Securities Law & Instruments


National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Closed-end investment fund exempt from prospectus requirements in connection with the sale of units repurchased from existing security holders pursuant to market purchase programs and by way of redemption of units by security holders subject to conditions.

Ontario Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).

National Instruments Cited

National Instrument 45-102 Resale of Securities, s. 2.8(2).

Citation: Pathfinder Convertible Debenture Fund, Re, 2010 ABASC 26

January 26, 2010




(the Jurisdictions)








(the Filer)



The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that the Filer be exempted from the requirement contained in the Legislation to file a prospectus (the Prospectus Requirement) in connection with the distribution of units of the Filer (Units) that have been repurchased by the Filer pursuant to the Programs (as that term is defined below) (the Exemption Sought).

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

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) 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 British Columbia, Saskatchewan, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Northwest Territories, Nunavut and Yukon; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.


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


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

1. The Filer is an unincorporated closed-end investment trust established under the laws of Alberta by a declaration of trust made as of October 28, 2009, as amended (the Declaration of Trust).

2. The Filer is not a "mutual fund" as defined in the Legislation because the holders of the Units (Unitholders) are not entitled to receive on demand an amount computed by reference to the value of a proportionate interest in the whole or in part of the net assets of the Filer as contemplated by the definition of "mutual fund" in the Legislation.

3. The Filer is a reporting issuer or has equivalent status in each of the provinces and territories of Canada and is not in default of any of the requirements of securities legislation applicable to it.

4. The Units are listed and posted for trading on the Toronto Stock Exchange (the TSX). As of January 14, 2010, there were 6,332,000 Units issued and outstanding.

5. Each whole Unit carries the rights to one vote at all meetings of Unitholders and to participate equally with all other Units with respect to any and all distributions made by the Filer.

6. Middlefield Limited (the Manager), which was incorporated pursuant to the Business Corporations Act (Alberta), is the manager and the trustee of the Filer.

7. In order to enhance liquidity and to provide market support for the Units, pursuant to the Declaration of Trust and the terms and conditions that attach to the Units, the Filer is, subject to compliance with any applicable regulatory requirements, obligated to purchase (the Mandatory Purchase Program) any Units offered on the TSX (or any successor thereto) if, at any time after the closing of the Filer's initial public offering, the price at which Units are then offered for sale on the TSX (or any successor thereto) is less than 95% of the net asset value of the Filer (Net Asset Value) per Unit as at the close of business in Toronto, Ontario on the immediately preceding business day, provided that the maximum number of Units that the Filer is required to purchase pursuant to the Mandatory Purchase Program in any calendar quarter is 1.25% of the number of Units outstanding at the beginning of each such period.

8. The Filer is not required to purchase Units pursuant to the Mandatory Purchase Program if:

(a) the Manager reasonably believes that the Filer would be required to make an additional distribution in respect of the year to Unitholders of record on December 31 of such year in order that the Filer will generally not be liable to pay income tax under the Income Tax Act (Canada) after the making of such purchase;

(b) in the opinion of the Manager, the Filer lacks the cash, debt capacity or other resources to make such purchases; or

(c) in the opinion of the Manager, such purchases would adversely affect the ongoing activities of the Filer or the remaining Unitholders.

9. In addition, the Declaration of Trust provides that the Filer, subject to applicable regulatory requirements and limitations, has the right, but not the obligation, exercisable in its sole discretion, at any time, to purchase outstanding Units in the market at prevailing market prices (the Discretionary Purchase Program).

10. Subject to the Filer's right to suspend redemptions, Units may be surrendered for redemption (the Redemption Program):

(a) on the last business day of each month (a Monthly Redemption Date) to the principal office of the Filer's registrar and transfer agent (the Transfer Agent) in Toronto, Ontario if the Units are surrendered by no later than 4:00 p.m. (Toronto time) on a date which is at least 10 business days prior to the applicable Monthly Redemption Date at a redemption price per Unit equal to an amount that is equal to the lesser of:

(i) 94% of the "market price" of a Unit (determined as the weighted average trading price of the Units on the TSX for the 15 trading days immediately preceding the applicable Monthly Redemption Date); and

(ii) 100% of the "closing market price" of a Unit on the applicable Monthly Redemption Date (generally determined as the closing market price of the units on the principal market on which the Units are quoted on that Monthly Redemption Date); and

(b) on May 31 of each year commencing in 2011 if the Units are surrendered to the principal office of the Transfer Agent in Toronto, Ontario during the period from and including the first business day in April in the applicable year until 4:00 p.m. (Toronto time) on April 15 in that year at a redemption price per Unit equal to the Annual Redemption Amount (as defined in the Prospectus).

11. In addition, at the sole discretion of the Manager and subject to the receipt of any necessary regulatory approvals, the Manager may allow additional redemptions from time to time of Units (Additional Redemptions), provided that the holder so redeeming is required to use the full amount received on such redemption to purchase treasury securities of a new or existing fund promoted by Middlefield Fund Management Limited or an affiliate thereof then being offered to the public by prospectus.

12. Purchases of Units made by the Filer under the Mandatory Purchase Program, the Discretionary Purchase Program, the Redemption Program, and the Additional Redemptions (collectively, the Programs) are exempt from the issuer bid requirements of the Legislation pursuant to exemptions contained therein.

13. On the Filer redeeming or otherwise acquiring any Units pursuant to the Programs the Filer will not, under the terms of the Declaration of Trust, be considered to be a Unitholder and, pending the sale of such Units, the rights, privileges, and obligations attached to issued and outstanding Units will be suspended and such Units will not be considered to be issued and outstanding Units. Upon the sale of one or more Units that have been so previously redeemed or otherwise acquired by the Filer, such Units will then be entitled to the rights and privileges and subject to the obligations of the Declaration of Trust and will be considered to be issued and outstanding for the purposes of the Declaration of Trust.

14. The Filer wants to, and the Declaration of Trust provides that the Filer has the ability to, sell Units that have been repurchased by the Filer pursuant to the Programs (Repurchased Units) through one or more securities dealers, subject to obtaining all necessary regulatory approvals.

15. In order to effect sales of Repurchased Units by the Filer, the Filer intends to sell, in its sole discretion and at its option, any Repurchased Units purchased by it under the Programs primarily through one or more securities dealers and through the facilities of the TSX (or any other exchange on which the Units are then listed).

16. All Repurchased Units will be held by the Filer for a period of 4 months after the repurchase thereof by the Filer (the Hold Period), prior to the resale thereof.

17. The sale of Repurchased Units will not have a significant adverse impact on the market price of the Units.

18. Repurchased Units that the Filer does not resell within 12 months after the Hold Period (or 16 months after the date of repurchase) will be cancelled by the Filer.

19. Prospective Purchasers who acquire Repurchased Units will have equal access to all of the Filer's continuous disclosure, which will be filed on SEDAR.

20. The Legislation provides that a trade by or on behalf of an issuer in previously issued securities of that issuer that have been purchased by that issuer is a distribution and, as such, is subject to the Prospectus Requirement. In the absence of a decision granting the Exemption Sought, any sale by the Filer of Repurchased Units would be a distribution that is subject to the Prospectus Requirement.


Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) the Repurchased Units are sold by the Filer through the facilities of and in accordance with the regulations and policies of the TSX or of any other exchange on which the Units are then listed; and

(b) the Filer complies with the conditions of paragraphs 1 through 5 of subsection 2.8(2) of National Instrument 45-102 Resale of Securities with respect to the sale of the Repurchased Units.

"Glenda A. Campbell, QC"
Alberta Securities Commission
"Stephen R. Murison"
Alberta Securities Commission