September 27, 2017
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 SENTRY INVESTMENTS INC. (the Manager or Sentry)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Manager and CI Financial Corp. (CI, and together with the Manager, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for approval with respect to a proposed change of control of the Manager pursuant to section 5.5(1)(a.1) of National Instrument 81-102 Investment Funds (NI 81-102) (the Approval Sought) and an abridgement to not less than 38 days of the time period prescribed by section 5.8(1)(a) of NI 81-102 for delivering notice to securityholders of the Sentry Funds (as defined below) of the change of control of the Manager resulting from the Proposed Transaction (as defined below) (the Abridgement Relief).
Under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions (NP 11-203) (for a passport application):
(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application; and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each province and territory of Canada (the Jurisdictions).
Interpretation
Terms defined in NI 81-102, National Instrument 14-101 Definitions, NP 11-203 and MI 11-102 have the same meaning if used in this decision unless otherwise defined.
Representations
The decision is based on the following facts represented by the Filers:
CI and CI Investments Inc.
1CI, a corporation existing under the Business Corporations Act (Ontario) (OBCA), with its head office in Toronto, Ontario, is an independent Canadian-owned wealth management company. Through its principal operating subsidiaries, CI offers a broad range of investment products and services. CI is a reporting issuer in all of the provinces of Canada and its common shares are listed on the Toronto Stock Exchange (the TSX) under the trading symbol "CIX".
2CI owns 100% of the issued and outstanding shares of CI Investments Inc. (the CI Manager).
3The CI Manager, a corporation existing under the Business Corporations Act (Ontario) with its head office in Toronto, Ontario, manages a large number of mutual funds which are sold to the public under the family names CI Funds, Black Creek Funds, Cambridge Funds, Harbour Funds, Marret Funds, Signature Funds and Synergy Funds, as well as other investment products.
4The CI Manager is registered as (i) an investment fund manager (IFM) in Ontario, Quebec and Newfoundland and Labrador; (ii) adviser in the category of portfolio manager (PM) in all provinces; (iii) a dealer in the category of exempt market dealer (EMD) in Ontario; and (iv) commodity trading counsel and commodity trading manager (CTM) in Ontario.
Sentry Investments Corp., Sentry and the Sentry Funds
5Sentry Investments Corp. (SIC), a corporation existing under the OBCA with its head office in Toronto, Ontario, is a privately-owned investment management firm.
6SIC, together with certain employee shareholders, owns 100% of Sentry.
7Sentry, a corporation existing under the OBCA, has its head office in Toronto, Ontario.
8Sentry is registered as (i) an IFM in Ontario, Quebec and Newfoundland and Labrador; (ii) an adviser in the category of PM in Alberta and Ontario; (iii) a dealer in the categories of EMD and mutual fund dealer in all of the provinces; and (iv) a CTM in Ontario.
The Sentry Funds
9Sentry is the "manager" for purposes of NI 81-102 of all the mutual funds, flow-through funds and closed-end funds (collectively, the Sentry Funds) as set out in Schedule "A" hereto.
10The Sentry Funds are reporting issuers in some or all provinces and territories of Canada.
11Portfolio management of the Sentry Funds is provided by Sentry.
12None of CI, the CI Manager, SIC, Sentry or the Sentry Funds is in default of any securities legislation in any of the Jurisdictions.
The Proposed Transaction
13CI entered into a binding agreement on August 9, 2017 to purchase 100% of the issued and outstanding shares of SIC and all of the issued and outstanding shares of Sentry not owned by SIC in return for cash and common shares of CI (the Proposed Transaction).
14CI and Sentry wish to close the Proposed Transaction on or about October 2, 2017 (the Closing Date), provided that, among other things, all necessary regulatory notices, non-objections, and approvals have been given and received. If completed as contemplated, following the Closing Date, CI will directly own 100% of the outstanding shares of SIC and directly and indirectly own 100% of the outstanding shares of Sentry.
15A notice regarding the Proposed Transaction was delivered to the Compliance & Registrant Regulation branch of the OSC on August 16, 2017, pursuant to sections 11.9 and 11.10 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
Change of Control of Manager
16As the share ownership of Sentry will change such that after the Closing Date, CI will directly own 100% of the outstanding shares of SIC and directly and indirectly own 100% of the outstanding shares of Sentry, the Proposed Transaction will result in a change of control of Sentry and accordingly regulatory approval is required pursuant to section 5.5(1)(a.1) of NI 81-102.
Impact on the Manager and the Sentry Funds
17Completion of the Proposed Transaction is not expected to result in any material adverse changes to, or impact on, the business, operations and affairs of the Sentry Funds, the securityholders of the Sentry Funds or Sentry.
18CI currently intends to maintain Sentry as a separate corporate entity and there is no current intention to: (i) change the names or branding of Sentry or the Sentry Funds as a result of the Proposed Transaction; or (ii) immediately following the Closing Date, or within a foreseeable period of time, replace Sentry as the investment fund manager or portfolio manager of the Sentry Funds.
19At closing, CI will elect as directors of Sentry current members of the executive or board of directors of CI or the CI Manager representing a majority of the board of directors of Sentry.
20There is no current intention to merge or integrate the business operations of Sentry into CI or the CI Manager.
21No final decisions have been made as to any duplication of personnel or systems.
22There is no current intention to: (a) merge or otherwise change the structures, investment objectives or strategies of, any of the Sentry Funds; (b) change the fees and expenses that would be charged to the Sentry Funds; (c) make changes to fund accounting and other administrative functions undertaken by the current providers, both internal and external, to Sentry or the Sentry Funds; or (d) make changes to the custodians or trustees of the Sentry Funds.
23The members of the Independent Review Committee (IRC) of the Sentry Funds will cease to be IRC members by operation of section 3.10(1)(c) of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107). However, it is currently intended that immediately following the completion of the Proposed Transaction, the same members of the IRC will be re-appointed by Sentry.
24CI confirms that from and after the date of closing of the Proposed Transaction, CI will cause Sentry to comply with the terms and conditions of the Settlement Agreement dated March 31, 2017 among Sentry, Sean Driscoll and the Ontario Securities Commission including the undertaking dated February 2, 2017, attached as Schedule "A" and the order dated April 5, 2017, attached as Schedule "B" thereto.
25The Proposed Transaction is not expected to negatively impact the financial stability of Sentry or its ability to fulfill its regulatory obligations.
Notice Requirement
26Written notice (the Notice) regarding the Proposed Transaction was sent to each securityholder of the Sentry Funds (other than securityholders of Sentry Select Primary Metals Corp.) on August 18, 2017, and to securityholders of Sentry Select Primary Metals Corp. in Canada on August 22, 2017 and in the United States on August 25, 2017, which in each case will be at least 38 days before the Closing Date, pursuant to section 5.8(1) of NI 81-102.
27While the Proposed Transaction is pending, but not closed, there is uncertainty among clients and others regarding Sentry. To preserve the business and relationships of Sentry, it is strongly preferable to close the Proposed Transaction promptly with an abridgement to the 60-day notice period and minimize this period of uncertainty.
28It is the Filers' view that it would not be prejudicial to the securityholders of the Sentry Funds to abridge the notice period required under s. 5.8(1)(a) of NI 81-102 from 60 days to not less than 38 days for the following reasons:
(a) the securityholders of the Sentry Funds will be sufficiently aware of the Proposed Transaction;
(b) there are no immediate plans to increase the management fees that the Sentry Funds charge or the operating expenses that they pay, to change the structures, investment objectives or strategies of the Sentry Funds, or to change the role of Sentry as manager of the Sentry Funds;
(c) the Proposed Transaction will not have any impact on the securityholders' interest in the Sentry Funds and securityholders are not required to take any action; securityholders need only consider whether they wish to dispose of their securities of the Sentry Funds. The change of control of the Manager, by itself, will not trigger any other material change to the Sentry Funds; and
(d) Except for NCE Diversified Flow-Through (16) Limited Partnership (the Flow-Through Fund), the Sentry Funds calculate and publish their net asset value per security on a daily basis (apart from Precious Metals and Mining Trust and Sentry Select Primary Metals Corp., which calculate net asset value per security daily but only publish this information weekly) and either permit redemptions of securities of the Sentry Funds on a daily basis or are listed on the TSX, allowing securityholders of the Sentry Funds to immediately redeem or dispose of their securities upon receipt of the Notice if they so choose. With respect to the Flow-Through Fund, prior to a liquidity event, which involves a tax deferred roll-over into an existing open-end mutual fund managed by Sentry (currently intended to occur on or about January 5, 2018), securityholders can only redeem their limited partnership units upon death or if they cease to be a Canadian resident, and there is no secondary or gray market for their limited partnership units.
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:
(a) the Approval Sought is granted; and
(b) the Abridgement Relief is granted provided that
(i) the Notice is given to securityholders of the Sentry Funds at least 38 days before the Closing Date, and
(ii) no material changes will be made to the management, operations or portfolio management of the Sentry Funds for at least 60 days following the date the Notice was delivered.
"Darren McKall"
Darren McKall
Manager, Investment Funds and Structured Products Branch
ONTARIO SECURITIES COMMISSION
Schedule "A"
LIST OF SENTRY FUNDS
Closed-End Funds
Precious Metals and Mining Trust Sentry Select Primary Metals Corp.
Flow-Through Limited Partnership
NCE Diversified Flow-Through (16) Limited Partnership
Mutual Funds
Sentry All Cap Income Fund Sentry Canadian Income Class Sentry Canadian Income Fund Sentry Diversified Equity Class Sentry Diversified Equity Fund Sentry Global Growth and Income Class Sentry Global Growth and Income Fund Sentry Global Infrastructure Fund Sentry Global Mid Cap Income Fund Sentry Growth and Income Fund Sentry Small/Mid Cap Income Class Sentry Small/Mid Cap Income Fund Sentry U.S. Growth and Income Class Sentry U.S. Growth and Income Currency Neutral Class Sentry U.S. Growth and Income Fund Sentry Canadian Resource Class Sentry Energy Fund Sentry Global REIT Class Sentry Global REIT Fund Sentry Precious Metals Class Sentry Precious Metals Fund Sentry Alternative Asset Income Fund Sentry Conservative Balanced Income Class Sentry Conservative Balanced Income Fund Sentry Conservative Monthly Income Fund Sentry Global Monthly Income Fund Sentry U.S. Monthly Income Fund Sentry Canadian Bond Fund Sentry Corporate Bond Class Sentry Corporate Bond Fund Sentry Global High Yield Bond Class Sentry Global High Yield Bond Fund Sentry Money Market Class Sentry Money Market Fund Sentry Growth Portfolio Sentry Growth and Income Portfolio Sentry Balanced Income Portfolio Sentry Conservative Income Portfolio Sentry Defensive Income Portfolio Sentry Canadian Equity Income Private Pool Class Sentry Canadian Equity Income Private Trust Sentry Global Equity Income Private Pool Class Sentry International Equity Income Private Pool Class Sentry International Equity Income Private Trust Sentry U.S. Equity Income Private Pool Class Sentry U.S. Equity Income Currency Neutral Private Pool Class Sentry U.S. Equity Income Private Trust Sentry Energy Private Trust Sentry Global Infrastructure Private Trust Sentry Global Real Estate Private Trust Sentry Precious Metals Private Trust Sentry Balanced Yield Private Pool Class Sentry Global Balanced Yield Private Pool Class Sentry Canadian Fixed Income Private Pool Sentry Canadian Core Fixed Income Private Trust Sentry Global Core Fixed Income Private Trust Sentry Global High Yield Fixed Income Private Trust Sentry Global Investment Grade Private Pool Class Sentry Global Tactical Fixed Income Private Pool Sentry Real Growth Pool Class Sentry Real Long Term Income Pool Class Sentry Real Long Term Income Trust Sentry Real Mid Term Income Pool Class Sentry Real Mid Term Income Trust Sentry Real Short Term Income Pool Class Sentry Real Short Term Income Trust Sentry Real Income 1941-45 Class Sentry Real Income 1946-50 Class Sentry Real Income 1951-55 Class