Sentry Select, much to my surprise, has released no news release regarding the results of their annual redemption option – I would have thought that such an announcement would be a regulatory requirement, but I’ll admit I’m not as familiar with the reporting requirements of public companies as I’d like to be.
Anyway, thanks to Financial Webring Forum and an Assiduous Reader, I can now say that they were forced to redeem about one-sixth of their units; according to their June 30 Semi-annual report, they used to have 13,071,383 units outstanding; now, according to the TSX, they have only 10,896,968.
That’s a difference of nearly 2.2-million units; at $21 each, that means that there was selling pressure in excess of $40-million hitting the market in the last half of October … readers may know that the PerpetualDiscount index fell about 2.5% in the latter half of October … and the fund made an unfortunately early shift into this sector at that time.
The fund’s raison d’etre is to sell liquidity! There was just too much on offer!
According to Sentry Select, the NAVPU of DPS.UN was 21.07 on November 28, while the market price was $20.20. This is a discount of about 4.1% … below the 5% required to trigger Mandatory Purchases for Cancellation … but not by much!
DPS.UN is still paying out an unsustainable dividend – according to the June financials, almost 28% of the 1H07 payout was return of capital, compared to 35.2% in 2006. Redemptions of higher coupon issues may be expected to exacerbate the unsustainability as time passes.
11/21/07 market price was $20.03, while NAV was $21.11. The discount is more than 5.1%. Why didn’t it trigger mandatory purchase? Thanks.
From the prospectus linked in the main post:
So …
(a) November 21 was a Wednesday, not the last business day of the week
(b) the trustees may have used their escape clause (iii)
(c) they are only obligated to buy shares that are offered on the TSX at a price below the Reference Closing Price. Shares could trade below this price without there ever being an actual qualifying offer.
(c) DPS.UN might have actually executed a mandatory purchase but not reported it.