Excel Funds Management Inc. and Sun Life Global Investments (Canada) Inc.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Approval granted for change of manager of mutual funds – change of manager is not detrimental to securityholders or the public interest – change of manager approved by the funds’ securityholders at a special meeting of securityholders.
Applicable Legislative Provisions
National Instrument 81-102 Investment Funds,
ss. 5.5(1)(a), 5.5(3), 5.7.
December 4, 2017
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
EXCEL FUNDS MANAGEMENT INC.
SUN LIFE GLOBAL INVESTMENTS (CANADA) INC. (Sun Life Global Investments, and
together with Excel, the Filers)
(as defined herein)
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for approval of the proposed change of manager of the funds listed in Appendix “A” (the Funds) from Excel to Sun Life Global Investments (the Change of Manager) under section 5.5(1)(a) of National Instrument 81-102 Investment 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, and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (together with Ontario, the Jurisdic-tions).
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:
Excel Funds Management Inc.
1. Excel is a corporation incorporated under the laws of the Province of Ontario with its head office located in Mississauga, Ontario.
2. Asdhir Enterprises Inc. (AsdhirCo) holds approximately 94.24% of the issued and outstanding common shares of Excel. AsdhirCo is a corporation incorporated under the laws of the Province of Ontario that is wholly-owned by Bhim D. Asdhir. The shareholders of Excel other than AsdhirCo (collectively, the Excel Minority Shareholders) hold, in the aggregate, approxi-mately 5.76% of the issued and outstanding common shares of Excel and 25,000 preferred shares in the capital of Excel.
3. Excel is the manager of each Fund. Excel is registered as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador.
4. Excel is not in default of any requirements under applicable securities legislation.
Excel Investment Counsel Inc.
5. Excel Investment Counsel Inc. (EIC) is a corporation incorporated under the laws of Ontario with its head office located in Mississauga, Ontario.
6. AsdhirCo holds 100% of the issued and outstanding common shares of EIC.
7. EIC is the portfolio adviser to each of the Funds. EIC is registered as a portfolio manager in Ontario and as an exempt market dealer in Ontario and Quebec.
8. EIC is not in default of any requirements under applicable securities legislation.
9. The mutual funds as listed in Appendix “A” (the Mutual Funds) are open-ended mutual fund trusts. Excel India Fund was established pursuant to a declaration of trust dated November 28, 1997, as amended, Excel China Fund was established pursuant to a declaration of trust dated January 17, 2000, as amended, and Excel Chindia Fund was established pursuant to a declaration of trust dated December 8, 1998, as amended. These individual declarations of trust, as amended, were consolidated under a master amended and restated declaration of trust dated December 23, 2004, as amended and restated on October 22, 2010 and as further amended (the Mutual Funds Declaration of Trust). Each of the other Mutual Funds was also established pursuant to the Mutual Funds Declaration of Trust. The management services are provided by Excel to the Mutual Funds pursuant to a second amended and restated master management agreement dated October 22, 2010 (the Mutual Funds Management Agreement).
10. The Mutual Funds are currently offered for sale in each Jurisdiction under a simplified prospectus, annual information form and fund facts dated September 18, 2017 prepared in accordance with the requirements of National Instrument 81-101 Mutual Fund Prospectus Disclosure.
11. The exchange-traded funds listed in Appendix “A” (the ETFs) are exchange-traded mutual fund trusts established pursuant to a declaration of trust dated May 3, 2017, pursuant to which Excel, as trustee, has delegated the management of the business and affairs of the ETFs to Excel.
12. The ETFs are currently offered for sale in each Jurisdiction under a long form prospectus dated May 3, 2017, as amended, prepared in accor-dance with the requirements of National Instru-ment 41-101 General Prospectus Requirements (NI 41-101).
13. Each of the Funds is a reporting issuer under the applicable securities legislation of each Juris-diction and is not in default of any requirements under applicable securities legislation.
14. Sun Life Global Investments is a corporation incorporated under the federal laws of Canada with its head office in Toronto, Ontario. Sun Life Global Investments is a wholly-owned indirect subsidiary of Sun Life Financial Inc., a public company incorporated under the Insurance Companies Act (Canada) and listed on the Toronto Stock Exchange, the New York Stock Exchange and the Philippines Stock Exchange.
15. Sun Life Global Investments is registered as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador, a mutual fund dealer in each of the Jurisdictions and a commodity trading manager and portfolio manager in Ontario. Sun Life Global Investments operates a family of mutual funds (the Sun Life Funds) that are currently offered for sale in each of the Jurisdictions under simplified prospectuses, annual information forms and fund facts dated February 10, 2017 and July 28, 2017, as amended.
16. Sun Life Global Investments is not in default of any requirements under applicable securities legislation.
The Proposed Transaction
17. AsdhirCo, Bhim D. Asdhir and Sun Life Global Investments have entered into an agreement (the Purchase Agreement) pursuant to which Sun Life Global Investments will acquire 100% of the outstanding shares of Excel and EIC (the Proposed Transaction).
18. Prior to the Proposed Transaction, Excel will complete a reorganization, as follows: (i) AsdhirCo will transfer all of the issued and outstanding common shares of Excel and EIC that it holds to a newly formed corporation existing under the laws of Ontario (NewCo), which will be an affiliate of AsdhirCo; (ii) each of the Excel Minority Shareholders will transfer all of the issued and outstanding common shares and preferred shares of Excel currently held by them to NewCo in exchange for a cash payment by NewCo; and (iii) each option to purchase common shares in the capital of Excel (Excel Option) that is outstanding and has not been exercised will be cancelled and the holder will receive from Excel an amount in satisfaction of the Excel Option. Following the reorganization, the Proposed Transaction will be completed by AsdhirCo causing NewCo to sell all of the issued and outstanding shares of Excel and EIC to Sun Life Global Investments.
19. The Proposed Transaction is scheduled to close on the last business day of the calendar month in which all of the conditions relating to the Proposed Transaction set out in the Purchase Agreement have been fulfilled or waived, provided that if these conditions have been fulfilled or waived on a day that is less than five business days before the end of such calendar month, the Proposed Transaction will close on the last business day of the next calendar month following such date (the Closing). The Filers expect that the Closing will occur on or about December 29, 2017. The Proposed Transaction will result in the Change of Manager.
20. The Proposed Transaction is subject to the receipt of all necessary regulatory and securityholder approvals, securities registrations and the satisfaction or waiver of all other conditions to the Proposed Transaction.
21. The Filers have considered the views of staff of the Ontario Securities Commission published in OSC Staff Notice 81-710 Approvals for Change in Control of a Mutual Fund Manager and Change of a Mutual Fund Manager under National Instrument 81-102 Mutual Funds. The Filers are seeking the approval of the securities regulatory authorities of the Proposed Transaction in a single application characterized as a change of manager under section 5.5(1)(a) of NI 81-102.
22. In accordance with National Instrument 81-106 Investment Fund Continuous Disclosure, a press release announcing the Proposed Transaction was issued on September 7, 2017 and subsequently filed on SEDAR. In addition, a material change report was filed on September 15, 2017 and details of the Proposed Transaction were included in the renewal simplified pros-pectus, annual information form and fund facts for the Mutual Funds dated September 18, 2017 and in Amendment No. 1 dated September 29, 2017 to the prospectus and summary documents for the ETFs dated May 3, 2017.
23. Excel considers the proposed Change of Manager to be a conflict of interest matter as set out in section 1.2 of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107). Accordingly, Excel presented the Change of Manager to the IRC for a recommendation on September 13, 2017. The IRC reviewed the potential conflict of interest matters related to the proposed Change of Manager and has determined that the proposed Change of Manager, if implemented, would achieve a fair and reasonable result for the Funds.
24. A notice of meeting and management information circular in connection with the Change of Manager (the Circular) was sent to securityholders of the Funds on October 27, 2017 and was subsequently filed on SEDAR in accordance with applicable securities legislation. The Circular contained sufficient information regarding the proposed business, management and operations of Excel following the Proposed Transaction, including details of its officers and directors, and all information necessary to allow securityholders to make an informed decision about the Proposed Transaction and the Change of Manager.
25. The approval of securityholders of the Funds is required under section 5.1(1)(b) of NI 81-102. Securityholders of the Funds approved the Change of Manager at special meetings held on November 17, 2017.
Impact of the Change of Manager on the Funds
26. Upon Closing, Sun Life Global Investments will acquire control of Excel and EIC and, within a foreseeable period of time following Closing, it is anticipated that Sun Life Global Investments will take steps as yet to be determined, to integrate the business, operations and management of the Excel Funds with that of the Sun Life Funds. Until such integration occurs, Excel will continue to operate as the investment fund manager of the Excel Funds.
27. Amundi Asset Management will remain the commodity futures portfolio manager of Excel High Income Fund. China Asset Management Company Limited will remain the sub-adviser of Excel China Fund, Amundi Canada Inc. will remain the sub-adviser of Excel High Income Fund and Itaú USA Asset Management Inc. will remain the sub-adviser of Excel Emerging Markets Fund.
28. EIC will remain the portfolio adviser to the Funds until EIC is amalgamated with either Excel or Sun Life Global Investments.
29. The current members of the IRC of the Funds will cease to act as members pursuant to Section 3.10(1)(b) of NI 81-107 and it is anticipated that Sun Life Global Investments will replace the IRC of the Funds with the IRC of the Sun Life Funds. Currently, the IRC of the Sun Life Funds is Nancy Church (Chair), Andrew Smith and Pierre-Yves Chaitillon.
30. Sun Life Global Investments intends to manage and administer the Funds in a similar manner as Excel. There is no current intention to change the investment objectives, investment strategies or increase the fees and expenses of the Funds. Any consolidation of the fund families or fund lineups, or changes to investment objectives and/or strategies, will be considered post-Closing.
31. The Proposed Transaction is not expected to have any material impact on the business, operations or affairs of the Funds or the securityholders of the Funds. The Funds will not bear any of the costs and expenses associated with the Proposed Transaction or Change of Manager.
32. The individuals that will be principally responsible for the investment fund management of the Funds upon Closing have the requisite integrity and experience, as required under Section 5.7(1)(a)(v) of NI 81-102.
33. All material agreements regarding the administration of the Funds will remain the same, other than with respect to any amendments that may be required to reflect the Proposed Transaction and/or transfer such agreements to Sun Life Global Investments.
34. Other than as required to reflect the Proposed Transaction and/or the transfer of such agreements to Sun Life Global Investments, Sun Life Global Investments does not currently contemplate any changes to the material contracts of the Funds.
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.
Investment Funds & Structured Products Branch
Ontario Securities Commission
Excel Global Growth Asset Allocation ETF
Excel Global Balanced Asset Allocation ETF
Excel China Fund
Excel Chindia Fund
Excel Emerging Markets Balanced Fund (formerly, Excel EM Blue Chip Equity Fund)
Excel Emerging Markets Fund
Excel High Income Fund
Excel India Balanced Fund
Excel India Fund
Excel New India Leaders Fund
Excel Money Market Fund