RBC Asset Management Inc. and the Mutual Funds Listed in Schedule A - MRRS Decision

Headnote

MRRS- exemption granted from sub-section 6.1(4) of NI 81-107 to permit inter-fund trades to be executed at last sale price as defined in UMIR -- applicant will comply with all other conditions of sub-section 6.1(2) of NI 81-107 including independent review committee approval -- should not be used as a drafting precedent - future applicants for similar relief should structure application as direct exemption from s. 118(2)(b) of the Act.

Applicable Legislative Provisions

National Instrument 81-107 -- Independent Review Committee for Investment Funds, ss. 6.1(2), 6.1(4), 7.1

January 18, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR,

NORTHWEST TERRITORIES, YUKON and NUNAVUT

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

(MRRS)

AND

IN THE MATTER OF

RBC ASSET MANAGEMENT INC.

(the Applicant)

AND

IN THE MATTER OF

THE MUTUAL FUNDS

LISTED IN SCHEDULE A (the Existing Funds)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (Decision Maker) in each of the Jurisdictions received an application (the Application) from the Applicant and any mutual funds subject to National Instrument 81-102 -- Mutual Funds (NI 81-102) that may be established in the future for which the Applicant or an affiliate of the Applicant acts as portfolio advisor and/or manager (the Future Funds and together with the Existing Funds, the Funds) for a decision exempting the Applicant or an affiliate of the Applicant and the Funds from sub-section 6.1(4) of National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) to the extent that it requires a purchase or sale of an exchange traded security between the Funds (an Inter-fund Trade) to comply with paragraph 6.1(2)(e) of NI 81-107 (the Requested Relief).

Under the MRRS

(i) the principal regulator for the Application is the Ontario Securities Commission (the OSC); and

(ii) this Decision Document represents the decision of each of the Decision Makers.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions (NI 14-101), NI 81-102 and NI 81-107 have the same meaning in this Decision Document unless they are otherwise defined in this Decision Document.

Representations

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

1. The Applicant is a corporation governed by the Canada Business Corporations Act. The Applicant is registered as an investment counsel and portfolio manager, or the equivalent, in each of the Jurisdictions and as a limited market dealer in Ontario and Newfoundland and Labrador. The head office of the Applicant is in Ontario.

2. Each of the Funds is, or will be, a reporting issuer in each of the Jurisdictions.

3. Each Existing Fund has and each Future Fund will have, an independent review committee (the Board of Governors) as required by NI 81-107.

4. The Applicant will, in accordance with section 6.1 of NI 81-107, establish policies and procedures (the Policies and Procedures) to enable the Funds to engage in Inter-fund Trades.

5. The Board of Governors will approve the Policies and Procedures.

6. Sub-section 6.1(4) of NI 81-107 provides an exemption from the inter-fund self-dealing investment prohibitions so long as the trades comply with the conditions in sub-section 6.1(2). These conditions include paragraph 6.1(2)(e) that the transaction must occur at the "current market price of the security". The Inter-fund Trades will comply with all of the conditions in sub-section 6.1(2) except paragraph 6.1(2)(e).

7. The Applicant considers that it would be in the best interests of a Fund if an Inter-fund Trade could be made at the last sale price, as defined in the Universal Market Integrity Rules (UMIR) created by Market Regulation Services Inc. (the Last Sale Price), prior to the execution of the trade since this will result in the trade being done at the price which is closest to the price at the time the decision to make the trade is made.

8. CSA Staff Notice 81-317 -- Frequently Asked Questions on National Instrument 81-107 Independent Review Committee for Investment Funds (Notice 81-317) was published on March 30, 2007. Section B-7 of Notice 81-317 provides that the CSA would consider applications for exemptive relief to permit inter-fund trades of exchange traded securities at last sale price upon appropriate terms and conditions.

9. An Inter-Fund Trade will be implemented by the Applicant on behalf of the Funds as follows:

(i) the portfolio manager will deliver the trade instruction in respect of a purchase or a sale of a security by a Fund (Fund A) to a trader on the Applicant's trading desk;

(ii) the portfolio manager will deliver the trade instruction in respect of a sale or purchase of a security by a Fund (Fund B) to a trader on the Applicant's trading desk;

(iii) the trader on the Applicant's trading desk will have the discretion to execute the trade as an inter-fund trade between Fund A and Fund B at the Last Sale Price of the security, prior to the execution of the trade;

(iv) the policies applicable to the Applicant's trading desk will require that all orders are to be executed on a timely basis and will remain open only for 30 days unless the portfolio manager cancels the order sooner; and

(v) the trader on the Applicant's trading desk will advise the portfolio manager of Fund A and Fund B of the Last Sale Price.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decision has been met.

The decision of the Decision Makers is that the Requested Relief is granted so long as the Applicant or an affiliate of the Applicant:

1. complies with all of the conditions of sub-section 6.1(2) of NI 81-107 in connection with the Inter-fund Trades except paragraph 6.1(2)(e); and

2. the Inter-fund Trades are executed at the Last Sale Price of the security.

SCHEDULE A

APPLICANT FUNDS