Approval of change of manager of mutual funds under paragraph 5.5(1)(a) of National Instrument 81-102 Mutual Funds.
National Instrument 81-102 Mutual Funds, s. 5.5(1)(a).
November 24, 2005
IN THE MATTER OF
NATIONAL INSTRUMENT 81-102
MUTUAL FUNDS (NI 81-102)
IN THE MATTER OF
NIGEL STEPHENS MANAGEMENT INC.
NSC CANADIAN BALANCED INCOME FUND,
NSC CANADIAN EQUITY FUND, AND
NSC GLOBAL BALANCED FUND
(COLLECTIVELY, THE "FUNDS")
The Ontario Securities Commission (the Commission) has received an application from the Filer dated November 7, 2005 (the Application) requesting the approval of the proposed change of manager of the Funds from the Filer to Northwood Stephens Private Counsel Inc. (Northwood Stephens) under paragraph 5.5(1)(a) of NI 81-102 (the Requested Approval).
This decision is based on the following facts represented by the Filer:
The proposed business combination
1. The Filer is currently the manager and trustee of the Funds.
2. On August 8, 2005, Nigel Stephens Counsel Inc. (NSCI), the former manager, trustee and investment advisor of the Funds, announced its proposed business combination with Northwood Private Counsel Inc., currently known as Northwood Stephens. The proposed business combination will be carried out in three stages and upon the completion of all three stages, Northwood Stephens will become the manager, trustee and investment advisor of the Funds.
3. A press release dated August 8, 2005 and a material change report dated August 18, 2005 were filed by the Funds in connection with the business combination under SEDAR Project Nos. 814688 and 820425, respectively.
4. On September 30, 2005, the Filer, as manager and trustee of the Funds, issued a press release announcing the completion of the first two stages of the business combination.
5. In the first stage of the business combination, NSCI transferred its trustee and management functions of the Funds to the Filer, a newly formed affiliated Ontario corporation. The Filer retained NSCI to provide advisory services to the Funds pursuant to an investment advisor agreement (the Advisory Agreement). Both NSCI and the Filer were at the first stage of the business combination owned and controlled by a sole shareholder, being Mr. J. Ian Dalrymple.
6. In the second stage of the business combination, substantially all of the assets of NSCI, including the Advisory Agreement, were sold to Northwood Private Counsel Inc. As a result, Northwood Private Counsel Inc. changed its name to Northwood Stephens and became the investment advisor of the Funds. In addition, during the second stage of the business combination, 49% of the shares of the Filer were sold to Mr. D. Scott Hayman and Mr. F. Thomas McCullough.
7. In the third stage of the business combination, it is proposed that all of the outstanding shares of the Filer will be sold to Northwood Stephens following which the Filer will either be wound-up or amalgamated with Northwood Stephens or dissolved. Accordingly, upon completion of the third stage, Northwood Stephens will become the manager, trustee and investment advisor of the Funds.
8. The Filer, as manager and trustee of the Funds, has called a special meeting of the unitholders of each of the Funds to be held on November 28, 2005. In connection with the special meeting, a notice of meeting, management information circular and proxy was mailed to unitholders of the Funds on October 31, 2005.
9. At the special meetings, unitholders of each of the Funds will be asked to consider, and if thought advisable, to approve, amongst other things, the change in manager and trustee of each of the Funds from the Filer to Northwood Stephens. If unitholder approval is received, the change in manager is expected to occur on or about November 30, 2005, subject to receipt of all necessary regulatory approvals and standard closing conditions.
10. Northwood Stephens is a corporation organized under the laws of Ontario. Northwood Stephens has provided customized financial services to its clients since February 2003.
11. Northwood Stephens is registered with the Commission as an advisor in the categories of investment counsel and portfolio manager and as a dealer in the category of limited market dealer.
12. All of the issued and outstanding shares of Northwood Stephens are held by NSPC Holdings Inc. NSPC Holdings Inc. is controlled, directly or indirectly, as follows: (i) 40% by Mr. J. Ian Dalrymple, the indirect sole shareholder of NSCI, the former manager and trustee of the Funds; (ii) 20% by Mr. D. Scott Hayman; and (iii) 40% by Mr. F. Thomas McCullough.
13. Northwood Stephens currently acts as investment advisor of the Funds pursuant to the terms of the Advisory Agreement. Northwood Stephens has received an exemption order from the Commission allowing Northwood Stephens to distribute units of the Funds to its managed accounts.
14. Each of the Funds is a trust governed by the Amended and Restated Declaration of Trust dated November 30, 2004, as amended by the First Supplemental Indenture dated September 30, 2005, made under the laws of the Province of Ontario.
15. Units of the Funds are qualified for distribution in the province of Ontario pursuant to a Simplified Prospectus and an Annual Information Form, respectively, each dated November 30, 2004, as amended by Amendment No. 1 dated August 18, 2005 (Amendment No. 1) and Amendment No. 2 dated October 14, 2005. Amendment No. 1 disclosed the proposed change of manager from the Filer to Northwood Stephens.
16. The Funds are reporting issuers in Ontario. The Funds are not on any list of defaulting reporting issuers maintained by the Commission.
The Commission is satisfied that the proposed change of manager from the Filer to Northwood Stephens would not be prejudicial to unitholders of the Funds.
The decision of the Commission is that the Requested Approval is granted.