Barclays Global Investors Canada Limited et al.

Decision

Headnote

Mutual Reliance Review System -- Relief granted from seed capital requirements for commodity pools in NI 81-104 -- Manager permitted to redeem $50,000 seed capital investment in each Fund provided the Fund has received subscriptions from investors other than the Manager totalling at least $5.0 million and provided the Manager maintain $100,000 in excess working capital -- Section 3.2(2)(a) of NI 81-104.

Applicable Legislative Provisions

National Instrument 81-104 Commodity Pools, ss. 3.2(2)(a), 10.1.

November 13, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO (THE JURISDICTION)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BARCLAYS GLOBAL INVESTORS

CANADA LIMITED

(the Filer or Barclays Canada)

AND

iSHARES CONSERVATIVE CORE PORTFOLIO

BUILDER FUND, iSHARES GROWTH CORE

PORTFOLIO BUILDER FUND, iSHARES GLOBAL

COMPLETION PORTFOLIO BUILDER FUND,

iSHARES ALTERNATIVES COMPLETION

PORTFOLIO BUILDER FUND

(the New iShares Funds) and such other

actively managed exchange-traded funds,

whether or not commodity pools, as the Filer

may establish (together with the New iShares

Funds, the Funds)

 

DECISION

Background

The principal regulator in the Jurisdiction (the Decision Maker) has received an application from the Filer on behalf of the Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for exemptive relief from paragraph 3.2(2)(a) of National Instrument 81-104 -- Commodity Pools (NI 81-104), which requires a commodity pool to have invested in it, at all times, securities that were issued pursuant to paragraph 3.2(1)(a) of NI 81-104 and have an aggregate issue price of $50,000 (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories of Canada other than Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102, NI 81-104 and National Instrument 81-102 -- Mutual Funds (NI 81-102) have the same meaning if used in this decision unless otherwise defined.

Alternative Asset Classes means asset classes including, but not limited to, commodities, real estate investment trusts, income trusts, real return bonds, emerging market equity, emerging market bonds, high yield bonds, specialty equity, infrastructure and private equity.

Baskets means, in relation to a particular Fund, a group of securities of iShares ETFs (as defined below) and/or other securities determined by Barclays Canada from time to time for the purpose of subscription orders, exchanges or redemptions or for other purposes determined by Barclays Canada from time to time.

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

iShares ETFs means exchange-traded funds managed by Barclays Canada or an affiliate other than the New iShares Funds.

Prescribed Number of Units means, in relation to a Fund, the number of units of the Fund (Units) determined by Barclays Canada from time to time for the purpose of subscription orders, exchanges or redemptions or for other purposes.

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

Unitholders means holders of Units.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer's head office is located in Toronto, Ontario. The Filer, the iShares ETFs and the New iShares Funds are not in default of securities legislation in any jurisdiction.

2. Each Fund is, or will be, a mutual fund trust governed by the laws of the province of Ontario and a reporting issuer under the laws of all of the provinces and territories of Canada.

3. The Funds are or will be commodity pools as such term is defined in section 1.1 of NI 81-104 in that each Fund has adopted or will adopt fundamental investment objectives that permit the Fund to use or invest in specified derivatives in a manner that is not permitted under NI 81-102.

4. Each Fund is, or will be, subject to NI 81-102 and the Securities Act (Ontario), subject to any exemptions therefrom that may be granted by securities regulatory authorities including as described below and to the exemptions relating to commodity pools, as such exemptions are outlined in NI 81-104.

5. The New iShares Funds have applied separately to the securities regulatory authorities for relief from certain requirements of NI 81-102, including relief that would enable the New iShares Funds to invest in any exchange-traded fund that is primarily listed on the London Stock Exchange and managed by an affiliate of the Filer on the same basis as would be permitted under section 2.5(2) of NI 81-102 if the securities of such exchange-traded fund were "index participation units" within the meaning of NI 81-102.

6. Units will be listed on the Toronto Stock Exchange (TSX). Barclays Canada has applied to list the units of each New iShares Fund on the TSX. Units will not be sold to investors until the TSX has approved the listing of the Units.

7. The Funds will be actively managed. Each Fund will be, and will generally be described as, an exchange-traded fund.

8. The investment objective of each of the New iShares Funds, other than the iShares Alternatives Completion Portfolio Builder Fund, is to provide a specified investment result by optimizing the asset mix of its portfolio among multiple asset classes. The investment objective of the iShares Alternatives Completion Portfolio Builder Fund is to provide a specified investment result by optimizing the asset mix of its portfolio among one or more Alternative Asset Classes. It is expected that other Funds will have similar investment objectives.

9. In order to achieve its investment objective, each New iShares Fund may invest in securities issued by iShares ETFs and may also invest directly in issuers and in derivatives such as options, futures contracts, forward contracts, swaps, debt-like securities and index options. Each New iShares Fund may also use derivatives to hedge, or protect, against changes in asset class prices or foreign exchange risks. Each New iShares Fund may also invest in futures contracts in order to provide market exposure for cash held by the New iShares Fund and may hold money market instruments or cash to meet its current obligations. It is expected that other Funds will use similar investment strategies.

10. The investment objective of each New iShares Fund, as well as its investment strategy, is disclosed in the preliminary prospectus dated October 6, 2008 and will be disclosed on an ongoing basis in the prospectus of the New iShares Funds.

11. Barclays Canada will act as trustee and manager of the Funds. Barclays Canada is registered in the categories of portfolio manager and investment counsel (or the equivalent categories of registration) in all of the provinces and territories of Canada. 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.

12. Units may only be subscribed for or purchased directly from the 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 and the primary market or exchange for the securities held by the Funds is open for trading. Under designated broker and underwriter agreements, the Designated Brokers and Underwriters agree to offer Units for sale to the public only as permitted by applicable Canadian securities legislation. Canadian securities legislation requires a prospectus to be delivered to purchasers buying Units as part of a distribution, including first purchasers of Units in the distribution on the TSX. Provided that the Designated Brokers and Underwriters comply with applicable Canadian securities legislation, first purchasers of Units in the distribution on the TSX will receive a prospectus from the Designated Brokers and Underwriters.

13. The Funds will appoint Designated Brokers to perform certain functions, which include standing in the market with a bid and ask price for Units for the purpose of maintaining liquidity for the Units.

14. Each Underwriter or Designated Broker that subscribes for Units must deliver, in respect of each Prescribed Number of Units to be issued, a Basket and cash in an amount sufficient so that the value of the Basket and cash delivered is equal to the NAV of the Units next determined following the receipt of the subscription order. In the discretion of Barclays Canada, the Funds may also accept cash only subscriptions for Units in an amount equal to the NAV of the Units next determined following the receipt of the subscription order.

15. The NAV per Unit of each Fund will be calculated and published and the investment portfolio of each Fund will be made available on the www.ishares.ca website on any day when there is a trading session on the TSX.

16. Upon notice given by the Filer 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 established by the Filer.

17. Neither the Underwriters nor the Designated Brokers will 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.

18. Except as described in paragraphs 12 through 17 above, Units may not be purchased directly from the 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.

19. 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 of a Fund may exchange such Units with the Fund for Baskets and cash; Unitholders may also redeem their Units directly from the Funds for cash at a redemption price equal to 95% of the closing price of the Units on the TSX on the date of redemption.

20. Paragraph 3.2(2)(a) of NI 81-104 states that a commodity pool may redeem, repurchase or return any amount invested in, securities issued upon the investment in the commodity pool referred to in paragraph 3.2(1)(a) of NI 81-104 only if securities issued under paragraph 3.2(1)(a) of NI 81-104 that had an aggregate issue price of $50,000 remain outstanding and at least $50,000 invested under paragraph 3.2(1)(a) remains invested in the commodity pool.

21. If the Funds were governed by the provisions of NI 81-102, Barclays Canada would be allowed to redeem its seed capital investment in each Fund upon the Fund having received subscriptions totalling not less than $500,000 from investors other than the persons or companies referred to in paragraph 3.1(1)(a) of NI 81-102.

22. Barclays Canada wishes to redeem the seed capital invested in each Fund subject to the conditions set out in this decision.

23. Barclays Canada understands that the policy rationale behind the permanent seed capital requirement for commodity pools under NI 81-104 is to encourage promoters to ensure that the commodity pool is being properly run for the benefit of the investors by requiring that the promoter of a pool, or a related party, will itself be an investor in the pool at all times.

24. Barclays Canada is obliged: (i) in accordance with the Legislation, to at all times act honestly and in good faith, and in the best interests of the Fund, and exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances; and (ii) in accordance with the terms of the declaration of trust governing each Fund, to act as a reasonably prudent trustee.

25. Having regard to Barclays Canada's fiduciary obligation as set out in paragraph 24 above, not having $50,000 invested in each Fund at all times will not change how Barclays Canada manages each Fund. Barclays Canada will manage the Funds in accordance with all applicable legal and contractual requirements.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1.

(a) Barclays Canada may not redeem any of its initial investment of $50,000 in a Fund unless and until the value of the Units subscribed for by persons or companies other than the persons and companies referred to in paragraph 3.2(1)(a) of NI 81-104 reaches $5.0 million,

(b) if, after Barclays Canada redeems its initial investment of $50,000 in a Fund in accordance with condition 1(a) above, the value of the Units subscribed for by investors other than the persons and companies referred to in paragraph 3.2(1)(a) of NI 81-104 drops below $5.0 million for more than 30 consecutive days, Barclays Canada will, unless the Fund is in the process of being dissolved or terminated, reinvest $50,000 in the Fund and maintain that investment until condition 1(a) is again satisfied, and

(c) Barclays Canada will at all times maintain excess working capital of a minimum of $100,000;

2. the basis on which Barclays Canada may redeem any of its initial investment of $50,000 from a Fund will be disclosed in the prospectus of the Fund; and

3. condition 1(c) above will cease to apply upon the coming into force of any legislation or rule of the Decision Makers dealing with the maintenance of excess working capital for investment fund managers.

"Vera Nunes"
Assistant Manager, Investment Funds Branch
Ontario Securities Commission