Norrep Short Duration 2015 Flow-Through Limited Partnership and Norrep Capital Management Ltd

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 81-106, s. 17.1 -- Continuous Disclosure Requirements for Investment Funds.

AIF requirement -- Relief is sought from subsection 9.2 of NI 81-106 that requires a fund that does not have a current prospectus as at its financial year end to prepare an annual information form -- The issuers are a short-term vehicles formed solely to invest their available funds in flow-through shares of resource issuers; the issuers' securities are not redeemable and there is no secondary trading in the issuers' securities; the issuers' other continuous disclosure documents will provide all relevant information necessary for investors to understand the issuers' business, financial position and future plans.

Proxy voting record -- Relief is sought from subsections 10.3 and 10.4 of NI 81-106 that requires a fund to maintain a proxy voting record and annually to post the proxy voting record on its website -- The issuers are short-term vehicles formed solely to invest their available funds in flow-through shares of resource issuers; the issuers' securities are not redeemable and there is no secondary trading in the issuers' securities; the issuers' other continuous disclosure documents will provide all relevant information necessary for investors to understand the issuers' business, financial position and future plans.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 9.2, 10.3, 10.4, 17.1.

Citation: Re Norrep Short Duration 2015 Flow-Through Limited Partnership, 2015 ABASC 722

May 22, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF NORREP SHORT DURATION 2015 FLOW-THROUGH LIMITED PARTNERSHIP (the 2015 FTLP) AND NORREP CAPITAL MANAGEMENT LTD. (the Manager, and together with the 2015 FTLP, the Filers)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filers on behalf of the 2015 FTLP and such other future flow-through limited partnerships that are established by the Manager and have a general partner with the same parent company as the General Partner (defined below) (the Future FTLPs, and together with the 2015 FTLP, the FTLPs and each an FTLP) for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from:

(a) the requirement in section 9.2 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) to prepare and file an annual information form (AIF) (the AIF Relief);

(b) the requirement in section 10.3 of NI 81-106 to maintain a proxy voting record (the Proxy Voting Record); and

(c) the requirements in section 10.4 of NI 81-106 to prepare a Proxy Voting Record on an annual basis for the period ending June 30 of each year, to post the Proxy Voting Record on the website of the FTLP no later than August 31 of each year, and to send the most recent copy of the proxy voting policies and procedures and Proxy Voting Record, without charge, to the limited partners of the FTLP upon request (paragraphs (b) and (c) are, together, the Proxy Voting Record Relief) (the AIF Relief and the Proxy Voting Record Relief are, together, the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission (the ASC) is the principal regulator for this application;

(b) the Filers have 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 excluding Québec; and

(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

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

Representations

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

1. The 2015 FTLP is a limited partnership duly formed under the laws of the Province of Alberta on December 10, 2014 and each Future FTLP will be a limited partnership duly formed under the laws of the Province of Alberta.

2. The principal place of business and registered office of each of the Filer is located in Calgary, Alberta.

3. The 2015 FTLP is, and each Future FTLP will be, a reporting issuer in each of the provinces of Canada, excluding Québec. The 2015 FTLP is, and each Future FTLP will be, a non-redeemable investment fund subject to NI 81-106.

4. The general partner of the 2015 FTLP is Norrep 2015 Management Inc. (General Partner). The General Partner is incorporated under the Business Corporations Act (Alberta) and has its principal head office in Calgary, Alberta.

5. The Manager is the investment fund manager and portfolio manager of the 2015 FTLP. The Manager will also be the investment fund manager and portfolio manager of each Future FTLP. The Manager is registered as an exempt market dealer, investment fund manager and portfolio manager in the Provinces of Alberta and Ontario, an exempt market dealer in the Province of British Columbia and an investment fund manager in the Province of Newfoundland and Labrador.

6. Neither the Manager, the 2015 FTLP nor the General Partner are in default of securities legislation of any province or territory in Canada.

7. The 2015 FTLP was, and each Future FTLP will be, organized for the sole purpose of investing in flow-through shares of issuers whose principal business is oil and gas exploration, development and production, mineral exploration, development and production, or renewable energy development and production (Resource Companies).

8. The 2015 FTLP's investment objective is, and each Future FTLP's investment objective will be, to achieve capital appreciation by entering into flow-through investment agreements, pursuant to which the FTLP will subscribe for flow-through shares of one or more Resource Companies and each Resource Company will agree to incur and renounce to the FTLP, in amounts equal to the subscription price of the flow-through shares, expenditures in respect of resource exploration and development which qualify as Canadian exploration expense or as Canadian development expense which may be renounced as Canadian exploration expense to the FTLP.

9. The limited partnership units of an FTLP will not be listed or quoted for trading on any stock exchange or market. None of the limited partnership units of an FTLP will be redeemable by its limited partners. Generally, limited partnership units are not transferred since limited partners must be holders of units on the last day of each fiscal year of the FTLP in order to obtain the desired tax deduction. In addition, other than the issuance of the initial limited partnership units to the initial limited partners and other than as described in this order, it is not contemplated that any FTLP will issue any limited partnership units.

10. Unless a material change takes place in the business and affairs of an FTLP:

(a) the limited partners of the FTLP will obtain adequate financial information concerning the FTLP from the interim financial statements and annual audited financial statements of the FTLP together with the auditor's report distributed to the limited partners; and

(b) the Prospectus (defined below) for each FTLP and the interim financial statements will provide sufficient background materials and the explanations necessary for a limited partner to understand the business, financial position and future plans of the FTLP.

11. If a material change occurs in the affairs of an FTLP, the FTLP will comply with the requirements of section 11.2 of NI 81-106.

12. The 2015 FTLP received a final receipt dated February 24, 2015 on behalf of the local securities regulatory authority or regulator in each of the provinces of Canada, excluding Québec, for the 2015 FTLP's final prospectus dated February 24, 2015 (the Prospectus) relating to an offering in those jurisdictions of up to 7,500,000 limited partnership units (the Offering). The 2015 FTLP completed the sale of an aggregate of 1,936,713 limited partnership units under the Offering, which had a final closing date of May 5, 2015 (the Closing Date).

13. In accordance with the 2015 FTLP's limited partnership agreement dated December 10, 2014 and as amended and restated February 23, 2015, and as may further be amended from time to time (the Partnership Agreement), the General Partner intends to implement, at a date no later than September 30, 2016, a transaction pursuant to which the assets of the 2015 FTLP will be transferred to Norrep Opportunities Corp. or another mutual fund corporation on a tax deferred basis, in exchange for securities of Norrep Opportunities Corp., following which the securities of Norrep Opportunities Corp. will be distributed to the limited partners of the 2015 FTLP on a pro rata tax deferred basis upon the dissolution of the 2015 FTLP. If the foregoing transaction is not implemented by September 30, 2016, the Partnership Agreement states that the 2015 FTLP will be terminated by December 31, 2016 unless extended by the General Partner in accordance with the Partnership Agreement. If the term of the 2015 FTLP is extended by the General Partner in accordance with the Partnership Agreement, the 2015 FTLP will within 30 months of the Closing Date undertake a reorganization with or transfer its assets to a mutual fund that is managed by the Manager or by an affiliate of the Manager. The prospectus of the 2015 FTLP discloses the circumstances where the term of the 2015 FTLP will be extended beyond September 30, 2016.

14. The 2015 FTLP's range of business activities is limited by the Partnership Agreement to investing in securities and flow-through shares of Resource Companies and seeking to implement a transaction in connection with the termination of the 2015 FTLP to provide liquidity to the limited partners and activities incidental thereto.

15. Given the limited range of business activities to be conducted by an FTLP, the short duration of its existence and the nature of the investments of the limited partners, the preparation and distribution of an AIF by the FTLP would not be of benefit to the limited partners and may impose a material financial burden on the FTLP.

16. If a Future FTLP is established, the Manager will file a notice with the ASC at least 30 days before the filing deadline for the first AIF required to be filed under section 9.3 of NI 81-106. The notice will set forth the legal name of the FTLP, refer to the citation for this decision and indicate that the FTLP has been granted the AIF Relief under this decision.

17. Investors that have purchased, or will purchase, units of an FTLP have been, or will be, provided with a prospectus disclosing the policies regarding how the FTLP votes the flow-through shares of Resource Companies that it holds pursuant to section 10.2 of NI 81-106.

18. Given the short lifespan of an FTLP, the production of a Proxy Voting Record would provide the limited partners of the FTLP with very little opportunity for recourse if they disagreed with the manner in which the FTLP exercised or failed to exercise its proxy voting rights, as the FTLP would likely be dissolved by the time any potential change could materialize.

19. Preparing, and making available to limited partners of an FTLP, a Proxy Voting Record will not be of any benefit to limited partners and may impose a material financial burden on the FTLP.

20. The Filers are of the view Requested Relief is not against the public interest and is in the best interests of the 2015 FTLP, the Future FTLPs and their limited partners.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted in respect of an FTLP provided that by the date the FTLP needs to rely on the Requested Relief, and on an ongoing basis thereafter, the FTLP will be in compliance with each of the following conditions:

(a) the FTLP's range of business activities is limited by its partnership agreement to investing in securities and flow-through shares of Resource Companies and seeking to implement a transaction in connection with the termination of the FTLP to provide liquidity to its limited partners and activities incidental thereto;

(b) the investment objective of the FTLP is to achieve capital appreciation by entering into flow-through investment agreements, pursuant to which the FTLP will subscribe for flow-through shares of the Resource Company and the Resource Company will agree to incur and renounce to the FTLP, in amounts equal to the subscription price of the flow-through shares, expenditures in respect of resource exploration and development which qualify as Canadian exploration expense or as Canadian development expense which may be renounced as Canadian exploration expense to the FTLP;

(c) the FTLP has filed a final prospectus (the FTLP Prospectus) in compliance with securities legislation before distributing the limited partnership units of the FTLP (the Distribution);

(d) the limited partnership units of the FTLP are not listed or quoted for trading on any stock exchange or market and none of the limited partnership units of the FTLP are redeemable by its limited partners;

(e) the FTLP is not in default of securities legislation in any jurisdiction of Canada; and

(f) the terms of the Partnership Agreement applicable to the FTLP provide that the FTLP will cease to exist within 30 months of the closing date of the Distribution by completing a reorganization with, or the transfer of its assets to, a mutual fund that is managed by the Manager or by an affiliate of the Manager.

"David Linder, QC"

Executive Director