Fédération des Caisses Desjardins du Québec - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Exemption from subsection 5.3.1(a) of National Instrument 81-102 Mutual Funds requiring it to obtain the approval of an independent review committee under NI 81-107 Independent Review Committee for Investment Funds prior to changing the Desjardins Funds' auditor.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.3.1(a), 19.1.

February 19, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR,

THE NORTHWEST TERRITORIES, NUNAVUT

AND YUKON

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

THE FÉDÉRATION DES CAISSES DESJARDINS

DU QUÉBEC AND THE MUTUAL FUNDS LISTED

IN SCHEDULE "A' HERETO (the "Desjardins Funds")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Fédération des Caisses Desjardins du Québec (the "Applicant" or "Manager"), the Manager of the Desjardins Funds, for a decision under section 19.1 of National Instrument 81-102 Mutual Funds (the "Legislation" or "NI 81-102") for an exemption from the requirement contained in subsection 5.3.1(a) of NI 81-102 requiring the approval of an independent review committee under National Instrument 81-107 Independent Review Committee for Investment Funds ("NI 81-107") prior to changing the Desjardins Funds' auditor (the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) L'Autorité des Marchés financiers du Québec is the principal regulator for this application; and

(b) This MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

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

1. The Manager of the Desjardins Funds acts as Promoter, Registrar and Transfer Agent of the Desjardins Funds.

2. The Desjardins Funds are open-ended mutual fund trusts governed by the laws of the Province of Québec.

3. The Desjardins Funds are currently qualified for distribution in all of the provinces and territories of Canada under the simplified prospectus and annual information form dated January 17, 2007 (the "Prospectus").

4. The Desjardins Funds are reporting issuers under the securities legislation of each of the provinces and territories of Canada. To the knowledge of the Applicant, none of the Desjardins Funds is in material default of any of the requirements of the securities legislation in any of the provinces or territories of Canada.

5. For business considerations the Manager has determined that it is in the interests of the Desjardins Funds that their current auditor Raymond Chabot Grant Thornton LLP be replaced by PricewaterhouseCoopers LLP (the "Change of Auditor").

6. To the knowledge of the Applicant, there have been no "reportable events" within the meaning of such term under National Instrument 51-102 in relation to the Desjardins Funds' two most recently completed financial years.

7. None of the Desjardins Funds has yet established an independent review committee under NI 81-107.

8. Each of the Desjardins Funds shall establish an independent review committee within the timelines set out in NI 81-107.

9. Without the Requested Relief the Desjardins Funds are unable to comply with the requirement of NI 81-102, implemented coincidentally with the introduction of NI 81-107, that an independent review committee approves a change in auditor of a mutual fund.

10. For the purpose of considering the approval of the proposed Change of Auditor, the Manager will appoint an ad hoc committee which will consist of at least 3 persons each of whom will be "independent", as such term is defined in NI 81-107 (the "Independent Group").

11. The Independent Group will not approve the Change of Auditor unless it has determined, after reasonable inquiry, that the change:

(a) is proposed by the Manager free from any influence by an entity related to the Manager and without taking into account any consideration relevant to an entity related to the Manager;

(b) represents the business judgment of the Manager uninfluenced by considerations other than the best interests of the Desjardins Funds; and

(c) achieves a fair and reasonable result for the Desjardins Funds.

12. Each member of the Independent Group in considering the proposed Change of Auditor will:

(a) act honestly and in good faith, with a view to the best interests of the Desjardins Funds; and

(b) exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

13. The Desjardins Funds will not relieve the members of the Independent Group from liabilities for losses that arise from a failure to satisfy the standard of care set out in paragraph 12 above.

14. The Desjardins Funds will not incur the cost of any portion of liability insurance that insures a member of the Independent Group for a liability for a loss that arises out of failure to satisfy the standard of care set out in paragraph 12 above.

15. The cost of any indemnification or insurance coverage paid for by the Manager or any associate or affiliate of the Manager to indemnify or insure the members of the Independent Group in respect of a loss that arises out of a failure to satisfy the standard of care set out in paragraph 12 above will not be paid either directly or indirectly by the Desjardins Funds.

16. The Prospectus includes disclosure that it is intended that the auditor of the Desjardins Funds will be changed from Raymond Chabot Grant Thornton LLP to PricewaterhouseCoopers LLP and that although the approval of securityholders will not be obtained for a change in auditor, securityholders will be sent a written notice at least 60 days before the effective date of the Change of Auditor.

17. Securityholders of the Desjardins Funds will be sent a written notice at least 60 days before the effective date of the Change of Auditor.

18. The Applicant will comply with the reporting requirements related to the Change of Auditor under Part 13 of National Instrument 81-106 Investment Fund Continuous Disclosure.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

(a) the Independent Group has reviewed and approved the Change of Auditor and that each member, after reasonable inquiry, is of the opinion that the Change of Auditor:

(i) is proposed by the Manager free from any influence by an entity related to the Manager and without taking into account any consideration relevant to an entity related to the Manager;

(ii) represents the business judgment of the Manager uninfluenced by considerations other than the best interests of the Desjardins Funds; and

(iii) achieves a fair and reasonable result for the Desjardins Funds;

(b) securityholders of the Desjardins Funds will be sent a written notice at least 60 days before the effective date of the Change of Auditor; and

(c) that there are no "reportable events" as defined in NI 51-102.

SCHEDULE "A"

Desjardins Money Market Fund

Desjardins Short-Term Income Fund

Desjardins Canadian Bond Fund

Desjardins Enhanced Bond Fund

Desjardins Northwest Specialty Global High Yield Bond Fund

Desjardins Canadian Balanced Fund

Desjardins Québec Balanced Fund

Desjardins Select Canadian Balanced Fund

Desjardins Dividend Fund

Desjardins Canadian Equity Value Fund

Desjardins Canadian Equity Fund

Desjardins Canadian Small Cap Equity Fund

Desjardins Select Canadian Equity Fund

Desjardins CI Canadian Investment Fund

Desjardins Fidelity True North® Fund

Desjardins Fidelity Canadian Growth Company Fund

Desjardins Northwest Specialty Equity Fund

Desjardins American Equity Value Fund

Desjardins Select American Equity Fund

Desjardins CI Value Trust Corporate Class Fund

Desjardins Fidelity Small Cap America Fund

Desjardins Global Equity Value Fund

Desjardins Overseas Equity Value Fund

Desjardins Global Real Estate Fund

Desjardins Emerging Markets Fund

Desjardins Select Global Equity Fund

Desjardins Fidelity Global Fund

Desjardins Environment Fund

Desjardins Ethical Canadian Balanced Fund

Desjardins Alternative Investments Fund

Desjardins Global Science and Technology Fund