Royal Canadian Equity Fund et al.

Headnote

Application for exemptive relief from the concentration restriction in section 2.1 ofNational Instrument 81-102 Mutual Funds. Relief granted to applicants and otheraffected funds owning shares of both BCE Inc. and Nortel Networks.

Rules Cited

National Instrument 81-102 Mutual Funds, section 2.1

WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, NewBrunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Yukon,Northwest Territories and Nunavut (the "Jurisdictions") has received an application fromRoyal Mutual Funds Inc. and AGF Funds Inc. (SEDAR Numbers 254750 and 255418) onbehalf of Royal Canadian Equity Fund, Royal Balanced Fund, Royal Balanced GrowthFund (the "RMFI Funds") and AGF Canadian Stock Fund, AGF Canadian Tactical AssetAllocation Fund and AGF International Group Limited-Canada Class (the "AGF Funds"),respectively, for a decision, pursuant to section 19.1 of National Instrument 81-102 MutualFunds ("NI 81-102") that RMFI Funds and AGF Funds, if they choose to vote in favour ofthe Arrangement (as defined below) are exempted from the concentration restriction insection 2.1 of NI 81-102 in connection with their receipt of common shares of New Nortel(as defined below) under the Arrangement;

AND WHEREAS other mutual funds that own common shares of BCE Inc. andNortel Networks Corporation ("Nortel Networks") and wish to vote in favour of theArrangement could be similarly impacted by the purchase provisions of section 2.1 of NI81-102 (the "Other Affected Funds") and accordingly may wish to rely on this Decision;

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 the RMFI Funds and the AGF Funds have represented to theDecision Makers that:

1. RMFI is the manager and principal distributor of the RMFI Funds and AGF is themanager and principal distributor of the AGF Funds.

2. Each of the RMFI Funds, AGF Canadian Stock Fund and AGF Canadian TacticalAsset Allocation Fund is an open-ended mutual fund trust established under thelaws of Ontario. AGF International Group Limited - Canada Class is a mutual fundcorporation incorporated under the laws of Ontario. Units of the RMFI Funds andthe AGF Funds are offered on a continuous basis in each of the provinces andterritories of Canada pursuant to simplified prospectuses dated June 28, 1999, inthe case of the RMFI Funds, and July 22, 1999, in the case of the AGF Funds.

3. BCE Inc. will, in a series of transactions to be implemented under a plan ofarrangement involving BCE Inc., 3056074 Canada Inc., 3263207 Canada Inc. andNortel Networks (the "Arrangement") indirectly distribute to its shareholders anapproximate 36 percent interest in Nortel Networks.

4. The Arrangement will be implemented pursuant to section 192 of the CanadaBusiness Corporations Act ("CBCA"). Under the Arrangement, holders of commonshares of BCE Inc. will receive approximately 0.78 of a common share of a newpublicly-traded Canadian company("New Nortel") that will own all of the commonshares of Nortel Networks. The final share exchange ratio will be determined byassuming that all outstanding stock options of BCE Inc. have been exercisedimmediately prior to the effective date of the Arrangement ("the Effective Date") andwill be subject to adjustment based on the number of common shares of BCE Inc.outstanding at the Effective Date and the number of New Nortel common shares tobe retained by BCE Inc. As part of the Arrangement, all public holders of commonshares of Nortel Networks will exchange their common shares of Nortel Networksfor common shares of New Nortel on a one-for-one basis.

5. Following completion of the Arrangement, the shareholders of BCE Inc. and thepublic shareholders of Nortel Networks will together own all of the common sharesof New Nortel, other than an approximate 2 percent interest in New Nortel, whichwill be held by BCE Inc. Each shareholder of BCE Inc. will continue to holdimmediately after the Arrangement the same number of common shares of BCE Inc.as it held immediately prior to the Arrangement.

6. The Arrangement is subject to certain conditions, including Court approval pursuantto section 192 of the CBCA and approval by the shareholders of each of BCE Inc.and Nortel Networks.

7. Under the Arrangement the RMFI Funds, the AGF Funds and the Other AffectedFunds (collectively "the Funds") will exchange their common shares of NortelNetworks for common shares of New Nortel. The Funds also will receive additionalcommon shares of New Nortel upon implementation of the Arrangement based onthe number of common shares of BCE Inc. which they hold.

8. The Funds are subject to the 10 percent concentration restrictions set out in section2.1 of NI 81-102, which provide that a mutual fund cannot purchase securities of anissuer if after giving effect to the purchase, more than 10 percent of the net assetsof the mutual fund, taken at market value at the time of the transaction, would beinvested in the securities of that issuer.

9. NI 81-102 defines a "purchase" of a security for the purpose of the concentrationrestrictions in section 2.1 thereof as "an acquisition that is the result of a decisionmade and action taken by the mutual fund".

10. Section 2.13 of the Companion Policy to NI 81-102 (the "Companion Policy") statesthat the Canadian securities regulatory authorities generally consider that a mutualfund "purchases" a security if the "mutual fund receives the security as a result ofa merger, amalgamation, plan of arrangement or other reorganization for which themutual fund voted in favour" . The Companion Policy goes on to state, however,that a mutual fund would not generally be considered to have "purchased" thesecurity if it voted against the merger, amalgamation, plan of arrangement or otherreorganization.

11. If the Funds vote in favour of the Arrangement, each may exceed the 10 percentconcentration restriction in section 2.1 of NI 81-102 upon receipt of additionalcommon shares of New Nortel under the Arrangement because each will beconsidered to have purchased those shares.

12. The implementation of the Arrangement will not change the economic exposure ofthe Funds to Nortel Networks but will change the nature of that exposure frompartially direct and indirect to entirely direct.

AND WHEREAS, pursuant to the System, this Decision Document evidences thedecision of each Decision Maker (collectively, the "Decision");

THE DECISION of the Decision Makers pursuant to subsection 19.1(1) of NI 81-102is that the RMFI Funds, the AGF Funds and the Other Affected Funds are exempt from theconcentration restriction under section 2.1 of NI 81-102 in connection with their receipt ofcommon shares of New Nortel under the Arrangement if they vote in favour of theArrangement.

April 19^th, 2000.

"Rebecca Cowdery"