Mutual Reliance Review System for Exemptive Relief Applications -- Approval of mutual fund mergers -- Terminating and Continuing Funds not having substantially similar fundamental investment objectives -- Tailored simplified prospectus rather than full simplified prospectus of Continuing Fund sent to unitholders of Terminating Funds -- Financial statements of Continuing Funds not sent to unitholders of Terminating Funds.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6.
June 5, 2007
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK,
NOVA SCOTIA, PRINCE EDWARD ISLAND,
NEWFOUNDLAND AND LABRADOR, YUKON
TERRITORY, NORTHWEST TERRITORIES AND
IN THE MATTER OF THE
MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
MACKENZIE FINANCIAL CORPORATION
(the "Filer" or "Mackenzie")
GWLIM US MID CAP FUND, LLIM US EQUITY FUND
AND LLIM US GROWTH SECTORS FUND
(collectively, the "Terminating Funds")
MRRS DECISION DOCUMENT
The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer on behalf of the Terminating Funds for a decision under the securities legislation of the Jurisdictions (the "Legislation") approving the Mergers (defined below) pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Mutual Funds ("NI 81-102") (the "Requested Relief").
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.
Defined terms contained in National Instrument 14-101 - Definitions have the same meaning in this decision unless they are defined in this decision.
This decision is based on the following facts represented by Mackenzie:
1. Mackenzie is a corporation governed by the laws of Ontario and is the manager and trustee of the Funds (defined below).
2. The Funds are sold by Quadrus Investment Services Ltd. ("Quadrus") in its capacity as principal distributor of the Funds.
3. Each Fund is an open-end mutual fund trust created under the laws of Ontario. The Funds are members of the "Quadrus Group of Funds" and offer the Quadrus Series of units and the H Series of units in all provinces and territories of Canada under a simplified prospectus and annual information form dated June 26, 2006, as amended (the "Funds' Prospectus"). Under certain circumstances, the Funds also offer Series S units on a privately-placed basis in accordance with National Instrument 45-106 Prospectus and Registration Exemptions.
4. In its capacity as manager and trustee of the Funds, Mackenzie proposes to merge (each a "Merger" and collectively, the "Mergers"):
a) GWLIM US Mid Cap Fund ("GWLIM US") into GWLIM Canadian Mid Cap Fund ("GWLIM Canadian");
b) LLIM US Equity Fund into LLIM Canadian Diversified Equity Fund ("LLIM Canadian Diversified"); and
c) LLIM US Growth Sectors Fund into LLIM Canadian Diversified,
(GWLIM Canadian and LLIM Canadian Diversified are collectively referred to as the "Continuing Funds" and, together with the Terminating Funds, the "Funds").
5. Unitholders of the Terminating Funds will be asked to approve the Mergers at respective special meetings of unitholders scheduled to be held on or about June 13, 2007.
6. Implicit in the expected approval by unitholders of the Mergers is the adoption by the Terminating Funds of the fundamental investment objectives of its corresponding Continuing Fund. In this regard, one of the Continuing Funds (GWLIM Canadian) is seeking approval for a change in its fundamental investment objective at a special meeting of unitholders of GWLIM Canadian to be held on the same day that unitholders of GWLIM US are voting on the proposed Merger with GWLIM Canadian. Investors in GWLIM US are being asked to review those parts of the information circular which describe the proposed change in fundamental investment objective for GWLIM Canadian when considering the merits of the proposed Merger of GWLIM US into GWLIM Canadian.
7. Quadrus will pay all costs and expenses relating to the solicitation of proxies and the holding of unitholder meetings in connection with the Mergers.
8. The Funds are reporting issuers under the applicable securities legislation of each province of Canada and are not on the list of defaulting reporting issuers maintained under the applicable securities legislation of the Decision Makers.
9. Unless an exemption has been obtained, each of the Funds follows the standard investment restrictions and practices established by the Decision Makers.
10. The net asset value for each series of units of each of the Funds is calculated on a daily basis on each day that The Toronto Stock Exchange is open for trading.
11. Unitholders of the Terminating Funds will continue to have the right to redeem units 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 applicable Merger.
12. Each of the Mergers will be structured as a "qualifying exchange" within the meaning of section 132.2 of the Income Tax Act (Canada).
13. Subject to the required approval of the Decision Maker and unitholders, the Mergers will be implemented on or about June 15, 2007.
14. Following the Mergers, the Continuing Funds will continue as publicly offered open-end mutual funds and the Terminating Funds will be wound up as soon as reasonably practicable.
15. A press release, material change report and an amendment to the Funds' Prospectus were filed on SEDAR in March 2007 in connection with the Mergers in accordance with the Funds' continuous disclosure obligations set forth in Part 11 of National Instrument 81-106 Investment Fund Continuous.
16. Management information circulars in connection with the Mergers will be timely filed on SEDAR and otherwise mailed to unitholders of the Terminating Funds on or about May 15, 2007.
17. Approval of the Mergers is required because the Mergers do not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 because the fundamental investment objectives of the Terminating Funds are not substantially similar to the fundamental investment objectives of the Continuing Funds, as would be required under clause 5.6(1)(a)(ii). Pre-approval under section 5.6 of NI 81-102 is also not available because a custom-made document, consisting of Part A and the relevant Part B of the Funds' Prospectus will, in connection with the Mergers, be delivered to security holders of the Terminating Funds instead of the full Funds' Prospectus as would be required under clause 5.6(1)(f)(ii) of NI 81-102. In addition, the financial statements of the Continuing Funds will not be delivered to securityholders of the Terminating Funds, as would be required under clause 5.6(1)(f)(ii) of NI 81-102.
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker 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 approved.