NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit an investment fund that uses specified derivatives to calculate its NAV on a weekly basis and not on a daily basis, subject to certain conditions.
Applicable Legislative Provisions
National Instrument 81-106 Investment Fund Continuous Disclosure, s. 14.2(3)(b).
July 29, 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
PRECIOUS METALS BULLION TRUST
The principal regulator in the Jurisdiction has received an application from the Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from Section 14.2(3)(b) of National Instrument 81-106 -- Investment Fund Continuous Disclosure (NI 81-106) which provides that the net asset value of an investment fund must be calculated at least once every business day if the investment fund uses specified derivatives (the Exemption Sought).
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 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 Alberta, British Columbia, Manitoba, Saskatchewan, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.
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 Fund:
1. The Fund was established pursuant to a declaration of trust dated as of March 27, 2009.
2. Brompton Funds Management Limited is the manager of the Fund (the Manager). The head office of the Manager is located in Ontario.
3. The investment objective of the Fund is to provide holders (the Unitholders) of redeemable, transferable units of the Fund (the Units) with a secure, low cost and convenient method of investing in gold, silver and platinum bullion on a Canadian dollar-hedged basis. The fund does not anticipate making regular distributions.
4. A preliminary long-form prospectus (the Preliminary Prospectus) was filed with respect to the offering (the Offering) of Combined Units at a price of $12.00 per Combined Unit. Each Combined Unit consists of one Unit and one transferrable warrant of the Fund (the Warrants). Each Warrant entitles the holder thereof to purchase one Unit at a subscription price of $12.00 on or before 5:00 p.m. (Toronto time) on January 31, 2010.
5. The net proceeds of the Offering will be used to purchase approximately equal dollar amounts of each of physical gold, silver and platinum bullion as soon as practicable following closing of the Offering in accordance with the investment objective and restrictions of the Fund.
6. Substantially all of the value of the Fund's portfolio will be hedged to the Canadian dollar. The Fund will use specified derivatives only for purposes of this hedging.
7. Units may be redeemed on a quarterly basis on the second last business day of each of January, April, July and October in each year commencing in April, 2010 (such a date being a Quarterly Redemption Date). Unitholders whose Units are redeemed on a Quarterly Redemption Date will receive a redemption price in an amount equal to 100% of the Net Asset Value per Unit (less any costs and expenses associated with the redemption). A Unitholder may elect to receive their pro rata share of the proceeds of a redemption in respect of a Quarterly Redemption Date in physical bullion provided that the redemption proceeds payable to the redeeming Unitholder is at least $1.5 million, or such other amount as may be determined and announced by the Manager from time to time.
8. In addition to the quarterly redemption right, Units may also be redeemed on the last business day of each month (other than in the months of January, April, July and October) (such a date being a Monthly Redemption Date). Unitholders whose Units are redeemed on a Monthly Redemption Date will receive a redemption price equal to 94% of the diluted Net Asset Value per Unit on the Monthly Redemption Date less any costs and expenses associated with the redemption.
9. The Toronto Stock Exchange (the TSX) has conditionally approved the listing of the Units and the Warrants subject to the Fund fulfilling all of the requirements of the TSX on or before September 18, 2009.
10. The Fund filed the Preliminary Prospectus in accordance with Form 41-101F2 of National Instrument 41-101 -- General Prospectus Requirements and does not intend on being in continuous distribution.
11. Under section 14.2(3)(b) of NI 81-106, an investment fund that is a reporting issuer that uses or holds specified derivatives, such as the Fund intends to do, must calculate its net asset value on a daily basis.
12. The Fund proposes to calculate the Net Asset Value on the Thursday of each week (or if any Thursday is not a business day, the immediately preceding business day) and the last business day of each month (a Valuation Date).
13. The Fund will calculate a basic Net Asset Value per Unit on each Valuation Date, and, in the event that the closing market price of the Units exceeds the subscription price per Unit for any Units issuable upon the exercise of any outstanding rights, warrants, options or other similar securities issued by the Fund on a Valuation Date, the Fund will also calculate a diluted Net Asset Value per Unit. If a diluted Net Asset Value per Unit is calculated, the Manager will make both the basic and the diluted Net Asset Value per Unit available to the financial press for publication, and will post both (a) the basic and diluted Net Asset Value per Unit, and (b) an explanation of the difference between the basic and diluted Net Asset Value per Unit, on its website.
14. The Preliminary Prospectus discloses, and the final prospectus of the Fund will disclose, that the basic Net Asset Value per Unit (and the diluted Net Asset Value per Unit, if applicable) will be calculated and made available to the financial press for publication on a weekly basis and that the Manager will post the basic and/or diluted Net Asset Value per Unit on its website.
15. The Fund is not in default of the securities legislation of any province or territory of Canada.
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 Units are listed on the TSX; and
(b) the Fund calculates the Net Asset Value per Unit (and the diluted Net Asset Value per Unit, if applicable) at least weekly.