The following information is provided for historical reference. Daylight Energy Trust ("DET") and Sequoia Oil and Gas Trust ("SQE") joined to form Daylight Resources Trust ("DRT") in 2006. Subsequently in 2010, Daylight Resources Trust ("DRT") converted from an income trust structure to a dividend paying corporation and is now Daylight Energy Ltd.
Daylight Energy / Sequoia Oil & Gas Merger Tax Information
The following information is intended to provide general guidance on certain frequently asked questions of holders ("Unitholders") of trust units of Daylight Energy Trust ("DET") and Sequoia Oil & Gas Trust ("SQE") in connection with the Plan of Arrangement involving among others DET and SQE completed on September 21, 2006. As such, the following information is qualified in its entirety, and Unitholders are urged to carefully review with their advisors, the Joint Information Circular and Proxy Statement (the "Circular") of DET and SQE dated August 18, 2006 including, without limitation, the description of the Canadian and United States federal income tax considerations contained on pages 77 through 98 , the effect of the arrangement contained on pages 49 through 72 and the Plan of Arrangement ("Arrangement") contained within Appendix E of the Circular.
This summary information is of a general nature only and is not intended to be legal, investment or tax advice to any particular former holder of DET or SQE Units or any holder or potential holder of Daylight Resources Trust units, Trafalgar Energy Ltd. ("Trafalgar") common shares or Trafalgar Arrangement Warrants. Moreover, the information provided below, and in the Circular, may not apply to all Unitholders. Holders, former holders or potential holders of any of these securities are urged to consult with their own legal, investment and tax advisors as to their own particular circumstances and the consequences of the Arrangement to them.
Daylight Energy Trust Unitholders
- Exchange ratio of 0.66420 of a Daylight Resources Trust ("DRT") unit
- Exchange ratio of 0.04170 of a Trafalgar common share
- Exchange ratio of 0.01208 of a Trafalgar Arrangement Warrant - exercisable at $4.02 per warrant
- Deemed value of the Trafalgar common share and Arrangement Warrant distributed for each DET unit is $0.16763
- Specified Daylight Percentage of units disposed of at Fair Market Value ("FMV") is 1.98% with balance of units exchanged at Adjusted Cost Base ("ACB")
Sequoia Oil & Gas Trust Unitholders
- Exchange ratio of 0.82500 of a Daylight Resources Trust unit
- Exchange ratio of 0.05170 of a Trafalgar common share
- Exchange ratio of 0.01498 of a Trafalgar Arrangement Warrant - exercisable at $4.02 per warrant
- Deemed value of the Trafalgar common share and Arrangement Warrant distributed for each SQE unit is $0.20783
- Specified Sequoia Percentage of units disposed of at FMV is 1.97% with balance of units exchange at ACB
Daylight Energy Ltd. Exchangeable Shareholders
- Exchange ratio of 1.29243 for DET units with each DET unit received treated in accordance with DET unitholders resulting in the following for each exchangeable share:
- Exchange ratio of 0.85843 of a Daylight Resources Trust unit
- Exchange ratio of 0.05389 of a Trafalgar common share
- Exchange ratio of 0.01561 of a Trafalgar Arrangement Warrant - exercisable at $4.02 per warrant
- Deemed value of the Trafalgar common share and Arrangement Warrant distributed for each DEL exchangeable share is $0.21664
Market Prices for Securities
- Closing price for September 20 (day prior to closing of the Arrangement)
DET $9.39 SQE $11.71
- Closing price for September 25 (final day of trading for DET and SQE)
DET $9.56 SQE $11.93
- Closing price for September 26 (first day of trading for DRT $14.05)
- Weighted average price for 5 days ended September 20 DET $9.72 SQE $11.99
- Weighted average price for 5 days ended September 25 DET $9.49 SQE $11.84
- Weighted average for September 26 DRT $13.03
Frequently Asked Questions
1.What is the FMV of the Units?
There is no specific method prescribed by the Canada Revenue Agency for determining the FMV of a share or unit other than it must be done on a reasonable basis. We have provided a variety of values for your reference.
2.How do I calculate the ACB of my Units?
Each Unitholder's ACB calculation may be complex and it is the sole responsibility of each Unitholder to calculate the ACB of their Units. Unitholders should consult their own tax advisors if they have any questions concerning the determination of their ACB. The ACB of units will generally be equal to the amount paid for the units less any portion of distributions received that represent a return of capital. The distribution history for both DET and SQE can be seen on the Daylight web site under the investors tab.