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
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 )
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
2017 ANNUAL FINANCIAL STATEMENTS SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) RBC CANADIAN EQUITY INCOME FUND, 2017 Fair % of Net Holdings Security Cost Value Assets EQUITIES Consumer Discretionary 200 000 Comcast Corp., Class A $ 9 855 $ 10 075 171 500 Magna International Inc., Class A 9 144 12 218 366 329 Shaw Communications Inc., Class B 9 284 10 510 28 283 32 803 0.9 Consumer Staples 542 500 Alimentation Couche-Tard Inc. 33 748 35 583 410 614 Loblaw Companies Ltd. 26 455 28 012 497 888 Maple Leaf Foods Inc. 8 008 17 834 68 211 81 429 2.3 Energy 170 000 AltaGas Ltd. 4 974 4 865 100 000 AltaGas Ltd., Subscription Receipts 2 775 2 838 544 400 Bonterra Energy Corp. 10 940 8 329 2 134 198 Canadian Natural Resources Ltd. 73 671 95 868 3 635 877 Enbridge Inc. 189 766 178 740 232 737 Enbridge Inc., Restricted April 7, 2018 10 436 11 278 1 805 000 Enbridge Income Fund Holdings Inc. 53 927 53 807 1 204 400 Enerflex Ltd. 17 455 18 475 930 935 Gibson Energy Inc. 20 249 16 924 2 939 700 Granite Oil Corp. 21 302 9 172 83 600 Inter Pipeline Ltd. 2 306 2 176 1 359 286 Keyera Corp. 50 541 48 146 405 882 Kinder Morgan Canada Ltd. 6 900 6 904 711 200 Parkland Fuel Corp. 18 877 19 096 788 421 Pembina Pipeline Corp. 32 122 35 881 840 618 PrairieSky Royalty Ltd. 26 218 26 950 452 000 Royal Dutch Shell Plc., A Shares 17 750 18 967 537 651 StatoilHydro ASA 12 624 14 468 2 623 300 Suncor Energy Inc. 95 071 121 065 153 441 Total S.A. 10 083 10 647 1 368 300 TransCanada Corp. 71 719 83 713 1 644 824 Whitecap Resources Inc. 18 867 14 721 768 573 803 030 22.8 Financials 625 500 Bank of Montreal 49 476 62 919 1 671 748 Bank of Nova Scotia 105 364 135 612 1 865 058 Brookfield Asset Management Inc., Class A 70 021 102 056 694 100 Canadian Imperial Bank of Commerce 69 072 85 055 32 450 Fairfax Financial Holdings Ltd. 20 829 21 720 620 800 Fiera Capital Corp. 7 822 8 070 258 900 Intact Financial Corp. 24 544 27 182 Fair % of Net Holdings Security Cost Value Assets Financials (cont.) 4 607 429 Manulife Financial Corporation $ 89 428 $ 120 807 284 200 National Bank of Canada 14 236 17 825 2 084 300 Royal Bank of Canada* 151 097 213 953 1 760 900 Sun Life Financial Inc. 75 070 91 355 428 000 Thomson Corp. 23 690 23 450 2 587 100 Toronto-Dominion Bank 146 457 190 540 11 852 Trisura Group Ltd. 267 310 847 373 1 100 854 31.2 Health Care 1 641 215 Chartwell Retirement Residences Real Estate Investment Trust 21 932 26 686 100 000 Johnson & Johnson 15 958 17 579 90 000 Medtronic Plc. 8 778 9 139 205 000 Merck & Co. Inc. 17 094 14 518 400 000 Pfizer Inc. 17 363 18 229 81 125 86 151 2.4 Industrials 400 000 Brookfield Business Partners LP 14 477 17 316 446 000 Canadian National Railway Co. 45 969 46 228 317 000 Canadian Pacific Railway Ltd. 60 108 72 802 250 000 Fluor Corp. 17 726 16 231 425 000 Johnson Controls International Plc. 24 042 20 367 210 000 Quanta Services Inc. 8 956 10 328 437 023 Russel Metals Inc. 12 092 12 748 933 400 SNC-Lavalin Group Inc. 51 682 53 250 160 700 WSP Global Inc. 7 030 9 628 242 082 258 898 7.3 Information Technology 100 000 Microsoft Corp. 9 311 10 759 325 000 Open Text Corp. 13 234 14 531 65 000 Visa Inc., Class A 7 025 9 336 29 570 34 626 1.0 Materials 387 800 Agnico Eagle Mines Ltd. 24 094 22 508 214 832 Agrium Inc. 23 681 31 060 152 200 Avery Dennison Corp. 17 611 21 977 667 200 Chemtrade Logistics Income Fund 14 181 12 944 100 100 Ecolab Inc. 17 492 16 886 222 905 Methanex Corp. 11 805 16 976 3 077 932 Mountain Province Diamonds Inc. 19 065 10 496 648 800 Newmont Mining Corporation 28 043 30 599 112 600 Norbord Inc. 3 605 4 791 928 572 Potash Corporation of Saskatchewan Inc. 29 228 23 939 38 900 Sherwin-Williams Co. 17 451 20 048 904 900 Teck Resources Ltd., Class B 22 999 29 744 156 700 West Fraser Timber Co. Ltd. 8 086 12 155 237 341 254 123 7.2 The accompanying notes are an integral part of the financial statements.
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) RBC CANADIAN EQUITY INCOME FUND, 2017 Fair % of Net Holdings Security Cost Value Assets Real Estate 1 247 933 Agellan Commercial Real Estate Investment Trust $ 10 876 $ 14 900 412 802 Allied Properties Real Estate Investment Trust 14 408 17 371 2 538 299 Brookfield Property Partners LP 43 933 70 692 508 516 Canadian Real Estate Investment Trust 23 166 23 544 490 000 Choice Properties Real Estate Investment Trust 6 608 6 542 544 287 Cominar Real Estate Investment Trust 8 180 7 838 275 628 Dream Office Real Estate Investment Trust 5 702 6 108 2 390 200 Dream Unlimited Corp. 15 841 18 548 1 427 700 First Capital Realty Inc. 27 372 29 582 763 000 GGP Inc. Real Estate Investment Trust 23 970 22 433 1 138 300 H&R Real Estate Investment Trust 25 612 24 314 1 101 100 Killam Apartment Real Estate Investment Trust 12 236 15 658 655 584 Morguard Real Estate Investment Trust 8 749 9 047 3 092 900 Pure Industrial Real Estate Investment Trust 16 964 20 939 1 392 400 RioCan Real Estate Investment Trust 33 981 33 919 845 000 SmartCentres Real Estate Investment Trust 26 359 26 119 1 522 400 Tricon Capital Group Inc. 14 272 17 584 1 547 100 WPT Industrial Real Estate Investment Trust 22 551 24 737 340 780 389 875 11.0 Fair % of Net Holdings Security Cost Value Assets Telecommunication Services 200 000 AT&T Inc. $ 10 930 $ 9 781 1 130 100 BCE Inc. 63 339 68 235 140 000 Rogers Communications Inc., Class B 9 005 8 967 541 000 TELUS Corp. 22 306 25 762 105 580 112 745 3.2 Utilities 2 069 419 Algonquin Power & Utilities Corp. 22 755 29 096 391 800 Atco Ltd., Class I, Non-Voting 18 042 17 631 918 300 Boralex Inc., Class A 12 848 21 580 497 086 Brookfield Infrastructure Partners LP 19 826 28 026 349 820 Brookfield Renewable Partners LP 12 037 15 326 435 950 Canadian Utilities Ltd., Class A 15 664 16 309 794 400 Capital Power Corp. 20 139 19 455 556 749 Emera Inc. 23 620 26 156 570 765 Fortis Inc. 21 591 26 318 400 000 Hydro One Ltd. 8 800 8 960 1 134 000 Innergex Renewable Energy Inc. 16 030 16 330 399 900 Northland Power Inc. 9 414 9 338 906 061 Pattern Energy Group Inc. 26 210 24 475 1 876 300 TransAlta Corp. 15 603 13 978 1 637 400 TransAlta Renewables Inc. 21 091 21 925 263 670 294 903 8.4 TOTAL EQUITIES 3 012 588 3 449 437 97.7 Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets BONDS 10 000 Canaccord Genuity Group Inc., Convertible 6.500 31-Dec-2021 $ 10 000 $ 10 000 11 250 DHX Media Ltd., Convertible 5.875 30-Sep-2024 11 250 10 856 TOTAL BONDS 21 250 20 856 0.6 SHORT-TERM INVESTMENTS 46 909 46 909 1.3 TOTAL INVESTMENTS 3 080 747 3 517 202 99.6 UNREALIZED GAIN ON FOREIGN EXCHANGE CONTRACTS (SCHEDULE A) 3 903 0.1 UNREALIZED LOSS ON FOREIGN EXCHANGE CONTRACTS (SCHEDULE A) (1 203) TOTAL PORTFOLIO $ 3 080 747 3 519 902 99.7 OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 9 601 0.3 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS $ 3 529 503 100.0 The accompanying notes are an integral part of the financial statements.
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) RBC CANADIAN EQUITY INCOME FUND, 2017 SCHEDULE A Foreign Exchange Contracts Unrealized Contracts Maturity Date Gain Bought CAD 3 463 Sold NOK 22 000 @ 0.1574 10-Jan-2018 $ 94 Bought CAD 2 045 Sold USD 1 600 @ 1.2784 24-Jan-2018 35 Bought CAD 17 899 Sold GBP 10 530 @ 1.6998 25-Jan-2018 19 Bought CAD 7 367 Sold USD 5 850 @ 1.2593 02-Feb-2018 17 Bought CAD 10 209 Sold USD 8 100 @ 1.2603 02-Feb-2018 32 Bought CAD 17 704 Sold USD 13 910 @ 1.2727 05-Feb-2018 229 Bought CAD 893 Sold USD 704 @ 1.2682 06-Feb-2018 8 Bought CAD 6 478 Sold USD 5 052 @ 1.2822 07-Feb-2018 131 Bought CAD 23 276 Sold USD 18 300 @ 1.2719 09-Feb-2018 287 Bought CAD 2 571 Sold USD 2 000 @ 1.2857 09-Feb-2018 59 Bought CAD 6 852 Sold USD 5 350 @ 1.2807 12-Feb-2018 131 Bought CAD 21 380 Sold USD 16 805 @ 1.2722 12-Feb-2018 269 Bought CAD 6 878 Sold NOK 44 600 @ 0.1542 15-Feb-2018 46 Bought CAD 2 521 Sold USD 1 990 @ 1.2668 20-Feb-2018 21 Bought CAD 4 430 Sold USD 3 500 @ 1.2657 20-Feb-2018 34 Bought CAD 17 544 Sold USD 13 800 @ 1.2713 22-Feb-2018 210 Bought CAD 32 032 Sold USD 25 100 @ 1.2762 23-Feb-2018 505 Bought CAD 27 631 Sold USD 21 750 @ 1.2704 26-Feb-2018 313 Bought CAD 38 283 Sold USD 30 000 @ 1.2761 01-Mar-2018 604 Bought CAD 10 642 Sold USD 8 317 @ 1.2796 06-Mar-2018 197 Bought CAD 5 066 Sold USD 3 940 @ 1.2859 13-Mar-2018 119 Bought CAD 2 283 Sold USD 1 800 @ 1.2683 14-Mar-2018 23 Bought CAD 4 941 Sold USD 3 851 @ 1.2831 15-Mar-2018 105 Bought CAD 8 010 Sold USD 6 238 @ 1.2841 19-Mar-2018 177 Bought CAD 7 091 Sold EUR 4 659 @ 1.5220 26-Mar-2018 35 Bought CAD 8 926 Sold USD 6 948 @ 1.2846 26-Mar-2018 203 $ 3 903 Unrealized Contracts Maturity Date Loss Bought CAD 8 729 Sold USD 7 100 @ 1.2294 11-Jan-2018 $ (195) Bought CAD 5 553 Sold USD 4 450 @ 1.2480 16-Jan-2018 (39) Bought CAD 15 150 Sold USD 12 137 @ 1.2483 18-Jan-2018 (102) Bought CAD 26 145 Sold USD 20 960 @ 1.2474 19-Jan-2018 (194) Bought USD 14 230 Sold CAD 18 273 @ 0.7788 19-Jan-2018 (391) Bought CAD 1 253 Sold USD 1 000 @ 1.2534 01-Feb-2018 (3) Bought CAD 15 246 Sold USD 12 238 @ 1.2458 05-Feb-2018 (128) Bought CAD 2 441 Sold NOK 16 000 @ 0.1526 05-Feb-2018 (10) Bought USD 6 000 Sold CAD 7 666 @ 0.7827 06-Feb-2018 (128) Bought CAD 3 640 Sold EUR 2 417 @ 1.5061 14-Feb-2018 (13) $ (1 203) TOTAL FOREIGN EXCHANGE $ 2 700 All counterparties have a credit rating of at least A. * 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 0.95% to 1.38% and mature between January 2, 2018 and April 19, 2018. The accompanying notes are an integral part of the financial statements.
FINANCIAL STATEMENTS RBC CANADIAN EQUITY INCOME FUND Statements of Financial Position (in $000s except per unit amounts) (see note 2 in the generic notes) 2017 2016 ASSETS Investments at fair value $ 3 517 202 $ 3 419 359 Cash 2 909 3 434 Due from investment dealers 3 835 6 640 Subscriptions receivable 1 831 2 526 Unrealized gain on foreign exchange contracts 3 903 1 873 Dividends receivable, interest accrued and other assets 10 620 9 957 TOTAL ASSETS 3 540 300 3 443 789 LIABILITIES Redemptions payable 4 098 3 544 Unrealized loss on foreign exchange contracts 1 203 2 547 Distributions payable 1 425 1 550 Accounts payable and accrued expenses 4 071 4 113 TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 10 797 11 754 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS ( NAV ) $ 3 529 503 $ 3 432 035 Investments at cost $ 3 080 747 $ 3 039 299 NAV SERIES A $ 1 491 912 $ 1 537 729 ADVISOR SERIES $ 663 164 $ 724 915 SERIES H $ $ SERIES D $ 265 600 $ 257 876 SERIES F $ 548 114 $ 376 706 SERIES I $ $ SERIES O $ 560 713 $ 534 809 NAV PER UNIT SERIES A $ 27.20 $ 26.20 ADVISOR SERIES $ 27.45 $ 26.42 SERIES H $ $ SERIES D $ 30.47 $ 28.98 SERIES F $ 31.91 $ 30.24 SERIES I $ $ SERIES O $ 31.64 $ 29.74 Statements of Comprehensive Income (in $000s except per unit amounts) For the periods ended (see note 2 in the generic notes) 2017 2016 INCOME (see note 3 in the generic notes) Dividends $ 107 667 $ 109 458 Interest for distribution purposes 1 803 1 424 Other income (loss) 8 513 15 495 Securities lending revenue (see note 7 in the generic notes) 577 382 Net realized gain (loss) on investments 149 811 (18 727) Net gain (loss) on foreign currencies and other net assets 13 481 152 Change in unrealized gain (loss) on investments 59 769 599 206 TOTAL INCOME (LOSS) 341 621 707 390 EXPENSES (see notes Fund Specific Information) Management fees 40 113 41 198 Administration fees 3 786 3 602 Independent Review Committee costs 3 2 GST/HST 4 143 4 253 Transaction costs 3 171 4 420 Withholding tax 940 1 399 TOTAL EXPENSES 52 156 54 874 INCREASE (DECREASE) IN NAV $ 289 465 $ 652 516 INCREASE (DECREASE) IN NAV SERIES A $ 117 655 $ 290 935 ADVISOR SERIES $ 53 582 $ 136 785 SERIES H $ $ 2 525 SERIES D $ 22 544 $ 49 880 SERIES F $ 42 798 $ 60 958 SERIES I $ $ 1 213 SERIES O $ 52 886 $ 110 220 INCREASE (DECREASE) IN NAV PER UNIT SERIES A $ 2.06 $ 4.69 ADVISOR SERIES $ 2.08 $ 4.72 SERIES H $ $ 2.31 SERIES D $ 2.57 $ 5.42 SERIES F $ 2.83 $ 5.77 SERIES I $ $ 2.61 SERIES O $ 2.97 $ 5.80 The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS RBC CANADIAN EQUITY INCOME FUND Statements of Cash Flow (in $000s) For the periods ended (see note 2 in the generic notes) 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in NAV $ 289 465 $ 652 516 ADJUSTMENTS TO RECONCILE NET CASH PROVIDED BY (USED IN) OPERATIONS Interest for distribution purposes Non-cash distributions from underlying funds Net realized loss (gain) on investments (146 464) 23 528 Change in unrealized loss (gain) on investments (59 769) (599 206) (Increase) decrease in accrued receivables (663) 4 116 Increase (decrease) in accrued payables (42) (341) (Increase) decrease in margin accounts Cost of investments purchased (3 408 592) (3 874 757) Proceeds from sale and maturity of investments 3 516 413 4 288 012 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 190 348 493 868 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of redeemable units 424 815 514 808 Cash paid on redemption of redeemable units (597 111) (987 692) Distributions paid to holders of redeemable units (18 577) (19 182) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ (190 873) $ (492 066) Net increase (decrease) in cash for the period (525) 1 802 Cash (bank overdraft), beginning of period 3 434 1 632 CASH (BANK OVERDRAFT), END OF PERIOD $ 2 909 $ 3 434 Interest received (paid) $ 1 638 $ 1 422 Dividends received, net of withholding taxes $ 114 742 $ 127 672 The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS RBC CANADIAN EQUITY INCOME FUND 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 2017 2016 2017 2016 2017 2016 2017 2016 NAV AT BEGINNING OF PERIOD $ 1 537 729 $ 1 504 191 $ 724 915 $ 710 826 $ $ 25 423 $ 257 876 $ 231 129 INCREASE (DECREASE) IN NAV 117 655 290 935 53 582 136 785 2 525 22 544 49 880 Early redemption fees 1 5 3 3 Proceeds from redeemable units issued 190 213 162 466 68 855 76 993 1 242 46 953 52 881 Reinvestments of distributions to holders of redeemable units 56 927 61 376 22 468 25 258 414 8 790 9 045 Redemption of redeemable units (349 265) (414 686) (179 012) (193 879) (29 018) (61 001) (75 046) NET INCREASE (DECREASE) FROM REDEEMABLE UNIT TRANSACTIONS (102 124) (190 844) (87 689) (91 623) (27 362) (5 255) (13 117) Distributions from net income (31 766) (35 120) (14 314) (16 397) (309) (4 953) (5 285) Distributions from net gains (21 122) (9 518) (3 293) Distributions from capital (8 460) (31 433) (3 812) (14 676) (277) (1 319) (4 731) TOTAL DISTRIBUTIONS TO HOLDERS OF REDEEMABLE UNITS (61 348) (66 553) (27 644) (31 073) (586) (9 565) (10 016) NET INCREASE (DECREASE) IN NAV (45 817) 33 538 (61 751) 14 089 (25 423) 7 724 26 747 NAV AT END OF PERIOD $ 1 491 912 $ 1 537 729 $ 663 164 $ 724 915 $ $ $ 265 600 $ 257 876 For the periods ended (see note 2 in the generic notes) Series F Series I Series O Total 2017 2016 2017 2016 2017 2016 2017 2016 NAV AT BEGINNING OF PERIOD $ 376 706 $ 252 483 $ $ 12 838 $ 534 809 $ 530 183 $ 3 432 035 $ 3 267 073 INCREASE (DECREASE) IN NAV 42 798 60 958 1 213 52 886 110 220 289 465 652 516 Early redemption fees 4 8 Proceeds from redeemable units issued 245 611 171 599 408 33 033 50 158 584 665 515 747 Reinvestments of distributions to holders of redeemable units 10 459 6 891 116 17 642 18 499 116 286 121 599 Redemption of redeemable units (110 486) (103 406) (14 319) (58 450) (153 901) (758 214) (984 255) NET INCREASE (DECREASE) FROM REDEEMABLE UNIT TRANSACTIONS 145 584 75 084 (13 795) (7 775) (85 244) (57 259) (346 901) Distributions from net income (8 789) (6 237) (135) (9 945) (10 739) (69 767) (74 222) Distributions from net gains (5 844) (6 613) (46 390) Distributions from capital (2 341) (5 582) (121) (2 649) (9 611) (18 581) (66 431) TOTAL DISTRIBUTIONS TO HOLDERS OF REDEEMABLE UNITS (16 974) (11 819) (256) (19 207) (20 350) (134 738) (140 653) NET INCREASE (DECREASE) IN NAV 171 408 124 223 (12 838) 25 904 4 626 97 468 164 962 NAV AT END OF PERIOD $ 548 114 $ 376 706 $ $ $ 560 713 $ 534 809 $ 3 529 503 $ 3 432 035 The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION RBC CANADIAN EQUITY INCOME FUND, 2017 General information (see note 1 in the generic notes) The investment objective of the Fund is to provide a high level of monthly cash flow, relatively tax-efficient distributions consisting primarily of returns of capital, capital gains and interest income, as well as the potential for modest capital growth. All outstanding Series H units were re-designated as Series A units effective June 30, 2016. All outstanding Series I units were re-designated as Series F units effective June 30, 2016. Financial instrument risk and capital management (see note 5 in the generic notes) Concentration risk (%) The table below summarizes the Fund s investment portfolio (after consideration of derivative products, if any) as at: Investment mix 2017 2016 Financials 31.2 31.3 Energy 22.8 24.3 Real Estate 11.0 11.6 Utilities 8.4 10.0 Industrials 7.3 4.5 Materials 7.2 7.0 Telecommunication Services 3.2 2.1 Health Care 2.4 1.4 Consumer Staples 2.3 2.7 Information Technology 1.0 0.5 Consumer Discretionary 0.9 1.6 Cash/Other 2.3 3.0 Total 100.0 100.0 Other price risk (% impact on NAV) The table below shows the impact of a 1% change in the broad-based index (noted below) on the Fund s NAV, using a 36-month historical correlation of data of the Fund s return and the index, with all other factors kept constant, as at: 2017 2016 S&P/TSX Capped Composite Total Return Index + or - 1.0 + or - 1.0 Since historical correlation may not be representative of future correlation, 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, 2017 and 2016., 2017 Level 1 Level 2 Level 3 Total Equities 3 394 077 55 360 3 449 437 Mutual fund units Fixed-income and debt securities 20 856 20 856 Short-term investments 46 909 46 909 Derivatives assets 3 903 3 903 Derivatives liabilities (1 203) (1 203) Total financial instruments 3 394 077 125 825 3 519 902 % of total portfolio 96.4 3.6 100.0, 2016 Level 1 Level 2 Level 3 Total Equities 3 302 436 37 263 3 339 699 Mutual fund units Fixed-income and debt securities 13 965 13 965 Short-term investments 65 695 65 695 Derivatives assets 1 873 1 873 Derivatives liabilities (2 547) (2 547) Total financial instruments 3 302 436 116 249 3 418 685 % of total portfolio 96.6 3.4 100.0 For the periods ended, 2017 and 2016, there were no transfers of financial instruments between Level 1, Level 2 and Level 3. 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 1.60% 0.15% Advisor Series 1.60% 0.10% Series H 1.65% 0.10% Series D 0.85% 0.10% Series F 0.60% 0.10% Series I 0.60% 0.10% Series O n/a 0.02% * Effective June 30, 2016, the management fees for Series A and Advisor Series units were reduced to 1.60% from 1.75%; for Series D units were reduced to 0.85% from 1.00%; and for Series F units were reduced to 0.60% from 0.75%. Series O unitholders pay a negotiated management fee directly to RBC GAM for investment-counselling services. Please see the generic notes at the back of the financial statements.
NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION RBC CANADIAN EQUITY INCOME FUND, 2017 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: 2017 2016 Units held Series O 30 29 Value of all units 1 1 Unconsolidated structured entities (%) (see note 3 in the generic notes) The table below summarizes the Fund s interest in the unsponsored funds as a percentage of NAV, and the Fund s ownership interest as a percentage of NAV of the unsponsored funds ( Ownership ). 2017 2016 NAV Ownership NAV Ownership ishares S&P/TSX Capped Financials Index Fund 0.3 0.8 Taxes ($000s) (see note 6 in the generic notes) The Fund had no capital or non-capital losses as at, 2017. 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) 2017 2016 Series A Opening units 58 694 66 832 Issued number of units 7 186 6 742 Reinvested number of units 2 155 2 529 Redeemed number of units (13 188) (17 409) Ending number of units 54 847 58 694 Advisor Series Opening units 27 443 31 354 Issued number of units 2 579 3 189 Reinvested number of units 843 1 033 Redeemed number of units (6 708) (8 133) Ending number of units 24 157 27 443 Series H Opening units 1 117 Issued number of units 56 Reinvested number of units 18 Redeemed number of units (1 191) Ending number of units For the periods ended (see note 2 in the generic notes) 2017 2016 Series D Opening units 8 899 9 398 Issued number of units 1 592 1 999 Reinvested number of units 299 339 Redeemed number of units (2 072) (2 837) Ending number of units 8 718 8 899 Series F Opening units 12 459 9 876 Issued number of units 7 974 6 114 Reinvested number of units 340 246 Redeemed number of units (3 594) (3 777) Ending number of units 17 179 12 459 Series I Opening units 502 Issued number of units 16 Reinvested number of units 4 Redeemed number of units (522) Ending number of units Series O Opening units 17 982 21 260 Issued number of units 1 090 1 932 Reinvested number of units 580 680 Redeemed number of units (1 927) (5 890) Ending number of units 17 725 17 982 Transaction costs ($000s except %) Transaction costs, including brokerage commissions, in consideration of portfolio transactions for the periods ended: 2017 2016 $ % $ % Total transaction costs 3 171 100 4 420 100 Related-party brokerage commissions* 429 14 435 10 Commission arrangements 169 5 153 3 * See note 8 in the generic notes. Commission arrangements are part of commission amounts paid to dealers. The Fund uses commission arrangements (formerly known as soft dollars ) for research and/or order execution goods and services. Securities lending revenue ($000s except %) (see note 7 in the generic notes) Fair value of securities on loan and collateral received as at: 2017 2016 Fair value of securities loaned 392 988 289 772 Fair value of collateral received 400 847 295 568 Please see the generic notes at the back of the financial statements.
NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION RBC CANADIAN EQUITY INCOME FUND The table below provides a reconciliation of the gross revenue generated from the securities lending transactions of the Fund to the securities lending revenue disclosed in the Statements of Comprehensive Income. 2017 2016 $ % $ % Gross revenue 799 100 620 100 RBC IS (paid) (217) (27) (217) (35) Tax withheld (5) (1) (21) (3) Fund revenue 577 72 382 62, 2017 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: 2017 2016 RBC Balanced Growth & Income Class 1.4 1.0 RBC Canadian Equity Income Class 5.5 5.7 RBC Conservative Growth & Income Fund 0.4 0.3 RBC Managed Payout Solution Enhanced 4.1 4.0 RBC Managed Payout Solution Enhanced Plus 4.2 3.2 Total 15.6 14.2 Please see the generic notes at the back of the financial statements.
GENERIC NOTES TO FINANCIAL STATEMENTS (also see Fund Specific Information), 2017 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, 2018. 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, 2017 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.
GENERIC NOTES TO FINANCIAL STATEMENTS (also see Fund Specific Information), 2017 Unconsolidated Structured Entities The Funds may invest in other Funds and exchange-traded funds ( ETFs ) managed by the manager or an affiliate of the manager ( sponsored funds ) and may invest in other funds and ETFs managed by unaffiliated entities ( unsponsored funds ); collectively, underlying funds. The underlying funds are determined to be unconsolidated structured entities, as decision making in the underlying fund is not governed by the voting rights or other similar rights held by the Fund. The investments in underlying funds are subject to the terms and conditions of the offering documents of the respective underlying funds and are susceptible to market price risk arising from uncertainties about future values of those underlying funds. The underlying funds objectives are generally to achieve long-term capital appreciation and/or current income by investing in a portfolio of securities and other funds in line with each of their documented investment strategies. The underlying funds apply various investment strategies to accomplish their respective investment objectives. The underlying funds finance their operations by issuing redeemable units which are puttable at the unitholder s option, and entitle the unitholder to a proportional stake in the respective underlying funds NAV. The Funds do not consolidate their investment in underlying funds but account for these investments at fair value. The manager has determined that the Funds are investment entities in accordance with IFRS 10 Consolidated Financial Statements, since the Funds meet the following criteria: (i) The Funds obtain capital from one or more investors for the purpose of providing those investors with investment management services, (ii) The Funds commit to their investors that their business purpose is to invest funds solely for the returns from capital appreciation, investment income or both, and (iii) The Funds measure and evaluate the performance of substantially all of their investments on a fair value basis. Therefore, the fair value of investments in the underlying funds is included in the Schedule of Investment Portfolio and included in Investments at fair value in the Funds Statements of Financial Position. The change in fair value of the investment held in the underlying funds is included in Change in unrealized gain (loss) on investments in the Statements of Comprehensive Income. Certain Funds may invest in mortgage-related or other asset-backed securities. These securities include commercial mortgage-backed securities, asset-backed securities, collateralized debt obligations and other securities that directly or indirectly represent a participation in, or are securitized by and payable from, mortgage loans on real property. Mortgage-related securities are created from pools of residential or commercial mortgage loans while asset-backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans and student loans. The Funds account for these investments at fair value. The fair value of such securities, as disclosed in the Schedule of Investment Portfolio, represents the maximum exposure to losses at that date. Determination of Fair Value The fair value of a financial instrument is the amount at which the financial instrument could be exchanged in an arm s-length transaction between knowledgeable and willing parties under no compulsion to act. In determining fair value, a three-tier hierarchy based on inputs is used to value the Funds financial instruments. The hierarchy of inputs is summarized below: Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), including broker quotes, vendor prices and vendor fair value factors; and Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs). Changes in valuation methods may result in transfers into or out of an investment s assigned level. The three-tier hierarchy of investments and derivatives is included in Notes to Financial Statements Fund Specific Information. Investments and derivatives are recorded at fair value, which is determined as follows: Equities Common shares, preferred shares and exchangetraded funds are valued at the closing price recorded by the security exchange on which the security is principally traded. In circumstances where the closing price is not within the bid-ask spread, management will determine the points within the bid-ask spread that are most representative of the fair value.
GENERIC NOTES TO FINANCIAL STATEMENTS (also see Fund Specific Information), 2017 Fixed-Income and Debt Securities Bonds, mortgage-backed securities, loans and debentures are valued at the closing price quoted by major dealers or independent pricing vendors in such securities. NHA-approved mortgages are valued at an amount, which produces a yield equivalent to the prevailing rate of return on mortgages of similar type and term. Short-Term Investments Short-term investments are valued at fair value, which is approximated at cost plus accrued interest. Options Listed options are valued at the closing price on the recognized exchange on which the option is traded. In circumstances where the closing price is not within the bid-ask spread, management will determine the points within the bid-ask spread that are most representative of the fair value. The premium received for written options is recorded as a liability in the Schedule of Investment Portfolio and adjusted daily to the fair value of the written option. Warrants Warrants are valued using a recognized option pricing model, which includes factors such as the terms of the warrant, time value of money and volatility inputs that are significant to such valuation. Forward Contracts Forward contracts are valued at the gain or loss that would arise as a result of closing the position at the valuation date. Any unrealized gain or loss at the close of business on each valuation date is recorded as Change in unrealized gain (loss) on investments in the Statements of Comprehensive Income. The receivable/payable on forward contracts is recorded separately in the Statements of Financial Position. Realized gain (loss) on foreign exchange contracts is included in Net gain (loss) on foreign currencies and other net assets in the Statements of Comprehensive Income. Total Return Swaps A total return swap is an agreement by which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains. Total return swap contracts are marked to market daily based upon quotations from the market makers and the change in value, if any, is recorded in Change in unrealized gain (loss) on investments in the Statements of Comprehensive Income. When the swap contract is terminated early, the Fund records a realized gain or loss equal to the difference between the current net present value and the executed net present value in Other derivatives in the Statements of Comprehensive Income. Unrealized gains and losses are recorded as Receivable on open swap contracts or Payable on open swap contracts in the Statements of Financial Position. The risks of total return swap contracts include changes in market conditions and the possible inability of the counterparty to fulfill its obligations under the agreement. Futures Contracts Futures contracts entered into by the Funds are financial agreements to purchase or sell a financial instrument at a contracted price on a specified future date. However, the Funds do not intend to purchase or sell the financial instrument on the settlement date; rather, they intend to close out each futures contract before settlement by entering into equal, but offsetting, futures contracts. Futures contracts are valued at the gain or loss that would arise as a result of closing the position at the valuation date. Any gain or loss at the close of business on each valuation date is recorded as Net gain (loss) from futures contracts in the Statements of Comprehensive Income. The receivable/ payable on futures contracts is recorded separately in the Statements of Financial Position. Mutual Fund Unit Valuation Units of Funds are valued at their respective NAV per unit from fund companies on the relevant valuation dates. Fair Valuation of Investments The Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these fair valuation procedures, the Funds primarily employ a market-based approach, which may use related or comparable assets or liabilities, NAV per unit (for exchange-traded funds), recent transactions, market multiples, book values and other relevant information for the investment to determine its fair value. Management also has procedures in place to determine the fair value of foreign securities traded in countries outside of North America daily to avoid stale prices and to take into account, among other things, any significant events occurring after the close of a foreign market. The Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments, but only
GENERIC NOTES TO FINANCIAL STATEMENTS (also see Fund Specific Information), 2017 if they arise as a feature of the instrument itself. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. All security valuation techniques are periodically reviewed by the Valuation Committee ( VC ) of the manager and are approved by the manager. The VC provides oversight of the Funds valuation policies and procedures. Cash Cash is comprised of cash and deposits with banks and is recorded at fair value. The carrying amount of cash approximates its fair value because it is short-term in nature. Foreign Exchange The value of investments and other assets and liabilities in foreign currencies is translated into Canadian dollars (U.S. dollars in the case of the Phillips, Hager & North $U.S. Money Market Fund, RBC $U.S. Money Market Fund, RBC Premium $U.S. Money Market Fund, RBC $U.S. Investment Grade Corporate Bond Fund, RBC $U.S. High Yield Bond Fund, BlueBay Emerging Markets Corporate Bond Fund, BlueBay $U.S. Global Convertible Bond Fund (Canada) and RBC U.S. Monthly Income Fund) at the rate of exchange on each valuation date. Purchases and sales of investments, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. Realized foreign exchange gains/losses are included in Net gain (loss) on foreign currencies and other net assets in the Statements of Comprehensive Income. Functional Currency The Funds, with the exceptions below, have their subscriptions, redemptions and performance denominated in Canadian dollars and, consequently, the Canadian dollar is the functional currency for the Funds. Phillips, Hager & North $U.S. Money Market Fund, RBC $U.S. Money Market Fund, RBC Premium $U.S. Money Market Fund, RBC $U.S. Investment Grade Corporate Bond Fund, RBC $U.S. High Yield Bond Fund, BlueBay Emerging Markets Corporate Bond Fund, BlueBay $U.S. Global Convertible Bond Fund (Canada) and RBC U.S. Monthly Income Fund have their subscriptions, redemptions and performance denominated in U.S. dollars and, consequently, the U.S. dollar is the functional currency for these Funds. Valuation of Series A different NAV is calculated for each series of units of a Fund. The NAV of a particular series of units is computed by calculating the value of the series proportionate share of the assets and liabilities of the Fund common to all series less the liabilities of the Fund attributable only to that series. Expenses directly attributable to a series are charged to that series. Other expenses are allocated proportionately to each series based upon the relative NAV of each series. Expenses are accrued daily. Investment Transactions Investment transactions are accounted for as of the trade date. Transaction costs, such as brokerage commissions, incurred by the Funds are recorded in the Statements of Comprehensive Income for the period. The unrealized gain and loss on investments is the difference between fair value and average cost for the period. The basis of determining the cost of portfolio assets, and realized and unrealized gains and losses on investments, is average cost which does not include amortization of premiums or discounts on fixed-income and debt securities with the exception of zero coupon bonds. Income Recognition Dividend income is recognized on the ex-dividend date and interest for distribution purposes is coupon interest recognized on an accrual basis and/or imputed interest on zero coupon bonds. Other income (loss) includes income from income trusts. Distributions received from income trusts are recognized based on the nature of the underlying components, such as income, capital gains and return of capital. Other income received from underlying funds includes income earned by a Fund from investments in underlying funds. Any premiums paid or discounts received on the purchase of zero coupon bonds are amortized. Increase (Decrease) in NAV per Unit Increase (decrease) in NAV per unit in the Statements of Comprehensive Income represents the increase (decrease) in net assets attributable to holders of redeemable units by series, divided by the average units outstanding per series during the period. Early Redemption Fees Early redemption fees (short-term trading fees) are paid directly to a Fund and are designed to deter excessive trading and its associated costs. With the exception of money market funds, a Fund may apply a fee of 2% of the current value of units if the unitholder redeems or switches out units within seven days of purchasing or previously switching into a Fund. These amounts are included in the Statements of Changes in NAV.