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Goodman & Company, Investment Counsel Ltd. and Dynamic Canadian Dividend Fund- MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications --
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 6.1 -- exemption from requirement in Item 5(b) of Form 81-101F1 to permit the Fund to disclose its start date as that of the Terminating Fund -- For purposes of the start date, units of each Existing Series will be indistinguishable from the Replacement Series.
National Instrument 81-102 Mutual Funds, s. 19.1 -- exemption from requirements in section 3.1 to be exempted from the seed capital requirement and sections 15.3(2), 15.6(a)(i), 15.6(b), 15.6(d), 15.8(2)(a), 15.8(3)(a) and 15.9(2)(d) to permit the Fund to use performance data of the Terminating Fund in its sales communications -- The Fund will inherit the assets of the Terminating Fund and will have sufficient liquidity. In addition, for purposes of disclosure of past performance in sales communications, units of each Existing Series will be indistinguishable from the Replacement Series.
National Instrument 81-106 Mutual Fund Continuous Disclosure, s. 17.1 -- exemption from requirements in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 4.4, Items 3.1(1), 3.1(7), 3.1(8), 4.2(1), 4.2(2), 4.3(1)(a) and 4.3(2) of Part B and Items 3(1) and 4 of Part C of Form 81-106F1 to enable the Fund to include in its annual and interim management reports of fund performance the financial highlights and past performance of the Terminating Fund -- For purposes of disclosure of financial data in the MRFP, units of each Existing Series will be indistinguishable from the Replacement Series.
Applicable Legislative Provisions
National Instrument 81-101 Mutual Fund Prospectus Disclosure, s. 6.1.
National Instrument 81-102 Mutual Funds, s. 19.1.
National Instrument 81-106 Mutual Fund Continuous Disclosure, s. 17.1.
May 24, 2006
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK,
NOVA SCOTIA, PRINCE EDWARD ISLAND,
NEWFOUNDLAND AND LABRADOR, YUKON,
NUNAVUT AND THE NORTHWEST TERRITORIES
(the "Jurisdictions")
AND
IN THE MATTER OF
NATIONAL INSTRUMENT 81-102 -- MUTUAL FUNDS
("NI 81-102")
AND
NATIONAL INSTRUMENT 81-101 -- MUTUAL FUND
PROSPECTUS DISCLOSURE ("NI 81-101")
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
GOODMAN & COMPANY,
INVESTMENT COUNSEL LTD.
(the "Filer")
AND
DYNAMIC CANADIAN DIVIDEND 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 for a decision under the securities legislation of the Jurisdictions (the "Legislation") for an exemption from:
(a) section 3.1 of NI 81-102 to permit the Filer not to comply with the $150,000 seed money required when establishing a new mutual fund; and
(b) sections 15.3(2), 15.6(a)(i), 15.6(b), 15.6(d), 15.8(2)(a), 15.8(3)(a) and 15.9(2)(d) of NI 81-102 which would otherwise preclude the Fund from including in its sales communications and reports to securityholders performance data and standard performance data that precedes the inception of the Fund and is derived from the past performance of the Terminating Fund (as defined below); and
(c) Item 5(b) of Part B of Form 81-101F1 to permit the Fund to disclose the start date of the Terminating Fund as its start date
(collectively, the "Requested Relief").
Under the Mutual Reliance Review System 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. Dynamic Canadian Dividend Fund Ltd. (the "Terminating Fund") is a mutual fund corporation subsisting under the laws of the Province of Ontario and offers series A, F and I shares pursuant to a simplified prospectus and annual information form dated December 19, 2005, as amended from time to time, (collectively, the "Terminating Fund's Prospectus").
2. The Filer is the manager of the Terminating Fund and will be the manager of the Fund.
3. The Filer has filed the annual management report of fund performance of the Terminating Fund for the period ended June 30, 2005 and the interim management report of fund performance of the Terminating Fund for the period ended December 31, 2005 (collectively, the "2005 Management Reports").
4. In order to provide investors in the Terminating Fund with a more tax-efficient investment fund, the Filer is proposing to convert the Terminating Fund from a mutual fund corporation to a mutual fund trust (the "Conversion").
5. The Conversion will not have any effect on the performance of the Fund going forward.
6. The Fund is a mutual fund trust that has been newly created for the purpose of implementing the Conversion. Each series of shares of the Terminating Fund (each, an "Existing Series") will be replaced by its corresponding series of units of the Fund (each, a "Replacement Series") as set forth below:
7. Subject to receipt of the relief requested from section 3.1 of NI 81-102, the Fund will not have any assets (other than a nominal amount to establish the Fund) or liabilities. In addition, the Fund will not have its own past performance data or financial highlights on the date the Conversion is implemented. In order to render the Conversion "seamless" for existing investors in the Terminating Fund:
(a) the investment objectives, investment strategies and management fees of the Fund will be identical to those of the Terminating Fund;
(b) the Manager proposes that the sales communications and reports to securityholders of the Fund (the "Fund's Communications") include the past performance data and standard performance data, as applicable, of the Terminating Fund; and
(c) the Manager proposes that the simplified prospectuses of the Fund (the "Fund's Simplified Prospectus") will:
(i) incorporate by reference the 2005 Management Reports and financial statements of the Terminating Fund for the corresponding periods (the "2005 Financial Statements") until the 2005 Management Reports and 2005 Financial Statements are superseded by more current management reports of fund performance and financial statements of the Fund; and
(ii) state that the date which is considered to be the date the Fund was started (the "Start Date") for each Replacement Series is based upon the Start Date of its corresponding Existing Series of the Terminating Fund.
8. The Conversion is subject to any necessary securityholder and regulatory approvals. Shareholders of the Terminating Fund will be asked to approve the Conversion at a special meeting of shareholders to be held on or about June 22, 2006.
9. If the Conversion is approved and implemented, then:
(a) the Terminating Fund will cease to exist;
(b) the assets of the Terminating Fund will become assets of the Fund; and
(c) each holder of Existing Series of shares will receive units of an equivalent value of its Replacement Series.
10. The Fund will not commence distributing its Replacement Series pursuant to the final simplified prospectus and annual information form of the Fund until after the Conversion is approved and implemented.
11. The information derived from the financial statements and performance data (as defined in NI 81-102) of each Existing Series is significant information which can assist investors in determining whether to purchase and continue to hold units of a Replacement Series.
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 provided that:
(a) the Fund's Communications include the past performance data and standard performance data, as applicable, of the Terminating Fund, prepared in accordance with Part 15 of NI 81-102; and
(b) the Fund's Simplified Prospectus:
(i) incorporates by reference the 2005 Management Reports and 2005 Financial Statements of the Terminating Fund until the 2005 Management Reports and 2005 Financial Statements are superseded by more current management reports of fund performance and financial statements of the Fund;
(ii) states that the Start Date for each Replacement Series is the Start Date of its corresponding Existing Series of the Terminating Fund; and
(iii) discloses the Conversion where the Start Date of a Replacement Series is stated.
"Rhonda Goldberg"
Assistant Manager, Investment Funds
Ontario Securities Commission