Claringtonfunds Inc. et al.

Headnote

Relief for RSP "clone" fund, and relief for fund-of-fund structure for class of a mutual fundcorporation. Exemptions granted from sections 111(2)(b), 111(2)(c), 111(3) (relating toself-dealing by mutual funds), and sections 117(1)(a), and 117(1)(d)(relating to reportingrequirements for same) of the Act.

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 111(2)(b), 111(2)(c), 111(3), 117(1)(a), and117(1)(d).

WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario,Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland, and Yukon (the"Jurisdictions") has received an application (the "Application") from ClaringtonFunds Inc.("Clarington"), on its own behalf and on behalf of the RSP Funds (as hereinafter defined),the Class (as hereinafter defined) and the Underlying Funds (as hereinafter defined)(collectively, the "Funds") for a decision (the "Decision") pursuant to the securitieslegislation of the Jurisdictions (the "Legislation") that the following requirements andrestrictions contained in the Legislation (the "Applicable Requirements") shall not applyto the purchase and redemption by the RSP Funds or the Class (collectively, the "TopFunds") of units of the Underlying Funds:

1. the restriction in the Legislation prohibiting a mutual fund from knowingly makingand holding an investment in a person or company in which the mutual fund, aloneor together with one or more related mutual funds, is a substantial security holder;

2. the restriction in the Legislation prohibiting a mutual fund from knowingly makingan investment in an issuer in which any officer or director of the mutual fund, itsmanagement company or distribution company or an associate of any of the them,or any person or company who is a substantial security holder of the mutual fund,its management company or its distribution company, has a significant interest;

3. the restriction in the Legislation, as it relates to the Province of British Columbia,prohibiting a mutual fund or a responsible person from knowingly causing a mutualfund to purchase or sell securities of any issuer from or to the account of aresponsible person; and

4. the requirements contained in the Legislation requiring a management company tofile a report of every transaction of purchase or sale of securities between a mutualfund it manages and any related person or company and any transaction in which,by arrangement other than an arrangement relating to insider trading in portfoliosecurities, a mutual fund is a joint participant with one or more of its related personsor companies, in respect of each mutual fund to which it provides services oradvice, within 30 days after the end of the month in which it occurs.

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application.

AND WHEREAS throughout this MRRS Decision Document the term "RSP Funds"shall mean:

(a) Clarington RSP International Equity Fund (the "RSP International Equity Fund");and

(b) all other mutual funds managed by Clarington after the date of this Decision havingan investment objective or strategy that is linked to the returns or portfolio ofanother specified Clarington mutual fund while remaining 100% eligible forRegistered Plans (the "Future RSP Funds").

AND WHEREAS throughout this Decision Document the term "Class" shall meanthe Clarington Global Equity Class.

AND WHEREAS throughout this Decision Document the term "Underlying Funds"shall mean:

(a) Clarington Global Equity Fund (the "Equity Fund");

(b) Clarington International Equity Fund (the "International Equity Fund"); and

(c) any underlying funds managed by Clarington (the "Future Underlying Funds").

AND WHEREAS it has been represented by Clarington to the Decision Makers that:

In respect of Clarington:

1. Clarington is a corporation incorporated under the laws of the Province of Ontario.Clarington's head office is located in Toronto, Ontario.

2. Clarington is, or will be, the manager of the Funds and the trustee of the RSPFunds and Underlying Funds.

In respect of the RSP Funds:

3. The RSP Funds are, or will be, open-ended mutual fund trusts governed by thelaws of the Province of Ontario and offered for sale in all provinces and territories.

4. The RSP Funds are, or will be, reporting issuers in all provinces and territories.

5. The securities of the RSP International Equity Fund are currently qualified fordistribution in all the Jurisdictions pursuant to a simplified prospectus and annualinformation form dated August 28, 2000, and the RSP International Equity Fund isnot in default of any requirements of the Legislation of the Jurisdictions.

6. Securities of the Future RSP Funds will be qualified for sale in all provinces andterritories to the public pursuant to a simplified prospectus and annual informationform.

7. Upon the creation of a Future RSP Fund and Future Underlying Fund, Claringtonwill invest seed money so that for a short period of time Clarington will have asignificant interest in, and be a substantial securityholder of, both the Future RSPFund and the Future Underlying Fund.

8. The investment objective of the RSP International Equity Fund is to achieve long-term asset appreciation by linking its returns to the returns of the InternationalEquity Fund while remaining 100% eligible for registered retirement savings plans,registered retirement income funds and deferred profit sharing plans (the"Registered Plans") under the Income Tax Act (Canada) (the "Tax Act").

9. The investment objective of each Future RSP Fund will be similar to the investmentobjective of the corresponding Underlying Fund which will be achieved by linkingits returns to the returns of that Underlying Fund while remaining 100% eligible forRegistered Plans.

10. To achieve their investment objectives, the RSP Funds will invest their assets insecurities such that their units will, in the opinion of tax counsel to the RSP Funds,be "qualified investments" for Registered Plans and will not constitute foreignproperty (as defined in the Tax Act) to such Registered Plans. This will primarilybe achieved through the implementation of derivatives strategies. However, theRSP Funds will also invest a portion of their assets directly in securities of thecorresponding Underlying Funds (the "Permitted Fund Investments"). Thisinvestment by the RSP Funds will at all times be below the maximum foreignproperty limit prescribed for Registered Plans (the "Permitted Limit").

11. The direct investments by the RSP Funds in the corresponding Underlying Fundswill be within the Permitted Limit. Clarington and the RSP Funds will comply withthe conditions of this Decision in respect of such investments. The amount of directinvestment by the RSP Funds in the corresponding Underlying Funds will beadjusted from time to time so that, except for transitional cash, the aggregate of thederivative exposure to, and direct investment in, the Underlying Funds will equal100% of the assets of the particular RSP Fund.

In respect of the Class:

12. The Class is a class of shares of Sector Fund Inc., a mutual fund corporationincorporated on July 17, 2000 under the laws of the Province of Ontario, whichshares are offered for sale in all provinces and territories.

13. The securities of the Class are currently qualified for distribution in all theJurisdictions pursuant to a simplified prospectus and annual information form datedAugust 28, 2000.

14. The Class is a reporting issuer and is not in default of any requirements of theLegislation of the Jurisdictions.

15. The Class seeks to achieve its investment objectives by investing substantially allof its assets in units of its corresponding Underlying Fund.

16. Except for transitional cash, the Class will initially be 100% invested in units of thecorresponding Underlying Fund.

17. The Class will seek securityholder approval if it wishes to change its investmentsfrom mutual fund units to investing directly in foreign securities.

In respect of the Underlying Funds:

18. The Underlying Funds are, or will be, open-ended mutual fund trusts governed bythe laws of the Province of Ontario and offered for sale in all provinces andterritories.

19. The Underlying Funds are, or will be, reporting issuers in all provinces andterritories.

20. The securities of each of the currently existing Underlying Funds are currentlyqualified for distribution in all the Jurisdictions pursuant to a simplified prospectusand annual information form dated August 28, 2000 and the currently existingUnderlying Funds are not in default of any requirements of the Legislation of theJurisdictions.

21. Securities of the Future Underlying Funds will be qualified for sale to the publicpursuant to a simplified prospectus and annual information form in all provinces andterritories.

22. The investment objectives of the Underlying Funds are, or will be, achieved throughinvestments primarily in foreign securities.

In respect of the Funds generally:

23. Except for specific exemptions or approvals granted, the investments by the TopFunds in the Underlying Funds will comply with the investment restrictions of theLegislation and National Instrument 81-102 ("NI 81-102").

24. In the absence of the Decision, each of the Top Funds is prohibited from

(a) knowingly making and holding an investment in the correspondingUnderlying Fund in which the Top Fund, alone or together with one or morerelated mutual funds, is a substantial securityholder; and

(b) in the Province of British Columbia, knowingly purchasing or selling thesecurities of an Underlying Fund from or to the account of a responsibleperson.

25. In the absence of the Decision, any Future RSP Funds would be prohibited fromknowingly making an investment in any Future Underlying Funds in whichClarington has a significant interest.

26. In the absence of the Decision, Clarington would be required to file a report onevery purchase or sale by the Top Funds of securities of their correspondingUnderlying Funds.

27. The investment in or redemption of securities of the corresponding UnderlyingFunds by the Top Funds represents business judgment of responsible persons,uninfluenced by considerations other than the best interests of the Funds.

AND WHEREAS under the System, this MRRS Decision Document evidences theDecision of each Decision Maker.

AND WHEREAS each of the Decision Makers is satisfied that the tests containedin the Legislation that provide the Decision Maker with the jurisdiction to make theDecision have been met.

THE DECISION of the Decision Makers under the Legislation is that the ApplicableRequirements do not apply so as to prevent the Top Funds from investing in, or redeemingthe securities of, the Underlying Funds, and such investment or redemption does notrequire the filing of a report with the Decision Makers.

PROVIDED THAT in respect of the investment by the each of the RSP Funds insecurities of the Underlying Funds:

1. the Decision evidenced by this MRRS Decision Document (the "Decision"), as itrelates to the jurisdiction of a Decision Maker, will terminate one year after thepublication in final form of any legislation or rule of that Decision Maker dealing withthe matters in subsection 2.5 of NI 81-102; and

2. the Decision shall only apply in respect of investments in, or transactions with, eachcorresponding Underlying Fund that are made in compliance with the followingconditions:

(a) each RSP Fund and its corresponding Underlying Fund are under commonmanagement, and the securities of each RSP Fund and correspondingUnderlying Fund are offered and will continue to be offered for sale in theJurisdiction of the Decision Maker pursuant to a simplified prospectus andannual information form that has been filed with and accepted by theDecision Maker;

(b) each RSP Fund restricts its aggregate direct investment in eachcorresponding Underlying Fund to a percentage of its assets that is withinthe Permitted Limit;

(c) the investment by each RSP Fund in its corresponding Underlying Fund iscompatible with the fundamental investment objectives of the RSP Fund;

(d) each RSP Fund may change the Permitted Fund Investments if itsfundamental investment objective is changed in accordance with NI 81-102;

(e) the simplified prospectus of each RSP Fund will describe the intent of theRSP Fund to invest in the corresponding Underlying Fund;

(f) no sales charges are payable by an RSP Fund in relation to its purchasesof securities of the corresponding Underlying Fund;

(g) each RSP Fund and its corresponding Underlying Fund have compatibledates for the calculation of the net asset value of such Funds for the purposeof the issue and redemption of the securities of the RSP Fund and thecorresponding Underlying Fund;

(h) no redemption fees or other charges are charged by an Underlying Fund inrespect of the redemption by its corresponding RSP Fund of securities of theUnderlying Fund owned by the RSP Fund;

(i) the arrangements between or in respect of each RSP Fund and itscorresponding Underlying Fund preclude duplication of management fees;

(j) no fees and charges of any sort are paid by an RSP Fund, its correspondingUnderlying Funds, the manager or principal distributor of the RSP Fund orthe Underlying Fund, or by any affiliate or associate of any of the foregoingentities, to anyone in respect of the RSP Fund's purchase, holding orredemption of the securities of its corresponding Underlying Fund;

(k) in the event of the provision of any notice to securityholders of an UnderlyingFund, as required by the constating documents of the Underlying Fund or byapplicable laws, such notice will also be delivered to the securityholders ofthe corresponding RSP Fund; all voting rights attached to the securities ofthe Underlying Fund which are owned by the corresponding RSP Fund willbe passed through to the securityholders of the RSP Fund;

(l) in the event that a meeting of the securityholders of an Underlying Fund iscalled, all of the disclosure and notice material prepared in connection withsuch meeting and received by the corresponding Top Fund will be providedto the securityholders of such Top Fund; each such securityholder will beentitled to direct a representative of the Top Fund to cast the votesrespecting such Top Fund securityholder's proportional holding in theUnderlying Fund in accordance with such securityholder's direction; and therepresentative of the Top Fund will not be permitted to vote the Top Fund'sholdings in the Underlying Fund except to the extent the securityholders ofthe Top Funds so direct;

(m) in addition to receiving the annual and (upon request) the semi-annualfinancial statements of the RSP Fund, securityholders of each RSP Fundwill receive the annual and (upon request) the semi-annual financialstatements of the corresponding Underlying Fund either in a combinedreport containing the financial statement of both the RSP Fund and thecorresponding Underlying Fund, or in a separate report containing theUnderlying Fund's financial statements; and

(n) to the extent that an RSP Fund and its corresponding Underlying Fund donot use a combined simplified prospectus, annual information form andfinancial statements containing disclosure about the RSP Fund and theUnderlying Fund, copies of the simplified prospectus, annual informationform and financial statements relating to the corresponding Underlying Fundmay be obtained upon request by a securityholder of the RSP Fund.

AND PROVIDED that in respect of the investment by the Class in securities of itscorresponding Underlying Fund:

1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate oneyear after the publication in final form of any legislation or rule of that DecisionMaker dealing with the matters in subsection 2.5 of NI 81-102; and

2. the Decision shall only apply in respect of investments in, or transactions with, thecorresponding Underlying Fund by the Class that are made in compliance with thefollowing conditions:

(a) the Class and its corresponding Underlying Fund are under commonmanagement, and the securities of the Class and Underlying Fund areoffered and will continue to be offered for sale in the Jurisdiction of theDecision Maker pursuant to a simplified prospectus and annual informationform that has been filed with and accepted by the each of the DecisionMakers;

(b) the investment by the Class in its corresponding Underlying Fund iscompatible with the fundamental investment objectives of the Class;

(c) the simplified prospectus of the Class will describe the intent of the Class toinvest in the corresponding Underlying Fund;

(d) no sales charges are payable by the Class in relation to purchases ofsecurities of its corresponding Underlying Fund;

(e) the Class and its corresponding Underlying Fund have compatible dates forthe calculation of the net asset value of the Funds for the purpose of theissue and redemption of the securities of the Class and the Underlying Fund;

(f) no redemption fees or other charges are charged by an Underlying Fund inrespect of the redemption by the Class of securities of the Underlying Fundowned by the Class;

(g) the arrangements between or in respect of the Class and the correspondingUnderlying Fund preclude duplication of management fees;

(h) no fees and charges of any sort are paid by the Class, their correspondingUnderlying Fund, the manager or principal distributor of the Classes or theUnderlying Fund, or by any affiliate or associate of any of the foregoingentities, to anyone in respect of the purchase, holding or redemption of theClass of the securities of the Underlying Fund;

(i) in the event of the provision of any notice to securityholders of theUnderlying Fund, as required by the constating documents of the UnderlyingFund or by applicable laws, such notice will also be delivered to thesecurityholders of the Class; all voting rights attached to the securities of theUnderlying Fund which are owned by the Class will be passed through to thesecurityholders of the Class;

(j) in the event that a meeting of the securityholders of the correspondingUnderlying Fund is called, all of the disclosure and notice material preparedin connection with such meeting and received by the Class will be providedto the securityholders of the Class; each such securityholder will be entitledto direct a representative of the Class to cast such securityholder'sproportional holding in the Underlying Fund in accordance with theirdirection; and the representative of the Class will not be permitted to vote theClass's holdings in the Underlying Fund except to the extent thesecurityholders of the Class so direct;

(k) in addition to receiving the annual and (upon request) the semi-annualfinancial statements of the Class, securityholders of the Class will receivethe annual and (upon request) the semi-annual financial statements of itscorresponding Underlying Fund either in a combined report containing thefinancial statement of both the Class and the Underlying Fund, or in aseparate report containing the Underlying Fund's financial statements; and

(l) to the extent that the Class and the Underlying Fund do not use a combinedsimplified prospectus, annual information form and financial statementscontaining disclosure about the Class and its corresponding UnderlyingFund, copies of the simplified prospectus, annual information form andfinancial statements relating to the Underlying Fund may be obtained uponrequest by a securityholder of the Class.

(m) if applicable, the Class will obtain securityholder approval to change itsinvestments from mutual fund units to investing directly in foreign securities.

September 29^th, 2000.

"J. A. Geller"      "Robert W. Davis"