Kingwest & Company et al

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions - Relief granted from sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1) and 15.8(3)(a.1) and 15.1.1 of National Instrument 81-102 Investment Funds to permit a prospectus qualified alternative mutual fund that has not distributed securities under a simplified prospectus in a jurisdiction for 12 consecutive months to include in its sales communications past performance data relating to a period when the fund's securities were previously distributed to investors on a prospectus-exempt basis and to use this past performance data to calculate its investment risk level in accordance with Appendix F Investment Risk Classification Methodology - Alternative mutual fund is managed substantially similarly after it became a reporting issuer as it was during the period prior to becoming a reporting issuer and has similar fee and expense structure.

Relief granted from section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure for the purposes of the relief requested from Item 10(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus to permit the alternative mutual fund to use the past performance data for a period when its securities were offered on a prospectus-exempt basis to calculate its investment risk rating in its simplified prospectus, and Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document to permit the alternative mutual fund to include in its fund facts document past performance data for a period when the fund was offered on a prospectus-exempt basis.

Relief granted from section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure for the purposes of the relief requested from Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B of Form 81-106F1, and Items 3(1) and 4 of Part C of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance, to permit the alternative mutual to include in its annual and interim management reports of fund performance the past performance and financial data relating to a period when the fund was previously offered on a prospectus-exempt basis.

Statutes Cited

National Instrument 81-102 Investment Funds, ss. 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), 15.8(3)(a.1), 15.1.1 and 19.1.

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 2.1 and 6.1.

Item 10(b) of Part B of Form 81-101F1 Contents of Simplified Prospectus.

Item 5 of Part I of Form 81-101F3 Contents of Fund Facts Document.

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 4.4 and 17.1.

Items 3.1(7), 4.1(1), 4.1(2), 4.2(1), 4.3(1) and 4.3(2) of Part B and Items 3(1) and 4 of Part C of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance.

February 14, 2024

IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
(the Jurisdiction)

AND

IN THE MATTER OF
KINGWEST & COMPANY
(the Filer)

AND

IN THE MATTER OF
THE KINGWEST CANADIAN EQUITY PORTFOLIO
THE KINGWEST U.S. EQUITY PORTFOLIO
THE KINGWEST AVENUE PORTFOLIO
(the Portfolios)

DECISION

Background

The regulator in the Jurisdiction has received an application (the Application) from the Filer on behalf of the Portfolios (where a Portfolio shall mean any one of the Portfolios) for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Portfolios from:

(a) Sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), and 15.8(3)(a.1) of National Instrument 81-102 Investment Funds (NI 81-102) to permit each Portfolio to include its past performance data in sales communications notwithstanding that: (i) the performance data will relate to a period prior to the Portfolio offering its securities under a simplified prospectus; and (ii) the Portfolio has not distributed its securities under a simplified prospectus for 12 consecutive months;

(b) Section 15.1.1(a) of NI 81-102 and Items 2 and 4 of Appendix F - Investment Risk Classification Methodology to NI 81-102 (Appendix F) to permit each Portfolio to include its past performance data in determining its investment risk level in accordance with Appendix F;

(c) Section 15.1.1(b) of NI 81-102 and Item 4(2)(a) and Instruction (1) of Item 4 of Form 81-101F3 Contents of Fund Facts Document (Form 81-101F3) to permit each Portfolio to disclose its investment risk level as determined by including its past performance data in accordance with Appendix F;

(d) With respect to Form 81-101F1 Contents of Simplified Prospectus (Form 81- 101F1), Item 10(b) of Part B of Form 81-101F1 to permit each Portfolio to use its past performance data to calculate its investment risk rating in its simplified prospectus;

(e) Section 2.1 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) for the purposes of the relief requested herein from Form 81-101F1 and Form 81-101F3;

(f) Items 5(2), 5(3), and 5(4), and Instruction (1) of Part I of Form 81-101F3 in respect of the requirement to comply with Sections 15.3(2), 15.3(4)(c), 15.6(1)(a)(i), 15.6(1)(d), 15.8(2)(a.1), and 15.8(3)(a.1) of NI 81-102 to permit each Portfolio to include in its fund facts documents past performance data of the Portfolio notwithstanding that: (i) the performance data relates to a period prior to the Portfolio offering its securities under a simplified prospectus; and (ii) the Portfolio has not distributed its securities under a simplified prospectus for 12 consecutive months;

(g) Section 4.4 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for the purposes of the relief requested herein from Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance (Form 81-106F1); and

(h) Items 3.1(7) and 4.1(1) in respect of the requirement to comply with Sections 15.3(2) and 15.3(4)(c) of NI 81-102, 4.1(2), 4.2(1), 4.3(1), and 4.3(2) of Part B of Form 81-106F1 and Items 3(1) and 4 of Part C of Form 81- 106F1 to permit each Portfolio to include in its annual and interim management reports of fund performance (individually, a MRFP and, collectively, the MRFPs) past performance data and financial highlights notwithstanding that such performance data and financial highlights relate to a period prior to the Portfolio offering its securities under a simplified prospectus;

(collectively, the Exemption Sought).

Interpretation

Terms defined National Instrument 14-101 - Definitions (NI 14-101) and NI 81-102 have the same meaning if used in this decision unless otherwise defined herein.

Representations

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

The Filer and the Portfolios

1. The Filer is a partnership organized under the laws of Province of Ontario with its head office and principal place of business located in Toronto, Ontario.

2. The Filer is registered as an investment dealer and investment fund manager in the provinces of Ontario, Alberta, British Columbia, Manitoba, New Brunswick and Nova Scotia and as an investment dealer, investment fund manager and derivatives dealer in the Province of Québec.

3. The Filer initially launched each Portfolio as an open-end investment fund established as a trust under the laws of Ontario, on June 16, 1995 (the Inception Date) pursuant to a master trust agreement, as amended, restated, and/or supplemented from time to time.

4. Each Fund is, or will be, a mutual fund to which NI 81-102 applies.

5. The Filer is the manager, portfolio advisor, promoter and principal distributor of the Portfolios. RBC Investor Services Trust is the trustee of the Portfolios.

6. The Filer and the Portfolios are not in default of securities legislation in any Canadian Jurisdiction.

The Exemption Sought

7. Since the Inception Date, units of the Portfolios have been offered to investors on a private placement basis in accordance with National Instrument 45-106 Prospectus Exemptions in one or more Jurisdictions other than Ontario and in accordance with the Securities Act (Ontario) in Ontario.

8. The Portfolios intend to offer one or more series units to the public in the Province of Ontario pursuant to a simplified prospectus and fund facts documents (the Public Offering). Each of the Portfolios has filed a preliminary simplified prospectus and preliminary fund facts documents with the regulator in the Jurisdiction and expects to file a final simplified prospectus and final fund facts documents as soon as practicable thereafter. Upon issuance of a receipt for the final simplified prospectus, each Portfolio will become a reporting issuer in the Province of Ontario and will become subject to the requirements of NI 81-102 and NI 81-106.

9. Since the Inception Date, each Portfolio has prepared audited annual financial statements and unaudited interim financial statements in accordance with NI 81-106.

10. Since the Inception Date, each Portfolio has complied with the investment restrictions and practices contained in NI 81-102 applicable to mutual funds.

11. Each Portfolio will be managed in substantially the same manner after it becomes a reporting issuer as it was prior to becoming a reporting issuer.

12. In connection with each Portfolio becoming a reporting issuer:

(a) the investment objective of the Portfolio will not change;

(b) the management fees charged on the series of units of the Portfolio offered under the Public Offering will not be higher than the management fees charged on the series of units of the Portfolio that are offered on a private placement basis;

(c) the day-to-day administration of each Portfolio will not change, other than to comply with the additional regulatory requirements associated with being a reporting issuer (none of which will impact the portfolio management of the Portfolio) and to provide additional features that are available to investors of mutual funds managed by the Filer, as described in the simplified prospectus and fund facts documents of the Portfolio; and

(d) the management expense ratio of each Portfolio is not expected to increase by more than 0.40%, which the Filer considers to be an immaterial amount.

13. The Filer proposes to present the performance data of the Portfolios for the time period since the Inception Date in sales communications pertaining to the Portfolios. Without the Exemption Sought, sales communications pertaining to the Portfolios could not include performance data of a Portfolio that relate to a period prior to it becoming a reporting issuer, and a Portfolio could not provide performance data in its sales communications until the Portfolio has distributed securities under a simplified prospectus for at least 12 consecutive months.

14. As a reporting issuer, each Portfolio will be required under NI 81-101 to prepare and file fund facts documents.

15. The Filer proposes to use the past performance data of each Portfolio to determine its investment risk level and to disclose that investment risk level in the simplified prospectus and the fund facts documents for each series of units of the Portfolio. Without the Exemption Sought, the Filer, in determining and disclosing a Portfolio's investment risk level in the simplified prospectus and the fund facts documents for each series of units of the Portfolio, could not use performance data of the Portfolio that relates to a period prior to the Portfolio becoming a reporting issuer.

16. The Filer proposes to include in the fund facts documents for each series of units of the Portfolios past performance data in the disclosure required by Items 5(2), 5(3) and 5(4) under the sub-headings "Year-by-year returns", "Best and worst 3-month returns" and "Average return", respectively, related to periods prior to the applicable Portfolio becoming a reporting issuer. Without the Exemption Sought, the fund facts document for each series of units of a Portfolio could not include performance data of the Portfolio that relate to a period prior to it becoming a reporting issuer.

17. As a reporting issuer, each Portfolio will be required under NI 81-106 to prepare and send MRFPs to all holders of its securities on an annual and interim basis. Without the Exemption Sought, the MRFP of a Portfolio could not include financial highlights and performance data of the Portfolio that relate to a period prior to it becoming a reporting issuer.

18. The performance data and other financial data of each Portfolio for the time period before it became a reporting issuer is significant and meaningful information for existing and prospective investors in the Portfolio.

Decision

The regulator is satisfied that the decision meets the test set out in the Legislation for the regulator to make the decision.

The decision of the regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) any sales communication, fund facts document, and MRFP that contains performance data of units of a Portfolio relating to a period prior to when the Portfolio was a reporting issuer discloses:

(i) that the Portfolio was not a reporting issuer during such period;

(ii) that the expenses of the Portfolio would have been higher during such period had the Portfolio been subject to the additional regulatory requirements applicable to a reporting issuer;

(iii) that the Filer obtained exemptive relief on behalf of the Portfolio to permit the disclosure of performance data of the units of the Portfolio relating to a period prior to when the Portfolio was a reporting issuer; and

(iv) with respect to any MRFP, that the financial statements of the Portfolio for such period are posted on the Portfolio's website and are available to investors upon request; and

(b) the Filer posts the annual financial statements of each Portfolio since the Inception Date on the Portfolio's designated website and makes those financial statements available to investors upon request.

"Darren McKall"
Manager, Investment Funds and Structured Products
Ontario Securities Commission
Application File #: 2024/0058

SEDAR+ File #: 6080830