In the Matter of AGF Investments Inc., 2012 CanLII 24428

Headnote NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Approval of mutual fund mergers – approval required because mergers do not meet the criteria for pre-approved reorganizations and transfer in National Instrument 81-102 – certain merging funds do not have substantially similar investment objectives and fees structure – certain mergers not a “qualifying exchange” or a tax-deferred transaction under Income Tax Act – securityholders of terminating funds provided with timely and adequate disclosure regarding the mergers.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds sections 5.5(1)(b), 5.5(3), 5.6, 5.7.

May 4 , 2012

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)

and

In the Matter of

the Merging Funds (as hereinafter defined)

and

In the Matter of the Continuing Funds (as hereinafter defined)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from AGF, the manager of each of the funds discussed below (AGF together with the funds discussed below are hereinafter referred to as the Filers) for a decision under the securities legislation of the Principal Jurisdiction (the Legislation) for merger approvals (Merger Approval) pursuant to clause 5.5(1)(b) of National Instrument 81-102 - Mutual Funds (NI 81-102).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for the 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, Quebec, 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 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

The following terms shall have the following meanings:

AWTAG

refers to AGF All World Tax Advantage Group Limited

Circular

refers to the management information circular described in this Application

Continuing Funds

refers, collectively, to AGF Canadian Stock Fund, Acuity Natural Resource Fund, Acuity Conservative Asset Allocation Fund, Acuity Social Values Canadian Equity Fund, Acuity Social Values Balanced Fund and AGF Canada Class

Continuing Trust Funds

refers, collectively, to AGF Canadian Stock Fund, Acuity Natural Resource Fund, Acuity Conservative Asset Allocation Fund, Acuity Social Values Canadian Equity Fund and Acuity Social Values Balanced Fund

Corporate Funds

refers to AGF Canadian Stock Class and AGF Canada Class

Corporate Fund Merger Effective Date

refers to May 25, 2012 – the expected date for effecting the Proposed Corporate Fund Merger

IRC

refers to the independent review committee of a fund or funds

Merging Funds

refers, collectively to AGF Canadian Value Fund, AGF Global Resources Fund, Acuity Canadian Balanced Fund, Acuity Social Values Global Equity Fund, Alpha Social Values Portfolio and AGF Canadian Stock Class

Merging Trust Funds

refers, collectively, to AGF Canadian Value Fund, AGF Global Resources Fund, Acuity Canadian Balanced Fund, Acuity Social Values Global Equity Fund and Alpha Social Values Portfolio

OBCA

refers to the Business Corporations Act (Ontario)

Tax Act

refers to the Income Tax Act (Canada)

Trust Fund Mergers Effective Date

refers to May 25, 2012 – the expected date for effecting the Proposed Trust Fund Mergers

Trust Funds

refers, collectively, to the Merging Trust Funds and the Continuing Trust Funds

Representations

This decision is based on the following facts represented by the Filers:

The Filers

1. The head office of AGF is located in Toronto, Ontario. The Filers are not in default of securities legislation in any jurisdiction of Canada.

2. On March 1, 2012, AGF Investments Inc. amalgamated with Acuity Funds Ltd. and continued as one corporation known as AGF Investments Inc. AGF is a corporation existing under the laws of Ontario.

3. AWTAG is a multi-class mutual fund corporation incorporated under the laws of Ontario. AWTAG offers both AGF Canadian Stock Class and AGF Canada Class.

4. Each of the Trust Funds is an open-end mutual fund trust established under the laws of Ontario by a declaration of trust pursuant to which AGF is the trustee.

5. AGF is the manager and trustee of each of the Trust Funds and the manager of each of the Corporate Funds.

6. Each of the Trust Funds and Corporate Funds is a reporting issuer under the applicable securities legislation of each jurisdiction in Canada.

7. The funds (the Funds) proposed to be merged (the Proposed Mergers) are set forth below:

MERGING FUND

CONTINUING FUND

Proposed Corporate Fund Merger

AGF Canadian Stock Class

AGF Canada Class

Proposed Trust Fund Mergers

AGF Canadian Value Fund

AGF Canadian Stock Fund

AGF Global Resources Fund

Acuity Natural Resource Fund

Acuity Canadian Balanced Fund

Acuity Conservative Asset Allocation Fund

Acuity Social Values Global Equity Fund

Acuity Social Values Canadian Equity Fund

Alpha Social Values Portfolio

Acuity Social Values Balanced Fund

8. Meetings of securityholders of all of the Merging Funds were held on April 10, 2012. All other approvals required by the OBCA in connection with the Proposed Corporate Fund Merger have been obtained.

9. AGF will be responsible for the costs associated with the special meeting matters.

10. There will be no sales charges payable in connection with the acquisition by a Continuing Fund of the investment portfolio of the corresponding Merging Fund.

11. Pursuant to NI 81-107 - Independent Review Committee for Investment Funds, the IRC has reviewed the Proposed Mergers on behalf of the Merging Funds and the Continuing Funds and the process to be followed in connection with the Proposed Mergers, and has advised AGF that in the IRC’s opinion, having reviewed each of the Proposed Mergers as a potential conflict of interest, following the process proposed, each of the Proposed Mergers achieves a fair and reasonable result for each of the Merging Funds and the Continuing Funds.

12. The relevant notices of the meetings and Circular have been mailed to securityholders of the relevant Funds and filed on SEDAR in accordance with applicable securities legislation.

13. Each of the Merging Funds will be wound up as soon as possible following completion of the Proposed Mergers.

The Proposed Corporate Fund Merger

14. AGF proposes that AGF Canadian Stock Class be merged into AGF Canada Class.

15. AGF currently proposes to effect the Proposed Corporate Fund Merger on or about May 25, 2012 (the Corporate Fund Merger Effective Date).

16. AGF has determined that the Proposed Corporate Fund Merger will not be a material change to AGF Canada Class due to the small size of AGF Canadian Stock Class relative to AGF Canada Class.

17. Shareholders of AGF Canada Class will be permitted to dissent from the Proposed Corporate Fund Merger pursuant to the provisions of the OBCA.

18. Securityholders of AGF Canadian Stock Class will continue to have the right to redeem securities of AGF Canadian Stock Class at any time up to the close of business immediately before the Corporate Fund Merger Effective Date.

Proposed Trust Fund Mergers

19. AGF is proposing that there be mergers of the Merging Trust Funds with the relevant Continuing Trust Funds.

20. AGF currently proposes to effect the Proposed Trust Fund Mergers of the Merging Trust Funds and Continuing Trust Funds on or about May 25, 2012 (the Trust Fund Mergers Effective Date).

21. AGF has determined that the Proposed Trust Fund Mergers will not be a material change to each of the Continuing Trust Funds due to the small size of the Merging Trust Funds relative to the applicable Continuing Trust Funds.

22. Securityholders of the Merging Trust Funds will continue to have the right to redeem securities of the Merging Trust Funds at any time up to the close of business immediately before the Trust Fund Mergers Effective Date.

Reasons for Merger Approval

23. AGF requires Merger Approval in connection with one or more Proposed Mergers and cannot rely on section 5.6(1) of NI 81-102 for the following reasons:

(a) the investment objectives of some of the Merging Funds with its corresponding Continuing Fund are not substantially similar;

(b) certain of the Proposed Trust Fund Mergers are not tax deferred mergers;

(c) certain of the Merging Funds do not have the same fees as the relevant Continuing Funds; and

(d) the materials sent to securityholders of the Merging Funds did not include a copy of the current simplified prospectus or the most recently filed fund facts document of the Continuing Funds.

24. Although the investment objectives of some Merging Funds or method of implementation may not be substantially similar to the relevant Continuing Funds, they are nevertheless complementary.

25. Current Canadian tax laws do not permit the merger of a unit trust with a mutual fund trust and certain Proposed Mergers would cause a Continuing Fund to lose its material loss carry forwards if done on a tax deferred basis.

26. To the extent that the fees of certain Merging Funds are lower than those of the Continuing Funds, the fees of the Continuing Funds will be lowered for all outstanding securities of such Continuing Funds and to the extent that the fees of certain Merging Funds are higher than those of the Continuing Funds, the securityholders of the Merging Funds will benefit from a decrease in fees.

27. Except as noted above, AGF believes that each Proposed Merger satisfies all of the criteria for pre-approved reorganizations and transfers set forth in section 5.6(1) of NI 81-102.

28. AGF believes that the Mergers will be beneficial to securityholders of each Fund for the following reasons:

(a) it is expected that each Proposed Merger will reduce duplication and create operational efficiencies;

(b) following the Proposed Mergers, each Continuing Fund will have more assets, thereby allowing for increased portfolio diversification opportunities; and

(c) each Continuing Fund will benefit from its larger profile in the marketplace.

29. AGF submits that the investors will not be prejudiced in connection with the Proposed Mergers as:

(a) the Circular sent to securityholders in connection with a Proposed Merger provided sufficient information about the Proposed Merger to permit securityholders to make an informed decision about the Proposed Merger including the tax implications of the Proposed Merger, the differences between the Merging Fund and the Continuing Fund and the Funds' IRC's recommendation that the Mergers achieve a fair and reasonable result for the applicable Funds;

(b) the Circular sent to securityholders prominently disclosed the various ways in which securityholders can obtain the most recently filed annual information form, fund facts documents, interim and annual financial statements and management reports of fund performance of the Funds;

(c) each applicable Continuing Fund and Merging Fund with respect to a Proposed Merger have an unqualified audit report in respect of their last completed financial period;

(d) also accompanying the Circular delivered to securityholders was a tailored simplified prospectus consisting of:

(i) the current Part A of the simplified prospectus of the applicable Continuing Fund; and

(ii) the current Part B of the simplified prospectus of the applicable Continuing Fund;

(e) securityholders of the Merging Funds approved the Proposed Mergers at meetings held on April 10, 2012.

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 Merger Approval is granted.

“Raymond Chan”

Raymond Chan

Manager, Investment Funds Branch

Ontario Securities Commission

SEDAR Project # 1869139 & 1869144

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Approval of mutual fund mergers – approval required because mergers do not meet the criteria for pre-approved reorganizations and transfer in National Instrument 81-102 – certain merging funds do not have substantially similar investment objectives and fees structure – certain mergers not a “qualifying exchange” or a tax-deferred transaction under Income Tax Act – securityholders of terminating funds provided with timely and adequate disclosure regarding the mergers.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds sections 5.5(1)(b), 5.5(3), 5.6, 5.7.