Securities Law & Instruments


Policy Statement 11-203 respecting Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund merger -- Approval required because this merger does not meet the criteria for pre-approved reorganizations and transfers in Regulation 81-102 -- Continuing Fund has different investment objectives than Terminating Fund provided with timely and adequate disclosure regarding the Proposed Merger.

Applicable Legislative Provisions

Regulation 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6.


October 3, 2013

(the Jurisdictions)





(the Filer)


(the Terminating Fund)


(the Continuing Fund)



The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer on behalf of the Terminating Fund, for a decision under the securities legislation of the Jurisdictions (the Legislation) approving the merger of the Terminating Fund into the Continuing Fund (the Proposed Merger) pursuant to paragraph 5.5(1)(b) of Regulation 81-102 respecting Mutual Funds (c.V-1.1, r.39) (Regulation 81-102) (the Approval Sought).

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

(a) the Autorité des marchés financiers is the principal regulator for this application;

(b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System (c. V-1.1, r. 1) (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.


Terms defined in Regulation 14-101 respecting Definitions (c. V-1.1, r.3) and Regulation 11-102 have the same meaning if used in this decision unless otherwise defined.


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

The Filer

1. The Filer is a corporation established under the Canada Business Corporations Act, R.S.C. 1985, c. C-44, whose head office is located at 1080 Grande Allée West blvd, Québec city, Québec, G1K 7M3.

2. The Filer is a wholly-owned subsidiary of Industrial Alliance Insurance and Financial Services Inc., a public company listed on the Toronto Stock Exchange.

3. The Filer is duly registered as an investment fund manager in Québec, Ontario and Newfoundland and Labrador and as a portfolio manager in each of the provinces of Canada.

4. The Filer is acting as the investment fund manager for the Terminating Funds and the Continuing Funds (together, the Funds) under a Master Management Agreement dated August 28, 2000, as amended.

5. The Filer is not in default of securities legislation in any jurisdiction of Canada.

The Funds

6. Each of the Funds is a separate class of shares of Clarington Sector Fund Inc., a mutual fund corporation incorporated under the laws of Ontario.

7. The Funds are reporting issuers under applicable securities legislation of each province and territory of Canada.

8. Shares of the Funds are distributed under a simplified prospectus. The simplified prospectus is governed by Regulation 81-101 respecting Mutual Fund Prospectus Disclosure.

9. The net asset value for each series of the Funds is calculated on a daily basis, each day that the Toronto Stock Exchange is open for trading.

10. The Funds are not in default of securities legislation in any province or territory of Canada.

The Proposed Merger

11. The board of directors of the Filer and the board of directors of Clarington Sector Fund Inc. approved the Proposed Merger on July 31, 2013.

12. On August 1st 2013, the Funds issued a press release and filed on August 2, 2013, a material change report with respect to the Proposed Merger.

13. On August 14, 2013, the Autorité des marchés financiers issued a receipt for the amendment to the simplified prospectus of the Terminating Fund that includes information relating to the Proposed Merger.

14. In accordance with Regulation 81-107 Independent Review Committee for Investment Funds, the Filer presented the terms of the Proposed Merger to the Independent Review Committee of the Funds (the IRC) for its recommendation. Further to reasonable inquiry, the IRC recommended the Proposed Merger, subject to the approval of the securityholders and the Decision Makers, on the basis that the Proposed Merger would achieve a fair and reasonable result for the Funds (the IRC's Conclusion).

15. The approval by the Decision Makers of the Proposed Merger is required because the Proposed Merger does not satisfy all of the conditions for pre-approved reorganizations and transfers as set out in section 5.6 of Regulation 81-102. In particular, the Proposed Merger does not satisfy the requirement set out in subparagraph 5.6(1)(a)(ii) of Regulation 81-102, namely because a reasonable person would not consider the fundamental investment objectives of the Terminating Fund and those of the Continuing Fund to be substantially similar.

16. Except for the condition stated above, the Proposed Merger meets all of the other conditions for pre-approved reorganizations and transfers under section 5.6 of Regulation 81-102.

17. As required by subsection 5.1(f) of Regulation 81-102, securityholders of the Terminating Fund will be asked to approve the Proposed Merger at a meeting to be held on September 25, 2013 (the Meeting).

18. On September 25, 2013, the securityholders of the Terminating Fund approved the Proposed Merger.

19. As required by section 5.4 of Regulation 81-102, a notice of meeting, a proxy solicitation and information circular (the Circular) was sent to securityholders of the Terminating Fund not less than 21 days before the date of the Meeting and was filed on the System for Electronic Document Analysis and Retrieval (SEDAR) on September 3, 2013.

20. The Circular sent to the securityholders of the Terminating Fund in accordance with paragraph 5.6(1)(f) of the Regulation 81-102 and sets out:

(a) the steps that will be taken to effect the Proposed Merger, which will occur on or about the close of business on October 4, 2013, or such later date as may be determined by the Filer (the Merger Date);

(b) the material 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;

(d) prominently, the various ways in which securityholders 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.

20. Prior to the date of the Proposed Merger, the Terminating Fund will sell in an orderly manner the securities of its portfolio that do not meet the investment objectives and investment strategies of the Continuing Fund. As a result, the Terminating Fund may temporarily hold cash in an higher proportion than what is suitable in order to achieve its investment objectives.

21. Following the Proposed Merger, the securityholders of the Terminating Fund will become securityholders of the Continuing Fund. As such, they will receive shares in the same series of shares of the Continuing Fund.

22. As soon as reasonably possible following the Merger Date, the Terminating Fund will be wound up and terminated.

23. No sales charges, redemption fees or other fees or commissions will be payable by securityholders of the Terminating Fund in connection with the Proposed Merger.

24. The Filer will pay for the costs of the Proposed Merger. These costs consist mainly of brokerage charges associated with the Proposed Merger related trades that occur both before and after the Merger Date and legal fees and fees related to reporting to the securityholders and with respect of the applicable regulatory requirements.

25. Securityholders of the Terminating Fund will continue to have the right to redeem units of the Terminating Fund at any time up to the close of business on the Merger Date.


Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Approval Sought is granted.

"Josée Deslauriers"
Senior Director,
Investment Funds and Continuous Disclosure
Autorité des marchés financiers