Securities Law & Instruments


MRRS Exemptive Relief Application -- Open-end mutual fund trust proposed to be merged into capital pool company -- President and CEO of the portfolio advisor of the terminating mutual fund also officer and director, and majority shareholder of capital pool company -- Portfolio advisor granted relief from prohibition contained in the legislation prohibiting it from knowingly causing an investment portfolio managed by it to invest in an issuer in which a responsible person is an officer or director.

Ontario Statutes Cited

Securities Act, R.S.O., c. S.5, as am., ss. 118(2)(a), 121(2)(a)(ii).

November 25, 2005






(the Jurisdictions)














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 (the Legislation) exempting the Filer from the provision in the Legislation prohibiting a portfolio manager from knowingly causing any investment portfolio managed by it to invest in an issuer in which a responsible person is an officer or director (the Requested Relief).

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.


Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.


This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation governed by the laws of the Province of Ontario. The Filer is registered as an advisor in the categories of investment counsel and portfolio manager and as a dealer in the category of mutual fund dealer in Ontario.

2. The Filer is the trustee, manager and portfolio advisor of the Terminating Fund.

3. The Terminating Fund is currently an open-end mutual fund trust established under the laws of Ontario by declaration of trust.

4. Units of the Terminating Fund are currently distributed in each of the provinces and territories of Canada pursuant to a simplified prospectus and an annual information form each dated July 27, 2005.

5. Masthead Resources Ltd. (the Corporation) is incorporated pursuant to the laws of the Province of Alberta. The Corporation is a capital pool company (CPC), as that term is defined in TSXV Venture Exchange (TSXV) Policy 2.4 Capital Pool Companies (TSXV Policy 2.4). The Corporation has completed an initial public offering of its shares pursuant to a CPC prospectus. The CPC prospectus for the offering of shares of the Corporation is dated August 8, 2005.

6. Shares of the Corporation are listed on TSXV. The Corporation is a Tier 2 CPC issuer. In order to become a regular (non-CPC) Tier 1 or Tier 2 issuer, the Corporation intends to complete a Qualifying Transaction in accordance with TSXV Policy 2.4.

7. A "Qualifying Transaction" is defined in TSXV Policy 2.4 as a transaction pursuant to which a CPC acquires significant assets (assets or a business) which, when purchased by the CPC, would result in the CPC meeting the Minimum Listing Requirements of TSXV.

8. The Filer wishes to merge the Terminating Fund into the Corporation (the Merger).

9. The Merger will occur through the implementation of the following steps:

(a) the declaration of trust of the Terminating Fund will be amended to remove the right of redemption to take effect on a specific date as set out in the Circular (as defined below);

(b) the day after the declaration of trust is amended, the Terminating Fund will transfer its assets (which will consist entirely of cash at the date of the Merger) to the Corporation in exchange for shares and an equal number of share purchase warrants of the Corporation;

(c) the Terminating Fund will then distribute its assets (now only shares and share purchase warrants) to its unitholders on a dollar-for-dollar basis so that they will become direct security holders of the applicable Corporation; and

(d) thereafter, the Terminating Fund will be wound-up.

10. It is believed by the Filer that the Merger is in the best interests of unitholders of the Terminating Fund.

11. It is the intention of the promoter of the Corporation to treat the Merger as Qualifying Transaction for the Corporation.

12. John F. Driscoll, the President and Chief Executive Officer of the Filer, is an officer and director, the promoter and majority shareholder (he holds approximately 54% of the issued and outstanding shares) of the Corporation. Mr. Driscoll also holds approximately 5.4% of the Terminating Fund. Mr. Driscoll will not vote the units which he holds in the Terminating Fund or the shares which he holds in the Corporation at the meetings of Terminating Fund unitholders and Corporation shareholders called to consider the proposed transaction in order to address any appearance of conflict of interest. Neither the Filer or any associate of Mr. Driscoll owns units of the Terminating Fund or shares of the Corporation.

13. Contemporaneously with the closing of the Merger, it is proposed that the Corporation will purchase all the shares of C.A. Bancorp Inc. (C.A. Bancorp), a corporation beneficially owned by John F. Driscoll and his family, in exchange for shares of the Corporation (the Acquisition). C.A. Bancorp intends to carry on business as a merchant bank focusing on investments in the Canadian mid-market sector.

14. A special meeting will be called for the Terminating Fund unitholders to approve the Merger. The notice of meeting and management information circular (the Circular) sent to Terminating Fund unitholders in advance of the special meetings will contain detailed disclosure in respect of the Merger and the Acquisition, including the three steps of the transaction: (1) de-mutualizing the mutual fund and eliminating the redemption rights of unitholders, (2) the sale of the Terminating Fund assets to the Corporation in exchange for shares and share purchase warrants, and (3) the acquisition of C.A. Bancorp. Unitholders will be advised that as of a certain date immediately prior to the Merger, redemptions of units of the Terminating Fund will cease and then ultimately, unitholders will become direct holders of shares and share purchase warrants in the applicable Corporation. The Circular will outline the business focus of the Corporation and C.A. Bancorp and the positive and negative aspects of an investment in the Corporation so that unitholders can make an informed decision about how to proceed. As well, a copy of the prospectus for the applicable Corporation will be provided with the Circular. The prospectus outlines the requirements for a capital pool company, a Qualifying Transaction and the risks involved (for example, the possible reduced liquidity) in this type of investment.

15. Approval for the Merger will be sought from the shareholders of the Corporation. The Merger must be approved on a "majority of the minority" basis.

16. No sales charges will be payable by the Terminating Fund or its unitholders in connection with the acquisition by the Terminating Fund of shares and share purchase warrants of the Corporation.

17. Neither the Terminating Fund nor its unitholders will be responsible for any of the costs associated with the Merger.

18. Following the Merger, shares of the Corporation issued to unitholders on the Merger and shares underlying the share purchase warrants issued to unitholders on the Merger, when issued, will be freely tradable on TSXV.

19. Share purchase warrants received by unitholders on the Merger will have a term of one year and will entitle the holder thereof to purchase one share for each share purchase warrant at a price per share equal to the price per share of the Corporation, as applicable, after the Merger on the date the Merger takes place.

20. In the absence of this Decision, the Filer is prohibited from knowingly causing the Terminating Fund to sell its assets in exchange for shares and share purchase warrants of the Corporation because the transaction will result in the Terminating Fund investing in an issuer in which a responsible person (John Driscoll, the President and Chief Executive Officer of the Filer) is an officer or director.


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, for the purpose of effecting the Merger described in this decision, the Requested Relief is granted.

"Paul Moore"
Ontario Securities Commission
"Robert W. Davis"
Ontario Securities Commission