Brascan Adjustable Rate Trust I
TSX : BAO.UN

Brascan Adjustable Rate Trust I

March 05, 2008 09:24 ET

Brascan Adjustable Rate Trust Provides Fund Update

TORONTO, ONTARIO--(Marketwire - March 5, 2008) - Brascan Adjustable Rate Trust I (the "Fund") (TSX:BAO.UN), an investment fund, today issued the following portfolio update in light of the current markets for mortgage-backed securities, the credit markets and the related effect on the Fund's net asset value ("NAV"). The Fund's NAV at February 29, 2008, its most recent valuation date, was $12 million in total unitholder value or $8.24 per unit.

The Fund provides exposure to an actively managed portfolio of investments held by Brascan Adjustable Rate Limited Partnership (the "Partnership"). The portfolio holds Agency mortgage-backed securities, which are guaranteed as to timely payment of principal and interest, as well as non-Agency mortgage-backed securities backed by prime hybrid mortgage loans rated A, BBB+ and BBB. The Partnership has no sub-prime mortgage-backed securities in its portfolio.

While the Fund has no exposure to the most troubled mortgage-backed securities sectors, risk premiums have risen significantly for virtually all non-Agency mortgage-backed securities, especially those rated less than AAA. Non-Agency mortgage-backed securities are most affected given their sensitivity to fundamental economic factors and the decline in liquidity across mortgage-backed securities in general. This has led to market value declines among the portfolio's more credit-sensitive mortgage securities, notably BBB rated securities. The Fund's NAV is predominantly a function of pricing in the U.S. mortgage-backed securities market and is magnified by the leverage inherent in the Partnership's structure.

Given current illiquidity, many markets have been driven well below any conservative fundamental valuations, and have led to disparities in prices for similar securities. The Manager believes that the quality of the Partnership's mortgage-backed securities is substantially better than current market prices would imply. While performance of the underlying securities to date suggests that fundamental value is above current market prices, the Manager expects the market to remain volatile and liquidity constrained through at least the first half of 2008. As a result, the non-Agency mortgage-backed securities in the portfolio are likely to remain under pressure and may experience further price declines in the near-term.

John Feeney, President and Chief Executive Officer of the Fund's Investment Manager, said, "We will continue to pursue the objective of preserving value for unitholders and are exploring alternatives for doing so."

Brascan Adjustable Rate Trust I is an investment trust established to provide unitholders with exposure to a portfolio primarily consisting of mortgage-backed securities with an actual or implied AAA rating. The Fund is listed on the TSX under the symbol BAO.UN.

About Forward-looking Information

This News Release contains forward-looking information within the meaning of Canadian provincial securities laws and other "forward-looking statements" and information, within the meaning of certain securities laws, including "safe harbour" provisions in any applicable Canadian securities regulations. These forward-looking statements include, among others, statements with respect to the future performance of the MBS market and the Partnership's portfolio. The words "believe," "will," "likely," "may," "expects," derivations thereof and other expressions which are predictions of or indicate future events, trends or prospects and which do not relate to historical matters, identify forward-looking statements. Although the Manager and Investment Manager believe that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund and the Partnership to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements or information include: general economic conditions; market disruptions; changes in interest and exchange rates; changes in mortgage prepayment rates; credit risk around borrower default; availability of financing; changes in legislation or practices governing the income trust sector and other risks and factors described in the Fund's and the Partnership's Prospectus, Annual Information Form and other documents filed by the Fund and the Partnership with the securities regulators in Canada. Except as may be required by law, neither the Fund nor the Partnership undertakes any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

Contact Information

  • Brascan Adjustable Rate Trust I
    Zev Korman, Director, Investor Relations,
    and Communications, Public Funds
    (416) 359-1955
    Email: zkorman@brookfield.com