HeadnoteMutualReliance Review System for Exemptive Relief Applications - Close-endinvestment trust exempt from prospectus and registration requirementsin connection with issuance of units to existing unitholders pursuantto a distribution reinvestment plan whereby distributions of incomeare reinvested in additional units of the trust, subject to certainconditions - first trade relief provided for additional unitsof trust, subject to certain conditions.
StatuesCitedSecuritiesAct, R.S.O. 1990, c.S.5, as am., ss. 25, 53, 72(5), 74(1).
RulesCitedRule45-502 Dividend or Interest Reinvestment and Stock Dividend Plans21 OSCB 3685.
Rule81-501 Mutual Fund Reinvestment Plans 20 OSCB 5163.
INTHE MATTER OF
THESECURITIES LEGISLATION OF
BRITISHCOLUMBIA, SASKATCHEWAN, MANITOBA,
ONTARIO,QUÉBEC, NOVA SCOTIA, NEW BRUNSWICK,
PRINCEEDWARD ISLAND AND NEWFOUNDLAND
INTHE MATTER OF
THEMUTUAL RELIANCE REVIEW SYSTEM
FOREXEMPTIVE RELIEF APPLICATIONS
INTHE MATTER OF
FIRMCAPITAL MORTGAGE INVESTMENT TRUST
MRRSDECISION DOCUMENTWHEREASthe Canadian securities regulatory authority or regulator(the "Decision Maker") in each of the Provincesof British Columbia, Saskatchewan, Manitoba, Ontario, Québec,Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland(the "Jurisdictions") has received an applicationfrom Firm Capital Mortgage Investment Trust (the "Trust")for a decision, pursuant to the securities legislation of theJurisdictions (the "Legislation") that the requirementcontained in the Legislation to be registered to trade in a securityand to file and obtain a receipt for a preliminary prospectusand a final prospectus (the "Registration and ProspectusRequirements") shall not apply to the distribution ofunits of the Trust pursuant to a distribution reinvestment plan(the "DRIP");
ANDWHEREAS under the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the OntarioSecurities Commission is the principal regulator for this application;
ANDWHEREAS the Trust has represented to the DecisionMakers that:
1.The Trust is an unincorporated closed-end investment trust governedby the laws of the Province of Ontario by an amended and restateddeclaration of trust dated as of May 24, 2001. As a mortgage investmenttrust, the Trust is a non-bank provider of residential and commercialreal estate finance. The Trust generates fees and income frominvestments in a portfolio of mortgage loans and generates stabledistributions for Unitholders.
2.The objectives of the Trust are to: (i) provide Unitholders withstable and secure cash distributions from the Trust's investmentsin mortgage loans in market segments which are underserviced byCanadian banks and other large financial institutions; and (ii)obtain superior yields and maximize distributions and Unit valuethrough the sourcing and efficient management of the Trust's mortgageinvestments in such market segments. The Trust makes regular monthlycash distributions to Unitholders and distributes all of the distributablecash of the Trust. The Trust paid aggregate distributions of distributablecash of $0.95 per Unit to Unitholders in 2000 (which includeda special year-end distribution of $0.0429 per Unit) and is currentlymaking regular monthly distributions of $0.075 per Unit.
3.The Trust is not a "mutual fund" as defined in the Legislationbecause the unitholders of the Trust ("Unitholders")are not entitled to receive on demand an amount computed by referenceto the value of a proportionate interest in the whole or in partof the net assets of the Trust as contemplated in the definitionof "mutual fund" in the Legislation.
4.The Trust is currently a reporting issuer (or its equivalent)in each of the Jurisdictions under the Legislation and has beena reporting issuer (or its equivalent) in each of the Jurisdictionsunder the Legislation since September 28, 1999 when it receiveda receipt in each of the Jurisdictions for a final prospectusfiled in connection with its initial public offering of Units.
5.On April 20, 2001, the Trust received a Stability Rating of SR-3from Standard & Poor's. Trusts rated SR-3 have a high levelof distribution stability relative to other rated Canadian incomefunds.
6.The beneficial interests in the Trust are divided into a singleclass of Units and the Trust is authorized to issue an unlimitednumber of Units. As of the date hereof, 7,557,500 Units are issuedand outstanding.
7.Units are listed and posted for trading on The Toronto Stock Exchange(the "TSE") under the symbol "FC.UN". The closingprice on the TSE on November 29, 2001 was $9.25.
8.The Trust intends to establish a DRIP pursuant to which Canadianresident Unitholders may, at their option, invest cash distributionspaid on their Units in additional Units ("Additional Units")as an alternative to receiving cash distributions. The DRIP willnot be available to Unitholders who are not Canadian residents.
9.Distributions due to participants in the DRIP ("DRIP Participants")will be paid to Computershare Trust Company of Canada in its capacityas agent under the DRIP (in such capacity, the "DRIP Agent")and applied to purchase Additional Units. If the weighted averageprice of Units on the TSE for the five trading days immediatelypreceding the relevant distribution date (the "AverageMarket Price") is less than $9.50, the DRIP Agent shalluse such funds to purchase, through an investment dealer selectedby the Trust, at a cost less than $9.50 per Unit, Additional Unitsthrough the facilities of the TSE for a period of five tradingdays following the relevant distribution date. To the extent theDRIP Agent is unable to purchase Additional Units at a cost lessthan $9.50 per Unit because Units are not offered or are offeredat prices which, after payment of brokerage fees of commissions,would result in a cost at or exceeding $9.50 per Unit, then theremaining funds will be applied to the purchase of AdditionalUnits from the treasury of the Trust at $9.50 per Unit. If theAverage Market Price is $9.50 or more, the funds will be appliedto the purchase of Additional Units from the treasury of the Trustat the Average Market Price.
10.DRIP Participants may elect to purchase additional Units (the"Purchase Units") at the Average Market Price (the "CashTop Up"). A minimum purchase of $1,000.00 per month andmaximum purchases of up to $12,000.00 per year will be permittedunder the Cash Top Up. These Purchase Units will be issued outof the treasury of the Trust. The aggregate number of Units thatmay be issued under the Cash Top Up may not exceed in each year2% of the number (at the commencement of the fiscal year of theTrust) of the outstanding Units of the Trust. In the event thatthe aggregate cash payments received in a particular month would,if fully applied to the purchase of Units, cause the Trust toissue a number of Units which exceeds 2% of the number (at thecommencement of the fiscal year of the Trust) of the outstandingUnits of the Trust, the DRIP Agent will apply a pro rataportion of the cash payments from each DRIP Participant. The balanceof the cash payments will be refunded to the applicable DRIP Participants.
11.Full investment of a DRIP Participant's funds will be possibleunder the DRIP and the Cash Top Up because the DRIP and the CashTop Up will permit fractions of Units, as well as whole Units,to be purchased and held for DRIP Participants. Also, distributionsin respect of whole Units and fractions of Units purchased underthe DRIP and the Cash Top Up will be held by the DRIP Agent forthe DRIP Participant's account and automatically invested underthe DRIP in Additional Units.
12.Additional Units and Purchase Units, as the case may be, purchasedunder the DRIP or Cash Top Up will be held by the DRIP Agent forDRIP Participants. Certificates for such Units will not be issuedto DRIP Participants unless specifically requested.
13.Unitholders may terminate their participation in the DRIP at anytime by written notice to the DRIP Agent. Such notice, if actuallyreceived prior to a distribution date, will have effect for suchdistribution. Thereafter, distributions payable to such Unitholderswill be by cash. The Trust may amend (subject to prior TSE approval),suspend or terminate the DRIP and Cash Top Up at any time, providedthat such action shall not have a retroactive effect which wouldprejudice the interests of the DRIP Participants except as otherwiserequired by law. All DRIP Participants will be sent written noticeof any such amendment, suspension or termination.
ANDWHEREAS under the System, this MRRS Decision Documentevidences the decision of each of the Decision Makers (collectively,the "Decision");
ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMakers with the jurisdiction to make the Decision has been met;
THEDECISION of the Decision Makers pursuant to the Legislationis that the trades of Additional Units (including the PurchaseUnits) by the Trust to the DRIP Participants pursuant to the DRIP(and the Cash Top Up incorporated therein) shall not be subjectto the Registration and Prospectus Requirements of the Legislationprovided that:
(a)at the time of the trade the Trust is a reporting issuer or theequivalent under the Legislation;
(b)no sales charge is payable in respect of the trade;
(c)the Trust has caused to be sent to the person or company to whomthe Additional Units are issued, not more that 12 months beforethe trade, a statement describing:
(i)their right to withdraw from the DRIP and to make an electionto receive cash instead of Units on the making of a distributionof income by the Trust; and
(ii)instructions on how to exercise the right referred to in (i);and
(d)the first trade in Additional Units (including Purchase Units)acquired pursuant to this Decision shall be deemed a distributionor primary distribution to the public unless
(i)except in Quebec, the conditions in subsections (3) or (4) ofsection 2.6 of Multilateral Instrument 45-102 are satisfied, and
(a)the issuer is a reporting issuer in Quebec and has complied withthe applicable requirements for 12 months immediately precedingthe trade;
(b)no unusual effort is made to prepare the market or to create ademand for the securities that are the subject of the trade;
(c)no extraordinary commission or consideration is paid to a personor company in respect of the trade, and
(d)if the seller of the securities is an insider or officer of theissuer, the selling securityholder has no reasonable grounds tobelieve that the issuer is in default of any requirement of securitieslegislation;
(e)disclosure of the initial distribution of the Additional Unitsis made to the relevant Jurisdictions by providing the particularsof the date of the distribution of such Additional Units, thenumber of such Additional Units and the purchase price paid orto be paid for such Additional Units in:
(i)an information circular or take-over bid circular filed in accordancewith the Legislation; or
(ii)a letter filed with the Decision Maker in the relevant Jurisdictionby a person or company certifying that the person or company hasknowledge of the facts contained in the letter, when the Trustdistributes such Additional Units for the first time and thereafter,not less frequently than annually, unless the aggregate numberof Additional Units so traded in any month exceeds 1% of the Unitsoutstanding at the beginning of a month in which the AdditionalUnits were traded, in which case a separate report shall be filedin each relevant Jurisdiction (other than Quebec) in respect ofthat month within ten days of the end of such month; and
(f)in the financial year of the Trust during which a trade or tradesin Purchase Units pursuant to the Cash Top Up takes place, theaggregate number of Purchase Units issued pursuant to the CashTop Up before such trade or trades, plus the aggregate numberof Purchase Units issued in the trade or trades or concurrentlywith the trade or trades, does not exceed two percent of the numberof Trust Units outstanding at the commencement of that financialyear.
March5, 2002."PaulMoore" "R. Stephen Paddon"