AGF Investments Inc. (Re), 2019 CanLII 45255

May 13, 2019

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 AGF Investments Inc. (the Filer)

and

THE TERMINATING FUNDS

(as defined below)

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 (the Legislation) approving the mergers (each a Merger, and collectively, the Mergers) of each of the Terminating Funds into applicable Continuing Funds (as defined below) pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (the Approval Sought).

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 provinces and territories of Canada, other than Ontario (together with Ontario, the Canadian 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. The following additional terms shall have the following meanings:

Continuing Fund means each of AGFiQ Dividend Income Fund, AGF Fixed Income Plus Fund, AGF Canadian Money Market Fund, AGF Global Equity Fund, AGF American Growth Fund, AGF Elements Balanced Portfolio, AGF Elements Conservative Portfolio, AGF Elements Growth Portfolio, AGF Elements Global Portfolio and AGF Elements Yield Portfolio;

Fund or Funds means, individually or collectively, the Terminating Funds and the Continuing Funds;

IRC means the independent review committee for the Funds;

Terminating Fund means each of Harmony Canadian Equity Pool, Harmony Canadian Fixed Income Pool, Harmony Money Market Pool, Harmony Overseas Equity Pool, Harmony U.S. Equity Pool, Harmony Balanced Growth Portfolio, Harmony Balanced Portfolio, Harmony Conservative Portfolio, Harmony Growth Plus Portfolio, Harmony Growth Portfolio, Harmony Maximum Growth Portfolio and Harmony Yield Portfolio;

Terminating Pool means each of Harmony Canadian Equity Pool, Harmony Canadian Fixed Income Pool, Harmony Money Market Pool, Harmony Overseas Equity Pool and Harmony U.S. Equity Pool;

Terminating Portfolio means each of Harmony Balanced Growth Portfolio, Harmony Balanced Portfolio, Harmony Conservative Portfolio, Harmony Growth Plus Portfolio, Harmony Growth Portfolio, Harmony Maximum Growth Portfolio and Harmony Yield Portfolio;

MF Series means Mutual Fund Series securities of the Continuing Funds;

NI 81-106 means National Instrument 81-106 Investment Fund Continuous Disclosure;

NI 81-107 means National Instrument 81-107 Independent Review Committee for Investment Funds; and

Tax Act means the Income Tax Act (Canada).

Representations

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

The Filer

1. The Filer is a corporation incorporated under the laws of the province of Ontario with its head office in Toronto, Ontario.

2. The Filer is the manager and trustee of the Funds and the portfolio manager of the Continuing Funds. The Filer is the portfolio manager of the Terminating Portfolios and of certain of the Terminating Pools, which also may have third party portfolio managers.

3. The Filer is registered as an investment fund manager in Alberta, British Columbia, Ontario, Quebec and Newfoundland and Labrador, as a portfolio manager in each of the Canadian Jurisdictions, as an exempt market dealer in Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan, as a mutual fund dealer in British Columbia, Ontario and Quebec and as a commodity trading manager in Ontario.

4. The Filer is not in default of any requirement of securities legislation in any of the Canadian Jurisdictions.

The Funds

5. The Funds are open ended mutual funds established as trusts under the laws of Ontario.

6. Securities of the Terminating Funds are currently qualified for sale in the Canadian Jurisdictions under a simplified prospectus, annual information form and fund facts documents dated June 27, 2018, as amended (the Harmony Offering Documents). Securities of the Continuing Funds are currently qualified for sale in each of the Canadian Jurisdictions under a simplified prospectus, annual information form and fund facts documents dated April 18, 2019 (the AGF Offering Documents and together with the Harmony Offering Documents, collectively, the Offering Documents).

7. Each of the Funds is a reporting issuer under the applicable securities legislation of the Canadian Jurisdictions.

8. The Funds are not in default of any requirement of the securities legislation of any of the Canadian Jurisdictions.

9. Other than circumstances in which the securities regulatory authority of a Canadian Jurisdiction has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices established under NI 81-102.

10. All of the Continuing Funds have substantially similar valuation procedures to those of the Terminating Funds. The net asset value for each series of the Funds is calculated on each day that the Toronto Stock Exchange is open for business in accordance with the Funds’ valuation policy and as described in the Offering Documents.

The Terminating Funds

11. As described in the Harmony Offering Documents, the Terminating Funds are offered as part of the Harmony Investment Program. The Harmony Investment Program includes the Terminating Pools and the Terminating Portfolios.

12. The Terminating Pools offer Embedded Series securities and Wrap Series securities. The Terminating Portfolios offer Embedded Series securities, Series F securities, Series T securities, Series V securities and Wrap Series securities, as applicable.

13. The Terminating Portfolios invest directly in, or obtain exposure to, one or more of the Terminating Pools.

14. Except Harmony Money Market Pool, the Terminating Pools, with respect to Embedded Series securities, pay a fixed management fee, a variable portfolio management fee, and an administration fee for certain registrar and transfer agency expenses, as well as certain operating expenses. Harmony Money Market Pool, with respect to Embedded Series securities, pays a variable portfolio management fee and an administration fee for certain registrar and transfer agency expenses, as well as certain operating expenses.

15. The Terminating Portfolios, with respect to Embedded Series securities, Series F securities, Series T securities, and Series V securities, as applicable, pay a fixed management fee and an administration fee for certain registrar and transfer agency expenses, as well as certain operating expenses. No portfolio management fees are borne directly by the Terminating Portfolios. Each Terminating Portfolio bears indirectly the portfolio management fees attributable to the underlying Terminating Pool(s) that the Terminating Portfolio invests in or obtains exposure to.

16. No service fee is payable for Embedded Series securities, Series F securities, Series T securities, and Series V securities, as applicable, of the Terminating Funds.

17. The Terminating Pools, with respect to Wrap Series, pay a variable portfolio management fee and an administration fee for certain registrar and transfer agency expenses, as well as certain operating expenses.

18. Wrap Series securityholders of the Terminating Pools (except Harmony Money Market Pool) agree to pay a negotiated service fee to their registered dealer on a quarterly basis. No service fee is payable by Wrap Series securityholders of Harmony Money Market Pool. The fee rate depends on the agreement between the securityholder and their registered dealer, and is based on the average total net asset value of the securityholder’s Wrap Series securities during the quarter. For investor support and other services that the Filer provides to the securityholder’s registered dealer, the Filer also retains a portion of the service fee.

19. The Terminating Portfolios, with respect to Wrap Series, pay an administration fee for certain registrar and transfer agency expenses, as well as certain operating expenses. No portfolio management fees are borne directly by the Terminating Portfolios. However, each Terminating Portfolio bears indirectly the portfolio management fees attributable to the underlying Terminating Pool(s) that the Terminating Portfolio invests in or obtains exposure to.

20. Wrap Series securityholders of the Terminating Portfolios agree to pay a negotiated service fee to their registered dealer on a quarterly basis. The fee rate depends on the agreement between the securityholder and their registered dealer, and is based on the average total net asset value of the securityholder’s Wrap Series securities during the quarter. For investor support and other services that the Filer provides to the securityholder’s registered dealer, the Filer also retains a portion of the service fee.

The Continuing Funds

21. The Continuing Funds offer MF Series securities, Series F securities, Series T securities, Series V securities and Series Q securities, as applicable.

22. The Continuing Funds, with respect to MF Series securities, Series F securities, Series T securities, and Series V securities, pay a fixed management fee, which fee includes compensation for portfolio management services provided to the Continuing Fund, and an administration fee for certain registrar and transfer agency expenses, as well as certain operating expenses.

23. No service fee is payable for MF Series securities, Series T securities, and Series V securities of the Continuing Funds.

24. Series Q securityholders of the Continuing Funds pay a management fee, which fee includes compensation for portfolio management services provided to the Continuing Fund, directly to the Filer based on a tiered management fee schedule. No administration fee is payable in respect of Series Q of the Continuing Funds.

25. A Series Q securityholder of a Continuing Fund also pays a negotiated service fee to their dealer on a quarterly basis, which can be nil, based on the average net asset value of the securityholder’s Series Q securities during the quarter.

26. The Continuing Funds, with respect to Series F securities, pay a fixed management fee, which fee includes compensation for portfolio management services provided to the Continuing Fund, and an administration fee for certain registrar and transfer agency expenses, as well as certain operating expenses. No service fee is payable for Series F of the applicable Continuing Fund, although Series F securityholders may pay a fee to their dealer for the fee-for-service or wrap account program. This fee is negotiated between the securityholder and the dealer.

Securities to be received by Terminating Fund Securityholders

Embedded Series securities, Series F securities, Series T securities, Series V securities and Wrap Series securities of the Terminating Funds

27. Except in the case of Wrap Series securityholders of the Terminating Funds, securityholders of each series of a Terminating Fund will receive the same series of securities of the corresponding Continuing Fund as they currently own. Embedded Series securityholders of a Terminating Fund will receive MF Series securities of the corresponding Continuing Fund, which the Filer considers to be equivalent.

28. Except in the case of Harmony Money Market Pool, securityholders of Embedded Series securities, Series F securities, Series T securities and Series V securities of the Terminating Funds will experience an overall decrease in combined fees (management fee plus variable portfolio management fee, if applicable, plus administration fee) upon implementation of the Mergers, due to the existing, lower overall combined fees (management fee plus administration fee) of the corresponding series of the Continuing Funds compared to the Terminating Funds. Certain series of the Continuing Funds pay an administration fee that is higher than the administration fee paid with respect to the corresponding series of the Terminating Funds. However, excluding Harmony Money Market Pool, any such increase is offset by the lower management fee payable with respect to the series of the Continuing Funds received by the securityholder as a result of the Mergers. As a result, with the exception of Harmony Money Market Pool, securityholders of the Terminating Funds will receive securities of the Continuing Funds that have a combined management fee and administration fee that is lower than the combined management fee, portfolio management fee, if applicable, and an administration fee charged in respect of the series of securities of the Terminating Funds that they currently hold.

29. In the case of Harmony Money Market Pool, securityholders of Embedded Series will experience an overall increase in combined fees (variable portfolio management fee plus administration fee) upon implementation of the Mergers, due to the existing, higher overall combined fees (management fee plus administration fee) of the corresponding MF Series of the Continuing Fund compared to this Terminating Fund.

Wrap Series securities of the Terminating Funds

30. Wrap Series securityholders of each Terminating Fund (except Harmony Money Market Pool) will receive Series Q securities of the corresponding Continuing Fund. As described above, Wrap Series securityholders of the Terminating Fund agree to pay a negotiated service fee to their registered dealer on a quarterly basis, a portion of which is retained by the Filer, a variable portfolio management fee and an administration fee. Series Q securityholders of the Continuing Funds pay a management fee, which fee includes compensation for portfolio management services provided to the Fund, directly to the Filer based on a tiered management fee schedule. Series Q securityholders of the Continuing Funds also pay a separate negotiated service fee to their registered dealer.

31. Series Q securities of the Continuing Funds are designed for investors who meet certain minimum investment requirements and who have agreed with their dealer that they wish to purchase a series of securities offering reduced overall costs, including a reduced management fee via a tiered management fee schedule. Management fees are paid directly by Series Q securityholders to the Filer and a negotiated service fee is paid by Series Q securityholders to their dealer. No administration fee is paid with respect to Series Q. There are no minimum investment requirements specific to Wrap Series securities of the Terminating Funds.

32. Generally, a household (which may consist of a single investor) will qualify and continue to qualify for the Series Q securities if it meets one of the following minimum investment requirements: (i) maintain the higher of a book value or market value of at least $100,000 in each Continuing Fund; or (ii) maintain the higher of an aggregate book value or market value of at least $250,000 in all AGF Group of Funds (which include, but are not limited to, the Continuing Funds, except AGF Canadian Money Market Fund). If the higher of the book value or market value falls below these minimums, the Series Q securities held by the investor(s) within the household may be switched to an equivalent value of MF Series of the same Continuing Fund(s).

33. If, upon implementation of the Merger, the higher of the book value or market value of the household falls below the minimum investment requirements for Series Q securities, the Series Q securities of the Continuing Fund(s) held by such securityholder(s) within the household may be switched to an equivalent value of MF Series securities of the same Continuing Fund(s). The Filer will contact the household’s registered dealer and/or investment advisor before processing the switch(es). The switch(es) will not be processed if the household increases their investment to the minimum investment amount within 30 calendar days of the household’s registered dealer and/or investment advisor being notified.

34. The term “household” shall have the meaning determined by the Filer from time to time and currently refers to a single investor holding any series (except Series D, Series I, Series O and Series S securities) of the AGF Group of Funds (except AGF Canadian Money Market Fund) within one or multiple accounts, plus accounts belonging to their spouse and family members residing at the same address, as well as corporate, partnership or trust accounts for which the investor and other members of the household beneficially own more than 50% of the voting equity. Currently, the minimum investment requirements are based on the household assets in aggregate instead of assets of each member of the household.

35. Wrap Series securityholders of Harmony Money Market Pool will receive Series F securities of the corresponding Continuing Fund. Wrap Series securityholders of Harmony Money Market Pool pay a variable portfolio management fee and an administration fee. Series F securityholders of the applicable Continuing Fund pay a management fee, which fee includes compensation for portfolio management services provided to the Continuing Fund, and an administration fee.

36. Series F securities of the Continuing Funds are intended for investors who are participants in a fee-for-service or wrap account program sponsored by certain dealers. Series F securityholders may pay a fee to their dealer for the fee-for-service or wrap account program. This fee is negotiated between the securityholder and their dealer.

37. Except in the case of Harmony Money Market Pool and certain Wrap Series securityholders of Harmony Canadian Fixed Income Pool, Wrap Series securityholders of the Terminating Funds will experience an overall decrease in combined fees (portion of service fee retained by the Filer, plus variable portfolio management fee, if applicable, plus administration fee) upon implementation of the Mergers, due to the existing, lower overall fee (only management fee) of Series Q of the Continuing Funds compared to the Terminating Funds.

38. In the case of Wrap Series securityholders of Harmony Canadian Fixed Income Pool that purchased Wrap Series securities under a front-end sales charge option, certain of these securityholders may experience an overall increase in combined fees (portion of service fee retained by the Filer, plus variable portfolio management fee, plus administration fee) upon implementation of the Merger, due to the existing, higher overall fee (only management fee) of the corresponding Series Q of the Continuing Fund compared to this Terminating Fund. Any increase may be offset for certain of these Wrap Series securityholders as Series Q securityholders benefit from a reduced management fee via a tiered management fee schedule based on their investments, therefore it is possible that these Wrap Series securityholders may experience an overall lower combined fee as a result of the Merger.

39. In the case of Harmony Money Market Pool, Wrap Series securityholders will experience an overall increase in combined fees (variable portfolio management fee plus administration fee) upon implementation of the Merger, due to the existing, higher overall combined fees (management fee plus administration fee) of the corresponding Series F of the Continuing Fund compared to this Terminating Fund.

Sales Charge Options and Securities to be Received by Securityholders of the Terminating Funds

40. Securityholders that purchased securities of the Terminating Funds under the front-end option or that were not subject to a sales charge will receive securities of the applicable Continuing Fund that are not subject to a sales charge. Except for Wrap Series securityholders, securityholders that purchased securities of the Terminating Funds under the low load option or the deferred sales charge option will receive securities of the applicable Continuing Fund that are subject to the same low load or deferred sales charge schedule with the same timing as the securities they currently own in the Terminating Funds. A Wrap Series securityholder’s deferred sales charge schedule (including a low load schedule) will be eliminated on the Merger Date as neither Series F securities nor Series Q securities of the Continuing Funds have deferred sales charge options. As a result, if the Mergers are implemented, the Series F securities and Series Q securities of the Continuing Funds received by such securityholders will be held under the front-end sales charge option. No charges, fees or commissions will be payable by Wrap Series securityholders of the Terminating Funds as a result of this change of purchase option.

Reason for Approval Sought

41. Regulatory approval of the Mergers is required because each Merger does not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102. The pre-approval criteria are not satisfied in the following ways:

(a) the fundamental investment objectives of Harmony Canadian Equity Pool, Harmony Overseas Equity Pool, Harmony Growth Portfolio and Harmony Yield Portfolio are not, or may not be considered to be, “substantially similar” to the investment objective of its corresponding Continuing Fund;

(b) the fee structure of the Embedded Series securities of each Terminating Pool is not, or may be considered not to be, “substantially similar” to the fee structure of the MF Series securities of its corresponding Continuing Fund;

(c) the fee structure of the Wrap Series securities of each Terminating Fund (except Harmony Money Market Pool) is not, or may be considered not to be, “substantially similar” to the fee structure of Series Q securities of its corresponding Continuing Fund;

(d) the fee structure of the Wrap Series securities of Harmony Money Market Pool is not, or may be considered not to be, “substantially similar” to the fee structure of Series F securities of its Continuing Fund; and

(e) the Merger of each of Harmony Canadian Equity Pool into AGFiQ Dividend Income Fund, Harmony Canadian Fixed Income Pool into AGF Fixed Income Plus Fund, Harmony Money Market Pool into AGF Canadian Money Market Fund, Harmony Overseas Equity Pool into AGF Global Equity Fund, Harmony U.S. Equity Pool into AGF American Growth Fund and Harmony Maximum Growth Portfolio into AGF Elements Global Portfolio (each a Taxable Merger, and collectively, the Taxable Mergers) will not be completed as “qualifying exchanges” or as tax-deferred transactions under the Tax Act.

42. Except as described in this decision, the proposed Mergers comply with all of the other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

The Proposed Mergers

43. The Filer intends to reorganize the Funds as follows:

(a) Harmony Canadian Equity Pool will merge into AGFiQ Dividend Income Fund;

(b) Harmony Canadian Fixed Income Pool will merge into AGF Fixed Income Plus Fund;

(c) Harmony Money Market Pool will merge into AGF Canadian Money Market Fund;

(d) Harmony Overseas Equity Pool will merge into AGF Global Equity Fund;

(e) Harmony U.S. Equity Pool will merge into AGF American Growth Fund;

(f) Harmony Balanced Growth Portfolio will merge into AGF Elements Balanced Portfolio;

(g) Harmony Balanced Portfolio will merge into AGF Elements Balanced Portfolio;

(h) Harmony Conservative Portfolio will merge into AGF Elements Conservative Portfolio;

(i) Harmony Growth Plus Portfolio will merge into AGF Elements Growth Portfolio;

(j) Harmony Growth Portfolio will merge into AGF Elements Growth Portfolio;

(k) Harmony Maximum Growth Portfolio will merge into AGF Elements Global Portfolio; and

(l) Harmony Yield Portfolio will merge into AGF Elements Yield Portfolio.

44. The Taxable Mergers will be effected on a taxable basis, while the other Mergers will be effected on a tax-deferred basis.

45. In accordance with NI 81-106, a press release announcing the proposed Mergers was issued and filed via SEDAR on April 17, 2019. A material change report and amendments to the Harmony Offering Documents of the Terminating Funds with respect to the proposed Mergers were filed via SEDAR on April 17, 2019.

46. As required by NI 81-107, the Filer presented the terms of the Mergers to the IRC for its review. The IRC determined that the Mergers, if implemented, will achieve a fair and reasonable result for each of the Funds.

47. Securityholders of each Terminating Fund will be asked to approve the applicable Merger at a special meeting to be held on or about June 11, 2019 (the Meeting).

48. The Filer is of the view that none of the Mergers will be a “material change” for any of the Continuing Funds, as the assets of each Continuing Fund are larger than the assets of its corresponding Terminating Fund.

49. By way of a decision dated November 4, 2016, the Filer was granted relief (the Notice-and-Access Relief) from the requirement set out in paragraph 12.2(2)(a) of NI 81-106 to send a printed management information circular to securityholders while proxies are being solicited, and, subject to certain conditions, instead allows a notice-and-access document (as described in the Notice-and-Access Relief) to be sent to such securityholders. In accordance with the Filer’s standard of care owed to the Funds pursuant to securities legislation, the Filer will only use the notice-and-access procedure for a particular meeting where it has concluded that it is appropriate and consistent with the purposes of notice-and-access (as described in the Companion Policy to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer) to do so, also taking into account the purpose of the meeting and whether the Funds would obtain a better participation rate by sending the management information circular with the other proxy-related materials.

50. Pursuant to the requirements of the Notice-and-Access Relief, a notice-and-access document and form of proxy in connection with the Meeting, along with the most recent fund facts document(s) of the relevant series of the Continuing Funds, were mailed to securityholders of the Terminating Funds commencing on May 7, 2019, and were concurrently filed via SEDAR. The management information circular (together with the notice-and-access document and form of proxy, the Meeting Materials), which the notice-and-access document describes how to obtain, was also filed via SEDAR at the same time.

51. The Meeting Materials describe all relevant facts concerning the Mergers, including the investment objectives, strategies and fee structure of the Funds, the tax implications and other consequences of the Mergers, as well as the IRC’s recommendation of the Mergers, so that securityholders of the Terminating Funds may make an informed decision before voting on whether to approve the Mergers. The Meeting Materials also describe the various ways in which securityholders can obtain a copy of the AGF Offering Documents, and the most recent interim and annual financial statements and management reports of fund performance of the Continuing Funds.

52. Each of the Continuing Funds (other than AGF American Growth Fund) is, and is expected to continue to be at all material times, a mutual fund trust under the Tax Act and, accordingly, units of the Continuing Funds (other than AGF American Growth Fund) are “qualified investments” under the Tax Act for registered retirement savings plans, registered retirement income funds, deferred profit sharing plans, registered education savings plans, registered disability savings plans and tax free savings accounts (collectively referred to as Registered Plans). Following the Merger of Harmony U.S. Equity Pool into AGF American Growth Fund, AGF American Growth Fund is expected to be a mutual fund trust under the Tax Act. Accordingly, following the Merger Date, units of AGF American Growth Fund are expected to be “qualified investments” for Registered Plans.

53. When considering a merger of two or more funds, the Filer undertakes a thoughtful and extensive process to ensure its fund line up meets the changing needs of investors. Once the Filer determines it is appropriate to no longer continue offering a particular mandate, the Filer selects the appropriate continuing fund to receive the assets of the merging fund by considering both qualitative and quantitative factors. The qualitative factors considered include the comparability of investment objectives, investment strategies, risk rating, investment philosophy and portfolio construction. When considering quantitative factors, the Filer reviews fund performance, the investment performance correlation between the potential merging funds and continuing funds, any overlap in investment holdings, the asset allocation/sector allocation/geographic allocation of each fund, fees for each series, the difference in assets under management between the funds, a taxation analysis at both the fund and unitholder level and any unique factors that would be applicable for the given merger. Once each of these items has been reviewed, the Filer formalizes the analysis and recommends a continuing fund with which to proceed forward.

54. The Filer has determined that it would not be appropriate to effect a Taxable Merger as a “qualifying exchange” within the meaning of section 132.2 of the Tax Act or as a tax-deferred transaction for the following reasons:

(a) to the extent that unitholders in the applicable Merging Fund have an accrued capital loss on their units, effecting a Taxable Merger on a taxable basis will afford them the opportunity to realize that loss and use it against current capital gains or even carry it forward or back as permitted under the Tax Act;

(b) effecting a Taxable Merger on a taxable basis would preserve the loss carry-forwards in the applicable Continuing Fund; and

(c) effecting a Taxable Merger on a taxable basis is not expected to have a tax impact on the applicable Continuing Fund.

55. If all required approvals for the Mergers are obtained, it is intended that the Mergers will occur after the close of business on or about June 28, 2019 and no later than December 31, 2019 (the Merger Date). The Filer therefore anticipates that securityholders of each Terminating Fund will become securityholders of the applicable Continuing Fund after the close of business on the Merger Date.

56. The assets of each Terminating Fund to be acquired by its applicable Continuing Fund are currently or will, on the Merger Date, be acceptable to the portfolio manager of the Continuing Fund and are, or will be, consistent with the investment objectives of the Continuing Fund.

57. The Filer will pay for the costs of the Mergers. These costs consist mainly of brokerage charges associated with any merger related trades, legal, proxy solicitation, printing, mailing and regulatory fees.

58. No sales charges will be payable by unitholders of the Terminating Funds in connection with the Mergers.

59. In light of the disclosure in the Circular, securityholders of the Terminating Funds have sufficient information necessary to determine whether the proposed Mergers are appropriate for them.

60. Securityholders of each Terminating Fund will continue to have the right to redeem securities of the applicable Terminating Fund at any time up to the close of business on the business day immediately before the Merger Date.

Merger Steps

61. The proposed Mergers will be structured as follows:

(a) Prior to the Merger Date, any investments of the Terminating Funds which are not suitable for the applicable Continuing Funds or acceptable to the portfolio manager of the Continuing Funds will be sold. As a result, the Terminating Funds may temporarily hold cash and/or money market instruments and/or may not be invested in accordance with its investment objectives for a brief period of time prior to the Merger Date. The value of any investments sold will depend on prevailing market conditions.

(b) Prior to the Merger Date, each Terminating Fund will distribute to its securityholders sufficient net income and net realized capital gains, if any, so that the Terminating Fund will not be subject to tax under Part I of the Tax Act for the taxation year that includes the Merger Date.

(c) The value of each Terminating Fund’s portfolios and other assets will be determined at the close of business on the Merger Date in accordance with its declaration of trust.

(d) On the Merger Date, substantially all of the Terminating Funds’ assets will be transferred to the applicable Continuing Fund (after reserving sufficient assets to satisfy its estimated liabilities, if any, as of the Merger Date) in exchange for securities of the applicable Continuing Fund having an aggregate net asset value equal to the aggregate value of the assets transferred by the applicable Terminating Funds, and the securities of the Continuing Funds will be issued at the applicable series net asset value per security of the Continuing Fund determined as of the close of business on the Merger Date.

(e) Immediately thereafter, the securities of the Terminating Funds will be redeemed at their applicable series net asset value and such amount will be paid to securityholders of the Terminating Funds by transferring securities of an equivalent series of the applicable Continuing Fund to each Terminating Fund securityholder (except for Wrap Series securityholders of the Terminating Funds) in an amount equal to the redemption proceeds. In the case of Wrap Series securityholders of the Terminating Funds (except for Harmony Money Market Pool), the securityholders will receive Series Q securities of the applicable Continuing Funds. In the case of Wrap Series securityholders of Harmony Money Market Pool, these securityholders will receive Series F securities of AGF Canadian Money Market Fund.

(f) Following the completion of the Mergers, the Terminating Funds will be wound up and terminated.

(g) Any outstanding unit certificates (if applicable) of the Terminating Funds will be cancelled.

Benefits of the Mergers

62. The Filer believes that the Mergers are beneficial to securityholders of each Terminating Fund and Continuing Fund for the following reasons:

(a) the Mergers will result in a more streamlined and simplified product line-up that is easier for investors to understand;

(b) the Mergers will eliminate similar fund offerings, thereby reducing the administrative and regulatory costs of operating the Terminating Funds and Continuing Funds as separate funds;

(c) a line-up consisting of fewer mutual funds that target similar types of investors will allow the Filer to concentrate its marketing efforts to attract additional assets in the Continuing Funds. Ultimately this benefits securityholders because it ensures that each Continuing Fund remains a viable, long-term investment vehicle for existing and potential investors;

(d) the Continuing Funds have a portfolio of greater value, allowing for increased portfolio diversification opportunities compared to the Terminating Funds;

(e) the Continuing Funds, as a result of their greater size, can spread the operating expenses over a larger asset base, which may positively impact the management expense ratio of each Continuing Fund;

(f) as each Continuing Fund has either the same or lower risk rating than its corresponding Terminating Fund, securityholders of the Terminating Fund will become investors in a Continuing Fund that has a risk profile that is the same as, or lower than, the risk profile of the Terminating Fund; and

(g) with the exception of Harmony Money Market Pool and certain Wrap Series securityholders of Harmony Canadian Fixed Income Pool, securityholders of the Terminating Funds will receive securities of the Continuing Funds that have a combined management fee and/or administration fee, if applicable, that is lower than the combined management fee, portfolio management fee, if applicable, and an administration fee charged in respect of the series of securities of the Terminating Funds that they currently hold.

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 Approval Sought is granted with respect to each Merger, provided that the Filer obtains the prior approval of the securityholders of the Terminating Fund for the Merger at a special meeting held for that purpose.

“Darren McKall”

Darren McKall

Investment Funds and Structured Products

Ontario Securities Commission

SEDAR Project #2911328

App No. #2019/0101