Triasima Portfolio Management Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to permit inter-fund trade between two pooled funds managed by the same portfolio manager subject to certain conditions -- inter-fund trade made in connection with an isolated operation.

Applicable Legislative Provisions

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

March 11, 2016

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the "Jurisdictions") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF TRIASIMA PORTFOLIO MANAGEMENT INC. (the "Filer")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for a decision pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) exempting the Filer from the restrictions contained in subsections 13.5(2)(b)(iii) which prohibits a registered advisor from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as advisor, to purchase or sell securities from or to the investment portfolio of an investment fund for which a responsible person acts as an advisor, for the sole purpose of allowing the Operation (as defined below) to proceed (the Relief Sought).

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

(a) the Autorité des marchés financiers (the AMF) is the principal regulator for this Application;

(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 Alberta, Saskatchewan, British Columbia, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland And Labrador, Northwest Territories and Nunavut;

(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Unless otherwise defined herein, terms defined in National Instrument 14-101 Definitions have the same meaning in this Application:

"ACWE Ex-Fossil Fuels Fund" means the Triasima All Countries World Equity Ex-Fossil Fuels Fund, an open-end investment trust to be established by Triasima in March 2016 under the laws of Québec pursuant to a master trust agreement to be entered into between Triasima and Computershare Trust Company of Canada effective as of March 11, 2016 with the same investment objectives than the ACWE Fund, except only that the ACWE Ex-Fossil Fund would not invest in certain fossil fuels securities, subject to an initial period during which this Fund will dispose on the market of all the securities of fossil fuels issuers;

"ACWE Fund" means the Triasima All Countries World Equity Fund, an open-end investment trust established by Triasima on September 28, 2012 under the laws of Québec pursuant to a master trust agreement between Triasima and Computershare Trust Company of Canada dated October 30, 2009, as amended on August 8, 2012;

"ITA" means Income Tax Act (Canada);

"Large Client" means one of Triasima's clients who currently has material holdings in the ACWE Fund;

"NI 31-103" means National instrument 31-103 Registration Requirements, Exemptions and Ongoing Registration Obligations;

"NI 81-107" means National Instrument 81-107 Independent Review Committee for Investment Funds;

"Triasima Funds" means collectively, the five existing pooled funds managed by Triasima and distributed to investors pursuant to exemptions from the prospectus requirements;

Representations

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

Background

1. The Filer is an asset-management firm registered as a portfolio manager and exempt market dealer in all Canadian jurisdictions other than the Yukon, and as investment fund manager in all Canadian jurisdictions except Manitoba, Prince Edward Island and the Territories.

2. Neither the Filer nor the ACWE Fund is a reporting issuer in any province or territory of Canada and neither of them is in default of securities legislation in any such jurisdiction.

3. The Filer services mainly institutional and private wealth clients, and also acts as sub-advisor for funds and provides strategies offered by some of its clients to individual investors across Canada, except in the Yukon.

4. The Filer manages the Triasima Funds.

5. The Filer is the registered investment fund manager and portfolio manager of the Triasima Funds.

6. The address of the five Triasima Funds and that of the Filer's head office is 1555 Peel Street, Suite 1200, Montréal, Québec, H3A 3L8, Canada.

7. The investment objectives for the Triasima Funds set out the investment objectives, strategies and restrictions pursuant to which the Triasima Funds are managed by the Filer.

8. One of these Triasima Funds is the ACWE Fund.

9. Pursuant to the ACWE Fund's investment objectives, the ACWE Fund is a flexible global equity mandate seeking a high total return primarily through growth of capital from a broad capitalization range of global stocks, excluding those of Canadian issuers. The investment performance objective of the ACWE Fund is to surpass over time the return from the MSCI All Country World Index.

10. As of February 25, 2016, the Filer managed approximately $72,328,237 in assets under administration in the ACWE Fund.

11. As of February 25, 2016, the ACWE Fund had issued 5,348,982.9999 Class F units that remain outstanding as of the date of the Application. The ACWE Fund has not issued any other class of securities to date.

12. All the underlying securities held in the portfolio of the ACWE Fund are exchange-traded, except for American deposit receipts and a debt instrument guaranteed by the U.S. Government. In any event, the portfolio of the ACWE Fund does not hold any illiquid security as that term is defined in National Instrument 81-102 Investment Funds.

13. As of February 25, 2016, the Large Client held, and still holds, 86.52 % of the ACWE Fund's Class F units, representing $62,5.15 in fund capitalization.

14. The Large Client recently requested Triasima to establish, and transfer the assets underlying its interest in the ACWE Fund to, another open-end investment trust with the same investment policy statement than the ACWE Fund, except only that the newly established fund would not invest in certain fossil fuels securities after an initial divestment period (the "ACWE Ex-Fossil Fuels Fund") and would not exclude Canadian issuers. The investment performance objective of the ACWE Ex-Fossil Fuels Fund will be to surpass over time the return from the MSCI ACWI Ex Fossil Fuels index.

15. Pursuant to the terms of the master trust agreement that will govern the ACWE Ex-Fossil Fuels Fund, the Filer will also be appointed as Manager of that Fund.

Regulatory Requirements

16. Subsection 13.5(2)(b) (iii) of NI 31-103 prohibits inter-fund trades between two funds managed by the same responsible person. Also, the Filer is unable to rely on the exemption provided for in section 6.1 of NI 81-107 because neither Triasima Fund is subject to NI 81-107. Therefore, securities laws, regulations and instruments do not allow the Filer to transfer in kind a portion of the assets held by the ACWE Fund to the ACWE Ex-Fossils Fund.

Tax Requirements

17. In order to achieve the transfer of the underlying assets representing proportionately Large Client's interest in the ACWE Fund to the ACWE Ex-Fossil Fuels Fund while minimizing the tax consequences for the Large Client, the ACWE Fund and its unitholders, Triasima intends to take advantage of the provisions of the ITA which provides, in brief, as follows:

(a) the transfer of assets of one trust (here the ACWE Fund) to another trust (the ACWE Ex-Fossil Fuels Fund) will be deemed to occur at cost and the ACWE Ex-Fossil Fund will be deemed to have acquired those assets at cost also, as a consequence of which there are no tax impacts for the ACWE Fund upon disposal of the transferred assets;

(b) the cost of the units of the ACWE Fund held by the Large Client before the transfer of assets shall simultaneously become the cost of the units that the Large Client will have acquired upon the launch of the ACWE Ex-Fossil Fuels Fund. There will therefore be no tax impact for the Large Client at the time that its units in the ACWE Fund are cancelled;

(c) there is no tax impact for the other unitholders of the ACWE Fund; and

(d) all of the above must have taken place within 24 hours.

The above statements are supported by a tax opinion rendered by Deloitte S.E.N.C.R.L./s.r.l.

Inter-Fund Trades

18. As a result of the foregoing, the Relief Sought would allow the Filer to cause certain inter-fund trades to be made between the ACWE Fund and the ACWE Ex-Fossil Fuels Fund, as follows:

(a) at the launch of the ACWE Ex-Fossil Fuels Fund, prior to the market close set out in sub-paragraph 18b. below, that Fund will issue to the Large Client for a nominal consideration 4,628,187.0308 units of its own capital;

(b) at market close on March 11, 2016 (or at a later date agreed by all of the parties involved, if all required authorizations have not been received before that date) the ACWE Fund will transfer at fair market value (the "Transfer") a portion of its portfolio assets (securities and cash) to the ACWE Ex-Fossil Fuels Fund, prorated on the same percentage basis as that of the units held in the ACWE Fund by the Large Client to the total number of units of the ACWE Fund (the "Transferred Securities");

(c) in respect of the Transfer, the Transferred Securities will be deemed for purposes of the Income Tax Act (Canada) to be at their cost amount;

(d) simultaneously, pursuant to a contractual agreement between the ACWE Fund and the Large Client, the ACWE Fund will redeem for a nil consideration, without prior notice, all of the issued and outstanding units of the ACWE Fund then held by the Large Client; and

(e) concurrently, the ACWE Ex-Fossil Fuels Fund will acquire at cost the Transferred Securities;

(these transactions being herein called collectively, the "Inter-Fund Trades" or the "Operation").

19. The Filer has represented that the Relief Sought will not be prejudicial to both the ACWE Fund, the ACWE Ex-Fossil Fuels Fund and their respective investors' protection as:

(a) the Operation will be tax-neutral for both these Triasima Funds and their investors whereas the sale of the said underlying portfolio assets of the ACWE Fund on the market to the ACWE Ex-Fossil Fuels Fund would generate capital gains or losses bearing tax consequences; and

(b) the Filer would be able to manage the transfer of the particular assets more effectively, including by avoiding transaction costs for both Triasima Funds and keeping the Large Client invested at all time.

20. In respect of each Inter-Fund Trades, the securities to be delivered will meet the investment criteria of the ACWE Ex-Fossil Fuels Fund and therefore will be consistent with the investment objectives of that Fund. The fossil fuels securities that will be transferred to the ACWE Ex-Fossil Fuel Fund in the Operation will be dealt with as follows in order that all investors be treated fairly:

(a) the fossil fuels securities underlying proportionately the Large Client's units in the ACWE Fund will be transferred to the ACWE Ex-Fossil Fuels Fund at the time of the Operation;

(b) these fossil fuels securities would then be gradually sold by the ACWE Ex-Fossil Fuels Fund within an agreed timeline with the Large Client; and

(c) the ACWE Ex-Fossil Fuels Fund will not offer its securities to investors other than the Large Client until the ACWE Ex-Fossil Fuels Fund has sold its fossil fuels securities.

21. The Inter-Fund Trades would be carried out in accordance with the decision of the Relief Sought and Triasima's compliance department will monitor the trades to ensure compliance with this decision.

22. The Filer will keep written records of all Inter-Fund Trades conducted, in accordance with the form, accessibility and retention of records requirements as prescribed by section 11.6 of NI 31-103 and as contemplated in section 6.1(2)(g) of NI 81-107 (even if neither Triasima fund is subject to NI 81-107).

23. The Filer will not receive any compensation in respect of any Inter-Fund Trade nor in respect of any delivery of securities pursuant to an Inter-Fund Trade. No fees will be charged to or will be payable by the Large Client to the ACWE Fund in connection with the redemption by the ACWE Fund of its Class F units. In addition, all the costs associated with the creation of the ACWE Ex-Fossil Fuels Fund will be borne by the Filer. As a result, the Operation will not thereby impact the ACWE Fund nor its unitholders.

24. The ultimate beneficial owner of the underlying securities subject to the Inter-Fund Trades will remain the same (the Large Client), and both Triasima fund will remain managed by the same portfolio manager (the Filer).

25. The Filer received a tax opinion from Deloitte S.E.N.C.R.L./s.r.l. to the effect that the Operation will be tax-neutral for the Large Client, the remaining unitholders of the ACWE Fund, the ACWE Fund and the ACWE Ex-Fossil Fuels Fund.

26. Following the Operation, the ACWE Fund will have sufficient assets in order for the Filer to continue to manage its portfolio in the same way as before the Operation.

Decision

Each of the Decision Makers 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 Decision Makers under the Legislation is that the Relief Sought is granted provided that:

(a) in respect of each Inter-Fund Trades, the Transferred Securities will meet the investment criteria of the ACWE Ex-Fossil Fuels Fund, except for the fossil fuels securities, if any, that will be transferred to the ACWE Ex-Fossil Fuel Fund in the Operation and gradually sold by the ACWE Ex-Fossil Fuels Fund within an agreed timeline with the Large Client;

(b) the Operation has been reviewed and approved by all the parties involved;

(c) the net asset value per unit of the ACWE Fund is unaffected by the Operation;

(d) no discretion is used in determining which portfolio assets are transferred to the ACWE Ex-Fossil Fuels Fund. That is, the same percentage of each position in the portfolio of the ACWE Fund is transferred to the ACWE Ex-Fossil Fuels Fund so that, immediately after the Operation, the ACWE Ex-Fossil Fuels Fund holds the same securities in the same proportions as the ACWE Fund;

(e) the Filer will keep written records of all Inter-Fund Trades conducted, in accordance with the form, accessibility and retention of records requirements as prescribed by section 11.6 of NI 31-103 and as contemplated in section 6.1(2)(g) of NI 81-107 (even if neither Triasima fund is subject to NI 81-107);

(f) the Transferred Securities will be transferred at fair market value at market close on the day of the Operation;

(g) the Filer will notify all other unitholders of the ACWE Fund of the occurrence of the Operation, on a confidential basis, by written communication at the latest 15 days after the Operation has occurred;

(h) the Filer will confirm to the AMF that condition (g) has been fulfilled.

"Eric Stevenson"
Superintendent, Client Services and Distribution Oversight
Autorité des marchés financiers