June 27, 2017
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
NGAM CANADA LP
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of each mutual fund listed in Schedule “A” (the NexGen Trust Funds) and Schedule “B” (the NexGen Tax Managed Funds, together with the NexGen Trust Funds, the NexGen Funds and each, a NexGen Fund) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the NexGen Funds from the requirement in section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106), such that the NexGen Funds may deviate from Items 3.1, 4.1(1) (in respect of the requirement to comply with subsections 15.3(2) and 15.3(4)(c) of National Instrument 81-102 Investment Funds (NI 81-102)), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1) and Items 3(1) and 4 of Part C of Form 81-106F1, to permit the annual and interim management reports of fund performance of Series A securities to show:
(a) as the financial highlights and past performance of Series A securities of the NexGen Funds (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund), the financial highlights and past performance of Regular Front End Load series securities of the same NexGen Fund; and
(b) as the financial highlights and past performance of Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, the financial highlights and past performance of Deferred Load series securities of the same NexGen Fund,
in each case, where the financial highlights and past performance relate to the time period prior to the date on which Series A securities first became available to the public (Series A Inception Date),
(paragraphs (a) and (b), collectively, 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 Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Québec, Saskatchewan and Yukon (together with the Jurisdiction, the Jurisdictions).
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.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
The Filer is a limited partnership established under the laws of Ontario with its head office based in Toronto, Ontario. The general partner of the Filer is NGAM Canada Limited, a corporation incorporated under the laws of the Province of Ontario.
The Filer is registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador, an exempt market dealer in each of the Jurisdictions and a portfolio manager and mutual fund dealer in Ontario.
The Filer is the manager, promoter and portfolio manager of the NexGen Funds and the trustee of the NexGen Trust Funds.
The Filer is not in default of securities legislation in any of the Jurisdictions.
The NexGen Funds
Each NexGen Trust Fund is an open-end mutual fund formed as a trust and each NexGen Tax Managed Fund is an open-end mutual fund consisting of multiple classes (the NexGen Tax Classes) and series of NGAM Canada Investment Corporation, an open-end mutual fund corporation established under the laws of Ontario.
Each NexGen Fund is a reporting issuer under the laws of Alberta, British Columbia, Newfoundland, Ontario and Quebec and will be a reporting issuer in each of the remaining Jurisdictions. Each NexGen Fund is subject to NI 81-102. The securities of the NexGen Funds are qualified for distribution pursuant to a simplified prospectus, annual information form and fund facts that have been prepared and filed in accordance with NI 81-101, subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities.
The Filer has filed a consolidated preliminary and pro forma simplified prospectus, annual information form and fund facts for the NexGen Funds and certain other mutual funds on May 10, 2017, which will (i) qualify for distribution the existing series of the NexGen Funds in each of Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Saskatchewan, Northwest Territories, Nunavut and Yukon, (ii) qualify for distribution the new Series A securities of the NexGen Funds in all of the Jurisdictions, and (iii) cease to qualify for distribution Regular Front End Load, Deferred Load and Low Load series securities of the NexGen Funds.
Each of the NexGen Funds offers units or shares, as applicable, issued in multiple series. Each of the NexGen Funds currently offers, among other series, Regular Front End Load, Deferred Load and Low Load series securities.
Regular Front End Load series securities are offered under the front end load purchase option (the Front End Load Option), Deferred Load series securities are offered under the deferred load purchase option (the Deferred Load Option) and Low Load series securities are offered under the low load purchase option (the Low Load Option). Under the Front End Load Option, investors pay a negotiated commission to their dealer at the time they purchase securities, while under the Deferred Load Option and Low Load Option no commission is paid by the investor at the time of purchase, but the investor will be required to pay a redemption fee if he or she redeems within a certain period of time from the date of purchase.
The NexGen Funds are not in default of securities legislation in any of the Jurisdictions.
Regular Front End Load, Deferred Load and Low Load Series Re-Designations
In order to simplify the number of series offered by each NexGen Fund and to reduce the costs payable by investors in the NexGen Funds of having multiple series, the Filer will re-designate all outstanding Regular Front End Load, Deferred Load and Low Load series securities of each NexGen Fund as Series A securities of the same NexGen Fund (the Re-Designations), effective on or about June 20, 2017 (the Re-Designation Date). Series A securities will be available for purchase under the Front End Load Option, Deferred Load Option and Low Load Option.
The Re-Designations will be neutral to Regular Front End Load, Deferred Load and Low Load series investors and, in the case of investors who hold Deferred Load and Low Load series of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, will result in a benefit to such investors:
(a) investors who hold Regular Front End Load, Deferred Load and Low Load series securities (which will be re-designated as Series A securities) will continue to hold securities of the same NexGen Fund with the same underlying pool of assets, the same investment objectives and investment strategies and the same valuation procedures and will continue to have the same rights as securityholders as they did prior to the Re-Designations;
(b) there will be no increase in charges to investors who hold Regular Front End Load, Deferred Load and Low Load series securities of the NexGen Funds as a result of the Re-Designations and, for investors who hold Deferred Load and Low Load series securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, these investors will experience a management fee decrease as a result of the Re-Designations, as Series A securities of such NexGen Funds will be subject to a lower management fee, which is equal to the current lower management fee paid in respect of Regular Front End Load series securities of such NexGen Funds; and
(c) implementation of the Re-Designations will have no adverse tax consequences on investors under current Canadian tax legislation.
The start dates of Regular Front End Load, Deferred Load and Low Load series securities are the same for each NexGen Fund, with the exception of NexGen Canadian Cash Fund, where the start dates of Regular Front End Load and Deferred Load series securities is September 5, 2006, while the start date of Low Load series securities is March 8, 2010.
The only differences between Regular Front End Load, Deferred Load and Low Load series securities of a NexGen Fund and Series A securities of the same NexGen Fund are that: (i) Regular Front End Load series securities are available for purchase under the Front End Load Option, Deferred Load series securities are available for purchase under the Deferred Load Option and Low Load series securities are available for purchase under the Low Load Option, while Series A securities will be available for purchase under any of the three purchase options; and (ii) in the case of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, Deferred Load and Low Load series securities are subject to a higher management fee than the management fee to which the Series A securities of the same NexGen Fund will be subject (the Series Differences).
The Filer will deliver or will arrange for the delivery of Series A fund facts to holders of Regular Front End Load, Deferred Load and Low Load series securities prior to the Re-Designation Date. Notice of the Re-Designations will be provided in a letter accompanying the Series A fund facts.
Series A Start Dates, Expense Information, Performance Data and Financial Highlights
Series A securities will be a new series of securities. Being new, Series A securities will not have their own expense information, performance data and financial highlights derived from financial statements. However, each Series A security, prior to the Re-Designation Date, was a Regular Front End Load, Deferred Load or Low Load series security of the same NexGen Fund.
The Filer proposes to show:
(a) as the expense information for Series A securities of the NexGen Funds (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund), in the section of the simplified prospectus entitled “Fund Expenses Indirectly Borne by Investors”, the expense information of Regular Front End Load series securities where the expense information for Regular Front End Load series securities relates to the time period prior to the Series A Inception Date;
(b) as the expense information for Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, in the section of the simplified prospectus entitled “Fund Expenses Indirectly Borne by Investors”, the expense information of Deferred Load series securities where the expense information for Deferred Load series securities relates to the time period prior to the Series A Inception Date;
(c) as the start date for Series A securities of the NexGen Funds (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund) in the simplified prospectus and the fund facts, the start date of Regular Front End Load series securities;
(d) as the start date for Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund in the simplified prospectus and the fund facts, the start date of Deferred Load series securities;
(e) as the performance data for Series A securities of the NexGen Funds (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund), in the sections of the fund facts entitled “Year-by-year returns”, “Best and worst 3-month returns” and “Average return”, the performance data of Regular Front End Load series securities where the performance data for Regular Front End Load series securities relates to the time period prior to the Series A Inception Date;
(f) as the performance data for Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, in the sections of the fund facts entitled “Year-by-year returns”, “Best and worst 3-month returns” and “Average return”, the performance data of Deferred Load series securities where the performance data for Deferred Load series securities relates to the time period prior to the Series A Inception Date;
(g) as the performance data for Series A securities of the NexGen Funds (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund), in the sales communications, the performance data of Regular Front End Load series securities where the performance data for Regular Front End Load series securities relates to the time period prior to the Series A Inception Date;
(h) as the performance data for Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, in the sales communications, the performance data of Deferred Load series securities where the performance data for Deferred Load series securities relates to the time period prior to the Series A Inception Date;
(i) in the annual and interim management reports of fund performance of Series A securities of the NexGen Funds (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund), the financial highlights and past performance of Regular Front End Load series securities where the financial highlights and past performance for Regular Front End Load series securities relate to the time period prior to the Series A Inception Date; and
(j) in the annual and interim management reports of fund performance of Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, the financial highlights and past performance of Deferred Load series securities where the financial highlights and past performance for Deferred Load series securities relate to the time period prior to the Series A Inception Date.
There will be no difference between the expense information, performance data and financial highlights of Regular Front End Load, Deferred Load and Low Load series securities of a NexGen Fund (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund) and Series A securities of the same NexGen Fund, as the fees and expenses of Regular Front End Load, Deferred Load and Low Load series securities prior to the Series A Inception Date will be identical to the fees and expenses of Series A securities of the same NexGen Fund upon the Series A Inception Date. The management expense ratio (MER) of Regular Front End Load series securities of the NexGen Funds (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund), prior to the Series A Inception Date, will be directly applicable to Series A securities of the same NexGen Fund.
In the case of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, the expense information and financial highlights for Deferred Load and Low Load series securities will be higher than that of Series A securities of the same NexGen Fund and the performance data of Deferred Load and Low Load series securities will be lower than that of Series A securities of the same NexGen Fund, as the fees and expenses of Deferred Load and Low Load series securities prior to the Series A Inception Date were higher than the fees and expenses of Series A securities. Notwithstanding the higher management fee paid in respect of Deferred Load and Low Load series securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund, the MER of Deferred Load series securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund prior to the Series A Inception Date still will be directly applicable to Series A securities of the same NexGen Fund and, if anything will reflect that the historical MERs of these NexGen Funds were higher than they would have been had the new Series A structure existed during the relevant period.
The Filer has sought the advice of the auditor of the NexGen Funds in respect of the presentation of the Series A expense information, performance data and financial highlights in the MRFPs of the NexGen Funds and the auditor has confirmed that it is comfortable with the proposed presentation (i.e. carrying over the expense information, performance data and financial highlights), as described in this decision.
Expense information, performance data and other financial data are significant and meaningful pieces of information for existing investors holding Regular Front End Load, Deferred Load and Low Load series securities, which will be re-designated upon the Re-Designation Date as Series A securities, and for prospective investors in Series A securities.
Investors re-designated from Regular Front End Load, Deferred Load and Low Load series securities will continue to hold securities of the same NexGen Fund with the same underlying pool of assets, the same investment objectives and investment strategies and the same valuation procedures. Such series of securities will be identical to Series A securities of the same NexGen Fund, except for the Series Differences.
The Filer has filed a separate application for exemptive relief from certain provisions of NI 81-101 and NI 81-102 to enable the NexGen Funds to show the start dates, expense information and performance data described in paragraphs 20(a) to (h) above (the NI 81-102 and NI 81-101 Relief).
In absence of the Requested Relief, the NexGen Funds’ annual and interim management reports of fund performance and financial statements cannot include, as the financial highlights and past performance of Series A securities, the financial highlights and past performance of Regular Front End Load or Deferred Load series securities of the same NexGen Fund, as applicable, where the financial highlights and past performance for Regular Front End Load or Deferred Load series securities relate to the time period prior to the Series A Inception Date.
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, for any Series A management reports of fund performance presenting information for a time period prior to the Series A Inception Date, the management report of fund performance discloses the Re-Designations, including that the information presented in the management report of fund performance is derived from historical information related to Regular Front End Load series securities or Deferred Load series securities, as applicable.
“Vera Nunes”
Vera Nunes, Manager,
Investment Funds and Structured Products Branch
Ontario Securities Commission
File # 2017/0256
Schedule “A”
NexGen Trust Funds
Natixis Canadian Cash Fund (formerly NexGen Canadian Cash Fund)
Natixis Canadian Bond Fund (formerly NexGen Canadian Bond Fund)
Loomis Sayles Global Diversified Corporate Bond Fund
Natixis Strategic Balanced Registered Fund
Natixis Intrinsic Balanced Registered Fund (formerly NexGen Intrinsic Balanced Registered Fund)
Natixis Canadian Dividend Registered Fund (formerly NexGen Canadian Dividend Registered Fund)
Natixis Intrinsic Growth Registered Fund (formerly NexGen Intrinsic Growth Registered Fund)
Natixis U.S. Dividend Plus Registered Fund (formerly NexGen U.S. Dividend Plus Registered Fund)
Natixis U.S. Growth Registered Fund (formerly NexGen U.S. Growth Registered Fund)
Natixis Global Equity Registered Fund (formerly NexGen Global Equity Registered Fund)
Natixis Canadian Preferred Share Registered Fund (formerly NexGen Canadian Preferred Share Registered Fund)
Schedule “B”
NexGen Tax Managed Funds
Natixis Canadian Bond Class (formerly NexGen Canadian Bond Tax Managed Fund)*
Loomis Sayles Global Diversified Corporate Bond Class (formerly Loomis Sayles Global Diversified Corporate Bond Tax Managed Fund)*
Natixis Strategic Balanced Class (formerly Natixis Strategic Balanced Tax Managed Fund)*
Natixis Intrinsic Balanced Class (formerly NexGen Intrinsic Balanced Tax Managed Fund)*
Natixis Canadian Dividend Class (formerly NexGen Canadian Dividend Tax Managed Fund)*
Natixis Intrinsic Growth Class (formerly NexGen Intrinsic Growth Tax Managed Fund)*
Natixis U.S. Dividend Plus Class (formerly NexGen U.S. Dividend Plus Tax Managed Fund)*
Natixis U.S. Growth Class (formerly NexGen U.S. Growth Tax Managed Fund)*
Natixis Global Equity Class (formerly NexGen Global Equity Tax Managed Fund)*
Natixis Canadian Preferred Share Class (formerly NexGen Canadian Preferred Share Tax Managed Fund)*
- An investment portfolio consisting of certain classes and series of NGAM Canada Investment Corporation, an open-ended mutual fund corporation.