Exemption Orders (Discretionary)

GUARDIAN GROUP OF FUNDS LTD.


2001 BCSECCOM 860


Headnote

Mutual Reliance Review System for Exemptive Relief Applications – Relief granted from the prohibition against investing in the securities of a person who is a substantial security holder of the manager of mutual funds, subject to certain conditions.

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, ss. 120(1), 120(2), 121(2)(b), 123

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 OFGUARDIAN GROUP OF FUNDS LTD.

AND

IN THE MATTER OF

GGOF ALEXANDRIA CANADIAN BALANCED FUND, GGOF ALEXANDRIA CANADIAN GROWTH FUND, GGOF CENTURION CANADIAN BALANCED FUND, GGOF CENTURION CANADIAN VALUE FUND, GGOF GUARDIAN CANADIAN EQUITY FUND, GGOF GUARDIAN CANADIAN LARGE CAP FUND, and GGOF GUARDIAN CANADIAN BOND FUND
(collectively, the “Funds”)

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the "Jurisdictions") has received an application from Bank of Montreal ("BMO"), and from Guardian Group of Funds Ltd. ("GGOF"), GGOF being the manager of each of the Funds, for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the requirements contained in the Legislation requiring that the Funds not knowingly hold an investment in the securities of any person or company who is a substantial security holder of the manager of the Funds (the "Requirements") shall not apply for a limited period of time in respect of certain investments held by the Funds in securities of BMO.

AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this Application;

AND WHEREAS BMO and GGOF have represented to the Decision Makers that:

1. GGOF is a wholly-owned subsidiary of Guardian Capital Group Limited (“Guardian Capital”). Guardian Capital is a diversified financial services company founded in 1962. Guardian Capital is a reporting issuer in British Columbia, Alberta, Manitoba and Ontario. Guardian Capital’s shares are listed on the Toronto Stock Exchange (the “TSE”) under the stock symbols “GCG” and “GCG.A”. The registered office of GGOF is located in Ontario.

2. BMO is a Canadian chartered bank listed in Schedule I to the Bank Act (Canada) and carries on a banking business in each province and territory of Canada. BMO is a reporting issuer in each of the provinces and territories of Canada. BMO’s shares are listed on the TSE, the New York Stock Exchange and the London Stock Exchange under the symbol “BMO”. The voting shares of BMO are widely-held, and to the knowledge of BMO, no shareholder holds in excess of 10% of the issued and outstanding voting shares of BMO.

3. As noted above, GGOF is the manager, and principal distributor of the Funds and of the 24 other mutual fund trusts and corporations which make up the GGOF Group of Funds (collectively, the “GGOF Funds”), and is the trustee of the 29 GGOF Funds that are organized as mutual fund trusts. GGOF employs the services of certain portfolio advisors to assist in the investment management of each of the GGOF Funds. In certain cases, Guardian Capital Inc., a subsidiary of Guardian Capital, and GGOF Investment Management, an investment advisory division of GGOF, act as portfolio advisors to certain of the GGOF Funds. GGOF, as manager of the GGOF Funds, monitors the performance of the portfolio advisers and may, from time to time, terminate a portfolio advisory agreement and select one or more new portfolio advisor(s) for a GGOF Fund.

4. The units and shares of the GGOF Funds are offered by prospectus in each of the provinces and territories of Canada.

5. On May 15, 2001, BMO and Guardian Capital entered into a binding share purchase agreement (the “Purchase Agreement”) pursuant to which BMO has agreed to purchase, and Guardian Capital has agreed to sell, all of the issued and outstanding shares of GGOF (the “Transaction”), resulting in a change of control of GGOF.

6. Upon consummation of the Transaction contemplated by the Purchase Agreement, BMO will become a substantial security holder of GGOF under the Legislation.

7. As at May 31, 2001 the Funds held securities of BMO as follows:

a. GGOF Alexandria Canadian Balanced Fund held 8,310 BMO common shares, representing approximately 1.27% of such Fund’s assets;

b. GGOF Alexandria Canadian Growth Fund held 3,680 BMO common shares, representing approximately 2.92% of such Fund’s assets;

c. GGOF Centurion Canadian Balanced Fund held 50,000 BMO common shares, representing approximately 1.73% of such Fund’s assets, and $1,050,000 principal amount of BMO 5.40% June 2, 2003 bonds, representing approximately 0.91% of the Fund’s assets;

d. GGOF Centurion Canadian Value Fund held 4,000 BMO common shares, representing approximately 3.21% of such Fund’s assets;

e. GGOF Guardian Canadian Equity Fund held 157,500 BMO common shares, representing approximately 2.27% of such Fund’s assets;

f. GGOF Guardian Canadian Large Cap Fund held 29,900 BMO common shares, representing approximately 4.25% of such Fund’s assets; and

g. GGOF Guardian Canadian Bond Fund held $50,000 principal amount of BMO 5.40% June 2, 2003 bonds, representing approximately 0.31% of such Fund’s assets.

8. As at May 31, 2001, the aggregate of all the Funds’ assets invested in common shares of BMO represented approximately 0.05% of all outstanding BMO common shares. As at the same date, the aggregate of all the Funds’ assets invested in debt securities of BMO represented approximately 0.02% of all outstanding BMO debt securities.

9. The GGOF Funds have ceased and will not in the future make any investment in securities of BMO (unless the Purchase Agreement is terminated and the Transaction not consummated).

10. At the time the securities of BMO were purchased by the Funds, BMO was not affiliated with the Funds or GGOF, and each investment by the Funds in the BMO securities represented the business judgement of professional portfolio advisors uninfluenced by considerations other than the best interests of the unitholders of the Funds.

11. In the absence of the Decision evidenced by this Decision Document, the Funds would be required to divest of securities of BMO not later than the date of the closing of the Transaction (the “Closing”).

12. The holding of investments in securities of BMO by the Funds after the Closing represents the business judgement of professional portfolio advisors uninfluenced by considerations other than the best interests of the unitholders of the Funds.

AND WHEREAS under the System this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each Decision Maker 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 under the Legislation is that the Requirements shall not apply to the holding of investments in securities of BMO by the Funds provided that the Funds divest all or a portion of their holdings of such securities as quickly as is commercially reasonable, so that no later than 90 days after the date of Closing the Funds do not hold any securities of BMO.

DATED at Toronto, Ontario this 13th day of July, 2001

Paul M. Moore R. Stephen Paddon
©2024 British Columbia Securities Commission