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Message from the Chair of the Pension Plan …

RBC CANADIAN RETIREMENT PROGRAM. Message from the Chair of the Pension plan Management Committee As RBC takes action to position ourselves for the future, there will be many contributors to our success, but none more important than you. You are instrumental in helping our clients thrive and communities prosper. And RBC is committed to helping you succeed and reach your full potential. Part of this is planning and saving for your future. The RBC Retirement & Savings Programs have many features that are designed to help you reach your financial goals. The Pension plan Management Committee (PPMC) helps protect the interests of RBC Pension plan members by ensuring that the Pension plans have a strong governance and compliance structure in place. Performance of the Defined Benefit (DB) plan The funded status of the DB plan in Canada remained sound during 2016 despite a volatile market and the impact of lower bond yields on the discount rate used to determine the plan 's liabilities.

Investment Policy vs. Actual Asset Mix Asset Class Allowable Range Based on the SIP&P Strategic Policy Actual Dec 31, 2016 Equity 25% to 55% 38% 39.7%

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Transcription of Message from the Chair of the Pension Plan …

1 RBC CANADIAN RETIREMENT PROGRAM. Message from the Chair of the Pension plan Management Committee As RBC takes action to position ourselves for the future, there will be many contributors to our success, but none more important than you. You are instrumental in helping our clients thrive and communities prosper. And RBC is committed to helping you succeed and reach your full potential. Part of this is planning and saving for your future. The RBC Retirement & Savings Programs have many features that are designed to help you reach your financial goals. The Pension plan Management Committee (PPMC) helps protect the interests of RBC Pension plan members by ensuring that the Pension plans have a strong governance and compliance structure in place. Performance of the Defined Benefit (DB) plan The funded status of the DB plan in Canada remained sound during 2016 despite a volatile market and the impact of lower bond yields on the discount rate used to determine the plan 's liabilities.

2 On a going-concern basis1, the Royal Bank Pension plan , Diversification our largest plan in Canada, was 115% funded as of January 1, is a technique 2017. Measured on a solvency basis2, the Royal Bank Pension plan that reduces risk was 92% funded as of January 1, 2017. by allocating The PPMC monitors the assets of the DB plan , ensuring an investments appropriate level of risk is taken in light of the long-term among a variety nature of the plan 's obligations (the pensions earned by plan of financial members) while looking for compelling long-term investment instruments, returns and opportunities. industries and For the 2016 calendar year, the plan earned an overall return of other categories. , outperforming our benchmark return of The strong By holding a mix performance was attributed to active management of the plan 's of investments, investments. your portfolio Features of the Defined Contribution (DC) plan may be cushioned The DC plan includes many features designed to support plan members with their retirement savings objectives including both against sudden automatic and matching contributions from RBC.

3 Market swings. In addition, RBC aims to provide a set of investment choices under the DC plan that enable plan members to construct and maintain a well-diversified investment portfolio, in addition to providing solutions for those who prefer a more hands-off . investment solution. 1 The going concern funded status is a measure used to determine the plan 's liabilities assuming that both the Royal Bank Pension plan and RBC continue indefinitely into the future. 2. The solvency funded status is another measure that is required by Pension regulators. It determines the funded status of the DB plan under a hypothetical scenario where the plan is terminated immediately and all benefits are paid to members. Assumptions used to determine the funded status are prescribed by legislation. September 2017 | 1. Defined Benefit Pension plan Assets Defined Benefit Pension plan Asset Mix (December 31, 2016).

4 The asset mix policy reflects Cash the plan 's long-term investment 1%. Alternative strategy. As of December 31, 2016, Investments the actual asset mix was within the allowable range of its policy. Equity Fixed Income Investment Policy vs. Actual Asset Mix Asset Class Allowable Range Based strategic Actual on the SIP&P Policy Dec 31, 2016. Equity 25% to 55% 38% Fixed Income 25% to 55% 42% Alternative Investments 5% to 30% 20% Cash & Equivalents 0% to 5% Royal Bank Pension plan Annual Performance Our active management strategy continues to be effective, achieving results above our benchmark in the past five calendar years. In 2016, the DB Pension plan assets earned an annual return of , outperforming our benchmark return of 12% 10% 8% Actual Return 6% Benchmark Return 4%. 2%. 0. 2012 2013 2014 2015 2016. September 2017 | 2. Canadian Pension plan Assets Statement of Changes in Net Assets Available for Benefits Defined Contribution Investments year ended December 31 2016 2015 year ended December 31, 2016 Fair Value % of DC Assets (in thousands of dollars) $ %.

5 (in thousands of dollars) $ $. PH&N Money Market Fund 46,748 PH&N Total Return Bond Fund 17,977 DEFINED CONTRIBUTION FUND. Blackrock Canadian Bond Index Fund 35,436 Net assets at beginning of year 820,192 713,765 Blackrock Balanced Index Fund 64,958 Increase (decrease) in net assets RBC Balanced Fund 94,094 Contributions by the employer 56,346 49,351 Blackrock Cdn Equity Index Fund 74,500 Contributions by members 48,423 41,830 RBC Canadian Equity Fund 123,515 Investment income (loss) 75,030 47,930 Blackrock US Equity Index Fund 155,654 Withdrawals (41,132) (32,684) Blackrock International Equity Index Fund 57,142 Capital Global Equity Fund 93,210 Net assets at end of year 958,859 820,192. Capital International Emerging Markets Opportunity Fund 4,515 DEFINED BENEFIT FUND PH&N LifeTime 2015 Fund 3,038 Net assets at beginning of year 10,783,807 10,403,123 PH&N LifeTime 2020 Fund 10,717 Increase (decrease) in net assets PH&N LifeTime 2025 Fund 18,029 Investment income (loss) PH&N LifeTime 2030 Fund 23,610 Interest Income 134,735 123,616 PH&N LifeTime 2035 Fund 29,736 Dividend Income 121,496 83,273 PH&N LifeTime 2040 Fund 31,006 Income (loss) on derivatives 9,118 (11,522) PH&N LifeTime 2045 Fund 64,012 PH&N LifeTime 2050 Fund 10,962 Other investment income 1,197 2,789.

6 Total investments 958,859 Change in market value of investments 408,124 406,318. Transaction costs (2,425) (2,460). Defined Benefit Investments 672,245 602,014. Counterparty Distribution: Debt Investments Contributions year ended December 31 2016 2015. Contributions by the employer 245,232 190,211 (% of category) (% of category). Contributions by members 49,951 50,491 Government of Canada Provinces and municipalities 295,183 240,702 Corporate and other Benefits and expenses Pension benefits (388,862) (365,729) Geographical Distribution - Equity Investments Termination benefits (75,986) (60,707) Canada Management and other professional fees (36,466) (35,596) United States Europe (excluding UK) (501,314) (462,032) Emerging markets United Kingdom Net assets at end of year 11,249,921 10,783,807. Japan Asia (excluding Japan) Management and Other Professional Fees Sectoral Distribution - Equity Investments (in thousands of dollars) 2016 2015 Financial services $ $ Energy Investment management fees 23,984 23,353 Information technology Professional fees 1,824 1,633 Consumer discretionary Trustee fees 3,521 4,083 Materials Administration fees 6,525 6,041 Industrial Health care Other 612 486.

7 Consumer staples Total 36,466 35,596 Telecommunications Utilities Real estate - September 2017 |3. Pension plan Management Committee Membership Neil Skelding Chair since 2012 is President & CEO of RBC Insurance. Neil has global responsibility for RBC's insurance business which includes a wide range of travel, life, health, home, auto, wealth and reinsurance products and solutions, as well as creditor and business insurance services, for individuals, businesses and groups. Neil joined RBC Insurance in January 2003 and was appointed to his current position in September 2004. As Chair of RBC's Pension plan Management Committee, Neil is responsible for leading a cross-functional team that oversees RBC's primary Pension plans globally. Neil earned an engineering degree from Ryerson University and an MBA from McMaster University with a major in finance. Carol McNamara Secretary since 2015 is Senior Vice President, Compensation & Benefits for RBC.

8 Carol has overall responsibility for compensation and benefit program design and governance ensuring that programs are aligned to RBC's compensation philosophy and principles. Carol also oversees employee relations and Human Resources policy governance. Carol joined RBC in 1989 and held progressively senior roles in the General Counsel Group, including Vice President, Associate General Counsel and Secretary before being appointed to her current position in 2014. Carol received her Bachelor of Arts in political science from the University of Toronto and her law degree from Queen's University. Katherine Gibson PPMC member since November 2016 is Senior Vice President, Finance & Controller for RBC and is responsible for Head Office Finance including all external reporting, accounting policy and finance operational risk. In addition, Katherine is responsible for Wealth Management and Insurance Finance.

9 She is a member of the CFO Operating Committee. Katherine is also the Executive Co- Chair of the Advancement of Women in Leadership committee (AWL) at RBC. Helena Gottschling Chief Human Resources Officer since June 2017 Helena Gottschling is RBC's Chief Human Resources Officer (CHRO) with global responsibility for Human Resources. Together with other members of Group Executive, Helena is responsible for setting the overall strategic direction of RBC. Helena joined RBC in 1985, holding progressively senior roles in Retail Banking, Human Resources and National Office. She re-joined Human Resources in 2006 and held a number of executive roles before being appointed CHRO in 2017. Helena holds a Bachelor of Business Administration degree from Simon Fraser University in Vancouver, British Columbia. September 2017 | 4. Pension plan Management Committee James Salem PPMC member since 2009 is Executive Vice President and Treasurer of Royal Bank of Canada, and is responsible for the enterprise's capital, funding and liquidity management, as well as for asset liability management of the bank.

10 Under Mr. Salem's leadership, RBC's Corporate Treasury executes term funding and capital transactions to optimize the bank's debt and equity structure, in addition to transactions carried out for managing discretionary fixed income portfolios and executing the bank's asset liability management strategies. He has also chaired the Pension plan Investment Sub-Committee since 2009. James has been with RBC since 1989. He is a Chartered Financial Analyst and is a Certified Risk Professional charter member. Martin Thibodeau PPMC member since 2015 is President, Quebec headquarters of RBC Royal Bank and is responsible for carrying out RBC Royal Bank's strategic objectives and for managing business priorities in Quebec. He also oversees the implementation of policies and programs that promote the interests of RBC clients, employees and shareholders. Martin joined RBC in 1989 and has worked primarily in Commercial Financial Services.


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