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.
PricewaterhouseCoopers LLP, Chartered Professional Accountants, Licensed Public Accountants, have performed an independent audit of the financial statements in accordance with Canadian generally accepted auditing standards. Their report is set out on the next page.
Damon G. Williams, FSA, FCIA, CFA Heidi Johnston, CPA, CA Chief Executive Officer Chief Financial Officer RBC Global Asset Management Inc. RBC GAM Funds December 10, 2020 INDEPENDENT AUDITOR’S REPORT
To the Unitholders and Trustee of
RBC 1-5 Year Laddered Canadian Bond ETF RBC Canadian Preferred Share ETF RBC Quant EAFE Dividend Leaders ETF RBC 1-5 Year Laddered Corporate Bond ETF RBC Quant Canadian Dividend Leaders ETF RBC Quant EAFE Dividend Leaders RBC 6-10 Year Laddered Canadian RBC Quant Canadian Equity Leaders ETF (CAD Hedged) ETF Corporate Bond ETF RBC Vision Women’s Leadership MSCI RBC Quant EAFE Equity Leaders ETF RBC Target 2020 Corporate Bond Index ETF Canada Index ETF RBC Quant EAFE Equity Leaders RBC Target 2021 Corporate Bond Index ETF RBC Canadian Bank Yield Index ETF (CAD Hedged) ETF RBC Target 2022 Corporate Bond Index ETF RBC Quant U.S. Dividend Leaders ETF RBC Quant Emerging Markets Dividend RBC Target 2023 Corporate Bond Index ETF RBC Quant U.S. Dividend Leaders Leaders ETF RBC Target 2024 Corporate Bond Index ETF (CAD Hedged) ETF RBC Quant Emerging Markets Equity Leaders ETF RBC Target 2025 Corporate Bond Index ETF RBC Quant U.S. Equity Leaders ETF RBC Strategic Global Dividend Leaders ETF RBC Target 2026 Corporate Bond Index ETF RBC Quant U.S. Equity Leaders (CAD Hedged) ETF RBC Strategic Global Equity Leaders ETF RBC Target 2027 Corporate Bond Index ETF RBC U.S. Banks Yield Index ETF RBC Quant Global Infrastructure Leaders ETF RBC Canadian Discount Bond ETF RBC U.S. Banks Yield (CAD Hedged) Index ETF RBC Quant Global Real Estate Leaders ETF RBC PH&N Short Term Canadian Bond ETF RBC Quant European Dividend Leaders ETF RBC Short Term U.S. Corporate Bond ETF RBC Quant European Dividend Leaders (individually, an ETF) RBC BlueBay Global Diversified Income (CAD Hedged) ETF (CAD Hedged) ETF
Our opinion In our opinion, the accompanying September 30, 2020 financial statements of each ETF present fairly, in all material respects, the financial position of each ETF, its financial performance and its cash flows as at and for the periods indicated in note 2 in accordance with International Financial Reporting Standards (IFRS).
What we have audited The financial statements of each ETF comprise:
• the statements of financial position as at the period-end dates indicated in note 2;
• the statements of comprehensive income for the periods indicated in note 2;
• the statements of cash flow for the periods indicated in note 2;
• the statements of changes in net assets attributable to holders of redeemable units (NAV) for the periods indicated in note 2; and
• the notes to the financial statements, which include a summary of significant accounting policies.
Basis for opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence We are independent of each ETF in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements. INDEPENDENT AUDITOR’S REPORT
Other information Management is responsible for the other information of each ETF. The other information comprises the 2020 Annual Management Report of Fund Performance of each ETF.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements of each ETF, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements of each ETF or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of each ETF in accordance with 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.
In preparing the financial statements, management is responsible for assessing the ability of each ETF to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate any ETF or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the financial reporting process of each ETF.
Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole for each ETF are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements of each ETF.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements of each ETF, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 internal control of each ETF.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of each ETF to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements of each ETF or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause any ETF to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements of each ETF, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. INDEPENDENT AUDITOR’S REPORT
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Patrizia Perruzza.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario December 10, 2020 2020 ANNUAL FINANCIAL STATEMENTS
SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) RBC VISION WOMEN’S LEADERSHIP MSCI CANADA INDEX ETF
September 30, 2020
Fair % of Net Fair % of Net Holdings Security Cost Value Assets Holdings Security Cost Value Assets CANADIAN EQUITIES Financials Communication Services 35 277 Bank of Montreal $ 3 296 $ 2 746 5 025 Cineplex Inc. $ 135 $ 36 66 910 Bank of Nova Scotia 5 087 3 701 1 270 Cogeco Communications Inc. 99 139 73 737 Brookfield Asset 16 424 Corus Entertainment Inc., Class B 84 47 Management Inc. 3 247 3 249 14 014 Quebecor Inc., Class B 387 467 24 578 Canadian Imperial 28 205 Rogers Communications Inc., Bank of Commerce 2 773 2 446 Class B 1 702 1 490 4 804 Canadian Western Bank 165 129 33 164 TELUS Corp. 787 777 648 Equitable Group Inc. 50 49 3 194 2 956 2.7 1 472 Fairfax Financial Holdings Ltd. 907 577 Consumer Discretionary 15 318 Great-West Lifeco Inc. 408 399 11 924 Aritzia Inc. 207 208 2 769 Home Capital Group Inc. 50 60 27 866 Gildan Activewear Inc., Class A 981 731 5 890 iA Financial Corp Inc. 311 273 6 393 Linamar Corp. 262 253 4 591 IGM Financial Inc. 178 140 40 051 Magna International Inc., Class A 2 637 2 440 7 872 Intact Financial Corp. 830 1 122 4 065 Park Lawn Corp. 117 112 2 353 Laurentian Bank of Canada 109 64 5 160 Sleep Country Canada Holdings Inc. 96 103 107 087 Manulife Financial Corporation 2 474 1 983 4 511 Transat AT Inc. 31 18 18 486 National Bank of Canada 1 158 1 223 78 591 Royal Bank of Canada* 7 837 7 347 4 331 3 865 3.5 1 190 Sprott Inc. 40 54 Consumer Staples 32 280 Sun Life Financial Inc. 1 723 1 752 48 153 Alimentation Couche-Tard Inc. 1 689 2 233 99 894 Toronto-Dominion Bank 7 345 6 158 9 566 Empire Co. Ltd., Class A 237 370 4 299 George Weston Ltd. 435 421 37 988 33 472 30.6 178 Lassonde Industries Inc. 29 26 Health Care 10 007 Loblaw Companies Ltd. 546 698 83 984 Extendicare Inc. 600 448 4 506 Maple Leaf Foods Inc. 143 122 66 244 Sienna Senior Living Inc. 938 742 14 136 Metro Inc., Class A 604 903 1 538 1 190 1.1 13 721 Saputo Group Inc. 552 458 Industrials 2 750 The North West Co. Inc. 78 100 3 623 Aecon Group Inc. 65 50 4 313 5 331 4.9 1 132 AG Growth International Inc. 40 31 Energy 8 659 Air Canada 328 136 19 755 Birchcliff Energy Ltd. 77 30 4 468 ATS Automation Tooling Systems 77 77 29 402 Cameco Corp. 409 395 128 801 Bombardier Inc., Class B 412 43 88 069 Canadian Natural Resources Ltd. 2 265 1 879 43 176 Canadian National Railway Co. 4 423 6 123 77 594 Cenovus Energy Inc. 781 403 8 226 Canadian Pacific Railway Ltd. 2 080 3 332 39 319 Crescent Point Energy Corp. 137 63 4 800 Chorus Aviation Inc. 34 11 150 908 Enbridge Inc. 6 349 5 870 1 031 Exchange Income Corp. 36 31 16 533 Enerplus Corp. 193 40 9 811 Finning International Inc. 295 200 31 883 Inter Pipeline Ltd. 678 417 4 124 Morneau Shepell Inc. 106 115 16 278 Keyera Corp. 490 327 6 027 Mullen Group Ltd. 59 54 20 027 MEG Energy Corp. 73 55 3 405 NFI Group Inc. 95 56 5 938 Pason Systems Inc. 68 31 6 553 Ritchie Bros Auctioneers Inc. 305 517 40 841 Pembina Pipeline Corp. 1 643 1 154 10 625 SNC-Lavalin Group Inc. 551 227 21 032 Seven Generations Energy Ltd. 87 76 6 729 Stantec Inc. 226 272 113 649 Suncor Energy Inc. 4 307 1 848 5 274 TFI International Inc. 234 294 19 109 Tourmaline Oil Corp. 317 311 4 962 Toromont Industries Ltd. 316 395 4 421 Transcontinental Inc., Class A 113 73 17 874 12 899 11.8 6 826 WSP Global Inc. 450 597 10 245 12 634 11.5
The accompanying notes are an integral part of the financial statements. SCHEDULE OF INVESTMENT PORTFOLIO (in $000s) RBC VISION WOMEN’S LEADERSHIP MSCI CANADA INDEX ETF
September 30, 2020
Fair % of Net Fair % of Net Holdings Security Cost Value Assets Holdings Security Cost Value Assets Information Technology Utilities 33 334 Blackberry Ltd. $ 227 $ 204 31 613 Algonquin Power & 14 538 CGI Inc. 1 312 1 314 Utilities Corp. $ 458 $ 611 1 668 Kinaxis Inc. 332 327 15 004 AltaGas Ltd. 226 241 17 158 Open Text Corp. 861 966 4 086 Atco Ltd., Class I, Non-Voting 171 157 6 812 Shopify Inc., Class A 3 779 9 276 4 143 Boralex Inc., Class A 92 159 6 511 12 087 11.0 6 972 Canadian Utilities Ltd., Class A 236 221 Materials 5 641 Capital Power Corp. 145 166 28 881 Agnico Eagle Mines Ltd. 1 679 3 064 13 136 Emera Inc. 696 719 46 634 Alamos Gold Inc., Class A 456 547 24 929 Fortis Inc. 1 101 1 357 9 574 Cascades Inc. 130 161 17 633 Hydro One Ltd. 370 498 17 916 CCL Industries, Class B 1 081 920 6 548 Innergex Renewable Energy Inc. 102 158 19 961 Eldorado Gold Corp. 232 280 9 376 Northland Power Inc. 300 378 15 037 Endeavour Mining Corp. 508 498 14 807 TransAlta Corp. 110 121 22 532 First Majestic Silver Corp. 365 285 4 007 4 786 4.4 22 741 Franco-Nevada Corp. 4 461 4 232 TOTAL CANADIAN EQUITIES 109 768 110 016 100.5 28 064 Hudbay Minerals Inc. 227 158 Less: Transaction costs (17) – – 8 027 Interfor Corp. 95 119 TOTAL INVESTMENTS $ 109 751 110 016 100.5 150 519 Kinross Gold Corp. 1 107 1 769 OTHER NET ASSETS (LIABILITIES) 7 638 Labrador Iron Ore Royalty Corp. 209 196 ATTRIBUTABLE TO HOLDERS OF 8 053 Lundin Gold Inc. 90 97 REDEEMABLE UNITS (626) (0.5) 7 730 Methanex Corp. 497 251 NET ASSETS ATTRIBUTABLE TO 76 647 New Gold Inc. 176 174 HOLDERS OF REDEEMABLE UNITS $ 109 390 100.0 5 838 Norbord Inc. 260 230 29 420 Novagold Resources Inc. 408 467 * Investment in related party (see note 9 in the generic notes). 68 064 Nutrien Ltd. 4 329 3 554 24 317 Osisko Mining Inc. 97 84 7 248 Stella-Jones Inc. 315 327 10 206 Torex Gold Resources Inc. 206 192 3 879 Winpak Ltd. 171 176 113 577 Yamana Gold Inc. 479 860 17 578 18 641 17.0 Real Estate 5 233 Altus Group Ltd. 181 290 10 789 Canadian Apartment Properties Real Estate Investment Trust 555 501 11 557 Cominar Real Estate Investment Trust 81 85 5 917 Crombie Real Estate Investment Trust 79 78 6 584 CT Real Estate Investment Trust 95 92 3 523 Dream Office Real Estate Investment Trust 71 64 3 852 Dream Unlimited Corp. 63 75 3 394 Granite Real Estate Investment Trust 222 262 6 216 Killam Apartment Real Estate Investment Trust 108 108 2 298 Minto Apartment Real Estate Investment Trust 45 42 20 096 RioCan Real Estate Investment Trust 445 283 24 930 Tricon Residential Inc. 244 275 2 189 2 155 2.0
The accompanying notes are an integral part of the financial statements. FINANCIAL STATEMENTS RBC VISION WOMEN’S LEADERSHIP MSCI CANADA INDEX ETF
Statements of Financial Position Statements of Comprehensive Income (in $000s except per unit amounts) (in $000s except per unit amounts)
September 30 December 31 For the periods ended September 30 December 31 (see note 2 in the generic notes) 2020 2019 (see note 2 in the generic notes) 2020 2019 ASSETS INCOME (see note 3 in the generic notes) Investments at fair value $ 110 016 $ 164 118 Dividends $ 3 591 $ 5 212 Cash – 277 Income from investment trusts 89 – Dividends receivable, interest accrued Net realized gain (loss) on investments (303) 2 673 and other assets 230 334 Change in unrealized gain (loss) on investments (9 924) 23 644 TOTAL ASSETS 110 246 164 729 TOTAL NET GAIN (LOSS) ON LIABILITIES INVESTMENTS AND DERIVATIVES (6 547) 31 529 Bank overdraft 829 – Other income (loss) – (13) Distributions payable – 1 356 Securities lending revenue Accounts payable and accrued expenses 27 43 (see note 8 in the generic notes) 14 56 TOTAL LIABILITIES EXCLUDING NET ASSETS Net gain (loss) on foreign cash balances (1) 3 ATTRIBUTABLE TO HOLDERS OF TOTAL OTHER INCOME (LOSS) 13 46 REDEEMABLE UNITS 856 1 399 TOTAL INCOME (LOSS) (6 534) 31 575 NET ASSETS ATTRIBUTABLE TO HOLDERS EXPENSES (see notes – ETF Specific Information) OF REDEEMABLE UNITS (“NAV”) $ 109 390 $ 163 330 Management fees 260 417 GST/HST 40 62 Investments at cost $ 109 751 $ 153 929 Transaction costs 31 26 Interest on bank overdraft 1 – NAV PER UNIT $ 20.45 $ 21.92 TOTAL EXPENSES 332 505 INCREASE (DECREASE) IN NAV $ (6 866) $ 31 070 INCREASE (DECREASE) IN NAV PER UNIT $ (0.98) $ 3.99
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENTS RBC VISION WOMEN’S LEADERSHIP MSCI CANADA INDEX ETF
Statements of Cash Flow (in $000s)
For the periods ended September 30 December 31 (see note 2 in the generic notes) 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in NAV $ (6 866) $ 31 070 ADJUSTMENTS TO RECONCILE NET CASH PROVIDED BY (USED IN) OPERATIONS Interest for distribution purposes – – Net unrealized foreign exchange (gain) loss on cash – – Net realized loss (gain) on investments 303 (2 673) Change in unrealized loss (gain) on investments 9 924 (23 644) Non-cash dividends – – Non-cash distributions from underlying funds – – (Increase) decrease in accrued receivables 104 215 Increase (decrease) in accrued payables (16) (2) Cost of investments purchased* (40 800) (37 136) Proceeds from sale and maturity of investments* 41 242 36 954 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3 891 4 784 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of redeemable units* 1 1 Cash paid on redemption of redeemable units* (35) (31) Distributions paid to holders of redeemable units (4 963) (4 648) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ (4 997) $ (4 678) Net unrealized foreign exchange gain (loss) on cash – – Net increase (decrease) in cash for the period (1 106) 106 Cash (bank overdraft), beginning of period 277 171 CASH (BANK OVERDRAFT), END OF PERIOD $ (829) $ 277
Interest received (paid)† $ – $ – Income from investment trusts received (paid)†‡ $ 89 $ – Dividends received (paid)†‡ $ 3 695 $ 5 427
* Excludes in-kind transactions. † Classified as part of operating activities. ‡ Net of withholding taxes, if applicable.
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENTS RBC VISION WOMEN’S LEADERSHIP MSCI CANADA INDEX ETF
Statements of Changes in NAV (in $000s) Total For the periods ended September 30 December 31 (see note 2 in the generic notes) 2020 2019 NAV AT BEGINNING OF PERIOD $ 163 330 $ 183 946 INCREASE (DECREASE) IN NAV (6 866) 31 070 Early redemption fees – – Proceeds from redeemable units issued 1 968 1 065 Reinvestments of distributions to holders of redeemable units – 551 Redemption of redeemable units (45 435) (47 761) NET INCREASE (DECREASE) FROM REDEEMABLE UNIT TRANSACTIONS (43 467) (46 145) Distributions from net income (3 572) (4 941) Distributions from net gains – (551) Distributions from capital (35) (49) TOTAL DISTRIBUTIONS TO HOLDERS OF REDEEMABLE UNITS (3 607) (5 541) NET INCREASE (DECREASE) IN NAV (53 940) (20 616) NAV AT END OF PERIOD $ 109 390 $ 163 330
The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS – ETF SPECIFIC INFORMATION RBC VISION WOMEN’S LEADERSHIP MSCI CANADA INDEX ETF
September 30, 2020
General information (see note 1 in the generic notes) Since historical correlation may not be representative of future The investment objective of the ETF is to replicate, to correlation, actual results could differ from this sensitivity the extent possible and before fees and expenses, the analysis and the difference could be material. performance of a broad Canadian equity markets index Fair value hierarchy ($000s except % amounts) with a focus on companies domiciled in Canada that have (see note 3 in the generic notes) demonstrated commitment to gender diversity as part of The following is a summary of the inputs used as of their corporate social responsibility strategy. Currently, the September 30, 2020 and December 31, 2019. ETF seeks to track the MSCI Canada IMI Women’s Leadership Select Index (or any successor thereto). September 30, 2020 Level 1 Level 2 Level 3 Total Equities 110 016 – – 110 016 The closing market price as of September 30, 2020 was 20.48 Underlying funds – – – – (December 31, 2019 – 22.01). Fixed-income and debt securities – – – – Financial instrument risk and capital management Short-term investments – – – – (see note 5 in the generic notes) Derivatives – assets – – – – Derivatives – liabilities – – – – Concentration risk (%) Total financial instruments 110 016 – – 110 016 The table below summarizes the ETF’s investment exposure % of total portfolio 100.0 – – 100.0 (after consideration of derivative products, if any) as at:
September 30 December 31 December 31, 2019 Level 1 Level 2 Level 3 Total Investment mix 2020 2019 Equities 164 118 – – 164 118 Canadian Equities Underlying funds – – – – Financials 30.6 34.5 Fixed-income Materials 17.0 12.2 and debt securities – – – – Energy 11.8 18.4 Short-term investments – – – – Industrials 11.5 10.1 Derivatives – assets – – – – Information Technology 11.0 6.3 Derivatives – liabilities – – – – Consumer Staples 4.9 4.3 Total financial instruments 164 118 – – 164 118 Utilities 4.4 3.9 % of total portfolio 100.0 – – 100.0 Consumer Discretionary 3.5 4.4 Communication Services 2.7 3.0 For the periods ended September 30, 2020 and Real Estate 2.0 2.2 December 31, 2019, there were no transfers of financial Health Care 1.1 1.2 instruments between Level 1, Level 2 and Level 3. Other Net Assets (0.5) (0.5) Total 100.0 100.0 Management fees (see note 9 in the generic notes) RBC GAM is paid a management fee per annum of the NAV Other price risk (% impact on NAV) by the ETF as compensation for its services. The management In light of current market volatility related to COVID‑19, fee of the ETF is calculated at 0.25% annually, before GST/HST, management has applied 10% for other price risk sensitivity. of the daily NAV of the ETF. The table below shows the impact of a 10% (December 31, 2019 – Taxes ($000s) (see note 7 in the generic notes) 1%) change in the broad-based index (noted below) on the ETF’s NAV, using a 30-month (December 31, 2019 – 21-month) The ETF had no capital or non-capital losses as at the historical correlation of data of the ETF’s return and the index, tax‑year ended December 2019. with all other factors kept constant, as at:
September 30 December 31 2020 2019 MSCI Canada IMI Women’s Leadership Select Index + or - 9.9 + or - 1.0
Please see the generic notes at the back of the financial statements. NOTES TO FINANCIAL STATEMENTS – ETF SPECIFIC INFORMATION RBC VISION WOMEN’S LEADERSHIP MSCI CANADA INDEX ETF
September 30, 2020
Redeemable units (000s) (see note 6 in the generic notes) The NAV per unit is arrived at by dividing the NAV of the ETF by the total number of units outstanding at the end of each trading day of the ETF.
For the periods ended September 30 December 31 (see note 2 in the generic notes) 2020 2019 Opening units 7 450 9 700 Issued number of units 100 50 Reinvested number of units – 25 Units consolidated* – (25) Redeemed number of units (2 200) (2 300) Ending number of units 5 350 7 450
* The units of the ETF are consolidated immediately after a distribution is reinvested so that the total number of units outstanding of the ETF after consolidation is the same as before the distribution.
Transaction costs ($000s except %) Transaction costs, including brokerage commissions, in consideration of portfolio transactions for the periods ended:
September 30 December 31 2020 2019 $ % $ % Total transaction costs 31 100 26 100 Related-party brokerage commissions* 30 97 25 96 Commission arrangements† – – – –
* See note 9 in the generic notes. † Commission arrangements are part of commission amounts paid to dealers. The ETF uses commission arrangements (formerly known as “soft dollars”) for research and/or order execution goods and services.
Securities lending revenue ($000s except %) (see note 8 in the generic notes) Fair value of securities on loan and collateral received as at:
September 30 December 31 2020 2019 Fair value of securities loaned 14 026 4 669 Fair value of collateral received 14 307 4 763
The table below provides a reconciliation of the gross revenue generated from the securities lending transactions of the ETF to the securities lending revenue disclosed in the Statements of Comprehensive Income.
September 30 December 31 2020 2019 $ % $ % Gross revenue 18 100 76 100 RBC IS (paid) (4) (25) (19) (25) Tax withheld – (2) (1) (2) ETF revenue 14 73 56 73
Please see the generic notes at the back of the financial statements. GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020
1. The ETFs Exchange The RBC ETFs, the exchange-traded funds (“ETF” or “ETFs”), Ticker ETF Symbol Index* are open-ended mutual fund trusts governed by the laws RBC Quant Canadian Equity RCE Not applicable of the Province of Ontario and governed by a Master Leaders ETF Declaration of Trust. RBC GAM is the manager, trustee and RBC Vision Women’s Leadership RLDR MSCI Canada IMI Women’s portfolio manager of the ETFs and its head office is located MSCI Canada Index ETF Leadership Select Index RBC Canadian Bank Yield RBNK Solactive Canada Bank at 155 Wellington Street West, 22nd Floor, Toronto, Ontario. Index ETF Yield Index These financial statements were approved for issuance by the RBC Quant U.S. Dividend RUD Not applicable Board of Directors of RBC GAM on December 10, 2020. Leaders ETF RUD.U RBC Quant U.S. Dividend RUDH Not applicable The units of the ETFs are listed either on the Toronto Leaders (CAD Hedged) ETF Stock Exchange (the “TSX”) or on the NEO Exchange (the RBC Quant U.S. Equity RUE Not applicable “NEO Exchange”) as the case may be. The TSX and the Leaders ETF RUE.U NEO Exchange are each referred to herein as the “Exchange.” RBC Quant U.S. Equity RUEH Not applicable Leaders (CAD Hedged) ETF Investors may purchase or sell units on the applicable RBC U.S. Banks Yield RUBY Solactive U.S. Bank Yield Exchange in the same way as other securities listed on Index ETF RUBY.U NTR Index the Exchange. RBC U.S. Banks Yield RUBH Solactive U.S. Bank Yield Exchange (CAD Hedged) Index ETF NTR (CAD Hedged) Index Ticker RBC Quant European RPD Not applicable ETF Symbol Index* Dividend Leaders ETF RPD.U RBC 1-5 Year Laddered RLB Not applicable RBC Quant European RPDH Not applicable Canadian Bond ETF Dividend Leaders RBC 1-5 Year Laddered RBO Not applicable (CAD Hedged) ETF Corporate Bond ETF RBC Quant EAFE RID Not applicable RBC 6-10 Year Laddered RMBO Not applicable Dividend Leaders ETF RID.U Canadian Corporate Bond ETF RBC Quant EAFE Dividend RIDH Not applicable RBC Target 2020 Corporate RQH FTSE Canada 2020 Maturity Leaders (CAD Hedged) ETF Bond Index ETF Corporate Bond Index RBC Quant EAFE Equity RIE Not applicable RBC Target 2021 Corporate RQI FTSE Canada 2021 Maturity Leaders ETF RIE.U Bond Index ETF Corporate Bond Index RBC Quant EAFE Equity RIEH Not applicable RBC Target 2022 Corporate RQJ FTSE Canada 2022 Maturity Leaders (CAD Hedged) ETF Bond Index ETF Corporate Bond Index RBC Quant Emerging Markets RXD Not applicable RBC Target 2023 Corporate RQK FTSE Canada 2023 Maturity Dividend Leaders ETF RXD.U Bond Index ETF Corporate Bond Index RBC Quant Emerging Markets RXE Not applicable RBC Target 2024 Corporate RQL FTSE Canada 2024 Maturity Equity Leaders ETF RXE.U Bond Index ETF Corporate Bond Index RBC Strategic Global Dividend RLD Not applicable RBC Target 2025 Corporate RQN FTSE Canada 2025 Maturity Leaders ETF Bond Index ETF Corporate Bond Index RBC Strategic Global Equity RLE Not applicable RBC Target 2026 Corporate RQO FTSE Canada 2026 Maturity Leaders ETF Bond Index ETF Corporate Bond Index RBC Quant Global RIG Not applicable RBC Target 2027 Corporate RQP FTSE Canada 2027 Maturity Infrastructure Leaders ETF RIG.U Bond Index ETF Corporate Bond Index RBC Quant Global Real Estate RGRE Not applicable RBC Canadian Discount RCDB Not applicable Leaders ETF RGRE.U Bond ETF * These indices have been licensed for use for certain purposes to RBC GAM by RBC PH&N Short Term RPSB Not applicable FTSE Global Debt Capital Markets Inc., FTSE International Limited, FTSE Fixed Canadian Bond ETF Income LLC, Solactive AG and MSCI Inc. (each an “Index Provider” and together, RBC Short Term U.S. RUSB Not applicable the “Index Providers”), as applicable. The ETFs are not sponsored, endorsed, sold Corporate Bond ETF RUSB.U or promoted by the Index Providers. The Index Providers make no warranty or RBC BlueBay Global Diversified RBDI Not applicable representation whatsoever, expressly or impliedly, either as to the results to be Income (CAD Hedged) ETF obtained from the use of the indices they have licensed to RBC GAM and/or the figures at which the indices they have licensed to RBC GAM stand at any particular time on RBC Canadian Preferred RPF Not applicable any particular day or otherwise. The indices are compiled, calculated and published Share ETF by the applicable Index Provider. The Index Providers shall not be liable (whether in RBC Quant Canadian Dividend RCD Not applicable negligence or otherwise) to any person for any error in the indices they have licensed Leaders ETF to RBC GAM and the Index Providers shall not be under any obligation to advise any person of any error therein. The Index Providers make no representation regarding the advisability of investing in the ETFs. GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020
2. Financial year be offset in certain circumstances, such as bankruptcy or The financial year-end of the ETFs has been changed from termination of contracts. Offsetting information, where December 31 to September 30. In accordance with regulatory applicable, is presented in the Notes to Financial requirements, notice of the change was filed with the Statements – ETF Specific Information. authorities concerned. Consequently, this annual report Classification of Redeemable Units The ETFs’ redeemable of the ETFs is as at September 30, 2020. units, which qualify as puttable instruments as required The information provided in these financial statements by IAS 32 Financial Instruments: Presentation, are held by and notes thereto is as at September 30, 2020 and different types of unitholders that are entitled to different December 31, 2019, as applicable, and for the nine-month redemption rights. See Note 6 for details. Unitholders may period ended September 30, 2020 and the 12-month period redeem their units for cash at a reduced redemption price ended December 31, 2019, as applicable, except for ETFs or on trading day or they may sell units at full market price on classes established during either period, in which case the the applicable exchange. As a result, the ETFs’ outstanding information for the ETF, or class, is provided for the period redeemable units are classified as financial liabilities. from the start date as described in the Notes to Financial Unconsolidated Structured Entities The ETFs may invest Statements – ETF Specific Information of the ETF. in other Funds and ETFs managed by the manager or an affiliate of the manager (“sponsored funds”) and may invest 3. Summary of significant accounting policies in other funds and ETFs managed by unaffiliated entities These financial statements have been prepared in accordance (“unsponsored funds”); collectively, “underlying funds.” with International Financial Reporting Standards (“IFRS”). The underlying funds are determined to be unconsolidated The significant accounting policies of the ETFs are as follows: structured entities, as decision making in the underlying Classification and Measurement of Financial Assets, fund is not governed by the voting rights or other similar Liabilities and Derivatives Each of the ETFs classifies rights held by the ETF. The investments in underlying funds its investment portfolio based on the business model for are subject to the terms and conditions of the offering managing the portfolio and the contractual cash flow documents of the respective underlying funds and are characteristics. The investment portfolio of financial assets susceptible to market price risk arising from uncertainties and liabilities is managed and performance is evaluated on a about future values of those underlying funds. The underlying fair value basis. The contractual cash flows of the ETFs’ debt funds’ objectives are generally to achieve long‑term capital securities that are solely principal and interest are neither appreciation and/or current income by investing in a held for the purpose of collecting contractual cash flows nor portfolio of securities and other funds in line with each of held both for collecting contractual cash flows and for sale. their documented investment strategies. The underlying The collection of contractual cash flows is only incidental to funds apply various investment strategies to accomplish their achieving the ETFs’ business model objectives. Consequently, respective investment objectives. all investments are measured at fair value through profit The underlying funds finance their operations by issuing and loss (“FVTPL”). Derivative assets and liabilities are also redeemable units which are puttable at the unitholder’s measured at FVTPL. option, and entitle the unitholder to a proportional stake in The ETFs’ obligation for net assets attributable to holders the respective underlying funds’ NAV. of redeemable units represents a financial liability and is The ETFs do not consolidate their investment in underlying measured at the redemption amount, which approximates funds but account for these investments at fair value. The fair value as of the reporting date. All other financial assets manager has determined that the ETFs are investment and liabilities are measured at amortized cost. entities in accordance with IFRS 10 Consolidated Financial Offsetting Financial Assets and Liabilities In the normal Statements, since the ETFs meet the following criteria: course of business, the ETFs may enter into various (i) The ETFs obtain capital from one or more investors for International Swaps and Derivatives Association master the purpose of providing those investors with investment netting agreements or other similar arrangements with management services, certain counterparties that allow for related amounts to GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020
(ii) The ETFs commit to their investors that their business Investments and derivatives are recorded at fair value, which purpose is to invest funds solely for the returns from is determined as follows: capital appreciation, investment income or both, and Equities – Common shares and preferred shares are valued at (iii) The ETFs measure and evaluate the performance of the closing price recorded by the security exchange on which substantially all of their investments on a fair value basis. the security is principally traded. In circumstances where the closing price is not within the bid-ask spread, management Therefore, the fair value of investments in the underlying will determine the points within the bid-ask spread that are funds is included in the Schedule of Investment Portfolio most representative of the fair value. and included in “Investments at fair value” in the ETFs’ Statements of Financial Position. The change in fair value Fixed-Income and Debt Securities – Bonds, mortgage-backed of the investment held in the underlying funds is included securities and other debt securities are valued at the mid in “Change in unrealized gain (loss) on investments” in the price quoted by major dealers or independent pricing Statements of Comprehensive Income. vendors in such securities.
Certain ETFs may invest in mortgage-related or other asset- Short-Term Investments – Short-term investments are valued at backed securities. These securities include commercial cost plus accrued interest, which approximates fair value. mortgage-backed securities, asset-backed securities, Warrants – Warrants are valued using a recognized option collateralized debt obligations and other securities that pricing model, which includes factors such as the terms of directly or indirectly represent a participation in, or are the warrant, time value of money and volatility inputs that securitized by and payable from, mortgage loans on real are significant to such valuation. property. Mortgage-related securities are created from pools of residential or commercial mortgage loans while Forward Contracts – Forward contracts are valued at the gain or asset-backed securities are created from many types of loss that would arise as a result of closing the position at the assets, including auto loans, credit card receivables, home valuation date. The receivable/payable on forward contracts equity loans and student loans. The ETFs account for these is recorded separately in the Statements of Financial Position. investments at fair value. The fair value of such securities, as Any unrealized gain or loss at the close of business on each disclosed in the Schedule of Investment Portfolio, represents valuation date is recorded as “Change in unrealized gain the maximum exposure to losses at that date. (loss) on investments” and realized gain or loss on foreign exchange contracts is included in “Derivative income” in the Determination of Fair Value The fair value of a financial Statements of Comprehensive Income. instrument is the amount at which the financial instrument could be exchanged in an arm’s-length transaction between Futures Contracts – Futures contracts entered into by the knowledgeable and willing parties under no compulsion to ETFs are financial agreements to purchase or sell a financial act. In determining fair value, a three-tier hierarchy based on instrument at a contracted price on a specified future date. inputs is used to value the ETFs’ financial instruments. The However, the ETFs do not intend to purchase or sell the hierarchy of inputs is summarized below: financial instrument on the settlement date; rather, they intend to close out each futures contract before settlement Level 1 – quoted prices (unadjusted) in active markets for by entering into equal, but offsetting, futures contracts. identical assets or liabilities; Futures contracts are valued at the gain or loss that would Level 2 – inputs other than quoted prices included in Level 1 arise as a result of closing the position at the valuation date. that are observable for the asset or liability, either directly Any gain or loss at the close of business on each valuation (i.e., as prices) or indirectly (i.e., derived from prices), date is recorded as “Derivative income” in the Statements including broker quotes, vendor prices and vendor fair value of Comprehensive Income. The receivable/payable on factors; and futures contracts is recorded separately in the Statements of Financial Position. Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). Underlying Funds – Underlying funds that are not exchange‑traded funds are valued at their respective NAV per Changes in valuation methods may result in transfers into or unit from fund companies on the relevant valuation dates out of an investment’s assigned level. GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020 and underlying funds that are exchange-traded funds are of investments, income and expenses are translated at the valued at market close on the relevant valuation dates. rate of exchange prevailing on the respective dates of such transactions. Realized foreign exchange gains/losses on spot Fair Valuation of Investments – The ETFs have procedures to and forward currency contracts are included in “Derivative determine the fair value of securities and other financial income” in the Statements of Comprehensive Income. instruments for which market prices are not readily available or which may not be reliably priced. Procedures are in place Investment Transactions Investment transactions are to determine the fair value of foreign securities traded in accounted for as of the trade date. Transaction costs, such as countries outside of North America daily to avoid stale prices brokerage commissions, incurred by the ETFs are recorded and to take into account, among other things, any significant in the Statements of Comprehensive Income for the period. events occurring after the close of a foreign market. The unrealized gain and loss on investments is the difference between fair value and average cost for the period. The basis Management also has procedures where the ETFs primarily of determining the cost of portfolio assets, and realized employ a market-based approach, which may use related or and unrealized gains and losses on investments, is average comparable assets or liabilities, NAV per unit (for exchange- cost which does not include amortization of premiums or traded funds), recent transactions, market multiples, book discounts on fixed-income and debt securities with the values and other relevant information for the investment to exception of zero coupon bonds. determine its fair value. The ETFs may also use an income- based valuation approach in which the anticipated future Income Recognition Dividend income is recognized on the cash flows of the investment are discounted to calculate ex-dividend date and interest for distribution purposes is fair value. Discounts may also be applied due to the coupon interest recognized on an accrual basis and/or nature or duration of any restrictions on the disposition imputed interest on zero coupon bonds. “Income from of the investments, but only if they arise as a feature of investment trusts” includes income from ETFs and the instrument itself. Due to the inherent uncertainty of income trusts. valuations of such investments, the fair values may differ Valuation of Series A different NAV is calculated for each significantly from the values that would have been used had series of Units of an ETF. The NAV of a particular series of an active market existed. Units is computed by calculating the value of the series’ All security valuation techniques are periodically reviewed proportionate share of the assets and liabilities of the ETF by the Valuation Committee (“VC”) of the manager and are common to all series less the liabilities of the ETF attributable approved by the manager. The VC provides oversight of the only to that series. Expenses directly attributable to a series ETFs’ valuation policies and procedures. are charged to that series. Other expenses are allocated proportionately to each series based upon the relative NAV of Cash Cash is comprised of cash and deposits with banks and each series. Expenses are accrued daily. is recorded at amortized cost. The carrying amount of cash approximates its fair value because it is short term in nature. Increase (Decrease) in Net Assets Attributable to Holders of Redeemable Units per Unit Increase (decrease) in net Margin Margin accounts represent margin deposits held with assets attributable to holders of redeemable units per unit brokers in respect of futures contracts. in the Statements of Comprehensive Income represents the Functional Currency The ETFs have their subscriptions, increase (decrease) in net assets attributable to holders of redemptions and performance primarily denominated in redeemable units, divided by the average units outstanding Canadian dollars and, consequently, the Canadian dollar is during the period. the functional currency for the ETFs. Foreign Currencies The following is a list of abbreviations Foreign Exchange The value of investments and other used in the Schedule of Investment Portfolio: assets and liabilities in foreign currencies is translated AUD – Australian dollar HKD – Hong Kong dollar into Canadian dollars at the rate of exchange on each CAD – Canadian dollar JPY – Japanese yen valuation date. Gains/losses on foreign cash balances are CHF – Swiss franc SEK – Swedish krona included in “Net gain (loss) on foreign cash balances” in the DKK – Danish krone SGD – Singapore dollar EUR – Euro USD – United States dollar Statements of Comprehensive Income. Purchases and sales GBP – Pound sterling GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020
4. Critical accounting judgments and estimates In addition, an ETF aims to retain sufficient cash and cash The preparation of financial statements requires the use equivalent positions to maintain liquidity, and has the ability of judgment in applying the ETFs’ accounting policies and to borrow up to 5% of its NAV. All non-derivative financial making estimates and assumptions about the future. There liabilities, other than redeemable units, are due within 90 days. were no critical accounting judgments and estimates made Any securities deemed to be illiquid are identified in the to prepare these financial statements. Schedule of Investment Portfolio.
5. Financial instrument risk and capital management Credit risk RBC GAM is responsible for managing each ETF’s Credit risk is the risk that a loss could arise from a security capital, which is its NAV and consists primarily of its issuer or counterparty not being able to meet its financial financial instruments. obligations. The carrying amount of investments and other assets represents the maximum credit risk exposure as An ETF’s investment activities expose it to a variety of disclosed in an ETF’s Statements of Financial Position. The financial risks. RBC GAM seeks to minimize potential adverse ETFs measure credit risk and expected credit losses using effects of these risks on an ETF’s performance by employing probability of default, exposure at default and loss given professional, experienced portfolio managers, daily monitoring default. Management considers both historical analysis and of the ETF’s holdings and market events and diversifying its forward-looking information in determining any expected investment portfolio within the constraints of its investment credit loss. All other receivables, amounts due from brokers, objectives. To assist in managing risks, RBC GAM also uses cash and short-term deposits are held with counterparties internal guidelines, maintains a governance structure that with a credit rating of AA/Aa or higher. Management oversees each ETF’s investment activities and monitors considers the probability of default to be close to zero as compliance with the ETF’s investment strategies, internal the counterparties have a strong capacity to meet their guidelines and securities regulations. contractual obligations in the near term. As a result, no loss The financial markets experienced significant volatility allowance has been recognized based on 12-month expected as a result of the developing COVID-19 global pandemic. credit losses as any such impairment would be wholly The effects of the pandemic and its impact on individual insignificant to the ETFs. The fair value of fixed-income companies, nations and the market in general can not securities includes a consideration of the creditworthiness necessarily be foreseen at the present time and may have an of the debt issuer. Credit risk exposure is mitigated for those adverse impact on the financial performance of the ETFs. The ETFs participating in a securities lending program (see impact of the pandemic may be short-term or may last for an note 8). RBC GAM monitors each ETF’s credit exposure and extended period of time. counterparty ratings daily. Rating data is provided by the Licensor Parties. Financial instrument risk, as applicable to an ETF, is disclosed in its Notes to Financial Statements – ETF Specific Concentration risk Information. These risks include an ETF’s direct risks and pro Concentration risk arises as a result of net financial rata exposure to the risks of underlying funds, as applicable. instrument exposures to the same category, such as Liquidity risk geographical region, asset type, industry sector or market segment. Financial instruments in the same category have Liquidity risk is the possibility that investments in an ETF similar characteristics and may be affected similarly by cannot be readily converted into cash when required. An ETF changes in economic or other conditions. is exposed to liquidity risk to the extent that it is subject to daily redemptions of redeemable units. Since the delivery of Interest rate risk redemptions is in the form of securities, an ETF is not exposed Interest rate risk is the risk that the fair value of an ETF’s to any significant liquidity risk. Liquidity risk is managed interest-bearing investments will fluctuate due to changes by investing the majority of an ETF’s assets in investments in market interest rates. The value of fixed-income and that are traded in an active market and that can be readily debt securities, such as bonds, is affected by interest rates. disposed. In accordance with securities regulation, an ETF Generally, the value of these securities increases if interest must maintain at least 90% of its assets in liquid investments. rates fall and decreases if interest rates rise. GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020
Securities with a stated maturity date beyond the target a) a basket of applicable securities for each prescribed maturity year of the ETF have an effective maturity date in number of units; and the target year of the ETF, as determined with the rules based b) cash in an amount sufficient so that the value of the basket on methodology developed by the Licensor Parties. of the applicable securities and cash delivered is equal to the Currency risk net asset value of the prescribed number of units plus the Currency risk is the risk that the value of investments distribution price adjustment, if applicable, of that class of denominated in currencies, other than the functional the ETF. currency of a Fund, will fluctuate due to changes in foreign A trading day is each day on which the TSX and/or the exchange rates. The value of investments denominated in a NEO Exchange is open for trading. currency other than the functional currency is affected by changes in the value of the functional currency in relation A unitholder is entitled on any trading day to redeem units to the value of the currency in which the investment is for cash at a redemption price of 95% of net asset value per denominated. When the value of the functional currency falls unit of that class of the ETF’s units at the next valuation in relation to foreign currencies, then the value of the foreign following receipt of the cash redemption request. Unitholders investments rises. When the value of the functional currency will generally be able to sell (rather than redeem) units at rises, the value of the foreign investments falls. The currency the full market price on the TSX or the NEO Exchange, as the risk as disclosed in the ETF Specific Information in the case may be, through a registered broker or dealer subject Notes to Financial Statements represents the monetary and only to customary brokerage commissions. To be effective on non‑monetary foreign exchange exposure of an ETF. a particular trading day, a cash redemption request must be received by such time as RBC GAM may, from time to time, Other price risk determine on that trading day. If a cash redemption request Other price risk is the risk that the value of financial is received later than the prescribed time on a trading day or instruments will fluctuate as a result of changes in market a day which is not a trading day, the cash redemption request prices (other than those arising from interest rate or currency shall be deemed to be received as of the next trading day. risk), whether caused by factors specific to an individual The NAV per unit of each class is derived by dividing the NAV investment, its issuer, or all factors affecting all instruments of that class of ETF by the outstanding units of that class at traded in a market or market segment. the end of each trading day of the ETF. The capital of the ETFs 6. Redeemable units is managed in accordance with the investment objective as The beneficial interest in the ETFs is divided into equal outlined in the Prospectus. interests of each class referred to as outstanding units. Each 7. Taxes ETF is authorized to issue an unlimited number of redeemable The ETFs qualify as “mutual fund trusts” or “unit trusts” as and transferable units in each class, each of which represents defined in the Income Tax Act (Canada). In general, the ETFs an equal, undivided interest in the net asset value of that are subject to income tax; however, no income tax is payable class of the ETF. Each unit outstanding shall participate pro on net income and/or net realized capital gains which are rata in any distributions made, other than management fee distributed to unitholders. Since the ETFs do not record distributions, and in the event of termination of the ETF, in income taxes, the tax benefit of capital and non-capital the net assets of that class of the ETF. losses has not been reflected in the Statements of Financial On any trading day, an underwriter or designated broker Position as a deferred income tax asset. In addition, for may place a subscription or redemption order for an integral mutual fund trusts, income taxes payable on net realized multiple of the prescribed number of units of an ETF. If the capital gains are refundable on a formula basis when units of order is accepted, the ETF will issue or redeem units to or the ETFs are redeemed. It is the intention of the ETFs to pay from the underwriter or designated broker within two trading out all net income and realized capital gains each year so that days thereafter. For each prescribed number of units issued the ETFs will not be subject to income taxes. Accordingly, no or redeemed, the underwriter or designated broker must provision for income taxes is recorded. deliver or receive payment consisting of: GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020
Net investment income and capital gains are distributable to fee is calculated and accrued on a daily basis and is based the unitholders in amounts determined under the provisions on a percentage of the NAV of the class of the ETF. The fee of the Declaration of Trust on a monthly or quarterly basis. plus applicable taxes are accrued daily and paid monthly All distributions, other than management fee distributions, in arrears. shall be credited to the unitholder pro rata in accordance RBC GAM in turn pays certain operating expenses of the with the number of units held by them on record date of the ETFs. These expenses include regulatory filing fees and other distribution. Reinvested distributions will be automatically day-to-day operating expenses including, but not limited reinvested in additional units of the applicable class of the to, recordkeeping, accounting and fund valuation costs, RBC ETF at a price equal to the net asset value per unit of custody fees, audit and legal fees and the cost of preparing the applicable class of the RBC ETF. The units of that class and distributing annual and interim reports, prospectuses will be immediately consolidated such that the number and investor communications. The ETFs also pay certain of outstanding units of the applicable class following the operating expenses directly, including the costs related to the distribution will equal the number of units of the applicable Independent Review Committee of the ETFs and the cost of class outstanding prior to the distribution. Management any new government or regulatory requirements introduced fee distributions shall be credited to the unitholder and any borrowing costs (collectively, “other fund costs”), entitled thereto. and taxes (including, but not limited to, GST/HST). Effective Capital losses are available to be carried forward indefinitely January 1, 2020, RBC GAM, not the ETFs, will be responsible and applied against future capital gains. Non-capital losses for the costs related to annual fees, meeting fees and may be carried forward to reduce future taxable income for reimbursement for expenses to members of the Independent up to 20 years. Review Committee. The ETFs will continue to be responsible for paying any Independent Review Committee costs that are 8. Securities lending revenue not related to annual fees, meeting fees and reimbursement for Certain of the ETFs lend portfolio securities from time to time expenses to members of the Independent Review Committee. in order to earn additional income. Income from securities Certain ETFs may invest in units of other Funds managed lending is included in the Statements of Comprehensive by RBC GAM or its affiliates (“underlying funds”). To the Income of the ETF. Each ETF will have entered into a extent an ETF invests in underlying funds managed by securities lending agreement with its custodian, RBC Investor RBC GAM or its affiliates, the fees and expenses payable by Services Trust (“RBC IS”). The aggregate market value of all the underlying funds are in addition to the fees and expenses securities loaned by an ETF cannot exceed 50% of the assets payable by the ETF. However, an ETF may only invest in one of an ETF. The ETF receives collateral, with an approved or more underlying funds provided that no management credit rating of at least A, of at least 102% of the value of the fees or incentive fees are payable that would duplicate a fee securities on loan. The ETF is indemnified by RBC IS for payable by the underlying fund for the same service. The any collateral credit or market loss. As such, the credit risk ETF’s ownership interest in underlying funds is disclosed in associated with securities lending is considered minimal. the Notes to Financial Statements – ETF Specific Information. 9. Administrative and other The fees and expenses payable by the underlying funds are in related-party transactions addition to the fees and expenses payable by the ETF. Manager, Trustee and Portfolio Manager RBC GAM or its affiliates may earn fees and spreads in RBC GAM is an indirect wholly owned subsidiary of connection with various services provided to, or transactions Royal Bank of Canada (“Royal Bank”). RBC GAM is the with, the ETFs, such as banking, brokerage, securities lending, manager, trustee and portfolio manager of the ETFs. RBC GAM foreign exchange and derivatives transactions. RBC GAM is responsible for the ETFs’ day-to-day operations, holds title or its affiliates may earn a foreign exchange spread when to the ETFs’ property on behalf of its unitholders, provides unitholders switch between ETFs denominated in different investment advice and portfolio management services to currencies. The ETFs also maintain bank accounts and the ETFs and appoints underwriters or designated brokers overdraft provisions with Royal Bank for which Royal Bank for the ETFs. RBC GAM is paid a management fee by the may earn a fee. Affiliates of RBC GAM that provide services to ETFs as compensation for its services. The management the ETFs in the course of their normal business, all of which GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)
September 30, 2020 are wholly owned subsidiaries of Royal Bank of Canada, are following the conclusion of such distribution of the discussed below. underwritten securities to the public; and
Sub-Advisors (c) purchases of debt securities from or sales of debt RBC Global Asset Management (U.S.) Inc. is the sub-advisor for securities to a related-party dealer, where it acted the RBC Short Term U.S. Corporate Bond ETF. BlueBay Asset as principal. Management LLP is the sub-advisor for the RBC BlueBay The applicable standing instructions require that Related- Global Diversified Income (CAD Hedged) ETF. Party Trading Activities be conducted in accordance with The sub-advisors earn a fee which is calculated and accrued RBC GAM policy and that RBC GAM advise the Independent on a daily basis and is based on a percentage of the NAV Review Committee of a material breach of any standing of the class of the ETF. The sub-advisors are paid by the instruction. RBC GAM policy requires that an investment manager from the management fee paid by the ETFs. decision in respect of Related-Party Trading Activities (i) is made free from any influence of Royal Bank or its Custodian and Valuation Agent associates or affiliates and without taking into account RBC IS is the custodian and valuation agent for the ETFs. any consideration relevant to Royal Bank or its affiliates RBC IS is responsible for certain aspects of day-to-day or associates, (ii) represents the business judgment of the administration including holding the assets and the daily portfolio manager, uninfluenced by considerations other calculation of the net asset value of the ETFs. RBC IS earns a than the best interests of the ETFs, (iii) is in compliance with variable fee based on the value of assets under custody and a RBC GAM policies and procedures, and (iv) achieves a fair fixed fee for other valuation and administrative services. and reasonable result for the ETFs. Designated Broker and Authorized Dealer 10. Revision of comparative information RBC Dominion Securities Inc. is a designated broker and/or Comparative figures on the Statements of Cash Flow have an authorized dealer for the ETFs. As such, RBC Dominion been revised for the RBC Quant EAFE Equity Leaders ETF. Securities Inc. may subscribe or redeem units of the ETFs. Amounts previously recorded in “Cost of investments Brokers and Dealers purchased” are now recorded in “Non-cash dividends.” The The ETFs have established or may establish standard brokerage impact on the “Net cash provided by (used in) operating agreements and dealing agreements at market rates with activities” is nil. related parties such as RBC Dominion Securities Inc., RBC Capital Markets, LLC, RBC Europe Limited, NBC Securities Inc. and Royal Bank of Canada.
Securities Lending Agent To the extent an ETF may engage in securities lending transactions, RBC IS may act as the ETF’s securities lending agent. Any revenue earned on such securities lending is split between the ETF and the securities lending agent.
Other Related-Party Transactions Pursuant to applicable securities legislation, the ETFs relied on the standing instructions from the Independent Review Committee with respect to the following related-party 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