TORONTO, ONTARIO--(Marketwire - Feb. 12, 2013) -
THIS PRESS RELEASE IS NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER U.S. WIRE SERVICES
Front Street U.S. MLP Income Fund Ltd. ("FS U.S. MLP") (TSX:MLP) and Front Street Strategic Yield Fund Ltd. ("FSS") (TSX:FSS), through their common manager Front Street Capital 2004 ("Front Street"), have each announced a special meeting of shareholders to be held on April 9, 2013. At the meetings, shareholders will be asked to consider the proposed merger of FS U.S. MLP and FSS (together, the "Funds"). Under the proposed merger, the Funds would merge to form a new amalgamated corporation using the name of the "continuing investment fund", Front Street U.S. MLP Income Fund Ltd. ("New MLP Fund"). FS U.S. MLP shareholders would receive one equity share (Series C or Series U, as applicable) of the New MLP Fund for each FS U.S. MLP equity share that they hold on the close of business prior to the effective date of the merger. FSS shareholders would receive the number of equity shares, Series C of the New MLP Fund determined by multiplying the number of FSS equity shares they hold on the close of business prior to the effective date of the merger by the exchange ratio (which will be equal to the net asset value per FSS equity share on the business day prior to the merger date, divided by the net asset value per FS U.S. MLP equity share, Series C on such date). The New MLP Fund is expected to have investment objectives and strategies substantially similar to those of FS U.S. MLP except that distributions will be monthly.
The arrangements currently in place for FSS's return to be linked to the return of Flatiron Strategic Yield Ltd. through a forward agreement, will be unwound through the merger process.
FS U.S. MLP provides Shareholders with exposure to the performance of an actively managed, diversified notional portfolio of U.S. energy infrastructure master limited partnerships ("MLPs"). MLPs generate predictable and growing cash flows (and therefore distributions) based on:
(i) Long-lived, high-value physical assets;
(ii) U.S. producer price index ("PPI") revenue indexing, which mitigates impact from inflation;
(iii) Substantial barriers to entry, which generate attractive organic investment opportunities; and
(iv) Strong operating leverage through hard assets that magnify inelastic demand.
Investors in FS U.S. MLP benefit from the potential for tax-efficient, inflation-protected distribution growth. Front Street Investment Management Inc. ("FSIMI") is the investment advisor for both FS U.S. MLP and FSS. FS U.S. MLP currently provides investors with a $0.60 annual ROC distribution.
Front Street previously announced on February 7, 2013 that FSIMI was going to be continuing as sole investment advisor of FSS effective February 15, 2013 following the fulfillment of objectives previously set out for the co-investment advisory appointments of FSIMI and Sprott Asset Management LP to certain funds including FSS. Front Street has now concluded that FSS shareholders would be best serviced by merging the assets of FSS into MLP.
Front Street believes that the merger will also be beneficial to shareholders of each Fund as a result of the increased economies of scale resulting from the consolidation of sales, marketing and management activities that are expected to reduce fund expenses, and as shareholders of the New MLP Fund will hold shares of a fund with a larger combined market capitalization, with anticipated increased liquidity.
Additional details regarding the proposed merger will be outlined in a joint information circular that will be sent in March to shareholders of record on March 8, 2013. The information circular will also be available at www.sedar.com. Shareholders are encouraged to complete voting instruction forms in order that their equity shares can be voted at the meetings. If the proposed merger is approved by shareholders of each of FS U.S. MLP and FSS, the merger is expected to occur on or before April 30, 2013.
In addition, FSS announced a conference call to provide a management update. The conference call for shareholders of FSS will be held on Thursday, February 14, 11:00 a.m. Eastern Standard Time at the following telephone number: 1-800-406-9725, local 416-981-9091 (listen-only). For those who wish to ask a question, please select the webcast option at: https://cc.callinfo.com/r/123yuje3fhlxs.
Certain statements in this press release may be viewed as forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, intentions, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "is expected", "anticipates", "plans", "estimates" or "intends" (or negative or grammatical variations thereof), or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Statements which may constitute forward-looking statements relate to: the proposed timing of the merger and expected completion thereof; the expected benefits of the merger; cash flows associated with an investment in the Funds or MLPs. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements including as a result of changes in the general economic and political environment, changes in applicable legislation, and the performance of each Fund. There are no assurances the Funds can fulfill such forward-looking statements and the Funds do not undertake any obligation to update such statements. Such forward-looking statements are only predictions; actual events or results may differ materially as a result of risks facing one or more of the Funds, some of which are beyond the control of the Funds. Past performance is not a guarantee of future results.