Mutual Reliance Review System for Exemptive Relief Applications - Investment by mutualfunds in securities of another mutual fund that is under common management for specifiedpurposes excepted from the requirements of section 101, clause 111(2)(b), and subsection111(3), clauses 117(1)(a) and (d), subject to certain specified conditions.
Securities Act (Ontario), R.S.O., c.S.5, as am. ss. 101, 104(2)(c), 111(2)(b), 111(3), 113,117(1)(a), 117(1)(d) and 117(2).
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
TALVEST GLOBAL MULTI MANAGER FUND, TALVEST GLOBAL EQUITY FUND, TALVEST GLOBAL SMALL CAP FUND,TALVEST GLOBAL HEALTH CARE FUND, TALVEST GLOBAL SCIENCE AND TECHNOLOGY FUND, TALVEST FUND MANAGEMENT INC.
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario,Quebec, Nova Scotia and Newfoundland (the "Jurisdictions") has received an application(the "Application") from Talvest Fund Management Inc., Talvest Global Multi ManagerFund (the "Top Fund") and Talvest Global Equity Fund, Talvest Global Small Cap Fund,Talvest Global Health Care Fund and Talvest Global Science and Technology Fund (the"Reference Funds") for a decision pursuant to the securities legislation of the Jurisdictions(the "Legislation") that, if applicable in a particular Jurisdiction:
1. the requirements contained in the Legislation requiring a mutual fund offeror toissue a news release and file a report where its aggregate holdings of securities ofa reporting issuer exceed 10% of the outstanding securities of the reporting issuershall not apply in respect of certain investments to be made by the Top Fund in theReference Funds;
2. the restrictions contained in the Legislation prohibiting a mutual fund fromknowingly 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 substantialsecurityholder shall not apply in respect of certain investments to be made by theTop Fund in the Reference Funds; and
3. the requirements contained in the Legislation requiring a management company tofile a report relating to a purchase or sale of securities between the mutual fund andany related person or company, or any transaction in which, by arrangement otherthan an arrangement relating to insider trading in portfolio securities, the mutualfund is a joint participant with one or more of its related persons or companies, shallnot apply in respect of certain investments to be made by the Top Fund in theReference Funds;
AND WHEREAS the requirements and restrictions outlined in paragraphs 1 through3 shall be referred to in this Decision Document as the "Applicable Legislation";
AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application;
AND WHEREAS it has been represented by Talvest Fund Management Inc. to theDecision Makers that:
1. Talvest Fund Management Inc. ("Talvest") is a corporation established under thelaws of Canada and will be the manager of the Top Fund and is the manager of theReference Funds. TAL Global Asset Management Inc., the parent corporation ofTalvest, will be the investment adviser of the Top Fund and is the investmentadviser of the Reference Funds.
2. The Top Fund will be and the Reference Funds are, open-ended investment trustsestablished under the laws of the Province of Ontario. Units of the Top Fund willbe offered for sale once the preliminary simplified prospectus and annualinformation form dated December 14, 1999 and filed under SEDAR Project No.227066 (the "Top Prospectus") is receipted as final in all of the jurisdictions ofCanada. Units of the Reference Funds are offered under a separate prospectusdated October 29, 1999 (the "Reference Prospectus"). The Reference Funds are,and the Top Fund will be, reporting issuers in each of the provinces and territoriesof the various securities authorities of Canada.
3. The Top Fund will invest all of its assets (exclusive of cash and cash equivalents)in securities of the Reference Funds. The Reference Prospectus will disclose theidentity and investment objectives of each Reference Fund and the fact that thereis no duplication of sales charges, redemption charges or management fees.
4. The Top Prospectus will disclose the investment objective of the Top Fund and theReference Funds, the fixed percentages of the net assets of the Top Fund investedin securities of each of the Reference Funds (the "Fixed Percentages") and thepermitted ranges within which such Fixed Percentages may vary (the "PermittedRanges"). The Top Fund will invests its assets in each of the Reference Funds inthe following Fixed Percentages: 40% in Talvest Global Equity Fund, 20% inTalvest Global Small Cap Fund, 20% in Talvest Global Health Care Fund and 20%in Talvest Global Science and Technology Fund. The Fixed Percentages aresubject to the Permitted Range of not more than 2.50 percentage points above orbelow the Permitted Percentages, all of which will be disclosed in the TopProspectus.
5. The Reference Funds in which the Top Fund will invest will not be changed withoutobtaining security holder approval and the Fixed Percentages will not be changedexcept upon the filing of an amendment of the Prospectus and the provision of sixtydays notice (which notice shall include a copy of the amendment) of the change tosecurityholders.
6. Except to the extent evidenced by this Decision and specific approvals granted bythe Canadian securities administrators pursuant to National Policy Statement No.39, the investments by the Top Fund in the Reference Funds have been structuredto comply with the investment restrictions of the Legislation and National PolicyStatement No. 39.
7. In the absence of this Decision, as soon as the aggregate holdings by the Top Fundof securities of a Reference Fund exceed 10% of the outstanding Units of aReference Fund, the Top Fund and Talvest Fund Management Inc., would berequired to comply with the reporting and other requirements of the Legislation.
8. In the absence of this Decision, pursuant to the Legislation, the Top Fund isprohibited from (a) knowingly making an investment in a person or company inwhich the mutual fund, alone or together with one or more related mutual funds, isa substantial securityholder; and (b) knowingly holding an investment referred toin subsection (a) hereof. As a result, in the absence of this Decision, the Top Fundwould be required to divest itself of any investments referred to in subsection (a)herein.
9. In the absence of this Decision, the Legislation requires Talvest Fund ManagementInc. to file a report on every purchase or sale of securities of the Reference Fundsby the Top Fund.
10. Talvest is of the view that the requested relief is in the best interests of the TopFund and represents the business judgment of responsible persons uninfluencedby considerations other than the best interests of the Top Fund and the ReferenceFunds.
AND WHEREAS pursuant to the System this MRRS Decision Document evidencesthe decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Maker with the jurisdiction to make the Decisionhas been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that theApplicable Legislation does not apply to the purchase and sale by the Top Fund of unitsof the Reference Funds,
PROVIDED IN EACH CASE THAT:
1. this Decision, as it relates to the jurisdiction of a Decision Maker, will terminate oneyear after the publication in final form of any legislation or rule of that DecisionMaker dealing with the matters in clause 2.04(4)(b) of National Policy StatementNo. 39; and
2. the foregoing Decision shall only apply to purchases and sales by the Top Fund ofthe Underlying Fund's units made in compliance with the following conditions:
(a) each of the Top Fund and the Reference Funds are under commonmanagement and the Reference Funds' Units are offered for sale in thejurisdiction of the Decision Maker pursuant to a prospectus which has beenfiled with and accepted by the Decision Maker;
(b) the Top Fund invest its assets in Units of certain Reference Funds inaccordance with the Permitted Percentages subject to a Permitted Rangeabove or below the Fixed Percentages of not more than 2.5 percentagepoints, provided that any deviations above or below the Fixed Percentagesof greater than 2.5 percentage points will be adjusted on the next valuationdate;
(c) the Top Prospectus will disclose the Fixed Percentages and the PermittedRanges within which such Fixed Percentages may vary;
(d) the Fixed Percentages, which are disclosed in the Top Prospectus, may notbe changed until the Top Prospectus is amended and filed or a newprospectus is filed with the Decision Maker, existing securityholders of theTop Fund have been given at least 60 days' prior written notice of thechange, or the prior approval of the securityholders has been given tochange the Fixed Percentages, at a meeting of securityholders of the TopFund called for that purpose and each prospective purchase of securities ofthe Top Fund who proposed to acquire securities following the issuance ofthe receipt for the amendment receives a copy of the amended TopProspectus;
(e) if at any time, the assets of the Top Fund that are invested in the ReferenceFunds deviate from the Permitted Ranges the necessary changes are madein the Top Fund's investment portfolio as at the next valuation date of theTop Fund in order to bring the Top Fund's investment portfolio intoconformity with the aforesaid amount;
(f) there are compatible dates for the calculation of the net asset value of theTop Fund and the Reference Funds for the purpose of the issue andredemption of the securities of such mutual funds;
(g) in the event of the provision of any notice to securityholders of a ReferenceFund as required by the constating documents of the Reference Fund or bythe laws applicable to the Reference Fund, such notice will also be deliveredto the securityholders of the Top Fund; all voting rights attached to the Unitsof a Reference Fund which are owned by the Top Fund will be passedthrough to the securityholders of the Top Fund; in the event that asecurityholders' meeting is called for a Reference Fund, all of the disclosureand notice material prepared in connection with such meeting will beprovided to the securityholders of the Top Fund and such securityholderswill be entitled to direct a representative of the Top Fund to vote that TopFund's holding in the Reference Fund in accordance with their direction.; therepresentative of the Top Fund will not be permitted to vote the Top Fund'sholdings in the Reference Funds except to the extent the securityholders ofthe Top Fund so direct;
(h) no sales charges are payable by the Top Fund in relation to their purchasesof Units of the Reference Funds;
(i) no redemption fees or other charges are charged by the Reference Fundsin respect of the redemption by the Top Fund of Units of the ReferenceFunds owned by the Top Fund;
(j) no fees and charges of any sort are paid by the Top Fund or by theReference Funds or by the manager or principal distributor of the Top Fundor by any affiliate or associate of any of the foregoing entities to anyone inrespect of the Fund's investment, or redemption of, the securities of theReference Funds;
(k) the investment by the Top Fund in units of the Reference Funds iscompatible with the fundamental investment objective of the Top Fund;
(l) the particular Reference Funds in which the Top Fund may invest, which isdisclosed in the Top Prospectus, may not be changed unless and until thesecurityholders of the Top Fund have approved the change at a meeting ofthe securityholders of the Fund called for that purpose, an amendment tothe Top Prospectus to reflect the change is filed with the Decision maker andeach prospective purchaser of securities of the Top Fund who proposes toacquire the securities following the issuance of a receipt for the amendmentreceives a copy of the amended Top Prospectus;
(m) the arrangements between or in respect of the Top Fund and the ReferenceFunds are such as to avoid the duplication of management fees;
(n) the annual and semi-annual financial statement of the Top Fund includeappropriate summary disclosure regarding each Reference Fund in whichit invests; and
(o) copies of the Reference Prospectus and annual and semi-annual financialstatements relating to the Reference Funds may be obtained upon requestby a securityholder of the Top Fund and this fact will be disclosed in thesimplified prospectus of the Top Fund.
February 2nd, 2000.
"Howard I. Wetston" "Theresa McLeod"