Navina Asset Management Inc. et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to permit a non-redeemable investment fund converting into a mutual fund to show pre-conversion past performance in sales communications; relief also granted from certain new mutual fund requirements -- the non-redeemable investment fund has always complied with the investment restrictions of NI 81-102 and the fund will have already met the minimum subscription for new mutual funds; relief also granted to allow converted mutual fund to short sell up to 20% of net assets subject to certain conditions.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.6(a) and (c), 3.1, 3.3, 6.1(1), 15.6(a), 15.6(d), 19.1.

June 15, 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

NAVINA ASSET MANAGEMENT INC.

(the "Filer")

AND

IN THE MATTER OF

NAVINA GLOBAL RESOURCE FUND

(formerly LONG RESERVE LIFE RESOURCE FUND)

(the "Fund")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer and the Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") granting exemptive relief to the Filer and the Fund from the following provisions of National Instrument 81-102 Mutual Funds ("NI 81-102") upon the conversion of the Fund from a closed-end investment trust to an open-end conventional mutual fund trust subject to NI 81-102 (the "Conversion", as further described below):

(a) the seed capital requirements in section 3.1 to permit the Fund, at the time it becomes a mutual fund, to rely on its existing net assets;

(b) the prohibitions contained in section 3.3 to permit the costs of the preparation and filing of a preliminary simplified prospectus and annual information form to be borne by the Fund; and

(c) the prohibitions in subsections 15.6(a) and (d) to permit the Fund to show its historic performance data in sales communications notwithstanding that it has not, as a mutual fund, distributed its securities under a simplified prospectus for 12 consecutive months and to permit sales communications relating to the Fund to contain performance data of the Fund for the period prior to the Fund, as a mutual fund, offering its securities under a simplified prospectus (paragraphs (a) (b) and (c) collectively, the "Conversion Relief"); and

(d) the requirement contained in subsection 2.6(a) prohibiting a mutual fund from providing a security interest over its assets;

(e) the requirement contained in subsection 2.6(c) prohibiting a mutual fund from selling securities short; and

(f) the requirement contained in subsection 6.1(1) prohibiting a mutual fund from depositing any part of its assets with an entity other than its custodian (paragraphs (d) (e) and (f), collectively, the "Short Selling Relief"),

(the Conversion Relief and the Short Selling Relief, collectively, 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 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 each of the provinces of Canada other than the Jurisdiction.

Interpretation

Terms defined in NI 81-102, 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 Filer and the Fund:

The Filer and the Fund

1. The Filer is a corporation amalgamated under the laws of the Province of Ontario, with its head office in Toronto, Ontario.

2. The Filer, as manager of the Fund, is responsible for the management of the Fund and the day-to-day operations of the Fund. The Filer is also the trustee and portfolio advisor of the Fund.

3. The Fund is currently a closed-end investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated as of May 18, 2006, as amended and restated as of June 21, 2007, as amended and restated as of March 31, 2009 and as amended as of June 7, 2010 (the "Declaration of Trust").

4. The Fund is a reporting issuer under the securities legislation of each of the provinces of Canada.

5. Units of the Fund were distributed pursuant to an initial public offering under a long form prospectus dated May 18, 2006 and are listed and traded on the Toronto Stock Exchange (the "TSX").

6. As at April 30, 2010, there were 826,782 units of the Fund outstanding with a net asset value ("NAV") per unit of $7.38, for an aggregate NAV of the Fund of $6,097,796.18.

7. Since its inception in May 2006, the Fund has complied with the investment restrictions contained in NI 81-102, including not using leverage in the management of its portfolio.

8. Neither the Filer nor the Fund is in default of any of the requirements of applicable securities legislation in any of the provinces or territories of Canada.

The Conversion and changes on the Conversion

9. At a special meeting of unitholders of the Fund held June 11, 2007 and adjourned to June 21, 2007 (the "2007 Unitholder Meeting"), unitholders of the Fund approved an amendment to the Declaration of Trust granting the Filer the authority to convert the Fund to an open-end mutual fund if, for a period of 10 consecutive trading days, the daily weighted average trading price of the units of the Fund is greater than a 2% discount of the NAV per unit for that day (the "Conversion Criteria").

10. The Fund first triggered the Conversion Criteria as of November 26, 2008. The Filer, which assumed control of the Fund on June 30, 2009 after a change of the Manager of the Fund, believes that implementing the Conversion at this time is in the best interest of the Fund. The Filer now expects to delist existing units of the Fund from trading on the TSX after the close of business on June 25, 2010 and subsequently convert the Fund as of July 5, 2010.

11. The Filer believes that the Conversion will benefit unitholders by providing the ability to redeem units daily at NAV rather than trade them at a discount to NAV on the TSX. As at the close of business on May 27, 2010, units of the Fund traded at a discount of approximately 7.15% to their NAV per unit, which was $7.13 on that date. The Conversion will also provide unitholders with the flexibility to switch from one series of units to another series of units of the Fund (where unitholders meet the requirements to do so). The Conversion will also provide the potential benefit to unitholders of the Fund's ability to raise additional capital by virtue of being in continuous distribution, which creates an opportunity for a larger amount of assets in the Fund's portfolio.

12. The Filer filed a preliminary simplified prospectus and annual information form dated March 8, 2010 under SEDAR Project #1543790 to qualify new units of the Fund for sale in each of the provinces of Canada, except Québec, and filed a final prospectus and annual information form for the Fund dated June 7, 2010.

13. The Information Circular sent to unitholders of the Fund in connection with the 2007 Unitholder Meeting disclosed that, if a decision is made to convert, the Filer will issue a press release at least 20 business days prior to the proposed effective date disclosing the proposed conversion. The Filer filed a press release disclosing the Conversion on May 28, 2010.

14. At a special meeting of unitholders of the Fund held October 20, 2008 and adjourned to October 30, 2008 (the "2008 Unitholder Meeting"), unitholders of the Fund passed resolutions authorizing certain changes to be adopted on the Conversion, including:

(a) Increasing the annual management fee from 1.1 % of the NAV of the Fund's existing units plus an amount equal to the service fee of 0.40% per unit to 2.5% of the NAV of the converted Fund's Series A units (from which service fees of 1.00% per annum are paid) and 1.5% of the NAV of the converted Fund's Series F units;

(b) Adding a performance fee equal to 20% of the amount by which the Fund outperforms its benchmark;

(c) Amending the investment strategies, investment restrictions and permitted investments of the Fund to, amongst other things:

(i) Permit the Fund to invest in agribusiness sector resource issuers;

(ii) Permit sector allocations to be determined periodically by the Filer rather than on a semi-annual basis;

(iii) Eliminate the permitted ranges for each commodity sector;

(iv) Decrease the market capitalization requirement for resource issuers from $500 million to $150 million;

(v) Permit short-selling with limits and conditions consistent with the Short Selling Relief; and

(vi) Permit investments in debt securities, convertible securities and other equity-related securities of resource issuers.

15. As part of the Conversion, the Declaration of Trust will be amended to reflect the changes mentioned above.

16. The Information Circular sent to unitholders of the Fund in connection with the 2008 Unitholder Meeting (the "2008 Circular") disclosed that, as required by National Instrument 81-107 Independent Review Committee for Investment Funds, the Filer referred the proposal relating to the amendments to the Declaration of Trust in the event the Fund is converted to an open-end mutual fund to the independent review committee for the Fund (the Fund's "IRC") for its review. The 2008 Circular further disclosed that the IRC considered the conflict of interest matters presented and, after due consideration and reasonable inquiry, the IRC resolved that the proposed action achieves a fair and reasonable result for the Fund in respect of the conflicts and recommends the proposal.

17. On Conversion, the Fund's existing units will be converted to Series A units on a 1:1 basis by redesignating the Fund's existing units as Series A units. The number of units and NAV per unit will remain unchanged immediately following the Conversion.

18. On June 7, 2010 the Fund changed its name to Navina Global Resource Fund.

19. The Filer will continue to be the manager, trustee and portfolio advisor of the Fund following Conversion.

20. The Fund will continue to be a reporting issuer in all of the provinces of Canada.

21. Following Conversion, the investment practices of the Fund will continue to comply in all respects with the requirements of Part 2 of NI 81-102, except to the extent that the Fund has received permission, including in accordance with the Requested Relief, from the securities regulatory authorities to deviate therefrom.

22. The Filer expects the Fund's NAV to be above $500,000 on Conversion when units of the Fund become available for sale under the Fund's simplified prospectus.

23. The Filer believes that the Fund will be managed substantially similarly post-Conversion as it was pre-Conversion. Any significant differences between the Fund pre- and post-Conversion, including the difference in the management fee and addition of the performance fee, and of how those changes could have affected the performance had they been in effect throughout the pre-Conversion performance measurement period, will be disclosed in sales communications pertaining to the Fund.

The Conversion Relief

24. Without the Conversion Relief:

(a) either

(i) the Filer or other persons specified in section 3.1 of NI 81-102 would be required to invest not less than $150,000 in securities of the Fund; or

(ii) the simplified prospectus of the Fund would be required to state that the Fund will not issue securities other than those referred to in (i) above unless subscriptions aggregating not less than $500,000 have been received and accepted by the Fund from investors other than the persons referred to in (i) above, in which circumstances the Fund would be prohibited from distributing any securities unless such subscriptions together with payment therefor had been received; and

(b) none of the costs of the preparation and filing of the simplified prospectus may be borne by the Fund; and

(c) sales communications pertaining to the Fund would not be permitted to include performance data until the Fund, as a mutual fund, had distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months and sales communications pertaining to the Fund would only be permitted to include performance information of the Fund for the period commencing after the date on which the Fund, as a mutual fund, had commenced distributing securities under a simplified prospectus.

The Short Selling Relief

25. The Filer proposes that the Fund be authorized, upon Conversion, to engage in a limited, prudent and disciplined amount of short selling. The Filer is of the view that the Fund could benefit from the implementation and execution of a controlled and limited short selling strategy. This strategy would operate as a complement to the Fund's primary discipline of buying securities with the expectation that they will appreciate in market value.

26. Any short sales made by the Fund will be made consistently with the investment objectives and investment strategies of the Fund.

27. In order to effect a short sale, the Fund will borrow securities from either its custodian or a dealer (in either case, the "Borrowing Agent"), which Borrowing Agent may be acting either as principal for its own account or as agent for other lenders of securities.

28. The Fund will implement the following requirements and controls when conducting a short sale:

(a) securities will be sold short for cash, with the Fund assuming the obligation to return to the Borrowing Agent the securities borrowed to effect the short sale;

(b) the short sale will be effected through market facilities through which the securities sold short are normally bought and sold;

(c) the Fund will receive cash for the securities sold short within normal trading settlement periods for the market in which the short sale is effected;

(d) the securities sold short will be liquid securities that satisfy either (i) or (ii) below:

(i) the securities are listed and posted for trading on a stock exchange; and

(A) the issuer of the securities has a market capitalization of not less than C$150 million, or the equivalent thereof, at the time the short sale is effected; or

(B) the Fund's portfolio advisor has pre-arranged to borrow the securities for the purposes of such short sale; or

(ii) the securities are fixed income securities, bonds, debentures or other evidences of indebtedness of, or guaranteed by, the Government of Canada or any province or territory of Canada or the Government of the United States of America;

(e) at the time securities of a particular issuer are sold short:

(i) the aggregate market value of all securities of that issuer sold short by the Fund will not exceed 5% of the net assets of the Fund; and

(ii) the Fund will place a "stop-loss" order with a dealer to immediately purchase for the Fund an equal number of the same securities if the trading price of the securities exceeds 120% (or such lesser percentage as the Filer may determine) of the price at which the securities were sold short;

(f) the Fund will deposit Fund assets with the Borrowing Agent as security in connection with the short sale transaction;

(g) the Fund will maintain appropriate internal controls regarding short selling prior to conducting any short sales, including written policies and procedures and risk management controls;

(h) the Fund will keep proper books and records of all short sales and Fund assets deposited with Borrowing Agents as security; and

(i) the Fund will provide disclosure in its (final) simplified prospectus and (final) annual information form of the proposed use of short selling by the Fund, the specific risks related to short selling, and details of this exemptive relief prior to implementing the short selling strategy.

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 Conversion Relief is granted.

The decision of the principal regulator under the Legislation is that the Short Selling Relief is granted provided that:

1. the aggregate market value of all securities sold short by the Fund does not exceed 20% of the net assets of the Fund on a daily marked-to-market basis;

2. any short sale made by the Fund is subject to compliance with the investment objectives of the Fund;

3. the Fund maintains appropriate internal controls regarding its short sales, including written policies and procedures, risk management controls and proper books and records;

4. the Fund holds "cash cover" (as defined in NI 81-102) in an amount, including Fund assets deposited with Borrowing Agents as security in connection with short sale transactions, that is at least 150% of the aggregate market value of all securities sold short by the Fund on a daily marked-to-market basis;

5. no proceeds from short sales by the Fund are used by the Fund to purchase long positions in securities other than cash cover;

6. for short sale transactions in Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund shall be a registered dealer in Canada and a member of a self-regulatory organization that is a participating member of the Canadian Investor Protection Fund;

7. for short sale transactions outside of Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund:

(a) is a member of a stock exchange, and, as a result, subject to a regulatory audit; and

(b) has a net worth in excess of the equivalent of CDN $50 million determined from its most recent audited financial statements that have been made public;

8. except where the Borrowing Agent is the Fund's custodian, when the Fund deposits Fund assets with a Borrowing Agent as security in connection with a short sale transaction, the amount of Fund assets deposited with the Borrowing Agent does not, when aggregated with the amount of Fund assets already held by the Borrowing Agent as security for outstanding short sale transactions of the Fund, exceed 10% of the net assets of the Fund, taken at market value as at the time of the deposit;

9. the security interest provided by the Fund over any of its assets that is required to enable the Fund to effect short sale transactions is made in accordance with industry practice for that type of transaction and relates only to obligations arising under such short sale transactions;

10. prior to conducting any short sales, the Fund discloses in its (final) simplified prospectus a description of: (i) short selling; (ii) how the Fund intends to engage in short selling; (iii) the risks associated with short selling; and (iv) in the Investment Strategy section of the simplified prospectus, the Fund's strategy and this exemptive relief;

11. prior to conducting any short sales, the Fund discloses in its (final) annual information form the following information:

(a) that there are written policies and procedures in place that set out the objectives and goals for short selling and the risk management procedures applicable to short selling;

(b) who is responsible for setting and reviewing the policies and procedures referred to in the preceding paragraph (a), how often the policies and procedures are reviewed, and the extent and nature of the involvement of the board of directors of the Filer in the risk management process;

(c) the trading limits or other controls on short selling in place and who is responsible for authorizing the trading and placing limits or other controls on the trading;

(d) whether there are individuals or groups that monitor the risks independent of those who trade;

(e) whether risk measurement procedures or simulations are used to test the portfolio under stress conditions; and

12. prior to conducting any short sales, the Fund has provided to its securityholders not less than 60 days' written notice that discloses the Fund's intent to begin short selling transactions and the disclosure required in the Fund's simplified prospectus and annual information form as outlined in paragraphs 10 and 11 above and the Fund's initial simplified prospectus and annual information form and each renewal thereof has included such disclosure.

The Short Selling Relief shall terminate upon the coming into force of any legislation or rule of the principal regulator dealing with matters referred to in subsections 2.6(a), 2.6(c) and 6.1(1) of NI 81-102.