Scotia Asset Management L.P. et al.

Scotia Asset Management L.P. et al.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund mergers -- approval required because mergers do not meet the criteria for per-approval -- continuing funds have different investment objectives than terminating funds -- certain mergers not a "qualifying exchange" or a tax-deferred transaction under the Income Tax Act -- securityholders provided with timely and adequate disclosure regarding the mergers.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6(1)(a) & (b), 19.1.

August 23, 2013

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
SCOTIA ASSET MANAGEMENT L.P.
(the Manager)

AND

IN THE MATTER OF
PINNACLE BALANCED GROWTH PORTFOLIO,
PINNACLE GROWTH PORTFOLIO,
SCOTIA GLOBAL CLIMATE CHANGE FUND,
SCOTIA PRIVATE ADVANTAGED INCOME POOL,
SCOTIA VISION CONSERVATIVE 2010 PORTFOLIO,
SCOTIA VISION AGGRESSIVE 2010 PORTFOLIO,
SCOTIA VISION CONSERVATIVE 2015 PORTFOLIO,
SCOTIA VISION AGGRESSIVE 2015 PORTFOLIO,
SCOTIA VISION CONSERVATIVE 2020 PORTFOLIO,
SCOTIA VISION AGGRESSIVE 2020 PORTFOLIO,
SCOTIA VISION CONSERVATIVE 2030 PORTFOLIO, AND
SCOTIA VISION AGGRESSIVE 2030 PORTFOLIO
(the Terminating Funds)
(the Manager on behalf of the Terminating Funds, collectively, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Manager on behalf of the Terminating Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) approving the proposed reorganizations of the Terminating Funds with the Continuing Funds (as defined below) (the Proposed Reorganizations) pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) (the Requested Approval).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for the Application (Principal Regulator), and

(b) the Filers have provided notice that Section 4.7(1)(c) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.

Interpretation

Circular	refers to the joint management information circular referred to in the Application
Continuing Funds	refers to each of the Scotia Selected Portfolios, Pinnacle Conservative Balanced Growth Portfolio, Pinnacle Balanced Growth Portfolio, Scotia Global Growth Fund and Scotia Income Advantage Fund
IRC	refers to the Independent Review Committee of the Terminating Funds and the Continuing Funds referred to in this Application
Scotia Selected Portfolios	refers collectively to Scotia Selected Income Portfolio, Scotia Selected Income & Modest Growth Portfolio, Scotia Selected Balanced Income & Growth Portfolio, and Scotia Selected Moderate Growth Portfolio
Scotia Vision Portfolios	refers collectively to Scotia Vision Conservative 2010 Portfolio, Scotia Vision Aggressive 2010 Portfolio, Scotia Vision Conservative 2015 Portfolio, Scotia Vision Aggressive 2015 Portfolio, Scotia Vision Conservative 2020 Portfolio, Scotia Vision Aggressive 2020 Portfolio, Scotia Vision Conservative 2030 Portfolio, and Scotia Vision Aggressive 2030 Portfolio
Tax Act	refers to the Income Tax Act (Canada)

Terms defined in National Instrument 14-101 -- Definitions (NI 14-101) and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision. In addition, the following terms have the following meanings:

Representations

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

The Filers

1. The head office of the Manager and of the Terminating Funds is in Toronto, Ontario. The Manager is an Ontario limited partnership, the general partner of which is Scotia Asset Management G.P. Inc., an Ontario corporation.

2. The Manager is the investment fund manager and trustee of each of the Terminating Funds and the Continuing Funds.

3. Each of the Terminating Funds is a mutual fund trust established under the laws of Ontario and is a reporting issuer under the applicable securities legislation of each jurisdiction in Canada.

4. The units of the Terminating Funds are continuously offered under a simplified prospectus filed in accordance with National Instrument 81-101 -- Mutual Fund Prospectus Disclosure and each of the Terminating Funds is subject to the requirements of NI 81-102 -- Mutual Funds. The units of the Terminating Funds are issuable and redeemable each business day.

5. The Filers are not in default of securities legislation in any jurisdiction of Canada.

Proposed Reorganizations

6. The Manager is proposing the following Proposed Reorganizations:

Terminating Fund		Continuing Fund
Pinnacle Balanced Growth Portfolio	to merge into	Pinnacle Conservative Balanced Growth Portfolio
Pinnacle Growth Portfolio	to merge into	Pinnacle Conservative Growth Portfolio
Scotia Global Climate Change Fund	to merge into	Scotia Global Growth Fund
Scotia Private Advantaged Income Pool	to merge into	Scotia Income Advantage Fund
Scotia Vision Conservative 2010 Portfolio	to merge into	Scotia Selected Income Portfolio
Scotia Vision Aggressive 2010 Portfolio
Scotia Vision Conservative 2015 Portfolio
Scotia Vision Aggressive 2015 Portfolio	to merge into	Scotia Selected Income & Modest Growth Portfolio
Scotia Vision Conservative 2020 Portfolio
Scotia Vision Aggressive 2020 Portfolio
Scotia Vision Conservative 2030 Portfolio	to merge into	Scotia Selected Balanced Income & Growth Portfolio
Scotia Vision Aggressive 2030 Portfolio	to merge into	Scotia Selected Moderate Growth Portfolio

7. In accordance with National Instrument 81-106Investment Fund Continuous Disclosure, a press release announcing the Proposed Reorganizations was filed on SEDAR on July 3, 2013. A material change report and amendments to the simplified prospectuses of the Terminating Funds were filed on SEDAR on July 11, 2013.

8. Pursuant to National Instrument 81-107 -- Independent Review Committee for Investment Funds, the IRC has reviewed the Proposed Reorganizations on behalf of the Terminating Funds and the Continuing Funds, and have advised the Manager that in the IRC's opinion, having reviewed the Proposed Reorganizations as a potential conflict of interest, each of the Proposed Reorganizations achieves a fair and reasonable result for each of the Terminating Funds and the Continuing Funds.

9. Regulatory approval of the Proposed Reorganizations is required because the Proposed Reorganizations do not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 in the following ways:

(a) contrary to subsection 5.6(1)(a) of NI 81-102, the investment objectives of the Terminating Funds may not be considered by a reasonable person to be "substantially similar" to the investment objectives of the Continuing Fund; and

(b) contrary to subsection 5.6(1)(b) of NI 81-102, the Proposed Reorganizations (other than the merger of Scotia Vision Conservative 2010 Portfolio with Scotia Selected Income Portfolio and Scotia Private Advantaged Income Portfolio with Scotia Income Advantage Fund) of the Terminating Funds into the applicable Continuing Funds will not be effected in reliance on the "qualifying exchange" provisions of theIncome Tax Act (Canada).

10. Except as noted above, the Proposed Reorganizations will otherwise comply with all other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

11. The Manager has determined that the Proposed Reorganizations do not result in a material change for any of the Continuing Funds.

12. The portfolio and other assets of each Terminating Fund that will become assets of the applicable Continuing Fund are acceptable to the portfolio advisor of the applicable Continuing Fund and are consistent with the investment objectives of the Continuing Fund. To the extent that a particular security may be unsuitable or undesirable for the Continuing Fund, that security will be sold prior to the Proposed Reorganizations.

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

14. Unitholders of the Terminating Funds will be asked to approve the Proposed Reorganizations at a special meeting of unitholders scheduled to be held on or about August 27, 2013.

15. A Circular and proxy in connection with the Proposed Reorganizations were both filed on SEDAR on July 26, 2013 and mailed to unitholders of the Terminating Fund of record as at July 13, 2013.

16. The costs and expenses specifically associated with the Proposed Reorganizations will be borne by the Manager.

17. In each case, the unitholders in the Terminating Funds will receive the same series of units of the Continuing Funds as such unitholders hold in the Terminating Funds.

18. The management fees for the relevant series of the Continuing Fund to be distributed to unitholders in the Terminating Funds have, in each case, the same or lower management fees than those of the Terminating Funds

19. Unitholders of the Terminating Funds will continue to have the right to redeem securities of the Terminating Funds up to the close of business immediately before the effective date of the Proposed Reorganizations.

20. As soon as reasonably possible following the date of the Proposed Reorganization, the Terminating Funds will be wound up.

21. While the investment objective of each of the Terminating Funds is not entirely the same as the corresponding Continuing Fund with which it is proposed to be merged, the investment objectives of the Terminating Funds and Continuing Funds are, in each case, nevertheless complementary.

22. Current Canadian tax laws do not permit the merger of a unit trust with a mutual fund trust and certain Proposed Mergers would cause a Continuing Fund to lose its material loss carry forwards if done on a tax deferred basis.

23. A Continuing Fund will be able to promptly invest any significant amounts of cash that the Continuing Fund receives from the Terminating Fund.

24. Unitholders of each Terminating Fund are expected to benefit from the increased scale and operational efficiencies of the applicable Continuing Fund, enjoying the same or lower management fees, and the ongoing right to redeem from the Terminating Fund if the unitholder does not choose to participate in the Proposed Reorganization.

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 Requested Approval is granted.

"Vera Nunes"

Manager, Investment Funds Branch