Venator Capital Management Ltd. and Venator Income Fund
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the purposes of the relief requested from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1, to permit a mutual fund to include in annual and interim management reports of fund performance the financial highlights and past performance of the fund that are derived from the fund's annual financial statements that pertain to time periods when the fund was not a reporting issuer.
Applicable Legislative Provisions
National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 4.4, 17.1.
Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B and Items 3(1) and 4 of Part C of Form 81-0106F1 Contents of Annual and Interim Management Report of Fund Performance.
February 7, 2020
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 VENATOR CAPITAL MANAGEMENT LTD. (the Filer) AND VENATOR INCOME FUND (the Fund)
The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the Fund for a decision under the securities legislation of the regulator (the Legislation) exempting class A units (Class A Units) and class F units (Class F Units and, together with the Class A Units, the Units) of the Fund from:
(a) Section 4.4. of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for the purposes of relief requested herein from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1); and
(b) Items 3.1(7) and 4.1(1) in respect of the requirement to comply with subsection 15.3(2) of National Instrument 81-102 Investment Funds (NI 81-102), 4.1 (2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1 to permit the Fund to include, in its annual and interim management reports of fund performance, past performance data notwithstanding that:
(i) such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus; and
(ii) the Fund has not distributed its securities under a simplified prospectus for 12 consecutive months.
(collectively, 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 by the Filer in each of the provinces and territories of Canada (the 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 Filer:
1. The Fund is an open-ended mutual fund trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated July 30, 2008 (the Inception Date), as amended and restated as at February 21, 2013 and January 23, 2020 (the Declaration of Trust).
2. The Filer is a corporation incorporated under the laws of the Province of Ontario with its head office located in Toronto, Ontario.
3. The Filer is the trustee, investment fund manager, promoter and portfolio manager of the Fund.
4. The Filer is registered under securities legislation in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec and Saskatchewan as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer. The Filer is registered under securities legislation in Newfoundland and Labrador, Ontario and Quebec as an investment fund manager.
5. Since the Inception Date until the date of the receipt issued for the Fund's simplified prospectus, dated January 23, 2020 (the Prospectus) filed pursuant to National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), the Units were distributed to investors on a prospectus-exempt basis in accordance with National Instrument 45-106 Prospectus Exemptions in the Jurisdictions.
6. Upon the issuance of the receipt for the Prospectus, the Fund became a reporting issuer under the securities legislation of each province and territory of Canada and commenced distributing its securities to the public. In addition, the Fund became subject to the requirements of NI 81-102 and NI 81-106 that apply only to investment funds that are reporting issuers
7. The Filer and the Fund are not in default of securities legislation in any of the Jurisdictions.
8. Since the Inception Date, the Fund, as a "mutual fund in Ontario", has prepared and sent annual and interim financial statements to all holders of its securities in accordance with NI 81-106.
9. The management of the Fund has not changed materially since it became a reporting issuer and, in particular:
(a) the Fund's investment objective has not changed, other than to provide additional detail as required by NI 81-101;
(b) the management fee charged to the Fund in respect of its existing classes of Units has not changed; and
(c) the day-to-day administration of the Fund has not changed, other than to comply with the additional regulatory requirements associated with being a reporting issuer (none of which would have impacted the portfolio management of the Fund) and to provide additional features that are available to investors of mutual funds managed by the Filer, as described in the Prospectus, annual information form and fund facts.
10. As a reporting issuer, the Fund will be required under NI 81-106 to prepare and send annual and interim management reports of fund performance (individually, an MRFP and collectively, the MRFPs) to all holders of its securities on an annual and interim basis.
11. Without the Exemption Sought, the MRFPs of the Fund cannot include financial highlights and performance data of the Fund that relate to a period prior to it becoming a reporting issuer.
12. The Filer also proposes to present the performance data of the Units for the time period since its inception in sales communications and fund facts of the Fund. The Filer has filed a separate application for exemptive relief from certain provisions of NI 81-102 and Form 81-101F3 Contents of Fund Facts Document to permit the Fund, with respect to the Units, to include its performance data since its inception in sales communications and fund facts and to include its past performance data in determining and disclosing its investment risk level in accordance with Appendix F Investment Risk Classification Methodology to NI 81-102 (the NI 81-101 and NI 81-102 Relief).
13. The performance data of the Fund for the time period before it became a reporting issuer is significant and meaningful information for existing and prospective investors of the Units and other classes of units of the Fund.
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) any MRFP that includes performance data of the Units of the Fund relating to a period prior to when the Fund was a reporting issuer discloses:
(i) that the Fund was not a reporting issuer during such period;
(ii) that the financial statements of the Fund for such period are posted on the Fund's website and are available to investors upon request; and
(iii) all performance data of Units of the Fund as applicable for the 10, 5, 3 and one year periods; and
(b) the Filer posts the financial statements of the Fund for the past 10 years on the Fund's website and makes those financial statements available to investors upon request; and
(c) the Fund prepares sales communications and fund facts in accordance with the NI 81-101 and NI 81-102 Relief.