TORONTO, ONTARIO -- (Marketwire) -- 02/15/13 -- 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.