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.
October 29, 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
OCP CREDIT STRATEGY FUND
The principal regulator in the Jurisdiction has received an application from the Filer 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) the Filer 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 Alberta, British Columbia, Manitoba, Saskatchewan, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.
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 Filer:
1. The Filer is an investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust.
2. Onex Credit Partners, LLC (the Manager and Promoter) will be responsible for providing or arranging for the provision of administrative services required by the Filer. The head office of the Manager is located in New Jersey.
3. Neither the Filer nor the Manager are in default of securities legislation in any jurisdiction.
4. The Filer filed a preliminary prospectus (the Preliminary Prospectus) dated September 29, 2009 in each of the provinces of Canada with respect to a public offering (the Offering) of units (the Units, and each holder of a Unit, a Unitholder) of the Filer, a receipt for which was issued by the Ontario Securities Commission on September 30, 2009. The Offering of the Units is a one-time offering and the Filer will not continuously distribute Units.
5. The Filer's investment objectives are to: (i) maximize total returns for Unitholders on a tax-advantaged basis, (ii) provide Unitholders with attractive, quarterly, tax-advantaged distributions, initially targeted to be $0.70 per annum, representing an annual yield of 7% based on the original issue price of $10.00 per Unit, and (iii) preserve capital. The Filer will seek to achieve its investment objectives through exposure to an actively managed portfolio (the Portfolio) consisting primarily of senior debt obligations.
6. The Portfolio is expected to be held by OCP Investment Trust (the Underlying Fund), a trust to be established under the laws of the Province of Ontario pursuant to a declaration of trust. The Underlying Fund will be established for the purpose of acquiring and holding the Portfolio. The Filer will seek to achieve its investment objective by entering into a forward purchase and sale agreement (the Forward Agreement) with a Canadian chartered bank or one of its affiliates whose obligations are guaranteed by the Canadian chartered bank (the Counterparty) pursuant to which the Counterparty will agree to deliver to the Filer "Canadian securities" (within the meaning of the Income Tax Act (Canada)) with an aggregate value equal to the redemption proceeds of a corresponding number of units of the Underlying Fund and/or the proceeds realized by the Counterparty on the disposition of the assets in the Portfolio, net of amount owing by the Filer to the Counterparty.
7. The Units are expected to be listed and posted for trading on Toronto Stock Exchange (the TSX) and the Filer has received conditional listing approval from the TSX.
8. Units may be redeemed on the last business day of March of each year commencing in 2011, subject to certain conditions, at a redemption price per Unit equal to the net asset value per Unit (less any costs and expenses incurred by the Filer in order to fund such redemption). The Units are also redeemable monthly at a discount to the market price.
9. Under section 14.2(3)(b) of NI 81-106, an investment fund that is a reporting issuer that uses or holds specified derivatives, such as the Filer intends to do, must calculate its net asset value on a daily basis.
10. The Filer proposes to calculate net asset value on the Thursday of each week (or if any Thursday is not a business day, the immediately preceding business day).
11. The Preliminary Prospectus discloses, and the final prospectus of the Filer will disclose, that the net asset value per Unit will be calculated on a weekly basis. The Filer will provide to the public on request and will post on its website the net asset value per Unit.
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 so long as:
(a) the Units are listed on the TSX; and
(b) the Filer calculates the net asset value per Unit at least weekly.