KBSH Capital Management Inc. - MRRS Decision

Headnote

MRRS -- Exemption granted from unitholder approval requirement contained in s. 5.1(a) of NI 81-102 -- Exemption required because fund to change basis for calculation of performance fee due to discontinuance of the BIGAR Broad Market Composite Index -- Fund will calculate fee using S&P/TSX Canadian Bond Index -- new index will perform substantially similar to old index -- change will not result in a material increase, if any, to the fee paid by the fund.

Applicable Legislative Provisions

National Instrument 81-102 -- Mutual Funds -- ss. 5.1(a), 19.1.

June 27, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC,NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND

AND NEWFOUNDLAND AND LABRADOR

(the Jurisdictions)

AND

IN THE MATTER OF THE

MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

KBSH CAPITAL MANAGEMENT INC.

(the Filer)

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 for a decision under the securities legislation of the Jurisdictions (the Legislation) that exempts the Disciplined Leadership High Income Fund (the Fund) from the requirement in section 5.1(a) of National Instrument 81-102 (NI 81-102) to obtain the prior approval of the Fund's unitholders in connection with the replacement of the benchmark used to calculate the performance fee charged to the Fund (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this 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 a corporation subsisting under the laws of the Province of Ontario and is registered under the Securities Act (Ontario) as an adviser in the categories of investment counsel and portfolio manager.

2. The Filer is the manager of the Fund.

3. The Fund is a reporting issuer or the equivalent thereof in each Jurisdiction and is not in default of any requirements of the securities legislation of the Jurisdictions. Units of the Fund are offered for sale on a continuous basis in each Jurisdiction pursuant to a simplified prospectus dated June 17, 2005, as amended (the Prospectus).

4. The Filer is entitled to receive a performance fee (the Fee) from the Fund which is calculated by comparing the performance of the Fund to the performance of a benchmark index.

5. The Fee payable by the Fund is equal to 20% of the amount by which the series net asset value of the Fund at the end of the calendar quarter (Ending NAV) exceeds the series target net asset value (Target NAV). The Target NAV is calculated by multiplying the series net asset value, net of the Fees paid, as at the last Fee payment date (Beginning NAV) by the sum of one plus the return of the Fund's benchmark (Benchmark Return) over the same period.

Fee = 20% x (Ending NAV -- Target NAV)

Target NAV = Beginning NAV x (1 + Benchmark Return)

The Fee is payable in all circumstances where the performance of the subject series of units of the Fund exceeds that of the benchmark, even in circumstances where the value of the series of units of the Fund has declined. The Fee is accrued daily and paid at the end of each calendar quarter (or on a prorated basis at the time of redemption).

6. The benchmark index currently consists of the BIGAR^TM Broad Market Composite Index (50%) and the S&P/TSX Capped Income Trust Index (50%) (the Original Index).

7. The BIGARTM Broad Market Composite Index is being discontinued by its third party provider, CIBC World Markets Inc., due to the launch of a new index managed by an independent third party provider, Standard & Poor's (S&P).

8. The Filer proposes to replace the Original Index with a new index (the New Index) that will include the new index to be managed by S&P.

9. The New Index will comprise S&P/TSX Canadian Bond Index (50%) and S&P/TSX Capped Income Trust Index (50%).

10. Effective July 1, 2006, the Filer proposes to calculate the Fee by comparing the performance of the Fund to the performance of the New Index.

11. The New Index will reasonably reflect the market sector in which the Fund will be investing its assets and considers the New Index to be appropriate given the investment objective and investment strategies of the Fund. The composition of the New Index will be substantially the same as the Original Index.

12. The Filer expects the New Index to have performance that is substantially similar to the Original Index. The proposed change will not result in a material increase, if any, to the Fee paid by the Fund.

13. The renewal Prospectus will disclose the change from the Original Index to the New Index.

14. The Filer will provide a notification of the change from the Original Index to the New Index in its next general mailing to unitholders of the Fund.

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.