Securities Law & Instruments


Exemption granted to labour sponsored investmentfund corporation has been revoked and replaced to permit thecorporation to pay certain specified distribution costs outof fund assets contrary to section 2.1 of National Instrument81-105 Mutual Fund Sales Practices subject to certain conditions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am.Section 144.

Rules Cited

National Instrument 81-105 Mutual Fund SalesPractises.



R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")










(Section 144)

UPON the application (the "Application")of First Ontario Labour Sponsored Investment Fund Ltd. ("FirstOntario") to the Ontario Securities Commission (the "Commission")for an Order pursuant to section 144 of the Act to revoke andreplace a Prior Exemption (herein defined) to permit First Ontarioto make certain revised distribution costs to participatingdealers directly;

AND UPON, on January 21, 2000, the Commissiongranted First Ontario an exemption (the "Prior Exemption")from section 2.1 of NI 81-105 pursuant to section 9.1 of NI81-105 permitting First Ontario to make the following distributioncosts ("Permitted Distribution Costs") to participatingdealers:

(i) a sales commission of 2% of the net assetvalue per Class A share payable to the broker supervisingthe individual members of the First Ontario sponsors licensedto sell Class A shares of First Ontario pursuant to an orderof the Commission dated January 31, 1997 (the "Secondees")plus certain expenses of the supervising broker associatedwith those sales (provided such expenses do not result inthe sales commission plus the reimbursed expenses exceedingthe threshold disclosed in the Prospectus) for sales of ClassA shares by the Secondees;

(ii) a sales commission of 5.4% of the netasset value per Class A share sold pursuant to payroll deductionsales (excluding sales initiated by Secondees under the supervisionof the supervising broker); and

(iii) a sales commission of 6% of the netasset value per Class A share sold by participating dealersfor all other sales.

AND UPON considering the Applicationof First Ontario and the recommendation of staff of the Commission;

AND UPON being represented by First Ontarioto the Commission that:

1. First Ontario is a corporation incorporatedunder the Business Corporations Act (Ontario) whichis registered as a labour sponsored investment fund corporationunder the Community Small Business Investment Funds Act(Ontario) and is prescribed as a labour-sponsored venturecapital corporation under the Income Tax Act (Canada).

2. First Ontario is a mutual fund as definedin subsection 1(1) of the Act, is a reporting issuer in theProvince of Ontario and is not on the list of defaulting reportingissuers maintained pursuant to section 72(9) of the Act.

3. The authorized capital of First Ontarioconsists of an unlimited number of Class A shares issuablein series (the "Class A Shares") and an unlimitednumber of Class B shares.

4. First Ontario Management Ltd. (the "Manager")formed and organized First Ontario. The sole business of theManager is the management of First Ontario.

5. The Class A Shares of First Ontario aresold through two distribution channels: (i) by registeredbrokers and dealers; and (ii) by a broker (the "SecondeeSupervisor") which supervises individual members of FirstOntario's sponsors (the "Secondees") who are licensedto sell Class A Shares of First Ontario pursuant to an orderof the Commission dated January 31, 1997, as amended.

6. First Ontario proposes to pay certain costsof distributing the Class A Shares directly to participatingdealers or, in the case of the Secondees, directly to or onbehalf of the Secondee Supervisor. These costs are:

i) in the case of non-Secondee sales, asales commission not exceeding 6% of the selling price ofClass A Shares sold by participating brokers and dealers(including the Secondee Supervisor) directly or throughthe payroll deduction sales method (the "Dealer SalesCommissions");

ii) in the case of Secondee sales, a totalamount of sales commissions and reimbursed expenses (whichinclude Secondee salaries, Secondee expenses and certainexpenses of the Secondee Supervisor associated with thesale of Class A Shares) not exceeding 6.4% of the sellingprice of Class A Shares sold by the Secondees (the "SecondeeSales Commissions"); and

iii) a maximum trailing commission of 0.5%per annum of the net asset value of Class A Shares heldby clients of participating brokers and dealers includingthe Secondee supervisor and the Secondees (the "TrailingCommissions").

7. The Fund may also pay for the reimbursementof co-op marketing expenses (the "Co-op Expenses")incurred by dealers in promoting the sales of the Class AShares pursuant to co-operative marketing arrangements betweenthe Fund and such dealers.

8. The Fund can rely on the Prior Exemptionto pay the Dealer Sales Commissions and the Secondee SalesCommissions, but will not be able to rely on the Prior Exemptionto pay the Trailing Commissions and the Co-op Expenses.

9. The Manager is the only member of the organizationof First Ontario, other than First Ontario, available to paythe Dealer Sales Commissions, Secondee Sales Commissions,the Trailing Commissions and the Co-op Expenses (the "DistributionCosts"). The Manager has insufficient resources to paythe Distribution Costs. The Manager would be obliged to financethe obligation to pay the Distribution Costs through borrowingsand would thereby incur borrowing costs. The Manager is uncertainthat it would be able to secure financing to pay the DistributionCosts on commercially reasonable terms.

10. In order for First Ontario to comply withsection 2.1 of the NI 81-105, First Ontario would have toincrease the fees payable to the Manager in an amount equalto the actual cost to the Manager of paying such DistributionCosts.

11. First Ontario complies with all otherprovisions of the NI 81-105. In particular, all DistributionCosts to be paid by First Ontario will be paid in compliancewith the NI 81-105.

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

NOW THEREFORE pursuant to section 144of the Act, the Commission hereby revokes and replaces the PriorExemption with this Order to exempt First Ontario from sections2.1 of the NI 81-105 to permit First Ontario to pay the DistributionCosts, provided

1. the Distribution Costs (subject to thelimits provide above) are permitted by, and otherwise paidin accordance with NI 81-105;

2. the Trailing Commissions and Co-op Expensesare expensed and reflected in the income statement in thefiscal period in which they are incurred for accounting purposes;

3. First Ontario's prospectus has full, trueand plain disclosure explaining the services and value thatthe participating dealers would provide to investors in returnfor the Trailing Commissions payable to them; and

4. this Order shall cease to be operativeon the date that a rule replacing or amending section 2.1of NI 81-105 comes into force.

September 26, 2003.

"Robert L. Shirriff"
"Paul M. Moore"