Securities Law & Instruments


Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – relief granted to exchange-traded series of conventional mutual funds for continuous distribution of securities – relief to permit funds’ prospectus to include a modified statement of investor rights – relief to permit funds’ prospectus to not include an underwriter’s certificate – relief from take-over bid requirements for normal course purchases of securities on the TSX – prospectus form and underwriting certificate relief granted subject to manager filing a prescribed summary document for each fund on SEDAR and other terms and conditions set out in decision document and subject to sunset clause tied to the implementation of rule amendments to create new ETF Facts document to replace summary document – relief granted to facilitate the offering of exchange-traded series and conventional mutual fund series within same fund structure – relief granted from the requirement in NI 41-101 to prepare and file a long form prospectus for exchange-traded series provided that a simplified prospectus is prepared and filed in accordance with NI 81-101 – exchange-traded series and mutual fund series referable to same portfolio and have substantially identical disclosure – relief permitting all series of funds to be disclosed in same prospectus – disclosure required by NI 41-101 for exchange-traded series and not contemplated by NI 81-101 will be disclosed in prospectus under relevant headings.

Applicable Legislative Provisions

Securities Act (Ontario), R.S.O. 1990, c. S.5, as am., ss. 59(1), 147.
National Instrument 41-101 General Prospectus Requirements, s. 19.1.
Form 41-101F2 Information Required in an Investment Fund Prospectus, Item 36.2.
National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.

August 4, 2017

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
PIMCO CANADA CORP.
(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of PIMCO Monthly Income Fund (Canada) and PIMCO Investment Grade Credit Fund (Canada) (collectively, the Proposed ETF Funds), each Proposed ETF Fund being an exchange traded series of a mutual fund, and such other exchange traded series mutual funds as are managed or may be managed by the Filer now or in the future and that are structured in the same manner as the Proposed ETF Funds (the Other Funds and together with the Proposed ETF Funds, the Funds and each individually, a Fund) for a decision under the securities legislation of the Jurisdiction (the Legislation) that:

(a)           exempts the Filer and each Fund from the requirement to prepare and file a long form prospectus for the ETF Securities (as defined below) in the form prescribed by Form 41-101F2 Information Required in an Investment Fund Prospectus (Form 41-101F2), subject to the terms of this decision and provided that the Filer files a prospectus for the ETF Securities in accordance with the provisions of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), other than the requirements pertaining to the filing of a fund facts document (the ETF Prospectus Form Requirement);

(b)           exempts the Filer and each Fund from the requirement to include a certificate of an underwriter in a Fund’s prospectus (the Underwriter’s Certificate Requirement);

(c)           exempts the Filer and each Fund from the requirement to include in a Fund’s prospectus the statement respecting purchasers’ statutory rights of withdrawal and remedies of rescission or damages in substantially the form prescribed in item 11 of Part A of Form 81-101F1 Contents of Simplified Prospectus (Form 81-101F1) or item 36.2 of Form 41-101F2 (the Prospectus Form Requirement); and

(d)           exempts a person or company purchasing ETF Securities (as defined below) in the normal course through the facilities of the TSX or another Marketplace (as defined below) from the Take-over Bid Requirements (as defined below).

(collectively, the Exemption Sought).

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

(a)           the Ontario Securities Commission is the principal regulator for this application; and

(b)           the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102, and National Instrument 81-102 Investment Funds (NI 81-102) have the same meaning if used in this decision, unless otherwise defined.

Affiliate Dealer means a registered dealer that is an affiliate of an Authorized Dealer or Designated Broker and that participates in the re-sale of Creation Units (as defined below) from time to time.

Authorized Dealer means a registered dealer that has entered, or intends to enter, into an agreement with the manager of a Fund authorizing the dealer to subscribe for, purchase and redeem Creation Units from one or more Funds on a continuous basis from time to time.

Basket of Securities means, in relation to the ETF Securities of a Fund, a group of securities or assets representing the constituents of the Fund.

Designated Broker means a registered dealer that has entered, or intends to enter, into an agreement with the Filer or an affiliate of the Filer on behalf of a Fund to perform certain duties in relation to the ETF Securities of the Fund, including the posting of a liquid two-way market for the trading of the Fund’s ETF Securities on the TSX or another Marketplace.

ETF Facts means a prescribed summary disclosure document required pursuant to amendments to the Legislation effective after the date of this decision document, in respect of one or more classes or series of ETF Securities being distributed under a prospectus.

ETF Securities means securities of an exchange-traded series of a Fund that are listed or will be listed on the TSX or another Marketplace and that will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.

Form 81-101F2 means Form 81-101F2 Contents of Annual Information Form.

Marketplace means a “marketplace” as defined in National Instrument 21-101 Marketplace Operations that is located in Canada.

Mutual Fund Securities means securities of a non-exchange-traded series of a Fund that are or will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.

Other Dealer means a registered dealer that acts as authorized dealer or designated broker to exchange-traded funds that are not managed by the Filer and that has received relief under a Prospectus Delivery Decision.

Prescribed Number of ETF Securities means, in relation to a Fund, the number of ETF Securities of the Fund determined by the Filer from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.

Prospectus Delivery Decision means a decision granting relief from the Prospectus Delivery Requirement to an Affiliate Dealer, Authorized Dealer, Designated Broker or Other Dealer dated August 24, 2015 and any subsequent decision granted to an Affiliate Dealer, Authorized Dealer, Designated Broker or Other Dealer that grants similar relief.

Prospectus Delivery Requirement means the requirement that a dealer, not acting as agent of the purchaser, who receives an order or subscription for a security offered in a distribution to which the prospectus requirement of the Legislation applies, send or deliver to the purchaser or its agent, unless the dealer has previously done so, the latest prospectus and any amendment either before entering into an agreement of purchase and sale resulting from the order or subscription, or not later than midnight on the second business day after entering into that agreement.

Securityholders means beneficial or registered holders of ETF Securities or Mutual Fund Securities of a Fund, as applicable.

Summary Document means a document, in respect of one or more classes or series of ETF Securities being distributed under a prospectus, prepared in accordance with the requirements set out by securities regulators as set out in Appendix A to the applicable draft decision document or the requirements set out by securities regulators in any rule or instrument that supersedes such Appendix A.

Take-over Bid Requirements means the requirements of NI 62-104 relating to take-over bids, including the requirement to file a report of a take-over bid and to pay the accompanying fee, in each Jurisdiction.

TSX means the Toronto Stock Exchange.

Representations

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

1.             The Filer is a corporation incorporated under the laws of Nova Scotia.

2.             The head office of the Filer is located at Commerce Court West, 199 Bay Street, Suite 2050, Toronto, Ontario M5L 1G2.

3.             The Filer is registered as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador, a portfolio manager and an exempt market dealer in each of the provinces of Canada, a commodity trading manager in Ontario and an adviser in Manitoba.

4.             The Filer is, or will be, the investment fund manager of each Fund, and the Filer or an affiliate of the Filer is, or will be, the portfolio manager of each Fund.

5.             The Filer is not in default of securities legislation in any of the Jurisdictions.

6.             Each Proposed ETF Fund is established under the laws of Ontario as an investment fund that is an open-ended mutual fund trust. The Funds will be either trusts or corporations or classes thereof governed by the laws of the Jurisdiction. Each Fund is, or will be, a reporting issuer in the Jurisdictions in which its securities are distributed. Each Fund offers, or will offer, ETF Securities and Mutual Fund Securities.

7.             Subject to any exemptions therefrom that have been, or may be, granted by the applicable securities regulatory authorities, each Fund is, or will be, subject to NI 81-102 and Securityholders will have the right to vote at a meeting of Securityholders in respect of matters prescribed by NI 81-102.

8.             The Proposed ETF Funds currently offer Series A, Series A (US$), Series F, Series F(US$), Series I, Series I(US$), Series M, Series M(US$), Series O and Series O(US$) units and PIMCO Monthly Income Fund (Canada) also currently offers Series H units. These Mutual Fund Securities are currently distributed under a simplified prospectus dated July 28, 2016.

9.             On or about June 28, 2017, a preliminary and pro forma prospectus in respect of the Mutual Fund Securities and ETF Securities of the Proposed ETF Funds will be filed with the securities regulatory authorities in each of the Jurisdictions.

10.          The Filer will apply to list any ETF Securities of the Funds on the TSX or another Marketplace. The Filer will not file a final prospectus for any of the Funds in respect of the ETF Securities until the TSX or other applicable Marketplace has conditionally approved the listing of the ETF Securities.

11.          Mutual Fund Securities may be subscribed for or purchased directly from a Fund through qualified financial advisors or brokers.

12.          ETF Securities will be distributed on a continuous basis in one or more of the Jurisdictions under a prospectus. ETF Securities may generally only be subscribed for or purchased directly from the Funds (Creation Units) by Authorized Dealers or Designated Brokers. Generally, subscriptions or purchases may only be placed for a Prescribed Number of ETF Securities (or a multiple thereof) on any day when there is a trading session on the TSX or other Marketplace. Authorized Dealers or Designated Brokers subscribe for Creation Units for the purpose of facilitating investor purchases of ETF Securities on the TSX or another Marketplace.

13.          In addition to subscribing for and re-selling Creation Units, Authorized Dealers, Designated Brokers and Affiliate Dealers will also generally be engaged in purchasing and selling ETF Securities of the same class or series as the Creation Units in the secondary market. Other Dealers may also be engaged in purchasing and selling ETF Securities of the same class or series as the Creation Units in the secondary market despite not being an Authorized Dealer, Designated Broker or Affiliate Dealer.

14.          Each Designated Broker or Authorized Dealer that subscribes for Creation Units must deliver, in respect of each Prescribed Number of ETF Securities to be issued, a Basket of Securities and/or cash in an amount sufficient so that the value of the Basket of Securities and/or cash delivered is equal to the net asset value of the ETF Securities subscribed for next determined following the receipt of the subscription order. In the discretion of the Filer, the Funds may also accept subscriptions for Creation Units in cash only, in securities other than Baskets of Securities and/or in a combination of cash and securities other than Baskets of Securities, in an amount equal to the net asset value of the ETF Securities subscribed for next determined following the receipt of the subscription order.

15.          The Designated Brokers and Authorized Dealers will not receive any fees or commissions in connection with the issuance of Creation Units to them. On the issuance of Creation Units, the Filer or the Fund may, in the Filer’s discretion, charge a fee to a Designated Broker or an Authorized Dealer to offset the expenses incurred in issuing the Creation Units.

16.          Each Fund will appoint a Designated Broker to perform certain other functions, which include standing in the market with a bid and ask price for ETF Securities for the purpose of maintaining liquidity for the ETF Securities.

17.          Except for Authorized Dealer and Designated Broker subscriptions for Creation Units, as described above, and other distributions that are exempt from the Prospectus Delivery Requirement under the Legislation, ETF Securities generally will not be able to be purchased directly from a Fund. Investors are generally expected to purchase and sell ETF Securities, directly or indirectly, through dealers executing trades through the facilities of the TSX or another Marketplace. ETF Securities may also be issued directly to Securityholders upon a reinvestment of distributions of income or capital gains.

18.          Securityholders that are not Designated Brokers or Authorized Dealers that wish to dispose of their ETF Securities may generally do so by selling their ETF Securities on the TSX or other Marketplace, through a registered dealer, subject only to customary brokerage commissions. A Securityholder that holds a Prescribed Number of ETF Securities or multiple thereof may exchange such ETF Securities for Baskets of Securities and/or cash in the discretion of the Filer. Securityholders may also redeem ETF Securities for cash at a redemption price equal to 95% of the closing price of the ETF Securities on the TSX or other Marketplace on the date of redemption, subject to a maximum redemption price of the applicable net asset value per ETF Security.

ETF Prospectus Form Requirement

19.          The Filer believes it is more efficient and expedient to include all of the series of each Fund in one prospectus form instead of two different prospectus forms and that this presentation will assist in providing full, true and plain disclosure of all material facts relating to the securities of the Funds by permitting disclosure relating to all series of securities to be included in one prospectus.

20.          The Filer will ensure that any additional disclosure included in the simplified prospectus and annual information form relating to the ETF Securities will not interfere with an investor’s ability to differentiate between the Mutual Fund Securities and the ETF Securities and their respective attributes.

21.          The Funds will comply with the provisions of NI 81-101 when filing any amendment or prospectus.

Underwriter’s Certificate Requirement

22.          Authorized Dealers and Designated Brokers will not provide the same services in connection with a distribution of Creation Units as would typically be provided by an underwriter in a conventional underwriting.

23.          The Filer will generally conduct its own marketing, advertising and promotion of the Funds to the extent permitted by its registrations.

24.          Authorized Dealers and Designated Brokers will not be involved in the preparation of a Fund’s prospectus, will not perform any review or any independent due diligence to the content of a Fund’s prospectus, and will not incur any marketing costs or receive any underwriting fees or commissions from the Funds or the Filer in connection with the distribution of ETF Securities. The Authorized Dealers and Designated Brokers generally seek to profit from their ability to create and redeem ETF Securities by engaging in arbitrage trading to capture spreads between the trading prices of ETF Securities and their underlying securities and by making markets for their clients to facilitate client trading in ETF Securities.

Prospectus Form Requirement

25.          Securities regulatory authorities have advised that they take the view that the first re-sale of a Creation Unit on the TSX or another Marketplace will generally constitute a distribution of Creation Units under the Legislation and that the Authorized Dealers, Designated Brokers and Affiliate Dealers are subject to the Prospectus Delivery Requirement in connection with such re-sales. Re-sales of ETF Securities in the secondary market that are not Creation Units would not ordinarily constitute a distribution of such ETF Securities.

26.          According to Authorized Dealers and Designated Brokers, Creation Units will generally be commingled with other ETF Securities purchased by the Authorized Dealers, Designated Brokers and Affiliate Dealers in the secondary market. As such, it is not practicable for the Authorized Dealers, Designated Brokers or Affiliate Dealers to determine whether a particular re-sale of ETF Securities involves Creation Units or ETF Securities purchased in the secondary market.

27.          Under the applicable Prospectus Delivery Decision, Authorized Dealers, Designated Brokers and Affiliate Dealers are exempt from the Prospectus Delivery Requirement in connection with the re-sale of Creation Units to investors on the TSX or another Marketplace. Under a Prospectus Delivery Decision, Other Dealers are also exempt from the Prospectus Delivery Requirement in connection with the re-sale of creation units of other exchange-traded funds that are either not managed by the Filer or that are managed by the Filer but are not structured as a separate series of a mutual fund.

28.          Each Prospectus Delivery Decision includes a condition that the Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer undertakes that it will, unless it has previously done so, send or deliver to each purchaser of an ETF Security who is a customer of the Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer and to whom a trade confirmation is required under the Legislation to be sent or delivered by the Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer in connection with the purchase, the latest Summary Document filed in respect of the ETF Security not later than midnight on the second day, exclusive of Saturdays, Sundays and holidays, after the purchase of the ETF Security.

29.          The Filer will prepare and file with the applicable Jurisdictions on the System for Electronic Document Analysis and Retrieval (SEDAR) a Summary Document for each class or series of ETF Securities and will make available to the applicable Authorized Dealers, Designated Brokers, Affiliate Dealers and Other Dealers the requisite number of copies of the Summary Document for the purpose of facilitating their compliance with the Prospectus Delivery Decision within the timeframe necessary to allow Authorized Dealers, Designated Brokers, Affiliate Dealers and Other Dealers to effect delivery of the Summary Document as contemplated in the Prospectus Delivery Decision.

30.          The Exemption Sought from the Prospectus Form Requirement is required to reflect the relief provided in the Prospectus Delivery Decision. Accordingly, the Filer will include language in each Fund’s prospectus explaining the impact on a purchaser’s statutory rights as a result of the Prospectus Delivery Decision in replacement of the language prescribed by the Prospectus Form Requirement, in addition to the disclosure required by item 11 of Part A of Form 81-101F1, subject to any exemptions granted by the applicable securities regulatory authorities.

Take-over Bid Requirements

31.          As equity securities that will trade on the TSX or another Marketplace, it is possible for a person or company to acquire such number of ETF Securities so as to trigger the application of the Take-over Bid Requirements. However,

a.             it will not be possible for one or more Securityholders to exercise control or direction over a Fund as the constating documents of each Fund provide that there can be no changes made to such Fund which do not have the support of the Filer;

b.             it will be difficult for the purchasers of ETF Securities or a Fund to monitor compliance with the Take-over Bid Requirements because the number of outstanding ETF Securities will always be in flux as a result of the ongoing issuance and redemption of ETF Securities by each Fund; and

c.             the way in which ETF Securities will be priced deters anyone from either seeking to acquire control, or offering to pay a control premium for outstanding ETF Securities because pricing for each ETF Security will generally reflect the net asset value of the ETF Securities.

32.          The application of the Take-over Bid Requirements to the Funds would have an adverse impact on the liquidity of the ETF Securities because they could cause the Designated Brokers and other large Securityholders to cease trading ETF Securities once the Securityholder has reached the prescribed threshold at which the Take-over Bid Requirements would apply. This, in turn, could serve to provide conventional mutual funds with a competitive advantage over the Funds.

Generally

33.          Rule amendments with an effective date of September 1, 2017 will require the Filer to file an ETF Facts, in respect of each class or series of ETF Securities of a Fund in connection with the filing of a prospectus. Upon the expiry of the transition period, the requirement for the Filer to file an ETF Facts will supersede the requirement for the Filer to file a Summary Document under this decision. Since the introduction of the ETF Facts is subject to a transition period, there may be a period of time where some Funds have an ETF Facts while other Funds have a Summary Document. If the Filer files an ETF Facts with respect to a class or series of ETF Securities, the Filer will use such ETF Facts instead of a Summary Document to satisfy its obligations under this decision with respect to any purchase of such class or series of ETF Securities that occurs after the filing of such ETF Facts.

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.

1.             The decision of the principal regulator is that the exemption sought from the ETF Prospectus Form Requirement is granted, provided that the Filer will be in compliance with the following conditions:

(a)           the Filer files a simplified prospectus and annual information form in respect of the ETF Securities in accordance with the requirements of NI 81-101, NI 81-101F1 and Form 81-101F2, other than the requirements pertaining to the filing of a fund facts document;

(b)           the Filer includes disclosure required pursuant to Form 41-101F2 (that is not contemplated by Form 81-101F1 or Form 81-101F2) in respect of the ETF Securities, in each Fund’s simplified prospectus and/or annual information form, as applicable; and

(c)           the Filer includes disclosure regarding this decision under the heading “Additional Information” and “Exemptions and Approvals” in each Fund’s simplified prospectus and annual information form, respectively.

2.             The decision of the principal regulator is that the exemption sought in respect of the Underwriter’s Certificate Requirement and the Prospectus Form Requirement are granted, provided that the Filer will be in compliance with the following conditions:

(a)           the Filer files with the applicable Jurisdictions on SEDAR the Summary Document for each class or series of ETF Securities concurrently with the filing of the final prospectus for that Fund;

(b)           the Filer displays on its website in a manner that would be considered prominent to a reasonable investor the Summary Document for each class or series of ETF Securities for each Fund;

(c)           the Filer amends the Summary Document at the same time it files any amendments to the Fund’s prospectus that affect the disclosure in the Summary Document and files the amended Summary Document with the applicable Jurisdictions on SEDAR and makes it available on its website in a manner that would be considered prominent to a reasonable investor;

(d)           the Filer provides or makes available to each Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer, the number of copies of the Summary Document of each ETF Security that the Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer reasonably requests in support of compliance with its respective Prospectus Delivery Decision;

(e)           each Fund's prospectus, as the same may be amended from time to time, will:

(i)            incorporate the relevant Summary Document by reference;

(ii)           contain the disclosure referred to in paragraph 30 above; and

(iii)          disclose both the relief granted pursuant to the Exemption Sought and the Prospectus Delivery Decision under Item 23 of Form 81-101F2 or Item 34.1 of Form 41-101F2 Information Required in an Investment Fund Prospectus, as applicable;

(f)            the Filer obtains an executed acknowledgement from each Authorized Dealer, Designated Broker and Affiliate Dealer, and uses its best efforts to obtain an acknowledgment from each Other Dealer:

(i)            indicating each dealer’s election, in connection with the re-sale of Creation Units on the TSX or another Marketplace, to send or deliver the Summary Document in accordance with a Prospectus Delivery Decision or, alternatively, to comply with the Prospectus Delivery Requirement; and

(ii)           if the Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer agrees to deliver the Summary Document in accordance with a Prospectus Delivery Decision:

(A)           an undertaking that the Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer will attach or bind one Fund’s Summary Document with another Fund’s Summary Document only if the documents are being sent or delivered under the Prospectus Delivery Decision at the same time to an investor purchasing ETF Securities of each such Fund; and

(B)           confirming that the Authorized Dealer, Designated Broker, Affiliate Dealer or Other Dealer has in place written policies and procedures to ensure that it is in compliance with the conditions of the Prospectus Delivery Decision;

(g)           the Filer will keep records of which Authorized Dealers, Designated Brokers, Affiliate Dealers and Other Dealers have provided it with an acknowledgement under a Prospectus Delivery Decision, and which intend to rely on and comply with the Prospectus Delivery Decision or intend to comply with the Prospectus Delivery Requirement;

(h)           the Filer files with its principal regulator, to the attention of the Director, Investment Funds and Structured Products Branch, on or before January 31st in each calendar year, a certificate signed by its ultimate designated person certifying that, to the best of the knowledge of such person, after making due inquiry, the Filer has complied with the terms and conditions of this decision during the previous calendar year;

(i)            if the Filer files an ETF Facts instead of a Summary Document with respect to a class or series of ETF Securities, the latest ETF Facts filed in respect of such class or series of ETF Securities must be substituted for a Summary Document in order to satisfy the foregoing conditions with respect to any purchase of such class or series of ETF Securities that occurs after the date of filing such ETF Facts;

(j)            conditions (a), (b), (c) and (e)(i) above do not apply to the Exemption Sought with respect to a class or series of an ETF Security if the Filer files an ETF Facts for such class or series of the ETF Security; and

(k)           conditions (d), (e)(ii), (e)(iii), (f), (g) and (h) above do not apply to the Exemption Sought after any new legislation or rule dealing with the Prospectus Delivery Decision takes effect and any applicable transition period has expired.

3.             The Exemption Sought from the Prospectus Form Requirement, as it relates to one or more of the Jurisdictions, will terminate on the latest of: (i) the coming into force of any legislation or rule dealing with the Exemption Sought from the Prospectus Form Requirement, or (ii) the end date of any applicable transition period for any legislation or rule dealing with the Exemption Sought from the Prospectus Form Requirement.

4.             The decision of the principal regulator is that the Exemption Sought from the Take-over Bid Requirements is granted.

As to the Exemption Sought from the Underwriter’s Certificate Requirement:

“Deborah Leckman”
Commissioner
Ontario Securities Commission

“Mark Sandler”
Commissioner
Ontario Securities Commission


As to the Exemption Sought from the ETF Prospectus Form Requirement, the Prospectus Form Requirement and the Take-over Bid Requirements:

“Darren McKall”
Manager, Investment Funds & Structured Products Branch
Ontario Securities Commission

 


APPENDIX A

CONTENTS OF SUMMARY DOCUMENT

General Instructions

1.             Items 1 to 10 represent the minimum disclosure required in a Summary Document for a fund. The inclusion of additional information is not precluded so long as the Summary Document does not exceed a total of four pages in length (two pages double-sided).

2.             Terms defined in National Instrument 81-102 Investment Funds, National Instrument 81-105 Mutual Fund Sales Practices or National Instrument 81-106 Investment Fund Continuous Disclosure and used in this Summary Document have the meanings that they have in those national instruments.

3.             Information in the Summary Document must be clear and concise and presented in plain language.

4.             The format and presentation of information in the Summary Document is not prescribed but the information must be presented in a manner that assists in readability and comprehension.

5.             The order of the Items outlined below is not prescribed, except for Items 1 and 2, which must be presented as the first 2 items in the Summary Document.

6.             Each reference to a fund in this Appendix A refers to an ETF as defined in the decision above.

Item 1 – Introduction

Include at the top of the first page a heading consisting of:

(a)           the title “Summary Document”;

(b)           the name of the manager of the fund;

(c)           the name of the fund to which the Summary Document pertains; and

(d)           the date of the document.

Item 2 – Cautionary Language

Include a statement in italics in substantially the following form:

“The following is a summary of the principal features of this fund. You can find more detailed information about the fund in the prospectus. The prospectus is available on [insert name of the manager of the fund] website at [insert manager of the fund website], or by contacting [insert name of the manager of the fund] at [insert manager of the fund’s email address], or by calling [insert telephone number of the manager of the fund].”

Item 3 – Fund Details

Include the following disclosure:

(a)           ticker symbol;

(b)           fund identification code(s);

(c)           index ticker (as applicable);

(d)           exchange;

(e)           currency;

(f)            inception date;

(g)           RSP eligibility;

(h)           DRIP eligibility;

(i)            expected frequency and timing of distributions, and if applicable, the targeted amount for distributions;

(j)            management expense ratio, if available; and

(k)           portfolio manager, when the fund is actively managed.

Item 4 – Investment Objectives

Include a description of the fundamental nature of the fund, or the fundamental features of the fund that distinguishes it from other funds.

INSTRUCTIONS:

Include a description of what the fund primarily invests in, or intends to primarily invest in, such as:

(a)           a description of the fund, including what the fund invests in, and if it is trying to replicate an index, the name of the index, and an overview of the nature of securities covered by the index or the purpose of the index; and

(b)           the key investment strategies of the fund.

Item 5 – Investments of the Fund

1.             Include a table disclosing:

(a)           the top 10 positions held by the fund; and

(b)           the percentage of net asset value of the fund represented by the top 10 positions.

2.             Include at least one, and up to two, charts or tables that illustrate the investment mix of the fund’s investment portfolio.

INSTRUCTIONS:

(a)           The information required under this Item is intended to give a snapshot of the composition of the fund’s investment portfolio. The information required to be disclosed under this Item must be as at a date within 60 days before the date of the Summary Document.

(b)           The information required under Item 5(2) must show a breakdown of the fund’s investment portfolio into appropriate subgroups and the percentage of the aggregate net asset value of the fund constituted by each subgroup. The names of the subgroups are not prescribed and can include security type, industry segment or geographic location. The fund should use the most appropriate categories given the nature of the fund. The choices made must be consistent with disclosure provided under “Summary of Investment Portfolio” in the fund’s MRFP.

(c)           For new funds where the information required to be disclosed under this Item is not available, provide a brief statement explaining why the required information is not available.

Item 6 – Risk

1.             Include a statement in italics in substantially the following form:

“All investments involve risk. When you invest in the fund the value of your investment can go down as well as up. For a description of the specific risks of this fund, see the fund’s prospectus.”

2.             If the cover page of the fund’s prospectus contains text box risk disclosure, also include a description of those risk factors in the Summary Document.

Item 7 – Fund Expenses

1.             Include an introduction using wording similar to the following:

“You don’t pay these expenses directly. They affect you because they reduce the fund’s returns.”


2.             Provide information about the expenses of the fund in the form of the following table:

 

Annual rate
(as a % of the fund’s value)

Management expense ratio (MER)
This is the total of the fund’s management fee and operating expenses.

________________

Trading expense ratio (TER)
These are the fund’s trading costs.

________________

Fund expenses
The amount included for fund expenses is the amount arrived at by adding the MER and the TER.

________________


3.             If the information in (2) is unavailable because the fund is new including wording similar to the following:

“The fund’s expenses are made up of the management fee, operating expenses and trading costs. The fund’s annual management fee is [l]% of the fund’s value. Because this fund is new, its operating expenses and trading costs are not yet available.”

INSTRUCTIONS:

Use a bold font or other formatting to indicate that fund expenses is the total of all ongoing expenses set out in the chart and is not a separate expense charged to the fund.

Item 8 – Trailing Commissions

1.             If the manager of the fund or another member of the fund’s organization pays trailing commissions, include a brief description of these commissions.

2.             The description of any trailing commission must include a statement in substantially the following words:

“The trailing commission is paid out of the management fee. The trailing commission is paid for as long as you own the fund.”

Item 9 – Other Fees

1.             Provide information about the amount of fees payable by an investor, other than those already described or payable by designated brokers and underwriters.

2.             Include a statement using wording similar to the following:

“You may pay brokerage fees to your dealer when you purchase and sell units of the fund.”

INSTRUCTIONS:

(a)           Examples include any redemption charges, sales charges or other fees, if any, associated with buying and selling securities of the fund.

(b)           Provide a brief description of each fee disclosing the amount to be paid as a percentage (or, if applicable, a fixed dollar amount) and state who charges the fee.

Item 10 – Statement of Rights

State in substantially the following words:

Under securities law in some provinces and territories, you have:

the right to cancel your purchase within 48 hours after you receive confirmation of the purchase, or

other rights and remedies if this document or the fund’s prospectus contains a misrepresentation. You must act within the time limit set by the securities law in your province or territory.

For more information, see the securities law of your province or territory or ask a lawyer.

Item 11 – Past Performance

If the fund includes past performance:

1.             Include an introduction using wording similar to the following:

This section tells you how the fund has performed over the past [insert the lesser of 10 years or the number of completed calendar years] years. Returns are after expenses have been deducted. These expenses reduce the fund’s returns.

It’s important to note that this doesn’t tell you how the fund will perform in the future as past performance may not be repeated. Also, your actual after-tax return will depend on your personal tax situation.

2.             Show the annual total return of the fund, in chronological order for the lesser of:

(a)           each of the 10 most recently completed calendar years; and

(b)           each of the completed calendar years in which the fund has been in existence and which the fund was a reporting issuer.

3.             Show the:

(a)           final value, of a hypothetical $1,000 investment in the fund as at the end of the period that ends within 60 days before the date of the Summary Document and consists of the lesser of:

(i)            10 years, or

(ii)           the time since inception of the fund,

and

(b)           the annual compounded rate of return that would equate the initial $1,000 investment to the final value.

INSTRUCTIONS:

In responding to the requirements of this Item, a fund must comply with the relevant sections of Part 15 of National Instrument 81-102 Investment Funds as if those sections applied to a Summary Document.

Item 12 – Benchmark Information

If the Summary Document includes benchmark information, ensure this information is consistent with the fund’s MRFP and presented in the same format as Item 11.