Natcan Investment Management Inc. - MRRS Decision

Headnote

Novel future-oriented relief granted from section 4.1(1) of NI 81-102 for Bought Deals involving Preferred shares, subject to prior IRC review of dealer manager's policies and procedures, and IRC standing approval. Non-bought deals subject to IRC pre-approval of first purchase of Preferred Shares irrespective of whether purchase made during the Distribution Period or the 60-Day Period. Quebec as PR.

Rule Cited

National Instrument 81-102 Mutual Funds, ss. 4.1(1), 19.1.

December 14, 2005

UNOFFICIAL TRANSLATION

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR,

AND THE NORTHWEST TERRITORIES, NUNAVUT

AND THE YUKON

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

NATCAN INVESTMENT MANAGEMENT INC.

(the "Applicant")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application dated August 26, 2005 from the Applicant (or "Dealer Manager"), the portfolio manager of the National Bank Dividend Fund (the "Dealer Managed Fund"), for a decision from:

• the Decision Maker in each Jurisdiction, under section 19.1 of National Instrument 81-102 Mutual Funds ("NI 81-102") granting an exemption from subsection 4.1(1) of NI 81-102, to enable the Dealer Managed Fund to invest in Preferred Shares (as defined herein) of an issuer of the same class of Preferred Shares offered by way of a public offering where National Bank Financial Inc. ("NBF") or another associate or affiliate of the Applicant (each referred to herein as a "Related Underwriter") acts as an underwriter (each a "Relevant Offering") during the period of distribution (the "Distribution") for the Relevant Offering and for the 60-day period (the "60-Day Period") following completion of the Distribution for the Relevant Offering (the Distribution and the 60-Day Period together, the "Prohibition Period"), such relief referred to as the "81-102 Requested Relief"; and

• the Autorité des Marchés Financiers (the "AMF") granting an exemption from the prohibition in Section 236 of the Regulations under the Securities Act (Québec) in the same circumstances, such relief referred to as the "Québec Requested Relief".

The 81-102 Requested Relief and the Québec Requested Relief are together referred to as the "Requested Relief", and NI 81-102 and the Securities Act (Québec) and Regulations under such Act are together referred to as the "Legislation".

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the AMF is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meanings in this decision (the "Decision") unless they are defined in this Decision. In addition to capitalized terms defined elsewhere in this Decision, the following terms have the following meanings:

"Approved Credit Rating" has the meaning given to it in National Instrument 51-102 Continuous Disclosure;

"Bought Deal" means a Relevant Offering which is made pursuant to an agreement under which an underwriter or underwriters, as principal(s), agree(s) to purchase Preferred Shares from an issuer or selling security holder with a view to a distribution of such Preferrerd Shares pursuant to a short form prospectus filed in accordance with National Instrument 44-101 Short Form Prospectus Distributions or any comparable system in any of the Jurisdictions and such agreement is entered into prior to or contemporaneously with the filing of the preliminary short form prospectus in respect of the Relevant Offering.

"Preferred Shares" means the following types of preferred shares: (i) soft retractable preferred shares; (ii) hard retractable preferred shares; (iii) perpetual preferred shares; (iv) floating rate preferred shares; (v) fixed-floater preferred shares; and (vi) the preferred share portion (but not the common portion) of any split share offering of preferred and common shares; provided such shares are non-participating and non-voting under normal circumstances, and are not convertible into common shares of the issuer at the option of the holder, and that such shares pay a dividend set on a fixed rate basis or floating rate basis where the floating rate is tied to a money market indicator. For greater certainty, where upon redemption, the issuer has the option of repaying the par value for the shares being redeemed in cash or common shares, such shares shall not be considered convertible for common shares.

Representations

This Decision is based on the following facts represented by the Applicant:

The Applicant

1. The Applicant is a subsidiary of the National Bank of Canada (the "Bank"), incorporated under the laws of Québec, specializing in portfolio management for pension funds, mutual funds and wealth management.

2. The Applicant is registered as an adviser in the categories of investment counsel and portfolio adviser or the equivalent in Quebec, Ontario, British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia and New Brunswick, Northwest Territories and Newfoundland. The head office of the Applicant is in Montréal, Québec.

3. The Applicant is a "dealer manager" with respect to the Dealer Managed Fund, as such term is defined in section 1.1 of NI 81-102.

The Dealer Managed Fund

4. The Dealer Managed Fund is a "dealer managed fund", as such term is defined in section 1.1 of NI 81-102.

5. The Dealer Managed Fund is an open-ended mutual fund trust established under the laws of the Province of Ontario. The securities of the Dealer Managed Fund are qualified for distribution in each of the Jurisdictions pursuant to a simplified prospectus and an annual information form that have each been prepared and filed in accordance with securities legislation in each of the Jurisdictions.

6. The investment objective (the "Investment Objective") for the Dealer Managed Fund is to provide high dividend income to its unitholders while preserving capital and permits the Dealer Managed Fund to invest in Preferred Shares.

7. In furtherance of the Investment Objective of the Dealer Managed Fund, a principal investment strategy of the Dealer Manager has been to invest a significant portion of the investment portfolio of the Dealer Managed Fund in Preferred Shares of Canadian issuers. Notwithstanding that the Dealer Managed Fund is also permitted to invest in preferred shares of U.S. issuers, there are tax disadvantages associated with such an investment strategy. To this end, the Dealer Manager believes that it is considerably more beneficial for unitholders of the Dealer Managed Fund for the Dealer Managed Fund to continue to invest a significant portion of its portfolio in preferred shares of Canadian issuers.

8. More particularly, the Dealer Manager's investment strategy for the Dealer Managed Fund includes having the Dealer Managed Fund target an investment of 50% of its investment portfolio in preferred shares with the remainder of the investment portfolio invested in common shares and other investments including debt securities.

The Transfer Investment

9. National Bank Securities Inc. (the "Manager" of the Dealer Managed Fund, and an affiliate of the Dealer Manager) administers National Bank Strategic Portfolios (collectively, the "Strategic Portfolios" and each individually, a "Strategic Portfolio") which offer investors portfolios in mutual funds that most match their investment goals and risk tolerance. Each portfolio (and the investors' monies) is invested among specified mutual funds for the particular portfolio, and each portfolio's investments are rebalanced every six months to maintain the original asset mix.

10. Traditionally, the asset mix for the Strategic Portfolios available for registered and non-registered investment plans differed, in part due to foreign content requirements in the Income Tax Act (Canada) (the "Tax Act").

11. As a result of changes to the Tax Act, the registered versions of the Strategic Portfolio accounts were restructured such that the asset mix of the registered and non-registered versions of Strategic Portfolios are now the same. As part of this restructuring, the Dealer Managed Fund (one of the funds in a number of the non-registered Strategic Portfolios) received a significant transfer investment (the "Transfer Investment") in an aggregate amount of approximately $275 million on September 30, 2005.

Preferred Share Offerings

12. The Related Underwriter is a wholly-owned subsidiary of the Bank and an affiliate of the Dealer Manager, and has historically been, and continues to be, a consistent participant in the underwriting of preferred share offerings in Canada. Since the beginning of 2004, the Related Underwriter has acted as an underwriter in the underwriting syndicates of more than 90% of the new issues of preferred shares in Canada and, as a result, the investment prohibition in Section 4.1 of NI 81-102 has frequently prohibited the Dealer Managed Fund from accessing preferred shares during the Prohibition Period for such offerings.

13. It is the understanding of the Dealer Manager that the publicly traded preferred share market in Canada is approximately $24 billion. A majority, representing 57% of the public preferred share market in Canada, is split among the Canadian Imperial Bank of Commerce (12.5%) and the following three groups of related issuers, the Power Corporation of Canada group (16.4%), the Brookfield Asset Management group (15.9%), and the BCE Inc. group (12.0%). The related issuers in each of the related groups are as follows: (i) the Power Corporation of Canada group includes Power Corporation of Canada, Power Financial Corporation, Great-West Life Assurance Company, Great-West Lifeco Inc. and IGM Financial Inc.; (ii) the Brookfield Asset Management group includes Brookfield Asset Management, Brookfield Properties Corporation, BPO Properties Ltd. and Falconbridge Limited; and (iii) the BCE Inc. group includes BCE Inc., Bell Canada, Bell Nordiq Group Inc. and Aliant Inc.

14. The Dealer Manager estimates that more than 90% of preferred share offerings in Canada (other than offerings of split shares and through structured products) are done by way of bought deals.

15. In an effort to attain the fullest value through the use of the above-noted investment strategy, the Dealer Manager would like to be able to continue targeting 50% of the Dealer Managed Fund's portfolio in preferred shares of issuers, and would like to invest the Transfer Investment in an efficient and effective manner so as to allow it to meet that target. To efficiently and effectively meet its target by investing an adequate portion of Transfer Investment in Preferred Shares, the Dealer Manager has determined that it needs to be able to invest in Relevant Offerings during the Prohibition Period, which is why the Dealer Manager is seeking the Requested Relief.

16. The short timeframe to purchase Securities in Relevant Offerings done by way of Bought Deals does not give the Applicant the opportunity to apply for relief to purchase Securities during the Distribution.

Relationship between the Dealer Manager and Related Underwriter

17. Despite the affiliation between the Dealer Manager and the Related Underwriter, they operate independently of each other. In particular, the investment banking and related dealer activities of the Related Underwriter and the investment portfolio management activities of the Dealer Manager are separated by "ethical" walls. Accordingly, no information flows from one to the other concerning their respective business operations or activities generally, except in the following or similar circumstances:

(a) in respect of compliance matters (for example, the Dealer Manager and the Related Underwriter may communicate to enable the Dealer Manager to maintain an up to date restricted-issuer list to ensure that the Dealer Manager complies with applicable securities laws); and

(b) the Dealer Manager and the Related Underwriter may share general market information such as discussion on general economic conditions, bank rates, etc.

18. The Dealer Manager has not been and will not (going forward) be involved in the work of the Related Underwriter. Similarly, the Related Underwriter has not been and will not be involved in the decisions of the Dealer Manager as to whether the Dealer Managed Fund will purchase preferred shares during the Prohibition Period of a Relevant Offering.

19. In respect of each Relevant Offering, the Dealer Managed Fund will not be required or obliged to purchase any Preferred Shares during the Prohibition Period for a Relevant Offering prior to placing an order for such Preferred Shares.

Purchases of Preferred Shares

20. The Dealer Manager will obtain the agreement of the Manager to pursue the investment opportunities proposed herein.

21. In respect of each Relevant Offering, the Dealer Manager may cause the Dealer Managed Fund to invest in Preferred Shares during the Prohibition Period of the Relevant Offering.

22. Any purchase of Preferred Shares of an issuer during the Prohibition Period of a Relevant Offering will be consistent with the Investment Objective of the Dealer Managed Fund and represent the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or in fact be in the best interests of the Dealer Managed Fund.

23. To the extent that the Dealer Manager manages other client accounts that are managed on a discretionary basis (the "Managed Accounts"), the Preferred Shares purchased in a Relevant Offering will be allocated:

(a) in accordance with the allocation factors or criteria stated in the written policies or procedures put in place by the Dealer Manager for the Dealer Managed Fund and Managed Accounts; and

(b) taking into account the amount of cash available to the Dealer Managed Fund for investment.

Independent Review

24. There will be an independent review committee (the "Independent Committee") appointed in respect of the Dealer Managed Fund to review the Dealer Managed Fund's investments in Preferred Shares during the Prohibition Period of a Relevant Offering.

25. The Dealer Manager will mandate its Independent Committee to review the Dealer Managed Fund's purchases of Preferred Shares pursuant to this Decision.

26. The Independent Committee will have at least three members and every member must be independent. A member of the Independent Committee is not independent if the member has a direct or indirect material relationship with the Dealer Manager, the Dealer Managed Fund, or any affiliate or associate thereof. For the purpose of this Decision, a material relationship means a relationship which could, in the view of a reasonable person, reasonably interfere with the exercise of the member's independent judgement regarding conflicts of interest facing the Dealer Manager.

27. Prior to the first reliance on this Decision, the Independent Committee will have reviewed and approved the Dealer Manager's written policies or procedures regarding its purchases of Preferred Shares to be made pursuant to this Decision which, as a minimum, will set out the conditions of this Decision.

28. The Independent Committee may, at the request of the Dealer Manager, provide written instructions permitting, on a continuing basis (each a "Standing Approval"), purchases of Preferred Shares during the Prohibition Period for Relevant Offerings made by way of Bought Deals pursuant to this Decision provided that the Standing Approval may only apply to purchases throughout the Prohibition Period for a Relevant Offering if the Dealer Managed Fund makes a purchase of Preferred Shares during the Distribution for such Relevant Offering. The Standing Approval must at a minimum include the terms and conditions of this Decision and (i) details as to the class of Preferred Shares that may be purchased, (ii) the minimum rating for such Preferred Shares, (iii) the maximum percentage of the Dealer Managed Fund's net asset value that the purchase of Preferred Shares during the Distribution of a Relevant Offering may represent, (iv) the maximum percentage of the total Preferred Shares issued in a Relevant Offering that the Dealer Manager may purchase in such Relevant Offering, and (v) that at least one underwriter in addition to the Related Underwriter will participate in the Relevant Offering.

29. Prior to the first purchase by the Dealer Managed Fund of Preferred Shares during the Prohibition Period for each Relevant Offering done by way of a Bought Deal to be made pursuant to this Decision, the Independent Committee will have provided a Standing Approval, which continues to be in effect throughout the Prohibition Period, provided however, that if the Dealer Managed Fund does not purchase Preferred Shares in such Relevant Offering during the Distribution for such Relevant Offering, the Independent Committee will have reviewed and approved the proposed first purchase of Preferred Shares to be made pursuant to this Decision during the 60-Day Period following the Distribution for such Relevant Offering.

30. Prior to the first purchase by a Dealer Managed Fund of Preferred Shares during the Prohibition Period for each Relevant Offering not done by way of a Bought Deal to be made pursuant to this Decision, the Independent Committee will have reviewed and approved the proposed first purchase of Preferred Shares to be made pursuant to this Decision during the Prohibition Period for such Relevant Offering.

31. The Independent Committee's approval in paragraphs 28, 29 and 30 will include a determination by the Independent Committee after reasonable inquiry, which may include but is not limited to, engaging independent counsel and other advisors it determines necessary to carry out its duties, that it has received reasonable assurances from the Dealer Manager and has a reasonable basis for believing that purchases of Preferred Shares made in reliance on this Decision during the Prohibition Period for the Relevant Offering(s):

(a) will be made by the Dealer Manager free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any associate or affiliate thereof; and

(b) will represent the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(c) will, in fact, be in the best interests of the Dealer Managed Fund; and

(d) will be made in compliance with the Applicant's written policies or procedures referred to in paragraph IV of this Decision below.

32. The members of the Independent Committee will exercise their powers and discharge their duties honestly, in good faith, and in the best interests of investors in the Dealer Managed Fund and, in so doing, exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances.

33. The Independent Committee will review and assess on a regular basis, but not less frequently than once every calendar quarter, the adequacy and effectiveness of (i) any Standing Approvals that it has granted; and (ii) the Applicant's written policies and procedures, referred to in paragraph IV of this Decision, below, in ensuring compliance with this Decision.

Decision

Each of the Decision Makers is satisfied that the tests contained in NI81-102 and the Securities Act (Québec) (collectively the "Legislation"), as applicable, that provide the Decision Maker with the jurisdiction to make this Decision has or have been met, as the case may be.

The Decision of the Decision Makers under the Legislation is that the Requested Relief is granted, notwithstanding that the Related Underwriter may act as one of the underwriters in a Relevant Offering, provided that, in respect of the Dealer Manager and the Dealer Managed Fund, the following conditions are satisfied:

The Investment Decision

I. At the time of each purchase by the Dealer Managed Fund, during a Prohibition Period for a Relevant Offering, of Preferred Shares of the class being issued in such Relevant Offering (each, a "Purchase"), the following conditions are satisfied:

(a) Prior to the Relevant Offering, the issuer in the Relevant Offering is a reporting issuer in more than one Jurisdiction and has issued and outstanding Preferred Shares that:

(i) are listed on the TSX;

(ii) have or are expected, at the time of the Purchase, to have an Approved Credit Rating; and

(iii) have an aggregate market value of $200 million based on the public asking price at the close of trading on the TSX on the last day on which trading takes place on the TSX prior to the Relevant Offering being announced;

(b) the Preferred Shares being purchased in reliance on this Decision have been issued pursuant to a final prospectus filed in more than one Jurisdiction and are or are reasonably expected to be listed on the TSX;

(c) the Purchase

(i) represents the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(ii) is, in fact, in the best interests of the Dealer Managed Fund;

(d) the Purchase is consistent with, or is necessary to meet, the Investment Objective of the Dealer Managed Fund as disclosed in its simplified prospectus;

(e) the Dealer Manager does not accept solicitation by the Related Underwriter for Purchases for the Dealer Managed Fund;

(f) the issuer is not a "related issuer", as defined in National Instrument 33-105 Underwriting Conflicts ("NI33-105"), of the Dealer Manager or its affiliates or associates;

(g) if the issuer is a "connected issuer", as defined in NI33-105, of a Related Underwriter, because a Related Underwriter is a subsidiary or affiliate of a lender (the "Lender") that has made credit facilities (the "Credit Facilities") available to the issuer,

(i) no material portion of the proceeds received by the issuer from the Relevant Offering will be used to reduce indebtedness under the Credit Facilities; and

(ii) the Related Underwriters will derive no benefit related to the Relevant Offering other than the remuneration described in the prospectus payable by the issuer;

(h) if the Relevant Offering is done by way of a Bought Deal, provided that the Dealer Managed Fund makes a Purchase in the Distribution for such Relevant Offering, the Purchase is made pursuant to a Standing Approval of the Independent Committee which continues to be in effect throughout the Prohibition Period;

(i) if the Relevant Offering is done by way of a Bought Deal and the Dealer Managed Fund does not make a Purchase during the Distribution for such Relevant Offering, the Independent Committee has, prior to the first Purchase to be made during the 60-Day Period, reviewed and approved the proposed first Purchase to be made during the 60-Day Period for such Relevant Offering;

(j) if the Relevant Offering is not done by way of a Bought Deal, the Independent Committee has reviewed and approved the proposed first Purchase to be made during the Prohibition Period for such Relevant Offering, prior to the first Purchase in the Prohibition Period for such Relevant Offering; and

(k) the approvals in paragraphs I(h), (i) and (j) above, shall include a determination that the Independent Committee has formed the opinion after reasonable inquiry, which may include but is not limited to, engaging independent counsel and other advisors it determines necessary to carry out its duties, that it has received reasonable assurances from the Dealer Manager and has a reasonable basis for believing that purchases of Preferred Shares made in reliance on this Decision during the Prohibition Period for the Relevant Offering(s):

(i) will be made by the Dealer Manager free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any associate or affiliate thereof; and

(ii) will represent the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(iii) will, in fact, be in the best interests of the Dealer Managed Fund; and

(iv) will be made in compliance with the Applicant's written policies or procedures referred to in paragraph IV of this Decision below;

Transparency

II. Prior to the first reliance on this Decision, the internet website of the Dealer Managed Fund or Dealer Manager, as applicable, discloses, and on the date which is the earlier of (i) the date when an amendment to the simplified prospectus of the Dealer Managed Fund is filed for reasons other than this Decision, and (ii) the date on which the initial or renewal simplified prospectus is receipted, Part A of the simplified prospectus of the Dealer Managed Fund discloses,

(a) that the Dealer Managed Fund may invest in Preferred Shares during the Prohibition Period, pursuant to this Decision, notwithstanding that the Related Underwriter has acted as underwriter in the Relevant Offering of the same class of such Preferred Shares;

(b) the existence, purpose, duties, obligations and standard of care of the Independent Committee, the names of its members and a brief description of pertinent personal background information on the Independent Committee members;

(c) the fact that they meet the independent requirements set forth in this Decision;

(d) whether and how they are compensated for their review; and

(e) that a securityholder of the Dealer Managed Fund may request a copy of the disclosure referred to in paragraph XX below (which may be provided by way of an electronic link to the location at which the SEDAR Report is filed on SEDAR);

III. On the date which is the earlier of:

(i) the date when an amendment to the annual information form of the Dealer Managed Fund is filed for reasons other than this Decision, or

(ii) the date on which the initial or renewal annual information form is receipted,

the annual information form of the Dealer Managed Fund discloses the information referred to in paragraph II (a) through (e) above and describes the policies or procedures referred to in paragraph IV below and the fact that Standing Approvals may be granted by the Independent Committee.

IV. Prior to effecting any Purchase pursuant to this Decision, the Dealer Managed Fund has in place written policies or procedures to ensure that,

(a) there is compliance with the conditions of this Decision; and

(b) in connection with any Purchase,

(i) there are stated factors or criteria for allocating the preferred shares purchased for the Dealer Managed Fund and other Managed Accounts; and

(ii) there is full documentation of the reasons for any allocation to the Dealer Managed Fund or Managed Account that departs from the stated allocation factors or criteria;

V. On the request by a securityholder of the Dealer Managed Fund, the Dealer Manager shall disclose the information referred to in paragraph XX below (which may be provided by way of an electronic link to the location at which the SEDAR Report is filed on SEDAR);

The Nature of the Purchase

VI. The Dealer Managed Fund does not place the order to purchase, on a principal or agency basis, with the Related Underwriter;

VII. For Purchases during the Distribution only, the Dealer Manager:

(a) expresses an interest to purchase on behalf of the Dealer Managed Fund and Managed Accounts a fixed number of Preferred Shares (the "Fixed Number") to an underwriter other than the Related Underwriter;

(b) agrees to purchase the Fixed Number or such lesser amount as has been allocated to the Dealer Manager, in the case of a Relevant Offering, no more than five (5) business days after a receipt for the final prospectus has been issued;

(c) does not place an order with an underwriter of the Relevant Offering to purchase an additional number of Preferred Shares under the Relevant Offering prior to the completion of the Distribution, provided that if the Dealer Manager was allocated less than the Fixed Number, in the case of a Relevant Offering, at the time the final prospectus was filed for the purposes of the closing of the Relevant Offering, the Dealer Manager may place an additional order for such number of additional Preferred Shares equal to the difference between the Fixed Number and the number of Preferred Shares allotted to the Dealer Manager at the time of the final prospectus in the event the underwriters exercise the over-allotment option; and

(d) in the case of a Relevant Offering, does not sell Preferred Shares purchased by the Dealer Manager under the Relevant Offering, prior to the listing of such Preferred Shares on the Toronto Stock Exchange (the "TSX") or another recognized market.

VIII. Each Purchase during the 60-Day Period is made on the TSX or another recognized market;

IX. For Purchases during the 60-Day Period, an underwriter provides to the Dealer Manager written confirmation that the "dealer restricted period", as defined in Ontario Securities Commission Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transactions, in respect of the Relevant Offering has ended.

X. Except to the extent evidenced by this Decision and specific approvals granted by the Decision Makers pursuant to the Legislation or securities legislation of the Jurisdictions, the Purchases comply with the Legislation and securities legislation of the Decision Makers.

Nature of the Underwriting Interest

XI. Except for Purchases done during the Prohibition Period for a Relevant Offering done by way of a Bought Deal, the minimum number of Preferred Shares qualified for distribution under the prospectus in the Relevant Offering is sold on the closing date stated in the prospectus as the expected closing date and the Related Underwriter does not purchase Preferred Shares for its own account except Preferred Shares sold by the Related Underwriter on the closing of such Relevant Offering;

Independent Review

XII. The Dealer Managed Fund has an Independent Committee to review the Dealer Managed Fund's Purchases;

XIII. The Independent Committee has a written mandate describing its duties and standard of care which, as a minimum, sets out the conditions of this Decision;

XIV. The members of the Independent Committee exercise their powers and discharge their duties honestly, in good faith, and in the best interests of investors in the Dealer Managed Fund and, in so doing, exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;

XV. The Independent Committee will review and assess on a regular basis, but not less frequently than once every calendar quarter, (i) the adequacy and effectiveness of any Standing Approvals granted by it; and (ii) the adequacy and effectiveness of the Applicant's written policies and procedures referred to in paragraph IV of this Decision to ensure compliance with this Decision;

Liability

XVI. The Dealer Managed Fund does not relieve the members of the Independent Committee from liability for loss that arises out of a failure to satisfy the standard of care set out in paragraph 0 above;

XVII. The Dealer Managed Fund does not indemnify the members of the Independent Committee against legal fees, judgments and amounts paid in settlement as a result of a breach of the standard of care set out in paragraph 0 above;

XVIII. A Dealer Managed Fund does not incur the cost of any portion of liability insurance that insures a member of the Independent Committee for a liability for loss that arises out of a failure to satisfy the standard of care set out in paragraph 0 above;

XIX. The cost of any indemnification or insurance coverage paid for by the Dealer Manager, or any associate or affiliate of the Dealer Manager to indemnify or insure the members of the Independent Committee in respect of a loss that arises out of a failure to satisfy the standard of care set out in paragraph 0 above is not paid either directly or indirectly by the Dealer Managed Fund;

Post-Transaction Disclosure

XX. The Dealer Manager files a certified report on SEDAR (the "SEDAR Report") in respect of the Dealer Managed Fund, no later than 30 days after the end of the Prohibition Period for each Relevant Offering (or if that day falls on a weekend or holiday, the next business day following that date) where it made a Purchase during the Prohibition Period for the Relevant Offering, that contains a certification by the Dealer Manager that contains:

(a) the following particulars of each Purchase:

(i) the number of Preferred Shares purchased by the Dealer Managed Fund during the Prohibition Period of such Relevant Offering;

(ii) the date of the Purchase and purchase price;

(iii) the yield of the Preferred Shares Purchased;

(iv) if applicable, that the Preferred Shares were Purchased under a Standing Approval;

(v) whether it is known whether any underwriter or syndicate member has engaged in market stabilization activities in respect of the Preferred Shares issued in such Relevant Offering;

(vi) if the Preferred Shares were purchased for the Dealer Managed Fund and other Managed Accounts of the Dealer Manager, the aggregate amount so purchased and the percentage of such aggregate amount that was allocated to the Dealer Managed Fund; and

(vii) the dealer from whom the Dealer Managed Fund purchased the Preferred Shares and the fees or commissions, if any, paid by the Dealer Managed Fund in respect of such Purchase;

(b) a certification by the Dealer Manager that each Purchase:

(i) was made free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any associate or affiliate thereof; and

(ii) represented the business judgment of the Dealer Manager uninfluenced by considerations other than the best interest of the Dealer Managed Fund, or

(iii) was, in fact, in the best interests of the Dealer Managed Fund;

(c) confirmation of the existence of the Independent Committee to review the Purchase by the Dealer Managed Fund during the Prohibition Period of each Relevant Offering, the names of the members of the Independent Committee, the fact that they meet the independence requirements set forth in this Decision, and whether and how they were compensated for their review;

(d) a certification by each member of the Independent Committee that:

(i) where Purchases were made in the Distribution only, or in the Distribution and during the 60-Day Period, for a Relevant Offering done by way of a Bought Deal, the Standing Approval continued in effect throughout the Prohibition Period;

(ii) after reasonable inquiry, the terms and conditions of any Standing Approvals are adequate and effective and any necessary amendments to ensure that any Standing Approvals remain adequate and effective have been made;

(iii) where Purchases were made by the Dealer Managed Fund during the Prohibition Period for each Relevant Offering not done by way of a Bought Deal or only during the 60-Day Period for any Relevant Offering done by way of a Bought Deal, the Independent Committee reviewed and approved the proposed first Purchase during the Prohibition Period or the 60-Day Period, respectively, as the case may be;

(iv) after reasonable inquiry the member is of the opinion that the policies and procedures referred to in Condition IV above are adequate and effective to ensure compliance with this Decision and that any necessary amendments have been made to ensure such policies and procedures remain adequate and effective to ensure compliance with this Decision; and

(v) that the decision made on behalf of the Dealer Managed Fund by the Dealer Manager to purchase on behalf of the Dealer Managed Fund and each Purchase by the Dealer Managed Fund:

(A) was made in compliance with the conditions of this Decision, the Applicant's written policies or procedures referred to in paragraph IV of this Decision above, and if applicable, the terms and conditions of any Standing Approval;

(B) was made by the Dealer Manager free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any associate or affiliate thereof; and

(C) represented the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(D) was, in fact, in the best interests of the Dealer Managed Fund.

XXI. The Independent Committee advises the Decision Makers in writing of:

(a) any determination by it that the condition set out in paragraph XX d) has not been satisfied with respect to any Purchase;

(b) any determination by it that any other condition of this Decision has not been satisfied;

(c) any action it has taken or proposes to take following the determinations referred to above; and

(d) any action taken, or proposed to be taken, by the Dealer Manager in response to the determinations referred to above.

Sunset

XXII. This Decision, as it relates to the jurisdiction of a Decision Maker, will terminate the earlier of:

(i) the date on which the Dealer Manager has made purchases of Preferred Shares totalling an amount equal to half of the Transfer Investment, which is no more than $140 million, in reliance on this Decision;

(ii) one year from the date of the Decision; or

(iii) the coming into force of any legislation or rule of the Decision Makers dealing with matters regulated by Section 4.1 of NI 81-102.