Managed by Phillips, Hager

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Managed by Phillips, Hager

  1. 1. Offering Memorandum RBC Institutional Cash Funds March 22, 2010 Managed by Phillips, Hager & North Investment Management Ltd. RBC Institutional Government – Plus Cash Fund RBC Institutional Cash Fund RBC Institutional US$ Cash Fund RBC Institutional Long Cash Fund The securities referred to in this Offering Memorandum are being offered on a private placement basis. This Offering Memorandum is not, and under no circumstances is it to be construed as, a prospectus relating to a distribution of the units described herein. Unless otherwise approved by the Manager, units will only be sold to Canadian residents. No securities commission or similar regulatory authority has in any way passed upon the merits of the securities offered hereunder nor has it reviewed this Offering Memorandum and any representation to the contrary is an offence. Units are not ‘deposits’ within the meaning of the Canada Deposit Insurance Corporation Act, are not insured under the provisions of that Act or any other legislation, and are not guaranteed. Phillips, Hager & North Investment Management Ltd.
  2. 2. Offering Memorandum: RBC Institutional Cash Funds Phillips, Hager & North Investment Management Ltd.
  3. 3. Offering Memorandum: RBC Institutional Cash Funds TABLE OF CONTENTS INTRODUCTION.......................................................... 1 SPECIFIC INFORMATION ABOUT EACH OF THE What is a mutual fund and what are the risks RBC INSTITUTIONAL CASH FUNDS of investing in a mutual fund?......................... 1 DESCRIBED IN THIS OFFERING What is a mutual fund? ............................. 1 MEMORANDUM ........................................................18 What are the risks of investing in a mutual Introduction....................................................18 fund? ......................................................... 1 Proxy voting ............................................18 Organization and management of the RBC How the funds engage in repurchase Institutional Cash Funds.................................. 5 transactions and reverse repurchase Purchases, switches and redemptions.............. 6 transactions ..............................................18 Net asset value .......................................... 6 Fund Specific Information .............................18 Cut-off times for orders ............................ 7 RBC Institutional Government – Plus Cash Purchasing units of the funds.................... 8 Fund ...............................................................19 How your units are registered................... 8 RBC Institutional Cash Fund .........................21 Short-term trading..................................... 8 RBC Institutional US$ Cash Fund .................23 Switching between funds .......................... 9 RBC Institutional Long Cash Fund................25 Switching between series of the same WHAT ARE YOUR LEGAL RIGHTS?......................27 fund........................................................... 9 Disclosures .....................................................35 Redeeming units of the funds ................... 9 Minimum account size............................ 10 Description of units of the funds............. 10 Fees and expenses ......................................... 10 Fees and expenses that the fund pays ..... 10 Fees and expenses that you pay directly . 11 Impact of sales charges ........................... 11 Dealer compensation ..................................... 12 Sales commissions .................................. 12 Income tax considerations for investors........ 12 Taxation of the funds .............................. 12 Taxation of unitholders........................... 13 Switching between funds and series ....... 14 Additional information.................................. 14 Regulatory relief from related dealer and related issuer investment restrictions...... 14 Reliance on prospectus exemptions and certain required disclosure ...................... 15 Statement of policies of Phillips, Hager & North ....................................................... 16 Phillips, Hager & North Investment Management Ltd.
  4. 4. Offering Memorandum: RBC Institutional Cash Funds Phillips, Hager & North Investment Management Ltd.
  5. 5. Offering Memorandum: RBC Institutional Cash Funds INTRODUCTION GENERAL INFORMATION ABOUT MUTUAL FUNDS AND THE RBC INSTITUTIONAL CASH This Offering Memorandum contains important FUNDS information to help you make an informed investment decision and understand your rights as an investor. It What is a mutual fund and what are the is divided into two parts. The first part, from page 1 to risks of investing in a mutual fund? 17, contains general information that applies to all RBC® Institutional Cash Funds described in this What is a mutual fund? document. The second part, from page 18 to 26, Each RBC Institutional Cash Fund is a mutual fund. contains specific information about each of the funds When you invest in a fund, you are combining your described in this document. money with that of many other investors. We use this Additional information about each fund is available in pool of money to buy a wide variety of investments on the most recently prepared annual financial statements behalf of the entire group of investors. We follow a set of the funds, and any interim financial statements of of guidelines outlined in the investment objectives and the funds prepared since the annual financial investment strategies of each fund. You can find these statements were prepared. These financial statements later in this Offering Memorandum. You and all the are available from us upon request. other investors share in any profits or losses the fund makes. In this Offering Memorandum, ‘you’ and ‘your’ mean the investor, and ‘we,’ ‘us,’ ‘our’ and ‘Phillips, Hager Each fund is sold in units, which are issued in series. & North’ mean Phillips, Hager & North Investment Each unit of a seriels represents an undivided share of Management Ltd. We refer to the mutual funds the fund’s net assets, equal to the share of every other described in this Offering Memorandum as either the unit of the series. There is no limit to the number of RBC Institutional Cash Funds or the funds, and each units each fund can issue. However, certain of the individual mutual fund as either an RBC Institutional funds may be closed to new investors from time to Cash Fund or a fund. The RBC Institutional time. Government – Plus Cash Fund, RBC Institutional Cash Fund and the RBC Institutional US$ Cash Fund What are the risks of investing in a mutual fund? are referred to as the ‘RBC Short Cash Funds’. The There is no such thing as risk-free investing. For RBC Institutional Long Cash Fund is referred to as the investors, risk is the possibility of losing money or not ‘RBC Long Cash Fund’. making any money. The same is true with mutual Unless otherwise specifically stated, all dollar funds. The value of a fund may change every day, amounts in this Offering Memorandum are stated in reflecting changes in interest rates, economic Canadian dollars except when dollar amounts are used conditions, financial markets and company news. in connection with the RBC Institutional US$ Fund, Therefore, when you redeem your units in a fund, you for which all dollar amounts are stated in United may receive less than the full amount you originally States dollars. invested. The full amount of your investment in any of the funds is not guaranteed. Unlike bank accounts or guaranteed investment certificates (“GICs”), mutual fund units are not covered by the Canada Deposit Insurance Corporation or any other government deposit insurer. One risk of a mutual fund is that, in exceptional circumstances, we will not accept requests to redeem units of the fund or we may delay delivery of redemption proceeds. These circumstances are explained under the heading Redeeming units of the funds on page 9. The value of a fund is directly related to the value of the investments held by the fund. The value of the Phillips, Hager & North Investment Management Ltd. 1
  6. 6. Offering Memorandum: RBC Institutional Cash Funds investments in a fund can change due to general are often rated by specialized rating agencies. Debt market conditions, changes in interest rates or securities issued by companies or governments in exchange rates, and political and economic emerging markets often have higher credit risk (lower developments. rated debt), while debt securities issued by well- established companies or by governments of Mutual funds own different types of investments, developed countries tend to have lower credit risk depending on their investment objectives. The (higher rated debt). A downgrade in an issuer’s credit principal risks associated with a fund are the same rating or other adverse news regarding an issuer can risks that affect the value of the investments held by influence a debt security’s market value. There is no that fund. guarantee that third party credit ratings represent an The total effect of the different types of risk is accurate assessment of the risk of owning a particular measured by volatility. Volatility measures how issuer’s securities. If a rating agency has given a variable the value of a fund is relative to an expected higher rating to an issuer’s securities than those return. The value of some funds will change very little securities inherently deserve, the value of the over time while others will change substantially. securities may decrease substantially as the market It is very important that you be aware of the risks becomes aware of the issuer’s true risk. Other factors associated with the different funds you invest in, their can also influence a debt security’s market value or relative return over time and their volatility. The the ability of an issuer to pay interest or repay particular risks associated with each of the RBC principal when due, such as a change in the market Institutional Cash Funds are described under each perception of the creditworthiness of the security, the fund description in the section Specific information parties involved in structuring the security, and the about each of the RBC Institutional Cash Funds. The underlying assets or collateral, if any. Lower rated and principal risks that may be associated with investing unrated debt instruments generally offer a better return in mutual funds are described and listed below in than higher grade debt instruments but have the alphabetical order. potential for substantial loss. Funds that invest in companies or markets with higher credit risk tend to be more volatile in the short term. However, they may Concentration risk offer the potential of higher returns over the long There are risks associated with any mutual fund that term. concentrates its investments in a particular issuer or A credit spread is the difference between interest rates issuers. Concentrating investments allows a fund to payable on an issuer’s fixed income security and a focus on a particular issuer’s potential, but it also government-issued fixed income security that are means that the value of the fund tends to be more identical except for the credit rating. If the market volatile than the value of a more diversified fund determines that a higher return is necessary to because the concentrated fund’s value is affected more compensate for the higher risk of a lower rated fixed by the performance of that particular issuer. income security, the credit spread will increase. If a credit spread increases after the purchase of a fixed Credit risk income security, the value of that security will Credit risk is the possibility that a borrower or issuer, decrease. or the counterparty to a derivatives contract, repurchase agreement or reverse repurchase Currency risk agreement, is unable or unwilling to repay the loan, For the RBC Institutional US$ Cash Fund, the Canada obligation or interest payment, either on time or at all. Revenue Agency requires that capital gains and losses A mutual fund can lose money if the borrower or the be reported in Canadian dollars. As a result, when you issuer of a bond or other fixed income security can’t redeem units in a U.S. dollar denominated mutual pay interest or repay principal when it’s due. fund, you need to calculate gains or losses based on The debt securities issued by companies, governments the Canadian dollar value of your units when they and special purpose vehicles (such as vehicles that were purchased and when they were sold. issue asset-backed securities or mortgage-backed Additionally, although the RBC Institutional US$ securities) that act as a counterparty or borrow money Cash Fund distributes any income in U.S. dollars, it Phillips, Hager & North Investment Management Ltd. 2
  7. 7. Offering Memorandum: RBC Institutional Cash Funds must be reported in Canadian dollars for Canadian tax may be illiquid because of legal restriction or the purposes. Consequently, all investment income will be nature of the investment, or due to certain features like reported to you in Canadian dollars for income tax guarantees or a lack of buyers interested in the purposes. particular security or market. Difficulty in selling securities may result in higher volatility, a loss or In each of the cases above, changes in the value of the reduced return for a fund. Canadian dollar relative to the U.S. dollar may affect your income tax payable. You may want to consult your tax adviser. Market risk The market value of a fund’s investments will rise and Interest rate risk fall based on specific issuer developments and broader equity or fixed income market conditions. Market If a fund invests primarily in bonds and other fixed value will also vary with changes in the general income securities, a significant influence on the fund’s economic and financial conditions in countries or value will be changes in the general level of interest sectors in which the investments are based. rates. If interest rates fall, the value of the fund’s units will tend to rise. If interest rates rise, the value of the fund’s units will tend to fall. Depending on a fund’s Risks of using derivatives holdings, short-term interest rates can have a different A derivative is a type of investment whose value is influence on a fund’s value than long-term interest derived from the performance of other investments or rates. If a mutual fund invests primarily in bonds and from the movement of interest rates, exchange rates or other fixed income securities with longer-term market indices. The funds may use derivatives as long maturities, the biggest influence on the mutual fund’s as their use is consistent with the individual fund’s value will be changes in the general level of long-term investment objectives. A fund cannot use derivatives interest rates. If a mutual fund invests primarily in for speculative trading or to create a portfolio with bonds and other fixed income securities with shorter- excess leverage. If a fund uses derivatives, securities term maturities, the biggest influence on the mutual regulations require that the fund hold enough assets or fund’s value will be changes in the general level of cash to cover its commitments in the derivative shorter-term interest rates. If you are seeking current contracts. This limits the amount of losses that could income, you should be aware that the level of interest result from the use of derivatives. There are many income from a money market fund will fluctuate as different types of derivatives – they usually take the short-term interest rates vary. form of a contract to buy or sell a specific commodity, currency, stock or market index. Large unitholder risk The most common types of derivatives that may be The securities of a fund, including an underlying fund, used by the funds are futures or forward contracts – may be held in significant percentages by an investor, these are agreements made today to buy or sell a including another mutual fund. In order to meet particular currency, on a specific day in the future at a purchase and redemption requests by the investor, the specified price. fund may have to alter its holdings significantly and Derivatives have their own special risks. Here are purchase or sell investments at unfavourable prices some of the common ones associated with derivatives and incur capital gains and transaction costs. This can used by the funds: reduce the returns of the fund. Using derivatives for hedging may not always Liquidity risk work and it could limit a mutual fund’s potential to make a gain. Liquidity refers to the speed and ease with which an asset can be sold and converted into cash. Most Costs relating to entering, maintaining and securities owned by mutual funds can be sold easily unwinding derivatives contracts may reduce the and at a fair price. In highly volatile markets, such as returns of a fund. in periods of sudden interest rate changes, certain securities may become less liquid, which means they cannot be sold as quickly or easily. Some securities Phillips, Hager & North Investment Management Ltd. 3
  8. 8. Offering Memorandum: RBC Institutional Cash Funds The price of a derivative may not accurately Series risk reflect the value of the underlying currency or The funds are available in more than one series of security. units. Each series has its own fees and expenses, There is no guarantee that a mutual fund can close which are tracked separately. Those expenses will be out a derivative contract when it wants to. If, for deducted in calculating the unit value for that series, example, a stock exchange imposes trading limits, thereby reducing its unit value. If one series is unable it could affect the ability of a mutual fund to close to pay its expenses or liabilities, the assets of the other out its position in derivatives. This type of event series will be used to pay those expenses or liabilities. could prevent a mutual fund from making a profit As a result, the unit price of the other series may also or limiting its losses. be reduced. Please see Purchases, switches and redemptions and Fees and expenses for more The other party to a derivative contract may not information regarding each series and how their unit be able to live up to its agreement to complete the value is calculated. transaction. In general, credit ratings are relied on as indications of the ability of the other party to live up to its agreement. Repurchase and reverse repurchase risk There are risks associated with repurchase transactions and reverse repurchase transactions. The value of securities sold under a repurchase transaction may exceed the value of the collateral held by the fund. If there is a default on an obligation to resell the securities to the fund, the collateral may be insufficient to enable the fund to purchase replacement securities and the fund may suffer a loss for the difference. Similarly, the value of securities purchased by a fund under a reverse repurchase transaction may decline below the amount of cash paid by the fund. If there is a default on an obligation to repurchase the securities from the fund, the fund may need to sell the securities for a lower price and suffer a loss for the difference. For more information about how the funds may engage in these transactions, please see the section called How the funds engage in repurchase transactions and reverse repurchase transactions on page 18. Phillips, Hager & North Investment Management Ltd. 4
  9. 9. Offering Memorandum: RBC Institutional Cash Funds Organization and management of the RBC Institutional Cash Funds Role Service provided Manager Phillips, Hager & North is the manager and principal portfolio advisor of Phillips, Hager & North the funds. We provide investment counselling services to company Investment Management Ltd. pension and multi-employer pension plans, foundations, endowments, 20th Floor, 200 Burrard Street corporations, private clients and our own investment funds. On September Vancouver, British Columbia V6C 3N5 30, 2009, we managed assets of over $65 billion. Phillips, Hager & North is an indirect wholly-owned subsidiary of Royal Bank of Canada. As manager, we manage the overall business and operations of the funds. The funds may invest in units of other funds managed by Phillips, Hager & North. We will not vote units of other funds held by the funds. However, we may pass on the right to vote units of other funds to unitholders of the funds that hold such units. Portfolio adviser As principal portfolio adviser, we manage the investment portfolios of the Phillips, Hager & North funds. Investment Management Ltd. Vancouver, British Columbia Trustee and custodian As trustee, RBC Dexia Investor Services Trust holds title to securities RBC Dexia Investor Services Trust owned by the funds on behalf of the unitholders with responsibility to act Toronto, Ontario in the best interest of unitholders. As custodian, RBC Dexia Investor Services Trust holds the funds’ cash and investments in safekeeping on behalf of the funds. RBC Dexia Investor Services Trust is an affiliate of Phillips, Hager & North. Registrar As registrar, we process all the purchases and redemptions of units of the Phillips, Hager & North funds, keep a register of all investors, and issue investor statements and Investment Management Ltd. annual tax slips for investors. Vancouver, British Columbia Auditors As auditors, Deloitte & Touche LLP provides assurance that the funds’ Deloitte & Touche LLP annual financial statements present fairly, in all material respects, their Vancouver, British Columbia financial positions and results of operations in accordance with Canadian generally accepted accounting principles. Independent review committee We have established an independent review committee to review certain transactions pursuant to regulatory relief granted to the funds (the ‘IRC’). The IRC is currently composed of four members and each member was appointed on May 1, 2008. Each member is independent from Phillips, Hager & North, the funds and the entities related to Phillips, Hager & North. Phillips, Hager & North Investment Management Ltd. 5
  10. 10. Offering Memorandum: RBC Institutional Cash Funds Purchases, switches and redemptions A fund’s assets - The value of any security or property held by a fund or any of its liabilities will be Each fund is permitted to have an unlimited number determined in the following way: of series of units and may issue an unlimited number of units of each series. Each fund currently has three Cash, bills, demand notes, accounts receivable, series of units: I-Series, J-Series and O-Series units. prepaid expenses, cash dividends received or receivable, distributions receivable and interest The funds pay us a management fee with respect to I- accrued and not yet received, will be valued at Series and J-Series units. No management fees are their full amount unless it is determined that the charged to the funds with respect to O-Series units. cash or other asset is not worth that amount. In O-Series unitholders pay a negotiated fee directly to such a case, a reasonable value will be us for investment counselling services. Different determined. initial investment amounts may apply to each series. Securities quoted in foreign currencies are translated to Canadian dollars using the Net asset value prevailing rate of exchange as quoted by Each fund maintains a separate net asset value for customary banking sources on the valuation day. each series of units, as if the series were a separate fund. However, the assets of the fund constitute a For the RBC Long Cash Fund, bonds, single pool for investment purposes. The net asset debentures, debt-like securities and other debt value for a series is based on series specific amounts, obligations are valued by taking the average of such as amounts paid on the purchase and redemption the latest available bid and asked quotations on of units of the series and expenses attributable solely the valuation day. Notes and money market to the series, and on the series’ share of the fund’s instruments are valued at their current market investment earnings, market appreciation or value on the valuation day. This value may be depreciation of assets, common expenses and other determined based on the cost of the investments, amounts not attributable to a specific series. which approximates market value after taking Expenses are recognized on an accrual (i.e., “as into account accrued interest which is recorded incurred”) basis, not on a cash (i.e., “when paid”) separately from the investment. If short-term basis. instruments are sold, the difference between the cost and the proceeds (less income previously The unit price for each series is the basis for credited for such security) will be recorded as calculating the purchase price or redemption price for income not capital. buying, switching or redeeming units of that series. Phillips, Hager & North or our agent calculates the For the RBC Short Cash Funds, notes and money unit price for each series by dividing the net asset market instruments will be valued at cost, which value for the series by the number of outstanding approximates market value after taking into units of the series. All of the funds, other than the account accrued interest which is recorded RBC Institutional US$ Cash Fund, are valued and separately from the investment. If short-term can be purchased in Canadian dollars. The RBC instruments are sold, the difference between the Institutional US$ Cash Fund can be purchased only cost thereof and the proceeds (less income in U.S. dollars. previously credited for such security) will represent an adjustment to income, not capital, of Valuation days - For funds other than the RBC the fund. Institutional US$ Cash Fund, a valuation day is any day that the Toronto Stock Exchange and Canadian The value of a futures contract or forward banks are open for business. contract will be the gain or loss that would be realized if, on the valuation day, the position in For the RBC Institutional US$ Cash Fund, a the futures contract or forward contract as the valuation day is any day that the Toronto Stock case may be, were to be closed out unless daily Exchange, Canadian banks and U.S. banks are open limits are in effect, in which case fair value, for business. based on the current market value of the underlying interest, shall be determined. Phillips, Hager & North Investment Management Ltd. 6
  11. 11. Offering Memorandum: RBC Institutional Cash Funds Margin paid or deposited in respect of futures A fund’s liabilities - A fund’s liabilities include: contracts and forward contracts will be reflected All debts, obligations, liabilities or claims of any as an account receivable and margin consisting of kind. assets other than cash will be noted as held as margin. All accrued operating expenses and other charges. Units of the various underlying funds held by a fund will be valued at their respective unit values Cut-off times for orders on the relevant valuation day. Phillips, Hager & North determines the unit price at If a valuation day of a fund is not a business day the close of trading on each valuation day. The cut- for a specific market, the prices or quotations of off times for receiving buy, switch or redemption the prior business day will be used to value any request differ depending on the fund and whether or asset or liability for such market. not the request is submitted directly to Phillips, Hager Although we or our agent will generally & North or through FundSERV. The timing of your determine the value of the assets of the funds by request, the fund and whether or not the request is following the valuation practices described submitted directly to Phillips, Hager & North or above, we or our agent have the discretion to through FundSERV also impacts when you will value the assets using other methods if we receive distributions from the fund. determine that these practices are not appropriate If your request is made directly through us and we in the circumstances. It may be necessary to receive your complete request to buy, switch or exercise such discretion in situations where redeem units of a RBC Short Cash Fund in our market prices are not readily available or Vancouver office by 1 p.m. Eastern Time on a securities may not be reliably priced (such as in valuation day, we will process your request using the the case of technical difficulties, and thinly price at the close of business on that valuation day. traded or illiquid securities). Phillips, Hager & If your request is made through FundSERV and we North and our agent have policies in place receive your complete request to buy, switch or regarding fair valuation and guidelines that redeem units of a RBC Short Cash Fund in our provide guidance on how fair value should be Vancouver office by 4:00 p.m. Eastern Time (1 p.m. determined. The application of fair value pricing Eastern Time on December 24, if that day is a represents a good faith determination based upon valuation day) we will process your request using the these guidelines. There can be no assurance that a price at the close of business on that valuation day. fund could obtain the fair value assigned to a security if it were able to sell the security at If your purchase request for units of the RBC Short approximately the time at which the fund Cash Funds is made directly through us and is determines its net asset value per unit. received by the applicable cut-off time, you will receive a distribution on that valuation day in respect The fair value of the securities used to determine the of the purchased units. If your purchase request for net asset value per unit of a series (“Pricing NAV”) units of the RBC Short Cash Funds is made through will be based on the funds’ valuation rules set out FundSERV, you will only receive a distribution in above, which may not be the same as Canadian respect of the purchased units on the next valuation generally accepted accounting principles (“Canadian day. GAAP”) requirements. Canadian GAAP requires that the fair value of actively traded securities held by a If we receive your complete request to buy, switch or fund should be valued at the bid price, instead of the redeem units of the RBC Long Cash Fund by 4 p.m. close price or last sale price of the securities for the Eastern Time on a valuation day (and by 1 p.m. day. Hence, the reported value of securities held by a Eastern Time on December 24, if that day is a fund in the annual and interim financial statements valuation day), we will process your request using the may be different from the fair value of the securities price at the close of business on that valuation day used to determine Pricing NAV. The financial whether or not the request is received through statements of the funds will disclose the Pricing NAV FundSERV. Otherwise, we will process your request for each series. Phillips, Hager & North Investment Management Ltd. 7
  12. 12. Offering Memorandum: RBC Institutional Cash Funds on the next valuation day, using the price at the close above, the units that you bought will generally be of business on that day. redeemed on the next valuation day. If they are redeemed for more than you paid, the fund will Your dealer may set earlier times for its receipt of keep the difference. If they are redeemed for less orders than the times we set. than you paid, you or your dealer will be charged Purchasing units of the funds for the difference plus any costs. Your dealer may, in turn, charge you for these amounts. There are no charges for opening an account or buying units of the funds directly through us. If you Phillips, Hager & North may refuse any request to buy units of the funds through a registered dealer, buy units within one business day of receiving it. If that dealer may charge you a fee for buying your your request is refused, your money will be returned units. These are negotiated between you and your to you in full, without interest. dealer. How your units are registered Generally, you must make an initial investment of at Your units can be registered on our records directly least $25 million to buy I-Series units of the RBC in your name, or in the name of your dealer or an Institutional Cash Funds. This $25 million may be intermediary who holds units for you. spread across more than one fund. If your units are registered in your own name: Generally, you must make an initial purchase of $500 million for J-Series units. This $500 million may be You may hold units of your funds only in a spread across more than one fund. Phillips, Hager & North account. For O-Series units, we will determine the initial You will receive trade confirmations and account investment amount in our discretion from time to statements directly from us. time. You will give us your transaction instructions. Subsequent purchases of I-Series and J-Series units If your units are registered in the name of your dealer must be at least $25,000. or an intermediary: Phillips, Hager & North may change or waive these You may be permitted to hold units of your funds minimum amounts at any time, at our discretion. along with other types of securities, such as Phillips, Hager & North may limit or ‘cap’ the size of stocks and bonds, in your account with your a fund or a series of units of a fund by restricting new dealer or the intermediary. purchases, including units bought through switches. You will receive trade confirmations and account We will continue to allow redemptions and the statements from your dealer or the intermediary, calculation of the fund's unit value for each series. rather than directly from us. We may subsequently decide to start accepting purchases or switches to that fund or series at any Your dealer or the intermediary will give us your time. transaction instructions. If you are purchasing RBC Short Cash Funds directly Short-term trading through us, you have to include full payment for your units with your request. If you are purchasing RBC We regularly monitor transactions in all our funds. Short Cash Funds through FundSERV or are We have established criteria for acceptable purchasing units of the RBC Long Cash Fund, you transaction activity in an effort to eliminate activity have to deliver payment to us within one business that we deem potentially detrimental to unitholders day after the applicable valuation day. If you buy including activity associated with attempts to engage units of a fund through a registered dealer, your in market timing. We have the right to restrict or dealer is responsible for sending in your request the reject any purchase or switch request without any same day that they receive it from you. prior notice, including those transactions accepted by your dealer. Whether your trading is considered If Phillips, Hager & North does not receive excessive or inappropriate will be determined by us payment in full within the time limits described at our sole discretion. Phillips, Hager & North Investment Management Ltd. 8
  13. 13. Offering Memorandum: RBC Institutional Cash Funds Switching between funds We will only send you the redemption proceeds if: Redeeming units of one RBC Institutional Cash Fund instructions necessary to complete the transaction to buy units of another RBC Institutional Cash Fund have been received; and is known as ‘switching’. The same rules for buying and redeeming units of the funds apply to switches. any payment for buying the same units that you are redeeming has cleared. If you switch units of a fund denominated in one currency to units of a fund denominated in another If a fund receives redemption requests for a valuation currency, the redemption proceeds will be converted day that in aggregate exceed 10% or more of the into the currency of the fund being purchased using units outstanding for a fund (a “Large Redemption the rate of exchange determined by RBC Dexia Request”), Phillips, Hager & North may, upon receipt Investor Services Trust for the transaction. of a Large Redemption Request return the Large We do not charge fees for switching units of, or Redemption Request unprocessed and require prior switching into or out of units of RBC Institutional notice of up to ten business days for the Large Cash Funds. Redemption Request. A unitholder requesting a Large Redemption Request will be advised that such We may suspend or restrict your switching privileges prior notice is required and have such Large if you switch funds in a manner that we consider to Redemption Request returned promptly following our be detrimental to the funds. receipt of the redemption request. Switching between series of the same fund In the event of a Large Redemption Request Phillips, A switch between series of units of a fund is called a Hager & North may make payment of redemption ‘redesignation.’ With our prior approval, you can proceeds by making good delivery to the unitholder switch units of a fund if you are eligible to buy them. of portfolio securities of the fund, the value of which is equal to the redemption price of the units being If you are no longer eligible to hold a series of units, redeemed. In the event that redemption proceeds are we may switch you out of that series to another series paid by making delivery of portfolio securities, of units of the same fund, as appropriate. Phillips, Hager & North must be satisfied that such We do not charge any fees to switch between series delivery is in the best interests of the fund. Securities of the same fund. Switching units of one series to delivered in payment of redemption proceeds will be units of another series of the same fund is not valued on the valuation day as of which the considered a disposition for tax purposes. redemption price is determined and on the same basis that the fund would use in determining the value of Redeeming units of the funds such securities on that day. The unitholder will be There are no charges for redeeming units of the funds required to pay any reasonable costs associated with through us. If you redeem units of the funds through delivering such securities to the unitholder and/or a registered dealer, that dealer may charge you a fee registering such securities in the name of the for redeeming your units. unitholder or a nominee of the unitholder, and any brokerage costs associated with the disposition by the When you redeem units of the RBC Short Cash unitholder of the relevant securities. Funds directly through Phillips, Hager & North, we will send you your money on the applicable valuation A fund may also suspend the redemption of its units day for the redemption request. When you redeem for any period in the event that Phillips, Hager & units of the RBC Short Cash Funds through North determines that conditions exist which render FundSERV, we will send you your money on the impractical the sale of the assets of that fund or valuation day following the applicable valuation day impair the ability of Phillips, Hager & North to for the redemption request. determine the value of assets held by the fund. When you redeem units of the RBC Long Cash Fund Any redemption request received during a suspension directly or through FundSERV, we will send you of redemptions will be completed at the series net your money on the valuation day after the applicable asset value per unit on the first valuation day valuation day for the redemption request. Phillips, Hager & North Investment Management Ltd. 9
  14. 14. Offering Memorandum: RBC Institutional Cash Funds following the termination of the suspension unless such approval is required under applicable securities earlier withdrawn by the unitholder. laws. However, if an amendment to the master trust agreement is one that we believe a reasonable Phillips, Hager & North reserves the right to require unitholder would consider important in determining any unitholder of a fund to redeem such unitholder’s whether to continue to hold units of the affected entire holding of units of a fund, or any portion funds and is prejudicial to the interests of unitholders thereof, if Phillips, Hager & North, in its sole as a group, we must provide unitholders with 30 discretion, so determines. days’ prior notice of that change. To the extent that investors who are U.S. citizens or Although the funds do not hold regular meetings, who are resident of the United States or any other Phillips, Hager & North will hold meetings to obtain foreign country become a unitholder of a fund, we your approval on certain matters. may require such investors to redeem their units if their participation has the potential to cause Fees and expenses regulatory or tax problems. A brief description of the fees and expenses that you Minimum account size may have to pay if you invest in the funds is set out Minimum investment levels are established in an below. You may have to pay some of these fees and effort to control the costs of administering accounts, expenses directly. However, you should be aware that which impact all unitholders. If you have less than the payment of fees and expenses by the funds will $25 million invested in I-Series or less than $500 reduce the value of your investment in the funds. million invested in J-Series units of the funds, we Fees and expenses that the fund pays may require you to bring the value of your account up to these minimums, redeem any or all of your units and forward you the proceeds, or, if you are Management and administration fees invested in J-Series units, switch you into I-Series Each fund pays an annual fee to Phillips, Hager & units. We will give you or your dealer 30 days notice North with respect to I-Series and J-Series units before any action is taken. issued by the fund for its services as manager of the fund. This management fee, and the fixed Description of units of the funds administration fee described in more detail below Each unit of a series of a fund entitles the holder to: under the heading Operating expenses and other costs for each fund is as follows: one vote at any meeting of unitholders of the fund or a meeting of unitholders of that specific series; Series Management Fee Administration Fee I-Series up to 0.11% 0.02% participate equally with all other units of the series in J-Series up to 0.08% 0.02% the regular distribution of net income and net realized O-Series - 0.02% capital gains of the fund allocable to the series; and participate equally with all other units of the series, if the fund is being terminated and wound-up, in the The funds do not pay a management fee with respect distribution of the series’ share of net assets of the to O-Series units. Investors who are eligible to fund that remain after the fund’s liabilities have been purchase O-Series units pay a negotiated fee directly paid. to us for investment counselling services. No unitholder owns any assets of a fund. Unitholders Unitholders will be provided with written notice of have only those rights mentioned in this Offering any change to these fees (and any other fee charged Memorandum and the master trust agreement for the to a fund) that could result in an increase in charges funds. to a fund in which they hold units at least 60 days before the change becomes effective. These rights may only be modified by amending the master trust agreement. The master trust agreement does not require unitholder approval with respect to amendments to the master trust agreement unless Phillips, Hager & North Investment Management Ltd. 10
  15. 15. Offering Memorandum: RBC Institutional Cash Funds Operating expenses and other costs The funds may invest in units of other funds managed Phillips, Hager & North pays certain operating by Phillips, Hager & North or our affiliate. These expenses of the funds. These expenses include other funds have their own fees and expenses to pay regulatory filing fees and other day-to-day operating in addition to those paid by any funds that invest in expenses, including, but not limited to, them. However, a fund will not invest in units of recordkeeping, accounting and fund valuation costs, another fund if the fund would be required to pay any custody fees, audit and legal fees, the costs of management or incentive fees in respect of that preparing and distributing annual and interim investment that a reasonable person would believe financial statements, statements and investor duplicates a fee payable by the other fund for the communications. In return, each fund pays us a fixed same service. In addition, a fund will not invest in administration fee. The administration fee may vary another fund managed by Phillips, Hager & North if by series of units and by fund and is listed above any sales or redemption fees are payable in respect of under the heading Management and administration the investment or invest in any other fund if the fund fees. The amount of operating expenses paid by us in would be required to pay any sales or redemption exchange for the payment of the administration fee fees in respect of the investment that a reasonable may exceed or be less than the administration fee in person would believe duplicates a fee payable by any particular period. Each fund also pays certain unitholders. operating expenses directly, including the costs and Proposed Harmonized Sales Tax - The Governments expenses related to the IRC, the cost of any of British Columbia and Ontario have announced government or regulatory requirements introduced their intention to harmonize the provincial sales tax after July 1, 2009 and any borrowing costs with the federal goods and services tax (GST). If the (collectively, “other fund costs”) and taxes proposed harmonization proceeds as announced, (including, but not limited to, GST). Fees and effective July 1, 2010, Phillips, Hager & North may expenses payable in connection with the IRC include be required to collect a combined harmonized sales compensation paid to members of the IRC in the tax on management fees and administration fees paid form of an annual retainer for each IRC member, a to it by a fund. Currently, management fees and separate retainer for the chair and a fee payable for administration fees charged by us to a fund are each meeting attended, insurance coverage required subject only to the 5% federal GST. Since the MER by the IRC, reimbursement for reasonable expenses of the funds includes taxes, if a harmonized sales tax and travel time and the costs of outside advisers were to apply to management and administration fees retained by the IRC (if any). Other fund costs will be paid by fund, the MER of these funds would increase allocated among funds and among each series of to reflect the additional taxes payable on management units of a fund in a fair and equitable manner in fees and administration fees resulting from the accordance with the services used. The harmonized sales tax. administration fee and operating expenses borne directly by a fund will be included in the Fees and expenses that you pay directly management expense ratio (“MER”) of a fund.  Sales charges None Unitholders will be provided with written notice at Short-term trading fee None least 60 days before the basis of calculating any of Switch fees None these expenses (or any other expense charged to a Redemption fees None fund) is changed in any other way that could result in Other fees and expenses1 None an increase in charges to a fund in which they hold 1 units.  Investors who are eligible to purchase Series O units pay a negotiated fee directly to us for investment counselling services. Phillips, Hager & North may, in some years and in certain cases, pay a portion of a series’ administration Impact of sales charges fee or other fund costs. The decision to absorb the Phillips, Hager & North funds are ‘no load,’ which administration fee or other fund costs is reviewed means you pay no sales charges or commissions annually and determined at the discretion of Phillips, when you buy and redeem units of the funds through Hager & North without notice to unitholders. Phillips, Hager & North Investment Management Ltd. 11
  16. 16. Offering Memorandum: RBC Institutional Cash Funds us. You also pay no account set-up or administration fund will not pay any tax under Part I of the Tax Act, fees, and you may transfer your units from one RBC other than alternative minimum tax. The funds could Institutional Cash Fund to another at no be subject to alternative minimum tax. administrative cost. All of a fund’s deductible expenses, including Dealer compensation expenses common to all series of the fund and expenses specific to a particular series (such as Sales commissions management fees), will be taken into account in You will not be charged a sales commission if you determining the income or loss of the fund as a buy your units directly from us. If you invest in the whole. funds through a dealer that distributes the funds, the Loss suspension rules may prevent a fund from dealer may charge you a sales charge, commission or recognizing capital losses on the disposition of service fee. These charges are negotiated between investments in certain circumstances. you and the dealer. Although the financial statements for the RBC Income tax considerations for investors Institutional US$ Cash Fund are maintained in U.S. dollars, the Canadian dollar amounts must be used in The following is a fair summary of the principal calculating income for tax purposes. The fund may Canadian federal income tax considerations generally therefore realize a capital gain or loss when it sells an relevant to investors who, for purposes of the Income investment or when an investment matures, as a Tax Act (Canada) (the “Tax Act”), are resident in result of a change in the exchange rate from the time Canada, hold their units as capital property and deal the investment was acquired to the time of sale or with the funds at arm’s length. maturity. This summary is based on the current provisions of If at any time in a year a fund has a unitholder that is the Tax Act and the regulations under it, all specific a “designated beneficiary” under the Tax Act, the proposals to amend the Tax Act and its regulations fund will be subject to a special tax at the rate of 36% that have been publicly announced by the Minister of under Part XII.2 of the Tax Act on its “designated Finance, and the published administrative practices of income”. A “designated beneficiary” includes a non- the Canada Revenue Agency (“CRA”). It is assumed resident, and “designated income” includes income that all amendments will be passed as proposed. from business, which could include certain income This summary is of a general nature and is not from derivatives. Where a fund is subject to tax intended to be exhaustive. It does not take into under Part XII.2, the fund may make a designation account provincial, territorial or foreign tax laws. which will result in unitholders that are not Investors should consult their own tax advisers designated beneficiaries receiving a tax credit with with respect to the tax consequences in their respect to their share of the tax under Part XII.2 paid particular circumstances. by the fund. Units of the funds are not qualified investments under If more than 50% (calculated on a fair market value the Tax Act for RRSPs, RRIFs, DPSPs, RESPs, basis) of the units of a fund are held by one or more RDSPs or TFSAs. Adverse tax consequences will unitholders that are considered to be ‘financial arise if units are acquired by such entities. institutions’ for the purposes of certain special rules in the Tax Act, then that fund itself will be treated as Taxation of the funds a financial institution under those special rules. Each fund must pay tax on its net income and net Under those rules, a fund will be required to realized capital gains for a year, except to the extent recognize at least annually on income account any such amounts are distributed to unitholders. Each gains and losses accruing on certain types of debt fund (other than the RBC Institutional US$ Cash obligations that it holds and also will be subject to Fund – please see the heading Distribution Policy for special rules with respect to income inclusion on this fund on page 24 for more details) intends to certain types of debt obligations that it holds. Any distribute all of its net income each year and income arising from such treatment will be included sufficient of its net realized capital gains, so that the in amounts to be distributed to Unitholders. If Phillips, Hager & North Investment Management Ltd. 12
  17. 17. Offering Memorandum: RBC Institutional Cash Funds financial institutions subsequently cease to hold more must report its income for tax purposes in Canadian than 50% of the units of the fund, the fund’s taxation dollars. In such case, the fund may make additional year will be deemed to end and any gains and losses distributions to unitholders calculated and paid in accrued on certain debt obligations to that time will accordance with the rules in the Tax Act so as to be recognized on income account and included in ensure that the fund will not pay income tax. Any amounts distributed to unitholders. A new taxation such additional distribution will be immediately year for the fund will then begin and for that and reinvested in additional units and the units of the fund subsequent taxation years, for so long as not more will then be consolidated to ensure that the net asset than 50% of the units of the fund are held by value per series unit is maintained at the amount prior financial institutions, the fund will not be subject to to the distribution. The amount of this distribution these special rules. will be included in your income and added to the adjusted cost base of your units. We will advise each Initially, Royal Bank of Canada or a subsidiary of the unitholder of the share of the net income, net taxable Bank will hold all the outstanding units of the RBC capital gains and return of capital of the fund Institutional Government-Plus Cash Fund, RBC distributed to the unitholder each year. Institutional Cash Fund and the RBC Long Cash Fund. As a result, these funds will be subject to the To the extent that distributions made by a fund to a special rules as described above. If more than 50% unitholder in a year exceed the unitholder's share of of the units of these funds subsequently cease to be the fund's net income and net realized capital gains held by the Royal Bank of Canada and/or other for the year, the excess distributions will be a return financial institutions, the taxation year of the fund of capital that is not taxable to the unitholder but that will be considered to have ended immediately before reduces the adjusted cost base of the unitholder's that time and any gains or losses accrued to that time units. If a unitholder’s adjusted cost base is reduced will be considered to be realized by the fund as to less than zero the unitholder will be deemed to described above and will be reflected in amounts have realized a capital gain equal to the negative considered to be distributed in that shortened taxation amount and the adjusted cost base will be reset at nil. year to unitholders of the fund. A new taxation year Where an investor acquires units of the RBC Long for the fund will then begin and for that and Cash Fund or RBC Institutional US$ Cash Fund, the subsequent taxation years, for so long as not more purchase price for the units may reflect net income than 50% of the units of the fund are held by and net realized capital gains which have not been financial institutions, the fund will not be subject to distributed. The investor is subject to tax on his or her these special rules. Steps will be taken to attempt to share of those amounts when distributed, even though minimize the time period during which the RBC the amounts were reflected in the purchase price paid Institutional Government-Plus Cash Fund, RBC for the units. Similarly, the investor’s share of capital Institutional Cash Fund and the RBC Long Cash gains realized after the units were acquired will Fund will be subject to these special rules as a result include the portion of the gains that accrued before of Royal Bank of Canada and/or other financial the investor acquired the units. institutions holding units in these funds. Each fund intends to make designations under the Taxation of unitholders Tax Act so that income from foreign sources and net Each unitholder of a fund will be required to include taxable capital gains distributed to unitholders will in computing its income for a particular year the retain their character in the hands of unitholders. portion of the net income, and the net realized taxable Each taxable unitholder will generally be entitled to a capital gains of the fund for the year distributed to the tax credit for foreign taxes paid by a fund in respect unitholder (including such amounts distributed or on of his or her share of income from foreign sources, the redemption of units), whether those amounts are except to the extent the fund has deducted the foreign distributed in cash or reinvested in additional units. taxes in computing its income. The RBC Institutional US$ Cash Fund may be On a redemption (including a redemption to switch considered to realize gains for Canadian tax purposes between the funds) or other disposition of units of a as a result of exchange rate fluctuations, since the fund, the unitholder will realize a capital gain to the fund invests in U.S. dollar-denominated securities but extent that the proceeds of disposition exceed the Phillips, Hager & North Investment Management Ltd. 13
  18. 18. Offering Memorandum: RBC Institutional Cash Funds adjusted cost base of the units plus any cost of units, may increase a unitholder’s liability for disposition, or a capital loss to the extent that the total alternative minimum tax. of the adjusted cost base of the units plus any costs of disposition exceeds the proceeds of disposition. One Switching between funds and series half of a capital gain must be included in income as a For tax purposes, switching units of a fund for units taxable capital gain. One-half of a capital loss is an of another fund is considered to be the same as allowable capital loss, which may be applied against redeeming units for cash, even though you actually taxable capital gains realized in the year. Allowable reinvested the money in units of another fund. The capital losses in excess of taxable capital gains may same tax rules apply for switching between funds as be carried back three years or forward indefinitely for redeeming your units. However, switching units and applied against taxable capital gains realized in of one series to units of another series of the same those earlier or later years, subject to the rules in the fund is not a disposition for tax purposes and no Tax Act. A unitholder that is throughout the relevant capital gain or loss will be realized. The adjusted cost taxation year a “Canadian-controlled private base of the units that were switched will be corporation” under the Tax Act, may be liable to pay, transferred to the units of the other series acquired on in addition to the tax otherwise payable under the Tax the switch. Act, a refundable tax of 6⅔% determined by reference to its aggregate investment income for the Additional information year, which is defined to include an amount in respect of taxable capital gains. Regulatory relief from related dealer and related issuer investment restrictions The adjusted cost base of a unit of a fund is equal to We have obtained relief from applicable securities the average adjusted cost base of all units of the fund legislation to engage in the types of transactions held by a unitholder. Generally, the adjusted cost described below on behalf of the funds. The base of all units at any time is equal to the total cost following transactions must be consistent with the of fund units purchased by the unitholder to that time investment objectives of a fund and carried out in (including units purchased by reinvesting accordance with any instructions received from the distributions) minus the return of capital component IRC of the funds. of distributions and the adjusted cost base of units previously sold. The proceeds of disposition on the redemption of units of a fund do not include net Investment restrictions income or net realized gains, if any, that are Purchase of securities of related issuers distributed as part of the redemption amount. We have obtained relief that permits each fund to The cost to a unitholder of units of the RBC purchase debt securities of a related issuer in the Institutional US$ Cash Fund is to be determined in secondary market, provided that, among other things: Canadian dollars based on the exchange rate when (a) the debt security has an approved credit rating by the units are acquired. The proceeds of disposition of an approved credit rating organization; and units are to be determined in Canadian dollars based on the exchange rate at the time of disposition. (b) the price payable is not more than the ask price of Consequently, a unitholder of this fund may realize a the security determined as follows: capital gain or loss on the disposition of units as a result of fluctuations in the exchange rate between (i) if the purchase occurs on a marketplace, in the Canadian and U.S. dollars. accordance with the requirements of the Individuals and certain trusts are required to pay tax marketplace; and equal to the greater of tax determined under the ordinary rules and alternative minimum tax. Amounts (ii) if the purchase does not occur on a distributed by a fund that are taxable dividends from marketplace, taxable Canadian corporations or net taxable capital gains, and capital gains realized on the redemption of the price at which an independent seller is willing to sell the debt security, or Phillips, Hager & North Investment Management Ltd. 14
  19. 19. Offering Memorandum: RBC Institutional Cash Funds if the fund does not intend to purchase the (b) a purchase must not be executed at a price higher debt security from an independent seller, than the ask price and a sale must not be executed the price quoted by an independent party. at a price which is lower than the bid price. We have also obtained relief that permits each fund Recordkeeping, disclosure and IRC involvement to purchase debt securities of a related issuer having a Appropriate records of the related party transactions term to maturity of 365 days or more (excluding asset described above must be maintained and, in certain backed commercial paper) in the primary market cases, particulars must be disclosed in the financial (i.e., securities issued for the first time), provided statements of the funds or filed with securities that, among other things: regulatory authorities. In addition, the IRC of a fund (a) the size of the primary offering is at least $100 must approve our policies and procedures in respect million; of these types of related party transactions. The IRC of the funds has approved standing (b) at least two purchasers who are independent, instructions in respect of these related party arm’s length purchasers, which may include transactions. In accordance with the conditions of the ‘independent underwriters’ within the meaning of applicable standing instructions of the IRC, the IRC National Instrument 33-105 – Underwriting typically reviews these activities on a quarterly basis. Conflicts, collectively purchase at least 20% of In its review, the IRC considers whether investment the primary offering; decisions in respect of these related party transactions: (c) following the purchase, the fund would not have more than 5% of its net assets invested in non- were made by us in the best interests of the fund exchange traded debt securities of Royal Bank of and were free from any influence of Royal Bank Canada; of Canada and without taking into account any consideration relevant to Royal Bank of Canada (d) following the purchase, the fund together with or its associates or affiliates; other funds managed by Phillips, Hager & North were in compliance with the conditions of our that are offered pursuant to exemptions from the policies and procedures; prospectus requirement hold less than 20% of the were in compliance with the applicable standing securities issued in the primary offering; and instructions of the IRC; and achieved a fair and reasonable result for the fund. (e) the price paid for the securities by a fund is no higher than the lowest price paid by any of the arm’s length purchasers who participate in the Inter-fund trades primary offering. We have also obtained relief, subject to similar conditions, that permits each fund to engage in Purchase of securities from related dealers – certain trades of portfolio securities with investment principal trading funds managed by us and discretionary accounts We have also obtained relief that permits a fund to managed by us or our related parties. purchase debt securities from or sell debt securities to Reliance on prospectus exemptions and certain a related party that is a principal dealer in the required disclosure Canadian debt securities market, provided that, among other things: Units of the funds are offered pursuant to certain exemptions from the prospectus requirements of the (a) the bid and ask price of the security is readily securities legislation of the provinces and territories available (either publicly or by reference to a of Canada. Purchasers may be required to acquire quote from an independent party); and units at an aggregate acquisition cost of not less than an amount prescribed by applicable securities legislation. Subscribers for units will be required to execute an investment management agreement or a Phillips, Hager & North Investment Management Ltd. 15
  20. 20. Offering Memorandum: RBC Institutional Cash Funds subscription agreement with Phillips, Hager & North, An issuer is a “connected issuer” to Phillips, Hager & and may be required to execute such certificates and North if there is a relationship between the issuer and other documents as Phillips, Hager & North may Phillips, Hager & North, a related issuer of us, or a reasonably require to evidence their eligibility and director or officer of us or the related issuer of entitlement to rely on such exemptions. Phillips, Hager & North, that might lead a reasonable prospective purchaser of the securities of the If the investor is resident in Ontario, applicable connected issuer to question whether Phillips, Hager securities legislation requires that the funds notify the & North and the issuer are independent of each other investor that (i) details of the distribution must be for the distribution of the issuer’s securities. delivered by the funds to the Ontario Securities Investment funds that are managed by, or that receive Commission, (ii) the information about the investment advice from Phillips, Hager & North or distribution is collected indirectly by the Ontario our affiliates are connected issuers of Phillips, Hager Securities Commission under the authority granted to & North and may be held in the portfolio of the fund it in securities legislation for the purpose of the as described in the investment strategies for each administration and enforcement of the securities fund. legislation of Ontario, and (iii) the public official who can be contacted regarding the indirect collection of In certain circumstances, issuers with whom Royal information is the Administrative Assistant to the Bank or its affiliates have a business relationship Director of Corporate Finance at the Ontario (such as being borrowers from Royal Bank or Securities Commission, Suite 1903, Box 55, 20 companies in which Royal Bank has a significant Queen Street West, Toronto, Ontario M5H 3S8, investment) may also be considered connected Telephone 416-593-8086. Such investors, by their issuers of Phillips, Hager & North. investment, will be deemed to have consented to the indirect collection of the information by the Ontario Related registrants Securities Commission. In addition to being the principal shareholder of Statement of policies of Phillips, Hager & North Phillips, Hager & North, Royal Bank is the direct or indirect principal shareholder of the following Business activities of Phillips, Hager &North registrants: BonaVista Asset Management Inc., RBC Asset Management Inc., RBC Dominion Securities We act as a portfolio manager, dealer, manager and Inc., RBC Direct Investing Inc., Commission Direct promoter of mutual fund securities including those Inc., Royal Mutual Funds Inc., RBC Private Counsel managed by us. Inc., RBC Global Asset Management (U.S.) Inc., RBC Capital Markets Corporation and RBC Related issuers and connected issuers to Securities Australia PTY Limited. In addition, Royal Phillips, Hager & North Bank holds a non-controlling interest in Sky An issuer of securities is “related” to us if, through Investment Counsel Inc. Certain directors and the ownership of, or direction or control over voting officers of Phillips, Hager & North may from time to securities, we exercise a controlling influence over time also be directors and officers of the above that issuer or that issuer exercises a controlling related-party registrants. Phillips, Hager & North influence over us or the same third party exercises a may purchase securities from, or sell securities to controlling influence over both Phillips, Hager & Royal Bank or a subsidiary or affiliate of Royal North and the issuer. We are an indirect subsidiary Bank, whether these companies are acting in an of Royal Bank of Canada (“Royal Bank”) and as a agency or principal capacity. In addition, Royal result of this relationship, Royal Bank is a related Bank or other related parties may act as an issuer of Phillips, Hager & North. In addition, other underwriter for securities sold to clients of Phillips, issuers will be considered related to us by virtue of Hager & North. We may also obtain from or provide Royal Bank’s direct or indirect ownership or to entities related to Royal Bank, other management, investment in these entities. The funds may purchase administrative, referral or other services in securities issued by Royal Bank in accordance with connection with our ongoing business. These regulatory relief described above under Purchase of relationships are subject to legislative and industry securities of related issuers. regulatory requirements that impose restrictions on Phillips, Hager & North Investment Management Ltd. 16
  21. 21. Offering Memorandum: RBC Institutional Cash Funds dealings between related registered companies intended to minimize the potential for conflicts of interest resulting from these relationships. Phillips, Hager & North has adopted internal policies and procedures that supplement these requirements. Cash balances held in mutual and/or pooled funds may be transferred by Phillips, Hager & North into bank accounts at Royal Bank for the funds’ interest earning purposes. Royal Bank and its subsidiaries may also earn income and/or spreads on such transferred cash balances and foreign exchange transactions. RBC Dexia Investor Services Trust, the trustee and custodian for the funds, is a joint venture equally owned by Royal Bank and Dexia Banque Internationale à Luxembourg. Fair allocation of opportunities Phillips, Hager & North performs investment advisory services for various clients as well as the funds and other investment funds that are managed by Phillips, Hager & North (collectively, “Accounts”) including a very small number of client accounts that involve performance fees. Phillips, Hager & North makes investment decisions for each Account dependent on the circumstances, investment objectives and guidelines of the specific Account. Phillips, Hager & North’s policy and practice is not to intentionally favour or disfavour any Account in the allocation of investment opportunities so that over a period of time, such opportunities will be allocated among Accounts on a fair basis. Phillips, Hager & North may give advice and take action with respect to any Account that differs from the advice given to, or the action taken for, other Accounts. Phillips, Hager & North’s emphasis is on ensuring that all Accounts, through their portfolio managers, are given a fair opportunity to invest in a security that is appropriate for the specific Account. Each portfolio manager makes the final determination as to whether a particular investment opportunity is appropriate for the specific Account to which Phillips, Hager & North provides investment advisory services. Phillips, Hager & North Investment Management Ltd. 17
  22. 22. Offering Memorandum: RBC Institutional Cash Funds SPECIFIC INFORMATION ABOUT EACH OF 50% of the total assets of the fund (exclusive of cash THE RBC INSTITUTIONAL CASH FUNDS held by the fund for repurchase transactions). DESCRIBED IN THIS OFFERING MEMORANDUM Fund Specific Information Introduction This section provides additional information that will help you to better understand the description of each of the funds that appears on the following pages. Proxy voting The proxies associated with securities held in the funds will be voted in accordance with guidelines which seek to enhance long-term shareholder value and which are consistent with leading corporate governance practices. The guidelines are available on our website, www.phn.com, or by contacting us at the number on the back cover of this offering memorandum. How the funds engage in repurchase transactions and reverse repurchase transactions A repurchase transaction occurs when a fund sells portfolio securities that it owns to a creditworthy institution for cash and simultaneously agrees to buy back the securities at a later date not to exceed 30 days. The amount of cash maintained by the fund for the transaction is at least 102% of the market value of the sold securities measured each business day. The fund retains its exposure to changes in the value of the sold securities, but also earns additional income for participation in the repurchase transaction. In repurchase transactions, the fund receives any interest or dividends paid by the issuer of the securities while those securities are held by the other party to the transaction. A reverse repurchase transaction occurs when a fund purchases portfolio securities from a creditworthy institution and simultaneously agrees to sell the securities back to the institution at a later date not to exceed 30 days. The difference between the fund’s purchase price for the securities and the resale price may provide the fund with additional income. The basic purpose is to provide a fund with short-term investment income for cash held by the fund. A fund will not enter into a repurchase transaction if, immediately thereafter, the aggregate market value of all securities sold by the fund in repurchase transactions and not yet repurchased, would exceed Phillips, Hager & North Investment Management Ltd. 18
  23. 23. RBC Institutional Government – Plus Cash Sector mix: Subject to any minimum rating limits Fund and individual issuer limits described in this section, the following sector guidelines apply: Fund details Sector Limit Type of fund Canadian cash management fund Issued or guaranteed by the Government No limit of Canada or an agency thereof Date the fund January 26, 2010 was started Issued or guaranteed by a province or an No Limit agency thereof Type of I-Series, J-Series and O-Series securities Schedule I banks1 Maximum 40% 1 In this fund profile Schedule I banks refers to the 6 largest Canadian Eligibility Units are not qualified investments for Schedule I banks as measured by market capitalization. RRSPs, RRIFs, DPSPs, RESPs, RDSPs or TFSAs. Individual issuer limits: The fund may not Fees and See the section called Fees and purchase a security of an issuer if, following the expenses expenses above on page 11. purchase, the market value of the fund invested in an issuer described below would exceed the corresponding issuer limits: What does the fund invest in? Security Type Limit Issued or guaranteed by the Government No limit Investment objectives of Canada or an agency thereof The fund’s objective is to earn a high rate of interest Issued or guaranteed by a province or an Maximum 25% income while focusing on preserving capital and agency thereof maintaining liquidity. The fund invests in Canadian Schedule I banks1 Maximum 10% dollar money market securities issued or guaranteed by Canadian federal and provincial government entities and their fully guaranteed agencies as well as Instruments: The fund restricts its investments to instruments issued by the six largest Canadian debt obligations including but not limited to treasury Schedule I chartered banks as measured by stock bills, promissory notes, bearer deposit notes, bankers’ market capitalization. acceptances, term deposits and certificates of deposit. Fundamental investment objectives may only be Dollar-weighted average term to maturity: The changed with the approval of a majority of fund targets a portfolio with a dollar-weighted unitholders at a meeting called for that purpose. average term to maturity not exceeding 60 days. The However, we may change the fund’s investment fund shall be restricted to securities having remaining strategies described below, at our discretion. terms to maturity of 365 days or less. Benchmark: The fund compares its performance Investment strategies against the DEX 30 Day T-Bill Index. To achieve the fund’s investment objectives, the fund shall invest in its assets in accordance with the Fund of fund investing: We may from time to time guidelines described below. invest a significant portion or even all of the fund’s net assets in other funds managed by Phillips, Hager Minimum credit rating: The fund shall invest in & North or our affiliate where we believe that an securities that, at the time of purchase, have a investment in other funds is a more efficient and cost minimum credit rating of any one of R-1 (mid) by effective way of achieving the fund’s investment DBRS, A-1 by Standard & Poor’s (“S&P”) or P-1 by objectives. We will only invest in units of other funds Moody’s Investor Services (“Moody’s”). where the investment is consistent with the fund’s investment objectives and strategies, and otherwise complies with applicable securities laws. Phillips, Hager & North Investment Management Ltd. 19

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