Exemption Orders (Discretionary)
CLARICA BOND INDEX FUND
2001 BCSECCOM 117
Headnote
Mutual Reliance System for Exemptive Relief Applications – relief granted from certain mutual fund self dealing restrictions contained in the Legislation in order to permit top funds to invest in selected mutual funds under common management, subject to certain conditions. Relief also granted from certain provisions of National Instrument 81-102 Mutual Funds.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, s. 123
IN THE MATTER OFTHE SECURITIES LEGISLATIONOF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,NOVA SCOTIA, PRINCE EDWARD ISLAND, NEWFOUNDLAND, YUKON TERRITORY, NORTHWEST TERRITORIES AND NUNAVUT TERRITORY
AND
IN THE MATTER OFTHE MUTUAL RELIANCE REVIEW SYSTEM FOREXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF CLARICA BOND INDEX FUND
CLARICA CANADIAN EQUITY INDEX FUND
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the “Decision Maker”) in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Yukon Territory, Northwest Territories and Nunavut Territory (the “Jurisdictions”) have received an application from Clarica Diversico Ltd. (“Clarica”), in its capacity as manager and promoter of the Clarica Bond Index Fund and Clarica Canadian Equity Index Fund (collectively, the “Funds”), for a decision pursuant to the Canadian securities legislation of Ontario, British Columbia, Alberta, Saskatchewan, Quebec, Nova Scotia and Newfoundland (the “Legislation”) that the following restrictions (the “Restrictions”) contained in the Legislation shall not apply in respect of investments made by the Funds:
1. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making an investment in any person or company who is a substantial security holder of the mutual fund, its management company or distribution company; and
2. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly holding an investment in any person or company who is a substantial security holder of the mutual fund, its management company or distribution company.
WHEREAS pursuant to the Mutual Reliance System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS the Corporation has represented to the Decision Makers that:
1. Clarica is a corporation incorporated under the laws of Ontario. Clarica is the manager and promoter of the Funds.
2. A preliminary simplified prospectus and a preliminary annual information form in respect of the Funds, both dated October 23, 2000, have been filed with each of the Jurisdictions.
3. Each Fund will be a reporting issuer under the securities legislation of each Jurisdiction.
4. TD Asset Management Inc. (“TDAM”) is the portfolio advisor of the Funds. TDAM is a mutual fund dealer and an investment counsel and portfolio manager.
5. TDAM is a wholly owned subsidiary of The Toronto-Dominion Bank (“TD Bank”). Shares of the TD Bank are listed on The Toronto Stock Exchange (the “TSE”).
6. Clarica is a wholly owned subsidiary of Clarica Life Insurance Company (“Clarica Life”). Shares of Clarica Life are listed on the TSE.
7. The Funds will be open-ended mutual fund trusts established by Clarica under the laws of Ontario by declarations of trust and the investment objective of each of the Funds is to track the performance of a specified target index.
8. The Funds are all index mutual funds as defined in NI 81-102 .
9. Among the securities comprising The Toronto Stock Exchange Total Return Index are those of Clarica Life and TD Bank. Securities of Clarica Life or TD Bank, could also be included in the Scotia Capital Bond Universe Index.
10. The target index for each Fund is disclosed in the Investment Objectives in the preliminary prospectus. It is part of the fundamental nature of the Funds that all the assets of the Funds are invested in the companies included in the target index or instruments that provide exposure to the securities of the companies that are included in the target index, and that the portfolios of the Funds are not actively managed.
11. The number of securities comprising the target index of each Fund in which each Fund actually invests from time to time will depend upon the size and value of the assets of the Fund. The Fund will therefore be rebalanced to track the target index as closely as possible while minimizing trading costs.
12. The portfolios of the Funds will not be actively managed. The portfolios will be passive and will be comprised of securities comprising the target indices of the Funds. All purchases and sales of the portfolios of the Funds will be determined by the composition of the target indices and the weightings therein of the constituent securities.
13. The deviation from the Restrictions, will not be the result of any active decision of the TDAM or Clarica to increase the investment of a Fund in any particular issuer, but rather an indirect consequence of carrying out the investment objective of the Fund, to match the performance of the target index.
14. The investments of the Funds in the target indices represent the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Funds.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);
AND WHEREAS the Decision Makers are of the opinion that it would not be prejudicial to the public interest to make the Decisions;
THE DECISION of the Decision Makers pursuant to the Legislation is that the Restrictions do not apply to the investment by the Funds in securities of Clarica Life or TD Bank.
PROVIDED THAT the portion of the Funds assets invested in these securities is determined according to each Fund’s investment objective of tracking the performance of a specified index, and not pursuant to the discretion of TDAM or Clarica.
DATED at Toronto this 22nd day of December, 2000.
Howard I. Wetston J.A. Geller