Marret Resource
Overview
The Corporation's articles will be amended to provide for the creation of unlisted Class A Shares and for an annual liquidity right (ALR), i.e., an annual offer to redeem at a discount to NAV, in respect of both the Common Shares and Class A Shares (collectively, "Shares"). The addition of the Class A Shares "will give shareholders…the opportunity to invest in unlisted securities of the Corporation while maintaining rights and privileges…substantially the same as those attached to the Common Shares." The addition of the ALR will permit shareholders "to dispose of Shares on an annual basis…at a price close to NAV at times when the trading price of the Common Shares is at a discount to NAV."
The Corporation
It is an OBCA corporation whose Common Shares are listed on the TSX. Its business is to lend to companies in the resource sector. Its reported issued share capital appears to be higher than its market cap. It does not appear to be a mutual fund corporation.
Class A Shares
. Their attributes will be substantially the same as the Common Shares except that they will not be listed. Holders of the Common Shares will have the one time right to convert their Common Shares into Class A Shares. Holders of Class A Shares will have the right to convert into Common Shares on a quarterly basis. The Corporation will have the ability to convert the Class A Shares into Common Shares at any time. The conversion of Common Shares into Class A Shares will be limited if it affects the Corporation's TSX listing.
ALR
Following satisfaction of the Redemption Conditions, the Corporation will offer to redeem Shares pursuant to redemption notices (given between 30 and 60 days in advance, and specifying the percentage of the NAV per Share for the determination of the Redemption Amount) at their redemption price (being the Redemption Amount plus any declared and unpaid dividends). If the Corporation receives requests to redeem more than the maximum number of Shares of a class to be redeemed in any year, the number of tendered Shares to be redeemed will be reduced pro rata.
Redemption Conditions
(i) As of December 31 of any year after 2013 the VAP of the Common Shares is less than 97% of their average NAV over the last quarter, and (ii) the Manager (currently, Marret Asset Management Inc.) has recommended to the Board that a certain number of Common Shares and Class A Shares be redeemed as determined in accordance with any applicable policy adopted by the Board (the ALR Policy).
Redemption Amount
An amount up to 99% of the NAV per Common Share or Class A Share as determined by the Manager in accordance with the ALR Policy.
ALR Policy
The anticipated ALR Policy is described. An equal percentage of the Common Shares and Class A Shares will be recommended by the Manager to be redeemed. No more than 25% of the outstanding Shares of each class may be redeemed by March 31, 2015 – and thereafter, no more than 10% annually. The NAV per Share will include a reduction for taxes on unrealized gains embedded in such NAV and a small reduction to ensure that redemptions are accretive to current shareholders. Any changes to the ALR Policy will be publicly announced prior to the next ALR.
Canadian tax consequences
The addition of the redemption right in favour of the Corporation will not be a disposition. S. 51 applies on share exchanges. A dividend received by a corporation generally will be deductible under s. 112 (but SFIs should seek their own tax advice). A holder will realize a capital gain or loss on a disposition (other than to the Corporation or in a tax-deferred disposition) based on the proceeds compared to ACB.