Goodman & Company, Investment Counsel Ltd.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to allow mutual fund to short sell up to 20% of net assets, subject to certain conditions -- National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.6(a), 2.6(c), 6.1(1), 19.1(2).

January 25, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

GOODMAN & COMPANY,

INVESTMENT COUNSEL LTD.

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Funds (as defined below) for a decision under the securities legislation of the Jurisdiction of the principal regulator ("Legislation") that notwithstanding clauses 2.6(a), 2.6(c) and 6.1(1) of National Instrument 81-102 -- Mutual Funds ("NI 81-102"), each of the Funds is permitted to sell securities short, to provide a security interest over the Fund's assets in connection with short sales and deposit the Fund's assets with either its custodian or a dealer as security for such transactions, on the terms and conditions described below (the "Requested Relief"). The Funds are herein defined as mutual funds (other than the Dynamic Dollar-Cost Averaging Fund, Dynamic Money Market Class, Dynamic Money Market Fund, Dynamic Short Term Bond Fund, Dynamic Corporate Bond Strategies Fund and Dynamic Strategic Global Bond Fund) subject to National Instrument 81-101 -- Mutual Fund Prospectus Disclosure ("NI 81-101") and NI 81-102 for which the Filer currently acts as manager (the "Existing Funds") and any other mutual funds subject to NI 81-101 and NI 81-102 which may be created in the future for which the Filer will act as manager (together with the Existing Funds, the "Funds").

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

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

(b) the Filer has 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 (together with Ontario, the "Jurisdictions").

Interpretation

Terms defined in National Instrument 14-101 -- Definitions and NI 81-102 have the same meaning if used in this decision, unless otherwise defined in this decision.

Representations

1. The Filer is a corporation existing under the laws of the Province of Ontario, is registered with the OSC as a portfolio manager in the category of adviser, is further registered in that category in each of British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, New Brunswick, Prince Edward Island and Nova Scotia and is registered as a commodity trading manager and investment fund manager with the OSC. The Filer is not in default of securities legislation in any of the Jurisdictions.

2. Each of the Funds is or will be an open-ended mutual fund trust or corporation established under the laws of the Province of Ontario. The securities of each of the Funds are or will be qualified for distribution in the Jurisdictions pursuant to simplified prospectuses and annual information forms prepared and filed in accordance with the Legislation.

3. For each Fund, the Filer (i) is or will be the trustee (where applicable), manager, principal distributor and registrar and (ii) may be the portfolio adviser.

4. The Filer proposes that each Fund be authorized to engage in a limited, prudent and disciplined amount of short selling. The Filer is of the view that the Funds could benefit from the implementation and execution of a controlled and limited short selling strategy.

5. Short sales will be made consistent with each Fund's investment objectives and strategies.

6. In order to effect a short sale, a Fund will borrow securities from either its custodian or a dealer (in either case, the "Borrowing Agent"), which Borrowing Agent may be acting either as principal for its own account or as agent for other lenders of securities.

7. The Fund will be required to deposit Fund assets with the Borrowing Agent as security in connection with the short sale transaction in accordance with usual industry practice.

8. All short sales will be effected through market facilities through which the securities sold short are normally bought and sold and will be sold short within normal trade settlement periods for the market in which the short sale is effected. Securities will be sold short for cash only with the Fund assuming the obligation to return to the Borrowing Agent the securities borrowed to effect the short sale transaction.

9. The securities sold short will not be "illiquid assets" as such term is defined in NI 81-102, and will be securities that are either:

(a) listed and posted for trading on a stock exchange and

1. the issuer of which has a market capitalization of not less than CDN $100 million, or the equivalent thereof, at the time the short sale is effected, or

2. that the Fund's portfolio adviser has pre-arranged to borrow for the purpose of such sale; or

(b) bonds, debentures or other evidences of indebtedness of, or guaranteed by, any issuer.

10. Each Fund will hold "cash cover" (as defined in NI 81-102) to cover its obligations in relation to the short sale.

11. Each Fund will maintain appropriate internal controls regarding its short sales prior to conducting any short sales, including written policies and procedures and risk management controls.

12. Each Fund will keep proper books and records of all short sales and Fund assets deposited with Borrowing Agents as security.

13. As of the date of this Decision the Funds will no longer rely on the previous relief granted in the Decision dated December 14, 2005In the Matter of Goodman & Company, Investment Counsel Ltd. (the "2005 Short Selling Relief"). The 2005 Short Selling Relief permits certain Funds to engage in short selling based on certain conditions that are more restrictive than the conditions contained herein.

Decision

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 Requested Relief is granted provided that:

1. any short sales made by a Fund will be subject to compliance with the investment objectives of the Fund;

2. any short sales will be effected through market facilities through which the securities sold short are normally bought and sold;

3. securities will be sold short for cash only;

4. no proceeds from short sales by a Fund will be used by the Fund to purchase long positions in securities other than cash cover;

5. the Requested Relief does not apply to any Fund that is classified as a money market fund;

6. the aggregate market value of all securities sold short by a Fund will not exceed 20% of the total net assets of the Fund on a daily marked-to-market basis;

7. the aggregate market value of all securities of an issuer that are sold short by a Fund will not exceed 5% of the total net assets of the Fund on a daily marked-to-market basis;

8. a Fund will hold "cash cover" (as defined in NI 81-102) in an amount, including the Fund assets deposited with Borrowing Agents as security in connection with short sale transactions, that is at least 150% of the aggregate market value of all securities sold short by the Fund on a daily marked-to-market basis;

9. except where the Borrowing Agent is a Fund's custodian, when the Fund deposits Fund assets with a Borrowing Agent as security in connection with a short sale transaction, the amount of Fund assets deposited with the Borrowing Agent does not, when aggregated with the amount of Fund assets already held by the Borrowing Agent as security for outstanding short sale transactions of the Fund, exceed 10% of the total net assets of the Fund, taken at market value as at the time of the deposit;

10. for short sale transactions in Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund shall be a registered dealer in Canada and a member of a self-regulatory organization that is a participating member of the Canadian Investor Protection Fund;

11. for short sale transactions outside of Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund shall:

(a) be a member of a stock exchange and, as a result, be subject to a regulatory audit; and

(b) have a net worth in excess of the equivalent of $50 million determined from its most recent audited financial statements that have been made public;

12. the security interest provided by a Fund over any of its assets that is required to enable the Fund to effect short sale transactions is made in accordance with industry practice for that type of transaction and relates only to obligations arising under such short sale transactions;

13. each Fund will maintain appropriate internal controls regarding its short sales including written policies and procedures, risk management controls and proper books and records;

14. prior to conducting any short sales, a Fund discloses in its simplified prospectus a description of: (i) short selling, (ii) how the Fund intends to engage in short selling, (iii) the risks associated with short selling, and (iv) in the Investment Strategy section of the simplified prospectus, the Fund's strategy and the Requested Relief;

15. prior to conducting any short sales, a Fund discloses in its annual information form the following information:

(a) that there are written policies and procedures in place that set out the objectives and goals for short selling and the risk management procedures applicable to short selling;

(b) who is responsible for setting and reviewing the policies and procedures referred to in the preceding paragraph, how often the policies and procedures are reviewed, and the extent and nature of the involvement of the board of directors of the manager in the risk management process;

(c) the trading limits or other controls on short selling in place and who is responsible for authorizing the trading and placing limits or other controls on the trading;

(d) whether there are individuals or groups that monitor the risks independent of those who trade; and

(e) whether risk measurement procedures or simulations are used to test the portfolio under stress conditions; and

16. the Requested Relief shall terminate upon the coming into force of any legislation or rule dealing with the matters referred to in subsections 2.6(a), 2.6(c) and 6.1(1) of NI 81-102.

"Sonny Randhawa"
Manager, Investment Funds Branch
Ontario Securities Commission