Mackenzie Financial Corporation et al.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from sections 2.3(f), 2.3(h), 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 Mutual Funds to permit mutual funds to invest up to 10% of net assets in aggregate in underlying ETFs which may be leveraged index bull and bear ETFs, inverse ETFs, leveraged gold ETFs, leveraged silver ETFs, metals ETFs, traded on Canadian or US stock exchanges, subject to certain conditions.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.3(f), 2.3(h), 2.5(2)(a), 2.5(2)(c), 19.1.

November 9, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATION IN MULTIPLE JURISDICTION

AND

IN THE MATTER OF

MACKENZIE FINANCIAL CORPORATION

(the Manager)

AND

IN THE MATTER OF

MACKENZIE UNIVERSAL GOLD BULLION CLASS,

MACKENZIE UNIVERSAL PRECIOUS METALS FUND,

MACKENZIE UNIVERSAL WORLD PRECIOUS METALS CLASS,

MACKENZIE UNIVERSAL WORLD RESOURCE CLASS

(collectively, the Precious Metals Funds)

BACKGROUND

The principal regulator in the Jurisdiction has received an application from the Manager for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for the following relief:

(a) exempting the Precisions Metals Funds from the prohibitions contained in paragraphs 2.3(f), 2.3(h), 2.5(2)(a), and 2.5(2)(c) of National Instrument 81-102 Mutual Funds, in order to permit the Precious Metals Funds to purchase and hold securities of the following types of exchange-traded funds (the Underlying ETFs):

a. Leveraged ETFs comprising of the following:

i. exchange-traded funds that seek to provide daily results that replicate the daily performance of a specified widely-quoted market index (the Underlying Index) by a multiple of up to 200% (Leveraged Bull ETFs), or an inverse multiple of up to 200% (Leveraged Bear ETFs, which together with Leveraged Bull ETFs are referred to collectively in this decision as Leveraged Index ETFs);

ii. exchange-traded funds that seek to provide daily results that replicate the daily performance of their Underlying Index by an inverse multiple of up to 100% (Inverse ETFs);

iii. exchange-traded funds that seek to provide daily results that replicate the daily performance of gold and/or silver, or the value of a specified derivative the underlying interest of which is gold and/or silver by a multiple of up to 200% (Leveraged Gold ETFs and Leveraged Silver ETFs, respectively); and

b. Metals ETFs comprising of exchange-traded funds that seek to replicate the performance of gold, silver, platinum, palladium and/or rhodium on an unlevered basis, or the value of a specified derivative the underlying interest of which is gold, silver, platinum, palladium and/or rhodium on an unlevered basis; and

(b) revoking the decision document granted by the Principal Regulator on January 13, 2009 (the Previous Decision), insofar as the Previous Decision applied to the Precious Metals Funds

(collectively, 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 Manager 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.

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.

REPRESENTATIONS

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

The Manager and the Precious Metals Funds

1. The Manager is a corporation governed by the laws of Ontario, is registered as a Portfolio Manager and Exempt Market Dealer in each Canadian jurisdiction, and has applied for registration in Ontario as an Investment Fund Manager. The Manager is also registered in Ontario under the Commodity Futures Act (Ontario) in the category of Commodity Trading Manager.

2. Each Precious Metals Fund is an open-end mutual fund trust or a class of shares of a mutual fund corporation established under the laws of Ontario.

3. The Manager is the investment fund manager and portfolio manager of the Precious Metals Funds.

4. Each Precious Metals Fund is qualified for distribution in all provinces and territories of Canada under a simplified prospectus and annual information form prepared in accordance with National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101), and receipted by the securities regulators in the applicable jurisdictions.

5. Each Precious Metals Fund is governed by the provisions of NI 81-102, and a reporting issuer in all of the provinces and territories of Canada.

6. Neither the Manager, nor any of the Precious Metals Funds, is in default of securities legislation in any province or territory of Canada.

Investment in Underlying ETFs

7. Each Underlying ETF will be a "mutual fund" (as such term is defined under the Securities Act (Ontario)), and will be listed and traded on a stock exchange in Canada or the United States.

8. Each Leveraged Index ETF will be rebalanced daily to ensure that its performance and exposure to its Underlying Index will not exceed +/- 200% of the corresponding daily performance of its Underlying Index.

9. Each Inverse ETF will be rebalanced daily to ensure that its performance and exposure to its Underlying Index will not exceed -100% of the corresponding daily performance of its Underlying Index.

10. Each Leveraged Gold ETF and Leveraged Silver ETF will be rebalanced daily to ensure that its performance and exposure to its underlying gold or silver interest, respectively, will not exceed +200% of the corresponding daily performance of its underlying gold or silver interest, respectively. 11. The leverage will be limited and monitored daily.

12. The maximum loss that can result from an investment by a Precious Metals Fund in an Underlying ETF will be limited to the amount invested by the Precious Metals Fund in securities of that Underlying ETF.

13. The Manager submits that there are no liquidity concerns with permitting the Precious Metals Funds to invest in an Underlying ETF.

14. The Manager submits that the Requested Relief will give the Precious Metals Funds additional flexibility in certain market conditions, which may otherwise cause a Precious Metals Fund to have significant cash positions and, therefore, deter from its ability to achieve its investment objectives.

15. The use of Metals ETFs are attractive investments for the Precious Metals Funds, as they provide efficient and cost effective means of achieving exposure to gold, silver, platinum, palladium and rhodium, and present no greater volatility than holding such metals as physical commodities.

16. As the aggregate investments in the Underlying ETFs would be 10% or less of the net assets of the Precious Metals Fund, taken at the market value thereof at the time of the investment, the Manager submits that there would be no significant change to the risk profile of a Precious Metals Fund.

17. The Precious Metals Funds will not invest in leveraged Metals ETFs or inverse Metals ETFs other than Leveraged Gold ETFs and Leveraged Silver ETFs.

18. Mackenzie Universal Gold Bullion Class will not purchase or hold ETFs with an underlying interest in rhodium, since it is not otherwise permitted to invest in rhodium directly.

19. An investment by a Precious Metals Fund in securities of an Underlying ETF will represent the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Precious Metals Fund.

Previous Decision

20. The Previous Decision exempts mutual funds managed by the Manager or an affiliate of the Manager, currently and in the future, from paragraph 2.5(2)(a) of NI 81-102, permitting those funds to invest in certain funds managed by BetaPro Management Inc. Upon obtaining the Requested Relief, the Precious Metals Funds will not rely on the Previous Decision.

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:

(a) the investment by a Precious Metals Fund in securities of an Underlying ETF is in accordance with the fundamental investment objectives of the Precious Metals Fund;

(b) the securities of the Underlying ETFs are traded on a stock exchange in Canada or United States;

(c) the securities of the Underlying ETFs are treated as specified derivatives for the purposes of Part 2 of NI 81-102;

(d) a Precious Metals Fund does not short sell securities of an Underlying ETF;

(e) a Precious Metals Fund does not purchase securities of an Underlying ETF, if immediately after the transaction, more than 10% of the net assets of the Precious Metals Fund in aggregate, taken at market value at the time of the purchase, would consist of securities of the Underlying ETFs;

(f) if a Precious Metals Fund is permitted to short sell, the Precious Metals Fund does not enter into any transaction if, immediately after the transaction, more than 20% of the net assets of the Precious Metals Fund, taken at market value at the time of the transaction, would consist of, in aggregate, securities of the Underlying ETFs and all securities sold short by the Precious Metals Fund; and

(g) the prospectus of each Precious Metals Fund discloses, or will disclose the next time it is renewed after the date hereof, in the Investment Strategy section of the prospectus, the fact that the Precious Metals Fund has obtained relief to invest in Underlying ETFs, together with the risks associated with investments in the Underlying ETFs, to the extent they differ from direct investments in precious metals, securities or the use of derivatives generally.

"Chantal Mainville"
Acting Manager
Investment Funds Branch