Legg Mason Canada Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- relief from the portfolio manager's requirement to obtain specific and informed written consent from its clients once in each twelve-month period with respect to the client's investment in certain funds that are related issuers of the portfolio manager -- subject to conditions.

Applicable Ontario Legislation

Ontario Regulation 1015, R.R.O. 1990, s. 227(2)(b)(ii), 233.

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA, ONTARIO, NOVA SCOTIA

AND NEWFOUNDLAND AND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

LEGG MASON CANADA INC.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the Provinces of Alberta, Ontario, Nova Scotia and Newfoundland and Labrador (the "Jurisdictions") has received an application (the "Application") from Legg Mason Canada Inc. ("LMC") for a decision (the "Decision") pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the restriction against an adviser exercising discretionary authority with respect to a client's account to purchase or sell the securities of a related issuer of the registrant without the specific and informed written consent of the client once in each twelve month period after the adviser has disclosed to the client all relevant facts and obtained the initial written consent of the client (the "Annual Consent Requirement") not apply to one or more pooled funds and mutual funds managed or to be managed by LMC (the "Funds") subject to certain conditions.

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS, unless otherwise defined, the terms herein have the meaning set out in National Instrument 14-101 Definitions;

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

1. LMC is a corporation incorporated under the laws of Canada with its head office in Toronto, Ontario, is registered as an adviser in the categories of investment counsel and portfolio manager and is registered as a dealer in the category of mutual fund dealer in Ontario and has an equivalent adviser registration in each of the Jurisdictions. LMC is also registered as a limited market dealer in Newfoundland.

2. LMC is a wholly owned subsidiary of Legg Mason Canada Holdings Ltd. ("LM Holdings") which, in turn, is a subsidiary of Legg Mason, Inc. (" Legg Mason"). LM Holdings, Legg Mason and the Funds are the only related issuers or connected issuers of LMC.

3. LMC manages some of its client's assets on a discretionary basis with segregated, separate portfolios of securities for each client which includes of securities of one or more of the Funds. All discretionary clients of LMC enter in to an investment management agreement with LMC in which the client specifically consents to LMC exercising its discretion under the agreement to trade in the securities of one or more of the Funds.

4. The Funds are, or will be, open-end mutual fund trusts created under the laws of Ontario. Units of the Funds are offered on a continuous basis and are either reporting issuers in each of the Jurisdictions or distributed to residents of a Jurisdiction on a private placement basis.

5. Currently, other than in connection with the distribution of units of the Funds, LMC does not act as an adviser, dealer or underwriter in respect of securities of LMC, a related issuer of LMC, or in the course of a distribution, a connected issuer of LMC.

6. Other than investments in other Funds, none of the Funds invest in securities of LMC, issuers that are related issuers of LMC, or in the course of a distribution, issuers that are connected issuers of LMC.

7. All clients of LMC receive a Statement of Policies which lists the related issuers and connected issuers of LMC. In the event of a significant change in its Statement of Policies, LMC will provide to each of its clients a copy of the revised version of, or amendment to, the Statement of Policies.

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that LMC is exempt from the Annual Consent Requirement under the Legislation in respect of the exercise of discretionary authority to invest in the securities of the Funds set out in LMC's Statement of Policies provided LMC has secured the specific and informed consent of the client in advance of the exercise of discretionary authority in respect of the Funds.

September 13, 2004.