National Bank Securities Inc. et al.

Headnote

Investment by mutual funds of all assets (excluding cash and cash equivalents held tomeet redemptions and to pay management fees) in other mutual funds that are not underthe same management to implement a "passive" fund-of-fund structure exempted from therequirements of clause 111(2)(b) and subsection 111(3), clauses 117(1)(a) and 117(1)(d),subject to certain specified conditions under which a "passive" investment structure maybe used.

Statutes Cited

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

WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMakers") in each of the provinces of British Columbia, Alberta, Ontario and Nova Scotia(the "Jurisdictions") has received an application (the "Application") from National BankSecurities Inc. ("NBSI"), the manager and principal distributor of the National Bank/FidelityCanadian Asset Allocation Fund, National Bank/Fidelity Global Asset Allocation Fund,National Bank/Fidelity International Portfolio Fund, National Bank/Fidelity Growth AmericaFund, National Bank/Fidelity Focus Financial Services Fund and other mutual fundsmanaged by NBSI after the date of this Decision (defined herein) having an investmentobjective that is to replicate the return of a specified third party managed fund (individually,the "Fund" and collectively, the "Funds") for a decision by each Decision Maker(collectively, the "Decision") pursuant to the securities legislation of the Jurisdictions (the"Legislation") that, if applicable in a particular Jurisdiction, the following requirements andrestrictions contained in the Legislation (the "Applicable Requirements") shall not applyto the Funds, or NBSI, as the case may be, in respect of certain investments to be madeby the Funds in the Fidelity Canadian Asset Allocation Fund, Fidelity Global AssetAllocation Fund, Fidelity International Portfolio Fund, Fidelity Growth America Fund,Fidelity Focus Financial Services Fund and such other specified third party managed fundswhich the Funds may invest in from time to time (individually, the "Underlying Fund" andcollectively, the "Underlying Funds"):

A. the requirement contained in the Legislation prohibiting the Funds from knowinglymaking or holding an investment in a person or company in which each Fund, aloneor together with one or more related mutual funds, is a substantial security holder;

B. the requirement contained in the Legislation requiring NBSI to file a report of thefollowing:

i. every transaction of purchase or sale of securities between a Fund and anyrelated person or company; and

ii. any transaction in which, by arrangement other than an arrangement relatingto insider trading in portfolio securities, a Fund is a joint participant with oneor more of its related persons or companies, in respect of each Fund towhich it provides services or advice, within 30 days after the end of themonth in which it occurs.

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application.

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

1. Each of the Funds will be an open-ended mutual fund trust established under thelaws of the Province of Ontario and will be qualified under a simplified prospectusand a preliminary annual information form (the "Prospectus) which will be filed inthe Jurisdictions, as well as in Québec, New Brunswick and Prince Edward Island.After the date of this Decision, the Funds may also be offered for sale in theremaining provinces and territories of Canada.

2. NBSI will serve as the manager, principal distributor and registrar and transferagent of each of the Funds. The head office of NBSI is in Montreal, Québec.

3. The investment objective of each of the Funds will be to replicate the return of anUnderlying Fund by investing all of the net assets of each Fund (excluding cash orcash equivalents to the extent necessary to meet redemptions and to pay themanagement fee charged at the Fund level) in the securities of a single UnderlyingFund.

4. The Underlying Fund in which each of the Funds invests will at all times be aprospectus-qualified mutual fund and will be disclosed in the Prospectus of theFunds.

5. The investment objectives of each of the Funds and its corresponding UnderlyingFund will be described in the Prospectus. The Underlying Fund in which each ofthe Funds invests will not be changed unless the prior approval of the unitholdersof the Fund has been obtained. A new prospectus or an amended prospectus willbe filed with the Decision Makers forthwith disclosing the change in the UnderlyingFund.

6. The managers of the Underlying Funds will deal at arms length with NBSI and willbe chosen by NBSI on the basis of their management style, their choice of sub-advisers and other consultants, their efficiency of administration, the calibre of theirreporting procedures and the historic performance of their mutual funds.

7. The arrangements between the Funds and Underlying Funds will avoid theduplication of management fees and operating expenses. The management feecharged by the Underlying Fund's manager will be reduced through the paymentof a management fee distribution or the use of a class of securities with a lowermanagement fee than is available to the general investing public, with the resultthat, except as described below, the aggregate of the management fees payableby the Fund at the Underlying Fund level and the management fee payable at theFund level will not exceed the management fee which is otherwise chargedindirectly to the general investing public at the Underlying Fund level.

8. If, having initially negotiated a fee structure with the manager of an Underlying Fundunder which the aggregate of the management fees charged indirectly at theUnderlying Fund level and directly at the Fund level does not exceed themanagement fee which is otherwise charged by the manager of the UnderlyingFund to the general investing public at the Underlying Fund level, NBSI is, afterarms-length negotiations with the manager of the Underlying Fund, forced to acceptan increase in the management fee charged to the Fund by the manager of theUnderlying Fund, NBSI may increase the aggregate of the management feescharged at the Underlying Fund and Fund levels by a corresponding amount orpercentage, provided it discloses in the notice of such increase to the Fund'sunitholders which is required under National Instrument 81-102 Mutual Funds ("NI81-102") the extent of the increase in the management fee being charged to theFund by the manager of the Underlying Fund.

9. Except to the extent evidenced by this Decision Document and the anticipatedspecific approvals to be granted by securities regulatory authorities pursuant to NI81-102, the investments by the Funds in securities of Underlying Funds will complyin all respects with the investment restrictions in the Legislation and in NI 81-102.

10. Unless the requested relief is granted,

i. each of the Funds would be prohibited from knowingly making and holdingan investment in securities of an Underlying Fund to the extent that each ofthe Funds, either alone or in combination with other NBSI managed funds,is a substantial security holder of the Underlying Fund; and

ii. NBSI would be required to file reports respecting every purchase or sale ofsecurities of an Underlying Fund by the Funds.

11. Each investment by the Funds in the Underlying Funds will be in the best interestsof the Funds and will represent the business judgment of responsible personsuninfluenced by considerations other than the best interests of the Funds and theUnderlying Funds.

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

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

THE DECISION of the Decision Makers pursuant to the Legislation is that theApplicable Requirements shall not apply to the Funds or NBSI, as the case may be, inrespect of the investments to be made by the Funds in securities of the Underlying Funds;

PROVIDED THAT IN RESPECT OF the investment by the Funds in units of theUnderlying Funds:

1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate oneyear after the publication in final form of any legislation or rule of that DecisionMaker dealing with the matters in section 2.5 of National Instrument 81-102; andmutual funds investing in other mutual funds; and

2. the Decision shall apply only to investments in, or transactions with, the UnderlyingFunds that are made by the Funds in compliance with the following conditions:

(a) the investment by each of the Funds in securities of an Underlying Fund willbe compatible with the fundamental investment objective of the Funds;

(b) the Underlying Funds' securities will be offered for sale in the jurisdiction ofthe Decision Maker pursuant to a Prospectus which has been filed with andaccepted by the Decision Maker;

(c) the Prospectus of a Fund will describe the intent of the Fund to invest in aspecified Underlying Fund, disclose the manager of the specified UnderlyingFund, and include all of the disclosure in respect of such Underlying Fundthat the Underlying Fund will be required to include in its own simplifiedprospectus in accordance with the disclosure requirements of Part B of Form81-101F1 Contents of Simplified Prospectus ("Form 81-101F1");

(d) an Underlying Fund will not include investing in other mutual funds in itsinvestment objective;

(e) the particular Underlying Fund in which each Fund will invest, and which willbe disclosed in the Prospectus, may not be changed unless the priorapproval of the unitholders of the relevant Fund has been obtained and anew prospectus or an amended prospectus reflecting the proposed changeis filed forthwith with the Decision Makers;

(f) the notice received by unitholders of a Fund with respect to a change in anUnderlying Fund will specifically disclose any change in management feerebate if such change would result in an increase in management fees forthe Fund.

(g) any management fee rebates negotiated by NBSI with the managers of theUnderlying Funds will be distributed to the relevant Fund. Any managementfee rebates will be reflected in the financial statements of the Fund;

(h) there will be compatible dates for the calculation of the net asset value ofeach of the Funds and the corresponding Underlying Funds for the purposeof the issue and redemption of the securities thereof;

(i) no sales charges will be payable to NBSI by a purchaser of the units of aFund;

(j) no sales charges will be payable by a Fund in relation to its purchase of thesecurities of an Underlying Fund;

(k) no redemption fees or other charges will be charged by an Underlying Fundin respect of the redemption by a Fund of the securities of the UnderlyingFund owned by the Fund;

(l) no redemption fees or other charges will be charged by a Fund in respect ofthe redemption by a unitholder of a Fund of units of the Fund;

(m) no trailing fees will be payable in respect of a Fund's investments in aspecified Underlying Fund;

(n) the arrangements between or in respect of the Funds and the UnderlyingFunds will be such as to avoid the duplication of management fees andoperating expenses;

(o) in the event of the provision of any notice to securityholders of an UnderlyingFund as required by the constating documents of the Underlying Fund or bythe laws applicable to the Underlying Fund, such notice will also bedelivered to the unitholders of the corresponding Fund. All voting rightsattached to the securities of the Underlying Fund which are owned by theFund will be passed through to the unitholders of the Fund;

(p) in the event that a securityholders' meeting is called for an Underlying Fund,all of the disclosure and notice material prepared in connection with suchmeeting will be provided to the unitholders of the Fund that holds securitiesof the Underlying Fund. Each unitholder will be entitled to direct arepresentative of the Fund to vote the Fund's holdings in the UnderlyingFund in accordance with his or her direction. The representative of the Fundwill not be permitted to vote the Fund's holdings in the Underlying Fundexcept to the extent the unitholders of the Fund so direct;

(q) as part of receiving the annual and, upon request, the semi-annual financialstatements of the Funds, unitholders of a Fund will receive appropriatesummary disclosure in the financial statements of the Funds in respect of theFunds' holdings of securities of their corresponding Underlying Funds;

(r) copies of the simplified prospectus and annual information form, as well asthe annual and semi-annual financial statements relating to each UnderlyingFund may be obtained by a unitholder of the Funds upon request andwithout charge to the unitholder, and this fact will be disclosed in theProspectus of the Funds.

October 12^th, 2000.

"Morley P. Carscallen"     "Robert W. Korthals"