BMO UCITS ETF ICAV. Interim Report and Unaudited Condensed Financial Statements

Transcription

1 An Irish collective assetmanagement vehicle constituted as an openended umbrella fund with variable capital and with segregated liability between SubFunds registered in Ireland on 8 June 2015 under the Irish Collective Assetmanagement Vehicles Act 2015 ( ICAV ) and authorised by the Central Bank of Ireland as an Undertaking for Collective Investment in Transferable Securities ( UCITS ) pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011, as amended. Interim Report and Unaudited Condensed Financial Statements for the period from 1 October 2016 to 31 March 2017

2 Contents Directory 1 General Information 2 Investment Manager s Reports 6 Condensed Statement of Financial Position 11 Condensed Statement of Comprehensive Income 15 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders 19 Notes to the Condensed Financial Statements 23 Schedule of Investments BMO MSCI UK Income Leaders 42 BMO MSCI USA Income Leaders 44 BMO MSCI USA Income Leaders 48 BMO MSCI Europe exuk Income Leaders 53 BMO MSCI Europe exuk Income Leaders 57 BMO Barclays 13 Year Global Corporate Bond 61 BMO Barclays 37 Year Global Corporate Bond 69 BMO Barclays 710 Year Global Corporate Bond 78 BMO Barclays Global High Yield Bond 86 BMO MSCI Emerging Markets Income Leaders 99 Schedule of Portfolio Changes 106 Page

3 Directory BOARD OF DIRECTORS Eimear Cowhey (Irish)* David Hammond (Irish)* Liam Miley (Irish)* Hugh Moir (British) Drew Newman (British) Subhas Sen (Canadian) (resigned 4 October 2016) REGISTERED OFFICE 78 Sir John Rogerson s Quay Dublin 2 Ireland INVESTMENT MANAGER F&C Management Limited Exchange House Primrose Street London EC2A 2NY United Kingdom SECRETARY State Street Fund Services (Ireland) Limited 78 Sir John Rogerson s Quay Dublin 2 Ireland ADMINISTRATOR State Street Fund Services (Ireland) Limited 78 Sir John Rogerson s Quay Dublin 2 Ireland REGISTRATION NUMBER C AUDITORS KPMG 1 Harbourmaster Place IFSC Dublin 1 Ireland LEGAL ADVISORS Matheson 70 Sir John Rogerson s Quay Dublin 2 Ireland DEPOSITARY State Street Custodial Services (Ireland) Limited 78 Sir John Rogerson s Quay Dublin 2 Ireland *Independent Directors 1

4 General Information BMO ICAV (the Fund or the ICAV ) is an Irish collective assetmanagement vehicle constituted as an openended umbrella fund with variable capital and with segregated liability between SubFunds with registration number C The ICAV was incorporated under an Instrument of Incorporation ( IoI ), pursuant to the Irish Collective Assetmanagement Vehicles Act 2015 (the ICAV Act ), and was registered with the Central Bank of Ireland (the Central Bank ) on 8 June The ICAV has been authorised by the Central Bank as an Undertaking for Collective Investment in Transferable Securities ( UCITS ) pursuant to the provisions of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011, as amended (the UCITS Regulations ). All capitalised terms used but not defined herein shall have the meaning ascribed thereto in the ICAV s Prospectus dated 29 September 2015 and updated on 3 January 2017 (the Prospectus ). The ICAV has been structured as an umbrella fund consisting of different SubFunds, each comprising one or more classes of shares. The Directors may from time to time, with the prior approval of the Central Bank, create different series of Shares representing separate portfolios of assets, each such series comprising a SubFund. Each SubFund will bear its own liabilities and, under Irish law, none of the ICAV, the service providers appointed to the ICAV, the Directors, any receiver, examiner or liquidator, or any other person will have access to the assets of a SubFund in satisfaction of a liability of any other SubFund. The Investment Manager of the ICAV is F&C Management Limited. The portfolio of assets maintained for each series of Shares and comprising a SubFund will be invested in accordance with the investment objectives and policies applicable to such SubFund as specified in the relevant Supplement. Different Shares shall be designated as either ETF Shares (being Shares that are intended to be actively traded on a secondary market) or NonETF Shares (being Shares which are not listed or actively traded on a secondary market). Shares may be divided into different Classes to accommodate, amongst other things, the distinction between ETF Shares and Non ETF Shares, different dividend policies, charges, fee arrangements (including different total expense ratios), currencies, or to provide for foreign exchange hedging in accordance with the policies and requirements of the Central Bank from time to time. The shares of the subfunds are admitted to listing on the Main Securities Market of the Irish Stock Exchange (the ISE ) and they are admitted to trading on the London Stock Exchange (the LSE ). The SubFunds are also registered for distribution in Germany and they are governed by the German Investment Act. The ICAV has received confirmation from HM Revenue & Customs (HMRC) in the UK that HMRC have granted reporting fund status with effect from 5 November 2015 in respect of all SubFunds for UK tax purposes. SubFunds and Share Classes There are ten active SubFunds in operation as at 31 March 2017, all of which launched on 5 November 2015, with the exception of BMO MSCI Emerging Markets Income Leaders which launched on 1 December The active funds are listed hereunder: Name of SubFund Currency Class BMO MSCI UK Income Leaders Distributing Shares BMO MSCI USA Income Leaders USD USD Distributing Shares BMO MSCI USA Income Leaders Hedged Distributing Shares BMO MSCI Europe exuk Income Leaders EUR EUR Distributing Shares BMO MSCI Europe exuk Income Leaders Hedged Distributing Shares BMO Barclays 13 Year Global Corporate Bond Hedged Distributing Shares BMO Barclays 37 Year Global Corporate Bond Hedged Distributing Shares BMO Barclays 710 Year Global Corporate Bond Hedged Distributing Shares BMO Barclays Global High Yield Bond Hedged Distributing Shares BMO MSCI Emerging Markets Income Leaders USD USD Distributing Shares Collectively referred to in this document as the SubFunds. Investment Objectives and Policies The ICAV has been registered for the purpose of investing in transferable securities in accordance with the UCITS Regulations. 2

5 General Information cont/d Investment Objectives and Policies cont/d The specific investment objectives, strategies and policies for each SubFund will be set out in the relevant Supplement to the Prospectus and are summarised below. In each case, the investment policy of the SubFund is to track the performance of the relevant Index as closely as possible, regardless of whether the Index level rises or falls, while seeking to minimise as far as possible the tracking error between the SubFund s performance and that of the Index. In order to seek to achieve this investment objective, the Investment Manager will aim to replicate the Index by holding all of the Index Securities in a similar proportion to their weighting in the Index. BMO MSCI UK Income Leaders The objective of the SubFund is to provide an exposure to high quality large and midcapitalisation UK stocks which have a history of paying above average dividends, as represented by the relevant Index. BMO MSCI USA Income Leaders The objective of the SubFund is to provide an exposure to high quality large and midcapitalisation stocks issued in the USA which have a history of paying above average dividends. BMO MSCI USA Income Leaders The objective of the SubFund is to provide an exposure to high quality large and midcapitalisation stocks issued in the USA which have a history of paying above average dividends which is hedged to sterling. BMO MSCI Europe exuk Income Leaders The objective of the SubFund is to provide an exposure to high quality large and midcapitalisation stocks issued in developed markets in Europe, excluding the UK, which have a history of paying above average dividends. BMO MSCI Europe exuk Income Leaders The objective of the SubFund is to provide an exposure to high quality large and midcapitalisation stocks issued in developed markets in Europe, excluding the UK, which have a history of paying above average dividends and is hedged to sterling. BMO Barclays 13 Year Global Corporate Bond The objective of the SubFund is to provide an exposure to fixed rate corporate bonds issued within the last five years and with an effective term to maturity of between one and three years which is hedged to sterling. BMO Barclays 37 Year Global Corporate Bond The objective of the SubFund is to provide an exposure to fixed rate corporate bonds issued within the last five years and with an effective term to maturity of between three and seven years which is hedged to sterling. BMO Barclays 710 Year Global Corporate Bond The objective of the SubFund is to provide an exposure to fixed rate corporate bonds issued within the last five years and with an effective term to maturity of between seven and ten years which is hedged to sterling. BMO Barclays Global High Yield Bond The objective of the SubFund is to provide an exposure to global fixedrate, high yield bonds issued within the last five years and that have a maturity greater than one year, which is hedged to sterling. BMO MSCI Emerging Markets Income Leaders The objective of the SubFund is to provide an exposure to high quality large and midcapitalisation emerging market stocks which have a history of paying above average dividends. Each of the active SubFunds is intended to track or replicate the benchmark indices listed hereunder. Name of SubFund Benchmark Index ( Index ) Strategy* BMO MSCI UK Income Leaders MSCI UK Select Quality Yield Index Replicating BMO MSCI USA Income Leaders MSCI USA Select Quality Yield Index Replicating BMO MSCI USA Income Leaders MSCI USA Select Quality Yield 100% Hedged to Index Replicating BMO MSCI Europe exuk Income Leaders MSCI Europe exuk Select Quality Yield Index Replicating BMO MSCI Europe exuk Income Leaders MSCI Europe exuk Select Quality Yield 100% Hedged to Index Replicating 3

6 General Information cont/d Investment Objectives and Policies cont/d Name of SubFund Benchmark Index ( Index ) Strategy* BMO Barclays 13 Year Global Corporate Bond Barclays Global Corporate 13 Very Liquid Hedged to Index Replicating BMO Barclays 37 Year Global Corporate Bond Barclays Global Corporate 37 Very Liquid Hedged to Index Replicating BMO Barclays 710 Year Global Corporate Bond Barclays Global Corporate 710 Very Liquid Hedged to Index Replicating BMO Barclays Global High Yield Bond Barclays Global High Yield Bond Corporate Very Liquid ex144a Hedged to Index Replicating BMO MSCI Emerging Markets Income Leaders MSCI Emerging Markets Select Quality Yield Index Replicating *Where full replication of the Index is not reasonably possible the SubFund will use an optimisation methodology for replicating funds and a stratified sampling methodology for nonreplicating funds to build a representative portfolio that provides a return that is comparable to that of the Index. See the Prospectus for further details. Investment Risks An investment in any SubFund involves investment risks, including possible loss of the amount invested. Moreover, there can be no assurance that a SubFund will achieve its investment objective. Subscriptions for Shares Applications for subscriptions directly to the Fund in respect of ETF Shares may only be made by Authorised Participants through a Shareholder as their nominee. All other investors may purchase ETF Shares through the Authorised Participants or other investors on the secondary market, as described below. Shares may be subscribed for initially during the initial offer period for the relevant SubFund and at the price specified in the relevant Supplement. Thereafter, Shares will be issued at the Net Asset Value per Share plus an amount in respect of Duties and Charges, where applicable, on each Dealing Day. Investors must subscribe for an amount that is at least equal to the Minimum Subscription Amount. Where specified in the relevant Supplement, the Minimum Subscription Amount may differ for initial subscriptions and subsequent subscriptions and may be waived by the Directors in their absolute discretion. Redemption of Shares In accordance with the redemption procedures as specified in the Prospectus and relevant Supplements, shareholders may request the SubFund to redeem their Shares on any Dealing Day at the Net Asset Value per Share as of the relevant Dealing Day, subject to an appropriate provision for duties and charges. Shareholders may only redeem Shares with a value that is at least equal to the minimum redemption amount. If redemption requests received in respect of Shares of a particular SubFund on any Dealing Day total, in aggregate, more than 10% of all of the issued Shares of that SubFund on that Dealing Day, the Directors shall be entitled, at their absolute discretion, to refuse to redeem such number of Shares of that SubFund on that Dealing Day, in excess of 10% of the issued Shares of the SubFund, in respect of which redemption requests have been received, as the Directors shall determine. If the SubFund refuses to redeem Shares for this reason, the requests for redemption on such date shall be reduced rateably and the redemption requests shall be treated as if they were received on each subsequent Dealing Day until all the Shares to which the original request related have been redeemed, provided that the SubFund shall not be obliged to redeem more than 10% of the number of Shares of a particular SubFund outstanding on any Dealing Day, until all the Shares of the SubFund to which the original request related have been redeemed. Applications for redemptions directly to the SubFund in respect of ETF Shares may generally only be made by Authorised Participants, through a Shareholder as nominee for the Authorised Participants. All other investors may sell ETF Shares through the Authorised Participants or to other investors on the secondary market. 4

7 General Information cont/d Secondary Market purchases and sales of ETF The ETF Shares are listed for secondary trading on each Listing Stock Exchange and individual ETF Shares may be purchased and sold by investors on Listing Stock Exchanges through a brokerdealer. If an investor buys or sells ETF Shares in the secondary market, such investor will pay the secondary market price for ETF Shares. In addition, an investor may incur customary brokerage commissions and charges and may pay some or all of the spread between the bid and the offered price in the secondary market on each leg of a round trip (purchase and sale) transaction. Distribution Policy Each SubFund may have either Accumulating Classes or Distributing Classes or both. With respect to the Accumulating Classes in all SubFunds, the Directors have determined to accumulate all net investment income and net realised capital gains attributable to such Accumulating Classes and therefore do not intend to declare dividends in respect of Shares in such classes. Pursuant to the IoI, the Directors may declare dividends in respect of Shares in any Distributing Class out of net income (including dividend and interest income) and the excess of realised and unrealised capital gains over realised and unrealised losses in respect of investments of the SubFund (collectively Net Income ). It is the current intention of the Directors to declare and pay dividends out of Net Income attributable to each of the Distributing Classes on a quarterly basis (based on quarters ending in March, June, September and December). All Shares in issue in a Distributing Class on any date on which the Directors determine to declare a dividend in respect of that class will be eligible for such dividend. Shareholders should note that the Directors may, in their discretion, decide not to make such declaration and payment in respect of a Distributing Class. The distribution policy of any SubFund or of any Class may be changed by the Directors upon reasonable notice to shareholders of that SubFund or Class as the case may be and, in such circumstances, the distribution policies will be disclosed in an updated Prospectus and relevant Supplement. Net Asset Value and Valuation of Assets The ICAV has delegated the calculation of the Net Asset Value of each SubFund and the Net Asset Value per Share to State Street Fund Services (Ireland) Limited (the Administrator ). The Net Asset Value of a SubFund shall be calculated by ascertaining the value of the assets of the relevant SubFund and deducting from such amount the liabilities of the SubFund, which shall include all fees and expenses payable and accrued or estimated to be payable out of the assets of the SubFund. The Net Asset Value per Share of a SubFund shall be calculated by dividing the Net Asset Value of the relevant Sub Fund by the total number of Shares issued in respect of that SubFund or deemed to be in issue as of the relevant Business Day. The Net Asset Value per Share in each SubFund shall be calculated to the nearest four decimal places in the base currency of the relevant SubFund on each Business Day in accordance with the valuation provisions set out in the IoI and summarised below. In the event that the Shares of any SubFund are divided into different Classes, the amount of the Net Asset Value of the SubFund attributable to a Class shall be determined by establishing the number of Shares issued in the Class at the relevant Valuation Point and by allocating the relevant fees and Class expenses to the Class, making appropriate adjustments to take account of distributions, subscriptions, redemptions, gains and expenses of that Class and apportioning the Net Asset Value of the SubFund accordingly. The Net Asset Value per Share in respect of a Class will be calculated by dividing the Net Asset Value of the relevant Class by the number of Shares of the relevant Class in issue. The Net Asset Value of the SubFund attributable to a Class and the Net Asset Value per Share in respect of a Class will be expressed in the class currency of such Class if it is different to the Base Currency. The Net Asset Value per Share in the SubFund will be calculated at the Valuation Point on each Business Day. For further information regarding the method and principles by which the Net Asset Value is determined and the circumstances under which the Directors may temporarily suspend the determination of the Net Asset Value, please refer to the Prospectus. 5

8 Investment Manager s Reports Fund Performance The performance of each fund, and the benchmark index it seeks to replicate, is shown in the following table, for both the period under review and since inception date. Fund Benchmark Fund return Index return Benchmark for the for the Fund Index return period ended period ended return since since fund 31/03/17 31/03/17 inception inception* BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders BMO MSCI Europe exuk Income Leaders BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond BMO MSCI Emerging Markets Income Leaders All figures are aggregated net monthly returns and based on the average published net asset value. *Fund inception dates are shown in the General Information section above. Where a fund has launched midperiod, the data is calculated from launch date. An Explanation of Tracking Error Realised tracking error is the annualised standard deviation of the difference in returns between a fund and its benchmark index. Tracking error shows the consistency of the returns relative to the benchmark index over a defined period of time. Anticipated tracking error is the expected volatility of differences between the returns of a fund and the returns of its benchmark index. For physically replicating funds, the investment management approach is to buy a portfolio of securities that as far as practicable consist of the securities that make up the benchmark index, in similar proportion to the weights represented in the benchmark index. Cash management, efficient portfolio management techniques including securities lending, transaction costs from rebalancing, the impact of witholding taxes on income received and currency hedging can have an impact on tracking error as well as the return differential between a Fund and its benchmark index. Importantly, these impacts can be either positive or negative depending on the underlying circumstances. The following table shows the anticipated tracking error as shown in the Fund Prospectus on an ex ante basis against the actual tracking error in the period under review and since the fund s inception. The amount shown for the period under review is annualised using monthly data for the period. 6

9 Investment Manager s Reports cont/d An Explanation of Tracking Error cont/d Fund Annualised Tracking Error Tracking Error v benchmark v Benchmark Index for the Index Anticipated period ended since fund Tracking Error 31/03/17 inception* BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders BMO MSCI Europe exuk Income Leaders BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond BMO MSCI Emerging Markets Income Leaders *Fund inception dates are shown in the General Information section above. Where a fund has launched midperiod, the data is calculated from launch date. Individual subfund investment commentary BMO MSCI UK Income Leaders UK stocks made gains over the period, with risk appetite rising on the back of Donald Trump s victory in the US presidential election given his agenda to cut taxes and increase spending. The UK economy grew by 0.7% in the fourth quarter, with the earlier devaluation of sterling during 2016 helping exporters. Consumer spending also remained buoyant as the savings ratio fell to its lowest on record. At the same time, sterling was relatively stable over the sixmonth period, which ended with the UK s move to trigger the Article 50 process to leave the EU. Citing Brexit, however, the government lowered economic growth projections, while raising public sector borrowing estimates. Although the Bank of England maintained its accommodative monetary policy, inflation rose to its highest level since 2013 on rising fuel and food prices. However, after being pushed up by OPEC s agreement to limit production, oil prices began to retreat towards periodend as high US crude stockpiles weighed on the market. Higher metals prices saw the industrials metals & mining sector lead performance. Banks also benefited strongly from higher interest rate expectations. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is just below the prospectus guideline, which is for a range of % and %. BMO MSCI USA Income Leaders US equities rose strongly over the period. Donald Trump s surprise win in November s presidential election generally boosted risk appetite, as markets priced in faster US economic growth, underpinned by tax cuts and increased spending. Against the backdrop of robust economic data, the Federal Reserve (Fed) hiked interest rates in December and forecast three further rate increases for The Fed subsequently raised interest rates for a second time in March. However, towards the end of the period, the Trump administration s failure to get healthcare reform through Congress raised questions over the legislative path of its plans to increase fiscal stimulus. In the final month of the period, Fed Chair Janet Yellen also adopted a less hawkish tone than many investors had expected. US economic data continued to strengthen as the period progressed, with US consumer confidence climbing to its highest level for 16 years in March. While inflation rose over the sixmonth period, oil prices began to ease towards the end of the period, with higher US crude stockpiles counteracting the earlier positive price impact from OPEC s agreement to cut production in November. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is below the prospectus guideline, which is for a range of % and %. 7

10 Investment Manager s Reports cont/d Individual subfund investment commentary cont/d BMO MSCI USA Income Leaders US equities rose strongly over the period. Donald Trump s surprise win in November s presidential election generally boosted risk appetite, as markets priced in faster US economic growth, underpinned by tax cuts and increased spending. Against the backdrop of robust economic data, the Federal Reserve (Fed) hiked interest rates in December and forecast three further rate increases for The Fed subsequently raised interest rates for a second time in March. However, towards the end of the period, the Trump administration s failure to get healthcare reform through Congress raised questions over the legislative path of its plans to increase fiscal stimulus. In the final month of the period, Fed Chair Janet Yellen also adopted a less hawkish tone than many investors had expected. US economic data continued to strengthen as the period progressed, with US consumer confidence climbing to its highest level for 16 years in March. While inflation rose over the sixmonth period, oil prices began to ease towards the end of the period, with higher US crude stockpiles counteracting the earlier positive price impact from OPEC s agreement to cut production in November. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is below the prospectus guideline, which is for a range of % and %. BMO MSCI Europe exuk Income Leaders European equities made strong gains over the period. Risk appetite was generally boosted by Donald Trump s victory in the US presidential election given his agenda of cutting taxes and increasing spending. Meanwhile, the European Central Bank s (ECB) decision to extend quantitative easing for an additional nine months, albeit with monthly asset purchases to be reduced from 80bn to 60bn, also supported investor sentiment. Eurozone economic data was generally robust with household and business surveys pointing to an acceleration in growth, while inflation also ticked up. Though the ECB maintained its loose monetary policy, it appeared to strike a more hawkish tone towards the end of the period, given the increasingly favourable macroeconomic backdrop. European markets largely shrugged off the negative outcome to the Italian referendum on constitutional reform and subsequent resignation of Prime Minister Matteo Renzi. Elsewhere, the defeat of farright candidate Geert Wilders in the Dutch general election boosted risk appetite in the Netherlands. However, the triggering of Article 50 by the UK and strong polling by farright French presidential candidate Marine Le Pen remained sources of political risk. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is below the prospectus guideline, which is for a range of % and %. BMO MSCI Europe exuk Income Leaders European equities made strong gains over the period. Risk appetite was generally boosted by Donald Trump s victory in the US presidential election given his agenda of cutting taxes and increasing spending. Meanwhile, the European Central Bank s (ECB) decision to extend quantitative easing for an additional nine months, albeit with monthly asset purchases to be reduced from 80bn to 60bn, also supported investor sentiment. Eurozone economic data was generally robust with household and business surveys pointing to an acceleration in growth, while inflation also ticked up. Though the ECB maintained its loose monetary policy, it appeared to strike a more hawkish tone towards the end of the period, given the increasingly favourable macroeconomic backdrop. European markets largely shrugged off the negative outcome to the Italian referendum on constitutional reform and subsequent resignation of Prime Minister Matteo Renzi. Elsewhere, the defeat of farright candidate Geert Wilders in the Dutch general election boosted risk appetite in the Netherlands. However, the triggering of Article 50 by the UK and strong polling by farright French presidential candidate Marine Le Pen remained sources of political risk. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is within the prospectus guideline, which is for a range of % and %. 8

11 Investment Manager s Reports cont/d Individual subfund investment commentary cont/d BMO Barclays 13 Year Global Corporate Bond Global corporate 13 year bonds traded broadly sideways over the period. While returns were held back during the first half of the period as global interest rate expectations rose, spread tightening and a more benign environment in major government bond markets during the first quarter of 2017 enabled global credit to generate positive absolute returns over the sixmonth period as a whole. The Federal Reserve (Fed) hiked interest rates at its December meeting, its only rate increase of 2016, but also forecast it would raise rates on three more occasions during While keeping interest rates on hold, the European Central Bank announced an extension to its quantitative easing programme to the end of 2017, albeit with monthly asset purchases to be reduced from 80bn to 60bn. Although the Fed hiked interest rates at its March meeting from 0.75% to 1%, Fed officials adopted a less hawkish tone than many investors had expected, raising hopes of a gradual approach to rate tightening. New issuance during the quarter included $11bn from Verizon Communications and an 8bn deal from Volkswagen. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is below the prospectus guideline, which is for a range of % and %. BMO Barclays 37 Year Global Corporate Bond Global corporate 37 year bonds posted a small negative return over the period. While returns were held back during the first half of the period as global interest rate expectations rose, spread tightening and a more benign environment in major government bond markets during the first quarter of 2017 enabled global credit to generate positive absolute returns over the sixmonth period as a whole. The Federal Reserve (Fed) hiked interest rates at its December meeting, its only rate increase of 2016, but also forecast it would raise rates on three more occasions during While keeping interest rates on hold, the European Central Bank announced an extension to its quantitative easing programme to the end of 2017, albeit with monthly asset purchases to be reduced from 80bn to 60bn. Although the Fed hiked interest rates at its March meeting from 0.75% to 1%, Fed officials adopted a less hawkish tone than many investors had expected, raising hopes of a gradual approach to rate tightening. New issuance during the quarter included $11bn from Verizon Communications and an 8bn deal from Volkswagen. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is below the prospectus guideline, which is for a range of % and %. BMO Barclays 710 Year Global Corporate Bond Global corporate 710 year bonds posted a negative return over the period. While returns were held back during the first half of the period as global interest rate expectations rose, spread tightening and a more benign environment in major government bond markets during the first quarter of 2017 enabled global credit to generate positive absolute returns over the sixmonth period as a whole. The Federal Reserve (Fed) hiked interest rates at its December meeting, its only rate increase of 2016, but also forecast it would raise rates on three more occasions during While keeping interest rates on hold, the European Central Bank announced an extension to its quantitative easing programme to the end of 2017, albeit with monthly asset purchases to be reduced from 80bn to 60bn. Although the Fed hiked interest rates at its March meeting from 0.75% to 1%, Fed officials adopted a less hawkish tone than many investors had expected, raising hopes of a gradual approach to rate tightening. New issuance during the quarter included $11bn from Verizon Communications and an 8bn deal from Volkswagen. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is within the prospectus guideline, which is for a range of % and %. 9

12 Investment Manager s Reports cont/d Individual subfund investment commentary cont/d BMO Barclays Global High Yield Bond Global high yield bonds generated positive returns over the period. Donald Trump s surprise win in November s presidential election generally boosted risk appetite, as markets priced in faster US economic growth, underpinned by tax cuts and increased spending. Meanwhile, generally robust economic data from the US, China and the eurozone also provided impetus for spread tightening. The Federal Reserve (Fed) hiked interest rates at its December meeting, its only rate increase of 2016, but also forecast it would raise rates on three more occasions during While keeping interest rates on hold, the European Central Bank announced an extension to its quantitative easing programme to the end of 2017, albeit with monthly asset purchases to be reduced from 80bn to 60bn. Although the Fed hiked interest rates at its March meeting from 0.75% to 1%, Fed officials adopted a less hawkish tone than many investors had expected, raising hopes of a gradual approach to rate tightening. A landmark OPEC agreement to cut oil supply boosted sentiment in energyrelated names, however this was offset to some degree towards periodend as record high US crude stockpiles weighed. The annualised realised tracking error using monthly data over the past 6 months is % and since inception is %. This is within the prospectus guideline, which is for a range of % and %. BMO MSCI Emerging Markets Income Leaders Emerging markets equities generated positive returns over the period. An improving global growth outlook backed by generally robust macroeconomic data from the US, China and the eurozone helped emerging markets gain ground. The Federal Reserve (Fed) hiked interest rates at both its December and March meetings, with US rates moving up from 0.5% to 1%. However, investors in emerging markets were largely reassured by a less hawkish tone than expected from Fed officials towards periodend. India was among the bestperforming emerging markets over the period, as victory for Prime Minister Narendra Modi s BJP party in state elections increased the probability of a continuation in the government s reform programme. Poland also performed strongly, with sentiment boosted by accelerating economic growth. Chile's equity market was propelled higher by improving copper prices. Russia was among the laggards as it was hurt by declining expectations of improved relations with Washington and a corresponding easing in sanctions. The annualised realised tracking error using daily data since inception is %. This is within the prospectus guideline. However the performance record only dates from the fund launch of 1st December

13 Condensed Statement of Financial Position As at 31 March 2017 Notes BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders EUR BMO MSCI Europe exuk Income Leaders Current Assets Financial assets at fair value through profit or loss: Transferable securities Financial derivative assets Cash and cash equivalents 7 Other receivables Total Current Assets 23,687, ,272 72,451 23,952,616 15,429,189 65,495 17,150 15,511,834 8,446,321 33,568 38,460 8,329 8,526,678 15,897,697 1,210 71,027 53,800 16,023,734 44,689,798 98, , ,233 45,092,297 Current Liabilities Financial liabilities at fair value through profit or loss: Financial derivative liabilities Other payables Total Current Liabilities (excluding net assets attributable to redeemable participating shareholders) Net assets attributable to holders of Redeemable Participating Shares (135) (130,363) (130,498) 23,822,118 (79,989) (79,989) 15,431,845 (280) (43,526) (43,806) 8,482,872 (47,945) (47,945) 15,975,789 (38,148) (128,379) (166,527) 44,925,770 Net asset value per share USD EUR The accompanying notes are an integral part of the financial statements. 11

14 Condensed Statement of Financial Position cont/d As at 31 March 2017 Notes BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond *BMO MSCI Emerging Markets Income Leaders USD Current Assets Financial assets at fair value through profit or loss: Transferable securities Financial derivative assets Cash and cash equivalents 7 Other receivables Total Current Assets 22,130, , ,332 1,613,929 24,039,600 21,897, , ,359 1,663,253 23,916,358 22,271,208 75, , ,849 22,712,532 68,429, , ,071 1,154,653 70,578,525 10,737,093 2,210 98,560 56,783 10,894,646 Current Liabilities Financial liabilities at fair value through profit or loss: Financial derivative liabilities Other payables Total Current Liabilities (excluding net assets attributable to redeemable participating shareholders) Net assets attributable to holders of Redeemable Participating Shares (6,399) (1,691,561) (1,697,960) 22,341,640 (6,612) (1,730,002) (1,736,614) 22,179,744 (5,777) (166,032) (171,809) 22,540,723 (23,888) (867,624) (891,512) 69,687,013 (49,673) (49,673) 10,844,973 Net asset value per share USD *As this SubFund launched on 1 December 2016, comparative data is not available. The accompanying notes are an integral part of the financial statements. 12

15 Condensed Statement of Financial Position As at 30 September 2016 Notes BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders EUR BMO MSCI Europe exuk Income Leaders Current Assets Financial assets at fair value through profit or loss: Transferable securities Financial derivative assets Cash and cash equivalents 7 Other receivables Total Current Assets 15,142, ,683 20,555 15,283,717 14,306,679 56,983 22,298 14,385,960 7,981, ,340 10,334 8,025,266 14,275,320 26,977 16,740 14,319,037 30,697,544 16,092 13,264 30,726,900 Current Liabilities Financial liabilities at fair value through profit or loss: Financial derivative liabilities Other payables Total Current Liabilities (excluding net assets attributable to redeemable participating shareholders) Net assets attributable to holders of Redeemable Participating Shares (137,168) (137,168) (137,168) 15,146,549 (79,930) (79,930) (79,930) 14,306,030 (72,001) (44,927) (116,928) (116,928) 7,908,338 (36,706) (36,706) (36,706) 14,282,331 (542,806) (69,858) (612,664) (612,664) 30,114,236 Net asset value per share USD EUR The accompanying notes are an integral part of the financial statements. 13

16 Condensed Statement of Financial Position cont/d As at 30 September 2016 Notes BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond Current Assets Financial assets at fair value through profit or loss: Transferable securities Financial derivative assets Cash and cash equivalents 7 Other receivables Total Current Assets 16,026, , ,937 16,919,466 15,965, , ,433 16,932,477 16,868, ,939 1,536,454 18,510,942 17,786,897 3, , ,172 18,323,650 Current Liabilities Financial liabilities at fair value through profit or loss: Financial derivative liabilities Other payables Total Current Liabilities (excluding net assets attributable to redeemable participating shareholders) Net assets attributable to holders of Redeemable Participating Shares (188,648) (554,455) (743,103) (743,103) 16,176,363 (184,051) (605,655) (789,706) (789,706) 16,142,771 (182,957) (1,248,055) (1,431,012) (1,431,012) 17,079,930 (205,985) (252,785) (458,770) (458,770) 17,864,880 Net asset value per share The accompanying notes are an integral part of the financial statements. 14

17 Condensed Statement of Comprehensive Income For the period from 1 October 2016 to 31 March 2017 Notes BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders EUR BMO MSCI Europe exuk Income Leaders Income Investment income 306, , , , ,386 Net gain on investment activities 4 Total investment income Expenses Operating expenses 5 Net income Finance costs Bank interest expense Distributions 10 Taxation Withholding tax 2 Net movement in net assets attributable to redeemable participating shareholders resulting from operations 1,113,912 1,420,547 (32,146) 1,388,401 (246,555) 1,141,846 1,118,392 1,323,807 (25,715) 1,298,092 (20) (142,819) (29,438) 1,125, , ,066 (16,190) 667,876 (26) (77,055) (16,261) 574,534 1,638,606 1,808,895 (25,876) 1,783,019 (57,192) (32,369) 1,693,458 4,215,598 4,663,984 (71,106) 4,592,878 (608) (140,803) (87,470) 4,363,997 The accompanying notes are an integral part of the financial statements. 15

18 Condensed Statement of Comprehensive Income cont/d For the period from 1 October 2016 to 31 March 2017 Notes BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond *BMO MSCI Emerging Markets Income Leaders USD Income Investment income 7,249 9,808 9,095 24,293 88,851 Net gain/(loss) on investment activities 4 Total investment income/(expense) Expenses Operating expenses 5 Net income/(expense) Finance costs Bank interest expense Distributions 10 Taxation Withholding tax 2 Net movement in net assets attributable to redeemable participating shareholders resulting from operations 32,626 39,875 (28,854) 11,021 (208) (120,713) (109,900) (129,093) (119,285) (28,629) (147,914) (93) (203,287) (25) (351,319) (446,920) (437,825) (28,699) (466,524) (282,155) (748,679) 2,024,191 2,048,484 (98,081) 1,950,403 (795) (1,432,644) (865) 516, , ,979 (13,220) 886,759 (547) (42,736) (10,925) 832,551 *As this SubFund launched on 1 December 2016, comparative data is not available. The accompanying notes are an integral part of the financial statements. 16

19 Condensed Statement of Comprehensive Income For the period from 8 June 2015 (date of registration) to 31 March 2016 Notes BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders EUR BMO MSCI Europe exuk Income Leaders Income Investment income 85, ,171 72,817 84,172 41,986 Net gain/(loss) on investment activities 4 Total investment income/(expense) Expenses Operating expenses 5 Net income/(expense) Finance costs Bank interest expense Distributions 10 Taxation Withholding tax 2 Net movement in net assets attributable to redeemable participating shareholders resulting from operations 344, ,334 (7,617) 422,717 (67,695) 355, , ,456 (13,640) 526,816 (105,658) (17,521) 403, , ,127 (9,435) 192,692 (60,909) (10,439) 121, , ,009 (11,725) 376,284 (57) (63,576) (21,037) 291,614 (227,437) (185,451) (7,542) (192,993) (35) (25,884) (9,891) (228,803) The accompanying notes are an integral part of the financial statements. 17

20 Condensed Statement of Comprehensive Income cont/d For the period from 8 June 2015 (date of registration) to 31 March 2016 Notes BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond Income Investment income 24,408 56,674 80, ,221 Net gain/(loss) on investment activities 4 Total investment income/(expense) Expenses Operating expenses 5 Net income/(expense) Finance costs Bank interest expense Distributions 10 Taxation Withholding tax 2 Net movement in net assets attributable to redeemable participating shareholders resulting from operations 18,759 43,167 (4,858) 38,309 (12) (16,716) 21, , ,467 (7,292) 152,175 (23) (42,739) 109, , ,151 (7,301) 254,850 (18) (63,828) 191,004 (375,550) (149,329) (13,492) (162,821) (51) (185,116) (347,988) The accompanying notes are an integral part of the financial statements. 18

21 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders For the period from 1 October 2016 to 31 March 2017 Notes BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders EUR BMO MSCI Europe exuk Income Leaders Net assets attributable to redeemable participating shareholders at the beginning of the period Net movement in net assets attributable to redeemable participating shareholders resulting from operations Proceeds from the issuance of redeemable participating shares Movement in net assets resulting from share transactions 3 Net assets attributable to redeemable participating shareholders at the end of the period 15,146,549 1,141,846 7,533,723 7,533,723 23,822,118 14,306,030 1,125,815 15,431,845 7,908, ,534 8,482,872 14,282,331 1,693,458 15,975,789 30,114,236 4,363,997 10,447,537 10,447,537 44,925,770 The accompanying notes are an integral part of the financial statements. 19

22 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders cont/d For the period from 1 October 2016 to 31 March 2017 Notes BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond *BMO MSCI Emerging Markets Income Leaders USD Net assets attributable to redeemable participating shareholders at the beginning of the period Net movement in net assets attributable to redeemable participating shareholders resulting from operations Proceeds from the issuance of redeemable participating shares Movement in net assets resulting from share transactions 3 Net assets attributable to redeemable participating shareholders at the end of the period 16,176,363 (109,900) 6,275,177 6,275,177 22,341,640 16,142,771 (351,319) 6,388,292 6,388,292 22,179,744 17,079,930 (748,679) 6,209,472 6,209,472 22,540,723 17,864, ,099 51,306,034 51,306,034 69,687, ,551 10,012,422 10,012,422 10,844,973 *As this SubFund launched on 1 December 2016, comparative data is not available. The accompanying notes are an integral part of the financial statements. 20

23 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders For the period from 8 June 2015 (date of registration) to 31 March 2016 Notes BMO MSCI UK Income Leaders BMO MSCI USA Income Leaders USD BMO MSCI USA Income Leaders BMO MSCI Europe exuk Income Leaders EUR BMO MSCI Europe exuk Income Leaders Net assets attributable to redeemable participating shareholders at the beginning of the period Net movement in net assets attributable to redeemable participating shareholders resulting from operations Proceeds from the issuance of redeemable participating shares Movement in net assets resulting from share transactions 3 Net assets attributable to redeemable participating shareholders at the end of the period 355,022 7,238,006 7,238,006 7,593, ,637 13,097,039 13,097,039 13,500, ,344 7,343,737 7,343,737 7,465, ,614 13,545,446 13,545,446 13,837,060 (228,803) 5,761,349 5,761,349 5,532,546 The accompanying notes are an integral part of the financial statements. 21

24 Condensed Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders cont/d For the period from 8 June 2015 (date of registration) to 31 March 2016 Notes BMO Barclays 13 Year Global Corporate Bond BMO Barclays 37 Year Global Corporate Bond BMO Barclays 710 Year Global Corporate Bond BMO Barclays Global High Yield Bond Net assets attributable to redeemable participating shareholders at the beginning of the period Net movement in net assets attributable to redeemable participating shareholders resulting from operations Proceeds from the issuance of redeemable participating shares Movement in net assets resulting from share transactions 3 Net assets attributable to redeemable participating shareholders at the end of the period 21,581 4,000,137 4,000,137 4,021, ,413 6,000,199 6,000,199 6,109, ,004 6,000,200 6,000,200 6,191,204 (347,988) 10,000,325 10,000,325 9,652,337 The accompanying notes are an integral part of the financial statements. 22