Excel Investment Counsel Inc. et al.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval for a one-time trade of securities between a non-redeemable investment fund and an affiliated fund, both advised by the same portfolio manager, to implement a merger -- costs of the merger to be borne by the manager -- sale of securities exempt from the self-dealing prohibitions in subsection 13.5(2)(b)(iii) of National Instrument 31-103 -- Registration Requirements and Exemptions.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.5(2)(b)(iii), 15.1.

August 26, 2010

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

EXCEL INVESTMENT COUNSEL INC. AND

EXCEL FUNDS MANAGEMENT INC.

(THE FILERS)

AND

EXCEL INDIA TRUST

(THE TERMINATING FUND)

AND

EXCEL INDIA FUND

(THE CONTINUING FUND, AND TOGETHER WITH

THE TERMINATING FUND, THE FUNDS)

DECISION

Background

The principal regulator in the Jurisdiction (Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) for exemptive relief from Section 13.5(2)(b)(iii) of National Instrument 31-103 -- Registration Requirements and Exemptions (NI 31-103) in connection with the transfer of the investment portfolio of the Terminating Fund to the Continuing Fund in order to implement the merger (the Merger) of the Terminating Fund into the Continuing Fund (the Exemption Sought).

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

(a) the Ontario Securities Commission is the principal regulator (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 all provinces and territories in Canada.

Interpretation

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

Representations

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

Excel Funds Management Inc. ("Manager")

1. The Manager is a corporation created under the laws of Ontario with its head office in Mississauga, Ontario.

2. The Manager is the investment fund manager and trustee of the Funds.

3. The Manager is not in default of securities legislation in any jurisdiction.

Excel Investment Counsel Inc. ("Portfolio Manager")

4. The Portfolio Manager is a corporation created under the laws of Ontario with its head office in Mississauga, Ontario.

5. The Portfolio Manager is registered as an adviser with the OSC in the category of portfolio manager.

6. The Portfolio Manager acts as portfolio manager to the Funds.

7. The Portfolio Manager is not in default of securities legislation in any jurisdiction.

Terminating Fund

8. The Terminating Fund was established pursuant to an amended and restated declaration of trust under the laws of Ontario.

9. The Terminating Fund is a "non-redeemable investment fund" as defined under the Securities Act (Ontario) and the units of the Terminating Fund are listed on the Toronto Stock Exchange ("TSX").

10. The Terminating Fund is a reporting issuer as defined under the applicable securities legislation of each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction.

Continuing Fund

11. The Continuing Fund was established pursuant to a declaration of trust, as amended, under the laws of Ontario.

12. The Continuing Fund is a mutual fund for the purposes of the Securities Act (Ontario) and offers its Series A and Series F units pursuant to a simplified prospectus dated November 2, 2009.

13. The Continuing Fund is a reporting issuer as defined under the applicable securities legislation of each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction.

Merger

14. The Manager intends to merge the Terminating Fund into the Continuing Fund which will involve the transfer of assets of the Terminating Fund in exchange for Series A units of the Continuing Fund. It is proposed that the Merger will occur on or about August 27, 2010.

15. The board of directors of the Manager approved the Merger and a press release and material change report in respect of the Merger were filed on SEDAR on June 16, 2010.

16. The Merger will be effected in accordance with the "permitted merger" provisions set out in the amended and restated declaration of trust of the Terminating Fund dated July 13, 2007 (the "Terminating Fund DOT") which stipulates that the Manager may, without obtaining unitholder approval, merge the Terminating Fund with the Continuing Fund provided that unitholders of the Terminating Fund are given the opportunity to receive the net asset value ("NAV") of their units in cash on the Trust's termination date.

17. No TSX approval is required for the Merger. However, the Terminating Fund will need to comply with the requirements of the TSX to delist.

18. The Funds have identical fundamental investment objectives and valuation procedures.

19. The Independent Review Committee ("IRC") of the Funds has approved the Merger as contemplated under National Instrument 81-107 -- Independent Review Committee for Investment Funds ("NI 81-107") on the basis that the Merger would achieve a fair and reasonable result for each of the Funds.

20. All costs and expenses associated with the Merger will be borne by the Manager and no sales charges, redemption fees or other fees or commissions will be payable by unitholders of the Funds in connection with the Merger.

21. The Merger will be implemented on a taxable basis in order to preserve significant tax losses at the Continuing Fund level.

22. Each unitholder in the Terminating Fund will receive prior written notice of the Merger that will describe, among other things, (i) the mechanics of the Merger, (ii) details about the Continuing Fund; (iii) the unitholder's right to receive the NAV of their units in cash on the Terminating Fund's termination date; and (iv) the unitholder's right to exchange their units of the Terminating Fund for Series A units of the Continuing Fund which pay an annual management fee of 2.5% to the Manager.

23. The Merger is expected to be implemented as follows:

a. units of the Terminating Fund were de-listed from the TSX on July 27, 2010;

b. on or about August 27, 2010, it is anticipated that substantially all the assets of the Terminating Fund will be transferred to the Continuing Fund in exchange for series A units of the Continuing Fund, the value of which will be equal to the NAV of the Terminating Fund transferred to the Continuing Fund calculated at the close of business on August 27, 2010;

c. the Continuing Fund will not assume the liabilities of the Terminating Fund and the Terminating Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the Merger;

d. the Terminating Fund will distribute to its unitholders a sufficient amount of its net income and net realized capital gains so that it will not be subject to tax under Part I of the Income Tax Act (Canada) for its current taxation year;

e. units of the Terminating Fund held by unitholders will be redeemed and cancelled and the units of the Continuing Fund received by the Terminating Fund under the Merger will be distributed to unitholders of the Terminating Fund on a dollar-for-dollar basis in exchange for their units in the Terminating Fund; and

f. as soon as reasonably possible following the Merger, the Terminating Fund will be wound up.

24. The Filer is a "responsible person" for purposes of NI 31-103 as a result of being the portfolio manager of the Funds.

25. The transfer of the investment portfolio of the Terminating Fund to the Continuing Fund, as a step in the Merger, may contravene s. 13.5(2)(b)(iii) of NI 31-103.

26. Therefore, in the absence of this order, the Filer would be prohibited from purchasing the investment portfolio of the Terminating Fund on behalf of the Continuing Fund in connection with the Merger.

27. In the opinion of the Filer, it would not be prejudicial to grant the Exemption Sought and would be in the best interests of the unitholders of the Terminating Funds for the following reasons:

a. it is no longer economically practical to continue the Terminating Fund;

b. the Continuing Fund has the potential to have a larger portfolio, as the Continuing Fund will be in continuous distribution, and may offer improved portfolio diversification opportunities;

c. in addition to switching privileges, series A units of the Continuing Fund will have greater liquidity through daily purchases and redemptions of units than the Terminating Fund; and

d. the Merger will eliminate the discount to NAV for the Terminating Fund's unitholders if they redeem their units of the Continuing Fund received in connection with the Merger.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers is that the Exemption Sought is granted.

"Vera Nunes"
Assistant Manager, Investment Funds Branch
Ontario Securities Commission