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Premium Income Corporation

 

PIC.PR.A
PIC.A

Fund Features

Objectives

The Fund’s investment objectives are:

  1. to provide holders of Preferred shares with fixed cumulative preferential quarterly cash distributions in the amount of $0.215625 per Preferred share representing a yield on the issue price of the Preferred shares of 5.75% per annum; and
  2. to provide holders of Class A shares with quarterly cash distributions targeted to be 8.0% of NAV per annum; and
  3. to return the original issue price to holders of both preferred share and Class A shares upon wind-up of the Fund.

Investment Strategy

The Fund invests in common shares of each of the following six Canadian banks while adjusting allocations to each bank over time depending on the Investment Manager’s outlook.

     Bank of Montreal
Bank of Nova Scotia
Canadian Imperial Bank of Commerce
National Bank of Canada
Royal Bank of Canada
The Toronto-Dominion Bank

Option Strategy

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

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

Distributions

Preferred shares pay fixed cumulative preferential quarterly cash distributions in the amount of $0.215625 per Preferred share representing a yield on the original issue price of the Preferred shares of 5.75% per annum.

Currently the Fund is paying distributions of $0.81276 per share per annum on the Class A shares on a quarterly basis. The Fund intends to continue to pay distributions at this rate on the Class A shares until the NAV per unit (consisting of one preferred share and one Class A share) reaches $25.00 at which point the Class A distribution will be based on 8.0% of the NAV of the Class A share.

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

Redemptions

Combined units of the fund are redeemable annually in October of each year at the option of the shareholder and shares may be redeemed monthly at a discount to market price.

Click to expand Redemption Details:

Redemption Deadlines:
Class A Shares and Preferred Shares may be surrendered at any time for retraction by the Fund but will be retracted only on the last day of a month (a “Valuation Date”). Shares surrendered for retraction by a holder of Class A Shares or Preferred Shares at least ten business days prior to a Valuation Date will be retracted on such Valuation Date and such shareholder will receive payment on or before the tenth business day following such Valuation Date.

Annual Retraction:
A shareholder may concurrently retract one Preferred Share and one Class A Share on the October Valuation Date of each year at a retraction price equal to the NAV per Unit on that date.

Monthly Retraction:
The monthly retraction prices for the Class A Shares will be equal to 96% of the lesser of:
  1. the difference between (i) the NAV per Unit on the applicable Valuation Date and (ii) the cost to the Fund of purchasing a Preferred Share in the market for cancellation; and
  2. the difference between (i) the Unit Market Price (as defined below) and (ii) the cost to the Fund of purchasing a Preferred Share in the market for cancellation.
The monthly retraction prices for the Preferred Shares will be equal to 96% of the lesser of:
  1. the difference between (i) the NAV per Unit on the applicable Valuation Date and (ii) the cost to the Fund of purchasing a Class A Share in the market for cancellation; and
  2. the lesser of (i) the Unit Market Price less the cost to the Fund of purchasing a Class A Share in the market for cancellation and (ii) $15.00.

For this purpose, the cost of the purchase of a Preferred Share or a Class A Share will include the purchase price of the share, commission and such other costs, if any, related to the liquidation of any portion of the Portfolio to fund the purchase of such share. Any declared and unpaid distributions payable on or before a Valuation Date in respect of Class A Shares or Preferred Shares tendered for retraction on such Valuation Date will also be paid on the retraction payment date. In addition, the following terms have the meanings set forth below.

Class A Market Pricemeans the weighted average trading price of the Class A Shares on the principal stock exchange on which the Class A Shares are listed (or, if the Class A Shares are not listed on any stock exchange, on the principal market on which the Class A Shares are quoted for trading) for the 10 trading days immediately preceding the applicable Valuation Date.
Preferred Market Pricemeans the weighted average trading price of the Preferred Shares on the principal stock exchange on which the Preferred Shares are listed (or, if the Preferred Shares are not listed on any stock exchange, on the principal market on which the Preferred Shares are quoted for trading) for the 10 trading days immediately preceding the applicable Valuation Date.
Unit Market Pricemeans the sum of the Class A Market Price and the Preferred Market Price.


Leverage

The Fund does not employ financial leverage, however Class A shares are considered to be leveraged investments by virtue of the Preferred Shares which rank ahead of the Class A for payment of distributions and proceeds on termination up to the Preferred Share par value of $15.00 per share. Positive or negative changes in the value of the total portfolio will have a greater effect on the value of the Class A shares. As the value of the portfolio increases this effect decreases and conversely as the value of the portfolio decreases, leverage increases.

Termination

The Fund is scheduled to be redeemed on November 1, 2024, subject to an automatic extension of the term for an additional seven years. In addition, shares may be sold daily on the TSX or redeemed concurrently on an annual basis at net asset value per unit.

CUSIP ISIN

Class A Shares
     CUSIP – 740910302
     ISIN - CA 7409103024
Preferred Shares
     CUSIP – 740910203
     ISIN - CA 7409102034

Eligibility

RRSPs, DPSPs, RRIFs, RESPs and TFSAs

Issuer Bid

The Fund may purchase up to 10% of its outstanding units at prices up to net asset value per unit. A unit consist of one Preferred Share combined with one Class A Share.

Management Fees

The Fund pays a management fee of 0.90% of net asset value annually to Strathbridge Asset Management for acting as the Manager and the Investment Manager.

MER

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

Inception Date

10-30-1996

Manager

Strathbridge Asset Management

 

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