BMO Mutual Funds 2017

Transcription

1 BMO Mutual Funds 2017 Annual Financial Statements BMO Preferred Share Fund

2 Independent Auditor s Report To the Unitholders and Trustee of: BMO Canadian Equity Fund BMO Canadian Small Cap Equity Fund BMO Resource Fund BMO Mortgage and Short-Term Income Fund BMO Money Market Fund BMO Bond Fund BMO Canadian Equity ETF Fund BMO Asset Allocation Fund BMO Dividend Fund BMO Precious Metals Fund BMO Monthly Income Fund BMO Diversified Income Portfolio BMO Global Infrastructure Fund BMO Laddered Corporate Bond Fund BMO Emerging Markets Bond Fund BMO Core Plus Bond Fund BMO Core Bond Fund BMO Target Education Income Portfolio BMO Target Education 2020 Portfolio BMO Target Education 2025 Portfolio BMO Target Education 2030 Portfolio BMO Target Education 2035 Portfolio BMO Tactical Global Bond ETF Fund BMO Tactical Global Equity ETF Fund BMO Global Balanced Fund BMO U.S. Dividend Fund BMO Retirement Income Portfolio BMO Retirement Conservative Portfolio BMO Retirement Balanced Portfolio BMO Ascent Income Portfolio BMO Ascent Conservative Portfolio BMO Ascent Balanced Portfolio BMO Ascent Growth Portfolio BMO Ascent Equity Growth Portfolio BMO LifeStage Plus 2020 Fund BMO LifeStage Plus 2025 Fund BMO LifeStage Plus 2030 Fund BMO LifeStage Plus 2022 Fund BMO LifeStage Plus 2026 Fund BMO SelectTrust Fixed Income Portfolio BMO FundSelect Income Portfolio BMO FundSelect Balanced Portfolio BMO FundSelect Growth Portfolio BMO FundSelect Equity Growth Portfolio BMO Fixed Income Yield Plus ETF Portfolio BMO Balanced Yield Plus ETF Portfolio BMO Fixed Income ETF Portfolio BMO Income ETF Portfolio BMO Conservative ETF Portfolio BMO Balanced ETF Portfolio BMO Growth ETF Portfolio BMO Equity Growth ETF Portfolio BMO World Bond Fund BMO Emerging Markets Fund BMO European Fund BMO North American Dividend Fund BMO U.S. Equity ETF Fund BMO U.S. Equity Fund BMO Global Dividend Fund BMO International Equity ETF Fund BMO Global Monthly Income Fund BMO Preferred Share Fund BMO Tactical Dividend ETF Fund BMO Global Strategic Bond Fund BMO U.S. High Yield Bond Fund BMO Tactical Balanced ETF Fund BMO Growth Opportunities Fund BMO Global Equity Fund BMO U.S. Equity Plus Fund BMO U.S. Dollar Money Market Fund BMO U.S. Dollar Equity Index Fund BMO U.S. Dollar Monthly Income Fund BMO U.S. Dollar Dividend Fund BMO U.S. Dollar Balanced Fund BMO Risk Reduction Equity Fund BMO Risk Reduction Fixed Income Fund BMO Covered Call Canadian Banks ETF Fund BMO Covered Call Europe High Dividend ETF Fund BMO Fossil Fuel Free Fund BMO Tactical Global Asset Allocation ETF Fund BMO Tactical Global Growth ETF Fund BMO Covered Call U.S. High Dividend ETF Fund BMO Women in Leadership Fund BMO International Equity Fund BMO Japan Fund To the Shareholders of BMO Global Tax Advantage Funds Inc.: BMO Global Dividend Class BMO Canadian Equity Class BMO Global Equity Class BMO Global Energy Class BMO Dividend Class BMO Greater China Class BMO International Value Class BMO Global Low Volatility ETF Class (formerly BMO Global Tactical ETF Class) BMO SelectClass Income Portfolio BMO SelectClass Balanced Portfolio BMO SelectClass Growth Portfolio BMO SelectClass Equity Growth Portfolio BMO Income ETF Portfolio Class BMO Balanced ETF Portfolio Class BMO Growth ETF Portfolio Class BMO Equity Growth ETF Portfolio Class BMO U.S. Equity Class BMO Asian Growth and Income Class (collectively, the Funds or individually the Fund)

3 Independent Auditor s Report We have audited the accompanying financial statements of each of the Funds, which comprise the statements of financial position, comprehensive income, changes in net assets attributable to holders of redeemable units/shares and cash flows as at and for the periods indicated in Note 1, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of each of the Funds in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the financial statements of each of the Funds based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in each of our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of each of the Funds present fairly, in all material respects, the financial position, financial performance and cash flows of each of the Funds as at and for the periods indicated in Note 1 in accordance with International Financial Reporting Standards. Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario December 18, 2017

4 STATEMENT OF FINANCIAL POSITION September 30 September 30 As at ASSETS CURRENT ASSETS Cash 3,580 17,960 Investments Non-derivative financial assets 439, ,956 Subscriptions receivable Dividends receivable Distribution receivable from investment trusts Total assets 444, ,769 LIABILITIES CURRENT LIABILITIES Payable for investments purchased 22 Redemptions payable 1, Accrued expenses 3 2 Total liabilities 1, redeemable units 442, ,725 redeemable units Series A Units 8,178 6,176 Advisor Series Units 4,958 4,501 Series F Units 9,054 6,270 Series D Units Series I Units 369, ,225 Series O Units 50,031 48,332 redeemable units per unit Series A Units $ 9.10 $ 8.33 Advisor Series Units $ 9.22 $ 8.44 Series F Units $ 9.31 $ 8.51 Series D Units $ 9.15 $ 8.36 Series I Units $ 9.24 $ 8.47 Series O Units $ 9.13 $ 8.36 STATEMENT OF COMPREHENSIVE INCOME September 30 September 30 For the periods ended INCOME Interest income Dividend income 21,218 24,464 Distribution from investment trusts Other changes in fair value of investments and derivatives Net realized loss (15,660) (88,111) Change in unrealized appreciation 55, ,515 Net gain in fair value of investments and derivatives 61,622 37,554 Securities lending revenue (note 8) Total other income Total income 61,643 37,566 EXPENSES Management fees (note 6) Fixed administration fees (note 6) Independent review committee fees (note 6) 0 0 Interest charges 0 Fund Facts fees 1 1 Commissions and other portfolio transaction costs (note 6) Operating expenses absorbed by the Manager (note 6) (49) (46) Total expenses Increase in net assets attributable to holders of redeemable units 61,010 36,879 Increase in net assets attributable to holders of redeemable units Series A Units Advisor Series Units Series F Units Premium Series Units 0 Series D Units Series I Units 51,565 32,554 Series O Units 7,070 3,153 Increase in net assets attributable to holders of redeemable units per unit (note 8) Series A Units Advisor Series Units Series F Units Premium Series Units 0.45 Series D Units Series I Units Series O Units The accompanying notes are an integral part of these financial statements.

5 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (All amounts in thousands of Canadian dollars) September 30 September 30 For the periods ended Series A Units redeemable units at beginning of period 6,176 8,833 Increase in net assets attributable to holders of redeemable units Distributions to holders of redeemable units from: Net investment income (216) (258) Return of capital (0) (0) Total distributions to holders of redeemable units (216) (258) Redeemable unit transactions Proceeds from redeemable units issued 3,796 1,937 Reinvestments of distributions to holders of redeemable units Redemption of redeemable units (2,606) (5,011) Net increase (decrease) from redeemable unit transactions 1,398 (2,826) Net increase (decrease) in net assets attributable to holders of redeemable units 2,002 (2,657) redeemable units at end of period 8,178 6,176 Advisor Series Units redeemable units at beginning of period 4,501 2,965 Increase in net assets attributable to holders of redeemable units Distributions to holders of redeemable units from: Net investment income (147) (144) Return of capital (0) (0) Total distributions to holders of redeemable units (147) (144) Redeemable unit transactions Proceeds from redeemable units issued 1,138 2,099 Reinvestments of distributions to holders of redeemable units Redemption of redeemable units (1,209) (808) Net increase from redeemable unit transactions 37 1,395 Net increase in net assets attributable to holders of redeemable units 457 1,536 redeemable units at end of period 4,958 4,501 September 30 September 30 For the periods ended Series F Units redeemable units at beginning of period 6,270 3,615 Increase in net assets attributable to holders of redeemable units Distributions to holders of redeemable units from: Net investment income (302) (246) Return of capital (0) (0) Total distributions to holders of redeemable units (302) (246) Redeemable unit transactions Proceeds from redeemable units issued 3,888 3,843 Reinvestments of distributions to holders of redeemable units Redemption of redeemable units (1,862) (1,451) Net increase from redeemable unit transactions 2,129 2,457 Net increase in net assets attributable to holders of redeemable units 2,784 2,655 redeemable units at end of period 9,054 6,270 Premium Series Units redeemable units at beginning of period 1 Increase in net assets attributable to holders of redeemable units 0 Redeemable unit transactions Redemption of redeemable units (1) Net decrease from redeemable unit transactions (1) Net decrease in net assets attributable to holders of redeemable units (1) redeemable units at end of period The accompanying notes are an integral part of these financial statements.

6 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (cont d) (All amounts in thousands of Canadian dollars) September 30 September 30 For the periods ended Series D Units redeemable units at beginning of period Increase in net assets attributable to holders of redeemable units Distributions to holders of redeemable units from: Net investment income (10) (8) Return of capital (0) (0) Total distributions to holders of redeemable units (10) (8) Redeemable unit transactions Proceeds from redeemable units issued Reinvestments of distributions to holders of redeemable units 10 7 Redemption of redeemable units (227) (104) Net increase from redeemable unit transactions Net increase in net assets attributable to holders of redeemable units redeemable units at end of period Series I Units redeemable units at beginning of period 374, ,762 Increase in net assets attributable to holders of redeemable units 51,565 32,554 Distributions to holders of redeemable units from: Net investment income (18,742) (19,691) Return of capital (10) (12) Total distributions to holders of redeemable units (18,752) (19,703) Redeemable unit transactions Proceeds from redeemable units issued 31, ,867 Reinvestments of distributions to holders of redeemable units 18,752 19,703 Redemption of redeemable units (86,865) (40,958) Net (decrease) increase from redeemable unit transactions (37,113) 79,612 Net (decrease) increase in net assets attributable to holders of redeemable units (4,300) 92,463 redeemable units at end of period 369, ,225 September 30 September 30 For the periods ended Series O Units redeemable units at beginning of period 48, ,943 Increase in net assets attributable to holders of redeemable units 7,070 3,153 Distributions to holders of redeemable units from: Net investment income (2,434) (6,393) Return of capital (2) (14) Total distributions to holders of redeemable units (2,436) (6,407) Redeemable unit transactions Proceeds from redeemable units issued 13,762 62,261 Reinvestments of distributions to holders of redeemable units 2,106 6,037 Redemption of redeemable units (18,803) (433,655) Net decrease from redeemable unit transactions (2,935) (365,357) Net increase (decrease) in net assets attributable to holders of redeemable units 1,699 (368,611) redeemable units at end of period 50,031 48,332 Total Fund redeemable units at beginning of period 439, ,262 Increase in net assets attributable to holders of redeemable units 61,010 36,879 Distributions to holders of redeemable units from: Net investment income (21,851) (26,740) Return of capital (12) (26) Total distributions paid to holders of redeemable units (21,863) (26,766) Redeemable unit transactions Proceeds from redeemable units issued 53, ,174 Reinvestments of distributions to holders of redeemable units 21,287 26,164 Redemption of redeemable units (111,572) (481,988) Net decrease from redeemable unit transactions (36,352) (284,650) Net increase (decrease) in net assets attributable to holders of redeemable units 2,795 (274,537) redeemable units at end of period 442, ,725 The accompanying notes are an integral part of these financial statements.

7 STATEMENT OF CASH FLOWS (All amounts in thousands of Canadian dollars) September 30 September 30 For the periods ended Cash flows from operating activities Increase in net assets attributable to holders of redeemable units 61,010 36,879 Adjustments for: Net realized loss on sale of investments and derivatives 15,660 88,111 Change in unrealized appreciation of investments and derivatives (55,524) (100,515) (Increase) decrease in dividends receivable (151) 267 Decrease in distribution receivable from investment trusts 9 21 Increase in accrued interest on money market investments (10) Increase (decrease) in accrued expenses 1 (5) Purchases of investments (288,816) (311,958) Proceeds from sale and maturity of investments 309, ,743 Net cash from operating activities 41, ,543 Cash flows from financing activities Distributions paid to holders of redeemable units, net of reinvested distributions (576) (602) Proceeds from issuances of redeemable units 53, ,168 Amounts paid on redemption of redeemable units (109,060) (482,502) Net cash from financing activities (56,317) (311,936) Net decrease in cash (14,380) (23,393) Cash at beginning of period 17,960 41,353 Cash at end of period 3,580 17,960 Supplementary Information Interest received, net of withholding taxes* Dividends received, net of withholding taxes* 21,067 24,731 Distribution received from investment trusts, net of withholding taxes* Interest expense paid* 0 *These items are from operating activities The accompanying notes are an integral part of these financial statements.

8 SCHEDULE OF INVESTMENT PORTFOLIO (All amounts in thousands of Canadian dollars, unless otherwise noted) MONEY MARKET INVESTMENTS Par Value (in thousands) Cost Fair Value Provincial 1.4% Province of Alberta, Treasury Bills, 1.148% Dec 5, , , ,988 Federal 1.5% Government of Canada, Treasury Bills, 0.730% Oct 5, , , ,050 Government of Canada, Treasury Bills, 0.881% Nov 16, , , ,693 Total Money Market Investments 2.9% , ,731 Fair Number of Shares or Units Cost + Value PREFERRED SHARES Preferred Shares - Floating Perpetual 0.4% Brookfield Asset Management Inc., Series 34, 4.200%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 31, 2019, $ , , ,872 Preferred Shares - Retractable 1.3% Royal Bank of Canada, Series BD, 3.600%, Non- Redeemable, May 24, 2020, $ , , ,017 Preferred Shares - Fixed/Floaters 64.8% AltaGas Ltd., Series G, 4.750%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Sep 30, 2019, $ , , ,206 AltaGas Ltd., Series I, 5.250%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Dec 31, 2020, $ , , ,518 AltaGas Ltd., Series K, 5.000%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Mar 31, 2022, $ , , ,068 Bank of Montreal, Series 27, 4.000%, Non- Redeemable, May 25, 2019, $ , , ,143 Bank of Montreal, Series 29, 3.900%, Non- Redeemable, Aug 25, 2019, $ , , ,134 Bank of Montreal, Series 31, 3.800%, Non- Redeemable, Nov 25, 2019, $ , Bank of Montreal, Series 38, 4.850%, Non- Cumulative, 5-Year Rate Reset Preferred, Redeemable, Feb 25, 2022, $ , , ,995 Bank of Montreal, Series 40, 4.500%, Non- Redeemable, May 25, 2022, $ , , ,924 Bank of Montreal, Series 42, 4.400%, Non- Redeemable, Aug 25, 2022, $ , Number of Shares or Units Cost + Fair Value Bank of Nova Scotia, The, Series 38, 4.850%, Non- Redeemable, Jan 27, 2022, $ , , ,033 BCE Inc., Series AA, 3.450%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Sep 1, 2022, $ , BCE Inc., Series AC, 3.550%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Mar 1, 2018, $ , BCE Inc., Series AF, 3.110%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Feb 1, 2020, $ , , ,498 BCE Inc., Series AI, 2.750%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Aug 1, 2021, $ , , ,439 BCE Inc., Series AK, 2.954%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Dec 31, 2021, $ , , ,143 BCE Inc., Series AM, 2.764%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Mar 31, 2021, $ , BCE Inc., Series R, 4.130%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Dec 1, 2020, $ , , ,298 BPO, Series AA, 4.750%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Dec 31, 2019, $ , , ,834 BPO, Series CC, 6.000%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Jun 30, 2021, $ , , ,509 BPO, Series GG, 4.850%, Cumulative, Fixed/ Floating Rate Preferred, Redeemable, Jun 30, 2022, $ , , ,793 BPO, Series P, 4.161%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 31, 2022, $ , , ,341 BPO, Series R, 4.155%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Sep 30, 2021, $ , , ,392 BPO, Series T, 4.600%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Dec 31, 2018, $ , , ,455 Brookfield Asset Management Inc., Series 18, 4.750%, Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,379 Brookfield Asset Management Inc., Series 24, 3.014%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jun 30, 2021, $ , , ,147 Brookfield Asset Management Inc., Series 26, 3.471%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Mar 31, 2022, $ , , ,430 Brookfield Asset Management Inc., Series 28-A, 2.727%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jun 30, 2022, $ , , ,248 Brookfield Asset Management Inc., Series 38, 4.400%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 31, 2020, $ , , ,391

9 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units Cost + Fair Value Brookfield Asset Management Inc., Series 40, 4.500%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Sep 30, 2019, $ , , ,548 Brookfield Asset Management Inc., Series 42, 4.500%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jun 30, 2020, $ , , ,538 Brookfield Asset Management Inc., Series 44, 5.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Dec 31, 2020, $ , , ,576 Brookfield Asset Management Inc., Series 46, 4.800%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 31, 2022, $ , Brookfield Renewable Partners L.P., Series 11, 5.000%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Apr 30, 2022, $ , , ,005 Brookfield Renewable Partners L.P., Series 7, 5.500%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jan 31, 2021, $ , , ,033 Brookfield Renewable Partners L.P., Series 9, 5.750%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jul 31, 2021, $ , , ,078 Brookfield Renewable Power Preferred Equity Inc., Series 1, 3.355%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Apr 30, 2020, $ , , ,356 Canadian Imperial Bank of Commerce, Series 39, 3.900%, Non-Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jul 31, 2019, $ , , ,660 Canadian Imperial Bank of Commerce, Series 41, 3.750%, Non-Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jan 31, 2020, $ , Canadian Imperial Bank of Commerce, Series 43, 3.600%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jul 31, 2020, $ , , ,968 Canadian Imperial Bank of Commerce, Series 45, 4.400%, Non-Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jul 31, 2022, $ , , ,048 Canadian Western Bank, Series 5, 4.400%, Non- Redeemable, Apr 30, 2019, $ , , ,491 Canadian Western Bank, Series 7, 6.250%, Non- Redeemable, Jul 31, 2021, $ , , ,885 Element Fleet Management Corp., Series A, 6.600%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Dec 31, 2018, $ , , ,702 Element Fleet Management Corp., Series C, 6.500%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 31, 2019, $ , , ,875 Element Fleet Management Corp., Series G, 6.500%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Sep 30, 2020, $ , , ,795 Element Fleet Management Corp., Series I, 5.750%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jun 30, 2022, $ , , ,471 Enbridge Inc., Series 11, 4.400%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 1, 2020, $ , , ,918 Enbridge Inc., Series 13, 4.400%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jun 1, 2020, $ , Number of Shares or Units Cost + Fair Value Enbridge Inc., Series 17, 5.150%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 1, 2022, $ , , ,519 Enbridge Inc., Series 3, 4.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Sep 1, 2019, $ , , ,114 Enbridge Inc., Series 9, 4.400%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Dec 1, 2019, $ , , ,596 Enbridge Inc., Series B, 3.415%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jun 1, 2022, $ , , ,823 Enbridge Inc., Series D, 4.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Mar 1, 2018, $ , , ,653 Enbridge Inc., Series F, 4.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jun 1, 2018, $ , , ,070 Enbridge Inc., Series N, 4.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Dec 1, 2018, $ , , ,429 Enbridge Inc., Series P, 4.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Mar 1, 2019, $ , , ,063 Enbridge Inc., Series R, 4.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jun 1, 2019, $ , , ,244 Husky Energy Inc., Series 3, 4.500%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Dec 31, 2019, $ , , ,349 Husky Energy Inc., Series 5, 4.500%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 31, 2020, $ , , ,338 Industrial Alliance Insurance and Financial Services Inc., Series G, 3.770%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jun 30, 2022, $ , , ,158 Intact Financial Corporation, Series 3, 3.332%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Sep 30, 2021, $ , Kinder Morgan Canada Limited, Series 1, 5.250%, Non- Redeemable, Nov 15, 2022, $ , , ,498 Manulife Financial Corporation, Series 1, Class 7, 4.312%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Mar 19, 2022, $ , Manulife Financial Corporation, Series 17, 3.900%, Non- Redeemable, Dec 19, 2019, $ , , ,174 Manulife Financial Corporation, Series 21, 5.600%, Non- Redeemable, Jun 19, 2021, $ , , ,535 Manulife Financial Corporation, Series 23, 4.850%, Non- Redeemable, Mar 19, 2022, $ , , ,937 Manulife Financial Corporation, Series 5, 3.891%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Dec 19, 2021, $ , , ,214 Manulife Financial Corporation, Series 9, 4.351%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Sep 19, 2022, $ , , ,059

10 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units Cost + Fair Value National Bank of Canada, Series 34, 5.600%, Non- Redeemable, May 15, 2021, $ , , ,977 National Bank of Canada, Series 36, 5.400%, Non- Redeemable, Aug 15, 2021, $ , , ,975 National Bank of Canada, Series 38, 4.450%, Non- Redeemable, Nov 15, 2022, $ , , ,730 Pembina Pipeline Corporation, Series 13, 5.750%, Redeemable, Jun 1, 2021, $ , , ,276 Pembina Pipeline Corporation, Series 5, 5.000%, Redeemable, Jun 1, 2019, $ , , ,583 Pembina Pipeline Corporation, Series 7, 4.500%, Redeemable, Dec 1, 2019, $ , , ,776 Pembina Pipeline Corporation, Series 9, 4.750%, Redeemable, Dec 1, 2020, $ , , ,920 Power Financial Corporation, Series P, 2.306%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jan 31, 2021, $ , ,283 Royal Bank of Canada, Series AZ, 4.000%, Non- Redeemable, May 24, 2019, $ , , ,116 Royal Bank of Canada, Series BB, 3.900%, Non- Redeemable, Aug 24, 2019, $ , , ,500 Royal Bank of Canada, Series BF, 3.600%, Non- Redeemable, Nov 24, 2020, $ , Royal Bank of Canada, Series BK, 5.500%, Non- Redeemable, May 24, 2021, $ , , ,666 Toronto-Dominion Bank, The, Series 1, 3.900%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Oct 31, 2019, $ , , ,333 Toronto-Dominion Bank, The, Series 12, 5.500%, Non- Redeemable, Apr 30, 2021, $ , , ,024 Toronto-Dominion Bank, The, Series 14, 4.850%, Non- Redeemable, Oct 31, 2021, $ , , ,294 Toronto-Dominion Bank, The, Series 16, 4.500%, Non- Redeemable, Oct 31, 2022, $ , , ,337 Toronto-Dominion Bank, The, Series 3, 3.800%, Non- Redeemable, Jul 31, 2019, $ , Toronto-Dominion Bank, The, Series 5, 3.750%, Non- Redeemable, Jan 31, 2020, $ , , ,151 Toronto-Dominion Bank, The, Series 7, 3.600%, Non- Redeemable, Jul 31, 2020, $ , , ,642 Toronto-Dominion Bank, The, Series 9, 3.700%, Non-Cumulative, 5-Year Rate Reset Preferred, Redeemable, Oct 31, 2020, $ , Number of Shares or Units Cost + Fair Value TransCanada Corporation, Series 13, 5.500%, Redeemable, May 31, 2021, $ , , ,527 TransCanada Corporation, Series 15, 4.900%, Redeemable, May 31, 2022, $ , , ,626 Veresen Inc., Series E, 5.000%, Cumulative, 5-Year Rate Reset Preferred, Redeemable, Jun 30, 2020, $ , , ,950 Westcoast Energy Inc., Series 12, 5.200%, Redeemable, Oct 15, 2021, $ , , , , ,610 Preferred Shares - Straight 27.7% Bank of Montreal, Series 35, 5.000%, Non- Cumulative, Preferred, Redeemable, Aug 25, 2020, $ , , ,876 BPO, Series N, 3.782%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Jun 30, 2021, $ , , ,472 Brookfield Asset Management Inc., Series 36, 4.850%, Cumulative, Preferred, Redeemable, Mar 31, 2018, $ , , ,084 Brookfield Asset Management Inc., Series 37, 4.900%, Cumulative, Preferred, Redeemable, Sep 30, 2018, $ , , ,157 Brookfield Renewable Power Preferred Equity Inc., Series 5, 5.000%, Cumulative, Preferred, Redeemable, Apr 30, 2018, $ , , ,467 Canadian Utilities Limited, Series EE, 5.250%, Cumulative, Preferred, Redeemable, Sep 1, 2020, $ , , ,637 Enbridge Inc., Series 7, 4.400%, Cumulative, Fixed/Floating Rate Preferred, Redeemable, Mar 1, 2019, $ , , ,985 Enbridge Inc., Series A, 5.500%, Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , Fortis Inc., Series F, 4.900%, Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , George Weston Limited, Series I, 5.800%, Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,239 George Weston Limited, Series III, 5.200%, Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,570 George Weston Limited, Series IV, 5.200%, Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,111 Great-West Lifeco Inc., Series F, 5.900%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,346 Great-West Lifeco Inc., Series G, 5.200%, Non- Cumulative, Preferred, Redeemable, Nov 10, 2017, $ , , ,888 Great-West Lifeco Inc., Series H, 4.850%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,013

11 SCHEDULE OF INVESTMENT PORTFOLIO (cont d) (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units Cost + Fair Value Great-West Lifeco Inc., Series M, 5.800%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,781 Great-West Lifeco Inc., Series P, 5.400%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,906 Great-West Lifeco Inc., Series Q, 5.150%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , Great-West Lifeco Inc., Series R, 4.800%, Non- Cumulative, Preferred, Redeemable, Dec 31, 2017, $ , , ,427 Great-West Lifeco Inc., Series S, 5.250%, Non- Cumulative, Preferred, Redeemable, Jun 30, 2019, $ , , ,834 HSBC Bank Canada, Series C, 5.100%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,033 IGM Financial Inc., Series B, 5.900%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,470 Intact Financial Corporation, Series 5, 5.200%, Non-Cumulative, Preferred, Redeemable, Jun 30, 2022, $ , , ,316 Intact Financial Corporation, Series 6, 5.300%, Non-Cumulative, Preferred, Redeemable, Sep 30, 2022, $ , , ,240 Loblaw Companies Limited, Series B, 5.300%, Cumulative, Preferred, Redeemable, Jun 30, 2020, $ , , ,537 Manulife Financial Corporation, Series 2, 4.650%, 30, 2017, $ , , ,424 Manulife Financial Corporation, Series 3, 4.500%, 30, 2017, $ , , ,289 Power Corporation of Canada, Series A, 5.600%, 30, 2017, $ , , ,545 Power Corporation of Canada, Series B, 5.350%, 30, 2017, $ , , ,118 Power Corporation of Canada, Series C, 5.800%, 30, 2017, $ , , ,310 Power Corporation of Canada, Series D, 5.000%, 30, 2017, $ , , ,381 Power Corporation of Canada, Series G, 5.600%, 30, 2017, $ , , ,600 Power Financial Corporation, Series D, 5.500%, 30, 2017, $ , Power Financial Corporation, Series E, 5.250%, 30, 2017, $ , , ,132 Power Financial Corporation, Series F, 5.900%, 30, 2017, $ , , ,622 Number of Shares or Units Cost + Fair Value Power Financial Corporation, Series H, 5.750%, 30, 2017, $ , , ,418 Power Financial Corporation, Series I, 6.000%, 30, 2017, $ , , ,496 Power Financial Corporation, Series K, 4.950%, 30, 2017, $ , , ,425 Power Financial Corporation, Series L, 5.100%, 30, 2017, $ , , ,888 Power Financial Corporation, Series O, 5.800%, 30, 2017, $ , , ,290 Power Financial Corporation, Series R, 5.500%, 30, 2017, $ , Power Financial Corporation, Series S, 4.800%, Non-Cumulative, Preferred, Redeemable, Apr 30, 2018, $ , , ,072 Power Financial Corporation, Series V, 5.150%, Non-Cumulative, Preferred, Redeemable, Jul 31, 2022, $ , , ,428 Royal Bank of Canada, Series BJ, 5.250%, Non- Cumulative, Preferred, Redeemable, Feb 24, 2021, $ , , ,665 Royal Bank of Canada, Series W, 4.900%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,470 Sun Life Financial Inc., Series 1, 4.750%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,939 Sun Life Financial Inc., Series 2, 4.800%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,682 Sun Life Financial Inc., Series 4, 4.450%, Non- Cumulative, Preferred, Redeemable, Oct 30, 2017, $ , , ,082 Toronto-Dominion Bank, The, Series 11, 4.900%, 31, 2020, $ , , , , ,437 Total Preferred Shares 94.2% , ,936 Fair Number of Units Cost Value HOLDINGS IN INVESTMENT FUNDS BMO Laddered Preferred Share Index ETF , , ,199 Total Holdings in Investment Funds 2.3% , ,199 Total Investment Portfolio 99.4% , ,866 Other Assets Less Liabilities 0.6% ,654 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS % ,520 + Where applicable, distributions received from holdings as a return of capital are used to reduce the adjusted cost base of the securities in the portfolio.

12 NOTES TO THE FINANCIAL STATEMENTS 1. The Mutual Fund BMO Preferred Share Fund (the Fund ) is an openended mutual fund established under the laws of the province of Ontario by Declaration of Trust. The Master Declaration of Trust was amended on October 23, 2008 and November 3, 2009 to permit certain funds to offer a multi-series structure. In addition to the existing Series A units, certain Funds are permitted to offer Series A Hedged, Advisor Series, Advisor Series Hedged, Series T4, Series T5, Series T6, Series M, Series F, Series F Hedged, Series F2, Series F4, Series F6, Premium Series, Series D, Series H, Series I, Series N, Series NBA, Series NBF, Series O, Series L, Series R, Series S and/or Classic Series units. Each series is intended for different kinds of investors and has different management fees and fixed administration fees. Refer to Note 8 for the series issued for this Fund as well as the management and administration fee rates for each series. BMO Investments Inc. ( the Manager ) is the Manager and Trustee of the Fund. The Manager is a wholly owned subsidiary of Bank of Montreal. The address of the Fund s registered office is 100 King Street West, Toronto, Ontario, M5X 1A1. The Statement of Financial Position of each of the Funds are as at and September 30, The Statement of Comprehensive Income, Statement of Changes Attributable to Holders of Redeemable Units, Statement of Cash Flows and related notes are for the periods ended September 30, 2017 and September 30, Financial information for a Fund established during the period(s) is presented from the date of inception as noted in Note 8. Financial information provided for a series established during the period(s) is presented from the inception date as noted in Note 8. Certain comparative figures in the Statement of Cash Flows have been revised to appropriately reflect the exclusion of non-cash items from Proceeds from issuances of redeemable units and Amounts paid on redemption of redeemable units arising from switches between series within a Fund. There is no net impact on cash flows from financing activities within each Fund. The amounts revised are disclosed in Note 8, where applicable. These financial statements were authorized for issuance by the Board of Directors of the Manager on December 5, Basis of preparation and presentation These audited financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). Certain prior period balances have been reclassified to conform with the current period presentation. 3. Summary of significant accounting policies Financial instruments The Fund records financial instruments at fair value. Investment transactions are accounted for on the trade date. The Fund 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 Fund 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 Fund manages together and that have a recent actual pattern of short-term profit taking. The Fund classifies all derivatives and short positions as held for trading. The Fund does not designate any derivatives as hedges in a hedging relationship. The Fund 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 Fund s investment strategy. The Fund 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 Fund. 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. The Fund may issue multiple series of redeemable units, which are equally subordinated but are not identical. As a result, the Fund s obligations for net assets attributable to holders of redeemable units are classified as financial liabilities and presented at the redemption amounts.

13 NOTES TO THE FINANCIAL STATEMENTS (cont d) 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 Fund meets the definition of investment entity and as a result, the Fund 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 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 the 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 Fund may use these instruments for trading purposes, as well as to manage the Fund 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 Fund and the counterparty) to purchase or sell a currency against another currency at a set price on a future date. The Fund 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 Fund may also enter into these contracts for nonhedging 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 Fund is recorded as the difference between the value of the contract on the Valuation Date and the value on the date the contract originated.

14 NOTES TO THE FINANCIAL STATEMENTS (cont d) Option contracts The Fund may engage in option contract transactions by purchasing (long positions) or writing (short positions) call or put option contracts. These contracts have different risk exposures for the Fund, whereas the risk for long positions will be limited to the premium paid to purchase the option contracts, the risk exposure for the short positions are potentially unlimited until closed or expired. Purchased option contracts The premium paid for purchasing an option is recorded as an asset in the Statement of Financial Position. The option contract is valued on each Valuation Date at an amount equal to the fair value of the option that would have the effect of closing the position. The change in the difference between the premium and the fair value is shown as Change in unrealized appreciation (depreciation) in the Statement of Comprehensive Income. When a purchased option expires, the Fund will realize a loss equal to the premium paid. When a purchased option is closed, the gain or loss the Fund will realize will be the difference between the proceeds and the premium paid. When a purchased call option is exercised, the premium paid is added to the cost of acquiring the underlying security. When a purchased put option is exercised, the premium paid is subtracted from the proceeds from the sale of the underlying security that had to be sold. Written option contracts The premium received from writing a call or put option is recorded as a liability in the Statement of Financial Position. When a written option expires, the Fund will realize a gain equal to the premium received. When a written option is closed, the Fund will realize a gain or loss equal to the difference between the cost at which the contract was closed and the premium received. When a written call option is exercised, the premium received is added to the proceeds from the sale of the underlying investments to determine the realized gain or loss. When a written put option is exercised, the premium received will be subtracted from the cost of the underlying investment the Fund had to purchase. The gain or loss that the Fund realizes when a purchased or written option is expired or closed is recorded as Net realized gain (loss) in the Statement of Comprehensive Income. Futures contracts Futures contracts are financial agreements to purchase or sell a financial instrument at a contracted price on a specified future date. Futures contracts are valued at the gain or loss that would arise as a result of closing the position at the Valuation date. Any difference between the notional value on each Valuation Date is recorded as Net realized gain (loss) in the Statement of Comprehensive Income. Treasury bills or cash are held as margin against futures contracts. Credit default swap contracts A credit default swap contract is an agreement to transfer credit risk from one party, a buyer of protection, to another party, a seller of protection. The Fund, as a seller of protection, would be required to pay a notional or other agreed upon value to the buyer of protection in the event of a default by a thirdparty. In return, the Fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default occurs. If no default occurs, the Fund would keep the stream of payments and would have no payment obligations. In connection with the agreement, securities or cash may be identified as collateral or margin in accordance with the terms of the agreement to provide assets of value in the event of default or bankruptcy/insolvency. The Fund, as a buyer of protection, would receive a notional or other agreed upon value from the seller of protection in the event of a default by a third-party. In return, the Fund would be required to pay to the counterparty a periodic stream of payments over the term of the contract provided that no event of default occurs. Credit default swap contracts are fair valued daily based upon quotations from independent security pricing sources. Premiums paid or received, if any, are included in Net realized gain (loss) in the Statement of Comprehensive Income. Net periodic payments are accrued daily and recorded as Interest income in the Statement of Comprehensive Income. When credit default swap contracts expire or are closed out, gains or losses are recorded as Net realized gain (loss) in the Statement of Comprehensive Income.