Pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, the fund and their manager are exempted from the dealer registration requirement for certain limited trading activities to be carried out by these parties in connection with warrant offerings by the fund, as the limited trading activities involve: i) the forwarding of short form prospectuses and the distribution of warrants to acquire units to existing holders of units and ii) the subsequent distribution of units to existing holders of warrants, upon their exercise of the warrants, through an appropriately registered dealer.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 74(1).
Multilateral Instrument 11-102 Passport System, s. 4.7(1).
National Instrument 45-106 Prospectus and Registration Exemptions, ss. 2.1, 3.1, 3.42, 8.5.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 8.5.
May 2, 2014
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 AUSTRALIAN REIT INCOME FUND (the Fund) AND HARVEST PORTFOLIOS GROUP INC. (the Manager) (collectively with the Fund, the Filers)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filers from the dealer registration requirement in the Legislation in respect of certain trades (the Warrant Offering Activities) to be carried out by the Manager, on behalf of the Fund, in connection with a proposed offering (the Warrant Offering) of Class A warrants (the Class A Warrants) to acquire Class A units (theClass A Units) of the Fund, and Class F warrants (the Class F Warrants) to acquire Class F units (the Class F Units) of the Fund, to be made pursuant to a short form (final) prospectus (the Warrant Prospectus). The Class A Units and the Class F Units are collectively referred to as Units. The Class A Warrants and the Class F Warrants are collectively referred to as Warrants.
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. each 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 British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut (collectively, the Passport Jurisdictions).
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 Filers:
1. The Fund is a trust established by a declaration of trust dated February 26, 2013 under the laws of the province of Ontario (the Declaration of Trust).
2. The Manager is the manager, trustee and promoter of the Fund.
3. The Manager was appointed as manager of the Fund and performs management functions and administrative services for the Fund pursuant to the Declaration of Trust.
4. The Manager has retained Macquarie Private Portfolio Management Limited as the portfolio manager to provide portfolio management services to the Fund.
5. The Manager has retained Avenue Investment Management Inc. as the investment advisor in respect of the Fund's currency hedging strategy.
6. The Fund is a reporting issuer in each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction.
7. The Fund is not a mutual fund under securities legislation of the provinces and territories of Canada.
8. The head office of each of the Filers is located in Oakville, Ontario.
9. The authorized capital of the Fund consists of an unlimited number of Class A Units and Class F Units. The Class A Units are listed and posted for trading on the Toronto Stock Exchange (the TSX). The Class F Units are not listed on any exchange, including the TSX.
10. The Fund filed a final long form prospectus dated February 26, 2013, under the securities legislation of Ontario and each of the Passport Jurisdictions for the initial public offering of Units
11. The Fund is not, nor has it ever been, in continuous distribution of securities.
12. The investment objectives of the Fund are to provide holders of Units (Unitholders) with: (i) stable monthly cash distributions; and (ii) the opportunity for capital appreciation. The Fund invests in an actively managed portfolio comprised primarily of equity securities listed on the Australian Securities Exchange issued by Australian real estate investment trusts and to a lesser extent, issuers principally engaged in the real estate industry in Australia.
13. The Fund's portfolio consists of securities issued by Australian REITs and other issuers principally engaged in the real estate industry in Australia.
14. The Fund is subject to certain investment restrictions that, among other things, limit the securities that may be acquired for the investment portfolio of the Fund.
15. In connection with the Warrant Offering, the Fund has filed a preliminary short form prospectus, under the securities legislation of Ontario and each of the Passport Jurisdictions. Under the Warrant Offering, each holder of a Class A Unit as at a specified record date will be entitled to receive, for no consideration, one Class A Warrant for each Class A Unit held by such holder and each holder of a Class F Unit as at a specified record date will be entitled to receive, for no consideration, one Class F Warrant for each Class F Unit held by such holder.
16. Holders of Class A Warrants and Class F Warrants will be entitled, upon the exercise of their Class A Warrants and Class F Warrants, to subscribe for Class A Units and Class F Units, respectively, pursuant to subscription privileges provided for in the Warrants, at a subscription price to be specified in the Warrant Prospectus. Two Warrants of a class will entitle the holder to subscribe for one Unit of such class under a basic subscription privilege. Holders of Warrants who exercise Warrants under the basic subscription privilege may also subscribe, pro rata, for additional Units that are not subscribed for by other holders under the basic subscription privilege, pursuant to the terms of an additional subscription privilege.
17. The term for the exercise of Warrants (including both the basic subscription privilege and the additional subscription privilege) will not exceed six months.
18. The Fund will apply to list the Class A Warrants and the Class A Units issuable on the due exercise of the Class A Warrants on the TSX. The Class F Warrants and the Class F Units will not be listed on any exchange. The Warrants, once issued, may be transferred or exercised by the holder.
19. The Warrant Offering Activities will consist of:
(a) the distribution of the Warrant Prospectus and the issuance of Warrants to the Unitholders (as at the record date specified in the Warrant Prospectus), after the Warrant Prospectus has been filed, and receipts obtained, under the securities legislation of Ontario and each of the Passport Jurisdictions; and
(b) the distribution of Units to holders of Warrants, upon the exercise of such Warrants by the holder, through a registered dealer that is registered in a category that permits the registered dealer to make such distribution.
20. The Fund is in the business of trading by virtue of its portfolio investing and trading activities. As a result, its capital raising activities, including the Warrant Offering Activities, would require each of the Filers to register as a dealer in the absence of this decision (or another available exemption from the dealer registration requirement).
21. Section 8.5 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) provides that the exemptions from the dealer registration requirements set out in section 3.1 [Rights offering] and section 3.42 [Conversion, exchange, or exercise] of NI 45-106 no longer apply.
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 Fund, and the Manager acting on behalf of the Fund, are not subject to the dealer registration requirement in respect of the Warrant Offering Activities.