I have added Income & Growth Split Trust Preferred Sec to the HIMIPref™ database for a number of reasons, mainly the probability that several other preferred securities I track will be converted into this security next week (FCI.PR.A, FCF.PR.A, FCN.PR.A).
I can’t say I’m a big fan of this issue. It has had a continuous call at par effective since issue date, which is annoying. I have long been an advocate of a declining call premium on split share preferreds, so that preferred holders have at least a sporting chance of a capital gain and can plan their portfolios with a bit more confidence.
According to their annual report, the fund had no redemptions in 2005, but this situation has changed markedly in 2006. The third-quarter report discloses that of the 5,545,000 units outstanding Dec. 31, 2005, 2,375,599 (or 42.8%) had been redeemed. No wonder they got the urge to merge!
Assuming they get approval, the underlying investments won’t be solely Income Trusts any more – the Investment strategy will include:
Subject to the Investment Restrictions, the net proceeds of any Offering, together with any amounts drawn under the Loan Facility, will under normal market conditions be invested by the Trust in an actively managed diversified portfolio of securities, consisting of the following asset classes: (i) Income Fund Securities, (ii) Dividend-Paying North American Equities, (iii) Non-Investment Grade Debt; (iv) Short Term Investments; (v) Convertible Debt; and (vi) other income-generating securities.’’
Which doesn’t sound exactly 100% thrilling, but as long as there’s a hefty asset coverage ratio, the pref holders shouldn’t mind.
