Strategicnova Funds Management Inc. et al. - MRRS Decision

MRRS Decision

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, BRITISH COLUMBIA, ALBERTA,

SASKATCHEWAN, NOVA SCOTIA AND NEWFOUNDLAND

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

STRATEGICNOVA FUNDS MANAGEMENT INC.

STRATEGICNOVA CANADIAN TECHNOLOGY FUND

STRATEGICNOVA WORLDTECH FUND

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatory authority or regulator (collectively, the "Decision Makers") ineach of the Provinces of Ontario, British Columbia, Alberta, Saskatchewan, Nova Scotia and Newfoundland (collectively,the "Jurisdictions") has received an application from StrategicNova Funds Management Inc. ("StrategicNova" or the"Applicant") for itself and on behalf of StrategicNova Canadian Technology Fund and StrategicNova WorldTech Fund,(each a "Top Fund" and, collectively, the "Top Funds") for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the following requirements and restrictions in the Legislation (the "Requirements")shall not apply to the purchase and sale by a Top Fund of units of StrategicNova USTech Fund, StrategicNova AsiaTechFund, StrategicNova EuroTech Fund or other StrategicNova Funds, now existing or hereafter forming part of such familyof mutual funds, (individually, a "Bottom Fund" and, collectively, the "Bottom Funds"):

1. the Requirement that a mutual fund shall not knowingly make an investment in a person or company in whichthe mutual fund, alone or together with one or more related mutual funds, is a substantial security holder;

2. the Requirement that a mutual fund, its management company and its distribution company shall not knowinglyhold an investment in a person or company in which the mutual fund, alone or together with one or more relatedmutual funds is a substantial security holder; and

3. the Requirement that a management company file a report relating to a purchase and sale of securitiesbetween the mutual fund and any related person or company and any transaction in which, by arrangement,other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participantwith one or more of its related persons or companies.

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS the Applicant has represented to the Decision Makers that:

1. The Applicant is a corporation established under the laws of the Province of Ontario and is the manager andtrustee of the family of mutual funds trusts and mutual fund corporations together known as the "StrategicNovaFunds". The head office of the Applicant is in Toronto, Ontario.

2. The Top Funds and the Bottom Funds are or will be open-end mutual fund trusts or corporations, belonging tothe family of the StrategicNova Funds, established under the laws of the Province of Ontario. Each of the themis a reporting issuer in all provinces and territories of Canada. Units of the Top Funds and the Bottom Fundsare qualified under a simplified prospectus and annual information form that have been filed with and acceptedby the Decision Makers.

3. Each of the Top Funds and Bottom Funds is not and will not be in default of any requirements of the Legislation.

4. There is presently no separate distribution company and the Applicant, as manager of the StrategicNova Funds,is responsible for arranging for the distribution of units of such mutual funds.

5. To achieve its investment objective, each Top Fund will invest fixed percentages (the "Fixed Percentages") ofits net assets (excluding cash and cash equivalents) in the securities of specified Bottom Funds, subject to apermitted deviation, due to market fluctuations, of not more than 2.5% above or below the Fixed Percentages(the "Permitted Ranges").

6. To achieve its investment objective, the StrategicNova Canadian Technology Fund will invest in the BottomFunds an aggregate amount which is 2.5% below the amount prescribed from time to time as the maximumpermitted amount capable of being made as a foreign property investment under the Income Tax Act (Canada)(the "ITA") for registered retirement savings plans, registered retirement income funds, deferred profit sharingplans and similar plans, such amount not to exceed 30% of its net assets, subject to a variation to account formarket fluctuations as described in representation 5. To achieve its investment objective, the StrategicNovaWorldTech Fund will invest in the Bottom Funds an aggregate amount not to exceed 90% of its net assets,subject to a variation to account for market fluctuations as described in representation 5. The aggregateamount invested by each Top Fund in Bottom Funds is herein referred to as the "Permitted AggregateInvestment".

7. The simplified prospectus of the Top Funds will disclose the investment objectives, investment strategies, risksand restrictions of the Top Funds and the Bottom Funds, the Fixed Percentages, the Permitted Ranges andthe Permitted Aggregate Investment.

8. The portfolios of the Top Funds will be reviewed on an ongoing basis and StrategicNova, in consultation withthe portfolio manager, may change the Fixed Percentages of a Bottom Fund, remove a Bottom Fund or adda new Bottom Fund that is a StrategicNova Fund, whether now existing or hereafter forming part of such familyof mutual funds.

9. It is presently anticipated that Brownstone Securities Inc., an affiliate of the Applicant and a registered securitiesdealer in Ontario, will act as dealer for the purchase by a Top Fund of units of a Bottom Fund. Thearrangements will be such that the Top Fund is not charged any initial sales charge in connection with itspurchase of units of a Bottom Fund, and the purchase of such units will be on a basis that does not give riseto any deferred sales charges payable by a Top Fund.

10. Except to the extent evidenced by this Decision and specific approvals granted by the Decision Makerspursuant to National Instrument 81-102 Mutual Funds ("NI 81-102"), the investments by the Top Funds in theBottom Funds have been structured to comply with the investment restrictions of the Legislation and NI 81-102.

11. In the absence of this Decision, pursuant to the Legislation, the Top Funds are prohibited from knowinglymaking or holding an investment in a person or company in which the mutual fund, alone or together with oneor more related mutual funds, is a substantial security holder. As a result, in the absence of this Decision theTop Funds would be required to divest themselves of any such investments.

12. In the absence of this Decision, Legislation requires StrategicNova to file a report on every purchase or saleof securities of the Bottom Funds by the Top Funds.

13. The investment by the Top Funds in securities of the Bottom Funds will represent the business judgment of"responsible persons" (as defined in the Legislation) uninfluenced by considerations other than the bestinterests of the Top Funds.

AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Makers with the jurisdiction to make the decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that the Requirements shall not apply soas to prevent a Top Fund from making or holding an investment in securities of the Bottom Funds or requireStrategicNova to file a report relating to the purchase or sale of such securities.

PROVIDED IN EACH CASE THAT:

1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that Decision Maker which deals with the matters in section 2.5 of NI81-102; and

2. the Decision shall only apply if, at the time a Top Fund makes or holds an investment in its Bottom Funds, thefollowing conditions are satisfied:

(a) the securities of both the Top Fund and the Bottom Funds are being offered for sale in the jurisdictionof the Decision Maker pursuant to a simplified prospectus and annual information form which has beenfiled with and accepted by the Decision Maker;

(b) the investment by the Top Fund in the Bottom Funds is compatible with the fundamental investmentobjectives of the Top Fund;

(c) the simplified prospectus discloses the intent of the Top Fund to invest in securities of the BottomFunds, the names of the Bottom Funds, the Fixed Percentages, the Permitted Ranges within whichsuch Fixed Percentages may vary, and the Permitted Aggregate Investment;

(d) the investment objective of the StrategicNova WorldTech Fund discloses that this fund invests insecurities of other mutual funds;

(e) the Bottom Funds are not mutual funds whose investment objective includes investing directly orindirectly in other mutual funds;

(f) the Top Fund invests its assets (exclusive of cash and cash equivalents) in the Bottom Funds inaccordance with the Fixed Percentages and the Permitted Aggregate Investment disclosed in thesimplified prospectus;

(g) the Top Fund's holding of securities of the Bottom Funds does not deviate from the Permitted Ranges;

(h) any deviation from the Fixed Percentages is caused by market fluctuations only;

(i) subject to condition (j), if an investment by the Top Fund in any of the Bottom Funds has deviated fromthe Permitted Ranges as a result of market fluctuations, the Top Fund's investment portfolio was re-balanced to comply with the Fixed Percentages on the next day on which the net asset value wascalculated following the deviation;

(j) if, due to the foreign property investment limitations under the ITA, the Top Fund was precluded frompurchasing additional securities of the Bottom Funds in order to comply with condition (i), the TopFund complied with condition (i) as soon as it was possible to do so in compliance with the foreignproperty investment limitations under the ITA;

(k) if the Fixed Percentages and the Bottom Funds which are disclosed in the simplified prospectus havebeen changed, either the simplified prospectus has been amended or a new simplified prospectus hasbeen filed to reflect the change and the securityholders of the Top Fund have been given at least 60days' prior written notice of the change;

(l) there are compatible dates for the calculation of the net asset value of the Top Fund and the BottomFunds for the purpose of the issue and redemption of the securities of such mutual funds;

(m) no sales charges are payable by the Top Fund in relation to its purchase of securities of the BottomFunds;

(n) no redemption fees or other charges are charged by a Bottom Fund in respect of the redemption bythe Top Fund of securities of the Bottom Fund owned by the Top Fund;

(o) no fees or charges of any sort are paid by the Top Fund and the Bottom Funds, by their respectivemanagers or principal distributors, or by any affiliate or associate of any of the foregoing entities, toanyone in respect of the Top Fund's purchase, holding or redemption of the securities of the BottomFunds;

(p) the arrangements between or in respect of the Top Fund and the Bottom Funds are such as to avoidthe duplication of management fees;

(q) any notice provided to securityholders of a Bottom Fund as required by applicable laws or theconstating documents of that Bottom Fund has been delivered by the Top Fund to its securityholders;

(r) all of the disclosure and notice material prepared in connection with a meeting of securitytholders ofthe Bottom Funds and received by the Top Fund has been provided to its securityholders, thesecurityholders have been permitted to direct a representative of the Top Fund to vote its holdings inthe Bottom Fund in accordance with their direction, and the representative of the Top Fund has notvoted its holdings in the Bottom Funds except to the extent the securityholders of the Top Fund havedirected;

(s) in addition to receiving the annual and, upon request, the semi-annual financial statements of the TopFund, securityholders of the Top Fund have received appropriate summary disclosure in respect ofthe Top Fund's holdings of securities of the Bottom Funds in the financial statements of the Top Fund;and

(t) to the extent that the Top Fund and the Bottom Funds do not use a combined simplified prospectusand annual information form containing disclosure about the Top Fund and the Bottom Funds, copiesof the simplified prospectus and annual information form of the Bottom Funds have been providedupon request to

securityholders of the Top Fund and the right to receive these documents is disclosed in the prospectus of the Top Fund.

May 1, 2001.

"Paul Moore" "R. Stephen Paddon"