The Wells Fargo Global Dividend Opportunity Fund (NYSE:EOD), a
closed-end fund, announced today that the fund’s Board of Trustees
has approved several changes with respect to the fund:
- Adoption of a multisleeve investment
approach and changes to investment policies
- Use of leverage
- Changes to portfolio management
arrangements
- Commencement of a managed distribution
plan of at least 10% annually, commencing with the dividend to be
paid in July 2017
The fund is and will continue to be a closed-end fund investing
in a diversified portfolio of common and/or preferred stocks of
U.S. and non-U.S. companies. With the changes discussed below, the
fund will also invest a portion of its assets in
below-investment-grade (high-yield) debt securities and loans. The
fund’s primary investment objective is to seek a high level of
current income. The fund’s secondary objective is long-term growth
of capital. These objectives are not changing.
Multisleeve investment approach
Effective on or about May 1, 2017, the fund will adopt a
multisleeve investment approach and will allocate its assets among
two separate investment strategies. Under normal market conditions,
the fund will allocate approximately 80% of its total assets to an
equity sleeve, which will be comprised primarily of common stocks
and up to 20% preferred stocks. The remaining 20% of the fund’s
total assets will be allocated to a separate sleeve, which will
primarily be invested in below-investment-grade (high-yield) debt
securities, loans, and preferred stocks.
Investment policy changes (equity sleeve)
The fund’s principal investment strategy has
been to primarily invest in common and/or preferred stocks of U.S.
and non-U.S. companies and any other equity securities that offer
an above-average potential for current and/or future dividends.
Except for the strategy changes specifically discussed below (that
is, relating to foreign securities, preferred stock, and dividend
capture), the principal investment strategy, limitations, and
restrictions currently in place for the fund will apply only to the
equity sleeve of the fund, which will comprise approximately 80% of
the fund’s total assets. These include, among others, the
following:
- At least 65% of the equity sleeve’s
total assets will be invested in securities of issuers in the
utilities, energy, and telecommunication services sectors.
- Up to 30% of the equity sleeve’s total
assets may be invested in short sales on equity securities.
- The fund may write call options with an
aggregate net notional amount of up to 50% of the value of the
equity sleeve’s total assets.
- Up to 5% of the equity sleeve’s total
assets may be invested in debt securities that are convertible into
common or preferred stocks or that the subadvisor otherwise
believes provide an investment return comparable with, or more
favorable than, investment in equity securities.
The normal allocation range for foreign investments in the
equity sleeve will be modified to be a typical range of 40% to 70%
of the equity sleeve’s total assets in foreign securities, rather
than a typical range of 30% to 70% of the fund’s total assets in
foreign securities.
The normal allocation for preferred stocks in the equity sleeve
will be no more than 20% of the equity sleeve’s total assets.
Under normal conditions, the fund will no longer make
significant use of the dividend capture strategy that the fund has
used significantly since inception to generate income in the
portfolio. This change is intended to provide flexibility to allow
the fund to more effectively seek its primary and secondary
investment objectives.
Investment policies (high-yield sleeve)
Under normal market conditions, the high-yield sleeve, which
will comprise approximately 20% of the fund’s total assets, expects
to be primarily invested in below-investment-grade (high-yield)
debt securities, loans, and preferred stocks. These securities are
rated Ba or lower by Moody’s or BB or lower by S&P or are
unrated securities of comparable quality as determined by the
advisor. Debt securities rated below investment grade are commonly
referred to as junk bonds and are considered speculative with
respect to the issuer’s capacity to pay interest and repay
principal. They involve greater risk of loss, are subject to
greater price volatility, and are less liquid (especially during
periods of economic uncertainty or change) than higher-rated debt
securities. The sleeve’s investments in high-yield securities may
have fixed or variable principal payments and all types of interest
rate and dividend payment and reset terms, including fixed-rate,
adjustable-rate, zero-coupon, contingent, deferred,
payment-in-kind, and auction-rate features. The sleeve may invest
up to 10% of its total assets in U.S. dollar–denominated securities
of foreign issuers, excluding emerging markets securities. The
sleeve may invest in securities of any credit quality at the time
of purchase. However, securities rated CCC or lower cannot be added
to the portfolio if, at the time of purchase, more than 20% of the
sleeve’s assets are rated CCC or lower. The sleeve will invest in
securities with a broad range of maturities.
Convertible securities: The high-yield sleeve’s investments in
fixed-income securities may include bonds and preferred stocks that
are convertible into the equity securities of the issuer. The
sleeve will not invest more than 20% of its total assets in
convertible instruments. Depending upon the relationship of the
conversion price to the market value of the underlying securities,
convertible securities may trade more like equity securities than
debt instruments.
Corporate loans: The high-yield sleeve may invest a portion of
its total assets in loan participations and other direct claims
against a corporate borrower. The corporate loans in which the
sleeve invests primarily consist of direct obligations of a
borrower. The sleeve may invest in a corporate loan at origination
as a co-lender or by acquiring in the secondary market
participations in, assignments of, or novations of a corporate
loan. By purchasing a participation, the fund acquires some or all
of the interest of a bank or other lending institution in a loan to
a corporate borrower.
Asset-backed securities: The high-yield sleeve may invest in
asset-backed securities but will not invest in mortgage-backed
securities. Asset-backed securities represent participations in and
are secured by and payable from assets such as installment sales or
loan contracts, leases, credit card receivables and other
categories of receivables.
Real estate investment trusts (REITs): The high-yield sleeve may
invest in REITs. REITs are companies that invest primarily in real
estate or real estate–related loans. Interests in REITs are
significantly affected by the market for real estate and are
dependent upon management’s skills and on cash flows.
Derivatives: The high-yield sleeve may invest up to 10% of its
total assets in futures and options on securities and indexes and
in other derivatives. In addition, the sleeve may enter into
interest-rate swap transactions with respect to the total amount
the fund is leveraged in order to hedge against adverse changes in
interest rates affecting dividends payable on any preferred shares
or interest payable on borrowings constituting leverage. In
connection with any such swap transaction, the fund will segregate
liquid securities in the amount of its obligations under the
transaction. A derivative is a security or instrument whose value
is determined by reference to the value or the change in value of
one or more securities, currencies, indexes, or other financial
instruments. The fund does not use derivatives as a primary
investment technique and generally does not anticipate using
derivatives for non-hedging purposes. In the event the advisor uses
derivatives for non-hedging purposes, no more than 3% of the
sleeve’s total assets will be committed to initial margin for
derivatives for such purposes. The fund may use derivatives for a
variety of purposes, including:
- As a hedge against adverse changes in
securities market prices or interest rates
- As a substitute for purchasing or
selling securities
Use of leverage by the fund
As permitted under the fund’s investment strategies, the fund
intends to borrow money as a form of leverage in order to seek to
obtain a higher return for shareholders than if it did not use
leverage. Specifically, the fund will seek to borrow money in an
amount that is approximately 16.5% of the fund’s net assets as of
January 31, 2017. Leveraging is a speculative technique, and there
are special risks involved. There can be no assurance that any
leveraging strategies, if employed by the fund, will be successful,
and such strategies can result in losses to the fund.
Management of the fund
For the purposes of managing the new high-yield sleeve,
effective May 1, 2017, the advisor will employ Wells Capital
Management, Inc., one of the current subadvisors of the fund. In
light of this additional role, the subadvisory fee paid to Wells
Capital Management will increase from 0.10% of average daily total
assets per year to 0.20% of average daily total assets per year. It
is important to note that this subadvisory fee is paid from the
advisor’s own assets and is not paid by the fund. Therefore, the
management fee charged to the fund’s shareholders will not change
as a result. The portfolio managers for this sleeve will be
Niklas Nordenfelt, CFA, and Philip Susser.
Mr. Nordenfelt is currently managing director and senior
portfolio manager of the U.S. High Yield Fixed Income team at Wells
Capital Management. Mr. Nordenfelt joined the U.S. High Yield Fixed
Income team at Wells Capital Management in February 2003 as an
investment strategist. Mr. Nordenfelt began his investment career
in 1991 and has managed portfolios ranging from quantitative-based
and tactical asset allocation strategies to credit-driven
portfolios. Previous to joining Wells Capital Management, Mr.
Nordenfelt was at Barclays Global Investors (BGI) from 1996 to
2002, where he was a principal. At BGI, he worked on the company’s
international and emerging markets equity strategies after having
managed its asset allocation products. Prior to this, Mr.
Nordenfelt was a quantitative analyst at Fidelity and a portfolio
manager and group leader at Mellon Capital Management. He earned a
bachelor’s degree in economics from the University of California,
Berkeley, and has earned the right to use the Chartered Financial
Analyst® (CFA®) designation.
Mr. Susser is currently managing director and senior portfolio
manager for the U.S. High Yield team at Wells Capital Management.
Mr. Susser joined the team as a senior research analyst in 2001. He
has extensive research experience in the cable/satellite, gaming,
hotels, restaurants, printing/publishing, telecom, REIT, lodging,
and distressed sectors. Mr. Susser’s investment experience began in
1995, spending three years as a securities lawyer at Cahill Gordon
and Shearman & Sterling representing underwriters and issuers
of high-yield debt. Later, he evaluated venture investment
opportunities for MediaOne Ventures before joining Deutsche Bank as
a research analyst. He earned a bachelor’s degree in economics from
the University of Pennsylvania and a law degree from the University
of Michigan Law School.
Crow Point Partners, LLC, and Wells Capital Management, the
current subadvisors for the fund, will continue to serve as
subadvisors for the equity sleeve. Timothy O'Brien, CFA, of
Crow Point Partners, along with Kandarp Acharya, CFA, FRM®,
and Christian Chan, CFA, of Wells Capital Management will
continue in their roles as portfolio managers.
Managed distribution plan
The fund’s Board of Trustees has approved the commencement of a
managed distribution plan, effective beginning with the quarterly
distribution to be declared in May 2017 and paid in July 2017, that
provides for the declaration of quarterly distributions to common
shareholders of the fund at an annual minimum fixed rate of 10%
based on the fund’s average monthly net asset value (NAV) per share
over the prior 12 months. Under the managed distribution plan,
quarterly distributions may be sourced from income, paid-in
capital, and/or capital gains, if any. Shareholders may elect to
reinvest distributions received pursuant to the managed
distribution plan in the fund under the existing dividend
reinvestment plan, which is described in the fund’s shareholder
reports.
Supplemental risk disclosures
Leverage risk: The fund may enter into transactions including,
among others, options, futures and forward contracts, loans of
portfolio securities, swap contracts, and other derivatives, as
well as when-issued, delayed delivery, or forward commitment
transactions, that may in some circumstances give rise to a form of
leverage. The fund would likely use some or all of these
transactions from time to time in the management of its portfolio,
for hedging purposes, to adjust portfolio characteristics, or more
generally for purposes of attempting to increase the fund’s
investment return. The fund may also offset derivatives positions
against one another or against other assets to manage effective
market exposure resulting from derivatives in its portfolio. To the
extent that any offsetting positions do not behave in relation to
one another as expected, the fund may perform as if it were
leveraged. The fund also borrows money for leveraging purposes.
Although it has no current intention to do so, the fund reserves
the flexibility to issue preferred shares and debt securities, for
leveraging purposes. The fund’s use of leverage would create the
opportunity for increased common share net income but also would
result in special risks for common shareholders. There is no
assurance that any leveraging strategies, if employed by the fund,
will be successful, and such strategies can result in losses to the
fund. Leverage creates the likelihood of greater volatility of the
NAV and market price of and distributions on common shares. Because
the fees received by the advisor and the subadvisor are based on
the total assets of the fund (including assets represented by any
preferred shares and certain other forms of leverage outstanding),
the advisor and the subadvisor have a financial incentive for the
fund to issue preferred shares or use such leverage, which may
create a conflict of interest between the advisor and the
subadvisor, on one hand, and the common shareholders, on the other
hand. To the extent the investment return derived from securities
purchased with funds received from leverage exceeds the cost of
leverage, the fund’s return will be greater than if leverage had
not been used. Conversely, if the investment return from the
securities purchased with such funds is not sufficient to cover the
cost of leverage or if the fund incurs capital losses, the return
of the fund will be less than if leverage had not been used, and
the amount available for distribution to shareholders as dividends
and other distributions will be reduced or potentially eliminated.
Leverage creates risks which may adversely affect the return for
the holders of common shares, including, for example, the
following: (i) the likelihood of greater volatility of the NAV, the
market price, or the dividend rate of the common shares; (ii)
fluctuations in the dividend rates on any preferred shares or in
interest rates on borrowings and short-term debt; (iii) increased
operating costs, which may reduce the fund’s total return; and (iv)
the potential for a decline in the value of an investment acquired
with borrowed funds, while the fund’s obligations under such
borrowing remain fixed. Certain types of borrowings may result in
the fund being subject to covenants in credit agreements, including
those relating to asset coverage, borrowing base, and portfolio
composition requirements and additional covenants that may affect
the fund’s ability to pay dividends and distributions on common
shares in certain instances. The fund also may be required to
pledge its assets to the lenders in connection with certain types
of borrowing. The fund may be subject to certain restrictions on
investments imposed by guidelines of one or more nationally
recognized rating organizations, which may issue ratings for any
preferred shares or short-term debt instruments issued by the fund.
These guidelines may impose asset coverage or portfolio composition
requirements that are more stringent than those imposed by the 1940
Act.
Derivatives involve risks, including interest-rate risk, credit
risk, the risk of improper valuation, and the risk of
noncorrelation to the relevant instruments they are designed to
hedge or closely track. There are numerous risks associated with
transactions in options on securities and/or indexes. As a writer
of an index call option, the fund forgoes the opportunity to profit
from increases in the values of securities held by the fund.
However, the fund has retained the risk of loss (net of premiums
received) should the price of the fund’s portfolio securities
decline. Similar risks are involved with writing call options or
secured put options on individual securities and/or indexes held in
the fund’s portfolio. This combination of potentially limited
appreciation and potentially unlimited depreciation over time may
lead to a decline in the net asset value of the fund. Foreign
investments may contain more risk due to the inherent risks
associated with changing political climates, foreign market
instability, and foreign currency fluctuations. Risks of foreign
investing are magnified in emerging or developing markets. Small-
and mid-cap securities may be subject to special risks associated
with narrower product lines and limited financial resources
compared with their large-cap counterparts, and, as a result,
small- and mid-cap securities may decline significantly in market
downturns and may be more volatile than those of larger companies
due to their higher risk of failure. When interest rates decline,
interest that a fund is able to earn on its investments in debt
securities may also decline, but the value of those securities may
increase. Changes in market conditions and governmental policies
may lead to periods of heightened volatility in the debt securities
market and reduced liquidity for certain fund investments.
Interest-rate changes and their impact on the funds and their NAVs
can be sudden and unpredictable. High-yield, lower-rated bonds may
contain more risk due to the increased possibility of default.
Illiquid securities may be subject to wide fluctuations in market
value. The fund may be subject to significant delays in disposing
of illiquid securities. Accordingly, the fund may be forced to sell
these securities at less than fair market value or may not be able
to sell them when the advisor or subadvisor believes that it is
desirable to do so. This closed-end fund is no longer available as
an initial public offering and is only offered through
broker/dealers on the secondary market.
Additional information
For more information on Wells Fargo’s closed-end funds, please
visit our website.
Unlike an open-end mutual fund, a closed-end fund offers a fixed
number of shares for sale. After the initial public offering,
shares are bought and sold through broker/dealers in the secondary
marketplace, and the market price of the shares is determined by
supply and demand, not by NAV, and is often lower than the NAV. A
closed-end fund is not required to buy its shares back from
investors upon request.
Wells Fargo Asset Management (WFAM) is a trade name used by the
asset management businesses of Wells Fargo & Company. Wells
Fargo Funds Management, LLC, a wholly owned subsidiary of Wells
Fargo & Company, provides investment advisory and
administrative services for Wells Fargo Funds. Other affiliates of
Wells Fargo & Company provide subadvisory and other services
for the funds. This material is being prepared by Wells Fargo
Funds Distributor, LLC, Member FINRA, an affiliate of Wells
Fargo & Company. Neither Wells Fargo Funds Management nor Wells
Fargo Funds Distributor has fund customer accounts/assets, and
neither provides investment advice/recommendations or acts as an
investment advice fiduciary to any investor.
Some of the information contained herein may include
forward-looking statements about the expected investment activities
of the funds. These statements provide no assurance as to the
funds’ actual investment activities or results. The reader must
make his/her own assessment of the information contained herein and
consider such other factors as he/she may deem relevant to his/her
individual circumstances.
301824 03-17
NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
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Wells Fargo & CompanyShareholder
inquiries1-800-730-6001orFinancial advisor
inquiries1-888-877-9275orJohn Roehm,
415-222-5338john.o.roehm@wellsfargo.com
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