NEW YORK, NEW YORK -- (Marketwire) -- 11/18/11 -- Brookfield Investment Management Inc. announced today that the Board of Directors of each of Helios Strategic Mortgage Income Fund, Inc. (NYSE: HSM) and Helios Total Return Fund, Inc. (NYSE: HTR) (each a "Fund" and together, the "Funds") approved the reorganization of HSM into HTR (the "Reorganization").
The Board of Directors of each Fund anticipates that the Reorganization will benefit shareholders of each Fund. The combined Fund is expected to provide enhanced investment flexibility for HSM shareholders as the investment guidelines for HTR, particularly its minimum ratings requirements for investments and ability to use a broader array of investment instruments are more flexible than those of HSM; lower portfolio trading cost, as the larger combined Fund is expected to experience a reduction in trading penalties that are paid by the smaller separate Funds when engaged in trading small share lots; the potential for a modestly lower operating expense ratio for HSM shareholders; the potential for the combined Fund to obtain better financing terms than each Fund could obtain separately due to its larger size; and the potential for enhanced market liquidity for the combined Funds' common stock which could positively impact the trading experience for the combined Fund's shares. The Reorganization is not expected to materially impact the expense ratio of HTR or the dividend/share paid by HTR. While the dividend/share paid by HSM is currently marginally higher than the dividend/share paid by HTR (and expected to be paid by the combined Fund following the Reorganization), the Adviser believes that the current HSM dividend/share may not be sustainable given its more restrictive investment policies.
Under the terms of the proposed Reorganization, which is currently expected to be concluded in the first quarter of 2012 and is expected to be tax-free to HSM shareholders, the assets of HSM will be transferred to, and the liabilities of HSM will be assumed by, HTR in exchange for shares of HTR. HSM shareholders will become shareholders of HTR and will receive HTR shares with an aggregate net asset value equal to their HSM shares on the day of closing. HSM will thereafter liquidate and terminate its existence pursuant to its Articles of Incorporation, Bylaws and the Investment Company Act of 1940, as amended. The Reorganization is subject to certain conditions, including the approval of the Reorganization by shareholders of HSM and the approval of the issuance of additional HTR shares by shareholders of HTR. In this regard, HSM and HTR will be sending a joint prospectus/proxy statement to all HSM and HTR shareholders with more details of the proposed Reorganization and soliciting their approval for the Reorganization.
Helios Strategic Mortgage Income Fund, Inc. is a diversified, closed-end fund whose primary investment objective is to provide a high level of current income by investing primarily in mortgage-backed securities ("MBS") that, in the opinion of the Fund's advisor, offer an attractive combination of credit quality, yield and maturity. The Fund's secondary investment objective is to provide capital appreciation. Under normal market conditions, the Fund will invest at least 80% of its total assets in MBS-securities backed by interests in real estate-including Agency MBS, non-Agency Residential MBS, and Commercial MBS ("CMBS").
Helios Total Return Fund, Inc. is a diversified, closed-end fund whose primary objective is to provide high total return, including short and long-term capital gains and a high level of current income. The Fund pursues this objective by investing and actively managing a portfolio consisting primarily of U.S. Treasury, mortgage-backed, asset-backed and high-yield corporate securities.
The Board of Directors of HTR has also approved certain changes to HTR's investment strategies and policies, to take effect February 1, 2012. These changes, which do not require shareholder approval and are not contingent upon the closing of the Reorganization, are designed to provide HTR with additional investment flexibility to pursue its investment mandate. These changes are as follows:
As of February 1, 2012, under normal market conditions, HTR will invest at least 40% of its total assets in the following:
-- Securities issued and/or guaranteed by the U.S. Government or one of its
agencies or instrumentalities;
-- Residential MBS and CMBS rated BBB- and above;
-- Real estate related asset-backed securities rated BBB- and above; and
-- Cash
HTR may invest the remaining 60% of its total assets in the following:
-- High yield high risk mortgage securities. The Fund's investments in high
yield high risk mortgage securities are likely to include unrated
investments that would not qualify for a B-/B3 rating or above.
-- Up to 25% of the Fund's total assets may be invested in subprime
Residential MBS. The Fund's limitation on investments in subprime
Residential MBS applies regardless of credit rating.
-- Up to 25% of the Fund's total assets may be invested in high yield high
risk corporate securities. The Fund's investments in high yield high
risk corporate securities will be principally in instruments that are
rated BB/Ba or B/B.
-- Up to 25% of the Fund's total assets may be invested in non-real estate
related asset-backed securities rated A-/A3 or above. These asset-backed
securities are secured by pools of assets, such as credit card
receivables or automobile loans.
-- Investment grade corporate securities, including debt securities,
convertible securities and preferred stock.
-- Investment grade issues of real estate investment trusts, including debt
securities, convertible securities and preferred stock.
-- Shares of closed-end funds whose principal investments are debt
securities.
-- Up to 15% of the Fund's total assets may be invested in Derivative
Residential Mortgage-Backed Securities ("Derivative RMBS"). Derivative
RMBS means RMBS securities that are specifically designed to have
leveraged exposure to interest rates and have specific designations on
Bloomberg. These securities designations may include interest-only (IO)
and principal-only (PO) stripped mortgage-backed securities, inverse
floaters (INV FLT) and inverse interest-only (IIO) stripped mortgage-
backed securities.
-- Up to 20% of the Fund's total assets may be invested in credit default
swaps and total rate of return swaps subject to a 5% counterparty limit.
-- Up to 10% of the Fund's total assets may be invested in B-Notes and
Mezzanine Loans subject to a 5% issuer limit.
-- Futures Contracts and Related Options and Eurodollar Futures Contracts
and Options on Futures Contracts.
A security is typically rated by rating agencies at issuance and that rating is updated over time. For the purposes of the Fund's guidelines, the ratings that are used for compliance tests are those available at the time of investment based on the available ratings provided by certain nationally recognized statistical rating organizations ("NRSROs") that the Adviser follows or, if not rated by one of those NRSROs, a rating determined to be of comparable quality by the Adviser. If a security's ratings from such NRSROs are varied (i.e., not the same), for purposes of these compliance tests, the Fund will use the highest rating. The Fund may retain any security whose rating has been downgraded after purchase if the Adviser considers the retention advisable. Although the Adviser will consider the credit reports and ratings of certain NRSROs when selecting portfolio securities, such considerations are only part of the overall analysis and research conducted by the Adviser when evaluating potential investments for the Fund.
Helios Total Return Fund, Inc. and Helios Strategic Mortgage Income Fund, Inc. are managed by Brookfield Investment Management Inc., a global investment manager focused on specialized equity and fixed income securities investments. The firm is a subsidiary of Brookfield Asset Management Inc., a global alternative asset manager with approximately $150 billion in assets under management as of September 30, 2011 and a 100-year history of owning and operating assets with a focus on real estate, infrastructure, power and private equity. Brookfield Investment Management Inc. is an SEC-registered investment advisor and with its affiliates, had approximately $21 billion in assets under management as of September 30, 2011. Headquartered in New York, the firm maintains offices and investment teams in Chicago, Boston, London, Hong Kong, Sydney and Toronto.
Additional Information about the Proposed Reorganizations and Where to Find It
This press release is not intended to, and shall not, constitute an offer to purchase or sell shares of any of the Funds; nor is this press release intended to solicit a proxy from any shareholder of any of the Funds. The solicitation of the purchase or sale of securities or of proxies to effect the Reorganization may only be made by a final, effective Registration Statement, which includes a definitive Joint Proxy Statement/Prospectus, after the Registration Statement is declared effective by the Securities and Exchange Commission ("SEC").
This press release references a Registration Statement, which includes a Joint Proxy Statement/Prospectus, to be filed by the Funds. This Registration Statement has yet to be filed with the SEC. After the Registration Statement is filed with the SEC, it may be amended or withdrawn and the Joint Proxy Statement/Prospectus will not be distributed to shareholders of the Funds unless and until the Registration Statement is declared effective by the SEC.
The Funds and their respective directors, officers and employees, and Brookfield Investment Management Inc., and its shareholders, officers and employees and other persons may be deemed to be participants in the solicitation of proxies with respect to the proposed Reorganization. Investors and shareholders may obtain more detailed information regarding the direct and indirect interests of the Funds' respective directors, officers and employees, and Brookfield Investment Management Inc. and its shareholders, officers and employees and other persons by reading the Joint Proxy Statement/Prospectus regarding the proposed reorganizations when it is filed with the SEC.
INVESTORS AND SECURITY HOLDERS OF THE FUNDS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUSES AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED REORGANIZATION. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE FUNDS CAREFULLY. THE JOINT PROXY STATEMENT/PROSPECTUSES WILL CONTAIN INFORMATION WITH RESPECT TO THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE FUNDS AND OTHER IMPORTANT INFORMATION ABOUT THE FUNDS. The Joint Proxy Statement/Prospectus will constitute neither an offer to sell securities, nor will it constitute a solicitation of an offer to buy securities, in any state where such offer or sale is not permitted.
Investors may obtain free copies of the Registration Statement and Joint Proxy Statement/Prospectus and other documents (when they become available) filed with the SEC at the SEC's web site at www.sec.gov. In addition, free copies of each Joint Proxy Statement/Prospectus and other documents filed with the SEC may also be obtained after the Registration Statement becomes effective by directing a request to Brookfield Investment Management at (800) 497-3746.
Forward-Looking Statements
Certain statements made in this news release that are not historical facts are referred to as "forward-looking statements" under the U.S. federal securities laws. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements due to numerous factors. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ from the historical experience of Brookfield Investment Management Inc. and the Funds managed by Brookfield Investment Management Inc. and its present expectations or projections. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Brookfield Investment Management Inc. and the Funds managed by Brookfield Investment Management Inc. undertake no responsibility to update publicly or revise any forward-looking statements.
The Funds use their web site as a channel of distribution of material company information. Financial and other material information regarding the Funds is routinely posted on and accessible at www.brookfieldim.com.
Contacts:
Helios Strategic Mortgage Income Fund, Inc.
Three World Financial Center
200 Vesey Street
New York, NY 10281-1010
(800) 497-3746
Helios Total Return Fund, Inc.
Three World Financial Center
200 Vesey Street
New York, NY 10281-1010
(800) 497-3746
funds@brookfield.com
