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Canadian Large Cap Leaders Split Corp.

Fund Objective

Class A Shares

The investment objectives for the Class A Shares are to provide their holders with regular monthly non-cumulative cash distributions* targeted to be $0.125 per Class A Share representing a yield on the issue price of the Class A Shares of 10% per annum on the issue price of $15.00 per Class A Share and to provide holders with the opportunity for growth in the Net Asset Value per Class A Share.

Preferred Shares

The investment objectives for the Preferred Shares are to provide their holders with fixed cumulative preferential quarterly cash distributions* in the amount of $0.1875 per Preferred Share ($0.75 per annum or 7.5% per annum on the issue price of $10.00 per Preferred Share) until February 28, 2029, subject to extension for successive terms of up to five years as determined by the Company’s Board of Directors (the “Maturity Date”), and to return the original issue price of $10.00 to holders on the Maturity Date.

 

1

Class A Shares:

    • 10.0% targeted distribution yield* payable monthly ($1.50 p.a.)
    • Provide holders with the opportunity for growth in the net asset value per Class A Share
2

Preferred Shares

    • 7.5% targeted distribution yield*, payable quarterly ($0.75 p.a.)
    • Initial 5-year term; redeemable at unitholder’s option on maturity
    • Pfd-3 (high) rating by DBRS Limited
3

Canadian Dividend Growth Companies

The Company selects Canadian Dividend Growth Companies that meet the following criteria at the time of investment:
  • Are listed on a Canadian stock exchange
  • Pay a dividend
  • Generally have a market capitalization of at least $10 billion
  • Have options in respect of its Equity Securities that, in the opinion of the Portfolio Manager, are sufficiently liquid to permit the Portfolio Manager to write options in respect of such securities
  • Have a history of dividend growth or, in the Portfolio Manager’s view have high potential for future dividend growth

 

 

An Emerging Asset Class

In the energy transition economy, many believe setting a price on carbon, and allowing that price to rise, is one of the best ways to encourage polluters to limit emissions and drive innovation in green technology.

According to the European Commission, companies covered by the European Union Emission Trading System (ETS) reduced emissions by about 35% between 2005 and 2019. In the United States, California launched its own ETS in 2013, and have since reduced emissions from sources covered by the ETS by 10% from 2013 to 2018.

Emissions Trading Systems (ETS) and Carbon Credits

In an emissions trading system - sometimes referred to as a cap-and-trade system, a regulator or government-entity sets a policy objective to reduce emissions in their region and sets a cap on total emissions allowable. Within an emissions trading system, the regulator splits the cap into carbon allowances or credits. A company regulated under the emission trading system can acquire carbon credits from the regulator, purchase through secondary markets, or reduce its emissions.

After each compliance period, regulated companies must surrender enough carbon credits to cover its emissions, or be heavily fined. Each year the regulator reduces the total number of allowances available, thereby achieving lower emissions targets.

What is a Carbon Credit?

A carbon credit is a permit allowing the holder to emit carbon dioxide or other greenhouse gases. One carbon credit represents one ton of CO2.

Source: Ministère de l’Environnement et de la Lutte contre les changements climatiques.

A unique investment opportunity

According to financial market data provider Refinitiv, the total value of global carbon market reached US$851 billion in 2021.1 Energy consulting firm Wood Mackenzie estimates that the global emissions trading market could be worth as much as $22 trillion by 2050.2

ETS systems are operating in 38 countries covering over 40% of global GDP. Some of the largest ETSs globally include:

• EU ETS
• California/Quebec
• US Eastern
•United Kingdom (UKA)

1 Refinitiv, “Carbon Market Year in Review 2021”.
2 Wood Mackenzie, “COP26: Make or Break for Global Emissions Trading”.

Unit Price - Class A

Ticker NPS
NAV
as at 4/26/2024 		$14.12
Market Close
as at 4/26/2024		 $12.39

Investment Team

* If the total return on the Portfolio is less than the amount necessary to fund the targeted distributions for the Class A Shares and the Preferred Shares and all expenses of the Company, and if the Company chooses to nevertheless ensure that such distributions are paid to Shareholders, this will result in a portion of the distributions paid to Shareholders being a return of the capital of the Company back to Shareholders, and accordingly, NAV per Unit will be reduced. There can be no assurance that the Company will be able to pay distributions to the holders of Preferred Shares or Class A Shares.

The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: No Assurances on Achieving Objectives; Concentration Risk; Risk Related to Passive Investments; Performance of the Portfolio Issuers and Other Considerations; Greater Volatility of the Class A Shares; Equity Risk; COVID-19; Market Volatility; Market Disruptions; Recent and Future Global Financial Developments; Sensitivity to Interest Rates; Changes in Credit Rating; Reliance on the Manager and the Portfolio Manager; Conflicts of Interest; Use of Options and Other Derivative Instruments; Securities Lending; Sensitivity to Volatility Levels; Taxation; Significant Retractions; Loss of Investment; Non-concurrent Retraction; Changes in Legislation and Regulatory Risk; Lack of Operating History; Cybersecurity Risk.

Are You An Accredited Investor?

An investment in this Fund requires the financial ability and willingness to accept the high risks and lack of liquidity inherent in this type of an investment. Investors in the Fund must be prepared to bear such risks for an extended period of time and should review suitability with their Investment Advisor.

The minimum subscription amount is $150,000.00 in all jurisdictions, unless you meet the definition of "accredited investor" under National Instrument 45-106 Prospectus and Registration Exemptions.

If you meet the definition "accredited investor" (see below), you may invest a minimum of $25,000. Please consult the Offering Memorandum to determine your qualification status. Investment Advisors should consult their company's internal policies.

The Subscriber, or one or more beneficial purchasers for whom the Subscriber is acting, is (i) a resident of, or the purchase and sale of securities to the Subscriber is otherwise subject to the securities legislation of one of the following: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Newfoundland and Labrador, Nova Scotia, New Brunswick, Prince Edward Island, North West Territories, or Nunavut, and the Subscriber is (and will at the time of acceptance of the Subscription be) an accredited investor within the meaning of National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106") because the Subscriber is one of the following:

(a) a Canadian financial institution, or a Schedule III bank;
(b) the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
(c) a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
(d) a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
(e) an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);
(f) the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;
(g) a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l'île de Montréal or an intermunicipal management board in Québec;
(h) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
(i) a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada;
(j) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;
(k) an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
(Note: If individual accredited investors wish to purchase through wholly-owned holding companies or similar entities, such purchasing entities must qualify under section (t) below, which must be initialled.)
(l) an individual who, either alone or with a spouse, has net assets of at least $5,000,000;
(m) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;
(n) an investment fund that distributes or has distributed its securities only to:
  1. a person that is or was an accredited investor at the time of the distribution,
  2. a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] or 2.19 [Additional investment in investment funds] of NI 45- 106, or
  3. a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106;
(o) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;
(p) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;
(q) a person acting on behalf of a fully managed account managed by that person, if that person:
  1. is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction; and
  2. Ontario, is purchasing a security that is not a security of an investment fund;
(r) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;
(s) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;
(t) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;
(u) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser, or;
(v) a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor.

 

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