MANAGEMENT S RESPONSIBILITY FOR FINANCIAL REPORTING

Transcription

1 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 GAM Investment Funds (the Funds ) and approved by the Board of Directors of RBC GAM. 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. PricewaterhouseCoopers LLP, Chartered Professional Accountants, Licensed Public 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. Heidi Johnston, CPA, CA Chief Financial Officer RBC GAM Funds March 8, 2018

2 INDEPENDENT AUDITOR S REPORT To the Unitholders of: RBC FUNDS & RBC PRIVATE POOLS RBC Canadian T-Bill Fund RBC Canadian Money Market Fund RBC Premium Money Market Fund RBC $U.S. Money Market Fund RBC Premium $U.S. Money Market Fund RBC Canadian Short-Term Income Fund RBC Monthly Income Bond Fund RBC Canadian Bond Index Fund (formerly, RBC Advisor Canadian Bond Fund) RBC Canadian Government Bond Index Fund RBC Bond Fund RBC Vision Bond Fund (formerly, Phillips, Hager & North Community Values Bond Fund) RBC Global Bond Fund RBC $U.S. Investment Grade Corporate Bond Fund RBC Global Corporate Bond Fund RBC High Yield Bond Fund RBC $U.S. High Yield Bond Fund RBC Global High Yield Bond Fund RBC Strategic Income Bond Fund RBC Emerging Markets Foreign Exchange Fund RBC Emerging Markets Bond Fund RBC Emerging Markets Bond Fund (CAD Hedged) BlueBay Global Monthly Income Bond Fund BlueBay Global Sovereign Bond Fund (Canada) BlueBay Global Investment Grade Corporate Bond Fund (Canada) BlueBay European High Yield Bond Fund (Canada) BlueBay Emerging Markets Corporate Bond Fund BlueBay Global Convertible Bond Fund (Canada) BlueBay $U.S. Global Convertible Bond Fund (Canada) RBC Managed Payout Solution RBC Managed Payout Solution Enhanced RBC Managed Payout Solution Enhanced Plus RBC Monthly Income Fund RBC U.S. Monthly Income Fund RBC Balanced Fund RBC Global Balanced Fund RBC Vision Balanced Fund (formerly, RBC Jantzi Balanced Fund) RBC Conservative Growth & Income Fund RBC Balanced Growth & Income Fund RBC Global Growth & Income Fund RBC Retirement Income Solution RBC Retirement 2020 Portfolio RBC Retirement 2025 Portfolio RBC Retirement 2030 Portfolio RBC Retirement 2035 Portfolio RBC Retirement 2040 Portfolio RBC Retirement 2045 Portfolio RBC Retirement 2050 Portfolio RBC Select Very Conservative Portfolio RBC Select Conservative Portfolio RBC Select Balanced Portfolio RBC Select Growth Portfolio RBC Select Aggressive Growth Portfolio RBC Select Choices Conservative Portfolio RBC Select Choices Balanced Portfolio RBC Select Choices Growth Portfolio RBC Select Choices Aggressive Growth Portfolio RBC Target 2020 Education Fund RBC Target 2025 Education Fund RBC Target 2030 Education Fund RBC Target 2035 Education Fund RBC Canadian Dividend Fund RBC Canadian Equity Fund RBC QUBE Canadian Equity Fund RBC QUBE Low Volatility Canadian Equity Fund RBC Trend Canadian Equity Fund RBC Vision Canadian Equity Fund (formerly, RBC Jantzi Canadian Equity Fund) RBC Canadian Index Fund RBC O Shaughnessy Canadian Equity Fund RBC O Shaughnessy All-Canadian Equity Fund RBC Canadian Equity Income Fund RBC Canadian Small & Mid-Cap Resources Fund RBC North American Value Fund RBC North American Growth Fund RBC U.S. Dividend Fund RBC U.S. Dividend Currency Neutral Fund RBC U.S. Equity Fund RBC U.S. Equity Currency Neutral Fund RBC QUBE U.S. Equity Fund RBC QUBE Low Volatility U.S. Equity Fund RBC QUBE Low Volatility U.S. Equity Currency Neutral Fund RBC U.S. Equity Value Fund RBC U.S. Index Fund RBC U.S. Index Currency Neutral Fund RBC O Shaughnessy U.S. Value Fund RBC U.S. Mid-Cap Growth Equity Fund RBC U.S. Mid-Cap Growth Equity Currency Neutral Fund RBC U.S. Mid-Cap Value Equity Fund RBC U.S. Small-Cap Core Equity Fund RBC U.S. Small-Cap Value Equity Fund RBC O Shaughnessy U.S. Growth Fund RBC O Shaughnessy U.S. Growth Fund II RBC Life Science and Technology Fund RBC International Dividend Growth Fund RBC International Equity Fund RBC International Equity Currency Neutral Fund RBC International Index Currency Neutral Fund RBC O Shaughnessy International Equity Fund RBC European Dividend Fund RBC European Equity Fund RBC European Mid-Cap Equity Fund RBC Asian Equity Fund RBC Asia Pacific ex-japan Equity Fund RBC Japanese Equity Fund RBC Emerging Markets Multi-Strategy Equity Fund RBC Emerging Markets Dividend Fund RBC Emerging Markets Equity Fund RBC Emerging Markets Small-Cap Equity Fund RBC Global Dividend Growth Fund RBC Global Dividend Growth Currency Neutral Fund RBC Global Equity Fund RBC Global Equity Focus Fund RBC QUBE Global Equity Fund RBC QUBE Low Volatility Global Equity Fund RBC Vision Global Equity Fund (formerly, RBC Jantzi Global Equity Fund) RBC Vision Fossil Fuel Free Global Equity Fund RBC O Shaughnessy Global Equity Fund RBC QUBE All Country World Equity Fund RBC QUBE Low Volatility All Country World Equity Fund RBC Global Energy Fund RBC Global Precious Metals Fund RBC Global Resources Fund RBC Global Technology Fund RBC Private Short-Term Income Pool RBC Private Canadian Corporate Bond Pool RBC Private Income Pool RBC Private Canadian Dividend Pool RBC Private Canadian Growth and Income Equity Pool RBC Private Canadian Equity Pool RBC Private Canadian Growth Equity Pool RBC Private Canadian Mid-Cap Equity Pool RBC Private U.S. Large-Cap Value Equity Pool RBC Private U.S. Large-Cap Value Equity Currency Neutral Pool RBC Private U.S. Growth Equity Pool RBC Private U.S. Large-Cap Core Equity Pool RBC Private U.S. Large-Cap Core Equity Currency Neutral Pool RBC Private U.S. Small-Cap Equity Pool RBC Private EAFE Equity Pool RBC Private Overseas Equity Pool RBC Private World Equity Pool PHILLIPS, HAGER & NORTH INVESTMENT FUNDS Phillips, Hager & North Canadian Money Market Fund Phillips, Hager & North $U.S. Money Market Fund Phillips, Hager & North Short Term Bond & Mortgage Fund Phillips, Hager & North Bond Fund Phillips, Hager & North Total Return Bond Fund Phillips, Hager & North Inflation-Linked Bond Fund Phillips, Hager & North High Yield Bond Fund Phillips, Hager & North Long Inflation-linked Bond Fund Phillips, Hager & North Monthly Income Fund Phillips, Hager & North Balanced Fund Phillips, Hager & North Dividend Income Fund Phillips, Hager & North Canadian Equity Fund Phillips, Hager & North Canadian Equity Value Fund Phillips, Hager & North Canadian Equity Underlying Fund Phillips, Hager & North Canadian Equity Underlying Fund II Phillips, Hager & North Canadian Growth Fund Phillips, Hager & North Canadian Income Fund Phillips, Hager & North Vintage Fund Phillips, Hager & North U.S. Dividend Income Fund Phillips, Hager & North U.S. Multi-Style All-Cap Equity Fund Phillips, Hager & North U.S. Equity Fund Phillips, Hager & North Currency-Hedged U.S. Equity Fund Phillips, Hager & North U.S. Growth Fund Phillips, Hager & North Overseas Equity Fund Phillips, Hager & North Currency-Hedged Overseas Equity Fund Phillips, Hager & North Global Equity Fund Phillips, Hager & North LifeTime 2015 Fund Phillips, Hager & North LifeTime 2020 Fund Phillips, Hager & North LifeTime 2025 Fund Phillips, Hager & North LifeTime 2030 Fund Phillips, Hager & North LifeTime 2035 Fund Phillips, Hager & North LifeTime 2040 Fund Phillips, Hager & North LifeTime 2045 Fund Phillips, Hager & North LifeTime 2050 Fund (collectively referred to as the Funds )

3 INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of each of the Funds, which comprise the statements of financial position, comprehensive income, cash flows and changes in net assets attributable to holders of redeemable units as at and for the periods indicated in note 2, and the related notes, which comprise 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 the financial statements of each of the Funds in accordance with International Financial Reporting Standards, 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 the financial statements of each of the Funds based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. 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 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 each of our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of each of the Funds present fairly, in all material respects, the financial position, financial performance and cash flows of each of the Funds as at and for the periods indicated in note 2, in accordance with International Financial Reporting Standards. Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario March 8, 2018

4 2017 ANNUAL FINANCIAL STATEMENTS SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) Number Fair % of Net of Units Security Cost Value Assets MUTUAL FUND UNITS Phillips, Hager & North High Yield Bond Fund* $ $ TOTAL MUTUAL FUND UNITS Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets BONDS CANADIAN BONDS CORPORATE Access Justice Durham Ltd Aug-2039 $ $ Access Prairies Partnership Mar Access Roads Edmonton Ltd Sep Aéroports de Montréal Apr Aéroports de Montréal Apr Aéroports de Montréal Oct Aéroports de Montréal Sep Aéroports de Montréal Apr Aéroports de Montréal Sep Aéroports de Montréal Jun Aéroports de Montréal Apr Alberta Powerline LP Jun Alberta Powerline LP Sep Alberta Powerline LP Dec Alberta Powerline LP Mar Alectra Inc Apr Alectra Inc Jul Alectra Inc Nov Alectra Inc May Alliance Pipeline LP Dec Alliance Pipeline LP Jun Alliance Pipeline LP Dec Alliance Pipeline LP Dec Alliance Pipeline LP Dec AltaGas Ltd Jun AltaLink Investments LP Jun AltaLink Investments LP Jun AltaLink Investments LP Mar AltaLink LP Nov AltaLink LP Mar BC Tel Apr Bell Canada Sep Bell Canada Feb Bell Canada Jun Bell Canada Mar Bow Centre Street LP Jun Bow Centre Street LP Jun Bow Centre Street LP Jun Brookfield Asset Management Inc Mar Brookfield Asset Management Inc Jan Brookfield Infrastructure Finance ULC Oct Brookfield Infrastructure Finance ULC Mar Brookfield Infrastructure Finance ULC Feb Brookfield Renewable Energy Partners ULC Oct The accompanying notes are an integral part of the financial statements.

5 SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) The accompanying notes are an integral part of the financial statements. Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets CORPORATE (cont.) Brookfield Renewable Energy Partners ULC Feb-2022 $ $ Brookfield Renewable Energy Partners ULC Jun Bruce Power LP Jun Bruce Power LP Jun Bruce Power LP Jun Bruce Power LP Jun Cameco Corp Sep Cameco Corp Nov Cameco Corp Jun Centra Gas Ontario Inc Oct Cominar Real Estate Investment Trust Jun Cominar Real Estate Investment Trust Dec Cominar Real Estate Investment Trust Jul Cominar Real Estate Investment Trust Nov Cominar Real Estate Investment Trust Dec Cominar Real Estate Investment Trust Jun Crombie Real Estate Investment Trust Oct Crosslinx Transit Solutions GP Jun CU Inc Nov CU Inc Apr CU Inc Mar CU Inc May CU Inc Nov CU Inc Nov CU Inc Oct CU Inc May CU Inc Nov CU Inc Nov CU Inc Oct CU Inc Oct Dufferin Wind Power Inc Nov Eagle Credit Card Trust Oct EllisDon Infrastructure JBH Inc Nov Enbridge Gas Distribution Inc Nov Enbridge Gas Distribution Inc Dec Enbridge Gas Distribution Inc Sep Enbridge Gas Distribution Inc Aug Enbridge Gas Distribution Inc May Enbridge Gas Distribution Inc Nov Enbridge Gas Distribution Inc Dec Enbridge Gas Distribution Inc Nov Enbridge Gas Distribution Inc Aug Enbridge Inc Sep Enbridge Inc Feb Enbridge Inc Jul Enbridge Inc Nov Enbridge Inc Sep Enbridge Inc Mar Enbridge Income Fund Feb Enbridge Pipelines Inc Nov Enbridge Pipelines Inc Aug Enbridge Pipelines Inc Nov Enbridge Pipelines Inc Feb Enbridge Pipelines Inc Sep Enbridge Pipelines Inc Feb Enbridge Pipelines Inc Jun Enbridge Pipelines Inc Nov Enbridge Pipelines Inc Apr

6 SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) The accompanying notes are an integral part of the financial statements. Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets CORPORATE (cont.) Enbridge Pipelines Inc Sep-2045 $ $ Enbridge Southern Lights LP Jun Enmax Corp Jun Enwave Energy Corp Dec Fortis Inc Dec Fortis Inc Jul FortisAlberta Inc Oct FortisAlberta Inc Sep FortisAlberta Inc Oct FortisBC Energy Inc Oct FortisBC Energy Inc May FortisBC Energy Inc Dec FortisBC Inc Jul FortisBC Inc Nov Gaz Metro Inc Jun Genesis Trust II Sep Genesis Trust II May Grand Renewable Solar LP Jan Great-West Lifeco Finance Delaware LP II Jun Greater Toronto Airports Authority Dec Greater Toronto Airports Authority Jul Greater Toronto Airports Authority Jun Greater Toronto Airports Authority Jun Greater Toronto Airports Authority Oct Greater Toronto Airports Authority Feb Greater Toronto Airports Authority Jun Greater Toronto Airports Authority Feb Greater Toronto Airports Authority Dec H2O Power LP Nov Hollis Receivables Term Trust II Jun Hospital Infrastructure Partners NOH Partnership Jan Hydro One Inc Apr Hydro One Inc Jun Hydro One Inc Jan Hydro One Inc Mar Hydro One Inc Apr Hydro One Inc Oct Hydro One Inc Jul Hydro Ottawa Holdings Inc Feb Hydro Ottawa Holdings Inc Feb Inter Pipeline Corridor Inc Feb Kingston Solar LP Jul Lower Mattagami Energy LP Oct Lower Mattagami Energy LP May Maple Leaf Sports & Entertainment Ltd Jun Maritimes & Northeast Pipeline LP Nov Melancthon Wolfe Wind LP Dec Mountain View Partners GP Mar North Battleford Power LP Dec North West Redwater Partnership Feb North West Redwater Partnership Jun North West Redwater Partnership Jun North West Redwater Partnership Jun North West Redwater Partnership Jun North West Redwater Partnership Jun North West Redwater Partnership Jan North West Redwater Partnership Jul Northland Power Solar Finance One LP Jun

7 SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets CORPORATE (cont.) Nova Gas Transmission Ltd May-2026 $ $ Nova Scotia Power Inc Aug Nova Scotia Power Inc May Nova Scotia Power Inc Jul OMERS Realty Corp Nov Ontario Power Generation Inc Oct Pembina Pipeline Corp Oct Pembina Pipeline Corp Feb Plenary Health Hamilton LP May Plenary Health North Bay Finco Inc Mar PSS Generating Station LP Oct Ridley Grain Ltd Aug Royal Bank of Canada* Jul Royal Bank of Canada* Dec Royal Bank of Canada* Apr Royal Bank of Canada* Mar Royal Bank of Canada* Mar Royal Bank of Canada* Jul SEC LP and Arci Ltd Aug SGTP Highway Bypass LP Jan Sun Life Financial Inc May TELUS Corp Apr Teranet Holdings LP Dec TMX Group Ltd Oct Toromont Industries Ltd Sep TransCanada PipeLines Ltd Aug TransCanada PipeLines Ltd Nov TransCanada PipeLines Ltd Jun TransCanada PipeLines Ltd Sep TransEd Partners GP Sep Trillium Windpower LP Feb Union Gas Ltd Apr Union Gas Ltd Aug Union Gas Ltd Nov Union Gas Ltd Jun Union Gas Ltd Sep Union Gas Ltd Jun Union Gas Ltd Jun Union Gas Ltd Jun Vancouver Airport Authority Nov Vancouver Fraser Port Authority Apr Vancouver International Airport Authority Dec Westcoast Energy Inc Jan Westcoast Energy Inc Jan Westcoast Energy Inc Jul Westcoast Energy Inc Oct Westcoast Energy Inc Dec Westcoast Energy Inc Oct Winnipeg Airport Authority Inc Nov Winnipeg Airport Authority Inc Apr Winnipeg Airport Authority Inc Sep Winnipeg Airport Authority Inc Nov Winnipeg Airport Authority Inc Sep The accompanying notes are an integral part of the financial statements.

8 SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) The accompanying notes are an integral part of the financial statements. Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets FEDERAL Canada Housing Trust No Dec-2020 $ $ Canada Housing Trust No Jun Canada Housing Trust No Jun Canada Housing Trust No Dec Canada Housing Trust No Dec Canada Housing Trust No Mar Canada Housing Trust No Jun Canada Housing Trust No Dec Canada Housing Trust No Dec Canada Housing Trust No Sep Canada Housing Trust No Jun Canada Housing Trust No Mar CBC Monetization Trust May Government of Canada Sep Government of Canada Nov Government of Canada Feb Government of Canada Mar Government of Canada Jun Government of Canada Sep Government of Canada Mar Government of Canada Jun Government of Canada Sep Government of Canada Jun Government of Canada Sep Government of Canada Mar Government of Canada Jun Government of Canada Jun Government of Canada Jun Government of Canada Jun Government of Canada Jun Government of Canada Jun Government of Canada Jun Government of Canada Dec Government of Canada Dec Government of Canada Dec Government of Canada Dec Government of Canada Dec PROVINCIAL/MUNICIPAL City of Montreal Sep City of Montreal Sep City of Ottawa Jul City of Ottawa Jul City of Vancouver Oct First Nations Finance Authority Jun Hospital for Sick Children Dec Hospital for Sick Children Dec McGill University Sep Municipal Finance Authority of British Columbia Dec Ontario Electricity Financial Corp May Ontario Electricity Financial Corp May Ontario Electricity Financial Corp Jun Ontario School Boards Financing Corp Oct Ontario School Boards Financing Corp Oct Ontrea Inc Apr OPB Finance Trust Jan Province of Alberta Jun

9 SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets PROVINCIAL/MUNICIPAL (cont.) Province of Alberta Dec-2033 $ $ Province of Alberta Dec Province of Alberta Dec Province of Manitoba Jun Province of Manitoba Sep Province of Manitoba Sep Province of New Brunswick Jun Province of New Brunswick Sep Province of New Brunswick Jun Province of New Brunswick Jun Province of New Brunswick Aug Province of Newfoundland and Labrador Oct Province of Ontario Jun Province of Ontario Sep Province of Ontario Feb Province of Ontario Jun Province of Ontario Jun Province of Ontario Dec Province of Ontario Jun Province of Ontario Jun Province of Ontario Jun Province of Ontario Jun Province of Ontario Jun Province of Ontario Jun Province of Ontario Jun Province of Ontario Dec Province of Ontario Jun Province of Ontario Jun Province of Quebec Dec Province of Quebec Jan Province of Quebec Apr Province of Quebec Sep Province of Quebec Sep Province of Quebec Oct Province of Quebec Dec Province of Quebec Dec Province of Quebec Dec Province of Quebec Dec Province of Saskatchewan Jun Province of Saskatchewan Mar Province of Saskatchewan Sep Province of Saskatchewan Jun Province of Saskatchewan Dec South Coast British Columbia Transportation Authority Nov South Coast British Columbia Transportation Authority Jun South Coast British Columbia Transportation Authority Nov University of British Columbia Dec University of Toronto Nov TOTAL CANADIAN BONDS The accompanying notes are an integral part of the financial statements.

10 SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets UNITED STATES BONDS Anheuser-Busch InBev Finance Inc. CAD May-2024 $ $ AT&T Inc. CAD Nov Bank of America Corp. CAD Jun Bank of America Corp. CAD Mar Bank of America Corp. CAD Sep Merrill Lynch & Co. Inc. CAD May Molson Coors International LP CAD Sep Molson Coors International LP CAD Sep Molson Coors International LP CAD Jul United Parcel Service Inc. CAD May United States Treasury Jun Wells Fargo & Co. CAD Mar Wells Fargo & Co. CAD Oct TOTAL UNITED STATES BONDS TOTAL BONDS MORTGAGE-BACKED SECURITIES Equitable Bank Jan Peoples Trust Oct TOTAL MORTGAGE-BACKED SECURITIES MORTGAGES CMHC Insured % Nov 01, % Dec 01, % Jan 01, % Nov 01, % Sep 05, TOTAL MORTGAGES SHORT-TERM INVESTMENTS TOTAL INVESTMENTS $ OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS $ * Investment in related party (see note 8 in the generic notes). Short-term investments, which may be made up of treasury bills, commercial paper, term deposits and discount notes, earn interest at rates ranging from 1.12% to 1.60% and mature between January 2, 2018 and June 6, The accompanying notes are an integral part of the financial statements.

11 FINANCIAL STATEMENTS Statements of Financial Position (in $000s except per unit amounts) (see note 2 in the generic notes) ASSETS Investments at fair value $ $ Cash Due from investment dealers 77 Subscriptions receivable Futures contracts margin receivable Dividends receivable, interest accrued and other assets TOTAL ASSETS LIABILITIES Redemptions payable Distributions payable (1) Accounts payable and accrued expenses TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS ( NAV ) $ $ Investments at cost $ $ NAV SERIES A $ $ ADVISOR SERIES $ $ SERIES H $ $ SERIES D $ $ SERIES F $ $ SERIES I $ $ SERIES O $ $ NAV PER UNIT SERIES A $ $ ADVISOR SERIES $ $ SERIES H $ $ SERIES D $ $ SERIES F $ $ SERIES I $ $ SERIES O $ $ Statements of Comprehensive Income (in $000s except per unit amounts) For the periods ended (see note 2 in the generic notes) INCOME (see note 3 in the generic notes) Interest for distribution purposes $ $ Net gain (loss) from futures contracts (4 029) Other income received from underlying funds Capital gains received from underlying funds Net realized gain (loss) on investments (46 552) Net gain (loss) on foreign currencies and other net assets Change in unrealized gain (loss) on investments ( ) TOTAL INCOME (LOSS) EXPENSES (see notes Fund Specific Information) Management fees Administration fees Independent Review Committee costs 3 2 GST/HST TOTAL EXPENSES INCREASE (DECREASE) IN NAV $ $ INCREASE (DECREASE) IN NAV SERIES A $ $ ADVISOR SERIES $ $ SERIES H $ $ 944 SERIES D $ $ SERIES F $ $ SERIES I $ $ SERIES O $ $ INCREASE (DECREASE) IN NAV PER UNIT SERIES A $ 0.19 $ 0.15 ADVISOR SERIES $ 0.18 $ 0.15 SERIES H $ $ 0.48 SERIES D $ 0.24 $ 0.24 SERIES F $ 0.23 $ 0.11 SERIES I $ $ 0.51 SERIES O $ 0.30 $ 0.32 The accompanying notes are an integral part of these financial statements.

12 FINANCIAL STATEMENTS Statements of Cash Flow (in $000s) For the periods ended (see note 2 in the generic notes) CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in NAV $ $ ADJUSTMENTS TO RECONCILE NET CASH PROVIDED BY (USED IN) OPERATIONS Interest for distribution purposes (325) (535) Non-cash distributions from underlying funds (1 370) (10 939) Net realized loss (gain) on investments (79 538) Change in unrealized loss (gain) on investments (15 584) (Increase) decrease in accrued receivables Increase (decrease) in accrued payables (Increase) decrease in margin accounts (4 562) (10 140) Cost of investments purchased ( ) ( ) Proceeds from sale and maturity of investments NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ( ) ( ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of redeemable units Cash paid on redemption of redeemable units ( ) ( ) Distributions paid to holders of redeemable units (54 374) (75 350) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ $ Net increase (decrease) in cash for the period Cash (bank overdraft), beginning of period CASH (BANK OVERDRAFT), END OF PERIOD $ $ Interest received (paid) $ $ Dividends received, net of withholding taxes $ $ The accompanying notes are an integral part of these financial statements.

13 FINANCIAL STATEMENTS Statements of Changes in NAV (in $000s) For the periods ended (see note 2 in the generic notes) Series A Advisor Series Series H Series D NAV AT BEGINNING OF PERIOD $ $ $ $ $ $ $ $ INCREASE (DECREASE) IN NAV Early redemption fees 2 Proceeds from redeemable units issued Reinvestments of distributions to holders of redeemable units Redemption of redeemable units (50 565) (39 113) (38 647) (28 856) (26 676) (80 364) (95 964) NET INCREASE (DECREASE) FROM REDEEMABLE UNIT TRANSACTIONS (22 149) (1 815) (23 888) (5 782) Distributions from net income (3 167) (3 332) (2 251) (2 162) (256) (14 269) (14 879) Distributions from net gains (2 079) (1 366) (7 135) Distributions from capital TOTAL DISTRIBUTIONS TO HOLDERS OF REDEEMABLE UNITS (3 167) (5 411) (2 251) (3 528) (256) (14 269) (22 014) NET INCREASE (DECREASE) IN NAV (22 605) (2 249) (23 200) (7 638) NAV AT END OF PERIOD $ $ $ $ $ $ $ $ For the periods ended (see note 2 in the generic notes) Series F Series I Series O Total NAV AT BEGINNING OF PERIOD $ $ $ $ $ $ $ $ INCREASE (DECREASE) IN NAV Early redemption fees 11 (4) 13 (4) Proceeds from redeemable units issued Reinvestments of distributions to holders of redeemable units Redemption of redeemable units ( ) ( ) ( ) ( ) ( ) ( ) ( ) NET INCREASE (DECREASE) FROM REDEEMABLE UNIT TRANSACTIONS (86 042) Distributions from net income (22 820) (17 104) (1 605) ( ) ( ) ( ) ( ) Distributions from net gains (9 821) (79 946) ( ) Distributions from capital TOTAL DISTRIBUTIONS TO HOLDERS OF REDEEMABLE UNITS (22 820) (26 925) (1 605) ( ) ( ) ( ) ( ) NET INCREASE (DECREASE) IN NAV (82 908) NAV AT END OF PERIOD $ $ $ $ $ $ $ $ The accompanying notes are an integral part of these financial statements.

14 NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION General information (see note 1 in the generic notes) The investment objective of the Fund is to provide investors with stability of capital by investing primarily in a well-diversified portfolio of fixed-income securities issued primarily by Canadian governments and corporations. It also invests in derivatives. All outstanding Series H units were re-designated as Series C units, and then all Series C units were renamed Series A units effective June 30, All outstanding Series I units were re-designated as Series F units effective June 30, Financial instrument risk and capital management (see note 5 in the generic notes) Credit risk (%) The table below summarizes the Fund s credit risk exposure grouped by credit ratings as at: Rating AAA AA A BBB BB B 0.6 CCC 0.2 Unrated* Total * Mortgages, which represent 59.7% (, %) of the unrated above, are all Canada Mortgage and Housing Corporation ( CMHC ) guaranteed mortgages, and therefore have the backing of an AAA rated issuer. As at and 2016, there were no mortgage payments in arrears for more than 90 days. Interest rate risk (%) The table below summarizes the Fund s exposure to interest rate risk by remaining term to maturity as at: Term to maturity Less than 1 year years years > 10 years Total As at, had prevailing interest rates risen or lowered by 1%, with all other factors kept constant, the Fund s NAV may have decreased or increased, respectively, by approximately 7.3% (, %). In practice, actual results could differ from this sensitivity analysis and the difference could be material. Fair value hierarchy ($000s except % amounts) (see note 3 in the generic notes) The following is a summary of the inputs used as of and Level 1 Level 2 Level 3 Total Equities Mutual fund units Fixed-income and debt securities Short-term investments Derivatives assets Derivatives liabilities Total financial instruments % of total portfolio Concentration risk (%) The table below summarizes the Fund s investment portfolio (after consideration of derivative products, if any) as at: Investment mix Federal Bonds Provincial Bonds Corporate Bonds Municipal Bonds Mortgages Mortgage-Backed Bonds 0.1 Cash/Other Total , 2016 Level 1 Level 2 Level 3 Total Equities Mutual fund units Fixed-income and debt securities Short-term investments Derivatives assets Derivatives liabilities Total financial instruments % of total portfolio Please see the generic notes at the back of the financial statements.

15 NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION During the periods ended and 2016, the reconciliation of financial instruments measured at fair value using unobservable inputs (Level 3) is presented as follows: Balance at beginning of period Net purchases Net sales (436) (395) Net transfers in Net transfers out Realized gains (losses) (6) (5) Unrealized gains (losses) (382) (283) Balance at end of period During the year ended, 2016, investments in mortgages of $8,721 were transferred into Level 3 from Level 2 following management s assessment of the significance of the unobservable inputs used to value those investments. The Level 3 assets are mortgages which are valued by a third-party vendor using industry-accepted methodologies which include unobservable inputs. Mortgages are valued by discounting future cash flows using a discount rate equal to the risk-free rate plus an appropriate risk spread premium. The spread premium is derived by the vendor from their risk rating program and a monthly spread matrix. This quantitative rules-based approach reviews seven risk factors to assess the market risk, credit risk and liquidity premiums to arrive at a total credit score for each mortgage. Among the inputs are the borrowers financial statements, rent roll and operating statements, the most recent property inspection report and the terms of the mortgage itself. As at, a 10% increase or decrease in the weighted average spread premium of 1.19% (, %), an unobservable input, would have increased or decreased the Fund s NAV respectively by approximately 0.0% (, %). Management fees and operating expenses (see note 8 in the generic notes) Management fees and administration fees of each series of the Fund are payable to RBC GAM and calculated at the following annual percentages, before GST/HST, of the daily NAV of each series of the Fund. Management fees* Operating expenses Series A 0.90% 0.05% Advisor Series 0.90% 0.05% Series H 0.90% 0.05% Series D 0.50% 0.04% Series F 0.40% 0.05% Series I 0.40% 0.05% Series O n/a 0.02% * Effective June 30, 2016, the management fees for Series A and Advisor Series units were reduced to 0.90% from 1.00%; and for Series F units were reduced to 0.40% from 0.50%. Series O unitholders pay a negotiated management fee directly to RBC GAM for investment-counselling services Investments by related parties ($000s except unit amounts) Royal Bank of Canada, or one of its subsidiaries, held the following investments in the Fund as at: Units held Series A Advisor Series Series D Series F Value of all units 3 3 Unconsolidated structured entities (%) (see note 3 in the generic notes) The table below summarizes the Fund s interest in the sponsored funds as a percentage of NAV, and the Fund s ownership interest as a percentage of NAV of the sponsored funds ( Ownership ). All sponsored funds are established and conduct business in Canada NAV Ownership NAV Ownership Phillips, Hager & North High Yield Bond Fund RBC High Yield Bond Fund Taxes ($000s) (see note 6 in the generic notes) The non-capital and capital losses as at for the Fund were approximately: Please see the generic notes at the back of the financial statements. Capital losses Non-capital losses

16 NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION Redeemable units (000s) There is no limitation on the number of units available for issue. Units are purchased and redeemed at the NAV per unit. For the periods ended (see note 2 in the generic notes) Series A Opening units Issued number of units Reinvested number of units Redeemed number of units (4 442) (3 341) Ending number of units Advisor Series Opening units Issued number of units Reinvested number of units Redeemed number of units (3 392) (2 471) Ending number of units Series H Opening units Issued number of units 220 Reinvested number of units 19 Redeemed number of units (2 248) Ending number of units Series D Opening units Issued number of units Reinvested number of units Redeemed number of units (7 064) (8 202) Ending number of units Series F Opening units Issued number of units Reinvested number of units Redeemed number of units (27 041) (12 148) Ending number of units Series I Opening units Issued number of units Reinvested number of units 108 Redeemed number of units (11 241) Ending number of units Series O Opening units Issued number of units Reinvested number of units Redeemed number of units (98 484) (82 073) Ending number of units Investments by other related investment funds (%) (see note 8 in the generic notes) The table below summarizes, as a percentage, the NAV of the Fund owned by other related investment funds as at: RBC Balanced Growth & Income Class RBC Balanced Growth & Income Fund RBC Conservative Growth & Income Fund RBC Monthly Income Bond Fund RBC Retirement 2020 Portfolio RBC Retirement 2025 Portfolio RBC Retirement 2030 Portfolio RBC Retirement 2035 Portfolio RBC Retirement 2040 Portfolio RBC Retirement 2045 Portfolio RBC Retirement 2050 Portfolio RBC Retirement Income Solution RBC Select Balanced Portfolio RBC Select Choices Balanced Portfolio RBC Select Choices Conservative Portfolio RBC Select Choices Growth Portfolio RBC Select Conservative Portfolio RBC Select Growth Portfolio RBC Select Very Conservative Portfolio RBC Target 2020 Education Fund RBC Target 2025 Education Fund RBC Target 2030 Education Fund 0.4 Total Please see the generic notes at the back of the financial statements.

17 GENERIC NOTES TO FINANCIAL STATEMENTS (also see Fund Specific Information) 1. The Funds The Funds ( Fund or Funds ) are open-ended mutual fund trusts governed by the laws of the Province of Ontario or British Columbia. RBC GAM is the manager and portfolio manager of the Funds and its head office is located at 155 Wellington Street West, 22nd Floor, Toronto, Ontario. RBC GAM is also the trustee of those Funds governed by the laws of the Province of Ontario. These financial statements were approved for issuance by the Board of Directors of RBC GAM on March 8, The Funds may issue an unlimited number of units in some or all of Series A, Advisor Series, Advisor T5 Series, Series T5, Series T8, Series H, Series D, Series DZ, Series F, Series FT5, Series FT8, Series I and Series O. Series A units have no sales charges and are available to all investors through authorized dealers. Advisor Series units and Advisor T5 Series units are available to all investors through authorized dealers with an initial sales charge or low-load sales charge option. For certain of the Funds, Advisor Series units and Advisor T5 Series units are available with a deferred sales charge option. Under the initial sales charge option, investors pay a sales charge ranging from 0% to 5% of the amount invested. Under the deferred sales charge or low-load sales charge option, sales charges may be applicable, as described in the Simplified Prospectus. Series T5 units and Series T8 units have no sales charges and are available to all investors through authorized dealers. Series H units have no sales charges, have lower fees than Series A units and are only available to investors who invest and maintain the required minimum balance through authorized dealers. Series D units and Series DZ units have no sales charges and have lower fees than Series A units. Series D units and Series DZ units may be available to investors who have accounts with RBC Direct Investing Inc., Phillips, Hager & North Investment Funds Ltd. ( PH&N IF ) or certain other authorized dealers (primarily discount brokers). Series F units, Series FT5 units and Series FT8 units have no sales charges and have lower fees than Series A units. Series F units, Series FT5 units and Series FT8 units are only available to investors who have fee-based accounts with their dealer. Series I units have no sales charges, have lower fees than Series F units, Series FT5 units and Series FT8 units and are only available to investors who invest and maintain the required minimum balance and who have accounts with dealers who have signed a fee-based agreement with RBC GAM. Series O units are only available to large private or institutional investors or dealers. No management fees are payable by the Funds in respect to Series O units. Unitholders pay a negotiated fee directly to RBC GAM for investment-counselling services. 2. Financial year/period The information provided in these financial statements and notes thereto is for the 12-month periods ended or as at and 2016, as applicable. In the year a Fund or series is established, period represents the period from inception to of that fiscal year. 3. Summary of significant accounting policies These financial statements have been prepared in compliance with International Financial Reporting Standards ( IFRS ). The significant accounting policies of the Funds, which are investment entities, are as follows: Classification of Financial Assets and Liabilities The Funds financial assets and financial liabilities, other than derivatives, are designated at fair value through profit or loss at inception, as those financial assets and liabilities are managed together and their performance evaluated on a fair value basis in accordance with the Funds documented investment strategy. Derivatives are classified as held for trading and measured at fair value through profit or loss. Redemption units are measured at their respective redemption values. All other assets and liabilities are measured at amortized cost. Realized gains arising on derivatives during a period are included in the Statements of Comprehensive Income in Net gain (loss) from futures contracts, Other derivatives and Net gain (loss) on foreign currencies and other net assets, where applicable. Classification of Redeemable Units The Funds have multiple features across the different series of the Funds. Consequently, the Funds outstanding redeemable units are classified as financial liabilities in accordance with the requirements of IAS 32 Financial Instruments: Presentation.