BMO UCITS ETF ICAV An Irish collective asset-management vehicle constituted as an umbrella fund with segregated liability between Sub-Funds

Transcription

1 An Irish collective asset-management vehicle constituted as an umbrella fund with segregated liability between Sub-s registered in Ireland on 8 June 2015 under the Irish Collective Asset-management Vehicles Act 2015 ( ICAV ) and authorised by the Central Bank of Ireland as an Undertaking for Collective Investment in Transferable Securities ( UCITS ) pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 Interim Report and Unaudited Condensed Financial Statements for the period from 8 June 2015 (date of registration) to 31 March 2016

2 Contents Page Directory 3 General Information 4 Investment Manager s Report 8 Condensed Statement of Financial Position 11 Condensed Statement of Comprehensive Income 13 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders 15 Notes to the Condensed Financial Statements 17 Schedule of Investments BMO MSCI UK Income Leaders 38 BMO MSCI USA Income Leaders 39 BMO MSCI USA Income Leaders ( Hedged) 43 BMO MSCI Europe ex-uk Income Leaders 47 BMO MSCI Europe ex-uk Income Leaders ( Hedged) 50 BMO Barclays 1-3 Year Global Corporate Bond ( Hedged) 53 BMO Barclays 3-7 Year Global Corporate Bond ( Hedged) 57 BMO Barclays 7-10 Year Global Corporate Bond ( Hedged) 61 BMO Barclays Global High Yield Bond ( Hedged) 65 Schedule of Portfolio Changes 71

3 Directory BOARD OF DIRECTORS AUDITORS Eimear Cowhey (Irish)* KPMG David Hammond (Irish)* One Stokes Place Liam Miley (Irish)* / ** Dublin 2 Hugh Moir (British) Ireland Drew Newman (British) Subhas Sen (Canadian) REGISTERED OFFICE LEGAL ADVISORS 78 Sir John Rogerson s Quay Matheson Dublin 2 70 Sir John Rogerson s Quay Ireland Dublin 2 Ireland INVESTMENT MANAGER DEPOSITARY F&C Management Limited State Street Custodial Services (Ireland) Limited Exchange House 78 Sir John Rogerson s Quay Primrose Street Dublin 2 London EC2A 2NY Ireland United Kingdom ADMINISTRATOR & SECRETARY State Street Services (Ireland) Limited 78 Sir John Rogerson s Quay Dublin 2 Ireland REGISTRATION NUMBER C *Independent Directors **All of the Directors were appointed on 8 June 2015, except Liam Miley who was appointed on 16 November

4 General Information BMO ICAV (the or the ICAV ) is an Irish collective asset-management vehicle constituted as an umbrella fund with segregated liability between Sub-s with registration number C The ICAV was registered on 8 June The ICAV has been authorised by the Central Bank of Ireland (the Central Bank ) as an Undertaking for Collective Investment in Transferable Securities ( UCITS ) pursuant to the provisions of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 (as amended) and the Central Bank (Supervision and Enforcement) Act 2013 (section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (together the UCITS Regulations ). All capitalised terms used but not defined herein shall have the meaning ascribed thereto in the ICAV s Prospectus dated 29 September 2015 (the Prospectus ). The ICAV has been structured as an umbrella fund consisting of different Sub-s, each comprising one or more classes of shares. The Directors may from time to time, with the prior approval of the Central Bank, create different series of Shares representing separate portfolios of assets, each such series comprising a Sub-. Each Sub- will bear its own liabilities and, under Irish law, none of the ICAV, the service providers appointed to the ICAV, the Directors, any receiver, examiner or liquidator, or any other person will have access to the assets of a Sub- in satisfaction of a liability of any other Sub-. The ICAV is managed by F&C Management Limited. The portfolio of assets maintained for each series of Shares and comprising a Sub- will be invested in accordance with the investment objectives and policies applicable to such Sub- as specified in the relevant Supplement. Different Shares shall be designated as either ETF Shares (being Shares that are intended to be actively traded on a secondary market) or Non-ETF Shares (being Shares which are not listed or actively traded on a secondary market). Shares may be divided into different Classes to accommodate, amongst other things, the distinction between ETF Shares and Non-ETF Shares, different dividend policies, charges, fee arrangements (including different total expense ratios), currencies, or to provide for foreign exchange hedging in accordance with the policies and requirements of the Central Bank from time to time. The ICAV and its Sub-s are listed on the Irish Stock Exchange and the London Stock Exchange. Sub-s and Share Classes There are nine active Sub-s in operation as at 31 March The active Sub-s launched on 5 November 2015, and are listed in the table below. A further Sub-, the BMO MSCI Emerging Markets Income Leaders, had not launched as at period end 31 March Name of Sub- Currency Class BMO MSCI UK Income Leaders Distributing Shares BMO MSCI USA Income Leaders USD USD Distributing Shares BMO MSCI USA Income Leaders ( Hedged) UCITS Hedged Distributing Shares ETF BMO MSCI Europe ex-uk Income Leaders EUR EUR Distributing Shares BMO MSCI Europe ex-uk Income Leaders ( Hedged Distributing Shares Hedged) BMO Barclays 1-3 Year Global Corporate Bond ( Hedged Distributing Shares Hedged) BMO Barclays 3-7 Year Global Corporate Bond ( Hedged Distributing Shares Hedged) BMO Barclays 7-10 Year Global Corporate Bond ( Hedged Distributing Shares Hedged) BMO Barclays Global High Yield Bond ( Hedged) Hedged Distributing Shares 4

5 General Information cont/d Investment Objectives and Policies The ICAV has been registered for the purpose of investing in transferable securities in accordance with the UCITS Regulations. Each of the active Sub-s is intended to track or replicate the benchmark indices listed hereunder. Name of Sub- Benchmark Index ( Index ) Strategy* BMO MSCI UK Income Leaders MSCI UK Select Quality Yield Index Replicating BMO MSCI USA Income Leaders MSCI USA Select Quality Yield Index Replicating BMO MSCI USA Income Leaders ( MSCI USA Select Quality Yield 100% Hedged Replicating Hedged) to Index BMO MSCI Europe ex-uk Income Leaders MSCI Europe ex-uk Select Quality Yield Replicating Index BMO MSCI Europe ex-uk Income Leaders MSCI Europe ex-uk Select Quality Yield Replicating ( Hedged) 100% Hedged to Index BMO Barclays 1-3 Year Global Corporate Bond Barclays Global Corporate 1-3 Very Liquid Replicating ( Hedged) Hedged to Index BMO Barclays 3-7 Year Global Corporate Bond Barclays Global Corporate 3-7 Very Liquid Replicating ( Hedged) Hedged to Index BMO Barclays 7-10 Year Global Corporate Barclays Global Corporate 7-10 Very Liquid Replicating Bond ( Hedged) BMO Barclays Global High Yield Bond ( Hedged) Hedged to Index Barclays Global High Yield Bond Corporate Very Liquid ex-144a Hedged to Index Replicating * where full replication of the Index is not reasonably possible the Sub- will use an optimisation methodology for replicating funds and a stratified sampling methodology for non-replicating funds to build a representative portfolio that provides a return that is comparable to that of the Index. See the Prospectus for further details. The specific investment objectives, strategies and policies for each Sub- will be set out in the relevant Supplement to the Prospectus and are summarised below. In each case, the investment policy of the Sub- is to track the performance of the relevant Index as closely as possible, regardless of whether the Index level rises or falls, while seeking to minimise as far as possible the tracking error between the Sub- s performance and that of the Index. In order to seek to achieve this investment objective, the Investment Manager will aim to replicate the Index by holding all of the Index Securities in a similar proportion to their weighting in the Index. BMO MSCI UK Income Leaders The objective of the Sub- is to provide an exposure to high quality large and mid-capitalisation UK stocks which have a history of paying above average dividends, as represented by the relevant Index. BMO MSCI USA Income Leaders The objective of the Sub- is to provide an exposure to high quality large and mid-capitalisation stocks issued in the USA which have a history of paying above average dividends. BMO MSCI USA Income Leaders ( Hedged) The objective of the Sub- is to provide an exposure to high quality large and mid-capitalisation stocks issued in the USA which have a history of paying above average dividends which is hedged to sterling. BMO MSCI Europe ex-uk Income Leaders The objective of the Sub- is to provide an exposure to high quality large and mid-capitalisation stocks issued in developed markets in Europe, excluding the UK, which have a history of paying above average dividends. BMO MSCI Europe ex-uk Income Leaders ( Hedged) The objective of the Sub- is to provide an exposure to high quality large and mid-capitalisation stocks issued in developed markets in Europe, excluding the UK, which have a history of paying above average dividends and is hedged to sterling. 5

6 General Information cont/d Investment Objectives and Policies cont/d BMO Barclays 1-3 Year Global Corporate Bond ( Hedged) The objective of the Sub- is to provide an exposure to fixed rate corporate bonds issued within the last five years and with an effective term to maturity of between one and three years which is hedged to sterling. BMO Barclays 3-7 Year Global Corporate Bond ( Hedged) The objective of the Sub- is to provide an exposure to fixed rate corporate bonds issued within the last five years and with an effective term to maturity of between three and seven years which is hedged to sterling. BMO Barclays 7-10 Year Global Corporate Bond ( Hedged) The objective of the Sub- is to provide an exposure to fixed rate corporate bonds issued within the last five years and with an effective term to maturity of between seven and ten years which is hedged to sterling. BMO Barclays Global High Yield Bond ( Hedged) The objective of the Sub- is to provide an exposure to global fixed-rate, high yield bonds issued within the last five years and that have a maturity greater than one year, which is hedged to sterling. Redemption of Shares In accordance with the redemption procedures as specified in the Prospectus and relevant Supplements, Shareholders may request the Sub- to redeem their Shares on any Dealing Day at the Net Asset Value per Share as of the relevant Dealing Day, subject to an appropriate provision for Duties and Charges. Shareholders may only redeem Shares with a value that is at least equal to the Minimum Redemption Amount. If redemption requests received in respect of Shares of a particular Sub- on any Dealing Day total, in aggregate, more than 10% of all of the issued Shares of that Sub- on that Dealing Day, the Directors shall be entitled, at their absolute discretion, to refuse to redeem such number of Shares of that Sub- on that Dealing Day, in excess of 10% of the issued Shares of the Sub-, in respect of which redemption requests have been received, as the Directors shall determine. If the Sub- refuses to redeem Shares for this reason, the requests for redemption on such date shall be reduced ratably and the redemption requests shall be treated as if they were received on each subsequent Dealing Day until all the Shares to which the original request related have been redeemed, provided that the Sub- shall not be obliged to redeem more than 10% of the number of Shares of a particular Sub- outstanding on any Dealing Day, until all the Shares of the Sub- to which the original request related have been redeemed. Applications for redemptions directly to the Sub- in respect of ETF Shares may generally only be made by Authorised Participants, through a Shareholder as nominee for the Authorised Participants. All other investors may sell ETF Shares through the Authorised Participants or to other investors on the secondary market. Dividends and Distributions Each Sub- may have either Accumulating Classes or Distributing Classes or both. With respect to the Accumulating Classes in all Sub-s, the Directors have determined to accumulate all net investment income and net realised capital gains attributable to such Accumulating Classes and therefore do not intend to declare dividends in respect of Shares in such classes. Pursuant to the Instrument of Incorporation, the Directors may declare dividends in respect of Shares in any Distributing Class out of net income (including dividend and interest income) and the excess of realised and unrealised capital gains over realised and unrealised losses in respect of investments of the Sub- (collectively Net Income ). 6

7 General Information cont/d Dividends and Distributions cont/d It is the current intention of the Directors to declare and pay dividends out of Net Income attributable to each of the Distributing Classes on a quarterly basis (based on quarters ending in March, June, September and December). All Shares in issue in a Distributing Class on any date on which the Directors determine to declare a dividend in respect of that class will be eligible for such dividend. Shareholders should note that the Directors may, in their discretion, decide not to make such declaration and payment in respect of a Distributing Class. The distribution policy of any Sub- or of any Class may be changed by the Directors upon reasonable notice to Shareholders of that Sub- or Class as the case may be and, in such circumstances, the distribution policies will be disclosed in an updated Prospectus and relevant Supplement. Net Asset Value and Valuation of Assets The ICAV has delegated the calculation of the Net Asset Value of each Sub- and the Net Asset Value per Share to State Street Services (Ireland) Limited (the Administrator ). The Net Asset Value of a Sub- shall be calculated by ascertaining the value of the assets of the relevant Sub- and deducting from such amount the liabilities of the Sub-, which shall include all fees and expenses payable and accrued or estimated to be payable out of the assets of the Sub-. The Net Asset Value per Share of a Sub- shall be calculated by dividing the Net Asset Value of the relevant Sub- by the total number of Shares issued in respect of that Sub- or deemed to be in issue as of the relevant Business Day. The Net Asset Value per Share in each Sub- shall be calculated to the nearest four decimal places in the base currency of the relevant Sub- on each Business Day in accordance with the valuation provisions set out in the Instrument of Incorporation and summarised below. In the event that the Shares of any Sub- are divided into different Classes, the amount of the Net Asset Value of the Sub- attributable to a Class shall be determined by establishing the number of Shares issued in the Class at the relevant Valuation Point and by allocating the relevant fees and Class expenses to the Class, making appropriate adjustments to take account of distributions, subscriptions, redemptions, gains and expenses of that Class and apportioning the Net Asset Value of the Sub- accordingly. The Net Asset Value per Share in respect of a Class will be calculated by dividing the Net Asset Value of the relevant Class by the number of Shares of the relevant Class in issue. The Net Asset Value of the Sub- attributable to a Class and the Net Asset Value per Share in respect of a Class will be expressed in the class currency of such Class if it is different to the Base Currency. The Net Asset Value per Share in the Sub- will be calculated at the Valuation Point on each Business Day. For further information regarding the method and principles by which the Net Asset Value is determined and the circumstances under which the Directors may temporarily suspend the determination of the Net Asset Value, please refer to the Prospectus. 7

8 Investment Manager s Report BMO MSCI UK Income Leaders Economic and political news flow were the key drivers of sentiment and resulting market moves in UK equities. Growth remained weak and inflation was subdued. Manufacturing activity was on a downward trajectory and the Chancellor revised 5-year growth projections down during his Budget statement. With the EU referendum announced for the 23 June uncertainty surrounding the UK s ongoing membership of the European Union led sterling to weaken against other major currencies. In late March, Yellen s comments that the Federal Reserve would proceed cautiously helped shares rise into the period s close. Within the market, higher yielding names tended to outperform their more growth-orientated counterparts. Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark MSCI UK Select Quality Yield TR Index 2.26% 2.59% BMO MSCI USA Income Leaders The US stock market was volatile during the period. Following the US Federal Reserve s (Fed) much anticipated rate hike in 2015, investors focused their attention on the pace of further US rate tightening. However, the Fed adopted a more cautious tone at the end of the period and expectations regarding the pace of rate rises in 2016 were dampened. US economic growth slowed to an annual pace of 0.5% during the first quarter of 2016, a sharp decline from the 1.4% rate of growth registered in the final quarter of 2015 and the slowest pace in two years. The disappointing result was attributed to a fall in domestic demand as well as weaker US exports on the back of a stronger US dollar. In addition, separate surveys also pointed to a weakening trend in US consumer sentiment. Shares fell sharply during January and into mid-february before dovish rhetoric from the Federal Reserve and improved economic data helped them recover into the period s close. Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark MSCI USA Select Quality Yield TR Index 8.05% 8.05% BMO MSCI USA Income Leaders ( Hedged) The US stock market was volatile during the period. Following the US Federal Reserve s (Fed) much anticipated rate hike in 2015, investors focused their attention on the pace of further US rate tightening. However, the Fed adopted a more cautious tone at the end of the period and expectations regarding the pace of rate rises in 2016 were dampened. US economic growth slowed to an annual pace of 0.5% during the first quarter of 2016, a sharp decline from the 1.4% rate of growth registered in the final quarter of 2015 and the slowest pace in two years. The disappointing result was attributed to a fall in domestic demand as well as weaker US exports on the back of a stronger US dollar. In addition, separate surveys also pointed to a weakening trend in US consumer sentiment. Shares fell sharply during January and into mid-february before dovish rhetoric from the Federal Reserve and improved economic data helped them recover into the period s close. During the period, currency moves made their impact keenly felt. Dollar based investors enjoyed strong positive returns but sterling weakness dampened returns for those hedging back into sterling. Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark MSCI USA Select Quality Yield TR Index (Hedged into ) 0.44% 0.50%

9 Investment Manager s Report cont/d BMO MSCI Europe ex-uk Income Leaders European shares gained ground but the period was a volatile one. The actions of central banks were a key determinant of market direction and having underwhelmed with their actions in late 2015 the European Central Bank exceeded expectations in March 2016 and the announced stimulus measures helped shares rise. Economic growth picked up ahead of expectations in the first quarter of 2016 but inflation was weak. Within the market, higher yielding names tended to outperform their more growthorientated counterparts. Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark MSCI Europe ex-uk Select Quality Yield TR Index 4.13% 4.21% BMO MSCI Europe ex-uk Income Leaders ( Hedged) The performance of European shares was volatile. The actions of central banks were a key determinant of market direction and having underwhelmed with their actions in late 2015 the European Central Bank exceeded expectations in March 2016 and the announced stimulus measures helped shares rise from earlier lows. Economic growth picked up ahead of expectations in the first quarter of 2016 but inflation was weak. Within the market, higher yielding names tended to outperform their more growth-orientated counterparts. During the period, currency moves made their impact keenly felt. Euro based investors enjoyed positive returns but sterling weakness, together with euro appreciation, pulled returns into negative territory for those hedging back into sterling. Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark MSCI Europe ex-uk Select Quality Yield TR Index (Hedged into ) -7.35% -7.13% BMO Barclays 1-3 Year Global Corporate Bond ( Hedged) Corporate bonds made gains over the period. Investor sentiment was dampened by concerns about global economic growth and increased market volatility. Corporate bonds benefited however, from the strength of the underlying government bond market and a continued appetite for higher-yielding assets. High yield bonds felt the impact of negative fund flows and postponed deals. The relatively high weighting of energy related names provided an additional drag in an environment of low energy prices (a trend that reversed somewhat later on). Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark Barclays 1-3 Year Global Corporate Bond Very Liquid TR Index (Hedged into ) 0.96% 1.13% BMO Barclays 3-7 Year Global Corporate Bond ( Hedged) Corporate bonds made gains over the period. Investor sentiment was dampened by concerns about global economic growth and increased market volatility. Corporate bonds benefited however, from the strength of the underlying government bond market and a continued appetite for higher-yielding assets. High yield bonds felt the impact of negative fund flows and postponed deals. The relatively high weighting of energy related names provided an additional drag in an environment of low energy prices (a trend that reversed somewhat later on). 9

10 Investment Manager s Report cont/d BMO Barclays 3-7 Year Global Corporate Bond ( Hedged) cont/d Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark Barclays 3-7 Year Global Corporate Bond Very Liquid TR Index (Hedged into ) 2.54% 2.60% BMO Barclays 7-10 Year Global Corporate Bond ( Hedged) Corporate bonds made gains over the period. Investor sentiment was dampened by concerns about global economic growth and increased market volatility. Corporate bonds benefited however, from the strength of the underlying government bond market and a continued appetite for higher-yielding assets. High yield bonds felt the impact of negative fund flows and postponed deals. The relatively high weighting of energy related names provided an additional drag in an environment of low energy prices (a trend that reversed somewhat later on). Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark Barclays 7-10 Year Global Corporate Bond Very Liquid TR Index (Hedged into ) 4.27% 3.71% BMO Barclays Global High Yield Bond ( Hedged) Corporate bonds made gains over the period. Investor sentiment was dampened by concerns about global economic growth and increased market volatility. Corporate bonds benefited however, from the strength of the underlying government bond market and a continued appetite for higher-yielding assets. High yield bonds felt the impact of negative fund flows and postponed deals. The relatively high weighting of energy related names provided an additional drag in an environment of low energy prices (a trend that reversed somewhat later on). Return Benchmark Return Anticipated Tracking Error Annualised Realised Tracking Error Benchmark Barclays Global High Yield Bond ex-144a Very Liquid TR Index (Hedged into ) -1.59% -1.92%

11 Condensed Statement of Financial Position As at 31 March 2016 Note BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders ( Hedged) BMO MSCI Europe ex-uk Income Leaders EUR BMO MSCI Europe ex-uk Income Leaders ( Hedged) Current assets Financial assets at fair value through profit or loss: Transferable securities 7,571,623 13,435,297 7,457,123 13,829,448 5,542,102 Unrealised gain on forward currency contracts , Cash and cash equivalents 1(d), 7 32, , ,133 72,122 34,342 Other receivables 8 50,619 11,122 6,109 4,618 60,855 Total current assets 7,654,445 13,584,185 7,778,164 13,906,188 5,637,299 Current liabilities Financial liabilities at fair value through profit or loss: Unrealised loss on forward currency contracts (75,945) Other payables 9 (61,417) (83,509) (313,083) (69,128) (28,808) Total current liabilities (excluding net assets attributable to redeemable participating shareholders) (61,417) (83,509) (313,083) (69,128) (104,753) Net assets attributable to redeemable participating shareholders 7,593,028 13,500,676 7,465,081 13,837,060 5,532,546 As the Sub-s launched on 5 November 2015, comparative data is not available. The accompanying notes are an integral part of the financial statements. 11

12 Condensed Statement of Financial Position cont/d As at 31 March 2016 Note BMO Barclays 1-3 Year Global Corporate Bond ( Hedged) BMO Barclays 3-7 Year Global Corporate Bond ( Hedged) BMO Barclays 7-10 Year Global Corporate Bond ( Hedged) BMO Barclays Global High Yield Bond ( Hedged) Current assets Financial assets at fair value through profit or loss: Transferable securities 3,999,663 6,062,814 6,129,572 9,404,405 Unrealised gain on forward currency contracts 88, , , ,303 Cash and cash equivalents 1(d), 7 17,160 33,076 30,462 62,923 Other receivables 8 245, , , ,467 Total current assets 4,350,457 6,787,309 6,566,434 10,099,098 Current liabilities Financial liabilities at fair value through profit or loss: Unrealised loss on forward currency contracts (17,109) (31,599) (19,380) (37,179) Other payables 9 (311,630) (646,098) (355,850) (409,582) Total current liabilities (excluding net assets attributable to redeemable participating shareholders) (328,739) (677,697) (375,230) (446,761) Net assets attributable to redeemable participating shareholders 4,021,718 6,109,612 6,191,204 9,652,337 As the Sub-s launched on 5 November 2015, comparative data is not available. The accompanying notes are an integral part of the financial statements. 12

13 Condensed Statement of Comprehensive Income For the period from 8 June 2015 (date of registration) to 31 March 2016 BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders ( Hedged) BMO MSCI Europe ex-uk Income Leaders UCITS ETF EUR BMO MSCI Europe ex-uk Income Leaders ( Hedged) UCITS ETF Note Income Investment income 1(f) 85, ,171 72,817 84,172 41,986 Net gain/(loss) on investment activities 1(b), 1(c), 4 344, , , ,837 (227,437) Total investment income/(expense) 430, , , ,009 (185,451) Expenses Operating expenses 5 (7,617) (13,640) (9,435) (11,725) (7,542) Net income/(expense) 422, , , ,284 (192,993) Finance costs Bank interest expense (57) (35) Distributions 10 (67,695) (105,658) (60,909) (63,576) (25,884) Taxation Withholding tax 1(j), 2 - (17,521) (10,439) (21,037) (9,891) Net movement in net assets attributable to redeemable participating shareholders resulting from operations 355, , , ,614 (228,803) Gains and losses arose solely from continuing operations. There were no gains or losses other than those dealt with in the Statement of Comprehensive Income. As the Sub-s launched on 5 November 2015, comparative data is not available. The accompanying notes are an integral part of the financial statements. 13

14 Condensed Statement of Comprehensive Income cont/d For the period from 8 June 2015 (date of registration) to 31 March 2016 BMO Barclays 1-3 Year Global Corporate Bond ( Hedged) BMO Barclays 3-7 Year Global Corporate Bond ( Hedged) BMO Barclays 7-10 Year Global Corporate Bond ( Hedged) BMO Barclays Global High Yield Bond ( Hedged) Note Income Investment income 1(f) 24,408 56,674 80, ,221 Net gain/(loss) on investment activities 1(b), 1(c), 4 18, , ,417 (375,550) Total investment income/(expense) 43, , ,151 (149,329) Expenses Operating expenses 5 (4,858) (7,292) (7,301) (13,492) Net income/(expense) 38, , ,850 (162,821) Finance costs Bank interest expense (12) (23) (18) (51) Distributions 10 (16,716) (42,739) (63,828) (185,116) Net movement in net assets attributable to redeemable participating shareholders resulting from operations 21, , ,004 (347,988) Gains and losses arose solely from continuing operations. There were no gains or losses other than those dealt with in the Statement of Comprehensive Income. As the Sub-s launched on 5 November 2015, comparative data is not available. The accompanying notes are an integral part of the financial statements. 14

15 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders For the period from 8 June 2015 (date of registration) to 31 March 2016 BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders ( Hedged) BMO MSCI Europe ex-uk Income Leaders EUR BMO MSCI Europe ex-uk Income Leaders ( Hedged) Net assets attributable to redeemable participating shareholders at the beginning of the period Net movement in net assets attributable to redeemable participating shareholders resulting from operations 355, , , ,614 (228,803) Proceeds from the issuance of redeemable participating shares 7,238,006 13,097,039 7,343,737 13,545,446 5,761,349 Movement in net assets resulting from share transactions 7,593,028 13,500,676 7,465,081 13,837,060 5,532,546 Net assets attributable to redeemable participating shareholders at the end of the period 7,593,028 13,500,676 7,465,081 13,837,060 5,532,546 As the Sub-s launched on 5 November 2015, comparative data is not available. The accompanying notes are an integral part of the financial statements. 15

16 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders cont/d For the period from 8 June 2015 (date of registration) to 31 March 2016 BMO Barclays 1-3 Year Global Corporate Bond ( Hedged) BMO Barclays 3-7 Year Global Corporate Bond ( Hedged) BMO Barclays 7-10 Year Global Corporate Bond ( Hedged) BMO Barclays Global High Yield Bond ( Hedged) Net assets attributable to redeemable participating shareholders at the beginning of the period Net movement in net assets attributable to redeemable participating shareholders resulting from operations 21, , ,004 (347,988) Proceeds from the issuance of redeemable participating shares 4,000,137 6,000,199 6,000,200 10,000,325 Movement in net assets resulting from share transactions 4,021,718 6,109,612 6,191,204 9,652,337 Net assets attributable to redeemable participating shareholders at the end of the period 4,021,718 6,109,612 6,191,204 9,652,337 As the Sub-s launched on 5 November 2015, comparative data is not available. The accompanying notes are an integral part of the financial statements. 16

17 Notes to the Condensed Financial Statements for the period ended 31 March Significant Accounting Policies The principal accounting policies and estimation techniques applied in the preparation of these financial statements are set out below. These condensed financial statements are the first set of unaudited condensed interim financial statements of BMO ICAV (the ICAV ). a) Basis of Preparation The ICAV s unaudited condensed interim financial statements have been prepared in accordance with Financial Reporting Standard 104 ( FRS 104 ) Interim Financial Reporting, Irish statute comprising the Irish Collective Asset-management Vehicles Act 2015 (the ICAV Act ) and the Central Bank s (Supervision and Enforcement) Act 2013 (section 48(1)) UCITS Regulations 2015, (the "Central Bank UCITS Regulations"). The financial statements are prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss. In preparation of financial statements in conformity with FRS 104, the ICAV is required to make certain accounting estimates and assumptions. Actual results may differ from these estimates and assumptions. The Directors believe that any estimates used in preparing the financial statements are reasonable and prudent. Critical accounting estimates are those which involve the most complex or subjective judgments or assessments. The areas of the ICAV s business that typically require such estimates are the determination of the fair value of financial assets and liabilities. The financial statements have been prepared on a going concern basis. The ICAV is availing of the exemption available to open-ended investment funds under FRS 104 and is not presenting a cash flow statement. b) Functional and Presentation Currency Items included in each Sub-'s financial statements are measured using the currency of the primary economic environment in which the relevant Sub- operates (the functional currency ). The functional or base currency of each Sub- is detailed in the General Information section. The ICAV also has adopted these functional currencies as the presentation currency of each of the Sub- s. Transactions in foreign currencies are translated into the functional currency at the exchange rate at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the functional currency of the Sub- at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency of the Sub- at the exchange rate at the date on which fair value was determined. Any foreign currency differences arising on retranslation are recognised in the Condensed Statement of Comprehensive Income as net foreign currency gains/(losses), including those arising on financial instruments at fair value through profit or loss ( FVTPL ), which are recognised as a component of net gain/(loss) on investment activities at FVTPL. c) Financial Assets and Financial Liabilities at Fair Value Through Profit or Loss Classification Financial assets and liabilities at fair value through profit or loss have two sub-categories: financial assets and financial liabilities held for trading and those designated by management at fair value through profit or loss at inception. Financial assets or financial liabilities held for trading are acquired or incurred principally for the purpose of selling or repurchasing in the short-term. Forward currency contracts and all other derivatives fall into this category. Equities and bonds (collectively transferable securities ) are designated by the Directors at FVTPL at inception. Gains and losses from changes in the fair value of the financial assets and liabilities at FVTPL category are included in the Condensed Statement of Comprehensive Income in Net gain/(loss) on investment activities. 17

18 Notes to the Condensed Financial Statements for the period ended 31 March 2016 cont/d 1. Significant Accounting Policies cont/d c) Financial Assets and Financial Liabilities at Fair Value Through Profit or Loss cont/d Recognition and Derecognition Recognition and initial measurement Purchases and sales of investments are recognised as of the day the transaction takes place (trade date), the date on which the Sub- commits to purchase or sell the asset. Other financial assets and liabilities are recognised on the date in which they originated. Investments are initially recognised at fair value, and costs for all financial assets and financial liabilities carried at FVTPL are expensed as incurred. Financial assets and liabilities not at FVTPL are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue. De-recognition Investments are de-recognised when the rights to receive cash flows from the investments have expired or the relevant Sub- has transferred substantially all risks and rewards of ownership. On de-recognition of a financial asset, the difference between the carrying amount of the asset and consideration received is recognised in the Condensed Statement of Comprehensive Income. Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or expired. Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the relevant Sub- has access at that date. The fair value of a liability reflects its non-performance risk. i) Transferable Securities FRS 102, the accounting standard applicable in the UK and Ireland (to which FRS 104 Interim Financial Reporting relates) requires that a reporting entity, in accounting for its financial instruments apply either a) the full provisions of section 11 "Basis Financial Instruments" and section 12 "Other Financial Instruments" of FRS 102, b) the recognition and measurement provisions of IAS 39 Financial Instruments: Recognition and Measurement and only the disclosure requirements of Sections 11 and 12 of FRS 102; or c) the recognition and measurement provisions of International Financial Reporting Standards ( IFRS ) 9, Financial Instruments and/or IAS 39 (as amended following the publication of IFRS 9) and only the disclosure requirements of Sections 11 and 12 of FRS 102. The ICAV has chosen to implement the recognition and measurement provisions of IAS 39 and only the disclosure requirements of Sections 11 and 12. When available, the Sub-s measure the fair value of an investment using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Sub-s measure instruments quoted in an active market at a last traded price, because this price provides a reasonable approximation of exit price. If there is no quoted price in an active market, then the Sub- uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. The Sub- recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred. ii) Forward Currency Contracts A Sub- may enter into forward currency contracts to hedge against exchange rate risk. A forward currency contract allows the Sub-s to purchase or sell a specific currency on a future date at a price set at the time of the contract. Performance may be significantly influenced by movements in foreign exchange rates because currency positions held by a Sub- may not correspond with the currency of the securities invested in. The unrealised gain or loss on forward currency contracts is calculated as the difference between the contract price and the spot price as at the reporting period end. Any changes in fair value are recognised in the Condensed Statement of Comprehensive Income. 18

19 Notes to the Condensed Financial Statements for the period ended 31 March 2016 cont/d 1. Significant Accounting Policies cont/d d) Amortised Cost Financial assets and financial liabilities other than those at FVTPL are held at amortised cost. The amortised cost of the financial asset or financial liability is amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the accumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. i) Cash and Cash Equivalents Cash comprises current deposits with banks. Cash and cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Cash and cash equivalents are carried at amortised cost in the Condensed Statement of Financial Position which approximates their fair value. ii) Debtors and Creditors Debtors and creditors are accounted for on an accruals basis in the Condensed Statement of Financial Position and are carried at amortised cost which approximates their fair value. e) Right of Offset Financial assets and liabilities are offset and the net amount presented in the Condensed Statement of Financial Position when, and only when, the ICAV or the Sub-s have a legal right to set off the amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis for gains and losses from financial instruments at fair value through profit and loss and foreign exchange gains and losses. The ICAV s financial assets and liabilities are not subject to offsetting, enforceable master netting arrangements and similar agreements. f) Investment Income i) Dividend income Dividend income arising on the underlying equity investments of the ICAV is recognised as income of the relevant Sub- on the ex-dividend date. Income is shown gross of any non-recoverable withholding taxes, which is disclosed separately in the Condensed Statement of Comprehensive Income, and net of any tax credits. ii) Interest income/expense Interest income/interest expense is recognised as income/expense of the relevant Sub- of the ICAV on an effective interest basis in line with the contractual terms. g) Expenses All expenses are recognised in the Condensed Statement of Comprehensive Income on an accruals basis. Expenses arising on the disposal of investments are deducted from the disposal proceeds. h) Realised Gains and Losses Realised gains and losses on sale of investments are calculated based on the average book cost of the investment in local currency and are included in net gains/(losses) on investment activities in the Condensed Statement of Comprehensive Income. i) Unrealised Gains & Losses Unrealised gains and losses on investments are the difference between the original cost of the investment and its value at the reporting period end and are included in net gain/(loss) on investment activities in the Condensed Statement of Comprehensive Income. 19

20 Notes to the Condensed Financial Statements for the period ended 31 March 2016 cont/d 1. Significant Accounting Policies cont/d j) Taxation Dividend and interest income received by the Sub-s may be subject to withholding tax imposed in the country of origin. Investment income is recorded gross of such taxes and the corresponding withholding tax is recognised as a tax expense. Withholding tax reclaims receivable are recorded as other receivables in the Condensed Statement of Financial Position. k) Redeemable Participating Shares The ICAV issues redeemable participating shares in each Sub-, which are redeemable at the holder's option and are classified as financial liabilities. Redeemable participating shares can be put back to the relevant Sub- at any time for cash, securities or a combination of cash and securities equal to a proportionate share of the Sub-'s Net Asset Value in accordance with the Prospectus. The Sub- s Net Asset Value per Share is calculated by dividing the net assets attributable to the redeemable participating shareholders by the total number of outstanding redeemable participating shares. Investment positions are valued in accordance with the valuation methodology laid out in the Prospectus for the purpose of determining the Net Asset Value per Share for subscriptions and redemptions. l) Transaction Costs Transaction costs are defined as the incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or a financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. When a financial asset or a financial liability is recognised initially, an entity shall measure it at its fair value through profit or loss plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on purchases and sales of securities and other investments are included in net gain/(loss) on investment activities in the Statement of Comprehensive Income account and transaction costs on custody transactions are included in operating expenses in the Statement of Comprehensive Income for each. These costs are separately identifiable transaction costs and the total costs incurred by each Sub- during the period are disclosed in Note 5. m) Distribution Policy The ICAV may issue either or both distributing share classes and accumulating share classes.the Directors may declare dividends in respect of Shares in any Distributing Class out of net income (including dividend and interest income) and the excess of realised and unrealised capital gains over realised and unrealised losses in respect of investments of the Sub-. In the case of Sub-s with accumulating share classes, the Directors have determined to accumulate all net investment income and net realised capital gains attributable to such Accumulating Classes and therefore do not intend to declare dividends in respect of Shares in such classes. n) Significant Accounting Estimates and Assumptions Critical accounting estimates are those which involve the most complex or subjective judgments or assessments. The areas of the ICAV s business that typically require such estimates are the determination of the fair value of financial assets and liabilities as outlined in Note 1(a). The Directors also made the assessment on the functional and presentation currency as outlined in note 1(b) and have also made the assessment on uncertain tax liabilities with respect to foreign capital gains taxes as outlined in Note 2. 20

21 Notes to the Condensed Financial Statements for the period ended 31 March 2016 cont/d 2. Taxation Under current law and practice the ICAV qualifies as an investment undertaking as defined in Section 739B of the Taxes Consolidation Act, 1997, as amended, (the Taxes Consolidation Act ). On that basis, it is generally not chargeable to Irish tax on its income and gains so long as the ICAV is nonresident for tax purposes in Ireland. However, Irish tax may arise on the happening of a chargeable event. A chargeable event includes any distribution payments to shareholders or any encashment, redemption, cancellation or transfer of share and the holding of shares at the end of each eight year period beginning with the acquisition of such shares. No Irish tax will arise on the ICAV in respect of chargeable events in respect of: o a shareholder who is neither Irish resident nor ordinarily resident in Ireland for tax purposes, at the time of the chargeable event, provided appropriate valid declarations in accordance with the provisions of the Taxes Consolidation Act, are held by the ICAV; and o certain exempted Irish tax resident shareholders who have provided the ICAV with the necessary signed statutory declarations. There were no chargeable events during the period under review. Dividends, interest and capital gains (if any) received on investments made by the ICAV may be subject to withholding taxes imposed by the country from which the investments income/gains are received and such taxes may not be recoverable by the ICAV and its shareholders. Withholding tax and reclaims incurred on dividends are recorded on ex-date. Dividends receivable are shown net of withholding taxes payable, if any, in the Condensed Statement of Financial Position. The ICAV may be subject to taxes imposed on realised and unrealised gains on securities of certain foreign countries in which the ICAV invests. The foreign tax expense, if any, is recorded on an accrual basis and is included in Capital gains taxes in the Condensed Statement of Comprehensive Income. The amount of foreign tax owed, if any, is included in Capital gains tax payable in the Condensed Statement of Financial Position. Capital gains, dividends and interest received may be subject to withholding taxes imposed by the country of origin and such taxes may not be recoverable by the ICAV or its shareholders. The dividend withholding tax charge for the period ended 31 March 2016 is presented in the Condensed Statement of Comprehensive Income. There was no capital gains tax charge for the period ended 31 March Share Capital & Net Asset Value per Share Authorised The authorised share capital of the ICAV is 500,000,300,002 Shares of no par value divided into 300,002 Subscriber Shares of no par value and 500,000,000,000 redeemable participating shares of no par value. The Directors have the power to issue all of the shares of the ICAV on such terms as they think fit. Subscriber shares The ICAV issued an additional 300,000 subscriber shares at 1 each for the purpose of the registration of the ICAV, which have largely since been redeemed. The remaining 101 shares in issue are legally and beneficially owned by F&C Asset Management plc (1) and F&C Asset Management Limited (100) as at the period end. The subscriber shares entitle the holders to attend and vote at any general meetings of the ICAV but do not entitle the holders to participate in the profits or assets of the ICAV except for a return of capital on a winding-up. They do not form part of the Net Asset Value of the ICAV and are thus disclosed in the financial statements by way of this note only. Redeemable Participating Shares Each of the Shares entitles the holder to attend and vote at meetings of the ICAV and to participate equally in the profits and assets of the Sub- to which the Shares relate, subject to any differences between fees, charges and expenses applicable to different Classes. Each Shareholder shall have one vote for each whole Share held. The liability of the Shareholders shall be limited to the amount, if any, unpaid on the Shares respectively held by them, and the Shareholders shall not be liable for the debts of the Sub-. Minimum subscription and redemption amounts are specified in the relevant Supplement for each Sub-. 21