Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Issuer granted relief from the requirement to include prospectus-level disclosure in an information circular to be circulated in connection with an arrangement, reorganization, acquisition or amalgamation -- Issuer is only internally restructuring, not adding or removing any assets or changing the shareholders' proportionate interest in the issuer's operations; the issuer will provide sufficient information about the transaction for shareholders to understand the restructuring -- issuer also granted relief from the qualification criteria in NI 44-101 so it can file a short form prospectus -- The issuer is a new reporting issuer that is the continuation of an existing business; the issuer satisfies all the criteria for the exemption in s. 2.7 except that the audited comparative annual financial statements incorporated in its final prospectus are not its own, but are the financial statements of the existing business -- Issuer also granted relief to file its short form prospectus less then 10 days after it files its notice of intention to file a short form prospectus -- The issuer is a successor issuer resulting from the conversion of an income fund under a plan of arrangement; the issuer would be entitled to rely on the exemption for successor issuers in s. 2.7(2) except that the financial statements incorporated into the information circular are not its own but are those of the existing business; the issuer is otherwise qualified to file a short form prospectus; the existing business is not required to file a notice of intention by virtue of s. 2.8(4); the relevant continuous disclosure for investors under the offering is the continuous disclosure of the fund, which will be incorporated by reference into the short form prospectus.

Applicable Legislative Provisions

National Instrument 51-102, s. 13.1 Continuous Disclosure Obligations.

National Instrument 44-101, s. 8.1 Short Form Prospectus Distributions.

October 21, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF BRITISH COLUMBIA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

SWISS WATER DECAFFEINATED COFFEE

INCOME FUND (the Fund) AND TEN PEAKS

COFFEE COMPANY INC. (Ten Peaks)

(together, the Applicants)

DECISION

Background

1 The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Applicants for a decision under the securities legislation of the Jurisdictions (the Legislation):

(a) exempting the Fund from the requirement under Item 14.2 of Form 51-102F5 Information Circular (the Circular Form) of the Legislation to include in the management information circular (Information Circular) to be prepared by the Fund and delivered to the holders (Unitholders) of trust units (Units) in connection with a special meeting (Meeting) of Unitholders expected to be held in December 2010 for the purposes of considering a plan of arrangement under the Canada Business Corporations Act (the CBCA) resulting in the reorganization of the Fund's trust structure into a corporate structure (the Conversion Transactions): (a) the financial statements of Swiss Water Decaffeinated Coffee Company Inc. (SWDCC) for the financial years ended December 31, 2009, December 31, 2008, and December 31, 2007; (b) the corresponding management's discussion and analysis for the financial years ended December 31, 2009, and December 31, 2008; and (c) certain comparative statements of SWDCC and of Ten Peaks, the resulting entity of the proposed conversion, including (i) a comparative income statement, a statement of retained earnings, and a cash flow statement of Ten Peaks for the most recent interim period ended more than 45 days before the date of the Information Circular, and (ii) a balance sheet of Ten Peaks as at the end of the most recent interim period ended more than 45 days before the date of the Circular (the Circular Relief);

(b) exempting Ten Peaks from the qualification criteria for short form prospectus eligibility contained in subsection 2.2(d) of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) following completion of the Conversion Transactions until the earlier of (a) March 31, 2011; and (b) the date upon which Ten Peaks has filed both its annual financial statements and annual information form for the year ended December 31, 2010, under NI 51-102 Continuous Disclosure Obligations (NI 51-102) (the Qualification Relief); and

(c) exempting Ten Peaks from the requirement to file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of its first preliminary short form prospectus after the notice (the Prospectus Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the British Columbia Securities Commission is the principal regulator for this Application;

(b) the Applicants have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

2 Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

3 This decision is based on the following facts represented by the Applicants:

The Swiss Water Entities and Ten Peaks

1. the Fund is an unincorporated, open-ended, limited purpose trust established under the laws of the Province of British Columbia pursuant to a trust indenture dated April 2, 2002;

2. the Fund is a reporting issuer (or the equivalent thereof) in each province of Canada and, to its knowledge, is currently not in default of any applicable requirements under the securities legislation of any such province;

3. the Fund is authorized to issue an unlimited number of Units and as at September 30, 2010, the Fund had 6,675,200 Units issued and outstanding;

4. the Units are listed and posted for trading on the Toronto Stock Exchange (TSX) under the trading symbol "SWS.UN";

5. the Fund has filed an "AIF" and has "current financial statements" (as such terms are defined in NI 44-101) for the financial year ended December 31, 2009;

6. the Fund holds all of the common shares (SWDCC Shares) and Series A and Series B Notes (SWDCC Notes) of SWDCC, a corporation incorporated under the laws of British Columbia;

7. SWDCC is not a reporting issuer in any jurisdiction and the SWDCC Shares and the SWDCC Notes are not listed or posted for trading on any exchange or quotation and trade reporting system;

8. the Fund does not carry on an active business, but holds, through the SWDCC Shares and the SWDCC Notes, an indirect 100% interest in SWDCC which carries on a green coffee decaffeination business (the Business);

9. Ten Peaks is a direct wholly-owned subsidiary of the Fund and will have conducted no business prior to the effective date (the Effective Date) of the Conversion Transactions;

10. prior to the completion of the Conversion Transactions, Ten Peaks will not be a reporting issuer in any jurisdiction and its common shares (Ten Peaks Shares) will not be listed or posted for trading on any exchange or quotation and trade reporting system;

Conversion Transactions

11. as part of the Conversion Transactions: (i) the Units will be cancelled; (ii) Ten Peaks Shares will be distributed to holders of Units on a one-for-one basis; (iii) the Fund will be dissolved into Ten Peaks; (iv) SWDCC will continue to carry on the Business it presently carries out on behalf of the Fund, and (v) Ten Peaks will own, directly or indirectly, all of the existing assets and assume all of the existing liabilities of the Fund, effectively resulting in the reorganization of the Fund's trust structure into a corporate structure;

12. following the completion of the Conversion Transactions: (i) the sole business of Ten Peaks will be the current business of the Fund; (ii) all equity holders of the Fund will own Ten Peaks Shares, rather than Units now held by Unitholders; (iii) Ten Peaks will be a reporting issuer or the equivalent under the securities legislation in all of the provinces of Canada; and (iv) the Ten Peaks Shares will, subject to approval by the TSX, be listed on the TSX;

13. the Conversion Transactions will not result in a change in beneficial ownership of the assets and liabilities of the Fund and Ten Peaks will continue to carry on the Business through SWDCC following the Conversion Transactions; the Conversion Transactions will be an internal reorganization undertaken without dilution to the Unitholders; the Unitholders will, following completion of the Conversion Transactions, be the shareholders of Ten Peaks;

14. under the Fund's constating documents, the CBCA and applicable securities laws, the Unitholders will be required to approve the Conversion Transactions at the Meeting; the Conversion Transactions must be approved by not less than two-thirds of the votes cast by Unitholders at the Meeting; the Meeting is anticipated to take place on December 9, 2010, and the Circular is expected to be mailed on or around November 1, 2010;

15. the Conversion Transactions will be accounted for on a continuity of interest basis and accordingly, following the Conversion Transactions, the comparative consolidated financial statements for Ten Peaks prior to the Conversion Transactions will reflect the financial position, results of operations and cash flows as if Ten Peaks had always carried on the business formerly carried on by the Fund;

16. the Conversion Transactions will be a "restructuring transaction" under NI 51-102 in respect of the Fund and therefore will require compliance with Item 14.2 of the Circular Form;

Financial statements and MD&A disclosure in the Circular

17. Item 14.2 of the Circular Form requires, among other items, that the Circular contain the disclosure (including financial statements and management's discussion and analysis) prescribed under securities legislation and described in the form of prospectus that Ten Peaks would be eligible to use immediately prior to the sending and filing of the Circular for a distribution of its securities; therefore, the Circular must contain the disclosure in respect of Ten Peaks prescribed by Form 41-101F1 -- Information Required in a Prospectus (the Prospectus Form) and by NI 41-101;

18. as Ten Peaks will not have been in existence for three years on the date of the Information Circular, Item 32.l(a) of the Prospectus Form requires that the financial statements of SWDCC be included as it is the predecessor entity that will form the business of Ten Peaks;

19. Items 8.2(l)(a) and 8.2(2) of the Prospectus Form require the Fund to include management's discussion and analysis corresponding to each of the financial years ended December 31, 2009, and December 31, 2008, of SWDCC (the MD&A) in the Circular;

20. Item 32.2(1) of the Prospectus Form requires the Fund to include certain annual financial statements of SWDCC in the Circular, including: (i) statements of income, retained earnings and cash flows of SWDCC for each of the financial years ended December 31, 2009, December 31, 2008, and December 31, 2007; and (ii) a balance sheet of SWDCC as at the end of December 31, 2009, and December 31, 2008 (the SWDCC Financial Statements); in addition, Item 32.3(1) of the Prospectus Form requires the Fund to include certain comparative statements of SWDCC and of Ten Peaks in the Circular (the Interim Financial Statements), including (a) a comparative income statement, a statement of retained earnings, and a cash flow statement of Ten Peaks for the most recent interim period ended more than 45 days before the date of the Circular and (b) a balance sheet of Ten Peaks as at the end of the most recent interim period ended more than 45 days before the date of the Circular (the SWDCC Financial Statements and the Interim Financial Statements are referred to collectively as the Financial Statements);

21. subsection 4.2(1) of NI 41-101 requires that the SWDCC Financial Statements required to be included in the Circular must be audited in accordance with National Instrument 52-107 -- Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107);

Exemptions Sought

Circular Relief

22. Ten Peaks was established for the exclusive purpose of effecting the Conversion Transactions and will have no material assets (other than a nominal amount of cash) or business operations prior to the Effective Date;

23. the financial statements of the Fund are reported on a consolidated basis, which includes the financial results of SWDCC; SWDCC does not report its financial results independently from the consolidated financial statements of the Fund; the Financial Statements and the MD&A, if prepared, would not include the accounts of the Fund; there are transactions between the Fund and SWDCC that would be eliminated when consolidation is performed; to present the Financial Statements and the MD&A in the Information Circular, which would exclude accounts of the Fund, would present the effects of only one side of the financing activities between the Fund and SWDCC; this would result in intra-group liabilities and intragroup interest expense being reflected in the Financial Statements;

24. the Financial Statements and the MD&A are not relevant to the Unitholders for the purposes of considering the Conversion Transactions; once the Conversion Transactions are completed, the financial statements and management's discussion and analysis of Ten Peaks will be substantially and materially the same as the consolidated financial statements of the Fund filed in accordance with Part 4 of NI 51-102 because the financial position of the entity that exists both before and after the Conversion Transactions is substantially the same;

25. the Circular will contain prospectus level disclosure in accordance with the Prospectus Form (other than the Financial Statements and MD&A) and will contain sufficient information to enable a reasonable Unitholder to form a reasoned judgement concerning the nature and effect of the Conversion Transactions and the nature of the resultant public entity and reporting issuer from the Conversion Transactions, being Ten Peaks;

Prospectus Relief

26. subsection 2.7(2) of NI 44-101 contains an exemption for successor issuers from the qualification criteria for short form prospectus eligibility contained in subsection 2.2(d) of NI 44-101, if an information circular relating to the restructuring transaction that resulted in the successor issuer was filed by the successor issuer or an issuer that was a party to the restructuring transaction, and such information circular (i) complied with applicable securities legislation, and (ii) included disclosure in accordance with Item 14.2 or 14.5 of the Circular Form of the successor issuer; Ten Peaks cannot rely on this exemption because the Financial Statements and MD&A will not be included in the Information Circular if the Circular Relief is granted;

Prospectus filing following the Conversion Transactions

27. the Fund is qualified to file a prospectus in the form of a short form prospectus under section 2.2 of NI 44-101 and is deemed to have filed a notice of intention to be qualified to file a short form prospectus under subsection 2.8(4) of NI 44-101;

28. the Applicants anticipate that Ten Peaks may wish to have the ability to file a preliminary short form prospectus following the completion of the Conversion Transactions, relating to the offering or potential offering of securities (including common shares or debt securities) of Ten Peaks;

29. in anticipation of the filing of a preliminary short form prospectus, and assuming the Conversion Transactions have been completed, Ten Peaks intends to file a notice of intention to be qualified to file a short form prospectus (the Notice of Intention) following completion of the Conversion Transactions; in the absence of the Prospectus Relief, Ten Peaks will not be qualified to file a preliminary short form prospectus until 10 business days after the date upon which the Notice of Intention is filed;

30. pursuant to the qualification criteria set forth in section 2.2 of NI 44-101 as modified in the Qualification Relief, following the Conversion Transactions, Ten Peaks will be qualified to file a short form prospectus under NI 44-101;

31. notwithstanding section 2.2 of NI 44-101 as modified in the Qualification Relief, subsection 2.8(1) of NI 44-101 provides that an issuer is not qualified to file a short form prospectus unless it has filed a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the issuer filing its first preliminary short form prospectus; and

32. the short form prospectus of Ten Peaks will incorporate by reference the documents that would be required to be incorporated by reference under Item 11 of Form 44-101F1 in a short form prospectus of Ten Peaks, as modified by the Qualification Relief.

Decision

4 Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that:

(a) the Circular Relief is granted provided that the Information Circular discloses that Ten Peaks is a newly incorporated entity that has no material assets, income or liabilities;

(b) the Qualification Relief is granted provided that any short form prospectus filed by Ten Peaks under NI 44-101 during the Qualification Relief specifically incorporates by reference:

(i) the Information Circular and any financial statements and related management's discussion and analysis of the Fund incorporated by reference into the Information Circular, and

(ii) any financial statements, management's discussion and analysis, material change reports or other documents that would have to be incorporated by reference in any short form prospectus filed by the Fund; and

(c) the Prospectus Relief is granted provided that, at the time Ten Peaks files its Notice of Intention, Ten Peaks meets the requirements of section 2.2 of NI 44-101, as modified by the Qualification Relief.

"Andrew Richardson, CA"
Acting Director, Corporate Finance
British Columbia Securities Commission