RBC Global Asset Management Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from s. 10.4(3)(b) of NI 81-102, to permit mutual funds with a specific target end date, created for the purpose of funding education endeavours, to pay the redemption price of their securities at the termination of the funds by making good delivery to securityholders a proportionate share of the portfolio assets, which will be money market securities. In lieu of obtaining prior written notice of securityholders, the funds shall provide securityholders with sixty days written notice to elect to receive the redemption proceeding in cash. Relief reflects strategy of the funds as disclosed in prospectus. -- National Instrument 81-102 -- Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 10.4(3), 19.1.

Securities Act, R.S.O. 1990, c. S.5, as am.

July 25, 2012

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.

(RBC GAM)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from RBC GAM in respect of the RBC Target 2015 Education Fund (the 2015 Fund), the RBC Target 2020 Education Fund (the 2020 Fund), the RBC Target 2025 Education Fund (the 2025 Fund), the RBC Target 2030 Education Fund (the 2030 Fund) (together, the Current Target Funds) and each of the future mutual funds (theFuture Target Funds) of which RBC GAM, or an affiliate thereof, is the manager, that are subject to the provisions of National Instrument 81-102 -- Mutual Funds (NI 81-102) and that, except for the specified target date, have investment objectives and strategies similar to the Current Target Funds (the Current Target Funds and the Future Target Funds are, each, a Fund and, collectively, the Funds) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption (the Exemption Sought) from subsection 10.4(3) of NI 81-102 to permit a Fund on the termination date (theTermination Date) thereof to pay the redemption price of the outstanding units to unitholders by making good delivery of units of the RBC Canadian Money Market Fund or its successor (the Money Market Fund) without the prior written consent of unitholders.

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

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

(b) RBC GAM 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 the Jurisdiction and in each of the other provinces and territories of Canada (collectively with the Jurisdiction, the Jurisdictions).$pc:$an:

Interpretation

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

Representations

This decision is based on the following facts represented by RBC GAM:

1. RBC GAM is a corporation formed by amalgamation pursuant to articles of amalgamation dated November 1, 2010 under the federal laws of Canada and its head office is located in Toronto, Ontario.

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

3. 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 Securities Act (Ontario) as an investment fund manager.

4. RBC GAM or an affiliate thereof acts, or will act, as manager of each of the Funds and of the Money Market Fund.

5. Each Fund and the Money Market Fund is, or will be: (i) an open-ended mutual fund organized and governed by the laws of Canada or a Jurisdiction, (ii) a reporting issuer under the laws of some or each of the Jurisdictions and (iii) governed by the provisions of NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities of any Jurisdiction.

6. The securities of each Fund and the Money Market Fund are, or will be, qualified for distribution in some or each of the Jurisdictions under a simplified prospectus and annual information form filed with and receipted by the securities regulators in the applicable Jurisdiction and/or Jurisdictions pursuant to the requirements of National Instrument 81-101 -- Mutual Fund Prospectus Disclosure.

7. The Money Market Fund is, and will be on the Termination Date of a Fund, a "money market fund" within the meaning of NI 81-102, that is, or is the successor to, the current RBC Canadian Money Market Fund which, as of the date hereof, has approximately $3 billion in assets under management and which invests primarily in high quality, short term (one year or less) debt securities, including treasury bills and promissory notes issued or guaranteed by Canadian governments or their agencies, bankers acceptances, asset-backed commercial paper and commercial paper issued by Canadian chartered banks, loan companies, trust companies and corporations.

8. Neither RBC GAM nor any of the Current Target Funds or the Money Market Fund is in default of securities legislation in any Jurisdiction.

9. Each of the 2015 Fund and the 2020 Fund was established in 2004. The 2025 Fund was established in 2007 and the 2030 Fund was established in June 2012.

10. It is anticipated that Future Target Funds will be established from time to time, approximately at 5-year intervals.

11. Each of the Current Target Funds are, and each of the Future Target Funds will be, a fund of funds, the investment objectives of which describe the Fund as an asset allocation fund designed to meet the needs of investors who are saving money to fund a post-secondary education that commences around the target date and which provide, or will provide, as follows:

"The Fund gradually shifts its asset mix from an emphasis on equity funds, in its early years, to an emphasis on money market funds as its "target date" (insert year) approaches."

and that:

"The Fund invests its assets primarily in units of other funds managed by RBC GAM or an affiliate of RBC GAM (called the underlying funds)."

12. The simplified prospectus (SP) of the Current Target Funds currently provides, and the SP of each of the Future Target Funds will provide, as follows:

"At the Fund's target date, the Fund will have a 100 per cent weighting in the money market funds asset class."

13. The SP of the 2015 Fund, the 2020 Fund and the 2025 Fund previously provided as follows:

"In the year the target date of the Fund is reached, we intend to merge the Fund into the RBC Canadian Money Market Fund or its successor (subject to any required approvals)."

14. The Current Target Funds are, and Future Target Funds will be, designed primarily for the purpose of saving for post-secondary education that commences around the target date of the Fund and are generally held within an RESP account (over 95% of units of the Current Target Funds are held within RESP accounts). As a Fund's target date approaches, it is expected that all assets of the Fund will be invested in the Money Market Fund as a way to preserve capital for unitholders as well as to provide unitholders with liquidity and current income. It is beneficial for investors to hold units of the Money Market Fund until such time that withdrawals are made from the RESP account to finance post-secondary education. This allows unitholders to earn income at a higher rate than is available on cash balances within RESP accounts while maintaining the same level of liquidity as cash.

15. RBC GAM anticipated when it established the RBC Target 2010 Education Fund (the 2010 Fund), the 2015 Fund, the 2020 Fund and the 2025 Fund that a merger of a Fund with the Money Market Fund would be the most appropriate and cost effective means to provide unitholders of a Fund with units of the Money Market Fund and that a merger could be achieved pursuant to subsection 5.3(2) of NI 81-102 without obtaining unitholder approval, i.e. without holding a meeting of unitholders.

16. As contemplated by its investment strategies at the target date (in 2010) of the 2010 Fund, the 2010 Fund held 100% of its assets in units of the Money Market Fund. However, RBC GAM determined that, since a merger of the 2010 Fund and the Money Market Fund could not be achieved without obtaining unitholder approval, pursuant to subsection 5.3(2) of NI 81-102, primarily because the merger would not have satisfied the requirements of paragraph 5.6(1)(b) of NI 81-102, i.e. it would not have been a "qualifying exchange" within the meaning of the ITA or a tax-deferred transaction under subsection 85(1), 85.1(1), 86(1) or 87(1) of the ITA, a more appropriate and cost effective means to achieve the same result as a merger would have achieved was to terminate the 2010 Fund and deliver to unitholders of the 2010 Fund their pro rata share of the units of the Money Market Fund held by the 2010 Fund.

17. While the Declaration of Trust which governs the Current Target Funds, governed the 2010 Fund and will govern the Future Target Funds permits a distribution in specie on the termination of any mutual fund to which it applies, staff of the Commission advised RBC GAM in the context of the termination of the 2010 Fund that staff's view was that unitholders could only receive portfolio assets if the requirements of subsection 10.4(3) of NI 81-102 were complied with.

18. Although RBC GAM was able to obtain the written consent of more than 95% of the unitholders of the 2010 Fund to the receipt of the units of the Money Market Funds (primarily because most of the unitholders were registered plans where the trustee had the authority to grant the consent), the process was time consuming and inefficient.

19. Based on its experience with the 2010 Fund, RBC GAM is proposing in the SP of the Funds to replace the disclosure set out in paragraph 13 above with the following:

"In the year the target date of the Fund is reached, it is expected that all of the assets of the Fund will be invested in units of the RBC Canadian Money Market Fund. During the target year, we intend to terminate the Fund and deliver the units of the RBC Canadian Money Market Fund to unitholders of the Fund. Unitholders will receive at least 60 days notice of the termination date and notice as to the process to be followed if they wish to redeem their units of a Fund and receive cash in lieu of units of the RBC Canadian Money Market Fund on the termination date."

RBC GAM requested the Exemption Sought so that in conjunction with the termination described above, a Fund will not have to obtain the written consent of unitholders in order to deliver units of the Money Market Fund to unitholders of the Fund.

20. There will be no costs incurred by unitholders of a Fund in connection with the acquisition, sale or redemption of the units of the Money Market Fund delivered on the termination of a Fund.

21. With respect to existing holders of units of the 2015 Fund, the 2020 Fund and the 2025 Fund (who have received an SP which contains the disclosure set out in paragraph 13 above) RBC GAM will provide a notice explaining that it has changed the process by which unitholders of a Fund will become unitholders of the Money Market Fund in the year the target date of the Fund is reached.

22. In the notice of the Termination Date of a Fund which will be sent to unitholders 60 days before the Termination Date, RBC GAM will advise that unitholders will be able to redeem their units of the Fund and receive cash in lieu of units of the Money Market Fund at any time prior to the Termination Date and will be able to redeem their units of the Money Market Fund and receive cash at any time after the Termination Date.

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, provided that:

(a) there will be no costs incurred by unitholders of a Fund in connection with the acquisition, sale or redemption of the units of the Money Market Fund delivered on the termination of a Fund;

(b) neither RBC GAM nor any of its affiliates receives any compensation in respect of the acquisition, sale or redemption of the units of the Money Market Fund delivered on the termination of a Fund;

(c) the SP of a Fund contains the disclosure set out in representation 19 above;

(d) in the notice of the Termination Date of a Fund which will be sent to unitholders 60 days before the Termination Date, RBC GAM will advise that unitholders will be able to redeem their units of the Fund and receive cash in lieu of units of the Money Market Fund at any time prior to the Termination Date and will be able to redeem their units of the Money Market Fund and receive cash at any time after the Termination Date; and

(e) the value of the units of the Money Market Fund delivered on the termination of a Fund will be equal to the value of such units used in calculating the net asset value of the units of the Fund for purposes of determining the redemption price of such units on the Termination Date of a Fund.