Headnote National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions – Exemptive relief granted to exchange-traded funds for initial and continuous distribution of units – Relief to revoke and replace existing relief – Relief to permit the funds’ prospectus to not contain an underwriter’s certificate and relief from take-over bid requirements in connection with normal course purchases of units on the Toronto Stock Exchange subject to undertaking by unitholders not to exercise any votes attached to units which represent more than 20% of the votes attached to all outstanding units of the funds – Certificate Relief subject to sunset clause. – Securities Act (Ontario). Applicable Legislative Provisions Securities Act,R.S.O. 1990, c.S.5, as am., Sections 74(1), 95-100, 104(2)(c), 144, and 147.
October 12, 2012
DECISION
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
VANGUARD INVESTMENTS CANADA INC.
(the Filer)
DECISION
Background
The principal regulator has received an application from the Filer under the securities legislation of the Jurisdiction (the Legislation) for a decision that:
(a) Revokes and replaces the Existing Relief (as defined below);
(b) Exempts all purchasers of Units (as defined below) of Vanguard Canadian Aggregate Bond Index ETF, Vanguard Canadian Short-Term Bond Index ETF, Vanguard MSCI Canada Index ETF, Vanguard MSCI U.S. Broad Market Index ETF (CAD-hedged), Vanguard MSCI EAFE Index ETF (CAD-hedged) and Vanguard MSCI Emerging Markets Index ETF (the Existing Funds) and any additional exchange-traded funds of which the Filer, or an affiliate or associate of the Filer, is or may be the trustee and/or manager and which operate on a similar basis as the Existing Funds (the Additional Funds, which together with the Existing Funds are collectively referred to as the Funds and each is singularly referred to as a Fund) from the requirements of the Legislation related to take-over bids, including the requirement to file a report of a take-over bid and to pay the accompanying fee with each applicable jurisdiction in respect of take-over bids for the Funds (the Take-over Bid Exemption); and
(c) Exempts the Funds from the requirement that the prospectus of the Funds contain a certificate of the underwriter or underwriters who are in a contractual relationship with the Funds (the Underwriter Certificate Exemption, and, together with the Take-over Bid Exemption, the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the OSC is the principal regulator for this application; and
(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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (collectively, the Passport Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Basket of Securities means (i) a group of the specific securities of the issuers included from time to time in the applicable Index (Constituent Securities) held, to the extent reasonably possible, in approximately the same proportion as they are reflected in the applicable Index; (ii) a broadly diversified subset of Constituent Securities and/or other securities selected by the sub-advisor of the applicable Fund from time to time that, in the aggregate, approximates the applicable Index in terms of primary risk factors and other key index characteristics; or (iii) securities of one or more Underlying Vanguard ETFs.
Designated Broker means a registered dealer that has entered into a designated broker agreement with the Filer, on behalf of one or more of the Funds, to perform certain duties in relation to the Funds.
Dealer means a registered broker or dealer that has entered into a continuous distribution dealer agreement with the Filer, on behalf of one or more of the Funds, and that subscribes for and purchases Units from the Funds.
Index means the benchmark or index that is used by a Fund in relation to that Fund’s investment objective.
Prescribed Number of Units means the number of Units of a Fund determined by the Filer from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.
Take-over Bid Requirements means the requirements of the Legislation relating to take-over bids, including the requirement to file a report of a take-over bid and to pay the accompanying fee, in each of the Jurisdiction and Passport Jurisdictions.
Underlying Vanguard ETF means an exchanged-traded share class of a fund managed by the Filer or an affiliate or associate of the Filer that either seeks to track the applicable Index or an unhedged version of the applicable Index or that has a similar investment objective or strategies.
Unitholders means beneficial or registered holders of Units, as applicable.
Units means the redeemable, transferable units of the Funds.
Representations
This decision is based on the following facts represented by the Filer:
The Existing Relief
The Filer was provided relief similar to the Exemption Sought under a decision of the principal regulator dated October 21, 2011 (the Existing Relief).
The Existing Relief terminates on October 21, 2012.
As of the date of this decision, the Filer will no longer rely on the Existing Relief.
The Filer and the Funds
The Funds are, or will be, mutual fund trusts governed by the laws of Ontario and are, or will be, reporting issuers under the laws of each of the Jurisdiction and Passport Jurisdictions. The Filer is not, and the Funds are not, and will not be, in default of securities legislation in any of the Jurisdiction or Passport Jurisdictions.
Units of the Funds are, or will be, listed on the Toronto Stock Exchange (TSX) or another recognized stock exchange.
The Filer is a registered investment fund manager, portfolio manager and commodity trading manager in Ontario. The Filer is, or will be, the trustee and the manager of the Funds and is, or will be, responsible for the administration of the Funds.
The Filer is a wholly-owned indirect subsidiary of The Vanguard Group, Inc., which in turn is wholly-owned by approximately 36 U.S. registered investment companies that are part of the Vanguard family of mutual funds.
Each Fund seeks, or will seek, investment results that seek to track the performance of an Index, net of fees and expenses, by investing, directly or indirectly, in the securities that constitute, from time to time, the applicable Basket of Securities.
Generally, Units of the Funds may only be subscribed for or purchased directly from the Funds by Designated Brokers or Dealers and orders may only be placed for Units in the Prescribed Number of Units (or a multiple thereof) on any day where there is a trading session on