Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from the requirements contained in subsection 2.1(1) and in paragraph 2.5(2)(a) of National Instrument 81-102 and revocation of a prior exemptive relief.

Applicable Legislative Provisions

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

[Translation]

August 9, 2013


IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
FIERA CAPITAL CORPORATION
(the Filer)

AND

IN THE MATTER OF
FIERA TACTICAL BOND YIELD FUND
(the Fund)

DECISION



Background

The securities regulatory authority or regulator in each of the Jurisdictions (theDecision Maker) has received an application from the Filer on behalf of the Fund for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption under section 19.1 of Regulation 81-102 respecting Mutual Funds (c. V-1.1, r. 39) (Regulation 81-102) from the requirements in subsection 2.1(1) and paragraph 2.5(2)(a) of Regulation 81-102 in order to permit the Fund to invest directly, or indirectly through the use of specified derivatives, in securities of Fiera Tactical Bond Yield Fund II (formerly, Fiera Tactical Bond Fund) (the Reference Fund) (the Exemption Sought).

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

a) the Autorité des marchés financiers is the principal regulator for this application;

b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System (c. V-1.1, r. 1) (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon; and

c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions (c. V-1.1, r. 3), Regulation 11-102 and Regulation 81-102 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:

The Filer

1. The Filer is a corporation incorporated under the Business Corporations Act (R.S.O. 1990, c. B.16) of Ontario.

2. The Filer's head office is located at 1501 McGill College Avenue, suite 800, Montréal, Québec, Canada, H3A 3M8.

3. The Filer is the investment fund manager, portfolio manager and promoter of the Fund and the Reference Fund.

4. The Filer is duly registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador. The Filer is also duly registered in all jurisdictions of Canada as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer. In addition, the Filer is duly registered in Québec as a derivatives portfolio manager pursuant to the Derivatives Act (c. I-14.01), in Ontario as a commodity trading manager pursuant to the Commodity Futures Act (R.S.O. 1990, c. C.20) of Ontario and in Manitoba as adviser pursuant to the Commodity Futures Act (CCSM c. C152) of Manitoba.

5. The Filer is not in default of securities legislation in any jurisdiction of Canada.

The Fund

6. The Fund (formerly, Fiera Sceptre Tactical Bond Yield Fund) is an open-ended investment trust established under the laws of Ontario pursuant to an amended and restated trust agreement dated April 26, 2011, as amended (the Trust Agreement). RBC Investor Services Trust acts as trustee.

7. The Fund is a reporting issuer under the securities legislation of each jurisdiction of Canada.

8. The Fund is a mutual fund subject to Regulation 81-102 and a commodity pool, as defined in section 1.1 of Regulation 81-104 respecting Commodity Pools (c. V-1.1, r. 40) (Regulation 81-104), since the Fund has adopted fundamental investment objectives that permit the Fund to use specified derivatives in a manner that is not permitted by Regulation 81-102.

9. From June 15, 2011 to April 8, 2013, the Fund distributed its Class A and Class F units under a prospectus governed by Regulation 41-101 respecting General Prospectus Requirements (c. V-1.1, r. 14) (Regulation 41-101) in all jurisdictions of Canada.

10. The Fund's investment objective is to generate a moderate level of current income and capital appreciation in all market environments with minimal correlation to traditional forms of fixed income and equity investments primarily through exposure to fixed income securities. The Fund aims at providing its unitholders with enhanced diversification and an improved risk/reward profile compared to conventional fixed income portfolios.

11. To pursue its investment objective, the Fund obtains exposure to the returns of the Reference Fund by using a forward contract (the Forward Contract) with the Canadian Imperial Bank of Commerce whose long-term debt has a designated rating. Generally, the Fund seeks to obtain an exposure to the Reference Fund that corresponds approximately to 100% of its net asset value. Accordingly, the return of the Fund will depend on the return of the Reference Fund by virtue of the Forward Contract. The Fund may also purchase units of the Reference Fund where the Filer is of the opinion that it would be more efficient to do so.

12. Through the use of the Forward Contract, the Fund characterizes the economic return of the Reference Fund as capital gains; such return would otherwise be treated as ordinary income in the hands of a unitholder.

13. The settlement date of the Forward Contract is August 17, 2016.

14. On April 8, 2013, the Fund ceased to offer the Units further to the publication of the 2013 Federal Budget. In conjunction with the 2013 Federal Budget announced on March 21, 2013, the Department of Finance (Canada) released a Notice of Ways and Means Motions containing proposed amendments to the ITA that, if enacted, would limit the ability of the Fund to use the Forward Contract to convert fully-taxable ordinary income into capital gains for tax purposes.

15. On August 2, 2013, further to the publication of a document entitled Backgrounder: Proposed Technical Changes to the Transitional Rules for the Economic Action Plan 2013 Character Conversion Measure, the Fund has filed with each jurisdiction of Canada a preliminary prospectus governed by Regulation 41-101.

16. According to the Trust Agreement, the net asset value of the Fund is calculated on each day on which the Toronto Stock Exchange is open for trading and such other day or days as determined from time to time by the Filer.

17. The Fund is not in default of securities legislation in any jurisdiction of Canada.

The Reference Fund

18. The Reference Fund is an open-ended investment trust established under the laws of Ontario pursuant to the Trust Agreement. RBC Investor Services Trust acts as trustee.

19. On June 15, 2011, the Reference Fund became a reporting issuer under the securities legislation of Québec pursuant to the receipt of a prospectus filed by the Reference Fund for the sole purpose of becoming a reporting issuer.

20. On May 14, 2013, the Reference Fund filed with each jurisdiction of Canada a preliminary prospectus governed by Regulation 41-101 in order to proceed with an initial public offering. It is expected that the Reference Fund will become a reporting issuer in all jurisdictions of Canada upon the issuance of a receipt for its final prospectus (the Final Prospectus).

21. The Reference Fund is a mutual fund and; upon issuance of a receipt for the Final Prospectus, it will be subject to Regulation 81-102 and will be a commodity pool, as such term is defined in section 1.1 of Regulation 81-104, since the Reference Fund has adopted fundamental investment objectives that permit the Reference Fund to use specified derivatives in a manner that is not permitted by Regulation 81-102.

22. The Reference Fund's investment objective is to generate a moderate level of current income and capital appreciation in all market environments with minimal correlation to traditional forms of fixed income and equity investments primarily through direct or indirect investment in fixed income securities.

23. According to the Trust Agreement, the net asset value of the Reference Fund is calculated on each day on which the Toronto Stock Exchange is open for trading and such other day or days as determined from time to time by the Filer.

24. The Reference Fund in not in default of securities legislation in any jurisdiction of Canada.

Reasons for the Exemption Sought

25. In accordance with subsection 2.5(1) of Regulation 81-102, the Fund is considered to directly hold the units of the Reference Fund.

26. The purchase and holding of units of the Reference Fund by the Fund will comply with the requirements of section 2.5 of Regulation 81-102 respecting investments in other mutual funds, except for the requirement of paragraph 2.5(2)(a) of Regulation 81-102 considering that the Reference Fund will not distribute its units under a simplified prospectus governed by Regulation 81-101 respecting Mutual Fund Prospectus Disclosure (c. V-1.1, r.38). In addition, the Fund will not benefit from the statutory exemption provided under paragraph 2.1(2)(c) of Regulation 81-102 respecting concentration restriction since this provision requires that the purchase of units issued by a mutual fund be made in accordance with section 2.5 of Regulation 81-102.

27. On June 17, 2011, the Fund obtained from the Canadian securities regulatory authorities an exemptive relief (no 2011-FIIC-0140) from subsection 2.1(1), paragraph 2.5(2)(a) and paragraph 2.5(2)(c) of Regulation 81-102 (the Prior Exemptive Relief). However, one of the conditions of the Prior Exemptive Relief is that the units of the Reference Fund be distributed only to accredited investors, as defined in Regulation 45-106 respecting Prospectus and Registration Exemptions (c. V-1.1, r. 21). Upon the issuance of a receipt for the Final Prospectus, the Reference Fund will become a reporting issuer in all jurisdictions of Canada and does not intend to limit the distribution of its units to accredited investors.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

Consequently, the Decision Makers revoke the Prior Exemptive Relief and grant the Exemption Sought. This decision will be effective on the date of the receipt for the Final Prospectus.

"Gilles Leclerc"
Senior Director, Corporate Finance
Autorité des marchés financiers