Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted to permit closed-end funds that had converted into exchange traded mutual funds to show pre-conversion past performance in sales communications – the closed-end funds had complied with the investment restrictions of NI 81-102, subject to certain exemptions.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, subsections 15.6(a) and 15.6(d) and section 19.1.
June 20, 2013
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 BLACKROCK ASSET MANAGEMENT CANADA LIMITED (the Filer)
AND
iSHARES SILVER BULLION FUND (SVR)
iSHARES GOLD BULLION FUND (CGL)
iSHARES EQUAL WEIGHT BANC & LIFECO FUND (CEW)
iSHARES CANADIAN FINANCIAL MONTHLY INCOME FUND (FIE, and together with SVR, CGL and CEW, the Funds).
Decision
BACKGROUND
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) for an exemption relieving (i) SVR from the prohibition in subsection 15.6(a) of National Instrument 81-102 Mutual Funds (NI 81-102) to permit SVR to show historic performance data in sales communications notwithstanding that it has not, as an exchange-traded mutual fund, distributed its securities under a prospectus for 12 consecutive months; and (ii) the Funds from the prohibition in subsection 15.6(d) of NI 81-102 to permit sales communications relating to the Funds to contain performance data of the classes of units of each Fund issued and outstanding during the periods prior to the dates on which the Funds converted into exchange-traded mutual funds1 and commenced offering their securities under a prospectus on a continuous basis (the Requested Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission 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, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Northwest Territories, Yukon and Nunavut (collectively, the Other 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 herein.
REPRESENTATIONS
This decision is based on the following facts represented by the Filer:
The Filer is the trustee, investment fund manager and portfolio advisor of the Funds. The head office of the Filer is located in Toronto, Ontario. The Filer is registered in the categories of Portfolio Manager, Investment Fund Manager and Exempt Market Dealer in all Canadian jurisdictions. The Filer is also registered as a Commodity Trading Manager in Ontario.
The Filer, formerly known as Claymore Investments, Inc., was previously an indirect, wholly-owned subsidiary of Guggenheim Partners, LLC and was acquired by BlackRock, Inc. (“BlackRock”) effective March 7, 2012 (the “Acquisition”). As a result of the Acquisition, the Filer is an indirect, wholly-owned subsidiary of BlackRock, a leader in investment management, risk management and advisory services for institutional and retail clients worldwide.
Following the Acquisition, the name of the Filer was changed to “BlackRock Investments Canada Inc.”. Effective December 1, 2012, the Filer was amalgamated under the laws of the Province of Ontario with another wholly-owned subsidiary of BlackRock and became known as “BlackRock Asset Management Canada Limited”.
Prior to the Acquisition, the Funds were managed by Claymore Investments, Inc.
SVR, CGL, CEW and FIE were established as independent closed-end investment funds under the laws of Ontario pursuant to a separate declaration of trust or trust agreement, as applicable, dated June 29, 2009, May 19, 2009, April 30, 2007 and July 27, 2005, respectively (each an Original Trust Document). Each Original Trust Document has been amended from time to time in accordance with its terms. Currently, SVR and CGL are governed by a single master declaration of trust dated November 1, 2012, CEW is governed by an amended and restated declaration of trust dated October 24, 2012 and FIE is governed by an amended and restated trust agreement dated November 9, 2012.
The Funds are reporting issuers under the securities legislation of each of the provinces and territories of Canada.
Units of SVR, CGL CEW and FIE were initially distributed pursuant to initial public offerings under long form prospectuses dated June 29, 2009, May 19, 2009, April 30, 2007 and July 27, 2005, respectively (each a Long Form Prospectus) and were listed and traded on the Toronto Stock Exchange.
Units of SVR and CGL are currently distributed under a final long form prospectus dated October 22, 2012.
Units of CEW and FIE are currently distributed under a final long form prospectus dated October 10, 2012.
The following table sets out the number of units outstanding, the net asset value (NAV) per unit, and assets under management (AUM) for each class of the Funds, as well as the aggregate AUM of each Fund, as of January 18, 2013:
SVR (Hedged)
SVR (Non-Hedged)
CGL (Hedged)
CGL (Non-Hedged)
FIE
FIE.A
CEW
CEW.A
Units
5,750,000
2,500,000.00
39,500,000
3,000,000
17,800,000
18,900,000
4,200,000
9,750,000
NAV per Unit
$18.52
$12.89
$15.09
$15.12
$6.73
$6.54
$7.85
$6.58
AUM
$106,510,343.50
$32,217,512.50
$596,240,018
$45,345,456
$119,816,428
$123,569,541.90
$32,956,303.80
$64,127,700
Aggregate AUM
$138,727,856.00
$641,585,474.00
$243,385,969.90
$97,084,003.80
Neither the Filer nor the Funds are in default of securities legislation in any province or territory of Canada.
On December 21, 2006, unitholders of FIE approved: 1) a merger of FIE and Canadian Financial Dividend & Income Fund (“FDI”), with FIE remaining as the continuing fund ; and 2) an amendment to the Original Trust Document of FIE to provide for a voluntary early conversion of FIE from a closed-end fund to an exchange-traded mutual fund (the FIE Conversion). The merger of FIE and FDI was effective as of January 16, 2007. The FIE Conversion was effective on March 2, 2007 (the FIE Conversion Date) and FIE was renamed “Claymore Canadian Financial Monthly Income ETF” (and later, “iShares Canadian Financial Monthly Income ETF”). FIE commenced distributing advisor class units on a continuous basis under a prospectus at that time.
Common units of FIE were first qualified for distribution on a continuous basis pursuant to a prospectus dated January 28, 2010, and began trading under the ticker symbol “FIE” on April 16, 2010. The advisor class units of FIE (which had previously been the only class of units issued and outstanding) then began trading on the Toronto Stock Exchange under the new ticker symbol “FIE.A”.
Pursuant to the terms of the Original Trust Document and as contemplated by the Long Form Prospectus of CEW, CEW converted to an exchange-traded mutual fund (the CEW Conversion) when the daily weighted average trading price of its units represented a discount of more than 2% of the NAV per unit for that day, for a period of 10 consecutive trading days. The CEW Conversion was effective as of February 6, 2008 (the CEW Conversion Date).
On the CEW Conversion Date, the name of CEW was changed to “Claymore Equal Weight Banc & Lifeco ETF” (and later, “iShares Equal Weight Banc & Lifeco Fund) and the advisor class units of CEW began trading on the Toronto Stock Exchange under the new ticker symbol “CEW.A”. Common units of CEW were first qualified for distribution on a continuous basis under a prospectus dated January 29, 2008 and began trading under the ticker symbol “CEW” on February 6, 2008.
Pursuant to the terms of the Original Trust Document and as contemplated by the Long Form Prospectus of CGL, CGL converted to an exchange-traded mutual fund (the CGL Conversion) when the daily weighted average trading price of its units represented a discount of more than 2% of the NAV per unit for that day, for a period of 10 consecutive trading days. The CGL Conversion was effective as of February 16, 2010 (the CGL Conversion Date).
On the CGL Conversion Date, the name of CGL was changed to “Claymore Gold Bullion ETF” (and later, “iShares Gold Bullion Fund”) and hedged units of CGL began trading on the Toronto Stock Exchange under the new ticker symbol “CGL”. Non-hedged units of CGL were first qualified for distribution on a continuous basis under a prospectus dated January 29, 2010 and began trading under the ticker symbol “CGL.C” on February 16, 2010.
The Original Trust Document and the Long Form Prospectus of SVR contemplated the automatic conversion of SVR into an exchange-traded mutual fund if, for a period of 10 consecutive trading days, the daily weighted average trading price of the hedged units of SVR was greater than a discount of 2% of NAV per hedged unit for that day. On August 28, 2012, unitholders of SVR approved an amendment to the Original Trust Document of SVR to provide for a voluntary early conversion of SVR from a closed-end fund to an exchange-traded mutual fund (the SVR Conversion), which was implemented by the Filer on November 5, 2012 (the SVR Conversion Date).
On the SVR Conversion Date, the name of SVR was changed to “iShares Silver Bullion Fund” and the hedged units and non-hedged units of SVR began trading on the Toronto Stock Exchange under the new ticker symbols “SVR” and “SVR.C”, respectively.
Both before and after conversion, but subject to the best of the knowledge of the Filer in relation to the period prior to the Acquisition, the investment practices of the Funds complied and continue to comply in all respects with the requirements of Part 2 of NI 81-102, except to the extent that the Funds have received permission from the Canadian securities regulatory authorities to deviate therefrom, as described in the current final long form prospectuses of the Funds.
Any changes between the Funds pre- and post-conversion that could have a material effect on the performance of the Funds will be disclosed in sales communications pertaining to the Funds.
Without the Requested Relief:
(i) sales communications pertaining to SVR will not be permitted to include performance data until November 25, 2013, being the date when the Fund will have distributed securities as an exchange-traded mutual fund under a prospectus in a jurisdiction for 12 consecutive months; and
(ii) Sales communications pertaining to each Fund will only be permitted to include performance data for the periods commencing on or after the approximate dates on which the Funds commenced distributing securities, as exchange-traded mutual funds, on each Fund’s Conversion Date.
DECISION
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Requested Relief is granted.
“Vera Nunes”
_______________________________ Vera Nunes
Manager, Investment Funds Branch
ONTARIO SECURITIES COMMISSION
Footnotes
- With respect to SVR, both the hedged and non-hedged units of the Fund were issued and outstanding prior to the date on which SVR converted into an exchange-traded mutual fund. With respect to CGL, only the hedged units of the Fund were issued and outstanding; and with respect to CEW and FIE, only the advisor class units of each Fund were issued and outstanding