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. Damon G. Williams, FSA, FCIA, CFA Chief Executive Officer RBC Global Asset Management Inc. Heidi Johnston, CPA, CA Chief Financial Officer RBC GAM Funds August 9, 2018 Unaudited Interim Financial Statements The accompanying interim financial statements have not been reviewed by the external auditors of the Funds. The external auditors will be auditing the annual financial statements of the Funds in accordance with Canadian generally accepted auditing standards.
2018 INTERIM FINANCIAL STATEMENTS SCHEDULE OF INVESTMENT PORTFOLIO (unaudited) (in USD000s) Fair % of Net Holdings Security Cost Value Assets COMMON EQUITIES Consumer Discretionary 33 600 Aptiv Plc. $ 2 328 $ 3 079 123 400 Comcast Corp., Class A 4 057 4 051 73 100 Dollar General Corp. 5 862 7 208 31 900 General Motors Co. 1 284 1 258 49 800 Home Depot Inc. 7 069 9 719 57 200 Kohl s Corp. 3 641 4 170 35 200 McDonald s Corp. 3 567 5 517 33 700 Nike Inc. 2 275 2 686 34 200 Ross Stores Inc. 2 778 2 898 54 100 Target Corporation 4 001 4 118 53 900 TJX Companies Inc. 4 571 5 130 36 200 V.F. Corporation 2 989 2 953 44 422 52 787 4.0 Consumer Staples 218 500 Altria Group Inc. 12 871 12 409 98 900 CVS Health Corp. 7 119 6 364 110 800 Mondelez International Inc. 4 387 4 546 54 300 PepsiCo Inc. 5 183 5 912 146 500 Philip Morris International Inc. 12 913 11 828 92 400 The Coca-Cola Co. 4 445 4 053 73 600 The Kraft Heinz Co. 4 281 4 624 36 900 Walmart Inc. 3 233 3 161 54 432 52 897 4.0 Energy 104 800 Chevron Corp. 10 149 13 250 105 600 ConocoPhillips 5 249 7 353 99 500 Marathon Petroleum Corp. 6 828 6 982 75 600 Occidental Petroleum Corp. 5 431 6 326 25 600 Phillips 66 Company 3 027 2 875 39 400 Valero Energy Corp. 3 108 4 367 33 792 41 153 3.1 Financials 444 650 Bank of America Corp. 8 405 12 541 2 800 BlackRock Inc. 1 477 1 398 88 600 Citigroup Inc. 5 759 5 931 110 100 Citizens Financial Group Inc. 4 787 4 283 36 900 CME Group Inc., Class A 6 104 6 049 97 500 Fifth Third Bancorp 3 245 2 798 139 600 JPMorgan Chase & Co. 7 704 14 564 118 200 KeyCorp 2 410 2 310 90 500 Morgan Stanley 4 161 4 290 50 400 PNC Bank Corp. 6 574 6 810 128 800 Regions Financial Corp. 2 390 2 290 114 900 Suntrust Banks Inc. 6 268 7 586 43 500 Zions Bancorporation 2 401 2 292 61 685 73 142 5.5 Fair % of Net Holdings Security Cost Value Assets Health Care 92 700 Abbott Laboratories $ 5 594 $ 5 655 76 900 AbbVie Inc. 6 817 7 128 16 700 Aetna Inc. 2 275 3 068 45 400 Amgen Inc. 7 622 8 380 38 200 Anthem Inc. 9 284 9 094 32 400 Baxter International Inc. 2 390 2 392 6 500 Becton Dickinson & Co. 1 570 1 558 41 600 Bristol-Myers Squibb Co. 2 492 2 303 37 200 Eli Lilly & Co. 3 162 3 174 98 100 Johnson & Johnson 10 132 11 905 69 200 Medtronic Plc. 5 444 5 924 128 200 Merck & Co. Inc. 7 388 7 782 203 900 Pfizer Inc. 7 118 7 401 41 100 Quest Diagnostics Inc. 4 413 4 519 52 500 UnitedHealth Group Incorporated 6 296 12 886 81 997 93 169 7.0 Industrials 26 600 Boeing Co. 5 544 8 926 79 100 Eaton Corp Plc. 6 439 5 913 85 900 Emerson Electric Co. 6 227 5 939 231 100 General Electric Company 3 356 3 145 41 800 Honeywell International Inc. 5 322 6 022 19 000 Northrop Grumman Corp. 5 060 5 847 28 800 Raytheon Company 4 158 5 565 83 500 Union Pacific Corp. 11 044 11 833 18 400 United Technologies Corp. 2 319 2 301 49 469 55 491 4.2 Information Technology 146 600 Apple Inc. 19 425 26 815 50 700 Broadcom Inc. 10 131 12 307 393 500 Cisco Systems Inc. 11 891 16 932 285 050 Intel Corp. 12 313 14 174 28 000 Micron Technology Inc. 1 476 1 468 297 224 Microsoft Corp. 15 570 29 309 15 000 Nvidia Corp. 2 970 3 554 125 600 Texas Instruments Inc. 10 202 13 847 83 978 118 406 8.9 Materials 137 100 DowDuPont Inc. 7 931 9 042 83 600 LyondellBasell Industries N.V. 8 536 9 183 16 467 18 225 1.4 Real Estate 55 900 Crown Castle International Corp. Real Estate Investment Trust 6 018 6 030 6 018 6 030 0.5 Telecommunication Services 187 000 AT&T Inc. 6 495 6 005 6 495 6 005 0.5 The accompanying notes are an integral part of the financial statements.
SCHEDULE OF INVESTMENT PORTFOLIO (unaudited) (in USD000s) Fair % of Net Holdings Security Cost Value Assets Utilities 59 000 American Electric Power $ 4 164 $ 4 086 30 700 DTE Energy Company 3 167 3 181 48 300 Duke Energy Corp. 3 791 3 820 20 100 Eversource Energy 1 163 1 178 97 100 Exelon Corp. 3 926 4 136 91 300 FirstEnergy Corporation 2 995 3 279 51 800 NextEra Energy Inc. 5 601 8 653 24 807 28 333 2.1 TOTAL COMMON EQUITIES 463 562 545 638 41.2 UNDERLYING FUNDS 153 100 ishares Dow Jones US Real Estate Index Fund 11 829 12 328 3 655 161 RBC $U.S. High Yield Bond Fund* 35 292 33 985 3 904 398 RBC Emerging Markets Bond Fund* 36 707 32 478 246 900 Utilities Select Sector SPDR Fund 12 427 12 838 TOTAL UNDERLYING FUNDS 96 255 91 629 6.9 Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets BONDS Australia 500 Commonwealth Bank of Australia USD 2.850 18-May-2026 $ 484 $ 464 484 464 Canada 600 Alimentation Couche-Tard Inc. USD 2.700 26-Jul-2022 601 577 600 Alimentation Couche-Tard Inc. USD 3.550 26-Jul-2027 601 570 1 000 Bank of Montreal USD 2.375 25-Jan-2019 1 009 1 000 1 000 Bank of Nova Scotia USD 2.050 05-Jun-2019 993 995 1 000 Bank of Nova Scotia USD 2.450 19-Sep-2022 998 964 698 Barrick PD Australia Finance Pty Ltd. USD 5.950 15-Oct-2039 788 783 1 525 Canadian Pacific Railway Co. USD 4.450 15-Mar-2023 1 665 1 587 1 000 Enbridge Inc. USD 4.500 10-Jun-2044 883 920 400 Goldcorp Inc. USD 3.625 09-Jun-2021 411 401 650 Goldcorp Inc. USD 3.700 15-Mar-2023 653 640 410 Nutrien Ltd. USD 3.150 01-Oct-2022 413 399 1 000 Nutrien Ltd. USD 3.000 01-Apr-2025 981 924 100 Rogers Communications Inc. USD 7.500 15-Aug-2038 138 135 1 000 Suncor Energy Inc. USD 6.500 15-Jun-2038 1 163 1 242 250 Thomson Reuters Corp. USD 3.350 15-May-2026 245 232 750 Thomson Reuters Corp. USD 5.500 15-Aug-2035 837 801 1 500 Toronto-Dominion Bank USD 2.250 05-Nov-2019 1 497 1 489 750 TransCanada PipeLines Ltd. USD 3.800 01-Oct-2020 718 760 500 TransCanada PipeLines Ltd. USD 6.100 01-Jun-2040 620 568 15 214 14 987 1.1 France 1 000 BPCE S.A. USD 5.150 21-Jul-2024 998 1 015 100 Orange S.A. USD 2.750 06-Feb-2019 102 100 500 Orange S.A. USD 4.125 14-Sep-2021 535 511 1 400 Total Capital International S.A. USD 2.700 25-Jan-2023 1 410 1 363 3 045 2 989 0.2 Germany 500 Deutsche Telekom International Finance BV USD 6.000 08-Jul-2019 584 515 1 400 Deutsche Telekom International Finance BV USD 1.950 19-Sep-2021 1 357 1 336 1 000 Siemens Financieringsmaatschappij N.V. USD 3.250 27-May-2025 985 977 The accompanying notes are an integral part of the financial statements. 2 926 2 828 0.2
SCHEDULE OF INVESTMENT PORTFOLIO (unaudited) (in USD000s) Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets Luxembourg 600 Schlumberger Investment S.A. USD 3.650 01-Dec-2023 $ 645 $ 605 645 605 0.1 Netherlands 1 000 ING Bank N.V. USD 4.125 21-Nov-2023 997 1 003 500 ING Groep N.V. USD 3.150 29-Mar-2022 513 491 250 LYB International Finance BV USD 4.875 15-Mar-2044 253 250 1 450 Shell International Finance BV USD 6.375 15-Dec-2038 1 869 1 883 3 632 3 627 0.3 Switzerland 350 Novartis Capital Corp. USD 2.400 21-Sep-2022 356 340 350 Novartis Capital Corp. USD 3.100 17-May-2027 360 336 250 Novartis Capital Corp. USD 4.400 06-May-2044 282 268 1 500 Tyco Electronics Group S.A. USD 3.700 15-Feb-2026 1 547 1 474 500 UBS AG USD 2.350 26-Mar-2020 504 494 3 049 2 912 0.2 United Kingdom 350 BP Capital Markets Plc. USD 2.315 13-Feb-2020 354 347 1 500 BP Capital Markets Plc. USD 2.750 10-May-2023 1 479 1 452 500 Diageo Capital Plc. USD 2.625 29-Apr-2023 476 484 500 Diageo Investment Corp. USD 2.875 11-May-2022 504 493 800 Diageo Investment Corp. USD 4.250 11-May-2042 810 816 1 500 HSBC Holdings Plc. USD 5.100 05-Apr-2021 1 691 1 568 1 000 Lloyds Banking Group Plc. USD 3.000 11-Jan-2022 1 011 975 1 000 Vodafone Group Plc. USD 2.500 26-Sep-2022 958 957 7 283 7 092 0.5 United States 505 Abbott Laboratories 2.900 30-Nov-2021 515 498 400 Abbott Laboratories 3.400 30-Nov-2023 413 395 500 AbbVie Inc. 2.500 14-May-2020 499 494 500 AbbVie Inc. 2.900 06-Nov-2022 497 486 300 AbbVie Inc. 4.500 14-May-2035 305 295 400 Actavis Funding SCS 3.450 15-Mar-2022 414 394 370 Alabama Power Co. 4.150 15-Aug-2044 413 366 2 000 Altria Group Inc. 4.000 31-Jan-2024 2 048 2 026 1 000 Amazon.com Inc. 3.150 22-Aug-2027 1 000 962 100 Amazon.com Inc. 4.050 22-Aug-2047 99 98 700 American Electric Power Co. Inc. 2.950 15-Dec-2022 655 682 1 500 American Express Co. 2.650 02-Dec-2022 1 451 1 441 1 000 American Honda Finance Corp. 2.900 16-Feb-2024 1 018 970 1 500 American International Group Inc. 4.875 01-Jun-2022 1 674 1 572 1 750 AmerisourceBergen Corp. 3.400 15-May-2024 1 760 1 724 1 075 Anheuser-Busch InBev Finance Inc. 2.650 01-Feb-2021 1 098 1 061 250 Anheuser-Busch InBev Finance Inc. 2.625 17-Jan-2023 239 241 500 Anheuser-Busch InBev Finance Inc. 3.650 01-Feb-2026 490 490 1 000 Anheuser-Busch InBev Worldwide Inc. 6.375 15-Jan-2040 1 414 1 223 650 Apache Corp. 3.625 01-Feb-2021 672 652 2 000 Apple Inc. 3.850 04-Aug-2046 2 020 1 889 425 Aptiv Plc. 4.400 01-Oct-2046 403 401 1 000 AT&T Inc. 2.300 11-Mar-2019 1 005 996 2 000 AT&T Inc. 3.950 15-Jan-2025 2 090 1 958 1 000 AT&T Inc. 6.500 01-Sep-2037 1 102 1 110 500 AT&T Inc. 5.150 15-Mar-2042 544 475 2 000 Bank of America Corp. 7.625 01-Jun-2019 2 425 2 083 3 000 Bank of America Corp. 5.700 24-Jan-2022 3 456 3 230 1 871 Bio-Rad Laboratories Inc. 4.875 15-Dec-2020 1 992 1 932 100 Cardinal Health Inc. 2.400 15-Nov-2019 101 99 The accompanying notes are an integral part of the financial statements.
SCHEDULE OF INVESTMENT PORTFOLIO (unaudited) (in USD000s) Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets United States (cont.) 1 000 Cardinal Health Inc. 3.500 15-Nov-2024 $ 992 $ 963 500 Cardinal Health Inc. 4.500 15-Nov-2044 546 453 1 500 Caterpillar Financial Services Corp. 1.700 09-Aug-2021 1 448 1 437 200 Caterpillar Financial Services Corp. 2.400 09-Aug-2026 192 182 350 Caterpillar Inc. 3.803 15-Aug-2042 344 335 1 500 CC Holdings GS V LLC 3.849 15-Apr-2023 1 449 1 488 1 025 Charter Communications Operating LLC 4.464 23-Jul-2022 1 076 1 037 1 000 Charter Communications Operating LLC 4.908 23-Jul-2025 1 027 1 011 1 250 Church & Dwight Co. Inc. 2.875 01-Oct-2022 1 232 1 223 1 000 Church & Dwight Co. Inc. 3.150 01-Aug-2027 934 929 500 Cintas Corp. No. 2 4.300 01-Jun-2021 537 514 500 Cintas Corp. No. 2 2.900 01-Apr-2022 510 489 500 Cisco Systems Inc. 1.850 20-Sep-2021 488 478 1 000 Cisco Systems Inc. 5.900 15-Feb-2039 1 281 1 239 2 600 Citigroup Inc. 4.500 14-Jan-2022 2 757 2 672 900 Citigroup Inc. 3.400 01-May-2026 922 855 300 Columbia Pipeline Group Inc. 4.500 01-Jun-2025 327 301 1 000 Comcast Corp. 1.625 15-Jan-2022 961 938 800 Comcast Corp. 7.050 15-Mar-2033 1 031 995 500 ConocoPhillips Co. 4.950 15-Mar-2026 567 540 250 ConocoPhillips Co. 5.950 15-Mar-2046 331 312 175 ConocoPhillips Holding Co. 6.950 15-Apr-2029 229 216 500 Consolidated Edison Company of New York Inc. 5.700 01-Feb-2034 591 568 800 Constellation Brands Inc. 2.700 09-May-2022 806 774 200 Constellation Brands Inc. 4.250 01-May-2023 215 204 1 000 CSX Corp. 4.100 15-Mar-2044 897 937 1 950 CVS Health Corp. 4.125 15-May-2021 2 071 1 986 1 060 D.R. Horton Inc. 4.000 15-Feb-2020 1 104 1 071 550 D.R. Horton Inc. 5.750 15-Aug-2023 602 594 1 500 Delphi Corp. 4.150 15-Mar-2024 1 556 1 505 1 000 Diamond 1 Finance Corp. 6.020 15-Jun-2026 1 012 1 052 750 Diamond 1 Finance Corp. 8.100 15-Jul-2036 760 883 300 Dominion Energy Inc. 2.000 15-Aug-2021 295 286 500 Dominion Energy Inc. 4.050 15-Sep-2042 492 463 2 000 Domtar Corp. 4.400 01-Apr-2022 2 063 2 038 1 000 Enterprise Products Operating LLC 4.450 15-Feb-2043 921 944 2 000 Everest Reinsurance Holdings Inc. 6.600 15-May-2037 2 062 1 973 1 000 Exelon Generation Co. LLC 5.200 01-Oct-2019 1 030 1 024 1 000 Expedia Group Inc. 7.456 15-Aug-2018 1 121 1 005 500 Exxon Mobil Corp. 2.726 01-Mar-2023 511 491 1 000 Exxon Mobil Corp. 3.043 01-Mar-2026 1 023 975 700 Exxon Mobil Corp. 4.114 01-Mar-2046 726 714 1 210 Federal Realty Investment Trust 2.750 01-Jun-2023 1 099 1 157 500 Fidelity National Information Services Inc. 4.500 15-Oct-2022 544 516 500 Fidelity National Information Services Inc. 3.000 15-Aug-2026 493 459 1 165 Flex Ltd. 4.625 15-Feb-2020 1 236 1 183 1 200 Ford Motor Credit Co. LLC 2.375 12-Mar-2019 1 202 1 196 300 Ford Motor Credit Co. LLC 7.450 16-Jul-2031 371 353 1 000 GE Capital Corp. 5.875 14-Jan-2038 1 071 1 137 1 400 General Mills Inc. 3.150 15-Dec-2021 1 409 1 383 1 500 Georgia-Pacific LLC 5.400 01-Nov-2020 1 547 1 572 1 475 GlaxoSmithKline Capital Inc. 6.375 15-May-2038 1 970 1 897 750 Halliburton Co. 6.700 15-Sep-2038 1 006 905 500 Halliburton Co. 5.000 15-Nov-2045 537 534 1 000 Hasbro Inc. 6.350 15-Mar-2040 1 104 1 098 2 250 Host Hotels & Resorts LP 4.000 15-Jun-2025 2 274 2 189 500 International Paper Co. 7.300 15-Nov-2039 685 641 The accompanying notes are an integral part of the financial statements.
SCHEDULE OF INVESTMENT PORTFOLIO (unaudited) (in USD000s) Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets United States (cont.) 1 950 ITC Holdings Corp. 3.250 30-Jun-2026 $ 1 981 $ 1 834 750 John Deere Capital Corp. 1.950 04-Mar-2019 750 747 600 John Deere Capital Corp. 2.650 10-Jun-2026 578 560 500 Johnson & Johnson 3.700 01-Mar-2046 518 485 500 Johnson & Johnson 3.750 03-Mar-2047 524 490 500 Johnson Controls International Plc. 3.625 02-Jul-2024 500 493 560 Johnson Controls International Plc. 4.625 02-Jul-2044 560 557 3 000 JPMorgan Chase & Co. 2.550 01-Mar-2021 2 997 2 941 2 000 JPMorgan Chase & Co. 4.500 24-Jan-2022 2 156 2 069 1 500 JPMorgan Chase & Co. 6.400 15-May-2038 1 861 1 842 500 Kimberly-Clark Corp. 2.750 15-Feb-2026 497 470 1 500 Kimberly-Clark Corp. 6.625 01-Aug-2037 2 081 2 010 1 500 Kinder Morgan Inc. 5.625 15-Nov-2023 1 644 1 597 1 300 KLA-Tencor Corp. 4.650 01-Nov-2024 1 345 1 345 429 Kraft Heinz Foods Co. 2.800 02-Jul-2020 435 426 200 Kraft Heinz Foods Co. 4.875 15-Feb-2025 210 204 500 Kraft Heinz Foods Co. 3.000 01-Jun-2026 472 451 400 Lear Corp. 5.375 15-Mar-2024 404 415 600 Lear Corp. 5.250 15-Jan-2025 632 618 200 Lear Corp. 3.800 15-Sep-2027 199 188 1 000 Liberty Mutual Group Inc. 5.000 01-Jun-2021 986 1 037 750 Liberty Mutual Group Inc. 4.950 01-May-2022 809 780 250 Liberty Mutual Group Inc. 4.250 15-Jun-2023 258 253 1 000 Lincoln National Corp. 6.050 20-Apr-2067 1 025 933 500 Lockheed Martin Corp. 2.500 23-Nov-2020 508 493 1 000 Lockheed Martin Corp. 3.550 15-Jan-2026 1 024 985 1 500 LyondellBasell Industries N.V. 5.750 15-Apr-2024 1 681 1 627 650 Masco Corp. 4.375 01-Apr-2026 668 648 1 200 McDonald's Corp. 6.300 15-Oct-2037 1 479 1 473 1 000 Medtronic Inc. 2.500 15-Mar-2020 1 019 993 234 Medtronic Inc. 4.375 15-Mar-2035 232 242 1 500 Merck & Co. Inc. 3.700 10-Feb-2045 1 499 1 428 2 000 MetLife Inc. 5.700 15-Jun-2035 2 435 2 284 500 Microsoft Corp. 2.400 08-Aug-2026 479 463 500 Microsoft Corp. 3.450 08-Aug-2036 490 479 1 000 Microsoft Corp. 4.450 03-Nov-2045 1 141 1 078 1 000 MidAmerican Energy Co. 6.750 30-Dec-2031 1 298 1 286 500 MidAmerican Energy Co. 4.800 15-Sep-2043 586 550 1 000 Mohawk Industries Inc. 3.850 01-Feb-2023 999 1 010 1 500 Morgan Stanley 5.500 28-Jul-2021 1 696 1 588 650 MPLX LP 5.500 15-Feb-2023 677 663 200 MPLX LP 4.875 01-Dec-2024 217 206 350 MPLX LP 4.875 01-Jun-2025 359 360 1 100 NewMarket Corp. 4.100 15-Dec-2022 1 112 1 113 1 000 NVIDIA Corp. 2.200 16-Sep-2021 978 971 1 000 Oracle Corp. 1.900 15-Sep-2021 980 953 1 000 Oracle Corp. 2.950 15-May-2025 996 956 1 550 Owens Corning 4.200 15-Dec-2022 1 531 1 555 750 PepsiCo Inc. 2.750 01-Mar-2023 733 733 750 PepsiCo Inc. 4.450 14-Apr-2046 785 791 1 000 Pfizer Inc. 3.000 15-Dec-2026 1 013 961 467 Pfizer Inc. 4.400 15-May-2044 520 486 1 605 Pioneer Natural Resources Co. 3.450 15-Jan-2021 1 652 1 609 1 000 Progress Energy Inc. 3.150 01-Apr-2022 1 016 987 1 900 Progress Energy Inc. 6.000 01-Dec-2039 2 377 2 300 1 500 Prudential Financial Inc. 2.300 15-Aug-2018 1 498 1 500 1 000 Quest Diagnostics Inc. 4.700 30-Mar-2045 997 1 002 The accompanying notes are an integral part of the financial statements.
SCHEDULE OF INVESTMENT PORTFOLIO (unaudited) (in USD000s) The accompanying notes are an integral part of the financial statements. Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets United States (cont.) 400 Raytheon Co. 2.500 15-Dec-2022 $ 399 $ 388 1 200 Raytheon Co. 4.200 15-Dec-2044 1 241 1 251 1 000 Regency Centers LP 4.800 15-Apr-2021 1 072 1 029 750 Republic Services Inc. 5.250 15-Nov-2021 840 792 1 000 Republic Services Inc. 4.750 15-May-2023 1 089 1 047 1 000 Sabine Pass Liquefaction LLC 5.625 01-Mar-2025 1 035 1 065 320 Schlumberger Holdings Corp. 4.000 21-Dec-2025 333 319 1 200 Southern California Edison Co. 3.600 01-Feb-2045 1 144 1 047 63 Sprint Spectrum Co. LLC 3.360 20-Sep-2021 63 62 750 Target Corp. 3.500 01-Jul-2024 796 753 1 500 The Dow Chemical Co. 8.550 15-May-2019 1 898 1 572 1 250 The Goldman Sachs Group Inc. 5.750 24-Jan-2022 1 428 1 338 750 The Kroger Co. 2.300 15-Jan-2019 760 748 250 The Kroger Co. 2.650 15-Oct-2026 235 222 500 The Walt Disney Co. 3.700 01-Dec-2042 476 456 2 500 Thermo Fisher Scientific Inc. 3.600 15-Aug-2021 2 675 2 515 1 577 Time Warner Cable Inc. 6.950 15-Jan-2028 2 033 1 891 300 Time Warner Inc. 4.700 15-Jan-2021 322 309 1 000 Toyota Motor Credit Corp. 3.400 15-Sep-2021 1 050 1 009 500 Tyson Foods Inc. 4.500 15-Jun-2022 518 514 500 Tyson Foods Inc. 5.150 15-Aug-2044 525 518 200 United Parcel Service Inc. 8.375 01-Apr-2020 270 218 800 United Parcel Service Inc. 3.625 01-Oct-2042 745 744 15 550 United States Treasury 1.125 30-Apr-2020 14 913 15 165 48 000 United States Treasury 1.500 31-Jan-2022 46 759 46 077 83 000 United States Treasury 1.750 15-May-2023 81 069 79 286 30 400 United States Treasury 2.250 15-Nov-2024 30 464 29 414 40 000 United States Treasury 2.000 15-Feb-2025 39 407 38 043 20 200 United States Treasury 1.625 15-Feb-2026 19 064 18 531 10 000 United States Treasury 2.375 15-May-2027 9 883 9 627 22 200 United States Treasury 3.500 15-Feb-2039 24 548 24 162 14 300 United States Treasury 2.500 15-Feb-2045 14 110 13 022 1 000 United Technologies Corp. 8.875 15-Nov-2019 1 439 1 077 1 000 United Technologies Corp. 1.950 01-Nov-2021 982 958 1 000 Verizon Communications Inc. 1.750 15-Aug-2021 963 956 1 250 Verizon Communications Inc. 5.150 15-Sep-2023 1 246 1 334 1 750 Volkswagen Group of America Finance LLC 2.125 23-May-2019 1 750 1 736 1 000 Walmart Inc. 3.300 22-Apr-2024 1 055 996 500 Waste Management Inc. 3.900 01-Mar-2035 499 487 500 Waste Management Inc. 4.100 01-Mar-2045 499 494 1 000 Wells Fargo & Co. 2.500 04-Mar-2021 1 000 978 1 500 Wells Fargo & Co. 4.600 01-Apr-2021 1 657 1 548 2 000 Wells Fargo & Co. 3.000 22-Apr-2026 2 036 1 861 1 100 Whirlpool Corp. 5.150 01-Mar-2043 1 123 1 121 460 909 447 755 33.7 TOTAL BONDS 497 187 483 259 36.3 MORTGAGE-BACKED SECURITIES 1 Fannie Mae Pool 5.000 01-Jan-2019 1 1 7 Fannie Mae Pool 5.000 01-Oct-2019 6 7 14 Fannie Mae Pool 5.500 01-May-2021 14 15 21 Fannie Mae Pool 5.000 01-May-2033 20 22 13 Fannie Mae Pool 5.000 01-Jul-2033 13 14 118 Fannie Mae Pool 5.000 01-Sep-2033 124 126 46 Fannie Mae Pool 5.500 01-Oct-2033 46 50 44 Fannie Mae Pool 5.500 01-Nov-2033 44 48 136 Fannie Mae Pool 5.000 01-Aug-2034 142 146 78 Fannie Mae Pool 6.500 01-Oct-2037 84 88
SCHEDULE OF INVESTMENT PORTFOLIO (unaudited) (in USD000s) Par Value Coupon Fair % of Net (000s) Security Rate % Maturity Cost Value Assets MORTGAGE-BACKED SECURITIES (cont.) 1 117 Fannie Mae Pool 4.000 01-Aug-2040 $ 1 133 $ 1 147 7 444 Fannie Mae Pool 4.000 01-Sep-2040 7 882 7 648 2 244 Fannie Mae Pool 4.000 01-Oct-2040 2 373 2 305 2 118 Fannie Mae Pool 4.000 01-Dec-2040 2 261 2 176 2 442 Fannie Mae Pool 4.500 01-Dec-2040 2 617 2 570 1 926 Fannie Mae Pool 4.500 01-May-2041 2 066 2 027 6 542 Fannie Mae Pool 4.000 01-Dec-2041 6 987 6 721 6 568 Fannie Mae Pool 4.000 01-Jan-2042 7 032 6 748 2 641 Fannie Mae Pool 4.000 01-May-2044 2 807 2 700 3 942 Fannie Mae Pool 4.000 01-Sep-2044 4 232 4 030 2 179 Fannie Mae Pool 4.000 01-Oct-2044 2 337 2 227 2 425 Fannie Mae Pool 4.000 01-Dec-2044 2 606 2 478 7 125 Fannie Mae Pool 3.000 01-Apr-2045 7 156 6 937 5 866 Fannie Mae Pool 3.000 01-May-2045 5 960 5 710 13 377 Fannie Mae Pool 3.500 01-Nov-2045 13 647 13 355 17 535 Fannie Mae Pool 4.000 01-Sep-2047 17 927 17 907 13 Freddie Mac Gold Pool 5.000 01-May-2020 13 13 8 Freddie Mac Gold Pool 5.500 01-Nov-2020 8 8 10 Freddie Mac Gold Pool 5.000 01-Feb-2021 9 10 9 Freddie Mac Gold Pool 5.500 01-Nov-2021 9 10 18 Freddie Mac Gold Pool 5.500 01-Apr-2022 18 18 93 Freddie Mac Gold Pool 4.500 01-Mar-2024 97 96 22 Freddie Mac Gold Pool 5.500 01-Dec-2034 22 24 140 Freddie Mac Gold Pool 5.000 01-Jan-2037 152 149 274 Freddie Mac Gold Pool 4.500 01-Sep-2040 286 288 1 544 Freddie Mac Gold Pool 4.000 01-Dec-2040 1 534 1 588 1 510 Freddie Mac Gold Pool 4.500 01-Feb-2041 1 566 1 589 1 382 Freddie Mac Gold Pool 4.000 01-Sep-2041 1 429 1 422 3 708 Freddie Mac Gold Pool 3.500 01-Feb-2042 3 850 3 719 3 971 Freddie Mac Gold Pool 3.500 01-Apr-2042 4 075 3 983 2 649 Freddie Mac Gold Pool 3.000 01-Aug-2042 2 723 2 589 3 187 Freddie Mac Gold Pool 3.500 01-Aug-2042 3 420 3 196 2 767 Freddie Mac Gold Pool 4.000 01-Jun-2044 2 936 2 832 6 381 Freddie Mac Gold Pool 4.000 01-Jun-2044 6 860 6 531 2 731 Freddie Mac Gold Pool 4.000 01-Nov-2044 2 938 2 795 4 795 Freddie Mac Gold Pool 4.000 01-Feb-2045 5 150 4 908 4 182 Freddie Mac Gold Pool 3.000 01-Mar-2045 4 243 4 067 8 814 Freddie Mac Gold Pool 3.000 01-May-2045 8 748 8 566 9 772 Freddie Mac Gold Pool 3.000 01-Nov-2046 9 848 9 470 12 Ginnie Mae I Pool 5.500 15-May-2033 12 13 52 Ginnie Mae I Pool 5.000 15-Nov-2033 51 56 49 Ginnie Mae I Pool 5.500 15-Nov-2034 50 54 80 Ginnie Mae I Pool 5.000 15-Mar-2035 81 86 3 718 Ginnie Mae II Pool 4.000 20-Sep-2045 3 985 3 841 8 073 Ginnie Mae II Pool 3.000 20-Jul-2046 8 290 7 925 7 838 Ginnie Mae II Pool 3.000 20-Aug-2046 7 975 7 694 6 676 Ginnie Mae II Pool 4.500 20-Jul-2047 7 027 6 945 TOTAL MORTGAGE-BACKED SECURITIES 176 922 171 688 12.9 SHORT-TERM INVESTMENTS 39 934 39 934 3.0 TOTAL INVESTMENTS $ 1 273 860 1 332 148 100.3 OTHER NET ASSETS (LIABILITIES) ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (3 771) (0.3) NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS $ 1 328 377 100.0 * 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 a rate of 1.90% and mature on July 3, 2018. The accompanying notes are an integral part of the financial statements.
FINANCIAL STATEMENTS (unaudited) (IN U.S. DOLLARS) Statements of Financial Position (unaudited) (in $000s except per unit amounts) (see note 2 in the generic notes) 2018 December 31 2017 ASSETS Investments at fair value $ 1 332 148 $ 1 342 732 Cash 177 1 022 Due from investment dealers 5 066 Subscriptions receivable 860 2 182 Dividends receivable, interest accrued and other assets 4 800 4 474 TOTAL ASSETS 1 343 051 1 350 410 LIABILITIES Due to investment dealers 11 207 Redemptions payable 1 138 787 Distributions payable 707 626 Accounts payable and accrued expenses 1 622 1 737 TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 14 674 3 150 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS ( NAV ) $ 1 328 377 $ 1 347 260 Investments at cost $ 1 273 860 $ 1 221 853 NAV SERIES A $ 1 087 295 $ 1 109 029 ADVISOR SERIES $ 46 574 $ 52 781 SERIES D $ 40 475 $ 41 897 SERIES F $ 94 308 $ 86 396 SERIES I $ 59 725 $ 57 157 NAV PER UNIT SERIES A $ 10.31 $ 10.72 ADVISOR SERIES $ 10.43 $ 10.84 SERIES D $ 11.26 $ 11.66 SERIES F $ 10.96 $ 11.34 SERIES I $ 11.03 $ 11.41 Statements of Comprehensive Income (unaudited) (in $000s except per unit amounts) For the periods ended (see note 2 in the generic notes) 2018 2017 INCOME (see note 3 in the generic notes) Dividends $ 7 223 $ 6 840 Interest for distribution purposes 10 597 9 115 Income from investment trusts 2 068 1 505 Derivative income (1) 2 Net realized gain (loss) on investments 24 700 18 346 Change in unrealized gain (loss) on investments (62 591) 27 623 TOTAL NET GAIN (LOSS) ON INVESTMENTS AND DERIVATIVES (18 004) 63 431 Securities lending revenue (see note 7 in the generic notes) 95 36 Net gain (loss) on foreign cash balances (2) 34 TOTAL OTHER INCOME (LOSS) 93 70 TOTAL INCOME (LOSS) (17 911) 63 501 EXPENSES (see notes Fund Specific Information) Management fees 8 693 7 341 Administration fees 609 517 Independent Review Committee costs 1 1 GST/HST 888 755 Transaction costs 375 250 Withholding tax 969 914 TOTAL EXPENSES 11 535 9 778 INCREASE (DECREASE) IN NAV $ (29 446) $ 53 723 INCREASE (DECREASE) IN NAV SERIES A $ (25 000) $ 43 687 ADVISOR SERIES $ (1 053) $ 2 583 SERIES D $ (770) $ 1 839 SERIES F $ (1 609) $ 2 874 SERIES I $ (1 014) $ 2 740 INCREASE (DECREASE) IN NAV PER UNIT SERIES A $ (0.24) $ 0.48 ADVISOR SERIES $ (0.23) $ 0.50 SERIES D $ (0.22) $ 0.56 SERIES F $ (0.19) $ 0.53 SERIES I $ (0.20) $ 0.58 The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS (unaudited) (IN U.S. DOLLARS) Statements of Cash Flow (unaudited) (in $000s) For the periods ended (see note 2 in the generic notes) 2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in NAV $ (29 446) $ 53 723 ADJUSTMENTS TO RECONCILE NET CASH PROVIDED BY (USED IN) OPERATIONS Interest for distribution purposes Non-cash distributions from underlying funds (1 967) (1 505) Net realized loss (gain) on investments (24 346) (18 152) Change in unrealized loss (gain) on investments 62 591 (27 623) (Increase) decrease in accrued receivables (326) 759 Increase (decrease) in accrued payables (115) 131 (Increase) decrease in margin accounts Cost of investments purchased (6 515 108) (5 889 497) Proceeds from sale and maturity of investments 6 495 577 5 792 875 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (13 140) (89 289) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of redeemable units 182 567 223 897 Cash paid on redemption of redeemable units (166 128) (131 142) Distributions paid to holders of redeemable units (4 122) (3 509) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 12 317 $ 89 246 Net increase (decrease) in cash for the period (823) (43) Cash (bank overdraft), beginning of period 1 022 159 CASH (BANK OVERDRAFT), END OF PERIOD $ 177 $ 116 Interest received (paid) $ 10 354 $ 9 571 Dividends received, net of withholding taxes $ 6 273 $ 6 229 The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS (unaudited) (IN U.S. DOLLARS) Statements of Changes in NAV (unaudited) (in $000s) For the periods ended (see note 2 in the generic notes) Series A Advisor Series Series D Series F 2018 2017 2018 2017 2018 2017 2018 2017 NAV AT BEGINNING OF PERIOD $ 1 109 029 $ 866 573 $ 52 781 $ 53 113 $ 41 897 $ 33 225 $ 86 396 $ 50 021 INCREASE (DECREASE) IN NAV (25 000) 43 687 (1 053) 2 583 (770) 1 839 (1 609) 2 874 Early redemption fees Proceeds from redeemable units issued 147 228 189 872 3 952 6 018 6 963 8 395 32 144 40 301 Reinvestments of distributions to holders of redeemable units 15 350 12 105 634 659 556 472 1 054 594 Redemption of redeemable units (140 853) (115 049) (8 921) (7 228) (7 502) (4 069) (22 098) (14 153) NET INCREASE (DECREASE) FROM REDEEMABLE UNIT TRANSACTIONS 21 725 86 928 (4 335) (551) 17 4 798 11 100 26 742 Distributions from net income (18 459) (14 787) (819) (845) (669) (570) (1 579) (932) Distributions from net gains Distributions from capital TOTAL DISTRIBUTIONS TO HOLDERS OF REDEEMABLE UNITS (18 459) (14 787) (819) (845) (669) (570) (1 579) (932) NET INCREASE (DECREASE) IN NAV (21 734) 115 828 (6 207) 1 187 (1 422) 6 067 7 912 28 684 NAV AT END OF PERIOD $ 1 087 295 $ 982 401 $ 46 574 $ 54 300 $ 40 475 $ 39 292 $ 94 308 $ 78 705 For the periods ended (see note 2 in the generic notes) Series I Total 2018 2017 2018 2017 NAV AT BEGINNING OF PERIOD $ 57 157 $ 54 070 $ 1 347 260 $ 1 057 002 INCREASE (DECREASE) IN NAV (1 014) 2 740 (29 446) 53 723 Early redemption fees Proceeds from redeemable units issued 6 136 1 604 196 423 246 190 Reinvestments of distributions to holders of redeemable units 701 548 18 295 14 378 Redemption of redeemable units (2 283) (9 088) (181 657) (149 587) NET INCREASE (DECREASE) FROM REDEEMABLE UNIT TRANSACTIONS 4 554 (6 936) 33 061 110 981 Distributions from net income (972) (777) (22 498) (17 911) Distributions from net gains Distributions from capital TOTAL DISTRIBUTIONS TO HOLDERS OF REDEEMABLE UNITS (972) (777) (22 498) (17 911) NET INCREASE (DECREASE) IN NAV 2 568 (4 973) (18 883) 146 793 NAV AT END OF PERIOD $ 59 725 $ 49 097 $ 1 328 377 $ 1 203 795 The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION (unaudited) Series I units have been capped and are no longer available for purchase by new investors effective, 2016. Existing investors who hold Series I units of the Fund can continue to make additional investments into this series. In addition, RBC GAM may maintain capacity for certain investors, including other related funds, that may invest in this series. General information (see note 1 in the generic notes) The investment objective of the Fund is to provide regular U.S. dollar monthly income and modest capital growth. Financial instrument risk and capital management (see note 5 in the generic notes) Credit risk (%) Credit-exposed securities, excluding short-term investments, comprise 51.7% (December 31, 2017 48.2%) of the NAV of the Fund. The table below summarizes the Fund s credit risk exposure grouped by credit ratings as at: Rating 2018 December 31 2017 AAA 65.4 59.3 AA 2.6 4.4 A 11.3 12.8 BBB 17.9 20.3 BB 1.5 1.9 B 0.9 0.9 CCC 0.1 0.2 Unrated 0.3 0.2 Total 100.0 100.0 Concentration risk (%) The table below summarizes the Fund s investment exposure (after consideration of derivative products, if any) as at: Investment mix 2018 December 31 2017 Equities 41.2 44.0 Bonds 36.3 33.3 Mortgage-Backed Securities 12.9 12.4 Underlying Funds 6.9 Cash/Other 2.7 10.3 Total 100.0 100.0 Interest rate risk (%) Fixed-income and debt securities, excluding short-term investments, comprise 49.2% (December 31, 2017 45.7%) of the NAV of the Fund. The table below summarizes the Fund s exposure to interest rate risk by remaining term to maturity as at: Term to maturity 2018 December 31 2017 Less than 1 year 5.0 4.0 1 5 years 40.3 29.1 5 10 years 26.7 41.5 > 10 years 28.0 25.4 Total 100.0 100.0 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 4.4% (December 31, 2017 4.1%). In practice, actual results could differ from this sensitivity analysis and the difference could be material. 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: 2018 December 31 2017 S&P 500 Total Return Index (USD) + or - 0.4 + or - 0.4 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 (USD000s except % amounts) (see note 3 in the generic notes) The following is a summary of the inputs used as of and December 31, 2017. Level 1 Level 2 Level 3 Total Equities 545 638 545 638 Underlying funds 91 629 91 629 Fixed-income and debt securities 654 947 654 947 Short-term investments 39 934 39 934 Derivatives assets Derivatives liabilities Total financial instruments 637 267 694 881 1 332 148 % of total portfolio 47.8 52.2 100.0 Please see the generic notes at the back of the financial statements.
NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION (unaudited) December 31, 2017 Level 1 Level 2 Level 3 Total Equities 559 278 559 278 Underlying funds 101 109 101 109 Fixed-income and debt securities 616 009 616 009 Short-term investments 66 336 66 336 Derivatives assets Derivatives liabilities Total financial instruments 660 387 682 345 1 342 732 % of total portfolio 49.2 50.8 100.0 For the periods ended and December 31, 2017, there were no transfers of financial instruments between Level 1, Level 2 and Level 3. Management fees and administration fees (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 Administration fees Series A 1.40% 0.10% Advisor Series 1.40% 0.05% Series D 0.80% 0.05% Series F 0.65% 0.05% Series I 0.60% 0.05% Investments by related parties (USD000s except unit amounts) Royal Bank of Canada, or one of its subsidiaries, held the following investments in the Fund as at: 2018 December 31 2017 Units held Series A 124 122 Series I 121 119 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. 2018 December 31 2017 NAV Ownership NAV Ownership RBC $U.S. High Yield Bond Fund 2.6 21.3 2.5 17.6 RBC Emerging Markets Bond Fund 1.9 3.8 2.6 4.1 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 ). 2018 December 31 2017 NAV Ownership NAV Ownership Financial Select Sector SPDR Fund 0.9 ishares Dow Jones US Real Estate Index Fund 0.9 0.3 1.2 0.4 SPDR KBW Regional Banking Fund 0.4 0.1 Utilities Select Sector SPDR Fund 1.0 0.2 Taxes (CAD000s) (see note 6 in the generic notes) The Fund prepares its financial statements in U.S. dollars but is taxable on its income and net realized capital gains (including gains from foreign exchange movements) calculated on a Canadian dollar basis. The Fund had no capital or non-capital losses as at December 31, 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) 2018 2017 Series A Opening units 103 458 86 255 Issued number of units 13 885 18 466 Reinvested number of units 1 466 1 177 Redeemed number of units (13 394) (11 180) Ending number of units 105 415 94 718 Advisor Series Opening units 4 869 5 231 Issued number of units 372 581 Reinvested number of units 60 63 Redeemed number of units (836) (696) Ending number of units 4 465 5 179 Please see the generic notes at the back of the financial statements.
NOTES TO FINANCIAL STATEMENTS FUND SPECIFIC INFORMATION (unaudited) For the periods ended (see note 2 in the generic notes) 2018 2017 Series D Opening units 3 594 3 065 Issued number of units 605 756 Reinvested number of units 49 42 Redeemed number of units (653) (366) Ending number of units 3 595 3 497 Series F Opening units 7 616 4 751 Issued number of units 2 869 3 722 Reinvested number of units 95 55 Redeemed number of units (1 979) (1 322) Ending number of units 8 601 7 206 Series I Opening units 5 008 5 109 Issued number of units 545 149 Reinvested number of units 63 50 Redeemed number of units (203) (838) Ending number of units 5 413 4 470 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. 2018 2017 $ % $ % Gross revenue 129 100 54 100 RBC IS (paid) (32) (25) (16) (30) Tax withheld (2) (1) (2) (4) Fund revenue 95 74 36 66 Transaction costs (USD000s except %) Transaction costs, including brokerage commissions, in consideration of portfolio transactions for the periods ended: 2018 2017 $ % $ % Total transaction costs 375 100 250 100 Related-party brokerage commissions* 45 12 26 10 Commission arrangements 90 24 48 19 * 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 (USD000s except %) (see note 7 in the generic notes) Fair value of securities on loan and collateral received as at: 2018 2017 Fair value of securities loaned 343 027 149 422 Fair value of collateral received 349 888 152 410 Please see the generic notes at the back of the financial statements.
GENERIC NOTES TO FINANCIAL STATEMENTS (unaudited) (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 August 9, 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 period The information provided in these financial statements and notes thereto is for the six-month periods ended, 2018 and 2017, or as at and December 31, 2017, 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 ) and in accordance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board ( IASB ). The significant accounting policies of the Funds, which are investment entities, are as follows: Adoption of New Accounting Standards Effective January 1, 2018, the Funds adopted IFRS 9 Financial Instruments. The new standard requires financial assets to be classified as amortized cost and fair value, with changes in fair value through profit and loss ( FVTPL ) or fair value through other comprehensive income ( FVOCI ) based on the entity s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. Assessment and decision on the business model approach used is an accounting judgment. The adoption of IFRS 9 has been applied retrospectively without the use of hindsight and did not result in a change to the measurement of financial instruments, in either the current or comparative period. The Funds financial assets and financial liabilities previously designated as FVTPL under IAS 39 Financial Instruments continue to be measured as FVTPL. Other financial assets and liabilities will continue to be measured at amortized cost.
GENERIC NOTES TO FINANCIAL STATEMENTS (unaudited) (also see Fund Specific Information) Classification and Measurement of Financial Assets, Liabilities and Derivatives Each of the Funds classify their investment and derivative portfolio based on the business model for managing the portfolio and the contractual cash flow characteristics. The investment portfolio of financial assets, liabilities and derivatives is managed and performance is evaluated on a fair value basis. The contractual cash flows of the Funds debt securities are solely principal and interest; however, these securities are neither held for the purpose of collecting contractual cash flows nor held both for collecting contractual cash flows and for sale. The collection of contractual cash flows is only incidental to achieving the Funds business model objectives. Consequently, all investments and derivative contracts are measured at FVTPL. The Funds obligation for net assets attributable to holders of redeemable units represents a financial liability and is measured at the redemption amount, which approximates fair value as of the reporting date. All other financial assets and liabilities are measured at amortized cost. 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. 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.
GENERIC NOTES TO FINANCIAL STATEMENTS (unaudited) (also see Fund Specific Information) 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 and preferred shares 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. 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 Options give the purchaser the right, but not the obligation, to buy (call) or sell (put) an underlying security or financial instrument at an agreed exercise or strike price during the specified period or on a specified date. 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. Options purchased and options written (sold) are recorded as investments in the Statements of Financial Position. These investments are reported at fair value in the Statements of Financial Position, and unrealized gain or loss at the close of business on each valuation date is recorded in Change in unrealized gain (loss) on investments in the Statements of Comprehensive Income. When an option is exercised and the underlying securities are acquired or delivered, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed the Fund will realize a gain or loss equal to the difference between the premium and the cost to close the position. When an option expires, gains or losses are realized equivalent to the amount of premiums received or paid, respectively. The net realized gains (losses) on written and purchased options are included in the Statements of Comprehensive Income in Net realized gain (loss) on investments. 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 Derivative income 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 Derivative income in the Statements of Comprehensive Income.