November 11, 2016
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 MACKENZIE FINANCIAL CORPORATION (the Filer)
AND
MACKENZIE REAL RETURN BOND FUND, MACKENZIE GLOBAL BOND FUND, MACKENZIE USD CONVERTIBLE SECURITIES FUND, MACKENZIE GLOBAL ASSET STRATEGY FUND, MACKENZIE CANADIAN CONCENTRATED EQUITY FUND, MACKENZIE ALL CAP DIVIDEND CLASS, MACKENZIE DIVERSIFIED EQUITY FUND, MACKENZIE GLOBAL DIVERSIFIED EQUITY CLASS AND MACKENZIE GLOBAL CONCENTRATED EQUITY CLASS (COLLECTIVELY, THE “TERMINATING FUNDS” AND INDIVIDUALLY, A “TERMINATING FUND”)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Terminating Funds, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) approving the proposed reorganization of each of the Terminating Funds with applicable Continuing Funds (each as defined below), pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (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 Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories in Canada (the Other Jurisdictions, collectively with Ontario, the Jurisdictions).
Interpretation
Terms defined in NI 81-102, National Instrument 14-101 Definitions, and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Closed and Exempt Mergers means the following Mergers, which: (i) involve Series E, J, PWX and PWX8 of the Continuing Funds which are not currently offered for purchase and are not currently qualified for distribution under a prospectus; or (ii) involve Series O, QF5 series, D5 series, D8 series, H series, H5 series, L series, L5 series, L8 series, N series, N5 series, QF series and Quadrus series of the Continuing Funds which are expected to be offered for sale under a simplified prospectus in advance of the Merger, however, the receipt for the final prospectus will not be issued in advance of the information circular mailing date:
| Terminating Fund | Continuing Fund |
|---|---|
| Mackenzie Real Return Bond Fund Series J | Mackenzie Canadian Bond Fund Series J |
| Mackenzie Diversified Equity Fund Series J | Mackenzie Global Dividend Fund Series J |
| Mackenzie Global Diversified Equity Class Series E | Mackenzie Global Dividend Fund Series E |
| Mackenzie Global Diversified Equity Class Series J | Mackenzie Global Dividend Fund Series J |
| Mackenzie All Cap Dividend Class Series PWX | Mackenzie Canadian All Cap Dividend Class Series PWX |
| Mackenzie All Cap Dividend Class Series PWX8 | Mackenzie Canadian All Cap Dividend Class Series PWX8 |
| Mackenzie Canadian Concentrated Equity Fund Quadrus series | Mackenzie Canadian Growth Fund Quadrus series |
| Mackenzie Canadian Concentrated Equity Fund D5 series | Mackenzie Canadian Growth Fund D5 series |
| Mackenzie Canadian Concentrated Equity Fund D8 series | Mackenzie Canadian Growth Fund D8 series |
| Mackenzie Canadian Concentrated Equity Fund H series | Mackenzie Canadian Growth Fund H series |
| Mackenzie Canadian Growth Fund H5 series | Mackenzie Canadian Growth Fund H5 series |
| Mackenzie Canadian Concentrated Equity Fund L series | Mackenzie Canadian Growth Fund L series |
| Mackenzie Canadian Growth Fund L5 series | Mackenzie Canadian Growth Fund L5 series |
| Mackenzie Canadian Concentrated Equity Fund L8 series | Mackenzie Canadian Growth Fund L8 series |
| Mackenzie Canadian Concentrated Equity Fund N series | Mackenzie Canadian Growth Fund N series |
| Mackenzie Canadian Concentrated Equity Fund N5 series | Mackenzie Canadian Growth Fund N5 series |
| Mackenzie Canadian Concentrated Equity Fund QF series | Mackenzie Canadian Growth Fund QF series |
| Mackenzie Canadian Concentrated Equity Fund QF5 series | Mackenzie Canadian Growth Fund QF5 series |
| Mackenzie All Cap Dividend Class Series O | Mackenzie Canadian All Cap Dividend Class Series O |
Continuing Funds means Mackenzie Canadian Bond Fund, Mackenzie Global Tactical Bond Fund, Mackenzie USD Global Tactical Bond Fund, Mackenzie Global Strategic Income Fund, Mackenzie Canadian Growth Fund, Mackenzie Canadian All Cap Dividend Class, Mackenzie Global Dividend Fund, and Mackenzie Global Concentrated Equity Fund (collectively, the “Continuing Funds” and individually, a “Continuing Fund”).
Effective Date means on or about November 25, 2016, the anticipated date of the Proposed Reorganization.
Exempt Mergers means the following Mergers, where Series M, R, S and T6 of the Continuing Funds are or will be offered only on an exempt distribution basis;
| Terminating Fund | Continuing Fund |
|---|---|
| Mackenzie Real Return Bond Fund Series R | Mackenzie Canadian Bond Fund Series R |
| Mackenzie Global Asset Strategy Fund Series R | Mackenzie Global Strategic Income Fund Series R |
| Mackenzie Canadian Concentrated Equity Fund Series M | Mackenzie Canadian Growth Fund Series M |
| Mackenzie Canadian Concentrated Equity Fund Series R | Mackenzie Canadian Growth Fund Series R |
| Mackenzie Diversified Equity Fund Series S | Mackenzie Global Dividend Fund Series S |
| Mackenzie Global Diversified Equity Class Series S | Mackenzie Global Dividend Fund Series S |
Funds means collectively, the Terminating Funds and the Continuing Funds.
Grandfathering Mergers means the following Mergers, where the series of securities of the Continuing Funds are being created solely to facilitate the Mergers, will not be qualified for distribution under a prospectus and will not be available for purchase subsequent to the Mergers:
| Terminating Fund | Continuing Fund |
|---|---|
| Mackenzie Real Return Bond Fund Series A | Mackenzie Canadian Bond Fund Series B |
| Mackenzie Real Return Bond Fund Series G | Mackenzie Canadian Bond Fund Series C |
| Mackenzie Global Bond Fund Series A | Mackenzie Global Tactical Bond Fund Series B |
| Mackenzie Canadian Concentrated Equity Fund Series B | Mackenzie Canadian Growth Fund Series B |
| Mackenzie Canadian Concentrated Equity Fund Series C | Mackenzie Canadian Growth Fund Series B |
| Mackenzie Diversified Equity Fund Series G | Mackenzie Global Dividend Fund Series G |
| Mackenzie Global Concentrated Equity Class Series T8 | Mackenzie Global Concentrated Equity Fund Series T6 |
| Mackenzie Global Concentrated Equity Class Series T6 | Mackenzie Global Concentrated Equity Fund Series T6 |
| Mackenzie Global Bond Fund Series I | Mackenzie Global Tactical Bond Fund Series I |
| Mackenzie Global Concentrated Equity Class Series PWT8 | Mackenzie Global Concentrated Equity Fund Series PWT8 |
Proposed Reorganizations means each of the proposed mergers of the Terminating Funds into the applicable Continuing Funds.
Taxable Mergers means the following Mergers:
a) the merger of Mackenzie USD Convertible Securities Fund into Mackenzie USD Global Tactical Bond Fund;
b) the merger of Mackenzie Global Asset Strategy Fund into Mackenzie Global Strategic Income Fund;
c) the merger of Mackenzie Global Diversified Equity Class into Mackenzie Global Dividend Fund; and
d) the merger of Mackenzie Global Concentrated Equity Class into Mackenzie Global Concentrated Equity Fund.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
The Filer is a corporation governed by the laws of Ontario and is registered as follows: as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador; as a portfolio manager and exempt market dealer in Ontario and the Other Jurisdictions; and as a commodity trading manager in Ontario.
The Filer, with its head office in Toronto, Ontario, is the trustee and manager of the Funds.
The Funds
Each of Mackenzie All Cap Dividend Class, Mackenzie Global Diversified Equity Class, Mackenzie Global Concentrated Equity Class, and Mackenzie Canadian All Cap Dividend Class (collectively, the Corporate Class Funds) are separate classes of securities of Mackenzie Financial Capital Corporation (the Corporation). The remaining Funds are unit trusts (collectively, the Trust Funds).
The Funds are either unit trusts established under the laws of Ontario or separate classes of securities of the Corporation, a mutual fund corporation governed under the laws of Ontario. The Terminating Funds and Continuing Funds are each reporting issuers under the securities legislation of the Jurisdictions. Neither the Filer nor the Funds are in default of securities legislation in Jurisdiction, as applicable.
Other than circumstances in which the securities regulatory authority of a Jurisdiction has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices established under NI 81-102.
Securities of the Funds are currently qualified for sale under one or more of the simplified prospectus, annual information form and fund facts each dated September 29, 2016, as amended (collectively, the Mackenzie Mutual Funds Offering Documents), the simplified prospectus, annual information form and fund facts each dated June 29, 2016, as amended (collectively, the Quadrus Offering Documents) and/or the simplified prospectus, annual information form and fund facts each dated November 26, 2015, as amended (collectively, the “Laurentian Offering Documents”, and, together with the Mackenzie Mutual Funds Offering Documents and the Quadrus Offering Documents, the Offering Documents). Certain securities of certain Funds are offered only on an exempt distribution basis or are no longer available for purchase; for example, Series B, C, E, G, I, J, M, OJ, R and S securities of certain Funds have never been or are no longer qualified for distribution under a prospectus.
The net asset value for each class or series of the Funds, as applicable, is calculated on a daily basis in accordance with the Funds’ valuation policy and as described in the applicable Offering Documents.
Reasons for the Requested Relief
- Approval of the Proposed Reorganization is required because:
(a) the fundamental investment objectives of certain Continuing Funds are not, or may be considered not to be, “substantially similar” to the investment objectives of their corresponding Terminating Funds;
(b) certain Mergers will not be completed as a “qualifying exchange” or a tax‑deferred transaction under the Income Tax Act (Canada) (the “Tax Act”) (collectively, the Taxable Mergers); and
(c) as described below, the materials to be sent to certain securityholders of the Terminating Funds in respect of certain Mergers will not include the current simplified prospectus or the most recently filed fund facts documents for the series of the Continuing Funds into which the applicable series of the Terminating Funds are merging because either:
(i) the applicable series of the Continuing Funds are being created solely to facilitate the Mergers, will not be qualified for distribution under a prospectus and will not be available for sale subsequent to the Mergers (the Grandfathering Mergers);
(ii) the applicable series of the Continuing Funds are not currently offered for sale and are not currently qualified for distribution under a prospectus (the Closed and Exempt Mergers); or
(iii) the applicable series of the Continuing Funds are or will be offered only on an exempt distribution basis, as is the case with the series of the Terminating Funds merging into these series (the Exempt Mergers).
- Pursuant to the Proposed Reorganizations, securityholders of each of the Terminating Funds would become securityholders of the applicable Continuing Fund, as follows (each a “Merger” and collectively, the “Mergers”):
| Terminating Fund | Continuing Fund |
|---|---|
| Mackenzie Real Return Bond Fund | Mackenzie Canadian Bond Fund |
| Mackenzie Global Bond Fund | Mackenzie Global Tactical Bond Fund |
| Mackenzie USD Convertible Securities Fund | Mackenzie USD Global Tactical Bond Fund |
| Mackenzie Global Asset Strategy Fund | Mackenzie Global Strategic Income Fund |
| Mackenzie Canadian Concentrated Equity Fund | Mackenzie Canadian Growth Fund |
| Mackenzie All Cap Dividend Class | Mackenzie Canadian All Cap Dividend Class |
| Mackenzie Diversified Equity Fund | Mackenzie Global Dividend Fund |
| Mackenzie Global Diversified Equity Class | Mackenzie Global Dividend Fund |
| Mackenzie Global Concentrated Equity Class | Mackenzie Global Concentrated Equity Fund |
Except as noted above, the Proposed Reorganizations will otherwise comply with all other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.
The Proposed Reorganizations do not require approval of securityholders of the Continuing Funds as the Filer has determined that the Proposed Reorganizations do not constitute material changes to any of the Continuing Fund.
As required by National Instrument 81-107 Independent Review Committee for Investment Funds, the Independent Review Committee (IRC) has been appointed for the Funds. The Filer presented the terms of the Proposed Reorganizations to the IRC for a recommendation. The IRC reviewed the Proposed Reorganizations and provided a positive recommendation for each of the Proposed Reorganization on September 21, 2016, having determined that the Proposed Reorganizations, if implemented, would achieve a fair and reasonable result for each of the Funds and their respective securityholders.
In accordance with National Instrument 81-106 Continuous Disclosure, a press release describing the Proposed Reorganizations was issued and the press release was filed on SEDAR on September 22, 2016. An associated material change report and simplified prospectus and annual information form (including amendments thereto where applicable), as well as revised fund facts of the Terminating Funds, which give notice of the Proposed Reorganizations, were filed on SEDAR on September 30, 2016 (Mackenzie Funds), October 3, 2016 (Quadrus Group of Funds) and October 5, 2016 (Laurentian Group of Funds).
A notice of meeting, management information circular, proxy and fund facts of the applicable series of the Continuing Fund (“Meeting Materials”) were mailed or otherwise made available to securityholders of the Terminating Fund on October 28, 2016 and were filed on SEDAR on October 28, 2016.
The Meeting Materials describe all of the relevant facts concerning the Proposed Reorganizations relevant to each securityholder, including the differences between investment objectives, strategies and fee structures of the Terminating Funds and the Continuing Funds, the IRC's recommendations of the Proposed Reorganization, and income tax considerations so that securityholders of the Terminating Funds may consider this information before voting on the Proposed Reorganization. The Meeting Materials also describe the various ways in which securityholders can obtain a copy of the simplified prospectus and annual information form of the Continuing Funds, as well as the most recent interim and annual financial statements and management reports of fund performance for the Continuing Funds, at no cost.
Fund facts relating to the applicable series of each Continuing Fund were mailed to securityholders of the corresponding series of each Terminating Fund in all instances other than in respect of the Grandfathering Mergers, the Closed and Exempt Mergers and the Exempt Mergers. In order to effect the Mergers relating to these series of the Terminating Funds, securities of the applicable series of the Continuing Funds will be distributed to securityholders of the Terminating Funds in reliance on the prospectus exemption contained in section 2.11 of National Instrument 45-106 Prospectus and Registration Exemptions.
In respect of the Grandfathering Mergers, the Closed and Exempt Mergers and the Exempt Mergers, because a current simplified prospectus and fund facts document are not available for the applicable series of the Continuing Funds, securityholders of each of the corresponding series of the Terminating Funds were sent fund facts relating to series A securities of the applicable Continuing Fund, or, where appropriate, another series of securities of the applicable Continuing Fund.
The Manager will pay for the costs of the proposed Mergers. These costs consist mainly of brokerage charges associated with the trades that occur both before and after the date of the proposed Mergers and legal, proxy solicitation, printing, mailing and regulatory fees. There are no charges payable by securityholders of the Terminating Funds who acquire securities of the corresponding Continuing Funds as a result of the Proposed Reorganization.
Securityholders of each of the Terminating Funds will be asked to approve the Proposed Reorganization associated with that Terminating Fund at a special meeting of securityholders scheduled to be held on or about November 21, 2016.
The Taxable Mergers will be effected on a taxable basis, which the Manager has determined will be in the overall best interests of the investors of the Terminating Funds and the Continuing Funds given the investment mandates and applicable portfolio management teams of the Continuing Funds. Effecting the Taxable Mergers on a taxable basis will preserve where applicable any unused tax losses of the Continuing Fund, which would otherwise expire upon implementation of the Taxable Merger on a tax deferred basis and therefore would not be available to shelter income and capital gains realized by the Continuing Fund in future years.
Following the implementation of the Proposed Reorganization, all systematic plans that were established with respect to the Terminating Funds will be re-established in the Continuing Fund, either on a series-for-series basis or into a similar series with substantially similar fees, unless securityholders advise the Filer otherwise.
Securityholders may change or cancel any systematic plan at any time and securityholders of the Terminating Funds who wish to establish one or more systematic plans in respect of their holdings in the Continuing Fund may do so following the implementation of the Proposed Reorganizations.
It is proposed that the investment objectives of Mackenzie Global Concentrated Equity Fund, a Continuing Fund, will change. These investment objective changes are subject to the approval of securityholders of Mackenzie Global Concentrated Equity Fund, to be effective immediately before the Mergers. If securityholders of Mackenzie Global Concentrated Equity Fund do not approve the investment objective change, the applicable Merger will not proceed. If securityholders of Mackenzie Global Concentrated Equity Fund approve the investment objective change and securityholders of the applicable Terminating Fund approve the Merger, the applicable Merger will proceed.
It is proposed that the investment objectives of Mackenzie Canadian Growth Fund, a Continuing Fund, will change. These changes are subject to the approval of securityholders of Mackenzie Canadian Growth Fund, to be effective on or about the effective date of the proposed Merger. If securityholders of Mackenzie Canadian Growth Fund do not approve the investment objective change, the applicable Merger will not proceed. If securityholders of Mackenzie Canadian Growth Fund approve the investment objective change and securityholders of the applicable Terminating Fund approve the Merger, the applicable Merger will proceed.
Proposed Reorganization Steps
- If the necessary approvals are obtained, the Filer will carry out the following steps to complete the Proposed Reorganizations:
(a) Procedure for the Merger of a Trust Fund into another Trust Fund:
(i) Prior to effecting the Merger, if required, each Trust Fund that is a Terminating Fund (each, a “Terminating Trust Fund”) will sell any securities in its portfolio that do not meet the investment objectives and investment strategies of the applicable Continuing Fund and purchase other securities so that, as of the effective date of the Merger, the portfolio of the Terminating Fund is substantially similar to that of the applicable Continuing Fund. As a result, some of the Terminating Trust Funds may temporarily hold cash, money market instruments or investments that are not consistent with their investment objectives, and may not be fully invested in accordance with their investment objectives for a brief period of time prior to the Merger being effected.
(ii) The value of each Terminating Trust Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Trust Fund.
(iii) Each Continuing Fund that is a trust (each, a “Continuing Trust Fund”) will acquire the investment portfolio and other assets of the applicable Terminating Trust Fund in exchange for securities of the Continuing Fund.
(iv) Each Continuing Trust Fund will not assume any liabilities of the applicable Terminating Trust Fund and the Terminating Trust Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the applicable Merger.
(v) Each Terminating Trust Fund and Continuing Trust Fund will distribute a sufficient amount of net income and net realized capital gains, if any, to securityholders to ensure that it will not be subject to tax under Part I of the Tax Act for its current tax year.
(vi) The securities of each Continuing Fund received by the applicable Terminating Trust Fund will have an aggregate net asset value equal to the value of the portfolio assets and other assets that the Continuing Fund is acquiring from the Terminating Trust Fund, and the securities of the Continuing Fund will be issued at the applicable series net asset value per security as of the close of business on the effective date of the applicable Merger.
(vii) Immediately thereafter, securities of each Continuing Fund received by the applicable Terminating Trust Fund will be distributed to securityholders of the Terminating Trust Fund, as proceeds of redemption of their securities in the Terminating Trust Fund on a dollar‑for‑dollar and series by series basis.
(viii) As soon as reasonably possible following each Merger, the applicable Terminating Trust Fund will be wound up.
(b) Procedure for the Merger of a Corporate Class Fund into another Corporate Class Fund:
(i) Prior to effecting the Merger, if required, the Corporation will sell any securities referable to the portfolio of each Terminating Fund (each a Terminating Corporate Class Fund) that do not meet the investment objectives and investment strategies of the applicable Continuing Corporate Class Fund and purchase other securities so that, as of the effective date of the Merger, the portfolio of the Terminating Corporate Class Fund is substantially similar to that of the applicable Continuing Corporate Class Fund. As a result, the portfolios of some of the Terminating Corporate Class Funds may temporarily hold cash, money market instruments or investments that are not consistent with their investment objectives, and may not be fully invested in accordance with their investment objectives for a brief period of time prior to the Merger being effected.
(ii) Each Terminating Corporate Class Fund may pay taxable dividends and/or capital gains dividends to its securityholders, but only to the extent required to manage the tax liability of the Corporation in a manner that the Board of Directors of the Corporation, in consultation with the Filer, determines to be fair and reasonable.
(iii) The value of each Terminating Corporate Class Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Corporate Class Fund.
(iv) The value of each Continuing Corporate Class Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Corporate Class Fund.
(v) The portfolio of assets attributable to each Terminating Corporate Class Fund will be combined with the portfolio of assets attributable to its applicable Continuing Corporate Class Fund. Together, these assets will be made referable to a new class of the Corporation (the “New Class Fund”). The New Class Fund will have the same name, investment objectives, investment strategies, share series and fee structure of the applicable Continuing Corporate Class Fund.
(vi) The New Class Fund will not assume any liabilities of the applicable Terminating Corporate Class Fund and the Terminating Corporate Class Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the applicable Merger.
(vii) All of the issued and outstanding securities of each Terminating Corporate Class Fund and the applicable Continuing Corporate Class Fund will be exchanged for securities of each applicable New Class Fund on a dollar-for-dollar and series-by-series basis, so that securityholders of each Terminating Corporate Class Fund and the applicable Continuing Corporate Class Fund become securityholders of each applicable New Class Fund.
(viii) As soon as reasonably possible following each Merger, the Corporation will cancel the securities of the applicable Terminating Corporate Class Fund and the applicable Continuing Corporate Class Fund.
(c) Procedure for the Merger of a Corporate Class Fund into a Trust Fund:
(i) Prior to effecting the Merger, if required, the Corporation will sell any securities in the portfolio underlying a Terminating Corporate Class Fund that do not meet the investment objectives and investment strategies of the applicable Continuing Trust Fund and purchase other securities so that, as of the effective date of the Merger, the portfolio of the Terminating Corporate Class Fund is substantially similar to that of the applicable Continuing Fund. As a result, the portfolios of some of the Terminating Corporate Class Funds may temporarily hold cash, money market instruments or investments that are not consistent with their investment objectives, and may not be fully invested in accordance with their investment objectives for a brief period of time prior to the Merger being effected.
(ii) Each Terminating Corporate Class Fund may pay taxable dividends and/or capital gains dividends to its securityholders, but only to the extent required to manage the tax liability of the Corporation in a manner that the Board of Directors of the Corporation, in consultation with the Filer, determines to be fair and reasonable.
(iii) The value of each Terminating Corporate Class Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Corporate Class Fund.
(iv) Each Continuing Trust Fund will acquire the investment portfolio and other assets of the applicable Terminating Corporate Class Fund in exchange for securities of the Continuing Trust Fund.
(v) Each Continuing Trust Fund will not assume any liabilities of the applicable Terminating Corporate Class Fund and the Terminating Corporate Class Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the applicable Merger.
(vi) The securities of each Continuing Trust Fund received by the applicable Terminating Corporate Class Fund will have an aggregate net asset value equal to the value of the portfolio assets and other assets that the Continuing Trust Fund is acquiring from the Terminating Corporate Class Fund, and the securities of the Continuing Trust Fund will be issued at the applicable series net asset value per security as of the close of business on the effective date of the applicable Merger.
(vii) Immediately thereafter, securities of each Continuing Trust Fund received by the applicable Terminating Corporate Class Fund will be distributed to securityholders of the Terminating Corporate Class Fund, as proceeds of redemption of their securities in the Terminating Corporate Class Fund on a dollar‑for‑dollar and series by series basis.
(viii) As soon as reasonably possible following each Merger, the Corporation will cancel the securities of the applicable Terminating Corporate Class Fund.
Securityholders in the Terminating Funds will continue to have the right to redeem their units or exchange their units for securities of any other mutual fund of the Filer at any time up to the close of business on the business day before the Effective Date. Securityholders of the Terminating Fund that switch their units for securities of other mutual funds of the Filer will not incur any charges other than switch fees, if applicable, as described in each Terminating Fund’s simplified prospectus. Securityholders who redeem units may be subject to redemption charges.
Following the implementation of the Proposed Reorganizations, the Continuing Funds will continue as publicly offered open-ended mutual funds offering securities in the Jurisdictions, or, in the case of Corporate Class Funds, will continue as classes of the Corporation.
Following the implementation of the Proposed Reorganizations, a press release and material change report announcing the results of the securityholder meetings in respect of the reorganization of the Terminating Funds will be issued and filed.
No sales charges will be charged by the Filer to investors or to the Terminating Fund or Continuing Fund in connection with the acquisition by a Continuing Fund of the investment portfolio of its applicable Terminating Fund.
The assets of each Terminating Fund to be acquired by the applicable Continuing Fund in order to effect the Mergers are currently, or will be, acceptable, on or prior to the effective date of the Mergers, to the portfolio manager(s) of the applicable Continuing Fund and are, or will be, consistent with the investment objectives of the Continuing Fund.
Proposed Reorganization Benefits
- The Filer believes that the Proposed Reorganization is beneficial to securityholders of the Terminating Funds for the following reasons:
(i) Effective use of investment managers: The Mergers are being proposed to reflect the Filer’s desire to deploy its portfolio managers as effectively as possible, in order to maximize return potential for fund investors. The Mergers will also allow the Filer to make its product offering smaller and simpler, and therefore easier for investors to navigate.
(ii) Flexible mandate of the Continuing Fund: In certain cases, the Continuing Funds provide a substantially similar yet broader or more flexible mandate, with consistency of management that the Filer believes provides those Continuing Funds with broader investment opportunities that can lead to increased diversification and return potential.
(iii) Superior performance of the Continuing Fund: In certain cases, the Continuing Funds have provided superior returns to investors (although past performance is not a guarantee of future returns and may not be repeated).
(iv) Similar or lower fees: Terminating Fund investors will receive securities of the Continuing Fund that have a management fee that is substantially similar or lower than the management fee charged in respect of the securities of the Terminating Fund that they currently hold.
General
- If the Proposed Reorganizations are approved, the reorganizations will be implemented after the close of business on the Effective Date. If the Proposed Reorganizations are not approved, the Terminating Fund will continue to be offered for distribution.
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 Requested Relief is granted, provided that the Filer obtains the prior approval of the securityholders of the Terminating Funds for the Proposed Reorganizations at a special meeting held for that purpose.
“Darren McKall”
Darren McKall Manager
Investment Funds and Structured Products Branch Ontario Securities Commission