R.S.O. 1990, C. S.5, AS AMENDED

Staff of the Enforcement Branch of the Ontario Securities Commission (the "Commission") allege that:

A. Background

A.1 Altamira is a corporation incorporated pursuant to the laws of Ontario. Altamira has established and is the investment manager for a family of 27 no-loadmutual funds known as the Altamira Funds. In addition, Altamira manages many institutional accounts. In such capacities Altamira is a "market participant" asthat term is defined in subsection 1(1) of the Securities Act, R.S.O. 1990 c.S.5., as amended (the "Act").

B. Dorset

B.1 At all material times, various accounts managed by Altamira held common shares of Dorset Exploration Ltd. ("Dorset"). Dorset carries on an oil and gasexploration business and is a reporting issuer in Ontario. The common shares of Dorset (symbol DXL) are listed and posted for trading on the Toronto StockExchange ("TSE"). As of December 31, 1992, Dorset had approximately 25 million common shares outstanding. During the period between December 31,1992 and December 31, 1994, approximately 3 million additional common shares were issued.

B.2 In April, 1993 various accounts managed by Altamira held approximately 5 million Dorset shares in aggregate. By late 1993, this position had increased toapproximately 8 million Dorset shares.

C. Attributes of the Purchases and Trades of Dorset Shares by Altamira

C.1 Through a number of its managed accounts, Altamira traded in Dorset shares more than 1,400 times during the period April 1, 1993 to October 31, 1994(the "Period").

C.2 Accounts managed by Altamira completed the final daily trade in Dorset shares at a price in excess of the previous trade on 137 of the 304 days on whichthey traded in the securities during the Period. Altamira thereby established the closing price for Dorset shares on the "up-tick" on these dates. On at least 50occasions, these "up-ticks" were effected by low volume trades of less than 500 Dorset shares.

C.3 On 17 additional trading days during the Period, Altamira transacted the second to last trade of the day at a price in excess of the previous trade incircumstances where the subsequent final trade of the day was transacted at the same price. In such circumstances, Altamira also in effect, established the dailyclosing price for the shares.

C.4 Of the 137 final daily trades discussed in paragraph C.2, 64 were executed on the "up-tick" that established the "high" price for the day or a price that washigher than the close of the preceding day.

C.5 Of the 137 final daily trades discussed in paragraph C.3 the remaining 73 were executed on the "up-tick" at a price that did not exceed the previous day'sclosing price (or the current day's opening price). These trades, however, had the effect of reversing a decline in the trading price of the shares that had occurredthrough third party trading during the day.

C.6 Forty-five of Altamira's orders to purchase Dorset shares (434,000 shares in aggregate) were filled by sell orders from other Altamira accounts (known as"cross trades"). These trades were reported through the TSE by one of its member firms in accordance with the requirements of the TSE. Over half of thesecross trades, among Altamira accounts, were made as "up-tick" transactions establishing a closing price that exceeded the value of the second to last trade of theday.

D. Percentage of Ownership and Trading

D.1 During the Period, Altamira accounts in aggregate held as much as 29% of the outstanding Dorset shares and accounted for 54% of the total volume oftrading in Dorset shares. These trades were executed through various members of the TSE.

D.2 During the Period, there were 394 trading days. Altamira traded in Dorset shares for its mananaged accounts on 304 of these days. On 58 of these daysAltamira accounts were responsible for 90% or more of one side of the trading volume in the shares.

E. Analysis

E.1 The large number of purchase transactions observed in which Altamira accounts acquired Dorset shares on the "up-tick" at or near the close of tradingcontravened the public interest because such trades can give a misleading impression of the value of publicly-traded securities to investors and other marketobservers.

E.2 The internal cross-trades referred to in paragraph C.6 above, also contravened the public interest insofar as they could have misled securities advisers,salesmen and the public concerning the negotiated value of the shares.

E.3 Moreover, the level of market dominance that Altamira exhibited in its trading in Dorset shares contravened the public interest because it could have had theeffect of impairing liquidity of the securities and skewed their trading value.


F.1 Such further allegations as counsel may advise and the Commission may permit.

DATED at Toronto, this 12th day of September, 1997.

R.S.O. 1990, C.S.5, AS AMENDED

Altamira Management Limited (Altamira) replies to the Statement of Allegations of the Staff of the Enforcement Branch of the Ontario Securities Commission(the "Commission") as follows:


1.2 The matter leading up to the issuance of this Notice of Hearing arose from a referral by The Toronto Stock Exchange ("TSE") to the Staff of theCommission (Staff) at the end of 1994.

1.3 As a result of the referral by the TSE, Staff reviewed trading in the common shares (the "Dorset shares") of Dorset Exploration Ltd. ("Dorset") by accountsmanaged by Altamira during the period April 1, 1993 to October 31, 1994 (the "Period"). Altamira cooperated fully and voluntarily with the Staff in its review.The cooperation included providing the Staff with any and all documents that were requested, meeting with the Staff on several occasions voluntarily to providethem with information relating to the trading review, responding to any questions or concerns and generally dealing promptly and responsibly with matters raisedby the Staff.

1.4 The purpose of the Staff's review was to determine whether there were circumstances that might raise concerns about Altamira's trading in Dorset Shares.

1.5 Altamira has not been the subject of any previous proceedings before the Commission.


2.1 Altamira and Staff will appear before a Panel of the Commission to ask the Commission to accept their joint recommendation and approve a settlement of theproceedings initiated by the Staff arising out of the trading review.


3.1 Altamira acknowledges that the facts contained in the Statement of Allegations are substantially correct.

3.2 Altamira also relies upon the following additional facts.

3.3 Dorset shares are a thinly traded security. While average daily trading in Dorset shares on the TSE in 1994 was approximately 104,000 shares comparedwith 112,000 shares for the average TSE 300 security, this average figure for trading in Dorset shares is skewed to the high side because of a few days ofabnormally high trading. As evidence of the lack of trading, on some days during the Period, no Dorset shares traded on the TSE, while on other days during thePeriod volumes were as low as a few hundred shares.

3.4 Dorset shares traded in a range from $12 in early 1993 to a high of $19.50 in June 1993. After June 1993 Dorset shares began a gradual decline to $19 inOctober 1993 before declining to a low of $8 in December 1994. There were particularly sharp declines in September and October 1993 and in January andSeptember 1994.

3.5 Coinciding with these declines in Dorset's stock price was a drop in the price of oil from $19 (U.S) to $14 (U.S) in the fall of 1993; poor financial results forthe fourth quarter of 1993, which were released in January 1994; and the announcement of poor summer drilling results in September 1994.

3.6 In 1994, part of the period reviewed by the Commission, Altamira executed approximately 194,000 trades in all of its managed accounts.


4.1 In Altamira's view, there is nothing inherently inappropriate about an "up-tick" if the purchase is made within the context of the market (the bid and ask).According to Altamira all of its trades in Dorset shares under review were within the bid/ask spread.

4.2 In Altamira's view, institutional investors engage in market transactions to enhance the overall value of assets under management. In some cases this willinvolve longer term "buy and hold" investment strategies while in other cases this will involve shorter term trading strategies. The objective of these shorter termstrategies is to take advantage of superior research, market analysis or market volatility to make incremental gains on specific trades over a short period of time.These strategies are influenced by a variety of factors such as market conditions, industry and company specific information, and the trading activity of othermarket participants. Altamira states that its trading in Dorset shares was for the benefit of its clients.

4.3 In some cases these strategies may involve small volume purchases to avoid signaling a buying interest which may push up the price of the securities to beacquired. In other situations, in order for Altamira to accumulate securities, it may take out the offer, which incidentally up-ticks the security, but which alsoencourages others to offer their securities for sale.

4.4 Altamira further states that it was difficult to avoid the purchase of small quantities of securities at the end of the day on the up-tick if the subject securitiesare relatively thinly traded and a large institutional investor accounts for more than 50 percent of the volume of the trading in the securities. In the presentcircumstances, Altamira accounted for more than 54 percent of the total trading in the Dorset shares during the Period.

4.5 As to Staff's concern related to this level of trading, Altamira states that given the increasing dominance of large institutional investors in the Canadiancapital markets, it is not unusual for situations of trading concentration to arise in thinly traded securities such as Dorset. This is simply a feature of the Canadianmarketplace.

4.6 Altamira engages in cross trades between managed accounts for a number of legitimate reasons, including because such trades are an efficient and costeffective way of shifting positions between accounts to meet the changing investment requirements of the accounts.

4.7 At the beginning of 1993 Altamira managed accounts held a large cumulative position in Dorset of approximately 7.5 million shares. From Altamira'sperspective there were a number of reasons for the size and concentration of its investment, including:

(i) prospects for the company were favourable;

(ii) the company was a low cost exploration company with little debt and with a pattern of increasing production and revenues; and

(iii) the stock was favoured by a number of independent research analysts.

4.8 In Altamira's view, its trading activity in Dorset shares, while substantial, had no material effect on the price of Dorset shares. The price of Dorset shares fellsubstantially during the Period, and according to Altamira, this price activity related directly to Dorset's performance and the price of oil. As the price of Dorsetshares declined, so too did the value of Altamira's position in Dorset shares.

4.9 Altamira has not received any complaint from any person indicating that they have been harmed or misled by Altamira's trading in Dorset shares.

4.10 Altamira also says, however, that trading at the end of the day has been the subject of considerable policy review and discussion by the TSE, most recentlygiving rise to the TSE notice to members number 96-015 dated January 5, 1996. Altamira also notes that "high" and "low" closings due to program trading andnormal market trading are very common and the TSE in the past has published warnings to its members to monitor such trading activity. Even though Altamirais not a TSE member, Altamira believed, at all material times herein, that it was complying with the requirements of the TSE and all other regulatoryrequirements concerning its trading practices at the end of the day. Altamira now recognizes that certain of its trading activities may have been inconsistent withacceptable trading practices.


5.1 Altamira has been and intends to remain in the forefront of the industry with its trading practices and in its compliance with all regulatory requirements.

5.2 Altamira has developed trading procedures which deal with the process of entering orders with brokers and with the aim of avoiding the placement of ordersthat are contrary to TSE trading rules. These procedures include:

(i) the daily monitoring of trades by compliance personnel to ensure that end of day market transactions comply with TSE rules;

(ii) the preparation and distribution of daily control reports which detail any unusual trades and possible violations;

(iii) a requirement that all crosses be pre-cleared by compliance personnel and priced off of the last independent trade in the market; and

(iv) the development of electronic surveillance systems to monitor unusual trading patterns by Altamira.

5.3 Altamira has prepared a trading procedures manual to which all of Altamira's trading staff must adhere to, and which contains the procedures outlined above.

5.4 Altamira has also carried out a review of its trading practices and procedures by the Altamira Advisory Council (the "Council"), an independent councilestablished to monitor the interests of Altamira's unitholders. The Council is chaired by Stanley Beck, former chairman of the Commission. The Councilretained Charles Caty a former Chairman of the IDA to assist it in this review. Mr. Caty focused his review on the Altamira trading and procedures manual,which Altamira voluntarily developed during the course of Staff's review of the trading in Dorset shares.

5.5 Altamira has implemented, and is continuing to implement, the changes recommended by Mr. Caty.

DATED at Toronto, this 12th day of September, 1997

P.O.Box 185, Suite 2600
South Tower, Royal Bank Plaza
Toronto, Ontario
M5J 2J4

Joseph Groia
(416) 360-3538
Solicitors for Altamira Management Ltd.