Navina Capital Corp. et al.

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 top fund to qualify its units for distribution by long form prospectus using Form 41-101F2 rather than by simplified prospectus using Form 81-101F1; from sections 2.1(1), 2.5(2)(a) and 2.5(2)(c) of NI 81-102 to permit its investment in bottom fund through forward contract, bottom fund to operate in accordance with NI 81-102 and be a reporting issuer pursuant to a non-offering prospectus; from section 3.3 of NI 81-102 to permit it initially to bear the expenses of the offering, section 10.3 of NI 81-102 to permit it to process redemptions of its units at their NAV per unit determined on a weekly redemption date and section 12.1(1) of NI 81-102 to relieve it from the compliance reporting prescribed by that section.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 2.1, 6.1.

National Instrument 81-102 Mutual Funds, 2.1(1), 2.5(2)(a), 2.5(2)(c), 3.3, 10.3, 12.1(1), 19.1.

May 21, 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),

NAVINA/LAZARD U.S. HIGH YIELD

BOND FUND (the Top Fund) and

NAVINA/LAZARD STRATEGIC 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 Top Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting it from the following requirements of National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101) and National Instrument 81-102 -- Mutual Funds (NI 81-102) (the Requested Relief):

(a) Section 2.1 of NI 81-101 to permit it to qualify its units for distribution by long form prospectus using Form 41-101F2 prescribed under National Instrument 41-101 -- General Prospectus Requirements (NI 41-101) rather than by simplified prospectus using Form 81-101F1 prescribed under NI 81-101;

(b) Section 2.1(1) of NI 81-102 to permit it to enter into the Forward Agreement (as defined below) to indirectly invest more than 10% of its net assets in the Bottom Fund;

(c) Sections 2.5(2)(a) and 2.5(2)(c) of NI 81-102 to permit it to make and hold an indirect investment through the Forward Agreement (as defined below) in the Bottom Fund;

(d) Section 3.3 of NI 81-102 to permit it initially to bear the expenses of the Offering (as defined below);

(e) Section 10.3 of NI 81-102 to permit it to process redemptions of its units at their net asset value (NAV) per unit determined on the Redemption Date (as defined below); and

(f) Section 12.1(1) of NI 81-102 to relieve it from the compliance reporting prescribed by that section.

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

1. The Ontario Securities Commission is the principal regulator for this application; and

2. The Top 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 each of the provinces of Canada other than the province of Ontario.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

This decision is based on the following facts represented by the Top Fund:

1. The Top Fund is a mutual fund trust governed by the laws of Ontario. The Top Fund proposes to issue two classes of units, Class A units and Class F units (the Offering).

2. The Top Fund's investment objectives are to provide its unitholders with: (a) monthly tax-efficient distributions initially targeted to be $0.058 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 high yield corporate bonds (the Portfolio). The Top Fund will obtain exposure to the Portfolio by entering into a forward agreement (the Forward Agreement).

3. The Bottom Fund will be a newly created mutual fund trust governed by the laws of Ontario established to acquire the Portfolio.

4. 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 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 or before the third anniversary of the closing of the Offering (the Forward Termination Date), as the purchase price for the Common Share Portfolio, an amount equal to 100% of the redemption proceeds of a corresponding number of units of the Bottom Fund. The Top Fund will partially settle the Forward Agreement prior to the Forward Termination Date in order to fund monthly tax-efficient distributions as well as redemptions of its units by its unitholders from time to time and for payment of expenses of the Top Fund.

5. The Top Fund filed a preliminary long form prospectus dated April 7, 2009 on SEDAR under SEDAR Project #1402288 in all provinces of Canada in respect of the Offering (the Preliminary Prospectus) and intends to file and obtain a receipt for a final prospectus (the Final Prospectus).

6. Units of the Top Fund will not be listed on an exchange.

7. The Bottom Fund filed a preliminary long form non-offering prospectus dated April 14, 2009 on SEDAR under SEDAR Project #1404655 in Ontario and Quebec and intends to file and obtain a receipt for a final prospectus.

8. Units of the Bottom Fund will be made available only to the Counterparty based on applicable exemptions from the prospectus requirements contained in securities legislation.

9. The Bottom Fund has not and will not offer its units by prospectus and will therefore not be subject to NI 81-101 or NI 81-102. However, the Bottom Fund will operate in accordance with NI 81-102.

10. The Manager is the manager of both Funds. The Manager has retained Lazard Asset Management (Canada) Inc. (the Portfolio Advisor) to provide investment advisory services to the Bottom Fund and to acquire the Common Share Portfolio on behalf of the Top Fund in consultation with the Counterparty. The Portfolio Advisor is registered in Ontario in the category of Non-Canadian Adviser (Investment Counsel & Portfolio Manager). The Portfolio Advisor will appoint Lazard Asset Management LLC (the Sub-Advisor) as its sub-advisor. The Portfolio Advisor will be responsible for all investment advisory services that are provided to the Funds by the Sub-Advisor.

11. 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.

12. The Top Fund intends initially to bear the expenses of the Offering to a maximum of 1.5% of the gross proceeds of the Offering. However, the Manager has agreed to reimburse the Top Fund for those expenses in quarterly instalments equal to one quarter of 1% of the NAV per annum of the Top Fund over a period of eight years commencing on or before September 30, 2009. This obligation will be evidenced by a promissory note to be issued to the Top Fund by the Manager at the closing of the Offering which will bear interest from the date of issue at the prime rate of interest posted by the Top Fund's primary lender from time to time (the Note). The balance of the Note outstanding on the due date will be paid by the Manager on the due date. The Note will be allocated between the Class A units and the Class F units of the Top Fund on the basis of their respective NAVs. If units of the Top Fund are redeemed, the pro rata portion of the Note then outstanding will be forgiven and the Note then outstanding will be reduced by that portion.

13. The Offering will not close unless the minimum proceeds are achieved and all investors purchasing pursuant to the Offering will be subject at the same time to the same expenses of the Offering borne by the Top Fund. The Final Prospectus for the Top Fund will fully disclose the approximate expected amount of the expenses of the Offering. The estimated expenses of the Offering are not expected to have a significant impact on the NAV of the Top Fund.

14. The NAV and the NAV per unit of each class of the Top Fund will be calculated every business day. However, the Top Fund's units will only be redeemable commencing 30 days following the closing of the Offering and at their NAV per unit (less any costs of funding the redemption and less the pro rata portion of the Note then outstanding) determined on the last business day of each week (the Redemption Date). Since redemption requests may be made at any time with a cut-off of 5 business days prior to the Redemption Date, the redemption price may not be the NAV next determined after receipt by the Top Fund of the redemption order. The redemption process is disclosed in the Preliminary Prospectus and will be disclosed in the Final Prospectus.

15. The Top Fund intends:

(a) The Offering to be a one-time offering through the investment dealer channel like any other one-time offering of units through the investment dealer channel, except that it intends to provide liquidity by redemptions at the NAV per unit on the Redemption Date of its units only and does not intend to list its units on any exchange;

(b) Its structure to provide tax-efficient distributions from the Top Fund to investors; and

(c) By not listing its units on an exchange, to attempt to improve secondary market trading issues that have developed for listed units of closed-end funds, including that: (i) they tend to trade at a discount to NAV; (ii) they often carry a large bid/ask spread; and (iii) low volumes can mean that an investor with a significant position can move the market lower if that investor tries to sell his/her entire holding.

16. While the Top Fund will be a mutual fund under securities legislation, it will therefore differ from a conventional mutual fund in that:

(a) It will not be in continuous distribution; and

(b) The initial public offering of its units will be conducted through the investment dealer channel, as is the case for non-redeemable investment funds.

17. The Preliminary Prospectus discloses and the Final Prospectus will disclose the investment objectives and strategies, the fees and expenses and organization and management of the Funds and all risks related to investing in the Funds including as they relate to the structure used by the Funds.

18. Absent obtaining the relief requested from Section 2.1 of NI 81-101, the Top Fund would be required to qualify its units by simplified prospectus using Form NI 81-101F1. The disclosure requirements of Form NI 81-101F1 are not intended for investment funds making a one-time offering through the investment dealer channel. The use of the simplified prospectus form to sell units of the Top Fund in the investment dealer channel may create confusion and may consequently negatively impact the marketing of the units of the Top Fund.

19. Absent obtaining the relief requested from Section 2.1(1) of NI 81-102, the Top Fund may not enter into the Forward Agreement to indirectly invest more than 10% of its net assets in the Bottom Fund and, absent obtaining the relief requested from Sections 2.5(2)(a) and 2.5(2)(c) of NI 81-102, the Top Fund may not make and hold an indirect investment through the Forward Agreement in the Bottom Fund. The Funds will otherwise comply with the requirements of section 2.5 of NI 81-102.

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:

(a) The Top Fund files a final prospectus that is a long form prospectus in the form of Form 41-101F2 prescribed under NI 41-101;

(b) The Top Fund is subject to NI 81-102 and the Bottom Fund will operate in accordance with NI 81-102;

(c) The exposure of the Top Fund to securities of the Bottom Fund is in accordance with the fundamental investment objectives of the Top Fund;

(d) The Final Prospectus discloses that the Top Fund will obtain exposure to securities of the Bottom Fund and the risks associated with such an investment;

(e) No securities of the Bottom Fund are distributed in Canada other than to the Counterparty under the Forward Agreement;

(f) The indirect investment by the Top Fund in securities of the Bottom Fund through the Forward Agreement is made in compliance with each provision of section 2.5 of NI 81-102, except for sections 2.5(2)(a) and 2.5(2)(c) of NI 81-102; and

(g) The expenses of the Offering borne by the Top Fund do not exceed 1.5% of the Offering.