Mutual Reliance Review System for ExemptiveRelief Applications - Continuous Disclosure - Insider ReportingRequirements - reporting issuer a special purpose trust - exemptedfrom continuous disclosure and insider reporting requirements,subject to certain conditions. Disclosure and reporting requiredto be provided by these provisions would not be meaningful tosecurity holders.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 75, 77, 79, 80(1)(b)(iii), 81, 107, 108, 109 and 121(2).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA, ONTARIO,
QUÉBEC, NOVA SCOTIA,AND NEWFOUNDLAND AND LABRADOR
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
MARITIME LIFE CANADIAN FUNDING
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authorityor regulator (the "Decision Maker") in each of BritishColumbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec,Nova Scotia and Newfoundland and Labrador (collectively, the"Jurisdictions") has received an application fromMaritime Life Canadian Funding (the "Trust") for adecision pursuant to the securities legislation of the Jurisdictions(the "Legislation") that:
a. the requirements contained in the Legislationto:
(i) make an annual filing (the "AnnualFiling") with the Decision Makers in lieu of filingan information circular, where applicable;
(ii) file an information circular withthe Decision Maker in Québec and deliver such informationcircular to noteholders (the "Noteholders")of the Trust;
(iii) file unaudited interim financialstatements (the "Interim Financial Statements")with the Decision Makers and deliver such Interim FinancialStatements to Noteholders of the Trust;
(iv) file interim management's discussionand analysis ("Interim MD&A") of the financialcondition and results of operations of the Trust withthe Decision Makers in Ontario and Saskatchewan and sendsuch Interim MD&A to security holders of the Trust(the "Interim MD&A Requirement"); and,
(v) file material change reports and pressreleases related thereto, only where such requirementrelates solely to a material change in the affairs ofThe Maritime Life Assurance Company ("Maritime Life")and which is the subject of a filing by Maritime Life(the "Material Change Reporting Requirement");
shall not apply to the Trust, subject tocertain terms and conditions; and
b. the requirements contained in the Legislationfor an insider of a reporting issuer to file:
(i) reports disclosing the insider's director indirect beneficial ownership of, or control or directionover, securities of the reporting issuer;
(ii) disclosing any trade by the insiderin such securities;
(iii) an insider profile report underNational Instrument 55-102 - System for Electronic Disclosureby Insiders (collectively, the "Insider ReportingRequirements");
shall not apply to insiders of the Trustand its successors who are not also insiders of MaritimeLife and who do not receive or have access to, in the ordinarycourse, information as to material facts or material changesconcerning the Trust before the material facts or materialchanges are generally disclosed;
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Trust represented tothe Decision Makers that:
1. The Trust was established as a specialpurpose trust by RBC Dominion Securities Inc. ("RBC DS"),as settlor, under a declaration of trust dated August 15,2001, as amended by the first supplement to the declarationof trust dated December 14, 2001 (collectively, the "Declarationof Trust"). The Declaration of Trust was made by TheCanada Trust Company (the "Trustee") and is governedby the laws of the Province of Ontario. The current beneficiaryof the Trust is a charitable organization.
2. The Trustee performs its duties as trusteeof the Trust from its offices in Toronto, Ontario.
3. The current auditors of the Trust are KPMGLLP, Toronto, Ontario.
4. Pursuant to the terms of the Declarationof Trust, the business activities of the Trust are substantiallylimited to:
(a) conducting, operating and administeringthe Trust's programme (the "Programme") of acquiring,through a dealer or an affiliate thereof, annuities issuedby Maritime Life (the "Annuities");
(b) financing such acquisitions throughthe issue of annuity-backed, secured, limited recourse debtsecurities (the "Notes"); and
(c) engaging in such activities which, inthe reasonable opinion of the Trustee, are reasonably incidentalor ancillary to (a) and (b) or required by any agreementrelating thereto.
The Trust is otherwise limited from carryingon any active business.
5. The Trust has no assets other than a $1,000initial contribution to the Trust, the Annuities, the Indemnity(as defined below at paragraph 15), other collateral heldfrom time to time as security for a series of Notes, amountsheld from time to time in expense accounts to finance variouscosts and expenses of the Trust, and related contractual rightsunder the documents establishing the Programme.
6. The Trust is a reporting issuer or theequivalent thereof in each of the Jurisdictions as a consequenceof having filed a short form base shelf prospectus dated December21, 2001 (the "Shelf Prospectus") in the Jurisdictionsfor the purpose of distributing Notes, and is not, to theTrustee's knowledge, in default of any requirement under theLegislation.
7. As set out more particularly in MaritimeLife's most recent Annual Information Form dated March 14,2002, Maritime Life was amalgamated under the provisions ofthe Insurance Companies Act (Canada) ("ICA")on January 1, 2002. Maritime Life was originally incorporatedby private act of the Legislature of Nova Scotia on April29, 1922. It commenced business on March 6, 1924. In 1969,Maritime Life became a wholly-owned subsidiary of The JohnHancock Life Insurance Company and today is an indirectlyheld wholly-owned subsidiary of John Hancock Financial Services,Inc. ("John Hancock") of Boston, Massachusetts.On December 24, 1999, Maritime Life was continued under theICA. John Hancock Canadian Holdings Limited, a wholly-ownedsubsidiary of John Hancock, currently owns all of the commonshares of Maritime Life. Maritime Life's reporting profileindicates that it is a reporting issuer or the equivalentthereof in each of the Jurisdictions.
8. As set out more particularly in MaritimeLife's quarterly report to shareholders for the nine monthperiod ended September 30, 2002, the authorized share capitalof Maritime Life consists of 5,000,000 Maritime Life commonshares, 3,960,000 Maritime Life First Preferred Shares ofwhich 1,400,000 have been designated as Maritime Life SeriesA First Preferred Shares and 8,000,000 Maritime Life SecondPreferred Shares, of which 4,000,000 have been designatedas Maritime Life Series 1 Second Preferred Shares and 4,000,000have been designated as Maritime Life Series 2 Second PreferredShares. As at September 30, 2002, Maritime Life had outstanding350,175 Maritime Life Common Shares and 1,400,000 MaritimeLife Series A Preferred Shares and 4,000,000 Maritime LifeSeries 1 Second Preferred Shares. Subsequent to September30, 2002, Maritime Life authorized and issued an additional4,000,000 Maritime Life Second Preferred Shares designatedas Maritime Life Series 3 Second Preferred Shares, as setout more particularly in Maritime Life's short form prospectusdated December 6, 2002. The Maritime Life First PreferredShares and Maritime Life Second Preferred Shares are issuablein series, with each series to consist of such number of Shareswith such designation, rights, restrictions, conditions andlimitations as Maritime Life's Board of Directors may determine.
9. The Trust will offer the Notes from timeto time under prospectus supplements to the Shelf Prospectus.As of the date of this application, the Trust has issued $150,000,000aggregate principal amount of floating-rate Notes, designatedSeries 2002-1 (the "Series 2002-1 Notes") and $200,000,000aggregate principal amount of 5.390% Notes, designated Series2002-2 (the "Series 2002-2 Notes").
10. Apart from the Series 2002-1 Notes andthe Series 2002-2 Notes, the Trust currently has no securitiesissued or outstanding.
11. The Notes are issued by the Trust in accordancewith the terms of:
(a) a trust indenture dated December 21,2001, as supplemented, amended or consolidated, from timeto time (the "Indenture"), under which ComputershareTrust Company of Canada is the indenture trustee (the "IndentureTrustee"); and
(b) a master programme agreement dated December21, 2001 (the "Master Programme Agreement") betweenthe Trust, the Trustee, the Indenture Trustee, MaritimeLife, RBC DS, and certain other securities dealers who mayoffer Notes. The provisions of the Master Programme Agreementinclude the following:
(i) a detailed set of obligations, conditions,and limitations relating to the issuance of the Annuitiesby Maritime Life;
(ii) representations and warranties byeach of the parties relating to its existence, business,power and capacity, and the truth and completeness ofinformation regarding such parties in the Shelf Prospectus,as supplemented by an applicable prospectus supplement;
(iii) representations and warranties byMaritime Life to each of the other parties relating tothe issuance of Annuities;
(iv) undertakings of Maritime Life toeach of the other parties to comply with applicable laws(including its continuous disclosure obligations applicableto it under the Legislation), to deliver the Trust andthe Trustee continuous disclosure information requiredby the Act in the event Maritime Life is no longer a reportingissuer and Notes remain outstanding, and to deliver informationrespecting any material change in the affairs of MaritimeLife;
(v) an indemnity by Maritime Life to eachof the parties in respect of certain aspects of the Programme(the details of such indemnity with respect to costs andexpenses associated with the Programme are described inparagraph 15); and
(vi) an acknowledgement respecting thelimited liability of the Trustee.
12. The obligations of the Trust under eachseries of Notes and to related obligees of the Trust willbe payable only from cashflows from, and the recourse of theNoteholders will be limited to the related security over,the "Series Collateral" applicable to such series."Series Collateral" for a series refers to the right,title and interest and property of the Trust in and to thefollowing:
(a) each Annuity issued by Maritime Lifeand acquired by the Trust in connection with such series;
(b) certain contractual obligations relatingto such series ("Series Specific Contractual Obligations");and
(c) all related rights, entitlements, privilegesand benefits derived from the Annuity and Series SpecificContractual Obligations and related contractual rights,proceeds and other rights and property relating to suchseries.
13. The maturity, payment and annuity rateprovisions of an Annuity acquired by the Trust in connectionwith the issuance of a tranche of Notes are structured sothat Maritime Life is obligated to make payments under thatAnnuity which are sufficient to satisfy the Trust's scheduledprincipal, interest (if any) and other payment obligations(if any) in connection with the tranche, and the Trust's costsand expenses related to that tranche.
14. The costs associated with issuing a trancheof Notes will be financed by a non-interest bearing, unsecured,subordinated, limited recourse loan made to the Trust by MaritimeLife (a related "Series Subordinated Loan"). Repaymentof a Series Subordinated Loan is funded from the paymentsto the Trust under the applicable Annuity.
15. Under the Master Programme Agreement,Maritime Life has granted to the Trust an indemnity (the "Indemnity")with respect to claims, liabilities, losses, costs and expenseswhich the Trust may incur in respect of:
(a) certain amounts owed by the Trust underthe Indenture to the Indenture Trustee;
(b) amounts payable by the Trust with respectto any unauthorized mortgage, charge, lien, security interestor other charge or encumbrance against any Series Collateral;
(c) amounts to maintain, preserve or otherwiseprotect the Series Collateral or to carry out any of thetransactions necessary under the Programme;
(d) fees and expenses to carry out the businessof the Trust;
(e) amounts payable to the Trustee withrespect to expenses or obligations for which the Trusteeis not otherwise indemnified; and
(f) other obligations, costs and expensesincurred by the Trust in connection with the Programme,
other than amounts which a court determineshave been caused by the bad faith, gross negligence or wilfulconduct of the Trustee.
16. Maritime Life has also provided an indemnityto the Trust in respect of taxes which may be incurred bythe Trust with respect to:
(a) amounts received by the Trust from theAnnuities and any other amounts which form part of the SeriesCollateral; and
(b) amounts required to be included in thecapital of the Trust in respect of the issuance of Notesto finance the acquisition of, or the payment of a premiumunder, an Annuity.
17. If an event of default occurs in respectof a series of Notes, remedies will be available to the Noteholdersunder the Indenture.
18. The Trustee's responsibilities on behalfof the Trust under the Programme documents are substantiallylimited to the following:
(a) preparing financial statements;
(b) preparing and filing tax returns;
(c) complying with continuous disclosurerequirements from time to time applicable to the Trust underapplicable laws;
(d) directing Maritime Life to deposit Annuitypayments into an account created in respect of a seriesof Notes and paying principal, interest and any other amountson the series of Notes from such account;
(e) instructing the Indenture Trustee topay liabilities for a series from amounts on deposit ina related expense account;
(f) exercising the Trust's rights underthe Programme documents, including claiming against MaritimeLife under the Master Programme Agreement;
(g) providing required notices to the IndentureTrustee; and
(h) delivering documentation to rating agencies.
19. The market value of the Notes will dependprimarily on the following:
(a) the creditworthiness of Maritime Lifewith respect to the Annuities and other contractual arrangementsin place to fund payments in respect of the Notes;
(b) the Noteholders' security and remedies(directly and indirectly) under the Programme documents;and
(c) the rate of interest on the Notes incomparison to the prevailing Canadian interest rates.
20. The Trust will continue to file its AIF,annual financial statements and management's discussion andanalysis thereon with the Decision Makers in accordance withthe Legislation.
21. Noteholders are entitled and shall continueto be entitled to receive the following documentation andinformation:
(a) the Shelf Prospectus and prospectussupplement related to the series of Notes of which theyare holders and, upon request, all documents incorporatedby reference therein;
(b) the list of holders in the registerof Noteholders for a particular series, provided that suchNoteholder or Noteholders represent at least 10% of theaggregate principal amount of a series and are accessingthe list for the purpose of communicating with other Noteholders;
(c) notice by the Indenture Trustee to Noteholdersof a series of the occurrence of a continuing event of defaultin respect of such series; and
(d) all such continuous disclosure documentsof the Trust as the Trust as may be required to deliverto its security holders under the Legislation, if any, exceptas such requirements are modified by this Decision Document.
22. The Trust will issue press releases andfile material change reports in accordance with the requirementsof the Legislation in respect of material changes in its affairswhich do not relate solely to the affairs of Maritime Lifeand which have not been the subject of a filing by MaritimeLife.
AND WHEREAS pursuant to the System, thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers pursuantto the Legislation is:
1. that the requirements contained in theLegislation:
(a) to make an Annual Filing, where applicable,with the Decision Makers in lieu of filing an informationcircular;
(b) to file an information circular withthe Decision Maker in Québec and deliver such informationcircular to Noteholders resident in Québec;
(c) to file Interim Financial Statementswith the Decision Makers and to deliver such Interim FinancialStatements to Noteholders; and
(d) to satisfy the Material Change ReportingRequirement,
shall not apply to the Trust, provided that,at the time that any such requirement would otherwise apply:
(i) the Trust has filed a current AIFon SEDAR;
(ii) Maritime Life is a reporting issuer;
(iii) the Trust carries on no other businessor activities other than those set out at paragraph 4hereof;
(iv) the Trust complies with paragraph22 hereof; and
(v) the Trust files a notice to Noteholderson SEDAR that it will undertake upon the request of aNoteholder to deliver to that Noteholder the continuousdisclosure materials of Maritime Life which have beenfiled with the Decision Makers,
provided that this Decision shall terminatewithin thirty (30) days of a material change in the affairsof the Trust, except where such material change relates solelyto the affairs of Maritime Life and which is the subject ofa filing by Maritime Life, unless the Trust satisfies the DecisionMakers that the Decision should continue, which satisfactionshall be evidenced in writing; and that
2. the Insider Reporting Requirements shallnot apply to the Trust or any insider of the Trust, who isnot otherwise an insider of Maritime Life and who does notreceive or have access to, in the ordinary course, informationas to material facts or material changes concerning the Trustbefore the material facts or material changes are generallydisclosed.
February 28, 2003.
"Robert W. Korthals" "RobertL. Shirriff"
AND THE FURTHER DECISION of the DecisionMakers in Ontario and Saskatchewan is that the Interim MD&ARequirement to file and send and deliver to the registered holdersof Notes, as the case may be, the Interim MD&A, shall notapply to the Trust.
February 28, 2003.