0000935069-01-500601.txt : 20011029
0000935069-01-500601.hdr.sgml : 20011029
ACCESSION NUMBER: 0000935069-01-500601
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010831
FILED AS OF DATE: 20011023
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PREFERRED INCOME OPPORTUNITY FUND INC
CENTRAL INDEX KEY: 0000882071
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 954355600
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1130
FILING VALUES:
FORM TYPE: N-30D
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-06495
FILM NUMBER: 1764134
BUSINESS ADDRESS:
STREET 1: 301 E COLORADO BLVD STE 720
STREET 2: C/O FLAHERTY & CRUMRINE INC
CITY: PASADENA
STATE: CA
ZIP: 91101
BUSINESS PHONE: 8187957300
MAIL ADDRESS:
STREET 1: 301 COLORADO BLVD
STREET 2: STE 720
CITY: PASADENA
STATE: CA
ZIP: 91101
N-30D
1
prefopp.txt
PREFERRED INCOME OPPORTUNITY QUARTERLY REPORT
PREFERRED INCOME OPPORTUNITY FUND INCORPORATED
Dear Shareholder:
This is being written as America is just beginning to recover from the
tragedies at the World Trade Center and the Pentagon. The Federal Reserve Bank
has clearly indicated its willingness to pump enough money into the economy to
prevent potential cash crunches. In addition, the securities markets have
resumed orderly operations. Once again, the country seems determined to
demonstrate its extraordinary resiliency in the face of events that may change
the course of history.
The performance of the Preferred Income Opportunity Fund through August 31,
2001 has been a positive note in a generally difficult year for investors. Total
returns on net asset value ("NAV") were 7.8% for the most recent quarter and
14.9% for the first nine months of fiscal 2001. We are very pleased with these
results.
Hybrid preferreds have been star performers so far in fiscal 2001.
Traditional preferreds (those which provide special tax benefits to corporate
investors) lagged behind hybrids earlier, but turned in good results in recent
months. That was the equivalent of the portfolio "hitting on all cylinders",
which produced the very strong returns in the latest quarter.
We have taken advantage of attractive opportunities to move from hybrids
into traditional preferreds when these two primary sectors of the preferred
market have been "out of sync". As a result, traditional preferreds accounted
for approximately 65% of the Fund's portfolio on August 31, 2001, up
approximately 10 percentage points since the beginning of fiscal 2001. We are
always searching for the cheapest preferreds available.
Falling short-term interest rates have helped by reducing the cost of the
Money Market Cumulative(TM) preferred ("MMP") shares issued by the Fund to
create leverage. The current cost of the Fund's leverage is 2.65%, which is
adjusted to market levels every 49 days through an auction process. We have not
yet had an auction following the events of September 11, but short-term rates
have declined further since then.
We can now write a happy ending to a matter previously discussed in these
reports. Moody's has completed the restructuring of its rating system for
preferred stocks as expected. The steps taken by the Fund in anticipation of
this, including amending its corporate articles, successfully avoided the
problems that were potentially posed for the Fund's MMP. "A stitch in time saves
nine!"
The market price of the Fund's shares has stayed fairly close to net asset
value recently. This may reflect a general increase in investors' interest in
income oriented investments caused by the decline in short-term interest rates
and the problems with common stocks. In response, we are enclosing a brief
description of the Fund's dividend reinvestment plan, which provides a very
convenient and cost efficient way to acquire additional shares of the Fund.
Sincerely,
/S/ ROBERT T. FLAHERTY
Robert T. Flaherty
CHAIRMAN OF THE BOARD
September 20, 2001
--------------------------------------------------------------------------------
Preferred Income Opportunity Fund Incorporated
SUMMARY OF INVESTMENTS
AUGUST 31, 2001 (UNAUDITED)
----------------------------------------------
PERCENT
VALUE OF TOTAL
(000'S) NET ASSETS
------- ----------
ADJUSTABLE RATE PREFERRED STOCKS
Utilities ................................... $ 7,901 3.9%
Banking ..................................... 21,086 10.5
Financial Services .......................... 1,044 0.5
-------- -----
Total Adjustable Rate ................... 30,031 14.9
-------- -----
FIXED RATE PREFERRED STOCKS AND SECURITIES
Utilities ................................... 69,014 34.5
Banking ..................................... 27,979 14.0
Financial Services .......................... 32,737 16.4
Insurance ................................... 18,113 9.0
Oil and Gas ................................. 12,123 6.1
Miscellaneous Industries .................... 5,461 2.7
-------- -----
Total Fixed Rate ........................ 165,427 82.7
-------- -----
TOTAL PREFERRED STOCKS AND SECURITIES ............ 195,458 97.6
SHORT TERM INVESTMENT FUND ....................... 1,865 0.9
PURCHASED PUT OPTIONS ............................ 656 0.4
-------- -----
TOTAL INVESTMENTS ................................ 197,979 98.9
OTHER ASSETS AND LIABILITIES (NET) ............... 2,244 1.1
-------- -----
TOTAL NET ASSETS ............................ $200,223 100.0%
======== =====
FINANCIAL DATA
PER SHARE OF COMMON STOCK (UNAUDITED)
--------------------------------------------------------------
DIVIDEND
DISTRIBUTION NET ASSET NYSE REINVESTMENT
PAID VALUE CLOSING PRICE PRICE (1)
------------ --------- ------------- ------------
December 31, 2000 ............................... $0.0680 $10.67 $10.38 $10.34
January 31, 2001 ................................ 0.0680 10.93 10.65 10.58
February 28, 2001 ............................... 0.0680 11.06 10.50 10.92
March 31, 2001 .................................. 0.0680 10.96 10.84 10.94
April 30, 2001 .................................. 0.0680 10.84 10.65 10.77
May 31, 2001 .................................... 0.0680 10.96 10.60 10.70
June 30, 2001 ................................... 0.0680 11.09 10.67 10.86
July 31, 2001 ................................... 0.0680 11.47 11.29 11.38
August 31, 2001 ................................. 0.0680 11.60 10.90 11.20
--------------------
(1) Whenever the net asset value per share of the Fund's common stock is less
than or equal to the market price per share on the payment date, new shares
issued will be valued at the higher of net asset value or 95% of the then
current market price. Otherwise, the reinvestment shares of common stock
will be purchased in the open market.
2
--------------------------------------------------------------------------------
Preferred Income Opportunity Fund Incorporated
STATEMENT OF CHANGES IN NET ASSETS(1)
NINE MONTHS ENDED AUGUST 31, 2001 (UNAUDITED)
----------------------------------------------
OPERATIONS:
Net investment income ......................................................................... $ 9,292,913
Net realized loss on investments sold ......................................................... (2,093,470)
Net unrealized appreciation of investments during the period .................................. 12,307,972
------------
Net increase in net assets from operations ................................................ 19,507,415
DISTRIBUTIONS:
Dividends paid from net investment income to MMP* Shareholders ................................ (2,433,207)
Distributions paid from net realized capital gains to MMP* Shareholders ....................... --
Dividends paid from net investment income to Common Stock Shareholders (2) .................... (6,832,683)
Distributions paid from net realized capital gains to Common Stock Shareholders ............... --
------------
Total Distributions ........................................................................... (9,265,890)
------------
FUND SHARE TRANSACTIONS:
Increase from Common Stock transactions ....................................................... 315,241
NET INCREASE IN NET ASSETS: ........................................................................ 10,556,766
NET ASSETS:
Beginning of period ........................................................................... 189,666,278
------------
End of period ................................................................................. $200,223,044
============
FINANCIAL HIGHLIGHTS(1)
NINE MONTHS ENDED AUGUST 31, 2001 (UNAUDITED)
FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD.
-----------------------------------------------------
OPERATING PERFORMANCE:
Net asset value, beginning of period ......................................................... $ 10.68
-----------
Net investment income ........................................................................ 0.83
Net realized loss and unrealized appreciation on investments ................................. 0.91
-----------
Net increase in net asset value resulting from investment operations ......................... 1.74
DISTRIBUTIONS:
Dividends paid from net investment income to MMP* Shareholders (2) ......................... (0.22)
Distributions paid from net realized capital gains to MMP* Shareholders ..................... --
Dividends paid from net investment income to Common Stock Shareholders (2) .................. (0.61)
Distributions paid from net realized capital gains to Common Stock Shareholders ............. --
Change in accumulated undeclared dividends on MMP* ........................................... 0.01
-----------
Total distributions .......................................................................... (0.82)
-----------
Net asset value, end of period ............................................................... $ 11.60
===========
Market value, end of period .................................................................. $ 10.90
===========
Common shares outstanding, end of period ..................................................... 11,179,743
===========
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON STOCK SHAREHOLDERS:
Net investment income ........................................................................ 7.52%**
Operating expenses ........................................................................... 1.60%**
--------------------------------------------------------
SUPPLEMENTAL DATA:++
Portfolio turnover rate fiscal year to date .................................................. 31%
Net assets, end of period (in 000's) ......................................................... $ 200,223
Ratio of operating expenses to total average net assets including MMP* ....................... 1.02%**
(1) These tables summarize the nine months ended August 31, 2001 and should be
read in conjunction with the Fund's audited financial statements, including
footnotes, in its Annual Report dated November 30, 2000.
(2) Includes dividends earned, but not paid out, in prior fiscal year.
* Money Market Cumulative Preferred TM Stock.
** Annualized.
++ Information presented under heading Supplemental Data includes MMP*.
3
DIRECTORS
Martin Brody
Donald F. Crumrine, CFA
Robert T. Flaherty, CFA
David Gale
Morgan Gust
Robert F. Wulf, CFA
OFFICERS
Robert T. Flaherty, CFA
Chairman of the Board
and President
Donald F. Crumrine, CFA
Vice President
and Secretary
Robert M. Ettinger, CFA
Vice President
Peter C. Stimes, CFA
Vice President
and Treasurer
INVESTMENT ADVISER
Flaherty & Crumrine Incorporated
e-mail: flaherty@fin-mail.com
QUESTIONS CONCERNING YOUR SHARES OF PREFERRED
INCOME OPPORTUNITY FUND?
o If your shares are held in a Brokerage
Account, contact your broker.
o If you have physical possession of your shares
in certificate form, contact the Fund's Transfer
Agent & Shareholder Servicing Agent --
PFPC Inc.
P.O. Box 1376
Boston, MA 02104
1-800-331-1710
THIS REPORT IS SENT TO SHAREHOLDERS OF PREFERRED INCOME OPPORTUNITY FUND
INCORPORATED FOR THEIR INFORMATION.
IT IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE
PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THIS
REPORT.
[LOGO OMITTED - PREFERRED INCOME OPPORTUNITY FUND]
Quarterly
Report
August 31, 2001
web site: www.preferredincome.com