Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund merger -- approval required because the merger does not meet the criteria for pre-approval -- the merging funds have different investment objectives -- securityholders of the terminating fund provided with timely and adequate disclosure regarding the merger.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.5(3), 5.6.

December 4, 2012

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

BRIGATA CAPITAL MANAGEMENT INC.

(the Filer or Brigata Capital or the Manager)

AND

BRIGATA CANADIAN EQUITY FUND

(the Terminating Fund)

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 of the principal regulator (the Legislation) for approval of the merger (the Merger) of the Terminating Fund into Brigata Canadian Balanced Fund (the Continuing Fund) (together with the Terminating Fund, the Funds) under subsection 5.5(1)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) (the Exemption Sought).

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

(a) the Ontario Securities Commission is the principal regulator (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 each of the other provinces and territories of Canada (the Other Jurisdictions).

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.

Representations

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

The Filer

1. Brigata Capital is a corporation governed by the laws of Canada with its head office in Ottawa, Ontario.

2. Brigata Capital is the investment fund manager of the Funds and is registered as an investment fund manager in Ontario.

The Funds

3. Each of the Funds is an open-end mutual fund trust established under the laws of the Province of Ontario.

4. Units of the Funds are currently qualified for sale under a simplified prospectus, annual information form and fund facts dated November 28, 2011 (collectively, the Offering Documents).

5. Each of the Funds is a reporting issuer under the applicable securities legislation of the Province of Ontario and the Other Jurisdictions (the Legislation).

6. Neither the Filer nor the Funds is in default under the Legislation.

7. Each of the Funds is subject to the requirements of NI 81-102.

8. The net asset value for each series of the Funds is calculated on a daily basis in accordance with the Funds' valuation policy and as described in the Offering Documents.

The Merger

9. In accordance with National Instrument 81-106 -- Investment Fund Continuous Disclosure, a press release announcing the proposed Merger was issued and filed via SEDAR on October 15, 2012 and was posted to the Manager's website. A material change report with respect to the proposed Merger was filed via SEDAR on October 25, 2012. The Terminating Fund was closed to new purchases as of October 15, 2012.

10. Pursuant to National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107), an Independent Review Committee (the IRC) has been established for the Funds. As required by NI 81-107, the Filer, as manager of the Funds, presented the terms of the proposed Merger to the Funds' IRC for its review and recommendation. On October 16, 2012, the IRC reviewed the potential conflict of interest matter related to the proposed Merger and provided its positive recommendation for the proposed Merger after determining that the proposed Merger, if implemented, would achieve a fair and reasonable result for each of the Funds.

11. Approval of the Principal Regulator for the Merger is required under subsection 5.5(1)(b) of the Instrument, and pre-approval for the Merger under section 5.6(1) is unavailable, because the fundamental investment objective of the Continuing Fund is not, or may be considered by a reasonable person to not be, "substantially similar" to the investment objective of the Terminating Fund. Accordingly, the proposed Merger may not meet the criteria for pre-approved reorganizations under subsection 5.6(1)(a)(ii) of NI 81-102.

12. In the opinion of the Filer, the Merger satisfies all of the criteria for pre-approved reorganizations and transfers set forth in section 5.6 of NI 81-102, except for the criteria in section 5.6(1)(a)(ii) of NI 81-102.

13. Unitholders of the Terminating Fund will be asked to approve the Merger at a special meeting to be held on or about December 3, 2012.

14. A notice of meeting, a management information circular and a proxy in connection with the special meeting of unitholders (the Meeting Materials) were mailed to unitholders of the Terminating Fund on November 12, 2012 and were concurrently filed via SEDAR. Fund facts relating to the relevant series of the Continuing Fund were mailed to unitholders of the Terminating Fund with the Meeting Materials.

15. The management information circular contains the following information that the Filer has deemed to be material so that unitholders of the Terminating Fund may consider this information before voting on the proposed Merger: (i) the differences between the Terminating Fund and the Continuing Fund; (ii) the tax implications of the proposed Merger; (iii) a statement that the units of the Continuing Fund acquired by unitholders of the Terminating Fund upon the implementation of the proposed Merger are subject to the same redemption charges to which their units of the Terminating Fund were subject prior to effecting the proposed Merger; and (iv) the fact that unitholders can obtain, at no cost, the annual information form of the Continuing Fund, the fund facts for all series of the Continuing Fund, the most recent interim and annual financial statements of the Continuing Fund, and the most recent management report of fund performance of the Continuing Fund that have been made public by contacting the Manager or by accessing the documents on the Manager's website.

16. Unitholders of the Terminating Fund will continue to have the right to redeem units of the Terminating Fund at any time up to the close of business on the business day immediately before the effective date of the Merger.

17. The Merger will be effected on a tax-deferred basis as a qualifying exchange under section 132.2 of the Income Tax Act (Canada) (the Tax Act).

18. Brigata Capital will pay for the costs of the Merger. These costs consist mainly of brokerage charges associated with the merger-related trades that occur both before and after the effective date of the Merger and legal, proxy solicitation, printing, mailing and regulatory fees.

19. No sales charges will be payable in connection with the acquisition by the Continuing Fund of the investment portfolio of the Terminating Fund.

20. The Terminating Fund will merge into the Continuing Fund at the close of business on or about December 7, 2012 and the Continuing Fund will continue as a publicly offered open-end mutual fund. In addition, the portfolio manager of the Continuing Fund will change. Specifically, the current portfolio manager of the Terminating Fund will be appointed as the portfolio manager of the Continuing Fund effective December 7, 2012. In accordance with National Instrument 81-106 -- Investment Fund Continuous Disclosure, a press release announcing the portfolio manager change in respect of the Continuing Fund was issued and filed via SEDAR on October 15, 2012. A material change report and an amendment to the simplified prospectus, annual information form and fund facts for the Continuing Fund with respect to the portfolio manager change, was filed via SEDAR on October 25, 2012. Also, the name of the Continuing Fund will change to "Brigata Diversified Portfolio".

21. The investment portfolio and other assets of the Terminating Fund to be acquired by the Continuing Fund in order to effect the Merger are currently, or will be, acceptable, on or prior to the effective date of the Merger, to the newly appointed portfolio manager of the Continuing Fund effective December 7, 2012, and are, or will be, consistent with the investment objective of the Continuing Fund.

22. The Terminating Fund will be wound up as soon as reasonably possible following the Merger.

23. The Merger is conditional on the approval of (i) the unitholders of the Terminating Fund; and (ii) the Principal Regulator. If the necessary approvals are obtained, the following steps will be carried out to effect the Merger, which is proposed to occur on or about December 7, 2012:

(a) Prior to effecting the Merger, if required, the Terminating Fund will sell any securities in its portfolio that do not meet the investment objective and investment strategies of the Continuing Fund.

(b) The value of the Terminating Fund's portfolio and other assets will be determined at the close of business on the effective date of the Merger in accordance with the constating documents of the Terminating Fund.

(c) The Continuing Fund will acquire the investment portfolio and other assets of the Terminating Fund in exchange for units of the Continuing Fund.

(d) The Continuing Fund will not assume any 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.

(e) The Terminating Fund will distribute a sufficient amount of its net income and net realized capital gains, if any, to unitholders to ensure that the Terminating Fund will not be subject to tax for its current tax year.

(f) The units of the Continuing Fund received by the Terminating Fund will have an aggregate net asset value equal to the value of the portfolio assets and other assets that the Continuing Fund is acquiring from the Terminating Fund, and the units of the Continuing Fund will be issued at the applicable series net asset value per unit as of the close of business on the effective date of the Merger.

(g) Immediately thereafter, units of the Continuing Fund received by the Terminating Fund will be distributed to unitholders of the Terminating Fund in exchange for their units in the Terminating Fund on a dollar-for-dollar and series by series basis.

(h) As soon as reasonably possible following the Merger, the Terminating Fund will be wound up.

24. The Terminating Fund and the Continuing Fund are, and are expected to continue to be at all material times, mutual fund trusts under the Tax Act and, accordingly, are qualified investments under the Tax Act for registered retirement savings plans, registered retirement income funds, deferred profit sharing plans, registered education savings plans and tax-free savings accounts.

25. The Filer believes that the Merger will be beneficial to unitholders of the Terminating Fund and Continuing Fund for the following reasons:

(a) The Merger will result in reducing the administrative and regulatory costs of operating the Terminating Fund and Continuing Fund as separate mutual funds;

(b) Unitholders of the Terminating Fund and Continuing Fund will enjoy increased economies of scale as part of a larger combined Continuing Fund and as a result, Brigata Capital expects that the management expense ratio of the combined Continuing Fund will be lower than that of the Continuing Fund;

(c) Following the Merger, the Continuing Fund will have a portfolio of greater value, which may allow for increased portfolio diversification opportunities if desired;

(d) There is significant overlap between the portfolio holdings of the Terminating Fund and the equity portion of the portfolio holdings of the Continuing Fund; and

(e) The Continuing Fund, as a result of its greater size, may benefit from its larger profile in the marketplace.

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 Exemption Sought is granted.

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