Aston Hill Capital Markets Inc. et al.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval granted under NI 81-102 for mergers of non-redeemable investment funds that will result in securityholders becoming securityholders of a different non-redeemable investment fund -- approval needed because mergers do not meet the criteria for pre-approved reorganizations and transfers under National Instrument 81-102 Investment Funds because investment objectives and fee structure are not substantially similar -- mergers to otherwise comply with pre-approval criteria, including securityholder and IRC approval.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 5.5(1)(b), 5.7(1)(b).

January 27, 2016

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 ASTON HILL CAPITAL MARKETS INC. (the Filer) AND IN THE MATTER OF AUSTRALIAN BANC CAPITAL SECURITIES TRUST (AB Fund), EURO BANC CAPITAL SECURITIES TRUST (EB Fund) AND HBANC CAPITAL SECURITIES TRUST (HB Fund, and collectively the Terminating Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Terminating Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for approval under paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) to merge (the Mergers) the Terminating Funds into North American Financials Capital Securities Trust (NA Fund), (the Approval Sought).

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 subsection 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, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, Northwest Territories, Nunavut and Yukon (the Jurisdictions).

Interpretation

Terms defined in NI 81-102, 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. The Filer is a corporation governed by the laws of Ontario with its head office in Toronto, Ontario.

2. The Filer is registered under NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations as an investment fund manager and a portfolio manager in Ontario and an investment fund manager in Newfoundland and Labrador, Ontario and Quebec.

3. The Filer is the manager of NA Fund and the Terminating Funds.

4. The Filer is not in default of securities legislation in the Jurisdictions.

The Terminating Funds

5. Each of the Terminating Funds is a closed-end investment fund established under the laws of the Province of Ontario that is governed by a trust agreement between the Filer and RBC Investor Services Trust as trustee (the Trustee). AB Fund is governed by a trust agreement dated as of November 23, 2010. EB Fund is governed by a trust agreement dated as of May 28, 2014. HB Fund is governed by a trust agreement dated as of September 28, 2010.

6. Each of the Terminating Funds was qualified by a prospectus. AB Fund was qualified by a prospectus dated November 29, 2010, EB Funds was qualified by a prospectus dated May 28, 2014 and HB Fund was qualified by a prospectus dated September 28, 2010.

7. AB Fund's issued and outstanding Class A units currently trade on the Toronto Stock Exchange (the TSX) under the ticker symbols AUZ.UN and CSB.UN, respectively and its issued Class F units are not listed for trading. EB Fund's issued and outstanding units are currently listed for trading on the TSX under the symbol EBT.UN. HB Fund's issued and outstanding Class A units currently trade on the TSX under the ticker symbol HSC.UN and its Class U units are not listed for trading.

8. Each of the Terminating Funds is a reporting issuer under applicable securities legislation of the Jurisdictions. The Terminating Funds are not in default of securities legislation in the Jurisdictions.

9. HB Fund had a forward agreement that terminated on December 22, 2015. HB Fund was originally scheduled to terminate on December 30, 2015 but its trust agreement was amended to extend the termination date to January 29, 2016 or such later date as the Manager may determine. AB Fund had a forward agreement that terminated on January 18, 2016. AB Fund was originally scheduled to terminate on January 29, 2016 but its trust agreement was amended to extend the termination date to January 29, 2016 or such later date as the Manager may determine.

The Continuing Fund

10. NA Fund is a closed-end investment fund established under the laws of the Province of Ontario that is governed by an amended and restated trust agreement dated as of December 1, 2014 between the Filer and the Trustee.

11. NA Fund was qualified by a prospectus dated September 28, 2009.

12. NA Fund's issued Class A units currently trade on the TSX under the ticker symbol NAF.UN and its Class F units are not listed for trading.

13. NA Fund is a reporting issuer under applicable securities legislation of the Jurisdictions. NA Fund is not in default of securities legislation in the Jurisdictions.

The Proposed Mergers

14. The Filer intends to merge the Terminating Funds into NA Fund.

15. The Approval Sought is required because the Mergers satisfy the requirements for pre-approved reorganizations and transfers set out in subsection 5.6(1) of NI 81-102, except that a reasonable person would not consider NA Fund to have (a) substantially similar fundamental investment objectives as each Terminating Fund and (b) a substantially similar fee structure as AB Fund and HB Fund.

16. Canadian Banc Capital Securities Trust (CB Fund) will also be merging into NA Fund however, no approval is required from the securities regulatory authority or regulator as the merger of CB Fund into NA Fund meets the pre-approval criteria under s. 5.6(1) of NI 81-102.

17. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, the Filer presented the terms of the Mergers which raise a conflict of interest for the purposes of NI 81-107 and the process proposed for completion of the Merger to the Independent Review Committee of NA Fund and the Terminating Funds (the IRC) on November 10, 2015 for its review and recommendation. The IRC reviewed the proposed transactions and has determined that the proposed Mergers, if implemented, would achieve a fair and reasonable result for each of the Terminating Funds and NA Fund.

18. The board of directors of the Filer approved and ratified the Mergers.

19. A press release and notice of meeting in respect of the proposed Mergers were filed on SEDAR on November 12, 2015. The material change report was filed on January 6, 2016.

20. Unitholders of the Terminating Funds and NA Fund each approved the Mergers and certain related matters at meetings of unitholders (each a Meeting) that were held on December 17, 2015.

21. In connection with each Meeting, a notice of meeting and a management information circular dated November 17, 2015 and a related form of proxy (the Meeting Materials) have been mailed to unitholders of NA Fund and the Terminating Funds on November 25, 2015 and were subsequently filed on SEDAR.

22. The Meeting Materials provided unitholders of the Terminating Funds with information, among other things, the differences between the Terminating Fund and NA Fund, the management fees of NA Fund and the tax consequences of the Mergers. The Meeting Materials also described the various ways in which unitholders can obtain a copy of the most recent interim and annual financial statements and management reports of fund performance for each of the Terminating Funds and NA Fund, at no cost. Accordingly, unitholders of the Terminating Funds had an opportunity to consider this information prior to voting on the Mergers.

23. A summary of the IRC's recommendation was included in the notice of the meeting sent to unitholders of the Terminating Funds and NA Fund as required by section 5.1(2) of NI 81-107.

24. Subject to receipt of unitholder approval and the Approval Sought, it is expected that the Mergers will take place on or about January 29, 2016 (the Merger Date).

25. If the necessary approvals are obtained, the following steps will be carried out to effect the Mergers:

(a) The Terminating Funds will be delisted from the TSX on or about the Merger Date.

(b) Each Terminating Funds will transfer all of its assets and liabilities to NA Fund for an amount equal to the net value of the assets transferred.

(c) NA Fund will issue securities to the Terminating Funds having a net asset value equal to the net value of the assets transferred by the Terminating Funds, determined based on an exchange ratio established as of the close of trading on the business day immediately preceding the Merger Date.

(d) The exchange ratio will be calculated based on the relative Net Asset Value of AB Units, EB Units, and HB Units, respectively, and NA Units. Immediately following the transfer of the assets of each Terminating Fund to NA Fund and the issuance of NA Units to each Terminating Fund, all AB Units, EB Units, and HB Units will be automatically redeemed and each AB Unitholder, EB Unitholder and HB Unitholder participating in the Merger will receive such number of NA Units as is equal to the number of AB Units, EB Units, and HB Units held multiplied by the exchange ratio. The Terminating Funds will redeem their outstanding securities and pay the redemption price for these securities by distributing securities of NA Fund to the Terminating Funds' unitholders.

(e) Any cash acquired by NA Fund in connection with the Mergers will be invested in accordance with the investment objectives, strategies, and restrictions of NA Fund.

(f) Securities of NA Fund received by the unitholders of the Terminating Fund will have an aggregate net asset value equal to the aggregate net asset value of the securities of the Terminating Fund which are being redeemed.

(g) Following the Mergers, NA Fund will continue as a TSX-listed investment fund and the Terminating Funds will be wound up as soon as reasonably practicable .

26. Pursuant to the Merger:

(a) holders of Class A units or Class F units of AB Fund will receive Class A units or Class F units, respectively, of NA Fund, the terms and conditions attaching to such Class A units and Class F unis being substantially the same as those attaching to the Class A units and Class F units, respectively, of NA Fund;

(b) holders of Class A units, series 1 and series 2 of HB Fund will receive Class A units of NA Fund, the terms and conditions attaching to such Class A units, Series 1 and Series 2 being substantially the same as those attaching to the Class A units of NA Fund;

(c) holder of units of EB Fund will receive Class A units of the NA Fund, the terms and conditions attaching to such units being substantially the same as those attaching to the Class A units of NA Fund; and

(d) holders of Class A units of HB Fund will receive Class A units of NA Fund, the terms and conditions attaching to such units being substantially the same as those attaching to the Class A units of NA Fund.

27. The Class U units of HB Fund were redeemed on the scheduled termination date of December 30, 2015 and did not participate in the merger with NA Fund as such units were priced in U.S. dollars and NA Fund does not offer U.S. dollar denominated classes of units.

28. The Filer will pay all costs and reasonable expenses relating to the solicitation of proxies and holding the Meetings in connection with the Mergers as well as the costs of implementing the Mergers, including any brokerage fees.

29. The trust agreements have been amended to provide unitholders of the Terminating Funds who do not wish to be part of the Merger the option of redeeming for cash their investment at net asset value prior to the Merger (the Special Redemption Right). For each unit submitted for redemption pursuant to the Special Redemption Right, unitholders received a cash amount equal to 100% of the net asset value per unit on January 22, 2016 together with any unpaid distributions (including any special distribution) in respect of such unit, less any amount required to be withheld therefrom under applicable law. Such amount will be paid to redeeming unitholders on or about January 27, 2016.

30. No sales charges will be payable in connection with the acquisition by NA Fund of any of the investment portfolios of the Terminating Funds.

31. The Mergers will be a "qualifying exchange" within the meaning of section 132.2 of the Income Tax Act (the Tax Act).

32. The Filer will not receive any compensation in respect of the acquisition, sale or redemptions of the units of NA Fund or the Terminating Funds delivered upon terminations. No sales charges will be payable by unitholders of the Terminating Funds in connection with the Mergers.

33. The Terminating Funds and NA Fund have the same valuation procedures.

34. The portfolios and other assets of the Terminating Funds to be acquired by NA Fund as a result of the Mergers are currently, or will be, acceptable to the portfolio advisors of NA Fund prior to the effective date of the Mergers.

35. The Terminating Funds and NA Fund are, and are expected to continue to be at all material times, mutual fund trusts under the Tax Act and, accordingly, units of both the Terminating Funds and NA Fund are "qualified investments" under the Tax Act for registered retirement savings plans, registered retirement income funds, deferred profit sharing plans, registered education savings plans, registered disability savings plans and tax free savings accounts.

36. Unitholders of EB Fund will have the benefit of lower management fees as unitholders of NA Fund. Unitholders of AB Fund and HB Fund will incur slightly higher management fees as unitholders of NA Fund.

37. The Filer believes that the Mergers will be beneficial to unitholders of the Terminating Funds and NA Fund for the following reasons:

(a) Upon completion of the Mergers, NA Fund will have a greater level of assets than each of the Terminating Funds or NA Fund separately which may result in economies of scale for operating expenses as part of a larger combined fund.

(b) Unitholders of EB Fund would benefit from being invested in NA Fund, which has a broader investment universe and lower management fees.

(c) HB Fund was scheduled to terminate in December 2015 and AB Fund was scheduled to terminate in January 2016. As part of the transactions forming part of the Mergers, each of HB Fund and AB Fund has been extended. Extending HB Fund and AB Fund and including them in the Mergers will allow unitholders of HB Fund and AB Fund to have an investment in a fund focused on capital securities chosen from a broad investment universe.

(d) HB Fund had a forward agreement that terminated in December 2015 and AB Fund has a forward agreement that is expected to terminate in January 2016. The Mergers will not trigger any additional tax for unitholders of AB Fund or HB Fund as the tax consequences associated with terminating the forward agreement must be paid by unitholders of the respective funds regardless of whether the Mergers are implemented.

(e) Implementation of the Mergers is not anticipated to result in more portfolio transactions for AB Fund or HB Fund than would have otherwise occurred if AB Fund or HB Fund were to terminate as scheduled.

38. The foregoing reasons for the Mergers were set out in the Meeting Materials along with certain prospectus-level disclosure concerning NA Fund, including information regarding investment objectives and restrictions, the portfolio manager and risk factors applicable to an investment in NA Fund.

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 Approval Sought is granted.

"Raymond Chan"
Manager, Investment Funds and Structured Products Branch
Ontario Securities Commission