NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit an investment fund that uses specified derivatives to calculate its NAV on a weekly basis and not on a daily basis, subject to certain conditions.
Applicable Legislative Provisions
National Instrument 81-106 Investment Fund Continuous Disclosure, s. 14.2(3)(b).
June 15, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
MARRET ASSET MANAGEMENT INC.
IN THE MATTER OF
MARRET HYS TRUST
The principal regulator in the Jurisdiction has received an application from Marret HYS Trust for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the requirement in section 14.2(3)(b) of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) that the net asset value of an investment fund must be calculated at least once every business day if the investment fund uses specified derivatives (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) Marret HYS Trust has provided notice that Section 4.7(1) of MI 11-102 is intended to be relied upon in Québec.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Manager and Marret HYS Trust:
1. Marret HYS Trust is an investment fund established under the laws of Ontario. Marret HYS Trust will be governed by a declaration of trust.
2. The Manager is the promoter of, and has been retained to act as manager, including as portfolio advisor for, Marret HYS Trust. The Manager will be responsible for providing or arranging for the provision of administrative services required by Marret HYS Trust. The head office of the Manager is located in Ontario.
3. Neither the Manager nor Marret HYS Trust are in default of securities legislation in any jurisdiction.
4. Marret HYS Trust proposes to issue units ("Trust Units") from time to time in reliance on exemptions from applicable prospectus and registration exemptions. Trust Units will be offered at prices negotiated between the Fund and the purchasers of Trust Units. Marret HYS Trust filed a preliminary non-offering prospectus dated May 6, 2009 on SEDAR, a receipt for which was issued by the Ontario Securities Commission on May 6, 2009.
5. Marret HYS Trust has been established for the purpose of holding a portfolio consisting primarily of high yield debt securities (the "Portfolio"), which will be actively managed by the Manager.
6. The prospectus of Marret High Yield Strategies Fund, dated May 28, 2009, states:
(i) Marret High Yield Strategies Fund will obtain exposure to the Portfolio by entering into a forward purchase and sale agreement (the "Forward Agreement") with a Canadian financial institution or one of its affiliates (the "Counterparty");
(ii) under the terms of the Forward Agreement, the Counterparty will agree to deliver to Marret High Yield Strategies Fund on May 30, 2014 (the "Termination Date"), a portfolio consisting of Canadian public issuers that are "Canadian securities" as defined under subsection 39(6) of the Income Tax Act (Canada) (the "Canadian Securities Portfolio"); and
(iii) the aggregate value of the Canadian Securities Portfolio will be equal to the redemption proceeds of the relevant number of Trust Units, net of any amount owing by Marret High Yield Strategies Fund to the Counterparty.
7. The investment objectives of Marret HYS Trust are to maximize total returns for holders of Trust Units consisting of both distributions and capital appreciation, while reducing risk. Marret HYS Trust may invest in derivative instruments for hedging purposes to the extent considered appropriate by the Manager. Marret HYS Trust may also use derivative instruments for non-hedging purposes to invest indirectly in securities or financial markets, provided the investment is consistent with Marret HYS Trust's investment objectives. Any or all of the derivative instruments invested in by Marret HYS Trust will constitute specified derivatives.
8. The Trust Units will not be offered to the public under a prospectus. The Counterparty is expected to be the initial beneficial owner of all of the Trust Units.
9. The Trust Units will not be listed on a stock exchange.
10. Trust Units may be redeemed at any time for a redemption price per Trust Unit equal to the net asset value per Trust Unit as at the applicable redemption date.
11. Marret HYS Trust will calculate its net asset value on the Thursday of each week (or if any Thursday is not a business day, the immediately preceding business day) and the last business day of each month, and on any other day upon request of a holder of Trust Units.
12. The prospectus of Marret High Yield Strategies Fund, dated May 28, 2009, states that Marret High Yield Strategies Fund will calculate its net asset value on the Thursday of each week (or if any Thursday is not a business day, the immediately preceding business day) and the last business day of each month, and on any other date on which Marret Asset Management Inc. elects, in its discretion, to calculate the net asset value of Marret High Yield Strategies Fund.
13. The final prospectus of Marret HYS Trust will disclose, that the net asset value per Trust Unit will be calculated on a weekly basis and will be made available to holders of Trust Units upon request.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
1. Marret HYS Trust calculates net asset value per Trust Unit at least once in each week;
2. the final prospectus of Marret HYS Trust discloses the net asset value calculation per Trust Unit will be provided to holders of Trust Units on request, for so long as: (i) the Trust Units are not offered to the public, and (ii) Marret HYS Trust calculates the net asset value per Trust Unit at least once in each week.