National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval granted for change of manager of certain mutual funds -- approval of the fund's unitholders at special meeting of unitholders -- change of manager is not detrimental to unitholders or the public interest.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(a), 5.7, 19.1.
Citation: Titan Funds Incorporated, Re, 2010 ABASC 506
November 1, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
TITAN FUNDS INCORPORATED
IN THE MATTER OF
TITAN MONEY MARKET FUND,
TITAN BALANCED INCOME PORTFOLIO,
TITAN BALANCED PORTFOLIO,
TITAN BALANCED GROWTH PORTFOLIO AND
TITAN GROWTH PORTFOLIO
(each, a Fund and collectively, the Funds)
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer on behalf of itself, ECI Investments Ltd. (ECI), Investment Planning Counsel Inc. (IPC) and their respective affiliates and associates (collectively, the Applicants) in connection with a proposed transaction (the Proposed Transaction) pursuant to which 1832802 Ontario Inc. (the Purchaser), a subsidiary of IPC, will combine with Titan pursuant to a court-approved plan of arrangement to form a corporation that will also be known as "Titan Funds Incorporated" (Titan Amalco) for a decision (Decision) under the securities legislation of the Jurisdictions (the Legislation) for approval of a change of manager of the Funds from the Filer to Titan Amalco in accordance with Section 5.5(1)(a) of National Instrument 81-102 Mutual Funds (NI 81-102) (the Approval Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for the Application;
(b) the Filer has provided notice that Section 4.7 of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Northwest Territories, Yukon and Nunavut (the Passport Jurisdictions); and
(c) the Decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions, NI 81-102 and MI 11-102 have the same meanings in this Decision unless otherwise defined.
This Decision is based on the following facts represented by the Applicants:
1. The Filer, ECI, the Purchaser, IPC and Interborder Holdings Ltd. have entered into a transaction agreement dated September 10, 2010 concerning the Proposed Transaction (the Transaction Agreement). The Proposed Transaction will be implemented as a plan of arrangement pursuant to the Business Corporations Act (Ontario) (the OBCA) and will therefore be subject to court and Filer shareholder approval. In addition to such approvals, given the structure of the Proposed Transaction and the proposed changes to Titan Amalco described below, completion of the Proposed Transaction will be considered to result in a change of the manager of the Funds rather than a change in control for purposes of NI 81-102. Accordingly, the change of manager for each Fund is also subject to the approval of at least a majority of the votes cast by unitholders of the relevant Fund at meetings that will be held on or about October 29, 2010. The notices of meeting and management information circular in respect of the special meetings have been mailed to the unitholders of the Funds, and copies thereof have been filed on SEDAR in accordance with applicable securities legislation.
2. The material steps that will be taken to complete the Proposed Transaction will comprise the following:
(a) all of the Class "A" voting shares in the capital of the Filer will be transferred by ECI to the Purchaser in exchange for cash consideration;
(b) all warrants held by the Filer shareholders will be cancelled for no consideration;
(c) the Class "B" non-voting shares in the capital of the Filer will be either transferred to the Purchaser for cash consideration or converted to redeemable preferred shares of Titan Amalco, which preferred shares will be redeemed for cash at the closing of the Proposed Transaction; and
(d) the Purchaser and Filer will amalgamate to form Titan Amalco and will continue as one corporation under the OBCA, and, in connection with the amalgamation, inter alia:
(i) Titan Amalco will possess all of the property, rights, privileges and franchises and will be subject to all liabilities, including civil, criminal and quasi criminal and all contracts and debts of each of the Filer and the Purchaser;
(ii) the name of Titan Amalco will be "Titan Funds Incorporated";
(iii) it is currently anticipated that the registered and head office of Titan Amalco will be located in the City of Mississauga in the Province of Ontario; and
(iv) the initial directors of Titan Amalco will be Murray D. Kilfoyle, Stephen J. Meehan, Christopher S. Reynolds, Murray J. Taylor and Gregory D. Tretiak.
3. Upon completion of the Proposed Transaction, Titan Amalco will be the successor corporation to the Filer, with certain changes in its capital structure, shareholder base, management and business operations. IPC Portfolio Services Inc., an indirect subsidiary of IPC, will own all of the issued and outstanding shares of Titan Amalco. In addition, it is anticipated that, in the months following the Proposed Transaction, Titan Amalco may combine its business with Counsel Portfolio Services Inc., an indirect subsidiary of IPC (Counsel), after which the combined entity would act as manager of the Funds.
Filer and the Funds
4. The Filer was incorporated under the OBCA on April 10, 2007 and is the current manager of the Funds. The Filer's head office is located at #2300, 605 -- 5th Avenue SW, Calgary, Alberta T2P 3H5. At present, all of the issued and outstanding Class "A" voting shares of Filer are owned by ECI. The Filer has applied to become registered as an investment fund manager in the Province of Alberta.
5. The Funds are reporting issuers in each of the provinces and territories of Canada other than Quebec, and units of the Funds are qualified for continuous distribution in each of the provinces and territories of Canada other than Quebec, Newfoundland, Prince Edward Island and Nova Scotia pursuant to a simplified prospectus dated June 10, 2010, as amended, and an annual information form dated June 10, 2010, as amended.
6. Neither the Filer nor any of the Funds is in default of the securities legislation of any province or territory of Canada.
IPC, Counsel and the Purchaser
7. IPC was incorporated under the Canada Business Corporations Act on February 10, 2004 for the purposes of acquiring IPC Financial Network Inc. and its subsidiaries, which included IPC Investment Corporation (IPCIC). Since its inception, the principal business of IPC has been that of an investment holding company which, through its subsidiaries, provides integrated wealth management services. Upon the completion of the Transaction, Titan Amalco will become an indirect subsidiary of IPC.
8. IPC is a majority-owned subsidiary of IGM Financial Inc. (IGM). IGM was incorporated under the Canada Business Corporations Act on August 3, 1978. IGM is a diversified financial services company and is one of Canada's largest mutual fund manufacturers, managing over $118.6 billion in assets on behalf of clients as of August 31, 2010. Its business is carried out through its operating subsidiaries.
9. Counsel is a direct subsidiary of IPC Portfolio Services Inc., which is an indirect subsidiary of IPC. Counsel was formed to support the partnership between financial advisors and their clients by providing comprehensive, objective portfolio solutions, and exclusively utilizing the strength and expertise of third party managers. Its assets under management were $2.28 billion as of August 31, 2010. Counsel is registered with the Ontario Securities Commission as a portfolio manager and has applied for registration as an investment fund manager in Ontario.
10. The Purchaser was incorporated under the OBCA on September 2, 2010 for the purposes of the Proposed Transaction and has carried on no other material business since it was incorporated.
11. None of IPC, Counsel or the Purchaser is in default of the securities legislation of any province or territory of Canada.
12. The name and municipality of residence of each individual who will be a director and executive officer of Titan Amalco, as well as each individual's proposed position within Titan Amalco, is as follows:
Name and Proposed Position Municipality of Residence Murray D. Kilfoyle Director Winnipeg, Manitoba Stephen J. Meehan Director, Chief Executive Mississauga, Officer and Ultimate Ontario Designated Person Christopher S. Director and President Reynolds Toronto, Ontario Murray J. Taylor Director and Chairman Winnipeg, Manitoba Gregory D. Tretiak Director Winnipeg, Manitoba Frank Gawlina Chief Financial Officer Burlington, Ontario Timothy J. Pryor Secretary Toronto, Ontario Richard Kenney Chief Compliance Officer Milton, Ontario
Change of Manager
13. As a result of the Proposed Transaction, there will be a change of manager of the Funds, thereby requiring the approval of the regulators in the Passport Jurisdictions pursuant to subsection 5.5(1)(a) of NI 81-102 and the approval of unitholders of each of the Funds. As such, unitholders will have the opportunity to consider and, if thought advisable, approve the change of manager.
14. There will be no changes to the fundamental investment objectives relating to each of the Funds as a result of the Proposed Transaction.
15. IPC and its affiliates represent an established, full-service, multi-product investment firm, with assets under management of over $118.6 billion as of August 31, 2010. IPC and its subsidiaries have a sophisticated and experienced management team, and unitholders will benefit from their expertise in fund management and distribution.
16. The Applicants do not foresee that the completion of the Proposed Transaction will give rise to any material conflicts of interest or have negative consequences on the ability of Titan Amalco to satisfy its obligations to the Funds.
17. The Applicants believe that the Proposed Transaction, including the resulting change of the manager of the Funds, will not be prejudicial to the interests of the Funds, their unitholders or the public in general, while allowing the Applicants to meet their bona fide commercial objectives.
Each of the Decision Makers is satisfied that the Decision meets the test set out in the Legislation for the Decision Maker to make the Decision.
The Decision of the Decision Makers under the Legislation is that the Approval Sought is granted.