TORONTO: The Board of Directors of Sentry Select Capital Corp. (the “Manager”) announces that it is proposing mergers of Mortgage-Backed Securities Trust and MBS Adjustable Rate Income Fund (the “Terminating Funds”) with Sentry Select MBS Adjustable Rate Income Fund II (collectively the “Mergers”).
If approved, the Terminating Funds will transfer all of their assets to Sentry Select MBS Adjustable Rate Income Fund II (the “ARIF II”) in exchange for units of ARIF II and the assumption by ARIF II of all the liabilities of the Terminating Funds. Each unitholder of a Terminating Fund will receive units of ARIF II having the same aggregate net asset value as their units of the Terminating Fund as of the close of business on the effective date of the Mergers, expected to be April 4, 2007.
The Mergers: The Manager believes that the Mergers will result in significant benefits to unitholders. The larger combined ARIF II will have the advantage of increased economies of scale and lower fund operating expenses. The Mergers will eliminate the administrative and regulatory costs of operating separate investment funds, provide greater liquidity on the Toronto Stock Exchange and a higher profile in the marketplace resulting from greater net asset value and market capitalization. Unitholders of Mortgage Backed Securities Trust will also benefit from minimized currency exchange risk and more advantageous tax treatment of distributions, as ARIF II provides currency hedging and its distributions are generally treated as capital gains or return of capital.
Fee reduction: If either or both Mergers are completed, the Manager has agreed to reduce its management fee for ARIF II by 20%, effective July 1, 2007, from 0.125% to 0.100% of the net asset value of the Trust multiplied by the Partnership Leverage Factor (assuming a debt-to-equity ratio of 9:1, this percentage would be 1.00%), plus the amount equal to the Servicing Fee.
If either or both Mergers are completed, the General Partner has agreed to reduce its fee by 20% from 0.125% to 0.100% of the net asset value of the Partnership immediately (assuming a debt-to-equity ratio of 9:1 this percentage would be 1.00%).
Costs of the Mergers: All costs and expenses associated with the Mergers will be borne by the Manager.
Unitholder approval: Each Merger will require approval of two-thirds of the votes cast by unitholders of a Terminating Fund at a special meeting of the unitholders to be held on April 4, 2007. The Mergers are not contingent on each other and one may proceed even if the other is not approved. The record date for the purpose of determining the unitholders entitled to receive notice and vote at the meetings is the close of business on February 28, 2007.
The proposed Mergers are subject to the acceptance and approval by the Toronto Stock Exchange.
Sentry Select Capital Corp.: Sentry Select Capital Corp. is a wealth management company providing investment, administrative and marketing services to 35 exchange-listed closed-end funds and corporations (including preferred securities and debentures), 22 principal-protected notes, 16 mutual funds and four flow-through limited partnerships. As of December 31, 2006, the firm had approximately $8 billion in gross assets under management.
More information: Investor Services (broker/investor inquiries) or Kinga Lam (media inquiries) Tel: 1-888-246-6656 Fax: 416-364-1197 firstname.lastname@example.org www.sentryselect.com
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