Fiera Capital Corporation

Headnote

Policy Statement 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions – Approval of change of manager of investment funds, and investment fund mergers – merger approval required because merger does not meet the criteria for per-approval – investment objectives not substantially similar – fee structure not substantially similar – majority of the mergers not a “qualifying exchange” or a tax-deferred transaction under the Income Tax Act – manager of continuing fund is not an affiliate of the manager of the terminating fund – securityholders provided with timely and adequate disclosure regarding the change of manager and the mergers – change of manager and mergers is not detrimental to the protection of investors.

Applicable Legislative Provisions

Regulation 81-102 respecting Investment Funds, paragraphs 5.5(1)(a), 5.5(1)(b), 5.6, 5.7 and 19.1.

[TRANSLATION]

February 15, 2019

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
FIERA CAPITAL CORPORATION
(the Filer)

AND

FIERA CAPITAL INCOME AND GROWTH FUND,
FIERA CAPITAL DIVERSIFIED BOND FUND,
FIERA CAPITAL HIGH INCOME FUND,
FIERA CAPITAL CORE CANADIAN EQUITY FUND,
FIERA CAPITAL EQUITY GROWTH FUND,
FIERA CAPITAL GLOBAL EQUITY FUND,
FIERA CAPITAL U.S. EQUITY FUND,
FIERA CAPITAL DEFENSIVE GLOBAL EQUITY FUND AND
FIERA CAPITAL INTERNATIONAL EQUITY FUND
(collectively, the Funds)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer, on behalf of the Funds, for a decision under the securities legislation of the Jurisdictions (the Legislation) approving:

a)            the Qualifying Dispositions (as defined below) required in order for the Fiera Related Unitholders (as defined below) to be moved to a Clone Trust (as defined below) from the QD Funds (as defined below) as part of the pre-closing reorganizations (the Pre-Closing Reorganizations) to be completed prior to the transaction between the Filer and Canoe Financial LP (Canoe) in a tax and/or cost-efficient manner pursuant to paragraph 5.5(1)(b) of Regulation 81-102 respecting Investment Funds, CQLR, c. V-1.1, r. 39 (Regulation 81-102);

b)            the change of manager of the Funds from the Filer to Canoe (the Change of Manager) pursuant to paragraph 5.5(1)(a) of Regulation 81-102; and

c)             the mergers of certain Funds (each, a Terminating Fund and together, the Terminating Funds) into certain mutual funds managed or to be managed by Canoe (each, a Canoe Continuing Fund and together, the Canoe Continuing Funds) pursuant to paragraph 5.5(1)(b) of Regulation 81-102.

(collectively, the Approvals Sought)

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

a)            The Autorité des marchés financiers is the principal regulator for this application;

b)            The Filer has provided notice that subsection 4.7(1) of Regulation 11-102 respecting the Passport System, CQLR, c. V-1.1, r. 1 (Regulation 11-102) is intended to be relied upon in Northwest Territories, Nunavut, Yukon, British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and

c)             The decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions, CQLR, c. V-1.1, r. 3, Regulation 11-102, Regulation 45-106 respecting Prospectus Exemptions, CQLR, V-1.1, r. 21 (Regulation 45-106) and Regulation 81-102 have the same meaning if used in this decision, unless otherwise defined.

“Closing” means the closing of the Proposed Transaction.

“Closing Date” means on or about February 22, 2019.

“Effective Date” means a day on which the TSX is open for trading and on which the Qualifying Dispositions (as defined below) will be effected.

“Fiera Continuing Funds” means the following three Funds:

a)            Fiera Capital Global Equity Fund;

b)            Fiera Capital Defensive Global Equity Fund; and

c)             Fiera Capital International Equity Fund.

“Fiera Institutional Clients” means certain institutional clients for which the Filer acts as exempt market dealer, which are accredited investors and Fiera Related Unitholders.

“Fiera Private Wealth Clients” means certain fully managed accounts and other private wealth clients of the Filer, which are accredited investors and Fiera Related Unitholders.

“Fiera Related Unitholders” means the unitholders of the Funds that have a relationship with the Filer.

“Meeting Materials” means the notice of meeting and the management information circular in respect of the Meetings dated December 21, 2018.

“QD Funds” means the following three Funds for which the Filer anticipates it will carry out Qualifying Dispositions:

a)            Fiera Capital U.S. Equity Fund;

c)             Fiera Capital Global Equity Fund; and

d)            Fiera Capital Core Canadian Equity Fund.

Representations

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

The Filer

1.             The Filer is a corporation formed under the laws of Ontario.

2.             The Filer’s head office is located in Montreal, Québec.

3.             The Filer is the trustee, investment fund manager and portfolio manager of the Funds.

4.             The Filer is registered in all provinces and territories in the categories of portfolio manager and exempt market dealer. The Filer is also registered in Québec, Ontario and Newfoundland and Labrador in the category of investment fund manager, in Manitoba in the category of adviser, in Ontario in the category of commodity trading manager and in Québec in the category of derivatives portfolio manager.

5.             The Filer is not in default of securities legislation in any Jurisdiction.

The Funds

6.             Each Fund is a mutual fund formed as a trust established under the laws of Ontario governed by the Amended and Restated Master Declaration of Trust dated as of August 28, 2018 (the Declaration of Trust).

7.             The Funds are currently offered for sale in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia and Yukon under a simplified prospectus, annual information form and fund facts dated August 28, 2018, as amended on November 2, 2018, prepared in accordance with the requirements of Regulation 81-101 Mutual Fund Prospectus Disclosure, CQLR, c. V-1.1, r.38 (Regulation 81‑101).

8.             Each Fund is a reporting issuer under the applicable securities legislation of each jurisdiction of Canada and is not in default of any requirements under applicable securities legislation.

9.             Each Fund qualifies as a mutual fund trust under the Income Tax Act (Canada) (Tax Act).

10.          State Street Trust Company Canada (SSTCC) acts as custodian of the Funds.

11.          The unitholders of the Funds fall into four categories: (i) the Fiera Related Unitholders in the QD Funds that will consent to the transfer to a Clone Trust; (ii) the Fiera Related Unitholders in the QD Funds that will not consent to the transfer to a Clone Trust and will remain in the Funds following the Closing; (iii) the Fiera Related Unitholders in the Funds, other than the QD Funds; and (iv) the unitholders that are not Fiera Related Unitholders which will remain in the Funds following the Closing.

Fiera Capital Pooled Funds

12.          The Filer acts as the manager of various pooled investment funds offered on a prospectus-exempt basis (each, a FCPF).

13.          Each FCPF is governed by the Amended and Restated Master Trust Agreement between the Filer and SSTCC, as amended from time to time (the SSTCC Trust Agreement).

14.          None of the FCPFs are subject to Regulation 81‑102.

15.          None of the FCPFs are in default of any requirement under applicable securities legislation of any jurisdictions of Canada.

Canoe

16.          Canoe is a limited partnership established under the laws of Alberta. The general partner of Canoe is Canoe Financial Corp., a corporation incorporated under the laws of Alberta. Canoe’s head office is located in Calgary, Alberta.

17.          Canoe is registered as an exempt market dealer in each of the provinces and territories of Canada, as a portfolio manager in Alberta, Ontario and Québec, as an investment fund manager in Alberta, Newfoundland and Labrador, Ontario and Québec and as a derivatives portfolio manager in Québec.

18.          Canoe acts as the manager of certain open-ended mutual funds (Canoe Funds).

19.          Canoe’s primary business is to act as investment fund manager for the Canoe Funds and to act as portfolio manager for certain Canoe Funds.

20.          Canoe is not in default of securities legislation in any Jurisdiction.

Canoe Funds

21.          Each of the Canoe Funds is formed as either (i) a trust under the laws of Alberta, or (ii) an investment in a series of shares of a class of Canoe ‘GO CANADA!’ Fund Corp. (Fund Corp.), a corporation established under the Business Corporations Act (Alberta), and a unit (CTF Unit) of Canoe Trust Fund (CTF), a fund that is formed as a trust (collectively, the Canoe Portfolio Class Funds). Canoe is the trustee of the Canoe Funds formed as trusts.

22.          Each Canoe Fund is a reporting issuer under the applicable securities legislation of each jurisdiction of Canada and is not in default of any requirements under applicable securities legislation.

23.          The securities of the Canoe Funds are qualified for distribution by simplified prospectus governed by Regulation 81‑101 and are currently offered under a simplified prospectus, annual information form and fund facts dated August 28, 2018, as amended on November 2, 2018 and December 10, 2018.

24.          The securities of the Canoe Funds are qualified investments for registered tax plans, as such term is defined under the Tax Act.

The Qualifying Dispositions

25.          The purpose of the Pre-Closing Reorganizations is to allow the Fiera Related Unitholders who do not want to remain invested in the Funds after Closing to be moved to other investment funds managed by the Filer in the most cost and/or tax-efficient manner.

26.          Letting Fiera Related Unitholders redeem their units of the QD Funds (in cash or in kind) in which they are invested and use the redemption proceeds to subscribe for units of FCPFs (each, a Redemption Transaction) would cause the realization of significant capital gains by the QD Funds which would be passed on to the unitholders in the QD Fund. In addition, if the Redemption Transactions were carried out in cash, they would result in significant transaction costs and, because of the significance of the assets that would likely have to have been redeemed in a short period for the QD Funds, the Redemption Transactions could lead to assets having to be sold below their fair value.

27.          To avoid such consequences at or prior to Closing, the Filer intends to carry out “qualifying dispositions” from each QD Fund to a newly created trust established under the laws of Québec pursuant to the SSTCC Trust Agreement in respect of each QD Fund (each, a Clone Trust) under section 107.4 of the Tax Act which exempts a transfer of property between trusts (each, a Qualifying Disposition) from being a taxable event for the transferor trust and its unitholders. A Qualifying Disposition is a transfer of property between two trusts which is exempt from being a taxable event for the transferor trust and its unitholders (essentially allowing for a pro-rata partition of a trust on a tax-deferred basis).

28.          Each Clone Trust will have an identical investment objective and identical investment strategies to its corresponding QD Fund and will have substantially similar terms including valuation procedure and fee structure as its corresponding QD Fund.

29.          The steps to carry out a Qualifying Disposition for each QD Fund (the Proposed QD Transactions) are as follows:

a)            Establishment of a Clone Trust by the Filer in respect of each QD Fund and issuance of a unit to the Filer for a nominal consideration;

b)            On the Effective Date, at a time that is after the close of trading on the TSX, the QD Fund will make payable to its unitholders a distribution (the Distribution) in an amount equal to the net income of such QD Fund and any capital gains realized by the QD Fund in the period from January 1st to the Effective Date;

c)             The net asset value (Net Asset Value) of the QD Fund will be determined on the Effective Date after the Distribution and such Net Asset Value will take into account any and all accrued liabilities of the QD Fund as of the Effective Date;

d)            Based on the Net Asset Value, the QD Fund will determine the relative value of the units held by the Transferring FRUs (as defined below) over all issued and outstanding units (the Transfer Percentage);

e)            On the Effective Date, the QD Fund will transfer to the Clone Trust a percentage of each asset held by the QD Fund equal to the Transfer Percentage. In particular, for each class of identical securities held by the QD Fund, the Transfer Percentage of such securities will be transferred by the QD Fund to the Clone Trust. The Transfer Percentage of any cash amounts held by the QD Fund will also be transferred to the Clone Trust. If and as necessary, the QD Fund will take advantage of the provisions of subsection 107.4(2.1) of the Tax Act to avoid the need to transfer a fractional share to the Clone Trust where this will not be feasible. If there are assets held by the QD Fund which cannot be transferred at the Transfer Percentage and the QD Fund is not able to take advantage of the provisions of subsection 107.4(2.1) of the Tax Act for such assets, the QD Fund will consider disposing of these prior to the Effective Date such that the Transfer Percentage for each asset of the QD Fund complies with the provisions of subsection 107.4(2.1) of the Tax Act;

f)             The Clone Trust will issue to each Transferring FRU such number of units of the Clone Trust as have a Net Asset Value per unit equal to the Net Asset Value per unit of the QD Fund owned by such Transferring FRU in the QD Fund. The units of the Clone Trust issued to the Transferring FRUs will be equivalent to the series of the QD Fund in which such Transferring FRUs were invested in (with equivalent rights and fees);

g)            Contemporaneously with the step above and the subsequent step and after having been either reduced to the appropriate fraction of a unit or subdivided into more than one unit so as to have the same Net Asset Value as the units issued as part of the Qualifying Dispositions, the initial unit issued by each of the Clone Trusts will be redeemed for its subscription price, i.e. a nominal consideration;

h)            Contemporaneously with the foregoing step, and, for greater certainty on the same day as the foregoing step, the units of the QD Fund held by each Transferring FRU will be surrendered to the QD Fund by each Transferring FRU and will be cancelled by the QD Fund without any action being required from the Transferring FRU; and

i)              Following completion of the Proposed QD Transactions, the value of each Transferring FRU’s beneficial interest in each asset held by the Clone Trust will be the same as the value of that Transferring FRU’s beneficial interest in such asset when it was held by the QD Fund prior to the Proposed QD Transactions taking place.

30.          The table below sets outs the Clone Trust that corresponds to each QD Fund:

31.          No Fiera Related Unitholder will be moved to a Clone Trust without having consented to being part of such transaction.

32.          No Fiera Related Unitholder will be moved to a Clone Trust if such unitholder could not have purchased securities thereof on a prospectus-exempt basis.

33.          Any Fiera Related Unitholder that does not provide its consent prior to the Qualifying Dispositions will remain invested in the Funds.

34.          The Fiera Related Unitholders who consent to being moved to a Clone Trust and who qualify under a prospectus exemption are herein referred to as the Transferring FRUs.

35.          In the opinion of the Filer, the Qualifying Dispositions satisfy all or the criteria for pre-approved reorganizations and transfers set forth in section 5.6 of Regulation 81-102 except that:

a)            the QD Funds are not being reorganized with other investment funds (the Clone Trusts) to which Regulation 81-102 applies;

b)            by effect of section 68(4) of the Securities Act (Québec), the Clone Trusts will be deemed to be reporting issuers in some of the local jurisdiction, but Filer is seeking the revocation of the reporting issuer status by way of a Process for Cease to be a Reporting Issuer Application. The Clone Trusts will not have a current prospectus in the local jurisdiction;

c)             the Qualifying Dispositions are not “qualifying exchanges” within the meaning of section 132.2 of the ITA or tax-deferred transactions under subsection 85(1), 85.1(1), 86(1) or 87(1) of the Income Tax Act;

d)            the Qualifying Dispositions do not contemplate the wind-up of the QD Funds as soon as reasonably possible following the Qualifying Dispositions;

e)            the Qualifying Dispositions are not being submitted to the unitholders of the Funds for approval.

36.          An Advance Income Tax Ruling was issued by the Canada Revenue Agency on December 24, 2018, notably relating to the proposed Qualifying Dispositions (the CRA Advanced Ruling).

37.          Certain amendments to the Declaration of Trust are required to permit the Filer to effect the Qualifying Dispositions (the Pre-Closing DoT Change). Such amendments have been submitted to the unitholders of the Funds for approval, along with sufficient information to make an informed decision about the Qualifying Dispositions.

38.          The Meeting Materials were mailed to unitholders of each Fund on January 4, 2019 and were filed on SEDAR. The Meeting Materials contained a description of the Pre-Closing DoT Change.

The Proposed Transaction

39.          The Filer has entered into an agreement with Canoe (the Purchase Agreement) pursuant to which Canoe has agreed to acquire the rights to manage the Funds as well as the Filer’s ownership interest in Fiera Capital Funds Inc., the Filer’s wholly owned subsidiary and registered mutual fund dealer (the Proposed Transaction).

40.          A press release announcing the Proposed Transaction was issued and disseminated on October 23, 2018 and a related material change report, and amendments to the simplified prospectus, annual information form and funds facts documents of the Funds were filed on SEDAR in connection with the Proposed Transaction on November 2, 2018.

41.          As part of the Proposed Transaction, Canoe intends to, amongst other things:

a)            change the investment fund manager, trustee and the portfolio manager of the Funds, change the names of the Funds to remove the reference to “Fiera Capital” and merge the Terminating Funds into the Canoe Continuing Funds as more fully described in the following table (each, a Merger and collectively, the Mergers):

*              This is a new Canoe Continuing Fund, which Canoe proposes to create if the Proposed Transaction closes and the Merger receives all necessary unitholder and regulatory approvals.

b)            have the Funds adopt the form of master declaration of trust used by the Canoe Funds (the Post-Closing DoT Change);

c)             have the Funds adopt the fixed administration fee expense structure used by the Canoe Funds (the Administration Fee Change); and

d)            retain the Filer, the current portfolio manager of the Funds, to act as sub-advisor in respect of the Fiera Continuing Funds as well as Canoe Canadian Small Mid Cap Portfolio Class.

42.          As a result, effective on the Closing Date, and subject to receipt of all necessary regulatory and unitholder approvals and the satisfaction of all other required conditions precedent set out in the Purchase Agreement, including approval of certain Mergers, the Change of Manager will occur.

43.          Also effective on the Closing Date, the Filer will become sub-advisor of the Fiera Continuing Funds as well as Canoe Canadian Small Mid Cap Portfolio Class in accordance with the terms of a sub-advisory agreement between Canoe and the Filer.

44.          The Fiera Continuing Funds will continue to exist following Closing.

45.          In accordance with the provisions of Regulation 81-107 Independent Review Committee for Investment Funds, CQLR, c. V.1-1, r. 43, the Filer referred the Proposed Transaction, including the Pre-Closing DoT Change, the Pre-Closing Reorganizations, the Change of Manager, the Mergers, the Post-Closing DoT Change and the Administration Fee Change, to the Independent Review Committee (IRC) of the Funds for its review. On December 19, 2018 the IRC advised the Filer that, after reasonable inquiry, the Proposed Transaction achieves a fair and reasonable result for the Funds.

46.          The Meeting Materials describing the Pre-Closing DoT Change, the Change of Manager, the Mergers, the Post-Closing DoT Change and the Administration Fee Change were mailed to unitholders of the Funds on January 4, 2019 and copies thereof were filed on SEDAR following the mailing in accordance with applicable securities legislation. The Meeting Materials contained sufficient information regarding the business, management and operations of Canoe, including details of its officers and directors, and all information necessary to allow unitholders of the Funds to make an informed decision about the Pre-Closing DoT Change, the Change of Manager, the Mergers, the Post-Closing DoT Change and the Administration Fee Change. All other information and documents necessary to comply with applicable proxy solicitation requirements of securities legislation for the Meetings were also mailed to unitholders of the Funds, including the most recent fund facts of the Canoe Continuing Funds, as applicable.

47.          Fund facts relating to the applicable series of each Canoe Continuing Fund were mailed to unitholders of the corresponding series of each Terminating Fund in all instances other than in respect of the Hard Capped Mergers, the Series OX Mergers and the New Canoe Fund Merger (each, as defined below).

48.          The materials sent to certain unitholders of the Terminating Funds in respect of the Hard Capped Mergers, the Series OX Mergers and the New Canoe Fund Merger did not include the most recently filed fund facts documents for the series of the Canoe Continuing Funds into which the applicable series of the Terminating Funds are merging into because:

a)            the applicable series of the Canoe Continuing Funds (the Hard Capped Series) are being created solely to facilitate the Mergers, will not be qualified for distribution under a prospectus and will not be available for sale subsequent to the Mergers (the Hard Capped Mergers);

b)            as series O unitholders of Fiera Capital Income and Growth Fund, Fiera Capital High Income Fund, Fiera Capital Core Canadian Equity Fund and Fiera Capital U.S. Equity Fund are predominantly Fiera Related Unitholders and assuming the Pre-Closing Reorganizations are completed, it is anticipated that there will be no unitholders in series O of such Funds on the Merger Date (as defined below), other than any Funds that hold such series as a fund-of-fund investment and unitholders benefiting from any prospectus exemption. Thus, series OX of Canoe Asset Allocation Portfolio Class, Canoe Premium Income Fund, Canoe Equity Portfolio Class and Canoe U.S. Equity Income Portfolio Class (Series OX) will only be created and qualified for distribution under a prospectus if it is anticipated that at least one unitholder not benefiting from any prospectus exemption will remain in series O of the corresponding Terminating Fund on the Merger Date (the Series OX Mergers); or

c)             the series of Canoe Canadian Small Mid Cap Portfolio Class (the New Canoe Fund) will only be created and qualified for distribution under a prospectus if the Proposed Transaction closes and the applicable Merger receives all necessary unitholder and regulatory approvals (the New Canoe Fund Merger).

49.          In respect of the Hard Capped Mergers, the following Hard Capped Series, which are being created solely to facilitate the Hard Capped Mergers, will not be qualified for distribution under a prospectus and will not be available for purchase subsequent to the Hard Capped Mergers. Because a current simplified prospectus and fund facts document are not available for the Hard Capped Series, unitholders of each of the corresponding series of the Terminating Funds were sent fund facts relating to the following series of securities of the applicable Canoe Continuing Fund:

50.          In respect of the Series OX Mergers, assuming the Pre-Closing Reorganizations are completed, it is anticipated that there will be no unitholders in series O of Fiera Capital Income and Growth Fund, Fiera Capital High Income Fund, Fiera Capital Core Canadian Equity Fund and Fiera Capital U.S. Equity Fund other than any Funds that hold such series as a fund-of-fund investment and unitholders benefiting from any prospectus exemption on the Merger Date, as series O unitholders of such Funds are predominantly Fiera Related Unitholders. Thus, Series OX will only be created and qualified for distribution under a prospectus if it is anticipated that at least one unitholder not benefiting from any prospectus exemption will remain in series O of the corresponding Terminating Fund on the Merger Date. Accordingly, fund facts documents are not currently available for Series OX.

51.          In respect of the New Canoe Fund Merger, Canoe will only create the New Canoe Fund if the Proposed Transaction closes and the necessary unitholder and regulatory approvals are obtained in respect of the New Canoe Fund Merger. As such, a current simplified prospectus and fund facts documents are not currently available for the New Canoe Fund. Instead of delivering these documents, the Filer included information in respect of the New Canoe Fund in the Meeting Materials, including its investment objectives and strategies (which will be substantially similar to those of the Terminating Fund), fees and expenses, purchase options and distribution policy. The Filer believes that with this information, together with the information contained in the fund facts of the relevant series of the Terminating Fund that each unitholder of the Terminating Fund received when their initial investment was made, unitholders in the Terminating Fund have access to prospectus-level disclosure with respect to the New Canoe Fund.

52.          In order to effect the Hard Capped Mergers, the Series OX Mergers and the New Canoe Fund Merger, securities of the Canoe Continuing Funds will be distributed to unitholders of the Terminating Funds in reliance on the prospectus exemption contained in section 2.11 of Regulation 45‑106.

53.          At Meetings held on January 25, 2019, unitholders of Fiera Capital Income and Growth Fund and Fiera Capital U.S. Equity Fund approved each of the Pre-Closing DoT Change, the Change of Manager, the Post-Closing DoT Change, the Administration Fee Change and the Mergers.

54.          At Meetings held on February 11, 2019, unitholders of each of the remaining Funds approved each of the Pre-Closing DoT Change, the Change of Manager, the Post-Closing DoT Change, the Administration Fee Change and the Mergers, as applicable.

Details of the Mergers

55.          The specific steps to implement the Mergers are described below. The result of the Mergers is that unitholders in the Terminating Funds will cease to be unitholders in the Funds and will become securityholders of the Canoe Continuing Funds.

56.          Unitholders of the Terminating Funds will receive securities of a similar series of a Canoe Continuing Fund as they currently own in the corresponding Terminating Fund.

57.          The management fee of each relevant series of each Canoe Continuing Fund is the same as the management fee of the corresponding series of its corresponding Terminating Fund.

58.          The Canoe Continuing Funds have all adopted a fixed administration fee structure while the Terminating Funds have a floating expense structure. The Meeting Materials delineate the differences in the management and administration fees and expense structures between the Terminating Funds and the Canoe Continuing Funds.

59.          The investment objectives of each Terminating Fund may not be substantially similar to the investment objectives of its corresponding Canoe Continuing Fund, except in the case of Merger 6 for which the investment objective of the Terminating Fund is substantially similar to that of the Canoe Continuing Fund. The Meeting Materials delineate the differences in investment objectives between each Terminating Fund and the Canoe Continuing Fund into which it will be merged.

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

61.          Merger 3 will be effected as a “qualifying exchange”, on a tax-deferred basis under section 132.2 of the Tax Act (the Tax-Deferred Merger).

62.          Merger 1, Merger 4, Merger 5 and Merger 6, each involving a Canoe Portfolio Class Fund as the Canoe Continuing Fund, will be completed as substantially tax-deferred transactions, as only an insignificant portion of each Merger will not be completed as a “qualifying exchange”. The transfer of each Terminating Fund’s portfolio to CTF will be a “qualifying exchange” and it is only the redemption of a portion of the value of a securityholder’s CTF Unit to subscribe for shares of a class of Fund Corp. that could result in a taxable event for a unitholder.

63.          Merger 2 will be effected on a taxable basis because the tax-deferred option that would be available is not desirable. In deciding to proceed with this Merger on a taxable basis, the Filer weighed the impact of the Merger on the Terminating Fund and the Canoe Continuing Fund, and on the unitholders in the Terminating Fund and the Canoe Continuing Fund, and determined that the negative effects of the Merger were greater on the Canoe Continuing Fund and the securityholders of the Canoe Continuing Fund than on the Terminating Fund and the unitholders of the Terminating Fund should the Merger proceed on a tax-deferred basis. A tax-deferred merger would result in accrued gains from the Terminating Fund being ultimately realized in the Canoe Continuing Fund. Further, any loss carryforwards in the Canoe Continuing Fund would be realized or lost in a tax-deferred merger. As very few unitholders in the Terminating Fund are taxable and in a gain position, very few unitholders will have a tax impact with a taxable merger. Thus, the Filer has determined that the benefits of the tax-deferral for this small number of taxable unitholders in the Terminating Fund are outweighed by the negative impact on the Canoe Continuing Fund of not being able to use its available loss carryforwards to offset future capital gains.

64.          The Meeting Materials provide a summary of the anticipated tax implications to securityholders of the Terminating Funds and the Canoe Continuing Funds as a result of the Mergers.

65.          The costs and expenses associated with the Mergers (consisting primarily of proxy solicitation, printing, mailing, legal and regulatory fees), including the costs of the Meetings, will be borne by the Filer or Canoe and will not be charged to the Funds.

66.          Unitholders of each Terminating Fund will continue to have the right to redeem their units for cash or switch into units of another Fund at any time up to the close of business on the business day immediately before the effective date of the applicable Merger (the Merger Date). Units so redeemed will be redeemed at a price equal to their series net asset value per unit on the redemption date.

67.          Following the Mergers, all pre-authorized purchase plans that had been established with respect to the Terminating Funds will be re-established on a series-for-series basis in the applicable Canoe Continuing Funds unless a unitholder advises Canoe otherwise, except for any series of a Canoe Continuing Fund that will not be available for purchase following the applicable Merger, in which case this plan will be re-established in the series of the Canoe Continuing Fund for which fund facts were mailed to the unitholder of the Terminating Fund. Unitholders may change or cancel any pre-authorized purchase plan at any time.

68.          As Canoe U.S. Equity Income Portfolio Class will be larger than Fiera Capital U.S. Equity Fund once the Pre-Closing Reorganizations have been effected, the Mergers will not constitute a material change for any of the Canoe Continuing Funds.

69.          The Terminating Funds have complied with Part 11 of Regulation 81-106 Investment Fund Continuous Disclosure, CQLR, c. V-1.1, r. 42, in connection with the making of the decision by the board of directors of the Filer to proceed with the Proposed Transaction, including the Mergers.

70.          The Filer is not entitled to rely upon the approval of the IRC of the Funds in lieu of unitholder approval for the Mergers due to the fact that one or more conditions of section 5.6 of Regulation 81-102 will not be met, as required by section 5.3(2)(c) of Regulation 81-102, as described below:

71.          Each Merger is contingent upon the Change of Manager being approved. All required approvals from the unitholders of the Funds for the Change of Manager were obtained at the Meetings.

Steps for the Mergers

72.          The Merger of a Terminating Fund into a Continuing Canoe Portfolio Class Fund (as defined below) will be structured as follows:

a)            Prior to the Merger Date, if required, each Terminating Fund that is merging into a Canoe Portfolio Class Fund (each, a Continuing Canoe Portfolio Class Fund) will sell any securities in its portfolio that do not meet the investment objectives and investment strategies of the applicable Continuing Canoe Portfolio Class Fund.  As a result, a Terminating Fund may temporarily hold cash or money market instruments and may not be fully invested in accordance with its investment objectives for a brief period of time prior to the Merger Date.

b)            The value of each Terminating Fund’s portfolio and other assets will be determined at the close of business on the Merger Date in accordance with its constating documents.

c)             Each Terminating Fund will distribute a sufficient amount of its net income and net realized capital gains, if any, to securityholders to ensure that the Terminating Fund will not be subject to tax for the taxation year ended on the Merger Date.

d)            On the Merger Date, the CTF will acquire the investment portfolio and other assets of the applicable Terminating Fund in exchange for CTF Units.

e)            Each Continuing Canoe Portfolio Class Fund will not assume any liabilities from the applicable Terminating Fund and the Terminating Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the Merger Date.

f)             The CTF Units received by the applicable Terminating Fund will have an aggregate net asset value equal to the value of the investment portfolio and other assets that the CTF is acquiring from the Terminating Fund, and the CTF Units will be issued at the applicable net asset value per unit as of the close of business on the Merger Date.

g)            Immediately thereafter (i) each securityholder of the Terminating Fund will exchange all of their securities of the Terminating Fund for a CTF Unit with equal value, and (ii) a portion of the value of each CTF Unit will subsequently be redeemed to subscribe for shares of Fund Corp. of the equivalent series of the Continuing Canoe Portfolio Class Fund to the series of the Terminating Fund previously owned by the securityholder.

h)            Each of CTF and Fund Corp. will contribute the investment portfolio and other assets received from the applicable Terminating Fund to Canoe Portfolio Class Limited Partnership (the Partnership) in exchange for an increased limited partnership interest in the Partnership.

i)              CTF and the applicable Terminating Fund will take all necessary steps, including the making of a joint election, so that the Merger will occur on a tax-deferred basis to the extent of CTF’s acquisition of the investment portfolio.

j)              As soon as reasonably possible following each Merger, and in any case within 60 days following the Merger Date, the applicable Terminating Fund will be wound-up.

73.          The Merger of Fiera Capital High Income Fund into Canoe Premium Income Fund will be structured as follows:

a)            Prior to the Merger Date, if required, Fiera Capital High Income Fund will sell any securities in its portfolio that do not meet the investment objectives and investment strategies of Canoe Premium Income Fund.  As a result, Fiera Capital High Income Fund may temporarily hold cash or money market instruments and may not be fully invested in accordance with its investment objectives for a brief period of time prior to the Merger being effected.

b)            The value of Fiera Capital High Income Fund’s portfolio and other assets will be determined at the close of business on the Merger Date in accordance with its constating documents.

c)             Fiera Capital High Income Fund will distribute a sufficient amount of its net income and net realized capital gains, if any, to unitholders to ensure that Fiera Capital High Income Fund will not be subject to tax for the taxation year ended on the Merger Date.

d)            On the Merger Date, Canoe Premium Income Fund will acquire the investment portfolio and other assets of Fiera Capital High Income Fund in exchange for securities of Canoe Premium Income Fund.

e)            Canoe Premium Income Fund will not assume any liabilities of Fiera Capital High Income Fund and Fiera Capital High Income Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the Merger Date.

f)             The units of Canoe Premium Income Fund received by Fiera Capital High Income Fund will have an aggregate Net Asset Value equal to the value of the portfolio assets and other assets that Canoe Premium Income Fund is acquiring from Fiera Capital High Income Fund, and the units of Canoe Premium Income Fund will be issued at the applicable series net asset value per unit as of the close of business on the Merger Date.

g)            Immediately thereafter, units of Canoe Premium Income Fund received by Fiera Capital High Income Fund will be distributed to unitholders of Fiera Capital High Income Fund in exchange for their units of Fiera Capital High Income Fund on a dollar-for-dollar and series by series basis.

h)            Fiera Capital High Income Fund and Canoe Premium Income Fund will take all necessary steps, including the making of a joint election, to ensure that the Merger will occur on a tax-deferred basis.

i)              As soon as reasonably possible following the Merger, and in any case within 60 days following the Merger Date, Fiera Capital High Income Fund will be wound-up.

74.          The Merger of Fiera Capital Diversified Bond Fund into Canoe Bond Advantage Fund will be structured as follows:

a)            Prior to the Merger Date, if required, Fiera Capital Diversified Bond Fund will sell any securities in its portfolio that do not meet the investment objectives and investment strategies of Canoe Bond Advantage Fund.  As a result, Fiera Capital Diversified Bond Fund may temporarily hold cash or money market instruments and may not be fully invested in accordance with its investment objectives for a brief period of time prior to the Merger being effected. 

b)            The value of Fiera Capital Diversified Bond Fund’s portfolio and other assets will be determined at the close of business on the Merger Date in accordance with its constating documents.

c)             Fiera Capital Diversified Bond Fund will distribute a sufficient amount of its net income and net realized capital gains, if any, to unitholders to ensure that Fiera Capital Diversified Bond Fund will not be subject to tax for the taxation year ended on the Merger Date.

d)            On the Merger Date, Canoe Bond Advantage Fund will acquire the investment portfolio and other assets of Fiera Capital Diversified Bond Fund in exchange for units of Canoe Bond Advantage Fund.

e)            Canoe Bond Advantage Fund will not assume any liabilities of Fiera Capital Diversified Bond Fund and Fiera Capital Diversified Bond Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the Merger Date.

f)             The units of Canoe Bond Advantage Fund received by Fiera Capital Diversified Bond Fund will have an aggregate Net Asset Value equal to the value of the portfolio assets and other assets that Canoe Bond Advantage Fund will acquire from Fiera Capital Diversified Bond Fund, and the units of Canoe Bond Advantage Fund will be issued at the applicable series net asset value per unit as of the close of business on the Merger Date.

g)            Immediately thereafter, units of Canoe Bond Advantage Fund received by Fiera Capital Diversified Bond Fund will be distributed to unitholders of Fiera Capital Diversified Bond Fund in exchange for their units of Fiera Capital Diversified Bond Fund on a dollar-for-dollar and series by series basis.

h)            Fiera Capital Diversified Bond Fund and Canoe Bond Advantage Fund will not elect that the Merger occur on a tax-deferred basis.

i)              As soon as reasonably possible following the Merger, and in any case within 60 days following the Merger Date, Fiera Capital Diversified Bond Fund will be wound-up.

Rationale for Approvals Sought

Qualifying Dispositions

75.          The purpose of the Qualifying Dispositions is to allow the Fiera Related Unitholders invested in the QD Funds who wish to maintain their assets with the Filer to be moved to other investment funds managed by the Filer in the most cost and/or tax-efficient manner.

76.          Proceeding by way of Redemption Transactions would cause the realization of significant capital gains by the QD Funds which would be passed on to the unitholders. In addition, if the Redemption Transactions were to be carried out in cash, they would result in significant transaction costs and, because of the significance of the assets that would likely have to be redeemed in a short period for certain of the QD Funds, the Redemption Transactions could lead to assets having to be sold below their fair value.

77.          The Meeting Materials contained a description of the Pre-Closing DoT Change.

78.          No Fiera Related Unitholder will be moved to a Clone Trust without having consented to the transaction (either personally, or in the case of the clients which gave discretionary authority to their portfolio managers, by such client’s portfolio manager).

79.          In addition, each Fiera Related Unitholder, or in the case of the clients which gave discretionary authority to their portfolio managers, their portfolio managers with discretionary authority will receive, concurrently with the Filer’s request for consent referred to above, sufficient information relating to (i) the Qualifying Dispositions, (ii) the Filer’s plan in the event the Qualifying Dispositions cannot be carried out, whether because the Approval Sought in respect thereof, or the unitholder approvals for the required Pre-Closing DoT Change are not obtained before Closing, or for any other reason, (iii) any potential impact of the foregoing for the Fiera Related Unitholders, the remaining unitholders and the Funds, and (iv) the SSTCC Trust Agreement.

80.          The Filer believes that it may consent on behalf of the Fiera Private Wealth Clients which gave the Filer discretionary authority over their accounts, even though keeping the Fiera Private Wealth Clients in funds managed by the Filer benefits the Filer, because such Fiera Private Wealth Clients have already consented to being invested in investment funds managed by the Filer.

81.          The Filer believes that the transaction will not materially impact the Fiera Private Wealth Clients.

82.          No Fiera Related Unitholder will be moved to a Clone Trust if such unitholder could not have subscribed in a FCPF on a prospectus-exempt basis.

83.          The Qualifying Dispositions are not expected to have any material impact on the Fiera Related Unitholders or the other remaining unitholders of the Funds. The Qualifying Dispositions will not negatively affect any unitholder’s interest in the assets and liabilities of the relevant QD Fund, each QD Fund’s investment objective and strategies will be substantially the same as its corresponding Clone Trust and the Qualifying Dispositions are being structured to be a non-taxable event to the Fiera Related Unitholders, the remaining unitholders and the Funds.

84.          Fiera Related Unitholders will continue to have the right to redeem units of the QD Funds for cash at any time up to the close of business on the business day immediately prior to the Qualifying Dispositions. Units so redeemed will be redeemed at a price equal to their Net Asset Value per unit on the redemption date.

85.          Except for the Fiera Institutional Clients which will be redeemed prior to the Qualifying Dispositions, none of the Fiera Related Unitholders is restricted from being invested in a Clone Trust or FCPF because it will not be subject to Regulation 81-102.

Change of Manager

86.          Other than with respect to the changes related to the Proposed Transaction and disclosed in the Meeting Materials, the Proposed Transaction is not expected to have any material impact on the business, operations or affairs of the Funds or the unitholders of the Funds and Canoe intends to manage and administer the Funds in a similar manner as the Filer.

87.          All material agreements regarding the administration of the Funds will either be amended and restated by Canoe or be terminated and Canoe will enter into new agreements with the relevant service provider, as required. Subject to obtaining any necessary approvals as of the Closing Date, Canoe will become the successor trustee, investment fund manager and portfolio manager of the Funds. The Filer will cease to act as portfolio manager of the Funds but will be appointed as sub-advisor to the Fiera Continuing Funds and Fiera Capital Equity Growth Fund.

Mergers

88.          The Filer and/or Canoe and not the Funds, will bear all costs and expenses associated with calling and holding the Meetings and implementing the Mergers.

89.          Except for Canoe U.S. Equity Income Portfolio Class and Canoe Canadian Small Mid Cap Portfolio Class, each Canoe Continuing Fund has a portfolio of greater value, allowing for increased portfolio diversification opportunities, which may lead to increased returns and/or a reduction of risk and Canoe U.S. Equity Portfolio Class is expected to have a portfolio of greater size than its corresponding terminating Fund once the Pre-Closing Reorganizations have been effected.

90.          With respect to the Merger of Fiera Capital Equity Growth Fund into Canoe Canadian Small Mid Cap Portfolio Class, the investment objectives and investment strategies of the Canoe Continuing Fund will be substantially similar to those of the Terminating Fund.

91.          With respect to the Merger of a Terminating Fund into a Canoe Portfolio Class Fund, the portfolio class structure of the Canoe Continuing Fund provides access to multiple Canoe Portfolio Class Funds on a tax-efficient basis, which may improve capital gains characterization and provide better alignment of capital gains realization between the time of the investment into a Canoe Portfolio Class Fund until the time of exit from a Canoe Portfolio Class Fund.

92.          Unitholders of the Terminating Funds received detailed information about the Mergers in the Meeting Materials and may redeem their securities prior to the Mergers should they wish to do so.

93.          No commission or other fee will be charged to unitholders of the Terminating Funds on the issue or exchange of securities of the Terminating Funds into the Canoe Continuing Funds.

Impacts of the Approvals Sought

94.          Neither the Funds nor the Canoe Funds will bear any of the costs and expenses including any portfolio realignment costs, associated with the Proposed Transaction, including the Mergers and the Change of Manager, except for certain fees and expenses with respect to the IRC of the Funds. Any costs and expenses associated with the Proposed Transaction will be borne by the Filer and/or Canoe, as determined between the parties.

95.          The current individuals comprising the IRC of the Funds will automatically cease to be members of the IRC by operation of paragraph 3.10(1)(c) of Regulation 81-107 following the Proposed Transaction. Canoe intends that the new members of the IRC of the Funds will be the same individuals that currently comprise the IRC of the Canoe Funds.

96.          The Filer considers that the experience and integrity of each of the members of Canoe’s current management team is apparent by their education and years of experience in the investment industry. Following the Proposed Transaction, it is expected that all of the current officers and directors of Canoe will continue on in their current capacities and that they will continue to have the requisite integrity and experience as contemplated under subparagraph 5.7(1)(a)(v) of Regulation 81-102.

97.          The Closing will not adversely affect Canoe’s financial position or its ability to fulfill its regulatory obligations.

98.          Canoe and the Filer are not related parties. Except pursuant to the Proposed Transaction, there are no relationships between Canoe and the Filer (or their respective affiliates).

99.          The Approvals Sought are not detrimental to the protection of investors in the Funds.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Approvals Sought are granted.

“Hugo Lacroix”
Senior Director, Investment Funds
PTO/hdu