Cumberland Investment Management Inc. and Cumberland Capital Appreciation Fund - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- exemption from unitholder approval requirement in clause 5.1(c) of NI 81-102 -- mutual fund permitted to change its investment objective without seeking unitholder approval -- all unitholders of the fund have entered into discretionary investment management agreements giving full discretionary authority to portfolio manager -- convening of unitholder meeting represents unnecessary expense.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.1(c), 19.1.

January 22, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO AND NOVA SCOTIA

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

CUMBERLAND INVESTMENT MANAGEMENT INC.

(the Filer)

AND

IN THE MATTER OF

CUMBERLAND CAPITAL APPRECIATION FUND

(the Fund)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer, on behalf of the Fund, for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Fund from the requirement contained in clause 5.1(c) of National Instrument 81-102 Mutual Funds (NI 81-102) requiring a mutual fund to obtain the prior approval of its securityholders before the fundamental investment objective of the mutual fund is changed (the Requested Relief).

Under the Mutual Reliance Review System (MRRS) for Exemptive Relief Applications:

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

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

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

1. The Filer is a corporation established under the laws of Ontario and is the manager and trustee of the Fund.

2. The Fund is an open-end mutual fund trust established under the laws of the Province of Ontario. The Fund is a reporting issuer in each Jurisdiction.

3. Cumberland Private Wealth Management Inc. (CPWM) is registered as an investment dealer in each Jurisdiction and is a member of the Investment Dealers Association of Canada authorized to provide portfolio investment management services. It is the investment manager and distributor of the Fund.

4. Units of the Fund are offered for sale on a continuous basis in each Jurisdiction pursuant to a simplified prospectus and annual information form and the Fund is otherwise subject to NI 81-102. Units of the Fund are exclusively offered through discretionary investment management services provided by CPWM.

5. The Fund was established as an efficient and cost effective means of providing discretionary investment management services to clients of CPWM, including all of the investors in the Fund, as an alternative to segregated account management.

6. The Filer has determined that it is appropriate to change the fundamental investment objective of the Fund from:

"to seek to achieve long-term capital appreciation while managing risk, by investing in equity securities and high-quality government and corporate fixed-income securities."

to:

"to seek to achieve long-term capital appreciation while managing risk, by investing in equity securities."

7. This change in the Fund's fundamental investment objective is being proposed as CPWM believes a dedicated capital appreciation account is appropriate for its clients seeking long term capital growth. As a result the Fund will target a 100% equity mandate which is primarily, but not limited to, North American equity securities. The fundamental approach to selecting investments will continue to be oriented to individual stock selection and a value driven strategy and will seek to achieve long term capital appreciation while managing risk.

8. CPWM is authorized under its discretionary investment management agreements with each client who is an investor in the Fund to make any investment decisions on behalf of the client (provided such investment is consistent with the mandate established for that client). This would include buying and selling securities of the Fund in favour of another fund or other securities without obtaining the client's approval. The unitholders of the Fund are relying entirely on CPWM to make investment decisions for them and, in these circumstances, the change of a fundamental investment objective is analogous to the unitholder changing to another fund managed by the Filer.

9. The Filer and CPWM believe that the change in the Fund's fundamental investment objective is in the best interests of the Fund's unitholders.

10. Paragraph 5.1(c) of NI 81-102 requires that unitholder approval be obtained for any change to the fundamental investment objective of the Fund. The Filer believes that, in the circumstances, a unitholder meeting convened for the purpose of obtaining unitholder approval to change the fundamental investment objective of the Fund is not desirable and represents an unnecessary cost and inconvenience to the Filer, the Fund and the unitholders of the Fund.

11. The declaration of trust governing the Fund does not require unitholder approval in order for the Filer to change the fundamental investment objective of the Fund.

12. If the Requested Relief is granted, the Filer proposes to amend the Fund's simplified prospectus and annual information form, issue a press release and file a material change report announcing the change.

13. The proposed change of the fundamental investment objective is neutral to the unitholders of the Fund from a fee and expense perspective.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted.