end of period.................................................... 17,376,792 17,365,236
============= ==============
Page 16 See Notes to Financial Statements
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations....... $ 48,261,437
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash provided by operating activities:
Purchases of investments........................................... (374,742,426)
Sales and maturities of investments................................ 390,854,887
Net amortization/accretion of premiums/discounts on investments.... (2,029,512)
Net realized gain/loss on investments.............................. (23,741,182)
Net change in unrealized appreciation/depreciation on forward foreign
currency contracts............................................... 3,055,340
Net change in unrealized appreciation/depreciation on investments.. (9,275,717)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in interest receivable.................................... 793,818
Decrease in prepaid expenses....................................... 46,966
Decrease in interest and fees on loans payable..................... (37,516)
Increase in investment advisory fees payable....................... 14,521
Increase in audit and tax fees payable............................. 2,200
Decrease in legal fees payable..................................... (48,511)
Increase in printing fees payable.................................. 3,429
Increase in administrative fees payable............................ 1,027
Increase in custodian fees payable................................. 20,303
Increase in transfer agent fees payable............................ 433
Increase in Trustees' fees and expenses payable.................... 34
Increase in other liabilities payable.............................. 1,715
_______________
CASH PROVIDED BY OPERATING ACTIVITIES................................. $ 33,181,246
_______________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of Common Shares reinvested............................... 212,053
Distributions to Common Shareholders from net investment income.... (27,092,773)
_______________
CASH USED IN FINANCING ACTIVITIES..................................... (26,880,720)
_______________
Increase in cash and foreign currency (a)............................. 6,300,526
Cash and foreign currency at beginning of period...................... 3,332,678
Unrealized appreciation/depreciation on Euro Loan..................... (916,478)
_______________
Cash and foreign currency at end of period............................ $ 8,716,726
===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees..................... $ 1,472,143
===============
-------------------------------------------------------
(a) Includes net change in unrealized appreciation/depreciation on foreign
currency of $36,572.
See Notes to Financial Statements Page 17
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006
____________ ___________ ___________ ___________ ___________
Net asset value, beginning of period ............. $ 16.58 $ 12.69 $ 18.54 $ 19.07 $ 19.24
____________ ___________ ___________ ___________ ___________
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)...................... 1.28 1.47 1.46 1.34 1.38
Net realized and unrealized gain (loss)........... 1.50 3.98 (5.75) (0.17) 0.48
____________ ___________ ___________ ___________ ___________
Total from investment operations.................. 2.78 5.45 (4.29) 1.17 1.86
____________ ___________ ___________ ___________ ___________
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income............................. (1.56) (0.68) (1.56) (0.79) (1.31)
Net realized gain................................. -- -- -- (0.55) (0.47)
Return of capital................................. -- (0.88) -- (0.36) (0.25)
____________ ___________ ___________ ___________ ___________
Total from distributions.......................... (1.56) (1.56) (1.56) (1.70) (2.03)
____________ ___________ ___________ ___________ ___________
Net asset value, end of period ................... $ 17.80 $ 16.58 $ 12.69 $ 18.54 $ 19.07
============ =========== =========== =========== ===========
Market value, end of period ...................... $ 17.36 $ 16.03 $ 10.40 $ 16.54 $ 19.15
============ =========== =========== =========== ===========
TOTAL RETURN BASED ON NET ASSET VALUE (A)......... 17.90% 47.48% (23.14)% 6.92% 10.72%
============ =========== =========== =========== ===========
TOTAL RETURN BASED ON MARKET VALUE (A)............ 18.93% 73.98% (29.39)% (5.01)% 27.33%
============ =========== =========== =========== ===========
--------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)................ $309,342 $287,961 $220,286 $322,016 $331,138
Ratio of total expenses to average net assets .... 2.13% 2.57% 3.55% 4.45% 4.04%
Ratio of total expenses to average net assets
excluding interest expense and fees on loans ... 1.65% 1.77% 1.83% 1.82% 1.79%
Ratio of net investment income to average net assets 7.41% 9.90% 8.72% 7.10% 7.19%
Portfolio turnover rate........................... 101% 72% 66% 97% 99%
INDEBTEDNESS:
Loans outstanding (in 000's)...................... $ 88,595 $89,511 $89,101 $144,624 $152,482
Asset coverage per $1,000 of indebtedness (b)..... $ 4,492 $ 4,217 $ 3,472 $3,227 $ 3,172
--------------------------------------------------
(a) Total return is based on the combination of reinvested dividend,
capital gain and return of capital distributions, if any, at prices
obtained by the Dividend Reinvestment Plan, and changes in net asset
value per share for net asset value returns and changes in Common
Share price for market value returns. Total returns do not reflect
sales load and are not annualized for periods less than one year. Past
performance is not indicative of future results.
(b) Calculated by taking the Fund's total assets less the Fund's total
liabilities (not including the loans outstanding), and dividing by the
outstanding loan balance in 000's.
Page 18 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010
1. FUND DESCRIPTION
First Trust/Aberdeen Global Opportunity Income Fund (the "Fund") is a
diversified, closed-end management investment company organized as a
Massachusetts business trust on September 7, 2004 and is registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund trades under the ticker symbol FAM
on the New York Stock Exchange ("NYSE").
The Fund's primary investment objective is to seek a high level of current
income. As a secondary objective, the Fund seeks capital appreciation. The Fund
pursues these objectives by investing its Managed Assets in the world bond
markets through a diversified portfolio of investment grade and below-investment
grade government and corporate debt securities. "Managed Assets" means the
average daily total asset value of the Fund minus the sum of the Fund's
liabilities other than the principal amount of borrowings, if any. 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 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 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. Domestic debt securities
and 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 in accordance with valuation procedures
adopted by the Fund's Board of Trustees and in accordance with provisions of the
1940 Act. The Fund's securities will be valued as follows:
Bond, notes and other debt securities are valued on the basis of
valuations provided by dealers who make markets in such securities or by
an independent pricing service approved by the Fund's Board of Trustees,
which may use the following valuation inputs when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Currency linked notes, credit linked notes, interest rate swaps and
credit default swaps, if any, are valued using a pricing service or, if
the pricing service does not provide a value, by quotes provided by the
selling dealer or financial institution.
Debt securities having a remaining maturity of sixty days or less when
purchased or valued at cost adjusted for amortization of premiums and
accretion of discounts.
In the event that market quotations are not readily available, the pricing
service does not provide a valuation for a particular asset, or the valuations
are deemed unreliable, the Fund's Board of Trustees has designated First Trust
Advisors L.P. ("First Trust") to use a fair value method to value the Fund's
securities and other investments. Additionally, if events occur after the close
of the principal market for particular securities (e.g., domestic debt and
foreign securities), but before the Fund values its assets, that could
materially affect NAV, First Trust may use a fair value method to value the
Fund's securities and other investments. The use of fair value pricing by the
Fund is governed by valuation procedures adopted by the Fund's Board of
Trustees, and in accordance with the provisions of the 1940 Act. As a general
principle, the fair value of a security is the amount which the Fund might
reasonably expect to receive for the security upon its current sale. However, in
light of the judgment involved in fair valuations, there can be no assurance
that a fair value assigned to a particular security will be the amount which the
Fund might be able to receive upon its current sale. Fair valuation of a
security will be based on the consideration of all available information,
including, but not limited to, the following:
Page 19
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010
1) the fundamental business data relating to the issuer, or economic
data relating to the country of issue;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of security;
4) the financial statements of the issuer, or the financial condition
of the country of issue;
5) the credit quality and cash flow of the issuer, or country of issue,
based on the Sub-Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities (or
equity securities) of the issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt only);
11) the economic, political and social prospects/developments of the
country of issue and the assessment of the country's governmental
leaders/officials (for sovereign debt only);
12) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry (for corporate debt only); and
13) other relevant factors.
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 securities. An active market is a market in which transactions
for the security 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 securities in active markets.
o Quoted prices for identical or similar securities in markets
that are non-active. A non-active market is a market where
there are few transactions for the security, 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
security (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 security.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value the Fund's investments as of December 31, 2010 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.
Interest income is recorded daily on the accrual basis. Amortization of premiums
and accretion of discounts are recorded using the effective interest method.
Securities purchased on a when-issued, delayed-delivery or forward purchase
commitment basis may have extended settlement periods. The value of the security
so purchased is subject to market fluctuations during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of its
when-issued, delayed-delivery or forward purchase commitments until payment is
made. At December 31, 2010, the Fund had no when-issued, delayed-delivery or
forward purchase commitments.
C. CREDIT LINKED NOTES:
The Fund invests in credit linked notes. Credit linked notes are securities that
are collateralized by one or more designated securities that are referred to as
"reference securities." Through the purchase of a credit linked note, the buyer
assumes the risk of the default or, in some cases, other declines in credit
quality of the reference securities. The buyer also takes on exposure to the
issuer of the credit linked note in the full amount of the purchase price of the
note. The issuer of a credit linked note normally will have hedged its risk on
the reference securities without acquiring any additional credit exposure. The
Fund has the right to receive periodic interest payments from the issuer of the
credit linked note at an agreed-upon interest rate, and, if there has been no
default or, if applicable, other declines in credit quality, a return of
principal at the maturity date.
Page 20
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010
Credit linked notes are subject to credit risk of the reference securities
underlying the credit linked notes. If one of the underlying reference
securities defaults, or suffers certain other declines in credit quality, the
Fund may, instead of receiving repayment of principal in whole or in part,
receive the security that has defaulted.
Credit linked notes typically are privately negotiated transactions between two
or more parties. The Fund bears the risk that the issuer of the credit linked
note will default or become bankrupt. The Fund bears the risk of loss of the
principal amount it invested, and the periodic interest payments expected to be
received for the duration of its investment in the credit linked note.
The market for credit linked notes may suddenly become illiquid. The other
parties to the transaction may be the only investors with sufficient
understanding of the derivative to be interested in bidding for it. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for credit linked notes. In certain cases, a market price for a credit
linked note may not be available.
D. FORWARD FOREIGN CURRENCY CONTRACTS:
The Fund is subject to foreign currency risk in the normal course of pursuing
its investment objectives. Forward foreign currency contracts are agreements to
exchange one currency for another at a future date and at a specified price. The
Fund uses forward foreign currency contracts to facilitate transactions in
foreign securities and to manage the Fund's foreign currency exposure. These
contracts are valued daily, and the Fund's net equity therein, representing
unrealized gain or loss on the contracts as measured by the difference between
the forward foreign exchange rates at the dates of entry into the contracts and
the forward rates at the reporting date, is included in "Unrealized
appreciation/(depreciation) on forward foreign currency contracts" on the
Statement of Assets and Liabilities. When the forward contract is closed, the
Fund records a realized gain or loss equal to the difference between the
proceeds from (or the cost of) the closing transaction and the Fund's basis in
the contract. This realized gain or loss is included in "Net realized gain
(loss) on forward foreign currency contracts" on the Statement of Operations.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from movement in currency and securities values and interest
rates. Due to the risks, the Fund could incur losses in excess of the net
unrealized value shown on the Schedule of Forward Foreign Currency Contracts.
During the year ended December 31, 2010, the open and close notional values of
forward foreign currency contracts were $935,427,708 and $923,513,992,
respectively.
E. FOREIGN CURRENCY:
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statement of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statement of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received. The portion of foreign
currency gains and losses related to fluctuations in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in "Net
realized gain (loss) on foreign currency transactions" on the Statement of
Operations.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Fund will distribute to holders of its Common Shares monthly dividends of
all or a portion of its net income after the payment of interest and dividends
in connection with leverage. 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.
Distributions from net investment income and realized capital gains are
determined in accordance with income tax regulations, which may differ from
accounting principles generally accepted in the United States of America.
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 net asset value 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 time in the
future. Permanent differences incurred during the year ended December 31, 2010,
resulting in book and tax accounting differences, have been reclassified at year
end to reflect an increase in accumulated net investment income (loss) of
$6,505,242, an increase in accumulated net realized gain (loss) of $2,522,945
and a decrease to paid-in capital of $9,028,187. Net assets were not affected by
these reclassifications.
The tax character of distributions paid during the years ended December 31, 2010
and December 31, 2009 was as follows:
Page 21
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010
2010 2009
Distributions paid from:
Ordinary income.................................. $27,092,773 $11,723,220
Capital gain..................................... -- --
Return of capital................................ -- 15,366,548
As of December 31, 2010, 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............. (9,315,025)
Net unrealized appreciation (depreciation)....... 21,636,140
____________
Total accumulated earnings (losses).............. 12,321,115
Paid-in capital.................................. 297,020,983
____________
Net assets....................................... $309,342,098
============
G. 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 (the "Code"), which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal or state income taxes.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under 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. At December 31, 2010, the
Fund had a capital loss carryforward for federal income tax purposes of
$8,457,603, expiring on December 31, 2017. During the year ended December 31,
2010, the Fund utilized capital loss carryforwards in the amount of $20,281,148.
Certain losses realized after October 31 may be deferred and treated as
occurring on the first day of the following fiscal year. For the fiscal year
ended December 31, 2010, the Fund intends to elect to defer net realized
currency losses of $857,422 incurred between November 1, 2010 and December 31,
2010.
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 2007, 2008,
2009 and 2010 remain open to federal and state audit. As of December 31, 2010,
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.
On December 22, 2010, President Obama signed into law the Regulated Investment
Company Modernization Act of 2010 effective for tax years beginning after
December 22, 2010. Management is currently evaluating the impact the Act will
have on future financial statement disclosures.
H. EXPENSES:
The Fund pays all expenses directly related to its operations.
I. NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements." ASU No. 2010-06 amends FASB Accounting Standards
Codification Topic 820, Fair Value Measurements and Disclosures, to require
additional disclosures regarding fair value measurements. Certain disclosures
required by ASU No. 2010-06 are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years. Management
is currently evaluating the impact ASU No. 2010-06 will have on the Fund's
financial statement disclosures, if any.
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. 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 services, First Trust is entitled to a monthly fee calculated at
an annual rate of 1.00% of the Fund's Managed Assets.
Page 22
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010
Aberdeen Asset Management Inc. ("Aberdeen" or the "Sub-Advisor") 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 out of its investment advisory fee.
James A. Bowen, the President of First Trust, on October 12, 2010, acquired 100%
of the voting stock of The Charger Corporation, the general partner of First
Trust (the "Transaction"). The consummation of the Transaction was deemed to be
an "assignment" (as defined in the 1940 Act) of the Fund's investment management
agreement and investment sub-advisory agreement and resulted in the automatic
termination of the agreements. The Transaction is not expected to impact the
day-to-day operations of the Fund.
The Board of Trustees of the Fund approved an interim investment management
agreement with First Trust and an interim investment sub-advisory agreement,
which were entered into effective upon the closing of the Transaction and would
be in effect for a maximum period of 150 days. A new investment management
agreement with First Trust and a new investment sub-advisory agreement have been
approved by the Board of Trustees of the Fund and were submitted to shareholders
of the Fund as of the record date (September 30, 2010) for approval to take
effect upon such shareholder approval. A special shareholder meeting of the Fund
to vote on a proposal to approve the new investment management agreement and the
new investment sub-advisory agreement was held on December 20, 2010, at which
time the new investment management agreement and new investment sub-advisory
agreement were approved by the Fund's shareholders. Until December 20, 2010,
advisory fees payable to First Trust and Aberdeen were held in escrow. See
Submission of Matters to a Vote of Shareholders, in the Additional Information
section of this report, for the results.
BNY Mellon Investment Servicing (US) Inc. (formerly PNC Global Investment
Servicing (U.S.) Inc.) serves as the Fund's Administrator, Fund Accountant and
Transfer Agent in accordance with certain fee arrangements. PFPC Trust Company,
which will be renamed BNY Mellon Investment Servicing Trust Company effective
July 1, 2011, serves as the Fund's Custodian in accordance with certain fee
arrangements.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor,
or any of their affiliates ("Independent Trustees"), is paid an annual retainer
of $10,000 per trust for the first 14 trusts of the First Trust Fund Complex and
an annual retainer of $7,500 per trust for each subsequent trust in the First
Trust Fund Complex. The annual retainer is allocated equally among each of the
trusts. No additional meeting fees are paid in connection with Board or
Committee meetings.
Additionally, the Lead Independent Trustee is paid $10,000 annually, the
Chairman of the Audit Committee is paid $5,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and Valuation Committee are
paid $2,500 annually to serve in such capacities, with such compensation paid by
the trusts in the First Trust Fund Complex and equally allocated among those
trusts. Trustees are also reimbursed by the trusts in the First Trust Fund
Complex for travel and out-of-pocket expenses in connection with all meetings.
The Lead Independent Trustee and each Committee chairman serve two-year terms
before rotating to serve as chairman of another Committee or as Lead Independent
Trustee. The officers and "Interested" Trustee receive no compensation from the
trusts for serving in such capacities.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, other than U.S.
government obligations and short-term obligations, for the year ended December
31, 2010, were $374,742,426 and $390,854,887, respectively.
5. BORROWINGS
The Fund has entered into a credit agreement with The Bank of Nova Scotia, which
provides for a revolving credit facility to be used as leverage for the Fund.
The revolving credit facility provides for a secured line of credit for the Fund
where Fund assets are pledged against advances made to the Fund. Under the
requirements of the 1940 Act, the Fund, immediately after any such borrowings,
must have an "asset coverage" of at least 300% (33-1/3% of the Fund's total
assets after borrowings). The total commitment under the facility is up to
$100,000,000. As of December 31, 2010, the Fund had three loans outstanding
under the revolving credit facility totaling $88,594,711. The three loans, which
are all LIBOR loans, bear interest based on the adjusted LIBOR rate and are in
the amounts of $46,000,000, $30,000,000 and $12,594,711 (the U.S. Dollar
equivalent of a (euro)9,425,000 loan). For the year ended December 31, 2010, the
average amount outstanding was $88,509,177. The high and low annual interest
rates during the year ended December 31, 2010 were 2.08% and 1.48%,
respectively, and the weighted average interest rate was 1.56%. The weighted
average interest rate at December 31, 2010 was 1.58%. The revolving credit
facility was originally scheduled to expire on January 5, 2011 but was extended
through January 4, 2012 with a total commitment of up to $110,000,000. The Fund
pays a commitment fee of 0.15% on any day that the loan balances exceed 50% of
the total commitment and 0.30% at all other times, which is included in
"Interest and fees on loans" on the Statement of Operations. Prior to January 6,
2011, the Fund paid a commitment fee of 0.30% on any day that the loan balances
exceeded 50% of the total commitment and 0.50% at all other times.
6. 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.
Page 23
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010
7. RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some 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.
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, which include a global bond portfolio of
investment grade and below-investment grade government and corporate debt
securities. 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
bond market, 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.
NON-INVESTMENT GRADE SECURITIES RISK: The Fund may invest up to 60% of its
Managed Assets in non-investment grade securities. Non-investment grade
securities are rated below "Baa3" by Moody's Investors Service, Inc., below
"BBB-" by Standard & Poor's, or comparably rated by another nationally
recognized statistical rating organization or, if unrated, determined by the
Sub-Advisor to be of comparable credit quality. Non-investment grade debt
instruments are commonly referred to as "high yield" or "junk" bonds, are
considered speculative with respect to the issuer's capacity to pay interest and
repay principal and are susceptible to default or decline in market value due to
adverse economic and business developments. The market values for high yield
securities tend to be very volatile, and these securities are less liquid than
investment grade debt securities.
EMERGING MARKETS RISK: The Fund may invest in fixed-income securities of issuers
located in countries considered to be emerging markets. Investments in such
securities are considered speculative. In addition to the general risks of
investing in non-U.S. securities, heightened risks of investing in emerging
markets securities include: smaller market capitalization of securities markets,
which may suffer periods of relative illiquidity; significant price volatility;
restrictions on foreign investment; and possible restrictions on repatriation of
investment income and capital. Furthermore, foreign investors may be required to
register the proceeds of sales, and future economic or political crises could
lead to price controls, forced mergers, expropriation or confiscatory taxation,
seizure, nationalization or creation of government monopolies. The currencies of
emerging market countries may experience significant declines against the U.S.
dollar, and devaluation may occur subsequent to investments in these currencies
by the Fund. Inflation and rapid fluctuations in inflation rates have had, and
may continue to have, negative effects on the economies and securities markets
of certain emerging market countries.
FIXED-INCOME SECURITIES RISK: Debt securities, including high yield securities,
are subject to certain risks, including: (i) issuer risk, which is the risk that
the value of fixed-income securities may decline for a number of reasons which
directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services; (ii)
reinvestment risk, which is the risk that income from the Fund's portfolio will
decline if the Fund invests the proceeds from matured, traded or called bonds at
market interest rates that are below the Fund portfolio's current earnings rate;
(iii) prepayment risk, which is the risk that during periods of declining
interest rates, the issuer of a security may exercise its option to prepay
principal earlier than scheduled, forcing the Fund to reinvest in lower yielding
securities; and (iv) credit risk, which is the risk that a security in the
Fund's portfolio will decline in price or the issuer fails to make interest
payments when due because the issuer of the security experiences a decline in
its financial status.
INTEREST RATE RISK: The Fund is also subject to interest rate risk. Interest
rate risk is the risk that fixed-income securities will decline in value because
of changes in market interest rates. Investments in debt securities with
long-term maturities may experience significant price declines if long-term
interest rates increase.
NON-U.S. ISSUER RISK: Investments in the securities and instruments of non-U.S.
issuers involve certain considerations and risks not ordinarily associated with
investments in securities and instruments of U.S. issuers. Non-U.S. companies
are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to U.S. companies.
Non-U.S. securities exchanges, brokers and listed companies may be subject to
less government supervision and regulation than exists in the United States.
Dividend and interest income may be subject to withholding and other non-U.S.
taxes, which may adversely affect the net return on such investments. There may
be difficulty in obtaining or enforcing a court judgment abroad.
CURRENCY RISK: The value of securities denominated or quoted in foreign
currencies may be adversely affected by fluctuations in the relative currency
exchange rates and by exchange control regulations. The Fund's investment
performance may be negatively affected by a devaluation of a currency in which
the Fund's investments are denominated or quoted. Further, the Fund's investment
performance may be significantly affected, either positively or negatively, by
currency exchange rates because the U.S. dollar value of securities denominated
Page 24
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NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010
or quoted in another currency will increase or decrease in response to changes
in the value of such currency in relation to the U.S. dollar. While certain of
the Fund's non-U.S. dollar-denominated securities may be hedged into U.S.
dollars, hedging may not alleviate all currency risks.
CREDIT LINKED NOTES RISK: The Fund may invest up to 35% of its Managed Assets in
credit linked notes. Credit linked notes are subject to credit risk of the
reference securities underlying the credit linked notes. If one of the
underlying reference securities defaults or suffers certain other declines in
credit quality, the Fund may, instead of receiving repayment of principal in
whole or in part, receive the security that has defaulted. The Fund also bears
the risk that the issuer of the credit linked note will default or become
bankrupt. The Fund bears the risk of loss of the principal amount it invested
and the periodic interest payments expected to be received for the duration of
its investment in the credit linked note.
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. The rights of lenders to receive payments of interest on and
repayments of principal on any borrowings made by the Fund under a leverage
borrowing program are senior to the rights of holders of Common Shares with
respect to payment of dividends or upon 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, including dividends and
distributions with respect to Common Shares or purchase Common Shares.
GOVERNMENT SECURITIES RISK: The ability of a government issuer, especially in an
emerging market country, to make timely and complete payments on its debt
obligations will be strongly influenced by the government issuer's balance of
payments, including export performance, its access to international credits and
investments, fluctuations of interest rates and the extent of its foreign
reserves. A country whose exports are concentrated in a few commodities or whose
economy depends on certain strategic imports could be vulnerable to fluctuations
in international prices of these commodities or imports. To the extent that a
country receives payment for its exports in currencies other than U.S. dollars,
its ability to make debt payments denominated in U.S. dollars could be adversely
affected. If a government issuer cannot generate sufficient earnings from
foreign trade to service its external debt, it may need to depend on continuing
loans and aid from foreign governments, commercial banks, and multinational
organizations. There are no bankruptcy proceedings similar to those in the
United States by which defaulted government debt may be collected. Additional
factors that may influence a government issuer's ability or willingness to
service debt include, but are not limited to, a country's cash flow situation,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of its debt service burden to the economy as a whole, and the
issuer's policy towards the International Monetary Fund, the International Bank
for Reconstruction and Development and other international agencies to which a
government debtor may be subject.
NON-U.S. GOVERNMENT SECURITIES RISK: Economies and social and political climates
in individual countries may differ unfavorably from the United States. Non-U.S.
economies may have less favorable rates of growth of gross domestic product,
rates of inflation, currency valuation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many countries have
experienced extremely high rates of inflation for many years. Unanticipated
economic, political and social developments may also affect the values of the
Fund's investments and limit the availability of additional investments in such
countries. Furthermore, such developments may significantly disrupt the
financial markets or interfere with the Fund's ability to enforce its rights
against non-U.S. government issuers.
Investments in debt instruments of issuers located in emerging market countries
are considered speculative. Heightened risks of investing in emerging markets
government debt include: smaller market capitalization of securities markets,
which may suffer periods of relative illiquidity; significant price volatility;
restrictions on foreign investment; and possible repatriation of investment
income and capital. Furthermore, foreign investors may be required to register
the proceeds of sales and future economic or political crises could lead to
price controls, forced mergers, expropriation or confiscatory taxation, seizure,
nationalization or creation of government monopolies. The currencies of emerging
market countries may experience significant declines against the U.S. dollar,
and devaluation may occur subsequent to investments in these currencies by the
Fund. Inflation and rapid fluctuations in inflation rates have had, and may
continue to have, negative effects on the economies and securities markets of
certain emerging market countries.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events to the date the
financial statements were issued, and has determined that, besides those
subsequent events that have already been disclosed, there were subsequent events
as follows:
On January 20, 2011, the Fund declared a dividend of $0.13 per share to Common
Shareholders of record on February 3, 2011, payable on February 15, 2011.
On February 22, 2011, the Fund declared a dividend of $0.13 per share to Common
Shareholders of record on March 3, 2011, payable on March 15, 2011.
Page 25
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST/ABERDEEN GLOBAL
OPPORTUNITY INCOME FUND:
We have audited the accompanying statement of assets and liabilities of First
Trust/Aberdeen Global Opportunity Income Fund (the "Fund"), including the
portfolio of investments and schedule of forward foreign currency contracts, as
of December 31, 2010, the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of investments owned as of December 31, 2010 by correspondence with the Fund's
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Trust/Aberdeen Global Opportunity Income Fund as of December 31, 2010, the
results of its operations and its cash flows for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 25, 2011
Page 26
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ADDITIONAL INFORMATION
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FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010 (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 27
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ADDITIONAL INFORMATION - (CONTINUED)
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FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010 (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 Forms N-Q
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.
NYSE CERTIFICATION INFORMATION
In accordance with Section 303A-12 of the NYSE Listed Company Manual, the Fund's
President has certified to the NYSE that, as of June 14, 2010, he was not aware
of any violation by the Fund of NYSE corporate governance listing standards. In
addition, the Fund's reports to the SEC on Form N-CSR and N-Q contain
certifications by the Fund's principal executive officer and principal financial
officer to the Fund's public disclosure in such reports and that are required by
Rule 30a-2 under the 1940 Act.
TAX INFORMATION
The Fund meets the requirements of Section 853 of the Code and elects to pass
through to its shareholders credit for foreign taxes paid. The total amount of
income received by the Fund from sources within foreign countries and
possessions of the United States is $25,620,621 (representing a total of $1.47
per share). The total amount of taxes paid to such countries is $110,306
(representing a total of $0.01 per share).
Of the ordinary income (including short-term capital gain) distributions made by
the Fund during the year ended December 31, 2010, none qualified for the
corporate dividends received deduction available to corporate shareholders or as
qualified dividend income.
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, Energy Income and
Growth Fund, First Trust Enhanced Equity Income Fund, First Trust/Aberdeen
Global Opportunity Income Fund, First Trust/FIDAC Mortgage Income Fund, First
Trust Strategic High Income Fund, First Trust Strategic High Income Fund II,
First Trust/Aberdeen Emerging Opportunity Fund, First Trust Strategic High
Income Fund III, First Trust Specialty Finance and Financial Opportunities Fund
and First Trust Active Dividend Income Fund was held on April 14, 2010. At the
Annual Meeting, Trustees James A. Bowen and Niel B. Nielson were elected by the
Common Shareholders of the First Trust/Aberdeen Global Opportunity Income Fund
as Class III Trustees for a three-year term expiring at the Fund's annual
meeting of shareholders in 2013. The number of votes cast in favor of Mr. Bowen
was 14,823,647, the number of votes against was 296,565 and the number of
abstentions was 2,245,024. The number of votes cast in favor of Mr. Nielson was
14,807,221, the number of votes against was 312,991 and the number of
abstentions was 2,245,024. Richard E. Erickson, Thomas R. Kadlec and Robert F.
Keith are the other current and continuing Trustees.
A special meeting of shareholders of the Fund was held on December 20, 2010. At
the meeting, shareholders approved a new investment management agreement between
the Fund and First Trust and a new investment sub-advisory agreement between the
Fund, First Trust and Aberdeen. 8,855,130 (50.99%) of the outstanding voting
securities were voted at the meeting. The number of votes cast in favor of the
new investment management agreement was 8,127,417, the number of votes against
was 274,659, and the number of abstentions was 453,053. The number of votes cast
in favor of the new investment sub-advisory agreement was 8,130,233, the number
of votes against was 266,589 and the number of abstentions was 458,308. The
terms of the new investment management agreement and new investment sub-advisory
agreement are substantially similar to the terms of the previous agreements.
INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Board Considerations Regarding Approval of Investment Management and
Sub-Advisory Agreements
The Board of Trustees of First Trust/Aberdeen Global Opportunity Income Fund
(the "Fund"), including the Independent Trustees, approved the Interim
Investment Management Agreement and the New Investment Management Agreement
(collectively, the "Advisory Agreements") between the Fund and First Trust
Advisors L.P. (the "Advisor") and the Interim Investment Sub-Advisory Agreement
and New Investment Sub-Advisory Agreement (collectively, the "Sub-Advisory
Agreements" and together with the Advisory Agreements, the "Agreements") among
the Fund, the Advisor and Aberdeen Asset Management Inc. (the "Sub-Advisor"), at
a meeting held on September 20, 2010. The Board determined that the terms of the
Agreements are fair and reasonable and that the Agreements are in the best
interests of the Fund. The Board also determined that it believes that the scope
and quality of services to be provided to the Fund under the Agreements will be
at least equivalent to the scope and quality of services provided under the
current Investment Management Agreement with the Advisor and the current
Investment Sub-Advisory Agreement among the Fund, the Advisor and the
Sub-Advisor (collectively, the "Original Agreements").
Page 28
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ADDITIONAL INFORMATION - (CONTINUED)
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FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010 (UNAUDITED)
On August 25, 2010, the Independent Trustees were informed that James A. Bowen,
the President of the Advisor and a Trustee and Chairman of the Board of the
Fund, had entered into an agreement to acquire 100% of the common stock of The
Charger Corporation, the general partner of the Advisor (the "Transaction"), the
consummation of which would constitute a "change of control" of the Advisor and
would result in the "assignment" and termination of the current Investment
Management Agreement and may also result in the "assignment" and termination of
the current Investment Sub-Advisory Agreement pursuant to their terms and in
accordance with Section 15 of the Investment Company Act of 1940, as amended
(the "1940 Act"). On August 31, 2010, counsel to the Independent Trustees
forwarded to Mr. Bowen and the Advisor a request for information regarding the
Transaction. In anticipation of the consummation of the Transaction, the Board
at its meeting held on September 20, 2010, considered the information provided
by Mr. Bowen and the Advisor in response to the Independent Trustees' request
for information and considered the approval of the Agreements.
To reach its determination, the Board considered its duties under the 1940 Act,
as well as under the general principles of state law in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; the
fiduciary duty of investment advisors with respect to advisory agreements and
compensation; the standards used by courts in determining whether investment
company boards have fulfilled their duties; and the factors to be considered by
the Board in voting on such agreements. In connection with its deliberations
regarding the Agreements, the Board noted the Advisor's representation that
apart from their effective and termination dates and any provisions of the
Interim Investment Management Agreement and Interim Investment Sub-Advisory
Agreement required by Rule 15a-4 under the 1940 Act, the Advisory Agreements and
Sub-Advisory Agreements were the same in all material respects as the Original
Agreements. The Board noted that it had recently considered the Advisor's and
Sub-Advisor's capabilities and the terms of the Original Agreements at a meeting
held on March 21-22, 2010 and had determined to renew the Original Agreements
for an additional one-year term (the "2010 Renewal"). The Board considered that
in connection with the 2010 Renewal, it had received a report from each of the
Advisor and the Sub-Advisor that, among other things, outlined the services
provided by the Advisor and the Sub-Advisor (including the relevant personnel
responsible for these services and their experience); the advisory and
sub-advisory fees for the Fund as compared to fees charged to other clients of
the Advisor and the Sub-Advisor and as compared to fees charged by investment
advisors and sub-advisors to comparable funds; expenses of the Fund as compared
to expense ratios of comparable funds; the nature of expenses incurred in
providing services to the Fund and the potential for economies of scale, if any;
financial data on the Advisor and the Sub-Advisor; any fall out benefits to the
Advisor and the Sub-Advisor; and information on the Advisor's and the
Sub-Advisor's compliance programs. Prior to the September meeting, the Advisor
represented to the Board that there had been no material changes to the
information provided in March 2010 and that the Board could continue to rely on
such information. In addition, the Sub-Advisor represented to the Board that,
except for updates to its Form ADV and a new chief compliance officer, there had
been no material changes to the information provided in March 2010 and that the
Board could continue to rely on such information.
Because the Board determined that any differences between the Original
Agreements and the Agreements were immaterial, the Board determined that much of
its previous analysis in connection with the 2010 Renewal applied to its review
and consideration of the Agreements. Accordingly, the Board took note of such
prior analysis and supplemented it with the additional considerations noted
below. The Independent Trustees also met separately with their independent legal
counsel to discuss the Transaction and their consideration of the Agreements.
In reviewing the Agreements, the Board considered the nature, quality and extent
of services to be provided by the Advisor and the Sub-Advisor under the
Agreements. The Board noted that the Transaction was not expected to result in
any changes to the personnel of the Advisor and Sub-Advisor responsible for
providing services to the Fund. The Board also considered the representations of
both the Advisor and the Sub-Advisor that there will be no diminution in
services provided under the Agreements. In light of the information presented
and the considerations made at the September meeting, including the
considerations made in connection with the 2010 Renewal, the Board concluded
that the nature, quality and extent of services to be provided to the Fund by
the Advisor and the Sub-Advisor under the Agreements are expected to be
satisfactory.
The Board considered the advisory and sub-advisory fees payable under the
Agreements, noting that they would be the same as the fees payable under the
Original Agreements. The Board considered that in connection with the 2010
Renewal it had reviewed the advisory fees charged by the Advisor to similar
funds and other non-fund clients, and had noted that the Advisor does not
provide advisory services to clients with investment objectives and policies
similar to the Fund's other than to another closed end fund to which an
identical advisory fee rate was charged. The Board also considered that it had
reviewed information provided by the Sub-Advisor as to the fees it charges to
other clients, noting that the Sub-Advisor does not manage any other closed-end
funds directly comparable to the Fund, but that the sub-advisory fee is
generally lower than the fees the Sub-Advisor charges to the other North
American closed-end fixed income and equity funds that it manages. The Board
also considered performance information for the Fund, including the Fund's
quarterly performance report, which is part of the process that the Board has
established for monitoring the Fund's performance and portfolio risk on an
ongoing basis. In light of the information presented on the fees and performance
of the Fund and the considerations made at the September meeting, including the
Page 29
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ADDITIONAL INFORMATION - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010 (UNAUDITED)
considerations made in connection with the 2010 Renewal, the Board concluded
that the advisory and sub-advisory fees were reasonable and appropriate in light
of the nature, quality and extent of services expected to be provided by the
Advisor and Sub-Advisor under the Agreements.
The Board noted that the Advisor has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board concluded that the advisory fee
continues to reflect an appropriate level of sharing of any economies of scale
at current asset levels. The Board noted that in connection with the 2010
Renewal it had reviewed the costs of the services provided and profits realized
by the Advisor from serving as investment manager to the Fund for the twelve
months ended December 31, 2009. The Board considered its prior conclusion that
the Advisor's profitability appeared to be not excessive in light of the
services provided to the Fund. The Board considered whether the Advisor derives
any ancillary benefits from its relationship with the Fund and noted that the
typical fall out benefits to the Advisor such as soft dollars are not present.
The Board noted that the Advisor will receive compensation from the Fund for
providing fund reporting services. The Board concluded that any other fall out
benefits received by the Advisor or its affiliates would appear to be limited.
The Board considered the Sub-Advisor's representation in connection with the
2010 Renewal that because it manages the Fund in a similar fashion to other
accounts it is able to achieve economies of scale through relationships with
brokers, administrative systems and other efficiencies and that while it expects
operating costs in general to continue to rise, it continues to expect to
experience the benefits of economies of scale. The Board considered that the
sub-advisory fee rate was negotiated at arm's length between the Advisor and the
Sub-Advisor, an unaffiliated third party. The Board noted that the Sub-Advisor
does not maintain any soft-dollar arrangements and that the Sub-Advisor
indicated that it does not receive any material fall out benefits from its
relationship to the Fund.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, determined that the terms of the
Agreements are fair and reasonable and that the approval of the Agreements is in
the best interests of the Fund. No single factor was determinative in the
Board's analysis.
Page 30
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010 (UNAUDITED)
NUMBER OF
PORTFOLIOS IN
THE FIRST OTHER
TRUST TRUSTEESHIPS OR
NAME, ADDRESS, TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS
DATE OF BIRTH AND AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY HELD BY
POSITION WITH THE FUND SERVICE(1) DURING PAST 5 YEARS TRUSTEE TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Three Year Physician; President, Wheaton 67 None
c/o First Trust Advisors L.P. Term Orthopedics; Co-owner and Co-Director
120 E. Liberty Drive, (January 1996 to May 2007), Sports
Suite 400 Med Center for Fitness; Limited
Wheaton, IL 60187 o Since Fund Partner, Gundersen Real Estate
D.O.B.: 04/51 Inception Limited Partnership; Member,
Sportsmed LLC
Thomas R. Kadlec, Trustee o Three Year President (March 2010 to Present), 67 Director of ADM
c/o First Trust Advisors L.P. Term Senior Vice President and Chief Investor
120 E. Liberty Drive, Financial Officer (May 2007 to March Services, Inc.
Suite 400 o Since Fund 2010), Vice President and Chief and ADM
Wheaton, IL 60187 Inception Financial Officer (1990 to May 2007), Investor
D.O.B.: 11/57 ADM Investor Services, Inc. (Futures Services
Commission Merchant) International
Robert F. Keith, Trustee o Three Year President (2003 to Present), 67 None
c/o First Trust Advisors L.P. Term Hibs Enterprises (Financial and
120 E. Liberty Drive, Management Consulting)
Suite 400 o Since June
Wheaton, IL 60187 2006
D.O.B.: 11/56
Niel B. Nielson, Trustee o Three Year President (June 2002 67 Director of
c/o First Trust Advisors L.P. Term to Present), Covenant Covenant
120 E. Liberty Drive, College Transport Inc.
Suite 400 o Since Fund
Wheaton, IL 60187 Inception
D.O.B.: 03/54
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen, Trustee, o Three Year Chief Executive Officer (December 2010 67 Trustee of
President, Chairman of the Board Trustee to Present), President (until Wheaton College
and CEO(2) Term and December 2010), First Trust Advisors
120 E. Liberty Drive, Indefinite L.P. and First Trust Portfolios L.P.;
Suite 400 Officer Chairman of the Board of Directors,
Wheaton, IL 60187 Term BondWave LLC (Software Development
D.O.B.: 09/55 Company/Investment Advisor) and
o Since Fund Stonebridge Advisors LLC (Investment
Inception Advisor)
---------------------
(1) Currently, Robert F. Keith, as a Class I Trustee, is serving as a trustee
until the Fund's 2011 annual meeting of shareholders. Richard E. Erickson
and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until
the Fund's 2012 annual meeting of shareholders. James A. Bowen and Niel B.
Nielson, as Class III Trustees, are serving as trustees until the Fund's
2013 annual meeting of shareholders. Officers of the Fund have an
indefinite term. The term "officer" means the president, vice president,
secretary, treasurer, controller or any other officer who performs a
policy making function.
(2) Mr. Bowen is deemed an interested person of the Fund due to his position
of Chief Executive Officer of First Trust Advisors L.P., investment advisor
of the Fund.
Page 31
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010 (UNAUDITED)
TERM OF OFFICE
NAME, ADDRESS AND POSITION AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
DATE OF BIRTH WITH FUND SERVICE DURING PAST 5 YEARS
-----------------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES (3)
-----------------------------------------------------------------------------------------------------------------------------------
Mark R. Bradley Treasurer, Chief o Indefinite term Chief Operating Officer
120 E. Liberty Drive, Financial Officer (December 2010 to Present) and
Suite 400 and Chief Accounting o Since Fund Chief Financial Officer,
Wheaton, IL 60187 Officer Inception First Trust Advisors L.P.
D.O.B.: 11/57 and First Trust Portfolios
L.P.; Chief Financial
Officer, BondWave LLC
(Software Development
Company/Investment Advisor)
and Stonebridge Advisors LLC
(Investment Advisor)
Erin E. Chapman Assistant Secretary o Indefinite term Assistant General Counsel
120 E. Liberty Drive, (October 2007 to Present),
Suite 400 o Since June 2009 Associate Counsel (March
Wheaton, IL 60187 2006 to October 2007), First
D.O.B.: 08/76 Trust Advisors L.P. and
First Trust Portfolios L.P.;
Associate Attorney (November
2003 to March 2006), Doyle &
Bolotin, Ltd.
James M. Dykas Assistant Treasurer o Indefinite term Controller (January 2011 to
120 E. Liberty Drive, Present) and Senior Vice President
Suite 400 o Since Fund (April 2007 to Present),
Wheaton, IL 60187 Inception Vice President (January 2005 to
D.O.B.: 01/66 April 2007), First Trust
Advisors L.P. and First
Trust Portfolios L.P.
Christopher R. Fallow Assistant Vice o Indefinite term Assistant Vice President
120 E. Liberty Drive, President (August 2006 to Present),
Suite 400 o Since Fund Associate (January 2005 to
Wheaton, IL 60187 Inception August 2006), First Trust
D.O.B.: 04/79 Advisors L.P. and First
Trust Portfolios L.P.
W. Scott Jardine Secretary o Indefinite term General Counsel, First Trust
120 E. Liberty Drive, Advisors L.P., First Trust
Suite 400 o Since Fund Portfolios L.P. and BondWave
Wheaton, IL 60187 Inception LLC (Software Development
D.O.B.: 05/60 Company/Investment Advisor);
Secretary of Stonebridge
Advisors LLC (Investment Advisor)
Daniel J. Lindquist Vice President o Indefinite term Senior Vice President
120 E. Liberty Drive, (September 2005 to Present),
Suite 400 o Since Fund First Trust Advisors L.P. and
Wheaton, IL 60187 Inception First Trust Portfolios L.P.
D.O.B: 02/70
Coleen D. Lynch Assistant Vice o Indefinite term Assistant Vice President
120 E. Liberty Drive, President (January 2008 to Present),
Suite 400 o Since July 2008 First Trust Advisors L.P. and
Wheaton, IL 60187 First Trust Portfolios L.P.;
DOB: 07/58 Vice President (May 1998 to
January 2008), Van Kampen
Asset Management and Morgan
Stanley Investment Management
Kristi A. Maher Assistant Secretary o Indefinite term Deputy General Counsel (May
120 E. Liberty Drive, and Chief Compliance 2007 to Present), Assistant
Suite 400 Officer o Assistant General Counsel (March 2004 to
Wheaton, IL 60187 Secretary since May 2007), First Trust
D.O.B.: 12/66 Fund Inception Advisors L.P. and First Trust
Portfolios L.P.
o Chief
Compliance
Officer since
January 2011
---------------------
(3) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 32
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN GLOBAL OPPORTUNITY INCOME FUND
DECEMBER 31, 2010 (UNAUDITED)
PRIVACY POLICY
The open-end and closed-end funds advised by First Trust Advisors L.P. (each a
"Fund") value our relationship with you and consider your privacy an important
priority in maintaining our relationship. We are committed to protecting the
security and confidentiality of your personal information.
SOURCES OF INFORMATION
We may collect nonpublic personal information about you from the following
sources:
o Information we receive from you or your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies."
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required by law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives and
printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information with affiliates of the Fund.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, the Fund restricts access to
your nonpublic personal information to those individuals who need to know that
information to provide products or services to you. We maintain physical,
electronic and procedural safeguards to protect your nonpublic personal
information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time; however if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at (800)
621-1675 (First Trust Portfolios) or (800) 222-6822 (First Trust Advisors).
Page 33
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[LOGO OMITTED]
First Trust
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard
Philadelphia, PA 19153
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
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code
of ethics description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set
forth in paragraph (b) of this item's instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
trustees has determined that Thomas
R. Kadlec and Robert F. Keith are qualified to serve as audit committee
financial experts serving on its audit committee and that each of them is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees (Registrant) -- The aggregate fees billed for each of the
last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements were $46,800 for 2009 and
$46,800 for 2010.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each
of the last two fiscal years, for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under paragraph
(a) of this Item were $0 for 2009 and $0 for 2010.
Audit-Related Fees (Investment Adviser) -- The aggregate fees billed
in each of the last two fiscal years of the registrant for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were $0 for 2009 and $0 for 2010.
(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $5,200
for 2009 and $5,215.18 for 2010. These fees were for tax preparation.
Tax Fees (Investment Adviser) -- The aggregate fees billed in each of
the last two fiscal years of the registrant for professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning to
the registrant's adviser were $0 for 2009 and $0 for 2010.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of
the last two fiscal years for products and services provided by the principal
accountant to the registrant, other than the services reported in paragraphs (a)
through (c) of this Item were $0 for 2009 and $0 for 2010.
All Other Fees (Investment Adviser) -- The aggregate fees billed in
each of the last two fiscal years for products and services provided by the
principal accountant to the registrant's investment adviser, other than services
reported in paragraphs (a) through (c) of this Item were $0 for 2009 and $0 for
2010.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) for the registrant and the registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the pre-approval
exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the Registrant for 2009 were $5,200
and $36,000 for the Registrant and the Registrant's investment adviser,
respectively, and for 2010 were $5,215.18 and $6,000, for the Registrant and the
Registrant's investment adviser, respectively.
(h) The Registrant's audit committee of its Board of Trustees determined
that the provision of non-audit services that were rendered to the Registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the Registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately designated audit committee consisting of
all the independent trustees of the Registrant. The members of the audit
committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson
and Robert F. Keith.
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.
The Proxy Voting Policies are attached herewith.
ABERDEEN U.S. REGISTERED ADVISERS
PROXY VOTING POLICIES AND PROCEDURES
AS OF FEBRUARY 8, 2010
The following are proxy voting policies and procedures ("Policies and
Procedures") adopted by affiliated investment advisers registered with the U.S.
Securities and Exchange Commission ("SEC") under the Investment Advisers Act of
1940, as amended ("Advisers Act"), that are subsidiaries of Aberdeen Asset
Management PLC ("AAM"); including, specifically, Aberdeen Asset Management Inc.,
a Delaware Corporation, ("Aberdeen US"), Aberdeen Asset Management Asia Limited,
a Singapore Corporation ("Aberdeen Singapore"), Aberdeen Asset Management
Limited, an Australian Corporation ("Aberdeen AU"), and Aberdeen Asset
Management Investment Services Limited, a UK Corporation ("AAMISL"),
(collectively referred to herein as "Aberdeen Advisers" and each an "Aberdeen
Adviser") (collectively with AAM, "Aberdeen"). These Policies and Procedures
address proxy voting considerations under U.S. law and regulation and under
Canadian securities laws. These Policies and Procedures do not address the laws
or requirements of other jurisdictions.
Each of the Aberdeen Advisers provides advisory resources to certain U.S.
clients, including substantive advice on voting proxies for certain equity
securities. These Policies and Procedures are adopted to ensure compliance by
the Aberdeen Advisers with Rule 206(4)-6 under the Advisers Act and other
applicable fiduciary obligations under rules and regulations of the SEC and
interpretations of its staff with respect to proxies for voting securities held
by client portfolios.
Clients may consist of investment companies registered under the Investment
Company Act of 1940, as amended ("1940 Act") ("Funds" and each a "Fund"), and
other U.S. residents as well as non-U.S. registered funds or clients. Each
Aberdeen Adviser follows these Policies and Procedures for each of its
respective U.S. clients as required under the Advisers Act and other applicable
law, unless expressly directed by a client in writing to refrain from voting
that client IS proxies or to vote in accordance with the client's proxy voting
policies and procedures. Aberdeen Advisers who advise or subadvise the Funds
follow both these Policies and Procedures and the proxy voting policies and
procedures adopted by the Funds and their respective Boards of Directors or
Trustees. Aberdeen Advisers located outside the U.S. may provide proxy voting
services to their non-U.S. based clients in accordance with the jurisdiction in
which the client is located. Aberdeen US, Aberdeen Singapore and Aberdeen AU
will provide proxy voting services to Canadian investment funds in accordance
with National Instrument 81-106 - Investment Fund Continuous Disclosure.
I. DEFINITIONS
A. "Best interest of clients". Clients' best economic interests over the long
term that is, the common interest that all clients share in seeing the value of
a common investment increase over time. Clients may have differing political or
social interests, but their best economic interest is generally uniform.
B. "Material conflict of interest". Circumstances when an Aberdeen Adviser or
any member of senior management, portfolio manager or portfolio analyst
knowingly does business with a particular proxy issuer or closely affiliated
entity, which may appear to create a material conflict between the interests of
the Aberdeen Adviser and the interests of its clients in how proxies of that
issuer are voted. A material conflict of interest might also exist in unusual
circumstances when Aberdeen has actual knowledge of a material business
arrangement between a particular proxy issuer or closely affiliated entity and
an affiliate of an Aberdeen Adviser.
II. GENERAL VOTING POLICIES
A. Client's Best Interest. These Policies and Procedures are designed and
implemented in a way that is reasonably expected to ensure that proxies are
voted in the best interests of clients. Proxies are voted with the aim of
furthering the best economic interests of clients, promoting high levels of
corporate governance and adequate disclosure of company policies, activities and
returns, including fair and equal treatment of stockholders.
B. Shareholder Activism. Aberdeen Advisers seek to develop relationships with
the management of portfolio companies to encourage transparency and improvements
in the treatment of employees, owners and stakeholders. Thus, Aberdeen Advisers
may engage in dialogue with the management of portfolio companies with respect
to pending proxy voting issues.
C. Case-by-Case Basis. These Policies and Procedures are guidelines. Each vote
is ultimately cast on a case-by-case basis, taking into consideration the
contractual obligations under the advisory agreement or comparable document, and
all other relevant facts and circumstances at the time of the vote. Aberdeen
Advisers may cast proxy votes in favor of management proposals or seek to change
the views of management, considering specific issues as they arise on their
merits. Aberdeen Advisers may also join with other investment managers in
seeking to submit a shareholder proposal to a company or to oppose a proposal
submitted by the company. Such action may be based on fundamental, social,
environmental or human rights grounds.
D. Individualized. These Policies and Procedures are tailored to suit Aberdeen's
advisory business and the types of securities portfolios Aberdeen Advisers
manage. To the extent that clients (e.g., investment companies, corporations,
pension plans) have adopted their own procedures, Aberdeen Advisers may vote the
same securities differently depending upon clients' directions.
E. Material Conflicts of Interest. Material conflicts are resolved in the best
interest of clients. When a material conflict of interest between an Aberdeen
Adviser and its respective client(s) is identified, the Aberdeen Adviser will
choose among the procedures set forth in Section IV.B.2. below to resolve such
conflict.
F. Limitations. The circumstances under which Aberdeen may take a limited role
in voting proxies, include the following:
1. No Responsibility. Aberdeen Advisers will not vote proxies for client
accounts in which the client contract specifies that Aberdeen will not vote.
Under such circumstances, the clients' custodians are instructed to mail proxy
material directly to such clients or the clients' designees.
2. Limited Value. An Aberdeen Adviser may abstain from voting a client proxy if
the Aberdeen Adviser determines that the effect on shareholders' economic
interests or the value of the ponfolio holding is indeterminable or
insignificant. Aberdeen Advisers may also abstain from voting the proxies of
portfolio companies held in their passively managed funds. Proxies with respect
to securities that have been sold before the date of the shareholders meeting
and are no longer held by a client generally will not be voted.
3. Unjustifiable Costs. An Aberdeen Adviser may abstain from voting a client
proxy for cost reasons (e.g., non-U.S. securities).
4. Securities Lending Arrangements. If voting securities are part of a
securities lending program, Aberdeen may be unable to vote while the securities
are on loan.
5. Share Blocking. Certain jurisdictions may impose share blocking restrictions
at various times which may prevent Aberdeen from exercising its voting
authority.
6. Special Considerations. Aberdeen's responsibilities for voting proxies are
determined generally by its obligations under each advisory contract or similar
document. If a client requests in writing that an Aberdeen Adviser vote its
proxy in a manner inconsistent with these Policies and Procedures, the Aberdeen
Adviser may follow the client's direction or may request that the client vote
the proxy directly.
G. Sources of Information. The Aberdeen Advisers may conduct research internally
and/or use the resources of an independent research consultant. The Aberdeen
Advisers may consider legislative materials, studies of corporate governance and
other proxy voting issues, and/or analyses of shareholder and management
proposals by a certain sector of companies, e.g., Fortune 500 companies.
H. Subadvisers. To the extent that an Aberdeen Adviser may rely on subadvisers,
whether affiliated or unaffiliated, to manage any client portfolio on a
discretionary basis, the Aberdeen Adviser may delegate responsibility for voting
proxies to the subadviser. However, such subadvisers will be required either to
follow these Policies and Procedures or to demonstrate that their proxy voting
policies and procedures are consistent with these Policies and Procedures or
otherwise implemented in the best interests of the Aberdeen Advisers' clients.
I. Availability of Policies and Procedures. Aberdeen Advisers will provide
clients with a copy of these Policies and Procedures, as revised from time to
time, upon request.
J. Disclosure of Vote. As disclosed in Part II of each Aberdeen Adviser's Form
ADV, a client may obtain infonnation on how its proxies were voted by requesting
such information from its Aberdeen Adviser. Aberdeen Advisers do not generally
disclose client proxy votes to third parties, other than as required for Funds,
unless specifically requested, in writing, by the client.
III. SPECIFIC VOTING POLICIES
A. General Philosophy.
o Support existing management on votes on the financial statements of
a company and the election of the Board of Directors;
o Vote for the acceptance of the accounts unless there are grounds to
suspect that either the accounts as presented or audit procedures
used, do not present an accurate picture of company results; and
o Support routine issues such as the appointment of independent
auditors, allocation of income and the declaration of stock (scrip)
dividend proposals provided there is a cash alternative.
B. Anti-takeover Measures. Aberdeen Advisers vote on anti-takeover measures on a
case-by-case basis taking into consideration such factors as the long-term
financial performance of the target company relative to its industry
competition. Key measures of performance will include the growth rates for
sales, operating income, net income and total shareholder returns. Other factors
which will be considered include margin analysis, cash flow and debt levels.
C. Proxy Contests for Control. Aberdeen Advisers vote on proxy contests for
control on a case-bycase basis taking into consideration such factors as
long-term financial performance of the target company relative to its industry,
management's track record, background to the proxy contest, qualifications of
director nominees, evaluation of what each side is offering shareholders as well
as the likelihood that the proposed objectives and goals can be met, and stock
ownership positions.
D. Contested Elections. Aberdeen Advisers vote on contested elections on a
case-by-case basis taking into consideration such factors as the qualifications
of all director nominees. Aberdeen Advisers also consider the independence of
board and key committee members and the corporate governance practices of the
company.
E. Executive compensation proposals. Aberdeen Advisers consider such proposals
on a case-by-case basis taking into consideration such factors as executive pay
and spending perquisites, particularly in conjunction with sub-par performance
and employee layoffs.
F. Shareholder Proposals. Aberdeen Advisers consider such proposals on a
case-by-case basis. Aberdeen Advisers support those proposals which will improve
the company's corporate governance or business profile at a reasonable cost, but
may oppose proposals which result in significant cost being incurred with little
or no benefit to the company or its shareholders.
IV. PROXY VOTING PROCEDURES
This section applies to each Aberdeen Adviser except to the extent that certain
procedures are identified as applicable only to a specific Aberdeen Adviser.
A. Obtain Proxy. Registered owners of record, e.g., trustees or custodian banks,
that receive proxy materials from the issuer or its information agent, are
instructed to sign physical proxy cards in blank and forward directly to the
Global Voting Team based in Scotland ("PA-UK"). Proxies may also be delivered
electronically by custodians using proxy services such as ProxyEdge and
Institutional Shareholder Services ("ISS"). Each proxy received is matched to
the securities to be voted.
B. Material Conflicts of Interest.
1. Identify the existence of any material conflicts of interest relating to the
securities to be voted or the issue at hand. Portfolio managers and research
analysts ("Analysts") and senior management of each Aberdeen Adviser have an
affirmative duty to disclose any personal conflicts such as officer or director
positions held by them, their spouses or close relatives in the portfolio
company or attempts by the portfolio company to exert influence over such person
with respect to their vote. Conflicts based on business relationships or
dealings of affiliates of any Aberdeen Adviser will only be considered to the
extent that the Aberdeen Adviser has actual knowledge of such business
relationships.
2. When a material conflict of interest between an Aberdeen Adviser'S interests
and its clients' interests appears to exist, the Aberdeen Adviser may choose
among the following options to eliminate such conflict: (1) vote in accordance
with these Policies and Procedures if it involves little or no discretion; (2)
vote as recommended by a third party service if the Aberdeen Adviser utilizes
such a service; (3) "echo vote" or "mirror vote" the proxies in the same
proportion as the votes of other proxy holders that are not Aberdeen clients;
(4) if possible, erect information barriers around the person or persons making
voting decisions sufficient to insulate the decision from the conflict; (5) if
practical, notify affected clients of the conflict of interest and seek a waiver
of the conflict; or (6) if agreed upon in writing with the client, forward the
proxies to affected clients allowing them to vote their own proxies.
C. Analysts. The proxy administration process is carried out by the PA-UK. The
PA-UK ensures that each proxy statement is directed to the appropriate Analyst.
If a third party recommendation service has been retained, the PA-UK will
forward the proxy statement to the Analyst with the recommendation highlighted.
The Analyst will determine whether to vote as recommended by the service
provider or to recommend an alternative and shall advise the PA-UK. The Analyst
may consult with the PA-UK as necessary. If the Analyst recommends voting
against the third party recommendation, he or she is responsible for documenting
the reasons for such recommendation and that no conflict of interest influenced
such recommendation. If no third party recommendation service is utilized or if
no recommendation is provided, the Analyst is responsible for documenting the
rationale for his or her vote recommendation.
D. Vote. The following describes the breakdown of responsibilities between the
PA-UK and the Corporate Governance Group ("CGG") in voting portfolio securities
and the extent to which the Aberdeen Advisers rely on third party service
providers.
The PA-UK is responsible for ensuring that votes for Aberdeen Advisers'
clients are cast in a timely fashion and in accordance with these Policies and
Procedures. In addition, the PA-UK is primarily responsible for administering
proxy votes for the US and Canadian Funds which are advised or sub-advised by
the Aberdeen Advisers.
Responsibility for considering the substantive issues relating to any vote
and for deciding how shares will be voted resides with the relevant Analyst.
In the event that a material conflict of interest is identified by an
Analyst, decisions on how to vote will be referred to the Corporate Governance
Group ("CGG"). The CGG includes the Chief Investment Officer, the head of the
Socially Responsible Research, and representatives from portfolio management
teams. The CGG meets as needed to consider material conflicts of interest or any
other items raising unique issues. If the CGG determines that there is no
material conflict of interest, the vote recommendation will be forwarded to the
PA-UK. If a material conflict of interest is identified, the CGG will follow the
conflict of interest procedures set forth in Section IV.B.2., above.
The PA-UK helps facilitate and coordinate proxy voting for U.S. clients of
the Aberdeen Advisers. The Aberdeen Advisers have engaged Proxy Edge, a third
party service provider, to cast votes electronically for certain clients and to
maintain records of such votes electronically. Aberdeen has also engaged ISS, a
third party service provider, to provide (I) notification of impending votes;
(2) research into non-routine votes, including shareholder resolutions; (3)
voting recommendations which may be viewed on-line; and (4) web-based voting. In
the absence of any material conflict of interest, the Aberdeen Advisers may
either vote in accordance with the ISS recommendation or decline to follow the
ISS recommendation based on its own view of the agenda item provided that
decisions to vote contrary to the ISS recommendation are documented as set forth
in Section IV.C., above. In the event of a material conflict of interest, the
Aberdeen Advisers will follow the procedures outlined in Section IV.B.2, above.
E. Review. PA-UK are responsible for ensuring that proxy materials are received
in a timely manner and reconciled against holdings on the record date of client
accounts over which the Aberdeen Adviser has voting authority to ensure that all
shares held on the record date, and for which a voting obligation exists, are
voted.
V. DOCUMENTATION, RECORDKEEPING AND REPORTING REQUIREMENTS
A. Documentation.
Each Adviser's Chief Compliance Officer is responsible for implementing
and updating these Policies and Procedures;
The PA-UK is responsible for:
1. Overseeing the proxy voting process;
2. Consulting with portfolio managers/analysts for the relevant
portfolio security; and
3. Maintaining manual proxy voting records, if any, and overseeing and
reviewing voting execution and recordkeeping by third party
providers such as ISS and ProxyEdge.
B. Record Keeping.
1. Each Aberdeen Adviser maintains or procures the maintenance of records of all
proxies it has voted. As permitted by Rule 204-2(c), electronic proxy statements
and the record of each vote cast by each client account will be maintained by
either ISS or Proxy Edge, depending on the client account.
A US Fund's proxy voting record must be filed with the SEC on Form N-PX.
Form N-PX must be completed and signed in the manner required, containing a
fund's proxy voting record for the most recent twelve-month period ended June
30th (beginning August) I, 2004). If an Aberdeen Adviser delegates this
reporting responsibility to a third party service provider such as ISS or Proxy
Edge, it will ensure that the third party service provider files Form N-PX
accordingly. Aberdeen Advisers shall obtain and maintain undertakings from both
ISS and Proxy Edge to provide it with copies of proxy voting records and other
documents relating to its clients' votes promptly upon request. Aberdeen
Advisers, ISS and Proxy Edge may rely on the SEC's EDGAR system to keep records
of certain proxy statements if the proxy statements are maintained by issuers on
that system (e.g., large U.S.-based issuers).
2. As required by Rule 204-2(c), such records will also include: (a) a copy of
the Policies and Procedures; (b) a copy of any document created by the Aberdeen
Adviser that was material to making a decision on how to vote proxies on behalf
of a client or that memorializes the basis for that decision; and (c) each
written client request for proxy voting records and the Aberdeen Adviser's
written response to any (written or oral) client request for such records .
3. Duration. Proxy voting books and records will be maintained in an easily
accessible place for a period of five years, the first two in an appropriate
office of the Aberdeen Adviser.
C. Reporting. The Aberdeen Advisers will initially inform clients of these
Policies and Procedures by summary disclosure in Part II of their respective
Forms ADV. Upon receipt of a client's request for more information, the Aberdeen
Advisers will provide to the client a copy of these Policies and Procedures
and/or, in accordance with the client's stated requirements, how the client's
proxies were voted during the period requested subsequent to the adoption of
these Policies and Procedures. Such periodic reports, other than those required
for Funds, will not be made available to third parties absent the express
written request of the client. However, to the extent that any Aberdeen Adviser
may serve as a subadviser to another adviser to a Client, such Aberdeen Adviser
will be deemed to be authorized to provide proxy voting records on such Client
accounts to such other adviser.
For Canadian investment funds, Aberdeen US, Aberdeen AU and Aberdeen
Singapore will assist in preparing annual proxy voting records for the period
ending June 30 of each year and will post an annual proxy voting record on each
Canadian investment fund's website no later than August 31 of each year. Upon
receipt of a client or securityholder's request, Aberdeen US, Aberdeen AU or
Aberdeen Singapore will make available a copy of these Policies and Procedures
and the Canadian investment fund's proxy voting record, without charge, to any
client or securityholder upon a request made by the client Or securityholder
after August 31.
D. Review of Policies and Procedures. These Policies and Procedures will be
subject to review on a periodic basis as deemed appropriate by the Aberdeen
Advisers. Any questions regarding the Policies and Procedures should be directed
to the Compliance Department of the respective Aberdeen Adviser.
(a)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM
MEMBER AND POTENTIAL CONFLICTS OF INTEREST
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
INFORMATION PROVIDED AS OF DECEMBER 31, 2010
(assets in millions).
# of Accounts
Managed for Total Assets
Total which for which
# of Advisory Fee Advisory Fee
Name of Portfolio Manager Accounts Total is Based on is Based on
or Team Member Type of Accounts*** Managed Assets Performance Performance
------------------------- ------------------- -------- ------ -------------- ------------
1. John Murphy Registered Investment Companies: 5 $12.74 0 $0
Other Pooled Investment Vehicles: 76 $6,845.45 0 $0
Other Accounts: 188 $19,654.51 6 $825.5
2. Brett Diment Registered Investment Companies: 5 $12.74 0 $0
Other Pooled Investment Vehicles: 76 $6,845.45 0 $0
Other Accounts: 188 $19,654.51 6 $825.5
3. Edwin Gutierrez Registered Investment Companies: 5 $12.74 0 $0
Other Pooled Investment Vehicles: 76 $6,845.45 0 $0
Other Accounts: 188 $19,654.51 6 $825.5
4. Max Wolman Registered Investment Companies: 5 $12.74 0 $0
Other Pooled Investment Vehicles: 76 $6,845.45 0 $0
Other Accounts: 188 $19,654.51 6 $825.5
5. Esther Chan Registered Investment Companies: 5 $12.74 0 $0
Other Pooled Investment Vehicles: 76 $6,845.45 0 $0
Other Accounts: 188 $19,654.51 6 $825.5
POTENTIAL CONFLICTS OF INTERESTS
The Sub-Adviser believes that there are no material conflicts of interest in
connection with any Portfolio Manager's management of the registrant's
investments and investments of other accounts. The Sub-Adviser has adopted the
CFA Institute Code of Ethics and Standards of Professional Conduct and adherence
by all employees is mandatory. All employees are expected to avoid any
employment, associations or business activities, including personal investments,
that interfere with their duties to Aberdeen, divide their loyalty or create or
appear to create a conflict of interest. Employees must promptly report any
situation or transaction involving an actual or potential conflict of interest
to the Compliance Officer.
With regards to allocation, the Sub-Adviser has adopted Best Execution, Soft
Dollar, Order Aggregation, and Trade Allocation Policies & Procedures designed
among other things to ensure fair treatment of all accounts.
Aberdeen aggregates orders so as to realize the benefits of larger block orders.
When executing aggregated orders, it seeks to allocate opportunities to all
clients in a consistent manner. Most portfolios are managed to a model based on
common attributes to a benchmark with low dispersion between accounts and
benchmarks. This is accomplished through the calculation of a 'median account'
with this median account becoming the model portfolio. Certain situations such
as new portfolio fundings, unique guideline restrictions and the fungability of
certain security types may cause us to adjust our weightings. However over time,
we expect to minimize the dispersion of account holdings around the model
portfolio.
New Issue Allocation
--------------------
Aberdeen seeks to allocate new issue opportunities to all clients in a
consistent manner.
New issue opportunities are allocated according to the following factors:
1. All portfolios are ranked based on their account composition versus their
benchmark. The portfolio management team will set a minimum acceptable position
size (in terms of percent of market value) for the security.
2. Next, we define the target percentage for our LAB portfolios, depending on
the characteristics of the security or the percentage of the account based on
that securities' contribution to duration and the current composition of each
account.
3. For portfolios with a benchmark other than LAB, we may adjust the target
allocation to reflect the characteristics of the non-LAB benchmark.
4. We then determine our desired total par value and give our indication of
interest.
5. If our order is completely filled, we will allocate according to the steps
outlined above. If we are allotted a significant percentage of our order
(typically 70% or more), we will allocate pro-rata based on the initial
allocation developed from the steps outlined above. If we are not allotted a
significant percentage of our order, we will remove the non-LAB benchmark
adjustments and allocate pro-rata based on market value of participating
accounts. If this continues to result in accounts receiving less than the
minimum target position size, the least deserving accounts (defined as those
accounts that are closest to the model account) will be eliminated from the
allocation.
Batch Transaction and Allocation Policy - Equity
------------------------------------------------
Where practicable, all client portfolio orders for the same security should be
combined or "batched" and executed as block transactions in order to facilitate
best execution as well as for the purpose of negotiating more favorable
brokerage commissions. Where a block trade is executed for a number of client
accounts, the average execution price on all of the purchases and sales that are
aggregated to this purpose should be used for all accounts.
If an entire block is not fully executed on the same day, an allocation method
should be administered that is fair and reasonable to all clients. If it is not
practicable to allocate the executed portion of the block on a pro rata basis,
allocation may be done on a random account basis (alphabetically, numerically,
or otherwise), but any procedure administered should not operate to consistently
favor or disfavor the same client accounts. If any method is to be used other
than a pro rata method, the manner in which the shares are to be allocated
should be documented, disclosed and signed off by the Chief Compliance Officer.
(a)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM
MEMBERS
INFORMATION PROVIDED AS OF MARCH 8, 2011
Aberdeen recognizes the importance of compensation in attracting and retaining
talent and has structured remuneration to include an attractive base salary, a
discretionary bonus that is directly linked to one's contribution to the overall
success of Aberdeen and a long term incentive plan for key staff members
comprised of a mixture of cash, options, and shares. Overall compensation
packages are designed to be competitive relative to investment management
industry standards. In addition to an attractive compensation package, Aberdeen
also offers a first class benefits package.
The compensation policy has been designed to deliver additional rewards through
appropriate incentive schemes, both annual and long term. These are directly
linked to performance at both a corporate and an individual level. The policy
seeks to reward performance in a manner which aligns the interests of clients,
shareholders and executives. As the level of the bonus goes up, the amount of
equity given to an investment professional goes up.
Performance is reviewed on a formal basis once a year and these reviews
influence individual staff members' subsequent remuneration. The review process
looks at all of the ways in which an individual has contributed to the
organization, and specifically, in the case of investment managers, to the
investment team. Overall participation in team meetings, quality of research
analysis, and presenting the team externally are also contributory factors.
Aberdeen does offer a long-term incentive plan to structure a portfolio
manager's compensation package so as to retain, motivate, and reward key staff
members with a view to improving performance and thereby increasing the value of
the Aberdeen Group for the benefit of shareholders. Long term incentive plans
can be either cash or share based and typically vest over a three year period.
These reviews are subjective and are not tied to any pre-determined formula
(i.e., directly linked to new assets raised). While the quantum of bonuses can
be very attractive, equity incentives offer the potential to form a
substantially greater part of compensation over the longer term. Therefore, the
equity component of the compensation plan provides the opportunity for direct
ownership, which in our view directly aligns the interests of the investment
team with those of our clients. The equity component typically vests annually
over a 3-year period. Leavers who depart prior to the end of the full vesting
period would typically forfeit their ownership stake.
When determining compensation, Fund performance is calculated using pre-tax
information. Fund performance is compared to standards such as peer performance
and benchmarks when determining compensation, with specific metrics including a
comparison to the Fund's benchmark. When determining compensation, Aberdeen
Group utilizes rolling twelve month periods and the life of the Fund.
As noted in question #2 above, portfolio manager performance on investment
matters is considered over all of the accounts of which a portfolio manager
contributes and it is documented in the appraisal process. However, since the
performance of other accounts is subjective portion of a portfolio manager's
annual bonus consideration, it is deliberated in a general fashion without a set
method or specialized compensation structure.
(a)(4) DISCLOSURE OF SECURITIES OWNERSHIP
THE INFORMATION BELOW IS AS OF DECEMBER 31, 2010
Name of Portfolio Dollar ($) Range of
Manager or Fund Shares
Team Member Beneficially Owned
----------------- -------------------
John Murphy $0
Brett Diment $0
Edwin Guiterrez $0
Max Wolman $0
Esther Chan $0
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required by
this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the 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) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(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/Aberdeen Global Opportunity Income Fund
-------------------------------------------------------------------
By (Signature and Title)* /s/ James A. Bowen
-----------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date February 23, 2011
----------------------
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 A. Bowen
-----------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date February 23, 2011
----------------------
By (Signature and Title)* /s/ Mark R. Bradley
-----------------------------------------------------
Mark R. Bradley, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer)
Date February 23, 2011
----------------------
* Print the name and title of each signing officer under his or her signature.