As filed with the Securities and Exchange Commission on May 16, 2016

 

Securities Act File No. 333-[   ]
Investment Company Act File No. 811-23157

 

UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, DC 20549

 

FORM N-14

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

o   Pre-Effective Amendment No. o  Post-Effective Amendment No. (Check appropriate box or boxes)

 

BROOKFIELD REAL ASSETS INCOME FUND INC.
(Exact name of registrant as specified in charter)

 

Brookfield Place
250 Vesey Street
New York, New York 10281-1023
(Address of Principal Executive Offices)

 

Telephone Number: (855) 777-8001 (Area Code and Telephone Number)

 

Brian F. Hurley
President
Brookfield Real Assets Income Fund Inc.
Brookfield Place
250 Vesey Street
New York, New York 10281-1023
(Name and Address of Agent for Service)

 

 

Copies to:

 

Alexis I. Rieger, Esq. Brookfield Real Assets Income Fund Inc. Brookfield Place, 250 Vesey Street New York, New York 10281-1023

Michael R. Rosella, Esq. Paul Hastings LLP 200 Park Avenue New York, New York 10166

 

Approximate Date of Proposed Offering:  As soon as practicable after this Registration Statement is declared effective.

 

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

 

Title of Securities Being Registered		Amount Being Registered(1)		Proposed Maximum Offering Price per Unit(1)			Proposed Maximum Aggregate Offering Price(1)			Amount of Registration Fee
Common stock, $0.001 par value per share		40,000		$	25.00		$	1,000,000		$	100.70

 

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(1)                                  Estimated solely for the purpose of calculating the registration fee, pursuant to Rule 457 under the Securities Act of 1933.

 

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

BROOKFIELD MORTGAGE OPPORTUNITY INCOME FUND INC.

BROOKFIELD TOTAL RETURN FUND INC.

BROOKFIELD HIGH INCOME FUND INC.
Brookfield Place
250 Vesey Street
New York, New York 10281-1023

 

(855) 777-8001

 

[ · ], 2016

 

Dear Shareholder:

 

A joint special meeting of shareholders (the “Special Meeting”) of the Brookfield Mortgage Opportunity Income Fund Inc. (“BOI”), the Brookfield Total Return Fund Inc. (“HTR”), and the Brookfield High Income Fund Inc. (“HHY” and together with BOI and HTR, the “Funds,” and each, a “Fund”), each a Maryland corporation, will be held at the offices of Brookfield Investment Management Inc. (“Brookfield”), Brookfield Place, 250 Vesey Street, 15th Floor, New York, New York 10291-1023, on August 5, 2016, at 8:30 a.m., Eastern Time, for the following purposes:

 

·                   The shareholders of each of BOI, HTR and HHY will be asked to consider and vote upon the proposed reorganization of each Fund into the Brookfield Real Assets Income Fund Inc., a newly organized Maryland corporation (“RA Fund”); and

 

·                   The shareholders of BOI and HTR will each be asked to consider and vote upon the appointment of Schroder Investment Management North America Inc. (“SIMNA”) as sub-adviser.

 

The Proposed Reorganizations ( For all Fund shareholders )

 

Brookfield Investment Management Inc. (“Brookfield”) recommended to the Boards of Directors of BOI, HTR and HHY that these Funds be reorganized into a new fund, Brookfield Real Assets Income Fund Inc. The Boards reviewed and considered Brookfield’s proposal in detail and on May 12, 2016, approved the proposed reorganizations. The shareholders of each of BOI, HTR and HHY are being asked to approve agreements and plans of reorganization pursuant to which each Fund will be reorganized into RA Fund (each a “Reorganization” and collectively, the “Reorganizations”).  As noted above, RA Fund is a newly created closed-end management investment company, organized as a Maryland corporation, which seeks to invest primarily in infrastructure, real estate and natural resources (“Real Assets”), fixed income securities and other debt instruments, including corporate credit securities (similar to HHY and securitized mortgage backed securities) (similar to BOI and HTR).  The RA Fund will invest to a lesser extent in equity securities of Real Assets companies.  The investment objectives of RA Fund and the Funds are similar; however, while the investment objectives are similar, there are differences that shareholders of the Funds should consider. As a result of the Reorganizations, shareholders of each of BOI, HTR and HHY will receive newly issued shares of RA. The conversion rate will be based on net asset value of each Fund. Upon the close of the Reorganizations, Brookfield will serve as the investment adviser to RA Fund. The closing of each Reorganization is contingent upon the closing of all of the Reorganizations.

 

The Appointment of a Sub-Adviser ( For BOI and HTR shareholders only )

 

Brookfield currently serves as the investment adviser to both BOI and HTR and each Fund’s portfolio is currently managed by investment professionals in Brookfield’s Securitized Products Investment Team (“SP Investment Team”).  Brookfield recently agreed to sell the SP Investment Team to SIMNA (such acquisition, the “SP Investment Team Transaction”), which is expected to close in the second half of 2016. On May 12, 2016, the Board of Directors of each of BOI and HTR approved a new sub-advisory agreement (“Sub-Advisory Agreement”) with SIMNA.  Shareholders of BOI and HTR are now being asked to approve the Sub-Advisory Agreement with SIMNA, in order for the SP Investment Team to continue managing BOI’s and HTR’s respective securitized product investments (“Securitized Products Allocation”).  It is important to note, that the same portfolio managers currently comprising the SP

 

 

Investment Team are expected to also be in charge of day-to-day portfolio management of the Securitized Products Allocation of the RA Fund.

 

Shareholders are being asked to approve the Sub-Advisory Agreement in the event that the SP Investment Team Transaction closes before the proposed Reorganizations of BOI and/or HTR (as described above) or the proposed Reorganizations are not approved by shareholders. In the event the Reorganizations are not approved, Brookfield will determine and have oversight over the Securitized Products Allocation to be managed by SIMNA and will continue to manage BOI’s and HTR’s respective investments outside of securitized products. The approval of SIMNA as sub-adviser by the respective shareholders of each of BOI and HTR is not contingent upon approval by the other Fund. The appointment of SIMNA as sub-adviser is contingent upon the closing of the SP Investment Team Transaction; if the Transaction does not close, SIMNA will not serve as sub-adviser for BOI or HTR and the SP Investment Team will remain at Brookfield, with Brookfield and the SP Investment Team continuing to manage BOI and HTR.

 

Each of these proposals is described in more detail in the enclosed Joint Proxy Statement/Prospectus.

 

The Board of Directors of each Fund believes each proposal, as applicable, is in the best interests of the respective Fund and shareholders and unanimously recommends that you vote “FOR” each proposal.

 

The enclosed materials explain these proposals in more detail, and I encourage you to review them carefully.  While you are welcome to attend the Special Meeting in person, most shareholders find it more convenient to authorize a proxy to vote their shares.  As a shareholder, your vote is important, and we hope that you will respond today to ensure that your shares will be represented and voted at the Special Meeting.  You may vote in person at the Special Meeting or choose one of the methods below to authorize proxies to vote your shares:

 

·                                           By touch-tone telephone;

 

·                                           By Internet; or

 

·                                           By returning the enclosed proxy card in the postage-paid envelope.

 

If you do not expect to attend the Special Meeting, please complete, sign, date and mail the enclosed proxy card(s) promptly in the accompanying postage-paid envelope, or give your voting instructions by telephone or via the Internet, in order to avoid the expense of additional mailings or having our proxy solicitor, AST Fund Solutions, LLC telephone you, and to ensure that the Special Meeting can be held as scheduled.  Please call [        ] if you have any questions about the Joint Proxy Statement/Prospectus or the proposal(s), or if you would like additional information.

 

As always, we appreciate your support.

 

Sincerely,   Brian F. Hurley President   Brookfield Mortgage Opportunity Income Fund Inc. Brookfield Total Return Fund Inc. Brookfield High Income Fund Inc.

 

Please submit your proxy now.  Your vote is important.

 

To avoid the wasteful and unnecessary expense of further solicitation, we urge you to indicate your voting instructions on the enclosed proxy card(s), date and sign it and return it promptly in the envelope provided,

 

 

or record your voting instructions by telephone or via the Internet, no matter how large or small your holdings may be.  If you authorize a properly executed proxy but do not indicate how you wish your shares of common stock to be voted, your shares will be voted “For” each proposal, as applicable.  If your shares are held through a broker, bank or other nominee, you must provide voting instructions to your broker, bank or other nominee about how to vote your shares in order for your broker, bank or other nominee to vote your shares of common stock at the Special Meeting.

 

[ · ], 2016

 

IMPORTANT NOTICE
TO SHAREHOLDERS OF
BROOKFIELD MORTGAGE OPPORTUNITY INCOME FUND INC.

BROOKFIELD TOTAL RETURN FUND INC.

BROOKFIELD HIGH INCOME FUND INC.

 

QUESTIONS & ANSWERS

 

Although we recommend that you read the entire Joint Proxy Statement/Prospectus, we have provided for your convenience a brief overview of the proposals to be voted on.

 

Q:                                   Why is a special shareholder meeting being held?

 

A:                                    You are receiving the Joint Proxy Statement/Prospectus in connection with a joint special shareholder meeting (the “Special Meeting”) of the Brookfield Mortgage Opportunity Income Fund Inc. (“BOI”), the Brookfield Total Return Fund Inc. (“HTR”), and the Brookfield High Income Fund Inc. (“HHY” and together with BOI and HTR, the “Funds,” and each, a “Fund”), each, a Maryland corporation. The following proposals will be considered and voted upon by shareholders (each, as more particularly described in the Joint Proxy Statement/Prospectus):

 

·                   ( For all Fund shareholders ): The approval of the proposed reorganization of each of BOI, HTR and HHY into the Brookfield Real Assets Income Fund Inc., a newly created closed-end management investment company, organized as a Maryland corporation (“RA Fund”); and

 

·                   ( For BOI and HTR shareholders only ): The approval of the appointment of Schroder Investment Management North America Inc. (“SIMNA”) as sub-adviser.

 

Proposals Regarding the Reorganizations

 

Q:                                   What is being proposed?

 

A:                                    Brookfield Investment Management Inc. (“Brookfield” or the “Adviser”) recommended to the Boards of Directors of BOI, HTR and HHY that these Funds be reorganized into a new fund, RA Fund. On May 12, 2016, The Boards reviewed and considered Brookfield’s proposal in detail and approved the proposed reorganizations. You are being asked to consider and vote upon the reorganization (each, a “Reorganization” and collectively, the “Reorganizations”) of each of BOI, HTR and HHY, respectively (each Fund being referred to herein as a “Target Fund” and together, the “Target Funds”) into Brookfield Real Assets Income Fund Inc. (the “Acquiring Fund” and, together with the Target Funds, each, a “Fund”), a newly-organized closed-end management investment company, organized as a Maryland corporation and managed by Brookfield. The term “Combined Fund” will refer to RA as the surviving fund after the Reorganizations.

 

The closing of each Reorganization is contingent upon the closing of all of the Reorganizations. Because the closing of the Reorganizations is contingent upon all of the Target Funds obtaining the requisite shareholder approvals and satisfying (or obtaining the waiver of) their other closing conditions, it is possible that your Fund’s Reorganization will not occur, even if shareholders of your Fund that are entitled to vote on the Reorganization approve the Reorganization and your Fund satisfies all of its closing conditions, if one or more of the other Funds does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions.  If each of the requisite shareholder approvals is not obtained, each Fund’s Board may take such other actions, as it deems in the best interests of such Fund, including conducting additional solicitations with respect to the proposals or continuing to operate the Fund as a stand-alone Fund.

 

 

If the Reorganizations are consummated, shareholders of the Combined Fund, including former shareholders of the Target Funds, would be subject to the investment objective and investment policies of the Acquiring Fund. The investment objectives of the Acquiring Fund and the Funds are similar; however, while the investment policies, strategies and risks of RA Fund and the Funds share certain similarities, there are differences that shareholders of the Funds should consider. See “Comparison of the Funds” in the Joint Proxy Statement/Prospectus for a comparison of the Funds’ investment objectives and investment policies.

 

Q:                                   Why are the Reorganizations being recommended?

 

A.                                     The Board of each Fund, as applicable, anticipates that the Reorganizations will benefit the shareholders of each Target Fund and the Acquiring Fund and considered the following factors:

 

i.                   Investment Strategy: the RA Fund will pursue a multi-asset, multi-portfolio manager investment strategy that will primarily invest in infrastructure, real estate and natural resources (“Real Assets”) fixed income securities and other debt instruments, including corporate credit securities (similar to HHY) and securitized mortgage backed securities (similar to BOI and HTR). The RA Fund will also invest to a lesser extent in Real Assets equity securities. Brookfield will allocate a portion of the RA Fund’s assets to (i) the Real Assets Credit investment team, which is comprised of investment personnel that currently manage HHY, (ii) the Securitized Products investment team, which is comprised of investment personnel that currently manage BOI and HTR (see further discussion below) and (iii) other portfolio management teams within Brookfield.

 

ii.                Investment Strategy Flexibility : the RA Fund’s multi-asset, multi-portfolio manager approach will allow Brookfield to allocate the RA Fund’s investments across multiple industries and sectors within Real Assets, which may potentially result in more stable income and less volatile returns across market cycles.

 

iii.             Potential for Greater Income, Income Growth, and Capital Appreciation : Brookfield believes that the RA Fund’s investment strategy may create (i) greater income, under current market conditions, (ii) greater income growth potential over time and (iii) greater capital appreciation for the Funds’ shareholders.

 

iv.            Potential for Improved Secondary Market Trading : potentially improved secondary market trading and demand over the long term, as a result of the larger asset size of the new RA Fund.

 

v.               Potential for Operational Cost Savings : the larger asset size of the RA Fund may potentially result in operational cost savings over time.

 

vi.            Costs of Reorganizations Borne by Brookfield : Brookfield will bear direct costs of the Reorganizations.

 

vii.         Expense Cap for Two Years :  Management Fees for the RA Fund will be 1.0% of managed assets, equivalent to management fees of BOI but higher than management fees for HTR and HHY. However, Brookfield has contractually agreed to waive a portion of its fees and/or reimburse expenses for two years following the closing date of the Reorganizations so that the total annual operating expense ratio of the RA Fund will not exceed 1.03% of net assets (excluding the costs of using leverage, brokerage commissions and other transactions, acquired fund fees and expenses, interest, taxes, and extraordinary expenses, such as litigation; and other expenses not incurred in the ordinary course of the RA Fund’s business).  Accordingly, during this two year expense cap period, the RA Fund’s total annual operating expense ratio (exluding, among other things, the cost of leverage) will be approximately equivalent to HTR’s current total annual operating expense ratio and will be below BOI’s and HHY’s current total annual operating expense ratio.

 

Q.                                    How will the Reorganizations affect the fees and expenses of the Funds?

 

A:                                    The contractual advisory fee of the Combined Fund is 1.00% of the Fund’s average daily net assets, plus the amount of any borrowings for investment purposes (“Managed Assets”). The Combined Fund’s

 

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contractual advisory fee is equal to the contractual advisory fee of BOI, but higher than the contractual advisory fee of HTR, which is 0.65% of HTR’s average weekly net assets (excluding financial leverage), and of HHY, which is 0.65% of HHY’s average weekly total assets minus the sum of accrued liabilities (other than the aggregate indebtedness constituting financial leverage).  Brookfield believes that the advisory fee of the Combined Fund is appropriate given the multi-investment strategy of the Combined Fund.

 

The Combined Fund will also pay to the Adviser an administration fee, payable monthly, at an annual rate of 0.15% of the Fund’s average daily Managed Assets. BOI pays the Adviser the same administration fee. HTR pays the Adviser an administration fee, payable monthly, at an annual rate of 0.20% of HTR’s average weekly net assets (excluding financial leverage).  HHY pays the Adviser an administrative fee, payable monthly, at an annual rate of 0.15% of HHY’s average weekly total assets minus the sum of accrued liabilities (other than the aggregate indebtedness constituting financial leverage).

 

The operating expense ratio for the twelve months ended March 31, 2016 on average net assets for the Target Funds (excluding the costs of using leverage, brokerage commissions and other transactions, acquired fund fees and expenses, interest, taxes, and extraordinary expenses, such as litigation; and other expenses not incurred in the ordinary course of each Fund’s business) was 1.73% for BOI, 1.48% for HHY and 1.03% for HTR.

 

Brookfield has agreed to waive its fees and/or reimburse expenses for two years following the closing date of the Reorganizations so that the total annual operating expense ratio on net assets of the Combined Fund (excluding the costs of using leverage, brokerage commissions and other transactions, acquired fund fees and expenses, interest, taxes, and extraordinary expenses, such as litigation; and other expenses not incurred in the ordinary course of the Combined Fund’s business) will not exceed 1.03%, as described above, which represents the lowest operating expense ratio for the twelve months ended March 31, 2016 of the Target Funds. This agreement may not be discontinued prior to the expiration of the two-year period unless authorized by the Board of the Combined Fund or the Combined Fund’s investment advisory agreement terminates. At this time, this agreement is not expected to be continued after the expiration of the two-year period.

 

Q.                                    Will the Reorganizations impact Fund distributions to shareholders?

 

A:                                    In considering the Reorganizations, the Board of each Target Fund took into account information from Brookfield indicating that Brookfield expects that the Reorganizations should result in the same or slightly higher distribution rates based on net asset value for shareholders of each Target Fund (as shareholders of the Combined Fund following the Reorganizations).  The potential for higher distribution rates is due to Brookfield’s expectation that RA Fund should be able to reallocate investments into higher yielding securities and Brookfield plans to allocate a portion of RA’s assets into equity securities that Brookfield believes have income growth potential and the potential for capital appreciation.  Furthermore, Brookfield and the Board of HHY  recently considered and determined that a reduction in HHY’s distribution rate was necessary whether or not HHY was reorganized into RA Fund, because under current market conditions, HHY was not producing enough net income to continue meeting the current distribution rate.  Following the reduction of HHY’s distribution rate Brookfield represented to the Boards of the Target Funds that Brookfield believes that, based on current market conditions, investors in BOI, HTR and HHY should be able to receive a higher distribution rate from RA Fund than they are currently receiving as investors in the Target Funds, based on current net asset values of the Target Funds.     In addition, as discussed above and in more detail below, Brookfield is also proposing to cap the total annual operating expense ratio (excluding the costs of leverage and certain other costs as discussed below) of the Combined Fund at 1.03% for two years following the closing date of the Reorganizations, which will enable the Combined Fund to have more net income available for distributions in those years.

 

The Combined Fund intends to make its first distribution to shareholders in the month immediately following the Reorganizations so there is no gap in distribution payments.  In addition, the Combined Fund

 

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expects to follow the same frequency of payments as the Target Funds and make monthly distributions to shareholders.

 

Q:                                   What happens if shareholders of one Target Fund do not approve its Reorganization but shareholders of the other Target Funds approve their Reorganizations?

 

A:                                    The closing of each Reorganization is contingent upon the closing of all of the Reorganizations.  Because the closing of the Reorganizations is contingent upon all of the Target Funds obtaining the requisite shareholder approvals and satisfying (or obtaining the waiver of) their other closing conditions, it is possible that your Fund’s Reorganization will not occur, even if shareholders of your Fund that are entitled to vote on the Reorganization approve the Reorganization and your Fund satisfies all of its closing conditions, if one or more of the other Funds does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions.  If each of the requisite shareholder approvals is not obtained, each Fund’s Board may take such actions as it deems in the best interests of such Fund, including conducting additional solicitations with respect to the proposals or continuing to operate the Fund as a stand-alone fund. The Reorganizations are not contingent on whether the SP Investment Team Transaction closes. However, if the SP Investment Team Transaction does not close, SIMNA will not serve as sub-adviser of the Combined Fund.

 

Q:                                   How similar are the Funds?

 

A:                                    Each Fund is a Maryland corporation and a diversified closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”).  The Board of each Fund consists of the same directors.  Each Target Fund’s shares of common stock are listed on the New York Stock Exchange (“NYSE”) and upon the closing of the Reorganizations, it is expected that shares of common stock of RA Fund will be listed on the NYSE.  The Funds have the same investment adviser and administrator and the RA Fund will be managed by a team of portfolio managers that is currently responsible for day-to-day oversight of the Funds.

 

Investment Objectives:

 

·                                           BOI’s investment objective is to provide high total investment return by providing a high level of current income and the potential for capital appreciation.

 

·                                           HTR’s investment objective is to provide high total return, including short- and long-term capital gains and a high level of current income, through the management of portfolio securities.

 

·                                           HHY’s investment objective is to seek high current income. HHY also seeks capital growth as a secondary objective to the extent consistent with its primary objective of seeking high current income.

 

·                                           RA’s investment objective will be to seek high total return, through current income and growth of capital.

 

The investment objectives of RA Fund and the Funds are similar, however, there are certain differences. Brookfield believes that RA’s investment strategy may create (i) greater income, under current market conditions, (ii) greater income growth potential over time and (iii) greater capital appreciation for the Funds’ shareholders.

 

RA’s and BOI’s investment objectives are not fundamental and may be changed by each Fund’s Board without shareholder approval. HTR’s and HHY’s investment objectives are fundamental and may not be changed without approval by the holders of a majority (as defined in the 1940 Act) of each Fund’s outstanding voting securities.

 

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Principal Investment Strategies:

 

RA Fund seeks to achieve its investment objective by investing primarily in the securities and other instruments of Real Asset companies and issuers, which includes the following categories:

 

·                   Real Estate;

 

·                   Infrastructure; and

 

·                   Natural Resources (collectively, “Real Asset Companies and Issuers”).

 

Under normal market conditions, RA Fund will invest at least 80% of its Managed Assets in the securities and other instruments of Real Asset Companies and Issuers (the “80% Policy”). RA may change the 80% Policy without shareholder approval upon at least 60 days’ prior written notice to shareholders.

 

RA normally expects to invest at least 65% of its Managed Assets in fixed income securities of Real Asset Companies and Issuers and in derivatives and other instruments that have economic characteristics similar to such securities. RA Fund actively trades portfolio securities. RA may invest in securities of companies or issuers of any size market capitalization.  RA will invest in companies or issuers located throughout the world and there is no limitation on RA’s investments in foreign securities or instruments or in emerging markets.  RA has flexibility in the relative weightings given to each of the Real Asset categories. In addition, RA Fund may, in the future, invest in additional Real Asset investment categories other than those listed herein, to the extent consistent with its name. RA Fund may invest without limit in investment grade and below investment grade, high yield fixed income securities (commonly referred to as “junk bonds”)). RA Fund may also invest in restricted (“144A”) or private securities, asset-backed securities (“ABS”), including mortgage-related debt securities and other mortgage-related instruments (collectively, “Mortgage-Related Investments”), collateralized loan obligations, bank loans (including participations, assignments, senior loans, delayed funding loans and revolving credit facilities), exchange-traded notes, and securities issued and/or guaranteed by the U.S. Government, its agencies or instrumentalities or sponsored corporations. RA Fund considers Mortgage-Related Investments to consist of, but not be limited to, mortgage-backed securities (“MBS”) of any kind; interests in loans and/or whole loan pools of mortgages, loans or other instruments used to finance long-term infrastructure, industrial projects and public services; mortgage REITs; ABS that are backed by interest in real estate, land or assets; and securities and other instruments issued by mortgage servicers. RA’s investments in MBS may include Residential Mortgage-Backed Securities (“RMBS”) or Commercial Mortgage-Backed Securities (“CMBS”). RA Fund may invest in fixed income securities of any maturity. The securities RA Fund may invest in may have fixed, floating or variable rates.

 

RA Fund may also invest up to 35% of its Managed Assets in equities, including common stock, preferred stock, convertible stock, and open-end and closed-end investment companies, subject to any applicable regulatory limits, including exchange-traded funds. RA Fund may invest up to 20% of its Managed Assets in fixed income securities other than those of Real Asset Companies and Issuers, including in Treasury Inflation Protected Securities (“TIPS”) and other inflation-linked fixed income securities.

 

The Adviser will determine RA’s strategic allocation with respect to its equity and fixed income investments as well as its strategic allocation with respect to its investment sub-portfolios.

 

BOI

 

BOI seeks to achieve its investment objective by investing primarily in Mortgage-Related Investments. Under normal market conditions, as a principal strategy, at least 80% of the Fund’s Managed Assets will be invested in Mortgage-Related Investments. The Fund normally expects to invest at least 50% of its Managed Assets in Mortgage-Related Investments tied to residential mortgages. Exposure to Mortgage-Related Investments through derivatives may be considered investments in Mortgage-Related Investments for purposes of these policies. The Fund may invest in securities of any credit quality, including securities that are unrated with respect to Mortgage-Related Investments.

 

HTR

 

Under normal market conditions, HTR invests at least 40% of its total assets in the following:

 

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·                   Securities issued and/or guaranteed by the U.S. government or one of its agencies or instrumentalities;

 

·                   RMBS and CMBS rated BBB-and above;

 

·                   Up to 25% of the Fund’s total asset may be invested in real estate related asset-backed securities rated BBB-and above; and

 

·                   Cash

 

HTR may invest the remaining 60% of its 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 RMBS. The Fund’s limitation on investment in subprime RMBS 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; and

 

·                   Futures Contracts and Related Options and Eurodollar Futures Contracts and Options on Futures Contracts.

 

HTR will normally invest at least 25% of its total assets in privately issued mortgage backed securities.

 

HHY, under normal market conditions, will invest at least 65% of its total assets in high yield bonds, debentures, notes, corporate loans, convertible debentures, and other debt instruments rated below investment grade (lower than Baa by Moody’s or lower than BBB by S&P, or comparably rated by another rating agency, or unrated but determined by the Adviser to be of comparable quality (collectively, “High Yield Obligations”) (also known as “junk bonds”)). Except with respect to up to 10% of its total assets, the debt securities purchased by the Fund will be rated, at the time of investment, at least CCC (or a comparable rating) by at least one Rating Agency or, if unrated, determined by the Adviser to be of comparable quality.

 

vi

 

Each Fund is authorized by its investment policies to use certain types of leverage. The Acquiring Fund currently intends to use leverage to achieve its investment objective. The Acquiring Fund currently anticipates obtaining leverage to seek to enhance the yield and net asset value of its common stock, through reverse repurchase agreements, borrowings from banks and/or other financial institutions, and the issuance of debt securities or shares of preferred stock. Although the Acquiring Fund may issue preferred shares or debt securities, it has no current intention to do so during its first year of operations. Each of BOI and HTR may utilize leverage to seek to enhance the yield and net asset value of its common stock, through reverse repurchase agreements, borrowings from banks and/or other financial institutions, and the issuance of debt securities or shares of preferred stock. HHY may utilize financial leverage through borrowings, the issuance of debt securities, or the issuance of preferred shares or through other transactions, such as reverse repurchase agreements, which have the effect of financial leverage. BOI and HTR each currently employ leverage through the use of reverse repurchase agreements, while HHY currently employs leverage through the use of bank borrowings.

 

See “Comparison of the Funds” in the Joint Proxy Statement/Prospectus for a comparison of the Funds’ investment strategies.

 

Q:                                   Are you concerned about the recent volatility in the high yield sector?

 

A:                                    The high yield market experienced a challenging 2015 bottoming in the early part of 2016. Lower energy and commodity prices have placed some producers under pressure resulting in rising default rates. Coupled with year-end concerns over Federal Reserve tightening and liquidity problems in certain focused credit funds, the market created what we consider to be attractive opportunities for investors skilled in evaluating credit. We believe valuation levels are attractive, particularly in certain sectors, making this a particularly opportune time to invest.

 

In keeping with Brookfield’s 100+ year history of owning, operating, and investing in long-lived assets, we take a long-term fundamental approach to the credit markets without undue focus on short term results. While we believe the investment strategies of BOI, HTR and HHY can, and have, provided investors with attractive investment opportunities over the last several years, we believe that we can offer investors a superior investment return with the expanded opportunity set offered by the multi-asset, multi-manager investment strategy of RA.

 

We believe RA’s investment strategy will harness the investment advantages of infrastructure, natural resources, and real estate to deliver superior risk adjusted yields and returns than the Target Funds.

 

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Q:                                   Do you rely on rating agency ratings?

 

A:                                    While we do consider credit ratings supplied by third party rating agencies, we believe that Brookfield’s internal credit research, analysis and review process allows us to assess the true intrinsic value and risk of a particular credit, and this internal review process generally drives our investment decisions.

 

Q:                                   Who will manage RA’s portfolio?

 

A:                                    RA will be managed by Brookfield and the following individuals will be jointly and primarily responsible for the day-to-day management of RA’s portfolio: Craig Noble, CFA and Larry Antonatos. Messrs. Noble and Antonatos are vested with the authority to adjust the strategic allocation of assets between RA’s fixed income and equity sub-portfolios. A sub-portfolio refers to the portion of RA’s assets that are allocated to, and managed by, particular portfolio managers on RA’s portfolio management team. Dana Erikson, CFA and Mark Shipley, CFA, will be jointly and primarily responsible for the day-to-day management of RA’s real asset debt and corporate credit investment sub-portfolio. Michelle Russell-Dowe is the lead portfolio manager and Jeffrey Williams, CFA and Anthony A. Breaks, CFA, are the co-portfolio managers and each will be jointly and primarily responsible for the day-to-day management of RA’s securitized products sub-portfolio. If the SP Investment Team Transaction closes, SIMNA will serve as a sub-adviser to RA Fund and it is expected that Ms. Russell-Dowe and Messrs. Williams and Breaks will provide portfolio management services as employees of SIMNA. With respect to RA’s equity investments, Messrs. Noble and Antonatos will be jointly and primarily responsible for the day-to-day management of RA’s equity sub-portfolios. It is important to note that either individually or collectively, these are the same investment professionals that are currently responsible for overseeing the Funds.  As a result, shareholders of the Combined Fund will benefit from the experience and expertise which they have come to rely on.

 

In making its asset allocation decisions, Brookfield will utilize a fundamental, bottom-up, value-based selection methodology, taking into account short-term considerations, such as temporary mispricing, and long-term considerations, such as values of assets and cash flows.  Brookfield will also draw upon the expertise and knowledge within Brookfield Asset Management Inc. (“BAM”) and its affiliates, which provides extensive owner/operator insights into industry drivers and trends.  BAM is a global alternative assets manager with approximately $225 billion in assets under management as of December 31, 2015 and over 100 years of experience owning and operating Real Assets, including property, infrastructure, renewable energy, timberland and agricultural lands.  Brookfield takes a balanced approach to investing, seeking to mitigate risk through diversification, credit analysis, economic analysis and review of sector and industry trends.

 

See “Management of the Funds — Portfolio Management” in the Joint Proxy Statement/Prospectus for more information on RA’s portfolio management.

 

Q:                                   How will the Reorganizations be effected?  As a shareholder in BOI, HTR and/or HHY will I receive the aggregate net asset value of my shares?

 

A:                                    Assuming each Target Fund’s shareholders approve their Fund’s Reorganization, each of BOI, HTR and HHY will transfer all of its assets to RA Fund in exchange for shares of common stock of RA, and the assumption by RA of all of the liabilities of each of BOI, HTR and HHY. Thereafter, each of BOI, HTR and HHY will be dissolved in accordance with Maryland law, its charter and bylaws and the 1940 Act.

 

Shareholders of BOI, HTR and HHY :  You will become a shareholder of RA Fund.  Holders of shares of common stock of BOI, HTR and HHY will receive newly issued shares of common stock of RA Fund, $0.001 par value per share, the aggregate net asset value (not the market value) of which will equal the aggregate net asset value (not the market value) of the shares of common stock of BOI, HTR and HHY you held immediately prior to the Reorganizations (although shareholders will receive cash for fractional shares).

 

Q:            Will there be any significant portfolio turnover in connection with the Reorganization?

 

A:                                    The Acquiring Fund has a broad and flexible mandate that permits investments in many types of securities that the Target Funds may hold, as well as other types of securities that are not eligible for investment by the Target Funds. Under current market conditions, it is expected that up to approximately 40% of the

 

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securities held by BOI, up to approximately 50% of the securities held by HTR, and up to approximately 5% of the securities held by HHY, may be sold in connection with the Reorganizations as RA’s portfolio managers seek to fully align or reposition the portfolio with RA’s broader investment guidelines. Brookfield expects that such repositioning will create income growth potential and increase capital appreciation potential for the Combined Fund.  RA’s portfolio managers expect that the majority (i.e., more than fifty percent (50%)) of the repositioning of each Target Fund will occur in the first six months following the Reorganizations. A portion of the repositioning, however, may take place before the closing of the Reorganizations while certain repositioning may take as long as two years following the Reorganizations, depending upon market conditions and the liquidity of certain securities. RA’s portfolio managers do not expect the repositioning to result in significant transaction costs, other than bid-ask spread, because most of the repositioning will involve the sale of fixed income securities where the transaction costs are built into the price of such securities. To the extent there are transaction costs, other than bid-ask spread, associated with portfolio repositioning prior to the Reorganizations, such costs will be borne by the respective Target Funds. To the extent there are transaction costs associated with portfolio repositioning after the Reorganizations, such costs will be borne by the Combined Fund shareholders.

 

Q:                                   Will I have to pay any fees or expenses in connection with the Reorganizations?

 

A:                                    No.  The Adviser is paying for the costs associated with the proposed Reorganizations, including the costs associated with the Special Meeting.  Such costs are estimated to be approximately $700,000.

 

A shareholder’s broker, dealer or other financial intermediary (each, a “Financial Intermediary”) may impose its own shareholder account fees for processing corporate actions which could be applicable as a result of the Reorganizations.  These shareholder account fees, if applicable, are not paid or otherwise remitted to the Target Funds or the Adviser.  The imposition of such fees is based solely on the terms of a shareholder’s account agreement with his, her or its Financial Intermediary and/or is in the discretion of the Financial Intermediary.  Questions concerning any such shareholder account fees for corporate actions should be directed to a shareholder’s Financial Intermediary.

 

Q:                                   Will I have to pay any federal taxes as a result of the Reorganizations?

 

A:                                    Each Reorganization is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).  If a Reorganization so qualifies, in general, shareholders of each Target Fund will recognize no gain or loss for federal income tax purposes in connection with a Reorganization.

 

On or prior to the closing date of the transactions with respect to the Reorganizations (the “Closing Date”), each Target Fund’s Board will authorize and each Target Fund will declare a distribution to its shareholders that, together with all previous distributions, will have the effect of distributing to each Target Fund’s shareholders all of its investment company taxable income (computed without regard to the deduction for dividends paid), if any, through the Closing Date, all of its net capital gains, if any, through the Closing Date, and such portion of its net tax-exempt interest income as is necessary to ensure that each Target Fund maintains its regulated investment company status at all times up to and including the Closing Date.  Such a distribution may be taxable to each Target Fund’s shareholders for federal income tax purposes.  In addition, to the extent that portfolio securities of a Target Fund are sold in connection with a Reorganization prior to such Reorganization closing, such Target Fund may realize gains or losses, which may increase or decrease the net capital gain or net investment income to be distributed by such Target Fund. The Funds’ shareholders should consult their own tax advisers regarding the federal income tax consequences of the Reorganizations, as well as the effects of state, local and non-U.S. tax laws, including possible changes in tax laws.

 

As a result of the Reorganizations, the Target Funds will lose/forfeit approximately $77 million of capital loss carryforwards due to the tax loss limitation rules.  Each Fund’s Board considered the ability of each Fund to fully utilize its existing capital loss carryforwards and the likelihood of the Fund generating enough gains to utilize those losses in the relevant time period.

 

ix

 

Q:                                   What is the timetable for the Reorganizations?

 

A:                                    If the shareholder voting and other conditions to closing are satisfied (or waived), the Reorganizations are expected to take effect in the third quarter of 2016.

 

Q:                                   Why are the Reorganizations not Contingent on the Closing of the SP Investment Team Transaction?

 

A:                                    Brookfield believes the Reorganizations are in the best interests of the Funds and their shareholders as discussed above. Brookfield believes the Funds should be combined even if the SP Investment Team does not move to SIMNA.

 

Proposal Regarding the Appointment of SIMNA as Sub-Adviser to BOI and HTR

 

Q:                                   Why is a sub-adviser being appointed for BOI and HTR?

 

A:                                    Brookfield currently serves as the investment adviser to both BOI and HTR and each Fund’s portfolio is currently managed by portfolio managers in Brookfield’s Securitized Products Investment Team (“SP Investment Team”).  Brookfield recently agreed to sell the SP Investment Team to SIMNA (such acquisition, the “SP Investment Team Transaction”), which is expected to close in the second half of 2016. On May 12, 2016, the Board of Directors of each of BOI and HTR approved a new sub-advisory agreement (“Sub-Advisory Agreement”) with SIMNA.  Shareholders of BOI and HTR are now being asked to approve the Sub-Advisory Agreement with SIMNA, in order for the SP Investment Team to continue managing BOI’s and HTR’s respective securitized investments (“Securitized Products Allocation”). It is important to note, that the same investment professionals currently comprising the SP Investment Team are expected to also be in charge of day-to-day portfolio management of the Securitized Products Allocation of the RA Fund.

 

Shareholders are being asked to approve the Sub-Advisory Agreement in the event that the SP Investment Team Transaction closes before the proposed Reorganizations of BOI and/or HTR (as described above) or the proposed Reorganizations are not approved by shareholders. In the event the Reorganizations are not approved, Brookfield will determine and have oversight over the Securitized Products Allocation to be managed by SIMNA and will continue to manage BOI’s and HTR’s respective investments outside of securitized products. The approval of SIMNA as sub-adviser by the respective shareholders of each of BOI and HTR is not contingent upon approval by the other Fund. The appointment of SIMNA as sub-adviser is contingent upon the closing of the SP Investment Team Transaction; if the Transaction does not close, SIMNA will not serve as sub-adviser for BOI or HTR and the SP Investment Team will remain at Brookfield, with Brookfield and the SP Investment Team continuing to manage BOI and HTR.

 

Q:                                   Why did Brookfield decide to sell its SP Investment Team to SIMNA?

 

A:                                    Brookfield decided that it no longer wanted to offer its clients a stand-alone securitized products investment strategy. Although Brookfield decided it no longer wants to support a stand-alone securitized products investment strategy, Brookfield believes securitized products can still serve a role in a Real Assets investment strategy, particularly in a closed-end fund structure. Brookfield and the SP Investment Team agreed that given Brookfield’s desire to focus on Real Assets, Brookfield and the SP Investment Team would benefit from the sale of the SP Investment Team to SIMNA. As discussed above, Brookfield believes BOI and HTR shareholders will benefit from an investment strategy that will more broadly invest in Real Assets companies and issuers. Brookfield, BOI and HTR would continue to benefit from the investment expertise of the SP Investment Team via the sub-advisory relationship, Brookfield would no longer have the internal costs of supporting the SP Investment Team and the SP Investment Team expects to benefit from the SIMNA platform and the opportunities the SIMNA platform may provide in raising assets for the SP Investment Team through both a stand-alone securitized products investment strategy, as well as through multi-sector channels.

 

x

 

Q:                                   Who will manage the Funds if the Sub-Advisory Agreements are approved?

 

A:                                    If the Sub-Advisory Agreements are approved, and in the event that the SP Investment Team Transaction closes before the proposed reorganizations of BOI and HTR (described above) or the proposed reorganizations are not approved by shareholders, Brookfield will continue to serve as the investment adviser of the Funds, while SIMNA will serve as the sub-adviser with respect to the Securitized Products Allocation of each Fund and Brookfield will have oversight responsibilities over the Securitized Products Allocation managed by SIMNA. As investment adviser, Brookfield will determine the Securitized Products Allocation to be managed by the SIMNA and will continue to manage BOI’s and HTR’s respective investments outside of securitized products and will have oversight responsibilities over the Securitized Products Allocation managed by SIMNA. Messrs. Noble and Antonatos will be vested with the authority to adjust the strategic allocation of assets within each of BOI and HTR.  Dana Erikson, CFA, and Mark Shipley, CFA, of Brookfield, will now serve as portfolio managers of BOI and HTR with respect to each Fund’s investments outside of securitized products and will have investment discretion over such investments. The Boards of BOI and HTR urge you to authorize a proxy to vote your shares without delay in order to avoid disruption to your Fund’s operations.

 

Q:                                   Will the appointment of a sub-adviser increase the fees and expenses of BOI and HTR?

 

A:                                    No. For BOI, the Sub-Advisory Agreement provides that the Adviser will pay SIMNA a monthly fee, computed and accrued daily, based on an annual rate of 0.32% of the Securitized Products Allocation of BOI’s average daily Managed Assets. For HTR, the Sub-Advisory Agreement provides that the Adviser will pay SIMNA a monthly fee, computed and accrued weekly, based on an annual rate of 0.32% of the Securitized Products Allocation of HTR’s average weekly net assets (excluding financial leverage). Because Brookfield will pay SIMNA out of its own fees received from each Fund, there is no “duplication” of advisory fees paid. There will be no increase in advisory fees to either Fund or their shareholders in connection with the appointment of SIMNA as sub-adviser.

 

Q:                                   Will I have to pay any fees or expenses in connection with the appointment of SIMNA as Sub-Adviser?

 

A:                                    No. The costs associated with the appointment of SIMNA as Sub-Adviser, including the costs associated with the Special Meeting related thereto, will be borne by Brookfield.

 

Q:                                   What will happen if shareholders of BOI and HTR approve the Sub-Advisory Agreement?

 

A:                                    If shareholders of BOI and HTR approve the Sub-Advisory Agreements, and the SP Investment Team Transaction closes, SIMNA will serve as sub-adviser of BOI and HTR with respect to each Fund’s Securitized Products Allocation until the approval of the Reorganizations, or indefinitely, if the Reorganizations are not approved and Brookfield will have oversight responsibilities over the Securitized Products Allocation managed by SIMNA. If shareholders of BOI and HTR approve the Sub-Advisory Agreements, but the SP Investment Team Transaction does not close, SIMNA will not serve as sub-adviser for BOI or HTR and the SP Investment Team will remain at Brookfield, with Brookfield continuing to serve as investment adviser. In such case, Brookfield may consider other alternatives, including another strategic sale of its SP Investment Team, the appointment of a different sub-adviser, or the sale, reorganization or liquidation of the Funds.

 

Q:                                   What will happen if shareholders of BOI and HTR do not approve the Sub-Advisory Agreement?

 

A:                                    If shareholders of BOI and HTR have not approved the Sub-Advisory Agreements by the time the SP Investment Team Transaction closes and the Reorganizations have not been approved by each Fund, Brookfield, in reliance on previously published no-action relief granted by the staff of the U.S. Securities and Exchange Commission, may seek to appoint SIMNA to serve as sub-adviser of BOI and HTR with respect to the Securitized Products Allocation of each Fund, respectively, on an interim basis until the earlier of the approval by shareholders of BOI and HTR of the Sub-Advisory Agreements, or the

 

xi

 

Reorganizations. If shareholders of BOI and HTR do not approve the Sub-Advisory Agreements, SIMNA will not serve as sub-adviser of the Funds and Brookfield will continue to manage the portfolios for BOI and HTR until the approval of the Reorganizations, which are not contingent upon whether the SP Investment Team Transaction closes, or indefinitely, if the Reorganizations are not approved and the SP Investment Team Transaction does not close. In the latter case, Brookfield may consider other alternatives, including another strategic sale of its SP Investment Team, the appointment of a different sub-adviser, or the sale, reorganization or liquidation of the Funds.

 

Q:                                   What happens if shareholders of one Fund (e.g., BOI) do not approve the Sub-Advisory Agreement but shareholders of the other Fund (e.g., HTR) approve the Sub-Advisory Agreement?

 

A:                                    The approval of each Sub-Advisory Agreement by the respective shareholders of BOI and HTR is not contingent upon approval of the other Fund. If shareholder approval of the Sub-Advisory Agreement by one Fund is not obtained, Brookfield will continue to serve as that Fund’s investment adviser until the Reorganizations are approved. If the Reorganizations are not approved, Brookfield and the Board may consider other alternatives with respect to such Fund, as discussed above.

 

General

 

Q:                                   How does the Board of my Fund suggest that I vote?

 

A:                                    After careful consideration, the Board of each Fund unanimously recommends that you vote “FOR” each of the items proposed for your Fund.

 

Q:                                   How do I authorize a proxy to vote my shares or vote at the Special Meeting?

 

A:                                    You may authorize your proxy by mail, phone or Internet or vote in person at the Special Meeting.  To authorize your proxy by mail, please mark your vote on the enclosed proxy card and sign, date and return the card in the postage-paid envelope provided.  If you choose to authorize your proxy by phone or Internet, please refer to the instructions found on the proxy card accompanying this Joint Proxy Statement/Prospectus.  To authorize your proxy by phone or Internet, you will need the “control number” that appears on the proxy card.  You may vote in person at the Special Meeting by attending in person and filling out a ballot.

 

Q:                                   Can I revoke my proxy?

 

A:                                    Yes, if your shares of common stock are held in your name, you can revoke your proxy by: filing written notice of revocation before the Special Meeting with AST Fund Solutions, LLC, at the address shown on the front of this Joint Proxy Statement/Prospectus; signing a proxy bearing a later date; or voting in person at the Special Meeting.  Attendance at the Special Meeting will not, by itself, revoke a proxy.  If your shares of common stock are held in the name of your broker, bank or other nominee, please follow the instructions provided by the holder of your common stock regarding how to revoke your proxy.

 

Q:                                   Whom do I contact for further information?

 

A:                                    You may contact your financial advisor for further information.  You may also call AST Fund Solutions, LLC, the Funds’ proxy solicitor, at [    ].

 

Please authorize your proxy now.  Your vote is important.

 

To avoid the wasteful and unnecessary expense of further solicitation, we urge you to indicate your voting instructions on the enclosed proxy card(s), date and sign it and return it promptly in the envelope provided, or record your voting instructions by telephone or via the Internet, no matter how large or small your holdings may be.  If you submit a properly executed proxy but do not indicate how you wish your shares of common stock to be voted, your shares will be voted “FOR” each Proposal, as applicable.  If your shares are

 

xii

 

held through a broker, you must provide voting instructions to your broker about how to vote your shares in order for your broker to vote your shares of common stock at the Special Meeting.

 

xiii

 

[ · ], 2016

BROOKFIELD MORTGAGE OPPORTUNITY INCOME FUND INC.

BROOKFIELD TOTAL RETURN FUND INC.

BROOKFIELD HIGH INCOME FUND INC.
Brookfield Place, 250 Vesey Street
New York, New York 10281-1023

 

NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 5, 2016

 

Notice is hereby given that a joint special meeting of shareholders (the “Special Meeting”) of Brookfield Mortgage Opportunity Income Fund Inc. (“BOI”), Brookfield Total Return Fund Inc. (“HTR”), and Brookfield High Income Fund Inc. (“HHY,” and together with BOI and HTR, the “Funds”), each a Maryland corporation, will be held at the offices of Brookfield Investment Management Inc., Brookfield Place, 250 Vesey Street, 15th Floor, New York, New York 10281-1023, on August 5, 2016, at 8:30 a.m., Eastern Time, for the following purposes:

 

1.               The Proposed Reorganizations of the Funds ( For all Fund shareholders )

 

Shareholders of BOI:

 

Proposal 1(A):  The shareholders of BOI are being asked to consider and vote upon an Agreement and Plan of Reorganization between BOI and Brookfield Real Assets Income Fund Inc. (“RA Fund”) (the “BOI Reorganization Agreement”) and the transactions contemplated thereby, including, among other things: (i) the transfer by BOI of all of its assets to RA in exchange solely for newly issued shares of common stock of RA Fund, and RA’s assumption of all of the liabilities of BOI; (ii) the distribution of such newly issued shares of common stock of RA Fund to the common shareholders of BOI (with cash being distributed in lieu of fractional shares of common stock); and (iii) the liquidation, dissolution and termination of BOI in accordance with applicable law.

 

Shareholders of HTR:

 

Proposal 1(B):  The shareholders of HTR are being asked to consider and vote upon an Agreement and Plan of Reorganization between HTR and RA (the “HTR Reorganization Agreement”) and the transactions contemplated thereby, including, among other things: (i) the transfer by HTR of all of its assets to RA Fund in exchange solely for newly issued shares of common stock of RA Fund, and RA’s assumption of all of the liabilities of HTR; (ii) the distribution of such newly issued shares of common stock of RA Fund to the common shareholders of HTR (with cash being distributed in lieu of fractional shares of common stock); and (iii) the liquidation, dissolution and termination of HTR in accordance with applicable law.

 

Shareholders of HHY:

 

Proposal 1(C):  The shareholders of HHY are being asked to consider and vote upon an Agreement and Plan of Reorganization between HHY and RA Fund (the “HHY Reorganization Agreement”) and the transactions contemplated thereby, including, among other things: (i) the transfer by HHY of all of its assets to RA Fund in exchange solely for newly issued shares of common stock of RA Fund, and RA’s assumption of all of the liabilities of HHY; (ii) the distribution of such newly issued shares of common stock of HHY to the common shareholders of HHY (with cash being distributed in lieu of fractional shares of common stock); and (iii) the liquidation, dissolution and termination of HHY in accordance with applicable law.

 

2.               Appointment of a Sub-Adviser (For BOI and HTR shareholders only)

 

Shareholders of BOI:

 

Proposal 2(A): The shareholders of BOI are being asked to consider and vote upon an investment sub-advisory agreement among Brookfield Investment Management Inc., BOI and Schroder Investment Management North America Inc.

 

xiv

 

Shareholders of HTR:

 

Proposal 2(B): The shareholders of HTR are being asked to consider and vote upon an investment sub-advisory agreement among Brookfield Investment Management Inc., HTR and Schroder Investment Management North America Inc.

 

3.               Other Business. For each Fund, to transact such other business as may properly come before the Special Meeting.

 

Shareholders of record of each of BOI, HTR and HHY as of the close of business on May 18, 2016, are entitled to notice of and to vote at the Special Meeting or any adjournment or postponement thereof.

 

THE BOARD OF DIRECTORS (EACH, A “BOARD” OR “BOARD OF DIRECTORS”) OF EACH OF BOI, HTR AND HHY REQUESTS THAT YOU AUTHORIZE PROXIES TO VOTE YOUR SHARES BY INDICATING YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD(S), DATING AND SIGNING SUCH PROXY CARD(S) AND RETURNING IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES, OR BY RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET.

 

THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS THAT YOU CAST YOUR VOTE:

 

·                                           FOR YOUR FUND’S REORGANIZATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, AMONG OTHER THINGS: (1) THE TRANSFER BY YOUR FUND OF ALL ASSETS TO RA IN EXCHANGE SOLELY FOR NEWLY ISSUED SHARES OF COMMON STOCK OF RA, AND RA’S ASSUMPTION OF ALL LIABILITIES OF YOUR FUND; (2) THE DISTRIBUTION OF SUCH NEWLY ISSUED SHARES OF COMMON STOCK OF RA TO THE COMMON SHAREHOLDERS OF YOUR FUND; AND (3) THE LIQUIDATION, DISSOLUTION AND TERMINATION OF YOUR TARGET FUND IN ACCORDANCE WITH APPLICABLE LAW.

 

THE BOARD OF EACH OF BOI AND HTR UNANIMOUSLY RECOMMENDS THAT YOU CAST YOUR VOTE:

 

·                   FOR THE APPROVAL OF AN INVESTMENT SUB-ADVISORY AGREEMENT AMONG BROOKFIELD INVESTMENT MANAGEMENT INC., BOI / HTR AND SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC.

 

IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT YOU MAIL YOUR PROXY CARD(S) OR RECORD YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET PROMPTLY.

 

For the Boards of Directors of

Brookfield Mortgage Opportunity Income Fund Inc.

Brookfield Total Return Fund Inc.

Brookfield High Income Fund Inc.

 

ALEXIS I. RIEGER

Secretary

 

Brookfield Mortgage Opportunity Income Fund Inc.

Brookfield Total Return Fund Inc.

Brookfield High Income Fund Inc.

 

xv

 

YOUR VOTE IS IMPORTANT.

 

PLEASE AUTHORIZE YOUR PROXY TO VOTE BY PROMPTLY SIGNING AND
RETURNING THE ENCLOSED PROXY CARD(S) OR BY RECORDING YOUR VOTING
INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET, NO MATTER HOW
MANY SHARES YOU OWN.

 

xvi

 

The information contained in this Joint Proxy Statement/Prospectus is not complete and may be changed.  We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion, dated [ · ], 2016

 

JOINT PROXY STATEMENT/PROSPECTUS
BROOKFIELD MORTGAGE OPPORTUNITY INCOME FUND INC.

BROOKFIELD TOTAL RETURN FUND INC.

BROOKFIELD HIGH INCOME FUND INC.

AND

BROOKFIELD REAL ASSETS INCOME FUND INC.

(EACH, A “FUND” AND COLLECTIVELY, THE “FUNDS”)

 

Brookfield Place
250 Vesey Street
New York, New York 10281-1023
(855) 777-8001

 

JOINT SPECIAL MEETING OF SHAREHOLDERS

 

[ · ], 2016

 

This Joint Proxy Statement/Prospectus is furnished to you as a common shareholder of Brookfield Mortgage Opportunity Income Fund Inc. (“BOI”), Brookfield Total Return Fund Inc. (“HTR”), and Brookfield High Income Fund Inc. (“HHY”), each a Maryland corporation and a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”).  This Joint Proxy Statement/Prospectus is being furnished in connection with the solicitation of proxies by the Board of Directors (each, a “Board” or “Board of Directors” and collectively, the “Boards”) of each Fund for a joint special meeting (the “Special Meeting”) of shareholders of BOI, HTR and HHY (each, a “Target Fund” and collectively, the “Target Funds”), which will be held at the offices of Brookfield Investment Management Inc. (“Brookfield” or the “Adviser”), Brookfield Place, 250 Vesey Street, 15th Floor, New York, New York 10281-1023, on August 5, 2016, at 8:30 a.m., Eastern Time, to consider and vote upon the items listed below and discussed in greater detail elsewhere in this Joint Proxy Statement/Prospectus. Even if you plan on attending the Special Meeting, the Board of each Fund requests that you authorize your proxy to vote your shares of common stock by completing and returning the enclosed proxy card or by recording your voting instructions by telephone or via the Internet to ensure your vote is counted if you are later unable to attend the Special Meeting. The approximate mailing date of this Joint Proxy Statement/Prospectus and accompanying form of proxy is [ · ], 2016.

 

This Joint Proxy Statement/Prospectus explains concisely what you should know before voting on the proposals for your Target Fund described in this Joint Proxy Statement/Prospectus or investing in Brookfield Real Assets Income Fund Inc., a newly formed Maryland corporation that will operate after the consummation of the Reorganizations (as defined below) as a registered closed-end management investment company (“RA Fund” or the “Acquiring Fund” and together with the Target Funds, the “Funds”).

 

The purposes of the Special Meeting are:

 

1.               The Proposed Reorganizations of the Target Funds

 

Shareholders of BOI:

 

Proposal 1(A):  The shareholders of BOI are being asked to consider and vote upon an Agreement and Plan of Reorganization between BOI and RA (the “BOI Reorganization Agreement”) and the transactions contemplated thereby, including, among other things: (i) the transfer by BOI of all of its assets to RA Fund in

 

 

exchange solely for newly issued shares of common stock of RA Fund, and RA’s assumption of all of the liabilities of BOI; (ii) the distribution of such newly issued shares of common stock of RA Fund to the common shareholders of BOI (with cash being distributed in lieu of fractional shares of common stock); and (iii) the liquidation, dissolution and termination of BOI in accordance with applicable law.

 

Shareholders of HTR:

 

Proposal 1(B):  The shareholders of HTR are being asked to consider and vote upon an Agreement and Plan of Reorganization between HTR and RA Fund (the “HTR Reorganization Agreement”) and the transactions contemplated thereby, including, among other things: (i) the transfer by HTR of all of its assets to RA Fund in exchange solely for newly issued shares of common stock of RA Fund, and RA’s assumption of all of the liabilities of HTR; (ii) the distribution of such newly issued shares of common stock of RA Fund to the common shareholders of HTR (with cash being distributed in lieu of fractional shares of common stock); and (iii) the liquidation, dissolution and termination of HTR in accordance with applicable law.

 

Shareholders of HHY:

 

Proposal 1(C):  The shareholders of HHY are being asked to consider and vote upon an Agreement and Plan of Reorganization between HHY and RA Fund (the “HHY Reorganization Agreement”) and the transactions contemplated thereby, including, among other things: (i) the transfer by HHY of all of its assets to RA Fund in exchange solely for newly issued shares of common stock of RA Fund, and RA’s assumption of all of the liabilities of HHY; (ii) the distribution of such newly issued shares of common stock of HHY to the common shareholders of HHY (with cash being distributed in lieu of fractional shares of common stock); and (iii) the liquidation, dissolution and termination of HHY in accordance with applicable law.

 

2.               Appointment of Sub-Adviser ( For BOI and HTR shareholders only )

 

Shareholders of BOI:

 

Proposal 2(A): The shareholders of BOI are being asked to consider and vote upon a new investment sub-advisory agreement among Brookfield Investment Management Inc., BOI and Schroder Investment Management North America Inc.

 

Shareholders of HTR:

 

Proposal 2(B): The shareholders of HTR are being asked to consider and vote upon an investment sub-advisory agreement among Brookfield Investment Management Inc., HTR and Schroder Investment Management North America Inc.

 

3.               Other Business. For each Target Fund, to transact such other business as may properly come before the Special Meeting.

 

Shareholders of record of each of BOI, HTR and HHY as of the close of business on May 18, 2016 (the “Record Date”), are entitled to notice of and to vote at the Special Meeting or any postponement or adjournment thereof.

 

Each Reorganization Agreement that Target Fund shareholders are being asked to consider involves transactions that will be referred to in this Joint Proxy Statement/Prospectus as a “Reorganization.” RA, the Fund surviving the Reorganizations, is referred to herein as the “Combined Fund.”

 

In the Reorganizations, each Target Fund will transfer all of its assets to RA in exchange for shares of common stock of RA, $0.001 par value per share, and the assumption by RA Fund of all of the liabilities of that Target Fund.  Each Target Fund will then be liquidated, dissolved and terminated in accordance with its charter, bylaws, the 1940 Act and Maryland law.  In connection with the Reorganizations, the holders of outstanding shares of common stock of each Target Fund will receive newly issued shares of common stock of RA Fund, in a liquidating

 

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distribution.  The aggregate net asset value of RA shares of common stock received by the shareholders of each Target Fund in the Reorganizations will equal the aggregate net asset value of such Target Fund’s shares of common stock held by such shareholders immediately prior to the Reorganization (though shareholders will receive cash for their fractional shares).

 

Each Target Fund will terminate its registration under the 1940 Act in connection with the Reorganizations and will be liquidated and dissolved pursuant to Maryland law.  RA Fund will commence operations after the Reorganizations as a registered, diversified, closed-end management investment company with the investment objectives and policies described in this Joint Proxy Statement/Prospectus.

 

The closing of each Reorganization is contingent upon the closing of all of the Reorganizations.  Because the closing of the Reorganizations is contingent upon all of the Target Funds obtaining the requisite shareholder approvals and satisfying (or obtaining the waiver of) their other closing conditions, it is possible that your Fund’s Reorganization will not occur, even if shareholders of your Fund that are entitled to vote on the Reorganization approve such Reorganization and your Fund satisfies all of its closing conditions, if one or more of the other Funds does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions. If the requisite shareholder approvals are not obtained, each Fund’s Board may take such actions as it deems in the best interests of such Fund, including conducting additional solicitations with respect to the proposals or continuing to operate the Fund as a stand-alone fund. The Reorganizations are not contingent on whether the SP Investment Team Transaction (as defined herein) closes. If the SP Investment Team Transaction does not close, but the Reorganizations are approved, the Target Funds will be reorganized into RA and Brookfield will serve as the investment adviser of RA; however, SIMNA will not serve as sub-adviser of RA.

 

This Joint Proxy Statement/Prospectus concisely sets forth the information shareholders of the Target Funds should know before voting on the proposals and constitutes an offering of shares of common stock of the Acquiring Fund only. Shareholders should read it carefully and retain it for future reference.

 

The following documents have been filed with the U.S. Securities and Exchange Commission (“SEC”) and are incorporated into this Joint Proxy Statement/Prospectus by reference:

 

·                                           A Statement of Additional Information, dated [ · ], 2016, relating to this Joint Proxy Statement/Prospectus (the “Statement of Additional Information”);

 

·                                           The audited financial statements and related independent registered public accounting firm’s report for BOI and the financial highlights for BOI contained in BOI’s Annual Report for the fiscal year ended June 30, 2015 and the unaudited financial statements for BOI contained in BOI’s Semi-Annual Report for the fiscal period ended December 31, 2015;

 

·                                           The audited financial statements and related independent registered public accounting firm’s report for HTR and the financial highlights for HTR contained in HTR’s Annual Report for the fiscal year ended September 30, 2015 and the unaudited financial statements for HTR contained in HTR’s Semi-Annual Report for the fiscal period ended March 31, 2016; and

 

·                                           The audited financial statements and related independent registered public accounting firm’s report for HHY and the financial highlights for HHY contained in HHY’s Annual Report for the fiscal year ended September 30, 2015 and the unaudited financial statements for HHY contained in HHY’s Semi-Annual Report for the fiscal period ended March 31, 2016.

 

Copies of the foregoing may be obtained without charge by calling (855) 777-8001, or writing to the Funds at Brookfield Place, 250 Vesey Street, 15th Floor, New York, New York 10281-1023.

 

The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and, in accordance therewith, file reports, proxy statements, proxy materials and other information with the SEC.  Materials filed with the SEC can be reviewed and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549, or downloaded from the SEC’s web site at www.sec.gov.

 

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Information on the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at (202) 551-8090.  You may also request copies of these materials, upon payment at the prescribed rates of a duplicating fee, by electronic request to the SEC’s e-mail address (publicinfo@sec.gov) or by writing the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549-0102.

 

Please note that only one copy of shareholder documents, including annual or semi-annual reports and proxy materials may be delivered to two or more shareholders of a Target Fund who share an address, unless the Target Funds have received instructions to the contrary.  This practice is commonly called “householding” and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents.  Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise.  To request a separate copy of any shareholder document, or for instructions as to how to request a separate copy of these documents or as to how to request a single copy if multiple copies of these documents are received, shareholders should contact the Fund at the address and phone number set forth above.

 

The shares of common stock of RA Fund are expected to be listed on the New York Stock Exchange (“NYSE”) upon the closing of the Reorganizations.  The shares of common stock of Brookfield Mortgage Opportunity Income Fund Inc. are listed on the NYSE under the ticker symbol “BOI” and will be delisted from the NYSE following the Reorganization. The shares of common stock of Brookfield Total Return Fund Inc. are listed on the NYSE under the ticker symbol “HTR” and will be delisted from the NYSE following the Reorganization. The shares of common stock of Brookfield High Income Fund Inc. are listed on the NYSE under the ticker symbol “HHY” and will be delisted from the NYSE following the Reorganization. Reports, proxy statements and other information concerning the Funds may be inspected at the offices of the NYSE, 11 Wall Street, New York, New York 10005.

 

This Joint Proxy Statement/Prospectus serves as a prospectus of RA Fund in connection with the issuance of RA Fund shares of common stock in the Reorganizations.  This Joint Proxy Statement/Prospectus sets forth concisely the information that shareholders of each Target Fund should know before voting on the proposals for their Target Fund.  Please read it carefully and retain it for future reference.  No person has been authorized to give any information or make any representation not contained in this Joint Proxy Statement/Prospectus and, if so given or made, such information or representation must not be relied upon as having been authorized.  This Joint Proxy Statement/Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which, or to any person to whom, it is unlawful to make such offer or solicitation.

 

Photographic identification and proof of ownership will be required for admission to the Special Meeting.  For directions to the Special Meeting, please contact the Funds at (855) 777-8001 or at funds@brookfield.com.  If you are planning to attend the Special Meeting, please RSVP to funds@brookfield.com at least one day prior to the Special Meeting.

 

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING.

 

This Joint Proxy Statement/Prospectus is available on the Internet at www.brookfieldim.com.  You may request a copy by mail (Brookfield Mortgage Opportunity Income Fund Inc., Brookfield Total Return Fund Inc., Brookfield High Income Fund Inc.), Brookfield Place, 250 Vesey Street, 15th Floor, New York, New York 10281-1023, or by telephone at 1-855-777-8001.

 

THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this Joint Proxy Statement/Prospectus is [ · ], 2016.

 

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TABLE OF CONTENTS

 

	Page
SUMMARY	2
PROPOSAL 1: THE REORGANIZATIONS OF THE TARGET FUNDS INTO RA	3
RISK FACTORS AND SPECIAL CONSIDERATIONS	28
REASONS FOR THE REORGANIZATIONS	50
INVESTMENT OBJECTIVES AND POLICIES OF THE ACQUIRING FUND	54
PROPOSAL 2: APPOINTMENT OF SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. AS SUB-ADVISER ( FOR BOI AND HTR SHAREHOLDERS ONLY )	80
MANAGEMENT OF THE FUNDS	87
ADDITIONAL INFORMATION ABOUT THE SHARES OF COMMON STOCK OF THE FUNDS	92
DIVIDENDS AND DISTRIBUTIONS	95
CALCULATION OF NET ASSET VALUE	97
DIVIDEND REINVESTMENT PLAN	99
CERTAIN PROVISIONS OF THE CHARTER	101
GOVERNING LAW	101
CONVERSION TO OPEN-END FUND	103
VOTING RIGHTS	103
APPRAISAL RIGHTS	103
FINANCIAL HIGHLIGHTS	104
INFORMATION ABOUT THE REORGANIZATIONS	108
TERMS OF THE REORGANIZATION AGREEMENTS	108
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATIONS	110
VOTING INFORMATION AND REQUIREMENTS	113
SHAREHOLDER INFORMATION	116
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	116
SHAREHOLDER PROPOSALS	116
SOLICITATION OF PROXIES	117
LEGAL PROCEEDINGS	118
LEGAL MATTERS	118
OTHER MATTERS WITH RESPECT TO THE MEETING	119
PRIVACY PRINCIPLES OF THE FUNDS	120
OTHER INFORMATION	122
APPENDIX A	123
APPENDIX B	124

 

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SUMMARY

 

The following is a summary of certain information contained elsewhere in this Joint Proxy Statement/Prospectus and is qualified in its entirety by reference to the more complete information contained in this Joint Proxy Statement/Prospectus and in the Statement of Additional Information.  Shareholders should read the entire Joint Proxy Statement/Prospectus carefully.

 

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PROPOSAL 1: THE REORGANIZATIONS OF THE TARGET FUNDS INTO RA

 

The Proposed Reorganizations

 

Brookfield Investment Management Inc. (“Brookfield”) recommended to the Boards of Directors of BOI, HTR and HHY that these Funds be reorganized into a new fund, Brookfield Real Assets Income Fund Inc. (“RA Fund”) The Boards reviewed and considered Brookfield’s proposal in detail and on May 12, 2016, approved the proposed reorganizations. The shareholders of each of BOI, HTR and HHY are being asked to approve agreements and plans of reorganization pursuant to which each Fund will be reorganized into RA Fund (each a “Reorganization” and collectively, the “Reorganizations”).

 

At a meeting held on May 12, 2016 (the “Meeting”), the Board of each Target Fund considered, authorized and approved its respective Reorganization, declared its respective Reorganization advisable and in the best interests of such Target Fund, and directed that its Reorganization be submitted to its shareholders for consideration at a joint special meeting of shareholders (the “Special Meeting”).  Brookfield provided each Board with information regarding the proposed Reorganizations, including the rationale therefor and alternatives considered to the Reorganizations. The Board of each Fund considered a number of factors, each presented at the Meeting, in reaching their determination, including, but not limited to, the factors discussed below.

 

Brookfield and the Boards of the Target Funds believe shareholders of BOI, HTR and HHY will benefit from a multi-asset, multi-portfolio manager investment strategy that will primarily invest in infrastructure, real estate and natural resources (“Real Assets”) fixed income securities and other debt instruments, including corporate credit securities (similar to HHY) and securitized mortgage backed securities (similar to BOI and HTR). The RA Fund will also invest to a lesser extent in Real Assets equity securities. Brookfield will allocate a portion of the RA Fund’s assets to (i) the Real Assets credit investment team, which is comprised of investment personnel that currently manage HHY, (ii) the securitized products investment team (the “SP Investment Team”), after the SP Investment Team, which is comprised of investment personnel that currently manage BOI and HTR (see further discussion below),  moves to Schroder Investment Management North America Inc. (“SIMNA” or the “Sub-Adviser”)(1), and (iii) other portfolio management teams within Brookfield.  Although Brookfield decided it no longer intends to have a stand-alone securitized products-only investment team, Brookfield believes that securitized products can still serve a role in a Real Assets investment strategy, particularly in a closed-end fund structure and will allocate a portion of RA’s assets to SIMNA to be invested in securitized products (the “Securitized Products Allocation”) and will continue to have oversight responsibilities over the Securitized Products Allocation managed by SIMNA.  Brookfield will also allocate a portion of RA’s assets to portfolio management teams within Brookfield, other than the Real Assets Credit Investment Team, in order to gain exposure to equity securities of Real Assets companies and issuers when it believes it will help RA Fund achieve its investment objective. Brookfield and the Boards of the Target Funds believe the multi-asset, multi-portfolio manager approach will benefit shareholders of the Target Funds because Brookfield will be able to allocate the Combined Fund’s investments across industries and sectors within Real Assets to better position the Combined Fund to achieve its investment objectives. Brookfield believes its focus on Real Assets and this asset allocation flexibility within Real Assets will have the potential to create greater income, income growth and greater capital appreciation for the Target Funds’ shareholders.  Brookfield and the Boards of the Target Funds reviewed Brookfield’s asset allocation process, information on the proposed repositioning of the Target Funds’ portfolios and historical performance information for a hypothetical blended portfolio consisting of Real Assets high yield corporate debt, mortgage backed securities and Real Assets equities.  The Boards of the Target Funds also considered that Brookfield is a wholly owned subsidiary of Brookfield Asset Management Inc. (“BAM”), which is a global alternative asset manager with over $225 billion in assets under management as of March 31, 2016.  The Boards of the Target Funds noted that BAM has over a 100 year history of owning and operating Real Assets, including property, infrastructure, renewable energy, timberland and agricultural lands, which will be beneficial to Brookfield in its management of a Real Assets closed-end fund.

 

Brookfield and the Boards of the Target Funds also reviewed each Target Fund’s investment guidelines, performance, use of leverage, trading history, distribution payments, capital loss carry forwards, tax consequences, and total annual fund operating expenses, as well as the investment guidelines, expected use of leverage, distribution potential and pro forma operating expenses with respect to the Combined Fund.  Additionally, Brookfield and the Boards of the Target Funds considered the potential costs of the Reorganizations to the Funds ( e.g., legal, audit and regulatory costs associated with the Reorganizations, as well as potential portfolio repositioning costs), outstanding

 

(1) Brookfield recently agreed to sell the SP Investment Team to SIMNA (such acquisition, the “SP Investment Team Transaction”), which is expected to close in the second half of 2016. This is discussed further in Proposal 2.

 

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legal proceedings involving HHY, and other alternatives to the Reorganizations.  Following review of all of these factors, the Boards of the Funds agreed with the recommendation of Brookfield that the Reorganizations should benefit shareholders of the Target Funds by providing investment strategy flexibility, potential for enhanced income, income growth and capital appreciation, improved secondary market trading, and potential for operational cost savings.  The Boards considered that certain of the investment personnel involved in managing the Combined Fund would be the same investment personnel as have been managing the Target Funds and that certain other investment personnel involved in managing the Combined Fund are involved in managing other registered investment companies that the Boards oversee.

 

·                   Investment Guidelines and Performance: As discussed above, Brookfield and the Boards of the Target Funds believe the multi-asset, multi-portfolio manager approach will benefit shareholders of the Target Funds because Brookfield will be able to allocate the Combined Fund’s investments across industries and sectors within Real Assets to better achieve its objectives.  Currently, the investment guidelines and focus of each of the Target Funds is narrower than what will be allowed in the Combined Fund.

 

·                   HTR currently requires that 40% of HTR’s total assets must be invested in (i) securities issued and/or guaranteed by the US Government or one of its agencies or instrumentalities; (ii) RMBS and CMBS rated BBB- and above; (iii) up to 25% of the Fund’s total assets may be invested in real estate related ABS rated BBB- and above; and (iv) cash.  The Combined Fund will not have this 40% investment restriction, which will provide Brookfield with greater flexibility in managing the portfolio to achieve the Combined Fund’s investment objectives across various market environments.  Brookfield represented to the Board of HTR that if HTR is reorganized into RA, Brookfield believes that HTR shareholders will benefit from a substantial repositioning of HTR’s portfolio holdings into higher yielding investments.

 

·                   Brookfield represented to the Board of BOI that Brookfield believes BOI investors will benefit from a repositioning of BOI’s portfolio holdings into higher yielding investments as a result of the proposed Reorganization.  Brookfield also noted that it is projecting that shareholders of BOI will pay a lower total expense ratio as shareholders of the Combined Fund than they pay as shareholders of BOI.  Brookfield and the Board of BOI noted that in March 2013, when BOI was initially launched, Brookfield’s view on interest rates was different than its view on interest rates today.  In 2013, Brookfield believed that interest rates were likely to be increased in the near term and would continue to move higher.  Today, Brookfield believes interest rates will go up modestly in the near term, but that interest rates are likely to stay lower for longer.  Brookfield represented that macroeconomic issues impacting the global economy have caused it to re-evaluate its view on interest rates since 2013.

 

·                   For HHY investors, although Brookfield is not anticipating a significant amount of portfolio repositioning, Brookfield believes HHY investors will benefit from being invested in a larger fund with a more diversified investment universe, which will include securitized products and Real Asset equities.

 

·                   Brookfield stated to the Boards of each Target Fund that reorganizing the Target Funds into RA will provide Brookfield with the flexibility to shift allocations within Real Assets as Brookfield’s outlook on macroeconomic issues and other factors impacting a sector or industry within Real Assets changes.  Brookfield and the Boards of the Target Funds considered that RA Fund will not commence operations until the Reorganizations are consummated and reviewed and discussed the ratings and sector breakdown of its proposed model portfolio.

 

·                   Use of Leverage:   BOI and HTR currently use reverse repurchase agreements to achieve leverage while HHY has a committed margin loan arrangement in place with BNP Paribas. Brookfield represented to the Boards of the Target Funds that it expects RA Fund will utilize both a committed margin loan arrangement with BNP Paribas and reverse repurchase agreements.  Brookfield believes it can leverage off the documentation and relationships currently in place for the Target Funds in setting up the leverage facilities for RA Fund.  The Target Funds are currently similarly levered and Brookfield expects RA Fund to be managed at a similar

 

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leverage percentage ( i.e. , 25-30% of total assets).  Following the Reorganizations, Brookfield expects that RA Fund will be in a better position to negotiate leverage terms or consider other leverage options because of its increased size.

 

·                   Trading History:   Brookfield and the Boards of the Target Funds considered recent and historical trading history.  As of May 3, 2016 (except HTR’s NAV, which is as of April 29th), the Target Funds were trading at the following discounts relative to their respective NAVs:

 

				(Premium/Discount)
HHY:		$7.91 NAV v. $7.24 Market Price		-8.47	%
BOI:		$16.36 NAV v. $14.80 Market Price		-9.54	%
HTR:		$24.16 NAV v. $24.09 Market Price		-0.29	%

 

Brookfield and the Boards of the Target Funds noted the difficulty in predicting the impact that the proposed Reorganizations will have on each Target Fund’s share price after announcement of the proposed Reorganizations.  Brookfield and the Boards of the Target Funds acknowledged that it is possible that the Target Funds’ discounts may widen or narrow following announcement of the Boards’ approval of the proposed Reorganizations.  Notwithstanding the possibility that the Target Funds’ discounts may widen, Brookfield and the Boards of the Target Funds believe the Reorganizations are in each Fund’s and their shareholders’ best interests over the long term.  Brookfield and the Boards of the Target Funds reviewed case studies for similar mergers of closed-end funds and the impact that such mergers had on the trading liquidity following the mergers.  Brookfield and the Boards of the Target Funds also noted the importance of closed-end fund analyst coverage.  Brookfield and the Boards of the Target Funds considered that funds that do not have a certain level of trading liquidity and are not of a certain size are unlikely to receive closed-end fund analyst coverage.  In addition, Brookfield and the Boards of the Target Funds considered that funds that have a narrower investment focus are unlikely to gain broad market attention and that the broader investment focus of RA may assist in gaining the attention of more investors.  Brookfield and the Boards of the Target Funds also believe that the larger asset size, expected greater common share trading volume and focus on Real Assets investments of the Combined Fund following the Reorganizations will enable the Combined Fund to attract more consistent secondary market demand over time and, together with enhanced performance potential, enable the Combined Fund’s shares of common stock to potentially trade at a narrower discount to net asset value.

 

·                   Distribution Payments:

 

Brookfield and the Boards of the Target Funds considered that last year, each of BOI, HTR and HHY were over distributed.  Brookfield represented to the Boards of the Target Funds that Brookfield believes that the Reorganizations should result in the same or slightly higher distribution rates based on net asset value for shareholders of each Target Fund (as shareholders of the Combined Fund following the Reorganizations).  The potential for higher distribution rates is due to Brookfield’s expectation that RA Fund should be able to reallocate investments into higher yielding securities and Brookfield plans to allocate a portion of RA’s assets into equity securities that Brookfield believes have income growth potential and potential for capital appreciation.  Furthermore, Brookfield and the Board of HHY considered and determined that a reduction in HHY’s distribution rate was necessary whether or not HHY was reorganized into RA Fund because as, under current market conditions, HHY was not producing enough net income to continue meeting the current distribution rate.  Following the reduction to HHY’s distribution rate Brookfield represented to the Boards of the Target Funds that Brookfield believes that, based on current market conditions, investors in BOI, HTR and HHY should be able to receive a higher distribution rate from RA Fund than they are currently receiving as investors in the Target Funds, based on current net asset values of the Target Funds.

 

Brookfield and the Boards of the Target Funds also discussed that on September 30, 2015, the SEC granted Brookfield, on behalf of itself and certain closed-end funds that it currently manages, including the Target Funds, and funds it advises in the future, which includes RA, an order granting an exemption from Section 19(b) of and Rule 19b-1 under the 1940 Act to conditionally permit a Fund to make periodic distributions

 

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of long-term capital gains with respect to the Fund’s outstanding common stock as frequently as twelve times each year, so long as it complies with the conditions of the order and maintains in effect a distribution policy with respect to its shares of common stock calling for periodic distributions of an amount equal to a fixed amount per share, a fixed percentage of market price per share or a fixed percentage of the fund’s net asset value per share (a “Managed Dividend Policy”). Although Brookfield and the Board of RA agreed that they do not intend to cause RA to utilize the Managed Dividend Policy immediately, Brookfield and the Board of RA believes it is beneficial to have this exemptive relief and may determine to implement the Managed Dividend Policy in the future, particularly given RA’s intended allocation to equity securities.

 

·                   Tax Consequences:   Brookfield and the Boards of the Target Funds considered that the Reorganizations are intended to be tax-free transactions, in which shareholders will recognize no gain or loss for U.S. federal income tax purposes.  After the Reorganizations, each Fund’s ability to use pre-Reorganization capital losses will be limited under certain federal income tax rules applicable to reorganizations of this type.

 

Although the Target Funds will be losing the ability to take advantage of approximately $77 million in capital loss carryforwards going forward, Brookfield believes that the Reorganizations are still in the best interests of the Target Funds and their shareholders.  Brookfield represented to the Boards of the Target Funds that Brookfield believes the loss of the capital loss carryforwards as a result of the Reorganizations should not be a material factor in evaluating the Reorganizations in light of the following (1) the difficulty of projecting the likelihood of utilization of some or all of the capital loss carryforwards prior to their expiration, and (2) the potentially limited opportunity for capital gains in light of the Target Funds’ current investment policy of investing primarily in debt securities and other fixed income instruments.

 

·                   Total Annual Fund Operating Expenses:   Brookfield believes the combination of the Target Funds into the Acquiring Fund may potentially result in operational cost savings over time as a result of the larger size of the Combined Fund. Additionally, the Boards of the Target Funds considered the following:

 

·                   the expense ratios of the Funds, including the potential for improved economies of scale and a lower total expense ratio with respect to BOI:

 

·                   The Target Funds estimate that the completion of all of the Reorganizations would result in a total expense ratio for the Combined Fund of 2.23% on a pro forma basis for the twelve-month period ended March 31, 2016, representing an increase in the total expense ratio for the shareholders of HTR and HHY of 0.65% and 0.13%, respectively, and a decrease in the total expense ratio for the shareholders of BOI of 0.10%;

 

·                   There can be no assurance that future expenses will not increase or that any expense savings will be realized;

 

·                   Brookfield’s agreement to waive its fees and/or reimburse expenses for two years following the closing date of the Reorganizations so that the total annual operating expense ratio of the Combined Fund will not exceed 1.03% (excluding the costs of using leverage, brokerage commissions and other transactions, acquired fund fees and expenses, interest, taxes, and extraordinary expenses, such as litigation; and other expenses not incurred in the ordinary course of the Combined Fund’s business);

 

·                   the expense ratios after giving effect to the fee waivers and/or expense reimbursements:

 

·                   The Target Funds estimate that the completion of all of the Reorganizations would result in a total expense ratio, after fee waivers and/or expense reimbursements, for the Combined Fund of 1.58% on a pro forma basis for the twelve-month period ended March 31, 2016, in Years 1 and 2, representing a reduction in the total expense ratio for the shareholders of BOI and HHY of 0.76% and 0.52%, respectively, and no change for the shareholders of HTR.

 

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·                   There can be no assurance that future expenses will not increase or that any expense savings will be realized;

 

·                   This agreement is not expected to be continued after the expiration of the two-year period;

 

·                   Management Fee for RA Fund:   Brookfield and the Boards of the Target Funds discussed the proposed management fee for RA.  The Boards of the Target Funds considered that the contractual advisory fee of RA, is higher than the current contractual advisory fees of both HTR (which is paid on net assets only and excludes financial leverage) and HHY and is the same as the current contractual advisory fee of BOI.  The Board concluded that the contractual advisory fee of RA was appropriate given the multi-asset, multi-portfolio manager investment strategy of RA and was in-line with the advisory fees for comparable funds.  The Board also considered Brookfield’s representation that RA has the potential for income growth and capital appreciation as a result of enhanced investment flexibility and Brookfield’s asset allocation process and risk management process.

 

·                   Potential Costs of the Reorganization:   RA has a broad and flexible mandate that permits investments in many types of securities that the Target Funds may hold, as well as other types of securities that are not eligible for investment by the Target Funds. Under current market conditions, Brookfield represented to the Boards of the Funds that Brookfield expects that up to approximately 40% of the securities held by BOI, up to approximately 50% of the securities held by HTR, and up to approximately 5% of the securities held by HHY, respectively, may be sold in connection with the Reorganizations as RA’s portfolio managers seek to fully align or reposition the portfolio with RA’s broader investment guidelines. Brookfield expects that such repositioning will create income growth potential and increase capital appreciation potential for the Combined Fund.  RA’s portfolio managers expect that the majority ( i.e. , more than fifty percent (50%)) of the repositioning of each Target Fund will occur in the first six months following the Reorganizations. A portion of the repositioning, however, may take place before the closing of the Reorganizations while certain repositioning may take as long as two years following the Reorganizations, depending upon market conditions and the liquidity of certain securities. RA’s portfolio managers do not expect the repositioning to result in significant transaction costs because most of the repositioning will involve the sale of fixed income securities where the transaction costs are built into the price of such securities. To the extent there are transaction costs associated with portfolio repositioning prior to the Reorganizations, such costs will be borne by the respective Target Funds. To the extent there are transaction costs associated with portfolio repositioning after the Reorganizations, such costs will be borne by RA.

 

Brookfield represented to the Boards of the Target Funds that other expenses incurred in the proposed Reorganizations will be paid by Brookfield.  Brookfield estimates that the costs of proxy solicitation and other service providers will be approximately $700,000.

 

·                   Legal Proceedings: Brookfield and the Boards of the Funds considered the current status of HHY’s legal proceedings ( i.e. , the legacy legal proceedings from the Helios Funds and their former investment manager, assumed by HHY after the reorganizations of the four Helios Funds into HHY) with outside counsel.  The Boards considered that the main legal proceedings had been settled and the only remaining cases were opt out cases.  The Boards of the Funds considered the expected ongoing costs of such legal proceedings, but determined that the overall benefits of the proposed Reorganizations outweighed these expected ongoing costs.

 

·                   Exchange Ratio:  The aggregate net asset value (not the market value) of RA Fund shares of common stock received by each Target Fund’s shareholders in the Reorganizations will equal the aggregate net asset value (not the market value) of the Target Fund’s shares of common stock held immediately prior to that Reorganization.  The market value of the shares of common stock of the Combined Fund may be more or less than the market value of the shares of common stock of BOI, HTR or HHY prior to the Reorganizations.

 

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·                  Other Factors:  The Boards of the Funds also considered potential benefits of the Reorganizations to Brookfield and its affiliates, the effect of the Reorganizations on shareholder rights, the potential for operating and administrative efficiencies and the effects on each Target Fund’s undistributed net investment income, if any. The Boards of the Target Funds also considered alternatives to the Reorganizations for each Target Fund.

 

The Board of each Target Fund, including all of the Independent Directors, approved its respective Reorganization, concluding that such Reorganization is in the best interests of each Fund, respectively, and that the interests of existing shareholders of each Fund will not be diluted as a result of its respective Reorganization.  This determination was made on the basis of each Director’s business judgment after consideration of all of the factors taken as a whole with respect to its Target Fund and shareholders, although individual Directors may have placed different weight on various factors and assigned different degrees of materiality to various factors.

 

If the shareholders of each Target Fund approve its Reorganization, each Target Fund will transfer all of its assets to RA in exchange for shares of common stock of RA, and the assumption by RA Fund of all the liabilities of that Target Fund.  Thereafter, the holders of that Target Fund’s common stock will receive shares of common stock of RA Fund in a liquidating distribution and each Target Fund will be dissolved and terminated in accordance with its charter, bylaws, the 1940 Act and Maryland law.  The Board of each Target Fund, including all of the Independent Directors, has unanimously approved its Reorganization, declared its Reorganization advisable and in the best interests of such Target Fund, and directed that its Reorganization be submitted to its shareholders for consideration at the Special Meeting.  The closing of each Reorganization is contingent upon the closing of all of the Reorganizations.  The Reorganizations, however, are not contingent on whether the SP Investment Team Transaction closes. If the SP Investment Team Transaction does not close, but the Reorganizations are approved, the Target Funds will be reorganized into RA Fund and Brookfield will serve as the investment adviser of RA; however, SIMNA will not serve as sub-adviser to the RA Fund.

 

The closing of each Reorganization is contingent upon the closing of all of the Reorganizations.  Because the closing of the Reorganizations is contingent upon all of the Target Funds obtaining the requisite shareholder approvals and satisfying (or obtaining the waiver of) their other closing conditions, it is possible that your Fund’s Reorganization will not occur, even if shareholders of your Fund that are entitled to vote on the Reorganization approve the Reorganization and your Fund satisfies all of its closing conditions, if one or more of the other Funds does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions.  If the requisite shareholder approvals are not obtained, each Fund’s Board may take such actions as it deems in the best interests of its Fund, including conducting additional solicitations with respect to the proposals or continuing to operate the Fund as a stand-alone fund. The Reorganizations are not contingent on whether the SP Investment Team Transaction closes. However, if the SP Investment Team Transaction does not close, SIMNA will not serve as sub-adviser of the Combined Fund.

 

Expenses

 

For the fiscal year ended June 30, 2015, BOI’s total expense ratio was 2.32% based on BOI’s net assets. For the fiscal year ended September 30, 2015, HTR’s and HHY’s total expense ratios were 1.55% and 1.92%, based on HTR’s and HHY’s net assets respectively. For the twelve-month period ended March 31, 2016, BOI’s, HHY’s and HTR’s total expense ratios were 2.33%, 2.10% and 1.58% based on BOI’s, HHY’s and HTR’s net assets respectively. The Target Funds estimate that the completion of the Reorganizations would result in a total expense ratio for the Combined Fund of 2.23% based on net assets on a pro forma basis for the 12-month period ended March 31, 2016, representing an increase in the total expense ratio (based on net assets) for the shareholders of HTR and HHY of 0.65% and 0.13%, respectively, and a decrease in the total expense ratio (based on net assets) for the shareholders of BOI of 0.10%. The Target Funds estimate that the completion of the Reorganizations would result in a total expense ratio, after waivers and/or expense reimbursements (see below), for the Combined Fund of 1.58% based on net assets on a pro forma basis for the 12-month period ended March 31, 2016, in Years 1 and 2, representing a decrease in the total expense ratio (based on net assets) for the shareholders of BOI and HHY of 0.76% and 0.52%, respectively, and no change in the total expense ratio (based on net assets) for the shareholders of HTR. There can be no assurance that future expenses will not increase or that any expense savings for the Combined Fund will be realized.

 

8

 

The contractual advisory fee of the Combined Fund and BOI is 1.00% of each Fund’s average daily Managed Assets (defined below). The Combined Fund’s contractual advisory fee is higher than the contractual advisory fee of HTR, which is 0.65% of HTR’s average weekly net assets (excluding financial leverage), and HHY, which is 0.65% of HHY’s average weekly total assets minus the sum of accrued liabilities (other than the aggregate indebtedness constituting financial leverage). Brookfield believes that the advisory fee of the Combined Fund is appropriate given the multi-asset, multi-portfolio manager model of the Combined Fund. The Combined Fund and BOI also pay to the Adviser an administration fee, payable monthly, at an annual rate of 0.15% of each Fund’s average daily Managed Assets. HTR pays the Adviser an administration fee, payable monthly, at an annual rate of 0.20% of HTR’s average weekly net assets (excluding financial leverage).  HHY pays the Adviser an administration fee, payable monthly, at an annual rate of 0.15% of HHY’s average weekly total assets minus the sum of accrued liabilities (other than the aggregate indebtedness constituting financial leverage).

 

Brookfield has agreed to waive its fees and/or reimburse expenses for two years following the closing date of the Reorganizations so that the total annual operating expense ratio of the Combined Fund will not exceed 1.03% (excluding the costs of using leverage, brokerage commissions and other transactions, acquired fund fees and expenses, interest, taxes, and extraordinary expenses, such as litigation; and other expenses not incurred in the ordinary course of the Combined Fund’s business) in Years 1 and 2. This agreement may not be discontinued prior to the expiration of the two-year period unless authorized by the Board of the Combined Fund or the Combined Fund’s investment advisory agreement terminates. This agreement is not expected to be continued after the expiration of the two-year period.

 

Under the Sub-Advisory Agreement, SIMNA is entitled to fees at an annual rate of 0.32% of the Securitized Products Allocation of the Combined Fund’s average daily Managed Assets; however, such fees will be paid by Brookfield and not the Combined Fund. Because Brookfield pays SIMNA out of its own fees received from the Combined Fund, there is no “duplication” of advisory fees paid. Pursuant to the terms of the SP Investment Team Transaction, Brookfield may receive compensation from SIMNA for a three year period following the closing of the Transaction, based upon the revenues received by SIMNA with respect to assets it manages under the Sub-Advisory Agreements with BOI, HTR and the Combined Fund, if certain conditions are satisfied.

 

Appraisal Rights

 

Shareholders of HHY, HTR and BOI do not have appraisal rights for their shares of common stock. Shareholders of RA will also not have appraisal rights for their shares of common stock.

 

Comparison of the Funds

 

RA’s and BOI’s investment objectives are not fundamental and may be changed by each Fund’s Board without shareholder approval. HHY’s and HTR’s investment objectives are fundamental and may not be changed without approval by the holders of a majority (as defined in the 1940 Act) of each Fund’s outstanding voting securities.  RA’s investment objective is to seek high total return through high current income and growth of capital. HHY’s primary investment objective is to seek high current income.  HHY also seeks capital growth as a secondary objective to the extent consistent with its objective of seeking high current income. HTR’s primary investment objective is to provide high total return, including short- and long-term capital gains and a high level of current income, through the management of a portfolio of securities.  BOI’s investment objective is to provide high total investment return by providing a high level of current income and the potential for capital appreciation.

 

The Acquiring Fund may invest in all of the types of securities currently held by the Target Funds, but will also have a broader investment mandate. The investment strategies and significant operating policies of the Combined Fund will be those of the Acquiring Fund.  Below is a summary of significant differences in the Acquiring Fund’s and Target Funds’ investment policies and strategies.  Please see the table beginning on page 14 for more detail.

 

Principal Investment Strategies .  RA Fund seeks to achieve its investment objective by investing primarily in the securities and other instruments of Real Asset companies and issuers, which includes the following categories:

 

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·                   Real Estate;

·                   Infrastructure; and

·                   Natural Resources (collectively, “Real Asset Companies and Issuers”).

 

Under normal market conditions, RA Fund will invest at least 80% of its Managed Assets in the securities and other instruments of Real Asset Companies and Issuers (the “80% Policy”). RA Fund may change the 80% Policy without shareholder approval upon at least 60 days’ prior written notice to shareholders. RA normally expects to invest at least 65% of its Managed Assets in fixed income securities of Real Asset Companies and Issuers and in derivatives and other instruments that have economic characteristics similar to such securities. RA actively trades portfolio securities. RA may invest in securities of companies or issuers of any size market capitalization.  RA will invest in companies or issuers located throughout the world and there is no limitation on RA’s investments in foreign securities or instruments or in emerging markets.  RA has flexibility in the relative weightings given to each of the Real Asset categories. In addition, RA may, in the future, invest in additional Real Asset investment categories other than those listed herein, to the extent consistent with its name. RA may invest without limit in investment grade and below investment grade, high yield fixed income securities (commonly referred to as “junk bonds”). RA may also invest in restricted (“144A”) or private securities, asset-backed securities (“ABS”), including mortgage-related debt securities and other mortgage-related instruments (collectively, “Mortgage-Related Investments”), collateralized loan obligations, bank loans (including participations, assignments, senior loans, delayed funding loans and revolving credit facilities), exchange-traded notes, and securities issued and/or guaranteed by the U.S. Government, its agencies or instrumentalities or sponsored corporations. RA considers Mortgage-Related Investments to consist of, but not be limited to, mortgage-backed securities (“MBS”) of any kind; interests in loans and/or whole loan pools of mortgages, loans or other instruments used to finance long-term infrastructure, industrial projects and public services; mortgage REITs; ABS that are backed by interest in real estate, land or other types of assets; and securities and other instruments issued by mortgage servicers. RA’s investments in MBS may include Residential Mortgage-Backed Securities (“RMBS”) or Commercial Mortgage-Backed Securities (“CMBS”). RA may invest in fixed income securities of any maturity. The securities RA may invest in may have fixed, floating or variable rates.

 

RA may also invest up to 35% of its Managed Assets in equities, including common stock, preferred stock, convertible stock, and open-end and closed-end investment companies, subject to any applicable regulatory limits, including exchange-traded funds. RA may invest up to 20% of its Managed Assets in fixed income securities other than those of Real Asset Companies and Issuers, including in Treasury Inflation Protected Securities (“TIPS”) and other inflation-linked fixed income securities.

 

The Adviser will determine RA’s strategic allocation with respect to its equity and fixed income investments as well as its strategic allocation with respect to its investment sub-portfolios.

 

RA defines a Real Estate Security as, any security tied to a company or issuer that (i) derives at least 50% of its revenues from the ownership, operation, development, construction, financing, management or sale of commercial, industrial or residential real estate and similar activities, or (ii) commits at least 50% of its assets to activities related to real estate.

 

For purposes of selecting investments in Real Estate Securities, RA defines the real estate sector broadly.  It includes, but is not limited to, the following:

 

·                   real estate investment trusts (“REITs”);

 

·                   real estate operating companies (“REOCs)”;

 

·                   firms dependent on real estate holdings for revenues and profits, including lodging, leisure, timber, mining, and agriculture companies; and

 

·                   debt securities, including securitized obligations, which are predominantly supported by real estate assets.

 

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REITs are companies that own interests in real estate or in real estate related loans or other interests, and their revenue primarily consists of rent derived from owned, income producing real estate properties and capital gains from the sale of such properties.  A REIT in the United States is generally not taxed on income distributed to shareholders so long as it meets tax-related requirements, including the requirement that it distribute substantially all of its taxable income to its shareholders.

 

REOCs are real estate companies that have not elected to be taxed as REITs and therefore are not required to distribute taxable income and have fewer restrictions on what they can invest in.

 

RA defines an Infrastructure Security as, any security tied to a company or issuer that (i) derives at least 50% of its revenue or profits, either directly or indirectly, from infrastructure assets, or (ii) commits at least 50% of its assets to activities related to infrastructure.

 

For purposes of selecting investments in Infrastructure Securities, RA defines the infrastructure sector broadly.  It includes, but is not limited to, the physical structures, networks and systems of:

 

·                   transportation;

 

·                   energy;

 

·                   water and sewage; and

 

·                   communication.

 

Infrastructure Securities also includes master limited partnerships (“MLPs”).

 

RA defines a Natural Resources Security as, any security tied to a company or issuer that (i) derives at least 50% of its revenues, profits or value, either directly or indirectly, from natural resources assets including, but not limited to:

 

·                   Timber and Agriculture assets and securities;

 

·                   Commodities and Commodity-Linked assets and securities, including, but not limited to, precious metals, such as gold, silver and platinum, ferrous and nonferrous metals, such as iron, aluminum and copper, metals such as uranium and titanium, hydrocarbons such as coal, oil and natural gas, timberland, undeveloped real property and agricultural commodities; and

 

·                   Energy, including the exploration, production, processing and manufacturing of hydrocarbon-related and chemical-related products;

 

or (ii) provides supporting services to such natural resources companies.

 

Each Fund is authorized by its investment policies to use certain types of leverage. The Acquiring Fund currently anticipates obtaining leverage to seek to enhance the yield and net asset value of its common stock, through reverse repurchase agreements, borrowings from banks and/or other financial institutions, and the issuance of debt securities or shares of preferred stock. Although the Acquiring Fund may issue preferred shares or debt securities, it has no current intention to do so during its first year of operations. Each of BOI and HTR may utilize leverage to seek to enhance the yield and net asset value of its common stock, through reverse repurchase agreements, borrowings from banks and/or other financial institutions, and the issuance of debt securities or shares of preferred stock. HHY may utilize financial leverage through borrowings, the issuance of debt securities, or the issuance of preferred shares or through other transactions, such as reverse repurchase agreements, which have the effect of financial leverage. Each of BOI and HTR currently employ leverage through the use of reverse repurchase agreements while HHY currently employs leverage through the use of bank borrowings.

 

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BOI seeks to achieve its investment objective by investing primarily in Mortgage-Related Investments. Under normal market conditions, as a principal strategy, at least 80% of the Fund’s Managed Assets will be invested in Mortgage-Related Investments. The Fund normally expects to invest at least 50% of its Managed Assets in Mortgage-Related Investments tied to residential mortgages. Exposure to Mortgage-Related Investments through derivatives may be considered investments in Mortgage-Related Investments for purposes of these policies. The Fund may invest in securities of any credit quality, including securities that are unrated with respect to Mortgage-Related Investments.

 

HTR invests 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;

 

·                   RMBS and CMBS rated BBB-and above;

 

·                   Up to 25% of the Fund’s total asset may be invested in real estate related asset-backed securities rated BBB-and above; and

 

·                   Cash.

 

HTR may invest the remaining 60% of its 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 RMBS. The Fund’s limitation on investment in subprime RMBS 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 FLTs”) 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;

 

12

 

·                   Up to 10% of the Fund’s total assets may be invested in B-Notes and Mezzanine Loans subject to a 5% issuer limit; and

 

·                   Futures Contracts and Related Options and Eurodollar Futures Contracts and Options on Futures Contracts.

 

HTR will normally invest at least 25% of its total assets in privately issued mortgage backed securities.

 

HHY, under normal market conditions, will invest at least 65% of its total assets in high yield bonds, debentures, notes, corporate loans, convertible debentures, and other debt instruments rated below investment grade (lower than Baa by Moody’s or lower than BBB by S&P, or comparably rated by another rating agency), or unrated but determined by the Adviser to be of comparable quality (collectively, “High Yield Obligations”).  Lower grade income securities are commonly known as “junk bonds.” Except with respect to 10% of its total assets, the debt securities purchased by the Fund will be rated, at the time of investment, above CCC (or a comparable rating) by at least one Rating Agency or, if unrated, determined by the Adviser to be of comparable quality.

 

Investment Grade Securities .  RA, HHY and HTR may each invest in investment grade securities to the extent it does not violate their primary investment strategies.  In addition, with respect to HHY, in certain market conditions, the Adviser may determine that securities rated investment grade offer significant opportunities for high income and capital growth and in such conditions, HHY may invest less than 65% of its total assets in High Yield Obligations.  BOI has no stated policy with respect to such investments.

 

Distressed Securities .  RA and HHY may each invest up to 10% of their total assets in distressed securities of corporate issuers which include securities: issued by a company in a bankruptcy reorganization proceeding; subject to some other form of public or private debt restructuring; otherwise in default or in significant risk of being in default as to the payment of interest or repayment of principal; or trading at prices substantially below other below investment grade debt securities of companies in similar industries. HTR and BOI have no stated policy with respect to such investments.

 

Non-U.S. Securities .  RA may invest without limitation in foreign securities. HHY may invest up to 30% of its total assets in the securities of issuers that are denominated in foreign currencies or multinational currency units, including in emerging markets.  HTR has no stated policy with respect to such investments. BOI may invest up to 10% of its Managed Assets in securities or instruments of issuers domiciled or organized in jurisdictions other than the United States (“foreign issuers”), except that the Fund may invest without limitation in securities or instruments of foreign issuers of MBS if the underlying mortgages are located in the United States or its territories

 

Equity Securities .  RA may invest up to 35% of its Managed Assets in equity securities. HHY may invest up to 35% of its total assets in equity securities, including common and preferred stocks, securities convertible into equity securities, and rights and warrants to purchase any of the foregoing.  HTR and BOI have no stated policy with respect to such investments.

 

Average Effective Portfolio Maturity .  None of the Funds have restrictions with respect to average effective portfolio maturity.

 

Leverage .  RA and BOI may issue preferred shares or borrow money and issue debt securities (“traditional leverage”) with an aggregate liquidation preference and aggregate principal amount up to 33 1/3% of each Fund’s Managed Assets. In addition, RA and BOI may enter into reverse repurchase agreements, swaps, futures, securities lending, or short sales, that may provide leverage (collectively referred to as “effective leverage”). Although certain forms of effective leverage used by RA and BOI may not be considered senior securities under the 1940 Act, such effective leverage will be considered leverage for such Fund’s leverage limits. RA’s and BOI’s total leverage, either through traditional leverage or effective leverage, will not exceed 38% of such Fund’s Managed Assets.  HHY may utilize financial leverage in an amount equal to approximately 30% of its total assets (including the amount obtained through leverage).  HTR may, subject to applicable law and the maintenance limitations for preferred shares, obtain leverage through reverse repurchase agreements, secured bank lines of credit and other various forms of borrowing.

 

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Each of BOI and HTR currently employ leverage through the use of reverse repurchase agreements while HHY currently employs leverage through the use of bank borrowings.

 

Derivatives .  RA, HHY and BOI do not have any stated limitation with respect to derivatives.  With respect to HTR, up to 15% of the Fund’s total assets may be invested in 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 IO and PO stripped mortgage-backed securities, INV FLTs and IIO stripped mortgage-backed securities.  Up to 20% of HTR’s total assets may be invested in credit default swaps and total rate of return swaps subject to a 5% counterparty limit.  HTR also may invest in futures contracts and related options and Eurodollar futures contracts and options on futures contracts.

 

Short - Selling .  Except for short sales against the box, RA and BOI will not sell short more than 10% of their Managed Assets and the market value for the securities sold short of any one issuer will not exceed 5% of such issuer’s voting securities. In addition, RA and BOI may not make short sales or maintain a short position if it would cause more than 25% of such Fund’s Managed Assets, taken at market value, to be held as collateral for such sales. Except with respect to short sales against the box, HHY will not sell short if after effect is given to any such short sale, the total market value of all securities sold short would exceed 25% of the value of its net assets, and will not make a short sale which results in the Fund having sold short in the aggregate more than 5% of the outstanding securities of any class of an issuer.  All of the Funds may make short sales against the box without respect to such limitations.  HTR may not, except in the case of short sales against the box, make any short sale of securities, unless, after giving effect to such sale, the market value of all securities sold short does not exceed 10% of the value of the Fund’s total assets and the Fund’s aggregate short sale of a particular class of securities does not exceed 25% of the then outstanding securities of that class.

 

A more detailed description of the Funds’ investment objectives and comparison of significant investment policies, other investment strategies and investment approaches is set forth in the tables below.

 

Investment Objectives:

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
Investment Objectives		Investment Objectives		Investment Objectives		Investment Objectives
RA’s investment objective is to seek high total return, through high current income and growth of capital.		BOI’s investment objective is to provide high total investment return by providing a high level of current income and the potential for capital appreciation.		HTR’s primary investment objective is to provide high total return, including short- and long-term capital gains and a high level of current income, through the management of a portfolio of securities.		HHY’s primary investment objective is to seek high current income. The Fund also seeks capital growth as a secondary objective to the extent consistent with its objective of seeking high current income		The Acquiring Fund, HTR and BOI each seek total return through current income, with the Acquiring Fund and BOI also seeking growth of capital. HHY seeks high current income as a primary objective and seeks growth of capital as a secondary objective.

 

Investment Policies:

 

RA
(Acquiring Fund)		BOI		HTR		HHY		Differences
Primary Investment		Primary Investment		Primary Investment		Primary Investment		Primary Investment
Strategies		Strategies		Strategies		Strategies		Strategies
The Fund seeks to achieve its investment objective by investing primarily in the securities and other instruments of Real Asset Companies and Issuers, which includes the following categories: ·      Real Estate;		The Fund seeks to achieve its investment objective by investing primarily Mortgage-Related Investments. Under normal market conditions, as a principal strategy, at least 80% of the Fund’s Managed Assets will be invested in Mortgage-Related		The Fund 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; ·   RMBS and CMBS rated BBB-and above; ·    Up to 25% of the		Under normal market conditions, the Fund will invest at least 65% of its total assets in high yield bonds, debentures, notes, corporate loans, convertible debentures, and other debt instruments rated below investment grade (lower than Baa by Moody’s or		The primary investment strategy of the Acquiring Fund differs from those of the Target Funds. The Acquiring Fund seeks to achieve its investment objective by investing primarily in the “real assets” asset class and will invest to a significant degree in the fixed

 

14

 

RA
(Acquiring Fund)		BOI		HTR		HHY		Differences
·    Infrastructure; and ·    Natural Resources (collectively, “Real Asset Companies and Issuers”).   Under normal market conditions, RA will invest at least 80% of its Managed Assets in the securities and other instruments of Real Asset Companies and Issuers (the “80% Policy”). RA may change the 80% Policy without shareholder approval upon at least 60 days’ prior written notice to shareholders. RA normally expects to invest at least 65% of its Managed Assets in fixed income securities of Real Asset Companies and Issuers and in derivatives and other instruments that have economic characteristics similar to such securities. RA actively trades portfolio securities. RA may invest in securities of companies or issuers of any size market capitalization. RA will invest in companies or issuers located throughout the world and there is no limitation on RA’s investments in foreign securities or instruments or in emerging markets. RA has flexibility in the relative weightings given to each of the Real Asset categories. In addition, RA may, in the future, invest in additional Real Asset investment categories other than those listed herein, to the extent consistent with its name. RA may invest without limit in investment grade and below investment grade, high yield fixed income securities (commonly referred to as “junk bonds”).   RA may also invest in restricted (“144A”) or private securities, ABS,		Investments (the “80% Policy”). The Fund may change the 80% Policy without shareholder approval upon at least 60 days’ prior written notice to shareholders. The Fund normally expects to invest at least 50% of its Managed Assets in Mortgage-Related Investments tied to residential mortgages. Exposure to Mortgage-Related Investments through derivatives may be considered investments in Mortgage-Related Investments for purposes of these policies. The Fund may invest in securities of any credit quality, including securities that are unrated with respect to Mortgage-Related Investments.		Fund’s total asset may be invested in real estate related asset-backed securities rated BBB-and above; and ·    Cash.   The Fund may invest the remaining 60% of its 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 RMBS. The Fund’s limitation on investment in subprime RMBS 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		lower than BBB by S&P, or comparably rated by another rating agency), or unrated but determined by the Adviser to be of comparable quality (collectively, “High Yield Obligations”). Lower grade income securities are commonly known as “junk bonds.” Except with respect to 10% of its total assets, the debt securities purchased by the Fund will be rated, at the time of investment, above CCC (or a comparable rating) by at least one Rating Agency or, if unrated, determined by the Adviser to be of comparable quality.		income securities of companies in the real estate, infrastructure, and natural resources sectors, and in derivatives and other instruments that have economic characteristics similar to such securities. Under this strategy, the Acquiring Fund may hold a broader range of securities than the Target Funds. BOI seeks to achieve its investment objective by investing primarily in mortgage-related debt securities and other mortgage-related investments. HTR seeks to achieve its investment objective by investing primarily in mortgage-backed and asset-backed securities and high-yield corporate securities. While BOI and HTR each invest to a large degree in securities in the real estate sector, HHY invests predominantly in high yield corporate securities without regard to any specific sector. Specifically, HHY seeks to achieve its investment objective by investing at least 65% of its total assets in high yield bonds, debentures, notes, corporate loans, convertible debentures and other debt instruments rated below-investment grade (lower than Baa by Moody’s or lower than BBB by S&P, or comparably rated by another Rating Agency, or unrated but determined by the Adviser to be of comparable quality (also known as “junk bonds”). Except with respect to up to 10% of its total assets, the debt securities purchased by HHY will be rated, at the time of investment, at least CCC (or a comparable rating) by at least one Rating Agency or, if unrated, determined by the Adviser to be of comparable quality. HHY may invest up to 30% of its total assets in the securities, including high

 

15

 

RA
(Acquiring Fund)		BOI		HTR		HHY		Differences
including Mortgage-Related Investments, collateralized loan obligations, bank loans (including participations, assignments, senior loans, delayed funding loans and revolving credit facilities), exchange-traded notes, and securities issued and/or guaranteed by the U.S. Government, its agencies or instrumentalities or sponsored corporations. RA considers Mortgage-Related Investments to consist of, but not be limited to, MBS of any kind; interests in loans and/or whole loan pools of mortgages, loans or other instruments used to finance long-term infrastructure, industrial projects and public services; mortgage REITs; ABS that are backed by interest in real estate, land or other types of assets; and securities and other instruments issued by mortgage servicers. RA’s investments in MBS may include RMBS or CMBS.   RA may invest in fixed income securities of any maturity. The securities RA may invest in may have fixed, floating or variable rates. RA may also invest up to 35% of its Managed Assets in equities, including common stock, preferred stock, convertible stock, and open-end and closed-end investment companies, including exchange-traded funds.   RA may invest up to 20% of its Managed Assets in fixed income securities other than those of Real Asset Companies and Issuers, including in TIPS and other inflation-linked fixed income securities.   The Adviser will determine RA’s strategic allocation with respect to its equity and fixed income investments as well as its strategic				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; and ·    Futures Contracts and Related Options and Eurodollar Futures Contracts and Options on Futures Contracts.   The Fund will normally invest at least 25% of its total assets in privately issued mortgage backed securities.				yield obligations, of issuers domiciled outside of the United States. HHY may also invest up to 10% of its total assets in securities that are the subject of bankruptcy proceedings or that are in default.

 

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RA (Acquiring Fund)		BOI		HTR		HHY		Differences
allocation with respect to its investment sub-portfolios.
Concentration		Concentration		Concentration		Concentration		Concentration
The Fund will invest more than 25% of its net assets (plus the amount of any borrowings for investment purposes) in investments offering exposure to Real Assets, which includes Real Estate Securities, Infrastructure Securities, and Natural Resources Securities, as defined in this Joint Proxy Statement/Prospectus.		The Fund will invest more than 25% of its net assets (plus the amount of any borrowings for investment purposes) in privately issued mortgage backed securities.		The Fund will normally invest at least 25% of its total assets in privately issued mortgage backed securities.		The Fund may not purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities) if, as a result, 25% or more of the Fund’s total assets would be invested in the securities of companies whose principal business activities are in the same industry.		RA has a policy to concentrate in investments offering exposure to real assets. BOI and HTR have a policy to concentrate in privately issued MBS. HHY has a policy not to concentrate.
Investment Grade Securities		Investment Grade Securities		Investment Grade Securities		Investment Grade Securities		Investment Grade Securities
The Fund may invest in investment grade corporate securities, including debt securities, convertible securities and preferred stock, as well as investment grade issues of real estate investment trusts, including debt securities, convertible securities and preferred stock.		No policy stated.		The Fund may invest in investment grade corporate securities, including debt securities, convertible securities and preferred stock, as well as investment grade issues of real estate investment trusts, including debt securities, convertible securities and preferred stock.		In certain market conditions, the Adviser may determine that securities rated investment grade (i.e., at least Baa by Moody’s or BBB by S&P or comparably rated by another rating agency) offer significant opportunities for high income and capital growth. In such conditions, the Fund may invest less than 65% of its total assets in High Yield Obligations.		The Acquiring Fund and HTR have substantially similar policies. HHY may invest in investment grade securities to a lesser extent. BOI has no stated policy.
Distressed Securities		Distressed Securities		Distressed Securities		Distressed Securities		Distressed Securities
The Fund may invest up to 10% of its total assets in securities of corporate issuers that are the subject of bankruptcy proceedings or in default as to payment of principal and/or interest or in significant risk of being in such default, or that are rated in the lower rating categories (Ca or lower by Moody’s and CC or lower by S&P) or which, if unrated, are in the judgment of the Adviser of equivalent quality (collectively, “Distressed Securities”).		No policy stated.		No policy stated.		The Fund may invest up to 10% of its total assets in securities of corporate issuers that are the subject of bankruptcy proceedings or in default as to payment of principal and/or interest or in significant risk of being in such default, or that are rated in the lower rating categories (Ca or lower by Moody’s and CC or lower by S&P) or which, if unrated, are in the judgment of the Adviser of equivalent quality (collectively, “Distressed Securities”).		The Acquiring Fund and HHY have substantially similar policies. HTR and BOI have no stated policy.

 

17

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
Non-U.S. Securities		Non-U.S. Securities		Non-U.S. Securities		Non-U.S. Securities		Non-U.S. Securities
The Fund may invest, without limitation, in foreign securities or in emerging markets.		The Fund may invest up to 10% of its Managed Assets in securities or instruments of issuers domiciled or organized in jurisdictions other than the United States (“foreign issuers”), except that the Fund may invest without limitation in securities or instruments of foreign issuers of MBS if the underlying mortgages are located in the United States or its territories.		No policy stated.		The Fund may invest up to 30% of its total assets in the securities, including High Yield Obligations, of issuers that are denominated in foreign currencies or multinational currency units, including in emerging markets.		The Acquiring Fund may invest in non-U.S. securities without limitation. BOI and HTR may invest in non-U.S. securities subject to limitations. HTR has no stated policy.
Equity Securities		Equity Securities		Equity Securities		Equity Securities		Equity Securities
The Fund may invest up to 35% of its Managed Assets in equity securities.		No policy stated.		No policy stated.		The Fund may invest up to 35% of its total assets in equity securities, including preferred stocks, common stocks, securities convertible into common stocks or rights or warrants to subscribe for or purchase any of the foregoing. If the Fund holds such investments as a result of purchase of unit offerings of debt securities which include such securities or in connection with an actual or proposed conversion or exchange of debt securities, the Fund will treat such investments, together with any holdings of convertible securities, as debt securities for purposes of its policy to invest at least 65% of its total assets, under normal circumstances, in High Yield Obligations.		The Acquiring Fund and HHY have substantially similar policies. HTR and BOI have no stated policy.
Defensive and Temporary Investments		Defensive and Temporary Investments		Defensive and Temporary Investments		Defensive and Temporary Investments		Defensive and Temporary Investments
When adverse market or economic conditions occur, the Fund may temporarily invest all or a portion of its assets in defensive investments that are short-term and liquid. Such investments include U.S. government securities, certificates of deposit, banker’s acceptances, time deposits, repurchase agreements, and other high quality debt instruments. When		Although under normal market conditions the Fund intends to invest at least 80% of its Managed Assets in securities of Mortgage-Related Investments, when a temporary defensive posture is believed by the Investment Adviser to be warranted (“temporary defensive periods”), the Fund may without limitation hold cash or invest its assets in money market instruments and		No policy stated.		The Fund may implement various temporary “defensive” strategies at times when the Adviser determines that conditions in the markets make pursuing the Fund’s basic investment strategy inconsistent with the best interests of its shareholders. These strategies may include investing all or a portion of the Fund’s assets in higher-quality debt securities. During all		The Acquiring Fund, BOI and HHY have substantially similar policies. HTR has no stated policy.

 

18

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
following a defensive strategy, the Fund will be less likely to achieve its investment objective.		repurchase agreements in respect of those instruments. The money market instruments in which the Fund may invest are obligations of the U.S. government, its agencies or instrumentalities; commercial paper rated A-1 or higher by S&P or Prime-1 by Moody’s; and certificates of deposit and bankers’ acceptances issued by domestic branches of U.S. banks that are members of the Federal Deposit Insurance Corporation. During temporary defensive periods, the Fund may also invest to the extent permitted by applicable law in shares of money market mutual funds.				periods when less than 65% of the Fund’s total assets are invested in High Yield Obligations, the Fund’s yield may be expected to be lower than if at least 65% of the Fund’s total assets were invested in High Yield Obligations.
Diversification		Diversification		Diversification		Diversification		Diversification
The Fund is “diversified” under the 1940 Act.		The Fund is “diversified” under the 1940 Act.		The Fund is “diversified” under the 1940 Act.		The Fund is “diversified” under the 1940 Act.		The Acquiring Fund and the Target Funds have identical policies.
Average Effective Portfolio Maturity		Average Effective Portfolio Maturity		Average Effective Portfolio Maturity		Average Effective Portfolio Maturity		Average Effective Portfolio Maturity
No restrictions.		No restrictions.		No restrictions.		No restrictions.		The Acquiring Fund and the Target Funds have identical policies.
Leverage		Leverage		Leverage		Leverage		Leverage
The Fund currently intends to use leverage to seek to achieve its investment objective. The Fund currently anticipates obtaining leverage through reverse repurchase agreements and through borrowings from banks and/or other financial institutions. The Fund may issue preferred shares or borrow money and issue debt securities (“traditional leverage”) with an aggregate liquidation preference and aggregate principal amount up to 33 1/3% of the Fund’s Total Assets. In addition, the Fund may enter into reverse repurchase agreements, swaps, futures, securities lending, or short sales, that may provide leverage (collectively referred to as		The Fund currently intends to use leverage to seek to achieve its investment objective. The Fund currently anticipates obtaining leverage through reverse repurchase agreements and through borrowings from banks and/or other financial institutions. The Fund may issue preferred shares or borrow money and issue debt securities (“traditional leverage”) with an aggregate liquidation preference and aggregate principal amount up to 33 1/3% of the Fund’s Total Assets. In addition, the Fund may enter into reverse repurchase agreements, swaps, futures, securities lending, or short sales, that may provide leverage (collectively referred to as		The Fund intends, subject to applicable law and the maintenance limitations for preferred shares, to obtain leverage through reverse repurchase agreements, secured bank lines of credit and other various forms of borrowing. The Fund may, but does not currently intend, to offer preferred shares under a separate prospectus for an aggregate offering price not currently expected to exceed 50% of the value of the Fund’s net assets to raise a portion of its capital and to provide investment leverage.		The Fund expects to utilize financial leverage through borrowings, including a credit facility, the issuance of debt securities, or the issuance of preferred shares or through other transactions, such as reverse repurchase agreements, which have the effect of financial leverage. The Fund currently intends to continue to utilize financial leverage in an amount equal to approximately 30% of its total assets (including the amount obtained through leverage). The Fund is permitted to use leverage in a maximum amount equal to 33 1/3% of its total assets. The Fund, with the approval of its Board of Directors,		The Acquiring Fund and BOI have identical policies. The Acquiring Fund and HTR and HHY each have substantially similar policies.

 

19

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
“effective leverage”). Although certain forms of effective leverage used by the Fund may not be considered senior securities under the 1940 Act, such effective leverage will be considered leverage for the Fund’s leverage limits. The Fund’s total leverage, either through traditional leverage or effective leverage, will not exceed 38% of the Fund’s Managed Assets. The use of leverage is subject to numerous risks. RA, with the approval of its Board, including its Independent Directors, has entered into a financing package that includes a Commitment Facility Agreement (the “BNP Agreement”) with BNP Paribas Prime Brokerage, Inc. that allows RA to borrow up to 33 1/3 of its total assets. If the Reorganizations had taken place as of March 31, 2016, RA would have had borrowings under the BNP Agreement representing approximately 6.35% of its Total Assets. Borrowings under the BNP Agreement are secured by assets of RA that are held with RA’s custodian in a separate account and reverse repurchase agreements. Interest is charged in the amount of .80% plus 3 month LIBOR (London Inter-bank Offered Rate), i.e., .80% on the amount borrowed and .80% on the unused amount.		“effective leverage”). Although certain forms of effective leverage used by the Fund may not be considered senior securities under the 1940 Act, such effective leverage will be considered leverage for the Fund’s leverage limits. The Fund’s total leverage, either through traditional leverage or effective leverage, will not exceed 38% of the Fund’s Managed Assets. The use of leverage is subject to numerous risks.				including its independent Directors, has entered into a financing package that includes a Commitment Facility Agreement (the “BNP Agreement”) with BNP Paribas Prime Brokerage, Inc. that allows the Fund to borrow up to 33 1/3% of its total assets. As of March 31, 2016, the Fund had borrowings under the BNP Agreement representing approximately 27.94% of the Fund’s total assets. Borrowings under the BNP Agreement are secured by assets of the Fund that are held with the Fund’s custodian in a separate account. Interest is charged at the 3 month LIBOR (London Inter-bank Offered Rate) plus up to .80% on the amount borrowed and up to .80% on the unused amount.
Zero Coupon, Pay- in- Kind and Deferred Payment Securities		Zero Coupon, Pay- in- Kind and Deferred Payment Securities		Zero Coupon, Pay- in- Kind and Deferred Payment Securities		Zero Coupon, Pay- in- Kind and Deferred Payment Securities		Zero Coupon, Pay- in- Kind and Deferred Payment Securities
The Fund may invest in zero coupon bonds, deferred interest bonds, and bonds on which the interest is payable in —kind.		The Fund may invest in zero coupon bonds, deferred interest bonds, and bonds on which the interest is payable in —kind.		No stated policy.		The Fund may invest in zero coupon, pay-in-kind and deferred payment securities, including those that are lower grade securities.		The Acquiring Fund, BOI and HHY have substantially similar policies, with the exception that HHY may invest in lower grade

 

20

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
								securities. HTR has no stated policy.
Corporate Loans		Corporate Loans		Corporate Loans		Corporate Loans		Corporate Loans
The Fund may invest in primary or secondary market purchases of loans or participation interests in loans extended to corporate borrowers or sovereign governmental entities by commercial banks and other financial institutions.		No stated policy.		No stated policy.		The Fund may invest in primary or secondary market purchases of loans or participation interests in loans extended to corporate borrowers or sovereign governmental entities by commercial banks and other financial institutions.		The Acquiring Fund and HHY have substantially similar policies. HTR and BOI have no stated policy.
Corporate Bonds		Corporate Bonds		Corporate Bonds		Corporate Bonds		Corporate Bonds
[The Fund may invest in corporate bonds.]		The Fund may invest in corporate bonds.		The Fund may invest in corporate bonds.		No stated policy.		The Acquiring Fund, HTR and BOI have substantially similar policies. HHY has no stated policy.
Mortgage-Related Securities		Mortgage-Related Securities		Mortgage-Related Securities		Mortgage-Related Securities		Mortgage-Related Securities
The Fund may invest in mortgage-related securities.		The Fund may invest in mortgage-related securities.		The Fund may invest in mortgage-related securities.		The Fund may invest in mortgage-related securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
Asset-Backed Securities		Asset-Backed Securities		Asset-Backed Securities		Asset-Backed Securities		Asset-Backed Securities
The Fund may invest in asset- backed securities.		The Fund may invest in asset- backed securities.		The Fund may invest in asset- backed securities.		The Fund may invest in asset- backed securities.		BOI and HTR focus on mortgage-related securities. RA and HHY may invest in mortgage-related securities.
Preferred Stock		Preferred Stock		Preferred Stock		Preferred Stock		Preferred Stock
The Fund may invest in preferred stock.		The Fund may invest in preferred stock.		The Fund may invest in preferred stock.		The Fund may invest in preferred stock.		The Acquiring Fund and the Target Funds have substantially similar policies.
Convertible Securities		Convertible Securities		Convertible Securities		Convertible Securities		Convertible Securities
The Fund may invest in convertible securities.		The Fund may invest in convertible securities.		The Fund may invest in convertible securities.		The Fund may invest in convertible securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
U.S. Government Securities		U.S. Government Securities		U.S. Government Securities		U.S. Government Securities		U.S. Government Securities
The Fund may invest in U.S. Government securities.		The Fund may invest in U.S. Government securities.		The Fund may invest in U.S. Government securities.		The Fund may invest in U.S. Government securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
Municipal Obligations		Municipal Obligations		Municipal Obligations		Municipal Obligations		Municipal Obligations
The Fund may invest in municipal obligations.		The Fund may invest in municipal obligations.		No stated policy.		The Fund may invest in municipal obligations.		RA, HHY and BOI may invest in municipal obligations. HTR have no

 

21

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
								stated policy.
Illiquid and Restricted Securities		Illiquid and Restricted Securities		Illiquid and Restricted Securities		Illiquid and Restricted Securities		Illiquid and Restricted Securities
The Fund may invest in illiquid and restricted securities.		The Fund may invest in illiquid and restricted securities.		The Fund may invest in illiquid and restricted securities.		The Fund may invest without limit in obligations for which no readily available market exists or which are otherwise illiquid, subject to the Fund’s policy of not investing in excess of 30% of the Fund’s assets in foreign securities or in excess of 10% of its assets in Distressed Securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
Derivatives		Derivatives		Derivatives		Derivatives		Derivatives
The Fund may purchase and sell derivative instruments such as exchange-listed and over-the-counter put and call options on securities, financial futures, equity, fixed-income and interest rate indices, and other financial instruments. It may purchase and sell financial futures contracts and options thereon. Moreover, the Fund may enter into various interest rate transactions such as swaps, caps, floors or collars and enter into various currency transactions such as currency forward contracts, currency futures contracts, currency swaps or options on currency or currency futures or credit transactions and credit default swaps. The Fund may also purchase derivative instruments that combine features of several of these instruments. The Fund may invest in, or enter into, derivatives for a variety of reasons, including to hedge certain market risks, to provide a substitute for purchasing or selling particular securities or to increase potential income gain.		The Fund may use various derivative strategies involving the purchase or sale of credit default swaps, total return swaps and other swap agreements, futures and options on securities, indices and currencies, forward foreign currency exchange contracts and other derivatives. The Fund may use derivatives for a variety of purposes, including: as a hedge against adverse changes in the market prices of securities, interest rates or currency exchange rates; as a substitute for purchasing or selling securities; to increase the Fund’s return as a non-hedging strategy that may be considered speculative; and to manage the Fund’s portfolio characteristics.		Up to 15% of the Fund’s total assets may be invested in 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 IO and principal-only PO stripped mortgage-backed securities, INV FLTs and 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. The Fund may invest in Futures Contracts and Related Options and Eurodollar Futures Contracts and Options on Futures Contracts.		The Fund may purchase and sell derivative instruments such as exchange-listed and over-the-counter put and call options on securities, financial futures, equity, fixed-income and interest rate indices, and other financial instruments. It may purchase and sell financial futures contracts and options thereon. Moreover, the Fund may enter into various interest rate transactions such as swaps, caps, floors or collars and enter into various currency transactions such as currency forward contracts, currency futures contracts, currency swaps or options on currency or currency futures or credit transactions and credit default swaps. The Fund may also purchase derivative instruments that combine features of several of these instruments. The Fund may invest in, or enter into, derivatives for a variety of reasons, including to hedge certain market risks, to provide a substitute for purchasing or selling particular securities or to increase potential income gain.		The Acquiring Fund, BOI and HHY have no stated limitation with respect to derivatives. HTR is limited to investing up to 15% of the Fund’s total assets in Derivative RMBS and up to 20% in credit default swaps and total rate of return swaps, subject to a 5% counterparty limit. HTR may also invest in futures contracts and related options and Eurodollar futures contracts and options on futures contracts.

 

22

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
Reverse Repurchase Agreements		Reverse Repurchase Agreements		Reverse Repurchase Agreements		Reverse Repurchase Agreements		Reverse Repurchase Agreements
The Fund may invest in reverse repurchase agreements.		The Fund may invest in reverse repurchase agreements.		The Fund may invest in reverse repurchase agreements.		The Fund may invest in reverse repurchase agreements.		The Acquiring Fund and the Target Funds have substantially similar policies.
Repurchase Agreements		Repurchase Agreements		Repurchase Agreements		Repurchase Agreements		Repurchase Agreements
The Fund may invest in repurchase agreements.		The Fund may invest in repurchase agreements.		The Fund may invest in repurchase agreements.		The Fund may invest in repurchase agreements.		The Acquiring Fund and the Target Funds have substantially similar policies.
Securities Lending		Securities Lending		Securities Lending		Securities Lending		Securities Lending
The Fund may lend portfolio securities.		The Fund may lend portfolio securities.		The Fund may lend portfolio securities.		The Fund may lend portfolio securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
Collateralized Loan Obligations		Collateralized Loan Obligations		Collateralized Loan Obligations		Collateralized Loan Obligations		Collateralized Loan Obligations
The Fund may invest in collateralized loan obligations.		The Fund may invest in collateralized loan obligations.		No stated policy		The Fund may invest in collateralized loan obligations.		The Acquiring Fund, BOI and HHY have substantially similar policies. HTR has no stated policy.
Variable and Floating Rate Securities		Variable and Floating Rate Securities		Variable and Floating Rate Securities		Variable and Floating Rate Securities		Variable and Floating Rate Securities
The Fund may invest in variable and floating rate securities.		The Fund may invest in variable and floating rate securities.		The Fund may invest in variable and floating rate securities.		The Fund may invest in variable and floating rate securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
Stripped Securities		Stripped Securities		Stripped Securities		Stripped Securities		Stripped Securities
The Fund may invest in stripped securities.		The Fund may invest in stripped securities.		The Fund may invest in stripped securities.		The Fund may invest in stripped securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
Bank Obligations		Bank Obligations		Bank Obligations		Bank Obligations		Bank Obligations
The Fund may invest in bank obligations.		The Fund may invest in bank obligations.		No stated policy.		The Fund may invest in bank obligations.		The Acquiring Fund, BOI and HHY have substantially similar policies. HTR has no stated policy.
Commercial Paper		Commercial Paper		Commercial Paper		Commercial Paper		Commercial Paper
The Fund may invest in commercial paper.		The Fund may invest in commercial paper.		No stated policy		The Fund may invest in commercial paper.		The Acquiring Fund, BOI and HHY have substantially similar policies. HTR has no stated policy.
Other Short-Term Corporate Obligations		Other Short-Term Corporate Obligations		Other Short-Term Corporate Obligations		Other Short-Term Corporate Obligations		Other Short-Term Corporate Obligations
The Fund may invest in other short-term corporate		The Fund may invest in variable or floating rate		No stated policy		The Fund may invest in other short-term corporate		The Acquiring Fund, BOI and HHY have

 

23

 

RA (Acquiring Fund)		BOI		HTR		HHY		Differences
obligations, which include variable amount master demand notes, which are obligations that permit the Fund to invest fluctuating amounts at varying rates of interest pursuant to direct arrangements between the Fund, as lender, and the borrower.		demand notes issued by corporations, bank holding companies, and financial institutions, as well as variable rate master demand notes.				obligations, which include variable amount master demand notes, which are obligations that permit the Fund to invest fluctuating amounts at varying rates of interest pursuant to direct arrangements between the Fund, as lender, and the borrower.		substantially similar policies. HTR has no stated policy.
Private Placements		Private Placements		Private Placements		Private Placements		Private Placements
The Fund may invest in private placements.		The Fund may invest in private placements.		The Fund may invest in private placements.		No stated policy.		The Acquiring Fund, HTR and BOI have substantially similar policies. HHY has no stated policy.
Short-Selling		Short-Selling		Short-Selling		Short-Selling		Short-Selling
The Fund may engage in short-selling. The Fund may from time to time make short sales of securities, including short sales “against the box.” Except for short sales against the box, the Fund will not sell short more than 10% of the Fund’s Managed Assets and the market value for the securities sold short of any one issuer will not exceed 5% of such issuer’s voting securities. In addition, the Fund may not make short sales or maintain a short position if it would cause more than 25% of the Fund’s Managed Assets, taken at market value, to be held as collateral for such sales. The Fund may make short sales against the box without respect to such limitations.		The Fund may engage in short-selling. The Fund may from time to time make short sales of securities, including short sales “against the box.” Except for short sales against the box, the Fund will not sell short more than 10% of the Fund’s Managed Assets and the market value for the securities sold short of any one issuer will not exceed 5% of such issuer’s voting securities. In addition, the Fund may not make short sales or maintain a short position if it would cause more than 25% of the Fund’s Managed Assets, taken at market value, to be held as collateral for such sales. The Fund may make short sales against the box without respect to such limitations.		The Fund may engage in short-selling. The Fund may not, except in the case of short sales against the box, make any short sale of securities, unless, after giving effect to such sale, the market value of all securities sold short does not exceed 10% of the value of the Fund’s total assets and the Fund’s aggregate short sale of a particular class of securities does not exceed 25% of the then outstanding securities of that class.		The Fund may engage in short-selling. Except for short sales against the box, the Fund will not sell short if, after effect is given to any such short sale, the total market value of all securities sold short would exceed 25% of the value of the Fund’s net assets. The Fund may not make a short sale which results in the Fund having sold short in the aggregate more than 5% of the outstanding securities of any class of an issuer. The Fund may make short sales against the box without respect to such limitations.		The Acquiring Fund and BOI have substantially similar policies. Except with respect to short sales against the box, HHY and HTR have policies on the amount of allowable short sales which differ from the Acquiring Fund. The Acquiring Fund and each of the Target Funds may make short sales against the box without limitation.
Forward Commitments; When-Issued Securities		Forward Commitments; When-Issued Securities		Forward Commitments; When-Issued Securities		Forward Commitments; When-Issued Securities		Forward Commitments; When-Issued Securities
The Fund may invest in forward commitments and when-issued securities.		The Fund may enter into forward commitments for the purchase or sale of securities, including on a “when issued” or “delayed delivery” basis.		The Fund may purchase securities on a “when-issued” basis and may purchase or sell securities on a “forward commitment” basis.		The Fund may invest in forward commitments and when-issued securities.		The Acquiring Fund and the Target Funds have substantially similar policies.
REITs		REITs		REITs		REITs		REITs
The Fund may invest in REITs.		The Fund may invest in mortgage REITs and other REITs. The Fund will not invest more than		The Fund may invest in debt securities, convertible securities and preferred stock issued by		No stated policy.		The Acquiring Fund has no stated limitations on investment in REITs. HTR is limited to

 

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