Securities Law & Instruments

Headnote

Approval to change the fund manager, change the custodian and conduct fund mergers as part of the transfer of one family of mutual funds into another family of mutual funds

Rules Cited

National Instrument 81-102 - Mutual Funds, ss. 5.5(1)(a), (b) and (c)

August 2, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,

ONTARIO, QUEBEC, NOVA SCOTIA, NEW BRUNSWICK, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR, NORTHWEST TERRITORIES,

YUKON TERRITORY AND NUNAVUT TERRITORY

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

ING INVESTMENT MANAGEMENT, INC.

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application dated May 27, 2005 (the Application) from ING Investment Management, Inc. (the Manager), for itself and on behalf of certain mutual funds managed by the Manager as listed in Schedule A attached hereto (collectively, the Terminating Funds), ING Canadian Money Market Fund and ING Canadian Dividend Income Fund (the Terminating Funds, ING Canadian Money Market Fund and ING Canadian Dividend Income Fund, collectively, the Funds) for a decision under from the securities legislation of the Jurisdictions (the Legislation) for the following approvals (the Requested Approvals):

1. the change in the manager of the ING Canadian Dividend Income Fund from the Manager to AGF Funds Inc. (AGF) pursuant to clause 5.5(1)(a) of NI 81-102;

2. the transfer of assets of the Terminating Funds to certain mutual funds managed by AGF as listed in Schedule A for securities of those funds (Fund Mergers) pursuant to clause 5.5(1)(b) of NI 81-102;

3. the transfer of net assets of the ING Canadian Money Market Fund to AGF Canadian Money Market Fund for units of AGF Canadian Money Market Fund (Fund Asset Merger) pursuant to clause 5.5(1)(b) of NI 81-102; and

4. the change in the custodian of the ING Canadian Dividend Income Fund from The Royal Trust Company to CIBC Mellon Global Securities Services Company pursuant to clause 5.5(1)(c) of NI 81-102.

The change in the manager and custodian of the ING Canadian Dividend Income Fund would be made in conjunction with other proposed changes in respect of the ING Canadian Dividend Income Fund (collectively, the Fund Amendments ) as more particularly described in the Management Information Circular dated May 6, 2005 (the Circular). The Fund Mergers, the Fund Asset Merger and the Fund Amendments are collectively defined as the Transactions.

Under the Mutual Reliance Review System for Exemptive Relief Applications

(a) the Ontario Securities Commission is the principal regulator for this Application, and

(b) this MRRS decision document evidences the decision of each Decision Maker, as applicable.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions or in Québec Commission Notice 14-101 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

This decision is based on the following facts represented by the Manager, for itself and on behalf of the Funds:

1. The Funds are open-ended mutual funds which have been established by way of a Master Declaration of Trust by General Trust of Canada (now National Bank Trust Inc.) dated December 12, 2000, as amended and restated on November 1, 2001 and as amended on November 1, 2002 and April 14, 2003 under the laws of the Province of Ontario, and in respect of which Natcan Trust Company was appointed trustee under a Trustee Replacement Agreement dated May 17, 2004.

2. Each Fund is a reporting issuer or the equivalent thereof in each Jurisdiction and not in default of any requirements of the securities legislation of the Jurisdictions.

3. Units of the Terminating Funds and ING Canadian Money Market Fund are offered for sale on a continuous basis in each Jurisdiction pursuant to a simplified prospectus and annual information form dated November 18, 2004 (collectively, the November Prospectus ). Units of ING Canadian Dividend Income Fund are for sale on a continuous basis in each Jurisdiction pursuant to a simplified prospectus and annual information form dated April 22, 2004 (collectively, the April Prospectus ). The Decision Makers issued a decision on April 22, 2005 granting an extension of the lapse date for the April Prospectus to July 31, 2005.

Fund Mergers

4. The proposed Fund Mergers will be structured as follows:

(a) All assets of the Terminating Funds will be liquidated on the open market and all derivatives contracts in respect of the ING US Equity RSP Fund and ING Global Equity RSP Fund will be settled;

(b) net cash proceeds of the liquidated assets of each Terminating Fund, after setting aside funds required to discharge estimated liabilities of such Terminating Fund as of the date of the Fund Mergers, payment of brokerage commissions on the liquidation of the assets of each Terminating Fund and the payment of sufficient distributions to Unitholders to ensure the Terminating Fund is not subject to Canadian federal income tax in its final taxation year, will be transferred to the applicable Corresponding AGF Fund (as listed in Schedule A attached hereto) on the Effective Date (as defined below) in exchange for MF Series units or shares of the applicable Corresponding AGF Fund. The Corresponding AGF Funds will not assume the liabilities of the Terminating Funds;

(c) the MF Series units or shares of each Corresponding AGF Fund received by the applicable Terminating Fund in payment for the transferred assets (being cash) will have an aggregate net asset value equal to the value of the assets transferred by that Terminating Fund. The units or shares of the Corresponding AGF Funds will be issued at the applicable net asset value per unit or share of the Corresponding AGF Fund determined in accordance with its constating documents as of the close of business on the Effective Date;

(d) the units or shares of the applicable Corresponding AGF Fund received by each Terminating Fund will be transferred to Unitholders of such Terminating Fund in exchange for the issued and outstanding Investor Class and Exclusive Class units of the Terminating Fund held by investors. No unit or share certificates will be issued; and

(e) the affairs of the Terminating Funds will be wound up and such funds shall be terminated.

Fund Asset Merger

5. The proposed Fund Asset Merger will be structured as follows:

(a) All portfolio assets of ING Canadian Money Market Fund, except for assets which will be liquidated in order to (a) discharge estimated liabilities of the fund as of the date of the Fund Asset Merger or, (b) pay sufficient distributions to Unitholders to ensure the ING Canadian Money Market Fund is not subject to Canadian federal income tax in its final taxation year, will be transferred to AGF Canadian Money Market Fund on the Effective Date of the Fund Asset Merger. The value of the portfolio assets of ING Canadian Money Market Fund which are to be transferred to AGF Canadian Money Market Fund will be determined as of the close of business on the business day before the effective date of the merger in accordance with the declaration of trust of the ING Canadian Money Market Fund;

(b) the MF Series units of AGF Canadian Money Market Fund received by ING Canadian Money Market Fund in payment for the transferred portfolio assets will have an aggregate net asset value equal to the value of the transferred portfolio assets. The units of AGF Canadian Money Market Fund will be issued at the applicable net asset value per unit of the AGF Canadian Money Market Fund determined in accordance with its constating documents as of the close of business on the Effective Date;

(c) the ING Canadian Money Market Fund will distribute any undistributed net income of the fund to Unitholders to ensure that the fund is not subject to Canadian federal income tax in its taxation year ending on the effective date of the Fund Asset Merger, and within 60 days of the Fund Asset Merger, the units of AGF Canadian Money Market Fund received by ING Canadian Money Market Fund will be transferred to Unitholders of ING Canadian Money Market Fund as consideration for all of the issued and outstanding units of ING Canadian Money Market Fund (being Investor Class and Exclusive Class units) surrendered by investors on the redemption of such units. No unit certificates will be issued.

(d) the manager or trustee of the ING Canadian Money Market Fund will, on behalf of the Fund, jointly elect with the AGF Canadian Money Market Fund under section 132.2 of the Income Tax Act (Canada) (the "Tax Act") (a) to defer the recognition of gains of Unitholders of the ING Canadian Money Market Fund on the exchange of their units of such Fund for units of the AGF Canadian Money Market Fund, and (b) such that the ING Canadian Money Market Fund will not realize any capital gains on the transfer of its portfolio assets to the AGF Canadian Money Market Fund, except to the extent that the Manager has confirmed that the ING Canadian Money Market Fund will not be subject to tax under the Tax Act on any such capital gains.

(e) the affairs of the ING Canadian Money Market Fund will be wound up and the ING Canadian Money Market Fund shall be terminated.

ING Canadian Dividend Income Fund Amendments

6. The principal changes in connection with the ING Canadian Dividend Income Fund (the Dividend Fund) Amendments are: (a) a change in the manager of the Dividend Fund, from the Manager to AGF; (b) a change in the auditors of the Dividend Fund, from Ernst & Young LLP to PricewaterhouseCoopers LLP; (c) a change in the trustee of the Dividend Fund, from Natcan Trust Company to AGF; (d) a change in other service providers, including a change in the custodian of the Dividend Fund from The Royal Trust Company to CIBC Mellon Global Securities Service Company; (e) a change in the name of the Dividend Fund, from ING Canadian Dividend Income Fund to AGF Dividend Income Fund; (f) the entering into by the trustee of a new management agreement; (g) the amendment of the Current Declaration of Trust (as defined below) to conform with the master declaration of trust used by AGF; and (h) a change in the terms under which deferred sales charges are payable (in respect of the annual free redemption right and ordering rules) to be more consistent with the terms under which AGF currently charges deferred sales charges in connection with redemptions from other AGF Funds. Unitholder approval has been obtained in respect of the changes described above other than in (d) and (e).

7. A press release has been issued and a material change report has been filed by the Funds announcing the proposed Transactions.

8. On April 8, 2005, amendments to each of the November Prospectus and the April Prospectus were filed with the Decision Makers to reflect the proposed Transactions.

9. Extracts from Part B of the simplified prospectus of the AGF Group of Funds dated April 15, 2005 relevant to the AGF funds listed in Schedule A and the AGF Canadian Money Market Fund and the preliminary simplified prospectus of the AGF U.S. Risk Managed Class dated April 26, 2005 were mailed to unitholders of each of the Funds (the Unitholders ) together with the Circular. The Circular indicated that copies of the AGF Funds annual information form and annual and interim financial statements including a statement of portfolio transactions could be obtained from Unitholders registered representatives or by contacting AGF and were available on SEDAR.

10. At special meetings (the Meetings) held on June 8, 2005, Unitholders approved the Transactions. It is proposed that the Transactions will be implemented after the close of business on or about August 5, 2005 (the Effective Date). The cost of effecting the Transactions (consisting primarily of proxy solicitation, printing, mailing, legal and regulatory fees) will be borne by the Manager. The Manager and AGF may postpone implementing any of the Transactions until a later date (which shall be not later than August 30, 2005, unless otherwise agreed between the parties) and may elect to not proceed with any of the Transactions.

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 Approvals are granted provided that the Transactions are completed no later than September 30, 2005.

"Susan Silma"
Director, Investment Funds Branch

 

Schedule A

Terminating Funds
Corresponding AGF Funds
 
ING Canadian Bond Fund
AGF Canadian Bond Fund
ING Canadian Balanced Fund
AGF Canadian Balanced Fund
ING Canadian Equity Fund
AGF Canadian Stock Fund
ING Canadian Small Cap Equity Fund
AGF Canadian Small Cap Fund
ING US Equity Fund
AGF U.S. Risk Managed Class
ING US Equity RSP Fund
AGF RSP American Growth Fund
ING Global Equity Fund
AGF World Companies Fund
ING Global Equity RSP Fund
AGF RSP World Companies Fund
ING Europe Equity Fund
AGF European Equity Class
ING Canadian Financial Services Fund
AGF Global Financial Services Class
ING Canadian Resources Fund
AGF Canadian Resources Fund Limited
ING Global Brand Names Fund
AGF World Companies Fund