Securities Law & Instruments

Headnote

MRRS exemption granted from the requirement in section 5.1(c) of National Instrument 81-102 -- Mutual Funds to obtain securityholder approval for a change in the fundamental investment objectives of the fund. Exemption granted in connection with termination of RSP clone funds due to change in foreign content restrictions.

Rules Cited

National Instrument 81-102 - Mutual Funds, s. 5.1(c).

November 3, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC, NOVA SCOTIA,

NEW BRUNSWICK, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR, YUKON,

NORTHWEST TERRITORIES AND NUNAVUT

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

PRIMERICA INTERNATIONAL RSP AGGRESSIVE

GROWTH PORTFOLIO FUND (the "Portfolio")

 

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 Portfolio for a decision, pursuant to National Instrument 81-102 -- Mutual Funds ("NI 81-102"), exempting the Portfolio from the requirement in Section 5.1(c) of NI 81-102 to obtain the approval of securityholders of the Portfolio for a change in the fundamental investment objectives of the Portfolio (the "Requested Relief").

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.

Interpretation

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

Representations

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

1. The Portfolio is a trust established under the laws of Ontario pursuant to a declaration of trust dated November 15, 1999. The Portfolio is a reporting issuer or the equivalent thereof in each Jurisdiction, is subject to the requirements of NI 81-102, and is not in default of any requirements of applicable securities legislation.

2. Units of the Portfolio are offered for sale in each Jurisdiction pursuant to a simplified prospectus and annual information form, each dated November 23, 2004 (collectively, the "Prospectus").

3. PFSL Investments Canada Ltd. ("PFSL") is a corporation incorporated under the laws of Ontario with its registered office located in Mississauga, Ontario. PFSL is the manager, trustee, exclusive distributor and the registrar and transfer agent of the Portfolio.

4. The Portfolio is a strategic asset allocation fund. Its investment objective is to seek superior capital growth by investing 100% of its assets in units of several RSP Clone Funds (collectively referred to herein as the "AGF RSP Funds") managed by AGF Funds Inc. ("AGF") in the proportions set out in the table below.

AGF RSP Fund
% of the Portfolio
AGF RSP American Growth Fund
20%
AGF RSP European Equity Fund
20%
AGF RSP Japan Fund
10%
AGF RSP World Companies Fund
25%
AGF RSP International Value Fund
25%

5. Each AGF RSP Fund qualified as an RSP Clone Fund. As such, each AGF RSP Fund was intended for investors who wished to invest in such fund through a registered plan without such investment constituting "foreign property" for purposes of the Income Tax Act (Canada) (the "Tax Act"). Each AGF RSP Fund had a fundamental investment objective that required it to link its performance to a fund managed by AGF whose securities constituted foreign property under the Tax Act (collectively, the "Underlying AGF Funds").

6. Upon the enactment of the Budget Implementation Act, 2005 (Canada) (the "Budget Act"), the foreign property rules contained in the Tax Act were repealed effective for months ending in 2005 and subsequent years. As a result, investors no longer need to invest in RSP Clone Funds since there are no longer any adverse tax consequences under the Tax Act for holding foreign property in a registered plan.

7. On July 5, 2005, AGF announced that the AGF RSP Funds would be closed to new purchases (other than for reinvested distributions) as of the close of business on July 22, 2005 and would be terminated on August 12, 2005. Prior to termination, each AGF RSP Fund unwound the forward contracts they held and received back from such AGF RSP Fund's counterparty, units of the corresponding AGF Underlying Fund held, as hedges, by those counterparties. The sole assets of the AGF RSP Fund then consisted of units of the AGF Underlying Fund, which were distributed out to unitholders of the AGF RSP Fund (including the Portfolio), in specie, as part of the wind-up. Accordingly, the unitholders of the AGF RSP Fund (including the Portfolio) became direct securityholders of the corresponding AGF Underlying Fund.

8. The AGF RSP Funds completed the changes described above without unitholder approval in reliance on CSA Staff Notice 81-314 - Removal of Foreign Content Restrictions for Registered Plans - Eliminating Indirect Foreign Content Exposure in Certain RSP Funds (the "CSA Notice"). The Portfolio, being a fund-of-funds, cannot rely on the CSA Notice as it is itself not (i) an RSP Clone Fund, (ii) a mutual fund that qualifies as an RSP Clone Fund except that it links its performance to the performance of a group of foreign securities that are similar to the portfolio of the underlying fund, or (iii) a mutual fund which qualifies as an RSP Clone Fund except that it links its performance to the performance of more than one underlying fund.

9. As a result of the changes to the AGF RSP Funds announced by AGF, the Portfolio is no longer able to invest cash received from new purchases in the AGF RSP Funds in accordance with its fundamental investment objectives. Furthermore, effective upon the termination of the AGF RSP Funds, the Portfolio's assets consist of the Underlying AGF Funds and thus the Portfolio is technically in breach of its fundamental investment objectives.

10. PFSL is satisfied that as trustee of the Portfolio it has sufficient authority and flexibility under the constating documents of the Portfolio to change the investment objectives of the Portfolio without the approval of its unitholders, provided the relief requested herein is granted by the Decision Makers.

11. Effective on or before November 23, 2005, PFSL intends to change the name of the Portfolio to "Primerica Global Aggressive Growth Portfolio Fund".

12. On July 22, 2005, PFSL issued a press release announcing that effective as of such date the Portfolio would invest its assets directly in the AGF Underlying Funds in the same proportions as set out in paragraph 4 above.

Decision

Each of the Decision Makers is satisfied that the test contained in NI 81-102 that provides the Decision Maker with the jurisdiction to make the Decision has been met.

The decision of the Decision Makers under NI 81-102 is that the Requested Relief is granted provided that:

1. An amendment to the Prospectus (the "Amendment") disclosing the change in the fundamental investment objectives of the Portfolio be filed as soon as practicable and in any event within ten days after the date of this Decision Document.

2. PFSL will send or cause to be sent to each person, who was a securityholder in the Portfolio on the date that the Amendment is filed, as soon as practicable and in any event by March 1, 2006, a communication (the "Communication") that may be part of or accompany:

(a) a trade confirmation, if a trade confirmation is sent following the Amendment;

(b) an account statement next sent to securityholders after the Amendment; or

(c) any other communication sent to securityholders.

The Communication will disclose:

(i) the reason for the change in fundamental investment objectives of the Portfolio;

(ii) that there has been a change in what the Portfolio holds;

(iii) that there has been no change in the risks to the securityholder;

(iv) that securityholders of the Portfolio will benefit from the reduced costs of investing directly in the Underlying AGF Funds; and

(v) that the name of the Portfolio has been or will be changed to "Primerica Global Aggressive Growth Portfolio Fund" on or before November 23, 2005.

"Leslie Byberg"
Manager, Investment Funds