Securities Law & Instruments

Headnote

A closed-ended trust established to comply with regulatory requirements of the Office of the Superintendent of Financial Institutions is exempt from having to pay corporate finance participation fees, subject to certain conditions.

Applicable Ontario Statutory Provisions

Ontario Securities Commission Rule 13-502 Fees 26 OSCB 890, s. 2.2 and 6.1.

IN THE MATTER OF

ONTARIO SECURITIES COMMISSION

RULE 13-502 FEES

AND

IN THE MATTER OF

THE BANK OF NOVA SCOTIA AND

BNS CAPITAL TRUST

 

ORDER

(Section 6.1 of Rule 13-502)

WHEREAS the Director has received an application from The Bank of Nova Scotia (the "Bank") and BNS Capital Trust (the "Trust") for an order, pursuant to Section 6.1 of Ontario Securities Commission Rule 13-502 Fees (the "Fees Rule"), that the requirement to pay a participation fee under Section 2.2 of the Fees Rule shall not apply to the Trust, subject to certain terms and conditions.

AND WHEREAS the Bank and the Trust have represented to the Director that:

1. The Trust is a closed-ended trust established under the laws of the Province of Ontario by Montreal Trust Company of Canada (now Computershare Trust Company of Canada) as trustee (the "Trustee"), pursuant to an amended and restated declaration of trust dated March 1, 2000.

2. The Trust has a financial year-end of December 31.

3. The Trust is a reporting issuer in Ontario and, to its knowledge, is not in default of any requirement under the securities legislation of the Province of Ontario.

4. The Bank is the administrative agent of the Trust pursuant to an amended and restated administration and advisory agreement dated March 1, 2000 and, in such capacity, provides advice and counsel with respect to the administration of the day-to-day operations of the Trust and other matters as may be requested by the Trustee from time to time.

5. The outstanding securities of the Trust consist of (i) Special Trust Securities (the "Special Trust Securities"), which are voting securities of the Trust, and (ii) Scotiabank Trust Securities -- Series 2000-1 (the "Scotia BaTS", together with the Special Trust Securities, the "Trust Securities"). All outstanding Special Trust Securities are held by the Bank. The Trust distributed 500,000 Scotia BaTS in a public offering pursuant to a prospectus dated March 28, 2000 (the "Offering"). The Scotia BaTS are listed on the Toronto Stock Exchange.

6. The Trust is a special purpose vehicle established solely for the purpose of effecting the Offering in order to provide the Bank with a cost-effective means of raising capital for Canadian financial institution regulatory purposes. The assets and liabilities of the Trust are reported on the consolidated balance sheet of the Bank. The Trust does not carry on any independent business activities other than to acquire and hold assets to generate income for distribution to holders of the Trust Securities.

7. Pursuant to the MRRS Decision Document dated May 11, 2001 (the "Continuous Disclosure Exemption") granted to the Trust by the Ontario Securities Commission ("OSC"), as principal regulator, on behalf of itself and other decision makers (collectively, the "Decision Makers"), the Decision Makers determined that the requirement contained in the securities legislation of the Province of Ontario and in other applicable jurisdictions (collectively, the "Legislation"):

(a) to file interim financial statements and audited annual financial statements with the Decision Makers and deliver such statements to the holders of Trust Securities;

(b) to make an annual filing, where applicable, with the Decision Makers in lieu of filing an information circular;

(c) to file an annual report and an information circular with the Decision Maker in the Province of Québec and deliver such report or information circular to holders of Trust Securities resident in the Province of Québec;

(d) to prepare and file an annual information form, including management's discussion and analysis (the "MD&A"), with the Decision Makers and send such MD&A to holders of Trust Securities;

shall not apply to the Trust for so long as:

(i) the Bank remains a reporting issuer under the Legislation;

(ii) the Bank sends its annual financial statements, interim financial statements, annual management discussion and analysis and interim management discussion and analysis to holders of Trust Securities and its annual report to holders of Trust Securities resident in the Province of Québec at the same time and in the same manner as if the holders of Trust Securities were holders of the common shares of the Bank;

(iii) all outstanding securities of the Trust are either Scotia BaTS Securities or Special Trust Securities;

(iv) the rights and obligations of holders of additional series of Capital Trust Securities are the same in all material respects as the rights and obligations of the holders of the Scotia BaTS as of the date of the Continuous Disclosure Exemption; and

(v) the Bank is the beneficial owner of all Special Trust Securities;

provided that if a material change occurs in the affairs of the Trust the Continuous Disclosure Exemption shall expire 30 days after the date of such change.

8. The Trust was established by the Bank in order to comply with the regulatory requirements of the Office of the Superintendent of Financial Institutions ("OSFI") relating to the issuance of innovative Tier 1 capital instruments (as contained in OSFI's Principles Governing Inclusion of Innovative Instruments in Tier 1 Capital dated August 2001 (the "OSFI Guideline").

9. OSFI maintains strict guidelines and standards with respect to the capital adequacy requirements of federally regulated financial institutions, including the Bank, and, in particular, specifies minimum required amounts of Tier 1 capital to be maintained by such institutions. Tier 1 capital consists of common shareholders' equity, qualifying non-cumulative perpetual preferred shares, qualifying innovative instruments and qualifying non-controlling interests arising on consolidation from Tier 1 capital instruments. Innovative instruments, such as the Scotia BaTS, must satisfy the detailed requirements of the OSFI Guideline to be included in Tier 1 capital. Accordingly, the innovative instruments (Scotia BaTS) must be issued by a special purpose vehicle (BNS Capital Trust), which is a consolidated non-operating entity whose primary purpose is to raise innovative Tier 1 capital (the Trust is included in the financial statements of the Bank on a fully-consolidated basis). OSFI approved the inclusion of the Scotia BaTS as Tier 1 capital of the Bank on March 24, 2000.

10. No continuous disclosure documents concerning only the Trust will be filed with the OSC.

11. The Trust is a "Class 2 reporting issuer" under the Fees Rule and would be required (but for this Order) to pay participation fees under such rule.

12. The Bank will not issue additional securities through the Trust.

THE ORDER of the Director under the Fees Rule is that the requirement to pay a corporate finance participation fee under Section 2.2 of the Fees Rule shall not apply to the Trust, for so long as:

(i) the Bank and the Trust continue to satisfy all of the conditions contained in the Continuous Disclosure Exemption;

(ii) the Bank does not issue further securities out of the Trust; and

(iii) the capitalization of the Trust represented by the Scotia BaTS is included in the participation fee calculation applicable to the Bank.

November 12, 2003.

"Charlie MacCready"