Foremost Income Fund Reports Fourth Quarter Revenues and Earnings and December 31, 2010 Consolidated Results

CALGARY, ALBERTA--(Marketwire - March 30, 2011) - Foremost Income Fund announces the financial results for the three and twelve months ended December 31, 2010. /T/ CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED EARNINGS (000's, except per trust For the THREE months For the TWELVE months unit amounts) ended December 31, ended December 31, (Unaudited) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Revenue $ 46,939 $ 34,944 $ 171,323 $ 128,986 Cost of sales 41,390 28,573 137,494 97,187 ---------------------------------------------------------------------------- 5,549 6,371 33,829 31,799 ---------------------------------------------------------------------------- Selling, general and administrative 3,705 3,756 16,752 17,508 Interest income 74 (16) 16 (18) Amortization 908 1,130 4,000 4,559 Foreign exchange loss 289 385 363 842 Gain on disposal of equipment (20) - (30) (145) ---------------------------------------------------------------------------- 4,956 5,255 21,101 22,746 ---------------------------------------------------------------------------- Net income (loss) before other expenses 593 1,116 12,728 9,053 Other Expenses Realized gain on forward exchange contracts - - - (614) Goodwill impairment - 13,540 - 13,540 ---------------------------------------------------------------------------- Net income (loss) before income tax 593 (12,424) 12,728 (3,873) Future income tax recovery (366) - (366) - ---------------------------------------------------------------------------- Net income (loss) and comprehensive income 959 (12,424) 13,094 (3,873) (loss) Accumulated earnings, beginning of period 83,694 92,550 77,985 90,422 Future income tax adjustment (18,518) - (18,518) - Distributions to unitholders (2,143) (2,141) (8,569) (8,564) ---------------------------------------------------------------------------- Accumulated earnings, end of period $ 63,992 $ 77,985 $ 63,992 $ 77,985 ---------------------------------------------------------------------------- Earnings per trust unit Basic $ 0.04 $ (0.58) $ 0.61 $ (0.18) Diluted $ 0.04 $ (0.58) $ 0.61 $ (0.18) ---------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (000's) (Unaudited) As at: December 31, December 31, 2010 2009 ---------------------------------------------------------------------------- Assets Current assets Cash $ 21,766 $ 37,035 Accounts receivable 37,686 19,444 Inventories 41,275 34,563 Prepaid expenses 749 353 ---------------------------------------------------------------------------- 101,476 91,395 Property, plant and equipment 46,863 49,555 Future income taxes 1,700 19,485 Goodwill 3,154 - Intangibles and other assets 1,628 1,431 ---------------------------------------------------------------------------- $ 154,821 $ 161,866 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Liabilities and Unitholders' Equity Current liabilities Accounts payable and accrued liabilities $ 16,395 $ 13,871 Deferred revenue 10,747 6,467 ---------------------------------------------------------------------------- 27,142 20,338 ---------------------------------------------------------------------------- Unitholders' equity Unitholders' capital 62,195 62,115 Contributed surplus 1,492 1,428 Accumulated earnings 63,992 77,985 ---------------------------------------------------------------------------- 127,679 141,528 ---------------------------------------------------------------------------- $ 154,821 $ 161,866 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- /T/ For the three months ended December 31, 2010 Fourth quarter 2010 results reflect the strengthening of business conditions relative to 2009 and continued efforts to control costs. Fourth quarter revenue was $46.9 million versus $35.0 million last year. Gross profit declined to $5.5 million (11.8% of revenue) from $6.4 million (18.2% of revenue) for 2009. Selling, general and administrative expenses in 2010 were equivalent to 2009. Income before other expenses was $0.6 million as compared with $1.1 million last year. Net income before tax was $0.6 million compared to a loss of $12.4 million in 2009. The loss in 2009 is a result of the non-cash goodwill impairment recorded in the fourth quarter. The 2010 fourth quarter net income was $1.0 million ($0.04 per trust unit) versus a net loss of $12.4 million for 2009. Fourth quarter property, plant and equipment expenditures were $0.7 million as compared with $0.2 million last year. Fourth quarter trust unit distributions paid in cash amounted to $0.10 per trust unit and totaled $2.1 million in both 2010 and 2009. A special non-cash distribution of $0.37 per unit was recorded at year-end. The special distribution allocates the balance of taxable income from the Fund to the unitholders. For the year ended December 31, 2010 /T/ -- Revenues increased 32.8% as a result of improvement in the domestic heavy oil markets and increased activity in the oil sands development. Consolidated revenues were $171.3 million versus $129 million for 2009. -- Revenues generated outside of Canada decreased from 22.4% to 17.5% of total revenues. -- Competitive pressures generated a gross margin percentage of 19.7% as compared with 24.7% in 2009. 2010 gross profits were $33.8 million as compared with $31.8 million for 2009. -- Selling, general and administrative expenses decreased 4.3%, reflecting continued declines in variable expenses such as commissions and performance bonuses, reductions in discretionary programs and personnel and includes $0.4 million of fees relating to the acquisition of Brahma and Air and Gas G.P. Ltd. Selling, general and administrative expenses were $16.8 million in 2010 and $17.5 million for 2009. -- Strengthening of the Canadian dollar against the U.S. dollar resulted in a $0.4 million exchange loss compared to a $0.8 million loss in 2009. -- During the year the Fund disposed of one property in the Grand Prairie region for proceeds of $0.3 million. -- In July, the Fund acquired 100% of the voting shares of Brahma and Air & Gas G.P. Ltd. (Brahma) for $3.3 million. The Fund's 2010 financials include the six months of results of Brahma. -- Income before other expenses (income) increased 39.5% to $12.7 million versus $9.1 million for 2009. -- Net income including a $0.4 million recovery of future income taxes was $13.1 million compared to a $3.9 million loss in 2009. The 2009 results include a goodwill impairment of $13.5 million and a realized gain on forward exchange of $0.6 million. -- Trust unit distributions were $0.77 per trust unit or $16.5 million in 2010 as compared with $0.40 per trust unit or $8.6 million for 2009. 2010 distributions were made up of $8.6 million paid in cash and $7.9 million relating to a year-end special distribution. The year-end special distribution was paid in accordance with the Deed of Trust that allows the Fund to distribute all taxable income to the unitholders. The special distribution was paid in the form of additional trust units; there was an immediate reconsolidation of the number of trust units outstanding. After the consolidation, each unitholder holds the same number of trust units as held before the distribution of additional trust units. The 2010 and 2009 trust unit distributions were paid from cash reserves and cash generated by operating activities during each year, $1.0 million and $45.2 million respectively. -- Earnings per trust unit from operations plus the realized gain on forward exchange contracts but before goodwill impairment was $0.61 per trust unit as compared with $0.45 per trust unit in 2009. -- 2010 basic earnings per trust unit is $0.61 per trust unit versus a loss of $0.18 per trust unit for 2009. -- Funds flow from operations for 2010, calculated as net income (loss) adjusted for items not involving cash such as amortization, gains on disposals of property, plant and equipment, trust units based compensation and goodwill impairment totaled $16.8 million versus $14.4 million for 2009. The increase is a direct result of the higher income generated from operations. -- Cash decreased $15.3 million to $21.8 million at December 31, 2010 and comprises 21.4% of current assets. This decrease was generated from a combination of funds flow from operations and significant increase in non-cash working capital accounts. At December 31, 2009 cash on hand amounted to $37.0 million and was 22.9% of current assets. -- Non-cash working capital accounts consist of accounts receivable, inventories, prepaid expenses, accounts payables, accrued liabilities, and deferred revenue. All of these account balances at December 31, 2010 increased relative to December 31, 2009, reflecting the impact of increased business activity. -- Working capital, defined as current assets less current liabilities increased $3.3 million to $74.3 million as at December 31, 2010. -- Property, plant and equipment at December 31, 2010 amounted to $46.9 million. The decrease relative to 2009 reflects a $4.0 million decrease from amortization plus a $1.0 million capital expenditure increase. -- No short-term or long-term bank indebtedness existed at December 31, 2010 or 2009. -- Unitholders' equity decreased from $141.5 million at December 31, 2009 to $129.5 million at December 31, 2010. The decrease relates primarily to the impact of an $18.5 million adjustment to future income tax assets. /T/ The Fund is an unincorporated open end mutual fund trust conducting its business through Foremost Universal LP ("Universal") and Foremost Industries LP ("Foremost"). The Fund derives its operational income from both Universal and Foremost. Universal's overall business is focused on the oil and gas industry and contains the business units of: /T/ -- Universal Industries, a manufacturer of oil treating systems, shop and field storage tanks; -- Maloney Industries, a manufacturer of medium- to large-scale oil and gas process treating equipment; -- Stettler Universal Limited Partnership, a gas separator manufacturer; -- Corlac Industries, Peace Land Fabricating and Supply Ltd. and De-In Industries Ltd., all shop tank manufacturers; -- Brahma a sub-200 horsepower compressor manufacturer. -- Foremost is comprised of the business unit of Foremost Industries, a manufacturer of custom equipment used for the oil and gas, construction, water-well and mining industries. /T/ On behalf of the Trustees Foremost Income Fund James T. Grenon, Trustee FORWARD-LOOKING STATEMENT Certain statements in this news release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this news release, such statements use words such 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 news release. These forward-looking statements involve a number of risks and uncertainties, including: the impact of general economic conditions, industry conditions, changes in laws and regulations, increased competition, fluctuations in commodity prices and foreign exchange, and interest rates and stock market volatility.

Contact Information: Foremost Income Fund Doug Rae, CA Investor Relations (403) 295-5800 or Toll Free 1-800-661-9190 (Canada/US) (403) 295-5832 (FAX) investorrelations@foremost.ca www.foremost.ca