Mackenzie Financial Corporation et al.

Headnote

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 81-1012 Mutual Funds, ss. 2.5, 2.5(2)(b), 19.1.

January 29, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

MACKENZIE FINANCIAL CORPORATION

("Mackenzie"),

SCOTIA SECURITIES INC. AND

NORTHWEST & ETHICAL INVESTMENTS L.P.

(the "Third Party Managers") (collectively, the "Filers")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers on behalf of the mutual funds they currently manage and other mutual funds that will be managed by a Filer or an affiliate of a Filer in the future for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") granting an exemption from paragraph 2.5(2)(b) of National Instrument 81-102 Mutual Funds ("NI 81-102") that prohibits a mutual fund from investing 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 (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 Filers have 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 Filers:

1. Mackenzie or an affiliate thereof is, or will be, the manager of mutual funds that offer, or will offer, securities under simplified prospectuses and annual information forms filed in some or all of the provinces and territories of Canada (the "Mackenzie Funds").

2. Each Third Party Manager or an affiliate thereof is, or will be, the manager of mutual funds that offer, or will offer, securities under simplified prospectuses and annual information forms filed in some or all of the provinces and territories of Canada (the "Third Party Funds", and together with the Mackenzie Funds, the "Funds").

3. The head office of each of the Filers is located in Ontario.

4. Mackenzie is 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. Securities of the CC Funds are offered under simplified prospectuses and annual information forms filed in all the provinces and territories of Canada.

5. The Funds are, or will be, mutual funds that directly or indirectly invest primarily in securities of other mutual funds, including the CC Funds, to achieve their investment objectives.

6. Mackenzie is also the manager of Mackenzie Sentinel Canadian Managed Yield Pool and Mackenzie Sentinel U.S. Managed Yield Pool (together, the "MY Pools"). Series R shares of the MY Pools are offered under a simplified prospectus and annual information form filed in all the provinces and territories of Canada. However, investment in the MY Pools is only available to other mutual funds managed by Mackenzie, including the CC Funds.

7. The investment objective of the Mackenzie Sentinel Canadian Managed Yield Pool is to provide tax-efficient returns similar to those of a Canadian money market fund managed by Mackenzie. It will achieve this objective by investing in equity securities and selling those equity securities to a counterparty by use of a forward contract with the price being equal to the return on Mackenzie Sentinel Canadian Money Market Pool (the "Canadian Underlying Fund").

8. The investment objective of the Mackenzie Sentinel U.S. Managed Yield Pool is to provide tax-efficient returns similar to those of a U.S. money market fund managed by Mackenzie. It will achieve this objective by investing in equity securities and selling those equity securities to a counterparty by use of a forward contract with the price being equal to the return on Mackenzie Sentinel U.S. Money Market Pool (the "U.S. Underlying Fund", together with the Canadian Underlying Fund, the "Underlying Funds").

9. Each of the Underlying Funds is a "money market fund" as defined in section 1.1 of NI 81-102.

10. Because substantially all of the assets of each MY Pool are invested in units of its Underlying Fund through the use of forward contracts, each MY Pool is not a "money market fund" as defined in section 1.1 of NI 81-102.

11. The CC Funds regularly have cash balances, which may attract capital taxes in Ontario. If the CC Funds invest this cash in money market instruments, such investments would be subject to capital taxes, as would an investment in a trust, including a typical money market fund.

12. 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.

13. Absent the Exemption Sought, paragraph 2.5(2)(b) of NI 81-102 would prohibit the Funds from investing in a CC Fund if the CC Fund's investment in the MY Pools exceeds 10% of its net assets.

14. Any investment by the 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 paragraph 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.

15. An investment by each Fund in the CC Funds will represent the business judgement of responsible persons uninfluenced by considerations other than the best interests of the 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.

16. Each of the MY Pools, the Underlying Funds, the CC Funds and the existing Funds is a reporting issuer in all of the provinces and territories of Canada and is not in default of any requirements of the securities legislation of those jurisdictions.

Decision

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.