Mutual Reliance Review System for ExemptiveRelief Applications - Relief granted to an issuer from requirementto deliver annual financial statements and requirement to filean annual report where applicable. The annual financial statementscovered a short operating period.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c.S.5, as am. s.80(b)(iii).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ONTARIO, BRITISH COLUMBIA,ALBERTA, QUÉBEC,
SASKATCHEWAN, MANITOBA, NOVASCOTIA AND NEWFOUNDLAND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
HIGH INCOME PREFERRED SHARESCORPORATION
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, British Columbia, Alberta, Saskatchewan, Manitoba,Québec, Nova Scotia and Newfoundland and Labrador (the"Jurisdictions") has received an application fromHigh Income Preferred Shares Corporation (the "Company")for a decision under the securities legislation (the "Legislation")of the Jurisdictions that the Company be exempted from deliveringto security holders annual financial statements for the periodended June 30, 2002 and be exempted from preparing, filing anddelivering to its security holders an annual report, where applicable,for the period ended June 30, 2002, as would otherwise be requiredpursuant to applicable Legislation;
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Company has representedto the Decision Maker that:
1. The Company was incorporated under thelaws of Canada on April 26, 2002. The fiscal year-end of theCompany is the last day of June in each calendar year.
2. The Company is authorized to issue an unlimitednumber of Class A Shares, Equity Shares, Series 1 Shares andSeries 2 Shares of which, as at June 20, 2002, 1,000 ClassA Shares, 1,260,000 Equity Shares, 1,260,000 Series 1 Sharesand 1,260,000 Series 2 Shares are outstanding. The Series1 Shares, Series 2 Shares and Equity Shares of the Companyare together referred to as the "Offered Shares".
3. The Company became a reporting issuer orthe equivalent in each of the Jurisdictions by virtue of itfiling with the securities regulatory authority in each ofthe provinces of Canada a long form prospectus dated May 31,2002 (the "Prospectus") qualifying the issuanceof up to 2,775,324 Series 1 Shares, up to 2,775,324 Series2 Shares and up to 2,775,324 Equity Shares (collectively,the "Offering") (plus up to 5% of the number ofeach of the Series 1 Shares, the Series 2 Shares and the EquityShares issued at the closing of the Offering).
4. On June 20, 2002, the Company issued 1,260,000Series 1 Shares, 1,260,000 Series 2 Shares and 1,260,000 EquityShares at an issuance price of $25.00 per Series 1 Share,$14.70 per Series 2 Share and $3.54 per Equity Share at theclosing of the Offering. The Series 1 Shares and Series 2Shares were listed on The Toronto Stock Exchange on June 19,2002.
5. The principal undertaking of the Companyis the holding of (i) a diversified portfolio (the "ManagedPortfolio") consisting principally of equity securitiesissued by American companies that have a market capitalizationof greater than U.S.$2 billion or companies which form partof the Standard & Poor's 500 Composite Stock Price Index,equity shares of Canadian public companies which form partof the S&P/TSX 60 Index, units or similar equity securitiesof ongoing business income funds, pipeline/energy income funds,power generation income funds and real estate investment trustsand debt securities that are rated to be at least investmentgrade and (ii) a portfolio of equity securities agreed uponby the Company and an affiliate of Canadian Imperial Bankof Commerce that the Company will acquire with approximately32% of the gross proceeds of the Offering.
6. The Offered Shares are redeemable at theoption of the holder on a monthly basis at a price computedby reference to the value of a proportionate interest in thenet assets of the Company. As a result, the Company is a "mutualfund" under the securities legislation of certain provincesof Canada (excluding the Province of Québec).
7. The Prospectus included an audited balancesheet of the Company as at May 31, 2002 and an unaudited proforma balance sheet as at May 31, 2002 prepared on the basisof the completion and sale of up to 2,775,324 Series 1 Shares,up to 2,775,324 Series 2 Shares and up to 2,775,324 EquityShares, the maximum number of Offered Shares of the Companybeing qualified for distribution by the Prospectus. On June20, 2002, the Company actually issued 1,260,000 Series 1 Shares,1,260,000 Series 2 Shares and 1,260,000 Equity Shares pursuantto the Offering. A press release was issued by the Companyon June 20, 2002 announcing to the public the actual numberof Offered Shares that were issued by the Company pursuantto the Offering.
8. Although the Company came into existenceon April 26, 2002, up to the time of the closing of the Offering,the Company had no significant assets or operations. The Companyhad only six business days of operations after the closingof the Offering prior to the end of the period for which theannual financial statements and annual report, where applicable,would be required.
9. The benefit to be derived by the securityholders of the Company from receiving the annual financialstatements and annual report, where applicable, would be minimalgiven (i) the extremely short period from the date of theProspectus to the end of the applicable period; (ii) thatthe Company had not yet fully invested its funds by the endof the applicable period; (iii) the disclosure already providedin the Prospectus; and (iv) there were no material changesin the affairs of the Company from June 20, 2002 to the dateof this application.
10. The expense to the Company of printingand delivering to its security holders the annual financialstatements and of preparing, filing and delivering to itssecurity holders an annual report, where applicable, wouldnot be justified in view of the minimal benefit to be derivedby the security holders from receiving such annual financialstatements and annual report, where applicable, and wouldbe detrimental to security holders in light of the unnecessarycosts that would as a consequence be incurred by the Company.
AND WHEREAS pursuant to the System, thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
IT IS HEREBY DECIDED by the DecisionMakers pursuant to the Legislation that the Company is exemptedfrom delivering to its security holders annual audited financialstatements for the period ended June 30, 2002 and is exemptedfrom preparing, filing and delivering to its security holdersan annual report, where applicable, for the period ended June30, 2002 provided that,
(i) the Company sends a copy of such annualfinancial statements to any security holder of the Companywho so requests.
August 2, 2002.
"Howard I. Wetston." "RobertL. Shirriff"