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Elliot & Page Limited - MRRS Decision
Headnote
Exemptions from the mutual fund self-dealingprohibitions of clauses 111(2)(a), 111(3) and 118(2)(a) of theSecurities Act (Ontario). Mutual funds allowed to make purchasesand sales of the securities of Manulife Financial Corporationand in certain circumstances SEAMARK Asset Management Inc. relatedcompanies of the manager and advisors of the mutual funds, andto retain those securities provided that a fund governance mechanismis used to oversee the holdings, purchases or sales of thesesecurities for the mutual funds and to ensure that such holdings,purchases or sales have been made free from any influence bythese related companies and without taking into account anyconsideration relevant to these related companies.
Statutes Cited
Securities Act (Ontario), R.S.O. 1990 c. S.5,as am., 111(2)(a), 111(3), and 118(2)(a).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,
ONTARIO, QUEBEC, NOVA SCOTIAAND
NEWFOUNDLAND AND LABRADOR
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ELLIOTT & PAGE LIMITED("EPL")
ELLIOTT & PAGE ACTIVEBOND FUND
ELLIOTT & PAGE MONEY FUND
ELLIOTT & PAGE MONTHLYHIGH INCOME FUND
ELLIOTT & PAGE BALANCEDFUND
ELLIOTT & PAGE GROWTH& INCOME FUND
ELLIOTT & PAGE VALUE EQUITYFUND
ELLIOTT & PAGE CANADIANEQUITY FUND
ELLIOTT & PAGE GENERATIONWAVE FUND
ELLIOTT & PAGE BLUE CHIPFUND
ELLIOTT & PAGE SECTORROTATION FUND
ELLIOTT & PAGE GROWTHOPPORTUNITIES FUND
ELLIOTT & PAGE AMERICANGROWTH FUND
ELLIOTT & PAGE U.S. MID-CAPFUND
ELLIOTT & PAGE INTERNATIONALEQUITY FUND
ELLIOTT & PAGE TOTAL EQUITYFUND
ELLIOTT & PAGE GLOBALMULTISTYLE FUND
ELLIOTT & PAGE GLOBALSECTOR FUND
ELLIOTT & PAGE ASIAN GROWTHFUND
ELLIOTT & PAGE RSP AMERICANGROWTH FUND
ELLIOTT & PAGE RSP U.S.MID-CAP FUND
ELLIOTT & PAGE RSP TOTALEQUITY FUND
(collectively, the "TrustFunds")
MIX AIM AMERICAN MID-CAP GROWTHCLASS
MIX AIM CANADIAN FIRST CLASS
MIX ELLIOTT & PAGE GROWTHOPPORTUNITIES CLASS
MIX ELLIOTT & PAGE U.S.MID-CAP CLASS
MIX F.I. CANADIAN DISCIPLINEDEQUITY CLASS
MIX F.I. GROWTH AMERICA CLASS
MIX F.I. INTERNATIONAL PORTFOLIOCLASS
MIX SEAMARK TOTAL CANADIANEQUITY CLASS
MIX SEAMARK TOTAL GLOBAL EQUITYCLASS
MIX SEAMARK TOTAL U.S. EQUITYCLASS
MIX TRIMARK GLOBAL CLASS
MIX TRIMARK SELECT CANADIANCLASS
MIX SHORT TERM YIELD CLASS
MIX CANADIAN EQUITY VALUECLASS
MIX CANADIAN LARGE CAP CORECLASS
MIX CANADIAN LARGE CAP GROWTHCLASS
MIX CANADIAN LARGE CAP VALUECLASS
MIX GLOBAL EQUITY CLASS
MIX GLOBAL SECTOR CLASS
MIX GLOBAL VALUE CLASS
MIX INTERNATIONAL GROWTH CLASS
MIX INTERNATIONAL VALUE CLASS
MIX JAPANESE CLASS
MIX U.S. LARGE CAP CORE CLASS
MIX U.S. LARGE CAP GROWTHCLASS
MIX U.S. LARGE CAP VALUE CLASS
MIX U.S. MID-CAP VALUE CLASS
(collectively, the CorporateFunds")
ELLIOTT & PAGE POOLEDCANADIAN EQUITY FUND
ELLIOTT & PAGE POOLEDU.S. EQUITY FUND
ELLIOTT & PAGE POOLEDBOND FUND
ELLIOTT & PAGE POOLEDBALANCED FUND
ELLIOTT & PAGE POOLEDCORPORATE BOND FUND
ELLIOTT & PAGE POOLEDSHORT-TERM FUND
(collectively, the "PooledFunds")
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, Alberta, British Columbia, Saskatchewan, Quebec,Nova Scotia and Newfoundland and Labrador (the "Jurisdictions")has received an application from Elliott & Page Limitedfor a decision under the securities legislation of the Jurisdictions(the "Legislation") that the following provisions,where applicable, do not apply so as to prevent the Trust Funds,the Corporate Funds, the Pooled Funds and such other funds asmay be managed or advised by Elliott & Page Limited or anaffiliate or division thereof ("EPL") from time totime (collectively with the Trust Funds, the Pooled Funds andthe Corporate Funds, the "Funds") from investing in,or continuing to hold an investment in, securities of the RelatedCompanies (as hereinafter defined):
(a) the provision prohibiting a mutual fundfrom knowingly making or holding an investment in any personor company who is a substantial security holder of the mutualfund, its management company or distribution company;
(b) the provision prohibiting a mutual fundfrom knowingly making or holding an investment in an issuerin which a substantial security holder of the mutual fund,its management company or its distribution company has asignificant interest; and
(c) the provision prohibiting a portfoliomanager (or in the case of the Securities Act (BritishColumbia), the mutual fund or responsible person) from knowinglycausing any portfolio managed by it to invest in any issuerin which a responsible person or an associate of a responsibleperson is an officer or director unless the specific factis disclosed to the client and the written consent of theclient to the investment is obtained before the purchase(the provisions of (a), (b) and (c) being collectively,the "Investment Restrictions");
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 or in Quebec Commission Statement 14-101;
AND WHEREAS it has been represented byEPL to the Decision Makers that:
1. EPL is a corporation incorporated underthe laws of Ontario with its registered office located inToronto, Ontario. In 1982, EPL was acquired by North AmericanLife Assurance Company, which is now The Manufacturers LifeInsurance Company ("MLIC"). Manulife Financial Corporation("Manulife") holds all of the outstanding sharesof MLIC and therefore, EPL is an indirect wholly-owned subsidiaryof Manulife.
2. Since its inception, EPL has been registeredas an adviser in the categories of investment counsel andportfolio manager under the Securities Act Ontario(the "Act"). By way of an amendment to its registrationin 1984, EPL also obtained registration as a mutual fund dealerunder the Act.
3. EPL is the manager, trustee and promoterof the Trust Funds and the Pooled Funds and the manager andpromoter of the Corporate Funds.
4. Advisor Class, Class F and Class I unitsof the Trust Funds are offered for sale continuously to thepublic in each of the provinces and territories of Canadapursuant to a combined simplified prospectus and annual informationform dated August 28, 2002. Each of the Trust Funds is a reportingissuer under the Act and is not on the list of defaultingissuers maintained under the Act.
5. Units of the Pooled Funds are sold to institutionalinvestors on an exempt basis.
6. Advisor Series and Series F shares of theCorporate Funds are offered for sale continuously to the publicin each of the provinces and territories of Canada pursuantto a combined simplified prospectus and annual informationform dated October 29, 2002. Each of the Corporate Funds isa reporting issuer under the Act and is not on the list ofdefaulting issuers maintained under the Act.
7. EPL is or will be the primary portfolioadvisor for each Fund. EPL also hires or will hire sub-advisorsto provide investment advice for certain Funds. The individualinvestment sub-advisor for each Fund is or will be listedin the prospectus or other offering document offering eachFund.
8. Manulife, the indirect parent company ofEPL, is one of the leading life insurance based financialservices organizations in Canada. Its wealth management productofferings include individual investment and banking products,annuities, group pension products, segregated funds and mutualfunds.
9. SEAMARK Asset Management Ltd. ("SEAMARK",collectively with Manulife, the "Related Companies")currently acts as a portfolio sub-advisor to Elliott &Page Growth & Income Fund, Elliott & Page InternationalEquity Fund, Elliott & Page Total Equity Fund, Elliott& Page RSP Total Equity Fund, MIX SEAMARK Total CanadianEquity Class, MIX SEAMARK Total Global Equity Class and MIXSEAMARK Total U.S. Equity Class and may in the future actas a portfolio sub-advisor to other Funds (collectively, the"SEAMARK-Advised Funds"). SEAMARK is an investmentcounsel and portfolio management firm which is publicly tradedand, of which, Manulife holds 35% of the voting securities.SEAMARK provides investment management services to a broadrange of clients including institutional clients, retail mutualfunds and high net worth private clients. SEAMARK is one ofthe fastest growing investment management firms in Canada.
10. The Funds have not made any investmentin securities of the Related Companies.
11. EPL believes that it would be in the bestinterests of investors in the SEAMARK-Advised Funds for suchFunds to be permitted to invest in securities of Manulife,in keeping with the investment objectives of the SEAMARK-AdvisedFunds, though only up to the limits allowed by applicablelegislation. EPL also believes that it would be in the bestinterests of investors in the Funds, other than the SEAMARK-AdvisedFunds, for the Funds to be permitted to invest in securitiesof the Related Companies, in keeping with the investment objectivesof the Funds, though only up to the limits allowed by applicablelegislation.
12. Although a number of directors and officersof EPL are also officers and directors of the Related Companies("Related Officers and Directors"), these individualsdo not participate in the formulation of, or generally haveaccess prior to implementation to, the day to day investmentdecisions made on behalf of the Funds. All officers and directorsof a Related Company are non-trading officers of EPL and assuch do not provide investment advice. Furthermore, no tradingofficer of EPL who makes trades on behalf of the Funds isunder the direction of an officer or director of a RelatedCompany in respect of investments by the Funds in a RelatedCompany.
13. All Related Officers and Directors whohave access to material information in relation to Manulifeand SEAMARK that has not been generally disclosed (an "AccessPerson") is subject to Manulife's written policy andthe IFIC Code of Ethics which prohibits Access Persons fromengaging in any trading in securities of the Related Companieswhile the trading window is closed or while the Access Personis in possession of undisclosed material information in relationto the Related Companies.
14. EPL will establish a 3-member independentreview committee (the "Independent Committee") tooversee investments by the Funds in securities of the RelatedCompanies. The Independent Committee will be comprised entirelyof individuals who are wholly independent of EPL, Manulife,and SEAMARK. No member of the Independent Committee will bean officer or director of EPL, or an associate or employee,of EPL, of any portfolio manager of a Fund, or of any associateor affiliate of EPL or the portfolio managers of the Funds.
15. The duties and obligations of the IndependentCommittee will include the following:
(a) to oversee the holdings, purchases,and sales by the Funds of securities of Related Companies;
(b) to examine the investment decisionsof each Fund's portfolio manager to ensure that such decisionsare in the best interest of the Fund's investors;
(c) in instances where the portfolio managerof a Fund is determined to not have acted in the best interestof the Fund's investors, to recommend or require that actionsbe taken to rectify the situation within a specific timeframe; and
(d) from time to time, as necessary, todevelop guidelines for the portfolio manager of a Fund tofollow with respect to investments by the Fund in RelatedCompanies.
16. The Independent Committee shall reviewthe holdings, purchases or sales of securities of the RelatedCompanies to ensure that they have been made free from anyinfluence by a Related Company and without taking into accountany consideration relevant to a Related Company.
17. The Independent Committee will take intoconsideration the best interests of securityholders of theFunds and no other factors.
18. The compensation to be paid to membersof the Independent Committee will be paid on a per meetingbasis and will be allocated among the Funds in a manner thatis considered by the Independent Committee to be fair andreasonable to the Funds.
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:
1. the Funds, other than the SEAMARK-AdvisedFunds, are exempt from the Investment Restrictions so as toenable the Funds, and EPL to cause the Funds, to invest, orcontinue to hold an investment in, securities of a RelatedCompany;
2. the SEAMARK-Advised Funds are exempt fromthe Investment Restrictions so as to enable the SEAMARK-AdvisedFunds, and EPL to cause the SEAMARK-Advised Funds, to invest,or continue to hold an investment in, securities of Manulife;and
3. this 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 mutual fund governance in a manner thatconflicts with or makes inapplicable any provision of thisDecision;
provided that:
(a) EPL has appointed the Independent Committeeto review the Funds' purchases, sales and continued holdingsof securities of a Related Company;
(b) the Independent Committee has at leastthree members, none of whom is an associate or employeeof (i) EPL, (ii) any portfolio manager of the Funds; or(iii) any associate or affiliate of EPL, Manulife, or theportfolio managers of the Funds;
(c) the Independent Committee has a writtenmandate describing its duties and standard of care which,as a minimum, sets out the conditions of this Decision;
(d) the members of the Independent Committeeexercise their powers and discharge their duties honestly,in good faith and in the best interests of investors inthe Funds and, in doing so, exercise the degree of care,diligence and skill that a reasonably prudent person wouldexercise in the circumstances;
(e) none of the Funds relieves the membersof the Independent Committee from liability for loss thatarises out of a failure to satisfy the standard of careset out in paragraph (d);
(f) none of the Funds indemnifies the membersof the Independent Committee against legal fees, judgmentsand amounts paid in settlement as a result of a breach ofthe standard of care set out in paragraph (d);
(g) none of the Funds incurs the cost ofany portion of liability insurance that insures a memberof the Independent Committee for a liability for loss thatarises out of a failure to satisfy the standard of careset out in paragraph (d);
(h) the cost of any indemnification or insurancecoverage paid for by EPL, any portfolio manager of the Funds,or any associate or affiliate of EPL or the portfolio managersof the Funds to indemnify or insure the members of the IndependentCommittee in respect of a loss that arises out of a failureto satisfy the standard of care set out in paragraph (d)is not paid either directly or indirectly by the Funds;
(i) the Independent Committee reviews theFunds' purchases, sales and continued holdings of securitiesof a Related Company on a regular basis, but not less frequentlythan every three months;
(j) the Independent Committee forms theopinion at any time, after reasonable inquiry, that thedecisions made on behalf of each Fund by EPL or the Fund'sportfolio manager to purchase, sell or continue to holdsecurities of a Related Company were and continue to bein the best interests of the Fund, and:
(i) represent the business judgement ofEPL or the Fund's portfolio manager, uninfluenced by considerationsother than the best interests of the Fund;
(ii) have been made free from any influenceby a Related Company and without taking into account anyconsideration relevant to a Related Company; and
(iii) do not exceed the limitations ofthe applicable legislation.
(k) the determination made by the IndependentCommittee pursuant to paragraph (j) is included in detailedwritten minutes provided to EPL not less frequently thanevery three months;
(l) the reports required to be filed pursuantto the Legislation with respect to every purchase and saleof securities of a Related Company are filed on SEDAR inrespect of the relevant Fund;
(m) the Independent Committee advises theDecision Makers in writing of:
(i) any determination by it that the conditionset out in paragraph (j) has not been satisfied with respectto any purchase, sale or holding of securities of a RelatedCompany;
(ii) any determination by it that anyother condition of this Decision has not been satisfied;
(iii) any action it has taken or proposesto take following the determinations referred to above;and
(iv) any action taken, or proposed tobe taken, by EPL or a portfolio manager of the Funds inresponse to the determinations referred to above; and
(n) the existence, purpose, duties and obligationsof the Independent Committee, the names of its members,whether and how they are compensated by the Funds, and thefact that they meet the requirements of the condition setout in paragraph (b) are disclosed:
(i) in a press release issued, and a materialchange report filed, prior to reliance on the Decision;
(ii) in item 12 of Part A of the simplifiedprospectus of the Funds; and
(iii) on EPL's internet website.
December 19, 2002.
"Theresa McLeod" "R.L. Shirriff"