Securities Law & Instruments


Investment by mutual funds in securities of another mutual fund that is under commonmanagement for specified purpose exempted from the requirements of clause111(2)(b), subsection 111(3), clauses 117(1)(a), 117(1)(d) and 118(2)(a), subject tocertain specified conditions.

Statutes Cited

Securities Act (Ontario), R.S.O. 1990 c.S.5, as am. ss. 111(2)(b), 111(3), 113,117(1)(a), 117(1)(d), 117(2), 118(2)(a) and 121(2)(a)(ii).







WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario,Quebec, Nova Scotia and Newfoundland (the "Jurisdictions") has received an application(the "Application") from MD Funds Management Inc. ("MD Management") in its owncapacity and on behalf of MD International Growth RSP Fund ("Growth RSP Fund") andMD US Large Cap Value RSP Fund ("Large Cap Value RSP Fund") and other mutualfunds managed by MD Management after the date of this Decision (defined herein) havingan investment objective or strategy that is linked to the returns or portfolio of anotherspecified MD Management mutual fund (collectively referred to as the "RSP Funds"), fora decision by each Decision Maker (collectively, the "Decision") under the securitieslegislation of the Jurisdictions (the "Legislation") that the following prohibitions orrequirements under the Legislation (the "Applicable Requirements") shall not apply to theRSP Funds, or MD Management, as the case may be, in respect of certain investmentsto be made by Growth RSP Fund in MD International Growth Fund ("Growth Fund"), byLarge Cap Value RSP Fund in MD US Large Cap Value Fund ("Large Cap Value Fund")and by other RSP Funds in their applicable corresponding MD Management mutual fundfrom time to time (collectively referred to as the "Underlying Funds"):

1. the prohibition against a mutual fund knowingly making and holding an investmentin a person or company in which the mutual fund, alone or together with one ormore related mutual funds, is a substantial securityholder;

2. the requirement that a management company of a mutual fund file a report relatingto the purchase or sale of securities between the mutual fund and any relatedperson or company, or any transaction in which, by arrangement other than anarrangement relating to insider trading in portfolio securities, the mutual fund is ajoint participant with one or more of its related persons or companies; and

3. the prohibition against a portfolio manager knowingly causing an investmentportfolio managed by it to invest in the securities of an issuer in which a"responsible person" (as that term is defined in the Legislation) is an officer ordirector unless, the specific fact is disclosed to the client, and if applicable, thewritten consent of the client to the investment is obtained before the purchase;

AND WHEREAS under the Mutual Reliance Review System for Exemptive ReliefApplications (the "System"), the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS MD Management has made the following representations to theDecision Makers:

1. Each of the RSP Funds and Underlying Funds will be open-ended mutual fundtrusts established under the laws of the Province of Ontario.

2. MD Management is a corporation established under the laws of Canada with itshead office located in Ottawa, Ontario. MD Private Trust Company ("MD PrivateTrust"), a wholly owned subsidiary of MD Management, is a corporation establishedunder the laws of Canada.


3. MD Management will be the manager, trustee and promoter of the RSP Funds andthe Underlying Funds. MD Private Trust will be the portfolio manager of the RSPFunds. The portfolio manager of the Growth Fund will be Nicholas ApplegateCapital Management of San Diego, California and MD Private Trust for the cashreserves of the investment portfolio. The portfolio manager of the Large Cap ValueFund will be Equinox Capital Management, LLC of New York, New York and MDPrivate Trust for the cash reserves of the investment portfolio. MD Private Trust,as an affiliate of MD Management and portfolio manager of the RSP Funds, and thedirectors and officers of MD Private Trust are "responsible persons" in respect ofthe RSP Funds. Certain directors and officers of MD Private Trust are alsodirectors and officers of the Underlying Funds.


4. The RSP Funds and the Underlying Funds will be reporting issuers. The units ofthe RSP Funds and the Underlying Funds will be qualified under a simplifiedprospectus and annual information form (collectively, the "Prospectus") filed on May15, 2000 in all the provinces and territories of Canada.

5. Each of the RSP Funds seeks to achieve its investment objective while ensuringthat its units do not constitute "foreign property" for registered retirement savingsplans, registered retirement income plans and deferred profit sharing plans (the"Registered Plans") under the Income Tax Act (Canada) (the "Tax Act").

6. To achieve its investment objective, each RSP Fund invests its assets in securitiessuch that its units will, in the opinion of tax counsel to the RSP Funds, be "qualifiedinvestments" for Registered Plans and will not constitute foreign property (asdefined in the Tax Act) to such Registered Plans. This will primarily be achievedthrough the implementation of a derivative strategy. However, each RSP Fund alsointends to invest a portion of its assets in securities of its Underlying Fund. Theseinvestments by the RSP Funds will at all times be below the maximum foreignproperty limit prescribed for Registered Plans (the "Permitted Limit").

7. The investment objectives of the Underlying Funds will be achieved throughinvestments primarily in foreign securities.

8. The direct investments by the RSP Funds in their Underlying Funds will be withinthe Permitted Limited (the "Permitted RSP Fund Investments"). MD Managementand the RSP Funds will comply with the conditions of this Decision in respect ofsuch investments. The amount of direct investment by each RSP Fund in itsUnderlying Fund will be adjusted from time to time so that, except for transitionalcash, the aggregate of the derivative exposure to, and direct investment in, theUnderlying Fund will equal 100% of the assets of that RSP Fund.

9. Except to the extent evidenced by this Decision Document and except for thespecific exemptions or approvals granted or to be granted by the Canadiansecurities administrators under National Instrument 81-102 Mutual Funds ("NI 81-102"), the investment by each RSP Fund in its Underlying Fund has been or will bestructured to comply with the investment restrictions of the Legislation and NI 81-102.

10. In the absence of the Decision, each of the RSP Funds is prohibited from

(a) knowingly making an investment in its Underlying Fund in which the RSP Fund,alone or together with one or more related mutual funds, is a substantialsecurityholder; and

(b) knowingly holding an investment referred to in subsection (a) above, and wouldthus be required to divest itself of such investment.

11. In the absence of the Decision, MD Management would be required to file a reporton every purchase or sale of securities of the Underlying Funds by their RSPFunds.

12. In the absence of the Decision, MD Management is prohibited from causing theRSP Funds to invest in their Underlying Funds, unless the fact that certain directorsand officers of MD Private Trust are also directors and officers of the UnderlyingFunds is disclosed to the RSP Funds and, if applicable, the written consent of theRSP Funds is obtained before the purchase.

13. The investment in or redemption of securities of the Underlying Funds by their RSPFunds represents the business judgement of responsible persons, uninfluenced byconsiderations other than the best interests of the RSP Funds.

AND WHEREAS pursuant to the System this Decision Document evidences thedecision of each Decision Maker;

AND WHEREAS each of the Decision Makers are satisfied that the tests containedin the Legislation that provides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers under the Legislation is that the ApplicableRequirements do not apply to the RSP Funds or MD Management, as the case may be,in respect of investments to be made by the RSP Funds in securities of the UnderlyingFunds.


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, theUnderlying Funds that are made by the RSP Funds in compliance with the followingconditions:

a) the investment by each RSP Fund in its Underlying Fund is compatible with thefundamental investment objective of the RSP Fund;

b) the RSP Funds and the Underlying Funds are under common management and theUnderlying Funds' securities are offered and will continue to be offered for sale inthe Jurisdiction of the Decision Maker pursuant to a prospectus which has beenfiled with and accepted by the Decision Maker;

c) each RSP Fund restricts its aggregate direct investment in its Underlying Fund toa percentage of its assets that is within the Permitted Limit;

d) the Prospectus of the RSP Funds describes the intent of the RSP Funds to investin their Underlying Funds;

e) each RSP Fund may change the Permitted RSP Fund Investment if it changes itsfundamental investment objective in accordance with NI 81-102;

f) there are compatible dates for the calculation of the net asset value of the RSPFunds and their Underlying Funds for the purpose of the issue and redemption ofthe securities of such mutual funds;

g) in the event of the provision of any notice to securityholders of an Underlying Fund,as required by the constating documents of the Underlying Fund or by theapplicable laws, such notice will also be delivered to the securityholders of its RSPFund; all voting rights attached to the securities of the Underlying Fund which areowned by its RSP Fund will be passed through to the securityholders of the RSPFund;

h) in the event that a meeting of securityholders' of an Underlying Fund is called, allof the disclosure and notice material prepared in connection with such meeting willbe provided to the securityholders of its RSP Fund; such securityholders will beentitled to direct a representative of the RSP Fund to vote the RSP Fund's holdingin the Underlying Fund in accordance with their direction; and the representativeof the RSP Fund will not be permitted to vote the RSP Fund's holding in theUnderlying Fund except to the extent the securityholders of the RSP Fund so direct;

i) no sales charges are payable by each of the RSP Funds in relation to its purchasesof securities of its Underlying Fund;

j) no redemption fees or other charges are charged by the Underlying Funds inrespect of the redemption by the RSP Funds of securities of the Underlying Fundsowned by the RSP Funds;

k) no fees and charges of any sort are paid by each RSP Fund, its Underlying Fund,the manager or principal distributor of the RSP Funds or the Underlying Funds, orby any affiliate or associate of any of the foregoing entities, to anyone in respect ofeach RSP Fund's purchase, holding or redemption of the securities of itsUnderlying Fund;

l) the arrangements between or in respect of the RSP Funds and the UnderlyingFunds are such as to avoid the duplication of management fees;

m) in addition to receiving the annual and, upon request, the semi-annual financialstatements of the RSP Funds, securityholders of the RSP Funds will receive theannual and, upon request, the semi-annual financial statements of the UnderlyingFunds either in a combined report containing both the RSP Funds' and UnderlyingFunds' financial statements, or in a separate report containing the UnderlyingFunds' financial statements; and

n) to the extent that the RSP Funds and the Underlying Funds do not use a combinedsimplified prospectus, annual information form and financial statements containingdisclosure about the RSP Funds and the Underlying Funds, copies of the simplifiedprospectus, annual information form and financial statements relating to theUnderlying Funds may be obtained upon request by a securityholder of the RSPFunds.

July 12th, 2000.

"Howard I. Wetston"      "Robert W. Davis"