AmeriStar RSP Income Trust, American Income Trust and Quadravest Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Application - Approval of merger of exchange-traded funds. -- Merger does not meet the criteria for pre-approval outlined in section 5.6 of NI 81-102 -- Unitholders have received timely and adequate disclosure regarding the merger and the merger is not detrimental to securityholders or the public interest.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, sections 5.5(1)(b) and 5.7(1)(b).

June 14, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO,

QUEBEC, NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

AMERISTAR RSP INCOME TRUST AND

AMERICAN INCOME TRUST

AND

IN THE MATTER OF

QUADRAVEST INC. (the "Filer")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer (the "Application") on behalf of AmeriStar RSP Income Trust ("AmeriStar") and American Income Trust ("American Income") and Income Financial Trust ("IFT", and together with AmeriStar and American Income, the "Trusts") for a decision under the securities legislation of the Jurisdictions (the "Legislation") granting approval of the merger of AmeriStar and American Income into IFT (the "Merger"), as contemplated by section 5.5(1)(b) of National Instrument 81-102 Mutual Funds ("NI 81-102") (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications:

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

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

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

1. IFT is an investment trust established under the laws of the Province of Ontario on January 27, 1999 pursuant to a trust agreement between the Filer, as manager of IFT, and the Royal Trust Company as trustee (the "Trustee"). American Income is an investment trust established under the laws of the Province of Ontario on June 8, 1999 pursuant to a trust agreement between the Filer and the Trustee. AmeriStar is an investment trust established under the laws of the Province of Ontario on December 7, 1999 pursuant to a trust agreement between the Filer and the Trustee. The investment manager of each of the Trusts is Quadravest Capital Management Inc. ("Quadravest"). The principal office address of each of the Trusts, the Filer and Quadravest is in Toronto, Ontario.

2. Units of American Income are qualified by long-form prospectus dated June 8, 1999. Units of AmeriStar are qualified by long-form prospectus dated December 7, 1999. Units of IFT are qualified by long form prospectus dated January 27, 1999. Units of the Trusts are not in continuous distribution, but currently trade on the Toronto Stock Exchange ("TSX").

3. The primary investment focus of both American Income and AmeriStar is to invest in a portfolio consisting principally of common shares issued by corporations whose shares are included in S&P 500 Index. The primary investment focus of IFT is to invest in a portfolio of financial services companies from the S&P/TSX Capped Financials Index, the S&P Financials Index or the S&P MidCap Financials Index.

4. Special meetings of the unitholders of AmeriStar and American Income (the "Meetings") were held on April 20, 2006 for the purpose of seeking the approval of such unitholders to the Merger. Approval of the unitholders of IFT is not required as the Merger would not constitute a material change to IFT.

5. In conjunction with the Meetings, a management information circular (the "Circular") was prepared and distributed to unitholders of Ameristar and American Income which contained "prospectus-level" disclosure of IFT but, through inadvertence, the most recent annual and interim financial statements of IFT were not provided to such unitholders. All unitholders were advised, however, in the annual management report of fund performance that such financial statements could be obtained electronically on the SEDAR and Quadravest websites.

6. Complete details of the Merger, as well as the risks associated with the proposal and the implementation thereof, were disclosed in the Circular.

7. The unitholders of Ameristar and American Income approved the Merger at the Meetings.

8. Upon the implementation of the Merger, units of AmeriStar and American Income will be exchanged for units of IFT at an exchange ratio (the "Exchange Ratio") calculated based on the relative net asset value per unit of the applicable Trusts as at the close of trading on the Toronto Stock Exchange on the business day prior to the date the Merger is to be effective (the "Effective Date").

9. In lieu of the annual retraction right at net asset value occurring in February 2007 in respect of AmeriStar, and in June 2006 in respect of American Income, unitholders of AmeriStar and American Income were permitted to redeem their units at their net asset value effective April 30, 2006, with payments of proceeds of redemption being made on or before May 10, 2006. This permitted those unitholders of Ameristar and American Income who did not approve of the Merger to exit those Trusts without penalty.

10. AmeriStar and American Income will sell all of the assets held in their portfolios through normal market sales. On the Effective Date, AmeriStar and American Income will subscribe for units of IFT based on the net asset value per unit of IFT as at the close of trading on the TSX on the day prior to the Effective Date. Immediately thereafter, the units of AmeriStar and American Income will be redeemed and the Manager will pay the redemption price therefore by delivering the applicable number of units of IFT to unitholders, with each unitholder receiving that number of units of IFT (rounded down to the nearest whole unit) as is equal to the applicable Exchange Ratio multiplied by the number of units of applicable Trust held by the unitholder immediately prior to the completion of the Merger.

11. Following the Merger, AmeriStar and American Income will apply to cease to be reporting issuers and will have their units delisted from the TSX. AmeriStar and American Income will continue to exist as trusts after the Merger in order to preserve tax losses for possible future use. The units of IFT (including the units issued in connection with the Merger) will continue trading on the TSX under the symbol "INC".

12. AmeriStar and American Income have issued and filed a press releases and have filed material change reports as required by Part 11 of National Instrument 81-106.

13. Should the Requested Relief be granted, the Filer intends to effect the Merger as soon as practical following the receipt of the Requested Relief.

14. The Filer submits that the Merger will result in the following benefits:

(a) lower operating costs are expected to be realized under a merged trust; and

(b) securityholders of each Trust will benefit from becoming investors in a larger merged trust which, due to larger market capitalization, should increase liquidity on the TSX.

15. In particular, there is a cap on the base management fee payable to Quadravest and the administration fee payable to the Filer, and the operating costs of IFT, in effect from March 1, 2006 until December 31, 2006, and from January 1, 2007 to December 31, 2007. Such costs will not exceed 1.35% of the average net asset value of IFT during each such period. Such costs represent all of the components of IFT's management expense ratio, with the exception of any performance fee that might to payable to Quadravest.

16. Quadravest has agreed with the Filer to waive, or rebate to unitholders of Ameristar and American Income as at the Effective Date of the Merger who remain in IFT on December 31, 2006 or December 31, 2007, as the case may be, such portion of any performance fee owing to it as would, if charged to IFT and not rebated to such unitholders, result in the management expense ratio of IFT as it relates to such unitholders exceeding 1.49% in respect of either such period.

17. If the Merger is approved, the costs of implementing the Merger will be borne by the Filer or Quadravest.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted, provided that:

(a) on or before the Effective Date of the Merger the Filer will obtain from Quadravest the agreement to waive or rebate performance fees referred to in paragraph 16 above; and

(b) the Filer will notify the Decision Makers, in writing, in advance of any public or private offerings of, or any future use being made of, AmeriStar or American Income.

SEDAR Project Nos. 919361 and 919363