CI Investments Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions -- Relief granted to manager/portfolio manager to engage the public mutual funds and pooled funds it advises and manages in purchases of long-term, non-exchange traded debt securities of related entities in the primary market -- Future-oriented relief -- Relief conditional on conditions including IRC approval, pricing requirements, and limits on the amount of the primary offering the funds can purchase.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 111(2)(a), 111(2)(c)(ii), 111(3).

National Instrument 31-103 Registration Requirements, ss. 13.5(2)(a), 15.1.

National Instrument 81-107 Independent Review Committee for Investment Funds, s. 6.2.

August 16, 2012

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

IN THE MATTER OF

THE MUTUAL FUNDS MANAGED BY THE FILER

AND ANY MUTUAL FUNDS THAT MAY BE

ESTABLISHED IN THE FUTURE FOR WHICH THE

FILER ACTS AS MANAGER AND/OR ADVISER

(the Funds, as further defined below))

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of existing mutual funds and future mutual funds of which the Filer is the manager (Manager) and/or portfolio manager and to which National Instrument 81-102 Mutual Funds (NI 81-102) applies (each, a Public Fund and collectively, the Public Funds) and on behalf of existing mutual funds and future mutual funds of which the Filer is the manager and/or portfolio manager and to which NI 81-102 does not apply (each, a Pooled Fund and collectively, the Pooled Funds) for a decision under the securities legislation of the Jurisdiction of the principal regulator (Legislation) exempting the Public Funds and Pooled Funds from the prohibitions in the Legislation that prohibit a mutual fund from making or holding an investment:

(a) pursuant to section 113 of the Securities Act (Ontario) (the Act) for relief (the Act Relief) from the following provisions:

(i) section 111(2)(a) of the Act which prohibits a mutual fund in Ontario from knowingly making an investment in any person or company who is a substantial security holder of the mutual fund, its management company or distribution company (Related Shareholder);

(ii) section 111(2)(c)(ii) of the Act which prohibits a mutual fund in Ontario from knowingly making an investment in an issuer in which a Related Shareholder has a significant interest (Related Person);

(iii) section 111(3) of the Act which prohibits a mutual fund in Ontario from knowingly holding an investment that is prohibited by sections 111(2)(a) and section 111(2)(c)(ii) of the Act; and

(b) pursuant to section 15.1 of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103) (the NI 31-103 Relief), exempting the Filer from the prohibition in section 13.5(2)(a) of NI 31-103 which prohibits a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase a security in any issuer in which a responsible person or an associate of a responsible person is a partner, officer or director (Related Issuer) unless the fact is disclosed to the client and the written consent of the client is obtained before the investment is made.

The Act Relief and the NI 31-103 Relief are collectively, the Exemption Sought.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(i) the Ontario Securities Commission (OSC) is the principal regulator for this application; and

(ii) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is also intended to be relied upon in British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (the Passport Jurisdictions) in respect of the Exemption Sought.

Interpretation

Terms defined in MI 11-102 and National Instrument 14-101 Definitions, National Instrument 81-102 Mutual Funds (NI 81-102), National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) and National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations (NI 31-103) have the same meaning if used in this decision, unless otherwise defined.

In this Decision, the term "Related Party" means a Related Shareholder, a Related Person or a Related Issuer depending on the provision that is being considered.

Representations

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

The Filer

1. The head office of the Filer is located in Toronto, Ontario.

2. The Filer is the investment fund manager and/or portfolio manager of one or more mutual funds and may, in the future, become the investment fund manager and/or portfolio manager of additional mutual funds (all such present and future mutual funds being hereinafter referred to as the Funds). Some Funds are or will be reporting issuers under the securities legislation of some or all of the jurisdictions of Canada (the Public Funds) while other Funds do not or will not have such status (the Pooled Funds, collectively the Funds).

3. The Filer is currently directly and wholly-owned by CI Financial Corp. (CI Financial).

The Funds

4. Each of the Funds is or will be a mutual fund established under the laws of Ontario or one of the other Passport Jurisdictions.

5. The Filer and the Funds are not in default of securities legislation in any jurisdiction of Canada.

6. The securities of each of the Public Funds are, or will be, qualified for distribution pursuant to simplified prospectuses and annual information forms that have been, or will be, prepared and filed in accordance with the securities legislation of each of the Jurisdiction and the Passport Jurisdictions.

7. Each of the Public Funds is, or will be, a reporting issuer in one or more of the Jurisdiction and the Passport Jurisdictions.

8. The securities of the Pooled Funds are or will be offered for sale only on an exempt basis pursuant to available prospectus and registration exemptions from the prospectus requirements in one or more of the Passport Jurisdictions. Accordingly, none of the Pooled Funds is or will be a reporting issuer.

9. The investment objectives or strategies of each Fund that relies on the Exemption Sought permit, or will permit, it to invest in the securities purchased.

10. As Manager of the Public Funds, the Filer has established, or will establish, an independent review committee (IRC) in respect of each Public Fund in accordance with the requirements of NI 81-107. The IRC shall comply with the standard of care set out in section 3.9 of NI 81-107.

11. The purchase of securities of a Related Party by a Public Fund will be referred to the IRC of such Fund under subsection 5.1(1)(b) of NI 81-107.

12. As Manager of the Pooled Funds, the Filer has established, or will establish, an IRC that will be composed in accordance with the requirements of section 3.7 of NI 81-107. The IRC of each Pooled Fund will be expected to comply with the standard of care set out in section 3.9 of NI 81-107 as if each Pooled Fund were subject to that rule.

13. The only conflict of interest matter that will be referred in respect of a Pooled Fund to its IRC will be investments made by the Pooled Fund in securities of Related Parties.

14. The IRC of each Fund will comply with section 4.5 of NI 81-107 in connection with any instance that it becomes aware that the Fund did not comply with any of the conditions of this decision.

15. The Filer is seeking the Exemption Sought to permit the Funds to purchase and hold non-exchange traded debt securities of Related Parties issued pursuant to a primary distribution or treasury offering (Primary Offering).

16. Section 6.2 of NI 81-107 provides an exemption from the prohibitions comprising the Act Relief and the NI 31-103 Relief for exchange-traded securities, such as common shares. It does not permit a Fund, or the Filer on behalf of a Fund, however, to purchase non-exchange-traded debt securities issued by Related Parties. Some securities of Related Parties, such as debt securities, are not listed or traded on an exchange. Accordingly, without the Exemption Sought, the Funds would be prohibited from purchasing and holding non-exchange traded debt securities of Related Parties.

17. The Filer has determined that it would be in the best interests of the Funds to receive the Exemption Sought.

18. The Filer submits that the granting of the Exemption Sought would not be prejudicial to the public interest.

19. Certain Related Parties of the Filer are significant issuers of securities and they are issuers of highly rated commercial paper and other debt instruments. The Filer considers that the Funds should have access to such securities for the following reasons:

a) there is limited supply of highly rated corporate debt;

b) diversification is reduced to the extent that a Fund is limited with respect to investment opportunities; and

c) to the extent that a Fund seeks to track or outperform a benchmark it is important for the Fund to be able to purchase any securities included in the benchmark. Debt securities of Related Parties of the Filer are included in most of the Canadian debt indices.

20. Where the debt security is purchased by a Fund in Primary Offering pursuant to the Exemption Sought,

a) the security will be a non-exchange traded debt security, other than an asset backed commercial paper security, with a term to maturity of 365 days or more, issued by a Related Party that has been given and continues to have, at the time of purchase, an "approved credit rating" by an approved credit rating organization; and

b) the terms of the Primary Offering, such as the size and the pricing, will be a matter of public record as evidenced in a prospectus, offering memorandum, press release or other public document.

21. If a Fund's purchase of debt securities involves an inter-fund trade with another Fund, the provisions of the relief received by the Filer on behalf of the Funds dated March 16, 2010, as may be amended, will apply to such transaction.

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 to permit the Public Funds and the Pooled Funds to purchase and hold non-exchange traded debt securities of Related Parties issued pursuant to a Primary Offering on condition that:

(a) the purchase or holding is consistent with, or is necessary to meet, the investment objective of the Fund;

(b) at the time of the purchase the IRC of the Fund has approved the transaction in accordance with Section 5.2(2) of NI 81-107;

(c) the manager of the Fund complies with section 5.1 of NI 81-107 and the manager and the IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(d) the size of the Primary Offering is at least $100 million;

(e) at least 2 purchasers who are independent, arm's length purchasers, which may include "independent underwriters" within the meaning of National Instrument 33-105 -- Underwriting Conflicts, collectively purchase at least 20% of the Primary Offering;

(f) no Fund shall participate in the Primary Offering if following its purchase the Fund together with related Funds will hold more than 20% of the securities issued in the Primary Offering;

(g) no Fund shall participate in the Primary Offering if following its purchase the Fund would have more than 5% of its net assets invested in non-exchange traded debt securities of a Related Party;

(h) the price paid for the securities by a Fund in the Primary Offering shall be no higher than the lowest price paid by any of the arm's length purchasers who participate in the Primary Offering;

(i) no later than the time a Public Fund files its annual financial statements, or on or before the 90th day after the end of each financial year of a Pooled Fund, the Filer files with the securities regulatory authority or regulator the particulars of any investments made in reliance on this relief; and

(j) this Decision will expire on the coming into force of any securities legislation relating to fund purchases of Related Party debt securities in a Primary Offering.

NI 31-103 Relief

"Raymond Chan"
Manager, Investment Funds Branch
Ontario Securities Commission

The Act Relief

"Christopher Portner"
Commissioner
Ontario Securities Commission
 
"James Turner"
Vice-Chair
Ontario Securities Commission