Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Approval of mutual fund mergers. Current simplified prospectus of the continuing funds not required to be sent to securityholders of the terminating funds provided that a tailored simplified prospectus is sent. Financial statements of the continuing funds not required to be sent to securityholders of the terminating funds provided that the information circular discloses how those financial statements may be obtained.

Applicable Legislative Provisions

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

May 17, 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,

NORTHWEST TERRITORIES, YUKON

AND NUNAVUT

(the "Jurisdictions")

AND

IN THE MATTER OF

NATIONAL INSTRUMENT 81-102 MUTUAL FUNDS

("NI 81-102")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

I.G. INVESTMENT MANAGEMENT, LTD.

(the "Manager")

and

IG MACKENZIE SELECT MANAGERS CANADA FUND

IG MACKENZIE SELECT MANAGERS CANADA CLASS

IG AGF ASIAN GROWTH FUND

IG AGF ASIAN GROWTH CLASS

MACKENZIE UNIVERSAL U.S. GROWTH

LEADERS FUND: IG SERIES UNITS

MACKENZIE UNIVERSAL GLOBAL FUTURE FUND:

IG SERIES UNITS

(collectively, the "Terminating Funds")

AND

IG MACKENZIE UNIVERSAL U.S. GROWTH

LEADERS CLASS

IG MACKENZIE UNIVERSAL GLOBAL FUTURE CLASS

(collectively, the "Mackenzie Class Funds")

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Manager, the Terminating Funds and the Mackenzie Class Funds (collectively, the "Filers") for a decision under the securities legislation of the Jurisdictions (the "Legislation") for approval under paragraph 5.5(1)(b) of NI 81-102 of the Mergers of the Terminating Funds into the applicable Continuing Funds (as defined below).

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) The Manitoba 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. The following additional terms shall have the following meanings:

"Continuing Funds" means IG Mackenzie Maxxum Canadian Equity Growth Fund, IG Mackenzie Maxxum Canadian Equity Growth Class, Investors Pacific International Fund, Investors Pacific International Class, IG Mackenzie Universal U.S. Growth Leaders Class, and IG Mackenzie Universal Global Future Class;

"Corporate Class Funds" means IG Mackenzie Select Managers Canada Class, IG Mackenzie Maxxum Canadian Equity Growth Class, IG AGF Asian Growth Class, Investors Pacific International Class, IG Mackenzie Universal U.S. Growth Leaders Class, and IG Mackenzie Universal Global Future Class;

"Corporate Class Fund Mergers" means the merger of the IG Mackenzie Select Managers Canada Class into IG Mackenzie Maxxum Canadian Equity Growth Class, and the merger of IG AGF Asian Growth Class into Investors Pacific International Class;

"Fund" or "Funds" means, individually or collectively, the Terminating Funds and the Continuing Funds;

"Mackenzie Universal Funds" means the Mackenzie Universal U.S. Growth Leaders Fund and the Mackenzie Universal Global Future Fund;

"Mackenzie Universal Mergers" means the merger of the IG Series units of Mackenzie Universal U.S. Growth Leaders Fund into IG Mackenzie Universal U.S. Growth Leaders Class, and the merger of the IG Series units of Mackenzie Universal Global Future Fund into IG Mackenzie Universal Global Future Class;

"Meeting" or "Meetings" means one or more special meetings of securityholders of the Terminating Funds, as applicable, to approve the Mergers;

"Mergers" means the Corporate Class Fund Mergers, the Mackenzie Universal Mergers and the Unit Trust Fund Mergers (and each individually referred to separately as a "Merger");

"Tax Act" means the Income Tax Act (Canada);

"Unit Trust Funds" means IG Mackenzie Select Managers Canada Fund, IG Mackenzie Maxxum Canadian Equity Growth Fund, IG AGF Asian Growth Fund, Investors Pacific International Fund, Mackenzie Universal U.S. Growth Leaders Fund, and Mackenzie Universal Global Future Fund; and

"Unit Trust Fund Mergers" means the merger of the IG Mackenzie Select Managers Canada Fund into IG Mackenzie Maxxum Canadian Equity Growth Fund, and the merger of IG AGF Asian Growth Fund into Investors Pacific International Fund.

Representations

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

1. The Manager is a corporation established under the laws of Canada, and is a wholly owned subsidiary of IGM Financial Inc., a public company listed on the Toronto Stock Exchange. It is the manager of the Funds (but just of the IG Series units of the Mackenzie Universal Funds) and is registered as an Investment Counsel/Portfolio Manager (or the equivalent) in both Manitoba and Ontario. The head office of the Manager is in Winnipeg, Manitoba and, accordingly, Manitoba has been selected as the principal regulator for this application.

2. Each of the Unit Trust Funds is an open-end mutual fund trust established by separate Declarations of Trust or Trust Agreements under the laws of Manitoba (or the laws of Ontario in the case of the Mackenzie Universal Funds). Investors Group Trust Co. Ltd. (head office in Winnipeg) was the trustee (the "Trustee") of the Unit Trust Funds until April 20, 2007 when the Manager, an affiliate of Investors Group Trust Co. Ltd., took over as trustee of the Unit Trust Funds.

3. The Corporate Class Funds are open-end mutual funds that are separate classes of shares issued by Investors Group Corporate Class Inc. ("IGCC"), a corporation governed by the Canada Business Corporations Act. The head office of IGCC is in Winnipeg, Manitoba.

4. Each of the Funds is a reporting issuer under the Legislation in each Jurisdiction and is not on the list of defaulting reporting issuers maintained under the Legislation in each Jurisdiction. The securities of each of the Unit Trust Funds are qualified for distribution in each of the Jurisdictions pursuant to a combined simplified prospectus and AIF (collectively referred to as the "Masterseries Prospectus") dated June 30, 2006 (except for the IG Mackenzie Maxxum Canadian Equity Growth Fund which is sold under a separate simplified prospectus and AIF dated July 12, 2006). The securities of each of the Corporate Class Funds are qualified for distribution in of the Jurisdictions pursuant to a combined simplified prospectus and AIF (collectively referred to as the "Corporate Class Prospectus") dated June 30, 2006 (except for the IG Mackenzie Maxxum Canadian Equity Growth Class which is sold under a separate simplified prospectus and AIF dated July 17, 2006).

5. Each Corporate Class Fund issues 2 series of mutual fund shares to retail purchasers. Each Unit Trust Fund issues 3 series of units to retail purchasers, except the Mackenzie Universal Funds. The Mackenzie Universal U.S. Growth Leaders Fund offers 11 Series of Units, of which the Manager manages and distributes exclusively 4 series comprising the IG Series Units, and Mackenzie Financial Corporation ("Mackenzie Financial") manages 7 series. The Mackenzie Universal Global Future Fund offers 10 Series of Units, of which the Manager manages and distributes exclusively 3 series comprising the IG Series Units, and Mackenzie Financial manages 7 series. The series managed by Mackenzie Financial (for both of these Funds referred to collectively as the "Mackenzie Series") are distributed through various other distribution networks. The Mackenzie Series are not a part of the Mackenzie Universal Mergers involving the Mackenzie Universal Funds.

6. The Manager proposes that each Terminating Fund be merged into the applicable Continuing Fund, as described in the Mergers defined above.

7. Meetings of the securityholders of the Terminating Funds are being convened on or about June 15, 2007, to approve the Mergers of each Terminating Fund. A notice of meeting, a management information circular, and a proxy in connection with meetings of securityholders of the Terminating Funds (collectively, the "Meeting Materials"), as well as a tailored document consisting of the Part A and the Part B of the simplified prospectus for the relevant Continuing Fund as set out in the current simplified prospectuses of the Continuing Funds have been mailed to securityholders of the Terminating Funds, commencing on or after May 8, 2007, and will be filed via SEDAR.

8. The tax implications of the Mergers, as well as the differences between the Terminating Funds and the Continuing Funds, will be described in the Meeting Materials so securityholders of the Terminating Funds will be fully informed when considering whether to approve the Mergers of their Funds at the Meetings. Accordingly, implicit in the approval by securityholders of the Mergers is the acceptance by each Terminating Fund of the proposed tax treatment and the adoption by each Terminating Fund of the investment objective and fee structure of the applicable Continuing Fund.

9. Amendments to the simplified prospectuses and annual information forms of the Terminating Funds, and a material change report will be filed on SEDAR with respect to the Mergers as required by the Legislation of the Jurisdictions on or after April 24, 2007.

10. The Terminating Funds will merge into the applicable Continuing Funds on or about the close of business on July 20, 2007, and the Continuing Funds will continue as publicly offered open-end mutual funds.

11. The Terminating Funds will be wound up as soon as reasonably possible following the Mergers, except for the Mackenzie Universal Funds which will continue as publicly offered open-end mutual funds after the Mergers for the Mackenzie Series and other future series of units managed by Mackenzie Financial, although the IG Series Units of the Mackenzie Universal Funds will be wound-up as soon as reasonably possible after the Mergers.

12. No sales charges will be payable in connection with the acquisition by the Continuing Funds of the investment portfolios of the Terminating Funds.

13. Securityholders of the Terminating Funds will continue to have the right to redeem securities of the Terminating Funds for cash at any time up to the close of business on the effective date of the Mergers.

14. Other than circumstances in which the securities regulatory authority of a Jurisdiction has expressly exempted a Fund there from, each of the Funds follows the standard investment restrictions and practices established under the Legislation of the Jurisdictions.

15. The net asset value of each series of the Funds is calculated on a daily basis on each day that the Manager is open for business.

16. Each of the Continuing Funds and the applicable Terminating Funds, other than the mergers involving the IG Maxxum Select Managers Canada Fund and IG Maxxum Select Managers Canada Class, has substantially similar fundamental investment objectives and strategies.

17. The Portfolio securities and other assets of each Terminating Fund to be acquired by the applicable Continuing Fund arising from the Mergers are currently (or will be) acceptable prior to the effective date of the Mergers to the Portfolio Advisors of the applicable Continuing Fund, and are (or will be) consistent with the investment objectives of the applicable Continuing Fund, except:

(i) for the Mergers involving the IG Maxxum Select Managers Canada Fund and IG Maxxum Select Managers Canada Class, where it is anticipated that up to 20-30% of the assets of the Terminating Funds may have to be rationalized prior to or after the Mergers; and

(ii) for the Mergers involving the IG AGF Asian Growth Fund and IG AGF Asian Growth Class, where it is anticipated that up to 5-10% of the assets of the Terminating Funds may have to be rationalized prior to or after the Mergers.

18. The Manager will pay for all direct costs associated with the Mergers, including legal, proxy solicitation, printing, mailing, brokerage transaction fees associated with the merger related trades referred to in paragraph 17, and regulatory fees.

19. The fee structure of each Terminating Fund is (or will be) substantially similar to the fee structure of the applicable Continuing Fund, except for the Mergers involving the Mackenzie Class Funds which do not have Series 'C' units. The IG Series 'C' securityholders of each Mackenzie Universal Fund will vote separately to approve the Mergers of their Funds into the applicable Continuing Fund.

20. Approval of the Mergers is required because each Merger does not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 in the following ways:

(a) contrary to section 5.6(1)(a)(ii) of NI 81-102, in the Mackenzie Universal Mergers a reasonable person may not consider the Continuing Funds as having substantially similar fee structures, and the Mergers involving the IG Maxxum Select Managers Canada Fund and IG Maxxum Select Managers Canada Class, respectively, a reasonable person may not consider the Continuing Funds as having substantially similar fundamental investment objectives, as the Terminating Funds;

(b) contrary to section 5.6(1)(b) of NI 81-102, the merger of IG AGF Growth Fund into Investors Pacific International Fund will not be a 'qualifying exchange' within the meaning of section 132.2 of the Tax Act or a tax-deferred transaction under sub-section 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act;

(c) contrary to section 5.6(1)(c) of NI 81-102, the Mackenzie Universal Funds will not be wound-up after the Mackenzie Universal Mergers because only the IG Series units of these Terminating Funds are merging into the relevant Continuing Funds;

(d) contrary to section 5.6(1)(d)(ii) of NI 81-102, not all of the portfolio assets of the Terminating Funds are acceptable to the Portfolio Advisor of all of the Continuing Funds;

(e) contrary to section 5.6(1)(e)(i) of NI 81-102, not all of the securityholders of the Mackenzie Universal Funds are being asked to approve the Mackenzie Universal Mergers as the Mackenzie Series of the Terminating Funds will continue after the mergers and are not involved in the mergers as the mergers involve only the IG Series units of those Terminating Funds;

(f) contrary to section 5.6(1)(f)(ii) of NI 81-102, the current simplified prospectuses and most recent financial statements for the Continuing Funds will not be sent to the securityholders of the Terminating Funds but, instead, the Manager will send to each securityholder of a Terminating Fund the following:

(i) a tailored document, consisting of the Part A and the Part B for the relevant Continuing Fund, as set out in the current simplified prospectus of the Continuing Fund filed on SEDAR; and

(ii) a management information circular fully describing the relevant Merger, which prominently discloses that the most recent audited financial statements of the Continuing Funds can be obtained by accessing the SEDAR website at www.sedar.com, by accessing the Investors Group website at www.investorgroup.com, by calling Investors Group at a toll-free telephone number, or by submitting a request to Investor Group as described in the meeting notice and management information circular with respect to the Mergers.

21. The securityholders of the Continuing Funds involved in the Mackenzie Universal Mergers will not be asked to approve these Mergers although they entail the merger of a larger Fund into a smaller Fund because there is no material change to the Continuing Funds. There is no material change since the fundamental investment objectives are substantially similar, all of the portfolio assets are acceptable to the Continuing Fund's portfolio advisor, and there are no adverse effects on the Continuing Funds;

22. The Manager believes that the Mergers will benefit securityholders of each Terminating Fund and Continuing Fund as follows:

(a) securityholders of the applicable Terminating Fund and the Continuing Fund may enjoy increased economies of scale, and may experience lower fund operating expenses, as part of a larger combined Continuing Fund, thereby providing the opportunity for lower MERs and the potential for enhanced and more stable performance in the future;

(b) each Continuing Fund will have a portfolio of greater size, allowing for increased portfolio diversification opportunities, and the potential for portfolio diversification is expected to improve (in some cases) because some Continuing Funds have a more flexible investment mandate than the applicable Terminating Funds;

(c) securityholders of some Terminating Funds, and for at least one Continuing Fund, will benefit from lower management and other fees;

(d) to the extent that securities in the portfolios of the Terminating Funds are transferred to the Continuing Funds, there will be a savings in brokerage charges as compared to the costs associated with having any Terminating Fund wound-up and, through the Mergers, the Manager will bear the brokerage transaction costs arising from a Merger (if any);

(e) the Mergers will eliminate the administrative and regulatory costs of operating each Terminating Fund as a separate mutual fund, and additionally, the bifurcation of the IG Series Units from the Mackenzie Universal Funds will eliminate any public and securityholder confusion and costs associated with the preparation, filing and distribution of two separate sets of Management Reports of Fund Performance and financial statements (for the IG Series units and Mackenzie Series units, respectively). These Mergers will also eliminate the duplication of time, effort and costs associated with the audit, board review, and other compliance requirements arising from the Mackenzie Universal Funds having a different fiscal year-end than the other mutual funds under common management of the Manager, thereby further simplifying the ongoing administration of the assets of the IG Series Units of the Mackenzie Universal Funds; and

(f) each Continuing Fund, as a result of its greater size, will benefit from its larger profile in the marketplace.

Decision

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 Mergers are approved, provided that:

(a) the information circular sent to securityholders in connection with a Merger provides sufficient information about the Merger to permit securityholders to make an informed decision about the Merger;

(b) the information circular sent to securityholders in connection with a Merger prominently discloses that securityholders can obtain the most recent interim and annual financial statements of the applicable Continuing Fund by accessing the SEDAR website at www.sedar.com, by accessing the Investors Group website, by calling Investors Group's toll-free telephone number, or by faxing a request to Investors Group;

(c) upon request by a securityholder for financial statements, the Manager will make best efforts to provide the securityholder with financial statements of the applicable Continuing Fund in a timely manner so that the securityholder can make an informed decision regarding a Merger;

(d) each applicable Terminating Fund and the applicable Continuing Fund with respect to a Merger have an unqualified audit report in respect of their last completed financial period; and

(e) the material sent to securityholders in respect of a Merger includes a tailored simplified prospectus consisting of:

(i) the current Part A of the simplified prospectus of the applicable Continuing Fund, and

(ii) the current Part B of the simplified prospectus of the applicable Continuing Fund.

"R. B. Bouchard"
Director, Corporate Finance
The Manitoba Securities Commission