Semi-Annual Financial Statements

Transcription

1 2013 Semi-Annual Financial Statements for the period ended June 30, 2013 High Yield & Mortgage Plus Trust High Yield & Mortgage Plus Fund

2 Table of Contents HIgH YIeld & MorTgAge PlUS TrUST Financial Statements Statement of Investment Portfolio Statements of Net Assets Statements of operations and retained earnings (deficit) Statements of Changes in Net Assets Statements of Cash Flows Trust Specific Financial Instruments risks HIgH YIeld & MorTgAge PlUS FUNd Financial Statements Statement of Investment Portfolio Statements of Net Assets Statements of operations and retained earnings (deficit) Statements of Changes in Net Assets Statements of Cash Flows Fund Specific Financial Instruments risks Notes to the Financial Statements Trust and Fund Information CI Investments Inc., the Manager of the Trust and the Fund appoints independent auditors to audit the Trust s and the Fund s Annual Financial Statements. Under Canadian securities laws (National Instrument ), if an auditor has not reviewed the Semi-Annual Financial Statements, this must be disclosed in an accompanying notice. The Trust s and the Fund s independent auditors have not performed a review of these Semi-Annual Financial Statements in accordance with standards established by the Canadian Institute of Chartered Accountants.

3 HIgH YIeld & MorTgAge PlUS TrUST Financial Statements (unaudited) Statement of Investment Portfolio (as at June 30, 2013) Average Fair Number of Shares Description Cost ($) Value ($) Equities Subject to Forward Agreement (63.6%) 20,609 Athabasca oil Corp.* 239, , ,072 Bankers Petroleum ltd.* 783, , ,624 BlackPearl resources Inc.* 4,047, ,813 97,744 Canfor Corp.* 2,141,571 1,818,038 10,963 Catamaran Corp.* 509, , ,191 Celestica Inc.* 1,901,814 1,983, ,796 CgI group Inc.* 3,188,000 11,358,917 70,822 Meg energy Corp.* 2,229,804 2,034, ,422 osisko Mining Corp.* 3,464,580 1,250,664 54,428 Paramount resources ltd., Class A* 1,967,636 1,935, ,956 Turquoise Hill resources ltd.* 3,085,062 1,675,596 Commissions and other portfolio transaction costs Total Equities Subject to Forward Agreement (63.6%) 23,558,425 23,875,064 DERIVATIVE INSTRUMENTS Forward Agreement (37.4%) (see Schedule A) 14,025,320 Total Investments (101.0%) 23,558,425 37,900,384 Other Net Assets (Liabilities) (-1.0%) (373,398) Net Assets (100%) 37,526,986 *Securities sold forward as part of the Forward Agreement. Percentages shown in brackets relate investments at fair value to net assets of the Trust. Semi-Annual Financial Statements as at June 30,

4 HIgH YIeld & MorTgAge PlUS TrUST Financial Statements (unaudited) (cont d) Statement of Investment Portfolio (as at June 30, 2013) (cont d) Schedule A Forward Agreement (37.4%) Investments sold forward Fair Value ($) Athabasca oil Corp. (134,165) Bankers Petroleum ltd. (282,068) BlackPearl resources Inc. (858,002) Canfor Corp. (1,818,038) Catamaran Corp. (561,196) Celestica Inc. (1,983,893) CgI group Inc. (11,358,917) Meg energy Corp. (2,041,798) osisko Mining Corp. (1,254,269) Paramount resources ltd., Class A (1,940,358) Turquoise Hill resources ltd. (1,678,285) (23,910,989) Notional Units Underlying Fund Fair Value ($) 2,686,510 High Yield & Mortgage Plus Fund 37,936,309 Total Forward Agreement Value 14,025,320 Settlement Date 31-dec.-14 Credit Rating of Counterparty A-1 Credit ratings are obtained from Standard & Poor s, where available, otherwise ratings are obtained from: Moody's Investors Service, Dominion Bond Rating Services or Canadian Bond Rating Services. Percentages shown in brackets relate investments at fair value to net assets of the Trust. Semi-Annual Financial Statements as at June 30,

5 HIgH YIeld & MorTgAge PlUS TrUST Financial Statements (unaudited) (cont d) Statements of Net Assets (in $000 s except for per unit amounts and number of units outstanding) As at As at June 30, 2013 December 31, 2012 ASSeTS Investments at fair value* Cash Unrealized gain on forward agreement receivable for securities sold dividends and accrued interest receivable liabilities Payable for securities purchased Payable for unit redemptions Management fees payable Unrealized loss on forward agreement Service fees payable distributions payable Spread fee payable Borrowing fee payable Accrued expenses Net assets and unitholders equity UNITHolderS equity Unit capital Contributed surplus retained earnings (deficit) Net assets and unitholders equity *Investments at cost Net assets per unit (Note 10) Number of units outstanding (Note 3) 23,875 24, ,025 15,277 38,028 40, ,527 39,546 18,326 20, ,464 17,983 37,527 39,546 23,558 27, ,667,325 2,667,325 Semi-Annual Financial Statements as at June 30,

6 HIgH YIeld & MorTgAge PlUS TrUST Financial Statements (unaudited) (cont d) Statements of Operations and Retained Earnings (Deficit) (in $000 s except for per unit amounts) For the periods ended June INveSTMeNT INCoMe dividends Interest other income Fees rebate less: Foreign withholding taxes expenses Management fees (Note 4) Administrative expenses (Note 4) Custody fees Interest expense Service fees (Note 4) legal fees Audit fees Independent review committee fees Harmonized sales tax Net investment income (loss) for the period Realized and unrealized gain (loss) on investments and commissions and other portfolio transaction costs realized gain (loss) on investments Foreign exchange gain (loss) Commissions and other portfolio transaction costs Forward fees (Note 4) Change in unrealized appreciation (depreciation) of investments and derivatives Net gain (loss) on investments Increase (decrease) in net assets from operations Increase (decrease) in net assets from operations per unit (192) (213) (1,485) 1,007 (138) (157) 2, STATeMeNTS of retained earnings (deficit) Retained earnings (deficit), beginning of period Increase (decrease) in net assets from operations (excess) deficiency on amounts paid on units redeemed distribution from net income distribution from realized gains Retained earnings (deficit), end of period Contributed surplus, beginning of period (excess) deficiency on amounts paid on units redeemed Contributed surplus, end of period 17,983 16, ,464 17, Semi-Annual Financial Statements as at June 30,

7 HIgH YIeld & MorTgAge PlUS TrUST Financial Statements (unaudited) (cont d) Statements of Changes in Net Assets (in $000 s) For the periods ended June Net assets, beginning of period CAPITAl TrANSACTIoNS Cost of units redeemed and repurchased (excess) deficiency on amounts paid on units redeemed distributions To UNITHolderS From net income From realized gains From return of capital Increase (decrease) in net assets from operations Net assets, end of period 39,546 43,227 (2,500) (2,503) (2,500) (2,503) ,527 41,483 Statements of Cash Flows (in $000 s) For the periods ended June CASH ProvIded BY (USed IN) operating ACTIvITIeS Net investment income (loss) Proceeds from sale of investments Purchase of investments Net change in non-cash balances related to operations FINANCINg ACTIvITIeS distributions paid Cost of units redeemed and repurchased Increase (decrease) in cash during the period Cash (Bank overdraft), beginning of period Cash (Bank overdraft), end of period (192) (213) 7,864 8,881 (5,092) (5,414) (6) (2) 2,574 3,252 (2,500) (2,511) (34) (782) (2,534) (3,293) 40 (41) (4) Semi-Annual Financial Statements as at June 30,

8 HIgH YIeld & MorTgAge PlUS TrUST Trust Specific Financial Instruments Risks (unaudited) (Note 14) The High Yield & Mortgage Plus Trust (the Trust ) is exposed to the financial instrument risks of the High Yield & Mortgage Plus Fund (the Fund ). The Trust was created to obtain exposure to an actively managed portfolio consisting primarily of high yield debt instruments, including corporate bonds, bank loans and commercial mortgage backed securities ( CMBS ) of Canadian CMBS issuers by virtue of the Forward Agreement. By entering into the Forward Agreement, the Trust eliminated the direct risk exposure to its common share portfolio, and assumed the risk exposure of the Fund, as well as credit risk to the Counterparty of the Forward Agreement in respect of any positive amount of the value of the Forward Agreement. details of the Fund s financial instruments risks exposure can be found in the Fund Specific Financial Instruments risks in the Fund s financial statements. As at June 30, 2013, the credit rating of the Counterparty to the Forward Agreement was A-1 (december 31, A-1). For details relating to fair value hierarchy, refer to the audited annual financial statements as at december 31, 2012, as the Trust's fair value hierarchy exposure remains unchanged. Semi-Annual Financial Statements as at June 30,

9 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) Statement of Investment Portfolio (as at June 30, 2013) Number of Shares/ Average Fair Par Value Description Cost ($) Value ($) CONSUMER DISCRETIONARY (28.3%) USd 165,000 Caesar's entertainment operating Co., Inc., 11.25% 06/01/ , , ,000 Canadian Satellite radio Holdings Inc., 9.75% 06/21/ , ,475 USd 95,000 CCo Holdings llc/cco Holdings Capital Corp., 5.75% 09/01/ ,312 96,674 USd 640,000 CCo Holdings llc/cco Holdings Capital Corp., 7% 01/15/ , ,542 USd 805,000 CCo Holdings llc/cco Holdings Capital Corp., 7.25% 10/30/ , ,560 USd 1,675,000 CityCenter Holdings llc 7.625% 01/15/2016 1,796,921 1,858,664 USd 200,000 Cogeco Cable Inc., 4.875% 05/01/ , ,575 USd 500,000 Columbus International Inc., 11.5% 11/20/ , ,658 USd 230,000 dish dbs Corp., 5% 03/15/ , ,842 USd 50,000 dish dbs Corp., 5.125% 05/01/ ,111 51,538 USd 60,000 eldorado resorts llc 8.625% 06/15/ ,095 60,742 USd 155,000 HdTFS Inc., 6.25% 10/15/ , ,162 USd 90,000 lamar Media Corp., 5% 05/01/ ,119 90,876 USd 190,000 limited Brands Inc., 8.5% 06/15/ , ,817 USd 129,350 MgM resorts International 4.25% 12/13/ , ,455 USd 410,000 Michaels Stores Inc., 7.75% 11/01/ , ,425 USd 100,000 MPl 2 Acquisition Canco Inc., 9.875% 08/15/ , ,391 USd 45,000 quebecor Media Inc., 5.75% 01/15/ ,680 46, ,000 quebecor Media Inc., 6.625% 01/15/ , ,290 65,000 quebecor Media Inc., 7.375% 01/15/ ,175 69,956 USd 750,000 quebecor World Inc., 9.75% 01/15/2015^ USd 145,000 reynolds group Issuer Inc., 5.75% 10/15/ , ,655 USd 320,000 reynolds group Issuer Inc., 7.875% 08/15/ , ,868 USd 535,000 Sirius xm radio Inc., 8.75% 04/01/ , ,985 USd 120,000 The Hertz Corp., 5.875% 10/15/ , ,003 USd 170,000 The Hertz Corp., 7.5% 10/15/ , ,770 USd 145,000 United rentals North America Inc., 9.25% 12/15/ , , ,000 videotron ltd., 5.625% 06/15/ , , ,000 videotron ltd., 7.125% 01/15/ , ,587 USd 540,000 videotron ltd., 9.125% 04/15/ , ,661 USd 830,000 xm Satellite radio Inc., 7.625% 11/01/ , ,565 10,472,267 10,728,360 TELECOMMUNICATION SERVICES (22.4%) USd 100,000 Centurylink Inc., 5.8% 03/15/ , ,602 USd 120,000 Centurylink Inc., 6.45% 06/15/ , ,580 USd 105,000 Centurylink Inc., 7.6% 09/15/ , ,917 USd 380,000 Cricket Communications Inc., 4.75% 03/08/ , ,310 USd 665,000 Crown Castle International Corp., 5.25% 01/15/ , ,470 USd 300,000 Crown Castle International Corp., 7.125% 11/01/ , ,839 USd 190,000 CSC Holdings Inc., 8.625% 02/15/ , ,818 USd 920,000 digicel ltd., 8.25% 09/01/ ,223 1,006,363 USd 310,000 Hughes Satellite Systems Corp., 6.5% 06/15/ , ,622 USd 200,000 Intelsat Jackson Holdings S.A., 7.5% 04/01/ , ,878 USd 35,000 Intelsat Jackson Holdings S.A., 8.5% 11/01/ ,532 39,666 USd 1,190,000 level 3 Financing Inc., 10% 02/01/2018 1,319,617 1,348,646 ^Denotes illiquid securities. Percentages shown in brackets relate investments at fair value to net assets of the Fund. Semi-Annual Financial Statements as at June 30,

10 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) (cont d) Statement of Investment Portfolio (as at June 30, 2013) (cont d) Number of Shares/ Average Fair Par Value Description Cost ($) Value ($) TELECOMMUNICATION SERVICES (22.4%) (cont d) USd 290,000 level 3 Financing Inc., 8.125% 07/01/ , ,273 USd 300,000 level 3 Financing Inc., 9.375% 04/01/ , ,784 USd 665,000 MetroPCS Wireless Inc., 7.875% 09/01/ , ,912 USd 435,000 NII International Telecom S.a.r.l., 7.875% 08/15/ , ,513 USd 705,000 Sprint Nextel Corp., 9% 11/15/ , ,578 USd 180,000 Trilogy International Partners llc 10.25% 08/15/ , ,751 USd 490,000 TW Telecom Holdings Inc., 8% 03/01/ , ,306 USd 105,000 Windstream Corp., 6.375% 08/01/ , ,261 USd 35,000 Windstream Corp., 7.75% 10/15/ ,846 38,102 8,260,415 8,514,191 ENERGY (13.5%) USd 255,000 Access Midstream Partners l.p./acmp Finance Corp., 4.875% 05/15/ , ,764 USd 110,000 Access Midstream Partners l.p./acmp Finance Corp., 5.875% 04/15/ , , ,000 Athabasca oil Corp., ristricted, 7.5% 11/19/ , ,925 USd 510,000 Baytex energy Corp., 6.75% 02/17/ , ,966 USd 325,000 Calfrac Holdings l.p., 7.5% 12/01/ , ,417 USd 90,000 Chaparral energy Inc., 9.875% 10/01/ , ,075 USd 90,000 Cimarex energy Co., 5.875% 05/01/ ,107 97,975 USd 80,000 Concho resources Inc., 5.5% 04/01/ ,216 82,882 USd 50,000 Connacher oil and gas ltd., 8.5% 08/01/ ,652 29,713 USd 270,000 Continental resources Inc., 5% 09/15/ , ,956 USd 150,000 denbury resources Inc., 4.625% 07/15/ , ,543 USd 435,000 ev energy Partners l.p., 8% 04/15/ , ,109 USd 225,000 Harvest operations Corp., 6.875% 10/01/ , ,871 USd 265,000 legacy reserves l.p./legacy reserves Financial Corp., 8% 12/01/ , ,786 USd 125,000 legacy reserves l.p./legacy reserves Finance Corp., 6.625% 12/01/ , ,545 USd 480,000 linn energy llc 8.625% 04/15/ , ,108 USd 100,000 linn energy llc/linn energy Finance Corp., 6.25% 11/01/ , ,184 USd 245,000 linn energy llc/linn energy Finance Corp., 7.75% 02/01/ , ,336 USd 105,000 Midstates Petroleum Co., Inc./Midstates Petroleum Co., llc 9.25% 06/01/ , ,813 USd 240,000 Northern oil and gas Inc., 8% 06/01/ , ,957 USd 170,000 PetroBakken energy ltd., 8.625% 02/01/ , ,866 USd 55,000 vanguard Natural resources llc/vnr Finance Corp., 7.875% 04/01/ ,205 58,861 4,974,211 5,124,086 MATERIALS (11.6%) USd 200,000 Aleris International Inc., 7.875% 11/01/ , ,619 70,000 Allied Nevada gold Corp., 8.75% 06/01/ ,235 60,200 USd 173,687 FMg resources Pty, ltd., 5.25% 10/18/ , ,857 USd 440,000 FMg resources Pty, ltd., 7% 11/01/ , ,420 USd 205,000 HudBay Minerals Inc., 9.5% 10/01/ , ,229 USd 140,000 IAMgold Corp., 6.75% 10/01/ , ,428 USd 230,000 Inmet Mining Corp., 8.75% 06/01/ , ,148 USd 490,000 NovA Chemicals Corp., 8.375% 11/01/ , ,017 USd 245,000 NovA Chemicals Corp., 8.625% 11/01/ , ,494 Percentages shown in brackets relate investments at fair value to net assets of the Fund. Semi-Annual Financial Statements as at June 30,

11 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) (cont d) Statement of Investment Portfolio (as at June 30, 2013) (cont d) Number of Shares/ Average Fair Par Value Description Cost ($) Value ($) MATERIALS (11.6%) (cont d) USd 260,000 Novelis Inc., 8.375% 12/15/ , ,876 USd 540,000 quadra FNx Mining ltd., 7.75% 06/15/ , ,492 USd 450,000 resolute Forest Products Inc., 5.875% 05/15/ , , ,000 Sherritt International Corp., 7.5% 09/24/ , , ,000 Sherritt International Corp., 7.75% 10/15/ , ,189 USd 60,000 Thompson Creek Metals Co., Inc., 7.375% 06/01/ ,515 53,326 29,000 Tree Island Steel ltd., 10% 11/26/ ,000 34,800 4,273,971 4,382,487 UTILITIES (5.6%) USd 869,000 Calpine Corp., 7.25% 10/15/ , ,861 USd 75,000 Calpine Corp., 7.5% 02/15/ ,759 84,210 USd 180,000 Calpine Corp., 7.875% 01/15/ , ,524 USd 40,000 dynegy Inc., 5.875% 06/01/ ,256 38,286 USd 165,000 energy Future Intermediate Holding Co., llc 10% 12/01/ , ,034 USd 110,000 genon energy Inc., 9.5% 10/15/ , ,425 USd 190,000 Nrg energy Inc., 7.625% 05/15/ , ,835 USd 270,000 Nrg energy Inc., 8.5% 06/15/ , ,510 2,022,050 2,109,685 HEALTH CARE (5.5%) 170,000 Centric Health Corp., 8.625% 04/18/ , ,367 USd 370,000 HCA Inc., 7.25% 09/15/ , ,867 USd 60,000 HCA Inc., 7.5% 02/15/ ,843 69,892 USd 60,000 HCA Inc., 7.875% 02/15/ ,356 67,960 USd 1,115,000 HCA Inc., 8.5% 04/15/2019 1,236,230 1,258,522 USd 105,000 Tenet Healthcare Corp., 4.5% 04/01/ , ,984 2,065,232 2,077,592 INDUSTRIALS (4.3%) USd 90,000 Be Aerospace Inc., 5.25% 04/01/ ,284 94,189 USd 65,000 Clean Harbors Inc., 5.125% 06/01/ ,932 68,880 USd 100,000 era group Inc., 7.75% 12/15/ , ,838 USd 325,000 Iron Mountain Inc., 5.75% 08/15/ , ,471 USd 225,000 Iron Mountain Inc., 8.375% 08/15/ , ,742 USd 200,000 livingston International Inc., 5% 04/18/ , ,229 USd 230,000 Masonite International Corp., 144A Series 8.25% 04/15/ , , ,000 rtl-westcan l.p., 9.5% 04/07/ , ,892 USd 99,750 Tervita Corp., 6.25% 02/11/ , ,786 1,550,589 1,614,690 PRIVATE PLACEMENTS (2.8%) USd 920,000 Cdx North America High Yield, Private Placement 8.875% 06/29/2013^ 842, ,195 USd 220,000 reliance Intermediate Holdings l.p., 144A, Private Placement 9.5% 12/15/ , ,908 1,072,293 1,063,103 ^Denotes illiquid securities. Percentages shown in brackets relate investments at fair value to net assets of the Fund. Semi-Annual Financial Statements as at June 30,

12 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) (cont d) Statement of Investment Portfolio (as at June 30, 2013) (cont d) Number of Shares/ Average Fair Par Value Description Cost ($) Value ($) CONSUMER STAPLES (2.1%) USd 65,000 Constellation Brands Inc., 3.75% 05/01/ ,618 64,009 USd 135,000 JBS USA llc/jbs USA Finance Inc., % 05/01/ , ,803 USd 130,000 Spectrum Brands Inc., 9.5% 06/15/ , ,724 USd 150,000 viterra Inc., 5.95% 08/01/ , ,288 USd 255,000 vpii escrow Corp., 6.75% 08/15/ , , , ,033 FINANCIALS (2.0%) 260,451 Tuckamore Capital Management Inc., 3.624% 03/23/ ,478 31,254 1,050,000 Tuckamore Capital Management Inc., 8% 03/23/ , ,750 1,007, ,004 INFORMATION TECHNOLOGY (2.0%) USd 110,000 Brocade Communications Systems Inc., 4.625% 01/15/ , ,756 USd 160,000 Brocade Communications Systems Inc., 6.875% 01/15/ , ,648 USd 200,000 Centurylink Inc., 6.875% 01/15/ , ,101 USd 220,000 Zayo group llc/zayo Capital Inc., % 07/01/ , , , ,355 ASSET-BACKED SECURITIES (1.3%) 444,017,154 Merrill lynch Financial Assets Inc., zero coupon, 02/12/2037^ ,633,777 Merrill lynch Financial Assets Inc., % 03/12/2036^ 3,772, ,812 3,772, ,856 WARRANTS (0.1%) 42,500 New gold Inc., Warrants (28Jun17) 52,700 Commissions and other portfolio transaction costs Total Bonds & Equities (101.5%) 41,011,747 38,487,142 DERIVATIVE INSTRUMENTS Foreign Currency Forward Contracts (-2.9%) (see Schedule A) (1,096,821) Total Investments (98.6%) 41,011,747 37,390,321 Other Net Assets (Liabilities) (1.4%) 543,862 Net Assets (100.0%) 37,934,183 Principal amounts stated in: USd U.S. dollar ^Denotes illiquid securities. Percentages shown in brackets relate investments at fair value to net assets of the Fund. Semi-Annual Financial Statements as at June 30,

13 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) (cont d) Statement of Investment Portfolio (as at June 30, 2013) (cont d) Schedule A Foreign Currency Forward Contracts (-2.9%) Credit Rating of Settlement Contract Unrealized Contracts Counterparty the Counterparty Date Rate ($) Pay Receive Gain (Loss)($) 1 royal Bank of Canada A-1+ 8-Jul (538,621) Canadian $ 512,000 US $ 27 1 royal Bank of Canada A-1+ 8-Jul (1,025,000) US $ 1,042,314 Canadian $ (36,017) 1 royal Bank of Canada A-1+ 8-Jul (31,661,000) US $ 32,281,339 Canadian $ (1,027,041) 1 royal Bank of Canada A-1+ 8-Jul (975,000) US $ 991,940 Canadian $ (33,790) Total Foreign Currency Forward Contracts Value (1,096,821) Credit ratings are obtained from Standard & Poor s, where available, otherwise ratings are obtained from: Moody's Investors Service, Dominion Bond Rating Services or Canadian Bond Rating Services. Percentages shown in brackets relate investments at fair value to net assets of the Fund. Semi-Annual Financial Statements as at June 30,

14 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) (cont d) Statements of Net Assets (in $000 s except for per unit amounts and number of units outstanding) As at June 30, 2013 ASSeTS Investments at fair value* 38,487 Cash 623 Short-term investments Unrealized gain on futures and foreign currency forward contracts daily variation margin on derivative investments Margin for short sales receivable for securities sold 1,715 dividends and accrued interest receivable ,633 As at December 31, , , ,913 liabilities Bank loan payable Payable for securities purchased Unrealized loss on futures and foreign currency forward contracts Management fees payable distributions payable Accrued expenses Net assets and unitholders equity 1,052 1,513 1, ,699 37, ,063 UNITHolderS equity Unit capital Contributed surplus retained earnings (deficit) Net assets and unitholders equity *Investments at cost Net assets per unit (Note 10) Number of units outstanding (Note 3) 40,429 9,095 (11,590) 37,934 41, ,686,510 41,904 9,094 (10,935) 40,063 38, ,688,590 Semi-Annual Financial Statements as at June 30,

15 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) (cont d) Statements of Operations and Retained Earnings (Deficit) (in $000 s except for per unit amounts) For the periods ended June INveSTMeNT INCoMe dividends Interest Income distribution from investments Fees rebate less: Foreign withholding taxes expenses Management fees (Note 4) Administrative expenses (Note 4) Commitment fees (Note 6) loan interest expense (Note 6) Interest expense dividend expense on securities sold short Interest expense on securities sold short legal fees Audit fees Independent review committee fees Harmonized sales tax Net investment income (loss) for the period Realized and unrealized gain (loss) on investments and commissions and other portfolio transaction costs realized gain (loss) on investments Foreign exchange gain (loss) Commissions and other portfolio transaction costs Change in unrealized appreciation (depreciation) of investments and derivatives Net gain (loss) on investments Increase (decrease) in net assets from operations Increase (decrease) in net assets from operations per unit 1 2 1,971 1,982 1,972 1, ,743 1,731 (600) (1,548) (43) 62 (1) (814) 925 (1,457) (562) 286 1, STATeMeNTS of retained earnings (deficit) Retained earnings (deficit), beginning of period Increase (decrease) in net assets from operations (excess) deficiency on amounts paid on units redeemed distribution from net income distribution from realized gains Retained earnings (deficit), end of period Contributed surplus, beginning of period (excess) deficiency on amounts paid on units redeemed Contributed surplus, end of period (10,935) (11,232) 286 1,169 (941) (11,590) (10,063) 9,094 9, ,095 9,094 Semi-Annual Financial Statements as at June 30,

16 HIgH YIeld & MorTgAge PlUS FUNd Financial Statements (unaudited) (cont d) Statements of Changes in Net Assets (in $000 s) For the periods ended June Net assets, beginning of period CAPITAl TrANSACTIoNS Cost of units redeemed (excess) deficiency on amounts paid on units redeemed distributions To UNITHolderS From net income From realized gains From return of capital Increase (decrease) in net assets from operations Net assets, end of period 40,063 44,052 (36) (812) 1 29 (35) (783) (941) (1,439) (2,345) (2,380) (2,345) 286 1,169 37,934 42,093 Statements of Cash Flows (in $000 s) For the periods ended June CASH ProvIded BY (USed IN) operating ACTIvITIeS Net investment income (loss) Proceeds from sale of investments Purchase of investments Margin for short sales Net change in non-cash balances related to operations FINANCINg ACTIvITIeS Proceeds from bank loan distributions paid Amounts paid for units redeemed Increase (decrease) in cash during the period Cash (Bank overdraft), beginning of period Cash (Bank overdraft), end of period 1,743 1,731 26,202 16,333 (26,932) (15,127) (247) 82 1,585 3,108 1,052 (2,880) (2,845) (35) (783) (1,863) (3,628) (278) (520) 901 1, ,018 Semi-Annual Financial Statements as at June 30,

17 HIgH YIeld & MorTgAge PlUS FUNd Fund Specific Financial Instruments Risks (unaudited) (Note 14) The Fund s investments were concentrated in the following segments: as at December 31, 2012 Category Net Assets (%) Consumer discretionary 17.9 Telecommunication Services 13.7 Canadian government Bonds 11.6 energy 11.6 Materials 10.2 Short-Term Investments 6.2 Utilities 6.1 Financials 5.2 Health Care 4.0 other Net Assets (liabilities) 3.9 Private Placements 3.2 Asset-Backed Securites 2.8 Industrials 2.3 Consumer Staples 1.0 Warrants 0.3 Information Technology 0.3 Foreign Currency Forward Contracts (0.3) during the six-month period the Fund's other price risk, interest rate risk, credit risk and fair value hierarchy exposure changed significantly as disclosed in the section below. For details relating to currency risk, refer to the audited annual financial statements as at december 31, 2012, as the Fund's currency risk exposure remains unchanged. Other Price Risk As at June 30, 2013 and december 31, 2012, the Fund did not have a significant exposure to other price risk as the Fund was mainly invested in high-yield bonds and asset backed securities. As at June 30, 2013, had the global markets increased or decreased by 10% (december 31, %), with all other variables held constant, net assets of the Fund would have increased or decreased, respectively, by approximately $5,000 (december 31, $12,000). In practice, actual results may differ from this analysis and the difference may be material. Semi-Annual Financial Statements as at June 30,

18 HIgH YIeld & MorTgAge PlUS FUNd Fund Specific Financial Instruments Risks (unaudited) (Note 14) (cont d) Interest Rate Risk As at June 30, 2013 and december 31, 2012, the Fund was exposed to interest rate risk as a significant portion of its investments were in interest bearing securities that are sensitive to changes in the prevailing levels of market interest rates. The Fund s assets were invested in below investment grade corporate bonds which are less sensitive to changes in prevailing interest rates. As a result, the interest rate risk associated with these types of bonds was considerably lower when compared to investment grade bonds. The Fund was also invested in assets-backed securities as well as in floating rate notes and bank loans with coupons paying a fixed spread to the london Inter-Bank offer rate (libor). Coupons on floating rate notes are re-set with frequencies ranging from monthly to quarterly. Any excess was invested in short-term discount instruments. The tables below summarize the Fund s exposure to interest rate risk, categorized by the contractual maturity date. as at June 30, 2013 Less than Greater 1 Year Years Years than 5 Years Total (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) Interest Rate Exposure 1,617 4,496 8,639 24,305 39,057 as at December 31, 2012 Less than Greater 1 Year Years Years than 5 Years Total (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) Interest Rate Exposure 8,067 4,787 9,321 18,052 40,227 As at June 30, 2013, had the prevailing interest rates increased or decreased by 0.25% (december 31, %), with all other variables held constant, net assets of the Fund would have decreased or increased, respectively, by approximately $284,000 (december 31, $204,000). In practice, the actual results may differ from this analysis and the difference may be material. Credit Risk As at June 30, 2013 and december 31, 2012, the Fund was exposed to credit risk as it was invested in below investment grade or speculative grade corporate bonds as well as asset-backed securities that bear an investment grade rating. All fixed income securities rated BB/Ba/B+ or lower are considered below investment grade and have a higher credit risk than investment grade bonds. The Fund was invested in fixed income securities, preferred securities and derivative instruments, as applicable, with the following credit ratings: as at June 30, 2013* CredIT rating^ Net Assets (%) AAA/AAA/A BBB/Baa/B BB/Ba/B B 41.0 CCC/Caa/C Not rated 5.5 Total *Credit ratings are obtained from Standard & Poor s, where available, otherwise ratings are obtained from: Moody s Investors Service, Dominion Bond Rating Services or Canadian Bond Rating Services, respectively. ^Refer to Note 14 for Credit Rating cross reference. Semi-Annual Financial Statements as at June 30,

19 HIgH YIeld & MorTgAge PlUS FUNd Fund Specific Financial Instruments Risks (unaudited) (Note 14) (cont d) Credit Risk (cont d) as at December 31, 2012* CredIT rating^ Net Assets (%) AAA/AAA/A BBB/Baa/B BB/Ba/B B 33.3 CCC/Caa/C Not rated 4.5 Total 96.1 Fair Value Hierarchy The tables below summarize the inputs used by the Fund in valuing the Fund s investments and derivatives carried at fair value. Long Positions at fair value as at June 30, 2013 Level 1 Level 2 Level 3 Total (in $000 s) (in $000 s) (in $000 s) (in $000 s) Bonds 37, ,922 Asset-backed securities Warrants Foreign currency forward contracts, net (1,097) (1,097) Total 53 36,012 1,325 37,390 Long Positions at fair value as at December 31, 2012 Level 1 Level 2 Level 3 Total (in $000 s) (in $000 s) (in $000 s) (in $000 s) Bonds 34,893 34,893 Asset-backed securities 1,116 1,116 Short-term investments 2,498 2,498 Warrants Foreign currency forward contracts, net (132) (132) Total ,259 1,116 38,494 There were no transfers between level 1 and 2 and level 1 and 3 during the six-month period ended June 30, 2013 and the year ended december 31, *Credit ratings are obtained from Standard & Poor s, where available, otherwise ratings are obtained from: Moody s Investors Service, Dominion Bond Rating Services or Canadian Bond Rating Services, respectively. ^Refer to Note 14 for Credit Rating cross reference. Semi-Annual Financial Statements as at June 30,

20 HIgH YIeld & MorTgAge PlUS FUNd Fund Specific Financial Instruments Risks (unaudited) (Note 14) (cont d) The tables below summarize the movement in level 3 financial instruments at fair value using unobservable inputs. For the period ended June 30, 2013 Balance at Net transfers Realized gain Unrealized gain Balance at Dec. 31, 2012 Purchases Sales in (out) (loss) (loss)* Jun. 30, 2013 (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) Long Positions Bonds Asset-backed securities 1,116 (604) 512 Total 1, (586) 1,325 *Change in unrealized gain (loss) related to investments held at June 30, 2013 was ($579,402). during the period ended June 30, 2013, fixed income investments with a net fair value of $795,000 were transferred out of level 2 into level 3 as observable market inputs were not longer available for these investments. For the year ended December 31, 2012 Balance at Net transfers Realized gain Unrealized gain Balance at Dec. 31, 2011 Purchases Sales in (out) (loss) (loss)** Dec. 31, 2012 (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) (in $000 s) Long Positions Bonds 187 (2) (185) 2 (2) Assets-backed securities 2,333 (1,217) 1,116 Total 2,520 (2) (185) 2 (1,219) 1,116 **Change in unrealized gain (loss) related to investments held at december 31, 2012 was ($1,216,497). during the year ended december 31, 2012, fixed income investments with a net fair value of $185,000 were transfered out of level 3 into level 2 as observable market inputs became available for these investments. Investments classified as level 3 are valued at fair value based on unobservable inputs and assumptions, which may include credit spreads, industry multipliers and discount rates. Management has assessed that the effect of changing the credit spread to reasonably possible alternatives would not have a significant impact on the net assets of the Fund as at June 30, 2013 (december 31, 2012 the fair value of the Fund would have increase by $6,000, or decrease by $5,600). Semi-Annual Financial Statements as at June 30,

21 Notes to the Financial Statements (unaudited) 1. THe TrUST ANd THe FUNd High Yield & Mortgage Plus Trust (the Trust ) is a closed-end investment trust established under the laws of the Province of ontario pursuant to a declaration of Trust dated as of November 28, on december 18, 2003, the Trust completed its initial public offering of 4,000,000 units at $25 per unit. The Trust is listed on the Toronto Stock exchange, under the symbol HYM.UN. on January 8, 2004, an over-allotment option granted to agents was exercised for further issuance of 600,000 units at $25 per unit. The Trust is managed by CI Investments Inc. (the Manager and Trustee ). The Trust will terminate operations on december 31, 2014 (the Termination date ) and the net assets will be distributed pro rata to unitholders unless an alternative later termination date is approved by unitholders. Through a forward agreement (the Forward Agreement ) with Canadian Imperial Bank of Commerce, the Trust provides unitholders with exposure to the performance of the High Yield & Mortgage Plus Fund (the Fund ), an actively managed portfolio consisting primarily of high yield debt instruments, including corporate bonds, bank loans and commercial mortgage backed securities ( CMBS ) of Canadian CMBS issuers. The Trust may partially settle the Forward Agreement prior to the Termination date in order to fund monthly distributions, redemptions of units, payment for purchases of units in the market and expenses of the Trust. The High Yield & Mortgage Plus Fund is an investment trust established under the laws of the Province of ontario pursuant to a declaration of Trust dated as of November 28, on december 18, 2003, the Fund completed its initial exempt offering of 4,000,000 units at $25 per unit. The Fund is managed by CI Investments Inc. (the Manager and Trustee ). The Manager has retained Marret Asset Management Inc. ( Marret or the Investment Advisor ) as investment advisor to the Fund to manage the Fund s investment portfolio pursuant to an Investment Advisory Agreement between the Manager and Marret. 2. SUMMArY of SIgNIFICANT ACCoUNTINg PolICIeS These financial statements have been prepared in accordance with Canadian generally Accepted Accounting Principles ( Canadian gaap ). Significant accounting policies used in preparing semi-annual financial statements are consistent with those used in preparing annual financial statements. The semi-annual financial statements should be read in conjunction with Trust s and Fund s december 31, 2012 annual financial statements. (a) Valuation of Investments Canadian gaap requires the fair value of financial instruments traded in an active market to be measured based on an investment s bid/ask price depending on the investment position (long/short). For the purpose of processing unitholder transactions, net asset value is calculated based on the closing market price of exchange-traded investments (referred to as Net Asset value ), while for financial statement purposes net assets are calculated based on bid/ask price of such investments (referred to as Net Assets ). In accordance with National Instrument , a comparison between the Net Asset value per unit and the Net Assets per unit is disclosed in Note 10. At the financial reporting date, listed securities are valued based on the bid price for securities held long and the ask price for securities held short. Unlisted securities are valued based on price quotations from recognized investment dealers, or failing that, their fair value is determined by the Manager on the basis of the latest reported information available. Fixed income securities, debentures, money market investments and other debt instruments including short-term investments, are valued at the bid quotation from recognized investment dealers. Underlying funds are valued on each business day at their net asset value as reported by the Underlying Fund s manager. Semi-Annual Financial Statements as at June 30,

22 Notes to the Financial Statements (unaudited) (cont d) (b) Forward Contracts The Fund may enter into forward contracts. Forward foreign currency contracts are valued on each valuation day based on the difference between the value of the contract on the date the contract originated and the value of the contract on the valuation day. All unrealized gains (losses) arising from forward foreign currency contracts are recorded as part of Change in unrealized appreciation (depreciation) of investments and derivatives in the Statements of operations and Unrealized gain (loss) on futures and foreign currency forward contracts in the Statements of Net Assets until the contracts are closed out or expire, at which time the gains (losses) are realized and reported as realized gain (loss) on investments in the Statements of operations. The value of the forward contract as part of the Forward Agreement held by the Trust on the valuation date is equal to the gain or loss that would be realized if the contract was closed out or expired. Investments sold forward as part of the Forward Agreement are valued at the market close price, and the underlying fund is valued at its net asset value as reported by the underlying fund s manager on the valuation date for purposes of determining the value of the Forward Agreement. All gains (losses) arising from the Forward Agreement are recorded as part of Change in unrealized appreciation (depreciation) of investments and derivatives in the Statements of operations and Unrealized gain (loss) on forward agreement in the Statements of Net Assets until the contract is closed out or expire; at which time the gains (losses) are realized and reported as realized gain (loss) on investments in the Statements of operations. (c) Private Placements The fair value of private placements is determined by using valuation models that may be based, in part, on assumptions that are not supported by observable market inputs. These methods and procedures may include, but are not limited to, performing comparisons with prices of comparable or similar securities, obtaining valuation related information from issuers and/or other analytical data relating to the investment and using other available indications of value. These values are independently assessed internally to ensure that they are reasonable. However, because of the inherent uncertainty of valuation, the estimated fair values for the aforementioned securities and interests may be materially different from the values that would have been used had a ready market for the investment existed. The fair values of private placements are affected by the perceived credit risks of the issuer, predictability of cash flows and the length of time to maturity. 3. UNITHolderS equity Units issued and outstanding represent the capital of the Trust. The relevant changes pertaining to subscription and redemption of the Trust units are disclosed in the Statements of Changes in Net Assets. In accordance with the objectives and risk management polices outlined in Note 14, the Trust endeavors to invest subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions through utilizing a short-term borrowing facility or partial settlement of the Forward Agreement. The Trust is authorized to issue an unlimited number of transferable units of a single class, each of which represents an equal, undivided interest in the net assets of the Trust. Unitholders are entitled to redeem their units outstanding at the end of each year (the Annual redemption ). Annual redemption price per unit is equal to net asset value per unit determined on the annual valuation date. The Trust endeavours to provide unitholders with monthly distributions of $ per unit ($1.875 per annum to yield 7.5% on the subscription price of $25.00 per unit). distributions commenced on January 31, Semi-Annual Financial Statements as at June 30,

23 Notes to the Financial Statements (unaudited) (cont d) For the periods ended June 30, net capital transactions of the Trust consisted of the following: Unit Transactions Balance, beginning of period 2,667,325 2,669,610 Units redeemed Units purchased for cancellation (Note 5) Balance, end of period 2,667,325 2,669,610 Units issued and outstanding represent the capital of the Fund. The relevant changes pertaining to subscription and redemption of the Fund units are disclosed in the Statements of Changes in Net Assets. In accordance with the objectives and risk management polices outlined in Note 14, the Fund endeavors to invest subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions through utilizing a short-term borrowing facility or disposal of investments when necessary. The Fund is authorized to issue an unlimited number of redeemable, transferable units of one class, each of which represents an equal, undivided interest in the net assets of the Fund. The counterparty is entitled to redeem their units daily. Units will be redeemed at the net asset value per unit on such date. For the periods ended June 30, net capital transactions of the Fund consisted of the following: Unit Transactions Balance, beginning of period 2,688,590 2,736,648 Units issued for cash 205 Units redeemed (2,285) (48,058) Balance, end of period 2,686,510 2,688,590 When units of the Trust and the Fund are redeemed at a price per unit which is lower than the average cost per unit of capital, the difference is included in Contributed surplus on the Statements of Net Assets. If the redemption price is greater than the average cost of capital, the difference is first charged to Contributed surplus until the entire account is eliminated, and the remaining amount is charged to retained earnings (deficit) in the Statements of Net Assets. 4. FeeS ANd other expenses (a) Management Fees The Trust pays to the Manager an annual fee equal to 0.25% of the Net Asset value of the Trust determined at the end of each month, calculated and paid monthly in arrears, plus an amount equal to the service fees payable by the Manager to registered dealers. The Fund pays to the Manager an annual fee equal to 0.85% of the Net Asset value of the Fund determined at the end of each month, calculated and paid monthly in arrears. (b) Administrative expenses The Trust and the Fund are also responsible for all their expenses incurred in connection with their operations and administration, (fees shown as administration fees include: trustee fees, transfer agency, custody and accounting fees). Audit fees, legal fees and independent review committee fees are disclosed separately. Semi-Annual Financial Statements as at June 30,

24 Notes to the Financial Statements (unaudited) (cont d) (c) Service Fees The Manager of the Trust pays an annual fee of 0.40% of the Net Asset value per Trust unit for units held by clients of registered dealers to the dealers in the form of a service fee calculated and paid quarterly in arrears. (d) Advisory Fees A portion of the management fee payable to the Fund Manager will be paid to the Investment Advisor by the Fund Manager. (e) Forward Agreement Fees The Trust will pay to the counterparties under the Forward Agreement a fee of approximately 0.55% per annum of the fair value of notional exposure to the Fund under the Forward Agreement ( spread fee ), plus an ongoing fee ( borrowing fee ) which may vary based upon hedging costs associated with the Forward Agreement, calculated and paid monthly in arrears. 5. MArKeT repurchase ProgrAM In accordance with the Trust s prospectus, and to enhance liquidity and to provide support to the units, the Trust has a mandatory market purchase program under which the Trust, subject to exceptions contained in the Trust Agreement and in compliance with any regulatory requirements, is obligated to purchase its own units for cancellation. If, on any business day, the price at which units are offered for sale is less than 90% of the net asset value per unit determined as of the most recent valuation date, the Trust will offer to purchase for cancellation any units offered in the market at the then prevailing market price. The maximum number of units to be purchased in any three month period will not be over 1.25% of the number of units outstanding at the beginning of such period. during the periods ended June 30, 2013 and 2012, the Trust purchased no units for cancellation. 6. loan FACIlITY High Yield & Mortgage Plus Fund has entered into a revolving term credit facility with The Bank of Nova Scotia, a related party (see Note 11), up to a maximum principal amount of $10,000,000. Under the terms of the credit agreement, the High Yield & Mortgage Plus Fund may borrow up to 25% of its Net Asset value, determined at the time of borrowing, in the form of Bankers Acceptances or Prime rate loans. Amounts borrowed are secured by a general security interest in all the personal property, assets and undertakings of the High Yield & Mortgage Plus Fund that are not otherwise pledged. The loan facility bears interest at a rate equal to libor plus 1.00%, The Bank of Nova Scotia s prime rate or the U.S. federal funds effective rate, depending on the form of the loan. In addition, High Yield & Mortgage Plus Fund is required to pay a commitment fee of 0.25% per annum on the maximum principal amount less any amounts drawn. during the period ended June 30, 2013 the Fund paid a nominal amount in interest expense (June 30, nil). As at June 30, 2013, the amount of the loan facility outstanding was $1,052,000 ( nil). The maturity date of the credit facility is November 25, BroKerAge ANd other CoMMISSIoNS Commissions paid for security transactions during the periods ended June 30 were as follows: (in $000 s) (in $000 s) Brokerage Commissions High Yield & Mortgage Plus Trust High Yield & Mortgage Plus Fund Soft Dollar Commissions High Yield & Mortgage Plus Trust High Yield & Mortgage Plus Fund A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. These amounts have been estimated by the Manager. Semi-Annual Financial Statements as at June 30,

25 Notes to the Financial Statements (unaudited) (cont d) 8. SeCUrITIeS lending The Trust may engage in securities lending. Under a Securities lending Agreement: (i) the borrower will pay to the Trust a negotiated securities lending fee and will make compensation payments to the Trust equal to any distributions received by the borrower on the securities borrowed; (ii) the securities loans must qualify as "securities lending arrangements" for the purposes of the Tax Act; and (iii) the Trust will receive prescribed collateral security which it may pledge as security under the Forward Agreement. The minimum level of collateralization in respect of a loan of Common Share Portfolio securities will be 105%. As at June 30, 2013 and 2012, the Trust was not engaged in securities lending. The Fund may engage in securities lending provided a number of conditions are satisfied, including that the loan is fully collateralized. The minimum level of collateralization in respect of a loan of the Fund s securities will be 105%. The Fund may also receive a fee or interest on the collateral, and may pay lending fees to a party arranging the loan. As at June 30, 2013 and 2012, the Fund was not engaged in securities lending. 9. INCoMe TAx losses CArrY ForWArd Net capital losses may be carried forward indefinitely to reduce future net realized capital gains. Non-capital losses arising in taxation years 2004 and 2005 may be carried forward ten years. Non-capital losses arising in taxation years after 2005 may be carried forward twenty years. Non-capital losses carried forward may reduce future taxable income. High Yield & Mortgage Plus Trust Losses carry forwards (in $000 s) as at December 31, Net capital losses carry forward 6,666 Year of expiry Total Non-capital losses carry forward High Yield & Mortgage Plus Fund Losses carry forwards (in $000 s) as at December 31, Net capital losses carry forward Year of expiry Total Non-capital losses carry forward 13, NeT ASSeTS CoMPArISoN In accordance with National Instrument , a comparison of net assets per unit and net asset value per unit, as at June 30, is as follows: High Yield & Mortgage Plus Trust 2013 ($) 2012 ($) Net assets per unit Net asset value per unit High Yield & Mortgage Plus Fund 2013 ($) 2012 ($) Net assets per unit Net asset value per unit Semi-Annual Financial Statements as at June 30,