Brompton Proposes Conversion of Flaherty & Crumrine Investment Grade Preferred Income Fund Into an Exchange Traded Fund
TORONTO, Sept. 09, 2021 (GLOBE NEWSWIRE) — (TSX: FFI.UN) Brompton Funds Limited (“Brompton” or the “Manager”), the manager of Flaherty & Crumrine Investment Grade Preferred Income Fund (the “Fund”) announces that a special meeting of the holders of units (“Units”) of the Fund (“Unitholders”) will be held on November 1, 2021 (the “Meeting”).
At the Meeting, Unitholders will be asked to approve, among other things, the conversion of the Fund (the “Conversion”) from a closed-end investment fund into an exchange-traded fund (“ETF”). If the Conversion is approved by Unitholders, the name of the Fund will be changed to “Brompton Flaherty & Crumrine Enhanced Investment Grade Preferred ETF” on the effective date of the Conversion.
Following the Conversation, the Fund will be considered to be an “alternative mutual fund” within the meaning of National Instrument 81-102 – Investment Funds.
All costs of the Conversion, including with respect to the Meeting, will be borne by the Manager.
The Manager believes that Unitholders will benefit from the Conversion for the following reasons:
1) Continuation of the Fund’s successful investment strategy: As of August 31, 2021, FFI had a 10-year total return of 10.0% per annum, and since-inception total return of 6.0% per annum (inception date: December 15, 2004).(1) Conversion to an ETF will allow the Fund to continue with its successful strategy, while adding incremental flexibility and increasing the Fund’s investible universe as an ETF.
2) Lower Management Expense Ratio: The combined portfolio management and management fee payable by the Fund is currently 1.0% of the Fund’s net asset value (“NAV”) plus applicable taxes (the “Management Fee”). The Management Fee will not change as a result of the Conversion. As of June 30, 2021, the Fund’s management expense ratio excluding cost of leverage was 1.32%. Following the Conversion, the Manager intends to waive a portion of the Management Fee of the Fund and/or reimburse the Fund to ensure that the sum of the Management Fee and operating expenses, exclusive of leverage and certain governance costs, but in each case inclusive of associated GST/HST, is limited to 1.20% of the NAV of the Fund, which represents a reduction from the current level.
3) Reduced Leverage Costs: Following the Conversion, the Fund will be permitted to utilize leverage primarily by way of a prime brokerage facility in accordance with applicable securities laws. Accordingly, the Manager expects that the Fund’s borrowing spreads will be reduced, and the fees currently payable by the Fund for undrawn amounts under its existing credit agreement will be eliminated, resulting in lower overall leverage costs. Lower leverage costs will result in higher net distributable income on the leveraged portion of the Fund’s portfolio.
4) Reduced Bid/Ask Spread: Market makers for ETFs are able to price their bids and asks for units of an ETF close to their estimate of NAV. The Manager expects that bid/ask spreads will be significantly reduced from the Fund’s current bid/ask spread. This is beneficial to investors because a smaller bid/ask spread is expected to result in a lower effective cost to buy or sell Units of the Fund.
5) Increased Trading Liquidity: Following the Conversion, approved dealers acting as market makers for the Fund will be able to offer or bid for large volumes of Units of the Fund on the Toronto Stock Exchange, as approved dealers have the ability to create or redeem Units daily in large blocks directly from the Fund. This is expected to result in improved liquidity of the Units as it will allow an investor to buy or sell large amounts of Units of the Fund without materially affecting the market price for the Units.
Unitholders of record of the Fund at the close of business on October 1, 2021 will be entitled to vote at the Meeting. If approved, the Conversion is expected to be implemented in November 2021, subject to obtaining the required regulatory approvals and the approval of the Toronto Stock Exchange (“TSX”). Details of the proposed Conversion will be further outlined in the Fund’s notice of special meeting of Unitholders and management information circular that will be prepared and delivered to Unitholders in connection with the Meeting and will be available under the Fund’s profile on www.sedar.com.
About Brompton Funds
Founded in 2000, Brompton is an experienced investment fund manager with income focused investment solutions including exchange-traded funds (ETFs) and other TSX traded investment funds. For further information, please contact your investment advisor, call Brompton’s investor relations line at 416-642-6000 (toll-free at 1-866-642-6001), email [email protected] or visit our website at www.bromptongroup.com.
|Annual Compound Returns||
|Flaherty & Crumrine Investment Grade Preferred Income Fund||7.5||%||16.9||%||8.2||%||7.2||%||10.0||%||6.0||%|
Returns are for the periods ended August 31, 2021 and are unaudited. The table shows the Fund’s compound return for each period indicated. Past performance does not necessarily indicate how the Fund will perform in the future. The information shown is based on NAV per Unit and assumes that distributions made by the Fund on the Units in the period shown were reinvested at NAV per unit in additional Units of the Fund. The table above also shows the Fund’s compound return for each period indicated.
You will usually pay brokerage fees to your dealer if you purchase or sell Units of the investment fund on the TSX or other alternative Canadian trading system (an “exchange”). If the Units are purchased or sold on an exchange, investors may pay more than the current NAV when buying Units of the investment fund and may receive less than the current net asset value when selling them.
There are ongoing fees and expenses associated with owning units of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the Fund in the public filings available at www.sedar.com. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account certain fees such as redemption costs or income taxes payable by any securityholder that would have reduced returns. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.
Certain statements contained in this news release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to matters disclosed in this press release and to other matters identified in public filings relating to the Fund, to the future outlook of the Fund and anticipated events or results and may include statements regarding the future financial performance of the Fund. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.