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Total
Return On Net Asset Value
Strong
vs. Weak Markets
A great strength of the Flaherty & Crumrine Preferred
Income Opportunity Fund has been its ability to do well in weak
markets. The bar chart below compares the Fund's total return since
inception, including both income and changes in net asset value,
to the average returns on the Lipper Domestic Investment Grade Funds
in Lipper's database. The historical returns are also broken down
between "strong" and "weak" months based upon
whether the average of the Lipper Domestic Investment Grade Funds,
on a month by month basis, managed to beat the total return on U.S.
Treasury bills.
Based
upon monthly data provided by Lipper Inc. over the 193 months since
the inception of Flaherty & Crumrine Preferred Income Opportunity
Fund. Months were characterized as "weak" or "strong"
based on whether the average of the Lipper Domestic Investment Grade
Funds outperformed 3 month US Treasury Bills, and included 73 weak months
and 120 strong months. The Lipper Funds include all funds in Lipper's
U.S. Government, U.S. Mortgage and Corporate Debt BBB Rated categories
in each month during the period.
Past
performance is not indicative of future results.
The purpose of the chart is to illustrate how the hedging strategy
has helped mitigate the negative performance of the Fund's preferred
securities portfolio during weak markets. Remember, PFO is leveraged
and leverage magnifies returns, both good and bad. The Lipper Domestic
Investment Grade Funds are not all leveraged. A leveraged fund should
underperform an unleveraged fund in a weak market. PFO has actually
outperformed the Lipper Domestic Investment Grade Funds as seen
in the performance of the "Weak Months". A leveraged Fund
should outperform an unleveraged fund in a strong market. PFO has
outperformed the Lipper Domestic Investment Grade Funds as seen
in the performance of the "Strong Months". The hedging
strategy allows for the positive effects of leverage, while helping
to mitigate the negative effects of leverage as illustrated in the
bar chart.
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Performance For Selected Time Periods
The table below compares the return on the Fund since its inception
with a broad group of fixed-income, closed-end funds. Although the investment
strategies used by the Fund differ significantly from the strategies
used by the other fixed-income funds, we believe that the Fund addresses
similar investment goals with better results.
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TOTAL
RETURN ON NET ASSET VALUE (1)
FOR PERIODS ENDED 2/29/2008 |
| |
One
Year |
Five
Year |
Life
of
Fund (2) |
| Flaherty & Crumrine Preferred Income Opportunity Fund |
-15.2% |
4.3% |
8.2% |
| Lipper Domestic Investment Grade Funds(3) |
2.3% |
5.3% |
6.1% |
|
-
Based on monthly data provided by Lipper Inc. in each calendar
month during the relevant period. Distributions are assumed to
be reinvested at NAV in accordance with Lipper's practice, which
differs from the methodology used elsewhere in this report.
- Since inception on February 13, 1992
- Includes
all funds in Lipper's U.S. Government, U.S. Mortgage and Corporate
Debt BBB Rated categories in each month during the period.
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We
hope to earn our keep by doing better than the Lipper Domestic Investment
Grade Funds over longer holding periods, including both ups and downs
in interest rates. In any single year, however, the impact of long-term
interest rate trends on our hedging strategy will probably have the
greatest effect on how we compare to these funds.
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Performance
of NAV and Market Price
The graph shows the performance of an investment of $1,000
in the Fund at its inception, including the impact of expenses and leverage.
Past performance is not indicative of future results.
NAV
performance is calculated assuming all distributions to shareholders were
reinvested at NAV on the date of payment, while market performance assumes
reinvestment at the Dividend Reinvestment Plan price. An investor in the
Fund could have fared better or worse depending on actual market prices
at which shares were purchased and sold, including brokerage commissions
and market premiums or discounts to the shares' net asset value. The investor's
results also would have been affected by whether or not distributions
were actually reinvested and the prices at which those reinvestments were
made. |
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Market vs. Net Asset Value...
The following charts illustrate the relationship of each Fund's market
price to its respective Net Asset Value (NAV). These charts are updated
monthly with weekly NAV data.
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