Manulife Asset Management Limited

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from section 4.2 of NI 81-102 and section 13.5(2)(b) of NI 31-103 to permit inter-fund trading between mutual funds, pooled funds and closed-end funds managed by the same manager or its affiliate -- Relief subject to conditions, including IRC approval and pricing requirements -- certain trades involving exchange-traded securities permitted to occur at last sale price as defined in the Universal Market Integrity Rules.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.2(1), 4.3(1), 4.3(2), 19.1.

National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.5, 15.1.

National Instrument 81-107 Independent Review Committee for Investment Funds, ss. 6.1(4), 6.1(2).

January 17, 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

(THE FILER) AND

THE NI 81-102 FUNDS

(AS DEFINED BELOW)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the existing and future mutual funds of which the Filer, or an affiliate of the Filer (collectively, the Investment Portfolio Managers) is, or will be, the manager and to which National Instrument 81-102 -- Mutual Funds (NI 81-102) applies (the NI 81-102 Funds) for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the NI 81-102 Funds from the prohibition in Section 4.2(1) of NI 81-102 to permit the NI 81-102 Funds to purchase debt securities from or sell debt securities to the following investment funds managed by the Investment Portfolio Managers:

(a) an existing or future mutual fund that is an associate of the Investment Portfolio Manager of the NI 81-102 Fund and to which NI 81-102 and National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) do not apply (collectively, the Pooled Funds); and

(b) an existing or future investment fund that is an associate of the Investment Portfolio Manager of the NI 81-102 Fund and to which NI 81-107 applies but to which NI 81-102 does not apply (collectively, the Closed-End Funds and, together with NI 81-102 Funds and the Pooled Funds, the Funds),

(collectively the Inter-Fund Trades).

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 of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in respect of the Exemption Sought in each of the other Provinces and Territories of Canada (together with Ontario, the Passport Jurisdictions).

Terms defined in the Legislation, National Instrument 14-101 -- Definitions, NI 81-102 or NI 81-107 have the same meanings in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation incorporated under the laws of Ontario, with its registered head office located in Toronto, Ontario. The Filer is an indirect-wholly owned subsidiary of Manulife Financial Corporation.

2. The Filer is registered in the categories of commodity trading manager, exempt market dealer, mutual fund dealer, portfolio manager and investment fund manager.

3. Each Fund is, or will be, an investment fund that is a trust, a corporation or a limited partnership that is established under the laws of Ontario, Canada or other jurisdiction of Canada.

4. An Investment Portfolio Manager acts, or will act, as the investment fund manager of the Funds. An Investment Portfolio Manager may act as the portfolio advisor of the Funds. An Investment Portfolio Manager may also act as the trustee of a Fund constituted as a trust.

5. A Fund's reliance on the Exemption Sought will be compatible with its investment objective and strategies.

6. Each NI 81-102 Fund is, or will be, a reporting issuer in one or more Passport Jurisdictions whose securities are, or will be, qualified for distribution pursuant to prospectuses and annual information forms that have been, or will be, prepared and filed in accordance with the securities legislation of those Passport Jurisdictions.

7. Each Closed-End Fund is, or will be, a reporting issuer in Ontario and one or more of the other Passport Jurisdictions whose securities are, or will be, qualified for distribution pursuant to prospectuses that have been, or will be, prepared and filed in accordance with the securities legislation of Ontario and those other Passport Jurisdictions.

8. The securities of each of the Pooled Funds are, or will be, distributed on a private placement basis pursuant to the Legislation and the Pooled Funds will not be reporting issuers.

9. The Filer and each of the existing NI 81-102 Funds are not in default of securities legislation, except to the extent the Filer or an existing NI 81-102 Fund engaged in certain related issuer trades ("Related Issuer Trades") before the date of this decision document and following the expiry of previously obtained exemptive relief dated December 19, 2002 relating to the investment by the Funds in debt securities of related issuers. The Related Issuer Trades were reviewed by the relevant IRC (as defined below) and each IRC was satisfied that the Related Issuer Trades were made uninfluenced by considerations other than the best interests of the Funds involved.

10. A Fund may be an associate of an Investment Portfolio Manager.

11. Each NI 81-102 Fund and Closed-End Fund has, or will have, an independent review committee (an IRC) in accordance with the requirements of NI 81-107. Each Inter-Fund Trade by a NI 81-102 Fund or a Closed-End Fund will be authorized by the relevant IRC of the NI 81-102 Fund or Closed-End Fund under Section 5.2 of NI 81-107 and the manager and the IRC of the NI 81-102 Fund or the Closed-End Fund, as applicable, will comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade.

12. Though the Pooled Funds are not, or will not be, subject to the requirements of NI 81-107, each Pooled Fund has, or will have, an IRC at the time the Pooled Fund makes an Inter-Fund Trade. All existing Pooled Funds have already established an IRC in order to comply with conditions attached to discretionary relief obtained by the Pooled Funds for other purposes (the Pooled Fund Existing Relief). The mandate of the IRC of each Pooled Fund will include approving Inter-Fund Trades between the Pooled Fund and another Fund.

13. The IRC of a Pooled Fund will be composed in accordance with Section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in Section 3.9 of NI 81-107. The IRC of a Pooled Fund will not approve an Inter-Fund Trade between a Pooled Fund and another Fund unless the IRC has made the determination set out in Section 5.2(2) of NI 81-107.

14. If the IRC of a Pooled Fund becomes aware of an instance where the Filer or an affiliate of the Filer, as manager of the Pooled Fund, did not comply with the terms of this decision or a condition imposed by securities legislation or the IRC in its approval, the IRC of the Pooled Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction under which the Pooled Fund is organized.

15. At the time of an Inter-Fund Trade, each Investment Portfolio Manager will have in place policies and procedures to enable the NI 81-102 Funds to engage in Inter-Fund Trades with Closed-End Funds or Pooled Funds.

16. When an Investment Portfolio Manager engages in an Inter-Fund Trade it will follow the following procedures:

(a) in respect of a purchase or a sale of a security by a Fund (Portfolio A), the portfolio manager of the Investment Portfolio Manager will either place the trade directly or will deliver the trade instructions to a trader on a trading desk of the Investment Portfolio Manager;

(b) in respect of a sale or a purchase of a security by another Fund (Portfolio B) the portfolio manager of the Investment Portfolio Manager will either place the trade directly or will deliver the trade instructions to a trader on a trading desk of the Investment Portfolio Manager;

(c) each portfolio manager of the Investment Portfolio Manager will request the approval of the chief compliance officer of the Investment Portfolio Manager (or his or her designated alternate during periods when it is not practicable for the chief compliance officer to address the matter) (the CO) to execute the trade as an Inter-Fund Trade;

(d) once the portfolio manager or trader on the trading desk has confirmed the approval of the CO, the portfolio manager or the trader on the trading desk will have the discretion to execute the trade as an Inter-Fund Trade between Portfolio A and Portfolio B in accordance with the requirements of paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107;

(e) the policies applicable to the portfolio manager and the trading desk of the Investment Portfolio Manager will require that all Inter-Fund Trade orders are to be executed on a timely basis and will remain open only for 30 days unless the portfolio manager cancels the order sooner; and

(f) the portfolio manager or the trader on a trading desk will advise the Investment Portfolio Manager of the price at which the Inter-Fund Trade occurred.

17. The Filer has determined that it would be in the best interests of the NI 81-102 Funds to receive the Exemption Sought for the following reasons:

(a) it will result in cost and timing efficiencies in respect of the execution of transactions for the NI 81-102 Funds; and

(b) it will result in less complicated and more reliable compliance procedures, as well as simplified and more efficient monitoring thereof, for an Investment Portfolio Manager, in connection with the execution of transactions on behalf of NI 81-102 Funds.

18. The NI 81-102 Funds cannot rely upon the exemption from Section 4.2(1) of NI 81-102 for Inter-Fund Trades in debt securities codified in paragraph 4.3(2) of NI 81-102 because (i) the Pooled Funds are not subject to NI 81-107 and (ii) a Closed-End Fund is not a mutual 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 Exemption Sought is granted provided that:

(a) the IRC of each Fund that is a party to the Inter-Fund Trade has approved the Inter-Fund Trade in respect of such Fund in accordance with the terms of Section 5.2(2) of NI 81-107; and

(b) the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107.

"Vera Nunes"
Assistant Manager, Investment Funds
Ontario Securities Commission