Headnote NP 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions – approval granted for change of control of mutual fund manager under s. 5.5(2) of NI 81-102 and approval for abridgement of the related 60 day notice requirement to 47 days under s. 5.8(1)(a) of NI 81-102 – approval conditional on at least 47 days notice to unitholders, no changes to the portfolio advisers to the Funds for at least 60 days after notice delivered – OSC staff view amalgamation, in conjunction with closing, to be a change of manager - prior approval of the unitholders to be obtained prior to the amalgamation a condition of approval – not to be considered a precedent.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, sections 5.5(2), 5.8(1) and 19.1.
December 8, 2010
In the Matter of the Securities Legislation of Ontario
(the “Jurisdiction”)
and
In the Matter of Process for Exemptive Relief Applications in Multiple Jurisdictions
and
In the Matter of Hartford Investments Canada Corp.
(“Hartford”)
and
In the Matter of
CI Financial Corp.
(the “Filer”)
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 of the principal regulator (the “Legislation”) for approval, and an exemption, pursuant to section 19.1 of National Instrument 81-102 - Mutual Funds (“NI 81-102”), pursuant to the following provisions of NI 81-102:
(a) Section 5.5(2) in connection with the proposed change of control of Hartford (“Approval Sought”); and
(b) Section 5.8(1)(a) to abridge the time for delivering notice to unitholders (the “Hartford Unitholders”) of the mutual funds identified in Schedule “A” hereto (the “Hartford Funds”) of the proposed change of control of Hartford from 60 days to 47 days (“Exemption Sought”).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(c) the Ontario Securities Commission is the principal regulator for this application; and
(d) 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 all of the provinces and territories of Canada (other than the Jurisdiction).
Interpretation
Defined terms contained in National Instrument 14-101 - Definitions and MI 11-102 have the same meaning in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer issued a press release on October 21, 2010 announcing a transaction (the “Transaction”) under which the Filer will acquire all of the outstanding shares of Hartford no later than December 15, 2010 (the “Closing”). The completion of the Transaction is subject to the satisfaction of certain conditions, including that the approval and relief described in this decision is granted.
The Filer is a reporting issuer in all provinces of Canada and is not on any list of defaulting issuers maintained in any jurisdiction. The Filer’s shares are listed on the Toronto Stock Exchange under the trading symbol “CIX”.
The Filer’s head office is located in Toronto, Ontario.
The mutual fund business owned by the Filer is carried on through CI Investments Inc. (the “CI Manager”). The CI Manager currently is registered under the Securities Act (Ontario) as an adviser in the category of portfolio manager, has applied for registration as an investment fund manager and is an exempt market dealer. The CI Manager manages in excess of 100 public mutual funds, which are sold to the public in all the provinces and territories of Canada.
Hartford is an unlimited liability corporation incorporated under the laws of the Province of Nova Scotia. Hartford acts as the trustee and the manager of the Hartford Funds. Units of the Hartford Funds are sold in all of the provinces and territories of Canada pursuant to a simplified prospectus and annual information form dated May 14, 2010.
The Filer, the CI Manager, Hartford and the Hartford Funds are not in default of any applicable securities legislation in any province or territory of Canada.
The directors and officers of Hartford will change on or after the Closing to provide, at a minimum, that the directors of Hartford will be nominees of the Filer. Such directors or officers of Hartford who are so replaced by the Filer will, however, be individuals who are currently directors and/or officers of the CI Manager. By virtue of their roles as directors and/or officers of the CI Manager, the proposed new directors and officers of Hartford have demonstrated that they have the necessary education, experience, integrity and competence to be directors and/or officers of Hartford.
The change of control of Hartford will not materially affect the operation and administration of the Hartford Funds. Hartford will remain the manager of the Hartford Funds for a period of time after Closing.
It is intended that the Hartford Funds will be maintained as a separate family of funds for a period of time after Closing. The CI Manager does not intend to increase the management fees that the Hartford Funds pay.
The Filer intends to amalgamate Hartford with the CI Manager or one of its subsidiaries or affiliates after Closing (the “Amalgamation”). OSC Staff take the view that the Amalgamation, in conjunction with the Closing, results in a change of manager for the Hartford Funds within the meaning of NI 81-102. Accordingly, the Filer has agreed to obtain the prior approval of the Hartford Unitholders for the Amalgamation at a meeting of the Hartford Unitholders.
The Filer intends to effect the Amalgamation within nine months after Closing.
To the extent that any change is made after Closing which constitutes a “material change” to the Hartford Funds within the meaning of National Instrument 81-106 - Investment Fund Continuous Disclosure (“NI 81-106”), the Hartford Funds will comply with the continuous disclosure obligations set out in section 11.2 of NI 81-106. Further, any notices which are required to be delivered to, or approvals obtained from, the Canadian securities administrators or Hartford Unitholders in connection with any such material change will be delivered or obtained, as required under applicable Canadian securities legislation.
A notice regarding the change of control of Hartford was submitted to the registration branch of the Ontario Securities Commission on October 29, 2010 pursuant to sections 11.9 and 11.10 of National Instrument 31-103 – Registration Requirements and Exemptions.
The notice contemplated by section 5.8(1) of NI 81-102 of the proposed indirect change in control of Hartford was mailed by the Filer to the Hartford Unitholders by October 29, 2010 (the “Notice Date”).
The Filer intends to cause no changes to the portfolio advisers to the Hartford Funds for at least 60 days following the Notice Date.
The Filer believes that abridging the period prescribed by section 5.8(1)(a) of NI 81-102 to 47 days will not be prejudicial to the Hartford Unitholders.
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 Approval Sought is granted and that the Exemption Sought is granted provided that:
(a) the Hartford Unitholders are given at least 47 days notice of the change of control of Hartford;
(b) no changes to the portfolio advisers to the Hartford Funds are effected for at least 60 days following the Notice Date; and
(c) prior approval of the Hartford Unitholders be obtained for the Amalgamation.
“Darren McKall”
Darren McKall
Assistant Manager, Investment Funds Branch
Ontario Securities Commission
SEDAR Project #1651376
Appendix “A”
HARTFORD FUNDS
Hartford Growth Portfolio
Hartford Balanced Growth Portfolio
Hartford Balanced Portfolio
Hartford Conservative Portfolio
Hartford Capital Appreciation Fund
Hartford Global Leaders Fund
Hartford International Equity Fund
Hartford U.S. Dividend Growth Fund
Hartford Canadian Dividend Fund
Hartford Canadian Dividend Growth Fund
Hartford Canadian Stock Fund
Hartford Canadian Value Fund
Hartford Canadian Balanced Fund
Hartford Global Balanced Fund
Hartford Canadian Bond Fund
Hartford Global High Income Fund
Hartford Canadian Money Market Fund