Securities Law & Instruments

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from disclosure requirements prescribed by Items 12 and 13.4(e)(i) or (ii) of Form 44-101F1 Short Form Prospectus and the related continuous disclosure requirements contemplated by Section 4.2(a)(ix) of NI 44-101 Short Form Prospectus Distributions in connection with a covered bond programme -- Financial statements of the guarantor or the summary of deconsolidated financial information about the guarantor and the filer prescribed by Item 12 and Item 13.4(e)(i) or (ii) of Form 44-101F1 will not contain any information that could be material to an investor which has not otherwise been disclosed -- Investor reports will contain information that is more adapted to the structure of the offering and more relevant to investors -- Investor reports will be filed on SEDAR, incorporated by reference in the pricing supplements and be available on the filer's website -- Relief granted subject to conditions, including condition that guarantor have no liabilities or claims outstanding other than those in connection with the CB Programme and condition that exempted financial disclosure would not contain any information that could be material to an investor which has not been otherwise disclosed.

Applicable Legislative Provisions

Securities Act (Quebec), s. 263.

National Instrument 44-101 Short Form Prospectus Distributions, s. 4.2(a)(ix).

Form 44-101F1 Short Form Prospectus, items 12 and 13.4(e)(i) or (ii).

Translation

October 30, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

ROYAL BANK OF CANADA (THE FILER) AND

RBC COVERED BOND GUARANTOR LIMITED PARTNERSHIP

(Guarantor LP)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for exemptions from the disclosure requirements prescribed by Items 12 and 13.4(e)(i) or (ii) of Form 44-101F1 Short Form Prospectus (Form 44-101F1) and the related continuous disclosure requirements contemplated by Section 4.2(a)(ix) of the Regulation 44-101 respecting Short Form Prospectus Distributions (Regulation 44-101) in connection with the CB Programme (as defined below) (the Exemption Sought). Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Autorité des marchés financiers is the principal regulator for this application,

(b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Nunavut, Northwest Territories and Yukon, and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

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

Representations

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

1. The Filer is a Schedule I bank under the Bank Act (Canada) and a reporting issuer or the equivalent in each province and territory of Canada. The head office of the Filer is located in Montréal, Québec.

2. Guarantor LP is a limited partnership formed and existing under the Limited Partnerships Act (Ontario) and is not a reporting issuer or the equivalent in each province and territory of Canada. The head office of Guarantor LP is in Toronto, Ontario.

3. Neither the Filer nor Guarantor LP is in default under securities legislation in any province or territory of Canada.

4. The Filer filed a short form base shelf prospectus which was receipted September 23, 2009 (the Base Shelf) which qualifies the distribution of first preferred shares, unsubordinated debt securities and subordinated debt securities of the Filer.

5. The Filer has filed a shelf prospectus supplement dated October 29, 2009 to the Base Shelf pursuant to Part 8 of Regulation 44-102 respecting Shelf Distributions (Regulation 44-102) to establish a continuous distribution programme for unsubordinated debt securities of the Filer referred to as covered bonds (Covered Bonds) in each of the provinces and territories of Canada and a shelf prospectus supplement dated October 29, 2009 with relevant disclosure from a base prospectus (the European Prospectus) in respect of the Filer's Global Covered Bond Programme (the CB Programme) and to offer Covered Bonds in Canada pursuant to applicable pricing supplements to be filed at the relevant time pursuant to Part 8 of Regulation 44-102. The European Prospectus was filed on October 31, 2008 with the United Kingdom's Financial Services Authority, and has been amended and supplemented by a Supplementary Prospectus dated December 11, 2008 and a Supplementary Prospectus dated March 2, 2009. Covered Bonds are currently offered by the Filer in the European Economic Area under the European Prospectus.

6. Covered Bonds are direct, unsecured and unsubordinated obligations of the Filer. The Covered Bonds are not "asset backed securities" or "specified derivatives", as such terms are defined, respectively, in Regulation 51-102 resptecting Continuous Disclosure Obligations and Regulation 44-102.

7. The Filer's obligations in respect of the Covered Bonds are unconditionally and irrevocably guaranteed by Guarantor LP (the Guarantee), which is an indirect subsidiary of the Filer established specifically for the purpose of the CB Programme.

8. Guarantor LP collateralizes the Guarantee through the purchase, initially, of Bank originated Canadian residential mortgage loans (the Cover Pool) and has granted a security interest in all such Cover Pool assets to a bond trustee under the CB Programme for the benefit of the bondholders. The Cover Pool assets stay on the consolidated balance sheet of the Filer.

9. Guarantor LP is restricted from carrying on any business other than in respect of acquiring the Cover Pool assets (together with their related security), investing in substitute assets for the Cover Pool, providing the Guarantee and activities ancillary thereto.

10. The mortgage assets held in the Cover Pool for the CB Programme are the same whether the Covered Bonds are issued in Canada, in Europe or in any other jurisdictions. Such mortgage assets represented approximately 2% of the total consolidated assets of the Filer as at July 31, 2009. The Filer may not issue Covered Bonds in an amount exceeding 4 % of its total consolidated assets, pursuant to requirements imposed by the Office of the Superintendent of Financial Institutions of Canada.

11. The Cover Pool serves as a credit enhancement and provides additional comfort to bondholders in their expectation to be repaid if the Filer were to default on its obligation under the CB Programme. The composition of the Cover Pool may change over time, subject to certain minimum asset coverage requirements designed to ensure that sufficient over-collateralization is maintained by Guarantor LP to provide full repayment of the Covered Bonds.

12. The Filer will file on SEDAR, will incorporate by reference to pricing supplements, and will make available to bondholders and prospective investors on its website the RBC Covered Bond Program Monthly Investor Reports (the Investor Reports) which detail, among other things, the assets of the Guarantor LP, including the Cover Pool and information on the asset coverage test, which is conducted at least monthly to ensure that the minimum asset coverage requirements are met.

13. The asset coverage test data included in the Investor Reports, which compares the amount of Covered Bonds outstanding with the amount of mortgage assets held in the Cover Pool, is designed specifically to help investors assess whether sufficient assets are held by Guarantor LP to repay bondholders if a Filer's event of default under the CB Programme occurs.

14. From and after the date of this Decision, the Investor Reports will include disclosure to the effect that Guarantor LP has no liabilities or claims outstanding against it, other than those in connection with the CB Programme.

15. The bondholders' recourse prior to a Filer's event of default under the CB Programme is to the Filer. If a Filer's event of default under the CB Programme occurs, in addition to the recourse to the Filer, Guarantor LP will assume the orderly payment of the Filer's obligations under the Covered Bonds and the Covered Bonds will accelerate against the Filer.

16. If a Filer's event of default under the CB Programme is followed by a Guarantor LP's event of default under the CB Programme, the Cover Pool may be orderly liquidated within a one year period to repay bondholders.

17. If a Filer's event of default under the CB Programme occurs, any payment owed to the Filer by Guarantor LP under the guarantee portion of an intercompany loan entered into between Guarantor LP and the Filer initially to finance the purchase of the assets held in the Cover Pool will be paid after the full payment of the amount of Covered Bonds outstanding. The guarantee portion of the intercompany loan is equal to the amount of Cover Pool assets necessary to meet the asset coverage test.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that:

1. Guarantor LP has no liabilities or claims outstanding against it other than those in connection with the CB Programme.

2. Financial statements of Guarantor LP or summary financial information that would otherwise be required by Items 12 and 13.4(e)(i) or (ii) of Form 44-101F1 and the related continuous disclosure requirements contemplated by Section 4.2(a)(ix) of Regulation 44-101 do not, and will not, contain any information that could be material to an investor which has not been otherwise disclosed by the Filer or Guarantor LP.

"Patrick Théorêt"
Manager, Corporate Finance