Mutual Reliance Review System for Exemptive Relief Applications -- exemption granted to an investment fund from the requirement in National Instrument 81-106 Investment Funds Continuous Disclosure to calculate its net asset value on a daily basis subject to certain conditions and requirements.
National Instrument 81-106 Investment Funds Continuous Disclosure, ss. 14.2(3), 17.1.
October 28, 2005
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,
NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR,
NORTHWEST TERRITORIES, YUKON
AND NUNAVUT (The Jurisdictions)
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
BROMPTON SPLIT BANC CORP. (the Filer)
MRRS DECISION DOCUMENT
The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application (the Application) from the Filer dated October 3, 2005 for a decision under s. 17.1 of National Instrument 81-106 -- Investment Funds Continuous Disclosure (the Legislation) for an exemption from the requirement to calculate net asset value at least once every business day contained in section 14.2(3)(b) of the Legislation (the Requested Relief).
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
This decision is based on the following facts represented by the Filer:
1. The Filer is a mutual fund corporation established under the laws of Ontario.
2. Brompton SBC Management Limited (the "Manager") is the promoter and manager of the Filer and will perform administrative services on behalf of the Filer.
3. The Filer will be issuing preferred shares (the "Preferred Shares") and class A shares (the "Class A Shares") (together referred to as the "Shares").
4. The offering of Shares by the Filer is a one-time offering and the Filer will not continuously distribute Shares.
5. The Filer's investment objectives are: (i) to provide holders of Preferred Shares with fixed cumulative preferential quarterly cash distributions in the amount of $0.13125 per Preferred Share representing a yield on the issue price of the Preferred Shares of 5.25% per annum; (ii) to provide holders of Class A Shares with regular monthly cash distributions targeted to be $0.10 per Class A Share representing a yield on the issue price of the Class A Shares of 8.00% per annum; (iii) to return the original issue price to holders of Preferred Shares at the time of redemption of such shares on November 30, 2012; and (iv) to provide holders of Class A Shares with the opportunity for growth in net asset value per Class A Share.
6. The net proceeds from the offering will be invested in an equally weighted portfolio consisting of common shares of the six largest Canadian banks (the "Portfolio").
7. The Filer will, from time to time, selectively write covered call options in respect of all or part of the securities in its Portfolio.
8. A preliminary prospectus of the Filer dated September 22, 2005 (the "Preliminary Prospectus") has been filed with the securities regulatory authorities in each of the Provinces and Territories of Canada.
9. The Shares are expected to be listed and posted for trading on the Toronto Stock Exchange (the "TSX").
10. The Shares will be retractable at the option of the holder on a monthly and annual basis at a price computed by reference to the value of a proportionate interest in the net assets of the Filer. As a result, the Filer will be a "mutual fund" under applicable securities legislation.
11. The description of the retraction process in the Preliminary Prospectus contemplates that the retraction price for the Shares will be determined as of the valuation date, being the second last business day of the month (the "Retraction Date").
12. The retraction procedures described in the Preliminary Prospectus provide that shareholders will receive payment within ten business days of the month following the Retraction Date.
13. The net asset value per Unit (a notional unit consisting of one Preferred Share and one Class A Share) will be calculated weekly. The Filer will make available to the financial press for publication on a weekly basis the net asset value per Unit as well as through the Internet at www.bromptongroup.com.
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that the prospectus discloses:
(a) that the net asset value calculation is available to the public upon request;
(b) a toll-free number or website that the public can access to obtain the net asset value;
for so long as:
(c) the Shares are listed on the TSX; and
(d) the Filer calculates its net asset value per Unit at least weekly