Vision Capital Corporation and Vision Market Neutral Alternative Fund (the Fund)

Decision

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), 15.8(3)(a.1) and 15.1.1 of National Instrument 81-102 Investment Funds to permit a new prospectus qualified alternative mutual fund that has not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months to (i) include in its sales communications the performance data of a non-prospectus qualified investment fund under common management that was reorganized into the alternative mutual fund, and (ii) permit the alternative mutual fund to use the past performance data of the terminated non-prospectus qualified investment fund to calculate its investment risk level in accordance with Appendix F Investment Risk Classification Methodology -- New alternative mutual fund having substantially the same investment objectives, strategies and fees as the terminated non-prospectus qualified investment fund and having no active business until the reorganization with the non-prospectus qualified investment fund -- Unitholders of the non-prospectus qualified investment fund became unitholders of the new alternative mutual fund further to the reorganization.

Relief granted from section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure for the purposes of the relief requested from Item 9.1(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus to permit the new alternative mutual fund to use the past performance data of the terminated non-prospectus qualified investment fund to calculate its investment risk rating in its simplified prospectus, and Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document to permit the alternative mutual fund to include in its fund facts document the past performance data of the terminated non-prospectus qualified investment fund.

Relief granted from section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the purposes of the relief requested from Items 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Item 4 of Part C of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, to permit the new alternative mutual fund to include in annual and interim management reports of fund performance the past performance of the terminated non-prospectus qualified investment fund.

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 and 6.1.

Item 9.1(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 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B and Item 4 of Part C of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance.

December 7, 2020

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 VISION CAPITAL CORPORATION (the Filer) AND VISION MARKET NEUTRAL ALTERNATIVE FUND (the Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the Fund for a decision under the securities legislation of the regulator (the Legislation) exempting the Class A units and Class F units (collectively, Units) of the Fund 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 Fund to include the performance data of the Terminated Fund (as defined below) in sales communications notwithstanding that the performance data relates to a period prior to the Fund offering its Units under a simplified prospectus;

(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 (Appendix F) to permit the Fund to include the past performance data of the Terminated Fund in determining its investment risk level in accordance with Appendix F;

(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 Fund to disclose its investment risk level as determined by including the past performance data of the Terminated Fund in accordance with Appendix F;

(d) Item 9.1(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus (Form 81-101F1) to permit the Fund to use the past performance data of the Terminated Fund to calculate its investment risk rating in its 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 Fund to include in its fund facts documents the past performance data of the Terminated Fund notwithstanding that (i) such performance data relates to a period prior to the Fund offering its Units under a simplified prospectus, and (ii) the Fund has not distributed its securities 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 relief requested herein from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1); and

(h) Items 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 Item 4 of Part C of Form 81-106F1 to permit the Fund to include in its annual and interim management reports of fund performance (MRFP) the past performance data of the Terminated Fund notwithstanding that such performance data relates to a period prior to the Fund offering its securities under a simplified prospectus.

(collectively, the Exemption Sought).

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 (MI 11-102) is intended to be relied upon by the Filer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Yukon (the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102, NI 81-101, NI 81-102 and NI 81-106 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 a corporation incorporated under the laws of the Province of Ontario with its head office located in Toronto, Ontario.

2. The Filer is registered under securities legislation in (i) Alberta, British Columbia, Manitoba and Ontario as an adviser in the category of portfolio manager, (ii) Alberta, British Columbia, Manitoba, Ontario and Quebec and as a dealer in the category of exempt market dealer, and (iii) Alberta, British Columbia, Manitoba, Newfoundland, Ontario and Quebec as an investment fund manager.

3. The Filer is the investment fund manager, portfolio manager, trustee and promoter of the Fund.

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

5. The Fund is an alternative mutual fund established under the laws of the Province of Ontario on April 24, 2020.

6. The Fund distributes the Units and other classes of units pursuant to a simplified prospectus and annual information form dated April 24, 2020. The Fund is subject to the requirements of NI 81-106 that apply to investment funds that are reporting issuers.

7. The Fund is not in default of securities legislation in any of the Jurisdictions.

8. The Fund did not carry on any active business until the former investors in Vision Market Neutral Master Fund Limited Partnership (the Terminated Fund) acquired Units of the Fund on September 1, 2020.

9. The Terminated Fund was a non-prospectus qualified investment fund managed by the Filer that offered its securities only to accredited investors pursuant to prospectus exemptions under National Instrument 45-106 Prospectus Exemptions. The Terminated Fund's performance history spans a period of 31 months from its inception date on February 1, 2018 up to and including its termination date of August 31, 2020.

10. The Fund acquired the portfolio of the Terminated Fund in exchange for Units of the Fund and unitholders of the Terminated Fund acquired Units on a pro rata basis when the Terminated Fund was wound up and dissolved (the Reorganization).

11. Further to the Reorganization, the unitholders of the Terminated Fund became holders of Units of the Fund with the same aggregate net asset value as they held as unitholders of the Terminated Fund.

12. The Fund has the same fundamental investment objective and investment strategies as the Terminated Fund. The offering memorandum of the Terminated Fund provided, and the simplified prospectus of the Fund provides, that the investment objective of the Terminated Fund and the Fund, respectively, is to provide consistent long-term capital appreciation and to provide unitholders with an attractive risk-adjusted rate of return with low downside volatility and drawdowns, while maintaining low correlation to the overall market through low equity and sectoral market exposure. To achieve this objective, the Terminated Fund employed, and the Fund employs, an investment strategy that generally maintains long and short exposures that results in relatively low net exposures through investments in securities with a principal focus on real estate-based securities. In addition, pursuant to exemptive relief granted to the Fund on February 21, 2020, the Fund was permitted to short sell up to 100% of its net asset value and process subscriptions and redemptions on a monthly basis, consistent with the strategies and practices of the Terminated Fund.

13. The management fee for the Units of the Fund is the same as units of the Terminated Fund but the performance fee was reduced from 20% to 15%.

14. As a result, the Fund will be managed in a manner that is the same in all materials respects to the manner in which the Terminated Fund was managed, and will essentially be a continuation of the Terminated Fund, although as a reporting issuer.

15. As a reporting issuer, the Fund is required under NI 81-101 to prepare and file a simplified prospectus and fund facts.

16. The Filer proposes to present the performance data of the Terminated Fund in sales communications pertaining to the Fund. Without the Exemption Sought, the sales communications pertaining to the Fund cannot include performance data of the Terminated Fund or performance data that relates to a period prior to the Fund becoming a reporting issuer, and the Fund cannot provide performance data in its sales communications until it has distributed securities under a simplified prospectus for at least 12 consecutive months.

17. The Filer proposes to use the Terminated Fund's past performance data to determine its investment risk level and to disclose that investment risk level in the simplified prospectus and the fund facts document for the Units. Without the Exemption Sought, the Filer, in determining and disclosing the Fund's investment risk level in the simplified prospectus and the fund facts documents for the Units, cannot use performance data of the Terminated Fund or performance data that relates to a period prior to the Fund becoming a reporting issuer.

18. The Filer proposes to include in the fund facts document for the Units past performance data of the Terminated Fund in the chart required by Items 5(2), 5(3) and 5(4) under the sub-headings "Year-by-year returns", "Best and worst 3-month returns" and "Average return", respectively. Without the Exemption Sought, the fund facts documents of the Fund cannot include performance data of the Terminated Fund or performance data that relates to a period prior to the Fund becoming a reporting issuer.

19. As a reporting issuer, the Fund is required under NI 81-106 to prepare and send MRFPs to all holders of its securities on an annual and interim basis. Without the Exemption Sought, the MRFPs of the Fund cannot include performance data of the Terminated Fund or performance data that relates to a period prior to the Fund becoming a reporting issuer.

20. The performance data of the Terminated Fund is significant and meaningful information for existing and prospective investors of Units.

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 Exemption Sought is granted provided that any sales communication, fund facts documents and MRFP of the Fund that contains performance data relating to the Terminated Fund discloses that:

(a) the Fund was inactive and the Terminated Fund was not a reporting issuer prior to the date of the Reorganization;

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

(c) the Filer obtained exemptive relief on behalf of the Fund to permit the disclosure of performance data of the Terminated Fund when it was not a reporting issuer.

"Darren McKall"

Manager

Investment Funds and Structured Products Branch

Ontario Securities Commission