FFC
Flaherty & Crumrine/Claymore
Preferred Securities Income Fund
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COMMON SHARES
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DAILY DATA as of
3/19/10
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Closing Share Price
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$15.55
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Current Distribution Rate6
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8.80%
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Monthly Dividend Per Share1
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$0.11400
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Ex-Dividend Date
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3/22/10
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Payable Date
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3/31/10
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Daily Volume
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156,408
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52 Week High/Low Share Price 2
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$15.67/$6.10
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52 Week High/Low NAV2
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$15.01/$7.07
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Intraday Trading Information
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NYSE
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Data subject to change on a daily basis.
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WEEKLY DATA as of
3/19/10
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Closing Share Price
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$15.55
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Closing NAV
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$15.01
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Premium/(Discount)
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3.60%
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52-Week Average Premium/Discount
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(1.90%)
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Current Distribution Rate
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8.80%
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Total Managed Assets
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$950,888,428
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Common Shares Outstanding
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42,705,758
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Overall Percent Leveraged
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32.59%
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Data subject to change on a daily basis.
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SEMI-ANNUAL DATA as of
11/30/09
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Fiscal Year-End
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11/30
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Portfolio Manager
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Flaherty & Crumrine
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Shareholder Servicing Agent
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Claymore Securities
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Expense Ratio (Total Fund)5
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0.73%
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Expense Ratio (Common Shares)5
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1.59%
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Portfolio Turnover Rate4
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41%
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Data subject to change on a daily basis.
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INCEPTION INFORMATION
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Common Shares3
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Inception Date
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January 28, 2003
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NYSE Symbol
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FFC
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NAV Symbol
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XFFCX
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The Wall Street Journal Listing
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FlrtyClayPfdSec
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CUSIP
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338478100
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Inception Share Price
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$25.00
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Inception NAV
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$23.88
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FINANCIAL LEVERAGE as of
3/19/10
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Leverage Outstanding
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$316,775,000
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1940 Act Asset Coverage Ratio
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307%
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QUARTERLY TOTAL RETURNS
as of 12/31/09
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MARKET PRICE
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NAV
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2009 YTD
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107.43 %
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81.05 %
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1 Year
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107.43 %
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81.05 %
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3 Year
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-2.33 %
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-5.68 %
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5 Year
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-1.91 %
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-1.51 %
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Since Inception
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1.74 %
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1.88 %
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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. Since Inception returns assume a purchase of common shares at the initial offering price of $25.00 per share for market price returns or initial net asset value (NAV) of $23.88 per share for NAV returns. Returns for periods of less than one year are not annualized. All distributions are assumed to be reinvested either in accordance with the dividend reinvestment plan (DRIP) for market price returns or NAV for NAV returns. Until the DRIP price is available from the Plan Agent, the market price returns reflect the reinvestment at the closing market price on the last business day of the month. Once the DRIP is available around mid-month, the market price returns are updated to reflect reinvestment at the DRIP price.
1
Dividend per share is subject to change on the ex-dividend date. The distribution amount may include net investment income, capital gains and/or return of capital. The distribution amount alone is not indicative of Fund performance.
2
Figures are based on market close.
3
Based on the prospectus information.
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Not annualized
5
Expense ratios are annualized.
6
Latest declared monthly dividend per share annualized and divided by the current share price. To the extent any portion of the current distribution is estimated to be sourced from something other than income, such as return of capital, the source would be disclosed on a Section 19a-1 letter located under the “Fund News” section of the “News & Literature” section of the Fund’s website. The distribution rate may include net investment income, capital gains and/or return of capital. The distribution rate alone is not indicative of Fund performance.
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INVESTMENT OBJECTIVE
The Fund’s investment objective is high current income for holders of its common stock consistent with preservation
of capital. At least 80% of the Fund's total assets will be invested in a diversified
portfolio of preferred securities. The Fund expects that its portfolio of preferred
securities will consist principally of 'hybrid' or taxable preferreds. At least 80%
of the Fund's preferred securities will be investment-grade quality at the time of purchase.
Up to 20% of the Fund's total assets may be invested in securities rated below-investment
grade (but not below Ba3 or BB-), provided the issuer has investment-grade senior debt
outstanding. The Fund’s investment adviser intends to pursue strategies that it expects
generally to result in the Fund’s income increasing in response to significant increases
in long-term interest rates while being relatively resistant to the impact of declines
in long-term interest rates. There can be no assurance the Fund will achieve its investment objectives.
For periodic shareholder reports and recent fund-specific filings, please visit the U.S. Securities and Exchange Commission (“SEC”) website via the following link, click here.
Hedging Strategy
The response of the Fund’s income to changes in long-term interest rates will be impacted by the effectiveness and use of its hedging strategies. The hedging positions, if any, that the Fund would hold are normally anticipated to appreciate in value when long-term interest rates rise significantly, reflecting either the rise in yields of Treasury securities or interest-rate swap yields, as applicable, and the associated decline in the prices of underlying Treasury securities or decreased net market value of an obligation to pay a fixed-income stream in a higher interest rate environment. In times of market dislocation, there can be economic costs of using any of the above strategies that could potentially diminish, or even outweigh, the benefits of hedging. Consequently, in those circumstances, the Adviser may elect to reduce or potentially eliminate the Fund’s use of any hedging instrument. Of course, if significant increases in long-term Treasury rates cause preferred securities prices to fall when hedging instruments are not being employed by the Fund or only being employed to a limited extent, the Fund’s income would not increase in response to those higher rates and the Fund’s total return can be expected to decline.
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FREQUENTLY ASKED QUESTIONS
Preferred Securities
What are the differences between traditional preferreds and hybrid preferreds?
It is all basically a matter of taxes. In other respects, the two are really very similar. Traditional preferreds are treated for tax purposes just like any other equity security such as common stock. The issuer receives no deduction for tax purposes for the dividend payments made to the holders of the preferred. On the other hand, those dividends are 70% tax free to corporate investors due to the Dividend Received Deduction ("DRD"). The purpose of the DRD is to eliminate in part the double taxation of these dollars at the corporate level that would otherwise occur. Additionally, with the enactment of the Jobs and Growth Tax Reconciliation Act of 2003, these securities generally classify as qualified dividend income (QDI) to individual investors. QDI is currently taxed at a maximum rate of 15% to individual investors.
Hybrid preferreds were created in the mid-1990s for the purpose of allowing issuers to get a deduction for the dividend payments on preferreds, just like they deduct interest payments on debt securities. Since no tax is paid by the issuer, there is no double tax to avoid and no DRD available to a corporate holder of hybrids. Initially, hybrids were primarily purchased by individual investors, but the market has now broadened to include institutions as well. The distributions from hybrid securities are classified as interest, and as such, they are taxed as ordinary income to the individual investor. Please contact your tax advisor for further discussion on this matter.
Dividends
How does leverage impact the amount of the dividend?
The Fund uses leverage to enhance returns to the shareholders. Most of the time, the Funds are able to borrow money through their issuance of preferred securities at rates well below the rates we can earn on the investment portfolio. Of course, the benefit of leverage is greatest when the "spread" between the income generated by the portfolio and the cost of leverage is wide. However, the converse is also true; leverage doesn't provide as much income when the spread is narrow.
Does the Fund's hedging strategy impact the amount of the dividends?
The hedging strategy employed by the Fund is designed to do two things:
• Protect the Fund's net asset value from significant increases in long-term U.S. Treasury rates which occur over a short period of time; and,
• Enable the Fund's dividend rate to increase if long-term U.S. Treasury rates increase significantly over a short period of time.
The mechanism is pretty straightforward - if long-terms rates rise significantly, the hedging instruments used by the Fund should under normal market conditions increase in value. This increase offsets some of the decline in the value of the Fund's investment portfolio (protecting the Fund's NAV) and produces gains which can be used by the Fund to purchase additional income-producing securities. Please note that on a temporary or extended basis, the Adviser may determine that hedging Fund holdings is not likely to produce these results. If it does, the Adviser may not utilize any hedging strategy for the Fund or may limit hedging to a large extent, and the above results would not occur. Consequently, the Fund could have less protection of NAV and could generate less income than if the hedging strategies had been used.
There is an expense associated with hedging, however. We like to use the analogy of an insurance policy - each Fund pays premiums (cost of the hedging instrument) to buy "insurance," and it collects on the policy if long-term U.S. Treasury rates rise significantly. If rates do not rise significantly, then the Fund will lose the premium it paid without receiving any benefit. Like most insurance policies, generally it is better to have the insurance and not need it than to need it and not have it. However, the Fund may not hedge the interest rate exposure of the portfolio if the Adviser believes that the cost of hedging outweighs the likely benefits of it. Similarly, when viewed historically, if it turns out that the cost of hedging did outweigh the benefits (either because long-term U.S. Treasury rates did not rise significantly or because the hedging instruments the Fund employed did not perform as expected), the Fund will have paid for insurance it ultimately did not need.
In addition, the rate of the "insurance premium" is a function of many things, but a key factor is the differential between short- and long-term interest rates. As a general rule, when this differential is large, the cost of hedging is high.
How does the Fund balance the factors that affect the dividend?
Income, leverage cost and hedging cost create a three-legged dividend stool, and each leg can move up or down for different or similar reasons. Trying to forecast changes in one leg is difficult enough, let alone three. Consequently, projecting a dividend amount is a mixture of art and science, and becomes more difficult the further out in time we look.
Having said that, we can make some general observations about how the legs of the stool relate to one another. We already noted that falling long-term interest rates and rising short-term interest rates tend to lower income. At the same time, a flatter yield curve (i.e. a smaller difference between long and short rates) lowers the cost of hedging, potentially improving returns going forward. Conversely, rising long-term and short-term interest rates tend to increase income and, at the same time, increase the cost of the Fund's leverage. Whether the cost of hedging changes depends on how long-term and short-term interest rates move relative to each other. Although far from perfect, over the longer term there is some degree of balance among the three legs of the stool.
Nonetheless, over the shorter term, interest rate changes can adversely or positively impact the income a Fund receives and the cost of its leverage and hedging, and shareholders should consider these changes and their impact on the net income generated by that Fund and consequently the size of the dividend it is able to pay.
How does the Fund produce income?
The Fund invests in a portfolio of income producing securities consistent with its objectives and guidelines. The Fund's strategy is pretty straightforward - maximize income over the long term, while not exposing the Fund's net asset value to unnecessary risk. Over the long run, the income generated by a Fund's securities portfolio will be influenced primarily by two things - the level of long-term interest rates (typically measured by the yield on 30 year U.S. Treasury bonds) and the relationship of yields on the preferred securities held by the Fund to those long-term interest rates.
How will the Fund report the breakdown between dividends and interest?
The Fund will calculate the breakdown between Qualified Dividend Income (QDI) and interest and report it to shareholders on Form 1099. We will also publish the breakdown on the Fund's website and in the Annual Report to Shareholders.
Can I reinvest dividends directly into the Fund and is there any benefit over purchasing shares in the open market?
The answer to both questions is yes. The Fund's Dividend Reinvestment Plan (the "DRIP") provides a means of acquiring additional shares of the Fund without paying the full market premium, if any. When the market price is above NAV, new shares will be issued to participants in the Plan at the higher of NAV or 95% of the then current market price. Participating shareholders can therefore receive a discount on their reinvested shares of up to 5% of the market price. If the market price of the shares is below the NAV, the Plan purchases shares in the open market. The brokerage commission charged for acquiring these shares is competitive with most "discount" brokers. Shareholders should be aware that not all broker-dealers participate in the Fund's dividend reinvestment plan. If your shares are held in a brokerage account, ask your broker if his/her firm is set up to participate. If you hold your shares in certificate form, or if you would just like more information, call PFPC Inc., at 1-800-331-1710.
What does "Ex-Div"refer to?
Every month the Funds pay dividends, and the value of the dividend is subtracted from the Funds' NAVs on the Ex-Dividend date each month. So when the NAVs are reported with an "Ex-Div" behind them, it means that the amount of the dividend has been taken out of the Net Asset Value.
Hedging and Leverage
In light of current market conditions, has the Fund altered its hedging strategy?
As a result of the credit crunch that began in July 2007, there has been a lower correlation between changes in the value of the Fund’s portfolio holdings of preferred securities and the put options on Treasury bond futures that the Fund normally has used to hedge its preferred securities. During that time, the preferred securities holdings tended to trade more based on credit quality than on changes in interest rates as expressed in Treasury bond rates. Recently, the correlation was further reduced as investors’ flight to quality pushed Treasury bond rates downward. At the same time, the cost of hedging the Fund’s portfolio holdings has increased as short-term interest rates have dropped substantially below long-term rates and interest-rate volatility has increased. In response, throughout this period, the Fund’s investment adviser has modified its approach to hedging, which has moderated its cost to common stock shareholders. With the more severe market disruptions that began in September, the cost of hedging has increased considerably and the effectiveness of the hedging strategy has been further reduced. In light of this, the Fund has, temporarily, ceased using any instruments to hedge against significant increases in long-term interest rates. On a going-forward basis, the Fund will continue to evaluate the potential benefits of hedging the Fund’s portfolio holdings and the costs of doing so. At any particular time, all, none or some portion of the Fund’s holdings may be hedged.
How does the slope of the yield curve impact the cost of the Funds' hedging strategy?
An inverted yield curve, where short-term rates are above long-term rates, would affect the Fund in three ways, and the net impact could be either positive or adverse depending upon the interaction of those three factors. First, an inverted yield curve would increase the cost of the Fund's leverage relative to the return the Fund earns on long-maturity assets. In fact, if the yield curve were to invert by a large amount, it's possible that the leverage costs could exceed the current return on the debt and preferred securities in the Fund's portfolio. These higher leverage costs would reduce the incremental return earned on the roughly one-third of the portfolio that is financed by the Fund's leverage.
Second, an inverted yield curve would reduce the cost of hedging on 100% of the portfolio. That is because the long-term cost of hedging is directly affected by the slope of the yield curve. When the yield curve is steep, hedging tends to be expensive, because the market charges hedgers the difference between long- and short-term yields. If the yield curve inverts, however, hedgers earn the difference between short- and long-term yields.
Third, how the yield curve inverts is also important to the Fund. On one hand, if the yield curve inverts with short-term rates rising and long-term rates falling, leverage costs rise while the hedge loses money. On the other hand, if the yield curve inverts with both short- and long-term rates rising, the hedge gains, if the hedging strategy is then being employed, can be used to offset some portion of the higher leverage costs; how much depends upon how far and how quickly long-term rates increase.
As we have explained in the past, the first two effects tend to generally offset the other over time in total return, with the higher cost of leverage reducing income and the lower cost of hedging improving NAV. But how those effects play out in any given quarter or year depends upon the third factor: How rates actually move.
What do swaptions add to the Fund's hedging strategy?
Two alternatives are almost always better than one. Subject to numerous conditions, interest rate swaps (and, therefore, swaptions) should track reasonably closely the value of corporate bonds as interest rates change. Our traditional Treasury based hedges are naturally more likely to follow the path of Treasury bonds. Being able to choose between the two alternatives gives us another way to attempt to manage tracking discrepancies between our hedges and the preferred portfolio.
What are interest rate swaps and swaptions?
Although their name sounds rather strange, interest rate swaps are one of the most widely used forms of derivative contracts. A swaption is simply an option to enter into an interest rate swap on pre-determined terms if that turns out to be attractive to do before the option expires. Similar to the put options on Treasury bond futures contracts that the Fund purchases as hedges, the entire price paid for the swaption is at risk. However, that is the most that a purchaser of a swaption can lose on the contract. For this reason, swaptions are probably more interesting to the Fund than swaps.
At the risk of oversimplification, this is the essence of an interest rate swap between two parties. Party A makes a "loan" to Party B at an interest rate that is fixed for the life of the swap. Party B makes a "loan" to Party A for the identical amount and life at an interest rate that will be variable based on a market indicator of short-term interest rates, which is often LIBOR (the London Interbank Offer Rate). Since the amounts of the "loans" offset each other, the only cash that actually changes hands is the difference between the fixed and variable interest rates, which will fluctuate over the life of the swap as the variable interest rate changes.
The structure of interest rate swaps, although it may seem somewhat contorted, makes them very useful in a wide range of hedging situations. The market value of existing interest rate swaps will reflect swings in general interest rates in a reasonably systematic way, which will, depending on how things turn out, be good for one of the parties to a swap and bad for the other. In this respect, swaps resemble the Fund's options-based hedges, but they also differ since they are not tied specifically to interest rates on Treasury bonds. At any point in time, they may or may not track preferred stocks closely given the often-observed idiosyncrasies of the preferred market.
There are various other risks of derivatives involved in interest rate swaps and swaptions. Even though major financial and broker/dealer organizations are the usual counterparties, anyone entering into such an agreement must carefully consider the other party's credit worthiness and its ability to perform its obligations. Market liquidity may also be a risk at certain times. Furthermore, legal and operational risks may be a reason to avoid more exotic derivative contracts. As is the case with the Fund's option-based hedges, interest rate swaps and swaptions involve significant economic leverage that could cause relatively small changes in interest rates to produce disproportionally large swings in the market value of the swaps or swaptions and a significant risk of loss.
Other Topics
How can investors purchase shares of Common Stock of the Fund?
The Fund’s shares trade on the New York Stock Exchange (NYSE) under the symbol “FFC”. As with any other companies listed on the NYSE, investors can purchase or sell shares of Common Stock of the Fund during normal business hours of the NYSE through a registered broker-dealer.
How much experience does the manager have with managing preferred securities?
Managing preferred portfolios has been the specialty of Flaherty & Crumrine since its inception in 1983 (and the experience of the portfolio managers goes back well beyond that at their prior employer). Flaherty & Crumrine has been managing similarly structured hedged and leveraged closed-end preferred funds since 1991.
Why does the Fund trade at premiums or discounts to NAV?
FFC is a closed-end investment company. Closed-end funds have inherent advantages over traditional mutual funds (or “open-end funds”). For example, a closed-end fund like FFC can use preferred stock leverage and as a fixed pool, it can fully allocate its assets to higher yielding securities without regard to the volatile inflows and outflows associated with the shareholder purchases and redemptions that occur in open-end funds. Both these advantages can work to increase the distributions paid to FFC’s shareholders.
These benefits are accompanied by investment risks that do not exist with open-end funds. Open-end funds issue and redeem shares directly with their shareholders at a price equal to the underlying value of all fund assets (Net Asset Value or NAV). Closed-end fund shareholders do not have the right to cause the redemption of their shares. Instead, closed-end fund shareholders buy and sell their shares on markets like the New York Stock Exchange. A closed-end fund’s shares should trade relative to the NAV of the fund – the market, however, further exposes the price of the shares to the laws of supply and demand and the price can and does vary widely from NAV.
Supply and demand for a fund is dictated by each investor’s perception of the underlying value of the shares relative to other available investment options.
The starting point for any investor considering selling or purchasing shares of a fund is the NAV calculated by the fund. With income funds, like FFC, investors also consider the fund’s dividend levels. These two performance components of NAV and income are reflected in the fund’s total investment return on NAV. In fact, the best measure of the performance of an investment adviser is the fund’s total investment return based on NAV.
Like all investors, investors in closed-end funds make their own decisions about the fundamental quality of a fund’s NAV and the likelihood that it will continue to produce similar total returns on NAV. An investor may value a fund’s shares at a premium to NAV if the investor believes that the fund is likely to perform better than it has in the past, because of projected dividend levels, net asset value, net asset value volatility, call protection, quality of fund management and portfolio credit quality. Alternatively, an investor may similar value a fund’s shares at a discount to NAV based on negative interpretations of the same factors.
Investor decisions are never made in isolation, however, and supply and demand cannot be fully understood without reference to the market conditions for a fund’s shares and the investor’s objectives and alternative investment opportunities. In other words, an investor may decide to purchase or sell shares of a fund based on reasons unrelated to his or her assessment of the fund’s total return on NAV. Commentators speculate that some investors apply an automatic discount to NAV because of the nature of the closed-end fund structure itself – yet some funds consistently trade at premiums. Once an investor has decided to purchase shares of a closed-end fund (perhaps because of some of their inherent advantages), comparative performance matters as well. Stated another way, a fixed-income investor will typically gravitate to that fund in a group of funds with similar investment objectives which offers the best yield for the amount of risk involved.
Finally, investment decisions may be motivated for reasons beyond the performance of the fund, the closed-end structure, or comparative performance. Investors always have personal economic situations that impact their decisions. One example of this may be year-end tax selling. If an investor has losses in a closed-end fund, and gains in some other investment, that investor may make a rational decision to sell his or her shares of the fund at year-end in order to offset any tax gains. In a market environment, tax selling is especially detrimental because it can provide increased supply which may drive down the market price which can in turn lead to more tax selling.
Of course, no single reason can explain the price calculated by a market. There are as many reasons, or combination of reasons, as there are shareholders for why each investor sells or buys shares. And, in the end, the collective effect of all these investor decisions may result in market prices at a premium or discount to NAV.
FFC is no different than any other closed-end fund, and its market price will be controlled by the laws of supply and demand.
What are the differences between "closed-end funds" and "open-end funds"?
Closed-end funds such as FFC differ from open-end funds in some very important ways.
First, let's identify the similarities. In general terms, both types are built around professionally managed portfolios intended to meet a specific investment objective. At any point in time, the value of the portfolio can be determined, and, adjusting for any liabilities incurred by the fund, used to calculate the net asset value ("NAV"). The NAV per share is the intrinsic value of one share of the fund.
The key difference between a closed-end fund and an open-end fund is the manner in which the shares change hands. Closed-end funds issue a fixed number of shares only at the inception of the fund (hence the term "closed"). The shares are usually listed on a major stock exchange (FFC is listed on the NYSE) and the price of the shares will fluctuate based on what a willing buyer would pay for the shares of a willing seller(just like buying or selling shares of Microsoft or any other listed company). The price may or may not bear a close relationship to the NAV. If the market price is above the NAV, the Fund is said to be trading at a "premium". If the market price is below the NAV, the Fund is said to be trading at a "discount".
Open-end funds issue new shares and redeem old shares daily (hence the term "open"). During business hours, investors may indicate to the fund their desire to purchase or sell shares in the fund. The fund will compute the NAV as of the close of business and either issue new shares or redeem outstanding shares at that NAV.
There are other important differences (for example, it is more common for closed-end funds to employ leverage), but the key difference is the mechanism for trading the shares of each.
The Fund’s prospectus offers a more thorough discussion of the risks and considerations associated with an investment in the Fund. Such risks and considerations include, but are not limited to: Investment Risk, Credit Risk, Investment and Market Risk, Management Risk, Hedging Risk, Leverage Risk, Concentration Risk, Inflation Risk, Anti-Takeover Provisions, Market Disruption, Subordination, Limited Voting Rights, Deferral Risk, Special Redemption Rights, Auction Market Preferred Shares Risk and Illiquidity and Tax Risks.
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FFC FUND MANAGER
The preferred securities market is a complex one for the
individual investor or average investment advisor to effectively navigate.
Flaherty & Crumrine was formed in 1983 with the express intention of managing
portfolios of preferred securities for institutional investors. The firm has
experience dating back to 1991 in managing leveraged and hedged preferred
securities funds. Through its experience in the preferred securities markets,
Flaherty & Crumrine has developed the expertise necessary to implement the
portfolio and interest rate management strategies necessary in seeking to obtain
the highest sustainable income.
Focus...The
preferred market is a relatively small and often overlooked segment of the
capital markets. It has been the focus of Flaherty & Crumrine's principals for
over 30 years, enabling them to find and exploit numerous opportunities in this
wonderfully inefficient market.
Philosophy...Flaherty
& Crumrine feels
that the best way to achieve consistently superior investment results is a
combination of intensive credit research and quantitative analysis,
along with some very pragmatic trading strategies. We have been described
as "a curious blend of mad scientist and horse trader.” However, we do not
believe in strategies which require heroic bets on individual credits or on the
direction of interest rates.
Independence...Flaherty
& Crumrine is an independent firm, not affiliated with any brokerage or other
securities firm. This independence allows them the flexibility to serve their
clients, and keeps their focus on managing preferred portfolios. Their clients'
assets are held by an independent custodian of their choosing, typically a bank
or trust company.
As a matter of philosophy, Flaherty & Crumrine operates with a very compact staff of highly qualified professionals, all of whom share in the profits of the firm. This approach is designed to encourage the focus on their specialized investment niche and to avoid having the attention of their key people diverted.
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INVESTMENT TEAM
Portfolio Management
Donald F. Crumrine, CFA | Chairman of the Board & Director
- 8/83 - Present
- Flaherty & Crumrine Incorporated
- 12/69 - 7/83
- Scudder, Stevens & Clark and affiliates
- Vice President, Investments - Scudder, Stevens & Clark Incorporated
- Director - Scudder Preferred Group
- University of Southern California - B.S. Finance, 1969 (Beta Gamma Sigma)
- The Wharton School, University of Pennsylvania – M.B.A., 1972 (With Distinction, Director's Honor List)
Robert M. Ettinger, CFA | President & Director
- 7/85 - Present
- Flaherty & Crumrine Incorporated
- 5/84 - 5/85
- The Wharton School, University of Pennsylvania
- Assistant Director of Admissions - Graduate Division
- 8/80 - 8/83
- Scudder, Stevens & Clark Incorporated
- University of California, Los Angeles - B.A. Economics, 1980 (With Honors)
- The Wharton School, University of Pennsylvania - M.B.A., 1985 (Catherine D. Sharpe Fellow)
Bradford S. Stone | Vice President & Director
- 5/03 - Present
- Flaherty & Crumrine Incorporated
- 6/01 - 5/03
- Barclays Capital
- Director, US Market Strategy
- 2/87 - 6/01
- Goldman, Sachs & Company
- Vice President, Interest Rate Strategy
- Executive Director, Global Hedge Fund Sales
- 8/83 - 2/87
- Salomon Brothers Inc.
- Vice President, Government & Derivatives Sales
- Associate, Options Trading Hedge Fund Sales
- Dartmouth College – A.B. Economics, 1981
- The Wharton School, University of Pennsylvania - M.B.A., 1983 (With Distinction, Director’s Honor List)
Robert E. Chadwick, CFA | Vice President & Director
- 1/99 - Present
- Flaherty & Crumrine Incorporated
- 1/97 - 12/98
- Koch Industries, Inc.
- Portfolio Manager/Financial Associate
- 5/96 - 8/96
- University of Kansas – B.S. Business, 1996 (Honor Roll)
- Anderson School of Business University of California, Los Angeles – M.B.A., 2003
Chad Conwell | Vice President, Chief Legal Officer, Chief Compliance Officer
- 7/05 - Present
- Flaherty & Crumrine Incorporated
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9/98 - 6/05
- Paul, Hastings, Janofsky & Walker, LLP
- University of California at Berkeley - B.A. Political Science, 1993 (With distinction)
- Georgetown University Law Center, Washington, D.C. - J.D., 1998 (Cum laude)
Rick J. Seto, CFA | Vice President & Senior Credit Analyst
- 10/03 - Present
- Flaherty & Crumrine Incorporated
- 10/99 - 10/03
- UBS Investment Bank
- Associate Analyst (Equity Research)
- Natural Gas & Electric Utilities, MLPs
- 10/96 - 10/99
- Moody's Investors Service
- Associate Analyst, Investment Grade - Consumer Products and Retail Companies
- 12/91 - 10/96
- Fleet Bank, N.A. (formerly NatWest Bank, N.A.)
- Assistant Vice President, Commercial Lending Officer
- Assistant Treasurer, Diversified Industries and Corporate Finance Group
- Financial Analyst, Asset-Based Lending
- New York University, B.S. Statistics and Econometrics, 1989
- NatWest Bank, N.A., Formal Credit Training Program, 1994-95
Pinto Suri | Senior Credit Analyst
- 2/05 - Present
- Flaherty & Crumrine Incorporated
- 9/04 - 2/05
- Merrill Lynch
- Vice President, Senior Analyst
- Manager Due Diligence
- 6/00 - 09/04
- UBS Investment Bank
- Associate Director (Equity Research) - Valuation & Accounting
- 1/98 - 6/00
- A.M. Best Company
- Managing Senior Financial Analyst, Debt Ratings Group
- 6/97 - 1/98
- Moody’s Investors Service
- Associate Analyst, Investment Grade - Retailers and Leisure
- 6/95 - 6/97
- PaineWebber, Inc.
- Corporate Retirement Plans Consulting Group
- 1/92 - 8/94
- Kidder, Peabody & Company
- Temple University, B.B.A., 1987
- Duke University, M.B.A., 1991
- University of Iowa, College of Business, Doctoral Student – Accounting, 1994/95
Lisa C. Tucci, CFA | Senior Credit Analyst
- 3/05 - Present
- Flaherty & Crumrine Incorporated
- 11/00 - 3/05
- UBS Investment Bank
- Associate Director (Equity Research) - Natural Gas & Electric Utilities
- State University at Albany, New York, B.S., 2000 (With Honors)
FFC Investment Adviser
Flaherty & Crumrine Incorporated
301 East Colorado Boulevard
Suite 720
Pasadena CA, 91101
If you would like to view the Investment Manager's website, you may click on the link below.
It is important to note that by clicking on the link, you will be leaving this website
and any information viewed there is not the property of Claymore Securities, Inc.
www.flaherty-crumrine.com
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RISKS AND OTHER CONSIDERATIONS
There can be no assurance that the Fund will
achieve its investment objective. The value of the Fund will fluctuate with
the value of the underlying securities. Historically, closed-end funds often
trade at a discount to their net asset value.
The Fund will only purchase investment-grade securities or securities issued
by companies whose senior debt is rated investment grade.
The Fund may, but is not required to, utilize a variety of strategic
transactions to seek to protect the value of the Fund’s assets against the
volatility of long-term interest rate changes and other market movements. There can be
no guarantee that hedging strategies will be employed or will be successful.
The premium paid for entering into such hedging strategies may result in a
reduction in the net asset value of the Fund and a subsequent reduction of
income to the Fund.
The Fund may seek to enhance the level of
the Fund’s current income through the use of leverage. Certain risks are
associated with the leveraging of common stock. Both the net asset value and
the market value of shares of common stock may be subject to higher
volatility and a decline in value. There is no assurance that the Fund will
utilize leverage or, if leverage is utilized, that it will be successful in
enhancing the level of the Fund’s current income.
Additionally, there is interest rate risk associated with the Fund. Changes in the level of interest rates are expected to affect the value of the Fund’s portfolio holdings of fixed rate securities, and, under certain circumstances, its holdings of adjustable rate securities. Significant changes in the interest rate environment, as well as other factors, may cause the Fund’s holding of preferred and debt securities to be redeemed by the issuers, thereby reducing the Fund’s holdings of higher-income paying securities at a time when the Fund may be unable to acquire other securities paying comparable income rates with the redemption proceeds.
There also risks associated with investing in Auction Market Preferred Shares or AMPS. The AMPS are redeemable, in whole or in part, at the option of the Fund on any dividend payment date for the AMPS, and will be subject to mandatory redemption in certain circumstances. The AMPS will not be listed on an exchange. You may only buy or sell AMPS through an order placed at an auction with or through a broker-dealer that has entered into an agreement with the auction agent and the Fund or in a secondary market maintained by certain broker-dealers. These broker-dealers are not required to maintain this market, and it may not provide you with liquidity.
An investment in the Fund includes, but is
not limited to, risks and considerations such as: Credit Risk, Investment
and Market Risk, Management Risk, Hedging Risk, Leverage Risk, Concentration
Risk, Inflation Risk, Anti-Takeover Provisions, Market Disruption,
Subordination, Limited Voting Rights, Deferral Risk, Special Redemption
Rights, Illiquidity and Tax Risks.
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NOT FDIC-INSURED |
NOT BANK-GUARANTEED |
MAY LOSE VALUE |
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Investors should carefully consider the investment objectives and policies, risk considerations, charges and ongoing expenses of any investment
product before investing. For more information, please contact a securities representative or Claymore Securities, Inc., 2455 Corporate West Drive,
Lisle, Illinois 60532, 800-345-7999.
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
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