Securities Law & Instruments

Headnote

MRRS for Exemptive Relief Applications - Relief from self-dealing provisions andconflict of interest provisions to permit top funds to invest in underlying funds.

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 101, 111(2), 111(3), 112, 117(1).


IN THE MATTER OF THE SECURITIES LEGISLATION OFBRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO,NOVA SCOTIA AND NEWFOUNDLAND

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
THE LIFEPOINTS® PORTFOLIOS :
BALANCED INCOME PORTFOLIO
BALANCED GROWTH PORTFOLIO
LONG-TERM GROWTH PORTFOLIO

AND

RUSSELL CANADIAN EQUITY FUND
RUSSELL CANADIAN FIXED INCOME FUND
RUSSELL US EQUITY FUND
RUSSELL OVERSEAS EQUITY FUND

MRRS DECISION DOCUMENT


WHEREAS the Canadian securities regulatory authority or regulator (the"Decision Maker") in each of the provinces of British Columbia, Alberta, Saskatchewan,Ontario, Nova Scotia and Newfoundland (the "Jurisdictions") has received anapplication (the "Application") from Frank Russell Canada Limited ("FRC"), LifePoints®Portfolios - Long-Term Growth Portfolio, Balanced Growth Portfolio and BalancedIncome Portfolio (the "Top Funds") and Russell Canadian Equity Fund, RussellCanadian Fixed Income Fund, Russell US Equity Fund and Russell Overseas EquityFund (such funds, together with such other funds established by the Manager from timeto time (other than Top Funds) being hereinafter referred to as the "Underlying Funds")for a decision pursuant to the securities legislation of the Jurisdictions (the"Legislation") concerning the following restrictions and requirements contained in theLegislation (the "Requirements"):

1. the restrictions contained in the Legislation prohibiting a mutual fund fromknowingly making or holding an investment, directly or indirectly, in a person orcompany who is a substantial security holder of the mutual fund, its managementcompany or distribution company;

2. the restrictions contained in the Legislation prohibiting a mutual fund fromknowingly making an investment in a person or company in which the mutualfund, alone or together with one or more related mutual funds, is a substantialsecurity holder; and

3. the requirements contained in the Legislation requiring a management companyto file a report relating to a purchase or sale of securities between the mutualfund and any related person or company, or any transaction in which, byarrangement other than an arrangement relating to insider trading in portfoliosecurities, the mutual fund is a joint participant with one or more of its relatedpersons or companies.

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

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

1. FRC is a corporation established under the laws of Canada with its head officein Toronto, Ontario. FRC is the manager and promoter of, and will be the trusteeof, each of the Top Funds and the Underlying Funds.

2. The Top Funds and the Underlying Funds are open-ended investment trustsestablished under the laws of the Province of Ontario. LifePoints® B Classunits of the Top Funds and Class B units of the Underlying Funds (eachhereinafter referred to as "Units") will be offered for sale by simplifiedprospectuses and annual information forms receipted in all of the jurisdictions ofCanada (hereinafter called the "Top Prospectus" and "Underlying Prospectus"respectively). Each of the Top Funds and the Underlying Funds will be reportingissuers in each of the provinces and territories of the various securitiesauthorities of Canada.

3. Following qualification for distribution, Units of the Top Funds will be offered forsale to investors by RBC Dominion Securities Inc., a registered investmentdealer and subsidiary of the Royal Bank of Canada ("RBC"), as a principaldistributor under the terms of a distribution agreement with FRC which isexpected to become non-exclusive after May, 2001.

4. RBC is a publicly traded Schedule I Canadian chartered bank whose equitysecurities form part of major indices on The Toronto Stock Exchange.

5. Each of the Top Funds will invest all of its net assets (exclusive of cash andcash equivalents) in Units of the Underlying Funds.

6. The Top Prospectus will disclose the investment objectives, strategies and risksof each Top Fund and Underlying Fund, the fixed percentages of the net assetsof the Top Fund invested in securities of the applicable Underlying Funds (the"Fixed Percentages") and the permitted ranges within which such FixedPercentages may vary ("Permitted Ranges").

7. Except to the extent evidenced by this Decision and specific approvals grantedby the Canadian securities administrators pursuant to National Instrument 81-102, the investments by the Top Funds in the Underlying Funds have beenstructured to comply with the investment restrictions of the Legislation andNational Instrument 81-102.

8. The Underlying Funds invest in diversified portfolios of securities andinstruments using the Multi Asset Multi Style Multi ManagerT investmenttechnique. FRC selects portfolio advisers for the Underlying Funds using acombination of qualitative and quantitative measurements. Each portfolio adviserhas complete discretion to purchase and sell securities for its segment of theportfolio of an Underlying Fund within the Underlying Fund's investmentobjective, policies and restrictions. The Underlying Funds currently holdsecurities of RBC.

9. In the absence of this Decision, pursuant to the Legislation, a Top Fund isprohibited from (a) knowingly making an investment in a person or company inwhich the mutual fund, alone or together with one or more related mutual funds,is a substantial security holder; (b) knowingly making an investment, directly orindirectly, in a person or company who is a substantial security holder of themutual fund, its management company or distribution company; and (c)knowingly holding an investment referred to in subsections (a) or (b) hereof. Asa result, in the absence of this Decision, the Top Fund would be required todivest itself of any investments referred to in subsections (a) and (b) herein.

10. In the absence of this Decision, the Legislation requires FRC to file a report onevery purchase or sale of securities of the Underlying Funds by the Top Funds.

11. The investment in, or redemption of, Units of the Underlying Funds by a TopFund represents the business judgment of responsible persons uninfluenced byconsiderations other than the best interests of the Top Fund.

AND WHEREAS pursuant to the System, this MRRS Decision Documentevidences the decision of each Decision Maker (collectively, the "Decision");

AND UPON each of the Decision Makers being satisfied that the test 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 theRequirements do not apply so as to prevent (i) the Top Funds from investing in, orredeeming the Units of, the Underlying Funds; and (ii) the Underlying Funds frominvesting in securities of RBC; and such investments do not require further consentfrom or notice to security holders of the Top Funds or the Decision Makers.

PROVIDED THAT:

1. this Decision, as it relates to the jurisdiction of a Decision Maker, will terminateone year after the publication in final form of any legislation or rule of thatDecision Maker dealing with the matters addressed by section 2.5 of NI 81-102;

2. the foregoing Decision shall only apply in respect of investments in, ortransactions with, the Underlying Funds that are made by the Top Funds incompliance with the following conditions:

(a) the investment by a Top Fund in the Underlying Funds is compatible withthe fundamental investment objective of the Top Fund;

(b) each of the Top Funds and the Underlying Funds are under commonmanagement and the Underlying Funds' Units are offered for sale in thejurisdiction of the Decision Maker pursuant to a prospectus which hasbeen filed with and accepted by the Decision Maker;

(c) each Top Fund invests its assets (exclusive of cash and cashequivalents) in Units of certain Underlying Funds in accordance with theFixed Percentages disclosed, subject to a permitted variation above orbelow such Fixed Percentages of not more than 2.5% to account formarket fluctuations;

(d) the Top Prospectus will disclose the intent to invest in the UnderlyingFunds, the names of the Underlying Funds, the Fixed Percentages andthe Permitted Ranges within which such Fixed Percentages may vary;

(e) the Fixed Percentages and Permitted Ranges which are disclosed in theTop Prospectus may be changed only if the prospectus is amended or anew prospectus is filed, and in either event, if the security holders of eachTop Fund have been given at least 60 days' notice of the change;

(f) if at any time the assets of a Top Fund that are invested in the UnderlyingFunds deviate from the Permitted Ranges, the necessary changes aremade in the Top Fund's investment portfolio as at the next valuation dateof the Top Fund in order to bring the Top Fund's investment portfolio intoconformity with the aforesaid amount;

(g) there are compatible dates for the calculation of the net asset value of theTop Funds and the Underlying Funds for the purpose of the issue andredemption of the Units;

(h) in the event of the provision of any notice to security holders of anUnderlying Fund as required by the constating documents of theUnderlying Fund or by the laws applicable to the Underlying Fund, suchnotice will also be delivered to the security holders of the Top Funds; allvoting rights attached to the Units of an Underlying Fund which are ownedby a Top Fund will be passed through to the security holders of the TopFunds; in the event that a security holders' meeting is called for anUnderlying Fund, all of the disclosure and notice material prepared inconnection with such meeting will be provided to the security holders ofthe Top Funds and such security holders will be entitled to direct arepresentative of the Top Funds to vote the Top Funds' holdings in theUnderlying Fund in accordance with their direction; and therepresentative of the Top Funds will not be permitted to vote the TopFunds' holdings in the Underlying Fund except to the extent the securityholders of the Top Funds so direct;

(i) no sales charges are payable by the Top Funds in relation to theirpurchases of Units of the Underlying Funds;

(j) no redemption fees or other charges are charged by the UnderlyingFunds in respect of the redemption by the Top Funds of Units of theUnderlying Funds owned by the Top Funds;

(k) the arrangements between or in respect of the Top Funds and theUnderlying Funds are such as to avoid the duplication of managementfees;

(l) no fees or charges of any sort are paid by a Top Fund, an UnderlyingFund, FRC, a distributor of a Top Fund or Underlying Fund or by anyaffiliate or associate of any of the foregoing entities to anyone in respectof a Top Fund's investment in, or redemption of, Units of an UnderlyingFund;

(m) in addition to receiving the annual and, upon request, the semi-annualfinancial statements of the Top Funds, security holders of a Top Fund willreceive appropriate summary disclosure in the financial statements of theTop Fund in respect of the Top Fund's holdings of Units of UnderlyingFunds;

(n) copies of the Underlying Prospectus and annual and semi-annualfinancial statements relating to the Underlying Funds may be obtainedupon request by a security holder of the Top Funds and this fact will bedisclosed in the Top Prospectus; and

3. this Decision, as it relates to the investment by an Underlying Fund inRBC, will apply only if no affiliate or associate of RBC acts as the portfolioadviser for such Underlying Fund with respect to such investment.

August 10th, 2000.

"J. A. Geller"       "R.Stephen Paddon"