NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit investment funds representing two tiers of a two-tiered fund structure that use specified derivatives to calculate their 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, ss.14.2(3)(b), 17.1.
October 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
OCP INVESTMENT TRUST
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) for relief from the requirement in section 14.2(3)(b) of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) 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 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 Quebec.
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 an investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust.
2. Onex Credit Partners, LLC (the Manager, Promoter, and Advisor) will be responsible for providing or arranging for the provision of administrative services required by the Filer. The head office of the Manager is located in New Jersey.
3. Neither the Filer nor the Manager are in default of securities legislation in any jurisdiction.
4. The Filer filed a preliminary non-offering prospectus (the Preliminary Prospectus) dated October 9, 2009 in the provinces of Ontario and Quebec, a receipt for which was issued by the Ontario Securities Commission on October 13, 2009. The Filer has filed the Preliminary Prospectus only for the purpose of becoming a reporting issuer. The Filer will only issue trust units (Units) in reliance on exemptions from applicable prospectus and registration requirements. The Units will not be listed on a stock exchange.
5. The Filer has been established for the purpose of acquiring and holding a portfolio (the Portfolio) consisting primarily of senior debt obligations. The Filer's investment objectives are to maximize total returns for holders of Units while preserving capital. The Filer may invest in or use derivative instruments to the extent considered appropriate by the Advisor, as disclosed in the Preliminary Prospectus.
6. The Manager is also the manager, promoter, and advisor of OCP Credit Strategy Fund (the Fund). The Fund's investment objectives are to: (i) to maximize total returns for unitholders on a tax-advantaged basis, (ii) to provide unitholders with attractive, quarterly, tax-advantaged distributions, initially targeted to be $0.70 per annum, representing an annual yield of 7% based on the original issue price of $10.00 per Unit, and (iii) to preserve capital. The Fund will seek to achieve its investment objectives through exposure to the Portfolio.
7. The Fund filed a preliminary prospectus dated September 29, 2009 in each of the provinces of Canada with respect to a public offering of units of the Fund, a receipt for which was issued by the Ontario Securities Commission on September 30, 2009. The Fund's offering is a one-time offering and the Fund will not continuously distribute Units.
8. The Fund will seek to achieve its investment objective by entering into a forward purchase and sale agreement (the Forward Agreement) with a Canadian chartered bank or one of its affiliates whose obligations are guaranteed by the Canadian chartered bank (the Counterparty) pursuant to which the Counterparty will agree to deliver to the Fund "Canadian securities" (within the meaning of the Income Tax Act (Canada)) with an aggregate value equal to the redemption proceeds of a corresponding number of units of the Filer and/or the proceeds realized by the Counterparty on the disposition of the assets in the Portfolio, net of amount owing by the Fund to the Counterparty.
9. The Counterparty is expected to be the only owner of Units. Units will be redeemable at the demand of unitholders (the Unitholders) of the Filer. On redemption, a Unitholder will receive for each Unit redeemed an amount equal to the net asset value per Unit. The net asset value per Unit will be equal to the amount by which the total assets of the Filer exceed its total liabilities on a per Unit basis and, accordingly, will be based upon the value of the Portfolio.
10. 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 Filer intends to do, must calculate its net asset value on a daily basis.
11. The Filer proposes to calculate net asset value on the Thursday of each week (or if any Thursday is not a business day, the immediately preceding business day).
12. The Preliminary Prospectus discloses, and the final prospectus of the Filer will disclose, that the net asset value per Unit will be calculated on a weekly basis. The Filer will also provide to the public on request the net asset value per Unit.
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 so long as:
(a) the Filer calculates net asset value per Unit at least weekly; and
(b) the Units are not offered to the public and only issued under exemptions from the prospectus and registration requirements.