FIRST QUARTER 1998
For the
period ending March 31, 1998
Press Release
SAGE ANNOUNCES FIRST QUARTER RESULTS
Message to Shareholders
SAGE High Yield Debt Trust ("SAGE") today announced its unaudited financial results for the first quarter ended March 31, 1998 which are attached.
During the first quarter of 1998, SAGE completed investing the proceeds from the first instalment of its October, 1997 initial public offering and on April 15, 1998 made a distribution of $0.15 per unit. To take advantage of the large positive spread between investment yield and the cost of borrowing, SAGE has drawn down a substantial portion of its bank facility to invest in high yield debt prior to receipt of the final instalment proceeds on October 28, 1998.
The Trust generated net investment income of $360,000 over the quarter ended March 31, 1998, which represents a significant increase from the previous period ended December 31, 1997. This increase was primarily a result of SAGE becoming fully invested during the first quarter of 1998. It is anticipated that distributions for the remainder of 1998 will be approximately $0.20 per unit per quarter. The net asset value per instalment receipt of SAGE is $7.17 and is published daily in the Globe and Mail Mutual Fund section.
Strong economic growth in North America with little sign of inflation has continued to provide a very positive environment for corporate bonds in 1998. The ten year U.S. benchmark Treasury yield continued to decline slightly through the first quarter which helped the performance of the portfolio. The volume of new issuance by U.S. corporations was high during the first quarter although issuance by Canadian corporations was down from last year. We anticipate that issuance by Canadian corporations will pick-up later this year. Strong fund flows into the high yield mutual fund sector has insured good liquidity for secondary market transactions.
SAGE is a closed-end investment trust that invests primarily in high yield corporate debt supplemented by high yield equity securities such as income funds and REITs. Individual securities are selected based upon the strength of their operating cash flows, competitive market position, management team and a thorough evaluation of their financial credit statistics. Risk is further reduced through broad diversification to ensure no undue exposure to any issuer, industry or commodity. Securities are further examined to determine the level of portfolio risk exposure and to ensure that SAGE is well diversified, eliminating undue exposure to any one industry group or commodity during these uncertain times.
SAGE trades on the Toronto Stock Exchange under the symbol "BBB.IR".
For further information, contact:
Mr. W. Garth Jestley
Director
May 27, 1998
| STATEMENT OF NET ASSETS As at March 31, 1998 Unaudited |
|
| Assets | |
| Investments at market value | $ 24,713,000 |
| Cash and short-term investments | 757,000 |
| Subscriptions receivable | 15,995,000 |
| Income receivable | 634,000 |
| 42,099,000 | |
| Liabilities | |
| Accounts payable and accrued liabilities | 106,000 |
| Unitholder distributions | 343,000 |
| Loan payable | 9,276,000 |
| 9,725,000 | |
| Net assets | $ 32,374,000 |
| Number of units issued and outstanding | 2,285,000 |
| Net asset value per unit | $ 14.17 |
| STATEMENT OF OPERATIONS For the three months ended March 31, 1998 Unaudited |
|
| Investment Income | |
| Interest | $ 369,000 |
| Income from investment trust units | 174,000 |
| 543,000 | |
| Expenses | |
| Management fee | 86,000 |
| Interest and bank charges | 76,000 |
| Custodian and trustee fee | 9,000 |
| Office | 5,000 |
| Other | 7,000 |
| 183,000 | |
| Net investment income | $ 360,000 |
| Distribution per instalment receipt | $ 0.15 |
Portfolio Holdings
The following table lists the current holdings as of May 11, 1998:
| Business | % Weight | |
| High Yield Debt | ||
| MDC Communications Corp. 10.5% due December 1, 2006 | Printing and Communications | 9.1% |
| Celestica International Inc. 10.5% due December 31, 2006 | Electronics Manufacturing | 8.7% |
| Scott Paper Limited 10% due June 6, 2007 | Paper Products | 8.6% |
| Anchor Lamina Inc. 9.88% due February 1, 2008 | Tool and Die Manufacturing | 8.4% |
| TrizecHahn Corporation 7.95% due June 1, 2007 | Real Estate | 8.3% |
| Tembec Inc. 9.875% due September 30, 2005 | Forest Products | 7.9% |
| Norampac Inc. 9.375% due February 1, 2008 | Corrugated Packaging | 7.1% |
| Consumers International Inc. 10.25% due April 1, 2005 | Glass Manufacturing | 5.9% |
| Sealy Mattress Company 9.88% due December 15, 2007 | Mattress Manufacturing and Sales | 5.9% |
| Trench Electric S.A. 10.25% due December 15, 2007 | Electric Distribution Equipment | 5.7% |
| Finlay Enterprises Inc. 9% due May 1, 2008 | Jewelry Retail | 5.4% |
| High Yield Equity | ||
| Westshore Terminals Income Fund | Coal Handling Facility | 5.8% |
| Associated Freezers Income Trust | Public Refrigeration Warehousing | 5.3% |
| Koch Pipelines Canada L.P. | Oil Pipeline | 4.0% |
| Pembina Pipeline Income Fund | Oil Pipeline | 3.9% |
Trust Profile
Sage High Yield Debt Trust closed its initial public offering in October 1997. The primary objective of the Trust is to provide unitholders with a high level of sustainable income while preserving capital. To achieve this objective, SAGE invests primarily in high yield debt securities supplemented with high yield equities. Unitholders of SAGE can acquire additional units by participating in the Distribution Reinvestment Plan. The Plan enables unitholders to reinvest their quarterly distributions in additional units of SAGE thereby achieving the benefit of compounding returns.
| Head Office | Directors and Officers |
| 1 First Canadian Place | Murray J. Brasseur, Director |
| 58th Floor | W. Garth Jestley, President and Director |
| P.O. Box 192 | James S. Parsons, Director |
| Toronto, Ontario | Anthony P. Traub, Secretary-Treasurer |
| M5X 1A6 | |
| Auditors | |
| Telephone: (416) 362-0714 | Arthur Andersen & Co. |
| Fax: (416) 362-7925 | |
| e mail: invest@middlefield.com | Banker |
| Web site: www.middlefield.com | Canadian Imperial Bank of Commerce |
| Corporate Counsel | |
| Davies, Ward and Beck |