Canadian Medical Discoveries Fund Inc. et al. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- approval of a change in control of manager as a result of sale of management and abridgement of the 60 day notice requirement to 31 days.
Rules Cited
National Instrument 81-102 Mutual Funds, ss. 5.5(2), 5.8(1).
January 20, 2006
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO, BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, MANITOBA, QUÉBEC,
NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD ISLAND,
NEWFOUNDLAND AND LABRADOR, NORTHWEST TERRITORIES,
NUNAVUT AND YUKON TERRITORY (THE "JURISDICTIONS")
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CANADIAN MEDICAL DISCOVERIES FUND INC. AND
CANADIAN MEDICAL DISCOVERIES FUND II INC. (the "Funds")
AND IMPAX CAPITAL CORP. (the "Filer")
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 the Filer dated December 22, 2005 (the "Application") for a decision under the securities legislation of the Jurisdictions (the "Legislation") for:
(i) approval pursuant to subsection 5.5(2) of National Instrument 81-102 -- Mutual Funds ("NI 81-102") for a change of control of Medical Discovery Management Corporation ("MDMC"), the manager of the Funds; and
(ii) an abridgement, pursuant to section 19.1 of NI 81-102, from the 60 day notice period required by subsection 5.8(1) of NI 81-102 (the "Notice Requirement").
Under the Mutual Reliance Review System for Exemptive Relief Applications
(a) the Ontario Securities Commission is the principal regulator for the Application, and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are otherwise defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
1. MDMC is the manager of two mutual funds: Canadian Medical Discoveries Fund Inc. ("CMDF") and Canadian Medical Discoveries Fund II Inc.("CMDF II") (together, the "Funds").
2. The Funds are registered as labour sponsored investment fund corporations under the Community Small Business Investment Act (Ontario). CMDF is also registered as a labour sponsored venture capital corporation under the Income Tax Act (Canada). CMDF II is prescribed as a labour-sponsored venture capital corporation under the Income Tax Act (Canada). CMDF has been approved as a qualifying fund pursuant to the Labour-sponsored Venture Capital Corporations Act (Saskatchewan).
3. CMDF is a reporting issuer, where such status exists, in the Jurisdictions except for the three territories. CMDF II is a reporting issuer, where such status exists, in the Jurisdictions, except for the provinces of Saskatchewan, New Brunswick and Nova Scotia.
4. MDMC is currently owned and controlled by MDS Capital Corp. (the "Seller"), a private corporation incorporated under the laws of the Province of Ontario. Impax intends to acquire all of the issued and outstanding shares of MDMC from the Seller (the "Transaction") pursuant to a share purchase agreement dated December 14, 2005. The Transaction is scheduled to close forthwith after the expiry of the notice period under subsection 5.8(1) of NI 81-102.
5. A notice regarding the change of control of MDMC was mailed to shareholders of the Funds on December 20, 2005.
6. The principals of the Filer have a strong track record in managing investment funds, particularly labour sponsored investment funds.
7. The Seller, which is the current investment advisor to the Funds, has agreed as part of the Transaction to continue to serve as an investment advisor to MDMC and the Funds for a minimum of 60 days after the closing and up to a maximum of 120 days after the closing to assist with the orderly transition of responsibilities to the Filer and its affiliates.
8. The Filer is of the view that there will be no material adverse changes to the Funds as a result of the change of control of MDMC. Few, if any, changes to the investment portfolios of the Funds are possible during a 30 or 60 day period given the nature of the venture capital investment portfolio maintained by the Funds.
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:
(a) the change of control of MDMC is approved pursuant to subsection 5.5(2) of NI 81-102; and,
(b) an exemption from the Notice Requirement is granted provided that:
(i) securityholders of the Funds are given at least 31 days notice of the change of control;
(ii) no changes are made to the portfolio management operations of the Funds during the 60 day period following the giving of notice of the change in control to the securityholders of the Funds; and
(c) the approval and exemption provided herein is subject to compliance with all applicable provisions of NI 81-102.