National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from multi-layering prohibition to permit mutual funds to invest in securities of mutual funds that invest more than 10% of the market value of their net assets in underlying funds -- each underlying fund uses derivatives to obtain the returns of a related money market fund -- each underlying fund is substantially similar to a money market fund -- National Instrument 81-102 Mutual Funds.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 2.5(2)(b), 2.5(4)(b)(i), 19.1.
August 25, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
GOODMAN & COMPANY,
INVESTMENT COUNSEL LTD.
IN THE MATTER OF
THE MARQUIS INVESTMENT PROGRAM
MUTUAL FUNDS CURRENTLY MANAGED
BY THE FILER AS LISTED IN SCHEDULE A
(the "Existing Marquis Funds") AND THE
MARQUIS INVESTMENT PROGRAM MUTUAL
FUNDS THE FILER WILL MANAGE IN THE FUTURE
(together with the Existing Marquis Funds,
the "Marquis Funds")
The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Marquis Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") granting an exemption from section 2.5(2)(b) of National Instrument 81-102 Mutual Funds ("NI 81-102") to permit the Marquis Funds, as the top funds in the four-tier fund-of-fund structure described below, to invest in a CC Fund (as defined below) when the CC Fund's investment in the MY Pools (as defined below) exceeds 10% of the market value of the CC Fund's net assets (the "Exemption Sought").
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, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, Northwest Territories, Nunavut and Yukon.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer and Mackenzie Financial Corporation ("Mackenzie"):
1. The Filer is, or will be, the manager of the Marquis Funds. The head office of the Filer is located in Toronto, Ontario.
2. Each of the Marquis Funds is, or will be, a mutual fund that:
(a) is a reporting issuer in all of the provinces and territories of Canada;
(b) offers securities under a simplified prospectus and annual information form filed in all of the provinces and territories of Canada; and
(c) directly or indirectly invests primarily in securities of other mutual funds, which may include the CC Funds, to achieve its investment objective.
3. Mackenzie is, or will be, the manager of mutual funds that consist of classes (the "CC Funds") of Mackenzie Financial Capital Corporation, a mutual fund corporation established under the laws of Ontario. Mackenzie is also the manager of Mackenzie Sentinel Canadian Short-Term Yield Pool (formerly, Mackenzie Sentinel Canadian Managed Yield Pool) and Mackenzie Sentinel U.S. Short-Term Yield Pool (formerly, Mackenzie Sentinel U.S. Managed Yield Pool) (together, the "MY Pools"). Mackenzie is also the manager of Mackenzie Sentinel Canadian Money Market Pool and Mackenzie Sentinel U.S. Money Market Pool (together, the "Current Underlying MMFs") and will be the manager of any other Mackenzie money market fund that may in the future be an underlying fund for the MY Pools (together with the Current Underlying MMFs, the "Underlying MMFs") (the CC Funds, the MY Pools and the Underlying MMFs, collectively the "Mackenzie Managed Funds").
4. Each of the Mackenzie Managed Funds is, or will be, a reporting issuer in all of the provinces and territories of Canada. Securities of the Mackenzie Managed Funds are, or will be, offered under simplified prospectuses and annual information forms filed in all of the provinces and territories of Canada.
5. The investment objective of each of Mackenzie Sentinel Canadian Short-Term Yield Pool and Mackenzie Sentinel U.S. Short-Term Yield Pool is to provide tax-efficient returns similar to those of a Canadian money market fund managed by Mackenzie and a U.S. money market fund managed by Mackenzie, respectively. Each of Mackenzie Sentinel Canadian Short-Term Yield Pool and Mackenzie Sentinel U.S. Short-Term Yield Pool will seek to achieve its objective by investing in equity securities and selling those equity securities to a counterparty through a forward contract with the price being equal to the return on a Canadian money market fund managed by Mackenzie (currently, Mackenzie Sentinel Canadian Money Market Pool) and a U.S. money market fund managed by Mackenzie (currently, Mackenzie Sentinel U.S. Money Market Pool), respectively.
6. Each of the Underlying MMFs is, or will be, a "money market fund" as defined in section 1.1 of NI 81-102.
7. Because substantially all of the assets of each MY Pool are, or will be, invested in units of its Underlying MMF through the use of forward contracts, each MY Pool is not, or will not be, a "money market fund" as defined in section 1.1 of NI 81-102.
8. The CC Funds wish to invest their cash in the MY Pools to achieve tax savings for the benefit of their securityholders. Such investments will exceed 10% of the net assets of the CC Funds from time to time.
9. Absent the Exemption Sought, section 2.5(2)(b) of NI 81-102 would prohibit the Marquis Funds from investing in a CC Fund if the CC Fund's investment in the MY Pools exceeds 10% of its net assets.
10. Any investment by the Marquis Funds in the CC Funds will be made in accordance with the provisions of section 2.5 of NI 81-102, except for the requirement in section 2.5(2)(b) that a mutual fund not invest in another mutual fund if the other mutual fund holds more than 10% of the market value of its net assets in securities of other mutual funds.
11. An investment by each Marquis Fund in the CC Funds will represent the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Marquis Fund, and an investment by each CC Fund in the MY Pools will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the CC Fund.
12. Each of the Filer, Mackenzie, the Existing Marquis Funds, the existing CC Funds, the MY Pools and the Current Underlying MMFs is not in default of any requirements of the securities legislation in any jurisdiction.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make a decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted.
Schedule A -
Marquis Investment Program mutual funds
currently managed by the Filer
Marquis Institutional Solutions
Marquis Portfolio Solutions