Mackenzie Financial Corporation (Re), 2018 CanLII 55870

June 18, 2018

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

MACKENZIE FINANCIAL CORPORATION

(the Filer)

AND

MACKENZIE CANADIAN MONEY MARKET CLASS, MACKENZIE IVY INTERNATIONAL EQUITY FUND, MACKENZIE GLOBAL LOW VOLATILITY FUND, MACKENZIE US LOW VOLATILITY FUND, MACKENZIE CUNDILL RECOVERY FUND, MACKENZIE CUNDILL RECOVERY CLASS, MACKENZIE EMERGING MARKETS OPPORTUNITIES CLASS, MACKENZIE CANADIAN ALL CAP DIVIDEND GROWTH FUND, MACKENZIE CANADIAN ALL CAP BALANCED CLASS, AND MACKENZIE US LARGE CAP CLASS (COLLECTIVELY, THE “TERMINATING FUNDS” AND INDIVIDUALLY, A “TERMINATING FUND”)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Terminating Funds, for a decision under the securities legislation of the Jurisdiction (the Legislation) approving the proposed reorganization of each of the Terminating Funds with applicable Continuing Funds (each as defined below), pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (the Requested Relief).

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

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer 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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.

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.

“Closed and Exempt Mergers” means the following Mergers, which: (i) involve Series I of Mackenzie Emerging Markets Class, which is not currently offered for purchase and is not currently qualified for distribution under prospectus; (ii) involve Series J, PWX and O of the Continuing Funds listed below, which are not currently offered for purchase and are not currently qualified for distribution under prospectus; (iii) involve Series I of Mackenzie US Growth Class, which is expected to be offered for sale under a simplified prospectus in advance of the Merger, however, the receipt of the amendment to the prospectus to create Series I will not be issued in advance of the information circular mailing date; (iv) involve Series AR, FB5, F5, F8, PWFB5, PWT5, PWX8 and T5 of the Continuing Funds listed below, which are expected to be offered for sale under a simplified prospectus in advance of the Merger, however, the receipt of the amendment to the prospectus to create the applicable series will not be issued in advance of the information circular mailing date; or (iv) involve Series LB and LX of the Continuing Funds, which are expected to be offered for sale under a simplified prospectus in advance of the Merger, however, the receipt of the final prospectus will not be issued in advance of the information circular mailing date:

Terminating Fund

Continuing Fund

Mackenzie Cundill Recovery Class Series O

Mackenzie Cundill Value Class Series O

Mackenzie Cundill Recovery Class Series PWX

Mackenzie Cundill Value Class Series PWX

Mackenzie Cundill Recovery Fund Series J

Mackenzie Cundill Value Fund Series J

Mackenzie Emerging Markets Opportunities Class Series I

Mackenzie Emerging Markets Class Series I

Mackenzie Emerging Markets Opportunities Class Series J

Mackenzie Emerging Markets Class Series J

Mackenzie Canadian All Cap Dividend Growth Fund Series J

Mackenzie Canadian Growth Fund Series J

Mackenzie Canadian All Cap Balanced Class Series FB5

Mackenzie Canadian Growth Balanced Class Series FB5

Mackenzie Canadian All Cap Balanced Class Series PWFB5

Mackenzie Canadian Growth Balanced Class Series PWFB5

Mackenzie Canadian All Cap Dividend Growth Fund Series PWT5

Mackenzie Canadian Growth Fund Series PWT5

Mackenzie Ivy International Equity Fund Series AR

Mackenzie Ivy International Equity Fund Series AR

Mackenzie Ivy International Equity Fund Series F5

Mackenzie Ivy International Equity Fund Series F5

Mackenzie Ivy International Equity Fund Series PWT5

Mackenzie Ivy International Equity Fund Series PWT5

Mackenzie Ivy International Equity Fund Series T5

Mackenzie Ivy International Equity Fund Series T5

Mackenzie US Large Cap Class Series I

Mackenzie US Growth Class Series I

Mackenzie US Large Cap Class Series F8

Mackenzie US Growth Class Series F8

Mackenzie US Large Cap Class Series FB5

Mackenzie US Growth Class Series FB5

Mackenzie US Large Cap Class Series PWFB5

Mackenzie US Growth Class Series PWFB5

Mackenzie US Large Cap Class Series PWX8

Mackenzie US Growth Class Series PWX8

Mackenzie Canadian All Cap Balanced Class Series LB

Mackenzie Canadian Growth Balanced Class Series LB

Mackenzie Canadian All Cap Balanced Class Series LX

Mackenzie Canadian Growth Balanced Class Series LX

“Continuing Funds” means Mackenzie Canadian Money Market Fund, Mackenzie Ivy International Fund, Mackenzie High Diversification Global Equity Fund, Mackenzie High Diversification US Equity Fund, Mackenzie Cundill Value Fund, Mackenzie Cundill Value Class, Mackenzie Emerging Markets Class, Mackenzie Canadian Growth Fund, Mackenzie Canadian Growth Balanced Class, and Mackenzie US Growth Class (collectively, the “Continuing Funds” and individually, a “Continuing Fund”).

“Effective Date” means on or about July 6, 2018, the anticipated date of the Proposed Reorganization.

“Exempt Mergers” means the following Mergers, where the Series R and S of the Continuing Funds are or will be offered only on an exempt distribution basis;

Terminating Fund

Continuing Fund

Mackenzie Canadian All Cap Dividend Growth Fund Series R

Mackenzie Canadian Growth Fund Series R

Mackenzie Cundill Recovery Fund Series R

Mackenzie Cundill Value Fund Series R

Mackenzie Cundill Recovery Fund Series S

Mackenzie Cundill Value Fund Series S

Mackenzie Emerging Markets Opportunities Class Series S

Mackenzie Emerging Markets Class Series S

Mackenzie Global Low Volatility Fund Series R

Mackenzie High Diversification Global Equity Fund Series R

Mackenzie US Low Volatility Fund Series R

Mackenzie High Diversification US Equity Fund Series R

Mackenzie US Large Cap Class Series R

Mackenzie US Growth Class Series R

Mackenzie US Large Cap Class Series S

Mackenzie US Growth Class Series S

“Funds” means collectively, the Terminating Funds and the Continuing Funds.

“Grandfathering Mergers” means the following Mergers, where the series of securities of the Continuing Funds are being created solely to facilitate the Mergers, will not be qualified for distribution under a prospectus and will not be available for purchase subsequent to the Mergers:

Terminating Fund

Continuing Fund

Mackenzie Canadian All Cap Balanced Class Series I

Mackenzie Canadian Growth Balanced Class Series I

Mackenzie Canadian All Cap Balanced Class Series J

Mackenzie Canadian Growth Balanced Class Series J

Mackenzie Canadian All Cap Balanced Class Series J8

Mackenzie Canadian Growth Balanced Class Series J8

Mackenzie Canadian All Cap Balanced Class Series O

Mackenzie Canadian Growth Balanced Class Series O

Mackenzie Canadian All Cap Balanced Class Series PWX

Mackenzie Canadian Growth Balanced Class Series PWX

Mackenzie Canadian All Cap Balanced Class Series PWX8

Mackenzie Canadian Growth Balanced Class Series PWX8

Mackenzie Canadian All Cap Dividend Growth Fund Series A

Mackenzie Canadian Growth Fund Series C

Mackenzie Canadian All Cap Dividend Growth Fund Series D

Mackenzie Canadian Growth Fund Series DZ

Mackenzie Canadian All Cap Dividend Growth Fund Series FB

Mackenzie Canadian Growth Fund Series GV

Mackenzie Canadian All Cap Dividend Growth Fund Series G

Mackenzie Canadian Growth Fund Series GG

Mackenzie Canadian All Cap Dividend Growth Fund Series T5

Mackenzie Canadian Growth Fund Series C5

Mackenzie Canadian Money Market Class Series J

Mackenzie Canadian Money Market Fund Series J

Mackenzie Cundill Recovery Fund Series LB

Mackenzie Cundill Value Fund Series GL

Mackenzie Cundill Recovery Fund Series LW

Mackenzie Cundill Value Fund Series GW

Mackenzie Cundill Recovery Fund Series A

Mackenzie Cundill Value Fund Series GA

Mackenzie Cundill Recovery Fund Series F

Mackenzie Cundill Value Fund Series GF

Mackenzie Cundill Recovery Fund Series I

Mackenzie Cundill Value Fund Series GI

Mackenzie Cundill Recovery Fund Series OJ

Mackenzie Cundill Value Fund Series OJ

Mackenzie Emerging Markets Opportunities Class Series OJ

Mackenzie Emerging Markets Class Series OJ

Mackenzie Money Market Class Series J

Mackenzie Money Market Fund Series J

Mackenzie US Large Cap Class Series A Quadrus

Mackenzie US Growth Class Series A Quadrus

Mackenzie US Large Cap Class Series DZ

Mackenzie US Growth Class Series DZ

Mackenzie US Large Cap Class Series J

Mackenzie US Growth Class Series J

“Proposed Reorganizations” means each of the proposed mergers of the Terminating Funds into the applicable Continuing Funds.

“Taxable Mergers” means the following Mergers:

a) the merger of Mackenzie Canadian Money Market Class into Mackenzie Canadian Money Market Fund;

b) the merger of Mackenzie Ivy International Equity Fund into Mackenzie Ivy International Fund;

c) the merger of Mackenzie Cundill Recovery Class into Mackenzie Cundill Value Class;

d) the merger of Mackenzie Emerging Markets Opportunities Class into Mackenzie Emerging Markets Class;

e) the merger of Mackenzie Canadian All Cap Balanced Class into Mackenzie Canadian Growth Balanced Class; and

f) the merger of Mackenzie US Large Cap Class into Mackenzie US Growth Class.

Representations

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

The Filer

1. The Filer is a corporation governed by the laws of Ontario and is registered as follows: as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador; as a portfolio manager and exempt market dealer in Ontario and the Other Jurisdictions; and as a commodity trading manager in Ontario.

2. The Filer, with its head office in Toronto, Ontario, is the trustee and manager of the Funds.

The Funds

3. Each of Mackenzie Canadian Money Market Class, Mackenzie Cundill Recovery Class, Mackenzie Emerging Markets Opportunities Class, Mackenzie Canadian All Cap Balanced Class, Mackenzie US Large Cap Class, Mackenzie Cundill Value Class, Mackenzie Emerging Markets Class, Mackenzie Canadian Growth Balanced Class, and Mackenzie US Growth Class (collectively, the “Corporate Class Funds”) are separate classes of securities of Mackenzie Financial Capital Corporation (the “Corporation”). The remaining Funds are unit trusts (collectively, the “Trust Funds”).

4. The Funds are either unit trusts established under the laws of Ontario or separate classes of securities of the Corporation, a mutual fund corporation governed under the laws of Ontario. The Terminating Funds and Continuing Funds are each reporting issuers under the securities legislation of the Jurisdictions. Neither the Filer nor the Funds are in default of securities legislation in the Jurisdictions, as applicable.

5. Other than circumstances in which the securities regulatory authority of a Jurisdiction has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices established under NI 81-102.

6. Securities of the Funds are currently qualified for sale under one or more of the simplified prospectus, annual information form and fund facts each dated September 29, 2017, as amended (collectively, the “Mackenzie Mutual Funds Offering Documents”), the simplified prospectus, annual information form and fund facts each dated June 28, 2017, as amended (collectively, the “Quadrus Offering Documents”) and/or the simplified prospectus, annual information form and fund facts each dated November 23, 2017, as amended (collectively, the “Laurentian Offering Documents”, and, together with the Mackenzie Mutual Funds Offering Documents and the Quadrus Offering Documents, the “Offering Documents”). Certain securities of certain Funds are offered only on an exempt distribution basis or are no longer available for purchase; for example, Series I, J, OJ, R, and S securities of certain Funds have never been or are no longer qualified for distribution under a prospectus.

7. The net asset value for each class or series of the Funds, as applicable, is calculated on a daily basis in accordance with the Funds’ valuation policy and as described in the applicable Offering Documents.

Reasons for the Requested Relief

8. Approval of the Proposed Reorganization is required because:

(a) the fundamental investment objectives of certain Continuing Funds are not, or may be considered not to be, “substantially similar” to the investment objectives of their corresponding Terminating Funds;

(b) certain Mergers will not be completed as a “qualifying exchange” or a tax‑deferred transaction under the Income Tax Act (Canada) (the “Tax Act”) (collectively, the Taxable Mergers); and

(c) as described below, the materials to be sent to certain securityholders of the Terminating Funds in respect of certain Mergers will not include the current simplified prospectus or the most recently filed fund facts documents for the series of the Continuing Funds into which the applicable series of the Terminating Funds are merging because either:

(i) the applicable series of the Continuing Funds are being created solely to facilitate the Mergers, will not be qualified for distribution under a prospectus and will not be available for sale subsequent to the Mergers (the Grandfathering Mergers);

(ii) the applicable series of the Continuing Funds are not currently offered for purchase and are not currently qualified for distribution under a prospectus, as is the case with the series of the Terminating Fund merging into these series (the Closed and Exempt Mergers); or

(iii) the applicable series of the Continuing Funds are or will be offered only on an exempt distribution basis, as is the case with the series of the Terminating Funds merging into these series (the Exempt Mergers).

9. Pursuant to the Proposed Reorganizations, securityholders of each of the Terminating Funds would become securityholders of the applicable Continuing Fund, as follows (each a “Merger” and collectively, the “Mergers”):

Terminating Fund

Continuing Fund

Mackenzie Canadian Money Market Class

Mackenzie Canadian Money Market Fund

Mackenzie Ivy International Equity Fund

Mackenzie Ivy International Fund

Mackenzie Global Low Volatility Fund

Mackenzie High Diversification Global Equity Fund

Mackenzie US Low Volatility Fund

Mackenzie High Diversification US Equity Fund

Mackenzie Cundill Recovery Fund

Mackenzie Cundill Value Fund

Mackenzie Cundill Recovery Class

Mackenzie Cundill Value Class

Mackenzie Emerging Markets Opportunities Class

Mackenzie Emerging Markets Class

Mackenzie Canadian All Cap Dividend Growth Fund

Mackenzie Canadian Growth Fund

Mackenzie Canadian All Cap Balanced Class

Mackenzie Canadian Growth Balanced Class

Mackenzie US Large Cap Class

Mackenzie US Growth Class

10. Except as noted above, the Proposed Reorganizations will otherwise comply with all other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

11. The Proposed Reorganizations do not require approval of securityholders of the Continuing Funds as the Filer has determined that the Proposed Reorganizations do not constitute material changes to any of the Continuing Fund.

12. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, the Independent Review Committee (IRC) has been appointed for the Funds. The Filer presented the terms of the Proposed Reorganizations to the IRC for a recommendation. The IRC reviewed the Proposed Reorganizations and provided a positive recommendation for each of the Proposed Reorganization, having determined that the Proposed Reorganizations, if implemented, would achieve a fair and reasonable result for each of the Funds and their respective securityholders.

13. In accordance with National Instrument 81-106 Continuous Disclosure, a press release describing the Proposed Reorganizations was issued and the press release, material change report and amendments to the applicable simplified prospectus and annual information form, as well as revised fund facts of the Terminating Funds, which give notice of the Proposed Reorganizations, were filed on SEDAR on April 2, 2018 for each of Mackenzie Funds, Quadrus Group of Funds and Laurentian Group of Funds.

14. A notice and access document, notice of meeting, management information circular, proxy and fund facts of the applicable series of the Continuing Fund (“Meeting Materials”) were mailed or otherwise made available to securityholders of the Terminating Fund on May 16, 2018 and were filed on SEDAR on May 17, 2018.

15. The Meeting Materials describe all of the relevant facts concerning the Proposed Reorganizations relevant to each securityholder, including the differences between investment objectives, strategies and fee structures of the Terminating Funds and the Continuing Funds, the IRC’s recommendations of the Proposed Reorganization, and income tax considerations so that securityholders of the Terminating Funds may consider this information before voting on the Proposed Reorganization. The Meeting Materials also describe the various ways in which securityholders can obtain a copy of the simplified prospectus and annual information form of the Continuing Funds, as well as the most recent interim and annual financial statements and management reports of fund performance for the Continuing Funds, at no cost.

16. Fund facts relating to the applicable series of each Continuing Fund were mailed to securityholders of the corresponding series of each Terminating Fund in all instances other than in respect of the Grandfathering Mergers, the Closed and Exempt Mergers and the Exempt Mergers. In order to effect the Mergers relating to these series of the Terminating Funds, securities of the applicable series of the Continuing Funds will be distributed to securityholders of the Terminating Funds in reliance on the prospectus exemption contained in section 2.11 of National Instrument 45-106 Prospectus and Registration Exemptions.

17. In respect of the Grandfathering Mergers, the Closed and Exempt Mergers and the Exempt Mergers, because a current simplified prospectus and fund facts document are not available for the applicable series of the Continuing Funds, securityholders of each of the corresponding series of the Terminating Funds were sent fund facts relating to series A securities of the applicable Continuing Fund, or, where appropriate, another series of securities of the applicable Continuing Fund.

18. The Manager will pay for the costs of the proposed Mergers. These costs consist mainly of brokerage charges associated with the trades that occur both before and after the date of the proposed Mergers and legal, proxy solicitation, printing, mailing and regulatory fees. There are no charges payable by securityholders of the Terminating Funds who acquire securities of the corresponding Continuing Funds as a result of the Proposed Reorganization.

19. Securityholders of each of the Terminating Funds will be asked to approve the Proposed Reorganization associated with that Terminating Fund at a special meeting of securityholders scheduled to be held on or about June 22, 2018.

20. The Taxable Mergers will be effected on a taxable basis, which the Manager has determined will be in the overall best interests of the investors of the Terminating Funds and the Continuing Funds given the investment mandates and applicable portfolio management teams of the Continuing Funds. Effecting the Taxable Mergers on a taxable basis will preserve, where applicable, any unused tax losses of the Continuing Fund, which would otherwise expire upon implementation of the Taxable Merger on a tax deferred basis and therefore would not be available to shelter income and capital gains realized by the Continuing Fund in future years.

21. Following the implementation of the Proposed Reorganization, all systematic plans that were established with respect to the Terminating Funds will be re-established in the Continuing Fund, either on a series-for-series basis or into a similar series with substantially similar fees, unless securityholders advise the Filer otherwise or unless otherwise noted in the information circular.

22. Securityholders may change or cancel any systematic plan at any time and securityholders of the Terminating Funds who wish to establish one or more systematic plans in respect of their holdings in the Continuing Fund may do so following the implementation of the Proposed Reorganizations.

Proposed Reorganization Steps

23. If the necessary approvals are obtained, the Filer will carry out the following steps to complete the Proposed Reorganizations:

(a) Procedure for the Merger of a Trust Fund into another Trust Fund:

(i) Prior to effecting the Merger, if required, each Trust Fund that is a Terminating Fund (each, a “Terminating Trust Fund”) will sell any securities in its portfolio that do not meet the investment objectives and investment strategies of the applicable Continuing Fund and purchase other securities so that, as of the effective date of the Merger, the portfolio of the Terminating Fund is substantially similar to that of the applicable Continuing Fund. As a result, some of the Terminating Trust Funds may temporarily hold cash, money market instruments or investments that are not consistent with their investment objectives, and may not be fully invested in accordance with their investment objectives for a brief period of time prior to the Merger being effected.

(ii) The value of each Terminating Trust Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Trust Fund.

(iii) Each Continuing Fund that is a trust (each, a “Continuing Trust Fund”) will acquire the investment portfolio and other assets of the applicable Terminating Trust Fund in exchange for securities of the Continuing Fund.

(iv) Each Continuing Trust Fund will not assume any liabilities of the applicable Terminating Trust Fund and the Terminating Trust Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the applicable Merger.

(v) Each Terminating Trust Fund and Continuing Trust Fund will distribute a sufficient amount of their net income and net realized capital gains, if any, to securityholders to ensure that they will not be subject to tax under Part I of the Tax Act for their current tax year.

(vi) The securities of each Continuing Fund received by the applicable Terminating Trust Fund will have an aggregate net asset value equal to the value of the portfolio assets and other assets that the Continuing Fund is acquiring from the Terminating Trust Fund, and the securities of the Continuing Fund will be issued at the applicable series net asset value per security as of the close of business on the effective date of the applicable Merger.

(vii) Immediately thereafter, securities of each Continuing Fund received by the applicable Terminating Trust Fund will be distributed to securityholders of the Terminating Trust Fund, as proceeds of redemption of their securities in the Terminating Trust Fund on a dollar‑for‑dollar and series by series basis.

(viii) As soon as reasonably possible following each Merger, the applicable Terminating Trust Fund will be wound up.

(b) Procedure for the Merger of a Corporate Class Fund into another Corporate Class Fund:

(i) Prior to effecting the Merger, if required, the Corporation will sell any securities referable to the portfolio of each Terminating Fund (each a “Terminating Corporate Class Fund”) that do not meet the investment objectives and investment strategies of the applicable Continuing Corporate Class Fund and purchase other securities so that, as of the effective date of the Merger, the portfolio of the Terminating Corporate Class Fund is substantially similar to that of the applicable Continuing Corporate Class Fund. As a result, the portfolios of some of the Terminating Corporate Class Funds may temporarily hold cash, money market instruments or investments that are not consistent with their investment objectives, and may not be fully invested in accordance with their investment objectives for a brief period of time prior to the Merger being effected.

(ii) Each Terminating Corporate Class Fund may pay taxable dividends and/or capital gains dividends to its securityholders, but only to the extent required to manage the tax liability of the Corporation in a manner that the Board of Directors of the Corporation, in consultation with the Filer, determines to be fair and reasonable.

(iii) The value of each Terminating Corporate Class Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Corporate Class Fund.

(iv) The value of each Continuing Corporate Class Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Corporate Class Fund.

(v) The Continuing Corporate Class Fund will not assume any liabilities of the applicable Terminating Corporate Class Fund and the Terminating Corporate Class Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the applicable Merger.

(vi) All of the issued and outstanding securities of each Terminating Corporate Class Fund will be exchanged for securities of each applicable Continuing Corporate Class Fund on a dollar-for-dollar and series-by-series basis, so that securityholders of each Terminating Corporate Class Fund become securityholders of each applicable Continuing Corporate Class Fund.

(vii) As soon as reasonably possible following each Merger, the Corporation will cancel the securities of the applicable Terminating Corporate Class Fund and the applicable Continuing Corporate Class Fund.

(c) Procedure for the Merger of a Corporate Class Fund into a Trust Fund:

(i) Prior to effecting the Merger, if required, the Corporation will sell any securities in the portfolio underlying a Terminating Corporate Class Fund that do not meet the investment objectives and investment strategies of the applicable Continuing Trust Fund and purchase other securities so that, as of the effective date of the Merger, the portfolio of the Terminating Corporate Class Fund is substantially similar to that of the applicable Continuing Fund. As a result, the portfolios of some of the Terminating Corporate Class Funds may temporarily hold cash, money market instruments or investments that are not consistent with their investment objectives, and may not be fully invested in accordance with their investment objectives for a brief period of time prior to the Merger being effected.

(ii) Each Terminating Corporate Class Fund may pay taxable dividends and/or capital gains dividends to its securityholders, but only to the extent required to manage the tax liability of the Corporation in a manner that the Board of Directors of the Corporation, in consultation with the Filer, determines to be fair and reasonable.

(iii) The value of each Terminating Corporate Class Fund’s portfolio and other assets will be determined at the close of business on the effective date of each applicable Merger in accordance with the constating documents of the applicable Terminating Corporate Class Fund.

(iv) Each Continuing Trust Fund will acquire the investment portfolio and other assets of the applicable Terminating Corporate Class Fund in exchange for securities of the Continuing Trust Fund.

(v) Each Continuing Trust Fund will not assume any liabilities of the applicable Terminating Corporate Class Fund and the Terminating Corporate Class Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the applicable Merger.

(vi) The securities of each Continuing Trust Fund received by the applicable Terminating Corporate Class Fund will have an aggregate net asset value equal to the value of the portfolio assets and other assets that the Continuing Trust Fund is acquiring from the Terminating Corporate Class Fund, and the securities of the Continuing Trust Fund will be issued at the applicable series net asset value per security as of the close of business on the effective date of the applicable Merger.

(vii) Immediately thereafter, securities of each Continuing Trust Fund received by the applicable Terminating Corporate Class Fund will be distributed to securityholders of the Terminating Corporate Class Fund, as proceeds of redemption of their securities in the Terminating Corporate Class Fund on a dollar‑for‑dollar and series by series basis.

(viii) As soon as reasonably possible following each Merger, the Corporation will cancel the securities of the applicable Terminating Corporate Class Fund.

24. Securityholders in the Terminating Funds will continue to have the right to redeem their units or exchange their units for securities of any other mutual fund of the Filer at any time up to the close of business on the business day before the Effective Date. Securityholders of the Terminating Fund that switch their units for securities of other mutual funds of the Filer will not incur any charges other than switch fees, if applicable, as described in each Terminating Fund’s simplified prospectus. Securityholders who redeem units may be subject to redemption charges.

25. Following the implementation of the Proposed Reorganizations, the Continuing Funds will continue as publicly offered open-ended mutual funds offering securities in the Jurisdictions, or, in the case of Corporate Class Funds, will continue as classes of the Corporation.

26. Following the implementation of the Proposed Reorganizations, a press release and material change report announcing the results of the securityholder meetings in respect of the reorganization of the Terminating Funds will be issued and filed.

27. No sales charges will be charged by the Filer to investors or to the Terminating Fund or Continuing Fund in connection with the acquisition by a Continuing Fund of the investment portfolio of its applicable Terminating Fund.

28. The assets of each Terminating Fund to be acquired by the applicable Continuing Fund in order to effect the Mergers are currently, or will be, acceptable, on or prior to the effective date of the Mergers, to the portfolio manager(s) of the applicable Continuing Fund and are, or will be, consistent with the investment objectives of the Continuing Fund.

Proposed Reorganization Benefits

29. The Filer believes that the Proposed Reorganization is beneficial to securityholders of the Terminating Funds for the following reasons:

(i) Efficient use of investment managers: The Mergers are being proposed to reflect the Filer’s desire to deploy its portfolio managers as efficiently as possible, in order to maximize return potential for fund investors. The Mergers will also allow the Filer to make its product offering smaller and simpler, and therefore easier for investors to navigate.

(ii) Flexible mandate of the Continuing Fund: In certain cases, the Continuing Funds provide a substantially similar yet broader or more flexible mandate, with consistency of management that the Filer believes provides those Continuing Funds with broader investment opportunities that can lead to increased diversification and return potential.

(iii) Superior performance of the Continuing Fund: In certain cases, the Continuing Funds have provided superior returns to investors (although past performance is not a guarantee of future returns and may not be repeated).

(iv) Similar or lower fees: In certain cases, management fees and/or fixed administration fees will be lower for the Continuing Funds.

General

30. If the Proposed Reorganizations are approved, the reorganizations will be implemented after the close of business on the Effective Date. If the Proposed Reorganizations are not approved, the Terminating Fund will continue to be offered for distribution.

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, provided that the Filer obtains the prior approval of the securityholders of the Terminating Funds for the Proposed Reorganizations at a special meeting held for that purpose.

“Stephen Paglia”

Stephen Paglia, Manager

Investment Funds & Structured Products Branch Ontario Securities Commission

App.#2018/0180

SEDAR #2754924

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -approval of investment fund mergers – approval required because mergers do not meet the criteria for pre-approved reorganizations and transfers in National Instrument 81-102 – Investment Funds – certain terminating funds and continuing funds do not have substantially similar fundamental investment objectives – certain mergers will not be a “qualifying exchange” or a tax-deferred transaction under the Income Tax Act – mergers to otherwise comply with pre-approval criteria, including securityholder vote, IRC approval – securityholders provided with timely and adequate disclosure regarding the mergers

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, paragraphs 5.5(1)(b) and 5.7(1)(b) and subsection 19.1(2).