With your annual statement, you will receive two helpful reports:

• Annual Charges and Compensation Report, which provides information to help you understand the costs of mutual fund investing including the Management Expense Ratio (MER) and any applicable account fees (for those holding series F Mutual Funds).
• Annual Performance Report, which shows how the mutual funds in your account have performed throughout the year after costs

The primary cost associated with mutual funds is the Management Expense Ratio (MER). It includes the Management Fee, Operating Expenses and Taxes. This pays for the management of the fund by the portfolio manager as well as any operating expenses and taxes. It also covers any trailing commission^*, which pays for the ongoing access, service and advice you receive from your advisor.

The Management Fee includes two components:

• The investment management fee is paid to the mutual fund manager (i.e. RBC Global Asset Management Inc.) and covers professional investment management, supervision of the fund, administration of fund operations and service support.
• The trailing commission^* is paid to the mutual fund dealer (i.e. Royal Mutual Funds Inc.). RBC and your RBC advisor provide a number of value-added activities for this fee, including advice, access and service.

^* Trailing commissions are not applicable to Series F mutual funds held within an RBC Investment Advantage Account

Each fund pays an administration fee that is used to cover the costs of regulatory filing fees and other day-to-day operating expenses.

RBC and your RBC advisor provide a number of value-added activities in exchange for the trailing commission, including:

• Advice: We offer advice about retirement planning and other goals, explain available investments and recommend solutions that will help you achieve your goals. This also includes advice on portfolio recommendations that will help you determine an appropriate asset mix, as well as ongoing monitoring and rebalancing to ensure you’re on track to meet your goals.
• Access: We offer convenient locations where you can discuss your investment goals, 24-hour telephone support with RBC Advice Centres, and online and mobile access anytime.
• Service: We work to keep you informed and make sure your accounts are properly administered. A few examples include: opening accounts and processing transactions; issuing regular statements; and ensuring your accounts comply with all laws, regulations, and tax requirements.

^* Trailing commissions are not applicable to Series F mutual funds held within an RBC Investment Advantage Account

In addition to the MER, there’s the Trading Expense Ratio, or TER. These are the fees the fund managers pay when they buy and sell stocks in a fund. Some mutual funds also have sales charges or loads, which are one-time commissions. However, none of the RBC mutual funds have sales charges.

These costs are automatically deducted from the fund. This means that the investment return that is reported on your account statement is shown on an after costs basis. For example, if the investments in a fund you own return 8% for the year and the MER is 2%, you would earn 6% after fees–and the fund’s rate of return would be reported as 6%.

Fund Facts highlight key information for investors, including a description of the fund and the performance and the risks and costs of buying and owning the fund, all in a short, easy-to-read document. You can also find information about MERs on a mutual fund company’s website or at many third-party research sites that provide mutual fund information. For MER information on RBC Funds, PH&N Funds and BlueBay Funds, please see A Guide to Understanding Fund Facts .