Mackenzie Industrial Pension Fund - MRRS Decision
Headnote
Exemptions from the mutual fund self-dealing prohibitions of clauses 111(2)(a) and (c) and 111(3) of the Securities Act(Ontario) to allow certain mutual funds to continue to hold securities of companies that become related to the mutualfunds pursuant to a take-over transaction. Requirement for mutual funds to divest securities of related companies overcertain time periods (maximum 48 months).
Statutes Cited
Securities Act (Ontario), R.S.O. 1990 c.S.5, as am., 111(2)(a) and (c) and 111(3).
IN THE MATTER OF
THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, ONTARIO, NOVA SCOTIA AND NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
MACKENZIE INDUSTRIAL PENSION FUND
MACKENZIE INDUSTRIAL HORIZON FUND
MACKENZIE INDUSTRIAL BALANCED FUND
MACKENZIE INDUSTRIAL DIVIDEND GROWTH FUND
MACKENZIE INDUSTRIAL INCOME FUND
MACKENZIE IVY ENTERPRISE FUND
MACKENZIE IVY GROWTH AND INCOME FUND
MACKENZIE IVY CANADIAN FUND
MACKENZIE HORIZON CAPITAL CLASS
MACKENZIE IVY CANADIAN CAPITAL CLASS
MACKENZIE IVY ENTERPRISE CAPITAL CLASS
MACKENZIE UNIVERSAL FUTURE CAPITAL CLASS
MACKENZIE UNIVERSAL SELECT MANAGERS CANADA CAPITAL CLASS
MACKENZIE UNIVERSAL CANADIAN BALANCED FUND
MACKENZIE UNIVERSAL FUTURE FUND
MACKENZIE UNIVERSAL SELECT MANAGERS CANADA FUND
CLARICA EQUITY FUND
CLARICA GROWTH AND INCOME FUND
CLARICA DIVIDEND FUND
KEYSTONE SCEPTRE EQUITY FUND
KEYSTONE AGF EQUITY FUND
KEYSTONE SPECTRUM EQUITY FUND
(the "Funds")
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provincesof British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the "Jurisdictions") has receivedan application (the "Application") from Mackenzie Financial Corporation ("Mackenzie"), on behalf of the Funds, for adecision (the "Decision") pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the followingprovisions do not apply in connection with Investors Group Inc.'s ("IG") cash and securities exchange offer to purchaseall of the outstanding common shares of Mackenzie by way of a formal take-over bid (the "Offer"):
(a) the provision prohibiting a mutual fund from knowingly holding an investment in any person or company whois a substantial security holder of the mutual fund, its management company or distribution company; and
(b) the provision prohibiting a mutual fund from knowingly holding an investment in an issuer in which asubstantial security holder of the mutual fund, its management company or its distribution company has asignificant interest (collectively, the "Investment Restrictions").
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this Application;
AND WHEREAS it has been represented by Mackenzie to the Decision Makers that:
1. The Funds are open-ended mutual fund trusts established, or mutual fund corporations incorporated, underthe laws of the Province of Ontario.
2. Mackenzie is the trustee, manager and registrar of each of the Funds except Clarica Equity Fund, ClaricaGrowth and Income Fund and Clarica Dividend Fund for which it is retained as advisor.
3. The securities of the Funds are offered for sale in all of the provinces and territories of Canada. Each of theFunds is a reporting issuer under the Legislation and is not on a list of defaulting issuers maintained under theLegislation.
4. On January 26, 2001, IG and Mackenzie entered into a support agreement (the "Support Agreement") underwhich, among other things, (i) IG agreed to make an offer for all of the outstanding common shares ofMackenzie on the terms set forth in the Support Agreement; and (ii) Mackenzie represented that the board ofdirectors of Mackenzie determined unanimously that such offer is fair to shareholders and is in the best interestof Mackenzie and resolved to recommend to shareholders that they accept the offer.
5. IG sent to all Mackenzie shareholders the Offer and accompanying circular dated February 15, 2001. In adirectors' circular dated February 23, 2001, the directors of Mackenzie recommended that shareholders ofMackenzie accept the Offer. Mackenzie anticipates that IG will purchase all of the outstanding common sharesof Mackenzie as outlined in the Offer and thereby complete the transaction (the "Transaction").
6. Power Financial Corporation ("PFC") is controlled by Power Corporation of Canada ("PCC") which holds morethan 67% of the outstanding common shares of PFC. PFC owns more than 67% of the outstanding commonshares in the capital of IG. PFC also owns 65% of the outstanding voting securities of Great-West Lifeco Inc.("Lifeco"), and has an 80.2% economic interest therein. As of the completion of the Transaction, IG will own100% of the outstanding common shares of Mackenzie.
7. Pursuant to the Legislation, as of the completion of the Transaction, IG, PFC and PCC will be substantialsecurity holders of Mackenzie and Lifeco will be an issuer in which a substantial security holder of Mackenziehas a significant interest.
8. Each of the Funds owns voting securities of one or more of IG, PFC, PCC or Lifeco (collectively, the "RelatedCompanies"). Collectively, as of April 6, 2001, the Funds held 2.2% of the shares of Lifeco, 2.11% of theshares of PFC, 3.95% of the shares of PCC and 0.28% of the shares of IG.
9. The shares of each of the Related Companies are traded on the Toronto Stock Exchange. For the year 2000,the volume of trading of Lifeco was approximately 24.7 million shares, of PFC was 55.8 million shares, of PCCwas 70.4 million shares and of IG was 40.5 million shares.
10. The Funds have not made any investment in securities of the Related Companies following the execution ofthe Support Agreement. The Funds will not make any further purchases of securities of the RelatedCompanies unless and until the Offer is not accepted by the Mackenzie shareholders, the Transaction doesnot take place as set forth in the Support Agreement or the Offer is withdrawn, whichever is earlier.
11. At the time the securities of the Related Companies were purchased, the Related Companies were not affiliatedwith the Funds or Mackenzie, and each investment by the Funds in the securities of the Related Companiesrepresented the business judgement of professional portfolio advisers uninfluenced by considerations otherthan the best interests of the unitholders of the Funds.
12. In the absence of the Decision, the Funds would be required to divest of securities of the Related Companiesnot later than the date of completion of the Transaction.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker;
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that the Investment Restrictions do notapply so as to prevent the Funds from holding their investments in the securities of the Related Companies beyond thedate of completion of the Transaction, provided that
(a) the Funds do not make any additional purchases of securities of a Related Company;
(b) the Funds divest all or a portion of the securities of the Related Companies as quickly as is commerciallyreasonable, so that:
(i) no later than 48 months from the date of completion of the Transaction, the Funds do not hold anysecurities of Lifeco;
(ii) no later than 6 months from the date of completion of the Transaction, the Funds do not hold anysecurities of IG;
(iii) no later than 18 months from the date of completion of the Transaction, the Funds do not hold anysecurities of PFC; and
(iv) no later than 12 months from the date of completion of the Transaction, the Funds do not hold anysecurities of PCC; and
(c) the Funds do not vote the securities of the Related Companies at any meetings of shareholders of the RelatedCompanies.
April 17, 2001.
"Paul Moore" "Howard I. Wetston"