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U.S. Financials Income Fund

 

USF.UN
CLASS U

Fund Features

Objectives

The Fund’s investment objectives are:

  1. to provide Unitholders with quarterly cash distributions; and
  2. to maximize total returns through capital appreciation and distributions.

Investment Strategy

The Fund will invest in an actively managed portfolio of U.S. financial issuers selected from the S&P 500 Index that are classified as “financials” by Standard & Poor’s Global Industry Classification Standard and which have a market capitalization of at least US$10 billion and a credit rating issued by Standard & Poor’s® Rating Services, a division of The McGraw-Hill Companies, Inc. of at least A- at the time of purchase. The Portfolio will also include U.S. publicly listed alterative asset management issuers which have a market capitalization of at least US$5 billion at the time of purchase. U.S. Financial issuers may include, but are not limited to, issuers operating in the following financial industry sub-sectors: retail and commercial banking, investment banking, wealth management, insurance and real estate. Alternative Asset Manager issuers may include, but are not limited to, managers or investment advisors who structure, promote, sponsor or operate investment and other funds focused on non-traditional asset classes such as private equity, real estate, commodities and alternative investment strategies.

The Fund may invest up to 25% of the net asset value in U.S. financial securities or alternative asset managers that do not meet the rating or market capitalization tests noted above. To generate additional returns above the dividend income earned on the Fund’s investment portfolio, the Fund will, from time to time, write covered call options in respect not more than 33% of the securities in its portfolio. In addition, the Fund may write cash covered put options and may invest up to 10% of net assets to purchase call options, both in respect of securities in which the Fund is permitted to invest.

The Manager may short securities from time to time. Short exposure in the Portfolio, for purposes other than hedging (as defined in NI 81-102), will not exceed 10% of the Net Asset Value of the Fund determined on a daily marked-to-market basis.

Option Strategy

The Fund employs Strathbridge’s proprietary SSO option strategy to generate additional returns above the distributions earned on its equity securities.

Click here for a detailed review of the Strathbridge Selective Overwriting (“SSO”) strategy.

Distributions

Class A distributions 0f $0.50 per Class A unit per annum are paid in the amount of $0.125 each calendar quarter.

Class U distributions of US$0.50 per Class U unit per annum are paid in the amount of US$0.125 each calendar quarter.

Distributions are not fixed but are reviewed and set annually at the discretion of the Fund.

Click here for a complete distribution history including the historical tax allocation.

Mandatory Market Repurchase Program

The Fund will undertake a mandatory market purchase program pursuant to which if the Class A Units close at a trading price that is less than 98% of the latest NAV per Class A Unit, the Fund will offer to purchase Class A Units thereafter if and to the extent that the Class A Units continue to trade at a price that is below 98% of the latest NAV per Class A Unit at the time.

Redemptions

The Units are redeemable annually in September of each year beginning in 2016 at 100% of each respective unit’s Net Asset Value less costs, at the option of the unitholder and monthly at a discount to market price. Redemption proceeds will be payable in Canadian dollars to holders of Class A Units and in U.S. dollars to holders of Class U Units.

Click to expand Redemption Details:

Redemption Deadlines
Units may be surrendered at any time for redemption, but will be redeemed only on a Redemption Date, being the last business day of any month. Units surrendered for redemption by a Unitholder on or before the first business day of September 2016 or any year thereafter (the “Annual Redemption Deadline”) will be redeemed on the last business day of September (the “Annual Redemption Date”). Units surrendered for redemption by a Unitholder at least ten business days prior to the last day of any other month (a “Monthly Redemption Date”), will be redeemed on such Monthly Redemption Date. Unitholders will receive payment for the Units on or before the 15th day following any such Redemption Date. If a Unitholder surrenders Units after 5:00 p.m. (EST) on the applicable cut-off date, the Units will be redeemed on the following Redemption Date. Redemption notices must be delivered to the Fund by an investor’s advisory firm in sufficient time to meet the deadline.

Annual Redemption
Beginning in September 2016, units surrendered for redemption on or before the first business day of September will be redeemed at 100% of each respective unit’s net asset value less costs, valued on the last business day of September being the redemption day. Costs may include an amount equal to the aggregate of all brokerage fees, commissions and other costs incurred by the Fund in connection with such payment, including, but not limited to, costs incurred in liquidating securities held in the Fund’s portfolio. Payment will be received on or before the 15th day following the redemption day. Redemption proceeds will be payable in Canadian dollars to holders of Class A Units and in U.S. dollars to holders of Class U Units.

Monthly Redemption
For Unitholders whose Units are redeemed on any other Redemption Date, the redemption price per Unit will be equal to the lesser of:
  1. a)95% of the Market Price. For such purposes, “Market Price” means the weighted average trading price of the Units on the principal stock exchange on which the Units are listed for the ten trading days immediately preceding the applicable Redemption Date, and
  2. b)100% of the Closing Market Price of the Units on the applicable Redemption Date, minus an amount equal to the aggregate of all brokerage fees, commissions and other costs incurred by the Fund in connection with such payment, including, but not limited to, costs incurred in liquidating securities held in the Fund’s portfolio. For such purposes, the “Closing Market Price” means the closing price of the Units on the principal stock exchange on which the Units are listed or, if there was no trade on the relevant date, the average of the last bid and the last asking prices of the Units on the principal stock exchange on which the Units are listed.

For Unitholders whose Class U Units are redeemed on a Monthly Redemption Date, the Redemption Price per Class U Unit will be the U.S. dollar amount calculated as the Class A Monthly Redemption Price (converted to U.S. dollars at the Reference Exchange Rate on the Monthly Redemption Date) multiplied by a fraction, the numerator of which is the NAV per Class U Unit and the denominator of which is the NAV per Class A Unit (converted to U.S. dollars at the Reference Exchange Rate on the Monthly Redemption Date).

Any unpaid distribution payable on or before the applicable Redemption Date in respect of Units tendered for redemption on such Redemption Date will also be paid on the applicable Redemption Payment Date.


Class U Conversion

A holder of Class U Units may convert such Class U Units into Class A Units on a weekly basis for liquidity purposes. It is expected that liquidity for the Class U Units will be obtained primarily by means of conversion into Class A Units and the sale of such Class A Units on the stock exchange. Class U Units may be converted in any week on the first Business Day of such week (the “Conversion Date”) by delivering a notice to the Manager and surrendering such Class U Units by 3:00 p.m. (Toronto time) at least five Business Days prior to the applicable Conversion Date.

For each Class U Unit so converted, a holder will receive that number of Class A Units equal to the Net Asset Value per Class U Unit as at the close of trading on the Business Day immediately preceding the Conversion Date divided by the Net Asset Value per Class A Unit as at such time. As the Units are denominated in different currencies, the Fund will utilize the applicable Reference Exchange Rate, or as nearly as practicable to, the Conversion Date. No fraction of a Class A Unit will be issued upon any conversion of Class U Units and any fractional amounts will be rounded down to the nearest whole number of Class A Units.

Leverage

The Fund will not employ leverage, except as described under shorting.

Shorting

The Manager may short securities from time to time. Short exposure in the Portfolio, for purposes other than hedging (as defined in NI 81-102), will not exceed 10% of the Net Asset Value of the Fund determined on a daily marked-to-market basis.

Termination

The Fund does not have a fixed termination date.

CUSIP ISIN

Class A Shares
     CUSIP – 90290Q102
     ISIN - CA 90290Q1028
Class U
     CUSIP – 90290Q110
     ISIN – CA 90290Q1101

Eligibility

RRSPs, DPSPs, RRIFs, RESPs and TFSAs

Management Fees

The Fund pays a management fee of 1.25% of net asset value annually to Strathbridge Asset Management for acting as the Manager and the Investment Manager.

MER

The Fund’s Management Expense Ratio (“MER”) is the sum of all operating expenses, including management and service fees but excluding portfolio transaction costs, expressed as percentage of average net asset value.

Inception Date

02/24/2015

Manager

Strathbridge Asset Management

Hedging

The Fund may hedge all or none of the U.S. dollar exposure of the Class A units back to the Canadian dollar from time to time at the discretion of the Manager.

 

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