CI Investments Inc. and the Mutual Funds Listed in Schedule A
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from sections 2.3(f), 2.3(h), 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 -- Investment Funds to permit mutual funds to invest in gold and silver products subject to a maximum of 10% of the Fund's net asset value exposed to gold and silver.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 2.3(f), 2.3(h), 2.5(2)(a), 2.5(2)(c), 19.1.
April 15, 2016
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 CI INVESTMENTS INC. (the Filer) AND EACH OF THE MUTUAL FUNDS LISTED IN APPENDIX A HERETO (the Existing Funds)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption, pursuant to Section 19.1 of National Instrument 81-102 Investment Funds (NI 81-102), from:
(a) subsection 2.3(f) of NI 81-102 (Silver Exemption) to permit each Fund to:
(i) purchase and hold silver; and
(ii) purchase and hold a certificate representing silver that is:
(A) available for delivery in Canada, free of charge, or to the order of the holder of such silver certificate;
(B) of a minimum fineness of 999 parts per 1,000;
(C) held in Canada;
(D) in the form of either bars or wafers; and
(E) if not purchased from a bank listed in Schedule I, II or III of the Bank Act (Canada), fully insured against loss and bankruptcy by an insurance company licensed under the laws of Canada or a province or territory of Canada,
(Permitted Silver Certificates).
(b) subsection 2.3(h) of NI 81-102 (Silver Derivatives Exemption) to permit each Fund to purchase, sell or use a specified derivative the underlying interest of which is:
(i) silver; or
(ii) a specified derivative of which the underlying interest is silver on an unlevered basis
(Silver Derivatives and, together with silver and Permitted Silver Certificates, Silver); and
(c) subsections 2.3(h), 2.5(2)(a), and 2.5(2)(c) of NI 81-102 (ETF Exemption) to permit each Fund to purchase and hold securities of exchange-traded funds that seek to replicate the performance of:
(i) gold or silver; or
(ii) the value of a specified derivative the underlying interest of which is gold or silver on an unlevered basis
(Gold ETFs and Silver ETFs, as the case may be, and collectively, Commodity ETFs);
(the Silver Exemption, the Silver Derivatives Exemption and the ETF Exemption are collectively referred to as Requested 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 the 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 and Nunavut (together with Ontario , the Jurisdictions).
Interpretation
1. Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined. The following additional terms shall have the following meanings:
Funds means the existing mutual funds (the Existing Funds) or any future mutual funds (the Future Funds) managed by the Filer that are subject to NI 81-102, other than a Fund that is a "money market fund" as defined in NI 81-102, and any one of them may be referred to as a Fund.
Gold and Silver Products means gold, permitted gold certificates, Silver, Commodity ETFs, and investments in specified derivatives the underlying interest of which is gold.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
2. The Filer is a corporation subsisting under the laws of the Province of Ontario with its head office located in Toronto, Ontario. The Filer is registered as follows:
(a) under the securities legislation of all provinces as a portfolio manager;
(b) under the securities legislation of Ontario, Québec, and Newfoundland and Labrador as an investment fund manager;
(c) under the securities legislation of Ontario as an exempt market dealer; and
(d) under the Commodity Futures Act (Ontario) as a commodity trading counsel and a commodity trading manager.
3. The Filer is not in default of securities legislation in any Jurisdiction.
4. The Filer is the manager of each Fund.
The Funds
5. Each Fund is a "mutual fund", as such term is defined under the Securities Act (Ontario) (the Act), and to which NI 81-102 applies, and offers, or offered, securities in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101). Each Fund is a reporting issuer under the securities legislation of each Jurisdiction.
6. None of the Existing Funds are in default of securities legislation in any Jurisdiction.
Investments in Silver
7. In addition to investing in gold, the Filer proposes that each Fund have the ability to invest in Silver as investing in Silver will provide the Funds with an opportunity to further diversify its investments.
8. To obtain exposure to gold or silver directly, the Filer intends to use Gold and Silver Products.
9. The Filer considers silver, like gold, to be a viable alternative to holding cash or cash equivalents. Permitting the Funds to invest in Gold and Silver Products will provide the Filer with the opportunity to increase gains for the Funds in certain market conditions which could otherwise cause the Funds to have significant cash positions and therefore could prohibit the Funds from achieving their investment objectives.
10. The Filer understands that NI 81-102 permits mutual funds to purchase gold or permitted gold certificates or enter into a specified derivative the underlying interest of which is gold on the basis that gold is a very liquid commodity. The Filer is requesting similar investment flexibility that would permit a Fund to make investments in Silver on the rationale that silver is, like gold, a very liquid commodity.
11. The Filer believes there are no liquidity concerns with permitting each Fund to invest directly, or indirectly through Silver Derivatives or Commodity ETFs, up to 10% of its net asset value in gold and Silver, in the aggregate.
12. The Filer believes that the potential volatility or speculative nature of Silver is no greater than that of gold, or of equity securities.
13. Any investment by a Fund in Silver will be made in compliance with the custodian requirements in Part 6 of NI 81-102.
14. If commencing to invest in Gold and Silver Products represents a material change for an Existing Fund, the Existing Fund will comply with the material change reporting obligations in respect of such change.
15. An investment by a Fund in Silver will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Fund.
16. In the absence of the Silver Exemption, subsection 2.3(f) of NI 81-102 would prohibit an investment by a Fund in Silver because each Fund is prohibited from purchasing a physical commodity other than gold or permitted gold certificates.
17. In the absence of the Silver Exemption, subsection 2.3(h) of NI 81-102 would prohibit an investment by a Fund in Silver because each Fund is prohibited from purchasing, selling or using a specified derivative the underlying interest of which is a physical commodity other than gold or a specified derivative of which the underlying interest is a physical commodity other than gold.
Investments in Commodity ETFs
18. The Filer believes that it would be in the best interests of each Fund to have the flexibility to obtain exposure to, from time to time, to gold and silver by investing a portion of its assets in Commodity ETFs.
19. Each Commodity ETF will be a "mutual fund" (as such term is defined under the Act) and will be listed and traded on a stock exchange in Canada or the United States.
20. The amount of loss that can result from an investment by a Fund in a Commodity ETF will be limited to the amount invested by the Fund in securities of the Commodity ETF.
21. The Filer believes that there are no liquidity concerns with permitting each Fund to invest in Commodity ETFs since the securities of Commodity ETFs trade on exchanges and are highly liquid.
22. The Filer will ensure that any investment in Commodity ETFs is in accordance with the investment objectives and investment strategies of such Fund.
23. In the absence of the ETF Exemption, subsection 2.5(2)(a) of NI 81-102 would prohibit a Fund from purchasing or holding a security of a Commodity ETF, because the Commodity ETFs are not subject to both NI 81-102 and NI 81-101.
24. In the absence of the ETF Exemption, subsection 2.5(2)(c) of NI 81-102 would prohibit a Fund from purchasing or holding securities of some Commodity ETFs, because some Commodity ETFs may not be qualified for distribution in at least one of the Jurisdictions.
25. The Filer is not currently, and does not currently expect to become, in the near future, the manager of, or affiliated with the manager of any Commodity ETF.
26. An investment by a Fund in securities of a Commodity ETF will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Fund.
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, provided that:
(a) the investment by a Fund in securities of a Commodity ETF and/or Silver is permitted by the fundamental investment objective of the Fund;
(b) a Fund does not short sell securities of a Commodity ETF;
(c) the securities of the Commodity ETFs are traded on a stock exchange in Canada or the United States;
(d) a Fund does not purchase Gold and Silver Products if, immediately after the transaction, more than 10% of the Fund's net asset value would consist of Gold and Silver Products; and
(e) the prospectus of the Fund discloses, or will disclose next time it is renewed:
(i) in the Investment Strategy section of the prospectus, the fact that the Fund has obtained relief to invest in Commodity ETFs and Silver, as appropriate; and
(ii) to the extent applicable, the risks associated with such an investment.
APPENDIX "A"
EXISTING FUNDS
CI Funds
1. CI American Managers Corporate Class
2. CI American Small Companies Fund
3. CI American Small Companies Corporate Class
4. CI American Value Fund
5. CI American Value Corporate Class
6. CI Canadian Investment Fund
7. CI Canadian Investment Corporate Class
8. CI Canadian Small/Mid Cap Fund
9. CI Global Fund
10. CI Global Corporate Class
11. CI Global Health Sciences Corporate Class
12. CI Global Managers Corporate Class
13. CI Global Small Companies Fund
14. CI Global Small Companies Corporate Class
15. CI Global Value Fund
16. CI Global Value Corporate Class
17. CI International Value Fund
18. CI International Value Corporate Class
19. CI Pacific Fund
20. CI Pacific Corporate Class
21. CI Short-Term Corporate Class
22. CI Short-Term US$ Corporate Class
23. CI Can-Am Small Cap Corporate Class
24. CI Global High Dividend Advantage Fund
25. CI Global High Dividend Advantage Corporate Class
26. CI Short-Term Advantage Corporate Class
27. CI Income Fund
28. CI Canadian Dividend Fund
29. CI U.S. Equity Plus Fund
30. CI Investment Grade Bond Fund
31. CI U.S. Income US$ Pool
Black Creek Funds
1. Black Creek Global Balanced Corporate Class
2. Black Creek Global Leaders Corporate Class
3. Black Creek International Equity Corporate Class
4. Black Creek Global Leaders Fund
5. Black Creek International Equity Fund
6. Black Creek Global Balanced Fund
Harbour Funds
1. Harbour Fund
2. Harbour Corporate Class
3. Harbour Global Equity Corporate Class
4. Harbour Global Growth & Income Corporate Class
5. Harbour Growth & Income Fund
6. Harbour Growth & Income Corporate Class
7. Harbour Voyageur Corporate Class
Signature Funds
1. Signature Global Resource Fund
2. Signature Global Resource Corporate Class
3. Signature Select Canadian Fund
4. Signature Select Canadian Corporate Class
5. Signature Canadian Balanced Fund
6. Signature Dividend Fund
7. Signature Dividend Corporate Class
8. Signature High Income Fund
9. Signature High Income Corporate Class
10. Signature Corporate Bond Fund
11. Signature Corporate Bond Corporate Class
12. Signature Income & Growth Fund
13. Signature Income & Growth Corporate Class
14. Signature Global Income & Growth Fund
15. Signature Global Income & Growth Corporate Class
16. Signature Global Energy Corporate Class
17. Signature Canadian Bond Fund
18. Signature Canadian Bond Corporate Class
19. Signature Short-Term Bond Fund
20. Signature Diversified Yield Fund
21. Signature Diversified Yield Corporate Class
22. Signature Select Global Fund
23. Signature Select Global Corporate Class
24. Signature Gold Corporate Class
25. Signature High Yield Bond Fund
26. Signature High Yield Bond Corporate Class
27. Signature High Yield Bond II Fund
28. Signature Emerging Markets Fund
29. Signature Emerging Markets Corporate Class
30. Signature Global Science & Technology Corporate Class
31. Signature International Fund
32. Signature International Corporate Class
33. Signature Global Bond Fund
34. Signature Global Bond Corporate Class
35. Signature Global Dividend Fund
36. Signature Global Dividend Corporate Class
37. Signature Diversified Yield II Fund
38. Signature Real Estate Pool
39. Signature Preferred Share Pool
40. Signature Tactical Bond Pool
Portfolio Series
1. Portfolio Series Conservative Balanced Fund
2. Portfolio Series Balanced Growth Fund
3. Portfolio Series Growth Fund
4. Portfolio Series Maximum Growth Fund
5. Portfolio Series Income Fund
6. Portfolio Series Conservative Fund
7. Portfolio Series Balanced Fund
Synergy Funds
1. Synergy Canadian Corporate Class
2. Synergy Global Corporate Class
3. Synergy American Fund
4. Synergy American Corporate Class
5. Synergy Tactical Asset Allocation Fund
Portfolio Select Series
1. Select Canadian Equity Managed Corporate Class
2. Select U.S. Equity Managed Corporate Class
3. Select International Equity Managed Corporate Class
4. Select Income Managed Corporate Class
5. Select 80i20e Managed Portfolio Corporate Class
6. Select 70i30e Managed Portfolio Corporate Class
7. Select 60i40e Managed Portfolio Corporate Class
8. Select 50i50e Managed Portfolio Corporate Class
9. Select 40i60e Managed Portfolio Corporate Class
10. Select 30i70e Managed Portfolio Corporate Class
11. Select 20i80e Managed Portfolio Corporate Class
12. Select 100e Managed Portfolio Corporate Class
13. Select Staging Fund
14. Select Canadian Equity Managed Fund
15. Select U.S. Equity Managed Fund
16. Select International Equity Managed Fund
Cambridge Funds
1. Cambridge American Equity Fund
2. Cambridge American Equity Corporate Class
3. Cambridge Canadian Equity Corporate Class
4. Cambridge Global Equity Corporate Class
5. Cambridge Asset Allocation Corporate Class
6. Cambridge Income Fund
7. Cambridge Income Corporate Class
8. Cambridge Income Trust
9. Cambridge Global Dividend Fund
10. Cambridge Global Dividend Corporate Class
11. Cambridge Canadian Growth Companies Fund
12. Cambridge Pure Canadian Equity Fund
13. Cambridge High Income Fund
14. Cambridge Growth Companies Corporate Class
15. Cambridge U.S. Dividend Registered Fund
16. Cambridge U.S. Dividend US$ Fund
17. Cambridge Bond Fund
18. Cambridge Canadian Dividend Fund
19. Cambridge U.S. Dividend Fund
20. Cambridge Canadian Dividend Corporate Class
21. Cambridge Pure Canadian Equity Corporate Class
22. Cambridge Stock Selection Fund
Lawrence Park
Lawrence Park Strategic Income Fund
Marret Funds
1. Marret High Yield Bond Fund
2. Marret Short Duration High Yield Fund
3. Marret Strategic Yield Fund
CI Guaranteed Retirement Cash Flow Series
1. CI G5|20i 2034 Q2 Fund
2. CI G5|20i 2034 Q3 Fund
3. CI G5|20i 2034 Q4 Fund
4. CI G5|20i 2035 Q1 Fund
5. CI G5|20i 2035 Q2 Fund
6. CI G5|20i 2035 Q3 Fund
7. CI G5|20i 2035 Q4 Fund
8. CI G5|20i 2036 Q1 Fund
9. CI G5|20 2038 Q3 Fund
10. CI G5|20 2038 Q4 Fund
11. CI G5|20 2039 Q1 Fund
12. CI G5|20 2039 Q2 Fund
13. CI G5|20 2039 Q3 Fund
14. CI G5|20 2039 Q4 Fund
15. CI G5|20 2040 Q1 Fund
16. CI G5|20 2040 Q2 Fund
17. CI G5|20 2040 Q3 Fund
18. CI G5|20 2040 Q4 Fund
19. CI G5|20 2041 Q1 Fund
United Pools
1. Cash Management Pool
2. Short Term Income Pool
3. Canadian Fixed Income Pool
4. Global Fixed Income Pool
5. Real Estate Investment Pool
6. Canadian Equity Small Cap Pool
7. Canadian Equity Value Pool
8. Canadian Equity Growth Pool
9. US Equity Value Pool
10. US Equity Growth Pool
11. International Equity Value Pool
12. International Equity Growth Pool
13. Emerging Markets Equity Pool
14. Enhanced Income Pool
15. US Equity Small Cap Pool
United Corporate Classes
1. Short Term Income Corporate Class
2. Canadian Fixed Income Corporate Class
3. Global Fixed Income Corporate Class
4. Real Estate Investment Corporate Class
5. Canadian Equity Small Cap Corporate Class
6. Canadian Equity Value Corporate Class
7. Canadian Equity Growth Corporate Class
8. US Equity Value Corporate Class
9. US Equity Growth Corporate Class
10. International Equity Value Corporate Class
11. International Equity Growth Corporate Class
12. Emerging Markets Equity Corporate Class
13. Enhanced Income Corporate Class
14. US Equity Small Cap Corporate Class
15. Canadian Equity Alpha Corporate Class
16. US Equity Value Currency Hedged Corporate Class
17. US Equity Alpha Corporate Class
18. International Equity Value Currency Hedged Corporate Class
19. International Equity Alpha Corporate Class