Mackenzie Financial Corporation et al. - MRRS Decision

MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- NI 81-102 Mutual Funds -- approval of fund mergers -- approval is required because merger does not meet the criteria for pre-approval outlined in s.5.6 of NI 81-102 -- approval is granted because the merger will benefit shareholders- as continuing fund is new, no simplified prospectus available to send to terminating fund shareholders- terminating fund shareholders provided with prospectus level disclosure with respect to continuing fund's investment objectives in information circular and the simplified prospectuses of the terminating funds received when the initial investment in any of the terminating funds was made.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6(1)(f)(ii), 5.7(1)(b).

National Instrument 51-102 F5 Ongoing Requirements for Issuers and Insiders, item 14.2.

November 29, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR,

YUKON TERRITORY, NORTHWEST TERRITORY

AND NUNAVUT TERRITORY

(THE "JURISDICTIONS")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

MACKENZIE FINANCIAL CORPORATION

("MACKENZIE")

AND

IN THE MATTER OF

SYMMETRY CANADIAN STOCK CAPITAL CLASS,

SYMMETRY US STOCK CAPITAL CLASS,

SYMMETRY EAFE STOCK CAPITAL CLASS AND

SYMMETRY SPECIALTY STOCK CAPITAL CLASS

(THE "TERMINATING FUNDS")

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application (the "Application") from Mackenzie and the Terminating Funds (the "Filers") for a decision under the securities legislation of the Jurisdictions (the "Legislation") granting approval for the proposed merger (the "Proposed Merger") of each of the Terminating Funds into Symmetry Equity Class (the "Continuing Fund") under s. 5.5(1)(b) of National Instrument 81-102 Mutual Funds (the "Requested Relief").

The Terminating Funds and the Continuing Fund are collectively referred to as the "Funds" and individually as a "Fund".

Under the Mutual Reliance Review System for Exemptive Relief Applications:

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

(b) this MRRS decision document evidences the Decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

1. Mackenzie is a corporation governed by the laws of Ontario and is registered as an advisor in the categories of investment counsel and portfolio manager in Ontario and certain other provinces of Canada and is registered as a limited market dealer in Ontario.

2. Mackenzie is the manager and portfolio adviser of each of the Funds.

3. Each of the Funds is a class of shares of Mackenzie Financial Capital Corporation ("Capitalcorp"), a mutual fund corporation incorporated under the laws of Ontario.

4. Series A, F, I, O and W shares of each of the Terminating Funds are offered for sale in all provinces and territories of Canada under a simplified prospectus and annual information form dated February 10, 2006.

5. Series A, F, I, O and W Shares of the Continuing Fund will be offered for sale in all provinces and territories of Canada, once a final receipt for the simplified prospectus and annual information form of the Continuing Fund has been obtained. A preliminary and pro forma simplified prospectus and annual information form for the Continuing Fund and other Symmetry funds has been filed via SEDAR in all provinces and territories of Canada.

6. The Terminating Funds are reporting issuers under the applicable securities legislation of each province and territory of Canada and are not on the list of defaulting reporting issuers maintained under the applicable securities legislation of the Authorities.

7. Each of the Funds follows or, in the case of the Continuing Fund, will follow the standard investment restrictions and practices established by the Authorities.

8. The net asset value for each series of shares of the Funds is calculated on a daily basis on each day that the Toronto Stock Exchange is open for trading.

9. The Terminating Funds are only offered to investors in the Symmetry Portfolio Service, an asset allocation program offered by Mackenzie. Investors in this service may either select one of eight model portfolios or may choose to customize their Symmetry portfolio by, among other things, including other Mackenzie-sponsored funds in their portfolio.

10. The equity component of the Symmetry Portfolio Service has consisted of the Terminating Funds, which cover various geographic regions and market capitalization. To streamline and simplify the service, Mackenzie has decided that the equity portion of a Symmetry portfolio should be invested in only one equity fund, which fund will be diversified by geographic region, market capitalization and investment style. Mackenzie has determined that it is more administratively efficient to merge the four Terminating Funds into the Continuing Fund and that an investment in the Continuing Fund will be a more efficient way for investors to hold the equity portion of their Symmetry portfolio.

11. Based upon testing completed with an external consultant, Mackenzie believes that the proposed equity blend of the Continuing Fund is consistent with the current risk profiles of the eight model portfolios in the Symmetry Portfolio Service. Investors who have chosen to customize their Symmetry portfolio may choose to participate in the Proposed Merger, may switch their investments in the Terminating Funds to other classes of Capitalcorp on a tax-deferred basis without realizing any immediate capital gains or capital losses on these switches or may move to Mackenzie's new portfolio rebalancing service.

12. Mackenzie believes the Proposed Merger will be beneficial to shareholders of the Terminating Funds for the following reasons:

(a) reduction in volatility and potential increase in returns;

(b) greater future flexibility;

(c) reduction in trading costs;

(d) clearer investor reporting;

(e) administrative simplicity; and

(f) economies of scale.

13. Mackenzie cannot provide the current simplified prospectus and the most recent annual and interim financial statements for the Continuing Fund, nor can it provide a statement describing how shareholders may obtain the annual information form for the Continuing Fund in the information circular sent to shareholders of the Terminating Funds, as the Continuing Fund will be new and does not yet have a simplified prospectus and annual information form or financial statements. Instead of delivering these documents, Mackenzie has included the proposed investment objectives and strategies of the Continuing Fund in the management information circular that was sent to shareholders of the Terminating Funds in respect of the Proposed Merger. Mackenzie believes that with the information provided in the information circular, together with the information contained in the simplified prospectus of the Terminating Funds that each shareholder in the Terminating Funds received when their initial investment was made, shareholders in the Terminating Funds have access to prospectus level disclosure with respect to the Continuing Fund.

14. The Proposed Merger will be a tax-deferred transaction under subsection 86(1) of the Tax Act.

15. Shareholders of the Terminating Funds will continue to have the right to redeem shares of the Terminating Funds for cash at any time up to the close of business on the business day immediately preceding the effective date of the Proposed Merger.

16. Shareholders of the Terminating Funds will be asked to approve the Proposed Merger at a special meeting scheduled to be held on December 6, 2006. Implicit in the approval by shareholders of the Proposed Merger is the adoption of the investment objectives of the Continuing Fund.

17. The Proposed Merger will be structured as follows:

(a) The articles of Capitalcorp will be amended to exchange all outstanding shares of each of the Terminating Funds for shares of the same series of the Continuing Fund as are held in each of the Terminating Funds, having the same value as the shares of the Continuing Fund so exchanged; and

(b) Following the completion of the Proposed Merger, there will be no outstanding shares of each of the Terminating Funds and they will be effectively terminated.

18. The portfolios and other assets of the Terminating Funds are, or prior to the Proposed Merger will be, acceptable to the portfolio sub-advisors of the Continuing Fund and are consistent with the investment objective of the Continuing Fund. These portfolios will be allocated to the Continuing Fund upon the Proposed Merger. No sales charges will be payable in respect of this allocation.

19. Mackenzie will pay for the costs of the Proposed Merger. These costs consist mainly of any brokerage charges associated with any merger-related trades that occur both before and after the date of the Proposed Merger and legal, proxy solicitation, printing, mailing and regulatory fees.

20. A material change report in respect of, among other things, the Proposed Merger was filed via SEDAR on October 12, 2006 and an amendment to the simplified prospectus and annual information form of the Terminating Funds dated October 12, 2006 was filed via SEDAR.

21. A management information circular in connection with the Proposed Merger was filed on SEDAR and was mailed to shareholders of the Terminating Funds on or about November 8, 2006.

22. Subject to the required approval of the Authorities and shareholders, the Proposed Merger will be implemented on or about December 8, 2006.

23. Mackenzie believes that the Proposed Merger would not satisfy all of the criteria for pre-approved reorganisations and transfers set forth in section 5.6 of NI 81-102 since a reasonable person would conclude that the Funds do not have substantially similar investment objectives and Mackenzie cannot provide the current simplified prospectus and the most recent annual and interim financial statements for the Continuing Fund, nor can it provide a statement describing how shareholders may obtain the annual information form for the Continuing Fund in the information circular sent to shareholders of the Terminating Funds.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decision has been met. The decision of the Decision Makers under the Legislation is that the Requested Relief is hereby granted provided that the shareholders of the Terminating Funds receive prospectus level disclosure with respect to the details of the Proposed Merger.

Leslie Byberg"
Manager, Investment Funds Branch
Ontario Securities Commission