Securities Law & Instruments

Headnote

Issuer exempt from requirement to pay participation fees, subject to conditions.

Ontario Rules Cited

Ontario Securities Commission Rule 13-502 Fees.

IN THE MATTER OF

ONTARIO SECURITIES COMMMISSION

RULE 13-502 FEES

AND

IN THE MATTER OF

THE BANK OF NOVA SCOTIA

SCOTIABANK CAPITAL TRUST

 

ORDER

WHEREAS the Director has received an application from The Bank of Nova Scotia (the "Bank") and Scotiabank Capital Trust (the "Trust") for an order, pursuant to Section 6.1 of OSC Rule 13-502 Fees (the "Fees Rule"), that the requirement to pay a participation fee under Section 2.2 of the Fees Rule shall not apply to the Trust, subject to certain terms and conditions.

AND WHEREAS the Bank and the Trust have represented to the Director that:

1. The Trust is an open-ended trust established under the laws of the Province of Ontario by Computershare Trust Company of Canada, as trustee (the "Trustee"), pursuant to a declaration of trust dated March 28, 2002 (as amended and restated from time to time).

2. The Trust has a financial year-end of December 31.

3. The Trust is a reporting issuer in Ontario and, to its knowledge, is not in default of any requirement under the securities legislation of the Province of Ontario.

4. The Bank is the administrative agent of the Trust pursuant to and administration and advisory agreement dated March 28, 2002 (as amended and restated from time to time) and, in such capacity, provides advice and counsel with respect to the administration and day-to-day operations of the Trust and other matters as may be requested by the Trustee from time to time.

5. The outstanding securities of the Trust consist of (i) Special Trust Securities (the "Special Trust Securities"), which are voting securities of the Trust, (ii) Scotiabank Trust Securities -- Series 2002-1 (the "Scotia BaTS II Series 2002-1"), and (iii) Scotiabank Trust Securities -- Series 2003-1 (the Scotia BaTS II Series 2003-1", together with the Special Trust Securities and the Scotia BaTS II Series 2002-1, the "Trust Securities"). All outstanding Special Trust Securities are held by the Bank. The Trust distributed 750,000 Scotia BaTS II Series 2002-1 and 750,000 Scotia BaTS II Series 2003-1 pursuant to prospectuses dated April 23, 2003 and February 6, 2003, respectively (the "Offerings"). None of the Trust Securities are listed on a stock exchange.

6. The Trust is a special purpose vehicle established solely for the purposes of effecting the Offerings in order to provide the Bank with a cost-effective means of raising capital for Canadian financial institution regulatory purposes. The assets and liabilities of the Trust are reported on the consolidated balance sheet of the Bank. The Trust does not carry on any independent business activities other than to acquire and hold assets to generate income for distribution to holders of the Trust Securities.

7. Pursuant to the MRRS Decision Document dated July 26, 2002 (the "July 26, 2002 Continuous Disclosure Exemption") granted to the Trust by the OSC, as principal regulator, on behalf of itself and other decision makers (collectively, the "Decision Makers"), the Decision Makers determined that the requirements contained in the securities legislation of the Province of Ontario and in other applicable jurisdictions (collectively, the "Legislation"):

(a) to file interim financial statements and audited annual financial statements (collectively, "Financial Statements") with the Decision Makers and deliver such statements to the holders of Trust Securities;

(b) to make an annual filing ("Annual Filing"), where applicable, with the Decision Makers in lieu of filing an information circular;

(c) to file an annual report ("Annual Report") and an information circular with the Decision Maker in the Province of Québec and deliver such report or information circular to the holders of Trust Securities resident in the Province of Québec;

shall not apply to the Trust for so long as:

(i) the Bank remains a reporting issuer under the Legislation;

(ii) the Bank files with the Decision Makers, in electronic format under the Trust's SEDAR profile, the documents listed in clauses (a) to (c) above in this paragraph 7, at the same time as they are required under the Legislation to be filed by the Bank;

(iii) the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of the documents referred to in clauses (a) to (c) above in this paragraph 7;

(iv) the Bank sends its Financial Statements and Annual Filing, where applicable, to holders of Trust Securities and its Annual Report to holders of Trust Securities resident in the Province of Québec at the same time and in the same manner as if the holders of Trust Securities were holders of the common shares of the Bank;

(v) all outstanding securities of the Trust are either Scotia BaTS II 2002-1 or Special Trust Securities;

(vi) the rights and obligations (other than the economic terms thereof) of holders of additional series of Scotiabank Trust Securities are the same in all material respects as the rights and obligations of the holders of the Scotia BaTS II Series 2002-1 as of the date of the Continuous Disclosure Exemption; and

(vii) the Bank or its affiliates are the beneficial owners of all Special Trust Securities;

provided that if a material adverse change occurs in the affairs of the Trust the Continuous Disclosure Exemption shall expire 30 days after the date of such change.

In addition, the Decision Makers in Ontario, Saskatchewan and Québec determined that the requirements to file an annual information form ("AIF") and annual management's discussion and analysis ("MD&A") of the financial condition and results of operation of the Trust with the Decision Makers in Ontario, Saskatchewan and Québec, an interim MD&A in Ontario and Saskatchewan and send such MD&A to securityholders of the Trust, where applicable, shall not apply to the Trust for so long as:

(i) the conditions set out in clauses (i), (v), (vi) and (vii) above in this paragraph 7 are complied with;

(ii) the Bank files its AIF and its annual and interim MD&A with the Decision Makers, as applicable, in electronic format under the Trust's SEDAR profile at the same time as they are required under the Legislation to be filed by the Bank

(iii) the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of documents referred to in clauses (a) to (c) above in this paragraph 7;

(iv) the Bank sends its annual and interim MD&A and its AIF, as applicable, to holders of Trust Securities at the same time and in the same manner as if the holders of Trust Securities were holders of common shares of the Bank;

and provided if a material adverse change occurs in the affairs of the Trust. The July 26, 2002 Continuous Disclosure Exemption shall expire 30 days after the date of such change.

8. Pursuant to the MRRS Decision Document dated May 28, 2004 (the "May 28, 2004 Continuous Disclosure Exemption") granted to the Trust by the OSC, as principal regulator, on behalf of itself and other Decision makers provided that the requirements contained in the legislation:

(a) to file Annual Certificates with the Decision Makers under section 2.1 of MI 52-109; and

(b) to file Interim Certificates with the Decision Makers under section 3.1 of MI 52-109;

shall not apply to the Trust for so long as:

(i) the Trust is not required to, and does not, file its own Interim filings and Annual Filings;

(ii) the Bank files with the Decision Makers, in electronic format under the Trust's SEDAR profile, the Bank's Annual Certificates and Interim Certificates at the same time as such documents are required under the Legislation to be filed by the Bank;

(iii) the Trust qualifies for the relief contemplated by, and is in compliance with, the requirements and conditions set out in the Previous Decision;

and provided that if a material adverse change occurs in the affairs of the Trust, this Decision shall expire 30 days after the date of such change.

9. The Trust was established by the bank in order to comply with the regulatory requirements of the Office of the Superintendent of Financial Institutions ("OSFI") relating to the issuance of innovative Tier 1 capital instruments (as contained in OSFI's Principles Governing Inclusion of Innovative Instruments in Tier 1 Capital dated August 2001 (the "OSFI Guideline").

10. OSFI maintains strict guidelines and standards with respect to the capital adequacy requirements of federally regulated financial institutions, including the Bank, and, in particular, specifies minimum required amounts of Tier 1 capital to be maintained by such institutions. Tier 1 capital consists of common shareholders' equity, qualifying non-cumulative perpetual preferred shares, qualifying innovative instruments and qualifying non-controlling interests arising on consolidation from Tier 1 capital instruments. Innovative instruments, such as the Scotia BaTS II Series 2002-1 and the Scotia BaTS II Series 2003-1, must satisfy the detailed requirements of the OSFI Guideline to be included in Tier 1 capital. Accordingly, the innovative instruments (Scotia BaTS II Series 2002-1 and Scotia BaTS II Series 2003-1) must be issued by a special purpose vehicle (Scotiabank Capital Trust), which is a consolidated non-operating entity whose primary purpose is to raise innovative Tier 1 capital (the Trust is included in the financial statements of the Bank on a fully-consolidated basis). OSFI approved the inclusion of the Scotia BaTS II Series 2002-1 and the Scotia BaTS II Series 2003-1 as Tier 1 capital of the Bank on April 25, 2002 and February 11, 2003, respectively.

11. No continuous disclosure documents concerning only the Trust will be filed with the OSC unless the conditions in the Continuous Disclosure Exemption are not satisfied.

12. The Trust would be required (but for this order) to pay participation fees under the Fees Rule.

13. The Bank will not issue additional Scotiabank Trust Securities through the Trust.

THE ORDER of the Director under the Fees Rule is that the requirement to pay a participation fee under Section 2.2 of the Fees Rule shall not apply to the Trust, for so long as:

(i) the Bank and the Trust continue to satisfy all of the conditions contained in the July 26, 2004 Continuous Disclosure Exemption and the May 28, 2004 Continuous Disclosure Exemption;

(ii) the Bank does not issue further securities out of the Trust; and

(iii) the capitalization of the Trust represented by the Scotia BaTS II Series 2002-1 and Scotia BaTS II Series 2003-1 is included in the participation fee calculation applicable to the Bank.

November 25, 2004.

"Cameron McInnis"