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Fiduciary/Claymore MLP Opportun Message Board

  • deskandchairs2004 deskandchairs2004 Nov 17, 2008 9:24 PM Flag

    FMO Distribution Policy

    Does anyone have concerns about the sustainability of current distribution levels given that FMO has, as announced in Dec 2006, a policy of determining distributions based not only on net investment income, but also reflecting capital appreciation the fund has experienced. With market prices tanking, one would think that accumulated, undistributed appreciation will pretty much dry up. I don't see how one can get a handle on this from published reports. Moreover, I have not found this policy described by other closed end funds concentrating in MPLs. Thoughts?

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    • I worry about such vague machinations in a fund, however there is a reality check: the premium/discount ratio. If this is accurate, the fund can do distributions in an arbitrary way, and the price will adjust to converge the premium/discount ratio back to one. In other words, the true value of FMO's holdings will reflect its price. What the distributions will affect are the tax consequences for the holder, and if distributions are not reinvested, distributions will affect the amount of FMO turned back to cash for the holder (i.e. sold).

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