AIC Advantage Fund - MRRS Decision

Headnote

Mutual fund applying for relief from 10% concentration restriction in subsection 2.1(1) of National Instrument 81-102 Mutual Funds in connection with the exchange of Exchangeable Shares of AMVESCAP Inc. for shares of AMVESCAP PLC -- Exercise of the exchange right considered a "purchase" -- Exchange done on a one-for-one basis -- Mutual fund's economic exposure to AMVESCAP PLC immediately after exchange not exceeding economic exposure to AMVESCAP PLC before the exchange.

Rule Cited

National Instrument 81-102 Mutual Funds, s. 2.1(1).

November 25, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA,

SASKATCHEWAN, MANITOBA, ONTARIO,

QUEBEC, NEW BRUNSWICK, NOVA SCOTIA,

PRINCE EDWARD ISLAND, NEWFOUNDLAND

AND LABRADOR,NORTHWEST TERRITORIES,

YUKON AND NUNAVUT

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

AIC ADVANTAGE FUND

(the Filer)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under section 19.1 of National Instrument 81-102 Mutual Funds (NI 81-102 or the Legislation) that the Filer be exempt from the issuer concentration restriction in subsection 2.1(1) of NI 81-102 in connection with the exchange of its Exchangeable Shares (described below) for PLC Shares (described below) (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications

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

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meanings in this decision unless they are defined in this decision.

Representations

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

1. AIC Limited (AIC) acts as the manager and trustee of the Filer. AIC Investment Services Inc., an affiliate of AIC, acts as the portfolio adviser for the Filer.

2. In 2000, AMVESCAP PLC entered into an arrangement (the Arrangement) with Trimark Financial Corporation (Trimark). Pursuant to this Arrangement, the Filer received shares of AMVESCAP Inc. (the Exchangeable Shares) in return for its Trimark shares. The Exchangeable Shares, which are Canadian securities, are exchangeable at the option of the holder on a one-for-one basis for shares of AMVESCAP PLC (the PLC Shares), which are foreign securities.

3. The Exchangeable Shares are structured so that they are economically equivalent to the PLC Shares. The Filer acquired Exchangeable Shares instead of PLC Shares because, at the time of the Arrangement, the Filer was fully eligible for registered plans and therefore, due to relevant foreign property restrictions under applicable tax regulation, unable to have more than 30% of the book value of its net assets invested in foreign securities. As such foreign property restrictions have recently been revoked, the Filer would now be fully eligible for registered plans after exchanging their Exchangeable Shares for PLC Shares. In any event, after such exchange the Filer will continue to hold no more than approximately 30% of its investments in foreign securities in accordance with the disclosure in its simplified prospectus.

4. Pursuant to various agreements, holders of the Exchangeable Shares are able to exercise essentially the same voting rights with respect to AMVESCAP PLC as they would have if they held PLC Shares. Also, holders of Exchangeable Shares are entitled to receive dividends that are economically equivalent to cash dividends paid on PLC Shares.

5. As at November 22, 2005, 12% of the net assets of the Filer taken at market value are invested in the aggregate in the Exchangeable Shares and the PLC Shares. The 10% threshold was exceeded passively.

6. NI 81-102 prohibits a mutual fund from purchasing a security of an issuer if, immediately after the transaction, more than 10% of the net assets of the mutual fund, taken at market value at the time of the transaction, would be invested in securities of any issuer. The Companion Policy to NI 81-102 provides that if a mutual fund, at its option, exercises, converts or exchanges a convertible security held by it, the Canadian securities regulatory authorities would generally consider that action to be a purchase of a security under the definition of "purchase" in connection with the acquisition of a portfolio asset by a mutual fund.

7. Without the relief requested, the Filer may not exercise the exchange right as the exchange would be considered a prohibited purchase since, immediately after the transaction, more than 10% of the net assets of the Filer, taken at market value, would be invested in the PLC Shares.

8. It would not be in the best interests of unitholders of the Filer to divest of the PLC Shares that are held in excess of 10% of net assets of the Filer as it is AIC's view that the PLC Shares are currently undervalued and, therefore, are a source of significant potential return for unitholders.

9. Immediately after the exchange, the Filer will have no more economic exposure to PLC Shares than it did immediately before the exchange. The Filer will not make any further purchases of PLC Shares after the exchange for as long as its exposure to PLC Shares remains above 10% of net assets.

Decision

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 Requested Relief is granted.