NEW YORK (Standard & Poor's) Dec. 1, 2003 -- Standard & Poor's Investment Services said today that it assigned its 'P-2(Low)f' Canadian national credit quality scale rating and its 'BBB-f' global credit quality scale rating to the Preferred Securities Fund on Nov. 25, 2003.
The Preferred Securities Fund (the Fund) is an investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust by First Asset Funds Inc. (First Asset) as trustee and manager of the Fund. The investment adviser for the Fund is First Asset Investment Management Inc. (FAIMI), one of Canada's leading independent asset management firms. In its role as manager and trustee of the Fund, First Asset (a wholly-owned subsidiary of FAIMI) will provide all administrative services required by the Fund.
The 'P-2(Low)f' and 'BBB-f' ratings reflect the credit quality of the Fund's portfolio investments, which will consist of preferred securities of North American Issuers, including hybrid securities. Eligible securities for the portfolio must be rated a minimum of investment grade ('BBB-' or better) by Standard & Poor's, or deemed to be of equivalent credit quality by Standard & Poor's at the time of purchase. Funds rated 'P-2(Low)f/BBB-f' provide adequate protection against losses from credit defaults. The 'P-2(Low)f/BBB-f' rating does not reflect the Fund's ability to provide holders of Units with a stable stream of monthly targeted distributions or to preserve and enhance the net asset value of the Fund to return at least $25 per Unit to Holders on or about Dec. 31, 2013.
First Asset has confirmed that the Fund plans to invest in a diversified portfolio of preferred securities, including hybrid preferred securities, rated 'BBB-' or better at purchase. In addition, the Fund plans to invest cash and cash equivalents in highly rated money market securities, Treasury securities, or high-grade money market securities. The Fund plans to utilize highly rated ('A' or better) entities as counterparties for market transactions, including repurchase agreements and forward agreements. The Fund's portfolio will be valued daily, and the net asset value will be posted daily. Standard & Poor's will monitor the credit quality of the Fund's holdings and counterparties continually to ensure the accuracy of the credit quality ratings assigned to the Fund.
Spectrum Asset Management Inc. (Spectrum) has been hired by First Asset to act as investment subadviser for the fund. As subadviser, Spectrum will manage the Fund's preferred securities portfolio on a day-to-day basis. Spectrum is an independently managed, wholly owned subsidiary of Principal Global Investors LLC. Spectrum is a U.S.-based (Stamford, Conn.), SEC-registered investment adviser specializing in the management of higher-grade, preferred security portfolios. At Oct. 1, 2003, Spectrum managed about $10.75 billion in preferred securities, mainly for mutual funds and institutional investors.
A Standard & Poor's Preferred Shares Fund credit quality rating is an assessment of the overall credit quality of the fund's portfolio. The ratings, which range from 'P-1(High)' to 'P-5(Low)' on the Canadian preferred share fund scale, and 'AAAf' (extremely strong) to 'CCCf' (extremely vulnerable to losses) on the global fund credit quality ratings scale, reflect the level of protection the fund's portfolio provides against losses from credit defaults. Credit quality ratings identified by the 'f' subscript are assigned to bond funds, preferred share funds, and other actively managed funds that exhibit variable net asset values. These ratings are current assessments of the overall credit quality of a fund's portfolio. The ratings reflect the level of protection against losses from credit defaults and are based on an analysis of the portfolio investments and the likelihood of counterparty defaults.
Credit quality ratings are not recommendations to purchase, sell, or hold a security, inasmuch as they are not comments on the market price, yield, or suitability for a particular investor.