MRRS -- Approval of fund mergers -- financial statements of continuing fund not required to be sent to unitholders of the terminating funds provided information circular sent in connection with the unitholder meeting clearly discloses the various ways unitholders can access the financial statements -- exemption from sending financial statements for future mergers as well.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6.
April 13, 2007
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
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
ELLIOTT & PAGE LIMITED
ELLIOTT & PAGE GENERATION WAVE FUND,
MIX SEAMARK TOTAL CANADIAN EQUITY CLASS AND
MIX TRIMARK SELECT CANADIAN CLASS
(collectively, the Terminating Funds)
MRRS DECISION DOCUMENT
The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Manager and the Terminating Funds (together, the "Filers") for a decision under the securities legislation of the Jurisdictions (the "Legislation") for:
(a) approval of the mergers (the "Mergers") of the Terminating Funds into the applicable Continuing Funds (as defined below); and
(b) approval of any merger, after the date of this decision, of funds managed by the Manager that meet all of the criteria for pre-approval of mergers under section 5.6 of the Instrument except for the financial statement delivery requirements of subparagraph 5.6(1)(f)(ii) of the Instrument (the "Future Mergers").
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.
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
"Continuing Funds" means Elliott & Page Canadian Equity Fund, MIX Canadian Large Cap Core Class and MIX Canadian Equity Value Class;
"Fund" or "Funds" means, individually or collectively, the Terminating Funds and the Continuing Funds.
This decision is based on the following facts represented by the Filers:
1. The Manager is a corporation established under the laws of Ontario. The Manager is the manager of each of the Funds.
2. The Elliott & Page Generation Wave Fund is an open-ended mutual fund trust established under the laws of the Province of Ontario pursuant to certain trust agreements.
3. Each of the MIX SEAMARK Total Canadian Equity Class and MIX Trimark Select Canadian Class is a class of shares of Manulife Investment Exchange Funds Corp. (the "Corporation"), a mutual fund corporation formed by articles of incorporation dated September 12, 2002 under the laws of the Province of Ontario.
4. Securities of the Funds are currently qualified for sale in all of the provinces and territories of Canada by a simplified prospectus and an annual information form, each dated August 24, 2006, as amended by amendment no. 1 thereto dated March 2, 2007.
5. Each of the Funds is a reporting issuer under the applicable securities legislation of each province and territory of Canada and is not in default of any requirements of applicable securities legislation.
6. The net asset value of each Fund is calculated on a daily basis on each day that the Manager is open for business.
7. The Manager proposes to merge each of the Terminating Funds into the Continuing Funds on a tax-deferred basis as follows:
(a) Elliott & Page Generation Wave Fund into Elliott & Page Canadian Equity Fund;
(b) MIX SEAMARK Total Canadian Equity Class into MIX Canadian Large Cap Core Class; and
(c) MIX Trimark Select Canadian Class into MIX Canadian Equity Value Class.
8. The proposed Merger of Elliott & Page Generation Wave Fund into Elliott & Page Canadian Equity Fund will be structured substantially as follows:
(i) The Terminating Fund will transfer all of its assets and liabilities to the Continuing Fund for an amount equal to the net value of the assets transferred, which amount will be satisfied as described in (ii) below.
(ii) The Continuing Fund will issue securities of the Continuing Fund to the Terminating Fund having a net asset value equal to the net value of the assets transferred by the Terminating Fund.
(iii) The Terminating Fund will redeem its outstanding securities and pay the redemption price for these securities by distributing securities of the Continuing Fund to the Terminating Fund's securityholders.
(iv) Securities of the Continuing Fund received by the securityholders of the Terminating Fund will have an aggregate net asset value equal to the aggregate net asset value of the securities of the Terminating Fund which are being redeemed.
(v) As soon as reasonably practicable after the distribution of securities of the Continuing Fund by the Terminating Fund, the Terminating Fund will be wound-up.
9. The proposed Mergers of MIX SEAMARK Total Canadian Equity Class into MIX Canadian Large Cap Core Class and MIX Trimark Select Canadian Class into MIX Canadian Equity Value Class will be structured substantially as follows:
(i) The articles of incorporation of the Corporation will be amended to allow for the completion of the MIX Mergers as described in (ii) below.
(ii) The securities of each Terminating Fund will be exchanged for securities of the corresponding Continuing Fund based on their relative net asset values.
(iii) Securities of the Continuing Fund received by the securityholders of the Terminating Fund will have an aggregate net asset value equal to the aggregate net asset value of the securities of the Terminating Fund which are being exchanged.
(iv) The assets and liabilities attributed to each Terminating Fund will be reallocated to the corresponding Continuing Fund.
(v) As soon as reasonably practicable following the Merger, the articles of incorporation of the Corporation will be amended to delete the Terminating Funds.
10. The assets of each Terminating Fund are acceptable to the portfolio manager of the corresponding Continuing Fund and are, or will be, consistent with the investment objectives of the corresponding Continuing Fund.
11. The securities of the Continuing Fund received by a securityholder of the corresponding Terminating Fund will have the same fee structure as the securities of the Terminating Fund held by that securityholder or, in some cases, will benefit from a decrease in management fees.
12. Securityholders of the Terminating Funds will continue to have the right to redeem securities of the Terminating Funds at any time up to the close of business on the effective date of the Mergers.
13. Any automatic reinvestments of distributions, purchases under pre-authorized chequing plans and automatic withdrawal plans in effect prior to the Merger for the Terminating Fund will be re-established in the applicable Continuing Fund unless the investor advises the Manager otherwise.
14. The costs attributable to the Mergers (consisting primarily of legal, proxy solicitation, printing and mailing costs) will be borne by the Manager and will not be borne by the Terminating Funds or the Continuing Funds.
15. At special meetings of securityholders of each Terminating Fund to be held on May 16, 2007, securityholders of each Terminating Fund will be asked to approve the Mergers. In accordance with applicable corporations legislation, securityholders of MIX Canadian Large Cap Core Class and MIX Canadian Equity Value Class will also be asked at such special meetings to approve the Mergers involving these funds. A notice of meeting and a management information circular will be mailed to securityholders of the Terminating Funds and MIX Canadian Large Cap Core Class and MIX Canadian Equity Value Class and filed on SEDAR in accordance with applicable securities legislation.
16. Approval of the Mergers is required because each of the Mergers does not satisfy all of the criteria for pre-approved reorganizations and transfers set forth in section 5.6 of NI 81-102 because, in the case of each Merger, the Manager proposes to indicate to securityholders of the Terminating Fund the manner in which the annual and interim financial statements of the applicable Continuing Fund may be obtained rather than delivering such statements. In addition, the Merger of Elliott & Page Generation Wave Fund into Elliott & Page Canadian Equity Fund involves the merger of funds that do not, in the opinion of the Manager, have "substantially similar investment objectives".
17. The primary difference between the fundamental investment objectives of the Elliott & Page Generation Wave Fund and the Elliott & Page Canadian Equity Fund is that the Elliott & Page Canadian Equity Fund invests primarily in equity securities of large, established Canadian companies and Canadian securities that offer potential for capital growth rather than the limited number of Canadian securities which meet the Elliott & Page Generation Wave Fund's criteria of investing in companies that are expected to benefit from demographic shifts and improvements in technology. However, the Filers submit that the Merger will reduce duplication between the Funds, thereby increasing operational efficiency as costs of the Continuing Fund will be spread across a greater pool of assets, also allowing for greater diversification and ensuring that the Continuing Fund remains a viable, long-term, attractive investment vehicle for existing and potential investors.
18. The most recent annual and interim financial statements of the Continuing Funds will not be sent to securityholders of the corresponding Terminating Funds but, instead, the Manager will prominently disclose in the information circular sent to securitytholders of the Terminating Funds that they can obtain the most recent interim and annual financial statements of the Continuing Funds by accessing the Manulife Investments and SEDAR websites, by toll-free number, by fax or by e-mail.
19. The Filers submit that if a securityholder is interested in reading the financial statements of the applicable Continuing Fund, he or she would take the time to access them by one of the means available. There would be cost savings if the Manager did not have to include the financial statements in the proxy packages sent to securityholders of the Terminating Funds.
20. Except as noted above, as at the time of the Mergers, the Mergers will meet all of the other conditions necessary for mutual funds to complete a merger without regulatory approval as prescribed by section 5.6 of NI 81-102.
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 Mergers and the Future Mergers are approved provided that:
(a) the information circular sent to securityholders with respect to a Merger or Future Merger provides sufficient information about the applicable merger to permit securityholders to make an informed decision about that merger;
(b) the information circular sent to securityholders in connection with a Merger or a Future Merger prominently discloses that securityholders can obtain the most recent interim and annual financial statements of the applicable Continuing Fund by accessing the Manulife Investments and SEDAR websites, upon request and at no cost by calling toll-free, by fax or by e-mail;
(c) upon request by a securityholder for financial statements, the Manager will make best efforts to provide the securityholder with financial statements of the applicable continuing fund in a timely manner so that the securityholder can make an informed decision regarding a Merger or a Future Merger; and
(d) each Terminating Fund, Continuing Fund and any mutual fund involved in a Merger or a Future Merger has, or will have, an unqualified audit report in respect of its 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 NI 81-102.