Excel Funds Management Inc. et al.

Headnote

Mutual fund granted exemption from NI 81-102 to permit investment in securities of another mutual fund which has the same investment objectives and investment strategies. Relief also granted from NI 81-101 to permit the bottom funds to use a long form prospectus rather than a simplified prospectus for the purposes of becoming a reporting issuer under a non-offering prospectus.

Rules Cited

National Instrument 81-102 Mutual Funds, s. 2.5(2)(a).

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 2.1(1)(a), 2.1(1)(c)

April 21, 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 EXCEL FUNDS MANAGEMENT INC. (the Filer, or we) AND IN THE MATTER OF EXCEL INDIA BALANCED FUND AND EXCEL NEW INDIA LEADERS FUND (the Funds) AND IN THE MATTER OF NEW LEADERS CLASS AND GROWTH & INCOME CLASS (the Underlying Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Funds and the Underlying Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Funds from paragraph 2.5(2)(a) of National Instrument 81-102 Investment Funds (NI 81-102) to permit each of the Excel New India Leaders Fund and the Excel India Balanced Fund to invest in securities of the New Leaders Class and the Growth & Income Class of shares of Excel Funds Mauritius Company Ltd. (each, an Underlying Fund and collectively, the Underlying Funds) respectively, which are managed by the Filer and have adopted the investment restrictions contained in NI 81-102 and will continue to be managed in accordance with these restrictions, subject to any exemptions therefrom obtained by the Funds, and exempting the Underlying Funds from paragraphs 2.1(1)(a) and 2.1(1)(c) of National Instrument 81-101 Mutual Fund Prospectus Disclosure to permit each Underlying Fund to file a preliminary prospectus in the form of preliminary long-form prospectus prepared in accordance with National Instrument 41-101 General Prospectus Requirements (NI 41-101) and to file a prospectus in the form of a long-form non-offering final prospectus prepared in accordance with NI 41-101 rather than by simplified prospectus, annual information form and fund facts as prescribed under National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101),

(collectively. the Exemption Sought).

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

(a) the Ontario Securities Commission (OSC) 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 each of the other provinces and territories of Canada (together with Ontario, the Jurisdictions).

Interpretation

Unless expressly defined herein, terms in this Application have the respective meanings given to them in MI 11-102, National Instrument 15-101 Definitions, NI 81-102 and National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106).

Aditya Birla means Aditya Birla Sun Life Asset Management Company Pte. Ltd.

Company means Excel Funds Mauritius Company Ltd. (formerly Excel India Growth & Income Company Ltd.), the multi-class investment fund corporation which relates to the Underlying Funds.

EBF means Excel India Balanced Fund, one of the Funds.

EGI means Excel India Growth & Income Fund, a closed-end fund managed by the Filer.

ENL means Excel New India Leaders Fund, one of the Funds.

Filer means Excel Funds Management Inc.

FPI means foreign portfolio investor.

FSC means the Financial Services Commission of Mauritius.

Funds means EBF and ENL.

Underlying Assets means publicly-listed equity securities and investment grade fixed income securities, in each case, issued by entities located in India and equity securities of companies located in India that are considered to be emerging industry leaders.

Underlying Funds means the underlying funds in which the Funds will invest, namely the New Leaders Class and the Growth & Income Class of shares of the Company.

Representations

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

The Filer

1. Excel Funds Management Inc. is a corporation incorporated under the Business Corporations Act (Ontario) with its head office located in Mississauga, Ontario.

2. Excel Funds Management Inc. is registered as an Investment Fund Manager in Ontario, Quebec, and Newfoundland and Labrador.

The Funds

3. The Funds will be mutual funds subject to NI 81-102.

4. EBF and ENL have filed a preliminary simplified prospectus, annual information form and fund facts dated January 22, 2016 on SEDAR with respect to the proposed offering of Series A, Series F, and PM Series units of each of EBF and ENL (the Preliminary Prospectus), that has been prepared and filed in accordance with securities legislation of the Jurisdictions. Upon receiving a receipt therefor, EBF and ENL will be reporting issuers in each of the Jurisdictions.

5. EBF's investment objective is to seek current income and long-term capital appreciation by obtaining exposure to an actively-managed, diversified portfolio comprised primarily of publicly-listed equity securities and investment grade fixed income securities, in each case, issued by entities located in India. EBF is essentially an open-end mutual fund version of EGI and will invest in the same Underlying Fund as EGI to achieve its investment objective.

6. ENL's investment objective is to seek long-term growth of capital through active management of equity securities of companies located in India that are considered to be emerging industry leaders. It will invest in an Underlying Fund, which is a newly created class of shares of the Company to achieve its investment objective.

7. EGI is a closed-end investment fund established as a trust under the laws of the Province of Ontario that was created to invest in an actively managed, diversified portfolio comprised primarily of publicly-listed equity securities and investment grade fixed income securities, in each case, issued by entities located in India. All or substantially all of EGI's investments are made through its Underlying Fund, namely the Growth & Income Class of shares of the Company.

8. As stated in EGI's prospectus dated April 23, 2015, the Filer intends that on or about May 31, 2017, EGI will, subject to applicable law and unitholder or regulatory approval, be merged on a tax-deferred basis or converted into an open-end mutual fund managed by the Filer or an affiliate of the Filer.

The Company and the Underlying Funds

9. The Company is a private company established under the laws of the Republic of Mauritius pursuant to the Companies Act 2001 and its capital consists of multiple classes of redeemable ordinary shares and one class of non-redeemable management shares. The New Leaders Class and the Growth & Income Class of shares of the Company are, or will be, reporting issuers under the securities legislation of all of the provinces and territories of Canada.

10. The Company does not take in money from outside parties and was established by the Filer as an underlying investment vehicle of EGI to address tax and licensing issues arising from investing in India. The Company was formerly named Excel India Growth & Income Company Ltd. and initially had one class of redeemable ordinary shares (which has since been redesignated as the Growth & Income Class). The Company acts as an underlying fund for EGI. The Company has since been renamed Excel Funds Mauritius Company Ltd. and has been restructured to comprise multiple classes of redeemable ordinary shares, including the New Leaders Class which will be the Underlying Fund of ENL.

11. At the time EGI was launched, the Company was a "non-redeemable investment fund". Accordingly, the Filer filed a long form non-offering prospectus (the Underlying Fund Ontario Prospectus) dated April 23, 2015 with the OSC, a receipt for which was issued on April 24, 2015, in order to qualify the Company as a reporting issuer in Ontario and be subject to the continuous disclosure requirements of NI 81-106. Financial statements and other reports required to be filed by the Company are available through SEDAR.

12. EGI invests in the Growth & Income Class of the Company in accordance with section 2.5(2)(a.1)(ii) of NI 81-102 and section 2.5(2)(c.1) of NI 81-102 and all other provisions of section 2.5(2) of NI 81-102 applicable to a non-redeemable investment fund.

13. The Company holds a Category 1 Global Business Licence issued by the FSC and is authorized by the FSC to operate as a collective investment scheme qualifying as an "Expert Fund", which is defined under the securities laws of Mauritius as a collective investment scheme which is available only to expert investors. Under the securities laws of Mauritius, an "expert investor" means an investor who makes an initial investment, for his own account, of no less than US$100,000 (or its equivalence in any other currency) or a sophisticated investor as defined under The Securities Act 2005 of Mauritius or any similarly defined investor in any other securities legislation.

14. The Company makes investments in India as a registered foreign portfolio investor (FPI) under the portfolio investment scheme that enables foreign investors to purchase and sell shares or non-convertible debentures of Indian companies listed (or to-be-listed) on a recognized stock exchange in India, subject to equity investments being restricted to holding less than 10% beneficial ownership position in a company.

15. An FPI is only permitted to purchase or sell shares on the facilities of a recognized stock exchange in India, is not permitted to acquire shares of unlisted companies and is generally prohibited from participating in off-market transactions.

16. The Funds would like to pursue their investment objectives through investments in the Underlying Funds.

17. The Growth & Income Class of shares of the Company invests in publicly-listed equity securities and investment grade fixed income securities, in each case, issued by entities located in India.

18. The New Leader Class of shares of the Company will invest primarily in equity securities of companies located in India that are considered to be emerging industry leaders.

19. The Filer, and current manager of the Company, will be the manager of the Funds and the Underlying Funds. Aditya Birla will be the investment sub-adviser to the Funds and the investment adviser to the Underlying Funds and will actively manage the Underlying Assets.

20. Each of the Underlying Funds have filed a long-form non-offering prospectus (collectively, the Non-Offering Prospectuses and each, a Non-Offering Prospectus) in each of the Jurisdictions, with the exception of Ontario for the Growth & Income Class of shares of the Company, for which the Underlying Fund Ontario Prospectus was already filed. Accordingly, each of the Underlying Funds is, or will become, a reporting issuer in the same Jurisdictions as EGI and ENL and will become subject to the continuous disclosure requirements of NI 81-106. Accordingly, the financial statements and other reports required to be filed by the Underlying Funds will be, or are, available through SEDAR.

21. The Underlying Funds will be mutual funds because holders of their securities will be entitled to receive on demand, an amount computed by reference to the net asset value of the applicable Underlying Fund. However, the Underlying Funds will not distribute any securities under their respective Non-Offering Prospectus.

22. Though NI 81-102 does not apply to the Underlying Funds, as neither of the Underlying Funds offers or has offered securities under a prospectus, each of the Underlying Funds will voluntarily adopt the investment restrictions contained in NI 81-102 except in accordance with any exemptions therefrom obtained by the relevant Fund.

23. None of Filer, the Funds, EGI or the Underlying Funds is in default of any securities legislation in any of the Jurisdictions.

Rationale

24. The Funds will only invest in securities of the Underlying Funds to gain exposure to the Underlying Assets, in accordance with their respective investment objectives and investment restrictions. Allowing the Funds to invest in the Underlying Funds and obtain exposure to the Underlying Assets by virtue of the proposed two-tier structure will give the Funds a more efficient and cost effective means of achieving their fundamental investment objectives and strategy than would otherwise be possible.

25. The Underlying Funds will adopt the applicable investment restrictions set out in NI 81-102, subject to any exemptions obtained by the Funds.

26. As stated in EGI's prospectus dated April 23, 2015, on or about May 31, 2017 EGI will be converting to or merging into an open-end mutual fund managed by the Filer or an affiliate of the Filer. As such, it is proposed that EGI, subject to unitholder and regulatory approval, will be merged into EBF.

27. EGI, as a closed-end fund, was able to do fund of fund investments and invest in the Growth & Income Class without the need for regulatory relief. The investment strategies utilized by EBF in respect of the Underlying Assets are similar, if not identical, to EGI's investment strategies as set forth in the Preliminary Prospectus. In this respect, we submit that EBF, as the mutual fund version of EGI, should be able to do fund of fund investments, just as EGI is permitted to do.

28. In accordance with the agreement between the Filer, the Funds and the Underlying Funds, the Filer will have access as is necessary to monitor the Underlying Funds' compliance with investment restrictions applicable to managing the Underlying Assets, and the Filer will be provided with all information necessary to ensure that the Filer and the Funds are able to fully comply with all applicable continuous disclosure obligations.

29. The Funds will not invest in the Underlying Funds if the Funds are exposed to any management fees or incentive fees in respect of the investment that duplicate a fee payable by unitholders of the Funds for the same service. Management fees payable by the Underlying Funds have been disclosed in the Preliminary Prospectus. In addition, the Funds will not invest in the Underlying Funds if any sales fees or redemption fees are payable in respect of the investment that duplicate a fee that the Funds would be exposed to. We submit that this, among other things, ensures that the Funds' decision to obtain exposure to the Underlying Funds is influenced only by the best interests of the Funds.

30. The Funds will comply with the requirements under NI 81-106 relating to the top 25 positions portfolio holdings disclosure in its management reports of fund performance as if the Funds were investing directly in the Underlying Assets.

31. The Underlying Funds are filing the Non-Offering Prospectuses to make themselves reporting issuers in order that they comply with the requirement of subsection 2.5(2)(c) of NI 81-102. We submit that the policy reason for this requirement is to ensure that the underlying funds of a fund-of-fund structure will be subject to the continuous disclosure requirements of NI 81-106. This policy objective will be achieved regardless of whether the Underlying Funds file a long form prospectus or a simplified prospectus, annual information form and fund facts.

32. The Underlying Funds will not issue any units under the Non-Offering Prospectuses. The Underlying Funds will only be issuing units to the Funds and this will be done under an exemption from the prospectus requirements. As no investors will be investing under the Non-Offering Prospectuses, the form of the prospectus is not important and the policy reasons for the mutual fund disclosure documents, namely to have simplified disclosure for use by retail investors, are not applicable.

33. As mentioned above, in connection with the launch of EGI, the Filer filed the Underlying Fund Ontario Prospectus with the OSC, a receipt for which was issued on April 24, 2015, in order to qualify one of the Underlying Funds as a reporting issuer in Ontario. It is most economical and efficient to use this existing form of non-offering prospectus when expanding the reporting issuer status of the Growth & Income Class outside of Ontario and to qualify the New Leaders Class as a reporting issuer in all provinces and territories of Canada. To take the existing form of long-form prospectus disclosure and convert it to a simplified prospectus, annual information form and fund facts would be time consuming and expensive for the Filer. We submit that these expenses are not warranted given the policy considerations noted above. Further, if it is sufficient to file a non-offering prospectus prepared in accordance with NI 41-101 for a closed-end fund, then we see no different policy reason to apply for a mutual fund.

34. The Filer may consider creating a closed-end fund in the future to invest in the New Leaders Class, as an Underlying Fund. Absent obtaining the Exemption Sought, the Underlying Fund would have to incur additional costs in preparing a long form non-offering prospectus at that time as the use of the simplified prospectus form to sell units of the Underlying Fund may create confusion and may negatively impact the marketing of the Underlying Fund. The Filer would like to use the long form non-offering prospectus form for consistency across all of its investment fund platforms.

35. Except for subsection 2.5(2)(a) of NI 81-102, the investment of the Funds in securities of the Underlying Funds will comply with provisions of NI 81-102. In addition, except as described in this Application, the Funds will comply with the applicable investment restrictions contained in NI 81-102 regarding investments in other mutual funds.

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 provided that:

(a) units of the Funds may not be sold to any mutual fund which is subject to NI 81-102;

(b) the investment objectives and investment strategies of each Underlying Fund will be substantially the same as its corresponding Fund;

(c) the Funds are subject to NI 81-102 and the Underlying Funds will adopt and comply with the investment restrictions and practices of NI 81-102;

(d) any changes in the provisions of the material contracts of the Underlying Funds which would delete or amend the requirements of conditions (b) and (c) above, will require the prior approval of the Filer and the Jurisdictions;

(e) a Fund will redeem its investment in an Underlying Fund in the event that the contractual provisions in (d) are breached, in respect of that Fund or its Underlying Fund;

(f) the simplified prospectus of the Funds disclose conditions (b) to (e) and the annual and interim management report of fund performance of the Funds and the quarterly portfolio disclosure of the Funds will disclose the top 25 holdings of the Underlying Funds;

(g) the process for calculating the net asset value ("NAV") of the securities of the Funds and the Underlying Funds will be identical and have compatible dates for the calculation of NAV for purposes of the issue and redemption of securities of these funds;

(h) the annual and semi-annual financial statements of the Funds and the financial statements of the Underlying Funds, including their respective portfolio holdings, shall be provided and made available upon request by a unitholder of the Funds, and this fact will be disclosed in the simplified prospectus of the Fund;

(i) the books and records of the Underlying Funds will be examined by the Filer and the financial statements of the Underlying Funds will be audited by the auditor of the Funds at least once per year;

(j) no sales charges will be payable by a Fund in relation to a purchase of securities of an Underlying Fund;

(k) no redemption fees or other charges will be charged by an Underlying Fund in respect of a redemption by a Fund of shares of the Underlying Fund;

(l) no trailer or other fees or other charges will be paid by the Filer, the Funds, and the Underlying Funds or by any affiliate or associate of any of the foregoing entities to anyone in respect of the investment by the Funds in an Underlying Fund;

(m) there are arrangements between or in respect of the Funds and the Underlying Funds to avoid the duplication of management fees;

(n) no securities of the Underlying Funds are distributed in Canada other than to the Funds and any other investment funds managed by the Filer;

(o) the Funds' prospectus discloses that the Funds will obtain exposure to securities of the Underlying Funds and the risks associated with such an investment; and

(p) the Underlying Funds' custodian meets the requirements of a sub-custodian for assets held outside Canada under section 6.3 of NI 81-102.

"Raymond Chan"

Manager, Investment Funds and Structured Products Branch

Ontario Securities Commission