Investors Group Trust Co. Ltd. and IG Templeton World Bond Fund - MRRS Decision
Headnote
MRRS - Approval of fund merger on the basis that the simplified prospectus and financial statements of the continuing fund need not be delivered to unitholders of the terminating fund but instead a tailored simplified prospectus be delivered to unitholders of the terminating fund - approval was needed because the merger did not meet the pre-approval requirements -- unitholders will still be able to obtain financial statements from the fund manager's website or SEDAR - clause 5.5(1)(b) of National Instrument 81-102 Mutual Funds.
Applicable Legislative Provisions
National Instrument 81.102 Mutual Funds, clause 5.5(1){b), clause 5.6(1){f){ii) and clause 5.7(1){b).
June 8, 2006
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
INVESTORS GROUP TRUST CO. LTD.
(THE "TRUSTEE") AND
IG TEMPLETON WORLD BOND FUND
(THE "TERMINATING FUND")
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 Trustee and the Terminating Fund (the "Filers") for a decision under the securities legislation of the Jurisdictions (the "Legislation") for approval of the merger (the "Merger") of the Terminating Fund into the Continuing Fund (as defined below) pursuant to paragraph 5.5(1)(b) of the Instrument (the "Requested Approval").
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(a) The Manitoba 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. The following additional terms shall have the following meanings:
"Authorities" means the securities regulatory authority of a Jurisdiction;
"Continuing Fund" means Investors Global Bond Fund;
"Fund" or "Funds" means, individually or collectively, the Terminating Fund and the Continuing Fund;
"Instrument" means National Instrument 81-102 Mutual Funds;
"Manager" means I.G. Investment Management, Ltd.; and
"Tax Act" means the Income Tax Act (Canada).
Representations
This decision is based on the following facts represented by the Filers:
1. The Trustee is a corporation having its registered head office in Winnipeg, Manitoba.
2. The Manager provides day-to-day administration, including unit holder record-keeping and tax reporting for the Funds.
3. The Funds are established by separate Declarations of Trust or Trust Agreements under the laws of Manitoba.
4. Each of the Funds is an open-end mutual fund. The net asset value for each series of units of the Funds is calculated on a daily basis on each business day.
5. Each Fund issues a single series of units to retail purchasers under both No-Load and Deferred Sales Charge purchase options. The Continuing Fund also issues a separate series of units (called "Series "Z" Units") for investment by accredited institutional investors, such as the Investors Portfolio Funds (which are fund-of-funds). The Series "Z" units are not qualified by prospectus, but are identical to the retail series of units except they have no management fees, sales charges or redemption fees in order to avoid any duplication of fees under a fund-of-funds structure.
6. Pursuant to the Merger, unitholders will receive retail units of equal value in the Continuing Fund with the same purchase option as they currently own in the Terminating Fund.
7. The retail units of each of the Funds are qualified for distribution in each province and territory of Canada pursuant to the Investors Group Funds simplified prospectus dated June 30, 2005, as amended, and the Investors Group Funds annual information form dated June 30, 2005, as amended.
8. Unitholders of the Terminating Fund will be asked to approve the Merger at a special meeting scheduled to be held on or about June 15, 2006. Implicit in the approval by unitholders of the Merger is the adoption by the Terminating Fund of the investment objective, strategies and fee structure of the Continuing Fund.
9. The Funds are reporting issuers under the applicable securities legislation of each province and territory of Canada and are not on the list of defaulting reporting issuers maintained under the applicable securities legislation of the Authorities. Following the Merger, the Continuing Fund will continue as a publicly offered open-end mutual fund.
10. Each of the Funds follows the standard investment restrictions and practices applicable to mutual funds pursuant to the Instrument and applicable securities legislation established by the Authorities, except to the extent that the Funds have obtained orders to deviate from such Instrument and applicable securities legislation.
11. Unitholders of the Terminating Fund will continue to have the right to redeem units of that Fund for cash at any time up to the close of business on the business day immediately preceding the effective date of the Merger.
12. As soon as is reasonably practical after the Merger, the Terminating Fund will be terminated.
13. The Merger will occur as a tax-deferred transaction under the Tax Act.
14. The Merger will not result in any fee increases. Unitholders of the Terminating Fund having investments subject to a deferred sales charge will not have any change in their redemption fee schedule.
15. A notice of meeting, a management information circular and a proxy in connection with the Merger will be filed on SEDAR and were mailed to unitholders of the Merging Fund on or before May 23, 2006. A press release and material change report in respect of the Merger was filed on SEDAR on April 28, 2006. A report of voting results as required by National Instrument 81-102 will be filed on SEDAR in due course after the meeting.
16. Currently, the sub-advisor of the Terminating Fund is Templeton Investment Management (an operating division of Franklin Templeton Investment Corp.). After the Merger, the Manager, together with its affiliate I.G. International Management Limited of Dublin, will continue as the portfolio advisors of the Continuing Fund and Templeton Investment Management will not provide sub-advisory services with respect to the Continuing Fund.
17. Although the investment strategies of the Continuing Fund and the Terminating Fund are not substantially similar, the mandate of the Continuing Fund is broader and, as a result, generally the securities of the Terminating Fund fall within the mandate of the Continuing Fund. To the extent that acquisition of the portfolio assets of the Terminating Fund are not what the portfolio advisor of the Continuing Fund would have chosen, they may be liquidated prior to the Merger and any costs associated with these changes in the portfolio will be borne by the Trustee or the Manager. Accordingly, the portfolio assets of the Merging Fund to be acquired by the Continuing Fund arising from the Merger are currently, or will be, acceptable, on or prior to the effective date of the Merger, to the portfolio advisors of the Continuing Fund and are, or will be, consistent with the investment objective of the Continuing Fund.
18. The Trustee or Manager will pay all of the costs specifically associated with the Merger, including the cost of holding the meeting in connection with the Merger and of soliciting proxies, including the costs of mailing the management information circular and accompanying materials.
19. Approval of the Merger is required because the Merger does not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of the Instrument in the following ways:
(a) The fundamental investment strategy of the Terminating Fund and the Continuing Fund are not substantially similar in all respects; and
(b) The current simplified prospectus of the Investors Group Funds will not be sent to unitholders of the Merging Fund but, instead, a tailored document consisting of the Part A, the Part B and any amendments of the simplified prospectus for the Continuing Fund will be sent to unitholders of the Terminating Fund.
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 the decision has been met. The decision of the Decision Makers under the Legislation is that the Requested Approval is granted, provided that:
(a) the material sent to unitholders of the Terminating Fund in respect of the Merger includes a tailored simplified prospectus consisting of:
(i) the current Part A of the simplified prospectus of the Continuing Fund (as amended), and
(ii) the current Introduction to Part B and Part B of the simplified prospectus of the Continuing Fund;
(b) the information circular sent to unitholders in connection with the Merger provides sufficient information about the Merger to permit unitholders to make an informed decision about the Merger;
(c) the information circular sent to unitholders in connection with the Merger prominently discloses that unitholders can obtain the most recent interim and annual financial statements of the Continuing Fund by accessing the SEDAR website at www.sedar.com, by accessing the Trustee's website at www.investorsgroup.com, by writing to the Trustee at 447 Portage Avenue, Winnipeg, Manitoba, R3C 3B6 or by contacting the Trustee by calling a toll-free telephone number;
(d) upon request by a unitholder for financial statements, the Trustee will make best efforts to provide the unitholder with financial statements of the Continuing Fund in a timely manner so that the unitholder can make an informed decision regarding the Merger; and
(e) the Terminating Fund and the Continuing Fund with respect to a Merger have an unqualified audit report in respect of their last completed financial period.
This Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publication in final form of any legislation or rule of that Decision Maker dealing with matters in paragraph 5.5(1)(b) of the Instrument.