Securities Law & Instruments

Headnote

Exemptions from most continuous disclosure requirementsgranted to a Trust on specified conditions, including the conditionsthat the Bank remains a reporting issuer and security holdersof the Trust receive the continuous disclosure documents ofthe parent company. Because of the terms of the Trust, a securityholder's return depends upon the financial condition of theBank and not that of the Trust. Trust offered Trust units tothe public in order to provide the parent company with a cost-effectivemeans of raising capital for Canadian bank regulatory purposes.No distributions are payable on the Trust units, if the Bankfails to pay dividends on its preferred shares or on its commonshares, if no preferred shares are outstanding. If distributionsare not paid, the Bank is prevented from paying dividends onits preferred shares. Trust units are redeemable by the Trustand are exchangeable at the option of the holder for a seriesof shares of the Bank. Holders of Trust units have no claimor entitlement to the income of the Trust or the assets heldby the Trust.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss 77, 78,79, 80(b)(iii), 81.

Applicable Ontario Rules Cited

OSC Rule 51-501- AIF and MD&A OSC Rule 52-501-Financial Statements.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA,

ONTARIO, QUEBEC, NOVA SCOTIAAND NEWFOUNDLAND AND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

ROYAL BANK OF CANADA AND

RBC CAPITAL TRUST II

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker", andcollectively the "Decision Makers") in each of theProvinces of Ontario, British Columbia, Alberta, Saskatchewan,Manitoba, Quebec, Nova Scotia and Newfoundland and Labrador(the "Jurisdictions") has received an application(the "Application") from Royal Bank of Canada (the"Bank") and RBC Capital Trust II (the "Trust")for a decision, pursuant to the securities legislation of theJurisdictions (the "Legislation"), that the requirementscontained in the Legislation to:

(a) file interim financial statements andaudited annual financial statements (collectively, "FinancialStatements") with the Decision Makers and deliver suchstatements to the security holders of the Trust;

(b) make an annual filing (an "AnnualFiling") with the Decision Makers in lieu of filing aninformation circular, where applicable;

(c) file an annual report (an "AnnualReport") and an information circular with the DecisionMaker in Quebec and deliver such report or information circularto the security holders of the Trust resident in Quebec; and

(d) file an annual information form ("AIF")and annual management's discussion and analysis ("MD&A")of the financial condition and results of operation of theTrust with the Decision Makers in Ontario, Saskatchewan andQuebec, an interim MD&A in Ontario and Saskatchewan andsend such MD&A to security holders of the Trust, whereapplicable (collectively the "AIF and MD&A Requirements");

shall not apply to the Trust, subject to certainterms and conditions;

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the System),the Ontario Securities Commission is the Principal Regulatorfor this application;

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Quebec Commission Notice 14-101;

AND WHEREAS the Bank and the Trust haverepresented to the Decision Makers that:

The Bank

1. The Bank is a Schedule I bank under theBank Act (Canada) and such act is its charter and governsits operations.

2. The authorized share capital of the Bankconsists of an unlimited number of: (i) common shares ("BankCommon Shares"); and (ii) an unlimited number of FirstPreferred Shares and Second Preferred Shares (the "BankPreferred Shares").

3. The Bank Common Shares are listed on theToronto Stock Exchange, the New York Stock Exchange and theSwiss Exchange.

4. The Bank is a reporting issuer in eachprovince and territory of Canada that provides for a reportingissuer regime and is not, to its knowledge, in default ofany requirement thereof. The Bank is qualified to use theshort form prospectus system provided under National Instrument44-101.

The Trust

5. The Trust is an open-end trust establishedunder the laws of the Province of Ontario pursuant to a declarationof trust made as of June 23, 2003 of The Royal Trust Company(the "Trustee"), which shall be amended and restatedprior to the completion of the Offering (as defined below)(as so amended and restated, the "Declaration of Trust").Upon completion of the Offering, the authorized capital ofthe Trust will consist of: (i) an unlimited number of TrustCapital Securities -- Series 2013 (the "RBC TruCS - Series2013"); and (ii) an unlimited number of Special TrustSecurities. Following the issuance of a MRRS Decision Documentevidencing receipts for the final prospectus (the "Prospectus")in respect of the proposed public offering of RBC TruCS --Series 2013 (the "Offering"), the Trust will bea reporting issuer in each of the provinces of Canada thatprovides for a reporting issuer regime (or the equivalent).

6. Following completion of the Offering, theRBC TruCS -- Series 2013 distributed pursuant to the Prospectuswill be held by the public (although the Offering will bemarketed only to institutional investors) and all outstandingSpecial Trust Securities will be held by the Bank (the SpecialTrust Securities and the RBC TruCS -- Series 2013 being collectivelyreferred to herein as the "Trust Securities"). TheTrust may, from time to time, issue further series of trustcapital securities of the Trust (the "Trust Capital Securities")having terms substantially similar to the RBC TruCS -- Series2013.

7. The RBC TruCS -- Series 2013 are non-votingsecurities of the Trust (except in limited circumstances whereholders can vote if changes to the terms of the RBC TruCS-- Series 2013 are made), which have the attributes describedbelow under "Details of the Offering". The SpecialTrust Securities are voting securities of the Trust.

8. The Trust was established solely for thepurpose of effecting the Offering and possible future offeringsof securities in order to provide the Bank with a cost effectivemeans of raising capital for Canadian financial institutionsregulatory purposes by means of: (i) creating and sellingthe Trust Securities; and (ii) acquiring and holding assets,which, on completion of the Offering, will consist primarilyof a senior deposit note issued by the Bank (the "BankDeposit Note") (to be acquired by the Trust with theproceeds of the Offering). The Bank Deposit Note will generateincome for distribution to holders of the Trust Securities.The Trust does not and will not carry on any operating activityother than in connection with the offering of the RBC TruCS-- Series 2013 and any future offerings.

RBC TruCS - Series 2013

9. Holders of RBC TruCS - Series 2013 willbe entitled to receive fixed, semi-annual non-cumulative distributions(each, an "Indicated Yield") on the basis describedbelow (the "Distributions"). Each semi-annual paymentdate for the Indicated Yield in respect of the RBC TruCS -Series 2013 (a "Distribution Date") will be eithera Regular Distribution Date or a Distribution Diversion Date.A Distribution Date will be a "Distribution DiversionDate", with the result that the Indicated Yield willnot be paid in respect of the RBC TruCS - Series 2013 but,instead, the Trust will pay the net distributable funds ofthe Trust to the Bank as holder of the Special Trust Securities,if: (i) the Bank has failed in the period described in theProspectus to declare regular dividends on the Bank PreferredShares of any series, or (ii) if no Bank Preferred Sharesare then outstanding and the Bank has failed in the perioddescribed in the Prospectus to declare regular dividends onthe Bank Common Shares. In all other cases, a DistributionDate will be a Regular Distribution Date, in which case holdersof RBC TruCS - Series 2013 will be entitled to receive theIndicated Yield and the Bank as holder of the Special TrustSecurities will be entitled to receive the net distributableincome, if any, of the Trust remaining after payment of theIndicated Yield. The Bank Preferred Shares and Bank CommonShares are hereinafter referred to as the "Bank DividendRestricted Shares".

10. Under a Share Exchange Agreement enteredinto among the Bank, the Trust and a party acting as ExchangeTrustee (the "Share Exchange Agreement"), the Bankhas agreed, for the benefit of the holders of RBC TruCS -Series 2013, that in the event that the Trust fails on anyRegular Distribution Date to pay the Indicated Yield on theRBC TruCS - Series 2013 in full, the Bank will not pay dividendson the Bank Dividend Restricted Shares until a specified periodof time has elapsed, unless the Trust first pays such IndicatedYield (or the unpaid portion thereof) to holders of RBC TruCS- Series 2013. Accordingly, it is in the interest of the Bankto ensure, to the extent within its control, that the Trustcomplies with its obligation to pay the Indicated Yield oneach Regular Distribution Date.

11. Pursuant to the terms of the RBC TruCS- Series 2013 and the Share Exchange Agreement, the RBC TruCS- Series 2013 may be exchanged, at the option of the holdersof RBC TruCS - Series 2013, for newly issued First PreferredShares Series U. The RBC TruCS - Series 2013 will be automaticallyexchanged, without the consent of the holder, for newly issuedFirst Preferred Shares Series T upon the occurrence of certainstated events relating to the solvency of the Bank or actionstaken by the Superintendent of Financial Institutions in respectof the Bank (the "Automatic Exchange").

12. The terms of the First Preferred SharesSeries U and Series T provide, among other things, that suchshares are convertible at the option of the holder into BankCommon Shares at certain times and in certain circumstances,but in any event the First Preferred Shares Series U and SeriesT are not convertible into Bank Common Shares until June 30,2013. This exchange right is not operative at any time thatan event giving rise to the Automatic Exchange in respectof the RBC TruCS - Series 2013 has occurred and is continuing.

13. The Trust may, subject to regulatory approval,on June 30, 2008 and on any Distribution Date thereafter,redeem the RBC TruCS - Series 2013. The price payable in respectof any such redemption will include an early redemption compensationcomponent (such price being the "Early Redemption Price")in the event of a redemption of RBC TruCS - Series 2013 priorto June 30, 2013 (the "Early Redemption Date").The price payable in all other cases will be $1,000 per RBCTruCS - Series 2013 together with any unpaid Indicated Yieldthereon (the "Redemption Price").

14. Upon the occurrence of certain regulatoryor tax events affecting the Bank or the Trust, the Trust may,subject to regulatory approval, redeem at any time all butnot less than all of the RBC TruCS - Series 2013 at the EarlyRedemption Price (if the RBC TruCS - Series 2013 are redeemedprior to the Early Redemption Date) and at the RedemptionPrice (if the RBC TruCS - Series 2013 are redeemed on or afterthe Early Redemption Date).

15. The Bank has convenanted, under the ShareExchange Agreement, that the Bank will maintain direct ownershipof 100% of the outstanding Special Trust Securities. As aresult, the financial results of the Trust will be consolidatedwith those of the Bank. Subject to regulatory approval, theRBC TruCS - Series 2013 constitute Tier 1 Capital of the Bank.

16. As long as any RBC TruCS - Series 2013are outstanding and are held by any person other than theBank, the Trust may only be terminated with the approval ofthe Bank as holder of the Special Trust Securities and withthe approval of the Superintendent: (i) upon the occurrenceof a Special Event (as defined in the Prospectus) prior toJune 30, 2008; or (ii) for any reason on June 30, 2008 orany Distribution Date thereafter. Holders of each series ofoutstanding Trust Securities will rank pari passu inthe distribution of the property of the Trust in the eventof a termination of the Trust, after the discharge of anycreditor claims. As long as any RBC TruCS - Series 2013 areoutstanding and held by any person other than the Bank, theBank will not approve the termination of the Trust unlessthe Trust has sufficient funds to pay the Early RedemptionPrice in the case of a termination prior to the Early RedemptionDate, or the Redemption Price in the case of a terminationat any other time.

17. As set forth in the Declaration of Trust,the RBC TruCS - Series 2013 are non-voting except in limitedcircumstances and Special Trust Securities entitle the holdersto vote.

18. Except to the extent that the Distributionsare payable to RBC TruCS - Series 2013 holders, and otherthan in the event of termination of the Trust (as set forthin the Declaration of Trust), RBC TruCS - Series 2013 holdershave no claim or entitlement to the income of the Trust orthe assets held by the Trust.

19. Pursuant to an Administration Agreemententered into between the Trustee and the Bank, the Trusteehas delegated to the Bank certain of its obligations in relationto the administration of the Trust. The Bank, as administrativeagent, will provide advice and counsel with respect to theadministration of the day-to-day operations of the Trust andother matters as may be requested by the Trustee from timeto time.

20. The Trust has not requested relief forthe purposes of filing a short form prospectus pursuant toNational Instrument 44-101 Short Form Prospectus Distributions(NI44-101) (including, without limitation, any relief thatwould allow the Trust to use the Bank's AIF as a current AIFof the Trust) and no such relief is provided by this DecisionDocument from any of the requirements of NI44-101.

21. The Trust may, from time to time, issuefurther series of Trust Capital Securities, the proceeds ofwhich would be used to acquire additional deposit notes fromthe Bank.

22. Because of the terms of the RBC TruCS- Series 2013, the Share Exchange Agreement and the variouscovenants of the Bank, information about the affairs and financialperformance of the Bank, as opposed to that of the Trust,is meaningful to holders of RBC TruCS - Series 2013. The Bank'sfilings and the delivery of the same material delivered toshareholders of the Bank will provide holders of RBC TruCS- Series 2013 and the general investing public with all informationrequired in order to make an informed decision relating toan investment in RBC TruCS - Series 2013. Information regardingthe Bank is relevant both to an investor's expectation ofbeing paid the Indicated Yield on the RBC TruCS - Series 2013as well as the return of the investor's principal.

AND WHEREAS under the System this MRRSDecision Document evidences the decision of the Decision Makers(collectively, the Decision);

AND WHEREAS the Decision Makers are satisfiedthat the tests contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision havebeen met;

THE DECISION of the Decision Makers underthe Legislation is that the requirement contained in the Legislation:

(a) to file Financial Statements with theDecision Makers and deliver such statements to holders ofTrust Securities;

(b) to make an Annual Filing, where applicable,with the Decision Makers in lieu of filing an informationcircular; and

(c) to file an Annual Report and an informationcircular with the Decision Maker in Quebec and deliver suchreport or information circular to holders of Trust Securitiesresident in Quebec;

shall not apply to the Trust for so long as:

(i) the Bank remains a reporting issuer underthe Legislation;

(ii) the Bank files with the Decision Makers,in electronic format under the Trust's SEDAR profile, thedocuments listed in clauses (a) to (c) above of this Decision,at the same time as they are required under the Legislationto be filed by the Bank;

(iii) the Trust pays all filing fees thatwould otherwise be payable by the Trust in connection withthe filing of the documents referred to in clauses (a) to(c) above of this Decision;

(iv) the Bank sends its Financial Statementsand Annual Filing, where applicable, to holders of Trust Securitiesand its Annual Report to holders of Trust Securities residentin the Province of Quebec at the same time and in the samemanner as if the holders of Trust Securities were holdersof the Bank Common Shares;

(v) all outstanding securities of the Trustare either Trust Capital Securities or Special Trust Securities;

(vi) the rights and obligations (other thanthe economic terms thereof) of holders of additional seriesof Trust Capital Securities are the same in all material respectsas the rights and obligations of the holders of RBC TruCS- Series 2013 at the date hereof; and

(vii) the Bank is the beneficial owner ofall Special Trust Securities,

and provided that this Decision shall expire30 days after the date a material adverse change occurs in theaffairs of the Trust.

August 18, 2003.

"P.M. Moore"
"R.L. Shirriff"

AND THE FURTHER DECISION of the DecisionMakers in Ontario, Saskatchewan and Quebec is that the AIF andMD&A Requirements shall not apply to the Trust for so longas:

(i) the conditions set out in clause (i),(v), (vi) and (vii) of the Decision above are complied with;

(ii) the Bank files its AIF and its annualand interim MD&A with the Decision Makers, as applicable,in electronic format under the Trust's SEDAR profile at thesame time as they are required under the Legislation to befiled by the Bank;

(iii) the Trust pays all filing fees thatwould otherwise be payable by the Trust in connection withthe filing of the documents referred to in clauses (a) to(c) above of this Decision;

(iv) the Bank sends its annual and interimMD&A and its AIF, as applicable, to holders of Trust Securitiesat the same time and in the same manner as if the holdersof Trust Securities were holders of Bank Common Shares;

and provided that this Decision shall expire30 days after the date a material adverse change occurs in theaffairs of the Trust.

August 18, 2003.

"Cameron McInnis"