September 13, 2021

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

Silver heights capital management inc.

(the Filer)

Decision

Background

The principal regulator in the Jurisdiction has received an application requesting an exemption on behalf of the Filer pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) from the prohibition in subparagraphs 13.5(2)(b)(ii) and 13.5(2)(b)(iii) of NI 31-103 to permit specified In-specie Transfers (the Exemption Sought).

Under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this 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 each of Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Nova Scotia, Ontario, Québec and Saskatchewan (together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in MI 11-102, National Instrument 14-101 Definitions, National Instrument 81-102 Investment Funds (NI 81-102) and NI 31-103 have the same meanings in this decision, unless otherwise defined.

In addition:

Fund Securities means units of a Pooled Fund.

Future Pooled Fund means each investment fund that is established after the formation of the Initial Pooled Fund, and for which the Filer will act as the investment fund manager and adviser and which is not a reporting issuer.

In-specie Transfer means the Filer’s actions to cause a Managed Account to deliver securities to a Pooled Fund in payment for the purchase by the Managed Account of Fund Securities of such Pooled Fund or to receive securities from the investment portfolio of a Pooled Fund in respect of a redemption of Fund Securities of such Pooled Fund in respect of the Managed Account.

Initial Pooled Fund means an investment fund of which the Filer will act as the investment fund manager and adviser and which is not a reporting issuer.

Managed Account means an existing or future account over which the Filer has discretionary authority for a client in its capacity as a registered adviser.

NI 81-102 means National Instrument 81-102 Investment Funds.

Pooled Funds means, collectively, the Initial Pooled Fund and the Future Pooled Funds.

Representations

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

The Filer

1. The Filer is a corporation incorporated under the laws of Ontario with its head office located in Toronto, Ontario.

2. The Filer is registered in each of the provinces of Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Nova Scotia, Ontario, Québec and Saskatchewan as an adviser in the category of portfolio manager. The Filer is also registered in the category of investment fund manager in the provinces of Ontario, Québec and Newfoundland and Labrador. It is registered as an exempt market dealer in the province of Ontario.

3. The Filer is not a reporting issuer in any jurisdiction and is not in default of the securities legislation of any Jurisdiction.

The Managed Accounts

Pooled Funds

5. The Filer wishes to manage certain accounts of its Managed Account clients within a Pooled Fund in order to achieve greater efficiencies for these Managed Account clients, including through reduced transaction costs and the ability to acquire institutional-size blocks of securities, that otherwise would need to be broken and re-assembled.

6. The Filer intends to establish the Initial Pooled Fund as a trust. The Filer will be the manager of the Pooled Funds. The Filer will act as trustee of the Pooled Funds, pursuant to Revised Approval 81-901 Mutual Fund Trusts: Approval of Trustees Under Clause 213(3)(b) of the Loan and Trust Corporations Act dated June 11, 2019.

7. The Filer wishes to invest existing and future Managed Accounts in one or more of the Pooled Funds, to the extent that a Pooled Fund’s investment objectives are consistent with the investment objectives of the applicable Managed Accounts.

In-specie Transfers

8. When acting for a Managed Account of a client, the Filer wishes to be able, in accordance with the investment objectives and restrictions of the client, to cause the client’s Managed Account to either invest in Fund Securities, or to redeem such securities, pursuant to an In-specie Transfer.

9. Establishing the Initial Pooled Fund and any Future Pooled Fund will, among other things, allow the Filer to manage certain accounts in a more efficient manner in accordance with the investment strategy for each account holder (which will be consistent with the investment objectives and strategy of the applicable Pooled Fund).

10. The Filer has determined that effecting the In-specie Transfers will allow the Filer to manage each investment strategy more effectively and reduce transaction costs for Managed Account clients and the Pooled Fund, as applicable. For example, In-specie Transfers may:

(i) reduce market impact costs, which can be detrimental to Managed Account clients and/or the Pooled Funds; and

(ii) allow the Filer as adviser to retain within its control institutional-size blocks of portfolio securities that otherwise would need to be broken and re-assembled.

11. The only cost which will be incurred by a Pooled Fund or a Managed Account for an In-specie Transfer is a nominal administrative charge levied by the custodian of the Pooled Fund in recording the trades and/or any commission or other transaction fees charged by the dealer (if any) executing the trade. The Filer will not receive any compensation in respect of an In-specie Transfer.

12. At the time of each In-specie Transfer, the Filer will have in place policies and procedures governing such transactions, including the following:

(ii) the portfolio securities transferred in an In-specie Transfer will be consistent with the investment criteria of the applicable Pooled Fund or Managed Account acquiring the portfolio securities;

(iii) with respect to the purchase of Fund Securities, the value of the portfolio securities transferred as payment for the purchase price in the In-specie Transfer will be at least equal to the issue price of the Fund Securities for which they are used as payment, valued as if the portfolio securities were portfolio assets of that Pooled Fund;

(iv) with respect to the redemption of Fund Securities, the value of the portfolio securities transferred as redemption proceeds in the In-specie Transfer will be equal to the amount at which those portfolio securities were valued by the Pooled Fund in calculating the net asset value per security used to establish the redemption price;

(v) the Filer will not cause any Pooled Fund or Managed Account to engage in an In-specie Transfer if the applicable Pooled Fund is not in compliance with the portfolio restrictions on the holding of illiquid securities described in section 2.4 of NI 81-102;

(vi) each “illiquid asset” (as defined in NI 81-102) included in the In-specie Transfer will be transferred on a pro-rata basis that fairly represents the portfolio of the Pooled Fund or Managed Account, as applicable, and the Filer will obtain at least one quote for the asset from an independent arm’s length purchaser or seller;

(vii) the next account statement the Filer prepares for the applicable Managed Accounts will describe the portfolio securities delivered or received as part of the In-specie Transfer and the value assigned to those portfolio securities; and

(viii) each Pooled Fund will keep written records of each payment in its financial year, reflecting the details of the portfolio securities delivered to the Pooled Fund and the value assigned to the portfolio securities, in a reasonably accessible place for two years after the end of the financial year and for a further three years after the end of the financial year.

13. Absent the Exemption Sought, neither the Managed Accounts nor the Pooled Funds, nor the Filer, on their behalf, would be permitted to engage in In-specie Transfers due to the provisions of section 13.5(2)(b) of NI 31-103.

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 so long as:

(a) if the In-specie Transfer is in respect of the purchase of Fund Securities by a Managed Account:

(ii) the Pooled Fund would, at the time of payment, be permitted to purchase the securities that are the subject of the In-specie Transfer;

(iii) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund and are consistent with the investment objectives of the Pooled Fund;

(iv) the value of the securities transferred to the Pooled Fund is at least equal to the issue price of the Fund Securities for which they are used as payment, valued as if the securities were portfolio assets of the Pooled Fund;

(v) the account statement next prepared for the Managed Account describes the securities delivered to the Pooled Fund and the value assigned to such securities; and

(vi) each Pooled Fund keeps written records of all In-specie Transfers during the financial year of the Pooled Fund, reflecting details of the securities delivered to the Pooled 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) if the In-specie Transfer is in respect of the redemption of Fund Securities by a Managed Account:

(ii) the securities are acceptable to the Filer as portfolio manager of the Managed Account and consistent with the Managed Account's investment objectives;

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

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

(v) the account statement next prepared for the Managed Account describes the securities received from the Pooled Fund and the value assigned to such securities; and

(vi) the Pooled Funds keep written records of all In-specie Transfers during the financial year, reflecting details of the securities delivered by the Pooled Funds 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;

(c) the Filer does not receive any compensation in respect of any sale or redemption of Fund Securities and the only cost which will be incurred by a Pooled Fund or a Managed Account for an In-specie Transfer is a nominal administrative charge levied by the custodian of the Pooled Fund in recording the trades and/or any commission or other transaction fees charged by the dealer (if any) executing the trade; and

(d) should any In-specie Transfer involve the transfer of an “illiquid asset” (as defined in NI 81-102) the Filer will obtain at least one quote for the asset from an independent arm’s length purchaser or seller, immediately before effecting the In-specie Transfer (as contemplated by commentary #7 to section 6.1 of National Instrument 81-107 Independent Review Committee for Investment Funds).

“Darren McKall”

Darren McKall

Manager, Investment Funds and Structured Products

Ontario Securities Commission

Application # 2021/0450

Silver Heights Capital Management Inc. (Re), 2021 CanLII 85633

Case Summary

1. The Filer is a corporation incorporated under the laws of Ontario with its head office located in Toronto, Ontario.

3. The Filer is not a reporting issuer in any jurisdiction and is not in default of the securities legislation of any Jurisdiction.

7. The Filer wishes to invest existing and future Managed Accounts in one or more of the Pooled Funds, to the extent that a Pooled Fund’s investment objectives are consistent with the investment objectives of the applicable Managed Accounts.

8. When acting for a Managed Account of a client, the Filer wishes to be able, in accordance with the investment objectives and restrictions of the client, to cause the client’s Managed Account to either invest in Fund Securities, or to redeem such securities, pursuant to an In-specie Transfer.

10. The Filer has determined that effecting the In-specie Transfers will allow the Filer to manage each investment strategy more effectively and reduce transaction costs for Managed Account clients and the Pooled Fund, as applicable. For example, In-specie Transfers may:

(i) reduce market impact costs, which can be detrimental to Managed Account clients and/or the Pooled Funds; and

(ii) allow the Filer as adviser to retain within its control institutional-size blocks of portfolio securities that otherwise would need to be broken and re-assembled.

12. At the time of each In-specie Transfer, the Filer will have in place policies and procedures governing such transactions, including the following:

(ii) the portfolio securities transferred in an In-specie Transfer will be consistent with the investment criteria of the applicable Pooled Fund or Managed Account acquiring the portfolio securities;

(v) the Filer will not cause any Pooled Fund or Managed Account to engage in an In-specie Transfer if the applicable Pooled Fund is not in compliance with the portfolio restrictions on the holding of illiquid securities described in section 2.4 of NI 81-102;

(vii) the next account statement the Filer prepares for the applicable Managed Accounts will describe the portfolio securities delivered or received as part of the In-specie Transfer and the value assigned to those portfolio securities; and

13. Absent the Exemption Sought, neither the Managed Accounts nor the Pooled Funds, nor the Filer, on their behalf, would be permitted to engage in In-specie Transfers due to the provisions of section 13.5(2)(b) of NI 31-103.

Decision

(a) if the In-specie Transfer is in respect of the purchase of Fund Securities by a Managed Account:

(ii) the Pooled Fund would, at the time of payment, be permitted to purchase the securities that are the subject of the In-specie Transfer;

(iii) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund and are consistent with the investment objectives of the Pooled Fund;

(iv) the value of the securities transferred to the Pooled Fund is at least equal to the issue price of the Fund Securities for which they are used as payment, valued as if the securities were portfolio assets of the Pooled Fund;

(v) the account statement next prepared for the Managed Account describes the securities delivered to the Pooled Fund and the value assigned to such securities; and

(b) if the In-specie Transfer is in respect of the redemption of Fund Securities by a Managed Account:

(ii) the securities are acceptable to the Filer as portfolio manager of the Managed Account and consistent with the Managed Account's investment objectives;

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

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

(v) the account statement next prepared for the Managed Account describes the securities received from the Pooled Fund and the value assigned to such securities; and

“Darren McKall”

1. The Filer is a corporation incorporated under the laws of Ontario with its head office located in Toronto, Ontario.

3. The Filer is not a reporting issuer in any jurisdiction and is not in default of the securities legislation of any Jurisdiction.

7. The Filer wishes to invest existing and future Managed Accounts in one or more of the Pooled Funds, to the extent that a Pooled Fund’s investment objectives are consistent with the investment objectives of the applicable Managed Accounts.

8. When acting for a Managed Account of a client, the Filer wishes to be able, in accordance with the investment objectives and restrictions of the client, to cause the client’s Managed Account to either invest in Fund Securities, or to redeem such securities, pursuant to an In-specie Transfer.

10. The Filer has determined that effecting the In-specie Transfers will allow the Filer to manage each investment strategy more effectively and reduce transaction costs for Managed Account clients and the Pooled Fund, as applicable. For example, In-specie Transfers may:

(i) reduce market impact costs, which can be detrimental to Managed Account clients and/or the Pooled Funds; and

(ii) allow the Filer as adviser to retain within its control institutional-size blocks of portfolio securities that otherwise would need to be broken and re-assembled.

12. At the time of each In-specie Transfer, the Filer will have in place policies and procedures governing such transactions, including the following:

(i) the Filer will have obtained the prior written consent of any applicable Managed Account client before it engages in any In-specie Transfer;

(ii) the portfolio securities transferred in an In-specie Transfer will be consistent with the investment criteria of the applicable Pooled Fund or Managed Account acquiring the portfolio securities;

(v) the Filer will not cause any Pooled Fund or Managed Account to engage in an In-specie Transfer if the applicable Pooled Fund is not in compliance with the portfolio restrictions on the holding of illiquid securities described in section 2.4 of NI 81-102;

(vii) the next account statement the Filer prepares for the applicable Managed Accounts will describe the portfolio securities delivered or received as part of the In-specie Transfer and the value assigned to those portfolio securities; and

13. Absent the Exemption Sought, neither the Managed Accounts nor the Pooled Funds, nor the Filer, on their behalf, would be permitted to engage in In-specie Transfers due to the provisions of section 13.5(2)(b) of NI 31-103.

Decision

(a) if the In-specie Transfer is in respect of the purchase of Fund Securities by a Managed Account:

(i) the Filer has obtained the prior written consent of the Managed Account client before it engages in the In-specie Transfer;

(ii) the Pooled Fund would, at the time of payment, be permitted to purchase the securities that are the subject of the In-specie Transfer;

(iii) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund and are consistent with the investment objectives of the Pooled Fund;

(iv) the value of the securities transferred to the Pooled Fund is at least equal to the issue price of the Fund Securities for which they are used as payment, valued as if the securities were portfolio assets of the Pooled Fund;

(v) the account statement next prepared for the Managed Account describes the securities delivered to the Pooled Fund and the value assigned to such securities; and

(b) if the In-specie Transfer is in respect of the redemption of Fund Securities by a Managed Account:

(i) the Filer has obtained the prior written consent of the Managed Account client before it engages in the In-specie Transfer;

(ii) the securities are acceptable to the Filer as portfolio manager of the Managed Account and consistent with the Managed Account's investment objectives;

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

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

(v) the account statement next prepared for the Managed Account describes the securities received from the Pooled Fund and the value assigned to such securities; and

“Darren McKall”