Exemption Orders (Discretionary)
TALVEST FUND MANAGEMENT INC.
2001 BCSECCOM 47
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief granted from certain of the self dealing requirements regarding investments for specified purposes by mutual funds in securities of other mutual funds that are under common management.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 120(1), 120(2), 121(2)(b), 126(a), 126(d) and 130(b)
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO AND NOVA SCOTIA
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF Talvest Fund Management Inc. and Talvest Cdn. Multi Management Fund
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario and Nova Scotia (the “Jurisdictions”) has received an application (the “Application”) from Talvest Fund Management Inc. (“Talvest”) in its own capacity and on behalf of Talvest Cdn. Multi Management Fund (the “Top Fund”) for a decision (the “Decision”) pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that the requirements or prohibitions under the Legislation (the “Applicable Requirements”) described in paragraphs (1) and (2) below shall not apply to investments by the Top Fund directly in securities of Talvest Cdn. Equity Growth Fund, Talvest Cdn. Equity Leaders Fund, Talvest Small Cap Cdn. Equity Fund and Talvest Millennium Next Generation Fund (the “Reference Funds”):
1. the provisions prohibiting a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder;
2. the provisions requiring a management company, or in British Columbia, the mutual fund manager, to file a report relating to a purchase or sale of securities between the mutual fund and any related person or company, or any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies.
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS it has been represented by Talvest to the Decision Makers that:
1. Talvest is a corporation established under the laws of Canada and will be the manager of the Top Fund and is the manager of the Reference Funds. TAL Global Asset Management Inc. will be the investment adviser of the Top Fund and is presently the investment adviser of Talvest Cdn. Equity Growth Fund and Talvest Cdn. Equity Leaders Fund. Van Berkom and Associates Inc. is the investment adviser of Talvest Small Cap Cdn. Equity Fund and Morrison Williams Investment Management Ltd. is the investment adviser of Talvest Millennium Next Generation Fund.
2. The Top Fund will be and the Reference Funds are, open-ended investment trusts established under the laws of the Province of Ontario. Securities of the Top Fund and the Reference Funds will be offered for sale under a (final) simplified prospectus and annual information form that will be filed shortly in each of the provinces and territories of Canada (the “Prospectus”) under SEDAR project number 288043. The Reference Funds are, and the Top Fund will be, reporting issuers in each of the provinces and territories of the various securities authorities of Canada.
3. The Top Fund will invest specified percentages (the “Fixed Percentages”) of its assets (exclusive of cash and cash equivalents) in securities of the Reference Funds and may not deviate more than 2.5% above or below the Fixed Percentages (the "Permitted Ranges”).
4. The Prospectus will disclose the investment objective of the Top Fund and the Reference Funds, the Fixed Percentages of the net assets of the Top Fund invested in securities of each of the Reference Funds and the Permitted Ranges within which such Fixed Percentages may vary.
5. The investments by the Top Fund in the Reference Funds will be without sales or redemption charges and without duplication of management fees.
6. The Reference Funds are not currently invested in other mutual funds. The Top Fund will not invest in any mutual fund whose investment objective includes investing directly or indirectly in other mutual funds.
7. Talvest will not change the Reference Funds without first obtaining approval of securityholders of the Top Fund and will not vary the Fixed Percentages without first filing an amendment to the Prospectus and in either event, will provide 60 days’ notice to securityholders of the Top Fund.
8. Except to the extent evidenced by this Decision and specific approvals granted by the Canadian securities administrators pursuant to National Instrument No 81-102, the investments by the Top Fund in the Reference Funds have been structured to comply with the investment restrictions of the Legislation and National Instrument No. 81-102.
9. In the absence of this Decision, pursuant to the Legislation, the Top Fund is prohibited from (a) knowingly making an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial unitholder; and (b) knowingly holding an investment referred to in subsections (a) hereof. As a result, in the absence of this Decision, the Top Fund would be required to divest itself of any investments referred to in subsections (a) and (b) herein.
10. In the absence of this Decision, the Legislation requires Talvest to file a report on every purchase or sale of securities of the Reference Funds by the Top Fund.
AND WHEREAS under the System, this MRRS Decision Document evidences the Decision of each Decision Maker;
AND WHEREAS 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 pursuant to the Legislation is that the Applicable Requirements shall not apply so as to prevent the Top Fund from investing in, or redeeming the securities of, the Reference Funds.
PROVIDED THAT IN RESPECT OF the investment by the Top Fund directly in securities of the Reference Funds:
1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publication in final form of any legislation or rule of that Decision Maker dealing with matters in section 2.5 of National Instrument 81-102.
2. the Decision shall only apply in respect of investments made by the Top Fund in compliance with the following conditions:
a) the Top Fund and the Reference Funds are under common management and the Reference Funds’ securities are offered for sale in the jurisdiction of the Decision Maker pursuant to a prospectus which has been filed with and accepted by the Decision Makers;
b) the Top Fund invests its assets (exclusive of cash and cash equivalents) in the Reference Funds in accordance with the Fixed Percentages disclosed, subject to a permitted variation above or below such Fixed Percentages of not more than 2.5% of the net asset value of the Top Fund to account for market fluctuations;
c) the Prospectus will disclose the intent of the Top Fund to invest in securities of the Reference Funds, the names of the Reference Funds, the Fixed Percentages and the Permitted Ranges within which such Fixed Percentages may vary;
d) the Top Fund will not invest in any mutual fund whose investment objective includes investing directly or indirectly in other mutual funds;
e) the investment by the Top Fund in the Reference Funds is compatible with the fundamental investment objectives of the Top Fund;
f) the Fixed Percentages and Permitted Ranges which are disclosed in the Prospectus may be changed only if the Prospectus is amended or a new prospectus is filed, and in either event, if the securityholders of the Top Fund have been given at least 60 days’ notice of the change;
g) if at any time, the assets of the Top Fund that are invested in the Reference Funds deviate from the Permitted Ranges the necessary changes are made in the Top Fund’s investment portfolio as at the next valuation date of the Top Fund in order to bring the Top Fund’s investment portfolio into conformity with the aforesaid amount;
h) there are compatible dates for the calculation of the net asset value of the Top Fund and the Reference Funds for the purpose of the issue and redemption of the securities of such mutual funds;
i) in the event of the provision of any notice to securityholders of a Reference Fund as required by the constating documents of the Reference Fund or by the laws applicable to the Reference Fund, such notice will also be delivered to the securityholders of the Top Fund; all voting rights attached to the securities of a Reference Fund which are directly owned by the Top Fund will be passed through to the securityholders of the Top Fund;
j) in the event that a securityholders’ meeting is called for the securityholders of a Reference Fund, all of the disclosure and notice material prepared in connection with such meeting and received by the Top Fund will be provided to its securityholders, and such securityholders will be entitled to direct a representative of the Top Fund to vote its holdings in the Reference Fund in accordance with their direction; the representative of the Top Fund will not be permitted to vote its holdings in the Reference Funds except to the extent the securityholders of the Top Fund so direct;
k) no sales charges are payable by the Top Fund in relation to its purchases of securities of the Reference Funds;
l) no fees or charges of any sort are paid by the Top Fund and the Reference Funds, by their respective managers or principal distributors, or by any affiliate or associate of any of the foregoing entities to anyone in respect of the Top Fund’s purchase, holding or redemption of the securities of the Reference Funds;
m) the arrangements between or in respect of the Top Fund and the Reference Funds are such as to avoid the duplication of management fees;
n) in addition to receiving the annual and, upon request, the semi-annual financial statements, of the Top Fund, its securityholders will receive the annual and, upon request, the semi-annual financial statements of the Reference Funds in either a combined report containing financial statements of the Top Fund and the Reference Funds, or in a separate report containing the financial statements of the Reference Funds; and
o) to the extent that the Top Fund and the Reference Funds do not use a combined simplified prospectus and annual information form containing disclosure about the Top Fund and the Reference Funds, copies of the simplified prospectus and annual information form of the Reference Funds may be obtained upon request by a securityholder of the Top Fund and this fact will be disclosed in the simplified prospectus of the Top Fund.
DATED at Toronto, Ontario this November 3, 2000
Howard I. Weston Robert W. Davis