Mutual Reliance Review System for Exemptive Relief Applications -- Approval of mutual fund mergers - Approval required because terminating and continuing funds not having substantially similar fundamental investment objectives, certain mergers not being completed as a "qualifying exchange", and current simplified prospectus and financial statements of continuing funds not proposed to be sent to security holders of terminating funds - Approval of current mergers and future mergers granted provided a tailored simplified prospectus is sent and the information circular sent in connection with merger prominently discloses how security holders may obtain the most recent financial statements of the continuing funds.
Applicable Ontario Statutory Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6.
August 22, 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
NATIONAL INSTRUMENT 81-102 MUTUAL FUNDS
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
ALTAMIRA INVESTMENT SERVICES INC.
ALTAMIRA GLOBAL 20 FUND
ALTAMIRA GLOBAL FINANCIAL SERVICES FUND
ALTAMIRA E-BUSINESS FUND
ALTAMIRA BIOTECHNOLOGY FUND
ALTAMIRA PRECISION DOW 30 INDEX FUND
ALTAMIRA PRECISION EUROPEAN
RSP INDEX FUND
(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 Altamira and the Terminating Funds (collectively, the Filers) for a decision under the securities legislation of the Jurisdictions (the Legislation) for:
• approval under paragraph 5.5(1)(b) of NI 81-102 of the mergers (the Current Mergers) of the Terminating Funds into the applicable Continuing Funds (as defined below) as set out in paragraph 4 below;
• approval under paragraph 5.5(1)(b) of NI 81-102 of any merger, after the date of this decision, of mutual funds managed by Altamira or an affiliate that meet all of the criteria for pre-approval of mergers under section 5.6 of NI 81-102 except for the financial statement delivery requirement and the simplified prospectus delivery requirement of sub-paragraph 5.6(1)(f)(ii) of NI 81-102 (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. The following additional terms shall have the following meanings:
Continuing Funds means Altamira Global Value Fund, Altamira Science & Technology Fund, Altamira Health Sciences Fund, Altamira Precision US RSP Index Fund and Altamira Precision European Index Fund;
Current Simplified Prospectus means the simplified prospectus dated August 31, 2006, as amended by Amendment No. 1 dated May 15, 2007 and Amendment No. 2 dated June 29, 2007, that qualifies the Funds for sale;
Fund or Funds means, individually or collectively, the Terminating Funds and the Continuing Funds;
Tax Act means the Income Tax Act (Canada).
This decision is based on the following facts represented by the Filers:
1. Altamira is a corporation established under the laws of Canada. Altamira is an indirect wholly-owned subsidiary of National Bank of Canada, a public company listed on the Toronto Stock Exchange.
2. Altamira is the manager and trustee of each of the Funds. The head office of Altamira is located in Ontario.
3. Each of the Funds is an open-end mutual fund trust established under the laws of Ontario by a declaration of trust.
4. Altamira intends to reorganize the Funds as follows:
(a) Altamira Global 20 Fund will be merged into Altamira Global Value Fund;
(b) Altamira Global Financial Services Fund will be merged into Altamira Global Value Fund;
(c) Altamira e-business Fund will be merged into Altamira Science and Technology Fund;
(d) Altamira Biotechnology Fund will be merged into Altamira Health Sciences Fund;
(e) Altamira Precision Dow 30 Index Fund will be merged into Altamira Precision US RSP Index Fund; and
(f) Altamira Precision European RSP Index Fund will be merged into Altamira Precision European Index Fund.
5. Securities of the Funds are currently qualified for sale by the Current Simplified Prospectus and an annual information form dated August 31, 2006, as amended, which have been filed and accepted in all of the provinces and territories of Canada.
6. Each of the Funds is a reporting issuer under the Legislation of each Jurisdiction and is not on the list of defaulting reporting issuers maintained under the Legislation of the Jurisdictions.
7. Other than circumstances in which the securities regulatory authority of a Jurisdiction has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices established under the Legislation of the Jurisdictions.
8. The net asset value for the mutual fund units of each of the Funds is calculated on a daily basis on each day that the Toronto Stock Exchange is open for business.
9. No sales charges will be payable in connection with the acquisition by a Continuing Fund of the investment portfolio of an applicable Terminating Fund.
10. The portfolios and other assets of each Terminating Fund to be acquired by the applicable Continuing Fund arising from the Current Mergers will be acceptable, on or prior to the effective date of the Current Mergers, to the portfolio advisers of the applicable Continuing Fund and will be consistent with the investment objectives of the applicable Continuing Fund.
11. Unitholders of a Terminating Fund will continue to have the right to redeem units of the Terminating Fund for cash at any time up to the close of business on the business day immediately before the Current Mergers.
12. Amendments to the simplified prospectuses and annual information forms of the Terminating Funds and a material change report were filed via SEDAR on June 29, 2007 with respect to the Current Mergers.
13. A notice of meeting, a management information circular and a proxy in connection with meetings of unitholders (collectively, the Meeting Materials) as well as the Part A section and only the pages from the Part B section of the Current Simplified Prospectus that are directly related to the Continuing Fund that relate to that unitholder, will be mailed to unitholders of the Terminating Funds, commencing on or about August 10, 2007, and will be filed via SEDAR.
14. Unitholders of the Terminating Funds will be asked to approve the Current Mergers at meetings to be held on or about September 4, 2007.
15. Each Terminating Fund will merge into the applicable Continuing Fund on or about the close of business on September 7, 2007 and the Continuing Funds will continue as publicly offered open-end mutual funds governed by the laws of Ontario.
16. Each Terminating Fund will be wound up as soon as reasonably possible following the relevant Current Merger.
17. Altamira will pay for the costs of the Current Mergers. These costs consist mainly of brokerage charges associated with the merger-related trades that occur both before and after the date of the Current Mergers and legal, proxy solicitation, printing, mailing and regulatory fees.
18. Approval of the Current Mergers is required because each Current Merger does not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 in the following ways:
(a) contrary to section 5.6(1)(a)(ii) of NI 81-102, a reasonable person may not consider the fundamental investment objectives of the Continuing Funds to be substantially similar to the fundamental investment objectives of the relevant Terminating Fund.;
(b) contrary to section 5.6(1)(b) of NI 81-102, the mergers of (i) Altamira e-business Fund into Altamira Science and Technology Fund; (ii) Altamira Biotechnology Fund into Altamira Health Sciences Fund; and (iii) Altamira Precision Dow 30 Index Fund into Altamira Precision US RSP Index Fund, will not be completed as a "qualifying exchange" within the meaning of section 132.2 of the Tax Act or a tax-deferred transaction under subsection 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act; and
(c) contrary to section 5.6(1)(f)(ii) of NI 81-102, the Current Simplified Prospectus and most recent annual and interim financial statements for the Continuing Funds will not be sent to the unitholders of the Terminating Funds but, instead, Altamira will send to each unitholder of a Terminating Fund the following: (i) a management information circular fully describing the relevant merger, which circular will include a statement describing how unitholders can obtain the financial statements, management report of fund performance and annual information form for the relevant Continuing Fund; and (ii) the Part A section and only the pages from the Part B section of the Current Simplified Prospectus that are directly related to the Continuing Fund that relate to that unitholder.
19. The tax implications of the Current Mergers as well as the differences between the Terminating Funds and the Continuing Funds are described in the Meeting Materials so that the unitholders of the Terminating Funds may consider this information before voting on the Current Mergers.
20. Altamira believes that the Current Mergers will benefit unitholders of each Terminating Fund and Continuing Fund for the following reasons:
(a) unitholders of the applicable Terminating Fund and the Continuing Fund may enjoy increased economies of scale and may experience lower fund operating expenses (which are borne indirectly by unitholders) as part of a larger combined Continuing Fund;
(b) the Current Mergers will eliminate the administrative and regulatory costs of operating each Terminating Fund as a separate mutual fund;
(c) each Continuing Fund will have a portfolio of greater value, allowing for increased portfolio diversification opportunities; and
(d) each Continuing Fund, as a result of its greater size, will benefit from its larger profile in the marketplace.
In addition, unitholders of the applicable Terminating Fund will acquire units of the Continuing Fund that have a management fee that is equal to or lower than the management fee currently charged to units of the Terminating Fund.
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 Current Mergers and the Future Mergers (collectively, the Mergers) are approved, provided that:
(a) the information circular sent to securityholders in connection with a Merger provides sufficient information about the Merger to permit securityholders to make an informed decision about the Merger;
(b) the information circular sent to securityholders in connection with a Merger prominently discloses that securityholders can obtain the most recent interim and annual financial statements of the applicable continuing fund by accessing the SEDAR website at www.sedar.com, by accessing the Altamira website, by calling Altamira's toll-free telephone number or by faxing a request to Altamira;
(c) upon request by a securityholder for financial statements, Altamira 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;
(d) each applicable terminating fund and the applicable continuing fund with respect to a Merger have an unqualified audit report in respect of their last completed financial period; and
(e) the material sent to securityholders in respect of a Merger includes a tailored simplified prospectus consisting of:
(i) the current Part A section of the simplified prospectus of the applicable continuing fund, and
(ii) only the pages from the current Part B section of the simplified prospectus that are directly related to the continuing fund that relate to that securityholder.
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.