Mackenzie Financial Corporation and GWLIM Ethics Fund - MRRS Decision

MRRS Decision

Headnote

MRRS - Approval of fund merger pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Mutual Funds -- The fundamental investment objectives of the Terminating Fund and Continuing Fund are not substantially similar and the simplified prospectus and financial statements of the continuing fund to not be delivered to securityholders of the Terminating Fund -- A tailored simplified prospectus will, instead, be delivered to securityholders of the Terminating Fund -- Regulatory approval needed because the merger does not meet certain of the pre-approval requirements of section 5.6 of NI 81-102.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.7(1)(b).

June 22, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC,

NEW BRUNSWICK, NOVA SCOTIA,

PRINCE EDWARD ISLAND AND

NEWFOUNDLAND AND LABRADOR

(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

MACKENZIE FINANCIAL CORPORATION

("the Filer")

AND

GWLIM ETHICS FUND

(the "Terminating Fund")

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application (the "Application") from the Filer, on behalf of the Terminating Fund, for a decision under the securities legislation of the Jurisdictions (the "Legislation") granting approval of the merger (the "Merger") of the Terminating Fund into the Continuing Fund (as defined below) as contemplated by section 5.5(1)(b) of National Instrument 81-102 ("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.

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 Fund" means GWLIM Canadian Growth Fund;

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

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

"Quadrus" means Quadrus Investment Services Ltd., the principal distributor of the Funds.

Representations

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

1. The Filer is a corporation governed by the laws of Ontario and is registered as an advisor in the categories of investment counsel and portfolio manager in Ontario and certain other provinces of Canada and is registered as a limited market dealer in Ontario.

2. The Filer is the manager and trustee of each of the Funds and Quadrus is the principal distributor of the Funds. The registered office of the Filer is located in Toronto and, accordingly, Ontario has been selected as the principal jurisdiction for this application.

3. Each of the Funds is an open-end mutual fund trust governed under the laws of Ontario by a declaration of trust.

4. Quadrus series and H series units of each of the Funds are offered for sale under a simplified prospectus and annual information form dated June 27, 2005, as amended, for the Quadrus Group of Funds. The Quadrus series and H series units of the Funds are offered in all provinces of Canada.

5. The Funds are reporting issuers under the Legislation of each Jurisdiction and are not on the list of defaulting reporting issuers maintained under the Legislation.

6. Each of the Funds follows the standard investment restrictions and practices established by the Decision Makers.

7. The net asset value for each series of units of the Funds is calculated on a daily basis on each day that the Toronto Stock Exchange is open for business.

8. No sales charges will be payable in connection with the acquisition by the Continuing Fund of the investment portfolio of the Terminating Fund.

9. The portfolio and other assets of the Terminating Fund to be acquired by the Continuing Fund arising from the Merger may be acquired by the Continuing Fund in compliance with NI 81-102 and are, or prior to the Merger will be, acceptable to the portfolio adviser of the Continuing Fund and are consistent with the investment objective of the Continuing Fund.

10. The Merger will be a "qualifying exchange" within the meaning of section 132.2 of the Tax Act.

11. Securityholders of the Terminating Fund will continue to have the right to redeem securities of the Terminating Fund for cash at any time up to the close of business on the business day immediately preceding the effective date of the Merger.

12. A material change report and an amendment to the simplified prospectus and annual information form of the Terminating Fund were filed via SEDAR on April 28, 2006 with respect to the proposed Merger.

13. The Terminating Fund has not attracted a sufficient number of investors to make it a viable fund. The Filer believes that the Merger will benefit securityholders of the Terminating Fund because the Continuing Fund has a lower management fee and a similar investment style. In addition, as part of a larger fund, securityholders could potentially benefit from reduced management expense ratios. These reasons are further described in the circular sent to securityholders.

14. A notice of meeting, a management information circular and a proxy in connection with the meeting of securityholders have been mailed to securityholders of the Terminating Fund commencing on May 29, 2006 and have been filed via SEDAR on June 2, 2006.

15. Securityholders of the Terminating Fund will be asked to approve the Merger at a meeting to be held on June 22, 2006.

16. The Terminating Fund will merge into the Continuing Fund on or about the close of business on June 23, 2006 and the Continuing Fund will continue as a publicly offered open-end mutual fund.

17. The Terminating Fund will be wound up as soon as reasonably possible following the Merger.

18. Quadrus will pay for the costs of the Merger. These costs consist mainly of any brokerage charges associated with the merger-related trades that occur both before and after the date of the Merger and legal, proxy solicitation, printing, mailing and regulatory fees.

19. Approval of the Merger is required because it does not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 in that,

(a) contrary to section 5.6(1)(a)(ii) of NI 81-102, a reasonable person may not consider the fundamental investment objectives of the Terminating Fund and the Continuing Fund to be substantially similar; and

(b) contrary to section 5.6(1)(f)(ii) of NI 81-102, the Filer intends to send to each unitholder of the Terminating Fund the following: (i) a management information circular fully describing the Merger, which circular will include a statement describing how unitholders can obtain the financial statements, management report of fund performance and annual information form for the Continuing Fund; and (ii) a tailored document, consisting of Part A, the Introduction to Part B and the Part B for the Continuing Fund, as set out in the current simplified prospectus of the Terminating Fund filed on SEDAR.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers 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 granted, provided that:

(a) the information circular sent to the securityholders of the Terminating Fund prominently discloses that they can obtain the most recent interim and annual financial statements of the Continuing Fund by accessing the SEDAR website at www.sedar.com, by calling Quadrus' toll-free telephone number (1-888-532-3322) or by submitting a request to Quadrus; and

(b) the material sent to securityholders of the Terminating Fund in connection with the approval of the proposed Merger includes a copy of:

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

(ii) the current Introduction to Part B and Part B of the simplified prospectus of the Continuing Fund.

"Leslie Byberg"
Manager, Investment Funds Branch
Ontario Securities Commission