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RBC ETFs
2014 Annual Report
TABLE OF CONTENTS
Management Report of Fund Performance
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
RBC
1-5 Year Laddered Corporate Bond ETF
Target 2015 Corporate Bond Index ETF
Target 2016 Corporate Bond Index ETF
Target 2017 Corporate Bond Index ETF
Target 2018 Corporate Bond Index ETF
Target 2019 Corporate Bond Index ETF
Target 2020 Corporate Bond Index ETF
Target 2021 Corporate Bond Index ETF
Quant Canadian Dividend Leaders ETF
Quant U.S. Dividend Leaders ETF
Quant U.S. Dividend Leaders (CAD Hedged) ETF
Quant European Dividend Leaders ETF
Quant European Dividend Leaders (CAD Hedged) ETF
Quant EAFE Dividend Leaders ETF
Quant EAFE Dividend Leaders (CAD Hedged) ETF
Quant Emerging Markets Dividend Leaders ETF
Financial Statements
2
6
11
16
21
26
31
36
41
45
49
53
57
61
65
69
1
MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL REPORTING
73
INDEPENDENT AUDITOR’S REPORT
74
RBC 1-5 Year Laddered Corporate Bond ETF
75
RBC Target 2015 Corporate Bond Index ETF
81
RBC Target 2016 Corporate Bond Index ETF
87
RBC Target 2017 Corporate Bond Index ETF
93
RBC Target 2018 Corporate Bond Index ETF
99
RBC Target 2019 Corporate Bond Index ETF
105
RBC Target 2020 Corporate Bond Index ETF
111
RBC Target 2021 Corporate Bond Index ETF
117
RBC Quant Canadian Dividend Leaders ETF
123
RBC Quant U.S. Dividend Leaders ETF
130
RBC Quant U.S. Dividend Leaders (CAD Hedged) ETF
138
RBC Quant European Dividend Leaders ETF
144
RBC Quant European Dividend Leaders (CAD Hedged) ETF
151
RBC Quant EAFE Dividend Leaders ETF
157
RBC Quant EAFE Dividend Leaders (CAD Hedged) ETF
165
RBC Quant Emerging Markets Dividend Leaders ETF
171
GENERIC NOTES TO FINANCIAL STATEMENTS
178
THE ROLE OF THE BOARD OF GOVERNORS
183
PLEASE CALL US
184
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC 1-5 YEAR LADDERED CORPORATE
BOND ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
2
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure to the
performance of a diversified portfolio of Canadian corporate bonds,
divided (“laddered”) into five groupings with staggered maturities
from one to five years, which will provide regular income while
preserving capital.
The Fund will achieve exposure to Canadian corporate bonds primarily
by investing in an equal-weighted portfolio of five RBC Target Maturity
Corporate Bond ETFs with remaining terms to maturity of one to five
years. At the beginning of each year, the nearest term RBC Target
Maturity Corporate Bond ETF will be sold and proceeds invested into
a longer-dated RBC Target Maturity Corporate Bond ETF to maintain
the one- to five-year ladder. The portfolio holdings will be rebalanced
initially on a semi-annual basis. The frequency of the rebalancing may
change without notice.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
Results of Operations
The Fund was launched on January 15, 2014, and its net asset value
was $72 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Recent Developments
The Canadian economy ended the year on a strong note and although
inflation is running a little higher than expected, the Bank of Canada
views the factors as transitory. The impact of a weaker Canadian dollar
and lower oil prices have not yet had any noticeable effect on growth
and inflation. Interest rates fell across all maturities as volatility spiked
in 2014. Yields on longer-dated bonds fell more than on shorter-dated
bonds. Interest rates could rise as the market expects the U.S. Federal
Reserve will raise rates in 2015.
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
In the long run, the portfolio manager is cautious but somewhat
optimistic as company fundamentals, while a little weaker, are still
supportive of non-government bonds. As well, solid economic growth
in North America and low default rates tend to be beneficial for nongovernment bonds. The impact of falling commodity prices, a lower
Canadian dollar, weaker economic growth in some regions and
geopolitical unrest could create headwinds for corporate bonds.
The applicable standing instructions require that Related-Party Trading
Activities be conducted in accordance with RBC GAM policy and
that RBC GAM advise the BoG of a material breach of any standing
instruction. RBC GAM policy requires that an investment decision in
respect of Related-Party Trading Activities (i) is made free from any
influence of Royal Bank or its associates or affiliates and without
taking into account any consideration relevant to Royal Bank or its
affiliates or associates, (ii) represents the business judgment of the
portfolio manager, uninfluenced by considerations other than the best
interests of the Fund, (iii) is in compliance with RBC GAM policies and
procedures, and (iv) achieves a fair and reasonable result for the Fund.
3
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 1-5 Year ETF
Dec. 31, 20143 20.00† 0.73 –
–
(0.19)
0.54 (0.65)
–
–
–
(0.65)
20.00
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From January 15, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
RBC 1-5 Year ETF
Dec. 31, 20144
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
72 016 3 600 Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
0.28 0.28 Trading
Expense Ratio (%) 2
–
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
0.64 20.00 20.00
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From January 15, 2014.
Management Fees
RBC Global Asset Management Inc. is the manager and portfolio
advisor of the ETF. A management fee is not charged directly to
the ETF as this ETF invests in the units of other RBC ETFs. It pays
management fees indirectly because the ETFs in which it invests pay
management fees.
4
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
PAST PERFORMANCE
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
January 2014.
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
% of Net Asset Value
Corporate Bonds
Financial
Communication
Infrastructure
Energy
Industrial
Real Estate
Other Net Assets
68.1
9.5
8.7
6.3
5.7
0.6
1.1
Top 25 Holdings*
RBC Target 2019 Corporate Bond Index ETF
RBC Target 2018 Corporate Bond Index ETF
RBC Target 2017 Corporate Bond Index ETF
RBC Target 2016 Corporate Bond Index ETF
RBC Target 2015 Corporate Bond Index ETF
Total
% of Net Asset Value
20.0
20.0
20.0
20.0
20.0
100.0
* The Fund holds fewer than 25 holdings.
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
5
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC TARGET 2015
CORPORATE BOND INDEX ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
6
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2015 CORPORATE BOND INDEX ETF
The Canadian bond market rallied in 2014 along with most developed
markets, as many investors sought safety in less-risky investments,
particularly in the second half of the year. Prices for both Canadian
corporate and government bonds rose over the year as yields declined,
with maturities longer than 10 years recording the largest gains. Bonds
in the Industrials sector and infrastructure bonds with longer maturities
performed best.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide income for a limited period of time ending
on its termination date by replicating, to the extent possible, the
investment results that correspond generally to the performance,
before fees and expenses, of the FTSE TMX Canada 2015 Maturity
Corporate Bond Index*. The FTSE TMX Canada 2015 Maturity
Corporate Bond Index is designed to represent the performance
of a held-to-maturity portfolio consisting of, primarily, Canadian
dollar-denominated investment grade corporate bonds with effective
maturities in 2015.
Corporate bonds with one year left until maturity recorded small gains
in 2014 on a combination of interest income and a slight decline in
yields over the course of the year.
Recent Developments
The Fund has entered its maturity year. Proceeds from maturing
bonds will be reinvested into Government of Canada T-bills. Shortterm rates are expected to rise as the market anticipates the U.S.
Federal Reserve will raise rates in 2015.
The Fund intends to invest at least 90% of its assets in and hold the
securities that comprise the FTSE TMX Canada 2015 Maturity Corporate
Bond Index and/or securities that have economic characteristics that
are substantially similar to those that comprise the index.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
Results of Operations
The Fund’s net asset value rose to $60 million as of December 31, 2014,
from $25 million at the end of 2013. The change was due mostly to
net inflows.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
Over the past year, the Fund’s units gained 1.5%, which
underperformed the 1.8% rise in the benchmark. The broad-based
index rose 8.8%. The Fund’s return is after the deduction of fees and
expenses, while benchmark and broad-based index returns do not
include any costs of investing. See the Financial Highlights section for
the management expense ratios and the Past Performance section
for the returns of other series, if any, which may vary because of
differences in management fees and expenses.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
* “FTSE TMX Canada 2015 Maturity Corporate Bond Index” is a trademark of FTSE TMX Debt
Capital Markets Inc. (“FTDCM”). “TMX” is a trademark of TSX Inc. (“TSX”) and is used under
licence. “FTSE” is a trademark of the London Stock Exchange Group companies (the “Exchange”)
and is used by FTDCM under licence. The “FTSE TMX Canada 2015 Maturity Corporate Bond
Index” trademark has been licensed for use for certain purposes to RBC GAM. The RBC ETFs are
not sponsored, endorsed, sold or promoted by FTDCM, FTSE International Limited, the Exchange
or TSX (together, the “Licensor Parties”). The Licensor Parties make no warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from
the use of the index and/or the figure at which the said index stands at any particular time
on any particular day or otherwise. The index is compiled and calculated by FTDCM and all
copyright in the index values and constituent lists vests in FTDCM. The Licensor Parties shall not
be liable (whether in negligence or otherwise) to any person for any error in the index and the
Licensor Parties shall not be under any obligation to advise any person of any error therein.
7
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2015 CORPORATE BOND INDEX ETF
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) purchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
8
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2015 CORPORATE BOND INDEX ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 2015 ETF
Dec. 31, 2014
19.60 0.78 (0.05)
(0.06)
(0.40)
0.27 (0.68)
Dec. 31, 2013
19.84 0.78(0.07)(0.01)(0.29)0.41(0.70)
Dec. 31, 2012
19.81 0.77(0.06)(0.01) – 0.70(0.70)
Dec. 31, 2011320.00†
0.24(0.02) –(0.16)0.06(0.16)
–
–
–
–
–
–
(0.68)
19.21
– –(0.70)19.57
– –(0.70)19.84
–(0.03)(0.19)19.81
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From September 15, 2011.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
Trading
Expense Ratio (%) 2
RBC 2015 ETF
Dec. 31, 2014
59 564 3 100 0.28 0.28 Dec. 31, 2013
25 480 1 300 0.34 0.34 Dec. 31, 2012
18 711
941
0.34
0.34
Dec. 31, 20114
5 998 3020.340.41
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
7.97 19.21 19.23
–
2.65 19.60 19.60
–
16.66
19.88
19.79
–0.6019.8619.89
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is
not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in
its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving
taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From September 15, 2011.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC 2015 ETF
up to 0.25%
9
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2015 CORPORATE BOND INDEX ETF
PAST PERFORMANCE
SUMMARY OF INVESTMENT PORTFOLIO
The performance information shown assumes that all distributions
made by the Fund in the periods shown were reinvested in additional
units of the Fund and would be lower if distributions were not
reinvested. The performance information does not take into account
sales, redemption, distribution, optional charges or income taxes
payable that would have reduced returns or performance. Past
performance does not necessarily indicate how the Fund may perform
in the future. A fund with more than 10 years of performance history is
only permitted to disclose the past 10 years.
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Corporate Bonds
Financial
Infrastructure
Communication
Industrial
Energy
Other Net Assets
Year-by-Year Returns (%)
The bar chart indicates the Fund’s performance for each of the years
shown, and illustrates how the Fund’s performance has changed from
year to year. The bar chart shows, in percentage terms, how much an
investment made on the first day of each financial year would have
grown or decreased by the end of the financial year.
1.0%
3.7%
2.1%
1.5%
2012
2013
2014
-10
-20
2011
Annual Compound Returns (%)
The table shows the annual compound returns for each series of the
Fund and for each of the periods indicated ended on December 31, 2014,
compared with the following benchmarks:
FTSE TMX Canada 2015 Maturity Corporate Bond Index
The broad-based index is the FTSE TMX Canada Universe Bond Index.
RBC 2015 ETF1
Benchmark1
Broad-based index
% of Net Asset Value
Royal Bank of Canada 3.18% Nov 02, 2020
Canadian Imperial Bank of Commerce, FRN 3.15% Nov 02, 2020
Bank of Montreal 3.93% Apr 27, 2015
Bell Canada 3.6% Dec 02, 2015
Wells Fargo Canada Corp. 4.38% Jun 30, 2015
The Toronto-Dominion Bank, FRN 3.37% Nov 02, 2020
Bank of Nova Scotia 3.34% Mar 25, 2015
Canadian Imperial Bank of Commerce, FRN 4.11% Apr 30, 2020
National Bank of Canada 4.03% May 26, 2015
Manulife Financial Corp. 4.08% Aug 20, 2015
Bank of Montreal 5.18% Jun 10, 2015
Molson Coors Capital Finance ULC 5% Sep 22, 2015
Royal Bank of Canada 3.18% Mar 16, 2015
The Toronto-Dominion Bank, FRN 4.97% Oct 30, 2104
The Toronto-Dominion Bank, FRN 5.48% Apr 02, 2020
Capital Desjardins Inc., FRN 3.80% Nov 23, 2020
Sun Life Financial Inc., FRN 4.8% Nov 23, 2035
Thomson Reuters Corp. 5.7% Jul 15, 2015
GE Capital Canada Funding Co. 4.65% Feb 11, 2015
Ford Credit Canada Ltd. 7.5% Aug 18, 2015
Manulife Financial Corp. 5.16% Jun 26, 2015
GE Capital Canada Funding Co. 4.24% Jun 08, 2015
Caisse Centrale Desjardins du Quebec 3.79% Jun 08, 2015
407 International Inc. 3.88% Jun 16, 2015
Hydro One Inc. 2.95% Sep 11, 2015
Top 25 Holdings
RBC 2015 ETF1 (%)
0
76.8
6.7
6.0
5.9
3.8
0.8
Top 25 Holdings
20
10
% of Net Asset Value
PastPastPastPastSince
Year
3 Years
5 Years
10 Years
Inception
1.52.4 – –2.5
1.82.8 – –2.9
8.83.7 – –4.0
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
The Benchmark and broad-based index returns do not include any costs of investing. See
Management Discussion of Fund Performance for a discussion of performance relative to the
Benchmark and broad-based indexes.
1 Inception date September 15, 2011.
INDEX DESCRIPTIONS
FTSE TMX Canada 2015 Maturity Corporate Bond Index* This index is designed to measure
the performance of a held-to-maturity portfolio consisting primarily of Canadian-dollar-denominated
investment-grade corporate bonds maturing in 2015.
FTSE TMX Canada Universe Bond Index* This index is designed as a broad measure of the
Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year.
* FTSE TMX fixed-income benchmarks were known as the DEX benchmarks before a name change.
10
5.1
4.9
4.7
3.8
3.8
3.7
3.7
3.6
3.4
3.4
3.3
3.3
3.2
3.0
2.9
2.6
2.3
2.3
2.2
2.1
2.1
1.9
1.9
1.9
1.9
77.0
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC TARGET 2016
CORPORATE BOND INDEX ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
11
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2016 CORPORATE BOND INDEX ETF
The Canadian bond market rallied in 2014 along with most developed
markets, as many investors sought safety in less-risky investments,
particularly in the second half of the year. Prices for both Canadian
corporate and government bonds rose over the year as yields declined,
with maturities longer than 10 years recording the largest gains. Bonds
in the Industrials sector and infrastructure bonds with longer maturities
performed best.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide income for a limited period of time ending
on its termination date by replicating, to the extent possible, the
investment results that correspond generally to the performance,
before fees and expenses, of the FTSE TMX Canada 2016 Maturity
Corporate Bond Index*. The FTSE TMX Canada 2016 Maturity
Corporate Bond Index is designed to represent the performance
of a held-to-maturity portfolio consisting of, primarily, Canadian
dollar-denominated investment grade corporate bonds with effective
maturities in 2016.
Canadian corporate bonds with two years left until maturity
outperformed government fixed income, posting modest gains in
an environment of generally falling yields. Yields on longer-dated
maturities fell more than those on shorter-term debt amid speculation
that the U.S. Federal Reserve (the “Fed”) would hike short-term
benchmark interest rates.
The Fund intends to invest at least 90% of its assets in and hold the
securities that comprise the FTSE TMX Canada 2016 Maturity Corporate
Bond Index and/or securities that have economic characteristics that
are substantially similar to those that comprise the index.
Recent Developments
The Canadian economy ended the year strongly and, as of early 2015,
the weaker Canadian dollar and lower oil prices have not yet had any
noticeable impact on growth and inflation. While inflation is running a
little higher than expected, the Bank of Canada views the causes as
temporary. Short-term rates could rise as the market expects the Fed
to raise rates in 2015.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
In the long run, the portfolio manager is cautious but somewhat
optimistic as company fundamentals, while a little weaker, are still
supportive of non-government bonds. As well, solid economic growth
in North America and low default rates tend to be beneficial for nongovernment bonds. The impact of falling commodity prices, a lower
Canadian dollar, weaker economic growth in some regions and
geopolitical unrest could create headwinds for corporate bonds.
Results of Operations
The Fund’s net asset value rose to $81 million as of December 31, 2014,
from $51 million at the end of 2013. The change was due mostly to
net inflows.
Over the past year, the Fund’s units gained 2.0%, which
underperformed the 2.3% rise in the benchmark. The broad-based
index rose 8.8%. The Fund’s return is after the deduction of fees and
expenses, while benchmark and broad-based index returns do not
include any costs of investing. See the Financial Highlights section for
the management expense ratios and the Past Performance section
for the returns of other series, if any, which may vary because of
differences in management fees and expenses.
Effective January 15, 2014, the management fee has been reduced to
0.25% from 0.30%.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
* “FTSE TMX Canada 2016 Maturity Corporate Bond Index” is a trademark of FTSE TMX Debt
Capital Markets Inc. (“FTDCM”). “TMX” is a trademark of TSX Inc. (“TSX”) and is used under
licence. “FTSE” is a trademark of the London Stock Exchange Group companies (the “Exchange”)
and is used by FTDCM under licence. The “FTSE TMX Canada 2016 Maturity Corporate Bond
Index” trademark has been licensed for use for certain purposes to RBC GAM. The RBC ETFs are
not sponsored, endorsed, sold or promoted by FTDCM, FTSE International Limited, the Exchange
or TSX (together, the “Licensor Parties”). The Licensor Parties make no warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from
the use of the index and/or the figure at which the said index stands at any particular time
on any particular day or otherwise. The index is compiled and calculated by FTDCM and all
copyright in the index values and constituent lists vests in FTDCM. The Licensor Parties shall not
be liable (whether in negligence or otherwise) to any person for any error in the index and the
Licensor Parties shall not be under any obligation to advise any person of any error therein.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
12
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2016 CORPORATE BOND INDEX ETF
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) purchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
13
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2016 CORPORATE BOND INDEX ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 2016 ETF
Dec. 31, 2014
19.71 0.78 (0.05)
(0.10)
(0.25)
0.38 (0.71)
Dec. 31, 2013
19.91 0.81 (0.07)
(0.02)
(0.27)
0.45 (0.73)
Dec. 31, 2012
19.81 0.82(0.07) – 0.04 0.79(0.74)
Dec. 31, 2011320.00†
0.26(0.02) –(0.20)0.04(0.13)
–
–
–
–
–
–
(0.71)
19.40
–
–
(0.73)
19.68
– –(0.74)19.91
–(0.07)(0.20)19.81
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From September 15, 2011.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
Trading
Expense Ratio (%) 2
RBC 2016 ETF
Dec. 31, 2014
80 514 4 150 0.28 0.28 Dec. 31, 2013
51 245 2 600 0.33 0.33 Dec. 31, 2012
32 511
1 630
0.33
0.33
Dec. 31, 20114
8 147 4100.350.41
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
23.52 19.40 19.35
–
7.49 19.71 19.70
–
10.97
19.95
19.85
–4.6019.8619.88
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From September 15, 2011.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC 2016 ETF
up to 0.25%
14
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2016 CORPORATE BOND INDEX ETF
PAST PERFORMANCE
SUMMARY OF INVESTMENT PORTFOLIO
The performance information shown assumes that all distributions
made by the Fund in the periods shown were reinvested in additional
units of the Fund and would be lower if distributions were not
reinvested. The performance information does not take into account
sales, redemption, distribution, optional charges or income taxes
payable that would have reduced returns or performance. Past
performance does not necessarily indicate how the Fund may perform
in the future. A fund with more than 10 years of performance history is
only permitted to disclose the past 10 years.
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Other Net Assets
Year-by-Year Returns (%)
The bar chart indicates the Fund’s performance for each of the years
shown, and illustrates how the Fund’s performance has changed from
year to year. The bar chart shows, in percentage terms, how much an
investment made on the first day of each financial year would have
grown or decreased by the end of the financial year.
1.4%
4.3%
2.5%
2.0%
2012
2013
2014
-10
-20
2011
Annual Compound Returns (%)
The table shows the annual compound returns for each series of the
Fund and for each of the periods indicated ended on December 31, 2014,
compared with the following benchmarks:
FTSE TMX Canada 2016 Maturity Corporate Bond Index
The broad-based index is the FTSE TMX Canada Universe Bond Index.
RBC 2016 ETF1
Benchmark1
Broad-based index
% of Net Asset Value
The Toronto-Dominion Bank, FRN 4.78% Dec 14, 2105
Bank of Nova Scotia 3.61% Feb 22, 2016
Canadian Imperial Bank of Commerce 3.4% Jan 14, 2016
Royal Bank of Canada 3.36% Jan 11, 2016
Bank of Montreal, FRN 3.98% Jul 08, 2021
Rogers Communications Inc. 5.8% May 26, 2016
Sun Life Financial Inc., FRN 4.95% Jun 01, 2036
National Bank of Canada 2.70% Dec 15, 2016
GE Capital Canada Funding Co. 5.1% Jun 01, 2016
American Express Canada Credit Corp. 3.6% Jun 03, 2016
The Manufacturers Life Insurance Co., FRN 4.21% Nov 18, 2021
Bell Aliant Regional Communications LP 5.41% Sep 26, 2016
GE Capital Canada Funding Co. 3.35% Nov 23, 2016
Ford Credit Canada Ltd. 2.63% Nov 21, 2016
Daimler Canada Finance Inc. 3.28% Sep 15, 2016
Hydro One Inc. 4.64% Mar 03, 2016
NAV Canada 4.71% Feb 24, 2016
TransCanada PipeLines Ltd. 4.65% Oct 03, 2016
Enbridge Inc. 5.17% May 19, 2016
Greater Toronto Airports Authority 4.7% Feb 15, 2016
George Weston Ltd. 3.78% Oct 25, 2016
Brookfield Renewable Power Inc. 6.13% Nov 30, 2016
Shaw Communications Inc. 6.15% May 09, 2016
Enbridge Inc. 5% Aug 09, 2016
Toyota Credit Canada Inc. 3.55% Feb 22, 2016
Top 25 Holdings
RBC 2016 ETF1 (%)
0
68.9
9.8
9.0
8.1
3.2
1.0
Top 25 Holdings
20
10
% of Net Asset Value
PastPastPastPastSince
Year
3 Years
5 Years
10 Years
Inception
2.02.9 – –3.1
2.33.3 – –3.4
8.83.7 – –4.0
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
The Benchmark and broad-based index returns do not include any costs of investing. See
Management Discussion of Fund Performance for a discussion of performance relative to the
Benchmark and broad-based indexes.
1 Inception date September 15, 2011.
INDEX DESCRIPTIONS
FTSE TMX Canada 2016 Maturity Corporate Bond Index* This index is designed to measure
the performance of a held-to-maturity portfolio consisting primarily of Canadian-dollar-denominated
investment-grade corporate bonds maturing in 2016.
FTSE TMX Canada Universe Bond Index* This index is designed as a broad measure of the
Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year.
* FTSE TMX fixed-income benchmarks were known as the DEX benchmarks before a name change.
15
8.2
8.0
8.0
7.9
6.7
5.5
5.1
4.1
4.0
3.2
3.0
2.7
2.7
2.6
2.5
2.4
2.4
2.2
2.2
1.9
1.9
1.7
1.7
1.6
1.6
93.8
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC TARGET 2017
CORPORATE BOND INDEX ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
16
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2017 CORPORATE BOND INDEX ETF
The Canadian bond market rallied in 2014 along with most developed
markets, as many investors sought safety in less-risky investments,
particularly in the second half of the year. Prices for both Canadian
corporate and government bonds rose over the year as yields declined,
with maturities longer than 10 years recording the largest gains. Bonds
in the Industrials sector and infrastructure bonds with longer maturities
performed best.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide income for a limited period of time ending
on its termination date by replicating, to the extent possible, the
investment results that correspond generally to the performance,
before fees and expenses, of the FTSE TMX Canada 2017 Maturity
Corporate Bond Index*. The FTSE TMX Canada 2017 Maturity
Corporate Bond Index is designed to represent the performance
of a held-to-maturity portfolio consisting of, primarily, Canadian
dollar-denominated investment grade corporate bonds with effective
maturities in 2017.
Corporate bonds with three years left until maturity posted gains in
2014, outperforming government bonds in a year where many investors
sought more conservative investments amid geopolitical risks. Yields
on longer-dated maturities fell more than those on shorter-term debt
amid speculation that the U.S. Federal Reserve (the “Fed”) would hike
short-term benchmark interest rates.
The Fund intends to invest at least 90% of its assets in and hold the
securities that comprise the FTSE TMX Canada 2017 Maturity Corporate
Bond Index and/or securities that have economic characteristics that
are substantially similar to those that comprise the index.
Recent Developments
The Canadian economy ended the year strongly and, as of early 2015,
the weaker Canadian dollar and lower oil prices have not yet had any
noticeable impact on growth and inflation. While inflation is running a
little higher than expected, the Bank of Canada views the causes as
temporary. Short-term rates could rise as the market expects the Fed
to raise rates in 2015.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
In the long run, the portfolio manager is cautious but somewhat
optimistic as company fundamentals, while a little weaker, are still
supportive of non-government bonds. As well, solid economic growth
in North America and low default rates tend to be beneficial for nongovernment bonds. The impact of falling commodity prices, a lower
Canadian dollar, weaker economic growth in some regions and
geopolitical unrest could create headwinds for corporate bonds.
Results of Operations
The Fund’s net asset value rose to $54 million as of December 31, 2014,
from $24 million at the end of 2013. The change was due mostly to
net inflows.
Over the past year, the Fund’s units gained 3.3%, which
underperformed the 3.6% rise in the benchmark. The broad-based
index rose 8.8%. The Fund’s return is after the deduction of fees and
expenses, while benchmark and broad-based index returns do not
include any costs of investing. See the Financial Highlights section for
the management expense ratios and the Past Performance section
for the returns of other series, if any, which may vary because of
differences in management fees and expenses.
Effective January 15, 2014, the management fee has been reduced to
0.25% from 0.30%.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
* “FTSE TMX Canada 2017 Maturity Corporate Bond Index” is a trademark of FTSE TMX Debt
Capital Markets Inc. (“FTDCM”). “TMX” is a trademark of TSX Inc. (“TSX”) and is used under
licence. “FTSE” is a trademark of the London Stock Exchange Group companies (the “Exchange”)
and is used by FTDCM under licence. The “FTSE TMX Canada 2017 Maturity Corporate Bond
Index” trademark has been licensed for use for certain purposes to RBC GAM. The RBC ETFs are
not sponsored, endorsed, sold or promoted by FTDCM, FTSE International Limited, the Exchange
or TSX (together, the “Licensor Parties”). The Licensor Parties make no warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from
the use of the index and/or the figure at which the said index stands at any particular time
on any particular day or otherwise. The index is compiled and calculated by FTDCM and all
copyright in the index values and constituent lists vests in FTDCM. The Licensor Parties shall not
be liable (whether in negligence or otherwise) to any person for any error in the index and the
Licensor Parties shall not be under any obligation to advise any person of any error therein.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
17
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2017 CORPORATE BOND INDEX ETF
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) purchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
18
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2017 CORPORATE BOND INDEX ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 2017 ETF
Dec. 31, 2014
19.87 0.80 (0.06)
(0.02)
(0.16)
0.56 (0.70)
Dec. 31, 2013
20.14 0.82 (0.07)
–
(0.32)
0.43 (0.73)
Dec. 31, 2012
19.90 0.82(0.07)0.02 0.18 0.95(0.75)
Dec. 31, 2011320.00†0.26(0.02) –(0.08)0.16(0.14)
–
–
–
–
–
–
(0.70)
19.82
–
(0.01)
(0.74)
19.84
– –(0.75)20.14
–(0.06)(0.20)19.90
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From September 15, 2011.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
RBC 2017 ETF
Dec. 31, 2014
54 495 2 750 Dec. 31, 2013
23 849 1 200 Dec. 31, 2012
16 674
826
Dec. 31, 201145 985 300
MER Before
Absorption (%) 1
0.28 0.34 0.34
0.35
Trading
Expense Ratio (%) 2
0.28 0.34 0.34
0.42
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
11.12 19.82 19.83
–
12.44 19.87 20.00
–
40.53
20.19
20.31
– –19.9519.95
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense ratio is
not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in
its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving
taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From September 15, 2011.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC 2017 ETF
up to 0.25%
19
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2017 CORPORATE BOND INDEX ETF
PAST PERFORMANCE
SUMMARY OF INVESTMENT PORTFOLIO
The performance information shown assumes that all distributions
made by the Fund in the periods shown were reinvested in additional
units of the Fund and would be lower if distributions were not
reinvested. The performance information does not take into account
sales, redemption, distribution, optional charges or income taxes
payable that would have reduced returns or performance. Past
performance does not necessarily indicate how the Fund may perform
in the future. A fund with more than 10 years of performance history is
only permitted to disclose the past 10 years.
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Corporate Bonds
Financial
Communication
Infrastructure
Industrial
Energy
Other Net Assets
Year-by-Year Returns (%)
The bar chart indicates the Fund’s performance for each of the years
shown, and illustrates how the Fund’s performance has changed from
year to year. The bar chart shows, in percentage terms, how much an
investment made on the first day of each financial year would have
grown or decreased by the end of the financial year.
5.0%
2.1%
3.3%
2013
2014
0
-10
-20
2011
2012
Annual Compound Returns (%)
The table shows the annual compound returns for each series of the
Fund and for each of the periods indicated ended on December 31, 2014,
compared with the following benchmarks:
FTSE TMX Canada 2017 Maturity Corporate Bond Index
The broad-based index is the FTSE TMX Canada Universe Bond Index.
RBC 2017 ETF1
Benchmark1
Broad-based index
% of Net Asset Value
Royal Bank of Canada 3.66% Jan 25, 2017
The Toronto-Dominion Bank, FRN 5.76% Dec 18, 2106
GE Capital Canada Funding Co. 5.53% Aug 17, 2017
Bank of Nova Scotia 4.1% Jun 08, 2017
Canadian Imperial Bank of Commerce 3.95% Jul 14, 2017
HSBC Bank Canada 3.56% Oct 04, 2017
Bank of Montreal 2.24% Dec 11, 2017
Canadian Imperial Bank of Commerce 2.35% Oct 18, 2017
Sun Life Financial Inc. 4.38% Mar 02, 2022
Bell Canada 5% Feb 15, 2017
TELUS Corp. 4.95% Mar 15, 2017
Bank of Nova Scotia 2.90% Aug 03, 2022
Hydro One Inc. 5.18% Oct 18, 2017
Caisse Centrale Desjardins du Quebec 3.50% Oct 05, 2017
Ford Credit Canada Ltd. 4.88% Feb 08, 2017
The Manufacturers Life Insurance Co., FRN 4.17% Jun 01, 2022
Bank of Montreal 5.45% Jul 17, 2017
Rogers Communications Inc. 3% Jun 06, 2017
Greater Toronto Airports Authority 4.85% Jun 01, 2017
VW Credit Canada Inc. 2.45% Nov 14, 2017
HSBC Bank Canada, FRN 4.8% Apr 10, 2022
Shaw Communications Inc. 5.7% Mar 02, 2017
Bank of Montreal 4.55% Aug 01, 2017
Bell Aliant Regional Communications LP 4.37% Sep 13, 2017
TransCanada PipeLines Ltd. 5.1% Jan 11, 2017
Top 25 Holdings
RBC 2017 ETF1 (%)
2.1%
71.5
13.8
8.7
3.1
1.6
1.3
Top 25 Holdings
20
10
% of Net Asset Value
PastPastPastPastSince
Year
3 Years
5 Years
10 Years
Inception
3.33.5 – –3.8
3.63.8 – –4.2
8.83.7 – –4.0
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
The Benchmark and broad-based index returns do not include any costs of investing. See
Management Discussion of Fund Performance for a discussion of performance relative to the
Benchmark and broad-based indexes.
1 Inception date September 15, 2011.
INDEX DESCRIPTIONS
FTSE TMX Canada 2017 Maturity Corporate Bond Index* This index is designed to measure
the performance of a held-to-maturity portfolio consisting primarily of Canadian-dollar-denominated
investment-grade corporate bonds maturing in 2017.
FTSE TMX Canada Universe Bond Index* This index is designed as a broad measure of the
Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year.
* FTSE TMX fixed-income benchmarks were known as the DEX benchmarks before a name change.
20
6.8
6.6
6.6
5.8
5.3
5.2
4.4
4.2
3.8
3.7
3.6
3.6
3.3
3.2
2.7
2.6
2.6
2.6
2.4
2.3
2.1
2.1
2.0
1.9
1.6
91.0
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC TARGET 2018
CORPORATE BOND INDEX ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
21
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2018 CORPORATE BOND INDEX ETF
The Canadian bond market rallied in 2014 along with most developed
markets, as many investors sought safety in less-risky investments,
particularly in the second half of the year. Prices for both Canadian
corporate and government bonds rose over the year as yields
declined, with maturities longer than 10 years recording the largest
gains. Bonds in the Industrials sector and infrastructure bonds with
longer maturities performed best.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide income for a limited period of time ending
on its termination date by replicating, to the extent possible, the
investment results that correspond generally to the performance,
before fees and expenses, of the FTSE TMX Canada 2018 Maturity
Corporate Bond Index*. The FTSE TMX Canada 2018 Maturity
Corporate Bond Index is designed to represent the performance
of a held-to-maturity portfolio consisting of, primarily, Canadian
dollar-denominated investment grade corporate bonds with effective
maturities in 2018.
Corporate bonds with four years left until maturity posted solid
positive returns this year as government-bond yields fell due to a
flight to quality by investors when market risk spiked. As a result, the
excess yield earned on corporate bonds was marginally tighter for
the year. Yields for longer-dated maturities fell more than shorterdated because of fears the U.S. Federal Reserve (the “Fed”) could
hike short-term rates.
The Fund intends to invest at least 90% of its assets in and hold the
securities that comprise the FTSE TMX Canada 2018 Maturity Corporate
Bond Index and/or securities that have economic characteristics that
are substantially similar to those that comprise the index.
Recent Developments
The Canadian economy ended the year strongly and, as of early 2015,
the weaker Canadian dollar and lower oil prices have not yet had any
noticeable impact on growth and inflation. While inflation is running a
little higher than expected, the Bank of Canada views the causes as
temporary. Short-term rates could rise as the market expects the Fed
to raise rates in 2015.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
Results of Operations
The Fund’s net asset value rose to $46 million as of December 31,
2014, from $20 million at the end of 2013. The change was due mostly
to net inflows.
In the long run, the portfolio manager is cautious but somewhat
optimistic as company fundamentals, while a little weaker, are still
supportive of non-government bonds. As well, solid economic growth
in North America and low default rates tend to be beneficial for nongovernment bonds. The impact of falling commodity prices, a lower
Canadian dollar, weaker economic growth in some regions and
geopolitical unrest could create headwinds for corporate bonds.
Over the past year, the Fund’s units gained 4.9%, which
underperformed the 5.2% rise in the benchmark. The broad-based
index rose 8.8%. The Fund’s return is after the deduction of fees and
expenses, while benchmark and broad-based index returns do not
include any costs of investing. See the Financial Highlights section
for the management expense ratios and the Past Performance
section for the returns of other series, if any, which may vary
because of differences in management fees and expenses.
Effective January 15, 2014, the management fee has been reduced to
0.25% from 0.30%.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
* “FTSE TMX Canada 2018 Maturity Corporate Bond Index” is a trademark of FTSE TMX Debt
Capital Markets Inc. (“FTDCM”). “TMX” is a trademark of TSX Inc. (“TSX”) and is used under
licence. “FTSE” is a trademark of the London Stock Exchange Group companies (the “Exchange”)
and is used by FTDCM under licence. The “FTSE TMX Canada 2018 Maturity Corporate Bond
Index” trademark has been licensed for use for certain purposes to RBC GAM. The RBC ETFs are
not sponsored, endorsed, sold or promoted by FTDCM, FTSE International Limited, the Exchange
or TSX (together, the “Licensor Parties”). The Licensor Parties make no warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from
the use of the index and/or the figure at which the said index stands at any particular time
on any particular day or otherwise. The index is compiled and calculated by FTDCM and all
copyright in the index values and constituent lists vests in FTDCM. The Licensor Parties shall not
be liable (whether in negligence or otherwise) to any person for any error in the index and the
Licensor Parties shall not be under any obligation to advise any person of any error therein.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
22
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2018 CORPORATE BOND INDEX ETF
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) purchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
23
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2018 CORPORATE BOND INDEX ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 2018 ETF
Dec. 31, 2014
19.62 0.74 (0.06)
–
0.16 0.84 (0.65)
Dec. 31, 2013
20.09 0.89 (0.07)
(0.13)
(0.47)
0.22 (0.81)
Dec. 31, 2012
19.82 0.93(0.07) – 0.32 1.18(0.87)
Dec. 31, 2011320.00†0.29(0.02) –(0.15)0.12(0.16)
–
–
–
–
–
–
(0.65)
19.93
–
–
(0.81)
19.58
– –(0.87)20.09
–(0.07)(0.23)19.82
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From September 15, 2011.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
Trading
Expense Ratio (%) 2
RBC 2018 ETF
Dec. 31, 2014
45 850 2 300 0.29 0.29 Dec. 31, 2013
19 622 1 000 0.34 0.34 Dec. 31, 2012
12 194
606
0.34
0.34
Dec. 31, 20114
5 962 3000.350.41
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
0.72 19.93 19.94
–
74.31 19.62 19.75
–
24.79
20.14
20.16
–0.2419.8719.94
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From September 15, 2011.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC 2018 ETF
up to 0.25%
24
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2018 CORPORATE BOND INDEX ETF
PAST PERFORMANCE
SUMMARY OF INVESTMENT PORTFOLIO
The performance information shown assumes that all distributions
made by the Fund in the periods shown were reinvested in additional
units of the Fund and would be lower if distributions were not
reinvested. The performance information does not take into account
sales, redemption, distribution, optional charges or income taxes
payable that would have reduced returns or performance. Past
performance does not necessarily indicate how the Fund may perform
in the future. A fund with more than 10 years of performance history is
only permitted to disclose the past 10 years.
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Corporate Bonds
Financial
Infrastructure
Communication
Energy
Industrial
Real Estate
Other Net Assets
Year-by-Year Returns (%)
The bar chart indicates the Fund’s performance for each of the years
shown, and illustrates how the Fund’s performance has changed from
year to year. The bar chart shows, in percentage terms, how much an
investment made on the first day of each financial year would have
grown or decreased by the end of the financial year.
5.8%
0
1.5%
4.9%
-10
-20
2011
2012
2013
2014
Annual Compound Returns (%)
The table shows the annual compound returns for each series of the
Fund and for each of the periods indicated ended on December 31, 2014,
compared with the following benchmarks:
FTSE TMX Canada 2018 Maturity Corporate Bond Index
The broad-based index is the FTSE TMX Canada Universe Bond Index.
RBC 2018 ETF1
Benchmark1
Broad-based index
% of Net Asset Value
Wells Fargo Canada Corp. 2.78% Nov 15, 2018
Bank of Montreal 3.21% Sep 13, 2018
Royal Bank of Canada 3.77% Mar 30, 2018
Royal Bank of Canada 2.89% Oct 11, 2018
Bank of Montreal, FRN 6.17% Mar 28, 2023
Bank of Nova Scotia 2.24% Mar 22, 2018
Hydro One Inc. 2.78% Oct 09, 2018
National Bank of Canada 2.79% Aug 09, 2018
Bank of Nova Scotia 2.75% Aug 13, 2018
The Toronto-Dominion Bank, FRN 5.83% Jul 09, 2023
Great-West Lifeco Finance Delaware LP II, FRN 7.13% Jun 26, 2068
American Express Canada Credit Corp. 2.31% Mar 29, 2018
Greater Toronto Airports Authority 5.26% Apr 17, 2018
Bell Canada 4.4% Mar 16, 2018
Ford Credit Canada Ltd. 3.7% Aug 02, 2018
Sobeys Inc. 3.52% Aug 08, 2018
bcIMC Realty Corp. 2.79% Aug 02, 2018
Toyota Credit Canada Inc. 2.8% Nov 21, 2018
Toyota Credit Canada Inc. 2.75% Jul 18, 2018
Canadian Imperial Bank of Commerce, FRN 6% Jun 06, 2023
GE Capital Canada Funding Co. 4.4% Feb 08, 2018
Manulife Financial Corp. 5.51% Jun 26, 2018
Bell Canada 3.5% Sep 10, 2018
Dollarama Inc. 3.10% Nov 05, 2018
Encana Corp. 5.8% Jan 18, 2018
Top 25 Holdings
RBC 2018 ETF1 (%)
1.7%
68.0
9.4
6.4
6.2
6.1
2.8
1.1
Top 25 Holdings
20
10
% of Net Asset Value
PastPastPastPastSince
Year
3 Years
5 Years
10 Years
Inception
4.94.1 – –4.2
5.24.4 – –4.6
8.83.7 – –4.0
The Benchmark and broad-based index returns do not include any costs of investing. See
Management Discussion of Fund Performance for a discussion of performance relative to the
Benchmark and broad-based indexes.
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
1 Inception date September 15, 2011.
INDEX DESCRIPTIONS
FTSE TMX Canada 2018 Maturity Corporate Bond Index* This index is designed to measure
the performance of a held-to-maturity portfolio consisting primarily of Canadian-dollar-denominated
investment-grade corporate bonds maturing in 2018.
FTSE TMX Canada Universe Bond Index* This index is designed as a broad measure of the
Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year.
* FTSE TMX fixed-income benchmarks were known as the DEX benchmarks before a name change.
25
5.6
5.2
5.1
4.8
4.5
4.4
4.2
4.2
4.2
3.5
3.2
3.2
3.0
2.9
2.8
2.8
2.8
2.8
2.8
2.7
2.4
2.3
2.3
2.2
2.2
86.1
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC TARGET 2019
CORPORATE BOND INDEX ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
26
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2019 CORPORATE BOND INDEX ETF
The Canadian bond market rallied in 2014 along with most developed
markets, as many investors sought safety in less-risky investments,
particularly in the second half of the year. Prices for both Canadian
corporate and government bonds rose over the year as yields
declined, with maturities longer than 10 years recording the largest
gains. Bonds in the Industrials sector and infrastructure bonds with
longer maturities performed best.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide income for a limited period of time ending
on its termination date by replicating, to the extent possible, the
investment results that correspond generally to the performance,
before fees and expenses, of the FTSE TMX Canada 2019 Maturity
Corporate Bond Index*. The FTSE TMX Canada 2019 Maturity
Corporate Bond Index is designed to represent the performance
of a held-to-maturity portfolio consisting of, primarily, Canadian
dollar-denominated investment grade corporate bonds with effective
maturities in 2019.
Corporate bonds with five years left until maturity posted gains in 2014,
outperforming government bonds in a year where many investors
sought more conservative investments amid geopolitical risks. Yields
on longer-dated maturities fell more than those on shorter-term debt
amid speculation that the U.S. Federal Reserve (the “Fed”) would hike
short-term benchmark interest rates.
The Fund intends to invest at least 90% of its assets in and hold the
securities that comprise the FTSE TMX Canada 2019 Maturity Corporate
Bond Index and/or securities that have economic characteristics that
are substantially similar to those that comprise the index.
Recent Developments
The Canadian economy ended the year strongly and, as of early 2015,
the weaker Canadian dollar and lower oil prices have not yet had any
noticeable impact on growth and inflation. While inflation is running a
little higher than expected, the Bank of Canada views the causes as
temporary. Short-term rates could rise as the market expects the Fed
to raise rates in 2015.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
In the long run, the portfolio manager is cautious but somewhat
optimistic as company fundamentals, while a little weaker, are still
supportive of non-government bonds. As well, solid economic growth
in North America and low default rates tend to be beneficial for nongovernment bonds. The impact of falling commodity prices, a lower
Canadian dollar, weaker economic growth in some regions and
geopolitical unrest could create headwinds for corporate bonds.
Results of Operations
The Fund’s net asset value rose to $61 million as of December 31, 2014,
from $22 million at the end of 2013. The change was due mostly to
net inflows.
Over the past year, the Fund’s units gained 6.5%, which
underperformed the 6.8% rise in the benchmark. The broad-based
index rose 8.8%. The Fund’s return is after the deduction of fees and
expenses, while benchmark and broad-based index returns do not
include any costs of investing. See the Financial Highlights section for
the management expense ratios and the Past Performance section
for the returns of other series, if any, which may vary because of
differences in management fees and expenses.
Effective January 15, 2014, the management fee has been reduced to
0.25% from 0.30%.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
* “FTSE TMX Canada 2019 Maturity Corporate Bond Index” is a trademark of FTSE TMX Debt
Capital Markets Inc. (“FTDCM”). “TMX” is a trademark of TSX Inc. (“TSX”) and is used under
licence. “FTSE” is a trademark of the London Stock Exchange Group companies (the “Exchange”)
and is used by FTDCM under licence. The “FTSE TMX Canada 2019 Maturity Corporate Bond
Index” trademark has been licensed for use for certain purposes to RBC GAM. The RBC ETFs are
not sponsored, endorsed, sold or promoted by FTDCM, FTSE International Limited, the Exchange
or TSX (together, the “Licensor Parties”). The Licensor Parties make no warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from
the use of the index and/or the figure at which the said index stands at any particular time
on any particular day or otherwise. The index is compiled and calculated by FTDCM and all
copyright in the index values and constituent lists vests in FTDCM. The Licensor Parties shall not
be liable (whether in negligence or otherwise) to any person for any error in the index and the
Licensor Parties shall not be under any obligation to advise any person of any error therein.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
27
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2019 CORPORATE BOND INDEX ETF
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) purchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
28
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2019 CORPORATE BOND INDEX ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 2019 ETF
Dec. 31, 2014
19.77
0.87
(0.06)
–
0.27
1.08
(0.76)
Dec. 31, 2013
20.28 0.89 (0.07)
(0.01)
(0.61)
0.20 (0.80)
Dec. 31, 2012
19.96 0.92(0.07)0.07 0.16 1.08(0.87)
Dec. 31, 2011320.00†0.29(0.02) – 0.01 0.28(0.16)
–
(0.01) –
(0.77)
20.27
–
–
–
(0.80)
19.72
– – –(0.87)20.28
– –(0.07)(0.23)19.96
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From September 15, 2011.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
Trading
Expense Ratio (%) 2
RBC 2019 ETF
Dec. 31, 2014
60 811 3 000 0.28 0.28 Dec. 31, 2013
21 747 1 100 0.33 0.33 Dec. 31, 2012
14 352
706
0.33
0.33
Dec. 31, 20114
6 001 3000.350.41
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
20.04 20.27 20.28
–
8.02 19.77 19.85
–
59.92
20.34
20.36
–2.2620.0019.98
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From September 15, 2011.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC 2019 ETF
up to 0.25%
29
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2019 CORPORATE BOND INDEX ETF
PAST PERFORMANCE
SUMMARY OF INVESTMENT PORTFOLIO
The performance information shown assumes that all distributions
made by the Fund in the periods shown were reinvested in additional
units of the Fund and would be lower if distributions were not
reinvested. The performance information does not take into account
sales, redemption, distribution, optional charges or income taxes
payable that would have reduced returns or performance. Past
performance does not necessarily indicate how the Fund may
perform in the future. A fund with more than 10 years of performance
history is only permitted to disclose the past 10 years.
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Other Net Assets
Year-by-Year Returns (%)
The bar chart indicates the Fund’s performance for each of the years
shown, and illustrates how the Fund’s performance has changed from
year to year. The bar chart shows, in percentage terms, how much an
investment made on the first day of each financial year would have
grown or decreased by the end of the financial year.
6.1%
0
1.1%
6.5%
-10
-20
2011
2012
2013
2014
Annual Compound Returns (%)
The table shows the annual compound returns for each series of the
Fund and for each of the periods indicated ended on December 31, 2014,
compared with the following benchmarks:
FTSE TMX Canada 2019 Maturity Corporate Bond Index
The broad-based index is the FTSE TMX Canada Universe Bond Index.
RBC 2019 ETF1
Benchmark1
Broad-based index
% of Net Asset Value
Bank of Nova Scotia 3.04% Oct 18, 2024
Wells Fargo Canada Corp. 2.94% Jul 25, 2019
National Bank of Canada 2.40% Oct 28, 2019
GE Capital Canada Funding Co. 5.68% Sep 10, 2019
Shaw Communications Inc. 5.65% Oct 01, 2019
Greater Toronto Airports Authority 5.96% Nov 20, 2019
Royal Bank of Canada 2.98% May 07, 2019
Brookfield Asset Management Inc. 3.95% Apr 09, 2019
Manulife Financial Corp. 7.77% Apr 08, 2019
Royal Bank of Canada 2.99% Dec 06, 2024
Enbridge Inc. 4.77% Sep 02, 2019
IGM Financial Inc. 7.35% Apr 08, 2019
NAV Canada 5.30% Apr 17, 2019
CU Inc. 6.8% Aug 13, 2019
TELUS Corp. 5.05% Dec 04, 2019
Sun Life Financial Inc. 5.7% Jul 02, 2019
Enbridge Pipelines Inc. 4.49% Nov 12, 2019
Rogers Communications Inc. 5.38% Nov 04, 2019
Cameco Corp. 5.67% Sep 02, 2019
Toronto Hydro Corp. 4.49% Nov 12, 2019
Intact Financial Corp. 5.41% Sep 03, 2019
GE Capital Canada Funding Co. 3.55% Jun 11, 2019
Alimentation Couche Tard Inc. 3.32% Nov 01, 2019
Fairfax Financial Holdings Ltd. 7.5% Aug 19, 2019
SNC-Lavalin Group Inc. 6.19% Jul 03, 2019
Top 25 Holdings
RBC 2019 ETF1 (%)
2.5%
55.9
11.5
10.7
10.7
10.2
1.0
Top 25 Holdings
20
10
% of Net Asset Value
PastPastPastPastSince
Year
3 Years
5 Years
10 Years
Inception
6.54.5 – –4.9
6.84.9 – –5.3
8.83.7 – –4.0
The Benchmark and broad-based index returns do not include any costs of investing. See
Management Discussion of Fund Performance for a discussion of performance relative to the
Benchmark and broad-based indexes.
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
1 Inception date September 15, 2011.
INDEX DESCRIPTIONS
FTSE TMX Canada 2019 Maturity Corporate Bond Index* This index is designed to measure
the performance of a held-to-maturity portfolio consisting primarily of Canadian-dollar-denominated
investment-grade corporate bonds maturing in 2019.
FTSE TMX Canada Universe Bond Index* This index is designed as a broad measure of the
Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year.
* FTSE TMX fixed-income benchmarks were known as the DEX benchmarks before a name change.
30
8.5
8.4
7.7
6.2
5.5
5.5
5.1
4.9
4.4
3.9
3.4
3.4
3.1
2.8
2.6
2.6
2.6
2.2
2.2
2.1
2.1
2.0
1.9
1.8
1.3
96.2
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC TARGET 2020
CORPORATE BOND INDEX ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
31
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2020 CORPORATE BOND INDEX ETF
The Canadian bond market rallied in 2014 along with most developed
markets, as many investors sought safety in less-risky investments,
particularly in the second half of the year. Prices for both Canadian
corporate and government bonds rose over the year as yields declined,
with maturities longer than 10 years recording the largest gains. Bonds
in the Industrials sector and infrastructure bonds with longer maturities
performed best.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide income for a limited period of time ending
on its termination date by replicating, to the extent possible, the
investment results that correspond generally to the performance,
before fees and expenses, of the FTSE TMX Canada 2020 Maturity
Corporate Bond Index*. The FTSE TMX Canada 2020 Maturity
Corporate Bond Index is designed to represent the performance
of a held-to-maturity portfolio consisting of, primarily, Canadian
dollar-denominated investment grade corporate bonds with effective
maturities in 2020.
Corporate bonds with six years left until maturity posted gains in 2014,
outperforming government bonds in a year where many investors
sought more conservative investments amid geopolitical risks. Yields
on longer-dated maturities fell more than those on shorter-term debt
amid speculation that the U.S. Federal Reserve (the “Fed”) would hike
short-term benchmark interest rates.
The Fund intends to invest at least 90% of its assets in and hold the
securities that comprise the FTSE TMX Canada 2020 Maturity Corporate
Bond Index and/or securities that have economic characteristics that
are substantially similar to those that comprise the index.
Recent Developments
The Canadian economy ended the year strongly and, as of early 2015,
the weaker Canadian dollar and lower oil prices have not yet had any
noticeable impact on growth and inflation. While inflation is running a
little higher than expected, the Bank of Canada views the causes as
temporary. Short-term rates could rise as the market expects the Fed
to raise rates in 2015.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
In the long run, the portfolio manager is cautious but somewhat
optimistic as company fundamentals, while a little weaker, are still
supportive of non-government bonds. As well, solid economic growth
in North America and low default rates tend to be beneficial for nongovernment bonds. The impact of falling commodity prices, a lower
Canadian dollar, weaker economic growth in some regions and
geopolitical unrest could create headwinds for corporate bonds.
Results of Operations
The Fund’s net asset value rose to $14 million as of December 31, 2014,
from $10 million at the end of 2013. Most of the change was due to
net inflows.
Over the past year, the Fund’s units gained 7.4%, which
underperformed the 7.7% rise in the benchmark. The broad-based
index rose 8.8%. The Fund’s return is after the deduction of fees and
expenses, while benchmark and broad-based index returns do not
include any costs of investing. See the Financial Highlights section for
the management expense ratios and the Past Performance section
for the returns of other series, if any, which may vary because of
differences in management fees and expenses.
Effective January 15, 2014, the management fee has been reduced to
0.25% from 0.30%.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
* “FTSE TMX Canada 2020 Maturity Corporate Bond Index” is a trademark of FTSE TMX Debt
Capital Markets Inc. (“FTDCM”). “TMX” is a trademark of TSX Inc. (“TSX”) and is used under
licence. “FTSE” is a trademark of the London Stock Exchange Group companies (the “Exchange”)
and is used by FTDCM under licence. The “FTSE TMX Canada 2020 Maturity Corporate Bond
Index” trademark has been licensed for use for certain purposes to RBC GAM. The RBC ETFs are
not sponsored, endorsed, sold or promoted by FTDCM, FTSE International Limited, the Exchange
or TSX (together, the “Licensor Parties”). The Licensor Parties make no warranty or epresentation
whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the
index and/or the figure at which the said index stands at any particular time on any particular
day or otherwise. The index is compiled and calculated by FTDCM and all copyright in the index
values and constituent lists vests in FTDCM. The Licensor Parties shall not be liable (whether in
negligence or otherwise) to any person for any error in the index and the Licensor Parties shall
not be under any obligation to advise any person of any error therein.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
32
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2020 CORPORATE BOND INDEX ETF
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) purchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
33
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2020 CORPORATE BOND INDEX ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 2020 ETF
Dec. 31, 2014
19.81 0.84 (0.06)
(0.03)
0.62 1.37 (0.76)
Dec. 31, 2013
20.55 0.88 (0.07)
(0.10)
(0.69)
0.02 (0.80)
Dec. 31, 2012
20.07 0.88(0.07)0.08 0.42 1.31(0.83)
Dec. 31, 2011320.00†
0.28(0.02) – 0.13 0.39(0.16)
–
–
–
–
–
–
(0.76)
20.49
–
–
(0.80)
19.77
– –(0.83)20.55
–(0.06)(0.22)20.07
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From September 15, 2011.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
Trading
Expense Ratio (%) 2
RBC 2020 ETF
Dec. 31, 2014
14 343 700 0.29 0.29 Dec. 31, 2013
9 904 500 0.34 0.34 Dec. 31, 2012
10 295
500
0.34
0.34
Dec. 31, 20114
6 036 3000.350.41
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
31.67 20.49 20.51
–
43.34 19.81 19.85
–
29.30
20.59
20.63
–0.6820.1220.00
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From September 15, 2011.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC 2020 ETF
up to 0.25%
34
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2020 CORPORATE BOND INDEX ETF
PAST PERFORMANCE
SUMMARY OF INVESTMENT PORTFOLIO
The performance information shown assumes that all distributions
made by the Fund in the periods shown were reinvested in additional
units of the Fund and would be lower if distributions were not
reinvested. The performance information does not take into account
sales, redemption, distribution, optional charges or income taxes
payable that would have reduced returns or performance. Past
performance does not necessarily indicate how the Fund may perform
in the future. A fund with more than 10 years of performance history is
only permitted to disclose the past 10 years.
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Real Estate
Provincial Bonds
Other Net Assets
Year-by-Year Returns (%)
The bar chart indicates the Fund’s performance for each of the years
shown, and illustrates how the Fund’s performance has changed from
year to year. The bar chart shows, in percentage terms, how much an
investment made on the first day of each financial year would have
grown or decreased by the end of the financial year.
6.6%
7.4%
0.1%
0
-10
-20
2011
2012
2013
2014
Annual Compound Returns (%)
The table shows the annual compound returns for each series of the
Fund and for each of the periods indicated ended on December 31, 2014,
compared with the following benchmarks:
FTSE TMX Canada 2020 Maturity Corporate Bond Index
The broad-based index is the FTSE TMX Canada Universe Bond Index.
RBC 2020 ETF1
Benchmark1
Broad-based index
% of Net Asset Value
The Toronto-Dominion Bank 2.56% Jun 24, 2020
Bank of Montreal 2.84% Jun 04, 2020
HSBC Bank Canada 2.94% Jan 14, 2020
Province of Quebec 4.5% Dec 01, 2020
Capital Desjardins Inc. 5.19% May 05, 2020
Hydro Quebec 11% Aug 15, 2020
Great-West Lifeco Inc. 4.65% Aug 13, 2020
Enbridge Inc. 4.53% Mar 09, 2020
Thomson Reuters Corp. 4.35% Sep 30, 2020
Rogers Communications Inc. 4.7% Sep 29, 2020
Enbridge Pipelines Inc. 4.45% Apr 06, 2020
Teranet Holdings LP 4.81% Dec 16, 2020
407 International Inc. 4.99% Jun 16, 2020
TELUS Corp. 5.05% Jul 23, 2020
Hydro One Inc. 4.4% Jun 01, 2020
OMERS Realty Corp. 3.20% Jul 24, 2020
Shaw Communications Inc. 5.5% Dec 07, 2020
Genworth MI Canada Inc. 5.68% Jun 15, 2020
Brookfield Renewable Power Inc. 5.14% Oct 13, 2020
CDP Financial Inc. 4.6% Jul 15, 2020
Loblaw Cos Ltd. 5.22% Jun 18, 2020
Fairfax Financial Holdings Ltd. 7.25% Jun 22, 2020
Westcoast Energy Inc. 4.57% Jul 02, 2020
Cash and Cash Equivalents Total
20
3.1%
44.4
13.8
10.9
5.6
4.6
2.6
16.5
1.6
Top 25 Holdings*
RBC 2020 ETF1 (%)
10
% of Net Asset Value
PastPastPastPastSince
Year
3 Years
5 Years
10 Years
Inception
7.44.6 – –5.2
7.75.0 – –5.5
8.83.7 – –4.0
The Benchmark and broad-based index returns do not include any costs of investing. See
Management Discussion of Fund Performance for a discussion of performance relative to the
Benchmark and broad-based indexes.
* The Fund holds fewer than 25 holdings.
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
1 Inception date September 15, 2011.
INDEX DESCRIPTIONS
FTSE TMX Canada 2020 Maturity Corporate Bond Index* This index is designed to measure
the performance of a held-to-maturity portfolio consisting primarily of Canadian-dollar-denominated
investment-grade corporate bonds maturing in 2020.
FTSE TMX Canada Universe Bond Index* This index is designed as a broad measure of the
Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year.
* FTSE TMX fixed-income benchmarks were known as the DEX benchmarks before a name change.
35
9.5
9.4
9.0
9.0
8.4
5.6
4.6
4.5
4.5
4.1
3.2
3.0
2.9
2.8
2.8
2.6
2.4
2.1
2.1
2.0
1.6
1.3
1.1
0.7
99.2
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC TARGET 2021
CORPORATE BOND INDEX ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
36
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2021 CORPORATE BOND INDEX ETF
The Canadian bond market rallied in 2014 along with most developed
markets, as many investors sought safety in less-risky investments,
particularly in the second half of the year. Prices for both Canadian
corporate and government bonds rose over the year as yields
declined, with maturities longer than 10 years recording the largest
gains. Bonds in the Industrials sector and infrastructure bonds with
longer maturities performed best.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide income for a limited period of time ending
on its termination date by replicating, to the extent possible, the
investment results that correspond generally to the performance,
before fees and expenses, of the FTSE TMX Canada 2021 Maturity
Corporate Bond Index*. The FTSE TMX Canada 2021 Maturity
Corporate Bond Index is designed to represent the performance
of a held-to-maturity portfolio consisting of, primarily, Canadian
dollar-denominated investment grade corporate bonds with effective
maturities in 2021.
Corporate bonds with seven years left until maturity performed strongly
in 2014, as yields on longer-dated maturities fell more than shorter-term
debt on speculation that the U.S. Federal Reserve (the “Fed”) would
hike short-term rates. Government bond yields fell as investors sought
more conservative investments amid geopolitical risks.
The Fund intends to invest at least 90% of its assets in and hold the
securities that comprise the FTSE TMX Canada 2021 Maturity Corporate
Bond Index and/or securities that have economic characteristics that
are substantially similar to those that comprise the index.
Recent Developments
The Canadian economy ended the year strongly and, as of early 2015,
the weaker Canadian dollar and lower oil prices have not yet had any
noticeable impact on growth and inflation. While inflation is running a
little higher than expected, the Bank of Canada views the causes as
temporary. Short-term rates could rise as the market expects the Fed
to raise rates in 2015.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
In the long run, the portfolio manager is cautious but somewhat
optimistic as company fundamentals, while a little weaker, are still
supportive of non-government bonds. As well, solid economic growth
in North America and low default rates tend to be beneficial for nongovernment bonds. The impact of falling commodity prices, a lower
Canadian dollar, weaker economic growth in some regions and
geopolitical unrest could create headwinds for corporate bonds.
Results of Operations
The Fund’s net asset value rose to $9 million as of December 31, 2014,
from $4 million at the end of 2013. Most of the change was due to
net inflows.
Over the past year, the Fund’s units gained 8.7%, which
underperformed the 9.0% rise in the benchmark. The broad-based
index rose 8.8%. The Fund’s return is after the deduction of fees and
expenses, while benchmark and broad-based index returns do not
include any costs of investing. See the Financial Highlights section
for the management expense ratios and the Past Performance
section for the returns of other series, if any, which may vary
because of differences in management fees and expenses.
Effective January 15, 2014, the management fee has been reduced to
0.25% from 0.30%.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
* “FTSE TMX Canada 2021 Maturity Corporate Bond Index” is a trademark of FTSE TMX Debt
Capital Markets Inc. (“FTDCM”). “TMX” is a trademark of TSX Inc. (“TSX”) and is used under
licence. “FTSE” is a trademark of the London Stock Exchange Group companies (the “Exchange”)
and is used by FTDCM under licence. The “FTSE TMX Canada 2021 Maturity Corporate Bond
Index” trademark has been licensed for use for certain purposes to RBC GAM. The RBC ETFs are
not sponsored, endorsed, sold or promoted by FTDCM, FTSE International Limited, the Exchange
or TSX (together, the “Licensor Parties”). The Licensor Parties make no warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from
the use of the index and/or the figure at which the said index stands at any particular time
on any particular day or otherwise. The index is compiled and calculated by FTDCM and all
copyright in the index values and constituent lists vests in FTDCM. The Licensor Parties shall not
be liable (whether in negligence or otherwise) to any person for any error in the index and the
Licensor Parties shall not be under any obligation to advise any person of any error therein.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
37
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2021 CORPORATE BOND INDEX ETF
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
(c) purchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
38
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2021 CORPORATE BOND INDEX ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC 2021 ETF
Dec. 31, 2014
19.17 0.78 (0.06)
0.03 0.63 1.38 (0.68)
Dec. 31, 2013
19.93 0.81 (0.07)
(0.07)
(0.77)
(0.10)
(0.77)
Dec. 31, 2012320.00†0.20(0.02) – 0.03 0.21(0.17)
–
–
–
–
(0.02)
(0.70)
20.13
–
–
(0.77)
19.12
– –(0.17)19.93
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From October 10, 2012.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
Trading
Expense Ratio (%) 2
RBC 2021 ETF
Dec. 31, 2014
9 060 450 0.29 0.29 Dec. 31, 2013
3 834 200 0.34 0.34 Dec. 31, 201243 995 200 0.34 0.34
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
63.45 20.13 20.51
–
10.97 19.17 19.26
– –19.9820.05
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From October 10, 2012.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC 2021 ETF
up to 0.25%
39
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC TARGET 2021 CORPORATE BOND INDEX ETF
PAST PERFORMANCE
SUMMARY OF INVESTMENT PORTFOLIO
The performance information shown assumes that all distributions
made by the Fund in the periods shown were reinvested in additional
units of the Fund and would be lower if distributions were not
reinvested. The performance information does not take into account
sales, redemption, distribution, optional charges or income taxes
payable that would have reduced returns or performance. Past
performance does not necessarily indicate how the Fund may perform
in the future. A fund with more than 10 years of performance history is
only permitted to disclose the past 10 years.
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Real Estate
Other Net Assets
Year-by-Year Returns (%)
The bar chart indicates the Fund’s performance for each of the years
shown, and illustrates how the Fund’s performance has changed from
year to year. The bar chart shows, in percentage terms, how much an
investment made on the first day of each financial year would have
grown or decreased by the end of the financial year.
8.7%
1.1%
-0.5%
-10
-20
2012
2013
2014
Annual Compound Returns (%)
The table shows the annual compound returns for each series of the
Fund and for each of the periods indicated ended on December 31, 2014,
compared with the following benchmarks:
FTSE TMX Canada 2021 Maturity Corporate Bond Index
The broad-based index is the FTSE TMX Canada Universe Bond Index.
% of Net Asset Value
HSBC Bank Canada 2.91% Sep 29, 2021
Thomson Reuters Corp. 3.31% Nov 12, 2021
Bank of Montreal 3.4% Apr 23, 2021
Rogers Communications Inc. 5.34% Mar 22, 2021
TransCanada PipeLines Ltd. 3.65% Nov 15, 2021
Capital Desjardins Inc. 4.95% Dec 15, 2026
407 International Inc. 4.3% May 26, 2021
Enbridge Inc. 3.16% Mar 11, 2021
Bank of Nova Scotia 2.87% Jun 04, 2021
Bank of Nova Scotia 3.27% Jan 11, 2021
Wells Fargo Canada Corp. 3.04% Jan 29, 2021
Brookfield Asset Management Inc. 5.3% Mar 01, 2021
Royal Bank of Canada 2.86% Mar 04, 2021
Bell Canada 4.95% May 19, 2021
Sun Life Financial Inc. 4.57% Aug 23, 2021
Toronto Hydro Corp. 3.54% Nov 18, 2021
OMERS Realty Corp. 2.97% Apr 05, 2021
Fairfax Financial Holdings Ltd. 6.4% May 25, 2021
Intact Financial Corp. 4.7% Aug 18, 2021
Cash and Cash Equivalents Total
RBC 2021 ETF1 (%)
0
51.5
18.1
11.7
9.6
4.4
3.9
0.8
Top 25 Holdings*
20
10
% of Net Asset Value
PastPastPastPastSince
Year
3 Years
5 Years
10 Years
Inception
* The Fund holds fewer than 25 holdings.
RBC 2021 ETF1
8.7–––
4.1
Benchmark1
9.0–––
4.4
Broad-based index 8.8–––
3.6
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
The Benchmark and broad-based index returns do not include any costs of investing. See
Management Discussion of Fund Performance for a discussion of performance relative to the
Benchmark and broad-based indexes.
1 Inception date October 10, 2012.
INDEX DESCRIPTIONS
FTSE TMX Canada 2021 Maturity Corporate Bond Index* This index is designed to measure
the performance of a held-to-maturity portfolio consisting primarily of Canadian-dollar-denominated
investment-grade corporate bonds maturing in 2021.
FTSE TMX Canada Universe Bond Index* This index is designed as a broad measure of the
Canadian investment-grade fixed-income market and includes bonds with maturities of at least one year.
* FTSE TMX fixed-income benchmarks were known as the DEX benchmarks before a name change.
40
9.6
7.0
6.9
6.8
6.7
6.6
5.6
5.1
5.0
4.5
4.4
4.4
4.4
4.3
4.2
4.0
3.9
3.3
2.5
0.3
99.5
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT CANADIAN
DIVIDEND LEADERS ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
41
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure to the
performance of a diversified portfolio of high-quality Canadian
dividend-paying equity securities that will provide regular income
and that have the potential for long-term capital growth.
Portfolio securities for the RBC Quant Canadian Dividend Leaders
ETF will be selected using a rules-based, multifactor investment
approach that considers a company’s balance sheet strength, the
stability and sustainability of its dividend payout and its ability to
grow dividends in the future. Securities are weighted in accordance
with a modified capitalization weighting methodology designed
to reduce the dispersion of weights between larger and smaller
capitalization companies. The portfolio holdings will be reconstituted
and rebalanced initially on a quarterly basis. The frequency of the
reconstitution and rebalancing may change without notice.
Brokerage
The Fund has established standard brokerage agreements at market
rates with related-party dealers. These related-party commissions
were $1,000 or 14% of the total transaction costs paid for this Fund.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
Results of Operations
The Fund was launched on January 15, 2014, and its net asset value
was $47 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
42
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant Canadian ETF
Dec. 31, 20143
20.00† 0.90 (0.10)
0.51 (2.20)
(0.89)
–
(0.52) (0.31)
(0.04) (0.87)
20.44
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From January 15, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
RBC Quant Canadian ETF
Dec. 31, 20144
47 010 2 300 Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
0.44 0.44 Trading
Expense Ratio (%) 2
–
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
44.85 20.44 20.39
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From January 15, 2014.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC Quant Canadian ETF
up to 0.39%
43
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
PAST PERFORMANCE
Top 25 Holdings
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
January 2014.
Royal Bank of Canada
The Toronto-Dominion Bank
Enbridge Inc.
Potash Corp. of Saskatchewan Inc.
Canadian Imperial Bank of Commerce
TELUS Corp.
Rogers Communications Inc.
Shaw Communications Inc.
Inter Pipeline Ltd.
Power Corp. of Canada
Intact Financial Corp.
Great-West Lifeco Inc.
Power Financial Corp.
RioCan Real Estate Investment Trust
CI Financial Corp.
ARC Resources Ltd.
Vermilion Energy Inc.
Canadian Utilities Ltd.
Brookfield Property Partners LP
AltaGas Ltd.
Keyera Corp.
Peyto Exploration & Development Corp.
IGM Financial Inc.
Brookfield Renewable Power Inc.
Canadian Real Estate Investment Trust
Top 25 Holdings
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Canadian Equities
Financial
Energy
Materials
Telecommunications
Utilities
Industrial
Consumer Discretionary
Consumer Staples
Other Net Assets
% of Net Asset Value
% of Net Asset Value
41.5
31.2
8.2
6.3
5.1
3.2
2.7
1.3
0.5
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
44
5.1
4.0
3.5
3.5
3.4
3.0
2.5
2.5
2.5
2.4
2.3
2.3
2.3
2.2
2.2
2.1
2.1
2.0
2.0
2.0
2.0
1.9
1.9
1.8
1.8
63.3
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT U.S. DIVIDEND
LEADERS ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
45
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT U.S. DIVIDEND LEADERS ETF
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure to the
performance of a diversified portfolio of high-quality U.S. dividendpaying equity securities that will provide regular income and that
have the potential for long-term capital growth.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
Portfolio securities for the RBC Quant U.S. Dividend Leaders ETF will
be selected using a rules-based, multifactor investment approach
that considers a company’s balance sheet strength, the stability
and sustainability of its dividend payout and its ability to grow
dividends in the future. Securities are weighted in accordance
with a modified capitalization weighting methodology designed
to reduce the dispersion of weights between larger and smaller
capitalization companies. The portfolio holdings will be reconstituted
and rebalanced initially on a quarterly basis. The frequency of the
reconstitution and rebalancing may change without notice.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
Results of Operations
The Fund was launched on January 15, 2014, and its net asset value
was $132 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
46
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT U.S. DIVIDEND LEADERS ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant U.S. ETF
Dec. 31, 20143
20.00† 0.88 (0.23)
0.47 3.91 5.03 –
(0.37) (0.27)
(0.01) (0.65)
23.79
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From January 15, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
RBC Quant U.S. ETF
Dec. 31, 20144
132 021 Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
5 550 MER Before
Absorption (%) 1
0.44 0.44 Trading
Expense Ratio (%) 2
0.01 Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
47.29 23.79 23.95
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From January 15, 2014.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC Quant U.S. ETF
up to 0.39%
47
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT U.S. DIVIDEND LEADERS ETF
PAST PERFORMANCE
Top 25 Holdings
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
January 2014.
Intel Corp.
Verizon Communications Inc.
Cisco Systems Inc.
Merck & Co Inc.
Philip Morris International Inc.
Abbvie Inc.
Altria Group Inc.
McDonalds Corp.
ConocoPhillips
Eli Lilly & Co.
Simon Property Group Inc.
Lockheed Martin Corp.
Dominion Resources Inc./VA
Kimberly-Clark Corp.
Kraft Foods Group Inc.
Emerson Electric Co.
LyondellBasell Industries NV
Public Storage
Sysco Corp.
Seagate Technology PLC
Ventas Inc.
Prologis Inc.
Public Service Enterprise Group Inc.
Spectra Energy Corp.
Analog Devices Inc.
Top 25 Holdings
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
United States Equities
Financial
Utilities
Consumer Staples
Information Technology
Consumer Discretionary
Health Care
Energy
Materials
Industrial
Telecommunications
Other Net Assets
% of Net Asset Value
% of Net Asset Value
31.7
11.1
11.0
9.5
9.0
7.7
5.6
5.6
5.5
3.0
0.3
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
48
2.8
2.6
2.6
2.5
2.3
2.3
2.2
2.1
2.1
2.0
1.9
1.8
1.8
1.7
1.7
1.6
1.5
1.4
1.4
1.4
1.4
1.4
1.4
1.3
1.3
46.5
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT U.S. DIVIDEND LEADERS
(CAD HEDGED) ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
49
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT U.S. DIVIDEND LEADERS
(CAD HEDGED) ETF
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure, either directly
or indirectly through investment in other mutual funds managed
by RBC GAM or an affiliate, to the performance of a diversified
portfolio of high-quality U.S. dividend-paying equity securities that
will provide regular income and that have the potential for long-term
capital growth, while seeking to minimize the exposure to currency
fluctuations between the U.S. and Canadian dollars.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
The Fund intends to invest substantially all of its assets in units of
the RBC Quant U.S. Dividend Leaders ETF (the “underlying fund”) but
may also invest directly in a portfolio of U.S. dividend-paying equity
securities. Portfolio securities for the underlying fund (and for the Fund,
to the extent it invests directly in equity securities) will be selected
using a rules-based, multifactor investment approach that considers a
company’s balance sheet strength, the stability and sustainability of its
dividend payout and its ability to grow dividends in the future. Securities
are weighted in accordance with a modified capitalization weighting
methodology designed to reduce the dispersion of weights between
larger and smaller capitalization companies. The portfolio holdings will
be reconstituted and rebalanced on a quarterly basis. The frequency of
the reconstitution and rebalancing may change without notice.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
The Fund uses derivatives to hedge against fluctuations in the U.S.
dollar to minimize exposure to changes of the U.S. dollar relative to the
Canadian dollar.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
Results of Operations
The Fund was launched on October 22, 2014, and its net asset value
was $11 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
50
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT U.S. DIVIDEND LEADERS
(CAD HEDGED) ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant U.S. (CAD Hedged) ETF
Dec. 31, 20143 20.00† 0.14 –
(0.09)
0.71 0.76 –
(0.08) (0.03) (0.01) (0.12)
21.47
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From October 22, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
RBC Quant U.S. (CAD Hedged) ETF
Dec. 31, 20144
10 735 Number of Units
Outstanding (000s)
500 Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
0.44 0.44 Trading
Expense Ratio (%) 2
–
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
5.69 21.47 21.73
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From October 22, 2014.
Management Fees
RBC Global Asset Management Inc. is the manager and portfolio
advisor of the ETF. A management fee is not charged directly to
the ETF as this ETF invests in the units of other RBC ETFs. It pays
management fees indirectly because the ETFs in which it invests pay
management fees.
51
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT U.S. DIVIDEND LEADERS
(CAD HEDGED) ETF
PAST PERFORMANCE
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
October 2014.
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
% of Net Asset Value
United States Equities
Financial
Utilities
Consumer Staples
Information Technology
Consumer Discretionary
Health Care
Energy
Materials
Industrial
Telecommunications
Other Net Assets
31.7
11.1
11.0
9.5
9.0
7.7
5.6
5.6
5.5
3.0
0.3
Top 25 Holdings*
RBC Quant U.S. Dividend Leaders ETF
Forward Contracts
Cash and Cash Equivalents
Total
% of Net Asset Value
100.3
(0.7)
0.4
100.0
* The Fund holds fewer than 25 holdings.
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
52
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT EUROPEAN DIVIDEND
LEADERS ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
53
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure to the
performance of a diversified portfolio of high-quality European
dividend-paying equity securities that will provide regular income and
that have the potential for long-term capital growth.
Portfolio securities for the Fund will be selected using a rules-based,
multi-factor investment approach that considers a company’s balance
sheet strength, the stability and sustainability of its dividend payout
and its ability to grow dividends in the future. Securities are weighted
in accordance with a modified capitalization weighting methodology
designed to reduce the dispersion of weights between larger and
smaller capitalization companies. The portfolio holdings will be
reconstituted and rebalanced on a quarterly basis. The frequency of
the reconstitution and rebalancing may change without notice.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
Results of Operations
The Fund was launched on October 22, 2014, and its net asset value
was $7 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
54
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant European ETF
Dec. 31, 20143 20.00† 0.08 (0.13)
(0.10)
0.53 0.38 –
(0.01)
–
(0.07) (0.08)
20.49
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From October 22, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
RBC Quant European ETF
Dec. 31, 20144
7 170 350 Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
0.57 0.57 Trading
Expense Ratio (%) 2
0.39 Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
608.53 20.49 20.61
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From October 22, 2014.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC Quant European ETF
up to 0.49%
55
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
PAST PERFORMANCE
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
October 2014.
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
% of Net Asset Value
European Equities
Financial
Materials
Utilities
Consumer Discretionary
Energy
Consumer Staples
Telecommunications
Health Care
Industrial Other Net Assets
38.4
13.3
10.7
8.1
8.0
7.5
5.5
5.0
3.6
(0.1)
Top 25 Holdings
% of Net Asset Value
Royal Dutch Shell PLC
HSBC Holdings PLC
Unilever NV
Zurich Insurance Group AG
Banco Santander SA
GlaxoSmithKline PLC
Total SA
British American Tobacco PLC
BASF SE
Unibail-Rodamco SE
Rio Tinto PLC
National Grid PLC
Standard Chartered PLC
Reed Elsevier NV
Deutsche Post AG
BHP Billiton PLC
Nordea Bank AB
SSE PLC
Svenska Handelsbanken AB
Legal & General Group PLC
CRH PLC
Swedbank AB
Skandinaviska Enskilda Banken AB
Centrica PLC
Sampo Oyj
Top 25 Holdings
3.6
3.4
3.1
3.0
3.0
2.8
2.7
2.7
2.6
2.5
2.5
2.3
2.1
2.1
2.1
2.0
2.0
1.8
1.8
1.8
1.8
1.7
1.7
1.7
1.7
58.5
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
56
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT EUROPEAN DIVIDEND
LEADERS (CAD HEDGED) ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
57
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure, either directly
or indirectly through investment in other mutual funds managed by
RBC GAM or an affiliate, to the performance of a diversified portfolio
of high-quality European dividend-paying equity securities that will
provide regular income and that have the potential for long-term
capital growth, while seeking to minimize the exposure to currency
fluctuations between foreign currencies and the Canadian dollar.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
The Fund intends to invest substantially all of its assets in units of the
RBC Quant European Dividend Leaders ETF (the “underlying fund”)
but may also invest directly in a portfolio of European dividend-paying
equity securities. Portfolio securities for the underlying fund (and
for the Fund, to the extent it invests directly in equity securities) will
be selected using a rules-based, multi-factor investment approach
that considers a company’s balance sheet strength, the stability
and sustainability of its dividend payout and its ability to grow
dividends in the future. Securities are weighted in accordance with
a modified capitalization weighting methodology designed to reduce
the dispersion of weights between larger and smaller capitalization
companies. The portfolio holdings will be reconstituted and rebalanced
on a quarterly basis. The frequency of the reconstitution and
rebalancing may change without notice.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
The Fund uses derivatives to hedge against fluctuations in foreign
currencies to minimize exposure to changes of the foreign currencies
held by the Fund relative to the Canadian dollar.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
Results of Operations
The Fund was launched on October 22, 2014, and its net asset value
was $5 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
58
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant European (CAD Hedged) ETF
Dec. 31, 20143 20.00† 0.11 –
0.07 0.58 0.76 –
(0.01) (0.04)
(0.07) (0.12)
20.96
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From October 22, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
Number of Units
Outstanding (000s)
RBC Quant European (CAD Hedged) ETF
Dec. 31, 20144
5 239 250 Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
0.57 0.57 Trading
Expense Ratio (%) 2
–
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
3.50 20.96 21.11
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From October 22, 2014.
Management Fees
RBC Global Asset Management Inc. is the manager and portfolio
advisor of the ETF. A management fee is not charged directly to
the ETF as this ETF invests in the units of other RBC ETFs. It pays
management fees indirectly because the ETFs in which it invests pay
management fees.
59
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
PAST PERFORMANCE
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
October 2014.
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
% of Net Asset Value
European Equities
Financial
Materials
Utilities
Consumer Discretionary
Energy
Consumer Staples
Telecommunications
Health Care
Industrial
Other Net Assets
38.4
13.3
10.7
8.1
8.0
7.5
5.5
5.0
3.6
(0.1)
Top 25 Holdings*
RBC Quant European Dividend Leaders ETF
Forward Contracts
Cash and Cash Equivalents
Total
% of Net Asset Value
98.2
1.3
0.5
100.0
* The Fund holds fewer than 25 holdings.
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
60
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT EAFE DIVIDEND
LEADERS ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
61
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EAFE DIVIDEND LEADERS ETF
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure to the
performance of a diversified portfolio of high-quality dividend-paying
equity securities in markets in Europe, Australasia and the Far East
(EAFE) that will provide regular income and that have the potential for
long-term capital growth.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Portfolio securities for the RBC Quant EAFE Dividend Leaders
ETF will be selected using a rules-based, multifactor investment
approach that considers a company’s balance sheet strength, the
stability and sustainability of its dividend payout and its ability to
grow dividends in the future. Securities are weighted in accordance
with a modified capitalization weighting methodology designed
to reduce the dispersion of weights between larger and smaller
capitalization companies. The portfolio holdings will be reconstituted
and rebalanced initially on a quarterly basis. The frequency of the
reconstitution and rebalancing may change without notice.
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
Results of Operations
The Fund was launched on January 15, 2014, and its net asset value
was $132 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
62
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EAFE DIVIDEND LEADERS ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant EAFE ETF
Dec. 31, 20143
20.00† 0.85 (0.35)
0.25 (0.86)
(0.11)
–
(0.43) (0.20) –
(0.63)
20.33
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From January 15, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
RBC Quant EAFE ETF
Dec. 31, 20144
132 174 Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
6 500 MER Before
Absorption (%) 1
0.55 0.55 Trading
Expense Ratio (%) 2
0.32 Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
251.89 20.33 20.35
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From January 15, 2014.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC Quant EAFE ETF
up to 0.49%
63
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EAFE DIVIDEND LEADERS ETF
PAST PERFORMANCE
Top 25 Holdings
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
January 2014.
HSBC Holdings PLC
Royal Dutch Shell PLC
Commonwealth Bank of Australia
GlaxoSmithKline PLC
British American Tobacco PLC
Total SA
Westpac Banking Corp
BASF SE
Unilever NV
Australia & New Zealand Banking Group Ltd.
National Australia Bank Ltd.
Rio Tinto PLC
National Grid PLC
Zurich Insurance Group AG
ABB Ltd.
AXA SA
Canon Inc.
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen
Standard Chartered PLC
KDDI Corp
Telefonaktiebolaget LM Ericsson
Deutsche Post AG
Nordea Bank AB
Swiss Re AG
DBS Group Holdings Ltd
Top 25 Holdings
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
International Equities
Financial
Utilities
Industrial
Consumer Discretionary
Materials
Telecommunications
Energy
Consumer Staples
Health Care
Information Technology
% of Net Asset Value
% of Net Asset Value
40.1
9.3
8.8
8.4
8.3
7.2
6.2
4.8
3.6
3.3
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
64
1.7
1.6
1.5
1.4
1.4
1.4
1.3
1.3
1.3
1.3
1.3
1.2
1.2
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.0
1.0
1.0
30.8
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT EAFE DIVIDEND LEADERS
(CAD HEDGED) ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
65
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EAFE DIVIDEND LEADERS
(CAD HEDGED) ETF
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure, either directly
or indirectly through investment in other mutual funds managed by
RBC GAM or an affiliate, to the performance of a diversified portfolio
of high-quality dividend-paying equity securities in markets in Europe,
Australasia and the Far East (“EAFE”) that will provide regular income
and that have the potential for long-term capital growth, while seeking
to minimize the exposure to currency fluctuations between foreign
currencies and the Canadian dollar.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
The Fund intends to invest substantially all of its assets in units of
the RBC Quant EAFE Dividend Leaders ETF (the “underlying fund”)
but may also invest directly in a portfolio of dividend-paying equity
securities in markets in Europe, Australasia and the Far East. Portfolio
securities for the underlying fund (and for the Fund, to the extent it
invests directly in equity securities) will be selected using a rulesbased, multi-factor investment approach that considers a company’s
balance sheet strength, the stability and sustainability of its dividend
payout and its ability to grow dividends in the future. Securities are
weighted in accordance with a modified capitalization weighting
methodology designed to reduce the dispersion of weights between
larger and smaller capitalization companies. The portfolio holdings will
be reconstituted and rebalanced on a quarterly basis. The frequency of
the reconstitution and rebalancing may change without notice.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
The Fund uses derivatives to hedge against fluctuations in foreign
currencies to minimize exposure to changes of the foreign currencies
held by the Fund relative to the Canadian dollar.
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
The applicable standing instructions require that Related-Party Trading
Activities be conducted in accordance with RBC GAM policy and
that RBC GAM advise the BoG of a material breach of any standing
instruction. RBC GAM policy requires that an investment decision in
respect of Related-Party Trading Activities (i) is made free from any
influence of Royal Bank or its associates or affiliates and without
taking into account any consideration relevant to Royal Bank or its
affiliates or associates, (ii) represents the business judgment of the
portfolio manager, uninfluenced by considerations other than the best
interests of the Fund, (iii) is in compliance with RBC GAM policies and
procedures, and (iv) achieves a fair and reasonable result for the Fund.
Results of Operations
The Fund was launched on October 22, 2014, and its net asset value
was $3 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
66
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EAFE DIVIDEND LEADERS
(CAD HEDGED) ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant EAFE (CAD Hedged) ETF
Dec. 31, 20143 20.00† 0.19 –
0.52 1.00 1.71 –
(0.11) (0.43)
(0.01) (0.55)
21.26
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From October 22, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
RBC Quant EAFE (CAD Hedged) ETF
Dec. 31, 20144
3 189 Number of Units
Outstanding (000s)
150 Management
Expense Ratio (%) 1
MER Before
Absorption (%) 1
0.55 0.55 Trading
Expense Ratio (%) 2
–
Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
–
21.26 21.29
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From October 22, 2014.
Management Fees
RBC Global Asset Management Inc. is the manager and portfolio
advisor of the ETF. A management fee is not charged directly to
the ETF as this ETF invests in the units of other RBC ETFs. It pays
management fees indirectly because the ETFs in which it invests pay
management fees.
67
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EAFE DIVIDEND LEADERS
(CAD HEDGED) ETF
PAST PERFORMANCE
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
October 2014.
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
% of Net Asset Value
International Equities
Financial
Utilities
Industrial
Consumer Discretionary
Materials
Telecommunications
Energy
Consumer Staples
Health Care
Information Technology
40.1
9.3
8.8
8.4
8.3
7.2
6.2
4.8
3.6
3.3
Top 25 Holdings*
RBC Quant EAFE Dividend Leaders ETF
Forward Contracts
Cash and Cash Equivalents
Total
% of Net Asset Value
98.7
0.9
0.4
100.0
* The Fund holds fewer than 25 holdings.
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
68
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC ETF
RBC QUANT EMERGING MARKETS
DIVIDEND LEADERS ETF
December 31, 2014
Portfolio Manager RBC Global Asset Management Inc. (“RBC GAM”)
The Board of Directors of RBC Global Asset Management Inc. approved this annual management report of fund performance on March 5, 2015.
A Note on Forward-looking Statements
This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words “may,” “could,” “should,” “would,”
“suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors,
so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a
number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made in relation to the Fund. These
factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and
capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events.
The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
This annual management report of fund performance (“MRFP”) contains financial highlights but does not contain the complete annual financial statements of the Fund. You can get a copy
of the annual financial statements at your request, and at no cost, by calling 1-855-RBC-ETFS (722-3837), by writing to us at RBC Global Asset Management Inc., P.O. Box 7500, Station A,
Toronto, Ontario M5W 1P9, or by visiting our website at www.rbcgam.com/etfs or SEDAR at www.sedar.com. Security holders may also contact us using one of these methods to request a
copy of the Fund’s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.
69
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EMERGING MARKETS
DIVIDEND LEADERS ETF
Designated Broker
RBC GAM has entered into an agreement with RBC Dominion
Securities Inc., an affiliate of RBC GAM, to act as designated broker
and underwriter for distribution of units of the Fund, on terms and
conditions that are comparable to arm’s length agreements in the
ETF industry. The material terms and conditions of the agreement
have been disclosed in the Fund’s Prospectus.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Investment Objective and Strategies
The Fund seeks to provide unitholders with exposure to the
performance of a diversified portfolio of high-quality emerging market
dividend-paying equity securities that will provide regular income and
that have the potential for long-term capital growth.
Portfolio securities for the Fund will be selected using a rules-based,
multi-factor investment approach that considers a company’s balance
sheet strength, the stability and sustainability of its dividend payout
and its ability to grow dividends in the future. Securities are weighted
in accordance with a modified capitalization weighting methodology
designed to reduce the dispersion of weights between larger and
smaller capitalization companies. The portfolio holdings will be
reconstituted and rebalanced on a quarterly basis. The frequency of
the reconstitution and rebalancing may change without notice.
Other Related-Party Transactions
Pursuant to applicable securities legislation, the Fund relied on the
standing instructions from the Board of Governors (“BoG”) in its
capacity as the Independent Review Committee with respect to one
or more of the following transactions:
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
(b) investments in the securities of issuers for which a related-party
dealer acted as an underwriter during the distribution of such
securities and the 60-day period following the conclusion of such
distribution of the underwritten securities to the public;
Risk
There were no significant changes to the Fund that materially affected
the Fund’s overall level of risk during the reporting period. The risks of
investing in the Fund and the suitability of the Fund for investors remain
as discussed in the Prospectus.
(c) p urchases of debt securities from or sales of debt securities to a
related-party dealer, where it acted as principal.
Results of Operations
The Fund was launched on October 22, 2014, and its net asset value
was $6 million as of December 31, 2014. Investment performance is
not provided for a fund that has been available for less than one year.
The applicable standing instructions require that Related-Party
Trading Activities be conducted in accordance with RBC GAM
policy and that RBC GAM advise the BoG of a material breach of any
standing instruction. RBC GAM policy requires that an investment
decision in respect of Related-Party Trading Activities (i) is made free
from any influence of Royal Bank or its associates or affiliates and
without taking into account any consideration relevant to Royal Bank
or its affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations other than
the best interests of the Fund, (iii) is in compliance with RBC GAM
policies and procedures, and (iv) achieves a fair and reasonable
result for the Fund.
Recent Developments
The portfolio manager has no recent developments to report.
Related-Party Transactions
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect, wholly owned subsidiary of Royal Bank of
Canada (“Royal Bank”) and is the manager, trustee and portfolio
advisor of the Fund. RBC GAM is responsible for the Fund’s dayto-day operations, holds title to the Fund’s property on behalf of its
unitholders, provides investment advice and portfolio management
services to the Fund. RBC GAM is paid a management fee by the Fund
as compensation for its services.
Affiliates of RBC GAM that provide services to the Fund in the course
of their normal businesses are discussed below.
Custodian and Valuation Agent
RBC Investor Services Trust (“RBC IS”) is the custodian and
valuation agent and holds the assets of the Fund and provides
administrative services to the Fund.
70
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EMERGING MARKETS
DIVIDEND LEADERS ETF
FINANCIAL HIGHLIGHTS
The following tables show selected key financial information about the Fund and are intended to help you understand the Fund’s financial
performance for the past five years or for the periods since inception. This information is derived from the Fund’s audited annual financial
statements. For financial years beginning on or after January 1, 2014, financial highlight information is derived from financial statements
prepared in compliance with International Financial Reporting Standards (“IFRS”). For financial years prior to January 1, 2014, financial highlight
information is derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).
“Net Assets,” for the periods prior to 2014, are calculated in accordance with GAAP, and “Net Asset Value” is derived from the valuation
method disclosed in the RBC Funds Annual Information Form and is used for transactional purposes (see Ratios and Supplemental Data). All
other calculations for the purposes of this MRFP are made using Net Asset Value. There is no significant difference between “Net Assets” and
“Net Asset Value” under IFRS.
Change in Net Assets Per Unit ($)
Annual Distributions2
Increase (Decrease) from Operations 1 From
Total
Realized Unrealized
Income
From
Net Assets
For the Year/
Net Assets
Revenue
Total
Gains
Gains (Excluding
From
Capital
Return
End of
Period Ended
Beginning of Year/Period
(Loss) Expenses
(Losses)
(Losses)
Total Dividends) Dividends
Gains of Capital
Total Year/Period
RBC Quant Emerging Markets ETF
Dec. 31, 20143 20.00† 0.09 (0.11)
(0.28)
0.78 0.48 –
(0.03) –
(0.07) (0.10)
20.36
1 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units
outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit.
2 Distributions are either paid in cash, reinvested in additional units of the Fund, or both.
3 From October 22, 2014.
† Initial offering net asset value per unit.
Ratios and Supplemental Data
As at
Net Asset Value
($000s)
RBC Quant Emerging Markets ETF
Dec. 31, 20144
6 108 Number of Units
Outstanding (000s)
Management
Expense Ratio (%) 1
300 MER Before
Absorption (%) 1
0.79 0.79 Trading
Expense Ratio (%) 2
0.22 Portfolio
Turnover Rate (%) 3
Net Asset Value
Per Unit ($)
Closing
Market Price ($)
632.85 20.36 20.61
1 The management expense ratio (“MER”) is based on expenses for the stated period, excluding commissions and other portfolio transaction costs, and is expressed as an annualized percentage of the daily
average net asset value during the period. RBC GAM may, at its discretion and without notice to unitholders, waive or absorb certain operating expenses. MER includes the waiver or absorption by RBC GAM
of certain operating expenses, while the MER before absorption shows the MER prior to operating expenses being waived or absorbed by RBC GAM.
2 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The trading expense
ratio is not applicable to fixed-income transactions.
3 The Fund’s portfolio turnover rate gives an indication of the level of activity employed by the portfolio manager. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of the year. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an
investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.
4 From October 22, 2014.
Management Fees
RBC GAM is the manager, trustee and portfolio advisor of the
Fund. The management fee of the Fund is calculated at the annual
percentage, before GST/HST, of the daily net asset value of the Fund.
Management Fees
RBC Quant Emerging Markets ETF
up to 0.64%
71
2014 ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE
RBC QUANT EMERGING MARKETS
DIVIDEND LEADERS ETF
PAST PERFORMANCE
Top 25 Holdings
Investment performance in respect of a fund that has been available
for less than one year is not provided. The Fund was launched
October 2014.
Cash & Cash Equivalents
Samsung Electronics Co. Ltd.
Taiwan Semiconductor Manufacturing Co. Ltd.
China Construction Bank Corp.
Industrial & Commercial Bank of China Ltd.
Bank of China Ltd.
Ambev SA
Infosys Ltd.
MTN Group Ltd.
China Merchants Bank Co. Ltd.
Standard Bank Group Ltd.
Agricultural Bank of China Ltd.
Astra International Tbk PT
Telekomunikasi Indonesia Persero Tbk PT
Sasol Ltd.
Wal-Mart de Mexico SAB de CV
Chunghwa Telecom Co. Ltd.
Malayan Banking Bhd
Advanced Info Service PCL
PTT PCL
DiGi.Com Bhd
Growthpoint Properties Ltd.
ICICI Bank Ltd.
Perusahaan Gas Negara Persero Tbk PT
Pegatron Corp.
Top 25 Holdings
SUMMARY OF INVESTMENT PORTFOLIO
(after consideration of derivative products, if any)
As at December 31, 2014
Investment Mix
Global Equities
Financial
Information Technology
Telecommunications
Industrial Materials
Consumer Staples
Consumer Discretionary
Energy
Utilities
Other Net Assets
% of Net Asset Value
% of Net Asset Value
33.0
13.1
11.0
8.8
8.8
8.3
6.5
5.5
5.1
(0.1)
The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the
Fund and a quarterly update is available at www.rbcgam.com/etfs.
72
13.7
4.6
3.7
3.3
3.2
3.1
2.4
2.3
2.3
2.1
1.9
1.8
1.8
1.8
1.8
1.7
1.7
1.7
1.6
1.4
1.3
1.3
1.3
1.3
1.3
64.4
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 ETFs
(the “ETFs”) 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 ETFs, are described in
Note 3 to the financial statements.
Although the Board of Directors of RBC GAM is solely responsible for approving the financial statements and overseeing management’s financial
reporting responsibilities, in 2014 the Financial Advisory Committee of the Board of Governors provided advice to RBC GAM concerning financial
reporting, the audit process and internal controls. Please see The Role of the Board of Governors at the end of this report.
Deloitte LLP, Independent Chartered Professional Accountants, Chartered Accountants, have performed an independent audit of the financial
statements in accordance with IFRS. Their report is set out on the next page.
John S. Montalbano, CFA
Chief Executive Officer
RBC Global Asset Management Inc.
Frank Lippa, CPA, CA
Chief Financial Officer and Chief Operating Officer
RBC Global Asset Management Inc.
March 5, 2015
73
INDEPENDENT AUDITOR’S REPORT
To the Unitholders of:
RBC 1-5 Year Laddered Corporate Bond ETF
RBC Target 2015 Corporate Bond Index ETF
RBC Target 2016 Corporate Bond Index ETF
RBC Target 2017 Corporate Bond Index ETF
RBC Target 2018 Corporate Bond Index ETF
RBC Target 2019 Corporate Bond Index ETF
RBC Target 2020 Corporate Bond Index ETF
RBC Target 2021 Corporate Bond Index ETF
RBC Quant Canadian Dividend Leaders ETF
RBC Quant U.S. Dividend Leaders ETF
RBC Quant U.S. Dividend Leaders
(CAD Hedged) ETF
RBC Quant European Dividend Leaders ETF
RBC Quant European Dividend Leaders
(CAD Hedged) ETF
RBC Quant EAFE Dividend Leaders ETF
RBC Quant EAFE Dividend Leaders
(CAD Hedged) ETF
RBC Quant Emerging Markets Dividend
Leaders ETF
(collectively referred to as the “ETFs”)
We have audited the accompanying financial statements of each
of the ETFs, which comprise the schedule of investment portfolio
as at December 31, 2014, the statements of financial position as
at December 31, 2014, December 31, 2013 and January 1, 2013 (as
applicable) and the statements of comprehensive income, statements
of cash flow and statements of changes in net assets attributable
to holders of redeemable units for the years or periods (since
establishment of each of the ETFs) then ended, and a summary of
significant accounting policies and other explanatory information.
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.
Management’s responsibility for 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.
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with International
Financial Reporting Standards (“IFRS”), and for such internal control
as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
Opinion
In our opinion, the financial statements of each of the ETFs present
fairly, in all material respects, the financial position of each of the ETFs
as at December 31, 2014, December 31, 2013 and January 1, 2013 (as
applicable), and the results of their operations, their cash flows and
changes in their net assets for the years or periods (since establishment
of each of the ETFs) then ended in accordance with IFRS.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with Canadian generally accepted auditing standards
(“GAAS”). Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from
material misstatement.
Chartered Professional Accountants, Chartered Accountants,
Licensed Public Accountants
March 5, 2015
Toronto, Ontario
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the financial
74
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
December 31, 2014
Number
of Units
Security
Cost
ETF UNITS
748 281
741 541
726 421
723 305
712 097
RBC Target 2015 Corporate Bond Index ETF*
RBC Target 2016 Corporate Bond Index ETF*
RBC Target 2017 Corporate Bond Index ETF*
RBC Target 2018 Corporate Bond Index ETF*
RBC Target 2019 Corporate Bond Index ETF*
$
14 524
14 529
14 479
14 406
14 388
Fair
Value
$
% of Net
Assets
14 378
14 386
14 396
14 419
14 434
TOTAL ETF UNITS
72 326
72 013100.0
TOTAL INVESTMENTS
$ 72 326
72 013100.0
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
3
–
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
72 016
100.0
* Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
75
FINANCIAL STATEMENTS
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Due from investment dealers
Subscriptions receivable
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
72 016
Investments at cost
$
72 326
NAV PER UNIT
$
20.00
$
72 013
3
147
2 998
175
75 336
3 113
207
3 320
The accompanying notes are an integral part of these financial statements.
76
FINANCIAL STATEMENTS
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
Securities lending revenue
(see note 7 in the generic notes)
Capital gains received from underlying funds
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
1 180
$
9
7
(313)
883
883
$
0.54
* Fund launched January 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
69 325
–
(983)
68 342
3
–
3
Interest received
Dividends received, net of withholding taxes
$
$
–
1 005
$
–
313
(175)
–
(72 679)
3 319
(68 339)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
77
883
FINANCIAL STATEMENTS
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
Statement of Changes in NAV (in $000s)
Total
2014
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
–
883
–
72 323
–
–
72 323
(1 190)
–
–
$
(1 190)
72 016
72 016
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
78
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
December 31, 2014
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
General information (see note 1 in the generic notes)
The investment objective of the Fund is to provide unitholders
with exposure to the performance of a diversified portfolio
of Canadian corporate bonds, divided (“laddered”) into five
groupings with staggered maturities from one to five years,
which will provide regular income while preserving capital.
The following is a summary of the inputs used as of
December 31, 2014.
Financial instrument risk and capital management
(see note 4 in the generic notes)
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
December 31
2014
December 31, 2014
Ownership
NAV
68.1
9.5
8.7
6.3
5.7
0.6
1.1
RBC Target 2015 Corporate
Bond Index ETF
RBC Target 2016 Corporate
Bond Index ETF
RBC Target 2017 Corporate
Bond Index ETF
RBC Target 2018 Corporate
Bond Index ETF
RBC Target 2019 Corporate
Bond Index ETF
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
December 31
2014
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
72 013
72 013
100.0
The table below summarizes the Fund’s interest in the
underlying mutual funds as a percentage of net assets
of the Fund (“NAV”), and the Fund’s ownership interest
as a percentage of the net assets of the underlying funds
(“Ownership”). All underlying funds are established
and conduct business in Canada, and have an associate
relationship to the Fund.
Interest rate risk (%)
Term to maturity
Total
–
–
–
Underlying mutual fund ownership interest (%)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Corporate Bonds
Financial
Communication
Infrastructure
Energy
Industrial
Real Estate
Other Net Assets
Level 3
–
–
–
A management fee is not charged directly to the ETF as this
ETF invests in the units of other RBC ETFs.
1.7
28.3
48.7
21.3
100.0
Concentration risk (%)
Investment mix
Level 2
72 013
72 013
100.0
Management fees (see note 8 in the generic notes)
December 31
2014
AAA
AA
A
BBB
Total
Level 1
ETF units
Total financial instruments
% of total portfolio
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
Credit risk (%)
Rating
December 31, 2014
20.0
24.1
20.0
17.9
20.0
26.4
20.0
31.4
20.0
23.7
Taxes ($000s) (see note 6 in the generic notes)
The Fund had no capital or non-capital losses as at
December 31, 2014.
20.0
80.0
–
–
100.0
As at December 31, 2014, had prevailing interest rates risen
or lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 2.4%. In practice, actual results could differ from
this sensitivity analysis and the difference could be material.
Please see the generic notes at the back of the financial statements.
79
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the period ended December 31
(see note 2 in the generic notes)
2014
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
–
3 600
–
–
3 600
Securities lending revenue ($000s)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
December 31
2014
Fair value of securities loaned
Fair value of collateral received
2 026
2 067
Please see the generic notes at the back of the financial statements.
80
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC TARGET 2015 CORPORATE BOND INDEX ETF
December 31, 2014
Par Value
(000s) Security
Coupon
Rate %
Maturity
Cost
CANADIAN BONDS
CORPORATE
989 407 East Development Group General Partnership
1 097 407 International Inc.
2 756 Bank of Montreal
1 939 Bank of Montreal
487 Bank of Montreal*, FRN
2 200 Bank of Nova Scotia
2 202 Bell Canada
1 099 Caisse Centrale Desjardins du Quebec
434 Canadian Imperial Bank of Commerce
2 107 Canadian Imperial Bank of Commerce*, FRN
2 859 Canadian Imperial Bank of Commerce*, FRN
551 Canadian Natural Resources Ltd.
549 Canadian Tire Corp Ltd.
645 Canadian Western Bank*, FRN
1 511 Capital Desjardins Inc.*, FRN
650 Capital Power LP
661 CI Investments Inc.*, FRN
876 Daimler Canada Finance Inc.
551 Enbridge Pipelines Inc.
1 207 Ford Credit Canada Ltd.
1 325 GE Capital Canada Funding Co.
1 098 GE Capital Canada Funding Co.
765 Greater Toronto Airports Authority
1 098 HSBC Bank Canada
494 Husky Energy Inc.
1 097 Hydro One Inc.
551 Laurentian Bank of Canada*, FRN
1 209 Manulife Financial Corp.
1 973 Manulife Financial Corp.
1 916 Molson Coors Capital Finance ULC
1 103 National Bank of Canada
1 986 National Bank of Canada
1 075 National Bank of Canada*, FRN
1 875 Royal Bank of Canada†
877 Royal Bank of Canada*†
2 984 Royal Bank of Canada*†
1 321 Sun Life Financial Inc.*, FRN
1 000 Teranet Holdings LP
1 702 The Toronto-Dominion Bank*, FRN
2 184 The Toronto-Dominion Bank*, FRN
1 763 The Toronto-Dominion Bank*, FRN
1 319 Thomson Reuters Corp.
2 201 Wells Fargo Financial Canada Corp.
Fair
Value
% of Net
Assets
2.813
23-Dec-15
$
1 007
$
1 000
3.880
16-Jun-15
1 136
1 109
3.930
27-Apr-15
2 844
2 778
5.180
10-Jun-15
2 043
1 970
4.870
22-Apr-20
507
492
3.340
25-Mar-15
2 249
2 210
3.600
02-Dec-15
2 273
2 239
3.788
08-Jun-15
1 133
1 110
3.100
02-Mar-15
442
435
4.110
30-Apr-20
2 172
2 123
3.150
02-Nov-20
2 913
2 892
4.950
01-Jun-15
577
558
4.950
01-Jun-15
574
556
4.389
30-Nov-20
667
660
3.797
23-Nov-20
1 556
1 537
4.600
01-Dec-15
672
666
3.940
14-Dec-16
685
675
2.330
14-Sep-15
884
880
2.930
08-Sep-15
564
557
7.500
18-Aug-15
1 304
1 246
4.650
11-Feb-15
1 369
1 329
4.240
08-Jun-15
1 138
1 111
5.000
01-Jun-15
805
776
3.860
21-May-15
1 132
1 109
3.750
12-Mar-15
506
496
2.950
11-Sep-15
1 124
1 109
3.700
02-Nov-20
564
559
5.161
26-Jun-15
1 264
1 229
4.079
20-Aug-15
2 034
2 003
5.000
22-Sep-15
2 016
1 960
3.147
11-Feb-15
1 122
1 105
4.030
26-May-15
2 054
2 006
4.700
02-Nov-20
1 128
1 101
3.180
16-Mar-15
1 914
1 882
4.350
15-Jun-20907887
3.180
02-Nov-20
3 043
3 021
4.800
23-Nov-35
1 371
1 355
3.531
16-Dec-15
1 030
1 015
5.480
02-Apr-20
1 785
1 718
3.367
02-Nov-20
2 235
2 214
4.970
30-Oct-04
1 856
1 808
5.700
15-Jul-15
1 403
1 347
4.380
30-Jun-15
2 289
2 232
TOTAL CANADIAN BONDS
60 291
59 06599.2
TOTAL INVESTMENTS
$ 60 291
59 06599.2
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
4990.8
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
59 564100.0
* Interest rate risk (see note 4 in the generic notes).
† Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
81
FINANCIAL STATEMENTS
RBC TARGET 2015 CORPORATE BOND INDEX ETF
Statements of Financial Position (in $000s except per unit amounts)
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Subscriptions receivable
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
December 31
2014
December 31
2013
$
$
59 065
199
960
461
60 685
25 200
169
–
201
25 570
January 1
2013
$
18 478
148
–
141
18 767
931
174
16
–
82
8
–
52
4
1 121
90
56
$
59 564
$
25 480
$
18 711
Investments at cost
$
60 291
$
25 518
$
18 487
NAV PER UNIT
$
19.21
$
19.60
$
19.88
The accompanying notes are an integral part of these financial statements.
82
FINANCIAL STATEMENTS
RBC TARGET 2015 CORPORATE BOND INDEX ETF
Statements of Cash Flow (in $000s)
Statements of Comprehensive Income
(in $000s except per unit amounts)
For the periods ended December 31
(see note 2 in the generic notes)
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
$
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
Board of Governors costs
GST/HST
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
$
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
$
For the periods ended December 31
(see note 2 in the generic notes)
2013
2014
1 780
$
834
2
(129)
(908)
745
–
(14)
(309)
511
113
3
10
126
619
$
64
3
6
73
438
0.27
$
0.41
Interest received
Dividends received, net of withholding taxes
2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
$
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
$
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
$
$
619
$
129
908
(260)
8
(41 500)
7 529
(32 567)
14
309
(60)
4
(7 592)
547
(6 340)
38 947
(4 853)
(1 497)
32 597 $
30
169
199 $
7 079
–
(718)
6 361
21
148
169
$
$
774
–
1 520
–
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
The accompanying notes are an integral part of these financial statements.
83
438
FINANCIAL STATEMENTS
RBC TARGET 2015 CORPORATE BOND INDEX ETF
Statements of Changes in NAV (in $000s)
Total
2014
For the periods ended December 31
(see note 2 in the generic notes)
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
$
25 480
619
–
39 907
$
2013
18 711
438
–
7 079
–
(4 853)
–
–
35 054
(1 589)
–
–
7 079
(748)
–
–
(1 589)
34 084
59 564 $
(748)
6 769
25 480
The accompanying notes are an integral part of these financial statements.
84
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2015 CORPORATE BOND INDEX ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, had prevailing interest rates risen or
lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 0.6% (December 31, 2013 – 1.5%, January 1,
2013 – 2.4%). In practice, actual results could differ from this
sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide income
for a limited period of time ending on its termination date by
replicating, to the extent possible, the investment results that
correspond generally to the performance, before fees and
expenses, of the FTSE TMX Canada 2015 Maturity Corporate
Bond Index*.
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
Financial instrument risk and capital management
(see note 4 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014, December 31, 2013 and January 1, 2013.
Credit risk (%)
December 31, 2014
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
Rating
AAA
AA
A
BBB
Total
December 31
2014
December 31
2013
January 1
2013
3.2
21.5
54.3
21.0
100.0
3.1
24.4
47.7
24.8
100.0
3.0
38.2
36.7
22.1
100.0
Level 1
Level 2
Level 3
Total
–
–
–
59 065
59 065
100.0
–
–
–
59 065
59 065
100.0
Level 2
Level 3
Fixed-income
and debt securities
Total financial instruments
% of total portfolio
December 31, 2013
Level 1
Fixed-income and debt securities
Total financial instruments
% of total portfolio
–
–
–
25 200 25 200 100.0 –
–
–
Total
25 200
25 200
100.0
Concentration risk (%)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Investment mix
Corporate Bonds
Financial
Infrastructure
Communication
Industrial
Energy
Other Net Assets
December 31
2014
December 31
2013
January 1
2013
76.8
6.7
6.0
5.9
3.8
0.8
73.9
6.4
8.0
6.9
3.7
1.1
72.7
6.3
8.7
6.9
4.2
1.2
January 1, 2013
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
December 31
2013
January 1
2013
100.0
–
–
–
100.0
–
100.0
–
–
100.0
–
100.0
–
–
100.0
Level 2
Level 3
Total
18 478
18 478
100.0
–
–
–
18 478
18 478
100.0
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services.
The management fee of the ETF is calculated at the following
annual percentage, before GST/HST, of the daily net asset
value of the ETF.
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
December 31
2014
–
–
–
For the periods ended December 31, 2014, December 31, 2013
and January 1, 2013, there were no transfers of financial
instruments between Level 1 or Level 2 and Level 3.
Interest rate risk (%)
Term to maturity
Level 1
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Until December 31, 2014
Effective January 1, 2015
0.25%
0.20%
The management fee was reduced to 0.25% from 0.30% effective January 15, 2014.
Taxes ($000s) (see note 6 in the generic notes)
The non-capital and capital losses as at December 31, 2014
for the Fund were approximately:
Capital losses
Non-capital losses
Please see the generic notes at the back of the financial statements.
85
67
–
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2015 CORPORATE BOND INDEX ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
Transition to IFRS ($000s) (see note 9 in the
generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
Reconciliation of net assets and comprehensive income as
previously reported under Canadian GAAP to IFRS:
For the periods ended December 31
(see note 2 in the generic notes)
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
2014
2013
1 300
2 050
–
(250)
3 100
941
359
–
–
1 300
Net assets
Net assets as reported under Canadian GAAP
Revaluation of investments at FVTPL
Net assets attributable to holders
of redeemable units
Comprehensive income
Comprehensive income as reported
under Canadian GAAP
Revaluation of investments at FVTPL
(see note 3 and note 9 in the generic notes)
Increase (decrease) in net assets attributable
to holders of redeemable units
Fair value of securities on loan and collateral received as at:
Fair value of securities loaned
Fair value of collateral received
December 31
2013
1 419
1 448
648
661
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
RBC 1-5 Year Laddered Corporate Bond ETF
December 31
2014
December 31
2013
24.1
–
January 1
2013
25 447
33
18 678
33
25 480
18 711
December 31
2013
Securities lending revenue ($000s)
(see note 7 in the generic notes)
December 31
2014
December 31
2013
Please see the generic notes at the back of the financial statements.
86
438
–
438
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC TARGET 2016 CORPORATE BOND INDEX ETF
December 31, 2014
Par Value
(000s) Security
Coupon
Rate %
Maturity
Cost
CANADIAN BONDS
CORPORATE
2 511 American Express Canada Credit Corp.
5 264 Bank of Montreal*, FRN
6 277 Bank of Nova Scotia
2 045 Bell Canada
1 255 Brookfield Renewable Power Inc.
6 279 Canadian Imperial Bank of Commerce
1 988 Daimler Canada Finance Inc.
1 047 Emera Inc.
1 674 Enbridge Inc.
1 256 Enbridge Inc.
2 092 Ford Credit Canada Ltd.
3 032 GE Capital Canada Funding Co.
2 092 GE Capital Canada Funding Co.
1 466 George Weston Ltd.
1 466 Greater Toronto Airports Authority
1 883 Hydro One Inc.
990 Loblaw Cos Ltd.
3 242 National Bank of Canada
1 883 NAV Canada
4 184 Rogers Communications Inc.
6 278 Royal Bank of Canada†
1 256 Shaw Communications Inc.
3 932 Sun Life Financial Inc.*, FRN
2 301 The Manufacturers Life Insurance Co.*, FRN
6 278 The Toronto-Dominion Bank*, FRN
1 255 Toyota Credit Canada Inc.
1 674 TransCanada PipeLines Ltd.
1 046 VW Credit Canada Inc.
1 045 Westcoast Energy Inc.
3.600
3.979
3.610
5.410
6.132
3.400
3.280
2.960
5.170
5.000
2.634
5.100
3.350
3.780
4.700
4.640
7.100
2.702
4.713
5.800
3.360
6.150
4.950
4.210
4.779
3.550
4.650
3.600
3.280
03-Jun-16
08-Jul-21
22-Feb-16
26-Sep-16
30-Nov-16
14-Jan-16
15-Sep-16
13-Dec-16
19-May-16
09-Aug-16
21-Nov-16
01-Jun-16
23-Nov-16
25-Oct-16
15-Feb-16
03-Mar-16
01-Jun-16
15-Dec-16
24-Feb-16
26-May-16
11-Jan-16
09-May-16
01-Jun-36
18-Nov-21
14-Dec-05
22-Feb-16
03-Oct-16
01-Feb-16
15-Jan-16
$
2 602
5 501
6 536
2 216
1 386
6 498
2 057
1 073
1 813
1 361
2 111
3 269
2 170
1 526
1 569
2 017
1 120
3 309
2 020
4 580
6 492
1 377
4 125
2 412
6 740
1 305
1 811
1 084
1 077
Fair
Value
$
% of Net
Assets
2 579
5 427
6 422
2 168
1 349
6 398
2 040
1 069
1 750
1 318
2 117
3 179
2 157
1 515
1 518
1 952
1 063
3 303
1 951
4 411
6 394
1 328
4 098
2 399
6 613
1 282
1 759
1 068
1 061
TOTAL CANADIAN BONDS
81 157
79 68899.0
TOTAL INVESTMENTS
$ 81 157
79 68899.0
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
8261.0
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
80 514
100.0
* Interest rate risk (see note 4 in the generic notes).
† Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
87
FINANCIAL STATEMENTS
RBC TARGET 2016 CORPORATE BOND INDEX ETF
Statements of Financial Position (in $000s except per unit amounts)
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Due from investment dealers
Subscriptions receivable
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
December 31
2014
December 31
2013
$
$
79 688
264
–
–
807
80 759
50 727
150
42
1 971
515
53 405
January 1
2013
$
32 174
108
–
–
333
32 615
–
224
21
1 969
175
16
–
96
8
245
2 160
104
$
80 514
$
51 245
$
32 511
Investments at cost
$
81 157
$
51 285
$
32 124
NAV PER UNIT
$
19.40
$
19.71
$
19.95
The accompanying notes are an integral part of these financial statements.
88
FINANCIAL STATEMENTS
RBC TARGET 2016 CORPORATE BOND INDEX ETF
Statements of Cash Flow (in $000s)
Statements of Comprehensive Income
(in $000s except per unit amounts)
For the periods ended December 31
(see note 2 in the generic notes)
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
$
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
Board of Governors costs
GST/HST
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
$
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
$
For the periods ended December 31
(see note 2 in the generic notes)
2013
2014
2 785
$
1 794
1
(361)
(911)
1 514
1
(35)
(609)
1 151
174
3
14
191
1 323
$
133
3
11
147
1 004
0.38
$
0.45
Interest received
Dividends received, net of withholding taxes
2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
$
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
$
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
$
$
1 323
$
361
911
(292)
5
(46 181)
14 021
(29 852)
35
609
(182)
8
(22 466)
5 196
(15 796)
45 156
(12 716)
(2 474)
29 966 $
114
150
264 $
17 378
–
(1 540)
15 838
42
108
150
$
$
1 612
–
2 493
–
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
The accompanying notes are an integral part of these financial statements.
89
1 004
FINANCIAL STATEMENTS
RBC TARGET 2016 CORPORATE BOND INDEX ETF
Statements of Changes in NAV (in $000s)
Total
2014
For the periods ended December 31
(see note 2 in the generic notes)
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
$
51 245
1 323
–
43 185
$
2013
32 511
1 004
–
19 349
–
(12 716)
–
–
30 469
(2 523)
–
–
19 349
(1 619)
–
–
(2 523)
29 269
80 514 $
(1 619)
18 734
51 245
The accompanying notes are an integral part of these financial statements.
90
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2016 CORPORATE BOND INDEX ETF
December 31, 2014
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
General information (see note 1 in the generic notes)
The investment objective of the Fund is to provide income
for a limited period of time ending on its termination date by
replicating, to the extent possible, the investment results that
correspond generally to the performance, before fees and
expenses, of the FTSE TMX Canada 2016 Maturity Corporate
Bond Index*.
The following is a summary of the inputs used as of
December 31, 2014, December 31, 2013 and January 1, 2013.
December 31, 2014
Level 1
Level 2
Level 3
Total
–
–
–
79 688
79 688
100.0
–
–
–
79 688
79 688
100.0
Level 2
Level 3
Fixed-income
and debt securities
Total financial instruments
% of total portfolio
Financial instrument risk and capital management
(see note 4 in the generic notes)
Credit risk (%)
December 31, 2013
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Rating
AA
A
BBB
Total
December 31
2014
December 31
2013
January 1
2013
32.3
47.5
20.2
100.0
30.9
45.7
23.4
100.0
35.7
46.1
18.2
100.0
January 1, 2013
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Other Net Assets
December 31
2013
January 1
2013
68.9
9.8
9.0
8.1
3.2
1.0
66.1
13.4
8.7
7.7
3.1
1.0
63.4
14.6
9.3
8.4
3.3
1.0
Level 2
Level 3
Total
32 174
32 174
100.0
–
–
–
32 174
32 174
100.0
The management fee of the ETF is calculated at the following
annual percentage, before GST/HST, of the daily net asset
value of the ETF.
Until December 31, 2015
Effective January 1, 2016
December 31
2014
December 31
2013
January 1
2013
–
100.0
–
–
100.0
–
100.0
–
–
100.0
–
100.0
–
–
100.0
Total
50 727
50 727
100.0
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services.
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
–
–
–
Management fees (see note 8 in the generic notes)
Interest rate risk (%)
Term to maturity
–
–
–
50 727 50 727 100.0 For the periods ended December 31, 2014, December 31,
2013 and January 1, 2013, there were no transfers of financial
instruments between Level 1 or Level 2 and Level 3.
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
December 31
2014
–
–
–
Level 1
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Concentration risk (%)
Investment mix
Level 1
0.25%
0.20%
The management fee was reduced to 0.25% from 0.30% effective January 15, 2014.
Taxes ($000s) (see note 6 in the generic notes)
The non-capital and capital losses as at December 31, 2014
for the Fund were approximately:
Capital losses
Non-capital losses
As at December 31, 2014, had prevailing interest rates risen or
lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 1.4% (December 31, 2013 – 2.0%, January 1,
2013 – 2.4%). In practice, actual results could differ from this
sensitivity analysis and the difference could be material.
Please see the generic notes at the back of the financial statements.
91
229
–
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2016 CORPORATE BOND INDEX ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
Transition to IFRS ($000s) (see note 9 in the
generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
Reconciliation of net assets and comprehensive income as
previously reported under Canadian GAAP to IFRS:
For the periods ended December 31
(see note 2 in the generic notes)
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
2014
2013
2 600
2 200
–
(650)
4 150
1 630
970
–
–
2 600
Net assets
Net assets as reported under Canadian GAAP
Revaluation of investments at FVTPL
Net assets attributable to holders
of redeemable units
Comprehensive income
Comprehensive income as reported
under Canadian GAAP
Revaluation of investments at FVTPL
(see note 3 and note 9 in the generic notes)
Increase (decrease) in net assets attributable
to holders of redeemable units
Fair value of securities on loan and collateral received as at:
Fair value of securities loaned
Fair value of collateral received
December 31
2013
3 304
3 370
237
241
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
RBC 1-5 Year Laddered Corporate Bond ETF
December 31
2014
December 31
2013
17.9
–
January 1
2013
51 165
80
32 444
67
51 245
32 511
December 31
2013
Securities lending revenue ($000s)
(see note 7 in the generic notes)
December 31
2014
December 31
2013
Please see the generic notes at the back of the financial statements.
92
991
13
1 004
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC TARGET 2017 CORPORATE BOND INDEX ETF
December 31, 2014
Par Value
(000s) Security
Coupon
Rate %
Maturity
Cost
CANADIAN BONDS
CORPORATE
820 407 International Inc.
820 Alimentation Couche Tard Inc.
1 313 Bank of Montreal
1 020 Bank of Montreal
2 393 Bank of Montreal
3 008 Bank of Nova Scotia
1 930 Bank of Nova Scotia
1 878 Bell Canada
956 Bell Canada
1 641 Caisse Centrale Desjardins du Quebec
2 732 Canadian Imperial Bank of Commerce
2 272 Canadian Imperial Bank of Commerce
1 367 Ford Credit Canada Ltd.
3 281 GE Capital Canada Funding Co.
1 230 Greater Toronto Airports Authority
2 735 HSBC Bank Canada
1 094 HSBC Bank Canada*, FRN
1 641 Hydro One Inc.
820 National Bank of Canada*, FRN
1 367 Rogers Communications Inc.
3 555 Royal Bank of Canada†
1 065 Shaw Communications Inc.
1 984 Sun Life Financial Inc.*
1 859 TELUS Corp.
1 367 The Manufacturers Life Insurance Co.*, FRN
3 281 The Toronto-Dominion Bank*, FRN
820 Tim Hortons Inc.
683 Toronto Hydro Corp.
820 TransCanada PipeLines Ltd.
1 230 VW Credit Canada Inc.
3.870
2.861
5.450
4.550
2.240
4.100
2.898
5.000
4.370
3.502
3.950
2.350
4.875
5.530
4.850
3.558
4.800
5.180
3.261
3.000
3.660
5.700
4.380
4.950
4.165
5.763
4.200
5.150
5.100
2.450
24-Nov-17
01-Nov-17
17-Jul-17
01-Aug-17
11-Dec-17
08-Jun-17
03-Aug-22
15-Feb-17
13-Sep-17
05-Oct-17
14-Jul-17
18-Oct-17
08-Feb-17
17-Aug-17
01-Jun-17
04-Oct-17
10-Apr-22
18-Oct-17
11-Apr-22
06-Jun-17
25-Jan-17
02-Mar-17
02-Mar-22
15-Mar-17
01-Jun-22
18-Dec-06
01-Jun-17
14-Nov-17
11-Jan-17
14-Nov-17
$
869
828
1 467
1 107
2 401
3 213
1 976
2 039
1 013
1 715
2 906
2 304
1 460
3 659
1 351
2 862
1 175
1 837
842
1 400
3 731
1 171
2 083
2 021
1 436
3 684
868
764
900
1 242
Fair
Value
$
% of Net
Assets
865
833
1 432
1 091
2 419
3 175
1 973
1 999
1 015
1 714
2 878
2 303
1 445
3 592
1 325
2 857
1 160
1 797
843
1 402
3 693
1 149
2 086
1 983
1 438
3 618
831
748
874
1 250
TOTAL CANADIAN BONDS
54 324
53 78898.7
TOTAL INVESTMENTS
$ 54 324
53 78898.7
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
7071.3
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
54 495
100.0
* Interest rate risk (see note 4 in the generic notes).
† Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
93
FINANCIAL STATEMENTS
RBC TARGET 2017 CORPORATE BOND INDEX ETF
Statements of Financial Position (in $000s except per unit amounts)
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
December 31
2014
December 31
2013
$
$
53 788
265
586
54 639
23 547
131
260
23 938
January 1
2013
$
16 477
59
184
16 720
129
15
82
7
43
3
144
89
46
$
54 495
$
23 849
$
16 674
Investments at cost
$
54 324
$
23 762
$
16 374
NAV PER UNIT
$
19.82
$
19.87
$
20.19
The accompanying notes are an integral part of these financial statements.
94
FINANCIAL STATEMENTS
RBC TARGET 2017 CORPORATE BOND INDEX ETF
Statements of Cash Flow (in $000s)
Statements of Comprehensive Income
(in $000s except per unit amounts)
For the periods ended December 31
(see note 2 in the generic notes)
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
$
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
Board of Governors costs
GST/HST
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
$
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
$
For the periods ended December 31
(see note 2 in the generic notes)
2013
2014
1 578
$
816
1
(41)
(321)
1 217
–
–
(317)
499
100
3
9
112
1 105
$
60
3
6
69
430
0.56
$
0.43
Interest received
Dividends received, net of withholding taxes
2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
$
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
$
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
$
$
1 105
$
41
321
(326)
8
(34 895)
4 292
(29 454)
–
317
(76)
4
(9 828)
2 441
(6 712)
30 947
–
(1 359)
29 588 $
134
131
265 $
7 479
–
(695)
6 784
72
59
131
$
$
740
–
1 252
–
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
The accompanying notes are an integral part of these financial statements.
95
430
FINANCIAL STATEMENTS
RBC TARGET 2017 CORPORATE BOND INDEX ETF
Statements of Changes in NAV (in $000s)
Total
2014
For the periods ended December 31
(see note 2 in the generic notes)
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
$
23 849
1 105
–
30 947
$
2013
16 674
430
–
7 479
4
–
–
–
30 951
(1 406)
(4)
–
7 479
(734)
–
–
(1 410)
30 646
54 495 $
(734)
7 175
23 849
The accompanying notes are an integral part of these financial statements.
96
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2017 CORPORATE BOND INDEX ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, had prevailing interest rates risen or
lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 2.7% (December 31, 2013 – 3.2%, January 1,
2013 – 4.0%). In practice, actual results could differ from this
sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide income
for a limited period of time ending on its termination date by
replicating, to the extent possible, the investment results that
correspond generally to the performance, before fees and
expenses, of the FTSE TMX Canada 2017 Maturity Corporate
Bond Index*.
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
Financial instrument risk and capital management
(see note 4 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014, December 31, 2013 and January 1, 2013.
Credit risk (%)
December 31, 2014
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
Rating
AA
A
BBB
Total
December 31
2014
December 31
2013
January 1
2013
40.1
36.9
23.0
100.0
38.8
36.2
25.0
100.0
35.3
42.3
22.4
100.0
December 31, 2013
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Corporate Bonds
Financial
Communication
Infrastructure
Industrial
Energy
Other Net Assets
December 31
2014
December 31
2013
January 1
2013
71.5
13.8
8.7
3.1
1.6
1.3
69.0
15.1
9.5
3.3
1.8
1.3
67.8
15.7
9.9
3.5
1.9
1.2
January 1, 2013
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
December 31
2013
January 1
2013
–
100.0
–
–
100.0
–
100.0
–
–
100.0
–
100.0
–
–
100.0
Total
–
–
–
53 788
53 788
100.0
–
–
–
53 788
53 788
100.0
Level 2
Level 3
Level 1
–
–
–
Level 1
–
–
–
23 547 23 547 100.0 –
–
–
Total
23 547
23 547
100.0
Level 2
Level 3
Total
16 447
16 447
100.0
–
–
–
16 447
16 447
100.0
For the periods ended December 31, 2014, December 31,
2013 and January 1, 2013, there were no transfers of financial
instruments between Level 1 or Level 2 and Level 3.
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services.
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
December 31
2014
Level 3
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Interest rate risk (%)
Term to maturity
Level 2
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Concentration risk (%)
Investment mix
Level 1
Fixed-income
and debt securities
Total financial instruments
% of total portfolio
The management fee of the ETF is calculated at the following
annual percentage, before GST/HST, of the daily net asset
value of the ETF.
Until December 31, 2016
Effective January 1, 2017
The management fee was reduced to 0.25% from 0.30% effective January 15, 2014.
Taxes ($000s) (see note 6 in the generic notes)
The Fund had no capital or non-capital losses as at
December 31, 2014.
Please see the generic notes at the back of the financial statements.
97
0.25%
0.20%
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2017 CORPORATE BOND INDEX ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
Transition to IFRS ($000s) (see note 9 in the
generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
Reconciliation of net assets and comprehensive income as
previously reported under Canadian GAAP to IFRS:
For the periods ended December 31
(see note 2 in the generic notes)
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
2014
2013
1 200
1 550
–
–
2 750
826
374
–
–
1 200
Net assets
Net assets as reported under Canadian GAAP
Revaluation of investments at FVTPL
Net assets attributable to holders
of redeemable units
Comprehensive income
Comprehensive income as reported
under Canadian GAAP
Revaluation of investments at FVTPL
(see note 3 and note 9 in the generic notes)
Increase (decrease) in net assets attributable
to holders of redeemable units
Fair value of securities on loan and collateral received as at:
Fair value of securities loaned
Fair value of collateral received
December 31
2013
7 858
8 015
401
409
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
RBC 1-5 Year Laddered Corporate Bond ETF
December 31
2014
December 31
2013
26.4
–
January 1
2013
23 806
43
16 636
38
23 849
16 674
December 31
2013
Securities lending revenue ($000s)
(see note 7 in the generic notes)
December 31
2014
December 31
2013
Please see the generic notes at the back of the financial statements.
98
425
5
430
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC TARGET 2018 CORPORATE BOND INDEX ETF
December 31, 2014
Par Value
(000s) Security
Coupon
Rate %
Maturity
Cost
CANADIAN BONDS
CORPORATE
1 429 American Express Canada Credit Corp.
405 Aon Finance NS 1 ULC
2 303 Bank of Montreal
1 835 Bank of Montreal*, FRN
1 996 Bank of Nova Scotia
1 872 Bank of Nova Scotia
1 244 bcIMC Realty Corp.
1 244 Bell Canada
500 Bell Canada
1 003 Bell Canada
1 119 Canadian Imperial Bank of Commerce*, FRN
1 006 Dollarama Inc.
745 Enbridge Pipelines Inc.
917 EnCana Corp.
371 Enmax Corp.
503 EPCOR Utilities Inc.
430 Finning International Inc.
1 244 Ford Credit Canada Ltd.
1 005 GE Capital Canada Funding Co.
1 244 Greater Toronto Airports Authority
1 244 Great-West Lifeco Finance Delaware LP II*, FRN
1 880 Hydro One Inc.
961 Manulife Financial Corp.
1 873 National Bank of Canada
2 177 Royal Bank of Canada†
2 118 Royal Bank of Canada†
1 243 Sobeys Inc.
706 Sun Life Financial Inc.*, FRN
867 Suncor Energy Inc.
1 422 The Toronto-Dominion Bank*, FRN
1 244 Toyota Credit Canada Inc.
1 243 Toyota Credit Canada Inc.
814 VW Credit Canada Inc.
2 496 Wells Fargo Canada Corp.
2.310
4.760
3.210
6.170
2.242
2.750
2.790
4.400
4.880
3.500
6.000
3.095
6.620
5.800
6.150
5.800
6.020
3.700
4.400
5.260
7.127
2.780
5.505
2.794
3.770
2.890
3.520
5.590
5.800
5.828
2.750
2.800
2.800
2.780
29-Mar-18
08-Mar-18
13-Sep-18
28-Mar-23
22-Mar-18
13-Aug-18
02-Aug-18
16-Mar-18
26-Apr-18
10-Sep-18
06-Jun-23
05-Nov-18
19-Nov-18
18-Jan-18
19-Jun-18
31-Jan-18
01-Jun-18
02-Aug-18
08-Feb-18
17-Apr-18
26-Jun-68
09-Oct-18
26-Jun-18
09-Aug-18
30-Mar-18
11-Oct-18
08-Aug-18
30-Jan-23
22-May-18
09-Jul-23
18-Jul-18
21-Nov-18
20-Aug-18
15-Nov-18
$
1 430 436 2 383 2 114 1 997 1 905 1 268 1 339 542 1 037 1 287 1 018 900 1 033 421 573 494 1 291 1 083 1 407 1 462 1 921 1 072 1 907 2 322 2 161 1 276 780 990 1 630 1 266 1 263 828 2 526 Fair
Value
$
% of Net
Assets
1 445
431
2 402
2 063
2 015
1 923
1 282
1 331
543
1 050
1 258
1 027
871
1 011
415
562
485
1 300
1 080
1 383
1 452
1 945
1 070
1 925
2 314
2 183
1 287
776
971
1 597
1 278
1 280
836
2 562
TOTAL CANADIAN BONDS
45 362
45 35398.9
TOTAL INVESTMENTS
$ 45 362
45 35398.9
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
4971.1
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
45 850
100.0
* Interest rate risk (see note 4 in the generic notes).
† Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
99
FINANCIAL STATEMENTS
RBC TARGET 2018 CORPORATE BOND INDEX ETF
Statements of Financial Position (in $000s except per unit amounts)
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Due from investment dealers
Subscriptions receivable
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
December 31
2014
December 31
2013
$
$
45 353
136
–
995
460
46 944
19 421
57
13
–
199
19 690
January 1
2013
$
12 036
71
–
–
133
12 240
994
88
12
–
63
5
–
43
3
1 094
68
46
$
45 850
$
19 622
$
12 194
Investments at cost
$
45 362
$
19 690
$
11 908
NAV PER UNIT
$
19.93
$
19.62
$
20.14
The accompanying notes are an integral part of these financial statements.
100
FINANCIAL STATEMENTS
RBC TARGET 2018 CORPORATE BOND INDEX ETF
Statements of Cash Flow (in $000s)
Statements of Comprehensive Income
(in $000s except per unit amounts)
For the periods ended December 31
(see note 2 in the generic notes)
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
$
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
Board of Governors costs
GST/HST
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
$
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
$
For the periods ended December 31
(see note 2 in the generic notes)
2013
2014
1 212
$
773
2
1
261
1 476
1
(117)
(397)
260
83
3
9
95
1 381
$
51
3
5
59
201
0.84
$
0.23
Interest received
Dividends received, net of withholding taxes
2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase (decrease) in NAV
$
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
$
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
$
$
1 381
$
117
397
(66)
2
(20 563)
12 651
(7 261)
(1)
(261)
(261)
7
(25 890)
1 227
(23 798)
24 924
–
(1 047)
23 877 $
79
57
136 $
8 044
(111)
(686)
7 247
(14)
71
57
$
$
707
–
951
–
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
The accompanying notes are an integral part of these financial statements.
101
201
FINANCIAL STATEMENTS
RBC TARGET 2018 CORPORATE BOND INDEX ETF
Statements of Changes in NAV (in $000s)
Total
2014
For the periods ended December 31
(see note 2 in the generic notes)
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
$
19 622
1 381
–
25 919
$
2013
12 194
201
–
8 044
–
–
–
(111)
25 919
(1 072)
–
–
7 933
(706)
–
–
(1 072)
26 228
45 850 $
(706)
7 428
19 622
The accompanying notes are an integral part of these financial statements.
102
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2018 CORPORATE BOND INDEX ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, had prevailing interest rates risen or
lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 3.3% (December 31, 2013 – 4.1%, January 1,
2013 – 4.6%). In practice, actual results could differ from this
sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide income
for a limited period of time ending on its termination date by
replicating, to the extent possible, the investment results that
correspond generally to the performance, before fees and
expenses, of the FTSE TMX Canada 2018 Maturity Corporate
Bond Index*.
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
Financial instrument risk and capital management
(see note 4 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014, December 31, 2013 and January 1, 2013.
Credit risk (%)
December 31, 2014
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
Rating
AAA
AA
A
BBB
Total
December 31
2014
December 31
2013
January 1
2013
5.1
31.5
43.8
19.6
100.0
5.1
31.3
40.6
23.0
100.0
12.6
27.4
37.1
22.9
100.0
Level 1
Level 2
Level 3
Total
–
–
–
45 353
45 353
100.0
–
–
–
45 353
45 353
100.0
Level 2
Level 3
Fixed-income
and debt securities
Total financial instruments
% of total portfolio
December 31, 2013
Level 1
Fixed-income and debt securities
Total financial instruments
% of total portfolio
–
–
–
19 239 19 239 100.0 –
–
–
Total
19 239
19 239
100.0
Concentration risk (%)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Investment mix
Corporate Bonds
Financial
Infrastructure
Communication
Energy
Industrial
Real Estate
Provincial Bonds
Other Net Assets
December 31
2014
December 31
2013
January 1
2013
68.0
9.4
6.4
6.2
6.1
2.8
–
1.1
67.9
9.4
6.4
6.4
6.1
2.8
–
1.0
53.6
10.1
7.9
12.2
2.1
–
12.8
1.3
January 1, 2013
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
December 31
2013
January 1
2013
–
100.0
–
–
100.0
–
100.0
–
–
100.0
–
–
100.0
–
100.0
Level 2
Level 3
Total
12 036
12 036
100.0
–
–
–
12 036
12 036
100.0
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services.
The management fee of the ETF is calculated at the following
annual percentage, before GST/HST, of the daily net asset
value of the ETF.
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
December 31
2014
–
–
–
For the periods ended December 31, 2014, December 31,
2013 and January 1, 2013, there were no transfers of financial
instruments between Level 1 or Level 2 and Level 3.
Interest rate risk (%)
Term to maturity
Level 1
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Until December 31, 2017
Effective January 1, 2018
The management fee was reduced to 0.25% from 0.30% effective January 15, 2014.
Please see the generic notes at the back of the financial statements.
103
0.25%
0.20%
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2018 CORPORATE BOND INDEX ETF
December 31, 2014
Taxes ($000s) (see note 6 in the generic notes)
Transition to IFRS ($000s) (see note 9 in the
generic notes)
The non-capital and capital losses as at December 31, 2014
for the Fund were approximately:
Capital losses
Non-capital losses
Reconciliation of net assets and comprehensive income as
previously reported under Canadian GAAP to IFRS:
5
–
Net assets
Net assets as reported under Canadian GAAP
Revaluation of investments at FVTPL
Net assets attributable to holders
of redeemable units
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the periods ended December 31
(see note 2 in the generic notes)
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
2014
2013
1 000
1 300
–
–
2 300
606
400
–
(6)
1 000
Comprehensive income
Comprehensive income as reported
under Canadian GAAP
Revaluation of investments at FVTPL
(see note 3 and note 9 in the generic notes)
Increase (decrease) in net assets attributable
to holders of redeemable units
Fair value of securities on loan and collateral received as at:
December 31
2014
December 31
2013
2 522
2 573
2 508
2 558
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
RBC 1-5 Year Laddered Corporate Bond ETF
January 1
2013
19 583
39
12 166
28
19 622
12 194
December 31
2013
Securities lending revenue ($000s)
(see note 7 in the generic notes)
Fair value of securities loaned
Fair value of collateral received
December 31
2013
December 31
2014
December 31
2013
31.4
–
Please see the generic notes at the back of the financial statements.
104
190
11
201
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC TARGET 2019 CORPORATE BOND INDEX ETF
December 31, 2014
Par Value
(000s) Security
Coupon
Rate %
Maturity
Cost
CANADIAN BONDS
CORPORATE
1 095 Alimentation Couche Tard Inc.
5 016 Bank of Nova Scotia*
699
Bell Canada
2 812 Brookfield Asset Management Inc.
1 171 Cameco Corp.
1 403 CU Inc.
1 873 Enbridge Inc.
1 404 Enbridge Pipelines Inc.
936 Fairfax Financial Holdings Ltd.
1 122 GE Capital Canada Funding Co.
3 281 GE Capital Canada Funding Co.
2 812 Greater Toronto Airports Authority
1 702 IGM Financial Inc.
1 105 Intact Financial Corp.
2 176 Manulife Financial Corp.
4 672 National Bank of Canada
1 637 NAV Canada
1 167 Rogers Communications Inc.
2 967 Royal Bank of Canada†
2 342 Royal Bank of Canada*†
2 927 Shaw Communications Inc.
702 SNC-Lavalin Group Inc.
1 357 Sun Life Financial Inc.
1 403 TELUS Corp.
1 167 Toronto Hydro Corp.
687
TransAlta Corp.
4 956 Wells Fargo Canada Corp.
420 Westcoast Energy Inc.
Fair
Value
% of Net
Assets
3.319
01-Nov-19
$
1 115
$
1 123
3.036
18-Oct-24
5 093
5 142
5.520
26-Feb-19779787
3.950
09-Apr-19
2 927
2 958
5.670
02-Sep-19
1 321
1 310
6.800
13-Aug-19
1 724
1 694
4.770
02-Sep-19
2 076
2 058
4.490
12-Nov-19
1 557
1 550
7.500
19-Aug-19
1 085
1 089
3.550
11-Jun-19
1 179
1 190
5.680
10-Sep-19
3 783
3 789
5.960
20-Nov-19
3 346
3 320
7.350
08-Apr-19
2 066
2 038
5.410
03-Sep-19
1 248
1 248
7.768
08-Apr-19
2 672
2 643
2.404
28-Oct-19
4 700
4 706
5.304
17-Apr-19
1 879
1 864
5.380
04-Nov-19
1 313
1 317
2.980
07-May-19
3 050
3 077
2.990
06-Dec-24
2 364
2 395
5.650
01-Oct-19
3 294
3 323
6.190
03-Jul-19
806
808
5.700
02-Jul-19
1 550
1 556
5.050
04-Dec-19
1 567
1 571
4.490
12-Nov-19
1 292
1 294
6.400
18-Nov-19767763
2.944
25-Jul-19
5 050
5 122
5.600
16-Jan-19
478
472
TOTAL CANADIAN BONDS
60 081
60 20799.0
TOTAL INVESTMENTS
$ 60 081
60 20799.0
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
6041.0
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
60 811
100.0
* Interest rate risk (see note 4 in the generic notes).
† Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
105
FINANCIAL STATEMENTS
RBC TARGET 2019 CORPORATE BOND INDEX ETF
Statements of Financial Position (in $000s except per unit amounts)
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Due from investment dealers
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
December 31
2014
December 31
2013
$
$
60 207
116
–
663
60 986
21 513
39
18
257
21 827
January 1
2013
$
14 199
39
–
167
14 405
159
16
75
5
50
3
175
80
53
$
60 811
$
21 747
$
14 352
Investments at cost
$
60 081
$
21 942
$
14 072
NAV PER UNIT
$
20.27
$
19.77
$
20.34
The accompanying notes are an integral part of these financial statements.
106
FINANCIAL STATEMENTS
RBC TARGET 2019 CORPORATE BOND INDEX ETF
Statements of Cash Flow (in $000s)
Statements of Comprehensive Income
(in $000s except per unit amounts)
For the periods ended December 31
(see note 2 in the generic notes)
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
$
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
Board of Governors costs
GST/HST
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
$
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
$
For the periods ended December 31
(see note 2 in the generic notes)
2013
2014
1 836
$
830
3
7
554
2 400
1
(13)
(555)
263
108
3
8
119
2 281
$
56
3
5
64
199
1.08
$
0.21
Interest received
Dividends received, net of withholding taxes
2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase (decrease) in NAV
$
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
$
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
$
$
2 281
$
(7)
(554)
(406)
11
(46 522)
8 407
(36 790)
13
555
(90)
2
(9 391)
1 491
(7 221)
41 463
(3 039)
(1 557)
36 867 $
77
39
116 $
8 060
(113)
(726)
7 221
–
39
39
$
$
740
–
1 430
–
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
The accompanying notes are an integral part of these financial statements.
107
199
FINANCIAL STATEMENTS
RBC TARGET 2019 CORPORATE BOND INDEX ETF
Statements of Changes in NAV (in $000s)
Total
2014
For the periods ended December 31
(see note 2 in the generic notes)
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
$
21 747
2 281
–
41 463
$
2013
14 352
199
–
8 060
29
(3 039)
2
(113)
38 453
(1 641)
(29)
–
7 949
(751)
–
(2)
(1 670)
39 064
60 811 $
(753)
7 395
21 747
The accompanying notes are an integral part of these financial statements.
108
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2019 CORPORATE BOND INDEX ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, had prevailing interest rates risen or
lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 4.2% (December 31, 2013 – 4.9%, January 1,
2013 – 5.6%). In practice, actual results could differ from this
sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide income
for a limited period of time ending on its termination date by
replicating, to the extent possible, the investment results that
correspond generally to the performance, before fees and
expenses, of the FTSE TMX Canada 2019 Maturity Corporate
Bond Index*.
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
Financial instrument risk and capital management
(see note 4 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014, December 31, 2013 and January 1, 2013.
Credit risk (%)
December 31, 2014
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
Rating
AA
A
BBB
Total
December 31
2014
December 31
2013
January 1
2013
16.0
61.1
22.9
100.0
9.1
67.5
23.4
100.0
19.5
55.7
24.8
100.0
December 31, 2013
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Other Net Assets
December 31
2014
December 31
2013
January 1
2013
55.9
11.5
10.7
10.7
10.2
1.0
53.2
12.7
12.0
11.8
9.2
1.1
51.8
13.4
12.9
12.7
8.1
1.1
January 1, 2013
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
December 31
2013
January 1
2013
–
100.0
–
–
100.0
–
–
100.0
–
100.0
–
–
100.0
–
100.0
Total
–
–
–
60 207
60 207
100.0
–
–
–
60 207
60 207
100.0
Level 2
Level 3
Level 1
–
–
–
Level 1
–
–
–
21 513 21 513 100.0 –
–
–
Total
21 513
21 513
100.0
Level 2
Level 3
Total
14 199
14 199
100.0
–
–
–
14 199
14 199
100.0
For the periods ended December 31, 2014, December 31,
2013 and January 1, 2013, there were no transfers of financial
instruments between Level 1 or Level 2 and Level 3.
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services.
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
December 31
2014
Level 3
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Interest rate risk (%)
Term to maturity
Level 2
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Concentration risk (%)
Investment mix
Level 1
Fixed-income
and debt securities
Total financial instruments
% of total portfolio
The management fee of the ETF is calculated at the following
annual percentage, before GST/HST, of the daily net asset
value of the ETF.
Until December 31, 2018
Effective January 1, 2019
The management fee was reduced to 0.25% from 0.30% effective January 15, 2014.
Taxes ($000s) (see note 6 in the generic notes)
The Fund had no capital or non-capital losses as at
December 31, 2014.
Please see the generic notes at the back of the financial statements.
109
0.25%
0.20%
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2019 CORPORATE BOND INDEX ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
Transition to IFRS ($000s) (see note 9 in the
generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
Reconciliation of net assets and comprehensive income as
previously reported under Canadian GAAP to IFRS:
For the periods ended December 31
(see note 2 in the generic notes)
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
2014
2013
1 100
2 050
–
(150)
3 000
706
400
–
(6)
1 100
Net assets
Net assets as reported under Canadian GAAP
Revaluation of investments at FVTPL
Net assets attributable to holders
of redeemable units
Comprehensive income
Comprehensive income as reported
under Canadian GAAP
Revaluation of investments at FVTPL
(see note 3 and note 9 in the generic notes)
Increase (decrease) in net assets attributable
to holders of redeemable units
Fair value of securities on loan and collateral received as at:
Fair value of securities loaned
Fair value of collateral received
December 31
2013
8 298
8 463
1 213
1 237
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
RBC 1-5 Year Laddered Corporate Bond ETF
December 31
2014
December 31
2013
23.7
–
January 1
2013
21 695
52
14 310
42
21 747
14 352
December 31
2013
Securities lending revenue ($000s)
(see note 7 in the generic notes)
December 31
2014
December 31
2013
Please see the generic notes at the back of the financial statements.
110
189
10
199
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC TARGET 2020 CORPORATE BOND INDEX ETF
December 31, 2014
Par Value
(000s) Security
Coupon
Rate %
Maturity
Cost
CANADIAN BONDS
CORPORATE
357 407 International Inc.
1 307 Bank of Montreal
267 Brookfield Renewable Power Inc.
1 070 Capital Desjardins Inc.
595
Enbridge Inc.
416 Enbridge Pipelines Inc.
164 Fairfax Financial Holdings Ltd.
270 Genworth MI Canada Inc.
590 Great-West Lifeco Inc.
1 248 HSBC Bank Canada
357 Hydro One Inc.
208 Loblaw Cos Ltd.
356 OMERS Realty Corp.
534 Rogers Communications Inc.
297 Shaw Communications Inc.
357
TELUS Corp.
386 Teranet Holdings LP
595 Thomson Reuters Corp.
1 346 Toronto-Dominion Bank
149 Westcoast Energy Inc.
Fair
Value
% of Net
Assets
4.990
16-Jun-20
$
408
$
409
2.840
04-Jun-20
1 308
1 344
5.140
13-Oct-20
288
296
5.187
05-May-20
1 195
1 209
4.530
09-Mar-20650649
4.450
06-Apr-20
460
460
7.250
22-Jun-20
186
191
5.680
15-Jun-20
294
307
4.650
13-Aug-20
645
658
2.938
14-Jan-20
1 264
1 286
4.400
01-Jun-20
396
399
5.220
18-Jun-20
232
235
3.203
24-Jul-20
363
372
4.700
29-Sep-20
576
590
5.500
07-Dec-20
330
340
5.050
23-Jul-20397402
4.807
16-Dec-20
420
427
4.350
30-Sep-20
640
644
2.563
24-Jun-20
1 363
1 364
4.570
02-Jul-20
164
164
11 579
11 74681.9
PROVINCIAL
249 CDP Financial Inc.
4.600
15-Jul-20
278
280
543
Hydro Quebec
11.000
15-Aug-20839804
1 129 Province of Quebec
4.500
01-Dec-20
1 267
1 285
2 384
2 36916.5
TOTAL CANADIAN BONDS
13 963
14 11598.4
TOTAL INVESTMENTS
$ 13 963
14 11598.4
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
2281.6
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
14 343
100.0
The accompanying notes are an integral part of the financial statements.
111
FINANCIAL STATEMENTS
RBC TARGET 2020 CORPORATE BOND INDEX ETF
Statements of Financial Position (in $000s except per unit amounts)
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Subscriptions receivable
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
December 31
2014
December 31
2013
$
$
14 115
103
1 022
131
15 371
9 760
81
–
100
9 941
January 1
2013
$
10 177
59
–
95
10 331
988
39
1
–
34
3
–
34
2
1 028
37
36
$
14 343
$
9 904
$
10 295
Investments at cost
$
13 963
$
9 926
$
9 981
NAV PER UNIT
$
20.49
$
19.81
$
20.59
The accompanying notes are an integral part of these financial statements.
112
FINANCIAL STATEMENTS
RBC TARGET 2020 CORPORATE BOND INDEX ETF
Statements of Cash Flow (in $000s)
Statements of Comprehensive Income
(in $000s except per unit amounts)
For the periods ended December 31
(see note 2 in the generic notes)
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
$
Net realized gain (loss) on investments
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
Board of Governors costs
GST/HST
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
$
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
$
For the periods ended December 31
(see note 2 in the generic notes)
2014
2013
428 $
(16)
318
730
458
(50)
(361)
47
24
3
3
30
700
$
30
3
4
37
10
1.37
$
0.02
Interest received
Dividends received, net of withholding taxes
2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase (decrease) in NAV
$
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
$
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
$
$
700
$
16
(318)
(31)
(2)
(7 357)
4 292
(2 700)
50
361
(5)
1
(4 523)
4 529
423
5 093
(1 986)
(385)
2 722 $
22
81
103 $
2 001
(1 980)
(422)
(401)
22
59
81
$
$
453
–
397
–
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
The accompanying notes are an integral part of these financial statements.
113
10
FINANCIAL STATEMENTS
RBC TARGET 2020 CORPORATE BOND INDEX ETF
Statements of Changes in NAV (in $000s)
Total
2014
For the periods ended December 31
(see note 2 in the generic notes)
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
$
9 904
700
–
6 115
$
2013
10 295
10
–
2 001
–
(1 986)
–
(1 980)
4 129
(390)
–
–
21
(422)
–
–
(390)
4 439
14 343 $
(422)
(391)
9 904
The accompanying notes are an integral part of these financial statements.
114
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2020 CORPORATE BOND INDEX ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, had prevailing interest rates risen or
lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 4.8% (December 31, 2013 – 5.5%, January 1,
2013 – 6.3%). In practice, actual results could differ from this
sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide income
for a limited period of time ending on its termination date by
replicating, to the extent possible, the investment results that
correspond generally to the performance, before fees and
expenses, of the FTSE TMX Canada 2020 Maturity Corporate
Bond Index*.
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
Financial instrument risk and capital management
(see note 4 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014, December 31, 2013 and January 1, 2013.
Credit risk (%)
December 31, 2014
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
Rating
AAA
AA
A
BBB
Total
December 31
2014
December 31
2013
January 1
2013
2.0
30.9
41.6
25.5
100.0
2.1
26.3
46.8
24.8
100.0
5.5
23.2
47.6
23.7
100.0
Level 1
Level 2
Level 3
Total
–
–
–
14 115
14 115
100.0
–
–
–
14 115
14 115
100.0
Level 1
Level 2
Level 3
Fixed-income
and debt securities
Total financial instruments
% of total portfolio
December 31, 2013
Fixed-income and debt securities
Total financial instruments
% of total portfolio
–
–
–
9 760 9 760 100.0 –
–
–
Total
9 760
9 760
100.0
Concentration risk (%)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Investment mix
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Real Estate
Provincial Bonds
Other Net Assets
December 31
2014
December 31
2013
January 1
2013
44.4
13.8
10.9
5.6
4.6
2.6
16.5
1.6
39.5
14.5
11.7
6.0
5.1
–
21.7
1.5
17.3
18.8
13.5
6.0
5.1
–
38.1
1.2
January 1, 2013
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
December 31
2013
January 1
2013
–
–
100.0
–
100.0
–
–
100.0
–
100.0
–
–
100.0
–
100.0
Level 2
Level 3
Total
10 177
10 177
100.0
–
–
–
10 177
10 177
100.0
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services.
The management fee of the ETF is calculated at the following
annual percentage, before GST/HST, of the daily net asset
value of the ETF.
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
December 31
2014
–
–
–
For the periods ended December 31, 2014, December 31,
2013 and January 1, 2013, there were no transfers of financial
instruments between Level 1 or Level 2 and Level 3.
Interest rate risk (%)
Term to maturity
Level 1
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Until December 31, 2019
Effective January 1, 2020
The management fee was reduced to 0.25% from 0.30% effective January 15, 2014.
Please see the generic notes at the back of the financial statements.
115
0.25%
0.20%
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2020 CORPORATE BOND INDEX ETF
December 31, 2014
Taxes ($000s) (see note 6 in the generic notes)
Transition to IFRS ($000s) (see note 9 in the
generic notes)
The non-capital and capital losses as at December 31, 2014
for the Fund were approximately:
Capital losses
Non-capital losses
Reconciliation of net assets and comprehensive income as
previously reported under Canadian GAAP to IFRS:
35
–
Net assets
Net assets as reported under Canadian GAAP
Revaluation of investments at FVTPL
Net assets attributable to holders
of redeemable units
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
January 1
2013
9 883
21
10 274
21
9 904
10 295
December 31
2013
For the periods ended December 31
(see note 2 in the generic notes)
2014
2013
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
500
300
–
(100)
700
500
100
–
(100)
500
Comprehensive income
Comprehensive income as reported
under Canadian GAAP
Revaluation of investments at FVTPL
(see note 3 and note 9 in the generic notes)
Increase (decrease) in net assets attributable
to holders of redeemable units
Securities lending revenue ($000s)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
Fair value of securities loaned
Fair value of collateral received
December 31
2013
December 31
2014
December 31
2013
781
797
–
–
Please see the generic notes at the back of the financial statements.
116
10
–
10
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC TARGET 2021 CORPORATE BOND INDEX ETF
December 31, 2014
Par Value
(000s) Security
Coupon
Rate %
Maturity
Cost
CANADIAN BONDS
CORPORATE
453 407 International Inc.
589 Bank of Montreal
388 Bank of Nova Scotia
445 Bank of Nova Scotia
345
Bell Canada
359 Brookfield Asset Management Inc.
525 Capital Desjardins Inc.*
453
Enbridge Inc.
269 Fairfax Financial Holdings Ltd.
853 HSBC Bank Canada
206 Intact Financial Corp.
340 OMERS Realty Corp.
539 Rogers Communications Inc.
387 Royal Bank of Canada†
340 Sun Life Financial Inc.
624 Thomson Reuters Corp.
340 Toronto Hydro Corp.
567 TransCanada PipeLines Ltd.
390 Wells Fargo Canada Corp.
Fair
Value
% of Net
Assets
4.300
26-May-21
$
505
$
507
3.400
23-Apr-21
606
622
3.270
11-Jan-21
403
407
2.873
04-Jun-21
455
456
4.950
19-May-21388388
5.300
01-Mar-21
398
401
4.954
15-Dec-26
592
593
3.160
11-Mar-21466460
6.400
25-May-21
298
303
2.908
29-Sep-21
870
871
4.700
18-Aug-21
228
230
2.971
05-Apr-21
350
351
5.340
22-Mar-21
613
616
2.860
04-Mar-21392396
4.570
23-Aug-21
372
380
3.309
12-Nov-21
632
634
3.540
18-Nov-21
358
364
3.650
15-Nov-21
604
603
3.040
29-Jan-21
397
401
TOTAL CANADIAN BONDS
8 927
8 98399.2
TOTAL INVESTMENTS
$
8 927
8 98399.2
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
770.8
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
9 060
100.0
* Interest rate risk (see note 4 in the generic notes).
† Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
117
FINANCIAL STATEMENTS
RBC TARGET 2021 CORPORATE BOND INDEX ETF
Statements of Financial Position (in $000s except per unit amounts)
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
December 31
2014
December 31
2013
$
$
8 983
26
75
9 084
3 792
27
28
3 847
January 1
2013
$
3 961
28
27
4 016
22
2
12
1
20
1
24
13
21
$
9 060
$
3 834
$
3 995
Investments at cost
$
8 927
$
3 932
$
3 947
NAV PER UNIT
$
20.13
$
19.17
$
19.98
The accompanying notes are an integral part of these financial statements.
118
FINANCIAL STATEMENTS
RBC TARGET 2021 CORPORATE BOND INDEX ETF
Statements of Cash Flow (in $000s)
Statements of Comprehensive Income
(in $000s except per unit amounts)
For the periods ended December 31
(see note 2 in the generic notes)
INCOME (see note 3 in the generic notes)
Interest for distribution purposes
$
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
GST/HST
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
$
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
$
For the periods ended December 31
(see note 2 in the generic notes)
2013
2014
239
$
161
1
9
196
445
1
(13)
(154)
(5)
16
2
18
427
$
12
2
14
(19)
1.38
$
(0.10)
Interest received
Dividends received, net of withholding taxes
2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase (decrease) in NAV
$
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
$
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
$
$
427
$
(9)
(196)
(47)
1
(8 885)
3 899
(4 810)
13
154
(1)
–
(426)
428
149
5 012
–
(203)
4 809 $
(1)
27
26 $
–
–
(150)
(150)
(1)
28
27
$
$
160
–
192
–
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
The accompanying notes are an integral part of these financial statements.
119
(19)
FINANCIAL STATEMENTS
RBC TARGET 2021 CORPORATE BOND INDEX ETF
Statements of Changes in NAV (in $000s)
Total
2014
For the periods ended December 31
(see note 2 in the generic notes)
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
$
3 834
427
–
5 012
$
2013
3 995
(19)
–
–
9
–
–
–
5 021
(213)
(9)
–
–
(142)
–
–
(222)
5 226
9 060 $
(142)
(161)
3 834
The accompanying notes are an integral part of these financial statements.
120
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2021 CORPORATE BOND INDEX ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, had prevailing interest rates risen or
lowered by 1%, with all other factors kept constant, the ETF’s
net assets may have decreased or increased, respectively, by
approximately 5.7% (December 31, 2013 – 6.4%, January 1,
2013 – 7.1%). In practice, actual results could differ from this
sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide income
for a limited period of time ending on its termination date by
replicating, to the extent possible, the investment results that
correspond generally to the performance, before fees and
expenses, of the FTSE TMX Canada 2021 Maturity Corporate
Bond Index*.
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
Financial instrument risk and capital management
(see note 4 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014, December 31, 2013 and January 1, 2013.
Credit risk (%)
December 31, 2014
The table below summarizes the ETF’s credit risk exposure
grouped by credit ratings as at:
Rating
AAA
AA
A
BBB
Total
December 31
2014
December 31
2013
January 1
2013
–
34.5
41.3
24.2
100.0
–
17.4
57.8
24.8
100.0
4.0
20.8
50.4
24.8
100.0
Level 1
Level 2
Level 3
Total
–
–
–
8 983
8 983
100.0
–
–
–
8 983
8 983
100.0
Level 1
Level 2
Level 3
Fixed-income
and debt securities
Total financial instruments
% of total portfolio
December 31, 2013
Fixed-income and debt securities
Total financial instruments
% of total portfolio
–
–
–
3 792 3 792 100.0 –
–
–
Total
3 792
3 792
100.0
Concentration risk (%)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Investment mix
Corporate Bonds
Financial
Communication
Energy
Infrastructure
Industrial
Real Estate
Provincial Bonds
Other Net Nssets
December 31
2014
December 31
2013
January 1
2013
51.5
18.1
11.7
9.6
4.4
3.9
–
0.8
33.7
16.1
9.6
13.8
6.5
–
19.2
1.1
23.9
16.2
9.7
13.9
6.5
–
28.9
0.9
January 1, 2013
Less than 1 year
1 – 5 years
5 – 10 years
> 10 years
Total
December 31
2013
January 1
2013
–
–
100.0
–
100.0
–
–
100.0
–
100.0
–
–
100.0
–
100.0
Level 2
Level 3
Total
3 961
3 961
100.0
–
–
–
3 961
3 961
100.0
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services.
The management fee of the ETF is calculated at the following
annual percentage, before GST/HST, of the daily net asset
value of the ETF.
The table below summarizes the ETF’s exposure to interest
rate risk by remaining term to maturity as at:
December 31
2014
–
–
–
For the periods ended December 31, 2014, December 31, 2013
and January 1, 2013, there were no transfers of financial
instruments between Level 1 or Level 2 and Level 3.
Interest rate risk (%)
Term to maturity
Level 1
Fixed-income and debt securities
Total financial instruments
% of total portfolio
Until December 31, 2020
Effective January 1, 2021
The management fee was reduced to 0.25% from 0.30% effective January 15, 2014.
Taxes ($000s) (see note 6 in the generic notes)
The Fund had no capital or non-capital losses as at
December 31, 2014.
Please see the generic notes at the back of the financial statements.
121
0.25%
0.20%
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC TARGET 2021 CORPORATE BOND INDEX ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the periods ended December 31
(see note 2 in the generic notes)
2014
2013
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
200
250
–
–
450
200
–
–
–
200
Securities lending revenue ($000s)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
Fair value of securities loaned
Fair value of collateral received
December 31
2014
December 31
2013
572
583
1 126
1 149
Transition to IFRS ($000s) (see note 9 in the
generic notes)
Reconciliation of net assets and comprehensive income as
previously reported under Canadian GAAP to IFRS:
Net assets
Net assets as reported under Canadian GAAP
Revaluation of investments at FVTPL
Net assets attributable to holders
of redeemable units
December 31
2013
January 1
2013
3 824
10
3 985
10
3 834
3 995
December 31
2013
Comprehensive income
Comprehensive income as reported
under Canadian GAAP
Revaluation of investments at FVTPL
(see note 3 and note 9 in the generic notes)
Increase (decrease) in net assets attributable
to holders of redeemable units
(19)
–
(19)
Please see the generic notes at the back of the financial statements.
122
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
CANADIAN EQUITIES
Consumer Discretionary
40 710 Shaw Communications Inc.
Consumer Staples
24 054 North West Co Inc.
$
1 130
1 130
585
Fair
Value
$
% of Net
Assets
1 276
1 2762.7
630
5856301.3
Energy
21 846 AltaGas Ltd.
1 003
947
40 173 ARC Resources Ltd.
1 177
1 011
12 427 Bonterra Energy Corp.
658
518
67 386 Canadian Energy Services & Technology Corp.
650
428
62 490 Canadian Oil Sands Ltd.
1 206
651
43 167 Canyon Services Group Inc.
573
388
37 339 Enbridge Inc.
1 952
2 231
26 672 Freehold Royalties Ltd.
612
510
27 463 Gibson Energy Inc.
848
747
35 380 Inter Pipeline Ltd.
1 157
1 272
11 676 Keyera Corp.
950
947
31 206 Mullen Group Ltd.
787
665
57 489 Pacific Rubiales Energy Corp.
947
413
29 529 Parkland Fuel Corp.
611
642
26 805 Peyto Exploration & Development Corp.
966
897
43 658 TORC Oil & Gas Ltd.
542
336
85 975 TransGlobe Energy Corp.
497
414
16 715 Vermilion Energy Inc.
1 080
953
57 603 Whitecap Resources Inc.
821
659
Financials
35 809 Brookfield Property Partners LP
30 038 Canadian Apartment Properties REIT
17 979 Canadian Imperial Bank of Commerce
16 670 Canadian Real Estate Investment Trust
31 724 CI Financial Corp.
37 744 Cominar Real Estate Investment Trust
56 902 Dream Global Real Estate Investment Trust
16 049 Genworth MI Canada Inc.
34 892 Great-West Lifeco Inc.
18 863 IGM Financial Inc.
14 827 Intact Financial Corp.
39 357 Power Corp of Canada
31 800 Power Financial Corp.
40 837 RioCan Real Estate Investment Trust
32 415 Royal Bank of Canada*
10 948 TMX Group Ltd.
44 807 Toronto-Dominion Bank
17 037
19 164
The accompanying notes are an integral part of the financial statements.
123
835
717
1 776
783
1 087
692
498
601
1 100
940
1 093
1 209
1 096
1 089
2 517
590
2 541
14 62931.2
947
755
1 795
763
1 024
702
488
593
1 172
874
1 243
1 250
1 151
1 079
2 601
554
2 487
19 47841.5
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
Industrials
25 151
21 669
20 119
Black Diamond Group Ltd.
Russel Metals Inc.
Westshore Terminals Investment Corp.
$
615
688
678
Fair
Value
$
% of Net
Assets
320
561
636
Materials
29 120 Intertape Polymer Group Inc.
30 260 Labrador Iron Ore Royalty Corp.
65 891 Major Drilling Group International Inc.
121 799 Nevsun Resources Ltd.
44 970 Potash Corporation of Saskatchewan Inc.
1 981
1 5173.2
424
725
482
501
1 768
542
563
376
546
1 847
Telecommunication Services
31 055 Rogers Communications Inc.
37 381 TELUS Corp.
3 900
3 8748.2
1 365
1 485
1 403
1 566
Utilities
23 882 Brookfield Renewable Energy Partners LP/CA
23 191 Canadian Utilities Ltd.
48 752 Superior Plus Corp.
2 850
2 9696.3
797
913
639
857
949
585
2 349
2 3915.1
TOTAL CANADIAN EQUITIES
48 996
46 76499.5
TOTAL INVESTMENTS
$ 48 996
46 764
99.5
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
246
0.5
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
47 010
100.0
* Investment in related party (see note 8 in the generic notes).
The accompanying notes are an integral part of the financial statements.
124
FINANCIAL STATEMENTS
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Subscriptions receivable
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
47 010
Investments at cost
$
48 996
NAV PER UNIT
$
20.44
$
46 764
241
1 023
159
48 187
1 017
142
18
1 177
The accompanying notes are an integral part of these financial statements.
125
FINANCIAL STATEMENTS
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Other income (loss)
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
GST/HST
Transaction costs
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
866
46
3
516
(1)
(2 230)
(800)
$
84
9
7
100
(900)
$
(0.89)
* Fund launched January 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
47 684
–
(655)
47 029
241
–
241
Interest received
Dividends received, net of withholding taxes
$
$
–
707
$
(516)
2 230
(159)
18
(57 937)
10 476
(46 788)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
126
(900)
FINANCIAL STATEMENTS
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
Statement of Changes in NAV (in $000s)
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
Total
2014
$
–
(900)
–
48 707
379
–
49 086
(703)
(419)
(54)
$
(1 176)
47 010
47 010
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
127
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
December 31, 2014
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
General information (see note 1 in the generic notes)
The investment objective of the Fund is to provide
unitholders with exposure to the performance of a diversified
portfolio of high-quality Canadian dividend-paying equity
securities that will provide regular income and have the
potential for long-term capital growth.
The following is a summary of the inputs used as of
December 31, 2014.
Financial instrument risk and capital management
(see note 4 in the generic notes)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
+ or - 0.9
46 764
46 764
100.0
The Fund had no capital or non-capital losses as at
December 31, 2014.
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
The table below shows the impact of a 1% change in the broadbased index (noted below) on the Fund’s net assets, using
an 11-month historical correlation of data of the Fund’s
return and the index, with all other factors kept constant, as at:
S&P/TSX Capped Composite Total Return Index
Total
–
–
–
Taxes ($000s) (see note 6 in the generic notes)
Other price risk (% impact on net assets)
December 31
2014
Level 3
–
–
–
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services. The management fee
of the ETF is calculated at 0.39% annually, before GST/HST, of
the daily net asset value of the ETF.
41.5
31.2
8.2
6.3
5.1
3.2
2.7
1.3
0.5
Level 2
46 764
46 764
100.0
Management fees (see note 8 in the generic notes)
December 31
2014
Canadian Equities
Financial
Energy
Materials
Telecommunications
Utilities
Industrial
Consumer Discretionary
Consumer Staples
Other Net Assets
Level 1
Equities
Total financial instruments
% of total portfolio
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
Concentration risk (%)
Investment mix
December 31, 2014
For the period ended December 31
(see note 2 in the generic notes)
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
Since historical correlation may not be representative of
future correlation, actual results could differ from this
sensitivity analysis and the difference could be material.
Please see the generic notes at the back of the financial statements.
128
2014
–
2 300
–
–
2 300
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT CANADIAN DIVIDEND LEADERS ETF
December 31, 2014
Transaction costs ($000s except %)
Transaction costs, including brokerage commissions, in
consideration of portfolio transactions for the period ended:
December 31
2014
$%
Total transaction costs
7100
Related-party brokerage commissions*
1 14
Commission arrangements†
– –
* 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)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
December 31
2014
Fair value of securities loaned
Fair value of collateral received
4 891
4 989
Please see the generic notes at the back of the financial statements.
129
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT U.S. DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
U.S. EQUITIES
Consumer Discretionary
14 637 Cato Corp.
23 801 Cinemark Holdings Inc.
33 232 Coach Inc.
33 880 Gannett Co Inc.
55 577 Harte-Hanks Inc.
38 824 Mattel Inc.
25 979 McDonalds Corp.
24 262 Nutrisystem Inc.
12 524 Tupperware Brands Corp.
7 364 Wynn Resorts Ltd.
$
560
886
1 359
1 158
423
1 456
2 754
518
993
1 472
Fair
Value
$
% of Net
Assets
715
981
1 446
1 253
498
1 392
2 819
549
914
1 269
Consumer Staples
51 402 Altria Group Inc.
14 060 Cal-Maine Foods Inc.
21 482 Kellogg Co.
16 838 Kimberly-Clark Corp.
30 755 Kraft Foods Group Inc.
32 327 Philip Morris International Inc.
39 979 Sysco Corp.
11 579
Energy
34 118 ConocoPhillips
14 286 Helmerich & Payne Inc.
42 101 Spectra Energy Corp.
33 479 Williams Cos Inc.
13 544
2 776
1 412
1 814
1 895
2 729
1 116
1 770
1 743
Financials
13 618 Agree Realty Corp.
11 978 Alexandria Real Estate Equities Inc.
22 577 American Campus Communities Inc.
22 511 Arthur J Gallagher & Co.
12 782 Bank of Hawaii Corp.
41 278 BioMed Realty Trust Inc.
13 534 Camden Property Trust
24 672 Corrections Corp of America
54 334 DiamondRock Hospitality Co.
10 554 EastGroup Properties Inc.
30 720 First Financial Bancorp.
42 786 FirstMerit Corp.
47 212 Franklin Street Properties Corp.
27 951 Government Properties Income Trust
33 824 HCP Inc.
20 505 Highwoods Properties Inc.
13 315 Home Properties Inc.
19 240 Horace Mann Educators Corp.
30 140 Hospitality Properties Trust
47 979 Kimco Realty Corp.
22 424 LaSalle Hotel Properties
27 221 Liberty Property Trust
14 974 LTC Properties Inc.
7 897
7 3585.6
452
1 079
968
1 167
823
977
1 092
955
809
754
583
881
632
734
1 584
941
926
644
985
1 267
1 003
1 084
662
490
1 231
1 082
1 228
878
1 030
1 158
1 038
936
774
661
936
671
745
1 725
1 052
1 012
739
1 082
1 397
1 051
1 186
749
The accompanying notes are an integral part of the financial statements.
130
2 560
623
1 600
2 026
1 973
3 077
1 685
11 8369.0
2 933
636
1 628
2 253
2 232
3 050
1 838
14 57011.0
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT U.S. DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
Financials (cont.)
12 674 Mercury General Corp.
15 536 Potlatch Corp.
36 172 Prologis Inc.
30 442 Provident Financial Services Inc.
8 828 Public Storage
30 947 Rayonier Inc.
22 704 Sabra Health Care REIT Inc.
8 289 Safety Insurance Group Inc.
8 556 Saul Centers Inc.
40 859 Senior Housing Properties Trust
11 715 Simon Property Group Inc.
9 186 Sovran Self Storage Inc.
9 203 Tompkins Financial Corp.
66 693 Trustco Bank Corp. NY
26 672 Trustmark Corp.
20 304 United Bankshares Inc.
9 746 Universal Health Realty Income Trust
21 197 Urstadt Biddle Properties Inc.
21 716 Ventas Inc.
$
743
715
1 704
591
1 724
1 067
718
525
481
1 017
2 218
810
492
510
713
740
530
493
1 605
Fair
Value
$
% of Net
Assets
832
753
1 803
637
1 890
1 001
799
615
567
1 046
2 471
928
589
561
758
881
543
537
1 803
Health Care
39 569 Abbvie Inc.
7 722 Computer Programs & Systems Inc.
32 946 Eli Lilly & Co.
51 215 Merck & Co Inc.
29 792 Meridian Bioscience Inc.
38 398
Industrials
19 915 CDI Corp.
29 940 Emerson Electric Co.
27 740 Iron Mountain Inc.
10 885 Lockheed Martin Corp.
38 018 Pitney Bowes Inc.
9 365
360
2 167
1 188
2 128
1 072
409
2 141
1 242
2 428
1 073
Information Technology
27 338 Analog Devices Inc.
106 221 Cisco Systems Inc.
12 006 Comtech Telecommunications Corp.
32 440 Daktronics Inc.
88 590 Intel Corp.
51 444 Intersil Corp.
23 592 Seagate Technology PLC
6 915
7 2935.5
1 597
2 938
530
494
3 173
767
1 552
1 758
3 422
438
470
3 724
862
1 817
Materials
59 617 Freeport-McMoRan Copper & Gold Inc.
29 082 FutureFuel Corp.
10 553 Innophos Holdings Inc.
20 869 LyondellBasell Industries NV
14 071 Schweitzer-Mauduit International Inc.
12 739 Scotts Miracle-Gro Co.
21 584 Sonoco Products Co.
11 051
2 042
451
655
2 128
666
832
1 015
1 613
440
714
1 919
689
920
1 092
Telecommunication Services
23 637 Spok Holdings Inc.
63 681 Verizon Communications Inc.
7 789
7 3875.6
402
3 468
475
3 450
3 870
3 9253.0
The accompanying notes are an integral part of the financial statements.
131
2 577
533
2 350
3 288
617
41 86531.7
2 999
543
2 633
3 369
568
10 1127.7
12 4919.5
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT U.S. DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
Utilities
16 783
17 950
34 887
26 410
16 418
14 081
12 846
22 168
37 058
37 488
19 077
Alliant Energy Corp.
Atmos Energy Corp.
CMS Energy Corp.
Dominion Resources Inc.
DTE Energy Co.
Laclede Group Inc.
New Jersey Resources Corp.
ONEOK Inc.
Public Service Enterprise Group Inc.
Questar Corp.
Vectren Corp.
$
1 108
1 022
1 214
2 078
1 425
763
773
1 484
1 594
986
888
Fair
Value
$
% of Net
Assets
1 291
1 160
1 404
2 352
1 642
868
911
1 278
1 777
1 098
1 021
13 335
14 80211.1
TOTAL U.S. EQUITIES
123 743
131 63999.7
TOTAL INVESTMENTS
$ 123 743 131 63999.7
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
3820.3
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
132 021
100.0
The accompanying notes are an integral part of the financial statements.
132
FINANCIAL STATEMENTS
RBC QUANT U.S. DIVIDEND LEADERS ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
131 639
441
260
132 340
266
53
319
$
132 021
Investments at cost
$
123 744
NAV PER UNIT
$
23.79
The accompanying notes are an integral part of these financial statements.
133
FINANCIAL STATEMENTS
RBC QUANT U.S. DIVIDEND LEADERS ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Other income (loss)
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
GST/HST
Transaction costs
Withholding tax
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
1 683
83
3
932
6
7 901
10 608
$
178
18
12
262
470
10 138
$
5.03
* Fund launched January 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
123 066
–
(917)
122 149
441
–
441
Interest received
Dividends received, net of withholding taxes
$
$
–
1 161
$
(932)
(7 901)
(260)
53
(144 741)
21 935
(121 708)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
134
10 138
FINANCIAL STATEMENTS
RBC QUANT U.S. DIVIDEND LEADERS ETF
Statement of Changes in NAV (in $000s)
Total
2014
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
–
10 138
–
123 066
673
–
123 739
(1 056)
(771)
(29)
$
(1 856)
132 021
132 021
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
135
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT U.S. DIVIDEND LEADERS ETF
December 31, 2014
General information (see note 1 in the generic notes)
Since historical correlation may not be representative of
future correlation, actual results could differ from this
sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide
unitholders with exposure to the performance of a diversified
portfolio of high-quality U.S. dividend-paying equity
securities that will provide regular income and that have the
potential for long-term capital growth.
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014.
Financial instrument risk and capital management
(see note 4 in the generic notes)
December 31, 2014
Equities
Total financial instruments
% of total portfolio
Concentration risk (%)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Investment mix
31.7
11.1
11.0
9.5
9.0
7.7
5.6
5.6
5.5
3.0
0.3
The Fund had no capital or non-capital losses as at
December 31, 2014.
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
United States dollar
100.0
Total
100.0
As at December 31, 2014, if the Canadian dollar had
strengthened or weakened by 1% in relation to the above
currencies, with all other factors kept constant, the Fund’s
net assets may have decreased or increased, respectively, by
approximately 1.0%. In practice, actual results could differ from
this sensitivity analysis and the difference could be material.
For the period ended December 31
(see note 2 in the generic notes)
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
Other price risk (% impact on net assets)
The table below shows the impact of a 1% change in the broadbased index (noted below) on the Fund’s net assets, using
an 11-month historical correlation of data of the Fund’s
return and the index, with all other factors kept constant, as at:
+ or - 0.7
131 639
131 639
100.0
Taxes ($000s) (see note 6 in the generic notes)
December 31
Currency
2014
S&P 1500 Total Return Index (CAD)
Total
–
–
–
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services. The management fee
of the ETF is calculated at 0.39% annually, before GST/HST, of
the daily net asset value of the ETF.
The table below summarizes the Fund’s net exposure (after
hedging, if any) to currency risk as at:
December 31
2014
Level 3
–
–
–
Management fees (see note 8 in the generic notes)
Currency risk (% of net assets)
Level 2
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
December 31
2014
United States Equities
Financial
Utilities
Consumer Staples
Information Technology
Consumer Discretionary
Health Care
Energy
Materials
Industrial
Telecommunications
Other Net Assets
Level 1
131 639
131 639
100.0
Please see the generic notes at the back of the financial statements.
136
2014
–
5 550
–
–
5 550
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT U.S. DIVIDEND LEADERS ETF
December 31, 2014
Transaction costs ($000s except %)
Transaction costs, including brokerage commissions, in
consideration of portfolio transactions for the period ended:
December 31
2014
$%
Total transaction costs
12100
Related-party brokerage commissions*
– –
Commission arrangements†
– –
* 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)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
December 31
2014
Fair value of securities loaned
Fair value of collateral received
3 285
3 351
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
December 31
2014
RBC Quant U.S. Dividend Leaders
(CAD Hedged) ETF
8.2
Please see the generic notes at the back of the financial statements.
137
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT U.S. DIVIDEND LEADERS (CAD HEDGED) ETF
December 31, 2014
Number
of Units
Security
Cost
ETF UNITS
452 931
RBC Quant U.S. Dividend Leaders ETF
$
10 533
Fair
Value
$
% of Net
Assets
10 774
TOTAL ETF UNITS
10 533
10 774100.4
TOTAL INVESTMENTS
$ 10 533
10 774100.4
UNREALIZED LOSS ON FOREIGN EXCHANGE CONTRACTS (SCHEDULE A)
(80)(0.8)
TOTAL PORTFOLIO
10 69499.6
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
410.4
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
10 735
100.0
SCHEDULE A
Foreign Exchange Contracts
Unrealized
Contracts
Maturity Date
Gain (Loss)
Bought USD 302 Sold CAD 351 @ 1.1633
Bought CAD 7 548 Sold USD 6 577 @ 1.1476
Bought CAD 2 818 Sold USD 1 834 @ 1.5369
Bought CAD 1 379 Sold USD 1 187 @ 1.1614
15-Jan-15
$
15-Jan-15
15-Jan-15
15-Jan-15
(1)
(73)
(9)
3
$
(80)
TOTAL FOREIGN EXCHANGE
All counterparties have a credit rating of at least A.
The accompanying notes are an integral part of the financial statements.
138
FINANCIAL STATEMENTS
RBC QUANT U.S. DIVIDEND LEADERS (CAD HEDGED) ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Unrealized loss on foreign exchange contracts
Distributions payable
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
10 774
46
22
10 842
80
27
107
$
10 735
Investments at cost
$
10 533
NAV PER UNIT
$
21.47
The accompanying notes are an integral part of these financial statements.
139
FINANCIAL STATEMENTS
RBC QUANT U.S. DIVIDEND LEADERS (CAD HEDGED) ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Capital gains received from underlying funds
Net realized gain (loss) on investments
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
Change in unrealized gain (loss) in value
of forward contracts
TOTAL INCOME (LOSS)
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
31
55
2
(77)
241
$
(80)
172
172
$
0.76
* Fund launched October 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
10 596
–
(6)
10 590
46
–
46
Interest received
Dividends received, net of withholding taxes
$
$
–
9
$
(2)
(161)
(22)
–
(10 602)
71
(10 544)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
140
172
FINANCIAL STATEMENTS
RBC QUANT U.S. DIVIDEND LEADERS (CAD HEDGED) ETF
Statement of Changes in NAV (in $000s)
Total
2014
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
$
–
172
–
10 596
–
–
10 596
(22)
(8)
(3)
$
(33)
10 735
10 735
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
141
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT U.S. DIVIDEND LEADERS (CAD HEDGED) ETF
December 31, 2014
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
General information (see note 1 in the generic notes)
The investment objective of the Fund is to provide unitholders
with exposure, either directly or indirectly through investment
in other mutual funds managed by RBC GAM or an affiliate,
to the performance of a diversified portfolio of high-quality
U.S. dividend-paying equity securities that will provide regular
income and that have the potential for long-term capital
growth, while seeking to minimize the exposure to currency
fluctuations between the U.S. and Canadian dollars.
The following is a summary of the inputs used as of
December 31, 2014.
Financial instrument risk and capital management
(see note 4 in the generic notes)
December 31, 2014
Level 1
ETF units
Derivatives – assets
Derivatives – liabilities
Total financial instruments
% of total portfolio
10 774
–
–
10 774
100.7
Level 2
–
–
(80)
(80)
(0.7)
Level 3
–
–
–
–
–
Total
10 774
–
(80)
10 694
100.0
Concentration risk (%)
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Management fees (see note 8 in the generic notes)
Investment mix
A management fee is not charged directly to the ETF as this
ETF invests in the units of other RBC ETFs.
December 31
2014
United States Equities
Financial
Utilities
Consumer Staples
Information Technology
Consumer Discretionary
Health Care
Energy
Materials
Industrial
Telecommunications
Other Net Assets
Underlying mutual fund ownership interest (%)
31.7
11.1
11.0
9.5
9.0
7.7
5.6
5.6
5.5
3.0
0.3
The table below summarizes the Fund’s interest in the
underlying mutual funds as a percentage of net assets
of the Fund (“NAV”), and the Fund’s ownership interest
as a percentage of the net assets of the underlying funds
(“Ownership”). All underlying funds are established
and conduct business in Canada, and have an associate
relationship to the Fund.
December 31, 2014
Ownership
NAV
RBC Quant U.S. Dividend
Leaders ETF
Currency risk (% of net assets)
Since the currency risk of the Fund has been hedged using
foreign exchange contracts, the Fund has minimal sensitivity
to changes in foreign exchange rates.
100.4
8.2
Taxes ($000s) (see note 6 in the generic notes)
The non-capital and capital losses as at December 31, 2014
for the Fund were approximately:
Other price risk (% impact on net assets)
Capital losses
Non-capital losses
Due to the fact that the Fund was in existence for less than
six months prior to December 31, 2014, no comparative
disclosure is provided because there is insufficient data, and
any resulting calculation of the impact on net assets of the
Fund using historical correlation between the Fund’s return
and a broad-based index could be materially misleading.
Please see the generic notes at the back of the financial statements.
142
20
–
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT U.S. DIVIDEND LEADERS (CAD HEDGED) ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the period ended December 31
(see note 2 in the generic notes)
2014
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
–
500
–
–
500
Please see the generic notes at the back of the financial statements.
143
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
EUROPEAN EQUITIES
Consumer Discretionary
600
Hugo Boss AG
2 100 Nokian Renkaat OYJ
1 200 Porsche Automobil Holding SE
1 900 ProSiebenSat.1 Media AG
5 400 Reed Elsevier NV
700 RTL Group SA
$86
68
113
85
138
71
Fair
Value
% of Net
Assets
$86
60
113
93
150
78
5615808.1
Consumer Staples
3 100 British American Tobacco PLC
197
196
5 600 Koninklijke Ahold NV
103
116
4 900 Unilever NV
215
224
5155367.5
Energy
4 300 Amec Foster Wheeler PLC
74
66
6 600 Royal Dutch Shell PLC
253
257
3 800 Seadrill Ltd.
78
51
3 300 Total SA
204
197
6095718.0
Financials
9 900 Aberdeen Asset Management PLC
74
77
3 100 Admiral Group PLC
71
74
600 Baloise Holding AG
85
89
21 700 Banco Santander SA
215
213
3 100 CNP Assurances
63
64
1 400 Deutsche Boerse AG
108
116
600
Gecina SA9287
3 200 Gjensidige Forsikring ASA
67
60
800 Hannover Rueck SE
74
84
22 400 HSBC Holdings PLC
253
246
700
ICADE6265
1 500
Klepierre7075
28 700 Legal & General Group PLC
119
129
10 600 Nordea Bank AB
144
143
2 200 Sampo Oyj
117
120
8 400 Skandinaviska Enskilda Banken AB
118
124
8 700 Standard Chartered PLC
159
151
2 400 Svenska Handelsbanken AB
124
130
4 300 Swedbank AB
120
124
800 Swiss Prime Site AG
68
68
500
Tryg A/S6265
600
Unibail-Rodamco SE169179
1 000 Vienna Insurance Group AG Wiener Versicherung Gruppe
52
52
600 Zurich Insurance Group AG
203
218
The accompanying notes are an integral part of the financial statements.
144
2 689
2 75338.4
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
Health Care
1 000
8 100
1 700
Coloplast A/S
GlaxoSmithKline PLC
Orion OYJ
$
90
202
65
Fair
Value
$
% of Net
Assets
98
201
61
3573605.0
Industrials
3 900 Deutsche Post AG
134
148
700 Kuehne + Nagel International AG
102
110
2362583.6
Materials
5 700 Antofagasta PLC
72
77
1 900 BASF SE
186
186
5 700 BHP Billiton PLC
163
143
4 500 CRH PLC
112
126
9 800 Rexam PLC
81
80
3 300 Rio Tinto PLC
181
178
5 000 UPM-Kymmene OYJ
92
95
1 500 Voestalpine AG
70
69
95795413.3
Telecommunication Services
1 900 Belgacom SA
76
80
2 200 Elisa OYJ
64
70
4 600 Tele2 AB
63
65
11 100 Telefonica Deutschland Holding AG
65
69
14 300 TeliaSonera AB
107
107
3753915.5
Utilities
23 800 Centrica PLC
122
120
3 600 Fortum OYJ
94
90
10 100 National Grid PLC
162
167
2 400 Severn Trent PLC
84
87
16 500 Snam SpA
96
95
4 500 SSE PLC
127
132
15 700 Terna Rete Elettrica Nazionale SpA
86
83
77177410.7
TOTAL EUROPEAN EQUITIES
7 070
7 177100.1
TOTAL INVESTMENTS
$
7 070
7 177100.1
OTHER NET ASSETS (LIABILITIES) ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
(7)
(0.1)
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
$
7 170
100.0
The accompanying notes are an integral part of the financial statements.
145
FINANCIAL STATEMENTS
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
7 177
6
7
7 190
16
4
20
$
7 170
Investments at cost
$
7 070
NAV PER UNIT
$
20.49
The accompanying notes are an integral part of these financial statements.
146
FINANCIAL STATEMENTS
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Net realized gain (loss) on investments
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
GST/HST
Transaction costs
Withholding tax
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
20
(27)
3
127
123
$
6
1
22
3
32
91
$
0.38
* Fund launched October 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
7 102
–
(7)
7 095
6
–
6
Interest received
Dividends received, net of withholding taxes
$
$
–
10
$
27
(127)
(7)
4
(14 342)
7 265
(7 089)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
147
91
FINANCIAL STATEMENTS
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
Statement of Changes in NAV (in $000s)
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
Total
2014
$
–
91
–
7 102
–
–
7 102
(3)
–
(20)
$
(23)
7 170
7 170
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
148
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
December 31, 2014
General information (see note 1 in the generic notes)
Other price risk (% impact on net assets)
The investment objective of the Fund is to provide
unitholders with exposure to the performance of a diversified
portfolio of high-quality European dividend-paying equity
securities that will provide regular income and that have the
potential for long-term capital growth.
Due to the fact that the Fund was in existence for less than
six months prior to December 31, 2014, no comparative
disclosure is provided because there is insufficient data, and
any resulting calculation of the impact on net assets of the
Fund using historical correlation between the Fund’s return
and a broad-based index could be materially misleading.
Financial instrument risk and capital management
(see note 4 in the generic notes)
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
Concentration risk (%)
The following is a summary of the inputs used as of
December 31, 2014.
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Investment mix
December 31, 2014
December 31
2014
European Equities
Financial
Materials
Utilities
Consumer Discretionary
Energy
Consumer Staples
Telecommunications
Health Care
Industrial
Other Net Assets
Equities
Total financial instruments
% of total portfolio
38.4
13.3
10.7
8.1
8.0
7.5
5.5
5.0
3.6
(0.1)
Level 1
Level 2
Level 3
Total
7 177
7 177
100.0
–
–
–
–
–
–
7 177
7 177
100.0
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
Management fees (see note 8 in the generic notes)
Currency risk (% of net assets)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services. The management fee
of the ETF is calculated at 0.49% annually, before GST/HST, of
the daily net asset value of the ETF.
The table below summarizes the Fund’s net exposure (after
hedging, if any) to currency risk as at:
Taxes ($000s) (see note 6 in the generic notes)
December 31
Currency
2014
The non-capital and capital losses as at December 31, 2014
for the Fund were approximately:
Euro
46.5
Pound sterling
33.3
Swedish krona
9.6
Swiss franc
6.8
Danish krone
2.3
Norwegian krone
1.5
Total
100.0
Capital losses
Non-capital losses
26
–
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
As at December 31, 2014, if the Canadian dollar had
strengthened or weakened by 1% in relation to the above
currencies, with all other factors kept constant, the Fund’s
net assets may have decreased or increased, respectively, by
approximately 1.0%. In practice, actual results could differ from
this sensitivity analysis and the difference could be material.
Please see the generic notes at the back of the financial statements.
149
For the period ended December 31
(see note 2 in the generic notes)
2014
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
–
350
–
–
350
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EUROPEAN DIVIDEND LEADERS ETF
December 31, 2014
Transaction costs ($000s except %)
Transaction costs, including brokerage commissions, in
consideration of portfolio transactions for the period ended:
December 31
2014
$%
Total transaction costs
22100
Related-party brokerage commissions*
–
–
Commission arrangements†
– –
* 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)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
December 31
2014
Fair value of securities loaned
Fair value of collateral received
51
52
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
December 31
2014
RBC Quant European Dividend Leaders
(CAD Hedged) ETF
71.8
Please see the generic notes at the back of the financial statements.
150
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
December 31, 2014
Number
of Units
Security
Cost
ETF UNITS
251 355
RBC Quant European Dividend Leaders ETF
$
5 131
Fair
Value
$
% of Net
Assets
5 149
TOTAL ETF UNITS
5 131
5 14998.3
TOTAL INVESTMENTS
$
5 131
5 14998.3
UNREALIZED GAIN ON FOREIGN EXCHANGE CONTRACTS (SCHEDULE A)
671.3
TOTAL PORTFOLIO
5 216
99.6
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
230.4
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
5 239
100.0
SCHEDULE A
Foreign Exchange Contracts
Unrealized
Contracts
Maturity Date
Gain (Loss)
Bought GBP 34 Sold CAD 60 @ 1.8016
Bought CAD 7 Sold GBP 4 @ 1.8191
Bought CAD 260 Sold GBP 143 @ 1.8152
Bought CAD 1 434 Sold GBP 796 @ 1.8007
Bought CAD 20 Sold DKK 105 @ 0.1942
Bought DKK 24 Sold CAD 5 @ 0.1945
Bought CAD 98 Sold DKK 512 @ 0.1916
Bought CAD 5 Sold DKK 28 @ 0.1918
Bought CAD 418 Sold EUR 290 @ 1.4446
Bought EUR 51 Sold CAD 73 @ 1.4293
Bought CAD 81 Sold EUR 57 @ 1.4141
Bought CAD 2 025 Sold EUR 1 421 @ 1.4252
Bought CAD 4 Sold NOK 28 @ 0.1575
Bought CAD 66 Sold NOK 416 @ 0.1599
Bought CAD 13 Sold NOK 86 @ 0.1565
Bought SEK 120 Sold CAD 18 @ 0.1521
Bought CAD 16 Sold SEK 109 @ 0.1495
Bought CAD 83 Sold SEK 547 @ 0.1523
Bought CAD 424 Sold SEK 2 785 @ 0.1524
Bought CAD 280 Sold CHF 236 @ 1.1851
Bought CAD 57 Sold CHF 47 @ 1.2022
Bought CAD 11 Sold CHF 10 @ 1.1779
Bought CAD 11 Sold CHF 10 @ 1.1827
15-Jan-15
$
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
–
–
1
(4)
1
–
2
–
12
(1)
1
33
–
2
–
–
–
2
12
4
2
–
–
TOTAL FOREIGN EXCHANGE$ 67
All counterparties have a credit rating of at least A.
The accompanying notes are an integral part of the financial statements.
151
FINANCIAL STATEMENTS
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Unrealized gain on foreign exchange contracts
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Distributions payable
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
5 149
23
67
12
5 251
12
12
$
5 239
Investments at cost
$
5 131
NAV PER UNIT
$
20.96
The accompanying notes are an integral part of these financial statements.
152
FINANCIAL STATEMENTS
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
Change in unrealized gain (loss) in value
of forward contracts
TOTAL INCOME (LOSS)
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
15
9
18
$
67
109
109
$
0.76
* Fund launched October 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
5 145
–
(3)
5 142
23
–
23
Interest received
Dividends received, net of withholding taxes
$
$
–
3
$
–
(85)
(12)
–
(5 156)
25
(5 119)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
153
109
FINANCIAL STATEMENTS
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
Statement of Changes in NAV (in $000s)
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
Total
2014
$
–
109
–
5 145
10
–
5 155
(2)
(8)
(15)
$
(25)
5 239
5 239
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
154
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
December 31, 2014
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
General information (see note 1 in the generic notes)
The investment objective of the Fund is to provide
unitholders with exposure, either directly or indirectly
through investment in other mutual funds managed by
RBC GAM or an affiliate, to the performance of a diversified
portfolio of high-quality European dividend-paying equity
securities that will provide regular income and that have
the potential for long-term capital growth, while seeking to
minimize the exposure to currency fluctuations between
foreign currencies and the Canadian dollar.
The following is a summary of the inputs used as of
December 31, 2014.
December 31, 2014
ETF units
Derivatives – assets
Derivatives – liabilities
Total financial instruments
% of total portfolio
Concentration risk (%)
Level 2
–
72
(5)
67
1.3
Level 3
–
–
–
–
–
Total
5 149
72
(5)
5 216
100.0
Management fees (see note 8 in the generic notes)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
A management fee is not charged directly to the ETF as this
ETF invests in the units of other RBC ETFs.
December 31
2014
European Equities
Financial
Materials
Utilities
Consumer Discretionary
Energy
5 149
–
–
5 149
98.7
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
Financial instrument risk and capital management
(see note 4 in the generic notes)
Investment mix
Level 1
Underlying mutual fund ownership interest (%)
38.4
13.3
10.7
8.1
8.0
Consumer Staples
7.5
Telecommunications
5.5
Health Care
5.0
Industrial
Other Net Assets
3.6
(0.1)
The table below summarizes the Fund’s interest in the
underlying mutual funds as a percentage of net assets
of the Fund (“NAV”), and the Fund’s ownership interest
as a percentage of the net assets of the underlying funds
(“Ownership”). All underlying funds are established
and conduct business in Canada, and have an associate
relationship to the Fund.
December 31, 2014
Ownership
NAV
RBC Quant European
Dividend Leaders ETF
Currency risk (% of net assets)
Since the currency risk of the Fund has been hedged using
foreign exchange contracts, the Fund has minimal sensitivity
to changes in foreign exchange rates.
98.3
Taxes ($000s) (see note 6 in the generic notes)
The Fund had no capital or non-capital losses as at
December 31, 2014.
Other price risk (% impact on net assets)
Due to the fact that the Fund was in existence for less than
six months prior to December 31, 2014, no comparative
disclosure is provided because there is insufficient data, and
any resulting calculation of the impact on net assets of the
Fund using historical correlation between the Fund’s return
and a broad-based index could be materially misleading.
Please see the generic notes at the back of the financial statements.
155
71.8
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EUROPEAN DIVIDEND LEADERS
(CAD HEDGED) ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the period ended December 31
(see note 2 in the generic notes)
2014
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
–
250
–
–
250
Please see the generic notes at the back of the financial statements.
156
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EAFE DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
EQUITIES
Consumer Discretionary
9 200 Cie Generale des Etablissements Michelin
35 900 Daihatsu Motor Co Ltd.
22 100 Denso Corp.
4 400 Hugo Boss AG
19 200 Nokian Renkaat OYJ
10 600 Porsche Automobil Holding SE
18 200 ProSiebenSat.1 Media AG
39 000 Reed Elsevier NV
6 200 RTL Group SA
146 200 Sands China Ltd
12 800 Sankyo Co Ltd
14 900 Sanrio Co Ltd.
286 200 SJM Holdings Ltd.
35 800 USS Co Ltd.
178 900 Wynn Macau Ltd
$
1 114
646
1 068
664
770
977
867
940
718
1 105
535
440
742
605
768
Fair
Value
$
% of Net
Assets
971
548
1 207
627
546
998
888
1 084
688
833
513
432
528
644
584
Consumer Staples
29 600 British American Tobacco PLC
36 000 Japan Tobacco Inc.
52 400 Koninklijke Ahold NV
188 000 Metcash Ltd.
3 200 Nestlé SA
36 800 Unilever NV
11 959
1 851
1 341
1 050
521
272
1 661
1 871
1 157
1 084
331
272
1 683
Energy
39 700 AMEC PLC
22 500 Neste Oil OYJ
33 500 Petrofac Ltd.
53 600 Royal Dutch Shell PLC
34 600 Seadrill Ltd.
50 500 Showa Shell Sekiyu KK
31 300 Total SA
31 100 Woodside Petroleum Ltd.
43 800 WorleyParsons Ltd.
6 696
6 3984.8
813
510
716
2 244
1 139
558
2 228
1 245
660
612
633
425
2 085
462
581
1 865
1 120
418
Financials
96 200 Aberdeen Asset Management PLC
29 400 Admiral Group PLC
23 300 AEON Financial Service Co Ltd.
170 000 Aozora Bank Ltd.
21 000 ASX Ltd.
55 000 Australia & New Zealand Banking Group Ltd.
54 000 AXA SA
5 000 Baloise Holding AG
151 300 Bank of East Asia Ltd.
52 900 Bank of Queensland Ltd.
54 900 Bendigo and Adelaide Bank Ltd.
242 000 BOC Hong Kong Holdings Ltd.
367 700 CapitaMall Trust
28 800 CNP Assurances
24 800 Commonwealth Bank of Australia
10 113
The accompanying notes are an integral part of the financial statements.
157
750
751
572
594
760
1 790
1 459
664
692
644
686
821
642
623
1 967
11 0918.4
8 2016.2
751
702
541
614
731
1 673
1 453
745
706
611
667
938
656
594
2 013
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EAFE DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
Fair
Value
% of Net
Assets
Financials (cont.)
6 600 Daito Trust Construction Co., Ltd.
$
798
$
874
71 700 DBS Group Holdings Ltd.
1 088
1 291
12 500 Deutsche Boerse AG
1 021
1 037
153 600 Direct Line Insurance Group PLC
809
808
109 100 Fukuoka Financial Group Inc.
662
659
30 000 Gjensidige Forsikring ASA
621
565
181 900 GPT Group
719
750
50 300 Hang Seng Bank Ltd.
904
971
7 400 Hannover Rueck SE
702
778
207 100 HSBC Holdings PLC
2 365
2 276
151 700 Insurance Australia Group Ltd.
894
899
200 Japan Prime Realty Investment Corp.
793
808
100 Japan Real Estate Investment Corp.
598
560
13 600
Klepierre695681
266 200 Legal & General Group PLC
1 118
1 195
17 100 Macquarie Group Ltd.
1 012
945
6 100 Muenchener Rueckversicherungs AG
1 373
1 417
51 800 National Australia Bank Ltd.
1 741
1 650
545 700 New World Development Co Ltd.
749
727
100 Nippon Building Fund Inc.
612
583
99 100 Nordea Bank AB
1 491
1 333
311 100 Novion Property Group
674
625
130 500 Oversea-Chinese Banking Corp Ltd.
1 081
1 193
21 000 Sampo
1 136
1 143
302 610 Scentre Group
994
1 004
19 800 SCOR SE
719
699
106 600 Singapore Exchange Ltd.
654
728
77 100 Skandinaviska Enskilda Banken AB
1 123
1 136
81 400 Standard Chartered PLC
1 766
1 416
22 200 Svenska Handelsbanken AB
1 187
1 204
40 600 Swedbank AB
1 162
1 174
7 800 Swiss Prime Site AG
688
664
13 300 Swiss Re AG
1 197
1 297
4 200 Tryg A/S
466
545
4 100 Unibail-Rodamco SE
1 200
1 223
9 300 Vienna Insurance Group AG Wiener Versicherung Gruppe
514
483
122 100 Westfield Group
973
1 044
56 500 Westpac Banking Corp.
1 894
1 776
4 100 Zurich Insurance Group AG
1 334
1 490
Health Care
9 100 Coloplast A/S
75 800 GlaxoSmithKline PLC
35 000 Mitsubishi Tanabe Pharma Corp.
8 000 Ono Pharmaceutical Co Ltd.
15 900 Orion OYJ
52 942
839
2 135
582
792
592
889
1 884
598
829
574
Industrials
59 000 ABB Ltd.
400 AP Moeller - Maersk A/S
136 600 Cobham PLC
287 200 ComfortDelGro Corp., Ltd.
36 700 Deutsche Post AG
40 800 Hino Motors Ltd.
19 600 Japan Airlines Co., Ltd.
111 400 Keppel Corp Ltd.
5 200 Kuehne + Nagel International AG
24 313 Leighton Holdings Ltd.
4 940
4 7743.6
1 461
966
756
580
1 325
630
577
1 005
756
510
1 454
931
799
653
1 391
632
682
862
820
519
The accompanying notes are an integral part of the financial statements.
158
53 04640.1
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EAFE DIVIDEND LEADERS ETF
December 31, 2014
Holdings Security
Cost
Industrials (cont.)
27 900 Park24 Co Ltd.
76 400 Sandvik AB
34 600 Skanska AB
112 300 Toll Holdings Ltd.
$
508
1 079
819
609
Fair
Value
$
% of Net
Assets
478
864
860
627
Information Technology
38 400 Canon Inc.
25 000 Hoya Corp.
10 900 Oracle Corp. Japan
99 900 Telefonaktiebolaget LM Ericsson
11 581
11 5728.8
1 349
891
481
1 360
1 425
991
516
1 395
Materials
52 800 Antofagasta PLC
17 900 BASF SE
42 386 CRH PLC
1 300 EMS-Chemie Holding AG
89 400 Fletcher Building Ltd.
211 800 Fortescue Metals Group Ltd.
76 100 Israel Chemicals Ltd.
16 700 Maruichi Steel Tube Ltd.
29 600 Rio Tinto PLC
49 300 Sumitomo Metal Mining Co Ltd.
3 300 Syngenta AG
14 400 Umicore SA
4 081
4 3273.3
750
2 066
1 199
540
738
832
681
475
1 753
819
1 221
677
718
1 753
1 182
612
672
550
640
415
1 604
862
1 231
672
Telecommunication Services
17 000 Belgacom SA
325 000 Bezeq The Israeli Telecommunication Corp., Ltd.
20 200 Elisa OYJ
19 100 KDDI Corp.
65 700 NTT DOCOMO Inc.
345 100 Singapore Telecommunications Ltd.
143 000 StarHub Ltd.
1 400 Swisscom AG
44 500 Tele2 AB
233 800 Telecom Corp. of New Zealand Ltd.
200 900 Telstra Corp. Ltd.
11 751
617
637
631
1 228
1 190
1 138
518
904
670
584
1 073
717
672
640
1 409
1 122
1 176
519
853
625
659
1 137
Utilities
61 700 AGL Energy Ltd.
221 100 Centrica PLC
80 400 Cheung Kong Infrastructure Holdings Ltd.
106 300 CLP Holdings Ltd.
20 800 Enagas SA
34 000 Fortum OYJ
93 300 National Grid PLC
181 600 Osaka Gas Co Ltd.
89 700 Power Assets Holdings Ltd.
22 700 Severn Trent PLC
153 600 Snam SpA
42 400 SSE PLC
146 000 Terna Rete Elettrica Nazionale SpA
9 190
9 5297.2
913
1 279
600
950
705
906
1 463
810
864
787
960
1 169
827
781
1 114
689
1 068
763
856
1 547
790
1 008
822
883
1 242
769
10 9118.3
12 233
12 3329.3
TOTAL EQUITIES
135 486
132 181100.0
TOTAL INVESTMENTS
$ 135 486 132 181100.0
OTHER NET ASSETS (LIABILITIES) ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (7)
–
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
132 174
100.0
The accompanying notes are an integral part of the financial statements.
159
FINANCIAL STATEMENTS
RBC QUANT EAFE DIVIDEND LEADERS ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
132 181
272
227
132 680
112
325
69
506
$
132 174
Investments at cost
$
135 486
NAV PER UNIT
$
20.33
The accompanying notes are an integral part of these financial statements.
160
FINANCIAL STATEMENTS
RBC QUANT EAFE DIVIDEND LEADERS ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Other income (loss)
Securities lending revenue
(see note 7 in the generic notes)
Net realized gain (loss) on investments
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
GST/HST
Transaction costs
Withholding tax
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
2014
$
2 993
(1)
28
857
24
(3 068)
833
$
359
38
372
467
1 236
(403)
$
(0.11)
Interest received
Dividends received, net of withholding taxes
* Fund launched January 2014.
2014
$
(857)
3 068
(227)
69
(312 067)
177 787
(132 630)
$
136 145
(1 043)
(2 200)
132 902
272
–
272
$
$
–
2 299
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
161
(403)
FINANCIAL STATEMENTS
RBC QUANT EAFE DIVIDEND LEADERS ETF
Statement of Changes in NAV (in $000s)
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
Total
2014
$
–
(403)
–
136 145
5
(1 043)
135 107
(1 727)
(803)
–
$
(2 530)
132 174
132 174
* Fund launched January 2014.
The accompanying notes are an integral part of these financial statements.
162
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EAFE DIVIDEND LEADERS ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, if the Canadian dollar had
strengthened or weakened by 1% in relation to the above
currencies, with all other factors kept constant, the Fund’s
net assets may have decreased or increased, respectively, by
approximately 1.0%. In practice, actual results could differ from
this sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide
unitholders with exposure to the performance of a diversified
portfolio of high-quality dividend-paying equity securities in
markets in Europe, Australasia and the Far East (EAFE) that
will provide regular income and that have the potential for
long-term capital growth.
Other price risk (% impact on net assets)
The table below shows the impact of a 1% change in the broadbased index (noted below) on the Fund’s net assets, using an
11-month historical correlation of data of the Fund’s return
and the index, with all other factors kept constant, as at:
Financial instrument risk and capital management
(see note 4 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
December 31
2014
International Equities
Financial
Utilities
Industrial
Consumer Discretionary
Materials
Telecommunications
Energy
Consumer Staples
Health Care
Information Technology
December 31
2014
MSCI EAFE Total Return Net Index (CAD)
+ or - 0.9
Since historical correlation may not be representative of
future correlation, actual results could differ from this
sensitivity analysis and the difference could be material.
40.1
9.3
8.8
8.4
8.3
7.2
6.2
4.8
3.6
3.3
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
The following is a summary of the inputs used as of
December 31, 2014.
December 31, 2014
Equities
Total financial instruments
% of total portfolio
Currency risk (% of net assets)
The table below summarizes the Fund’s net exposure (after
hedging, if any) to currency risk as at:
Level 1
Level 2
Level 3
Total
132 181
132 181
100.0
–
–
–
–
–
–
132 181
132 181
100.0
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
December 31
Currency
2014
Euro
23.1
Pound sterling
16.6
Japanese yen
15.5
Australian dollar
15.0
Swiss franc
7.1
Swedish krona
6.5
Hong Kong dollar
6.1
Singapore dollar
5.4
Danish krone
1.8
New Zealand dollar
1.0
Israeli new shekel
1.0
Norwegian krone
0.8
United States dollar0.1
Total
100.0
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services. The management fee
of the ETF is calculated at 0.49% annually, before GST/HST, of
the daily net asset value of the ETF.
Taxes ($000s) (see note 6 in the generic notes)
The Fund had no capital or non-capital losses as at
December 31, 2014.
Please see the generic notes at the back of the financial statements.
163
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EAFE DIVIDEND LEADERS ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the period ended December 31
(see note 2 in the generic notes)
2014
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
–
6 550
–
(50)
6 500
Transaction costs ($000s except %)
Transaction costs, including brokerage commissions, in
consideration of portfolio transactions for the period ended:
December 31
2014
$%
Total transaction costs
372100
Related-party brokerage commissions*
– –
Commission arrangements†
– –
* 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)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
December 31
2014
Fair value of securities loaned
Fair value of collateral received
13 510
13 780
Investments by other related investment funds (%)
(see note 8 in the generic notes)
The table below summarizes, as a percentage, the net assets
of the Fund owned by other related investment funds as at:
December 31
2014
RBC Quant EAFE Dividend Leaders
(CAD Hedged) ETF
2.4
Please see the generic notes at the back of the financial statements.
164
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EAFE DIVIDEND LEADERS (CAD HEDGED) ETF
December 31, 2014
Number
of Units
Security
Cost
ETF UNITS
155 028
RBC Quant EAFE Dividend Leaders ETF
$
3 074
Fair
Value
$
% of Net
Assets
3 152
TOTAL ETF UNITS
3 074
3 15298.8
TOTAL INVESTMENTS
$
3 074
3 15298.8
UNREALIZED GAIN ON FOREIGN EXCHANGE CONTRACTS (SCHEDULE A)
290.9
TOTAL PORTFOLIO
3 18199.7
OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
80.3
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS$
3 189
100.0
SCHEDULE A
Foreign Exchange Contracts
SCHEDULE A (cont.)
Foreign Exchange Contracts
Unrealized
Contracts
Maturity Date
Gain (Loss)
Unrealized
Contracts
Maturity Date
Gain (Loss)
Bought CAD 311 Sold AUD 327 @ 0.9511
Bought CAD 152 Sold AUD 160 @ 0.9523
Bought CAD 16 Sold AUD 17 @ 0.9393
Bought GBP 7 Sold CAD 13 @ 1.8016
Bought CAD 360 Sold GBP 200 @ 1.8007
Bought CAD 15 Sold GBP 9 @ 1.8137
Bought CAD 149 Sold GBP 82 @ 1.8153
Bought GBP 9 Sold CAD 16 @ 1.8015
Bought CAD 3 Sold NOK 16 @ 0.1913
Bought CAD 19 Sold NOK 98 @ 0.1942
Bought NOK 7 Sold CAD 1 @ 0.1937
Bought CAD 19 Sold NOK 98 @ 0.1942
Bought NOK 7 Sold CAD 1 @ 0.1917
Bought NOK 14 Sold CAD 3 @ 0.1945
Bought CAD 514 Sold EUR 361 @ 1.4252
Bought EUR 13 Sold CAD 18 @ 1.4293
Bought CAD 244 Sold EUR 169 @ 1.4447
Bought EUR 24 Sold CAD 35 @ 1.4568
Bought CAD 36 Sold EUR 25 @ 1.4230
Bought HKD 43 Sold CAD 6 @ 0.1505
Bought HKD 31 Sold CAD 5 @ 0.1490
Bought CAD 64 Sold HKD 427 @ 0.1500
Bought CAD 131 Sold HKD 882 @ 0.1480
Bought CAD 8 Sold HKD 55 @ 0.1496
Bought CAD 31 Sold ILS 104 @ 0.2942
Bought JPY 2 244 Sold CAD 22 @ 0.0099
Bought JPY 1 112 Sold CAD 11 @ 0.0098
Bought CAD 166 Sold JPY 16 900 @ 0.0098
Bought CAD 339 Sold JPY 35 025 @ 0.0097
Bought CAD 19 Sold JPY 1 949 @ 0.0097
Bought CAD 32 Sold NZD 35 @ 0.9044
Bought CAD 110 Sold SGD 126 @ 0.8744
Bought CAD 56 Sold SGD 63 @ 0.8846
Bought SGD 8 Sold CAD 7 @ 0.8927
Bought CAD 6 Sold SGD 7 @ 0.8825
Bought CAD 62 Sold SEK 405 @ 0.1523
Bought CAD 142 Sold SEK 935 @ 0.1524
Bought CAD 8 Sold SEK 53 @ 0.1485
Bought CAD 7 Sold CHF 6 @ 1.1779
Bought CAD 76 Sold CHF 63 @ 1.2022
Bought CHF 8 Sold CAD 9 @ 1.2134
Bought CAD 7 Sold CHF 6 @ 1.1827
Bought CAD 154 Sold CHF 130 @ 1.1851
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
$
1
1
–
–
(1)
–
1
–
–
–
–
1
–
–
8
–
7
(1)
–
–
–
–
15-Jan-15
$
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
15-Jan-15
(1)
–
–
(1)
–
3
–
–
–
–
1
–
–
2
4
–
–
2
–
–
2
$
29
TOTAL FOREIGN EXCHANGE
All counterparties have a credit rating of at least A.
The accompanying notes are an integral part of the financial statements.
165
FINANCIAL STATEMENTS
RBC QUANT EAFE DIVIDEND LEADERS (CAD HEDGED) ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Unrealized gain on foreign exchange contracts
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Distributions payable
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
3 152
12
29
8
3 201
12
12
$
3 189
Investments at cost
$
3 074
NAV PER UNIT
$
21.26
The accompanying notes are an integral part of these financial statements.
166
FINANCIAL STATEMENTS
RBC QUANT EAFE DIVIDEND LEADERS (CAD HEDGED) ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
Change in unrealized gain (loss) in value
of forward contracts
TOTAL INCOME (LOSS)
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
20
56
79
$
29
184
184
$
1.71
* Fund launched October 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
3 027
–
(10)
3 017
12
–
12
Interest received
Dividends received, net of withholding taxes
$
$
–
12
$
–
(108)
(8)
–
(3 073)
–
(3 005)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
167
184
FINANCIAL STATEMENTS
RBC QUANT EAFE DIVIDEND LEADERS (CAD HEDGED) ETF
Statement of Changes in NAV (in $000s)
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
Total
2014
$
–
184
–
3 027
56
–
3 083
(16)
(61)
(1)
$
(78)
3 189
3 189
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
168
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EAFE DIVIDEND LEADERS (CAD HEDGED) ETF
December 31, 2014
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
General information (see note 1 in the generic notes)
The investment objective of the Fund is to provide unitholders
with exposure, either directly or indirectly through investment
in other mutual funds managed by RBC GAM or an affiliate,
to the performance of a diversified portfolio of high-quality
dividend-paying equity securities in markets in Europe,
Australasia and the Far East (EAFE) that will provide regular
income and that have the potential for long-term capital growth,
while seeking to minimize the exposure to currency fluctuations
between foreign currencies and the Canadian dollar.
The following is a summary of the inputs used as of
December 31, 2014.
December 31, 2014
ETF units
Derivatives – assets
Derivatives – liabilities
Total financial instruments
% of total portfolio
Concentration risk (%)
Level 2
–
33
(4)
29
0.9
Level 3
–
–
–
–
–
Total
3 152
33
(4)
3 181
100.0
Management fees (see note 8 in the generic notes)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
A management fee is not charged directly to the ETF as this
ETF invests in the units of other RBC ETFs.
December 31
2014
International Equities
Financial
Utilities
Industrial
Consumer Discretionary
Materials
Telecommunications
Energy
Consumer Staples
Health Care
Information Technology
3 152
–
–
3 152
99.1
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
Financial instrument risk and capital management
(see note 4 in the generic notes)
Investment mix
Level 1
Underlying mutual fund ownership interest (%)
40.1
9.3
8.8
8.4
8.3
7.2
6.2
4.8
3.6
3.3
The table below summarizes the Fund’s interest in the
underlying mutual funds as a percentage of net assets
of the Fund (“NAV”), and the Fund’s ownership interest
as a percentage of the net assets of the underlying funds
(“Ownership”). All underlying funds are established
and conduct business in Canada, and have an associate
relationship to the Fund.
December 31, 2014
Ownership
NAV
Currency risk (% of net assets)
RBC Quant EAFE Dividend
Leaders ETF
Since the currency risk of the Fund has been hedged using
foreign exchange contracts, the Fund has minimal sensitivity
to changes in foreign exchange rates.
Taxes ($000s) (see note 6 in the generic notes)
98.8
The Fund had no capital or non-capital losses as at
December 31, 2014.
Other price risk (% impact on net assets)
Due to the fact that the Fund was in existence for less than
six months prior to December 31, 2014, no comparative
disclosure is provided because there is insufficient data, and
any resulting calculation of the impact on net assets of the
Fund using historical correlation between the Fund’s return
and a broad-based index could be materially misleading.
Please see the generic notes at the back of the financial statements.
169
2.4
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EAFE DIVIDEND LEADERS (CAD HEDGED) ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the period ended December 31
(see note 2 in the generic notes)
2014
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
–
150
–
–
150
Securities lending revenue ($000s)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
December 31
2014
Fair value of securities loaned
Fair value of collateral received
94
96
Please see the generic notes at the back of the financial statements.
170
2014 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EMERGING MARKETS DIVIDEND LEADERS ETF
December 31, 2014
Par Value
Security
Cost
EQUITIES
Consumer Discretionary
159 000 Astra International Tbk PT
35 200 Berjaya Sports Toto Bhd
4 500 Foschini Group Ltd.
4 800 OPAP SA
8 800 Truworths International Ltd.
$
104
41
62
63
65
Fair
Value
$
% of Net
Assets
110
41
60
60
68
3353395.6
Consumer Staples
20 300 Ambev SA
149
145
2 700 British American Tobacco Malaysia BHD
61
58
47 000 IOI Corp Bhd
75
75
7 700 Souza Cruz SA
70
65
3 900 Spar Group Ltd.
54
63
41 900 Wal-Mart de Mexico SAB de CV
109
104
5185108.3
Energy
60 600 Ecopetrol SA
78
61
22 800 Indo Tambangraya Megah Tbk PT
37
33
7 600 PTT PCL
92
87
2 500 Sasol Ltd.
124
108
37 700 Tambang Batubara Bukit Asam Persero Tbk PT
44
44
3753335.5
Financials
192 000 Agricultural Bank of China Ltd.
101
112
34 100 Alliance Financial Group BHD
55
53
700 Banco de Chile
57
56
2 800 Banco Santander Chile
69
64
289 300 Bank of China Ltd.
159
189
4 500 CETIP SA - Mercados Organizados
65
63
212 100 China Construction Bank Corp.
179
202
92 000 China Everbright Bank Co. Ltd.
53
58
44 600 China Merchants Bank Co. Ltd.
99
130
25 100 Compartamos SAB de CV
60
58
5 700 Coronation Fund Managers Ltd.
57
66
29 700 Growthpoint Properties Ltd.
81
82
6 000 ICICI Bank Ltd.
72
80
231 700 Industrial & Commercial Bank of China Ltd.
174
196
33 600 Malayan Banking Bhd
106
102
3 000 Nedbank Group Ltd.
68
75
3 900 Porto Seguro SA
53
52
64 100 Redefine Properties Ltd.
64
69
28 000 Shimao Property Holdings Ltd.
67
73
8 200 Standard Bank Group Ltd.
109
118
Diversified Financials
900 iShares MSCI Emerging Markets ETF
11 600 RMB Holdings Ltd.
1 748
41
67
1 89831.1
41
75
1081161.9
The accompanying notes are an integral part of the financial statements.
171
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)
RBC QUANT EMERGING MARKETS DIVIDEND LEADERS ETF
December 31, 2014
Par Value
Security
Cost
Industrials
46 300
162 000
130 700
10 300
4 300
10 700
41 800
2 600
49 200
35 500
Aboitiz Equity Ventures Inc.
BTS Group Holdings PCL
DMCI Holdings Inc.
Ecorodovias Infraestrutura e Logistica SA
Grupo Aeroportuario del Sureste SAB de CV
Grupo Carso SAB de CV
Jiangsu Expressway Co. Ltd.
Localiza Rent a Car SA
Sinopec Engineering Group Co. Ltd.
United Tractors Tbk PT
$
60
56
50
50
61
66
52
40
51
60
Fair
Value
$
% of Net
Assets
63
55
53
48
66
61
58
40
39
58
5465418.8
Information Technology
3 900 Infosys Ltd.
140
142
5 700 Pegatron Corp.
63
76
400 Samsung Electronics Co. Ltd.
248
280
8 800 Taiwan Semiconductor Manufacturing Co. Ltd.
214
228
5 800 Wipro Ltd.
79
76
74480213.1
Materials
3 600 African Rainbow Minerals Ltd.
50
43
2 100 Assore Ltd.
37
31
29 100 Indocement Tunggal Prakarsa Tbk PT
66
68
2 700 Industrias Penoles SAB de CV
63
61
1 900 Kumba Iron Ore Ltd.
52
46
15 400 Lafarge Malaysia Bhd
52
50
19 000 PPC Ltd.
53
52
31 200 PTT Global Chemical PCL
63
56
2 100 Sociedad Quimica y Minera de Chile SA
55
58
2 200 Southern Copper Corp.
71
72
5625378.8
Media
30 100 BEC World PCL
51
54
51540.9
Telecommunication Services
11 000 Advanced Info Service PCL
90
97
3 000 Chunghwa Telecom Co. Ltd.
102
102
40 000 DiGi.Com Bhd
81
82
31 200 Maxis Bhd
70
70
6 400 MTN Group Ltd.
150
142
402 900 Telekomunikasi Indonesia Persero Tbk PT
103
108
5 700 Vodacom Group Ltd.
72
73
66867411.0
Utilities
49 200 Aboitiz Power Corp.
52
55
5 200 AES Tiete SA
43
40
13 100 Cia Energetica de Minas Gerais
76
75
1 200 GAIL India Ltd.
60
59
142 000 Perusahaan Gas Negara Persero Tbk PT
81
80
3123095.1
TOTAL EQUITIES
5 967
6 113100.1
TOTAL INVESTMENTS
$
5 967
6 113
100.1
OTHER NET ASSETS (LIABILITIES) ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
(5)
(0.1)
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS
$
6 108
100.0
The accompanying notes are an integral part of the financial statements.
172
FINANCIAL STATEMENTS
RBC QUANT EMERGING MARKETS DIVIDEND LEADERS ETF
Statement of Financial Position (in $000s except per unit amounts)
December 31
2014
(see note 2 and note 9 in the generic notes)
ASSETS
Investments at fair value
Cash
Dividends receivable, interest accrued and other assets
TOTAL ASSETS
LIABILITIES
Due to investment dealers
Distributions payable
Accounts payable and accrued expenses
TOTAL LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF REDEEMABLE UNITS (“NAV”)
$
6 113
834
7
6 954
820
23
3
846
$
6 108
Investments at cost
$
5 968
NAV PER UNIT
$
20.36
The accompanying notes are an integral part of these financial statements.
173
FINANCIAL STATEMENTS
RBC QUANT EMERGING MARKETS DIVIDEND LEADERS ETF
Statement of Cash Flow (in $000s)
Statement of Comprehensive Income
(in $000s except per unit amounts)
For the period ended December 31
(see note 2 in the generic notes)*
For the period ended December 31
(see note 2 in the generic notes)*
INCOME (see note 3 in the generic notes)
Dividends
Net realized gain (loss) on investments
Net gain (loss) on foreign currencies
and other net assets
Change in unrealized gain (loss) on investments
TOTAL INCOME (LOSS)
EXPENSES (see notes – Fund Specific Information)
Management fees
GST/HST
Transaction costs
Withholding tax
TOTAL EXPENSES
INCREASE (DECREASE) IN NAV
INCREASE (DECREASE) IN NAV
PER REDEEMABLE UNIT
2014
$
18
(40)
(17)
159
120
$
6
1
14
1
22
98
$
0.48
* Fund launched October 2014.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in NAV
ADJUSTMENTS TO RECONCILE NET CASH
PROVIDED BY OPERATIONS
Net realized loss (gain) on investments
Change in unrealized loss (gain) on investments
(Increase) decrease in accrued receivables
Increase (decrease) in accrued payables
Cost of investments purchased
Proceeds on sales of investments
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable units
Cash paid on redemption of redeemable units
Distributions paid to holders of redeemable units
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash for the year
Cash (bank overdraft), beginning of period
CASH (BANK OVERDRAFT), END OF PERIOD
$
6 038
–
(5)
6 033
834
–
834
Interest received
Dividends received, net of withholding taxes
$
$
–
15
$
40
(159)
(2)
3
(12 995)
7 816
(5 199)
$
Cash consists of cash and futures contracts margin receivable/payable, as applicable.
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
174
98
FINANCIAL STATEMENTS
RBC QUANT EMERGING MARKETS DIVIDEND LEADERS ETF
Statement of Changes in NAV (in $000s)
For the period ended December 31
(see note 2 in the generic notes)*
NAV AT BEGINNING OF PERIOD
INCREASE (DECREASE) IN NAV
Early redemption fees
Proceeds from redeemable units issued
Reinvestments of distributions to holders
of redeemable units
Redemption of redeemable units
NET INCREASE (DECREASE) FROM
REDEEMABLE UNIT TRANSACTIONS
Distributions from net income
Distributions from net gains
Distributions from capital
TOTAL DISTRIBUTIONS TO HOLDERS
OF REDEEMABLE UNITS
NET INCREASE (DECREASE) IN NAV
NAV AT END OF PERIOD
Total
2014
$
–
98
–
6 038
–
–
6 038
(8)
–
(20)
$
(28)
6 108
6 108
* Fund launched October 2014.
The accompanying notes are an integral part of these financial statements.
175
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EMERGING MARKETS DIVIDEND LEADERS ETF
December 31, 2014
General information (see note 1 in the generic notes)
As at December 31, 2014, if the Canadian dollar had
strengthened or weakened by 1% in relation to the above
currencies, with all other factors kept constant, the Fund’s
net assets may have decreased or increased, respectively, by
approximately 1.0%. In practice, actual results could differ from
this sensitivity analysis and the difference could be material.
The investment objective of the Fund is to provide
unitholders with exposure to the performance of a diversified
portfolio of high-quality emerging market dividend-paying
equity securities that will provide regular income and that
have the potential for long-term capital growth.
Other price risk (% impact on net assets)
Financial instrument risk and capital management
(see note 4 in the generic notes)
Due to the fact that the Fund was in existence for less than
six months prior to December 31, 2014, no comparative
disclosure is provided because there is insufficient data, and
any resulting calculation of the impact on net assets of the
Fund using historical correlation between the Fund’s return
and a broad-based index could be materially misleading.
Concentration risk (%)
The table below summarizes the Fund’s investment portfolio
(after consideration of derivative products, if any) as at:
Investment mix
December 31
2014
Global Equities
Financial
Information Technology
Telecommunications
Industrial
Materials
Consumer Staples
Consumer Discretionary
Energy
Utilities
Other Net Assets
Fair value hierarchy ($000s except % amounts)
(see note 3 in the generic notes)
33.0
13.1
11.0
8.8
8.8
8.3
6.5
5.5
5.1
(0.1)
The following is a summary of the inputs used as of
December 31, 2014.
December 31, 2014
Equities
Total financial instruments
% of total portfolio
Level 1
Level 2
Level 3
Total
6 113
6 113
100.0
–
–
–
–
–
–
6 113
6 113
100.0
Currency risk (% of net assets)
For the period ended December 31, 2014, there were no
transfers of financial instruments between Level 1 or Level 2
and Level 3.
The table below summarizes the Fund’s net exposure (after
hedging, if any) to currency risk as at:
Management fees (see note 8 in the generic notes)
RBC GAM is paid a management fee per annum of the NAV by
the ETF as compensation for its services. The management fee
of the ETF is calculated at 0.64% annually, before GST/HST, of
the daily net asset value of the ETF.
December 31
Currency
2014
United States dollar
26.3
South African rand
17.4
Hong Kong dollar
15.7
Malaysian ringgit
10.6
Brazilian real
7.9
Indonesian rupiah
7.4
Mexican peso
5.2
Thailand baht
5.2
Philippine peso
2.5
Colombian peso
0.9
Euro
0.9
Total
100.0
Taxes ($000s) (see note 6 in the generic notes)
The non-capital and capital losses as at December 31, 2014
for the Fund were approximately:
Capital losses
Non-capital losses
Please see the generic notes at the back of the financial statements.
176
61
–
NOTES TO FINANCIAL STATEMENTS – FUND SPECIFIC INFORMATION
RBC QUANT EMERGING MARKETS DIVIDEND LEADERS ETF
December 31, 2014
Unitholders’ equity (000s)
(see note 5 in the generic notes)
The NAV per unit is arrived at by dividing the net asset
value of the ETF by the total number of units outstanding
at the end of each trading day of the ETF. The ETF’s capital
is managed in accordance with the investment objective as
outlined in the Prospectus.
For the period ended December 31
(see note 2 in the generic notes)
2014
Opening units
Issued number of units
Reinvested number of units
Redeemed number of units
Ending number of units
–
300
–
–
300
Transaction costs ($000s except %)
Transaction costs, including brokerage commissions, in
consideration of portfolio transactions for the period ended:
December 31
2014
$%
Total transaction costs
14100
Related-party brokerage commissions*
–
–
Commission arrangements†
– –
* 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)
(see note 7 in the generic notes)
Fair value of securities on loan and collateral received as at:
December 31
2014
Fair value of securities loaned
Fair value of collateral received
16
17
Please see the generic notes at the back of the financial statements.
177
GENERIC NOTES TO FINANCIAL STATEMENTS
(also see Fund Specific Information)
December 31, 2014
1. The ETFs
The RBC ETFs, the exchange-traded funds (“ETF” or “ETFs”),
are open-ended mutual fund trusts governed by the laws
of the Province of Ontario and governed by a Master
Declaration of Trust. RBC GAM is the manager, trustee and
portfolio advisor of the ETFs and its head office is located
at 155 Wellington Street West, 22nd Floor, Toronto, Ontario.
These financial statements were approved for issuance by the
Board of Directors of RBC GAM on March 5, 2015.
TSX Ticker
SymbolIndex*
RBC 1-5 Year Laddered
Corporate Bond ETF
RBO
Not applicable
RBC Target 2015 Corporate RQC
FTSE TMX Canada
Bond Index ETF2015 Maturity Corporate Bond
Index
RBC Target 2020 Corporate RQH
FTSE TMX Canada
Bond Index ETF2020 Maturity Corporate Bond
Index
RBC Target 2021 Corporate
RQI
FTSE TMX Canada
Bond Index ETF2021 Maturity Corporate Bond
Index
RUD
RUD.U
Not applicable
RBC Quant U.S. Dividend
Leaders (CAD Hedged) ETF
RHU
Not applicable
RBC Quant European Dividend
Leaders ETF
RPD
RPD.U
Not applicable
RBC Quant European Dividend
Leaders (CAD Hedged) ETF
RHP
Not applicable
RBC Quant EAFE Dividend
Leaders (CAD Hedged) ETF
RHI
Not applicable
RBC Quant Emerging Markets
Dividend Leaders ETF
RXD
RXD.U
Not applicable
These financial statements have been prepared in
compliance with International Financial Reporting Standards
(“IFRS”), which include estimates and assumptions made by
management that may affect the reported amounts of assets
(primarily valuation of investments), liabilities, income and
expenses during the reported periods. Actual results may
differ from estimates. The significant accounting policies of
the ETFs, which are investment entities, are as follows:
RBC Target 2019 Corporate RQG
FTSE TMX Canada
Bond Index ETF2019 Maturity Corporate Bond
Index
RBC Quant U.S.
Dividend Leaders ETF
Not applicable
3. Summary of significant accounting policies
RBC Target 2018 Corporate RQF
FTSE TMX Canada
Bond Index ETF2018 Maturity Corporate Bond
Index
Not applicable
RID
RID.U
The information provided in these financial statements
and notes thereto is for the 12-month periods ended or as at
December 31, 2014, December 31, 2013 and January 1, 2013.
In the year a Fund or series is established, “period” represents
the period from inception to December 31 of that fiscal year.
RBC Target 2017 Corporate RQE
FTSE TMX Canada
Bond Index ETF2017 Maturity Corporate Bond
Index
RCD
RBC Quant EAFE
Dividend Leaders ETF
2. Financial year/period
RBC Target 2016 Corporate RQD
FTSE TMX Canada
Bond Index ETF2016 Maturity Corporate Bond
Index
RBC Quant Canadian
Dividend Leaders ETF
TSX Ticker
SymbolIndex*
* The indices are trademarks of FTSE TMX Debt Capital Markets Inc. (“FTDCM”).
“TMX” is a trademark of TSX Inc. (“TSX”) and is used under licence. “FTSE” is a
trademark of the London Stock Exchange Group companies (the “Exchange”) and is
used by FTDCM under licence. These marks have been licensed for use for certain
purposes to RBC GAM. The ETFs are not sponsored, endorsed, sold or promoted by
FTDCM, FTSE International Limited, the Exchange or TSX (together, the “Licensor
Parties”). The Licensor Parties make no warranty or representation whatsoever,
expressly or impliedly, either as to the results to be obtained from the use of the
indices and/or the figures at which the said indices stand at any particular time on any
particular day or otherwise. The indices are compiled and calculated by FTDCM and
all copyright in the values of the indices and their constituent lists vests in FTDCM. The
Licensor Parties shall not be liable (whether in negligence or otherwise) to any person
for any error in the indices and the Licensor Parties shall not be under any obligation to
advise any person of any error therein.
The units of the ETFs are listed on the Toronto Stock
Exchange (“TSX”). Investors may purchase or sell units on the
TSX in the same way as other securities listed on the TSX.
ETF
ETF
Fair Value Option Financial instruments are designated as
fair value through profit and loss (“FVTPL”) on their initial
recognition (the fair value option). Derivative financial
instruments are held for trading (“HFT”) and are required to be
classified as FVTPL by nature. Other non-derivative financial
instruments can be designated as FVTPL if they have a reliably
measurable fair value and satisfy some criteria such as (i) it
eliminates or significantly reduces an accounting mismatch
and (ii) it is part of a portfolio that is managed and its
performance is evaluated on a fair value basis. Management’s
judgment is that all non-derivative financial instruments
are designated as FVTPL since all Funds satisfy the above
criteria. The Funds’ financial assets and liabilities, such as
foreign exchange contracts, are offset and the net amounts are
178
GENERIC NOTES TO FINANCIAL STATEMENTS
(also see Fund Specific Information)
December 31, 2014
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.
reported in the Statements of Financial Position. The Funds
enter into various master netting or similar agreements with
counterparties, which provide the Funds with the legally
enforceable right to offset financial assets and liabilities.
Income Recognition Interest for distribution purposes is
coupon interest recognized on the accrual basis and/or
imputed interest on zero coupon bonds.
Redeemable units are measured at their respective
redemption values. All other assets and liabilities are
measured at amortized cost.
Increase (Decrease) in Net Assets Attributable to Holders
of Redeemable Units per Unit Increase (decrease) in net
assets attributable to holders of redeemable units per unit
in the Statements of Comprehensive Income represents the
increase (decrease) in net assets attributable to holders of
redeemable units, divided by the average units outstanding
during the period.
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:
Foreign Currencies The following is a list of abbreviations
used in the Schedule of Investment Portfolio:
Level 1 – quoted prices (unadjusted) in active markets for
identical assets or liabilities;
AUD – Australian Dollar
CAD – Canadian Dollar
CHF – Swiss Franc
DKK – Danish Krone
EUR – Euro
GBP – Pound Sterling
HKD – Hong Kong Dollar
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
ILS – Israeli New Shekel
JPY – Japanese Yen
NOK – Norwegian Krone
NZD – New Zealand Dollar
SEK – Swedish Krona
SGD – Singapore Dollar
USD – United States Dollar
4. Financial instrument risk and capital management
Level 3 – inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
RBC GAM is responsible for managing each ETF’s capital,
which is its net assets and consists primarily of its
financial instruments.
Changes in valuation methods may result in transfers into or
out of an investment’s assigned level.
An ETF’s investment activities expose it to a variety of
financial risks. RBC GAM seeks to minimize potential adverse
effects of these risks on an ETF’s performance by employing
professional, experienced portfolio advisors, daily monitoring
of the ETF’s holdings and market events and diversifying its
investment portfolio within the constraints of its investment
objectives. To assist in managing risks, RBC GAM also uses
internal guidelines, maintains a governance structure that
oversees each ETF’s investment activities and monitors
compliance with the ETF’s investment strategies, internal
guidelines and securities regulations.
Investments are recorded at fair value, which is determined
as follows:
Fixed-Income and Debt Securities – Bonds are valued at the
closing price quoted by major dealers or independent pricing
vendors in such securities.
Fair Valuation of Investments – If the valuation methods described
above are not appropriate, RBC GAM will estimate the fair
value of an investment using established fair valuation
procedures, such as consideration of public information,
broker quotes, valuation models, fundamental analysis, matrix
pricing, discounts from market prices of similar securities or
discounts applied due to restrictions on the disposition of
securities, and external fair value service providers.
Financial instrument risk, as applicable to an ETF, is
disclosed in its Notes to Financial Statements – Fund
Specific Information.
Liquidity risk
Investment Transactions Investment transactions are
accounted for as of the trade date. 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
Liquidity risk is the possibility that investments in an ETF
cannot be readily converted into cash when required. An ETF
is exposed to liquidity risk to the extent that it is subject to
daily redemptions of redeemable units. Since the delivery of
179
GENERIC NOTES TO FINANCIAL STATEMENTS
(also see Fund Specific Information)
December 31, 2014
redemptions is in the form of securities, an ETF is not exposed
to any significant liquidity risk. Liquidity risk is managed
by investing the majority of an ETF’s assets in investments
that are traded in an active market and that can be readily
disposed. In accordance with securities regulation, an ETF
must maintain at least 90% of its assets in liquid investments.
In addition, an ETF aims to retain sufficient cash and cash
equivalent positions to maintain liquidity, and has the ability
to borrow up to 5% of its net assets. All non-derivative financial
liabilities, other than redeemable units, are due within 90 days.
5. Unitholders’ equity
Any securities deemed to be illiquid are identified in the
Schedules of Investment Portfolio.
On any trading day, an underwriter or designated broker
may place a subscription or redemption order for an integral
multiple of the prescribed number of units of an ETF. If the
order is accepted, the ETF will issue or redeem units to or
from the underwriter or designated broker within three
trading days thereafter. For each prescribed number of units
issued or redeemed, the underwriter or designated broker
must deliver or receive payment consisting of:
The beneficial interest in the ETFs is divided into equal
interests of one class referred to as outstanding units.
Each ETF is authorized to issue an unlimited number of
redeemable and transferable units, each of which represents
an equal, undivided interest in the net asset value of
the ETF. Each unit outstanding shall participate pro rata
in any distributions made, other than management fee
distributions, and in the event of termination of the ETF, in
the net assets of the ETF.
Credit risk
Credit risk is the risk that a loss could arise from a security
issuer or counterparty not being able to meet its financial
obligations. The carrying amount of investments and other
assets represents the maximum credit risk exposure as
disclosed in an ETF’s Statement of Financial Position. The fair
value of fixed-income securities includes a consideration of
the credit worthiness of the debt issuer. Credit risk exposure
is mitigated for those ETFs participating in a securities
lending program (see note 7). RBC GAM monitors each ETF’s
credit exposure and counterparty ratings daily. Rating data is
provided by the Licensor Parties.
a) a basket of applicable securities for each prescribed
number of units; and
b) cash in an amount sufficient so that the value of the basket
of the applicable securities and cash delivered is equal to the
net asset value of the prescribed number of units plus the
distribution price adjustment, if applicable, of the ETF.
Concentration risk
The distribution price adjustment is a distribution that has
been declared by the ETF and has reduced the net asset value
but has not yet been reflected in the market price. A trading
day is each day on which the TSX is open for trading.
Concentration risk arises as a result of net financial
instrument exposures to the same category such as,
geographical region, asset type, industry sector or market
segment. Financial instruments in the same category have
similar characteristics and may be affected similarly by
changes in economic or other conditions.
A unitholder is entitled on any trading day to redeem units
for cash at a redemption price of 95% of net asset value
per unit of the ETF’s units at the next valuation following
receipt of the cash redemption request. To be effective on a
particular trading day, a cash redemption request must be
received by such time as RBC GAM may, from time to time,
determine on that trading day. If a cash redemption request
is received later than the prescribed time on a trading day or
a day which is not a trading day, the cash redemption request
shall be deemed to be received as of the next trading day.
Interest rate risk
Interest rate risk is the risk that the fair value of an ETF’s
interest-bearing investments will fluctuate due to changes
in market interest rates. The value of fixed-income and
debt securities, such as bonds, is affected by interest rates.
Generally, the value of these securities increases if interest
rates fall and decreases if interest rates rise.
Securities with a stated maturity date beyond the target
maturity year of the ETF have an effective maturity date in
the target year of the ETF, as determined with the rules based
on methodology developed by the Licensor Parties.
The net asset value per unit is arrived at by dividing the
net asset value of the ETF by the total number of units
outstanding at the end of each trading day of the ETF.
The capital of the ETFs is managed in accordance with
the investment objective as outlined in the Prospectus.
180
GENERIC NOTES TO FINANCIAL STATEMENTS
(also see Fund Specific Information)
December 31, 2014
6.Taxes
to the ETFs’ property on behalf of its unitholders, provides
investment advice and portfolio management services to the
ETFs and appoints underwriters or designated brokers for
the ETFs. RBC GAM is paid a management fee by the ETFs as
compensation for its services. The fee plus applicable taxes
are accrued daily and paid monthly in arrears.
The ETFs qualify as “mutual fund trusts” or “unit trusts” as
defined in the Income Tax Act (Canada). In general, the ETFs
are subject to income tax, however, no income tax is payable
on net income and/or net realized capital gains which are
distributed to unitholders. In addition, for mutual fund
trusts, income taxes payable on net realized capital gains are
refundable on a formula basis when units of the ETFs are
redeemed. It is the intention of the ETFs to pay out all net
income and realized capital gains each year so that the ETFs
will not be subject to income taxes.
RBC GAM in turn pays certain operating expenses of the
ETFs. These expenses include regulatory filing fees and other
day-to-day operating expenses including, but not limited to,
recordkeeping, accounting and fund valuation costs,
custody fees, audit and legal fees and the cost of preparing
and distributing annual and semi-annual reports,
prospectuses and investor communications. The ETFs also
pay certain operating expenses directly, including the costs
related to the Board of Governors of the ETFs and the cost of
any new government or regulatory requirements introduced
and any borrowing costs (collectively, other fund costs), and
taxes (including, but not limited to, GST/HST).
Accordingly, no provision for income taxes is recorded.
Net investment income and capital gains are distributable
to the unitholders in amounts determined under the
provisions of the Declaration of Trust on a monthly basis.
All distributions, other than management fee distributions,
shall be credited to the unitholder pro rata in accordance
with the number of units held by them on record date of the
distribution. Management fee distributions shall be credited
to the unitholder entitled thereto.
Certain Funds may invest in units of other Funds managed
by RBC GAM or its affiliates (“underlying mutual funds”).
The Fund’s ownership interest in underlying mutual funds is
disclosed in the Fund Specific Information.
Capital losses are available to be carried forward indefinitely
and applied against future capital gains. Non-capital losses
may be carried forward to reduce future taxable income for
up to 20 years.
Affiliates of RBC GAM that provide services to the ETFs in the
course of their normal businesses are discussed below.
Custodian and Valuation Agent
7. Securities lending revenue
RBC IS is the custodian and valuation agent for the ETFs.
RBC IS is responsible for certain aspects of day-to-day
administration including holding the assets and the daily
calculation of the net asset value of the ETFs.
Certain of the ETFs lend portfolio securities from time to time
in order to earn additional income. Income from securities
lending is included in the Statements of Comprehensive
Income of the ETF. Each ETF will have entered into a
securities lending agreement with its custodian, RBC Investor
Services Trust (“RBC IS”). The aggregate market value of all
securities loaned by an ETF cannot exceed 50% of the assets
of an ETF. The ETF receives collateral, with an approved
credit rating of at least A, of at least 102% of the value of the
securities on loan. The ETF is indemnified by RBC IS for
any collateral credit or market loss. As such, the credit risk
associated with securities lending is considered minimal.
Designated Broker and Underwriter
RBC Dominion Securities Inc. is a designated broker and an
underwriter for the ETFs. As such, RBC Dominion Securities
Inc. may subscribe or redeem units of the ETFs.
Brokerage
The ETFs have established standard brokerage agreements at
market rates with related-party brokerages.
Other Related-Party Transactions
8.Administrative and other relatedparty transactions
Pursuant to applicable securities legislation, the ETFs relied
on the standing instructions from the Board of Governors
(“BoG”) in its capacity as the Independent Review Committee
with respect to the following related-party transactions:
Manager, Trustee and Portfolio Advisor
RBC GAM is an indirect wholly owned subsidiary of
Royal Bank of Canada (“Royal Bank”). RBC GAM is the
manager, trustee and portfolio advisor of the ETFs. RBC GAM
is responsible for the ETFs’ day-to-day operations, holds title
Related-Party Trading Activities
(a) trades in securities of Royal Bank;
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GENERIC NOTES TO FINANCIAL STATEMENTS
(also see Fund Specific Information)
December 31, 2014
All financial assets and financial liabilities were classified as
FVTPL upon transition to IFRS. Previously financial assets
and financial liabilities were carried at fair value under
Canadian GAAP.
(b) investments in the securities of issuers for which a
related-party dealer acted as an underwriter during the
distribution of such securities and the 60-day period
following the conclusion of such distribution of the
underwritten securities to the public; and
Reconciliation of net assets and comprehensive income
previously reported under Canadian GAAP to IFRS are
disclosed in the Fund Specific Information.
(c) purchases of debt securities from or sales of debt
securities to a related-party dealer, where it acted
as principal.
Classification of redeemable units of the Fund – Management has
determined that the Funds’ units do not meet all the criteria
in IAS 32, Financial Instruments Presentation to be classified
as equity and, therefore, by exception to those criteria, have
been reclassified as financial liabilities upon transition to IFRS.
Under Canadian GAAP the units were accounted for as equity.
The applicable standing instructions require that RelatedParty Trading Activities be conducted in accordance with
RBC GAM policy and that RBC GAM advise the BoG of a
material breach of any standing instruction. RBC GAM policy
requires that an investment decision in respect of RelatedParty Trading Activities (i) is made free from any influence of
Royal Bank or its associates or affiliates and without taking
into account any consideration relevant to Royal Bank or its
affiliates or associates, (ii) represents the business judgment
of the portfolio manager, uninfluenced by considerations
other than the best interests of the ETFs, (iii) is in compliance
with RBC GAM policies and procedures, and (iv) achieves a
fair and reasonable result for the ETFs.
Investment entity – Management has determined that the
Funds meet the definition of “investment entity” and as a
result, investments in other mutual funds managed by
RBC GAM are measured at FVTPL. An investment entity is
an entity that: obtains funds from one or more investors for
the purpose of providing them with investment management
services; commits to its investors that its business purpose is
to invest funds solely for returns from capital appreciation,
investment income, or both; and measures and evaluates
the performance of substantially all of its investments on a
fair value basis. The most significant judgment that has been
made in determining that the Funds meet this definition is
that fair value is used as the primary measurement attribute
to measure and evaluate the performance of substantially all
of their investments.
9. Transition to IFRS
The effect of the Funds’ transition to IFRS from Canadian
generally accepted accounting principles (“GAAP”) is
summarized as follows:
Statements of cash flows – All Funds are required under IFRS
to provide cash flow statements. Under Canadian GAAP most
Funds were exempt from this requirement.
10. Future accounting changes
Revaluation of investments as FVTPL – Under Canadian GAAP, the
fair value of investments was generally required to use bid
prices for long positions and ask prices for short positions.
Under IFRS, the fair value of investments is generally measured
using closing prices – that is, in the same manner in which
the daily net asset value per unit is measured for unitholder
transaction purposes. As a result, upon adoption of IFRS,
adjustments were recognized at January 1, 2013 and
December 31, 2013.
The following IFRS standard has been issued, but is not
yet in effect:
IFRS 9 – Financial Instruments. IFRS 9 replaces parts of
IAS 39 related to the classification and measurement of
financial assets and liabilities.
The new standard is not expected to have a significant impact
on the Funds.
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THE ROLE OF THE BOARD OF GOVERNORS
December 31, 2014
The annual report of the Board of Governors describing
its activities as the independent review committee of the
RBC ETFs is available under Fund Governance at
www.rbcgam.com/etf/reports/ and on SEDAR at
www.sedar.com.
The Board of Governors is the independent review committee
of the RBC ETFs. The Board of Governors was first established
in 1994 to provide advice to RBC Global Asset Management Inc.
regarding conflicts of interest in mutual fund management.
All of the members of the Board of Governors are
independent of RBC Global Asset Management Inc. and
RBC Financial Group.
If you have any questions or comments about the Board
of Governors or its subcommittees, please let us know
by contacting Melanie Adams, Secretary to the Board of
Governors, at the address below.
In its capacity as the independent review committee, the
Board of Governors provides input on conflict of interest
matters in respect of RBC Global Asset Management Inc. and
the RBC ETFs. At least once per year, the Board of Governors
reviews and assesses the adequacy and effectiveness of the
fund manager’s policies and procedures relating to conflict
of interest matters.
Lloyd R. McGinnis, OC, PEng
Chair of the Board of Governors
The Board of Governors is responsible for reviewing
and assessing the independence of its members, the
compensation of its members, and the effectiveness of the
Board of Governors, its subcommittees and its members.
Effective July 1, 2015, the Board of Governors will be referred
to as the Independent Review Committee (“IRC”) and will
no longer be using a subcommittee structure. The IRC will
continue to review advisory matters relating to conflicts of
interest. This change in structure will have no impact on its
ability to effectively fulfill all IRC responsibilities.
Board of Governors
Attention: Melanie Adams
RBC Global Asset Management Inc.
P.O. Box 7500, Station A
Toronto, Ontario M5W 1P9
Board of Governors
Lloyd R. McGinnis Chair of the Board of Governors
Director
Airport Site Development
Winnipeg Airports Authority
Charles F. Macfarlane1,3
Board Director and Former
Investment Industry Executive
and Regulator
Toronto, Ontario
Michael G. Thorley1,4
Vice Chair of the Board of Governors
Retired Lawyer
Toronto, Ontario
Linda S. Petch1,3
Principal
Linda S. Petch Governance Services
Victoria, British Columbia
Paul K. Bates6
Academic and Former Investment
Industry Executive
Millgrove, Ontario
Élaine Cousineau Phénix5
President
Phénix Capital Inc.
Montreal, Quebec
Mary C. Ritchie2,3
President
Richford Holdings Ltd.
Edmonton, Alberta
Joseph P. Shannon6
President
Atlantic Corporation
Port Hawkesbury, Nova Scotia
James W. Yuel6
Chair
PIC Investment Group Inc.
Saskatoon, Saskatchewan
Selwyn B. Kossuth1,3 Financial Consultant
Mississauga, Ontario
183
1 Member of the Financial Advisory Committee
2 Chair of the Financial Advisory Committee
3 Member of the Investment Conflicts Committee
4 Chair of the Investment Conflicts Committee
5 Chair of the Governance Committee
6 Member of the Governance Committee
PLEASE CALL US
If you have questions regarding RBC ETFs, you can contact us using the following options:
On the Internet
By Phone
Investors:
Dealers:
Visit our website at:
1-855-RBC-ETFS (722-3837)
1-800-662-0652
www.rbcgam.com/etfs
By Mail
Head office:
RBC Global Asset Management Inc.
155 Wellington Street West
Suite 2200
Toronto, Ontario
M5V 3K7
For general mutual fund enquiries, write to:
RBC Global Asset Management Inc.
P.O. Box 7500, Station A
Toronto, Ontario
M5W 1P9
RBC ETFs are managed by RBC Global Asset Management Inc. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence.
© RBC Global Asset Management Inc. 2015
184