WINNIPEG, Jan. 28 /CNW/ - Pollard Banknote Income Fund (TSX Symbol PBL.UN) (the "Fund") today announced its intention to convert the Fund from an income trust to a publicly listed corporation.
On January 28, 2009, the Board of Directors of Pollard Banknote Limited, General Partner of the operating business known as Pollard Banknote and the Board of Trustees of the Fund approved in principle a plan to convert the Pollard Banknote Income Fund into a publicly traded corporation, with conversion expected to occur May 2010.
Pollard Banknote has been proactively assessing several options available to provide long term stable growth to the business while minimizing the impact of the trust taxation legislated by the Federal Government in June of 2007. In addition, the ongoing opportunities and competitive pressures in the lottery market underline the need to continue to invest appropriate amounts in capital and technological improvements. Pollard Banknote believes the conversion to a corporation will help accomplish these objectives.
The conversion will utilize legislative tax-free conversion options and is expected to become effective in May 2010, following appropriate approvals and Unitholders vote at the annual general meeting to be held May 6th, 2010. It is anticipated that ultimately Unitholders in the fund will hold shares in the new public corporation on a one for one basis compared to their current unit holdings.
After the conversion it is expected the new corporation will pay a dividend that will be in line with typical dividend payout ratios for publicly traded corporations. Accordingly the plan approved in principle by the Board sets out a quarterly dividend after conversion of $0.03 per share. Prior to the conversion, effective with the distribution payable March 15, 2010, its monthly distribution to Unitholders will be adjusted to the equivalent rate of $0.01 per unit.
Further information on the conversion will be made available once the detailed plan has been completed.
Rationale and benefits of the conversion
On October 31, 2006, the Department of Finance announced the Specified Investment Flow-Through ("SIFT") trust income and distribution tax (the "SIFT Tax") which will apply to the Fund in 2011. In order to qualify under new legislation for a tax-free conversion the Fund must convert to a corporation before the end of 2013. Having regard to these legislative changes, as well as the opportunities to advance the Fund's long-term plan, the Fund believes it is in its best interests to proceed with the conversion at this time.
- The conversion provides for an efficient and effective method of
converting from a SIFT to a corporation consistent with existing
- The conversion is expected to be tax deferred for the Fund and
Unitholders resident in Canada such that no tax will be payable by
the Fund or the Unitholders resident in Canada as a result of the
- The new structure will simplify Pollard Banknote's interaction with
capital providers such as banks, bonding companies and other
financial institutions, as well as simplify its dealings with various
gaming commissions and other regulatory agencies;
- Conversion to a publicly traded corporation will greatly simplify the
current corporate structure and governance setup, allowing all
Unitholders to maintain their current ownership interests in one
share class in the public corporation. In addition it is expected
that administrative and overhead costs should be reduced;
- The operations of Pollard Banknote will be contained and disclosed in
one consolidated financial statement, eliminating the requirement to
have two separate financial statements, one for the business (Pollard
Holdings Limited Partnership) and a separate financial statement and
disclosure requirement for the Pollard Banknote Income Fund;
- The conversion will allow Pollard Banknote to reinvest a significant
portion of its free cash flow into the business in order to
capitalize on future growth opportunities, increase capital
expenditures and strengthen the balance sheet by reducing debt;
- The conversion may result in greater access to capital and the
removal of the "normal growth" and "undue expansion restrictions" in
the SIFT legislation which limits Pollard Banknote's ability to
consider strategic acquisitions.
Following conversion, it is intended that Pollard Banknote will pay a quarterly dividend of $0.03 ($0.12 annually) per share. The expected dividend policy will allow Pollard Banknote to continue to achieve its growth objectives relating to capital and technological investments, strengthen the balance sheet through reduced debt and still maintain an ongoing cash return to its shareholders.
Distribution policy prior to conversion
The monthly cash distribution will be reduced to $0.01 per unit, consistent with the equivalent anticipated dividend rate, beginning with the distribution covering the period from February 1, 2010 to February 28, 2010. Payment of the February distribution will be made on March 15, 2010, to Unitholders of record on February 26, 2010.
The cash distribution covering the period January 1, 2010 to January 31, 2010 was declared on January 9, 2010. Payment of the $0.0475 per unit will still be made on February 15, 2010, to Unitholders of record on January 29, 2010.
Details of the Conversion
The conversion will take advantage of current legislation enabling a SIFT to convert to a public corporation on a tax free basis. The conversion is subject to completion of the detailed conversion plan and related agreements and is subject to various customary commercial conditions, including the receipt of various regulatory approvals. The mailing to the Fund's Unitholders of an information circular in respect of the meeting is expected to occur in April 2010 and the conversion is expected to occur in May 2010.
About Pollard Banknote Limited Partnership
Pollard Banknote Limited Partnership ("Pollard Banknote") is one of the world's leading full-service lottery vendors and is a major supplier to North America's charitable gaming industry. The firm manufactures instant tickets and provides related programming, design, and marketing support. As well, Pollard Banknote manufactures ticket vending machines, pull tab tickets and bingo paper, and supplies lottery management services (including warehousing and distribution). Established in 1907, the firm is owned by the Pollard family and the Pollard Banknote Income Fund and currently serves more than 45 lotteries worldwide, including some of the largest and most respected lotteries in the United States, Canada, Europe, Asia, and Central and South America.
About Pollard Banknote Income Fund
Pollard Banknote Income Fund (TSX: PBL.UN) is an unincorporated, open-end trust which owns 26.7% of Pollard Holdings Limited Partnership, which in turn owns Pollard Banknote Limited Partnership.
Certain statements in this report may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this document, such statements include such words as "may," "will," "expect," "believe," "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this document. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
SOURCE Pollard Banknote Limited
For further information: For further information: John Pollard, Co-Chief Executive Officer, Telephone: (204) 474-2323 ext 204, Facsimile: (204) 453-1375; Gordon Pollard, Co-Chief Executive Officer, Telephone: (204) 474-2323 ext 211, Facsimile: (204) 453-1375; Rob Rose, Chief Financial Officer, Telephone: (204) 474-2323 ext 250, Facsimile: (204) 453-1375