Securities Law & Instruments

Headnote

National Policy11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager of mutual funds -- proximity of the acquisition of the manager and subsequent amalgamation of the manager with two other wholly-owned subsidiaries considered a change of manager -- exemption granted from the requirement to obtain prior securityholder approval for change of manager on specific facts -- no material impact to securityholders of mutual funds -- Relief from securityholder approval not to be considered a precedent.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.1(b), 5.5(1)(a), 5.7, 19.1.

March 4, 2010

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

MERITAS FINANCIAL INC.

(the "Manager" or the "Filer")

AND

MERITAS MONEY MARKET FUND, MERITAS

CANADIAN BOND FUND, MERITAS BALANCED

PORTFOLIO FUND, MERITAS MONTHLY DIVIDEND

AND INCOME FUND, MERITAS JANTZI SOCIAL

INDEX® FUND, MERITAS U.S. EQUITY FUND AND

MERITAS INTERNATIONAL EQUITY FUND

(collectively, the "Meritas 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 (the "Legislation") for an exemption from the requirement in subsection 5.1(b) of National Instrument 81-102 Mutual Funds ("NI 81-102") such that no approval of the securityholders of the Meritas Funds will be required with respect to the change in manager of the Meritas Funds, and for approval pursuant to subsection 5.5(1)(a) of NI 81-102, of the change in manager of the Meritas Funds (the "Relief & 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 each of the provinces and territories of Canada other than Ontario.

Interpretation

Terms defined in 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:

Proposed Acquisition and Amalgamation

1. The Manager, the shareholders of the Manager (Mennonite Savings and Credit Union (Ontario) Limited ("MSCU"), MMA Holdings, Inc. and Mennonite Foundation of Canada ("MFC")) and Qtrade Canada Inc. ("Qtrade") have entered into an agreement dated December 2, 2009 pursuant to which Qtrade will purchase all of the issued and outstanding shares of the Manager in exchange for common shares of Qtrade and a specified amount of cash (the "Acquisition"). The completion of the Acquisition is subject to receipt of all required regulatory approvals and other customary closing conditions and is scheduled to occur on or about March 31, 2010.

2. Upon completion of the Acquisition, the Manager will be a wholly-owned subsidiary of Qtrade. The Manager subsequently will be amalgamated with two other wholly-owned subsidiaries of Qtrade, Qtrade Fund Management Inc. ("QFM") and OceanRock Capital Partners Inc. ("OceanRock"), and will continue as a combined entity under the name Qtrade Fund Management Inc. (the Acquisition and subsequent amalgamation collectively being the "Transaction"). The amalgamated entity will be part of the Qtrade Financial Group which will have over $4 billion in assets under administration and $350 million in assets under management.

3. The Manager acknowledges that, due to the proximity of the amalgamation to the Acquisition, the principal regulator views the Transaction as resulting in a change of manager, rather than a change in control of the Manager.

4. As required by section 11.2 of National Instrument 81-106 Investment Fund Continuous Disclosure, a press release disclosing the Transaction has been issued and posted on the website of the Manager and the press release, a Form 51-102F3 Material Change Report describing the Transaction and amendments to the Meritas Funds' simplified prospectus and annual information form disclosing the Transaction have all been filed on SEDAR.

5. As required by section 11.10 of National Instrument 31-103 Registration Requirements and Exemptions, the Manager has given the regulator written notice of the Transaction.

6. It is contemplated that the amalgamated entity will be registered in the provinces of Alberta, British Columbia and Ontario as an exempt market dealer, and in the provinces of Alberta, British Columbia, Manitoba, Ontario and Saskatchewan as an adviser.

7. There will be continuity in the directors and officers of Qtrade Fund Management Inc. following the amalgamation as it is anticipated that they will all be existing directors or officers of MSCU, the Manager, QFM or OceanRock.

8. The directors and officers of Qtrade following the Transaction will have the requisite integrity and experience required under subsection 5.7(1)(a)(v) of NI 81-102.

The Manager and the Meritas Funds

9. The Manager is incorporated pursuant to the Canada Business Corporations Act with its head office located in Kitchener, Ontario and is responsible for all of the day-to-day management and administration for each of the Meritas Funds as their manager, portfolio adviser and trustee. The Manager is registered in the province of Ontario as an adviser and an exempt market dealer.

10. The Meritas Funds are qualified for continuous distribution in each province and territory of Canada. Neither the Manager nor any of the Meritas Funds is in default of the securities laws of any province or territory of Canada.

11. The Manager estimates that greater than two-thirds of the securityholders of the Meritas Funds are also members or beneficial owners of MSCU or MFC, which are both shareholders of the Manager.

Qtrade Financial Group

12. Qtrade is incorporated pursuant to the Canada Business Corporations Act with its head office located in Vancouver, British Columbia. Qtrade carries on business as Qtrade Financial Group providing wealth management services and solutions to the retail public as well as the customers of financial institutions across Canada through five wholly-owned subsidiaries, QFM, Qtrade Asset Management Inc. ("QAM"), Qtrade Securities Inc. ("QSI"), Qtrade Insurance Solutions Inc. and OceanRock. Upon the completion of the Acquisition, MSCU, the current majority shareholder of Meritas, will own greater than 10% of the issued and outstanding shares of Qtrade. MSCU is wholly-owned by its nearly 17,000 members, none of which have an ownership stake in MSCU greater than 10%.

13. QFM is incorporated pursuant to the Canada Business Corporations Act with its head office located in Vancouver, British Columbia. QFM is the manager and trustee of the QFM Fixed Income Fund, QFM Global Equity Fund, QFM Global Sector Target Fund, QFM Structured Yield Fund, QFM Money Market Fund and QFM World Balanced Fund (collectively, the "QFM Funds").

14. OceanRock is incorporated pursuant to the Canada Business Corporations Act with its head office located in Vancouver, British Columbia. OceanRock is the portfolio manager of the QFM Funds and provides portfolio management and individual discretionary investment management services to institutions and high net worth clients. OceanRock is registered in the provinces of Alberta, British Columbia, Manitoba, Ontario and Saskatchewan as an adviser.

15. Each of Qtrade, QFM and OceanRock is not in default of the securities laws of any province or territory of Canada.

Submissions

16. The Transaction will not materially affect the management or administration of the Meritas Funds. The Manager will continue to operate within the amalgamated entity substantially as it currently operates with the same management, employees and offices and there are no foreseeable changes to the senior management, middle management or other employees of the Manager with respect to the management and administration of the Meritas Funds. This also applies to the Manager's role as portfolio adviser of the Meritas Funds, and currently no decisions have been made to make changes to any of the sub-advisors to the Meritas Funds, so the investment advice will continue to be given by the same individuals as prior to the Transaction.

17. The Meritas Funds will continue to be managed and administered as a separate division within the Qtrade Financial Group. The business, operations and administration of the Meritas Funds will remain in the Manager's current office in Kitchener, Ontario while the business, operations and administration of the QFM Funds will continue to be conducted from Qtrade's current office in Vancouver, British Columbia.

18. There is currently no intention to merge the QFM Fund family with the Meritas Fund family. The Meritas Funds are expected to continue to focus exclusively on socially responsible investing with no expected changes to their investment objectives and strategies.

19. Exemption from the requirement for securityholder approval of the Transaction is being sought because:

(a) while the Transaction may be viewed as a change of manager, the Meritas Funds will continue to be managed and administered as its own separate division within the Qtrade Financial Group; and

(b) the majority of securityholders of the Meritas Funds are also members or beneficial owners of the shareholders of the Manager, which shareholders have already approved the Transaction.

20. The Manager has referred the proposed Transaction to the Independent Review Committee ("IRC") of the Meritas Funds for its review, and the IRC has provided its positive recommendation that, after reasonable inquiry, it is its opinion that the Transaction achieves a fair and reasonable result for the Meritas Funds.

21. Qtrade and the Manager do not foresee that the Transaction will give rise to any conflicts of interest of a type different from those which are currently managed by the firms comprising the Qtrade Financial Group.

22. The firms comprising the Qtrade Financial Group will follow standard policies and procedures for addressing conflicts of interest. For example, QSI (a registered investment dealer), QAM (a registered mutual fund dealer) and the amalgamated entity (which will be registered under securities legislation), will provide disclosure to all clients that the Meritas Funds and the QFM Funds are related and/or connected issuers of QSI, QAM and the amalgamated entity. They will also continue to have policies and procedures for addressing conflicts of interest, which will be centred on disclosing conflicts to clients and resolving them in clients' best interests. These policies will also address matters such as frontrunning and the fair allocation of investment opportunities among clients of the various entities.

23. Upon the completion of the proposed Transaction, all current members of the IRC for the Meritas Funds will cease to be members of the IRC pursuant to subsection 3.10(1)(c) of National Instrument 81-107 Independent Review Committee for Investment Funds ("NI 81-107"). In accordance with subsection 3.3(5) of NI 81-107, the amalgamated QFM will fill the vacancies by appointing new members of the IRC.

24. Notice of the Transaction was mailed to the securityholders of the Meritas Funds in January 2010, at least 60 days in advance of the completion of the Transaction.

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 Relief & Approval Sought is granted.

"Darren McKall"
Assistant Manager, Investment Funds
Ontario Securities Commission