Burgundy Asset Management Ltd.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions - Relief granted to permit (i) interfund trading at 'last sale price' based on UMIR Rules, between a manager's pooled funds, and managed accounts and (ii) in-species transactions involving pooled funds and managed accounts.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, ss. 13.5(2)(b)(ii), (iii), and 15.1.

National Instrument 81-107 -- Independent Review Committee for Investment Funds, ss. 6.1(2) and 6.1(4).

April 15, 2010

Background

The principal regulator in the Jurisdiction (the Principal Regulator) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the Principal Regulator (the Legislation) for an exemption from the prohibition against a registered adviser knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase or sell a security from or to the investment portfolio of: (i) a responsible person; (ii) an associate of a responsible person; or (iii) an investment fund for which a responsible person acts as an adviser, to permit:

1. the purchase and redemption of securities of any issuer:

(a) between a Pooled Fund (defined below) and another Pooled Fund or a Managed Account (defined below);

(b) between a Managed Account and a Pooled Fund; and

(c) the transactions contemplated in 1(a) and (b) to occur at the last sale price, as defined in the Market Integrity Rules of the Investment Industry Regulatory Organization of Canada, prior to the execution of the trade (the Last Sale Price) or in lieu of the closing sale price (the Closing Sale Price) contemplated by the definition of current market price referred to in paragraph (e) of section 6.1(2) of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107), as determined by the Filer in its discretion

(each purchase and redemption, an Inter-Fund Trade), and

2.

(a) the purchase by a Pooled Fund of securities of another Pooled Fund, and the redemption of securities held by a Pooled Fund in another Pooled Fund, and as payment for such purchase or redemption, in whole or in part, by making good delivery of portfolio securities that meet the investment criteria of that Pooled Fund; and

(b) the purchase by a Managed Account of securities of a Pooled Fund, and the redemption of securities held by a Managed Account in a Pooled Fund, and as payment:

(i) for such purchase, in whole or in part, by the Managed Account making good delivery of portfolio securities to the Pooled Fund; and

(ii) for such redemption, in whole or in part, by the Pooled Fund making good delivery of portfolio securities to the Managed Account

(each purchase and redemption, an In Specie Transaction),

(1 and 2 collectively, the Exemption Sought).

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

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

(d) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador (collectively with Ontario, 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.

Pooled Fund means an open ended investment fund managed by the Filer or managed in the future by the Filer, the securities of which are sold pursuant to exemptions from the prospectus requirement.

Managed Account means an account over which the Filer has discretionary authority.

Certain other defined terms have the meanings given to them below under "Representations".

Representations

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

1. The Filer is incorporated under the laws of Ontario, with its head office in Toronto, Ontario.

2. The Filer is registered as a portfolio manager in each of the Jurisdictions. The Filer is also registered as an exempt market dealer in Ontario and in Newfoundland and Labrador.

3. Each Pooled Fund is, or will be, an open-ended mutual fund trust governed under the laws of Ontario.

4. The Filer is, or will be, the manager, trustee and portfolio manager of each of the Pooled Funds.

5. The Pooled Funds are not, and will not be, reporting issuers in any of the Jurisdictions.

6. Securities of the Pooled Funds are, or will be, distributed pursuant to exemptions from the prospectus requirements in each of the Jurisdictions.

7. The Filer and the Pooled Funds are not, and will not be, in default of securities legislation in any of the Jurisdictions.

8. The Filer is also the portfolio manager of each of the Managed Accounts.

9. The Filer offers investment management services primarily to high net worth individuals, institutions and foundations (Clients) through a Managed Account. The Filer has two types of Client accounts: "Beaujolais" Clients and "Burgundy" Clients.

10. The Filer's normal minimum aggregate balance for the Managed Accounts of a Burgundy Client is $3 million. The Filer's normal minimum aggregate balance for the Managed Accounts of a Beaujolais Client is $500,000. These minimums may be waived at the Filer's discretion. From time to time, the Filer may accept certain Clients with less than $500,000 under management.

11. Each Client who wishes to receive the investment management services of the Filer executes a written agreement (the Investment Counsel Agreement) whereby the Client appoints the Filer to act as portfolio manager in connection with an investment portfolio of the Client with full discretionary authority to trade in securities for the Managed Account without obtaining the specific consent of the Client to execute the trade.

12. Investments in individual securities may at certain times not be appropriate in certain circumstances for the Filer's Clients. Consequently, the Filer may, where authorized under the Investment Counsel Agreement, from time to time invest Client assets in securities of any one or more of the Pooled Funds in order to give their Clients the benefit of asset diversification and economies of scale regarding minimum commission charges on portfolio trades and generally to facilitate portfolio management.

13. Each Investment Counsel Agreement or other documentation in respect of the Managed Accounts will contain the authorization of the Client for the Filer to engage in Inter-Fund Trades and/or In Specie Transactions.

Inter-Fund Trades

14. The Filer may wish to cause a Pooled Fund to engage in an Inter-Fund Trade with another Pooled Fund or a Managed Account or for a Managed Account to engage in an Inter-Fund Trade with a Pooled Fund.

15. When the Filer engages in an Inter-Fund Trade of securities between two Pooled Funds or between a Managed Account and a Pooled Fund, it will follow the following procedures:

(a) the portfolio manager will deliver the trade instructions in respect of a purchase or a redemption of a portfolio security by a Pooled Fund or a Managed Account to a trader on a trading desk with a registered dealer that is unrelated to the Filer;

(b) the portfolio manager will deliver the trade instructions in respect of a redemption or a purchase of a portfolio security by another Pooled Fund or Managed Account to a trader on a trading desk with a registered dealer that is unrelated to the Filer;

(c) the trader will be required to execute the trade on a timely basis as an Inter-Fund Trade between the Pooled Fund or Managed Account on one hand and the other Pooled Fund or Managed Account on the other hand at the Last Sale Price of the security prior to execution of the trade or at the Closing Sale Price, as instructed by the Filer;

(d) the portfolio manager will instruct the trader that all Inter-Fund Trade orders will remain open for a period not to exceed 30 days unless the portfolio manager cancels the order sooner; and

(e) the trader will advise the Filer of the price at which the Inter-Fund Trade occurred.

16. At the time of an Inter-Fund Trade, the Filer will have in place policies and procedures to enable the Pooled Funds and Managed Accounts to engage in Inter-Fund Trades.

17. The Filer has established or will establish an independent review committee (IRC) in respect of each Pooled Fund. The IRC will be composed by the Filer 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. The mandate of the IRC will include approving purchases and sales of securities between a Pooled Fund and a Managed Account or between two Pooled Funds and the IRC will not approve an Inter-Fund Trade between a Pooled Fund and a Managed Account or between two Pooled Funds unless it has made the determination set out in section 5.2(2) of NI 81-107.

18. If the IRC of a Pooled Fund becomes aware of an instance where the Filer, as manager of the Pooled Fund, did not comply with the terms of this decision or a condition imposed by the IRC in its approval, the IRC of the Pooled Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction under which the Pooled Fund is organized.

19. As the Filer is, or will be, the manager, trustee and portfolio manager of the Pooled Funds and the portfolio manager of the Managed Accounts, the Filer would be considered a "responsible person" and an "associate" of a responsible person within the meaning of the applicable provisions of the Legislation. Accordingly, absent the granting of the Exemption Sought, the Filer would be prohibited from engaging in Inter-Fund Trades.

In Specie Transactions

20. The Filer wishes to be able to enter into In Specie Transactions between a Pooled Fund and a Managed Account that permit payment, in whole or in part, for securities of a Pooled Fund purchased by a Managed Account to be made by making good delivery of portfolio securities, held by such Managed Account, to a Pooled Fund, provided those portfolio securities meet the investment criteria of the Pooled Fund. Similarly, following a redemption of securities of a Pooled Fund by a Managed Account, the Filer wishes to be able to enter into In Specie Transactions that permit payment, in whole or in part, of redemption proceeds to be satisfied by making good delivery of portfolio securities held in the investment portfolio of a Pooled Fund to such Managed Account, provided those portfolio securities meet the investment criteria of the Managed Account. The Filer anticipates that such transactions will occur following a redemption of securities of a Pooled Fund where a Managed Account invested in such Pooled Fund has experienced a change in circumstances which results in the Managed Account being an ideal candidate for direct holdings of individual securities rather than securities of the Pooled Fund and vice versa in the case of a purchase of securities of the Pooled Fund by the Managed Account.

21. The Filer wishes to be able to enter into In Specie Transactions between Pooled Funds that permit payment, in whole or in part, for securities of a Pooled Fund to be made by making good delivery of portfolio securities held by the Pooled Fund to the Pooled Fund in which it seeks to invest. Similarly, following a redemption of securities of a Pooled Fund, the Filer wishes to be able to enter into In Specie Transactions that permit payment, in whole or in part, of the redemption proceeds to be satisfied by making good delivery of portfolio securities held in the investment portfolio of the Pooled Fund provided those portfolio securities meet the investment criteria of the other Pooled Fund. Such purchases and redemptions of securities between two Pooled Funds will occur where, as part of its portfolio management, a Pooled Fund wishes to obtain exposure to certain investments or categories of asset classes invested in by a Pooled Fund by investing in securities of that Pooled Fund.

22. The Filer will value the portfolio securities under an In Specie Transaction using the same values that are used to calculate the net asset value for the purpose of the issue price or redemption price of securities of the Pooled Fund.

23. The portfolio securities transferred in an In Specie Transaction will meet the investment criteria of the Pooled Fund or Managed Account, as the case may be, acquiring the portfolio securities.

24. None of the portfolio securities which are the subject of each In Specie Transaction will be securities of related issuers of the Filer.

25. The Pooled Fund will keep written records of each In Specie Transaction, including records of each purchase and redemption of portfolio securities and the terms thereof for a period of five years commencing after the end of the financial year in which the trade occurred, the most recent two years in a reasonably accessible place.

26. Effecting In Specie Transactions of securities between a Pooled Fund and a Managed Accounts and between two Pooled Funds will allow the Filer to manage each asset class more effectively and reduce transaction costs for the Client and the Pooled Fund or for the two Pooled Funds, as appropriate. For example, In Specie Transactions reduce market impact costs, which can be detrimental to the Clients and/or Pooled Fund(s). In Specie Transactions also allow a portfolio manager to retain within its control institutional-size blocks of securities that otherwise would need to be broken and re-assembled.

27. The only cost which will be incurred by a Pooled Fund or a Managed Account for an In Specie Transaction is a nominal administrative charge levied by the custodian of the Pooled Fund in recording the trades and/or any commission charged by the dealer executing the trade.

28. The Filer will obtain the prior written consent of the relevant Client before it engages in any In Specie Transactions in connection with the purchase or redemption of securities of the Pooled Funds for the Managed Account.

29. At the time of an In Specie Transaction, the Filer will have in place policies and procedures to enable the Pooled Funds and Managed Accounts to engage in In Specie Transactions with Pooled Funds and Managed Accounts, as applicable.

30. As the Filer is, or will be, the manager, trustee and portfolio manager of the Pooled Funds and the portfolio manager of the Managed Accounts, as applicable, the Filer would be considered a "responsible person" and an "associate" of a responsible person within the meaning of the applicable provisions of the Legislation. Accordingly, absent the granting of the Exemption Sought, the Filer would be prohibited from engaging in In Specie Transactions.

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 provided that:

Inter-Fund Trade

(a) the Inter-Fund Trade is consistent with the investment objective of the Pooled Fund or the Managed Account, as applicable;

(b) the Filer refers the Inter-Fund Trade that involves a Pooled Fund to the IRC of the Pooled Fund in the manner contemplated by section 5.1 of NI 81-107 and the Filer and the Pooled Fund comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade;

(c) if the transaction is with a Pooled Fund or between two Pooled Funds, the IRC of each Pooled Fund has approved the Inter-Fund Trade in respect of that Pooled Fund in accordance with the terms of subsection 5.2(2) of NI 81-107;

(d) if the transaction is with a Managed Account, the Investment Counsel Agreement or other documentation in respect of the Managed Account contains the authorization of the Client for the Filer to engage in Inter-Fund Trades; and

(e) for exchange-traded securities, the Inter-Fund Trade is executed at the Last Sale Price or the Closing Sale Price of the security and the Inter-Fund Trade complies with paragraphs (c), (d), (f) and (g) of subsection 6.1(2) of NI 81-107.

In Specie Transaction

(f) in connection with an In Specie Transaction where a Managed Account acquires securities of a Pooled Fund:

(i) the Investment Counsel Agreement or other documentation in respect of the Managed Account contains the authorization of the Client for the Filer to engage in the In Specie Transactions;

(ii) the Pooled Fund would, at the time of payment, be permitted to purchase the securities;

(iii) the securities are acceptable to the portfolio manager of the Pooled Fund and meet the investment criteria of the Pooled Fund;

(iv) the value of the portfolio securities is at least equal to the issue price of the securities of the Pooled Fund for which they are used as payment, valued as if the securities were portfolio assets of that Pooled Fund;

(v) none of the securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer;

(vi) the account statement next prepared for the Managed Account will describe the securities delivered to the Pooled Fund and the value assigned to such securities; and

(vii) the Filer will keep written records of each In Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered to the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place,

(g) in connection with an In Specie Transaction where a Managed Account redeems securities of a Pooled Fund:

(i) the Investment Counsel Agreement or other documentation in respect of the Managed Account contains the authorization of the Client for the Filer to engage in the In Specie Transactions and such authorization has not been revoked;

(ii) the securities meet the investment criteria of the Managed Account acquiring the securities and are acceptable to the Filer;

(iii) the value of the securities is equal to the amount at which those securities were valued by the Pooled Fund in calculating the net asset value per security used to establish the redemption price;

(iv) none of the securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer;

(v) the account statement next prepared for the Managed Account will describe the securities received from the Pooled Fund and the value assigned to such securities; and

(vi) the Filer will keep written records of each In Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered by the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place,

(h) in connection with an In Specie Transaction where a Pooled Fund purchases the securities of another Pooled Fund:

(i) the Pooled Fund acquiring the securities would, at the time of payment, be permitted to purchase the securities;

(ii) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund and meet the investment criteria of the Pooled Fund acquiring the securities;

(iii) the value of the securities is equal to the issue price of the securities of the Pooled Fund, valued as if the securities were portfolio assets of that Pooled Fund;

(iv) none of the portfolio securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer; and

(v) the Filer will keep written records of each In Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered to the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place, and

(i) in connection with an In Specie Transaction where a Pooled Fund redeems the securities of another Pooled Fund:

(i) the securities are acceptable to the portfolio manager of the Pooled Fund and consistent with the Pooled Fund's investment objective;

(ii) the value of the securities is equal to the amount at which those securities were valued by the Pooled Fund in calculating the net asset value per security used to establish the redemption price; and

(iii) the Filer will keep written records of each In Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered by the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place; and

(j) the Filer does not receive any compensation in respect of any In Specie Transaction (other than any redemption fees which have been disclosed) and, in respect of any delivery of securities further to an In Specie Transaction, the only charges paid by the Managed Account or the applicable Pooled Fund is the commission charged by the dealer executing the trade and/or any administrative charges levied by the custodian.