New Generation Biotech (Balanced) Fund Inc. - s. 9.1
IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")
AND
IN THE MATTER OF
NATIONAL INSTRUMENT 81-105
MUTUAL FUND SALES PRACTICES
AND
IN THE MATTER OF
NEW GENERATION BIOTECH (BALANCED) FUND INC.
EXEMPTION
(Section 9.1)
UPON the application (the "Application") of New Generation Biotech (Balanced)
Fund Inc. (the "Fund") to the Ontario Securities Commission (the "Commission") for an exemption pursuant to section 9.1 of National Instrument 81-105 Mutual Fund Sales Practices (the "National Instrument") from section 2.1 of the National Instrument to permit the Fund to make certain payments to participating dealers;
AND UPON considering the Application and the recommendation of staff of the
Commission;
AND UPON the Fund and NGB Management Inc. (the "Manager") having represented to the Commission that:
1.The Fund is a corporation incorporated under the Business Corporations Act (Ontario) which is registered as a labour sponsored investment fund corporation under the Community Small Business Investments Fund Act (Ontario) and is a prescribed as a labour-sponsored venture capital corporation under the Income Tax Act (Canada).
2.The Fund is a mutual fund as defined in subsection 1(1) of the Act. The Fund has filed a preliminary prospectus dated October 31, 2000 (the "Preliminary Prospectus") with the Commission and intends to distribute Class A Shares once a receipt for a final prospectus has been issued by the Director.
3.The authorized capital of the Fund consists of an unlimited number of Class A Shares, of which none are issued and outstanding as of the date hereof and an unlimited number of Class B Shares, of which 100 are issued and outstanding as of the date hereof.
4.The Manager, Triax Investment Management Inc. ("Triax") and the United Steelworkers of America, TCU National Local 1976 (the "Sponsor") formed and organized the Fund.
5.The Fund intends to pay to participating dealers a sales commission of 6% of the net asset value per Class A share purchased for certain costs of distributing its shares directly. The Fund will also pay a corporate finance fee of 0.5% of the gross proceeds raised on the initial offering of Class A Shares to TD Securities Inc. (collectively, these costs are referred to as "Distribution Costs"). These costs are fully disclosed in the Preliminary Prospectus. The fact that the Fund intends to pay the Distribution Costs out of fund assets is also disclosed in the Preliminary Prospectus.
6.Triax intends to pay trailing commissions to participating dealers as disclosed in the Preliminary Prospectus.
7.Due to the structure of the Fund, the most tax efficient way for the Distribution Costs to be financed is for the Fund to pay them directly.
8.Triax is the only member of the organization of the Fund, other than the Fund, available to pay the Distribution Costs. Triax is unlikely to have sufficient resources to pay the Distribution Costs, and would likely be obliged to finance the obligation to pay the Distribution Costs through borrowings and would thereby incur borrowing costs.
9.In order for the Fund to comply with section 2.1 of the National Instrument, the Fund would have to increase the fees payable to Triax by an amount equal to the borrowing costs incurred by Triax, plus an amount required to compensate Triax for any risks associated with fluctuations in the net asset value of the Fund and, therefore, fluctuations in Triax’s fee. Requiring compliance with section 2.1 of the National Instrument would cause the expenses of the Fund to increase above those contemplated in the Preliminary Prospectus.
10.The Fund undertakes to comply with all other provisions of the National Instrument. In particular, the Fund undertakes that all Distribution Costs paid by it will be compensation permitted to be paid to participating dealers under the National Instrument. The trailing commissions to be paid by Triax will be paid in compliance with the National Instrument.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the
public interest;
NOW THEREFORE pursuant to section 9.1 of the National Instrument, the Commission
hereby exempts the Fund from section 2.1 of the National Instrument to permit the Fund to pay the Distribution Costs.
December 22, 2000
"J.A. Geller""R. Stephen Paddon"