Securities Law & Instruments

Headnote

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), 17.1.

June 28, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

LYSANDER FUNDS LIMITED

(the Manager)

AND

IN THE MATTER OF

CANSO CREDIT TRUST

(the Applicant)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Canso Credit 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) Canso Credit 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.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by Canso Credit Trust:

1. Canso Credit Trust is an investment trust to be established under the laws of Ontario pursuant to a declaration of trust which proposes to issue units (Units) from time to time in reliance on exemptions from applicable prospectus and registration exemptions. Units will be offered at prices negotiated between the Applicant and the purchasers of Units.

2. Canso Credit Trust filed a preliminary non-offering prospectus dated June 1, 2010 (the Preliminary Prospectus) on SEDAR, a receipt for which was issued by the Commission on June 1, 2010.

3. Canso Credit Trust has been established for the purpose of acquiring and holding a portfolio focused primarily on corporate bonds (the Portfolio). The Applicant's investment objectives are to maximize total returns for holders of Units (the Unitholders), while reducing risk by holding the Portfolio. The Applicant may invest in or use derivative instruments for hedging purposes, subject to the investment restrictions of Canso Credit Trust which are set forth in the Preliminary Prospectus.

4. The Manager is the promoter of Canso Credit Trust. Canso Investment Counsel Ltd. will be retained to actively manage the Portfolio. The Manager will be responsible for providing or arranging for the provision of administrative services required by the Applicant.

5. Neither the Manager nor Canso Credit Trust are in default of securities legislation in any jurisdiction.

6. The preliminary prospectus of Canso Credit Income Fund, dated May 20, 2010, states:

a. Canso Credit Income 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);

b. under the terms of the Forward Agreement, the Counterparty will agree to deliver to Canso Credit Income Fund on a date to be determined in 2015 (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

c. the aggregate value of the Canadian Securities Portfolio will be equal to the redemption proceeds of the relevant number of Units, net of any amount owing by Canso Credit Income Fund to the Counterparty

7. The 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 Units.

8. The Units will not be listed on a stock exchange.

9. Units may be redeemed at any time for a redemption price per Unit equal to the net asset value per Unit as at the applicable redemption date.

10. Canso Credit 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 Units.

11. The preliminary prospectus of Canso Credit Income Fund, dated May 20, 2010, states that Canso Credit Income Fund will calculate its net asset value on the Thursday of each week (or if any Thursday is not a business day, the immediately proceeding 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 net asset value of Canso Credit Income Fund.

12. The final prospectus of Canso Credit Trust will disclose that the net asset value per Unit will be calculated on a weekly basis and will be made available to holders of Trust Units upon request.

Decision

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 Canso Credit Trust calculates net asset value per Unit at least once in each week.

"Vera Nunes"
Assistant Manager, Investment Funds
Ontario Securities Commission