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Mulvihill Fund Services Inc. et al.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager of mutual funds -- change of manager will not result in any material changes to the management and administration of the Funds -- unitholders have received timely and adequate disclosure regarding the change of manager and the change is not detrimental to unitholders or the public interest.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(a), 5.7, 19.1.
August 21, 2008
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
MULVIHILL FUND SERVICES INC. (the "Filer")
MULVIHILL CANADIAN MONEY MARKET FUND
MULVIHILL CANADIAN BOND FUND
MULVIHILL GLOBAL EQUITY FUND
MULVIHILL TOTAL RETURN FUND
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for approval of a change of manager of the Funds (as defined below) from the Filer to Ridgewood Capital Asset Management Inc. ("Ridgewood") under Section 5.5(1)(a) of National Instrument 81-102 Mutual Funds (NI 81-102) (the "Approval 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 Filer 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 British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, Prince Edward Island, New Brunswick, Newfoundland, Northwest Territories, Yukon Territory and Nunavut Territory.
Interpretation
Terms defined in National Instrument 41-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is the manager and trustee of each of Mulvihill Canadian Money Market Fund, Mulvihill Canadian Bond Fund, Mulvihill Global Equity Fund and Mulvihill Total Return Fund (each a "Fund" and collectively, the "Funds").
2. The Filer is a corporation incorporated under the laws of Canada and is not in default of securities legislation in any jurisdiction of Canada. An affiliate of the Filer, Mulvihill Capital Management Inc. ("MCM"), is the portfolio adviser and principal distributor of the Funds. The Filer is a wholly-owned subsidiary of MCM.
3. Each Fund is an open-end investment trust governed by a declaration of trust or trust agreement under the laws of the province of Ontario.
4. Each of the Funds is a reporting issuer in all of the provinces and territories of Canada, other than Quebec, and is not in default of securities legislation in any jurisdiction of Canada.
5. The units of the Funds currently are offered under a combined simplified prospectus and annual information form each dated March 7, 2008, as amended by amendment no. 1 thereto dated July 14, 2008, prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure, and are subject to NI 81-102.
6. MCM and Ridgewood, among others, entered into a purchase agreement on July 2, 2008 whereby Ridgewood agreed to acquire the mutual fund business of MCM (the "Transaction"). Subject to receipt of all necessary regulatory and unitholder approvals and the satisfaction of all other conditions precedent to the Transaction, Ridgewood will become the manager, trustee, portfolio adviser and principal distributor of each Fund. MCM will be retained by Ridgewood to act as adviser of the Total Return Fund. The closing of the Transaction is expected to occur on or about September 1, 2008 (the "Effective Date").
7. On the Effective Date, the names of the Funds will be changed as follows:
8. After the Effective Date, the Filer will continue to be a wholly owned subsidiary of MCM. The Filer will have no further responsibilities in respect of the Funds after the Effective Date. The Filer will continue to act as manager for certain other closed-end funds that are not relevant to the transaction between MCM and Ridgewood.
9. A press release, amendments to the simplified prospectus and annual information form of the Funds and a material change report have been filed in connection with the announcement of the change of manager.
10. Ridgewood was incorporated on April 14, 2008 under the Canada Business Corporations Act and its head office address will be located at Suite 1020, 55 University Avenue, Toronto, Ontario. Ridgewood will acquire MCM's private wealth management business (which includes the mutual fund business) and MCM's institutional asset management business and will focus its operations on those activities. Ridgewood is not in default of securities legislation in any jurisdiction of Canada.
11. The current principal shareholders of Ridgewood are John H. Simpson and Paul W. Meyer who each own 50% of the company indirectly through holding companies controlled by them. As at the Effective Date, MCM will acquire a 25% interest of Ridgewood and Mr. Simpson and Mr. Meyer will each indirectly hold 30%. The remaining interests will be held by employees of Ridgewood.
12. Ridgewood has applied to be registered under the Securities Act (Ontario) and the analogous legislation in the other provinces and territories as an adviser in the categories of investment counsel and portfolio manager (or the equivalent) and a mutual fund dealer (or the equivalent). In addition, Ridgewood has applied to be registered under the Securities Act (Ontario) as a limited market dealer. Ridgewood has applied for an exemption from becoming a member of the Mutual Fund Dealers Association ("MFDA") (the applications are collectively, the "Registration Application"). Ridgewood does not intend to become a member of the MFDA as its activities as a mutual fund dealer are incidental to its principal activities and will be limited to servicing clients of Ridgewood. The completion of the registration of Ridgewood in accordance with the Registration Application is a condition precedent to the closing of the transactions between MCM and Ridgewood.
13. The names, municipalities of residence, position with Ridgewood and principal occupation of the current directors and officers of Ridgewood are set forth below:
14. The following is a brief biography of each of the officers and directors of Ridgewood:
John Simpson. Mr. Simpson has 30 years investment experience, 13 years with MCM. He has been a Senior Vice President of MCM since April 1995. Prior thereto, he was the President of Fidelity Investments Canada Ltd. from June 1992 to March 1995. Mr. Simpson has an Honours BA (Business Admin) from the University of Western Ontario and a MBA from the University of Windsor. He is also a CFA charter holder. Mr. Simpson is currently registered as an Advising, Trading Officer (resident) for MCM.
Paul Meyer. Mr. Meyer has 18 years investment experience, all with MCM. He has been Vice President, Equities of MCM since October 2004. Mr. Meyer has an Honours B. Commerce from the University of Toronto and is a CFA charter holder. In addition, Mr. Meyer has his Canadian Options course. Mr. Meyer is currently registered as an Advising, Non-Trading Officer (resident) for MCM.
It is anticipated that the individual registrations of Mr. Simpson and Mr. Meyer will be transferred to Ridgewood upon approval of the Registration Application.
15. The Filer considers that the experience and integrity of each of the members of the Ridgewood current management team is apparent by their education and years of experience in the investment industry and has been established and accepted through the granting of registration status.
16. Ridgewood intends to administer the Funds in substantially the same manner as the Filer. There is no current intention to change the investment objectives, strategies or fees and expenses of any Fund. The persons principally responsible for the portfolio management of each Fund will remain the same after the Effective Date. All material agreements regarding the administration of the Funds will either be assigned to Ridgewood by the Filer or Ridgewood will enter into new agreements as required. In either case, the material terms of the material agreements of the Fund will remain the same. Ridgewood will also take steps to ensure that it has appointed any additional officers and directors that may be required in order to properly execute and file any renewal simplified prospectus and annual information for the Funds.
17. On the Effective Date, it is expected that approximately 13 employees of MCM will be transferred to Ridgewood including those individuals that are principally responsible for the portfolio management of the Funds.
18. At special meetings of unitholders of each Fund to be held on August 21, 2008, unitholders of each Fund will be asked to approve the change of manager. A notice of meeting and a management information circular have been mailed to unitholders of the Funds and filed on SEDAR in accordance with applicable securities legislation. The resignation of the Filer as trustee and manager of each Fund will be effective on the Effective Date. On that date, Ridgewood will assume the roles of trustee, manager, portfolio adviser and principal distributor of each Fund under the existing trust agreements of each 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 the Approval Sought is granted.
"Vera Nunes"
Assistant Manager, Investment Funds Branch
Ontario Securities Commission