Companion Policy to NI 81-102 Investment Funds
Part 7 Changes
Section 7.1

Integrity and Competence of Investment Fund Management Groups

(1) Paragraph 5.5(1)(a) of the Instrument requires that the approval of the securities regulatory authority be obtained before the manager of an investment fund is changed. Paragraph 5.5(1)(a.1) of the Instrument contemplates similar approval to a change in control of a manager.

(2) In connection with each of these approvals, applicants are required by section 5.7of the instrument to provide information to the securities regulatory authority concerning the integrity and experience of the persons or companies that are proposed to be involved in, or control, the management of the investment fund after the proposed transaction.

(3) The Canadian securities regulatory authorities would generally consider it helpful in their assessment of the integrity and experience of the proposed new management group that will manage an investment fund after a change in manager if the application set out, among any other information the applicant wishes to provide

(a) the name, registered address and principal business activity or the name, residential address and occupation or employment of

(i) if the proposed manager is not a public company, each beneficial owner of securities of each shareholder, partner or limited partner of the proposed manager, and

(ii) if the proposed manager is a public company, each beneficial owner of securities of each shareholder of the proposed manager that is the beneficial holder, directly or indirectly, of more than 10% of the outstanding securities of the proposed manager and

(b) information concerning

(i) if the proposed manager is not a public company, each shareholder, partner or limited partner of the proposed manager,

(ii) if the proposed manager is a public company, each shareholder that is the beneficial holder, directly or indirectly, of more than 10% of the outstanding securities of the proposed manager,

(iii) each director and officer of the proposed manager, and

(iv) each proposed director, officer or individual trustee of the investment fund.

(4) The Canadian securities regulatory authorities would generally consider it helpful if the information relating to the persons and companies referred to in paragraph (3)(b) included

(a) for a company

(i) its name, registered address and principal business activity,

(ii) the number of securities or partnership units of the proposed manager beneficially owned, directly or indirectly, and

(iii) particulars of any existing or potential conflicts of interest that may arise as a result of the activities of the company and its relationship with the management group of the investment fund and

(b) for an individual

(i) his or her name, birthdate and residential address,

(ii) his or her principal occupation or employment,

(iii) his or her principal occupations or employment during the five years before the date of the application, with a particular emphasis on the individual’s experience in the financial services industry,

(iv) the individual’s educational background, including information regarding courses successfully taken that relate to the financial services industry,

(v) his or her position and responsibilities with the proposed manager or the controlling shareholders of the proposed manager or the investment fund,

(vi) whether he or she is, or within five years before the date of the application has been, a director, officer or promoter of any reporting issuer other than the investment fund, and if so, disclosing the names of the reporting issuers and their business purpose, with a particular emphasis on relationships between the individual and other investment funds,

(vii) the number of securities or partnership units of the proposed manager beneficially owned, directly or indirectly,

(viii) particulars of any existing or potential conflicts of interest that may arise as a result of the individual’s outside business interests and his or her relationship with the management group of the investment fund, and

(ix) a description of the individual’s relationships to the proposed manager and other service providers to the investment fund.

(5) The Canadian securities regulatory authorities would generally consider it helpful in their assessment of the integrity and experience of the persons or companies that are proposedto manage an investment fund after a change of control of the manager, if the application set out, among any other information that applicant wishes to provide, a description of

(a) the proposed corporate ownership of the manager of the investment fund after the proposed transaction, indicating for each proposed direct or indirect shareholder of the manager of the investment fund the information about that shareholder referred to in subsection-4

(b) the proposed officers and directors of the manager of the investment fund, of the investment fund and of each of the proposed controlling shareholders of the investment fund, indicating for each individual, the information about that individual referred to in sub


Companion Policy to NI 81-102 Investment Funds
Part 7 Changes
Section 7.2

Mergers of Investment Funds

Subsection 5.6(1) of the Instrument provides that mergers of investment funds may be carried out on the conditions described in that subsection without prior approval of the securities regulatory authority. The Canadian securities regulatory authorities consider that the types of transactions contemplated by subsection 5.6(1) of the instrument when carried out in accordance with the conditions of that section address the fundamental regulatory concerns raised by mergers of investment funds. Subsection 5.6(1) of the instrument is designed to facilitate consolidations of investment funds within fund families that have similar fundamental investment objectives and strategies and that are operated in a consistent and similar fashion. Since subsection 5.6(1) will be unavailable unless the investment funds involved in the transaction have substantially similar fundamental investment objectives and strategies and are operated in a substantially similar fashion, the Canadian securities regulatory authorities do not expect that the portfolios of the consolidating funds will be required to be realigned to any great extent before a merger. If realignment is necessary, the Canadian securities regulatory authorities note that paragraph 5.6(1)(h) of the Instrument provides that none of the costs and expenses associated with the transaction may be borne by the investment fund. Brokerage commissions payable as a result of any portfolio realignment necessary to carry out the transaction would, in the view of the Canadian securities regulatory authorities, be costs and expenses associated with the transaction.


Companion Policy to NI 81-102 Investment Funds
Part 7 Changes
Section 7.3

Regulatory Approval for Reorganizations

(1) Paragraph 5.7(1)(b) of the Instrument requires certain details to be provided in respect of an application for regulatory approval required by paragraph 5.5(1)(b) that is not automatically approved under subsection 5.6(1). The Canadian securities regulatory authorities will be reviewing this type of proposed transaction, among other things, to ensure that adequate disclosure of the differences between the issuers participating in theproposed transaction is given to securityholders of the investment fund that will be merged, reorganized or amalgamated with another issuer.

(2) If an investment fund is proposed to be merged, amalgamated or reorganized with an investment fund that has a net asset value that is smaller than the net asset value of the terminating investment fund, the Canadian securities regulatory authorities will consider the implications of the proposed transaction on the smaller continuing investment fund. The Canadian securities regulatory authorities believe that this type of transaction generally would constitute a material change for the smaller continuing investment fund, thereby triggering the requirements of paragraph 5.1(1)(g) of the Instrument and Part 11 of National Instrument 81-106 Investment Fund Continuous Disclosure.


Companion Policy to NI 81-102 Investment Funds
Part 7 Changes
Section 7.5

Circumstances in Which Approval of Securityholders Not Required

(1) Subsection 5.3(2) of the Instrument provides that an investment fund’s reorganization with, or transfer of assets to, another issuer may be carried out on the conditions described in paragraph 5.3(2)(a) or (b) without the prior approval of the securityholders of the investment fund.

(2) If the manager refers the change contemplated in subsection 5.3(2) of the Instrument to the investment fund’s independent review committee, and subsequently seeks the approval of the securityholders of the investment fund, the Canadian securities regulatory authorities expect the manager to include a description of the independent review committee’s determination in the written notice to securityholders referred to in section
5.4 of the Instrument.

(3) The Canadian securities regulatory authorities expect the written notice referred to in subparagraph 5.3(2)(a)(iv) and (v) of the Instrument to include, at a minimum, the expected date of the reorganization, the name of the other investment fund with which the investment fund will be reorganized, how a securityholder of the investment fund may obtain a copy of the other investment fund’s fund facts, simplified prospectus or annual information form, as applicable, and a description of the determination of the investment fund’s independent review committee with respect to the reorganization.


Companion Policy to NI 81-102 Investment Funds
Part 7 Changes
Section 7.7

Connection to NI 81-107 –

There may be matters under subsection 5.1(1) of the Instrument that may also be a conflict of interest matter as defined in NI 81-107. The Canadian securities regulatory authorities expect any matter under subsection 5.1(1) of the instrument subject to review by the independent review committee to be referred by the manager to the independent review committee before seeking the approval of securityholders of the investment fund. The Canadian securities regulatory authorities further expect the manager to include a description of the independent review committee’s determination in the written notice to securityholders referred to in subsection 5.4(2) of the instrument.


Companion Policy to NI 81-102 Investment Funds
Part 7 Changes
Section 7.8

Termination of an Investment Fund –

Subsection 5.8(2) of the Instrument requires a mutual fund that is terminating to give notice of the termination to all securityholders of the mutual fund. section 5.8.1 of the instrument requires a non-redeemable investment fund that is terminating to issue and file a press release announcing the termination. Investment funds for which the termination is a material change must also comply with the requirements of Part 11 of National Instrument 81-106 Investment Fund Continuous Disclosure.