Exemption Orders (Discretionary)
AIM FUNDS MANAGEMENT INC.
2001 BCSECCOM 224
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief from the self-dealing prohibitions and reporting requirements of the Act to permit RSP clone fund structure, subject to certain conditions.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 121(2)(b), 123, 126(a), 126(d) and 130
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO, NOVA SCOTIA and NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
AIM FUNDS MANAGEMENT INC.
AIM RSP GLOBAL FINANCIAL SERVICES FUND
AIM RSP GLOBAL SECTOR MANAGERS FUND
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the "Jurisdictions") has received an application (the "Application") from AIM Funds Management Inc.("AIM" or the "Manager") on behalf of AIM RSP Global Financial Services Fund, AIM RSP Global Sector Managers Fund and other mutual funds managed by AIM after the date of this Decision (defined herein) (collectively referred to as the “Top Funds”) having an investment objective or strategy that is linked to the returns or portfolio of another specified mutual fund, for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that the following provisions in the Legislation (the “Applicable Requirements”) shall not apply in connection with certain investments to be made by the Top Funds in applicable corresponding mutual funds from time to time (the funds in which such investments are to be made being collectively referred to as the "Underlying Funds"):
1. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial security holder;
2. the requirements contained in the Legislation requiring a management company, or in British Columbia, a mutual fund manager, to file a report relating to a purchase or sale of securities between the mutual fund and any related person or company, or any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies.
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS it has been represented by AIM to the Decision Makers that:
1. Each of the Top Funds is, or will be, an open-ended mutual fund trust established under the laws of the Province of Ontario.
2. AIM is a corporation amalgamated under the laws of the Province of Ontario and is, or will be, the manager of each of the Top Funds.
3. The securities of the Top Funds and the Underlying Funds are, or will be, qualified for sale under a simplified prospectus and annual information form filed in all provinces and territories in which they are distributed. A preliminary simplified prospectus for the AIM RSP Global Financial Services Fund and AIM RSP Global Sector Managers Fund has been filed under SEDAR project number 308017.
4. The simplified prospectus for each Top Fund will disclose the investment objectives, investment strategies, risks and restrictions of the Top Fund and the investment objectives and strategies of the Underlying Fund. The investment objectives and strategies of each of the Top Funds will disclose the name of the corresponding Underlying Fund and the Top Fund's total aggregate derivative exposure to, and direct investment in the Underlying Fund.
5. The investment objectives of the Underlying Funds are, or will be, achieved through investment primarily in foreign securities.
6. Each Top Fund seeks, or will seek, to achieve its investment objective while ensuring that its units do not constitute “foreign property” under the Income Tax Act (Canada) (the “Tax Act”) for registered retirement savings plans, registered retirement income plans, and deferred profit sharing plans (“Registered Plans”).
7. To achieve its investment objective each Top Fund invests or will invest its assets such that the securities of the Top Fund will, in the opinion of tax counsel to the Top Fund, be “qualified investments” for Registered Plans and will not constitute foreign property in a Registered Plan. This will primarily be achieved by the Top Funds entering into derivative contracts with one or more financial institutions that link the returns to those of the Underlying Funds. However, each Top Fund also intends to invest a portion of its assets directly in securities of a corresponding Underlying Fund. This investment by a Top Fund will at all times be below the maximum foreign property limit prescribed under the Tax Act for Registered Plans (the “Permitted Limit”).
8. The amount of direct investment by each Top Fund in its applicable Underlying Fund will be adjusted from time to time so that, except for transitional cash, the aggregate of derivative exposure to, and direct investment in, the Underlying Fund will equal 100% of the assets of the Top Fund.
9. Except to the extent evidenced by this Decision and specific approvals granted by the Canadian securities administrators pursuant to National Instrument 81-102 Mutual Funds (“NI 81-102"), the investments by the Top Funds in the Underlying Funds have been, or will be, structured to comply with the investment restrictions of the Legislation and NI 81-102.
10. In the absence of this Decision, pursuant to the Legislation, the Top Funds are prohibited from (a) knowingly making an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder; and (b) knowingly holding an investment referred to in clause (a) hereof. As a result, in the absence of this Decision the Top Funds would be required to divest themselves of any such investments.
11. In the absence of this Decision, the Legislation requires AIM to file a report on every purchase or sale of securities of the Underlying Funds by the Top Funds.
12. The investment by the Top Funds in securities of the Underlying Funds will represent the business judgment of responsible persons, uninfluenced by considerations other than the best interest of the Top Funds.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);
AND WHEREAS 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 Applicable Requirements do not apply to the Top Funds or the Manager, as the case may be, in respect of investments to be made by the Top Funds in securities of the Underlying Funds.
PROVIDED IN EACH CASE THAT:
1. the 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 the matters in section 2.5 of NI 81-102; and
2. the Decision shall only apply if, at the time a Top Fund makes or holds an investment in an Underlying Fund, the following conditions are satisfied:
a. the securities of both the Top Fund and the Underlying Fund are being offered for sale in the jurisdiction of the Decision Maker pursuant to a simplified prospectus and annual information form which has been filed with and accepted by the Decision Maker;
b. the investment by the Top Fund in the Underlying Fund is compatible with the fundamental investment objectives of the Top Fund;
c. the investment objective of the Top Fund discloses that the Top Fund invests directly and indirectly (through derivative exposure) in the Underlying Fund and the name of the Underlying Fund;
d. the Underlying Fund is not a mutual fund whose investment objective includes investing directly or indirectly in other mutual funds;
e. the Top Fund restricts its direct investment in the Underlying Fund to a percentage of its assets that is within the Permitted Limit;
f. there are compatible dates for the calculation of the net asset value of the Top Fund and the Underlying Fund for the purpose of the issue and redemption of securities of such mutual funds;
g. no sales charges are payable by the Top Fund in relation to its purchases of securities of the Underlying Fund;
h. no redemption fees or other charges are charged by the Underlying Fund in respect of the redemption by the Top Fund of securities of the Underlying Fund owned by the Top Fund;
i. no fees and charges of any sort are paid by the Top Fund and the Underlying Fund, by their respective managers or principal distributors, or by any affiliate or associate of any of the foregoing entities to anyone in respect of the Top Fund’s purchase, holding or redemption of the securities of the Underlying Fund;
j. the arrangements between or in respect of the Top Fund and the Underlying Fund are such as to avoid the duplication of management fees;
k. any notice provided to securityholders of the Underlying Fund, as required by applicable laws or the constating documents of the Underlying Fund, has been delivered by the Top Fund to its securityholders along with all voting rights attached to the securities of the Underlying Fund which are directly owned by the Top Fund.
l. all of the disclosure and notice material prepared in connection with a meeting of securityholders of the Underlying Fund and received by the Top Fund has been provided to its securityholders, the securityholders have been permitted to direct a representative of the Top Fund to vote its holdings in the Underlying Fund in accordance with their direction, and the representative of the Top Fund has not voted its holdings in the Underlying Fund except to the extent the securityholders of the Top Fund have directed;
m. in addition to receiving the annual and, upon request, the semi-annual financial statements of the Top Fund, securityholders of the Top Fund have received the annual and, upon request, the semi-annual financial statements, of the Underlying Fund in either a combined report, containing financial statements of the Top Fund and the Underlying Fund, or in a separate report containing the financial statements of the Underlying Fund; and
n. to the extent that the Top Fund and the Underlying Fund do not use a combined simplified prospectus and annual information form containing disclosure about the Top Fund and the Underlying Fund, copies of the simplified prospectus and annual information form of the Underlying Fund have been provided upon request to securityholders of the Top Fund and this right is disclosed in the simplified prospectus of the Top Fund.
DATED this 15th day of January, 2001.
J.A. Geller Stephen N. Adams