Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief granted from restrictions and requirements in subsection 2.1(1) and paragraphs 2.2(1)(a), 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 – Mutual Funds. Exemption will permit certain mutual funds to continue their investment in securities of certain related underlying funds after these underlying funds cease to offer their securities under a simplified prospectus – Underlying funds are not available for purchase by retail investors – Underlying funds will remain reporting issuers in the same jurisdictions as the top mutual funds after their prospectuses lapse and will continue to be subject to the requirements of NI 81-102, NI 81-106 and NI 81-107.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, subsection 2.1(1), paragraphs 2.2(1)(a), 2.5(2)(a), 2.5(2)(c) and section 19.1.
October 4, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(THE JURISDICTION)
AND
IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATION IN MULTIPLE JURISDICTION
AND
IN THE MATTER OF
MACKENZIE FINANCIAL CORPORATION
(MACKENZIE or FILER)
AND
IN THE MATTER OF
THE FUNDS AND THE UNDERLYING FUNDS
(as each is defined below)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from Mackenzie on behalf of:
a) each of the mutual funds (other than the Underlying Funds) of which the Filer, or an affiliate of the Filer, is or in the future becomes, the manager and to which National Instrument 81-102 – Mutual Funds (NI 81-102) applies (the Funds); and
b) Mackenzie Sentinel Canadian Short-Term Yield Corporate Class, Mackenzie Sentinel Canadian Money Market Fund, Mackenzie Sentinel U.S. Short-Term Yield Corporate Class, Mackenzie Sentinel U.S. Money Market Fund, Mackenzie Universal Canadian Resource Class, Symmetry Equity Corporate Class, and Symmetry Fixed Income Corporate Class (the Underlying Funds),
for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Funds from the requirements of subsection 2.1(1), and paragraphs 2.2(1)(a), 2.5(2)(a) and 2.5(2)(c) of NI 81-102 to permit each Fund to invest in securities of the Underlying Funds (the Requested Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) Mackenzie has provided notice that section 4.7(1) of Multilateral Instrument 11-102 - Passport System (MI 11-102) is intended to be relied upon in respect of the Requested relief in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, Northwest Territories, Nunavut and Yukon.
Interpretation
Terms defined in National Instrument 14-101 - Definitions, and MI 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:
Mackenzie is a corporation amalgamated under the laws of Ontario and is registered as an advisor in the category of Investment Counsel and Portfolio Manager in Ontario and Alberta and in the category of Portfolio Manager in Manitoba. Mackenzie is also registered in Ontario as a dealer in the category of Limited Market Dealer, and is registered under the Commodity Futures Act (Ontario) in the category of Commodity Trading Manager.
Mackenzie is the manager of the Underlying Funds. Mackenzie or an affiliate of Mackenzie is also manager of the Funds.
Each of the Funds and the Underlying Funds is a mutual fund to which National Instrument 81-101 – Mutual Fund Distributions (NI 81-101), NI 81-102, National Instrument 81-106 – Investment Fund Continuous Disclosure (NI 81-106) and National Instrument 81-107 – Independent Review Committee for Investment Funds (NI 81-107 and, together with NI 81-102 and NI 81-106, the Mutual Fund Instruments) currently applies, except to the extent that it may be granted discretionary relief from any such requirements.
The securities of each Fund and Underlying Fund are qualified for distribution in each of the provinces and territories of Canada pursuant to simplified prospectuses and annual information forms that have been prepared and filed in accordance with the securities legislation of Ontario. Each Fund and Underlying Fund is, accordingly, a reporting issuer in each of the provinces and territories of Canada.
The Ontario Securities Commission is the principal regulator to review and grant the Requested Relief as the head office of the Filer is in the Province of Ontario.
Mackenzie, the Funds and the Underlying Funds are not in default of securities legislation in any province or territory of Canada.
Each Fund’s investment objective permits the Fund to invest, directly or indirectly in securities. The Funds’ investment objectives permit the Funds to make such investments either: (a) directly, by purchasing and holding such securities; or (b) indirectly through investments in other mutual funds such as the Underlying Funds.
The Underlying Funds offer series R units or shares (Series R securities) which, although currently prospectus qualified, are not offered for purchase by retail investors in Canada. Series R securities of the Underlying Funds are only available for purchase by the Funds and certain other institutional investors, all of whom are “accredited investors” (as defined in National Instrument 45-106 – Prospectus Exempt Distributions).
The Underlying Funds do not intend to renew their prospectus after their prospectus lapse date in June 2011 (the Lapse Date). After the Lapse Date, the Underlying Funds intend to continue distributing their Series R securities only on a basis which is exempt from the prospectus requirements in Canadian securities legislation (principally by distributing their Series R securities only to accredited investors).
After the Lapse Date, the Underlying Funds will remain reporting issuers in each jurisdiction in which the Funds are also reporting issuers, and will accordingly remain subject to all of the requirements of the Mutual Fund Instruments.
A Fund will not purchase or hold securities of an Underlying Fund if the Underlying Fund ceases to be a reporting issuer in any jurisdiction in which that Fund is a reporting issuer.
A Fund will invest in securities of an Underlying Fund only if such investment is permitted by, and consistent with, the investment objective of the Fund.
The Filer believes that it would be economically advantageous to each Fund and its securityholders to continue to investing in Series R securities of the Underlying Funds and to maintain its exposure to the portfolio of securities owned by the Underlying Funds as the Funds do not pay any management fees or operating expenses to invest in the Underlying Funds.
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 Relief is granted to a Fund provided that the Underlying Fund remains a reporting issuer that is subject to the Mutual Fund Instruments in all jurisdictions in which the Fund is a reporting issuer.
“Darren McKall”
__________________________________
Darren McKall
Assistant Manager, Investment Funds Branch
Ontario Securities Commission
SEDAR No. 1614743