One time trade of securities between mutual funds in the same family of funds that are not reporting issuers to implement fund merger is exempted from the conflict of interest restrictions in section 118(2)(b).
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 118(2)(b), 121(2)(a)(ii).
November 8, 2005
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
IN THE MATTER OF
GOODMAN & COMPANY,
INVESTMENT COUNSEL LTD.
WHEREAS the Ontario Securities Commission has received an application (the "Application") from Goodman & Company, Investment Counsel Ltd. ("Goodman") for an order pursuant to clause 121(2)(a)(ii) of the Securities Act (Ontario) (the "Securities Act") for relief from the prohibition in paragraph 118(2)(b) of the Securities Act in connection with the merger (the "Merger") of Dynamic Equity Hedge Fund into Dynamic Alpha Performance Fund (each, a "Fund" and collectively, the "Funds");
AND WHEREAS it has been represented by Goodman that:
1. Each Fund is a "mutual fund in Ontario" as defined in the Securities Act.
2. Each Fund was established as a trust and Goodman is the trustee, manager and portfolio manager of each Fund.
3. Each Fund offers its units in all of the Provinces and Territories of Canada pursuant to applicable prospectus exemptions.
4. The Funds are not offered by way of prospectus and are neither "reporting issuers" nor subject to National Instrument 81-102.
5. The approval of the unitholders of Dynamic Equity Hedge Fund (the "Terminating Fund") and Dynamic Alpha Performance Fund (the "Continuing Fund") is not required by the Funds' constating documents or offering documents or under applicable securities laws in order to effect the Merger.
6. The Merger will be advantageous for investors because, among other reasons:
(a) investors in the Continuing Fund will enjoy increased economies of scale and potentially lower management expenses borne indirectly by investors as part of a larger Fund; and
(b) investors will benefit from becoming investors in a larger Fund which will be better able to maintain a diversified, well-managed portfolio with a smaller proportion of assets set aside to fund redemptions.
7. The Terminating Fund and the Continuing Fund have the same fee structures and valuation procedures.
8. The assets of the Terminating Fund will be transferred to the Continuing Fund at a value determined in accordance with the valuation procedures set out in the constating documents of the Terminating Fund and the Continuing Fund. The Continuing Fund will then issue units of the Continuing Fund to the Terminating Fund having an aggregate net asset value equal to the value of the assets transferred. Because the transfer of assets will take place at a value determined by common valuation procedures and the issue of units will be based upon the net asset value of the assets received by the Continuing Fund, Goodman believes that there will be no conflict of interest for Goodman to effect the Merger.
9. Units of the Funds are redeemable weekly at their respective net asset values. Unitholders of the Terminating Fund will be given sufficient notice of the Merger to allow them to redeem their units prior to the Merger, should they wish to do so. A letter dated November 7, 2005 (which date is at least 30 days prior to the date of the Merger) was sent to the unitholders of the Terminating Fund notifying the unitholders of the Merger.
10. Goodman expects to implement the Merger on or about December 9, 2005, and in any event no later than December 31, 2005.
11. In the opinion of Goodman, the Merger will not adversely affect unitholders of the Terminating Fund or the Continuing Fund.
12. In the absence of this order, Goodman would be prohibited from purchasing and selling the securities of the Terminating Fund in connection with the Merger.
AND WHEREAS the Commission is satisfied that the test contained in the legislation that provides the Commission with the jurisdiction to make the Order has been met;
IT IS ORDERED pursuant to clause 121(2)(a)(ii) that paragraph 118(2)(b) of the Securities Act shall not apply so as to prevent the sale of the assets of the Terminating Fund to the Continuing Fund in connection with the Merger provided that the Merger is completed no later than December 31, 2005.
"Paul M. Moore"
"Carol S. Perry"