In the Matter of AGF Investments INC., 2015 CanLII 35730

June 24, 2015

In the Matter of

the Securities Legislation of

Ontario

(the Principal 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 Principal 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 – Investment Funds (NI 81-102) and an exemption pursuant to National Policy 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions (NP 11-203).

The funds (each a Fund and collectively, the Funds) proposed to be merged (the Proposed Mergers) are set forth below:

MERGING FUND

CONTINUING FUND

Proposed Corporate Fund Merger

AGF Canadian Resources Class

AGF Global Resources Class

Proposed Trust Fund Merger

AGF Traditional Balanced Fund

AGF Traditional Income Fund

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, 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 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined. The following additional terms shall have the following meanings:

AGF AIF

refers to the AGF funds’ annual information form dated April 17, 2015, as amended

AGF SP

refers to the AGF funds’ simplified prospectus dated April 17, 2015, as amended

AWTAG

refers to AGF All World Tax Advantage Group Limited

Circular

refers to the management information circular described in this Application

Continuing Trust Fund

refers to AGF Traditional Income Fund

Corporate Funds

refers to AGF Canadian Resources Class and AGF Global Resources Class

Corporate Fund Merger Effective Date

refers to June 26, 2015 – the expected date for effecting the Proposed Corporate Fund Merger

IRC

refers to the independent review committee of a Fund or Funds

Merging Trust Fund

refers to AGF Traditional Balanced Fund

OBCA

refers to the Business Corporations Act (Ontario)

Tax Act

refers to the Income Tax Act (Canada)

Trust Fund Merger Effective Date

refers to June 26, 2015 – the expected date for effecting the Proposed Trust Fund Merger

Trust Funds

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

Representations

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

The Filers

1. 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.

2. AWTAG is a multi-class mutual fund corporation incorporated under the laws of Ontario. AWTAG offers both AGF Canadian Resources Class and AGF Global Resources Class.

3. 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.

4. AGF is the investment fund manager and trustee of each of the Trust Funds and the investment fund manager of each of the Corporate Funds.

5. AGF is registered as an investment fund manager in each of Ontario, Québec, Alberta, British Columbia and Newfoundland and Labrador.

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

7. Securityholders of the Merging Trust Fund will be asked to approve the Proposed Trust Fund merger at a special meeting to be held on June 25, 2015. Securityholders of the Corporate Funds will also be asked to approve the Corporate Fund Merger, as required by the OBCA, at a special meeting to be held on June 25, 2015.

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

9. If securityholder approval is not received at a special meeting of securityholders of the Merging Trust Fund or in respect of the Proposed Corporate Fund Merger, then the relevant merger will not proceed.

10. AGF is not entitled to seek the approval of the respective IRCs for the Proposed Mergers due to the fact that one or more conditions of section 5.6 of NI 81-102 will not be met as required by section 5.3(2)(c) of NI 81-102.

11. Pursuant to NI 81-107 - Independent Review Committee for Investment Funds, on May 20, 2015, the IRCs 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 have advised AGF that in the IRCs’ 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. The Circular includes prospectus-like disclosure concerning the Continuing Funds resulting from the Proposed Mergers, including information regarding fees, expenses, investment objectives, investment strategies, valuation procedures, the manager, the investment manager, redemptions, income tax considerations, dividend policies and net asset values. The Circular also includes disclosure where securityholders can obtain the most recent continuous disclosure documents of the Merging Funds and the Continuing Funds. Also accompanying the Circular delivered to securityholders is a Fund Facts document of the relevant Continuing Fund.

The Proposed Corporate Fund Merger

14. AGF proposes that AGF Canadian Resources Class be merged into AGF Global Resources Class.

15. The Filers currently propose to effect the Proposed Corporate Fund Merger on or about June 26, 2015 (the Corporate Fund Merger Effective Date).

16. It is proposed that AGF intends to undertake the following steps in order to effect the Proposed Corporate Fund Merger: (i) review the investment portfolio of AGF Canadian Resources Class and consider the portfolio in light of the investment objectives of AGF Global Resources Class, in consultation with the portfolio manager of AGF Global Resources Class. If AGF Canadian Resources Class holds investments which are not suitable for AGF Global Resources Class, those investments will be sold. The value of any investments sold will depend on prevailing market conditions; (ii) on the Corporate Fund Merger Effective Date, convert the securities of each series of AGF Canadian Resources Class for securities of the relevant series of AGF Global Resources Class having a net asset value thereof, so that securityholders of AGF Canadian Resources Class shall become direct securityholders of AGF Global Resources Class holding the identical series of securities; (iii) on the Corporate Fund Merger Effective Date, re-allocate the assets and liabilities allocated to AGF Canadian Resources Class to AGF Global Resources Class; (iv) effectively terminate AGF Canadian Resources Class by ceasing to utilize and offer the existing corporate class; and cancel any outstanding share certificates (if applicable) of AGF Canadian Resources Class; and (v) cancel any outstanding share certificates (if applicable) of AGF Canadian Resources Class.

17. AGF has determined that the Proposed Corporate Fund Merger will not be a material change to AGF Global Resources Class. AGF is of the view that AGF Canadian Resources Class and AGF Global Resources Class are materially the same size. In addition, the merger of AGF Canadian Resources Class into AGF Global Resources Class will not involve any material realignment of the investment portfolios of the AGF Canadian Resources Class or the AGF Global Resources Class in order to complete the merger. As such, AGF is of the view that there is no material impact on the securityholders of the AGF Global Resources Class which would constitute a material change. Nonetheless, in compliance with applicable corporate law, meetings of the securityholders of AGF Canadian Resources Class and AGF Global Resources Class, respectively, will be held to approve the Proposed Corporate Fund Merger.

18. Shareholders of AGF Global Resources Class will be permitted to dissent from the Proposed Corporate Fund Merger pursuant to the provisions of the OBCA.

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

The Proposed Trust Fund Merger

20. AGF is proposing that there be a merger of the Merging Trust Fund with the relevant Continuing Trust Fund.

21. The Filers currently propose to effect the Proposed Trust Fund Merger of the Merging Trust Fund and Continuing Trust Fund on or about June 26, 2015 (the Trust Fund Merger Effective Date).

22. It is proposed that AGF intends to undertake the following steps in order to effect the Proposed Trust Fund Merger: (i) review the Merging Trust Fund’s investment portfolio and consider the portfolio in light of the investment objectives of the Continuing Trust Fund, in consultation with the portfolio manager of the Continuing Trust Fund. If the Merging Trust Fund holds investments which are not suitable for the Continuing Trust Fund, those investments will be sold. The value of any investments sold will depend on prevailing market conditions; (ii) prior to the Trust Fund Merger Effective Date, the Merging Trust Fund will distribute to its securityholders sufficient net income and net realized capital gains so that the Merging Trust Fund will not be subject to tax under Part I of the Tax Act for the taxation year ended at the time of the Proposed Trust Fund Merger; (iii) on the Trust Fund Merger Effective Date, transfer substantially all of the Merging Trust Fund’s assets (after reserving sufficient assets to satisfy its estimated liabilities) to the Continuing Trust Fund in exchange for securities of the Continuing Trust Fund having an aggregate net asset value equal to the aggregate value of the net assets transferred;(iv) immediately thereafter redeem the securities of the Merging Trust Fund for a price equal to the net asset value thereof and pay that net asset value by way of the transfer of securities of the relevant series of the Continuing Trust Fund to each securityholder of the Merging Trust Fund, so that such securityholders of the Merging Trust Fund shall become direct securityholders of such Continuing Trust Fund holding the identical series of securities; (v) terminate the Merging Trust Fund; and (vi) cancel any outstanding unit certificates (if applicable) of the Merging Trust Fund.

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

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

Reasons for Merger Approval

25. The Filers require Merger Approval in connection with the Proposed Mergers and cannot rely on section 5.6(1) of NI 81-102 because the investment objectives of the Merging Funds are not substantially similar to its corresponding Continuing Funds.

26. Although the investment objectives of the Merging Funds may not be substantially similar to the relevant Continuing Funds, they are nevertheless complementary.

27. 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, except as follows:

PROPOSED MERGER

REASONS FOR MERGER APPROVAL

AGF Canadian Resources Class merging into AGF Global Resources Class

Different investment objectives

AGF Traditional Balanced Fund merging into AGF Traditional Income Fund

Different investment objectives

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.

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 provided that AGF obtains the prior approval of the securityholders of each of the Merging Funds of the Proposed Mergers.

“Darren McKall”

_______________________________

Darren McKall, Manager

Investment Funds and Structured Products Branch

Ontario Securities Commission