CI Investments Inc. (Re), 2016 CanLII 50765

August 9, 2016

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

CI INVESTMENTS INC.

(the Filer)

AND

CI LifeCycle 2015 Portfolio

CI LifeCycle 2020 Portfolio

CI LifeCycle 2025 Portfolio

CI LifeCycle 2030 Portfolio

CI LifeCycle 2035 Portfolio

CI LifeCycle 2040 Portfolio

CI LifeCycle 2045 Portfolio

CI LifeCycle 2050 Portfolio

CI LIFECYCLE 2055 PORTFOLIO

CI LifeCycle Income Portfolio

(the LifeCycle Portfolios)

AND

IVARI CI Conservative Portfolio

IVARI CI Canadian Balanced Portfolio

IVARI CI Balanced Portfolio

IVARI CI Growth Portfolio

IVARI CI Maximum Growth Portfolio

(the CI Portfolios and, together with the LifeCycle Portfolios, the Portfolio Pools)

AND

CI Signature Canadian Balanced Fund

CI Signature Canadian Core Bond Fund

CI Signature Canadian Equity Plus Fund

CI Cambridge All Canadian Equity Fund

CI Cambridge US Equity Fund

CI Cambridge International Equity Fund

CI Cambridge Global Equity Fund

CI Signature Core Bond Plus Fund

CI Signature Money Market Fund

KBSH EAFE Equity Fund

CI BLACK CREEK INTERNATIONAL EQUITY POOL

SIGNATURE CANADIAN BOND POOL

SIGNATURE CORPORATE BOND POOL

SIGNATURE GLOBAL INCOME & GROWTH POOL

CI SIGNATURE LONG BOND FUND

(the Non-Portfolio Pools)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for a decision:

(a) pursuant to section 113 of the Securities Act (Ontario) (the OSA) exempting each Portfolio Pool and Non-Portfolio Pool (together, the Current Pooled Funds) and each Future Pooled Fund (as defined below and, together with the Current Pooled Funds, the Pooled Funds), from paragraph 111(2)(b), subsection 111(3) and subsection 111(4) of the OSA (the Related Party Relief); and

(b) pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) exempting the Filer from paragraph 13.5(2)(a) of NI 31-103 (the Consent Requirement Relief),

in each case with respect to investments by the Pooled Funds in securities of the Underlying Mutual Funds (as defined below) and for a decision revoking the Prior Relief (as defined below) (collectively, the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for the 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 other provinces of Canada (together with Ontario, the Applicable Jurisdictions).

Interpretation

Terms defined in MI 11-102 and National Instrument 14-101 Definitions 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:

The Filer

1. The Filer is a corporation subsisting under the laws of the Province of Ontario with its head office located in Toronto, Ontario. The Filer is registered:

(a) under the securities legislation of each Applicable Jurisdiction as a portfolio manager;

(b) under the securities legislation of Ontario, Québec, and Newfoundland and Labrador as an investment fund manager;

(c) under the securities legislation of Ontario as an exempt market dealer; and

(d) under the Commodity Futures Act (Ontario) as a commodity trading counsel and a commodity trading manager.

First Asset Management Inc.

2. The parent company of the Manager, CI Financial Corp., acquired 100% indirect voting control of First Asset Investment Management Inc. (FAIMI) effective November 30, 2015.

3. FAIMI is a corporation subsisting under the laws of the Province of Ontario with its head office located in Toronto, Ontario. FAIMI is registered as an investment fund manager, a portfolio manager and an exempt market dealer under the Securities Act (Ontario).

4. FAIMI, or an affiliate of FAIMI, is or will be:

(a) the trustee and investment fund manager and may act as portfolio manager of one or more existing or future exchange traded mutual fund trusts; and

(b) the investment fund manager and may act as portfolio manager of one or more existing or future exchange traded mutual funds, each comprising a separate class of shares of First Asset Fund Corp., a mutual fund corporation subsisting under the laws of the Province of Ontario.

(individually an “Underlying ETF” and collectively, the “Underlying ETFs”).

The Top Funds

5. Each Current Pooled Fund is, or will be, a trust formed under the laws of the Province of Ontario. Each Pooled Fund is, or will be:

(a) a “mutual fund” (as such term is defined in the OSA); and

(b) not a reporting issuer under the securities legislation of any province or territory of Canada.

6. The Filer is, or will be, the trustee and manager of each Current Pooled Fund.

7. The Filer may, in the future, become the trustee and manager of one or more trusts formed under the laws of the Province of Ontario each of which is:

(a) a “mutual fund” (as such term is defined in the OSA); and

(b) not a reporting issuer under the securities legislation of any province or territory of Canada,

(each a Future Pooled Fund).

8. Each Current Pooled Fund is not in default of securities legislation in any Applicable Jurisdiction.

9. Each LifeCycle Portfolio is sold exclusively to accredited investors (as defined in National Instrument 45-106 Prospectus Exemptions (NI 45-106)) other than individuals (Institutional Investors). Each Institutional Investor uses the units it owns of the LifeCycle Portfolios as the reference assets for investment products and services it offers to its clients. Each LifeCycle Portfolio provides a risk/return profile suitable for a specific investment horizon. To accomplish this goal, the LifeCycle Portfolio obtains exposure to a combination of fixed income and equity investments. Over time, the LifeCycle Portfolio adjusts its risk/return profile by increasing its exposure to fixed income investments (and decreases its exposure to equity investments) as the LifeCycle Portfolio approaches a pre-determined future date. This simplifies the investment process for Institutional Investors because they only need to own units of a single LifeCycle Portfolio as the reference asset for their corresponding investment product or service with an equivalent investment horizon, rather than investing directly in multiple mutual funds and periodically rebalancing such holdings to achieve the same profile.

10. Each CI Portfolio is sold exclusively to Institutional Investors. Each Institutional Investor uses the units it owns of the CI Portfolios as the reference assets for investment products and services it offers to its clients. Each CI Portfolio provides a pre-determined risk/return profile. To accomplish this goal, the CI Portfolio obtains exposure to a combination of fixed income and equity investments consistent with its risk/return profile. This simplifies the investment process for Institutional Investors because they only need to own units of a single CI Portfolio as the reference asset for their corresponding investment product or service with an equivalent risk/return profile, rather than investing directly in multiple mutual funds to achieve the same profile.

11. Units of each Non Portfolio Pool may be purchased by any investor who qualifies to purchase such units on a prospectus-exempt basis. Each Non-Portfolio Pool has its own investment objective and strategies. To achieve its investment objective, each Non-Portfolio Pool invests its assets in a combination of fixed income and equity securities, as well as securities of Underlying Mutual Funds.

The Underlying Funds

12. To achieve its investment objective, each Pooled Fund invests, or will invest some or all of its assets in securities of existing or future mutual funds managed by the Manager or an affiliate of the Manager, including (subject to obtaining the Requested Relief) the Underlying ETFs (collectively, the “Underlying Mutual Funds”).

13. Each Underlying Mutual Fund is, or will be, either:

(a) a trust formed under the laws of the Province of Ontario; or

(b) one or more classes of shares of CI Corporate Class Limited, a corporation subsisting under the laws of the Province of Ontario, or one or more series of a class of shares of First Asset Fund Corp., a corporation subsisting under the laws of the Province of Ontario (in either case, an Underlying Corporate Mutual Fund). The name of an Underlying Corporate Mutual Fund typically includes the word “Class”.

14. Each Underlying Mutual Fund is, or will be:

(a) a “mutual fund” (as such term is defined in the OSA); and

(b) a reporting issuer under the securities legislation of each province and territory of Canada.

Accordingly, National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) (in the case of Underlying Mutual Funds that are not Underlying ETFs), National Instrument 81-102 Investment Funds (NI 81-102), National Instrument 41-101 Prospectus Contents – Non-Financial Matters (NI 41-101) (in the case of Underlying Mutual Funds that are Underlying ETFs), and National Instrument 81-107 Independent Review Committee for Investment Funds apply to each Underlying Mutual Fund.

15. The Filer, FAIMI or another affiliate of the Filer is, or will be, the manager of each Underlying Mutual Fund.

16. Each existing Underlying Mutual Fund is not in default of securities legislation in any province or territory of Canada.

The Fund-on-Fund Structure

17. Each investment by a Pooled Fund in securities of an Underlying Mutual Fund (“Fund-on-Fund Investing”) is, or will be, compatible with the investment objective and investment strategies of the Pooled Fund and, in the case of a Portfolio Pool, is, or will be, aligned with the risk/return profile of the Portfolio Pool.

18. On September 22, 2015, the Filer obtained related party relief and consent requirement relief (the Prior Relief). The Prior Relief only permits investments in Underlying Mutual Funds that are managed by the Filer, and as such, does not permit investments in Underlying Mutual Funds managed by FAIMI or an affiliate.

19. Each Underlying Mutual Fund typically holds, or will hold, investments in numerous different issuers, in some cases comprising more than 100 positions. Different Underlying Mutual Funds may use different portfolio advisers, each of which has its own investment approach. Fund-on-Fund Investing thereby provides each Pooled Fund with immediate diversification through exposure to the investment portfolios of all the Underlying Mutual Funds in which the Pooled Fund invests its assets. Each Portfolio Pool typically invests, or will invest, in 11 to 18 Underlying Mutual Funds which also provides the Portfolio Pool with diversification regarding portfolio advisers of the Underlying Mutual Funds.

20. When a Pooled Fund engages in Fund-on-Fund Investing:

(a) there is, or will be, no duplication of management fees or incentive fees in respect of the investment by the Pooled Fund in the Underlying Mutual Funds;

(b) there are, or will be, no sales fees or redemption fees payable by the Pooled Fund in respect of the acquisition, disposition or redemption of securities of the Underlying Mutual Funds; and

(c) if the Underlying Mutual Fund is an Underlying ETF, the Pooled Fund may pay brokerage commissions when it purchases or sells the Underlying ETF on an exchange.

21. Each current investor in a Pooled Fund has received disclosure in writing of:

(a) the intention of the Pooled Fund to invest in securities of Underlying Mutual Funds; and

(b) the relationships and potential conflicts of interest between the Pooled Fund and the Underlying Mutual Funds, including that the Underlying Mutual Funds are managed by the Filer,

the Previous Fund-on-Fund Disclosure.

22. Each future investor in a Pooled Fund will receive, prior to their first purchase of securities of a Pooled Fund, an offering memorandum or other written document containing the New Fund-on-Fund Information (as defined below).

23. Each Pooled Fund and Underlying Mutual Fund prepares annual audited financial statements and interim unaudited financial statements in accordance with National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) and complies with the other requirements of NI 81-106 applicable to it.

24. Unitholders of each Pooled Fund receive, on request, a copy of such Pooled Fund’s audited annual financial statements and interim unaudited financial statements. The financial statements of each Pooled Fund disclose its holdings of securities of Underlying Mutual Funds.

25. The Filer will not cause the securities of an Underlying Mutual Fund held by a Pooled Fund to be voted at any meeting of the securityholders of the Underlying Mutual Fund; provided that the Filer may arrange for the securities of the Underlying Mutual Fund held by a Pooled Fund to be voted by the unitholders of the Pooled Fund.

26. The custodian of the assets of each Pooled Fund and each Underlying Mutual Fund is, or will be, a financial institution that meets the qualifications for an investment fund custodian set out in subsection 6.2 of NI 81-102 or, for assets held outside of Canada, subsection 6.3 of NI 81-102.

27. Each Pooled Fund and its Underlying Mutual Funds have, or will have, matching valuation dates. Accordingly, each Underlying Mutual Fund is, or will be, valued no less frequently than the Pooled Funds which invest in the Underlying Mutual Fund.

28. Each Underlying Mutual Fund’s securities are, or will be, redeemable no less frequently than the units of the Pooled Funds which invest in the Underlying Mutual Fund (subject, in the case of any Underlying Mutual Fund that is an Underlying ETF, to the conditions relating to redemptions set out in its prospectus).

29. No Pooled Fund purchases or holds, or will purchase or hold, securities of an Underlying Mutual Fund unless, at the time of the purchase, the Underlying Mutual Fund holds no more than 10% of its net assets in securities of other investment funds unless:

(a) the other investment fund is a “money market fund” (as defined in NI 81-102);

(b) the securities of the other investment fund are “index participation units” (as defined in NI 81-102); or

(c) the Underlying Mutual Fund is a “clone fund” (as defined in NI 81-102).

30. Each Pooled Fund currently invests some or all of its assets in securities of Underlying Mutual Funds (other than Underlying ETFs). Such current investments comply with the requirements of securities legislation applicable to the Pooled Funds and the Filer except to the extent of any previously granted relief.

31. The aggregate amount invested from time to time in an Underlying Mutual Fund by a Pooled Fund and other related investment funds exceeds 20% of the outstanding voting securities of the Underlying Mutual Fund. As a result, each Pooled Fund, either alone or together with other related investment funds, is a substantial security holder of an Underlying Mutual Fund. Absent the Related Party Relief:

(a) paragraph 111(2)(b) of the OSA prohibits each Pooled Fund from using Fund-on-Fund Investing where it is a substantial security holder of the Underlying Mutual Fund; and

(b) subsections 111(3) and 111(4) of the OSA requires each Pooled Fund to dispose of such investments.

32. Certain directors and/or officers of CI Corporate Class Limited or First Asset Fund Corp. are or may, from time to time, be responsible persons (as such term is defined in NI 31-103) of a Pooled Fund. Absent the Consent Requirement Relief, paragraph 13.5(2)(a) of NI 31-103 prohibits the Filer from causing a Pooled Fund to invest in securities of an Underlying Corporate Mutual Fund in such circumstances.

33. By using Fund-on-Fund Investing, each Pooled Fund can obtain immediate, diversified exposure to the investment portfolios of all the Underlying Mutual Funds in which the Pooled Fund invests a portion of its assets. A single investment using Fund-on-Fund Investing provides a Pooled Fund with exposure to the numerous investments held by an Underlying Mutual Fund. In the case of a Portfolio Pool, Fund-on-Fund Investing provides the Portfolio Pool with exposure as many as 300 investments and potentially over 1,000 investments held by its Underlying Mutual Funds. The resulting diversification of investment exposure could not be replicated by a Pooled Fund investing directly in securities rather than using Fund-on-Fund Investing. Further, the Pooled Funds may use Fund-on-Fund Investing to obtain diversification regarding portfolio advisers of the Underlying Mutual Funds, which diversification could not be replicated by the Pooled Fund investing directly in securities rather than using Fund-on-Fund Investing.

34. Fund-on-Fund Investing by the Pooled Funds complies with all the requirements of section 2.5 of NI 81-102 and therefore addresses all the potential issues associated with these investments. The Requested Relief is required only because the Pooled Funds are not currently subject to the requirements of NI 81-102 and therefore cannot rely upon the exemptions contained in subsection 2.5(7) of NI 81-102.

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 Requested Relief sought is granted provided that:

(a) the Prior Relief is hereby revoked and replaced with the present decision;

(b) securities of the Pooled Funds are distributed in Canada solely pursuant to exemptions from the prospectus requirements in NI 45-106;

(c) each Underlying Mutual Fund is, or will be, a “mutual fund” (as such term is defined in the OSA) to which the NI 81-102 and one of NI 81-101 or NI 41-101 applies;

(d) the investment by a Pooled Fund in an Underlying Mutual Fund is, or will be, compatible with the fundamental investment objectives of the Pooled Fund;

(e) no Pooled Fund purchases or holds, or will purchase or hold, securities of an Underlying Mutual Fund unless, at the time of the purchase of securities of the Underlying Mutual Fund, the Underlying Mutual Fund holds no more than 10% of its net assets in securities of other investment funds unless:

(i) the other investment fund is a “money market fund” (as defined in NI 81-102);

(ii) the securities of the other investment fund are “index participation units” (as defined in NI 81-102) issued by an investment fund; or

(iii) the Underlying Mutual Fund is a “clone fund” (as defined in NI 81-102).

(f) no management fees or incentive fees are payable by a Pooled Fund that, to a reasonable person, would duplicate a fee payable by an Underlying Mutual Fund for the same service;

(g) no sales fees or redemption fees are payable by a Pooled Fund in relation to its purchases or redemptions of securities of an Underlying Mutual Fund other than brokerage fees incurred for the purchase and sale of Underlying Mutual Funds that are exchange traded funds;

(h) the Filer, or its affiliate, does not cause the securities of the Underlying Mutual Fund held by a Pooled Fund to be voted at any meeting of holders of such securities, except that the Filer, or its affiliate, may arrange for the securities the Pooled Fund holds of the Underlying Mutual Fund to be voted by the beneficial holders of securities of the Pooled Fund; and

(i) prior to making their first investment in a Pooled Fund, each investor will be provided with an offering memorandum or, if no offering memorandum is prepared, another written document that discloses the following (the New Fund-on-Fund Information):

(i) that the Pool Fund may purchase securities of the Underlying Mutual Funds;

(ii) the fact that the Filer or an affiliate of the Filer is the investment fund manager of both the Pooled Fund and the Underlying Mutual Funds;

(iii) the approximate or maximum percentage of net assets of the Pooled Fund that the Pooled Fund intends to invest in securities of the Underlying Mutual Funds;

(iv) the process or criteria used to select the Underlying Mutual Funds;

(v) where the Pooled Fund indirectly bears any fees (including performance-based fees) or expenses incurred by an Underlying Mutual Fund, a description of such fees and expenses; and

(vi) that they are entitled to receive from the Filer, or its affiliates, on request and free of charge, a copy of:

(A) the Fund Facts, ETF Summary Document or ETF Facts, if available;

(B) the annual or semi-annual financial statements;

(C) the management report of fund performance (MRFP); and

(D) any other continuous disclosure documents that the Underlying Mutual Funds may make available to its investors;

relating to all Underlying Mutual Funds in which the Pooled Fund may invest its assets.

The Related Party Relief:

_____ ”Garnet W. Fenn” ____ ”Judith Robertson”_

Name: Garnet W. Fenn Name: Judith Robertson

Commissioner Commissioner

Ontario Securities Commission Ontario Securities Commission

The Consent Requirement Relief:

_”Darren McKall”

Darren McKall

Manager, Investment Funds and Structured Products

Ontario Securities Commission