Securities Law & Instruments

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from section 2.1(1) of National Instrument 81-102 Investment Funds to permit a global bond mutual fund to invest more than 10 percent of net assets in debt securities issued by a foreign government or supranational agency subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.1(1), 19.1,

Citation: Re Mawer Investment Management Ltd., 2015 ABASC 726

May 28, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF MAWER INVESTMENT MANAGEMENT LTD. (the Filer) AND IN THE MATTER OF MAWER GLOBAL BOND FUND (the Fund)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision 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 (the Requested Relief) pursuant to section 19.1 of National Instrument 81-102 Investment Funds (NI 81-102) from subsection 2.1(1) of NI 81-102 (the Concentration Restriction) to permit the Fund to make the following investments (the Permitted Investments) of up to:

(a) 20% of the Fund's net asset value at the time of the transaction in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments other than the government of Canada, the government of a jurisdiction in Canada or the government of the United States of America and are rated "AA" by Standard & Poor's Rating Services (Canada) or its DRO affiliate, or have an equivalent rating by one or more other designated rating organizations or their DRO affiliates; and

(b) 35% of the Fund's net asset value at the time of the transaction in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments other than the government of Canada, the government of a jurisdiction in Canada, or the government of the United States of America and are rated "AAA" by Standard & Poor's Rating Services (Canada) or its DRO affiliate, or have an equivalent rating by one or more other designated rating organizations or their DRO affiliates

(evidences of indebtedness referred to in (a) and (b) are collectively referred to as the Foreign Government Securities).

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

(a) the Alberta Securities Commission is the principal regulator for this application;

(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 each of the provinces and territories of Canada; and

(c) this 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 MI 11-102, NI 81-102 and National instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined herein. For greater certainty, in this decision "designated rating organization" and "DRO affiliate" have the meanings given to those terms in NI 81-102.

Representations

This decision is based on the following representations made by the Filer:

1. The Filer is a corporation organized under the laws of Alberta, with its head office in Calgary, Alberta.

2. The Filer is registered in:

(a) Alberta, British Columbia, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Yukon and Northwest Territories as an adviser in the category of portfolio manager;

(b) Alberta, Ontario, Québec and Newfoundland and Labrador as an investment fund manager; and

(c) Alberta, British Columbia, Saskatchewan, Manitoba and Ontario as a mutual fund dealer.

The Filer is not a member of the Mutual Fund Dealers Association of Canada.

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

4. The Fund will be an open-ended mutual fund trust established under the laws of Alberta.

5. The Filer will be the manager, portfolio adviser and principal distributor of the Fund.

6. Securities of the Fund will be qualified for distribution in one or more of the provinces and territories of Canada under a simplified prospectus, annual information form and fund facts filed in accordance with applicable securities legislation. As a result, the Fund will be a reporting issuer in one or more of the provinces and territories of Canada. A preliminary simplified prospectus was filed for the Fund via SEDAR in each the provinces and territories of Canada on April 10, 2015.

7. The investment objective of the Fund will be to invest for interest income and the preservation of global purchasing power primarily in fixed income securities from around the world.

8. To achieve its investment objective, the Fund will invest primarily in a broadly diversified portfolio of government, government-related, corporate and structured fixed income securities denominated in local and foreign currencies.

9. As part of the Fund's investment strategies, the Filer would like to invest a portion of the Fund's assets in Foreign Government Securities.

10. The Concentration Restriction prohibits the Fund from purchasing a security of an issuer, entering into a specified derivatives transaction or purchasing index participation units if, immediately after the transaction, more than 10% of the net asset value of the Fund would be invested in securities of any issuer.

11. The Concentration Restriction does not apply to a purchase of, among other things, a "government security", which under NI 81-102 means an evidence of indebtedness that is issued, or fully and unconditionally guaranteed as to principal and interest, by any of the government of Canada, the government of a jurisdiction of Canada or the government of the United States of America.

12. Foreign Government Securities do not meet the definition of "government security", as such term is defined in NI 81-102.

13. In Companion Policy 81-102CP (the Companion Policy), the Canadian Securities Administrators state their views on various matters relating to NI 81-102. Subsection 3.1(4) of the Companion Policy indicates that relief from paragraph 2.04(1)(a) of National Policy 39, which was replaced by the Concentration Restriction, has been provided to mutual funds generally under the following circumstances:

(a) the mutual fund has been permitted to invest up to 20% of its net asset value in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments other than the government of Canada, the government of a jurisdiction or the government of the United States of America and are rated "AA" by Standard & Poor's Rating Services (Canada) or its DRO affiliate, or have an equivalent rating by one or more other designated rating organizations or their DRO affiliates; and

(b) the mutual fund has been permitted to invest up to 35% of its net asset value in evidences of indebtedness of any one issuer, if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments other than the government of Canada, the government of a jurisdiction or the government of the United States of America and are rated "AAA" by Standard & Poor's Rating Services (Canada) or its DRO affiliate, or have an equivalent rating by one or more other designated rating organizations or their DRO affiliates.

14. The Fund seeks the Requested Relief to enhance its ability to pursue and achieve its investment objective.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation for the Decision Maker to make the decision has been met.

1. The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

(a) the Filer in respect of any one issuer can only rely on one of paragraph (a) or (b) of the definition of Permitted Investment.

(b) any security that may be purchased under the Requested Relief is traded on a mature and liquid market;

(c) the acquisition of the securities purchased pursuant to this decision is consistent with the fundamental investment objective of Fund;

(d) the simplified prospectus of the Fund discloses the additional risks associated with the concentration of net asset value of the Fund in securities of fewer issuers, such as the potential additional exposure to the risk of default of the issuer in which the Fund has so invested and the risks, including foreign exchange risks, of investing in the country in which the issuer is located; and

(e) the simplified prospectus of the Fund includes a summary of the nature and terms of the Requested Relief under the investment strategies section along with the conditions imposed and the type of securities covered by this decision.

"David Linder, QC"
Executive Director