Securities Law & Instruments


Mutual Reliance Review System for ExemptiveRelief Applications - open-end investment trust exempt fromprospectus and registration requirements in connection withissuance of units to existing unit holders pursuant to distributionreinvestment plan whereby distributions of income are reinvestedin additional units of the trust, subject to certain conditions- first trade in additional units deemed a distribution unlessmade in compliance with MI 45-102.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53 and 74(1).

Multilateral Instrument Cited

Multilateral Instrument 45-102 Resale of Securities(2001), 24 OSCB 5522.
















WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Québec, Nova Scotia, New Brunswick, Prince Edward Island,Newfoundland and Yukon (the "Jurisdictions") has receivedan application from PATHFINDER Income Fund (the "Trust")for a decision, pursuant to the securities legislation of theJurisdictions (the "Legislation"), that the requirementcontained in the Legislation to be registered to trade in asecurity and to file and obtain a receipt for a preliminaryprospectus and a final prospectus (the "Registration andProspectus Requirements") shall not apply to certain tradesin units of the Trust pursuant to a distribution reinvestmentplan (the "Plan");

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;

AND WHEREAS THE TRUST has representedto the Decision Makers that:

1. The Trust is an unincorporated closed-endinvestment trust established under the laws of the Provinceof Ontario by a declaration of trust dated as of September25, 2002.

2. The Trust is not considered to be a "mutualfund" as defined in the Legislation because the holdersof Units ("Unitholders") are not entitled to receiveon demand an amount computed by reference to the value ofa proportionate interest in the whole or in part of the netassets of the Trust as contemplated in the definition of "mutualfund" in the Legislation.

3. The Trust became a reporting issuer orthe equivalent thereof in the Jurisdictions on September 26,2002 upon obtaining a receipt for its final prospectus datedSeptember 25, 2002 (the "Prospectus"). As of thedate hereof, the Trust is not in default of any requirementsunder the Legislation.

4. The beneficial interests in the Trust aredivided into a single class of voting units (the "Units").The Trust is authorized to issue an unlimited number of Units.Each Unit represents a Unitholder's proportionate undividedbeneficial interest in the Trust.

5. The Units are listed and posted for tradingon the Toronto Stock Exchange (the "TSX") underthe symbol "PAZ.UN". As of the date hereof, 15,500,000Units are issued and outstanding.

6. The Trust currently intends to make cashdistributions ("Distributions") of distributableincome to Unitholders of record on the day on which the Trustdeclares a distribution to be payable (each a "DeclarationDate"), and such Distributions will be payable on a daywhich is on or before the last business day of the month followinga Declaration Date (each a "Distribution Date").

7. The Trust has adopted the Plan which, subjectto obtaining all necessary regulatory approvals, will permitDistributions to be automatically reinvested, at the electionof each Unitholder, to purchase additional Units ("PlanUnits") pursuant to the Plan and in accordance with adistribution reinvestment plan agency agreement entered intoby the Trust, Middlefield PATHFINDER Management Limited inits capacity as manager of the Trust (in such capacity, the"Manager") and MFL Management Limited in its capacityas agent under the Plan (in such capacity, the "PlanAgent"). The Plan will not be available to Unitholderswho are not residents of Canada for the purposes of the IncomeTax Act (Canada).

8. Pursuant to the terms of the Plan, a Unitholderwill be able to elect to become a participant in the Planby notifying the Manager, or by causing the Manager to benotified, in writing, of the Unitholder's decision to participatein the Plan. Participation in the Plan will not be availableto Unitholders who are not residents of Canada for the purposesof the Income Tax Act (Canada).

9. Distributions due to participants in thePlan ("Plan Participants") will be paid to the PlanAgent and applied to purchase Plan Units. Plan Units purchasedunder the Plan will be purchased by the Plan Agent in themarket or directly from the Trust in the following manner:

(a) if the weighted average trading priceof the Units on the TSX (or such other exchange or marketon which the Units are then listed) for the 10 trading daysimmediately preceding the relevant Distribution Date (the"Market Price") plus estimated brokerage feesand commissions is greater than or equal to the net assetvalue of the Trust (the "Net Asset Value") perUnit on the applicable Distribution Date, the Plan Agentwill, after such Distribution Date, apply Distributionsto the purchase of Plan Units from the Trust at a priceequal to Net Asset Value per Unit as at the DistributionDate, provided that if the Net Asset Value per Unit as atthe Distribution Date is less than 95% of the Market Priceper Unit on the Distribution Date, then Plan Units willbe purchased from the Trust at a price equal to 95% of theMarket Price as at the Distribution Date;

(b) if the Market Price plus estimated brokeragefees and commissions is less than the Net Asset Value perUnit on the Distribution Date, purchases of Plan Units willbe made in the market during the 10 business days next followingthe relevant Distribution Date, on any business day whenthe Market Price plus estimated brokerage fees and commissionsis less than the Net Asset Value per Unit determined asat such Distribution Date, and on the 11th businessday after the Distribution Date the unused part (if any)of the Distributions paid to the Plan Agent for the benefitof Plan Participants will be applied to a purchase of PlanUnits from the Trust in accordance with paragraph (a) above;

(c) the Plan Units purchased in the marketor from the Trust shall be allocated by the Plan Agent ona pro rata basis to the Plan Participants; and

(d) any applicable brokerage fees and commissionsincurred in connection with purchases of Plan Units madein the market as contemplated by paragraph (b) above shallbe borne on a pro rata basis by and from each PlanParticipant's account.

10. The Plan also allows Plan Participantsto make optional cash payments ("Optional Cash Payments")which will be used by the Plan Agent to purchase Plan Units.A Plan Participant must invest a minimum of $100 per OptionalCash Payment. Optional Cash Payments will be used by the PlanAgent to purchase Plan Units on the same basis as Distributionsas described above. The aggregate number of Plan Units thatmay be purchased with Optional Cash Payments in a calendaryear will be limited to 2% of the outstanding Units at thecommencement of that calendar year, provided that for the2002 calendar year, the number of Plan Units that may be purchasedwith Optional Cash Payments will be limited to 2% of the outstandingUnits immediately following the Closing of the initial publicoffering of Units pursuant to the Prospectus (including anyUnits outstanding following the closing of the exercise ofthe over-allotment option granted to the agents under theinitial public offering). The Plan Agent may limit the maximumamount of Optional Cash Payments in any calendar year to ensurethat the 2% limit is not exceeded.

11. Optional Cash Payments, along with a PlanParticipant's notice of his or her intention to make an OptionalCash Payment, must be received by the Plan Agent on or before5:00 p.m. (Toronto time) on the day which is at least fivebusiness days prior to a Distribution Date, in order to beinvested in Plan Units immediately following such DistributionDate. Optional Cash Payments and/or notices received lessthan five business days prior to a Distribution Date willresult in the Plan Agent holding (without interest) the OptionalCash Payment and using the same to purchase Plan Units afterthe second Distribution Date following the date of receiptof the Optional Cash Payment.

12. The Plan Agent will purchase Plan Unitsonly in accordance with mechanics described in the Plan and,accordingly, there is no opportunity for a Plan Participantor the Plan Agent to speculate on Net Asset Value per Unit.

13. The Plan is open for participation byall Unitholders (other than non-residents of Canada), so thatsuch Unitholders can ensure protection against potential dilution,albeit insignificant, by electing to participate in the Plan.

14. The Trust will invest in securities withthe objective of providing Unitholders with a high level ofsustainable income (as described in the Prospectus) as wellas a cost-effective method of reducing the risk of investingin such securities through broad diversification. In addition,the Net Asset Value per Unit should be less volatile thanthat of a typical equity fund based on historical data. Asa result, the potential for significant changes in the NetAsset Value per Unit over short periods of time is moderate.

15. The amount of Distributions that may bereinvested in Plan Units issued from treasury is small relativeto the Unitholders' equity in the Trust. The potential fordilution arising from the issuance of Plan Units by the Trustat the Net Asset Value per Unit on a Distribution Date isnot significant.

16. Plan Units purchased under the Plan willbe registered in the name of the Plan Agent, as agent forthe Plan Participants.

17. A Plan Participant may terminate his orher participation in the Plan by providing, or by causingto be provided, at least ten business days' prior writtennotice to the Manager and, such notice, if actually receivedno later than ten business days prior to the next DeclarationDate, will have effect beginning with the distribution tobe made with respect to such Declaration Date. Thereafter,Distributions payable to such Unitholder will be in cash.

18. The Manager reserves the right to suspendor terminate the Plan at any time in its sole discretion,in which case Plan Participants and the Plan Agent will besent written notice thereof. In particular, the Manager may,on behalf of the Trust, terminate the Plan in its sole discretion,upon not less than 30 days' prior written notice to the PlanParticipants and the Plan Agent.

19. The Manager may amend or modify the Planat any time in its sole discretion, provided that it obtainsthe prior approval of the TSX (if Units are then listed thereon)and provided further that if, in the Manager's reasonableopinion: (i) the amendment or notification is material toPlan Participants, then at least 30 days' prior written noticethereof is given to Plan Participants and the Plan Agent;or (ii) the amendment or modification is not material to PlanParticipants, then notice thereof may be given to Plan Participantsand the Plan Agent after effecting the amendment or modification.The Manager may also, in consultation with the Plan Agent,adopt additional rules and regulations to facilitate the administrationof the Plan.

20. The distribution of the Plan Units bythe Trust pursuant to the Plan cannot be made in relianceon certain registration and prospectus exemptions containedin the Legislation as the Plan involves the reinvestment ofdistributable income distributed by the Trust and not thereinvestment of dividends or interest of the Trust.

21. The distribution of the Plan Units bythe Trust pursuant to the Plan cannot be made in relianceon registration and prospectus exemptions contained in theLegislation for distribution reinvestment plans of mutualfunds, as the Trust is not considered to be a "mutualfund" as defined in the Legislation because the Unitholdersare not entitled to receive on demand an amount computed byreference to the value of a proportionate interest in thewhole or in a portion of the net assets of the Trust.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each of the DecisionMakes (collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Makers with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers pursuantto the Legislation is that the trades of Plan Units to the PlanParticipants pursuant to the Plan shall not be subject to theRegistration and Prospectus Requirements of the Legislationprovided that:

(a) at the time of the trade the Trust isa reporting issuer or the equivalent under the Legislationand is not in default of any requirements of the Legislation;

(b) no sales charge is payable in respectof the distributions of Plan Units from treasury;

(c) the Trust has caused to be sent to theperson or company to whom the Plan Units are traded, notmore than 12 months before the trade, a statement describing:

(i) their right to withdraw from the Planand to make an election to receive cash instead of PlanUnits on the making of a distribution by the Trust; and

(ii) instructions on how to exercise theright referred to in (i);

(d) in the calendar year during which thetrade takes place, the aggregate number of Plan Units issuedpursuant to the Optional Cash Payments shall not exceed2% of the aggregate number of Units outstanding at the commencementof that calendar year (or for the 2002 calendar year, outstandingat the closing of the Trust's initial public offering ofUnits pursuant to the Prospectus including any Units outstandingfollowing the closing of the exercise of the over-allotmentoption granted to the agents under the initial public offering);and

(e) except in Québec, the first tradeor resale of Plan Units acquired pursuant to the Plan ina Jurisdiction shall be deemed a distribution or primarydistribution to the public under the Legislation unlessthe conditions of paragraphs 2 through 5 of subsection 2.6(3)of Multilateral Instrument 45-102 are satisfied;

(f) in Québec, the first trade (alienation)of Plan Units acquired pursuant to the Plan in a Jurisdictionshall be deemed to be a distribution or primary distributionto the public unless:

(i) at the time of the first trade, theTrust is a reporting issuer in Québec and is notin default on any of the requirements of securities legislationin Québec;

(ii) no unusual effort is made to preparethe market or to create a demand for the Plan Units;

(iii) no extraordinary commission or considerationis paid to a person or company other than the vendor ofthe Plan Units in respect of the first trade; and

(iv) the vendor of the Plan Units, ifin a special relationship with the Trust, has no reasonablegrounds to believe that the Trust is in default of anyrequirement of the Legislation of Québec; and

(g) disclosure of the initial distributionof the Plan Units is made to the relevant Jurisdictionsby providing the particulars of the date of the distributionof such Plan Units, the number of such Plan Units and thepurchase price paid or to be paid for such Plan Units in:

(i) an information circular or take-overbid circular filed in accordance with the Legislation;or

(ii) a letter filed with the DecisionMaker in the relevant Jurisdiction by a person or companycertifying that the person or company has knowledge ofthe facts contained in the letter,

when the Trust distributes such Plan Unitsfor the first time and thereafter, not less frequently thanannually, unless the aggregate number of Plan Units so tradedin any month exceeds 1% of the Units outstanding at thebeginning of a month in which the Plan Units were traded,in which case a separate report shall be filed in each relevantJurisdiction in respect of that month within ten days ofthe end of such month.

December 4, 2002.

"H. Lorne Morphy"                    "RobertW. Korthals"