NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit investment funds representing two tiers of a two-tiered fund structure that use specified derivatives to calculate their 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, ss. 14.2(3)(b), s.17.1.
September 25, 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 IGB TRUST
The principal regulator in the Jurisdiction has received an application from IGB 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 (NAV) 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) IGB Trust has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (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 IGB Trust:
1. IGB Trust is an investment trust to be established under the laws of Ontario. IGB 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, IGB Trust. The Manager will be responsible for providing or arranging for the provision of administrative services required by IGB Trust. The head office of the Manager is located in Ontario.
3. Neither the Manager nor IGB Trust are in default of securities legislation in any jurisdiction.
4. IGB 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 IGB Trust and the purchasers of Trust Units. IGB Trust filed a preliminary non-offering prospectus dated September 22, 2009 on SEDAR, a receipt for which was issued by the Ontario Securities Commission on September 23, 2009.
5. IGB Trust has been established for the purpose of acquiring and holding a portfolio consisting primarily of North American investment grade bonds (the Portfolio), which will be actively managed by the Manager.
6. The preliminary prospectus of Marret Investment Grade Bond Fund (the Fund), dated September 1, 2009, states:
i. the 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 the Fund on a date to be determined in 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 the Fund to the Counterparty.
7. The investment objectives of IGB Trust are to maximize total returns for Unitholders, while reducing risk and preserving capital by holding the Portfolio, which is focused primarily on investment grade bonds. IGB Trust may invest in derivative instruments for hedging purposes to the extent considered appropriate by the Manager. IGB Trust may also use derivative instruments for non-hedging purposes to invest directly in securities or financial markets, provided the investment is consistent with IGB Trust's investment objectives. Any or all of the derivative instruments invested in by IGB 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 NAV per Trust Unit as at the applicable redemption date.
11. IGB Trust will calculate its NAV 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 Fund will calculate its NAV per unit 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 the Manager elects, in its discretion, to calculate the NAV per unit of the Fund.
13. The final prospectus of IGB Trust will disclose, that the NAV 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:
(a) IGB Trust calculates net asset value per Trust Unit at least once in each week; and
(b) the final prospectus of IGB 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) IGB Trust calculates the net asset value per Trust Unit at least once in each week.