Securities Law & Instruments

Headnote

Exemption granted from mutual fund conflict of interest investment restrictions in paragraphs 111(2)(b) and 111(3) to permit pooled funds to purchase and hold securities of other pooled funds managed by the same manager.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(3), 113.

June 15, 2007

IN THE MATTER OF

THE SECURITIES ACT, R.S.O. 1990, c. S.5,

AS AMENDED

(the "Act")

AND

IN THE MATTER OF

MCLEAN & PARTNERS

WEALTH MANAGEMENT LTD. (the "Filer")

AND

MCLEAN & PARTNERS PRIVATE

GLOBAL BALANCED POOL,

MCLEAN & PARTNERS PRIVATE

GLOBAL DIVIDEND GROWTH POOL,

MCLEAN & PARTNERS PRIVATE

INTERNATIONAL EQUITY POOL

(collectively, the "McLean Pooled Funds")

 

ORDER

(Section 113 of the Act)

Background

The Ontario Securities Commission (the "Commission") has received an application from the Filer on behalf of the McLean Pooled Funds and such other mutual funds the Filer may establish and manage from time to time (together with the McLean Pooled Funds, the "Pooled Funds") for an Order under section 113 of the Act exempting the Pooled Funds from the investment restrictions in paragraph 111(2)(b) and subsection 111(3) of the Act which prohibit a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder (the "Requested Relief").

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this Order unless they are defined in this Order.

Representations

This Order is based on the following facts represented by the Filer on behalf of the Pooled Funds:

1. The Filer is a corporation incorporated under the laws of the Province of Alberta. The head office and principal place of business of the Filer is located in Calgary, Alberta.

2. The Filer is registered with the Commission under the Act as an investment dealer (including managed accounts) and is a member of the Investment Dealers Association of Canada. The Filer is not a reporting issuer in Ontario.

3. The McLean Pooled Funds were established under the laws of the Province of Ontario by way of a Declaration of Trust dated March 30, 2007. CIBC Mellon Trust Company, a trust company existing under the laws of Canada, will act as trustee of the McLean Pooled Funds.

4. Each of the Pooled Funds is or will be a "mutual fund" and a "mutual fund in Ontario" as defined in the Act, but will not be a reporting issuer in Ontario or any other jurisdiction of Canada.

5. The Filer is, or will be, the manager, principal distributor and portfolio adviser of the Pooled Funds. The Filer is responsible for the day-to-day administrative management of the Pooled Funds and the management of the investment portfolios of the Pooled Funds under the terms of a Pooled Fund Trust Agreement dated March 30, 2007, as it may be amended from time to time.

6. The Filer may appoint various sub-advisers (each a "Sub-Adviser" and collectively the "Sub-Advisers") to assist in the management of the investment portfolios of any of the Pooled Funds.

7. The Filer may delegate some or all of its portfolio management responsibilities in respect of any of the Pooled Funds to Sub-Advisers selected by the Filer under the terms of various investment sub-adviser agreements to be entered into between each Sub-Adviser and the Filer.

8. The Filer intends to cause certain of the Pooled Funds to make investments in units of other Pooled Funds. In this Order, each Pooled Fund that invests in units of another Pooled Fund is referred to as a "Top Fund" and the Pooled Fund that a Top Fund invests in is referred to as an "Underlying Fund".

9. The Pooled Funds will not be reporting issuers in any jurisdiction in Canada and, to the knowledge of the Filer, none of the Pooled Funds are, nor is it anticipated that they will be, in default of any requirements under the Act.

10. The investment objectives of the McLean Pooled Funds are as follows:

(a) McLean & Partners Private Global Balanced Pool

The investment objective of the fund is to provide superior returns through capital appreciation and income by investing in equity securities of companies that have a history of dividend growth, growth-oriented companies that may pay dividends and in fixed income securities anywhere in the world.

(b) McLean & Partners Private Global Dividend Growth Pool

The investment objective of the fund is to provide superior returns through capital appreciation and dividend income by investing primarily in equity securities of companies anywhere in the world that have a history of dividend growth and also by investing in growth-oriented companies anywhere in the world that may pay dividends.

(c) McLean & Partners Private International Equity Pool

The investment objective of the fund is to provide superior returns through capital appreciation and dividend income by investing primarily in equity securities of companies that have a history of dividend growth and also by investing in growth oriented companies that may pay dividends. The Fund invests in companies anywhere in the world except Canada and the United States.

As part of its investment strategy, McLean & Partners Private Global Balanced Pool may invest up to 70% of the equity portion of its assets in units of McLean & Partners Global Dividend Growth Pool.

11. Units of the Pooled Funds are or will be sold solely in Canada's private placement markets pursuant to exemptions from the prospectus requirements in accordance with National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106"). The Pooled Funds are not reporting issuers in the Province of Ontario and are not in default under the Act.

12. A Top Fund would be a "substantial securityholder" in an Underlying Fund pursuant to section 110(2)(b) of the Act if at any time a Top Fund, alone or together with one or more related Top Funds, held more than 20% of the outstanding units of an Underlying Fund.

13. The amounts invested from time to time in an Underlying Fund by one or more Top Funds may exceed 20% of the outstanding voting securities of that Underlying Fund.

14. A Top Fund and an Underlying Fund are related issuers by virtue of the common management of such funds by the Filer.

15. An offering memorandum in respect of the Pooled Funds will be prepared and will be made available to investors in those funds.

16. In connection with the purchase by a Top Fund of securities of an Underlying Fund (the "Fund-on-Fund Structure"), the Filer shall ensure that

(a) no management or incentive fees are payable by a Top Fund that, to a reasonable person, would duplicate a fee payable by the Underlying Fund for the same service;

(b) no sales or redemption fees are payable by a Top Fund in relation to its purchases or redemptions of securities of the Underlying Fund that, to a reasonable person, would duplicate a fee payable by an investor in the Top Fund;

(c) the Filer does not vote the securities of the Underlying Funds that are held by a Top Fund;

(d) the offering memorandum of a Top Fund will disclose:

(i) that the Top Fund may purchase securities of the Underlying Funds;

(ii) the fact that both the Top Fund and the Underlying Funds are managed by the Filer; and

(iii) the approximate or maximum percentage of net assets of the Top Fund that is dedicated to the investment in securities of the Underlying Funds;

(e) upon request and if available, an investor in a Top Fund will receive a copy of the offering memorandum of the Underlying Fund prior to subscribing for units of the Top Fund, and the availability of that offering memorandum and the method by which it may be requested will be disclosed in the offering memorandum of the Top Fund;

(f) upon request, an investor in a Top Fund will be provided with the annual and interim financial statements of the Underlying Fund, and the method by which these financial statements may be requested will be disclosed in the offering memorandum of the Top Fund; and

(g) any investment by a Top Fund in securities of the Underlying Fund is compatible with the Top Fund's investment objectives.

17. In the absence of the Requested Relief, each Top Fund would be precluded from implementing the Fund-on-Fund Structure due to the investment restrictions contained in paragraph 111(2)(b) and subsection 111(3) of the Act.

18. The Fund-on-Fund Structure represents the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Pooled Funds.

Decision

The Commission is satisfied that the test contained in section 113 of the Act has been met.

The Commission orders that the Requested Relief is granted to the Pooled Funds in connection with the Fund-on-Fund Structure provided that:

1. units of the Pooled Funds are sold solely in Canada pursuant to exemptions from the prospectus requirements in accordance with NI 45-106;

2. no management or incentive fees are payable by a Top Fund that, to a reasonable person, would duplicate a fee payable by the Underlying Fund for the same service;

3. no sales or redemption fees are payable by a Top Fund in relation to its purchases or redemptions of securities of the Underlying Fund that, to a reasonable person, would duplicate a fee payable by an investor in the Top Fund;

4. The Filer does not vote the securities of the Underlying Funds that are held by a Top Fund; and

5. The offering memorandum of a Top Fund will disclose:

(i) that the Top Fund may purchase securities of the Underlying Funds;

(ii) the fact that both the Top Fund and the Underlying Funds are managed by the Filer; and

(iii) the approximate or maximum percentage of net assets of the Top Fund that is dedicated to the investment in securities of the Underlying Funds.

"Robert L. Shirriff"
Commissioner
Ontario Securities Commission
 
"Suresh Thakrar"
Commissioner
Ontario Securities Commission