Mutual Reliance Review System for Exemptive Relief Applications - exemption granted from the requirement to provide acquisition statements (in part) to be included in a business acquisition report, in accordance with the accounting principles enumerated under section 6.1 of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency - relief required because the acquisition statements contemplated were prepared in part using differential reporting options - the acquisition statements at issue represent assets which are excluded from the business acquisition - the Filer intends to disclose the acquisition statements in a business acquisition report in their current form.
Applicable Legislative Provisions
National Instrument 51-102 Continuous Disclosure Obligations, Part 8.
National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, ss.6.1, 9.1.
Citation: Parkland Income Fund, 2007 ABASC 117
March 8, 2007
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
PARKLAND INCOME FUND (the Filer)
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) that the Filer be exempt from the requirements of section 6.1 of National Instrument 52-107 - Acceptable Accounting Principles, Auditing Standards and Reporting Currency (the 52-107 Requirements) which requires acquisition statements included in a business acquisition report be prepared in accordance with specific accounting principles enumerated thereunder.
Application of the 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 (MRRS):
2.1 the Alberta Securities Commission is the principal regulator for the Filer;
2.2 the Filer is relying on the exemption in Part 3 of MI 11-101 in all of the provinces and territories in Canada except Alberta and Ontario; and
2.3 this MRRS decision document evidences the decision of each Decision Maker.
3 Defined terms contained in National Instrument 14-101 - Definitions have the same meaning in this decision unless they are otherwise defined in this decision;
4 This decision is based on the following facts represented by the Filer:
4.1 The Filer is an unincorporated open-end mutual fund trust established pursuant to a declaration of trust dated April 30, 2002, as amended and restated as at May 5, 2005 and governed by the laws of Alberta.
4.2 The registered, head and principal office of the Filer is located in Red Deer, Alberta.
4.3 The Filer is currently a reporting issuer, or its equivalent, in each of the provinces of Canada, except Quebec and the Territories.
4.4 The Filer is not in default of its obligations as a reporting issuer under the legislation of any jurisdiction in which it is a reporting issuer or its equivalent.
4.5 On December 21, 2006, the Filer announced it had entered into a share purchase agreement to indirectly acquire (the Acquisition) all of the issued and outstanding shares of each of Neufeld Petroleum and Propane Ltd. (NPPL) and Neufeld Holdings Ltd. (NHL and collectively, with NPPL, the Acquired Companies), each a privately held corporation incorporated under the laws of Alberta.
4.6 On January 10, 2007, the Filer filed a preliminary short form prospectus (the Preliminary Prospectus) with the securities regulatory authorities in each of the provinces of Canada other than Québec in respect of a bought-deal offering of 1,360,000 trust units of Parkland Income Fund (the Offering) and a preliminary receipt was obtained. A receipt was issued for the Filer's final short form prospectus (collectively, with the Preliminary Prospectus, the Prospectus) in respect of the Offering by the applicable securities regulatory authorities dated January 18, 2007.
4.7 The Acquisition closed, concurrently with the closing of the Offering, on January 24, 2007.
4.8 The Acquisition was a significant acquisition for the purposes of Part 8 of National Instrument 51-102 -- Continuous Disclosure Obligations (NI 51-102) and the Filer is required to file a business acquisition report in respect of the Acquisition (the BAR) which includes, among other things, the financial statements prescribed under section 8.4 of NI 51-102 in respect of each of the Acquired Companies.
4.9 The Filer seeks to include in the BAR, the financial statements for each of the Acquired Companies for the years ended August 31, 2006 and August 31, 2005 together with the notes and the auditor's report along with unaudited pro forma consolidated financial statements for the Filer, NHL and NPPL for the year ended December 31, 2005 and the nine month period ended September 30, 2006 after giving effect to the Acquisition (collectively, the Acquisition Statements).
4.10 Section 6.1 of National Instrument 52-107 -- Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) sets out that the financial statements to be included in the BAR must be prepared in accordance with certain accounting principles enumerated thereunder (the 52-107 Requirements).
4.11 The Acquisition Statements in respect of NHL (the NHL Statements) were prepared by the auditor of NHL in accordance with Canadian GAAP using differential reporting options available to non-publicly accountable enterprises (the Differential Reporting Options).
4.12 The Differential Reporting Options utilized by the auditor of NHL in the preparation of certain portions of the NHL Statements is not one of the permissible classes of accounting principles enumerated under the 52-107 Requirements.
4.13 The Differential Reporting Options were used in respect of the NHL Statements only in respect of assets that were excluded from the Acquisition (collectively, the Excluded Assets) as noted specifically in Note 2(f) of the NHL Statements, and such assets were not acquired by the Filer as a consequence of the Acquisition. The effect of the use of the Differential Reporting Options in respect of the Excluded Assets in the NHL Statements is that such Excluded Assets were elected to be carried at cost.
4.14 The accounting principles used in the preparation of the remainder of the NHL Statements, and the Acquisition Statements generally, comply with the 52-107 Requirements.
4.15 As the Excluded Assets were not acquired by the Filer in connection with the Acquisition, the use of the Differential Reporting Options has no impact on the financial position of the portion of NHL, or, collectively, the Acquired Companies, acquired, indirectly, by the Filer and consequently, indirectly, the financial condition of the Filer on a consolidated basis (including the Acquisition).
4.16 On January 10, 2007, the Filer filed the Preliminary Prospectus which included, among other required disclosure, information in respect of the Acquisition, as a proposed significant acquisition at such time, as required by National Instrument 44-101 -- Short Form Prospectus Distributions and the Acquisition Statements which were disclosed to the applicable securities regulatory authorities in the Prospectus to have been prepared, in part, in accordance with the Differential Reporting Options.
4.17 The 52-107 Requirements in respect of the NHL Statements are applicable for the purposes of the disclosure of the Acquisition set forth in the Prospectus.
4.18 The use of Differential Reporting Options in respect of the Excluded Assets is not relevant to the holders of the Units of the Filer and the Filer should not be required to have the NHL Statements reaudited for the purposes of the Prospectus.
4.19 The relief requested in respect of the Prospectus was granted by the securities regulatory authorities in the Jurisdictions (the Prospectus Relief), which receipt was issued for the Prospectus on January 18, 2007.
4.20 Notwithstanding the Prospectus Relief was granted by the securities regulators, pursuant to NI 51-102 and NI 52-107, the Filer must apply for specific relief to include the NHL Statements in the BAR despite the use of the Differential Reporting Options.
5 Each of the Decision Makers is satisfied that the test contained in the Legislation which provides the Decision Makers with the jurisdiction to make the Decision has been met.
6 The Decision of the Decision Makers is that the Filer be granted an exemption from the requirements under section 6.1 of NI 52-107 that the NHL Statements to be included in the BAR be prepared in all respects in accordance with the accounting principles enumerated thereunder, provided that the NHL Statements included in the BAR, when filed, shall in all respects, other than as disclosed in Note 2 to the NHL Statements, be prepared and presented in accordance with the requirements of NI 51-102 and NI 52-107.