Securities Law & Instruments


Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted to mutual funds subject to National Instrument 81-101 Mutual Fund Prospectus Disclosure that seeks to engage in alternative investment strategies not otherwise permitted by National Instrument 81-102 Investment Funds – Relief to permit funds to invest up to 20% of net assets in securities of a single issuer – Relief from cash cover and designated rating requirement in respect of use of derivatives – Relief to permit funds to borrow cash for investment purposes and to grant a security interest over assets in connection with such borrowing – Relief to permit funds to engage in short selling in excess of 20% of the net assets of the fund and to use proceeds from short sales to enter into a long position in a security – Relief to permit funds to enter into incentive fee arrangements – Borrowing and short selling subject to a combined maximum limit of 50% of the fund's net asset value – Aggregate gross exposure of the fund (long positions, short positions and notional value of derivatives positions) subject to maximum limit of 3 times the net asset value of the fund – Relief subject to certain limitations on distribution of securities of the funds – Relief subject to the inclusion of certain required disclosures in the simplified prospectus, annual information form, fund facts document and continuous disclosure documents.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.1(1), 2.6, 2.6.1(1)(c), (2), and (3), 2.7(1), (2), and(3), 2.8, 2.11, 6.8, 7.1, 19.1.

October 2, 2018

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
1832 ASSET MANAGEMENT L.P.
 (the Filer)

AND

IN THE MATTER OF
DYNAMIC ALPHA PERFORMANCE II FUND,
DYNAMIC PREMIUM YIELD PLUS FUND
(each a Fund and collectively, the Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation), pursuant to section 19.1 of National Instrument 81-102 Investment Funds (NI 81-102), exempting the Funds from the following provisions of NI 81-102:

(i)            subsection 2.1(1) of NI 81-102 , to permit a Fund to invest more than 10% of its net asset value in the securities of a single issuer (Single Issuer Relief);

(ii)           subsections 2.3(d),(e), (f) and (h) of NI 81-102, to permit a Fund to invest in precious metal certificates (other than permitted gold certificates), if, immediately after the purchase, more than 10% of the Fund’s net asset value would be made up of precious metal certificates; to invest in gold certificates, including permitted gold certificates; and to invest in physical commodities other than gold certificates (Commodities Relief);

(iii)           subsection 2.3(g) of NI 81-102 to purchase, sell or use specified derivatives and/or debt-like securities other than in compliance with subsections 2.7(1),(2) and (3) and section 2.8 of NI 81-102 (Specified Derivatives Relief);

(iv)          section 2.6 of NI 81-102, to permit a Fund to borrow cash to use for investment purposes in excess of the limits set out in subsection 2.6(a) of NI 81-102 and to grant a security interest of its assets in connection therewith (Cash Borrowing Relief);

(v)           subsections 2.6.1(1)(c) and 2.6.1(2) and (3) of NI 81-102, to permit a Fund to borrow securities from a borrowing agent to sell securities short whereby: (i) the aggregate market value of all securities of the issuer of the securities sold short by the Fund may exceed 5% of the net asset value of the Fund; (ii) the aggregate market value of all securities sold short by the Fund may exceed 20% of the net asset value of the Fund; (iii) the Fund is not required to hold cash cover in connection with short sales of securities by the Fund; and (iv) the Fund is permitted to use the cash from a short sale to enter into a long-position in a security (Short Selling Relief);

(vi)          section 6.8 of NI 81-102, to permit a Fund to deposit with its lender, assets over which it has granted a security interest in connection with the Cash Borrowing Relief (Cash Borrowing Custody Relief); and

(vii)         section 7.1 of NI 81-102 to permit Dynamic Alpha Performance II Fund to pay a performance fee that is based on the cumulative total return of the Fund for the period that began immediately after the last period for which the performance fee was paid (the Performance Fee Relief);

(collectively, the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(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 and territories of Canada (the Other Jurisdictions).

Interpretation

Terms defined in MI 11-102, National Instrument 14-101 Definitions and NI 81-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

Background Facts

1.             The Filer will be the trustee, investment fund manager and the portfolio manager of the Funds. The Filer is registered as: (i) a portfolio manager in all of the provinces of Canada and in the Northwest Territories and the Yukon; (ii) an exempt market dealer in all of the provinces of Canada (except Prince Edward Island and Saskatchewan); (iii) an investment fund manager in Ontario, Québec, Newfoundland and Labrador and the Northwest Territories; and (iv) a commodity trading manager in Ontario.

2.             The Funds will be mutual funds created under the laws of the Province of Ontario and will be governed by the provisions of NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities.

3.             The Filer and the Funds are not in default of securities legislation in any Jurisdiction.

4.             Units of the Funds will be offered by simplified prospectus filed in all of the provinces and territories in Canada and, accordingly, each Fund will be a reporting issuer in each of the provinces and territories of Canada.

5.             The proposed investment objective of Dynamic Alpha Performance II Fund is to protect capital during a wide range of economic and market environments while earning superior risk-adjusted equity or equity related returns that are not correlated to major stock market indices. The Fund will use alternative investment strategies primarily including engaging in physical short sales and may also include purchasing securities on margin or with borrowed funds. The Fund aims to reduce risk and invest in a diversified portfolio of equity securities from around the world.

6.             The proposed investment objective of Dynamic Premium Yield PLUS Fund is to achieve long-term capital appreciation primarily by investing directly in U.S. equity securities, writing call options on these securities, and/or by writing put options, which generate premium yield. The Fund will use alternative investment strategies including the use of leverage, primarily created through the use of derivatives.

7.             The Funds may use leverage through a combination of one or more of the following: (i) borrowing cash for investment purposes; (ii) physical short sales on equities, fixed-income securities or other portfolio assets; and/or (iii) through the use of specified derivatives.

8.             The Funds may invest in a variety of derivatives and may take both long and short positions. A Fund’s use of derivatives may include futures (including commodity futures, index futures, equity futures, bond futures and interest rate futures); currency forwards; and options and swaps (including commodity swaps, swaps on commodity futures, equity swaps, swaps on index futures, total return swaps, interest rate swaps, and credit default swaps). In its use of derivatives, a Fund will aim to contribute to the target return and the volatility objectives of the Fund.

9.             The Funds may also invest in foreign currencies and/or physical commodities.

10.          The Filer will determine the Funds’ risk ratings using the CSA’s Mutual Fund Risk Classification Methodology For Use In Fund Facts and ETF Facts as set out in Appendix F of NI 81-102 (the Risk Methodology). Given that the Funds do not have established ten-year track records, the Filer will determine the risk rating for each Fund based on the standard deviation of a reference index selected in accordance with Item 5 of the Risk Methodology (the Reference Index). In conducting this analysis, the Filer will also consider whether it is appropriate to exercise the discretion accorded by the Risk Methodology to increase the risk rating of the Fund.

11.          The Filer acknowledges that additional guidance regarding proficiency for the distribution of alternative funds has not been finalized at this time and will accompany the final publication of the proposed amendments to NI 81-102 (the Proposed Alternative Fund Investment Restrictions) and 81-101 Mutual Funds Prospectus Disclosure (the Proposed Alternative Fund Disclosure) (the Proposed Alternative Fund Investment Restrictions and the Proposed Alternative Fund Disclosure, collectively, the Proposed Alternative Fund Rules), which were contemplated within the CSA Notice and Request for Comment – Modernization of Investment Fund Product Regulation – Alternative Funds (2016), 39 OSCB 8051 dated September 22, 2016. The Filer will take steps to ensure the Funds are only distributed through dealers that are registered with the Investment Industry Regulatory Organization of Canada (IIROC) or to Top Funds (as defined below) managed by the Filer.

12.          The Filer also manages other mutual funds, and will manage future mutual funds, subject to NI 81-102 (collectively, the Top Funds). A Top Fund may seek to invest up to 10% of its net assets in a Fund provided that such investment is consistent with the Top Fund’s investment objectives.

13.          The Filer has previously been granted relief to allow mutual funds managed or advised by the Filer to invest up to 10% of their net assets in non-redeemable investment funds (NRIFs) and, specifically for Dynamic Alternative Yield Fund (the Specified Top Fund), to invest up to 25% of its net assets in NRIFs.

14.          Prior to allowing a Top Fund managed by the Filer to invest in a Fund, the Filer will implement policies and procedures to monitor a Top Fund’s compliance with the investment limits that will apply to a Top Fund’s investment in the Fund and, where applicable, the Top Fund’s investment in NRIFs.

15.          The Filer believes that it is in the best interest of the Top Funds to be permitted to invest in the Funds and that such investments would be consistent with the requirements in Proposed Alternative Fund Investment Restrictions relating to investments by mutual funds in alternative funds.

Fund Disclosure of Alternative Strategies

16.          The Filer proposes to file a simplified prospectus in respect of the Funds that:

(a)           indicates on the prospectus cover that the Funds are alternative funds;

(b)           discloses within the Funds’ investment objectives the asset classes and strategies used which are outside the scope of the existing NI 81-102;

(c)           discloses within the Funds’ investment objectives the maximum amount of leverage to be employed;

(d)           discloses within the Funds’ strategies the maximum amount the Fund may borrow, together with a description of how borrowing will be used in conjunction with the Funds’ other strategies and a summary of the Funds’ borrowing arrangements; and

(e)           discloses, in connection with investment strategies that may be used which are outside the scope of the existing NI 81-102, how such strategies may affect investors’ chance of losing money on their investment in the Funds.

17.          The Filer proposes to file an annual information form in respect of the Funds that:

(a)           indicates on the annual information form cover that Funds are alternative funds; and

(b)           discloses the name of each person or company that has lent money to a Fund including whether such person or company is an affiliate or associate of the manager of the Fund.

18.          The Filer proposes to file Fund Facts documents for the Funds that indicate the Funds are alternative funds and includes text box disclosure to highlight how the Funds differ from other mutual funds in terms of their investment strategies and the assets they are permitted to invest in.

19.          The Filer will include within the Funds’ financial statements and management reports of fund performance disclosure regarding actual use of leverage within the Funds for the applicable period referenced therein.

20.          The Filer submits that the proposed Funds’ disclosure accurately describes their investment strategies while emphasizing the particular strategies which are outside the scope of the existing NI 81-102.

Single Issuer Relief

21.          A Fund’s investment strategies may allow it to invest up to 20% of its net asset value in securities of an issuer.

22.          Subsection 2.1(1) of NI 81-102, does not permit an investment fund to purchase a security of an issuer, enter into a specified derivatives transaction or purchase index participation units if, immediately after the transaction, more than 10% of its net asset value would be invested in securities of any issuer.

23.          The Filer believes that it is in the best interests of the Funds to be permitted to invest up to 20% of their net assets in one issuer, as such investments will allow the Funds to fully express the convictions of the Funds’ portfolio managers.

Specified Derivatives and Debt-Like Security Relief

24.          The investment strategies of the Funds contemplate flexible use of specified derivatives for hedging and/or non-hedging purposes. The Funds have the ability to opportunistically use options, swaps, futures and forward contracts and/or other derivatives under different market conditions.

25.          Under subsections 2.7(1), (2) and (3) of NI 81-102, a mutual fund cannot purchase an option (other than a clearing corporation option) or a debt-like security or enter into a swap or a forward contract unless, at the time of the transaction, the option, debt-like security, swap or contract has a designated rating or the equivalent debt of the counterparty or of a person or company that has fully and unconditionally guaranteed the obligations of the counterparty in respect of the option, debt-like security, swap or contract, has a designated rating (the Designated Rating Requirement). The policy rationale behind this is to address, at least in part, a mutual fund’s counterparty credit risk by ensuring that counterparties that enter into certain types of derivatives with mutual funds meet a minimum credit rating.

26.          The Filer is seeking to have the operational flexibility to deal with a variety of over- the-counter derivative counterparties, including scenarios where at the time of the transaction, the specified derivative or equivalent counterparty (or its guarantor) will not have a designated rating. The Filer submits that this flexibility will provide more competitive pricing and give the Funds access to a wider variety of over-the-counter products.

27.          The Filer submits that any increased credit risk which may arise due to an exemption from the Designated Rating Requirements is counterbalanced by the fact that a Fund’s mark-to-market exposure to any specified derivatives counterparty (other than for positions in cleared specified derivatives) must not exceed 10% of its net asset value for a period of 30 days or more.

28.          Under Section 2.8 of NI 81-102, a mutual fund must not purchase a debt-like security that has an options component, unless, immediately after the purchase, not more than 10% of its net asset value would be made up of those instruments held for purposes other than hedging. Section 2.8 also imposes a series of requirements for mutual funds to cover their specified derivatives positions for purposes other than hedging, using a combination of cash, cash equivalents, the underlying interest of the specified derivative and/or the right to acquire the underlying interest of the specified derivative (the Option and Cover Requirements).

Commodities Relief

29.          The investment strategies of the Funds may permit them to purchase precious metal certificates other than permitted gold certificates, to invest in physical commodities either directly or indirectly, and to invest more than 10% of the net assets of a Fund in physical commodities or precious metal certificates.

30.          Subsections 2.3(d), (e), (f) and (h) of NI 81-102, do not permit an investment fund to:

(a)           purchase a gold certificate, other than a permitted gold certificate;

(b)           purchase gold or a permitted gold certificate if, immediately after the purchase, more than 10% of its net asset value would be made up of gold and permitted gold certificates; and

(c)           except for the above conditions, to purchase a physical commodity including indirectly through the use of specified derivatives.

31.          The Filer believes that it is in the best interests of the Funds for them to be permitted to invest in physical commodities, other than gold, including indirect exposure to certain physical commodities through the use of certificates, index participation units and/or specified derivatives.

Cash Borrowing Relief

32.          The investment strategies of the Funds will permit the Funds to borrow cash in excess of the limits currently described in section 2.6 of NI 81-102, provided that:

(a)           a Fund may only borrow from an entity described in section 6.2 of NI 81-102, except that the requirement set out in subsection 6.2(3)(a) of NI 81-102 will be satisfied if the company has equity, as reported in its most recent audited financial statements that have been made public or that will be made available to the Fund and its custodian upon request, of not less than $10,000,000;

(b)           if the lender is an affiliate of the Filer, the independent review committee shall approve the applicable borrowing agreement under subsection 5.2(2) of NI 81- 107;

(c)           the borrowing agreement entered into is in accordance with normal industry practice and on standard commercial terms for the type of transaction; and

(d)           the total value of cash borrowed shall not exceed 50% of a Fund’s net asset value.

33.          Subsection 2.6(a) of NI 81-102, restricts investment funds from borrowing cash or providing a security interest over portfolio assets unless the transaction is a temporary measure to accommodate redemptions, the security interest is required to enable the investment fund to effect a specified derivative transaction or short sale under NI 81- 102, the security interest secures a claim for the fees and expenses of the custodian or sub-custodian of the investment fund, or, in the case of an exchange-traded mutual fund, the transaction is to finance the acquisition of its portfolio securities and the outstanding amount of all borrowings is repaid on the closing of its initial public offering.

34.          The Proposed Alternative Fund Investment Restrictions give investment funds the ability to borrow up to 50% of their net asset value to use for investment purposes in order to facilitate a wider array of investment strategies.

35.          The Filer believes that it is in the best interests of the Funds to be permitted to borrow cash to meet their investment objectives and strategies.

Short Sale Relief

36.          The investment strategies of the Funds will permit the Funds to:

(a)           sell securities short, provided the aggregate market value of securities of any one issuer sold short by a Fund does not exceed 10% of the net asset value of the Fund, and the aggregate market value of all securities sold short by a Fund does not exceed 50% of its net asset value;

(b)           sell a security short without holding cash cover; and

(c)           sell a security short and use the cash from a short sale to enter into a long position in a security, other than a security that qualifies as cash cover.

37.          Subsection 2.6.1 of NI 81-102, requires that a fund may only sell a security short if, at the time the fund sells the security short, the fund has borrowed or arranged to borrow the security to be sold under the short sale, if the aggregate market value of all securities of the issuer of the securities sold short by the fund does not exceed 5% of the net asset value of the fund, and if the aggregate market value of all securities sold short by the fund does not exceed 20% of the net asset value of the Fund.

38.          The Filer believes that it is in the best interests of the Funds to be permitted to sell securities short in excess of the current limits, in a manner that is consistent with the Proposed Alternative Fund Investment Restrictions.

Performance Fee Relief

39.          Dynamic Alpha Performance II Fund proposes to pay the Filer an annual performance fee equal to (a) 20% of the amount by which the Net Asset Value per Unit on the last day of such calendar year (before giving effect to any distributions by the Fund since the High Water Mark (as defined in the Fund’s simplified prospectus) and adjusted to exclude the accrual of the incentive fee during the calendar year) exceeds 103% of the High Water Mark, multiplied by (b) the average number of Units of that series outstanding during such calendar year.

40.          Section 7.1 of NI 81-102 restricts a mutual fund from paying a performance fee unless the payment of the fee is based on the comparison of the total return of the mutual fund against the cumulative total percentage increase or decrease of a benchmark or index.

41.          The Proposed Alternative Fund Rules would create an exemption from the requirement in Section 7.1 of NI 81-102 that a performance fee paid by a mutual fund be calculated with reference to a benchmark or index. This exemption is currently available to publically offered Commodity Pools subject to NI 81-104 – Commodity Pools.

42.          For the reasons provided above, the Filer respectfully submits that it would not be prejudicial to the public interest to grant the Requested Relief.

Decision

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:

1.             the Filer will file a standalone simplified prospectus, annual information form and fund facts document for the Funds, which will include the following disclosure:

(a)           the simplified prospectus and annual information form will indicate on the cover page that each Fund is an alternative fund;

(b)           within the simplified prospectus, the Filer will include disclosure within each Fund’s investment objectives on the asset classes that the Fund may invest in and the investment strategies that the Fund may engage in pursuant to the Requested Relief and which are outside the scope of NI 81-102;

(c)           within the simplified prospectus, the Filer will include disclosure in each Fund’s investment objectives describing the maximum amount of leverage to be employed by the Fund;

(d)           within the simplified prospectus, the Filer will include disclosure in each Fund’s investment strategies on the maximum amount of borrowing and short selling that the Fund may engage in, together with a description of how borrowing and short selling will be used in conjunction with the Fund’s other strategies;

(e)           within the simplified prospectus, the Filer will include disclosure in each Fund’s investment strategies explaining how the investment strategies that the Fund may engage in pursuant to the exemptive relief which are outside the scope of the existing NI 81-102 may affect investors’ chance of losing money on their investment in the Fund;

(f)            the annual information form will disclose under Item 10 of Form 81-101F2 the name of each person or company that has lent money to the Fund including whether such person or company is an affiliate or associate of the Filer; and

(g)           the fund facts document will include text box disclosure above Item 2 of Part I of Form 81-101F3 identifying each Fund as an alternative fund and highlighting how the Fund differs from other mutual funds in terms of its investment strategies and the assets it is permitted to invest in.

2.             The Filer will disclose in each Fund’s annual and interim financial statements and each Fund’s Management Report of Fund Performance:

(a)           the lowest and highest level of leverage experienced by the Fund in the reporting period covered by the financial statements;

(b)           a brief explanation of the sources of leverage used (e.g. borrowing, short selling or use of derivatives);

(c)           a description of how the Fund calculates leverage; and

(d)           the significance to the Fund of the lowest and highest levels of leverage.

3.             In the case of the Single Issuer Relief, the Fund must not purchase a security of an issuer, enter into a specified derivatives transaction or purchase an index participation unit if, immediately after the transaction, more than 20% of its net asset value would be invested in securities of any one issuer, provided, however, this limitation shall not apply in respect of (i) a government security; (ii) a security issued by a clearing corporation; (iii) a security issued by an investment fund if the purchase is made in accordance with the requirements of section 2.5 of NI 81-102; or (iv) an index participation unit that is a security of an investment fund.

4.             In the case of the Specified Derivatives Relief:

(a)           each Fund’s aggregate gross exposure calculated as the sum of the following, must not exceed three times the Fund’s net asset value: (i) the aggregate market value of the Fund’s long positions; (b) the aggregate market value of securities sold short by the Fund pursuant to the Short Selling Relief; and (c) the aggregate notional value of the Fund’s specified derivatives positions excluding any specified derivatives used for “hedging purposes” as defined in NI 81-102;

(b)           in determining each Fund’s compliance with the restriction contained in 4(a) above, the Fund must also include in its calculation its proportionate shares of securities of any underlying investment funds for which a similar calculation is required;

(c)           each Fund must determine its compliance with the restriction contained in 4(a) above, as of the close of business of each day on which the Fund calculates a net asset value; and

(d)           if a Fund’s aggregate gross exposure as determined in subsection 4(a) above exceeds three times the Fund’s net asset value, the Fund must, as quickly as is commercially reasonable, take all necessary steps to reduce the aggregate gross exposure to three times the Fund’s net asset value or less.

5.             In the case of the Cash Borrowing Relief:

(a)           each Fund may only borrow from an entity described in section 6.2 of NI 81-102, except that the requirement set out in subsection 6.2(3)(a) of NI 81-102 will be satisfied if the company has equity, as reported in its most recent audited financial statements that have been made public or that will be made available to the Fund and its custodian upon request, of not less than $10,000,000;

(b)           if the lender is an affiliate of the Filer, the independent review committee must approve the applicable borrowing agreement under subsection 5.2(2) of NI 81-107;

(c)           the borrowing agreement entered into is in accordance with normal industry practice and on standard commercial terms for the type of transaction; and

(d)           the total value of cash borrowed must not exceed 50% of each Fund’s net asset value.

6.             In the case of Short Selling Relief:

(a)           the aggregate market value of all securities sold short by each Fund does not exceed 50% of the net asset value of the Fund; and

(b)           the aggregate market value of all securities of the issuer of the securities sold short by each Fund does not exceed 10% of the net asset value of the Fund.

7.             In the case of Incentive Fee Relief:

Each Fund must not pay, or enter into arrangements that would require it to pay, an incentive fee that is determined by the performance of the Fund unless:

(a)           the payment of the incentive fee is based on the cumulative total return of the Fund for the period that began immediately after the last period for which such incentive fee was paid; and

(b)           the method of calculating the incentive fee payable by each Fund shall be described in the simplified prospectus in respect of each Fund.

8.             In the case of the Cash Borrowing Relief and the Short Selling Relief:

(a)           each Fund must not borrow cash pursuant to the Cash Borrowing Relief or sell securities short pursuant to the Short Selling Relief, if immediately after entering into a cash borrowing or short selling transaction, the aggregate value of cash borrowed combined with the aggregate market value of all securities sold short by the Fund would exceed 50% of the Fund’s net asset value; and

(b)           if the aggregate value of cash borrowed combined with the aggregate market value of all securities sold short by each Fund exceeds 50% of the Fund’s net asset value, the Fund must, as quickly as commercially reasonable take all necessary steps to reduce the aggregate value of cash borrowed combined with the aggregate market value of securities sold short to 50% or less of the Fund’s net asset value.

Distribution

9.             The Filer will ensure each Fund is only distributed through dealers that are registered with IIROC.

10.          The Filer will not distribute securities of the Fund to other mutual funds other than the Top Funds.

11.          In the case of Top Funds managed by the Filer, with the exception of the Specified Top Fund, the Filer will ensure that such Top Funds will not purchase securities of the Funds if, immediately after the transaction, more than 10% of the net asset value of the Top Fund, taken at market value at the time of the transaction, would consist of securities of the Funds and NRIFs.

12.          In the case of the Specified Top Fund, the Filer will ensure that the Specified Top Fund will not purchase securities of the Funds if, immediately after the transaction: (i) more than 10% of the net asset value of the Specified Top Fund, taken at market value at the time of the transaction, would consist of securities of the Funds; and (ii) more than 25% of the net asset value of the Specified Top Fund, taken at market value at the time of the transaction, would consist of securities of the Funds and NRIFs.

Term

13.          This decision shall expire upon the earlier of: (i) the coming into force of the Proposed Alternative Fund Rules or substantially similar rules; and (ii) five years from the date of this decision.

“Darren McKall”
Manager, Investment Funds and Structured Products Branch
Ontario Securities Commission