Foremost Income Fund

Foremost Income Fund

December 07, 2015 11:34 ET

Foremost Income Fund Announces Special Non-Cash Distribution

CALGARY, ALBERTA--(Marketwired - Dec. 7, 2015) - Foremost Income Fund (the "Fund") announces that it will distribute its 2015 taxable income by a non‐cash distribution in the form of units of the Fund (the "distribution").

Record Date and Amount

The record date of the distribution will be December 15, 2015, and the distribution will be completed on December 31, 2015.

The amount of the distribution will be based on an estimate of the taxable income of the Fund for the financial year ended December 31, 2015, which estimate will be announced on December 31, 2015. The number of trust units to be issued will be established by dividing the total amount of the distribution, once determined, by the value of each unit as determined in accordance with section 5.7 of the Deed of Trust of the Fund dated November 12, 2005 as amended (the "Deed of Trust"), as of December 31, 2015.

The exact amount of the distribution will be based on the taxable income of the Fund for the financial year ended December 31, 2015 and will be announced via a press release once the taxable income is determined in February, 2016.

Consolidation of Units

Immediately after the distribution of trust units, in accordance with the terms of the Deed of Trust, the number of outstanding trust units will be consolidated, such that each unitholder holds, following the consolidation, the same number of trust units as before the distribution, with the exception of any non‐resident unitholders electing to pay withholdings by surrendering units as set out below under the heading "NOTICE TO NON‐ RESIDENT UNITHOLDERS."

Unitholder Income Tax Treatment

Individuals and taxable entities will incur a tax liability in respect of the distribution. As it has done in the past, Foremost encourages unitholders to consider holding their units in an RRSP to avoid these tax consequences. Alternatively unitholders may consider redeeming their units prior to the record date of the distribution (December 15, 2015), subject to consideration of the monthly redemption limit announcement concurrently released with this announcement (see below). All unitholders should consult your professional advisors to confirm the tax treatment of the distribution, and prior to redeeming units of the Fund, if you are considering doing so.

NOTICE TO NON‐RESIDENT UNITHOLDERS

Each unitholder that is a non‐resident of Canada that receives the distribution will be required to remit tax withholdings in an amount dependent on such unitholder's jurisdiction of residence. Withholdings must be remitted to the Canada Revenue Agency on or before January 15, 2016. A non‐ resident unitholder may remit such withholdings by (a) a cash payment independent of the distribution, (b) determining the number of units constituting equal value to the amount of the required withholdings, rounded up to the nearest whole unit, and surrendering those units to Foremost in exchange for which Foremost will, through Computershare, pay cash to the unitholder which the unitholder can then remit to the Canada Revenue Agency as the required withholdings. The formula, based on estimated taxable income of the Fund, for determining the number of units to be surrendered, and the procedure for surrendering such units will be provided in greater detail at the time the distribution is completed. However please take notice that any non‐resident unitholder wishing to provide for withholdings by surrendering units is required to surrender such units on or before January 8, 2016 in order to allow for the administration of the surrendered units, and the return of the cash payment through Computershare no later than January 11, 2016, so as to enable the remittance of withholdings to the Canada Revenue Agency no later than January 15, 2016. Non‐resident's are obligated to ensure the required withholdings are remitted to the Canada Revenue Agency. All non‐ residents should consult your professional advisors to determine and ensure the timeliness of your response in this regard.

Trustees' Considerations Regarding the Distribution

In determining to distribute the Fund's income in units, the Trustees considered the following:

  1. Pursuant to subsection 5.4(b) of the Deed of Trust, the Trustees are obligated to ensure that the Fund is not liable to pay income taxes in respect of its current taxation year ending December 31, 2015, by distributing the taxable income of the Fund; and
  2. Pursuant to subsection 5.7(a) of the Deed of Trust, and having regard to current economic conditions and anticipated operating cash requirements of the Fund, a distribution in the form of units conserves cash and tax pool resources for anticipated future Fund requirements and opportunities.

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 subsections 6.4(ii)(A) and (B) of 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 through November 2015, inclusive, the Trustees of the Fund exercised their discretion pursuant to subsection 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 December 2015 no later than December 15, 2015.

With respect to the month of December 2015, 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 January 2016 no later than January 15, 2016.

In accordance with the Deed of Trust, unitholders that submit or have submitted notices of redemption during the month of December 2015, such that the Fund is obligated to pay the redemption price in respect of the subject units on or before January 31, 2016, 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 information 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 information is of a summary 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.

On behalf of the Trustees Foremost Income Fund

Bevan May, Interim President/CEO and Trustee

FORWARD‐LOOKING STATEMENT

Certain statements in this news release may constitute "forward‐looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund to be materially different from any future results, performance or achievements expressed or implied by such forward‐looking statements. When used in this news release, such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements include statements the Fund's intention to proceed with a Unitholders' meeting and information regarding the Trustees' views of the future prospects and tax treatment of the Fund and tax treatment of the Special Redemption, the Fund's expectations regarding the future availability of cash to meet redemption requests and the Trustee's expectations for redemption prices in December 2011 and January 2012. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this news release. These forward‐looking statements involve a number of risks and uncertainties, including: the impact of general economic conditions, industry conditions, changes in laws and regulations, increased competition, fluctuations in commodity prices and foreign exchange, and interest rates and stock market volatility.

Contact Information