Exemption Orders (Discretionary)
I.G. INVESTMENT MANAGEMENT, LTD.
2001 BCSECCOM 72
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Investment by RSP fund in securities of two other mutual funds for specified purpose exempted from certain of the self-dealing prohibitions and reporting requirements subject to certain specified conditions.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 121(2)(b), 123, 126(a), 126(d) and 130(b)
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, ONTARIO, NOVA SCOTIA AND NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF I.G. INVESTMENT MANAGEMENT, LTD. AND iPROFILE GLOBAL EQUITY RSP POOL
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the “Jurisdictions”) has received an application (the “Application”) from I.G. Investment Management, Ltd. (“IGIM”) and the iProfile Global Equity RSP Pool (the “Top Fund”) for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that the following provisions in the Legislation (the “Applicable Requirements”) shall not apply in connection with certain investments to be made by the Top Fund in the iProfile U.S. Equity Pool (the “U.S. Equity Fund”) and the iProfile International Equity Pool (the “International Equity Fund”, and collectively referred to as the “Underlying Funds”):
1. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder; and
2. the requirements contained in the Legislation requiring a management company, or in British Columbia, a mutual fund manager, to file a report relating to a purchase or sale of securities between the mutual fund and any related person or company, or any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies;
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief
Applications (the “System”), the Ontario Securities Commission is the principal regulator for this
application;
AND WHEREAS it has been represented by IGIM to the Decision Makers that:
1. The Top Fund and the Underlying Funds will be open-ended mutual fund trusts established under the laws of the Province of Manitoba. IGIM is a corporation established under the laws of the Province of Manitoba and will be the manager for the Top Fund and the Underlying Funds. The head office of IGIM is in Winnipeg, Manitoba.
2. The Top Fund and the Underlying Funds will be reporting issuers. The securities of the Top Fund and the Underlying Funds will be qualified under a simplified prospectus and annual information form and filed in all provinces and territories.
3. The simplified prospectus will disclose the investment objectives, investment strategies, risks and restrictions of the Top Fund and the Underlying Funds. The investment objective of the Top Fund will include the disclosure of the names of the Underlying Funds and the Top Fund’s total aggregate derivative exposure to, and direct investment in, the Underlying Funds.
4. The investment objectives of the Underlying Funds will be achieved through investment primarily in foreign securities.
5. The Top Fund seeks to achieve its investment objective while ensuring that its securities do not constitute “foreign property” for registered retirement savings plans, registered retirement income funds, deferred profit sharing plans and similar plans (“Registered Plans”).
6. To achieve its investment objective, the Top Fund will invest its assets in securities such that its units will, in the opinion of tax counsel to the Top Fund, be “qualified investments” for Registered Plans and will not constitute foreign property in a Registered Plan. This will primarily be achieved through the implementation of a derivative strategy. However, the Top Fund also intends to invest a portion of its assets directly in securities of the Underlying Funds. This investment by the Top Fund will at all times be below the maximum foreign property limit prescribed for Registered Plans (the “Permitted Limit”).
7. The aggregate of derivative exposure to, and direct investment in, the Underlying Funds, will equal 80% (the “Permitted Aggregate Investment”) of the assets of the Top Fund, subject to a variation to account for market fluctuations as described in paragraph 9.
8. The amount of direct investment by the Top Fund in the Underlying Funds will be adjusted from time to time so that, except for transitional cash (ie. cash from purchases not yet invested or cash held to satisfy redemptions), the Top Fund will invest its assets in accordance with the Permitted Aggregate Investment and the Fixed Percentages disclosed in the simplified prospectus.
9. To achieve its investment objective, the Top Fund invests an aggregate specified percentage (the “Fixed Percentages”) of its assets directly and indirectly (through derivative exposure) in each of the Underlying Funds, subject to a variation of 2.5% above or below the Fixed Percentages (the “Permitted Ranges”) to account for market fluctuations. The Fixed Percentages disclosed in the simplified prospectus of the Top Fund are 60% in the U.S. Equity Fund and 20% in the International Equity Fund. The balance of the assets of the Top Fund not invested in the Underlying Funds will be invested directly or indirectly (through derivative exposure) in other securities or cash.
10. Except to the extent evidenced by this Decision and specific approvals granted by the Canadian securities administrators pursuant to National Instrument 81-102 Mutual Funds (“NI 81-102”), the investments by the Top Fund in the Underlying Funds will be structured to comply with the investment restrictions of the Legislation and NI 81-102.
11. In the absence of this Decision, pursuant to the Legislation, the Top Fund is prohibited from (a) knowingly making an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder; and (b) knowingly holding an investment referred to in clause (a) hereof. As a result, in the absence of this Decision the Top Fund would be required to divest itself of any investments referred to in clause (a) hereof.
12. In the absence of the Decision, the Legislation requires IGIM to file a report on every purchase or sale of securities of the Underlying Funds by the Top Fund.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the
decision of each Decision Maker (collectively, the “Decision”);
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the
Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that the Applicable
Legislation shall not apply so as to prevent the Top Fund from making or holding an investment
in securities of the Underlying Funds.
PROVIDED IN EACH CASE THAT:
1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publication in final form of any legislation or rule of that Decision Maker dealing with the matters in section 2.5 of NI 81-102; and
2. the Decision shall only apply if, at the time the Top Fund makes or holds an investment in the Underlying Funds, the following conditions are satisfied:
(a) the securities of both the Top Fund and the Underlying Funds are being offered for sale in the jurisdiction of the Decision Maker pursuant to a simplified prospectus and annual information form which has been filed with and accepted by the Decision Maker;
(b) the investment by the Top Fund in the Underlying Funds is compatible with the fundamental investment objectives of the Top Fund;
(c) the simplified prospectus discloses the intent of the Top Fund to invest directly and indirectly (through derivative exposure) in the Underlying Funds, the names of the Underlying Funds, the Fixed Percentages and the Permitted Ranges within which such Fixed Percentages may vary;
(d) the investment objective of the Top Fund discloses names of the Underlying Funds and the Permitted Aggregate Investment;
(e) the Underlying Funds are not mutual funds whose investment objective includes investing directly or indirectly in other mutual funds;
(f) except as permitted by this Decision, the Top Fund will not invest in any other mutual funds;
(g) the Top Fund restricts its aggregate direct investment in the Underlying Funds to a percentage of its assets that is within the Permitted Limit;
(h) the Top Fund invests its assets directly and indirectly (through derivative exposure) in the Underlying Funds in accordance with the Permitted Aggregate Investment and the Fixed Percentages disclosed in the simplified prospectus;
(i) the Top Fund’s derivative exposure to, and direct investment in, the Underlying Funds does not deviate from the Permitted Ranges;
(j) any deviation from the Fixed Percentages is caused by market fluctuations only;
(k) if a direct or indirect investment by the Top Fund in any of the Underlying Funds has deviated from the Permitted Ranges as a result of market fluctuations, the Top Fund’s investment portfolio was re-balanced to comply with the Fixed Percentages on the next day on which the net asset value was calculated following the deviation.
(l) if the Fixed Percentages which are disclosed in the simplified prospectus have been changed, either the simplified prospectus has been amended or a new simplified prospectus filed to reflect the change, and the securityholders of the Top Fund have been given at least 60 days’ notice of the change;
(m) there are compatible dates for the calculation of the net asset value of the Top Fund and the Underlying Funds for the purpose of the issue and redemption of securities of such mutual funds;
(n) no sales charges are payable by the Top Fund in relation to its purchases of securities of the Underlying Funds;
(o) no redemption fees or other charges are charged by an Underlying Fund in respect of the redemption by the Top Fund of securities of the Underlying Funds owned by the Top Fund;
(p) no fees or charges of any sort are paid by the Top Fund and the Underlying Funds, by their respective managers or principal distributors, or by any affiliate or associate of any of the foregoing entities, to anyone in respect of the Top Fund’s purchase, holding or redemption of the securities of the Underlying Funds;
(q) the arrangements between or in respect of the Top Fund and the Underlying Funds are such as to avoid the duplication of management fees;
(r) any notice provided to securityholders of an Underlying Fund as required by applicable laws or the constating documents of that Underlying Fund, has been delivered by the Top Fund to its securityholders along with all voting rights attached to the securities of the Underlying Fund which are directly owned by the Top Fund;
(s) all of the disclosure and notice material prepared in connection with a meeting of securityholders of the Underlying Funds and received by the Top Fund has been provided to its securityholders, the securityholders have been permitted to direct a representative of the Top Fund to vote its holdings in the Underlying Fund in accordance with their direction, and the representative of the Top Fund has not voted its holdings in the Underlying Funds except to the extent the securityholders of the Top Fund have directed;
(t) in addition to receiving the annual and, upon request, the semi-annual financial statements, of the Top Fund, securityholders of the Top Fund have received the annual and, upon request, the semi-annual financial statements of the Underlying Funds in either a combined report, containing financial statements of the Top Fund and the Underlying Funds, or in a separate report containing the financial statements of the Underlying Funds; and
(u) to the extent that the Top Fund and the Underlying Funds do not use a combined simplified prospectus and annual information form containing disclosure about the Top Fund and the Underlying Funds, copies of the simplified prospectus and annual information form of the Underlying Funds have been provided upon request to securityholders of the Top Fund and this right is disclosed in the prospectus of the Top Fund;
DATED at Toronto this 2nd day of January, 2001.
J.A. Geller Howard I. Weston