Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager of mutual funds for the purpose of paragraph 5.5(1)(a) -- change of manager is not detrimental to investors or the public.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, s. 5.5(1)(a).

[Translation]

January 20, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF STANDARD LIFE MUTUAL FUNDS LTD. (the Filer) AND IN THE MATTER OF MANULIFE ASSET MANAGEMENT LIMITED (MAML) AND IN THE MATTER OF THE STANDARD LIFE MUTUAL FUNDS (as defined below)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for approval of the proposed change of manager (the Change of Manager) of the mutual funds managed by the Filer and listed in Schedule A (the Standard Life Mutual Funds) under paragraph 5.5(1)(a) of Regulation 81-102 respecting Investment 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 subsection 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, Yukon, and Northwest Territories;

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

Interpretation

Terms defined in Regulation 14-101 respecting Definitions (c. V-1.1, r. 3), Regulation 11-102, Regulation 81-102 and Regulation 81-106 respecting Investment Fund Continuous Disclosure (chapter V-1.1, r. 42) (Regulation 81-106) 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 (in respect of itself and its affiliates, as applicable), and MAML (in respect of itself and its affiliates, as applicable):

The Filer and the Standard Life Mutual Funds

1. The Filer, a wholly owned subsidiary of Standard Life Financial Inc. (SL Financial), is a corporation incorporated and existing under the Canada Business Corporations Act. Its head office is located at 1245 Sherbrooke Street West, Montréal, Québec H3G 1G3.

2. The Filer is duly registered as an investment fund manager under the securities legislation in Ontario, Québec and Newfoundland and Labrador.

3. The Filer serves as the investment fund manager of each of the Standard Life Mutual Funds.

4. The Standard Life Mutual Funds are comprised of 34 trust funds (the Standard Life Trust Funds) and 23 corporate class funds of Standard life Corporate Class Inc. (the Standard Life Corporate Class Funds) as listed in Schedule A.

5. The Standard Life Trust Funds are open-ended investment funds established under an amended and restated master declaration of trust dated 30 October 2014.

6. The Standard Life Corporate Class Funds are share classes of Standard Life Corporate Class Inc., a mutual fund corporation incorporated under the laws of Canada.

7. The Standard Life Mutual Funds are reporting issuers in the Jurisdictions and in all other provinces and territories of Canada, other than Nunavut.

8. The securities of each of the Standard Life Mutual Funds are qualified for distribution in the Jurisdictions and in all other provinces and territories of Canada, other than Nunavut, pursuant to a simplified prospectus dated October 30th, 2014 that has been prepared and filed in accordance with Regulation 81-101 respecting Mutual Fund Prospectus Disclosure (c. V-1.1, r. 38).

9. The Standard Life Mutual Funds are notably subject to the provisions of Regulation 81-102, Regulation 81-106 and Regulation 81-107 respecting Independent Review Committee for Investment Funds (chapter V-1.1, r. 43) (Regulation 81-107).

10. Neither the Filer nor the Standard Life Mutual Funds are in default of their obligations under the applicable securities legislation in any Jurisdictions or in any other provinces and territories of Canada in which the Standard Life Mutual Funds are reporting issuers.

SL Financial and Standard Life Investments Inc.

11. SL Financial, an indirect, wholly-owned subsidiary of Standard Life plc, is a corporation incorporated and existing under the laws of Canada with its head office located at 1245 Sherbrooke Street West, Montréal, Québec H3G 1G3.

12. SL Financial owns all of the issued and outstanding shares of the Filer.

13. Standard Life Investments Inc. (SL Investments) is a corporation incorporated and existing under the laws of Canada with its head office located at 1001 de Maisonneuve Boulevard West, Bureau 1000, Montréal, Québec H3A 3C8.

14. SL Investments is the portfolio manager of the Standard Life Mutual Funds, with the following exceptions:

(a) the Filer has retained Beutel, Goodman & Company Ltd. (Beutel) as portfolio manager of the Standard Life Canadian Equity Value Fund, the Standard Life Canadian Equity Value Class, the Standard Life U.S. Equity Value Fund, the Standard Life U.S. Equity Value Class, the Standard Life Global Equity Value Fund and the Standard Life Global Equity Value Class; and

(b) the Filer has retained Guardian Capital LP (Guardian) as portfolio manager of the Standard Life Canadian Equity Growth Fund and the Standard Life Canadian Equity Growth Class.

15. SL Investments is duly registered as a portfolio manager and exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan, and Yukon and as a derivatives portfolio manager in Québec.

16. SL Investments is also duly registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador.

17. SL Investments is not in default of its obligations under the applicable securities legislation in any of the provinces and territories of Canada.

The Proposed Transaction

18. On 3 September 2014, Manulife, as defined below, announced that it has agreed to acquire, indirectly, all the shares of the Filer as part of its acquisition of the Canadian based operations of Standard Life plc, all in accordance with terms and conditions of the Share Purchase Agreement described below (the Proposed Transaction).

19. Pursuant to the share purchase agreement dated 3 September 2014 (the Share Purchase Agreement), The Manufacturers Life Insurance Company will acquire all of the issued and outstanding shares of each of SL Financial and SL Investments resulting in a change of control of the Filer.

20. The Proposed Transaction is subject to all necessary securityholder and regulatory approvals and is expected to be completed on or about 30 January 2015, and in any event during the first quarter of 2015, under the terms of the Share Purchase Agreement.

21. In accordance with Regulation 81-106, the Filer has treated the announcement of the Proposed Transaction as a "material change" for the Standard Life Mutual Funds and therefore filed the press release dated 3 September 2014, a material change report dated 5 September 2014 announcing the Proposed Transaction and amendments dated 10 September 2014 (the Amendments) in relation to the Standard Life Mutual Funds' simplified prospectus.

22. In accordance with section 11.9 of Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations (c. V-1.1, r. 10), Manulife Financial Corporation (Manulife) provided notice of the Proposed Transaction to the Canadian securities regulators on September 24, 2014.

23. The Amendments announce an indirect change of control of the Filer, SL Investments and Standard Life Trust Company, the trustee (where applicable) and custodian of the Standard Life Mutual Funds.

24. The securityholders of the Standard Life Mutual Funds (the Securityholders) will continue to be able to redeem or purchase securities of the Standard Life Mutual Funds in the normal course, before and after completion of the Proposed Transaction.

Manulife and Manulife Asset Management Limited

25. Manulife is incorporated and existing under the laws of Canada and is a leading Canada-based publicly traded financial services company with its headquarters are located at 200 Bloor Street East, North Tower -- 10th Floor, Toronto, Ontario M4W 1E5.

26. Manulife is a reporting issuer in all of the provinces and territories of Canada and its shares are listed on the Toronto Stock Exchange, the New York Stock Exchange, the Philippine Stock Exchange and the Stock Exchange of Hong Kong.

27. Manulife is not in default of securities legislation in any of the provinces and territories of Canada.

28. Manulife has four subsidiaries that are registrants under securities legislation (the Manulife Registered Subsidiaries); however, Manulife Asset Management Limited (MAML) is the Manulife Registered Subsidiary expected to be most relevant to the Change of Manager.

29. MAML, an indirect, wholly owned subsidiary of Manulife, is a corporation incorporated and existing under the laws of Ontario with its head office located at 200 Bloor Street East, North Tower, Toronto, Ontario M4W 1E5.

30. MAML is duly registered as a portfolio manager in Alberta, British Columbia, Manitoba, Newfoundland and Labrador, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan; as an investment fund manager in Québec, Ontario and Newfoundland and Labrador; and as a commodity trading manager in Ontario.

31. MAML surrendered its exempt market dealer registration on 29 September 2014. Its exempt market dealer activities have been transferred to Manulife Asset Management Investments Inc. (MAMII), another Manulife Registered Subsidiary.

32. MAMII is duly registered as an exempt market dealer in Alberta, British Columbia, Manitoba, Newfoundland and Labrador, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan.

33. MAML is the investment fund manager and portfolio manager for a group of mutual funds domiciled in Canada that are subject to Regulation 81-102 (the Manulife Mutual Funds), a group of mutual funds domiciled in Canada that are not subject to Regulation 81-102 (the Manulife Asset Management Pooled Funds) and most Manulife non-redeemable investment funds.

34. Manulife, including its subsidiaries, and the Filer are not related parties. Except pursuant to the Share Purchase Agreement and as described below, there are currently no relationships between Manulife, including its subsidiaries, and the Filer or its affiliates. Certain Standard Life entities have an existing relationship with Manulife entities, pursuant to which the Standard Life entities provide portfolio management services to certain Manulife-sponsored Canadian segregated funds and Manulife U.S. subsidiary-sponsored and U.S. domiciled mutual funds. There are currently no relationships between the Filer and the Manulife Registered Subsidiaries.

35. MAML is not in default of its obligations under the securities legislation in any of the provinces and territories of Canada.

36. The experience and integrity of each of the members of MAML's management team is apparent by their education and years of experience in the investment industry and will be described in the Circulars defined below.

The Change of Manager

37. The Proposed Transaction will result in Manulife acquiring indirect control over the Filer.

38. It is the intention of Manulife to proceed with the Change of Manager for the Standard Life Mutual Funds from the Filer to MAML, likely by way of an amalgamation or other consolidation of the Filer with MAML (the Proposed Amalgamation).

39. During the initial period following the completion of the Proposed Transaction, Manulife has no present intention to make immediate material changes to the day-to-day operations of the Filer other than as described in this representation 39 and representation 54 below. It is expected that the current directors, executive officers and the registered individuals of the Filer will generally remain in their current positions. However, certain individuals who are currently directors or executive officers of MAML and/or MAMII may also become directors or executive officers of the Filer prior to the Change of Manager and particularly, Manulife intends to appoint Paul Lorentz and Barry Evans as directors of the Filer immediately following the completion of the Proposed Transaction. In addition, while SL Investments, Beutel and Guardian will remain in their current positions as portfolio managers as described above, it is also expected that certain limited changes may be made to the advising representatives of SL Investments and sub-advisers to SL Investments who are responsible for the portfolio advisory function for certain Standard Life Mutual Funds. Any such changes will be implemented in accordance with applicable securities laws.

40. During the initial period following the completion of the Proposed Transaction, it is expected that Michel Fortin will remain the Ultimate Designated Person of the Filer and Marc Goyette will remain the Chief Compliance Officer of the Filer.

41. It is also expected that the directors and officers of Standard Life Corporate Class Inc., the mutual fund corporation managed by the Filer, will generally remain the same immediately following the completion of the Proposed Transaction; however, certain individuals who are currently directors and executive officers of MAML may also become directors and/or officers of Standard Life Corporate Class Inc.

42. Following the completion of the Change of Manager, Manulife may amalgamate Standard Life Corporate Class Inc. with Manulife Investment Exchange Funds Corp., a mutual fund corporation incorporated under the laws of Canada and managed by MAML in accordance with applicable securities laws.

43. Following completion of the Change of Manager, it is expected that the directors and executive officers of MAML will remain in their positions and certain directors and executive officers of the Filer may be appointed to positions at MAML.

44. Regarding the continuity of operations and administration personnel, it is Manulife's intention to retain all necessary and relevant employees responsible for the operations of the Filer during the period prior to the Change of Manager. This would include the operations and back-office personnel who not only have experience with the operations and administration of conventional mutual funds, but have the institutional knowledge and experience with the Standard Life Mutual Funds. Following the Change of Manager, the operational employees of MAML will include the employees currently responsible for the operations of the Filer and MAML who, as a group, will have sufficient knowledge and experience to ensure the effective ongoing operation and administration of the Standard Life Mutual Funds and the Manulife Mutual Funds.

45. In accordance with paragraph 5.1(1)(b) of Regulation 81-102, Manulife will cause the Filer to call meetings of the Securityholders (the Securityholder Meetings) to obtain the approval of such Securityholders prior to completing the Change of Manager, (the Securityholder Approvals). It is expected that the Securityholder Meetings will be held by 30 June 2015.

46. During the initial period following completion of the Proposed Transaction, Manulife will develop plans for the integration of the operations of the Filer into MAML subject to the satisfaction of applicable regulatory approval requirements and matters requiring notice to Securityholders and/or matters requiring securityholder approval, including the Securityholder Approvals. Manulife expects that the integration of the operations of the Filer in MAML will involve some or all of the following steps: the shares of the Filer will be transferred within the Manulife group of companies, SL Financial (the shareholder of the Filer) will be dissolved and the Filer will be formally amalgamated or otherwise consolidated with MAML.

47. It is expected that the material aspects of the Change of Manager will be completed by 31 August 2015.

48. Within 10 days of the completion of the Proposed Transaction, it is the intention of the Filer to file a press release and a material change report announcing the completion of the Proposed Transaction and file amendments in relation to the Standard Life Mutual Funds' simplified prospectus.

49. Within 10 days of the completion of the Change of Manager, it is the intention of MAML to file a press release and a material change report announcing the completion of the Change of Manager and file amendments in relation to the Standard Life Mutual Funds' simplified prospectus.

50. Manulife does not expect the Proposed Transaction to adversely affect the Filer's financial position or its ability to fulfill its regulatory obligations.

51. Manulife does not expect the Proposed Transaction or the Change of Manager to have negative consequences on the ability of the Filer to satisfy its obligations to the Standard Life Mutual Funds or to have any material adverse impact on the business, affairs, operations and administration of the Standard Life Mutual Funds or its Securityholders or to give rise to material conflicts of interest.

52. In this regard, the Filer has determined that the Proposed Transaction is not a conflict of interest matter to be referred to the Independent Review Committee of the Standard Life Mutual Funds (the Standard Life Mutual Funds IRC) pursuant to section 5.1 of Regulation 81-107 and that, as a result, the Proposed Transaction will not require the approval or recommendation of the Standard Life Mutual Funds IRC. The Filer has, however, provided information relating to the Proposed Transaction and the Change of Manager to the Standard Life Mutual Funds IRC. Any conflicts of interest arising in the future as a result of the Proposed Transaction will be promptly assessed by compliance and legal staff of the Filer and MAML and will be addressed through client disclosure and, where appropriate, client consent and, if applicable, will be referred to the Standard Life Mutual Funds IRC and the Independent Review Committee of the Manulife Mutual Funds, as the case may be.

53. By operation of paragraphs 3.10(1)(b) and 3.10(1)(c) of Regulation 81-107, the members of the Standard Life Mutual Funds IRC will cease to be Standard Life Mutual Funds IRC members on two separate occasions: (i) following the completion of the Proposed Transaction and (ii) following the completion of the Change of Manager. MAML intends to appoint certain members of the Independent Review Committee of the Manulife Mutual Funds and the Standard Life Mutual Funds IRC to form the new Standard Life Mutual Funds IRC following the completion of the Proposed Transaction and to reappoint the same members following the completion of the Change of Manager.

54. In respect of changes to the Filer and/or the Standard Life Mutual Funds:

(a) Manulife has confirmed that there is no current intention to do any of the following prior to obtaining the Securityholder Approvals:

(i) to make any material changes to the operations of the Filer or how the Filer operates or manages the Standard Life Mutual Funds except as described in representation 39 above;

(ii) to amalgamate or consolidate the Filer with MAML or any other investment fund manager;

(iii) to change the manager of the Standard Life Mutual Funds from the Filer to MAML or another Manulife subsidiary;

(iv) to change the custodian, auditor or trustee of the Standard Life Mutual Funds;

(v) to make any changes to the investment objectives and strategies of the Standard Life Mutual Funds or the expenses that are charged to the Standard Life Mutual Funds;

(b) Manulife currently intends to maintain the Standard Life Mutual Funds as a separately managed fund family prior to the Filer obtaining the Securityholder Approvals; and

(c) after obtaining the Securityholder Approvals, any changes to the Standard Life Mutual Funds (including changes to the corporate name of the Filer and the names of the Standard Life Mutual Funds, possible changes to the investment objectives of the Standard Life Mutual Funds, possible fund mergers and possible change of custodian) will be implemented in accordance with applicable securities laws, including the satisfaction of any applicable regulatory approval requirements and matters requiring notice to Securityholders and/or matters requiring securityholder approval. For example, to the extent that any changes made to the Standard Life Mutual Funds following the Proposed Transaction would constitute "material changes" within the meaning of Regulation 81-106, press releases will be issued, material change reports filed and amendments made to the prospectuses of the applicable Standard Life Mutual Funds.

55. Manulife does not expect the Change of Manager to adversely affect MAML's financial position or its ability to fulfill its regulatory obligations.

56. The Standard Life Mutual Funds will not bear any of the costs and expenses associated with the Proposed Transaction or the Change of Manager. Such costs will be borne by the Filer. These costs may include legal and accounting fees, proxy solicitation, printing and mailing costs and regulatory fees.

57. The Approval Sought will not be detrimental to the protection of the Standard Life Mutual Funds Securityholders or prejudicial to the public interest.

58. Manulife and the Filer understand that, based on the structure of the Proposed Transaction, it is not necessary to also obtain the approval of the Decision Makers for a change of control of the Filer pursuant to paragraph 5.5(1)(a.1) of Regulation 81-102 or for the Filer to also provide notice of a change of control of the Filer to all securityholders of the Standard Life Mutual Funds pursuant to subsection 5.8(1) of Regulation 81-102.

Decision

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

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

(i) the Filer obtains prior approval of Securityholders for the Change of Manager for the Standard Life Mutual Funds at the Securityholder Meetings;

(ii) the notice of the Securityholder Meetings and the management information circulars in respect of the Securityholder Meetings (the Circulars) are sent to Securityholders and copies thereof are filed on SEDAR in accordance with applicable securities legislation;

(iii) the Circulars contain:

(A) sufficient information regarding the business, management and operations of MAML, including details of the funds it manages and its officers and board of directors;

(B) all information necessary to allow Securityholders to make an informed decision about the Change of Manager of the Standard Life Mutual Funds and to vote on the Change of Manager of the Standard Life Mutual Funds; and

(iv) all other information and documents necessary to comply with the applicable proxy solicitation requirements of securities legislation for the Securityholder Meetings are sent to Securityholders.

"Lucie J. Roy"
Senior Director, Corporate Finance
Autorité des marchés financiers

 

SCHEDULE A

STANDARD LIFE MUTUAL FUNDS

1. Standard Life Trust Funds

Standard Life Fixed Income Funds
Standard Life Money Market Fund
Standard Life Short Term Bond Fund
Standard Life Canadian Bond Fund
Standard Life Tactical Bond Fund
Standard Life Corporate Bond Fund
Standard Life Global Bond Fund (formerly Standard Life International Bond Fund)
Standard Life High Yield Bond Fund
Standard Life Emerging Markets Debt Fund
Standard Life Monthly Income and Balanced Funds
Standard Life Diversified Income Fund
Standard Life Monthly Income Fund
Standard Life Dividend Income Fund
Standard Life Tactical Income Fund
Standard Life Balanced Fund
Standard Life U.S. Monthly Income Fund
Standard Life Canadian Equity Funds
Standard Life Canadian Dividend Growth Fund
Standard Life Canadian Equity Value Fund
Standard Life Canadian Equity Fund
Standard Life Canadian Equity Growth Fund
Standard Life Canadian Small Cap Fund
Standard Life U.S. Equity Funds
Standard Life U.S. Dividend Growth Fund
Standard Life U.S. Equity Value Fund
Standard Life Global Equity Funds
Standard Life Global Dividend Growth Fund
Standard Life International Equity Fund
Standard Life Global Equity Value Fund
Standard Life Global Equity Fund
Standard Life Global Real Estate Fund
Standard Life European Equity Fund
Standard Life Emerging Markets Dividend Fund
Standard Life Portrait Portfolio Funds
Standard Life Conservative Portfolio
Standard Life Moderate Portfolio
Standard Life Growth Portfolio
Standard Life Dividend Growth & Income Portfolio
Standard Life Aggressive Portfolio
Standard Life Global Portfolio

2. Standard Life Corporate Class Funds

Standard Life Fixed Income/Specialty Funds
Standard Life Short Term Yield Class
Standard Life Canadian Bond Class
Standard Life Corporate Bond Class
Standard Life Monthly Income Funds
Standard Life Monthly Income Class
Standard Life Dividend Income Class
Standard Life Canadian Equity Funds
Standard Life Canadian Dividend Growth Class
Standard Life Canadian Equity Value Class
Standard Life Canadian Equity Class
Standard Life Canadian Equity Growth Class
Standard Life Canadian Small Cap Class
Standard Life U.S. Equity Funds
Standard Life U.S. Dividend Growth Class
Standard Life U.S. Equity Value Class
Standard Life Global Equity Funds
Standard Life Global Dividend Growth Class
Standard Life International Equity Class
Standard Life Global Equity Value Class
Standard Life Global Equity Class
Standard Life Emerging Markets Dividend Class
Standard Life Portrait Portfolio Funds
Standard Life Conservative Portfolio Class
Standard Life Moderate Portfolio Class
Standard Life Growth Portfolio Class
Standard Life Dividend Growth & Income Portfolio Class
Standard Life Aggressive Portfolio Class
Standard Life Global Portfolio Class