AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 2004
REGISTRATION NO. 333-119874
_______________________________________________________________________________
_______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
AMENDMENT NO. 1 TO
FORM F-10
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
CENTRAL FUND OF CANADA LIMITED
(Exact name of Registrant as specified in its charter)
ALBERTA, CANADA NOT APPLICABLE NOT APPLICABLE
(Province or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification No.)
HALLMARK ESTATES, #805, 1323-15TH AVENUE S.W., CALGARY, ALBERTA T3C 0X8, CANADA
(403) 228-5861
(Address and telephone number of Registrant's principal executive offices)
MARTIN POMERANCE
250 PARK AVENUE
NEW YORK, NY 10177
(212) 415-9200
(Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States)
__________________
COPIES TO:
JOHN S. ELDER, Q.C. GIL I. CORNBLUM, ESQ.
FRASER MILNER CASGRAIN LLP DORSEY & WHITNEY LLP
1 FIRST CANADIAN PLACE, 39TH FLOOR BCE PLACE
100 KING STREET WEST 161 BAY STREET, SUITE 4310
TORONTO, ONTARIO M5X 1B2 TORONTO, ONTARIO M5J 2S1
CANADA CANADA
(416) 863-4511 (416) 367-7370
__________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
PROVINCE OF ALBERTA, CANADA
(Principal jurisdiction regulating this offering)
__________________
It is proposed that this filing shall become effective (check
appropriate box):
A. /X/ Upon filing with the Commission pursuant to Rule 467(a) (if in
connection with an offering being made contemporaneously in
the United States and Canada).
B. / / At some future date (check the appropriate box below).
1. / / Pursuant to Rule 467(b) on __________ (date) at __________
(time) (designate a time not sooner than seven calendar
days after filing).
2. / / Pursuant to Rule 467(b) on __________ (date) at __________
(time) (designate a time not sooner than seven calendar
days after filing) because the securities regulatory
authority in the review jurisdiction has issued a receipt
or notification of clearance on __________ (date).
3. / / Pursuant to Rule 467(b) as soon as practicable after
notification of the Commission by the registrant or the
Canadian securities regulatory authority of the review
jurisdiction that a receipt or notification of clearance
has been issued with respect hereto.
4. / / After the filing of the next amendment to this form (if
preliminary material is being filed).
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to the home jurisdiction's
shelf prospectus offering procedures, check the following box. / /
______________________
PART I
INFORMATION REQUIRED TO BE DELIVERED TO
OFFEREES OR PURCHASERS
PROSPECTUS
[LOGO]
15,000,000 NON-VOTING, FULLY-PARTICIPATING CLASS A SHARES
CENTRAL FUND OF CANADA LIMITED
U.S.$84,900,000
------------------
This short form prospectus (the "Prospectus") qualifies the distribution
(the "Offering") of 15,000,000 non-voting, fully-participating Class A shares
(the "Shares") of Central Fund of Canada Limited ("Central Fund" or the
"Company"). Holders of non-voting, fully-participating Class A shares (the
"Class A non-voting shares") are not entitled to vote at any meetings of
shareholders of Central Fund, except as provided for by law and with respect to
those matters set out in Central Fund's articles. See "Share Capital of the
Company".
The Offering price of the Shares was determined by negotiation between the
Company and CIBC World Markets Inc. (the "Underwriter"), and in the context of
the market.
The outstanding Class A non-voting shares are listed and posted for trading
on the Toronto Stock Exchange (the "TSX") under the symbol "CEF.A" and on the
American Stock Exchange ("Amex") under the symbol "CEF". The closing prices of
the Class A non-voting shares on the TSX and on Amex on October 21, 2004, the
day before the Offering price was determined, were Cdn.$7.46 per share and
U.S.$5.99 per share, respectively. The issuer has applied to list the securities
distributed under this short form prospectus on each of the TSX and the Amex.
The TSX has conditionally approved the listing of these securities. Listing on
the TSX is subject to the Company fulfilling all of the requirements of the TSX
on or before January 21, 2005. Listing on the AMEX will be subject to the issuer
fulfilling all the listing requirements of the Amex.
THIS OFFERING IS MADE BY A FOREIGN ISSUER THAT IS PERMITTED, UNDER A
MULTIJURISDICTIONAL DISCLOSURE SYSTEM ADOPTED BY THE UNITED STATES, TO PREPARE
THIS PROSPECTUS IN ACCORDANCE WITH THE DISCLOSURE REQUIREMENTS OF CANADA.
PROSPECTIVE INVESTORS SHOULD BE AWARE THAT SUCH REQUIREMENTS ARE DIFFERENT FROM
THOSE OF THE UNITED STATES. FINANCIAL STATEMENTS INCLUDED OR INCORPORATED HEREIN
HAVE BEEN PREPARED IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, AND MAY BE SUBJECT TO FOREIGN AUDITING AND AUDITOR INDEPENDENCE
STANDARDS, AND THUS MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED
STATES COMPANIES.
PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THE ACQUISITION OF THE SECURITIES
DESCRIBED HEREIN MAY HAVE TAX CONSEQUENCES BOTH IN THE UNITED STATES AND IN
CANADA. SUCH CONSEQUENCES FOR INVESTORS WHO ARE RESIDENTS IN, OR CITIZENS OF,
THE UNITED STATES MAY NOT BE FULLY DESCRIBED HEREIN.
THE ENFORCEMENT BY INVESTORS OF CIVIL LIABILITIES UNDER THE FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BY THE FACT THAT THE COMPANY IS
INCORPORATED UNDER THE LAWS OF ALBERTA, THAT SOME OR ALL OF ITS OFFICERS AND
DIRECTORS MAY BE RESIDENTS OF A FOREIGN COUNTRY, THAT SOME OR ALL OF THE
UNDERWRITERS OR EXPERTS NAMED IN THE REGISTRATION STATEMENT MAY BE RESIDENTS OF
A FOREIGN COUNTRY, AND THAT ALL OR A SUBSTANTIAL PORTION OF THE ASSETS OF THE
COMPANY AND SAID PERSONS MAY BE LOCATED OUTSIDE THE UNITED STATES.
----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SHARES OFFERED HEREBY.
------------------------------------
PRICE: U.S.$5.66 PER NON-VOTING, FULLY-PARTICIPATING CLASS A SHARE
------------------------------------
PROCEEDS TO THE
PRICE TO THE PUBLIC UNDERWRITER'S FEE COMPANY(1)
Per non-voting, fully-participating
Class A Share.................. U.S.$5.66 U.S.$0.2264 U.S.$5.4336
Total(2)(3)........................ U.S.$84,900,000 U.S.$3,396,000 U.S.$81,504,000
(1) Before deducting expenses of this Offering, estimated to be U.S.$600,000,
which, together with the Underwriter's fee, will be paid by the Company from
the proceeds of the Offering.
(2) For Shares sold in the United States, the Price to the Public, Underwriter's
Fee and Proceeds to the Company are payable in U.S. dollars. For Shares sold
in Canada, the Price to the Public, Underwriter's Fee and Proceeds to the
Company and amounts related to the Offering are payable in Canadian dollars
at the Canadian dollar equivalent to such amounts based on a prevailing
U.S.-Canadian dollar exchange rate as of the date of the pricing of the
Offering.
(3) The Company granted to the Underwriter under the Underwriting Agreement an
option (the "Option"), which was exercised in full on October 22, 2004 to
purchase 2,000,000 Class A non-voting shares (the "Optioned Shares"). As the
Option was exercised in full prior to the date of this prospectus, the
Optioned Shares are included in this distribution table. This short form
prospectus qualifies the grant of the Option and the distribution of the
Optioned Shares. See "Plan of Distribution".
The Underwriter, as principal, conditionally offers the Shares, subject to
prior sale, if, as and when issued by the Company and accepted by the
Underwriter in accordance with the conditions contained in the Underwriting
Agreement referred to under "Plan of Distribution" and subject to the approval
of certain legal matters on behalf of the Company by Fraser Milner Casgrain LLP
and Dorsey & Whitney LLP and on behalf of the Underwriter by Cassels Brock &
Blackwell LLP and Shearman & Sterling LLP.
Subscriptions for the Shares will be received subject to rejection or
allotment in whole or in part, and the right is reserved to close the
subscription books at any time without notice. It is expected that the closing
of this Offering will take place on November 3, 2004 or on such other date as
the Company and the Underwriter may agree, but not later than November 30, 2004,
and that certificates representing the Shares will be available for delivery on
or about the closing of the Offering.
On October 27, 2004, the inverse of the noon buying rate in the City of
New York for cable transfers in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York was U.S.$0.8161 per Cdn.$1.00.
Subject to applicable laws and in connection with the Offering, the
Underwriter may effect transactions which stabilize or maintain the market price
of the Shares at levels other than those which otherwise might prevail on the
open market. Such transactions, if commenced, may be discontinued at any time.
See "Plan of Distribution".
The date of this Prospectus is October 28, 2004.
TABLE OF CONTENTS
PAGE
--------
FINANCIAL INFORMATION AND ACCOUNTING
PRINCIPLES............................ 2
EXCHANGE RATES.......................... 2
DOCUMENTS INCORPORATED BY REFERENCE..... 3
ELIGIBILITY FOR INVESTMENT.............. 4
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS............................ 4
THE COMPANY............................. 5
BUSINESS OF THE COMPANY................. 5
SHARE CAPITAL OF THE COMPANY............ 5
PLAN OF DISTRIBUTION.................... 7
USE OF PROCEEDS......................... 8
CANADIAN FEDERAL INCOME TAX
CONSIDERATIONS........................ 8
UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS........................ 11
PAGE
--------
ERISA AND RELATED CONSIDERATIONS........ 16
ENFORCEMENT OF CERTAIN CIVIL
LIABILITIES........................... 17
RISK FACTORS............................ 17
LEGAL MATTERS........................... 18
AUDITORS, TRANSFER AGENTS AND
REGISTRARS............................ 18
PURCHASERS' STATUTORY RIGHTS............ 18
EXPERTS................................. 19
DOCUMENTS FILED AS PART OF THE
U.S. REGISTRATION STATEMENT........... 19
CERTIFICATE OF THE COMPANY.............. C-1
CERTIFICATE OF THE UNDERWRITER.......... C-2
FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES
Unless otherwise indicated, financial information in this Prospectus has
been prepared in accordance with Canadian generally accepted accounting
principles. The financial information of the Company presented herein is in
U.S. dollars. In this Prospectus, except where indicated, all dollar amounts are
in U.S. dollars.
EXCHANGE RATES
The following table sets forth, for the period and rates indicated,
information concerning exchange rates for the Canadian dollar expressed in
United States dollars, based on the inverse of the noon buying rate in the City
of New York for cable transfers in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York.
THREE MONTHS THREE MONTHS THREE MONTHS TWELVE MONTHS ENDED OCTOBER 31,
ENDED JULY 31, ENDED APRIL 30, ENDED JANUARY 31, ---------------------------------
2004 2004 2004 2003 2002 2001
--------------- ---------------- ------------------ --------- --------- ---------
High......................... $0.7644 $0.7645 $0.7880 $0.7667 $0.6619 $0.6696
Low.......................... $0.7158 $0.7293 $0.7460 $0.6288 $0.6200 $0.6241
Period End................... $0.7521 $0.7293 $0.7539 $0.7579 $0.6406 $0.6279
Average...................... $0.7395 $0.7500 $0.7650 $0.6940 $0.6356 $0.6459
The average noon buying rate is derived by taking the average of the noon
buying rate on the last business day of each month during the relevant period.
On October 27, 2004, the inverse of the noon buying rate was
U.S.$0.8161 per Cdn.$1.00.
2
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, filed with the securities commission or similar
authority in each of the provinces and territories of Canada and the United
States Securities and Exchange Commission (the "SEC"), are specifically
incorporated by reference into, and form an integral part of, this Prospectus:
(a) the Annual Information Form of the Company dated March 1, 2004;
(b) the Management Information Circular of the Company dated January 9, 2004
in connection with the Company's annual meeting of shareholders on
February 23, 2004;
(c) the audited financial statements of the Company as at October 31, 2003
and 2002 and for each of the years in the three year period ended
October 31, 2003 together with the auditors' report thereon and
consisting of the statements of net assets as at October 31, 2003 and
2002 and the statements of loss, shareholders' equity and changes in net
assets for each of the years in the three year period ended October 31,
2003;
(d) management's discussion and analysis of financial condition and results
of operations for the year ended October 31, 2003 (incorporated by
reference from the annual report of the Company for the year ended
October 31, 2003);
(e) the unaudited interim financial statements of the Company for the three
and nine month periods ended July 31, 2004 with comparative figures for
the corresponding periods in the immediately preceding year;
(f) management's discussion and analysis of financial condition and results
of operations for the nine month period ended July 31, 2004;
(g) the material change report of the Company dated December 29, 2003
disclosing the Company's public offering of 15,050,000 Class A non-voting
shares;
(h) the material change report of the Company dated April 14, 2004
disclosing the Company's public offering of 19,500,000 Class A non-voting
shares; and
(i) supplementary information, dated October 6, 2004, relating to
reconciliation with United States generally accepted accounting
principles in respect of the unaudited interim financial statements of
the Company for the three and nine month periods ended July 31, 2004 with
comparative figures for the corresponding periods in the immediately
preceding year.
ALL DOCUMENTS OF THE TYPE REFERRED TO ABOVE (OTHER THAN ANY CONFIDENTIAL
MATERIAL CHANGE REPORTS) FILED BY THE COMPANY PURSUANT TO THE REQUIREMENTS OF
APPLICABLE SECURITIES LEGISLATION IN CANADA AND THE UNITED STATES AFTER THE DATE
OF THIS PROSPECTUS AND PRIOR TO COMPLETION OR WITHDRAWAL OF THIS OFFERING, WILL
BE DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN CONTAIN MEANINGFUL AND MATERIAL INFORMATION
RELATING TO THE COMPANY, AND PROSPECTIVE INVESTORS OF SHARES SHOULD REVIEW ALL
INFORMATION CONTAINED IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE BEFORE MAKING AN INVESTMENT DECISION.
ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED
FOR THE PURPOSES OF THIS PROSPECTUS TO THE EXTENT THAT A STATEMENT CONTAINED IN
THIS PROSPECTUS OR IN ANY SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS OR IS DEEMED
TO BE INCORPORATED BY REFERENCE HEREIN MODIFIES OR SUPERSEDES SUCH STATEMENT.
ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT CONSTITUTE A PART OF THIS
PROSPECTUS, EXCEPT AS SO MODIFIED OR SUPERSEDED. THE MODIFYING OR SUPERSEDING
STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR
INCLUDE ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT THAT IT MODIFIES OR
SUPERSEDES. THE MAKING OF SUCH A MODIFYING OR SUPERSEDING STATEMENT SHALL NOT BE
DEEMED AN ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED STATEMENT,
WHEN MADE, CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL
FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR
THAT IS NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE
CIRCUMSTANCES IN WHICH IT WAS MADE.
Copies of documents incorporated herein by reference may be obtained upon
request, without charge, from the President of the Company at The Central Group
Alberta Limited's Investor Inquiries Office, 55 Broad Leaf Crescent, P.O.
Box 7319, Ancaster, Ontario L9G 3N6, tel: 1-905-648-7878.
3
ELIGIBILITY FOR INVESTMENT
In the opinion of Fraser Milner Casgrain LLP on behalf of the Company and
Cassels Brock & Blackwell LLP on behalf of the Underwriter, the Shares offered
hereby will be, on the date of issue, qualified investments under the INCOME
TAX ACT (Canada) (the "Act") for trusts governed by registered retirement
savings plans, registered retirement income funds, deferred profit sharing plans
(collectively, "Plans") and registered education savings plans ("RESPs"), and
based in part on a certificate of an officer of the Company as to certain
factual matters, will not constitute foreign property for Plans, registered
pension funds or any other person subject to Part XI of the Act. RESPs are not
subject to the foreign property rules.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analysis and other information contained in this
Prospectus and the documents incorporated herein relative to the Company's
assets and trends in revenue and anticipated expense levels, as well as other
statements about anticipated future events or results, constitute
forward-looking statements. Forward-looking statements often, but not always,
are identified by the use of the words such as "seek", "anticipate", "believe",
"plan", "estimate", "expect" and "intend" and statements that an event or result
"may", "will", "should", "could" or "might" occur or be achieved and other
similar expressions. Forward-looking statements are subject to business and
economic risks and uncertainties and other factors that could cause actual
results of operations to differ materially from those contained in the
forward-looking statements. Forward-looking statements are based on estimates
and opinions of management at the date the statements are made. Some of these
risks, uncertainties and other factors are described in this Prospectus under
the heading "Risk Factors". The Company does not undertake any obligation to
update forward-looking statements even if circumstances or management's
estimates or opinions should change. Investors should not place undue reliance
on forward-looking statements.
4
THE COMPANY
The Company was incorporated under the laws of the Province of Ontario on
November 15, 1961, as an investment holding company. On April 5, 1990, the
Company was continued under the laws of the Province of Alberta.
Central Fund's head office and principal place of business is located at
Hallmark Estates, Suite 805, 1323-15th Avenue S.W., Calgary, Alberta, T3C 0X8.
Investor inquiries may be directed to The Central Group Alberta Ltd.'s Investor
Inquiries Office, P.O. Box 7319, Ancaster, Ontario, L9G 3N6.
BUSINESS OF THE COMPANY
Following incorporation, Central Fund operated as an investment holding
company investing mainly in shares and other securities of Canadian issuers,
primarily with a view to capital appreciation. In September 1983, Central Fund
changed its character to a specialized investment holding company investing
almost entirely in pure gold and silver bullion, primarily in international bar
form, and continues to operate on this basis.
The objective of Central Fund is to provide a convenient low-cost investment
alternative for investors interested in holding marketable gold and silver
related investments. The policy of Central Fund is to invest primarily in
long-term holdings of unencumbered, segregated and insured gold and silver
bullion and not to actively speculate with regard to short-term changes in gold
and silver prices, thereby providing retail and institutional investors with an
ability to effectively hold gold and silver bullion without the associated high
transactional and handling costs and inconvenience. The investment policies
established by the board of directors of the Company require the Company to hold
at least 90% of its net assets in gold and silver bullion, which the Company
believes to be conservative. As at October 20, 2004, Central Fund's net assets
as denominated in U.S. dollars consisted of 52.8% gold bullion, 45.1% silver
bullion and 2.1% cash, marketable securities and other working capital amounts.
Pursuant to an administration agreement dated November 1, 1986, as assigned
to it on April 10, 1990 (the "Administration Agreement"), The Central Group
Alberta Ltd. (the "Administrator") is responsible for the administration of the
business and affairs of Central Fund. The services provided include general
market and economic advice with respect to the investment of the assets of the
Company in accordance with its investment policies and restrictions, subject to
the ultimate approval of the board of directors of Central Fund.
SHARE CAPITAL OF THE COMPANY
The authorized capital of the Company consists of 100,000,000 Class A
non-voting shares without nominal or par value and 50,000 common shares without
nominal or par value. As at October 20, 2004, there were 79,296,320 Class A
non-voting shares and 40,000 common shares outstanding. The rights, privileges,
restrictions and conditions attaching to the Class A non-voting shares and the
common shares are summarized below.
CLASS A NON-VOTING SHARES
NOTICE OF MEETINGS. Holders of Class A non-voting shares are entitled to
notice of and to attend all meetings of shareholders. HOLDERS OF CLASS A
NON-VOTING SHARES ARE NOT ENTITLED TO VOTE AT ANY MEETINGS OF SHAREHOLDERS OF
CENTRAL FUND EXCEPT AS PROVIDED FOR BY LAW AND WITH RESPECT TO THOSE MATTERS SET
OUT IN THE ARTICLES OF THE COMPANY, THE MAJORITY OF WHICH ARE DESCRIBED BELOW.
CERTAIN VOTING RIGHTS. So long as any Class A non-voting shares are
outstanding, Central Fund shall not, without the prior approval of the holders
thereof given by the affirmative vote of at least 66 2/3% of the votes cast at a
meeting of the holders of the Class A non-voting shares duly called for that
purpose:
(i) approve any change in the minimum amount of Central Fund's assets which
must be invested in gold and silver related investments as required by
its articles of incorporation. This minimum amount is currently set at
75% of the market value of the non-cash net assets of the Company;
(ii) approve any change in the restrictions on the investments which
Central Fund is permitted to make;
(iii) issue more than an additional 10,000 common shares;
5
(iv) create any class of shares ranking in preference or priority to the
Class A non-voting shares;
(v) create any class of shares ranking as to dividends in preference to or
on a parity with the common shares;
(vi) consolidate or subdivide the common shares, except where the Class A
non-voting shares are consolidated or subdivided on the same basis;
(vii) reclassify any shares into Class A non-voting shares or common shares;
or
(viii) provide to the holders of any other class of shares the right to
convert into Class A non-voting shares or common shares.
In addition, so long as any of the Class A non-voting shares are
outstanding, Central Fund shall not, without the prior approval of the holders
thereof given by the affirmative vote of a majority of the votes cast at a
meeting of the holders of the Class A non-voting shares duly called for that
purpose, appoint any person, firm or corporation to replace the Administrator
(or any duly authorized replacement of the Administrator) or to perform
generally the duties and responsibilities of the Administrator under the
Administration Agreement.
DIVIDENDS. The Class A non-voting shares are entitled to receive a
preferential non-cumulative dividend of U.S.$0.01 per share per annum and
thereafter to participate pro rata in any further dividends with the common
shares on a share-for-share basis.
PURCHASE FOR CANCELLATION OF CLASS A NON-VOTING SHARES. Central Fund may,
at any time or times, subject to applicable regulatory requirements, purchase
for cancellation in the open market or by invitation for tenders to all holders
all or any part of the Class A non-voting shares then outstanding at the market
price or lowest tender price per Class A non-voting share, as the case may be.
RIGHTS ON LIQUIDATION. In the event of liquidation, dissolution or
winding-up of Central Fund, the holders of Class A non-voting shares are
entitled to receive U.S.$3.00 per share together with any declared and unpaid
dividends thereon, calculated to the date of payment before any amount is paid
or any assets of Central Fund are distributed to the holders of common shares or
any shares ranking junior to the Class A non-voting shares. The holders of
Class A non-voting shares are entitled to participate pro rata in any further
distributions of the assets of Central Fund with the holders of the then
outstanding common shares on a share-for-share basis.
REDEMPTION. Any holder of Class A non-voting shares is entitled, upon
90 days' notice, to require Central Fund to redeem on the last day of any of
Central Fund's fiscal quarters, all or any of the Class A non-voting shares
which that person then owns. The retraction price per Class A non-voting share
shall be 80% of the net asset value per Class A non-voting share as of the date
on which such Class A non-voting shares are redeemed. The articles of
Central Fund provide for the suspension of redemptions during specified unusual
circumstances such as suspensions of normal trading on certain stock exchanges
or the London bullion market or to comply with applicable laws and regulations.
COMMON SHARES
The common shares entitle the holders to one vote per share at all annual
and general meetings of the shareholders. The rights of common shares in respect
of dividends and upon liquidation rank secondary to those of the Class A
non-voting shares as described above.
Certain of the holders of a majority of the common shares have previously
agreed that none of them may transfer their common shares unless: (1) as a
condition of the completion of such transfer, the transferee agrees to be bound
by similar terms; or (2) there has been obtained the prior approval of the board
of directors of Central Fund (excluding any directors who are holders or
nominees of holders of more than 200 common shares). The same holders of common
shares as a group may not transfer their common shares without the prior
approval of the board of directors as described above.
6
PLAN OF DISTRIBUTION
Under an agreement (the "Underwriting Agreement"), dated October 22, 2004,
between the Company and the Underwriter, the Company has agreed to issue and
sell, and the Underwriter has agreed to purchase, on November 3, 2004 or on such
other date as may be agreed, but in any event not later than November 30, 2004,
subject to compliance with all necessary legal requirements and to the terms and
conditions contained in the Underwriting Agreement, 15,000,000 Shares at a price
of U.S.$5.66 per Share for an aggregate price of U.S.$84,900,000, payable in
cash to the Company against delivery of a certificate or certificates
representing such Shares. The Underwriter and its registered broker-dealer
affiliate in the United States will act as book-running managers in connection
with the Offering. The Underwriting Agreement provides that the Company will pay
to the Underwriter a fee of U.S.$3,396,000 in consideration of services rendered
by the Underwriter in connection with the Offering. For Shares sold in the
United States, the price per Share is payable in U.S. dollars. For Shares sold
in Canada, the price per Share and amounts related to the Offering are payable
in Canadian dollars at the Canadian dollar equivalent to such amounts based on a
prevailing U.S.-Canadian dollar exchange rate as of the date of the pricing of
the Offering.
The offering price of the Shares was determined by negotiation between the
Company and the Underwriter, and in the context of the market.
The Company granted to the Underwriter an option (the "Option"), which
Option was exercised in full on October 22, 2004, to purchase 2,000,000 Class A
non-voting shares (the "Optioned Shares", which, together with the Shares, are
collectively referred to in this short form prospectus as the "Shares"). The
Option was exercised in full and, therefore, this short form prospectus
qualifies the grant of the Option and the distribution of the Optioned Shares.
The Company has agreed that, for a period of 90 days following the closing
of this Offering, it will not sell, offer to sell, announce any intention to
sell or enter into any agreement to sell any equity securities of the Company or
any other securities convertible into equity securities of the Company (except
in connection with currently outstanding employee and director compensation
securities or similar liabilities and outstanding instruments or contractual
commitments), without the prior written consent of the Underwriter, acting
reasonably.
The Underwriter is not registered as a broker-dealer under section 15 of the
United States SECURITIES EXCHANGE ACT OF 1934, as amended (the "Exchange Act"),
and has agreed that, in connection with the Offering and subject to certain
exceptions, it will not offer or sell any Shares in, or to persons who are
nationals or residents of, the United States other than through its United
States registered broker-dealer affiliate.
The Offering is being made concurrently in all the provinces and territories
of Canada (other than the Province of Quebec) and in the United States pursuant
to the multijurisdictional disclosure system implemented by securities
regulatory authorities in Canada and the United States. Subject to applicable
law, the Underwriter may offer the Shares outside Canada and the United States.
The obligations of the Underwriter under the Underwriting Agreement may be
terminated upon the occurrence of certain stated events, including any major
financial occurrence of national or international consequence which seriously
adversely affects the financial markets. The Underwriter is however obligated to
take up and pay for all of the securities if any of the securities are purchased
under the Underwriting Agreement.
Pursuant to policy statements of the Ontario Securities Commission, the
Underwriter may not, throughout the period of distribution under this
prospectus, bid for or purchase Shares. This restriction is subject to certain
exceptions, as long as the bid or purchase is not engaged in for the purpose of
creating actual or apparent active trading in or raising the price of such
securities. These exceptions include a bid or purchase permitted under the
by-laws and rules of the TSX relating to market stabilization and passive market
making activities and a bid or purchase made for and on behalf of a customer
where the order was not solicited during the period of distribution. In
connection with this distribution, the Underwriter may effect transactions which
stabilize or maintain the market price of the Shares at levels other than those
which otherwise might prevail on the open market. Such transactions, if
commenced, may be discontinued at any time.
7
The Underwriter, acting pursuant to Regulation M promulgated by the SEC, may
engage in transactions, including stabilizing bids or syndicate covering
transactions, that may have the effect of stabilizing or maintaining the market
price of the Shares at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of Shares on
behalf of the Underwriter for the purpose of fixing or maintaining the price of
Class A non-voting shares. A "syndicate covering transaction" is a bid for the
purchase of Shares on behalf of the Underwriter to reduce a short position
incurred by the Underwriter in connection with the Offering. The Underwriter has
advised Central Fund that stabilizing bids and open market purchases may be
effected on the Amex, in the over-the-counter market or otherwise and, if
commenced, may be discontinued at any time.
The Company has agreed to indemnify the Underwriter against certain
liabilities under the United States SECURITIES ACT OF 1933, as amended, and
applicable Canadian securities legislation or to contribute to payments that the
Underwriter may be required to make in respect of those liabilities.
The issuer has applied to list the securities distributed under this short
form prospectus on each of the TSX and the Amex. The TSX has conditionally
approved the listing of these securities. Listing on the TSX is subject to the
Company fulfilling all of the requirements of the TSX on or before January 21,
2005. Listing on the AMEX will be subject to the issuer fulfilling all the
listing requirements of the Amex.
USE OF PROCEEDS
The estimated net proceeds from this Offering, after deducting fees payable
to the Underwriter and the estimated expenses of the Offering, will be
approximately U.S.$80,904,000. The Company will use substantially all of such
net proceeds of this Offering to purchase gold and silver bullion in a ratio of
approximately 50 ounces of silver for every one fine ounce of gold, in keeping
with the investment policies established by the board of directors of the
Company. The balance of the net proceeds will be used by the Company for general
corporate purposes.
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Fraser Milner Casgrain LLP, counsel to the Company, and
Cassels Brock & Blackwell LLP, counsel to the Underwriter, the following is a
summary as at the date hereof of the principal Canadian federal income tax
considerations generally applicable to a person who will acquire Class A
non-voting shares, and who at all relevant times, within the meaning of the Act,
deals at arm's length with, and is not affiliated with the Company and holds the
Class A non-voting shares as capital property. The Class A non-voting shares
will generally be considered to be capital property to a holder unless the
holder either holds such Class A non-voting shares in the course of carrying on
a business or has acquired such Class A non-voting shares in a transaction or
transactions considered to be an adventure in the nature of trade. In
particular, this summary is not applicable to holders (i) who are
"principal-business corporations" within the meaning of subsection 66(15) of the
Act, (ii) who are "financial institutions" as defined in the Act for purposes of
the mark-to-market provisions of the Act, (iii) who are "specified financial
institutions" for purposes of the Act, or (iv) who have an interest in which is
a "tax shelter investment" within the meaning of section 143.2 of the Act.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, NOR
SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER.
ACCORDINGLY, PROSPECTIVE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS WITH
RESPECT TO THEIR PARTICULAR CIRCUMSTANCES.
This summary is based upon the facts set out in this short form prospectus,
and an officer's certificate provided to counsel by the Company, the provisions
of the Act in force on the date hereof, the regulations enacted pursuant
thereto, all specific proposals to amend the Act and the regulations publicly
announced by or on behalf of the Minister of Finance (Canada) prior to the date
hereof and counsel's understanding of the current published administrative
practices of the Canada Revenue Agency. This summary does not otherwise take
into account or anticipate any changes in law, whether by legislative,
governmental or judicial decision or action or changes in the administrative
practices of the Canada Revenue Agency, nor does it take into account or
consider any provincial, territorial or foreign income tax legislation or
considerations.
8
For the purposes of the Act, all amounts relating to the acquisition,
holding or disposition of Class A non-voting shares, including dividends,
adjusted cost base and proceeds of disposition, must be converted into Canadian
dollars based on the prevailing United States dollar exchange rate at the time
such amounts arise. In computing a holder's liability for tax under the Act, any
cash amounts received by a holder in United States dollars must be converted
into the Canadian dollar equivalent at the time such amounts are received, and
the amount of any non-cash consideration received by a holder must be expressed
in Canadian dollars at the time such consideration is received.
TAX STATUS OF THE COMPANY
Based upon a certificate of an officer of the Company provided to counsel,
the Company is a "mutual fund corporation" as defined in the Act. The Company
has advised counsel that it intends to continue to qualify as a mutual fund
corporation throughout each taxation year in which Class A non-voting shares
remain outstanding.
SHAREHOLDERS RESIDENT IN CANADA
The following portion of this summary is applicable to a holder of Class A
non-voting shares who, for the purposes of the Act and any applicable income tax
treaty or convention, is resident or deemed to be resident in Canada at all
relevant times. Certain of such persons to whom a Class A non-voting share might
not constitute capital property may elect, in certain circumstances, to have
such property treated as capital property by making the irrevocable election
permitted by subsection 39(4) of the Act.
ACQUISITION OF CLASS A NON-VOTING SHARES
The cost of Class A non-voting shares to a holder must be averaged with the
adjusted cost base of all Class A non-voting shares held by that holder for the
purposes of calculating taxable capital gains or allowable capital losses on
subsequent dispositions of Class A non-voting shares.
DIVIDENDS
Dividends (including deemed dividends) received on the Class A non-voting
shares will be included in computing the recipient's income for tax purposes.
Such dividends received by an individual will be subject to the gross-up and
dividend tax credit rules normally applicable to taxable dividends received from
taxable Canadian corporations.
A holder that is a corporation will include such dividends in computing its
income and generally will be entitled to deduct the amount of such dividends
when calculating its taxable income under the Act. A shareholder that is a
"private corporation", as defined in the Act, or a "subject corporation", as
defined in the Act, may be liable under Part IV of the Act to pay a refundable
tax of 33 1/3% on dividends received or deemed to be received on the Class A
non-voting shares to the extent that such dividends are deductible in computing
the holder's taxable income.
Provided appropriate elections are made by the Company, "capital gains
dividends" on Class A non-voting shares received by a holder will be taxable as
a capital gain of the holder and not as a dividend.
The Company has historically paid only nominal dividends on Class A
non-voting shares.
DISPOSITION OF CLASS A NON-VOTING SHARES
A holder who disposes of or is deemed to dispose of Class A non-voting
shares (either on redemption by the Company or otherwise) will generally realize
a capital gain (or a capital loss) to the extent that the proceeds of
disposition exceed (or are less than) the adjusted cost base of such Class A
non-voting shares to the holder thereof plus any reasonable costs of
disposition. If the holder of Class A non-voting shares is a corporation, any
capital loss realized may be reduced by the amount of any dividends, including
deemed dividends, which have been previously received on such shares to the
extent and under the circumstances specified in the Act. Similar rules may apply
where the corporation is a member of a partnership or beneficiary of a trust
that owns Class A non-voting shares. Similar rules may also apply where a
partnership or trust is a member of a partnership or a
9
beneficiary of a trust that owns Class A non-voting shares. Shareholders to whom
these rules may be relevant should consult their own tax advisors.
Generally, one-half of any such capital gain ("taxable capital gain") will
be included in computing the holder's income as a taxable capital gain and
one-half of any such loss ("allowable capital loss") may be deducted from his or
her taxable capital gains in accordance with the rules contained in the Act.
Allowable capital losses in excess of taxable capital gains of the holder for
that year may generally be carried back three years and carried forward
indefinitely for deduction against taxable capital gains realized in those years
to the extent and under the circumstances specified in the Act.
Individuals and certain trusts are subject to an alternative minimum tax
under the Act. Such a liability may arise because of realized capital gains
(including capital gain dividends received).
A holder that is, throughout the relevant taxation year, a
"Canadian-controlled private corporation" (as defined in the Act) may be liable
to pay an additional refundable tax of 6 2/3% on its "aggregate investment
income" for the year, which is defined to include an amount in respect of
taxable capital gains.
SHAREHOLDERS NOT RESIDENT IN CANADA
The following portion of this summary is applicable to a holder of Class A
non-voting shares who, for the purposes of the Act and any applicable income tax
treaty or convention, is not resident nor deemed to be resident in Canada at all
relevant times and does not use or hold, and is not deemed to use or hold,
Class A non-voting shares in connection with carrying on a business in Canada.
Special rules, which are not discussed in this summary, may apply to a
non-resident that is an insurer carrying on business in Canada and elsewhere.
DIVIDENDS
Dividends paid or credited and deemed to be paid or credited on the Class A
non-voting shares to non-residents of Canada will be subject to a non-resident
withholding tax under the Act at the rate of 25%, subject to reduction under the
provisions of an applicable income tax treaty or convention. For example, for a
holder who is a resident of the United States, within the meaning of the
Canada-U.S. Income Tax Convention, the rate of such withholding tax is generally
reduced to 15% (5% if the beneficial owner of the dividend is a company which
owns at least 10% of the voting stock of the Company). It should be noted that
it is the position of the Canada Revenue Agency that LLCs are generally not
considered to be a resident of the United States within the meaning of the
Canada-U.S. Income Tax Convention.
Capital gains dividends will not be subject to such withholding tax. As
discussed above under "Shareholders Resident in Canada -- Dividends" the Company
has advised counsel that it intends to make the appropriate elections as
necessary.
On September 16, 2004, the Minister of Finance (Canada) released draft
amendments to the provisions of the Act that would impose a withholding tax on
the payment of capital gains dividends to a non-resident of Canada by a mutual
fund corporation that has realized capital gains on the disposition of "taxable
Canadian property". Based on a certificate of an officer of the Company that the
Company does not currently hold, nor does it intend to hold, taxable Canadian
property, counsel are of the opinion that these amendments will not apply to
dividends paid to a non-resident holder of Class A non-voting shares.
DISPOSITIONS OF CLASS A NON-VOTING SHARES
A non-resident holder of Class A non-voting shares will not be subject to
tax under the Act on any capital gain realized on a disposition of Class A
non-voting shares unless such Class A non-voting shares constitute "taxable
Canadian property" to the holder. A non-resident holder's capital gain (or
capital loss) in respect of Class A non-voting shares that constitute taxable
Canadian property will be equal to the amount by which the proceeds of
disposition exceed (or are less than) the adjusted cost base of the Class A
non-voting shares to the non-resident holder plus any reasonable costs of
disposition. In general, the non-resident holder will be required to include
one-half of any resulting capital gain (a "taxable capital gain") in income, and
will be entitled to deduct one-half of the amount of any resulting capital loss
(an "allowable capital loss") against taxable capital gains realized in the year
of disposition from the disposition of taxable Canadian property. However,
capital
10
losses arising from the disposition of "treaty protected property" may not be
taken into account in computing taxable income of a non-resident holder. "Treaty
protected property" includes property where any income or gain of a holder from
the disposition of such property in the year could, under an applicable income
tax treaty or convention, be exempt from Canadian tax.
A Class A non-voting share will constitute taxable Canadian property to a
non-resident holder if, at any time during the five-year period immediately
preceding the disposition, the non-resident, either alone or together with
persons with whom the non-resident did not deal at arm's length, owned 25% or
more of the shares of any class or series of the Company. The Class A non-voting
shares may also be taxable Canadian property in certain other circumstances,
including where the holder elected to have them treated as taxable Canadian
property upon ceasing to be a resident of Canada. Even if the Class A non-voting
shares are taxable Canadian property to a non-resident, any capital gain
realized upon the disposition may be exempt from tax under the Act pursuant to
the provisions of an applicable income tax treaty or convention to which Canada
is a party.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Dorsey & Whitney LLP, counsel to the Company, the
following is a summary of certain United States federal income tax
considerations relevant to United States persons (as defined below) that acquire
Class A non-voting shares pursuant to this Offering. This summary is based upon
the Internal Revenue Code of 1986 (the "Code"), as amended, Treasury regulations
promulgated thereunder, judicial decisions, and the Internal Revenue Service's
current administrative rules, practices and interpretations of law, all as in
effect on the date of this Prospectus, and all of which are subject to change,
possibly with retroactive effect. This summary also takes into account proposed
Treasury regulations regarding passive foreign investment companies, which are
not currently in effect but would purport to apply on a retroactive basis (the
"Proposed Regulations"). There can be no assurance as to whether, when or in
what form the Proposed Regulations will be adopted as final Treasury
regulations. For purposes of this summary, a "United States Person" means (i) a
citizen or resident of the United States, (ii) a corporation or partnership
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source, or
(iv) a trust if: (a) a court within the United States is able to exercise
primary supervision over the administration of such trust, and (b) one or more
United States Persons have the authority to control all substantial decisions of
such trust.
This summary is only a general discussion and is not intended to be, and
should not be construed to be, legal or tax advice to any prospective investor.
In addition, this summary does not discuss all aspects of United States federal
income taxation that may be relevant to a United States Person in light of such
person's particular circumstances, including certain United States Persons that
may be subject to special treatment under the Code (for example, persons
(i) that are tax-exempt organizations, qualified retirement plans, individual
retirement accounts and other tax-deferred accounts; (ii) that are financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, or brokers, dealers or traders in securities; (iii) that
are subject to the alternative minimum tax provisions of the Code; or (iv) that
own Class A non-voting shares as part of a straddle, hedging, conversion
transaction, constructive sale or other arrangement involving more than one
position), United States Persons that also own common shares and United States
Persons that hold Class A non-voting shares other than as capital assets.
Moreover, this summary does not include any discussion of state, local or
foreign income or other tax consequences.
THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF THE CLASS A NON-VOTING
SHARES IS VERY COMPLEX, UNCERTAIN AND, IN SOME CASES, POTENTIALLY UNFAVORABLE TO
UNITED STATES PERSONS. ACCORDINGLY, EACH UNITED STATES PERSON WHO ACQUIRES CLASS
A NON-VOTING SHARES UNDER THIS PROSPECTUS IS STRONGLY URGED TO CONSULT HIS, HER
OR ITS OWN TAX ADVISOR WITH RESPECT TO THE UNITED STATES FEDERAL, STATE, LOCAL
AND FOREIGN INCOME, ESTATE AND OTHER TAX CONSEQUENCES OF THE ACQUISITION OF
CLASS A NON-VOTING SHARES, WITH SPECIFIC REFERENCE TO SUCH PERSON'S PARTICULAR
FACTS AND CIRCUMSTANCES.
11
SALE OR DISPOSITION OF CLASS A NON-VOTING SHARES
Because the Company is a "passive foreign investment company", special
complex rules apply to sales or other dispositions of Class A non-voting shares.
See "Passive Foreign Investment Company Treatment", below. Each United States
Person is strongly urged to consult his or her own tax advisor with respect to
such rules.
PASSIVE FOREIGN INVESTMENT COMPANY TREATMENT
The Company has been, and expects to continue to be, a "passive foreign
investment company" for United States federal income tax purposes. The tax rules
generally applicable to passive foreign investment companies are very complex
and, in many cases, uncertain.
If a United States Person holding Class A non-voting shares is treated under
these rules as owning stock of a passive foreign investment company, any gain
recognized by such person upon a sale or other disposition of Class A non-voting
shares may be ordinary (rather than capital), and any resulting United States
federal income tax may be increased by an interest charge, as discussed further
below. In addition, as discussed below, a "qualified electing fund" ("QEF")
election may not be available with respect to the Class A non-voting shares if
the Company fails to provide certain information, and accordingly, any gain
recognized upon a sale or other disposition of Class A non-voting shares may be
ordinary (rather than capital) and may be subject to the interest charge rules,
notwithstanding that such person had a QEF election in effect with respect to
the Company for his or her entire holding period.
The tax consequences to a United States Person who owns, directly or, in
certain cases, indirectly, Class A non-voting shares depend on whether or not a
QEF election or a mark-to-market election ("mark-to-market election") is made by
such person with respect to the Company.
QEF ELECTION
A United States Person that owns Class A non-voting shares may elect,
provided that the Company provides such person with certain information, to have
the Company treated, with respect to that person, as a QEF. A QEF election must
be made by a shareholder before the due date (with regard to extensions) for
such person's tax return for the taxable year for which the election is made
and, once made, will be effective for all subsequent taxable years of such
person unless revoked with the consent of the Internal Revenue Service. (A
United States Person who makes a QEF election with respect to the Company is
referred to herein as an "Electing Shareholder".) THE COMPANY NOW MAKES, AND
INTENDS TO CONTINUE TO MAKE, AVAILABLE TO HOLDERS OF CLASS A NON-VOTING SHARES
THE ANNUAL STATEMENT CURRENTLY REQUIRED BY THE INTERNAL REVENUE SERVICE, WHICH
WILL INCLUDE INFORMATION AS TO THE ALLOCATION OF THE COMPANY'S ORDINARY EARNINGS
AND NET CAPITAL GAIN AMONG THE CLASS A NON-VOTING SHARES AND AS TO DISTRIBUTIONS
ON SUCH CLASS A NON-VOTING SHARES. SUCH STATEMENT MAY BE USED BY ELECTING
SHAREHOLDERS FOR PURPOSES OF COMPLYING WITH THE REPORTING REQUIREMENTS
APPLICABLE TO THE QEF ELECTION.
So long as an Electing Shareholder's QEF election is in effect with respect
to the entire holding period for his Class A non-voting shares, any gain or loss
realized by such shareholder on the disposition of such Class A non-voting
shares held as capital assets ordinarily would be a capital gain or loss. Such
capital gain or loss ordinarily would be long-term if such Electing Shareholder
had held the Class A non-voting shares for more than 12 months at the time of
the disposition. For non-corporate United States persons, long-term capital gain
is generally subject to a maximum federal income tax rate of 15%. Gain from the
disposition of collectibles such as gold or silver, however, is subject to a
maximum rate of 28%. The Internal Revenue Service has authority to issue
Treasury regulations applying the 28% rate to a gain from the sale of an
interest in a passive foreign investment company with respect to which a QEF
election is in effect to the extent that such gain is attributable to unrealized
appreciation of collectibles held by such passive foreign investment company. As
no such Treasury regulations have as yet been issued, the 15% maximum rate
currently should apply to long-term capital gains from the disposition of
Class A non-voting shares by an Electing Shareholder. There can be no assurance,
however, as to whether, when or with what effective date any such Treasury
regulations may be issued, or
12
whether any such Treasury regulations would subject long-term capital gains
realized by an Electing Shareholder from the disposition of Class A non-voting
shares to the 28% maximum rate.
Under Section 1291(d)(2)(A) of the Code, a United States Person holding
shares with respect to which a QEF election is not in effect for the entire
holding period may avoid the adverse ordinary income and interest charge
consequences described above upon any subsequent disposition of such shares if
such person elects to recognize any gain in such shares as of the first day in
the first year that the QEF election applies to such shares (a "deemed sale"
election). Any gain so recognized, however, would be subject to the ordinary
income and interest charge consequences. Although a deemed sale election
ordinarily must be made for the year in which a QEF election is made, such
election should be available with respect to Class A non-voting shares even if
the Electing Shareholder had a QEF election in effect with respect to the
Company for a prior year, and should apply only to such Class A non-voting
shares (and not to other Class A non-voting shares held by such shareholder).
There is no authority regarding the availability or effect of a deemed sale
election in these circumstances, however, and each Electing Shareholder is
strongly urged to consult his or her own tax advisor.
An Electing Shareholder will be required to include currently in gross
income his, her or its pro rata share of the Company's annual ordinary earnings
and annual net capital gains. Such inclusion will be required whether or not
such shareholder owns Class A non-voting shares for an entire year or at the end
of the Company's taxable year. The amount so includable will be determined
without regard to the amount of cash distributions, if any, received from the
Company. Electing Shareholders will be required to pay tax currently on such
imputed income, unless, as described below, an election is made to defer such
payment. Under these rules, in the event that the Company disposes of all or a
portion of its gold or silver holdings, including dispositions in the course of
varying its mix between gold and silver, Electing Shareholders could realize
substantial imputed income, even in the absence of any cash distributions.
Historically, the Company has declared and paid a cash dividend of U.S.$0.01 per
share (prior to 1996, Cdn.$0.01 per share) on its outstanding Class A non-voting
shares.
The amount currently included in income will be treated as ordinary income
to the extent of the Electing Shareholder's allocable share of the Company's
ordinary earnings and generally will be treated as long-term capital gain to the
extent of such shareholder's allocable share of the Company's net capital gains.
Such net capital gains ordinarily would be subject to a maximum 15% United
States federal income tax rate in the case of non-corporate United States
persons, unless the Company elects to treat the entire amount of its net capital
gain as ordinary income.
If an Electing Shareholder demonstrates to the satisfaction of the Internal
Revenue Service that amounts actually distributed to him have been previously
included in income as described above by such shareholder or a previous United
States shareholder, such distributions generally will not be taxable. An
Electing Shareholder's tax basis in his or her Class A non-voting shares will be
increased by any amounts currently included in income under the QEF rules and
will be decreased by any subsequent distributions from the Company that are
treated as non-taxable distributions pursuant to the preceding sentence. For
purposes of determining the amounts includable in income by Electing
Shareholders, the tax bases of the Company's assets, and the ordinary earnings
and net capital gains of the Company, will be computed on the basis of United
States federal income tax principles. Accordingly, it is anticipated that such
tax bases, and such ordinary earnings and net capital gains may differ from the
figures set forth in the Company's financial statements (including those
incorporated by reference herein).
In the event that an Electing Shareholder would be required to include in
gross income for United States federal income tax purposes his or her pro rata
share of the Company's ordinary earnings and net capital gains for any taxable
year of the Company under the passive foreign investment company provisions,
then it is the intention of the Company to distribute to holders of record of
Class A non-voting shares and common shares as of the last day of such taxable
year (currently October 31) an aggregate amount of dividends (including the
stated dividends on the Class A non-voting shares) such that the amount of
dividends payable to a United States Person who holds Class A non-voting shares
for the entire taxable year of the Company will be at least equal to the product
of (a) the Company's ordinary earnings and net capital gains (as computed for
United States federal income tax purposes) for such taxable year allocable to
such person and (b) the highest marginal rate of United States federal income
tax on ordinary income or long-term capital gain, as appropriate, applicable to
individuals. Any such dividends (other than certain capital gains dividends) to
non-residents of Canada will be subject to
13
Canadian withholding tax. See "Canadian Federal Income Tax
Considerations -- Shareholders Not Resident in Canada". Because such dividends
may be subject to Canadian withholding tax and because the amount of such
dividends will be determined without reference to possible state or local income
tax liabilities or to the rate of United States federal income tax applicable to
corporate shareholders, such dividends may not provide Electing Shareholders
with sufficient cash to pay their tax liabilities arising from imputed income in
respect of the Company's ordinary earnings and net capital gains under the QEF
rules.
An Electing Shareholder may elect to defer, until the occurrence of certain
events, payment of the United States federal income tax attributable to amounts
includable in income for which no current distributions are received, but will
be required to pay interest on the deferred tax computed by using the statutory
rate of interest applicable to an extension of time for payment of tax.
Under temporary Treasury regulations, an individual is required to include
in income his or her proportionate share of the investment expenses of certain
"pass-through" entities. It is not clear under such Treasury regulations whether
a passive foreign investment company for which a QEF election is in effect may
be treated as a "pass-through" entity. If these provisions were to apply to the
Company, each individual Electing Shareholder would be required to include in
income an amount equal to a portion of the Company's investment expenses and
would be permitted an offsetting deduction (if otherwise allowable under the
Code) to the extent that the amount of such expenses included in income, plus
certain other miscellaneous itemized deductions of such shareholder, exceed 2%
of such shareholder's adjusted gross income.
MARK-TO-MARKET ELECTION
A United States Person generally may make a mark-to-market election with
respect to shares of "marketable stock" of a passive foreign investment company.
Under the Code and Treasury regulations, the term "marketable stock" includes
stock of a passive foreign investment company that is "regularly traded" on a
"qualified exchange or other market". Generally, a "qualified exchange or other
market" means (i) a national securities exchange which is registered with the
Securities and Exchange Commission or the national market system established
pursuant to Section 11A of the Securities Exchange Act of 1934 or (ii) a foreign
securities exchange that is regulated or supervised by a governmental authority
of the country in which the market is located and has the following
characteristics: (a) the exchange has trading volume, listing, financial
disclosure, and other requirements designed to prevent fraudulent and
manipulative acts and practices, to remove impediments to and perfect the
mechanism of a free and open market, and to protect investors, and the laws of
the country in which the exchange is located and the rules of the exchange
ensure that such requirements are actually enforced; and (b) the rules of the
exchange ensure active trading of listed stocks. A class of stock is "regularly
traded" on a qualified exchange or other market for any calendar year during
which such class of stock is traded (other than in de minimis quantities) on at
least 15 days during each calendar quarter. Based upon the foregoing, the
Company expects that the Class A non-voting shares will be "marketable stock"
for such purposes.
As a result of such an election, a United States Person would generally be
required to report gain or loss annually to the extent of the difference between
the fair market value of the shares at the end of the taxable year and the
adjusted tax basis of the shares at that time. Any gain under this computation,
and any gain on an actual disposition of the passive foreign investment company
shares, would be treated as ordinary income. Any loss under this computation and
any loss on an actual disposition would be treated as an ordinary loss to the
extent of the cumulative net mark-to-market gain and thereafter would be
considered capital loss. The United States Person's tax basis in the shares is
adjusted for any gain or loss taken into account under the mark-to-market
election.
Unless either (i) the mark-to-market election is made as of the beginning of
the United States Person's holding period for the passive foreign investment
company shares or (ii) a QEF election has been in effect for such person's
entire holding period, any mark-to-market gain for the election year generally
will be subject to the rules applicable to dispositions by non-Electing
Shareholders described below.
14
NON-ELECTING SHAREHOLDERS
If a QEF election is not made by a United States Person, or is not in effect
with respect to the entire period that such person holds (or is treating as
holding) his or her Class A non-voting shares, then, unless such person has made
the mark-to-market election as described above, any gain on his or her sale or
other disposition of Class A non-voting shares (directly or, in certain
circumstances, indirectly) generally will be treated as ordinary income realized
pro rata over such holding period for such Shares.
A United States Person will be required to include as ordinary income in the
year of disposition the portion of the gain attributed to such year. In
addition, such person's United States federal income tax for the year of
disposition will be increased by the sum of (i) the tax computed by using the
highest statutory rate applicable to such person for each year (without regard
to other income or expenses of such person) on the portion of the gain
attributed to years prior to the year of disposition plus (ii) interest on the
tax determined under clause (i), at the rate applicable to underpayments of tax,
from the due date of the return (without regard to extensions) for each year
described in clause (i) to the due date of the return (without regard to
extensions) for the year of disposition. Under the Proposed Regulations, a
"disposition" may include, under certain circumstances, transfers at death,
gifts, pledges and other transactions with respect to which gain ordinarily is
not recognized. Under certain circumstances, the adjustment generally made to
the tax basis of property held by a decedent may not apply to the tax basis of
Class A non-voting shares if a QEF election was not in effect for the deceased
United States Person's entire holding period. Rules similar to those applicable
to dispositions generally apply to excess distributions in respect of a Class A
non-voting share (i.e., distributions that exceed 125% of the average amount of
distributions in respect of such Class A non-voting share received during the
preceding three years or, if shorter, during the United States Person's holding
period prior to the distribution year). Any loss realized by a non-Electing
Shareholder on the disposition of Class A non-voting shares held as a capital
asset ordinarily will be capital loss.
TREATMENT OF CERTAIN DISTRIBUTIONS
To the extent that a distribution paid on a Class A non-voting share to a
United States Person is not an "excess distribution" received by a non-Electing
Shareholder, and is not treated as a non-taxable distribution paid from earnings
previously included in income by an Electing Shareholder under the QEF rules,
such distribution (including amounts withheld in respect of Canadian federal
income tax) will be taxable as ordinary income to the extent of the Company's
current or accumulated earnings and profits (as computed for United States
federal income tax purposes) and, to the extent the distribution exceeds such
earnings and profits, generally will be treated as a non-taxable return of
capital to the extent of the tax basis of the Class A non-voting share and then
as gain from the sale or exchange of the Class A non-voting share. Dividends on
the Class A non-voting shares will not be eligible for the maximum 15% United
States federal income tax rate generally applicable to dividends paid by a
"qualified foreign corporation" to non-corporate United States persons if the
Company qualifies as a passive foreign investment company for its taxable year
during which it pays a dividend on the Class A non-voting shares, or for its
immediately preceding taxable year. In addition, dividends on the Class A
non-voting shares generally will not be eligible for the deduction for dividends
received by corporations.
CANADIAN WITHHOLDING TAXES
Subject to complex limitations set forth in the Code and the United
States-Canada Income Tax Convention, shareholders who are United States Persons
may be entitled to claim a credit against their United States federal income tax
liability for Canadian federal income tax withheld from dividends on the
Class A non-voting shares. Among other things, any dividends or inclusions under
the passive foreign investment company rules for a year in which more than 50%
of the total voting power or value of the Company's shares is owned by United
States Persons may be treated in part as United States source income under
Section 904(g) of the Code. Taxpayers who do not elect to claim foreign tax
credits for a taxable year may be able to deduct any such Canadian federal
income tax withheld.
15
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States information reporting requirements and backup withholding tax
generally will apply to certain non-corporate holders of Class A non-voting
shares. Information reporting generally will apply to payments of dividends on,
and to proceeds from the sale or redemption of, Class A non-voting shares by a
paying agent within the United States to a holder of Class A non-voting shares
(other than an "exempt recipient," which includes non-U.S. shareholders that
provide an appropriate certification and certain other persons). A paying agent
or other intermediary within the United States will be required to withhold at a
rate of 28% on any payment of proceeds from the sale or redemption of Class A
non-voting shares within the United States to a United States shareholder (other
than a corporation or an "exempt recipient") if such shareholder fails to
furnish its correct taxpayer identification number or otherwise fails to comply
with such backup withholding requirements. Any amounts withheld under the backup
withholding rules from a payment to a United States shareholder generally may be
refunded (or credited against such United States shareholder's U.S. federal
income tax liability, if any) provided the required information is furnished to
the Internal Revenue Service. United States shareholders should consult their
tax advisors as to their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption. If information reporting
requirements apply to a United States shareholder, the amount of dividends paid
with respect to such Class A non-voting shares will be reported annually to the
Internal Revenue Service and such United States shareholder.
A United States Person must report certain transfers of cash to foreign
corporations if: (i) immediately after the transfer, such person holds directly,
or indirectly or by attribution at least 10% of the total voting power or the
total value of the foreign corporation; or (ii) the amount of cash transferred
by such person or any related person to such foreign corporation during the
12-month period ending on the date of the transfer exceeds U.S.$100,000.
ERISA AND RELATED CONSIDERATIONS
The Employee Retirement Income Security Act of 1974 ("ERISA") and/or
section 4975 of the Code impose certain requirements on employee benefit plans
and certain other plans and arrangements, including individual retirement
accounts and annuities, Keogh plans, and certain collective investment funds or
insurance company general or separate accounts in which such plans or
arrangements are invested, that are subject to ERISA and/or the Code
(collectively, "Plans"), and on persons who are fiduciaries with respect to the
investment of assets treated as "plan assets" of a Plan. Government plans and
some church plans are not subject to the fiduciary responsibility provisions of
ERISA or the provisions of section 4975 of the Code, but may be subject to
substantially similar rules under state or other federal law.
In contemplating an investment of a portion of Plan assets in Shares, the
Plan fiduciary responsible for making such investment should carefully consider,
taking into account the facts and circumstances of the Plan, the risk factors
discussed below and whether such investment is consistent with its fiduciary
responsibilities, including, but not limited to: (1) whether the fiduciary has
the authority to make the investment under the appropriate governing plan
instrument; (2) whether the investment would constitute a direct or indirect
non-exempt prohibited transaction with a party in interest; (3) the Plan's
funding objectives; and (4) whether under the general fiduciary standards of
investment prudence and diversification such investment is appropriate for the
Plan, taking into account the overall investment policy of the Plan, the
composition of the Plan's investment portfolio and the Plan's need for
sufficient liquidity to pay benefits when due.
A regulation issued under ERISA (the "Plan Assets Regulation") contains
rules for determining when an investment by a Plan in an equity interest of a
pooled investment vehicle such as the Company (an "Investment Fund") will result
in the underlying assets of the Investment Fund being deemed to constitute plan
assets. Those rules provide that assets of the Investment Fund will not be
deemed to constitute plan assets of a Plan which purchases an equity interest in
the Investment Fund if certain exceptions apply, including that the equity
interest purchased is a "publicly-offered security" (the "Publicly-Offered
Security Exception").
The Publicly-Offered Security Exception applies if the equity interest is a
security that is (1) "freely transferable," (2) part of a class of securities
that is "widely held" and (3) either (a) part of a class of securities
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
or (b) sold to the Plan as part of a public offering pursuant to an effective
registration statement under the Securities Act of 1933 and the class of
16
which such security is a part is registered under the Securities Exchange Act of
1934 within 120 days (or such later time as may be allowed by the Securities and
Exchange Commission) after the end of the fiscal year of the issuer in which the
offering of such security occurred. The Plan Assets Regulation states that the
determination of whether a security is "freely transferable" is to be made based
on all relevant facts and circumstances; there are no transfer restrictions
applicable to the Shares. Under the Plan Assets Regulation, a class of
securities is "widely held" only if it is of a class of securities owned by 100
or more investors independent of the issuer and of each other. A class of
securities will not fail to be widely held solely because subsequent to the
initial offering the number of independent investors falls below 100 as a result
of events beyond the issuer's control.
It is anticipated that the Publicly-Offered Security Exception will be
satisfied with respect to the Shares. Shares are being sold only as part of a
public offering pursuant to an effective registration statement under the
Securities Act of 1933, and the Shares will be registered under the Securities
Exchange Act of 1934. Also, the Shares are freely transferable. Finally, it is
anticipated that immediately after the Offering, the Shares will be owned by
substantially in excess of 100 investors independent of the Company as well as
of each other.
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES
The Company is governed by the BUSINESS CORPORATIONS ACT (Alberta). All of
the Company's assets are located outside of the United States, and all of its
directors and officers, as well as the experts named in this Prospectus, are
residents of Canada or other jurisdictions outside of the United States. As a
result, it may be difficult for investors to effect service within the United
States upon the Company or those directors, officers and experts who are not
residents of the United States or to realize in the United States upon judgments
of courts of the United States predicated upon the civil liability provisions of
the United States federal securities laws.
In addition, there is some doubt as to the enforceability in Canada by a
court in original actions, or in actions to enforce judgments of United States
courts, of civil liabilities predicated upon United States federal securities
laws.
RISK FACTORS
The following are certain factors relating to the business of the Company
which prospective investors should consider carefully before deciding whether to
purchase Shares.
GOLD AND SILVER PRICE VOLATILITY
Central Fund's business almost entirely involves investing in pure gold and
silver bullion. Therefore, the principal factors affecting the price of the
Shares, are factors which affect the price of gold and silver, and which are
beyond the Company's control. However, the Company believes that such factors
have a lesser impact on the shares of Central Fund than on shares of gold
producers as gold producers have considerable inherent operational risks,
resulting in more volatile share prices of such producers. Central Fund's net
assets are denominated in U.S. dollars. As at October 20, 2004, the Company's
assets were made up of 52.8% gold bullion, 45.1% silver bullion and 2.1% cash,
marketable securities and other working capital amounts.
The Company does not engage in any leasing, lending or hedging activities
involving these assets, so the value of the Shares will depend on, and typically
fluctuate with, the price fluctuations of such assets.
The market prices of gold and silver bullion may be affected by a variety of
unpredictable international economic, monetary and political considerations.
Macroeconomic considerations include: expectations of future rates of
inflation; the strength of, and confidence in, the U.S. dollar, the currency in
which the price of gold is generally quoted, and other currencies; interest
rates; and global or regional political or economic events (including banking
crises).
Political factors, including international conflicts, may also affect gold
and silver prices. For example, the largest producer of gold bullion is South
Africa. In addition to changes in production costs, shifts in political and
economic conditions affecting this country may have a direct impact on its sales
of gold. South Africa depends on gold sales for a significant portion of its
foreign exchange necessary to finance its imports and its sales policy
17
is necessarily subject to national economic and political developments. In
addition, a number of eastern European and Central Asian countries have
encountered severe economic conditions. Some of these countries, through their
Central banks, have been active in sales in the gold market as a result of their
need for foreign exchange. Similarly, Australia, Canada and certain western
European countries have also been net sellers of portions of their gold bullion
reserves in recent years. While announcements have been made in respect of
bullion reserves sales by several Central banks of European and other countries,
there can be no assurance that their stated intentions in respect of net sales
will not change in the future.
PRICE VOLATILITY OF NON-GOLD AND SILVER ASSETS AND OTHER COMMODITIES
To the extent that the Company holds a nominal amount of securities of
issuers in the precious metals industry, the value of such securities can also
be affected by the same types of economic and political considerations.
In addition, Central Fund's business may also be affected to a lesser extent
by the price of other commodities which may be viewed by investors as
competitively priced or as an alternative to investing in gold and silver
related investments.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Company is a "passive foreign investment company" for United States
federal tax purposes. Under the passive foreign investment company rules, the
tax treatment of the Class A non-voting shares is very complex, uncertain and,
in some cases, potentially unfavorable to United States Persons. See "United
States Federal Income Tax Considerations". EACH UNITED STATES PERSON THAT
ACQUIRES CLASS A SHARES, WHETHER FROM THE CORPORATION OR IN THE MARKET, IS
STRONGLY URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR.
LEGAL MATTERS
Certain legal matters in connection with this Offering will be passed upon
by Fraser Milner Casgrain LLP and Dorsey & Whitney LLP on behalf of the Company
and by Cassels Brock & Blackwell LLP and Shearman & Sterling LLP on behalf of
the Underwriter. John S. Elder, Q.C., a partner of Fraser Milner Casgrain LLP,
is an officer and director of the Company.
As at October 20, 2004, the partners and associates of each of the firms
mentioned above, as a group, beneficially owned, directly or indirectly, less
than 1% of the outstanding Class A non-voting shares and common shares of the
Company.
AUDITORS, TRANSFER AGENTS AND REGISTRARS
Central Fund's auditors are Ernst & Young LLP, Chartered Accountants,
Toronto, Ontario.
The registrar and transfer agent for the Class A non-voting shares of the
Company in Canada is CIBC Mellon Trust Company at its principal offices in
Calgary, Montreal, Toronto and Vancouver. The registrar and transfer agent for
the Class A non-voting shares of the Company in the United States is Mellon
Investor Services LLC at its principal office in New York.
PURCHASERS' STATUTORY RIGHTS
Securities legislation in certain of the provinces and territories of Canada
provides purchasers with the right to withdraw from an agreement to purchase
securities. This right may be exercised within two business days after receipt
or deemed receipt of a prospectus and any amendment thereto. In several of the
provinces and territories, the securities legislation further provides a
purchaser with remedies for rescission or, in some jurisdictions, damages where
the prospectus and any amendment contains a misrepresentation or is not
delivered to the purchaser, provided that the remedies for rescission or damages
are exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchaser's province or territory. Purchasers
should refer to any applicable provisions of the securities legislation of their
provinces or territories, as the case may be, for the particulars of these
rights or consult with a legal advisor.
18
EXPERTS
The audited financial statements incorporated by reference in this
Prospectus and included in the U.S. registration statement of which this
Prospectus forms a part, have been included in reliance upon the report of
Ernst & Young LLP, Chartered Accountants, also incorporated by reference herein,
and upon the authority of such firm as experts in accounting and auditing.
DOCUMENTS FILED AS PART OF THE U.S. REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of the
U.S. registration statement of which this Prospectus forms a part: (i) the
documents referred to under "Documents Incorporated by Reference"; (ii) the
Underwriting Agreement; (iii) consent of Ernst & Young LLP; (iv) consent of
Fraser Milner Casgrain LLP; (v) consent of Cassels Brock & Blackwell LLP;
(vi) consent of Dorsey & Whitney LLP; and (vii) powers of attorney from
directors and officers of the Company.
19
CERTIFICATE OF THE COMPANY
Dated: October 28, 2004
This short form prospectus, together with the documents incorporated herein
by reference, constitutes full, true and plain disclosure of all material facts
relating to the securities offered by this prospectus as required by the
securities legislation of each of the provinces and territories of Canada, other
than the Province of Quebec.
(Signed) J.C. STEFAN SPICER (Signed) CATHERINE A. SPACKMAN
President and Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
(Signed) PHILIP M. SPICER (Signed) JOHN S. ELDER
Director Director
C-1
CERTIFICATE OF THE UNDERWRITER
Dated: October 28, 2004
To the best of our knowledge, information and belief, this short form
prospectus, together with the documents incorporated herein by reference,
constitutes full, true and plain disclosure of all material facts relating to
the securities offered by this prospectus as required by the securities
legislation of each of the provinces and territories of Canada, other than the
Province of Quebec.
CIBC WORLD MARKETS INC.
By: (Signed) DAVID A. SCOTT
C-2
PART II
INFORMATION NOT REQUIRED TO BE DELIVERED TO
OFFEREES OR PURCHASERS
INDEMNIFICATION
The laws of Alberta and the Registrant's Articles permit
indemnification of its directors and officers against certain liabilities, which
would include liabilities arising under the Securities Act of 1933, as amended.
Section 124 of the Alberta Business Corporation Act (the "ABCA")
provides as follows:
(1) Except in respect of an action by or on behalf of the corporation
or body corporate to procure a judgment in its favour, a corporation
may indemnify a director or officer of the corporation, a former
director or officer of the corporation or a person who acts or acted
at the corporation's request as a director or officer of a body
corporate of which the corporation is or was a shareholder or
creditor, and the director's or officer's heirs and legal
representatives, against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, reasonably
incurred by the director or officer in respect of any civil, criminal
or administrative action or proceeding to which the director or
officer is made a party by reason of being or having been a director
or officer of that corporation or body corporate, if
(a) the director or officer acted honestly and in good faith
with a view to the best interests of the corporation, and
(b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, the director
or officer had reasonable grounds for believing that the
director's or officer's conduct was lawful.
(2) A corporation may with the approval of the Court indemnify a
person referred to in subsection (1) in respect of an action by or on
behalf of the corporation or body corporate to procure a judgment in
its favour, to which the person is made a party by reason of being or
having been a director or an officer of the corporation or body
corporate, against all costs, charges and expenses reasonably incurred
by the person in connection with the action if the person fulfills the
conditions set out in subsections (1)(a) and (b).
(3) Notwithstanding anything in this section, a person referred to in
subsection (1) is entitled to indemnity from the corporation in
respect of all costs, charges and expenses reasonably incurred by the
person in connection with the defense of any civil, criminal or
administrative action or proceeding to which the person is made a
party by reason of being or having been a director or officer of the
corporation or body corporate, if the person seeking indemnity
(a) was substantially successful on the merits in the person's
defense of the action or proceeding,
(b) fulfills the conditions set out in subsection (1)(a) and
(b), and
(c) is fairly and reasonably entitled to indemnity.
(4) A corporation may purchase and maintain insurance for the benefit
of any person referred to in subsection (1) against any liability
incurred by the person
(a) in the person's capacity as a director or officer of the
corporation, except when the liability relates to the person's
failure to act honestly and in good faith with a view to the
best interests of the corporation, or
(b) in the person's capacity as a director or officer of
another body corporate if the person acts or acted in that
capacity at the corporation's request, except when the liability
relates to the person's failure to act honestly and in good faith
with a view to the best interests of the body corporate.
(5) A corporation or a person referred to in subsection (1) may apply
to the Court for an order approving an indemnity under this section
and the Court may so order and make any further order it thinks fit.
(6) On an application under subsection (5), the Court may order notice
to be given to any interested person and that person is entitled to
appear and be heard in person or by counsel.
For the purposes of Section 124, "Court" means the Court of Queen's
Bench of Alberta.
The Bylaws of the Registrant provide that, subject to the limitations
contained in the ABCA, the Registrant shall indemnify a director or officer, a
former director or officer, or a person who acts or acted at the Registrant's
request as a director or officer of a body corporate of which the Registrant is
or was a shareholder or creditor and his heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by him in respect of any
civil, criminal or administrative action or proceeding to which he is made a
party by reason of being or having been a director or officer of the Corporation
or such body corporate, if:
(a) he acted honestly and in good faith with a view to the
best interests of the Registrant; and
(b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he had reasonable
grounds for believing that his conduct was lawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the U.S. Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
II-2
EXHIBITS
The following exhibits have been filed as part of the Registration
Statement:
EXHIBIT DESCRIPTION
------- -----------
3.1 Form of Underwriting Agreement (filed herewith)
4.1 Annual Information Form of the Registrant dated March 1, 2004
(incorporated by reference to the Registrant's Annual Report
on Form 40-F for the fiscal year ended October 31, 2003,
filed on March 19, 2004)
4.2 Management Information Circular of the Registrant dated
January 9, 2004 in connection with the Company's annual meeting
of shareholders on February 23, 2004 (incorporated by
reference to the Registrant's Report on Form 6-K, filed on
January 22, 2004)
4.3 Audited financial statements of the Registrant as at October
31, 2003 and 2002 and for each of the years in the three year
period ended October 31, 2003 together with the auditors'
report thereon and consisting of the statements of net assets
as at October 31, 2003 and 2002 and the statements of loss,
shareholders' equity and changes in net assets for each of the
years in the three year period ended October 31, 2003
(incorporated by reference to the Registrant's Annual Report on
Form 40-F for the fiscal year ended October 31, 2003, filed on
March 19, 2004)
4.4 Management's discussion and analysis of financial condition and
results of operations for the year ended October 31, 2003
(incorporated by reference to the Registrant's Annual Report on
Form 40-F for the fiscal year ended October 31, 2003, filed on
March 19, 2004)
4.5 Unaudited interim financial statements of the Registrant as at
January 31, 2004 for the three months ended January 31, 2004
(incorporated by reference to the Registrant's Form 6-K, filed
on March 18, 2004)
4.6 Management's discussion and analysis of financial condition and
results of operations for the interim period ended January 31,
2004 (incorporated by reference to the Registrant's Form 6-K,
filed on March 18, 2004)
4.7 Press Release dated April 8, 2004 (incorporated by reference to
the Registrant's Report on Form 6-K, filed on April 13, 2004)
4.8 Unaudited interim financial statements of the Registrant as at
April 30, 2004 for the three and six months ended April 30,
2004 (incorporated by reference to the Registrant's Form 6-K,
filed on June 10, 2004)
4.9 Management's discussion and analysis of financial condition
and results of operations for the interim period ended
April 30, 2004 (incorporated by reference to the Registrant's
Form 6-K, filed on June 10, 2004)
4.10 Unaudited interim financial statements of the Registrant as
at July 31, 2004 for the three and nine months ended July 31,
2004 and 2003 (incorporated by reference to the Registrant's
Form 6-K, filed on September 2, 2004)
4.11 Management's discussion and analysis of financial condition
and results of operations for the interim period ended July
31, 2004 (incorporated by reference to the Registrant's Form
6-K, filed on September 2, 2004)
4.12 The supplementary information, dated October 6, 2004,
relating to reconciliation with United States generally
accepted accounting principles in respect of the
Registrant's unaudited financial statements as at July 31,
2004 and 2003 and for the nine months ended July 31, 2004
and 2003*
5.1 Consent of Fraser Milner Casgrain LLP*
5.2 Consent of Cassels Brock & Blackwell LLP*
II-3
EXHIBIT DESCRIPTION
------- -----------
5.3 Consent of Ernst & Young LLP*
5.4 Consent of Dorsey & Whitney LLP*
6.1 Powers of Attorney (contained in the signature pages of the
Registration Statement on Form F-10)*
__________
* Previously filed.
II-4
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
ITEM 1. UNDERTAKING
The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to the securities registered pursuant to Form F-10 or to transactions
in said securities.
ITEM 2. CONSENT TO SERVICE OF PROCESS
Concurrently with the filing of the Registration Statement on Form
F-10, the Registrant is filing with the Commission a written irrevocable consent
and power of attorney on Form F-X. Any change to the name or address of the
agent for service of the Registrant shall be communicated promptly to the
Commission by amendment to Form F-X referencing the file number of the relevant
registration statement.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-10 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Ancaster, Ontario, country of Canada, on October 28,
2004.
CENTRAL FUND OF CANADA LIMITED
By /s/ J.C. Stefan Spicer
---------------------------------
J.C. Stefan Spicer
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment
No. 1 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ J.C. Stefan Spicer President, Chief Executive October 28, 2004
-------------------------------------------------- Officer and Director
J.C. Stefan Spicer (principal executive officer)
/s/ Catherine A. Spackman Treasurer October 28, 2004
-------------------------------------------------- (principal financial officer and
Catherine A. Spackman CMA principal accounting officer)
* Director October 28, 2004
--------------------------------------------------
John S. Elder Q.C.
Signature Title Date
--------- ----- ----
* Director October 28, 2004
--------------------------------------------------
Douglas E. Heagle
* Director October 28, 2004
--------------------------------------------------
Ian M.T. McAvity
* Director October 28, 2004
--------------------------------------------------
Michael A. Parente
* Director October 28, 2004
--------------------------------------------------
Robert R. Sale
* Director October 28, 2004
--------------------------------------------------
Dale R. Spackman Q.C.
* Director October 28, 2004
--------------------------------------------------
Philip M. Spicer
* Director October 28, 2004
--------------------------------------------------
Malcolm A. Taschereau
* By: /s/ J.C. Stefan Spicer Attorney-in-Fact for the October 28, 2004
-------------------------------------------- persons indicated above
J.C. Stefan Spicer with a *
Attorney-in-Fact
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act, the
undersigned has signed this Registration Statement, solely in the capacity of
the duly authorized representative of Central Fund of Canada Limited in the
United States on October 28, 2004.
/s/ Martin Pomerance
----------------------------------------
Martin Pomerance
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
3.1 Form of Underwriting Agreement (filed herewith)
4.1 Annual Information Form of the Registrant dated March 1, 2004
(incorporated by reference to the Registrant's Annual Report on
Form 40-F for the fiscal year ended October 31, 2003, filed on
March 19, 2004)
4.2 Management Information Circular of the Registrant dated January 9,
2004 in connection with the Company's annual meeting of
shareholders on February 23, 2004 (incorporated by reference to
the Registrant's Report on Form 6-K, filed on January 22, 2004)
4.3 Audited financial statements of the Registrant as at October 31,
2003 and 2002 and for each of the years in the three year period
ended October 31, 2003 together with the auditors' report thereon
and consisting of the statements of net assets as at October 31,
2003 and 2002 and the statements of loss, shareholders' equity and
changes in net assets for each of the years in the three year
period ended October 31, 2003 (incorporated by reference to the
Registrant's Annual Report on Form 40-F for the fiscal year ended
October 31, 2003, filed on March 19, 2004)
4.4 Management's discussion and analysis of financial condition and
results of operations for the year ended October 31, 2003
(incorporated by reference to the Registrant's Annual Report
on Form 40-F for the fiscal year ended October 31, 2003, filed on
March 19, 2004)
4.5 Unaudited interim financial statements of the Registrant as at
January 31, 2004 for the three months ended January 31, 2004
(incorporated by reference to the Registrant's Form 6-K, filed on
March 18, 2004)
4.6 Management's discussion and analysis of financial condition and
results of operations for the interim period ended January 31,
2004 (incorporated by reference to the Registrant's Form 6-K,
filed on March 18, 2004)
4.7 Press Release dated April 8, 2004 (incorporated by reference to
the Registrant's Report on Form 6-K, filed on April 13, 2004)
4.8 Unaudited interim financial statements of the Registrant as at
April 30, 2004 for the three and six months ended April 30, 2004
(incorporated by reference to the Registrant's Form 6-K, filed
on June 10, 2004)
4.9 Management's discussion and analysis of financial condition and
results of operations for the interim period ended April 30, 2004
(incorporated by reference to the Registrant's Form 6-K, filed on
June 10, 2004)
4.10 Unaudited interim financial statements of the Registrant as at
July 31, 2004 for the three and nine months ended July 31, 2004
and 2003 (incorporated by reference to the Registrant's Form 6-K,
filed on September 2, 2004)
4.11 Management's discussion and analysis of financial condition and
results of operations for the interim period ended July 31,
2004 (incorporated by reference to the Registrant's Form 6-K,
filed on September 2, 2004)
4.12 The supplementary information, dated October 6, 2004, relating
to reconciliation with United States generally accepted
accounting principles in respect of the Registrant's unaudited
financial statements as at July 31, 2004 and 2003 and for the
nine months ended July 31, 2004 and 2003*
5.1 Consent of Fraser Milner Casgrain LLP*
5.2 Consent of Cassels Brock & Blackwell LLP*
5.3 Consent of Ernst & Young LLP*
5.4 Consent of Dorsey & Whitney LLP*
EXHIBIT DESCRIPTION
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6.1 Powers of Attorney (contained in the signature pages of the
Registration Statement on Form F-10)*
__________
* Previously filed.