CMA’S SELECT HIGH INCOME BOND PORTFOLIO ACCOUNT
The US stock market has been quite volatile for the past decade and CDs & Money Market Accounts are now paying less than 2% (One year CD rates on www.Bankrate.com are 1.5% and MMA from 0% to 1% as of 4/16/10). Savers and investors may be seeking an alternative to higher risk stock market investing and low CD rates. The CMA Select High Income Bond Portfolio Account is now offered to provide high current income for savings, income, or as an alternative to “growth stock investing”.
WHAT IS THE SELECT HIGH INCOME BOND PORTFOLIO ACCOUNT?
This investment Portfolio, maintained as a separate account for each client, is designed for "long term investors" seeking high current income from interest over a long period of time such as retirement, or for long term savings for building wealth via re-investment of annual investment income. The Portfolio is structured to hold only exchange-traded corporate bonds and debt securities of major companies across many industries. Bond and debt security prices will fluctuate day to day in the market place. The Estimated Annual Income from interest ranges from approximately 7% to 10% based upon the bond portfolio selected by the client.
Portfolio assets will be invested in corporate bonds and debt securities, which are senior to the common shares of the issuing company. Security selection criteria may change from time to time based on market conditions and availability of high income securities. Corporate bond issuers guarantee repayment of principal at the originally issued Par Values at maturity and guarantee to pay the regular semi-annual coupon interest payments when due for the life of the bond.
All securities held in the client's portfolio trade on the New York Stock Exchange (NYSE) or other public exchange. The interest income representation means that when the portfolio is purchased for a client account, the custodian states the anticipated "Estimated Annual Income" to be received from the investment holdings, as calculated from the past 12 month of income collections recorded from each security's income payment history. The "percent value" is determined by dividing the Estimated Annual Income by the Current Market Value of the portfolio holdings.
WHICH ISSUERS MAKE UP THE SECURITIES OF THE PORTFOLIO?
Some issuers of the corporate debt securities in the Portfolio include: CBS Corp, Duke Power, Goodrich Corp, JC Penney, News Corp, RR Donnelley, Valero Energy, plus many others. All issuers of Portfolio securities have been in business as a public company, for at least 5 years and others for many decades. Securities selections are diversified across more than 12 different industries. CMA offers several portfolios to choose from. These different portfolios have different: corporate issuers, bond weightings and different "credit quality ratings" from Standard & Pours. CMA corporate bond portfolios of a minimum of 12 bond issuers to portfolios of up to 50 or more bond issuers. CMA has the discretion to increase or decrease the number of bond issuer holdings, if desirable, in the best interests of the Client or investment strategy. See the following Moody's website for a discussion of corporate bond credit ratings and default risks contained in their 2008 report.
WHAT ARE THE EXPENSE COSTS, MINIMUM SIZE AND MANAGEMENT STYLE?
The CMA Select High Income Bond Portfolio Account is offered in a $25,000 minimum account size. CMA charges a .85% annual Investment Advisory Management Fee for managing this Portfolio account. Clients can direct our custodian, GreatBanc Trust Company, to make regular monthly, quarterly or annual distributions of Portfolio income to their checking accounts at their bank via ACH no-cost transfer deposits or receive checks in the mail. GBTC charges a custody fee of .25% of assets annually for accounting, and statement preparation & distribution. Transaction charges apply from the Trust Company at $4.25 for each buy or sell transaction. If income is not distributed to the client, it will be reinvested within the Portfolio. The Portfolio will be actively managed by CMA, where changes in holdings would be made at times at the discretion of CMA to maintain quality of issuers, high yields, and to replace any called or matured securities.
HOW IS THE PORTFOLIO ACCOUNT ESTABLISHED?
New clients would set up a new account by executing an Investment Advisory Agreement with CMA and new custody account documents with our custodian GreatBanc Trust Company( www.GreatBancTrust.com ). The client would then fund the new account with cash, and CMA will then buy all the required portfolio securities. Clients would then receive quarterly account statements from the custodian in paper format or electronically, at the client’s selection. The Custodian offers online access for viewing account holdings and activity for the account. All security holdings are held in custody at SEI Trust Company (Ticker: SEIC), a large public trust company.
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