Securities Law & Instruments


Mutual Reliance Review System for ExemptiveRelief Applications -- relief from registration and prospectusrequirements to permit trades to facilitate the acquisitionby a trust of all of the issued shares of a related corporationwhere part of the consideration for the purchase is exchangeableshares.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53 and 74(1).

Multilateral Instrument

Multilateral Instrument 45-102 Resale of Securities.














WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario and Alberta (the "Jurisdictions") has receivedan application from NCE Petrofund ("Petrofund"), NCEPetrofund Corp. ("NCEP") and 1518274 Ontario Limited("NCE Subco") for a decision under the securitieslegislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation to be registeredto trade in a security (the "Registration Requirement")and to file and receive receipts for a preliminary prospectusand a prospectus (the "Prospectus Requirement") willnot apply to any trade of securities to be made in connectionwith the purchase by NCEP of all of the outstanding shares ofNCE Petrofund Management Corp. (the "Manager") (the"Internalization Transaction");

AND WHEREAS under the Mutual RelianceReview Systems For Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the Principal Regulatorfor this application;

AND WHEREAS Petrofund, NCEP and NCE Subcohave represented to the Decision Makers that:

1. Petrofund is an open-ended investment trustcreated on December 18, 1988 under the laws of the Provinceof Ontario;

2. Petrofund is authorized to issue an unlimitednumber of units (the "Trust Units");

3. as at March 25, 2003, there were 54,148,799Trust Units outstanding;

4. Petrofund was created for the purpose ofissuing Trust Units to the public and investing the fundsso raised to acquire net royalty interests from NCEP, itswholly owned subsidiary;

5. all Trust Units share equally in all distributionsfrom Petrofund and all Trust Units carry equal voting rightsat meetings of holders of Trust Units;

6. the Trust Units are currently traded onthe Toronto Stock Exchange (the "TSX") and the AmericanStock Exchange (the "AMEX");

7. Petrofund is a reporting issuer, or hasequivalent status, under securities legislation in all provincesand territories of Canada and is not in default of any ofthe requirements of the legislation of the provinces and territories;

8. the management of Petrofund is not awareof any holder of Trust Units which owns in excess of 10% ofthe outstanding Trust Units;

9. NCEP was formed by articles of amalgamationon May 31, 2002 under the Alberta Business CorporationsAct;

10. all of the issued and outstanding commonshares of NCEP are held by Petrofund;

11. the authorized capital of NCEP presentlyconsists of an unlimited number of common shares;

12. before completion of the InternalizationTransaction, NCEP will amend its articles to allow it to issuean unlimited number of exchangeable shares (the "ExchangeableShares");

13. NCEP will acquire all of the issued andoutstanding shares of the Manager (which shares constitutethe "Manager Shares") and issue Exchangeable Sharesto Petro Assets Inc. ("Petro Assets"), the soleshareholder of the Manager, as the consideration for its ManagerShares;

14. the Exchangeable Shares will not be listedand posted for trading on the TSX, the AMEX or any other stockexchange;

15. the Manager was incorporated on July 26,1988 under the Ontario Business Corporations Act (the"OBCA");

16. on January 1, 2002, the Manager enteredinto an amended and restated management, advisory and administrationagreement with Petrofund and NCEP under which the Managerwas engaged to, among other things, identify, assess and assistin the ongoing management of NCEP's properties, to administerall matters relating to the net royalties granted by NCEPto Petrofund and to manage and administer Petrofund and allmatters relating to the Trust Units;

17. Petro Assets Inc. was incorporated onJuly 25, 1988 under the OBCA;

18. all of the issued and outstanding votingshares of Petro Assets are owned by the Driscoll Family Trust,a trust established for the family of John F. Driscoll ("Driscoll");

19. NCE Subco was incorporated on March 7,2002 under the OBCA;

20. all of the issued and outstanding sharesof NCE Subco are owned by Petrofund;

21. NCE Subco is being utilized to facilitatethe acquisition of Exchangeable Shares on a tax-effectivebasis;

22. Petrofund, NCEP, the Manager, Petro Assets,Driscoll and NCE Management Services Inc. ("NMSI")have entered into a share purchase agreement dated March 10,2003 (the "Share Purchase Agreement") to effectthe Internalization Transaction;

23. the purpose of the Internalization Transactionis to internalize the management functions of Petrofund, improvePetrofund's corporate governance structure and streamlineand consolidate the management of Petrofund, while retainingthe current management group and aligning interests amongthe management group and the holders of Trust Units;

24. under the Internalization Transaction,NCEP has agreed to acquire all of the outstanding ManagerShares from Petro Assets for consideration equal to $23.6million plus the amount described under paragraph 26. Thepurchase price will be satisfied by the issuance of 1,939,147Exchangeable Shares. The purchase price is subject to a downwarddollar for dollar adjustment. The amount of any adjustmentis not expected to be material;

25. each Exchangeable Share will be initiallyexchangeable into one Trust Unit. The Exchangeable Shareswere ascribed a value of $12.17 per share, representing thevolume weighted average trading price of the Trust Units onthe TSX during the 10 trading days ending on March 4, 2003;

26. on or before the Closing Date, Petro Assetswill receive an additional cash payment per Exchangeable Shareto be issued to it equal to the amount of the distributionsper Trust Unit paid or payable to holders of record of TrustUnits during the period commencing on January 1, 2003 andending on the date of completion of the transactions contemplatedby the Share Purchase Agreement (the "Closing Date");

27. it is a condition to the closing of theInternalization Transaction that NCEP will cause NMSI to deliverto the executives of NCEP $780,000 in cash and 100,244 TrustUnits (plus an amount per delivered Trust Unit equal to thedistributions per unit paid to holders of record of TrustUnits during the period commencing on January 1, 2003 andending on the Closing Date);

28. pursuant to the Exchangeable Share Provisions(as defined in paragraph 30) and certain rights to be grantedin connection with the Internalization Transaction, Petrofund,NCE Subco or NCEP shall have the right and/or the obligationto redeem, retract or acquire Exchangeable Shares in exchangefor Trust Units or cash in certain circumstances;

29. on the Closing Date, Petrofund, NCEP,NCE Subco and/or Petro Assets will enter into one or moreSupport, Voting and Exchange Trust Agreement(s) (the "Votingand Exchange Trust Agreement");

30. the principal rights, privileges, restrictionsand conditions attached to the Exchangeable Shares ("ExchangeableShare Provisions"), together with the terms of the Support,Voting and Exchange Trust Agreement, the Shareholders Agreement(as entered into on the Closing Date, among NCEP, Petro Assets,Petrofund and NCE Subco) and the Special Voting Unit (as definedunder paragraph 32), will result in the Exchangeable Sharesproviding the holders thereof with a security having economic,ownership and voting rights which are substantially equivalentto those of Trust Units;

31. the Exchangeable Shares will be requiredto be exchanged upon the occurrence of certain events;

32. in order to facilitate the closing ofthe Internalization Transaction, Petrofund will create a "SpecialVoting Unit" (the "Special Voting Unit") andissue the same to Petro Assets as the sole holder of the ExchangeableShares;

33. the Special Voting Unit will entitle PetroAssets to such number of votes, exercisable at any meetingat which the holders of the Trust Units are entitled to vote,consent or otherwise act, equal to the number of votes thatthe holder of a Special Voting Unit would be entitled to hadthe holder exchanged all of the Exchangeable Shares then heldby the holder for Trust Units immediately prior to the recorddate set for such meeting;

34. the Share Purchase Agreement states thatit is a condition of proceeding with the Internalization Transactionthat Petro Assets enters into an escrow agreement (the "EscrowAgreement"). Forty percent of the original number ofExchangeable Shares to be issued to Petro Assets will be depositedin escrow. Five percent of the original number of ExchangeableShares (or that number of Trust Units issuable upon the exchangeof the Exchangeable Shares using an initial exchange ratio)held in escrow will be released at the end of each quartercommencing on the Closing Date over a period of 20 calendarfiscal quarters, in arrears, to be released at the end ofeach fiscal quarter;

35. an annual and special meeting of holdersof Trust Units was held on April 16, 2003 (the "Meeting")for the purpose of approving the Internalization Transaction;

36. a detailed information circular datedMarch 10, 2003 (the "Circular") was prepared inconnection with the Meeting and contains detailed disclosurein respect of the Internalization Transaction and was mailedto registered holders of Trust Units on March 20, 2003;

37. at the Meeting, Petrofund obtained approvalof the Internalization Transaction by the affirmative vote,either in person or by proxy, of holders of Trust Units holding90.5% of the Trust Units voted, other than Trust Units heldby:

(i) Petro Assets;

(ii) the NCEP Executives; and

(iii) associates or affiliates of such persons;

38. the terms of the Internalization Transaction,the Exchangeable Share Provisions, and the exercise of certainrights provided for in connection with the InternalizationTransaction will result in a number of trades or potentialtrades in the Manager Shares, Exchangeable Shares, Trust Units,and rights to acquire Trust Units (collectively, the "InternalizationTransaction Trades") for which no exemption is availableunder the Legislation;

AND WHEREAS pursuant to the System, thisMRRS Decision Document evidences the decision of each of theDecision Makers (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 the Registration Requirements and theProspectus Requirements will not apply to the InternalizationTransaction Trades, provided that the first trade of Trust Unitsor Exchangeable Shares acquired pursuant to a InternalizationTransaction Trade (other than a trade which is also an InternalizationTransaction Trade) will be deemed to be a distribution unlessthe conditions in subsections (3) or (4) of section 2.6 of MultilateralInstrument 45-102 are satisfied, with the issuer of both TrustUnits and the Exchangeable Shares being deemed to be Petrofundfor the purposes of determining such satisfaction.

April 29, 2003.

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