AGF Investments

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund reorganization -- Approval required because mergers do not meet the criteria for pre-approval -- Funds have differing investment objectives and fees, and mergers conducted on a taxable basis -- Securityholders provided with timely and adequate disclosure regarding the mergers.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6(1)(a), 5.6(1)(b).

April 9, 2014

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Principal Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF AGF INVESTMENTS INC. (AGF) AND IN THE MATTER OF THE MERGING FUNDS (as hereinafter defined) AND IN THE MATTER OF THE CONTINUING FUNDS (as hereinafter defined)

DECISION

Background

The principal regulator in the Principal Jurisdiction has received an application (the Application) from AGF, the manager of each of the funds discussed below (AGF, together with the funds discussed below are hereinafter referred to as the Filers) for a decision under the securities legislation of the Principal Jurisdiction (the Legislation) for merger approvals (Merger Approval) pursuant to clause 5.5(1)(b) of National Instrument 81-102 -- Mutual Funds (NI 81-102) and an exemption pursuant to National Policy 11-203 -- Process for Exemptive relief Applications in Multiple Jurisdictions (NP 11-203).

The funds (each a Fund and collectively, the Funds) proposed to be merged (the Proposed Mergers) are set forth below:

MERGING FUND	CONTINUING FUND
<<Proposed Corporate Fund Merger>>
AGF High Income Class	AGF Diversified Income Class
<<Proposed Trust Fund Mergers>>
AGF Social Values Equity Fund	AGF Global Equity Fund
AGF Social Values Balanced Fund	AGF Traditional Income Fund
AGF Global Government Bond Fund	AGF Global Aggregate Bond Fund

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

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

(b) the Filers have provided notice that Section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, The Northwest Territories, Yukon and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

The following terms shall have the following meanings:

AGF AIF	refers to the AGF funds' annual information form dated April 19, 2013, as amended
AGF SP	refers to the AGF funds' simplified prospectus dated April 19, 2013, as amended
AWTAG	refers to AGF All World Tax Advantage Group Limited
Circular	refers to the management information circular described in this Application
Continuing Trust Funds	refers, collectively, to AGF Global Equity Fund, AGF Traditional Income Fund and AGF Global Aggregate Bond Fund
Corporate Funds	refers to AGF High Income Class and AGF Diversified Income Class
Corporate Fund Merger Effective Date	refers to May 23, 2014 -- the expected date for effecting the Proposed Corporate Fund Merger
IRC	refers to the independent review committee of a Fund or Funds
Merging Trust Funds	refers, collectively, to AGF Social Values Equity Fund, AGF Social Values Balanced Fund and AGF Global Aggregate Bond Fund
OBCA	refers to the Business Corporations Act (Ontario)
Tax Act	refers to the Income Tax Act (Canada)
Trust Fund Mergers Effective Date	refers to May 23, 2014 -- the expected date for effecting the Proposed Trust Fund Mergers
Trust Funds	refers, collectively, to the Merging Trust Funds and the Continuing Trust Funds

Representations

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

The Filers

1. The head office of each of the Filers is located in Toronto, Ontario. The Filers are not in default of securities legislation in any jurisdiction of Canada.

2. AWTAG is a multi-class mutual fund corporation incorporated under the laws of Ontario. AWTAG offers both AGF High Income Class and AGF Diversified Income Class.

3. Each of the Trust Funds is an open-end mutual fund trust established under the laws of Ontario by a declaration of trust pursuant to which AGF is the trustee.

4. AGF is the manager and trustee of each of the Trust Funds and the manager of each of the Corporate Funds.

5. Each of the Trust Funds and Corporate Funds is a reporting issuer under the applicable securities legislation of each jurisdiction in Canada.

6. Meetings of securityholders of all of the Merging Funds will be held on April 9, 2014. All other approvals required by the OBCA in connection with the Proposed Corporate Fund Merger will also be sought.

7. AGF will be responsible for all the costs associated with Mergers.

8. There will be no sales charges payable in connection with the acquisition by a Continuing Fund of the investment portfolio of the corresponding Merging Fund.

9. AGF is not entitled to seek the approval of the respective IRCs for the Proposed Mergers due to the fact that one or more conditions of section 5.6 of NI 81-102 will not be met as required by section 5.3(2)(c) of NI 81-102.

10. Pursuant to NI 81-107 -- Independent Review Committee for Investment Funds, the IRCs have reviewed the Proposed Mergers on behalf of the Merging Funds and the Continuing Funds and the process to be followed in connection with the Proposed Mergers, and have advised AGF that in the IRCs' opinion, having reviewed each of the Proposed Mergers as a potential conflict of interest, following the process proposed, each of the Proposed Mergers achieves a fair and reasonable result for each of the Merging Funds and the Continuing Funds.

11. The relevant notices of the meetings and Circular have been mailed to securityholders of the relevant Funds and filed on SEDAR in accordance with applicable securities legislation.

12. The Circular describes all relevant facts concerning the Proposed Mergers, including information regarding fees, expenses, investment objectives, investment strategies, income tax implications of the mergers, as well as the IRCs recommendation of the Proposed Mergers. The Circular also includes disclosure where securityholders can obtain the most recent continuous disclosure documents of the Merging Funds and the Continuing Funds.

The Proposed Corporate Fund Merger

13. AGF proposes that AGF High Income Class be merged into AGF Diversified Income Class.

14. The Filers currently propose to effect the Proposed Corporate Fund Merger on or about May 23, 2014 (the Corporate Fund Merger Effective Date).

15. AGF has determined that the Proposed Corporate Fund Merger will not be a material change to AGF Diversified Income Class due to the small size of AGF High Income Class relative to AGF Diversified Income Class.

16. Shareholders of AGF Diversified Income Class will be permitted to dissent from the Proposed Corporate Fund Merger pursuant to the provisions of the OBCA.

17. Securityholders of AGF High Income Class will continue to have the right to redeem securities of AGF High Income Class at any time up to the close of business immediately before the Corporate Fund Merger Effective Date.

The Proposed Trust Fund Mergers

18. AGF is proposing that there be mergers of the Merging Trust Funds with the relevant Continuing Trust Funds.

19. The Filers currently propose to effect the Proposed Trust Fund Mergers of the Merging Trust Funds and Continuing Trust Funds on or about May 23, 2014 (the Trust Fund Mergers Effective Date).

20. AGF has determined that the Proposed Trust Fund Mergers will not be a material change to each of the Continuing Trust Funds due to the small size of the Merging Trust Funds relative to the applicable Continuing Trust Funds.

21. Securityholders of the Merging Trust Funds will continue to have the right to redeem securities of the Merging Trust Funds at any time up to the close of business immediately before the Trust Fund Mergers Effective Date.

Reasons for Merger Approval

22. The Filers require Merger Approval in connection with one or more Proposed Mergers and cannot rely on section 5.6(1) of NI 81-102 for the following reasons:

(a) the investment objectives of some of the Merging Funds with its corresponding Continuing Fund are not substantially similar;

(b) the merger of AGF Social Values Equity Fund into AGF Global Equity Fund will not be done on a tax deferred basis;

(c) certain of the Merging Funds do not have the same fees as the relevant Continuing Funds; and

(d) the investment objectives and implementation of AGF High Income Class are not substantially similar with those of AGF Diversified Income Class.

23. Although the investment objectives of some Merging Funds may not be substantially similar to the relevant Continuing Funds, they are nevertheless complementary.

24. The merger of AGF Social Values Equity Fund into AGF Global Equity Fund would cause AGF Global Equity Fund to lose its material loss carry forwards if done on a tax deferred basis.

25. To the extent that the fees of certain Merging Funds are lower than those of the Continuing Funds, former holders of the Merging Funds will receive management fee distributions or rebates such that there will not be an increase in management fees borne by such holders.

26. AGF believes that each Proposed Merger satisfies all of the criteria for pre-approved reorganizations and transfers set forth in section 5.6(1) of NI 81-102, except as follows:

PROPOSED MERGER	REASONS FOR NON-COMPLIANCE WITH NI 81-102
AGF High Income Class merging into AGF Diversified Income Class	•	Different investment objectives and implementation of investment objectives
	•	Different fees
AGF Social Values Equity Fund merging into AGF Global Equity Fund	•	Different investment objectives
	•	Not tax deferred merger
AGF Social Values Balanced Fund merging into AGF Traditional Income Fund	•	Different investment objectives
AGF Global Government Bond Fund merging into AGF Global Aggregate Bond Fund	•	Different investment objectives
	•	Different fees

27. AGF believes that the Mergers will be beneficial to securityholders of each Fund for the following reasons:

(a) it is expected that each Proposed Merger will reduce duplication and create operational efficiencies;

(b) following the Proposed Mergers, each Continuing Fund will have more assets, thereby allowing for increased portfolio diversification opportunities; and

(c) each Continuing Fund will benefit from its larger profile in the marketplace.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Merger Approval is granted.

Raymond Chan

Manager, Investment Funds

Ontario Securities Commission