Investors Group Trust Co. et al. - MRRS Decision
Headnote
Investment for specified purpose by mutual funds in securities of another mutual fund that is under commonmanagement exempted from the requirements of clause 111(2)(b), subsection 111(3), clauses 117(1)(a), and 117(1)(d)subject to certain specified conditions.
Statutes Cited
Securities Act (Ontario), R.S.O. 1990 c.S.5, as am. ss. 111(2)(b), 111(3), 113, 117(1)(a), 117(1)(d), 117(2), and121(2)(a)(ii).
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
INVESTORS GROUP TRUST CO. LTD.
AND
INVESTORS GLOBAL SCIENCE & TECHNOLOGY RSP FUND
IG AGF U.S. GROWTH RSP 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 Investors Group Trust Co. Ltd. ("Investors"), Investors Global Science &Technology RSP Fund and IG AGF U.S. Growth RSP Fund and other mutual funds managed by Investors after the dateof this Decision (defined herein) having an investment objective that is linked to the returns or portfolio of anotherspecified Investors managed mutual fund (collectively referred to as the "Top Funds"), 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 Investors Global Science &Technology RSP Fund and IG AGF U.S. Growth RSP Fund in the Investors Global Science & Technology Fund andthe IG AGF U.S. Growth Fund and by the other Top Funds in their applicable corresponding Investors managed mutualfunds from time to time (the funds in which such investments are to be made being collectively referred 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; and
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 Investors to the Decision Makers that:
1. Each of the Top Funds and each of the Underlying Funds (collectively, the "Funds") is, or will be, an open-ended mutual fund trust established under the laws of the Province of Manitoba.
2. The Top Funds and the Underlying Funds will be reporting issuers. The securities of the Investors GlobalScience & Technology RSP Fund will be qualified under a preliminary simplified prospectus and annualinformation form which were filed in all provinces and territories under SEDAR project number 308722. Thesecurities of IG AGF U.S. Growth RSP Fund will be qualified under a preliminary simplified prospectus andannual information form which were filed in all provinces and territories under SEDAR project number 310004.
3. The simplified prospectuses will disclose the investment objectives, investment strategies, risks and restrictionsof the Top Funds and the Underlying Funds. The investment objective of the Top Funds will include disclosureof the names of the Underlying Funds and the Top Funds' total aggregate derivative exposure to, and directinvestment in the Underlying Funds.
4. The investment objective of the Underlying Funds is, or will be, achieved through investment primarily in foreignsecurities.
5. The investment objective of the Top Funds is, or will be, to provide long-term capital growth, primarily throughthe implementation of a derivative strategy that provides a return linked to the return of the applicableUnderlying Fund. Each Top Fund will also invest directly in the applicable Underlying Fund up to the amountprescribed from time to time as the maximum permitted amount which may be invested in foreign propertyunder the Income Tax Act (Canada) (the "Tax Act") without the imposition of tax under Part XI of the Tax Act(the "Foreign Property Maximum").
6. To achieve its investment objective, each of the Top Funds will invest its assets in securities such that its unitswill, in the opinion of tax counsel to the Top Fund, be "qualified investments" for registered retirement savingsplans, registered retirement income funds, deferred profit sharing plans and similar plans (collectively, the"Registered Plans") under the Tax Act and will not constitute foreign property in a Registered Plan.
7. The direct investment by a Top Fund in units of the applicable Underlying Fund will be within the ForeignProperty Maximum (the "Permitted Limit"). Investors and the Top Funds will comply with the conditions of thisDecision in respect of such investments. The amount of direct investment by each Top Fund in its applicableUnderlying Fund will be adjusted from time to time so that, except for transitional cash, the aggregate ofderivative exposure to, and direct investment in, the Underlying Fund will equal 100% of the assets of the TopFund.
8. 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.
9. 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 unitholder; and (b) knowingly holding an investment referred to in clause(a) hereof. As a result, in the absence of this Decision the Top Funds would be required to divest themselvesof any such investments.
10. In the absence of this Decision, the Legislation requires Investors to file a report on every purchase or sale ofsecurities of the Underlying Funds by the Top Funds.
11. The Top Funds' investment in or redemption of units of their corresponding Underlying Funds will representthe business judgment of responsible persons, uninfluenced by considerations other than the best interest ofthe Top Funds.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that the Applicable Requirements shallnot apply so as to prevent a Top Fund from making or holding an investment in securities of an Underlying Fund,
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;
d. the investment objective of the Top Fund discloses the name of the Underlying Fund;
e. the Underlying Fund is not a mutual fund whose investment objective includes investing directly orindirectly in other mutual funds;
f. the Top Fund restricts its direct investment in the Underlying Fund to a percentage of its assets thatis within the Permitted Limit;
g. 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;
h. no sales charges are payable by the Top Fund in relation to its purchases of securities of theUnderlying Fund;
i. 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;
j. 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;
k. the arrangements between or in respect of the Top Fund and the Underlying Fund are such as toavoid the duplication of management fees;
l. 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.
m. 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 Funds except to the extent the securityholders of the Top Fundhave directed;
n. 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
o. 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 10, 2001.
"J.A. Geller" "R. Stephen Paddon"