June 12, 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:
(a) the requirement in section 2.1 of NI 81-101 to prepare a prospectus in the form of Form 81-101F1 Contents of Simplified Prospectus (Form 81-101F1), such that the NexGen Funds may deviate from:
(1) Instruction (1) of Item 5 of Part B of Form 81-101F1 to permit:
(a) Series A securities of each NexGen Fund (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund) to use, as their start date, the start date of Regular Front End Load series securities of the same NexGen Fund, and
(b) Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund to use, as their start date, the start date of Deferred Load series securities of the same NexGen Fund; and
(2) Item 13.2 of Part B of Form 81-101F1 to permit:
(a) Series A securities of each NexGen Fund (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund) to show, as their expense information in the section entitled "Fund Expenses Indirectly Borne by Investors" of the simplified prospectus, the expense information of Regular Front End Load series securities of the same NexGen Fund, and
(b) Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund to show, as their expense information in the section entitled "Fund Expenses Indirectly Borne by Investors" of the simplified prospectus, the expense information of Deferred Load series securities of the same NexGen Fund,
in each case, where the expense information relates 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)(1) and (a)(2), collectively, the Form 81-101F1 Relief);
(b) the requirement in section 2.1 of NI 81-101, to prepare fund facts in the form of Form 81-101F3 Contents of Fund Facts Document (Form 81-101F3), such that the NexGen Funds may deviate from:
(1) Instruction (1) of Item 2 of Part I of Form 81-101F3 to permit:
(a) Series A securities of each NexGen Fund (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund) to use, as their start date, the start date of Regular Front End Load series securities of the same NexGen Fund, and
(b) Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund to use, as their start date, the start date of Deferred Load series securities of the same NexGen Fund; and
(2) Items 5(2), 5(3) and 5(4) and Instruction (1) of Item 5 of Part I of Form 81-101F3 (in respect of the requirement to comply with sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a), 15.8(2)(a.1), 15.8(3)(a) and 15.8(3)(a.1) of NI 81-102) to permit:
(a) Series A securities of each NexGen Fund (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund) to show, as their performance data, the performance data of Regular Front End Load series securities of the same NexGen Fund, and
(b) Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund to show, as their performance data, the performance data of Deferred Load series securities of the same NexGen Fund,
in each case, where the performance data relates to the time period prior to the Series A Inception Date,
(paragraphs (b)(1) and (b)(2), collectively, the Form 81-101F3 Relief); and
(c) the requirements in subsections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a), 15.8(2)(a.1), 15.8(3)(a) and 15.8(3)(a.1) of NI 81-102, to permit:
(1) Series A securities of each NexGen Fund (other than NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund) to show, as their performance data, the performance data of Regular Front End Load series securities of the same NexGen Fund, and
(2) Series A securities of NexGen Canadian Cash Fund and NexGen Canadian Preferred Share Registered Fund to show, as their performance data, the performance data of Deferred Load series securities of the same NexGen Fund,
in each case where the performance data relates to the time period prior to the Series A Inception Date (the Sales Communication Relief),
(the Sales Communication Relief, collectively with the Form 81-101F1 Relief and the Form 81-101F3 Relief, 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
1The 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.
2The 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.
3The Filer is the manager, promoter and portfolio manager of the NexGen Funds and the trustee of the NexGen Trust Funds.
4The Filer is not in default of securities legislation in any of the Jurisdictions.
The NexGen Funds
5Each 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.
6Each 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.
7The 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.
8Each 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.
9Regular 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.
10The 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
11In 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.
12The 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 securitiesof 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.
13The 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.
14The 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).
15The 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
16Series 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.
17The 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.
18There 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.
19In 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.
20To the extent that any differences between the Regular Front End Load, Deferred Load and Low Load series securities and the Series A securities of the same NexGen Fund could have materially affected the performance data of Series A, the Filer will comply with subsection 15.9(1) of NI 81-102 in the preparation of the Fund Facts and any sales communication and provide a summary disclosure of the Re-Designations and of how the Re-Designations could have affected performance had those changes been in effect throughout the performance measurement period.
21Expense 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.
22Investors 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.
23The Filer has filed a separate application for exemptive relief from certain provisions of National Instrument 81-106 Investment Fund Continuous Disclosure to enable the NexGen Funds to include in their annual and interim management reports of fund performance of the 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 Series A securities relate to the time period prior to the Series A Inception Date (the NI 81-106 Relief).
24In the absence of the Requested Relief, the NexGen Funds' simplified prospectus, fund facts and sales communications cannot show, as the start dates, expense information, performance data and financial highlights of Series A securities, the start dates, expense information, performance data and financial highlights of Regular Front End Load or Deferred Load series securities, as applicable, where such information relates 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.
"Vera Nunes"
Vera Nunes
Manager, Investment Funds and Structured Products Branch
Ontario Securities Commission
Application: 2017/0255
SEDAR Project # 2621226
Schedule "A"
NexGen Trust Funds
NexGen Canadian Cash Fund (to be renamed Natixis Canadian Cash Fund)
NexGen Canadian Bond Fund (to be renamed Natixis Canadian Bond Fund)
Loomis Sayles Global Diversified Corporate Bond Fund
Natixis Strategic Balanced Registered Fund
NexGen Intrinsic Balanced Registered Fund (to be renamed Natixis Intrinsic Balanced Registered Fund)
NexGen Canadian Dividend Registered Fund (to be renamed Natixis Canadian Dividend Registered Fund)
NexGen Intrinsic Growth Registered Fund (to be renamed Natixis Intrinsic Growth Registered Fund)
NexGen U.S. Dividend Plus Registered Fund (to be renamed Natixis U.S. Dividend Plus Registered Fund)
NexGen U.S. Growth Registered Fund (to be renamed Natixis U.S. Growth Registered Fund)
NexGen Global Equity Registered Fund (to be renamed Natixis Global Equity Registered Fund)
NexGen Canadian Preferred Share Registered Fund (to be renamed Natixis Canadian Preferred Share Registered Fund)
Schedule "B"
NexGen Tax Managed Funds
NexGen Canadian Bond Tax Managed Fund (to be renamed Natixis Canadian Bond Class)*
Loomis Sayles Global Diversified Corporate Bond Tax Managed Fund (to be renamed Loomis Sayles Global Diversified Corporate Bond Class)*
Natixis Strategic Balanced Tax Managed Fund (to be renamed Natixis Strategic Balanced Class)*
NexGen Intrinsic Balanced Tax Managed Fund (to be renamed Natixis Intrinsic Balanced Class)*
NexGen Canadian Dividend Tax Managed Fund (to be renamed Natixis Canadian Dividend Class)*
NexGen Intrinsic Growth Tax Managed Fund (to be renamed Natixis Intrinsic Growth Class)*
NexGen U.S. Dividend Plus Tax Managed Fund (to be renamed Natixis U.S. Dividend Plus Class)*
NexGen U.S. Growth Tax Managed Fund (to be renamed Natixis U.S. Growth Class)*
NexGen Global Equity Tax Managed Fund (to be renamed Natixis Global Equity Class)*
NexGen Canadian Preferred Share Tax Managed Fund (to be renamed Natixis Canadian Preferred Share Class)*
- An investment portfolio consisting of certain classes and series of NGAM Canada Investment Corporation, an open-ended mutual fund corporation.