Barclays Global Investors Canada Limited and Barclays Global Investors, N.A.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from s. 4.1(2) of NI 81-102, following the acquisition of the manager by another organization, to permit mutual funds to purchase securities of related entities on secondary market -- Relief also granted from self-dealing provisions in s. 4.2 of NI 81-102 to permit funds to conduct inter-fund trades with pooled funds -- Relief subject to conditions including IRC approval and pricing requirements -- inter-fund transfers will comply with conditions in s. 6.1(2) of NI 81-107.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.1(2), 4.2(1), 4.3, 19.1.

National Instrument 81-107 Independent Review Committee for Investment Funds, s. 6.1(2).

November 24, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BARCLAYS GLOBAL INVESTORS CANADA LIMITED

(BGICL) AND

BARCLAYS GLOBAL INVESTORS, N.A. (BGINA)

(each, a Filer and, collectively, the Filers)

AND

IN THE MATTER OF

THE NI 81-102 FUNDS (as defined below)

DECISION

Background

The securities regulatory authority or regulator in Ontario received an Application (the Application) on behalf of the Filers and on behalf of the existing mutual funds and future mutual funds of which BGICL is the investment fund manager to which National Instrument 81-102 -- Mutual Funds (NI 81-102) applies (each, an NI 81-102 Fund and, collectively, the NI 81-102 Funds) for a decision under section 19.1 of NI 81-102 providing the following relief:

Transactions in Securities of Related Issuers

(a) from the requirement in section 4.1(2) of NI 81-102 that prohibits a dealer managed mutual fund from knowingly making an investment in a class of securities of an issuer (a Related Issuer) of which a partner, director, officer or employee of the dealer manager of the mutual fund, or a partner, director, officer or employee of an affiliate or associate of the dealer manager, is a partner, director or officer, unless the partner, director, officer or employee

(A) does not participate in the formulation of investment decisions made on behalf of the dealer managed mutual fund;

(B) does not have access before implementation to information concerning investment decisions made on behalf of the dealer managed mutual fund; and

(C) does not influence, other than through research, statistical and other reports generally available to clients, the investment decisions made on behalf of the dealer managed mutual fund;

(the foregoing individuals being referred to as Access Persons)

in order to permit an NI 81-102 Fund to purchase certain exchange-traded securities and non exchange-traded debt securities of a Related Issuer in the secondary market;

Transactions with Related Parties

(b) from the requirement in section 4.2(1) of NI 81-102 that prohibits a mutual fund from purchasing a security from or selling a security to any of the following acting as principal:

(i) the manager, portfolio adviser or trustee of the mutual fund;

(ii) a partner, director or officer of the mutual fund or of the manager, portfolio adviser or trustee of the mutual fund;

(iii) an associate or affiliate of a person or company referred to in (i) or (ii);

(iv) a person or company, having fewer than 100 security holders of record, of which a partner, director or officer of the mutual fund or of the manager or portfolio adviser of the mutual fund, is a partner, director, officer or security holder;

in order to permit an NI 81-102 Fund to purchase debt securities from or sell debt securities to an existing mutual fund or a future mutual fund to which NI 81-102 does not apply, of which BGICL is the investment fund manager (each, a Pooled Fund and, collectively, the Pooled Funds),

(collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for the Application; and

(b) the Filers have provided notice that Section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Northwest Territories, Yukon and Nunavut (the Passport Jurisdictions).

Interpretation

Terms defined in MI 11-102, National Instrument 14-101 -- Definitions, NI 81-102 and National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) have the same meaning if used in this decision, unless otherwise defined.

Representations

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

General

1. The head office of BGICL is located in Toronto, Ontario. The head office of BGINA is located in San Francisco, California.

2. BGICL is registered as a portfolio manager in Ontario and in each of the Passport Jurisdictions (together, the Jurisdictions), as a commodity trading manager in Ontario and as an exempt market dealer in Ontario and in Newfoundland and Labrador. BGICL expects that, in due course, it will be registered as an exempt market dealer in each of the Jurisdictions and as an investment fund manager in Ontario and in one or more Passport Jurisdictions as necessary.

3. BGINA is registered as a portfolio manager in Ontario (operating under OSC Rule 35-502 conditions for international advisers). BGINA expects that, in due course, it will rely on the international adviser exemption in NI 31-103 or obtain registration as a portfolio manager in one or more Jurisdictions as necessary.

4. BGICL is, or will be, the investment fund manager of each of the NI 81-102 Funds and the Pooled Funds (each, a Fund, and collectively, the Funds), each of which is, or will be, organized under the laws of Ontario.

5. Each of the existing NI 81-102 Funds is a reporting issuer in each of the Jurisdictions and is listed on the Toronto Stock Exchange.

6. None of the Pooled Funds are, or will be, a reporting issuer in any of the Jurisdictions.

7. One or more of the Funds is, or will be, an index fund, the investment objective of which is to replicate the performance of an index.

8. BGICL or BGINA is, or will be, the portfolio manager of each of the Funds.

9. BGINA is, or may be, the sub-adviser of each of the Funds of which BGICL is the portfolio manager.

10. Each of BGICL and BGINA is currently, indirectly, a subsidiary of Barclays Bank PLC (Barclays Bank) which is wholly-owned by Barclays PLC (Barclays).

11. Barclays Bank has entered into an agreement to sell (the Transaction) its interest in the Barclays Global Investors asset management business, including the iShares business, which includes selling all of its securities of BGICL and BGINA, directly or indirectly, to BlackRock, Inc. (BlackRock).

12. Following the closing of the Transaction it has been announced that:

(i) BlackRock will hold, directly or indirectly, all of the outstanding securities of BGICL and BGINA;

(ii) Barclays will hold, indirectly through its indirect holding in BlackRock, approximately 4.9% of the outstanding voting securities of BGICL and BGINA and 19.9% of the outstanding securities of BGICL and BGINA;

(iii) Merrill Lynch & Co., Inc. (Merrill) will hold, indirectly through its holding in BlackRock, approximately 3.4% of the outstanding voting securities of BGICL and BGINA and approximately 34.2% of the outstanding securities of BGICL and BGINA;

(iv) Bank of America (BofA) will hold, indirectly, through its holding in Merrill, the same interest as Merrill in BGICL and BGINA;

(v) The PNC Financial Services Group, Inc. (PNC) will hold, indirectly through its holding in BlackRock, approximately 32.8% of the outstanding voting securities of BGICL and BGINA and approximately 24.6% of the outstanding securities of BGICL and BGINA; and

(vi) the public, BlackRock employees and other investors will hold, indirectly through their holdings in BlackRock, the remaining outstanding voting securities and outstanding securities of BGICL and BGINA.

13. Each of BlackRock, BofA, PNC and Barclays is a reporting issuer in the United States, the equity securities of which are listed on the New York Stock Exchange, and, in the case of Barclays, the London Stock Exchange.

Transactions in Securities of Related Issuers

14. Following the closing of the Transaction, BlackRock will be a principal shareholder of dealers including Barclays Global Investors Services and Barclays Global Investors Fund Distribution Company, which are dealers in the United States. As a result, BGICL and BGINA will each be a dealer manager and the NI 81-102 Funds will be dealer managed mutual funds, within the meaning in NI 81-102.

15. A director, officer or employee of BGICL or BGINA who is an Access Person may be a director or officer of BlackRock or another affiliate and a director, officer or employee of BlackRock or another affiliate who is an Access Person may be a director or officer of other issuers, including Barclays Bank, Barclays, PNC, BofA or Merrill which will result in BlackRock and such others being Related Issuers.

16. Currently, one or more directors of BlackRock is a director or officer of other related entities including PNC and BofA and following the closing of the Transaction, one or more directors of BlackRock will be a director or officer of Barclays. The directors and officers of such other issuers may be Access Persons as a result of the structure of the investment management activities of the Filers, BlackRock and its related entities, which will result in such other issuers being Related Issuers.

17. The NI 81-102 Funds are permitted to invest in exchange-traded securities of Related Issuers in the secondary market pursuant to section 6.2 of NI 81-107. However, section 6.2 of NI 81-107 does not provide relief from section 4.1(2) of NI 81-102 and it does not provide an exemption for purchases of non-exchange-traded debt securities.

18. The investment strategies of an NI 81-102 Fund that relies on the Exemption Sought permit or will permit the NI 81-102 Fund to invest in the securities purchased, either as a principal strategy in achieving its investment objective or as a temporary strategy pending the purchase of other securities.

19. Some of the Related Issuers are, or may be, issuers of non-exchange-traded debt securities that have an "approved credit rating" within the meaning of NI 81-102. The Filers consider that the NI 81-102 Funds should have access to such securities for the following reasons:

(a) There is currently and has been for several years a very limited supply of such securities; to limit the supply available to the NI 81-102 Funds even further by removing debt issued by a Related Issuer puts the NI 81-102 Funds at a competitive disadvantage and may increase the cost a fund pays for available securities.

(b) Diversification is reduced to the extent that an NI 81-102 Fund is limited with respect to investment opportunities.

(c) To the extent that an NI 81-102 Fund is trying to track or outperform a benchmark, it is important for the NI 81-102 Fund to be able to purchase any securities included in the benchmark; debt securities of the Related Issuers may be included in a number of debt indices.

20. BGICL and BGINA are seeking the Exemption Sought because it may be appropriate for the NI 81-102 Funds to invest in non-exchange-traded debt and exchange-traded securities of BlackRock, PNC, BofA, Barclays or other Related Issuers.

21. In respect of the Funds which are index funds, the Exemption Sought is required because non-exchange-traded debt and exchange-traded securities of BlackRock, PNC, BofA, Barclays or other Related Issuers may be included in an index which an NI 81-102 Fund seeks to replicate.

22. Each purchase of non-exchange-traded debt securities of a Related Issuer will occur in the secondary market and not under primary distributions or treasury offerings of a Related Issuer.

23. Each non-exchange-traded debt security of a Related Issuer purchased by an NI 81-102 Fund will have, at the time of the purchase, an "approved credit rating" by an "approved credit rating organization" within the meaning of those terms in NI 81-102.

24. If an NI 81-102 Fund's purchase of non-exchange-traded debt securities issued by a Related Issuer involves an inter-fund trade with another fund to which NI 81-107 applies, the provisions of section 6.1(2) of NI 81-107 will apply to such transaction.

Transactions with Related Parties

25. The Pooled Funds are associates of BGICL.

26. BGICL or BGINA may wish to cause an NI 81-102 Fund to purchase securities from or sell securities to an NI 81-102 Fund or a Pooled Fund.

27. Sections 4.3(1) and 4.3(2) of NI 81-102 permit an NI 81-102 Fund to purchase exchange-traded securities from or sell exchange-traded securities to an NI 81-102 Fund or a Pooled Fund and to purchase debt securities from or sell debt securities to an NI 81-102 Fund, provided the terms of Sections 4.3(1) and 4.3(2) are complied with.

28. BGICL and BGINA cannot rely on section 4.3(2) of NI 81-102 to permit an NI 81-102 Fund to purchase non-exchange-traded debt securities from or sell non-exchange-traded debt securities to a Pooled Fund because the Pooled Funds are not subject to NI 81-107.

29. BGICL has established, or will establish, an independent review committee (IRC) in respect of each NI 81-102 Fund in accordance with the requirements of NI 81-107.

30. BGICL will establish an IRC (the members of which may also be members of the IRC of the NI 81-102 Funds) in respect of the Pooled Funds which rely on the Exemption Sought.

31. The IRC of the Pooled Funds will be composed by BGICL in accordance with Section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in Section 3.9 of NI 81-107.

32. The mandate of the IRC of a Pooled Fund will include:

(i) approving purchases and sales of securities between the Pooled Fund and an NI 81-102 Fund; and

(ii) approving purchases of securities issued by a Related Issuer;

on behalf of the Pooled Fund.

33. The IRC of the Pooled Funds will not provide any of the approvals referred to in paragraph 32 unless it has made the determination set out in Section 5.2(2) of NI 81-107.

34. Purchases and sales of securities involving an NI 81-102 Fund will be referred to the IRC of the NI 81-102 Fund under section 5.2(1) of NI 81-107 and will be subject to the requirements of section 5.2(2) of NI 81-107.

35. Each purchase and sale of securities between two Funds will be consistent with the investment objective of the NI 81-102 Fund or the Pooled Fund, as the case may be.

36. If the IRC of an NI 81-102 Fund or a Pooled Fund becomes aware of an instance where BGICL, as investment fund manager of the NI 81-102 Fund or Pooled Fund, did not comply with the terms of this decision, or a condition imposed by the IRC in its approval, the IRC of the NI 81-102 Fund or the Pooled Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the Jurisdiction under which the NI 81-102 Fund or Pooled Fund is organized.

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 is that the Exemption Sought is granted on the following conditions:

(a) In respect of the relief from section 4.1(2) of NI 81-102:

(i) in respect of the purchase by an NI 81-102 Fund of exchange-traded securities of a Related Issuer in the secondary market:

(A) the purchase or holding is consistent with, or is necessary to meet, the investment objective of the NI 81-102 Fund;

(B) the IRC of the NI 81-102 Fund has approved the transaction in accordance with Section 5.2(2) of NI 81-107;

(C) the purchase is made on an exchange on which the securities are listed and traded; and

(D) no later than the time the NI 81-102 Fund files its annual financial statements, BGICL files with the securities regulatory authority or regulator the particulars of any such investments; and

(ii) in respect of the purchase by an NI 81-102 Fund of non exchange-traded debt securities of a Related Issuer in the secondary market:

(A) the purchase or holding is consistent with, or is necessary to meet, the investment objective of the Fund;

(B) the applicable IRC of the Fund has approved the transaction in accordance with section 5.2(2) of NI 81-107;

(C) BGICL complies with section 5.1 of NI 81-107 and BGICL and the applicable IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the applicable IRC provides in connection with the transaction;

(D) the price payable for the security is not more than the ask price of the security;

(E) the ask price of the security is determined as follows:

(1) if the purchase occurs on a marketplace, the price payable is determined in accordance with the requirements of that marketplace; or

(2) if the purchase does not occur on a marketplace,

A. the Fund may pay the price for the security at which an independent, arm's-length seller is willing to sell the security, or

B. if the Fund does not purchase the security from an independent, arm's-length seller, consistent with Commentary 7 of Section 6.1 of NI 81-107, the Fund must pay the price quoted publicly by an independent marketplace or obtain, immediately before the purchase, at least one quote from an independent, arm's-length purchaser or seller and not pay more than that quote;

(F) the transaction complies with any applicable "market integrity requirements" as defined in NI 81-107; and

(G) no later than the time the Fund files its annual financial statements, BGICL files with the securities regulatory authority or regulator the particulars of any such investments.

(b) In respect of the relief from section 4.2(1) of NI 81-102:

(A) the IRC of the NI 81-102 Fund has approved the transaction in respect of the NI 81-102 Fund in accordance with the terms of section 5.2(2) of NI 81-107;

(B) the IRC of the Pooled Fund has approved the transaction in respect of the Pooled Fund in accordance with the terms of section 5.2(2) of NI 81-107; and

(C) the transaction complies with paragraphs (c) to (g) of section 6.1(2) of NI 81-107.

"Rhonda Goldberg"
Manager, Investment Funds
Ontario Securities Commission