Headnote
NP 11-203 – section 2.8 of NI 44-101 – notice of intention to be qualified to file a short form prospectus for a rights offering – relief from minimum 10-day period – closed end investment trust believed it was eligible under transitional provisions in subsection 2.8(4) of NI 44-101 to file a short form prospectus without first filing a notice of intention – issuer has previously filed annual information forms – issuer has current annual information form – issuer has suspended unit distributions – offering may allow issuer to resume unit distributions – absent relief issuer will not reasonably be able to complete offering by year-end
Applicable Legislative Provisions
National Instrument 44-101 Short From Prospectus Distributions, ss. 2.8(1) and 8.1.
November 7, 2008
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
FAIRCOURT INCOME & GROWTH SPLIT TRUST
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption pursuant to section 8.1 of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) from the requirement, contained in section 2.8 of NI 44-101, to file a notice declaring its intention to be qualified to file a short form prospectus (a Notice of Intention) at least ten business days prior to the filing of its first preliminary short form prospectus (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless they are otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a closed-end investment trust established and existing under the laws of the Province of Ontario pursuant to an amended and restated trust agreement dated as of January 31, 2007. The manager of the Filer is Faircourt Asset Management Inc. (the Manager), a corporation operating under the laws of the Province of Ontario, with its head office in Toronto, Ontario.
The units of the Filer are listed on the Toronto Stock Exchange.
The Filer is currently a reporting issuer in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland. The Filer has filed the required continuous disclosure documents with the securities commissions or similar regulatory authorities in each of these jurisdictions.
Neither the Manager nor the Filer is in default of securities legislation in any jurisdiction in which it is a reporting issuer. The Filer became a reporting issuer on February 26, 2004 and has always filed an annual information form as required under applicable continuous disclosure requirements. The Filer’s most current annual information form is dated March 31, 2008.
On October 16, 2008, the Manager, on behalf of the Filer filed a material change report announcing that, effective October 10, 2008 and in accordance with the trust indenture governing the preferred securities of the Filer (the Preferred Securities) and in particular the requirement for the Filer to maintain a minimum 1.4 times asset coverage, monthly distributions on the units of the Filer were to be suspended until further notice.
The Manager believes that a unique window of opportunity has currently presented itself to the Filer to raise financing by way of a rights offering using a short-form prospectus (the Rights Offering). Given the fluctuating markets and the current circumstances being faced by the Filer, the Filer would like to take advantage of this window of opportunity and file a short form preliminary prospectus for the Rights Offering on November 7, 2008. If the preliminary prospectus is not filed by November 7, 2008, the Rights Offering could not reasonably be completed prior to 2009.
The proceeds of the Rights Offering will allow the Filer to reduce the leverage associated with its outstanding Preferred Securities and increase the asset coverage for the Preferred Securities which may allow the Filer to reinstate distributions on its units.
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 of Intention to be qualified to file a short form prospectus at least ten business days prior to the issuer filing its first preliminary short form prospectus. For the purposes of section 2.8, if, on December 29, 2005, an issuer had a current annual information form, the issuer is deemed to have filed a notice on December 14, 2005 declaring its intention to be qualified to file a short form prospectus pursuant to subsection 2.8(4) of NI 44-101.
The Filer believed that it was currently eligible to file a short form prospectus in respect of the Rights Offering, without first filing a Notice of Intention, under the transitional provisions in subsection 2.8(4) of NI 44-101. While the Filer did have a current annual information form as at December 29, 2005, that annual information form was not filed under NI 44-101, and the Filer is not listed on the lists of issuers grandfathered under section 2.8 of NI 44-101 that were previously published by the principal regulator.
The Filer has filed a Notice of Intention on November 6, 2008. Unless the Exemption Sought is granted, the Filer will not be able to file a preliminary prospectus until November 19, 2008 (the Permitted Filing Date).
The Manager, on behalf of the Filer believes that delaying its filing of the preliminary prospectus in respect of the Rights Offering until the Permitted Filing Date will preclude the Filer from taking advantage of this window of opportunity in the market and will cause significant prejudice to the Filer.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted.
“Erez Blumberger”
Erez Blumberger,
Manager, Corporate Finance
Ontario Securities Commission