Exemption Orders (Discretionary)

SCOTIA EXCELSIOR MONEY MARKET FUND


COR#98/290

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF

SCOTIA EXCELSIOR MONEY MARKET FUND
SCOTIA EXCELSIOR MORTGAGE FUND
SCOTIA EXCELSIOR INCOME FUND
SCOTIA EXCELSIOR DIVIDEND FUND
SCOTIA EXCELSIOR AMERICAN GROWTH FUND
SCOTIA EXCELSIOR INTERNATIONAL FUND
SCOTIA EXCELSIOR BALANCED FUND

AND

IN THE MATTER OF

NATIONAL TRUST MONEY MARKET FUND
NATIONAL TRUST MORTGAGE FUND
NATIONAL TRUST CANADIAN BOND FUND
NATIONAL TRUST DIVIDEND FUND
NATIONAL TRUST BALANCED FUND
NATIONAL TRUST AMERICAN EQUITY FUND
NATIONAL TRUST INTERNATIONAL EQUTY FUND

AND

IN THE MATTER OF

SCOTIA SECURITIES INC.
NATIONAL TRUST COMPANY

Exemption Order Under Sections 123(a) and 130(b)

WHEREAS the joint application of Scotia Securities Inc. (“SSI”), as manager of the Scotia Excelsior Funds and National Trust Company (“National Trust”), as manager of the National Trust Funds (the Scotia Excelsior Funds and the National Trust Funds being referred to collectively as the “Funds”) for an order pursuant to section 123(a) and 130(b) of the Act that sections 121(2)(b), 126(a) and 127(1)(b) of the Act do not apply to certain transactions proposed to effect the mergers described below (each a “Merger”);

AND WHEREAS SSI and National Trust having represented to the Commission that:

1. SSI is trustee and manager of the 21 Scotia Excelsior Funds; SSI is a wholly-owned subsidiary of The Bank of Nova Scotia (“BNS”); Scotia Investment Management Ltd. and Montrusco Associates Ltd. act as portfolio advisers to the Scotia Excelsior Funds; BNS is the custodian and promoter of each of the Scotia Excelsior Funds;

2. National Trust is trustee and manager of the 13 National Trust Funds; the portfolio adviser of the National Trust Funds is Cassels Blaikie Investment Management Limited (“CBIM”); CBIM is a wholly-owned subsidiary of National Trust and on or about August 1, 1998 will amalgamate with SIML to form Scotia Cassels Investment Counsel Limited, a subsidiary of BNS;

3. the Scotia Excelsior Funds are offered in all provinces and territories of Canada by simplified prospectus and annual information form dated October 1, 1997 (the “Scotia Prospectus”);

4. the National Trust Funds are offered in all provinces of Canada (except New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland) by simplified prospectus and annual information form dated July 18, 1997 (the “National Prospectus”); applications have been made in all provinces for an extension of the lapse date to October 30, 1998;

5. by an offer dated June 30, 1997 (the “Offer”), BNS made an offer to shareholders of National Trustco Inc. to acquire all of the outstanding shares of National Trustco Inc.; National Trust was the principal operating subsidiary of National Trustco Inc.; the Offer was open until July 31, 1997 and was successfully completed;

6. by letter dated July 30, 1997 application was made to Canadian Securities Administrators under Section 9.01 of the Policy for approval of the change in control of National Trust, the manager of the National Trust Funds; by letter dated January 8, 1998 such approval was granted;

7. following the completion of the Offer, management of SSI and National Trust have been reviewing the organization and operation of the two families of mutual funds; that process is nearly complete and both SSI and National Trust wish to begin making operational decisions concerning the organization, operation and distribution of the two families of funds;
8. each of the Scotia Excelsior Funds and the National Trust Funds is an unincorporated mutual fund trust established by way of declaration of trust and governed by the laws of the Province of Ontario;

9. each of the Scotia Excelsior Funds and the National Trust Funds is a reporting issuer and is not on the list of reporting issuers in default;

10. it is currently proposed that the operations of seven Scotia Excelsior Funds be merged with seven National Trust Funds; the relevant Funds are as follows:

Terminating Funds
Continuing Funds
National Trust Money Market FundScotia Excelsior Money Market Fund
National Trust Mortgage FundScotia Excelsior Mortgage Fund
National Trust American Equity FundScotia Excelsior American Growth Fund
National Trust International Equity FundScotia Excelsior International Fund
Scotia Excelsior Income FundNational Trust Canadian Bond Fund
Scotia Excelsior Dividend FundNational Trust Dividend Fund
Scotia Excelsior Balanced FundNational Trust Balanced Fund

11. the Merger of the Terminating Funds and the Continuing Funds (collectively the “Relevant Funds”) will occur through the following steps:
      (a) Step 1 - each of the Terminating Funds will transfer all of its net assets (which will include its portfolio securities) to the applicable Continuing Fund in exchange for units of that Continuing Fund having an aggregate value equivalent to the value of the assets transferred;

      (b) Step 2 - immediately following the above-noted transfer, each of the Terminating Funds will distribute to its unitholders its respective portfolio securities (which would consist solely of units of the applicable Continuing Fund), in exchange for such unitholders’ units of the Terminating Fund, so that following the exchange, the unitholders of each of the Terminating Funds become direct unitholders of the applicable Continuing Fund;

      (c) Step 3 - following the above-noted distribution, each of the Terminating Funds will be terminated;
12. the Mergers are to be effected for the following reasons:
      (a) the Mergers will improve the potential for diversification of the investment portfolios of each of the Relevant Funds because a single, larger fund will be under management;

      (b) the Mergers will allow for the more efficient management of the two fund groups and are expected to result in a reduction of the costs of operating the two fund families;

      (c) more specifically, the Mergers will eliminate the cost of operating the Terminating Funds and the fixed costs of operating the Continuing Funds will be spread over a greater net asset value;

      (d) the Mergers will permit unitholders in both families of funds to take advantage of asset allocation and other services currently available to unitholders in one or the other fund family; and

      (e) the Mergers will eliminate duplication of funds that would otherwise be offered by the same dealers, thus eliminating a source of client confusion; and

      accordingly, the Mergers are in the best interests of the Relevant Funds and their unitholders;

2. each of the Relevant Funds are offered on a “no-load” basis resulting in clients not paying a charge on entering or exiting the fund;

3. all of the Terminating Funds contemplate termination of the fund being at the discretion of the respective trustee upon the giving of notice to unitholders;

4. management of SSI and National Trust are of the view that the proposed “qualifying exchanges” can be made without the loss of material tax losses to unitholders of the Terminating Funds;

5. in all cases, the management fee of the Continuing Fund will be equal to or lower than the management fee exigible in respect of the relevant Terminating Fund;

6. no change in the fundamental investment objective of each Terminating Fund would result from the proposed Merger; this conclusion has been reached following a comparison of the investment objectives of the Terminating and Continuing Funds as well as a more detailed comparison of the actual investment portfolios;

7. the valuation procedures of each Terminating Fund are substantially similar to those of the applicable Continuing Funds;

8. unitholders of each of the Relevant Funds will continue to have the right to redeem their units for cash without a redemption fee at any time up to the close of business on the business day before the effective date of the Merger, which is expected to be on or about October 24, 1998;

9. all costs of the Mergers, including the numerous steps taken to facilitate the Mergers that would otherwise be ordinary costs charged to the Relevant Funds, will be or have been borne by SSI and National Trust and will not be and have not been charged to the Relevant Funds or their unitholders;

10. the Scotia Excelsior Funds and the National Trust Funds operate and are maintained on different unitholder and record keeping systems; the management, systems design and programming resources necessary (i) to effect the integration of the Scotia Excelsior Funds and the National Trust Funds into a single fund family; and (ii) to ensure Year 2000 compliance for the unitholder and record keeping systems, are substantial; the trustee of the Funds are of the view that if systems work is delayed pending meetings of unitholders of the Terminating Funds that this will substantially increase the risk that the merged family of mutual funds cannot be made Year 2000 compliant a prudent period in advance of December 31, 1999;

11. proxy level disclosure and notice of the Mergers and of their effect on the Funds will be given to unitholders of the Relevant Funds in a notice (the “Notice”) to be delivered thereto by National Trust and SSI at least 60 days prior to the Mergers; a copy of the simplified prospectus and annual audited financial statements for the relevant Continuing Funds will accompany the Notice; the simplified prospectus states that a copy of the annual information form for the relevant Continuing Fund will be made available to unitholders without charge on request;

12. an amendment to the prospectus of the Terminating Funds will be made and will be delivered to all new purchasers of units of the Terminating Funds containing full, true, and plain disclosure and notice of the Mergers;

13. SSI, National Trust and Relevant Funds have applied to all the Canadian securities administrators for all necessary approvals under NP 39 in connection with the Mergers;

14. upon each Terminating Fund investing its assets in the applicable Continuing Fund, each Terminating Fund will be a “substantial security holder” of that Continuing Fund, as those words are defined in section 120(2)(c) of the Act, and, accordingly, in the absence of this order, each Terminating Fund would be precluded by section 121(2)(b) from making or holding units of the Continuing Fund; and

15. pursuant to the definition in section 120(1) of the Act and the deeming provision of section 120(2)(a) of the Act each Terminating Fund is a “related person” to the applicable Continuing Fund, in the absence of this order, section 126(a) of the Act would require National Trust to file a report in connection with (i) the purchase of each Continuing Fund of portfolio securities of the respective Terminating Fund and (ii) the sale by each Continuing Fund of its units to the applicable Terminating Fund;

16. each of the Scotia Excelsior Funds is an “associate” as that term is defined for the purposes of the Act since SSI is the trustee and the manager of the Scotia Excelsior Funds; each of the National Trust Funds is an “associate” of National Trust since National Trust is the trustee and manager of the National Trust Funds; in addition, SSI and National Trust are “affiliates” within the meaning of the Act; consequently in the absence of this order, section 127(1)(b) of the Act would prohibit the proposed purchase by each of the Terminating Funds of units of the applicable Continuing Fund, and the proposed purchase by each Continuing Fund of the portfolio securities of the applicable Terminating Fund, because such proposed transactions would involve the purchase or sale of the securities of the issuers from or to the account of an “associate” of a “responsible person” within the meaning of the Act;

AND WHEREAS the Commission being satisfied that the purpose of the order requested pursuant to section 123(a) of the Act that the proposed investment by each Terminating Fund in units of the applicable Continuing Fund represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Relevant Funds;

AND WHEREAS the Commission is satisfied, for the purpose of the order requested pursuant to section 130(b) of the Act, that it would not be prejudicial to the public interest to grant the relief requested;

IT IS ORDERED, effective July 24, 1998:

1. under section 123(a) of the Act that section 121(2)(b) of the Act does not apply to the proposed investment by each Terminating Fund in units of the applicable Continuing Fund, as described in paragraph 11 above provided that, immediately following such investment, all of the assets of each Terminating Fund, namely the units of the applicable Continuing Fund, are distributed to the unitholders of the Terminating Fund and each Terminating Fund is immediately thereafter wound-up;

2. under section 130(b) of the Act that section 126(a) of the Act does not apply to National Trust with respect to the purchase and sale of securities between each Terminating Fund and the applicable Continuing Fund provided that the audited financial statements are prepared for the terminal year of each of the Terminating Funds and copies filed with the Commission; and

under section 130(b) of the Act that section 127(1)(b) of the Act does not apply to the portfolio managers of the Funds in connection with the proposed purchase by each of the Continuing Funds of the securities portfolio of the applicable

Terminating Fund, provided that immediately following such purchases, all of the assets of such Terminating Fund, namely the units of the Continuing Fund acquired in exchange for its securities portfolio, are distributed by such Terminating Fund to its unitholders and such Terminating Fund is thereafter wound up.

DATED at Vancouver, British Columbia, on December 8, 1998.





Douglas M. Hyndman
Chair
©2025 British Columbia Securities Commission