First Asset Investment Management Inc. et al.

November 3, 2015

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- investment fund manager obtaining relief from the requirement to obtain the approval of securityholders before changing the fundamental investment objective of a non-redeemable investment fund -- relief required as a result of changes to tax law eliminating certain tax benefits associated with character conversion transactions -- manager required to send written notice at least 30 days before the effective date of the change to the investment objective of the funds setting out the change, the reasons for such change and a statement that the funds will no longer distribute gains under forward contracts that are treated as capital gains for tax purposes -- National Instrument 81-102 Investment Funds.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 5.1(1)(c), 19.1.

November 3, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF FIRST ASSET INVESTMENT MANAGEMENT INC. (the Filer) AND IN THE MATTER OF CANADIAN ADVANTAGED CONVERTIBLES FUND AND NORTH AMERICAN ADVANTAGED CONVERTIBLE FUND (collectively, the Funds)

DECISION
Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) for exemptive relief from the requirement to obtain prior securityholder approval before changing the fundamental investment objective of the Funds under subsection 5.1(1)(c) of National Instrument 81 102 -- Investment Funds (NI 81-102) (the Requested Relief).

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

1. the Ontario Securities Commission is the principal regulator for this application; and

2. the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (collectively with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 -- Definitions, MI 11-102 and NI 81-102 have the same meaning if used in this decision, unless otherwise defined.

The following terms have the following meaning:

ADC means Canadian Advantaged Convertibles Fund;

Fund means any one of the Funds, individually;

NCD means North American Advantaged Convertible Fund.

Representations

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

1. The Filer is the portfolio adviser and manager of the Funds. The Filer is registered as an investment fund manager in Ontario, a portfolio manager and an exempt market dealer under the Securities Act (Ontario) and a commodity trading manager under the Commodity Futures Act (Ontario). It is also registered as an investment fund manager under the Securities Act (Newfoundland and Labrador) and Securities Act (Québec). The head office of the Filer is located at 95 Wellington Street West, Suite 1400, Toronto Ontario, M5J 2N7.

2. Each Fund is an investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust.

3. Neither the Filer nor the Funds are in default of securities legislation in any jurisdiction.

4. ADC is a non-redeemable investment fund. Its units were qualified for distribution pursuant to a prospectus dated December 10, 2010 that was prepared and filed in accordance with the securities legislation of the Jurisdictions. Accordingly, ADC is a reporting issuer or the equivalent in each province or territory of Canada. The units of ADC are listed and posted for trading on the Toronto Stock Exchange (the TSX).

5. NCD is a non-redeemable investment fund. Its units were qualified for distribution pursuant to a prospectus dated April 19, 2011, that was prepared and filed in accordance with the securities legislation of the Jurisdictions. Accordingly, NCD is a reporting issuer or the equivalent in each province or territory of Canada. The units of NCD are listed and posted for trading on the TSX.

6. Under its current investment objective and strategies, each Fund is a party to a forward purchase and sale agreement (each a Forward Agreement). Each Forward Agreement provides the applicable Fund with exposure to the returns of the securities of an applicable investment fund (individually, a Reference Fund or collectively, the Reference Funds). The current investment objective of each Fund is set out in the table below:

Fund

Investment Objective

ADC

The fund's investment objectives are to provide holders of units with: (i) quarterly tax-advantaged distributions; and (ii) the opportunity for capital appreciation.

The fund invests in an actively managed, diversified portfolio (the Portfolio) comprised primarily of convertible debentures of Canadian issuers. The fund obtains economic exposure to the Portfolio through the Forward Agreement. As the fund will partially settle the Forward Agreement to fund distributions, such distributions will be comprised primarily of returns of capital and capital gains and accordingly, such distributions are described herein as tax-advantaged.

NCD

The fund's investment objectives are to provide holders of units with: (i) quarterly tax-advantaged distributions; and (ii) the opportunity for capital appreciation.

The fund invests in the Portfolio comprised primarily of convertible debentures of Canadian, U.S. and global issuers and to seek to provide a good risk-adjusted way to invest in the Canadian, U.S. and global markets, through a combination of stable current income, security of principal and the opportunity for capital appreciation. The fund obtains economic exposure to the Portfolio through the Forward Agreement. As the fund will partially settle the Forward Agreement to fund distributions, such distributions will be comprised primarily of returns of capital and capital gains and accordingly, such distributions are described as tax-advantaged.

7. The fundamental investment objective of each Reference Fund is as follows:

ACD Reference Fund

The fund's investment objective is to provide holders of units with the opportunity for capital appreciation by investing in an actively managed portfolio comprised primarily of convertible debentures of Canadian issuers.

NCD Reference Fund

The fund's investment objective is to provide holders of units with the opportunity for capital appreciation by investing in an actively managed, diversified portfolio comprised primarily of convertible debentures of Canadian, U.S. and global issuers.

8. Through the use of the Forward Agreements, each Fund provides tax-advantaged distributions to securityholders because each Fund will realize capital gains (or capital losses) on the disposition of securities acquired under the Forward Agreements, rather than ordinary income. Ordinary income is subject to tax at a higher rate in Canada than capital gains.

9. The Forward Agreements with respect to ADC and NCD are expected to expire and terminate on December 21, 2015 and May 20, 2016, respectively (the Forward Expiry Dates).

10. The Income Tax Act (Canada) was amended in December 2013 to implement proposals that were first announced in the March 21, 2013 federal budget regarding the income tax treatment of character conversion transactions (the Tax Changes). Under the Tax Changes, the favourable tax treatment of character conversion transactions will be eliminated after a prescribed date (the Effective Date). The Effective Date for each Fund will be the applicable Forward Expiry Date.

11. As a result of the Tax Changes, it is anticipated that the Forward Agreements would no longer be able to, over the long term, provide material tax efficiency to securityholders of the Funds. As a result, the Filer determined that, upon termination of the Forward Agreements, each Fund would own its portfolio of investments directly rather than through the Reference Fund, and the corresponding Reference Fund for each Fund will be wound up.

12. The Filer has determined that, as a result of the Tax Changes, it would be more efficient and less costly for each Fund to seek to achieve its fundamental investment objective after the Effective Date by investing its assets directly in the same, or substantially the same, assets as those held by the applicable Reference Fund.

13. The Filer wishes to amend the investment objectives of each Fund to remove all references to the use of Forward Agreements to gain exposure to the applicable Reference Fund, to delete references to "tax-advantaged" and to clarify that each Fund will invest directly in securities similar to those held by the applicable Reference Fund.

14. Following such amendment, the revised investment objectives of each Fund will be as set out in the table below:

Fund

Investment Objective

ADC

The Fund's investment objectives are to provide holders of units with: (i) quarterly distributions; and (ii) the opportunity for capital appreciation.

The Fund obtains exposure to the Portfolio comprised primarily of convertible debentures of Canadian issuers. The Portfolio will be actively managed by First Asset Investment Management Inc.

NCD

The Fund's investment objectives are to provide holders of units with: (i) quarterly tax-advantaged distributions; and (ii) the opportunity for capital appreciation.

The Fund has been created to obtain exposure to the Portfolio comprised primarily of convertible debentures of Canadian, U.S. and global issuers and to seek to provide a good risk-adjusted way to invest in the Canadian, U.S. and global markets, through a combination of stable current income, security of principal and the opportunity for capital appreciation.

15. The Filer expects to effect an inter-fund transfer of the portfolio assets of the Reference Funds to the Funds in accordance with applicable securities laws, or an exemption therefrom.

16. The Filer has complied with the material change report requirements set out in Part 11 of National Instrument 81-106 -- Investment Fund Continuous Disclosure in connection with the Filer's decision to make the changes to the investment objectives of the Funds set out above.

17. The Filer has determined that it would be in the best interests of each Fund and not prejudicial to the public interest to receive the Requested Relief.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted, provided that, at least 30 days before the effective date of the change in the investment objectives of each Fund, the Filer will send to each securityholder of each Fund a written notice that sets out the change to the investment objective, the reasons for such change and a statement that such Fund will no longer distribute gains under forward contracts that are treated as capital gains for tax purposes.

"Darren Mckall"

Manager, Investment Funds and Structured Products Branch

Ontario Securities Commission

Fund	Investment Objective

ADC	The fund's investment objectives are to provide holders of units with: (i) quarterly tax-advantaged distributions; and (ii) the opportunity for capital appreciation.

	The fund invests in an actively managed, diversified portfolio (the Portfolio) comprised primarily of convertible debentures of Canadian issuers. The fund obtains economic exposure to the Portfolio through the Forward Agreement. As the fund will partially settle the Forward Agreement to fund distributions, such distributions will be comprised primarily of returns of capital and capital gains and accordingly, such distributions are described herein as tax-advantaged.

NCD	The fund's investment objectives are to provide holders of units with: (i) quarterly tax-advantaged distributions; and (ii) the opportunity for capital appreciation.

	The fund invests in the Portfolio comprised primarily of convertible debentures of Canadian, U.S. and global issuers and to seek to provide a good risk-adjusted way to invest in the Canadian, U.S. and global markets, through a combination of stable current income, security of principal and the opportunity for capital appreciation. The fund obtains economic exposure to the Portfolio through the Forward Agreement. As the fund will partially settle the Forward Agreement to fund distributions, such distributions will be comprised primarily of returns of capital and capital gains and accordingly, such distributions are described as tax-advantaged.

ACD Reference Fund	The fund's investment objective is to provide holders of units with the opportunity for capital appreciation by investing in an actively managed portfolio comprised primarily of convertible debentures of Canadian issuers.

NCD Reference Fund	The fund's investment objective is to provide holders of units with the opportunity for capital appreciation by investing in an actively managed, diversified portfolio comprised primarily of convertible debentures of Canadian, U.S. and global issuers.