Securities Law & Instruments


Relief from certain self-dealing prohibitionsto permit mutual fund to passively track target securities marketindex.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended,s. 111(2)(a), 111(3), 113, s. 118(2)(a), 121.













WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan and Ontario (the"Jurisdictions") has received an application fromNational Bank Securities Inc. ("NBSI"), in its capacityas manager of National Bank Canadian Index Fund (the "Fund"),and Natcan Investment Inc. ("Natcan"), in its capacityas the portfolio adviser of the Fund (collectively, the "Filer")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that the following requirements(the "Applicable Restrictions") contained in the Legislationshall not apply in respect of investments made by the Fund insecurities of National Bank of Canada ("NBC") or itsaffiliates or associates (collectively, "NBC Securities"):

1. The restrictions contained in the Legislationprohibiting a mutual fund from knowingly making or holdingan investment in a person or company who is a substantialsecurityholder of the mutual fund, its management companyor distribution company; and

2. The restrictions contained in the Legislationprohibiting a portfolio manager, or in British Columbia, themutual fund, from knowingly causing an investment portfoliomanaged by it to invest in any issuer in which a "responsibleperson" (as that term is defined in the Legislation)is an officer or director, unless the specific fact is disclosedto the client and, if applicable, the written consent of theclient to the investment is obtained before the purchase.

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 the Filer has representedto the Decision Makers that:

1. NBSI, a corporation duly incorporated underthe laws of Canada, is a wholly-owned subsidiary of NBC andis registered as a mutual fund dealer. NBSI is the managerof the Fund.

2. Natcan, a corporation duly incorporatedunder the laws of Quebec, is a majority-owned subsidiary ofNBC and is registered as an investment counsel and portfoliomanager and Extra-Provincial Adviser.

3. The Fund is an open end mutual fund trustestablished under the laws of Ontario. The investment objectiveof the Fund is to seek long-term growth of capital by trackingthe performance of the S&P/TSX 60 Index (the "TargetIndex").

4. The units of the Fund are offered by prospectus(the "Prospectus") in the following provinces ofCanada : Quebec, Ontario, British Columbia, Alberta, Saskatchewan,Manitoba, New Brunswick and Prince Edward Island. The Fundis or will be a reporting issuer under the securities legislationof each Jurisdiction.

5. The Target Index for the Fund is disclosedin it's investment objective in the Prospectus. Natcan isusing a full replication strategy in which the Fund will generallyhold the same investments and in the same proportion as theTarget Index.

6. The number of securities comprising theTarget Index in which the Fund actually invests from timeto time will vary depending upon the size and value of theassets of the Fund and the composition of the Target Index.The Fund will therefore be periodically rebalanced to reflectthe Target Index as closely as possible.

7. The portfolio of the Fund is not activelymanaged, and is comprised of securities comprising, or derivativesgiving exposure to, the Target Index. All purchases and salesof the portfolio of the Fund will be determined by the compositionof the Target Index and the weighting of its constituent securities.

8. The securities which comprise the TargetIndex include NBC Securities. In order to track the TargetIndex, the Fund will have to hold NBC Securities and may needto acquire additional NBC Securities in the future.

9. Through inadvertence, the Fund has heldNBC Securities since it's inception in the same proportionas the Target Index. The Fund currently holds NBC Securitiesrepresenting 1.28% of the assets of the Fund.

10. The deviation from the Applicable Restrictionswill not be the result of any active decision of Natcan toincrease the investment of the Fund in NBC Securities, butrather it would be an indirect consequence of carrying outthe investment objective of the Fund, to match the performanceof the Target Index.

11. Natcan will ensure that the Fund doesnot invest in NBC Securities in a proportion larger than thatreflected in the Target Index.

12. There may be directors and/or officerof Natcan and its affiliates that are also directors and/orofficers of NBC and its affiliates.

13. The investments of the Fund in the TargetIndex represents the business judgement of responsible personsuninfluenced by considerations other than the best interestsof the Fund.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that effective as of the date of this Decision,the Applicable Restrictions do not apply to the investment orthe holding of an investment by the Fund in NBC Securities;

PROVIDED THAT the portion of the Fund'sassets invested in NBC Securities is determined in accordancewith the Fund's investment objective of tracking the performanceof the Target Index and not pursuant to the discretion of NBSIor Natcan.

March 25, 2003.

"Paul M. Moore"                    "RobertW. Korthals"