Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from section 2.1 of NI 81-101 to permit bottom fund in an exchange traded two-tier structure to file a long form prospectus using Form 41-101F2 rather than a simplified prospectus using Form 81-101F1; units of both the top fund and the bottom fund to be qualified by long form prospectus; bottom fund will issue one unit to the manager and become subject to NI 81-102.

Applicable Legislative Provisions

Sections 2.1 and 6.1 of National Instrument 81-101 -- Mutual Fund Prospectus Disclosure.

November 25, 2009

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

NAVINA CAPITAL CORP.

(THE MANAGER),

LAZARD GLOBAL CONVERTIBLE BOND FUND

(THE TOP FUND) AND

LAZARD STRATEGIC GLOBAL CONVERTIBLE BOND

TRUST (THE BOTTOM FUND AND,

TOGETHER WITH THE TOP FUND, THE FUNDS)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Bottom Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting it from Section 2.1 of National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101) to permit the Bottom Fund to qualify its units for distribution by long form prospectus using Form 41-101F2 prescribed under National Instrument 41-101 -- General Prospectus Requirements rather than by simplified prospectus using Form 81-101F1 prescribed under NI 81-101 (the Requested Relief).

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 Bottom Fund 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 the Province of Quebec.

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 the Manager and the Funds:

1. The Manager is the manager of the Funds. The head office of the Manager is located in Ontario. The Manager and the Funds are not in default of securities legislation in any jurisdiction. The Manager will retain Lawrence Asset Management Inc. (the Investment Manager) to provide investment advisory and portfolio management services to the Funds. The Investment Manager is registered in Ontario in the category of Portfolio Manager. The Investment Manager will retain Lazard Asset Management LLC to provide investment advisory services to the Bottom Fund.

2. The Top Fund will make an offering of its units to the public on a best efforts basis pursuant to a final long form prospectus in respect of which a preliminary long form prospectus was filed on SEDAR on October 8, 2009 under SEDAR Project #1484233 in all provinces of Canada (the Offering). The Toronto Stock Exchange has conditionally approved the listing of the units of the Top Fund.

3. The Top Fund is a closed-end investment trust governed by the laws of the Province of Ontario. The Top Fund's investment objectives are to provide its unitholders with: (a) monthly tax-efficient distributions initially targeted to be $0.0583 per unit ($0.70 per annum to yield 7.0% on the $10.00 per unit issue price); and (b) the opportunity for capital appreciation by obtaining exposure to an actively managed portfolio comprised primarily of U.S. dollar denominated global convertible bonds (the Portfolio). The Top Fund will obtain exposure to the Portfolio by entering into the Forward Agreement (as defined below).

4. The Bottom Fund is a mutual fund trust governed by the laws of the Province of Ontario newly created to acquire the Portfolio.

5. The Top Fund will invest the net proceeds of the Offering in a portfolio of common shares of Canadian public companies (the Common Share Portfolio). The Top Fund will then enter into a forward agreement (the Forward Agreement) with a Canadian chartered bank or an affiliate of a Canadian chartered bank whose obligations are guaranteed by a Canadian chartered bank (the Counterparty). Pursuant to the Forward Agreement, the Counterparty will agree to pay to the Top Fund on the business day immediately prior to Conversion (the Forward Termination Date), as the purchase price for the Common Share Portfolio, an amount based on the value of either: (i) the units of the Bottom Fund; or (ii) a notional portfolio comprised primarily of U.S. dollar denominated global convertible bonds managed by the Investment Manager. The Top Fund will partially settle the Forward Agreement prior to the Forward Termination Date in order to fund monthly distributions as well as redemptions of its units and for payment of expenses of the Top Fund.

6. It is intended that, on or about June 30, 2011, the Top Fund will automatically convert to an open-end mutual fund and delist its units which will become redeemable daily at their net asset value per unit (the Conversion). The Manager intends to extend the Forward Agreement beyond the Conversion.

7. The Bottom Fund filed a preliminary long form non-offering prospectus dated October 19, 2009 on SEDAR under SEDAR Project #1486842 in the Provinces of Ontario and Quebec in accordance with NI 41-101. The Bottom Fund intends to withdraw its preliminary long form non-offering prospectus and file and obtain a receipt for a preliminary long form offering prospectus and a final long form offering prospectus (the Final Prospectus).

8. Units of the Bottom Fund will not be listed on an exchange and will be redeemable daily at their net asset value per unit. In anticipation of the Conversion and the resulting application to the Top Fund, as an open-end mutual fund, of National Instrument 81-102 -- Mutual Funds ("NI 81-102"), the Bottom Fund wishes to attract the application of NI 81-102. To that end, the Bottom Fund proposes to issue one unit to the Manager for nominal consideration pursuant to the Final Prospectus, which unit may be redeemed in the future.

9. As a result, the Bottom Fund will become a mutual fund under securities legislation subject to NI 81-102 and NI 81-101. However, the operations of the Bottom Fund will differ from those of a conventional mutual fund. Unlike a conventional mutual fund, the Bottom Fund does not intend to issue units on a continuous basis under the Final Prospectus. The Bottom Fund will only issue one unit to the Manager under the Final Prospectus; no other units of the Bottom Fund will be issued under the Final Prospectus.

10. In the absence of being granted the Requested Relief, the Filer would be required to file a simplified prospectus in the form of Form 81-101F1 prescribed under NI 81-101. The use of the simplified prospectus form to qualify units of the Bottom Fund may create confusion in the investment dealer channel in which units of the Top Fund will be sold and may consequently negatively impact the marketing of the units of the Top Fund.

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 Requested Relief is granted, provided that the Filer files a Final Prospectus that is a long form prospectus in the form of Form 41-101F2 prescribed under National Instrument 41-101 General Prospectus Requirements.

"Darren McKall"
Assistant Manager
Investment Funds Branch
Ontario Securities Commission