Algonquin Capital Corporation
Headnote
National Policy 11-203 Process for Exemptive Relief Application in Multiple Jurisdictions -- Relief granted from the self-dealing provision in subsection 4.2(1) of National Instrument 81-102 Investment Funds to permit inter-fund trades in debt securities between investment funds subject to NI 81-102 and pooled funds managed by the same manager or its affiliates -- Inter-fund trades will comply with the conditions in subsection 6.1(2) of NI 81-107 Independent Review Committee for Investment Funds, including the requirement for independent review committee approval.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from paragraph 13.5(2)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to permit inter-fund trading between public funds, pooled funds and managed accounts managed by the same manager or its affiliate -- Relief subject to conditions, including independent review committee approval and pricing requirements -- Exemption also granted from conflict of interest trading prohibition in paragraph 13.5(2)(b) to permit in-specie subscriptions and redemptions by separately managed accounts and pooled funds -- Relief subject to conditions.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from section 6.1 of National Instrument 81-102 Investment Funds that all portfolio assets of an investment fund must be held under the custodianship of one custodian -- Relief needed because plain reading of exemption in section 6.8.1 of NI 81-102 from the requirement in section 6.1 of NI 81-102 results in unintended consequences -- Relief subject to conditions -- Relief also granted from the single custodian requirement to permit the use of more than one custodian for securities lending purposes -- Relief is required to appoint a securities lending agent that is not a custodian or sub-custodian of the funds -- Additional custodians will meet all the Part 6 (except Part 6.1(1)) requirements of National Instrument 81-102 Investment Funds -- Additional custodians will only act as custodian and securities lending agent for securities of the funds transferred to them.
Applicable Legislative Provisions
National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.5 and 15.1.
National Instrument 81-102 Investment Funds -- ss. 4.2(1), 6.1, 6.8.1, and 19.1.
National Instrument 81-107 Independent Review Committee for Investment Funds, s. 6.1(2).
January 19, 2021
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 IN THE MATTER OF ALGONQUIN CAPITAL CORPORATION (the Filer) AND IN THE MATTER OF THE FUNDS (as defined below)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of each of the Filer, the NI 81-102 Funds (as defined below), and Pooled Funds (as defined below) for a decision under the securities legislation of the Jurisdiction (the Legislation):
(1) exempting the Filer and NI 81-102 Funds from the requirement set out in subsection 6.1(1) of National Instrument 81-102 Investment Funds (NI 81-102) in order to permit the Filer and the NI 81-102 Funds to appoint more than one custodian, each of which is qualified to be a custodian under section 6.2 of NI 81-102 and each of which is subject to all of the other requirements in Part 6 of NI 81-102 other than the prohibition against the Funds appointing more than one custodian in subsection 6.1(1) of NI 81-102 (the Custodian Relief);
(2) exempting the Filer and the NI 81-102 Funds from the prohibition in section 4.2(1) of NI 81-102 in order to permit the NI 81-102 Funds to purchase debt securities from, or sell debt securities to the Pooled Funds (the Section 4.2(1) Relief);
(3) exempting the Filer and the Funds from prohibitions in section 13.5(2)(b)(ii) and (iii) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) in order to permit:
a. a Pooled Fund to purchase securities from or sell securities to a Fund;
b. a Managed Account (as defined below) to purchase securities from or sell securities to a Fund; and
c. a NI 81-102 Fund to purchase securities from or sell securities to a Fund;
((a), (b), and (c) are collectively the InterFund Trading Relief); and
d. In-specie subscriptions and redemptions (each subscription or redemption an In-specie Transfer) by a:
i. Managed Account in relation to a NI 81-102 Fund or a Pooled Fund; and
ii. a Pooled Fund in relation to another Pooled Fund or a NI 81-102 Fund
(collectively, the In-specie Transfer Relief)
(4) exempting the Filer and the NI 81-102 Funds from the requirement in subsection 6.1(1) of NI 81-102 in order to permit the Filer and the NI 81-102 Funds to deposit portfolio assets with a borrowing agent that is not an NI 81-102 Fund's custodian or sub-custodian in connection with a short sale of securities whereby the aggregate market value of the portfolio assets held by the borrowing agent after such deposit, excluding the aggregate market value of the proceeds from outstanding short sales of securities held by the borrowing agent exceeds: (i) 10% of the net asset value of a mutual fund that is not an Alternative Mutual Fund and (ii) 25% of the net asset value of an Alternative Mutual Fund (the Short Sale Collateral Limit) at the time of the deposit (the Short Sale Collateral Relief).
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 is intended to be relied upon in each of the other provinces and territories of Canada.
Interpretation
Unless otherwise defined herein, terms in this decision have the respective meanings given to them in National Instrument 14-101 Definitions. The following additional terms shall have the following meanings:
Alternative Mutual Fund means an alternative mutual fund as defined in NI 81-102.
Clients means pension plans, endowments, trusts, insurance companies, corporation, mutual funds, individuals, and other entities to whom the Filer offers, or may offer, discretionary portfolio management services through a Managed Account (as defined below).
Discretionary Management Agreement means a written agreement between the Filer and a Client seeking wealth management or related service.
Funds means, collectively, the NI 81-102 Funds and the Pooled Funds.
In-specie Transfer means causing a Managed Account or a Pooled Fund to deliver portfolio securities to a Fund, in respect of the purchase of securities of the Fund by the Managed Account or Pooled Fund, or to receive portfolio securities from the investment portfolio of a Fund in respect of a redemption of securities of the Fund by the Managed Account or Pooled Fund.
Managed Account means an account managed by the Filer for a Client that is not a responsible person and over which the Filer has discretionary authority.
NI 81-102 Funds means Algonquin Fixed Income 2.0 Fund, and any investment fund to be established in the future, that is a reporting issuer and subject to NI 81-102, for which the Filer acts as manager and/or portfolio adviser.
Pooled Funds means Algonquin Debt Strategies Fund LP, and any investment fund to be established in the future, that is not a reporting issuer, to which NI 81-102 does not apply, for which the Filer acts as manager and or portfolio/adviser.
Prime Broker means any entity that acts as a lender or borrowing agent, as the case may be, to a NI 81-102 Fund.
Securities Lending Agreements means agreements which effect securities lending, repurchase or reverse repurchase transactions between a NI 81-102 Fund, as lender of the securities, third party borrowers and the NI 81-102 Fund's securities lending agent.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is a corporation existing under the Business Corporations Act (Ontario), with its head office in Toronto, Ontario.
2. The Filer is registered with the Ontario Securities Commission in the categories of investment fund manager, portfolio manager and exempt market dealer. The Filer is also registered as an exempt market dealer in Alberta, British Columbia, Manitoba and Nova Scotia and an exempt market dealer and investment fund manager in Québec and Newfoundland and Labrador.
3. The Filer is not a reporting issuer in any jurisdiction and is not in default of securities legislation of any jurisdiction of Canada.
4. The Filer acts, or will act, as manager and/or portfolio adviser of each of the Funds.
The Funds
5. Each of the NI 81-102 Funds is, or will be, organized as a trust established under the laws of the Province of Ontario or another jurisdiction, and a reporting issuer under the laws of one or more provinces and territories of Canada.
6. Each of the Pooled Funds is, or will be, organized as a limited partnership or a trust established under the laws of the Province of Ontario or another jurisdiction.
7. The securities of the Pooled Funds are and will be distributed on a private placement basis pursuant to available prospectus exemptions. Each Pooled Fund will not be a reporting issuer under the laws of any provinces or territories of Canada.
8. Algonquin Fixed Income 2.0 Fund and Algonquin Debt Strategies Fund LP are not in default of securities legislation in any jurisdiction of Canada.
The Managed Accounts
9. The Filer will offer discretionary portfolio management services to Clients seeking wealth management or related services under Discretionary Management Agreements between the Clients and the Filer.
10. Pursuant to the Discretionary Management Agreement entered into with each Client, the Client will appoint the Filer to act as portfolio manager in connection with an investment portfolio of the Client with full discretionary authority to trade in securities for the Managed Account without obtaining the specific consent or instructions of the Client to execute the trade.
11. Investments in individual securities may not be appropriate in certain circumstances for a Client. Consequently, the Filer may, where authorized under the Discretionary Management Agreement, from time to time, invest the assets in a Client's Managed Account in securities of any one or more of the Funds in order to give such Client the benefit of asset diversification and economies of scale regarding minimum commission charges on portfolio trades and generally to facilitate portfolio management.
The Custodian Relief
12. The Filer would like the flexibility for each NI 81-102 Fund to engage Prime Brokers as additional custodians provided that such Prime Brokers are qualified to act as custodian under subsection 6.2(3) of NI 81-102 (each, an Additional Custodian). The Filer and any Additional Custodians would be subject to all requirements applicable to custodians under Part 6 of NI 81-102, other than the requirement in subsection 6.1(1) of NI 81-102 that there only be one custodian. The Filer is requesting the Custodian Relief in order to provide additional flexibility for the NI 81-102 Funds to engage in the short selling of securities under Section 6.8.1 of NI 81-102, as portfolio assets deposited with a borrowing agent that is the custodian or a sub-custodian of the Fund are not subject to the 10% and 25% of the net asset value limitations in subparagraph 6.8.1(1)(a) and 6.8.1(1)(b), respectively.
13. An Additional Custodian may also be appointed as a securities lending agent of the NI 81-102 Funds and, in such circumstances, would provide the NI 81-102 Funds with the opportunity to enter into a greater number of Securities Lending Agreements than would be the case with a single custodian and would therefore have the potential to increase revenues of the NI 81-102 Funds from securities lending activities.
14. Prime Brokers are not widely appointed as sub-custodians by custodians under NI 81-102 as it can be operationally challenging for the custodian and the Filer to appoint them to act in such capacity. This is especially true in circumstances where the custodian of a Fund is a Prime Broker.
15. If the Custodian Relief is granted, an Additional Custodian's responsibility for custody of the NI 81-102 Funds' assets will apply only to the assets held by the Additional Custodian on behalf of the NI 81-102 Funds (the Relevant Assets). The custodial arrangements between the NI 81-102 Funds and each Additional Custodian will comply with the requirements of Part 6 of NI 81-102 other than subsection 6.1(1).
16. Any Additional Custodian will meet the requirements of NI 81-102 to act as a custodian for an investment fund and will have experience acting as custodian of the assets of public investment funds governed by NI 81-102. As custodian of the Relevant Assets, an Additional Custodian will comply with the standard of care applicable to qualified custodians under Section 6.6 of NI 81-102, will hold the Relevant Assets in the name of the applicable Fund in accordance with Section 6.5 of NI 81-102 and will include the provisions prescribed in Section 6.4 of NI 81-102 in its custodial agreement with the Filer and the NI 81-102 Funds. Each Additional Custodian will complete the review and provide compliance reports to the Filer as contemplated in Section 6.7 of NI 81-102.
17. The ability to terminate an Additional Custodian as custodian of the Relevant Assets of an NI 81-102 Fund at any time without cause on written notice will ensure that the Filer maintains ultimate control over all of the portfolio assets of the NI 81-102 Funds and can restore all assets to the custody of the Custodian at any time if the Filer considers it to be in the best interests of the NI 81-102 Funds and their respective unitholders to do so.
18. The appointment of an Additional Custodian should not have an impact on the safety of the portfolio assets of the NI 81-102 Funds because any Additional Custodian will meet the requirements of NI 81-102 to act as a custodian for an investment fund and will have experience acting as custodian of the assets of public investment funds governed by NI 81-102.
19. Upon receipt of the Custodian Relief and appointment of an Additional Custodian, the Filer will provide notice of the appointment of any Additional Custodian to unitholders and amend the Prospectus and AIF of the applicable NI 81-102 Funds to include disclosure regarding the Custodial Relief and particulars of the appointment of an Additional Custodian of the NI 81-102 Funds with respect to the Relevant Assets.
The InterFund Trading Relief
20. The Filer wishes to effect purchases and sales of debt securities between:
(a) a NI 81-102 Fund and another NI 81-102 Fund, a Pooled Fund or a Managed Account;
(b) a Pooled Fund and another Pooled Fund, a NI 81-102 Fund or a Managed Account; and
(c) a Managed Account and a Pooled Fund or a NI 81-102 Fund;
(each an InterFund Trade).
21. Different sections of NI 31-103, NI 81-102, and NI 81-107 impose different prohibitions and exceptions on different types of Funds with respect to InterFund Trades.
22. The Funds trade debt securities that are typically not subject to public quotations therefore the Filer is unable to rely on the exception in section 4.3(1) of NI 81-102. The Pooled Funds are not subject to National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) and therefore the Filer cannot rely on Section 4.3(2) of NI 81-102 that permits an NI 81-102 Fund to purchase debt securities from or sell debt securities to an entity that would otherwise be prohibited by Section 4.2 of NI 81-102 where certain conditions are met, including a condition that the NI 81-102 Fund is purchasing from, or selling to, another investment fund to which NI 81-107 applies.
23. The Filer has submitted that because of the various investment objectives and investment strategies utilized by the Funds and Managed Accounts, it may be appropriate for different investment portfolios to acquire or dispose of the same securities directly, rather than with a third party. Authorizing the Inter-Fund Trades may result in such benefits as lower trading costs, reduced market disruption and quicker execution.
24. The Filer has determined that it would be in the best interests of the Funds and Managed Accounts to receive the InterFund Trading Relief because making the Funds and Managed Accounts subject to the same set of rules governing the execution of InterFund Trades will result in:
(a) cost and timing efficiencies in respect of the execution of InterFund Trades; and
(b) simplified and more efficient monitoring thereof, for the Filer in connection with the execution of InterFund Trades.
25. At the time of an InterFund Trade, the Filer will have policies and procedures in place to enable the applicable Funds and Managed Accounts to engage in InterFund Trades.
26. The Filer has established, or will establish, an independent review committee (IRC) in respect of a NI 81-102 Fund in accordance with the requirement of NI 81-107.
27. The Filer, as manager of each Pooled Fund, will establish an IRC in respect of each Pooled Fund to review and provide its approval for any proposed InterFund Trades between a Pooled Fund and another Fund or a Managed Account.
28. The IRC of the Pooled Funds will be composed by the manager of the Pooled Funds in accordance with section 3.7 of NI 81-107 and the IRC will be subject to, and have the protections of, each of the provisions set out in section 3.9 of NI 81-107, as if the Pooled Funds were subject to NI 81-107. The mandate of the IRC will be to review transactions contemplated in the Section 4.2(1) Relief, the InterFund Trading Relief, and the In-Specie Transfer Relief. The IRC of the Pooled Funds will not approve an Inter-Fund Trade or an In-Specie Transfer unless it has made the determination set out in subsection 5.2(2) of NI 81-107.
29. InterFund Trades by the NI 81-102 Funds will be referred to the IRC of the NI 81-102 Funds as contemplated by section 5.2(1) of NI 81-107. The Filer, as manager of an NI 81-102 Fund, and the IRC of the NI 81-102 Fund, will comply with section 5.4 of NI 81-107 in respect to any standing instructions the IRC has provided in connection with the InterFund Trades. The IRC of the NI 81-102 Funds will not approve such purchase or sale transactions unless it has made the determinations set out in subsection 5.2(2) of NI 81-107.
30. Each InterFund Trade will be consistent with the fundamental investment objectives and in compliance with the investment restrictions of the relevant Funds or Managed Account engaged in the trade.
31. Prior to engaging in InterFund Trades on behalf of a Managed Account, each Discretionary Management Agreement or other documentation will contain the authorization of the Client for the portfolio manager of the Managed Account to engage in InterFund trades.
32. InterFund trades will be engaged in accordance with the following procedures:
(a) the Filer, as the portfolio manager, will deliver the trade instruction in respect of a purchase or sale of a debt security by a Fund or Managed Account, as applicable (Party A), to a trader on the Filer's trading desk;
(b) the Filer, as the portfolio manager, will deliver the trade instruction in respect of a purchase or sale of a debt security by another Fund or Managed Account, as applicable (Party B), to a trader on the Filer's trading desk;
(c) the trader on the Filer's trading desk will have the discretion to execute the trade as an InterFund Trade between Party A and Party B, prior to the execution of the trade;
(d) the policies applicable to the Filer's trading desk will require that all orders are to be executed in a timely manner and orders will remain open only for 30 days unless the Filer, as portfolio manager, cancels the order sooner; and
(e) upon execution of the trade, the trader on the Filer's trading desk will advise the portfolio manager of the price at which the Inter-Fund Trade occurred.
33. If the IRC of an NI 81-102 Fund becomes aware of an instance where the Filer as the manager of the Fund, did not comply with the terms of this decision, or a condition imposed by the securities legislation or the IRC in its approval, the IRC of such NI 81-102 Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction under which the Fund is organized.
In-specie Transfer Relief
34. The Filer may wish to, or otherwise be required to, deliver portfolio securities held in a Managed Account or Pooled Fund to a Fund in respect of a purchase of units or shares of the Fund (Fund Securities), and may wish to, or otherwise be required to, receive portfolio securities from a Fund in respect of a redemption of Fund Securities by a Managed Account or Pooled Fund. As the Filer is, or may be, the portfolio manager of the Funds and is, or may be, the portfolio manager of the Managed Accounts, the Filer would be considered a 'responsible person' within the meaning of NI 31-103.
35. As the Filer is, or may be in the future, the trustee of a Fund which is organized as a trust, each such Fund may be an 'associate' of the Filer, and accordingly, absent the grant of the In-specie Transfer Relief, the Filer would be precluded by the provisions of section 13.5(2)(b)(ii) of NI 31-103 from effecting the In-specie Transfers in such circumstances. As the Filer is, or will be, a registered adviser, and is or will be the manager and/or portfolio manager of the Funds and is, or will be, the portfolio manager of the Managed Accounts, absent the grant of the In-specie Transfer Relief, the Filer would be precluded by section 13.5(2)(b)(iii) of NI 31-103 from effecting the In-specie Transfers.
36. Each Discretionary Management Agreement or other documentation will contain the authorization of the Client for the Filer to engage in In-specie Transfers on behalf of the Managed Account.
37. The only cost which will be incurred by a Managed Account or a Fund for an In-specie Transfer is a nominal administrative charge levied by the custodian of the relevant Fund in recording the trades.
38. The Filer, as manager of the Funds, will value the securities transferred under an In-specie Transfer on the same valuation day on which the purchase price or redemption price of the Fund Securities of a Fund is determined. With respect to the purchase of Fund Securities of a Fund, the securities transferred to a Fund under an In-specie Transfer in satisfaction of the purchase price of those Fund Securities will be valued as if the securities were portfolio assets of the Fund, as contemplated by section 9.4(2)(b)(iii) of NI 81-102. With respect to the redemption of Fund Securities of a Fund, the securities transferred to a Managed Account or Pooled Fund in satisfaction of the redemption price of those Fund Securities will have a value equal to the amount at which those securities were valued in calculating the net asset value per security used to establish the redemption price of the Fund Securities of the Fund, as contemplated by section 10.4(3)(b) of NI 81-102.
39. Should any In-specie Transfer contemplated specifically by the In-specie Transfer Relief, involve the transfer of an "illiquid asset" (as defined in NI 81-102), the Filer will obtain at least one quote for the asset from an independent arm's length purchaser or seller, immediately before effecting the In-specie Transfer.
40. In-specie Transfers will be subject to (i) compliance with the written policies and procedures of the Filer respecting In-specie Transfers that are consistent with applicable securities legislation, and (ii) the oversight of the Chief Compliance Officer of the Filer to ensure that the transaction represents the business judgment of the Filer acting in its discretionary capacity with respect to the Fund and the Managed Account, uninfluenced by considerations other than the best interests of the Fund and Managed Account.
The Short Sale Collateral Relief
41. As part of its investment strategy, each NI 81-102 Fund that engages in short sales of securities is permitted to grant a security interest in favour of and to deposit pledged portfolio assets with its Prime Broker. If a Fund engages as its Prime Broker an entity that is not its custodian or sub-custodian, then a NI 81-102 Fund may only deliver to its Prime Broker portfolio assets having a market value, in the aggregate, of not more than (i) 10% of the net asset value of a mutual fund that is not an Alternative Mutual Fund and (ii) 25% of the net asset value of an Alternative Mutual Fund at the time of deposit.
42. A Prime Broker may not wish to act as the borrowing agent for a mutual fund that is not an Alternative Mutual Fund that wants to sell securities short that have an aggregate market value of up to 20% of that fund's net asset value, if the Prime Broker is only permitted to hold, as security for such transactions, portfolio assets having an aggregate market value that is not in excess of 10% of the net asset value of the mutual fund that is not an Alternative Mutual Fund. This issue is even greater in the context of an Alternative Mutual Fund, as a counterparty may not wish to act as the Prime Broker for an Alternative Mutual Fund that wants to sell securities short that have an aggregate market value of up to 50% of the Alternative Mutual Fund's net asset value if the Prime Broker is only permitted to hold, as security for such transactions, portfolio assets having an aggregate market value that is not in excess of 25% of the net asset value of the Alternative Mutual Fund.
43. As a result of the Short Sale Collateral Limit, the NI 81-102 Funds are required to engage numerous Prime Brokers in order to fully utilize the ability of the NI 81-102 Funds to engage in short selling of securities. Managing and overseeing relationships with multiple Prime Brokers introduces unnecessary operational and administrative complexities and additional potential costs to a Fund.
44. Prime Brokers that are qualified to act as a custodian or sub-custodian under NI 81-102 are not widely appointed as custodians or sub-custodians under NI 81-102 as it can be operationally challenging and costly to appoint them to act in such capacity.
45. Given the typical collateral requirements that Prime Brokers impose on their customers who engage in the short sale of securities, if the Short Sale Collateral Limit is applied, the NI 81-102 Funds would need to retain multiple Prime Brokers in order to sell short securities to the extent permitted under Section 2.6.1 of NI 81-102. This would result in inefficiencies for the NI 81-102 Funds and would increase their costs of operations.
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:
1. The Custodian Relief is granted provided that the following conditions are met:
(a) a single entity reconciles all the portfolio assets of the NI 81-102 Fund and provides the NI 81-102 Fund with valuation and unitholder recordkeeping services and will complete daily reconciliations amongst the custodians before calculating a daily net asset value;
(b) the Filer maintains such operational systems and processes, as between two or more custodians and the single entity referred to in part (a) above, in order to keep a proper reconciliation of all the portfolio assets that will move amongst the custodians, as appropriate; and
(c) each Additional Custodian will act as custodian and securities lending agent only for the portion of portfolio assets of the NI 81-102 Fund transferred to it.
2. The Section 4.2(1) Relief is granted provided that the following conditions are satisfied:
(a) the transaction is consistent with the investment objectives of each of the Funds involved in the trade;
(b) the IRC of each Fund involved in the trade has approved the transaction in respect of that Fund in accordance with the terms of subsection 5.2(2) of NI 81-107; and
(c) the transaction complies with paragraph (c) to (g) of subsection 6.1(2) of NI 81-107.
3. The InterFund Trading Relief is granted provided that the following conditions are met:
(a) the InterFund Trade is consistent with the investment objectives of the Fund or Managed Account, as applicable;
(b) the Filer, as manager of a Fund, refers the InterFund Trade involving a Fund to the IRC of that Fund in the manner contemplated by section 5.1 of NI 81-107 and the Filer and the IRC of the Fund comply with section 5.4 of NI 81-107 in respect of any standing instructions an IRC provides in connection with the Inter-Fund Trade;
(c) in the case of an InterFund Trade between Funds:
(i) the IRC of each Fund has approved the InterFund Trade in respect of the Fund in accordance with the terms of subsection 5.2(2) of NI 81-107; and
(ii) the InterFund trade complies with paragraphs (c) to (g) of section 6.1(2) of NI 81-107.
(d) in the case of an InterFund Trade between a Managed Account and a Fund:
(i) the IRC of the Fund has approved the InterFund Trade in respect of such Fund in accordance with the terms of subsection 5.2(2) of NI 81-107;
(ii) the Discretionary Management Agreement or other documentation in respect of the Managed Account authorizes the InterFund Trade; and
(iii) the InterFund trade complies with paragraphs (c) to (g) of section 6.1(2) of NI 81-107.
4. The In-specie Transfer Relief is granted provided that the following conditions are met:
(a) If the transaction is the purchase of Fund Securities of a Fund by a Managed Account:
(i) in respect of the In-specie Transfer Relief as it applies to purchases of Fund Securities of an NI 81-102 Fund by a Managed Account:
I. the Filer as manager of the NI 81-102 Fund, obtains the approval of the IRC of the NI 81-102 Fund in respect of an In-specie Transfer in accordance with the terms of subsection 5.2(2) of NI 81-107; and
II. the Filer as manager of the NI 81-102 Fund, and the IRC, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In-specie Transfer;
(ii) the Filer obtains the prior written consent of the Client of the Managed Account before it engages in any In-specie Transfer in connection with the purchase of Fund Securities of the Fund;
(iii) the Fund would, at the time of payment, be permitted to purchase the portfolio securities held by the Managed Account;
(iv) the portfolio securities are acceptable to the Filer, as portfolio manager of the Fund and consistent with the Fund's investment objectives;
(v) the value of the portfolio securities sold to the Fund by the Managed Account is equal to the issue price of the Fund Securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund;
(vi) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Fund and the value assigned to such securities; and
(vii) the Fund keeps written records of all In-specie Transfers during the financial year of the Fund, reflecting details of the portfolio securities delivered to the Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(b) If the transaction is the redemption of Fund Securities of a Fund by a Managed Account:
(i) in respect of the In-specie Transfer Relief as it applies to redemptions of Fund Securities of an NI 81-102 Fund by a Managed Account:
I. the Filer, as manager of the NI 81-102 Fund, obtains the approval of the IRC of the NI 81-102 Fund in respect of an In-specie Transfer in accordance with the terms of subsection 5.2(2) of NI 81-107; and
II. the Filer, as manager of the NI 81-102 Fund, and the IRC of the NI 81-102 Fund, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In-specie Transfer;
(ii) the Filer obtains the prior written consent of the Client of the Managed Account to the payment of redemption proceeds in the form of an In-specie Transfer;
(iii) the portfolio securities are acceptable to the Filer, as portfolio manager of the Managed Account and consistent with the Managed Account's investment objectives;
(iv) the value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price;
(v) the holder of the Managed Account has not provided notice to terminate its Discretionary Management Agreement with the Filer;
(vi) the account statement next prepared for the Managed Account will include a note describing the portfolio securities delivered to the Managed Account and the value assigned to such securities;
(vii) the Fund keeps written records of all In-specie Transfers during the financial year of the Fund, reflecting details of the portfolio securities delivered to the Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place; and
(viii) the Filer does not receive any compensation in respect of any sale or redemption of Fund Securities of a Fund, and in respect of any delivery of securities further to an In-specie Transfer, the only charge paid by the Managed Account, if any, is a nominal administrative charge levied by the custodian in recording the trade and any commission charged by the dealer executing the trade;
(c) If the transaction is the purchase of Fund Securities of a NI 81-102 Fund by a Pooled Fund:
(i) the Filer, as manager of the NI 81-102 Fund, obtains the approval of the IRC of the NI 81-102 Fund in respect of an In-specie Transfer in accordance with the terms of subsection 5.2(2) of NI 81-107;
(ii) the Filer, as manager of the NI 81-102 Fund, and the IRC of the NI 81-102 Fund, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In-specie Transfer;
(iii) the Fund would, at the time of payment, be permitted to purchase the portfolio securities;
(iv) the portfolio securities are acceptable to the Filer, as portfolio manager of the Fund and consistent with the Fund's investment objectives;
(v) the value of the portfolio securities is equal to the issue price of the Fund Securities of the NI 81-102 Fund for which they are used as payment, valued as if the securities were portfolio assets of that NI 81-102 Fund; and
(vi) each of the Funds keeps written records of all In-specie Transfers in a financial year of the Fund, reflecting details of the portfolio securities delivered by the Pooled Fund to the NI 81-102 Fund, and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(d) If the transaction is the redemption of Fund Securities of an NI 81-102 Fund by a Pooled Fund:
(i) the Filer, as manager of the NI 81-102 Fund, obtains the approval of the IRC of the NI 81-102 Fund in respect of an In-specie Transfer in accordance with the terms of subsection 5.2(2) of NI 81-107; and
(ii) the Filer, as manager of the NI 81-102 Fund, and the IRC of the NI 81-102 Fund, comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In-specie Transfer;
(iii) the portfolio securities are acceptable to the Filer, as portfolio manager of the Pooled Fund and consistent with the Pooled Fund's investment objectives;
(iv) the value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price of the NI 81-102 Fund; and
(v) each of the Funds keeps written records of all In-specie Transfers in a financial year of the Fund, reflecting details of the portfolio securities delivered to the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(e) If the transaction is the purchase of Fund Securities of a Pooled Fund by a Pooled Fund:
(i) the Pooled Fund would, at the time of payment, be permitted to purchase the portfolio securities;
(ii) the portfolio securities are acceptable to the Filer, as portfolio manager of the Pooled Fund and consistent with the Pooled Fund's investment objectives;
(iii) the value of the portfolio securities is equal to the issue price of the Fund Securities of the Pooled Fund for which they are used as payment, valued as if the securities were portfolio assets of that Pooled Fund; and
(iv) each Pooled Fund keeps written records of all In-specie Transfers in a financial year of the Pooled Fund, reflecting details of the portfolio securities delivered to the Pooled Fund, and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(f) If the transaction is the redemption of Fund Securities of a Pooled Fund by a Pooled Fund:
(i) the portfolio securities are acceptable to the Filer, as portfolio manager of the Pooled Fund and consistent with the Pooled Fund's investment objectives;
(ii) the value of the portfolio securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price of the Pooled Fund; and
(iii) each Pooled Fund keeps written records of all In-specie Transfers in a financial year of the Pooled Fund, reflecting details of the portfolio securities delivered by the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;
(g) the Filer does not receive any compensation in respect of any sale or redemption of Fund Securities of a Fund and, in respect of any delivery of portfolio securities further to an In-specie Transfer, the only charge paid by the Fund, if any, is a nominal administrative charge levied by the custodian in recording the trade and any commission charged by the dealer executing the trade.
5. The Short Sale Collateral Relief is granted provided that each NI 81-102 Fund otherwise complies with subsections 6.8.1(2) and (3) of NI 81-102.