To Directors and Shareholders:
Clearly we have an admission of Cause by the manager (DRI Captial). Item 2 of Cause (see below) is clearly met as DRI Capital embezzled / misappropriated funds against the Trust, and obviously caused the Trust material harm with the share price down 25% today.
If DRI Trust can either buy DRI Capital, or cancel its management contract and build in-house management, then this affair could be a positive in the long term. At this point it is likely even in Persis Holdings own interest to put a line under this and offload DRI Capital to the Trust and may even result in greater return in the long run.
The investment thesis is still in tact and all that matters is ability to close deals for the long term, get a grip on management, and stop issuing units. See: Constellation Software as model.
Excerpts from page 23 of the 2023 Annual Information Form,
During the initial term and each renewal term, the management agreement may only be terminated by us for Cause (as defined below). We will have the right to terminate our manager following:
(i) a determination of Cause by a court or governmental body of competent jurisdiction in a final judgement, or
(ii) an admission of Cause by our manager.
“Cause” will exist where:
(i) our manager defaults in the performance or observance of any material term, condition or covenant contained in the management agreement that results in a material harm to us and such default continues for a period of 60 days after written notice thereof by us to our manager specifying such default and requesting that the same be remedied in such 60-day period,
(ii) our manager engages in any act of fraud, misappropriation of funds or embezzlement against us and such act results in material harm to us,
(iii) our manager is grossly negligent in the performance of its duties under the management agreement and such gross negligence results in material harm to us,