Phillips, Hager & North Investment Management Ltd.

Headnote

Relief granted to permit the portfolio managers to purchase and sell certain debt securities from and to accounts of related parties of the Royal Bank of Canada that are principal dealers in debt securities for client portfolios over which the portfolio managers have discretionary authority.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., s. 147.

R.R.O. 1990, Regulation 1015, amended to O. Reg. 500/06, s. 115(6).

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

May 1, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, ALBERTA, SASKATCHEWAN, NOVA

SCOTIA, AND NEWFOUNDLAND AND LABRADOR

(Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

PHILLIPS, HAGER & NORTH INVESTMENT

MANAGEMENT LTD.

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer on behalf of the Filer and its affiliates, Phillips, Hager & North Investment Management Limited Partnership (PH&N LP) and BonaVista Asset Management Ltd. (BonaVista and collectively, with the Filer and PH&N LP, the Portfolio Managers) for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief (the Exemptive Relief Sought) from the prohibition under the Legislation of the Jurisdictions that prohibits the purchase or sale of a security in which an investment counsel, or any associate of an investment counsel (a Related Counsel) has a direct or indirect beneficial interest from or to any portfolio managed or supervised by the investment counsel (the Related Counsel Prohibition), to permit the Portfolio Managers to purchase and sell certain debt securities from and to accounts of related parties of RBC that are principal dealers in debt securities for client portfolios over which the Portfolio Managers have discretionary authority.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a coordinated review application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the decision is the decision of the principal regulator and evidences the decision of each other Decision Maker.

Interpretation

Terms defined in National Instrument 14-101 Definitions and in National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. the Filer is a company organized under the laws of British Columbia having its head office located in Vancouver, British Columbia;

2. each of the Portfolio Managers is registered under the Legislation of British Columbia as an adviser in the categories of investment counsel and portfolio manager, and in equivalent categories under the Legislation of the other Jurisdictions; in addition, the Filer is registered under the Legislation in Ontario as a dealer in the category of mutual fund dealer, and BonaVista is registered under the Legislation in Ontario as a dealer in the category of limited market dealer;

3. each of the Portfolio Managers provide discretionary portfolio management services through proprietary mutual funds managed by the Filer or one of the other Portfolio Managers and/or through segregated portfolios of securities (Segregated Accounts) for certain clients (Segregated Account Clients); all Segregated Account Clients enter into a discretionary investment management agreement with the applicable Portfolio Manager;

4. as at April 18, 2008, the Portfolio Managers had discretionary authority over approximately 476 Segregated Accounts; of these Segregated Accounts, approximately 172 are related to different institutions, such as multi-employer and/or union sponsored pension plans, trusts, endowments or foundations;

5. on February 21, 2008, RBC entered into an agreement with the Filer and the shareholders of the Filer pursuant to which RBC agreed to purchase, through a wholly-owned subsidiary, all of the issued and outstanding shares of the Filer (the Transaction); the Filer currently anticipates closing the Transaction on or about May 1, 2008 (the Closing Date), subject to receipt of regulatory approvals and other customary closing conditions; upon closing of the Transaction, RBC and its related issuers and connected issuers will become related issuers or connected issuers, as applicable, of the Portfolio Managers, as a result of RBC becoming an influential securityholder of the Portfolio Managers;

6. following the closing of the Transaction, the Portfolio Managers will continue to operate their respective businesses in a manner that is substantially similar to their present manner, as will RBC and its related parties; in particular, the Portfolio Managers intend to continue to manage the assets of all clients, including those in the Segregated Accounts, in the same manner as they are currently managed;

7. the Portfolio Managers have, in the past, purchased debt securities for Segregated Accounts from, or sold debt securities for Segregated Accounts to, related parties of RBC who are principal dealers in debt securities, and the Portfolio Managers may conclude that it is in the best interests of the Segregated Account Clients to do so in the future with respect to Canadian debt securities of issuers other than the federal or a provincial government (Non-Government Debt Securities) and debt securities issued or fully and unconditionally guaranteed by the federal or a provincial government (Government Debt Securities);

8. each of the Portfolio Managers has provided each Segregated Account Client with a notice describing the Transaction and the issuers that will become related issuers or connected issuers of the Portfolio Manager upon the closing of the Transaction;

9. as at April 18, 2008, the Portfolio Managers had obtained written consents from 332 of 476 Segregated Account Clients, representing approximately 69.7% of the total Segregated Account Clients;

10. the Portfolio Managers will diligently seek consents from each remaining Segregated Account Client prior to the Closing Date; however, given the relatively short time period between the announcement of the Transaction and the expected Closing Date, the significant number of Segregated Account Clients and the time required for certain institutional Segregated Account Clients to provide this type of authorization, the Filer has applied for the Exemptive Relief Sought in the likely instance that some consents are not duly executed and returned to the applicable Portfolio Manager prior to the Closing Date;

11. in the absence of the Exemptive Relief Sought, effective as of the Closing Date the Portfolio Managers would be prohibited from purchasing or selling Non-Government Debt Securities and Government Debt Securities for a Segregated Account from or to related parties of RBC who are principal dealers in debt securities; and

12. any purchase or sale of Non-Government Debt Securities and Government Debt Securities for a Segregated Account from or to related parties of RBC who are principal dealers in debt securities will be consistent with, or necessary to meet, the investment objectives of the applicable Segregated Account Client, and will represent the business judgment of the Portfolio Manager uninfluenced by considerations other than the best interests of the applicable Segregated Account Client or in fact be in the best interests of the applicable Segregated Account Client.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemptive Relief Sought from the Related Counsel Prohibition is granted, provided that:

1. at the time of the transaction, the purchase or sale is consistent with, or necessary to meet the investment objectives of the applicable Segregated Account and represents the business judgment of the Portfolio Manager uninfluenced by considerations other than the best interests of the applicable Segregated Account Client or in fact is in the best interests of the applicable Segregated Account Client;

2. the bid and ask price of the Non-Government Debt Security or Government Debt Security is readily available, as provided in Commentary 7 to section 6.1 of NI 81-107;

3. a purchase is not executed at a price that is higher than the available ask price and a sale is not executed at a price that is lower than the available bid price;

4. the purchase or sale is subject to market integrity requirements as defined in NI 81-107

5. at the time of a purchase or sale for a Segregated Account, the Portfolio Manager has not received notice from the applicable Segregated Account Client that it refuses to give its consent to (a) purchasing and selling securities issued by RBC and its related issuers and connected issuers for the client, and (b) purchasing or selling securities from or to related parties of RBC;

6. the Portfolio Manager continues to diligently seek consent from each Segregated Account Client;

7. the Portfolio Manager obtains the consent of the Segregated Account Client within six months of the date of this Decision; and

8. if a Client's consent is not obtained for that Client's Segregated Account within six months of the date of this Decision, the Decision will cease to apply to that Client's Segregated Account.