Vision Capital Corporation (Re), 2018 CanLII 140768

December 19, 2018

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction)

AND

IN THE MATTER OF VISION CAPITAL CORPORATION (the Filer)

AND

IN THE MATTER OF VISION ALTERNATIVE INCOME FUND (the Fund)

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), pursuant to section 19.1 of National Instrument 81-102 Investment Funds (NI 81-102), exempting the Fund from the following provisions of NI 81-102:

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

(ii) to permit the Fund to purchase, sell or use specified derivatives and/or debt-like securities other than in compliance with subsections 2.7(1), (2) and (3), section 2.8 and section 2.11 of NI 81-102 (Specified Derivatives Relief);

(iii) section 2.6 to permit the Fund to borrow cash to use for investment purposes in excess of the limits set out in subsection 2.6(a) and to grant a security interest over its portfolio assets in connection therewith (Cash Borrowing Relief);

(iv) subsections 2.6.1(1)(c) and 2.6.1(2) and (3) to permit the 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 short sales to enter into long positions in securities (Short Selling Relief);

(v) subsection 6.1(1), to permit the 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);

(vi) section 7.1, to permit the Fund to pay, or enter into arrangements that would require it to pay, a fee that is determined by the performance of such Fund that is based on the cumulative total return of the Fund for the period that began immediately after the last period for which such fee was paid (Incentive Fee Relief);

(vii) subsection 9.3(1), to permit the Fund to process purchase orders for its units, as described in its simplified prospectus and Fund Facts, on a monthly basis at their class net asset value per unit calculated as at the last Valuation Date (as defined below) of the calendar month in which the purchase order for such units is received (Purchase Relief);

(viii) subsection 10.3(1), to permit the Fund to process redemption orders for its units, as described in its simplified prospectus and Fund Facts:

(A) initially, on a Valuation Date that is no more than 6 months after the date on which the receipt was issued for its initial prospectus (the Initial Redemption Date). Redemption orders for units received at least 20 business days prior to the Initial Redemption Date will be redeemed at their class net asset value per unit determined on the Initial Redemption Date; and

(B) following the date referred to in (A) above, and on at least 20 business days prior written notice, on a quarterly basis, redeeming such units at their class net asset value per unit calculated on the last Valuation Date of each calendar quarter in which the redemption order for such units is received (Redemption Relief); and

(ix) subsection 10.4(1), to permit the Fund to pay the redemption proceeds for units that are the subject of a redemption order no later than 15 business days after the Valuation Date on which the redemption price was calculated (Redemption Payment 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 NI 81-102, National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), National Instrument 14-101 Definitions, and MI 11-102 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

The Filer will be the manager, portfolio manager, trustee and promoter of the Fund. The Filer is registered as a portfolio manager, investment fund manager and exempt market dealer in the provinces of Ontario, British Columbia, Alberta and Manitoba, as an investment fund manager in the Province of Newfoundland and Labrador, and as an investment fund manager and exempt market dealer in the Province of Quebec.
The Fund will be a mutual fund established 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.
Units of the Fund, initially offered in Classes A, F, A-US, F-US and I, will be offered by simplified prospectus, subject to NI 81-101, filed in all of the provinces and territories in Canada and, accordingly, the Fund will be a reporting issuer in all of the provinces and territories in Canada.
The proposed investment objective of the Fund is to provide consistent long-term capital appreciation and to provide investors with an attractive risk-adjusted rate of return with low downside volatility and drawdowns. The Fund will attempt to meet its objectives by using alternative investment strategies, including primarily equity long/short and equity market neutral strategies and utilizing derivatives to invest and trade primarily in real estate focused securities. The alternative investment strategies will be used to gain exposure to a broad range of asset classes, including primarily equities, fixed-income securities, equity ETFs and/or convertible securities issued by real estate operating companies and/or real estate investment trusts primarily in North America and selectively globally. The Fund’s aggregate gross exposure (as defined in subsection 2.9.1(2) of the Proposed Amendments, as defined below) to be calculated as the sum of the following must not exceed 300% of the Fund’s net asset value: (i) the aggregate value of the Fund’s indebtedness under any borrowing agreements entered into pursuant to the Cash Borrowing Relief; (ii) the aggregate market value of securities sold short by the Fund pursuant to the Short Selling Relief; and (iii) the aggregate notional value of the Fund’s specified derivatives positions excluding any specified derivatives used for hedging purposes. The fundamental investment objective of the Fund will not change without the consent of a majority of the voting unitholders of the Fund.
The Fund may take both long and short positions in foreign currencies in order to hedge currency exposure of the Fund, its investment portfolio or a particular class of units.
The Fund is expected to invest in a variety of derivatives and may take both long and short positions. The Fund’s use of derivatives may include futures (including index futures, equity futures, bond futures and interest rate futures), currency forwards, options and swaps (including equity swaps, swaps on index futures, total return swaps, and interest rate swaps). In its use of derivatives, the Fund will aim to contribute to the target return and the volatility objectives of the Fund.
The Fund may use leverage through a combination of one or more of the following: (i) borrowing cash for investment purposes; (ii) physical short sales of equity securities, fixed-income securities or other portfolio assets; and/or (iii) through the use of specified derivatives.
The Fund’s net asset value will be calculated at the close of regular trading, normally 4:00 p.m. (Eastern Time), on a day the Toronto Stock Exchange is open (a Valuation Date).
The Filer will determine the Fund’s risk rating 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 Fund does not have an established ten-year track record, the Filer will determine the risk rating based on the standard deviation of a reference index selected in accordance with Item 5 of the Risk Methodology (the Reference Index). The Filer will assess the reasonableness of using the Reference Index on at least a quarterly basis. This will include monitoring the correlation between the Fund and the applicable Reference Index over time. 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 particular Fund.
The Filer and its affiliates may also manage future mutual funds and non-redeemable investment funds that will be subject to NI 81-102 (collectively, the Top Funds). A Top Fund may seek to invest a portion of its net assets in the Fund provided that such investment is consistent with the Top Fund’s investment objectives and the requirements of NI 81-102.
Prior to allowing a Top Fund managed by the Filer to invest in the 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 (the Top Fund Policies). To the extent that a Top Fund is managed by an affiliate of the Filer, the Filer will obtain an undertaking from the affiliate confirming that it has also implemented Top Fund Policies and that the affiliate will monitor and adhere to the restrictions on Top Fund investments that are set out in this decision (the Undertaking).
The Filer will observe the standards regarding proficiency for the distribution of alternative mutual funds reflected in the final publication package for the proposed amendments to NI 81-102 scheduled, subject to ministerial approval requirements, to come into force on January 3, 2019 (the Proposed Amendments).
The Filer will take steps to ensure the Fund is only distributed through dealers that are registered with the Investment Industry Regulatory Organization of Canada (IIROC) or to Top Funds managed by the Filer or its affiliates. In order to be eligible to distribute the Fund, each dealer will be required to sign an agreement with the Filer confirming its registration status with IIROC.
The Filer is not, and the Fund will not be, in default of the securities legislation in any of the Jurisdictions.
The Filer respectfully submits that it would not be prejudicial to the public interest to grant the Requested Relief, including for the reasons provided in this decision.

Fund Disclosure of Alternative Strategies

The Filer proposes to file a simplified prospectus in respect of the Fund that:

(a) identifies the Fund as an alternative mutual fund;

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

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

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

The Filer proposes to file an annual information form in respect of the Fund that:

(a) identifies the Fund as an alternative mutual fund; and

(b) discloses 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 manager of the Fund.

The Filer proposes to file a fund facts document in respect of the Fund that:

(a) identifies the Fund as an alternative mutual fund; and

(b) includes cover page text box disclosure to highlight how the Fund differs from other mutual funds in terms of its investment strategies and the assets it is permitted to invest in.

The Filer will include within the Fund’s financial statements and management reports of fund performance disclosure regarding actual use of leverage within the Fund for the applicable period referenced therein.
The Filer will ensure that the proposed disclosure in respect of the Fund accurately describes its investment strategies while emphasizing the particular strategies which are outside the current scope of NI 81-102.

Single Issuer Relief

The Fund’s investment strategies will allow it to invest up to 20% of its net asset value in securities of an issuer.
Subsection 2.1(1) of NI 81-102, does not permit a mutual 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.
The Filer believes that it is in the best interest of the Fund to be permitted to invest up to 20% of its net assets in one issuer, as such investments will allow the Fund to fully express the convictions of the Fund’s portfolio manager.

Specified Derivatives Relief

The investment strategy of the Fund contemplates flexible use of specified derivatives for hedging and/or non-hedging purposes. The Fund has the ability to opportunistically use options, swaps, futures and forward contracts and/or other derivatives under different market conditions.
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.
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 Fund access to a wider variety of over-the-counter products.
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 the 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.
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).
Commodity pools, the predecessor to alternative mutual funds, are not subject to the Option and Cover Requirements or to section 2.11 of NI 81-102. The Filer submits that the Fund should also be exempt from the Designated Rating Requirement, the Option and Cover Requirements and from section 2.11 of NI 81-102.

Cash Borrowing Relief and Cash Borrowing Custody Relief

The investment strategies of the Fund will permit the Fund to borrow cash in excess of certain limits currently prescribed in section 2.6 of NI 81-102.
The Fund’s investment strategy has the ability to borrow cash in excess of the limits currently described in section 2.6 of NI 81-102 and the Filer’s current expectation is that the Fund may engage in cash borrowing at launch.
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 acquisition of its portfolio securities and the outstanding amount of all borrowings is repaid on the closing of its initial public offering.
Subsection 6.1(1) of NI 81-102 requires that, except as provided in the specified exceptions, all portfolio assets of a mutual fund shall be held under the custodianship of one custodian that satisfies the requirements of section 6.2 of NI 81-102.
The Proposed Amendments 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 and also add to the specified exceptions to subsection 6.1(1) of NI 81-102 that an investment fund may deposit with its lender portfolio assets over which it has granted a security interest in connection with a borrowing agreement to which section 2.6 of NI 81-102 applies.
The Filer believes that it is in the best interests of the Fund to be permitted to borrow cash to meet its investment objectives and strategies and to be permitted to deposit with its lender, assets over which it has granted a security interest in connection with the Cash Borrowing Relief.

Short Sale Relief

The investment strategies of the Fund will permit it to:

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

The Fund may engage in physical short sales from time to time.
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.
The Filer believes that it is in the best interests of the Fund to be permitted to sell securities short in excess of the current limits, in a manner that is consistent with the Proposed Amendments.

Incentive Fee Relief

The Fund will be permitted to pay, or enter into arrangements that would require it to pay, an incentive fee that is determined by the performance of the Fund that 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.
The method of calculating the incentive fee payable by the Fund shall be described in the simplified prospectus in respect of the Fund.
The Filer believes that the proposed incentive fee structure for the Fund aligns the interests of the manager or portfolio advisor with that of the investors.
The Filer believes that it is in the best interests of the Fund to be permitted to pay, or enter into arrangements that would require it to pay, a fee that is determined by the performance of the Fund in a manner that is consistent with the Proposed Amendments.

Purchase Relief, Redemption Relief and Redemption Payment Relief

The Filer will calculate the net asset value for the Fund on a daily basis in order to meet its obligations under NI 81-106 regarding the use of derivatives, including the obligation to daily mark-to-market the value of its derivatives.
Subsections 9.3(1) and 10.3(1) of NI 81-102 require that the purchase price and redemption price of a security of a mutual fund to which a purchase order and redemption order pertains, respectively, be the net asset value per security next determined after receipt by the fund of the purchase order and redemption order, respectively.
As described in the Fund's simplified prospectus and Fund Facts, the Fund will:

(a) process purchase orders for its units on a monthly basis at their class net asset value per unit calculated as at the last Valuation Date of the calendar month in which the purchase order for such units is received; and

(b) process redemption orders for its units:

(i) initially, on the Initial Redemption Date. Redemption orders for units received at least 20 business days prior to the Initial Redemption Date will be redeemed at their class net asset value per unit determined on the Initial Redemption Date; and

(ii) following the date referred to in (i) above, and on at least 20 business days prior written notice, on a quarterly basis, redeeming such units at their class net asset value per unit calculated on the last Valuation Date of each calendar quarter in which the redemption order for such units is received.

As described in the Fund's simplified prospectus, the Fund will pay the redemption proceeds for units that are the subject of a redemption order no later than 15 business days after the Valuation Date on which the redemption price was calculated.
The Filer has structured its mutual fund operations so that it can consolidate all purchase orders into one efficient monthly processing transaction and all redemption orders into one efficient quarterly transaction. The Filer has determined that effecting such purchases and redemptions on a monthly and quarterly basis, respectively, strikes the best balance between the needs of a unitholder to invest or access its assets in a timely and orderly manner, and the need to minimize the impact of such transactions on other unitholders in the Fund.
The Filer believes that quarterly redemptions will mitigate excessive portfolio turnovers to boost the Fund’s net asset value due to lower transaction costs in the form of brokerage commissions and the bid-ask spread. Further, it has determined that quarterly redemptions will protect the Fund from having to reduce positions at less than ideal times during potentially challenging market conditions. This will ensure that all unitholders of the Fund will be treated fairly in instances where the Fund is not able to unwind its portfolio holdings in an orderly manner to honour the redemption requests at the time.
The Proposed Amendments give an alternative mutual fund the ability, if disclosed in its simplified prospectus and otherwise in accordance with NI 81-102, to require that that units of the fund may not be redeemed for a period up to 6 months after the date on which the receipt is issued for the initial prospectus of the alternative mutual fund and the ability to pay the redemption proceeds for any units that are the subject of a redemption order no later than 15 business days after the Valuation Date on which the redemption price was established. The Filer believes that it is in the best interests of the Fund to be permitted to so proceed.

Decision

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

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

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

(b) within the simplified prospectus, the Filer will include disclosure within the 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 the 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 the Fund’s investment strategy 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 the 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 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 the Fund as an alternative mutual 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.

The Filer will disclose in the Fund’s annual and interim financial statements and the 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);

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

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.
In the case of the Specified Derivatives Relief:

(a) the Fund’s aggregate gross exposure calculated as the sum of the following, must not exceed 300% of the Fund’s net asset value: (i) the aggregate value of the Fund’s indebtedness under any borrowing agreements entered into pursuant to the Cash Borrowing Relief; (ii) the aggregate market value of securities sold short by the Fund pursuant to the Short Selling Relief; and (iii) 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 the 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) the 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.

In the case of the Cash Borrowing Relief:

(a) the 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 the Fund’s net asset value.

In the case of the Short Selling Relief:

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

In the case of the Incentive Fee Relief:

The 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 the Fund shall be described in the simplified prospectus in respect of the Fund.

In the case of the Purchase Relief, the Fund:

(a) processes, and discloses in its simplified prospectus and in the “Quick Facts” section of its Fund Facts that it processes, purchase orders for its units on a monthly basis at their class net asset value per unit calculated as at the last Valuation Date of the calendar month in which the purchase order for such units is received (the Purchase Processing Frequency); and

(b) discloses in the “Who should invest in the Fund?” section of the Part B of its simplified prospectus and in the “Who is this Fund for?” section of its Fund Facts the Purchase Processing Frequency and that the Fund is only suitable for investors who can accept the Purchase Processing Frequency.

In the case of the Redemption Relief, the Fund:

(a) processes, and discloses in its simplified prospectus and in the “Quick Facts” section of its Fund Facts that it processes, redemption orders for its units as follows (the Redemption Processing Frequency):

(b) discloses in the “Who should invest in the Fund?” section of the Part B of its simplified prospectus and in the “Who is this Fund for?” section of its Fund Facts the Redemption Processing Frequency and that the Fund is only suitable for investors who can accept the Redemption Processing Frequency.

In the case of the Redemption Payment Relief, the Fund discloses in its simplified prospectus that it pays, and does pay, the redemption proceeds for securities that are the subject of a redemption order no later than 15 business days after the Valuation Date on which the redemption price was calculated.
In the case of the Cash Borrowing Relief and the Short Selling Relief:

(a) the 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 the 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

The Filer will ensure the Fund is only distributed through dealers that are registered with IIROC.
The Filer will not distribute securities of the Fund to other mutual funds other than the Top Funds.
In the case of Top Funds managed by the Filer, the Filer will ensure that such Top Funds will not purchase securities of the Fund if, immediately after the transaction, more than 10% of the net asset value of the Top Funds, taken at market value at the time of the transaction, would consist of securities of the Fund.
For Top Funds managed by an affiliate of the Filer, the Filer will obtain the Undertaking from its affiliate affirming that the affiliate will ensure that the Top Funds it manages will abide by the investment limits set out in condition 14 above.
The Filer will provide the Principal Regulator with notification of all affiliates from which it has obtained an Undertaking.

Term

This decision, except with respect to the Purchase Relief and the Redemption Relief to the extent not contemplated by the Proposed Amendments, shall expire upon the earlier of: (i) the coming into force of the Proposed Amendments or substantially similar rules; and (ii) five years from the date of this decision.

“Darren McKall”

Darren McKall Manager, Investment Funds and Structured Products Branch Ontario Securities Commission App# 2018/0488