Horizon Funds Inc. et al. - MRRS Decision

Decision

Headnote

MRRS -- Approval under subsection 5.5(2) of National Instrument 81-102 ("NI 81-102") for change of control of mutual fund manager.

Rule Cited

National Instrument 81-102 Mutual Funds, s. 5.5(2).

January 12, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, NOVA SCOTIA,

NEW BRUNSWICK, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR,

NORTHWEST TERRITORIES,

YUKON TERRITORY AND NUNAVUT

(THE "JURISDICTIONS")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

HORIZONS FUNDS INC.

(THE "FILER", "MANAGER" OR "HFI"),

HORIZONS MONDIALE HEDGE FUND,

HORIZONS TACTICAL HEDGE FUND AND

HORIZONS PHOENIX HEDGE FUND

(COLLECTIVELY THE "FUNDS")

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") for approval of a proposed change of control of the Filer as manager of the Funds under Section 5.5(2) of National Instrument 81-102 Mutual Funds.

Under the Mutual Reliance System for Exemptive Relief Applications:

(a) the British Columbia Securities Commission is the principal regulator for this application; and

(b) this MRRS Decision Document evidences the decision of each Decision Maker.

Representations

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

1. Jovian Asset Management Inc. ("Jovian"), a wholly-owned subsidiary of Jovian Capital Corporation ("JCC"), is incorporated under the laws of the Province of Ontario.

2. JCC is listed on the TSX Venture Exchange (JVN) and has a registered office at 491 Portage Avenue, Winnipeg, Manitoba, R3B 2E4. JCC is a management company that invests in companies that operate within two primary market segments: wealth management and asset management.

3. JCC's current directors and officers, together with their principal occupations, are as follows:

Name & Position
Principal Occupation/Employment
 
Thomas J. Rice, Director
Chairman of JCC
 
Philip Armstrong, Director, President and Chief Executive Officer
Chief Executive of JCC
 
Mark L. Arthur, Director and Executive Vice-President
Executive Vice-President of JCC
 
Bradley D. Griffiths, Director
Managing Director -- Capital Markets of MGI Securities Inc.
 
Melvin A. MacRae, Director
Semi-retired
 
Pattrick Matthews, Director
Semi-retired
 
Donald S. McFarlane, Director
Managing Director -- Retail Sales of MGI Securities Inc.
 
John M. McKimm, Director
Chairman and Chief Executive Officerof Brainhunter Inc.
 
Derek Nelson, Director
Chairman of MGI Securities Inc.
 
Donald H. Penny, Director
Chartered Accountant and Principal of Meyers, Norris, Penny, Chartered Accountants
 
Bradley D. Rice, Director
President of Acquire Capital
 
Malcolm Anderson, Chief Operating Officer
President of Rice Financial Group Inc.
 
Jason Mackey, Chief Financial Officer
Chief Financial Officer of JCC
 
Duriya Patel, Secretary
Secretary and General Counsel for JCC

4. The only direct/indirect beneficial holder of 10% or more of JCC is Thomas J. Rice, Chairman of JCC, of 342 Country Club Blvd. Winnipeg, MB R3K 1X6.

5. Jovian's current directors and officers, together with their principal occupations, are as follows:

Name & Position
Principal Occupation/Employment
 
Philip Armstrong, Director and Chairman
President and Chief Executive Officer of JCC
 
Mark L. Arthur, Director, President and Chief Executive Officer
Executive Vice-President of JCC
 
Donald S. McFarlane, Director and Managing Director
Managing Director -- Retail Sales of MGI Securities Inc.
 
Jason Mackey, Secretary and Chief Financial Officer
Chief Financial Officer of JCC

6. Jovian will acquire all of the issued and outstanding shares of the Manager held by CSI Capital Incorporated ("CSI"), a Barbadian domestic corporation, and by the holders of smaller blocks of shares, most of whom are employees or ex-employees of the Manager, representing 66.67% of the issued and outstanding voting securities of the Manager. On closing, Jovian will subscribe for additional shares in the capital stock of the Manager, resulting in Jovian owing 73.15% of the issued and outstanding shares of the Manager.

7. CSI is a wholly-owned subsidiary of CSI Holdings Ltd., a Barbados International Business Company, owned as to 80% by Jansix Ltd. (a British Virgin Islands company wholly-owned by Fred Purvis) and as to 20% by the Cummings Family Trust (beneficiaries being the family of Gordon Cummings).

8. Following the proposed transaction, the directors and officers of the Manager will be as follows:

Name
Position
 
Gordon Cummings
President and Chief Executive Officer
 
Robert Reid
Director
 
Philip Armstrong
Director and Vice-President
 
Mark L. Arthur
Director and Vice-President
 
Jason Mackey
Chief Financial Officer
 
Duriya Patel
Secretary

9. Following the closing of the transaction, the accounting services for the Funds will be handled by a subsidiary of JCC, namely Felcom Data Services Inc. Felcom Data Services Inc. will also act as registrar of the Funds. Otherwise, HFI will remain as the trustee of the Funds and the current management and operation of the Funds, namely the custodian services, fund advisors, portfolio managers, and the Funds' investment objectives, will be maintained for a period of not less than 12 months following closing of the transaction. Gordon Cummings will continue to serve as President and Chief Executive Officer of HFI. HFI intends to maintain its office in Vancouver, but its office in Toronto will be moved to offices of Jovian.

10. The Manager provided written notice, dated October 18, 2005, to all of the unitholders of the Funds regarding the proposed change of control of the Manager.

11. The Manager and JCC issued a joint press release dated August 15, 2005 advising of the change of control of the Manager and the Funds filed a Material Change Report on August 29, 2005.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision was met.

The decision of the Decision Makers under the Legislation is that the change of control of HFI as Manager of the Funds, pursuant to subsection 5.5(2) of National Instrument 81-102, is approved.

"Allan Lim"
Manager, Corporate Finance
British Columbia Securities Commission