Headnote
NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Approval of mutual fund merger and to suspend the rights of redemption of the units of continuing funds pursuant to the mergers – approval required because merger does not meet the criteria for pre-approval – merging funds have different investment objectives – fee structures of terminating funds and corresponding continuing funds not substantially similar – five-days suspension of redemptions needed to facilitate operational steps to transfer units upon completion of mergers
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss 5.5(1)(b), 5.5(1)(d), 5.6(2)(a)(ii) and 19.1.
March 10, 2010
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)
and
diversiTrust Stable Income Fund (the Terminating Fund)
and
Dynamic Strategic Yield Fund (the Continuing Fund, and together with the Terminating Fund, the Funds)
and
Dynamic Global Dividend Value Fund and Dynamic Energy Income Fund (the Other Continuing Funds)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for (i) approval of the merger (the Merger) of diversiTrust Stable Income Fund (the Terminating Fund) into Dynamic Strategic Yield Fund (the Continuing Fund) pursuant to clause 5.5(1)(b) of National Instrument 81-102 - Mutual Funds (NI 81-102) (the 81-102 Merger Approval) and (ii) approval pursuant to clause 5.5(1)(d) of NI 81-102 of the suspension of the rights of redemption of Series A units of the Continuing Fund and the Other Continuing Funds distributed pursurant to the Merger and the Other Mergers (as defined below) for up to five (5) business days subsequent to completion of such mergers (the 81-102 Redemption Approval, and collectively with the 81-102 Merger Approval, the 81-102 Approval).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator (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 (MI 11-102) is intended to be relied upon in each of the provinces and territories of Canada, other than the province of Ontario (the Non-Principal Jurisdictions).
Interpretation
Terms defined in MI 11-102 and National Instrument - 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
81-102 Merger Approval
1The Filer intends to merge the Terminating Fund into the Continuing Fund, which will involve the transfer of assets of the Terminating Fund in exchange for series A units (the Series A Units) of the Continuing Fund. Unitholders of the Terminating Fund will receive Series A Units of the Continuing Fund, the value of which are equal to the net asset value (NAV) of the units held by such unitholder in the Terminating Fund. The Filer also intends to merge diversiGlobal Dividend Value Fund with Dynamic Global Dividend Value Fund, diversiTrust Energy Income Fund with Dynamic Energy Income Fund and each of diversiTrust Income Fund, diversiTrust Income+ Fund and diversiYield Income Fund with Dynamic Strategic Yield Fund on the same basis (collectively, the Other Mergers).
2The Filer is a corporation existing under the Business Corporations Act (Ontario) (the OBCA) and is registered as a portfolio manager under the securities legislation of Ontario, Alberta, British Columbia, Saskatchewan, Manitoba, New Brunswick, Nova Scotia and Québec and as a commodity trading manager under the Commodity Futures Act (Ontario).
3At the time that the Merger steps are completed, the Filer will manage the investment portfolios of each of the Terminating Fund and the Continuing Fund.
4Each Fund was established pursuant to a declaration of trust under the laws of the Province of Ontario and the Filer is the trustee and manager of each Fund. Accordingly, each Fund is an associate of the Filer.
5Each Fund is a mutual fund for the purposes of the Legislation.
6The Continuing Fund offers its Series A Units and certain other series of units in all of the provinces and territories of Canada on a continuing basis pursuant to a simplified prospectus dated December 23, 2009.
7The head office of the Filer is located in Ontario.
8The Funds are reporting issuers under the applicable securities legislation of each province and territory of Canada (the Canadian Legislation) and are not on the list of defaulting reporting issuers maintained under such securities legislation.
9Unless an exemption has been obtained, each of the Funds follows the standard investment restrictions and practices established under the Canadian Legislation.
10The NAV for units of each of the Terminating Fund and the Continuing Fund is calculated on a daily basis on each day that the Toronto Stock Exchange (the TSX) is open for trading.
11The board of directors of the Filer approved the Merger on December 8, 2009 and a press release and material change report in respect of the Merger was filed on SEDAR in December 2009.
12As required by National Instrument 81-107 - Independent Review Committee for Investment Funds (NI 81-107), an Independent Review Committee (IRC) has been appointed for the Funds, and the Filer presented the terms of the Merger to the IRC for a recommendation. The IRC considered the proposed Merger and provided a positive recommendation to the Filer on the basis that the Merger would achieve a fair and reasonable result for each of the Funds.
13Unitholders of the Terminating Fund approved the Merger at a special meeting of unitholders held on March 2, 2010 (the Meeting).
14In connection with the Meeting, the Filer, as manager of the Terminating Fund, sent to the unitholders of the Terminating Fund a notice of special meeting of unitholders and joint management information circular (the Circular) each dated January 20, 2010 and a related form of proxy (collectively, the Meeting Materials).
15The Filer intends to rely on the exemption from the requirement to send annual and interim financial statements to unitholders of the Terminating Fund that was granted by the Principal Regulator to all mutual funds managed by the Filer pursuant to an order dated October 27, 2008. The Filer has sent to the unitholders of the Term