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Gluskin Sheff + Associates Inc.
Headnote
Exemptions for pooled funds from subsections111 and 117 and 118(2)(b) of the Securities Act (Ontario) topermit a fund of fund structure.
Regulations Cited
Securities Act, R.S.O. 1990, Reg. 1015, as am.,sections 111(2)(b), 111(2)(c), 111(3), 117(1)(a), 117(1)(d),117(2), 118(2)(a) and 121(2)(a)(ii).
IN THE MATTER OF
THE SECURITIES ACT, R.S.O.1990,
CHAPTER S.5, AS AMENDED (THE"ACT")
AND
IN THE MATTER OF
THE GLUSKIN SHEFF FUND
THE GS+A PREMIUM INCOME FUND
THE GS+A VALUE FUND
ORDER
WHEREAS the Ontario Securities Commission(the "OSC" or the "Commission") has receivedan application from Gluskin Sheff + Associates Inc. ("GS+A"),The Gluskin Sheff Fund, The GS+A Premium Income Fund and TheGS+A Value Fund (the "Existing Funds") and any othermutual fund which is not a reporting issuer under the Act, establishedand managed by GS+A after the date hereof (the "FutureFunds", together with the Existing Funds, the "Funds")which invests its assets in the The GS+A Global Fund (the "UnderlyingFund") for an order pursuant to sections 113, 117(2) and121(2) of the Act (collectively "Ontario Legislation")exempting GS+A and the Funds from the following requirements:
(a) the restriction prohibiting a mutualfund from knowingly making an investment in a person orcompany in which the mutual fund, alone or together withone or more related mutual funds, is a substantial securityholder as set out in paragraphs 111(2)(b) and 111(2)(c)and subsection 111(3) of the Act;
(b) the requirement of a management companyto file a report of every transaction of purchase or saleof securities between a mutual fund it manages and any relatedperson or company and any transaction in which, by arrangementother than an arrangement relating to insider trading inportfolio securities, a mutual fund is a joint participantwith one or more of its related persons or companies, inrespect of each mutual fund to which it provides servicesor advice, within 30 days after the end of the month inwhich it occurs as set our in paragraphs 117(1)(a) and 117(1)(d)of the Act; and
(c) the restriction against a portfoliomanager knowingly causing an investment portfolio managedby it to invest in the securities of any issuer in whicha "responsible person" (as that term is definedin the Act) or an associate of a responsible person is anofficer or director, unless the relationship is disclosedto the client and, if applicable, the written consent ofthe client to the investment is obtained before the purchaseas set out in paragraph 118(2)(a) of the Act.
(collectively, the "Applicable Requirements").
AND UPON considering the applicationand the recommendation of staff of the Commission;
AND UPON GS+A having represented as follows:
1. GS+A is a corporation incorporated underthe laws of the Province of Ontario.
2. GS+A is the manager, portfolio advisor,trustee and principal distributor of each of the ExistingFunds and the Underlying Fund. GS+A is registered with theOSC as a Mutual Fund Dealer, Portfolio Manager, Limited MarketDealer and Investment Counsel.
3. The Royal Trust Company is the custodianof the Existing Funds and CIBC Mellon Global Securities ServicesCompany is the custodian of the Underlying Fund.
4. The Existing Funds and the Underlying Fundare pooled investment funds established as limited partnershipsunder the laws of Ontario. Each investor in these funds hasan undivided pro rata interest in the fund evidencedby units in the fund. The units of these funds have been offeredfor sale on an exempt basis to investors.
5. The investment objectives of the ExistingFunds and the Underlying Fund are as follows:
The Gluskin Sheff Fund
The purpose of the fund is to invest primarilyin publicly traded securities.
The GS+A Premium Income Fund
The purpose of the fund is to invest primarilyin publicly traded debt and equity securities with the objectiveof providing unitholders stable income, quarterly distributionsand capital appreciation.
The GS+A Value Fund
The purpose of the fund is to invest primarilyin publicly traded debt and equity securities with the objectiveof providing unitholders an income stream and the opportunityfor capital appreciation.
The GS+A Global Fund
The purpose of the fund is to achieve long-termcapital growth by investing in equity securities publiclytraded on stock exchanges in the United States, Europe, Australiaand the Far East.
6. The Manager intends to establish otherpooled investment funds in the future. A Future Fund willbe an open-ended trust or limited partnership.
7. The Manager intends to invest a certainamount of the capital of each of the Funds in the UnderlyingFund. The percentage invested by each Fund in the UnderlyingFund may fluctuate on a daily basis based on investment decisionsmade by the Manager in order to meet the investment objectivesof each Fund.
8. The actual weightings of the investmentof a Fund in the Underlying Fund will be reviewed on a dailybasis and adjusted to ensure that the investment weightingcontinues to be appropriate for a Fund's investment objectives.The investment of a particular Fund in the Underlying Fundwill be actively managed by the Manager on a daily basis.
9. The investment objectives of the UnderlyingFund will be described in the annual report and annual financialstatements of the Existing Funds.
10. Unitholders of the Funds receive the auditedannual and unaudited quarterly financial statements of theFunds together with the report of the Funds' auditor. Unitholderswill also receive appropriate summary disclosure in the financialstatements of the Underlying Fund.
11. Unitholders of the Funds may receive theoffering memorandum (if any), the annual report, and annualand quarterly financial statements of the Underlying Fundfree of charge upon request to the Manager.
12. Where a matter relating to an UnderlyingFund requires a vote of security holders of the UnderlyingFund, the Manager will not cause the securities of the UnderlyingFund held by a Fund to be voted at such meeting.
13. There will be no duplication of managementfees and performance fees as between the Funds or the UnderlyingFund. The total effective management fee and performance feecharged to an investor in the Funds will be the stated managementfee and performance fee in the Limited Partnership Agreementfor each of the Existing Funds.
14. There will be no charges levied on thepurchase or redemption of securities of the Underlying Fundby the Funds.
15. In the absence of this Order, pursuantto the Applicable Requirements, the Funds are prohibited fromknowingly making or holding an investment in a person or companyin which the mutual fund, alone or together with one or morerelated mutual funds, is a substantial securityholder. Asa result, in the absence of this Order, the Funds would berequired to divest themselves of any such investments.
16. In the absence of this Order, the ApplicableRequirements requires GS+A to file a report on every purchaseor sale of securities of the Underlying Funds by the Funds.
17. In the absence of this Order, pursuantto the Applicable Requirements, GS+A is prohibited from causingthe Funds to invest in the Underlying Fund unless the specificfact is disclosed to unitholders of the Funds and the writtenconsent of unitholders of the Funds is obtained before thepurchase.
18. The investments by the Funds in securitiesof the Underlying Fund represent the business judgment of"responsible persons" (as defined in the OntarioLegislation) uninfluenced by considerations other than thebest interests of the Funds.
AND UPON the undersigned being of theopinion that the tests contained in the Ontario Legislationhaving been met;
IT IS ORDERED pursuant to the OntarioLegislation that the Applicable Requirements shall not applyso as to prevent the Funds from making and holding investmentsin securities of the Underlying Fund or so as to require GS+Ato file a report relating to each purchase or sale of such securitiesand disclose such purchase to unitholders of the Funds and obtaintheir written consent to the investment prior to the purchase;
PROVIDED THAT
1. the Order shall only apply if, at the timethe Funds make or hold investments in the Underlying Fund,the following conditions are satisfied:
(a) the annual report and annual financialstatements for each of the Funds discloses:
(i) the intent of the Fund to invest aportion of its assets in securities of the UnderlyingFund;
(ii) the manager of the Underlying Fund;
(iii) the name of the Underlying Fund;and
(iv) the investment objectives, investmentstrategies, risks and restrictions of the Underlying Fund;
(b) the arrangements between or in respectof the Fund and the Underlying Fund are such as to avoidthe duplication of management fees and performance fees;
(c) the manager of the Funds will not votethe securities of the Underlying Fund held by them, respectively,at any meeting of holders of such securities; and
(d) in addition to receiving the annualand the quarterly financial statements of the Fund, securityholdersof the Fund have received appropriate summary disclosurein respect of the Funds' holdings of securities of the UnderlyingFund in the financial statements of the Fund.
March 7, 2003.
"Robert L. Shirriff" "TheresaMcLeod"