TORONTO, ONTARIO--(Marketwire - Feb. 15, 2013) - The Board of Trustees (the "Trustees") of Diversified Preferred Share Trust (the "Trust") (TSX:DPS.UN) proposes that the Trust be restructured such that, among other things:
- the Trust be administered as an open-end mutual fund in compliance with National Instrument 81-102 - Mutual Funds, which would include daily liquidity at the Trust's net asset value per unit;
- the Trust's investment objectives and investment restrictions be changed;
- the structure of the administration fees paid by the Trust to Sentry Investments Inc. ("Sentry"), the Trust's administrator, be changed as further described below;
- the existing units of the Trust be converted into a new series of the Trust, to be named "Series X units", to which no management fee will apply until June 1, 2016, as further described below; and
- the Series X units of the Trust will be consolidated in the future with newly created Series A units of the Trust with identical attributes;
(collectively, the "Restructuring").
A Special Meeting of the Trust's unitholders of record is to be held on or about April 11, 2013 to consider the Restructuring. Should the Restructuring be approved by unitholders, it is expected to become effective in May 2013.
The Trust's current investment strategy is passive and rules-based, and mandates a quarterly rebalancing of the Trust's investment portfolio. As a result, the Trust often incurs excessive and unnecessary trading costs and may be forced to trade at inopportune times. Moreover, the Trust's current mandate to have exposure to every preferred share issue in Canada that meets the stipulated investment criteria does not permit Sentry, as the administrator of the Trust, to differentiate between attractive and unattractive investment opportunities. Additionally, the Trust has experienced difficulties in generating sufficient investment income to meet its quarterly distribution obligations. As such, investor capital has been returned, leading to a decrease in the Trust's net asset value per unit.
Should the Restructuring be approved, the Trust's current investment objectives will be changed to mandate that the Trust seek to provide investors with stable income and long-term capital appreciation by investing in a diversified, actively managed portfolio comprised primarily of equity and fixed-income securities from anywhere in the world.
It is also proposed that, should the Restructuring be approved, effective in May 2013 and for a period of approximately three years thereafter, Sentry, as the manager of the Trust upon the implementation of the Restructuring, will waive its management fee in respect of the Series X units of the Trust. In addition, as is currently the case in respect of the Trust's units, no trailing commission will be applicable in respect of the Series X units. Effective June 1, 2016, the Series X units will be consolidated with newly created Series A units of the Trust. The management fee of the Trust's Series A units is expected to be 1.85% per annum of the monthly average of the daily series net asset value per unit of the assets of the Trust, of which up to 1.00% will be paid by Sentry, as manager of the Trust, to investment dealers as a trailing commission.
Among other potential benefits to unitholders, the Restructuring:
- will allow the Trust to preserve and provide a better opportunity to use its tax losses, which currently amount to approximately $38 million in capital losses, and as such, generally permit the Trust's future distributions to receive a more favourable tax treatment. As the Trust is presently constituted, it is likely unable to make effective use of its capital losses because of the limited upside potential of many of the preferred shares included in the Trust's portfolio that, due to the Trust's rules-based investment criteria, are purchased close to their par value;
- may reduce the expenses paid by the Trust until June 1, 2016, as Sentry has agreed to waive its management fee in respect of the Trust's Series X units until such time;
- will allow the investors to benefit from the investment potential associated with an actively managed portfolio, as opposed to the Trust's current passive, rules-based, investment strategy, allowing investors to potentially benefit from the proven and disciplined investment process currently being employed in other Sentry-managed mutual funds;
- may alleviate many of the unnecessary and, at times, excessive trading costs associated with the required purchase and liquidation of portfolio securities at inopportune times, as is currently associated with administering the Trust's rules-based portfolio;
- will provide the Trust with a broader investment mandate, which may attract new investors, spreading the fixed operating expenses of the Trust over a larger unitholder base;
- will provide the Trust with exposure to global markets, which Sentry believes present broader and more diversified investment opportunities. The Trust's current investable universe is limited to Canadian preferred shares which are dominated by the financial services, energy, utilities and telecom sectors. A more diversified global mandate will permit the Trust to more effectively capitalize on a larger set of attractive investment opportunities while mitigating the risks associated with concentration in a few sectors;
- will allow for units of the Trust to be redeemable on a daily basis at its series net asset value per unit. Currently, the Trust's units are redeemable either through the facilities of the Toronto Stock Exchange at a discount to net asset value, or through the Trust's annual redemption mechanism; and
- will enable unitholders to switch their Series X units of the Trust, once qualified for distribution, to units or shares of other mutual funds managed by Sentry.
A management information circular and other proxy materials that provide further details of the Restructuring will be sent in due course to unitholders of record as at March 11, 2013.
It is anticipated that, should the Restructuring be approved, unitholders will be provided with a redemption right at the Trust's net asset value per unit prior to the implementation of the Restructuring. Further details regarding this redemption right will be provided in the management information circular. Following the Restructuring, unitholders will be able to redeem their investment at the series net asset value per unit on a daily basis.
The Restructuring remains subject to review by the Trust's independent review committee.
Sentry Investments is a Canadian asset management company with more than $9 billion in assets under management on behalf of Canadian investors. Sentry Investments offers a diverse range of investment products including mutual funds and flow-through limited partnerships. Sentry Investments was one of only three firms to receive four consecutive Brendan Wood International TopGun Asset Management Team Awards (2009 to 2012).
Certain statements included in this news release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect", "intend", "will" and similar expressions to the extent they relate to Sentry or the Trustees. The forward-looking statements are not historical facts but reflect Sentry's and the Trustee's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including, but not limited to, the intended benefits of the Restructuring. Although Sentry and the Trustees believe that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. Sentry nor the Trustees undertake any obligation to update publicly or otherwise revise any forward-looking statement or information whether as a result of new information, future events or other such factors which affect this information, except as required by law. For a complete disclosure record of the Trust, please visit www.sedar.com.
|Sentry Investments Inc.
|Commerce Court West
|199 Bay Street, Suite 4100
|P.O. Box 108
|Toronto, ON M5L 1E2