Investors Canadian Equity Fund et al.

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – approval of mutual fund mergers – approval required because mergers do not meet the criteria for pre-approval – securityholders of merging funds provided with timely and adequate disclosure regarding the mergers.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 5.5(1)(b), 5.6(1), 5.7(1)(b).

November 15, 2018

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
MANITOBA AND ONTARIO
(the “Jurisdictions”)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
THE MERGERS OF
INVESTORS CANADIAN EQUITY FUND,
IG MACKENZIE CANADIAN EQUITY GROWTH FUND,
INVESTORS CANADIAN GROWTH FUND,
INVESTORS CANADIAN LARGE CAP VALUE FUND,
INVESTORS CANADIAN SMALL CAP FUND,
IG MACKENZIE IVY CANADIAN BALANCED FUND,
INVESTORS U.S. DIVIDEND GROWTH FUND,
INVESTORS U.S. LARGE CAP VALUE FUND,
IG PUTNAM LOW VOLATILITY U.S. EQUITY FUND,
INVESTORS CANADIAN BOND FUND,
IG PUTNAM EMERGING MARKETS INCOME FUND,
IG MACKENZIE CUNDILL GLOBAL VALUE FUND,
INVESTORS GLOBAL REAL ESTATE FUND,
ALTO MONTHLY INCOME & GLOBAL GROWTH FUND
(the “Merging Funds”) into
INVESTORS CANADIAN SMALL CAP GROWTH FUND,
INVESTORS NORTH AMERICAN EQUITY FUND,
INVESTORS MUTUAL OF CANADA,
INVESTORS CORE U.S. EQUITY FUND,
IG MACKENZIE INCOME FUND,
IG PUTNAM U.S. HIGH YIELD INCOME FUND,
INVESTORS GLOBAL FUND,
ALLEGRO BALANCED GROWTH FUND
(the “Continuing Funds”, and collectively with the Merging Funds, referred to as the “Funds”)

AND

IN THE MATTER OF
I.G. INVESTMENT MANAGEMENT, LTD.
(referred to as “IGIM” and collectively with the Funds referred to as the “Filers”)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the “Decision Maker”) has received an application from the Filers for a decision under the securities legislation (the “Legislation”) of the Jurisdictions for approval under paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (“NI 81-102”) of the mergers (the “Mergers”) of the Merging Funds into the applicable Continuing Funds (the “Exemption”).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Manitoba Securities Commission is the principal regulator for this application;

(b) the Filers have provided notice that section 4.7(1) of Multi-Lateral Instrument 11-102 Passport System (“MI 11-102”) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Nunavut and the North West Territories; and

(c) the decision is the decision of the Principal Regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless they are otherwise defined. The following terms have the following meanings:

• The Merging Funds and the Continuing Funds (as defined below) managed by IGIM are herein individually and collectively referred to as the “Funds”;
• Investors Canadian Equity Fund, IG Mackenzie Canadian Equity Growth Fund, Investors Canadian Growth Fund, Investors Canadian Large Cap Value Fund, Investors Canadian Small Cap Fund, IG Mackenzie Ivy Canadian Balanced Fund, Investors U.S. Dividend Growth Fund, Investors U.S. Large Cap Value Fund, IG Putnam Low Volatility U.S. Equity Fund, Investors Canadian Bond Fund, IG Putnam Emerging Markets Income Fund, IG Mackenzie Cundill Global Value Fund, Investors Global Real Estate Fund and Alto Monthly Income & Global Growth Fund are herein collectively referred to as the “Merging Funds”;

• Investors Canadian Small Cap Growth Fund, Investors North American Equity Fund, Investors Mutual of Canada, Investors Core U.S. Equity Fund, IG Mackenzie Income Fund, IG Putnam U.S. High Yield Income Fund, Investors Global Fund and Allegro Balanced Growth Fund are herein collectively referred to as the “Continuing Funds”.

Representations

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

The Filers

1. The head office of IGIM is in Winnipeg, Manitoba and, accordingly, Manitoba is the principal regulator. IGIM is a corporation continued under the laws of Ontario. It is the trustee and manager of the Funds.

2. IGIM is registered as a Portfolio Manager and an Investment Fund Manager in Manitoba, Ontario, and Quebec and as an Investment Fund Manager in Newfoundland and Labrador.

3. IGIM is not in default of any of the requirements of securities legislation of any of the provinces and territories in Canada.

The Funds

4. All of the Funds are open-end mutual funds established or continued under a Master Declaration of Trust under the laws of Manitoba.

5. Securities of the Funds are qualified for distribution in each province and territory of Canada pursuant to a simplified prospectus (“SP”), annual information form (“AIF”) and fund facts (“Fund Facts”) prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure dated June 30, 2018, as amended on September 30, 2018 (the “Prospectus”).

6. The net asset values of each series of the Funds are calculated on a daily basis on each day that IGIM is open for business.

7. The Funds are reporting issuers under the Legislation in each Jurisdiction and are not on the list of defaulting reporting issuers maintained under the Legislation in each Jurisdiction, and are not in default of any of the requirements of the Legislation of any of the provinces and territories of Canada.

The Mergers

8. IGIM proposes that each Merging Fund be merged into a corresponding Continuing Fund (each a “Merger” and collectively the “Mergers”) as follows:

9. Approval of the Mergers is required because the Mergers do not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102. More specifically, contrary to section 5.6(1)(a)(ii), a reasonable person might consider that the fundamental investment objectives of the Continuing Funds and the Merging Funds are not substantially similar.

10. The Mergers will proceed on a tax-deferred basis so securityholders of the Merging Funds will not realize any capital gain or loss as a result of the Mergers.

11. Except as set out in paragraph 9, the Mergers will comply with all of the other criteria for pre-approved reorganizations and transfers set out in paragraph 5.6 of NI 81-102.

12. Subject to obtaining all necessary approvals, the Merging Funds will merge into the Continuing Funds on or about the close of business on February 8, 2019 (the “Effective Date”), and the Continuing Funds will continue as publicly offered open-end mutual funds, whereas the Merging Funds will be wound up as soon as reasonably possible.

13. Securityholders of the Merging Funds will continue to have the right to redeem securities of the Merging Funds for cash at any time up to the close of business on the Effective Date.

14. The fee structure of each Continuing Fund is the same as the fee structure of its corresponding Merging Fund and, on the Effective Date, the fees payable by the Continuing Funds will be the same as, or lower than, the fees payable by their corresponding Merging Funds. Accordingly, there will be no increase in fees payable by securityholders of the Merging Funds as a result of the Mergers.

15. IGIM will pay for all costs associated with the securityholder meetings to vote on the Mergers, including legal, proxy solicitation, printing, and mailing expenses, as well as any brokerage transaction fees associated with any Merger related trades and regulatory fees.

16. IGIM has determined that the Mergers will not be a material change to the Continuing Funds because they will not entail a change in the business, operations or affairs of the Continuing Funds that would be considered important by a reasonable investor in determining whether to purchase or continue to hold securities of the Continuing Funds.

17. IGIM intends to proceed with any Merger that obtains securityholder and regulatory approval, even if other Mergers fail to obtain securityholder and/or regulatory approval.

18. If implemented, IGIM intends to implement the Mergers as follows:

Step 1: Prior to the Merger, the Merging Fund and the Continuing Fund will determine the amount of income and net capital gains each has realized during the taxation year up to the Effective Date. These Funds will then distribute sufficient income and net capital gains to their securityholders to ensure that the Funds will not pay any taxes.

Step 2: Each Merging Fund will transfer or sell all of its net assets (being its investment portfolio, other assets including cash, and liabilities) to it's corresponding Continuing Fund in exchange for units of equivalent value in the Continuing Fund, as determined on the date of the Merger

Step 3: Following Step 2, each Merging Fund will immediately thereafter redeem its own units at their net asset value per unit. Securityholders of the Merging Fund will receive units of the equivalent Series of the Continuing Fund in an amount equal to the fair market value of their units in the Merging Fund. After this step, securityholders of each Merging Fund will become securityholders of it's corresponding Continuing Fund.

Step 4: Within 60 days after the Merger, the Merging Funds each will be wound-up.

Securityholder Meetings

19. Securityholder meetings for the Merging Funds are being convened on or about December 4, 2018, to approve the Mergers. This will give the securityholders the opportunity to approve the Mergers as required by paragraph 5.1(1)(f) of NI 81-102.

20. A notice of meeting in the form of a “Notice and Access” document (the “Notice Document”) along with a form of proxy and the Fund Facts document(s) for the series of the Continuing Fund into which the investment of a securityholder of a Merging Fund will be merged as a result of the Merger of their Fund will be mailed to securityholders of the Merging Funds beginning on or about October 23, 2018 in compliance with the “Notice and Access” requirements pursuant to an exemption granted to IGIM on behalf of the Funds dated November 29, 2016 (the “2016 Exemption”).

21. A management information circular (the “Circular”) will be made available to securityholders and posted on the website of IGIM or the Funds in compliance with the 2016 Exemption. The Circular will, among other things, describe the tax implications of the Mergers, as well as the material differences between each Merging Fund and the corresponding Continuing Fund for all the Mergers, so securityholders of the Merging Funds will have sufficient information to permit them to make an informed decision of whether or not to approve each Merger at the meetings of their Funds.

22. The Notice Document will disclose that the Circular and audited annual financial statements of the Continuing Funds can be obtained by accessing them at the website of IGIM or the SEDAR website, or requesting paper copies of each by calling a toll-free telephone number as well as any other disclosure requirements mandated by the 2016 Exemption.

23. A news release was issued on September 17, 2018 announcing the proposed Mergers and amendments to the Prospectus and Fund Facts of each retail series of each Merging Fund, and a material change report was filed on SEDAR on September 17, 2018 with respect to the Mergers as required by the Legislation of the Jurisdictions.

IRC Review

24. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, IGIM has referred the Mergers to the Funds’ independent review committee (the “IRC”) for its review. On September 14, 2018, the IRC provided a recommendation to the Manager that the Mergers, if implemented, would achieve a fair and reasonable result for the Funds.

Reasons for the Mergers

25. The Mergers are being proposed to simplify and streamline IGIM’s product offering by merging Funds whose investment objectives have a large amount of overlap. It is expected that the elimination of similar fund offerings across product lines will result in a product line-up that is easier for investors to understand.

26. The Mergers are also being proposed because it is anticipated that the larger asset size of the combined Continuing Funds may provide the potential for efficiencies in the management of the investment portfolios of the securityholders, which may include lower portfolio transaction costs in some instances.

27. In conjunction with the Mergers, IGIM has called a meeting of the securityholders of the Investors Canadian Small Cap Growth Fund to approve a change of its investment objective that will permit the Fund to seek exposure to small- and mid- cap Canadian corporations, rather than simply small-cap Canadian Corporations. It is anticipated that this change, if approved by their securityholders, will benefit the Merging Fund involved in this Merger, Investors Canadian Small Cap Fund.

28. Overall, it is anticipated by IGIM that these changes will enhance the potential for improved long-term performance of the Funds.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation of the Decision Maker to make the decision.

The Decision of the Decision Makers under the Legislation is that the Exemption sought is granted, provided the securityholders of each Merging Fund approve the Merger.

“Christopher Besko”
Director, General Counsel
The Manitoba Securities Commission