iShares CDN S&P/TSX 60 Index Fund et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Exemptive relief granted to exchange traded funds offered in continuous distribution from certain mutual fund requirements and restrictions on: transmission of purchase or redemption orders, calculation and payment of redemptions, and date of record for payment of distributions. - National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 9.1, 10.2, 10.3, 14.1, 19.1.

November 22, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR, YUKON,

NORTHWEST TERRITORIES AND NUNAVUT

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

iSHARES CDN S&P/TSX 60 INDEX FUND ("XIU"),

iSHARES CDN S&P/TSX CAPPED COMPOSITE

INDEX FUND ("XIC"), iSHARES CDN S&P/TSX

MIDCAP INDEX FUND ("XMD"), iSHARES CDN

S&P/TSX CAPPED ENERGY INDEX FUND ("XEG"),

iSHARES CDN S&P/TSX CAPPED FINANCIALS INDEX

FUND ("XFN"), iSHARES CDN S&P/TSX CAPPED

GOLD INDEX FUND ("XGD"), iSHARES CDN

S&P/TSX CAPPED INFORMATION TECHNOLOGY

INDEX FUND ("XIT"), iSHARES CDN S&P/TSX

CAPPED REIT INDEX FUND ("XRE"), iSHARES CDN

SCOTIA CAPITAL SHORT TERM BOND INDEX

FUND ("XSB"), and iSHARES CDN SCOTIA CAPITAL

UNIVERSE BOND INDEX FUND ("XBB")

(collectively, the "Affected iShares Funds")

AND

BARCLAYS GLOBAL INVESTORS CANADA LIMITED

as trustee of the Affected iShares Funds ("Barclays Canada",

and together with the Affected iShares Funds, the "Filers")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application under the securities legislation of the Jurisdictions (the "Legislation") for a decision that exempts the Filers from the following provisions of National Instrument 81-102 -- Mutual Funds ("NI 81-102"):

1. Sections 9.1 and 10.2 to permit purchases and sales of Units of XIU and XRE on the Toronto Stock Exchange ("TSX");

2. Section 10.3 to permit XIU, XIC, XMD, XEG, XFN, XGD, XIT, XSB and XBB to redeem less than the Prescribed Number of Units at a price equal to 95% of the closing price of the Units on the TSX; and

3. Section 14.1 to permit XIU, XIC, XMD, XEG, XFN, XGD, XIT, XSB and XBB to establish a record date for distributions in accordance with TSX Rules.

(collectively, the "Requested Relief")

Under the Mutual Reliance Review System ("MRRS") for Exemptive Relief Applications:

1. the Ontario Securities Commission is the principal regulator for this application; and

2. this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

"Baskets" means baskets of shares, bonds or other securities as Barclays Canada may determine in its discretion from time to time that may be used, along with cash, by Designated Brokers and Underwriters as subscription proceeds for a Prescribed Number of Units of the Affected iShares Funds and for which, along with cash, a Prescribed Number of Units of the Affected iShares Funds may be exchanged.

"Designated Brokers" means registered brokers and dealers that enter into agreements with the Affected iShares Funds to perform certain duties in relation to the Affected iShares Funds, and "Designated Broker" means any one of them.

"iShares™ Funds" means the family of exchange traded mutual funds for which Barclays Canada acts as trustee.

"Prescribed Number of Units" means, in relation to an Affected iShares Fund, the number of Units of the Affected iShares Fund determined by Barclays Canada from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.

"Underwriters" means registered brokers and dealers that have entered into underwriting agreements with the Affected iShares Funds and that subscribe for and purchase Units from the Affected iShares Funds, and "Underwriter" means any one of them.

"Unitholders" means beneficial and registered holders of Units.

"Units" means units of beneficial interest in the Affected iShares Funds.

Section references set out in this decision are references to NI 81-102, unless otherwise indicated.

Defined terms contained in NI 81-102 and National Instrument 14-101 have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Affected iShares Funds:

1. Each Affected iShares Fund is (i) a mutual fund trust governed by the laws of Ontario, and (ii) issues Units.

2. Each Affected iShares Fund is a reporting issuer under the laws of all of the Jurisdictions.

3. Each Affected iShares Fund is listed on the TSX.

4. Units issued by the Affected iShares Funds are index participation units within the meaning of NI 81-102. The Affected iShares Funds are generally described as exchange traded funds ("ETFs").

5. Barclays Canada is the trustee of all the Affected iShares Funds. Barclays Canada is registered under the Legislation of all Jurisdictions as a portfolio manager and investment counsel (or the equivalent categories of registration). Barclays Canada is also registered as a Commodity Trading Manager and Limited Market Dealer in Ontario and as a Limited Market Dealer in Newfoundland and Labrador.

6. The investment objective of each Affected iShares Fund is to replicate, to the extent possible, the performance of an index provided by a third-party index provider, net of expenses. The investment objective and applicable index for each Affected iShares Fund, as well as its investment strategy, is disclosed on an ongoing basis in the prospectus of the iShares Funds.

7. Units may only be subscribed for or purchased directly from the Affected iShares Funds by Underwriters or Designated Brokers and orders may only be placed for Units in the Prescribed Number of Units (or an integral multiple thereof) on any day when there is a trading session on the TSX.

8. The Affected iShares Funds have appointed Designated Brokers to perform certain functions which include standing in the market with a bid and ask price for Units of each Affected iShares Fund for the purpose of maintaining liquidity for the Units.

9. Each Underwriter or Designated Broker that subscribes for Units must deliver, in respect of each Prescribed Number of Units to be issued, (i) a Basket and cash in an amount sufficient so that the value of the Basket and cash delivered is equal to the net asset value of the Units next determined following the receipt of the subscription order; or (ii) cash in an amount equal to the net asset value of the Prescribed Number of Units next determined following the receipt of the subscription order.

10. The net asset value per Unit of each Affected iShares Funds is calculated and published daily.

11. Upon notice given by Barclays Canada from time to time and, in any event, not more than once quarterly, a Designated Broker will subscribe for Units in cash in an amount not to exceed 0.30% of the net asset value of XIU, XIC, XMD, XEG, XFN, XGD, XIT and XRE and 0.15% of the net asset value of XSB and XBB next determined following delivery of the notice of subscription to that Designated Broker.

12. Neither the Underwriters nor the Designated Brokers receive any fees or commissions in connection with the issuance of Units to them. Barclays Canada may, at its discretion, charge an administration fee on the issuance of Units to the Designated Brokers or Underwriters.

13. Except as described in paragraphs 7 through 11 above, Units may not be purchased directly from the Affected iShares Funds. Investors are generally expected to purchase Units through the facilities of the TSX. However, Units may be issued directly to Unitholders upon the reinvestment of distributions of income or capital gains.

14. Unitholders that wish to dispose of their Units may generally do so by selling their Units on the TSX, through a registered broker or dealer, subject only to customary brokerage commissions. A Unitholder that holds a Prescribed Number of Units or an integral multiple thereof may exchange such Units for Baskets and cash. Unitholders may also redeem their Units for cash at a redemption price equal to 95% of the closing price of the Units on the TSX on the date of redemption.

15. As trustee, Barclays Canada is entitled to receive an annual trustee fee from each Affected iShares Fund. Such annual trustee fee is calculated as a fixed percentage of the net asset value of each Affected iShares Fund. Except for XIU, Barclays Canada is responsible for the payment of all expenses of the Affected iShares Funds, except for the trustee fee, any administration fee payable by Designated Brokers or Underwriters in connection with the issuance of Units, any redemption fees payable by Unitholders upon the redemption of a Prescribed Number of Units, and any withholding taxes and any income taxes. Barclays Canada is responsible for all costs and expenses of XIU, except for: the trustee fee; brokerage expenses and commissions; registrar and transfer agency fees; securities movement charges payable to XIU's custodian; legal and audit fees; the preparation, printing, filing and distribution of prospectuses, financial statements, annual reports; and annual filing fees payable to Canadian securities regulatory authorities relating to the issuance of Units of XIU. Barclays Canada has agreed, however, that the aggregate of the costs and expenses charged to XIU in any year including GST, will not exceed 0.17% per year of the average daily net asset value of XIU. Barclays Canada has agreed to be responsible for the costs and expenses of XIU in excess of that amount except for income taxes and withholding taxes.

16. The Requested Relief has been granted to all of the iShares Funds other than the Affected iShares Funds. With the exception of the Requested Relief, the Affected iShares Funds have received all of the exemptive relief that has been granted to the other iShares Funds. The Requested Relief is being sought so that all the iShares Funds will have the same exemptive relief.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted.