MRRS for Exemptive Relief Applications - applicantmanages mutual fund which tracks the performance of a specifiedtarget index; portfolio advisor is a wholly owned subsidiaryof a company whose shares form part of target index; exemptiongranted from the mutual fund conflict of interest investmentrestrictions in clause 111(2)(a) and 111(3) of the Act in respectof proposed investments by the mutual fund in securities ofa substantial security holder of mutual fund's portfolio advisor.
Securities Act, R.S.O. 1990, c. S.5, as am.,clause 111(2)(a), subsection 111(3) and section 113.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO, NOVA SCOTIA,
NEWFOUNDLAND AND LABRADOR
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
SCOTIA AMERICAN STOCK INDEX FUND
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Makers") ineach of the provinces of British Columbia, Alberta, Saskatchewan,Ontario, Nova Scotia and Newfoundland and Labrador (collectively,the "Jurisdictions") have received an application(the "Application") from Scotia Securities Inc. ("SSI"),in its capacity as trustee and manager of the Scotia AmericanStock Index Fund (the "Index Fund"), for a decisionpursuant to the securities legislation of the Jurisdictions(the "Legislation") that the restrictions containedin the Legislation prohibiting a mutual fund from knowinglymaking or holding an investment in any person or company whois a substantial security holder of the mutual fund, its managementcompany or distribution company (together, the "Restrictions"),shall not apply in respect of investments made by the IndexFund;
AND WHEREAS pursuant to the Mutual RelianceReview System ("MRRS") for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal regulator for this Application;
AND WHEREAS SSI has represented to theDecision Makers that:
1. SSI is a corporation incorporated under thelaws of the Province of Ontario. SSI is the trustee and managerof the Index Fund.
2. The Index Fund is an open-end mutual fundtrust established under the laws of the Province of Ontario.The Index Fund is a reporting issuer under the securities legislationof each Jurisdiction and units of the Index Fund are qualifiedfor distribution under a simplified prospectus and annual informationform dated December 3, 2001, as amended, and accepted by theDecision Makers in each of the Jurisdictions.
3. The portfolio advisor of the Index Fund isState Street Global Advisors, Ltd. ("SSGA"). SSGAwas appointed portfolio advisor of the Fund effective March1, 2002. SSGA is an indirect wholly-owned subsidiary of StateStreet Corporation ("State Street").
4. The investment objective of the Index Fundis long-term capital growth by tracking the performance of agenerally recognized U.S. equity index, currently the Standard& Poor's 500 Total Return Index (the "Target Index").In order to achieve its investment objective, the Index Fund'sprimary investment strategy is to invest all of its assets directlyin the securities of companies included in the Target Indexin substantially the same proportion as such securities areweighted in the Target Index.
5. The Fund is an index mutual fund as definedin National Instrument 81-102 Mutual Funds.
6. Among the securities comprising the TargetIndex are common shares of State Street.
7. Due to the Restrictions, the Index Fund hasnot, while under the portfolio management of SSGA, investedin common shares of State Street. It has instead invested inalternate securities to attempt to match the performance andrisk composition of the Target Index.
8. The portfolio of the Index Fund is not activelymanaged. The portfolio is passive and is comprised of securitiescomprising the Target Index. Purchases and sales of portfoliosecurities of the Fund are determined by the composition ofthe Target Index and the weightings therein of the constituentsecurities.
9. The deviation from the Restrictions willnot be the result of any active decision of SSGA to increasethe investment of the Index Fund in any particular issuer, butrather an indirect consequence of carrying out the investmentobjective of the Index Fund to match the performance of theTarget Index.
10. The investments by the Index Fund in commonshares of State Street represent the business judgement of responsiblepersons uninfluenced by considerations other than the best interestsof the Index Fund.
AND WHEREAS pursuant to the System, thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers pursuantto the Legislation is that the Restrictions do not apply tothe investment by the Index Fund in securities of State Street;
PROVIDED THAT the proportion of the IndexFund's assets to be invested in common shares of State Streetis determined in accordance with the Index Fund's stated investmentstrategy of investing in the constituent securities of the TargetIndex in substantially the same proportion as such securitiesare weighted in that index, and not pursuant to the discretionof SSI or SSGA.
May 16, 2002.
"Paul M. Moore" "Harold P. Hands"