Manulife Asset Management Limited
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from restrictions and requirements in subsection 2.1(1) and paragraphs 2.2(1)(a), 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 -- Mutual Funds. Exemption will permit certain mutual funds to continue their investment in securities of certain related underlying funds after these underlying funds cease to offer their securities under a simplified prospectus -- Underlying funds are not available for purchase by retail investors -- Underlying funds will remain reporting issuers in the same jurisdictions as the top mutual funds after their prospectus lapses and will continue to be subject to the requirements of NI 81-102, NI 81-106 and NI 81-107.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 2.1(1), 2.2(1)(a), 2.5(2)(a), 2.5(2)(c), 19.1.
June 21, 2011
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
MANULIFE ASSET MANAGEMENT LIMITED
(MAML or the Filer)
AND
IN THE MATTER OF
THE MUTUAL FUNDS NOW (the Existing Funds)
OR IN THE FUTURE (the Future Funds, together with
the Existing Funds, the Funds) AND THE
UNDERLYING FUNDS (as defined below)
MANAGED BY MAML OR AN AFFILIATE
OR A SUCCESSOR OF MAML THAT ARE
SUBJECT TONATIONAL INSTRUMENT 81-102
MUTUAL FUNDS (NI 81-102)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Funds and on behalf of Manulife Canadian Equity Value Fund, Manulife Canadian Large Cap Growth Fund, Manulife U.S. Diversified Growth Fund, Manulife Canadian Equity Index Fund, Manulife International Equity Index Fund, Manulife U.S. Equity Index Fund and Manulife Canadian Fixed Income Fund (collectively, the Underlying Funds) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) granting an exemption (the Requested Relief) relieving the Funds from the requirements of subsection 2.1(1), 2.2(1)(a), 2.5(2)(a) and 2.5(2)(c) of NI 81-102 to permit each Fund to invest in securities of the Underlying Funds.
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 (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer on its own behalf and on behalf of the Funds and the Underlying Funds:
1. MAML is a corporation governed under the Business Corporations Act (Ontario) and has its head office located in Toronto, Ontario.
2. MAML is registered in the categories of commodity trading manager, exempt market dealer, mutual fund dealer, portfolio manager and investment fund manager.
3. MAML or an affiliate or a successor of MAML is or will be the manager of each of the Funds.
4. Each Fund is, or will be, a mutual fund organized and governed under the laws of a jurisdiction of Canada.
5. Securities of each Fund and Underlying Fund are qualified for distribution in each of the provinces and territories of Canada pursuant to simplified prospectuses and annual information forms that have been, or will be, receipted by the securities regulators in the applicable jurisdiction(s). Each Fund and Underlying Fund is, accordingly, a reporting issuer in each of the provinces and territories of Canada.
6. Each of the Funds and the Underlying Funds is a mutual fund to which National Instrument 81-101 -- Mutual Fund Distributions (NI 81-101), NI 81-102, National Instrument 81-106 -- Investment Fund Continuous Disclosure (NI 81-106) and National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107 and, together with NI 81-102 and NI 81-106, the Mutual Fund Instruments) currently applies, except to the extent that it may be granted discretionary relief from any such requirements.
7. The Ontario Securities Commission is the principal regulator to review and grant the Requested Relief as the head office of the Filer is in the Province of Ontario.
8. MAML, the Funds and the Underlying Funds are not in default of securities legislation in any province or territory of Canada.
9. Each Fund's investment objective permits the Fund to invest, directly or indirectly in securities. The Funds' investment objectives permit the Funds to make such investments either: (a) directly, by purchasing and holding such securities; or (b) indirectly through investments in other mutual funds such as the Underlying Funds.
10. The Underlying Funds offer series O units (Series O units) which, although currently prospectus qualified, are not currently offered for purchase by retail investors in Canada. In the past, Series O units of the Underlying Funds were only available for purchase by the Funds and certain other institutional investors, all of whom are "accredited investors" (as defined in National Instrument 45-106 -- Prospectus Exempt Distributions) and employees of MAML or its affiliates.
11. Once the Requested Relief is granted, the Series O units will only be available for purchase by accredited investors.
12. The Underlying Funds, subject to receipt of the Requested Relief, intend not to renew their prospectus after their prospectus lapse date in August 2011 (the Lapse Date). After the Lapse Date, the Underlying Funds intend to continue distributing their Series O units only on a basis which is exempt from the prospectus requirements in Canadian securities legislation (principally by distributing their Series O units only to accredited investors).
13. After the Lapse Date, the Underlying Funds will remain reporting issuers in each jurisdiction in which the Funds are also reporting issuers, and will accordingly remain subject to all of the requirements of the Mutual Fund Instruments, except to the extent that they may be granted discretionary relief from any such requirements, such as the Requested Relief. A Fund will not purchase or hold securities of an Underlying Fund if the Underlying Fund ceases to be a reporting issuer in any jurisdiction in which that Fund is a reporting issuer.
14. A Fund will invest in securities of an Underlying Fund only if such investment is permitted by, and consistent with, the investment objective of the Fund.
15. The Filer believes it would advantageous to each Fund and its securityholders that currently invest in Series O units of the Underlying Funds to be able to continue to invest in Series O units of the Underlying Funds and to maintain exposure to the portfolio of securities of the Underlying Funds. It would be administratively inefficient and costly for each Fund to directly invest in the securities held by the Underlying Funds.
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 the Requested Relief is granted to the Funds provided that the Underlying Funds remain reporting issuers that are subject to the Mutual Fund Instruments in all jurisdictions in which the Funds are reporting issuers.