EnerVest Natural Resources Fund Ltd. and EverVest Funds Management Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- approval of a change in control of manager.

Rules Cited

National Instrument 81-102 Mutual Funds, s. 5.5(2).

February 6, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA, BRITISH COLUMBIA, MANITOBA,

NEW BRUNSWICK, NEWFOUNDLAND AND

LABRADOR, NORTHWEST TERRITORIES,

NOVA SCOTIA, NUNAVUT, ONTARIO,

PRINCE EDWARD ISLAND, SASKATCHEWAN,

YUKON AND QUEBEC

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

ENERVEST NATURAL RESOURCES FUND LTD. (THE FUND)

AND ENERVEST FUNDS MANAGEMENT INC.

(THE MANAGER)

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Manager for a decision under National Instrument 81-102 (the Instrument) for a decision that:

1.1 the Decision Maker approve the change of control of the Manager

(the Requested Relief).

2. Under the Mutual Reliance Review System for Exemptive Relief Applications (MRRS):

2.1 the Alberta Securities Commission is the principal regulator for this application; and

2.2 this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

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

Representations

4. This decision is based on the following facts represented by the Manager:

4.1 The Manager, a corporation incorporated under the laws of Alberta, is the manager and promoter of the Fund.

4.2 The Fund is a mutual fund corporation incorporated under the laws of Alberta. At the time of the application its special shares were distributed under a simplified prospectus dated December 15, 2004, as amended, in each Jurisdiction other than Québec. Currently its special shares are distributed under a simplified prospectus dated December 21, 2005, as amended, in each Jurisdiction other than Québec.

4.3 The Fund is a reporting issuer under the applicable securities legislation of each Jurisdiction and is not on the list of defaulting reporting issuers maintained under applicable securities legislation in those Jurisdictions.

4.4 The Manager is a wholly owned subsidiary of EnerVest Management Ltd. (EML).

4.5 On July 7, 2005, EML and the joint venture partners and principals of EML entered into an agreement of purchase and sale with EnerVest Limited Partnership (the Partnership) and Avenir Operating Corp. The Partnership ultimately is a wholly owned subsidiary of Avenir Diversified Income Trust (the Trust) and Avenir Operating Corp. (the manager and wholly owned subsidiary of the Trust) (collectively, the Avenir Companies).

4.6 The transaction closed on October 4, 2005 (the Closing Date) at which time control of the Manager ultimately vested in the Trust as the Trust, through its subsidiaries, acquired all of the outstanding shares of EML (the Change of Control).

4.7 As of the Closing Date, individuals associated with the Trust replaced certain senior managers and directors of the Manager and the Fund. The portfolio manager of the Fund continued to act as portfolio manager of the Fund.

4.8 The Manager did not obtain the approval of the Decision Maker prior to the Change of Control.

4.9 Notice of the Change of Control (the Notice) was sent to securityholders of the Fund on November 10, 2005. The Manager did not provide notice of the Change of Control to the securityholders at least 60 days prior to the Closing Date.

Decision

5. 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.

6. The decision of the Decision Maker under the Instrument regarding the Change of Control is that the Change of Control is approved on the condition that the portfolio manager act in that capacity for at least 60 days after the delivery of Notice to shareholders of the Fund.

7. Nothing in this Decision precludes Enforcement Staff from proceeding against the Manager or any other responsible party with respect to the failure to seek regulatory approval prior to the Change of Control and the failure to provide notice of the Change of Control to securityholders at least 60 days prior to the Change of Control.