The Futura Corporation

The Futura Corporation

February 21, 2008 10:23 ET

Futura Reminds Current Trustees of Tree Island: Scare Tactics Won't Rebuild Unitholder Value; New Leadership Will

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 21, 2008) - The Futura Corporation ("Futura") today responded to the repeated efforts of the Current Trustees of Tree Island Wire Income Fund ("Tree Island" and the "Fund") to deflect attention from the Current Trustees' failure to protect and generate unitholder value:

- Fund units lost 80% of their value in less than 24 months

- Fund units lost 50% of their value since the introduction of the current Fund strategy

- Fund distributions cut by 33% since the introduction of the current Fund strategy

- Fund strategy is failing unitholders: financial performance continues to erode

- Recent recovery in the unit price is coincident with the requisition for the special meeting, not the result of any fundamental improvement at the Fund

- Current Trustees claim the strategy is working but will not provide proof by releasing Fourth Quarter 2007 financial results before the special meeting -- withholding key information from unitholders

"The fact is that the Current Trustees we are seeking to replace, who own less than two-tenths of one percent of the units, have overseen a stunning destruction in unitholder value," said Amar S. Doman, President and CEO of Futura. "Their response to these dismal results has been to oppose meaningful attempts to rebuild value and to simply reiterate unfounded claims about Futura and our reasons for attempting to bring fresh thinking and leadership to the board. The Current Trustees appear to be putting much more effort and corporate resources into defending their positions on the board than they have into building unitholder value."

"Tree Island's Current Trustees have failed unitholders and it is time for change," Mr. Doman said. "We are confident that unitholders will act to protect their interests on March 4th."

On February 8, 2008, Futura filed a proxy circular providing unitholders with reasons to support its resolution at the special meeting. The circular is available at Futura recommends that unitholders read its circular, which clearly outlines the reasons for Futura's actions and dispels the numerous inaccuracies and mischaracterizations that the Current Trustees have repeatedly put forward in their efforts to entrench themselves.

Futura urges fellow unitholders to vote the YELLOW proxy to create positive change at Tree Island.

In a letter to unitholders mailed on February 19, the Current Trustees repeat misstatements from their earlier news releases and circular and add very little that would help unitholders in their voting decision. Futura makes the following comments:

Change of Leadership - Not Change of Control

Unitholders are seeking a change - from the Current Trustees who have failed to protect their interests to a reconstituted board that will recognize the need for change in order to serve the interests of all unitholders.

However, as the Current Trustees must know, reconstituting the board is not a change of control and it is irresponsible of the Current Trustees to continue to claim that it is.

Futura reiterates that its efforts are aimed solely at increasing distributions and value for the benefit of all unitholders. Despite the Current Trustees' repeated and misleading claims to the contrary, Futura is not attempting "seize control" of the Fund without paying a premium. Unitholders should consider the following facts:

- Futura is asking unitholders only to elect five new trustees to the Tree Island board. It is not increasing its ownership position or acquiring any additional voting rights in the Fund. Therefore, to suggest that Futura should somehow pay a "premium" to unitholders in connection with the special meeting is misguided, misleading and clearly intended to distract unitholders from concentrating on the Fund's poor performance under the direction of the Current Trustees.

- Unitholders are, and will continue to be, protected from an unwanted takeover of Tree Island by a rights plan that can only be removed or amended by a majority vote of all independent unitholders. As the Current Trustees know, Futura cannot unilaterally remove the rights plan.

- If the new nominees are elected, six of the Fund's eight trustees will be independent of Futura and all of the trustees will have fiduciary duties to act in the best interests of Tree Island and all of its unitholders.

The Current Strategy is Failing Tree Island - and Failing Unitholders

Simply repeating a claim that the current strategy is working does not make it true. In fact, it is clear that, after 15 months, the Fund's current strategy does not work. Profitability has suffered as a result of the strategy and distributions have been cut, putting downward pressure on unit value.

The Current Trustees have provided no evidence that the Baoan acquisition is - or will be - accretive to distributable cash flow. They have not provided evidence that the acquisition has met the Current Trustees' own criteria: there is no sign of reducing raw material costs, expanding markets or adding to product range. They also did not seek an independent fairness opinion about the effect of the transaction on unitholders.

If there is evidence that the strategy is working, it should be apparent in the Fund's results for the fourth quarter of 2007. However, the Current Trustees refused to provide those results before the special meeting. They are withholding information that could help unitholders determine the desired future course of their Fund.

New Trustees, a New Direction and New Commitment to Unitholder Value

The Current Trustees make the unfounded claim that Futura does not have a strategy for Tree Island. This is false. The proposed strategy was clearly outlined in the Futura circular and elsewhere - along with the important fact that any strategy would have to be approved and implemented by the new independent Board of Trustees.

The priority must be to stabilize Tree Island's business. While unitholders have waited in vain for more than 15 months to see positive results from the Fund's current strategy, Futura is recommending an immediate action plan designed to get Tree Island rapidly on a new course towards enhanced value.

From the date of election of the reconstituted board, under Futura's plan:

- Within 30 days - Trustees will meet with management, customers, and suppliers to and review and analyze strategies and plans. This would include an immediate review of the Fund's capital structure and debt, and the advisability of a unit repurchase plan to improve the capitalization. It would also include a thorough review of the Baoan acquisition to determine what, if any, value can be extracted from it;

- Within 60 days - Trustees will complete a detailed review of operations and adopt a specific plan to respond to the current economic environment

- Within 90 days - Tree Island will be re-focused on being the low-cost producer of nails and wire products in its sector. It will be more efficient with fewer management layers, a more direct approach, and more focused on serving the customer.

For the longer term, Futura has recommended that the board implement a strategy that will:

- Cost-effectively increase organic growth and shift it away from its reliance on western North America;

- Reduce reliance on expensive capital through a normal course issuer bid for up to 10% of the outstanding units. This would enhance unitholder value and have, at most, a marginal impact on Futura's ownership position in the Fund;

- Focus on higher-margin products to reduce Tree Island's vulnerability to commodity and raw material price changes;

- Diversify by product offerings but not by geographic markets until market conditions improve;

- Gradually increase imports, using joint ventures and partnerships, to increase margins.

More details are available in the Futura proxy circular. These steps have been successful with other similar businesses and are all designed to enhance profitability, secure cash generation, increase potential distributions, and add value to Tree Island units.

Futura notes that Tree Island's unit price, after hitting a low in December 2007 just prior to Futura's requisition of the special meeting, has increased to $5.12 since the requisition. Tree Island has not publicly disclosed any material fact and has not demonstrated any operating or financial improvement that would account for the unit price increase. Futura is convinced that this unit price improvement has occurred solely because of investor expectations that Futura will be successful in replacing the Current Trustees with the unitholder nominees who can make the necessary changes to get Tree Island on the course to value growth.

New Independent Trustees With Proven Experience

The unitholder nominees are being proposed for their proven leadership and business experience in creating value. It is absurd for the Current Trustees to suggest that Futura should not nominate trustees it has seen deliver results for investors.

The Current Trustees comparison of ownership of Tree Island units serves only to highlight their own lack of alignment with unitholder interests. Two of the unitholder nominees represent Futura which owns approximately 19.9% of the Fund's units. The remaining nominees have not yet been elected as trustees, and yet their interest in the Fund is not materially different than the 0.19% ownership of the Current Trustees that Futura proposes to replace.

Futura notes that the Current Trustees it is seeking to replace include current Chairman Keith Purchase and that three of these trustees were appointed after Mr. Purchase's appointment in 2006; Mr. Dingle, Mr. Fitch and Mr. Leverton were all "handpicked". Mr. Leverton was an officer of Catalyst Paper while Mr. Purchase was chairman of that company, posts neither holds following the recent proxy contest at Catalyst.

The Current Trustees have no experience relevant to the management of Tree Island - other than the time they have spent overseeing the destruction of value at the Fund:

- Mr. Purchase is a former executive, board member and chairman in the forest products sector. He is a former chair of a health authority. He is on the board of a company in the decorative paving business.

- Laurence Dingle has a background in human resources, has no related industry experience and appears to serve on no other boards.

- Michael Fitch is a retired lawyer, has no related industry experience and serves on the board of a junior mining company.

- Jacqueline Hurlbutt is a retired banker, has no related industry experience and serves on no other boards.

- Ralph Leverton is the former chief financial officer of Catalyst Paper, where he worked for Mr. Purchase. He has no related industry experience and serves on no other boards.

The Current Trustees continue to misconstrue Futura's unequivocal statements that it has no interest in pursuing related party transactions with Tree Island.

They also attempt to discount the good faith undertaking by Mr. Doman and Harry Rosenfeld to serve on the Board for a nominal C$1 per year by arguing that director compensation can be changed at the discretion of the Board. Without reservations or conditions, Mr. Doman and Mr. Rosenfeld reiterate this undertaking and pledge to unitholders that they will refuse any personal compensation from the Fund for their efforts to restore unitholder value at Tree Island.

Unitholders are reminded that all trustees -whether the currently entrenched group or the individuals nominated by Futura - are responsible to the unitholders and must be approved by a vote of the unitholders. If unitholders are dissatisfied with their trustees, they always have the power to replace the trustees.

Futura is confident that unitholders will disregard the Current Trustees' attempts to distract their attention from the loss of value they have suffered under the leadership of the Current Trustees.

Current Trustees Explore Unitholder Dilution as a Strategic Alternative

The Fund's weakened financial position, resulting largely from the Baoan acquisition, has led the Current Trustees to reveal that they are considering financing alternatives. These include the sale of convertible debentures or convertible preferred shares which would lead to dilution of the interests of current unitholders. Its effect would be the exact opposite of the value-enhancing unit repurchase plan proposed by Futura.

The Current Trustees continue to understate the financial benefits of a unit repurchase for all unitholders and exaggerate its effect on Futura's ownership which would be inconsequential.

In addition, and in response to the special meeting requisition, the Current Trustees highlight that they are currently reviewing alternatives to deal with the changes to the taxation of income trusts - changes that were announced 16 months ago. There can be no assurance that the result of this review would be beneficial to Tree Island unitholders.

About the Special Meeting

The special meeting of unitholders of Tree Island Wire Income Fund is scheduled be held at 2:00 p.m. Vancouver time, Tuesday March 4, 2008 at the Metropolitan Hotel, 645 Howe Street, Vancouver, B.C.

Proxy Voting

Unitholders are reminded to vote the YELLOW proxy form so that the proxy can be received no later than 11:00 a.m. Vancouver time on Friday February 29, 2008. Detailed instructions are included in the proxy circular that is being distributed to all Tree Island unitholders.

Further information about voting the YELLOW proxy is available from Kingsdale Shareholders Services at 1-866-639-8089.

About Futura

Futura is a Vancouver, British Columbia based private asset management and investment company. Futura has interests in numerous private and public companies, and specializes in income funds in the building materials sector.

Certain statements contained in this press release constitute forward-looking statements. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions as they relate to Futura, the Unitholder Nominees, Tree Island or future management are intended to identify forward-looking statements. Such statements reflect Futura's current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause Tree Island's actual results, performance or achievements that may be expressed or implied by such forward-looking statements to vary from those described herein should one or more of these risks or uncertainties materialize. Such factors include, but are not limited to, economic, business, competitive and regulatory factors.

Contact Information

  • Investors
    Kingsdale Shareholder Services
    Wesley Hall
    Lute & Company
    John Lute
    (416) 929-5883