Scotiamocatta Physical Copper Fund

Decision

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit investment fund that uses specified derivatives to calculate its NAV weekly and not on a daily basis, subject to certain conditions.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 14.2(3)(b), 17.1.

April 7, 2010

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

SCOTIAMOCATTA PHYSICAL COPPER FUND

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for relief from Section 14.2(3)(b) of National Instrument 81-106 -- Investment Fund Continuous Disclosure ("NI 81-106"), which requires that the net asset value of an investment fund that uses specified derivatives (as defined in National Instrument 81-102 -- Mutual Funds) be calculated at least once every business day (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 Multinational Instrument 11-102 -- Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 -- Definitions have the same meaning if used in this decision, unless otherwise defined.

(a) "Units" means the Class A Units and Class F Units of the Filer.

Representations

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

1. The Filer is an investment fund to be established under the laws of the Province of Ontario.

2. SMCA Copper Holding Corp. is the trustee of the Filer.

3. Scotia Managed Companies Administration Inc. (the "Administrator"), a wholly-owned subsidiary of Scotia Capital Inc., is the administrator of the Filer and is responsible for administering the ongoing operations of the Filer. The head office of the Administrator is located at 40 King Street West, 26th Floor, P.O. Box 4085, Station A, Toronto, Ontario M5W 2X6. The Administrator is also the promoter of the Filer.

4. The Filer is authorized to issue an unlimited number of Units.

5. The Filer filed a preliminary prospectus dated July 28, 2009, and an amended and restated preliminary prospectus dated March 16, 2010 (the "Preliminary Prospectus"), with respect to a public offering of Units of the Filer, in each of the provinces and territories of Canada (SEDAR Project No. 1452758).

6. The Filer has been created to provide holders of Units ("Unitholders") with direct exposure to the price performance of physical copper ("Physical Copper"). The Physical Copper purchased by the Filer will be high grade quality cathode of an approved brand or producer and will meet the chemical and physical specifications prescribed by the contract rules governing one or more of the London Metal Exchange, New York Mercantile Exchange (COMEX Division) and Shanghai Futures Exchange (collectively, the "Metal Exchanges").

7. The net proceeds of the offering of Units will be used by the Filer to purchase and hold the Filer's investment portfolio, which will consist of Physical Copper acquired from various sources including primary copper producers, the Metal Exchanges and through standardized futures markets in order to acquire and take delivery of Physical Copper, together with cash and cash equivalents (the "Portfolio"). Prior to the acquisition of the Physical Copper, the Filer may obtain some or all of its exposure to Physical Copper through forward contracts and standardized futures.

8. Although the Filer will be a mutual fund trust for the purposes of the Income Tax Act (Canada), it will not be a mutual fund for the purposes of Canadian securities legislation.

9. The operations of the Filer will differ in some respects from those of a conventional mutual fund, including the following:

(a) unlike a conventional mutual fund, in which the fund's securities are offered to the public on a continuous basis, the Filer does not intend to continuously offer its Units once it is out of primary distribution; and

(b) the Class A Units are expected to be listed and posted for trading on the Toronto Stock Exchange ("TSX"). This is unlike securities of a conventional mutual fund where there is normally no such market and where, as a result, holders of securities who wish to liquidate their holdings must cause the fund to redeem them. In the present case, because the Class A Units will be listed for trading on the TSX, holders of the Class A Units will not have to rely solely on the retraction features of the Class A Units to provide liquidity for their investment.

10. The Class F Units are intended for fee-based accounts. The Class F Units will not be listed on a stock exchange, but will be convertible into Class A Units. It is expected that liquidity for the Class F Units will be obtained by means of conversion into Class A Units and the sale of those Class A Units through the facilities of the TSX.

11. Commencing in 2011, Units may be surrendered annually for retraction at the option of the Unitholder for a price per Unit equal to the net realized value of their pro rata interest of Physical Copper in the Filer per Unit, plus their share of any other net assets or liabilities.

12. Class A Units may be retracted monthly at the option of a Unitholder at a price determined by reference to the market price of the Class A Units (the "Class A Monthly Retraction Amount"). Class F Units may be retracted monthly at the option of a Unitholder at a price equal to the product of: (i) the Class A Monthly Retraction Amount and (ii) a fraction, the numerator of which is the most recently calculated NAV per Class F Unit, and the denominator of which is the most recently calculated NAV per Class A Unit.

13. The Filer will calculate and publish the NAV of each class of Units of the Filer and NAV per Unit of each class on a weekly basis.

14. As disclosed in the Preliminary Prospectus, the NAV of each class of Units of the Filer and NAV per Unit of each class will be provided to Unitholders at no cost on a weekly basis on the Filer's website or on request by contacting the Administrator.

15. The Filer is not in default of any of its obligations under securities legislation in any of Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut.

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:

(a) the Class A Units are listed on the TSX; and

(b) the Filer calculates the NAV per Unit of each class of Units at least weekly.

"Rhonda Goldberg"
Manager
Ontario Securities Commission