Investment by Top Funds in securities of UnderlyingFunds under common management for specified purpose exemptedfrom the reporting requirements and self-dealing prohibitionsof clauses 111(2)(b), 111(3) and clauses 117(1)(a) and (d).
Securities Act (Ontario), R.S.O. c. S.5, asam., 111(2)(b), 111(3), 117(1)(a), and 117(1)(d).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTAAND ONTARIO
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
LOGIX ASSET MANAGEMENT INC.
LOGIX CANADIAN EQUITY FUND
LOGIX U.S. EQUITY FUND
LOGIX U.S. EQUITY RSP FUND
LOGIX GLOBAL BOND FUND
LOGIX INTERNATIONAL EQUITYFUND
LOGIX SHORT TERM INVESTMENTFUND (the "Short Term Fund")
(collectively, the "NewTop Funds")
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (collectively, the "Decision Makers")in each of the provinces of British Columbia, Alberta and Ontario(collectively, the "Jurisdictions") has received anapplication from Logix Asset Management Inc. ("Logix"or the "Manager") in its own capacity and on behalfof the New Top Funds and other mutual funds established andmanaged by Logix after the date of this Decision (as definedherein) that have as their investment objective the investmentof substantially all of their assets in securities of one ormore mutual funds (the "Future Top Funds", which togetherwith the New Top Funds are collectively referred to as the "TopFunds") for a decision under the securities legislationof the Jurisdictions (the "Legislation") that thefollowing provisions of the Legislation (the "ApplicableRequirements") shall not apply to a Top Fund or Logix,as the case may be, in respect of certain investments to bemade from time to time by a Top Fund in securities of selectedprospectus-qualified mutual funds (the "Underlying Funds",as described in paragraph 4 below):
(a) the restrictions contained in the Legislationprohibiting a mutual fund from knowingly making or holdingan investment in a person or company in which the mutualfund, alone or together with one or more related mutualfunds, is a substantial securityholder; and
(b) the requirements contained in the Legislationrequiring a management company or, in British Columbia,a mutual fund manager, to file a report relating to a purchaseor sale of securities between the mutual fund and any relatedperson or company, or any transaction in which, by arrangementother than an arrangement relating to insider trading inportfolio securities, the mutual fund is a joint participantwith one or more of its related persons or companies.
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 - Definitions;
AND WHEREAS Logix has represented tothe Decision Makers that:
1. Logix is a corporation incorporated underthe laws of Ontario and is or will be the manager and trusteeof the Top Funds. The head office of Logix is located in Toronto,Ontario.
2. The Top Funds are or will be open-endedmutual fund trusts established under the laws of the Provinceof Ontario.
3. The securities of each of the Top Fundsand Underlying Funds (as described in paragraph 4 below) areor will be qualified for distribution in all the Jurisdictionspursuant to simplified prospectuses and annual informationforms filed with and accepted by the Decision Makers, andaccordingly are or will be reporting issuers in the Jurisdictions.The Top Funds will not be in default of any of the requirementsof the Legislation.
4. Each Top Fund will invest substantiallyall of its assets, other than cash or cash equivalents, insecurities of one or more Underlying Funds. The Short TermFund will invest substantially all of its assets in securitiesof a single Underlying Fund (the "Specified UnderlyingFund"). The Underlying Funds will represent a selectionof mutual funds managed by prominent Canadian mutual fundmanagers (the "Third Party Fund Managers"), notaffiliated with the Manager, who are considered to excel inparticular investment niches. Third Party Fund Managers arechosen on the basis of their investment style, their choiceof portfolio sub-advisers, the performance of their portfoliosand their risk control, among other factors.
5. The Underlying Fund or Funds in which aTop Fund invests will be mutual funds whose investment objectivesare compatible with those of the Top Fund.
6. The Underlying Funds will not invest inany other mutual funds (other than index participation units)whose investment objectives include investing directly orindirectly in other mutual funds.
7. In order to achieve its fundamental investmentobjective, each Top Fund (other than the Short Term Fund)will invest fixed percentages (collectively, "Fixed Percentages",individually, a "Fixed Percentage") of its assets,excluding cash and cash equivalents, directly in securitiesof the Underlying Funds, subject to a variation of 2.5% aboveor below the Fixed Percentages (the "Permitted Ranges")resulting from market fluctuations and, in respect of certainTop Funds, subject to compliance with restrictions in theIncome Tax Act (Canada) (the "Tax Act") relatingto holdings of foreign property.
8. The simplified prospectus of each Top Fund(other than the Short Term Fund) will disclose the investmentobjectives and risks of the Top Fund and the Underlying Funds,the names of the Underlying Funds, the manager of the UnderlyingFunds, the Fixed Percentages and the Permitted Ranges withinwhich the Fixed Percentages may vary.
9. The simplified prospectus of the ShortTerm Fund will disclose the manager of the Specified UnderlyingFund, the name of the Specified Underlying Fund, that theShort Term Fund will invest substantially all of its assetsin securities of the Specified Underlying Fund, and will includethe investment objectives, investment strategies, risks andrestrictions and top ten holdings of the Specified UnderlyingFund.
10. If a Fixed Percentage or an UnderlyingFund (other than the Specified Underlying Fund) that is disclosedin the simplified prospectus has been changed, the Managerwill provide 60 days' prior written notice to security holdersof the Top Fund and the simplified prospectus will be amendedor a new simplified prospectus will be filed with the DecisionMakers in the Jurisdictions to reflect the change.
11. The Specified Underlying Fund in whichthe Short Term Fund invests will not be changed unless theprior approval of security holders has been obtained. A newprospectus or an amended prospectus will be filed with theDecision Makers forthwith disclosing the change of the SpecifiedUnderlying Fund.
12. The investments by a Top Fund in securitiesof the Underlying Fund or Underlying Funds represent the businessjudgement of "responsible persons" (as defined inthe Legislation) uninfluenced by considerations other thanthe best interests of the Top Fund.
13. Except to the extent evidenced by thisDecision and specific approvals granted by the Decision Makerspursuant to National Instrument 81-102-Mutual Funds("NI 81-102"), the investments by a Top Fund inthe Underlying Fund or Underlying Funds have been structuredto comply with the investment restrictions of the Legislationand NI 81-102.
14. In the absence of this Decision, pursuantto the Legislation, each Top Fund is prohibited from knowinglymaking or holding an investment in a person or company inwhich the mutual fund, alone or together with one or morerelated mutual funds, is a substantial securityholder. Asa result, in the absence of this Decision each Top Fund wouldbe required to divest itself of any such investments.
15. In the absence of the Decision, the Legislationrequires Logix to file a report on every purchase or saleof securities of an Underlying Fund by a Top Fund.
AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers underthe Legislation is that the Applicable Requirements shall notapply so as to prevent the Top Funds from making and holdingan investment in securities of the Underlying Funds or to requireLogix to file a report relating to the purchase or sale of suchsecurities;
PROVIDED IN EACH CASE THAT:
1. the Decision, as it relates to the jurisdictionof a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that DecisionMaker dealing with matters in section 2.5 of NI 81-102.
2. the Decision shall only apply if, at thetime a Top Fund makes or holds an investment in its UnderlyingFund or Underlying Funds, the following conditions are satisfied:
(a) the securities of both the Top Fundand the Underlying Fund or Underlying Funds are being offeredfor sale in the jurisdiction of the Decision Maker pursuantto a simplified prospectus and annual information form whichhave been filed with and accepted by the Decision Maker;
(b) the investment by the Top Fund in theUnderlying Fund or Underlying Funds is compatible with thefundamental investment objectives of the Top Fund;
(c) the simplified prospectus disclosesthe intent of the Top Fund (other than the Short Term Fund)to invest in securities of the Underlying Funds, the namesof the Underlying Funds, the Fixed Percentages and the PermittedRanges within which such Fixed Percentages may vary;
(d) the simplified prospectus of the ShortTerm Fund discloses the name of the Specified UnderlyingFund and the name of its portfolio adviser, the investmentobjectives, investment strategies, and top ten holdingsof the Specified Underlying Fund, and the risks associatedwith investing in the Specified Underlying Fund;
(e) the investment objective of the TopFund (other than the Short Term Fund) discloses that theTop Fund invests in securities of other mutual funds;
(f) the investment objective of the ShortTerm Fund discloses that the Short Term Fund invests insecurities of a mutual fund and the name of the SpecifiedUnderlying Fund;
(g) the Underlying Funds are not mutualfunds whose investment objectives include investing directlyor indirectly in other mutual funds;
(h) the Top Fund (other than the Short TermFund) invests substantially all of its assets, exclusiveof cash and cash equivalents, in securities of the UnderlyingFunds in accordance with the Fixed Percentages disclosedin the simplified prospectus;
(i) the Top Fund's holdings of securitiesin the Underlying Funds does not deviate from the PermittedRanges;
(j) subject to condition (I), any deviationfrom the Fixed Percentages is caused by market fluctuationsonly;
(k) subject to condition (l), if an investmentby the Top Fund in any of the Underlying Funds has deviatedfrom the Permitted Ranges as a result of market fluctuations,the Top Fund's investment portfolio was re-balanced to complywith the Fixed Percentages on the next day on which netasset value was calculated following the deviation;
(l) if, due to the foreign property investmentlimitations under the Tax Act, the Top Fund was precludedfrom purchasing additional securities or re-instating theFixed Percentages in order to comply with condition (k),or the Top Fund was re-balanced in order to comply withthose foreign property investment limitations and such re-balancingrequired the Top Fund to temporarily deviate beyond thePermitted Ranges, the Top Fund complied with condition (k)as soon as it was possible to do so in compliance with thoseforeign property investment limitations;
(m) if the Fixed Percentages or the UnderlyingFunds which are disclosed in the simplified prospectus ofthe Top Fund (other than the Short Term Fund) have beenchanged, either the simplified prospectus has been amendedor a new simplified prospectus has been filed to reflectthe change and the security holders of the Top Fund (otherthan the Short Term Fund) have been given at least 60 days'notice of the change;
(n) if the Specified Underlying Fund disclosedin the simplified prospectus of the Short Term Fund hasbeen changed, security holders of the Short Term Fund havegiven prior approval and the simplified prospectus has beenamended or a new simplified prospectus filed to reflectthe change;
(o) there are compatible dates for the calculationof the net asset value of a Top Fund and the UnderlyingFund or Underlying Funds for the purpose of the issue andredemption of the securities of such mutual funds;
(p) no sales charges are payable by theTop Fund in relation to its purchases of securities of theUnderlying Fund or Underlying Funds;
(q) no redemption fees or other chargesare charged by an Underlying Fund in respect of the redemptionby the Top Fund of securities of the Underlying Fund ownedby the Top Fund;
(r) no fees or charges of any sort are paidby the Top Fund and the Underlying Funds, by their respectivemanagers or principal distributors, or by any affiliateor associate of any of the foregoing entities, to anyonein respect of the Top Fund's purchase, holding or redemptionof the securities of the Underlying Funds;
(s) the arrangements between or in respectof the Top Fund and the Underlying Funds are such as toavoid the duplication of management fees;
(t) any notice provided to security holdersof an Underlying Fund as required by applicable laws orthe constating documents of that Underlying Fund has beendelivered by the Top Fund to its security holders;
(u) all of the disclosure and notice materialprepared in connection with a meeting of security holdersof the Underlying Fund (other than regular business conductedat an annual meeting of an Underlying Fund that is a mutualfund corporation) and received by the Top Fund has beenprovided to its security holders, the security holders havebeen permitted to direct a representative of the Top Fundto vote its holdings in the Underlying Fund in accordancewith their direction, and the representative of the TopFund has not voted its holdings in the Underlying Fundsexcept to the extent the security holders of the Top Fundhave directed;
(v) in addition to receiving the annualand, upon request, the semi-annual financial statementsof the Top Fund, security holders of the Top Fund have receivedappropriate summary disclosure in respect of the Top Fund'sholdings of securities of the Underlying Funds in the financialstatements of the Top Fund; and
(w) to the extent that the Top Fund andthe Underlying Funds do not use a combined simplified prospectusand annual information form containing disclosure aboutthe Top Fund and the Underlying Funds, copies of the simplifiedprospectus and annual information form of the UnderlyingFunds have been provided upon request to security holdersof the Top Fund and the right to receive these documentsis disclosed in the simplified prospectus of the Top Fund.
February 28, 2003.
"Robert W. Korthals" "RobertL. Shirriff"