Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to allow three global balanced funds to invest more than 10 percent of net assets in debt securities issued by a foreign government or supranational agency, subject to certain conditions -- National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.1(1), 19.1.

August 5, 2011

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" OR THE "FILER")

AND

MACKENZIE IVY EUROPEAN FUND,

MACKENZIE SENTINEL REGISTERED STRATEGIC

INCOME FUND, AND MACKENZIE SENTINEL

STRATEGIC INCOME CLASS

DECISION

Background

1. The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") granting an exemption from subsection 2.1(1) of NI 81-102, which prohibits a mutual fund from investing more than 10% of its net assets, taken at market value at the time of the transaction, in the securities of any issuer (the "Concentration Restriction"), on behalf of Mackenzie Ivy European Fund (prior to November 27, 2010, Mackenzie Universal European Opportunities Fund), Mackenzie Sentinel Registered Strategic Income Fund, and Mackenzie Sentinel Strategic Income Class (each individually, a "Fund", and collectively, the "Funds").

2. Specifically, the Filer seeks:

(a) to permit Mackenzie Ivy European Fund to invest up to:

(i) 20% of its net assets, taken at market value at the time of purchase, in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments other than the government of Canada, the government of a jurisdiction, or the government of the United States of America and are rated "AA" or the equivalent credit rating assigned for short-term issues, by Standard & Poor's, or have an equivalent rating by one or more other approved credit rating organizations; and

(ii) 35% of its net assets, taken at market value at the time of purchase, in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies or governments other than the government of Canada, the government of a jurisdiction, or the government of the United States of America and are rated "AAA" or the equivalent credit rating assigned for short-term issues, by Standard & Poor's, or have an equivalent rating by one or more other approved credit rating organizations; and

(b) to permit Mackenzie Sentinel Registered Strategic Income Fund and Mackenzie Sentinel Strategic Income Class to invest up to:

(i) 20% of the proportion of its net assets then invested in evidences of indebtedness, taken at market value at the time of purchase, in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies (as defined in NI 81-102) or governments other than the government of Canada, the government of a jurisdiction, or the government of the United States of America and are rated "AA" by Standard & Poor's, or have an equivalent rating by one or more other approved credit rating organizations.

(ii) 35% of the proportion of its net assets then invested in evidences of indebtedness, taken at market value at the time of purchase, in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies (as defined in NI 81-102) or governments other than the government of Canada, the government of a jurisdiction, or the government of the United States of America and are rated "AAA" by Standard & Poor's, or have an equivalent rating by one or more other approved credit rating organizations; and

Sub-paragraphs 2(a) and (b) shall together be referred to as the "Foreign Government Securities Allowance".

Paragraphs 1 and 2 shall be referred to collectively as the "Requested Relief".

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (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, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (the "Non-Principal Jurisdictions").

Interpretation

Defined terms contained in National Instrument 14-101Definitions have the same meaning in this decision unless otherwise defined.

Representations

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

Background Facts

3. Mackenzie is a corporation governed by the laws of Ontario and is registered as a portfolio manager and exempt market dealer in all jurisdictions across Canada. Mackenzie is also registered under the Commodity Futures Act (Ontario) in the category of Commodity Trading Manager. Mackenzie has also applied for (but has not yet received) registration as an investment fund manager. Mackenzie's head office is in Toronto, Ontario.

4. Each of the Funds is, or will be, as applicable, a mutual fund whose securities are offered by simplified prospectus and annual information form filed in accordance with NI 81-102. Each Fund is, or will be, as applicable, a reporting issuer and is not in default of securities legislation in any of the jurisdictions of Canada.

5. Mackenzie Financial Corporation is not in default of any securities legislation in any of the jurisdictions of Canada.

About Mackenzie Ivy European Fund (prior to November 27, 2010, Mackenzie Universal European Opportunities Fund)

6. The Fund's investment objective is to seek long-term capital growth by investing primarily in European securities. Such securities include European equity securities and foreign income securities issued by companies and governments in Europe.

About Mackenzie Sentinel Registered Strategic Income Fund

7. he Fund's investment objective is to seek income with the potential for long-term capital growth by investing primarily in fixed income and/or income-oriented equity securities. The Fund's investments are not limited geographically.

8. The Fund's investments in fixed-income securities may include government bonds.

9. The Fund has a flexible approach to investing in fixed income and/or equity asset class, and will generally invest 30% to 70% of its assets in any one asset class but may invest 0% to 100% of its assets in any one asset class, depending on economic conditions and/or the Fund's assessment of relative evaluations.

About Mackenzie Sentinel Strategic Income Class

10. The Fund's investment objective and strategies is to provide tax-efficient returns similar to those of a diversified fund managed by Mackenzie, Mackenzie Sentinel Registered Strategic Income Fund. The Fund may also, however, invest directly in fixed income securities, including in securities held by Mackenzie Sentinel Registered Strategic Income Fund.

Reasons for the Requested Relief

11. The Funds desire the Requested Relief so that they could enhance their ability to pursue and achieve their fundamental investment objectives.

12. Mackenzie was granted relief from the Concentration Restriction on several mutual funds it manages on September 10, 2007. Relief from the Concentration Restriction has been routinely granted to mutual funds. See, for example: In the matter of Sprott Asset Management L.P. (May 3, 2011).

13. The Companion Policy to NI 81-102 ("Companion Policy") states, in section 3.1, that the Canadian securities regulatory authorities will consider applications for relief from the Concentration Restriction, with relief generally being limited to the Foreign Government Securities Allowance, if:

(a) the mutual fund making the application demonstrates that the relief will better enable the mutual fund to meet its fundamental investment objectives; and

(b) the securities that may be purchased under the relief are traded on a mature and liquid market.

14. The Requested Relief will better enable each Fund to meet its investment objectives as follows:

(a) Mackenzie Ivy European Fund: The Fund has a foreign investment mandate, primarily in Europe. The Requested Relief will enable the Fund to expose the cash equivalents portion of its portfolio to foreign markets, consistent with the Fund's foreign investment mandate. Allowing the Fund to hold highly rated short term fixed income securities issued by foreign governments would enable the Fund to preserve capital in foreign markets during adverse market conditions. The increased flexibility to hold as cash equivalents short term foreign government fixed income securities may also yield higher returns than Canadian or U.S. shorter term government fixed income alternatives.

(b) Mackenzie Sentinel Registered Strategic Income Fund and Mackenzie Sentinel Strategic Income Class: The Requested Relief will enable each Fund to increase its exposure to highly rated fixed income securities issued by foreign governments and/or supranational agencies that offer higher yields and/or are undervalued and may be expected to generate capital growth over the long term.

15. If the Requested Relief is granted, the Funds would invest in securities that trade on mature and liquid markets with high credit ratings (with Standard & Poor or equivalent, ratings of AA or AAA (or equivalents for short-term issues), as applicable, pursuant to Requested Relief).

Decision

The principal regulator is satisfied that the test contained 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:

(1) for Mackenzie Ivy European Fund:

a. paragraphs 2(a)(i) and 2(a)(ii) of the Requested Relief shall not be combined for one issuer;

b. the Fund's purchases of evidences of indebtedness for the purposes of this Requested Relief shall be restricted to purchases of evidences of indebtedness of the government of a sovereign state that qualify as cash equivalents under NI 81-102;

(2) for Mackenzie Sentinel Registered Strategic Income Fund and Mackenzie Sentinel Strategic Income Class, paragraphs 2(b)(i) and 2(b)(ii) of the Requested Relief shall not be combined for one issuer;

(3) the securities that are purchased pursuant to this Decision are traded on a mature and liquid market;

(4) the acquisition of the securities purchased pursuant to this Decision is consistent with the fundamental investment objectives of the Fund;

(5) the simplified prospectus of the Fund discloses the additional risks associated with the concentration of the net assets of the Fund in securities of fewer issuers, such as the potential additional exposure to the risk of default of the issuer in which the Fund has so invested and the risks, including foreign exchange risks, of investing in the country in which that issuer is located; and

(6) the simplified prospectus of the Fund discloses, in the investment strategy section, the details of the Requested Relief along with the conditions imposed and the type of securities covered by this Decision.

"Raymond Chan"
Manager, Investment Funds Branch