Big 8 Split Inc. is a “split share company” created on June 26, 2003 to invest in a portfolio of publicly listed common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, The Toronto-Dominion Bank, Great West Lifeco Inc., Manulife Financial Corporation and Sun Life Financial Inc. (the “Portfolio Shares”). In September 2003, the Company issued 4,500,000 Class A Preferred Shares and 4,500,000 Class A Capital Shares with the net proceeds being used to acquire the Portfolio Shares. On November 21, 2008, the holders of Capital Shares approved a share capital reorganization extending the term of their investment in the Company for an additional five years. On December 15, 2008 the Company redeemed the Class A Preferred and issued 1,204,980 Class B Preferred Shares. On December 15, 2009, the Company paid a Share Dividend resulting in an additional 640,203 Capital Shares being issued. In addition, through a public offering, the Company subsequently issued 1,165,203 new Class C Preferred Shares and an additional 525,000 Capital Shares. On December 13, 2013 the Company redeemed the Class B and Class C Preferred and Class A Capital Shares and issued 1,719,382 Class D Preferred Shares and 1,719,382 Class D Capital Shares. The Preferred Shares entitle the holders to receive quarterly fixed cumulative preferential distributions equal to $0.1125 per Class D Preferred Share. The Class D Capital Shares provide holders with a leveraged investment, the value of which is linked to changes in the market price of the Portfolio Shares. Both the Class D Preferred Shares and Class D Capital Shares are listed and publicly traded on the Toronto Stock Exchange.
Preferred Shareholders will receive quarterly cash dividends funded primarily from the dividends received on the Portfolio Shares and, if necessary, with proceeds from the sale of the Portfolio Shares. Any portion of the Preferred Share Dividend, which is derived from the proceeds of the sale of the Portfolio Shares, will consist of a non-taxable return of capital, or a combination of a capital gains dividend and non-taxable return of capital. Dividends where declared, will be paid on or before the 15th day of March, June, September and December in each year. Holders of the Preferred Shares will not be entitled to receive any dividends in excess of the Preferred Share Dividend.
Capital Shareholders will be entitled on redemption to the benefit of any capital appreciation in the market price of the Portfolio Shares after payment of the administrative and operating expenses of the Company, and if necessary, a portion of the Preferred Share Dividend and will benefit from any increase in the dividends paid on the Portfolio Shares. In the event that the dividends paid on the Portfolio Shares held by the Company exceed the Preferred Share Dividend and all expenses of the Company, the excess amount will be reinvested in Portfolio Shares or paid as dividends on the Capital Shares, as determined by the Board of Directors of the Company. The Board anticipates that dividends will not be declared on the Capital Shares unless the Company becomes subject to tax under Part IV of the Tax Act that would otherwise not be refunded.
Unit Value is defined as the amount received by the Company on the disposition of that number of Portfolio Shares represented by each Unit’s pro rata share of each of the Portfolio Shares or, if it is determined that it is not practicable to sell Portfolio Shares, Unit Value will be determined with reference to the closing price for the Portfolio Shares on the tenth business day prior to the retraction payment date of the applicable month, less any brokerage fees, commissions and other transactions costs relating to the sale plus (minus) the pro rata share of the net assets of the Company.
Preferred and Capital Shares may be surrendered for retraction at any time by the holders. Holders may surrender their shares for retraction by exercising a Regular Retraction, a Concurrent Retraction or a Special Annual Retraction. Retraction payments will be on the 15th day of the month, or where such day is not a business day, on the preceding business day. To exercise the retraction a holder must provide an investment dealer (CDS Participant) with written notice for submission to CDS. Holders must provide sufficient notice to the investment dealer as both the Preferred and Capital Shares must be surrendered for retraction at least ten business days prior to the retraction payment date.
A holder who surrenders Preferred Shares will receive for each Preferred Share retracted the amount if any, by which 95% of the Unit Value exceeds the aggregate of:
- average cost to the Company, including commissions, of purchasing a Capital Share in the market; and
A holder who surrenders Capital Shares will receive for each Capital Share retracted the amount if any, by which 95% of the Unit Value exceeds the aggregate of:
average cost to the Company, including commissions, of purchasing a Capital Share in the market
A holder who surrenders both a Capital Share and a Preferred Share under a Concurrent Retraction will receive an amount equal to 95% of the Unit Value less $1.00.
A holder who concurrently surrenders one Class D Preferred Share and one Class D Capital Share under special annual retraction for the Retraction Payment Date occurring on December 15 in each year or, where such day is not a business day, the preceding day, will receive an amount equal to the Unit Value.
Provided a holder of Capital Shares surrenders 10,000 or more Capital Shares for retraction and tenders one Preferred Share for each Capital Share retracted, such holder may elect to receive his or her pro rata share of the Portfolio Shares and other net assets of the Company.
The Company will redeem all outstanding Preferred and Capital Shares on December 15, 2018. Preferred Shareholders will receive a cash value per share equal to the lesser of $10.00 and the Unit Value. Capital Shareholders will receive either the cash value per share that the Unit Value exceeds $10.00; or if the holder tenders $10.00 per Capital Share redeemed, such holder’s pro rata share of the Portfolio Shares for each Capital Share redeemed, plus the holder’s pro rata share of the other net assets of the Company.
Income Taxes: The Company qualifies as a “mutual fund company” under the Income Tax Act (Canada). As a result thereof and of the deduction of expenses in computing its taxable income, the Company should not be subject to any material net income tax liability.
Dividends: Dividends other than capital gains dividends received by the individuals on the Preferred Shares or Capital Shares will subject to the normal gross-up and dividend tax credit rules applicable to dividends received on shares of a taxable Canadian corporation.
Return of capital payments to a holder of Preferred Shares will not be subject to tax but will reduce the adjusted cost base of the Preferred Shares to the holder.
The amount of any capital gains dividend received by a holder of Preferred Shares or Capital Shares will be considered to be a capital gain of the holder from the disposition of capital property in the taxation year of the holder in which the capital gains dividend is received.
If a capital gains dividend is paid on the Capital Share in Capital Shares rather than in cash, the adjusted cost base of the holder’s Capital Shares will also be increased by the amount of such dividend/
For the purposes of the Income Tax Act (Canada) and any other similar provincial and territorial tax legislation, the dividends paid on both capital and on preferred shares are designated as “eligible dividends”. Unless stated otherwise, all dividends (and deemed dividends) paid hereafter are designated as “eligible dividends” for the purposes of such legislation.
Holders of the Preferred and Capital Shares will not be entitled to vote any of the Portfolio Shares held by the Company. The Board of Directors of the Company will determine the manner in which the Portfolio Shares will be voted at any meeting of shareholders of a Financial Institution.
Chief Executive Officer and Director
Chief Financial Officer and Director
*Audit Committee Member
Big8 Split Inc. is managed by Timbercreek Investment Management Inc.