Maxxum Fund Management Inc. and Conservative Folio Fund, Moderate Folio Fund, Balanced Folio Fund, Advanced Folio Fund, Agressive Folio Fund, Fixed Income Folio Fund, Canadian Equity Folio Fund, Global Equity Fund - MRRS Decision

Headnote

Investment by mutual funds in the securities of other mutual funds in specified percentages exempted from the self-dealing prohibition in clause 111(2)(b) and subsection 111(3), and from reporting requirements of clauses 117(1)(a) and117(1)(d) subject to certain specified conditions.

Statutes Cited

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

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA,

SASKATCHEWAN, ONTARIO, QUEBEC, NEW BRUNSWICK,

PRINCE EDWARD ISLAND, NOVA SCOTIA, NEWFOUNDLAND

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM FOR

EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

MAXXUM FUND MANAGEMENT INC.

AND

CONSERVATIVE FOLIO FUND

MODERATE FOLIO FUND

BALANCED FOLIO FUND

ADVANCED FOLIO FUND

AGGRESSIVE FOLIO FUND

FIXED INCOME FOLIO FUND

CANADIAN EQUITY FOLIO FUND

GLOBAL EQUITY FOLIO FUND

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in each of theprovinces of British Columbia, Alberta, Saskatchewan, Ontario, Quebec, New Brunswick, Nova Scotia, Newfoundlandand Prince Edward Island (the "Jurisdictions") has received an application (the "Application") from Maxxum FundManagement Inc. ("MFMI"), in its own capacity and on behalf of Conservative Folio Fund, Moderate Folio Fund,Balanced Folio Fund, Advanced Folio Fund, Aggressive Folio Fund, Fixed Income Folio Fund, Canadian Equity FolioFund and Global Equity Folio Fund, (collectively, the "Top Funds", individually, the "Top Fund") for a decision (the"Decision") pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the following requirementsor prohibitions under the Legislation (the "Applicable Requirements") shall not apply in connection with the investmentby the H class and Quadrus class of the Top Funds directly in a portfolio of H class units of selected funds within theQuadrus Group of Funds (the "Underlying Funds", as further defined in paragraph 3 below):

(a) the provision prohibiting a mutual fund from knowingly making or holding an investment in a person or companyin which the mutual fund, alone or together with one or more related mutual funds, is a substantialsecurityholder; and

(b) the provision requiring a management company of a mutual fund to file a report, or in British Columbia, a mutualfund manager, relating to a purchase or sale of securities between the mutual fund and any related person orcompany, or any transaction in which, by arrangement other than an arrangement relating to insider trading inportfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies.

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

AND WHEREAS it has been represented by MFMI to the Decision Makers that:

1. MFMI is a corporation incorporated under the laws of Ontario and is or will be the manager and portfolio advisorof each of the Top Funds and Underlying Funds. MFMI is an indirect wholly-owned subsidiary of InvestorsGroup Inc.

2. Each of the Top Funds will be an open-end mutual fund trust governed by the laws of the province of Ontario.Each Top Fund and each Underlying Fund will offer two classes of securities, being the Quadrus classsecurities and the H class securities, both of which will be referable to the same portfolio of assets. TheQuadrus class securities and the H class securities of the Top Funds and of the Underlying Funds will bequalified for sale in each of the provinces of Canada under (final) simplified prospectuses and annualinformation forms that will be filed shortly in each of the provinces of Canada under SEDAR project numbers307279 and 307524, respectively (together, the Prospectuses").

3. The Top Funds will each invest specified percentages (the "Fixed Percentages")of their assets (exclusive of cash and cash equivalents) ina portfolio of H class securities of selected Underlying Fundslisted in the 3^rd column of the table below as follows:

4. It is proposed by MFMI that the Fixed Percentages of assets invested by a Top Fund in the H class securitiesof the Underlying Funds may not deviate more than 2.5% above or below the Fixed Percentages (the"Permitted Ranges"). MFMI will review the investments made by each Top Fund in H class securities of theUnderlying Funds on a daily basis and will adjust them as needed to keep within the Fixed Percentages.

5. In addition, the appropriateness of each Top Fund's selection of Underlying Funds and Fixed Percentages willalso be reviewed by MFMI on an ongoing basis to ensure that a particular Underlying Fund or Fixed Percentagecontinues to be appropriate for a Top Fund's investment objectives. MFMI may, as the result of that review,decide to change the Fixed Percentages in one or more Underlying Funds, remove an existing Underlying Fundor add a new Underlying Fund. MFMI will give unitholders of the H class and of the Quadrus class of the TopFunds 60 days' prior notice of any such change and amend the Prospectuses of the H class and Quadrus classof the Top Fund to reflect any such change.

6. The H class securities, which are designed for high net worth investors, will be sold on a no-load basis and willcarry a low management fee. The Quadrus class securities, which are designed for the average retail investor,will be sold on an initial sales commission or deferred sales commission basis and will have a highermanagement fee than the H class securities.

7. Given the different fees payable by each class of securities, the Top Funds will be investing only in the H classsecurities of the Underlying Funds because if they were to invest in Quadrus class securities of the UnderlyingFunds, this would have the effect of forcing investors in the H class securities of the Top Funds to pay higherfees associated with a Quadrus class investment.

8. The management fee structure for the Top Funds will be such as to avoid the duplication of management fees.The Top Funds, in issuing H class securities to high net worth investors, will charge only a nominal fee,currently estimated to be 15 basis points per annum, to compensate MFMI for Underlying Fund selection, assetallocation and ongoing monitoring, re-balancing and related investment management services which are inaddition to the administrative and portfolio management services provided to the Underlying Funds. The TopFunds, in issuing Quadrus class securities to investors, will charge a management fee that will be approximatelyequal to the management fee that an investor in Quadrus class securities would pay if he or she investeddirectly into the Underlying Funds, plus the estimated 15 basis point fee referred to above. The purpose of thisstructure is to allow both H class and Quadrus class investors to pay sales charges and management fees fortheir Top Fund investment similar to what they would pay if they invested in the Underlying Funds in the sameproportions directly.

9. Except to the extent evidenced by this Decision and specific approvals granted by the Canadian securitiesadministrators pursuant to National Instrument 81-102 Mutual Funds ("NI 81-102"), the investments by the TopFunds in the H class securities of the Underlying Funds have been or will be structured to comply with theinvestment restrictions of the Legislation and NI 81-102.

10. In the absence of this Decision, pursuant to the Legislation, the Top Funds are each prohibited from (a)knowingly making an investment in H class securities of the Underlying Funds to the extent that the Top Fund,either alone or in combination with other MFMI managed funds, is a substantial security holder of the H classof the Underlying Funds; and (b) knowingly holding an investment referred to in subsections (a) hereof. As aresult, in the absence of this Decision, the Top Funds would be required to divest themselves of anyinvestments referred to in subsections (a) and (b) herein.

11. In the absence of this Decision, the Legislation requires MFMI to file a report on every purchase or sale ofsecurities of the Underlying Funds by the Top Funds.

12. Each investment by the Top Funds in H class securities of the Underlying Funds will be in the best interestsof the Top Funds and represents the business judgment of "responsible persons" (as defined in the Legislation),uninfluenced by considerations other than the best interests of the Top Funds and the Underlying Funds.

AND WHEREAS under the System, this MRRS Decision Document evidences the Decision of each DecisionMaker;

AND WHEREAS each Decision Maker is satisfied that the tests contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that the Applicable Requirements shallnot apply so as to prevent the Top Funds from investing in, or redeeming the securities of, the H class securities of theUnderlying Funds;

PROVIDED THAT IN RESPECT OF the investment by the Top Funds directly in H class securities of theUnderlying Funds:

1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that Decision Maker dealing with matters in section 2.5 of NI 81-102;and

2. the Decision shall only apply if, at the time the Top Funds make or hold an investment in H class securities ofthe Underlying Funds, the following conditions are satisfied:

(a) the securities of the H class and Quadrus class of the Top Funds and the securities of the H class ofthe Underlying Funds are being offered for sale in the jurisdiction of the Decision Maker pursuant toa simplified prospectus and annual information form which have been filed with and accepted by theDecision Maker;

(b) the investment by a Top Fund in H class securities of the Underlying Funds is compatible with theinvestment objective of the Top Fund;

(c) the simplified prospectus discloses the intent of the Top Fund to invest in the H class securities of theUnderlying Funds, the names of the Underlying Funds, the Fixed Percentages and the PermittedRanges within which such Fixed Percentages may vary;

(d) the Underlying Funds are not mutual funds whose investment objective includes investing directly orindirectly in other mutual funds;

(e) the Top Funds each invest their assets (exclusive of cash and cash equivalents) in H class securitiesof the Underlying Funds in accordance with the Fixed Percentages disclosed in the simplifiedprospectus;

(f) the holdings of the Top Funds in the H class of the Underlying Funds do not deviate from thePermitted Ranges;

(g) any deviation from the Fixed Percentages is caused by market fluctuations only;

(h) if an investment by a Top Fund in the H class securities of any of the Underlying Funds has deviatedfrom the Permitted Ranges as a result of market fluctuations, the investment portfolio of the Top Fundwas re-balanced to comply with the Fixed Percentages on the next day on which the net asset valuewas calculated following the deviation;

(i) if the Fixed Percentages and the Underlying Funds which are disclosed in the prospectus have beenchanged, either the simplified prospectus has been amended or a new simplified prospectus filed toreflect the change, and the securityholders of the H class and Quadrus class of the affected Top Fundhave been given at least 60 days' notice of the change;

(j) there are compatible dates for the calculation of the net asset value of the Top Funds and the H classof the Underlying Funds for the purpose of the issue and redemption of the securities of such mutualfunds;

(k) no sales charges are payable by the Top Funds in relation to their purchases of securities of the Hclass of the Underlying Funds;

(l) no redemption fees or other charges are charged by an Underlying Fund in respect of the redemptionby a Top Fund of securities of the H class of the Underlying Funds owned by the Top Fund;

(m) no fees or charges of any sort are paid by a Top Fund and the Underlying Funds, by their respectivemanagers or principal distributors, or by any affiliate or associate of any of the foregoing entities, toanyone in respect of the purchase, holding or redemption by a Top Fund of the securities of the Hclass of the Underlying Funds;

(n) the arrangements between or in respect of the H class and Quadrus class of each Top Fund and theH class of the Underlying Funds are such as to avoid the duplication of management fees;

(o) any notice provided to securityholders of the H class of an Underlying Fund, as required by applicablelaws or the constating documents of the Underlying Fund, has been delivered by the H class and theQuadrus class of a Top Fund to its securityholders along with all voting rights attached to thesecurities of the H class of the Underlying Fund which are directly owned by the H class and Quadrusclass of the Top Fund;

(p) all of the disclosure and notice material prepared in connection with a meeting of securityholders ofthe H class of an Underlying Fund and received by the H class and Quadrus class of the Top Fundhas been provided to its securityholders, the securityholders have been permitted to direct arepresentative of the H class and of the Quadrus class of the Top Fund to vote such class' holdingsin the H class of the Underlying Fund in accordance with their direction, and the representative of theH class and of the Quadrus class of the Top Fund has not voted such class' holdings in the H classof the Underlying Funds except to the extent the securityholders of the H class and Quadrus class ofthe Top Fund have directed;

(q) in addition to receiving the annual and, upon request, the semi-annual financial statements, of the Hclass or Quadrus class of the Top Funds, as the case may be, securityholders of the H class andQuadrus class of a Top Fund have received (i) appropriate summary disclosure in the financialstatements of each H class and Quadrus class of a Top Fund in respect of that Top Fund's holdingsof H class securities of the Underlying Funds; or (ii) upon request, the annual and semi-annualfinancial statements of the H class of the Underlying Funds in either a combined report, containingfinancial statements of the H class and Quadrus class of a Top Fund and of the H class of theUnderlying Funds, or in a separate report containing the financial statements of the H class of theUnderlying Funds; and

(r) to the extent that either the H class or Quadrus class of securities of the Top Funds do not use acombined simplified prospectus and annual information form containing disclosure about the H classand Quadrus class of the Top Funds and the H class of the Underlying Funds, copies of the simplifiedprospectus and annual information form of the H class of the Underlying Funds have been providedupon request to securityholders of the H class and Quadrus class of the Top Funds and this right isdisclosed in the prospectus of the H class and Quadrus class of the Top Funds.

January 5^th, 2001.

"J. A. Geller"       "Howard I. Wetston"