Arctic Glacier Income Fund - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- National Instrument 51-102, s. 13.1 Continuous Disclosure Obligations - relief from the requirement to include certain interim and pro forma financial statements in a business acquisition report - The issuer filed a prospectus that included the financial information for the acquisition of a probable significant acquisition; the financial information in the prospectus was for a period that ended not more than one interim period before the financial information that would be required under Part 8 of NI 51-102; the issuer will include or incorporate by reference the financial information that was in the prospectus in the business acquisition report; the acquired business does not constitute a material departure from the business or operations of the issuer immediately before the acquisition; the issuer will not account for the acquired business as a continuity of interests.
Applicable Legislative Provisions
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.2, 8.3, 8.4, 13.1.
National Instrument 44-101 Short Form Prospectus Distributions, s. 10.1 of Form 44-101F1.
August 2, 2006
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
MANITOBA AND ONTARIO (THE "JURISDICTIONS")
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ARCTIC GLACIER INCOME FUND (THE "FILER")
MRRS DECISION DOCUMENT
Background
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") exempting the Filer from the requirement to include the BAR Financial Statements (as hereinafter defined) prescribed by Section 8.4 of National Instrument 51-102 in the Business Acquisition Report (the "BAR") to be filed by the Filer in connection with an acquisition which was completed on May 25, 2006 (hereinafter defined as the "Initial Acquisition") on the condition that the Filer includes or incorporates by reference the Prospectus Financial Statements (as hereinafter defined) in the BAR (the "Requested Relief").
Principal Regulator System
Under Multilateral Instrument 11-101 Principal Regulator System ("MI 11-101") and the Mutual Reliance Review System ("MRRS") for Exemptive Relief Applications:
(a) the Manitoba Securities Commission is the principal regulator for the Filer;
(b) the Filer is relying on the exemption in Part 3 of MI 11-101 in all of the Provinces and Territories in Canada except Ontario; and
(c) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is an unincorporated open-ended mutual fund trust governed by the laws of the Province of Alberta and created pursuant to a declaration of trust dated January 22, 2002, which declaration was amended and restated on March 11, 2002 and further amended and restated on December 6, 2004.
2. The principal and head office of the Filer is located at 625 Henry Avenue, Winnipeg, Manitoba R3A 0V1.
3. The Filer was established to invest in the packaged ice manufacturing and distribution business in Canada and the United States initially through the acquisition of The Arctic Group Inc. by the Filer's wholly-owned subsidiary ("Acquisitionco"). Following the acquisition, The Arctic Group Inc. and Acquisitionco were amalgamated to form Arctic Glacier Inc. ("AGI"). AGI now operates the packaged ice manufacturing and distribution business formerly operated by The Arctic Group Inc., which business includes the corporate strategy of growth through acquisition. The Filer owns all of the issued and outstanding securities of AGI.
4. The Filer is a reporting issuer in all of the provinces and territories of Canada where such status exists, including the Jurisdictions and, to the best of its knowledge, is currently not in default of any applicable requirements under the Legislation.
5. The units of the Filer are listed and posted on the Toronto Stock Exchange under the symbol AG.UN.
The Acquisition
6. The Filer, via an indirect subsidiary, entered into purchase agreements made as of May 8, 2006 pursuant to which it agreed to indirectly acquire a group of six entities in California involved in the packaged ice business (the "Acquisition"), such entities consisting of 100% of the outstanding equity interest of Mountain Water Ice Company, Diamond Newport Corporation, Jack Frost Ice Service, Inc., Glacier Valley Ice Company, L.P., Glacier Ice Company, Inc., and South Bay Ice LLC (each, an "Ice Company" and collectively referred to herein as "California Ice").
7. The Acquisition will be completed in two stages. The closing of the acquisition of four of the Ice Companies that comprise California Ice, such Ice Companies being Mountain Water Ice Company, Diamond Newport Corporation, Jack Frost Ice Service, Inc., and Glacier Valley Ice Company, L.P. (the "Initial Acquisition"), occurred on May 25, 2006 while the closing of the acquisition of the two remaining Ice Companies that comprise California Ice, such Ice Companies being Glacier Ice Company, Inc. and South Bay Ice LLC. (the "Subsequent Acquisition"), is expected to occur on or about August 7, 2006.
8. The Acquisition was partially financed by the Filer's public offering of $50,001,100 of Subscription Receipts and $100,000,000 of 6.50% Extendible Convertible Unsecured Subordinated Debentures (the "Offering") made pursuant to a (final) short form prospectus dated May 17, 2006 (the "Prospectus"). That Offering closed on May 25, 2006.
9. The business acquired by the Filer pursuant to the Initial Acquisition did not constitute a material departure from the business or operations of the Filer immediately before completion of the Initial Acquisition.
The Prospectus Financial Statement Requirements
10. In compliance with the requirements of Item 10.1 of Form 44-101F1, the Prospectus contained the following annual financial statements relating to the Acquisition:
(a) the audited financial statements of Mountain Water Ice Company for the years ended December 31, 2005 and 2004;
(b) the audited financial statements of Diamond Newport Corporation for the years ended December 31, 2005 and 2004;
(c) the audited consolidated financial statements of Jack Frost Ice Service, Inc. for the years ended December 31, 2005 and 2004;
(d) the audited financial statements of Glacier Valley Ice Company, L.P. for the years ended December 31, 2005 and 2004;
(e) the audited consolidated financial statements of Glacier Ice Company, Inc. for the years ended December 31, 2005 and 2004; and
(f) the audited financial statements of South Bay Ice LLC for the years ended December 31, 2005 and 2004
(items 10(a) through 10(f) are collectively referred to herein as the "Prospectus Acquisition Annual Financial Statements").
11. Since the Prospectus was dated within 60 days of the end of the most recently completed interim period for each of the Ice Companies to be acquired pursuant to the Acquisition, Item 10.1 of Form 44-101F1 did not require the Filer to include, and the Filer did not include, interim financial statements for any of the Ice Companies for any interim periods subsequent to the date of the Prospectus Acquisition Annual Financial Statements.
12. In compliance with the requirements of Item 10.1 of Form 44-101F1, the Prospectus contained the unaudited pro forma balance sheet of the Filer as at December 31, 2005 and the unaudited pro forma statement of operations for the twelve months ended December 31, 2005, in each case after giving effect to the Acquisition (the "Prospectus Pro Forma Financial Statements", the Prospectus Pro Forma Financial Statements and the Prospectus Acquisition Annual Financial Statements being collectively referred to herein as the "Prospectus Financial Statements"). However, the Filer submitted a pre-filing application with the Manitoba Securities Commission for, and was granted, an exemption from the requirement of Item 10.1 of Form 44-101F1 to include an unaudited pro forma balance sheet of the Filer as at March 31, 2006 and an unaudited pro forma consolidated statement of operations for the three months ended March 31, 2006, in each case after giving effect to the Acquisition.
13. All material facts in respect of California Ice and the Acquisition at the time the Prospectus was filed, including the Prospectus Financial Statements, were provided in the Prospectus. To the knowledge of the Filer since the time the Prospectus was filed on May 17, 2006, there has not been any change in the business or affairs of California Ice that is material and adverse to the Filer.
The Business Acquisition Report Financial Statement Requirements
14. Pursuant to the requirements of Section 8.2 of NI 51-102 the Filer is required to file a BAR relating to the Initial Acquisition within 75 days after the date of the Initial Acquisition.
15. Using the significance tests set forth in Section 8.3 of NI 51-102, the Initial Acquisition, when considered in combination with the Subsequent Acquisition, was determined to be significant at the "over 40%" level.
16. To comply with the requirements of Section 8.4 of NI 51-102, the Filer is required to include the following annual financial statements in the BAR for the Initial Acquisition:
(a) the audited financial statements of Mountain Water Ice Company for the years ended December 31, 2005 and 2004;
(b) the audited financial statements of Diamond Newport Corporation for the years ended December 31, 2005 and 2004;
(c) the audited consolidated financial statements of Jack Frost Ice Service, Inc. for the years ended December 31, 2005 and 2004; and
(d) the audited financial statements of Glacier Valley Ice Company, L.P. for the years ended December 31, 2005 and 2004
(items 16(a) through 16(d) are collectively referred to herein as the "BAR Acquisition Annual Financial Statements").
17. To comply with the requirements of Section 8.4 of NI 51-102, the Filer is required to include the following interim financial statements in the BAR for the Initial Acquisition:
(a) the unaudited financial statements of Mountain Water Ice Company for the three month period ended March 31, 2006;
(b) the unaudited financial statements of Diamond Newport Corporation for the three month period ended March 31, 2006;
(c) the unaudited financial statements of Jack Frost Ice Service, Inc. for the three month period ended March 31, 2006; and
(d) the unaudited financial statements of Glacier Valley Ice Company, L.P. for the three month period ended March 31, 2006
(items 17(a) through 17(d) are collectively referred to herein as the "BAR Acquisition Interim Financial Statements").
18. To comply with the requirements of Section 8.4 of NI 51-102, the Filer is required to include the unaudited pro forma balance sheet of the Filer as at March 31, 2006 and the unaudited pro forma statement of operations for the three months ended March 31, 2006 (the "BAR Pro Forma Interim Financial Statements") along with the unaudited pro forma balance sheet of the Filer as at December 31, 2005 and the unaudited pro forma statement of operations for the twelve months ended December 31, 2005, in each case after giving effect to the Initial Acquisition (the "BAR Pro Forma Financial Statements", the BAR Pro Forma Financial Statements, the BAR Acquisition Annual Financial Statements and the BAR Acquisition Interim Financial Statements being collectively referred to herein as the "BAR Financial Statements").
19. As they apply to the Ice Companies acquired pursuant to the Initial Acquisition, the Prospectus Acquisition Annual Financial Statements and the BAR Acquisition Annual Financial Statements are identical.
20. As they apply to the Ice Companies acquired pursuant to the Initial Acquisition, the BAR Acquisition Interim Financial Statements and the BAR Pro Forma Interim Financial Statements are for the interim financial period immediately following the annual financial period for which the Prospectus Acquisition Annual Financial Statements and the Prospectus Pro Forma Financial Statements have been prepared.
Decision
The Decision Makers being satisfied that they have the jurisdiction to make this decision and that the relevant test under the Legislation has been met.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted, provided that:
1. the Filer includes or incorporates by reference the Prospectus Financial Statements in the BAR;
2. the business acquired by the Filer pursuant to the Initial Acquisition did not constitute a material departure from the business or operations of the Filer immediately before completion of the Initial Acquisition; and
3. the Filer will not account for the Initial Acquisition as a continuity of interests.