Skylon Advisors Inc. and Venturelink Funds - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- approval of a change in control of manager as a result of sale of management and abridgement of the 60 day notice requirement to 40 days. Staff not persuaded by filer's submission regarding the lack of uncertainty in LSIF industry in last quarter of 2005 or that the public interest is sufficiently protected within a shorter notice period. Staff recommended the abridgment on the specific facts that the sale was originally announced a few months before, so securityholders effectively had in excess of 60 days notice of the pending sale.

Rules Cited

National Instrument 81-102 Mutual Funds, ss. 5.5(2), 5.8(1)a.

December 7, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA,

SASKATCHEWAN, MANITOBA, ONTARIO,

NEW BRUNSWICK, NOVA SCOTIA,

NEWFOUNDLAND AND LABRADOR,

PRINCE EDWARD ISLAND

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

SKYLON ADVISORS INC. AND

THE VENTURELINK FUNDS

(collectively, the Filers)

MRRS DECISION DOCUMENT

Background

The securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received the application of Skylon Advisors Inc. (Skylon) and the VentureLink Funds as listed in Schedule "A", for a decision pursuant to National Instrument 81-102 Mutual Funds (NI 81-102) for:

(a) a decision of the Decision Makers under subsection 5.5(2) of NI 81-102 approving the change in control of the manager of the VentureLink Funds as a result of the sale of the management of the VentureLink Funds; and

(b) a decision of the Decision Makers abridging the 60 day notice requirement (the Notice Requirement) in clause 5.8(1) (a) of NI 81-102 to 40 days.

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario 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 the Filer:

1. Each VentureLink Fund was established as a corporation under the Canada Business Corporations Act or the Business Corporations Act (Ontario) and is registered as a labour-sponsored investment fund corporation under the Community Small Business Investment Funds Act (Ontario).

2. On October 14, 2005, CI Fund Management Inc., the parent company of Skylon and CI Investments Inc. (CI), entered into an agreement with Geoffrey Horton, John Varghese and James Whitaker (collectively, the Purchasers), the individuals principally responsible for management of the VentureLink Funds, each of whom is registered as an officer of Skylon, to sell the management of the VentureLink Funds to a business entity to be controlled by the Purchasers (the Acquisition).

3. Skylon is the manager of each VentureLink Fund pursuant to management agreements (the Management Agreements) between Skylon and the VentureLink Funds. The Management Agreements are currently in the process of being assigned by Skylon to VentureLink LP (the New Manager), an affiliate of Skylon. As a result, the New Manager will be the manager of the VentureLink Funds. The New Manager will retain Skylon as the investment advisor to the VentureLink Funds until closing, at which point it is expected that VL Advisors Inc. will replace Skylon.

4. On the closing of the Acquisition, the Purchasers will acquire from Skylon 100% ownership of the general partner of the New Manager (the General Partner) and all issued and outstanding voting limited partnership units in the New Manager. Skylon will hold limited partnership units in the New Manager that will carry voting rights only in limited circumstances (including with respect to a change in the terms of those units). The acquisition by the Purchasers of all voting interests in the General Partner and the New Manager will constitute a change in control of the manager of the VentureLink Funds (the Change in Control).

5. As a limited partnership, the New Manager does not have its own officers and directors but is managed by its General Partner. On the Change in Control of the New Manager, the directors and officers of the General Partner will be the three Purchasers who will also be the directors and officers of VL Advisors Inc.

6. Skylon and the Purchasers believe that the Acquisition will have no adverse effect on the management and administration of the VentureLink Funds and, in fact, will have little impact on the day-to-day management and administration of the VentureLink Funds. In connection with the Acquisition, there will be no change to the individuals who are responsible for the day-to-day investment decisions of the VentureLink Funds and, under an administration agreement to be entered into between VentureLink Funds and CI, CI will continue to provide back-office and other administrative support for the VentureLink Funds. As a result, there will be very few practical changes to the management and administration of the VentureLink Funds.

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:

i) the Change in Control is approved pursuant to subsection 5.5(2) of NI 81-102; and

ii) an exemption from the Notice Requirement is granted provided that:

(a) securityholders of the VentureLink Funds are given at least 40 days notice of the Change in Control; and

(b) no changes are made to the portfolio management operations of the VentureLink Funds during the 60 day period following the giving of notice of the Change in Control to the securityholders of the VentureLink Funds.

SCHEDULE A

THE VENTURELINK FUNDS