TORONTO, March 5 /CNW/ - Lawrence Asset Management Inc., the Manager of
Lawrence Payout Ratio Trust ("the Trust") today announced that it is calling a
Special Meeting of Unitholders to propose changes to the Trust's investment
restrictions and investment strategy to better position the Trust for
performance and sustainability in light of the government's proposal to tax
Income Funds commencing in 2011.
The Trust currently employs a strategy whereby, of the 40 income funds
included in the portfolio, 18 (45%) are business and industrial funds, 10
(25%) are commodity-based trusts, 6 (15%) are real estate investment trusts
and 6 (15%) are pipeline and power generation funds (the "Fixed Sector
Weightings"). The Manager proposes to change the investment strategy and
investment restrictions of the trust to remove the restrictions on the income
funds in which the Trust can invest. The result of this change will be to move
from a passive, rules-based approach to an actively managed portfolio of
income funds without increasing the management fee. The Manager's intention is
to continue to focus on income funds with low payout ratios. The Manager
believes that an active management approach focusing on income funds with low
payout ratios will provide the Trust with more flexibility and therefore be
beneficial to unitholders. As a result of the proposed amendments, the Fixed
Sector Weightings would be removed as would the requirements that, for
inclusion in the portfolio of the Trust, an income fund must (i) have a market
capitalization of at least $200 million, (ii) have not reduced or suspended
distributions during the previous 24 months, and (iii) have had its securities
listed for trading on the Toronto Stock Exchange for at least 12 months. The
requirement to invest in 40 equally weighted income funds and rebalance the
Trust on a quarterly basis would also be removed.
The Manager anticipates that the pending income fund taxation reforms
will precipitate the conversion of a number of existing income funds to a
corporate structure, which could result in there being too few income funds
with low payout ratios for the current Fixed Sector Weightings. The proposed
changes to the investment strategy will provide the Trust with the flexibility
to adapt to changes in the income fund sector.
Because a number of income funds, particularly commodity-based trusts,
have recently reduced distributions, the Manager believes that the current
restriction that income funds not have reduced or suspended distributions
during the previous 24 months is detrimental to the Trust's ongoing
performance. Many of these income funds which have cut distributions remain
healthy businesses and in fact with lower payout ratios following a cut in
distributions, may represent more conservative investments. The Manager
believes that removing this restriction will result in improved net asset
value performance and sustainability for the Trust.
In addition, the Manager believes that smaller capitalization income
funds with low payout ratios will become attractive acquisition targets that
could contribute to the net asset value of the Trust if included in the
portfolio and therefore believes that, in the current environment, the
$200 million restriction is no longer appropriate.
It has been the experience of the Trust that the lack of liquidity in a
number of income funds currently eligible for inclusion in the portfolio can
have a negative impact on net asset value at the time of each quarterly
rebalance. The Manager believes that the flexibility to make changes to the
portfolio at any time rather than once a quarter will contribute to improved
net asset value.
The change to the Trust's Investment Restrictions and Investment Strategy
will require approval of the Unitholders at a special meeting to be held on
March 29, 2007.
Lawrence Asset Management is a performance-oriented investment firm that
manages a growing family of alternative investment funds designed to deliver a
combination of capital appreciation and yield in a tax efficient manner. The
firm draws upon the experience of its partners and advisory board to identify
sectors and asset classes that will deliver returns to its investors. Lawrence
Payout Ratio Trust is managed by Lawrence Asset Management Inc.
For further information:
For further information: Investor Relations, Catherine Stretch, (416)
362-6283, firstname.lastname@example.org, www.lawrenceasset.com