Sentry Investments Inc. et al.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund merger -- approval required because merger does not meet the criteria for pre-approved reorganizations and transfers in National Instrument 81-102 -- merging funds do not have substantially similar investment objectives -- securityholders of 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, 5.7.

March 7, 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

SENTRY INVESTMENTS INC.

(the Filer or Sentry)

AND

SENTRY MINING OPPORTUNITIES CLASS

(the Terminating Fund)

AND

SENTRY PRECIOUS METALS GROWTH CLASS

(the Continuing Fund and, together with the

Terminating Fund, the Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) approving the merger (the Merger) of the Terminating Fund into the Continuing Fund pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) (the Merger Approval).

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

(a) The Ontario Securities Commission is the principal regulator (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 each of the provinces and territories of Canada, other than the province of Ontario.

Interpretation

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

Representations

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

The Filer

1. Sentry is a corporation incorporated under the laws of the province of Ontario with its head office in Toronto, Ontario.

2. Sentry is registered as a dealer in the category of mutual fund dealer under applicable securities legislation in each province of Canada and an adviser in the category of portfolio manager under theSecurities Act (Ontario) (the OSA) and the Securities Act (Alberta). Sentry is also registered as an investment fund manager under the OSA and as an adviser in the category of commodity trading manager under the Commodity Futures Act (Ontario).

3. Sentry is the manager and the portfolio adviser of the Funds.

The Funds

4. Each of the Funds is a class of shares of Sentry Corporate Class Ltd. (Sentry Corp.), a mutual fund corporation incorporated by articles of incorporation under the laws of the Province of Ontario.

5. Shares of the Funds are currently offered for sale under a simplified prospectus and annual information form dated May 27, 2011, as amended on August 30, 2011 and January 10, 2012, in each of the provinces and territories of Canada. The Funds are reporting issuers under the applicable securities legislation of each province and territory of Canada. Sentry and the Funds are not in default of such legislation in any province or territory of Canada.

6. Unless an exemption has been obtained, each of the Funds follows the standard investment restrictions and practices established under NI 81-102.

7. The investment objective of the Terminating Fund is to provide long-term capital appreciation by investing primarily in companies involved in the exploration, development, production, marketing and distribution of commodities (referring to naturally occurring or synthetic substances that can be mined, processed or developed), excluding oil and natural gas, and companies that supply goods or services to them. The investment objective of the Continuing Fund is to provide long-term capital appreciation by investing substantially all of its assets in securities of Sentry Precious Metals Growth Fund (the Underlying Fund). The investment objective of the Underlying Fund is to provide long-term capital appreciation by investing primarily in equity securities of companies engaged in the precious metals sector while remaining eligible for registered retirement savings plans.

8. The net asset value (the NAV) for each series of shares of each Fund is calculated on a daily basis on each day that the Toronto Stock Exchange is open for trading and shares of the Funds are generally redeemable on a daily basis.

The Proposed Merger

9. The board of directors of each of Sentry and Sentry Corp. approved the proposed Merger on January 9, 2012 and a press release and material change report, which gave notice of the proposed Merger, were issued and filed on SEDAR on January 9, 2012. Related amendments to the simplified prospectus and annual information form of the Funds were filed on SEDAR on January 10, 2012.

10. In anticipation of implementation of the Merger, sales of shares of the Terminating Fund were suspended effective January 10, 2012 other than with respect to existing pre-authorized chequing plans.

11. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, Sentry has presented the terms of the Merger to the Independent Review Committee of the Funds (the IRC) for its recommendation. The IRC considered the proposed Merger and provided a positive recommendation and approval to Sentry on the basis that the Merger would achieve a fair and reasonable result for the Funds (the IRC's Conclusion).

12. Regulatory approval of the proposed Merger is required because the Merger does not satisfy all of the criteria for pre-approved reorganizations and transfers as set out in section 5.6 of NI 81-102, namely because a reasonable person may not consider the fundamental investment objectives of the Terminating Fund and those of the Continuing Fund to be "substantially similar", as set forth in section 5.6(1)(a)(ii).

13. Except as described in this decision, the proposed Merger meets all of the other criteria for pre-approved reorganizations and transfers under section 5.6 of NI 81-102.

14. Shareholders of the Funds will be asked to approve the proposed Merger at special meetings scheduled to be held concurrently on March 8, 2012 (the Meetings). The shareholders of the Continuing Fund will also be asked to approve the Merger as required under Business Corporations Act (Ontario) (Corporate Law). The Merger has been approved by the sole common shareholder of Sentry Corp. as also required under Corporate Law.

15. In connection with the Meetings, Sentry, as manager of the Funds, sent to shareholders of the Funds a notice of meetings of shareholders, a joint management information circular (the Information Circular) and a related proxy form. The Information Circular was filed on SEDAR and mailed to shareholders of the Funds on or about February 16, 2012.

16. Sentry is relying on the exemption from the requirement to send the simplified prospectus set out in section 5.6(1)(f)(ii) of NI 81-102 granted pursuant to the decision In the Matter of Sentry Select Capital Inc. and Sentry Select 40 Split Income Fund May 29, 2009, 32 OSCB 4637. Sentry complies with the conditions of the exemption. In fulfilment of one of the conditions, on or about February 16, 2012, together with the Information Circular, shareholders of the Terminating Fund were also sent Part A of the simplified prospectus of the Continuing Fund dated May 27, 2011, as amended, as well as Part B of such simplified prospectus as it relates to the Continuing Fund.

17. Amongst other information about the proposed Merger, the Information Circular sets out:

(a) The steps that will be taken to effect the Merger, which is proposed to occur on or about the close of business on March 16, 2012, or such later date as may be determined by Sentry (the Merger Date);

(b) The similarities and differences between the Terminating Fund and the Continuing Fund;

(c) Income tax disclosure as it relates to the impact of the implementation of the Merger. The exchange of shares of the Terminating Fund into shares of the Continuing Fund will take place on a tax-deferred basis under theIncome Tax Act (Canada);

(d) Prominently, the various ways in which shareholders can obtain the most recent simplified prospectus, annual information form, fund facts, interim and annual financial statements and management reports of fund performance of the Funds; and

(e) The IRC's Conclusion.

18. Shareholders of the Terminating Fund will continue to have the right to switch or redeem shares of the Terminating Fund for cash at any time up to the close of business on the business day immediately prior to the Merger Date.

19. Shares of the Continuing Fund acquired by shareholders upon the completion of the proposed Merger are subject to the same redemption charges and redemption charge schedule to which their shares of the Terminating Fund were subject prior to the Merger.

20. Sentry will pay all costs and expenses associated with the Merger. These costs consist mainly of brokerage fees, legal, proxy solicitation, printing, mailing and regulatory fees.

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

22. All of the issued and outstanding shares of the Terminating Fund will be exchanged for shares of the Continuing Fund on a dollar-for-dollar and series-by-series basis.

23. Prior to the date of the Merger, the portfolio assets of the Terminating Fund to be acquired by the Continuing Fund will be acceptable to the portfolio adviser of the Continuing Fund and will be consistent with the investment objectives and strategies of the Continuing Fund.

24. Following the Merger, the Continuing Fund will continue as a publicly offered open-end mutual fund and the Terminating Fund will be wound up as soon as reasonably practical.

25. Sentry believes that the Merger will be beneficial to shareholders of the Funds for the following reasons:

(a) going forward, the portfolio manager of the Terminating Fund is of the view that the outlook for precious metals is stronger than that for base metals. While the Terminating Fund can invest in precious metal issuers, its broader investment objective requires the Manager to maintain a more broad-based exposure to both the precious and base metals sectors. By transitioning to the Continuing Fund, shareholders in the Terminating Fund will be able to take advantage of greater exposure to precious metals, which the portfolio manager believes offer stronger investment opportunities;

(b) the smaller size and historic growth rate of the Terminating Fund and the administrative and regulatory costs of operating the Terminating Fund as a stand-alone mutual fund could potentially result in higher costs per shareholder if the Terminating Fund decreases in asset size as it continues to experience significant net redemptions;

(c) shareholders in the Terminating Fund and Continuing Fund are expected to enjoy improved economies of scale which could result in potentially lower proportionate fund operating expenses (which are borne indirectly by shareholders) as part of a larger combined Continuing Fund; and

(d) due to its smaller size, the Terminating Fund may be impacted if forced to liquidate securities at inopportune times to fund redemptions. The Continuing Fund, through its holdings of units in the Underlying Fund, is not affected this way as it has no listed securities that it must liquidate for purposes of funding redemptions. Instead, when necessary, it redeems units that it holds in the Underlying Fund at the Underlying Fund's daily series NAV per Share. Because of its size and access to larger cash reserves, the series NAV per Share of the Underlying Fund's units will less likely be impacted by a redemption of securities by the Continuing 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 Merger Approval is granted.