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McLean Budden Limited et al. - MRRS Decision
IN THE MATTER OF
THE CANADIAN SECURITIES LEGISLATION
OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
ONTARIO, NOVA SCOTIA AND NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
MCLEAN BUDDEN LIMITED, MCLEAN BUDDEN BALANCED GROWTH FUND,
MCLEAN BUDDEN CANADIAN EQUITY GROWTH FUND
AND MCLEAN BUDDEN CANADIAN EQUITY VALUE FUND
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in each of BritishColumbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the "Jurisdictions") has received anapplication from McLean Budden Limited ("MB") on behalf of the McLean Budden Balanced Growth Fund (the "BalancedGrowth Fund"), McLean Budden Canadian Equity Growth Fund (the "Canadian Equity Growth Fund"), McLean BuddenCanadian Equity Value Fund (the "Canadian Equity Value Fund") (the "Current Top Funds") and other mutual fundsmanaged by MB after the date of this Decision (defined herein) having an investment strategy that invests in anothermutual fund or mutual funds managed by MB for foreign property exposure while remaining eligible for registered plans(individually, a "Top Fund" and, together with the Current Top Funds, the "Top Funds") for a decision pursuant to thesecurities legislation of the Jurisdictions (the "Legislation") that the following provisions of the Legislation (the "ApplicableRequirements") shall not apply to the Top Funds or MB, as the case my be, in respect of certain investments to be madeby a Top Fund in an Underlying Fund (as defined herein) from time to time:
(a) the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making or holdingan investment in a person or company in which the mutual fund, alone or together with one or morerelated mutual funds, is a substantial security holder; and
(b) the requirements contained in the Legislation requiring a management company file a report or inBritish Columbia, a mutual fund manager, relating to a purchase and sale of securities between themutual fund and any related person or company, or any transaction in which, by arrangement, otherthan an arrangement relating to insider trading in portfolio securities, the mutual fund is a jointparticipant with one or more of its related persons or companies.
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System") the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS it has been represented by MB to the Decision Makers that:
1. MB is a corporation established under the laws of [Canada?] and is or will be the manager, principal distributorand a promoter of each of the Top Funds and each of the Underlying Funds (collectively, the "MB Funds"). Thehead office of MB is located in Ontario.
2. Each of the MB Funds is or will be an open-ended mutual fund established under the laws of Ontario by aDeclaration of Trust.
3. Each of the MB Funds is or will be a reporting issuer in each of the provinces of Canada.
4. Units of each of the MB Funds will be qualified for distribution by means of a simplified prospectus and anannual information form filed in accordance with the legislation applicable in each of the provinces of Canada.
5. Each of the Top Funds seeks to achieve its investment objective while ensuring that its securities do notconstitute "foreign property" for registered retirement savings plans, registered retirement income funds,deferred profit sharing plans and similar plans ("Registered Plans"). As part of its investment strategy, each TopFund will invest fixed percentages of its assets (other than cash) in specified underlying MB mutual funds forits foreign property component.
6. The Top Funds currently invest in the McLean Budden International Equity Fund (formerly, the McLean BuddenInternational Equity Growth Fund) (the "International Equity Fund") and the McLean Budden American EquityFund (formerly, the McLean Budden American Equity Growth Fund) (the "American Equity Fund") (the "CurrentUnderlying Funds"), subject to the terms of a waiver letter dated January 7, 2000 (the "Existing Waiver"), anda decision document dated January 19, 2000 (the "Existing Decision Document").
7. MB now wishes to add the McLean Budden Global Equity Fund (the "Global Equity Fund") as an UnderlyingFund and may in the future establish other mutual funds (together with the Global Equity Fund, the "FutureUnderlying Funds" and collectively with the Existing Underlying Funds, the "Underlying Funds").
8. MB wishes to revoke and replace the terms of the Existing Waiver and the Existing Decision Document so thatthe Top Funds may invest in the Underlying Funds (as defined herein) on substantially the same terms as theterms of the Existing Waiver and the Existing Decision Document.
9. The investment objectives of the Underlying Funds will be achieved through investment primarily in foreignsecurities.
10. In order to achieve its investment strategy, each Top Fund invests fixed percentages (the "Fixed Percentages")of its assets (other than cash and cash equivalents) in securities of specified Underlying Funds, subject to avariation of 2.5% above or below the Fixed Percentages (the "Permitted Ranges") to account for marketfluctuations.
11. Each of the Top Funds invests in the Underlying Funds an aggregate amount which is 2.5% below the amountprescribed from time to time as the maximum permitted amount capable of being made as a foreign propertyinvestment under the Income Tax Act (Canada) (the "Act") for Registered Plans (the "Permitted AggregateInvestment"), subject to a variation to account for market fluctuations as described in representation #10.
12. Each Top Fund invests its assets in accordance with the Fixed Percentages and the Permitted AggregateInvestment disclosed in the simplified prospectus.
13. The simplified prospectus for the Top Funds will disclose the investment objectives, investment strategies, risksand restrictions of the Top Fund and the applicable Underlying Funds, the Fixed Percentages, PermittedRanges and the Permitted Aggregate Investment.
14. Except to the extent evidenced by this Decision and specific approvals granted by the Decision Makerspursuant to National Instrument 81-102 Mutual Funds ("NI 81-102"), the investments by each of the Top Fundsin the Underlying Funds have been structured to comply with the investment restrictions of the Legislation andNI 81-102.
15. In the absence of this Decision, pursuant to the Legislation, each Top Fund is prohibited from knowingly makingor holding an investment in a person or company in which the mutual fund, alone or together with one or morerelated mutual funds, is a substantial securityholder. As a result, in the absence of this Decision each Top Fundwould be required to divest itself of any such investments.
16. In the absence of this Decision, Legislation requires MB to file a report on every purchase or sale of securitiesof the Underlying Funds by a Top Fund.
17. The investments by the Top Funds in securities of the Underlying Funds will represent the business judgmentof "responsible persons" (as defined in the Legislation) uninfluenced by considerations other than the bestinterests of the Top Funds.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that the Existing Decision Document ishereby revoked;
AND THE DECISION of the Decision Makers pursuant to the Legislation is that the Applicable Requirementsshall not apply so as to prevent the Top Funds from making and holding an investment in securities of the UnderlyingFunds or require MB to file a report relating to the purchase or sale of such securities.
PROVIDED IN EACH CASE THAT:
1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after thepublication in final form of any legislation or rule of that Decision Maker dealing with matters in section2.5 of NI 81-102.
2. the Decision shall only apply if, at the time a Top Fund makes or holds an investment in its UnderlyingFunds, the following conditions are satisfied:
(a) the securities of both the Top Fund and the Underlying Fund are being offered for sale in thejurisdiction of the Decision Maker pursuant to a simplified prospectus and annual information formwhich has been filed with and accepted by the Decision Maker;
(b) the investment by the Top Fund in the Underlying Funds is compatible with the fundamentalinvestment objectives of the Top Fund;
(c) the simplified prospectus discloses the intent of the Top Fund to invest in securities of the UnderlyingFunds, the names of the Underlying Funds, the Fixed Percentages and the Permitted Ranges withinwhich such Fixed Percentages may vary and the Permitted Aggregate Investment;
(d) the Underlying Funds are not mutual funds whose investment objective includes investing directly orindirectly in other mutual funds;
(e) the Top Fund invests its assets (exclusive of cash and cash equivalents) in the Underlying Funds inaccordance with the Fixed Percentages and the Permitted Aggregate Investment disclosed in thesimplified prospectus;
(f) the Top Fund's holding of securities in the Underlying Funds does not deviate from the PermittedRanges;
(g) any deviation from the Fixed Percentages is caused by market fluctuations only;
(h) if an investment by the Top Fund in any of the Underlying Funds has deviated from the PermittedRanges as a result of market fluctuations, the Top Fund's investment portfolio was re-balanced tocomply with the Fixed Percentages on the next day on which the net asset value was calculatedfollowing the deviation;
(i) if the Fixed Percentages and the Underlying Funds which are disclosed in the simplified prospectushave been changed, either the simplified prospectus has been amended or a new simplifiedprospectus has been filed to reflect the change, and the securityholders of the Top Fund have beengiven at least 60 days' notice of the change;
(j) there are compatible dates for the calculation of the net asset value of the Top Fund and theUnderlying Funds for the purpose of the issue and redemption of the securities of such mutual funds;
(k) no sales charges are payable by the Top Fund in relation to its purchases of securities in theUnderlying Funds;
(l) no redemption fees or other charges are charged by an Underlying Fund in respect of the redemptionby the Top Fund of securities of the Underlying Fund owned by the Top Fund;
(m) no fees or charges of any sort are paid by the Top Fund and the Underlying Funds, by their respectivemanagers or principal distributors, or by any affiliate or associate of any of the foregoing entities, toanyone in respect of the Top Fund's purchase, holding or redemption of the securities of theUnderlying Funds;
(n) the arrangements between or in respect of the Top Fund and the Underlying Funds are such as toavoid the duplication of management fees;
(o) any notice provided to securityholders of an Underlying Fund as required by applicable laws or theconstating documents of that Underlying Fund has been delivered by the Top Fund to itssecurityholders;
(p) all of the disclosure and notice material prepared in connection with a meeting of security holders ofthe Underlying Funds and received by the Top Fund has been provided to its securityholders, thesecurityholders have been permitted to direct a representative of the Top Fund to vote its holdings inthe Underlying Fund in accordance with their direction, and the representative of the Top Fund hasnot voted its holdings in the Underlying Funds except to the extent the securityholders of the Top Fundhave directed;
(q) in addition to receiving the annual, and upon request, the semi-annual financial statements, of the TopFund, securityholders of a Top Fund have received appropriate summary disclosure in respect of theTop Fund's holdings of securities of the Underlying Funds in the financial statements of the Top Fund;and
(r) to the extent that the Top Fund and the Underlying Funds do not use a combined simplifiedprospectus and annual information form containing disclosure about the Top Fund and the UnderlyingFunds, copies of the simplified prospectus and annual information form of the Underlying Funds havebeen provided upon request to securityholders of the Top Fund and the right to receive thesedocuments is disclosed in the simplified prospectus of the Top Fund.
March 29, 2001.
"J.A. Geller" "Howard I. Wetston"