Man Investments Canada Corp. and Man Canada AHL DP Investment Fund

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to a commodity pool from paragraphs 2.5(2)(a) and (c) of National Instrument 81-102 Mutual Funds to permit the commodity pool to gain exposure to a portfolio of assets by way of another commodity pool, subject to certain conditions -- the underlying commodity pool has not filed a prospectus under National Instrument 81-101 Mutual Fund Prospectus Disclosure, but has filed a non-offering long form prospectus and is a reporting issuer subject to National Instrument 81-106 Investment Fund Continuous Disclosure and National Instrument 81-102 -- Mutual Funds,as modified by National Instrument 81-104 Commodity Pools -- investment in the portfolio limited to 10% of the net assets of the second commodity pool.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.5(2)(a), 2.5(2)(c), 19.1.

February 24, 2012

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

MAN INVESTMENTS CANADA CORP.

(the Filer)

AND

IN THE MATTER OF

MAN CANADA AHL DP INVESTMENT FUND

(the Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of the Fund, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) granting exemptive relief, pursuant to paragraph 19.1 of National Instrument 81-102 Mutual Funds (NI 81-102), from the requirements contained in subsections 2.5(2)(a) and (c) of NI 81-102 in order to permit the Fund to indirectly gain exposure to the AHL Evolution Programme (as defined herein) by means of the Credit Suisse Notes (as defined herein) to be held in the AHL Portfolio (as defined herein) (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,

(b) the Fund 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 (collectively, with Ontario, the Jurisdictions),

Interpretation

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

Representations

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

The Filer

1. The Filer is a corporation incorporated under the Canada Business Corporations Act and is the trustee and manager of the Fund.

2. The Filer is registered as an Investment Fund Manager in Ontario, as an adviser in the category of Portfolio Manager in Ontario and Alberta and as a dealer in the category of Exempt Market Dealer in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia. The Filer's head office is located in Toronto, Ontario.

The Fund

3. The Fund is a mutual fund to which NI 81-102 applies. The securities of the Fund are qualified for distribution in each of the Jurisdictions pursuant to a prospectus that has been prepared and filed in accordance with the securities legislation of the Jurisdictions. The Fund is, accordingly, a reporting issuer in each of the Jurisdictions.

4. The Fund is also a commodity pool, as such term is defined in National Instrument 81-104 Commodity Pools (NI 81-104), in that the Fund has adopted fundamental investment objectives that permit the Fund to invest in financial instruments in a manner that is not permitted under NI 81-102.

5. The Fund's investment objectives include seeking the provision of tax-efficient returns based on returns of specific types of investments. The Fund's investment objectives state that it may use specified derivatives to seek to provide these returns.

6. The Fund obtains exposure to the returns of a diversified portfolio of financial instruments across a range of global markets including, without limitation, stocks, bonds, currencies, short-term interest rates, energy, metals and agricultural commodities (the AHL Portfolio) managed by Man Investments Limited (the Investment Manager), an affiliate of the Filer, using a predominantly trend following trading program (the AHL Diversified Programme).

AHL SPC -- Class D and the AHL Portfolio

7. The AHL Portfolio is held by Class D Man AHL Diversified 2 CAD Notes (the AHL SPC -- Class D), a segregated portfolio of AHL Investment Strategies SPC (the AHL SPC), a segregated portfolio company incorporated with limited liability in the Cayman Islands and registered as a segregated portfolio company under the Companies Law (2007 Revision).

8. AHL SPC -- Class D has filed and obtained a receipt for a non-offering prospectus in 2009, pursuant to which it became a reporting issuer under the Securities Act (Ontario) and the Securities Act (Québec) and subject to the continuous disclosure requirements of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106). Accordingly, the financial statements and other reports required to be filed by AHL SPC -- Class D are available through SEDAR.

9. The assets of AHL SPC -- Class D are managed by the Investment Manager. The Investment Manager is a company incorporated in England and Wales with limited liability (No. 2093429) whose registered address is Riverbank House, 2 Swan Lane, London EC4R 3AD, United Kingdom, and is regulated in the conduct of regulated activities in the United Kingdom by the Financial Services Authority of the United Kingdom.

10. The assets of AHL SPC -- Class D are invested in accordance with the AHL Diversified Programme. AHL SPC -- Class D has adopted and is subject to the investment restrictions and practices contained in NI 81-102 and is managed in accordance with these restrictions and practices, except as otherwise permitted by NI 81-104 and any prior exemptive relief obtained by the Fund.

11. Pursuant to the November 9, 2009 decision In the Matter of Man Canada AHL DP Investment Fund, the Fund obtained exemptive relief from the restrictions in subsections 2.5(2)(a) and (c) of NI 81-102 to permit it to obtain exposure to the AHL Portfolio by investing directly or indirectly in securities of AHL SPC -- Class D.

12. The Fund obtains exposure to AHL SPC -- Class D, and thus to the economic returns of the AHL Portfolio, through one or more forward sale agreements (each, a Forward Agreement) entered into with one or more Canadian chartered banks and/or their affiliates (each, a Counterparty).

The AHL Evolution Programme

13. The AHL Evolution Programme (the AHL Evolution Programme) is a trading program that invests in a portfolio of futures, forward contracts, swaps and other financial derivative instruments both on and off exchange. The markets covered include both developed and emerging markets. The AHL Evolution Programme is implemented and managed by AHL, a division of the Investment Manager.

14. Trading in the AHL Evolution Programme may focus upon inefficiencies in a whole range of markets including, but not limited to, bonds, commodities, credit, stocks and currencies. These inefficiencies include price momentum and relative value, and other nondirectional trading strategies may be added from time to time. The AHL Evolution Programme trades in a number of markets not traditionally accessed by the AHL Diversified Programme. These markets may be accessed directly or indirectly and include, without limitation, credit indices, cash bonds, interest rate swaps, electricity and emerging market currencies and stock indices.

15. In order to access the AHL Evolution Programme, it is anticipated that a portion of the assets of AHL SPC -- Class D will be invested in a series of U.S. dollar denominated open-end tracker certificates (the Credit Suisse Notes) issued by Credit Suisse AG (Credit Suisse). The long-term debt of Credit Suisse is currently rated A+ by Standard & Poor's, a division of the McGraw Hill Companies, Inc. The Credit Suisse Notes are issued by Credit Suisse as open-ended managed tracker certificates that are linked to the performance of AHL Evolution Limited, a Bermuda exempted company investing its assets in accordance with the AHL Evolution Programme.

16. Credit Suisse is a Swiss bank and joint stock corporation established under Swiss law and is a wholly-owned subsidiary of Credit Suisse Group AG (CSG), which is the holding company of the Credit Suisse group of companies. The business of Credit Suisse is substantially the same as the business of its parent, CSG, and substantially all of Credit Suisse's operations are conducted through the private banking, investment banking and asset management segments.

17. The Credit Suisse Notes entitle the holders thereof to payment upon redemption of an amount in U.S. dollars equal to the value of a notional investment in a portfolio held by AHL Evolution Limited which provides exposure to the AHL Evolution Programme.

18. The return of the Credit Suisse Notes is calculated in accordance with the following formula:

Denomination × Current Level/Initial Level × (1-SF)N(t)/360

where "Current Level" and "Initial Level" refer to the net asset value of the underlying interest, "SF" stands for "Structuring Fee" equal to 0.4% per annum and "N(t)" is the relevant number of calendar days. Apart from the Structuring Fee, there is no other component, such as a liquidity reserve, and in particular no embedded derivative component included in the Credit Suisse Notes, that is not linked to the performance of the AHL Evolution Programme. The performance of the Credit Suisse Notes can be regarded as being linked 1:1 to the performance of the AHL Evolution Programme.

19. The holder of the Credit Suisse Notes may exercise its right to redeem the Credit Suisse Notes on the last business day of each calendar year by providing at least 180 days prior written notice of redemption. In addition, upon receipt of an irrevocable request from a holder of Credit Suisse Notes to sell a specified amount of Credit Suisse Notes at least three business days prior to a relevant purchase date, Credit Suisse will buy back the specified number of Credit Suisse Notes from the holder for a cash amount calculated in accordance with the above formula. Credit Suisse will complete purchases of the Credit Suisse Notes on the business day following the Monday of each week and on the last day of each calendar month.

20. AHL Evolution Limited is subsisting as an exempted company with limited liability in Bermuda under the provisions of the Companies Act 1981 of Bermuda and is an open-ended mutual fund authorized as an institutional investment fund by the Bermuda Monetary Authority in Bermuda and regulated under the Investment Funds Act 2006 of Bermuda.

21. The exposure to the AHL Evolution Programme through the Credit Suisse Notes is notional only and a holder will not have, and the Credit Suisse Notes will not represent, any direct or indirect ownership or other interest in the portfolio held by AHL Evolution Limited or the assets thereof. Holders of the Credit Suisse Notes will not have any direct or indirect recourse to the portfolio held by AHL Evolution Limited or the assets thereof, and will only have the right against Credit Suisse to be paid the redemption amount of the Credit Suisse Notes upon final redemption of the Credit Suisse Notes.

22. The AHL Evolution Programme invests in, or gains exposure to, the same financial instruments that, in accordance with the fundamental investment objectives and restrictions of the Fund and AHL SPC -- Class D and with NI 81-104, AHL SPC -- Class D could acquire directly. The Credit Suisse Notes are attractive investments for AHL SPC -- Class D as they provide an efficient and cost effective method of achieving exposure to the AHL Evolution Programme.

23. The Investment Manager also serves as the investment manager of AHL Evolution Limited. There are no management fees or incentive fees paid to the Investment Manager by AHL Evolution Limited in connection with the investment management services provided by the Investment Manager in respect of the assets of AHL Evolution Limited.

24. AHL SPC -- Class D will not invest more than 10% of the net assets of the AHL Portfolio in the Credit Suisse Notes.

25. In the absence of the Requested Relief, the Fund would not be permitted to indirectly gain exposure to the AHL Evolution Programme by means of the Credit Suisse Notes in the AHL Portfolio because:

(a) the Credit Suisse Notes constitute an instrument, agreement or security, the market price, value or payment obligations of which are based on an underlying interest, AHL Evolution Limited which provides exposure to the AHL Evolution Programme; and

(b) AHL Evolution Limited is not subject to NI 81-101 and NI 81-102, and the securities of AHL Evolution Limited are not qualified for distribution in one or more local jurisdictions, contrary to the requirements of subsections 2.5(2)(a) and (b) of NI 81-102.

26. An investment by AHL SPC -- Class D in the Credit Suisse Notes will be made in accordance with the investment restrictions contained in NI 81-102 and NI 81-104, except for the restrictions in subsections 2.5(2)(a) and (c) of NI 81-102.

27. The Investment Manager will monitor the investment restrictions of the AHL SPC -- Class D. If the Investment Manager becomes aware of any breach of the investment restrictions, appropriate action and notification to the directors and manager of the AHL SPC will be taken to bring the AHL SPC -- Class D back within the investment restrictions as soon as practicable.

28. None of the Filer, the Fund or AHL SPC -- Class D is in default of any securities legislation in any of the Jurisdictions.

Decision

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) the Fund and AHL SPC -- Class D are commodity pools subject to NI 81-102 and NI 81-104;

(b) the exposure of the Fund to securities of AHL SPC -- Class D is in accordance with the fundamental investment objectives of the Fund;

(c) the prospectus of the Fund discloses that the Fund will obtain exposure to securities of AHL SPC -- Class D and, to the extent applicable, the risks associated with such an investment;

(d) AHL SPC -- Class D is a reporting issuer subject to NI 81-106;

(e) no securities of AHL SPC -- Class D are distributed in Canada other than to the Counterparty under the Forward Agreement;

(f) the indirect investment by the Fund in securities of AHL SPC -- Class D is made in compliance with each provision of section 2.5 of NI 81-102, except subsection subsections 2.5(2)(a) and (c) of NI 81-102;

(g) the Credit Suisse Notes held in the AHL Portfolio do not in the aggregate represent more than 10% of the net asset value of the AHL Portfolio;

(h) the total exposure of the AHL Portfolio to Credit Suisse (through the Credit Suisse Notes and other securities of Credit Suisse) does not in the aggregate represent more than 10% of the net asset value of the AHL Portfolio;

(i) AHL SPC -- Class D provides disclosure regarding its investment in the Credit Suisse Notes and exposure to the AHL Evolution Programme, including disclosure regarding any fees paid to Credit Suisse, in its annual information form and other applicable continuous disclosure documents that it will file on SEDAR; and

(j) Financial statements of AHL Evolution Limited are provided to any securityholder of the Fund that requests them from the Filer.

"Raymond Chan"
Manager, Investment Funds Branch
Ontario Securities Commission