1832 Asset Management L.P. and Dynamic Credit Absolute Return Fund

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from certain provisions of NI 81-101, NI 41-101, NI 81-102 and NI 81-106 to permit new ETF series of continuing funds to use the past performance, financial data, start date and fund expenses of corresponding terminating funds in their sales communications, simplified prospectus, ETF facts documents, management reports of fund performance and financial statements -- subject to conditions.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 2.1 and 6.1(1).

Form 81-101F1 Contents of Simplified Prospectus, Item 8(2) of Part B.

National Instrument 81-102 Investment Funds, ss. 2.3(1)(f), 3.1, 15.1.1, 15.3(2), 15.6(1)(a)(i)(A), 15.6(1)(b), 15.6(1)(d)(i), 15.8(2)(a), 15.8(2)(a.1), 15.8(3)(a), 15.8(3)(a.1), and 19.1(1).

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 2.1, 2.3, 4.4 and 17.1(1).

Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, Items 3.1(1), 3.1(7), 3.1(7.1), 3.1(8), 4.1(1), 4.1(2), 4.2(1), 4.2(2), 4.3(1)(a) and 4.3(1)(b) of Part B, and Items 3(1) and 4 of Part C.

November 7, 2023

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 1832 ASSET MANAGEMENT L.P. (the Filer) AND IN THE MATTER OF DYNAMIC CREDIT ABSOLUTE RETURN FUND (the Continuing Fund)

DECISION

Background

The principal regulator in the Jurisdiction (as defined below) has received an application from the Filer, on behalf of the Continuing Fund, a mutual fund that will offer Series A, F, FH, H, O and OP units, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that grants exemptive relief to the Filer and the Continuing Fund as set forth below (collectively, the Exemption Sought):

(a) an exemption from section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) and the Instructions of Part I of Form 81-101F3 Contents of Fund Facts Document (Form 81-101F3) for the purpose of the following exemptions sought from Form 81-101F1 Contents of Simplified Prospectus (Form 81-101F1):

(i) to modify Item 8(2) of Part B of Form 81-101F1 and Item 2 of Part I of Form 81-101F3 to permit each series of the Continuing Fund to disclose its "series start date" as the start date of the series of DCARF I within the simplified prospectus and each Fund Fact (as defined below) of the Continuing Fund; and

(ii) Item 10(b) of Part B of Form 81-101F1 to permit each series of the Continuing Fund to use the Terminating Funds' past performance data to calculate each series of the Continuing Fund's investment risk rating when complying with Item 4 of Appendix F Investment Risk Classification Methodology (Appendix F) to National Instrument 81-102 Investment Funds (NI 81-102);

(b) an exemption from section 2.1 of NI 81-101 for the purposes of the following exemptions sought from Form 81-101F3:

(i) Item 2 of Part I of Form 81-101F3 to permit each series of the Continuing Fund to disclose its "series start date" as the start date of the series of DCARF I within the simplified prospectus and each Fund Fact of the Continuing Fund;

(ii) Item 2 of Part I of Form 81-101F3 to permit each series of the Continuing Fund to disclose the management expense ratio (MER) of the series of the Terminating Funds as its information in the applicable Fund Facts;

(iii) Item 5 of Part I of Form 81-101F3 to permit each series of the Continuing Fund to use the past performance data of the Terminating Funds in the "Average return", "Year-by-year returns" and "Best and worst 3-month returns" sections in the Fund Facts for each series of the Continuing Fund; and

(iv) Item 1.3 of Part II of Form 81-101F3 to permit each series of the Continuing Fund to use the MER, the trading expense ratio and the expenses of the Terminating Funds in the "Fund expenses" section of the applicable Fund Facts;

(c) an exemption from sections 15.3(2), 15.6(1)(a)(i)(A), 15.6(1)(b), 15.6(1)(d)(i), 15.8(2)(a), 15.8(2)(a.1), 15.8(3)(a) and 15.8(3)(a.1) of NI 81-102 to permit each series of the Continuing Fund to use the performance data of the Terminating Funds in sales communications and reports to unitholders (collectively, Fund Communications) of the Continuing Fund;

(d) an exemption from Section 15.1.1 of NI 81-102 and Items 2 and 4 of Appendix F to NI 81-102 to permit each series of the Continuing Fund to calculate its investment risk level using the performance history of the Terminating Funds (together with paragraphs (a), (b) and (c) above, the Past Performance Relief);

(e) an exemption from sections 2.1 and 2.3 of NI 81-106 to permit the Continuing Fund to file comparative annual and interim financial statements that include, in respect of each series of the Continuing Fund, information derived from the financial statements of the Terminating Funds;

(f) an exemption from section 4.4 of NI 81-106 for relief from the requirements of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1) set out below, to permit the Continuing Fund to include in its annual and interim management reports of fund performance (MRFPs), in respect of each series of the Continuing Fund, the performance data and information derived from the financial statements and other financial information (collectively, the Financial Data) of the Terminating Funds, as follows:

(i) Items 3.1(1), 3.1(7), 3.1(7.1) and 3.1(8) of Part B of Form 81-106F1 to permit each series of the Continuing Fund to use the financial highlights of the Terminating Funds in its Form 81-106F1;

(ii) Items 4.1(1), 4.1(2), 4.2(1), 4.2(2), 4.3(1)(a) and 4.3(1)(b) of Part B of Form 81-106F1 to permit each series of the Continuing Fund to use the past performance data of the Terminating Funds in its Form 81-106F1; and

(iii) Items 3(1) and 4 of Part C of Form 81-106F1 to permit each series of the Continuing Fund to use the financial highlights and past performance data of the Terminating Funds in its Form 81-106F1 (together with paragraph (d) above, the Continuous Disclosure Relief).

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 Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filer and the Continuing Fund in all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Continuing Fund means Dynamic Credit Absolute Return Fund.

DCARF I means Dynamic Credit Absolute Return I Fund.

DCARF II means Dynamic Credit Absolute Return II Fund.

Funds means the Continuing Fund and the Terminating Funds.

Fund Facts means a prescribed summary disclosure document required pursuant to NI 81-101 in the form prescribed by Form NI 81-101F3, in respect of one or more series of units of the Continuing Fund being distributed under a simplified prospectus.

Terminating Funds means DCARF I and DCARF II.

Representations

This decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is a limited partnership formed and organized under the laws of the province of Ontario. The general partner of the Filer is 1832 Asset Management G.P. Inc., an Ontario corporation wholly-owned by the Bank of Nova Scotia, with its head office located in Toronto, Ontario.

2. The Filer is registered as: (i) a portfolio manager in all of the provinces of Canada and in the Northwest Territories and the Yukon; (ii) an exempt market dealer in all of the provinces of Canada (except Prince Edward Island and Saskatchewan); (iii) an investment fund manager in Ontario, Quebec, Newfoundland and Labrador and the Northwest Territories; (iv) a commodity trading manager in Ontario; (v) an adviser in Manitoba; and (vi) a derivatives portfolio manager in Quebec.

3. The Filer is the investment fund manager and portfolio manager of the Terminating Funds and will be the investment fund manager and portfolio manager of the Continuing Fund upon creation.

4. The Filer is not in default of securities legislation in any of the Jurisdictions.

The Funds

5. Each of the Terminating Funds is a mutual fund structured as a trust that is organized and governed by the laws of the Province of Ontario. Upon creation, the Continuing Fund will be a reporting issuer in the Jurisdiction(s) in which its units are distributed.

6. Subject to any exemptions that may be granted by the applicable securities regulatory authorities, the Continuing Fund will be an open-ended mutual fund subject to the provisions of NI 81-102. Unitholders will have the right to vote at a meeting of unitholders in respect of matters prescribed by NI 81-102.

7. Units of DCARF I are not qualified for distribution to the public under any applicable Canadian securities laws and are offered pursuant to an offering memorandum (the DCARF I Offering Memorandum).

8. Units of DCARF II are qualified for distribution to the public in each of the Jurisdictions under a simplified prospectus dated October 14, 2022, (the DCARF II Prospectus and together with the DCARF I Offering Memorandum, the Offering Documents) and fund facts documents dated October 14, 2022, each of which has been prepared in accordance with NI 81-102.

9. On September 7, 2023, the Filer filed a final simplified prospectus and fund facts documents prepared in accordance with NI 81-101 for the Continuing Fund. The Filer will not begin distributing units, other than those issued to the Filer as seed capital, of the Continuing Fund prior to the Mergers.

10. The fundamental investment objectives and investment strategies of the Continuing Fund will be substantially similar to those of the Terminating Funds.

11. The Continuing Fund's investment objectives and investment strategies will follow the standard investment restrictions and practices established under NI 81-102, except pursuant to the terms of any exemption that has been obtained.

12. None of the Funds are in default of securities legislation in any of the Jurisdictions.

The Mergers

13. DCARF I offers Series A, Series F and Series O units.

14. DCARF II offers Series A, Series F, Series FH, Series H and Series OP units.

15. The Continuing Fund will offer Series A, Series F, Series FH, Series H, Series O and Series OP units, which are qualified for distribution to the public pursuant to a simplified prospectus. The Continuing Fund will also be creating a Series A1 and a Series F1, each of which will not be qualified for distribution to the public pursuant to the simplified prospectus. Unitholders of Series A and Series F of DCARF I will be merged into Series A1 and Series F1 of the Continuing Fund on the Merger Date, and each of those series will subsequently be hard capped by the Filer. There are no units outstanding of Series O of DCARF I, and so no corresponding non-prospectus qualified series will be created on the Continuing Fund. Unitholders of Series A, Series F, Series FH, Series H and Series OP units of DCARF II will be merged into Series A, Series F, Series FH, Series H and Series OP of the Continuing Fund, respectively.

16. The Filer proposes to merge the Terminating Funds into the Continuing Fund on or about the Merger Date.

17. Each Merger will be completed without the approval of unitholders of the Terminating Funds in accordance with the requirements of NI 81-102, as applicable, and with each Terminating Fund's declaration of trust. Notice of each Merger has been provided to unitholders of the Terminating Funds.

18. The Filer does not consider the Mergers to constitute a "material change" for the Continuing Fund and accordingly, there is no intention to convene a meeting of unitholders of the Continuing Fund to approve the Mergers pursuant to paragraph 5.1(1)(g) of NI 81-102.

19. Following the Mergers, the Terminating Funds will be terminated on or about the Merger Date and will be wound up as soon as reasonably possible thereafter.

20. The Continuing Fund is being created for the purpose of implementing each Merger, and therefore:

(a) upon completion of the Mergers, the unitholders of the Terminating Funds will have rights as investors in the Continuing Fund that are substantially similar in all material aspects to the rights they had as investors in the Terminating Funds prior to the Mergers;

(b) the unitholders of the Terminating Funds will hold units of the equivalent series of the Continuing Fund, as applicable, with the same aggregate net asset value that they held before as unitholders of the Terminating Funds;

(c) the Continuing Fund will have an investment objective and investment strategies that are substantially similar to the investment objectives and investment strategies of the Terminating Funds;

(d) the portfolio manager of the Terminating Funds will be the same as the portfolio manager of the Continuing Fund;

(e) the Continuing Fund will have valuation procedures that are identical to the valuation procedures of the Terminating Funds; and

(f) the fees payable by each series of the Continuing Fund will be the same as, or lower than, the fees payable by each series of the Terminating Funds, and thus there will be either no change to or lowering of the current fee structure of the Terminating Funds as a result of the Mergers. The operating expenses, including an administration fee, paid by each series of the Continuing Fund are expected to be the same as or lower than those paid by each series of DCARF I, which do not pay an administration fee, and DCARF II. In each case, neither will have a material impact on unitholders of the Terminating Funds who will become unitholders of the Continuing Fund.

21. As a result, notwithstanding the Mergers, the Filer considers that the Continuing Fund will be managed in a manner which is substantially similar in all material respects to the manner in which the Terminating Funds have been managed.

Past Performance Relief and Continuous Disclosure Relief

22. The Filer is seeking to make the Mergers as seamless as possible for investors in the Terminating Funds. The past performance data and financial information of the Terminating Funds is significant information which can assist investors in determining whether to purchase and/or to continue to hold units of the Continuing Fund. Other than seed capital, the Filer will not commence distributing units of the Continuing Fund until the completion of the Mergers. As a result, as at the Merger Date, in the absence of the Exemption Sought, the Continuing Fund will not have its own past performance or series specific financial data on which investors can base an investment decision.

23. In particular, the Filer submits that treating each series of the Continuing Fund as fungible with each series of the Terminating Funds for purposes of the past performance data and financial information of the Continuing Fund would be beneficial to investors and that to do otherwise would cause unnecessary confusion among investors concerning the difference between each series of the Terminating Funds and each series of the Continuing Fund.

24. In connection with the Exemption Sought, the Filer proposes that:

(a) The simplified prospectus for the Continuing Fund will contain information about each series of the Continuing Fund that is based on: (i) for the period beginning January 2, 2014 (i.e., the launch date of DCARF I) and ending one day prior to the launch of DCARF II, the information disclosed in the DCARF I Offering Memorandum; and (ii) for the period beginning on August 6, 2019 (i.e., the launch date of DCARF II) and ending on the Merger Date, the information disclosed in the DCARF II Prospectus, until such time as the Continuing Fund has information regarding each of its series based on its own operations for the applicable periods.

(b) The Fund Facts for each series of the Continuing Fund will contain information that is based on: (i) for the period beginning January 2, 2014 (i.e., the launch date of DCARF I) and ending one day prior to the launch of DCARF II, the information disclosed in the DCARF I Offering Memorandum; and (ii) for the period beginning on August 6, 2019 (i.e., the launch date of DCARF II) and ending on the Merger Date, the information disclosed in the DCARF II Prospectus, until such time as the Continuing Fund has information regarding each of its series based on its own operations for the applicable periods.

(c) The risk level for each series of the Continuing Fund will be based on, and calculated in accordance with: (i) the performance of DCARF I for the period beginning January 2, 2014 (i.e., the launch date of DCARF I) and ending one day prior to the launch of DCARF II; and (ii) the performance of DCARF II for the period beginning August 6, 2019 and ending on the Merger Date, until such time as each series of the Continuing Fund has the requisite 10-years of performance history. In this regard, the Filer considers that it is appropriate that each series have its own investment risk level, as contemplated in Item 3 of Appendix F of NI 81-102.

(d) The MRFPs and financial statements for the Continuing Fund will contain information about each series of the Continuing Fund that is based on: (i) the information disclosed in the past financial statements for DCARF I for the period beginning January 2, 2014 (i.e., the launch date of DCARF I) and ending one day prior to the launch of DCARF I; and (ii) the information disclosed in the past financial statements for DCARF II for the period beginning August 6, 2019 and ending on the Merger Date, until such time as the Continuing Fund has the requisite information based on its own operations for the applicable periods.

(e) The Fund Communications for each series of the Continuing Fund will include past performance data, prepared in accordance with Part 15 of NI 81-102, of: (i) DCARF I for the period beginning January 2, 2014 (i.e., the launch date of DCARF I) and ending one day prior to the launch of DCARF I; and (ii) DCARF II for the period beginning August 6, 2019 and ending on the Merger Date, until such time as the Continuing Fund has the requisite information based on its own operations for the applicable periods.

25. The Filer will include disclosure about the Mergers in each of the documents listed in paragraph 24, to the extent the Filer considers appropriate for the type of document.

26. The Filer submits that investors will not be misled if each of the documents listed in paragraph 24 contains the applicable information about the Terminating Funds and rather will have more complete and accurate information about whether to invest or to continue to hold investments in units of the Continuing Fund.

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:

1. the Past Performance Relief is granted, provided that:

(a) the Fund Communications of each series of the Continuing Fund include the applicable past performance data of the Terminating Funds prepared in accordance with Part 15 of NI 81-102;

(b) the simplified prospectus of the Continuing Fund:

(i) includes information about each series of the Continuing Fund that is based on the information disclosed in the Offering Documents, until such time as the Continuing Fund has information regarding each series based on its own operations for the applicable periods;

(ii) states that the start date for each series of the Continuing Fund is the start date of DCARF I; and

(iii) discloses the Merger where the start date for each series of the Continuing Fund is stated;

(c) the Fund Facts for each series of the Continuing Fund:

(i) include information that is based on the information disclosed in the Offering Documents, until such time as the Continuing Fund has information regarding each series based on its own operations for the applicable periods prepared in accordance with Part 15 of NI 81-102;

(ii) state that the "Date series started" date for each series of the Continuing Fund is the applicable series start date of DCARF I; and

(iii) disclose the Merger where the "Date series started" date is stated; and

(d) the Continuing Fund prepares its MRFPs in accordance with the Continuous Disclosure Relief; and

2. the Continuous Disclosure Relief is granted, provided that:

(a) the MRFPs and financial statements for the Continuing Fund include the Financial Data of the Terminating Funds pertaining to the Terminating Funds and disclose the Merger for the relevant time periods; and

(b) the Continuing Fund prepare its simplified prospectus, Fund Facts and other Fund Communications in accordance with the Past Performance Relief.

Application File #: 2023/0468

SEDAR+ File #: 6033584