BCSC

Exemption Orders (Discretionary)

PERIGEE INVESTMENT COUNSEL INC.

2001 BCSECCOM 951

\Headnote

Mutual Reliance Review System for Exemptive Relief Applications – Relief granted from the reporting requirements for fund managers regarding a fund on fund structure.

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, ss. 126(a), 126(b), and 130.

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO, NOVA SCOTIA AND NEWFOUNDLAND

AND

IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF PERIGEE INVESTMENT COUNSEL INC.

DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and Newfoundland (the “Jurisdictions”) has received an application (the “Application”) from Perigee Investment Counsel Inc. (“Perigee”), as manager of the Legg Mason U.S. Value RP Fund (the “Top Fund”) having an investment objective or strategy that is linked to the returns or portfolio of the Legg Mason U.S. Value Fund (the “Underlying Fund”), for a decision by each Decision Maker (collectively, the “Decision”) under the securities legislation of the Jurisdictions (the “Legislation”) that the reporting requirements (the “Reporting Requirements”) under the Legislation which require a management company (or in British Columbia, a mutual fund manager) to file a report relating to a purchase or sale of any securities between the mutual fund and any related person or company, or any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies, shall not apply to Perigee in respect of certain investments to be made by the Top Fund in the Underlying Fund.

AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission (the “Commission”) is the principal regulator for this Application;

AND WHEREAS Perigee has represented to the Decision Makers as follows:

1. The Top Fund is an open-end mutual fund trust established under the laws of Ontario. The Top Fund is not and does not intend to become a reporting issuer in any province or territory of Canada. Class A units of the Top Fund are offered on a private placement basis to sophisticated purchasers in all of the provinces of Canada. The Top Fund does not provide investors with a confidential offering memorandum.

2. The Underlying Fund is an open-end mutual fund trust established under the laws of Ontario. The Underlying Fund is a reporting issuer in each of the provinces of Canada. The Class A and Class B units of the Underlying Fund are offered by means of a simplified prospectus and annual information form to investors in all of the provinces of Canada.

3. Perigee is a corporation established under the laws of Canada. Perigee is the manager and promoter of both the Top Fund and the Underlying Fund. Perigee is registered with the Commission as a mutual fund dealer and adviser in the categories of investment counsel and portfolio manager.

4. The Top Fund and the Underlying Fund are not in default of any requirement of the Legislation applicable in each of the Jurisdictions.

5. The investment objective of the Top Fund is to replicate the return of the Underlying Fund while ensuring that units of the Top Fund do not constitute foreign property under the Income Tax Act (Canada) (the “Tax Act”).

6. The investment objective of the Underlying Fund is achieved through investment primarily in foreign securities.

7. To achieve its investment objective, the Top Fund will primarily use a derivative strategy that provides a return linked to the return of the Underlying Fund. The Top Fund will also invest a portion of its assets directly in Class A units of the Underlying Fund. This investment shall at all times be below the maximum foreign property limit permitted under the Tax Act (the “Permitted Limit”).

8. The amount of direct investment by the Top Fund in Class A units of the Underlying Fund will be adjusted from time to time so that, except for the transitional cash (i.e. cash from purchases not yet invested or cash held to satisfy redemptions), the aggregate of derivative exposure to, and direct investment in, the Class A units of the Underlying Fund will equal 100% of the net assets of the Top Fund.

9. No management fee is paid to Perigee by either the Top Fund or the Underlying Fund. Accordingly, there will not be any duplication of management fees between the Top Fund and the Underlying Fund.

10. Except to the extent evidenced by this MRRS Decision Document and by an Order granted to the Top Fund by the Commission on July 24, 2001, the investments by the Top Fund in the Underlying Fund have been structured to comply with the investment restrictions of the Legislation.

11. In the absence of this Decision, the Legislation requires Perigee to file a report on every purchase and sale of units of the Underlying Fund by the Top Fund.

12. The Top Fund’s investment in or redemption of Class A units of the Underlying Fund will represent the business judgment of “responsible persons” (as defined in the Legislation), uninfluenced by considerations other than the best interests of the Top Fund.

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

AND WHEREAS each of the Decision Makers is satisfied that the tests 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 the Reporting Requirements do not apply to Perigee in respect of investments to be made by the Top Fund in Class A units of the Underlying Fund;

PROVIDED IN EACH CASE THAT this Decision shall only apply in respect of investments in, or transactions with, the Underlying Fund that are made by the Top Fund in compliance with the following conditions:

a. the investment by the Top Fund in Class A units of the Underlying Fund is compatible with the fundamental investment objectives of the Top Fund;

b. the Underlying Fund is not a mutual fund whose investment objective includes investing directly or indirectly in other mutual funds;

c. the Top Fund restricts its direct investment in Class A units of the Underlying Fund to a percentage of its assets that is within the Permitted Limit;

d. there are compatible dates for the calculation of the net asset value of the Top Fund and the Underlying Fund for the purpose of the issue and redemption of securities of such mutual funds;

e. no sales charges are payable by the Top Fund in relation to its purchases of Class A units of the Underlying Fund;

f. no redemption fees or other charges are charged by the Underlying Fund in respect of the redemption by the Top Fund of Class A units of the Underlying Fund owned by the Top Fund;

g. no fees or charges of any sort are paid by the Top Fund and the Underlying Fund, by their respective managers or principal distributors, or by any affiliate or associate of any of the foregoing entities to anyone in respect of the Top Fund’s purchase, holding or redemption of the Class A units of the Underlying Fund;

h. the arrangements between or in respect of the Top Fund and the Underlying Fund are such as to avoid the duplication of management fees;

i. any notice provided to unitholders of the Underlying Fund, as required by applicable laws or the constating documents of the Underlying Fund, is delivered by the Top Fund to its unitholders;

j. all of the disclosure and notice material prepared in connection with a meeting of unitholders of the Underlying Fund and received by the Top Fund are provided to its unitholders, the unitholders are permitted to direct a representative of the Top Fund to vote its holdings in the Underlying Fund in accordance with their direction, and the representative of the Top Fund does not vote its holdings in the Underlying Fund except to the extent the unitholders of the Top Fund have so directed;

k. in addition to receiving the annual and, upon request, the semi-annual financial statements of the Top Fund, unitholders of the Top Fund are provided with the annual and, upon request, the semi-annual financial statements, of the Underlying Fund in either a combined report, containing financial statements of the Top Fund and the Underlying Fund, or in a separate report containing the financial statements of the Underlying Fund; and

l. copies of the simplified prospectus and annual information form of the Underlying Fund are provided upon request to unitholders of the Top Fund.

DATED September 28, 2001.

Paul Moore R. Stephen Paddon