UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21652
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Fiduciary/Claymore MLP Opportunity Fund
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(Exact name of registrant as specified in charter)
2455 Corporate West Drive, Lisle, IL 60532
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(Address of principal executive offices) (Zip code)
J. Thomas Futrell
2455 Corporate West Drive, Lisle, IL 60532
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
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Date of fiscal year end: November 30
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Date of reporting period: November 30, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is as follows:
ANNUAL
REPORT
November 30, 2008
Fiduciary/Claymore | FMO
MLP Opportunity Fund
Graphic:Pipeline
FAMCO
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FIDUCIARY ASSET MANAGEMENT
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Logo: Claymore (SM)
www.claymore.com/fmo
... YOUR PIPELINE TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
FIDUCIARY/CLAYMORE MLP OPPORTUNITY FUND
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The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.CLAYMORE.COM/FMO, you will find:
o Daily, weekly and monthly data on share prices, distributions, dividends
and more
o Portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and adviser contact information
Fiduciary Asset Management and Claymore are constantly updating and expanding
shareholder information services on the Fund's website, in an ongoing effort to
provide you with the most current information about how your Fund's assets are
managed, and the results of our efforts. It is just one more small way we are
working to keep you better informed about your investment in the Fund.
2 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
Dear SHAREHOLDER |
We thank you for your investment in the Fiduciary/Claymore MLP Opportunity Fund
(the "Fund"). This report covers the Fund's performance for the fiscal year
ended November 30, 2008. This has been an extraordinarily difficult time for all
investors, and we are disappointed to report that the Fund's return was negative
for the period.
The Fund's investment objective is to provide a high level of after-tax total
return with an emphasis on current distributions paid to shareholders. Fiduciary
Asset Management, LLC ("FAMCO"), the Fund's sub-adviser, seeks to achieve that
objective by investing at least 80% of the Fund's managed assets in master
limited partnership ("MLP") entities, which can provide shareholders with
attractive tax-deferred income.
FAMCO manages a wide range of institutional products and is one of the leading
managers of hedged equity investments. As of November 30, 2008, FAMCO managed or
supervised approximately $12.9 billion in assets.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For thE 12-month period
ending November 30, 2008, the Fund provided a total return based on market price
of -45.67% and a return of -43.55% based on NAV. As of November 30, 2008, the
Fund's closing market price of $11.42 represented a discount of 5.54% to the
Fund's NAV of $12.09. Past performance is not a guarantee of future results.
The market value of the Fund's shares fluctuates from time to time, and it may
be higher or lower than the Fund's NAV.
On January 2, 2008, the Board of Trustees of the Fund announced that it would
increase the quarterly dividend by 1.41% to $0.36000 per share, effective with
the January 2008 distribution. The Board of Trustees subsequently authorized
three additional dividend increases during this fiscal period: a 1.39% increase
to $0.36500 effective with the April 2008 distribution; a 1.37% increase to
$0.37000 per share effective with the July 2008 distribution; and a 0.5%
increase to $0.37185 per share effective with the October 2008 distribution.
This quarterly dividend level of $0.37185 as of October 2008 represents an
annualized distribution rate of 13.02%, based on the Fund's closing market price
of $11.42 as of November 30, 2008.
Under the Fund's Automatic Dividend Reinvestment Plan (the "Plan"), a
shareholder whose Common Shares are registered in his or her own name will have
all distributions reinvested automatically unless the shareholder elects to
receive cash. Distributions with respect to Common Shares registered in the name
of a broker-dealer or other nominee (that is, in "street name") will be
reinvested by the broker or nominee in additional Common Shares under the Plan,
unless the service is not provided by the broker or nominee or the shareholder
elects to receive distributions in cash. The Plan is described in detail on page
25 of the Fund's annual report. When shares trade at a discount to NAV, the Plan
takes advantage of
Annual Report | November 30, 2008 | 3
FMO | Fiduciary/Claymore MLP Opportunity Fund | DEAR SHAREHOLDER continued
the discount by reinvesting the quarterly dividend distribution in common shares
of the Fund purchased in the market at a price less than NAV. Conversely, when
the market price of the Fund's common shares is at a premium above NAV, the Plan
reinvests participants' dividends in newly-issued common shares at NAV, subject
to an IRS limitation that the purchase price cannot be more than 5% below the
market price per share. The Plan provides a cost-effective means to accumulate
additional shares and enjoy the benefits of compounding returns over time.
To learn more about the Fund's performance and investment strategy, we encourage
you to read the Questions & Answers section of the report, which begins on page
5. You'll find information on FAMCO's investment philosophy, its views on the
economy and market environment, and detailed information about the factors that
impacted the Fund's performance.
We appreciate your investment and look forward to serving your investment needs
in the future. We sincerely hope to report improved investment results in the
year ahead. For the most up-to-date information on your investment, please visit
the Fund's website at www.claymore.com/fmo.
Sincerely,
/s/ J. Thomas Futrell
J. Thomas Futrell
Fiduciary/Claymore MLP Opportunity Fund
4 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
QUESTIONS & ANSWERS |
The Fiduciary/Claymore MLP Opportunity Fund (the "Fund") is managed by Fiduciary
Asset Management, LLC ("FAMCO"). In the following interview, Portfolio Manager
James J. Cunnane, Jr., CFA, discusses the Fund's performance for the Fund's
fiscal year ended November 30, 2008.
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WILL YOU REMIND US OF THIS FUND'S OBJECTIVE AND INVESTMENT STRATEGY?
The Fund's investment objective is to provide a high level of after-tax total
return with an emphasis on current distributions paid to shareholders. The total
return sought by the Fund includes appreciation in the net asset value ("NAV")
of the Fund's common shares and all distributions made by the Fund to its common
shareholders, regardless of the tax characterization of such distributions. The
Fund has been structured to seek to provide an efficient vehicle through which
its shareholders may invest in a portfolio of publicly traded securities of
master limited partnerships ("MLPs") and related entities. MLPs combine the tax
benefits of limited partnerships with the liquidity of publicly traded
securities. The Fund believes that as a result of the tax characterization of
cash distributions made by MLPs to their investors, in a typical year, a
significant portion of the Fund's income will be tax-deferred, which may allow
distributions by the Fund to its shareholders to include high levels of
tax-deferred income.
Under normal market conditions, we invest at least 80% of the Fund's managed
assets in MLP entities, and at least 65% of managed assets in equity securities
of MLP entities. The Fund anticipates that a substantial portion of the MLP
entities in which the Fund invests will be engaged primarily in the energy,
natural resources and real estate sectors of the economy. MLP affiliates include
affiliates of MLPs that own general partner interests or, in some cases,
subordinated units, registered or unregistered common units, or other limited
partner units in an MLP. The Fund may also invest in common stock of large
capitalization companies, including companies engaged primarily in such sectors.
We may employ an option strategy of writing (selling) covered call options on
securities which may include MLPs held in the Fund's portfolio in order to
generate current income and gains. Up to 40% of the Fund's managed assets may be
invested in unregistered or otherwise restricted securities, which may consist
of equity securities of MLP entities and other securities of public and
non-public companies, but no more than 20% of its managed assets will be
invested in restricted securities issued by non-public companies. The Fund may
invest a total of up to 25% of its Managed Assets in debt securities of MLP
entities and non-MLP entity issuers, including securities rated below investment
grade.
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HOW WOULD YOU DESCRIBE THE MASTER LIMITED PARTNERSHIP MARKET OVER THE LAST 12
MONTHS?
During the first half of the Fund's fiscal year, there was considerable
volatility in the trading pattern for MLPs but no clear direction, following a
sell-off in the MLP market in the summer of 2007. Over the last few months, the
driving factor in all securities markets has been significant and severe risk
aversion. Prices of essentially all publicly traded entities that do not have
implicit or explicit government guarantees have dropped sharply, and MLPs are no
exception. Most securities are at much lower prices than they were six or 12
months ago because of a combination of risk aversion and impairment of earnings
streams and cash flows caused by current economic conditions.
Looking at MLPs more specifically, most of them are in the business of owning
energy infrastructure assets. Those assets derive their cash flow either from
moving the commodity through the infrastructure system from the source to the
end user or from owning and selling the commodity. MLPs generally perform well
when energy prices are in a normal range; however, they can have difficulty
operating profitably when energy prices are too high or too low. During 2008
we've seen both: oil prices crossed the symbolic threshold of $100 per barrel on
the first trading day of 2008, reached an all-time peak of $147.27 in July, then
in early December plunged to $40.50, the lowest level in four years. When energy
prices are too high, demand for refined products such as gasoline and jet fuel
drops because individuals and businesses make an effort to reduce consumption by
traveling less and through other measures. That causes volume declines for
infrastructure owners who move products from where they are to where they need
to be. When energy prices fall too low, new projects such as extracting natural
gas from new supply areas and moving it to end users becomes less profitable or
uneconomic.
Annual Report | November 30, 2008 | 5
FMO | Fiduciary/Claymore MLP Opportunity Fund | QUESTIONS & ANSWERS continued
Because MLPs pay out most of their cash each year as distributions to
shareholders, they need to be able to tap the capital markets on a continuing
basis to finance growth. Debt financing has become very hard to obtain, and the
cost of debt has increased substantially. In current market conditions, the
ability to issue new equity is almost non-existent. The result is that balance
sheets of MLP entities are not nearly as strong as they were a year ago.
Consequently, the growth in distributions from MLP entities has slowed
significantly, and some MLP entities have even had to cut their distributions.
Six months to a year ago, when the market expectation was for distribution
growth of greater than 5% a year, MLPs were priced to provide yields around 7%.
That made MLPs competitive with other yield-oriented investment options such as
real estate investment trusts. Now, with little distribution growth projected,
the market places a lower value on the cash flows from MLPs; consequently,
prices have dropped, and yields are in the 12% range. Using the Alerian MLP
Index (the "Index") as a benchmark for the industry, total return for the
12-month period ended November 30, 2008, was -33.98%.1
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HOW DID THE FUND PERFORM IN THIS MARKET ENVIRONMENT?
All Fund returns cited--whether based on NAV or market price--assume the
reinvestment of all distributions. For the 12-month period ended November 30,
2008, the Fund provided a total return based on market price of -45.67% and a
return of -43.55% based on NAV. Past performance is not a guarantee of future
results.
Underperformance during the period relative to the Alerian MLP Index (the
"Index") is driven by a combination of leverage and capitalization differences
between the holdings in the portfolio and holdings in the Index. Since returns
were negative, the Fund's leverage exacerbated the negative return; the Index
was not leveraged.
With regard to capitalization, the Fund's portfolio was overweight smaller
capitalization MLPs and underweight large-cap MLPs. During 2008, as investors
became increasingly wary of risk, they tended to move into investments of
greater size and liquidity, which are generally considered to be less risky;
this was true for MLPs, as well as for most other types of investments.
The market value of the shares of closed-end funds fluctuates from time to time,
and a fund's market value may be higher or lower than its net asset value. The
closing price of the Fund's shares as of November 30, 2008, was $11.42,
representing a 5.54% discount to the NAV of $12.09. On November 30, 2007, the
Fund's market price closed at $22.66, which represented a discount of 1.95% to
the NAV of $23.11. At its inception in December 2004, the Fund's NAV was $19.10.
Please keep in mind that the Fund is a taxable entity--meaning it recognizes
either a tax liability on realized portfolio gains as well as portfolio
appreciation or recognizes a deferred tax asset related to realized portfolio
losses as well as portfolio depreciation and net operating losses. The intent of
this process is to ensure the Fund's NAV reflects the net after-tax value of the
Fund's portfolio. As of November 30, 2008, the Fund's NAV included a net
deferred tax asset of $23.6 million, or $1.29 per share. Realization of the
deferred tax asset is dependent on whether there will be sufficient taxable
income with the carryforward periods to realize some or all of the deferred tax
benefit. A valuation allowance is recorded against the deferred tax asset for
that portion of the deferred tax benefit for which it is more likely than not
that it will not be realized (see note 4 in Notes to Financial Statements).
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PLEASE TELL US ABOUT THE FUND'S DISTRIBUTIONS.
On January 2, 2008, the Board of Trustees of the Fund announced that it would
increase the quarterly dividend by 1.41% to $0.360 per share, effective with the
January 2008 distribution. The Board of Trustees subsequently authorized three
additional dividend increases during this fiscal period: a 1.39% increase to
$0.365 effective with the April 2008 distribution; a 1.37% increase to $0.370
per share effective with the July 2008 distribution; and a 0.5% increase to
$0.37185 per share effective with the October 2008 distribution.
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HOW DID THE FUND'S LEVERAGE AFFECT PERFORMANCE DURING THIS PERIOD?
The purpose of leverage (borrowing) is to fund the purchase of additional
securities that provide increased income and potentially greater appreciation to
common shareholders than could be achieved from an unleveraged portfolio. Of
course, leverage results in greater NAV volatility and entails more downside
risk than an unleveraged portfolio.
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1 The Alerian MLP Index measures the composite performance of the 50 most
prominent energy MLPs, and is calculated by Standard & Poor's using a
float-adjusted, capitalization-weighted methodology. An index is unmanaged
and it is not possible to invest directly in an index.
6 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund | QUESTIONS & ANSWERS continued
Managing a leveraged fund in the recent environment of falling asset prices has
been extremely difficult for several reasons. First, the leverage itself has
contributed to the downside pressure on NAV. When the dollar amount of leverage
is maintained constant as NAV falls, leverage as a percentage of NAV rises.
Since leverage adds to performance only when the cost of leverage is less than
the return generated by investments, the use of leverage detracted from
performance during this period.
A second issue is that the lenders that provide funds for leverage have become
much more cautious and demanding. In September 2008, we announced that we had
refinanced the Fund's leverage, for which we formerly utilized the commercial
paper conduit market, through a new borrowing facility. This facility is a prime
brokerage account with an evergreen renewal feature with a 180-day cancellation
period. Under the terms of this agreement, the Fund must post collateral against
leverage of at least 200% of the amount of leverage outstanding. As of November
30, 2008, the Fund's leverage, net of cash, cash equivalents and pending trade
settlements, was approximately 17.2% of managed assets, which represented a
coverage ratio of approximately 580%. It is worth noting that official
statistics regarding leverage, such as those posted on the Fund's web site,
which show leverage of 24.6% of managed assets as of November 30, 2008, do not
reflect the excess cash the Fund has available to pay down debt, should we
decide to do so. Leverage of 24.6% of managed assets represents a coverage ratio
of approximately 406%.
One positive for the performance of this Fund relative to peer group funds was
that the Fund's leverage as a percentage of managed assets has been kept
somewhat low. While the Fund's leverage is permitted to be as high as 33.33% of
managed assets, defined as net assets plus leverage, we have generally
maintained it close to 28% of managed assets. When the market began to drop in
the autumn of 2008, we became more aggressive in reducing leverage. Our thinking
was that even though the reduction in leverage required us to sell assets at
what we considered to be low prices, the uncertainty in the market, together
with pressure from lenders, made a more conservative approach to leverage seem
sensible.
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HOW IS THE FUND POSITIONED IN TERMS OF SECTORS?
We have made some changes in the Fund's sector positioning, moving to a more
conservative asset mix that is more liquid and we believe will be less subject
to market volatility. We consider this positioning to be to the best advantage
of shareholders while meeting the requirements of the new borrowing facility.
Because of these changes, there was considerable turnover in the Fund's
portfolio in October and November. In order to improve liquidity, we have
reduced the Fund's exposure to some of the smaller MLPs. Also, during the year
we reduced the position in coal-related MLPs, which we believe have solid growth
prospects, but are more sensitive to fluctuations in commodity prices than we
find comfortable at this time.
Within the MLP category, the two largest sectors by far are midstream gas and
midstream oil, which together represent approximately 85% of the Index. As in
prior periods, we kept the Fund invested across the MLP market but maintained
most of its exposure in these two large sectors. Because midstream gas is
somewhat more volatile than midstream oil, we have reduced the Fund's exposure
to midstream gas and increased the percentage of assets in midstream oil.
As of November 30, 2008, midstream gas represented 32.1% of the portfolio, and
midstream oil represented 43.6%, so together these two large sectors represented
75.7% of the portfolio, somewhat less than the Index. Six months earlier, at May
31, 2008, midstream gas represented 42.3% of the portfolio, and midstream oil
represented 37.2%.
Annual Report | November 30, 2008 | 7
FMO | Fiduciary/Claymore MLP Opportunity Fund | QUESTIONS & ANSWERS continued
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WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING THE FUND'S PERFORMANCE?
The Fund's portfolio was positioned with slightly smaller market capitalization
than the Index and most competing funds. These securities are generally less
liquid and more volatile than the largest MLPs. In a market where investors have
demonstrated a strong preference for liquidity and stability, some of these
holdings performed very poorly. Holdings that detracted from performance include
DCP Midstream Partners L.P. (1.9% of the Fund's long-term investments as of
November 30, 2008), one of the largest natural gas and processors operating in
16 states within the U.S.; Copano Energy L.L.C. (6.2% of the Fund's long-term
investments as of November 30, 2008), a natural gas pipeline and processing
company operating in Texas, Oklahoma and Wyoming; and EV Energy Partners L.P.
(1.4% of the Fund's long-term investments as of November 30, 2008), a natural
gas and oil exploration and production company based in the Appalachian Basin.
In most cases, we have continued to hold these securities, which we believe have
solid fundamentals and good potential for recovery.
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WHAT IS YOUR CURRENT OUTLOOK FOR THE MLP MARKET?
We find many reasons to be reasonably optimistic about the market, despite the
current difficult conditions. As the end of the calendar year approaches, we
believe many holders who bought MLP securities about a year ago when there were
many new issues, are selling to take advantage of losses for tax purposes. After
January 1, there may be new buyers eager to take advantage of bargain prices,
establishing a stronger ownership base that may contribute to price stability.
Forced selling of MLPs by investors such as hedge funds faced with the need to
reduce leverage created a supply/demand imbalance and pushed prices down. We
believe that we have seen the worst of this wave of selling, and that market
conditions may improve in the months ahead. We expect to see continued
choppiness, but with some improvement in stability.
What is more difficult to evaluate is the long-term effect on the energy
industry of the major drop in the prices of crude oil and natural gas. At the
current low prices, there may be little interest in new projects, and financing
for projects may be difficult to obtain. The result may be very limited growth
in MLP distributions over the next several years.
On the positive side, we believe that the monetary stimulus already in place and
the fiscal stimulus that seems likely under a new administration will begin to
take effect, resulting in improved economic conditions. Over the long term, we
believe that worldwide economic growth will result in increasing demand for
energy, and that will be positive for MLPs.
We believe that MLPs offer a combination of current yield and growth potential
that provides greater stability, higher income and better long-term potential
than other income-oriented investments such as bonds, utility stocks or real
estate investment trusts. MLPs also have a reasonable level of growth potential
and tax deferral features. We believe that the correlation to other asset
classes will remain low over the next few years as the credit markets settle
into more normal patterns.
8 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund | QUESTIONS & ANSWERS continued
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RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the portfolio manager and
Claymore only through the report period as stated on the cover. These views are
subject to change at any time, based on market and other conditions and should
not be construed as a recommendation of any kind. The material may also include
forward looking statements that involve risk and uncertainty, and there is no
guarantee that any predictions will come to pass. There can be no assurance that
the Fund will achieve its investment objectives. 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.
RISKS OF INVESTING IN MLP UNITS. An investment in MLP units involves risks that
differ from a similar investment in equity securities, such as common stock, of
a corporation. Holders of MLP units have the rights typically afforded to
limited partners in a limited partnership. As compared to common shareholders of
a corporation, holders of MLP units have more limited control and limited rights
to vote on matters affecting the partnership. There are certain tax risks
associated with an investment in MLP units. Additionally, conflicts of interest
may exist between common unit holders, subordinated unit holders and the general
partner of an MLP; for example a conflict may arise as a result of incentive
distribution payments.
TAX RISKS OF INVESTING IN EQUITY SECURITIES OF MLPS. There are certain tax risks
associated with an investment in MLP units. Much of the benefit the Fund derives
from its investment in equity securities of MLPs is a result of MLPs generally
being treated as partnerships for U.S. federal income tax purposes. A change in
current tax law, or a change in the business of a given MLP, could result in an
MLP being treated as a corporation for U.S. federal income tax purposes, which
would result in such MLP being required to pay U.S. federal income tax on its
taxable income. The classification of an MLP as a corporation for U.S. federal
income taxation purposes would have the effect of reducing the amount of cash
available for distribution by the MLP and causing any such distributions
received by the Fund to be taxed as dividend income. Thus, if any of the MLPs
owned by the Fund were treated as corporations for U.S. federal income tax
purposes, the after-tax return to the Fund with respect to its investment in
such MLPs would be materially reduced, which could cause a substantial decline
in the value of the common shares.
Because of the Fund's concentration in MLPs, the Fund is not eligible to be
treated as a "regulated investment company" under the Internal Revenue Code of
1986, as amended. Instead, the Fund will be treated as a regular corporation for
US federal income tax purposes and as a result, unlike most investment
companies, will be subject to corporate income tax to the extent the Fund
recognizes taxable income. The Fund believes that as a result of the tax
characterization of cash distributions made by MLPs, a significant portion of
the Fund's income will be tax-deferred, which will allow distributions by the
Fund to its shareholders to include high levels of tax-deferred income. However,
there can be no assurance in this regard. If this expectation is not realized,
the Fund will have a larger corporate income tax expense than expected, which
will result in less cash available to distribute to shareholders.
EQUITY SECURITIES RISK. Equity risk is the risk that MLP units or other equity
securities held by the Fund will fall due to general market or economic
conditions, perceptions regarding the industries in which the issuers of
securities held by the Fund participate, changes in interest rates, and the
particular circumstances and performance of particular companies whose
securities the Fund holds. In addition, MLP units or other equity securities
held by the Fund may decline in price if the issuer fails to make anticipated
distributions or dividend payments because, among other reasons, the issuer
experiences a decline in its financial condition.
CONCENTRATION RISK. Because the Fund will invest in MLP entities, a substantial
portion of which are expected to be engaged primarily in the energy, natural
resources and real estate sectors of the economy, such concentration may present
more risks than if the Fund were broadly diversified over numerous industries
and sectors of the economy.
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES. There are several risks associated
with transactions in options on securities. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events. As the writer of a covered call option, the Fund
forgoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the strike price of the call, but has retained the risk of loss
should the price of the underlying security decline. The writer of an option has
no control over the time when it may be required to fulfill its obligation as a
writer of the option.
CASH FLOW RISK. The Fund expects that a substantial portion of the cash flow it
receives will be derived from its investments in equity securities of MLP
entities. The amount and tax characterization of cash available for distribution
by an MLP entity depends upon the amount of cash generated by such entity's
operations. Cash available for distribution by MLP entities will vary widely
from quarter to quarter and is affected by various factors affecting the
entity's operations. In addition to the risks described herein, operating costs,
capital expenditures, acquisition costs, construction costs, exploration costs
and borrowing costs may reduce the amount of cash that an MLP entity has
available for distribution in a given period.
SMALL CAPITALIZATION RISK. The Fund may invest in securities of MLP entities and
other issuers that have comparatively smaller capitalizations relative to
issuers whose securities are included in major benchmark indices, which present
unique investment risks.
LOWER GRADE SECURITIES RISK. The Fund may invest in fixed-income securities
rated below investment grade, which are commonly referred to as "junk bonds."
Investment in securities of below-investment grade quality involves substantial
risk of loss.
FOREIGN SECURITIES. Investing in securities of foreign companies (or foreign
governments) may involve certain risks not typically associated with investing
in domestic companies. The prices of foreign securities may be affected by
factors not present with securities traded in the U.S. markets, including,
political and economic conditions, less stringent regulation and higher
volatility.
RISKS OF LEVERAGE. The Fund's use of leverage creates special risks that may
adversely affect the return for the holders of common shares, including: greater
volatility of the net asset value and market price of the Fund's common shares;
fluctuations in the interest rates on forms of leverage; and the possibility
that the increased costs associated with leverage, which would be borne entirely
by holders of the Fund's common shares, may reduce the Fund's total return.
Leverage is a speculative investment technique, and there can be no assurance
that the Fund's potential leverage strategy will be successful. Because the fees
received by Claymore Advisors, LLC (the "Investment Adviser") and Fiduciary
Asset Management, LLC (the "Sub-Adviser") are based on the managed assets of the
Fund (including the proceeds of any leverage), the aforementioned firms have a
financial incentive for the Fund to utilize leverage, which may create a
conflict of interest between them and the common shareholders.
NON-DIVERSIFIED STATUS. The Fund may invest a greater portion of its assets in a
more limited number of issuers than a diversified fund.
In addition to the risks described above, the Fund is also subject to:
Affiliated Party Risk, Energy Sector Risks, Other Sector Risks, Restricted
Securities Risks, Cash Flow Risk, Liquidity Risk, Valuation Risk, Interest Rate
Risk, Portfolio Turnover Risk, Derivatives Risk, Market Discount Risk, Other
Investment Companies Risk, Royalty Trust Risk, Financial Leverage, Management
Risk, and Current Developments. Please see www.claymore.com/fmo for a more
detailed discussion about Fund risks and considerations.
Annual Report | November 30, 2008 | 9
FMO | Fiduciary/Claymore MLP Opportunity Fund
Fund SUMMARY | AS OF NOVEMBER 30, 2008 (unaudited)
FUND STATISTICS
-------------------------------------------------------
Share Price $11.42
Common Share Net Asset Value $12.09
Premium/(Discount) to NAV -5.54%
Net Assets ($000) $221,155
-------------------------------------------------------
TOTAL RETURNS
-------------------------------------------------------
(INCEPTION 12/28/04) MARKET NAV
-------------------------------------------------------
One Year -45.67% -43.55%
Three Year (annualized) -8.23% -9.57%
Since Inception (annualized) -7.77% -5.48%
-------------------------------------------------------
% OF LONG-TERM
TOP SECTORS INVESTMENTS
-------------------------------------------------------
Midstream Oil Infrastructure 43.6%
Midstream Gas Infrastructure 32.1%
Coal 9.7%
Oil and Gas Production 7.6%
Propane 6.1%
Consumer Discretionary 0.8%
Marine Transportation 0.1%
-------------------------------------------------------
% OF LONG-TERM
TOP TEN ISSUERS INVESTMENTS
-------------------------------------------------------
Magellan Midstream Partners 12.1%
Energy Transfer Partners 9.5%
Plains All American Pipeline 8.7%
Enbridge Energy 7.4%
Kinder Morgan 7.2%
Copano Energy 6.2%
Inergy 6.1%
Clearwater 5.0%
Alliance 4.7%
Enterprise Products Partners 4.6%
-------------------------------------------------------
Past performance does not guarantee future results. All portfolio data is
subject to change daily. For more current information, please visit
www.claymore.com/fmo. The above summaries are provided for informational
purposes only and should not be viewed as recommendations.
Line Chart:
SHARE PRICE & NAV PERFORMANCE
SHARE PRICE NAV
11/30/06 21.87 22.49
22.3 22.49
22.42 22.49
22.36 22.49
23.35 22.49
22.91 22.63
23.05 22.63
23.29 22.63
23.2 22.63
22.9 22.63
22.76 22.73
22.76 22.73
22 22.73
21.9 22.73
22.22 22.73
22.12 22.52
22.03 22.52
22.12 22.52
22.38 22.52
22.79 22.7
22.7 22.65
22.2 22.65
22.41 22.5
22.31 22.5
22.61 22.5
22.79 22.5
21.91 22.5
21.95 22.15
21.67 22.15
21.28 22.15
21.81 22.15
21.97 22.37
22 22.37
21.79 22.37
21.6 22.37
22.14 22.37
21.69 22.84
21.93 22.84
22.06 22.84
22.78 22.84
23.05 23.31
23.45 23.39
23.45 23.39
23.21 23.39
23 23.39
22.43 23.39
22.58 23.67
22.74 23.67
22.75 23.67
22.69 23.67
22.82 23.67
23.3 23.7
23.02 23.7
22.89 23.7
23.35 23.7
23.81 23.87
23.35 23.87
23.34 23.87
23.3 23.87
23.46 23.89
23.3 24.04
23.42 24.04
23.52 24.04
23.57 24.04
23.23 24.04
23.4 24.05
23.47 24.05
23.44 24.05
23.5 24.05
23.45 24.05
23.62 24.38
23.65 24.38
23.72 24.38
24.12 24.38
24.24 24.38
24.53 24.81
24.86 24.81
24.75 24.81
24.32 24.81
24.11 24.81
23.9 24.98
24.33 24.95
24.55 24.95
24.69 24.95
24.5 24.95
24.91 25.31
25.01 25.31
25.1 25.31
24.7 25.31
24.5 25.08
24.69 25.08
24.52 25.08
24.65 25.08
24.96 25.08
24.83 25.5
24.68 25.5
24.95 25.5
24.8 25.5
24.74 25.5
24.79 26.16
24.88 26.16
24.92 26.07
24.97 26.07
25.14 26.07
25.31 25.96
25.4 25.96
25.24 25.96
25.35 25.96
25.59 25.96
25.4 26.53
25.82 26.53
25.79 26.53
25.71 26.53
25.1 26.53
24.75 26.18
24.73 26.18
24.83 26.18
25.29 26.18
25.31 26.18
24.19 25.74
23.89 25.74
24.39 25.74
24.6 25.74
25 26.27
25.15 26.27
25.54 26.27
25.55 26.27
25.12 26.27
24.5 25.91
24.42 25.91
24.45 25.91
24.01 25.91
24.18 25.91
24.75 25.99
25.44 25.99
25.15 25.99
24.98 25.99
24.79 25.99
24.86 26.29
24.91 26.29
24.83 26.29
24.81 26.29
24.56 26.29
24.73 26.32
24.36 26.48
24.6 26.48
24.67 26.48
24.9 26.77
24.95 26.77
25.32 26.77
25.21 26.77
25.09 26.77
25.41 26.77
25 26.77
24.84 26.77
24.7 26.77
24.59 26.77
24.78 26.95
24.51 26.95
24.78 26.95
24.35 26.95
24.33 26.95
23.48 26.2
23.28 26.2
23.18 26.2
23.46 25.9
23.02 25.9
22 24.87
21.96 24.87
21.1 24.87
22.45 24.87
23 24.87
22.41 23.83
21.93 23.83
22.26 23.83
21.83 23.83
21.37 23.83
20.35 23
21.25 23
21.5 23
21.75 23
22.15 23
22.43 24.13
22.99 24.13
22.78 24.13
22.3 24.13
22.53 24.13
22.4 23.87
23.06 24.03
23.21 24.03
23.5 24.03
23.5 24.14
22.98 24.14
22.5 24.14
22.46 24.14
22.28 24.14
22.51 23.51
22.74 23.51
22.57 23.51
23.04 23.51
23.19 23.51
22.64 23.93
22.68 23.93
23.06 23.93
23.15 23.93
22.95 23.93
22.7 23.08
22.86 23.12
22.6 23.12
22.45 23.12
21.9 23.12
22.1 22.84
22.5 22.84
22.77 22.84
23.23 22.84
23.6 22.84
23.25 23.56
23.16 23.56
23.2 23.56
23.06 23.56
22.94 23.56
22.8 23.6
22.35 23.6
22.3 23.6
22.45 23.6
22.3 23.6
22.43 23.6
22.88 23.6
23.65 23.6
23.74 23.6
23.84 24.04
23.74 23.95
23.68 23.95
23.84 23.95
23.76 23.95
23.79 23.95
23.6 23.3
23.58 23.3
22.75 23.3
22.88 23.3
23 23.3
22.9 22.92
22.5 22.92
21.7 22.92
21.31 22.92
20.85 22.43
20.91 22.43
21.05 22.43
20.95 22.43
22.72 22.43
22.68 22.75
22.66 23.11
22.6 23.11
22.35 23.11
22 23.11
22.44 22.58
22.16 22.58
21.99 22.58
21.79 22.58
21.58 22.58
21.3 22.44
21.58 22.44
21.19 22.44
21.08 22.44
20.89 22.44
20.59 22.14
20.79 22.14
20.33 22.14
20.2 22.14
20.18 23.17
20.8 23.17
20.88 23.11
21.46 23.11
22.37 23.17
22.35 23.17
22.17 23.17
21.8 23.17
22.25 23.17
22.42 22.86
22.18 22.86
21.75 22.86
21.92 22.86
22.11 22.86
22.11 21.99
21.25 21.99
19.75 21.99
19.6 21.99
20.26 21.6
21.03 21.6
21.45 21.6
21.31 21.6
22 21.6
21.99 22.1
22.5 22.1
22.65 22.1
22.23 22.1
21.91 22.1
21.59 22.03
21.71 22.03
21.84 22.03
21.69 22.03
21.94 22.03
21.17 21.97
20.79 21.97
21.01 21.97
21.22 21.97
21.36 21.77
21.48 21.77
21.44 21.77
21.71 21.77
22.25 21.77
22.19 22.19
22.09 21.99
22.06 21.99
22.13 21.99
22.09 21.99
21.8 21.57
21.35 21.57
20.7 21.57
20.82 21.57
20.93 21.57
20.73 20.8
20.34 20.8
19.8 20.8
20.54 20.8
20.5 20.8
20.6 19.83
20.89 19.83
20.92 19.83
21.02 19.83
20.9 20.54
20.91 20.54
20.96 20.57
21.24 20.57
22.04 21.04
21.89 21.13
22.16 21.13
22.33 21.13
22.24 21.13
21.9 21.13
22.2 21.33
21.75 21.33
21.15 21.33
21.43 21.33
21.47 21.33
21.23 21.18
21.2 21.18
21.25 21.18
21.19 21.18
21.24 21.18
21.34 21.36
21.74 21.36
21.65 21.36
21.26 21.36
21.57 21.6
22.1 21.54
22.9 21.54
22.2 21.54
21.91 21.54
22.17 21.54
22.21 21.96
22.18 21.96
22.64 21.96
22.32 21.96
22.54 21.96
22.42 21.9
22.26 21.9
22.6 21.9
22.64 21.9
22.38 21.9
22.27 21.88
22.4 21.88
22.47 21.88
22.59 21.88
22.52 21.73
22.7 21.9
22.84 21.9
22.65 21.9
22.68 21.9
23.2 21.99
23.26 21.99
22.89 21.99
22.68 21.99
22.72 21.99
22.95 21.61
23 21.61
22.61 21.61
22.26 21.61
22.15 21.61
22.5 21.41
22.35 21.41
22.02 21.41
21.5 21.41
21.42 21.41
20.93 21.03
20.64 21.03
20.67 20.71
20.26 20.71
20.6 20.71
20.6 20.32
21.1 20.32
20.32 20.32
20.51 20.32
20.73 20.22
20.07 20.22
19.71 20.22
19.14 20.22
18.88 20.22
19.25 18.88
19.58 18.88
19.95 18.88
20.43 18.88
20.32 18.88
20.3 18.99
19.85 18.99
20.42 18.99
20.15 18.99
20.79 18.99
21 19.79
21.26 19.79
21 19.79
20.54 19.79
20.04 19.79
20.33 19.14
20.68 19.14
20.51 19.14
20.02 19.14
19.94 19.14
19.88 19.44
19.63 19.44
20 19.44
20.96 19.44
21.35 19.44
20.81 19.57
20.62 19.57
20.7 19.57
20.71 19.57
21.35 19.57
21.41 19.87
21.14 19.83
20.89 19.83
20.83 19.83
20.52 19.28
20.24 19.28
20.01 19.28
19.76 19.28
19.8 19.28
19.65 17.75
19.6 17.75
18.67 17.75
17.54 17.75
15.9 17.75
16.07 15.99
18.12 15.99
18.03 15.99
18.01 15.99
17.86 15.99
18.25 17.4
18.05 17.4
17.28 17.4
18.53 16.35
18.5 16.35
17.5 15.81
17.85 15.81
15.2 15.81
15.11 15.81
14.89 15.81
13.27 10.5
10.83 10.5
14.45 10.5
14 10.5
12.62 10.5
12.09 12.66
13.16 12.66
14.98 12.66
15.83 12.66
15 12.66
15.2 14.33
16.9 14.33
15.85 14.33
16.72 14.33
16.74 14.33
16.25 14.84
16.24 14.9
15.55 14.9
15.15 14.9
14.54 14.9
14.9 13.82
14.65 13.82
14.16 13.82
14.21 13.82
12.63 13.82
13.12 12.61
12.5 12.61
12.56 12.61
12 12.61
10.95 12.61
10.15 10.77
9.5 10.77
11 10.77
11.65 10.77
11.6 11.81
11/30/08 11.42 12.09
Bar Chart:
DISTRIBUTIONS TO SHAREHOLDERS
Oct 05 0.3125
Jan 06 0.3125
Apr 06 0.3125
Jul 06 0.3125
Oct 06 0.3125
Jan 07 0.3275
Apr 07 0.3325
Jul 07 0.35
Oct 07 0.355
Jan 08 0.36
Apr 08 0.365
Jul 08 0.37
Oct 08 0.3719
10 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
Portfolio of INVESTMENTS | NOVEMBER 30, 2008
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS AND MLP AFFILIATES - 115.3%
COAL - 10.7%
819,523 Alliance Holdings GP, L.P. $ 11,965,036
1,145,621 Clearwater Natural Resources, L.P.
(Acquired 08/01/05 and 10/02/06,
Cost $22,912,423) (a) (b) (c) 11,456,210
123 Clearwater GP Holding Co.
(Acquired 02/29/08, Cost $187,828) (a) (b) (c) 154,000
300 Natural Resource Partners, L.P. 4,986
--------------------------------------------------------------------------
23,580,232
--------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 1.0%
162,680 StoneMor Partners, L.P. 2,113,213
--------------------------------------------------------------------------
MARINE TRANSPORTATION - 0.1%
16,700 Teekay LNG Partners, L.P. (Marshall Islands) 233,800
--------------------------------------------------------------------------
MIDSTREAM GAS INFRASTRUCTURE - 37.2%
1,160,717 Copano Energy, L.L.C. (d) 13,940,211
190,000 Copano Energy, L.L.C.,
Unregistered Series D Units
(Acquired 03/14/08, Cost $4,987,500) (a) (b) (c) 1,974,062
368,190 Crosstex Energy, L.P. 2,201,776
387,534 Crosstex Energy, L.P.,
Senior Subordinated Series D Units
(Acquired 03/23/07, Cost $10,050,005) (a) (b) (c) 2,240,823
586,915 DCP Midstream Partners, L.P. 4,812,703
521,754 El Paso Pipeline Partners, L.P. 9,203,741
734,127 Energy Transfer Partners, L.P. (d) 24,321,628
551,582 Enterprise Products Partners, L.P. 11,787,307
251,451 Hiland Partners, L.P. 2,615,090
8,060 Spectra Energy Partners, L.P. 161,200
44,300 Targa Resources Partners, L.P. 384,081
132,690 Western Gas Partners, L.P. 1,778,046
322,200 Williams Partners, L.P. 4,523,688
151,335 Williams Pipeline Partners, L.P. 2,232,191
--------------------------------------------------------------------------
82,176,547
--------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------
MIDSTREAM OIL INFRASTRUCTURE - 50.5%
667,527 Enbridge Energy Partners, L.P. (d) $ 18,857,638
436,625 Genesis Energy, L.P. 4,431,744
229,615 Global Partners, L.P. 2,617,611
395,200 Holly Energy Partners, L.P. 7,907,952
445,911 Kinder Morgan Management, L.L.C. (e) 18,393,829
1,033,629 Magellan Midstream Partners, L.P. (d) 31,029,543
2,400 NuStar GP Holdings, L.L.C. 38,976
649,851 Plains All American Pipeline, L.P. 22,218,406
269,790 TEPPCO Partners, L.P. (d) 6,121,535
--------------------------------------------------------------------------
111,617,234
--------------------------------------------------------------------------
OIL AND GAS PRODUCTION - 8.8%
363,512 Abraxas Petroleum Corp. (c) (d) 450,755
525,211 Abraxas Energy Partners, L.P.
(Acquired 05/25/07, Cost $7,605,318) (a) (b) 8,750,015
778,888 BreitBurn Energy Partners, L.P. 6,612,759
276,142 EV Energy Partner, L.P. 3,645,074
8,196 Pioneer Southwest Energy Partners, L.P. 122,940
--------------------------------------------------------------------------
19,581,543
--------------------------------------------------------------------------
PROPANE - 7.0%
524,400 Inergy Holdings, L.P. 10,750,200
288,931 Inergy, L.P. 4,807,812
--------------------------------------------------------------------------
15,558,012
--------------------------------------------------------------------------
TOTAL MASTER LIMITED PARTNERSHIPS AND MLP AFFILIATES
(Cost $307,833,164) 254,860,581
--------------------------------------------------------------------------
INCENTIVE DISTRIBUTION RIGHTS - 0.0%
43 Clearwater Natural Resources, L.P. (Acquired 08/01/05,
Cost $0) (a) (b) (c) -
--------------------------------------------------------------------------
WARRANTS - 0.0%
114,230 Abraxas Petroleum Corp.
(Acquired 05/25/07, Cost $0) (a) (b) (c) 32,578
--------------------------------------------------------------------------
See notes to financial statements.
Annual Report | November 30, 2008 | 11
FMO | Fiduciary/Claymore MLP Opportunity Fund | PORTFOLIO OF INVESTMENTS
continued
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------
TERM LOANS - 0.5%
$ 1,183,880 Clearwater Subordinate Note 11.40%, 12/03/09, NR
(Acquired 07/08/08, 08/06/08 and 09/29/08,
Cost $1,183,880) (a) (b) (c) (e) (f) $ 1,183,880
--------------------------------------------------------------------------
NUMBER
OF SHARES
--------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 11.7%
MONEY MARKET FUND - 11.7%
25,922,912 Dreyfus Treasury & Agency Cash Management -
Investor Shares
(Cost $25,922,912) 25,922,912
--------------------------------------------------------------------------
TOTAL INVESTMENTS - 127.5%
(Cost $334,939,956) 281,999,951
Borrowings Outstanding -
(32.7% of Net Assets or 25.6% of
Total Investments) (72,262,708)
Other Assets in excess of Liabilities - 5.2% 11,417,494
--------------------------------------------------------------------------
NET ASSETS - 100.0% $221,154,737
==========================================================================
L.L.C. Limited Liability Company
L.P. Limited Partnership
MLP Master Limited Partnership
NR Security is not rated by Standard & Poor's or Moody's. (unaudited)
(a) Security is restricted and may be resold only in transactions
exempt from registration, normally to qualified institutional buyers.
At November 30, 2008, restricted securities aggregate market value
amounted to $25,791,568 or 11.7% of net assets.
(b) Security is valued in accordance with Fair Valuation procedures
established in good faith by the Board of Trustees. The total market
value of such securities is $25,791,568 which represents 11.7% of net
assets.
(c) Non-income producing security.
(d) All or a portion of these securities have been physically segregated in
connection with swap agreements.
(e) While non-income producing, security makes regular in-kind distributions.
(f) Floating rate security. The rate shown is as of November 30, 2008.
See notes to financial statements.
12 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
Statement of ASSETS AND LIABILITIES | NOVEMBER 30, 2008
ASSETS
Investments in securities, at value (cost $309,017,044) $256,077,039
Short term investments (cost $25,922,912) 25,922,912
--------------------------------------------------------------------------------------------------------------
Total Investments (cost $334,939,956) 281,999,951
--------------------------------------------------------------------------------------------------------------
Cash 482,929
Net deferred tax asset 23,596,330
Receivable for investments sold 84,090
Interest receivable 60,894
Other assets 8,655
--------------------------------------------------------------------------------------------------------------
Total assets 306,232,849
--------------------------------------------------------------------------------------------------------------
LIABILITIES
Borrowings 72,262,708
Payable for investments purchased 6,261,950
Net unrealized depreciation on interest rate swaps 4,149,735
Current tax liability 1,460,109
Interest due on borrowings 427,762
Advisory fee payable 265,513
Administration fee payable 6,539
Accrued expenses and other liabilities 243,796
--------------------------------------------------------------------------------------------------------------
Total liabilities 85,078,112
--------------------------------------------------------------------------------------------------------------
NET ASSETS $221,154,737
==============================================================================================================
COMPOSITION OF NET ASSETS
Common stock, $.01 par value per share; unlimited number of shares authorized, 18,285,742
shares issued and outstanding $ 182,857
Additional paid-in capital 259,226,124
Net unrealized depreciation on investments and swaps, net of tax (36,239,634)
Accumulated net realized gain on investments, net of tax 20,684,956
Accumulated net investment loss, net of tax (22,699,566)
--------------------------------------------------------------------------------------------------------------
NET ASSETS $221,154,737
==============================================================================================================
NET ASSET VALUE
(based on 18,285,742 common shares outstanding) $ 12.09
==============================================================================================================
See notes to financial statements.
Annual Report | November 30, 2008 | 13
FMO | Fiduciary/Claymore MLP Opportunity Fund
Statement of OPERATIONS | FOR THE YEAR ENDED NOVEMBER 30, 2008
INVESTMENT INCOME
Distributions from master limited partnerships
(net of return of capital distributions received of $38,589,002) $ 30,948
Interest 215,406
--------------------------------------------------------------------------------------------------------------
Total income $ 246,354
--------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 5,179,724
Commercial paper issuance costs 312,032
Professional fees 228,862
Trustees' fees and expenses 143,163
Fund accounting 117,823
Administration fee 116,293
Printing expense 104,872
Custodian fee 91,356
Insurance 26,218
NYSE listing fee 21,423
Transfer agent fee 18,444
Miscellaneous 15,029
Interest expense and fees on borrowings 6,520,716
--------------------------------------------------------------------------------------------------------------
Total expenses 12,895,955
--------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS BEFORE TAXES (12,649,601)
--------------------------------------------------------------------------------------------------------------
Deferred tax benefit 6,597,757
Current tax expense (1,590,209)
--------------------------------------------------------------------------------------------------------------
Net investment loss (7,642,053)
--------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) on investments before taxes 4,519,775
Net realized gain/(loss) on swaps 782,701
Deferred tax expense (2,099,070)
--------------------------------------------------------------------------------------------------------------
Net realized gain/(loss) on investments 3,203,406
--------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments before taxes (276,736,893)
Net change in unrealized depreciation on swaps before taxes (4,149,735)
Deferred tax benefit 111,193,489
--------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and swaps (169,693,139)
--------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain/(loss) on investments and swaps (166,489,733)
--------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(174,131,786)
==============================================================================================================
See notes to financial statements.
14 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
Statements of CHANGES IN NET ASSETS |
FOR THE FOR THE
YEAR ENDED YEAR ENDED
NOVEMBER 30, 2008 NOVEMBER 30, 2007
---------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (7,642,053) $ (7,169,757)
Net realized gain/(loss) on investments 3,203,406 9,089,770
Net change in unrealized appreciation/(depreciation) on investments (169,693,139) 34,030,992
---------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from operations (174,131,786) 35,951,005
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and In Excess of Net Investment Income (1,486,710) -
Return of capital (25,162,072) (24,701,113)
---------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Reinvestment of dividends 3,497,034 893,428
---------------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 3,497,034 893,428
---------------------------------------------------------------------------------------------------------------
Total increase/(decrease) in net assets (197,283,534) 12,143,320
NET ASSETS
Beginning of period 418,438,271 406,294,951
---------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment losses of
$22,699,566 and $13,570,803, respectively, net of deferred tax) $221,154,737 $418,438,271
===============================================================================================================
See notes to financial statements.
Annual Report | November 30, 2008 | 15
FMO | Fiduciary/Claymore MLP Opportunity Fund
Statement of CASH FLOWS | FOR THE YEAR ENDED NOVEMBER 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations $(174,131,786)
---------------------------------------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS TO
NET CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
Net change in unrealized depreciation on investments and swaps 280,886,628
Net accretion of bond discount and amortization of bond premium on short term before taxes (40,546)
Net realized gain on investments before taxes (4,519,775)
Purchases of long-term investments (128,443,817)
Proceeds from sale of long-term investments 243,589,876
Net purchases of short-term investments (21,783,209)
Increase in deferred tax benefit (115,692,175)
Increase in receivable for investments sold (84,090)
Increase in interest receivable (60,894)
Decrease in other assets 316,440
Increase in current tax liability 910,209
Decrease in interest due on borrowings (531,901)
Decrease in advisory fee payable (221,954)
Increase in payable for investments purchased 6,261,950
Decrease in administration fee payable (4,060)
Increase in accrued expenses and other liabilities 36,703
Return of capital distributions received from investee companies 38,589,002
Adjustment to prior year estimated return of capital distributions received
from investee companies 911,151
---------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities $125,987,752
---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings (267,737,292)
Proceeds from borrowings 165,000,000
Distributions to Common Shareholders (23,151,748)
---------------------------------------------------------------------------------------------------------------
Net Cash Used by Financing Activities (125,889,040)
---------------------------------------------------------------------------------------------------------------
Net change in cash 98,712
CASH AT BEGINNING OF PERIOD 384,217
---------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 482,929
===============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: CASH PAID DURING THE PERIOD FOR INTEREST $ 7,052,617
===============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: IN KIND STOCK DIVIDENDS RECEIVED
DURING THE PERIOD $ 1,853,355
===============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: TAXES PAID DURING THE PERIOD $ 680,000
===============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: DIVIDEND REINVESTMENT $ 3,497,034
===============================================================================================================
See notes to financial statements.
16 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
Financial HIGHLIGHTS |
FOR THE PERIOD
FOR THE FOR THE FOR THE DECEMBER 28, 2004*
PER SHARE OPERATING PERFORMANCE YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD NOVEMBER 30, 2008 NOVEMBER 30, 2007 NOVEMBER 30, 2006 NOVEMBER 30, 2005
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.11 $ 22.49 $ 19.78 $ 19.10 (b)
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (0.70) (0.67) (0.33) (0.26)
Net realized and unrealized gain/loss on investments (8.85) 2.66 4.29 1.92
--------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (9.55) 1.99 3.96 1.66
--------------------------------------------------------------------------------------------------------------------------------
COMMON SHARES' OFFERING EXPENSES CHARGED TO PAID-IN CAPITAL - - - (0.04)
--------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and In Excess of Net Investment Income (0.08) - - -
Return of capital (1.39) (1.37) (1.25) (0.94)
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.09 $ 23.11 $ 22.49 $ 19.78
================================================================================================================================
MARKET VALUE, END OF PERIOD $ 11.42 $ 22.66 $ 21.87 $ 17.99
================================================================================================================================
TOTAL INVESTMENT RETURN (c)
Net asset value -43.55% 8.53% 20.70% 8.38%
Market value -45.67% 9.70% 29.68% -5.81%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 221,155 $ 418,438 $ 406,295 $ 357,441
Ratios to Average Net Assets applicable to
Common Shares: (d)
Total expenses, excluding interest expense and
tax expense/benefit 1.79% 1.62% 1.69% 1.48%
Total expenses, including interest expense and tax
expense/benefit (28.34)% 9.40% 16.89% 8.41%
Interest expense 1.83% 2.13% 2.17% 1.02%
Current and deferred tax expense/(benefit) (31.96)% 5.65% 13.03% 5.91%
Net investment income/(loss), including interest expense
and tax expense/benefit 28.42% (8.40)% (14.66)% (7.30)%
Net investment income/(loss), excluding interest expense
and tax expense/benefit (1.71)% (0.62)% 0.55% (0.37)%
Ratios to Average Managed Assets: (d)(e)
Total expenses, excluding interest expense and
tax expense/benefit 1.23% 1.18% 1.20% 1.19%
Total expenses, including interest expense and tax
expense/benefit (19.54)% 6.86% 12.03% 6.77%
Interest expense 1.26% 1.56% 1.55% 0.82%
Current and deferred tax expense/(benefit) (22.03)% 4.12% 9.28% 4.76%
Net investment income/(loss), including interest expense
and tax expense/benefit 19.59% (6.13)% (10.44)% (5.88)%
Net investment income/(loss), excluding interest expense
and tax expense/benefit (1.18)% (0.45)% 0.39% (0.30)%
Portfolio Turnover Rate 22% 11% 21% 41%
Senior Indebtedness
Total borrowings outstanding (in thousands) $ 72,263 $ 175,000 $ 150,000 $ 150,000
Asset coverage per $1,000 of indebtedness(f) $ 4,060 $ 3,391 $ 3,709 $ 3,383
* Commencement of investment operations.
(a) Based on average shares outstanding during the period.
(b) Before deduction of offering expenses charged to capital.
(c) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value ("NAV") or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for NAV
returns or the prices obtained under the Fund's Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
(d) Annualized.
(e) Managed assets are equal to net assets plus outstanding leverage.
(f) Calculated by subtracting the Fund's total liabilities (not including the
borrowings) from the Fund's total assets and dividing by the total
borrowings.
See notes to financial statements.
Annual Report | November 30, 2008 | 17
FMO | Fiduciary/Claymore MLP Opportunity Fund
Notes to FINANCIAL STATEMENTS | NOVEMBER 30, 2008
Note 1 - ORGANIZATION:
Fiduciary/Claymore MLP Opportunity Fund (the "Fund") was organized as a Delaware
statutory trust on October 4, 2004. The Fund is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended.
The Fund's investment objective is to provide a high level of after-tax total
return with an emphasis on current distributions paid to shareholders. The Fund
has been structured to seek to provide an efficient vehicle through which its
shareholders may invest in a portfolio of publicly traded securities of master
limited partnerships ("MLPs") and MLP affiliates. MLPs combine the tax benefits
of limited partnerships with the liquidity of publicly traded securities. The
Fund believes that as a result of the tax characterization of cash distributions
made by MLPs to their investors (such as the Fund) a significant portion of the
Fund's income will be tax-deferred returns of capital, which will allow
distributions by the Fund to its shareholders to include high levels of
tax-deferred income. There can be no assurance that the Fund will achieve its
investment objective.
Note 2 - ACCOUNTING POLICIES:
The preparation of the financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies followed by the
Fund.
(a) VALUATION OF INVESTMENTS
Readily marketable securities listed on an exchange are valued at the last
reported sale price on the primary exchange or in the principal over the counter
("OTC") market on which they are traded. Readily marketable securities traded on
an exchange or OTC for which there are no transactions on a given day are valued
at the mean of the closing bid and asked prices. Securities traded on NASDAQ are
valued at the NASDAQ Official Closing Price. Debt securities are valued by
independent pricing services or dealers using the last available bid price for
such securities or, if such prices are not available, at prices for securities
of comparable maturity, quality and type. Short-term securities having a
remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value.
For those securities whose quotations or prices are not available, the
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Valuations in accordance with these procedures
are intended to reflect each security's (or asset's) "fair value". Such "fair
value" is the amount that the Fund might reasonably expect to receive for the
security (or asset) upon its current sale. Each such determination should be
based on a consideration of all relevant factors, which are likely to vary from
one pricing context to another. Examples of such factors may include, but are
not limited to: (i) the type of security, (ii) the initial cost of the security,
(iii) the existence of any contractual restrictions on the security's
disposition, (iv) the price and extent of public trading in similar securities
of the issuer or of comparable companies, (v) quotations or evaluated prices
from broker-dealers and/or pricing services, (vi) information obtained from the
issuer, analysts, and/or the appropriate stock exchange (for exchange traded
securities), (vii) an analysis of the company's financial statements, and (viii)
an evaluation of the forces that influence the issuer and the market(s) in which
the security is purchased and sold (e.g. the existence of pending merger
activity, public offerings or tender offers that might affect the value of the
security).
In September, 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157, "Fair Valuation
Measurements" ("FAS 157"). This standard clarifies the definition of fair value
for financial reporting, establishes a framework for measuring fair value and
requires additional disclosures about the use of fair value measurements. FAS
157 establishes three different categories for valuations. Level 1 valuations
are those based upon quoted prices in active markets. Level 2 valuations are
those based upon quoted prices in inactive markets or based upon significant
observable inputs (i.e. yield curves; benchmark interest rates; indices). Level
3 valuations are those based upon unobservable inputs (i.e. discounted cash flow
analysis; non-market based methods used to determine fair valuation). Details of
the valuations as of November 30, 2008 were as follows:
DESCRIPTION SECURITIES DERIVATIVES TOTAL
--------------------------------------------------------------------------------
(value in $000s)
ASSETS
Level 1 $ 256,208 $ - $ 256,208
Level 2 4,215 - 4,215
Level 3 21,577 - 21,577
--------------------------------------------------------------------------------
Total $ 282,000 $ - $ 282,000
================================================================================
LIABILITIES
Level 1 $ - $ - $ -
Level 2 - 4,150 4,150
Level 3 - - -
--------------------------------------------------------------------------------
Total $ - $ 4,150 $ 4,150
================================================================================
LEVEL 3 HOLDINGS SECURITIES DERIVATIVES TOTAL
--------------------------------------------------------------------------------
Beginning Balance at 11/30/07 $ 20,418 $ - $ 20,418
Total Realized Gain/Loss - - -
Change in Unrealized Gain/Loss (179) - (179)
Net Purchases and Sales 1,338 - 1,338
Net Transfers In/Out - - -
--------------------------------------------------------------------------------
Ending Balance at 11/30/08 $ 21,577 $ - $ 21,577
================================================================================
All net realized and unrealized gains/losses in the above table are reflected in
the Statement of Operations. Net unrealized gains/losses relate to those
investments held by the Fund at November 30, 2008.
(b) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date.Realized gains and
losses on investments are determined on the identified cost basis.Dividend
income is recorded on the ex-dividend date and interest income is recorded on an
accrual basis.Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over the lives of the respective securities using
the effective interest method.
The Fund records the character of dividends received from MLPs based on
estimates made at the time such distributions are received.These estimates are
based upon a historical review of information available from each MLP and other
industry sources.The Fund's characterization of the estimates may subsequently
be revised based on information received from MLPs after their tax reporting
periods conclude.
For the year ended November 30,2008,the Fund estimated approximately 0.1% of its
distributions from MLPs as investment income and approximately 99.9% as return
of capital,which is reflected in the Statement of Operations.
Subsequent to November 30, 2007, the Fund reclassified the amount of investment
income and return of capital it recognized based on the 2007 tax reporting
information received from the individual MLPs. This reclassification amounted to
a decrease in pre-tax net investment income of approximately $0.9 million ($0.5
million net of deferred tax benefit), and a corresponding increase in unrealized
appreciation of investments of approximately $0.9 million ($0.5 million net of
deferred tax benefit). The reclassification is reflected in the year ended
November 30, 2008.
18 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund | NOTES TO FINANCIAL STATEMENTS
continued
(c) SWAPS
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates and/or credit risk or to
generate income. Interest rate swap agreements involve the exchange by the Fund
with another party of their respective commitments to pay or receive interest.
The swaps are valued daily at current market value and any unrealized gain or
loss is included in the Statement of Assets and Liabilities. Gain or loss is
realized on the termination date of the swap and is equal to the difference
between the Fund's basis in the swap and the proceeds of the closing
transaction, including any fees. During the period that the swap agreement is
open, the Fund may be subject to risk from the potential inability of the
counterparty to meet the terms of the agreement. The swaps involve elements of
both market and credit risk in excess of the amounts reflected on the Statement
of Assets and Liabilities.
Realized gain (loss) upon termination of swap contracts is recorded on the
Statement of Operations. Fluctuations in the value of swap contracts are
recorded as a component of net change in unrealized appreciation (depreciation)
of swap contracts. Net periodic payments received by the Fund are included as
part of realized gains (losses) and, in the case of accruals for periodic
payments, are included as part of unrealized appreciation (depreciation) on the
Statement of Operations.
(d) DISTRIBUTIONS TO SHAREHOLDERS
The Fund intends to make quarterly distributions to shareholders. Distributions
to shareholders are recorded on the ex-dividend date. Distributions are
determined in accordance with U.S. generally accepted accounting principles
which may differ from their ultimate characterization for federal income tax
purposes. The Fund anticipates that a significant portion of its distributions
will be comprised of return of capital as a result of the tax character of cash
distributions made by MLPs. The Fund is unable to make final determinations as
to the tax character of the distributions to shareholders until after the end of
the calendar year. The Fund will inform shareholders of the final tax character
of the distributions on IRS Form 1099 DIV in January 2009.
Note 3 - INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENT AND OTHER
AGREEMENTS:
Pursuant to an Investment Advisory Agreement (the "Advisory Agreement") between
the Fund and Claymore Advisors, LLC (the "Adviser"), the Adviser will furnish
offices, necessary facilities and equipment, oversee the activities of Fiduciary
Asset Management, LLC (the "Sub-Adviser"), provide personnel including certain
officers required for its administrative management and pay the compensation of
all officers and Trustees of the Fund who are its affiliates. As compensation
for these services, the Fund will pay the Adviser an annual fee, payable
monthly, in an amount equal to 1.00% of the Fund's average daily Managed Assets
(net assets plus any assets attributable to financial leverage).
Pursuant to a Sub-Advisory Agreement (the "Sub-Advisory Agreement") between the
Fund, the Adviser and the Sub-Adviser, the Sub-Adviser under the supervision of
the Fund's Board of Trustees and the Adviser, provides a continuous investment
program for the Fund's portfolio; provides investment research and makes and
executes recommendations for the purchase and sale of securities; and provides
certain facilities and personnel, including certain officers required for its
administrative management and pays the compensation of all officers and Trustees
of the Fund who are its affiliates. As compensation for its services, the
Adviser pays the Sub-Adviser a fee, payable monthly, in an annual amount equal
to 0.50% of the Fund's average daily Managed Assets.
Under a separate Fund Administration agreement, the Adviser provides Fund
Administration services to the Fund. As compensation for services performed
under the Administration Agreement, the Adviser receives an administration fee
payable monthly at the annual rate set forth below as a percentage of the
average daily managed assets of the Fund:
MANAGED ASSETS RATE
----------------------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
The Bank of New York Mellon ("BNY") acts as the Fund's custodian, accounting
agent and transfer agent. As custodian, BNY is responsible for the custody of
the Fund's assets. As accounting agent, BNY is responsible for maintaining the
books and records of the Fund's securities and cash. As transfer agent, BNY is
responsible for performing transfer agency services for the Fund.
Note 4 - FEDERAL INCOME TAXES:
The Fund will be treated as a regular corporation, or "C" corporation, for U.S.
federal income tax purposes. Accordingly, the Fund generally will be subject to
U.S. federal income tax on its taxable income at the graduated rates applicable
to corporations (currently at a maximum rate of 35%). In addition, as a regular
corporation, the Fund will be subject to various state income taxes by reason of
its investments in MLPs. The Fund may be subject to a 20% alternative minimum
tax to the extent that it exceeds the Fund's regular income tax liability. The
amount to which the Fund is required to pay U.S. corporate income tax or
alternative minimum tax could materially reduce the Fund's cash available to
make distributions on Common Shares.
Information on the tax components of investments as of November 30, 2008 is as
follows:
COST OF NET TAX NET TAX
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED UNREALIZED
FOR TAX UNREALIZED UNREALIZED DEPRECIATION DEPRECIATION
PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS ON DERIVATIVES
--------------------------------------------------------------------------
$312,421,981 $33,948,939 ($64,370,969) ($30,422,030) ($3,891,164)
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes. The Fund will accrue deferred
income taxes for its future tax liability or benefit associated with that
portion of MLP distributions considered to be a tax-deferred return of capital
as well as capital appreciation or depreciation of its investments. For purposes
of estimating a deferred tax asset or liability for financial statement
reporting and determining its net asset value, the Fund will be required to
rely, to some extent, on information provided by MLPs in which it invests. Such
information may not be received in a timely manner. Accordingly, the Fund will,
from time to time, modify its estimates or assumptions regarding its deferred
tax liability as new information becomes available. Upon the sale of an equity
security in an MLP, the Fund generally will be liable for any previously
deferred taxes. The Fund's income tax provision consists of the following:
Current taxes* $ 1,590,209
Deferred federal income taxes benefit $ (94,151,255)
Deferred state income taxes benefit $ (21,540,921)
--------------------------------------------------------------------------------
Total current and deferred tax expense benefit $ (114,101,967)
--------------------------------------------------------------------------------
*Includes foreign income taxes of $435,700.
Annual Report | November 30, 2008 | 19
FMO | Fiduciary/Claymore MLP Opportunity Fund | NOTES TO FINANCIAL STATEMENTS
continued
Total income tax benefit differs from the amount computed by applying the
federal statutory income tax rate of 35% to net investment income and realized
and unrealized gains before taxes as follows:
RATE
--------------------------------------------------------------------------------
Application of statutory income tax rate benefit $100,881,814 35.00%
State income taxes benefit 13,655,853 4.74%
Foreign income taxes (435,700) -0.15%
--------------------------------------------------------------------------------
Total benefit $114,101,967 39.59%
--------------------------------------------------------------------------------
Components of the Fund's net deferred tax asset as of November 30, 2008 are as
follows:
DEFERRED TAX ASSETS:
Unrealized loss on investments $ 14,013,620
Net operating loss carryforward 12,575,662
Valuation allowance (2,992,952)
--------------------------------------------------------------------------------
Deferred tax asset 23,596,330
--------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Gross deferred tax liability $ --
--------------------------------------------------------------------------------
Net deferred tax asset $ 23,596,330
--------------------------------------------------------------------------------
At November 30, 2008, November 30, 2007 and November 30, 2006, the Fund recorded
a valuation allowance against its deferred tax assets in the amount of $652,188,
$1,665,241 and $675,523, respectively. This allowance occurred because it is
unlikely that the Fund will be able to use net operating losses sourced to
states (other than Illinois) because it is not projected that the Fund will have
future taxable income sourced to these states. For the remaining deferred tax
asset, a valuation allowance has not been recorded as the Fund believes it is
more than likely than not that there will be sufficient future taxable income,
primarily related to distributions to be received from portfolio companies, to
allow the Fund to realize these deferred tax assets.
As of November 30, 2008, for federal income tax purposes, the Fund anticipates
utilizing $1,486,710 of net operating loss carryforward. The Fund had a
remaining net operating loss carryforward of $25,269,665. The net operating loss
carryforward is set to expire as follows: $14,935,679 in 2026 and $10,333,986 in
2027.
On July 13, 2006, the FASB released FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Fund's tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. Management has evaluated the implications of FIN 48 and has
determined it does not have any impact on the financial statements as of
November 30, 2008.
Tax years for 2005, 2006 and 2007 are still subject to examination by major
jurisdictions.
Note 5 - AFFILIATED COMPANIES:
During the period, the Fund owned shares of the following affiliated companies.
Affiliated companies are defined by the 1940 Act, as amended, as those companies
in which a Fund holds 5% or more of the outstanding voting securities.
RETURN
OF CAPITAL MARKET
DIVIDEND DISTRIBUTIONS VALUE
NAME SHARES INCOME RECEIVED 11/30/08 COST
---------------------------------------------------------------------------------------
Holly Energy Partners, L.P. 395,200 - $1,356,289 $7,907,952 $12,896,075
Affiliate transactions during the year ended November 30, 2008 were:
RETURN
REALIZED OF CAPITAL
SHARES GROSS GROSS SHARES GAIN/ DISTRIBUTIONS
NAME 11/30/07 ADDITIONS REDUCTIONS 11/30/08 (LOSS) RECEIVED
----------------------------------------------------------------------------------------------------------
Holly Energy Partners, L.P. 624,150 11,800 (240,750) 395,200 $ 1,132,167 $ 1,356,289
As of November 30,2008, the Fund does not own 5% or more of the outstanding
voting securities of any of the companies held in the Fund.
Note 6 - INVESTMENTS IN SECURITIES:
For the year ended November 30, 2008, purchases and sales of investments,
excluding short-term securities, were $128,443,817 and $243,589,876,
respectively.
Note 7 - SWAP AGREEMENTS:
The Fund entered into interest rate swap agreements during the year ended
November 30, 2008. As of November 30, 2008, the Fund had swaps with a total
notional value of $120,000,000 outstanding. Details of the swap agreements
outstanding as of November 30, 2008 were as follows:
NOTIONAL UNREALIZED
TERMINATION AMOUNT FIXED APPRECIATION/
COUNTERPARTY DATE (000) RATE FLOATING RATE (DEPRECIATION)
--------------------------------------------------------------------------------
Merrill Lynch 01/30/2011 $ 30,000 3.05% 1-Month LIBOR $ (993,957)
Merrill Lynch 01/30/2013 $ 30,000 3.49% 1-Month LIBOR (1,472,619)
Morgan Stanley 02/07/2011 $ 30,000 2.92% 1-Month LIBOR (843,843)
Morgan Stanley 03/19/2013 $ 30,000 3.13% 1-Month LIBOR (839,316)
--------------------------------------------------------------------------------
$(4,149,735)
--------------------------------------------------------------------------------
For each swap noted, the Fund is obligated to pay the fixed rate and entitled to
receive the floating rate.
Note 8 - BORROWINGS:
Through September 29, 2008, the Fund had access to a $175,000,000 line of credit
through a commercial paper conduit funding agreement. Interest on the amount
borrowed was based on the prevailing commercial paper rate plus 0.35%. An unused
commitment fee of 0.15% was charged on the difference between the credit line of
$175,000,000 and the amount borrowed. Effective September 30, 2008, the Fund's
$175,000,000 commercial paper conduit funding agreement was terminated. The
remaining issuance cost associated with the commercial paper conduit was
expensed during the 2008 fiscal year.
On September 30, 2008, the Fund entered into a $155,000,000 credit facility
agreement. The Fund incurred an issuance cost of 0.25% on the credit facility.
Interest on the amount borrowed is based on the 3-month LIBOR plus 1.50%. An
unused fee of 1.15% is charged on the difference between the $155,000,000 credit
facility and the amount borrowed. At November 30, 2008 there was $72,262,708
outstanding in connection with the Fund's credit facility.
The average daily amount of borrowings on both the commercial paper and the
credit facilities during the year ended November 30, 2008 was $160,959,023 with
a related weighted average interest rate of 4.05%, inclusive of the program
fees. The maximum amount outstanding during the year ended November 30, 2008,
was $175,000,000.
Note 9 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and 18,285,742 issued and outstanding.
20 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund | NOTES TO FINANCIAL STATEMENTS
continued
Transactions in common shares were as follows:
YEAR ENDED YEAR ENDED
NOVEMBER 30, 2008 NOVEMBER 30, 2007
--------------------------------------------------------------------------------
Beginning shares 18,105,218 18,067,021
Shares issued through dividend reinvestment 180,524 38,197
--------------------------------------------------------------------------------
Ending shares 18,285,742 18,105,218
--------------------------------------------------------------------------------
At November 30, 2008, Claymore Advisors, LLC, the Fund's investment adviser and
administrator, owned 5,490 shares.
Note 10 - CONCENTRATION OF RISK:
Because the Fund is focused in MLP entities in the energy, natural resources and
real estate sectors of the economy, such concentration may present more risks
than if the Fund were broadly diversified over numerous industries and sectors
of the economy. A downturn in the energy, natural resources or real estate
sectors of the economy could have a larger impact on the Fund than on an
investment company that does not concentrate in such sectors. At times, the
performance of securities of companies in the energy, natural resources and real
estate sectors of the economy may lag the performance of other sectors or the
broader market as a whole.
An investment in MLP units involves risks that differ from a similar investment
in equity securities, such as common stock, of a corporation. Holders of MLP
units have the rights typically afforded to limited partners in a limited
partnership. As compared to common shareholders of a corporation, holders of MLP
units have more limited control and limited rights to vote on matters affecting
the partnership. There are certain tax risks associated with an investment in
MLP units. Additionally, conflicts of interest may exist between common unit
holders, subordinated unit holders and the general partner of an MLP; for
example a conflict may arise as a result of incentive distribution payments.
Note 11 - RESTRICTED SECURITIES:
The Fund may invest up to 40% of its Managed Assets in unregistered or otherwise
restricted securities. Restricted securities are securities that are
unregistered, held by control persons of the issuer or are subject to
contractual restrictions on resale. The Fund will typically acquire restricted
securities in directly negotiated transactions. Restricted securities are fair
valued in accordance with procedures established by the Fund's Board of
Trustees. As of November 30, 2008, the Fund held the following restricted
securities:
FAIR PRICE AT
DATE OF CURRENT MARKET ACQUISITION DATE 11/30/2008
SECURITY ACQUISITION SHARES COST VALUE (UNRESTRICTED)*** PRICE
------------------------------------------------------------------------------------------------------------------------------
Abraxas Energy Partners, L.P. 5/25/2007 525,211 $ 7,605,318 $ 8,750,015 $ 16.66 $ 16.66
Abraxas Petroleum Corp.* 5/25/2007 114,230 $ - $ 32,578 - $ 0.2852
Clearwater GP Holding Co. 2/29/2008 123 $ 187,828 $ 154,000 $1,252.03 $ 1,252.03
Clearwater Natural Resources, L.P.** 8/1/2005 43 $ - $ - - -
Clearwater Natural Resources, L.P. 8/1/2005 892,857 $17,857,143 $ 8,928,570 - $ 10.00
Clearwater Natural Resources, L.P. 10/2/2006 252,764 $ 5,055,280 $ 2,527,640 - $ 10.00
Clearwater Subordinate Note 7/8/2008 212,000 $ 212,000 $ 212,000 $ 100.00 $ 100.00
Clearwater Subordinate Note 8/6/2008 212,000 $ 212,000 $ 212,000 $ 100.00 $ 100.00
Clearwater Subordinate Note 9/29/2008 759,880 $ 759,880 $ 759,880 $ 100.00 $ 100.00
Copano Energy, L.L.C.,
Unregistered Series D Units 3/14/2008 190,000 $ 4,987,500 $ 1,974,062 $ 34.05 $ 10.39
Crosstex Energy, L.P., Senior
Subordinated Series D Units 3/23/2007 387,534 $10,050,005 $ 2,240,823 $ 34.65 $ 5.78
=========================
Total $46,926,954 $25,791,568
=========================
* Warrants.
** Incentive Distribution Rights.
***Valuation of unrestricted common stock on the acquisition date of the
restricted securities.
Note 12 - ACCOUNTING PRONOUNCEMENTS:
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities." This standard is intended to enhance
financial statement disclosures for derivative instruments and hedging
activities and enable investors to understand: a) how and why a fund uses
derivative instruments; b) how derivatives instruments and related hedge fund
items are accounted for; and c) how derivative instruments and related hedge
items affect a fund's financial position, results of operations and cash flows.
SFAS No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. As of November 30, 2008,
management does not believe the adoption of SFAS No. 161 will impact the
financial statement amounts; however, additional footnote disclosures may be
required about the use of derivative instruments and hedging items.
Note 13 - INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would involve
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
Note 14 - SUBSEQUENT EVENTS:
Subsequent to November 30, 2008, the Fund declared a quarterly dividend of
$0.37185 per share. This dividend is payable on January 30, 2009 to shareholders
of record on January 15, 2009.
Effective January 7, 2009, Clearwater Natural Resources, L.P. and its affiliates
filed for bankruptcy in the United States Bankruptcy Court for the Eastern
District of Kentucky. Consequently, effective January 8, 2009, the pricing
committee decreased the valuation of Clearwater Natural Resources L.P. and
Clearwater GP Holding Co. to $0.00 per share. Additionally, the pricing
committee reduced the valuation of the Clearwater Subordinated Notes from
$100.00 to $35.00. The net effect to the Fund as a result of these reduced
valuations was a decrease in net assets of $12,379,732.
Annual Report | November 30, 2008 | 21
FMO | Fiduciary/Claymore MLP Opportunity Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
FIDUCIARY/CLAYMORE MLP OPPORTUNITY FUND
We have audited the accompanying statement of assets and liabilities of
Fiduciary/Claymore MLP Opportunity Fund, (the "Fund"), including the portfolio
of investments, as of November 30, 2008, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years then ended, the statement of cash flows for the year then ended, and
the financial highlights for each of the three years then ended and for the
period from December 28, 2004 (commencement of operations) through November 30,
2005. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of November 30, 2008, by correspondence with the Fund's
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Fiduciary/Claymore MLP Opportunity Fund as of November 30, 2008, and the results
of its operations for the year then ended, the changes in its net assets for
each of the two years then ended, the cash flows for the year then ended, and
financial highlights for each of the three years then ended and for the period
from December 28, 2004 (commencement of operations) through November 30, 2005,
in conformity with U.S generally accepted. accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
January 27, 2009
22 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
Supplemental INFORMATION | (unaudited)
FEDERAL INCOME TAX INFORMATION
In January 2009, shareholders will be advised on IRS Form 1099 DIV or substitute
1099 DIV as to the federal tax status of the distributions received by you in
the calendar year 2008.
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on July 22, 2008. Common
shareholders voted on the election of Trustees.
With regard to the election of the following Class III Trustees by common
shareholders of the Fund:
# OF SHARES # OF SHARES
IN FAVOR WITHHELD
----------------------------------------------------------------
Robert B. Karn III 15,903,754 171,701
John M. Roeder 15,905,571 169,884
Ronald E. Toupin, Jr. 15,900,532 174,923
The other Trustees of the Fund whose terms did not expire in 2008 are Randall C.
Barnes, Joseph E. Gallagher, Jr., Nicholas Dalmaso, Howard H. Kaplan, and Ronald
A. Nyberg.
TRUSTEES
The Trustees of the Fiduciary/Claymore MLP Opportunity Fund and their principal
occupation during the past five years:
NUMBER OF
FUNDS IN
NAME, ADDRESS*, YEAR OF TERM OF OFFICE** PRINCIPAL OCCUPATIONS DURING FUND COMPLEX*** OTHER
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND OVERSEEN BY DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2004 Private Investor (2001-present). 43 None
Year of birth: 1951 Formerly, Senior Vice President &
Trustee Treasurer PepsiCo, Inc.
(1993-1997), President, Pizza Hut
International (1991-1993) and
Senior Vice President, Strategic
Planning and New Business
Development (1987-1990) of PepsiCo,
Inc. (1987-1997).
------------------------------------------------------------------------------------------------------------------------------------
Howard H. Kaplan Since 2004 Partner of Stinson Morrison Hecker 2 None
Year of birth: 1969 LLP, a law firm providing legal
Trustee advice in business law and
litigation matters (2007-present).
Formerly, principal of Blumenfeld,
Kaplan & Sandweiss P.C., a law firm
providing legal advice in business
law and litigation (1994-2007).
------------------------------------------------------------------------------------------------------------------------------------
Robert B. Karn III Since 2004 Consultant (1998-present). 2 Director of Peabody
Year of birth: 1942 Previously, Managing Partner, Energy Company, GP
Trustee Financial and Economic Consulting, Natural Resource
St. Louis office of Arthur Partners LLC and
Andersen, LLP. Kennedy Capital
Management, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, 46 None
Year of birth: 1953 a law firm specializing in
Trustee corporate law, estate planning and
business transactions
(2000-present). Formerly, Executive
Vice President, General Counsel and
Corporate Secretary of Van Kampen
Investments (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
John M. Roeder Since 2005 Financial consultant 2 Director,
Year of birth: 1943 (1999-present). Formerly, Director LMI Aerospace.
Trustee in Residence at The Institute for
Excellence in Corporate Governance
of the University of Texas at
Dallas School of Management
(2005-2007). Office Managing
Partner, Arthur Andersen, LLP.
(1966-1999)
------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Retired. Formerly, Vice President, 43 None
Year of Birth: 1958 Manager and Portfolio Manager of
Trustee Nuveen Asset Management
(1998-1999), Vice President of
Nuveen Investment Advisory Corp.
(1992-1999), Vice President and
Manager of Nuveen Unit Investment
Trusts (1991-1999), and Assistant
Vice President and Portfolio
Manager of Nuveen Unit Investment
Trusts (1988-1999), each of John
Nuveen & Co., Inc. (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso+ Since 2004 Attorney. Formerly, Senior Managing 45 None
Year of birth: 1965 Director and Chief Administrative
Officer (2007-2008) and General
Counsel (2001-2007) of Claymore
Advisors, LLC and Claymore
Securities, Inc. Formerly,
Assistant General Counsel, John
Nuveen and Company, Inc.
(1999-2000). Former Vice President
and Associate General Counsel of
Van Kampen Investments, Inc.
(1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
Joseph E. Gallagher, Jr.++ Since 2004 Executive Managing Director and 2 Member of the Board
8235 Forsyth Boulevard Suite 700 Chief Operating Officer of of Directors for
St. Louis, MO 63105 Fiduciary Asset Management, LLC the Rossman School.
Year of birth: 1956 (1994-present). Member of the St.
Trustee Louis Chapter of the National
Association for Business Economics.
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Trustees unless otherwise noted: 2455 Corporate West Drive,
Lisle, IL 60532
** After a Trustee's initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
-Messrs. Barnes and Dalmaso, as Class I trustees, are expected to stand for
re-election at the Fund's 2009 annual meeting of shareholders.
-Messrs. Gallagher, Kaplan and Nyberg, as Class II trustees, are expected
to stand for re-election at the Fund's 2010 annual meeting of shareholders.
-Messrs. Roeder, Toupin and Karn, as Class III trustees, are expected to
stand for re-election at the Fund's 2011 annual meeting of shareholders.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
+ Mr. Dalmaso is an "interested person" (as defined in section 2(a)(19) of
the 1940 Act) of the Fund because of his former position as an officer of,
and his equity ownership in, the Fund's Investment Adviser and certain of
its affiliates.
++ Mr. Gallagher is an "interested person" (as defined in section 2(a)(19) of
the 1940 Act) of the Fund because of his position as an officer of
Fiduciary Asset Management, LLC, the Fund's Sub-Adviser.
Annual Report | November 30, 2008 | 23
FMO | Fiduciary/Claymore MLP Opportunity Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
OFFICERS
The Officers of the Fiduciary/Claymore MLP Opportunity Fund and their principal
occupation during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Since 2008 Senior Managing Director and Chief Investment Officer of Claymore
Year of birth: 1955 Advisors, LLC and Claymore Securities, Inc. (2008-present). Formerly,
Chief Executive Officer Managing Director of Research, Nuveen Asset Management (2000-2007).
------------------------------------------------------------------------------------------------------------------------------------
Kevin M. Robinson Since 2008 Senior Managing Director and General Counsel of Claymore Advisors,
Year of birth: 1959 LLC, ClaymoreSecurities, Inc. and Claymore Group, Inc. (2007-present).
Chief Legal Officer Formerly, Associate General Counsel and Assistant Corporate Secretary
of NYSE Euronext, Inc. (2000-2007).
------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2004 Senior Managing Director of Claymore Advisors, LLC and Claymore
Year of birth: 1964 Securities, Inc. (2005-present). Previously, Chief Financial Officer
Chief Financial Officer, of Claymore Group Inc. (2005-2006). Managing Director of Claymore
Chief Accounting Officer Advisors, LLC and Claymore Securities, Inc. (2003-2005). Treasurer of
and Treasurer Henderson Global Funds and Operations Manager for Henderson Global
Investors (North America) Inc., (2002-2003); Managing Director,
FrontPoint Partners LLC (2001-2002); Vice President, Nuveen
Investments (1999-2001); Chief Financial Officer, Skyline Asset
Management LP, (1999); Vice President, Van Kampen Investments and
Assistant Treasurer, Van Kampen mutual funds (1989-1999).
------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President - Fund Compliance Officer of Claymore Advisors, LLC
Year of birth: 1957 (Feb. 2006-present). Previously, Chief Compliance Officer/Assistant
Chief Compliance Officer Secretary of Harris Investment Management, Inc. (2003-2006).
Director-Compliance of Harrisdirect LLC (1993-2003).
------------------------------------------------------------------------------------------------------------------------------------
Mark E. Mathiasen Since 2007 Assistant Vice President, Assistant General Counsel of Claymore Group,
Secretary Inc. (2007 to present). of certain funds in the Fund Complex.
Year of Birth: 1978 Previously, Law Clerk for the Idaho State Courts (2003-2007).
------------------------------------------------------------------------------------------------------------------------------------
Charles D. Walbrandt Since 2008 Founding Principal, Chief Executive Officer & Chief Investment Officer
Year of birth: 1938 of Fiduciary Asset Management, LLC (1994-present).
Vice President
------------------------------------------------------------------------------------------------------------------------------------
James Cunnane, Jr. Since 2007 Managing Director, Senior Portfolio Manager (1996-present) of Fiduciary
Year of birth: 1970 Asset Management, LLC.
Vice President
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers: 2455 Corporate West Drive, Lisle, IL 60532
** Officers serve at the pleasure of the Board of Trustees and until his or her
successor is appointed and qualified or until his or her earlier resignation
or removal.
24 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
Dividend Reinvestment PLAN | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants. There will be
no brokerage charges with respect to common shares issued directly by the Fund.
However, each participant will pay a pro rata share of brokerage commission
incurred in connection with Open-Market Purchases. The automatic reinvestment of
Dividends will not relieve participants of any Federal, state or local income
tax that may be payable (or required to be withheld) on such Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, BNY Mellon Shareowner Services, PO Box 358015, Pittsburgh,
PA 15252-8015, Phone Number: (866) 488-3559.
Annual Report | November 30, 2008 | 25
FMO | Fiduciary/Claymore MLP Opportunity Fund
Board Considerations Regarding Investment Advisory AGREEMENT AND INVESTMENT
SUB-ADVISORY AGREEMENT CONTRACT RE-APPROVAL | (unaudited)
On November 11, 2008, the Board of Trustees (the "Board") of the
Fiduciary/Claymore MLP Opportunity Fund (the "Fund"), including those trustees
who are not "interested persons" as defined by the Investment Company Act of
1940 (the "Independent Trustees"), on the recommendation of the Nominating &
Governance Committee (referred to as the "Committee" and consisting solely of
the Independent Trustees) of the Board of the Fund, renewed: (1) the investment
advisory agreement ("Investment Advisory Agreement") between the Fund and
Claymore Advisors, LLC ("Adviser") and (2) the investment sub-advisory agreement
("Investment Sub-Advisory Agreement") among the Adviser, the Fund and Fiduciary
Asset Management, LLC ("Sub-Adviser"). (The Investment Advisory Agreement and
the Investment Sub-Advisory Agreement are together referred to as the "Advisory
Agreements.") As part of its review process, the Committee was represented by
independent legal counsel. The Board and Committee reviewed materials received
from the Adviser, the Sub-Adviser and independent legal counsel. The Board and
Committee members had previously received, throughout the year, Board meeting
information regarding performance and operating results of the Fund.
In preparation for their review, the Committee members communicated with
independent legal counsel regarding the nature of information to be requested
for evaluation, and independent legal counsel, on behalf of the Committee, sent
a formal request for information. The Adviser and the Sub-Adviser provided
extensive information in response to the request. Among other information, the
Adviser and Sub-Adviser provided general information to assist the Committee in
assessing the nature and quality of services provided by the Adviser and
Sub-Adviser and information comparing the investment performance, advisory fees
and total expenses of the Fund to other funds, information about the
profitability from the Advisory Agreements to each of the Adviser and the
Sub-Adviser and compliance matters regarding each of the Adviser and the
Sub-Adviser.
Based upon its review, the Board and the Committee concluded that it was in the
best interest of the Fund to renew each of the Advisory Agreements. In reaching
this conclusion for the Fund, no single factor was determinative in the Board's
analysis, but rather the Board considered a variety of factors.
INVESTMENT ADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by the
Adviser, the Board noted that the Adviser had delegated responsibility for the
investment and reinvestment of the Fund's assets to the Sub-Adviser. The Board
considered the Adviserresponsibility to oversee the Sub-Adviser and that the
Adviser has similar oversight responsibilities for other registered funds for
which it serves as investment adviser. The Board reviewed financial information
regarding the Adviser and its parent company and considered the parent company's
guaranty of the Adviser's obligations under the Investment Advisory Agreement.
The Board also considered the secondary market support services provided by the
Adviser to the Fund. The Board members considered the experience and
qualifications of the Adviser's Sub-Advisory Oversight Group and personnel
providing compliance oversight. Specifically, the Board noted the ongoing
oversight activities performed by the Adviser, including on-site compliance
diligence visits and monitoring of compliance with policies and procedures and
with the Fund's investment policies. After considering these factors, the Board
concluded that the Adviser and its personnel were qualified to serve the Fund in
such capacity.
The Board considered the Fund's investment performance by reviewing the Fund's
total return on a net asset value and market price basis for the three month,
six month, one year and since inception periods ended August 31, 2008 and
compared it to comparable performance of a peer group of closed-end funds that
invest at least eighty percent (80%) of their assets in energy-related equity
securities ("peer group of funds") for the same time periods. The Board received
updated performance information for the Fund through October 17, 2008 for its
October 20 and 21, 2008 meeting. The Board noted that the Fund's investment
results were consistent with the Fund's investment objective and met
expectations. The Board also considered the Fund's use of leverage and the
impact of the leverage on the Fund's performance. The Board also considered that
the Adviser does not directly control investment performance but had delegated
such duties to the Sub-Adviser. The Board concluded that the Adviser had
appropriately reviewed and monitored the Sub-Adviser's investment performance
and efforts to seek the Fund's investment objective, and that the Adviser's
performance was satisfactory.
The Board compared the Fund's advisory fee (which includes the subadvisory fee
paid to the Sub-Adviser) and expense ratio to the peer group of funds and to the
advisory fee that the Adviser charges to other closed-end funds for which it
serves as adviser. The Board also reviewed the mean and median advisory fees and
expense ratios of the peer group of funds. The Board concluded that the Fund's
advisory fee was reasonable.
With respect to the costs of services to be provided and profits realized by the
Adviser from its relationship with the Fund, the Board reviewed information
regarding the revenues the Adviser received under the Investment Advisory
Agreement as well as the estimated allocated direct and indirect costs the
Adviser incurred in providing advisory services to the Fund, including paying
the subadvisory fee to the Sub-Adviser, and concluded that the Adviser's
profitability was not unreasonable.
The Board considered the extent to which economies of scale could be realized
with respect to the management of the Fund as the Fund grows and whether fee
levels reflect a reasonable sharing of such economies of scale for the benefit
of Fund investors. Given the size of the Fund, the Board does not anticipate
significant economies of scale.
The Board considered other benefits available to the Adviser because of its
relationship with the Fund and noted that the administrative services fees
received by the Adviser from serving as administrator provides it with
additional revenue, and concluded that the advisory fee was reasonable taking
into account any benefits from such administration agreement. In reaching the
conclusion that the advisory fee was reasonable, the Board also considered the
Adviser's statement that it benefits from its association with the Sub-Adviser,
which has opened up other business opportunities to the Adviser with the
Sub-Adviser and may continue to do so in the future.
INVESTMENT SUB-ADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by the
Sub-Adviser, the Board considered the qualifications, experience, good
reputation and skills of the Sub-Adviser's portfolio management and other key
personnel. The Board reviewed the financial statements of the Sub-Adviser's
parent company. The Board also considered the Sub-Adviser's ability to achieve
the Fund's investment objective of providing a high level of after-tax total
return with an emphasis on current distributions. The Board concluded that the
Sub-Adviser was qualified to provide the services under the Investment
Sub-Advisory Agreement.
In evaluating investment performance, the Board considered that during the
periods reviewed, the Fund's investment performance on a total return net asset
value basis was below that of the Alerian index, and was competitive with the
performance of the peer group of funds. The Board considered the Sub-Adviser's
statement that the Fund had been managed somewhat more conservatively than its
peer group funds in terms of using a lower level of leverage that disadvantaged
the Fund on an absolute NAV performance basis through 2007, but made the Fund's
returns less volatile than the peer group over more recent periods. The Board
concluded that the Sub-Adviser's investment performance met expectations. With
26 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund | BOARD CONSIDERATIONS REGARDING
INVESTMENT ADVISORY AGREEMENT AND INVESTMENT SUB-ADVISORY AGREEMENT CONTRACT
RE-APPROVAL (unaudited) continued
respect to the Fund's market price performance, the Board noted that the Fund's
market price total returns slightly trailed the market price returns of the
average of the peer group funds over some of the periods reviewed but, since
inception, the Fund's market price total return performance had been positive.
The Board also considered the statement by the Adviser that the peer group of
funds' more aggressive distribution policies may account for their greater
market price returns as compared to the Fund's.
The Board reviewed the subadvisory fee paid by the Adviser to the Sub-Adviser
and compared it to the fee charged by the Sub-Adviser to another investment
company client that has an energy-related equity securities strategy similar to
the Fund's for which the Sub-Adviser serves as subadviser. The Board also
considered the Sub-Adviser's representation that it does not charge a lower
advisory or subadvisory fee to any other client to which it provides comparable
services to those it provides to the Fund. The Board concluded that the
subadvisory fee was reasonable.
With respect to the costs of services to be provided and profits realized by the
Sub-Adviser from its relationship with the Fund, the Board reviewed information
regarding the revenues the Sub-Adviser received under the Investment
Sub-Advisory Agreement and estimated direct and indirect allocated expenses of
the Sub-Adviser in providing services under the Investment Sub-Advisory
Agreement and concluded that the profitability was not unreasonable.
The Board reviewed the extent to which economies of scale with respect to the
subadvisory services provided to the Fund would be realized as the Fund grows
and whether fee levels reflect a reasonable sharing of such economies of scale
for the benefit of Fund investors. Given the size of the Fund, the Board does
not anticipate significant economies of scale.
The Board considered other benefits derived by the Sub-Adviser from its
relationship with the Fund, including the Sub-Adviser's use of soft dollars and
the Sub-Adviser's other business relationships with the Adviser. The Board noted
that the Sub-Adviser receives indirect benefits in the form of soft dollar
arrangements which may or may not be used for the benefit of the Fund and may be
used for the benefit of other clients of the Sub-Adviser. The Board concluded
that the sub-advisory fee was reasonable, taking into account these benefits.
OVERALL CONCLUSIONS
Based upon all of the information considered and the conclusions reached, the
Board determined that the terms of each Advisory Agreement continue to be fair
and reasonable and that the continuation of each Advisory Agreement is in the
best interests of the Fund.
Annual Report | November 30, 2008 | 27
FMO | Fiduciary/Claymore MLP Opportunity Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Randall C. Barnes
Nicholas Dalmaso*
Joseph E. Gallagher, Jr.**
Howard H. Kaplan
Robert B. Karn III
Ronald A. Nyberg
John M. Roeder
Ronald E. Toupin, Jr.
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended, as a result of his former position as an
officer of, and his equity ownership in, the Fund's Investment Adviser and
certain of its affiliates.
** Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
OFFICERS
J. Thomas Futrell
Chief Executive Officer
Kevin M. Robinson
Chief Legal Officer
Steven M. Hill
Chief Accounting Officer, Chief
Financial Officer and Treasurer
Bruce Saxon
Chief Compliance Officer
Mark E. Mathiasen
Secretary
Charles D. Walbrandt
Vice President
James Cunnane, Jr.
Vice President
INVESTMENT ADVISER
AND ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
INVESTMENT SUB-ADVISER
Fiduciary Asset Management, LLC
St. Louis, Missouri
ACCOUNTING AGENT, CUSTODIAN AND
TRANSFER AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate,
Meagher & Flom LLP
Chicago, Illinois
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF FIDUCIARY/CLAYMORE MLP OPPORTUNITY FUND FOR SHAREHOLDERS
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
we protect that information and why, in certain cases, we may share information
with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about the
shareholders to Claymore Advisors, LLC employees with a legitimate business need
for the information. The Fund maintains physical, electronic and procedural
safeguards designed to protect the non-public personal information of its
shareholders.
QUESTIONS CONCERNING YOUR SHARES OF FIDUCIARY/CLAYMORE MLP 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 Accounting Agent, Custodian and Transfer Agent:
The Bank of New York Mellon, 101 Barclay 11E New York, New York 10286;
(866) 488-3559
This report is sent to shareholders of Fiduciary/Claymore MLP Opportunity Fund
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.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (888) 991-0091.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling (888) 991-0091 or by
accessing the Fund's Form N-PX on the SEC's website at www.sec.gov or
www.claymore.com.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available on the SEC website at www.sec.gov or www.claymore.com. The Fund's Form
N-Q may also be viewed and copied at the SEC's Public Reference Room in
Washington, DC; information on the operation of the Public Reference Room may be
obtained by calling (800) SEC-0330 or at www.sec.gov.
In August 2008, the Fund submitted a CEO annual certification to the NYSE in
which the Fund's principal executive officer certified that he was not aware, as
of the date of the certification, of any violation by the Fund of the NYSE's
Corporate Governance listing standards. In addition, as required by Section 302
of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund's principal
executive and principal financial officers have made quarterly certifications,
included in filings with the SEC on Forms N-CSR and N-Q, relating to, among
other things, the Fund's disclosure controls and procedures and internal control
over financial reporting.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may from time to time purchase its shares of
common stock in the open market.
28 | Annual Report | November 30, 2008
FMO | Fiduciary/Claymore MLP Opportunity Fund
About the FUND MANAGER |
FIDUCIARY ASSET MANAGEMENT, LLC
Fiduciary is a registered investment adviser that manages a broad array of
equity and fixed-income portfolios primarily for institutional investors and is
based in St. Louis, Missouri. Fiduciary currently supervises and manages
approximately $12.9 billion in assets for endowments & foundations, public
pension plans, corporate trusts, union plans, Taft-Hartley plans, three
exchange-listed closed-end funds and five private investment funds.
INVESTMENT PHILOSOPHY
Fiduciary believes that investment decisions should always be guided
by a disciplined, risk-aware strategy that seeks to add value in all market
environments. Their unique investment philosophy is multifaceted, utilizing
macroeconomic analysis, disciplined security selection, cost-controlled trading
procedures, continuous risk analysis and an unwavering focus on achieving
shareholder objectives.
INVESTMENT PROCESS
The manager seeks to achieve the Fund's investment objective by investing
primarily in securities of MLP (Master Limited Partnership) entities that
Fiduciary believes offer attractive distribution rates and capital appreciation
potential. Energy and natural resources represent a substantial portion of the
MLP entities. In seeking investments, Fiduciary looks for MLPs that offer a
combination of quality, growth and yield; intended to produce superior total
returns over the long run. In selecting individual positions, the manager
employs Fiduciary's top-down process which considers a combination of
quantitative, qualitative and relative value factors. Fiduciary emphasizes
rigorous proprietary analysis and valuation models constructed and maintained by
its in-house investment analysts, while maintaining active dialogues with
research analysts covering the MLP entities and an ongoing relationship with
company management. In applying its selection criteria, the manager considers a
company's proven track record, business prospects, strong record of distribution
or dividend growth, ratios of debt to cash flow, coverage ratios with respect to
distributions to unit holders, distribution incentive structure and the
composition and goals of the company management team.
Annual Report | November 30, 2008 | 29
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FIDUCIARY ASSET MANAGEMENT, LLC
8235 Forsyth Boulevard
Suite 700
St. Louis, MO 63105
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC (01/09)
FMO
LISTED
NYSE
FMO-AR-1108
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) No information need be disclosed pursuant to this paragraph.
(c) The registrant has not amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The registrant has not granted a waiver or an implicit waiver to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions from a provision
of its Code of Ethics during the period covered by this report.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached hereto as an exhibit.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that it has at least one audit
committee financial expert serving on its audit committee, Robert B. Karn, III.
Mr. Karn is an "independent" Trustee. Mr. Karn qualifies as an audit committee
financial expert by virtue of his experience obtained as a managing partner in a
public accounting firm, which included an understanding of generally accepted
accounting principals ("GAAP") in connection with the accounting for estimates,
accruals and reserves and also the review, audit and evaluation of financial
statements using GAAP.
(Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as amended, as a result of being designated or identified as an
audit committee financial expert. The designation or identification of a person
as an audit committee financial expert does not impose on such person any
duties, obligations, or liabilities that are greater than the duties,
obligations, and liabilities imposed on such person as a member of the audit
committee and Board of Trustees in the absence of such designation or
identification. The designation of identification of a person as an audit
committee financial expert does not affect the duties, obligations or liability
of any other member of the audit committee or Board of Trustees.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees: the aggregate fees billed for professional services rendered by
the principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements
were $58,800 and $56,000 for the fiscal years ending November 30, 2008, and
November 30, 2007, respectively.
(b) Audit-Related Fees: the aggregate fees billed for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item, were $0 and $0 for the fiscal years
ending November 30, 2008, and November 30, 2007, respectively.
(c) Tax Fees: the aggregate fees billed for professional services rendered by
the principal accountant for tax compliance, tax advice, and tax planning were
$18,000 and $41,200 for the fiscal years ending November 30, 2008, and November
30, 2007, respectively.
(d) All Other Fees: the aggregate fees billed for products and services provided
by the principal accountant, other than the services reported in paragraphs (a)
thru (c) of this Item were $0 and $0 for the fiscal years ending November 30,
2008, and November 30, 2007, respectively.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the Audit Committee pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X during the Registrant's last two fiscal years.
(e) Audit Committee Pre-Approval Policies and Procedures.
(i) The Registrant's audit committee reviews, and in its sole discretion,
pre-approves, pursuant to written pre-approval procedures (A) all engagements
for audit and non-audit services to be provided by the principal accountant to
the registrant and (B) all engagements for non-audit services to be provided by
the principal accountant (1) to the registrant's investment adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and (2) to any entity
controlling, controlled by or under common control with the registrant's
investment adviser that provides ongoing services to the registrant; but in the
case of the services described in subsection (B)(1) or (2), only if the
engagement relates directly to the operations and financial reporting of the
registrant; provided that such pre-approval need not be obtained in
circumstances in which the pre-approval requirement is waived under rules
promulgated by the Securities and Exchange Commission or New York Stock Exchange
listing standards. Sections IV.C.2 and IV.C.3 of the Audit Committee's revised
Audit Committee Charter contain the Audit Committee's Pre-Approval Policies and
Procedures and such sections are included below.
IV.C.2 Pre-approve any engagement of the independent auditors to
provide any non-prohibited services to the Fund, including the
fees and other compensation to be paid to the independent
auditors (unless an exception is available under Rule 2-01 of
Regulation S-X).
(a) The Chairman or any member of the Audit Committee may
grant the pre-approval of services to the Fund for
non-prohibited services up to $10,000. All such delegated
pre-approvals shall be presented to the Audit Committee no
later than the next Audit Committee meeting.
IV.C.3 Pre-approve any engagement of the independent auditors,
including the fees and other compensation to be paid to the
independent auditors, to provide any non-audit services to the
Adviser (or any "control affiliate" of the Adviser providing
ongoing services to the Fund), if the engagement relates
directly to the operations
and financial reporting of the Fund (unless an exception is
available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may
grant the pre-approval for non-audit services to the Adviser
up to $10,000. All such delegated pre-approvals shall be
presented to the Audit Committee no later than the next Audit
Committee meeting.
(ii) None of the services described in each of Items 4 (b) through (d) were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant's investment adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted with or overseen by another investment adviser) and or any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant that directly related to the
operations and financial reporting of the registrant was $18,000 and $41,200 for
the fiscal years ending November 30, 2008, and November 30, 2007, respectively.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934, as amended. The audit committee of the registrant is comprised of:
Randall C. Barnes, Howard H. Kaplan, Robert B. Karn, III, Ronald A. Nyberg, John
M. Roeder, and Ronald E. Toupin, Jr.
(b) Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has delegated the voting of proxies relating to its voting
securities to its investment sub-adviser, Fiduciary Asset Management, LLC (the
"Sub-Adviser" or "Fiduciary"). The Sub-Adviser's Proxy Voting Policies and
Procedures are included as an exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) (1) James J. Cunnane, Jr. and Quinn T. Kiley are primarily responsible for
the day-to-day management of the registrant's portfolio. The following provides
information regarding the portfolio managers as of November 30, 2008:
------------------------ ---------- ------------------------------------------
NAME SINCE PROFESSIONAL EXPERIENCE
------------------------ ---------- ------------------------------------------
JAMES J. CUNNANE, JR. 2004 Mr. Cunnane manages institutional and
private client equity portfolios and has
an industry leading role as portfolio
manager of Fiduciary's Master Limited
Partnership (MLP) assets. He is actively
involved with the Strategy Committee's
macroeconomic assessment and top-down
approach to portfolio management. Mr.
Cunnane has been employed by Fiduciary
for over 13 years.
------------------------ ---------- ------------------------------------------
QUINN T. KILEY 2008 Mr. Kiley is responsible for private
placement and private equity transactions
and portfolio management as they relate
to Fiduciary's various energy
infrastructure assets. Prior to joining
Fiduciary in 2005, Mr. Kiley was Vice
President of Corporate & Investment
Banking at Banc of America Securities in
New York. He joined Banc of America
Securities in 2000 and was responsible for
executing strategic advisory and
financing transactions for clients in the
Energy & Power sectors. Mr. Kiley has
been employed by Fiduciary for over 3
years.
------------------------ ---------- ------------------------------------------
(a) (2) (i-iii) Other accounts managed. The following summarizes information
regarding each of the other accounts managed by the Portfolio Managers as of
November 30, 2008:
# of Accounts Total Assets
Managed for for which
Total which Advisory Advisory Fee
Name of Portfolio # of Accounts Fee is Based is Based on
Manager or Team Member Type of Accounts Managed Total Assets on Performance Performance
---------------------- ---------------- ------------- ------------ -------------- ------------
James J. Cunnane, Jr. Registered Investment 1 $143 mil 0 $0
Companies:
Other Pooled Investment 0 $0 0 $0
Vehicles:
Other Accounts: 192 $254 mil 1 $66 mil
Quinn T. Kiley Registered Investment 1 $143 mil 0 $0
Companies:
Other Pooled Investment 0 $0 0 $0
Vehicles:
Other Accounts: 125 $153 mil 1 $66 mil
(a) (2) (iv) Conflicts of Interest.
Actual or apparent conflicts of interest may arise when a portfolio manager has
day-to-day management responsibilities with respect to more than one fund or
other account. More specifically, portfolio managers who manage multiple funds
and/or other accounts may be presented with one or more of the following
potential conflicts:
The management of multiple funds and/or other accounts may result in a portfolio
manager devoting unequal time and attention to the management of each fund
and/or other account. Fiduciary seeks to manage such competing interests for the
time and attention of a portfolio manager by having the portfolio manager's
focus on a particular investment discipline. Most other accounts managed by a
portfolio manager are managed using the same investment models that are used in
connection with the management of the registrant.
If a portfolio manager identifies a limited investment opportunity which may be
suitable for more than one fund or other account, a fund may not be able to take
full advantage of that opportunity due to an allocation of filled purchase or
sale orders across all eligible funds and other accounts. To deal with these
situations, Fiduciary and the registrant have adopted procedures for allocating
portfolio transactions across multiple accounts. With respect to securities
transactions for the funds, Fiduciary determines which broker to use to execute
each order, consistent with its duty to seek best execution of the transaction.
However, with respect to certain other accounts (such as other funds for which
Fiduciary acts as sub-adviser, other pooled investment vehicles that are not
registered mutual funds, and other accounts managed for organizations and
individuals), Fiduciary may be limited by the client with respect to the
selection of brokers or may be instructed to direct
trades through a particular broker. In these cases, trades for a fund in a
particular security may be placed separately from, rather than aggregated with,
such other accounts. Having separate transactions with respect to a security may
temporarily affect the market price of the security or the execution of the
transaction, or both, to the possible detriment of the registrant or other
account(s) involved.
Fiduciary and the registrant have adopted certain compliance procedures which
are designed to address these types of conflicts. However, there is no guarantee
that such procedures will detect each and every situation in which a conflict
arises.
(a) (3) Compensation Structure. The primary portfolio manager's compensation
consists of the following elements:
o Base Salary. The primary portfolio managers are paid a base salary
which is set at a level determined to be appropriate based upon the
portfolio managers' experience and responsibilities through the use of
independent compensation surveys of the investment management
industry.
o Annual Bonus. The portfolio manager's annual bonus is determined by
the CEO of Fiduciary pursuant to a specific company formula. It is not
based on the performance of the registrant or other managed accounts.
The monies paid are directly derived from a "pool" created from
Fiduciary's earnings. The bonus is payable in a combination of cash
and restricted Piper Jaffray Companies stock.
o The portfolio managers also participates in benefit plans and programs
generally available to all employees.
(a) (4) Securities ownership. The following table discloses the dollar range of
equity securities of the registrant beneficially owned by the Fiduciary
Portfolio Managers as of November 30, 2008:
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF EQUITY
SECURITIES IN
REGISTRANT
--------------------------------------------------------------------------------
James J. Cunnane, Jr. $50,001-$100,000
Quinn T. Kiley $10,001-$50,000
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 21, 2008, the registrant's Board of Trustees (the "Board") approved a
revised written charter (the "Nominating and Governance Committee Charter") for
its nominating and governance committee (the "Nominating and Governance
Committee") that contains changes to the procedures by which shareholders may
recommend nominees to the Board.
Under the Nominating and Governance Charter, the previously existing procedures
by which shareholders may recommend nominees to the Board, as described in the
registrant's proxy
statement filed with the Securities and Exchange Commission on June 1, 2007,
remain in effect. In addition to these previously existing procedures, the
Nominating and Governance Charter includes a new requirement that following the
submission by a shareholder of a Trustee candidate recommendation, a Trustee
candidate must (i) be prepared to submit written answers to a questionnaire
seeking professional and personal information that will assist the Nominating
and Governance Committee to evaluate the candidate and to determine, among other
matters, whether the candidate would qualify as a Trustee who is not an
"interested person" of the registrant as such term is defined under the
Investment Company Act of 1940; (ii) be prepared to submit character references
and agree to appropriate background checks; and (iii) be prepared to meet with
one or more members of the Nominating and Governance Committee at a time and
location convenient to those Nominating and Governance Committee members in
order to discuss the nominee's qualifications.
A copy of the Nominating and Governance Committee Charter will be filed with the
Securities and Exchange Commission as an appendix to the registrant's 2009
annual shareholder meeting proxy statement.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures (as defined
in Rule 30a3(c) under the Investment Company Act) as of a date within 90 days of
this filing and have concluded based on such evaluation as required by Rule
30a-3(b) under the Investment Company Act of 1940, that the registrant's
disclosure controls and procedures were effective, as of that date, in ensuring
that information required to be disclosed by the registrant in this Form N-CSR
was recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that
occurred during the registrant's second fiscal quarter of the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Chief Executive and Senior Officers.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2 of the Investment Company Act.
(a)(3) Not applicable.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(b) of the Investment Company Act and Section 906
of the Sarbanes-Oxley Act of 2002.
(c) Proxy Voting Policies and Procedures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Fiduciary/Claymore MLP Opportunity Fund
By: /s/ J. Thomas Futrell
-----------------------------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: February 5, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ J. Thomas Futrell
-----------------------------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: February 5, 2009
By: /s/ Steven M. Hill
-----------------------------------------------------------------------
Name: Steven M. Hill
Title: Chief Financial Officer, Chief Accounting Officer and Treasurer
Date: February 5, 2009