ONE Financial Corporation
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to commodity pools from paragraphs 2.1(1), 2.2(1)(a), and 2.5(2)(a),(b),(c) of NI 81-102 to permit certain fund on fund structures -- relief subject to certain conditions.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 2.1(1), 2.2(1)(a), 2.5(2)(a), (b), (c), 19.1.
October 10, 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
ONE FINANCIAL CORPORATION
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of each of the Funds (as defined below) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Funds from the requirements of sections 2.1(1), 2.2(1)(a) and 2.5(2)(a) and (c) of National Instrument 81-102 -- Mutual Funds (NI 81-102) and, in the case of ONE Financial All-Weather Profit Growth & Income Balanced Fund, ONE Financial All-Weather Profit Conservative Growth 2022 Protected Portfolio and ONE Financial All-Weather Profit Monthly ROC Income 2022 Protected Portfolio (collectively, the Multi-Layer Funds), section 2.5(2)(b) of NI 81-102, to permit the Funds to invest in or gain exposure to the Investment Pools (as defined below) (collectively, the Requested Relief).
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 section 4.7(1) of Multilateral Instrument 11-102 -- Passport System is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia the Northwest Territories, Nunavut, Prince Edward Island, Québec, Saskatchewan and the Yukon.
Interpretation
Terms defined in National Instrument 14-101 -- Definitions have the same meaning if used in this decision, unless otherwise defined.
Representations
1. The Filer has launched a family of open-end commodity pools listed below (the Funds), each of which is a class of shares of ONE Financial All-Weather Profit Family Inc. (the Mutual Fund Corporation), a mutual fund corporation incorporated pursuant to the laws of the province of Ontario, pursuant to a preliminary long form prospectus dated December 29, 2011, as amended and restated on July 13, 2012 (the Prospectus).
|
ONE Financial All-Weather Profit Canada Fund |
ONE Financial All-Weather Profit Global Diversified Growth Fund |
|
|
|
|
ONE Financial All-Weather Profit U.S. Fund |
ONE Financial All-Weather Profit Growth & Income Balanced Fund |
|
|
|
|
ONE Financial All-Weather Profit Europe & Asia Fund |
ONE Financial All-Weather Profit Monthly Tax-Efficient Bond Fund |
|
|
|
|
ONE Financial All-Weather Profit Emerging Markets Fund |
ONE Financial All-Weather Profit Tax-Efficient Short-term Savings Fund |
|
|
|
|
ONE Financial All-Weather Profit Commodities Fund |
ONE Financial All-Weather Profit Conservative Growth 2022 Protected Portfolio |
|
|
|
|
ONE Financial All-Weather Profit Global Diversified Fund |
ONE Financial All-Weather Profit Monthly ROC Income 2022 Protected Portfolio |
2. The Filer will be appointed manager of the Funds pursuant to a management agreement between the Filer and the Mutual Fund Corporation. The Filer is a corporation incorporated under the laws of the province of Ontario having its head office in Toronto, Ontario. The Filer is registered as an investment fund manager, portfolio manager, exempt market dealer and commodity trading manager under applicable Ontario securities laws. The Filer is not a reporting issuer in any province or territory of Canada.
3. None of the Filer, the Mutual Fund Corporation, any of the Funds or any of the Investment Pools (as defined below) is in default under any applicable securities legislation in any of the provinces or territories of Canada.
4. The Filer has filed the Prospectus in all of the provinces and territories of Canada pursuant to which it will offer various series of shares of the Funds. No securities of the Mutual Fund Corporation, the Funds or the Investment Pools (as defined below) will be listed for trading on a stock exchange.
5. As the respective investment objectives and strategies of each of the Funds will permit it to use or invest in specified derivatives in a manner not permitted by NI 81-102, each Fund will be a commodity pool under applicable securities legislation.
6. With the exception of the Requested Relief and certain other requested relief, the investment practices of each of the Funds will comply with the requirements of Part 2 of NI 81-102, as modified by National Instrument 81-104 -- Commodity Pools (NI 81-104).
7. It is proposed that each Fund will initially seek to achieve its investment objectives by investing in the units (the Unit Strategy) of an investment pool trust (each, an Investment Pool and collectively, the Investment Pools), which Investment Pool will invest:
(a) directly in a portfolio of securities; and
(b) in the case of the All-Weather Profit Growth & Income Balanced Investment Pool (the Growth & Income Balanced Investment Pool) and the All-Weather Conservative Growth 2022 Protected Investment Pool and the All-Weather Profit Monthly ROC Income 2022 Protected Investment Pool (together, the Protected Investment Pools), in the units of certain other Investment Pools.
Pursuant to the Unit Strategy, the Funds and, where applicable, the Investment Pools, will subscribe for units of the applicable Investment Pools on a private placement basis. Each Investment Pool will file a non-offering prospectus and as result will be a reporting issuer in Ontario and Québec. As a result of the Unit Strategy, each Fund would gain direct or indirect exposure to the investment return of one or more Investment Pools.
8. In addition, each Fund may use a portion of its assets to enter into one or more forward contracts (each, a Forward) with a Canadian chartered bank (each, a Counterparty) (the Forward Strategy). The Counterparty under each Forward may use the amount received from the Fund to subscribe for units of an Investment Pool. As a result of the Forward Strategy, each Fund would gain indirect exposure to the investment return of one or more Investment Pools.
9. The Investment Pool to which each Fund will gain exposure is set out below:
|
Fund |
Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Canada Fund |
ONE Financial All-Weather Profit Canada Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit U.S. Fund |
ONE Financial All-Weather Profit U.S. Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Europe & Asia Fund |
ONE Financial All-Weather Profit Europe & Asia Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Emerging Markets Fund |
ONE Financial All-Weather Profit Emerging Markets Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Commodities Fund |
ONE Financial All-Weather Profit Commodities Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Global Diversified Fund |
ONE Financial All-Weather Profit Global Diversified Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Global Diversified Growth Fund |
ONE Financial All-Weather Profit Global Diversified Growth Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Growth & Income Balanced Fund |
ONE Financial All-Weather Profit Growth & Income Balanced Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Monthly Tax-Efficient Bond Fund |
ONE Financial All-Weather Profit Monthly Bond Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Tax-Efficient Short-term Savings Fund |
ONE Financial All-Weather Profit Short-term Savings Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Conservative Growth 2022 Protected Portfolio |
ONE Financial All-Weather Profit Conservative Growth 2022 Protected Investment Pool |
|
|
|
|
ONE Financial All-Weather Profit Monthly ROC Income 2022 Protected Portfolio |
ONE Financial All-Weather Profit Monthly ROC Income 2022 Protected Investment Pool |
10. Each of the Funds is a clone fund as that term is currently defined in NI 81-102.
11. Each of the Investment Pools will be a trust established pursuant to a declaration of trust governed by the laws of the province of Ontario as it may be amended and/or restated (the Declaration of Trust) and the Filer will be the trustee of each of the Investment Pools. The Filer will also be the manager of the Investment Pools pursuant to the Declaration of Trust. Except as described herein, each of the Investment Pools will invest the proceeds from its sale of units in accordance with the investment objectives and strategies of the applicable Investment Pool or Investment Pools, as will be described in the final Prospectus. Certain of the Investment Pools, namely the Growth & Income Balanced Investment Pool and the Protected Investment Pools, will invest, in part, in units of certain other Investment Pools in accordance with the investment objectives and strategies of the applicable Investment Pool, as will be described in the final Prospectus. The investment practices of each of the Investment Pools will be in accordance with the requirements of Part 2 of NI 81-102, as modified by NI 81-104, other than, in respect of the Growth & Income Balanced Investment Pool and the Protected Investment Pools, sections 2.1(1), 2.2(1)(a), and 2.5(2)(a) to (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 investments of a Fund in an Investment Pool or the exposure of a Fund to an Investment Pool will be in accordance with the fundamental investment objectives of the Fund;
(b) each of the Funds is a commodity pool subject to NI 81-102, as modified by NI 81-104;
(c) each of the Investment Pools will operate in accordance with the Part 2 of NI 81-102, as modified by NI 81-104, other than those sections that are referenced in representation 11 above, and in accordance with NI 81-104, other than section 3.2(1);
(d) the investment of a Fund in units of an Investment Pool or the exposure of a Fund to an Investment Pool will be in accordance with each provision of section 2.5 of NI 81-102 except paragraphs 2.5(2)(a) and 2.5(2)(c) and, in the case of the Multi-Layer Funds, paragraph 2.5(2)(b);
(e) the Prospectus discloses and the final prospectus of the Funds will disclose that the Funds will invest in or gain exposure to the Investment Pools;
(f) the Investment Pools will be reporting issuers subject to NI 81-106 -- Investment Fund Continuous Disclosure; and
(g) no securities of an Investment Pool will be distributed other than to a Fund, a Counterparty, the Growth & Income Balanced Investment Pool, a Protected Investment Pool, the Filer or an affiliate thereof.