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Horizon Funds Inc. et al. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- Variation of prior decision granting approval of change of manager, based on new non-material facts. Variation order granted under NI 81-102 as original approval of change of manager approved under NI 81-102. British Columbia as principal regulator.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(2), 5.8(1)(a).
OSC Blanket Order 1.2 Assignment by Commission Pursuant to Section 6 of the Act of Certain Commission's Powers and Duties, s. (j)(i).
May 10, 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. ( HFI) AND
HORIZONS MONDIALE HEDGE FUND AND
HORIZONS TACTICAL HEDGE FUND
(the Funds)
MRRS Decision Document
Background
1. The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions that the decision document dated January 12, 2006 issued by the Decision Makers under Section 5.5(2) of National Instrument 81-102 Mutual Funds in respect of HFI and the Funds be varied by changing representations primarily relating to the identity of the President and Chief Executive Officer of HFI.
Under the Mutual Reliance Review 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.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by HFI:
1. On January 12, 2006 the British Columbia Securities Commission issued a decision document (the Original Decision Document) under Section 5.5(2) of National Instrument 81-102 Mutual Funds on behalf of the Decision Makers approving a proposed transaction whereby Jovian Asset Management Inc. (Jovian) would acquire a controlling interest in the capital stock of HFI, resulting in a change of control of HFI (the Proposed Transaction).
2. All representations contained in the Original Decision Document remain true and complete except for paragraphs 6, 8 and 9 of the representations.
3. HFI is the manager of the Funds and is the manager of Horizons Phoenix Hedge Fund, which ceased to be a reporting issuer in the Jurisdictions on March 9, 2006.
4. Jovian is a wholly-owned subsidiary of Jovian Capital Corporation (JCC), which is listed on the TSX Venture Exchange and is a management company operating in the market segments of wealth management and asset management.
5. HFI sent notice of the Proposed Transaction (the Notice) to unitholders of the Funds on 18th October 2005, and anticipated that the Proposed Transaction would close soon after the Original Decision Document was issued.
6. The Original Decision Document contained the following representation (Representation No. 8):
7. "Following the Proposed Transaction, the directors and officers of the Manager will be as follows:
8. Representation No. 9 of the Original Decision Document (Representation 9) contained the following statement: "Gordon Cummings will continue to serve as President and Chief Executive Officer of HFI."
9. Two of the three directors listed in the above table and four of the six officers listed in the table were, and still are, directors and officers respectively of Jovian, providing Jovian with effective control of HFI on completion of the Proposed Transaction.
10. Due to delays including negotiations between the parties over the terms of the Proposed Transaction, the Proposed Transaction still has not closed; however, the negotiations have now been substantially concluded and the parties anticipate being in a position to close the Transaction within 10 days of issuance of this Decision Document.
11. In the interim, Gordon Cummings has ceased to be President and Chief Executive Officer of HFI, and has resigned as a director of HFI.
12. Malcolm Anderson is now a Senior Vice President of JCC rather than its Chief Operating Officer, and Russell Lindsay has been appointed Chief Operating Officer of JCC.
13. The percentage of shares of HFI to be acquired by Jovian after closing of the Proposed Transaction has now changed and will be approximately 62% rather than 66.67% as set out in representation No. 6 of the Original Decision Document (Representation 6), and the total percentage of shares of HFI to be held by Jovian after subscribing for additional shares on closing will be approximately 70% rather than 73.15% as set out in Representation 6.
14. The current intention of the parties is that immediately following the Proposed Transaction, the directors and officers of the Manager will be as follows:
15. The Notice indicated that, following the Proposed Transaction, Gordon Cummings would serve as President and Chief Executive Officer and Philip Armstrong would serve as Director and Vice-President of the Manager. In fact, Mr. Cummings will not continue in these roles. Immediately following the Proposed Transaction, Mr. Armstrong will serve as President and Chief Executive Officer, as well as Director of the Manager.
16. HFI has not provided additional written notice to all of the unitholders of the Funds advising of the fact that it will be Mr. Armstrong, and not Mr. Cummings, who will in fact serve as President and Chief Executive Officer of the Manager immediately following the proposed transaction; however, this fact will not result in any material change to the management and operation of the Funds. No changes to the investment portfolios of the Funds will take place as result of this substitution.
17. As stated in the Notice: "HFI will remain as 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 Proposed Transaction."
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 has been met.
The decision of the Decision Makers under the Legislation is that:
1. Representation 3 is amended by deleting the words "Chief Operating Officer" beneath the name of Malcolm Anderson and replacing them with "Senior Vice President", and by adding the words "Russell Lindsay, Chief Operating Officer" in the left hand column and "Chief Operating Officer, Jovian Capital Corp." opposite his name in the right hand column;
2. The percentages "66.67%" and "73.15%" are deleted from Representation 6 of the Original Decision Document and replaced by "approximately 62%" and "approximately 70%" respectively;
3. Representation 8 is deleted from the Original Decision Document and replaced with the following:
"8. The current intention of the parties is that immediately following the Proposed Transaction, the directors and officers of the Manager will be as follows:
4. The words "Gordon Cummings will continue to serve as President and Chief Executive Officer of HFI" are deleted from Representation 9 of the Original Decision Document.
"Martin Eady"
Director, Corporate Finance
British Columbia Securities Commission