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Memos from Howard Marks: Ruminating on Asset AllocationNew York, NY – October 10, 2017 – Brookfield Asset Management’s Public Securities Group today announced that it has entered into a definitive agreement to acquire Center Coast Capital Holdings, LLC, an affiliate of Center Coast Capital Advisors, LP (“CCC”), a Houston-based SEC-registered investment adviser focusing on energy infrastructure investments, including master limited partnerships (“MLPs”), with over $4 billion in assets under management. In conjunction with the transaction, Brookfield also will acquire certain assets of Liberty Street Advisors, Inc. (“Liberty Street”), a New York-based SEC-registered investment adviser that serves as the investment adviser to the Liberty Street family of funds. Additionally, Brookfield will acquire certain assets of Liberty Street’s affiliates, HRC Fund Associates, LLC and HRC Portfolio Solutions, LLC (collectively, “HRC”), a New York-based third-party marketing and servicing agent of CCC products to financial advisors and wealth managers at major wire houses, independent registered investment advisers and independent broker-dealers. Financial terms were not disclosed.
Founded in 2007, CCC manages energy infrastructure assets with an investment process focused on due diligence from an owner-operator perspective. CCC invests in a portfolio of MLPs and other high-quality energy infrastructure companies through the following products: Center Coast MLP Focus Fund (CCCAX) (CCCCX) (CCCNX) (the “Focus Fund”); Center Coast MLP & Infrastructure Fund (NYSE: CEN); separately managed accounts; and other investment funds. Liberty Street has served as the investment adviser to the Focus Fund since its inception on December 31, 2010, and HRC has served as the marketing and servicing agent to wealth management channels for CCC products since 2011, and also serves as the shareholder servicing agent to the Center Coast MLP & Infrastructure Fund. Following the completion of the transaction, both HRC’s marketing business and Liberty Street’s advisory business with respect to the Liberty Street family of mutual funds will continue.
The acquisition of CCC will strengthen and expand Brookfield’s business and research capability, diversifying its real asset public securities investment offerings, which currently focus on real estate equities, infrastructure equities, real asset solutions and real asset debt. In addition, with the acquisition of certain HRC assets related to CCC, Brookfield will broaden its national retail distribution capability that markets its suite of public securities investment funds. CCC will benefit from Brookfield’s strong distribution relationships and the continued development of its investment team, while broadening its product offerings.
The CCC investment team, led by Dan Tutcher, Rob Chisholm and Jeff Jorgensen, will remain based in Houston and continue to manage CCC’s funds and accounts, as they have continuously done for many years. Collaboration across the CCC investment team and Brookfield’s existing real asset securities investment teams will further strengthen the research and investment processes across Brookfield’s Public Securities Group.
“Center Coast is a leader in energy infrastructure investing whose talented team, investment focus and owner-operator mentality is a complementary fit with Brookfield’s investment philosophy, and provides us with additional investment capabilities in the MLP marketplace at an attractive point in the investment cycle,” said Craig Noble, Senior Managing Partner at Brookfield and CEO of Brookfield’s Public Securities Group.
“We are excited to join Brookfield’s Public Securities Group, with its global resources, enviable track record and highly complementary investment approach,” said Dan Tutcher, Founder, Principal and Senior Portfolio Manager of CCC. “We will continue to seek to generate attractive risk-adjusted returns for our investors, while expanding our offerings to institutional clientele.”
“We believe CCC’s alignment with Brookfield provides a strong platform from which to evaluate opportunities in today’s changing MLP and energy infrastructure landscape,” added Victor Fontana, President of Liberty Street and HRC. “We look forward to working with Brookfield and CCC to ensure a seamless transition and to maximize the continuity of personnel serving the numerous financial advisors who invest in CCC strategies.”
Noble concluded: “We are excited to have the CCC team join Brookfield and continue to manage their investment strategies, which we are confident will appeal to our client base given the attractive investment opportunities in the midstream MLP and energy infrastructure sectors. The assets acquired from HRC will also help us to maintain the quality and continuity of relationships that HRC has established over several years.”
The transaction, which is subject to customary closing conditions and regulatory approvals, including shareholder approvals for the funds, is expected to close in the first quarter of 2018.
Berkshire Capital served as financial advisor to Brookfield and Paul Hastings served as legal advisor. Sandler O’Neill + Partners, L.P. served as financial advisor to CCC and Skadden, Arps, Slate, Meagher & Flom, Porter Hedges and Alston & Bird served as its legal advisors. Moelis & Company LLC served as financial advisor to Liberty Street and HRC, and Lowenstein Sandler LLP and Stradley Ronon Stevens & Young served as legal advisors.
Consummation of the transaction will result in the automatic termination of the current investment advisory agreement between CCC and Center Coast MLP & Infrastructure Fund (“CEN”), and the current sub-advisory agreement between Liberty Street and CCC with respect to the Focus Fund (CEN and the Focus Fund together, the “Funds”). The Board of Trustees of CEN has approved a new investment advisory agreement with Brookfield Investment Management Inc., an indirect wholly-owned subsidiary of Brookfield Asset Management Inc., and has nominated the members of the Board of Trustees of Brookfield’s suite of registered funds to serve as the Board of Trustees of CEN. The transaction is not expected to result in any material change in the portfolio management of CEN or in CEN’s investment objective or policies. The Board of Trustees of the Focus Fund has approved the reorganization of the Focus Fund into a newly formed series of Brookfield Investment Funds having the same investment objective and substantially similar principal investment strategies and risks as the Focus Fund. The Board of Trustees of each of CEN and the Focus Fund has determined that the foregoing matters will be presented to the Funds’ shareholders for approval at upcoming special shareholder meetings.
Brookfield Investment Management Inc. (the “Firm”) is an SEC-registered investment adviser and represents the Public Securities platform of Brookfield Asset Management Inc., providing global listed real assets strategies including real estate equities, infrastructure equities, multi-strategy real asset solutions and real asset debt. With more than $15 billion of assets under management as of June 30, 2017, the Firm manages separate accounts, registered funds and opportunistic strategies for institutional and individual clients, including financial institutions, public and private pension plans, insurance companies, endowments and foundations, sovereign wealth funds and high net worth investors. The Firm is a wholly-owned subsidiary of Brookfield Asset Management Inc., a leading global alternative asset manager with approximately $250 billion of assets under management as of June 30, 2017. For more information, go to www.brookfield.com.
CEN is a non-diversified closed-end management investment company. CEN’s investment objective is to provide a high level of total return with an emphasis on distributions to shareholders. The "total return" sought by CEN includes appreciation in the net asset value of the Fund's common shares and all distributions made by CEN to its common shareholders, regardless of the tax characterization of such distributions, including distributions characterized as return of capital. CEN seeks to achieve its investment objective by investing primarily in a portfolio of MLPs and energy infrastructure companies. Under normal market conditions, CEN will invest at least 80% of its managed assets in securities of MLPs and energy infrastructure companies. CEN may invest up to 20% of its managed assets in unregistered or restricted securities, including securities issued by private companies. CEN utilizes leverage as part of its investment strategy. There is no assurance that CEN will achieve its investment objective. The Portfolio Managers for CEN are planning a third quarter update call on Wednesday, October 11, 2017, at 11:00 EDT. Details are available on the CCC website.
The Focus Fund is a non-diversified open-end management investment company. The Focus Fund’s investment objective is to seek maximum total return with an emphasis on providing cash distributions to shareholders. The "total return" sought by the Focus Fund includes appreciation in the net asset value of the Focus Fund's common shares and all distributions made by the Focus Fund to its common shareholders, regardless of the tax characterization of such distributions, including distributions characterized as return of capital. The Focus Fund seeks to achieve its investment objective by investing primarily in a portfolio of MLPs. There is no assurance that the Focus Fund will achieve its investment objective.
Brookfield: Alice Olive: 1-855-777-8001, publicsecurities.enquiries@brookfield.com
For the Focus Fund: 1-800-207-7108
For CEN: 1-800-651-2345
This press release is not intended to, and does not, constitute an offer to purchase or sell shares of any Fund; nor is this press release intended to solicit a proxy from any shareholder of any Fund. Proxies will be solicited via a definitive combined registration statement and proxy statement on Form N-14 (each, a “Registration Statement”), which includes a definitive proxy statement/prospectus, after the Registration Statement is declared effective by the Securities and Exchange Commission (the “SEC”). The Registration Statements have yet to be filed with the SEC. After the Registration Statement is filed with the SEC, it may be amended or withdrawn and the proxy statement/prospectus will not be distributed to shareholders unless and until the Registration Statement becomes effective.
The Funds and their investment adviser and investment sub-adviser and their respective Trustees, officers and employees and other persons may be deemed under the rules of the SEC to be participants in the solicitation of proxies from shareholders in connection with the proposals. Information about the Trustees and officers of the Funds may be found in their annual reports and will be contained in the proxy statement/prospectus when available.
Shareholders of each Fund are urged to read its proxy statement/prospectus and other documents filed with the SEC carefully and in their entirety when they become available because these documents will contain important information about the proposals.
Shareholders may obtain free copies of the proxy statement/prospectus and other documents filed with the SEC (when they become available) at the SEC's web site at www.sec.gov. In addition, free copies of the proxy statement/prospectus and other documents filed with the SEC may also be obtained when they become available by directing a request to Center Coast at 713-759-1400 or investor_relations@centercoastcap.com.
The Fund’s investments are concentrated in the energy infrastructure industry with an emphasis on securities issued by MLPs, which may increase price fluctuation. The value of commodity-linked investments such as the MLPs and energy infrastructure companies (including Midstream MLPs and energy infrastructure companies) in which the Fund invests are subject to risks specific to the industry they serve, such as fluctuations in commodity prices, reduced volumes of available natural gas or other energy commodities, slowdowns in new construction and acquisitions, a sustained reduced demand for crude oil, natural gas and refined petroleum products, depletion of the natural gas reserves or other commodities, changes in the macroeconomic or regulatory environment, environmental hazards, rising interest rates and threats of attack by terrorists on energy assets, each of which could affect the Fund’s profitability.
MLPs are subject to significant regulation and may be adversely affected by changes in the regulatory environment including the risk that an MLP could lose its tax status as a partnership. If an MLP were to be obligated to pay federal income tax on its income at the corporate tax rate, the amount of cash available for distribution would be reduced and such distributions received by the Fund would be taxed under federal income tax laws applicable to corporate dividends received (as dividend income, return of capital, or capital gain).
In addition, investing in MLPs involves additional risks as compared to the risks of investing in common stock, including risks related to cash flow, dilution and voting rights. Such companies may trade less frequently than larger companies due to their smaller capitalizations which may result in erratic price movement or difficulty in buying or selling.
The information contained herein has been prepared by Center Coast Capital Advisors, LP and is current as of the date hereof. Such information is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. AN INVESTMENT IN THE FUND COULD SUFFER LOSS.
The Fund seeks to achieve its investment objective by investing primarily in a portfolio of master limited partnerships (“MLPs”) and energy infrastructure companies. Under normal market conditions, the Fund will invest at least 80% of its Managed Assets in securities of MLPs and energy infrastructure companies. The Fund may invest up to 20% of its Managed Assets in unregistered or restricted securities, including securities issued by private companies. The Fund utilizes leverage as part of its investment strategy. There is no assurance that the Fund will achieve its investment objectives.
The Fund is a non-diversified closed-end investment company. Shares of closed-end investment companies, such as the Fund, frequently trade at a discount to their net asset value, which may increase investors’ risk of loss.
Investors should consider the Fund’s investment objective, risks, charges and expenses carefully before investing.
This document is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale or offer of these securities, in any jurisdiction where such sale or offer is not permitted.
Investing in the Fund involves risk, including possible loss of principal invested. The Fund is not a complete investment program and you may lose money investing in the Fund.
Because of the Fund’s concentration in MLP investments, the Fund is not eligible to be treated as a “regulated investment company” under the Internal Revenue Code of 1986, as amended (the “Code”). Instead, the Fund will be treated as a regular corporation for U.S. federal income tax purposes and, as a result, unlike most investment companies, will be subject to corporate income tax to the extent the Fund recognizes taxable income.
The Fund is a non-diversified investment company under the Investment Company Act of 1940, as amended, and will not elect to be treated as a regulated investment company under the Code. Accordingly, the Fund may concentrate its investments in a limited number of companies. As a result, the Fund’s returns may fluctuate as a result of any single economic, political or regulatory occurrence affecting, or in the market’s assessment of, such portfolio companies to a greater extent than those of a diversified investment company.
An investment in MLP units involves risks that differ from a similar investment in equity securities, such as common stock, of a corporation. Holders of MLP units have the rights typically afforded to limited partners in a limited partnership. As compared to common shareholders of a corporation, holders of MLP units have more limited control and limited rights to vote on matters affecting the partnership. There are certain tax risks associated with an investment in MLP units. Additionally, conflicts of interest may exist between common unit holders, subordinated unit holders and the general partner of an MLP; for example, a conflict may arise as a result of incentive distribution payments, as such an incentive structure may result in divergent and potentially conflicting interests between common unitholders and the general partner, which may have more motivation to pursue projects with high risk and high potential reward.
Because the Fund is focused in MLP and infrastructure companies operating in the industry or group of industries that make up the energy sector of the economy, the Fund may be more susceptible to risks associated with such sector. A downturn in such sector could have a larger impact on the Fund than on an investment company that does not concentrate in such sector. At times, the performance of securities of companies in the energy sector may lag the performance of other sectors or the broader market as a whole.
The Fund currently seeks to enhance the level of its current distributions by utilizing financial leverage. The Fund may utilize financial leverage up to the limits imposed by the Investment Company Act of 1940, as amended. The costs associated with the issuance and use of financial leverage will be borne by the holders of the common shares. Financial leverage is a speculative technique and investors should note that there are special risks and costs associated with financial leverage. There can be no assurance that a financial leverage strategy will be successful during any period in which it is employed. On June 30, 2017, the Fund’s outstanding borrowings were $76.0 million under its credit facility (20% of Managed Assets) and $50.0 million of Mandatory Redeemable Preferred Stock (12% of Managed Assets), resulting in a total leverage percentage of 33.8%. As of June 30, 2017, the Credit Facility had an interest rate of 2.17% and the Preferred Stock has a 4.29% annual coupon.
Information is as of the date indicated and subject to change.
Before investing you should carefully consider the Center Coast MLP Focus Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus and summary prospectus, a copy of which may be obtained by calling 800-207-7108 or by visiting the Fund’s website at www.libertystreetfunds.com. Please read the prospectus or summary prospectus carefully before investing.
An investment in the Center Coast MLP Focus Fund (the “Focus Fund”) is subject to risk, including the possible loss of principal amount invested and including, but not limited to, the following risks, which are more fully described in the prospectus: the Focus Fund concentrates its investments in master limited partnerships (MLPs), which involve additional risks compared to those from investments in common stock, including, but not limited to, cash flow risk, tax risk, and risks associated with limited voting rights.
Unlike most other open-end mutual funds, the Focus Fund will be taxable as a regular corporation, or “C” corporation. Consequently, the Focus Fund will accrue and pay federal, state and local income taxes on its taxable income, if any, at the fund level, which will ultimately reduce the returns that the shareholder would have otherwise received. Additionally, on a daily basis the Focus Fund’s net asset value per share (“NAV”) will include a deferred tax expense (which reduces the Fund’s NAV) or asset (which increases the Fund’s NAV, unless offset by a valuation allowance). To the extent the Focus Fund has a deferred tax asset, consideration is given as to whether or not a valuation allowance is required. The Focus Fund’s deferred tax expense or asset is based on estimates that could vary dramatically from the Focus Fund’s actual tax liability/benefit and, therefore, could have a material impact on the Focus Fund’s NAV.
The Focus Fund, unlike the MLPs in which it invests which are treated as partnerships for U.S. federal income tax purposes, is not a pass-through entity. Consequently, the tax characterization of the distributions paid by the Focus Fund, such as dividend income or return of capital, may differ greatly from those of its MLP investments. An investment in the Focus Fund does not provide the same tax benefits as a direct investment in an MLP. The Focus Fund currently anticipates paying monthly cash distributions to shareholders at a rate that over time is similar to the distribution rate the Focus Fund receives from the MLPs in which it invests, without offset for the expenses of the Focus Fund. The Focus Fund may maintain cash reserves, borrow or sell certain investments at less desirable prices in order to pay the expenses of the Focus Fund. Because the Focus Fund’s distribution policy takes into consideration estimated future cash flows from its underlying holdings, and to permit the Focus Fund to maintain a stable distribution rate, the Focus Fund’s distributions may not represent yield or investment return on the Focus Fund’s portfolio. To the extent that the distributions paid exceed the distributions the Focus Fund has received, the distributions will reduce the Focus Fund’s net assets. The Focus Fund is not required to make distributions and in the future could decide not to make such distributions or not to make distributions at a rate that over time is similar to the distribution rate it receives from the MLPs in which it invests.
It is expected that a portion of the distributions will be considered tax deferred return of capital (ROC). ROC is tax deferred and reduces the shareholder’s cost basis (until the cost basis reaches zero); and when the Focus Fund shares are sold, if the result is a gain, it would then be taxable to the shareholder at the capital gains rate. Any portion of distributions that are not considered ROC are expected to be characterized as qualified dividends for tax purposes. Qualified dividends are taxable in the year received and do not serve to reduce the shareholder’s cost basis. The portion of the Focus Fund’s distributions that may be classified as ROC is uncertain and can be materially impacted by events that are not subject to the control of the Focus Fund’s advisor or sub-advisor (e.g. mergers, acquisitions, reorganizations and other capital transactions occurring at the individual MLP level, changes in the tax characterization of distributions received from the MLP investments held by the Focus Fund, or change in tax laws). Gains and other income realized by the Focus Fund may also cause distributions from the Focus Fund to be treated as taxable dividends rather than as ROC distributions. Because of these factors, the portion of the Focus Fund’s distributions that are considered ROC may vary materially from year to year. Accordingly, there is no guarantee that future distributions will maintain the same classification for tax purposes as past distributions.
The MLPs owned by the Focus Fund are subject to regulatory and tax risks, including but not limited to changes in current tax law which could result in MLPs being treated as corporations for U.S. federal income tax purposes or the elimination or reduction of MLPs tax deductions, which could result in a material decrease in the Focus Fund’s NAV and/or lower after-tax distributions to Focus Fund shareholders. As a non-diversified fund, the Focus Fund may focus its assets in the securities of fewer issuers, which exposes the Focus Fund to greater market risk than if its assets were diversified among a greater number of issuers. Equity securities issued by MLPs may trade less frequently than larger companies due to their smaller capitalizations, which may result in erratic price movement or difficulty in buying or selling.
A substantial portion of the MLPs within the Focus Fund are primarily engaged in the energy sector. As a result, any negative development affecting that sector, such as regulatory, environmental, commodity pricing or extreme weather risk, will have a greater impact on the Focus Fund than a fund that is not over-weighted in that sector.
The Focus Fund and CEN are distributed by Foreside Fund Services, LLC. www.foreside.com