Mutual Reliance Review Systemfor Exemptive Relief Application - all unitholders of exchangetraded index fund exempted from formal take-over bid requirementsin connection with normal course purchases of units on the TSE,provided that such unitholders provide trustee/manager of fundwith an undertaking not to exercise any votes attached to unitswhich represent more than 20% of the votes attached to all outstandingunits of the fund.
Applicable Ontario Statute
Securities Act, R.S.O. 1990,c. S.5, as amended, ss. 95, 96, 97, 98, 100 and 104(2)(c).
Applicable Ontario Regulation
Regulation under the SecuritiesAct, R.R.O. 1990, Regulation 1015, as amended, s. 203.1(1).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,
MANITOBA, ONTARIO, QUÉBEC,NEW BRUNSWICK,
NOVA SCOTIA, NEWFOUNDLANDAND LABRADOR,
YUKON AND NUNAVUT
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
TD SECURITIES INC. ("TDSI")
BMO NESBITT BURNS INC. ("BMONB")
RBC DOMINION SECURITIES INC.("RBCDS")
BARCLAYS GLOBAL INVESTORSCANADA LIMITED ("BARCLAYS")
IN THE MATTER OF
iUNITS S&P/TSX 60 INDEXFUND
iUNITS S&P/TSX 60 CAPPEDINDEX FUND
iUNITS S&P/TSX CANADIANMIDCAP INDEX FUND
iUNITS S&P/TSX CANADIANENERGY INDEX FUND
iUNITS S&P/TSX CANADIANINFORMATION TECHNOLOGY INDEX FUND
iUNITS S&P/TSX CANADIANGOLD INDEX FUND
iUNITS S&P/TSX CANADIANFINANCIALS INDEX FUND
(COLLECTIVELY, THE "FUNDS")
MRRS DECISION DOCUMENT
WHEREAS the local securitiesregulatory authority or regulator (the "Decision Maker")in each of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, Québec, New Brunswick, Nova Scotia, Newfoundlandand Labrador, Yukon and Nunavut (the "Jurisdictions")has received an application from TDSI, BMO NB, RBCDS and Barclaysfor a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") exempting all unitholdersof the Funds from the requirements of the Legislation relatedto take-over bids, including the requirement to file a reportof a take-over bid and the accompanying fee with each applicableJurisdiction (the "Take-over Bid Requirements") inrespect of take-over bids for the Funds (as defined in paragraph10 below);
AND WHEREAS pursuantto the Mutual Reliance Review System for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal regulator for this application;
AND WHEREAS TDSI, BMONB, RBCDS and Barclays have represented to the Decision Makersas follows:
1. Each Fund is a trust thathas been created under the laws of Ontario, the units of eachFund are listed on The Toronto Stock Exchange (the "TSX"),the head office of each Fund is located in Toronto, Ontarioand each Fund is a reporting issuer or its equivalent in everyprovince and territory of Canada.
2. The investment objectiveof each Fund is to track the performance of a relevant S&P/TSXIndex (each, an "Index" and collectively, the "Indices").Each Fund holds shares of the companies (collectively, the"Constituent Companies") that make up the relevantIndex in substantially the same weight as they are reflectedin the Index.
3. Barclays is the trusteeof the Funds and as such is responsible for the day-to-dayadministration of each Fund.
4. The market price of theshares of Constituent Companies underlying each Fund unitequals, as closely as possible, a specified percentage ofthe level of the relevant Index. The net asset value of eachFund is calculated and published daily.
5. Units of a Fund may bepurchased directly from the Fund by registered dealers whohave entered into an underwriting agreement with the Fund.The consideration payable by underwriters for each Unit consistsof a basket of shares of the Fund's Constituent Companies(a "Basket of Shares") and a cash component.
6. Each Fund has appointedBMO NB and RBCDS as the designated brokers (the "DesignatedBrokers") to perform certain functions which includestanding in the market with a bid and ask price for the Fund'sunits for the purpose of maintaining market liquidity forthe units and facilitating adjustments to Baskets of Sharesboth as a result of adjustments that have been made to theIndex and as a result of non-cash distributions received bythe Fund.
7. Except as described inparagraphs 5 and 6 above, units of a Fund may not be purchaseddirectly from the Fund. As a result, investors must generallyacquire units through the facilities of the TSX.
8. Individuals who wish todispose of units must generally do so by selling them throughthe TSX. Unitholders of the Funds ("Unitholders")may, however, redeem prescribed numbers of units, or integralmultiples thereof, for Baskets of Shares plus cash. Each Unitholderalso has the right to have its units redeemed for cash onlyat a discount to the then market price of the units on theTSX. The cash redemption price of the units of each Fund isequal to 95% of the closing trading price of such units onthe effective day of the redemption.
9. Unitholders holding atleast a prescribed number of the units of a Fund are alsoentitled to vote the proportion of the shares of a ConstituentCompany that are held by the Fund that is equal to the Unitholder'sproportionate holding of outstanding units. Unitholders holdingless than the prescribed number of units have no right tovote the shares of Constituent Companies.
10. Barclays may, from timeto time, establish additional exchange traded index funds(the "Future Funds") for the purpose of trackingindices other than those tracked by the Funds and it is anticipatedthat Future Funds will be structured and operated in a mannerthat is substantially similar to the way in which the Fundsare structured and operated. For purposes of this MRRS DecisionDocument, Funds and Future Funds are referred to collectivelyas "Funds" and Unitholders and unitholders of FutureFunds are referred to collectively as "Fund Unitholders".
11. As the units of each Fundare, or will be, both voting and equity securities for purposesof the Take-over Bid Requirements, anyone acquiring beneficialownership of, or the power to exercise control or directionover, 10% or more of the outstanding units of a Fund wouldbe required to comply with the early warning press releaseand reporting requirements, as well as the further acquisitionrestrictions, imposed by the Legislation (the "EarlyWarning Requirements") but for section 3.3 of NationalInstrument 62-103 which provides that the Early Warning Requirementsdo not apply in respect of the ownership or control of securitiesissued by a mutual fund that is governed by National Instrument81-102.
12. There is no exemptionfrom the Take-over Bid Requirements for conventional mutualfunds that is comparable to the exemption from Early WarningRequirements in section 3.3 of National Instrument 62-103because the securities of conventional mutual funds are nottypically subject to the Take-over Bid Requirements becauseacquisitions of conventional mutual funds are made from treasury.
13. Although units of theFunds trade, or will trade, on the TSX and the acquisitionof such units can therefore become subject to the Take-overBid Requirements,
(a) it is not, and willnot be, possible for one or more Fund Unitholders to exercisecontrol or direction over a Fund as the constating documentof each Fund generally ensures, or will ensure, that therecan be no changes made to the Fund which do not have thesupport of the trustee of the Fund;
(b) it is difficult forpurchasers of units of the Funds to monitor compliance withTake-over Bid Requirements because the number of outstandingunits is always in flux as a result of the ongoing issuanceand redemption of units by the Funds; and
(c) the way in which Fundunits are, or will be, priced deters anyone from eitherseeking to acquire control, or offering to pay a controlpremium, for outstanding units because unit pricing is dependentupon, and generally represents a prescribed percentage of,the level of the relevant Index.
14. The application of theTake-over Bid Requirements to the Funds can have an adverseimpact upon Fund unit liquidity because they can cause boththe Designated Broker and hedgers to cease trading Fund unitsonce prescribed take-over bid thresholds are reached and this,in turn, can serve to provide conventional mutual funds witha competitive advantage over the Funds.
AND WHEREAS pursuantto the System this Decision Document evidences the decisionof each Decision Maker (collectively, the "Decision");
AND WHEREAS each DecisionMaker is satisfied that the test contained in the Legislationthat provides the Decision Maker with the jurisdiction to makethe Decision has been met;
THE DECISION of the DecisionMakers pursuant to the Legislation is that the purchase of theunits of a Fund by a person or company (a "Unit Purchaser")in the normal course through the facilities of the TSX is exemptfrom the Take-over Bid Requirements for so long as the Fundremains an exchange traded index fund provided that, prior tomaking any take-over bid for the units of the Fund that is nototherwise exempt from the Take-over Bid Requirements, the UnitPurchaser, and any person or company acting jointly or in concertwith the Unit Purchaser (a "Concert Party"), provideBarclays, as trustee and manager of the Funds, with an undertakingnot to exercise any votes attached to units of the Fund heldby the Unit Purchaser and any Concert Party which representmore than 20% of the votes attached to all outstanding unitsof the Fund.
July 26, 2002.
"Paul M. Moore" "RobertL. Shirriff"