Exemptions granted from the mutual fund conflict of interest investment restrictions and reporting requirements of the Securities Act (Ontario) to permit a fund of fund structure.
Securities Act, R.S.O. 1990, c. S.5, as am., sections 111(2)(b), 111(2)(c), 111(3), 113, 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")
IN THE MATTER OF
GLUSKIN SHEFF + ASSOCIATES INC.
THE GS+A GROWTH FUND
THE GS+A PREMIUM INCOME FUND
THE GS+A VALUE FUND
UPON the application of Gluskin Sheff + Associates Inc. ("GS+A"), on its behalf and on behalf of The GS+A Growth Fund, The GS+A Premium Income Fund and The GS+A Value Fund (collectively, the "Existing Funds") and any other mutual fund that is a mutual fund in Ontario but is not a reporting issuer under the Act, established and managed by GS+A after the date hereof (the "Future Funds", together with the Existing Funds, the "Funds") for an order of the Ontario Securities Commission (the "Commission") pursuant to sections 113, 117(2) and 121(2) of the Act (collectively, "Ontario Legislation") for relief from the restrictions and requirements described below (together, the "Applicable Requirements") in respect of the Funds' investments in The GS+A Small-Cap Fund (the "Existing Underlying Fund") and any other mutual fund that is a mutual fund in Ontario but is not a reporting issuer under the Act, established and managed by GS+A after the date hereof (the "Future Underlying Funds", together with the Existing Underlying Fund, the "Underlying Funds"):
(a) the restriction prohibiting a mutual fund from knowingly making and holding an investment,
(i) in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial security holder; or
(ii) in an issuer in which,
1. any officer or director of the mutual fund, its management company or distribution company or an associate of any of them, or
2. any person or company who is a substantial security holder of the mutual fund, its management company or its distribution company,
has a significant interest, 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 company to file a report of every transaction of purchase or sale of securities between a mutual fund it manages and any related person or company and any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, a mutual fund is a joint participant with one or more of its related persons or companies, in respect of each mutual fund to which it provides services or advice, within 30 days after the end of the month in which it occurs as set out in paragraphs 117(1)(a) and 117(1)(d) of the Act; and
(c) the restriction against a portfolio manager knowingly causing an investment portfolio managed by it to invest in the securities of any issuer in which a "responsible person" (as that term is defined in the Act) or an associate of a responsible person is an officer or director, unless the relationship is disclosed to the client, and, if applicable, the written consent of the client to the investment is obtained before the purchase as set out in paragraph 118(2)(a) of the Act;
AND UPON considering the application and the recommendation of staff of the Commission;
AND UPON GS+A having represented as follows:
1. GS+A is a corporation incorporated under the laws of the Province of Ontario.
2. GS+A is the manager, portfolio advisor, trustee and principal distributor of each of the Existing Funds and the Existing Underlying Fund. GS+A is registered with the OSC as a Mutual Fund Dealer, Portfolio Manager, Limited Market Dealer and Investment Counsel.
3. The Royal Trust Company is the custodian of the Existing Funds and the Existing Underlying Fund.
4. The Existing Funds and the Existing Underlying Fund are pooled investment funds established as limited partnerships under the laws of Ontario. Each investor in these funds has an undivided pro rata interest in the fund evidenced by units in the fund. The units of these funds have been offered for sale on an exempt basis to investors.
5. The Manager intends to establish other pooled investment funds in the future. The Future Funds and Future Underlying Funds will be open-ended trusts or limited partnerships.
6. To achieve their respective investment objectives, the Funds will invest a certain amount of their capital in the Underlying Fund.
7. The actual weightings of the investment of a Fund in the Underlying Fund will be reviewed on a regular basis and adjusted to ensure that the investment weighting continues to be appropriate for a Fund's investment objectives. The investment of a particular Fund in the Underlying Fund will be actively managed by the Manager on a regular basis.
8. The investment objectives of the Underlying Fund will be described in the annual report and annual financial statements of the Funds.
9. Unitholders of the Funds receive the audited annual and unaudited quarterly financial statements of the Funds together with the report of the Funds' auditor. Unitholders will also receive appropriate summary disclosure in respect of the Funds' holdings of securities of the Underlying Fund in the financial statements of the Funds.
10. Unitholders of the Funds may receive the annual report and annual and quarterly financial statements of the Underlying Fund, free of charge, upon request to the Manager.
11. Where a matter relating to an Underlying Fund requires a vote of unitholders of the Underlying Fund, the Manager will not cause the securities of the Underlying Fund held by a Fund to be voted at such meeting.
12. There will be no duplication of management fees and performance fees as between the Funds and the Underlying Fund. The total effective management fee and performance fee charged to an investor in the Funds will be the stated management fee and performance fee in the applicable Limited Partnership Agreement or Declaration of Trust, as the case may be, for each of the Funds.
13. There will be no charges levied to the Funds on the purchase or redemption of securities of the Underlying Fund.
14. In the absence of this Order, the Applicable Requirements prohibit the Funds from knowingly making or holding an investment in the Underlying Fund.
15. In the absence of this Order, the Applicable Requirements require GS+A to file a report on every purchase or sale of securities of the Underlying Fund by the Funds.
16. In the absence of this Order, the Applicable Requirements prohibit GS+A from causing the Funds to invest in the Underlying Fund unless the specific fact is disclosed to unitholders of the Funds and the written consent of unitholders of the Funds is obtained before the purchase.
17. The investments by the Funds in securities of the Underlying Fund represent the business judgement of "responsible persons" (as defined in the Act) uninfluenced by considerations other than the best interests of the Funds.
AND UPON the Commission being satisfied that it would not be prejudicial to the public interest to do so;
IT IS ORDERED pursuant to the Ontario Legislation that the Applicable Requirements shall not apply so as to prevent the Funds from making and holding investments in securities of the Underlying Fund or so as to require GS+A to file a report relating to each purchase or sale of such securities and disclose such purchase to unitholders of the Funds and obtain their written consent to the investment prior to the purchase;
PROVIDED THAT, the Order shall only apply if, at the time the Funds make or hold investments in the Underlying Fund, the following conditions are satisfied:
(a) the annual report and annual financial statements for each of the Funds discloses:
(i) the intent of the Fund to invest a portion of its assets in securities of the Underlying Fund;
(ii) the manager of the Underlying Fund;
(iii) the name of the Underlying Fund; and
(iv) the investment objectives, investment strategies, risks and restrictions of the Underlying Fund;
(b) the arrangements between or in respect of a Fund and the Underlying Fund are such as to avoid the duplication of management and performance fees;
(c) GS+A does not vote the securities of the Underlying Fund held by a Fund at any meeting of holders of such securities; and
(d) in addition to receiving the annual and the quarterly financial statements of a Fund, unitholders of the Fund have received appropriate summary disclosure in respect of the Fund's holdings of securities of the Underlying Fund in the financial statements of the Fund.
May 28, 2004.
"Paul M. Moore"
"H. Lorne Morphy"