Delisting of Units from the Toronto Stock Exchange and Redemption and Transfer of Units
At a Special Meeting of Unitholders held on November 26, 2010, the Unitholders of the Fund passed resolutions approving: (i) the delisting of the Units from the Toronto Stock Exchange (the “TSX”) and (ii) certain amendments to the Fund’s Deed of Trust relating to the trading rights of Unitholders, cash redemptions and redemption limits.
Delisting of the Units from the TSX
In accordance with the resolution approved at the Special Meeting, the Fund arranged to have the Units delisted from the TSX effective the close of trading on December 15, 2010.
The Fund continues to be a reporting issuer in the Provinces of Alberta, Ontario, Quebec and Nova Scotia. Accordingly, the Fund will continue to file quarterly and annual financial statements and other continuous disclosure documents required by the applicable securities regulatory authorities, which will be posted on the SEDAR system and the existing outstanding Units will continue to be free from transfer restrictions under applicable Canadian securities laws.
The Fund’s Deed of Trust was amended and restated to ensure that there is no public or organized market for the trading of the Units, in order that the Fund was not considered to be a “SIFT” pursuant to the provisions of the Income Tax Act (Canada. Accordingly, the amendments to the Deed of Trust included a provision that the consent of the Trustees of the Fund is required for any transfer of Units.
In addition, to address in part the loss of liquidity to Unitholders that resulted from the delisting, the Deed of Trust was amended to enhance the Fund’s redemption rights. The amendment increased the amount the Fund can make available to redeem Units, in cash, from $100,000 per month to $1,500,000 per month (subject to the Trustees discretion to exceed this amount). The amendments also provided for the Trustees to post a redemption price to be determined by the Trustees, from time to time, based upon the Fund’s tangible book value (the “TBV”), plus or minus 10% of the TBV, depending upon the Trustee’s view of the Fund’s business prospects and liquidity at a particular time. The Trustee’s also have the right, in their discretion, to immediately adjust the TBV for any sudden material events or changes in the business of the Fund. The detailed calculation of the TBV is more specifically set forth in the amended and restated Deed of Trust, a copy of which is available to any Unitholder, without charge, upon request.
The aggregate value of redemptions is determined on a monthly basis for approval by the Board of Trustees. Any Units tendered and accepted for redemption will be processed and cancelled by the tenth day of the month immediately following the tendering of same by Unitholders requesting their Units be redeemed.
In order for a Unitholder to have their Units redeemed, they must tender the following documents:
1. a completed Trust Unit Redemption Form;
2. a Trust Unit Certificate, duly endorsed for transfer.
Completed documents are to be submitted to the Fund’s Registrar and Transfer Agent at the address set forth below:
530 8 Avenue SW
Calgary, Alberta T2P 3S8
Attention: Simon Law
Download Foremost Trust Redemption Form
Transfers of Units
Unitholders are still entitled to trade their Units through private sales, subject to the specific consent of the Trustees, and any restrictions which may apply to a specific selling Unitholder. However, the Units are not listed on any stock exchange and there is no other public market for trading the Units.
Temporary Reduction of Monthly Limit for Fund Unit Redemptions Pursuant to Section 6.4(ii)(A) and (B) of the Deed of Trust
Pursuant to section 6.4(ii)(A) and (B) of the Deed of Trust of the Fund dated November 12, 2005 as amended (the “Deed of Trust”), the Trustees of the Fund have discretion, in any calendar month, to reduce the monthly limit for cash redemptions of units of the Fund due to a material change, or concerns as to the current working capital or debt of the Fund. The exercise of such discretion may result in all or a portion (on a pro rata basis, depending on notices of redemption received) of the amount payable for units redeemed being paid by unsecured promissory notes in accordance with section 6.5 of the Deed of Trust.
As disclosed by prior press releases, effective May 1, 2014 and applying to all notices of redemption received in the months of May through October 2014, inclusive, and February 2015, through January 2017, inclusive, the Trustees of the Fund exercised their discretion pursuant to section 6.4(ii)(B) to reduce the monthly limit for cash redemptions from $1,500,000.00 to $0.00, and to $500,000.00 for the months of November and December, 2014, and January 2015 (in each case the subject redemptions being payable by the end of the following month). The Trustees undertook to review the revised monthly limit in respect of the month of February 2017 no later than February 15, 2017.
With respect to the month of February 2017, the Trustees have determined that the monthly limit for cash redemptions will be set at $0.00 due to concerns as to current working capital and debt of the Fund, having regard to the Board’s views on the potential impact of current and expected market conditions on the Fund’s performance. The Trustees have undertaken to review the revised monthly limit in respect of the month of March 2017 no later than March 15, 2017.
In accordance with the Deed of Trust, unitholders that submit or have submitted notices of redemption during the month of February 2017, such that the Fund is obligated to pay the redemption price in respect of the subject units on or before March 31, 2017, will be contacted individually and provided with the opportunity to elect to withdraw all or any part of such notices of redemption. Any unitholders not electing to withdraw their redemption notices, in whole or in part, will be paid the redemption price in respect of the units that they submit for redemption by unsecured promissory notes.
This discussion is intended for summary purposes only and is subject in all respects to the Deed of Trust. The income and other tax consequences of holding, redeeming or disposing of units and acquiring promissory notes will vary depending on the unitholder’s particular circumstances, including the jurisdiction(s) in which the unitholder resides or carries on business, and whether the unitholder is an RRSP, RESP, RRIF, PPSP or TFSA. Accordingly, this summary is of a general nature only and is not intended to be legal or tax advice to any prospective purchaser or any unitholder. All unitholders should consult their own legal and tax advisors prior to redeeming units of the Fund.
On behalf of the Trustees
Foremost Income Fund
Bevan May, Trustee