Securities Law & Instruments


Investment by mutual funds in a portfolio ofspecified mutual funds under common management exempted fromthe self-dealing prohibitions in clause 111(2)(b), subsection111(3) and clause 118(2)(a) and from the reporting requirementsof clauses 117(1)(a) and 117(1)(d), subject to certain specifiedconditions.

Statutes Cited

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


















WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof the provinces of British Columbia, Alberta, Saskatchewan,Ontario, Nova Scotia, New Brunswick, and Newfoundland and Labrador(the "Jurisdictions") has received an application(the "Application") from ClaringtonFunds Inc. ("Clarington")on its own capacity and on behalf of the Top Funds (as hereinafterdefined) for a decision (the "Decision") under thesecurities legislation of the Jurisdictions (the "Legislation")that the following restrictions and requirements contained inthe Legislation (the "Applicable Requirements") shallnot apply to investments by the Top Funds directly in securitiesof the applicable Underlying Funds (as hereinafter defined):

1. the restrictions contained in the Legislationprohibiting a mutual fund from knowingly making or holdingan investment in a person or company in which the mutual fund,alone or together with one or more related mutual funds, isa substantial securityholder;

2. the requirements contained in the Legislationrequiring the management company of a mutual fund, or in BritishColumbia, the mutual fund manager to file a report relatingto a purchase or sale of securities between the mutual fundand any related person or company, or any transaction in which,by arrangement other than an arrangement relating to insidertrading in portfolio securities, the mutual fund is a jointparticipant with one or more of its related persons or companies;

3. the restrictions contained in the Legislationprohibiting a portfolio manager or, in British Columbia, themutual fund, from knowingly causing an investment portfoliomanaged by it to invest in any issuer in which a "responsibleperson" (as that term is defined in the Legislation)is an officer or director, unless the specific fact is disclosedto the client and, if applicable, the written consent of theclient to the investment is obtained before the purchase;

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;

AND WHEREAS Clarington has been representedto the Decision Makers that:

1. Clarington is a corporation establishedunder the laws of the Province of Ontario. Clarington's headoffice is located in Toronto, Ontario.

2. Each of Clarington Canadian Core Portfolio,Clarington U.S. Core Portfolio and Clarington Global CorePortfolio (the "Current Top Funds") is an open-endedmutual fund trust established under the laws of the Provinceof Ontario. Collectively, the "Top Funds" (individually,as the "Top Fund") include the Current Top Fundsand future Clarington managed mutual funds that invest insecurities of other mutual funds managed by Clarington.

3. Each of Clarington Canadian Equity Fund,Clarington Canadian Growth Fund, Clarington Canadian SmallCap Fund, Clarington Canadian Value Fund, Clarington U.S.Growth Fund, Clarington U.S. Smaller Company Growth Fund andClarington Global Equity Fund (the "Current UnderlyingTrust Funds") is an open-ended mutual fund trust establishedunder the laws of the Province of Ontario.

4. Each of Clarington U.S. Large Cap ValueClass, Clarington U.S. Mid-Cap Value Class, Clarington GlobalSmall Cap Class and Clarington Global Value Class (the "CurrentUnderlying Classes") is a class of Clarington SectorFund Inc., a mutual fund corporation incorporated under thelaws of the Province of Ontario on July 17, 2000. Collectively,the "Underlying Funds" (individually, as the "UnderlyingFund") include the Current Underlying Trust Funds, theCurrent Underlying Classes and future Clarington managed mutualfunds that do not invest substantially all of its assets inother mutual funds.

5. Clarington is the manager, trustee andprincipal distributor of the Current Top Funds and the CurrentUnderlying Trust Funds. Clarington is the manager and principaldistributor of the Current Underlying Classes.

6. The Top Funds and the Underlying Fundsare, or will be, reporting issuers in each jurisdiction ofCanada. Units of the Current Top Funds, Current UnderlyingTrust Funds and Current Underlying Classes (collectively,as the "Current Funds") are qualified for distributionin each jurisdiction of Canada pursuant to a simplified prospectusand annual information form dated July 23, 2002. However,units of the Current Top Funds have not been distributed tothe public.

7. The Current Funds are not in default ofany requirement of the Legislation.

8. To achieve its investment objective, eachof the Top Funds invests fixed percentages (the "FixedPercentages") of its assets (other than cash and cashequivalents) in securities of specified Underlying Funds,subject to a variation of 2.5% above or below The Investmentsmay deviate +/- 2.5% from the Fixed Percentages (the "PermittedRange") to account for market fluctuations.

9. The simplified prospectus for the Top Fundswill disclose the investment objectives, investment strategies,risks and restrictions of the Top Fund and the UnderlyingFunds, the Fixed Percentages and the Permitted Ranges

10. Except to the extent evidenced by thisDecision and specific approvals granted by the Decision Makersunder National Instrument 81-102 Mutual Funds ("NI 81-102"),the investments by the Top Funds in the Underlying Funds havebeen structured to comply with the investment restrictionsof the Legislation and NI 81-102.

11. In the absence of this Decision, pursuantto the Legislation, the Top Fund is prohibited from knowinglymaking or holding an investment in a person or company inwhich the mutual fund, alone or together with one ore morerelated mutual funds, is a substantial securityholder. Asa result, in the absence of this Decision the Top Fund wouldbe required to divest itself of any such investments.

12. In the absence of this Decision, Legislationrequires Clarington to file a report on every purchase orsale of securities of the Underlying Funds by the Top Fund.

13. In the absence of this Decision, underthe Legislation, Clarington is prohibited from causing theTop Fund to invest in the Underlying Funds unless the specificfact is disclosed to securityholders of the Top Fund and thewritten consent of securityholders of the Top Fund is obtainedbefore the purchase.

14. The investments by the Top Funds in securitiesof the Underlying Funds will represent the business judgementof "responsible persons" (as defined in the Legislation)uninfluenced by considerations other than the best interestsof the Funds.

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

AND WHEREAS each of the Decision Makersis satisfied that the tests contained in the Legislation thatprovide the Decision Maker with the jurisdiction to make theDecision have been met.

THE DECISION of the Decision Makers underthe Legislation is that the Applicable Requirements do not applyso as to prevent the Top Funds from making and holding an investmentin securities of the Underlying Fund or so to require Claringtonto file a report relating to the purchase and sale of such securitiesand disclose such purchase to securityholders of the Top Fundsand obtain their written consent to the investment prior tothe purchase.


1. the Decision, as it relates to the jurisdictionof a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that DecisionMaker dealing with matters in section 2.5 of National Instrument81-102.

2. the Decision shall only apply if, at thetime the Top Funds make or hold investments in the UnderlyingFunds, the following conditions are satisfied:

(a) the securities of both the Top Fundand the Underlying Funds are being offered for sale in thejurisdiction of the Decision Maker pursuant to a simplifiedprospectus and annual information form which has been filedwith and accepted by the Decision Maker;

(b) the investment by the Top Fund in theUnderlying Funds is compatible with the fundamental investmentobjective of the Top Fund;

(c) the Prospectus of the Top Fund discloses:

(i) the intent of the Top Fund to investsubstantially all of its assets in securities comprisedof a combination of the Underlying Funds;

(ii) the managers of the Underlying Funds;

(iii) the names of the Underlying Funds;

(iv) the Fixed Percentages and the PermittedRanges within which such Fixed Percentages may vary; and

(v) the investment objectives, investmentstrategies, risks and restrictions of the Underlying Funds;

(d) the investment objective of each TopFund discloses that the Top Fund invests substantially allof its assets in securities of the Underlying Funds;

(e) the Underlying Funds are not mutualfunds whose investment objectives include investing directlyor indirectly in other mutual funds;

(f) each Top Fund invests its assets (exclusiveof cash and cash equivalents) in specified Underlying Fundsin accordance with the Fixed Percentages disclosed in thesimplified prospectus of the Top Fund ;

(g) the Top Fund's holding of securitiesin the Underlying Funds does not deviate from the PermittedRanges;

(h) any deviation from the Fixed Percentagesis caused by market fluctuations only;

(i) if an investment of any Top Fund inthe Underlying Funds has deviated from the Permitted Rangesas a result of market fluctuations, the Top Fund's investmentportfolio is re-balanced to comply with the Fixed Percentageson the next day on which the net asset value was calculatedfollowing the deviation;

(j) if the Fixed Percentages and the UnderlyingFunds have changed, either the Prospectus has been amendedin accordance with securities legislation to reflect thissignificant change, or a new simplified prospectus has beenfiled to reflect the proposed change and existing securityholdersof the Top Funds have been given at least 60 days priorwritten notice of the proposed change;

(k) there are compatible dates for the calculationof the net asset value of the Top Fund and the UnderlyingFunds for the purpose of the issue and redemption of thesecurities of such mutual funds;

(l) no sales charges are payable by a TopFund in relation to its purchases of securities of the UnderlyingFunds;

(m) no redemption fees or other chargesare charged by the Underlying Funds in respect of the redemptionby a Top Fund of securities of the Underlying Funds ownedby the Top Fund;

(n) no fees or charges of any sort are paidby the Top Fund and the Underlying Funds, by their respectivemanagers or principal distributors, or by any affiliateor associate of any of the foregoing entities, to anyonein respect of the Top Fund's purchase, holding or redemptionof the securities of the Underlying Funds;

(o) the arrangements between or in respectof the Top Fund and the Underlying Funds are such as toavoid the duplication of management fees;

(p) any notice provided to security holdersof an Underlying fund as required by applicable laws orthe constating documents of that Underlying Fund, has beendelivered by the Top Fund to its security holders;

(q) all of the disclosure and notice materialprepared in connection with a meeting of security holdersof the Underlying Funds and received by the Top Fund hasbeen provided to its security holders, the security holdershave been permitted to direct a representative of the TopFund to vote its holdings in the Underlying Fund in accordancewith their direction, and the representative of the TopFund has not voted its holdings in the Underlying Fund exceptto the extent the security holders of the Top Fund havedirected;

(r) in addition to receiving the annualand, upon request, the semi-annual financial statementsof the Top Fund, securityholders of the Top Fund have receivedappropriate summary disclosure in respect of the Top Funds'holdings of securities of the Underlying Funds in the financialstatements of the Top Fund; and

(s) to the extent that the Top Fund andthe Underlying Funds do not use a combined simplified prospectusand annual information form containing disclosure aboutthe Top Fund and the Underlying Funds, copies of the simplifiedprospectus and annual information form of the UnderlyingFunds have been provided upon request to securityholdersof the Top Fund and the right to receive these documentsis disclosed in the simplified prospectus of the Top Fund.

November 8, 2002.

"Paul M. Moore"                    "HaroldP. Hands"