NP 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from requirement in section 2.1 of NI 81-101 and Item 5(b) of Form 81-101F1, Item 2 of Form 81-101F3, to permit existing funds to preserve their respective start dates once continued as mutual fund trust following the mergers -- Exemption from Item 4 of Form 81-101F3, to permit continuing funds to use information of existing funds for the average return and year-by-year return in the fund facts -- Exemption from sections 15.3(2), 15.8(a)(i), 15.6(b), 15.6(d), 15.8(2)(a), 15.8(3)(a) and 15.9(2)(d) of NI 81-102 to permit the continuing funds to use the performance data of the existing funds in sales communications and reports to securityholders -- Exemption from section 4.4 of NI 81-106 and Items 3.1(1), 3.1(7), 3.1(8), 4.1(1), 4.1(2), 4.2(2) and 4.3(1)(a) of Part B of Form 81-106F1 and Item 3(1) and 4 of Part C of Form 81-106F1 to permit the continuing funds to include in their annual and interim management reports of fund performance the financial highlights' and past performance of the existing funds -- continuing funds granted relief from seed capital requirements in section 3.1 of NI 81-102.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 6.1.
National Instrument 81-102 Mutual Funds, s. 19.1.
National Instrument 81-106 Investment Fund Continuous Disclosure, s. 17.1.
December 10, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
BMO NESBITT BURNS INC.,
BMO INVESTMENTS INC.
(collectively, the Filers)
BMO NESBITT BURNS CANADIAN STOCK SELECTION FUND,
BMO NESBITT BURNS INTERNATIONAL EQUITY FUND,
BMO CANADIAN STOCK SELECTION FUND,
BMO INTERNATIONAL VALUE FUND
(collectively, the Funds)
The principal regulator in the Jurisdiction (the Decision Maker) has received an application from the Filers on behalf of the Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) granting an exemption from the following provisions of the Legislation to enable BMO Canadian Stock Selection Fund and BMO International Value Fund (collectively, the Continuing Funds) to include in their annual and interim management reports of fund performance the performance data and information derived from the financial statements (collectively, the Financial Data) of BMO Nesbitt Burns Canadian Stock Selection Fund and BMO Nesbitt Burns International Equity Fund (collectively, the Existing Funds) that will be presented in the Existing Funds' annual management reports of fund performance:
(a) Section 4.4 of National Instrument 81-106 -- Investment Fund Continuous Disclosure (NI 81-106) for the relief requested from Form 81-106F1 -- Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1) for the Continuing Funds;
(b) Items 3.1(1), 3.1(7), 3.1(8), 4.1(1) in respect of the requirement to comply with subsections 15.3(2) and 15.9(2)(d) of National Instrument 81-102 -- Mutual Funds (NI 81-102), 4.1(2), 4.2(1), 4.2(2) and 4.3(1)(a) of Part B of Form 81-106F1; and
(c) Items 3(1) and 4 of Part C of Form 81-106F1 for the Continuing Funds;
(collectively, the Requested Relief),
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 Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in each of the other provinces and territories of Canada.
Terms defined in National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
The Filers and the Funds
1. The head office of each of the Filers is located in Toronto, Ontario.
2. The Filers are not in default of securities legislation in any jurisdiction in Canada.
3. The Filers are each corporations governed under the laws of Canada, and are registered as investment fund managers in Ontario, Quebec and Newfoundland and Labrador. The Filers are both indirect wholly-owned subsidiaries of Bank of Montreal.
4. BMO Nesbitt Burns Inc. (BMONB) is the manager of certain mutual funds known as the "BMO Nesbitt Burns Group of Funds", which include the Existing Funds. Units of the Existing Funds are currently qualified for sale in each of the provinces and territories of Canada pursuant to a simplified prospectus dated October 23, 2012 as amended by amendment no. 1 dated August 30, 2013 and amendment no. 2 dated September 27, 2013, and an annual information form dated October 23, 2012, as amended by amendment no. 1 dated August 30, 2013 and amendment no. 2 dated September 27, 2013. On October 17, 2013, BMONB was granted an exemption which extended the time limits pertaining to filing the renewal prospectus for the Existing Funds to December 17, 2013.
5. BMO Investments Inc. (BMOII) is the manager of certain mutual funds known as the "BMO Mutual Funds" and will be manager and trustee of the Continuing Funds.
6. BMOII filed a preliminary simplified prospectus and preliminary annual information form and preliminary fund facts documents on October 11, 2013, with respect to the Continuing Funds.
7. The Existing Funds are, and the Continuing Funds will be, reporting issuers under the applicable securities legislation of each province and territory of Canada. The Existing Funds have been reporting issuers for at least 12 months.
8. The Existing Funds have operated, and the Continuing Funds will operate in accordance with NI 81-102, except for any exemptive relief that has been previously obtained.
9. The Filers have proposed to merge the Existing Funds with the Continuing Funds (the Mergers) on or about December 13, 2013 (the Merger Date).
10. The Continuing Funds are being created for purposes of implementing the Mergers, and therefore:
(a) the unitholders of Existing Funds will have rights as unitholders of the Continuing Funds that are substantially similar in all material respects to the rights they had as unitholders of the Existing Funds;
(b) the unitholders of the Existing Funds will hold units of the equivalent series of the relevant Continuing Funds with the same aggregate net asset value as they held before as unitholders of the relevant Existing Fund;
(c) the Continuing Funds will have investment objectives and investment strategies that are substantially similar in all material respects to the investment objectives and investment strategies of the corresponding Existing Funds; and
(d) the Continuing Funds will have fee structures and valuation procedures that are identical to the fee structures and valuation procedures of the corresponding Existing Funds.
11. As a result, notwithstanding the Mergers, the Continuing Funds will be managed in a manner which is substantially similar in all material respects to the manner in which the Existing Funds have been managed.
12. The assets of the Existing Funds will be transferred to the Continuing Funds in connection with the implementation of the Mergers.
13. The Financial Data of the Existing Funds is significant information which can assist investors in determining whether to purchase units of the Continuing Funds. In the absence of the relief requested herein, investors will have no financial information (such as past performance) on which to base such an investment decision.
14. The Continuing Funds will be new funds. However, while the Continuing Funds will each have the same assets and liabilities as the corresponding Existing Funds, as new funds, they will not have their own Financial Data as at the Merger Date. In order for the Mergers to be as seamless as possible for unitholders of the Existing Funds, the Filers propose that:
(a) the Continuing Funds will prepare annual management reports of fund performance commencing with the year ended December 31, 2013 and interim management reports of fund performance commencing with the six-month period ended June 30, 2014 using the relevant Existing Funds' historical financial data;
(b) the Continuing Funds will prepare comparative annual financial statements commencing with the year ended December 31, 2013 and interim financial statements commencing with the six-month period ended June 30, 2014 under sections 2.1 and 2.3, respectively, of NI 81-106 using the Existing Funds' historical financial data.
15. Each Continuing Fund will be indistinguishable from its corresponding Existing Fund since the investment objectives, investment strategies and management fees attached to each continuing series of each Continuing Fund will be the same as the corresponding Existing Fund.
16. The Filers are seeking to make the Mergers as seamless as possible for investors of the Existing Funds. Accordingly, the Filers submit that treating each Continuing Fund as fungible with its corresponding Existing Fund for 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 Existing Funds and the Continuing Funds.
17. The Filers submit that investors will not be misled if the Financial Data of each Continuing Fund reflect the Financial Data of the corresponding Existing Fund.
18. The Filers have filed a separate application for exemptive relief from certain provisions of (a) NI 81-102 to permit the Continuing Funds to use performance data of the Existing Funds in sales communications and other communications to securityholders (the Fund Communications) and (b) National Instrument 81-101 Mutual Fund Prospectus Disclosure and Form 81-101F1 Contents of Simplified Prospectus and Form 81-101F3 Contents of Fund Facts Document to permit the Continuing Funds to disclose the start dates of the Existing Funds as their respective start dates (NI 81-102 and NI 81-101 Relief).
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the Decision Maker under the Legislation is that the Requested Relief is granted provided that:
(a) the management reports of fund performance for each Continuing Fund include the Financial Data of the Existing Funds, pertaining to the corresponding series of the Existing Funds, and disclose the Mergers for the relevant time periods; and
(b) the Continuing Funds prepare their simplified prospectus, fund facts and other Fund Communications in accordance with the NI 81-102 and NI 81-101 Relief.