Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted to mutual funds for extension of lapse date of prospectuses for 66 days – Lapse date extended to accommodate system conversion and fund mergers – Extension of lapse date will not affect the currency or accuracy of the information contained in the prospectuses – Securities Act (Ontario).
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as amended, s.62(1.1) and 147.
July 25, 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
CI INVESTMENTS INC.
(the Manager)
AND
IN THE MATTER OF
CASTLEROCK BALANCED GROWTH PORTFOLIO
CASTLEROCK BALANCED PORTFOLIO
CASTLEROCK CANADIAN BALANCED FUND
CASTLEROCK CANADIAN BOND FUND
CASTLEROCK CANADIAN STOCK FUND
CASTLEROCK CANADIAN VALUE FUND
CASTLEROCK CANADIAN MONEY MARKET FUND
CASTLEROCK CONSERVATIVE PORTFOLIO
CASTLEROCK GLOBAL HIGH INCOME FUND
CASTLEROCK GROWTH PORTFOLIO
CASTLEROCK TOTAL RETURN FUND
CI EUROPEAN CORPORATE CLASS
CI EUROPEAN FUND
CI INTERNATIONAL BALANCED CORPORATE CLASS
CI INTERNATIONAL BALANCED FUND
CI JAPANESE CORPORATE CLASS
CI VALUE TRUST CORPORATE CLASS
LAKEVIEW DISCIPLINED LEADERSHIP U.S. EQUITY FUND
SIGNATURE MORTGAGE FUND
(the Funds, and together with the Manager, 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 an exemption that the time limits pertaining to filing the renewal prospectuses of the Filers be extended as if the lapse date of the simplified prospectuses, annual information forms and fund facts dated July 27, 2011 of the Funds, as amended from time to time, (collectively, the Prospectuses) is October 1, 2012 (the Requested Relief).
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 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 they are defined in this decision.
Representations
This decision is based on the following facts represented by the Filers:
Each Fund is a reporting issuer (or the equivalent) as defined in the Legislation of each of the Jurisdictions and is not in default of any of the requirements of the Legislation.
Each Fund currently distributes its securities in all the Jurisdictions pursuant to the Prospectuses.
The lapse date of the Prospectuses under the Legislation is July 27, 2012.
There was a change of control of the former manager of the Castlerock Funds (defined in Appendix “A”) on December 15, 2010 as the Manager purchased all of the outstanding shares of Hartford Investments Canada Corp.
The Manager and Castlerock Investments Inc. (formerly Hartford Investments Canada Corp.) amalgamated on June 30, 2011.
The Manager manages, in aggregate, over 170 mutual funds (the Affiliated Funds). The Affiliated Funds currently distribute their securities to the public under three simplified prospectuses and annual information forms (collectively, the CI Prospectuses), each of which have July 27, 2012 as their earliest lapse dates under the Legislation.
The Affiliated Funds share many common operational and administrative features which simplify the ability of investors to compare the Affiliated Funds and implement switches of investments between the Affiliated Funds.
The Manager intends to convert the Castlerock Funds onto the CI platform (the Conversion) thereby simplifying the ability of investors to compare the Funds with the Affiliated Funds and implement switches of investments between the Castlerock Funds and the Affiliated Funds.
The current back office provider has indicated that the earliest they can accommodate the Conversion is during the month of July 2012, with a fall back date of August 2012. As such, the Manager intends to undertake the Conversion during July or August 2012.
On May 28, 2012, the Manager announced by press release, in connection with which a material change report and amendment to the Prospectuses were filed on SEDAR, that it is proposing to streamline its mutual fund line-up by merging the Funds with certain Affiliated Funds (the Mergers). These Mergers cannot be completed until after the Conversion has been completed. As a result, the Manager may not be able to implement these Mergers until September 2012. The Mergers will allow unitholders to benefit from larger funds with better investment opportunities and lower portfolio costs due to economies of scale. Certain of the Mergers may also allow unitholders of the Funds to participate in the tax-advantaged corporate class funds that are part of the Affiliated Funds.
It is the intention of the Manager to adopt additional operational and administrative features for the Castlerock Funds which are consistent with the Affiliated Funds in order for investors in the Castlerock Funds and the Affiliated Funds to more easily compare the features of these mutual funds, including aligning the deferred sales charge methodology. These changes require the Conversion to have been completed.
Because the changes relating to the Manager adopting operational and administrative features for the Castlerock Funds are extensive and require changes to the back office facilities (that can only be implemented once the Conversion is complete), that information be disseminated to financial advisors and that prospectus disclosure of the Castlerock Funds may be amended, the Manager cannot complete the changes until the Conversion which is expected to be in July or August 2012.
The independent review committee for the Funds has reviewed the Mergers with respect to conflict of interest issues and has determined that the Mergers achieve a fair and reasonable result for investors. Subject to obtaining all applicable investor, regulatory and other required approvals, the Manager intends to effect the Mergers on or about September 7, 2012, after which the Funds will be wound up. An extension of the Lapse date is therefore requested until October 1, 2012.
The Mergers will be effected in accordance with applicable requirements of the Legislation, including National Instrument 81-102 Mutual Funds, National Instrument 81-106 Investment Fund Continuous Disclosure and National Instrument 81-107 Independent Review Committee for Investment Funds.
Special meetings of the securityholders of certain Funds will be held on or about September 7, 2012 to approve the Mergers of certain of the Funds into other mutual funds managed by the Filers.
If the Requested Relief is not granted, a pro forma simplified prospectus and a final prospectus for the Funds would have to be filed by June 30, 2012 and July 27, 2012 respectively in accordance with the existing time limits for the renewal of the Prospectuses, notwithstanding that the Funds will be wound up after the effective date of the Mergers. It is not planned to file a pro forma simplified prospectus in order to avoid the costs and potential confusion which may result from the Funds having a renewal prospectus that would be used for only approximately two months.
There have been no material changes in the affairs of any Fund since the filing of the Prospectuses, other than those for which amendments have been filed. Accordingly, the Prospectuses represent current information regarding each Fund.
The Requested Relief will not affect the accuracy of the information in the Prospectuses and therefore will not be prejudicial to the public interest.
Decision
The principal regulator is satisfied that the decision meets the test set out for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Requested Relief is granted.
“C. Portner” “C. Wesley M. Scott”
Name: C. Portner Name: C. Wesley M. Scott
Title: Commissioner Title: Commissioner
Ontario Securities Commission Ontario Securities Commission
Appendix “A”
In this order, “Castlerock Funds” mean:
Castlerock Balanced Growth Portfolio
Castlerock Balanced Portfolio
Castlerock Canadian Balanced Portfolio
Castlerock Canadian Bond Fund
Castlerock Canadian Stock Fund
Castlerock Canadian Value Fund
Castlerock Canadian Money Market Fund
Castlerock Conservative Portfolio
Castlerock Global High Income Fund
Castlerock Global Growth Portfolio
Castlerock Total Return Fund
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted to mutual funds for extension of lapse date of prospectuses for 66 days – Lapse date extended to accommodate system conversion and fund mergers – Extension of lapse date will not affect the currency or accuracy of the information contained in the prospectuses – Securities Act (Ontario).
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as amended, s.62(1.1) and 147.