Thursday, February 14, 2008
Enerplus Resources Fund (ERF.UN) and Focus Energy Trust (FET.UN) merge
Enerplus Resources Fund ("Enerplus") and Focus Energy Trust ("Focus") are pleased to announce that the merger of Enerplus and Focus pursuant to a plan of arrangement (the "Arrangement") was completed today.
The combination of Focus and Enerplus has created a large oil and gas
producer that possesses high quality, long life assets with an extensive
portfolio of resource play opportunities in shallow natural gas, Bakken light
oil, crude oil waterfloods, deep tight gas and the oil sands. Enerplus
Unitholders will enjoy a diversified and balanced portfolio of oil and gas
assets producing approximately 100,000 BOE/day with a proved plus probable
reserve life index of approximately 14 years.
As previously announced by Focus, the Focus Dividend Reinvestment Plan
("DRIP") was suspended such that the cash distribution to be paid on February
15, 2008 to holders of record on January 31, 2008 is not be eligible for
reinvestment under the Focus DRIP. As the Arrangement has been completed, the
Focus DRIP has been terminated. Former Focus Unitholders who are resident in
Canada and who are interested in participating in the Enerplus DRIP should
contact their broker, investment dealer, financial institution or other
nominee through which their Enerplus Units are held. If you are a registered
unitholder, you must complete and deliver an authorization form found on our
website at www.enerplus.com and submit it to CIBC Mellon Trust Company with
instructions on how you wish to participate in the Enerplus DRIP.
Note that I have now removed Focus from the DRIP list of companies.
Full information of Enerplus' announcement can be found here: Enerplus and Focus announce closing of strategic merger
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Monday, February 04, 2008
Changes to Eveready Income Fund (EIS.UN)
"Eveready’s Board of Trustees has unanimously approved amendments to the Fund’s distribution policy to maximize the retention of operating cash flow to re-invest in growth. Eveready’s current monthly cash distribution of $0.06 per unit ($0.72 per unit on an annualized basis) will be eliminated and replaced with a quarterly “in-kind” distribution of $0.18 per unit ($0.72 per unit on an annualized basis). Distributions settled “in-kind” means that unitholders will receive additional Fund units instead of cash. “In-kind” Fund units will be issued at a deemed price equal to the volume-weighted average price of all units traded on the Toronto Stock Exchange on the ten trading days preceding the applicable record date. Eveready anticipates that the next distribution will be paid on or about April 15, 2008 to unitholders of record as of the close of business on March 31, 2008."
In summary, they have made the reinvestment of distributions mandatory for all shareholders. They have also eliminated the 5% discount and will now purchase the shares using a 10-day average price. Finally, they have changed the payment period from monthly to quarterly with the unit distribution amount staying the same. As such, I have changed Eveready's record on the DRIP list of companies to reflect that distribution reinvestment is now mandatory and that the discount has been removed.
Eveready is the first company that I have heard of that has gone to this type of mandatory dividend reinvestment program. This is how the company explained the move: “The market has been sending us a strong signal that our current distribution policy is not the most effective use of our cash,” comments Peter Lacey, Eveready’s Chairman of the Board. “We concur and believe that reinvesting the Fund’s cash in growing our business will maximize Eveready’s long-term value. Essentially, our new distribution policy will provide the benefits that a corporation enjoys of being able to reinvest its profits in growth, yet retains the positive flow-through tax characteristics of an income trust until our likely conversion to a corporation in 2011.”
The last line makes reference to the Canadian government's implementation of taxes on income trusts starting in 2011. (More info here: Canada’s New Government Announces Tax Fairness Plan) Eveready might be the first of many income trust funds in Canada to reduce or remove their distributions so they can stockpile money for the eventual tax hit once they change to a corporation.
Full information of Eveready's announcement can be found here: Eveready Income Fund Announces 2008 Growth Plans and Approves Strategic Changes to Distribution Policy
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