This is wrong. iCloud documents are absolutely cached/stored on the device. 
Changes are sync'd to the cloud and then to other devices/computers.

This was publicly discussed and if you're in the iOS or Mac developer program, 
it's also covered extensively in the iCloud developer docs.

On Aug 18, 2011, at 12:23 PM, Kevin Callahan wrote:

>> Think of it like this, the file is never on your iPhone, it just grabs it 
>> from the cloud when it needs it.
>> 
>> Mike
> 
> So  you are saying iCloud documents when closed disappear off the device? 
> They're never cached locally? They get pulled down from iCloud whenever 
> opened even if there are no changes in the document?  And therefore, you 
> effectively need to be connected at all times to view documents on your 
> mobile devices?  Is this true?  That's not the impression I got from the 
> keynote, but maybe I misunderstood.  What you describe is what I think of as 
> Google Docs, which I would never use. 
> 
> Can't anyone clarify? 


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