DBRS Assigns Stability Rating of STA-3 (high) to Diversified Preferred Share Trust; Discontinues Previous Rating

DBRS has today assigned a stability rating of STA-3 (high) to the retractable units (the Units) issued by Diversified Preferred Share Trust (the Trust). The previous rating of Pfd-2 (low) has been discontinued as the DBRS preferred share rating scale will no longer be applied to the Trust.

Proceeds from the Trust’s offerings have been used to invest in a diversified portfolio (the Portfolio) of preferred shares and securities. The Portfolio is passively managed by Sentry Select Capital Inc. (the Administrator).

On May 11, 2010, DBRS published a methodology for rating structured income funds. Prior to the release of the methodology, DBRS had applied its stability ratings only to income trusts, but with the release of the methodology, the stability rating scale now also applies to Canadian investment income funds. A stability rating provides an opinion on both the stability and sustainability of a fund’s cash distributions per unit.

A stability rating of STA-3 (high) has been assigned to the Units issued by the Trust. This rating is mainly based on the strong credit quality of the Trust’s preferred share portfolio and the limited flexibility for the Administrator to invest in riskier assets. The main constraint to the rating is the current shortfall in portfolio income relative to the distribution paid out to the Trust’s unitholders. The Trust’s net income can currently cover approximately 83% of the distributions paid out to unitholders. Other constraints to the rating include the interest rate risk of the Portfolio and the capital losses that may result from underlying securities being called for redemption by their respective issuers.

DBRS believes that a stability rating reflecting an opinion on the stability of the fund’s distributions will be useful to the Trust’s investors. The rating is based on factors such as the asset composition, credit quality and diversification of the Trust’s portfolio, among others. For more information on the rating factors considered by DBRS in its analysis, refer to the Structured Income Fund methodology that was published on May 11, 2010.

Notes:
The applicable methodology is Stability Ratings for Structured Income Funds, which can be found on our website under Methodologies.