Fort Dearborn Income Securities, Inc. Announces Final Proposals Related to Investment Policies & Restrictions to be Presented...
31 Octobre 2013 - 10:05PM
Business Wire
Fort Dearborn Income Securities, Inc. (NYSE:FDI) (the “Fund”)
announced that at the annual meeting of shareholders to be held on
December 6, 2013 (the “Annual Meeting”), shareholders will be asked
to approve changes to the Fund’s investment policies and
restrictions, as described below. These changes, if approved, will
become effective on or after December 31, 2013. The proposals being
submitted to shareholders differ to some extent from those
described in the Media Release previously issued on September 18,
2013.
At the Annual Meeting, shareholders will be asked to approve
amendments to the Fund’s fundamental investment policy of investing
at least 75% of the Fund’s total assets in investment grade debt
(the “75% Policy”) in order to modernize and streamline the related
language. For example, the current 75% Policy is linked to credit
ratings so that to come under the 75% Policy, debt obligations must
be rated in the four highest credit rating grades of Moody’s
Investor Services, Inc. or Standard & Poor’s Rating Services.
The current 75% Policy dates back to 1993, when the Fund’s
prospectus was last updated in conjunction with a rights offering.
Since then, Fitch Ratings, Inc. (“Fitch”) has established itself as
the third major ratings agency and is viewed by UBS Global Asset
Management (Americas), Inc. (“UBS Global AM”), the Fund’s
investment advisor, as being as reliable as the other two ratings
organizations. The proposed amended 75% Policy, included below, now
incorporates Fitch:
The Company may not have less than 75% of the Company's total
assets in, non-convertible fixed income securities which at the
time of purchase are considered investment grade by being rated in
the four highest grades as determined by Moody's Investors
Services, Inc. ("Moody's"), Standard & Poor's Ratings Services
("S&P"), or Fitch Ratings, Inc. ("Fitch") or if not rated are
considered by the Investment Advisor to be of comparable investment
quality.
As noted earlier, the Fund’s offering documents, restrictions
and policies have not been updated in almost two decades and,
therefore, feature a number of limitations that many modern funds
no longer include. As such, shareholders will also be asked to
approve amendments to the Fund’s restrictions related to borrowing,
senior securities and commodities. These changes will provide the
Fund with more modern restrictions that will no longer prevent the
Fund from using derivative instruments, such as futures, forwards,
swaps and options, to more efficiently manage the Fund’s
investments. Also, amending the borrowing and senior securities
restrictions will remove any ambiguity with respect to the Fund’s
ability to engage in structural leverage (e.g., borrowing from a
bank for investment purposes), if it is determined that such
leverage would be beneficial at some time in the future. At this
time, the Fund does not intend to engage in structural leverage
(such as borrowing from a bank for investment purposes), however,
Fund shareholders will be alerted in writing should the Board and
UBS Global AM decide to implement such strategies in the
future.
Finally, shareholders are asked to approve the elimination of
four outdated fundamental investment restrictions that currently
prevent the Fund from employing derivative instruments as
additional tools to manage the Fund’s exposures and provide greater
flexibility in portfolio construction. The investment restrictions
that shareholders are being asked to approve for elimination
include restrictions prohibiting: 1) mortgaging, hypothecating or
pledging assets; 2) purchasing securities on margin; 3) making
short sales or maintaining short positions; and 4) engaging in
options. UBS Global AM seeks to initiate use of derivative
instruments to more efficiently manage the Fund’s exposures. For
example, the Fund may utilize interest rate instruments, such as
futures, to more precisely manage the Fund’s interest rate
exposure, while potentially seeking to improve its earnings
potential by investing in longer maturity, higher-yielding debt,
but reducing overall portfolio interest rate exposure using
futures. Furthermore, the Fund intends to utilize currency
instruments (e.g., foreign exchange forwards) to hedge any foreign
currency exposure back to the US dollar. Overall, the Fund expects
to use derivative instruments for both hedging and investment
purposes.
The Board set Friday, October 11, 2013 as the record date for
determination of the shareholders entitled to vote at the Annual
Meeting. Additional matters to be considered at the Annual Meeting
are the election of directors and such other business as may
properly come before the Annual Meeting. The Board has recommended
that shareholders vote for all of the directors nominated and for
the proposed amendments to the Fund’s 75% Policy and fundamental
investment restrictions.
In connection with the Annual Meeting, a proxy statement was
filed with the SEC. WE URGE SHAREHOLDERS TO READ THE PROXY
STATEMENT CAREFULLY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT
THE FUND. Shareholders are able to obtain free copies of the proxy
statement, as well as other filed documents containing information
about the Fund, at www.sec.gov, the SEC’s Internet site.
Shareholders can also obtain copies of these documents and other
related documents for free by calling the Fund’s proxy solicitor,
Georgeson Inc. at 866-316 3922.
Additional risk considerations
While the changes discussed above present attractive investment
opportunities, they may potentially introduce additional risks,
which are further outlined below and in the proxy statement.
Derivatives risk: The value of “derivatives”—so called
because their value “derives” from the value of an underlying
asset, reference rate or index—may rise or fall more rapidly than
other investments. When using derivatives for non-hedging purposes,
it is possible for the Fund to lose more than the amount it
invested in the derivative. The risks of investing in derivative
instruments also include market and management risks. Derivatives
relating to fixed income markets are especially susceptible to
interest rate risk and credit risk. In addition, many types of
swaps and other non-exchange traded derivatives may be subject to
liquidity risk, credit risk and mispricing or valuation complexity.
These derivatives risks are different from, and may be greater
than, the risks associated with investing directly in securities
and other instruments.
Leverage risk associated with financial instruments: The
use of financial instruments to increase potential returns,
including derivatives used for investment (nonhedging) purposes,
may cause the Fund to be more volatile than if it had not been
leveraged. The use of leverage may also accelerate the velocity of
losses and can result in losses to the Fund that exceed the amount
originally invested.
Fort Dearborn Income Securities, Inc. is a closed-end bond fund
managed by UBS Global AM. The Fund invests principally in
investment grade, long-term fixed income debt securities. The
primary objective of the Fund is to provide its shareholders
with:
- A stable stream of current income
consistent with external interest rate conditions; and
- A total return over time that is above
what they could receive by investing individually in the investment
grade and long-term maturity sectors of the bond market.
Further information regarding the Fund, including a
discussion of principal objectives, principal investment strategies
and principal risks, may be found in the fund overview located
at http://www.ubs.com/closedendfundsinfo. You may
also request copies of the fund overview by calling the Closed-End
Funds Desk at 888-793 8637.
©UBS 2013. All rights reserved.
The key symbol and UBS are among the registered and unregistered
trademarks of UBS.
UBS Global Asset ManagementClosed-End Funds Desk: 888-793
8637ubs.com
Fort Dearborn Income Securities, Inc. (NYSE:FDI)
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