Kingwest & Company and Kingwest Avenue Portfolio - MRRS Decision

Headnote

MRRS -- exemption granted from mutual fund conflict of interest investment restrictions to permit pooled fund to purchase securities of a pooled fund managed by affiliate.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(3), 113.

December 19, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO (THE JURISDICTIONS)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

KINGWEST & COMPANY (THE FILER) AND

KINGWEST AVENUE PORTFOLIO (THE FUND)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer and the Fund for a decision pursuant to the securities legislation of the Jurisdictions (the Legislation) for an exemption from the requirements in the Legislation that a mutual fund not knowingly make or hold 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 security holder (the Investment Limits) (the Requested Relief) in respect of the Fund's investment in the Underlying Funds (defined herein).

Under the Mutual Reliance Review System for Exemptive Relief Applications

(a) the Ontario Securities Commission (the "OSC") 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 defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is registered as an investment dealer with the OSC and the Alberta Securities Commission, with its registered address at 86 Avenue Road, Toronto, Ontario;

2. As of the date hereof, in total, the Filer manages in excess of $1.3 billion for mutual funds, pension funds, corporations, institutions, endowments, foundations and high net worth individuals;

3. The Filer is the manager of the Fund and the Kingwest Bond Portfolio, the Kingwest Canadian Equity Portfolio, the Kingwest U.S. Equity Portfolio and may also become the manager of one or more additional funds (individually an Underlying Fund and together the Underlying Funds);

4. The Fund and the Underlying Funds are open-ended unit trusts established under the laws of the Province of Ontario by the Filer by a trust agreement between the Filer and The Royal Trust Company;

5. The Fund and the Underlying Funds issue units (Units) to qualified investors pursuant to exemptions from applicable registration and prospectus requirements. The Fund and the Underlying Funds each have one class of Units, the characteristics of which are described in an offering memorandum. Each investor is given a copy of the offering memorandum when initially subscribing for Units;

6. The Fund and the Underlying Funds are "mutual funds" as defined in the securities legislation of the Jurisdictions;

7. The Fund and the Underlying Funds are not reporting issuers and they do not intend to become reporting issuers, as such term is defined in the securities legislation of the Jurisdictions, and the Units are not and will not be listed on any stock exchange;

8. The Fund's investment objective is to provide growth through both capital appreciation of, and income generated by the assets held by the Fund;

9. The Fund seeks to achieve its investment objectives by investing in an actively managed mix of Canadian and non-Canadian stocks, bonds and short-term securities. The investment objectives are effected through direct investment and, if the Requested Relief is granted, through investing all or part of the assets of the Fund in one or more of the Underlying Funds, which have investment objectives compatible with the fundamental investment objectives of the Fund, thereby indirectly providing the Fund with the asset mix determined to be appropriate by the Filer for purposes of the Fund;

10. The Filer will not perform any activity which would require it to be registered under applicable securities laws unless the Filer holds the necessary registrations;

11. The investment by the Fund in the Underlying Funds will represent the business judgment of "responsible persons" uninfluenced by considerations other than the best interests of the Fund;

12. No charges will be payable in connection with the acquisition or disposition by the Fund of units of the Underlying Funds;

13. No management fee or incentive fees are payable by the Fund that, to a reasonable person, would duplicate a fee payable by the Underlying Fund for the same service;

14. Where a matter relating to an Underlying Fund requires a vote of unitholders of the Underlying Funds, the Filer will not cause the securities of the Underlying Fund held by the Fund to be voted at such meeting;

15. Investors in the Fund will receive a copy of the offering memorandum of the Underlying Funds prior to subscribing for Units of the Fund;

16. Investors in the Fund will be provided with the annual and interim financial statements of the Underlying Funds in which the Fund invests; and

17. In the absence of the Requested Relief, the Investment Limits prohibit the Fund from knowingly making or holding an investment in the Underlying 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 the Requested Relief is granted provided that:

1. Units of the Fund are sold solely in Canada's private placement markets in accordance with National Instrument 45-106;

2. The offering memorandum for the Underlying Funds is provided to Fund investors prior to subscribing for units of the Fund;

3. The annual and interim financial statements of the Underlying Funds are provided to investors in the Fund;

4. The arrangements between or in respect of the Fund and the Underlying Funds are such as to avoid the duplication of management and performance fees;

5. No sales fees or redemption fees are payable by the Fund in relation to its purchases or redemptions of securities of the Underlying Funds; and

6. The Manager does not vote the securities of the Underlying Funds held by the Fund at any meeting of holders of such securities.