Mackenzie Finanacial Corporation and Mackenzie Multi-Strategy Absolute Return Fund
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to a mutual fund subject to National Instrument 81-101 Mutual Fund Prospectus Disclosure that seeks to engage in alternative investment strategies not otherwise permitted by National Instrument 81-102 Investment Funds -- Relief to permit fund to invest up to 20% of net assets in securities of a single issuer -- Relief to permit fund to invest in precious metals and physical commodities -- Relief from cash cover and designated rating requirement in respect of use of derivatives -- Relief to permit fund to borrow cash for investment purposes and to grant a security interest over assets in connection with such borrowing -- Relief to permit fund to engage in short selling in excess of 20% of the net assets of the fund and to use proceeds from short sales to enter into a long position in a security -- Borrowing and short selling subject to a combined maximum limit of 50% of the fund's net asset value -- Aggregate gross exposure of the fund (long positions, short positions and notional value of derivatives positions) subject to maximum limit of 3 times the net asset value of the fund -- Relief subject to certain limitations on distribution of securities of the fund -- Relief subject to the inclusion of certain required disclosures in the simplified prospectus, annual information form, fund facts document and continuous disclosure documents.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds, ss. 2.1(1), 2.3(d), (e), (f), and (h), 2.7(1), (2) and (3), 2.8, 2.6, 2.6.1(1)(c), 2.6.1(2) and (3), 6.8, 19.1.
April 27, 2018
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 MACKENZIE FINANACIAL CORPORATION (the Filer) AND IN THE MATTER OF MACKENZIE MULTI-STRATEGY ABSOLUTE RETURN 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), pursuant to section 19.1 of National Instrument 81-102 Investment Funds (NI 81-102) and section 6.1 of National Instrument 81-101 Mutual Funds Prospectus Disclosure (NI 81-101), exempting the Fund from the following provisions of NI 81-102 and NI 81-101:
(a) subsection 2.1(1) of NI 81-102, to permit the Fund to invest more than 10% of its net asset value in the securities of a single issuer (Single Issuer Relief);
(b) subsections 2.3(d), (e), (f) and (h) of NI 81-102, to permit the Fund to invest in precious metal certificates (other than permitted gold certificates), if, immediately after the purchase, more than 10 percent of its net asset value would be made up of precious metal certificates; to invest in gold certificates, including permitted gold certificates; and to invest in physical commodities other than gold certificates (Commodities Relief);
(c) to purchase, sell or use specified derivatives and/or debt-like securities other than in compliance with subsections 2.7(1),(2) and (3) and section 2.8 of NI 81-102 (Specified Derivatives Relief);
(d) section 2.6 of NI 81-102, to permit the Fund to borrow cash to use for investment purposes in excess of the limits set out in subsection 2.6(a) of NI 81-102 and to grant a security interest of its assets in connection therewith (Cash Borrowing Relief);
(e) subsections 2.6.1(1)(c) and 2.6.1(2) and (3) of NI 81-102, 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 a short sale to enter into a long position in a security (Short Selling Relief);
(f) section 6.8 of NI 81-102, 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);
(the Single Issuer Relief, Commodities Relief, Specified Derivatives Relief, Cash Borrowing Relief, Short Selling Relief, and the Cash Borrowing Custody Relief are, 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 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 Facts
1. The Filer will be the trustee, investment fund manager and the portfolio manager of the Fund. The Filer is registered as an investment fund manager, portfolio manager, exempt-market dealer and commodity trading manager in Ontario. The Filer is also registered as a portfolio manager and exempt-market dealer in all other Canadian provinces and territories, as an investment fund manager in Newfoundland and Labrador and Québec, and as an adviser in Manitoba. The head office of the Filer is in Toronto, Ontario.
2. The Fund will be a mutual fund created 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.
3. The Filer is not in default of securities legislation in any Jurisdiction.
4. Units of the Fund will be offered by simplified prospectus filed in all of the provinces and territories in Canada and, accordingly, the Fund will be a reporting issuer in each of the provinces and territories of Canada.
5. The proposed investment objective of the Fund is to provide a positive long-term total return over a market cycle, regardless of market conditions or general market direction, by employing disciplined strategic asset allocation with the flexibility to dynamically tilt the allocations according to the attractiveness of each of the following strategies: Credit Absolute Return, Global Macro, Long/Short Equity and/or Equity Market Neutral (each, a Strategy). These Strategies will be used to gain exposure to a broad range of asset classes, including equities, fixed-income securities and/or convertible securities issued by companies anywhere in the world, including emerging markets.
6. The Fund's Global Macro Strategy involves a number of top-down strategies that seek to enhance returns by taking advantage of movement in the prices of securities that are highly sensitive to macro-economic conditions, across a broad spectrum of assets. This Strategy provides long and short exposure to equities, currencies, fixed income securities, interest rates and commodities markets. It aims for significant diversification across risk factors, investment strategies, time horizons and economic exposures where investment decisions will reflect a blend of fundamental and qualitative research, delivering attractive absolute and relative risk characteristics with low correlations to global stock and government bond markets.
7. The Fund's Credit Absolute Return Strategy is a global, flexible and actively managed approach to adding value through the use of multiple sectors, geographies and parts of the capital structure. The Strategy will use a levered long-short and/or a momentum-long approach to corporate investments which is expected to include an allocation to high yield debt securities, loans and investment grade debt securities. The Strategy may also use independent systematic strategies using a long-short currency model and a duration timing model. Investment decisions will be driven by model outputs as well as macro qualitative overlays, including the use of tail risk management strategies.
8. The Fund's Long/Short Equity and Equity Market Neutral Strategies will employ a disciplined, quantitative investment approach. These Strategies will use a sophisticated stock selection process utilizing a multi-factor model to exploit market inefficiencies. The portfolio construction process of these Strategies will use leading edge risk modelling and rules with disciplined, rigorous implementation. Models will be run on a daily basis and portfolio characteristics will be monitored daily.
9. The Fund may also invest in foreign currencies and/or physical commodities.
10. 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 commodity futures, index futures, equity futures, bond futures and interest rate futures); currency forwards; options and swaps (including commodity swaps, swaps on commodity futures, equity swaps, swaps on index futures, total return swaps, interest rate swaps, and credit default swaps). In its use of derivatives, the Fund will aim to contribute to the target return and the volatility objectives of the Fund.
11. 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 on equities, fixed-income securities or other portfolio assets; and/or (iii) through the use of specified derivatives.
12. 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 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 Fund.
13. The Filer and its affiliates also manage other mutual funds, and will manage future mutual funds, subject to NI 81-102 (collectively the Top Funds). A Top Fund may seek to invest up to 10% of its net assets in the Fund provided that such investment is consistent with the Top Fund's investment objectives.
14. Pursuant to a decision document dated September 30, 2015 (the Prior Decision), the Filer has obtained exemptive relief that permits the Top Funds managed by the Filer to invest up to 10% of their respective net assets in Underlying Exchange Traded Funds (as defined in the Prior Decision). Each Top Fund will reduce the maximum permitted exposure to the Fund by the amount of any investment in an Underlying Exchange Traded Fund.
15. 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 that 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).
16. The Filer acknowledges that additional guidance regarding proficiency for the distribution of alternative funds has not been finalized at this time and will accompany the final publication of the proposed amendments to NI 81-102 (the Proposed Alternative Fund Investment Restrictions) and NI 81-101 (the Proposed Alternative Fund Disclosure) (the Proposed Alternative Fund Investment Restrictions and the Proposed Alternative Fund Disclosure, collectively, the Proposed Alternative Fund Rules) which were contemplated within the CSA Notice and Request for Comment -- Modernization of Investment Fund Product Regulation -- Alternative Funds (2016), 39 OSCB 8051 dated September 22, 2016. 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.
Fund Disclosure of Alternative Strategies
17. The Filer proposes to file a simplified prospectus that:
(a) identifies the Fund as an alternative 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;
(c) disclose within the Fund's investment objectives the maximum amount of leverage to be employed;
(d) disclose within the Fund's 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 investment strategies that may be used which are outside the scope of the existing NI 81-102, how such strategies may affect investors' chance of losing money on their investment in the Fund.
18. The Filer proposes to file an annual information form that:
(a) identifies the Fund as an alternative 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.
19. The Filer proposes to file a fund facts document that:
(a) identifies the Fund as an alternative 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.
20. 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.
21. The Filer submits that the proposed Fund disclosure accurately describes its investment strategies while emphasizing the particular strategies which are outside the scope of the existing NI 81-102.
Single Issuer Relief
22. The Fund's investment strategies will allow it to invest up to 20 percent of its net asset value in securities of an issuer.
23. Subsection 2.1(1) of NI 81-102 does not permit an investment 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 percent of its net asset value would be invested in securities of any one issuer.
24. The Filer believes that it is in the best interests of the Fund to be permitted to invest up to 20 percent of its net assets in one issuer, as such investments will allow the Fund to fully express the convictions of the Fund's portfolio managers.
Specified Derivatives and Debt-Like Security Relief
25. The investment strategies of the Fund contemplate 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. For example, depending on prevailing interest rates, the Fund's Credit Absolute Return portfolio manager may use futures to lengthen or shorten duration within this Strategy.
26. 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.
27. 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.
28. The Filer submits that, any increased credit risk which may arise due to an exemption from the Designated Rating Requirements is counterbalanced given 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.
29. 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 percent 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).
30. Commodity pools, the predecessor to alternative 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 Option and Cover Requirements and from section 2.11 of NI 81-102.
Commodities Relief
31. The investment strategies of the Fund will permit the Fund to purchase precious metal certificates other than permitted gold certificates, to invest in physical commodities either directly or indirectly, and to invest more than 10 percent of the net assets of the Fund in physical commodities or precious metal certificates.
32. Subsections 2.3(d), (e), (f) and (h) of NI 81-102 do not permit an investment fund to:
(a) purchase a gold certificate, other than a permitted gold certificate,
(b) purchase gold or a permitted gold certificate if, immediately after the purchase, more than 10 percent of its net asset value would be made up of gold and permitted gold certificates,
(c) except for the above conditions, to purchase a physical commodity including indirectly through the use of specified derivatives, and
(d) purchase, sell or use a specified derivative other than in compliance with sections 2.7 to 2.11.
33. The portfolio management team considers investment in commodities other than gold to be an important investment tool that is available to it to properly manage the Fund's portfolio.
34. The Filer believes that it is in the best interests of the Fund for it to be permitted to invest in physical commodities other than gold, including indirect exposure to certain physical commodities through the use of certificates, index participation units and/or specified derivatives.
Cash Borrowing Relief
35. The investment strategies of the Fund will permit the Fund to borrow cash in excess of the limits currently described in section 2.6 of NI 81-102.
36. While each Strategy has the ability to borrow cash in excess of the limits currently described in section 2.6 of NI 81-102, the Filer's current expectation is that the Fund's Credit Absolute Return Strategy may engage in cash borrowing at launch whereas the Filer does not expect the remaining Strategies will do so immediately.
37. 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.
38. The Proposed Alternative Fund Investment Restrictions give investment funds the ability to borrow up to 50 percent of their net asset value to use for investment purposes in order to facilitate a wider array of investment strategies.
39. 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.
Short Sale Relief
40. The investment strategies of the Fund will permit the Fund 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.
41. Each Strategy may engage in physical short sales from time to time.
42. 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.
43. 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 Alternative Fund Investment Restrictions.
44. For the reasons provided above, the Filer respectfully submits that it would not be prejudicial to the public interest to grant the Requested Relief.
Decision
The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:
1. 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 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 strategies 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 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 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.
2. 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);
(c) a description of how the Fund calculates leverage; and
(d) the significance to the Fund of the lowest and highest levels of leverage.
3. 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.
4. 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 three times the Fund's net asset value: (i) the aggregate market value of the Fund's long positions; (b) the aggregate market value of securities sold short by the Fund pursuant to the Short Selling Relief; and (c) 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 the 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.
5. 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.
6. In the case of Short Selling Relief and the Short Selling Custody 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.
7. 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
8. The Filer will ensure the Fund is only distributed through dealers that are registered with IIROC. In order to be eligible to distribute the Fund, each dealer will be required to sign an agreement with the Filer confirming its IIROC registration status.
9. The Filer will not distribute securities of the Fund to other mutual funds other than the Top Funds.
10. 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, either:
(a) more than 10% of the net asset value of the Top Fund, taken at market value at the time of the transaction, would consist of securities of the Fund; or
(b) the aggregate value of securities of the Fund and Underlying Exchange Traded Funds, taken at market value at the time of the transaction, would exceed 10% of the net asset value of the Top Fund.
11. 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 10 above.
12. The Filer will provide the Principal Regulator with notification of all affiliates from which it has obtained an Undertaking.
Term
13. This decision shall expire upon the earlier of: (i) the coming into force of the Proposed Alternative Fund Rules or substantially similar rules; and (ii) five years from the date of this decision.