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Northwest Mutual Funds Inc. & Northwest Balanced Fund - MRRS Decision
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
THE PROVINCES OF BRITISH COLUMBIA,
ALBERTA, SASKATCHEWAN, ONTARIO, NOVA SCOTIA AND NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
NORTHWEST MUTUAL FUNDS INC.
("NORTHWEST") AND
NORTHWEST BALANCED FUND
(the "Top Fund")
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provincesof British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the "Jurisdictions") has receivedan application (the "Application") from Northwest as manager of the Top Fund for a decision by each Decision Maker(collectively, the "Decision") under the securities legislation of the Jurisdictions (the "Legislation") that the followingprovisions of the Legislation (the "Applicable Legislation") shall not apply to the Top Fund or Northwest, in respect ofits investment in securities of Northwest International Fund (the "International Fund") or other mutual funds createdby Northwest from time to time (the "Underlying Fund(s)"), for the purpose of managing the foreign exposure of theTop Fund within the Permitted Aggregate Investment (as defined herein):
1. the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making and holding aninvestment in a person or company, in which the mutual fund, alone or together with one or more related mutualfunds, is a substantial securityholder; and
2. the requirements contained in the Legislation requiring a management company, or in British Columbia, amutual fund manager, to file 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 other than an arrangement relatingto insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its relatedpersons or companies.
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS Northwest has represented to the Decision Makers that:
1. Northwest is a registrant, registered as a mutual fund dealer under the Ontario Securities Act (the "Act").
2. Northwest is or will be the trustee and manager of the Top Fund and the Underlying Funds and has its headoffice located in Ontario.
3. The Top Fund is an open-ended mutual fund trust established under the laws of Ontario, and the UnderlyingFunds are or will be open-ended mutual funds established under the laws of Ontario.
4. The Top Fund and the Underlying Funds are or will be reporting issuers and, to the best of the knowledge,information and belief of Northwest, the Top Fund and the International Fund are not in default of anyrequirement of the Legislation.
5. A simplified prospectus and annual information form in respect of the Top Fund and the International Fund wasfiled in each of the provinces and territories of Canada in June 2000 (SEDAR #263469) and receipts thereforewere obtained. This prospectus was amended in October 2000. A pro forma simplified prospectus and annualinformation form for the Top Fund and the International Fund were filed in each of the provinces and territoriesof Canada on February 27, 2001 (SEDAR #335206) .
6. To achieve its investment objective, the Top Fund will invest in the Underlying Funds an aggregate amount thatshall not exceed 27.5% (the "Permitted Aggregate Investment") of the assets of the Top Fund, subject to avariation to account for market fluctuations as described in representation 7.
7. To achieve its investment objective, the Top Fund will invest fixed percentages (the "Fixed Percentages") ofits assets (other than cash and cash equivalents) in securities of one or more specified Underlying Funds,subject to a variation of 2.5% above or below the Fixed Percentages (the "Permitted Ranges") to account formarket fluctuations.
8. The simplified prospectus for the Top Fund will disclose the investment objectives, investment strategies, risksand restrictions of the Top Fund and the Underlying Funds, the Fixed Percentages, the Permitted Ranges, andthe Permitted Aggregate Investment. The Top Fund's investment in Underlying Funds will be in accordancewith the Fixed Percentages and the Permitted Aggregate Investment which will be disclosed in the simplifiedprospectus of the Top Fund.
9. Except to the extent evidenced by this Decision and specific approvals granted by the Canadian securitiesadministrators pursuant to National Instrument 81-102, the investments by the Top Fund in the UnderlyingFunds will be, structured to comply with the investment restrictions of the Legislation and National Instrument81-102.
10. In the absence of this Decision, the Top Fund would be prohibited from knowingly making or holding aninvestment in a person or company in which the mutual fund, alone or together with one or more related mutualfunds, is a substantial securityholder. As a result, in the absence of this Decision, the Top Fund would berequired to divest itself of any investments referred to in this paragraph.
11. In the absence of this Decision, Northwest would be required to file a report of every purchase or sale by theTop Fund of the securities of an Underlying Fund.
12. The Top Fund's investment in, or redemption of, securities of the Underlying Funds will represent the businessjudgement of responsible persons uninfluenced by considerations other than the best interests of the Top Fund.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe 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 Legislation shall notapply so as to prevent the Top Fund from making and holding an investment in securities of the Underlying Funds inaccordance with the Permitted Aggregate Investment, or to require Northwest to file a report relating to the purchase orsale of such securities.
PROVIDED IN EACH CASE THAT:
1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that Decision Maker dealing with the matters in section 2.5 of NI 81-102;and
2. the Decision shall only apply if, at the time the Top Fund makes or holds an investment in the Underlying Funds,the following conditions are satisfied:
a. the securities of both the Top Fund and the Underlying Funds are being offered for sale in thejurisdiction of the Decision Maker pursuant to a simplified prospectus and annual information formwhich has been filed with and accepted by the Decision Maker;
b. the investment by the Top Fund in the Underlying Funds is compatible with the fundamentalinvestment objectives of the Top Fund;
c. the simplified prospectus discloses the intent of the Top Fund to invest directly in securities of theUnderlying Funds, the name(s) of the Underlying Funds, the Fixed Percentages, the Permitted Rangeswithin which such Fixed Percentages may vary, and the Permitted Aggregate Investment;
d. the investment objective of the Top Fund discloses that the Top Fund invests in securities of othermutual funds and the Permitted Aggregate Investment;
e. the Underlying Funds are not mutual funds whose investment objective includes investing directly orindirectly in other mutual funds;
f. the Top Fund invests its assets (exclusive of cash and cash equivalents) in the Underlying Funds inaccordance with the Fixed Percentages and the Permitted Aggregate Investment disclosed in thesimplified prospectus;
g. the Top Fund 's holding of securities in the Underlying Funds does not deviate from the PermittedRanges;
h. any deviation from the Fixed Percentages is caused by market fluctuations only;
i. if an investment by the Top Fund in any of the Underlying Funds has deviated from the PermittedRanges as a result of market fluctuations, the Top Fund's investment portfolio was re-balanced tocomply with the Fixed Percentages on the next day on which the net asset value was calculatedfollowing the deviation;
j. if the Fixed Percentages and the Underlying Funds which are disclosed in the simplified prospectushave been changed, either the simplified prospectus has been amended in accordance with securitieslegislation to reflect the change, or a new simplified prospectus reflecting the change has been filedwithin ten days thereof, and the securityholders of the Top Fund have been given at least 60 days'notice of the change;
k. there are compatible dates for the calculation of the net asset value of the Top Fund and theUnderlying Funds for the purpose of the issue and redemption of the securities of such mutual funds;
l. no sales charges are payable by the Top Fund in relation to its purchases of securities of theUnderlying Funds;
m. no redemption fees or other charges are charged by an Underlying Fund in respect of the redemptionby the Top Fund of securities of the Underlying Fund owned by the Top Fund;
n. no fees or charges of any sort are paid by the Top Fund and the Underlying Funds, by their respectivemanagers or principal distributors, or by any affiliate or associate of any of the foregoing entities, toanyone in respect of the Top Fund's purchase, holding or redemption of the securities of theUnderlying Funds;
o. the arrangements between or in respect of the Top Fund and the Underlying Funds are such as toavoid the duplication of management fees;
p. any notice provided to securityholders of an Underlying Fund as required by applicable laws or theconstating documents of that Underlying Fund has been delivered by the Top Fund to itssecurityholders;
q. all of the disclosure and notice material prepared in connection with a meeting of securityholders ofthe Underlying Funds and received by the Top Fund has been provided to its securityholders, thesecurityholders have been permitted to direct a representative of the Top Fund to vote its holdings inthe Underlying Fund in accordance with their direction, and the representative of the Top Fund hasnot voted its holdings in the Underlying Funds except to the extent the securityholders of the Top Fundhave directed;
r. in addition to receiving the annual and, upon request, the semi-annual financial statements, of the TopFund, securityholders of the Top Fund have received appropriate summary disclosure in respect ofthe Top Fund's holdings of securities of the Underlying Funds in the financial statements of the TopFund; and
s. to the extent that the Top Fund and the Underlying Funds do not use a combined simplifiedprospectus and annual information form containing disclosure about the Top Fund and the UnderlyingFunds, copies of the simplified prospectus and annual information form of the Underlying Funds havebeen provided upon request to securityholders of the Top Fund and the right to receive thesedocuments is disclosed in the prospectus of the Top Fund.
April 10, 2001.
"J.A. Geller" "K.D. Adams"