Fund on funds exemption granted to a mutual fund has been varied to permit the bottom fund to merge with the top fund.
Securities Act, R.S.O. 1990, c. S.5, as am. clause 111(2)(b), subsection 111(3), clause 117(1)(a) and section 144.
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990, CHAPTER S.5, AS AMENDED
IN THE MATTER OF
VARIATION AND REVOCATION ORDER
WHEREAS on May 17, 1996, the Ontario Securities Commission (the Commission) granted an order (the Ruling) to All-Canadian Compound Fund (the Compound Fund) from the substantial security holder restriction as set out in clause 111(2)(b) and subsection 111(3) of the Act and the reporting requirement as set out in clause 117(1)(a) of the Act to allow the Compound Fund to re-invest its distributions received from All-Canadian Capital Fund (the Capital Fund) in the Capital Fund;
WHEREAS the Commission has received an application made on behalf of the Compound Fund and the Capital Fund (collectively, the Funds) for an variation and revocation order pursuant to section 144 of the Act that the Ruling be varied and revoked as hereinafter provided;
WHEREAS the Commission has considered the application and the recommendation of staff of the Commission;
WHEREAS All-Canadian Management Inc. (the Manager) have represented to the Commission as follows:
1. The Manager is the manager, trustee and principal distributor of the Funds.
2. The Compound Fund and The Capital Fund are open-ended unincorporated mutual fund trusts. Each fund was organized on October 1, 1954 under the laws of British Columbia and each is presently governed by its respective Amended, Consolidated and Restated Trust Indenture dated November 1, 1997.
3. The Compound Fund and the Capital Fund are reporting issuers under the Act. Neither fund is in default of any of the requirements of the Act or the regulation made thereunder.
4. Units of the Compound Fund are currently not qualified for distribution to the public.
5. Units of the Capital Fund are offered for sale on a continuous basis in Ontario under a simplified prospectus dated April 6, 2004. As at March 31, 2004, the Compound Fund owned 91.4% of the issued and outstanding units of the Capital Fund.
6. Due to adverse tax consequences for both of the Funds, the proposed wind-up of the Capital Fund into the Compound Fund could not be completed in 1996. Upon the application by the Funds, the Commission issued the Ruling to the Compound Fund exempting the Compound Fund from the substantial security holder restriction and the reporting requirement for the purposing of re-investing distributions made by the Capital Fund to the Compound Fund.
7. Condition (j) of the Ruling (the Condition) requires that the Compound Fund would not issue any units other than pursuant to a distribution reinvestment plan whereby units are issued to existing securityholders of the Compound Fund in compliance with certain deemed rules of the Commission.
8. The Income Tax Act (Canada) now permits the wind-up of the Capital Fund into the Compound Fund (the Merger) without adverse tax consequences and the Manager proposes to proceed with such transaction. Unitholders of the Funds have approved the completion of the proposed transaction at meetings duly called on January 30, 2004.
9. To complete the Merger, the Compound Fund will have to issue units to the Capital Fund in exchange of assets of the Capital Fund being rolled to the Compound Fund. The Condition prohibits new issues of units by the Compound Fund.
WHEREAS the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED by the Commission, pursuant to section 144 of the Act that the Ruling is hereby varied such that:
(a) the Condition of the Ruling is deleted to permit the issuance of units by the Compound Fund to the Capital Fund to facilitate the Merger; and
(b) upon completion of the Merger, the Ruling is revoked in its entirety.
May 11, 2004.
"Paul M. Moore"
"Paul K. Bates"