Exemption Orders (Discretionary)
ELLIOTT & PAGE LIMITED
2001 BCSECCOM 863
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – Investment by mutual funds in securities of other existing and future mutual funds that are under common management is exempted from certain self-dealing requirements, subject to certain specified conditions.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 123 and 130
IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF
ALBERTA, BRITISH COLUMBIA, NEWFOUNDLAND, NOVA SCOTIA, ONTARIO AND SASKATCHEWAN
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF ELLIOTT & PAGE LIMITED AND E&P MANULIFE BALANCED ASSET ALLOCATION PORTFOLIO
DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in each of Alberta, British Columbia, Newfoundland, Nova Scotia, Ontario and Saskatchewan (the "Jurisdictions") has received an application from Elliott & Page Limited ("EPL"), the trustee, manager and primary investment advisor of the Top Funds (as hereinafter defined) for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the following requirements and restrictions contained in the Legislation (the "Applicable Requirements") shall not apply to the Top Funds or EPL, as the case may be, in respect of certain investments to be made by a Top Fund in an Underlying Fund (as hereinafter defined) from time to time:
(A) the requirements 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 security holder; and
(B) 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 a 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 EPL to the Decision Makers that:
1. EPL is a corporation incorporated under and governed by the laws of Ontario and is registered under the Legislation of Ontario as a mutual fund dealer and as an adviser in the categories of investment counsel and portfolio manager. The head office of EPL is located in Ontario. EPL is a wholly-owned subsidiary of The Manufacturers Life Insurance Company.
2. EPL is the manager, trustee, primary portfolio advisor, principal distributor, promoter and the registrar and transfer agent of the following mutual funds: Elliott & Page Money Fund, Elliott & Page Active Bond Fund, Elliott & Page Monthly High Income Fund, Elliott & Page Balanced Fund, Elliott & Page Growth & Income Fund, Elliott & Page Value Equity Fund, E&P Cabot Canadian Equity Fund, Elliott & Page Generation Wave Fund, E&P Cabot Blue Chip Fund, Elliott & Page Equity Fund, Elliott & Page Sector Rotation Fund, Elliott & Page Growth Opportunities Fund, Elliott & Page American Growth Fund, Elliott & Page U.S. Mid-Cap Fund, Elliott & Page Global Equity Fund, E&P Cabot Global MultiStyle Fund, Elliott & Page European Equity Fund, Elliott & Page Global Momentum Fund, Elliott & Page Asian Growth Fund, Elliott & Page RSP American Growth Fund, Elliott & Page RSP U.S. Mid-Cap Fund and Elliott & Page RSP Global Equity Fund (collectively, the “Existing Underlying Funds”). Units of the Existing Underlying Funds are offered for sale on a continuous basis in each of the Jurisdictions pursuant to a simplified prospectus and annual information form dated August 16, 2000.
3. EPL may in the future establish other mutual funds (the “Future Underlying Funds” and collectively with the Existing Underlying Funds, the “Underlying Funds”). Units of a Future Underlying Fund will be offered for sale to the public pursuant to the simplified prospectus and annual information form that qualifies units of other Underlying Funds or by a separate simplified prospectus and annual information form receipted in each of the Jurisdictions.
4. EPL proposes to establish a new group of mutual funds (the “E&P Manulife Multi-Advisor Portfolios”) which includes the E&P Manulife Balanced Asset Allocation Portfolio (the “Existing Top Fund”). EPL may in the future add other mutual funds (the “Future Top Funds” and collectively with the Existing Top Fund, the “Top Funds”) to the E&P Manulife Multi-Advisor Portfolios. Units of a Top Fund will be offered for sale pursuant to the simplified prospectus and annual information form that qualifies units of the Underlying Funds or by a separate simplified prospectus and annual information form receipted in each of the Jurisdictions.
5. Each of the Underlying Funds and the Top Funds is or will be an open-ended unincorporated mutual fund trust governed by the laws of the province of Ontario.
6. Each of the Underlying Funds and the Top Funds is or will be a reporting issuer in each of the provinces and territories of Canada and is not or will not be in default of any of the requirements of the Legislation.
7. EPL is or will be the manager, trustee, primary portfolio advisor, principal distributor, promoter and the registrar and transfer agent of the Top Funds.
8. As part of its investment objective, each of the Top Funds will invest a certain fixed percentage (the “Fixed Percentages”) of its assets (excluding cash and cash equivalents) in units of specified Underlying Funds, subject to a variation of 2.5% above or below the Fixed Percentages (the “Permitted Ranges”) to account for market fluctuations. Investments of each Top Fund will be made in accordance with the fundamental investment objectives of the Top Fund. The remaining assets of the Top Funds are allocated among one or more portfolio investment sub-advisers.
9. The total direct investment in the Underlying Funds will equal 53% (the “Permitted Total Investment”) of the assets of a Top Fund, subject to a variation to account for market fluctuations as described in paragraph 8.
10. A Top Fund will invest its assets in accordance with the Permitted Total Investment and the Fixed Percentages disclosed in the simplified prospectus of the Top Fund.
11. A Top Fund will not invest in an Underlying Fund with an investment objective which includes investing directly or indirectly in other mutual funds.
12. The simplified prospectus for each of the Top Funds will disclosure the investment objectives, investment strategies, risks and restrictions of the Top Fund and the Underlying Funds, the Permitted Total Investment, the Fixed Percentages and Permitted Ranges.
13. Except to the extent evidenced by this Decision and specific approvals granted by the Decision Makers pursuant to National Instrument 81-102 Mutual Funds (“NI 81-102”), the investments by the Top Funds in the Underlying Funds have been structured to comply with the investment restrictions of the Legislation and NI 81-102.
14. In the absence of this Decision, pursuant to the Legislation, the Top Funds are prohibited from knowingly making or holding an investment in a person or company in which the Top Fund, alone or together with one or more related mutual funds, is a substantial securityholder. As a result, in the absence of this Decision the Top Funds would be required to divest themselves of any such investments.
15. In the absence of this Decision, the Legislation requires EPL to file a report on every purchase or sale of units of the Underlying Funds by the Top Funds.
16. The investments by the Top Funds in the Underlying Funds will represent the business judgement of “responsible persons” (as defined in the Legislation) uninfluenced by considerations other than the best interests of the Top Funds.
AND WHEREAS pursuant to the System, this MRRS Decision Document evidences the decision of each Decision Maker (the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the tests 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 Requirements shall not apply so as to prevent a Top Fund from making or holding an investment in units of the Underlying Funds or require EPL to file a report relating to the purchase or sale of such securities.
PROVIDED IN EACH CASE THAT:
1. this 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 National Instrument 81-102.
2. the Decision shall only apply if, at the time a Top Fund makes or holds an investment in its Underlying Funds, the following conditions are satisfied:
a. the units 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 of the Top Fund discloses the intent of the Top Fund to invest in units of 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 that the Top Fund invests in units of other mutual funds and the Permitted Total Investment;
e. the Underlying Funds are not mutual funds whose investment objective includes investing directly or indirectly in other mutual funds;
f. the Top Fund invests its assets (exclusive of cash and cash equivalents) in the Underlying Funds in accordance with the Permitted Total Investment and the Fixed Percentages disclosed in the simplified prospectus of the Top Fund;
g. the Top Fund’s holding of units in the Underlying Funds does not deviate from the Permitted Ranges;
h. any deviation from the Fixed Percentages is caused by market fluctuation only;
i. if an 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;
j. if the Fixed Percentages and the Underlying Funds which are disclosed in the simplified prospectus have been changed, either the simplified prospectus has been amended in accordance with securities legislation to reflect this significant change, or a new simplified prospectus reflecting the significant change has been filed within ten days thereof, and the securityholders of the Top Fund have been given at least 60 days’ notice of the change;
k. 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 the units of such mutual funds;
l. no sales charges are payable by the Top Fund in relation to its purchase of the units of the Underlying Funds;
m. no redemption fees or other charges are charged by an Underlying Fund in respect of the redemption by the Top Fund of units of the Underlying Fund owned by the Top Fund;
n. 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 units of the Underlying Funds;
o. the arrangements between or in respect of the Top Fund and the Underlying Funds are such as to avoid the duplication of management fees;
p. 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;
q. 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;
r. 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 appropriate summary disclosure in respect of the Top Fund’s holdings of units of the Underlying Funds in the financial statements of the Top Fund; and
s. 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 the right to receive these documents is disclosed in the simplified prospectus of the Top Fund.
DATED this 24 day of August , 2001.
Paul M. Moore R. Stephen Paddon