Barclays Global Investors Canada Limited et al.

Headnote

Multilateral Instrument 11-102 Passport System -- National Instrument 81-102 Mutual Funds -- A mutual fund manager seeks approval of proposed current fund mergers and future fund mergers under the approval requirements in NI 81-102 -- The continuing fund will include a component of the fundamental investment objective of the terminating fund in the continuing funds' objectives; the funds' independent review committee approved the merger; unitholders will vote on the proposed merger; terminating fund unitholders will receive alternate prospectus level disclosure; the tax consequences of the merger are as beneficial to unitholders as if the merger was on a tax-deferred basis; unitholders can redeem their units of the terminating fund before the merger. -- Future fund mergers comply with the pre-approved merger requirements in NI 81-102 except that the Manager will provide alternate prospectus level disclosure instead of the prospectus and financial statements for the terminating funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, s. 5.5.

November 17, 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)

(the Filers)

AND

IN THE MATTER OF

THE NI 81-102 FUNDS (as defined below) AND

THE POOLED FUNDS (as defined below)

DECISION

Background

The securities regulatory authority or regulator in Ontario received an application (the Application) from the Filers under the securities legislation of the principal regulator (the Legislation) for a decision providing an exemption from the requirements that prohibit a mutual fund from knowingly making or holding an investment in any person or company who is a substantial security holder of the mutual fund, its management company or distribution company or in an issuer in which any person or company who is a substantial security holder of the mutual fund, its management company or its distribution company has a significant interest (in each case, a Related Issuer), in order to permit:

(i) 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) and existing mutual funds and future mutual funds of which BGICL is the investment fund manager to which NI 81-102 does not apply (each, a Pooled Fund and, collectively the Pooled Funds) to purchase certain non-exchange-traded debt securities of a Related Issuer in the secondary market; and

(ii) a Pooled Fund to purchase exchange-traded securities of a Related Issuer in the secondary market.

(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 Alberta, British Columbia, Saskatchewan, New Brunswick, Nova Scotia and Newfoundland and Labrador (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:

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. A Filer 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.

10. Each of the Filers 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; and

(ii) 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.

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

14. BlackRock, which will be a Related Issuer with respect to a Fund because it will be a substantial security holder of BGICL, currently manages fixed income, cash management, equity and alternative investment products on behalf of institutional and individual investors worldwide. BlackRock also offers risk management, investment system outsourcing and financial advisory services to institutional investors worldwide.

15. PNC will be a Related Issuer with respect to a Fund because it will be a substantial security holder of BGICL and BGINA.

16. Any issuer in which BlackRock or PNC holds a significant interest will also be a Related Issuer.

17. BGICL will establish an independent review committee (IRC) (the members of which may also be members of the IRC of the NI 81-102 Funds) in respect of each Pooled Fund. The IRC of the Pooled Fund 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, as if NI 81-107 applied to the Pooled Fund.

18. The mandate of the IRC established in respect of the Pooled Funds includes, or will include, reviewing and approving purchases of securities issued by a Related Issuer. Further, the IRC of the Pooled Fund will not approve the purchase of securities in a Related Issuer unless it has made the determination set out in section 5.2(2) of NI 81-107.

19. Section 6.2 of NI 81-107 provides an exemption for the NI 81-102 Funds to invest in exchange-traded securities of Related Issuers in the secondary market. That exemption does not apply to the Pooled Funds and does not permit any of the Funds to purchase non-exchange-traded securities issued by Related Issuers. Some securities issued by a Related Issuer, such as debt securities, are not listed and traded.

20. 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 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 Funds even further by removing debt issued by a Related Issuer puts the Funds at a competitive disadvantage and may increase the cost a Fund pays for available securities.

(b) Diversification is reduced to the extent that a Fund is limited with respect to investment opportunities.

(c) To the extent that a Fund is trying to track or outperform a benchmark, it is important for the 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.

21. BGICL and BGINA are seeking the Exemption Sought because securities of BlackRock, PNC or other Related Issuers that are exchange-traded may be appropriate for the Pooled Funds to invest in and debt securities of BlackRock, PNC or other Related Issuers that are non-exchange-traded may be appropriate for the Funds to invest in.

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

23. 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.

24. Each non-exchange-traded debt security of a Related Issuer purchased by a 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.

25. If a 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.

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:

(a) to permit an NI 81-102 Fund or a Pooled Fund to make and hold an investment in non-exchange-traded debt securities of a Related Issuer in the secondary market on the following conditions:

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 90th day after the end of each financial year, BGICL files with the securities regulatory authority or regulator the particulars of any such investments.

(b) to permit a Pooled Fund to make and hold an investment in exchange-traded securities of a Related Issuer in the secondary market on the following conditions:

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

B. the IRC of the Pooled 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 90th day after the end of each financial year, BGICL files with the securities regulatory authority or regulator the particulars of any such investments.