Norbourg Funds - MRRS Decison

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- approval to change investment objective without unitholder meeting and exemption from 60 day notice period prior to terminating funds in order to facilitate court ordered liquidation.

Rules Cited

National Instrument 81-102 Mutual Funds, ss. 5.1, 5.8

November 11, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

NEW-BRUNSWICK, ONTARIO, AND QUÉBEC

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

THE NORBOURG FUNDS ( the Funds )

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (each, a "Decision Maker" and together, the Decision Makers) in each of the Jurisdictions has received an application from Ernst & Young Inc. ("E&Y") ( the application ), acting as provisional administrator of the Funds ( see Schedule A ) appointed pursuant to an order dated August 25^th, 2005, of the Québec's Finance Minister, for a decision under the section 19.1 of National Instrument 81-102 Mutual Funds ( NI 81-102 or the Legislation ) exempting the manager of the Norbourg Funds, and E&Y from obligations provided for at Sections 5.1 c) and 5.8 2) of NI 81-102 to get the unitholder's approval and to provide to the unitholders the 60 days notice before the termination of the Norbourg Funds, in connection with the appointment of Jarislowsky Fraser Ltd. as investment adviser of the Funds and the liquidation of the Funds ( the Requested Relief ).

Under the Mutual Reliance Review System for Exemptive Relief Application,

(a) the Autorité des marchés financiers ( AMF ) is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions or in Québec Notice 14-401 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

Concurrently to the application, E&Y also requested from the AMF a similar exemption relief for the Evolution Funds. Therefore, this Document Decision would not cover the Evolution Funds.

This decision is based upon the following facts represented by E&Y and the manager of the Norbourg and Evolution Funds (collectively referred to as the "Funds"):

A. On August 25, 2005 Richard J. Messier of E&Y was named provisional administrator ("Provisional Administrator") of Norbourg Gestion d'actifs inc., Norbourg International inc., Norbourg Groupe Financier inc., Fonds Évolution inc. and the Funds by order of the Québec's Finance Minister, the whole pursuant to section 257 of the Securities Act (Québec) RSQ c.v-1.1 (the "Act") (the "Order").

B. The Bureau de décision et de révision en valeurs mobilières (Québec) issued, on August 24, 2005, Decision No. 2005-014 pursuant to which a freeze order and a prohibition order for trade on units of the Funds were rendered pursuant to the Act.

C. On October 25, 2005, Pierre Laporte of E&Y has been named liquidator of the Funds by the Québec's Finance Minister in accordance with section 261 of the Act (the "Liquidator").

D. In order to protect the assets of the unitholders of the Funds from now until completion of the liquidation process, E&Y appointed Jarislowsky Fraser Limited ("Jarislowsky") as funds investment advisor. In its capacity of funds investment advisor, Jarislowsky will follow a conservative investment policy copy of which have been provided to the Decision Makers (the "Investment Policy"), which policy diverges in part from investment objectives disclosed in the prospectus of the Funds.

E. The Investment Policy will aim at maintaining the actual Funds asset value for the upcoming liquidation. The preservation of the asset value will be the overarching investment objective for fixed revenue investment and any speculation will be avoided in order to minimize the volatility of Funds portfolios.

F. As of the August 25, 2005, there were 43 and two unitholders of the Funds residing in Ontario and New-Brunswick, respectively.

G. The precise mechanism pursuant to which the Funds will be liquidated is, as of today's date, not determined.

H. On September 12, 2005, E&Y issued a notice to all unitholders of the Funds which explained the existing situation and the nomination of the Provisional Administrator. This notice also indicated a telephone number to reach the dedicated phone line at E&Y which is supported by a voicemail. All voicemails are picked-up by E&Y staff and replied to within 24 working hours.

I. On October 12, 2005, a second letter was issued by E&Y to the unitholders which included further explanations on the process and the scope of his mandate and the procedure to be followed in order to participate to the liquidation. This letter also informs the unitholders of the appointment ofJarislowsky as investment advisor for the Funds. By this correspondence, the unitholders where asked to answer a few questions on the enclosed document primarily for verification purposes. So far E&Y has received 7,000 answers from unitholders and are receiving responses at the rate of approximately 200 or 300 replies per day.

J. E&Y also set up an informal committee of unitholders representatives based on the groups that have made representations before different administrative and judicial tribunals in the last few months on behalf of unitholders (the "Committee"). This informal group of unitholders of the Funds representatives which was formed at the initiative of E&Y has two objectives:

a) relay information directly to unitholders of the Funds in addition to the formal procedure put in place by E&Y;

b) act as a sounding board for administrative and liquidation decisions to be made by E&Y.

K. As of today's date it is impossible to determine with precision the exact date of the liquidation of the Funds.

L. The Liquidator intends to have (i) all major liquidation decisions and (ii) any necessary exemptions from applicable provisions of the Declarations of Trust in order to proceed to the liquidation, submitted, reviewed and approved by the Superior Court of Québec, which will ensure that the unitholders are duly protected.

Decision

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 the Requested Relief is granted.