RBC CORPORATE CLASS FUNDS Annual Report

Transcription

1 RBC CORPORATE CLASS FUNDS Annual Report

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3 TABLE OF CONTENTS Management Report of Fund Performance FIXED-INCOME FUNDS RBC Short Term Income Class 2 BlueBay Global Convertible Bond Class (Canada) 10 BALANCED FUNDS Phillips, Hager & North Monthly Income Class 18 CANADIAN EQUITY FUNDS RBC Canadian Dividend Class 27 RBC Canadian Equity Class 35 RBC QUBE Low Volatility Canadian Equity Class 43 Phillips, Hager & North Canadian Equity Value Class 49 RBC Canadian Equity Income Class 55 RBC Canadian Mid-Cap Equity Class 63 NORTH AMERICAN EQUITY FUNDS RBC North American Value Class 71 U.S. EQUITY FUNDS RBC U.S. Dividend Class 80 RBC U.S. Equity Class 87 RBC QUBE Low Volatility U.S. Equity Class 95 RBC U.S. Equity Value Class 101 Phillips, Hager & North U.S. Multi-Style All-Cap Equity Class 106 RBC U.S. Mid-Cap Value Equity Class 114 RBC U.S. Small-Cap Core Equity Class 120 INTERNATIONAL EQUITY FUNDS RBC International Equity Class 126 RBC European Equity Class 132 Phillips, Hager & North Overseas Equity Class 137 RBC Emerging Markets Equity Class 146 GLOBAL EQUITY FUNDS RBC Global Equity Class 155 RBC QUBE Low Volatility Global Equity Class 161 RBC Global Resources Class 166 Financial Statements MANAGEMENT S RESPONSIBILITY FOR FINANCIAL REPORTING 175 INDEPENDENT AUDITOR S REPORT 176 FIXED-INCOME FUNDS RBC Short Term Income Class 177 BlueBay Global Convertible Bond Class (Canada) 184 BALANCED FUNDS Phillips, Hager & North Monthly Income Class 192 CANADIAN EQUITY FUNDS RBC Canadian Dividend Class 201 RBC Canadian Equity Class 208 RBC QUBE Low Volatility Canadian Equity Class 215 Phillips, Hager & North Canadian Equity Value Class 221 RBC Canadian Equity Income Class 227 RBC Canadian Mid-Cap Equity Class 235 NORTH AMERICAN EQUITY FUNDS RBC North American Value Class 242 U.S. EQUITY FUNDS RBC U.S. Dividend Class 249 RBC U.S. Equity Class 256 RBC QUBE Low Volatility U.S. Equity Class 263 RBC U.S. Equity Value Class 269 Phillips, Hager & North U.S. Multi-Style All-Cap Equity Class 275 RBC U.S. Mid-Cap Value Equity Class 282 RBC U.S. Small-Cap Core Equity Class 288 INTERNATIONAL EQUITY FUNDS RBC International Equity Class 294 RBC European Equity Class 301 Phillips, Hager & North Overseas Equity Class 308 RBC Emerging Markets Equity Class 315 GLOBAL EQUITY FUNDS RBC Global Equity Class 322 RBC QUBE Low Volatility Global Equity Class 328 RBC Global Resources Class 334 GENERIC NOTES TO FINANCIAL STATEMENTS 341 THE ROLE OF THE BOARD OF GOVERNORS 346 PLEASE CALL US Inside Back Cover 1

4 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE FIXED-INCOME FUND RBC SHORT TERM INCOME CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 2

5 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC SHORT TERM INCOME CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide current income and liquidity consistent with short-term money market rates, and to preserve the value of an investment. To achieve its investment objective, the Fund invests most of its assets in the RBC Canadian Money Market Fund (the underlying fund ), which holds primarily high-quality short-term government and corporate-debt securities with a maximum term of 365 days. The underlying fund s corporate-debt holdings are deemed by major debt-rating agencies to be suitable for conservative investors. The underlying fund also includes short-term debt issued by Canadian chartered banks and promissory notes issued or guaranteed by Canadian governments or their agencies. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value fell to $31 million as of, from $35 million as of,. Most of the change was due to net redemptions. Over the past year, the Fund s Series A shares gained 0.6%, which underperformed the 0.9% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. Short-term bond yields declined for most of the period, as lacklustre economic growth in Canada and Europe and slowing growth in China left global policymakers grasping for ways to reignite economic momentum. The drop in Canadian rates was particularly sharp late in the fiscal year, mostly in response to a surprise 25-basis-point rate cut by the Bank of Canada (the BOC ) in January. The central bank cited the abrupt and steep decline in energy prices as the reason for the move, saying it expected the decline to have a significantly negative impact on domestic economic activity. The U.S. proved an exception to the minimal-growth trend, and relatively robust economic growth led to expectations that the U.S. Federal Reserve (the Fed ) would start to boost interest rates sometime this year. Nonetheless, U.S. bond yields also generally fell during the period as weak inflationary pressures and tepid global growth buoyed interest in U.S. bonds. The Fed, owing to improvement in the U.S. economy, signalled that a rate hike may be in the offing. However, a rapidly strengthening U.S. dollar and sluggish global economies prevented the Fed from committing more strongly to rate hikes until more persuasive evidence emerged of sustained employment growth and a bottoming-out of disinflationary pressures. Canadian corporate bonds underperformed during the period, with yields on government bonds declining more than they did on corporate fixed income. The portfolio manager kept the Fund s exposure to corporate bonds unchanged through the fiscal year as their yields remained relatively attractive and company balance sheets stayed healthy. The Fund took on slightly more risk toward the end of the period as the portfolio manager extended the average term of its assets after the BOC rate cut on expectations that the central bank would lower rates again in. Recent Developments Anticipation that global economic growth would pick up significantly over the past year has taken a back seat to an acknowledgement that bond yields will depend more on central bank commitments to easing monetary policy to combat deflationary forces, especially in Europe and Japan. In this environment, and with the BOC turning to lower rates as a way to boost domestic growth, Canadian shortbond yields are falling. Meanwhile, the Fed is preparing to start lifting interest rates, although, in the view of the portfolio manager, the pace and extent of the tightening will be gradual. Given that the portfolio manager expects yields to decline further amid sluggish global growth and weaker oil prices, the strategy will be to lock in yields by maintaining an average term that is slightly higher than the benchmark. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. 3

6 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC SHORT TERM INCOME CLASS Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 4

7 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC SHORT TERM INCOME CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.06) Mar. 31, (0.06) Mar. 31, (0.06) Mar. 31, (0.02) Advisor Series Mar. 31, (0.07) Mar. 31, (0.07) Mar. 31, (0.07) Mar. 31, (0.03) Series H Mar. 31, (0.05) Mar. 31, (0.05) Mar. 31, (0.04) Series D Mar. 31, (0.06) Mar. 31, (0.06) Mar. 31, (0.06) Mar. 31, (0.02) Series F Mar. 31, (0.06) Mar. 31, (0.06) Mar. 31, (0.06) Mar. 31, (0.03) Series I Mar. 31, (0.04) Mar. 31, (0.03) Mar. 31, (0.03)

8 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC SHORT TERM INCOME CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, Mar. 31, Mar. 31, (0.01) Mar. 31, (0.02) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

9 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC SHORT TERM INCOME CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A up to 0.75% 33% 67% Advisor Series up to 0.75% 33% 67% Series H up to 0.60% 17% 83% Series D up to 0.60% 20% 80% Series F up to 0.50% 100% Series I up to 0.40% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 7

10 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC SHORT TERM INCOME CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years Series D 1 (%) Series F 1 (%) 0.6% % 0.6% Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series A 1 (%) 0.6% 0.6% 0.6% Series I 2 (%) 0.7% 0.7% 0.7% % 0.8% 0.8% 2013 Series O 1 (%) Advisor Series 1 (%) % 0.6% 0.6% % 1.2% 1.2% Series H 2 (%) % 0.7% 0.7%

11 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC SHORT TERM INCOME CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: FTSE TMX Canada 91 Day TBill Index Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTION FTSE TMX Canada 91 Day TBill Index This index is a measure of the performance of Canadian short-term cash investments. FTSE TMX Canada 91 Day T-Bill Index formerly known as DEX 91-Day T-Bill Index. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Commercial Paper 60.8 Bankers Acceptances and Bank Obligations 34.1 Provincial Obligations 5.0 Cash/Other 0.1 Top 25 Holdings* % of Net Asset Value Bank of Nova Scotia 1.270% Jul SAFE Trust - Series % Apr SOUND Trust 1.250% Apr Bank of Nova Scotia 1.350% Sep Zeus Receivables Trust - Senior Notes 0.940% Sep HSBC Bank Canada 0.960% Nov Toronto-Dominion Bank 0.830% Aug Canadian Imperial Bank of Commerce 1.443% Apr Toronto-Dominion Bank 1.473% Apr Toronto-Dominion Bank 0.849% Jun Canadian Imperial Bank of Commerce 0.919% Nov Fusion Trust 1.330% Apr Province of Nova Scotia 1.054% Apr Bank of Nova Scotia 0.849% May Inter Pipeline Ltd % Apr Ridge Trust 1.249% Apr Toronto-Dominion Bank 0.849% Jun JPMorgan Chase & Co % May Wells Fargo Financial Canada Corp % Jun Darwin Receivables Trust - Senior Notes 1.281% May King Street Funding Trust 0.909% Jun Merit Trust - Senior Notes 1.281% May National Bank of Canada 0.802% Apr Canadian Imperial Bank of Commerce 1.373% May Canadian Imperial Bank of Commerce 1.260% Jul Top 25 Holdings 39.7 * The Fund invests substantially all of its assets directly in the RBC Canadian Money Market Fund. The above are the Top 25 holdings of the RBC Canadian Money Market Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 9

12 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE FIXED-INCOME FUND BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 10

13 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide total returns consisting of interest income and modest capital appreciation through exposure to global convertible bonds. To achieve the Fund s objectives, the Fund invests most of its assets in the BlueBay Global Convertible Bond Fund (Canada) (the underlying fund ), which holds mainly global convertible bonds issued by entities domiciled or carrying out business activities anywhere in the world. The portfolio manager of the underlying fund conducts detailed credit and equity analysis to identify investment opportunities offering high probabilities of superior rates of return while minimizing the prospect of default. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $132 million as of, from $39 million as of,. Most of the change was due to net inflows. Over the past year, the Fund s Series A shares gained 7.2%, which outperformed the 6.5% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. U.S. equity markets reached new all-time highs, boosted by strong economic growth and job gains as the U.S. Federal Reserve s program of extraordinarily loose monetary policy known as quantitative easing ( QE ) came to an end. The U.S. dollar strengthened significantly against both the Japanese yen and the euro, underlining the divergence in regional growth prospects. Japanese Prime Minister Shinzo Abe increased the rate of bond purchases by the Bank of Japan ( BOJ ) in an effort to stimulate the economy and achieve his 2% inflation target, but the economy continued to stagnate after a rise in the sales tax in April further dampened consumer demand. The Eurozone struggled to avoid recession and deflation, prompting European Central Bank President Mario Draghi to launch a plan to purchase 60 billion in bonds each month through September 2016 and introduced negative interest rates. European equities staged a sharp rally in the first quarter of, albeit with periods of volatility. Uncertainty remains over the short-term outlook for Greece after the election of an inexperienced government seeking to renegotiate an austerity package previously agreed to with EU partners. Global emerging markets were volatile, as geopolitical risk weighed on investor appetite for more risky assets. Emerging-market equities underperformed developed-market stocks as commodity prices fell on weaker demand. Oil prices fell almost 50% to 2009 levels as OPEC maintained production instead of cutting output as many investors had expected. The Fund s U.S. holdings posted the strongest gains, followed by Asia excluding Japan. The Fund s investments in Japan also added to performance. Exposure to the pharmaceutical, electronics, information technology and finance industries contributed the most to performance. The oil and gas industry hurt overall returns. Holdings that were selected based on fundamental factors such as dependable earnings and strong balance sheets performed strongly, as did securities acquired for their attractive valuations rather than momentum potential. Recent Developments The start of QE in Europe makes it likely, in the portfolio manager s view, that the BOJ and the People s Bank of China will implement further measures to stimulate growth, and that interest rates in the U.S. will likely remain lower for longer. This environment should continue to support prices for stocks and other assets considered to carry higher risks. Negotiations between Greece and its Eurozone partners over an extension of financial support are likely to come to a head in the summer, although the portfolio manager believes the probability of a Greek exit from the euro currency union remains low. Furthermore, the portfolio manager expects corporate profit margins to be bolstered by lower commodity prices and subdued wage growth. Corporate default rates should remain below historical averages, and investors are also focusing on the relative benefits of equity-related securities in the very low interest-rate environment. The portfolio manager believes this backdrop will prove positive for convertible bond prices and retains a somewhat optimistic outlook for the coming months. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. 11

14 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 12

15 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.20) Mar. 31, (0.04) Advisor Series Mar. 31, (0.20) Mar. 31, (0.04) Advisor T5 Series Mar. 31, (0.18) (0.50) (0.50) Series T5 Mar. 31, (0.18) (0.50) (0.50) Series H Mar. 31, (0.17) Mar. 31, (0.03) Series D Mar. 31, (0.13) Mar. 31, (0.03) Series F Mar. 31, (0.12) Mar. 31, (0.02) Series FT5 Mar. 31, (0.10) (0.50) (0.50) Series I Mar. 31, (0.09) Mar. 31, (0.02) Series O Mar. 31, Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 20,. 4 From April 21,. Initial offering net asset value per mutual fund share. 13

16 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Advisor T5 Series Mar. 31, Series T5 Mar. 31, Series H Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Series FT5 Mar. 31, Series I Mar. 31, Mar. 31, Series O Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 20,. 5 From April 21,. 14

17 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) FINANCIAL HIGHLIGHTS (cont.) Advisor Series 1 (%) Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: % 7.2% Breakdown of Services Management Fees Distribution Other* Series A 1.70% 44% 56% Advisor Series 1.70% 44% 56% Advisor T5 Series 1.70% 44% 56% Series T5 1.70% 44% 56% Series H 1.45% 52% 48% Series D 1.10% 14% 86% Series F 0.95% 100% Series FT5 0.95% 100% Series I 0.70% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services Advisor T5 Series 2 (%) Series T5 2 (%) 7.5% 7.6% * Includes all costs related to management, investment advisory services, general administration and profit. -20 PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional units of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years. Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series H 1 (%) Series D 1 (%) Series F 1 (%) 1.7% 1.7% 7.4% 7.9% Series A 1 (%) % 7.2% % 8.1%

18 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Series FT5 2 (%) Fund and for each of the periods indicated ended on, % compared with the following benchmark: 10 Thomson Reuters Convertible Global Focus Index (hedged to CAD) Series I 1 (%) Series O 1 (%) 1.9% 2.0% 8.4% 9.3% Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Advisor T5 Series Benchmark 7.0 Series T Benchmark 7.0 Series H Benchmark Series D Benchmark Series F Benchmark Series FT Benchmark 7.0 Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 20,. 2 Inception date April 21, INDEX DESCRIPTION Thomson Reuters Convertible Global Focus Index (hedged to CAD) This index is designed to measure the performance of global convertible bonds and focuses on larger convertible securities, with the number of constituents being limited to ensure breadth and manageability. 16

19 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BLUEBAY GLOBAL CONVERTIBLE BOND CLASS (CANADA) SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value United States 34.1 Japan 13.4 Other Countries 6.4 China 6.2 United Arab Emirates 5.0 Hong Kong 3.8 Australia 3.7 Norway 3.4 Netherlands 2.9 Singapore 2.8 Malaysia 2.8 United Kingdom 2.6 France 2.4 Germany 1.9 South Africa 1.7 Taiwan 0.6 Cash/Other 6.3 Top 25 Holdings* % of Net Asset Value Cash & Cash Equivalents 4.0 Aabar Investments PJSC, Convertible EUR 0.500% Mar Aabar Investments PJSC, Convertible EUR 1.000% Mar Cahaya Capital Ltd., Convertible USD 0.000% Sep Steinhoff Finance Holding GmbH, Convertible EUR 4.000% Jan Salesforce.com Inc., Convertible 0.250% Apr Billion Express Investments Ltd., Convertible USD 0.750% Oct Microchip Technology Inc., Convertible 1.625% Feb Yahoo! Inc., Convertible 0.000% Dec NVIDIA Corp., Convertible 1.000% Dec Cemex S.A.B. de C.V., Convertible USD 3.750% Mar SanDisk Corp., Convertible 0.500% Oct SunEdison Inc., Convertible 2.375% Apr Marine Harvest ASA, Convertible EUR 0.875% May LinkedIn Corp., Convertible 0.500% Nov Olam International Ltd., Convertible USD 6.000% Oct NXP Semiconductor N.V., Convertible USD 1.000% Dec The Priceline Group Inc., Convertible 1.000% Mar Liberty Media Corp., Convertible 1.375% Oct Intel Corp., Convertible 3.250% Aug Tesla Motors Inc., Convertible 1.250% Jan Cardtronics Inc., Convertible 1.000% Dec Paladin Energy Ltd., Convertible USD 3.625% Nov LIXIL Group Corp., Convertible JPY 0.000% Mar Jarden Corp., Convertible 1.125% Mar Top 25 Holdings 37.8 * The Fund invests substantially all of its assets directly in the BlueBay Global Convertible Bond Fund (Canada). The above are the Top 25 holdings of the BlueBay Global Convertible Bond Fund (Canada). The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund and reference fund are available on SEDAR website at 17

20 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BALANCED FUND PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 18

21 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide monthly income that may consist of dividend income, interest income, realized capital gains and return of capital. The Fund will also have the potential to provide modest capital growth. The Fund primarily invests in a well diversified balanced portfolio of income-producing equity securities, including, but not limited to, common shares of dividend-paying Canadian companies and income trusts. The Fund may also invest in fixed-income securities such as preferred shares, government and corporate bonds, debentures and notes, asset-backed commercial paper, mortgage-backed securities and other income-generating securities. The Fund s target weightings for each asset class are 50% for fixed income and 50% for equities. The target weightings for each asset class may be adjusted based on changes in the market outlook for each asset class. To achieve its investment objective, the Fund invests most of its assets in the Phillips, Hager & North Monthly Income Fund and/ or a combination of other mutual funds managed by RBC GAM (underlying funds). The underlying funds invest in income-producing equity securities, fixed-income securities, and may also hold incomegenerating securities such as convertible bonds and convertible preferred shares. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $199 million as of, from $104 million as of,. Most of the change was due to net inflows. Over the past year, the Fund s Series D shares rose 5.4%, which underperformed the benchmark return of 6.8% and the broad-based index return of 10.3%. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. Fixed-income markets performed strongly during the period due to continued global declines in interest rates and, on the domestic front, a surprise rate cut by the Bank of Canada. The Fund s holdings reflected a preference for bonds that would tend to hold up better had interest rates declined as expected by the portfolio manager. While interest rates actually fell during the period, the Fund was able to benefit from timely securities trading decisions by the portfolio manager. The Fund benefited from overweight positions in provincial bonds and corporate bonds. The portfolio manager s preference for these areas reflected their higher yields and relative safety sought by a growing number of investors, especially in the case of provincial bonds. Offsetting the performance impact of fixed income was the negative effect of equity exposure in the Energy sector. Holdings in exploration and production companies had a negative impact on relative performance as oil prices fell significantly during the second half of the fiscal year. These included above-benchmark positions in Trilogy Energy, Crescent Point Energy and Talisman Energy. The Utilities sector contributed to returns over the year as Pattern Energy, a producer of renewable power focused on energy produced by wind turbines, performed well. In the Consumer Staples sector, overweight positions in the grocers Empire Co., Loblaw and Alimentation Couche-Tard were large contributors to performance. Recent Developments Falling interest rates have led to consistently higher bond prices and fixed-income gains in recent decades. However, bond yields are unlikely to keep falling indefinitely and so investors should not continue to count on gains propelled by rising bond prices. Continued equity-market strength has made stocks somewhat less attractive on a valuation basis. The portfolio manager has been shifting exposure from sectors whose earnings are more tied to economic growth in favour of high-quality areas such as the Utilities sector that can deliver a combination of income and growth, and which are better suited to weather overall declines in share prices. However, valuations remain reasonable, and history indicates that markets can frequently continue to rise long after stocks have begun to exceed fair value. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. 19

22 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Advisor T5 Series, Series T5, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 20

23 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.22) 0.59 (0.59) 0.35 (0.13) (0.13) Mar. 31, (0.07) (0.12) (0.12) Mar. 31, (0.04) (0.01) (0.01) Advisor Series Mar. 31, (0.22) 0.59 (0.59) 0.35 (0.13) (0.13) Mar. 31, (0.07) (0.13) (0.13) Mar. 31, (0.01) (0.01) (0.01) Advisor T5 Series Mar. 31, (0.20) 0.56 (0.57) 0.34 (0.17) (0.34) (0.51) Mar. 31, (0.02) (0.18) (0.33) (0.51) Mar. 31, (0.01) (0.07) (0.14) (0.21) Series T5 Mar. 31, (0.20) 0.56 (0.56) 0.34 (0.17) (0.34) (0.51) Mar. 31, (0.03) (0.18) (0.33) (0.51) Mar. 31, (0.01) (0.07) (0.14) (0.21) Series H Mar. 31, (0.20) 0.59 (0.59) 0.37 (0.12) (0.12) Mar. 31, (0.04) (0.12) (0.12) Mar. 31, (0.01) (0.01) (0.01) Series D Mar. 31, (0.12) 0.60 (0.61) 0.46 (0.13) (0.13) Mar. 31, (0.03) (0.12) (0.12) Mar. 31, (0.01) (0.01) Series F Mar. 31, (0.09) 0.57 (0.57) 0.46 (0.11) (0.11) Mar. 31, (0.01) (0.16) (0.16) Mar. 31, (0.01) (0.01) Series FT5 Mar. 31, (0.09) 0.54 (0.54) 0.43 (0.17) (0.35) (0.52) Mar. 31, (0.18) (0.33) (0.51) Mar. 31, (0.08) (0.13) (0.21)

24 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series I Mar. 31, (0.07) 0.56 (0.56) 0.47 (0.06) (0.06) Mar. 31, (0.17) (0.17) Mar. 31, (0.01) (0.01) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 31, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Advisor T5 Series Mar. 31, Mar. 31, Mar. 31, Series T5 Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31,

25 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series FT5 Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 31, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.65% 61% 39% Advisor Series 1.65% 61% 39% Advisor T5 Series 1.65% 61% 39% Series T5 1.65% 61% 39% Series H 1.50% 67% 33% Series D 0.90% 28% 72% Series F 0.65% 100% Series FT5 0.65% 100% Series I 0.50% 100% * Includes all costs related to management, investment advisory services, general administration and profit. 23

26 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years Series T5 1 (%) Series H 1 (%) 4.3% % 4.5% Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series D 1 (%) 4.4% % 4.7% Series A 1 (%) % 8.0% 4.5% % 9.0% 5.4% Series F 1 (%) 20 Advisor Series 1 (%) % 9.3% 5.7% % 8.1% 4.5% Series FT5 1 (%) Advisor T5 Series 1 (%) 4.3% 8.1% 4.6% % 9.2% 5.7%

27 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS PAST PERFORMANCE (cont.) Series I 1 (%) 4.9% % 5.8% Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmarks: The blended benchmark (the Benchmark ) is composed of: 50% S&P/TSX Capped Composite Total Return Index 35% FTSE TMX Canada Universe Bond Index 10% Merrill Lynch Canadian High Yield Index 5% S&P/TSX Preferred Share Total Return Index The broad-based index is the FTSE TMX Canada Universe Bond Index. Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Broad-based index Advisor Series Benchmark Broad-based index Advisor T5 Series Benchmark Broad-based index Series T Benchmark Broad-based index Series H Benchmark Broad-based index Series D Benchmark Broad-based index Series F Benchmark Broad-based index Series FT Benchmark Broad-based index Series I Benchmark Broad-based index The returns of each series may vary because of differences in management fees and expenses. The Benchmark and broad-based index returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date October 31, INDEX DESCRIPTIONS S&P/TSX Capped Composite Total Return Index This index is the amended capitalizationweighted index measuring the performance of selected securities listed on the Toronto Stock Exchange, with no individual stock exceeding 10% of the overall weight. FTSE TMX Canada Universe Bond Index This index is designed as a broad measure of the Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year. FTSE TMX Canada Universe Bond Index formerly known as DEX Universe Bond Index. Merrill Lynch Canadian High Yield Index This index tracks the performance of U.S. dollar- and Canadian dollar-denominated below-investment-grade corporate debt publicly issued by Canadian issuers in the Canadian or U.S. domestic markets. S&P/TSX Preferred Share Total Return Index This index is composed of preferred stocks trading on the Toronto Stock Exchange that meet criteria relating to minimum size, liquidity, issuer rating and exchange listing. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Canadian Equities 52.5 Bonds 32.9 Preferred Equities 5.0 Cash/Other

28 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH MONTHLY INCOME CLASS SUMMARY OF INVESTMENT PORTFOLIO (cont.) (after consideration of derivative products, if any) As at Top 25 Holdings* % of Net Asset Value RBC High Yield Bond Fund 5.6 Royal Bank of Canada 3.6 Phillips, Hager & North High Yield Bond Fund 3.5 Bank of Nova Scotia 3.4 Toronto-Dominion Bank 3.2 Province of Ontario 6.500% Mar Government of Canada 1.000% May Province of Ontario 7.600% Jun Bank of Montreal 2.1 Canadian Imperial Bank of Commerce 1.8 Enbridge Inc. 1.8 Canadian National Railway Co. 1.7 Manulife Financial Corporation 1.7 Cenovus Energy Inc. 1.5 Brookfield Asset Management Inc., Class A 1.5 TransCanada Corp. 1.3 TELUS Corp. 1.2 Industrial Alliance Insurance & Financial Services Inc. 1.1 Encana Corp. 1.1 ARC Resources Ltd. 1.1 Province of Ontario 3.450% Jun Restaurant Brands International Inc. 1.1 Canadian Natural Resources Ltd. 1.0 Fortis Inc. 1.0 Rogers Communications Inc., Class B 1.0 Top 25 Holdings 50.0 * The Fund invests substantially all of its assets directly in the Phillips, Hager & North Monthly Income Fund. The above are the Top 25 holdings of the Phillips, Hager & North Monthly Income Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 26

29 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE CANADIAN EQUITY FUND RBC CANADIAN DIVIDEND CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 27

30 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN DIVIDEND CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to achieve long-term total returns consisting of regular dividend income, which benefits from the preferential tax treatment given to dividends from Canadian companies, and modest long-term capital growth. To achieve its investment objective, the Fund invests most of its assets in the RBC Private Canadian Dividend Pool and/or the RBC Canadian Dividend Fund (the underlying funds ). The underlying funds invest primarily in common shares with above-average dividend yields and also invest in preferred shares of major Canadian companies. The underlying funds select companies with long-term prospects of growing their dividends and tend to focus on interest-sensitive securities to achieve dividend income, primarily investing in the Financials, Telecommunication Services and Utilities sectors. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $111 million as of, from $88 million as of,. Of the change, $16 million was due to net inflows and $7 million to investment returns. Over the past year, the Fund s Series A shares gained 7.3%, which outperformed the 6.9% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. The S&P/TSX Composite Index, Canada s equity benchmark, underperformed most other global indexes during the period. While the decline in commodity prices weighed on many global markets beginning in September, the resource-heavy Canadian index lagged its peers in the rally that followed. The price of crude oil led commodityprice declines, as OPEC opted to maintain production levels even with a global oil glut caused by rising U.S. shale-oil output and softening demand. This led to a decline in Canadian energy stocks, which account for about a quarter of the S&P/TSX market capitalization. In the U.S., an improving labour market heightened prospects for an eventual rise in interest rates. This development contributed to a strengthening U.S. dollar, which held back profits of U.S. multinational corporations but benefited many Canadian companies that rely on exports to the U.S. Globally, the demand for Canada s resources remained tepid. Europe s economic recovery had been lagging global peers, but the initiation of quantitative easing ( QE ) announced in January infused confidence and helped suppress concerns of low inflation. Emerging markets lagged their developed-market counterparts amid the headwinds of a strong U.S. dollar and weak commodity prices. Strong performance in the Financials and Materials sectors was offset by weaker performance in the Consumer Staples and Information Technology sectors. Security selection in the Financials sector drove strong relative performance. Significant exposure to Brookfield Asset Management proved beneficial as increased assets under management bolstered the outlook for fee revenue. Overweight positions in Brookfield Property Partners and Power Corp. of Canada also aided returns. With metals prices falling, underweight exposure to the struggling Materials sector contributed to the Fund s overall outperformance. A total lack of exposure to gold producer Yamana Gold, and underweight positions in Barrick Gold and Goldcorp, helped performance as the declining price of gold hurt the stocks of these companies. In the Energy sector, an overweight position in Husky Energy weighed on performance amid falling oil prices and concerns regarding the company s Sunrise oil-sands project. Also holding back the Fund s performance was overweight exposure to Bonavista Energy and Cenovus Energy. In the Information Technology sector, the decision to not hold Constellation Software had a negative impact on relative performance. The company, which has grown through a series of takeovers, managed to offset a slowdown in the pace of acquisitions with cost-cutting and margin expansion. Recent Developments Expectations for Canadian equity-market returns should remain modest until energy prices convincingly bottom, in the opinion of the portfolio manager. Oil prices are difficult to forecast in the short run, and it now appears that prices will be lower on average and more volatile than seen in the recent past. A recovery in the price of oil could prompt a rally in the Canadian dollar, but the portfolio manager remains of the view that a weaker Canadian dollar is probably with us for some time. The U.S. Federal Reserve is likely to raise interest rates before the Bank of Canada, as energy markets and a fully valued housing market will remain lingering concerns in Canada. 28

31 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN DIVIDEND CLASS In Europe, the economy remains fragile, but the announcement of QE, coupled with a weaker euro, is setting the stage for an economic recovery. The Japanese economy remains challenged, but the Bank of Japan s recent decision to double down on QE has improved longerterm confidence. China continues to adjust to a lower-than-historical growth rate, with corporate-debt levels sitting at inflated levels. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 29

32 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN DIVIDEND CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.23) (0.30) (0.30) Mar. 31, (0.20) (0.22) (0.22) Mar. 31, (0.18) (0.12) (0.12) Mar. 31, (0.05) Advisor Series Mar. 31, (0.23) (0.27) (0.27) Mar. 31, (0.20) (0.27) (0.27) Mar. 31, (0.18) (0.11) (0.11) Mar. 31, (0.05) Series H Mar. 31, (0.22) (0.30) (0.30) Mar. 31, (0.19) (0.23) (0.23) Mar. 31, (0.13) (0.13) (0.13) Series D Mar. 31, (0.15) (0.30) (0.30) Mar. 31, (0.13) (0.31) (0.31) Mar. 31, (0.13) (0.13) (0.13) Mar. 31, (0.03) Series F Mar. 31, (0.12) (0.27) (0.27) Mar. 31, (0.11) (0.26) (0.26) Mar. 31, (0.10) (0.12) (0.12) Mar. 31, (0.03) Series I Mar. 31, (0.09) (0.33) (0.33) Mar. 31, (0.08) (0.20) (0.20) Mar. 31, (0.06) (0.13) (0.13)

33 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN DIVIDEND CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (0.32) (0.32) Mar. 31, (0.28) (0.28) Mar. 31, (0.01) (0.14) (0.14) Mar. 31, (0.01) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

34 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN DIVIDEND CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.50% 67% 33% Advisor Series 1.50% 67% 33% Series H 1.45% 79% 21% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 32

35 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN DIVIDEND CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years Series D 1 (%) Series F 1 (%) 9.0% % 16.9% 7.9% Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year. 20 Series A 1 (%) 15.9% Series I 2 (%) 9.1% % 17.1% 8.2% 8.4% % 7.3% Advisor Series 1 (%) % Series O 1 (%) % 17.9% 9.1% % 7.3% Series H 2 (%) % 16.0% 7.3%

36 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN DIVIDEND CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: S&P/TSX Capped Composite Total Return Index Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTION S&P/TSX Capped Composite Total Return Index This index is the amended capitalizationweighted index measuring the performance of selected securities listed on the Toronto Stock Exchange, with no individual stock exceeding 10% of the overall weight. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Financials 42.6 Energy 19.8 Industrials 6.4 Utilities 4.7 Consumer Discretionary 4.7 Telecommunication Services 3.7 Materials 3.6 Consumer Staples 3.3 Information Technology 0.3 Health Care 0.1 Cash/Other 10.9 Top 25 Holdings* % of Net Asset Value Cash & Cash Equivalents 10.2 Toronto-Dominion Bank 6.4 Royal Bank of Canada 6.2 Bank of Nova Scotia 4.9 Canadian National Railway Co. 4.2 Brookfield Asset Management Inc., Class A 3.8 Enbridge Inc. 3.6 Bank of Montreal 3.0 Canadian Imperial Bank of Commerce 3.0 Suncor Energy Inc. 2.7 Canadian Natural Resources Ltd. 2.5 Manulife Financial Corporation 2.5 TransCanada Corp. 2.3 Magna International Inc., Class A 1.8 Power Corporation of Canada 1.8 Imperial Oil Ltd. 1.7 Canadian Pacific Railway Ltd. 1.7 Sun Life Financial Inc. 1.6 TELUS Corp. 1.6 Loblaw Companies Ltd. 1.6 Brookfield Property Partners LP 1.4 Husky Energy Inc. 1.3 Thomson Corp. 1.2 CI Financial Corp. 1.2 Potash Corporation of Saskatchewan Inc. 1.2 Top 25 Holdings 73.4 * The Fund invests substantially all of its assets directly in the RBC Private Canadian Dividend Pool. The above are the Top 25 holdings of the RBC Private Canadian Dividend Pool. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 34

37 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE CANADIAN EQUITY FUND RBC CANADIAN EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 35

38 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of major Canadian companies. To achieve its investment objective, the Fund invests most of its assets in the RBC Private Canadian Equity Pool and/or RBC Canadian Equity Fund (the underlying funds ). The underlying funds typically invest in large-cap Canadian companies or income trusts and may take advantage of opportunities in mid-cap companies. The underlying funds diversify across S&P/TSX industry sectors, with minimum and maximum exposures. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $16 million as of, from $11 million as of,. Most of the change was due to net inflows. Over the past year, the Fund s Series A shares gained 5.2%, which underperformed the 6.9% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. The S&P/TSX Composite Index, Canada s equity benchmark, underperformed most other global indexes during the period. While the decline in commodity prices weighed on many global markets beginning in September, the resource-heavy Canadian index lagged its peers in the rally that followed. The price of crude oil led commodityprice declines, as OPEC opted to maintain production levels even with a global oil glut caused by surging U.S. shale-oil output. This led to a decline in Canadian energy stocks, which account for about a quarter of the S&P/TSX market capitalization. In the U.S., an improving labour market heightened prospects for an eventual rise in interest rates. This development contributed to a strengthening U.S. dollar, which held back profits of U.S. multinational corporations but benefited many Canadian companies that rely on exports to the U.S. Globally, the demand for Canada s resources remained tepid. Europe s economic recovery had been lagging global peers, but the initiation of quantitative easing ( QE ) announced in January infused confidence and helped suppress concerns of low inflation. Emerging markets lagged their developed-market counterparts amid the headwinds of a strong U.S. dollar and weak commodity prices. Positive relative performance in the Consumer Discretionary and Financials sectors was partially offset by weaker performance in the Health Care and Industrials sectors. In the Consumer Discretionary sector, the Fund benefited from an overweight allocation to Tim Hortons, which was propelled higher after the company agreed to be taken over by Burger King. An overweight position in Magna International also helped relative returns, as did an overweight position in Brookfield Property Partners in the Financials sector. In Health Care, an underweight position in Valeant Pharmaceuticals hindered performance. The company spent most of the period in a takeover battle to acquire Allergan, which was eventually bought by Actavis. The failed takeover weighed on Valeant s stock, but the shares have recovered over the past quarter on stronger-thanexpected earnings. In the Industrials sector, an overweight position in Black Diamond Group hurt relative returns as demand declined for the company s camps built for oilfield workers. An underweight position in small- and mid-cap resources companies contributed to performance, as declining commodity prices had a negative impact on companies in the Materials and Energy sectors. The commodity-price uncertainty in the second half of was reflected swiftly in the share prices of energy producers, as companies with the highest production costs or financial leverage tended to be hurt most. This was a familiar scenario for the metals and mining companies, as the price decline in various metals pressured shares during the period and had a negative impact on returns. Recent Developments Expectations for Canadian equity-market returns should remain modest until energy prices convincingly bottom, in the opinion of the portfolio manager. Oil prices are difficult to forecast in the short run, and it now appears that prices will be lower on average and more volatile than seen in the recent past. A recovery in the price of oil could prompt a rally in the Canadian dollar, but the portfolio manager remains of the view that a weaker Canadian dollar is probably with us for some time. The U.S. Federal Reserve is likely to raise interest rates before the Bank of Canada, as energy markets and a fully valued housing market will remain lingering concerns in Canada. In Europe, the economy remains fragile, but the announcement of QE, coupled with a weaker euro, is setting the stage for a recovery that could help heighten demand for commodities. The Japanese economy remains challenged, but the Bank of Japan s recent decision to double down on QE has improved longer-term confidence. China continues to adjust to a lower-than-historical growth rate, with corporate-debt levels sitting at inflated levels. 36

39 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY CLASS Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 37

40 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.26) (0.18) (0.18) Mar. 31, (0.23) (0.27) (0.27) Mar. 31, (0.21) (0.13) (0.13) Mar. 31, (0.14) Advisor Series Mar. 31, (0.26) (0.19) (0.19) Mar. 31, (0.23) (0.26) (0.26) Mar. 31, (0.22) (0.14) (0.14) Mar. 31, (0.15) Series H Mar. 31, (0.23) (0.21) (0.21) Mar. 31, (0.20) (0.31) (0.31) Mar. 31, (0.15) (0.14) (0.14) Series D Mar. 31, (0.15) (0.19) (0.19) Mar. 31, (0.13) (0.32) (0.32) Mar. 31, (0.13) (0.14) (0.14) Mar. 31, (0.13) Series F Mar. 31, (0.12) (0.14) (0.14) Mar. 31, (0.11) (0.25) (0.25) Mar. 31, (0.10) (0.12) (0.12) Mar. 31, (0.12) Series I Mar. 31, (0.09) (0.10) (0.10) Mar. 31, (0.08) (0.10) (0.10) Mar. 31, (0.05) (0.14) (0.14)

41 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (0.18) (0.18) Mar. 31, (0.01) (0.30) (0.30) Mar. 31, (0.01) (0.13) (0.13) Mar. 31, (0.15) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

42 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 66% 34% Advisor Series 1.75% 66% 34% Series H 1.65% 61% 39% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 40

43 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years. Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series D 1 (%) Series F 1 (%) Series I 2 (%) 8.4% % % 16.9% 6.2% 6.4% 20 Series A 1 (%) 15.6% % 17.3% 6.6% % 5.2% Advisor Series 1 (%) 15.7% Series O 1 (%) 9.6% 17.9% 7.3% % 5.2% Series H 2 (%) % 15.9% 5.5%

44 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: S&P/TSX Capped Composite Total Return Index Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTION S&P/TSX Capped Composite Total Return Index This index is the amended capitalizationweighted index measuring the performance of selected securities listed on the Toronto Stock Exchange, with no individual stock exceeding 10% of the overall weight. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Financials 37.2 Energy 21.1 Industrials 9.4 Materials 7.4 Consumer Discretionary 4.4 Telecommunication Services 2.9 Information Technology 2.8 Consumer Staples 2.6 Utilities 2.1 Health Care 1.2 Cash/Other 8.9 Top 25 Holdings* % of Net Asset Value Royal Bank of Canada 6.4 Toronto-Dominion Bank 4.7 RBC Canadian Small & Mid-Cap Resources Fund 4.4 Cash & Cash Equivalents 4.1 Bank of Nova Scotia 4.1 Canadian National Railway Co. 3.4 Enbridge Inc. 3.0 Manulife Financial Corporation 3.0 Canadian Natural Resources Ltd. 2.7 Bank of Montreal 2.7 Canadian Imperial Bank of Commerce 2.7 Suncor Energy Inc. 2.6 TransCanada Corp. 2.5 Magna International Inc., Class A 2.1 Brookfield Asset Management Inc., Class A 1.8 Canadian Pacific Railway Ltd. 1.7 Sun Life Financial Inc. 1.6 Agrium Inc. 1.5 TELUS Corp. 1.5 Cenovus Energy Inc. 1.5 Potash Corporation of Saskatchewan Inc. 1.3 Pembina Pipeline Corp. 1.3 Alimentation Couche-Tard Inc. 1.2 ARC Resources Ltd. 1.2 BCE Inc. 1.1 Top 25 Holdings 64.1 * The Fund invests substantially all of its assets directly in the RBC Private Canadian Equity Pool. The above are the Top 25 holdings of the RBC Private Canadian Equity Pool. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 42

45 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE CANADIAN EQUITY FUND RBC QUBE LOW VOLATILITY CANADIAN EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 43

46 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY CANADIAN EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of Canadian companies. The Fund uses a quantitative investment approach and seeks to achieve a reduced level of volatility of returns compared with the broader Canadian equity market. To achieve its investment objective, the Fund invests most of its assets in the RBC QUBE Low Volatility Canadian Equity Fund (the underlying fund ). The underlying fund is managed using a quantitative investment model designed to select individual stocks while controlling portfolio-level risk. This involves building a portfolio that maximizes exposure to factors associated with outperformance, while controlling for exposure to risk factors. The portfolio manager of the underlying fund diversifies across industries within the Canadian market. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $1.5 million as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments Canadian markets experienced big swings in, but finished the year strongly and rallied into on the back of rising earnings. While valuations are not high by historical standards, they are fuller and suggest lower average returns and greater volatility for the rest of the year. As a result, the portfolio manager is more cautious on stocks. Recent Canadian economic data has been mixed, with the impact of falling crude-oil prices somewhat muted by a substantially weaker Canadian dollar. Oil prices are hard to forecast in the short run, but it now appears that they will be lower on average and more volatile than in the recent past. In the view of the portfolio manager, a weaker Canadian dollar, coupled with a stronger U.S. economy, suggests the potential for improving manufacturing exports. However, falling energy prices and a fully valued housing market are likely to remain headwinds for the Canadian economy. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. 44

47 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY CANADIAN EQUITY CLASS The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 45

48 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY CANADIAN EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.03) Series D Mar. 31, (0.02) Series F Mar. 31, (0.02) Series I Mar. 31, (0.01) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 46

49 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY CANADIAN EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 57% 43% Advisor Series 1.75% 57% 43% Series H 1.60% 63% 37% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 47

50 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY CANADIAN EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Financials 27.9 Consumer Discretionary 18.6 Consumer Staples 15.9 Energy 13.4 Utilities 8.3 Telecommunication Services 7.9 Industrials 5.9 Information Technology 1.1 Materials 0.6 Cash/Other 0.4 Top 25 Holdings* % of Net Asset Value Dollarama Inc. 4.3 Alimentation Couche-Tard Inc. 4.1 BCE Inc. 4.0 RioCan Real Estate Investment Trust 4.0 Canadian National Railway Co. 3.9 TELUS Corp. 3.9 Royal Bank of Canada 3.9 Shaw Communications Inc., Class B 3.9 Saputo Group Inc. 3.9 Fortis Inc. 3.6 George Weston Ltd. 3.5 Intact Financial Corp. 3.4 TransCanada Corp. 3.1 Canadian Tire Corp. Ltd., Class A 3.0 Bank of Montreal 3.0 Toronto-Dominion Bank 2.7 Magna International Inc., Class A 2.6 Imperial Oil Ltd. 2.5 CI Financial Corp. 2.2 Brookfield Asset Management Inc., Class A 2.2 Canadian Real Estate Investment Trust 1.8 Inter Pipeline Ltd. 1.7 Jean Coutu Group, Class A 1.7 Thomson Corp. 1.7 Empire Co. Ltd., Class A 1.6 Top 25 Holdings 76.2 * The Fund invests substantially all of its assets directly in the RBC QUBE Low Volatility Canadian Equity Fund. The above are the Top 25 holdings of the RBC QUBE Low Volatility Canadian Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 48

51 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE CANADIAN EQUITY FUND PHILLIPS, HAGER & NORTH CANADIAN EQUITY VALUE CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 49

52 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH CANADIAN EQUITY VALUE CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing in equity securities of Canadian companies. To achieve its investment objective, the Fund invests most of its assets in the Phillips, Hager & North Canadian Equity Value Fund (the underlying fund ). The underlying fund invests primarily in equities of Canadian companies priced below the portfolio manager s assessment of their true value and offering long-term opportunities for growth. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $800,000 as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments Expectations for Canadian equity-market returns should remain modest until energy prices convincingly bottom, in the opinion of the portfolio manager. Oil prices are difficult to forecast in the short run, and it now appears that prices will be lower on average and more volatile than seen in the recent past. A recovery in the price of oil could prompt a rally in the Canadian dollar, but the portfolio manager remains of the view that a weaker Canadian dollar is probably with us for some time. The U.S. Federal Reserve is likely to raise interest rates before the Bank of Canada, as energy markets and a fully valued housing market will remain lingering concerns in Canada. In Europe, the economy remains fragile, but the announcement of quantitative easing ( QE ), coupled with a weaker euro, is setting the stage for an economic recovery. The Japanese economy remains challenged, but the Bank of Japan s recent decision to double down on QE has improved longer-term confidence. China continues to adjust to a lower-than-historical growth rate, with corporate-debt measures sitting at inflated levels. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. 50

53 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH CANADIAN EQUITY VALUE CLASS The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 51

54 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH CANADIAN EQUITY VALUE CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) (0.07) (0.11) Advisor Series Mar. 31, (0.04) (0.11) (0.15) Series H Mar. 31, (0.03) (0.11) (0.14) Series D Mar. 31, (0.02) (0.06) (0.08) Series F Mar. 31, (0.01) (0.11) (0.12) Series I Mar. 31, (0.01) (0.11) (0.12) Series O Mar. 31, (0.11) (0.11) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 52

55 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH CANADIAN EQUITY VALUE CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 57% 43% Advisor Series 1.75% 57% 43% Series H 1.60% 63% 37% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 53

56 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH CANADIAN EQUITY VALUE CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Financials 38.1 Energy 21.6 Materials 8.3 Industrials 8.2 Telecommunication Services 3.9 Consumer Staples 3.8 Consumer Discretionary 3.7 Utilities 2.2 Information Technology 2.0 Health Care 0.1 Cash/Other 8.1 Top 25 Holdings* % of Net Asset Value Cash & Cash Equivalents 8.1 Royal Bank of Canada 6.2 Toronto-Dominion Bank 5.5 Bank of Nova Scotia 4.2 Canadian National Railway Co. 4.1 Suncor Energy Inc. 3.7 Canadian Natural Resources Ltd. 3.1 Enbridge Inc. 3.1 Manulife Financial Corporation 2.8 Brookfield Asset Management Inc., Class A 2.8 Bank of Montreal 2.6 Canadian Pacific Railway Ltd. 2.4 Canadian Imperial Bank of Commerce 2.1 Power Corporation of Canada 1.9 TransCanada Corp. 1.7 Loblaw Companies Ltd. 1.7 Potash Corporation of Saskatchewan Inc. 1.6 Sun Life Financial Inc. 1.5 Agrium Inc. 1.5 Thomson Corp. 1.5 TELUS Corp. 1.5 Cenovus Energy Inc. 1.4 Imperial Oil Ltd. 1.2 Rogers Communications Inc., Class B 1.2 BCE Inc. 1.2 Top 25 Holdings 68.6 * The Fund invests substantially all of its assets directly in the Phillips, Hager & North Canadian Equity Value Fund. The above are the Top 25 holdings of the Phillips, Hager & North Canadian Equity Value Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 54

57 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE CANADIAN EQUITY FUND RBC CANADIAN EQUITY INCOME CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 55

58 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY INCOME CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in a diversified portfolio of Canadian securities including, but not limited to, common and preferred shares of Canadian companies that pay dividends, real estate investment trusts and income trusts. To achieve its investment objective, the Fund invests most of its assets in the RBC Canadian Equity Income Fund (the underlying fund ). The underlying fund invests primarily in a diversified portfolio of Canadian equity securities including common and preferred shares, real estate investment trusts and income trusts. The underlying fund may also invest in fixed-income securities, such as government and corporate bonds, debentures and notes. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $259 million as of, from $204 million as of,. Most of the change was due to net inflows. Over the past year, the Fund s Series A shares gained 4.9%, which underperformed the 6.9% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. The S&P/TSX Composite Index, Canada s equity benchmark, underperformed most other global indexes during the period. While the decline in commodity prices weighed on many global markets beginning in September, the resource-heavy Canadian index lagged its peers in the rally that followed. The price of crude oil led commodityprice declines, as OPEC opted to maintain production levels even with a global oil glut caused by surging U.S. shale-oil output. This led to a decline in Canadian energy stocks, which account for about a quarter of the S&P/TSX market capitalization. In the U.S., an improving labour market heightened prospects for an eventual rise in interest rates. This development contributed to a strengthening U.S. dollar, which held back profits of U.S. multinational corporations but benefited many Canadian companies that rely on exports to the U.S. Globally, the demand for Canada s resources remained tepid. Europe s economic recovery had been lagging global peers, but the initiation of quantitative easing ( QE ) announced in January infused confidence and helped suppress concerns of low inflation. Emerging markets lagged their developed-market counterparts amid the headwinds of a strong U.S. dollar and weak commodity prices. Strong relative performance in the Utilities and Financials sectors was offset by weaker performance in the Industrials and Energy sectors. In the Utilities sector, the Fund benefited from an above-benchmark allocation to Brookfield Renewable Energy Partners and a position in Brookfield Infrastructure Partners. Shares of Brookfield Renewable Energy Partners, one of the largest global companies focused exclusively on renewable power, rose amid plans to increase the targeted percentage of income distributed to unitholders and the positive effect of a lower cost of capital on the company s ability to make acquisitions. In Financials, an overweight position in Brookfield Property Partners aided relative returns. An underweight position in the Industrials sector hindered performance. Below-benchmark exposure to Canadian National Railway and Canadian Pacific Railway hurt performance as the companies benefited from strong rail volumes and rising earnings. In the Energy sector, a significant decline in commodity prices in the latter half of weighed on share prices. As a result, overweight positions in Encana and Trinidad Drilling held back returns. Recent Developments Expectations for Canadian equity-market returns should remain modest until energy prices convincingly bottom, in the opinion of the portfolio manager. Oil prices are difficult to forecast in the short run, and it now appears that prices will be lower on average and more volatile than seen in the recent past. A recovery in the price of oil could prompt a rally in the Canadian dollar, but the portfolio manager remains of the view that a weaker Canadian dollar is probably with us for some time. The U.S. Federal Reserve is likely to raise interest rates before the Bank of Canada, as energy markets and a fully valued housing market will remain lingering concerns in Canada. In Europe, the economy remains fragile, but the announcement of QE, coupled with a weaker euro, is setting the stage for a recovery that could help heighten demand for commodities. The Japanese economy remains challenged, but the Bank of Japan s recent decision to double down on QE has improved longer-term confidence. China continues to adjust to a lower-than-historical growth rate, with corporate-debt measures sitting at inflated levels. 56

59 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY INCOME CLASS Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 57

60 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY INCOME CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.28) 0.65 (0.33) 0.53 (0.17) (0.17) Mar. 31, (0.24) (0.12) (0.12) Mar. 31, (0.22) (0.02) (0.02) Mar. 31, (0.05) Advisor Series Mar. 31, (0.28) 0.65 (0.33) 0.53 (0.18) (0.18) Mar. 31, (0.24) (0.13) (0.13) Mar. 31, (0.22) (0.02) (0.02) Mar. 31, (0.05) Advisor T5 Series Mar. 31, (0.05) 0.11 (0.06) 0.08 (0.11) (0.11) Series T5 Mar. 31, (0.05) 0.11 (0.06) 0.08 (0.11) (0.11) Series H Mar. 31, (0.25) 0.66 (0.33) 0.57 (0.16) (0.16) Mar. 31, (0.22) (0.11) (0.11) Mar. 31, (0.15) (0.02) (0.02) Series D Mar. 31, (0.16) 0.67 (0.34) 0.67 (0.16) (0.16) Mar. 31, (0.14) (0.14) (0.14) Mar. 31, (0.13) (0.02) (0.02) Mar. 31, (0.03) Series F Mar. 31, (0.13) 0.67 (0.34) 0.70 (0.16) (0.16) Mar. 31, (0.11) (0.13) (0.13) Mar. 31, (0.10) (0.02) (0.02) Mar. 31, (0.02) Series FT5 Mar. 31, (0.02) 0.12 (0.06) 0.13 (0.12) (0.12) Series I Mar. 31, (0.10) 0.68 (0.34) 0.75 (0.16) (0.16) Mar. 31, (0.09) (0.12) (0.12) Mar. 31, (0.06) (0.02) (0.02)

61 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY INCOME CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (0.35) 0.87 (0.31) (0.31) Mar. 31, (0.12) (0.12) Mar. 31, (0.02) (0.02) Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From October 16,. 5 From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor T5 Series Mar. 31, Series T5 Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series FT5 Mar. 31,

62 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY INCOME CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series I Mar. 31, Mar. 31, Mar. 31, Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From October 16,. 6 From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 66% 34% Advisor Series 1.75% 66% 34% Advisor T5 Series 1.75% 66% 34% Series T5 1.75% 66% 34% Series H 1.65% 70% 30% Series D 1.00% 25% 75% Series F 0.75% 100% Series FT5 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 60

63 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY INCOME CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years Series H 3 (%) Series D 1 (%) 12.9% % 18.1% 5.1% Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year. 20 Series A 1 (%) 17.1% Series F 1 (%) 8.9% % 18.4% 5.9% 6.1% % 4.9% Series FT5 2 (%) 2013 Advisor Series 1 (%) % 17.1% 4.9% % Advisor T5 Series 2 (%) Series I 3 (%) 13.8% 18.7% 6.4% % Series T5 2 (%) Series O 1 (%) % 19.5% 7.0% %

64 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN EQUITY INCOME CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: S&P/TSX Capped Composite Total Return Index Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Advisor T5 Series Benchmark 12.8 Series T Benchmark 12.8 Series H Benchmark Series D Benchmark Series F Benchmark Series FT Benchmark 12.8 Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date January 26,. 3 Inception date July 9, INDEX DESCRIPTION S&P/TSX Capped Composite Total Return Index This index is the amended capitalizationweighted index measuring the performance of selected securities listed on the Toronto Stock Exchange, with no individual stock exceeding 10% of the overall weight. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Financials 38.4 Energy 27.9 Industrials 7.9 Utilities 7.4 Materials 4.7 Telecommunication Services 4.3 Consumer Discretionary 3.3 Consumer Staples 2.0 Health Care 0.9 Information Technology 0.6 Cash/Other 2.6 Top 25 Holdings* % of Net Asset Value Royal Bank of Canada 5.3 Suncor Energy Inc. 3.6 Bank of Nova Scotia 3.6 Manulife Financial Corporation 3.4 Enbridge Inc. 3.4 Toronto-Dominion Bank 3.2 Canadian Imperial Bank of Commerce 3.0 TransCanada Corp. 2.9 Canadian Natural Resources Ltd. 2.9 Cash & Cash Equivalents 2.4 Brookfield Property Partners LP 2.2 Bank of Montreal 2.1 Potash Corporation of Saskatchewan Inc. 1.8 Sun Life Financial Inc. 1.7 Brookfield Asset Management Inc., Class A 1.7 TELUS Corp. 1.6 Magna International Inc., Class A 1.5 Pembina Pipeline Corp. 1.4 Boardwalk Real Estate Investment Trust 1.3 BCE Inc. 1.2 Brookfield Renewable Energy Partners LP 1.1 CI Financial Corp. 1.1 AT&T Inc. 1.1 Veresen Inc. 1.1 Northland Power Inc. 1.0 Top 25 Holdings 55.6 * The Fund invests substantially all of its assets directly in the RBC Canadian Equity Income Fund. The above are the Top 25 holdings of the RBC Canadian Equity Income Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 62

65 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE CANADIAN EQUITY FUND RBC CANADIAN MID-CAP EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 63

66 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN MID-CAP EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of mid-sized Canadian companies that offer above-average prospects for growth and may also invest in smaller capitalization companies that have adequate liquidity. To achieve its investment objective, the Fund invests most of its assets in the RBC Private Canadian Mid-Cap Equity Pool (the underlying fund ). The underlying fund focuses on companies with a history of high growth in sales and earnings, with above-average prospects for continued growth. The underlying fund invests in companies with strong management, focused business models and a competitive advantage. The underlying fund typically invests across major industry sectors within minimum and maximum exposures for each sector. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $11 million as of, from $10 million as of,. Most of the change was due to net inflows. Over the past year, the Fund s Series A shares lost 0.1%, which outperformed the 2.5% decline in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. The S&P/TSX Composite Index, Canada s equity benchmark, underperformed most other global indexes during the period. While the decline in commodity prices weighed on many global markets beginning in September, the resource-heavy Canadian index lagged its peers in the rally that followed. The price of crude oil led commodityprice declines, as OPEC opted to maintain production levels even with a global oil glut caused by rising U.S. shale-oil output and softening demand. This led to a decline in Canadian energy stocks, which account for about a quarter of the S&P/TSX market capitalization. In the U.S., an improving labour market heightened prospects for an eventual rise in interest rates. This development contributed to a strengthening U.S. dollar, which held back profits of U.S. multinational corporations but benefited many Canadian companies that rely on exports to the U.S. Globally, the demand for Canada s resources remained tepid. Europe s economic recovery had been lagging global peers, but the initiation of quantitative easing ( QE ) announced in January infused confidence and helped suppress concerns of low inflation. Emerging markets lagged their developed-market counterparts amid the headwinds of a strong U.S. dollar and weak commodity prices. Mid-cap stocks underperformed their larger-cap peers during the 12-month period. Within the Fund, strong relative performance in the Energy, Materials and Consumer Discretionary sectors was offset by weakness in the Industrials and Utilities sectors. In the Energy sector, security selection helped offset the negative impact of falling prices for crude oil and natural gas. The Fund benefited from limited exposure to Pacific Rubiales, which declined significantly during the period. A lack of exposure to Penn West Petroleum and Athabasca Oil also contributed to the Fund s performance Security selection in the Materials sector proved beneficial. Relative returns were boosted by overweight positions in Eldorado Gold and West Fraser Timber. A lack of exposure to Labrador Iron Ore also helped performance. In the Consumer Discretionary sector, the Fund s lack of exposure to underperformer AutoCanada bolstered relative performance. An overweight position in Linamar also proved beneficial as the auto-parts maker reported strong earnings and forecast improved profit margins. In the Industrials sector, a lack of exposure to Toromont and Ritchie Bros. contributed negatively to performance as both stocks moved higher during the period. This was somewhat offset by a lack of exposure to underperformer Badger Daylighting. Relative performance in the Utilities sector was weighed down by underweight positions in Brookfield Renewable Energy Partners and TransAlta Corp. Recent Developments Expectations for Canadian equity-market returns should remain modest until energy prices convincingly bottom, in the opinion of the portfolio manager. Oil prices are difficult to forecast in the short run, and it now appears that prices will be lower on average and more volatile than seen in the recent past. A recovery in the price of oil could prompt a rally in the Canadian dollar, but the portfolio manager remains of the view that a weaker Canadian dollar is probably with us for some time. The U.S. Federal Reserve is likely to raise interest rates before the Bank of Canada, as energy markets and a fully valued housing market will remain lingering concerns in Canada. In Europe, the economy remains fragile, but the announcement of QE, coupled with a weaker euro, is setting the stage for an economic 64

67 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN MID-CAP EQUITY CLASS recovery. The Japanese economy remains challenged, but the Bank of Japan s recent decision to double down on QE has improved longerterm confidence. China continues to adjust to a lower-than-historical growth rate, with corporate-debt levels sitting at inflated levels. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 65

68 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN MID-CAP EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.25) 1.07 (1.14) (0.07) (0.21) (0.21) Mar. 31, (0.23) (0.16) (0.16) Mar. 31, (0.21) (0.10) (0.10) Mar. 31, (0.05) (0.22) (0.17) 9.83 Advisor Series Mar. 31, (0.24) 1.08 (1.14) (0.05) (0.17) (0.17) Mar. 31, (0.22) (0.09) (0.09) Mar. 31, (0.19) (0.04) (0.04) Mar. 31, (0.07) (0.01) (0.22) (0.20) 9.83 Series H Mar. 31, (0.21) 1.07 (1.14) (0.03) (0.21) (0.21) Mar. 31, (0.20) (0.22) (0.22) Mar. 31, (0.13) (0.10) (0.10) Series D Mar. 31, (0.15) 1.11 (1.18) 0.03 (0.29) (0.29) Mar. 31, (0.14) (0.04) (0.04) Mar. 31, (0.13) (0.07) (0.07) Mar. 31, (0.04) (0.22) (0.16) 9.85 Series F Mar. 31, (0.11) 1.11 (1.18) 0.07 (0.29) (0.29) Mar. 31, (0.10) (0.20) (0.20) Mar. 31, (0.10) (0.07) (0.07) Mar. 31, (0.04) (0.22) (0.16) 9.86 Series I Mar. 31, (0.08) 1.11 (1.18) 0.10 (0.21) (0.21) Mar. 31, (0.08) (0.22) (0.22) Mar. 31, (0.05) (0.10) (0.10)

69 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN MID-CAP EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (1.20) 0.19 (0.21) (0.21) Mar. 31, (0.01) (0.19) (0.19) Mar. 31, (0.01) (0.09) (0.09) Mar. 31, (0.01) (0.22) (0.13) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

70 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN MID-CAP EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 66% 34% Advisor Series 1.75% 66% 34% Series H 1.65% 70% 30% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 68

71 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN MID-CAP EQUITY CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years Series D 1 (%) Series F 1 (%) 9.0% % 16.8% 0.7% Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series I 2 (%) 9.3% % Series A 1 (%) % 17.0% % 15.4% % Advisor Series 1 (%) % 15.6% -0.1% 0.0% Series O 1 (%) % 17.7% 1.9% Series H 2 (%) % 15.7% 0.2%

72 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC CANADIAN MID-CAP EQUITY CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: S&P/TSX MidCap Index Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTION S&P/TSX MidCap Index This is an index of mid-sized Canadian companies, with weights adjusted across economic sectors. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Energy 22.4 Financials 21.2 Materials 15.8 Industrials 13.2 Utilities 8.5 Consumer Discretionary 8.0 Consumer Staples 4.4 Information Technology 4.1 Health Care 0.5 Cash/Other 1.9 Top 25 Holdings* % of Net Asset Value Canadian Utilities Ltd., Class A 3.7 West Fraser Timber Co. Ltd. 2.8 Brookfield Property Partners LP 2.8 H&R Real Estate Investment Trust 2.6 Onex Corporation 2.5 Emera Inc. 2.3 Veresen Inc. 2.2 Canadian Real Estate Investment Trust 2.1 Whitecap Resources Inc. 2.1 AltaGas Ltd. 1.9 SNC-Lavalin Group Inc. 1.8 Linamar Corp. 1.8 George Weston Ltd. 1.8 Progressive Waste Solutions Ltd. 1.7 Allied Properties Real Estate Investment Trust 1.7 Industrial Alliance Insurance & Financial Services Inc. 1.7 Methanex Corp. 1.6 Brookfield Renewable Energy Partners LP 1.6 Element Financial Corp. 1.6 Paramount Resources Ltd., Class A 1.6 Blackberry Ltd. 1.6 Cineplex Inc. 1.6 CAE Inc. 1.5 Empire Co. Ltd., Class A 1.5 Granite Real Estate Investment Trust 1.4 Top 25 Holdings 49.5 * The Fund invests substantially all of its assets directly in the RBC Private Canadian Mid-Cap Equity Pool. The above are the Top 25 holdings of the RBC Private Canadian Mid-Cap Equity Pool. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 70

73 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE NORTH AMERICAN EQUITY FUND RBC NORTH AMERICAN VALUE CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 71

74 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing in equity securities of Canadian and/or U.S. companies priced below their true value and offering long-term opportunities for growth. To achieve its investment objective, the Fund invests most of its assets in the RBC North American Value Fund (the underlying fund ). The underlying fund identifies quality companies that are undervalued based on criteria such as assets, earnings and cash flow. The approach provides for a lower level of volatility than a portfolio of growth companies. The underlying fund may also invest in income trusts. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $203 million as of, from $144 million as of,. Of the change, $38 million was due to net inflows and $21 million to investment returns. Over the past year, the Fund s Series A shares gained 12.1%, which exceeded the 6.9% rise in the S&P/TSX Capped Composite Total Return Index. The shares lagged the 29.2% rise in the S&P 500 Index. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. The S&P/TSX Composite Index, Canada s equity benchmark, underperformed most other global indexes during the period, including the S&P 500. While the decline in commodity prices weighed on many global markets beginning in September, the resource-heavy Canadian index lagged its peers in the rally that followed. The price of crude oil led commodity-price declines, as OPEC opted to maintain production levels even with a global oil glut caused by rising U.S. shale-oil output and softening demand. This led to a decline in Canadian energy stocks, which account for about a quarter of the S&P/TSX market capitalization. In the U.S., an improving labour market heightened prospects for an eventual rise in interest rates. This development contributed to a strengthening U.S. dollar, which held back profits of U.S. multinational corporations but benefited many Canadian companies that rely on exports to the U.S. U.S. equity markets continued their advance during the fiscal year as corporate earnings extended their gains, propelled by rising revenues and earnings. The positive impact of a recovering domestic economy offset the negative effect of sluggish global growth and colder-thanusual weather in the northeastern U.S. Improved consumer spending and employment growth prompted the U.S. Federal Reserve (the Fed ) to conclude its extraordinarily loose monetary policy known as quantitative easing ( QE ), and the central bank signalled that it was moving closer to raising short-term benchmark interest rates sometime in, although the timing remains dependent on incoming economic data. The Fund benefited from security selection in Canada s Financials sector. Significant exposure to Brookfield Asset Management proved beneficial as increased assets under management bolstered the outlook for fee revenue. An underweight position in the Materials sector in Canada helped the Fund s relative performance. A complete lack of exposure to gold producer Yamana Gold along with an underweight position in Barrick Gold, proved beneficial amid a decline in the price of gold. In the U.S., above benchmark exposure to the Health Care sector had a positive impact on the Fund s performance. Specific exposure to Amerisource-Bergen had a positive impact as the stock rose significantly during the period. This was somewhat offset by a lack of exposure to the Canadian Health Care sector, specifically Valeant Pharmaceuticals. Underweight exposure to the U.S. Information Technology sector weighed on the Fund s relative performance. Positions that had a negative impact on the Fund s returns were underweight exposure to Apple Inc. and lack of exposure to Facebook. Recent Developments Expectations for Canadian equity-market returns should remain modest until energy prices convincingly bottom, in the opinion of the portfolio manager. Oil prices are difficult to forecast in the short run, and it now appears that prices will be lower on average and more volatile than seen in the recent past. A recovery in the price of oil could prompt a rally in the Canadian dollar, but the portfolio manager remains of the view that a weaker Canadian dollar is probably with us for some time. The Fed is likely to raise interest rates before the Bank of Canada, as energy markets and a fully valued housing market will remain lingering concerns in Canada. In Europe, the economy remains fragile, but the announcement of QE, coupled with a weaker euro, is setting the stage for an economic recovery. The Japanese economy remains challenged, but the Bank of Japan s recent decision to double down on QE has improved longerterm confidence. China continues to adjust to a lower-than-historical growth rate, with corporate-debt measures sitting at inflated levels. 72

75 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 73

76 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.30) Mar. 31, (0.26) (0.11) (0.11) Mar. 31, (0.23) (0.07) (0.07) Mar. 31, (0.06) Advisor Series Mar. 31, (0.31) Mar. 31, (0.27) (0.11) (0.11) Mar. 31, (0.23) (0.07) (0.07) Mar. 31, (0.06) Series H Mar. 31, (0.28) Mar. 31, (0.24) (0.11) (0.11) Mar. 31, (0.16) (0.06) (0.06) Series D Mar. 31, (0.18) Mar. 31, (0.15) (0.11) (0.11) Mar. 31, (0.14) (0.07) (0.07) Mar. 31, (0.04) Series F Mar. 31, (0.14) Mar. 31, (0.12) (0.11) (0.11) Mar. 31, (0.10) (0.08) (0.08) Mar. 31, (0.03) Series I Mar. 31, (0.11) Mar. 31, (0.09) (0.11) (0.11) Mar. 31, (0.06) (0.06) (0.06)

77 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, Mar. 31, (0.11) (0.11) Mar. 31, (0.01) (0.09) (0.09) Mar. 31, (0.06) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

78 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 66% 34% Advisor Series 1.75% 66% 34% Series H 1.65% 70% 30% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 76

79 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years. Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series A 1 (%) 10.9% 19.7% 12.1% Series D 1 (%) Series F 1 (%) Series I 2 (%) 11.8% % % 20.8% 21.1% 21.3% 13.1% 13.4% 13.6% Advisor Series 1 (%) % 19.6% 12.1% Series O 1 (%) % 22.2% 14.4% Series H 2 (%) 16.5% 19.9% 12.3%

80 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmarks: Benchmark 1 S&P 500 Total Return Index (CAD) Benchmark 2 S&P/TSX Capped Composite Total Return Index Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Benchmark Advisor Series Benchmark Benchmark Series H Benchmark Benchmark Series D Benchmark Benchmark Series F Benchmark Benchmark Series I Benchmark Benchmark Series O Benchmark Benchmark SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix Sectors % of Net Asset Value Financials 28.7 Energy 13.2 Health Care 10.3 Industrials 9.3 Consumer Staples 7.0 Information Technology 6.6 Consumer Discretionary 6.2 Materials 3.8 Telecommunication Services 2.3 Utilities 1.4 Cash/Other 11.2 Investment Mix Countries/Regions % of Net Asset Value Canada 47.2 United States 41.5 Cash/Other 11.3 The returns of each series may vary because of differences in management fees and expenses. The Benchmark index returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark indexes. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTIONS S&P 500 Total Return Index (CAD) This index is a capitalization-weighted index measuring the Canadian dollar performance of 500 widely held common stocks representing all major industries in the United States. The index gives investors a broad measure of the overall performance of the U.S. stock market. S&P/TSX Capped Composite Total Return Index This index is the amended capitalizationweighted index measuring the performance of selected securities listed on the Toronto Stock Exchange, with no individual stock exceeding 10% of the overall weight. 78

81 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC NORTH AMERICAN VALUE CLASS SUMMARY OF INVESTMENT PORTFOLIO (cont.) (after consideration of derivative products, if any) As at Top 25 Holdings* % of Net Asset Value Cash & Cash Equivalents 11.6 Royal Bank of Canada 3.0 Bank of Nova Scotia 2.8 Brookfield Asset Management Inc., Class A 2.7 Apple Inc. 2.0 Toronto-Dominion Bank 2.0 Canadian Natural Resources Ltd. 1.7 Suncor Energy Inc. 1.5 Canadian National Railway Co. 1.5 Manulife Financial Corporation 1.4 Fairfax India Holdings Corp. 1.2 AmerisourceBergen Corp. 1.1 Husky Energy Inc. 1.1 Google Inc., Class C 1.0 Enbridge Inc. 1.0 Anthem Inc. 1.0 JPMorgan Chase & Co. 1.0 CVS Health Corp. 1.0 Canadian Imperial Bank of Commerce 1.0 Abbott Laboratories 1.0 Brookfield Property Partners LP 1.0 Canadian Pacific Railway Ltd. 1.0 Imperial Oil Ltd. 1.0 UnitedHealth Group Incorporated 1.0 Lowe s Companies 0.9 Top 25 Holdings 45.5 * The Fund invests substantially all of its assets directly in the RBC North American Value Fund. The above are the Top 25 holdings of the RBC North American Value Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 79

82 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE U.S. EQUITY FUND RBC U.S. DIVIDEND CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 80

83 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. DIVIDEND CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth and regular dividend income by investing primarily in common and preferred shares of major U.S. companies with above-average dividend yields in order to provide targeted exposure to opportunities in U.S. equity markets. Stocks that qualify as investments will generally carry aboveaverage dividend yields and offer the potential for increased payouts. To achieve its investment objective, the Fund invests most of its assets in the RBC U.S. Dividend Fund (the underlying fund ). The underlying fund invests in companies with long-term prospects of growing their dividends or which have the potential for such special events as stock buybacks, takeovers and special dividends. The underlying fund may also invest in government bonds, corporate bonds and treasury bills. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $103 million as of, from $52 million as of,. Of the change, $34 million was due to net inflows and $17 million to investment returns. Over the past year, the Fund s Series A shares gained 24.5%, which underperformed the 29.2% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. The S&P 500 experienced a solid advance during the period, driven by improvement in the outlook for the U.S. economy, decent earnings given the muted growth environment, substantial improvement in the U.S. fiscal deficit, very low reported inflation, and extremely accommodative global monetary policies. The U.S. Federal Reserve s (the Fed ) loose approach to monetary policy continued to keep interest rates low, make returns on cash deposits highly unattractive and lower the odds that a number of dire end game scenarios might take place. The domestically focused Health Care and Consumer Discretionary sectors were the best-performing in the Fund during the period, with help from the more globally focused Information Technology and Consumer Staples sectors, which moved higher as energy prices moved lower. Underweight positions in the Energy, Telecommunication Services, Materials and Financials sectors aided returns. Strong stock selection in the Industrials sector also contributed. Anthem Inc., a health-management organization, and Cardinal Health, a drug distributor, were stand-outs in the Health Care sector, as rising demand for health-care services and products drove rapid revenue and earnings growth. CVS Health, the largest drugstore chain, and Altria, which makes cigarettes, were leaders in the Consumer Staples sector. Apple Inc. again led the Information Technology sector, thanks to launch of its latest smartphone, the iphone 6. Performance was hurt by some of the Fund s positions in the Information Technology sector, where weaker-than-expected demand for PCs and a strong U.S. dollar blunted earnings of Hewlett-Packard and Microsoft. The Fund s large position in Energy producer ConocoPhillips also hurt performance, as the company s financials were negatively impacted by the sharp drop in the price of oil. A large position in Bank of America also detracted from performance, with lower capital-markets activity and regulatory changes pressuring earnings. The Fund s position in LyondellBasell was a drag on performance as the fall in oil prices squeezed margins and reduced earnings. Recent Developments In the portfolio manager s opinion, the S&P 500 is likely to generate a modest rate of return over the next 12 months given that valuations are above historical levels and earnings growth is subpar. However, in light of the large drop in energy prices, low interest rates and extensive monetary stimulus found globally, the portfolio manager expects economic activity to accelerate later in driven by improved consumer spending and a resurgence in housing. Importantly, stocks remain attractive relative to bonds as the S&P 500 s free-cash-flow and earnings yields remain well above fixed-income yields. Historically, bull markets end when robust economic activity results in tight labour markets and wage inflation above 4%. In this environment, the Fed generally raises short-term interest rates to slow inflation and economic activity stalls over the next several quarters. At the moment, the portfolio manager believes that the Fed will begin raising short-term rates in the fall of but that it will take some time before monetary policy poses a threat to the economic expansion. 81

84 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. DIVIDEND CLASS Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 82

85 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. DIVIDEND CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.32) Mar. 31, (0.25) Mar. 31, (0.09) Advisor Series Mar. 31, (0.31) Mar. 31, (0.26) Mar. 31, (0.09) Series H Mar. 31, (0.29) Mar. 31, (0.23) Mar. 31, (0.09) Series D Mar. 31, (0.18) Mar. 31, (0.14) Mar. 31, (0.06) Series F Mar. 31, (0.14) Mar. 31, (0.12) Mar. 31, (0.05) Series I Mar. 31, (0.11) Mar. 31, (0.09) Mar. 31, (0.04) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 31, Initial offering net asset value per mutual fund share. 83

86 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. DIVIDEND CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 31, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 66% 34% Advisor Series 1.75% 66% 34% Series H 1.65% 70% 30% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% * Includes all costs related to management, investment advisory services, general administration and profit. 84

87 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. DIVIDEND CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years. Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series A 1 (%) 9.0% % 24.5% Series D 1 (%) Series F 1 (%) Series I 1 (%) 9.4% % % % 25.6% 29.1% 25.9% 29.4% 26.2% Advisor Series 1 (%) % 27.7% 24.5% Series H 1 (%) % 28.0% 24.7%

88 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. DIVIDEND CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: S&P 500 Total Return Index (CAD) Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date October 31, INDEX DESCRIPTION S&P 500 Total Return Index (CAD) This index is a capitalization-weighted index measuring the Canadian dollar performance of 500 widely held common stocks representing all major industries in the United States. The index gives investors a broad measure of the overall performance of the U.S. stock market. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Information Technology 19.9 Health Care 17.7 Financials 15.5 Consumer Staples 11.6 Industrials 10.9 Consumer Discretionary 10.9 Energy 7.0 Materials 1.5 Telecommunications 1.5 Utilities 1.3 Cash/Other 2.2 Top 25 Holdings* % of Net Asset Value Apple Inc. 6.0 Microsoft Corp. 3.7 Pfizer Inc. 3.0 Intel Corp. 2.6 Johnson & Johnson 2.5 JPMorgan Chase & Co. 2.5 Altria Group Inc. 2.5 Wells Fargo & Company 2.4 General Electric Company 2.4 Cash & Cash Equivalents 2.2 ConocoPhillips 2.1 PepsiCo Inc. 2.0 Cardinal Health Inc. 2.0 CVS Health Corp. 2.0 Cisco Systems Inc. 2.0 Merck & Co. Inc. 2.0 Gilead Sciences Inc. 2.0 Philip Morris International Inc. 2.0 Seagate Technology 1.9 Medtronic Plc. 1.9 McDonald s Corp. 1.8 Reynolds American Inc. 1.6 Blackstone Group LP 1.6 Macy s Inc. 1.5 LyondellBasell Industries N.V. 1.5 Top 25 Holdings 57.7 * The Fund invests substantially all of its assets directly in the RBC U.S. Dividend Fund. The above are the Top 25 holdings of the RBC U.S. Dividend Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 86

89 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE U.S. EQUITY FUND RBC U.S. EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 87

90 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of major U.S. companies. To achieve its investment objective, the Fund invests most of its assets in the RBC Private U.S. Equity Pool and/or the RBC U.S. Equity Fund (the underlying funds ). The underlying funds diversify across industries and invest in companies with strong management, focused business models and the potential for growth in earnings and cash flow. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $31 million as of, from $21 million as of,. Of the change, $6 million was due to investment returns and $4 million was due to net inflows. Over the past year, the Fund s Series A shares gained 21.8%, which underperformed the 29.2% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. U.S. equity markets continued their advance during the fiscal year as corporate earnings extended their gains, propelled by rising revenues and earnings. The positive impact of a recovering domestic economy offset the negative effect of sluggish global growth and colder-thanusual weather in the northeastern U.S. Improved consumer spending and employment growth prompted the U.S. Federal Reserve (the Fed ) to conclude its extraordinarily loose monetary policy known as quantitative easing, and the central bank signalled that it was moving closer to raising short-term benchmark interest rates sometime in. The Fund s underperformance was due to subpar stock selection in the Information Technology and Financials sectors, along with underweight exposure to the Health Care sector. On the positive side, the Fund benefited from a decision to hold a lower-than-benchmark position in the Energy, Telecommunication Services and Financials sectors, as these sectors underperformed the broad market. Increased exposure to the Consumer Staples sector and good stock selection in the Industrials sector also contributed to the Fund s performance. Companies that had a negative impact on performance were Whiting Petroleum, Macy s and Cimarex Energy. Companies that aided relative returns were Kroger, Northrop Grumman and Southwest Airlines. Recent Developments The portfolio manager remains somewhat optimistic about prospects for the U.S. equity market in against a backdrop of rising corporate profits, relatively low inflation and falling commodity prices. Stocks have risen closer to fair value after several years of being undervalued, and this environment suggests that investors will have to be more selective in the stocks that they hold in their portfolio. In the portfolio manager s opinion, the Fed will need to move cautiously when it starts to raise interest rates to avoid jeopardizing the economic recovery. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: 88

91 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY CLASS Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 89

92 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.34) Mar. 31, (0.28) Mar. 31, (0.23) Mar. 31, (0.06) Advisor Series Mar. 31, (0.33) Mar. 31, (0.28) Mar. 31, (0.23) Mar. 31, (0.06) Series H Mar. 31, (0.31) Mar. 31, (0.27) Mar. 31, (0.14) Series D Mar. 31, (0.18) Mar. 31, (0.15) Mar. 31, (0.13) Mar. 31, (0.04) Series F Mar. 31, (0.15) Mar. 31, (0.13) Mar. 31, (0.10) Mar. 31, (0.03) Series I Mar. 31, (0.12) Mar. 31, (0.11) Mar. 31, (0.06)

93 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (0.01) Mar. 31, (0.01) Mar. 31, (0.01) Mar. 31, (0.01) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

94 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 66% 34% Advisor Series 1.75% 66% 34% Series H 1.65% 70% 30% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 92

95 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years. Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series D 1 (%) Series F 1 (%) Series I 2 (%) 11.2% % % 23.0% 27.5% 23.3% Series A 1 (%) 10.3% 26.0% 21.8% % 27.9% 23.5% Series O 1 (%) Advisor Series 1 (%) 10.3% 26.0% 21.9% % 28.6% 24.4% Series H 2 (%) % 26.4% 22.1%

96 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: S&P 500 Total Return Index (CAD) Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTION S&P 500 Total Return Index (CAD) This index is a capitalization-weighted index measuring the Canadian dollar performance of 500 widely held common stocks representing all major industries in the United States. The index gives investors a broad measure of the overall performance of the U.S. stock market. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Information Technology 20.0 Consumer Discretionary 18.8 Financials 15.7 Health Care 13.4 Industrials 11.7 Consumer Staples 6.6 Energy 5.4 Utilities 3.3 Telecommunications 1.5 Materials 1.1 Cash/Other 2.5 Top 25 Holdings* % of Net Asset Value Apple Inc. 4.9 Cash & Cash Equivalents 2.4 Lockheed Martin Corporation 2.0 BlackRock Inc. 2.0 Blackstone Group LP 1.8 JPMorgan Chase & Co. 1.8 Anthem Inc. 1.8 Google Inc., Class A 1.7 Pfizer Inc. 1.7 Texas Instruments Inc. 1.7 Edison International 1.7 Starbucks Corp. 1.7 United Technologies Corp. 1.6 PG&E Corporation 1.6 UnitedHealth Group Incorporated 1.6 Wells Fargo & Company 1.6 CVS Health Corp. 1.6 Citigroup Inc. 1.6 Home Depot Inc. 1.6 Actavis Plc. 1.5 KeyCorp 1.5 Ryder System Inc. 1.5 CBS Corp. 1.5 Honeywell International Inc. 1.5 Facebook Inc., Class A 1.5 Top 25 Holdings 45.4 * The Fund invests substantially all of its assets directly in the RBC Private U.S. Equity Pool. The above are the Top 25 holdings of the RBC Private U.S. Equity Pool. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 94

97 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE U.S. EQUITY FUND RBC QUBE LOW VOLATILITY U.S. EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 95

98 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY U.S. EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of U.S. companies. The Fund uses a quantitative approach and seeks to achieve a reduced level of volatility of returns compared with the broader U.S. equity market. To achieve its investment objective, the Fund invests most of its assets in the RBC QUBE Low Volatility U.S. Equity Fund (the underlying fund ). The underlying fund is managed using a quantitative investment model designed to select individual stocks while controlling portfolio-level risk. This involves building a portfolio that maximizes exposure to factors associated with outperformance, while controlling for exposure to risk factors. The portfolio manager of the underlying fund will diversify across industries within the U.S. equity market. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $3.4 million as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments Equities continued to rally through and into on rising earnings, and valuations for most major equity markets are not yet expensive by historical comparison. However, with fuller valuations, comes the potential for lower average returns and greater volatility. As a result, the portfolio manager is more cautious on stocks. Uneven economic growth was one of the hallmarks of. For, the portfolio manager expects growth to come from a broader set of global economies as Europe continues to heal, albeit slowly. As the global economic recovery becomes self-sustaining, the portfolio manager expects rising corporate profits to sustain the bull market. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. 96

99 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY U.S. EQUITY CLASS The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 97

100 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY U.S. EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.03) Series D Mar. 31, (0.02) Series F Mar. 31, (0.02) Series I Mar. 31, (0.01) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 98

101 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY U.S. EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 57% 43% Advisor Series 1.75% 57% 43% Series H 1.60% 63% 37% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 99

102 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY U.S. EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Consumer Staples 24.4 Utilities 15.5 Information Technology 13.1 Financials 11.5 Health Care 11.1 Consumer Discretionary 9.4 Industrials 7.5 Energy 3.0 Telecommunication Services 2.6 Materials 1.7 Cash/Other 0.2 Top 25 Holdings* % of Net Asset Value PepsiCo Inc. 3.0 Costco Wholesale Corp. 3.0 Wal-Mart Stores, Inc. 2.9 Johnson & Johnson 2.9 3M Co. 2.8 Colgate-Palmolive Company 2.3 Wells Fargo & Company 2.3 McDonald s Corp. 2.3 Verizon Communications Inc. 2.1 The Procter & Gamble Co. 2.1 Altria Group Inc. 2.1 Exxon Mobil Corp. 2.0 Apple Inc. 2.0 AmerisourceBergen Corp. 1.9 Berkshire Hathaway Inc., Class B 1.8 Sempra Energy 1.8 DTE Energy Company 1.7 Home Depot Inc. 1.7 General Mills Inc. 1.6 Automatic Data Processing Inc. 1.6 TJX Companies Inc. 1.6 U.S. Bancorp 1.5 Southern Co. 1.5 The Coca-Cola Co. 1.4 American Financial Group Inc. 1.4 Top 25 Holdings 51.3 * The Fund invests substantially all of its assets directly in the RBC QUBE Low Volatility U.S. Equity Fund. The above are the Top 25 holdings of the RBC QUBE Low Volatility U.S. Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 100

103 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE U.S. EQUITY FUND RBC U.S. EQUITY VALUE CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 101

104 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY VALUE CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of U.S. companies in order to provide broad exposure to economic growth through the U.S. stock market. To achieve its investment objective, the Fund invests most of its assets in the RBC U.S. Equity Value Fund (the underlying fund ). The underlying fund diversifies across industries and selects companies with strong management, focused business models and the potential for growth in earnings and cash flow. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $227,000 as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments The portfolio manager remains somewhat optimistic about prospects for the U.S. equity market in against a backdrop of rising corporate profits, relatively low inflation and falling commodity prices. Stocks have risen closer to fair value after several years of being undervalued, and this environment suggests that investors will have to be more selective in the stocks that they hold in their portfolio. In the portfolio manager s opinion, the U.S. Federal Reserve will need to move cautiously when it starts to raise interest rates to avoid jeopardizing the economic recovery. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 102

105 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY VALUE CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.03) Series D Mar. 31, (0.02) Series F Mar. 31, (0.01) Series I Mar. 31, (0.01) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 103

106 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY VALUE CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 57% 43% Advisor Series 1.75% 57% 43% Series H 1.60% 63% 37% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 104

107 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. EQUITY VALUE CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Information Technology 16.8 Financials 16.3 Health Care 15.5 Consumer Discretionary 13.3 Industrials 9.5 Consumer Staples 8.9 Energy 7.9 Materials 3.0 Utilities 2.3 Telecommunication Services 1.4 Cash/Other 5.1 Top 25 Holdings* % of Net Asset Value Cash & Cash Equivalents 5.1 Apple Inc. 4.2 Google Inc., Class A 2.1 Pfizer Inc. 2.0 Microsoft Corp. 1.8 Wells Fargo & Company 1.7 Exxon Mobil Corp. 1.6 The Walt Disney Company 1.5 Berkshire Hathaway Inc., Class B 1.4 Medtronic Plc. 1.4 UnitedHealth Group Incorporated 1.3 Bank of America Corp. 1.3 JPMorgan Chase & Co. 1.2 Honeywell International Inc. 1.2 Lowe s Companies 1.1 Abbott Laboratories 1.1 Express Scripts Holding Co. 1.1 Nike Inc. 1.1 AmerisourceBergen Corp. 1.1 Chevron Corp. 1.1 Aetna Inc. 1.1 EOG Resources Inc. 1.0 Johnson & Johnson 1.0 CVS Health Corp. 1.0 Wal-Mart Stores, Inc. 1.0 Top 25 Holdings 39.5 * The Fund invests substantially all of its assets directly in the RBC U.S. Equity Value Fund. The above are the Top 25 holdings of the RBC U.S. Equity Value Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 105

108 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE U.S. EQUITY FUND PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 106

109 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in a well-diversified portfolio of U.S. equity securities. To achieve its investment objective, the Fund invests most of its assets in the Phillips, Hager & North U.S. Multi-Style All-Cap Equity Fund (the underlying fund ). The underlying fund invests in U.S. equity securities with the objective of building a portfolio that encompasses multiple investment styles. The underlying fund s portfolio will be comprised of the following investment styles, which are managed by RBC GAM s sub-advisors as separate portfolios within the underlying fund: U.S. Large Cap Growth, U.S. Mid Cap Growth, U.S. Large Cap Value, U.S. Mid Cap Value and U.S. Small Cap Core. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $33 million as of from $23 million a year earlier. The change was due to a combination of net inflows and investment returns. Over the past year, the Fund s Series D shares rose 26.8%, which underperformed the 28.7% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. U.S. equity markets continued their advance during the fiscal year as corporate earnings extended their gains, propelled by rising revenues and earnings. The positive impact of a recovering domestic economy offset the negative effect of sluggish global growth and colderthan-usual weather in the northeastern U.S. Improved consumer spending and employment growth prompted the U.S. Federal Reserve to conclude its quantitative easing program and the central bank signalled that it was moving closer to raising short-term benchmark interest rates sometime in. The Large Cap Growth component underperformed the benchmark, the Russell Top 200 Growth Index, due primarily to security selection. Lagging performance in the Energy, Consumer Discretionary and Financials sectors was a major detractor from returns. Positive sector weightings from Energy, Consumer Discretionary and Information Technology aided performance. The Large Cap Value strategy outperformed versus its Russell Top 200 Value Index. Favourable stock selection was a key contributor to performance, mainly within the Consumer Staples, Industrials and Financials sectors. Stock selection in the Energy and Utilities sectors had a negative impact. Although the team generally utilizes a sectorneutral mandate to limit the impact of sector allocation decisions, favourable sector allocation decisions during the period aided performance. The effect was mainly due to an underweight position in the poorly performing Energy sector, and overweight positions in the Consumer Discretionary and Information Technology sectors. The Mid Cap Growth component underperformed its benchmark, the Russell Mid Cap Growth Index. The strategy benefited from an overweight allocation to the Health Care sector and an underweight allocation to the underperforming Energy sector. Positive security selection in the Consumer Discretionary sector was offset by adverse selection in the Health Care, Financials and Consumer Staples sectors. The Mid Cap Value strategy outperformed versus the Russell Mid Cap Value Index. During the 12-month period, stock selection drove returns while sector allocation decisions detracted from overall performance. Favourable stock selections within the Information Technology, Energy and Utilities sectors were the biggest contributors to portfolio performance; more than offsetting adverse stock selection within Industrials, Financials and Materials. An underweight allocation to the Utilities sector contributed to the portfolio s outperformance; however, this was offset by a moderate underweight position to the strongperforming Health Care sector and a significant overweight allocation to the Industrials sector, which both detracted from returns. The Small Cap Core component underperformed its benchmark, the Russell 2000 Index. Underperformance was due to adverse sector allocation decisions, as strong overall stock selection was not enough to offset the sector headwinds. Adverse stock selection and a significant underweight position to the strong-performing Health Care sector were the biggest detractors from performance, primarily due to the strategy s lack of holdings in the biotechnology and pharmaceuticals industries. A significant overweight allocation to the Industrials sector also had a negative impact on returns. Favourable stock selection in the Industrials, Energy and Consumer Staples sectors were the biggest contributors to returns. Recent Developments The portfolio manager s long-term outlook is for growth to improve and inflation to normalize. Fairly substantial downgrades to earnings expectations have been experienced in recent months due to the significant decline in oil prices and the stronger U.S. dollar. Although lower earnings growth is seldom positive for stocks, the downgrades have been narrowly focused on these two themes and, in the portfolio 107

110 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS manager s view, are not indicative of a broad-based deterioration in the outlook for the economy and/or corporate profitability. While the portfolio manager has lowered total-return expectations for stocks, the portfolio manager s overall outlook for equities remains positive. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related- Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 108

111 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.33) Mar. 31, (0.27) (0.28) (0.28) Mar. 31, (0.22) Mar. 31, (0.06) Advisor Series Mar. 31, (0.32) Mar. 31, (0.26) (0.28) (0.28) Mar. 31, (0.22) Mar. 31, (0.06) Series H Mar. 31, (0.29) Mar. 31, (0.24) (0.28) (0.28) Mar. 31, (0.15) Series D Mar. 31, (0.19) Mar. 31, (0.15) (0.28) (0.28) Mar. 31, (0.13) Mar. 31, (0.03) Series F Mar. 31, (0.15) Mar. 31, (0.12) (0.28) (0.28) Mar. 31, (0.11) Mar. 31, (0.03) Series I Mar. 31, (0.12) Mar. 31, (0.09) (0.28) (0.28) Mar. 31, (0.06)

112 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (0.01) Mar. 31, (0.01) (0.28) (0.28) Mar. 31, (0.01) Mar. 31, (0.02) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

113 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.75% 57% 43% Advisor Series 1.75% 57% 43% Series H 1.60% 63% 37% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 111

114 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years Series D 1 (%) Series F 1 (%) 12.3% % 26.8% 30.8% 27.0% Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series I 2 (%) 12.6% Series A 1 (%) 11.4% 29.3% 25.7% % 31.1% 27.3% Series O 1 (%) Advisor Series 1 (%) 11.4% 29.4% 25.7% % 31.9% 28.2% Series H 2 (%) % 29.7% 26.0%

115 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH U.S. MULTI-STYLE ALL-CAP EQUITY CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: Russell 3000 Total Return Index (CAD) Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTION Russell 3000 Total Return Index (CAD) This index measures the Canadian dollar performance of the largest 3000 U.S. companies representing approximately 98% of the U.S. equity market. The index provides a broader barometer of the equity market than the S&P 500 Index. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Information Technology 18.9 Financials 16.3 Consumer Discretionary 15.4 Health Care 13.9 Industrials 13.7 Energy 6.1 Consumer Staples 5.7 Materials 3.7 Utilities 2.7 Telecommunication Services 1.2 Cash/Other 2.4 Top 25 Holdings* % of Net Asset Value Apple Inc. 3.3 Cash & Cash Equivalents 3.0 Wells Fargo & Company 1.3 CVS Health Corp. 1.2 The Walt Disney Company 1.1 Pfizer Inc. 1.1 Aetna Inc. 1.0 Hartford Financial Services Inc. 1.0 Verizon Communications Inc. 1.0 Exxon Mobil Corp. 1.0 Lowe s Companies 0.9 McKesson Corp. 0.9 JPMorgan Chase & Co. 0.9 Honeywell International Inc. 0.9 BlackRock Inc. 0.9 The Kroger Co. 0.8 Medtronic Plc. 0.8 Target Corporation 0.8 NXP Semiconductor N.V. 0.8 Amazon.com, Inc. 0.8 Johnson & Johnson 0.8 Anadarko Petroleum Corp. 0.7 Microsoft Corp. 0.7 Cigna Corp. 0.7 United Technologies Corp. 0.7 Top 25 Holdings 27.1 * The Fund invests substantially all of its assets directly in the Phillips, Hager & North U.S. Multi-Style All-Cap Equity Fund. The above are the Top 25 holdings of the Phillips, Hager & North U.S. Multi-Style All-Cap Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 113

116 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE U.S. EQUITY FUND RBC U.S. MID-CAP VALUE EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 114

117 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. MID-CAP VALUE EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of U.S. mid-cap companies that are deemed to be undervalued in order to provide broad exposure to economic growth opportunities in the equity markets. To achieve its investment objective, the Fund invests most of its assets in the RBC U.S. Mid-Cap Value Equity Fund (the underlying fund ). The underlying fund s investment process is based primarily on fundamental research, although the portfolio manager will also consider quantitative and technical factors. Stock selection decisions are ultimately based on an understanding of the company, its business and its outlook. The portfolio manager diversifies the underlying fund across industries in the U.S. market and selects companies based on strong management, focused business models and the potential for future growth in earnings and cash flow. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $575,000 as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments In the view of the portfolio manager, moderate gains in U.S. corporate earnings should be supported by U.S. domestic GDP growth in the 2%-3% range, a low unemployment rate that continues to improve and expectations that inflation will remain low. The sharp decline in oil prices, a headwind in the later stages of the period for index-level earnings, is a double-edged sword in the portfolio manager s opinion. While the broader impact will be a boost to consumers discretionary income from lower gasoline and home-heating expenses, another effect will be a potential decrease in energy exploration and related infrastructure development, which have been major drivers of U.S. industrial activity over the past few years. In, the portfolio manager expects stock selection to continue to drive the Fund s relative returns, and the current market offers opportunities to invest in companies with the potential for improvements in corporate performance and attractive valuations. The portfolio manager remains positioned for a continued economic recovery with overweight allocations to the economically sensitive Industrials, Consumer Discretionary and Materials sectors. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. 115

118 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. MID-CAP VALUE EQUITY CLASS The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 116

119 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. MID-CAP VALUE EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.04) Series D Mar. 31, (0.03) Series F Mar. 31, (0.02) Series I Mar. 31, (0.02) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 117

120 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. MID-CAP VALUE EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.70% 59% 41% Series D 1.10% 23% 77% Series F 0.85% 100% Series I 0.70% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 118

121 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. MID-CAP VALUE EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Financials 28.7 Industrials 19.8 Consumer Discretionary 11.3 Materials 11.1 Information Technology 9.6 Utilities 7.0 Health Care 5.1 Energy 4.6 Cash/Other 2.8 Top 25 Holdings* % of Net Asset Value Hartford Financial Services Inc. 3.6 United Rentals Inc. 3.5 Carlisle Co. Inc. 2.9 Universal Health Services Inc., Class B 2.9 Cash & Cash Equivalents 2.9 Ryder System Inc. 2.5 Lincoln National Corp. 2.5 The Laclede Group Inc. 2.3 Swift Transportation Co., Class A 2.3 Jarden Corp. 2.3 Huntington Bancshares 2.2 NXP Semiconductor N.V. 2.1 CMS Energy Corp. 2.1 CIT Group Inc. 2.1 Cytec Industries Inc. 2.0 Columbia Property Trust Inc. Real Estate Investment Trust 2.0 Brunswick Corp. 2.0 Amtrust Financial Services Inc. 1.9 Regal-Beloit Corp. 1.9 Fifth Third Bancorp 1.9 Ashland Inc. 1.8 National General Holdings Corp. 1.8 Newell Rubbermaid Inc. 1.7 Ferro Corp. 1.7 Arrow Electronics Inc. 1.6 Top 25 Holdings 56.5 * The Fund invests substantially all of its assets directly in the RBC U.S. Mid-Cap Value Equity Fund. The above are the Top 25 holdings of the RBC U.S. Mid-Cap Value Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 119

122 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE U.S. EQUITY FUND RBC U.S. SMALL-CAP CORE EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 120

123 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. SMALL-CAP CORE EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of U.S. small-cap companies in order to provide broad exposure to economic growth opportunities in the equity markets. To achieve its investment objective, the Fund invests most of its assets in the RBC U.S. Small-Cap Core Equity Fund (the underlying fund ). The underlying fund s investment process is based primarily on fundamental research, although the portfolio manager will also consider quantitative and technical factors. Stock selection decisions are ultimately based on an understanding of the company, its business and its outlook. The portfolio manager diversifies the underlying fund across industries in the U.S. market and selects companies based on strong management, focused business models and the potential for future growth in earnings and cash flow. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $318,000 as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments There is much to be optimistic about in as the U.S. economy continues to improve and job growth picks up. However, geopolitical risks, the potential for higher interest rates and the negative impact on overall earnings could have a negative impact on markets. The portfolio manager remains positioned for a continued economic recovery with overweight allocations to the economically sensitive Industrials, Consumer Discretionary and Materials sectors. To protect against the potential for an overall decline in the market, the portfolio manager is emphasizing companies with strong balance sheets, high returns on equity, market leadership and the potential for profit-margin improvement. The portfolio continues to trade at a valuation discount on several measures while providing superior returns on equity and projected earnings growth. In the portfolio manager s view, the end of the U.S. Federal Reserve s extraordinary economic-stimulus measures, known as quantitative easing, could have a positive impact on small-cap stocks, as they tend to fare well when rates rise against a backdrop of a strong economy. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. 121

124 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. SMALL-CAP CORE EQUITY CLASS The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 122

125 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. SMALL-CAP CORE EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.04) Series D Mar. 31, (0.02) Series F Mar. 31, (0.02) Series I Mar. 31, (0.01) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 123

126 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. SMALL-CAP CORE EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.70% 59% 41% Series D 1.10% 23% 77% Series F 0.85% 100% Series I 0.70% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 124

127 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC U.S. SMALL-CAP CORE EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value Industrials 26.7 Consumer Discretionary 22.7 Information Technology 16.7 Financials 12.8 Health Care 8.9 Materials 4.6 Energy 4.1 Utilities 1.3 Consumer Staples 0.5 Real Estate 0.2 Cash/Other 1.5 Top 25 Holdings* % of Net Asset Value Universal Electronics Inc. 3.8 Synaptics Inc. 3.4 Synchronoss Technologies Inc. 3.2 Tyler Technologies Inc. 3.1 Astronics Corp. 2.9 Libbey Inc. 2.8 The Greenbrier Co. Inc. 2.4 West Pharmaceutical Services Inc. 2.4 Compass Diversified Holdings 2.4 EnerSys 2.3 Columbus McKinnon Corp. 2.3 Patrick Industries Inc. 2.3 AZZ Inc. 2.2 Helen Of Troy Ltd. 1.9 GP Strategies Corp. 1.8 Amerisafe Inc. 1.8 Take-Two Interactive Software Inc. 1.8 Drew Industries Inc. 1.7 Grand Canyon Education Inc. 1.7 Old Dominion Freight Line Inc. 1.7 Gulfport Energy Corp. 1.6 Cash & Cash Equivalents 1.6 U.S. Physical Therapy Inc. 1.6 Amtrust Financial Services Inc. 1.5 ACCO Brands Corp. 1.4 Top 25 Holdings 55.6 * The Fund invests substantially all of its assets directly in the RBC U.S. Small-Cap Core Equity Fund. The above are the Top 25 holdings of the RBC U.S. Small-Cap Core Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 125

128 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE INTERNATIONAL EQUITY FUND RBC INTERNATIONAL EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 126

129 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC INTERNATIONAL EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing in stocks of companies outside of North America in order to provide exposure to economies that may be at different stages of the business cycle or offer growth opportunities unavailable in U.S. and Canadian markets. To achieve its investment objective, the Fund invests most of its assets in the RBC International Equity Fund (the underlying fund ). The underlying fund focuses on companies that are primarily in Europe, Australasia and the Far East. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $756,000 as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments Large-scale asset purchases by the European Central Bank combined with a weak euro, improving credit demand and lower oil prices, suggest that the outlook for the European economy, and therefore regional stocks, is improving. As a consequence, the portfolio manager has over the past quarter slightly increased exposure to companies that benefit from stronger economic growth, particularly in the Consumer Discretionary sector and areas of the Financials sector. Japanese bank lending is growing more quickly, suggesting the credit spigot has been successfully opened by the Bank of Japan s largescale monetary stimulus, and Japanese exports are soaring given the competitiveness boost provided by a plummeting yen. China s stock markets have been rallying strongly on the back of loosening monetary policies and expectations that a plan to link the country more closely economically with Europe will help relieve some of China s overcapacity in heavy industries. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. 127

130 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC INTERNATIONAL EQUITY CLASS The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 128

131 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC INTERNATIONAL EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.04) Series D Mar. 31, (0.02) Series F Mar. 31, (0.01) Series I Mar. 31, (0.01) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 129

132 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC INTERNATIONAL EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.70% 59% 41% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 130

133 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC INTERNATIONAL EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value United Kingdom 22.4 Japan 19.1 Germany 7.2 Other Countries 6.1 Australia 6.1 Switzerland 6.0 Hong Kong 6.0 Netherlands 5.8 Denmark 4.9 Ireland 3.7 France 3.7 Finland 3.7 Spain 2.2 Cash/Other 3.1 Top 25 Holdings* % of Net Asset Value Cash & Cash Equivalents 2.8 Elsevier N.V. 2.8 Novo Nordisk A/S 2.7 Unilever Plc. 2.5 Novartis AG 2.2 Roche Holdings AG Genusscheine 2.2 InBev N.V. 1.9 Daily Mail & General Trust Plc. 1.9 Henkel KGaA, Preferred Non-Voting 1.7 Christian Dior SE 1.7 Bayer AG 1.7 Sampo OYJ 1.6 ING Groep N.V. 1.6 Mitsubishi UFJ Financial Group Inc. 1.6 BT Group Plc. 1.5 Schroders Plc. 1.5 Tencent Holdings Ltd. 1.5 Royal Dutch Shell Plc., A Shares 1.5 Toyota Motor Corp. 1.5 Paddy Power Plc. 1.4 London Stock Exchange Group Plc. 1.4 Diageo Plc. 1.4 Swedbank AB 1.4 Olympus Optical Co. Ltd. 1.3 British American Tobacco Plc. 1.3 Top 25 Holdings 44.6 * The Fund invests substantially all of its assets directly in the RBC International Equity Fund. The above are the Top 25 holdings of the RBC International Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 131

134 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE INTERNATIONAL EQUITY FUND RBC EUROPEAN EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 132

135 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EUROPEAN EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in European stocks in order to provide exposure to growth opportunities in the European economy and diversification benefits beyond North America. To achieve its investment objective, the Fund invests most of its assets in the RBC European Equity Fund (the underlying fund ). The sub-advisor of the underlying fund reviews the economic outlook for Europe and then selects stocks based on fundamental, technical and quantitative inputs. The underlying fund is managed to limit risk by spreading investments across different industries. The underlying fund may also invest in debt securities issued or guaranteed by European governments and international agencies. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $1 million as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments Large-scale asset purchases by the European Central Bank combined with a weak euro, improving credit demand and lower oil prices suggest that the outlook for the European economy, and therefore regional stocks, is improving. As a consequence, the portfolio manager has over the past quarter slightly increased exposure to companies that benefit from stronger economic growth, particularly in the Consumer Discretionary sector and areas of the Financials sector. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 133

136 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EUROPEAN EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.04) Series D Mar. 31, (0.02) Series F Mar. 31, (0.02) Series I Mar. 31, (0.01) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 134

137 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EUROPEAN EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.70% 59% 41% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 135

138 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EUROPEAN EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value United Kingdom 31.7 Germany 11.1 Switzerland 9.0 Netherlands 8.4 Denmark 7.0 Other Countries 6.0 Finland 5.8 Ireland 5.5 France 5.1 Belgium 3.5 Spain 3.3 Cash/Other 3.6 Top 25 Holdings* % of Net Asset Value Elsevier N.V. 4.1 Novo Nordisk A/S 3.9 Unilever Plc. 3.5 InBev N.V. 3.5 Roche Holdings AG Genusscheine 3.4 Novartis AG 3.0 Daily Mail & General Trust Plc. 2.8 Sampo OYJ 2.7 Cash & Cash Equivalents 2.6 Bayer AG 2.6 Christian Dior SE 2.3 BT Group Plc. 2.3 Henkel KGaA, Preferred Non-Voting 2.3 ING Groep N.V. 2.3 Paddy Power Plc. 2.2 British American Tobacco Plc. 2.2 Schroders Plc. 2.2 London Stock Exchange Group Plc. 2.2 Royal Dutch Shell Plc., A Shares 2.0 Swedbank AB 2.0 SAP SE 1.9 Continental AG 1.9 Hargreaves Lansdown Plc. 1.9 Diageo Plc. 1.9 Kerry Group Plc. 1.8 Top 25 Holdings 63.5 * The Fund invests substantially all of its assets directly in the RBC European Equity Fund. The above are the Top 25 holdings of the RBC European Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 136

139 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE INTERNATIONAL EQUITY FUND PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 137

140 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing in a diversified portfolio of common stocks in companies in the world s largest industrialized countries outside North America, including countries in Europe, the Far East, including Japan and Australia. To achieve its investment objective, the Fund will invest most of its assets in the Phillips, Hager & North Overseas Equity Fund (the underlying fund ). The underlying fund invests in companies that are attractively valued, possess sound fundamentals and have a strong market position. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $43 million as of, from $30 million as of,. Of the change, $7 million was due to net inflows and $5 million to investment returns. Over the past year, the Fund s Series D shares gained 15.6%, which outperformed the 13.7% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. Equities in the developed countries of Europe and Asia rose during the period, as extremely loose monetary policies drove economic recoveries in the Eurozone and Japan. Expansions in the U.S., the U.K. and some emerging markets also helped stimulate economic activity in slower-growing regions. Holdings contributing to relative returns included: Santen Pharmaceutical, a Japanese maker of eye-care products; Liberty Global, a U.S.-listed operator of European cable-television systems; South African pay-tv company Naspers; and India s HDFC Bank. Holdings that had a negative impact on performance included an overweight position in Aryzta, a Swiss baked-goods manufacturer that recorded softer revenue; and a holding in Australian petroleum company Oil Search, whose stock declined in an environment of weak oil prices. Recent Developments The portfolio manager believes there are many reasons to be optimistic regarding the strength and sustainability of economic growth. The low oil price helps growth in more economies than it penalizes, and the beneficiaries include Europe, India, China, Japan and the U.S. Interest rates remain at historic lows, and countries stand to benefit from trade linked to falls in their currencies against the U.S. dollar. Finally the election of reform-minded governments, particularly in some important emerging markets, may boost infrastructure spending in areas such as transportation and energy distribution. However, many equity indexes are at historic highs. As a result, the portfolio manager believes that profit growth will be the key to supporting stock returns in the future rather than the higher valuations that have driven much of the gains in recent years. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: 138

141 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 139

142 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.32) Mar. 31, (0.29) Mar. 31, (0.24) (0.02) Mar. 31, (0.06) Advisor Series Mar. 31, (0.31) Mar. 31, (0.26) Mar. 31, (0.25) (0.01) Mar. 31, (0.07) Series H Mar. 31, (0.29) Mar. 31, (0.26) Mar. 31, (0.15) (0.01) Series D Mar. 31, (0.19) Mar. 31, (0.16) Mar. 31, (0.15) (0.02) Mar. 31, (0.04) Series F Mar. 31, (0.16) Mar. 31, (0.13) Mar. 31, (0.12) (0.02) Mar. 31, (0.03) Series I Mar. 31, (0.13) Mar. 31, (0.12) Mar. 31, (0.08) (0.01)

143 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (0.01) Mar. 31, (0.01) Mar. 31, (0.01) (0.02) Mar. 31, (0.01) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

144 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.75% 57% 43% Series D 1.10% 23% 77% Series F 0.85% 100% Series I 0.75% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 142

145 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years. Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series D 1 (%) Series F 1 (%) Series I 2 (%) 6.7% % % 27.6% 15.6% 15.8% Series A 1 (%) 5.9% 26.1% 14.6% % 27.8% 16.0% Series O 1 (%) Advisor Series 1 (%) 5.9% 26.3% 14.7% % 28.8% 17.0% Series H 2 (%) % 26.5% 14.8%

146 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: MSCI EAFE Total Return Net Index (CAD) Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix Sectors % of Net Asset Value Financials 27.5 Consumer Discretionary 17.7 Industrials 13.4 Health Care 12.0 Consumer Staples 9.8 Information Technology 6.6 Materials 6.0 Energy 3.9 Telecommunication Services 1.3 Cash/Other 1.8 Investment Mix Countries/Regions % of Net Asset Value Europe ex. U.K. Equities 42.1 U.K. Equities 19.0 Japan Equities 16.5 Pacific ex. Japan Equities 13.1 Middle East & Africa Equities 4.0 Cash/Other 5.3 INDEX DESCRIPTION MSCI EAFE Total Return Net Index (CAD) This index is a broad measure of the Canadian dollar performance of stocks from developed equity markets covering countries in Europe, Australasia and the Far East. The net total return index reinvests dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 144

147 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE PHILLIPS, HAGER & NORTH OVERSEAS EQUITY CLASS SUMMARY OF INVESTMENT PORTFOLIO (cont.) (after consideration of derivative products, if any) As at Top 25 Holdings* % of Net Asset Value Toyota Motor Corp. 4.5 InBev N.V. 4.2 Safran S.A. 4.1 AIA Group Ltd. 4.1 Naspers Ltd. 4.0 Deutsche Post AG 3.9 Roche Holdings AG Genusscheine 3.8 Taiwan Semiconductor Manufacturing Co. Ltd. ADR 3.5 Shire Plc. 3.4 SMC Corp. 3.4 Continental AG 3.4 UBS Group AG 2.9 HDFC Bank Ltd. ADR 2.8 Astellas Pharma Inc. 2.5 Liberty Global Plc. 2.5 St James s Place Plc. 2.5 Svenska Cellulosa AB 2.4 Royal Dutch Shell Plc., B Shares 2.3 Santen Pharmaceutical Co. Ltd. 2.2 Kasikornbank PCL 2.2 Admiral Group Plc. 2.2 Aryzta AG 2.2 ASML Holding N.V. 2.0 Akzo Nobel N.V. 2.0 Syngenta AG 2.0 Top 25 Holdings 75.0 * The Fund invests substantially all of its assets directly in the Phillips, Hager & North Overseas Equity Fund. The above are the Top 25 holdings of the Phillips, Hager & North Overseas Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 145

148 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE INTERNATIONAL EQUITY FUND RBC EMERGING MARKETS EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 146

149 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of companies located in or active in emerging markets. To achieve its investment objective, the Fund invests most of its assets in the RBC Emerging Markets Equity Fund (the underlying fund ). The underlying fund invests in securities of companies located or active in emerging-market countries, including, but not limited to: China, Brazil, South Korea, Taiwan, India, South Africa, Russia, Mexico, Israel, Malaysia, Indonesia, Turkey, Chile, Thailand and Poland. The portfolio is diversified by sector and emerging-market country to help reduce risk. Individual stocks are selected based on the intrinsic value of each company, liquidity and overall portfolio risk. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $68 million as of, from $39 million as of,. Of the change, $18 million was due to net inflows and $11 million to investment returns. Over the past year, the Fund s Series A shares gained 23.1%, which outperformed the 15.2% rise in the benchmark. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. Emerging-market equities were flat during the period and underperformed developed markets as an appreciating U.S. dollar hurt the ability of many emerging-market companies to finance debt, and falling oil and metals prices had a negative impact on emerging markets that export commodities. The Fund had a preference for companies with attractive valuations and cash flows, and the ability to benefit from strong economic growth in their home markets and raise prices without losing significant business to competitors. Over the year, a relative lack of exposure to the Materials and Energy sectors proved to be positive for returns, as these were the worst-performing sectors. An overweight position in the Health Care sector also supported performance as this was by far the best-performing sector. The Fund s overweight positions in the Consumer Staples and Consumer Discretionary sectors were negative for relative returns, as they underperformed. India and the Philippines were among the best-performing stock markets during the year, and the Fund benefited from abovebenchmark exposure in both. India got a boost from falling inflation and reform progress under new Prime Minister Narendra Modi, while the Philippines market was aided by decreasing bond yields and resilient economic growth. Holding back relative returns was an overweight position in Chile, which underperformed due to slow growth as a result of falling copper prices and pressure on corporate earnings due to increasing corporate tax rates. A relative lack of exposure to China and a preference for stocks that tend to perform better in an environment of slowing economic growth were also negative for returns. Progress on economic reforms and expectations of monetary easing meant that stocks that tend to do better against a backdrop of faster growth outperformed. The Fund benefited from its position in the Indian pharmaceutical company Lupin, which was a standout in a strong sector given its attractive drug pipeline and high, rising returns on equity. Naspers, a South African company in the Information Technology sector, also helped performance. Naspers was especially aided by its large shareholding in Tencent, a Chinese Internet company that increased earnings from advertisements distributed on its smartphone applications. Recent Developments Looking ahead, a rising U.S. dollar continues to be a risk for emerging markets that export commodities and borrow in U.S. dollars. However, investors should also consider that emerging-market economicgrowth rates are rising relative to those in developed markets, and that the narrowing of this gap in favour of emerging markets could bode well for emerging-market stocks. Another positive for emerging markets is the commitment of countries including China, India and Mexico to economic reforms. As these economies slowly transition to developed status, the structural economic changes unleash economic growth which, combined with higher levels of overall economic transparency, should translate into attractive investment returns, in the view of the portfolio manager. The Fund will retain its preference for high-quality stocks and domestic sectors, and under-emphasize areas exposed to commodity prices. 147

150 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 148

151 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.30) Mar. 31, (0.26) Mar. 31, (0.24) Mar. 31, (0.06) Advisor Series Mar. 31, (0.30) Mar. 31, (0.26) Mar. 31, (0.25) Mar. 31, (0.11) Series H Mar. 31, (0.28) Mar. 31, (0.23) Mar. 31, (0.18) Series D Mar. 31, (0.17) Mar. 31, (0.15) Mar. 31, (0.14) Mar. 31, (0.04) Series F Mar. 31, (0.14) Mar. 31, (0.11) Mar. 31, (0.11) Mar. 31, (0.08) Series I Mar. 31, (0.13) Mar. 31, (0.11) Mar. 31, (0.08)

152 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, Mar. 31, (0.01) Mar. 31, (0.01) Mar. 31, (0.01) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

153 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily net asset value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.70% 59% 41% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.70% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 151

154 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years. Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series D 1 (%) Series F 1 (%) Series I 2 (%) 11.0% % % 7.7% 24.3% 24.6% Series A 1 (%) 9.9% 6.4% 23.1% % 7.7% 24.7% Series O 1 (%) Advisor Series 1 (%) 9.9% 6.3% 23.1% % 8.7% 25.8% Series H 2 (%) % 6.7% 23.4%

155 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmark: MSCI Emerging Markets Total Return Net Index (CAD) Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Advisor Series Benchmark Series H Benchmark Series D Benchmark Series F Benchmark Series I Benchmark Series O Benchmark SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value India 15.0 China 14.1 Taiwan 9.8 South Korea 9.5 South Africa 9.5 Other Countries 8.8 Hong Kong 7.6 Brazil 5.6 Malaysia 4.0 Indonesia 3.2 Philippines 3.2 Peru 2.3 Mexico 2.2 Chile 2.2 Cash/Other 3.0 The returns of each series may vary because of differences in management fees and expenses. The Benchmark returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTION MSCI Emerging Markets Total Return Net Index (CAD) This index is a broad measure of the Canadian dollar performance of emerging-market equities. As of May 2010, the index consisted of the following 21 emerging-market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. The net total return index reinvests dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 153

156 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC EMERGING MARKETS EQUITY CLASS SUMMARY OF INVESTMENT PORTFOLIO (cont.) (after consideration of derivative products, if any) As at Top 25 Holdings* % of Net Asset Value Housing Development Finance Corp. 4.6 Taiwan Semiconductor Manufacturing Co. Ltd. 4.0 CK Hutchison Holdings Ltd. 3.5 Samsung Electronics Co. Ltd. 3.5 Naspers Ltd. 3.2 SM Investments Corp. 3.2 Lupin Ltd. 2.9 Cash & Cash Equivalents 2.8 China Mobile (Hong Kong) Ltd. 2.5 HCL Technologies Ltd. 2.5 Axiata Group Berhad 2.4 AIA Group Ltd. 2.3 Banco Bradesco S.A. ADR 2.3 Credicorp Ltd. 2.3 South African Breweries Plc. 2.2 Lenovo Group Limited 2.0 Hikma Pharmaceuticals Plc. 1.8 Samsonite International S.A. 1.8 Standard Foods Corp. 1.8 Clicks Group Ltd. 1.7 PT Kalbe Farma Tbk 1.6 PT Bank Central Asia Tbk 1.6 Infosys Technologies Ltd. ADR 1.6 Public Bank Berhad 1.6 Baidu.com Inc. ADR 1.5 Top 25 Holdings 61.2 * The Fund invests substantially all of its assets directly in the RBC Emerging Markets Equity Fund. The above are the Top 25 holdings of the RBC Emerging Markets Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 154

157 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE GLOBAL EQUITY FUND RBC GLOBAL EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 155

158 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of a diversified mix of companies operating around the world and across a range of sectors. To achieve its investment objective, the Fund invests most of its assets in the RBC Global Equity Fund (the underlying fund ). The portfolio manager of the underlying fund uses primarily fundamental research to assess the economic outlook for regions around the world, including expected growth, market valuations and economic trends. The underlying fund may invest in American Depositary Receipts and may invest as much as 10% of its assets in units of other mutual funds managed by RBC GAM or an affiliate. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $1 million as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments The portfolio manager believes there are many reasons to be optimistic regarding the strength and sustainability of economic growth. The low oil price helps growth in more economies than it penalizes, and the beneficiaries include Europe, India, China, Japan and the U.S. Interest rates remain at historical lows, and countries stand to benefit from trade linked to falls in their currencies against the U.S. dollar. Finally the election of reform-minded governments, particularly in some important emerging markets, may prove a boost for infrastructure spending, particularly in transportation and energy distribution. However, many equity indexes are at historic highs. As a result, the portfolio manager believes that profit growth will be the key to supporting stock returns in the future rather than the higher valuations that have driven much of the gains in recent years. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. 156

159 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL EQUITY CLASS The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 157

160 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.04) Series D Mar. 31, (0.03) Series F Mar. 31, (0.02) Series I Mar. 31, (0.01) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 158

161 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.70% 59% 41% Series D 1.10% 23% 77% Series F 0.85% 100% Series I 0.70% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 159

162 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value United States 52.9 Switzerland 6.3 United Kingdom 6.2 Japan 5.6 Germany 4.7 Other Countries 4.3 Belgium 3.2 Taiwan 3.0 South Africa 2.6 Canada 2.4 France 2.4 India 2.3 Hong Kong 2.1 Cash/Other 2.0 Top 25 Holdings* % of Net Asset Value InBev N.V. 3.2 UnitedHealth Group Incorporated 3.2 Toyota Motor Corp. 3.2 Blackstone Group LP 3.1 TJX Companies Inc. 3.0 Taiwan Semiconductor Manufacturing Co. Ltd. ADR 3.0 Amgen Inc. 3.0 First Republic Bank 2.9 Google Inc., Class A 2.8 ITC Holdings Corp. 2.8 Estée Lauder Companies Inc., Class A 2.7 Roche Holdings AG Genusscheine 2.7 Shire Plc. 2.6 Naspers Ltd. 2.6 Danaher Corp. 2.5 International Flavors & Fragrances Inc. 2.5 Amazon.com, Inc. 2.4 Enbridge Inc. 2.4 Safran S.A. 2.4 Deutsche Post AG 2.4 EOG Resources Inc. 2.3 HDFC Bank Ltd. ADR 2.3 Cognizant Technology Solutions Corp., Class A 2.1 AIA Group Ltd. 2.1 Cash & Cash Equivalents 2.0 Top 25 Holdings 66.2 * The Fund invests substantially all of its assets directly in the RBC Global Equity Fund. The above are the Top 25 holdings of the RBC Global Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 160

163 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE GLOBAL EQUITY FUND RBC QUBE LOW VOLATILITY GLOBAL EQUITY CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 161

164 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY GLOBAL EQUITY CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing primarily in equity securities of global companies. The Fund uses a quantitative approach and seeks to achieve a reduced level of volatility of returns compared with the broader global equity market. To achieve its investment objective, the Fund invests most of its assets in the RBC QUBE Low Volatility Global Equity Fund (the underlying fund ). The underlying fund is managed using a quantitative investment model designed to select individual stocks while controlling portfoliolevel risk. This involves building a portfolio that maximizes exposure to factors associated with outperformance, while controlling for exposure to risk factors. The portfolio manager of the underlying fund will diversify across industries within the global market. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund was launched on January 26,, and its net asset value was $6 million as of. Investment performance is not provided for a fund that has been available for less than one year. Recent Developments Equities continued to rally through and into and despite strong returns, valuations for most major equity markets are not yet expensive by historical comparison. However, with fuller valuations, comes lower average returns and greater volatility. As a result, the portfolio manager is more cautious on stocks at these valuation levels. Uneven economic growth was one of the hallmarks of. For, the portfolio manager expects growth to come from a broader set of global economies as Europe continues to heal, albeit slowly. As the global economic recovery becomes self-sustaining, the portfolio manager expects rising corporate profits to sustain the bull market. Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 162

165 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY GLOBAL EQUITY CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.04) Advisor Series Mar. 31, (0.04) Series H Mar. 31, (0.04) Series D Mar. 31, (0.03) Series F Mar. 31, (0.02) Series I Mar. 31, (0.02) Series O Mar. 31, Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From October 16,. Initial offering net asset value per mutual fund share. 163

166 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY GLOBAL EQUITY CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Advisor Series Mar. 31, Series H Mar. 31, Series D Mar. 31, Series F Mar. 31, Series I Mar. 31, Series O Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From October 16,. Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 54% 46% Advisor Series 1.85% 54% 46% Series H 1.70% 59% 41% Series D 1.10% 23% 77% Series F 0.85% 100% Series I 0.70% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 164

167 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC QUBE LOW VOLATILITY GLOBAL EQUITY CLASS PAST PERFORMANCE Investment performance in respect of a fund that has been available for less than one year is not provided. SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix % of Net Asset Value United States 57.0 Japan 12.7 Other Countries 6.6 Hong Kong 5.6 Switzerland 4.9 Canada 4.3 United Kingdom 2.7 Singapore 2.6 Israel 1.8 Australia 1.6 Cash/Other 0.2 Top 25 Holdings* % of Net Asset Value PepsiCo Inc. 2.9 NTT DoCoMo Inc. 2.8 Johnson & Johnson 2.8 Southern Co. 2.5 CLP Holdings Ltd. 2.5 Novartis AG 1.9 Wal-Mart Stores, Inc. 1.9 Church & Dwight Co. Inc. 1.9 Royal Bank of Canada 1.8 Colgate-Palmolive Company 1.8 Duke Energy Corp. 1.8 Oriental Land Co. Ltd. 1.7 Nestlé S.A. 1.7 McDonald s Corp. 1.6 Sempra Energy 1.6 Telstra Corp. Ltd. 1.6 The Walt Disney Company 1.5 The Procter & Gamble Co. 1.5 Pfizer Inc. 1.5 Singapore Press Holdings Ltd. 1.5 Cintas Corp M Co. 1.4 Tanabe Seiyaku Co. Ltd. 1.4 Verizon Communications Inc. 1.4 Cheung Kong Infrastructure Holdings Ltd. 1.4 Top 25 Holdings 45.8 * The Fund invests substantially all of its assets directly in the RBC QUBE Low Volatility Global Equity Fund. The above are the Top 25 holdings of the RBC QUBE Low Volatility Global Equity Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 165

168 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE GLOBAL EQUITY FUND RBC GLOBAL RESOURCES CLASS Portfolio Manager RBC Global Asset Management Inc. ( RBC GAM ) The Board of Directors of RBC Corporate Class Inc. approved this annual management report of fund performance on May 21,. A Note on Forward-looking Statements This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. This annual management report of fund performance ( MRFP ) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling FUND (3863), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9, or by visiting our website at or SEDAR at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. 166

169 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund seeks to provide long-term capital growth by investing in equity securities of companies around the world in any or all of the Energy, Materials, Industrials and Utilities sectors. To achieve its investment objective, the Fund invests most of its assets in the RBC Global Resources Fund (the underlying fund ). The underlying fund pursues global companies with a leading market position, high and sustainable profitability, sound finances and attractive valuations relative to peers and the market. The Fund will focus on mid- to large-cap stocks, but will also invest in smaller companies. Risk There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. The risks of investing in the Fund and the suitability of the Fund for investors remain as discussed in the Simplified Prospectus. Results of Operations The Fund s net asset value rose to $2.5 million as of, from $1.5 million as of,. The change was due to net inflows. Over the past year, the Fund s Series A shares lost 7.8%, which underperformed the 0.4% rise in the benchmark. The broad-based index rose 21.7%. The Fund s return is after the deduction of fees and expenses, while benchmark and broad-based index returns do not include any costs of investing. See the Financial Highlights section for the management expense ratios and the Past Performance section for the returns of other series, if any, which may vary because of differences in management fees and expenses. The Fund underperformed during the 12-month period, with its two areas of investment Energy and Materials having a negative impact on relative returns. The Energy sector was hurt overall by the sharp fall in oil prices in the latter half of, when the global inventories of crude oil swelled as production continued to climb. Low natural gas prices also pressured energy-company returns during the period. The Fund s exposure to North American energy-exploration companies that were highly exposed to the declines in oil and natural gas prices more than offset the positive impact of below-benchmark exposure to the Energy sector as a whole. Stocks with a particularly negative impact included Whiting Petroleum and Range Resources. Energy-services companies also suffered in this environment, and an overweight position in Halliburton hurt returns. Positions in highquality exploration companies including EOG and Anadarko aided the Fund s relative performance. The portfolio s holdings in the Materials sector underperformed as overweight positions in metals companies such as BHP, Glencore and First Quantum had a negative impact on relative returns. Weak demand from China, new supplies and the relative unattractiveness of commodities due to U.S. dollar strength continued to weigh on metals prices. At First Quantum, concerns emerged about lower copper prices on the company s balance sheet and efforts by the Zambian government to charge higher royalties on mine production in the country. Weakness in iron-ore prices held back relative returns at BHP and Glencore. Partially offsetting the negative impact of commodity prices was the positive effect of a weaker Canadian dollar on shares in the forest-products industry. Recent Developments Global crude-oil inventories are not as high as one might assume given the recent drop in oil prices, exceeding demand by no more than 2 million barrels in a market of 93 million barrels. A majority of high-profile shale-oil producers have cut capital spending and drilling-rig activity for, which will reduce North American supply growth later in the year. Geopolitical risks to supply are also possible and could cause the balance between supply and demand to tighten again. Natural gas prices will be pressured to stay low in North America as production from the prolific Marcellus Shale continues to grow and adequately supply the increasing demand for the fuel from power generation. Mining companies have focused on improving productivity by reducing costs. The steep decline in oil prices will likely translate into lower diesel and power costs, and focusing on high-margin production has brought down the projected lives of some mines noticeably in the past few years. Companies with strong balance sheets are turning their attention to increasing reserves at existing mines or finding new deposits, without necessarily resorting to takeovers. The portfolio manager continues to invest in higher-quality companies, including those with superior assets, financial strength and credible management teams. In fact, the portfolio manager believes that many precious-metal producers could boost profit margins in even if commodity prices stagnate. 167

170 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS Related-Party Transactions Manager and Portfolio Advisor RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of Canada ( Royal Bank ) and is the manager and portfolio advisor of the Fund. RBC GAM is responsible for the Fund s day-to-day operations, provides investment advice and portfolio management services to the Fund and appoints distributors for the Fund. RBC GAM is paid a management fee by the Fund as compensation for its services. The Fund pays a fixed administration fee to RBC GAM, which, in turn, pays certain operating expenses of the Fund. Affiliates of RBC GAM that provide services to the Fund in the course of their normal businesses are discussed below. Distributors RBC GAM, Royal Mutual Funds Inc., RBC Direct Investing Inc., RBC Dominion Securities Inc. and Phillips, Hager & North Investment Funds Ltd. are the principal distributors of, or distribute certain series of the mutual fund shares of, the Fund. Dealers receive an ongoing commission based on the total value of their clients Series A, Advisor Series, Series H and Series D mutual fund shares. Custodian RBC Investor Services Trust ( RBC IS ) is the custodian and holds the assets of the Fund. Registrars Royal Bank, RBC IS and RBC GAM are the registrars of the Fund and keep records of who owns the mutual fund shares of the Fund. Other Related-Party Transactions Pursuant to applicable securities legislation, the Fund relied on the standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee with respect to one or more of the following transactions: Related-Party Trading Activities (a) trades in securities of Royal Bank; (b) investments in the securities of issuers for which a related-party dealer acted as an underwriter during the distribution of such securities and the 60-day period following the conclusion of such distribution of the underwritten securities to the public; (c) purchases of equity and debt securities from or sales of equity or debt securities to a related-party dealer, where it acted as principal; and Inter-Fund Trading (d) purchases or sales of securities of an issuer from or to another investment fund or managed account managed by RBC GAM. The applicable standing instructions require that Related-Party Trading Activities and Inter-Fund Trading be conducted in accordance with RBC GAM policy and that RBC GAM advise the BoG of a material breach of any standing instruction. RBC GAM policy requires that an investment decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its associates or affiliates and without taking into account any consideration relevant to Royal Bank or its affiliates or associates, (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the Fund. RBC GAM policy requires that an investment decision in respect of Inter-Fund Trading is in the best interests of each Fund. 168

171 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past five years or for the periods since inception. This information is derived from the Fund s audited annual financial statements. For financial years beginning on or after April 1,, financial highlight information is derived from financial statements prepared in compliance with International Financial Reporting Standards ( IFRS ). For financial years prior to April 1,, financial highlight information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles ( GAAP ). Net Assets, for the periods prior to April 1,, are calculated in accordance with GAAP, and Net Asset Value is derived from the valuation method disclosed in the RBC Corporate Class Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between Net Assets and Net Asset Value under IFRS. Change in Net Assets Per Mutual Fund Share ($) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series A Mar. 31, (0.22) 0.24 (0.49) (0.47) 9.24 Mar. 31, 8.88 (0.22) Mar. 31, (0.22) (0.66) 0.05 (0.83) 8.88 Mar. 31, (0.06) (0.28) (0.34) 9.67 Advisor Series Mar. 31, (0.21) 0.23 (0.47) (0.45) 9.25 Mar. 31, 8.88 (0.23) Mar. 31, (0.22) (0.70) 0.05 (0.87) 8.88 Mar. 31, (0.06) (0.28) (0.34) 9.67 Series H Mar. 31, (0.19) 0.26 (0.54) (0.47) 9.33 Mar. 31, 8.90 (0.19) Mar. 31, (0.14) (0.46) 0.03 (0.57) 8.90 Series D Mar. 31, (0.12) 0.24 (0.50) (0.38) 9.55 Mar. 31, 8.99 (0.13) Mar. 31, (0.14) (0.66) 0.05 (0.75) 8.99 Mar. 31, (0.03) (0.28) (0.31) 9.70 Series F Mar. 31, (0.09) 0.25 (0.51) (0.35) 9.64 Mar. 31, 9.02 (0.11) Mar. 31, (0.10) (0.52) 0.04 (0.58) 9.02 Mar. 31, (0.03) (0.28) (0.31) 9.70 Series I Mar. 31, (0.08) 0.26 (0.53) (0.35) 9.73 Mar. 31, 9.07 (0.10) Mar. 31, (0.06) (0.32) 0.02 (0.36)

172 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS FINANCIAL HIGHLIGHTS (cont.) Change in Net Assets Per Mutual Fund Share ($) (cont.) Annual Distributions2 Increase (Decrease) from Operations1 From Total Realized Unrealized Income From Net Assets For the Year/ Net Assets Revenue Total Gains Gains (Excluding From Capital Return End of Period Ended Beginning of Year/Period (Loss) Expenses (Losses) (Losses) Total Dividends) Dividends Gains of Capital Total Year/Period Series O Mar. 31, (0.52) (0.27) 9.93 Mar. 31, 9.12 (0.03) Mar. 31, (0.03) (0.65) 0.05 (0.63) 9.12 Mar. 31, (0.01) (0.28) (0.29) Net assets and distributions are based on the actual number of mutual fund shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of mutual fund shares outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per mutual fund share. 2 Distributions are reinvested in additional mutual fund shares of the Fund or paid in cash. 3 From January 1, From July 9, Initial offering net asset value per mutual fund share. Ratios and Supplemental Data Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series A Mar. 31, Mar. 31, Mar. 31, Mar. 31, Advisor Series Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series H Mar. 31, Mar. 31, Mar. 31, Series D Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series F Mar. 31, Mar. 31, Mar. 31, Mar. 31, Series I Mar. 31, Mar. 31, Mar. 31,

173 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS FINANCIAL HIGHLIGHTS (cont.) Ratios and Supplemental Data (cont.) Number of Net Asset Value Net Asset Value Mutual Fund Shares Management MER Before Portfolio Trading As at Per Mutual Fund Share ($) ($000s) Outstanding (000s) Expense Ratio (%)1 Absorption (%)1 Turnover Rate (%)2 Expense Ratio (%)3 Series O Mar. 31, Mar. 31, Mar. 31, Mar. 31, The management expense ratio ( MER ) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily average net asset value during the period. RBC GAM may, at its discretion and without notice to shareholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM. 2 The Fund s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is not applicable to fixed-income transactions. 4 From January 1, From July 9, Management Fees RBC GAM is the manager and portfolio advisor of the Fund. Management fees of each series of the Fund are calculated at the annual percentages, before GST/HST, of the daily value of each series of the Fund. The breakdown of the services received in consideration of the management fees for each series, as a percentage of the management fees, is as follows: Breakdown of Services Management Fees Distribution Other* Series A 1.85% 62% 38% Advisor Series 1.85% 62% 38% Series H 1.75% 66% 34% Series D 1.00% 25% 75% Series F 0.75% 100% Series I 0.60% 100% Series O no management fees are paid by the Fund with respect to Series O mutual fund shares. Series O shareholders pay a negotiated fee directly to RBC GAM for investment-counselling services. * Includes all costs related to management, investment advisory services, general administration and profit. 171

174 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS PAST PERFORMANCE The performance information shown assumes that all distributions made by the Fund in the periods shown were reinvested in additional shares of the Fund and would be lower if distributions were not reinvested. The performance information does not take into account sales, redemption, distribution, optional charges or income taxes payable that would have reduced returns or performance. Past performance does not necessarily indicate how the Fund may perform in the future. A fund with more than 10 years of performance history is only permitted to disclose the past 10 years Series D 1 (%) Series F 1 (%) -7.3% % 14.4% -6.9% Year-by-Year Returns (%) The bar chart indicates the Fund s performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by the end of the financial year Series I 2 (%) -7.0% % Series A 1 (%) 12.9% % 14.6% % % % -20 Series O 1 (%) Advisor Series 1 (%) 12.9% % % -5.7% % % Series H 2 (%) % 13.3% %

175 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS PAST PERFORMANCE (cont.) Annual Compound Returns (%) The table shows the annual compound returns for each series of the Fund and for each of the periods indicated ended on, compared with the following benchmarks: The blended benchmark (the Benchmark ) is composed of: 65% MSCI World Index Energy (CAD) 35% MSCI World Index Materials (CAD) The broad-based index is the MSCI World Total Return Net Index (CAD). Past Past Past Past Since Year 3 Years 5 Years 10 Years Inception Series A Benchmark Broad-based index Advisor Series Benchmark Broad-based index Series H Benchmark Broad-based index Series D Benchmark Broad-based index Series F Benchmark Broad-based index Series I Benchmark Broad-based index Series O Benchmark Broad-based index SUMMARY OF INVESTMENT PORTFOLIO (after consideration of derivative products, if any) As at Investment Mix Sectors % of Net Asset Value Oil, Gas and Consumable Fuels 48.6 Chemicals 21.1 Metals and Mining 12.9 Containers and Packaging 4.8 Energy Equipment and Services 4.7 Paper and Forest Products 2.2 Construction Materials 1.4 Commercial Services and Supplies 0.2 Cash/Other 4.1 Investment Mix Countries/Regions % of Net Asset Value United States 57.4 Canada 21.1 United Kingdom 5.8 France 4.9 Germany 3.7 Other Countries 2.9 Cash/Other 4.1 The returns of each series may vary because of differences in management fees and expenses. The Benchmark and broad-based index returns do not include any costs of investing. See Management Discussion of Fund Performance for a discussion of performance relative to the Benchmark and broad-based index. 1 Inception date January 1, Inception date July 9, INDEX DESCRIPTIONS MSCI World Index Energy (CAD) This sub-index is a measure of the Canadian dollar performance of the stocks in the Energy sector in the MSCI World Index. MSCI World Index Materials (CAD) This sub-index is a measure of the Canadian dollar performance of stocks in the Materials sector in the MSCI World Index. MSCI World Total Return Net Index (CAD) This index is the capitalization-weighted index measuring the Canadian dollar performance of selected companies listed on stock exchanges in countries around the world. The net total return index reinvests dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 173

176 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE RBC GLOBAL RESOURCES CLASS SUMMARY OF INVESTMENT PORTFOLIO (cont.) (after consideration of derivative products, if any) As at Top 25 Holdings* % of Net Asset Value Total S.A. 4.9 Halliburton Co. 4.1 Cash & Cash Equivalents 4.1 EOG Resources Inc. 3.9 Exxon Mobil Corp. 3.7 Anadarko Petroleum Corp. 3.7 Suncor Energy Inc. 3.6 International Flavors & Fragrances Inc. 3.1 Dow Chemical Company 2.5 EQT Corp. 2.4 Pioneer Natural Resources Co. 2.4 Ecolab Inc. 2.1 Concho Resources Inc. 2.1 BHP Billiton Plc. 2.1 Cabot Oil & Gas Corp. 2.0 Praxair Inc. 2.0 Nucor Corp. 2.0 Glencore Plc. 1.9 Potash Corporation of Saskatchewan Inc. 1.9 Linde AG 1.8 Range Resources Corp. 1.7 Continental Resources Inc. 1.6 Williams Companies Inc. 1.5 Cytec Industries Inc. 1.5 Keyera Corp. 1.5 Top 25 Holdings 64.1 * The Fund invests substantially all of its assets directly in the RBC Global Resources Fund. The above are the Top 25 holdings of the RBC Global Resources Fund. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund and a quarterly update is available at The Simplified Prospectus and other information about the underlying fund are available on SEDAR website at 174

177 MANAGEMENT S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying financial statements have been prepared by RBC Global Asset Management Inc. ( RBC GAM ) as manager of the RBC Corporate Class Funds (the Funds ) and approved by the Board of Directors of RBC Corporate Class Inc. We are responsible for the information contained within the financial statements. We have maintained appropriate procedures and controls to ensure that timely and reliable financial information is produced. The financial statements have been prepared in compliance with International Financial Reporting Standards ( IFRS ) (and they include certain amounts that are based on estimates and judgments). The significant accounting policies, which we believe are appropriate for the Funds, are described in Note 3 to the financial statements. Although the Board of Directors of RBC Corporate Class Inc. is solely responsible for approving the financial statements and overseeing management s financial reporting responsibilities along with RBC GAM, in the Financial Advisory Committee of the Board of Governors provided advice to RBC GAM concerning financial reporting, the audit process and internal controls. Please see The Role of the Board of Governors at the end of this report. Deloitte LLP, Independent Chartered Professional Accountants, Chartered Accountants, have performed an independent audit of the financial statements in accordance with IFRS. Their report is set out on the next page. Damon G. Williams, FSA, FCIA, CFA Chief Executive Officer RBC Global Asset Management Inc. Frank Lippa, CPA, CA Chief Financial Officer and Chief Operating Officer RBC Global Asset Management Inc. May 21, 175

178 INDEPENDENT AUDITOR S REPORT To the Shareholders of the following classes of RBC Corporate Class Inc.: RBC Short Term Income Class BlueBay Global Convertible Bond Class (Canada) Phillips, Hager & North Monthly Income Class RBC Canadian Dividend Class RBC Canadian Equity Class RBC QUBE Low Volatility Canadian Equity Class Phillips, Hager & North Canadian Equity Value Class RBC Canadian Equity Income Class RBC Canadian Mid-Cap Equity Class RBC North American Value Class RBC U.S. Dividend Class RBC U.S. Equity Class RBC QUBE Low Volatility U.S. Equity Class RBC U.S. Equity Value Class Phillips, Hager & North U.S. Multi-Style All-Cap Equity Class RBC U.S. Mid-Cap Value Equity Class RBC U.S. Small-Cap Core Equity Class RBC International Equity Class RBC European Equity Class Phillips, Hager & North Overseas Equity Class RBC Emerging Markets Equity Class RBC Global Equity Class RBC QUBE Low Volatility Global Equity Class RBC Global Resources Class (collectively referred to as the Funds ) We have audited the accompanying financial statements of each of the Funds, which comprise the schedule of investment portfolio as at, the statements of financial position as at,, and April 1, 2013 (as applicable) and the statements of comprehensive income, statements of cash flow and statements of changes in net assets attributable to holders of redeemable mutual fund shares for the years or periods (since establishment of the Funds) then ended, and a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards ( IFRS ), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards ( GAAS ). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as at,,, and April 1, 2013 (as applicable), and the results of their operations, their cash flows and changes in their net assets for the years or periods (since establishment of the Funds) then ended in accordance with IFRS. Chartered Professional Accountants, Chartered Accountants, Licensed Public Accountants May 21, Toronto, Ontario An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 176