Mackenzie Financial Corporation et al.

Headnote

NP 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund reorganizations pursuant to section 5.5(1)(b) of NI 81-102 required because the reorganizations do not meet criteria for pre-approval -- the reorganizations do not meet the requirement in section 5.6(1)(a)(ii) of NI 81-102 because the investment objectives of the terminating Funds may not be considered by a reasonable person to be "substantially similar" to the investment objectives of the continuing Funds -- the reorganizations do not meet the requirement in sections 5.6(1)(f)(ii) of NI 81-102 because the continuing funds do not have a simplified prospectus or fund facts documents for certain series that correspond to the terminating funds -- those certain series are offered under a prospectus exempt basis only

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, s. 19.1.

July 17, 2012

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

(the Filer)

AND

IN THE MATTER OF

MACKENZIE UNIVERSAL U.S. DIVIDEND INCOME FUND

(HEDGED CLASS AND UNHEDGED CLASS),

MACKENZIE UNIVERSAL U.S. GROWTH LEADERS CLASS

(HEDGED CLASS AND UNHEDGED CLASS) AND

MACKENZIE UNIVERSAL U.S. BLUE CHIP CLASS

(the Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Terminating Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) approving the proposed reorganizations of the Terminating Funds with the Continuing Fund (as defined below) pursuant to subsection 5.5(1)(b) of National Instrument 81-102 Mutual Funds (NI 81-102)(the Approval Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for this application (Principal Regulator); and

(b) the Filer has provided notice that section 4.7(1)(c) 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 in this decision unless they are defined in this decision.

"Capitalcorp" means Mackenzie Financial Capital Corporation.

"Continuing Fund" means the portfolio of assets owned by Capitalcorp that is referable to Mackenzie Universal U.S. Blue Chip Class.

"Effective Date" means on or about September 14, 2012, the anticipated date of the Proposed Reorganizations.

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

"Mackenzie" means Mackenzie Financial Corporation, the manager of the Funds.

"Proposed Reorganizations" means the proposed reorganizations pursuant to which securityholders of the Terminating Funds will become securityholders of the Continuing Fund as set out below:

"Terminating Funds" means the portfolio of assets that is referable to Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class) and Mackenzie Universal U.S. Growth Leaders Class (Hedged Class and Unhedged Class).

Representations

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

The Filer and the Funds

1. The Filer is a corporation governed by the laws of Ontario and is registered as portfolio manager and exempt market dealer in all of the provinces and territories of Canada. The Filer is also registered in Ontario as an investment fund manager and under the Commodity Futures Act (Ontario) in the category of Commodity Trading Manager.

2. The Filer is the manager and portfolio manager of the Funds.

3. The head office of the Filer is located in Toronto, Ontario.

4. The Filer and the Funds are not in default of securities legislation in any province or territory of Canada.

5. Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class) is an open-ended mutual fund trust established under the laws of Ontario.

6. Mackenzie Universal U.S. Growth Leaders Class (Hedged Class and Unhedged Class) is referable to a class of shares of Capitalcorp, a mutual fund corporation formed under the Business Corporations Act (Ontario).

7. Capitalcorp qualifies as a "mutual fund corporation" under the Income Tax Act (Canada).

8. Each of the Funds is a mutual fund that is subject to the requirements in NI 81-102 and National Instrument 81-101Mutual Fund Prospectus Disclosure. Each of the Funds operate in accordance with NI 81-102, except for exemptive relief that has been previously obtained.

9. The Funds are reporting issuers under the applicable securities legislation of each province and territory of Canada.

10. The Funds are currently qualified for sale in each of the provinces and territories of Canada pursuant to a simplified prospectus, fund facts and an annual information form dated September 30, 2011, as amended (the Funds' Prospectus).

11. The net asset value for each series of securities of the Funds is calculated on a daily basis on each day the Toronto Stock Exchange is open for trading.

The Proposed Reorganizations

12. Pursuant to the Proposed Reorganizations, investors of each Terminating Fund will become investors of the Continuing Fund.

13. In accordance with National Instrument 81-106 Investment Fund Continuous Disclosure, a press release announcing the Proposed Reorganizations was filed on SEDAR on June 27, 2012. A material change report and amendments to the Funds' Prospectus were filed on SEDAR on July 5, 2012.

14. As required by National Instrument 81-107Independent Review Committee for Investment Funds, the Independent Review Committee (the IRC) has been appointed for the Funds. The Filer presented the terms of the Proposed Reorganizations to the IRC for a recommendation. The IRC reviewed the Proposed Reorganizations and provided a positive recommendation for the Proposed Reorganizations, having determined that the Proposed Reorganizations, if implemented, would achieve a fair and reasonable result for each of the Funds.

15. Regulatory approval of the Proposed Reorganizations is required because the Proposed Reorganizations do not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 in the following ways:

(a) contrary to subsection 5.6(1)(a)(ii) of NI 81-102, the investment objectives of the Terminating Funds may not be considered by a reasonable person to be "substantially similar" to the investment objectives of the Continuing Fund;

(b) contrary to subsection 5.6(1)(f)(ii) of NI 81-102 (SP Delivery Requirement), the materials to be sent to securityholders of Series D shares of Mackenzie Universal U.S. Growth Leaders Class (Unhedged Class) will not include the current simplified prospectus or the most recently filed fund facts document of series D of the Continuing Fund; and

(c) contrary to subsection 5.6(1)(f)(ii) of NI 81-102, the materials to be sent to securityholders of Series R shares of the Terminating Funds will not include the current simplified prospectus or the most recently filed fund facts document of Series R shares of the Continuing Fund.

16. Except as noted above, the Proposed Reorganizations will otherwise comply with all other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

17. Investors of the Terminating Funds will be asked to approve the Proposed Reorganizations at a special meeting of investors scheduled to be held on or about August 27, 2012. The Filer will pay the costs of holding the special meetings and solicitation of proxies in connection with the Proposed Reorganizations.

18. On or about August 3, 2012, a management information circular and proxy in connection with the Proposed Reorganizations will be both filed on SEDAR and mailed to securityholders of record of the Terminating Fund, as at July 25, 2012.

19. Fund facts relating to the relevant series of the Continuing Fund will be mailed to securityholders of the corresponding series of each of the Terminating Funds, with the exception of securityholders of Series D shares of Mackenzie Universal U.S. Growth Leaders Class (Unhedged Class) and Series R securities of the Terminating Funds.

20. The Continuing Fund does not have fund facts documents to send to securityholders of Series D shares of Mackenzie Universal U.S. Growth Leaders Class (Unhedged Class) and Series R securities of the Terminating Funds.

21. Series D shares of the Mackenzie Universal U.S. Growth Leaders Class (Unhedged Class) are no longer in distribution, and the Continuing Fund does not currently offer Series D shares. In order to effect the Proposed Reorganization for Mackenzie Universal U.S. Growth Leaders Class (Unhedged Class), the Continuing Fund will distribute Series D shares to securityholders of Series D shares of Mackenzie Universal U.S. Growth Leaders Class (Unhedged Class) in reliance on the prospectus exemption contained in section 2.11(a) of National Instrument 45-106. No further Series D shares will be issued by the Continuing Fund subsequent to the Proposed Reorganizations.

22. Series R securities of the Terminating Funds and the Continuing Fund are offered on an exempt distribution basis only to other mutual funds in connection with fund-of-funds investing.

23. The Filer submits that it would not be prejudicial to the interests of the securityholders of the Series D shares of the Mackenzie Universal U.S. Growth Leaders Class (Unhedged Class) and Series R securities of the Terminating Funds that the materials to be sent to them in connection with the Proposed Reorganizations will not include the current simplified prospectus or the most recently filed fund facts documents of the corresponding series of the Continuing Fund because the management information circular that is sent to them will provide sufficient information about the Proposed Reorganizations to permit them to make an informed decision about the Proposed Reorganizations. In particular, the management information circular will describe similarities and differences between the investment objectives and investment strategies of the Terminating Funds and the Continuing Fund, the fees, the tax implications of the Proposed Reorganizations as well as a summary of the Independent Review Committees' decision with respect to the Proposed Reorganizations.

24. The portfolio and other assets of the Terminating Funds that will become assets of the Continuing Fund are acceptable to the portfolio advisor of the Continuing Fund and are consistent with the investment objectives of the Continuing Fund. To the extent that a particular security may be unsuitable or undesirable for the Continuing Fund, that security will be sold prior to the Proposed Reorganizations.

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

26. All of the issued and outstanding securities of the Terminating Fund will be exchanged for shares of the Continuing Fund on a dollar-for-dollar and series-by-series basis.

27. Terminating Fund securityholders will continue to have the right to redeem their securities or exchange their securities for securities of any other Mackenzie-sponsored mutual fund at any time up to the close of business on the Effective Date. Terminating Fund investors that switch their securities for securities of other Mackenzie-sponsored mutual funds will not incur any charges. Investors who redeem securities may be subject to redemption charges.

28. If the approval of investors of the Terminating Funds is not obtained at the special meeting, then the Proposed Reorganization for that Terminating Fund will not proceed.

29. If the necessary approvals are obtained, Mackenzie will carry out the following steps to complete the Proposed Reorganizations on the Effective Date:

(a) Creating the Continuing Class (as defined below):

(i) The directors of Capitalcorp will redesignate one of the authorized, but unissued classes of mutual fund shares of Capitalcorp as the "Mackenzie Universal U.S. Blue Chip Class" (the "Continuing Class").

(ii) Capitalcorp will cause the Continuing Class to adopt the investment objectives, investment strategies and fee structure of the class of shares of the Continuing Fund.

(b) For the Proposed Reorganization of Mackenzie Universal U.S. Growth Leaders Class (Hedged Class and Unhedged Class):

(i) Capitalcorp will combine the net assets that are referable to Mackenzie Universal U.S. Growth Leaders Class (Hedged Class and Unhedged Class) with the net assets that are referable to the Continuing Fund and will cause the combined net assets to become the net assets that are referable to the Continuing Class.

(ii) The articles of Capitalcorp will be amended to exchange all outstanding shares of Mackenzie Universal U.S. Growth Leaders Class (Hedged Class and Unhedged Class) and the Continuing Fund for corresponding series of shares of the Continuing Class and the shares of Mackenzie Universal U.S. Growth Leaders Class (Hedged Class and Unhedged Class) and the Continuing Fund will then be cancelled.

(c) For the Proposed Reorganization of Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class):

(i) The declaration of trust of Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class) will be amended to create the right of Capitalcorp to purchase the units of Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class) held by each investor of that fund.

(ii) Capitalcorp will purchase the units of Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class) held by each investor of that fund.

(iii) In exchange, Capitalcorp will issue to each such investor shares of the Continuing Class that will have an aggregate value equal to the aggregate value of the units of Mackenzie Universal U.S. Dividend Income Fund held by that investor.

(iv) Capitalcorp, which will then be the sole unitholder of Mackenzie Universal U.S. Dividend Income Fund, will then cause that fund to be terminated. As a result, all of the assets of Mackenzie Universal U.S. Dividend Income Fund will be distributed to the Continuing Class.

30. The Continuing Fund is not required by NI 81-102 to vote on the Proposed Reorganizations because it is not a material change for the Continuing Fund.

31. The Filer believes that the Proposed Reorganizations are beneficial to securityholders of the Terminating Funds for the following reasons:

(a) Performance. The Continuing Fund has generally demonstrated better historical performance over most time periods than the Unhedged Class of the Terminating Funds and even though the Continuing Fund does not hedge its currency exposures, its performance has been comparable to that of the Hedged Class of each Terminating Fund. Accordingly, the Proposed Reorganizations will allow the securityholders of the Terminating Funds to be part of a comparable or better performing fund and to possibly benefit from the potential for improved future performance of their investments.

(b) Similar or lower fees. Generally, the management fees and administration fees for each series of the Continuing Fund are similar to, or lower than, the management fees and administration fees of each corresponding series of the Terminating Funds.

(c) Tax efficiencies for taxable investors of Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class). The Continuing Fund offers tax benefits that Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class) does not provide:

(i) Mackenzie Universal U.S. Dividend Income Fund (Hedged Class and Unhedged Class) is a mutual fund trust. On an annual basis, the fund distributes its net income and any net capital gains to its investors, and taxable investors may incur a tax liability in respect of these distributions. The Continuing Fund is a class of shares of Capitalcorp, and as a result it is less likely that the Continuing Fund will pay taxable dividends to its investors.

(ii) Switches among the funds offered by Capitalcorp, including the Continuing Fund, are entirely tax-deferred. In comparison, if a taxable investor switches out of a mutual fund trust such as Mackenzie Universal U.S. Dividend Income Fund, the investor will realize capital gains or losses on the switch.

32. For each Proposed Reorganization that is approved, the reorganization will be implemented after close of business on the Effective Date and the costs of the Proposed Reorganizations will be borne by the Filer.

33. Following the Proposed Reorganizations, the Continuing Fund will continue as a publicly offered open-ended mutual fund.

34. Following the Proposed Reorganizations, a material change report and amendments to the simplified prospectus, and annual information form of each Terminating Fund in respect of its respective Proposed Reorganization will be filed.

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 Exemption Sought is granted provided that the management information circular sent to securityholders of the Terminating Funds provides sufficient information about the Proposed Reorganizations to permit securityholders to make an informed decision about the Proposed Reorganizations.