Mutual Reliance Review System for Exemptive Relief Applications -- relief from the requirement to provide financial statements in an information circular for a business that constituted a significant acquisition.
National Instrument 51-102 Continuous Disclosure Obligations.
Citation: Foremost Industries Income Fund, 2005 ABASC 937.
November 29, 2005
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO (THE "JURISDICTIONS")
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
FOREMOST INDUSTRIES INCOME FUND
MRRS DECISION DOCUMENT
1. The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") exempting the Filer from the requirement in item 14.2 of Form 51-102F5 to National Instrument 51-102 Continuous Disclosure ("NI 51-102") to provide prospectus-level disclosure in information circular with respect to financial statements of a business that the Fund acquired as a result of a binding agreement entered into on March 11, 2004.
Application of Principal Regulator System
2. Under Multilateral Instrument 11-101 Principal Regulator System ("MI 11-101") and the Mutual Reliance Review System for Exemptive Relief Applications (the "System"):
(a) the Alberta Securities Commission is the principal regulator for the Filer,
(b) the Filer is relying on the exemption in Part 3 of MI 11-101 in Québec and Nova Scotia; and
(c) this MRRS decision document evidences the decision of each Decision Maker.
3. Defined terms in National Instrument 14-101 Definitions have the same meaning in this decision unless they are otherwise defined in this decision.
This decision is based on the following facts represented by the Filer:
4. The Filer's head office is in Calgary, Alberta;
5. The Filer is a reporting issuer in Alberta, Ontario, Québec and Nova Scotia (the "Reporting Issuer Jurisdictions") and is not in default of its obligations as a reporting issuer under the Legislation in any of the Reporting Issuer Jurisdictions;
6. The Filer was established under the laws of Alberta pursuant to an Amended and Restated Declaration of Trust, initially dated as of November 14, 2001;
7. The Filer became a reporting issuer as a result of the conversion of Foremost Industries Inc. into an income fund in December, 2001, pursuant to a plan of arrangement (the "Plan of Arrangement");
8. Since the completion of the Plan of Arrangement, the Filer has not undertaken a prospectus offering of its trust units ("Units");
9. The Filer acquired the assets and business operations (the "Business") of Corlac Industries (1998) Ltd. ("Corlac") on or about July 1, 2004 for a purchase price of $15.428 million, of which approximately $7.091 million was attributable to purchase of Corlac's accounts receivable. A binding agreement with respect to the acquisition of the Business was entered into on March 11, 2004, and accordingly the requirement to file a Business Acquisition Report pursuant to Part 8 of NI 51-102 did not apply as a result of the transitional provision in subsection 14.2 (d) of NI 51-102;
10. At the date of the acquisition of Corlac, the Filer's consolidated investments in the Business represented approximately 26.5% of the Filer's consolidated assets therefore meeting the investment test set forth in Ontario Securities Commission Rule 41-501 General Prospectus Requirements;
11. The Filer announced a proposed internal reorganization (the "Reorganization') on November 10, 2005, pursuant to which a new, publicly-traded income fund ("New Fund") will acquire all of the existing assets and business operations presently conducted by the subsidiary entities of the Filer. The business and operations of the Filer will be unaffected by the Reorganization and holders of units of the Filer ("Unitholders") will receive one unit of New Fund for each Unit of the Filer they now hold;
12. The Reorganization requires the approval of 66 2/3% of the votes cast by Unitholders at a special meeting (the "Meeting") which is scheduled for December 28, 2005, with closing to occur before the end of 2005;
13. Pursuant to item 14.2 of Form 51-102F5, the information circular and proxy statement (the "Information Circular") of the Filer to be sent to Unitholders in connection with the Meeting must include:
(a) statements of income, retained earnings and cash flow for the Business for the year ended December 31, 2003; and
(b) a pro forma income statement relating to the combination of the Filer and the Business as though the acquisition had taken place on January 1, 2004;
(the "Corlac Information Requirement").
14. Also pursuant to item 14.2 of Form 51-102F5, the Information Circular of the Filer to be sent to Unitholders in connection with the Meeting must include pro forma consolidated statements of income for the year ended December 31, 2004 prepared with the results of the Business included therein (the "Pro Forma Requirement");
15. The Filer has been advised by the accountants of Corlac that it may take as many as 45 days to prepare statements in compliance with the Corlac Information Requirement and to furnish information necessary to prepare statements in compliance with the Pro Forma Requirement.
16. The Information Circular of the Filer will otherwise comply with item 14.2 of NI 51-102 and will disclose that the Requested Relief has been granted.
17. 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.
18. The decision of the Decision Makers under the Legislation is that
(a) the Filer is exempt from the Corlac Information Requirement; and
(b) the Filer is exempt from the Pro Forma Requirement.