Securities Law & Instruments


National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager of mutual funds for the purpose of 5.5(1)(a) -- change of manager is not detrimental to investors or the public.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(a), 5.3, 5.7 and 19.1.

March 31, 2014




The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) for approval of the change of manager of the Funds from the Current Manager (the Change of Manager) to the Proposed Manager in accordance with sections 5.5(1)(a) of National Instrument 81-102 Mutual Funds (NI 81-102) (the Approval Sought).

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 (the Principal Regulator); and

(b) the Filers have provided notice that section 4.7 of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, and Yukon (together with Ontario, the Jurisdictions).


Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.


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

The Current Manager

1. BCC is a privately-owned corporation existing under the Business Corporations Act (Ontario) and a wholly-owned subsidiary of Arrow Capital Management Inc. (Arrow), a private company based in Toronto. Arrow and BCC will amalgamate on April 1, 2014, with the amalgamated company continuing under the name "Arrow Capital Management Inc."

2. BCC is the manager and trustee of the Funds. BCC is registered in certain of the Jurisdictions indicated below:

(a) Ontario: Portfolio Manager (PM), Mutual Fund Dealer, Investment Fund Manager (IFM) and Exempt Market Dealer (EMD);

(b) Alberta: EMD;

(c) British Columbia: EMD;

(d) Quebec: IFM; and

(e) Newfoundland and Labrador: IFM.

3. BCC's head office is located at 36 Toronto Street -- Suite 750, Toronto, Ontario M5C 2C5.

4. BCC is not in default of any requirements under applicable securities legislation.

The Funds

5. Each Fund is an open-ended mutual fund trust established under the laws of the Province of Ontario by an amended and restated declaration of trust, as amended.

6. Securities of the Funds are distributed in each of the Jurisdictions under an amended and restated simplified prospectus, annual information form and fund facts each dated December 11, 2013, as amended, prepared in accordance with the requirements of National Instrument 81-101 Mutual Fund Prospectus Disclosure.

7. The portfolio manager of the Funds is BCC. BCC has engaged Capital Innovations, LLC as the sub-advisor of the Funds.

8. Each Fund is a reporting issuer under the applicable securities legislation of the Jurisdictions.

9. The Funds are not in default of applicable securities legislation in any of the Jurisdictions.

Details of the Proposed Transaction

10. On February 18, 2014, Arrow announced that BCC and SAM, acting through its general partner, Sprott Asset Management GP Inc. (the GP), entered into a definitive purchase agreement (the Purchase Agreement) pursuant to which SAM will acquire the rights of BCC to manage the Funds (the Proposed Transaction). Under the terms of the Purchase Agreement, the Proposed Transaction will be completed on the fifth business day after the later of receipt of unitholder approval and all necessary approvals of applicable securities regulatory authorities or such other date as BCC and SAM agrees to, but in any event no later than May 31, 2014 (the Closing).

11. In accordance with section 5.1(b) of NI 81-102, special meetings of the unitholders of the Funds were held on March 25, 2014 (the Meetings). At the Meetings the unitholders of the Funds approved the Change of Manager. In respect of the Meetings, the notice of Meetings and the management information circular in respect of the Meetings (the Circular) were mailed to unitholders of the Funds and copies thereof were filed on SEDAR in accordance with applicable securities legislation. The Circular contained sufficient information regarding the business, management and operations of SAM, including details of its officers and directors, and all information necessary to allow unitholders to make an informed decision about the Proposed Transaction. All other information and documents necessary to comply with applicable proxy solicitation requirements of securities legislation for the Meeting were mailed to unitholders of the Funds.

12. In accordance with National Instrument 81-106 Investment Fund Continuous Disclosure, a press release announcing the Proposed Transaction was issued on February 18, 2014 and subsequently the press release and material change report were filed on SEDAR. In addition, amendments to the simplified prospectus, the annual information form and the fund facts of the Funds describing the Proposed Transaction were filed in each of the Jurisdictions, and the Commission issued a receipt in respect of the same on March 21, 2014.

13. It is intended that the Proposed Transaction will result in the Change of Manager and a change of trustee of the Funds from BCC to RBC Investor Services Trust (RBC IST).

14. Following completion of the Proposed Transaction, it is proposed that:

(a) SAM will be the successor manager of the Funds;

(b) RBC IST will remain as the custodian of the Funds;

(c) RBC IST will be appointed as the successor trustee of the Funds; and

(d) Capital Innovations, LLC will remain as the sub-advisor of the Funds.

15. The Current Manager has determined that the Proposed Transaction is not a conflict of interest matter pursuant to section 5.1 of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) and that, as a result, the Proposed Transaction did not require the approval or recommendation of the Independent Review Committee (IRC) of the Funds. The Manager has, however, provided information relating to the Proposed Transaction and the Change of Manager to the IRC.

16. Upon the Closing, the members of the Current Manager's IRC will cease to be members of the IRC of the Funds by operation of section 3.10(1)(b) of NI 81-107. Immediately following the Closing, the IRC of the Funds will be reconstituted. SAM has confirmed to the Current Manager that it is anticipated that the new members of the Funds' IRC will be the same individuals that currently comprise the IRC for the Sprott Funds (as defined herein) being: Lawrence A. Ward (chair), W. William Woods and Eamonn McConnell.

The Change of Manager

17. SAM is a limited partnership established under the laws of the Province of Ontario. The GP, the general partner of SAM, is a wholly-owned subsidiary of Sprott Inc., a public company incorporated under the laws of the Province of Ontario and listed on the Toronto Stock Exchange.

18. SAM is registered in the following categories in certain of the Jurisdictions indicated below:

(a) Ontario: PM, IFM, EMD and Commodity Trading Manager

(b) Alberta: PM and EMD

(c) British Columbia: PM and EMD

(d) Saskatchewan: PM and EMD

(e) Manitoba: PM and EMD

(f) Nova Scotia: PM and EMD

(g) New Brunswick: PM and EMD

(h) Newfoundland and Labrador: PM, IFM and EMD

(i) Quebec: IFM

19. SAM's head office is located at the Royal Bank Plaza, 200 Bay Street, Suite 2700, Toronto, Ontario M5J 2J1.

20. Upon the completion of the Proposed Transaction, SAM will be the IFM of the Funds.

21. SAM is not in default of any requirements under applicable securities legislation.

22. SAM is currently the manager of 22 mutual funds, which are offered for distribution in all of the provinces and territories of Canada (the Sprott Funds), which as of December 31, 2013, represented $1.5 billion of SAM's assets under management. The Sprott Funds include 11 corporate mutual funds each representing a class of shares of Sprott Corporate Class Inc.

23. SAM and BCC are not related parties. Except pursuant to the Purchase Agreement, there are currently no relationships between BCC and SAM (or its affiliates).

24. The experience and integrity of each of the members of the SAM management team is apparent by their education and years of experience in the investment industry, and was described in the Circular.

25. The Closing is not expected to have any material impact on the business, operations or affairs of the Funds or the securityholders of the Funds.

26. SAM intends to manage and administer the Funds in a similar manner as BCC. It is not expected that there will be any change to the sub-advisor of the Funds. There is therefore no intention to change the investment objectives, investment strategies or fees and expenses of the Funds.

27. All material agreements regarding the administration of the Funds will either be amended and restated by SAM and RBC IST or SAM will enter into new agreements as required. Subject to unitholder approval and the necessary approvals being obtained, RBC IST will become the successor trustee of the Funds.

28. The Closing will not adversely affect the Proposed Manager's financial position or its ability to fulfill its regulatory obligations.

29. Within 10 days of the completion of the Change of Manager, it is the intention of the Proposed Manager to file amendments to the applicable offering documents of the Funds to disclose the closing of the Proposed Transaction and the matters relating thereto.

30. The Funds will not bear any of the costs and expenses associated with the Change of Manager. Such costs will be borne by the Current Manager or the Proposed Manager. These costs may include legal and accounting fees, proxy solicitation, printing and mailing costs and regulatory fees.

31. The Approval Sought will not be detrimental to the protection of investors in the Funds or prejudicial to the public interest.


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 Principal Regulator under the Legislation is that the Approval Sought is granted.

"Vera Nunes"
Manager, Investment Funds Branch
Ontario Securities Commission