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 the following provisions of the Legislation to enable the new AGF High Income Class and the new AGF Diversified Income Class (collectively, the Continuing Amalco Funds) to include in their annual and interim management reports of fund performance (MRFPs) the performance data and information derived from the financial statements (collectively, the Financial Data) of Acuity High Income Class and Acuity Diversified Income Class (collectively, the Existing Funds) that will be presented in the Existing Funds’ annual MRFPs for the year ended September 30, 2011 (the Existing Funds’ 2011 annual MRFPs):
(a) Section 4.4 of NI 81-106 for the purposes of the relief requested from Form 81-106F1 -- Contents of Annual and Interim Management Report of Fund Performance ("Form 81-106F1") for the Continuing Amalco Funds;
(b) Items 3.1(1), 3.1(7), 3.1(8), 4.1(1) in respect of the requirement to comply with subsections 15.3(2) and 15.9(2)(d) of National Instrument 81-102 -- Mutual Funds ("N1 81-102"), 4.1(2), 4.2(1), 4.2(2), and 4.3(1)(a) of Part B of Form 81-106F1 for the Continuing Amalco Funds; and
(c) Items 3(1) and 4 of Part C of Form 81-106F1 for the Continuing Amalco Funds,
(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 81-102, NI 81-106 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
1The 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.
2Each 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.
3Each 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.
4Each 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).
5Each of ACC and AWTAG held special meetings of shareholders in May 2011 and obtained the required approval for the Amalgamation.
6For securities law purposes, each mutual fund is a separate share class.
The Amalgamation
7Subject to regulatory approval, ACC will amalgamate with AWTAG (the Amalgamation) and continue as one corporation known as AGF All World Tax Advantage Group Limited (Amalco).
8The 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).
9The Filers currently propose to effect the Amalgamation on or about October 1, 2011 (the Effective Date).
10There are no comparable classes in AWTAG to Acuity High Income Class and Acuity Diversified Income Class. 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). The Existing Funds and the corresponding Continuing Amalco Funds will be substantially similar, with the Continuing Amalco Funds having the same investment objectives, investment strategies, management fees, portfolio investment manager, and, at the Effective Date of the Amalgamation, the same portfolio assets as the Existing Funds.
11Upon the Amalgamation, the portfolio assets of the Existing Funds will continue as portfolio assets referable to the Continuing Amalco Funds. The portfolio assets of the Continuing Funds will be maintained as a separate portfolio by Amalco for the exclusive benefit of the shareholders of the Continuing Amalco Funds, as they are for the other classes of Amalco. AGF will be the manager of Amalco as most of the classes of Amalco will be existing classes of AWTAG.
12Upon the Amalgamation, the portfolio assets referable to each series of shares of the Existing Funds will become referable to a corresponding series of shares of the Continuing Funds (each such series, a Replacement Series). The rights associated with each Replacement Series will be identical 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.
13The 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.
14Prior to the Amalgamation, the Existing Funds were operated in accordance with the requirements of National Instrument 81-102 and distributed their shares to the public pursuant to a prospectus and had been reporting issuers for at least 12 months.
15On 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.
16Following 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.
17AWTAG has a September 30 year end and ACC has a December 31 year end. Acuity is proposing to change the financial year end of ACC, including the Existing Funds, to September 30, commencing with September 30, 2011. Year-end financial statements for ACC and AWTAG will be prepared for a year ended September 30, 2011 and management reports of fund performance (MRFPs) for such September 30, 2011 year-end.
18Acuity filed the requisite notice under NI 81-106 on June 7, 2011 in connection with ACC’s proposed change of financial year end.
19The Continuing Amalco Funds will be new funds and will not have any assets or liabilities and will not have their own Financial Data as at the Effective Date.
20In 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 Existing Funds will prepare annual financial statements for the year ended September 30, 2011. The Existing Funds will file and deliver annual financial statements and an annual MRFP for their financial year ended September 30, 2011 within 90 days as required under NI 81-106; and
(b) the Continuing Amalco Funds will prepare comparative interim and annual financial statements for 2012 under section 2.1 of NI 81-106 using the Existing Funds’ annual financial statements for the year ended September 30, 2011. The Continuing Amalco Funds will file their first comparative interim financial statements within 60 days of March 31, 2012 as required under NI 81-106 compared against the interim financial statements of the Existing Funds as at March 31, 2011.
21The 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.
22The Filers have filed a separate application for exemptive relief from certain provisions of (a) NI 81-102 to permit the Continuing Amalco Funds to use performance data of the Existing Funds in sales communications and reports to securityholders (the Fund Communications) and (b) National Instrument 81-101 -- Mutual Fund Prospectus Disclosure and Form 81-101F1 -- Contents of Simplified Prospectus and Form 81-101F3 Contents of Fund Facts Document to permit the Continuing Amalco Funds to disclose the start dates of the Existing Funds as their respective start dates (NI 81-102 and NI 81-101 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 Existing Funds prepare annual financial statements under section 2.1 of NI 81-106 for the year ended September 30, 2011;
(b) the MRFP for each Replacement Series includes the Financial Data of the corresponding series of the Existing Funds and discloses the merger by way of Amalgamation for the relevant time periods; and
(c) the Continuing Amalco Funds prepare their simplified prospectuses and other Fund Communications in accordance with the NI 81-102 and NI 81-101 Relief.
“ Vera Nunes “
Vera Nunes
Manager – Investment Funds Branch
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