Headnote NP 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions – Exemption from requirement in section 2.1 of NI 81-101, Item 5(b) of Form 81-101F1, Item 2 and Item 4 of Form 81-101F3 to permit existing funds to preserve their respective start dates once continued as new classes of a mutual fund corporation further to an amalgamation – Exemption from sections 15.3(2), 15.6(a)(i), 15.6(b), 15.6(d), 15.8(2)(a), 15.8(3)(a) and 15.9(2)(d) of NI 81-102 to permit the continuing funds to use the performance data of the existing funds in sales communications and reports to securityholders – Exemption from section 4.4 of NI 81-106 and Items 3.1(1), 3.1(7), 3.1(8), 4.1(1), 4.1(2), 4.2(1), 4.2(2) and 4.3(1)(a) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1 to permit the continuing funds to include in their annual and interim management reports of fund performance the financial highlights and past performance of the existing funds.
Upon amalgamation, portfolio assets of existing funds to continue as portfolio assets referable to the continuing funds – Continuing funds to have same investment objectives, investment strategies, management fees, portfolio investment manager, and, at effective date of amalgamation, same portfolio assets as the existing funds – Financial data of existing funds is significant information that can assist investors in making decision to purchase or hold shares of continuing funds.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s.6.1
National Instrument 81-102 Mutual Funds, s.19.1
National Instrument 81-106 Investment Fund Continuous Disclosure, s.17.1
June 28, 2011
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
AGF Investments Inc. (AGF),
AGF All World Tax Advantage Group Limited (AWTAG),
Acuity Funds Ltd. (Acuity),
Acuity Corporate Class Ltd. (ACC),
AGF High Income Class and AGF Diversified Income Class
(collectively, the Filers)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) granting an exemption from:
(a) Sections 15.3(2), 15.6(a)(i), 15.6(b), 15.6(d), 15.8(2)(a), 15.8(3)(a) and 15.9(2)(d) of National Instrument 81-102 -- Mutual Funds (NI 81-102) to permit the Continuing Amalco Funds (as defined below) to use performance data of the Existing Funds (as defined below) in sales communications and reports to securityholders (collectively, the Fund Communications);
(b) Section 2.1 of National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101) for the purposes of the relief requested from Form 81-101F1 -- Contents of Simplified Prospectus (Form 81-101F1) and for the purposes of the relief requested from Form 81-101F3 – Contents of Fund Facts Document (Form 81-101F3);
(c) Item 5(b) of Part B of Form 81-101F1 to permit the new AGF High Income Class and the new AGF Diversified Income Class (collectively, Continuing Amalco Funds) to disclose the start dates of Acuity High Income Class and Acuity Diversified Income Class (collectively, the Existing Funds) as their respective start dates;
(d) Item 2 of Part 1 of Form 81-101F3 to permit the Continuing Amalco Funds to disclose the Date Fund Created dates of the respective Existing Funds as their Date Fund Created dates; and
(e) Item 4 of Part 1 of Form 81-101F3 to permit the Continuing Amalco Funds to use performance data of the Existing Funds in the Average return and Year-by-year returns,
(collectively, the Exemption Sought).
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 Filers have 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, The Northwest Territories, Yukon and Nunavut.
Interpretation
Terms defined in National Instrument 14-101 Definitions, NI 81-101, NI 81-102 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers:
The Filers
The head office of each of the Filers is located in Toronto, Ontario. The Filers are not in default of securities legislation in any jurisdiction of Canada.
Each of Acuity Corporate Class Ltd. (ACC) and AGF All World Tax Advantage Group Limited (AWTAG) (together, the Corporations) is a multi-class mutual fund corporation incorporated under the laws of Ontario. ACC offers 4 classes of shares, including Acuity High Income Class and Acuity Diversified Income Class. AWTAG currently has designated 22 classes out of the 100 classes authorized for issuance.
Each of Acuity and AGF is a corporation incorporated under the laws of Ontario. AGF Management Limited recently acquired control of Acuity such that both AGF and Acuity are direct or indirect wholly owned subsidiaries of AGF Management Limited.
Each of the mutual fund classes of ACC and AWTAG, including Acuity High Income Class and Acuity Diversified Income Class, is a reporting issuer as defined in the securities legislation of each province and territory of Canada, operates in accordance with NI 81-102, and distributes its shares to the public pursuant to a simplified prospectus (SP) and annual information form (AIF).
Each of ACC and AWTAG held special meetings of shareholders in May 2011 and obtained the required approval for the Amalgamation.
For securities law purposes, each mutual fund is a separate share class.
The Amalgamation
ACC will amalgamate with AWTAG (the Amalgamation) and continue as one corporation known as AGF All World Tax Advantage Group Limited (Amalco).
The Amalgamation will be effected pursuant to an amalgamation agreement entered into between the Corporations as contemplated by section 174 of the Business Corporations Act (Ontario) (OBCA).
The Filers currently propose to effect the Amalgamation on or about October 1, 2011 (the Effective Date).
There are no comparable classes in AWTAG to Acuity High Income Class and Acuity Diversified Income Class. On the Amalgamation, each of the Existing Funds will become two new classes of Amalco, to be known as AGF High Income Class and AGF Diversified Income Class (the Continuing Amalco Funds).
Upon the Amalgamation, the portfolio assets of the Existing Funds will continue as portfolio assets referable to the Continuing Amalco Funds. The portfolio assets of each Amalco class will be maintained as a separate portfolio by Amalco for the exclusive benefit of the shareholders of such Amalco class. AGF will be the manager of Amalco as most of the classes of Amalco will be existing classes of AWTAG.
As a result, the merger by way of Amalgamation is not a merger of mutual funds as it is commonly understood since the Existing Funds will not terminate under the OBCA but will continue with the other classes of AWTAG as one corporation while remaining separate classes (funds) from other classes.
As the Existing Funds will continue as the Continuing Amalco Funds, each Series A and Series F share of the Existing Funds will be exchanged for Mutual Fund Series and Series F shares (each such series, a Replacement Series) of Continuing Amalco Funds on a one-for-one basis. The rights associated with each series will be identical in all respects to the rights formerly associated with the corresponding series of shares of the Existing Funds except that the voting rights will be enhanced. Upon the Amalgamation, for each share they held of an Existing Fund, shareholders will receive a share of the Replacement Series. The net asset value (NAV) of each such share of the Replacement Series will be equal to the NAV per share of the corresponding series of shares of the Existing Fund.
On the Effective Date, an amendment to AWTAG's SP and AIF will be filed relating to the Amalgamation and the Continuing Amalco Funds since AWTAG is effectively the continuing corporation. The classes of ACC will no longer be available as of such date pursuant to the ACC SP and AIF.
Following the Amalgamation, Amalco, including the Continuing Amalco Funds, will be a reporting issuer as defined in the securities legislation of each province and territory of Canada.
The Continuing Amalco Funds will be new funds and will not have any assets or liabilities and will not have their own performance data or information derived from financial statements (collectively, the Financial Data) as at the Effective Date.
In order for the merger by way of Amalgamation to be as seamless as possible for investors in the Existing Funds and the Continuing Amalco Funds, the Filers propose that:
(a) the Continuing Amalco Funds' Fund Communications include the performance data of the Existing Funds;
(b) Amalco's SP:
(i) incorporate by reference the following financial statements and management reports of fund performance (MRFPs) of each Existing Fund (collectively, the Existing Fund Disclosure):
the annual financial statements and MRFP for the year ended September 30, 2011, when available; and
the interim financial statements and MRFP for the six months ended June 30, 2011;
until such Existing Fund Disclosure is superseded by more current financial statements and MRFPs of the Continuing Amalco Funds; and
(ii) states that the start date for each Replacement Series of the Continuing Amalco Funds is based upon the start date of the corresponding series of the respective Existing Funds.
(c) the Fund Facts Documents of each of the Replacement Series of the Continuing Amalco Funds:
(i) states that the Date Fund Created date for each Replacement Series of the Continuing Amalco Funds is based upon the Date Fund Created date of the corresponding series of the respective Existing Funds; and
(ii) includes the performance data of the Existing Funds.
The Financial Data of each series of the Existing Funds is significant information which can assist investors in determining whether to purchase or hold shares of the corresponding Replacement Series.
The Filers have filed a separate application for exemptive relief from certain provisions of National Instrument 81-106 — Investment Fund Continuous Disclosure (NI 81-106) to enable the Continuing Amalco Funds' to include in its annual and interim MRFPs Financial Data presented in the Existing Fund's annual MRFP for the year ended September 30, 2011 ( NI 81-106 Relief).
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 Exemption Sought is granted provided that:
(a) the Continuing Amalco Funds' Fund Communications include the performance data of the Existing Funds prepared in accordance with Part 15 of NI 81-102, including section 15(1) of NI 81-102;
(b) the Continuing Amalco Funds' simplified prospectus:
(i) incorporates by reference the Existing Fund Disclosure, until such Existing Fund Disclosure is superseded by more current financial statements and MRFPs of the Continuing Amalco Funds;
(ii) states that the start date for each Replacement Series is the start date of the corresponding series of the Existing Funds;
(iii) discloses the Amalgamation where the start date of each Replacement Series of the Continuing Amalco Funds is stated;
(c) the Fund Facts Documents of each of the Replacement Series of the Continuing Amalco Funds:
(i) states that the Date Fund Created date for each Replacement Series is the Date Fund Created date of the corresponding series of the Existing Funds;
(ii) includes the performance data of the Existing Funds prepared in accordance with Part 15 of NI 81-102, including section 15.9(1) of NI 81-102; and
(iii) discloses the Amalgamation where the Date Fund Created date of each Replacement Series of the Continuing Amalco Funds is stated; and
(d) the Continuing Amalco Funds prepare their respective MRFPs in accordance with the NI 81-106 Relief.
“ Vera Nunes “
Vera Nunes
Manager – Investment Funds Branch
Project No. 1756568
Headnote
NP 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions – Exemption from requirement in section 2.1 of NI 81-101, Item 5(b) of Form 81-101F1, Item 2 and Item 4 of Form 81-101F3 to permit existing funds to preserve their respective start dates once continued as new classes of a mutual fund corporation further to an amalgamation – Exemption from sections 15.3(2), 15.6(a)(i), 15.6(b), 15.6(d), 15.8(2)(a), 15.8(3)(a) and 15.9(2)(d) of NI 81-102 to permit the continuing funds to use the performance data of the existing funds in sales communications and reports to securityholders – Exemption from section 4.4 of NI 81-106 and Items 3.1(1), 3.1(7), 3.1(8), 4.1(1), 4.1(2), 4.2(1), 4.2(2) and 4.3(1)(a) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81-106F1 to permit the continuing funds to include in their annual and interim management reports of fund performance the financial highlights and past performance of the existing funds.
Upon amalgamation, portfolio assets of existing funds to continue as portfolio assets referable to the continuing funds – Continuing funds to have same investment objectives, investment strategies, management fees, portfolio investment manager, and, at effective date of amalgamation, same portfolio assets as the existing funds – Financial data of existing funds is significant information that can assist investors in making decision to purchase or hold shares of continuing funds.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s.6.1
National Instrument 81-102 Mutual Funds, s.19.1
National Instrument 81-106 Investment Fund Continuous Disclosure, s.17.1