Rights Offerings

Overview

Yamana Gold is proposing to distribute a part interest in a gold-mining subsidiary (Brio Gold) to its shareholders through a dividend-in-kind of rights to purchase common shares of Brio Gold from Yamana for a specified per-share price. These Purchase Rights will trade on the TSX. Yamana will be providing its shareholders with its estimate of the value of this dividend.

See detailed summary under Spin-offs and Distributions - Taxable rights offerings.

Overview

Kingsway, whose Common Shares trade on the TSX and NYSE (with a closing price on July 16, 2013 of U.S.$3.67 per share), and which has 13.15M common shares outstanding, intends to raise gross proceeds of U.S.$13.1M by issuing transferable Subscription Rights to all its Common Shareholders - entitling them to subscribe for 3.29 Units, at a subscription price of U.S.$4.00 per Unit. Each Unit consists of one common share, one Series A Warrant and one Series B Warrant. In order to preserve U.S.$827M of NOLs, there are potential restrictions on the number of Common Shares which may be acquired.

Subscription Rights

Common Shareholders receive one Subscription Right for each Common Share held on the record date (August 9, 2013). Four Subscription Rights entitle Shareholders to purchase one Unit, at a purchase price of U.S.$4.00, consisting of one Common Share, one Series A Warrant and one Series B Warrant. The Subscription Rights expire on September 6, 2013 and are transferable (with trading to occur on the TSX). To the extent that the basic subscription privileges are not exercised, holders may exercise an over-subscription privilege (subject to allotment and to a maximum of five Units for each one Unit purchased by the holder under the basic subscription privilege.)

Series A Warrants

The term is seven years and the exercise price per Common Share is the greater of U.S.$4.50 and 120% of the 20-trading-day VWAP prior to issuance. Redeemable by Kingsway at U.S.$0.25 per warrant once the closing price of common shares exceeds U.S.$6.00 for 20 consecutive trading days. Conditionally listed on the TSX.

Series B Warrants

The term is 10 years and the exercise price per Common Share is the greater of U.S.$5.00 and 120% of the 20-trading-day VWAP prior to issuance. Non-redeemable. Conditionally listed on the TSX.

Allocation

Based on financial advice, Kingsway believes that the aggregate fair value of one Series A Warrant and one Series B Warrant is at least U.S.$0.41.

U.S./ineligible holders

Subscription Rights are also being offered to U.S. residents in a separate process involving the filing of a registration statement with the SEC. Other shareholders who reside outside Canada will not be able to exercise their Subscription Rights except where Kingsway determines that this would comply with securities and other laws.

U.S. NOLs and s. 382

As at March 31, 2013, Kingsway had net U.S. operating loss carryforwards totaling approximately US$827.4 million. Code s. 382 generally restricts the use of NOL carryforwards after an "ownership change." An ownership change occurs if, among other things, the shareholders (or specified groups of shareholders) who own or have owned, directly or indirectly, 5% or more of Kingsway Common Shares or are otherwise treated as 5% shareholders under s. 382 increase their aggregate percentage ownership of Kingsway stock by more than 50% over the lowest percentage of the stock owned by these shareholders over a three-year rolling period.

Plan for U.S. NOL preservation

On September 28, 2010, Kingsway put in place a plan under which: upon (i) any person becoming an owner of 5% or more of the outstanding Common Shares or (ii) an existing greater than 5% Shareholder acquiring additional Common Shares (each a "5% Shareholder"), without express approval of the Board, Kingsway will issue rights to purchase additional Common Shares to Shareholders holding Common Shares as of the closing of such transaction (other than such 5% Shareholder), generally resulting in substantial dilution to such 5% Shareholder. See Plan of Kingsway Financial for Restricting Share Ownership Changes. If the total of Common Shares currently beneficially owned together with Common Shares expected to be received by exercising Subscription Rights (including on exercising Subscription Rights acquired by others) is greater than 650,000, the Common Shareholder may need to request Board exemption.

Canadian tax consequences

No amount will be required to be included in income as a consequence of acquiring Subscription Rights, their cost will be nil and no gain or loss will be realized on exercise. The aggregate cost of Common Shares, Series A Warrants and Series B Warrants will the aggregate exercise price plus the adjusted cost base of the Subscription Rights, with the allocation amongst the three acquired securities required to be reasonable.

The exercise of Warrants will not constitute a disposition, and the Common Shares acquired will have a cost equal to the exercise price plus the adjusted cost based of the exercised Warrants.

U.S. tax consequences

No taxable income should be recognized upon receipt of Subscription Rights (rather than dividend income being recognized to the extent of current or accumulated E&P), and no gain or loss will be recognized on exercise of Subscription Rights or Warrants.

Kingsway is not believed to be a PFIC.

Overview. Slate Retail REIT is making a rights offering to the holders of its units (including the holders of exchangeable units in subsidiary LPs) to acquire REIT units at a discount to their pre-announcement trading price. The rights will be tradeable on the TSX. CRA likely would accept there would be no consequences of the distribution of the rights to the unitholders other than under the s. 49 rules.

Offering to different Unitholders. Rights are being offered to eligible holders of the REIT's outstanding Units, Class A Units and Class I Units (collectively, the "Unitholders") and to eligible holders of outstanding exchangeable units of subsidiary LPs, namely class B limited partnership units of U.S. Grocery-Anchored Retail (1B) Limited Partnership ("GAR B Units"), class B limited partnership units of Slate Retail One L.P. ("LP1 Units") and exchangeable class B limited partnership units of Slate Retail Two L.P. ("LP2 Units" and, collectively with the GAR B Units and LP1 Units, the "Exchangeable Securities", and the holders of Exchangeable Securities being "Exchangeable Securityholders").

"Basic Subscription Privilege." An eligible holder of Units will receive one Right for each Unit (1.0078 Rights for each Class A Unit, 1.0554 Rights for each Class I Unit held, and one Right for each Exchangeable Security held.) Every nine Rights held will entitle an eligible holder of Rights to subscribe for one Unit at a subscription price is C$13.71 per Unit (representing a discount to the closing price of the Units on the TSX on the last trading day prior to the announcement of the Rights Offering. However, the subscription price may also be satisfied through payment in U.S. dollars at a price of U.S.$10.21 per Unit.

Attributes of Units. Each Unit, Class A Unit and Class I Unit entitles the holder to the same rights and obligations as a Unitholder without preferences. Each Class A Unit is convertible at the option of the holder into 1.0078 Units. Each Class I Unit is convertible at the option of the holder into 1.0554 Units. Each Exchangeable Security is redeemable for cash or Units on a one-for-one basis, as determined by the respective general partner of Grocery-Anchored Retail (1B) Limited Partnership, Slate Retail One L.P. or Slate Retail Two L.P. The Exchangeable Securities are economically equivalent to the Units in all material respects, and their value is derived from the same entities (i.e., the operating limited partnerships of the REIT) from which the Units derive their value.

Numbers of Units and Rights. On March 1, 2016, there were 28,549,905 Units, 386,656 Class A Units, 348,000 Class I Units, 547,355 GAR B Units, 219,620 LP1 Units and 1,778,776 LP2 Units issued and outstanding. A total of 31,852,607 Rights will be issued. The total Units issuable under the Rights Offering represent 12.40% of the issued and outstanding Units on March 1, 2016.

Listing. The Rights are transferable and will be listed on the TSX until April 19, 2016 (the "Expiry Date").

Use of proceeds. The REIT estimates it will use its available funds from the Rights Offering as follows: as to $5M for capital improvements and redevelopments and, as to the balance of up to $31 million, for acquisitions of new properties.

Non-Qualified Jurisdictions. Rights may not be exercised by or on behalf of, and the REIT will not accept any subscriptions from or on behalf of, any holder of Rights with an address of record in a Non-Qualified Jurisdiction (generally, outside Canada).

"Additional Subscription Privilege". An eligible holder who has exercised in full the Basic Subscription Privilege will be entitled to subscribe for additional Units. If any holder entitled to subscribe for Units under the Basic Subscription Privilege does not subscribe for the full amount of Units to which it is entitled, the unsubscribed Units offered to it will be aggregated with all other unsubscribed Units under the Rights Offering to make up the available additional Units that holders exercising their Additional Subscription Privilege will be entitled to subscribe for. The maximum number of Additional Units which a holder will be entitled to subscribe under your Additional Subscription Privilege will be limited to its pro rata share of the total number of additional Units available for additional subscription.

Canadian tax consequences. Characterization of Rights as options. There are two possible scenarios respecting the receipt of a Right. First, the value, if any, of a Right issued may be required to be included in income by the Holder as a taxable benefit from the REIT. Alternatively, the issuance of a Right may be considered to be an amount distributed in respect of a Holder's capital interest in the REIT such that the fair market value thereof, if any, will be deducted from the adjusted cost base of the Holder's existing Units. Under either of those two scenarios, the Rights should have a cost to the Holder equal to their fair market value at the time of issuance. Notwithstanding the foregoing, the CRA's current published administrative position is that where a trust grants an option to acquire units of the trust that are to be issued by the trust, there are no tax consequences to the trust or the recipient of the option. Applying this administrative position, the issuance of the Rights should have no immediate tax consequences for a Holder and the Holder would be deemed to acquire the Rights at a cost of nil. Holders should note that the CRA is not bound by its administrative positions and may change such positions at any time.

Application of option rules. The exercise of Rights will not constitute a disposition of property for purposes of the Tax Act and, consequently, no gain or loss will be realized by a Holder upon the exercise of Rights. A Unit acquired by a Holder upon the exercise of Rights will have a cost to the Holder equal to the aggregate of the subscription price paid for such Unit and the adjusted cost base, if any, to the Holder of the Rights so exercised. Upon the disposition by a Holder of a Right, other than pursuant to the exercise thereof, the Holder will realize a capital gain (or capital loss) to the extent that the proceeds of disposition exceed (or are exceeded by) the aggregate adjusted cost base to the Holder of such Right and any reasonable costs of disposition.

Terms of rights

Unitholders receive one right for each unit. Three units entitle the holder to acquire one unit at a subscription price of $9.00 per unit corresponding to 91% of the closing price of the units on the TSX on December 18, 2012 (the "Basic Subscription Right") - to raise $37.39M net. Holders of rights who have exercised their rights under the Basic Subscription Right are entitled to subscribe pro rata for any units not purchased initially under the rights. The rights expire on 28 January 2013.

Trading of rights

Unitholders may sell their rights. The rights will commence to trade on the TSX on 28 December 2012 under the symbol MID.RT.

US residents

US residents are not eligible to exercise rights. Prior to the expiry of the rights, the subscription agent will attempt to sell the rights allocable to such ineligible unitholders for their account.

Canadian tax consequences

The disclosure states:

..no property owned by the Fund is being distributed to Unitholders, no amount is being made payable by the Fund to Unitholders and the identical offering is being made to all Unitholders under the Offering. Accordingly, the issuance of the Rights pursuant to the Offering should have no immediate tax consequences for a Unitholder and the Unitholder should be deemed to acquire the Rights under the Offering at a cost of nil.

The option rules will apply to the exercise of a right, dispositions of rights (otherwise than on exercise) will result in capital gains or loss treatment, and the expiry of rights will give rise to capital losses based on the adjusted cost base, if any, of the rights.