FAQs

Some commonly asked questions about Prodesse and the market in which we invest.

What is the investment objective for Prodesse?

The investment objective is to achieve distributable income yield on net assets (in US dollar terms) of at least 3.5% greater than the yield on the ten-year US Treasury on an annualised basis while preserving net asset value (in US dollar terms) over the long term.

What exchange is Prodesse traded on and what is its ticker?

Prodesse is listed on the London Stock Exchange and the Channel Islands Stock Exchange and trades under the symbol PRD.

Is Prodesse part of any of the FTSE indices?

Prodesse is part of the FTSE All-Share, FTSE All Share Financials, FTSE All Share General Financials, FTSE All-Share Ex Investment Trusts, FTSE Smallcap, and FTSE Smallcap Ex Investment Trusts Indices.

What are mortgage-backed securities?

Mortgage-backed securities are ownership interests in mortgage loans made by financial institutions (savings and loans, commercial banks and mortgage bankers). When an institution has made enough loans it will "pool" or package them together and sell them to mortgage investors. The institution will collect the principal and interest payments made by the homeowners and forward them to the mortgage investor.

What are Fannie Mae, Freddie Mac and Ginnie Mae?

Fannie Mae and Freddie Mac are federally chartered, stockholder-owned corporations and together are the largest investors in home mortgage loans in the United States. Fannie Mae and Freddie Mac don’t lend money directly to home buyers, but by buying mortgages from originators they are the nation’s largest and most consistent source of financing for them. The two companies are called Government Sponsored Enterprises, or GSEs. Ginnie Mae, another important source of funding to the mortgage originators, is a wholly-owned Government instrumentality and explicitly backed by the US Government. GSE MBS have virtually zero credit risk because they carry actual or implied AAA ratings and are direct, in the case of Ginnie Mae MBS, obligations of the US government or indirect in the case of Fannie Mae and Freddie Mac MBS.

Freddie Mac and Fannie Mae were placed under the control of the Federal Housing Finance Agency (FHFA). What does that mean?

Fannie Mae and Freddie Mac are federally chartered, stockholder-owned corporations and together are the largest investors in home mortgage loans in the United States. Fannie Mae and Freddie Mac don’t lend money directly to home buyers, but by buying mortgages from originators they are the nation’s largest and most consistent source of financing for them. The two companies are called Government Sponsored Enterprises, or GSEs. Ginnie Mae, another important source of funding to the mortgage originators, is a wholly-owned Government instrumentality and explicitly backed by the US Government. GSE MBS have virtually zero credit risk because they carry actual or implied AAA ratings and are direct, in the case of Ginnie Mae MBS, obligations of the US government or indirect in the case of Fannie Mae and Freddie Mac MBS.

What role does the US Treasury have in supporting Freddie Mac and Fannie Mae?

The US Department of Treasury agreed to purchase as much senior preferred stock in the Agencies as necessary to maintain positive net worth, up to a maximum of $100 billion per company. In exchange for committing to purchase the shares, Treasury will receive warrants to purchase approximately 80% of each company and $1 billion in senior preferred stock. Also the Treasury established a liquidity facility for the Agencies (and the Federal Home Loan Bank) called the GSECF, which will ensure continued funding.

What does this mean for Freddie Mac and Fannie Mae MBS?

This plan confirms our belief about Agency MBS: Fannie Mae and Freddie Mac have never failed to make good on their guarantee, and in the worst case the government would stand behind that guarantee. To be exact, Fannie Mae’s and Freddie Mac’s senior debt obligations, including the guarantee of Agency mortgage-backed securities, will continue in their current form with the explicit support of the Treasury’s commitments (in fact, their AAA ratings have been affirmed).

Who is the investment manager for Prodesse?

FIDAC, which stands for Fixed Income Discount Advisory Company, is a wholly-owned subsidiary of Annaly Capital Management, Inc. FIDAC is a registered investment advisor in the United States which manages, assists in managing or supervises investment funds for a wide array of clients around the world on a discretionary basis. FIDAC is a fee-based asset management business with a global distribution reach. For additional information on FIDAC and Annaly go to www.fidacadvisors.com

When are dividends paid?

Dividends are declared quarterly and generally paid in February, May, August and November.

Is there currency risk in investing in Prodesse?

Yes. Prodesse invests in US$-denominated securities, its earnings are in US$, and it pays dividends in US$ (see Investors – Dividends for the ability to convert dividends into sterling). The shares of Prodesse however, trade in sterling.

Can I reinvest my dividends?

Yes. Prodesse has a Dividend Reinvestment Plan or DRIP which allows for the quarterly reinvestment of your dividends. For more information on the programme and to apply, please go to Investors – Dividends.