As part of the capital reorganization, the Company will be creating one new class of shares to be designated as 2012 Preferred Shares, and two series of warrants (the “2013 Warrants” and the “2014 Warrants”) to acquire one 2012 Preferred Share and one Class A Share (together, a “Unit”). It is intended that the 2012 Preferred Shares, 2013 Warrants and 2014 Warrants will be issued on or about June 28, 2012, and will commence trading on the TSX at the opening of trading on such date.
Holders of the existing Preferred Shares will receive the following securities for each Preferred Share held on or about June 28, 2012 (the “Conversion Date”):
One 2012 Preferred Share – paying fixed cumulative preferential monthly dividends in an amount equal to 5.25% per annum of the net asset value per Unit calculated as at the end of the preceding month, up to a monthly dividend of $0.04375 per 2012 Preferred Share, and having a repayment objective on the termination date of $10.00;
One 2013 Warrant – each 2013 Warrant can be exercised to purchase one Unit for an exercise price of the lesser of $5.50 and 103% of the net asset value of the Company on the Conversion Date (the “2013 Warrant Subscription Price”) on any business day during the period commencing at market open (Eastern time) on the day following the Conversion Date and ending at 5:00 p.m. (Eastern time) on June 3, 2013; and
One 2014 Warrant – each 2014 Warrant can be exercised to purchase one Unit for an exercise price of 105% of the 2013 Warrant Subscription Price on any business day during the period commencing at market open (Eastern time) on the day following the Conversion Date and ending at 5:00 p.m. (Eastern time) on June 2, 2014.
Class A Shareholders will continue to hold their current Class A Shares and would participate in any further increases in the net assets over $10.00 per Unit.
In connection with the reorganization, the Company’s investment manager, Quadravest Capital Management Inc. (“Quadravest”), will be lowering its annual management fee from 0.85% to 0.75% per annum of the net asset value of the Company. In addition, the discount to net asset value applicable to monthly redemptions of Shares will be decreased from 4% to 2% and the amount of this reduced discount would be paid to Quadravest and not retained by the Company. These measures are intended to lower ongoing expenses of the Company and improve trading prices relative to the net asset value for the Company.
Shareholders are being given a special retraction right (the “2012 Special Retraction Right”) as a result of the approval of this capital reorganization, which is in addition to the regular monthly retraction at the end of April 2012 and the dissent rights which Shareholders had in respect of the special meeting under the Business Corporations Act (Ontario).
Shareholders who do not wish to remain invested in the Company under its reorganized share structure will have until the close of business on May 17, 2012 to provide the Company with notice through their CDS participant that they wish to have their Preferred Shares or Class A Shares redeemed pursuant to the 2012 Special Retraction Right, and to surrender their Shares for retraction. On such a special retraction, each holder of a Preferred Share will receive the lesser of (i) $10.00 and (ii) the net asset value per Unit calculated on May 31, 2012; while holder of a Class A Share will receive the net asset value per Unit calculated on May 31, 2012, less $10.00. Shareholders interested in exercising such retraction right should contact the CDS Participant through which they hold the Shares for further information and instructions as to how to exercise this right. Shareholders should note that the requirements of any particular CDS Participant may vary, and that Shareholders may need to inform their CDS Participant of any intention to exercise this retraction right in advance of the May 17 deadline. Payment for the Class A Shares or Preferred Shares so tendered for retraction pursuant to the 2012 Special Retraction Right will be made no later than June 19, 2012.
If more Class A Shares are tendered for retraction under the 2012 Special Retraction Right than Preferred Shares, the outstanding Preferred Shares will be consolidated so that following the retraction pursuant to the 2012 Special Retraction Right there would be an equal number of Preferred Shares and Class A Shares outstanding. Similarly, if more Preferred Shares are tendered for retraction than Class A Shares, the outstanding Class A shares will be consolidated so that again there would be an equal number of Preferred Shares and Class A Shares outstanding following implementation of the 2012 Special Retraction Right. The Company may implement this consolidation by adjusting the number of 2012 Preferred Shares, 2013 Warrants and 2014 Warrants to be issued to holders of Preferred Shares, in the event a consolidation of Preferred Shares is required.
Additional information regarding the capital reorganization is contained in the Management Information Circular dated March 14, 2012 prepared in respect of the special meeting, available on SEDAR at www.sedar.com or on the Company’s website www.financial15.com.
