1832 Asset Management L.P. and the Terminating Fund

September 28, 2021

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Fund merger approval under paragraph 5.5(1)(b) of NI 81-102 -- Fund merger does not meet all the pre-approval criteria because merging funds' investment objectives may not be considered substantially similar -- Merger approval granted subject to obtaining the prior approval of securityholders of the Terminating Fund -- National Instrument 81-102 Investment Funds.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 5.5(1)(b), 5.6(1) and 5.7(1)(b).

September 28, 2021

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 1832 ASSET MANAGEMENT L.P. (the Filer) AND THE TERMINATING FUND (as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of Scotia CanAm Index Fund (the Terminating Fund) for a decision under the securities legislation of the Jurisdiction (the Legislation) approving the proposed merger (the Merger) of the Terminating Fund into Scotia U.S. Equity Index Fund (the Continuing Fund) pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (the Approval Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

1. the Ontario Securities Commission is the principal regulator for this application; and

2. the Filer has provided notice that paragraph 4.7(1)(c) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories of Canada other than the Jurisdiction (together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined. The following additional terms have the following meanings:

Funds means, individually or collectively, the Terminating Fund and the Continuing Fund.

Representations

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

The Filer

3. The Filer is an Ontario limited partnership, which is wholly-owned by the Bank of Nova Scotia (BNS). The general partner of the Filer is 1832 Asset Management G.P. Inc., an Ontario corporation wholly-owned by BNS with its head office located in Toronto, Ontario.

4. The Filer is the manager of the Funds.

5. The Filer is registered as (i) a portfolio manager in all of the provinces of Canada and in the Northwest Territories and the Yukon; (ii) an exempt market dealer in all of the provinces of Canada (except Prince Edward Island and Saskatchewan); (iii) an investment fund manager in Ontario, Québec, Newfoundland and Labrador and the Northwest Territories; and (iv) a commodity trading manager in Ontario.

The Funds

6. Each Fund is a conventional mutual fund for purposes of NI 81-102 established as a trust under the laws of the Province of Ontario.

7. Each of the Funds is a reporting issuer under applicable securities legislation in each of the Jurisdictions.

8. Neither the Filer nor any Fund is in default of securities legislation in any of the Jurisdictions.

9. Each of the Funds follows the standard investment restrictions established under NI 81-102, or an exemption therefrom.

10. Securities of the Terminating Fund were previously offered and distributed in all of the Jurisdictions pursuant to a simplified prospectus, annual information form and fund facts dated November 12, 2014. Securities of the Terminating Fund are no longer in distribution (since July 24, 2015).

11. Securities of the Continuing Fund are currently qualified for sale in each of the Jurisdictions under a simplified prospectus, annual information form and fund facts dated May 21, 2021.

12. The Continuing Fund has a substantially similar valuation procedure and fee structure as the Terminating Fund.

13. The investment objectives of the Terminating Fund and the Continuing Fund are as follows:

Terminating Fund

Continuing Fund

Scotia CanAm Index Fund's objective is long-term capital growth by tracking the performance of a generally recognized U.S. equity index. The fund currently tracks the Standard & Poor's 500 (the "S&P 500") Index. It invests primarily in futures contracts that are linked to the performance of the index and in cash, Government of Canada treasury bills and other short-term debt instruments guaranteed by the Government of Canada.

Scotia U.S. Equity Index Fund's objective is long-term capital growth by tracking the performance of a generally recognized U.S. equity index. It invests primarily in the stocks that are included in the index.

Reason for Approval Sought

14. Regulatory approval of the Merger is required because the Merger does not satisfy all the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102. In particular, the fundamental investment objectives of the Continuing Fund may be considered not to be "substantially similar" to the fundamental investment objectives of the Terminating Fund.

15. Except as described above, the proposed Merger will otherwise comply with all the other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

The Proposed Merger

16. The Merger will be effected as a tax-deferred "qualifying exchange" within the meaning of section 132.2 of the Income Tax Act (Canada).

17. Securityholders of each series of the Terminating Fund will receive the same series of securities of the Continuing Fund as they currently own.

18. The proposed Merger was announced in a press release dated August 12, 2021. A material change report with respect to the Merger was also filed via SEDAR on August 16, 2021.

19. As required by National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107), the Filer has presented the terms of the Merger to the independent review committee (the IRC) for its review. The IRC has reviewed the Merger and has provided a positive recommendation, on the basis that, in the IRC's opinion after reasonable inquiry, the Merger, if implemented, would achieve a fair and reasonable result for each of the Terminating Fund and Continuing Fund.

20. The Filer is convening a special meeting (the Meeting) of the securityholders of the Terminating Fund in order to seek the approval of the securityholders of the relevant series of the Terminating Fund to complete the Merger, as required by paragraph 5.1(1)(f) of NI 81-102. The Meeting will be held on or about October 28, 2021.

21. The Filer anticipates that the Merger will not constitute a material change to the Continuing Fund as of the Effective Date (as defined below), and, accordingly, there is no intention to convene a meeting of securityholders of the Continuing Fund to approve the Merger pursuant to paragraph 5.1(1)(g) of NI 81-102.

22. By way of order dated November 4, 2016, the Filer was granted relief (the Notice-and-Access Relief) from the requirement set out in paragraph 12.2(2)(a) of National Instrument 81-106 Investment Fund Continuous Disclosure to send a printed management information circular to securityholders while proxies are being solicited, and, subject to certain conditions, instead allows a notice-and-access document (as described in the Notice-and-Access Relief) to be sent to such securityholders. In accordance with the Filer's standard of care owed to the Terminating Fund pursuant to securities legislation, the Filer will only use the notice-and-access procedure for a particular meeting where it has concluded it is appropriate and consistent with the purposes of notice-and-access (as described in Companion Policy 54-101CP Communication with Beneficial Owners of Securities of a Reporting Issuer) to do so, also taking into account the purpose of the meeting and whether the Terminating Fund would obtain a better participation rate by sending the management information circular with the other proxy-related materials.

23. Pursuant to the requirements of the Notice-and-Access Relief, a notice-and-access document and applicable proxies in connection with the Meeting, along with the most recent fund facts of the relevant series of the Continuing Fund, will be mailed to securityholders of the Terminating Fund on or about September 27, 2021. The notice-and-access document, template form of proxy and the management information circular in respect of the Merger (the Circular), which the notice-and-access document will provide a link to, will also be filed via SEDAR at the same time.

24. If all required approvals for the Merger are obtained, it is intended that the Merger will occur on or about November 8, 2021, or such other date as determined by the Filer (the Effective Date). The Filer therefore anticipates that each securityholder of the Terminating Fund will become a securityholder of the Continuing Fund after the close of business on the Effective Date. As it is currently anticipated that there will be no holders of any other series of units of the Terminating Fund following the implementation of the Merger, the Terminating Fund will be wound-up as a result of the Merger.

25. The tax implications of the Merger as well as the differences between the investment objectives and other features of the Terminating Fund and the Continuing Fund and the IRC's determination for the Merger, will be set out in the Circular, so that securityholders may make an informed decision before voting on whether to approve the Merger. The Circular will also describe the various ways in which securityholders can obtain a copy of the prospectus of the Continuing Fund and its most recent interim and annual financial statements and management reports of fund performance.

26. All costs and expenses associated with the Merger, including the costs of the Meeting, will be borne by the Filer and will not be charged to the Terminating Fund or the Continuing Fund. No commission or other fee will be charged to securityholders on the issue or exchange of securities of the Terminating Fund and the Continuing Fund, or otherwise in connection with the Merger.

27. No sales charges will be payable by securityholders of the Terminating Fund in connection with the Merger.

28. Following the Merger, all operational services (such as automatic withdrawal plans and pre-authorized contribution plans) will be available to investors with respect to the Continuing Fund. Securityholders of the Terminating Fund who wish to establish one or more systematic plans in respect of their holdings in the Continuing Fund may do so following the implementation of the Merger.

29. The investment portfolio and other assets of the Terminating Fund to be acquired by the Continuing Fund in order to effect the Merger are currently, or will be, acceptable, on or prior to the Effective Date, to the portfolio manager of the Continuing Fund and are, or will be, consistent with the investment objectives of the Continuing Fund.

30. Securityholders of the Terminating Fund will continue to have the right to redeem their securities of the Terminating Fund until the business day immediately prior to the Effective Date. If securityholders of the Terminating Fund approve the Merger at the Meeting, the securityholders of the Terminating Fund who do not wish to participate in the Merger will have the opportunity to redeem their securities prior to the Effective Date.

Steps of the Merger

31. If the necessary approvals are obtained, the Filer will carry out the following steps to complete the Merger:

(a) Prior to effecting the Merger, the Terminating Fund may sell any investment that is not consistent with the investment objective and investment strategies of the Continuing Fund or acceptable to the portfolio manager of the Continuing Fund. As a result, the Terminating Fund may temporarily hold cash or money market instruments and may not be fully invested in accordance with their investment objectives for a brief period of time prior to the Merger being effected.

(b) The value of the Terminating Fund's portfolio and other assets will be determined at the close of business on the Effective Date in accordance with the constating documents of the Terminating Fund.

(c) The Continuing Fund will acquire the investment portfolio and other assets of the Terminating Fund in exchange for securities of the Continuing Fund. The securities of the Continuing Fund received by the Terminating Fund will (a) have an aggregate net asset value equal to the value of the net assets transferred by the Terminating Fund and (b) be issued at the net asset value per security of the Continuing Fund as of the close of business on the Effective Date.

(d) Immediately thereafter, the securities of the Continuing Fund received by the Terminating Fund will be distributed to securityholders of the Terminating Fund in exchange for their securities in the Terminating Fund on a dollar-for-dollar and series-by-series basis.

(e) In each case, the investors in the Terminating Fund will receive the same series of securities of the Continuing Fund as such investors hold in the Terminating Fund.

(f) The Continuing Fund will not assume any liabilities of the Terminating Fund and the Terminating Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the Effective Date.

(g) The Terminating Fund will distribute a sufficient amount of its net income and net realized capital gains, if any, to securityholders to ensure that it will not be subject to tax for its current tax year.

(h) The Terminating Fund will be wound up as a result of the Merger.

Benefits of the Merger

32. In the opinion of the Filer, the Merger will be beneficial to securityholders of the Terminating Fund for the following reasons:

(a) The Merger will provide economies of scale by eliminating duplicative administrative and regulatory costs of operating the Terminating Fund and the Continuing Fund as separate mutual funds.

(b) The Terminating Fund has been closed to new and additional purchases since July 24, 2015. The Merger will allow securityholders of the Terminating Fund to resume pre-authorized contributions and/or lump sum purchases in the Continuing Fund.

(c) The management fees and fixed administration fees of the Terminating Fund and Continuing Fund are currently the same. If the Merger is approved and implemented, securityholders of the Terminating Fund will benefit from a proposed fixed administration fee reduction of the Continuing Fund from 0.17% to 0.16%.

(d) The Merger will be effected on a tax-deferred basis for securityholders.

(e) The Terminating Fund will be merged into the Continuing Fund that also tracks the performance of a U.S. equity index and possesses the same risk rating and portfolio manager as the Terminating Fund; and

(f) The Merger will result in a more simplified index product line-up that is easier for investors to understand.

33. For the reasons set forth above, in the opinion of the Filer, it will not be prejudicial to the public interest to grant the Approval Sought.

Terminating Fund	Continuing Fund

Scotia CanAm Index Fund's objective is long-term capital growth by tracking the performance of a generally recognized U.S. equity index. The fund currently tracks the Standard & Poor's 500 (the "S&P 500") Index. It invests primarily in futures contracts that are linked to the performance of the index and in cash, Government of Canada treasury bills and other short-term debt instruments guaranteed by the Government of Canada.	Scotia U.S. Equity Index Fund's objective is long-term capital growth by tracking the performance of a generally recognized U.S. equity index. It invests primarily in the stocks that are included in the index.

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 Approval Sought is granted, provided that the Filer obtains the prior approval of the security holders of the Terminating Fund for the proposed Merger at the Meeting, or any adjournment thereof.

"Darren McKall"

Manager, Investment Funds and Structured Products

Ontario Securities Commission

Application File#: 2021/0520