CI Investments et al. - MRRS Decision
Headnote
Approval of fund mergers, including the merger of two RSP funds, pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Mutual Funds. Additional language included in the Decision portion of the Decision Document to specify that the approval is only available if the mergers are implemented by August 30, 2005.
Rule Cited
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 19.1.
July 27, 2005
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,
ONTARIO, QUÉBEC, NEW BRUNSWICK, NOVA SCOTIA,
PRINCE EDWARD ISLAND, NEWFOUNDLAND AND LABRADOR,
YUKON TERRITORY, NORTHWEST TERRITORIES
AND NUNAVUT TERRITORY
(the Jurisdictions)
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CI INVESTMENTS INC. (the Manager)
AND
BPI GLOBAL EQUITY CORPORATE CLASS
BPI INTERNATIONAL EQUITY FUND
BPI INTERNATIONAL EQUITY RSP FUND
BPI INTERNATIONAL EQUITY CORPORATE CLASS
CI CANADIAN SMALL CAP FUND
CI ASIAN DYNASTY FUND
CLARICA PREMIER BOND FUND
CLARICA SUMMIT DIVIDEND GROWTH FUND
CLARICA CANADIAN BLUE CHIP FUND
CLARICA CANADIAN DIVERSIFIED FUND
CLARICA SUMMIT CANADIAN EQUITY FUND
CLARICA SUMMIT GROWTH AND INCOME FUND
CLARICA SUMMIT FOREIGN EQUITY FUND
CLARICA CANADIAN EQUITY FUND
CLARICA PREMIER INTERNATIONAL FUND
CLARICA US SMALL CAP FUND
(the Terminating Funds)
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Manager and the Terminating Funds (together, the Filer) for a decision under the securities legislation of the Jurisdictions (the Legislation) for approval under section 5.5(1)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) to merge each Terminating Fund into its Continuing Fund (as set out below) as contemplated by applicable Legislation (the Requested Approval).
Under the Mutual Reliance Review System for Exemptive Relief Applications
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
1. CI Investments Inc. is the manager (the "Manager") of each of the mutual funds (individually, a "Fund" and, collectively, the "Funds") set out in paragraph 2.
2. The Manager intends to merge the Funds identified below under "Terminating Fund" (individually, a "Terminating Fund" and, collectively, the "Terminating Funds") into the respective Funds (individually, a "Continuing Fund" and, collectively, the "Continuing Funds") identified opposite their names below.
(individually a "Merger" and, collectively, the "Mergers").
3. The Manager believes that each Merger may not satisfy all of the criteria for pre-approved reorganizations and transfers set forth in section 5.6 of NI 81-102.
4. As the principal office of the Manager is in Ontario, the Ontario Securities Commission has been selected as the principal regulator for purposes of this application in accordance with the provisions of section 3.2(1) of National Policy 12-201.
5. Each Fund is a reporting issuer as defined in the securities legislation of each province and territory of Canada. Each Terminating Fund that is identified as a "BPI" Fund or a "CI" Fund currently distributes its securities in each province and territory of Canada pursuant to a simplified prospectus and annual information form dated July 23, 2004, as amended, previously filed with the CSA as SEDAR project no. 665081 (the "CI Prospectus"). Each Terminating Fund that is identified as a "Clarica" Fund currently distributes its units in each province and territory of Canada pursuant to a simplified prospectus and annual information form dated July 15, 2004, as amended, previously filed with the CSA as SEDAR project no. 659955 (the "Clarica Prospectus"). The Manager has filed press releases, material change reports and amendments to the CI Prospectus and the Clarica Prospectus to announce the Mergers.
6. The Mergers are being proposed in order to rationalize the line-up of Funds for the benefit of securityholders of the Funds. The anticipated benefits of the Mergers are as follows:
(a) each Terminating Fund and its Continuing Fund are largely duplicative of one another and the Mergers will eliminate the duplicative costs of operating each Terminating Fund and its Continuing Fund as separate mutual funds;
(b) securityholders of the Terminating Funds and the Continuing Funds will enjoy increased economies of scale and potentially lower management expenses borne indirectly by securityholders as part of larger post-merger Continuing Funds; and
(c) securityholders of both the Terminating Funds and Continuing Funds will benefit from becoming investors in larger mutual funds which will be better able to maintain diversified, well-managed portfolios with a smaller proportion of assets set aside to fund redemptions.
7. Each Terminating Fund will be wound-up as soon as reasonably possible following its Merger.
8. In the opinion of the Manager, each Terminating Fund and its Continuing Fund have substantially similar valuation procedures and, except as noted in the Application, substantially similar fundamental investment objectives. Each class of securities of a Continuing Fund is charged management fees that are the same or lower than the management fees charged to the equivalent class of securities of its Terminating Fund. By press release dated June 23, 2005, CI announced its intention to seek the approval of securityholders of the Continuing Funds for CI to bear all of the operating expenses of the Continuing Funds (other than taxes, borrowing costs and certain new governmental fees) in return for fixed administration fees. This proposal is described in the management information circulars and the simplified prospectuses of the Continuing Funds sent to securityholders of the Terminating Funds in connection with the Meetings. Due to this proposed change, a reasonable investor may not consider the Continuing Funds to have fee structures that are substantially similar to the fee structures of the Terminating Funds.
9. Due to the different structures utilized by the Funds and their current tax circumstances, the procedures for implementing the Mergers will vary. However, the result of each Merger will be that investors in the Terminating Fund will cease to be securityholders in that Terminating Fund and will become securityholders in its Continuing Fund.
10. Investors in the Terminating Funds will be asked to approve the Mergers at special meetings of securityholders to be held on July 28, 2005 (the "Meetings"). If securityholders approve the Mergers, the Manager intends to effect each Merger after the close of business on July 29, 2005 (the "Effective Date"), subject to regulatory approvals, where necessary. The cost of effecting the Mergers (consisting primarily of proxy solicitation, printing, mailing, legal and regulatory fees) will be borne by the Manager.
11. Purchases of and transfers to securities of each Terminating Fund will be suspended on or prior to the Effective Date. Following each Merger, automatic purchase plans and systematic redemption plans which were established with respect to the Terminating Fund will be re-established with respect to its Continuing Fund unless securityholders who are affected by the Merger advise the Manager otherwise. Securityholders may change any automatic purchase plan or systematic redemption plan at any time and investors in a Terminating Fund who wish to establish an automatic purchase plan or systematic redemption plan in respect of their holdings of the Continuing Fund may do so following its Merger.
Decision
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make this decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Approval is granted provided that the Mergers are implemented no later than August 30, 2005.