McLean Budden Limited

Decision

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from conflict of interest trading prohibition in paragraph 13.5(2)(b) of NI 31-103 to permit in specie subscriptions and redemptions by separately managed accounts and mutual funds in mutual funds -- Portfolio manager of managed accounts is also portfolio manager of mutual funds and is, therefore, a "responsible person" -- Relief subject to certain conditions.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, ss. 13.5, 15.1.

February 7, 2012

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

MCLEAN BUDDEN LIMITED

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from McLean Budden Limited and any affiliate of McLean Budden Limited (collectively, the Filer) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) granting an exemption from Section 13.5(2)(b) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) that prohibits an adviser from knowingly causing an investment portfolio managed by it (including an investment fund for which it acts as an adviser) to purchase or sell the securities of any issuer from or to the investment portfolio of a responsible person, an associate of a responsible person, or any investment fund for which a responsible person acts as an adviser,

(a) to permit the following purchases and redemptions (each purchase and redemption, anIn Specie Transaction):

(i) the purchase by a fully managed account managed by the Filer (each, a Managed Account and, collectively, the Managed Accounts) of securities of existing or future mutual funds managed by the Filer, to which National Instrument 81-102Mutual Funds (NI 81-102) applies (each, a Fund and, collectively, the Funds) and the redemption of securities held by a Managed Account in a Fund, and as payment:

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

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

(collectively, the Exemption Sought).

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

(a) the Ontario Securities Commission is the principal regulator for the Application; and

(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 all of the provinces and territories of Canada other than the Jurisdiction (the Passport Jurisdictions).

Interpretation

Terms defined in NI 31-103, National Instrument 14-101 Definitions, NI 81-102, National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) or the securities legislation of the Jurisdiction or the Passport Jurisdictions have the same meaning in this Decision Document.

Representations

This decision is based on the following representations by the Filer:

The Filer

1. The Filer is, or will be, registered as a portfolio manager in Ontario and each of the Passport Jurisdictions.

2. The Filer is, or will be, registered as an investment fund manager, in respect of any Fund managed by it, in Ontario and in any other Passport Jurisdiction where such registration is required.

3. The Filer is, or will be, the investment fund manager and/or portfolio manager of each of the Funds.

4. The Filer is, or will be, the portfolio manager of each of the Managed Accounts.

The Funds

5. Each of the Funds is, or will be, an open-end mutual fund trust or mutual fund corporation to which NI 81-102 applies.

6. Each of the Funds is, or will be, a reporting issuer in Ontario and in each of the Passport Jurisdictions, qualified for distribution pursuant to a simplified prospectus and annual information form prepared and filed in accordance with securities legislation.

7. A Fund may be an associate of the Filer that is a responsible person in respect of a Managed Account or an investment fund for which the Filer acts as an advisor.

Managed Accounts

8. Each client of the Filer has executed, or will execute, an investment management agreement for a fully managed account (the Client) with the Filer whereby the Filer has been appointed, or will be appointed, as portfolio manager for the investment portfolio of the Client with full discretionary authority. The investment management agreement or other documentation contains, or will contain, the authorization of the Client, on behalf of the Managed Account, to engage in In Specie Transaction with the Funds.

In Specie Transactions

9. The Filer wishes to be able to enter into In Specie Transactions in accordance with the investment objectives of the applicable Managed Accounts. Absent the Exemption Sought, the Filer would be prohibited by subsection 13.5(2)(b) of NI 31-103 from engaging in In Specie Transactions.

10. In all In Specie Transactions, the Filer will value the portfolio securities to be delivered using the same values that are used to calculate the net asset value for the purpose of the issue price or redemption price of the securities of the Fund.

11. The Filer has established, or will establish, an independent review committee (IRC) in respect of each Fund in accordance with the requirements of NI 81-107.

12. In Specie Transactions involving a Fund will be referred to the IRC of the Fund under Section 5.1 of NI 81-107 for approval on behalf of the Fund.

13. The IRC will not provide its approval in respect of In Specie Transactions unless it has made the determination set out in Section 5.2(2) of NI 81-107.

14. If the IRC of a Fund becomes aware of an instance where the Filer, as investment fund manager or portfolio manager of the Fund, did not comply with the terms of the Exemption Sought or a condition imposed by the IRC in its approval, the IRC will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction in which the Fund is organized.

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

16. The Filer considers that effecting In Specie Transactions will be beneficial to the Funds and Managed Accounts in that they will reduce transaction costs on the acquisition or disposition of securities for the applicable Fund or Managed Account and there will be reduced market disruption associated with the 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:

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

(i) the Filer obtains the prior written consent of the relevant Client before it engages in any In Specie Transactions and such consent has not been revoked;

(ii) the securities delivered by the Managed Account to the Fund are acceptable to the Filer as portfolio manager of the Fund and consistent with the investment objective of the Fund;

(iii) the value of the securities delivered by the Managed Account to the Fund is at least equal to the issue price of the securities of the Fund for which they are payment, valued as if the securities were portfolio assets of that Fund;

(iv) the account statement next prepared for the Managed Account will include a note describing the securities delivered by the Managed Account to the Fund and the value assigned to such securities; and

(v) the Fund will keep written records of an In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered by the Managed Account to the 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;

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

(i) the Filer obtains the prior written consent of the relevant Client before it engages in any In Specie Transactions in connection with the redemption of securities of a Fund and such consent has not been revoked;

(ii) the securities delivered by the Fund to the Managed Account are acceptable to the Filer as portfolio manager of the Managed Account, and are consistent with the Managed Account's investment objective;

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

(iv) the holder of the Managed Account has not provided notice to terminate its Managed Account with the Filer;

(v) the account statement next prepared for the Managed Account will include a note describing the securities delivered by the Fund to the Managed Account and the value assigned to such securities; and

(vi) the Fund will keep written records of an In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered by the Fund to the Managed Account 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

(c) the Filer does not receive any compensation in respect of any sale or redemption of securities of a Fund (other than 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 are the commission charged by the dealer executing the trade and/or any administrative charges levied by the custodian.

"Raymond Chan"
Manager, Investment Funds Branch
Ontario Securities Commission