Notice and Final Rule: OSC Rule - 41-502 - Prospectus Requirements for Mutual Funds (Repealed by 41-801 on March 17, 2008)

NOTICE OF RULE AND POLICY UNDER
THE SECURITIES ACT
RULE 41-502 AND COMPANION POLICY 41-502CP
PROSPECTUS REQUIREMENTS FOR MUTUAL FUNDS

I.Notice of Rule and Policy and Revocation of Regulations

The Ontario Securities Commission (the "Commission") has, under section 143 of the Securities Act (Ontario) (the "Act"), made Rule 41-502 Prospectus Requirements for Mutual Funds (the "Rule") and a regulation amending and revoking certain provisions of Regulation 1015 of the Revised Regulations of Ontario, 1990 the Regulation to the Act.

The Rule and the material required by the Act to be delivered to the Minister of Finance were delivered on January 17, 2001. If the Minister does not approve the Rule, reject the Rule or return it to the Commission for further consideration by March 19, 2001, or if the Minister approves the Rule, the Rule will come into force, pursuant to Part 12 of the Rule, on April 5, 2001. The regulation made by the Commission will come into force on the day that the Rule comes into force.

The Commission has adopted Companion Policy 41-502CP Prospectus Requirements for Mutual Funds (the "Policy") under section 143.8 of the Act. The Policy will come into force on the date the Rule comes into force.

II. Substance and Purpose of the Rule and Policy

The Rule

The substance and purpose of the Rule is to set out a number of form, content and filing requirements applicable to mutual fund prospectuses. The Rule is to be read together with Rule 41-501 General Prospectus Requirements, Companion Policy and Forms 41-501F2, 41-501F3 and 41-501F4 (collectively, "Rule 41-501") and National Instrument 41-101 Prospectus Disclosure Requirements ("NI 41-101"). Rule 41-501 sets out the basic form, content and filing requirements that apply to all prospectuses filed in Ontario. NI 41-101 sets out certain general prospectus disclosure requirements including front page disclosure and purchasers’ statutory rights. The Rule specifies which provisions of Rule 41-501 and NI 41-101 apply to mutual fund prospectuses.

Rule 41-501 and NI 41-101 were published in final form on October 13, 2000 and came into force on December 31, 2000.

Rule 41-501 consolidates certain provisions previously set forth in the Regulation and various policy statements of the Commission concerning the preparation, certification and receipting of prospectuses. The notice which accompanied

Rule 41-501 sets out which provisions of the Regulation and which policy statements were revoked or amended in connection therewith.

NI 41-101 consolidates certain prospectus disclosure requirements previously set forth in various national policy statements and in the securities legislation of certain provinces. The notice which accompanies NI 41-101 sets out which provisions of the Regulation and national policy statements were revoked or amended in connection therewith.

Unlike Rule 41-501, the Rule does not prescribe a new form for mutual fund prospectuses. Instead the Rule continues to require the use of Form 15 of the Regulation in respect of commodity pools and Form 45 of the Regulation for labour sponsored investment fund corporations. The Regulation has been amended to require the use of Form 15 for the prospectus of a scholarship plan. Those mutual funds which are governed by National Instrument 81-101 Mutual Fund Prospectus Disclosure ("NI 81-101") must use the forms prescribed in that instrument. Other mutual funds, such as exchange traded mutual funds, must prepare their prospectuses in accordance with Rule 41-501.

III.Substance and Purpose of Companion Policy

The substance and purpose of the Policy is to clarify how the Rule integrates with other rules and policies of the Commission and the Canadian Securities Administrators relating to mutual fund prospectuses, to bring certain mattersrelating to the Rule to the attention of persons and companies involved with mutual fund prospectuses and to provide interpretative guidance on certain of the provisions in the Rule.

Terms used in the Policy that are defined or interpreted in the Rule, Rule 41-501, NI 81-101 or the definition instruments in force in Ontario should be read in accordance with such definitions or interpretations, unless the Rule states otherwise.

IV.Summary of Changes to Rule and Policy

A proposed version of the Rule and Policy was first published for comment on June 27, 1997 (the "June 1997 Version"). No comments were received in respect of the Rule or the Policy.

Changes have been made to the Rule and Policy to reflect changes to Rule 41-501 and Rule 41-101 that resulted from comments received by the Commission.

Changes have also been made to the Rule and Policy as the result of the coming into force of NI 81-101. NI 81-101 came into force on February 1, 2000 and replaced National Policy Statement No. 36.

The Commission is of the view that none of the changes made since the June 1997 Version is material. Accordingly the Rule and Policy are not subject to a further comment period.

The following is a summary of changes made to the Rule and Policy since the June 1997 Version:

Rule 41-502

Part 1

Part 1.1 has been revised to reflect the coming into force of NI 81-101 and to conform the terms and definitions in the Rule with NI 81-101. In addition, specific definitions have been added including: (i) the definition of the term ‘mutual fund’ which has been expanded to include a scholarship plan for the purposes of the Rule; (ii) the definition of ‘material contract’ which mirrors the definition of material contract in NI 81-101 and (iii) the definition of ‘personal information’ which is defined in Part 1 in order to simplify the drafting of Part 7 and Part 8 of the Rule and reduce repetition.

Part 2

In the June 1997 Version, Part 2 referred to sections in Rule 41-501 which were not to apply to mutual funds. The drafting of this part has been revised to specify those sections of Rule 41-501 which do apply to mutual funds. Furthermore, this part has been divided into two sections. Section 2.1 sets out those sections of Rule 41-501 which apply to mutual fund prospectuses prepared in accordance with Form 15 and Form 45 and Section 2.2 sets out those sections of Rule 41-501 which apply to mutual fund prospectuses prepared in accordance with NI 81-101.

Part 3

Part 3 is a new addition to the Rule. Part 3 outlines those provisions of NI 41-101 that apply to mutual fund prospectuses prepared in accordance with Form 15 (section 3.1), Form 45 (section 3.2) and NI 81-101 (section 3.3). Please see the section in this notice titled ‘Related Instruments’ for a discussion of NI 41-101.

Part 4

Part 4 replaces Part 3 of the June 1997 Version. This part has been revised to exclude reference to the forms of permitted disclosure documents in order to avoid repetition with the Regulation. In the June 1997 Version, the revocation of section 44 and 237 of the Regulation was contemplated because, in their place, this Part would set out the permitted forms of disclosure documents for mutual funds. The Commission has revised and not revoked these provisions of the Regulation and as a result it is not necessary to name the permitted forms of disclosure documents for mutual funds in the Rule. Please see the section in this notice titled ‘Regulations to be Amended or Revoked’.

Section 4.1 sets out certain preparation requirements for mutual fund prospectuses that were originally included in the Regulation (Part III -Prospectus Requirements), but were revoked effective December 31, 2000 when Rule 41-501 became effective. The requirements previously in the Regulation are included in the general instructions to Form 41-501F1, which does not apply to mutual funds prepared in accordance with Form 15 or Form 45. In order for these preparation requirements to continue to apply to mutual fund prospectuses prepared in accordance with Form 15 orForm 45, they have been included in the Rule.

Part 5

Subsection 5.2(2) has been amended to clarify that this section applies only to a mutual fund that has been in existence for less than one year.

Section 5.2(3) is a new subsection. This subsection has been added to address mutual funds that may have distributed securities on an exempt basis prior to filing a prospectus. Such mutual funds must include audited financial statements for the last completed financial year in the prospectus despite the fact that such mutual fund may not have been required to file those financial statements with the Commission under the Act for that financial year. However, if the prospectus is filed within 140 days of its year end, the prospectus must include the financial statements for the preceding year.

Section 5.4 and section 5.5 have been added to clarify that all financial statements included in a prospectus must be audited financial statements and must be accompanied by an auditor’s report without a reservation of opinion, unless they are interim financial statements.

This Part does not replace the financial disclosure requirements for mutual funds filing prospectuses in compliance with NI 81-101 and NI 81-102 Mutual Funds ("NI 81-102").


Part 6

Part 6 was originally section 5.1 of Part 5 of the June 1997 Version and was titled ‘Additional Requirements’. The content of Part 6 has not been revised; however, it is now presented separately from the other items that were included in Part 5 in the June 1997 Version. The remainder of Part 5 in the June 1997 Version has been revised and now forms part of the requirements set out in Parts 7 and 8 of the Rule.

Part 7 and Part 8

Part 5 of the June 1997 Version has been revised to include all filing and delivery requirements for a mutual fund that files a prospectus in accordance with either Form 15 or Form 45. To assist filers, the Commission has decided to include all filing and delivery requirements in this Part instead of referring back to Part 13 of Rule 41-501 which may be applicable for mutual funds preparing a prospectus in accordance with Form 15 or Form 45. These additional delivery and filing requirements have also been revised to make the requirements mirror the filing and delivery requirements under NI 81-101, including, for example, the filing and delivery of material contracts and amendments to material contracts.

Section 7.7 has been included to make the Rule consistent with the approach taken by the Canadian Securities Administrators in the proposed amendments to NI 81-101 ( (2000) 23 OSCB) to permit sensitive commercial or financial information, as described in this section, contained in agreements with portfolio advisors of a mutual fund, to be omitted from filed copies of such agreements.

Part 8 has been added to set out all additional filing requirements for mutual funds that file a prospectus in Ontario under NI 81-101.

41-502 Companion Policy

Part 1

This Part has been revised to reflect the sections of the Rule that apply to preliminary and pro forma prospectuses as well as (final) prospectuses.

This Part has also been revised to reflect the change made to the Rule since the June 1997 Version with respect to the definition of ‘prospectus’. The Rule now specifically sets out in section 1.2 that reference in the Rule to a ‘prospectus’ does not include a reference to a simplified prospectus. Where a provision of the Rule applies to mutual funds that file a simplified prospectus under NI 81-101, it is made explicit.

Part 2

Part 2 has been revised to update the explanations to reflect the coming into force of NI 81-101 and NI 81-102 and the coming into force of Rule 41-501 and NI 41-101. Part 2 has also been revised to delete certain discussions of section 63 of the Act and NI 41-101, because the application of section 63 of the Act and NI 41-101 to mutual fund issuers in Ontario has been addressed in the Rule.

In addition, section 2.6 has been added to this Part. Section 2.6 provides a summary of applicable prospectus rules (both national and local) to assist filers of mutual fund prospectuses.

Part 3

Section 3.3 addresses the issues associated with making material contracts available to the public and addresses the application of section 5.3 of Companion Policy 41-501CP to material contracts of mutual funds.

Part 4

This part discusses the ability of mutual funds to add classes and series of securities by way of amendment as long as the new class or series of securities is not referable to a separate portfolio of assets.

V.Related Instruments

These instruments are also related to Rule 41-501, NI 81-101 and NI 41-101.

Rule 41-501

Mutual funds that file a prospectus in Ontario must comply with Rule 41-501. The Rule and Policy state the provisions of Rule 41-501 that do not apply to mutual fund prospectuses and also set out additional requirements for mutual fund prospectuses filed in Ontario. Rule 41-501 came into force on December 31, 2000. Please see "Transition Period" below.

National Instrument 81-101

For mutual funds that are required to prepare a prospectus under NI 81-101, the prospectus must comply with NI 81-101 and its Companion Policy and be prepared in accordance with its Forms (Form 81-101F1 and 81-101F2). If such mutual fund’s securities are offered in Ontario, then such mutual fund’s prospectus will also be subject to all of the applicable provisions of the Rule and Policy and Rule 41-501. Please see "Transition Period" below.

National Instrument 41-101

Mutual funds that are required to file a prospectus in accordance with Form 15 or Form 45 of the Rule must also comply with the provisions of NI 41-101. The Rule and Policy state the provisions of NI 41-101 that apply to mutual fund prospectuses filed in Ontario. NI 41-101 came into force on December 31, 2000. Please see "Transition Period" below.

VI.Transition Period

Rule 41-501 and NI 41-101 came into force on December 31, 2000 . During the transition period from the effective date of Rule 41-501 and NI 41-101 to the effective date of the Rule and Policy, to the extent that the Rule and Policy address the applicability or inapplicability of certain provisions of Rule 41-501 and NI 41-101 to mutual fund prospectuses, Staff’s administrative practice will be governed by the current form of the Rule and Policy.

VII.Regulations to be Amended or Revoked

The Commission has made the following amendments to the Regulation, in conjunction with the making of the Rule. These amendments come into force at the time that the Rule comes into force:

1.Section 33 of Regulation 1015 of the Revised Regulations of Ontario, 1990 is revoked.

2.Section 44 of the Regulation is revoked and the following substituted:

44. The prospectus of a commodity pool, as defined in National Instrument 81-101 Mutual Fund Prospectus Disclosure, or of a scholarship plan shall be prepared in accordance with Form 15.
3.Section 51 of the Regulation is amended by striking out "preliminary prospectus, prospectus or summary statement" and substituting "preliminary prospectus or prospectus".

4.(1) Subsection 54 (1) of the Regulation is amended by striking out "and every summary statement of a mutual fund" in the portion before clause (a).

(2) Subsections 54 (2) and (3) of the Regulation are revoked and the following substituted:

(2) The financial statements described in subsection (1) may be omitted from the prospectus of the mutual fund if a copy of the financial statements that are otherwise required by subsection (1) is filed concurrently with the filing of the prospectus or if a copy of them has previously been filed under section 78 of the Act.

(3) If, under subsection (2), a prospectus of a mutual fund does not contain the financial statements described in subsection (1), a prospectus that is sent or delivered to a purchaser of securities under section 71 or under subsection 63 (5) of the Act shall be accompanied by,

(a) a copy of the financial statements that are otherwise required by subsection (1); and

(b)if one or more financial statements for periods subsequent to those covered by the financial statements referred to in clause (a) have been filed under section 77 or 78 of the Act, a copy of the financial statements most recently filed before the day on which the prospectus is sent or delivered to the purchaser.

(3) Subsection 54 (4) of the Regulation is amended by striking out the portion before the statement and substituting the following:

(4) If, under subsection (2), a prospectus of a mutual fund does not contain the financial statements described in subsection (1), the following statement shall be printed on the outside cover page of the prospectus:

5.Section 237 of the Regulation is revoked and the following substituted:

237. A prospectus of a labour sponsored investment fund corporation shall be in Form 45.

6.Form 16 of the Regulation is revoked.

VIII. Text of Rule and Policy

The text of the Rule and Policy follows.


January 19, 2001.

ONTARIO SECURITIES COMMISSION RULE 41-502
PROSPECTUS REQUIREMENTS FOR MUTUAL FUNDS

TABLE OF CONTENTS

PARTTITLEPAGE

PART 1INTERPRETATION AND APPLICATION1
1.1Interpretation1
1.2Application1

PART 2APPLICATION OF RULE 41-501 GENERAL PROSPECTUS REQUIREMENTS2
2.1Application to a Prospectus Prepared in accordance with Form 15 or Form 452
2.2Application to a Simplified Prospectus and Annual Information Form Prepared under National Instrument 81-1012

PART 3APPLICATION OF NATIONAL INSTRUMENT 41-101 PROSPECTUS DISCLOSURE REQUIREMENTS2
3.1Application to a Prospectus Prepared in accordance with Form 152
3.2Application to a Prospectus Prepared in accordance with Form 453
3.3Application to a Simplified Prospectus and Annual Information Form Prepared under National Instrument 81-1013

PART 4GENERAL REQUIREMENTS FOR A PROSPECTUS PREPARED IN ACCORDANCE WITH FORM 15 OR FORM 45
4.1General Requirements for a Prospectus Prepared in accordance with Form 15 or Form 453

PART 5FINANCIAL STATEMENTS IN A PROSPECTUS4
5.1Application4
5.2Financial Statements in a Prospectus4
5.3Form and Contents of Financial Statements5
5.4Audit Requirement for Financial Statements5
5.5Exception to Audit Requirement for Interim Financial Statements 5
5.6Exception to Audit Requirements for Financial Statements in a Pro Forma Prospectus5

PART 6NON-CANADIAN MANAGER5
6.1Non-Canadian Manager5

PART 7ADDITIONAL FILING AND DELIVERY REQUIREMENTS FOR A MUTUAL FUND THAT PREPARES A PROSPECTUS IN ACCORDANCE WITH FORM 15 OR FORM 456
7.1Application6
7.2 Interpretation6
7.3Additional Filing and Delivery Requirements for a Preliminary Prospectus6
7.4Additional Filing and Delivery Requirements for a Pro Forma Prospectus7
7.5Additional Filing and Delivery Requirements for a Prospectus 8
7.6Additional Filing and Delivery Requirements for an Amendment to a Prospectus9
7.7Material Contracts10

PART 8ADDITIONAL FILING AND DELIVERY REQUIREMENTS FOR A MUTUAL FUND THAT PREPARES A SIMPLIFIED PROSPECTUS AND ANNUAL INFORMATION FORM UNDER NATIONAL INSTRUMENT 81-10110
8.1Application10
8.2Interpretation11
8.3Additional Filing and Delivery Requirements for a Preliminary Simplified Prospectus11
8.4Additional Filing and Delivery Requirements for a Pro Forma Simplified Prospectus12
8.5Additional Filing and Delivery Requirements for a Simplified Prospectus12
8.6Additional Filing and Delivery Requirements for an Amendment to a Simplified Prospectus13

PART 9PROSPECTUS UNDER SECTION 63 OF THE ACT14
9.1Prospectus under Section 63 of the Act14

PART 10EXEMPTION FROM SUBSECTION 81(2) OF THE ACT14
10.1Exemption from Subsection 81(2) of the Act14

PART 11EXEMPTION15
11.1Exemption15
11.2Evidence of Exemption15

PART 12EFFECTIVE DATE15
12.1Effective Date15

ONTARIO SECURITIES COMMISSION RULE 41-502
PROSPECTUS REQUIREMENTS FOR MUTUAL FUNDS

PART 1INTERPRETATION AND APPLICATION

1.1Interpretation

(1)In this Rule

"material contract" means, for a mutual fund, a document that the mutual fund would be required to list in an annual information form under Item 16 of Form 81-101F2 Contents of Annual Information Form if the mutual fund filed a simplified prospectus under National Instrument 81-101 Mutual Fund Prospectus Disclosure;

"mutual fund" includes a scholarship plan; and

"personal information" means, for a mutual fund, information describing the full name, position with or relationship to the mutual fund or its manager, names and address of employer, full residential address, date and place of birth and citizenship, for

(a)each director or officer of the mutual fund;

(b)each promoter of the mutual fund, or if the promoter is not an individual, for each director and officer of the promoter; and

(c)each director or officer of the manager of the mutual fund.

(2)Terms defined in National Instrument 81-101 or National Instrument 81-102 Mutual Funds and used in this Rule have at any time the respective meanings ascribed to them in that National Instrument.

(3)In this Rule, "prospectus" does not include a simplified prospectus under National Instrument 81-101.

1.2Application - A pro forma and a preliminary prospectus of a mutual fund shall comply with the requirements of this Rule that relate to a prospectus.

PART 2APPLICATION OF RULE 41-501 GENERAL PROSPECTUS REQUIREMENTS

2.1Application to a Prospectus Prepared in accordance with Form 15 or Form 45 - The following provisions of Rule 41-501 are the only provisions of that rule that apply to a prospectus that is prepared in accordance with Form 15 or Form 45:

1.sections 2.1 and 2.8.
2.Part 3.
3.sections 9.1, 9.3 and 9.4.
4.sections 12.2 and 12.3.
5.sections 13.4, 13.5, 13.6, 13.7, 13.8 and 13.9.
6.Part 14.
7.Part 15, as it relates to the sections and Parts listed in this section.

2.2Application to a Simplified Prospectus and Annual Information Form Prepared under National Instrument 81-101 - The following provisions of Rule 41-501 are the only provisions of that rule that apply to a simplified prospectus and annual information form prepared under National Instrument 81-101:

1.sections 2.1 and 2.8.
2.sections 12.2 and 12.3.
3.sections 13.4, 13.5, 13.8 and 13.9.
4.Part 14.
5.Part 15, as it relates to the sections and Part listed in this section.

PART 3APPLICATION OF NATIONAL INSTRUMENT 41-101 PROSPECTUS DISCLOSURE REQUIREMENTS

3.1Application to a Prospectus Prepared in accordance with Form 15 - The following provisions of National Instrument 41-101 are the only provisions of that national instrument that apply to a prospectus that is prepared in accordance with Form 15:

1.Part 1.
2.sections 2.1 and 2.2.
3.section 4.1.
4.Part 5, as it relates to the sections and Part listed in this subsection.

3.2Application to a Prospectus Prepared in accordance with Form 45 - The following provisions of National Instrument 41-101 are the only provisions of that national instrument that apply to a prospectus that is prepared in accordance with Form 45:

1.Part 1.
2.sections 2.1 and 2.2.
3.Part 5, as it relates to the sections and Part listed in this subsection.

3.3Application to a Simplified Prospectus and Annual Information Form Prepared under National Instrument 81-101 - National Instrument 41-101 does not apply to a simplified prospectus prepared under National Instrument 81-101.

PART 4GENERAL REQUIREMENTS FOR A PROSPECTUS PREPARED IN ACCORDANCE WITH FORM 15 OR FORM 45

4.1General Requirements for a Prospectus Prepared in accordance with Form 15 or Form 45 - A prospectus of a mutual fund prepared in accordance with Form 15 or Form 45

(a)shall present disclosure in a manner that is understandable to readers and in an easy to read format;

(b)shall be prepared using plain language;

(c)shall provide clear and concise explanations for technical terms;

(d)for information that is required to be disclosed on a specific date, shall update that information if there has been a material or significant change in the required information since the specific date; and

(e)need not make reference to inapplicable items and may, unless otherwise required in the applicable Form, omit negative answers to items.

PART 5FINANCIAL STATEMENTS IN A PROSPECTUS

5.1Application - This Part applies only to a prospectus prepared in accordance with Form 15 or Form 45.

5.2Financial Statements in a Prospectus

(1)A prospectus of a mutual fund shall contain

(a)the financial statements of the mutual fund

(i)for its last completed financial year if those financial statements have been, or were required under the Act to have been, filed; or

(ii)for the preceding financial year if the financial statements for the last completed financial year have not been, and have not yet been required under the Act to have been, filed; and

(b)the financial statements of the mutual fund for the six month period that began immediately after the financial year to which the annual financial statements required to be included in the prospectus under paragraph (a) relate, if those six month financial statements have been, or have been required under the Act to have been, filed.

(2)Despite subsection (1), a prospectus of a mutual fund that has been in existence for less than one financial year shall contain

(a)the balance sheet of the mutual fund dated the date of inception of the mutual fund; and

(b)financial statements of the mutual fund for the period commencing with the beginning of the first financial year and ending six months before the date on which that financial year ends, if those financial statements have been, or have been required to have been, filed.

(3)Despite subsection (1), a prospectus of a mutual fund that has been in existence for one financial year or more but that has not previously offered securities under a prospectus shall contain

(a)the financial statements of the mutual fund

(i)for its last completed financial year, or

(ii)for the preceding financial year if the prospectus is filed 140 days or less after the end of the last completed financial year; and

(b)the financial statements of the mutual fund for the six month period that began immediately after the financial year to which the annual financial statements required to be included in the prospectus under paragraph (a) relate, if the prospectus is filed 60 days or more after the end of that six month period.

5.3Form and Contents of Financial Statements - The financial statements referred to in section 5.2 shall comply with Part IV of the Regulation.

5.4Audit Requirement for Financial Statements - Financial statements included in a prospectus of a mutual fund shall be accompanied by an auditor's report without a reservation of opinion.

5.5Exception to Audit Requirement for Interim Financial Statements - Despite section 5.4, a mutual fund may omit from its prospectus an auditor's report for interim financial statements required to be included under section 5.2.

5.6Exception to Audit Requirements for Financial Statements in a Pro Forma Prospectus - Despite section 5.4, a mutual fund may omit from a prospectus an auditor's report for the financial statements included in a pro forma prospectus.

PART 6NON-CANADIAN MANAGER

6.1Non-Canadian Manager - A prospectus of a mutual fund, the manager of which is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, shall include the following on one of its first three pages or under a separate heading elsewhere with bracketed information completed:

The manager is incorporated, continued or otherwise governed under the laws of a foreign jurisdiction or resides outside of Canada. Although the manager has appointed [name and address of agent for service] as its agent for service of process in Ontario it may not be possible for investors to collect from the manager judgments obtained in courts in Ontario.

PART 7ADDITIONAL FILING AND DELIVERY REQUIREMENTS FOR A MUTUAL FUND THAT PREPARES A PROSPECTUS IN ACCORDANCE WITH FORM 15 OR FORM 45

7.1Application - This Part applies only to a mutual fund that prepares a prospectus in accordance with Form 15 or Form 45.

7.2Interpretation

(1)Despite section 1.2, the requirements of this Part relating to the filing of a prospectus do not apply to the filing of a pro forma prospectus or a preliminary prospectus.

(2)The filing and delivery requirements contained in this Part are in addition to any other filing and delivery requirement imposed by securities legislation.

7.3Additional Filing and Delivery Requirements for a Preliminary Prospectus
(1)A mutual fund that files a preliminary prospectus shall file the following with the preliminary prospectus:

1.a signed copy of the preliminary prospectus.

2.if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada, a submission to the jurisdiction and appointment of an agent for service of process of the manager of a mutual fund in Form 41-501F4.

(2)A mutual fund that files a preliminary prospectus shall deliver the following to the Commission with the preliminary prospectus:

1.any personal information for the mutual fund that has not been previously delivered to the Commission in connection with a prospectus of another mutual fund managed by the manager.

2.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to i this subsection.

3.a copy of all material contracts of, and drafts of material contracts intended to be of, the mutual fund.

4.a signed letter to the Commission from the auditor of the mutual fund prepared in accordance with the form suggested for this circumstance by the Handbook, if a financial statement of the mutual fund included in the preliminary prospectus is accompanied by an unsigned auditor's report.

7.4Additional Filing and Delivery Requirements for a Pro Forma Prospectus

(1)A mutual fund that files a pro forma prospectus shall file the following with the pro forma prospectus:

1.a copy of any material contract of the mutual fund, and a copy of any amendment to a material contract of the mutual fund not previously filed.

2.if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada, a submission to the jurisdiction and appointment of an agent for service of process of the manager of a mutual fund in Form 41-501F4, if it has not already been filed.

(2)A mutual fund that files a pro forma prospectus shall deliver the following to the Commission with the pro forma prospectus:

1.a copy of the pro forma prospectus, blacklined to show changes and the text of deletions from the latest prospectus previously filed.

2.any personal information for the mutual fund that has not been previously delivered to the Commission in connection with a prospectus filing of the mutual fund or another mutual fund managed by the manager.

3.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to in this section.

4.a copy of a draft of each material contract of the mutual fund, and a copy of each draft amendment to a material contract of the mutual fund, in either case not yet executed but proposed to be executed by the time of filing of the prospectus.

5.a signed letter to the Commission from the auditor of the mutual fund prepared in accordance with the form suggested for this circumstance by the Handbook, if a financial statement of the mutual fund included in the pro forma prospectus is accompanied by an unsigned auditor's report.
7.5Additional Filing and Delivery Requirements for a Prospectus

(1)A mutual fund that files a prospectus shall file the following with the prospectus:

1.a signed copy of the prospectus.

2.a copy of any material contract, and a copy of any amendment to a material contract, of the mutual fund and not previously filed.

3.if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada, a submission to the jurisdiction and appointment of an agent for service of process of the manager of a mutual fund in Form 41-501F4, if it has not already been filed.

4. any consents required by section 13.4 of Rule 41-501.

(2)A mutual fund that files a prospectus shall deliver the following to the Commission with the prospectus:

1.a copy of the prospectus blacklined to show changes and the text of deletions from the preliminary or pro forma prospectus.

2.details of any changes to the personal information for the mutual fund since the delivery of that information in connection with the filing of the preliminary or pro forma prospectus.

3.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to in this section.

4.a comfort letter to the Commission from the auditor of the mutual fund prepared in accordance with the relevant standards of the Handbook, if an unaudited financial statement of the mutual fund is included in the prospectus.

7.6Additional Filing and Delivery Requirements for an Amendment to a Prospectus

(1)A mutual fund that files an amendment to a prospectus shall file the following with the amendment:

1.a copy of any material contract, and a copy of any amendment to a material contract, of the mutual fund and not previously filed.

2 any consents required by section 13.4 of Rule 41-501.

(2)A mutual fund that files an amendment to a prospectus shall deliver the following to the Commission with the amendment:

1.if the amendment is in the form of an amended and restated prospectus, a copy of that document blacklined to show changes and the text of deletions from the prospectus.

2.details of any changes to the personal information for the mutual fund since the delivery of that information in connection with the filing of the prospectus.

3.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to in this subsection.

4.if applicable, a comfort letter to the Commission from the auditor of the mutual fund prepared in accordance with the relevant standards of the Handbook.

7.7Material Contracts - Despite any other provision of this Part, a mutual fund may delete commercial or financial information from the copy of an agreement of the mutual fund, its manager or trustee with a portfolio adviser or portfolio advisers of the mutual fund filed under this Part if the disclosure of that information could reasonably be expected to:

(a)prejudice significantly the competitive position of a party to the agreement; or

(b)interfere significantly with negotiations in which parties to the agreement are involved.


PART 8ADDITIONAL FILING AND DELIVERY REQUIREMENTS FOR A MUTUAL FUND THAT PREPARES A SIMPLIFIED PROSPECTUS AND ANNUAL INFORMATION FORM UNDER NATIONAL INSTRUMENT 81-101

8.1Application - This Part applies only to a mutual fund that prepares a simplified prospectus and annual information form under National Instrument 81-101.

8.2Interpretation - The filing and delivery requirements contained in this Part are in addition to any other filing and delivery requirement imposed by securities legislation.

8.3Additional Filing and Delivery Requirements for a Preliminary Simplified Prospectus

(1)A mutual fund that files a preliminary simplified prospectus and preliminary annual information form under National Instrument 81-101 shall file the following with those documents:

1.a signed copy of the preliminary annual information form.

2.if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada, a submission to the jurisdiction and appointment of an agent for service of process of the manager of a mutual fund in Form 41-501F4.

(2)A mutual fund that files a preliminary simplified prospectus and preliminary annual information under National Instrument 81-101 shall deliver the following to the Commission with those documents:

1.any personal information for the mutual fund that has not been previously delivered to the Commission in connection with a simplified prospectus of another mutual fund managed by the manager.

2.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to in this subsection.

3.a signed letter to the Commission from the auditor of the mutual fund prepared in accordance with the form suggested for this circumstance by the Handbook, if a financial statement of the mutual fund incorporated by reference into the preliminary simplified prospectus is accompanied by an unsigned auditor's report.

8.4Additional Filing and Delivery Requirements for a Pro Forma Simplified Prospectus

(1)A mutual fund that files a pro forma simplified prospectus under National Instrument 81-101 shall file, with the pro forma simplified prospectus, a submission to the jurisdiction and appointment of an agent for service of process of the manager of a mutual fund in Form 41-501F4, if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada and if that document has not already been filed.

(2)A mutual fund that files a pro forma simplified prospectus under National Instrument 81-101 shall deliver the following to the Commission with the pro forma simplified prospectus:

1.any personal information for the mutual fund that has not been previously delivered to the Commission in connection with a simplified prospectus of the mutual fund or another mutual fund managed by the manager.

2.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to in this section.

3.a signed letter to the Commission from the auditor of the mutual fund prepared in accordance with the form suggested for this circumstance by the Handbook, if a financial statement of the mutual fund incorporated by reference into the pro forma simplified prospectus is accompanied by an unsigned auditor's report.

8.5Additional Filing and Delivery Requirements for a Simplified Prospectus

(1)A mutual fund that files a simplified prospectus and annual information form under National Instrument 81-101 shall file the following with those documents:

1.if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada, a submission to the jurisdiction and appointment of an agent for service of process of the manager of a mutual fund in Form 41-501F4, if it has not already been filed.

2. any consents required by section 13.4 of Rule 41-501.

(2)A mutual fund that files a simplified prospectus and annual information form shall deliver the following to the Commission with those documents:

1.details of any changes to the personal information for the mutual fund since the delivery of that information in connection with the filing of the simplified prospectus.

2.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to in this section.

3.a comfort letter to the Commission from the auditor of the mutual fund prepared in accordance with the relevant standards of the Handbook, if an unaudited financial statement of the mutual fund is incorporated by reference into the simplified prospectus.

8.6Additional Filing and Delivery Requirements for an Amendment to a Simplified Prospectus

(1)A mutual fund that files an amendment to a simplified prospectus or annual information form, or both, under National Instrument 81-101 shall file, with the amendment or amendments, any consents required by section 13.4 of Rule 41-501.

(2)A mutual fund that files an amendment to a simplified prospectus or annual information form, or both, under National Instrument 81-101 shall deliver the following to the Commission with the amendment or amendments:

1.details of any changes to the personal information for the mutual fund since the delivery of that information in connection with the filing of the simplified prospectus.

2.a completed Form 41-501F2 required by the Freedom of Information and Protection of Privacy Act for the collection of the personal information referred to in this section.

3.if applicable, a comfort letter to the Commission from the auditor of the mutual fund prepared in accordance with the relevant standards of the Handbook.


PART 9PROSPECTUS UNDER SECTION 63 OF THE ACT

9.1Prospectus under Section 63 of the Act - A preliminary simplified prospectus, simplified prospectus, or pro forma simplified prospectus, in each case, prepared and filed in accordance with National Instrument 81-101, is a short form of prospectus or short form of pro forma prospectus, as the case may be, in prescribed form for the purposes of section 63 of the Act.


PART 10EXEMPTION FROM SUBSECTION 81(2) OF THE ACT

10.1Exemption from Subsection 81(2) of the Act - Subsection 81(2) of the Act does not apply to a mutual fund that has obtained a receipt for a current prospectus or simplified prospectus.

PART 11EXEMPTION

11.1Exemption - The Director may grant an exemption to this Rule, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.

11.2Evidence of Exemption - Without limiting the manner in which an exemption under section 11.1 may be evidenced, the issuance by the Director of a receipt for a prospectus or a simplified prospectus or an amendment to a prospectus or a simplified prospectus is evidence of the granting of the exemption for any form or content requirements relating to a prospectus or a simplified prospectus if

(a)the person or company that sought the exemption delivered to the Director, with the preliminary or pro forma prospectus or a simplified prospectus or at least 10 days before the issuance of a receipt in the case of an amendment, a letter or memorandum describing the matters relating to the exemption and indicating why consideration should be given to the granting of the exemption; and

(b)the Director has not sent written notice to the contrary to the person or company that sought the exemption before, or concurrent with, the issuance of the receipt.

PART 12EFFECTIVE DATE

12.1Effective Date - This Rule comes into force on April 5, 2001.


January 16, 2001.

COMPANION POLICY 41-502CP
TO ONTARIO SECURITIES COMMISSION RULE 41-502
PROSPECTUS REQUIREMENTS FOR MUTUAL FUNDS

PARTTITLEPAGE

PART 1INTRODUCTION1
1.1Purpose of Policy1
1.2Use of Term "Prospectus" in the Rule1

PART 2GENERAL STRUCTURE OF THE RULE1
2.1Relationship to Securities Legislation Applicable to Mutual Fund Instruments1
2.2Form Requirements2
2.3Rule 41-501 General Prospectus Requirements2
2.4National Instrument 41-101 Prospectus Disclosure Requirements2
2.5National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR)3
2.6National Policy 43-201 Mutual Reliance Review System for Prospectuses and Annual Information Forms3
2.7Summary of Applicable Prospectus Rules for Mutual Fund Prospectuses Filed in Ontario3
2.8National Instrument 81-103 Mortgage Funds and National Instrument 81-104 Commodity Pools4

PART 3DISCLOSURE4
3.1Individual Trustees or General Partners4
3.2Notices/Consent Forms and Security Check Information5
3.3Material Contracts6

PART 4AMENDMENTS6
4.1Amendments

COMPANION POLICY 41-502CP
TO ONTARIO SECURITIES COMMISSION RULE 41-502
PROSPECTUS REQUIREMENTS FOR MUTUAL FUNDS

PART 1INTRODUCTION

1.1Purpose of Policy - The purpose of this Policy is to clarify how Rule 41-502 Prospectus Requirements for Mutual Funds (the "Rule") integrates with other rules and policies of the Ontario Securities Commission (the "Commission") and the Canadian Securities Administrators ("CSA") relating to prospectuses of mutual funds. This Policy also is designed to bring certain matters relating to the Rule to the attention of persons or companies involved with mutual fund prospectuses.

1.2Use of Term "Prospectus" in the Rule

(1)The Rule generally uses the term "prospectus" in reference to the prospectus of a mutual fund. The Act uses the term "prospectus" to refer to a final prospectus, and that usage is consistent with the usage in the Rule.

(2)Section 1.2 of Rule 41-502 provides that a pro forma prospectus and a preliminary prospectus are required to comply with the requirements of the Rule that relate to a prospectus. Therefore, the form and content requirements of Parts 2, 3, 4, 5 and 6 of the Rule are applicable to pro forma prospectuses and preliminary prospectuses as well as to (final) prospectuses.

(3)The Rule treats a prospectus prepared in accordance with Form 15 or Form 45 separately from a simplified prospectus. Therefore, subsection 1.1(3) of the Rule provides that the term "prospectus" in the Rule does not include a simplified prospectus under National Instrument 81-101.

PART 2GENERAL STRUCTURE OF THE RULE

2.1Relationship to Securities Legislation Applicable to Mutual Fund Instruments - The Rule sets out the Ontario prospectus requirements that are specific to mutual funds. A person or company preparing a mutual fund prospectus must have regard to other rules and policies of the Commission and the CSA that relate to prospectuses, in addition to the applicable provisions of securities acts and regulations of the jurisdictions of Canada.

2.2Form Requirements - Section 44 of the Regulation provides that a prospectus of a commodity pool or scholarship plan shall comply with Form 15. Section 237 of the Regulation provides that the prospectus of a labour sponsored investment fund corporation shall comply with Form 45.

2.3Rule 41-501 General Prospectus Requirements

(1)Rule 41-501 is an Ontario-only Rule that sets out the general requirements in Ontario concerning the preparation, certification, filing and receipting of a prospectus filed in Ontario. Rule 41-501 consolidates various provisions previously set out in the Regulation and in various policy statements and notices of the Commission and Commission staff concerning the preparation, certification, filing and receipting of prospectuses.

(2)Rule 41-501 applies to a prospectus of a mutual fund filed in Ontario unless its application is excluded in the Rule. Sections 2.1 and 2.2 of the Rule operate to exclude provisions of Rule 41-501 from applying to mutual fund prospectuses. Section 2.1 of the Rule clarifies which provisions of Rule 41-501 apply to a long form prospectus prepared in accordance with Form 15 or Form 45 and section 2.2 of the Rule clarifies which provisions of Rule 41-501 apply to a simplified prospectus prepared under National Instrument 81-101.

(3)Persons or companies should also have regard to Companion Policy 41-501CP in following the requirements of Rule 41-501.

2.4National Instrument 41-101 Prospectus Disclosure Requirements - National Instrument 41-101 contains a number of provisions that are applicable to all prospectuses filed in Ontario, including certain front pagedisclosure requirements, plan of distribution disclosure requirements and statutory rights disclosure requirements. Section 3.1 of the Rule clarifies which provisions of National Instrument 41-101 apply to a long form prospectus prepared in accordance with Form 15, and section 3.2 of the Rule clarifies which provisions of National Instrument 41-101 apply to a long form prospectus prepared in accordance with Form 45. Section 3.3 of the Rule provides that National Instrument 41-101 does not apply to a simplified prospectus or annual information form prepared under National Instrument 81-101.

2.5National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) - National Instrument 13-101 mandates the electronic filing of various documents with the Canadian securities regulatory authorities, and is applicable to mutual fund prospectuses filed in Ontario.

2.6National Policy 43-201 Mutual Reliance Review System for Prospectuses and Annual Information Forms - National Policy 43-201 establishes the mutual reliance review system for the filing and regulatory review of prospectuses and annual information forms, and applies, for mutual funds, both to long form prospectuses and simplified prospectuses filed in Ontario.

2.7Summary of Applicable Prospectus Rules for Mutual Fund Prospectuses Filed in Ontario

(1)A person or company preparing and filing a mutual fund prospectus in accordance with Form 15 or Form 45 should ensure compliance with Rule 41-501 and National Instrument 41-101 (to the extent those instruments are made applicable by Rule 41-502), Rule 41-502, National Instrument 13-101 and should follow National Policy 43-201 in order to use the Mutual Reliance Review System for Prospectuses and Annual Information Forms.

(2)A person or company preparing and filing a simplified prospectus under National Instrument 81-101 should ensure compliance with Rule 41-501 (to the extent made applicable by Rule 41-502), Rule 41-502, National Instrument 81-101, National Instrument 13-101 and should follow National Policy 43-201 in order to use the Mutual Reliance Review System for Prospectuses and Annual Information Forms.

(3)In addition, reference to National Instrument 81-102 in connection with the preparation of a prospectus may be appropriate. National Instrument 81-102 references the contents of a prospectus in a number of places, generally by requiring specific prospectus disclosure of a particular matter as a condition of the mutual fund being entitled to take some specified action. For example, section 2.11 of National Instrument 81-102 requires prospectus disclosure concerning the use of specified derivatives by a mutual fund in order for the mutual fund to be permitted to commence such use.

(4)The Commission notes that the prospectus of a mutual fund that is not permitted to use the simplified prospectus disclosure system of National Instrument 81-101 and that is not either a commodity pool, labour sponsored investment fund corporation or a scholarship plan will be required to comply with Rule 41-501, as that rule applies to Ontario prospectuses generally. An exchange-traded mutual fund would be an example of this type of fund. Rule 41-502 will not generally apply to a prospectus for such a mutual fund, although it is noted that Part 6 of the Rule applies to all mutual funds, including exchange-traded funds.

2.8National Policy Statement 29 - Mutual Funds Investing in Mortgages and Proposed National Instrument 81-104 Commodity Pools - A mutual fund that is a commodity pool will be subject to the applicable disclosure requirements contained in National Instrument 81-104 Commodity Pools when that National Instrument comes into force. A mutual fund that is a mortgage fund should continue to comply with National Policy Statement No. 29 until a replacement instrument for that policy statement comes into force.

PART 3DISCLOSURE

3.1Individual Trustees or General Partners

(1)The Rule requires that an issuer deliver to the Commission, at prescribed times, personal information for the mutual fund, which includes information about each director and executive officer of the issuer.

(2)The Commission is of the view that any individual that is a trustee of a mutual fund constituted as a trust is "acting in a capacity similar to that of a director of a company", according to the definition of "director" in section 1 of the Act. Therefore, the Commission is of the view that these individualsare required to provide the specified personal information. However, the Commission is of the view that this concept is not applicable to registered trust companies acting as trustees, and so personal information for the directors and officers of a registered trust company is not required to be provided as part of personal information under the Rule.

(3)The Commission is of the view that general partners of a mutual fund constituted as a limited partnership are also acting in a capacity similar to that of a director. As a result, the Commission is of the view that information concerning these general partners is part of personal information under the Rule. Furthermore, if a general partner is itself a corporation or partnership, the Commission is of the view that the personal information should be provided for each of the directors and officers of that corporation or partners of that partnership.

3.2Notices/Consent Forms and Security Check Information

(1)Sections 7.3, 7.4, 8.3 and 8.4 of the Rule require that a mutual fund deliver to the Commission, at the time of filing a preliminary or pro forma prospectus or a preliminary or pro forma simplified prospectus, personal information that has not been previously delivered to the Commission in connection with a prospectus filing of the mutual fund or another mutual fund managed by the manager, together with the notices and consent forms required by the Freedom of Information and Protection of Privacy Act.

(2)Due to the repeated prospectus filings made by mutual funds, the Commission has provided in the Rule that this information must be provided only if it has not already been provided in connection with an earlier prospectus filing of the mutual fund or another mutual fund managed by the same manager. The Commission does not wish to encourage duplicative filings, and so notes that information concerning a particular individual is considered to have been already provided if it has been provided previously by the mutual fund or by another mutual fund managed by the same manager as the mutual fund.

3.3Material Contracts

(1)Section 5.3 of Companion Policy 41-501CP indicates that the Director will consider granting relief from the requirement to make material contracts of an issuer available for inspection if disclosure would be unduly detrimental to the issuer and the disclosure would not necessary be in the public interest.

(2)The Commission has considered this issue in the context of mutual funds, and has included section 7.7 of the Rule to permit the exclusion of certain information from certain material contracts required to be filed by a mutual fund under the Rule. Although it is recognized that there may be circumstances in which other relief from the requirement to file the entire version of a material contract may be appropriate, the Commission and the Director expect that this type of relief would not normally be granted.

PART 4AMENDMENTS

4.1Amendments - Subsection 57(2) of the Act provides that where an amendment to a mutual fund prospectus is filed under subsection 57(1) of the Act for the purpose of distributing securities in addition to the securities previously disclosed in the prospectus or an amendment to the prospectus, the additional distribution shall not be proceeded with for a period of 10 days after the amendment is filed or, in the event the Commission informs the party filing in writing within 10 days of the filing that it objects to the further distribution, until such time as a receipt for the amended prospectus is obtained from the Director. The Commission is of the view that subsection 57(2) applies in cases where a new class or series of securities is added to a mutual fund. Subsection 57(2) does not apply where the new class or series of securities is referable to a new separate portfolio of assets. See section 1.3 of NI 81-102. In such cases, a preliminary or simplified prospectus must be filed.

January 16, 2001.

"Howard I. Wetston""J.A. Geller"