RBC Global Asset Management Inc. et al.

Headnote

NP 11-203 -- Exemptive relief granted to ETF offered in continuous distribution from certain mutual fund requirements and restrictions on: transmission of purchase or redemption orders, issuing units for cash or securities, calculation and payment of redemptions, date of record for payment of distributions, and borrowing from custodian and, if necessary, provision of a security interest to the custodian to fund distributions payable under the fund's distribution policy -- National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.6(a), 9.1, 9.4(2), 10.2, 10.3, 14.1, 19.1

September 1, 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

RBC GLOBAL ASSET MANAGEMENT INC.

(the Filer or RBC GAM)

AND

RBC TARGET 2013 CORPORATE BOND ETF

RBC TARGET 2014 CORPORATE BOND ETF

RBC TARGET 2015 CORPORATE BOND ETF

RBC TARGET 2016 CORPORATE BOND ETF

RBC TARGET 2017 CORPORATE BOND ETF

RBC TARGET 2018 CORPORATE BOND ETF

RBC TARGET 2019 CORPORATE BOND ETF

RBC TARGET 2020 CORPORATE BOND ETF

(the Existing Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Existing Funds and such other exchange-traded funds as the Filer, or an affiliate of the Filer, may establish in the future (together with the Existing Funds, the Funds) for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from the following provisions of National Instrument 81-102 -- Mutual Funds (NI 81-102):

(a) Sections 9.1 and 10.2 to permit purchases and sales of units (Units) of the Funds on the Toronto Stock Exchange (TSX), instead of through order receipt offices.

(b) Section 9.4(2) to permit the Funds to accept a combination of cash and securities as subscription proceeds for Units.

(c) Section 10.3 to permit the Funds to redeem less than the Prescribed Number of Units (as defined below) at 95% of their net asset value on the date of redemption.

(d) Section 14.1 to permit the Funds to establish a record date for distributions in accordance with the rules of the TSX.

(e) Section 2.6(a) to permit those Funds that have an investment objective to replicate, to the extent possible, the performance of a specified index (the "Index", and such Funds, the "Index Funds") to borrow cash from the custodian of the Fund (the "Custodian") and, if required by the Custodian, to provide a security interest over any of its portfolio assets as a temporary measure to fund the portion of any distributions payable to Unitholders (as defined below) that represent amounts that are owing to but have not yet been received by the Index Fund.

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

(a) the Ontario Securities Commission (OSC) is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

Basket of Securities means, in relation to a Fund, a group of securities determined by RBC GAM from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.

Designated Brokers means registered brokers and dealers that enter into agreements with the Funds to perform certain duties in relation to the Funds and Designated Broker means any one of them.

Prescribed Number of Units means, in relation to a Fund, the number of Units of the Fund determined by RBC GAM from time to time for the purpose of subscription orders, exchanges, redemptions or for such other purposes as RBC GAM may determine.

Underwriters means registered brokers and dealers that have entered into underwriting agreements with the Funds and that subscribe for and purchase Units from the Funds, and Underwriter means any one of them.

Unitholders means beneficial and registered holders of Units.

Terms defined in National Instrument 14-101 -- Definitions (NI 41-101) or in NI 81-102 have the same meaning in this decision as in NI 41-101 or NI 81-102. Certain other defined terms have the meanings given to them below under Representations.

Representations

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

(a) The Filer is a corporation organized under the federal laws of Canada, with a head office in Ontario.

(b) Each Fund is, or will be, a mutual fund governed by the laws of the Province of Ontario and a reporting issuer under the laws of all of the Jurisdictions.

(c) Each Fund is, or will be, subject to NI 81-102, subject to any exemptions therefrom that may be granted by securities regulatory authorities.

(d) Units of each Fund will be listed on the TSX or another stock exchange recognized by the OSC. RBC GAM has applied to list the Units of each of the Existing Funds on the TSX.

(e) RBC GAM or its affiliate will act as trustee, investment fund manager and portfolio adviser to the Funds. RBC GAM is registered as an adviser in the category of portfolio manager and as a dealer in the category of exempt market dealer under the securities legislation of each of the Jurisdictions and is registered under the OSA as an investment fund manager.

(f) RBC GAM is an indirect, wholly-owned subsidiary of the Royal Bank of Canada.

(g) Units may only be subscribed for or purchased directly from the Funds by Underwriters or Designated Brokers and orders may only be placed for Units in the Prescribed Number of Units (or an integral multiple thereof) on any day when there is a trading session on the TSX.

(h) The Funds will appoint Designated Brokers to perform certain functions, which include standing in the market with a bid and ask price for Units of each Fund for the purpose of maintaining liquidity for the Units.

(i) Each Underwriter or Designated Broker that subscribes for Units must deliver, in respect of each Prescribed Number of Units to be issued, a Basket of Securities and cash in an amount sufficient so that the value of the Basket of Securities and cash delivered is equal to the net asset value of the Units subscribed for next determined following the receipt of the subscription order. In the discretion of RBC GAM, the Funds may also accept cash only subscriptions for Units in an amount equal to the net asset value of the Units subscribed for next determined following the receipt of the subscription order.

(j) All subscriptions and redemptions for Units may be submitted on any day on which there is a trading session on the TSX and will settle by the third day after that date.

(k) The net asset value per Unit of each Fund will be calculated and published by RBC GAM on any day when there is a trading session of the TSX and will be made available at www.rbcgam.com/etfs.

(l) Neither the Underwriters nor the Designated Brokers will receive any fees or commissions in connection with the issuance of Units to them. RBC GAM may, at its discretion, charge an administration fee on the issuance of Units to the Designated Brokers or Underwriters.

(m) Except as described above, Units may not be purchased directly from the Funds. Investors are generally expected to purchase Units through the facilities of the TSX. However, Units may be issued directly to Unitholders upon the reinvestment of distributions of income or capital gains.

(n) Unitholders that wish to dispose of their Units may generally do so by selling their Units on the TSX, through a registered broker or dealer, subject only to customary brokerage commissions. A Unitholder that holds a Prescribed Number of Units or an integral multiple thereof of a Fund may exchange such Units with the Fund for Baskets of Securities and cash. Unitholders may also redeem their Units directly from the Funds for cash at a redemption price equal to 95% of the net asset value of the Units on the date of redemption.

(o) As trustee, investment fund manager and portfolio adviser to the Funds, RBC GAM will be entitled to receive a management fee from each Fund. Such annual fee is calculated as a fixed percentage of the net asset value of each Fund. As investment fund manager, RBC GAM is responsible for all costs and expenses of the Funds except the fees and expenses payable by the Funds, which are the management fee, fees and expenses incurred in complying with National Instrument 81-107 Independent Review Committee for Investment Funds, including the fees payable and expenses reimbursed to members of the Board of Governors, brokerage expenses and commissions, income tax, GST, HST, withholding and other taxes, the costs of complying with any new governmental or regulatory requirement introduced after the Fund was established and extraordinary expenses.

(p) Unitholders of a Fund will have the right to vote at a meeting of Unitholders of the Fund prior to: any change in the fundamental investment objectives of the Fund; any change to their voting rights; the introduction of a fee or expenses to be charged to the Fund or to Unitholders; a change in the basis of the calculation of a fee or expenses charged to the Fund or Unitholders where such change could result in an increase in the amount of fees or expenses payable by the Fund or Unitholders; and in certain other circumstances as described in the Preliminary Prospectus.

(q) Each of the Index Funds has, or will have, an investment objective to replicate, to the extent possible, the performance of an Index, net of expenses. In meeting its investment objective, an Index Fund holds, or will hold, the securities of the constituent issuers of the applicable Index (the Constituent Issuers).

(r) Each of the Index Funds has, or will have, a distribution policy (the Distribution Policy) that requires that the net income and net realized capital gains of the Index Fund for a taxation year will be due and payable on the last trading day of such taxation year or on such other day as is permitted under the Income Tax Act (Canada) (the Tax Act) and that permits the distribution of net income and net realized capital gains on other trading days.

(s) The intention of the Distribution Policy is that an Index Fund will distribute sufficient net income and net realized capital gains so that it will not be liable to pay income tax under Part I of the Tax Act.

(t) Amounts included in the calculation of net income and net realized capital gains of an Index Fund for a taxation year that must be distributed in accordance with the Distribution Policy sometimes include amounts that are owing to but have not actually been received by the Index Fund from the Constituent Issuers.

(u) While it is possible for an Index Fund to maintain a portion of its assets in cash or to dispose of securities in order to obtain any cash necessary to make a distribution in accordance with the Distribution Policy, maintaining such a cash position or making such a disposition (which would generally be followed, when the cash is actually received from the Constituent Issuers, by an acquisition of the same securities) impacts the Index Fund's ability to achieve its investment objective of replicating the performance of the Index. Maintaining assets in cash or disposing of securities means that a portion of the net asset value of the Index Fund is not invested on a basis that replicates the Index. Further, any transaction costs reduce the amount available to invest in the Index. Both of these result in some error in replicating the performance of the Index (referred to as tracking error).

(v) RBC GAM is of the view that it is in the interests of an Index Fund to have the ability to borrow cash from the Custodian and, if required by the Custodian, provide a security interest over its portfolio assets as a temporary measure to fund the portion of any distributions payable to Unitholders that represents amounts that are owing to but have not yet been received by the Index Fund from the Constituent Issuers. While such borrowing will have a cost, RBC GAM expects that it will reduce the tracking error that results from using the alternatives set out in paragraph (u).

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 Exemption Sought is granted such that the Funds are exempt from the following provisions of NI 81-102:

1. Sections 9.1 and 10.2 -- to enable the purchase and sale of Units of the Funds on the TSX, which precludes the transmission of purchase or redemption orders to the order receipt offices of the Funds;

2. Section 9.4(2) -- to permit payment for the issuance of Units of the Funds to be made partially in cash and partially in securities, provided that the acceptance of securities as payment is made in accordance with Section 9.4(2)(b);

3. Section 10.3 -- to permit the redemption of less than the Prescribed Number of Units of the Funds at a price equal to 95% of the net asset value of the Units on the date of redemption;

4. Section 14.1 -- to relieve the Funds from the requirement relating to the record date for the payment of distributions, provided that the Funds comply with applicable TSX requirements; and

5. Section 2.6(a) -- to permit an Index Fund to borrow cash from the Custodian of the Index Fund and, if required by the Custodian, to provide a security interest over any of its portfolio assets, provided that:

(a) the borrowing by an Index Fund in respect of a distribution does not exceed the portion of the distribution that represents amounts that are payable to the Index Fund but have not been received by the Index Fund from the Constituent Issuers and, in any event, does not exceed five percent of the net assets of the Index Fund;

(b) the borrowing is not for a period longer than 45 days;

(c) any security interest in respect of the borrowing is consistent with industry practice for the type of borrowing and is only in respect of amounts owing as a result of the borrowing;

(d) an Index Fund shall not make any distribution to Unitholders where the distribution would impair the Index Fund's ability to repay any borrowing to fund distributions; and

(e) the prospectus of the Index Funds discloses the potential borrowing, the purpose of the borrowing, the material terms of any loan agreement regarding the borrowing and the risks associated with the borrowing.

The Exemption Sought shall terminate upon the coming into force of any legislation or rule of the principal regulator dealing with the matters referred to in subsections 9.1, 9.4(2), 10.2, 10.3, and 14.1 of NI 81-102.