Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief from management report of fund performance disclosure requirements to permit a continuing fund to use certain disclosure of a terminating fund -- National Instrument 81-106 Investment Fund Continuous Disclosure.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 4.4 and 17.1.

Citation: Re Canoe Financial LP, 2019 ABASC 125

August 6, 2019

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (THE JURISDICTIONS) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF CANOE FINANCIAL LP (THE FILER) AND CANOE CANADIAN SMALL MID CAP FUND (THE TERMINATING FUND) CANOE CANADIAN SMALL MID CAP PORTFOLIO CLASS (THE CONTINUING FUND, AND TOGETHER WITH THE TERMINATING FUND, THE FUNDS)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each, a Decision Maker) has received an application from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdictions (the Legislation) granting an exemption from the following provisions of the Legislation to enable the Continuing Fund to include in its annual and interim management reports of fund performance (MRFPs) the performance data and information derived from the financial statements and other financial information (collectively, the Financial Data) of the Terminating Fund:

(a) section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the relief requested from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1) to permit the Continuing Fund to use the Financial Data of the Terminating Fund, as follows:

(i) Items 3.1(1), 3.1(7), 3.1(7.1) and 3.1(8) of Part B of Form 81-106F1 to permit the Continuing Fund to use the financial highlights of the Terminating Fund in its Form 81-106F1;

(ii) Items 4.1(1), 4.1(2), 4.2(1), 4.2(2), 4.3(1)(a) and 4.3(1)(b) of Part B of Form 81-106F1 to permit the Continuing Fund to use the past performance data of the Terminating Fund in its Form 81-106F1; and

(iii) Items 3(1) and 4 of Part C of Form 81-106F1 to permit the Continuing Fund to use the financial highlights and past performance data of the Terminating Fund in its Form 81-106F1

(collectively, the Exemption 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 this application;

(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 each of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Northwest Territories, Nunavut and Yukon; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

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.

Representations

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

The Filer and the Funds

1. The Filer is a limited partnership established under the laws of Alberta. The general partner of the Filer is Canoe Financial Corp., a corporation incorporated under the laws of Alberta. The Filer's head office is located in Calgary, Alberta.

2. The Filer is registered as an investment fund manager in Alberta, Ontario, Québec and Newfoundland and Labrador, a portfolio manager in Alberta, Ontario and Québec and an exempt market dealer in each jurisdiction of Canada. The Filer is also registered as a derivatives portfolio manager in Québec.

3. The Filer is the investment fund manager of the Terminating Fund and will be the investment fund manager of the Continuing Fund once it is created.

4. The Terminating Fund is an open-ended mutual fund trust governed by a master declaration of trust under the laws of Alberta. The Continuing Fund will form part of Canoe's portfolio class structure, and will consist of: (i) an investment in Canoe Canadian Small Mid Cap Class, being a share class of an open-ended mutual fund corporation called Canoe 'GO CANADA!' Fund Corp.; and (ii) units of Canoe Trust Fund.

5. Securities of the Terminating Fund are qualified for sale in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia and Yukon under an amended and restated simplified prospectus, annual information form and fund facts documents, each dated March 1, 2019, prepared in accordance with the requirements of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101).

6. The Terminating Fund is a reporting issuer under the applicable securities legislation of each jurisdiction of Canada, is subject to National Instrument 81-102 Investment Funds (NI 81-102) and has been a reporting issuer for more than 12 months.

7. The Filer has filed a preliminary simplified prospectus, annual information form and fund facts documents each dated June 20, 2019, with respect to the Continuing Fund. The Filer will not begin distributing securities of the Continuing Fund prior to the Merger (as defined below).

8. The Continuing Fund is expected to be a reporting issuer under the applicable securities legislation of each jurisdiction of Canada and is expected to be subject to NI 81-102.

9. Neither the Filer nor the Funds are in default of securities legislation in any jurisdiction in Canada.

10. The Terminating Fund follows, and the Continuing Fund will follow, the standard investment restrictions and practices established under NI 81-102, except pursuant to the terms of any exemption that has been previously obtained.

The Merger

11. The Filer proposes to merge the Terminating Fund into the Continuing Fund (the Merger) on or about August 12, 2019 and no later than December 31, 2019 (the Merger Date).

12. Information regarding net assets (as of May 28, 2019), series offered and series start dates for the Terminating Fund are as follows:

Net assets

Series currently offered by the Terminating Fund

Date first offered for sale

Equivalent series to be offered by the Continuing Fund

$225,977,932

Series A

April 30, 2009

Series A

Series D

November 22, 1985

Series D

Series F

August 26, 2011

Series F

Series FV{1}

September 22, 2014

Series FV{2}

Series OX

July 13, 2001

Series O

{1} Not available for purchase.

{2} This series will be created solely to facilitate the Merger and will not be available for purchase following the Merger.

13. The Terminating Fund will be terminated on or about the Merger Date and will be wound up as soon as reasonably possible following the Merger Date, and in any event, no later than 60 days following the Merger Date.

14. The Continuing Fund is being created for the purpose of implementing the Merger, and therefore:

(a) the securityholders of the Terminating Fund will have rights as securityholders of the Continuing Fund that are substantially similar in all material respects to the rights they had as securityholders of the Terminating Fund;

(b) the securityholders of the Terminating Fund will hold securities of the equivalent series of the Continuing Fund with the same aggregate net asset value as they held before as securityholders of the Terminating Fund;

(c) the Continuing Fund will have an investment objective and investment strategies that are identical to the investment objective and investment strategies of the Terminating Fund;

(d) the portfolio manager and sub-advisor of the Terminating Fund are the Filer and Fiera Capital Corporation (Fiera Capital), respectively, and the Filer and Fiera Capital will also be the portfolio manager and sub-advisor, respectively, of the Continuing Fund;

(e) the Continuing Fund will have valuation procedures that are identical to the valuation procedures of the Terminating Fund; and

(f) the management fees attached to each series of the Continuing Fund will be the same as the management fees for each corresponding series of the Terminating Fund. However, the Terminating Fund uses a floating expense model whereas the Continuing Fund will have a fixed administration fee plus certain fund costs that are chargeable to the Continuing Fund. Notwithstanding the difference in expense structures, the Filer believes that the management expense ratio (the MER) of the Continuing Fund will be similar to the most recent MER of the Terminating Fund.

15. As a result, notwithstanding the Merger, the Continuing Fund will be managed in a manner which is substantially similar in all material respects to the manner in which the Terminating Fund has been managed.

Exemption Sought

16. Subject to receipt of the Seed Capital Relief (as defined below), the Continuing Fund will not have any assets (other than a nominal amount to establish the Continuing Fund) or liabilities at the time of the Merger.

17. The assets of the Terminating Fund will be transferred to the Continuing Fund in connection with the implementation of the Merger.

18. As the Filer intends to cease distribution of units of the Terminating Fund at the close of business on the business day prior to the Merger Date, it does not intend to renew the Terminating Fund's simplified prospectus and annual information form after their lapse date.

19. The Continuing Fund will be a new fund. While the Continuing Fund will have the same assets and liabilities as the Terminating Fund, as a new fund, it will not have its own Financial Data as at the Merger Date.

20. The Financial Data of the Terminating Fund is significant information which can assist investors in determining whether to purchase securities of the Continuing Fund. In the absence of the Exemption Sought, investors will have no historical financial or performance information (such as past performance) on which to base such an investment decision.

21. The Filer proposes to:

(a) prepare annual MRFPs for the Continuing Fund commencing with the year ending December 31, 2019 and interim MRFPs for the Continuing Fund commencing with the period ending June 30, 2020 using the Terminating Fund's financial highlights and past performance; and

(b) prepare comparative annual financial statements for the Continuing Fund commencing with the year ending December 31, 2019 and interim financial statements for the Continuing Fund commencing with the period ending June 30, 2020 using the Terminating Fund's financial highlights and past performance.

22. The Filer is seeking to make the Merger as seamless as possible for investors of the Terminating Fund. Accordingly, the Filer submits that treating the Continuing Fund as fungible with the Terminating Fund for the purposes of the Financial Data would be beneficial to investors and that to do otherwise would cause unnecessary confusion among investors concerning the difference between the Terminating Fund and the Continuing Fund.

23. The Filer submits that investors will not be misled if the Financial Data of the Continuing Fund reflects the Financial Data of the Terminating Fund.

24. The Filer has filed a separate application for exemptive relief from certain provisions of:

(a) NI 81-102 to permit the filing of a simplified prospectus for the Continuing Fund, notwithstanding that the initial investment in respect of the Continuing Fund under section 3.1 of NI 81-102 will not be provided (the Seed Capital Relief);

(b) NI 81-101 to permit the Continuing Fund to disclose certain information and performance data of the Terminating Fund in its simplified prospectus and fund facts documents;

(c) NI 81-102 to permit the Continuing Fund to use the performance data of the Terminating Fund in sales communications and other communications to securityholders (the Fund Communications) of the Continuing Fund; and

(d) NI 81-102 to permit the Continuing Fund to calculate its investment risk level using the performance history of the Terminating Fund

(collectively, the NI 81-101 and NI 81-102 Relief).

Decision

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 Exemption Sought is granted provided that:

(a) the MRFPs for the Continuing Fund include the Financial Data of the Terminating Fund pertaining to the corresponding series of the Terminating Fund, and disclose the Merger for the relevant time periods; and

(b) the Continuing Fund prepares its simplified prospectus, fund facts documents and other Fund Communications in accordance with the NI 81-101 and NI 81-102 Relief.

For the Commission:

"Tom Cotter"
Vice-Chair
"Kari Horn"
Vice-Chair