Securities Law & Instruments

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund merger -- approval required because merger does not meet the criteria for pre-approved reorganizations and transfers in National Instrument 81-102 -- the fundamental investment objectives of the terminating fund and the continuing fund are not substantially similar -- securityholders of terminating fund are provided with timely and adequate disclosure regarding the merger.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 5.5(1)(b), 19.1.

June 23, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (THE JURISDICTION) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF COUNSEL PORTFOLIO SERVICES INC. (the Filer) AND BRIGATA DIVERSIFIED PORTFOLIO

DECISION

BACKGROUND

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Terminating Fund, for a decision under the securities legislation of the Jurisdiction (the Legislation) approving the proposed reorganization of the Terminating Fund with the Continuing Fund (each as defined below), pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.

INTERPRETATION

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

"Continuing Fund" means Counsel Regular Pay Portfolio.

"Effective Date" means on or about June 26, 2015, the anticipated date of the Proposed Reorganization.

"Funds" means collectively, the Terminating Fund and the Continuing Fund.

"Proposed Reorganization" means the proposed merger of the Terminating Fund into the Continuing Fund.

"Terminating Fund" means Brigata Diversified Portfolio.

REPRESENTATIONS

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

The Filer

1. The Filer is a corporation governed by the laws of Ontario and is registered as a portfolio manager and investment fund manager in Ontario, and as an investment fund manager in Québec and Newfoundland and Labrador.

2. The Filer is the trustee and manager of the Funds.

The Funds

3. Each of the Funds is a mutual fund trust formed under the laws of Ontario. The Terminating Fund is a reporting issuer under the securities legislation of each province and territory of Canada. The Continuing Fund is a reporting issuer under the securities legislation in each province of Canada, except Québec. Neither the Filer nor the Funds are in default of securities legislation in any province or territory of Canada, as applicable.

4. Each of the Funds is a mutual fund that is subject to the requirements in NI 81-102 and National Instrument 81-101 Mutual Fund Prospectus Disclosure. Each of the Funds follows the standard investment restrictions and practices in NI 81-102, except pursuant to the terms of any exemption that has been previously obtained in respect of that fund.

5. The Terminating Fund is currently qualified for sale in each of the provinces of Canada pursuant to a simplified prospectus and annual information form dated June 27, 2014. The Continuing Fund is currently qualified for sale in each of the provinces and territories of Canada, except Québec, pursuant to a simplified prospectus and annual information form dated October 28, 2014.

The Proposed Reorganization

6. Pursuant to the Proposed Reorganization, unitholders of the Terminating Fund would become unitholders of the Continuing Fund.

7. Approval of the Proposed Reorganization is required because the Proposed Reorganization does not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102. In particular, the Proposed Reorganization does not comply with subsection 5.6(1)(a)(ii) of NI 81-102 because a reasonable person might consider that the fundamental investment objectives of the Terminating Fund and the Continuing Fund are not substantially similar.

8. Except as noted above, the Proposed Reorganization will otherwise comply with all other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 and will be carried out on a tax-deferred basis.

9. The Proposed Reorganization does not require approval of unitholders of the Continuing Fund as the Filer has determined that the Proposed Reorganization does not constitute a material change to the Continuing Fund.

10. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, the Independent Review Committee (IRC) has been appointed for the Funds. The Filer presented the terms of the Proposed Reorganization to the IRC for a recommendation. The IRC reviewed the Proposed Reorganization and provided a positive recommendation for the Proposed Reorganization, having determined that the Proposed Reorganization, if implemented, would achieve a fair and reasonable result for each of the Funds and their respective unitholders.

11. A press release describing the Proposed Reorganization was issued and the press release, material change report and amendments to the simplified prospectus and annual information form, as well as revised fund facts of the Terminating Fund, which give notice of the Proposed Reorganization, were filed on SEDAR between April 23, 2015 and May 6, 2015.

12. A notice of meeting, management information circular, proxy and fund facts of the applicable series of the Continuing Fund (Meeting Materials) were mailed to unitholders of the Terminating Fund on May 26, 2015 and were filed on SEDAR on May 28, 2015.

13. The Meeting Materials contain a description of the Proposed Reorganization, information about the Terminating Fund and the Continuing Fund and income tax considerations for unitholders of the Terminating Fund. The Meeting Materials also describe the various ways in which unitholders can obtain a copy of the simplified prospectus and annual information form of the Continuing Fund, as well as the most recent interim and annual financial statements and management reports of fund performance for the Continuing Fund, at no cost.

14. None of the costs and expenses associated with the Proposed Reorganization will be borne by either of the Funds, including costs and expenses associated with the dispositions of the Terminating Fund's assets. All such costs including legal, proxy solicitation, printing, mailing brokerage costs and regulatory fees will be borne by the Filer. There are no charges payable by unitholders of the Terminating Fund who acquire securities of the corresponding Continuing Fund as a result of the Proposed Reorganization.

15. Unitholders of the Terminating Fund will be asked to approve the Proposed Reorganization at a special meeting of unitholders scheduled to be held on or about June 24, 2015.

16. Following the implementation of the Proposed Reorganization, all systematic plans, other than reinvestment plans held by Québec-resident unitholders, that were established with respect to the Terminating Fund will be re-established on a series-for-series basis in the Continuing Fund, unless unitholders advise the Filer otherwise.

17. Unitholders may change or cancel any systematic plan at any time and unitholders of the Terminating Fund who wish to establish one or more systematic plans in respect of their holdings in the Continuing Fund, except the establishment of any reinvestment plan by Québec-resident unitholders, may do so following the implementation of the Proposed Reorganization.

Proposed Reorganization Steps

18. If the necessary approvals are obtained, the Filer will carry out the following steps to complete the Proposed Reorganization:

(i) To facilitate the Proposed Reorganization, the Terminating Fund will, before the Effective Date, sell a substantial portion of its investments, realizing a substantial portion of its accrued capital gains and losses.

(ii) The Terminating Fund will distribute to unitholders its net income and net realized capital gains to the extent required to ensure that the Terminating Fund is not itself subject to tax. The distribution will be automatically reinvested in additional units of the Terminating Fund.

(iii) Immediately after the close of business on the Effective Date, the Terminating Fund will transfer all of its net assets to the Continuing Fund in exchange for Continuing Fund units of the applicable series. The value of the Continuing Fund units received by the Terminating Fund will equal the value of the net assets of the applicable series that were transferred to the Continuing Fund.

(iv) The units of the Terminating Fund will then be redeemed and the unitholders of the Terminating Fund will receive their pro rata share of the applicable series of the Continuing Fund units. Series A unitholders of the Terminating Fund will receive the equivalent value of Series E units of the Continuing Fund. Series F unitholders of the Terminating Fund will receive the equivalent value of Series D units of the Continuing Fund.

(v) As soon as reasonably possible after the reorganization, the Terminating Fund will be terminated.

19. Unitholders in the Terminating Fund will continue to have the right to redeem their units or exchange their units for securities of any other mutual fund of the Filer at any time up to the close of business on the business day before the Effective Date. Unitholders of the Terminating Fund that switch their units for securities of other mutual funds of the Filer will not incur any charges. Unitholders who redeem units may be subject to redemption charges.

20. Following the implementation of the Proposed Reorganization, the Continuing Fund will continue as a publicly offered open-ended mutual fund offering its securities in all provinces and territories in Canada, other than Québec. In Québec, upon the implementation of the Proposed Reorganization, the Continuing Fund will become a reporting issuer.

21. Since the Continuing Fund is not offered in Québec, following the implementation of the Proposed Reorganization, Québec-resident unitholders of the Continuing Fund will be able to keep or redeem their investments in the Continuing Fund, but will not be able to make additional purchases in the Continuing Fund.

22. Following the implementation of the Proposed Reorganization, a press release and material change report announcing the results of the unitholder meeting in respect of the reorganization of the Terminating Fund will be issued and filed.

Proposed Reorganization Benefits

23. The Filer believes that the Proposed Reorganization is beneficial to unitholders of the Terminating Fund for the following reasons:

(i) Specialized investment managers: The Continuing Fund's use of specialist investment managers and the Filer's multi-manager investment philosophy is considered beneficial to the Continuing Fund and, accordingly, also to its investors.

(ii) Superior performance of the Continuing Fund: The Continuing Fund has generally demonstrated better historical performance than the Terminating Fund. Accordingly, the Proposed Reorganization will allow unitholders of the Terminating Fund to be part of a better performing fund and to possibly benefit from the potential for improved future performance on their investments.

(iii) Exposure to multiple asset classes: The Continuing Fund's exposure to multiple asset classes increases the Continuing Fund's diversification, which offers improved prospects for superior risk adjusted returns.

(iv) Larger size: The Continuing Fund will have a portfolio of a larger asset size, which may allow for increased portfolio diversification opportunities than within the Terminating Fund.

(v) Similar or lower fees: The management fee and administration fee for Series A of the Terminating Fund are the same as the fees for Series E of the Continuing Fund and unitholders in Series F of the Terminating Fund will benefit from the lower management fee in Series D of the Continuing Fund.

General

24. If the Proposed Reorganization is approved, the reorganization will be implemented after the close of business on the Effective Date. If the Proposed Reorganization is not approved, the Terminating Fund will continue to be offered for distribution.

DECISION

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

The decision of the Principal Regulator under the Legislation is that the Requested Relief is granted, provided that the Filer obtains the prior approval of the unitholders of the Terminating Fund for the Proposed Reorganization at a special meeting held for that purpose.

"Vera Nunes"
Manager,
Investment Funds and Structured Products Branch
Ontario Securities Commission