Russell Investments Canada Limited

Headnote

National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions -- Relief granted from conflict of interest reporting requirement in subsections 117(1)(c) of the Securities Act (Ontario) for transactions involving related parties of a mutual fund -- monthly reporting not required provided that similar disclosure is made in the management reports on fund performance for each mutual fund and that certain records of related party portfolio transactions are kept by the mutual funds.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 117(1)(c), 117(2).

October 4 , 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

RUSSELL INVESTMENTS CANADA LIMITED

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation (the Legislation) of the Jurisdiction of the principal regulator that the provisions of the Legislation requiring a management company to file a report within thirty days after the end of each month relating to every purchase or sale effected by a mutual fund through any related person or company with respect to which the related person or company received a fee either from the mutual fund or from the other party to the transaction or both (the Reporting Requirement) does not apply to purchases or sales effected by the Funds (as defined below) through Russell Implementation Services Inc. (RIS) (the Requested Relief).

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

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

(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, New Brunswick, Nova Scotia, and Newfoundland and Labrador (the Non-Principal Jurisdictions).

Interpretation

Terms defined in MI 11-102 and National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1. The Filer is a corporation subsisting under the laws of Ontario with its head office located in Toronto, Ontario. The Filer is registered under the securities legislation of Ontario as an investment fund manager, portfolio manager, commodity trading manager, mutual fund dealer and exempt market dealer.

2. The Filer currently is the manager and portfolio advisor of each of the mutual funds listed in Schedule A hereto (the Existing Funds) and may, in the future, become the manager and portfolio advisor of other mutual funds (the Future Funds and, together with the Existing Funds, the Funds). All representations herein relating to a Future Fund are made as of the time the Future Fund relies on the Requested Relief.

3. In its capacities as manager and portfolio advisor to the Funds, the Filer provides investment advice to each Fund under a management contract and is the "management company" for each Fund within the meaning of the Legislation.

4. Each Fund is a reporting issuer under the securities legislation of one or more Jurisdictions and, consequently, subject to the requirements of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) and National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107). Each Fund has an independent review committee (an IRC) as required by NI 81-107.

5. RIS is a corporation subsisting under the laws of the State of Washington, U.S. RIS is a member of the United States Financial Industry Regulatory Authority (FINRA) and is registered as a broker dealer with the United States Securities and Exchange Commission (the SEC).

6. RIS is a "related person or company" to each Fund within the meaning of the Legislation as Frank Russell Company (FRC) is a substantial security holder of the Filer and has a significant interest in RIS.

7. From time to time, the Filer retains one or more sub-advisors to the Funds (together with the Filer, the Investment Managers). Investment Managers may include companies which are affiliates of the Filer, including RIS and FRC.

8. Currently, each Investment Manager has discretion to allocate the brokerage transactions of the Funds in any manner that the Investment Manager believes to be in the best interests of the Funds, subject to such guidelines as may be established by the Filer from time to time. The general policy is to seek to obtain prompt and efficient execution (referred to as "best execution"), meaning the payment of reasonable commissions in relation to the value of the brokerage services provided, including research, execution and other goods and services offered by the dealer.

9. When exercising its discretion to allocate brokerage transactions, each Investment Manager may utilize RIS for executing trades in portfolio securities (Discretionary Order Execution) for which RIS is paid a fee or receives other compensation; provided that such transactions are effected on terms and conditions comparable to those offered by unrelated brokers and dealers. Discretionary Order Execution reflects the business judgement of the Investment Manager uninfluenced by considerations other than the best interests of the Fund. In allocating brokerage transactions to RIS, the Investment Manager generally seeks best execution. The annual information form of the Funds discloses the basis on which Discretionary Order Execution may occur.

10. Rather than authorizing an Investment Manager to arrange for execution of trades in portfolio securities for the Funds, the Filer may seek only investment recommendations from the Investment Manager which then are implemented by RIS at a time and in a manner considered by RIS to be efficient for the Fund (Enhanced Portfolio Implementation). Transactions will be effected using Enhanced Portfolio Implementation on terms and conditions comparable to those offered by unrelated brokers and dealers. Enhanced Portfolio Implementation will reflect the business judgement of the Filer uninfluenced by considerations other than the best interests of the Fund. In allocating brokerage transactions to RIS for Enhanced Portfolio Implementation, the Investment Manager generally seeks best execution for such trades. The annual information form of each Fund that utilizes Enhanced Portfolio Implementation will disclose the basis on which Enhanced Portfolio Implementation may occur.

11. Discretionary Order Execution and Enhanced Portfolio Implementation have been referred to the IRC as a conflict of interest matter under NI 81-107. The IRC has given its positive recommendation for the Funds to utilize either Discretionary Order Execution or Enhanced Portfolio Implementation on the basis described in each Fund's annual information form.

12. Each Fund prepares interim and annual management reports of fund performance (MRFPs) in accordance with NI 81-106.

13. Pursuant to an MRRS Decision Document dated December 31, 2001 (the Existing Order), the Filer received an exemption from the Reporting Requirement in respect of Discretionary Order Execution. The Filer now seeks new passport relief to (i) update various representations and conditions contained in the Existing Order which have been superceded by subsequent changes to facts or applicable securities legislation or no longer reflect the basis on which equivalent relief has been granted to other applicants in recent years and (ii) to exempt the filer from the Reporting Requirement with respect to Enhanced Portfolio Implementation by RIS. Once the Requested Relief is granted, the Filer no longer will rely upon the Existing Order.

14. The Funds are not in default of the securities legislation of any province or territory of Canada. The Filer is not in default of the securities legislation of any province or territory of Canada, except in New Brunswick. The Existing Order was not granted under the securities legislation of New Brunswick because at that time such securities legislation did not include the Reporting Requirement. The securities legislation in New Brunswick was amended in 2004 to include the Reporting Requirement. Through inadvertence, the Filer was not aware of this change and, accordingly, has not been in compliance with the Reporting Requirement in the securities legislation of New Brunswick to date.

15. Pursuant to NI 81-106, each Fund's MRFPs must disclose any transactions involving a related party, including the identity of the related party, its relationship to the Fund, the purpose of the transaction, the measurement basis used to determine the recorded amount and any ongoing commitments to the related party. The discussion in an MRFP of portfolio transactions with a related party must include the dollar amount of commission, spread or any other fee that the Fund paid to any related party in connection with the transaction.

16. In the absence of the Requested Relief, the Reporting Requirement would require that the Filer prepare and file a report of any Enhanced Portfolio Implementation within 30 days after the end of the month in which the Enhanced Portfolio Implementation occurs. Such reports would disclose the issuer of the securities, the class or designation of the securities, the amount or number of securities, the consideration, the name of RIS, the name of the person or company that paid the fee to RIS and the amount of such fee.

17. It would be costly and time consuming to prepare and file the reports contemplated by the Reporting Requirement, which contain information similar to that required by NI 81-106 to be disclosed in the MRFPs, on a monthly and segregated basis for each Fund.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:

(a) the annual and interim MRPFs for each Fund disclose:

(i) the name of RIS;

(ii) the amount of fees paid to RIS; and

(iii) the person or company who paid the fees, if they were not paid by the Fund; and

(b) the records of portfolio transactions maintained by each Fund include, separately for every portfolio transaction effected by the Fund through RIS:

(i) the name of RIS;

(ii) the amount of fees paid to RIS; and

(iii) the person or company who paid the fees.

SCHEDULE A