BSD.PR.A : Dividends on Capital Stock to be Reduced

Brookfield Funds has announced:

The monthly distribution rate for the Brascan SoundVest Rising Distribution Split Trust (capital units) is being decreased to $0.084 per unit, or $1.008 on an annual basis, effective with the January 2008 distribution (payable February 2008). The reduction is partly due to distribution decreases by certain trusts in the portfolio, fewer distribution increases by other trusts due to regulatory changes in the income trust sector, and increased borrowing costs due to higher interest rates relative to last year.

“While we are disappointed to record our first ever distribution reduction, the new rate still represents an attractive yield of 17.2% based on the current unit price. Moreover, we believe it is more sustainable in the current environment, provides a greater margin of safety and better reflects the income-generating ability of the portfolio,” said Kevin Charlebois, President and Chief Executive Officer of SoundVest Capital Management. The $0.15 quarterly payment on the Rising Distribution Split Trust preferred securities (BSD.PR.A) will remain unchanged from 2007 levels.

The former rate of distribution on the capital units, BSD.UN, was $0.1167 monthly, or $1.40 annually, according to their semi-annual financials. It is to be hoped that this distribution reduction to the capital stock holders will help to end the decline in NAV; asset coverage on the preferreds has declined from 1.8+:1 as at January 5, 2007, to 1.6+:1 on December 14 according to the company. No distributions to capital stock holders are allowed if asset coverage declines below 1.4:1, according to the prospectus:

The payment of interest on the Preferred Securities will be made in priority to any distributions on the Capital Units. The Trust may not make any cash distributions on the Capital Units if, after giving effect to the proposed distribution, the Combined Value would be less than 1.4 times the Repayment Price. Distributions on the Capital Units are conditional upon the Trust being current in its obligation to pay interest on the Preferred Securities. See ‘‘Details of the Offering — Certain Provisions of the Capital Units— Distributions’’.

Interest payments on the preferred securities, BSD.PR.A, remain unaffected.

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