WINK Calgary presents "Learn to love your money - basics of investing"

Learn To Love Your Money – Basics of InvestingInvestment Allocation and Risk Management

RBC Wealth Management

Prepared by: Gwen I. Becker, CIM, CFP, FCSIPortfolio Manager & Wealth Advisor403-299-5265 | [email protected] Cheng & Charbonneau Wealth Management

mailto:[email protected]

Agenda1. Types of Relationship with Investment Managers Pages 3-5

Advisory vs. Fiduciary Duty

2. Asset Allocation for Lifecycles Pages 6-14

Models Historical Returns Index Descriptions Risk Metrics

3. Timeless Risk Management Strategies Pages 15-16

Sector & Position Limits CAD vs. USD

4. Market Update Pages 17-26

Commodity Super-cycle CAD vs. USD Bear Market Statistics

2RBC Dominion Securities Inc. | 18 January 2016

Types of Relationships with Investment Managers


Types of Advisors

IIROC CSC, CPH, WME Investment Dealer Agency relationship KYC Wealth & Estate Planning Domestic, US &

International stocks, bonds & Specialty pooled funds

Commission based compensation

Fee based compensation Fees tax-deductible

MFDA IFIC, CFP Mutual Fund Dealer Agency Relationship KYP Domestic, International &

Specialty Mutual Funds, Insurance

Front end load, DSC & Trailer Fee compensation

ASC or IIROC CFA, CIM, CFP Fiduciary Duty Investment Policy

Statement Portfolio Management Wealth & Estate Planning Domestic, US & International

stocks, bonds & Specialty pooled funds

Fee based compensation as a % of assets (fully transparent)

Fees tax-deductible

Investment Advisor Financial Planner Portfolio Manager

May 1, 2023 4RBC DOMINION SECURITIES

Client / Advisor Relationships – Value Proposition

Client Prefers: Deal flow Specialization Active Involvement Risk management & wealth

management focus Transaction based cost structure Fee-based

Reporting Monthly Account Statements Quarterly Reporting

Cost Structure 1-3% trade value commission Spread on bonds ~1% Fund Trailer Fees Commission to Broker from

Issuer Fee-based

Investment Advisor Financial Planner Portfolio Manager

Client Prefers: Variety of investment products Planning focus Advisory Relationship with active

involvement Fee-based

Reporting Monthly & Quarterly Account

Statements Fund performance

Cost Structure Average Fund MER ~2.50% Front-end or Back-end Sales

Commissions (FE Load/DSCs) ~1% Fund Trailer Fees

Client Prefers: Customized discretionary

portfolio management Risk management & wealth

management focus Fiduciary Duty based Professional Fee-based

Reporting Monthly Account Statements Quarterly portfolio &

performance reporting Benchmarks

Cost Structure 1.25-1.50% all-in annual fee (tax

deductible) Declining fee schedule Cannot “double dip” on bond

spreads (commissions) or issuance

May 1, 2023 5RBC DOMINION SECURITIES

Asset Allocation for Lifecycles


7

Simply Your Life – Pension Style PortfoliosEx

pect

ed R

etur

n

Risk Profiles

The focus is long term capital appreciation with a secondary focus on wealth preservation. The majority of the portfolio will typically be invested in a blend of growth assets. The investor in this category has a higher tolerance for risk over their investment horizon.

The focus is capital preservation. The portfolio will typically be invested mainly in fixed income and other low volatility instruments. The investor in this category has a low tolerance for loss over their investment horizon.

The focus is the wealth preservation which includes an element of growth to retain the real (inflation – adjusted) value of the portfolio. The portfolio will typically include fixed income instruments as well as some exposure to growth assets. The investor in this category has some tolerance for loss over their investment horizon.

The focus is a balance between capital appreciation and wealth preservation. The portfolio may include exposure to all asset classes and carries moderate risk of loss over the investment horizon.

Very Conservative

Expected Volatility

Conservative

Balanced

Growth

Aggressive GrowthThe focus is the maximization of long term capital appreciation. The portfolio will be invested mainly in growth assets and may have a higher proportion of higher risk investments and possible concentrations. The investor in this category has a high tolerance for risk over their investment horizon.

Very Conservative

Conservative

Balanced

Growth

Aggressive Growth

Efficient Frontier

Cash

Fixed Income

Equities

Asset Allocation Profiles are based on RBC's Strategic Asset Allocation Framework and tradditional asset classes. Expected Risk & Return and the Efficient Frontier are illustrative based on long term (5-10 Year) time horizon.

RBC Dominion Securities Inc. | 18 January 2016

Boomers

Gen X

Millennials

Boomers

Gen X

Millennials

Source: RBC Dominion Securities

8

Asset Allocation – Index DescriptionsAsset Allocation Model: Balanced Profile

Sub Asset Class Index Name Geography Allocation

Cash 5.0%

Cash - Money Market DEX Canadian Trsury Bill 30 Day Canada 5.0%

Fixed Income 40.0%

FI - Government Bonds DEX Government Bond TR Canada 14.0%

FI - Corporate Bonds DEX Universe Corporate Bond TR Canada 16.0%

FI - High Yield Bonds Merrill Lynch US High Yield Master II USD US 5.0%

FI - Emerging Markets JP Morgan EMBI Global Diversified TR USD Emerging Markets 5.0%

Equity 55.0%

Eq - Cap/Style: Large Cap S&P/TSX Composite TR Canada 20.0%

Eq - Cap/Style: Large Cap S&P 500 Total Return US 20.0%

Eq - Cap/Style: Large Cap MSCI EAFE Int'l ex. US 10.0%

Eq - Region: Emerging Markets MSCI Emerging Markets (Net) Emerging Markets 5.0%

For modelling purposes, the indices used to represent the indicated asset classes are described on Page 28 under the heading "Index Descriptions". Reference Currency: CAD. It is not possible to invest directly in an index. Past performance does not guarantee future results.



9

Asset Allocation – Portfolio Composition

Asset Class Very Conservative Conservative Balanced Growth Aggressive Growth

Cash 5% 5% 5% 5% 5%

Canadian Cash 5% 5% 5% 5% 5%

Fixed Income 75% 60% 40% 25% -

Government 40% 26% 14% 5% -

Corporate - Investment Grade 35% 26% 16% 10% -

Corporate - High Yield - 4% 5% 5% -

Emerging Markets - 4% 5% 5% -

Equities 20% 35% 55% 70% 95%

Canadian Domestic 10% 15% 20% 24% 30%

US 5% 10% 20% 24% 30%

International (EAFE) 5% 10% 10% 15% 25%

Emerging Markets - - 5% 7% 10%


Gen XBoomers Millennials


10

Historical Performance

Very Conservative Conservative Balanced Growth Aggressive Growth

Annualized Return: Ending September 20151 Year 4.2% 5.2% 5.6% 5.5% 4.4%

3 Year 4.6% 7.3% 10.0% 11.7% 13.6%

5 Year 5.0% 6.6% 8.2% 9.0% 9.7%

10 Year 5.0% 5.5% 6.0% 6.2% 5.9%

20 Year 6.7% 7.0% 7.3% 7.2% 6.8%

Max Common History: Jan 1994 To Sep 2015 6.6% 7.0% 7.3% 7.3% 7.0%

Distribution of Returns January 1994 To September 2015Best 12 Month Rolling Return 22.0% 24.2% 29.3% 31.9% 35.0%

Median 12 Month Rolling Return 7.0% 8.0% 9.7% 10.8% 11.9%

Worst 12 Month Rolling Return -5.6% -11.3% -18.8% -24.3% -32.8%

% Positive Calendar Years 90.5% 90.5% 85.7% 76.2% 76.2%

% Negative Calendar Years 9.5% 9.5% 14.3% 23.8% 23.8%

Max Consecutive Calendar Yrs (+) 13 8 7 6 6

Max Consecutive Calendar Yrs (-) 1 1 2 3 3

Risk Measures: January 1994 To September 2015Volatility of Returns (St. Dev.) 4.4% 5.5% 7.5% 9.2% 11.7%

Average Drawdown -1.6% -2.3% -3.3% -4.0% -5.9%

Average Recovery Period (# Months) 3.3 4.4 5.0 5.0 7.4

Max Drawdown -9.2% -13.9% -22.2% -29.2% -39.0%

Max Drawdown Date Feb-94 Jul-08 Jul-07 Jul-07 Sep-00

Longest Recovery Period Length 13 34 41 53 67

Longest Recovery Period Start Date Feb-94 Oct-00 Oct-00 Oct-00 Jun-07

For modelling purposes, the indices used to represent the indicated asset classes are described on Page 28 under the heading "Index Descriptions". Reference Currency: CAD. It is not possible to invest directly in an index. Past performance does not guarantee future results.


Gen XBoomers Millennials


11

Calendar Year Performance – Best to WorstVery Conservative

Conservative

Balanced

Growth

Aggressive Growth

More Conservative

More Aggressive

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014EM FI

(JPM EMBI Gbl Div)

16.58%

EM FI(JPM EMBI Gbl

Div)12.17%

Em Eq(MSCI EM)

28.57%

Em Eq(MSCI EM)

16.33%

Em Eq(MSCI EM)

29.54%

Em Eq(MSCI EM)

32.62%

Em Eq(MSCI EM)

19.34%

Can FI(DEX Govt)

9.03%

Em Eq(MSCI EM)

54.26%

Can Eq(SP/TSX TR)

17.61%

Can FI(DEX Govt)

10.2%

Em Eq(MSCI EM)

14.86%

US Eq(SP 500 TR)

41.75%

US Eq(SP 500 TR)

24.34%

US FI(ML US HY)

11.03%

Can FI(DEX Govt)

8.78%

Can Eq(SP/TSX TR)

26.73%

Can Eq(SP/TSX TR)

14.49%

Can Eq(SP/TSX TR)

24.13%

Intl Eq(MSCI EAFE)

26.77%

Can Eq(SP/TSX TR)

9.84%

EM FI(JPM EMBI Gbl

Div)7.38%

US FI(ML US HY)

36.12%

Em Eq(MSCI EM)

12.65%

EM FI(JPM EMBI Gbl

Div)9.77%

EM FI(JPM EMBI Gbl

Div)14.09%

Intl Eq(MSCI EAFE)

31.47%

EM FI(JPM EMBI Gbl

Div)17.53%

Can FI(DEX Univ Corp)

9.28%


8.58%

Aggressive Growth16.29%

Intl Eq(MSCI EAFE)

11.42%



Can FI(DEX Govt)

4.45%

Can Cash(DEX 30D Tbill)

2.57%

Can Eq(SP/TSX TR)

35.06%



8.25%

Intl Eq(MSCI EAFE)

13.97%


US FI(ML US HY)

12.14%

Can FI(DEX Govt)

7.71%

Very Conservative

3.12%

Intl Eq(MSCI EAFE)

14.35%


Growth10.88%

Can Eq(SP/TSX TR)

17.27%


4.27%


0.24%


Growth9.67%

US FI(ML US HY)

6.74%

US Eq(SP 500 TR)

12.68%

Growth17.57%

Growth12.11%


4.37%


2.38%

Growth13.57%

Growth8.58%

Balanced9.78%

Growth16.26%

Very Conservative

2.88%

Very Conservative

-2.99%

Growth20.48%

Balanced9.29%

Very Conservative

5.79%

US FI(ML US HY)

12.28%

US FI(ML US HY)

15.02%


Very Conservative

4.13%

Conservative-1.27%

Balanced12.06%

Balanced8.07%

Intl Eq(MSCI EAFE)

9.75%

US Eq(SP 500 TR)

16.18%


1.8%

Conservative-8.95%

Balanced18.04%

US FI(ML US HY)

9.16%

US Eq(SP 500 TR)

4.39%


Balanced13.18%

Balanced11.68%

Em Eq(MSCI EM)

3.49%

US FI(ML US HY)

-3.17%

Conservative10.24%

Conservative7.76%

Conservative8.36%

Balanced13.52%

Conservative0.95%

US FI(ML US HY)

-10.14%


16.26%

US Eq(SP 500 TR)

9.06%

Conservative3.55%

Growth10.16%

Can Eq(SP/TSX TR)

13%

Can Eq(SP/TSX TR)

10.56%

Conservative1.5%

Balanced-6.41%

Very Conservative

9.22%

Very Conservative

7.7%

Very Conservative

7.83%

US FI(ML US HY)

12.15%


Balanced-16.26%

Conservative14.09%

Conservative8.2%


0.91%

Balanced8.96%

Conservative7.44%

Conservative9.98%

Balanced-1.05%

Em Eq(MSCI EM)

-7.39%


8.5%


7.3%

Can FI(DEX Govt)

6.63%

EM FI(JPM EMBI Gbl

Div)10.24%

Balanced0.43%

Growth-21.47%

Intl Eq(MSCI EAFE)

13.88%

Very Conservative

7.64%

Balanced0.83%

Conservative7.23%

Em Eq(MSCI EM)

4.29%

Can FI(DEX Govt)

9.3%

Growth-3.84%

Growth-10.06%

US Eq(SP 500 TR)

6.17%

Can FI(DEX Govt)

7.09%

EM FI(JPM EMBI Gbl

Div)6.58%

Conservative10.06%

Growth0.04%

US Eq(SP 500 TR)

-23.08%

EM FI(JPM EMBI Gbl

Div)12.18%


7.34%

Growth-1.6%

Can Eq(SP/TSX TR)

7.19%

Very Conservative

2.06%

Very Conservative

8.87%

US Eq(SP 500 TR)

-6.35%

Can Eq(SP/TSX TR)

-12.43%

Can FI(DEX Govt)

6.05%

EM FI(JPM EMBI Gbl

Div)3.42%


6.02%

Very Conservative

7.12%

Intl Eq(MSCI EAFE)

-4.82%

Aggressive Growth-28.81%

Very Conservative

10.83%

Can FI(DEX Govt)

6.52%



6.22%

EM FI(JPM EMBI Gbl

Div)1.46%


7.59%



US FI(ML US HY)

5.74%

US FI(ML US HY)

2.73%


2.58%


4.4%

EM FI(JPM EMBI Gbl

Div)-9.11%

Intl Eq(MSCI EAFE)

-30.88%

US Eq(SP 500 TR)

9.29%

EM FI(JPM EMBI Gbl

Div)6.36%

Can Eq(SP/TSX TR)

-8.71%

Very Conservative

5.39%


0.11%

Em Eq(MSCI EM)

7.01%

Can Eq(SP/TSX TR)

-12.57%

Intl Eq(MSCI EAFE)

-17.03%


2.86%

US Eq(SP 500 TR)

2.73%

US Eq(SP 500 TR)

1.41%


3.94%

US Eq(SP 500 TR)

-9.68%

Can Eq(SP/TSX TR)

-33%

Can FI(DEX Govt)

1.57%

Intl Eq(MSCI EAFE)

2.11%

Intl Eq(MSCI EAFE)

-10.16%

Can FI(DEX Govt)

2.65%

Can FI(DEX Govt)

-2.9%

Intl Eq(MSCI EAFE)

4.03%

Intl Eq(MSCI EAFE)

-16.52%

US Eq(SP 500 TR)

-23.11%

EM FI(JPM EMBI Gbl

Div)0.84%


2.25%

US FI(ML US HY)

-0.68%

Can FI(DEX Govt)

3.92%

US FI(ML US HY)

-12.5%

Em Eq(MSCI EM)

-43.03%


0.37%


0.43%

Em Eq(MSCI EM)

-16.58%


0.91%


-3.48%


0.81%

Asset Allocation Models are described on Page 4. Indices used to calculate the performance are described on Page 28 under the heading "Index Descriptions". Reference Currency: CAD. It is not possible to invest directly in an index. Past performance does not guarantee future results.



12

Cumulative Portfolio GrowthAnalysis Period: January 1994 To September 2015

The Asset Allocation Model is described on Page 13. Indices used to calculate the performance are described on Page 28 under the heading "Index Descriptions". Reference Currency: CAD. It is not possible to invest directly in an index. Past performance does not guarantee future results.

Asset Allocation Model: Balanced Profile - Canadian International Model

CAD Cash DEX Canadian Trsy Bill 30 Day

CAD Fixed Income DEX Universe (%Total Return)

CAD Equities S&P/TSX Composite TR Index (Canada)



13

Balanced Model - Calendar Year Return DistributionAnalysis Period: 1994 To 2014

20142013

2012 20092011 20062010 20032007 19992005 19982004 1997

2002 2000 19962008 2001 1994 1995

-50% to -40% -40% to -30% -30% to -20% -20% to -10% -10% to -0% 0% to 10% 10% to 20% 20% to 30% 30% to 40% 40% to 50% > 50 %

Asse

t Allo

catio

n M

odel

Asset Allocation Model: Balanced Profile - Canadian International Model

Legend1990+2000+2010+

Most Recent

The Asset Allocation Model is described on Page 13. Indices used to calculate the performance are described on Page 28 under the heading "Index Descriptions". Reference Currency: CAD. It is not possible to invest directly in an index. Past performance does not guarantee future results.




15

Let the Investment Professionals Remove Emotions from Decision-Making


Source: www.google.ca

Timeless Risk Management Strategies


17

1. Control Sector Exposure No more than > 20% in any one sector

2. Control Single Stock Exposure No more than > 5% in any one stock

3. CAD vs. USD exposure (Global Diversification) When in commodity super cycle, overweight CAD and CAD equities When NOT in a commodity super cycle, overweight USD and US

equities Buy USD when CAD close to or above parity Hedge USD exposure below $0.70/USD – 0.65/USD

Timeless Risk Management Strategies


18

Market Update


The Long Term – Stocks vs. Commodity Super Cycle

Source: Ned Davis


20

Past Oil Corrections - Peak to Trough Bottoms Average oil correction (peak to trough) is -57%

Current correction -70%

Oil should be close to a bottom but from a

secular perspective, many headwinds still

persist

On an inflation adjusted basis, oil looking like it’s nearing a bottom

(next page)

May 1, 2023

21

Long Term Oil Prices (inflation adjusted)

Source: MacroTrends.NET - As of January 14, 2016

May 1, 2023

The Long Term - Canadian Dollar (CAD/USD) Cycles


Source: Fidelity

House Fire (Recession) vs. Kitchen Fire (Correction)?

Source: Ned Davis


Trend is your Friend – Put the Sector Odds in your Favor

Source: Morningstar CPMS


Opportunity – Dividend Growth

7 Fed tightening cycles since 1973 – all stocks were weak in the initial 3 months post-tightening However, dividend growers and payers outperformed non-payers for the 24 month period after the

beginning of each tightening cycle


Risk Management & Strategy in Current Environment

Higher cash reserves in-lieu of bonds & stocks• Strategically look to re-invest cash once

Bond yields higher Market valuations more appealing

Core Weighting in Investment Grade Bonds (Defense)• Don’t be tempted by higher rate junk bonds at this stage of cycle

Neutral stocks relative to bonds• Will begin reducing stock exposure once

Money becomes tight or yield curve inverted Valuations become excessive

Global diversification matters in current environment• Exposure to US dollar remains favorable

Hedge below $0.70 CAD/USD to locking in currency gains• Minimal exposure to commodity heavy countries, sectors and companies


27

Disclosures


28

Index Descriptions

Index Name Sub Asset Class Description Data Start Date

Cash

DEX Canadian Trsury Bill 30 Day Cash - Money Market The DEX Canadian Trsury Bill 30 Day Index consists of 30-day Treasury Bills issued by the Canadian

Government. 06/30/1973

Fixed Income

DEX Universe Corporate Bond TR FI - Corporate Bonds

The DEX Univ Corp TR Index consists of a held-to-maturity portfolio consisting of, primarily, Canadian dollar-denominated investment grade corporate bonds with effective maturities in the applicable Maturity Year. The effective maturity of an eligible corporate bond is determined by its actual maturity or the anticipated maturity of the security as determined in accordance with a rules-based methodology developed by PC-Bond.

01/31/1986

DEX Universe Bond TR FI - Aggregate Bonds

The DEX Universe Bond TR Index consists of the broad Canadian investment-grade fixed income market. As of December 31, 2010, the Universe Index consisted of 1,103 securities, with a total market value of approximately $1.031 Trillion. The Universe Index has been published since 1979.

12/31/1979

JP Morgan EMBI Global Diversified TR USD

FI - Emerging Markets The JP Morgan EMBI Global Diversified TR Index consists of external-currency-denominated Brady bonds, loans, Eurobonds and dollar-denominated local market debt instruments with a minimum credit rating of BBB+/Baa1. 01/31/1994

Merrill Lynch US High Yield Master II USD FI - High Yield Bonds The Merrill Lynch US High Yield Master II Index consists of USD- denominated, below investment grade rated

corporate debt publically issued in the US domestic market. 09/30/1986

DEX Government Bond TR FI - Government Bonds The DEX Government Bond TR Index consists of selected constituents of the DEX Universe Bond Index

laddered into different term buckets in years. Index constituents are rebalanced annually, on June 30 each year. 01/31/1980

Data Sources: Bloomberg, Zephyr, Morningstar, HFRI/HFRX, Cambridge AssociatesIt is not possible to invest directly in an index.


29

Index Descriptions

Index Name Sub Asset Class Description Data Start Date

Equity

S&P 500 Total Return Eq - Cap/Style: Large Cap

The S&P 500 Total Return Index consists of the 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities. 01/31/1963

MSCI EAFE Eq - Cap/Style: Large Cap

The MSCI EAFE Index (Europe, Australasia, Far East) consists of the equity markets of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. It is a free float-adjusted market capitalization index.

01/31/1970

MSCI Emerging Markets (Net)

Eq - Region: Emerging Markets

The MSCI Emerging Markets Index (Net) consists of equity indices from 26 emerging market countries in Europe, Latin America, Africa, Asia and Middle East. The index is capitalization-weighted and excludes closed markets, as well as those shares in otherwise free markets that are not purchasable by foreigners. The benchmark is widely used as a measure of overall developing market stock performance around the world.

01/31/1989

S&P/TSX Composite TR

Eq - Cap/Style: Large Cap

The S&P/TSX Composite Index consists of stocks of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Toronto Stock Exchange listed companies in this index comprise about 70% of market capitalization for all Canadian-based companies listed on the TSX. It replaces the earlier TSE 300 index.

01/31/1963

Data Sources: Bloomberg, Zephyr, Morningstar, HFRI/HFRX, Cambridge AssociatesIt is not possible to invest directly in an index.


30

General DisclaimerThe information contained in this report has been compiled by RBC Dominion Securities Inc*. from sources believed to be reliable, but no representation or warranty, express or implied, is made by RBC Dominion Securities Inc., its affiliates or any other person as to its accuracy, completeness or correctness. All charts, illustrations, examples and other demonstrative content contained in this report have been provided for illustrative purposes only as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Whilst efforts are made to ensure the accuracy and completeness of the information contained in this report at the time of publication, errors and omissions may occur.

Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Hypothetical historical data used in this report, including any underlying assumptions used, is not indicative of future performance or value. Any upward or downward trend presented during the Analysis Time Horizon is not an indication that the portfolio is likely to increase or decrease in value at any time.

Each legal jurisdiction has its own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, any securities or investment products discussed in this report may not be eligible for sale in some jurisdictions. This report is not an offer to sell or a solicitation of an offer to buy any security. Additionally this report is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. The contents of this report are provided for informational purposes only and do not constitute a recommendation to purchase a particular security or investment product. Nothing in this report constitutes legal, accounting or tax advice and you are advised to seek independent legal, tax and accounting advice prior to acting upon anything contained in this report. Interest rates, market conditions, tax and legal rules and other important factors which will be pertinent to your circumstances are subject to change. Specific investment strategies should be considered relative to the suitability of the products contained therein, your objectives and risk tolerances. For information on any security or investment product mentioned in this report you are advised to consult the applicable offering document pertaining to such security prior to investing.

To the full extent permitted by law neither RBC Dominion Securities Inc. nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of RBC Dominion Securities Inc. Additional information available upon request.

RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ®Registered trademarks of Royal Bank of Canada. Used under licence. © RBC Dominion Securities Inc. 2014. All rights reserved.


31

Data and Report Disclosures

Asset Allocation is the process of determining the relative weight of various asset types and strategies within a portfolio. An appropriate asset allocation model forms the basis for effective portfolio construction, and enforces investment management discipline consistent with your objectives and risk preferences. Comparing different asset allocation models can help you better understand the potential risk and return trade-off and validate that a proposed strategy is consistent with your expectations.

Base Currency. For analysis purposes, available indices are converted into a common base currency. As a result, indices denominated in a currency other that the base currency will be impacted by changes in the relative currency valuation over the Analysis Time Horizon. This will affect total portfolio returns and volatility.

Risk and Return. Unless otherwise specified, return and risk figures have been annualized. The reported risk and return figures presented in the report are indicative, based on index data, and do not represent any individual or aggregate set of actual portfolios. Actual risk and return for your portfolio may be impacted by rebalancing frequency, transaction costs, execution valuations, and additional management fees that differ from the assumptions used in this report. No assurance can be given as to the actual return on any portfolio.

Allocation (%) represents the target percentage weight of the indicated index within the asset allocation model. The report reflects the periodic rebalancing back to the target allocation weights of the model on a monthly basis; however, in between rebalancing dates, the actual portfolio weights will vary based on changes in the market value of the indices.

Asset Allocation Model represents the primary investment strategy under consideration. When selected, a Comparison Model may also be included as an alternative investment strategy, asset allocation, or blended benchmark. The Asset Allocation Profile page provides details on the specific model and indices used.

Customized Asset Allocation Your advisor may customize or tailor an asset allocation model to better meet your specific needs and preferences. In this case, the Asset Allocation Model or Comparison Model will be labelled as a “Customized Asset Allocation” and the Asset Allocation Profile page provides details on the specific model and indices used. If you have any questions about the use of a customized asset allocation model, please be sure to discuss them with your Investment Advisor or Portfolio Manager.

Rebalancing For analysis purposes, the Asset Allocation Model and the Comparison Model are rebalanced monthly back to the target allocation percentages for each index. Monthly returns are calculated on a calendar basis and rebalancing is assumed to occur at the end of each month.

Transaction Costs The analysis relies on index data and does not incorporate any transaction costs that may be incurred during the initial purchase of investment products, during the periodic rebalancing of the portfolio, or during liquidation of the investments.

Management Fees The analysis relies on index data and does not incorporate any ongoing product fees, advisory or management fees, or any other costs that may be incurred in an actual investment portfolio.

Historical Analysis. Throughout this report, the hypothetical return of the Asset Allocation Model is used to illustrate the historical performance of the strategy, the historical relationship between risk and return and, if specified, the differences between the Asset Allocation Model and the Comparison Model. Past performance does not guarantee future performance and there is no guarantee that historical relationships between risk and return will continue to hold in the future.

The information contained in this report is updated regularly; however, the report may not reflect changes recently made to source data or material and the information, data and calculations contained in the report are provided on a commercial efforts basis only. There is no assurance that the data including prices, weightings, ratios, ratings, or recommended securities will remain the same over time. None of RBC Dominion Securities Inc., its affiliates or any other person makes any representations or warranties, express or implied, as to, or accepts any responsibility for, the accuracy, completeness or correctness of this information. RBC Dominion Securities Inc. and its affiliates assume no liability for errors or omissions.


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Data and Report Disclosures (continued)Standard Deviation is a statistical measure of how much variability there is in observed returns. A lower standard deviation indicates that the asset class or asset allocation strategy has been more predictable historically, while a higher standard deviation indicates an increased likelihood of very high or very low returns. Past performance does not guarantee future performance.

Sharpe Ratio is a risk-adjusted performance measure that is calculated as the ratio of the portfolio’s excess return over cash to the standard deviation of returns. A higher value indicates a higher realized return per unit of risk taken within the strategy. Past performance does not guarantee future performance.

Trailing Returns are indicated as relating to a relative period of time (Year To Date/YTD, 1 Month, 1 Year, 3 Year, etc.) and are measured relative to the final date in the analysis period.

Calendar Year Returns are indicated as relating to a specific year (2009, 2010, etc.).

Comparative Indices. Certain graphs show various asset class indices to provide context and the ability to compare the asset allocation model to representative benchmarks. The most appropriate indices to include in the analysis changes with your objectives, preferences, and investment knowledge; and the specific indices used have been selected by your advisor to be appropriate and representative. If you have any questions about the specific indices included, please be sure to discuss them with your Investment Advisor or Portfolio Manager.

Rolling Returns are calculated by computing the holding period returns over a specified window (usually 12 or 36 months) and then moving this window through time over the entire analysis period in order to calculate the range of holding period returns experienced. The best and worst rolling return represents the highest or lowest cumulative 12 or 36 month return that would have resulted from following the asset allocation strategy throughout the analysis period; while the distribution of returns provides an indication of how likely achieving a target rate of return or falling below a minimum rate of return has been in the past. Past performance does not guarantee future performance.

Drawdown is calculated as the maximum loss in portfolio value from a historical high-watermark to a subsequent minimum. The drawdown measures the severity of the loss in portfolio value and extends until the initial portfolio value has been fully recovered. A related concept is the Recovery Period which measures the length of time from when the drawdown begins until the initial portfolio value is fully recovered. Maximum Drawdown represents the largest peak to trough loss that would have resulted over the analysis period while the Longest Recovery Period represents the longest time to recover the portfolio’s high-watermark value. The maximum drawdown and the longest recovery period may occur at different points in time. Both metrics are very useful and intuitive ways of measuring the historical downside risk of the strategy. Past performance does not guarantee future performance.


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Investment Risks

Market Risk Any investment is subject to market fluctuations and thus there can be no assurance that an investment will return its value or that appreciation will occur.

Concentration Risk Where significant percentages of a portfolio are held in a single security or asset class or highly correlated securities, volatility may be very high relative to broader market indices. Concentrations may occur with counterparties (issuer), asset class, issuer, industry, or currency.

Credit risk This risk is typically associated with fixed income instruments, but applies to any instrument where repayment depends on the ability of an entity to settle an obligation. The risk borne is that the issuer may default on their obligation.

Counterparty Risk Conceptually the same as ‘Credit Risk’, but generally used to describe the risk of less direct exposures such as the issuer on a structured product, some Exchange Traded Funds (ETFs), or the entity behind a derivatives contract.

Transparency / Complexity Risk Some products such as hedge funds, structured products, fund of funds, and private equity may not give clients full or real-time transparency on holdings or have complex underlying positions. Investors should take particular care in understanding the structure of these holdings and the nature of the product prior to investing.

Leverage Risk Where lending is either secured by a portfolio or is embedded in a product, investors may be particularly exposed to increased market risk and liquidity risk in adverse markets.

Currency Risk Currency can either directly or indirectly affect an investment. The value of a holding will be directly affected by foreign exchange movements where the investor’s reference currency is different from the investment currency. For investments such as equities, the value of the underlying investment may also be indirectly affected by currency where foreign exchange movements influence the market economy and competitiveness of companies.

Liquidity Risk There are two types of ‘liquidity risk’. Firstly, by design a structure may render funds inaccessible to the investor over certain periods of time as a result of lockups or redemptions leaving the investor open to market risk during these interim periods. Secondly, if market volumes in an investment are low, an investor may be unable to find a buyer or seller to match their position or may only be able to buy or sell at disadvantageous prices.

Political Risk Countries with political instability or where political bodies can exert a strong influence on markets and business practices may be subject to greater volatility. Political risk is present if the potential returns on an investment could be significantly affected by a political entity’s decisions rather than by predominantly economic and market factors. Political risk may include potential for currency controls, expropriation and insufficient legal or regulatory infrastructure.

Rollover Risk Rollover risk is faced by countries and companies when their debt is close to maturity and must be ‘rolled over’ into new debt. If conditions for the issuer have deteriorated since the issue to be refinanced, the costs of the new financing may be considerably higher, or it may not even be possible to find new buyers to provide refinancing for maturing debt.

Inflation Risk Erosion of real capital value relative to its future purchasing power.

The following represents some of the key portfolio risks investors should consider; however, it is not intended to be an exhaustive catalogue of all potential risks, nor is every risk listed necessarily applicable to every investment product or security.


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WINK Calgary presents "Learn to love your money - basics of investing"