HeadnoteA variationorder granted to labour sponsored investment fund corporationpermit it to pay co-operative marketing expenses out of fund assetscontrary to section 2.1 of National Instrument 81-105 Mutual FundSales Practices.
StatuesCitedSecuritiesAct, R.S.O. 1990, c.S.5, as am. S.144
RulesCitedNationalInstrument 81-105 Mutual Fund Sales Practices
INTHE MATTER OF
R.S.O.1990, CHAPTER S.5, AS AMENDED (the "Act")
INTHE MATTER OF
- MUTUAL FUNDS SALES PRACTICES
INTHE MATTER OF
NEWGENERATION BIOTECH (EQUITY) FUND INC.
(Section144 of the Act)WHEREASon December 22, 2000 the Ontario Securities Commission (the "Commission")granted New Generation Biotech (Equity) Fund Inc. (the "Fund")relief from section 2.1 of National Instrument ("NI") 81-105 tomake certain payments to participating dealers in connection withthe distribution of Class A Shares (the "Prior Decision");
ANDWHEREAS the Prior Decision does not provide relief forthe Fund to pay co-operative marketing expenses ("Co-op Expenses)to participating dealers;
ANDWHEREAS the Commission has received an application fromthe Fund for an order pursuant to section 144 of the Act to varythe Prior Decision to allow the Fund to pay Co-op Expenses toparticipating dealers;
ANDWHEREAS the Fund has represented to the Commission asfollows:
1.The Fund is a corporation incorporated under the Business CorporationsAct (Ontario). The Fund is registered as a labour sponsored investmentfund corporation under the Community Small Business InvestmentFunds Act (Ontario), as amended, and is a prescribed labour sponsoredventure capital corporation under the Income Tax Act (Canada),as amended.
2.The Class A Shares in the capital of the Fund are currently qualifiedfor distribution in the Province of Ontario pursuant to a renewalprospectus dated December 31, 2001 (the "Prospectus").
3.The Fund desires to pay for the reimbursement of Co-op Expensesincurred by certain dealers in promoting sales of Class A Shares,pursuant to co-operative marketing agreements the Fund may enterinto with such dealers.
4.The fact that the Fund intends, subject to regulatory approval,to pay the Co-op Expenses directly is disclosed in the Prospectus.
5.Requiring the manager of the Fund to pay the Co-op Expenses whilegranting an exemption to other labour funds permitting such fundsto pay similar Co-op Expenses directly, would put the Fund ata permanent and serious competitive disadvantage with its competitors.
6.The Fund undertakes to comply with all other provisions of NI81-105 other than those provisions from which the Fund has beengranted relief.
ITIS ORDERED pursuant to section 144 of the Act that thePrior Decision is hereby varied by replacing representation paragraph5 of the Prior Decision with the following representation:
"TheFund intends to pay to participating dealers a sales commissionof 6% of the net asset value per Class A Share purchased for certaincosts of distributing its shares directly. The Fund will alsopay a corporate finance fee of 0.5% of the gross proceeds raisedon the initial offering of Class A Shares to TD Securities Inc.The Fund intends to pay the co-operative marketing expenses incurredon its behalf by certain participating dealers pursuant to co-operativemarketing agreements entered into with such dealers. Collectively,the sales commissions, the corporate finance fee and the co-operativemarketing expenses are referred to as "Distribution Costs".
THISORDER is subject to the following conditions:
(a)the Co-op Expenses are otherwise permitted by, and paid in accordancewith NI 81-105, except to the extent that the Fund has previouslybeen granted specific relief under NI 81-105; and
(b)the Co-op Expenses are expensed when incurred for accounting purposes.
"PaulMoore" "H. Lorne Morphy"