Desjardins Investments Inc. et al.

Decision

Headnote

Policy Statement 11-203 respecting Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund merger of assets -- Approval required because merger of assets do not meet the criteria for pre-approved reorganizations and transfers in Regulation 81-102 -- The transaction is not a "qualifying exchange" within the meaning of section 132.2 of the ITA or is a tax-deferred transaction under subsection 85(1), 85.1(1), 86(1) or 87(1) of the ITA.

Applicable Legislative Provisions

Regulation 81-102 respecting mutual funds, ss. 5.5(1)(b), 5.6(1)(b).

[Translation]

October 11, 2013

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

DESJARDINS INVESTMENTS INC.

(the Filer)

AND

DIAPASON RETIREMENT PORTFOLIO G (HIGH GROWTH)

(the Terminating Fund)

AND

IN THE MATTER OF

DIAPASON RETIREMENT PORTFOLIO F (GROWTH)

(the Continuing Fund)

DECISION

Background

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 proposed 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 (the Autorité) 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, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, the Yukon Territory and Nunavut Territory; and

(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) and Regulation 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:

The Filer

1. The Filer is a corporation established under the Business Corporation Act (RSQ, c.s-31.1) of Québec.

2. The Filer's head office is located at 1 Complexe Desjardins, South Tower, P.O. Box 34, Montreal, Québec H5B 1E4.

3. The Filer is duly registered as an investment fund manager in Québec, Ontario and Newfoundland and Labrador.

4. The Filer is acting as the investment fund manager, promoter, registrar and transfer agent for the Terminating Fund and the Continuing Fund (collectively, the Funds).

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

The Funds

6. The Funds are mutual fund trusts established under the laws of Québec pursuant to an amended and restated declaration of trust dated January 5, 2009 with Desjardins Trust Inc. acting as trustee.

7. Units of the Funds are distributed in each province and territory of Canada under a simplified prospectus governed by Regulation 81-101 respecting Mutual Fund Prospectus Disclosure (c. V-1.1, r. 38).

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

9. The net asset value of the Funds is determined by the Filer as at the close of business (Montreal time) on each business day.

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

The Proposed Merger

11. The Proposed Merger is scheduled to close on or about October 18, 2013 (the Effective date).

12. The board of directors of the Filer approved the Proposed Merger on June 25, 2013.

13. The Proposed Merger will not constitute a material change for the Continuing Fund.

14. The Proposed Merger will not result in an increase in the management fees or operating expenses for securityholders of the Terminating Fund.

15. On June 26, 2013, the Filer issued a press release related to the Proposed Merger. The Terminating Fund filed a material change report with respect of the Proposed Merger.

16. On July 12, 2013, the Autorité issued a receipt for amendment no. 1 dated June 27, 2013 to the simplified prospectus of the Funds dated March 28, 2013. This amendment provided information on the Proposed Merger.

17. In accordance with Regulation 81-107 respecting Independent Review Committee for Investment Funds (c. V-1.1, r. 43), the Filer presented the terms of the Proposed Merger to the Independent Review Committee of the Funds (the IRC) at an IRC meeting held on June 20, 2013. After reasonable inquiry, the IRC determined that the Proposed Merger, subject to the approval of the securityholders and the Decision Makers, would achieve a fair and reasonable result for the Funds.

The reasons for the Approval Sought

18. The approval of the Proposed Merger by the Decision Makers is required because the Proposed Merger does not satisfy all of the conditions for pre-approved reorganizations and transfers set out in section 5.6 of Regulation 81-102.

19. Specifically, the Proposed Merger does not satisfy the condition set out in paragraph 5.6(1)(b) of Regulation 81-102 since the Proposed Merger will not be completed as a "qualifying exchange" within the meaning of Section 132.2 of the ITA nor a tax deferred transaction under subsection 85(1), 85.1(1), 86(1) or 87(1) of the ITA (the Qualifying Exchange Requirement).

20. Except for the Qualifying Exchange Requirement set forth in paragraph 5.6(1)(b) of Regulation 81-102, the Proposed Merger meets all the other Requirements set forth at section 5.6 of Regulation 81-102.

21. Securityholders of the Terminating Fund have to approve the Proposed Merger as required by pursuant to paragraph 5.1(f) of Regulation 81-102. Securityholders of the Terminating Fund have approved the Proposed Merger at the Meeting held on September 18, 2013.

22. As required by section 5.4 of Regulation 81-102 and Part 12 of Regulation 81-106 respecting Investment Fund Continuous Disclosure (c.V-1.1, r. 42), the Filer has sent to securityholders of the Terminating Fund, on August 13, 2013, more than 21 days before the date of the meeting, a notice of meeting, a proxy solicitation and information circular (the Circular).

23. The Circular sent to securityholders of the Terminating Fund :

(a) complies with paragraph 5.6(1)(f) of Regulation 81-102;

(b) provides information on the significant differences between the Continuing Fund and the Terminating Fund;

(c) provides information on the process of the Proposed Merger and its structure in an orderly manner;

(d) provides information on the Proposed Merger to enable the securityholders of the Terminating Fund to make an informed decision regarding the Proposed Merger.

24. The approval of the Proposed Merger by the securityholders of the Terminating Fund was announced by a press release dated September 18, 2013.

25. All of the securityholders of the Terminating Fund invested through registered plans or other non-taxable entities. Consequently, the Proposed Merger will be tax neutral to securityholders.

26. No later than by the Effective date, securities in the portfolio of the Terminating Fund will need to be liquidated if they do not meet the investment objective of the Continuing Fund. This will result in a realized capital gain or loss to the Terminating Fund. On the Effective date, the Terminating Fund will dispose of its assets to the Continuing Fund for proceeds of disposition equal to the fair value thereof at that time. Accordingly, the Terminating Fund will realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition of the particular asset exceed (or are exceeded by) the adjusted cost base of the particular portfolio asset and any reasonable cost of disposition.

27. Assets of the Terminating Fund to be acquired by the Continuing Fund will be consistent with the investment objectives of the Continuing Fund.

28. Following the Proposed merger, the securityholders of the Terminating Fund will become securityholders of the Continuing Fund.

29. As a result, the securityholders of the Terminating Fund will receive units of the Continuing Fund that are equivalent in value to the units of the Terminating Fund.

30. The Terminating Fund will be wound up as soon as reasonably possible following the Proposed Merger and the Continuing Fund will continue as a publicly offered open-end mutual fund.

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

32. All costs and expenses associated with the Proposed Merger will be borne by the Filer.

33. Securityholders of the Terminating Fund will have the right to redeem units of the Terminating Fund up to noon (12:00 pm) on the Effective date of the Proposed Merger.

34. Pursuant to this Proposed Merger, the Continuing Fund will be identified in English under the name Melodia Diversified Income Portfolio.

Decision

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