AIM Funds Management Inc. et al. - MRRS Decision
Headnote
Relief to permit RSP clone fund structure.
Statutes Cited
Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 111, 117, 118.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
ONTARIO, NOVA SCOTIA and NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
AIM FUNDS MANAGEMENT INC.
AIM RSP GLOBAL FINANCIAL SERVICES FUND
AIM RSP GLOBAL SECTOR MANAGERS FUND
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provincesof British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the "Jurisdictions") has receivedan application (the "Application") from AIM Funds Management Inc.("AIM" or the "Manager") on behalf of AIM RSPGlobal Financial Services Fund, AIM RSP Global Sector Managers Fund and other mutual funds managed by AIM afterthe date of this Decision (defined herein) (collectively referred to as the "Top Funds") having an investment objectiveor strategy that is linked to the returns or portfolio of another specified mutual fund, for a decision pursuant to thesecurities legislation of the Jurisdictions (the "Legislation") that the following provisions in the Legislation (the "ApplicableRequirements") shall not apply in connection with certain investments to be made by the Top Funds in applicablecorresponding mutual funds from time to time (the funds in which such investments are to be made being collectivelyreferred to as the "Underlying Funds"):
1. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making or holding aninvestment in a person or company in which the mutual fund, alone or together with one or more related mutualfunds, is a substantial security holder;
2. the requirements contained in the Legislation requiring a management company, or in British Columbia, amutual fund manager, to file a report relating to a purchase or sale of securities between the mutual fund andany related person or company, or any transaction in which, by arrangement other than an arrangement relatingto insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its relatedpersons or companies.
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive
Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS it has been represented by AIM to the Decision Makers that:
1. Each of the Top Funds is, or will be, an open-ended mutual fund trust established under the laws of theProvince of Ontario.
2. AIM is a corporation amalgamated under the laws of the Province of Ontario and is, or will be, the manager ofeach of the Top Funds.
3. The securities of the Top Funds and the Underlying Funds are, or will be, qualified for sale under a simplifiedprospectus and annual information form filed in all provinces and territories in which they are distributed. Apreliminary simplified prospectus for the AIM RSP Global Financial Services Fund and AIM RSP Global SectorManagers Fund has been filed under SEDAR project number 308017.
4. The simplified prospectus for each Top Fund will disclose the investment objectives, investment strategies,risks and restrictions of the Top Fund and the investment objectives and strategies of the Underlying Fund.The investment objectives and strategies of each of the Top Funds will disclose the name of the correspondingUnderlying Fund and the Top Fund's total aggregate derivative exposure to, and direct investment in theUnderlying Fund.
5. The investment objectives of the Underlying Funds are, or will be, achieved through investment primarily inforeign securities.
6. Each Top Fund seeks, or will seek, to achieve its investment objective while ensuring that its units do notconstitute "foreign property" under the Income Tax Act (Canada) (the "Tax Act") for registered retirementsavings plans, registered retirement income plans, and deferred profit sharing plans ("Registered Plans").
7. To achieve its investment objective each Top Fund invests or will invest its assets such that the securities ofthe Top Fund will, in the opinion of tax counsel to the Top Fund, be "qualified investments" for RegisteredPlans and will not constitute foreign property in a Registered Plan. This will primarily be achieved by the TopFunds entering into derivative contracts with one or more financial institutions that link the returns to those ofthe Underlying Funds. However, each Top Fund also intends to invest a portion of its assets directly insecurities of a corresponding Underlying Fund. This investment by a Top Fund will at all times be below themaximum foreign property limit prescribed under the Tax Act for Registered Plans (the "Permitted Limit").
8. The amount of direct investment by each Top Fund in its applicable Underlying Fund will be adjusted from timeto time so that, except for transitional cash, the aggregate of derivative exposure to, and direct investment in,the Underlying Fund will equal 100% of the assets of the Top Fund.
9. Except to the extent evidenced by this Decision and specific approvals granted by the Canadian securitiesadministrators pursuant to National Instrument 81-102 Mutual Funds ("NI 81-102"), the investments by the TopFunds in the Underlying Funds have been, or will be, structured to comply with the investment restrictions ofthe Legislation and NI 81-102.
10. In the absence of this Decision, pursuant to the Legislation, the Top Funds are prohibited from (a) knowinglymaking an investment in a person or company in which the mutual fund, alone or together with one or morerelated mutual funds, is a substantial securityholder; and (b) knowingly holding an investment referred to inclause (a) hereof. As a result, in the absence of this Decision the Top Funds would be required to divestthemselves of any such investments.
11. In the absence of this Decision, the Legislation requires AIM to file a report on every purchase or sale ofsecurities of the Underlying Funds by the Top Funds.
12. The investment by the Top Funds in securities of the Underlying Funds will represent the business judgmentof responsible persons, uninfluenced by considerations other than the best interest of the Top Funds.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences
the decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in
the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers under the Legislation is that the Applicable
Requirements do not apply to the Top Funds or the Manager, as the case may be, in respect of investments to be madeby the Top Funds in securities of the Underlying Funds.
PROVIDED IN EACH CASE THAT:
1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that Decision Maker dealing with the matters in section 2.5 of NI 81-102;and
2. the Decision shall only apply if, at the time a Top Fund makes or holds an investment in an Underlying Fund,the following conditions are satisfied:
a. the securities of both the Top Fund and the Underlying Fund are being offered for sale in thejurisdiction of the Decision Maker pursuant to a simplified prospectus and annual information formwhich has been filed with and accepted by the Decision Maker;
b. the investment by the Top Fund in the Underlying Fund is compatible with the fundamental investmentobjectives of the Top Fund;
c. the investment objective of the Top Fund discloses that the Top Fund invests directly and indirectly(through derivative exposure) in the Underlying Fund and the name of the Underlying Fund;
d. the Underlying Fund is not a mutual fund whose investment objective includes investing directly orindirectly in other mutual funds;
e. the Top Fund restricts its direct investment in the Underlying Fund to a percentage of its assets thatis within the Permitted Limit;
f. there are compatible dates for the calculation of the net asset value of the Top Fund and theUnderlying Fund for the purpose of the issue and redemption of securities of such mutual funds;
g. no sales charges are payable by the Top Fund in relation to its purchases of securities of theUnderlying Fund;
h. no redemption fees or other charges are charged by the Underlying Fund in respect of the redemptionby the Top Fund of securities of the Underlying Fund owned by the Top Fund;
i. no fees and charges of any sort are paid by the Top Fund and the Underlying Fund, by theirrespective managers or principal distributors, or by any affiliate or associate of any of the foregoingentities to anyone in respect of the Top Fund's purchase, holding or redemption of the securities ofthe Underlying Fund;
j. the arrangements between or in respect of the Top Fund and the Underlying Fund are such as toavoid the duplication of management fees;
k. any notice provided to securityholders of the Underlying Fund, as required by applicable laws or theconstating documents of the Underlying Fund, has been delivered by the Top Fund to itssecurityholders along with all voting rights attached to the securities of the Underlying Fund which aredirectly owned by the Top Fund.
l. all of the disclosure and notice material prepared in connection with a meeting of securityholders ofthe Underlying Fund and received by the Top Fund has been provided to its securityholders, thesecurityholders have been permitted to direct a representative of the Top Fund to vote its holdings inthe Underlying Fund in accordance with their direction, and the representative of the Top Fund hasnot voted its holdings in the Underlying Fund except to the extent the securityholders of the Top Fundhave directed;
m. in addition to receiving the annual and, upon request, the semi-annual financial statements of the TopFund, securityholders of the Top Fund have received the annual and, upon request, the semi-annualfinancial statements, of the Underlying Fund in either a combined report, containing financialstatements of the Top Fund and the Underlying Fund, or in a separate report containing the financialstatements of the Underlying Fund; and
n. to the extent that the Top Fund and the Underlying Fund do not use a combined simplified prospectusand annual information form containing disclosure about the Top Fund and the Underlying Fund,copies of the simplified prospectus and annual information form of the Underlying Fund have beenprovided upon request to securityholders of the Top Fund and this right is disclosed in the simplifiedprospectus of the Top Fund.
January 15, 2001.
"J.A. Geller" "Stephen N. Adams"