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 – Filers have no current plans to change the manager of the Funds, or to amalgamate or merge the current manager with any other entity, for the foreseeable future.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, sections 5.5(2) and 19.1
January 31, 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
Acuity Funds Ltd.
(“Acuity”)
and
In the Matter of
AGF Management Limited
(“AGF”)
(Acuity and AGF collectively referred to as 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 of the principal regulator (the “Legislation”) for approval with respect to a proposed change of control of Acuity pursuant to Section 5.5(2) of National Instrument 81-102 - Mutual Funds (“NI 81-102”) (“Approval 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 all of the provinces and territories (except Nunavut) of Canada.
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 Filers:
Acuity
Acuity is a corporation incorporated under the laws of Ontario with its head office in Toronto, Ontario.
Acuity is currently registered with the principal regulator as an investment fund manager, exempt market dealer and mutual fund dealer.
Acuity acts as manager of the mutual funds listed on Appendix "A" (the "Funds") as well as trustee for those Funds that were created as trusts.
Acuity is not in default of securities legislation in any province or territory.
The Funds
The Funds are governed by the laws of Ontario and are either trusts operating under the provisions of a master declaration of trust or are a class of shares of Acuity Corporate Class Ltd. ("ACC"), a mutual fund corporation and an affiliate of Acuity.
Securities of the Funds are distributed in each province and territory (except Nunavut) of Canada under a simplified prospectus and annual information form dated August 18, 2010, as amended, prepared in accordance with National Instrument 81-101 – Mutual Fund Prospectus Disclosure.
Each Fund is a reporting issuer under the applicable securities legislation of each province and territory (except Nunavut) of Canada.
The Funds are not in default of securities legislation in any province or territory.
AGF
AGF is a corporation incorporated under the laws of Ontario and owns (directly or indirectly) a group of financial and wealth management service companies that operate around the world. AGF and its affiliates have approximately $44 billion in assets under management and shares of AGF trade on the Toronto Stock Exchange ("TSX") under the symbol AGF.B.
AGF is not in default of securities legislation in any province or territory.
Proposed Transaction and Change of Control
The Filers jointly issued a press release on November 30, 2010 announcing that AGF had agreed to buy, and the shareholders of Acuity had agreed to sell, all the issued and outstanding shares of Acuity to AGF (the “Proposed Transaction”).
Also, in connection with the Proposed Transaction, AGF agreed to purchase on the closing all the outstanding Class A shares and Class B shares of ACC from the shareholders of ACC who hold such shares.
The Proposed Transaction is anticipated to close on or about February 1, 2011 (subject to receipt of applicable regulatory approvals and other customary closing conditions) and will result in a change of control of Acuity ("Change of Control") for purposes of subsection 5.5(2) of NI 81-102 when AGF acquires all the issued and outstanding shares of Acuity.
A press release, material change report and an amendment to the Funds’ current simplified prospectus and annual information form were duly issued and filed on SEDAR in accordance with the Funds’ continuous disclosure obligations.
Written notice of the Change of Control was timely delivered to all securityholders of the Funds on November 30, 2010.
A notice regarding the change of control of Acuity was submitted to the registration branch of the Ontario Securities Commission on December 21, 2010 pursuant to section 11.9 of National Instrument 31-103 Registration Requirements and Exemptions.
The directors and some officers of Acuity and ACC are anticipated to change after the Closing. The directors and officers of Acuity who are so replaced by AGF will, however, be replaced by individuals who are currently directors or officers of AGF Investments Inc., which is registered with the securities regulatory authorities in all provinces and territories of Canada. The directors and officers of ACC who are so replaced by AGF will be replaced by individuals who are currently directors or officers of AGF All World Tax Advantage Group Limited. By virtue of their roles as directors or officers of AGF Investments Inc. or AGF All World Tax Advantage Group Limited, such new directors and officers of Acuity and ACC have demonstrated the necessary education, experience, integrity and competence to be directors and officers of Acuity and ACC.
The Filers have reviewed OSC Staff Notice 81-710 Approvals for a Change in Control of a Mutual Fund Manager and Change of a Mutual Fund Manager under National Instrument 81-107 Mutual Funds (the Notice) and acknowledge the policy concerns expressed in the Notice.
In respect of the impact of the Change of Control on the management and administration of the Funds:
(a) AGF has confirmed that there are no current plans:
(i) to amalgamate or merge Acuity with another investment fund manager;
(ii) immediately following the Closing, to change the manager of the Funds to either AGF or an affiliate of AGF;
(iii) within a foreseeable period of time, to change the manager of the Funds to either AGF or an affiliate of AGF;
(b) AGF intends to maintain the Funds as a separate family of funds for some period of time after Closing;
(c) there is no current intention to increase the management fees that the Funds pay or the operating expenses borne by the Funds;
(d) there are no current plans to change the Funds’ portfolio manager, Acuity Investment Management Inc. ("AIMI"), or the individual portfolio managers of AIMI who currently manage the investment portfolios of the Funds within a foreseeable period of time following the Closing; and
(e) the Change of Control is not expected to materially affect the management of the Funds and will not affect the financial stability of Acuity or its ability to fulfill its regulatory obligations.
AGF intends to make some changes involving the Funds over the course of time after Closing. These may include changes to Acuity’s compliance processes and other operational functions and potentially to the Fund’s custodian and/or auditors. Other changes include changes to the fundamental investment objectives of certain Funds, which would require securityholder approvals under NI 81-102, and are expected to include the mergers of certain Funds with funds managed by AGF Investments Inc. Such mergers would be designed to avoid duplication between the Funds and funds managed by AGF Investments Inc., and to take advantage of benefits such as enhanced liquidity and potential improvements in management expense ratios. Any such mergers would be implemented in accordance with applicable securities legislation.
To the extent that any change is made after Closing which constitutes a “material change” to the Funds within the meaning of National Instrument 81-106 - Investment Fund Continuous Disclosure (“NI 81-106”), the 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 regulatory authorities or Fund securityholders in connection with any such material change will be delivered or obtained, as required under applicable Canadian securities legislation.
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.
“Vera Nunes”
Vera Nunes
Assistant Manager, Investment Funds Branch
ONTARIO SECURITIES COMMISSION
SEDAR #1678700
Appendix “A”
Trust Funds
Acuity Canadian Equity Fund
Acuity All Cap 30 Canadian Equity Fund
Acuity Canadian Small Cap Fund
Acuity Natural Resource Fund
Acuity Clean Environment Equity Fund
Acuity EAFE Equity Fund
Acuity Canadian Balanced Fund
Acuity Conservative Asset Allocation Fund
Acuity Diversified Income Fund
Acuity Growth & Income Fund
Acuity High Income Fund
Acuity Dividend Fund
Acuity Fixed Income Fund
Acuity Global High Income Fund
Acuity Global Dividend Fund
Acuity Money Market Fund
Acuity Social Values Canadian Equity Fund
Acuity Social Values Global Equity Fund
Acuity Social Values Balanced Fund
Alpha Global Portfolio
Alpha Growth Portfolio
Alpha Balanced Portfolio
Alpha Social Values Portfolio
Alpha Income Portfolio
Fonds d’actions canadiennes Acuity
Fonds d’actions canadiennes de 30 sociétés toutes capitalisations Acuity
Fonds de sociétés canadiennes à faible capitalisation Acuity
Fonds de ressources naturelles Acuity
Fonds d’actions environnement sain Acuity
Fonds d’actions EAEO Acuity
Fonds équilibré canadien Acuity
Fonds de répartition prudente de l’actif Acuity
Fonds diversifié de revenu Acuity
Fonds de revenu et de croissance Acuity
Fonds de revenu élevé Acuity
Fonds de dividendes Acuity
Fonds de revenu fixe Acuity
Fonds mondial de revenu élevé Acuity
Fonds mondial de dividendes Acuity
Fonds marché monétaire Acuity
Fonds d’actions canadiennes valeurs sociales Acuity
Fonds mondial d’actions valeurs sociales Acuity
Fonds équilibré de valeurs sociales Acuity
Portefeuille mondial Alpha
Portefeuille croissance Alpha
Portefeuille équilibré Alpha
Portefeuille valeurs sociales Alpha
Portefeuille de revenu Alpha
Acuity Corporate Class Ltd.
Acuity All Cap 30 Canadian Equity Class
Acuity Natural Resource Class
Acuity High Income Class
Acuity Diversified Income Class
Acuity Short Term Income Class
Catégorie d’actions canadiennes de 30 sociétés toutes capitalisations Acuity
Catégorie de ressources naturelles Acuity
Catégorie de revenu élevé Acuity
Catégorie diversifiée de revenu Acuity
Catégorie de revenu à court terme Acuity