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Top 10 Split Trust

 

TXT.PR.A
TXT.UN

Fund Features

Objectives

The Fund’s investment objectives are:

  1. Capital Units – (i) to provide holders of Capital Units, upon redemption, with the benefit of any capital appreciation in the market price of the securities in the Fund’s portfolio; and (ii) to pay quarterly distributions to holders of Capital Units in an amount targeted to be 7.5% per annum of the NAV per Capital Unit; and
  2. Preferred Securities – (i) to pay holders of Preferred Securities fixed quarterly cash interest payments equal to 6.25% per annum on the $12.50 principal amount of a Preferred Security; and (ii) to repay the principal amount of $12.50 per Preferred Security on the maturity date.

Investment Strategy

The Fund will invest not less than 5% and not more than 15% of the Trust’s assets in each of the following ten securities comprising the portfolio.

Bank of Montreal   Great-West Lifeco Inc.   
Bank of Nova Scotia   Industrial Alliance Insurance and Financial Services Inc.   
Canadian Imperial Bank of Commerce   Manulife Financial Corporation   
National Bank of Canada   Sun Life Financial Inc.   
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 Security distributions of $0.78124 per security per annum are paid quarterly for a yield of 6.25% on the $12.50 issue price. Capital Unit distributions are calculated and paid each calendar quarter based on 7.5% per annum of the net asset value of the Capital Unit and are generally classified as a return of capital for tax purposes.

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

Redemptions

Capital Units may be redeemed annually in December of each year at the option of the security holder and monthly at a discount to market price. Preferred Securities may only be surrendered for redemption on a monthly or annual basis when combined with a Capital Unit.

Click to expand Redemption Details:

Redemption DeadlinesSecurities 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”). Securities surrendered for retraction by a holder of Capital Units or Preferred Securities at least ten business days prior to a Valuation Date will be retracted on such Valuation Date and such security holder will receive payment on or before the tenth business day following such Valuation Date.

Annual Retraction
Capital Units may be surrendered for retraction either alone or combined with a Preferred Security. Capital Units surrendered alone will receive an amount equal to the NAV of a combined unit less the price paid by the Fund to purchase a Preferred Security in the market. Combined Units surrendered for retraction will receive the combined NAV.

Monthly Retraction
The monthly retraction prices for the Capital Units will be equal to 95% of the lesser of:
  1. the Combined Value less the aggregate cost to purchase a Preferred Security in the market and $0.50; and
  2. the Capital Unit Market Price.
The monthly retraction prices for the Capital Unit and Preferred Shares concurrently redeemed will be equal to 95% of the lesser of:
  1. the Combined Value less $0.50; and
  2. the Combined Security Market Price.

For this purpose, the cost of the purchase of a Preferred Security or a Capital Unit in the market will include the purchase price of the security, commission and such other costs, if any, related to the liquidation of any portion of the Portfolio to fund the purchase. Any declared and unpaid distributions or accrued interest payable on or before a Valuation Date in respect of Capital Units or Preferred Securities 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.

Capital Unit Market Pricemeans the weighted average trading price of the Capital Units on the principal stock exchange on which the Capital Units are listed for the 10 trading days immediately preceding the applicable Valuation Date.
Preferred Security Market Pricemeans the weighted average trading price of the Preferred Securities on the principal stock exchange on which the Preferred Securities are listed for the 10 trading days immediately preceding the applicable Valuation Date.
Unit Security Market Pricemeans the sum of the Capital Unit Market Price and the Preferred Security Market Price.


Leverage

The Fund does not employ financial leverage, however Capital Units are considered to be leveraged investments by virtue of the Preferred Securities which rank ahead of the Capital Units for payment of distributions and proceeds on termination up to the Preferred Security principal amount of $12.50 per security. Positive or negative changes in the value of the total portfolio will have a greater effect on the value of the Capital Units. 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 March 31, 2021, subject to an automatic extension of the term for an additional five years. In addition, securities may be sold daily on the TSX or redeemed concurrently on an annual basis at net asset value per unit.

CUSIP ISIN

Capital Units
     CUSIP – 890520109
     ISIN - CA 8905201098
Preferred Shares
     CUSIP – 890520117
     ISIN - CA 8905201171

Eligibility

RRSPs, DPSPs, RRIFs, RESPs and TFSAs

Management Fees

The Fund pays a management fee of 1.10% of net asset value annually to Strathbridge Asset Management for acting as the Manager and the Investment Manager.

Service Fee

A service fee of 0.40% of NAV of the Capital Units per annum is paid quarterly to Investment Advisors whose clients hold the Capital Units.

MER

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

Inception Date

02/03/1997

Manager

Strathbridge Asset Management

 

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