Brompton VIP Income Fund
TSX : VIP.UN

Brompton VIP Income Fund
Brompton Stable Income Fund
TSX : BSR.UN

Brompton Stable Income Fund
Brompton Equal Weight Income Fund
TSX : EWI.UN

Brompton Equal Weight Income Fund
Business Trust Equal Weight Income Fund
TSX : BWI.UN

Business Trust Equal Weight Income Fund
BG Top 100 Equal Weighted Income Fund
TSX : BTH.UN

BG Top 100 Equal Weighted Income Fund
Brompton Tracker Fund
TSX : BTF.UN

Brompton Tracker Fund
BG Income + Growth Split Trust
TSX : BDS.UN
TSX : BDS.PR.A

BG Income + Growth Split Trust
BG Advantaged S&P/TSX Income Trust Index Fund
TSX : BAI.UN

BG Advantaged S&P/TSX Income Trust Index Fund
BG Advantaged Equal Weighted Income Fund
TSX : BAE.UN

BG Advantaged Equal Weighted Income Fund
Brompton Advantaged Tracker Fund
TSX : ATF.UN

Brompton Advantaged Tracker Fund
Brompton Top 50 Compound Growth Fund
TSX : CGF.UN

Brompton Top 50 Compound Growth Fund
BG Advantaged Corporate Bond Fund
TSX : BAC.UN

BG Advantaged Corporate Bond Fund
Brompton Equal Weight Oil & Gas Income Fund
TSX : OGF.UN

Brompton Equal Weight Oil & Gas Income Fund
Brompton Advantaged Oil & Gas Income Fund
TSX : AOG.UN

Brompton Advantaged Oil & Gas Income Fund

April 18, 2008 08:18 ET

Brompton Proposes Fund Reorganizations

TORONTO, ONTARIO--(Marketwire - April 18, 2008) - (TSX:VIP.UN)(TSX:BSR.UN)(TSX:EWI.UN)(TSX:BWI.UN)(TSX:BTH.UN)(TSX:BTF.UN)(TSX:BDS.UN)(TSX:BDS.PR.A)(TSX:BAI.UN)(TSX:BAE.UN)(TSX:ATF.UN)(TSX:CGF.UN)(TSX:BAC.UN)(TSX:OGF.UN)(TSX:AOG.UN) - Brompton Funds Management Limited (the "Manager") is proposing a reorganization of its investment funds that primarily invest in income trusts. This proposal is designed primarily to address the uncertainty concerning the future of income trust investments resulting from the Federal Government's decision to tax income trusts commencing in January 2011 and to address the economic inefficiencies inherent in smaller investment funds. As a result, the Manager is calling a special meeting of unitholders for the funds listed below (collectively, the "Funds") to consider a proposal to reorganize the Funds.



Brompton VIP Income Fund ("VIP")
Brompton Stable Income Fund ("BSR")
Brompton Equal Weight Income Fund ("EWI")
Business Trust Equal Weight Income Fund ("BWI")
BG Top 100 Equal Weighted Income Fund ("BTH")
Brompton Tracker Fund ("BTF")
BG Income + Growth Split Trust ("BDS")
BG Advantaged S&P/TSX Income Trust Index Fund ("BAI")
BG Advantaged Equal Weighted Income Fund ("BAE")
Brompton Advantaged Tracker Fund ("ATF")
Brompton Top 50 Compound Growth Fund ("CGF")
BG Advantaged Corporate Bond Fund ("BAC")
Brompton Equal Weight Oil & Gas Income Fund ("OGF")
Brompton Advantaged Equal Weight Oil & Gas Income Fund ("AOG")


The reorganization will involve (i) merging of certain of the Funds, with an expected end result of four continuing funds; (ii) amendments to the investment objectives and strategies of the Funds which will become the continuing funds to among other things expand the investment universe; (iii) adopting, where not currently in place, an active investment management strategy for each of the continuing funds and appointing MFC Global Investment Management ("MFC Global") as the portfolio manager; (iv) changing the fee structure to bring them more in line with actively managed funds; (v) enabling unitholders who do not wish to continue their investment in the continuing funds to redeem their Units by moving up the annual redemption date to August; and (vi) making certain administrative changes to facilitate the proposed reorganization and improve the operational efficiencies of the continuing funds. If approved by unitholders, the reorganization is expected to be effective in July 2008.

Prior to the October 31, 2006 announcement of the tax change to income trusts, the income trust sector was a vibrant component of the Canadian capital markets. The number of new public income trusts grew significantly in the previous five years from 84 income trusts with a market capitalization of $34 billion to 255 income trusts with a market capitalization of over $200 billion. Buoyed by a favourable cost of capital over traditional public corporate entities, income trusts performed well both in absolute and relative terms, generating a total return of 188% over that period as measured by the S&P/TSX Income Trust Index, and outperforming the S&P/TSX Composite Index by 90%.

Since the announced tax changes, however, uncertainty has grown over the future of the income trust sector as managers of these entities continue to struggle with a higher cost of capital. Forty-six income trusts with a combined market value of over $40 billion have been taken-over, converted to a corporate structure or merged following the announcement. Questions still remain regarding the future level of distributions and whether these entities will remain as income trusts. It is possible that many of the remaining income trusts may disappear through a combination of mergers, acquisitions and corporate conversions.

Brompton's investment funds that invest primarily in income trusts generally have similar investment objectives, to provide unitholders with:

1. a high level of monthly distributions; and

2. the opportunity for capital appreciation.

As a result of the changes to and the uncertainty surrounding the income trust sector, the Manager believes that changes to the investment strategy of these funds are required in order to continue to meet their investment objectives. In particular, the rules based, passive investment strategies employed by a number of the funds that invest in income trusts may no longer be applicable.

The Manager is proposing that the new investment strategy be modelled after its successful Brompton VIP Income Fund ("VIP"), which is actively managed by MFC Global. VIP has generated compound total returns of approximately 15% per annum since inception of the fund in February 2002 to March 31, 2008 based on net asset value. During 2007, VIP generated an annual total return of 15.9% which compares favourably with the 6.6% total return attained by the S&P/TSX Income Trust Index over the same period. In order to address the potentially shrinking income trust sector, VIP's investment universe will be broadened to include high dividend paying common shares, convertible debt instruments, preferred shares and other debt instruments.

Brompton VIP Income Fund is managed by MFC Global's income oriented equity investment manager, Alan Wicks and his team. Mr. Wicks is the award winning portfolio manager of the Manulife Monthly High Income Fund, which placed first in the Canadian Equity Balanced category at the 2008 Lipper Fund Awards, in recognition of the fund's consistently strong, risk-adjusted performance relative to its peers over a 10-year period. MFC Global, the diversified investment group of Manulife Financial Corporation, has over $240 billion in assets under management and over 100 years of experience in managing portfolios for institutional and retail clients.

In order to effect the change in investment strategy, unitholders of EWI, BWI, BTH, BTF and BDS will be given the opportunity to merge with VIP. These mergers will provide unitholders with the opportunity to hold an investment in a fund with an established track record of providing high total returns for unitholders, access to a top-ranked portfolio management team and an investment mandate that is designed to continue to meet investor objectives of income and growth. The fund will also have a large market capitalization and as such has the potential for increased liquidity and lower general and administration costs per unit. Unitholders of BSR, which is already actively managed by MFC Global, will also be given the opportunity to merge with VIP. This merger addresses the same uncertainty concerning the future of income trusts and it is expected to result in significantly lower costs for BSR unitholders, as the management fee will be reduced, and VIP's larger fund size will provide the potential for lower general and administration costs per unit and increased liquidity. As part of the reorganization, it is anticipated that the preferred securities issued by BDS will be called for redemption in June 2008.

The Manager is also proposing that its tax advantaged funds, BAI, BAE, CGF and ATF be merged into a continuing fund to be called Brompton Advantaged VIP Income Fund ("Advantaged VIP") which will employ the same portfolio manager, investment strategy and mandate as VIP and is expected to have a similar portfolio. Advantaged VIP will also put in place a tax advantaged structure so that distributions remain primarily return of capital.

Unitholders of BG Advantaged Corporate Bond Fund ("BAC") will also be given the opportunity to approve the merger of their fund with Advantaged VIP, which is expected to provide BAC unitholders with an investment in a larger fund with greater liquidity and lower operating costs than their current investment. Due to its smaller size, BAC's general and administration costs currently represent approximately 0.75% of its net asset value and the fund is becoming too small to operate on its own. In addition, BAC currently employs a significantly more expensive tax advantaged structure.

It is also being proposed that the investment universe of both Brompton Equal Weight Oil & Gas Income Fund ("OGF") and Brompton Advantaged Equal Weight Oil & Gas Income Fund ("AOG") be expanded beyond income trusts to include other income producing oil and gas securities, such as dividend paying common equities and convertible debt, to offset the decreasing quantity of oil and gas trusts. The portfolios will be broadened beyond oil and gas producers to also include service companies, pipelines and mid-stream operators. The funds will adopt an active investment management strategy, with MFC Global and Alan Wicks' team specifically, being appointed as the portfolio manager. OGF and AOG are expected to have very similar portfolios and investment strategies, but AOG will retain its tax advantaged structure.

Unitholders of AOG and Advantaged VIP will also be asked to approve amendments which would permit the Manager, at a later date, to collapse each fund's respective forward agreements and effect a merger so that AOG is merged into OGF and Advantaged VIP is merged into VIP. The amendments would provide that the merger would occur when, in the Manager's discretion, the tax advantaged structure of such funds no longer provides economic benefits for unitholders, which is expected to occur following the implementation of the proposed tax on income trusts in 2011.

Unitholders of the continuing funds will receive the benefit of VIP's low fee structure. Management fees for Continuing VIP and OGF will be 0.85% of net asset value per annum. This fee compares favourably with typical active management fees in the closed-end fund sector of 1.10% per annum. The service fee for all funds will be 0.40% of net asset value per annum which is standard for actively managed closed-end funds. The tax advantaged funds will have a slightly higher management fee of 0.90% of net asset value per annum to reflect the additional work and complexity involved in managing this tax structure.

Unitholders will also vote on making certain administrative changes to the Funds to facilitate the reorganization and improve the operational efficiency of the continuing funds. All mergers are expected to be conducted on a tax deferred basis.

To accommodate those unitholders who may not wish to continue their investment in these actively managed funds, the annual redemption date of all these funds will be moved up to August from the current November or December redemption dates. Accordingly, all unitholders are encouraged to vote in favour of the proposed reorganization.

The special meetings of unitholders of the Funds have been called and will be held on June 9, 2008 for all Funds except BDS, which will have a special meeting date of July 2, 2008. Details regarding the proposed reorganization will be contained in a joint information circular which is expected to be mailed to unitholders in May in connection with the special meetings. The circular will also be available on www.sedar.com and be posted on Brompton's website. The reorganization is also subject to applicable regulatory approvals. Unitholders are encouraged to read the circular in its entirety and consult with their advisors regarding the proposed reorganization. Unitholders are encouraged to complete voting instruction forms in order that their units can be voted at their respective meetings.

Forward-Looking Statements

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 Funds, to the future outlook of the Funds and anticipated events or results and may include statements regarding the future financial performance of the Funds. 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 for a variety of reasons, including those set forth below. Past performance of MFC Global Investment Management is not indicative of future returns.

Forward-looking statements in this press release include among other things, the proposed timing of the reorganization and the expected completion thereof; the expected benefits of the reorganization; the Funds that are proposed to be merged. These statements are based on certain factors and assumptions. In arriving at our conclusions regarding the proposed timing of the reorganization, we have assumed that Unitholder approval will be obtained at the Meeting or adjournment thereof, and that any regulatory approvals and third party consents and actions are given or carried out (as the case may be) in a timely manner. Our expectations regarding the benefits of the reorganization are based on there occurring a decrease in the quantities of investable income funds and that income funds will eventually be taxed commencing in and around January 2011. While we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect. There are no assurances that the actual outcomes will match the forward-looking statements as a result of a number of risks and uncertainties that could cause actual results to differ materially from what we currently expect. These factors include changes in market and competition, governmental or regulatory developments and general economic conditions. Other than as required under securities laws, we do not undertake to update this information at any particular time.

Contact Information

  • Brompton Funds Management Limited
    Mark A. Caranci
    President and CEO
    (416) 642-6004
    or
    Brompton Funds Management Limited
    David E. Roode
    Senior Vice-President
    (416) 642-6008