Foremost Income Fund

Foremost Income Fund

November 10, 2005 17:06 ET

Foremost Industries Income Fund Announces Proposed Reorganization

CALGARY, ALBERTA--(CCNMatthews - Nov. 10, 2005) -

Not for distribution to U.S. newswire services or for dissemination in the United States.

Foremost Industries Income Fund (TSX:FMO.UN) ("FMO" or the "Fund") announces that its Trustees have unanimously approved a proposed reorganization ("Reorganization") of the Fund into a new publicly-traded income fund ("New FMO" or the "New Fund") which will be established by the Fund and which will acquire all of the existing assets and business operations presently conducted by FMO and its subsidiary entities. The Reorganization will result in unitholders of the Fund receiving one trust unit of New FMO for each unit of FMO held. The current business and operations of the Fund will be unaffected by the Reorganization and will continue to be performed by the current management and employees of the Fund and its subsidiary entities.

The Reorganization will require the approval of at least 66 2/3% of the votes cast by FMO unitholders at a special meeting of the Fund to be held on Monday, December 19, 2005. An information circular relating to the special meeting and describing the Reorganization will be mailed to FMO unitholders later in November. The Trustees of the Fund recommend that unitholders approve the Reorganization. In addition to the requirement for unitholder approval, the Reorganization will be subject to a number of other conditions including finalization of transaction documentation as well as the receipt of all necessary regulatory approvals.

For FMO unitholders resident in Canada, the Reorganization will result in a disposition, giving rise to a gain or loss for tax purposes to each unitholder, depending on their tax circumstances. Tax-exempt unitholders, and unitholders in tax deferred plans, will not be materially impacted; for other unitholders, the Reorganization may mitigate the allocation of taxable income they would otherwise incur for the year. Management expects that the trust units of New Fund will be eligible for RRSPs, RRIFs and registered pension plans.

As part of a continuing focus of improving the trading liquidity of its units, the Fund has reacted to the Federal Government's fiscal review policy in relation to flow through entities and income trusts, which has created uncertainty in the income fund market and volatility in trust unit prices. Management of FMO completed an extensive review of a number of alternatives to increase unit liquidity and unitholder value, which resulted in its determination to recommend the proposed Reorganization.

The Trustees, in approving the Reorganization, believe it will:

1. simplify somewhat the organizational and governance structure of the Fund;

2. increase the internal tax cost basis of New Fund, while there is certainty about the tax law, which may have some utility should the rules regarding income trusts be changed dramatically in the future; and

3. most importantly, increase the trading liquidity of Fund's units by allowing the Fund to attract a wider retail investor base (by being better able to depreciate assets and return capital to unitholders as part of its distributions) beyond its current concentration in tax deferred plans.

The Fund is an unincorporated open-end mutual fund trust conducting its business through Foremost Universal Limited Partnership ("Universal") and Foremost Industries Limited Partnership ("Foremost"). The Fund derives its operational income from both Universal and Foremost. Universal's overall business is focused on the oil and gas industry and contains the business units of: Universal Industries ("Universal Industries"), a manufacturer of oil treating systems, shop and field storage tanks; Stettler Oil and Gas Equipment, a gas separator manufacturer; and Wilco Industries; Corlac Industries ("Corlac"); Peace Land Fabricating and Supply Ltd. ("Peace Land") and De-In Industries Ltd. ("De-In"), all shop tank manufacturers. Universal purchased the assets and business operations of Corlac on July 1, 2004 and the shares and business operations of Peace Land and De-In during the third quarter of 2005. Foremost is comprised of the business units of Foremost Industries, a manufacturer of custom equipment used for the oil and gas, construction, mining and water-well industries; and Mobile Drilling, a U.S. based business which manufactures and sells parts for the geotechnical industry. The units of the Fund are listed and trade on the Toronto Stock Exchange under the symbol "FMO.UN".

"Certain statements in this press 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 press release, such statements use words such as "estimate", "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this press 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. The Fund is not undertaking to update any forward looking statements."

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

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