Royal Bank of Canada (TSX:RY)

AGM 2014

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Feb 26, 2014

Ladies and gentlemen, the meeting is about to start. Please take your seats now. Mesdames et messieurs, l'assemblée est sur le point de commencer. Veuillez prendre vos places maintenant. Good morning, ladies and gentlemen. Mesdames and Messieurs, bonjour. Welcome to our annual meeting of common shareholders. I'm Katie Taylor, Chair of the Board of the Royal Bank of Canada. I'm very pleased that so many of you could join us here in the room today, and I know that we have many more with us on the webcast as well. As notice that the meeting has been duly given and a quorum is present, I now call the meeting to order. Anyone addressing this meeting may speak in English or in French. If you would like a translation headset, please raise your hand, and an attendant will assist you. You will find English on channel 1 and French on channel 2. The meeting will begin with reports from Gord Nixon, our CEO, and Dave McKay, our President, followed by the regular items of business, including the election of directors and the appointment of the auditor. Shareholders will be asked to approve a non-binding advisory resolution on our approach to executive compensation disclosed in the proxy circular. We will then consider the shareholder proposals and deal with any other business, including questions from our shareholders. I draw your attention now to the cautions posted on the screen. At this meeting, we may make forward-looking statements which involve certain assumptions and have inherent risks and uncertainties. Actual results could differ from these statements. As always, we invite and welcome questions and comments from shareholders. Some guidelines are set out in the agenda included in the package you received as you came into the meeting. Please keep your comments brief. In fairness to all shareholders, we ask the presenters limit their remarks to 3 minutes. At the appropriate time, if you would like to ask a question, please proceed to a microphone and give your name, then tell us whether you are a shareholder or a proxy holder. I'd like to take a moment now to introduce the others who are with me here today on the podium. From your left to right, we have Janice Fukakusa, Chief Administrative Officer and Chief Financial Officer, Dave McKay, who today assumed his new role as President of RBC, Gord Nixon, our Chief Executive Officer, and Carol McNamara, Vice President, Associate General Counsel, and Secretary. I will act as Chair of the meeting, Carol will be Secretary. Joe Chirico and Pina Pacifico, officers of our transfer agent, Computershare Trust Company of Canada, will be our scrutineers. Also present are the members of our board and our management team. At this time, I'd also like to introduce the representative of our auditor. From Deloitte, we have Richard Nunn, Mike Lloyd, and Frank Vettese joining us today. Before we proceed with today's business, I'd like to take a few minutes to pay tribute to four of our experienced directors who are retiring from the board today and say a few words about each of them before we thank them all together with our applause. First, Paule Gauthier. Paule is the senior partner of the law firm Stikeman Elliott and serves as a director of Metro Inc., TransCanada Corporation, and TransCanada PipeLines. Paule has served on the RBC board since 1991 and has most recently been a member of our Human Resources and Corporate Governance and Public Policy committees. Next, Jacques Lamarre, who was President and Chief Executive Officer of SNC-Lavalin Group until 2009 and is currently a director of Suncor Energy, PPP Canada, and the Canadian Institute for Advanced Research. Jacques has been a director of RBC since 2003 and was a member of both the Risk and Audit committees. Next, Brandt C. Louie, who is Chairman and Chief Executive Officer of H.Y. Louie, Chairman of London Drugs, Vice Chairman of IGA Canada, and serves as a director for a number of not-for-profit organizations. Mr. Louie was appointed to the RBC board in 2001 and has most recently served on the Audit and Corporate Governance and Public Policy committees. Last, but certainly not least, David O'Brien, who has served with distinction as Chair of the Board from 2004 until December 31 of last year, and as a member of the RBC board since 1996. David was also Chair of the Corporate Governance and Public Policy Committee and a member of the Human Resources Committee. David's record of business achievements is legendary, having served as Chairman and Chief Executive Officer of PanCanadian Energy Corporation, which merged with Alberta Energy to form Encana Corporation, where David served as Chairman and a Director until 2012. David's exemplary leadership has guided this board in its stewardship of RBC through a period of significant reform in financial services, and also a period of global growth for RBC. David leaves an incredible legacy at this organization that he served so well. As shareholders, we owe our retiring directors a debt of gratitude, so please join me now in thanking them for their contributions to RBC's success. I would also like to take a moment to recognize Gord Nixon, who in December announced his intention to retire on August 1st of this year. As a result, this marks Gord's last annual meeting as our CEO. Gord has been widely acknowledged as a national leader for the way he guided RBC to strong earnings growth through the most challenging financial crisis since the Great Depression. Great leaders inspire great performance, and Gord's leadership over the past 13 years as CEO enabled RBC to deliver enviable growth, with record earnings of CAD 8.3 billion last year, market capitalization rising above CAD 100 billion, generating strong returns to shareholders. There is also a deeper story of Gord's leadership that underlies these outstanding financial results. Great leaders listen to their clients. That is because clients are knowledgeable and notice the quality of the service and advice they receive. During Gord's tenure, RBC has continually adapted to the changes in the market and has consistently met the evolving needs of clients, giving them the service that has become the hallmark of RBC. Gord also knew that you cannot have a client focus without an employee focus, because employees have to receive the support they need in order to succeed with clients. Keeping the trust of colleagues and creating a working environment where employees feel engaged guided Gord's thinking. In this constant quest to build trust, leaders cannot manage on the power of position, only on the power of example, and Gord, you truly lead by example. You promote a culture where engaged employees are not only leaders at work, but also in their communities, where they volunteer their time and resources, helping the people who need it most. So where we can easily measure RBC's strong business performance during Gord's time as our CEO, we also see an organization whose people care about making a positive social and environmental change. I would like all of you to join me in thanking Gord for his outstanding leadership, his energy, his passion, and his lasting contribution to RBC. Of course, another important job of any successful CEO is to develop robust succession plans. Under Gord's leadership, RBC's senior management ranks have grown deep and broad, and the board's selection of Dave McKay as the next CEO shows that RBC will continue moving forward, growing as an exemplary franchise while maintaining sound risk management. The board is very confident in Dave's leadership, given his years of experience driving strong financial performance and demonstrating commitment to clients, shareholders, employees, and communities. At this point in the program, I am going to call on Gord, followed by Dave to address the meeting. Thank you very much, Katie Taylor, for those kind words. Thank you to all of you for joining us this morning. I, too, would like to welcome all of you to our 2014 Annual General Meeting. I am honored to formally report on our performance in 2013 and our first quarter of 2014, and to provide a few retrospective comments on RBC and our outlook for the future. One of the things that I have learned early in my tenure was that RBC has enduring strengths. They have driven our past success, and they are exactly what positions us so well to navigate the constant change ahead. Our strengths include our focus on clients, taking a long-term view, as well as our values and culture. Another strength is our strategy, which leverages our competitive advantages and capabilities to deliver high-quality, sustainable, and profitable earnings growth. This means pursuing not just growth, but profitable growth, and we do so with three strategic goals. First, we are committed to remaining the undisputed leader in financial services right here in Canada. Second, we are focused on being a leading global provider of capital markets, investor, and wealth management solutions. Third, in targeted markets, we will provide select financial services complementary to our core strengths. We have a diversified business model that expands our ability to benefit from economic and business opportunity. It also minimizes our exposure to risk in any one area, and therefore reduces earnings volatility. Our diversification extends across businesses, across geographies and client segments, all of which helps us achieve our goals. I am going to briefly review last year's results as well as RBC's first quarter. In 2013, our employees delivered record net income of CAD 8.3 billion, up 11% from last year, and generated return on equity of 19.7%, with earnings per share of CAD 5.49. We achieved all of our financial performance objectives, and we continued to deliver growth, industry-leading efficiency, consistent profitability, and strong long-term returns for our shareholders. Our results were driven by record earnings in our personal and commercial banking, our wealth management, and our capital markets businesses, as well as higher earnings in investor and treasury services, and solid earnings in insurance. All in all, 2013 was a strong year. We are off to a good start in 2014. I am pleased to announce that in the first quarter of 2014, we delivered net income of CAD 2.1 billion, net income of CAD 2.2 billion if you exclude the previously announced loss on sale of RBC Jamaica and the provisions we incurred in our Caribbean operations. This is up CAD 137 million or 7% from last year. Our results were driven by continued strength in Canadian banking and higher earnings in capital markets, wealth management, and investor and treasury services. With our results this quarter, we remain confident in our ability to meet our objectives. I am pleased to announce an increase in our dividend of CAD 0.04 a share or 6%. Our growth across businesses and geography demonstrates the strength of our segments. Our strength in Canada continues to grow, while the largest markets we have targeted globally are delivering strong results. A good example is the U.S., where we have earned about $1.3 billion in 2013. As a result of our consistent growth, we have a strong capital position. One of the questions that I am often asked by investors is how will we deploy that capital. I believe capital allocation is one of the most important decisions made by both management and the board, as it is easy to invest capital, but it is much more difficult to generate strong risk-adjusted returns. Our answer to that question is consistent. We take a prudent and a balanced approach. Our priorities are first investing in our existing businesses because we have a proven track record of generating strong returns. Second, returning to capital to our shareholders through dividends and share buybacks. Third, making targeted acquisitions that fit our strategy and risk appetite, and importantly, deliver strong returns for our shareholders. In some cases, this may mean selling or exiting businesses that do not meet our hurdle rates of return, as was the case this year with our operations in RBC Jamaica. This year, in addition to investing in all of our businesses, we raised our dividend twice for a combined increase of 12%. We repurchased shares during the year, renewed our share buyback program for 2014, and we invested in new businesses, which included the $3.7 billion acquisition of the Canadian Auto Finance business of Ally Financial. A good business strategy includes provisions for adapting to regulatory change because that is part of doing business. Basel III and Volcker represent significant change, as do pending reforms to the settlement of over-the-counter derivatives and new rules around capital, liquidity, and leverage. The fact of the matter is that regulatory change is a constant, and an evolving regulatory environment is part of being a financial institution. New regulations are costly, but we are very well positioned to adapt and have the capacity and flexibility to absorb many of these changes, and frankly, much better than our global competitors. Across the organization, we stay true to our core values and beliefs, which helps us take a longer-term view of our businesses. Our employees believe in our vision and our focus of delivering strong, stable returns for shareholders. This helps avoid overreacting to short-term challenges, which often call for short-term solutions. We believe we have achieved great success without necessarily looking to hit home runs at every turn. Instead, we are selective about the opportunities we pursue because we are focused on delivering steady annual growth over a long term. It is very easy for banks to grow assets, but we should be, and we are in the business of building businesses and growing our franchises. The recent acquisition of Ally Canada is a good example of this approach. It was a manageable size, the timing was good, and it fills a niche for us in what we believe is a high-growth area. Now that it is fully integrated, the business adds scale and extends our leadership position in the auto finance sector. Having a good strategy and client focus are vital, but unless you have great people, you can't deliver on that strategy. Banking is a people business, and there's no question that our employees are RBC's greatest asset. My role as CEO has given me the opportunity to meet and work with so many great people. They come from a broad variety of backgrounds and with a diverse range of experiences. RBC is an employer of choice because we attract and keep top-notch talent, and people stay with us because the opportunities we create for them to advance their careers and do meaningful work. Part of that success is due to the progress we've made evolving from diversity to inclusion, which I strongly believe plays a central role in driving productivity, innovation, and growth. Embedding diversity in what we do allows RBC to better reflect the clients and communities we serve and also drives employee engagement, which is critical to our continued success. It is both the right thing and the smart thing to do, and we have been building an inclusive work environment where employees feel valued and encouraged to achieve their full potential. We also have the privilege of serving over 16 million clients around the world, and we certainly don't take their business for granted. We appreciate their business, and we are going to work very hard to keep it. RBC plays an important role in helping people either start their own business or run a business. We provide them with expert advice and capital to expand and create jobs. As the needs of our clients are consistently evolving, we are always looking for ways to innovate and deliver insightful advice and a positive client experience. It has also been an honor for me to serve you, our shareholders, over the past 13 years. Your capital has enabled us to build a strong and growing RBC, and your support has contributed to Canada's economic health and prosperity. I've been asked a lot lately what I will miss the most when I step down. While there is much, none is greater than my fellow RBC employees across multiple businesses in more than 40 countries around the world. Their dedication to the organization and to our clients is without peer. But it's more than that. We have seen RBC employees give of themselves to the communities where they live and work, whether that's in Alberta, where RBCers gave countless hours cleaning out their neighbors' basements after the floods last summer, or the more than 18,000 employees in 22 countries who participated in activities like planting trees as part of our Blue Water Project last year, or the countless among us who are community volunteers, hockey coaches, and supporters of various causes. Time and time again, the RBC community has proven it is just that, a community. The expectations of our employees have also risen at a time where we are increasingly competing for talent. In some respects, employees are like clients with more choices now than ever before. And what are they looking for? An employer that cares about the same things they do, which is why our core values of service, teamwork, responsibility, diversity, and integrity are so important. And it's not just those words, but it is how we bring them to life. Employees also expect a commitment to social good, and they push us as an organization, which is a good thing. They want us to use our resources to bring positive environmental and social change. Good example is our RBC Believe in Kids Pledge, a five-year, $100 million commitment, which is intended to improve the emotional, physical, and intellectual health of one million children and youth. The RBC Career Launch program is part of that commitment. It helps young Canadians attain experience in that crucial first job to help them as they begin their working lives. Our RBC Blue Water Project is another multi-year commitment that is helping provide access to drinkable, swimmable, fishable water now and for future generations. Our passion to drive positive change energizes our leadership team, our employees, our clients, and the communities in which we serve. Our support also extends to the arts and to sports. When people are active and healthy, they are more likely to contribute to their communities, both socially and economically. By undertaking these kinds of initiatives, RBC is helping build stronger and more prosperous communities in Canada and around the world. I am extremely proud of the role that organizations like RBC play in Canada's success, and it is important to emphasize that value, particularly in the face of today's public skepticism. The reputation of the business community, and particularly large corporations, is constantly under scrutiny, often maligned and criticized, and sometimes without regard to facts. While transparency is a good thing, social media, sensationalized news coverage, and political opportunism can create a challenging environment. I recognize that businesses are not and never will be perfect, and the financial industry, particularly in the U.S. and Europe, has much to answer for. We have made mistakes which we should be held to account, and certainly at RBC, we place a great deal of emphasis on resolving problems and issues in a fair and equitable manner. I also know that we, our competitors in the financial industry, and many large corporations across this country and all industries create value for society, help formulate public policy, and frankly, lead on issues like human rights, diversity, the environment, and community engagement. If you ask the public what they think of banks, you may not get the answer we like. But if you ask our clients what they think of our bank or their banker, you get a wonderfully positive response. The communities that we serve and the organizations we support enjoy excellent and beneficial relationships with us. In addition, in Canada, the banks alone contribute about 3% to Canada's GDP and account for a significant portion of all corporate taxes. The profits and returns we generate for our shareholders help drive economic prosperity and support wealth creation and retirement planning for many Canadians. We have close to 60,000 employees in Canada and 20,000 elsewhere in the world. We're a top employer and make employee engagement and satisfaction a high priority. We take our responsibility to society very seriously. We support many initiatives that improve our communities and support the growth and development of our clients. The point is that Canada will only thrive if it has strong corporations and strong industries that are profitable, that grow, that invest, that create employment, and that foster other businesses and other industries. I'm proud to be part of one of those organizations that helps make the greatest country in the world even stronger. Strong, profitable, and socially responsible corporations should unite Canadians and not divide them. Now, these last few weeks, we have had the Olympic Games, which also united Canadians, as we have cheered for our teams and followed the stories of the athletes who worked so hard to compete for our country. We are proud that RBC is the longest-standing corporate sponsor of the Canadian Olympic Team, having supported our team since 1947. Today, we are honored to support 47 RBC Olympians across our organizations in their dreams to win gold and own the podium. Now, we have a few of our RBC Olympians here today, and I am going to ask each of them to stand as I read their names and accomplishments out loud. I will ask you to hold your applause to the end. First, we have Bryan Price, who is now retired, he is working hard for us, who rowed to gold in 2008 and rowed to silver in 2012. Heather Hamilton, whose sport is pole vault and was the gold medal winner at the 2013 Canadian National Championships, and we look forward to seeing Heather in Rio. Becky Kellar-Duke, I am not sure if she is here, but is now retired from ice hockey, and she won gold in 2002, 2006, and 2010. How great were our women this year again in 2014, not only winning gold but inspiring the men at the same time. We have Jason Burnett, who won silver in trampoline in 2008, and again, we look forward to seeing Jason in Rio. Finally, Cody Sorensen, who just returned from Sochi where he competed in the four-man bobsled. I am sure most of you saw it. Yes, he was in the bobsled that flipped over, and it is great to have Cody here, healthy and smiling. Congratulations. They will all be around, and I encourage you to meet them after the meeting. Now, before I conclude, I want to take a moment to congratulate Dave McKay on his appointment effective today as President and as CEO on the 1st of August. I believe our executive team has never been stronger, and I am proud of our succession process. I am confident that Dave's outstanding leadership and financial services experience will continue to drive RBC's industry leadership and growth. Dave stands out for his client focus. He is recognized as one of the best retail bankers in the world, and he is passionate about driving innovation. He cares deeply about people and is committed to creating a workplace where employees can succeed. Dave is a value-based leader who embodies what we care about, and I look forward to working with Dave and my colleagues on group executive during our transition period over the next few months. I would also like to thank our Board of Directors, which is widely recognized as a leader in good governance. Our Board has helped guide RBC to continued success and has been a tremendous resource to me personally, as well as to the organization. In particular, I would like to thank David O'Brien, who stepped down as Chairman on December 31st and officially retires today from the Board. David has maintained a focus on serving our shareholders and managing risk and has established RBC as a leader in corporate governance. There is no question we are a stronger organization as a result of David's commitment. Thank you, David. I would also like to thank and congratulate Katie Taylor on her appointment as Chair to the Board. Katie has been an outstanding Director since 2001 and has served on our audit, our risk, and human resources committee. All of us are particularly proud to have the first woman Chair of a major bank in Canada. Although I can assure you her appointment has nothing to do with gender. Under Katie's leadership, I am confident that the Board will continue to focus on creating long-term value for our shareholders and for our customers. Congratulations, Katie. Thank you to our 79,000 employees who embody our values and brand in all that they do. And thank you most of all to my senior management team for your support over the years. If there's one thing I believe even more strongly today than when I became CEO, it is that responsibility is distributed and success is shared. Any success I have enjoyed is in large part due to the remarkable executives who run our businesses and our functional areas. I can't tell you what an honor and a privilege it has been for me to have represented this remarkable organization over the past 13 years. I'm leaving with the confidence that we have the right strategy, the right culture, and the right people, most importantly, in place to continue to grow and create value. I look forward to being a shareholder, a client, and a cheerleader for many years to come. Thank you very much now, and I'd now like to turn the podium over to our President, Dave McKay, for a few comments. Thank you. Thank you, Gord, for those kind words. As I assume the role of President, I've been thinking about what made RBC so successful under your leadership. You've been at the helm during a time of great change, and that pace of change will continue and even accelerate. There are a few key factors that help a leading company like RBC adapt and succeed. One of those key factors is our relationship with clients. For me, it's an obvious starting point because I've seen firsthand how Gord always puts the client first. When Gord became CEO, he determined we were not as client-focused as we needed to be. He acted immediately and made always earning the right to be our client's first choice the core of our business strategy. This is especially important because the financial services business has always been, at its heart, a relationship business. These client relationships are built on trust that has deepened over time. Our brand strength lies in trust, expertise, strength, and stability, as well as corporate citizenship. They have helped us build broader, deeper, and more profitable relationships with clients than our competitors have been able to do. We can see the positive impacts of these deep relationships really across all our business segments. For instance, our Investor and Treasury Services segment has more than 40% market share in custody assets in Canada. In Canadian banking, putting the client first has resulted in being number one or two in every single line of business. We lead the industry with close to 22% of our clients having at least three key products or services with us, checking, investments, and lending, compared to the peer average of 14%. It's why we continue to lead, gaining market share, growing volumes at a premium to the market. In wealth management, we remain the Canadian leader in long-term fund sales, capturing almost 18% of the market in 2013. In Capital Markets, we led the Canadian league tables in 2013 in almost every major category, including M&A, debt capital markets, equity capital markets, and loan syndication. This broad-based success is due to the unparalleled value for money we deliver to clients, the high quality of advice we provide, and the convenience of our service. Traditionally, our client relationships have been built through face-to-face contact. Today, technology is changing client needs and preferences, including how they choose to do business with us. Clients interact with us through multiple channels on a daily basis, from the branch and telephone to online and mobile. These changes offer an unprecedented opportunity to understand client preferences more deeply and to build more relevant services and products for them. At the same time, it's becoming increasingly difficult to get their attention and to spend the time necessary to build deeper relationships. If we want to build on our capability for helping clients by providing relevant advice and services, we need to adapt, changing the way we listen to clients and interact with them in a multi-channel digital world. One of the first ways we are adapting is by digitizing and simplifying our business model. We've invested in automating many of our core processes, most recently through the deployment of our new mortgage system known as Lynx. This new state-of-the-art system provides a much better client experience because it simplifies and automates the end-to-end mortgage process. It also reduces sales force time and effort and eliminates errors. The new electronic signature technology also enhances the client experience in our investments business while saving employees time and effort. We have eliminated the production and transportation of over 42 million pages annually, helping our environment and saving costs at the same time. These investments will help us build the client insights and relationship capabilities that leading retailers such as Amazon have established so successfully. This is the type of work required to build deep client relationships in a digital age. Our digital presence leads the industry. For seven straight years, we've earned a number one ranking for our secure banking website. We've also invested heavily in our financial planning tools, as well as our new model for the branch of the future. These award-winning retail stores leverage new technology to assist client discovery while providing a bricks and mortar presence that helps build in-person relationships. Employees in all our businesses put clients first. For example, Capital Markets employees discovered trading practices where the market could take advantage of our clients. They found that in the time it took a trade to leave RBC and arrive at any number of different exchanges, a high-speed firm could spot the trade and intervene to create an arbitrage opportunity against our client. RBC countered this arbitrage with the invention of a smart order router and algorithms we call THOR, which was approved for a patent last summer. Our clients depend on RBC as their broker to develop solutions and strategies that level the playing field on their behalf. THOR protects our clients from predatory trading strategies and reduces the cost of executing trades. The story of THOR shows how our employees really make a difference for clients. They work together to produce results, and that brings me to the second important factor that helps grow a successful leading company, the way our employees collaborate. We excel at collaboration, both inside and outside the organization. Internally, collaboration's really the secret sauce of our success, or how we get the caramel inside the Caramilk bar. It's part of the way we do business every single day. We have aligned our organizational structure, technology infrastructure, our distribution channels, and the way we reward employees, all to enable collaboration. Time and time again, we see employees from one business segment reach out to colleagues from another to help clients achieve their goals. We also collaborate externally to provide innovative solutions. An example is the RBC Wallet, our mobile payment solution. The RBC Mobile clients can now buy goods and services from merchants with either their debit or Visa credit cards using their Bell Mobility Android smartphone. We won't stop there. Eventually, RBC Wallet will work on all phones, carriers, and all forms of payment. This type of open and welcome collaboration leads to innovation. Innovation in emerging payment and mobile technologies, which I just mentioned, will reshape banking, commerce, and retail industries significantly, as much as ATMs and online banking did historically. The patent-pending RBC Secure Cloud will support the new RBC Wallet. It provides our clients with added simplicity, convenience, and choice, so they can do their banking where, when, and with whom they want. It gives added security and protection by storing payment information with a bank virtually instead of residing on the mobile device itself. This is the kind of simple, fast, and secure experience that we believe an overwhelming majority of our clients want. Building on this infrastructure, we united the popular person-to-person electronic money transfer solution, Interac e-Transfer, with the world's most popular social networking platform, Facebook. We've also been innovative in the way we sell insurance and going directly to consumers more than ever. This approach improves distribution efficiency and deepens client relationships because it's easier for clients to do business with us. Clearly, RBC is a leader in business and in client service, and leadership is the final key factor I'll discuss today. We are a leader as an employer, offering careers that provide personal success for our employees. When our employees win, our clients also win, as they are better served, and in the end, we win as an organization. Through our investments in corporate citizenship and donations, we are a leader in our communities. While we have momentum, we know clients have choices. Because of that, we need to listen to them even more carefully. History has shown that there can be a danger when leaders get complacent and take success for granted. RBC does not and will not belong to that group. If we did, we would not be leaders for long. We know we hold a privileged position, and we will work hard to keep it. That means never resting on our laurels and never being complacent. We will never stop listening and responding to our clients. We will do the right thing, and we will take the long view. When you do these things the right way, good business results will take care of themselves. In order for clients to continue to rely on us for the best advice, we need to be recognized as a thought leader. We need to invest to make sure we have the best people and to ensure the best people want to come to work at RBC and enjoy rewarding careers with us. There's no question that a collaborative working environment is essential to employee engagement, and it helps employees provide the best possible service to clients. Over the years, I've seen how Gord puts clients first. He takes a collaborative approach. He's a great listener. When I walk down the hall to his office and talk about something new and innovative, he always asks thoughtful questions. We have all learned a lot from Gord, and I am personally grateful for it. For me, it's a great privilege to be asked to lead RBC. I am both humbled and excited by it. This is a great company, one that has a strong history in Canada and is expanding its reach around the world. I'm looking forward to working with the senior management team and employees across the bank to build on our success. RBC is positioned for continued growth, and we have the right diversified business mix, the right strategy, and the right people. We are a leader in what we do and in supporting our communities, and we will build on our leadership by focusing on clients through collaboration and by bringing innovative solutions to the market. Thank you. I now turn the meeting over to Katie Taylor. Thank you, Dave, and thank you, Gord. Now we will proceed to the next item on our agenda. Copies of the auditor's report and the financial statements have been mailed to shareholders and are also available at the information desk. Shareholders will now have an opportunity to ask questions on the 2013 financial statements. If your questions relate to another matter, I'd ask that you wait until the time provided for shareholder questions following the formal business of the meeting. As we open the microphones, I'd like to extend a very special welcome this morning to the students from Emery Collegiate in North York and their teacher, Corinne Thompson. This is the third RBC annual meeting that Corrine has attended with her Emery students. Corrine is a former RBC employee, and we're pleased to have grade 11 and 12 students from Emery's financial and accounting classes joining us today to see how their coursework is applied in the real world. One of Canada's greatest resources is our youth. Your talent, ambition, and energy will drive our country's long-term prosperity, and RBC is passionate about investing in your future. Welcome, and thank you for coming. Now, if you have a question on the 2013 financial statements, please proceed to the nearest microphone. It does not appear that we have any questions on the financial statements. As there are no questions on that matter, we'll now proceed with the next item of business on the agenda. You have received the notice of meeting and proxy circular, which specify the matters to be considered at this meeting. I'm now going to ask Carol to review the voting procedures. Carol? Good morning. Today we will be voting by ballot, except as otherwise advised by the Chair. Registered shareholders who have not sent in proxies and proxy holders who are present have received ballots at the registration desk. Please print your name clearly and sign each ballot. Votes will be tabulated by the scrutineers, and the results will be announced later this morning and posted on our website. Only registered shareholders or their proxy holders are entitled to propose or second motions. A simple majority of the votes cast by proxy or in person is required to approve matters voted on at this meeting. Thank you, Carol. To facilitate our proceedings, we've asked a select group of RBC employees who are shareholders or proxy holders to move and second motions. I will call on them at the appropriate time. The first item of business is the election of directors. The number of directors to be elected has been fixed by the board at 14. One of the nominees is standing for election for the first time. Tom Renyi joined our board last August, bringing valuable experience from a career of close to 40 years in the financial services industry. Most recently, he was Chairman of the Bank of New York Mellon. Prior to that, Tom was Chairman and Chief Executive Officer of that bank for 10 years, having served in progressively more senior leadership roles in that organization in credit policy, security services, capital markets, and banking. We are pleased to welcome Tom, along with the other directors who have joined us over the past few years as part of our focus on board renewal in anticipation of our planned retirements. Our new members add to the financial industry experience, risk experience, and international perspective already represented on the board. Biographies of each of the nominees begin on page 5 in the circular. I'll now ask Carol to read the names of those proposed for election as directors, and I would ask them to stand and remain standing as the names are called. Madam Chair, the following individuals are proposed for election as directors: W. Geoffrey Beattie, David F. Denison, Richard L. George, Timothy J. Hearn, Alice D. Laberge, Michael H. McCain, Heather Munroe-Blum, Gord Nixon, J. Pedro Reinhard, Tom Renyi, Edward Sonshine, Kathleen Taylor, Bridget A. van Kralingen, and Vic L. Young. Thank you, Carol. I'll now ask Naeem Mirza and Chinyere Eni to nominate the directors. Madam Chair, thank you. My name is Naeem Mirza. I work for RBC for nine years and currently Director of Finance and Capital Analytics in the RBC head office performance management groups supporting capital analytics and Investor and Treasury Services business. I'm pleased to nominate each of the persons named by the Secretary of the bank to be elected as a director of the bank to hold office until the close of the next annual meeting of common shareholders or until their successors are elected or appointed. Madam Chair, my name is Chinyere Eni. I've been with RBC for 15 years, and I'm currently National Director of Aboriginal and Public Sector Markets. I second the nominations. The nominations have been made and seconded. Are there any other nominations? I'll now ask Matthew Arnold and Rana Khalife to make a motion to close the nominations. Madam Chair, my name is Matthew Arnold. I have been with RBC for six years and am currently Senior Counsel in the RBC Law Group. I move that the nominations be closed and that each of the persons nominated be elected a director of the bank to hold office until the close of the next annual meeting of common shareholders or until their successors are elected or appointed. Madam Chair, my name is Rana Khalife. I have worked with RBC for over 16 years, and I'm currently Director of Global Credit in Capital Markets. I second the motion. Thank you. The motion has been made and seconded. Is there any discussion on the motion? We'll now proceed with the vote. On ballot A, please mark your vote on the election of directors. I would ask that you keep your ballots until after the motion to approve the advisory resolution on our approach to executive compensation. At that time, our scrutineers will collect the ballots for both the election of the directors and the appointment of the auditor. The next item on the agenda is the appointment of the auditor. I'll now ask John Wu and Rajan Bansi to make a motion for the appointment of the auditor. Madam Chair, my name is John Wu, and I have worked with RBC for four years, and I am currently Senior Manager of Enterprise Architecture in the Technology and Operations Group. I move that Deloitte LLP be appointed auditor of the bank until the close of the next annual meeting of common shareholders. Madam Chair, my name is Rajan Bansi. I have worked with RBC for nine years, and I am currently Head of Fixed Income Strategies for RBC Wealth Management. I second the motion. Thank you. The motion has been moved and seconded. Is there any discussion on this motion? Questions. I think we have a question at microphone number five. Right. Okay. I have the highest respects for Deloitte. I think they are great auditors. I just got one first question to begin with. For how many years has Deloitte audited the bank? Could everybody hear the question? How many years has Deloitte been the auditor of the bank? Deloitte has served the Royal Bank for very many years. First, in the early years, as a panel of auditors. in 2003, the bank moved to a single auditor when that was permitted and conducted an RFP at that time. Deloitte was selected from the group of auditors who were reviewed for the appointment in 2003 and have served in that capacity as RBC's sole auditor since that time. For how many years were they in the group? For how many years were they in the group? Janice, can you help me with the historical date? They started auditing us approximately 80 years ago with the group of other auditors. Good. For 80 years, you have the same auditor, and we have heard the real disaster with Arthur Andersen, who were totally blindsided by the bankruptcy in Enron, and they had been the auditors for them for a number of years. There afterwards, most large corporations make changes of auditors every five years or so. Therefore, even two years ago, we had pointed out to you that isn't there a time for a change so that each auditor looks at the books of accounts from a different perspective, and so that neither they or you are blindsided? This is a very important aspect of it. Would you just consider that, if not now, at a future date? Indeed. The supervisory elements of the audit are extremely important, not only to shareholders but, of course, to the board as it discharges its duties. The effectiveness of the auditor is of critical importance. Auditor rotation, as you point out, has received quite a lot of attention over the past number of years. Our focus in Canada, as you've probably been following, both in the agencies that oversee auditors but also in corporations, is really to focus on auditor effectiveness. I can assure you that the audit committee, under the leadership of Mr. Vic Young, is extremely focused on ensuring the effectiveness of Deloitte's oversight of RBC. Right. But yes, sir, we will take your comments into account and continue to consider those. Sure. I have the highest respects both for the Royal Bank and Deloitte. This is just to give a different perspective to the examination of your books. Thank you very much. Are there any other questions on this motion? Then we'll now proceed with the vote. On ballot A, please mark your vote on the appointment of the auditor. The next item of business on the agenda is the shareholder advisory vote on our approach to executive compensation. We have in place a policy to hold an advisory vote on compensation at each annual meeting. We hope you've had a chance to review our compensation discussion analysis in this year's proxy circular, which explains in detail how our compensation programs are designed to pay for performance and are aligned with effective risk management practices and the long-term interests of our shareholders. We take a progressive approach to continuously improving our compensation programs, integrating best practices, and responding to input from shareholders and our independent compensation advisor. In considering our approach to compensation in the future, the board will take into account the results of the vote, together with other feedback received from shareholders. I will now ask Laura Fisher and Lori Darlington to make a motion to approve this resolution. Madam Chair, my name is Laura Fisher, and I have worked for RBC for over 22 years, and I'm currently head of the RBC Insurance Advice Center. I move on an advisory basis and not to diminish the roles and responsibilities of the board of directors, that the shareholders accept the approach to the executive compensation disclosed in the management proxy delivered in advance of the annual meeting of common shareholders. Madam Chair, my name is Lori Darlington. I have worked with RBC for over 10 years, and I'm currently director of cards transformation in personal and commercial banking, and I second the motion. Thank you. The motion has been moved and seconded. Is there any discussion? Hearing none, we will. Oh, I am sorry. Excuse me. Yes. Microphone number 4. Thank you. [Foreign language] Daniel Thouin. [Foreign language] Mouvement d'éducation et de défense des actionnaires. Excuse me for my French, but it is the best language I use everywhere. [Foreign language] Banque Royale, [Foreign language] [Foreign language] Je veux juste vous dire qu'actuellement, votre politique salariale est encore loin des objectifs que le MÉDAC défend depuis bientôt 17 ans, à savoir qu'il n'y a pas de ratio d'équité dans votre politique qui puisse permettre de faire un comparable entre le salaire des hauts dirigeants et le salaire moyen donné à vos employés dans la banque. C'est une des revendications que l'on a faites depuis plusieurs années et c'est une des propositions qu'actuellement une loi américaine est en train de compléter, la loi justement qui vise à compléter le ratio d'équité des employés. Deuxième des choses, vous avez encore des options d'achat d'actions dans votre politique et vous allez avoir tantôt une proposition à voter sur justement cet élément de la politique salariale de la banque. [Foreign language] Donc j'invite les gens qui, par souci d'équité et par souci plus simplement de rendre justice aux employés qui travaillent dans cette banque et dans les autres banques, à demander qu'un ratio d'équité de salaire soit décrété comme un des éléments majeurs de la politique et qu'on puisse s'en inspirer pour établir dans le futur des politiques salariales auprès des banques canadiennes. Madame la Présidente, merci de votre attention. Thank you for your comments. You may have seen as it relates to the issue of vertical comparisons that the bank did participate this year with other Canadian banks in a study that was commissioned with Meridian to take a view of the effects of horizontal benchmarking on compensation levels and the impact of vertical benchmarking on that. It gave us a great opportunity at RBC to review our approach to compensation once again with an external consultant. The results of their report are published on their website. As you say, vertical compensation ratios are something that are being talked about in a number of places for all the reasons that people have discussed. We look at those at the Human Resources Committee, and they are one touch point of the things that the board looks at under its broad principles of approach to compensation, which are focused on ensuring that the bank pays for performance and is able, as you heard Mr. McKay and Mr. Nixon comment on, continue to attract and retain the highest quality of people to serve the interests of our clients and therefore of our shareholders over the long term. Are there any other questions or comments? Seeing none, we will now proceed with the vote. On ballot A, please mark your vote on our approach to executive compensation. I would now ask the scrutineers to collect the ballots. If you have additional ballots to be collected, please raise your hand. Thank you very much. The voting is now closed for the election of directors, the appointment of the auditor, and the advisory resolution on our approach to executive compensation. Next on the agenda are the shareholder proposals. As we indicate on page 80 of the circular, NEI Investments withdrew a shareholder proposal that it co-filed with William Davis and the United Church of Canada. NEI is represented here today by Michelle De Cordova, who will now briefly comment on the issues raised in that proposal. Ms. De Cordova. Thank you, Madam Chair. I would like to thank you for giving me the opportunity to speak on this withdrawn proposal, which, as you say, was co-filed by NEI Investments, which holds 361,500 shares in RBC, and also by Mr. William Davis and the United Church of Canada. In this proposal, we asked the board to report to shareholders on the results and the risks of basing the quantum of senior executive compensation largely on horizontal comparisons with compensation at peer companies, and also to consider the potential to integrate some vertical compensation metrics into compensation decision-making. This proposal was withdrawn when RBC agreed to report back to shareholders. As Katie described, research was conducted. The proxy circular describes that research and explains that the compensation committee was indeed provided with select vertical pay ratios to provide context during its deliberations. We think this is important. When RBC adopts a governance practice, other companies take notice. We know from our conversations with other companies that they have already taken notice so far what RBC has done. We would really like to thank the company for considering that proposal and taking a lead on this issue. We do still see potential for further disclosure by RBC on the relationship of the pay of executives and other bank employees and trends in that relationship. We do still think there is value in exploring issues related to the quantum of executive compensation that were mentioned in the supporting statement to that proposal, but not necessarily covered in last year's research. Those issues would be whether high levels of executive compensation are actually wholly what motivate really great executives to give their best for the company. I think from some of the things we have been hearing today, that motivation is a lot more complicated than just pay. Also further research into what possible impacts might be of pay disparity on the motivation and productivity across companies. Finally, what the relationship might be between executive compensation and the question of income inequality, and the threat of the hollowing out of the middle class, which has become a focus of public debate. We think it is an important social issue, but also something very important for companies, because companies can't prosper if their customers are not prospering. Perhaps there is a role for some vertical comparisons with perhaps wider social metrics here. Obviously, high pay is not the only factor in income inequality, but it is one that we shareholders actually have some kind of a say on. So, just in conclusion, we would like to thank RBC once again for its really positive response to the proposal and for taking a lead in exploring the equitable compensation issue. And we are very much looking forward to further discussions on this issue. Thank you very much for your comments. RBC, of course, will continue to engage with NEI and our other shareholders on these and other important governance issues in the months and years ahead. We will now move on to the five shareholder proposals submitted by Mouvement d'éducation et de défense des actionnaires, which is represented here today by Mr. Daniel Thouin. Mr. Thouin, shareholders have had an opportunity to read the proposals and the board's responses and voting recommendations, which are set out in the proxy circular starting on page 76. Mr. Thouin, I would ask that you take 15 minutes to speak to the merits of all of your proposals, and we will then open the floor for discussion. Shareholders may wish to vote on these proposals by marking ballot B as they are presented. We will then collect the ballots following the discussion of all five of these proposals. Mr. Thouin, the floor is now yours. Madam President, thank you. Just a little summary to indicate how MÉDAC has contributed so far to promote and implement good governance policies throughout Canada, particularly in publicly listed companies. I mention, among other things, the separation of powers between CEOs. [Foreign language] C'est une de nos propositions initiales, qu'il y ait plus de femmes au conseil d'administration des sociétés cotées en bourse. Vous en avez une preuve ce soir et la Banque Laurentienne a fait de même aussi en nommant une femme à sa présidence. Le vote consultatif sur la politique salariale, c'est une de nos propositions qui a été votée en 2009 et dont encore aujourd'hui, on vient de prendre connaissance. Maintenant, la proposition sur le ratio d'équité, ce n'est pas encore fait. Les Américains vont le faire avant nous, malheureusement, et par la suite, il va falloir se rallier. Donc, on précise encore cette proposition. Enfin, l'année passée, on parlait des fonds de retraite et je pense que vous avez fait un geste exceptionnel, d'où notre retrait d'une proposition à ce sujet. Le fonds de retraite de la banque cette année est beaucoup mieux en santé, beaucoup plus en santé qu'il l'était l'année passée. J'en félicite la banque qui pourrait s'en réjouir d'une façon un peu plus encore positive que vous l'avez fait jusqu'à maintenant. La première proposition que l'on vous soumet aujourd'hui, c'est une proposition qui vise à éliminer complètement les options d'achat d'actions comme source de rémunération pour les dirigeants de la banque. Pas les éliminer immédiatement, mais les éliminer dans le temps, progressivement. Voici les arguments sur lesquels cette proposition-là puisse être appuyée. Une étude des HEC et de l'UQAM Montréal, qui porte sur la période 1998 à 2008, a démontré clairement que 90% de l'évolution de la cote boursière des cinq grandes banques canadiennes s'explique par des caractéristiques de secteur bancaire, comme le taux d'intérêt faible et un contexte socio-économique favorable. En d'autres mots, au cours de cette décennie, soit 10 ans, moins de 10% des différences dans la performance boursière de ces banques peuvent être expliquées par des facteurs propres à chacune d'elles, dont les décisions des initiatives des PDG en place, mais aussi par une foule d'autres facteurs, comme leur personnel, leur clientèle, la localisation de leurs places d'affaires et bien sûr, leur mix d'affaires. Donc, en vertu de cette analyse, qui est une analyse complètement objective, faite par des chercheurs, pas payés par une organisation quelconque pour avoir des résultats, ce sont des gens qui sont complètement désintéressés, ce sont des chercheurs autonomes. Ils nous disent que la cote boursière, ça ne relève pas nécessairement des actions du PDG. Dans ce sens-là, deux autres études aussi, en 2006 et 2007, ont démontré le même phénomène. Dans votre réplique à cette proposition, vous dites tout simplement : « Les options d'achat d'actions, les autres l'utilisent et nous, on doit l'utiliser pour maintenir notre statut concurrentiel, pour maintenir notre capacité à retenir nos gens et à les rémunérer. » Donc, ça n'a rien à voir avec la performance de ces personnes. Ce n'est qu'un des outils potentiels de rémunération et ça ne vient rien ajouter à la performance des personnes sur la cote boursière. Vous dites aussi que c'est une option valable, concurrentielle. Est-ce que c'est une option nécessaire et obligatoire ? Non. Donc, on précise encore une fois que le programme d'options d'achat d'actions de la banque n'est pas une nécessité. Dans les états financiers, si vous regardez ce que ça représente, le programme d'achat d'actions potentiel, c'est 112 millions d'actions au taux actuel des actions à CAD 70. C'est un chiffre qui avoisine les CAD 7 billion 800 million potentiellement. Donc, ce n'est pas insignifiant le programme d'options d'achat de la banque. On dit : « Mettez fin à ça n'a plus de bon sens. » Ça ne donne rien quant à la performance de vos gestionnaires. La deuxième proposition, c'est celle de payer sa juste part d'impôts. Pourquoi on dit ça, payer sa juste part d'impôts? C'est parce que les lois qui prévoient que les entreprises multinationales doivent payer de l'impôt à un endroit et à un autre endroit, lorsqu'ils sont des multinationales dans plusieurs pays, a été, avec les années, détourné, tordu. On a créé de la comptabilité très évasive et très créative pour justement éviter de payer trop d'impôts dans les pays où le taux d'imposition était le plus élevé. Ces lois datent des années 20, 1920, on s'entend. L'OCDE, à l'été 2013, a dévoilé un rapport qui indique qu'il doit y avoir des réformes importantes à ce sujet-là. L'OCDE dit entre autres que les règles fiscales internationales, qui datent des années 20, garantissent que les entreprises ne paient pas d'impôts dans deux pays simultanément, donc il n'y avait pas de double imposition. C'est un objectif louable, mais malheureusement, les règles sont désormais détournées pour aboutir à une double exonération. Le plan d'action entend remédier à cette situation de sorte que les entreprises multinationales paient elles aussi leur juste part d'impôts. Vous avez, dans votre réplique à ce sujet, mentionné que bien sûr, vous ne faites absolument aucune transaction illégale à ce sujet-là. Le problème, ce n'est pas que la transaction est illégale. Le problème, c'est que les lois datent. Les lois sont vieilles, les lois doivent être renouvelées. Ce que nous proposons dans notre proposition, c'est que la banque, immédiatement, s'engage à prendre position et à adopter les nouvelles règles qui seront décrétées par l'OCDE. En tout cas, au moins recommandées par l'OCDE et éventuellement appliquées dans nos lois respectives. Je constate que dans votre réplique, à la fin de votre réplique, vous dites expressément que lorsque les mesures proposées par l'OCDE seront précisées et adoptées sous forme de loi, la banque assurera sa conformité de façon continue. C'est juste ça qu'on vous demande. On vous demande tout simplement de vous engager à le faire et je pense que dans votre réplique, vous avez répondu positivement à notre proposition. La troisième proposition, Madame la Présidente, vise des appels d'offres pour les auditeurs aux 5 ans. Je fais juste la suite de notre intervention précédente qui vous mentionnait que vos auditeurs, ici à la banque, ont 28 ans d'âge. Je pense que c'est vraiment un vieux couple. Notre proposition vise effectivement à ce que régulièrement, vous fassiez des appels d'offres pour mettre un peu plus de dynamisme dans votre vérification comptable, mais surtout plus de capacité de transparence. Les études que nous avons mentionnées à ce sujet-là indiquent que les analystes financiers en MBA ont observé, ils ont mentionné que lorsque les états financiers étaient vérifiés depuis des années et des années par les mêmes personnes, la confiance dans ces états financiers diminue. Je prends mon exemple personnel. J'ai travaillé dans plusieurs entreprises de très petite taille et la vérification financière, c'était un élément quasi majeur de nos discussions en assemblée annuelle. Les membres des petites associations ont une attention très particulière sur la vérification financière et demandent souvent d'avoir de nouvelles personnes et de nouveaux vérificateurs pour s'assurer que la comptabilité est bien faite. [Foreign language] Donc la banque ne peut pas échapper à ce regard-là quand, à petite échelle, il se manifeste partout dans notre société. Est-ce que j'ai encore un peu de temps, Madame? Yes, sir. [Foreign language] Merci Madame. La quatrième proposition, c'est sur le vote consultatif sur la rémunération des hauts dirigeants. On demande à ce que dans le cas d'un vote consultatif qui serait relativement défavorable, le conseil d'administration donne immédiatement réplique à ce vote-là et puisse expliquer quels gestes ils vont faire pour y remédier. Dans les années passées, 2011, la banque a eu un vote non satisfaisant de 15.7% à ce sujet-là sur vote politique salariale et par la suite, le taux a baissé. L'année passée, c'était 6.19%. Nous, les proposeurs de propositions, les petits actionnaires, on est obligés par la loi d'avoir un vote minimum de 3%. Par la suite, si on veut représenter une proposition, il faut que le vote minimum soit de 6%. S'il faut qu'on représente une proposition une troisième fois, il faut que le vote soit de 8%. [Foreign language] Donc nous, les proposeurs, on a des contraintes légales qui sont minimum 3, 6, 8. Mais la banque, elle n'en met pas de contraintes de minimum où vous allez répondre à nos objections ou à une réponse de vote négatif. Donc, on vous dit simplement ceci: si nous, on est contraints à un vote minimum de 3, 6 et 8, pourquoi la banque, elle, n'aurait pas de contrainte du tout et attendrait d'avoir un vote à 50% ou à 60% pour réagir sur un vote négatif de sa politique? Donc, on vous dit tout simplement, lorsqu'un vote négatif significatif sur la politique salariale, on vous demande tout simplement de réagir et de nous donner les actions que vous allez utiliser, que vous allez faire à ce sujet-là. [Foreign language] Je veux juste vous mentionner, Madame la Présidente, que votre réponse à nos propositions est beaucoup plus longue que nos propositions qui sont habituellement maximum 500 mots. Je veux juste vous mentionner que pour mon temps de parole, j'aimerais bien que l'on me le laisse encore une fois. La proposition 5, s'il vous plaît. Maintenant, rétroaction à la suite d'un pourcentage d'abstention élevé sur la nomination des administrateurs. On vote individuellement sur des administrateurs et nos membres sont toujours gênés de faire un vote en disant : « Je m'abstiens. » Donc s'abstenir, ce n'est pas un vrai vote, c'est une C'est une constatation que je ne peux rien changer. À ce sujet-là, beaucoup de gens se posent la question : pourquoi voter si je ne peux pas exprimer une obstruction légale, dire non, je ne veux pas tel ou tel vote. On ne fait que s'abstenir. [Foreign language] Quelle est la signification d'un vote d'abstention des administrateurs ? Dans notre proposition, on indique que quand un vote d'abstention est révélé parce que, par exemple 98 ou 97% des administrateurs ont un vote positif et il y en a qui ont un vote négatif à 7, 8, 9, 10%. Est-ce que c'est significatif ? Nous, on dit oui. On dit oui parce que le vote qui est d'une abstention ne dévoile pas l'ensemble de l'intérêt des actionnaires. Ce n'est pas tout le monde qui va voter pour une abstention. Ils savent bien qu'ils n'ont pas beaucoup de pouvoir à faire ça. Sauf que ceux qui le font, ils le font parce qu'ils ont des raisons très importantes de le faire. [Foreign language] Donc on dit, nous, dès qu'il y a un vote significatif qui est au-delà de ce que la moyenne des administrateurs a comme vote, on pense qu'il faut que vous ayez une réaction à ce sujet-là et que vous preniez action immédiatement là-dessus. Enfin, je voulais juste mentionner à nouveau que nous avons retiré une proposition à propos des fonds de pension. Vous nous avez donné des explications extrêmement positives à ce sujet-là et vous faites bien des jaloux dans le monde des banques. Merci beaucoup Madame la Présidente. Je vous demande de passer au vote. Merci. Thank you very much, Mr. Thouin, for those fine comments on matters of interest to you and others. Are there any other comments on the five proposals before we proceed to our vote? Seeing none, I'll then move on to ask you on ballot B to please mark your vote on proposals 1 through 5. The scrutineers will now come along and collect those ballots. Again, raise your hand if you have ballots that you would need collected. Thank you. The voting is now closed on the shareholder proposals. While we wait for the results of these votes, we'd like to show you a brief video about RBC and what we stand for. Following the video, Gord Nixon will lead the next part of our meeting, when shareholders will have an opportunity to ask additional questions. Thank you for that. At this point in the meeting, our shareholders will have the opportunity to ask questions around any other areas. If you do have a question, please proceed to the nearest microphone. Please give your name and tell us whether you are a shareholder or a proxy holder. If your question relates to a personal matter, we would ask that you speak with one of the RBC employees at our information desk in the lobby. I will now open up the floors for questions or for comments, starting with microphone number 6. My name is William Wiesenthal. I am a shareholder for about 23 years. I guess this is my first question. In 23 years, I hope- Hope it is a good one. Well, I do not know whether it is a good one, but I am interested in the comment of the high-frequency trades, and I was just wondering, is the THOR system that you have in place, is that available just to RBC clients, or is it available if you have another bank? The second question is, how widespread is that practice of the high-frequency trades? It means if I want to buy, let us say, 1,000 shares or 100 shares of RBC or sell that, does that mean that the high-frequency trader gets between me and the execution? If somebody could clarify that, I would appreciate it. That's a great question. Thank you. Is Doug McGregor here? I'm hoping he is. Doug is the head of RBC Capital Markets and is responsible for the business that has created THOR, which is not available to other banks, but is certainly available to other financial institutions who are our clients, fund managers, et cetera. Doug, over to you. THOR is an algorithm that our electronic equity traders use only. If you want to avail yourself to THOR, you'll have to trade with us, I'm afraid. It depends on the size of the order in terms of whether there'll be intervention by a high-frequency trader, but it's not uncommon when there's a lot of order flow. Has somebody done a study on the extent of high-frequency trading? We have spent a fair amount of time with the OSC, with THOR, and the OSC is an interested party, as is the Toronto Stock Exchange. If you go to their websites, they'll have information for you on the subject. Okay. Thank you. I just want to commend the management having a workable strategy that I can understand, so thank you. Thank you. On the issue, if you are more interested in the THOR, the people in that side of the business I'm sure would be happy to spend some time with you taking through some of the more intricate details. Microphone number 6 again. Yes, sir. Good morning, Mr. Nixon. I believe you will be remembered as both affable and a very good president. My question has to do with capital allocation. The 2,500 ounces of gold in the 14,000 windows, it is worth, well, put it in the calculator, at 1,300 an ounce. It could have come out at 1,800 an ounce a couple of years ago. I know Oxford Properties owns the building, but the gold went in at a very different price when the building went up. Is there no way that can come out at a profit? Even if you shared it with Oxford, you washed the windows and looked after the building. It goes onto the balance sheet for the Swiss Basel rules that you want. Firstly, thank you for your comments. I'm hoping when I step down in August that I'm going to take my window with me. I have a feeling they're not going to let me. You're absolutely right in that Oxford Properties owns the building, not RBC, and to be honest, I'd be curious myself. I'm not sure of the value of the gold flakes in those windows. I suspect it's not quite as valuable as people might think, but it may be an interesting question to figure out. Well, at $1,300 an ounce, 2,500 ounces is what? About $3 million, isn't it? Yeah. If that's the right calculation, then I guess that is it. But when the gold went in, it went in at a totally different price. Absolutely. Who owned the building then? You did. We owned the building then. Well, then you are- You're telling we sold it too cheap to Oxford because gold prices went up. A piece of that capital appreciation belongs to the bank, not to Oxford. Yes. I think we're going to have to try to enter those negotiations with them. Appreciate that. I have another question, but I will wait for someone else. Thank you. Yes, microphone number two. Yes. Hi, Gord. Congratulations to you for all the last 13 years. Thank you. My name is Kailash Bahadur, and I am a shareholder. My question to you is about this Bitcoin concept of banking on the internet. It has got a fair bit of press in the last few months. The views go from one extreme to the other. Some think it is just a passing fad. Others think that it's designed with great thought by intelligent people, and is here to stay, like the internet itself, despite recent setbacks. I would like your comments on that. Thank you for your question, Kash. My comments, I will preface my remarks by saying that I am far from an expert on Bitcoin. I am not sure that my remarks are any better informed than anyone else. Firstly, I would never underestimate the power of change, and what technology and new things bring to the marketplace. I think that history would prove that if you didn't believe in things like the internet or transformational things, you'd be proven to be wrong. Having said that, I have a very difficult time understanding the sustainability and permanency and depth of a currency that does not have some form of government, some form of central bank ultimately behind it. As you said, there's been some recent significant issues around Bitcoin with respect to the technology that underpins it and so forth. It is very complicated. I think for most of us, it's very difficult to understand exactly how Bitcoin really works and how it would work into the future given the complexity of global currency markets. Having said that, it's something that we should continue to look at and continue to try to understand better because it may well evolve. Whether it's Bitcoin or some derivation of it, there may well be some form of alternative currency or alternative payment mechanisms into the future. Certainly in the short term, I remain probably on the more skeptical side as to whether it really has any long-term viability. Yes, microphone number 6 again. Mr. Nixon, I read somewhere that there is serious concern on the part of foreign banks in the U.S., I believe in their capital market trading. I'm not sure this, I think those are the Volcker rules, aren't they? That's certainly one of the rules. There's a couple recently. Volcker is certainly one that impacts the proprietary trading businesses. I think the more recent news tends to be around what is called foreign banking legislation, FBO rules, which requires foreign banks to be separately capitalized in the United States. There are a lot of regulatory issues in the United States that banks are dealing with generally, including foreign banks. Okay. Just exactly how will this affect the Royal Bank's U.S. operations? How is it going and what are those costs? Does that mean that certain services can't be offered? Yeah. It's actually a very good question. The overriding comment that I would make is that it does add cost and complexity to comply with these various rules and regulations, not just in the United States, but in every country. Clearly the U.S. is our biggest operations outside of Canada. Having said that, we're very well positioned to both manage the cost and manage those complexities, and in many ways better than our foreign competitors. Volcker certainly has an impact in terms of how we had to structure some of our trading businesses, but that process is underway, and we're certainly confident that we can manage that with very little impact in terms of the overall operations and profitabilities, although there is some restructuring required. With respect to the FBO rules, again, we're in a very good position because unlike many foreign institutions in the U.S. who have very little capital in that market to underpin their businesses, we actually have quite a bit of capital in terms of our U.S. businesses and subsidiaries. Partially because of the sale of our U.S. bank, we've left the vast majority of that capital in the U.S. So when it comes to being able to comply with the new rules and the new regulations, to answer your question, yes, there is an increased cost. But that cost of regulation has been growing at a very fast pace, really since 2007 or 2008. But we're in a very good position to be able to comply, and so it shouldn't have any impact in terms of our U.S. business going forward. We continue to be very positive with respect to the U.S. and our opportunities there. Thank you very much. Thank you for your question, sir. Are there any other questions? Here we go. Microphone number 7. Jim Keatings, shareholder. I've got a golf question for you, and it has to do with the fact that RBC is a major sponsor of two tournaments. Can you get a better date on the calendar for the Canadian Open? Well, that's a question that's dear to my heart because I must say I have been an active participant in some of our golf programs and activities. I should firstly say, just as a general comment, our golf sponsorship for the organization has been terrific, both here in Canada and particularly outside of Canada where our brand is lesser known. The golfers that we sponsor, the tournaments that we host in the U.S., in particular, have been very instrumental in terms of building our brand outside of Canada. Within Canada, the RBC Canadian Open, which is our national championship, was something that we did for a couple of reasons. One, because of our involvement in golf, and secondly, because the Canadian Open needed somebody to step up and take over that tournament, run it effectively, invest in it. Otherwise, the tournament and our national championship would not have likely survived. I think that we've done that very effectively. The question relates to the date. We unfortunately have a date which is after the British Open, which certainly limits the number of particularly European players who will come to Canada. The challenge with dates is there's a number of reasons, one of which Canada's climate is such that it's hard to run a golf tournament outside of the months of really June to September, and it's a very crowded calendar. It's something that we have actually been working on with the PGA in terms of getting the date revised. I'm not sure that it's going to happen too quickly, but it's certainly a topic for discussion. I think the great news is, though, we have invested heavily in the tournament. So notwithstanding the challenging date, we have been able to generate a pretty strong field and a pretty strong interest in our national championship. I think that's been a good thing, not just for RBC, but it's certainly a good thing for Golf Canada and for the golf industry in Canada. So we are working on it is the short answer. Okay, well, if there are no further questions, I think in 13 years that's the easiest question period that I've been through. So we appreciate that. Oh, I said that too quickly. Yes, sir. My name is Leslie Dobos. I am a shareholder for 35 years, a little more than this gentleman before. I have a question, which is more of a curiosity. I read in the paper last week that Eddie Clark also retiring with 30 years as a CEO, and he is being paid $2.2 million pension, and you are 1.8. Is that an indication that you did not perform as well? Well, just to correct things, he has not been CEO for 13 years. He has been or 30 years, CEO for I think. He has not been with the TD as long as you have with the Royal Bank. I certainly would not comment on any other bank's compensation structure or pension matters, but we certainly appreciate your comment and observation. With that, I will now with pleasure turn the meeting back to Katie. Thank you. Thank you, Gord. At this point in the proceedings, I'm going to call on Joseph Chirico to report on the preliminary voting results, which are also posted on the screens. Copies of these voting results will be available at the information desk after the meeting, and they're also posted on the bank's website. Joe. Thank you. We wish to report that 700,138,776 shares, or 48.56% of eligible shares have been voted at this meeting. For the election of directors, a substantial majority of the votes cast at the meeting were voted in favor of each of the 14 nominees named in the proxy circular, with each nominee receiving in excess of 96.63% in favor. For the appointment of auditor, 98.92% voted in favor of Deloitte LLP, and 1.08% withheld from voting. For the advisory resolution to accept the approach to executive compensation, 93.16% voted in favor and 6.84% voted against. On the shareholder proposals, for proposal number one regarding stock options, 4.09% voted in favor, 95.4% voted against, and less than 1% abstained. For proposal number two regarding payment of taxes, 2.48% voted in favor, 96.97% voted against, and less than 1% abstained. For proposal number three regarding tendering for auditors, 3.07% voted in favor, 96.29% voted against, and less than 1% abstained. For proposal number four regarding the board's response to the advisory vote on compensation, 3.65% voted in favor, 95.76% voted against, and less than 1% abstained. For proposal number five regarding the board's response to withheld votes for directors, 3.47% voted in favor, 95.93% voted against, and less than 1% abstained. Thank you, Joe. I now declare that the 14 nominees named in the proxy circular have been duly elected as directors. Deloitte LLP has been appointed as the auditor. The advisory vote to accept the bank's approach to executive compensation has been approved, and each of the shareholder proposals has been defeated. Ladies and gentlemen, I sincerely want to thank all of you for your participation with us here today, both in the room and on the webcast. I will conclude by once again thanking our employees, whose dedication and commitment to the success of our clients continues to be a competitive advantage for this organization. On behalf of the board and shareholders, thank you all for your efforts and contribution to RBC's success in 2013. The meeting is now concluded. Je déclare maintenant l'assemblée levée. Thank you for joining us today.

Data Source: Quartr Last updated: Feb 26, 2014

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