NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit investment fund that uses specified derivatives to calculate its NAV twice monthly 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.
April 6, 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
TRIDENT PERFORMANCE CORP. II
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) exempting the Filer from the requirement contained in section 14.2(3)(b) of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for an investment fund that uses specified derivatives to calculate its net asset value (NAV) at least once every business day (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(i) the Ontario Securities Commission is the principal regulator for this application; and
(ii) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces of Canada.
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 a corporation incorporated under the laws of the province of Ontario and is a non-redeemable investment fund. The Filer is a reporting issuer in each of the provinces of Canada. The head office of the Filer is located in Toronto, Ontario. The Filer is not in default of the securities legislation in any of the provinces of Canada.
2. The Filer's manager is CI Investments Inc. (the Manager). The head office of the Manager is located in Toronto, Ontario.
3. The Filer will make an offering (the Offering) on a best efforts basis to the public of Class A shares (the Shares) in each of the provinces of Canada.
4. The Filer has filed a long form final prospectus dated March 31, 2009 (the Prospectus) in respect of the Offering and the Shares with the securities regulatory authorities in each of the provinces of Canada and received a receipt for the Prospectus dated March 31, 2009. The Offering is a one-time offering and the Filer will not continuously distribute the Shares.
5. The Shares are expected to be listed and posted for trading on the Toronto Stock Exchange (the TSX). The TSX has conditionally approved the listing of the Shares. Listing is subject to the Filer fulfilling all of the requirements of the TSX on or before June 18, 2009, including distribution of the Shares to a minimum number of public securityholders.
6. The Filer's investment objective is to provide tax-efficient risk-adjusted long term rates of return by obtaining exposure to an investment portfolio which may consist of equity and fixed income securities, commodities, currencies and derivative instruments which provide exposure to any or all of the foregoing or to general or specific market indices (the Global Macroeconomic Portfolio).
7. The Global Macroeconomic Portfolio is held by Trident Performance Trust (the Trust). The Trust is an investment trust established under the laws of the province of Ontario by the Manager as trustee.
8. The net proceeds of the Offering will be invested in a portfolio of common shares of Canadian public companies (the Common Share Portfolio). The Filer also will enter into one or more forward purchase and sale agreements (collectively, the Forward Agreements) with counterparties (the Counterparties). Each Counterparty will be a Canadian chartered bank or an affiliate thereof whose obligations under its Forward Agreement are guaranteed by a Canadian chartered bank.
9. The Forward Agreements will provide the Filer with exposure to the returns of the Global Macroeconomic Portfolio. Each Counterparty, pursuant to its Forward Agreement, will agree to pay to the Filer on or about February 28, 2018 (the Forward Date), as the purchase price for a portion of the Common Share Portfolio, an amount equal to 100% of the redemption proceeds that would be paid by the Trust to holders of an applicable number of units of the Trust.
10. The Filer will partially settle the Forward Agreements, from time to time, prior to the Forward Date in order to fund redemptions of Shares and to fund the payment of expenses of the Filer.
11. Shares will be redeemable on the last day of each month (each a Monthly Redemption Date). A holder of Shares of the Filer (a Shareholder) who properly surrenders a Share for redemption at least 20 business days prior to a Monthly Redemption Date will receive on or before the 15th business day following such Monthly Redemption Date payment of the Monthly Redemption Price per Share (as defined below) for such Share calculated by reference to the price at which Shares are trading on the TSX (subject to the Filer's right to suspend redemptions in certain circumstances).
12. The Monthly Redemption Price per Share will be equal to the lesser of:
(a) 94% of the weighted average trading price of the Shares on the TSX during the 15 trading days preceding the applicable Monthly Redemption Date, and
(b) the closing market price of the Shares on the TSX on the applicable Monthly Redemption Date,
less any costs associated with the redemption including, without limitation, if the Manager determines that it is not practicable or necessary for the Filer to partially settle the Forward Agreements to fund such redemption, the aggregate of all brokerage fees, commissions and other transaction costs that the Manager estimates would have resulted from such a partial settlement (Redemption Costs).
13. Commencing in 2010, Shares also may be surrendered for redemption on December 31 in each year (a December Redemption Date). A Shareholder who properly surrenders a Share for redemption at least 20 business days prior to a December Redemption Date will receive on or before the 15th business day following such December Redemption Date payment of the Redemption Price per Share (as defined below) for such Share calculated by reference to the NAV of the Share (subject to the Filer's right to suspend redemptions in certain circumstances).
14. The Redemption Price per Share generally will be equal to:
(a) the NAV per Share as at the December Redemption Date, less
(b) any applicable Redemption Costs
provided that, at the sole option of the Manager for the purposes of calculating the Redemption Price per Share, the Manager may value any security in the Common Share Portfolio and, for purposes of valuing the Forward Agreements, any security to which the Filer has direct or indirect exposure by reason of the Forward Agreements, in either case which is listed or traded on a stock exchange (or if more than one, on the stock exchange where the security primarily trades, as determined by the Manager) by taking the volume weighted average trading price of the security on such exchange during the three most recent trading days of such exchange ending on and including such December Redemption Date or, lacking any sales during such period or any record thereof, the simple average of the latest available offer price and the latest available bid price (unless in the opinion of the Manager such value does not reflect the value thereof and in which case the fair value as determined by the Manager shall be used), all as reported by any means in common use.
15. Holders of Shares will have the opportunity to trade their Shares on a daily basis on the TSX. As such, Shareholders do not need to rely on the redemption features attached to the Shares in order to provide liquidity for their Shares.
16. Under clause 14.2(3)(b) of NI 81-106, an investment fund that is a reporting issuer and that uses specified derivatives, such as the Filer intends to do, must calculate its NAV on a daily basis.
17. The Filer intends to calculate its NAV and NAV per Share twice per month, namely on each Valuation Date, a Valuation Date being the second Friday of each month and each Monthly Redemption Date and December Redemption Date.
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 provided that:
(a) the Prospectus discloses that the net asset value per Share will be provided by the Manager to the public on request and further discloses that the net asset value per Share is accessible to the public on the internet at www.ci.com;
(b) the Shares remain listed on the TSX; and
(c) the Filer calculates its net asset value per Share at least twice a month.