Securities Law & Instruments


Subsection 38(1) of the Commodity Futures Act(Ontario) - relief from the requirements of subsection 22(1)(b)of the CFA, for a period of three years, in respect of advisinga Fund and a Master Fund that may invest in commodity futurescontracts and commodity futures options subject to certain termsand conditions.



R.S.O. 1990, C. C20, AS AMENDED(the "CFA")







(Section 38(1))

UPON the application of Western AssetManagement Company (the "Applicant") and Western AssetManagement Company Limited (the "Sub-Adviser") tothe Ontario Securities Commission (the "Commission")for an order pursuant to section 38(1) of the CFA that the Applicantand its employees, and the Sub-Adviser and its employees, beexempt from the requirement, in clause 22(1)(b) of the CFA ofhaving to become registered as an adviser or in an equivalentcapacity, under the CFA, respectively;

AND UPON considering the applicationand the recommendation of the staff of the Commission;

AND UPON the Applicant and the Sub-Adviserhaving represented to the Commission that:

1. The Applicant is organized under the lawsof California and is registered as an investment adviser withthe U.S. Securities and Exchange Commission (the "SEC").

2. The Applicant is, pursuant to an investmentmanagement agreement, the investment manager of the San GabrielOpportunity Fund N.V. (the "Fund") and is responsiblefor providing investment research and advice to the Fund,and supervising the management of the Fund's assets.

3. The Applicant has, pursuant to a sub-investmentmanagement agreement, retained the services of the Sub-Adviser,a sister company, to provide certain advisory services tothe Fund.

4. The Sub-Adviser is organized under thelaws of the United Kingdom and is authorised as an adviserby the Financial Services Authority in the United Kingdom.The Sub-Adviser is also registered as an investment adviserwith the SEC.

5. The Applicant and the Sub-Adviser are affiliatedcompanies by virtue of their common control and ownershipby Legg Mason, Inc.

6. The Fund is a limited liability companyorganized under the laws of the Netherlands Antilles. TheFund is organized as a "feeder" fund in a "master/feeder" structure. The Fund will invest all or substantiallyall of its assets in the San Gabriel Opportunity Fund, LLC(the "Master Fund"), which in turn makes investmentson behalf of the Fund.

7. The Master Fund is organized as a limitedliability company under the laws of the State of Delawareand may accept investments from other investors, includingother feeder funds.

8. The Applicant and the Sub-Adviser alsoprovide investment advice to the Master Fund.

9. The Fund may offer separate classes ofshares. Currently, the Fund offers the Galleon class of sharesto investors who are "qualified purchasers" forpurposes of section 3(c)(7) of the Investment Company Actof 1940 (United States) and "accredited investors"under Regulation D promulgated under the U.S. SecuritiesAct of 1933, as amended.

10. The Fund's investment objective, as implementedthrough the Master Fund, is to maximize total return throughopportunistic investing in an actively managed portfolio offixed income securities. The Master Fund will generally investin securities issued by G-10 countries, which may includedebt obligations issued or guaranteed by the government ofa G-10 country, its agencies or instrumentalities, as wellas corporate, mortgage-related and asset-backed securitiesissued in those countries. The Master Fund's emphasis is oninvestment in developed countries.

11. Instruments in which the Master Fund mayinvest include, but are not limited to, the following: obligationsof the U.S. Government or any of its agencies or instrumentalities;securities backed by or representing interests in residential,multifamily or commercial mortgage loans; securities backedby or representing interests in other financial assets thatby their terms generate cash flows; corporate notes, bonds,debentures and loans; non-dollar notes, bonds, debenturesand loans; shares of closed-end, fixed income investment companies,including those managed by the Applicant; forward contracts,option contracts, futures contracts and options on futurescontracts relating to fixed income instruments, currencies,interest rates or other factors affecting the value of fixedincome investments; swaps, caps and floors; and short-terminvestments.

12. Shares of the Fund will be offered toqualified investors pursuant to a confidential offering memorandum.

13. The minimum initial investment in theFund is U.S. $1,000,000. The minimum subsequent investmentin the Fund is U.S. $100,000. The Fund reserves the rightat any time to vary or waive the minimum amounts for initialand subsequent investments and to suspend or change at anytime the terms of the Fund's offering of its shares.

14. Galleon class shares of the Fund may bepurchased on the last business day of each calendar quarterand at such other days as the Fund shall determine. A shareholderof the Fund may also redeem all or a portion of their shareson the last business day of each calendar quarter or on suchother dates acceptable to the Fund.

15. The Fund wants to sell its shares to sophisticatedpurchasers in Ontario pursuant to exemptions in Ontario securitieslaws.

16. Shares of the Fund will be sold to qualifiedinvestors in Ontario by Legg Mason Wood Walker, Incorporated,which is registered with the Commission as an internationaldealer.

17. The Applicant and its employees, and theSub-Adviser and its employees, are exempt from registrationas an adviser under the OSA pursuant to section 7.10 of OSCRule 35-502 entitled "Non-Resident Advisers".

18. The Fund may indirectly through the MasterFund, invest in a variety of securities which may include"commodity futures contracts" and "commodityfutures options" as such terms are defined in section1 of the CFA. As a result, the Applicant and its employees,and the Sub-Adviser and its employees, may be providing advicewith respect to securities that would require that they beregistered as an adviser or in an equivalent capacity underthe CFA, respectively.

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS RULED, pursuant to section 38(1)of the CFA that the Applicant and its employees, and the Sub-Adviserand its employees, are exempt from the requirement, in clause22(1)(b) of the CFA, of having to become registered as an adviseror in an equivalent capacity under the CFA, respectively, toprovide advice to the Fund and the Master Fund for a periodof three years, provided that, at the time such activities areengaged in:

(a) the Applicant continues to be registeredas an investment adviser with the U.S. Securities and ExchangeCommission and the Sub-Adviser continues to be authorisedas an adviser by the Financial Services Authority in theUnited Kingdom and registered as an investment adviser withthe U.S. Securities and Exchange Commission;

(b) the Applicant and the Sub-Adviser willnot act as an adviser for commodity futures contracts andcommodity futures options traded on an exchange in Canadaunless this activity is incidental to its acting as an adviserfor commodity futures contracts and commodity futures optionstraded on organized exchanges outside of Canada and clearedthrough clearing corporations outside of Canada;

(c) shares of the Fund are offered primarilyoutside of Canada and are only distributed in Ontario throughregistrants (as defined under the Securities Act)and in reliance upon an exemption from the prospectus requirementsof the Securities Act and upon an exemption fromthe adviser registration requirement provided under section7.10 of Ontario Securities Commission Rule 35-502 Non-ResidentAdvisers;

(d) prospective investors who are Ontarioresidents receive disclosure that includes

(i) a statement that there may difficultyin enforcing legal rights against any of the Applicantor the Sub-Adviser, the Fund or the Master Fund becausethey are resident outside of Canada and all or substantiallyall of their assets are situated outside of Canada; and

(ii) a statement that the Applicant andthe Sub-Adviser are not registered with or licensed byany securities regulatory authority in Canada and, accordingly,the protections available to clients of a registered adviserwill not be available to purchasers of shares of the Fund.

October 1, 2002.

"H.L. Morphy"                    "H.P.Hands"