McLean Budden Limited - ss. 121(2)(a)(ii)

Headnote

Conflict relief for portfolio manager of managed accounts to purchase units of related mutual funds on behalf of managed accounts whereby the payment of the purchase price of units of the mutual funds may be satisfied by making good delivery of securities held by the managed accounts and the payment of the redemption price of units of the mutual funds to the managed accounts may be satisfied by making good delivery of securities held in the investment portfolio of the mutual funds.

Statutes Cited

Securities Act (Ontario), R.S.O. 1990, c. S.5, as am., ss. 118(1) & (2)(b) and 121(2)(a)(ii).

IN THE MATTER OF

THE SECURITIES ACT, R.S.O. 1990,

CHAPTER S.5, AS AMENDED (THE "ACT")

AND

IN THE MATTER OF

MCLEAN BUDDEN LIMITED ("MCLEAN BUDDEN")

ORDER

(Subsection 121(2)(a)(ii) of the Act)

UPON the application (the "Application') of McLean Budden to the Ontario Securities Commission (the "Commission") for an order pursuant to subsection 121(2)(a)(ii) of the Act that the conflict of interest provision contained in the subsection 118(2)(b) of the Act does not apply to McLean Budden in connection with the purchase and redemption of units of pooled funds and prospectus qualified mutual funds that are currently or may in the future be managed by McLean Budden (collectively referred to as the "Funds"), whereby:

(a) the payment of the purchase price of units of the Funds by a managed account client of McLean Budden (a "Managed Account") may be satisfied by making good delivery of securities, held by a Managed Account, to a Fund and those securities meet the investment criteria of the Fund; or

(b) the payment of the redemption price of units of a Fund to a Managed Account may be satisfied by making good delivery of securities held in the investment portfolio of a Fund to the Managed Account (paragraphs a) and b) shall be individually referred to as an "In-Species Transfer");

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON McLean Budden having represented to the Commission that:

1. McLean Budden is a corporation incorporated under the laws of Canada. The head office of McLean Budden is located in Ontario.

2. McLean Budden is registered under the Act as an adviser in the categories of investment counsel and portfolio manager. In addition, McLean Budden is registered under the Act as a limited market dealer.

3. McLean Budden is or will be the manager, portfolio adviser and promoter of the Funds.

4. Each of the Funds is or will be an open-ended mutual fund trust established under the laws of Ontario.

5. McLean Budden acts as a portfolio manager to Managed Accounts pursuant to discretionary management agreements (the "Agreements").

6. McLean Budden manages the Managed Accounts on a discretionary basis via investments in the Funds, but also utilizes segregated, separate portfolios of securities for clients.

7. Under the Agreements, the clients specifically authorize McLean Budden to invest in the Funds.

8. All clients with Managed Accounts receive written specific disclosure of the relationship between McLean Budden and the Funds.

9. Units of each of the Funds will be offered on a continuous basis and will be acquired by Managed Accounts either on a private placement basis or on a prospectus qualified basis.

10. In order to ensure that neither the Managed Accounts nor a Fund incurs significant expenses related to the disposition and acquisition of portfolio securities in connection with a purchase of units of a Fund, McLean Budden may permit payment for units purchased to be made by an In-Species Transfer. This will only occur if the securities to be delivered in payment for units are securities that McLean Budden considers appropriate for the Fund. Appropriate securities would be securities currently held in the Fund or about to be purchased for the Fund.

11. In order to ensure that the Fund does not incur significant expenses related to the disposition of portfolio securities following a redemption of units of a Fund, McLean Budden may require that payment of redemption proceeds be satisfied by an In-Species Transfer. This will only occur in respect of redemptions that require a large payment (being a payment in excess of 10% of the market value of the Fund).

12. McLean Budden does not receive any compensation in respect of any sale or redemption of units or in respect of In-Species Transfers described in paragraphs 10 and 11 above.

13. McLean Budden obtains the prior specific consent of the relevant Managed Account client before it engages in any In-Species Transfers in connection with the purchase of units.

14. Managed Account clients specifically consent in the Agreements to receiving redemption proceeds in the form of In-Species Transfer in the event the redemption proceeds are in excess of 10% of the market value of a Fund.

15. The Royal Trust Company, the trustee and custodian of the Funds, values the securities transferred under an In-Species Transfer on the same valuation day on which the unit purchase price or redemption price is determined and on the same basis that the Fund would use in determining the value of such securities.

16. Under the Act, a portfolio manager is prohibited from purchasing or selling securities of any issuer from or to the account of a responsible person or any associate of a responsible person.

17. Since McLean Budden is the portfolio manager of the Managed Accounts, it would be considered a "responsible person" within the meaning of subsection 118(1) of the Act with respect to such Managed Accounts.

18. Each of the Funds is an associate of McLean Budden within the meaning of paragraph (c) of the definition of "associate" contained in subsection 1(1) of the Act because McLean Budden, as the manager and portfolio adviser of the Funds, serves in a similar capacity to a trustee in respect of the Funds.

19. In the absence of this Order, McLean Budden, as portfolio manager of the Managed Accounts is prohibited from engaging in an In-Species Transfer of securities of any issuer to or from a Fund, which is an associate of McLean Budden.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to subsection 121(2)(a)(ii) that subsection 118(2)(b) does not apply to McLean Budden in connection with the payment of the purchase price for units of a Fund or the payment of the redemption price of units of a Fund by In-Species Transfers between the Managed Accounts and the Funds, provided that:

i) in connection with the purchase of units of a Fund by a Managed Account:

(a) McLean Budden obtains the prior specific consent of the relevant Managed Account client before it engages in any In-Species Transfers in connection with the purchase of units;

(b) the Fund would at the time of payment be permitted to purchase those securities;

(c) the securities are acceptable to the portfolio adviser of the Fund and consistent with the Fund's investment objective;

(d) the value of the securities 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 the Fund;

(e) the statement of portfolio transactions next prepared by a Fund shall include a note describing the portfolio assets delivered to the Fund and the value assigned to the portfolio assets; and

ii) in connection with the redemption of units of a Fund by a Managed Account:

(a) Managed Account clients specifically consent in the Agreements to receiving redemption proceeds in the form of an In-Species Transfer in the event the redemption proceeds are in excess of 10% of the market value of a Fund;

(b) the value of the securities 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 ;

(c) the statement of portfolio transactions next prepared by a Fund shall include a note describing the portfolio assets delivered to the Managed Account and the value assigned to the portfolio assets; and

McLean Budden does not receive any compensation in respect of any sale or redemption of units of a Fund or in respect of any delivery of securities by an In-Species Transfer.

September 24, 2004.