Royal Mutual Funds Inc. et al.

MRRS Decision







WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of Alberta, British Columbia, Newfoundland, Nova Scotia, Ontario andSaskatchewan (the "Jurisdictions") have received an application from Royal Mutual FundsInc. ("RMFI"), the manager and principal distributor of the Select Portfolios (as hereinafterdefined) and Royal Bank Investment Management Inc. ("RBIM"), the primary investmentadvisor of the Select Portfolios for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the following requirements and restrictions containedin the Legislation (the "Requirements") shall not apply to the purchase and sale by a SelectPortfolio of units of an Underlying Fund (as such terms are hereinafter defined):

A. the requirements contained in the Legislation prohibiting the Select Portfolios fromknowingly making or holding an investment in a person or company in which themutual fund, alone or together with one or more related mutual funds, is asubstantial security holder;

B. the requirement contained in the Legislation requiring RBIM to file a report of everytransaction of purchase or sale of securities between a Select Portfolio and anyrelated person or company or any transaction in which, by arrangement other thanan arrangement relating to insider trading in portfolio securities, a Select Portfoliois a joint participant with one or more of its related persons or companies, in respectof each Select Portfolio to which it provides services or advice, within 30 days afterthe end of the month in which it occurs;

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

AND WHEREAS RMFI and RBIM have represented to the Decision Makers that:

1. RMFI is a corporation incorporated under and governed by the laws of Canada andis registered as a mutual fund dealer or its equivalent under the Legislation of eachof the Jurisdictions.

2. The head office of RMFI is located in Ontario.

3. RMFI is the manager and principal distributor of the following mutual funds: RoyalCanadian T-Bill Fund, Royal Canadian Money Market Fund, Royal Premium MoneyMarket Fund, Royal U.S. $ Money Market Fund, Royal Mortgage Fund, Royal BondFund, Royal Monthly Income Fund, Royal Global Bond Fund, Royal Balanced Fund,Royal Balanced Growth Fund, Zweig Global Balanced Fund, Royal Select IncomePortfolio, Royal Select Balanced Portfolio, Royal Select Growth Portfolio, RoyalDividend Fund, Royal Canadian Value Fund, Royal Canadian Equity Fund,O'Shaughnessy Canadian Equity Fund, Royal Canadian Growth Fund, RoyalCanadian Small Cap Fund, Royal Energy Fund, Royal Precious Metals Fund, RoyalU.S. Equity Fund, O'Shaughnessy U.S. Value Fund, Zweig Strategic Growth Fund,O'Shaughnessy U.S. Growth Fund, Royal Life Science and Technology Fund,Royal International Equity Fund, Royal Global Education Fund, Royal EuropeanGrowth Fund, Royal Latin American Fund, Royal Japanese Stock Fund and RoyalAsian Growth Fund (collectively, the "Royal Mutual Funds"). Units of the RoyalMutual Funds are offered for sale on a continuous basis in each of the Jurisdictionspursuant to a combined simplified prospectus and annual information form datedJune 28, 1999.

4. RMFI is also the manager and principal distributor of the following funds: RoyalCanadian Index Fund, Royal U.S. Index Fund, Royal U.S. RSP Index Fund, RoyalInternational RSP Index Fund, Royal Premium Canadian Index Fund and RoyalPremium U.S. Index Fund (collectively, the "Royal Index Funds"). Units of theRoyal Index Funds are offered for sale on a continuous basis in each of theJurisdictions pursuant to a combined simplified prospectus and annual informationform dated August 31, 1999 as amended on December 17, 1999 and furtheramended on March 24, 2000.

5. RMFI is also the manager of DS Premier Canadian Bond Portfolio ("DS Premier").Units of DS Premier are offered for sale on a continuous basis in each of theJurisdictions pursuant to a combined simplified prospectus and annual informationform dated November 1, 1999.

6. RMFI has appointed RBIM as the investment advisor of the Royal Mutual Funds,the Royal Index Funds and DS Premier (collectively, the "Existing RMFI-ManagedFunds"). RBIM is registered as an investment counsel/portfolio manager ("IC/PM"),limited market dealer and commodity trading manager in Ontario. RBIM is alsoregistered as an IC/PM in British Columbia, Alberta and Nova Scotia, as anInvestment Counsel and Broker Dealer in Saskatchewan and as an Advisor inQuebec.

7. The Royal Trust Company ("Royal Trust") is the trustee and custodian of theExisting RMFI-Managed Funds.

8. Royal Trust, RBIM and RMFI are wholly-owned subsidiaries of Royal Bank ofCanada ("Royal Bank").

9. RMFI proposes to establish a new group of mutual funds initially comprised of fournew mutual funds to be known as Royal Select Choices Income Portfolio, RoyalSelect Choices Balanced Portfolio, Royal Select Choices Growth Portfolio andRoyal Select Choices Aggressive Growth Portfolio (collectively, the "Existing SelectPortfolios"). RMFI may in the future add other mutual funds (the "Future SelectPortfolios" and collectively with the Existing Select Portfolios, the "Select Portfolios")to the Royal Select Choices Portfolios group of funds. Units of a Future SelectPortfolio will be offered for sale to the public pursuant to the simplified prospectusand annual information form that qualifies units of other Select Portfolios, the RMFI-Managed Funds (as defined below in paragraph 10) or by a separate simplifiedprospectus and annual information form receipted in each of the Jurisdictions.

10. RMFI may in the future establish other mutual funds (the "Future RMFI-ManagedFunds" and collectively with the Existing RMFI-Managed Funds, the "RMFI-Managed Funds") other than the Select Portfolios, to the Existing RMFI-ManagedFunds. Units of a Future RMFI-Managed Fund will be offered for sale to the publicpursuant to the simplified prospectus and annual information form that qualifiesunits of other RMFI-Managed Funds or by a separate simplified prospectus andannual information form receipted in each of the Jurisdictions.

11. Each of the Select Portfolios will be an open-ended unincorporated mutual fundtrust governed by the laws of the province of Ontario.

12. RMFI will be the manager and principal distributor of the Select Portfolios. RBIMwill be the primary investment advisor of the Select Portfolios and Royal Trust willbe the trustee and custodian of the Select Portfolios.

13. The Select Portfolios have been created to provide investors with a professionallymanaged portfolio designed to suit individual investor objectives, risk tolerance andinvestment time horizons. Each Select Portfolio will invest and rebalance its assetsfrom time to time in accordance with one of the investor profiles developed byRBIM. Each investor profile has been developed to balance different risk andreturn characteristics and maintains a different combination of stocks, bonds andcash.

14. RBIM determines the strategic asset allocation of each Select Portfolio based onrigorous investment analysis as described in the simplified prospectus of the SelectPortfolios. Investments of each Select Portfolio will be made in accordance with thefundamental investment objectives of the Select Portfolio. Each of the SelectPortfolios will invest its assets (excluding cash and cash equivalents) in units of acombination of RMFI-Managed Funds and certain mutual funds which are notmanaged by RMFI (each a "Third Party Fund" and collectively with the RMFI-Managed Funds, "Underlying Funds").

15. Each Select Portfolio invests specified percentages (the "Fixed Percentages") of itsassets in specified Underlying Funds. A Fixed Percentage has been established foreach of the Underlying Funds and the allocation to an Underlying Fund (excludingcash and cash equivalents) may not deviate more than 2.5% above or below theFixed Percentage (the "Permitted Percentages").

16. A Select Portfolio will not invest in an Underlying Fund which includes investing inother mutual funds in its investment objective.

17. The Underlying Funds in which a Select Portfolio invests will be disclosed in thesimplified prospectus of the Select Portfolio along with the Fixed Percentages foreach. The Select Portfolios will be reviewed on an ongoing basis and RMFI maychange the Fixed Percentages of an Underlying Fund, remove an existingUnderlying Fund or add a new Underlying Fund. Unitholders will be notified at least60 days before any of such changes are made and the simplified prospectus of therelevant Select Portfolio will be amended accordingly.


18. Except to the extent evidenced by this Decision and specific approvals granted bythe Decision Makers pursuant to National Instrument 81-102 Mutual Funds ("NI 81-102"), the investments by the Select Portfolios in the Underlying Funds have beenstructured to comply with the investment restrictions of the Legislation and NI 81-102.

19. Unless the requested relief is granted,

(A) each Select Portfolio is prohibited from knowingly making an investment andknowingly holding an investment in units of an Underlying Fund to the extentthat the Select Portfolio, either alone or in combination with other RMFI-Managed Funds, is a substantial security holder of the Underlying Fund; and

(B) the Manager would be required to file reports respecting every purchase orsale of units of an Underlying Fund by the Select Portfolios.

20. Each investment by the Select Portfolios in the Underlying Funds will be in the bestinterests of the Select Portfolios and represents the business judgment ofresponsible persons uninfluenced by considerations other than the best interestsof the Select Portfolios and the Underlying Funds.

AND WHEREAS under the System, this MRRS Decision Document evidences thedecision of each Decision Maker (the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the tests 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 shall not apply to the acquisition or redemption of the units of an UnderlyingFund by a Select Portfolio, provided that the following conditions are satisfied in respectof each investment:

(a) The investment by a Select Portfolio in units of an Underlying Fund is compatiblewith the investment objective of the Select Portfolio.

(b) The Underlying Funds' securities are offered for sale in the jurisdiction of theDecision Maker pursuant to a simplified prospectus which has been filed with andaccepted by the Decision Maker.

(c) Each Select Portfolio invests its assets (exclusive of cash and cash equivalents) inUnderlying Funds in accordance with the Fixed Percentages disclosed, subject toa permitted variation above or below such Fixed Percentages of not more than2.5% to account for market fluctuations.

(d) The Select Portfolios' simplified prospectus discloses its intent to invest in theUnderlying Funds, the names of the Underlying Funds, the Fixed Percentages andthe Permitted Percentages.

(e) The Fixed Percentages and the Underlying Funds in which a Select Portfolio mayinvest which are disclosed in the simplified prospectus may not be changed unlessand until the simplified prospectus is amended to reflect the proposed change andthe amendments are filed with the Decision Makers, existing unitholders of theSelect Portfolio are given at least 60 days' prior written notice of the proposedchange.

(f) The notice received by unitholders with respect to a change in an Underlying Fundwill specifically disclose the change in trailing fee or management fee rebate, if thetrailing fee or rebate is higher for the new Underlying Fund.

(g) The trailing fees in respect of the Select Portfolios' investments in Third PartyFunds that are paid to RMFI are those paid by the managers of the Third PartyFunds to any dealer selling the Third Party Funds in accordance with the disclosurein the simplified prospectus of the Third Party Funds and in the simplifiedprospectus of the Select Portfolios.

(h) Any management fee rebates negotiated by RMFI with the managers of theUnderlying Funds will be distributed to the relevant Select Portfolio. Anymanagement fee rebates will be reflected in the financial statements of the SelectPortfolio.

(i) If at any time, the assets of a Select Portfolio that are invested in Underlying Fundsdeviate from the Permitted Percentages, the necessary changes are made to theSelect Portfolio's assets as at the next valuation date of the Select Portfolio in orderto re-balance the Select Portfolio's assets in accordance with the FixedPercentages.

(j) Each Select Portfolio and the Underlying Funds that it invests in will havecompatible frequencies of calculation of the net asset value per unit for the purposeof the issue and redemption of the units.

(k) No sales charges are payable by a purchaser of the units of a Select Portfolio.

(l) No sales charges are payable by a Select Portfolio in relation to its purchases ofthe units of any Underlying Funds.

(m) No redemption fees or other charges are charged by an Underlying Fund in respectof the redemption by a Select Portfolio of the units of the Underlying Fund ownedby the Select Portfolio.

(n) No redemption fees or other charges are charged by a Select Portfolio in respectof the redemption by a unitholder of the Select Portfolio of units of the SelectPortfolio.

(o) The arrangements between or in respect of each Select Portfolio and theUnderlying Funds are such as to avoid the duplication of management fees.

(p) In the event of the provision of any notice to the unitholders of an Underlying Fund,as required by the constating documents of the Underlying Fund or by the lawsapplicable to the Underlying Fund, such notice will also be delivered to theunitholders of each Select Portfolio that then holds units of the Underlying Fund. Allvoting rights attached to the units of the Underlying Funds will be passed throughto the unitholders of the applicable Select Portfolio. In the event that a meeting ofthe unitholders of the Underlying Fund is convened, all of the disclosure and noticematerial prepared in connection with such meeting will be provided to theunitholders of the relevant Select Portfolio and such unitholders will be able todirect RMFI to vote the Select Portfolios' holdings in the Underlying Fund inaccordance with their direction. Where a matter relating to an Underlying Fundrequires a vote of security holders of the Underlying Fund (other than regularbusiness conducted at an annual meeting of an Underlying Fund which is acorporation, i.e., the election of directors and appointment of auditors), RMFI willeither hold a meeting of unitholders of each Select Portfolio which holds securitiesof the Underlying Fund or will give unitholders of each such Select Portfolio theopportunity to vote by proxy without holding a meeting. RMFI will cause thesecurities of the Underlying Fund held by such Select Portfolio to be voted in thesame proportions as unitholders of the Select Portfolio have voted.

(q) In addition to receiving the annual and, upon request, the semi-annual financialstatements of the Select Portfolio, unitholders of a Select Portfolio will receiveappropriate summary disclosure in the financial statements of the Select Portfolioin respect of the Select Portfolio's holdings of units of Underlying Funds.

(r) Copies of the simplified prospectus and the annual and semi-annual financialstatements relating to each relevant Underlying Fund may be obtained by aunitholder of the Select Portfolio upon request and this fact will be disclosed in thesimplified prospectus of the Select Portfolio.

(s) This Decision Document will terminate on the first anniversary date following thepublication in final form of any legislation or rule of the Decision Makers which deals withthe matters addressed by section 2.5 of NI 81-102.

May 9th, 2000.

"J. A. Geller"     "Morley P. Carscallan"