Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications -- Director grants exemption from the requirementof National Instrument 44-101 to permit a Canadian company todistribute approved rating, fully guaranteed securities -- securitiesguaranteed by sister company that is MJDS eligible -- Directorgrants exemption from requirement in National Instrument 44-101which mandates GAAP reconciliation where financial statementsprepared in accordance with foreign GAAP -- Director grantsexemption from requirement in National Instrument 44-101 thatfinancial statements audited in accordance with foreign GAASbe accompanied by certain report from foreign auditor.

Mutual Reliance Review System for ExemptiveRelief Applications -- Commission grants continuous disclosurerelief to Canadian issuer.

Mutual Reliance Review System for ExemptiveRelief Applications -- Director grants exemption from the annualinformation form requirements imposed under Rule 51-501.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 75, 80(b)(iii), 81, 88(2)(b), 107, 108, 109 and 121(2)(a)(ii).

National Instruments Cited

National Instrument 44-101 Short Form ProspectusDistributions (2000) 22 OSCB (Supp) 867.

National Instrument 44-102 Shelf Distributions(2000) 22 OSCB (Supp) 985.

Ontario Rule Cited

Rule 51-501 AIF and MD&A (2000) 23 OSCB8365, as am.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA,

ONTARIO, QUÉBEC, NEWBRUNSWICK, NOVA SCOTIA,

NEWFOUNDLAND AND LABRADORAND

PRINCE EDWARD ISLAND

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

HOUSEHOLD FINANCE CORPORATIONAND

HOUSEHOLD FINANCIAL CORPORATIONLIMITED

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Québec, New Brunswick, Nova Scotia, Newfoundland andLabrador and Prince Edward Island (the "Jurisdictions")has received an application from Household Finance Corporation("Household Finance") and its affiliate HouseholdFinancial Corporation Limited ("Household Canada",and together with Household Finance, the "Applicants")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that, commencing as of the dateof the Decisions (as hereinafter defined), the Applicants beexempted from the following requirements contained in the Legislation:

(A) the requirement pursuant to NationalInstrument 44-101 ("NI 44-101") to reconcile financialstatements included in a prospectus and prepared in accordancewith generally accepted accounting principles ("GAAP")of a foreign jurisdiction to Canadian GAAP (the "CanadianGAAP Reconciliation Requirement");

(B) the requirement to provide, where financialstatements are audited in accordance with generally acceptedauditing standards ("GAAS") of a foreign jurisdiction,a statement by the auditor (a) disclosing any material differencesin the form and content of the auditor's report as comparedto a Canadian auditor's report and (b) confirming that theauditing standards of the foreign jurisdiction are substantiallyequivalent to Canadian GAAS (the "Canadian GAAS ReconciliationRequirement" and together with the Canadian GAAP ReconciliationRequirement, the "Reconciliation Requirements");

(C) the requirement under the Legislationof Ontario, Quebec and Saskatchewan that Household Canadahave a current AIF and file renewal AIFs (collectively,the "AIF Requirements");

(D) the requirement that Household Canadaissue and file news releases with respect to material changesand file material change reports (collectively, the "MaterialChange Requirements");

(E) the requirement that Household Canadasatisfy the proxy and proxy solicitation requirements, includingthe requirement to file an information circular or reportin lieu thereof annually (the "Proxy Requirements");

(F) the requirement that the insiders ofHousehold Canada file insider reports (the "InsiderReporting Requirements"); and

(G) the requirement that a short form prospectusinclude the information set forth in items 12.1(1)(1) and12.1(1)(2), items 12.1(1)(5) to 12.1(1)(8) and items 12.2(1)and 12.2(4) of Form 44- 101F3 of NI 44-101 ("Form 44-101F3")(the "Prospectus Disclosure Requirements").

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS the Applicants have representedto the Decision Makers that:

1. Household Finance was incorporated underthe laws of the State of Delaware in 1925 and is not a reportingissuer or the equivalent in any of the Jurisdictions.

2. Household Finance is a reporting companyunder the United States Securities Exchange Act of 1934,as amended (the "1934 Act") and has filed with theSecurities and Exchange Commission (the "SEC") annualand quarterly reports on Form 10-K and Form 10-Q, respectively,during the past 12 months, in accordance with the filing obligationsset out in the 1934 Act.

3. Household Finance satisfies the criteriaset forth in paragraph 3.1(a) of National Instrument 71-101("NI 71-101") and is eligible to use the multi-jurisdictionaldisclosure system ("MJDS") (as set out in NI 71-101)for the purpose of distributing approved rating non-convertibledebt in Canada based on compliance with United States prospectusrequirements with certain additional Canadian disclosure.

4. As at December 31, 2002, Household Financeand its consolidated subsidiaries had approximately US$70.3billion in senior and subordinated debt instruments outstanding(with original maturities over one year). All of HouseholdFinance's outstanding long-term senior debt is rated "A-"by Standard & Poor's Corporation and "A2" byMoody's Investors Service.

5. Household Finance is a wholly-owned subsidiaryof Household International, Inc., a publicly owned Delawarecompany ("Household International").

6. On November 14, 2002, Household Internationaland HSBC Holdings plc ("HSBC") announced that theyhad entered into a definitive merger agreement under whichHousehold International will be merged into a wholly ownedsubsidiary of HSBC. Completion of the merger is subject toregulatory approvals, the approval of the stockholders ofboth Household International and HSBC and other customaryconditions.

7. Household Finance offers real estate securedloans, auto finance loans, MasterCard andVisa credit cards, private label creditcards, tax refund anticipation loans and other types of unsecuredloans to consumers in the United States. Where applicablelaws permit, Household Finance also offers credit and specialtyinsurance to customers in connection with its products. HouseholdFinance's (including its consolidated subsidiaries) managedreceivables at December 31, 2002 was approximately US$98.6billion and its net income for the year ended December 31,2002 was approximately US$1.6 billion.

8. Household Canada, formerly Household SecuritiesLimited, was incorporated by Letters Patent on September 9,1947, pursuant to a predecessor to the Business CorporationsAct (Ontario). Household Canada changed its name fromHousehold Securities Limited to Household Financial CorporationLimited on August 13, 1975 when a Certificate and Articlesof Amendment were issued.

9. The authorized share capital of HouseholdCanada consists of 100,000 common shares ("Shares"),of which 90,002 Shares were outstanding as at December 31,2002. All of the Shares are owned, directly or indirectlyby Household International. In addition to the Shares, HouseholdCanada also has outstanding medium term notes and commercialpaper, all of which are fully guaranteed by Household Finance.As at December 31, 2002, Household Canada and its consolidatedsubsidiaries had approximately Cdn.$1.5 billion in mediumterm notes and approximately Cdn.$678.0 million in commercialpaper outstanding. The medium term notes and the commercialpaper are the only securities of Household Canada that areheld by the public.

10. Household Canada coordinates the activitiesof, arranges the funding of, and furnishes administrativeservices for its subsidiaries. Household Canada offers a diversifiedrange of consumer financial services to the Canadian publicthrough a network of approximately 109 retail branches. Theseservices include consumer loans, mortgages, retail finance,revolving credit and the acceptance of deposits. They areoffered by Household Canada through four principal operatingsubsidiaries: Household Finance Corporation of Canada, HouseholdRealty Corporation Limited, Household Finance CorporationInc. and Household Trust Company.

11. Household Canada is an indirect wholly-ownedsubsidiary of Household International. The authorized sharecapital of Household Canada consists of 100,000 common shares

12. Household Canada is a reporting issueror the equivalent in the Jurisdictions and is not includedin a list of defaulting reporting issuers maintained by anyof the Decision Makers.

13. Household Canada has maintained a mediumterm note program in the Jurisdictions by way of a short formshelf prospectus for more than 10 years.

14. Household Canada has recently renewedits existing medium term note program in Canada. The mediumterm notes issued pursuant to the 2002 Prospectus (as definedbelow) (the "Notes") will be fully and unconditionallyguaranteed by Household Finance as to payment of principaland interest and have received an "approved rating"(as such term is defined in NI 44-101) and are rated by arecognized security evaluation agency in one of the categoriesdetermined by the Commission des valeurs mobilièresdu Québec (an "Approved Rating").

15. In connection with the offering of Notes(the "Offering"):

(A) a short form base shelf prospectus datedNovember 20, 2002 (the "2002 Prospectus") hasbeen prepared pursuant to NI 44-101 and National Instrument44-102, with the intention that future disclosure requiredby (i) item 12 of Form 44-101F3 would be addressed by incorporatingby reference (a) Household Finance's current public disclosuredocuments, including Household Finance's annual informationform in the form of an annual report on Form 10-K (as suchreport may be amended and/or restated); and (b) HouseholdCanada's audited Canadian GAAP financial statements fortwo consecutive financial years ending December 31, 2001and Household Canada's Canadian GAAP financial statementsfor any subsequent interim periods; and (ii) items 13.1(1)(3)and 13.1(2) of Form 44-101F3 in respect of Household Canadawould be addressed by incorporating by reference in the2002 Prospectus the information described in clause 15(A)(i)(b)above;

(B) the 2002 Prospectus incorporates byreference (i) disclosure made in Household Finance's mostrecent annual report on Form 10-K filed under the 1934 Act,together with all quarterly reports on Form 10-Q and currentreports on Form 8-K filed under the 1934 Act in respectof the financial year following the year that is the subjectof Household Finance's most recently filed annual reporton Form 10-K (in each case, such reports as they may beamended and/or restated) and (ii) any documents of the foregoingtype filed after the date of the 2002 Prospectus and priorto the termination of the Offering;

(C) the 2002 Prospectus includes directlyor incorporates by reference all material disclosure concerningHousehold Canada and Household Finance;

(D) commencing as of the date of the Decisions,future continuous disclosure filings to be made by HouseholdCanada with the Decision Makers and incorporated by referencein the 2002 Prospectus will be the audited annual financialstatements and unaudited interim financial statements thatHousehold Canada is obligated to file pursuant to the applicablerequirements of the Legislation; the current AIF (as definedin NI 44-101) of Household Canada for years subsequent to2001 will not be included or incorporated by reference inthe 2002 Prospectus;

(E) the consolidated annual and interimfinancial statements of Household Finance and its consolidatedsubsidiaries that will be included in or incorporated byreference into the 2002 Prospectus are prepared in accordancewith generally accepted accounting principles in the UnitedStates that the SEC has identified as having substantiveauthoritative support, as supplemented by Regulation S-Xand Regulation S-B under the 1934 Act ("U.S. GAAP")and, in the case of audited annual financial statements,such financial statements are audited in accordance withgenerally accepted auditing standards in the United States,as supplemented by the SEC's rules on auditor independence("U.S. GAAS");

(F) Household Finance will fully and unconditionallyguarantee payment of the principal and interest on the Notes,when and as the same shall become due and payable, in accordancewith the provisions of the trust indenture relating to theNotes;

(G) the Notes have an Approved Rating;

(H) Household Finance has signed the 2002Prospectus as credit supporter; and

(I) Household Finance will undertake tofile with the Decision Makers, in electronic format throughSEDAR under Household Canada's SEDAR profile, all documentsthat it files under sections 13 and 15(d) of the 1934 Actuntil such time as the Notes are no longer outstanding.

AND WHEREAS under the System this MRRSDecision Document evidences the decisions of each Decision Maker(collectively, the "Decisions");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecisions has been met;

THE DECISION of the Decision Makers ineach of Ontario, Quebec and Saskatchewan pursuant to their Legislationis that, commencing as of the date hereof, the AIF Requirementsshall not apply to Household Canada provided that (i) HouseholdFinance complies with the AIF requirements of NI 44-101 as ifit is the issuer; and (ii) the Applicants comply with all ofthe requirements of each of the Decisions below.

March 25, 2003.

"Heidi Franken"

AND THE FURTHER DECISION of the DecisionMakers pursuant to the Legislation is that, commencing as ofthe date hereof, the Applicants be exempted from the ReconciliationRequirements in connection with the Offering provided that:

(A) each of Household Canada and HouseholdFinance complies with paragraph 15 above;

(B) Household Canada complies with all ofthe filing requirements and procedures set out in NI 44-101except as varied by the Decisions or as permitted by NationalInstrument 44-102;

(C) the Household Finance financial statementsthat are included or incorporated by reference in a prospectusof Household Canada are prepared in accordance with U.S.GAAP and, in the case of the audited annual financial statements,such financial statements are audited in accordance withU.S. GAAS;

(D) Household International, or any successorthereto, maintains direct or indirect 100% ownership ofthe voting shares of both Household Canada and HouseholdFinance; and

(E) Household Finance continues to satisfythe eligibility criteria set forth in paragraph 3.1 of NI71-101 (or any applicable successor provision) for usingMJDS (or any successor instrument) for the purpose of distributingapproved rating non-convertible debt in Canada based oncompliance with United States prospectus requirements withcertain additional Canadian disclosure.

March 25, 2003.

"Heidi Franken"

AND THE FURTHER DECISION of the DecisionMakers under the Legislation is that, commencing as of the datehereof, the Prospectus Disclosure Requirements shall not applyto the 2002 Prospectus provided that each of Household Canadaand Household Finance comply with paragraph 15 above.

March 25, 2003.

"Heidi Franken"

AND THE FURTHER DECISION of the DecisionMakers under the Legislation is that, commencing as of the datehereof:

(A) the Material Change Requirements shallnot apply to Household Canada, provided:

(i) Household Finance files with the DecisionMakers, in electronic format through SEDAR under HouseholdCanada's SEDAR profile, the current reports on Form 8-Kof Household Finance which are filed by it with the SECpromptly after they are filed with the SEC;

(ii) Household Finance promptly issuesin each Jurisdiction and Household Canada files with theDecision Makers, in electronic format through SEDAR underHousehold Canada's SEDAR profile, any news release thatdiscloses material information and which is required tobe issued in connection with the mandatory Form 8-K requirementsapplicable to Household Finance; and

(iii) if there is a material change inrespect of the business, operations or capital of HouseholdCanada that is not a material change in respect of HouseholdFinance, Household Canada will comply with the requirementsof the Legislation to issue a press release and file amaterial change report notwithstanding that the changemay not be a material change in respect of Household Finance;

(B) the Proxy Requirements shall not applyto Household Canada, provided that (i) Household Financecomplies with the requirements of the 1934 Act and the rulesand regulations made thereunder relating to proxy statements,proxies and proxy solicitations in connection with any meetingof the holders of its notes; (ii) Household Finance fileswith the Decision Makers, in electronic format through SEDARunder Household Canada's SEDAR profile, materials relatingto any such meeting filed by Household Finance with theSEC promptly after they are filed with the SEC; and (iii)such documents are provided to holders of Notes whose lastaddress as shown on the books of Household Canada is inCanada, in the manner, at the time and if required by applicableUnited States law to be sent to Household Finance debt holdersresident in the United States; and

(C) the Insider Reporting Requirements shallnot apply to insiders of Household Canada, provided thatsuch insiders file with the SEC on a timely basis the reports,if any, required to be filed with the SEC pursuant to section16(a) of the 1934 Act and the rules and regulations thereunder;

provided that (for A. through C.):

(a) Household Canada does not issue additionalsecurities to the public other than securities fully guaranteedby Household Finance;

(b) each of Household Canada and HouseholdFinance comply with paragraph 15 above;

(c) the Notes maintain an Approved Rating;

(d) Household International, or any successorthereto, maintains direct or indirect 100% ownership ofthe voting shares of both Household Canada and HouseholdFinance;

(e) Household Finance maintains a classof securities registered pursuant to section 12 of the 1934Act or is required to file reports under Section 15(d) ofthe 1934 Act;

(f) Household Finance continues to satisfythe eligibility criteria set forth in paragraph 3.1 of NI71-101 (or any applicable successor provision) for usingMJDS (or any successor instrument) for the purpose of distributingapproved rating non-convertible debt in Canada based oncompliance with US prospectus requirements with certainadditional Canadian disclosure;

(g) Household Finance continues to fullyand unconditionally guarantee payment of the principal andinterest on the Notes, together with any other amounts thatmay be due under any provisions of the trust indenture relatingto the Notes; and

(h) all filing fees that would otherwisebe payable by Household Canada in connection with the MaterialChange Requirements, the Proxy Requirements and the InsiderReporting Requirements are paid.

March 25, 2003.

"Paul M. Moore"                    "RobertW. Korthals"