Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions - Relief granted to a commodity pool from paragraph 2.5(2)(a) and (c) of National Instrument 81-102 Mutual Funds to permit a commodity pool to gain exposure to another commodity pool implementing a two tiered structure, subject to certain conditions. The underlying commodity pool is not subject to National Instrument 81-101 Mutual Fund Prospectus Disclosure, and not qualified for distribution.

Applicable Legislative Provisions

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

April 30, 2009

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 CANADA AHL ALPHA FUND

(the "Filer")

AND

IN THE MATTER OF

MAN INVESTMENTS CANADA CORP.

(the "Manager")

 

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Manager, on behalf of the Filer, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for exemptive relief from subparagraph 2.5(2)(a) and (c) of National Instrument 81-102 Mutual Funds ("NI 81-102") to permit the Filer to make an indirect investment in securities of AHL Investment Strategies SPC -- Class C AHL Alpha CAD Notes (the "AHL SPC Class C") (the "Requested Relief").

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

(a) the Ontario Securities Commission (the "Commission") is the principal regulator for this 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 in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, Northwest Territories, Nunavut and the Yukon (the "Passport Jurisdictions").

Interpretation

Terms defined in National Instrument 14-101 Definitions and Ml 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:

1. The Filer is an investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust.

2. The Manager is the manager, trustee and promoter of the Filer. The Manager will be responsible for providing or arranging for the provision of administrative services required by the Filer. The principal office of the Manager is located at Suite 1202, 70 York Street, Toronto, Ontario M5J 1S9.

3. The Filer filed a preliminary prospectus (the "Preliminary Prospectus") dated March 17, 2009 on SEDAR with respect to the proposed offering (the "Offering") of Class A Units and Class F Units (together, the "Units") of the Filer, a receipt for which was issued by the Commission on March 18, 2009.

4. The Filer is a commodity pool as defined in National Instrument 81-104 Commodity Pools ("NI 81-104"). The Filer is subject to the investment restrictions contained in applicable Canadian securities legislation, including National Instrument 81-102 Mutual Funds ("NI 81-102"), and the Filer will be managed in accordance with these restrictions, except as otherwise permitted by NI 81-104.

5. The Filer's investment objective is to provide investors with the opportunity to realize capital appreciation through investment returns that have a low correlation to traditional forms of stock and bond securities.

6. To pursue its investment objective, the Filer will obtain exposure to a diversified portfolio of financial instruments across a range of global markets including currencies, bonds, stocks, energy, metals and interest rates (the "AHL Portfolio") that invests in futures, options and forward contracts, swaps and other financial derivative instruments.

7. The AHL SPC Class C is a segregated portfolio established by AHL Investment Strategies 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). The AHL Portfolio will be held by the AHL SPC Class C.

8. The AHL SPC Class C intends to file and obtain a receipt for a (final) prospectus from the Commission and the Autorité des marchés financiers, pursuant to which it will become a reporting issuer under the Securities Act (Ontario) and the Securities Act (Québec). Accordingly, the financial statements and other reports required to be filed by the AHL SPC Class C will be available through SEDAR.

9. The AHL SPC Class C filed a preliminary non-offering prospectus (the "Preliminary Prospectus") dated April 14, 2009 on SEDAR, a receipt for which was issued by the Commission on April 14, 2009.

10. The AHL SPC Class C is a commodity pool as defined in NI 81-104. The AHL SPC Class C is subject to the investment restrictions contained in applicable Canadian securities legislation, including NI 81-102, and the AHL Portfolio will be managed in accordance with these restrictions, except as otherwise permitted by NI 81-104; however, the AHL SPC Class C is a mutual fund that is not subject to National Instrument 81-101 Mutual Fund Prospectus Disclosure ("NI 81-101").

11. The Filer will obtain exposure to the AHL Portfolio through one or more forward purchase and sale agreements (collectively, the "Forward Agreement") to be entered into with one or more Canadian chartered banks and/or their affiliates (collectively, the "Counterparty").

12. The return to the Filer, and consequently to holders of Units (the "Unitholders"), will by virtue of the Forward Agreement be based the return of a series of Canadian dollar denominated redeemable notes (the "AHL SPC Class C Notes") issued by the AHL SPC Class C which will be referable to the AHL Portfolio.

13. The maximum exposure of a Unitholder to the AHL SPC Class C Notes will be the amount invested by the Unitholder in the Filer. However, investment exposure to the AHL SPC Class C Notes does not constitute a direct investment in the AHL Portfolio. Unitholders will not own the financial instruments held by the AHL Portfolio.

14. An investment by the Filer in the AHL SPC Class C Notes will be made in accordance with the provisions of paragraph 2.5 of NI 81-102, except for subparagraph 2.5(2)(a) and (c).

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 is granted provided that:

(a) the Filer and the AHL SPC Class C are commodity pools subject to NI 81-102 and NI 81-104;

(b) the exposure of the Filer to securities of the AHL SPC Class C is in accordance with the fundamental investment objective of the Filer;

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

(d) no securities of the AHL SPC Class C are distributed in Canada other than to the Counterparty under the Forward Agreement; and

(e) the indirect investment by the Filer in securities of the AHL SPC Class C is made in compliance with each provision of paragraph 2.5 of NI 81-102, except for subparagraph 2.5(2)(a) and (c) of NI 81-102.

Darren McKall
Assistant Manager
Ontario Securities Commission