Semi-Annual Financial Statements

Transcription

1 Semi-Annual Financial Statements BMO Private Portfolios June 30, 2017 BMO Private Canadian Short-Term Bond Portfolio NOTICE OF NO AUDITOR REVIEW OF THE SEMI-ANNUAL FINANCIAL STATEMENTS BMO Private Investment Counsel Inc., the Manager of the Portfolios, appoints independent auditors to audit the Portfolio 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 Portfolio s independent auditors have not performed a review of these Semi-Annual Financial Statements in accordance with standards established by the Chartered Professional Accountants of Canada.

2 STATEMENT OF FINANCIAL POSITION (All amounts in thousands of Canadian dollars, except per unit data) June 30 December 31 As at Assets Current Assets Cash 8,234 15,962 Investments Non-derivative financial assets 3,207,123 2,651,594 Receivable for investments sold 5,678 Subscriptions receivable 2,191 4,130 Interest receivable 12,790 13,076 Total assets 3,236,016 2,684,762 Liabilities Current Liabilities Payable for investments purchased 13,749 14,641 Redemptions payable 2,961 1,182 Distributions payable 279 Accrued expenses Total liabilities 17,104 15,938 Net assets attributable to holders of redeemable units 3,218,912 2,668,824 Net assets attributable to holders of redeemable units per unit $ $ The accompanying notes are an integral part of these financial statements.

3 STATEMENT OF COMPREHENSIVE INCOME (All amounts in thousands of Canadian dollars, except per unit data) June 30 June 30 For the periods ended Income Interest income 23,967 23,088 Other changes in fair value of investments and derivatives Net realized gain 746 3,860 Change in unrealized (depreciation) appreciation (22,100) 482 Net gain in fair value of investments and derivatives 2,613 27,430 Securities lending (note 8) Foreign exchange gain 0 0 Total other income Total income 2,847 27,646 Expenses Sub-advisory fees 1,631 2,036 Audit fees Independent review committee fees 3 4 Withholding taxes 0 1 Custodian fees, interest and bank charges Legal and filing fees Unitholder servicing fees Printing and stationery fees 8 7 Operating expenses absorbed by the Manager (1,632) (2,036) Total expenses Increase in net assets attributable to holders of redeemable units 2,504 27,322 Increase in net assets attributable to holders of redeemable units per unit (note 8) The accompanying notes are an integral part of these financial statements.

4 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (All amounts in thousands of Canadian dollars) June 30 June 30 For the periods ended Net assets attributable to holders of redeemable units at beginning of period 2,668,824 2,698,527 Increase in net assets attributable to holders of redeemable units 2,504 27,322 Distributions to holders of redeemable units From net investment income (36,062) (34,052) Total distributions paid to holders of redeemable units (36,062) (34,052) Redeemable unit transactions Proceeds from redeemable units issued 907, ,163 Reinvestments of distributions to holders of redeemable units 34,583 32,783 Redemption of redeemable units (358,929) (327,995) Net increase (decrease) from redeemable unit transactions 583,646 (10,049) Net increase (decrease) in net assets attributable to holders of redeemable units 550,088 (16,779) Net assets attributable to holders of redeemable units at end of period 3,218,912 2,681,748 The accompanying notes are an integral part of these financial statements.

5 STATEMENT OF CASH FLOWS (All amounts in thousands of Canadian dollars) BMO Private Canadian Short-Term Bond Portfolio June 30 June 30 For the periods ended Cash flows from operating activities Increase in net assets attributable to holders of redeemable units 2,504 27,322 Adjustments for: Net realized gain on sale of investments and derivatives (746) (3,860) Change in unrealized depreciation (appreciation) of investments and derivatives 22,100 (482) Decrease in interest receivable 286 1,401 Decrease in accrued expenses (0) (20) Amortization of premium and discount 13,107 11,273 Purchases of investments (1,232,137) (531,215) Proceeds from sale and maturity of investments 635, ,959 Net cash from operating activities (559,309) 45,378 Cash flows from financing activities Distributions paid to holders of redeemable units, net of reinvested distributions (1,200) (1,051) Proceeds from issuances of redeemable units 909, ,697 Amounts paid on redemption of redeemable units (357,150) (328,415) Net cash from financing activities 551,581 (43,769) Net (decrease) increase in cash (7,728) 1,609 Cash at beginning of period 15,962 9,931 Cash at end of period 8,234 11,540 Supplementary Information Interest received, net of withholding taxes* 37,360 35,762 *These items are from operating activities The accompanying notes are an integral part of these financial statements.

6 SCHEDULE OF INVESTMENT PORTFOLIO As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Bonds & Debentures Federal Bonds 48.0% Canada Housing Trust, Mortgage Bonds, Series 56, Secured, 2.350% Dec 15, ,250 51,870 52,124 Canada Housing Trust, Mortgage Bonds, Series 23, Secured, 4.100% Dec 15, ,500 26,377 26,572 Canada Housing Trust, Mortgage Bonds, Series 59, Secured, 1.950% Jun 15, ,800 52,207 52,506 Canada Housing Trust, Mortgage Bonds, Series 61, Secured, 2.000% Dec 15, ,250 58,252 58,156 Canada Housing Trust, Mortgage Bonds, Series 30, Secured, 3.750% Mar 15, ,500 29,355 29,210 Canada Housing Trust, Mortgage Bonds, Series 64, Secured, 1.200% Jun 15, ,000 31,967 31,780 Canada Housing Trust, Mortgage Bonds, Series 66, Secured, 1.450% Jun 15, ,000 30,033 30,010 Canada Housing Trust, Mortgage Bonds, Series 68, Secured, 1.250% Dec 15, ,250 47,379 46,795 Canada Housing Trust, Mortgage Bonds, Series 36, Secured, 3.350% Dec 15, ,750 21,135 20,945 Canada Housing Trust, Mortgage Bonds, Series 71, Secured, 1.250% Jun 15, ,250 55,418 54,431 Canada Housing Trust, Mortgage Bonds, Series 40, Secured, 3.800% Jun 15, ,734 33,854 33,259 Canada Housing Trust, Mortgage Bond, Secured, 1.150% Dec 15, ,500 25,061 24,891 Canada Housing Trust, Mortgage Bond, Secured, 1.500% Dec 15, ,000 24,934 24,777 Canada Housing Trust, Mortgage Bonds, Series 45, Senior, Secured, 2.650% Mar 15, ,250 51,763 51,264 Canada Housing Trust, Mortgage Bonds, Series 78, Secured, 1.750% Jun 15, ,000 20,194 19,989 CPPIB Capital Inc., Series A, Senior, Unsecured, Notes, 1.400% Jun 4, ,000 5,988 5,973 Government of Canada, Unsecured, 0.500% Aug 1, ,750 59,651 59,412 Government of Canada, 1.250% Sep 1, ,150 48,854 49,271 Government of Canada, Unsecured, 0.500% Nov 1, ,200 52,069 51,817 Government of Canada, 0.500% Feb 1, ,750 52,544 52,280 Government of Canada, 1.750% Mar 1, ,500 52,784 53,086 Government of Canada, 0.750% May 1, ,000 41,972 41,740 Government of Canada, 3.750% Jun 1, ,050 81,763 81,911 Government of Canada, Unsecured, 0.750% Aug 1,2019 2,250 2,251 2,233 Government of Canada, Unsecured, 1.750% Sep 1, ,800 72,597 72,745 Government of Canada, Unsecured, 1.500% Mar 1, ,650 89,265 88,391 Government of Canada, 3.500% Jun 1, ,738 74,896 74,323 Government of Canada, Unsecured, 0.750% Sep 1, ,300 71,370 70,254 Government of Canada, Unsecured, 0.750% Mar 1, ,900 52,934 51,875 Government of Canada, 3.250% Jun 1, ,700 57,716 56,579 Government of Canada, Unsecured, 0.750% Sep 1, ,200 59,034 57,793 Government of Canada, Unsecured, 0.500% Mar 1, ,550 61,721 61,035 Government of Canada, 2.750% Jun 1, ,750 48,534 47,595

7 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value PSP Capital Inc., Senior, Unsecured, Notes, 1.730% Jun 21, ,000 9,000 8,907 1,554,742 1,543,929 Provincial Bonds 18.8% Financement-Quebec, Unsecured, Notes, 2.400% Dec 1, ,000 11,014 11,179 Financement-Quebec, Unsecured, Notes, 2.450% Dec 1, ,500 23,986 24,074 Hydro-Quebec, Unsecured, 1.000% May 25, ,000 2,998 2,983 Province of Alberta, Unsecured, 2.000% Jun 1, ,500 3,551 3,546 Province of Alberta, 4.000% Dec 1, ,550 6,939 6,948 Province of Alberta, Unsecured, 1.250% Jun 1, ,600 17,571 17,454 Province of Alberta, Unsecured, 1.350% Sep 1, ,000 7,921 7,852 Province of British Columbia, Medium Term Notes, Senior, Unsecured, 4.650% Dec 18, ,250 9,682 9,710 Province of British Columbia, Unsecured, 2.250% Mar 1, ,000 11,123 11,190 Province of British Columbia, Unsecured, 4.100% Dec 18, ,700 6,115 6,072 Province of British Columbia, 3.700% Dec 18, ,100 8,754 8,675 Province of British Columbia, 3.250% Dec 18, ,000 12,820 12,747 Province of Manitoba, Unsecured, 1.850% Sep 5, ,000 5,030 5,040 Province of Manitoba, Unsecured, 1.150% Nov 21, ,000 4,001 3,978 Province of Manitoba, Medium Term Notes, 4.750% Feb 11, ,600 1,748 1,733 Province of Manitoba, 4.150% Jun 3, ,100 4,430 4,404 Province of Manitoba, Unsecured, 1.600% Sep 5, ,000 3,008 3,002 Province of Manitoba, Unsecured, 1.550% Sep 5, ,500 7,493 7,427 Province of New Brunswick, 4.400% Jun 3, ,500 6,813 6,875 Province of New Brunswick, 4.500% Jun 2, ,750 6,246 6,230 Province of New Brunswick, Unsecured, 3.350% Dec 3, ,300 5,663 5,631 Province of Newfoundland and Labrador, Unsecured, 1.950% Jun 2, ,000 3,054 2,991 Province of Nova Scotia, 4.150% Nov 25, ,500 5,802 5,851 Province of Nova Scotia, 4.100% Jun 1, ,300 5,834 5,767 Province of Ontario, Unsecured, 2.100% Sep 8, ,050 30,309 30,382 Province of Ontario, Senior, Unsecured, 1.750% Oct 9, ,500 1,513 1,511 Province of Ontario, 4.400% Jun 2, ,000 42,145 42,331 Province of Ontario, Unsecured, 2.100% Sep 8, ,750 36,206 36,321 Province of Ontario, 4.200% Jun 2, ,000 54,086 53,794 Province of Ontario, 4.000% Jun 2, ,250 55,260 54,525 Province of Ontario, Senior, Unsecured, 1.350% Mar 8, ,600 13,405 13,290 Province of Ontario, 3.150% Jun 2, ,500 58,839 57,658 Province of Quebec, Medium Term Notes, 4.500% Dec 1, ,450 16,097 16,156 Province of Quebec, Unsecured, 4.500% Dec 1, ,100 38,545 38,736 Province of Quebec, Unsecured, 4.500% Dec 1, ,250 35,448 35,332 Province of Quebec, 4.250% Dec 1, ,000 37,810 37,473 Province of Saskatchewan, Unsecured, 1.950% Mar 1, ,000 2,032 2,023 Province of Saskatchewan, Unsecured, 3.900% Jul 28, ,600 3,887 3, , ,742 Municipal Bonds 0.6% City of Toronto, Unsecured, Notes, 3.500% Dec 6, ,100 1,174 1,169 City of Vancouver, Senior, Unsecured, Notes, 3.450% Dec 2, ,100 1,175 1,165 Municipal Finance Authority of British Columbia, Series DQ, Unsecured, Debentures, 5.100% Nov 20, ,500 12,961 13,146

8 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Municipal Finance Authority of British Columbia, Series DT, Unsecured, Debentures, 4.450% Jun 1, ,500 4,875 4,859 20,185 20,339 Corporate Bonds & Debentures 30.8% 407 International Inc., Series 10-A3, Medium Term Notes, Senior, Secured, 4.300% May 26, ,500 6,028 5,963 Alimentation Couche-Tard Inc., Series 2, Senior, Unsecured, Notes, 3.319% Nov 1, ,650 4,687 4,793 Alimentation Couche-Tard Inc., Series 4, Senior, Unsecured, Notes, 4.214% Aug 21, ,000 4,255 4,248 AltaGas Ltd., Series 8, Medium Term Notes, Unsecured, 3.720% Sep 28, ,000 4,231 4,184 AltaLink Investments L.P., Series 13-1, Senior, Unsecured, Notes, Callable, 3.265% Jun 5, ,700 2,782 2,778 Bank of Montreal, Deposit Notes, Senior, Unsecured, 3.210% Sep 13, ,500 3,524 3,572 Bank of Montreal, Deposit Notes, Senior, Unsecured, 2.430% Mar 4, ,000 5,050 5,070 Bank of Montreal, Deposit Notes, Senior, Unsecured, 2.840% Jun 4, ,800 8,059 8,032 Bank of Montreal, Deposit Notes, Senior, Unsecured, 2.100% Oct 6, ,500 9,547 9,576 Bank of Montreal, Senior, Unsecured, Notes, 1.880% Mar 31, ,000 10,067 9,966 Bank of Montreal, Deposit Notes, Senior, Unsecured, 3.400% Apr 23, ,500 4,742 4,733 Bank of Montreal, Senior, Unsecured, Notes, 1.610% Oct 28, ,000 7,978 7,849 Bank of Montreal, Deposit Notes, Senior, Unsecured, 2.120% Mar 16, ,000 10,050 9,998 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 2.750% Aug 13, ,500 3,549 3,549 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 2.462% Mar 14, ,950 6,003 6,036 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 2.400% Oct 28, ,750 9,854 9,899 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 2.270% Jan 13, ,000 8,124 8,099 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 2.130% Jun 15, ,000 7,069 7,061 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 2.090% Sep 9, ,600 6,624 6,645 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 3.270% Jan 11, ,500 7,830 7,840 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 2.873% Jun 4, ,000 6,245 6,190 Bank of Nova Scotia, Deposit Notes, Senior, Unsecured, 1.900% Dec 2, ,000 9,983 9,911 Bank of Nova Scotia, Fixed to Floating, Notes, Subordinated, Callable, 3.036% Oct 18, ,700 10,985 10,952 bcimc Realty Corp., Unsecured, Notes, 2.790% Aug 2, ,000 1,018 1,014

9 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value bcimc Realty Corp., Series 8, Unsecured, Notes, 2.960% Mar 7, ,000 2,015 2,043 bcimc Realty Corp., Series 12, Unsecured, Notes, 2.100% Jun 3, ,000 6,074 6,014 bcimc Realty Corp., Series 10, Unsecured, Notes, 3.510% Jun 29, ,000 5,316 5,299 Bell Canada, Series M-37, Medium Term Notes, Senior, Unsecured, 3.540% Jun 12, ,000 4,133 4,171 Bell Canada, Series M-27, Medium Term Notes, Senior, Unsecured, 3.250% Jun 17, ,500 2,607 2,589 Bell Canada, Series M-24, Medium Term Notes, Senior, Unsecured, 4.950% May 19, ,500 6,085 6,054 Bell Canada, Series M-30, Medium Term Notes, Senior, Unsecured, Callable, 3.150% Sep 29, ,000 2,100 2,070 Bell Canada, Series M-42, Medium Term Notes, Senior, Unsecured, 2.000% Oct 1, ,000 6,970 6,921 BMO Capital Trust II, Series A, Fixed to Floating, Junior, Unsecured, Notes, Callable, % Dec 31, ,000 1,306 1,116 BMW Canada Inc., Series K, Senior, Unsecured, Notes, 2.330% Sep 26, ,550 1,554 1,564 BMW Canada Inc., Series M, Senior, Unsecured, Notes, 2.270% Nov 26, ,100 2,106 2,118 BMW Canada Inc., Series P, Senior, Unsecured, Notes, 1.780% Oct 19, ,000 2,008 1,986 BMW Canada Inc., Series O, Senior, Unsecured, Notes, 1.830% Jun 15, ,000 2,003 1,978 Brookfield Infrastructure Finance ULC, Medium Term Notes, Senior, Unsecured, 3.538% Oct 30, ,000 2,089 2,064 BRP Finance ULC, Series 7, Medium Term Notes, Unsecured, 5.140% Oct 13, ,300 5,700 5,757 BRP Finance ULC, Series 8, Medium Term Notes, Unsecured, 4.790% Feb 7, ,500 5,999 5,995 Bruce Power L.P., Senior, Unsecured, Notes, 2.844% Jun 23, ,000 3,090 3,052 Caisse centrale Desjardins, Medium Term Notes, Senior, Unsecured, 2.795% Nov 19, ,800 7,918 7,930 Caisse centrale Desjardins, Medium Term Notes, Senior, Unsecured, 2.443% Jul 17, ,000 4,022 4,060 Caisse centrale Desjardins, Medium Term Notes, Senior, Unsecured, 1.748% Mar 2, ,000 7,013 6,991 Calloway Real Estate Investment Trust, Series H, Senior, Unsecured, Debentures, 4.050% Jul 27, ,850 1,940 1,938 Cameco Corporation, Series D, Senior, Unsecured, Notes, 5.670% Sep 2, ,000 4,232 4,222 Canadian Imperial Bank of Commerce, Unsecured, Notes, 1.700% Oct 9, ,200 6,228 6,217 Canadian Imperial Bank of Commerce, Deposit Notes, Unsecured, 2.350% Jun 24, ,500 7,639 7,603 Canadian Imperial Bank of Commerce, Deposit Notes, Unsecured, 1.660% Jan 20, ,000 5,025 4,988 Canadian Imperial Bank of Commerce, Deposit Notes, Unsecured, 1.850% Jul 14, ,000 5,015 5,007 Canadian Imperial Bank of Commerce, Deposit Notes, Unsecured, 1.900% Apr 26, ,000 7,013 6,983

10 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Canadian Imperial Bank of Commerce, Unsecured, Notes, 1.640% Jul 12, ,500 7,458 7,393 Canadian Imperial Bank of Commerce, Deposit Notes, Senior, Unsecured, 2.040% Mar 21, ,000 6,049 5,978 Canadian Natural Resources Limited, Medium Term Notes, Senior, Unsecured, 3.050% Jun 19, ,500 1,515 1,524 Canadian Natural Resources Limited, Medium Term Notes, Senior, Unsecured, 2.600% Dec 3, ,500 4,575 4,539 Canadian Natural Resources Limited, Medium Term Notes, Unsecured, 2.890% Aug 14, ,500 5,604 5,567 Canadian Natural Resources Limited, Medium Term Notes, Senior, Unsecured, 3.310% Feb 11, ,000 5,166 5,092 Canadian Western Bank, Deposit Notes, Senior, Unsecured, 2.751% Jun 29, ,000 3,031 3,023 Canadian Western Bank, Fixed to Floating, Notes, Subordinated, Callable, 3.463% Dec 17, ,000 5,112 5,069 Capital Desjardins Inc., Series G, Senior, Secured, Notes, 5.187% May 5, ,110 2,275 2,290 CDP Financial Inc., Senior, Unsecured, Notes, 4.600% Jul 15, ,500 1,631 1,627 Choice Properties L.P., Series 7, Senior, Unsecured, Notes, Callable, 3.000% Sep 20, ,000 2,054 2,038 Choice Properties Real Estate Investment Trust, Series E, Senior, Unsecured, Notes, 2.297% Sep 14, ,250 2,282 2,250 Choice Properties Real Estate Investment Trust, Series C, Senior, Unsecured, Notes, 3.498% Feb 8, ,400 3,561 3,523 CIBC Capital Trust, Series A, Tier 1 Notes, Fixed to Floating, Unsecured, Subordinated, Callable, 9.976% Jun 30, ,000 7,864 6,859 Cominar Real Estate Investment Trust, Series 4, Senior, Unsecured, Notes, 4.941% Jul 27, ,300 1,364 1,326 Cominar Real Estate Investment Trust, Series 9, Senior, Unsecured, Notes, 4.164% Jun 1, ,000 2,005 1,956 CU Inc., Medium Term Notes, Senior, Unsecured, 6.800% Aug 13, ,000 6,581 6,632 Daimler Canada Finance Inc., Senior, Unsecured, Notes, 1.420% Oct 2, ,750 4,748 4,736 Daimler Canada Finance Inc., Senior, Unsecured, Notes, 1.780% Aug 19, ,000 5,006 4,991 Dollarama Inc., Senior, Unsecured, Notes, 3.095% Nov 5, ,500 5,563 5,597 Dollarama Inc., Senior, Unsecured, Notes, 2.337% Jul 22, ,000 2,009 2,003 Enbridge Gas Distribution Inc., Medium Term Notes, Senior, Unsecured, 4.040% Nov 23, ,000 4,290 4,278 Enbridge Inc., Medium Term Notes, Unsecured, 4.770% Sep 2, ,250 3,407 3,439 Enbridge Inc., Medium Term Notes, Unsecured, 4.530% Mar 9, ,000 5,287 5,308 Enbridge Inc., Medium Term Notes, Senior, Unsecured, Callable, 3.160% Mar 11, ,500 3,521 3,583 Enbridge Pipelines Inc., Medium Term Notes, Senior, Unsecured, 4.450% Apr 6, ,500 1,613 1,600 Fairfax Financial Holdings Limited, Senior, Unsecured, Notes, 6.400% May 25, ,000 3,426 3,355

11 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Federation des caisses Desjardins du Quebec, Medium Term Notes, Senior, Unsecured, 2.091% Jan 17, ,000 4,024 3,991 First Capital Realty, Inc., Series M, Senior, Unsecured, Debentures, 5.600% Apr 30, ,500 3,803 3,815 Ford Credit Canada Company, Senior, Unsecured, Notes, 3.700% Aug 2, ,500 5,590 5,608 Ford Credit Canada Company, Senior, Unsecured, Notes, 2.939% Feb 19, ,250 2,255 2,283 Ford Credit Canada Company, Senior, Unsecured, Notes, 2.450% May 7, ,000 2,999 3,006 Ford Credit Canada Company, Senior, Unsecured, Notes, 2.923% Sep 16, ,500 7,561 7,606 Ford Credit Canada Company, Senior, Unsecured, Notes, 2.580% May 10, ,000 2,015 1,995 Ford Credit Canada Company, Senior, Unsecured, Notes, 3.279% Jul 2, ,000 1,030 1,022 Ford Credit Canada Company, Senior, Unsecured, Notes, 2.710% Feb 23, ,000 2,015 1,989 Ford Credit Canada Company, Senior, Unsecured, Notes, 2.766% Jun 22, ,500 1,509 1,491 Gaz Metro inc., Series J, First Mortgage, Secured, 5.450% Jul 12, ,000 1,154 1,133 GE Capital Canada Funding Company, Series A, Medium Term Notes, Senior, Unsecured, 4.600% Jan 26, ,000 5,582 5,532 General Motors Financial of Canada, Ltd., Senior, Unsecured, Notes, 3.080% May 22, ,000 2,016 2,033 Greater Toronto Airports Authority, Series , Medium Term Notes, Secured, 5.960% Nov 20, ,625 5,023 5,088 Great-West Lifeco Inc., Senior, Unsecured, Notes, 4.650% Aug 13, ,000 2,170 2,164 Honda Canada Finance, Inc., Senior, Unsecured, Notes, 1.631% Aug 12, ,000 3,014 2,992 Honda Canada Finance, Inc., Series 16-4, Senior, Unsecured, Notes, 1.823% Dec 7, ,000 4,964 4,926 HSBC Bank of Canada, Senior, Unsecured, Notes, 2.078% Nov 26, ,000 3,009 3,018 HSBC Bank of Canada, Deposit Notes, Senior, Unsecured, 2.938% Jan 14, ,700 9,908 9,955 HSBC Bank of Canada, Deposit Notes, Senior, Unsecured, 1.816% Jul 7, ,000 6,981 6,973 HSBC Bank of Canada, Senior, Unsecured, Notes, 2.449% Jan 29, ,000 2,053 2,027 HSBC Bank of Canada, Deposit Notes, Senior, Unsecured, 2.908% Sep 29, ,500 8,840 8,741 Husky Energy Inc., Medium Term Notes, Senior, Unsecured, 5.000% Mar 12, ,120 4,404 4,415 Hydro One Inc., Series 28, Medium Term Notes, Senior, Unsecured, 2.780% Oct 9, ,550 1,561 1,576 Hydro One Inc., Series 37, Medium Term Notes, Senior, Unsecured, 1.480% Nov 18, ,000 2,009 1,994 Hydro One Inc., Series 33, Medium Term Notes, Unsecured, 1.620% Apr 30, ,500 3,494 3,491

12 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Hydro One Inc., Series 20, Medium Term Notes, Senior, Unsecured, 4.400% Jun 1, ,800 1,941 1,933 Hydro One Inc., Series 34, Medium Term Notes, Senior, Unsecured, 1.840% Feb 24, ,000 1, Hydro One Inc., Series 25, Medium Term Notes, Unsecured, 3.200% Jan 13, ,750 6,076 6,032 IGM Financial, Inc., Senior, Unsecured, Notes, 7.350% Apr 8, ,500 1,616 1,635 Intact Financial Corporation, Series 1, Medium Term Notes, Senior, Unsecured, 5.410% Sep 3, ,000 2,119 2,152 Intact Financial Corporation, Series 4, Medium Term Notes, Senior, Unsecured, 4.700% Aug 18, ,500 2,763 2,746 Inter Pipeline Ltd., Series 2, Medium Term Notes, Senior, Unsecured, 3.839% Jul 30, ,500 1,526 1,534 Inter Pipeline Ltd., Series 4, Medium Term Notes, Senior, Unsecured, 3.448% Jul 20, ,000 5,184 5,187 Inter Pipeline Ltd., Series 3, Medium Term Notes, Senior, Unsecured, 3.776% May 30, ,000 3,225 3,156 John Deere Canada Funding Inc, Medium Term Notes, Senior, Unsecured, 1.850% Mar 24, ,000 3,022 2,978 John Deere Canada Funding Inc., Series 13-03, Senior, Unsecured, 2.650% Jul 16, ,000 5,050 5,058 John Deere Canada Funding Inc., Series 14-02, Senior, Unsecured, 2.350% Jun 24, ,000 5,041 5,062 Laurentian Bank of Canada, Deposit Notes, Senior, Unsecured, 2.810% Jun 13, ,000 3,032 3,039 Laurentian Bank of Canada, Deposit Notes, Senior, Unsecured, 2.500% Jan 23, ,500 1,514 1,507 Loblaw Companies Limited, Series 2019, Senior, Unsecured, Notes, 3.748% Mar 12, ,800 2,848 2,891 Loblaw Companies Limited, Series 2-B, Medium Term Notes, Senior, Unsecured, 5.220% Jun 18, ,100 1,193 1,201 Manufacturers Life Insurance Company, The, Fixed to Floating, Notes, Subordinated, Callable, 2.926% Nov 29, ,000 2,031 2,030 Manufacturers Life Insurance Company, The, Fixed to Floating, Notes, Subordinated, Callable, 2.811% Feb 21, ,500 6,563 6,598 Manufacturers Life Insurance Company, The, Fixed to Floating, Notes, Subordinated, Callable, 2.100% Jun 1, ,000 6,002 6,004 Manulife Financial Capital Trust II, Fixed to Floating, Unsecured, Notes, Subordinated, Callable, 7.405% Dec 31, ,000 8,616 7,846 Manulife Financial Corporation, Medium Term Notes, Senior, Unsecured, 7.768% Apr 8, ,500 1,626 1,649 National Bank of Canada, Deposit Notes, Unsecured, 2.794% Aug 9, ,000 2,997 3,044 National Bank of Canada, Deposit Notes, Senior, Unsecured, 2.404% Oct 28, ,000 4,020 4,061 National Bank of Canada, Deposit Notes, Senior, Unsecured, 1.742% Mar 3, ,500 5,515 5,489 National Bank of Canada, Deposit Notes, Senior, Unsecured, 1.809% Jul 26, ,500 7,537 7,427

13 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value National Bank of Canada, Deposit Notes, Senior, Unsecured, 2.105% Mar 18, ,000 3,007 2,992 National Bank of Canada, Deposit Notes, Senior, Unsecured, 1.957% Jun 30, ,000 1,984 1,978 NAV Canada, Series , Medium Term Notes, Senior, Unsecured, 5.304% Apr 17, ,714 2,853 2,886 Nissan Canada Financial Services, Inc., Series A, Senior, Unsecured, Notes, 1.584% Oct 7, ,000 3,004 2,981 OMERS Realty Corporation, Series 5, Senior, Unsecured, Notes, 2.473% Nov 12, ,000 2,048 2,034 OMERS Realty Corporation, Series 3, Senior, Unsecured, Notes, 3.203% Jul 24, ,500 2,609 2,599 OMERS Realty Corporation, Series 4, Senior, Unsecured, Notes, 2.971% Apr 5, ,000 4,171 4,133 Pembina Pipeline Corporation, Series 1, Medium Term Notes, Unsecured, 4.890% Mar 29, ,250 1,324 1,356 Reliance LP, Secured, Notes, 4.075% Aug 2, ,000 3,042 3,092 RioCan Real Estate Investment Trust, Series Q, Senior, Unsecured, Notes, 3.850% Jun 28, ,500 2,583 2,588 RioCan Real Estate Investment Trust, Series U, Senior, Unsecured, Notes, 3.620% Jun 1, RioCan Real Estate Investment Trust, Series R, Senior, Unsecured, Notes, 3.716% Dec 13, ,750 9,130 9,134 RioCan Real Estate Investment Trust, Series V, Senior, Unsecured, Notes, 3.746% May 30, ,500 6,905 6,788 Rogers Communications, Inc., Senior, Unsecured, Notes, 5.380% Nov 4, ,500 5,868 5,936 Rogers Communications, Inc., Senior, Unsecured, Notes, 4.700% Sep 29, ,000 3,261 3,245 Rogers Communications, Inc., Senior, Unsecured, Notes, 5.340% Mar 22, ,650 7,427 7,392 Rogers Communications, Inc., Senior, Unsecured, Notes, 4.000% Jun 6, ,000 5,475 5,370 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 2.820% Jul 12, ,050 4,071 4,106 Royal Bank of Canada, Deposit Notes, Unsecured, 2.890% Oct 11, ,400 7,491 7,529 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 2.770% Dec 11, ,200 9,260 9,359 Royal Bank of Canada, Secured, Notes, 1.400% Apr 26, ,000 3,013 2,992 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 2.980% May 7, ,500 5,565 5,631 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 2.350% Dec 9, ,500 8,650 8,622 Royal Bank of Canada, Secured, Notes, 1.590% Mar 23, ,200 5,228 5,183 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 1.920% Jul 17, ,200 7,216 7,219 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 2.860% Mar 4, ,000 10,332 10,310

14 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 2.030% Mar 15, ,000 11,068 11,016 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 1.650% Jul 15, ,500 13,474 13,302 Royal Bank of Canada, Senior, Unsecured, Notes, 1.583% Sep 13, ,000 4,976 4,899 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 1.968% Mar 2, ,275 10,319 10,195 Royal Bank of Canada, Deposit Notes, Senior, Unsecured, 2.000% Mar 21, ,000 9,017 8,936 Royal Bank of Canada, Series 15, Medium Term Notes, Fixed to Floating, Subordinated, Callable, 2.990% Dec 6, ,000 8,155 8,189 Saputo Inc., Medium Term Notes, Senior, Unsecured, 2.654% Nov 26, ,000 6,128 6,109 Scotiabank Tier I Trust, Scotia BaTS III, Series , Fixed to Floating, Senior, Unsecured, Notes, Callable, 7.802% Jun 30, ,000 3,695 3,312 Shaw Communications Inc., Senior, Unsecured, Notes, 5.650% Oct 1, ,000 3,183 3,237 Shaw Communications Inc., Senior, Unsecured, Notes, 5.500% Dec 7, ,000 7,653 7,728 Smart Real Estate Investment Trust, Series L, Senior, Unsecured, Notes, 3.749% Feb 11, ,500 3,660 3,629 Sun Life Capital Trust II, Series , SLEECS, Fixed to Floating, Senior, Notes, Subordinated, Callable, 5.863% Dec 31, ,500 2,876 2,708 Sun Life Financial Inc., Series D, Senior, Unsecured, Debentures, 5.700% Jul 2, ,000 1,066 1,076 Sun Life Financial Inc., Series E, Senior, Unsecured, Debentures, 4.570% Aug 23, ,000 3,318 3,289 Sun Life Financial Inc., Series , Fixed to Floating, Notes, Subordinated, Callable, 2.770% May 13, ,000 3,022 3,039 Sun Life Financial Inc., Series , Fixed to Floating, Unsecured, Debentures, Subordinated, Callable, 2.600% Sep 25, ,000 3,068 3,036 Suncor Energy, Inc., Series 5, Medium Term Notes, Unsecured, Callable, 3.100% Nov 26, ,550 4,729 4,702 TD Capital Trust III, Series 2008, CaTS, Fixed to Floating, Unsecured, Notes, Perpetual, Callable, 7.243% Dec 31, ,000 13,121 11,864 TD Capital Trust IV, Series 3, CaTS, Fixed to Floating, Unsecured, Notes, Subordinated, Callable, 6.631% Jun 30, ,500 15,725 15,465 TELUS Corporation, Series CG, Senior, Unsecured, Notes, 5.050% Dec 4, ,630 2,788 2,824 TELUS Corporation, Series CH, Senior, Unsecured, Notes, 5.050% Jul 23, ,000 2,176 2,175 TELUS Corporation, Series CM, Senior, Unsecured, Notes, 3.600% Jan 26, ,500 2,612 2,621 TELUS Corporation, Series CO, Unsecured, Notes, Callable, 3.200% Apr 5, ,500 5,697 5,691 TELUS Corporation, Series CT, Unsecured, Notes, Callable, 2.350% Mar 28, ,755 8,788 8,751 Teranet Holdings L.P., Senior, Secured, Notes, 4.807% Dec 16, ,500 5,876 5,870 Thomson Reuters Corporation, Senior, Unsecured, Notes, 3.369% May 23, ,000 2,045 2,054

15 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Thomson Reuters Corporation, Unsecured, Notes, 4.350% Sep 30, ,000 2,155 2,136 Thomson Reuters Corporation, Senior, Unsecured, Notes, Callable, 3.309% Nov 12, ,100 8,430 8,392 TMX Group Ltd., Senior, Unsecured, Notes, 3.253% Oct 3, ,000 2,041 2,036 Toronto Hydro Corporation, Series 3, Senior, Unsecured, Notes, 4.490% Nov 12, ,500 4,807 4,792 Toronto Hydro Corporation, Series 7, Senior, Unsecured, Debentures, 3.540% Nov 18, ,000 3,222 3,191 Toronto-Dominion Bank, The, Deposit Notes, Unsecured, 2.447% Apr 2, ,000 7,095 7,104 Toronto-Dominion Bank, The, Deposit Notes, Senior, Unsecured, 1.693% Apr 2, ,000 6,021 5,987 Toronto-Dominion Bank, The, Deposit Notes, Senior, Unsecured, 2.563% Jun 24, ,000 7,173 7,153 Toronto-Dominion Bank, The, Deposit Notes, Senior, Unsecured, 2.045% Mar 8, ,000 6,080 6,019 Toronto-Dominion Bank, The, Series CBL14, Secured, Notes, 1.680% Jun 8, ,000 2,009 1,981 Toronto-Dominion Bank, The, Deposit Notes, Senior, Unsecured, 2.621% Dec 22, ,300 12,609 12,582 Toronto-Dominion Bank, The, Deposit Notes, Senior, Unsecured, 1.994% Mar 23, ,000 3,018 2,984 Toronto-Dominion Bank, The, Medium Term Notes, Fixed to Floating, Unsecured, Subordinated, Callable, 5.828% Jul 9, ,000 2,182 2,084 Toyota Credit Canada Inc., Medium Term Notes, Senior, Unsecured, 2.750% Jul 18, ,000 2,002 2,026 Toyota Credit Canada Inc., Medium Term Notes, Senior, Unsecured, 2.800% Nov 21, ,000 2,015 2,033 Toyota Credit Canada Inc., Medium Term Notes, Senior, Unsecured, 2.250% May 23, ,000 2,000 2,021 Toyota Credit Canada Inc., Senior, Unsecured, Notes, 1.800% Feb 19, ,500 5,513 5,496 Toyota Credit Canada Inc., Euro Medium Term Notes, Senior, Unsecured, 2.050% May 20, ,000 2,018 2,009 Toyota Credit Canada Inc., Medium Term Notes, Senior, Unsecured, 2.200% Feb 25, ,000 3,029 3,018 Toyota Credit Canada Inc., Medium Term Notes, Senior, Unsecured, 2.020% Feb 28, ,000 2,017 1,986 TransCanada PipeLines Limited, Medium Term Notes, Unsecured, 3.650% Nov 15, ,350 5,721 5,688 Union Gas Limited, Series 11, Medium Term Notes, Senior, Unsecured, Callable, 2.760% Jun 2, ,000 3,112 3,085 Ventas Canada Finance Ltd., Series A, Senior, Unsecured, Notes, 3.000% Sep 30, ,000 3,014 3,058 VW Credit Canada Inc., Senior, Unsecured, Notes, 2.500% Oct 1, ,300 2,324 2,323 VW Credit Canada Inc., Senior, Unsecured, Notes, 2.150% Jun 24, ,000 3,027 2,995 Wells Fargo Canada Corporation, Medium Term Notes, Unsecured, 2.780% Nov 15, ,250 5,315 5,333

16 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) As at June 30, 2017 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Par Value (in thousands) Cost Fair Value Wells Fargo Canada Corporation, Medium Term Notes, Unsecured, 2.944% Jul 25, ,650 11,847 11,927 Wells Fargo Canada Corporation, Medium Term Notes, Unsecured, 3.040% Jan 29, ,500 10,893 10,866 Westcoast Energy Inc., Series 9, Medium Term Notes, Senior, Unsecured, 5.600% Jan 16, ,500 2,610 2,638 Westcoast Energy Inc., Series 10, Medium Term Notes, Senior, Unsecured, 4.570% Jul 2, ,500 1,597 1,603 WestJet Airlines Ltd., Senior, Unsecured, Notes, 3.287% Jul 23, ,150 6,214 6, , ,023 Asset-Backed Securities 1.4% Canadian Credit Card Trust II, Series , Class A, Credit Card Receivables-Backed Notes, 1.829% Mar 24, ,000 5,028 4,998 CARDS II Trust, Series , Class A, Credit Card Receivables- Backed Notes, Sinkable, 2.155% Oct 15, ,200 6,272 6,258 Genesis Trust II, Series , Class A, Real Estate Secured Line of Credit-Backed Notes, 1.675% Sep 17, ,500 3,505 3,507 Genesis Trust II, Series , Class A, Real Estate Secured Line of Credit-Backed Notes, 2.433% May 15, ,500 3,539 3,547 Genesis Trust II, Series , Class A, Real Estate Secured Line of Credit-Backed Notes, 1.699% Apr 15, ,000 8,941 8,979 Glacier Credit Card Trust, Series , Credit Card Asset-Backed Notes, Senior, 2.237% Sep 20, ,200 6,288 6,251 Hollis Receivables Term Trust II, Series , Class A, Receivables- Backed Notes, 2.434% Jun 26, ,000 3,009 3,042 Hollis Receivables Term Trust II, Series , Class A, Receivables- Backed Notes, 1.788% Feb 26, ,000 2,018 1,999 Master Credit Card Trust II, Series , Class A, Credit Card Receivables-Backed Notes, 2.723% Nov 21, ,300 5,388 5,387 NBC Asset Trust, Trust Capital Securities, Series 2, Fixed to Floating, Asset-Backed, Perpetual, Callable, 7.447% Jun 30, ,000 1,221 1,122 45,209 45,090 Total Investment Portfolio 99.6% 3,226,378 3,207,123 Other Assets Less Liabilities 0.4% 11,789 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 100.0% 3,218,912

17 NOTES TO FINANCIAL STATEMENTS (All amounts in thousands of Canadian dollars, except per unit data) June 30, The Portfolio BMO Private Canadian Short-Term Bond Portfolio ( the Portfolio ) is an open-ended mutual fund trust established by a Declaration of Trust under the laws of the Province of Ontario, most recently amended on July 8, BMO Private Investment Counsel Inc. ( the Manager ) is the Manager of the Portfolio. The address of the Portfolio s registered office is 1 First Canadian Place, 41st Floor, Toronto, Ontario, M5X 1A1. The Statement of Financial Position and related notes of each of the Portfolios are as at June 30, 2017 and December 31, The Statement of Comprehensive Income, Statement of Changes in Net Assets Attributable to Holders of Redeemable Units, Statement of Cash Flows and related notes are for the periods ended June 30, 2017 and June 30, These financial statements were authorized for issuance by the Board of Directors of the Manager on August 14, These financial statements should be read in conjunction with the annual financial statements for the period ended December 31, 2016 which have been prepared in accordance with International Financial Reporting Standards ( IFRS ). 2. Basis of preparation and presentation These unaudited interim financial statements have been prepared in accordance with IFRS and in accordance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board ( IASB ). 3. Summary of significant accounting policies Financial instruments The Portfolio records financial instruments at fair value. Investment transactions are accounted for on the trade date. The Portfolio s investments are either designated at fair value through profit or loss ( FVTPL ) at inception or classified as held for trading. The changes in the investment fair values and related transaction costs are recorded in the Portfolio s Statement of Comprehensive Income. Financial assets and financial liabilities held for trading are those acquired or incurred principally for the purpose of selling or repurchasing in the near future, or on initial recognition, are part of a portfolio of identified financial instruments that the Portfolio manages together and that have a recent actual pattern of short-term profit taking. The Portfolio classifies all derivatives and short positions as held for trading. The Portfolio does not designate any derivatives as hedges in a hedging relationship. The Portfolio designates all other investments at FVTPL, as they have reliably measurable fair values and are part of a group of financial assets or financial liabilities that are managed and have their performance evaluated on a fair value basis in accordance with the Portfolio s investment strategy. The Portfolio s outstanding redeemable units, which are puttable instruments, are entitled to a contractual obligation of annual distribution of any net income and net realized capital gains by the Portfolio. This annual distribution can be in cash at the option of the unitholders, and therefore the ongoing redemption feature is not the redeemable units only contractual obligation. Consequently, the units of the Portfolio do not meet the conditions to be classified as equity and therefore are classified as financial liabilities and presented at the redemption amounts. All other financial assets and financial liabilities are measured at amortized cost. Under this method, financial assets and financial liabilities reflect the amount required to be received, paid or discounted, when appropriate, at the contract s effective interest rate. The Manager has determined that the Portfolio meets the definition of investment entity and as a result, the Portfolio measures subsidiaries, if any, at FVTPL. Cost of investments The cost of investments represents the amount paid for each security and is determined on an average cost basis. Fair value measurement Investments are recorded at their fair value with the change between this amount and their average cost being recorded as Change in unrealized appreciation (depreciation) in the Statement of Comprehensive Income. For exchange-traded securities, close prices are considered to be fair value if they fall within the bidask spread. In circumstances where the close price is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. Procedures are in place to fair value securities traded in countries outside of North America daily, to avoid stale

18 NOTES TO FINANCIAL STATEMENTS (cont d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2017 prices and to take into account among other things, any significant events occurring after the close of a foreign market. For bonds, debentures, asset-backed securities and other debt securities, fair value is represented by bid prices provided by independent security pricing services. Short-term investments, if any, are held at amortized cost which approximates fair value. Unlisted warrants, if any, are valued based on a pricing model which considers factors such as the market value of the underlying security, strike price and terms of the warrant. Mutual fund units held as investments are valued at their respective Net Asset Value ( NAV ) on each Valuation Date (the Valuation Date is each day on which the Toronto Stock Exchange is open for trading), as these values are the most readily and regularly available. For securities where market quotes are not available, unreliable or not considered to reflect the current value, the Manager may determine another value which it considers to be fair and reasonable, or use a valuation technique that, to the extent possible, makes maximum use of inputs and assumptions based on observable market data including volatility, comparable companies, NAV (for exchange-traded funds) and other applicable rates or prices. These estimation techniques include discounted cash flows, internal models that utilize observable data or comparisons with other securities that are substantially similar. In limited circumstances, the Manager may use internal models where the inputs are not based on observable market data. Derivative instruments Derivative instruments are financial contracts that derive their value from changes in underlying interest rates, foreign exchange rates or other financial or commodity prices or indices. Derivative instruments are either regulated exchangetraded contracts or negotiated over-the-counter contracts. The Portfolio may use these instruments for trading purposes, as well as to manage the Portfolio s risk exposures. Derivatives are measured at fair value. Realized gains and losses are included in Net realized gain (loss) in the Statement of Comprehensive Income and unrealized gains and losses are included in Change in unrealized appreciation (depreciation) in the Statement of Comprehensive Income. Forward currency contracts A forward currency contract is an agreement between two parties (the Portfolio and the counterparty) to purchase or sell a currency against another currency at a set price on a future date. The Portfolio may enter into forward currency contracts for hedging purposes, which can include the economic hedging of all or a portion of the currency exposure of an investment or group of investments, either directly or indirectly. The Portfolio may also enter into these contracts for non-hedging purposes, which can include increasing the exposure to a foreign currency, or shifting the exposure to foreign currency fluctuations from one country to another. The value of forward currency contracts entered into by the Portfolio is recorded as the difference between the value of the contract on the Valuation Date and the value on the date the contract originated. Income recognition Dividend income and distribution from investment trusts are recognized on the ex-dividend and exdistribution date, respectively. Interest income from interest bearing investments is recognized in the Statement of Comprehensive Income using the effective interest rate. Interest receivable shown in the Statement of Financial Position is accrued based on the interest bearing investments stated rates of interest. Interest on inflation-indexed bonds is paid based on a principal value, which is adjusted for inflation. The inflation adjustment of the principal value is recognized as part of interest income in the Statement of Comprehensive Income. If held to maturity, the Portfolio will receive, in addition to a coupon interest payment, a final payment equal to the sum of the par value and the inflation compensation accrued from the original issue date. Interest is accrued on each Valuation Date based on the inflation adjusted par value at that time and is included in Interest income in the Statement of Comprehensive Income. Foreign currency translation The fair value of investments and other assets and liabilities in foreign currencies are translated into the Portfolio s functional currency at the rates of exchange prevailing at the period-end date. Purchases and sales of investments, and income and expenses are translated at the rates of exchange prevailing on the respective

19 NOTES TO FINANCIAL STATEMENTS (cont d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2017 dates of such transactions. Foreign exchange gains (losses) on completed transactions are included in Net realized gain (loss) in the Statement of Comprehensive Income and unrealized foreign exchange gains (losses) are included in Change in unrealized appreciation (depreciation) in the Statement of Comprehensive Income. Foreign exchange gains (losses) relating to cash, receivables and payables are included in "Foreign exchange gain (loss)" in the Statement of Comprehensive Income. Securities lending A Portfolio may engage in securities lending pursuant to the terms of an agreement with BNY Mellon (the security lending agent ). The aggregate market value of all securities loaned by the Portfolio cannot exceed 50% of the NAV of the Portfolio. The Portfolio will receive collateral of at least 102% of the value of securities on loan. Collateral will generally be comprised of obligations of or guarantee by the Government of Canada or a province thereof, or by the United States government or its agencies, but it may include obligations of other governments with appropriate credit ratings. Further, the program entered into provides for 100% indemnification by the securities lending agent and parties related to the Portfolio s custodian, to the Portfolio for the defaults by borrowers. For those Portfolios participating in the program, aggregate values of securities on loan and the collateral held as at June 30, 2017 and December 31, 2016 are disclosed in Note 8(f). Income from securities lending, where applicable, is included in the Statement of Comprehensive Income and is recognized when earned. The breakdown of the securities lending income is disclosed in Note 8(f), where applicable. Short-term trading penalty To discourage excessive trading, the Portfolio may, at the Manager s sole discretion, charge a short-term trading penalty. This penalty is paid directly to the Portfolio and is included in Short-term trading penalty fees in the Statement of Comprehensive Income. Cash Cash is comprised of cash and deposits with banks which include bankers acceptances and overnight demand deposits. Cash is recorded at fair value. The carrying amount of cash approximates its fair value because it is short-term in nature. Other assets and other liabilities Receivable for investments sold, dividends receivable, distribution receivable from investment trusts, and subscriptions receivable are initially recorded at fair value and subsequently measured at amortized cost. Similarly, payable for investments purchased, redemptions payable, distributions payable and accrued expenses are measured at amortized cost. Other assets and liabilities are short-term in nature, and are carried at cost or amortized cost. Increase or decrease in net assets attributable to holders of redeemable units Increase (decrease) in net assets attributable to holders of redeemable units in the Statement of Comprehensive Income represents the increase (decrease) in net assets attributable to holders of redeemable units ( Net Assets ) divided by the weighted average number of units outstanding during the period. Taxation The Portfolio qualifies as a unit trust under the provisions of the Income Tax Act (Canada). Distributions of all net taxable income and sufficient amounts of net realized capital gains for each taxation year will be paid to unitholders so that the Portfolio will not be subject to income tax. As a result, the Portfolio has determined that it is in substance not taxable and therefore does not record income taxes in the Statement of Comprehensive Income nor does it recognize any deferred tax assets or liabilities in the Statement of Financial Position. The Portfolio may incur withholding taxes imposed by certain countries on investment income and capital gains. Such income and capital gains are recorded on a gross basis with the related withholding taxes shown as a separate expense in the Statement of Comprehensive Income. Investments in subsidiaries, joint ventures and associates Subsidiaries are entities over which the Portfolio has control through its exposure or rights to variable returns from its investment and has the ability to affect those returns through its power over the entity. The Manager has determined that the Portfolio is an investment entity and as such, it accounts for subsidiaries, if any, at fair value. Joint ventures are those where the Portfolio exercises joint control through an agreement with other shareholders, and associates are investments in which the Portfolio exerts significant influence over operating, investing, and financing decisions (such as entities in