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. Deloitte LLP, Chartered Professional Accountants, Licensed Public Accountants, have performed an independent audit of the financial statements in accordance with IFRS. Their report is set out on the next page.

Damon G. Williams, FSA, FCIA, CFA Chief Executive Officer RBC Global Asset Management Inc. March 4, 2016

Frank Lippa, CPA, CA Chief Financial Officer and Chief Operating Officer RBC Global Asset Management Inc.

INDEPENDENT AUDITOR’S REPORT

To the Unitholders of: RBC 1-5 Year Laddered Corporate Bond 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 RBC Quant Canadian Equity Leaders ETF RBC Quant U.S. Equity Leaders ETF RBC Quant U.S. Equity Leaders (CAD Hedged) ETF RBC Quant EAFE Equity Leaders ETF RBC Quant EAFE Equity Leaders (CAD Hedged) ETF (collectively referred to as the “ETFs”)

We have audited the accompanying financial statements of each of the ETFs, which comprise the statements of financial position as at December 31, 2015 and December 31, 2014, 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.

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.

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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk

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, 2015 and December 31, 2014, and their financial performance, 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.

Chartered Professional Accountants, Licensed Public Accountants March 4, 2016 Toronto, Ontario

2015 ANNUAL FINANCIAL STATEMENTS

SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)

RBC QUANT EUROPEAN DIVIDEND LEADERS ETF December 31, 2015 Holdings Security Cost

EUROPEAN EQUITIES Consumer Discretionary 8 700 Daimler AG 3 300 Hugo Boss AG 3 600 Next PLC 7 500 Nokian Renkaat OYJ 12 200 Persimmon PLC 7 200 ProSiebenSat.1 Media AG 32 989 Reed Elsevier NV 2 600 RTL Group SA 125 100 Taylor Wimpey PLC

$

1 040 504 572 285 460 437 663 308 524

Fair Value

$

1 018 381 537 375 506 508 774 302 520

Consumer Staples 44 000 British American Tobacco PLC 64 200 Koninklijke Ahold NV 61 100 Unilever NV

4 793

4 921

3 048 1 569 3 254

3 397 1 887 3 698

Energy 115 800 Amec Foster Wheeler PLC 130 100 Royal Dutch Shell PLC 20 000 Technip SA 85 500 Tenaris SA 57 200 Total SA

7 871

8 982

1 634 4 769 1 590 1 448 3 619

1 017 4 065 1 380 1 411 3 562

13 060 11 435 Financials 86 200 Aberdeen Asset Management PLC 702 511 18 300 Admiral Group PLC 614 622 6 500 Allianz SE 1 287 1 604 3 800 Baloise Holding AG 617 673 206 500 Banco Santander SA 1 813 1 420 24 800 CNP Assurances 534 466 26 000 Danske Bank A/S 952 974 33 200 Deutsche Bank AG 1 167 1 128 7 700 Deutsche Boerse AG 779 946 4 100 Fonciere Des Regions 483 510 3 400 Gecina SA 563 575 24 300 Gjensidige Forsikring ASA 518 542 4 300 Hannover Rueck SE 536 686 177 700 HSBC Holdings PLC 2 008 1 951 4 900 ICADE 463 458 11 000 KBC Groep NV 866 957 12 500 Klepierre 741 773 187 100 Legal & General Group PLC 964 1 026 139 700 Mapfre SA 573 487 77 100 Natixis SA 633 607 76 700 Nordea Bank AB 1 205 1 179 212 900 Old Mutual PLC 874 780 14 900 Sampo Oyj 923 1 057 63 200 Skandinaviska Enskilda Banken AB 957 931 31 900 Swedbank AB 961 983 5 200 Swiss Prime Site AG 549 566

The accompanying notes are an integral part of the financial statements.

% of Net Assets

5.1

9.5

12.1

SCHEDULE OF INVESTMENT PORTFOLIO (in $000s)

RBC QUANT EUROPEAN DIVIDEND LEADERS ETF

December 31, 2015 Holdings Security Cost

Financials (cont.) 8 800 Swiss Re AG 18 400 Tryg A/S 2 900 Unibail-Rodamco SE

$

1 120 521 984

Fair Value

$

% of Net Assets

1 199 511 1 026

Health Care 20 800 Coloplast A/S 179 600 GlaxoSmithKline PLC 34 400 Orion OYJ

24 907

25 148

1 967 4 954 1 445

2 343 5 049 1 660

Industrials 17 000 Andritz AG 217 500 BAE Systems PLC 7 900 Kuehne + Nagel International AG 31 800 Metso OYJ 700 SGS SA 56 200 Skanska AB

8 366

9 052

1 142 2 052 1 404 1 090 1 705 1 441

1 156 2 225 1 511 993 1 856 1 526

Materials 19 200 BASF SE 84 800 BHP Billiton PLC 38 100 Rio Tinto PLC 18 100 Voestalpine AG

8 834

9 267

2 190 1 935 1 957 862

2 049 1 319 1 544 774

Telecommunication Services 41 700 Elisa OYJ 46 000 Proximus 4 200 Swisscom AG 130 900 Tele2 AB 430 100 TeliaSonera AB

6 944

5 686 6.0

1 550 2 038 2 965 1 936 3 218

2 189 2 082 2 932 1 828 2 990

Utilities 221 400 Centrica PLC 17 700 Enagas SA 35 700 Fortum OYJ 75 400 National Grid PLC 6 900 Red Electrica Corp. SA 16 800 Severn Trent PLC 122 700 Snam SpA 35 200 SSE PLC 111 100 Terna Rete Elettrica Nazionale SpA

11 707

12 021

1 085 627 885 1 278 707 674 766 1 047 636

989 694 750 1 447 803 749 894 1 101 797

26.4

9.5

9.8

12.7

7 705 8 224 8.7 TOTAL EUROPEAN EQUITIES 94 187 94 736 99.8 Less: Transaction costs (241) – – TOTAL INVESTMENTS $ 93 946 94 736 99.8 OTHER NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 156 0.2 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS $ 94 892 100.0

The accompanying notes are an integral part of the financial statements.

FINANCIAL STATEMENTS

RBC QUANT EUROPEAN DIVIDEND LEADERS ETF

Statements of Financial Position

Statements of Comprehensive Income

(in $000s except per unit amounts)

(in $000s except per unit amounts)

(see note 2 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 2015

$

94 736 63 169

December 31 2014

$

7 177 6 –

189 95 157

7 7 190

217 48

16 4

265

20

$

94 892

$

7 170

Investments at cost

$

93 946

$

7 050

NAV PER UNIT

$

22.33

$

20.49

The accompanying notes are an integral part of these financial statements.

For the periods 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 – ETF Specific Information) Management fees Independent Review Committee costs GST/HST Transaction costs Withholding tax TOTAL EXPENSES INCREASE (DECREASE) IN NAV $ INCREASE (DECREASE) IN NAV   PER REDEEMABLE UNIT $

2014

2015

3 102 $ (2)

20 –

64 (578)

– (27)

84 663 3 333

3 127 123

361 1 45 418 438 1 263 2 070

$

6 – 1 22 3 32 91

0.63

$

0.38

FINANCIAL STATEMENTS

RBC QUANT EUROPEAN DIVIDEND LEADERS ETF

Statements of Cash Flow (in $000s) For the periods ended December 31 (see note 2 in the generic notes)

Interest received (paid) Dividends received, net of withholding taxes

2014

2015

CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in NAV $ ADJUSTMENTS TO RECONCILE NET CASH   PROVIDED BY (USED IN) 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 (USED IN)   OPERATING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of redeemable units Cash paid on redemption of redeemable units Distributions paid to holders of redeemable units NET CASH PROVIDED BY (USED IN)   FINANCING ACTIVITIES $ Net increase (decrease) in cash for the period Cash (bank overdraft), beginning of period CASH (BANK OVERDRAFT), END OF PERIOD $ $ $

2 070

$

91

578 (664) (182) 44 (252 509) 164 867

27 (127) (7) 4 (14 342) 7 265

(85 796)

(7 089)

101 096 (13 170) (2 073)

7 102 – (7)

85 853 57 6 63

$

$

7 095 6 – 6

– 2 482

$ $

– 10

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENTS

RBC QUANT EUROPEAN DIVIDEND LEADERS ETF

Statements of Changes in NAV (in $000s) Total 2015

For the periods ended December 31 (see note 2 in the generic notes)

NAV AT BEGINNING OF PERIOD INCREASE (DECREASE) IN NAV 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

$

$

7 170 2 070 101 096

$

2014

– 91 7 102

– (13 170)

– –

87 926 (2 084) – (190)

7 102 (3) – (20)

(2 274) 87 722 94 892 $

(23) 7 170 7 170

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS – ETF SPECIFIC INFORMATION

RBC QUANT EUROPEAN DIVIDEND LEADERS ETF

December 31, 2015

General information (see note 1 in the generic notes)

Other price risk (% impact on net assets)

The investment objective of the ETF 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.

The table below shows the impact of a 1% change in the broad-based index (noted below) on the ETF’s net assets, using a 14-month historical correlation of data of the ETF’s return and the index, with all other factors kept constant, as at:

The ETF was started in October 2014.

MSCI Europe Total Return Index (CAD)

Financial instrument risk and capital management (see note 4 in the generic notes) Concentration risk (%) The table below summarizes the ETF’s investment portfolio (after consideration of derivative products, if any) as at: Investment mix

European Equities  Financials   Telecommunication Services  Energy  Industrials   Health Care   Consumer Staples  Utilities  Materials   Consumer Discretionary Other Net Assets Total

December 31 2015

December 31 2014

38.4 5.5 8.0 3.6 5.0 7.5 10.7 13.3 8.1 (0.1) 100.0

26.4 12.7 12.1 9.8 9.5 9.5 8.7 6.0 5.1 0.2 100.0

Currency risk (% of net assets) The table below summarizes the ETF’s net exposure (after hedging, if any) to currency risk as at: Currency

Euro Pound sterling Swedish krona Swiss franc Danish krone Norwegian krone Total

December 31 2015

December 31 2014

45.3 31.1 10.0 9.3 4.0 0.6 100.3

46.5 33.3 9.6 6.8 2.3 1.5 100.0

As at December 31, 2015, if the Canadian dollar had strengthened or weakened by 1% in relation to the above currencies, with all other factors kept constant, the ETF’s net assets may have decreased or increased, respectively, by approximately 1.0% (December 31, 2014 – 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.

December 31 2015

+ or -   0.9

Due to the fact that the ETF 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 ETF using historical correlation between the ETF’s return and a broad-based index could be materially misleading.

Since historical correlation may not be representative of future correlation, actual results could differ from this sensitivity analysis and the difference could be material. Fair value hierarchy ($000s except % amounts) (see note 3 in the generic notes) The following is a summary of the inputs used as of December 31, 2015 and 2014. December 31, 2015

Level 1

Level 2

Level 3

Total

Equities Total financial instruments % of total portfolio

94 736 94 736 100.0

– – –

– – –

94 736 94 736 100.0

December 31, 2014

Level 1

Level 2

Level 3

Total

7 177 7 177 100.0

– – –

– – –

7 177 7 177 100.0

Equities Total financial instruments % of total portfolio

For the periods ended December 31, 2015 and 2014, there were no transfers of financial instruments between Level 1, 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 management fee of the ETF is calculated at up to 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 non-capital and capital losses as at December 31, 2015 for the ETF were approximately: Capital losses Non-capital losses

451 –

NOTES TO FINANCIAL STATEMENTS – ETF SPECIFIC INFORMATION

RBC QUANT EUROPEAN DIVIDEND LEADERS ETF

December 31, 2015

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

2015

2014

350 4 500 – (600) 4 250

– 350 – – 350

Transaction costs ($000s except %) Transaction costs, including brokerage commissions, in consideration of portfolio transactions for the periods ended: December 31 2015 $ %

Total transaction costs Related-party brokerage commissions* Commission arrangements†

418 – –

100 – –

December 31 2014 % $

22 – –

100 – –

* See note 8 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) (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 2015

December 31 2014

13 502 13 772

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 ETF owned by other related investment funds as at:

RBC Quant European Dividend Leaders   (CAD Hedged) ETF

December 31 2015

December 31 2014

73.3

71.8

Please see the generic notes at the back of the financial statements.

GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)

December 31, 2015

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 manager 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 4, 2016. 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

TSX Ticker Symbol Index*

RBC 1-5 Year Laddered   Corporate Bond ETF

RBO

Not applicable

RBC Target 2016 Corporate RQD FTSE TMX Canada   Bond Index ETF 2016 Maturity Corporate Bond Index RBC Target 2017 Corporate RQE FTSE TMX Canada   Bond Index ETF 2017 Maturity Corporate Bond Index RBC Target 2018 Corporate RQF FTSE TMX Canada   Bond Index ETF 2018 Maturity Corporate Bond Index RBC Target 2019 Corporate RQG FTSE TMX Canada   Bond Index ETF 2019 Maturity Corporate Bond Index RBC Target 2020 Corporate RQH FTSE TMX Canada   Bond Index ETF 2020 Maturity Corporate Bond Index RBC Target 2021 Corporate RQI FTSE TMX Canada   Bond Index ETF 2021 Maturity Corporate Bond Index RBC Quant Canadian   Dividend Leaders ETF

RCD

Not applicable

RBC Quant U.S.   Dividend Leaders ETF

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 ETF

RID RID.U

Not applicable

RBC Quant EAFE Dividend   Leaders (CAD Hedged) ETF

RHI

Not applicable

ETF

TSX Ticker Symbol Index*

RBC Quant Emerging Markets   Dividend Leaders ETF

RXD RXD.U

Not applicable

RBC Quant Canadian RCE   Equity Leaders ETF

Not applicable

RBC Quant U.S.   Equity Leaders ETF

Not applicable

RUE RUE.U

RBC Quant U.S. Equity Leaders RHS   (CAD Hedged) ETF

Not applicable

RBC Quant EAFE Equity   Leaders ETF

Not applicable

RIE RIE.U

RBC Quant EAFE Equity RHF   Leaders (CAD Hedged) ETF

Not applicable

* 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.

2. Financial year/period The information provided in these financial statements and notes thereto is for the 12-month periods ended or as at December 31, 2015 and 2014. In the year an ETF or a series is established, “period” represents the period from inception to December 31 of that fiscal year.

3. Summary of significant accounting policies 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: 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

GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)

December 31, 2015

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 ETFs satisfy the above criteria. The ETFs’ financial assets and liabilities, such as foreign exchange contracts, are offset and the net amounts are reported in the Statements of Financial Position. The ETFs enter into various master netting or similar agreements with counterparties, which provide the ETFs with the legally enforceable right to offset financial assets and liabilities.

Forward Contracts – Forward contracts are valued at the gain or loss that would arise as a result of closing the position at the valuation date. Any gain or loss at the close of business on each valuation date is recorded as “Change in unrealized gain (loss) on investments” in the Statements of Comprehensive Income. The receivable/payable on forward contracts is recorded separately in the Statements of Financial Position. Realized gain (loss) on foreign exchange contracts is included in “Net gain (loss) on foreign currencies and other net assets” in the Statements of Comprehensive Income.

Redeemable units are measured at their respective redemption values. All other assets and liabilities are measured at amortized cost.

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.

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 ETFs’ financial instruments. The hierarchy of inputs is summarized below: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), including broker quotes, vendor prices and vendor fair value factors; and Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). Changes in valuation methods may result in transfers into or out of an investment’s assigned level. Investments are recorded at fair value, which is determined as follows: Equities – Common shares, preferred shares and exchangetraded funds are valued at the closing price recorded by the security exchange on which the security is principally traded. In circumstances where the closing price is not within the bid-ask spread, management will determine the points within the bid-ask spread that are most representative of the fair value. Fixed-Income and Debt Securities – Bonds are valued at the closing price quoted by major dealers or independent pricing vendors in such securities.

Foreign Exchange The value of investments and other assets and liabilities in foreign currencies is translated into Canadian dollars at the rate of exchange on each valuation date. Purchases and sales of investments, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. Realized foreign exchange gains/losses are included in “Net gain (loss) on foreign currencies and other net assets” in the Statements of Comprehensive Income. Functional Currency The ETFs have their subscriptions, redemptions and performance denominated in Canadian dollars and, consequently, the Canadian dollar is the functional currency for the ETFs. Investment Transactions Investment transactions are accounted for as of the trade date. Transaction costs, such as brokerage commissions, incurred by the ETFs are recorded in the Statements of Comprehensive Income for the period. The unrealized gain and loss on investments is the difference between fair value and average cost for the period. The basis of determining the cost of portfolio assets, and realized and unrealized gains and losses on investments, is average cost which does not include amortization of premiums or discounts on fixed-income and debt securities with the exception of zero coupon bonds.

GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)

December 31, 2015

Income Recognition Dividend income is recognized on the ex-dividend date and interest for distribution purposes is coupon interest recognized on an accrual basis and/or imputed interest on zero coupon bonds. “Other income (loss)” includes income from income trusts. Distributions received from income trusts are recognized based on the nature of the underlying components, such as income, capital gains and return of capital. “Other income received from underlying funds” includes income earned by an ETF from investments in underlying ETFs. Any premiums paid or discounts received on the purchase of zero coupon bonds are amortized on a straight line basis. 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. Foreign Currencies The following is a list of abbreviations used in the Schedule of Investment Portfolio: AUD – Australian dollar CAD – Canadian dollar CHF – Swiss franc DKK – Danish krone EUR – Euro GBP – Pound sterling HKD – Hong Kong dollar

ILS – Israeli new shekel JPY – Japanese yen NZD – New Zealand dollar SEK – Swedish krona SGD – Singapore dollar USD – United States dollar

4. Financial instrument risk and capital management RBC GAM is responsible for managing each ETF’s capital, which is its net assets and consists primarily of its financial instruments. 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 managers, 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. Financial instrument risk, as applicable to an ETF, is disclosed in its Notes to Financial Statements – ETF Specific Information.

Liquidity risk 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 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. Any securities deemed to be illiquid are identified in the Schedules of Investment Portfolio. 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 Statements 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. Concentration risk 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. 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.

GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)

December 31, 2015

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.

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.

Currency 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.

Currency risk is the risk that the value of investments denominated in currencies, other than the functional currency of an ETF, will fluctuate due to changes in foreign exchange rates. The value of investments denominated in a currency other than Canadian dollars is affected by changes in the value of the Canadian dollar or an ETF’s functional currency, in relation to the value of the currency in which the investment is denominated. When the value of the Canadian dollar falls in relation to foreign currencies, then the value of foreign investments rises. When the value of the Canadian dollar rises, the value of foreign investments falls. Other price risk

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.

Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate or currency risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment.

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.

5. Unitholders’ equity

6. Taxes

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.

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.

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: a) a basket of applicable securities for each prescribed number of units; and

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 or quarterly 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.

GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)

December 31, 2015

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.

Certain ETFs may invest in units of other Funds managed by RBC GAM or its affiliates (“underlying mutual funds”). The ETF’s ownership interest in underlying mutual funds is disclosed in the ETF Specific Information.

7. Securities lending revenue

Affiliates of RBC GAM that provide services to the ETFs in the course of their normal businesses are discussed below.

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.

Custodian and Valuation Agent 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. 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

8. Administrative and other related-party transactions

The ETFs have established standard brokerage agreements at market rates with related-party brokerages.

Manager, Trustee and Portfolio Manager

Other Related-Party Transactions

RBC GAM is an indirect wholly owned subsidiary of Royal Bank of Canada (“Royal Bank”). RBC GAM is the manager, trustee and portfolio manager of the ETFs. RBC GAM is responsible for the ETFs’ day-to-day operations, holds title 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.

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:

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 interim reports, prospectuses and investor communications. The ETFs also pay certain operating expenses directly, including the costs related to the Independent Review Committee 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).

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; and (c) purchases of debt securities from or sales of debt securities to a related-party dealer, where it acted as principal.

GENERIC NOTES TO FINANCIAL STATEMENTS (also see ETF Specific Information)

December 31, 2015

The applicable standing instructions require that RelatedParty Trading Activities be conducted in accordance with RBC GAM policy and that RBC GAM advise the Independent Review Committee 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 ETFs, (iii) is in compliance with RBC GAM policies and procedures, and (iv) achieves a fair and reasonable result for the ETFs.

9. Future accounting changes The following IFRS standard has been issued, but is not yet in effect: In July 2014, the IASB finalized the reform of financial instruments accounting and issued IFRS 9 (as revised in 2014), which contains the requirements for a) the classification and measurement of financial assets and financial liabilities, b) impairment methodology and c) general hedge accounting. IFRS 9 (as revised in 2014) will supersede IAS 39 Financial Instruments: Recognition and Measurement in its entirety upon its effective date. The new standard, which becomes effective for annual periods beginning on or after January 1, 2018, is not expected to have a significant impact on the ETFs. In December 2014, Disclosure Initiative was issued, which amends IAS 1 Presentation of Financial Statements. The amendments are designed to encourage entities to use professional judgment to determine what information to disclose in the financial statements and accompanying notes by clarifying guidance on materiality, presentation and note structure. These amendments are effective for annual periods beginning on or after January 1, 2016. ETFs will amend disclosures if required in the 2016 Financial Statements.