Investment by mutual funds in a portfolio ofspecified mutual funds exempted from the self-dealing prohibitionsin clause 111(2)(b), subsection 111(3) and clause 118(2)(a)and from the reporting requirements of clauses 117(1)(a) and117(1)(d), subject to certain specified conditions.
Securities Act (Ontario), R.S.O. 1990, c. S.5,as am., 111(2)(b), 111(3), 117(1)(a), 117(1)(d) and 118(2)(a).
IN THE MATTER OF
THE CANADIAN SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, ONTARIO,
QUEBEC, NOVA SCOTIA AND NEWFOUNDLANDAND LABRADOR
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
SCOTIA PARTNERS INCOME &MODEST GROWTH PORTFOLIO
SCOTIA PARTNERS BALANCED INCOME& GROWTH PORTFOLIO
SCOTIA PARTNERS CONSERVATIVEGROWTH PORTFOLIO
SCOTIA PARTNERS AGGRESSIVEGROWTH PORTFOLIO
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Maker") in eachof the provinces of British Columbia, Alberta, Saskatchewan,Ontario, Quebec, Nova Scotia and Newfoundland and Labrador,(the "Jurisdictions") has received an applicationfrom Scotia Securities Inc. (the "Manager"), ScotiaPartners Income & Modest Growth Portfolio, Scotia PartnersBalanced Income & Growth Portfolio, Scotia Partners ConservativeGrowth Portfolio, Scotia Partners Aggressive Growth Portfolio(the "Initial Portfolios") and any other mutual fundestablished and managed by the Manager after the date hereofwhich has as its investment objective the investment of itsassets in more than one underlying fund (the "Future Portfolios")for a decision under the securities legislation of the Jurisdictions(the "Legislation") concerning the following restrictionsand requirements contained in the Legislation (the "Requirements"):
1. the restrictions contained in the Legislationprohibiting a mutual fund from knowingly making or holdingan investment in a person or company in which the mutual fund,alone or together with one or more related mutual funds, isa substantial security holder;
2. the restrictions contained in the Legislationprohibiting a portfolio manager from knowingly causing a mutualfund managed by it to invest in any issuer in which a responsibleperson or an associate of a responsible person is an officeror director unless the specific fact is disclosed to the clientand , if applicable, the written consent of the client tothe investment is obtained before the purchase; and
3. the requirements contained in the Legislationrequiring a management company or, in British Columbia, amutual fund manager, to file a report relating to a purchaseor sale of securities between a mutual fund and any relatedperson or company, or any transaction in which, by arrangementother than an arrangement relating to insider trading in portfoliosecurities, the mutual fund is a joint participant with oneor more of its related persons or companies;
AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Manager has representedto the Decision Makers that:
1. Each Initial Portfolio will be an open-endedmutual fund trust established under the laws of the Provinceof Ontario. Each Initial Portfolio will be a reporting issuerin each of the Jurisdictions and units of the Initial Portfolioswill be qualified for distribution under a simplified prospectusand annual information form (the "Prospectus") filedin each of the Jurisdictions.
2. The Manager may, in the future, createFuture Portfolios which, together with the Initial Portfolios,are each referred to herein as a "Portfolio".
3. The Manager will be the trustee and managerof the Portfolios. The Manager is a corporation establishedunder the laws of the Province of Ontario and registered asa dealer in the category of mutual fund dealer (or the equivalent)in the Jurisdictions as well as all other provinces and territoriesof Canada.
4. Scotia Capital Inc. ("Scotia Capital")will be the portfolio advisor of each of the Initial Portfolios.The portfolio advisor is a member of the Investment DealersAssociation of Canada.
5. It is expected that Scotia Capital willbe the portfolio advisor of Future Portfolios. Scotia Capitalis an affiliate of the Manager and both Scotia Capital andthe Manager are wholly owned subsidiaries of The Bank of NovaScotia.
6. Each Portfolio will invest its assets,other than cash or cash equivalents, in other prospectus-qualifiedmutual funds (the "Underlying Funds") managed bythe Manager or by third party fund managers (the "UnderlyingManagers") not affiliated with the Manager consideredto excel in particular investment niches. Currently, the ScotiaCanadian Income Fund is an Underlying Fund and a related mutualfund of the Portfolios. The Underlying Funds are those fundswhose investment objectives align with the investment objectivesof the Portfolios.
7. In order to achieve its investment objective,each Portfolio will invest fixed percentages (the "FixedPercentages") of its assets, excluding cash and cashequivalents, directly in securities of the Underlying Funds,subject to variation of 2.5 percent above or below the FixedPercentages (the "Permitted Ranges") resulting frommarket fluctuations.
8. The Prospectus of each Portfolio will disclosethe names and investment objectives of the Underlying Funds,the manager of the Underlying Funds along with the Fixed Percentagesand the Permitted Ranges.
9. Where an Underlying Fund or a Fixed Percentageis changed, the Manager will provide 60 days' prior writtennotice to unitholders of the Portfolios and will amend theProspectus of the Portfolios to reflect any such change.
10. The investments by a Portfolio in securitiesof an Underlying Fund represent the business judgment of "responsiblepersons" (as defined in the Legislation) uninfluencedby considerations other than the best interests of the Portfolio.
11. Except to the extent evidenced by thisdecision and specific approvals granted by the regulator orthe securities regulatory authority in each of the provincesof Canada pursuant to National Instrument 81-102 Mutual Funds("NI 81-102"), the investments by a Portfolio inthe Underlying Funds have been structured to comply with theinvestment restrictions of the Legislation and NI 81-102.
12. Upon the filing of the final Prospectusand the issuance of a final receipt by each Jurisdiction inrespect thereof, each of the Initial Portfolios will be areporting issuer in each Jurisdiction.
AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(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 underthe Legislation is that the Requirements shall not apply soas to prevent the Portfolios from making and holding investmentsin the Underlying Funds or so as to require the Manager to filea report relating to each purchase or sale of such investmentsand disclose such purchase to unitholders of the Portfoliosand, if applicable, obtain their consent to the investment priorto the purchase,
PROVIDED IN EACH CASE THAT:
1. this Decision, as it relates to the jurisdictionof a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that DecisionMaker dealing with matters in section 2.5 of NI 81-102; and
2. this Decision shall only apply if, at thetime a Portfolio makes or holds an investment in its UnderlyingFunds, the following conditions are satisfied:
(a) the Portfolios and the Underlying Fundsare being offered for sale in the jurisdiction of the DecisionMaker pursuant to a simplified prospectus and annual informationform which has been filed with and accepted by the DecisionMaker;
(b) the investment by a Portfolio in theUnderlying Funds is compatible with the fundamental investmentobjectives of the Portfolio;
(c) the Prospectus discloses the intentof the Portfolio to invest in the Underlying Funds, thenames of the Underlying Funds, the investment objectivesand manager of the Underlying Funds, the Fixed Percentagesand the Permitted Ranges within which such Fixed Percentagesmay vary;
(d) the investment objective of a Portfoliodiscloses that the Portfolio invests in securities of othermutual funds;
(e) the Underlying Funds are not mutualfunds whose investment objective includes investing directlyor indirectly in other mutual funds;
(f) the Portfolio invests its assets (exclusiveof cash and cash equivalents) in securities of the applicableUnderlying Funds in accordance with the Fixed Percentagesdisclosed in the Prospectus:
(g) the Portfolio's holding of securitiesin the Underlying Funds does not deviate from the PermittedRanges;
(h) any deviation from the Fixed Percentagesis caused by market fluctuations only;
(i) subject to condition (j), where an investmentby a Portfolio in any of the Underlying Funds has deviatedfrom the Permitted Ranges as a result of market fluctuations,the Portfolio's investment is re-balanced to comply withthe Fixed Percentages on the next day on which the net assetvalue is calculated following the deviation;
(j) if, due to the foreign property investmentlimitations under the Income Tax Act (Canada), a Portfoliois precluded from purchasing additional securities of theUnderlying Funds in order to comply with condition (i),the Portfolio complies with condition (i) as soon as itis possible to do so in compliance with those foreign propertyinvestment limitations;
(k) if the Fixed Percentages and the UnderlyingFunds which are disclosed in the Prospectus are changed,either the Prospectus will be amended or a new Prospectuswill be filed to reflect the change, and in any case theunitholders of each Portfolio will be given at least 60days' notice of the change;
(l) there are compatible dates for the calculationof the net asset values of the Portfolios and the UnderlyingFunds for the purpose of the issue and redemption of thesecurities of such mutual funds;
(m) no sales charges will be payable bya Portfolio in relation to its purchase of the securitiesof an Underlying Fund;
(n) no redemption fees or other chargeswill be charged by an Underlying Fund in respect of theredemption by a Portfolio of the securities of the UnderlyingFund owned by the Portfolio;
(o) no fees or charges of any sort are paidby the Portfolio and the Underlying Funds, by their respectivemanagers or principal distributors, or by any affiliateor associate of any of the foregoing entities, to anyonein respect of the Portfolio's purchase, holding or redemptionof the securities of the Underlying Funds, except for apayment by the Manager of a Portfolio to the Manager ofthe Underlying Fund as compensation for investment managementservices provided as a result of the investment in the UnderlyingFund;
(p) the Portfolios do not pay any managementfees to the Underlying Funds, except for those UnderlyingFunds for which a management fee must be paid (and subsequentlyrebated) because the Underlying Funds do not have a classof securities without a management fee;
(q) any notice provided to security holdersof an Underlying Fund as required by applicable laws orthe constating documents of that Underlying Fund has beendelivered by the Portfolio to its unitholders;
(r) all of the disclosure and notice materialprepared in connection with a meeting of the security holdersof the Underlying Funds and received by the Portfolio hasbeen provided to its unitholders, the unitholders have beenpermitted to direct a representative of the Portfolio tovote its holdings in the Underlying Fund in accordance withtheir direction, and the representative of the Portfoliohas not voted its holdings in the Underlying Fund exceptto the extent the unitholders of the Portfolio have directed;
(s) in addition to receiving the annual,and upon request, the semi-annual financial statements,of the Portfolio, unitholders of the Portfolio have receivedappropriate summary disclosure in respect of the Portfolio'sholdings of securities of the Underlying Funds in the financialstatements of the Portfolio; and
(t) to the extent that the Portfolio andthe Underlying Funds do not use a combined simplified prospectusand annual information form containing disclosure aboutthe Portfolio and the Underlying Funds, copies of the simplifiedprospectus and annual information form of the UnderlyingFunds will be provided upon request to unitholders of thePortfolio and the right to receive these documents is disclosedin the Prospectus of the Portfolio.
November 28, 2002.
"Robert L. Shirriff" "RobertW. Korthals"