Caldwell Investment Management Ltd.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- limited relief granted from the self-dealing provisions in section 13.5(2) of National Instrument 31-103 Registration Requirements to permit inter-fund trades between mutual funds, pooled funds, closed-end funds and discretionary managed accounts managed by the same portfolio advisor or an affiliate -- relief restricted to trades in securities evidencing equity ownership of securities marketplaces -- inter-fund trades will comply with conditions in s. 6.1(2) of National Instrument 81-107 Independent Review Committee for Investment Funds, including independent review committee approval or client consent.

Applicable Legislative Provisions

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

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

March 6, 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

CALDWELL INVESTMENT MANAGEMENT LTD.

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction 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 subsections 13.5(2)(b)(ii) and (iii) of National Instrument 31-103 Registration Requirements (NI 31-103), (the "Inter-Fund Trading Prohibition") which prohibits a registered adviser from knowingly causing a managed account or investment fund managed by it to purchase or sell a security from or to a managed account or investment fund for which a responsible person acts as an adviser, to permit:

(a) a Pooled Fund (as defined below) to purchase Private Marketplace Investments (as defined below) from or sell Private Marketplace Investments to another Pooled Fund, a Managed Account (as defined below), an NI 81-102 Fund (as defined below) or a Closed-End Fund (as defined below);

(b) a Managed Account to purchase Private Marketplace Investments from or sell Private Marketplace Investments to, another Managed Account, a Pooled Fund, an NI 81-102 Fund or a Closed-End Fund;

(c) an NI 81-102 Fund to purchase Private Marketplace Investments from or sell Private Marketplace Investments to a Pooled Fund or a Managed Account, and

(d) a Closed-End Fund, to purchase Private Marketplace Investments from or sell Private Marketplace Investments to a Pooled Fund or a Managed Account.

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

(a) The Ontario Securities Commission is the principal regulator (the "Principal Regulator") for this application, and

(b) The Filer has provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied up on in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Nunavut, the Yukon territory and the Northwest Territories (together with the Jurisdiction, the "Jurisdictions").

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions, MI 11-102, NI 31-103, National Instrument 81-102 Mutual Funds ("NI 81-102") and National Instrument 81-107 -- Independent Review Committee for Investment Funds ("NI 81-107") have the same meaning in this decision, unless otherwise defined herein.

Representations

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

1. The Filer is a corporation incorporated under the law of the province of Ontario. The Filer's head office is in Toronto, Ontario.

2. The Filer is registered as a portfolio manager in Alberta, British Columbia, Saskatchewan and Ontario.

3. The Filer currently acts as manager, portfolio advisor and trustee to several pooled funds, and may in the future act as manager, portfolio advisor and trustee to additional pooled funds, which are made available to accredited investors on a private placement basis through an offering memorandum (the existing pooled funds and any future pooled funds are hereinafter collectively referred to as the "Pooled Funds"). The Pooled Funds are not reporting issuers and are not subject to NI 81-102 or NI 81-107.

4. The Filer currently provides discretionary investment management services to certain accounts and may in the future provide discretionary investment management services to additional accounts (the existing managed accounts and any future managed accounts are hereinafter collectively referred to as the "Managed Accounts") for which the Filer acts as portfolio advisor. The Managed Accounts are not reporting issuers and are not subject to NI 81-102 or NI 81-107.

5. The Filer currently acts as manager, portfolio advisor and trustee to several mutual funds, and may in the future act as manager, portfolio advisor and trustee to additional mutual funds, which are offered by way of simplified prospectus and annual information form (the existing mutual funds offered by way of simplified prospectus and annual information form and any future mutual funds offered by way of simplified prospectus and annual information form are referred to as "NI 81-102 Funds"), and are qualified for distribution in each province or territory of Canada except Québec. The NI 81-102 Funds are reporting issuers and are subject to NI 81-102 and NI 81-107.

6. The Filer acts as investment manager to Urbana Corporation ("Urbana"), a closed-end investment fund that is a reporting issuer whose shares are listed and trade on The Toronto Stock Exchange, and may in the future act as investment manager for one or more closed-end investment funds that are reporting issuers (Urbana and any such future closed-end reporting issuer investment funds are referred to as Closed-End Funds). The Closed-End Funds are subject to NI 81-107 but are not subject to NI 81-102.

7. The Filer is therefore a "responsible person" under NI 31-103, in respect of the NI 81-102 Funds, the Closed-End Funds, the Pooled Funds (collectively, the "Funds") and the Managed Accounts.

8. None of the Filer nor the Funds are in default of securities legislation in any of the Jurisdictions.

9. The Filer, from time to time, causes each of the Funds and the Managed Accounts (collectively, the "Investment Accounts") to purchase shares, seats, memberships or other instruments evidencing equity ownership in a stock exchange, alternative trading systems or other similar securities marketplaces ("Marketplace Investments"). Such purchases of Marketplace Investments are, in all cases, within the scope of the investment objective and liquidity requirements of the applicable Investment Accounts.

10. In many cases, the Marketplace Investments are publicly qualified in their domestic capital markets and are traded on one or more organized stock exchanges. In other cases, these marketplace equity ownership interests are not traded on an organized stock exchange and are not reporting issues or the equivalent therein their domestic jurisdiction and are not subject to continuous disclosure rules (a "Private Marketplace Investment").

11. Private Marketplace Investments are not traded on organized stock exchanges, however, some are available for purchase and sale through bulletin boards (a "Bulletin Board") operated by the particular marketplace for the convenience of its investors where bid and ask quotations are posted by buyers and sellers on the Bulletin Board. The spreads shown on a Bulletin Board between the bid and ask prices are often material in percentage and dollar terms.

12. The Filer wishes to facilitate inter-fund trades of Private Marketplace Investments (each a "Private Marketplace Inter-Fund Trade") from an Investment Account to another, subject to the terms and conditions in this decision document.

13. The NI 81-102 Funds and the Closed-End Funds have an Independent Review Committee ("IRC"), in accordance with the requirements of NI 81-107. Any inter-fund trades amongst the NI 81-102 Funds and the Closed-End Funds, including Private Marketplace Inter-Fund Trades, are or will be referred to the IRC for approval under section 5.2(1) of NI 81-107.

14. Although they are not subject to NI 81-107, the Filer will appoint the IRC to oversee the Pooled Funds if the Exemption Sought is granted. The mandate for the Pooled Funds' IRC will be to provide approval for Private Marketplace Inter-Fund Trades involving the Pooled Funds.

15. The IRC has been composed by the Filer in accordance with the requirements of Section 3.7 of NI 81-107 and the IRC complies or will comply with the standard of care set out in Section 3.9 of NI 81-107.

16. At the time of a Private Marketplace Inter-Fund Trade, the Filer will have in place policies and procedures to enable the Funds and/or the Managed Accounts to engage in Private Marketplace Inter-Fund Trades.

17. If the Exemption Sought is granted, the Filer will ask the IRC to approve a standing instruction that permits Private Marketplace Investment Inter-Fund Trades from an Investment Account to another Investment Account provided that:

(a) the Filer confirms to the IRC that the Private Marketplace Investment is a suitable sale or purchase for each Investment Account, as applicable;

(b) the Private Marketplace Investments being traded have bid and ask prices displayed on Bulletin Boards where such bid and ask prices are publicly available and has appropriate rules and procedures to ensure the market integrity of the bid and ask prices displayed on the Bulletin Board;

(c) the price paid for the Private Marketplace Investment by the applicable Investment Account will be the average of the highest current bid and lowest current ask as displayed on the applicable Bulletin Board, (that being the "current market price of the security" as that term is defined under section 6.1(a)(ii) of NI 81-107);

(d) none of the Investment Accounts, the Filer or any of its affiliates receive compensation for the trade and the only cost for the trade to the Investment Account will be the nominal cost incurred by the Investment Account to effect transfer and custody arrangements which will be paid to parties at arm's length to the Filer;

(e) the Private Marketplace Inter-Fund Trade is conducted through Caldwell Securities Limited (CSL), a registered investment dealer and member of the Investment Industry Regulatory Organization of Canada and an affiliate of the Filer;

(f) the Filer will, on behalf of the Investment Account(s), keep written records, including (i) a record of each purchase and sale of securities; (ii) the parties to the trade; and (iii) the terms of the purchase or sale for five years after the end of the fiscal year in which the trade occurred, the most recent two years in a reasonably accessible place; and

(g) in the case of a Private Marketplace Inter-Fund Trade involving a Managed Account, the Filer will ensure that the account agreement governing the Managed Accounts contain an authorization of the holder of the Managed Account to purchase securities from, or sell securities to, another Investment Account or, in the absence of such authority being contained in the account agreement governing the Managed Account, the Filer will obtain the prior written consent of the holder of the Managed Account before the Private Marketplace Inter-Fund Trade is conducted.

18. The Filer will comply with the following procedures when entering into Private Marketplace Inter-Fund Trades between Investment Accounts:

(a) the portfolio manager will deliver the trade instructions in respect of a purchase or a sale of the Private Marketplace Investment by a Fund or a Managed Account ("Fund A") to a trader on the trading desk of the Filer;

(b) the portfolio manager will deliver the trade instructions in respect of a purchase or sale of the Private Marketplace Investment by a Fund ("Fund B") to a trader on the trading desk of the Filer;

(c) the trader on the trading desk will execute the trade as a Private Marketplace Inter-Fund Trade between Fund A and Fund B in accordance with the requirements of paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107;

(d) the policies applicable to the trading desk will require that all orders are to be executed on a timely basis;

(e) the trader on the trading desk will advise the portfolio manager of Fund A and Fund B of the price at which the Private Marketplace Inter-Fund Trade occurs; and

(f) the trade as well as the final sale price will be displayed on the applicable Bulletin Board.

19. The Filer submits that:

(a) in the absence of the Exemption Sought, the Inter-Fund Trading Prohibition would mean that Private Marketplace Inter-Fund Trades would not be permitted to the extent that the trade involved a Managed Account or a Pooled Fund as a party, because they cannot avail themselves of the codified exemption in section 6.1(4) of NI 81-107, because the Pooled Funds and Managed Accounts are not reporting issuers subject to NI 81-107;

(b) granting the Exemption Sought, on the terms and conditions in the decision, would ensure that trades involving the Pooled Funds or the Managed Accounts are made pursuant to the same requirements as would be for trades involving only the NI 81-102 Funds or the Closed-End Funds under section 6.1(2) of NI 81-107;

(c) it is in the best interests of the Investment Accounts to be able to engage in Private Marketplace Inter-Fund Trades on the terms proposed; and

(d) in particular, setting the price at the average of the highest current bid and lowest current ask as displayed on the Bulletin Board will result in a material saving to the Investment Account as it will result in a better price whether the Investment Account is a buyer or a seller than would be the case if the Investment Account bought or sold over the Bulletin Board.

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 is under the Legislation is that the Exemption Sought is granted provided that:

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

(b) the IRC of each Fund that is a party to the Private Marketplace Inter-Fund Trade has approved the trade in respect of such Fund in accordance with the terms of Section 5.2(2) of NI 81-107; and

(c) each such Private Marketplace Inter-Fund Trade is made pursuant to the following conditions:

(i) the Filer confirms to the IRC that the Private Marketplace Investment is a suitable sale or purchase for each Investment Account, as applicable;

(ii) the Private Marketplace Investments being traded have bid and ask prices displayed on Bulletin Boards where such bid and ask prices are publicly available;

(iii) The Private Marketplace Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107, and

(iv) in the case of a Private Marketplace Inter-Fund Trade involving a Managed Account, the Filer ensures that the account agreement governing the Managed Accounts contain an authorization of the holder of the Managed Account to purchase securities from, or sell securities to, another Investment Account or, in the absence of such authority being contained in the account agreement governing the Managed Account, the Filer will obtain the prior written consent of the holder of the Managed Account before the Private Marketplace Inter-Fund Trade is conducted.