Fixed Income: Why choose active management? Why Active Management? You may use a bond laddering strategy in your practice today. A laddering strategy is suitable for conservative portfolios where a predictable stream of income is required. In employing a static laddered approach, investors avoid interest rate risk, but they are missing out on the opportunity to take advantage of shifting yield curve and credit environments. By using an active approach, a fixed income manager can employ a number of strategies and use a variety of different instruments – including high yield bonds, provincial bonds and corporate bond issues – to generate lower risk and achieve higher yields. This type of investing requires the expertise and resources of a skilled bond manager that is able to make nimble portfolio adjustments and identify opportunities in constantly changing markets. Phillips, Hager & North’s fixed income desk focuses on “adding value while controlling risk.” This gives your clients the opportunity to enhance yield and portfolio diversification while benefiting from the conservative approach that is PH&N’s hallmark, and which has served institutions and investors for over two decades. Benefits of active management An actively managed bond fund can offer your clients n Sound credit oversight: Ability to look beyond the reports of Wall Street analysts and perform original the opportunity to benefit from additional yield and credit research on issuers. diversification with lower risk. An actively managed bond portfolio offers the following benefits: n Automatic re-investment of interest and principal: Clients benefit from the power of compounding. n Gain access to bond issues with high barriers to entry: Corporate bond and high-yield issuances n Exposure to a wider range of bond strategies: often have investment minimums of over $10,000. Enhanced flexibility and return potential through PH&N manages over $15 billion in corporate exposure to strategies including convertible bonds, bonds, allowing investors to benefit from improved foreign-pay bonds, convergence trades, curve information flow, economies of scale and outstanding steepeners and butterfly trades. dealer relationships. n Nimble response to changing market conditions: n Professional management: The resources of a Ability to capitalize on market inefficiencies. dedicated bond team. For example, the PH&N fixed income desk comprises 28 investment professionals n Ease of tax reporting: Less onerous tax reporting and administration relative to laddered portfolios. fully dedicated to the research, analysis, trading and risk management of fixed income assets. n Detailed reporting: Detailed quarterly commentary and reporting helps you to save time so you can focus n Enhanced diversification: Exposure to a wider on servicing your clients. variety of bonds provides diversification by geography, industry, maturity, duration and yield. n Active risk management: Risk management figures prominently in actively managed bond portfolios and allows clients to assume lower risk for the same return potential. Or conversely, gain higher return potential for the same level of risk. PH&N: A proven fixed income leader Winner “Best Bond Fund Family” two years in a row – Lipper Phillips, Hager & North has been managing assets for institutions, pension plans and individual investors for over forty years. The firm is widely recognized as one of Canada’s leading fixed income managers. PH&N uses a diverse toolkit to help you manage risk within a clients’ fixed income portfolio. Their conservative approach to risk management has been sought after by the “smart money” since 1967. Now, you can draw on this same trusted expertise to achieve diversification and enhance clients’ risk/return profiles. Two excellent choices to diversify your clients’ fixed income portfolios: PH&N Total Return Bond Fund The Total Return Bond Fund is an excellent core bond holding for almost all investors with an allocation to fixed income. The Fund is ranked in the 12th percentile among its peer group over five years ended September 30, 2008.* • Winner of “Canadian Fixed Income Fund” for the past two years – Canadian Investment Awards. PH&N High Yield Bond Fund The High Yield Bond Fund is at the conservative end of the range for high yield funds, with excellent competitive performance. It is suitable for investors who are looking for yield pick-up within their bond portfolios. The fund is ranked in the 1st percentile among its peer group over the five years ended September 30, 2008, and has the highest Sharpe Ratio out of 40 funds for the same time period.* *Source: Morningstar. Fund codes and compensation PH&N Fund Name Fund Code Series C Series F PH&N Total Return Bond Fund PH&N High Yield Bond Fund PHN 3340 PHN 3280 PHN 5340 PHN 5280 Management Fee Series C Series F 1.00% 1.25% 0.50% 0.75% Trailing Commission Series C Series F 0.50% 0.50% n/a n/a PH&N and RBC Asset Management – working together to offer you and your clients value, choice and transparency. Talk to your RBC Asset Management Regional Sales Team at 1-888-770-2586 for more information. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed or insured, and their values change frequently. Performance data shown assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Past performance may not be repeated. The Lipper Fund Awards were awarded based on the best risk-adjusted performance over the 3-year periods ending December 31, 2006 and 2007. Lipper Inc. is a Reuters company. Phillips, Hager & North Investment Management Ltd. (PH&N IM) and Phillips, Hager & North Investment Funds Ltd. (PH&N IF) are the principal portfolio adviser and principal distributor, respectively, for all PH&N funds. PH&N IM and PH&N IF are both wholly-owned subsidiaries of the Royal Bank of Canada. Annualized rates of return for periods ending September 30, 2008: Total Return Bond Fund: 1-year = 1.7%; 3-year = 2.3%; 5-year = 4.1%; and since inception (July 2000) = 5.8%; High Yield Bond Fund: 1-year = 1.4%; 3-year = 4.0%; 5-year = 5.9%; and since inception (July 2000) = 7.5%; DEX Universe Bond Index: 1-year = 4.6%; 3-year = 3.4%; 5-year = 4.8%. 60054 (10-2008)