Headnote NP 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions – approval granted for change of control of mutual fund manager under s. 5.5(2) of NI 81-102 and approval for abridgement of the related 60 day notice requirement to 35 days under s. 5.8(1)(a) of NI 81-102 – approval conditional on at least 35 days notice to unitholders and no changes being made to the management, administration or portfolio management of the funds for at least 60 days after the notice delievered.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, sections 5.5(2), 5.8(1)(a) and 19.1
January 20, 2011
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 MANAGER)
AND
THE FUNDS LISTED IN SCHEDULE A
(THE FUNDS)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Manager for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for:
(a) approval of an indirect change of control of the Manager (the Manager Change of Control) of the Funds in accordance with Section 5.5(2) of National Instrument 81-102 Mutual Funds (NI 81-102) (the Approval Sought); and
(b) an abridgement of the 60 day notice period prescribed by Section 5.8(1)(a) of NI 81-102 for delivering notice of the Manager Change of Control to the securityholders of the Funds to 35 days (the Notice Requirement) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Manager 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 province and territory of Canada other than Ontario (collectively with Ontario, the Jurisdictions).
Interpretation
Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.
Representations
The decision is based on the following facts represented by the Manager:
The Manager
The Manager is a corporation incorporated under the Business Corporations Act (Ontario) and has its head office in Toronto, Ontario.
The Manager is the investment fund manager, portfolio advisor, trustee, principal distributor and registrar of the Funds.
The Manager is registered in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan as a portfolio manager and as a commodity trading manager in Ontario, and has applied to become registered as an investment fund manager in Ontario.
The Funds are reporting issuers in all of the Jurisdictions and, if in distribution, distribute their securities pursuant to a simplified prospectus and annual information form.
Neither the Manager nor any of the Funds is in default of applicable securities legislation in any of the Jurisdictions.
The Transaction
The Manager is an indirectly wholly-owned subsidiary of DundeeWealth Inc. (DWI). DWI is a financial services company listed on the Toronto Stock Exchange with its common shares trading under the symbol “DW”.
The Bank of Nova Scotia (BNS) currently owns approximately 18% of the shares of DWI. In a press release dated November 22, 2010, BNS announced that it intends to acquire DWI and that it has agreed to make an offer for all of the shares of DWI that BNS does not currently own (the Transaction).
In accordance with applicable take-over bid legislation, it is possible that BNS could take up the shares of DWI that are tendered to it and that the Transaction could close on January 20, 2011, or on such later date when all of conditions precedent have been satisfied or waived, and all registrations and approvals have been obtained (the Closing).
Following the Transaction, while BNS will become the new indirect owner of the Manager, there will not be any change in how the Manager operates or acts in relation to the Funds.
Manager Change of Control
- In respect of the impact of the Manager Change of Control on the Manager and the management and administration of the Funds:
(a) BNS has confirmed that there is no current intention:
(i) to make any substantive changes to how the Manager operates or administers the Funds;
(ii) to merge the Manager with another investment fund manager;
(iii) immediately following the Transaction, to change the manager of the Funds to either BNS or another affiliate of BNS; and
(iv) within a foreseeable period of time, to change the manager of the Funds to either BNS or another affiliate of BNS;
(b) BNS has confirmed that it currently intends to maintain the Funds as a separately managed fund family managed by the Manager;
(c) the Transaction after Closing is not expected to have any material impact on the business, operations or affairs of the Funds or the securityholders of the Funds;
(d) there is no current intention to change the directors, officers or advising or associate advising representatives of the Manager;
(e) it is not expected that there will be any change in how the Funds are managed or the expenses that are charged to the Funds as a result of the Transaction; and
(f) the Transaction is only expected to benefit the Manager and will not adversely affect its financial position or its ability to fulfill its regulatory obligations.
Notice Requirement
The notice to the securityholders of the Funds with respect to the Transaction in accordance with Section 5.8(1)(a) of NI 81-102 (the Notice) was mailed to such securityholders on December 14, 2010 (the Notice Date), which means that if the Closing occurs on January 20, 2011 such securityholders will have received the Notice approximately 35 days in advance of the Manager Change of Control.
We hereby respectfully submit that it would not be prejudicial to the securityholders of the Funds to abridge the notice period prescribed by Section 5.8(1)(a) of NI 81-102 from 60 days to not less than 35 days for the following reasons:
(a) while the Transaction will result in the Manager Change of Control, as noted above, there is not expected to be any change in how the Manager administers or manages the Funds;
(b) the Transaction will not have any impact on the securityholders interest in the Funds;
(c) the securityholders of the Funds will still be able to redeem their securities of the Funds prior to Closing; and
(d) the Transaction has been well publicized since November 22, 2010 such that most securityholders of the Funds are probably already aware of the Transaction.
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:
(a) the Approval Sought is granted; and
(b) the Exemption Sought is granted provided that:
(i) the securityholders of the Funds are given at least 35 days notice of the Manager Change of Control; and
(ii) no changes are made to the management, administration or portfolio management of the Funds for at least 60 days following the Notice Date.
“Darren McKall”
Darren McKall
Assistant Manager, Investment Funds Branch
Ontario Securities Commission
SEDAR Project # 1675723
SCHEDULE A
THE Funds
Dynamic Focus+ Funds
Dynamic Focus+ Balanced Fund
Dynamic Focus+ Equity Fund
Dynamic Focus+ Resource Fund
Dynamic Equity Income Funds
Dynamic Dividend Fund
Dynamic Dividend Income Fund
Dynamic Energy Income Fund
Dynamic Equity Income Fund
Dynamic Small Business Fund
Dynamic Strategic Yield Fund
Dynamic Fixed Income Funds
Dynamic Advantage Bond Fund
Dynamic Canadian Bond Fund
Dynamic Dollar-Cost Averaging Fund
Dynamic High Yield Bond Fund
Dynamic Money Market Fund
Dynamic Real Return Bond Fund
Dynamic Short Term Bond Fund
Dynamic Power Funds
Dynamic Power American Currency Neutral Fund
Dynamic Power American Growth Fund
Dynamic Power Balanced Fund
Dynamic Power Canadian Growth Fund
Dynamic Power Small Cap Fund
Dynamic Power Global Growth Fund
Dynamic Specialty Funds
Dynamic Diversified Real Asset Fund
Dynamic Financial Services Fund
Dynamic Global Infrastructure Fund
Dynamic Global Real Estate Fund
Dynamic Precious Metals Fund
Dynamic Strategic Portfolios
Dynamic Strategic All Income Portfolio
Dynamic Strategic Growth Portfolio
Dynamic Value Funds
Dynamic American Value Fund
Dynamic Canadian Dividend Fund
Dynamic Dividend Value Fund
Dynamic European Value Fund
Dynamic Far East Value Fund
Dynamic Global Discovery Fund
Dynamic Global Dividend Value Fund
Dynamic Global Value Balanced Fund
Dynamic Global Value Fund
Dynamic Value Balanced Fund
Dynamic Value Fund of Canada
DynamicEdge Trust Portfolios
DynamicEdge Balanced Portfolio
DynamicEdge Balanced Growth Portfolio
DynamicEdge Equity Portfolio
DynamicEdge Growth Portfolio
DynamicEdge 2020 Portfolio
DynamicEdge 2025 Portfolio
DynamicEdge 2030 Portfolio
Dynamic Aurion Funds
Dynamic Aurion Total Return Bond Fund
DYNAMIC CORPORATE CLASS FUNDS
Corporate Class Equity Income Funds
Dynamic Dividend Income Class
Dynamic Strategic Yield Class
Corporate Class Fixed Income Funds
Dynamic Advantage Bond Class
Dynamic Money Market Class
Corporate Class Power Funds
Dynamic Power American Growth Class
Dynamic Power Balanced Class
Dynamic Power Canadian Growth Class
Dynamic Power Global Balanced Class
Dynamic Power Global Growth Class
Dynamic Power Global Navigator Class
Corporate Class Value Funds
Dynamic Canadian Dividend Class
Dynamic Canadian Value Class
Dynamic EAFE Value Class
Dynamic Global Discovery Class
Dynamic Global Dividend Value Class
Dynamic Global Value Class
Dynamic Value Balanced Class
Corporate Class Specialty Funds
Dynamic Emerging Markets Class
Dynamic Global Energy Class
Dynamic Strategic Gold Class
DynamicEdge Corporate Class Portfolios
DynamicEdge Balanced Class Portfolio
DynamicEdge Balanced Growth Class Portfolio
DynamicEdge Equity Class Portfolio
DynamicEdge Growth Class Portfolio
DynamicEdge 2020 Class Portfolio
DynamicEdge 2025 Class Portfolio
DynamicEdge 2030 Class Portfolio
Dynamic Aurion Corporate Class Funds
Dynamic Aurion Canadian Equity Class
Dynamic Aurion Tactical Balanced Class
Dynamic Aurion Total Return Bond Class
Dynamic Managed Portfolios
DMP Canadian Dividend Class
DMP Canadian Value Class
DMP Global Value Class
DMP Power Canadian Growth Class
DMP Power Global Growth Class
DMP Resource Class
DMP Value Balanced Class
Dynamic Protected Mutual Funds
Dynamic Protected Dividend Value Fund
Dynamic Protected Global Value Fund
Dynamic Venture Opportunities Fund Ltd.
Marquis Institutional Solutions
Marquis Institutional Balanced Portfolio
Marquis Institutional Balanced Growth Portfolio
Marquis Institutional Growth Portfolio
Marquis Institutional Equity Portfolio
Marquis Institutional Canadian Equity Portfolio
Marquis Institutional Global Equity Portfolio
Marquis Institutional Bond Portfolio
Marquis Portfolio Solutions
Marquis Balanced Portfolio
Marquis Balanced Growth Portfolio
Marquis Growth Portfolio
Marquis Equity Portfolio
Marquis Balanced Income Portfolio