TORONTO, ONTARIO--(Marketwired - Dec. 24, 2013) - Meadowbank Capital Inc. ("Meadowbank") as the manager of the Legg Mason BW Investment Grade Focus Fund (TSX:BWI.UN) (the "Fund") is pleased to announce that it has today entered into an asset purchase agreement with Purpose Investments Inc. ("Purpose") whereby, subject to approval by the Fund's unitholders at a special meeting of unitholders expected to be held on or about February 3, 2014, Purpose will upon the closing of the transaction: (1) become the manager and portfolio advisor of the Fund, (2) merge the Fund with the Limited Duration Investment Grade Preferred Securities Fund, a fund managed by Purpose, (the "Purpose Fund") with similar investment objectives to the Fund, both in terms of its global and investment grade profiles and (3) change the auditor of the Fund to the auditor of the Purpose Fund, Ernst & Young LLP.
The Fund's current investment strategy uses a forward agreement to gain economic exposure to a fixed income portfolio and provides the unitholders with distributions in the form of returns of capital and capital gains. As a result of recent amendments to federal tax laws pertaining to re-characterization transactions, the Fund cannot increase its exposure under its forward agreement. This impairs the Fund's ability to expand its assets under management and realize the potential benefits to unitholders of a larger fund structure. The principals at Meadowbank have concluded that a merger of the Fund with the Purpose Fund is in the best interest of the Fund's unitholders. The proposed merger will achieve significant cost savings for the Fund given the Fund's current size of approximately $30 million, while allowing the Fund's unitholders access to an investment strategy that is similar to the Fund, both in terms of the global and the investment grade profiles.
The change of manager and the merging of the Fund with the Purpose Fund offers a number of benefits to unitholders of the Fund including: (1) combined assets under management of approximately $125 million, which in addition to the expected cost reductions, achieves economies of scale and enhanced trading liquidity, (2) creates an opportunity for higher monthly distributions to unitholders on a pre-tax basis, and (3) reduces both the currency and the interest rate risks of the Fund.
The management team at Purpose has a proven track record of managing investment funds and growing asset management companies, with over 60 years of combined experience in the investment funds industry.
Management at Meadowbank strongly endorses and supports the proposed merger of the two funds. "We believe this transaction is in the best interest of unitholders of the Legg Mason BW Investment Grade Focus Fund. Both funds have strong similarities. Furthermore, we believe that the current unitholders of the Legg Mason BW Investment Grade Focus Fund will benefit from potentially higher returns and from the lower costs associated with this merger," said John Kattan, the Chief Executive Officer of Meadowbank.
The exchange ratio for the merger will be determined as the ratio between the close of the net asset value per unit of each of the two funds on the date of the merger, which is expected to occur as soon as possible after the closing of the transaction, on or about February 28, 2014, subject to unitholder approval and the satisfaction of certain closing conditions, including any required regulatory approvals.
The costs and fees associated with this merger will be borne by Purpose and Meadowbank, not by the Fund.
About Meadowbank Capital Inc.
Meadowbank is an investment fund manager. Its principal office is located at 25 Adelaide Street East, Suite 1710, Toronto, Ontario, M5C 3A1. For further information on Meadowbank, please visit the web site www.meadowbankcapital.com.
About Purpose Investments Inc.
Purpose is an investment management firm inspired by the belief that all investors should have access to great investment products at reasonable fees. Through innovative and thoughtful product design and development, Purpose's investment strategies are managed with prudence, a long-term perspective, and with the goal of providing returns that are consistently better than those of a benchmark index. Purpose believes in focusing first on managing risk and creating value that is currently missing from the marketplace, thus empowering all Canadians to be better investors. Purpose is the manager of NexC Partners Corp. (TSX:NXC), an investment corporation which invests in a portfolio of North American dividend-paying equity securities plus an equity stake in Purpose.
For more information about Purpose, visit www.purposeinvest.com or follow Purpose on Twitter: @purposeinvest.
Certain statements included in this press release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect", "intend", "will" and similar expressions to the extent that they relate to the Fund. These forward-looking statements are not historical facts but reflect Meadowbank's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Although Meadowbank believes that the assumptions inherent in these forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. Meadowbank does not undertake any obligation to update publicly or otherwise revise any forward-looking statement or information whether as a result of new information, future events or other such factors which affect this information, except as required by law.