Onex Canada Asset Management Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1) and 15.8(3)(a.1) and 15.1.1 of National Instrument 81-102 Investment Funds to permit prospectus qualified mutual funds that were not distributed under a simplified prospectus in a jurisdiction for 12 consecutive months to include in their sales communications past performance data relating to a period when the funds' securities were previously distributed to investors on a prospectus-exempt basis and to use this past performance data to calculate their investment risk level in accordance with Appendix F Investment Risk Classification Methodology -- Mutual funds are managed substantially similarly after they became reporting issuers as they were during the period prior to becoming reporting issuers and have similar fee and expense structures.

Relief granted from section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) for the purposes of the relief requested from Item 10(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus to permit the mutual funds to use the past performance data for a period when their securities were offered on a prospectus-exempt basis to calculate their investment risk rating in their simplified prospectus, and Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document to permit mutual funds to include in their fund facts document past performance data for a period when the funds were offered on a prospectus-exempt basis.

Relief granted from section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the purposes of the relief requested from Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, to permit the mutual funds to include in their annual and interim management reports of fund performance the past performance and financial data relating to a period when the funds were previously offered on a prospectus-exempt basis.

Relief granted from subsection 5.1(4) of NI 81-101 to permit simplified prospectus disclosure of alternative mutual funds to be consolidated with simplified prospectus disclosure of mutual funds that are not alternative mutual funds.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), 15.8(3)(a.1), 15.1.1 and 19.1.

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 2.1, 5.1(4) and 6.1.

Item 10(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus.

Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document.

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 4.4 and 17.1.

Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B and Items 3(1) and 4 of Part C of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance.

February 7, 2024

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
ONEX CANADA ASSET MANAGEMENT INC.
(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of Onex High Yield Bond Fund (Canada), Onex Premium Income Trust, Onex International Fund, Onex U.S. Equity Fund, and Onex Dividend Distribution Fund (each, a Conventional Fund and collectively, the Conventional Funds), as well as Onex Global Special Situations Alternative Fund (the Proposed Alternative Fund, and collectively with the Conventional Funds, the Funds and each, a Fund), for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Funds from:

(a) sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), and 15.8(3)(a.1) of National Instrument 81-102 Investment Funds (NI 81-102), to permit the Conventional Funds to include their past performance data in sales communications notwithstanding that:

(i) the past performance data will relate to a period prior to the Conventional Funds offering their units under a simplified prospectus; and

(ii) the Conventional Funds have not distributed their securities under a simplified prospectus for 12 months,

(collectively, the past performance data);

(b) section 15.1.1(a) of NI 81-102 and Items 2 and 4 of Appendix F Investment Risk Classification Methodology to NI 81-102 (the Risk Classification Methodology) to permit the Conventional Funds to include their past performance data in determining their investment risk level in accordance with the Risk Classification Methodology;

(c) section 15.1.1(b) of NI 81-102 and Item 4(2)(a) and Instruction (1) of Item 4 of Form 81-101F3 Contents of Fund Facts Document (Form 81-101F3) to permit the Conventional Funds to disclose their investment risk level as determined by including their past performance data in accordance with the Risk Classification Methodology;

(d) Item 10(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus (Form 81-101F1), to permit the Conventional Funds to use their past performance data to calculate their investment risk rating in their simplified prospectus;

(e) section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), for the purposes of the relief requested herein from Form 81-101F1 and Form 81-101F3;

(f) Items 5(2), 5(3), and 5(4) and Instructions (1) and (5) of Part I of Form 81-101F3 in respect of the requirement to comply with sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), and 15.8(3)(a.1) of NI 81-102 to permit the Conventional Funds to include in their fund facts the past performance data of the Conventional Funds notwithstanding that such performance data relates to a period prior to the Conventional Funds offering their units under a simplified prospectus and that the Conventional Funds have not distributed their units under a simplified prospectus for 12 consecutive months;

(g) section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for the purposes of the relief requested herein from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1);

(h) Items 3.1(7), 4.1(1) in respect of the requirement to comply with subsections 15.3(2) and 15.3(4)(c) of NI 81-102, 4.1(2), 4.2(1), 4.3(1), and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1 to permit the Conventional Funds to include in their annual and interim management reports of fund performance (MRFP) the past performance data and financial highlights of the Conventional Funds notwithstanding that such performance data and financial highlights relate to a period prior to the Conventional Funds offering their units under a simplified prospectus,

(paragraphs (a) to (h) above, the Performance Relief); and

(i) in respect of the Proposed Alternative Fund and any alternative mutual fund established or restructured in the future and managed by the Filer or an affiliate of the Filer (collectively with the Proposed Alternative Fund, the Alternative Funds), section 5.1(4) of NI 81-101, which states that a simplified prospectus for an alternative mutual fund must not be consolidated with a simplified prospectus of another mutual fund if the other mutual fund is not an alternative mutual fund,

(the Consolidation Relief and, together with the Performance Relief, the Exemption Sought).

Under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator; 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 all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

Unless expressly defined herein, terms in this Application have the respective meanings given to them in NI 81-101, NI 81-102, NI 81-106, National Instrument 14-101 Definitions, and MI 11-102.

Representations

This decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is a corporation incorporated under the laws of the Province of Ontario. The head office of the Filer is located in Toronto, Ontario.

2. The Filer is registered as an investment fund manager in Newfoundland and Labrador, Ontario and Québec, as a portfolio manager and exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Ontario, Québec, Saskatchewan and Yukon, and as a commodity trading manager in Ontario.

3. The Filer is the investment fund manager, portfolio manager and trustee of each of the Conventional Funds and will be the investment fund manager, portfolio manager and trustee of the Proposed Alternative Fund.

4. The Filer is not in default of applicable securities legislation in any of the Jurisdictions.

The Funds

5. Each Conventional Fund is, and the Proposed Alternative Fund will be, an open-ended mutual fund, structured as a trust under the laws of Ontario.

6. Each Conventional Fund is, and the Proposed Alternative Fund will be, governed by an amended and restated declaration of trust dated as of February 28, 2019, as amended from time to time.

7. The Conventional Funds are not in default of securities legislation in any of the Jurisdictions.

8. The securities of each Alternative Fund will be qualified for distribution in one or more of the Jurisdictions using a simplified prospectus and fund facts documents prepared and filed in accordance with the securities legislation of such Jurisdictions. Each Alternative Fund will be subject to the requirements of NI 81-101 and NI 81-102.

9. Units of the Conventional Funds have been distributed to investors on a prospectus-exempt basis in accordance with National Instrument 45-106 Prospectus Exemptions and the Securities Act (Ontario) since the inception of each of the Conventional Funds.

10. The inception date of each Conventional Fund (each an Inception Date and, collectively, the Inception Dates) is as follows:

a. July 1, 2010 for Onex Premium Income Trust (Onex PIT),

b. November 12, 2010 for Onex International Fund,

c. December 31, 2011 for Onex U.S. Equity Fund,

d. February 28, 2019 for Onex Dividend Distribution Fund, and

e. April 23, 2010 for Onex High Yield Bond Fund (Canada) (Onex HYBF) under different investment objectives. Onex HYBF adopted new investment objectives as of October 31, 2020.

11. From the Inception Date to July 31, 2023 (the Transition Date), each of the Conventional Funds offered, among others, Series A units. The Conventional Funds paid a management fee to the Filer in respect of Series A. Unlike typical "Series A" sold in the retail distribution channel, no compensation was paid to any dealer in respect of Series A units of the Conventional Funds. This series was sold to managed account clients of the Filer.

12. On the Transition Date, each of the previously issued Series A units of the Conventional Funds other than Onex HYBF was redesignated into Series F units of those Funds, and each of the previously issued Series A units of Onex HYBF was redesignated into Series FL units of that Fund, resulting in the impacted unitholders paying a lower management fee. The only differences between the Series A and Series F units of the Conventional Funds, and between Series A and Series FL units of Onex HYBF, are:

a. a lower management fee in respect of Series F and Series FL; and

b. prior to January 1, 2020, a performance fee was charged in respect of Series A units of the Conventional Funds (other than Onex HYBF), while no performance fee is charged in respect of Series F units.

13. Each of Onex HYBF and Onex PIT offered Series H units, which allowed unitholders to hedge exposure to fluctuations in the exchange rate between the Canadian dollar and the United States dollar in respect to the interest attributable to such series. No compensation was paid to any dealer in respect of the Series H. This series was sold to managed account clients of the Filer.

14. On the Transition Date, each of the previously issued Series H units were redesignated into Series FH units of Onex HYBF and Onex PIT resulting in the impacted unitholders paying a lower management fee. The only differences between the Series H and Series FH units of these Funds are:

a. a lower management fee in respect of Series FH units, and

b. prior to January 1, 2020, a performance fee was charged in respect of Series H units of Onex PIT, while no performance fee is charged in respect of Series FH units.

15. The Filer filed a preliminary simplified prospectus and fund facts to qualify Series F and Series O units of the Conventional Funds and Series FH and Series OH units of Onex HYBF and Onex PIT in the Jurisdictions. Each of the other series of units will continue to be distributed pursuant to prospectus exemptions, with the exception of Series FL units of Onex HYBF, which will no longer be distributed.

16. Upon the issuance of a final receipt for the simplified prospectus and fund facts documents, the Conventional Funds will become reporting issuers in each of the Jurisdictions, and, except for any exemptions granted, will become subject to the requirements of NI 81-102 and the requirements of NI 81-106 that apply to investment funds that are reporting issuers.

17. Each Conventional Fund will be managed substantially similarly after it becomes a reporting issuer as it was prior to becoming a reporting issuer. Specifically:

a. except in the case of Onex HYBF, the investment objective and strategies will not change, other than minor grammatical changes;

b. the management fee charged to the Conventional Fund in respect of Series F units of the Conventional Fund will not change and unitholders holding Series O units will pay a negotiated management fee directly to the Filer; and

c. the day-to-day administration of the Conventional Fund will not change, other than to comply with the additional regulatory requirements associated with being a reporting issuer (as modified by the Exemption Sought) and to provide additional features that are available to investors of mutual funds managed by the Filer, as will be described in the simplified prospectus and fund facts documents.

18. Onex HYBF became a feeder fund as of October 31, 2020 and sought to achieve its investment objective by investing substantially all of its assets in a limited partnership organized under the laws of the Cayman Islands (the Underlying Fund) managed by an affiliate of the Filer. Under NI 81-102, Onex HYBF will be prohibited from investing in an underlying fund that is not prospectus qualified.

19. As the Underlying Fund does not expect to qualify under a prospectus, the investment objectives and strategies of Onex HYBF will be amended, no later than the date of the final prospectus, by deleting the reference to the Underlying Fund and replacing it with the ability to permit it to hold the Fund's portfolio directly, rather than obtain exposure to the portfolio by investing in the Underlying Fund. To implement the change to its investment objective and strategies, Onex HYBF will redeem all of its interest in the Underlying Fund in exchange for an assignment or conveyance of its pro rata share of the assets of the Underlying Fund directly to Onex HYBF.

20. While the Conventional Funds are not reporting issuers, they prepared interim and annual financial statements since inception, and the annual financial statements have been audited by an independent auditor, as required by NI 81-106.

21. Since the Inception Dates, each Conventional Fund, other than Onex HYBF, has complied with the investment restrictions and practices contained in NI 81-102, as modified by any exemptions sought. Onex HYBF complied with the investment restrictions and practices contained in NI 81-102, as modified by any exemptions sought, except for the fact that it invested in the Underlying Fund from October 31, 2020 until its investment objectives and strategies were amended to delete the reference to the Underlying Fund and allow Onex HYBF to directly hold the same securities as the Underlying Fund in compliance with the investment restrictions and practices contained in NI 81-102.

The Performance Relief

22. In sales communications and fund facts documents for Series F units of the Conventional Funds, the Filer proposes to present:

a. the past performance data for Series A units for the time period from the Inception Date (or October 31, 2020 in the case of Onex HYBF) to Transition Date (the Series A Performance Period), and

b. thereafter, (i) the performance data for Series F units for each Conventional Fund other than Onex HYBF, and (ii) the performance data for Series FL units of Onex HYBF, for the time period from Transition Date until Series F units have been issued under a simplified prospectus (the HYBF Series FL Performance Period), and thereafter, use the Series F performance data for Onex HYBF.

23. The only differences in performance between the Series A and Series F units of a Conventional Fund during the Series A Performance Period, and between Series FL and Series F units of Onex HYBF during the HYBF Series FL Performance Period, are:

a. due to the different management fees paid by each such series of units, and

b. prior to January 1, 2020, a performance fee being charged in respect of Series A units of the Conventional Funds (other than for Onex HYBF).

24. In sales communications and fund facts documents for Series O units of the Conventional Funds, the Filer proposes to present:

a. the past performance data for Series A units during the Series A Performance Period, and

b. thereafter, (i) the performance data for Series F units for each Conventional Fund other than Onex HYBF until Series O units of the Conventional Fund have been issued under a simplified prospectus (the Series F Performance Period), and (ii) the performance data for Series FL units of Onex HYBF during the HYBF Series FL Performance Period, and thereafter, use the Series O performance data for each of the Conventional Funds.

25. The only differences in performance between the Series A and Series O units during the Series A Performance Period and between Series F and Series O units during the Series F Performance Period and between Series FL and Series O units during the HYBF Series FL Performance Period are due to the fact that management fees are charged to the Conventional Funds in respect of Series A, Series F and Series FL units, while fees for Series O units are negotiated directly with the Manager and will not exceed the management fee for Series F units of the Fund.

26. In sales communications and fund facts documents for Series FH units of Onex HYBF, the Filer proposes to present:

a. the past performance data for Series H units for the time period from October 31, 2020 to Transition Date (the Series H Performance Period), and

b. thereafter, use the performance data for Series FH units.

27. The only differences in performance between the Series H and Series FH units during the Series H Performance Period is due to the different management fees paid by each such series of units of Onex HYBF.

28. In sales communications and fund facts documents for Series OH units of Onex HYBF, the Filer proposes to present:

a. the past performance data of Series H units for the Series H Performance Period, and

b. thereafter, the performance data for Series FH units until Series OH units have been issued under a simplified prospectus (the Series FH Performance Period, and collectively with the Series A Performance Period, the HYBF Series FL Performance Period, the Series F Performance Period and the Series H Performance Period, the Performance Periods), and thereafter, use the Series OH performance data.

29. The only differences in performance between the Series H and Series OH units during the Series H Performance Period and between Series FH and Series OH during the Series FH Performance Period are due to the fact that management fees are charged to the Conventional Funds in respect of Series H and Series FH units, while fees for Series OH units are negotiated directly with the Manager and will not exceed the management fee for Series FH units of the Fund.

30. The performance data presented in sales communications and fund facts of the Conventional Funds will be adjusted during the Performance Periods to reflect the differences described in paragraphs 23, 25, 27 and 29 above.

31. All the expenses of the Conventional Funds are common expenses.

32. Without the Performance Relief, the sales communications pertaining to the Conventional Funds cannot include past performance data of the Conventional Funds that relate to a period prior to the Conventional Funds becoming reporting issuers, and the Conventional Funds cannot provide past performance data in their sales communications until they have distributed securities under a simplified prospectus for at least 12 consecutive months.

33. Once reporting issuers, the Conventional Funds will be required under NI 81-101 to prepare and file a simplified prospectus and fund facts documents.

34. The Filer proposes to use the past performance data of the Conventional Funds for the time period commencing as of the Inception Date (or October 31, 2020 in the case of Onex HYBF) to determine their investment risk level and to disclose that investment risk level in the fund facts documents for the Series F and Series O units of the Conventional Funds and Series FH and Series OH units of Onex HYBF. Without the Performance Relief, the Filer, in determining and disclosing the Conventional Funds' investment risk level in the fund facts documents cannot use performance data of the Conventional Funds that relate to a period prior to the Conventional Funds becoming reporting issuers.

35. The Filer proposes to include in the fund facts documents for Series F and Series O units of the Conventional Funds and Series FH and Series OH units of Onex HYBF, past performance data in the charts required by Items 5(2), 5(3) and 5(4) of Part I of Form 81-101F3 under the sub-headings "Year-by-year returns", "Best and worst 3-month returns" and "Average return", respectively, related to periods prior to the Conventional Funds becoming reporting issuers. Without the Performance Relief, the fund facts documents of the Conventional Funds cannot include performance data of the Conventional Funds that relate to a period prior to the Conventional Funds becoming reporting issuers.

36. Once reporting issuers, the Conventional Funds will be required under NI 81-106 to prepare and send MRFPs to all holders of their securities on an annual and interim basis. Without the Performance Relief, the MRFPs of the Conventional Funds cannot include financial highlights and performance data of the Conventional Funds that relate to a period prior to the Funds becoming reporting issuers.

37. The performance data and financial statements of the Conventional Funds relating to the time period prior to becoming reporting issuers, commencing as of the Inception Date (or October 31, 2020 in the case of Onex HYBF) and adjusted during the Performance Periods to reflect the differences set out in paragraphs 23, 25, 27 and 29 above, is significant and meaningful information for existing and prospective investors of units of the Conventional Funds.

The Consolidation Relief

38. In order to reduce renewal, printing and related costs, the Filer wishes to combine the simplified prospectus of the Alternative Funds with the simplified prospectus of the Conventional Funds and any future mutual funds (i) that are reporting issuers to which NI 81-101 and NI 81-102 apply, (ii) that are not alternative mutual funds, and (iii) for which the Filer, or an affiliate of the Filer, acts as the investment fund manager.

39. Even though the Alternative Funds will be alternative mutual funds, they will share many common operational and administrative features with the Conventional Funds and combining them in the same simplified prospectus will allow investors to more easily compare the features of the Alternative Funds and the Conventional Funds.

40. The ability to file the same simplified prospectus for the Alternative Funds and the Conventional Funds will ensure that the Filer can make corresponding changes to the operational and administrative features of Alternative Funds and the Conventional Funds in a consistent manner, if required.

41. Investors will continue to receive the fund facts document(s) when purchasing securities of the Alternative Funds or Conventional Funds as required by applicable securities legislation. The form and content of the fund facts document(s) of the Alternative Funds and Conventional Funds will not change as a result of the Consolidation Relief.

42. The simplified prospectus of the Alternative Funds and Conventional Funds will, as required, be provided to investors, upon request, as required by applicable securities legislation.

43. National Instrument 41-101 General Prospectus Requirements (NI 41-101) does not contain a provision equivalent to section 5.1(4) of NI 81-101. Accordingly, an investment fund manager that manages exchange-traded funds (ETFs) is permitted to consolidate a prospectus under NI 41-101 for its ETFs that are alternative mutual funds with a prospectus for its ETFs that are conventional mutual funds. There is no reason why mutual funds filing a prospectus under NI 81-101 should be treated differently from ETFs filing a prospectus under NI 41-101.

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:

1. Consolidation Relief is granted to the Alternative Funds.

2. Performance Relief is granted to the Conventional Funds provided that:

(a) any sales communication, fund facts documents and MRFP that contains past performance data of the units of a Fund relating to a period of time prior to when the Fund was a reporting issuer discloses that:

(i) the Fund was not a reporting issuer during such period;

(ii) the expenses of the Fund would have been higher during such period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer;

(iii) the Filer obtained exemptive relief on behalf of the Fund to permit the disclosure of past performance data of the units of the Fund relating to a period prior to when the Fund was a reporting issuer; and

(iv) with respect to any MRFP, the financial statements of the Fund for such period are available to investors upon request; and

(b) the Filer makes the financial statements of the Funds since the Inception Dates (or since October 31, 2020 in the case of Onex HYBF) available to investors upon request.

"Darren McKall"
Manager, Investment Funds & Structured Products
Ontario Securities Commission

Application File #: 2023/0640

SEDAR+ File #: 6064375