Securities Law & Instruments


Investment by Top Funds in securities of UnderlyingFunds under common management for specified purpose and Investmentby RSP "clone" fund in Underlying Funds under commonmanagement for specified purpose exempted from the reportingrequirements and self-dealing prohibitions of clauses 111(2)(b),111(3) and clauses 117(1)(a) and (d).

Statutes Cited

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




















WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia,and Newfoundland and Labrador (the "Jurisdictions")has received an application (the "Application") fromDynamic Mutual Funds Ltd. (the "Manager") on its ownbehalf and on behalf of Marquis Conservative Portfolio, MarquisBalanced Portfolio, Marquis Growth Portfolio, Marquis All EquityPortfolio and Marquis RSP All Equity Portfolio (collectively,the "Initial Top Funds") and other mutualfunds established and/or managed by the Manager after the dateof this Decision that have as their investment objective theinvestment of substantially all of their assets in securitiesof one or more mutual funds (the "Future Top Funds",which together with the Initial Top Funds are collectively referredto as the "Top Funds") for a decision (the "Decision")under the securities legislation of the Jurisdictions (the "Legislation")that the following provisions of the Legislation (the "ApplicableRequirements") shall not apply to a Top Fund or the Manager,as the case may be, in respect of certain investments to bemade from time to time by a Top Fund in securities of selectedprospectus-qualified mutual funds (the "Underlying Funds",as described in paragraph 4 below):

(a) 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; and

(b) the requirements contained in the Legislationrequiring a management company or, in British Columbia, amutual fund manager, to file a report relating to a purchaseor sale of securities between the mutual fund and any relatedperson or company, or any transaction in which, by arrangementother than an arrangement relating to insider trading in portfoliosecurities, the mutual fund is a joint participant with oneor more of its related persons or companies.

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 or in Québec Commission Notice 14-101;

AND WHEREAS it has been represented bythe Manager to the Decision Makers that:

1. The Manager is a corporation subsistingunder the laws of the Province of Ontario and is registeredas an adviser in the categories of investment counsel andportfolio manager with the Ontario Securities Commission.The Manager is or will be the manager of the Top Funds andthe Underlying Funds (as defined in paragraph 4 below).

2. The Top Funds are or will be open-endedmutual fund trusts established under the laws of the Provinceof Ontario.

3. The securities of each of the Top Fundsand Underlying Funds are or will be qualified for distributionin all the Jurisdictions pursuant to simplified prospectusesand annual information forms filed with and accepted by theDecision Makers, and accordingly are or will be reportingissuers in the Jurisdictions. The Top Funds will not be indefault of any of the requirements of the Legislation.

4. Each Top Fund is designed to provide investorswith indirect investments in a portfolio of other mutual funds("Underlying Funds") managed by the Manager by investingall of its assets, other than cash or cash equivalents, ina combination of Underlying Funds. The Underlying Funds inwhich an Top Fund will invest its assets, as well as the targetasset allocations of the Top Fund in its Underlying Funds,will be determined by the Manager based upon the risk/returnprofile of the Top Fund. The Top Funds will provide investorswith access to asset allocation services and automatic rebalancingservices provided by the Manager.

5. Securities of each Underlying Fund in whicha Top Fund invests its assets will be distributed pursuantto a prospectus that has been filed with and accepted by theDecision Maker in each Jurisdiction where the Top Fund distributesits securities. A preliminary prospectus and annual informationform dated July 3, 2003 for the Initial Top Funds has beenfiled under Sedar Project No. 555589 in all the provincesand terrritories of Canada for purposes of qualification fordistribution.

6. Each Top Fund will not invest in any othermutual funds whose investment objectives include investingdirectly or indirectly in other mutual funds.

7. In order to achieve its investment objective,each of the Top Funds will invest fixed percentages (the "FixedPercentages") of its assets, excluding cash and cashequivalents held to meet redemptions and expenses, directlyin securities of the Underlying Funds, subject to variationof 2.5 percent above or below the Fixed Percentages (the "PermittedRanges") resulting from market fluctuations and, in respectof certain Top Funds, subject to compliance with restrictionsin the Income Tax Act (Canada) (the "Tax Act")relating to holdings of foreign property.

8. To achieve its investment objective, MarquisRSP All Equity Portfolio will invest its assets such thatthe units of the Top Fund will, in the opinion of tax counselto the Top Fund, be "qualified investments" forregistered retirement savings plans, registered retirementincome funds, deferred profit sharing plans and similar plans("Registered Plans") and will not constitute "foreignproperty" under the Income Tax Act (Canada) (the"Tax Act"). This will primarily be achieved throughthe implementation of a derivative strategy that providesa return linked to the returns of specified Underlying Funds.The Top Fund will also invest a portion of its assets directlyin securities of Underlying Funds. This investment will atall times be below the maximum foreign property limit forRegistered Plans (the "Permitted Limit").

9. The prospectus of each Top Fund will disclosethe names and investment objectives of the Underlying Funds,the manager of the Underlying Funds along with the Fixed Percentagesand the Permitted Ranges.

10. Each Top Fund's target asset allocationswill be reviewed by the Manager on an ongoing basis and theManager may change the target asset allocation for an UnderlyingFund, or remove or add an Underlying Fund, as a result ofsuch reviews. Any such changes to the Underlying Funds ofa Top Fund will be treated by the Manager as a "significantchange" for the Top Fund (as defined in National Instrument81-102 ("NI 81-102")). In addition, the Top Fundwill give its existing securityholders not less than 60 days'prior notice of any such change.

11. The investments by a Top Fund in securitiesof the Underlying Fund or Underlying Funds represent the businessjudgement of "responsible persons" (as defined inthe Legislation) uninfluenced by considerations other thanthe best interests of the Top Fund.

12. Except to the extent evidenced by thisDecision and specific approvals granted by the Decision Makerspursuant to NI 81-102, the investments by a Top Fund in theUnderlying Fund or Underlying Funds have been structured tocomply with the investment restrictions of the Legislationand NI 81-102.

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

14. In the absence of the Decision, the Legislationrequires the Manager to file a report on every purchase orsale of securities of an Underlying Fund by a Top Fund.

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

AND WHEREAS each Decision Maker is satisfiedthat the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision hasbeen met;

THE DECISION of the Decision Makers underthe Legislation is that the Applicable Requirements shall notapply so as to prevent the Top Funds from making and holdingan investment in securities of the Underlying Funds or to requirethe Manager to file a report relating to the purchase or saleof such securities;


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 NI 81-102.

2. the Decision shall only apply if, at thetime a Top Fund makes or holds an investment in its UnderlyingFund or Underlying Funds, 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 have been filedwith and accepted by the Decision Maker;

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

(c) the simplified prospectus of the TopFund discloses the intent of the Top Fund to invest directlyand indirectly (through derivative exposure), where applicable,in securities of the Underlying Funds, the names of theUnderlying Funds, the Fixed Percentages, the Permitted Rangeswithin which such Fixed Percentages may vary and with respectto the Marquis RSP All Equity Portfolio, that the Top Fundis fully eligible for registered plans;

(d) the investment objective of the TopFund discloses that the Top Fund invests in securities ofother mutual funds;

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

(f) the Marquis RSP All Equity Portfoliorestricts its direct investment in the Underlying Fundsto a percentage of its assets that is within the PermittedLimit;

(g) the Top Fund invests substantially allof its assets, exclusive of cash and cash equivalents, insecurities of the Underlying Funds in accordance with theFixed Percentages disclosed in the simplified prospectusof the Top Fund;

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

(i) subject to condition (k), any deviationfrom the Fixed Percentages is caused by market fluctuationsonly;

(j) subject to condition (k), if an investmentby the Top Fund in any of the Underlying Funds has deviatedfrom the Permitted Ranges as a result of market fluctuations,the Top Fund's investment portfolio was re-balanced to complywith the Fixed Percentages on the next day on which netasset value was calculated following the deviation;

(k) if, due to the foreign property investmentlimitations under the Tax Act, the Top Fund was precludedfrom purchasing additional securities or re-instating theFixed Percentages in order to comply with condition (j),or the Top Fund was re-balanced in order to comply withthose foreign property investment limitations and such re-balancingrequired the Top Fund to temporarily deviate beyond thePermitted Ranges, the Top Fund complied with condition (j)as soon as it was possible to do so in compliance with thoseforeign property investment limitations;

(l) if the Fixed Percentages or the UnderlyingFunds which are disclosed in the simplified prospectus ofthe Top Fund have been changed, either the simplified prospectushas been amended or a new simplified prospectus has beenfiled to reflect the change and the security holders ofthe Top Fund have been given at least 60 days' notice ofthe change;

(m) there are compatible dates for the calculationof the net asset value of a Top Fund and the UnderlyingFund or Underlying Funds for the purpose of the issue andredemption of the securities of such mutual funds;

(n) no sales charges are payable by theTop Fund in relation to its purchases of securities of theUnderlying Funds;

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

(p) 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;

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

(r) 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;

(s) all of the disclosure and notice materialprepared in connection with a meeting of security holdersof the Underlying Fund (other than regular business conductedat an annual meeting of an Underlying Fund that is a mutualfund corporation) and received by the Top Fund has beenprovided to its security holders, the security holders havebeen permitted to direct a representative of the Top Fundto 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 Fundsexcept to the extent the security holders of the Top Fundhave directed;

(t) in addition to receiving the annualand, upon request, the semi-annual financial statementsof the Top Fund, security holders of the Top Fund have receivedappropriate summary disclosure in respect of the Top Fund'sholdings of securities of the Underlying Funds in the financialstatements of the Top Fund; and

(u) 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 security holdersof the Top Fund and the right to receive these documentsis disclosed in the simplified prospectus of the Top Fund.

August 12, 2003.

"Harold P. Hands"
"Wendell S. Wigle"