IN THE MATTER OF
THE SECURITIES LEGISLATION OF
NOVA SCOTIA, BRITISH COLUMBIA, MANITOBA, NEWFOUNDLAND AND LABRADOR, PRINCE EDWARD ISLAND
AND NEW BRUNSWICK
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ROYAL BANK OF CANADA AND
RBC CAPITAL TRUST II
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority
or regulator (the "Decision
Maker") in each of Nova Scotia, British Columbia, Manitoba, Newfoundland and
Labrador, Prince Edward Island and New Brunswick (collectively, the
"Jurisdictions") has received an application (the "Application") on
behalf of Royal Bank of Canada (the "Bank") and RBC Capital Trust II (the
"Trust") for a decision pursuant to the securities legislation of the
Jurisdictions (the "Legislation") that certain trades in securities
of the Bank are exempt from the dealer registration requirement and the prospectus
requirement,
subject to certain conditions;
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications
(the "System"), the Nova Scotia Securities Commission is the principal
regulator for
the Application;
AND WHEREAS unless otherwise defined, the terms herein have the meaning set out in
National Instrument 14-101 Definitions;
AND WHEREAS the Bank and the Trust have represented to the Decision Makers that:
1. The Trust is an open-end trust established under
the laws of Ontario by The Royal
Trust Company (the "Trustee"), as trustee, pursuant to a declaration of trust
made as of June 23, 2003, which shall be amended and restated prior to the completion of
the Offering (as defined below) (as so amended and restated, the "Declaration of
Trust"). The Trust has its head office in Ontario.
2. Following completion of the Offering, the authorized capital of the Trust
will consist
of an unlimited number of (i) Special Trust Securities (the "Special Trust
Securities"); and (ii) Trust Capital Securities – Series 2013 (the "RBC
TruCS – Series 2013"). The Special Trust Securities and the RBC TruCS –
Series 2013 are collectively referred to herein as the "Trust Securities".
3. The Trust was established solely for the purpose of effecting the Offering
and possible future offerings of securities in order to provide the Bank with
a cost effective means of
raising capital for Canadian financial institutions regulatory purposes by means
of: (i) creating and selling the Trust Securities; and (ii) acquiring and holding
assets, which,
on completion of the Offering, will consist primarily of a senior deposit note
issued by
the Bank (the "Bank Deposit Note") to be acquired by the Trust with
the proceeds of the Offering. The Bank Deposit Note will generate income for
distribution to holders of
the Trust Securities. The Trust is a special purpose vehicle that has no independent
business activities other than to acquire and hold the Bank Deposit Note for
the purpose
of generating income for distribution to holders of the Trust Securities.
4. Subject to regulatory approval, the RBC TruCS – Series 2013 will qualify
as Tier 1
Capital of the Bank.
5. The Bank is a bank under the Bank Act (Canada) and such act is its charter and
governs its operations. The Bank has its head office in Quebec.
6. The Bank is a reporting issuer or the equivalent in each of the provinces and
territories of Canada that provides for a reporting issuer regime and is not in default of
any reporting requirement under the Legislation.
7. The authorized share capital of the Bank consists of an unlimited number of
(i) common
shares (the "Bank Common Shares"); and (ii) First Preferred Shares and Second
Preferred Shares (the "Bank Preferred Shares"), issuable in series.
8. The Bank Common Shares are listed for trading on The Toronto Stock Exchange, the New
York Stock Exchange and the Swiss Exchange.
9. The Trust proposes to issue and Sell to investors pursuant to a final prospectus
(the "Prospectus") transferable trust units, being the RBC TruCS – Series 2013
(the "Offering"), to be issued at a price of $1,000 per RBC TruCS – Series
2013.
10. Pursuant to the terms of the RBC TruCS – Series 2013 and a Share Exchange
Agreement (the "Share Exchange Agreement") to be entered into among the Bank,
the Trust and CIBC Mellon Trust Company acting as exchange trustee, the RBC TruCS –
Series 2013 may be exchanged, at the option of the holders of RBC TruCS – Series 2013
(the "Holder Exchange Right") for First Preferred Shares Series U of the Bank
(the "First Preferred Shares Series U"). The RBC TruCS – Series 2013 will
be automatically exchanged, without the consent of the holder, for First Preferred Shares
Series T of the Bank (the "First Preferred Shares Series T") upon the occurrence
of certain stated events relating to the solvency of the Bank or actions taken by the
Superintendent of Financial Institutions (the "Superintendent") in respect of
the Bank (the "Automatic Exchange"). The First Preferred Shares Series U and T
are collectively referred to herein as the "Bank Exchange Preferred Shares".
11. The Bank Deposit Note will be convertible at any time at the option of the
holder into First Preferred Shares Series U (such right of conversion being referred
to herein as the "Conversion Right"), exercisable by the Trust in circumstances in which holders
of RBC TruCS – Series 2013 exercise the Holder Exchange Right, to enable the Trust to
satisfy its obligation to deliver First Preferred Shares Series U to holders of RBC TruCS
– Series 2013 in connection with the Holder Exchange Right.
12. Pursuant to the Share Exchange Agreement, the Bank will grant to the Trust
the right
to subscribe (the "Subscription Right") for Bank Exchange Preferred Shares of
the appropriate series in order to enable the Trust to redeem the RBC TruCS – Series
2013 (if any remain outstanding) in circumstances (i) where the Holder Exchange Right is
exercised following maturity of the Bank Deposit Note (in which case, the Trust would not
have the benefit of the Conversion Right), or (ii) where the Automatic Exchange is
triggered and, for any reason, does not result in the exchange of all of the RBC TruCS
– Series 2013 for First Preferred Shares Series T.
13. The Holder Exchange Right will be effected through the conversion by the
Trust of the corresponding principal amount of the Bank Deposit Note into First
Preferred Shares Series
U, or the acquisition by the Trust of such shares through the exercise of the
Subscription
Right. Holders of RBC TruCS – Series 2013 exercising the Holder Exchange Right will,
upon surrendering the RBC TruCS – Series 2013 to be exchanged, receive from the Trust
40 First Preferred Shares Series U in respect of each RBC TruCS – Series 2013 so
exchanged and the RBC TruCS – Series 2013 surrendered for exchange will
be cancelled.
14. The Automatic Exchange will be effected through the terms of the Share Exchange
Agreement and the Declaration of Trust. As of the time of the exchange, each
holder of RBC
TruCS – Series 2013 shall be deemed to have exchanged and transferred to the Bank all
of such holder's right, title and interest in and to its RBC TruCS – Series 2013 in
exchange for 40 First Preferred Shares Series T for each RBC TruCS – Series 2013 and:
(i) such holder shall cease to be a holder of any RBC TruCS – Series 2013; (ii) all
rights of such holder as a securityholder of the Trust will cease; and (iii) such person
shall therefrom be deemed to be and shall be for all purposes a holder of First Preferred
Shares Series T. If, for any reason, the Automatic Exchange does not result in the
exchange of all outstanding RBC TruCS – Series 2013 for First Preferred Shares Series
T, the Automatic Exchange will be effected through the exercise by the Trust of the
Subscription Right pursuant to which the Trust will acquire First Preferred Shares Series
T and the Trust will subsequently redeem each RBC TruCS – Series 2013 not
so
exchanged for 40 First Preferred Shares Series T.
15. The terms of the Bank Exchange Preferred Shares provide that the Bank Exchange
Preferred Shares are convertible at the option of the holder into Bank Common
Shares at certain times and in certain circumstances, except where an event giving
rise to the
Automatic Exchange in respect of the RBC TruCS – Series 2013 has occurred and is
continuing (the "Bank Common Share Conversion Right"). The Bank Exchange
Preferred Shares are not convertible into Bank Common Shares until June 30, 2014.
16. In addition, the Bank may redeem the Bank Exchange Preferred Shares and pay
the redemption price thereof by delivering cash or Bank Common Shares to holders
of redeemed
Bank Exchange Preferred Shares (the entitlement of the Bank to issue Bank Common
Shares
for such purpose being the "Bank Preferred Share Redemption Right").
The Bank Exchange Preferred Shares are not redeemable until December 31, 2008,
subject to
Superintendent approval and certain other terms and conditions.
17. In addition to qualifying the RBC TruCS – Series 2013 for distribution, the
Prospectus will also qualify the Holder Exchange Right, the Automatic Exchange, the
Conversion Right, the Subscription Right, the Bank Preferred Share Redemption Right and
the Bank Common Share Conversion Right (collectively, the "Conversion and Exchange
Rights"). Information concerning the Trust and the Bank will be included,
or
incorporated by reference, in the Prospectus.
18. There may be no registration or prospectus exemptions available under the
Legislation for certain of the trades contemplated by the Conversion and Exchange
Rights (the "Trades").
AND WHEREAS under the System, this MRRS Decision Document evidences the decision
of each
of the Decision Makers (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the
Legislation that provides the Decision Maker with the jurisdiction to make the Decision
has been met;
THE DECISION of the Decision Makers under the Legislation is that the dealer
registration requirement and the prospectus requirement shall not apply to the
Trades provided that the
first trade in Bank Exchange Preferred Shares and Bank Common Shares acquired
pursuant to the Decision, other than a trade by the Trust or the Bank pursuant
to the Conversion and
Exchange Rights, shall be deemed to be a distribution or a primary distribution
to the public under the Legislation of the Jurisdiction in which the trade takes
place (the "Applicable Legislation") unless:
(a) the Bank has filed and obtained a receipt for the Prospectus under the Applicable
Legislation;
(b) the Bank is a reporting issuer or the equivalent under the Applicable Legislation at
the time of the trade, to the extent that the Applicable Legislation provides a reporting
issuer regime; and
(c) the trade is not a control distribution as defined in Multilateral Instrument 45-102
Resale of Securities.
DATED this 16th day of July, 2003.
H. Leslie O'Brien