For the
fiscal year ended October 31,
2009
Commission File Number 1-9038
Central
Fund of Canada Limited
(Exact
name of registrant as specified in its charter)
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Alberta,
Canada
(Province
or Other Jurisdiction of Incorporation or Organization)
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Not
Applicable
(Primary
Standard Industrial Classification Code)
|
Not
Applicable
(I.R.S.
Employer
Identification
No.)
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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)
|
DL
Services, Inc.
Columbia
Center
701
Fifth Avenue, Suite 6100
Seattle,
WA 98104-7043
(206)
903-8800
(Name,
address (including zip code) and telephone number (including
area
code) of agent for service in the United
States)
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Securities
to be registered pursuant to Section 12(b) of the Act:
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Title of Each
Class:
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Name of Each Exchange
On Which Registered:
|
| |
|
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Class
A Non-Voting Shares
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NYSE
Amex Equities
Toronto
Stock Exchange
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Securities
registered pursuant to Section 12(g) of the Act: None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act: None
For
annual reports, indicate by check mark the information filed with this
form:
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x Annual
Information Form
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x Audited
Annual Financial Statements
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Indicate
the number of outstanding shares of each of the registrant’s classes of capital
or common stock as of the close of the period covered by the annual
report:
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Class
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Outstanding
at
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|
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October
31, 2009
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Class
A non-voting shares, no par value
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196,007,713
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Common
shares, no par value
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40,000
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Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. x Yes o No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). o Yes
o No
EXPLANATORY NOTE
Central Fund of Canada Limited (the “Issuer” or the “Registrant”) is a Canadian issuer eligible to file its annual
report pursuant to Section 13 of the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”) on Form 40-F pursuant to the
multi-jurisdictional disclosure system of the Exchange Act . The
Issuer is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange
Act. Equity securities of the Issuer are accordingly exempt from
Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule
3a12-3.
Exhibits 99.1, 99.2 and 99.3 to this Form 40-F are
incorporated by reference as exhibits to the Registration Statement on Form F-10
(File No. 333-161635) of the Registrant.
NOTE TO UNITED STATES READERS-
DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING
PRACTICES
The Issuer is permitted, under a multi-jurisdictional
disclosure system adopted by the United States, to prepare this annual report in
accordance with Canadian disclosure requirements, which are different from those
of the United States. The Issuer prepares its financial statements,
which are filed with this report on Form 40-F, in accordance with Canadian
generally accepted accounting practices (“GAAP”), and they may be subject to
Canadian auditing and auditor independence standards. They may not be
comparable to financial statements of United States
companies.
CURRENCY
Unless otherwise indicated, all dollar amounts in this
annual report on Form 40-F are in United
States dollars. The exchange
rate of Canadian dollars into United States dollars, on December 14, 2009, based
upon the Bank of Canada noon exchange rate was U.S.$1.00 =
CDN.$1.0593.
ANNUAL INFORMATION FORM
The Issuer’s Annual Information Form (“AIF”) for the
fiscal year ended October 31, 2009 is filed as Exhibit 99.1 and incorporated by reference in this annual report on
Form 40-F.
AUDITED ANNUAL FINANCIAL STATEMENTS
AND
MANAGEMENT’S DISCUSSION AND ANALYSIS
Audited Annual Financial Statements
The audited financial statements of the
Registrant for the years ended October 31, 2009 and 2008, including the report
of the independent auditor with respect thereto, are filed as Exhibit
99.3 and incorporated by
reference in this annual report on Form 40-F. For a reconciliation of important
differences between Canadian and United States generally accepted accounting
principles, see Note 11 to the Registrant’s audited financial
statements.
Management’s Discussion and Analysis
The Issuer’s
management’s discussion and analysis (“MD&A”) is filed
as Exhibit
99.2 and incorporated by reference in this annual report on Form
40-F.
TAX
MATTERS
Shareholders
should be aware that the acquisition, ownership, and disposition of shares of
non-voting, fully participating Class A common stock of the Issuer (the “Class A
Shares”) may have tax consequences under the laws of both Canada and the United
States. Shareholders are solely responsible for determining the tax consequences
applicable to their particular circumstances and should consult their own tax
advisors concerning an investment in the Issuer’s Class A Shares.
UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS
The
following is a summary of certain material U.S. federal income tax consequences
to a United States Person (as defined below) arising from and relating to the
acquisition, ownership, and disposition of the Company’s Class A
Shares.
This
summary is only a general discussion and is not intended to be, and should not
be construed to be, legal or United States federal income tax advice to any
United States Person. 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 United States Person’s
particular circumstances. No ruling from the Internal Revenue Service has been
requested, or will be obtained, regarding the United States federal income
tax consequences to United States Persons of the ownership or disposition
of Class A Shares. This summary is not binding on the Internal Revenue
Service, and the Internal Revenue Service is not precluded from taking a
position that is different from, and contrary to, the positions taken in this
summary. In addition, because the authorities on which this summary is based are
subject to various interpretations, the Internal Revenue Service and the
United States courts could disagree with one or more of the positions taken
in this summary. Moreover, this summary does not include any discussion of
United States state or local, United States federal estate or gift,
United States federal alternative minimum tax or foreign tax
consequences.
Scope
of this Summary
Authorities
This
summary is based on the Internal Revenue Code of 1986, as amended (the “Code”),
Treasury Regulations (whether final, temporary, or proposed), published rulings
of the Internal Revenue Service (“IRS”), published administrative positions of
the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
(the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable
and, in each case, as in effect and available, as of the date of this Form
40-F. Any of the authorities on which this summary is based could be
changed in a material and adverse manner at any time, and any such change could
be applied on a retroactive basis. This summary does not discuss the
potential effects, whether adverse or beneficial, of any proposed legislation
that, if enacted, could be applied on a retroactive basis.
United States
Persons
For
purposes of this summary, a “United States Person” means (i) an
individual citizen or resident of the United States, (ii) a
corporation, or other entity treated as a corporation for United States
federal income tax purposes, created or organized in or under the laws of the
United States, any state in the United States 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 either (a) such trust has validly elected to be
treated as a United States person for United States federal income tax
purposes or (b) a United States court is able to exercise primary
supervision over the administration of such trust and one or more
United States Persons have the authority to control all substantial
decisions of such trust.
U.S. Holders Subject to
Special U.S. Federal Income Tax Rules Not Addressed
This
summary does not discuss the United States federal income tax consequences
to United States Persons that are subject to special treatment under the
Code (for example, United States Persons (i) that are tax-exempt
organizations, qualified retirement plans, individual retirement accounts, or
other tax-deferred accounts; (ii) that are financial institutions,
insurance companies, real estate investment trusts, or regulated investment
companies; (iii) that are dealers in securities or currencies or that are
traders in securities that elect to apply a mark-to-market accounting method;
(iv) that have a “functional currency” other than the United States
dollar; (v) that own Class A Shares as part of a straddle, hedging
transaction, conversion transaction, constructive sale, or other arrangement
involving more than one position; (vi) that hold Class A Shares other
than as a capital asset within the meaning of Section 1221 of the Code; or
(vii) that own (directly, indirectly, or constructively) 10% or more of the
total combined voting power of the outstanding shares of the Company). The
summary below also does not address the consequences of owning Class A Shares to
United States Persons who are United States expatriates or former long-term
residents of the United States subject to Section 877 of the Code. United States
Persons and others that are subject to special provisions under the Code,
including United States Persons described immediately above, should consult a
tax advisor regarding the United States federal income tax consequences arising
from and relating to the ownership of Class A Shares.
The
United States federal income tax consequences of the ownership and
disposition of the Class A Shares are very complex and, in certain cases,
uncertain or potentially unfavorable to United States Persons. Accordingly,
a United States Person considering acquiring Class A Shares is strongly
urged to consult a tax advisor with respect to the United States federal
income, United States state or local, United States federal estate or
gift, alternative minimum tax or foreign tax consequences of the ownership and
disposition of Class A Shares in light of such United States Person’s
particular facts and circumstances.
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Sale
or Disposition of Class A
Shares
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A
United States Person generally will recognize gain or loss on the sale or
other taxable disposition of Class A Shares in an amount equal to the
difference, if any, between (a) the amount of cash plus the fair market
value of any property received and (b) such United States Person’s tax
basis in the Class A Shares sold or otherwise disposed of. Amounts received
by a United States Person upon the redemption by the Company of
Class A Shares will be treated either as a distribution by the Company
(See “Distributions on Class A Shares” below) or as a payment in
exchange for the Class A Shares, depending on whether and to what extent
the redemption reduces the United States Person’s percentage ownership
interest in the Company. Generally, a redemption will be treated as an exchange
of Class A Shares if (taking into account certain constructive ownership
rules under Section 318 of the Code) the redemption (a) completely
terminates the United States Person’s interest in the Company under
Section 302(b)(3) of the Code, (b) is “substantially disproportionate”
with respect to the United States Person under Section 302(b)(2) of
the Code, or (c) is “not essentially equivalent to a dividend” under
Section 302(b)(1) of the Code. Because the Company has been, and expects to
continue to be, a “passive foreign investment company”, the special rules
discussed below generally will apply to any gain recognized by a
United States Person on sales or other taxable dispositions of Class A
Shares. See “Passive Foreign Investment Company Treatment”, below.
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Distributions
on Class A Shares
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A
distribution paid on a Class A Share, including a constructive
distribution, generally will be included in gross income of a United States
Person as ordinary income (without reduction for any amounts withheld in respect
of Canadian federal income tax) to the extent of the Company’s current or
accumulated “earnings and profits” (as computed under United States
federal income tax rules). To the extent that a distribution paid on the
Class A Shares exceeds the “earnings and profits” of the Company, such
distribution generally will be treated as a non-taxable return of capital to the
extent of the tax basis of the Class A Share and then as gain from the sale
or exchange of the Class A Share. Dividends paid on the Class A 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 the Company’s taxable year during which
it pays a dividend on the Class A Shares, or for the Company’s immediately
preceding taxable year. In addition, dividends paid on the Class A Shares
generally will not be eligible for the deduction for dividends received by
corporations. Notwithstanding the discussion above, because the Company has
been, and expects to continue to be, a “passive foreign investment company”, the
special rules discussed below generally will apply to any distribution paid on
the Class A Shares. See “Passive Foreign Investment Company Treatment”,
below.
For
U.S. federal income tax purposes, the amount received by a
United States Person as payment with respect to a distribution on or a
disposition of Class A Shares if paid in Canadian dollars, is the
U.S. dollar value at the date of the payment, regardless of whether the
payment is promptly converted into U.S. dollars. If the Canadian dollars
are not converted into U.S. dollars on the date of the payment, the
United States Person may recognize additional ordinary income or loss as a
result of currency fluctuations between the date on which the payment is made
and the date the payment is converted into U.S. dollars.
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Passive
Foreign Investment Company
Treatment
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The
Company generally will be a “passive foreign investment company” for
United States federal income tax purposes if, for a taxable year, either
(i) 75% or more of the gross income of the Company for such taxable year is
passive income or (ii) on average, 50% or more of the assets held by the
Company either produce passive income or are held for the production of passive
income, based on the fair market value of such assets. “Passive income”
includes, for example, dividends, interest, certain rents and royalties, certain
gains from the sale of stock and securities, and certain gains from commodities
transactions. The Company has been, and expects to continue to be, a “passive
foreign investment company” for United States federal income tax purposes.
The United States federal income tax rules applicable to passive foreign
investment companies are very complex and, in certain cases, uncertain. Each
United States Person is strongly urged to consult its own tax advisor with
respect to the passive foreign investment company rules.
The
United States federal income tax consequences to a United States
Person that owns (directly or, in certain cases, indirectly) Class A Shares
will depend on whether or not a qualified electing fund (a “QEF”) election
or a mark-to-market election (a “Mark-to-Market Election”), each as
described below, is made by such United States Person with respect to
the Company.
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Non-Electing
Shareholders
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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 United States Person has held the
Class A Shares, then, unless such United States Person has made the
Mark-to-Market Election, any gain recognized on the sale or other taxable
disposition of Class A Shares will be treated as ordinary income realized
pro rata over such holding period for such Class A 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 United States 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
United States Person for each year (without regard to other income or
expenses of such United States 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, which interest will not be deductible by non-corporate
United States Persons, from the due date of the United States federal
income tax return (without regard to extensions) for each year described in
clause (i) to the due date of the United States federal income
tax return (without regard to extensions) for the year of disposition. Under
certain proposed Treasury regulations, a “disposition” for this purpose may
include, under certain circumstances, transfers at death, gifts, pledges,
transfers pursuant to tax-deferred reorganizations and other transactions with
respect to which gain ordinarily would not be 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 Shares if a QEF
election was not in effect for the deceased United States Person’s entire
holding period. Any loss recognized by a United States Person on the
disposition of Class A Shares generally will be capital loss. In addition,
rules similar to those applicable to dispositions generally will apply to
“excess distributions” paid on a Class A Share (i.e., distributions
that exceed 125% of the average amount of distributions received on the
Class A Share during the preceding three years or, if shorter, during the
United States Person’s holding period for the
Class A Share).
A
United States Person that owns Class A Shares may elect (assuming that
the Company provides such United States Person with certain information) to
have the Company treated, with respect to that United States Person, as a
QEF. A QEF election must be made by a United States Person before the due
date (including extensions) for such United States Person’s
United States federal income tax return for the taxable year for which the
QEF election is made and, once made, will be effective for all subsequent
taxable years of such United States Person, unless revoked with the consent
of the Internal Revenue Service. (A United States Person that makes a
QEF election with respect to the Company is referred to in this summary as an
“Electing Shareholder”.) The
Company now makes, and intends to continue to make, available to Electing
Shareholders the PFIC Annual Information Statement currently required by the
Internal Revenue Service with respect to a QEF election, which will include
information as to the allocation of the Company’s “ordinary earnings” and “net
capital gains” (each as computed under United States federal income tax
rules) among the Class A Shares and as to distributions on such
Class A Shares. Such PFIC Annual Information Statement may be used by
Electing Shareholders for purposes of complying with the reporting requirements
applicable to the QEF election.
Provided
that an Electing Shareholder’s QEF election is in effect with respect to the
entire holding period for the Class A Shares, any gain or loss recognized
by such Electing Shareholder on the sale or other taxable disposition of such
Class A Shares generally would be a capital gain or loss. Such capital gain
or loss generally would be long-term if such Electing Shareholder had held the
Class A Shares for more than one year at the time of the sale or other
taxable disposition. For non-corporate United States Persons, long-term
capital gain is generally subject to a maximum United States federal income
tax rate of 15%. Gain from the disposition of collectibles such as gold or
silver, however, is subject to a maximum United States federal income tax
rate of 28%. The Internal Revenue Service has authority to issue Treasury
regulations applying the 28% tax rate to 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 been issued, the 15% maximum tax rate currently should
apply to long-term capital gains arising from the sale or other taxable
disposition of Class A 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 whether any such Treasury regulations
would subject long-term capital gains realized by an Electing Shareholder from
the disposition of Class A Shares to the 28% maximum
tax rate.
A
United States Person holding Class A 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 rules described above upon any
subsequent disposition of such Class A Shares if such United States
Person elects to recognize any gain in such Class A Shares as of the first
day in the first year that the QEF election applies to such Class A Shares
(a “deemed sale” election). Any gain recognized by a United States
Person under such a deemed sale election will, however, be subject to the
ordinary income and interest charge rules described above.
An
Electing Shareholder will be required to include currently in gross income such
Electing Shareholder’s pro rata share of the annual “ordinary earnings” and
“net capital gains” (but may not include any net loss) of the Company. Such
inclusion will be required whether or not such Electing Shareholder owns
Class A Shares for an entire taxable year or at the end of the Company’s
taxable year. For purposes of determining the amounts includable in income by
Electing Shareholders under the QEF rules, the tax bases of the Company’s
assets, and the “ordinary earnings” and “net capital gains” of the Company, will
be computed under United States federal income tax rules. Accordingly, it
is anticipated that such tax bases, and such “ordinary earnings” and “net
capital gains”, will differ from the figures set forth in the Company’s
financial statements. The amount currently included in income by an Electing
Shareholder will be treated as ordinary income to the extent of the Electing
Shareholder’s pro rata share of the Company’s “ordinary earnings” and
generally will be treated as long-term capital gain to the extent of such
Electing Shareholder’s pro rata share of the Company’s “net capital gains.”
The Electing Shareholder will be required to include in income such
pro rata share of the “ordinary earnings” and “net capital gains” of the
Company, without regard to the amount of cash distributions, if any, received
from the Company. Electing Shareholders will be required to pay
United States federal income tax currently on such pro rata share of
“ordinary earnings” and “net capital gains” of the Company, unless, as described
below, an election is made to defer such payment of tax.
Under
these QEF rules, in the event that the Company disposes of a portion of its gold
or silver holdings, including dispositions in the course of varying its relative
investment between gold and silver, Electing Shareholders may be required to
report substantial amounts of income for United States federal income tax
purposes (in the absence of any cash distributions received from the
Company). Historically, the Company has declared and paid a cash distribution of
U.S.$0.01 per share (prior to 1996, Cdn.$0.01 per share) on its outstanding
Class A Shares. In addition, it is the intention of the Company to
distribute to holders of record of Class A Shares and common shares as of
the last day of each taxable year (currently October 31) an aggregate
amount of cash distributions (including the stated distributions on the
Class A Shares) such that the amount of cash distributions payable to an
Electing Shareholder that holds Class A Shares for the entire taxable year
of the Company will be at least equal to the product of (i) the Company’s
“ordinary earnings” and “net capital gains” for such taxable year allocable to
such Electing Shareholder and (ii) the highest marginal rate of
United States federal income tax on ordinary income or long-term capital
gain, as appropriate, applicable to individuals. Because such cash distributions
may be subject to Canadian withholding tax and because the amount of such cash
distributions will be determined without reference to possible
United States state or local income tax liabilities or to the rate of
United States federal income tax applicable to corporate United States
Persons, such cash distributions may not provide an Electing Shareholder with
sufficient cash to pay the United States federal income tax liability
arising from the inclusion in income of the Electing Shareholders’ pro rata
share 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 liability arising from the
inclusion in income of the Electing Shareholders’ pro rata share of the
Company’s “ordinary earnings” and “net capital gains” under the QEF rules, 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.
If an
Electing Shareholder demonstrates to the satisfaction of the Internal Revenue
Service that amounts actually distributed on the Class A Shares have been
previously included in income under the QEF rules by such Electing Shareholder
(or a previous United States Person), such distributions generally
will not be taxable. An Electing Shareholder’s tax basis in the Class A
Shares generally will be increased by any amounts currently included in income
under the QEF rules and generally will be decreased by any subsequent
distributions from the Company that are treated as non-taxable distributions
pursuant to the preceding sentence.
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. The Company believes that
the Class A Shares are, and expects that the Class A Shares will
continue to be, “marketable stock” for purposes of the Mark-to-Market
Election rules.
A
United States Person that makes a Mark-to-Market Election would generally
be required to report gain or loss annually to the extent of the difference, if
any, between (i) the fair market value of the Class A Shares at the
end of each taxable year and (ii) the adjusted tax basis of the
Class A Shares at the end of each taxable year. Any gain under this
computation, and any gain recognized on an actual sale or other taxable
disposition of the Class A Shares, generally would be treated as ordinary
income. Any loss under this computation, and any loss recognized on an actual
sale or other taxable disposition of the Class A Shares, generally 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 adjusted tax basis in the Class A Shares generally would be
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 Class A Shares or
(ii) a QEF election has been in effect for such United States Person’s
entire holding period for the Class A Shares, any mark-to-market gain for
the election year generally will be subject to the ordinary income and interest
charge rules described above.
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United States
Foreign Tax Credit
|
Subject
to complex limitations set forth in the Code, 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 distributions paid on
the Class A Shares. For purposes of applying the limitations set forth in
the Code, dividends paid on the Class A Shares generally will constitute
“foreign source” income and generally will be categorized as “passive category
income”. Gain from the sale or other disposition of the Class A Shares
generally will constitute “US source” income for foreign tax credit purposes
unless the gain is subject to tax in Canada and is resourced as “foreign source”
under the Treaty and the United States Person elects to treat such gains as
“foreign source.” United States Persons that do not elect to claim foreign
tax credits for a taxable year may be able to deduct any such Canadian federal
income tax withheld. Each United States Person is strongly urged to consult
his, her or its own tax advisor with respect to the foreign tax
credit rules.
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Information
Reporting and Backup Withholding
|
Payments
to a United States Person made within the United States, or by a
United States payor or United States middleman, of dividends on, or
proceeds arising from the sale or other taxable disposition of, Class A
Shares generally will be subject to information reporting and backup withholding
tax, at the rate of 28%, if a United States Person fails to furnish its
correct United States taxpayer identification number, and to make
certain certifications, or otherwise fails to establish an exemption. Any
amounts withheld under the backup withholding rules from a payment to a
United States Person generally may be refunded (or credited against
such United States Person’s United States federal income tax
liability, if any) provided the required information is furnished to the
Internal Revenue Service. Each United States Persons should consult a tax
advisor regarding the backup withholding rules.
DISCLOSURE
CONTROLS AND PROCEDURES
The
Registrant carried out an evaluation as at the end of the period covered by this
report, under the supervision and with the participation of the Registrant’s
senior executive officers, including the Registrant’s President and Chief
Executive Officer and Treasurer and Chief Financial Officer, of the
effectiveness of the Registrant’s disclosure controls and procedures, as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on
that evaluation, the President and Chief Executive Officer and Treasurer and
Chief Financial Officer (the Registrant’s Principal Financial Officer) have
concluded that as of the end of the period covered by this report, the Issuer’s
disclosure controls and procedures were adequately designed and effective to
ensure that i) information required to be disclosed by the Registrant in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the applicable
rules and forms and ii) information required to be disclosed in our reports
filed or submitted under the Exchange Act is accumulated and communicated to our
senior executive officers, including its President and Chief Executive Officer
and Treasurer and Chief Financial Officer, as appropriate, to allow for accurate
and timely decisions regarding required disclosure.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The
Issuer’s senior executive officers are responsible for establishing and
maintaining adequate internal control over financial reporting as defined in
Rules 13(a)-15(f) and 15d-15(f) under the Exchange Act. The Issuer’s internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of the financial reporting and the
preparation and fair presentation of financial statements for external purposes
in accordance with generally accepted accounting principles.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and/or procedures may deteriorate.
The
senior executive officers conducted an evaluation of the effectiveness, design
and operation of the Issuer’s internal control over financial reporting as of
October 31, 2009 based on the criteria established in Internal Control – Integrated
Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission. This evaluation included review of the documentation of
controls, evaluation of the design effectiveness of controls, testing of the
operating effectiveness of controls and a conclusion on this
evaluation. Based on this evaluation, management has concluded that the Issuer’s
internal control over financial reporting was effective as of October 31, 2009
and no material weaknesses were discovered.
This
report is required for U.S. reporting purposes as the Issuer is a “foreign
private issuer” as defined in Rule 3b-4 of the Exchange Act, and as the Issuer
is an “accelerated
filer”, the Issuer is required to provide an auditor’s attestation report
on internal control over financial reporting. The Issuer’s auditor
has attested the Issuer’s internal controls over financial reporting for the
year ended October 31, 2009. The auditor’s attestation is filed in
Exhibit 99.3
and is incorporated by reference in this annual report on Form
40-F.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL
REPORTING
During the
period covered by this annual report on Form
40-F, no change occurred in the
Issuer’s internal control over financial
reporting that has materially affected, or is
reasonably likely to materially affect, the
Issuer’s internal control over financial
reporting.
The senior executive officers of the Issuer, including
the President and Chief Executive Officer and Treasurer and Chief Financial
Officer, do not expect that its disclosure controls and procedures or internal
controls and procedures will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Issuer have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion
of two or more people, or by officers’ override of the
control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there
can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions; over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
CORPORATE GOVERNANCE
The Issuer is listed on the Toronto Stock Exchange and
is required to describe its practices and
policies with regards to corporate governance with specific reference to the
corporate governance guidelines of the Canadian Securities
Administrators on an annual basis by way of a corporate governance statement
contained in the Issuer’s annual information form or information circular. The Issuer
is also listed on the NYSE Amex Equities (“NYSE Amex”)
(formerly the American Stock Exchange) and additionally complies as necessary
with the rules and guidelines of NYSE Amex as well as the United States Securities
and Exchange Commission (“SEC”). The Issuer reviews its governance practices on an
ongoing basis to ensure it is in compliance with the rules and guidelines both
in Canada and in the United States. The Issuer is complying with applicable
new
and revised rules and regulations, introduced pursuant to the Sarbanes-Oxley Act
in the United States, by the SEC and NYSE Amex.
The Issuer’s Board of
Directors is responsible for the Issuer’s corporate
governance policies and has separately
designated a standing Corporate Governance
Committee. The Issuer’s Board of Directors has determined that the members of
the Corporate Governance Committee are independent, based on the criteria for
independence and unrelatedness prescribed by the Sarbanes-Oxley Act of 2002, section
10A(m)(3), and the NYSE Amex.
Corporate governance relates to the activities of the
Issuer’s board of directors (the “Board”), the
members of which are elected by and are accountable to the shareholders, and
takes into account the role of the senior
officers who are appointed by the Board and who are charged with the
day to day administration of the Issuer. The Board is committed to
sound corporate governance practices which are both in the interest of its
shareholders and contribute to effective and
efficient decision making.
AUDIT
COMMITTEE
The Issuer’s Board of
Directors has a separately designated standing Audit Committee established in
accordance with section 3(a)(58)(A) of the Exchange Act. The members
of the Issuer’s Audit Committee
are identified on pages 11 and 12 of the Annual Information Form, attached
herewith as Exhibit 99.1 and incorporated by reference. In the
opinion of the Board, all members of the Audit Committee are independent as
determined under Rule 10A-3 of the Exchange
Act and the rules of the NYSE Amex and the policies of the Canadian Securities
Administrators and are financially literate.
Audit Committee Financial Expert
Douglas
E. Heagle, Chairman of the Audit Committee, is the
financial expert, in that he has an
understanding of generally accepted accounting principles and financial
statements; is able to assess the general application of such accounting
principles in connection with the accounting for estimates, accruals and
reserves; has experience preparing, reviewing, analyzing or evaluating financial
statements that entail accounting issues that are generally comparable in
breadth and complexity to the issues raised by the Issuer's financial statements
(or actively supervising another person who did so); has an
understanding of internal controls and procedures for financial reporting and an
understanding of audit committee functions.
The members of the Audit Committee do not have fixed
terms and are appointed and replaced annually by resolution of the
Board.
The Audit Committee meets with the President and Chief
Executive Officer and the Treasurer and Chief Financial Officer of the Issuer
and the Issuer’s independent auditors to review and inquire into
matters affecting financial reporting, the system of internal accounting and financial controls, as well as
accounting policies, audit procedures and audit plans. The Audit
Committee also recommends to the Board the auditors to be appointed and their
compensation. In addition, the Committee reviews and recommends to the
Board for approval the Issuer’s financial statements and reports, the
Management’s Discussion and Analysis and Annual Information Form,
and undertakes other activities required by regulatory
authorities.
Audit Committee Charter
The Issuer’s Audit Committee
Charter is available on the Issuer’s website at
www.centralfund.com, in the Annual
Information Form attached hereto as Exhibit 99.1 or in print to any shareholder who provides the Issuer
with a written request.
PRINCIPAL
ACCOUNTING FEES AND SERVICES
Ernst
& Young LLP acted as the Issuer’s independent auditor for the fiscal year
ended October 31, 2009. See page 17 of the Registrant’s Annual Information Form,
which is attached hereto as Exhibit 99.1 for the
total amount billed to the Issuer by Ernst & Young LLP for services
performed in the last two fiscal years by category of service (for audit fees,
audit-related fees, tax fees and all other fees) in United
States dollars.
PRE-APPROVAL
OF AUDIT AND NON-AUDIT SERVICES PROVIDED BY
INDEPENDENT
AUDITORS
See page
17 of the Registrant’s Annual Information Form incorporated by reference to this
document as Exhibit
99.1.
OFF-BALANCE
SHEET TRANSACTIONS
The
Issuer does not have any off-balance sheet financing arrangements or
relationships with unconsolidated special purpose entities.
CODE
OF CONDUCT AND ETHICS
The Board has adopted a written Code of Conduct and
Ethics by which the principal executive officer, principal financial
officer and principal accounting officer of the
Issuer abide. In addition, the Board, through its meetings with
officers and other informal discussions with officers, encourages a culture of
ethical business conduct and believes the Issuer's high caliber officers promote
a culture of ethical business conduct
throughout the Issuer's operations and is expected to monitor the activities of
the Issuer’s officers, consultants and agents in that
regard. The Board encourages any concerns regarding ethical conduct
in respect of the Issuer’s operations to be raised, on
an anonymous basis, with the President and CEO, the Chairman, or
another Board member as appropriate.
It is a requirement of applicable corporate law that
directors or directors and officers who have an interest in a transaction or
agreement with the Issuer promptly disclose
that interest at any meeting of the Board at which the transaction or agreement
will be discussed and abstain from discussions and voting in respect to same if
the interest is material.
A copy of
the Registrant’s Code of Conduct and Ethics is available on its website at
www.centralfund.com and without charge, upon written request made to Catherine
A. Spackman, Treasurer and Chief Financial Officer at Hallmark Estates, #805,
1323-15th Avenue
S.W., Calgary, Alberta, Canada (403) 228-5861.
CONTRACTUAL OBLIGATIONS
The information provided under the heading “Management’s Discussion and
Analysis — Contractual Obligations ” contained in Exhibit 99.2 as filed with this annual report on Form 40-F contains the Issuer’s disclosure of
contractual obligations and is incorporated by reference herein.
NOTICES PURSUANT TO REGULATION BTR
There were no notices required by Rule 104 of Regulation
BTR that the Registrant sent during the year ended October 31, 2009 concerning any equity
security subject to a blackout period under Rule 101 of Regulation
BTR.
NYSE AMEX CORPORATE GOVERNANCE
The Issuer’s Class A Shares
are listed on the NYSE Amex. Section 110 of the AMEX Company Guide
permits the NYSE Amex to consider the laws,
customs and practices of foreign issuers in relaxing certain NYSE Amex listing
criteria, and to grant exemptions from NYSE Amex listing criteria based on these
considerations. An issuer seeking relief under these
provisions is required to provide written certification from
independent local counsel that the non-complying practice is not prohibited by
home country law. A description of the significant ways in which the
Issuer’s governance practices differ from those
followed by domestic companies pursuant to NYSE Amex standards
is as follows:
Shareholder Meeting Quorum
Requirement: The NYSE Amex
minimum quorum requirement for a shareholder meeting is one-third of the
outstanding shares of common stock. In addition, a company listed on the NYSE Amex is required to state its
quorum requirement in its bylaws. The Issuer’s quorum
requirement is set forth in its bylaws. A quorum for a meeting of shareholders of the Issuer is two persons who
are, or who represent by proxy, shareholders who, in the aggregate, hold at least 10% of
the common shares entitled to be voted at the meeting.
Proxy Delivery
Requirement: NYSE Amex requires
the solicitation of proxies and delivery of
proxy statements for all shareholder meetings, and requires that these proxies shall be solicited pursuant to a
proxy statement that conforms to SEC proxy rules. The Issuer is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act, and the
equity securities of the Issuer are accordingly exempt from the proxy
rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange
Act. The Issuer solicits proxies in accordance with applicable rules
and regulations in Canada.
The foregoing are consistent with the laws, customs and practices in Canada.
In addition, we may from time-to-time seek relief from NYSE Amex corporate governance requirements
on specific transactions under Section 110 of the AMEX Company Guide by
providing written certification from independent local counsel that the
non-complying practice is not prohibited by
our home country law, in which case, we shall make the disclosure of such
transactions available on our website at
www.centralfund.com. Information contained on our website is not part
of this annual report.
UNDERTAKINGS
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 40-F; the securities in
relation to which the obligation to file an annual report on Form 40-F arises;
or to transactions in said securities.
CONSENT TO SERVICE OF PROCESS
The Issuer filed an Appointment of Agent for
Service of Process and Undertaking on Form
F-X with respect to the class of securities in relation to which the obligation
to file the Form 40-F arises.
Any
change to the name or address of the agent for service of process of the
registrant shall be communicated promptly to the Commission by an amendment to
the Form F-X referencing the file number of
the registrant.
SIGNATURES
Pursuant
to the requirements of the Exchange Act, the Registrant certifies that it meets
all of the requirements for filing on Form 40-F and has duly caused this annual
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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CENTRAL FUND OF
CANADA LIMITED |
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/s/
J.C. Stefan Spicer |
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J.C.
Stefan Spicer |
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President
and Chief Executive Officer |
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Date:
December 18, 2009
EXHIBIT
INDEX
The
following documents are being filed with the Commission as exhibits to this
annual report on Form 40-F.
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Exhibit
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Description
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99.1
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Annual
Information Form
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99.2
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Management’s
Discussion and Analysis
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99.3
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Annual
Financial Statements
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99.4
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Consent
of Ernst & Young LLP
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99.5
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Certification
of Chief Executive Officer and Chief Financial Officer pursuant
to Rule 13(a)-14(a) or 15(d)-14 of the Securities Exchange Act of
1934
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99.6
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Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350
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