YEARS Financial Trust - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Revocation of exemptive relief previously granted to an exchange-traded fund from certain requirements of National Instrument 81-102 Mutual Funds ("NI 81-102"), and standard relief from certain requirements of NI 81-102 granted to an exchange-traded continuing fund in existence as a result of the recent merger of two exchange-traded funds.

Rules Cited

National Instrument 81-102 Mutual Funds, subsection 2.1(1), sections 10.3 & 10.4, subsection 12.1(1), section 14.1, and section 19.1

December 23, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, QUEBEC, NEW BRUNSWICK, NOVA SCOTIA,

NEWFOUNDLAND AND LABRADOR AND PRINCE EDWARD ISLAND

(The Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

YEARS FINANCIAL TRUST (formerly YEARS Trust) (the Filer)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") revoking the decision previously granted to YEARS Trust (YEARS) pursuant to National Instrument 81-102 Mutual Funds ("NI 81-102") and issuing a decision in the name of YEARS Financial Trust (as the Filer has been renamed) for exemptive relief from sections 2.1(1), 10.3, 10.4, 12.1(1) and 14.1 of NI 81-102 (collectively, the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a mutual fund trust governed by the laws of Ontario.

2. The Filer completed its initial public offering on February 13, 2001 pursuant to a final prospectus dated January 29, 2001.

3. A proposal was submitted to the unitholders of the Filer and of YEARS U.S. Trust (YEARS US) to merge the two funds and make changes to the continuing fund, including changes to its investment objectives, in order to provide unitholders of both funds with the opportunity to continue their investment in a single fund that should be better positioned to provide a higher level of distributions and the opportunity for growth in net asset value (NAV) per unit.

4. Special meetings of the unitholders of each of the Filer and YEARS US were held on December 12, 2005 for the purposes of voting on the proposal, including without limitation the merger and changes to the manager, investment objectives, investment strategy, investment restrictions, redemption provisions and record date of the Filer, as the continuing fund.

5. A notice of special meetings and joint management information circular (the Circular) of YEARS and YEARS US relating to the proposal and the special meetings was mailed to unitholders and subsequently filed on SEDAR on November 11, 2005.

6. The merger was implemented on December 16, 2005.

7. Pursuant to the merger, the Filer acquired substantially all of the net assets of YEARS US, and the Filer issued to YEARS US additional units of the Filer in consideration for those assets. YEARS US then automatically redeemed all of its outstanding units, other than one unit held by Highstreet Asset Management Inc. (Highstreet), and transferred units of the Filer to unitholders of YEARS US in payment of the redemption price. As of December 16, 2005, former unitholders of YEARS US are unitholders of the Filer.

8. As of December 16, 2005, as part of the changes to the Filer, Brompton YTU Management Limited (Brompton) replaced Highstreet as the manager of the Filer. Highstreet continues to act as the investment manager of the Filer.

9. Units of the Filer are redeemable at a price computed by reference to the value of a proportionate interest in the NAV of the Filer. As a result, the Filer continues to be a "mutual fund" under applicable securities legislation, but will not have certain of the features of conventional mutual funds.

10. Units of the Filer are currently listed and traded on the Toronto Stock Exchange (TSX). Therefore, unitholders of the Filer have an additional source of liquidity for their investment and are not dependent on redemptions alone.

11. The investment objectives of the Filer are to provide unitholders (i) with a stable stream of monthly cash distributions initially targeted to be $1.60 per unit per annum, which would represent a yield of approximately 7.5% per annum on the initial NAV of the Filer; and (ii) the opportunity for growth in NAV per unit. The target distributions for the Filer will be determined on an annual basis by the manager of the fund.

12. The Filer's investment strategy is to invest in a portfolio (the Portfolio) consisting of common shares and income trust units of issuers listed on the TSX and classified as falling within the "Financials Sector", within the meaning of the Global Industry Classification Standard or "GICS" maintained by Standard & Poor's and Morgan Stanley Capital International. This strategy may involve investment in the securities of any one issuer beyond 10% of NAV at any given time.

13. On January 31, 2001, the Filer was granted relief by the local securities regulatory authority or regulator in each of the provinces of Canada, except for Quebec and Manitoba, from the requirements of sections 10.3, 10.4 and 12.1(1) of NI 81-102. At that time the Filer did not require relief from the concentration restriction in section 2.1(1) of NI 81-102, however, given the new investment strategy of the Filer, the Requested Relief is now requested.

14. The Filer may, from time to time, hold a portion of its assets in cash equivalents, write call options and put options, utilize derivatives and engage in securities lending activities as permitted by NI 81-102 and the provisions of its trust agreement.

15. Effective January 1, 2006, (i) the redemption rights of units of the Filer will be changed so that redeeming unitholders of the Filer will be required to surrender their units for redemption at least 10 business days prior to the valuation date in order for their units to be redeemed the following month, (ii) the valuation date for each month will be the second last business day of the month instead of the last business day and (iii) in determining the redemption price, the costs associated with the redemption, including brokerage costs, will be deducted.

16. Since requests to redeem units of the Filer may be made at any time during the month but are subject to a cut-off date (10 business days prior to the valuation date), and since the NAV of the Filer will be calculated weekly, redemptions may not necessarily be implemented at a price equal to the NAV next determined after receipt of a redemption order from unitholders. Rather, redemptions could be executed at a later-calculated NAV if redemption orders are received after the cut-off date.

17. The redemption procedures of the Filer provide that shareholders will receive payment within 10 business days after the valuation date on which a unitholder's units are redeemed.

18. Other amendments to the trust agreement that governs the Filer were made in order to make certain provisions of the trust agreement consistent with the terms of the agreements relating to other funds managed by the Brompton Group of Companies. The amendments include changes to the record and payment dates for distributions of the Filer.

19. The Filer will only offer additional units pursuant to a non-simplified long-form or short-form prospectus or pursuant to an exemption from the prospectus requirements of securities legislation.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met.

The decision of the Decision Makers is that relief is granted from the following requirements of NI 81-102:

(a) section 2.1(1) -- to enable the Filer to invest all of its net assets in the Portfolio;

(b) section 10.3 -- to permit the Filer to continue to calculate the redemption price for its units on the applicable redemption date according to the Filer's current practices, as modified in the manner disclosed in the Circular;

(c) section 10.4 -- to permit the Filer to continue to pay the redemption price for units according to the Filer's current practices, as modified in the manner disclosed in the Circular;

(d) section 12.1(1) -- to continue to relieve the Filer from the requirement to file the prescribed compliance reports;

(e) section 14.1 -- to relieve the Filer from the requirement relating to the record date for the payment of dividends or other distributions, provided that it complies with the applicable requirements of the TSX.