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Ethical Funds Inc. - MRRS Decision
Headnote
Exemption from the requirement to deliver comparativeannual financial statements for the year-ending December 31,2002 to registered securityholders of certain mutual funds.
Statutes Cited
Securities Act (Ontario), R.S.O. 1990 c. S.5,as am., ss. 79 and 80(b)(iii).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ALBERTA, ONTARIO, QUEBEC,NOVA SCOTIA AND
NEWFOUNDLAND AND LABRADOR
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CREDENTIAL® SELECT BALANCEDPORTFOLIO, CREDENTIAL SELECT GROWTH PORTFOLIO, CREDENTIAL SELECTHIGH GROWTH PORTFOLIO, CREDENTIAL BALANCED PORTFOLIO, CREDENTIALGROWTH PORTFOLIO, CREDENTIAL EQUITY PORTFOLIO, ETHICAL®CANADIAN DIVIDEND FUND, ETHICAL US SPECIAL EQUITY FUND, ETHICALGLOBAL GROWTH FUND, ETHICAL INTERNATIONAL EQUITY FUND, ETHICALRSP INTERNATIONAL EQUITY FUND, ETHICAL EUROPEAN EQUITY FUND,ETHICAL RSP EUROPEAN EQUITY FUND, ETHICAL MONEY MARKET FUND,ETHICAL INCOME FUND, ETHICAL GLOBAL BOND FUND, ETHICAL BALANCEDFUND, ETHICAL CANADIAN EQUITY FUND, ETHICAL GROWTH FUND, ETHICALSPECIAL EQUITY FUND, ETHICAL NORTH AMERICAN EQUITY FUND, ETHICALRSP NORTH AMERICAN EQUITY FUND, ETHICAL GLOBAL EQUITY FUND,ETHICAL RSP GLOBAL EQUITY FUND AND ETHICAL PACIFIC RIM FUND
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Maker") in eachof the Provinces of Alberta, Ontario, Québec, Nova Scotiaand Newfoundland and Labrador (the "Jurisdictions")has received an application (the "Application") fromEthical Funds Inc. (the "Manager"), Credential®Select Balanced Portfolio, Credential Select Growth Portfolio,Credential Select High Growth Portfolio, Credential BalancedPortfolio, Credential Growth Portfolio, Credential Equity Portfolio(collectively, the "Credential Funds"), Ethical®Canadian Dividend Fund, Ethical US Special Equity Fund, EthicalGlobal Growth Fund, Ethical International Equity Fund, EthicalRSP International Equity Fund, Ethical European Equity Fund,Ethical RSP European Equity Fund (collectively, the "EthicalNew Funds"), Ethical Money Market Fund, Ethical IncomeFund, Ethical Global Bond Fund, Ethical Balanced Fund, EthicalCanadian Equity Fund, Ethical Growth Fund, Ethical Special EquityFund, Ethical North American Equity Fund, Ethical RSP NorthAmerican Equity Fund, Ethical Global Equity Fund, Ethical RSPGlobal Equity Fund and Ethical Pacific Rim Fund (collectively,the "Ethical Funds") and any mutual funds createdsubsequent to the date hereof that are managed by the Manager(the "Future Funds") (the Credential Funds, the EthicalNew Funds and the Ethical Funds collectively, the "Funds"and individually, a "Fund") for a decision pursuantto the securities legislation of certain of the Jurisdictions(the "Legislation") for relief from the requirementto deliver an annual report, where applicable and comparativeannual financial statements of the Funds to certain securityholdersof the Funds unless they have requested to receive them;
AND WHEREAS pursuant to 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 Québec Commission Notice 14-101;
AND WHEREAS it has been represented bythe Manager to the Decision Makers that:
(a) The Credential Funds and the EthicalNew Funds are open-ended mutual fund trusts establishedunder the laws of British Columbia. The Ethical Funds areopen-ended mutual fund trusts established under the lawsof Alberta, British Columbia, Saskatchewan and Ontario.
(b) The Manager is a corporation establishedunder the laws of Canada with its head office located inVancouver, British Columbia. The Manager is the trusteeand manager of the Funds. The Manager is registered as aportfolio manager in British Columbia.
(c) The Ethical Funds are reporting issuersin each of the Jurisdictions. The Credential Funds and EthicalNew Funds are reporting issuers in each of the Jurisdictions,except Quebec. The Funds are not in default of any requirementsof the Legislation.
(d) Units of the Ethical Funds are currentlyoffered for sale in each province of Canada and units ofthe Credential Funds and of the Ethical New Funds are offeredfor sale in each province of Canada, except Quebec, pursuantto a simplified prospectus. The current simplified prospectusis dated: (i) June 27, 2002 for units of the CredentialFunds; (ii) September 20, 2002 for units of the EthicalNew Funds and (iii) June 24, 2002 for units of the EthicalFunds
(e) Each of the Funds is required to deliverannually, within 140 days of its financial year-end, toeach registered securityholder, an annual report, whereapplicable and comparative financial statements in the prescribedform pursuant to the Legislation.
(f) The Manager proposes to send to securityholderswho hold securities registered in client name ("DirectSecurityholders"), either together with the relevantaccount statements or otherwise, a notice advising themthat they will not receive the annual report, where applicableand annual financial statements of the Funds for the yearthen ended unless they request same, and providing themwith a request form to send back, by fax or prepaid mail,if they wish to receive the annual report, where applicableand the annual financial statements. The notice will advisethe Direct Securityholders that the annual reports, whereapplicable and annual financial statements of the Fundsmay be found on the websites referred to in clause (h) anddownloaded. The Manager would send such financial statementsor an annual report containing such financial statementsto any Direct Securityholder who requests them in responseto such notice or who subsequently requests them by requeston a toll-free number.
(g) Securityholders who hold their securitiesin the Funds through a nominee will be dealt with pursuantto National Instrument 54-101. Securityholders who holdtheir securities in the Funds in client name with an entityother than the Manager will be sent the annual report, whereapplicable and annual financial statements of the Fundsin accordance with the Legislation.
(h) Securityholders will be able to accessthe annual report, where applicable and annual financialstatements of the Funds either on the SEDAR website or onthe relevant Fund Family's website: www.credential.com(in the case of the Credential Funds) and www.ethicalfunds.com(in the case of the Ethical Funds and the Ethical New Funds).The top five or ten holdings, as the case may be, will alsobe accessible via a toll-free phone line or the relevantFund Family's website, which are updated monthly, and whichinformation, in the case of the Ethical Funds, is disclosedin the simplified prospectus.
(i) There would be substantial cost savingsif the Funds are not required to print and mail annual report,where applicable and annual financial statements to thoseDirect Securityholders who do not want them.
(j) The Canadian Securities Administratorshave published for comment proposed National Instrument81-106 which, among other things, would permit mutual fundsnot to deliver annual financial statements to those of itssecurityholders who do not request them, if the Funds provideeach securityholder with a request form under which thesecurityholder may request, at no cost to the securityholder,to receive the mutual fund's annual financial statementsfor that financial year.
(k) Proposed National Instrument 81-106would also require a mutual fund to have a toll-free telephonenumber for, or accept collect calls from, persons or companiesthat want to receive a copy of, among other things, theannual financial statements of the mutual fund.
AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS each of the Decision Makersare 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 pursuantto the Legislation is that:
(i) the Funds; and
(ii) the Future Funds,
shall not be required to deliver their annualreport, where applicable and comparative annual financial statementsfor the year ending December 31, 2002 to their Direct Securityholdersother than those Direct Securityholders who have requested toreceive them provided that:
(a) the Manager shall file on SEDAR, underthe annual financial statements category, confirmation ofmailing of the request forms that have been sent to applicableDirect Securityholders as described in paragraph (f) abovewithin 90 days of mailing the request forms;
(b) the Manager shall file on SEDAR, underthe annual financial statements category, information regardingthe number and percentage of requests for the annual report,where applicable and annual financial statements made bythe return of the request forms, on a province-by-provincebasis within 30 days after the end of each quarterly periodbeginning from the time of mailing the request forms andending 12 months from the time of mailing;
(c) the Manager shall record the numberand a summary of complaints received from Direct Securityholdersabout not receiving the annual report, where applicableand annual financial statements and shall file on SEDAR,under the annual financial statements category, this informationwithin 30 days after the end of each quarterly period beginningfrom the time of mailing the request forms and ending 12months from the time of mailing;
(d) the Manager shall, if possible, measurethe number of "hits" on the annual report andannual financial statements of the relevant Funds on eachof the www.credential.com and www.ethicalfunds.comwebsites and shall file on SEDAR, under the annual financialstatements category, this information within 30 days afterthe end of each quarterly period beginning from the timeof mailing the request forms and ending 12 months from thetime of mailing; and
(e) the Manager shall file on SEDAR, underthe annual financial statements category, estimates of thecost savings resulting from the granting of this Decisionwithin 90 days of mailing the request forms.
March 17, 2003.
"Robert L. Shirriff" "MaryTheresa McLeod"