BlackRock Investments Canada Inc. et al.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from subsection 2.1(1) and paragraphs 2.5(2)(a) and (c) of NI 81-102 to permit exchange traded mutual funds and exchange traded commodity pools to enter into forward agreements providing exposure to the portfolio of a reference fund -- Reference funds may not be subject to NI 81-101 and NI 81-102, nor qualified for distribution in the same jurisdictions as the exchange traded mutual funds and commodity pools, contrary to paragraphs 2.5(2)(a) and (c) of NI 81-102 -- Exchange traded mutual funds and commodity pools prohibited by subsection 2.1(1) from being 100% exposed to the portfolio of the reference fund through the forward agreement -- Units of the reference fund sold only to the counterparty under the forward agreement on an exempt basis -- National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.1(1), 2.5(2)(a) and (c), 19.1.

April 17, 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

BLACKROCK INVESTMENTS CANADA INC.

(the Filer)

AND

IN THE MATTER OF

iSHARES ADVANTAGED CANADIAN BOND INDEX FUND,

iSHARES ADVANTAGED CONVERTIBLE BOND INDEX FUND,

iSHARES ADVANTAGED U.S. HIGH YIELD BOND INDEX FUND (CAD-HEDGED),

iSHARES ADVANTAGED SHORT DURATION HIGH INCOME FUND,

iSHARES GLOBAL MONTHLY ADVANTAGED DIVIDEND INDEX FUND,

iSHARES MANAGED FUTURES INDEX FUND AND

iSHARES BROAD COMMODITY INDEX FUND (CAD-HEDGED)

(collectively, the Funds)

DECISIONS

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) granting exemptive relief (the Exemption Sought) from sections 2.1(1), 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 -- Mutual Funds (NI 81-102), in respect of one or more forward purchase and sale agreements providing each Fund with exposure to the portfolio of another mutual fund (each, a Reference Fund). The Reference Fund of each Fund is set forth in the following table.

Fund

Reference Fund

iShares Advantaged Canadian Bond Index Fund

Claymore Canadian Bond Fund

 

iShares Advantaged Convertible Bond Index Fund

Claymore Convertible Bond Fund

 

iShares Advantaged U.S. High Yield Bond Index Fund (CAD-Hedged)

Claymore High Yield Bond Fund

 

iShares Advantaged Short Duration High Income Fund

Claymore Short Duration High Income Fund

 

iShares Global Monthly Advantaged Dividend Index Fund

Claymore Global Dividend Fund

 

iShares Managed Futures Index Fund

Claymore Managed Futures Fund

 

iShares Broad Commodity Index Fund (CAD-Hedged)

Claymore Broad Commodity Fund

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

(a) the Ontario Securities Commission is the principal regulator for this 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, Yukon, Northwest Territories and Nunavut (collectively, the Passport Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used 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 amalgamated under the Business Corporations Act (Alberta) and is the manager, trustee and investment advisor of the Funds and the Reference Funds. The head office of the Filer is located in Toronto, Ontario. The Filer is registered as an investment fund manager, a portfolio manager and an exempt market dealer under the Securities Act (Ontario).

2. Each of iShares Advantaged Canadian Bond Index Fund, iShares Advantaged Convertible Bond Index Fund, iShares Advantaged U.S. High Yield Bond Index Fund (CAD-Hedged), iShares Advantaged Short Duration High Income Fund and iShares Global Monthly Advantaged Dividend Index Fund is organized as a trust and is a mutual fund within the meaning of the Legislation and similar legislation in each Passport Jurisdiction. Each such Fund is subject to NI 81-102, subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities.

3. Each of iShares Managed Futures Index Fund and iShares Broad Commodity Index Fund (CAD-Hedged) is organized as a trust and is a commodity pool within the meaning of the Legislation and similar legislation in each Passport Jurisdiction. Each such Fund is subject to NI 81-102, subject to any exemptions therefrom set forth in National Instrument 81-104 -- Commodity Pools (NI 81-104) or that have been, or may in the future be, granted by the securities regulatory authorities.

4. Each Fund is a reporting issuer in the Province of Ontario and each Passport Jurisdiction.

5. Each Fund is, and is generally described as, an exchange-traded fund. The units of each Fund are listed on the Toronto Stock Exchange.

6. Currently, each Fund seeks to achieve its investment objectives by obtaining exposure to the returns on the portfolio which are or may in the future be held by its Reference Fund, except for iShares Global Monthly Advantaged Dividend Index Fund, which intends to adopt this investment strategy. Each Fund gains, or will gain, exposure to the portfolio of its Reference Fund through one or more forward purchase and sale agreements (collectively, the Forward Agreement) with one or more counterparties (collectively, the Counterparty) with an approved credit rating, as defined in NI 81-102. Generally, the Forward Agreement provides 100% exposure to the portfolio of the Reference Fund such that the returns to the Fund and its unitholders are based upon the return of the portfolio of the Reference Fund.

7. The investment objectives and strategies of each Reference Fund are consistent with its Fund's investment objectives.

8. Each Reference Fund is organized as a trust and will file with the Autorité des marchés financiers a preliminary non-offering prospectus. Upon the issuance of a receipt for its final non-offering prospectus, each Reference Fund will become a reporting issuer in the Province of Québec.

9. No Reference Fund intends to list its units on a stock exchange. Units of each Reference Fund will only be offered in reliance on exemptions from the applicable prospectus requirements. The current holder of units of each Reference Fund (other than Claymore Global Dividend Fund) is the Counterparty to the Forward Agreement with the corresponding Fund. The only expected holder of units of Claymore Global Dividend Fund will be the Counterparty to the Forward Agreement with its corresponding Fund, iShares Global Monthly Advantaged Dividend Index Fund.

10. Each Reference Fund is a mutual fund within the meaning of the Legislation and similar legislation in each Passport Jurisdiction because the holder of its units is entitled to receive, on demand, an amount computed by reference to the net asset value of the Reference Fund.

11. Each of Claymore Managed Futures Fund and Claymore Broad Commodity Fund is a commodity pool within the meaning of NI 81-104 because it has adopted investment objectives that permit it to use or invest in specified derivatives in a manner that is not permitted by NI 81-102.

12. No Reference Fund will distribute any units under its final non-offering prospectus. Accordingly, each Reference Fund will be a mutual fund to which National Instrument 81-106 -- Investment Fund Continuous Disclosure (NI 81-106) applies, but will not be subject to the requirements of either National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101) or NI 81-102.

13. Each of Claymore Canadian Bond Fund, Claymore Convertible Bond Fund, Claymore High Yield Bond Fund, Claymore Short Duration High Income Fund and Claymore Global Dividend Fund only makes investments as if it were subject to NI 81-102 and subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities to iShares Advantaged Canadian Bond Index Fund, iShares Advantaged Convertible Bond Index Fund, iShares Advantaged U.S. High Yield Bond Index Fund (CAD-Hedged), iShares Advantaged Short Duration High Income Fund and iShares Global Monthly Advantaged Dividend Index Fund, respectively.

14. Each of Claymore Managed Futures Fund and Claymore Broad Commodity Fund only makes investments as if it were subject to NI 81-102, to the extent the investment restrictions in NI 81-102 are applicable to commodity pools subject to NI 81-104 and subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities to iShares Managed Futures Index Fund and iShares Broad Commodity Index Fund (CAD-Hedged), respectively.

15. None of the Filer or the Funds is in default of any of its obligations under the Legislation or similar legislation in any Passport Jurisdiction, except in respect of the Exemption Sought by the Funds (other than iShares Global Monthly Advantaged Dividend Index Fund), which Funds inadvertently did not seek exemptive relief in connection with the Forward Agreements entered into by them.

16. In the absence of the Exemption Sought, a Fund would not be permitted to invest through the Forward Agreement in its Reference Fund because the Reference Funds are not subject to NI 81-101 or NI 81-102 and their securities are not qualified for distribution in the Province of Ontario and the Passport Jurisdictions, contrary to the requirements of sections 2.1(1), 2.5(2)(a) and 2.5(2)(c) of NI 81-102.

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 exposure of each Fund to the portfolio of its Reference Fund is in accordance with the fundamental investment objectives of the Fund;

(b) The indirect investment by each Fund in securities of its Reference Fund is made in compliance with the requirements of NI 81-102 other than the requirements of sections 2.1(1), 2.5(2)(a) and 2.5(2)(c) of NI 81-102;

(c) Each Reference Fund is a reporting issuer in Quebec subject to the requirements of NI 81-106;

(d) Each Fund is subject to NI 81-102 or NI 81-104, as applicable, and each Reference Fund operates in accordance with NI 81-102 or NI 81-104, as applicable;

(e) The prospectus of each Fund discloses that such Fund will obtain exposure to securities of its Reference Fund and, to the extent applicable, the risks associated with such an investment; and

(f) No securities of a Reference Fund are distributed in Canada other than to the Counterparty under its Forward Agreement.

"Raymond Chan"
Manager, Investment Funds
Ontario Securities Commission