Securities Law & Instruments


NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted to a commodity pool from margin deposit limit contained in paragraph 6.8(2)(c) of National Instrument 81-102. Exemption granted to permit commodity pools to invest in derivatives in the U.S. through their portfolio manager that, in turn, will use U.S. future commission merchants. Exemption conditional on the amount of margin deposited not exceeding 20% of the net assets of the fund and on all margin deposited with U.S. futures commission merchants being held in segregated accounts.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 6.8(2)(c), 19.1.

April 27, 2009




(the "Jurisdiction")








(the "Filer") AND


(the "Fund")




1. The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation"), for relief pursuant to section 19.1 of NI 81-102 exempting the Fund from the margin deposit limit contained in paragraph 6.8(2)(c) of NI 81-102 (the "Exemption Sought").

2. 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 subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the provinces and territories of Canada, except Nunavut (the "Jurisdictions").


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


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

(a) The Fund is a class of shares of Exemplar Portfolios Ltd., a mutual fund corporation incorporated under the Business Corporations Act (Ontario) on March 18, 2008. The Filer, a corporation incorporated under the Business Corporations Act (Ontario), is the manager of the Fund.

(b) The Fund is expected to be a reporting issuer in all of the provinces and territories of Canada, except Nunavut, and is not, nor is the Filer, in default of any requirements of applicable securities legislation.

(c) The Fund is a "commodity pool" as is defined in Section 1.1 of National Instrument 81-104 as the Fund has adopted a fundamental investment objective that permits it to use or invest in specified derivatives in a manner that is not permitted under NI 81-102.

(d) A preliminary prospectus dated March 24, 2009 has been filed in each of the provinces and territories of Canada, except Nunavut, in respect of the sale and distribution of Series A, Series F, and Series I shares of the Fund.

(e) The investment objective of the Fund is to seek superior long term absolute and risk-adjusted returns with the potential for low correlation to global equity and fixed-income market returns through the selection and management of long and short positions in a globally diversified portfolio of futures, options, forward contracts, and other financial derivative instruments on agricultural and soft commodities, metals, energies, currencies, interest rates and equity indices. The Fund will not be restricted in the amount of leverage it can apply through its use of derivatives.

(f) The Fund will transact on highly liquid exchanges globally that may include, but are not limited to, all futures exchanges in the United States and Canada, the London Metals Exchange (LME), Euronext-LIFFE, the Eurex Deutschland (EUREX), The International Petroleum Exchange of London Limited (IPE), the Singapore International Monetary Exchange (SIMEX), the Sydney Futures Exchange Ltd. and The Tokyo Commodities Exchange (TCE). The Filer also acts as the investment manager of the Fund. The Filer has in turn retained its affiliate, Integrated Managed Futures Corp. (the "Investment Sub-Advisor"), to make and execute investment decisions on behalf of the Fund. The Investment Sub-Advisor, a corporation incorporated under the Business Corporations Act (Ontario), is a commodity trading manager and a limited market dealer registered in the Province of Ontario and also registered in the United States as a commodity trading advisor and commodity pool operator with the Commodity Futures Trading Commission.

(g) The Investment Sub-Advisor primarily engages in specified derivative transactions in Canada and outside of Canada.

(h) Subject to the prior written approval of the Filer, the Investment Sub-Advisor is authorized to establish, maintain, change and close brokerage accounts on behalf of the Fund. In order to facilitate specified derivatives transactions outside of Canada, the Fund will establish accounts (each an "Account") with futures commissions merchants in the United States of America ("FCMs").

(i) Each FCM is regulated by the Commodity Futures Trading Commission (the "CFTC") and the National Futures Association (the "NFA") in the United States, and is required to segregate all assets held on behalf of clients, including the Fund. Each FCM is subject to audits and must have insurance to guard against employee fraud. Each FCM has a net worth, determined from its most recent audited financial statements that have been made public, in excess of the equivalent of $50 million. Each FCM has an exchange assigned to it as its designated self-regulatory organization (the "DSRO"). As a member of a DSRO, each FCM must meet capital requirements, comply with the conduct rules of the CFTC, NFA and its DSRO, and participate in an arbitration process with a complainant.

(j) Each FCM is a member of the clearing corporations and exchanges that the standardized futures in the Fund's portfolio are primarily traded through. Each clearing corporation is obliged to apply its surplus funds and the security deposits of its members to reimburse clients of failed members.

(k) Each FCM requires, for each Account, that cash and/or government securities be deposited with the FCM as collateral for specified derivatives transactions ("Margin"). Margin represents the minimum amount of funds that must be deposited with the FCM to initiate trading in specified derivatives transactions or to maintain the FCM's open position in standardized futures.

(l) Each FCM is required to hold all Margin, including cash and government securities, in segregated accounts and the Margin is not available to satisfy claims against the FCM made by parties other than the Filer or the Fund.

(m) Margin will be deposited with an FCM in respect of standardized futures traded on exchanges.

(n) Levels of Margin will be established at the FCM's discretion.

(o) The use of Margin allows the Fund to use leverage to invest in standardized futures more extensively than if no leverage was used.

(p) The use of leverage is in accordance with the investment objectives and investment restrictions of the Fund.


5. The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

6. The decision of the principal regulator under the Legislation is that the Exemption Sought is granted so long as:

(a) the amount of Margin deposited does not, when aggregated with the amount of Margin already held by a FCM on behalf of the Fund, exceed 20% of the net assets of the Fund, taken at market value as at the time of the deposit; and

(b) all Margin deposited with the FCMs is held in segregated accounts and is not available to satisfy claims against an FCM made by parties other than the Filer or the Fund.

"Vera Nunes "
Assistant Manager,
Investment Funds Branch
Ontario Securities Commission