2014 Annual Management Report of Fund Performance

Transcription

1 BMO SelectTrust Growth Portfolio (the Fund ) For the 12-month period ended December 31, (the period ) Manager: BMO Investments Inc. (the Manager or BMOII ) Portfolio Manager: BMO Asset Management Inc. (the portfolio manager ) Annual Management Report of Fund Performance This annual management report of fund performance contains financial highlights but does not contain the complete annual financial statements of the Fund. If the annual financial statements of the Fund do not accompany the mailing of this report, you may obtain a copy of the annual financial statements at your request, and at no cost, by calling , by writing to us at BMO Investments Inc., 1 First Canadian Place, 43rd Floor, 100 King Street West, Toronto, Ontario, M5X 1A1 or by visiting our website at or SEDAR at You may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record and/or quarterly portfolio disclosure. MANAGEMENT DISCUSSION OF FUND PERFORMANCE Investment Objective and Strategies The Fund s objective is to generate long-term growth of capital and income by investing primarily in securities of Canadian and foreign funds within the BMO Mutual Funds family of mutual funds. In attempting to achieve its objective, the Fund employs a strategic asset allocation strategy and allocates assets among the underlying mutual funds based on each underlying mutual fund s investment objective and strategies, among other factors. The underlying mutual funds, as well as the percentage holding in each underlying fund, may be changed without notice, from time to time. The Fund s asset class weighting will generally be approximately 2 in fixed income securities and 8 in equity securities. Risk No changes affecting the overall level of risk associated with investing in the Fund were made during the period. The risks of this Fund remain as discussed in the Fund s most recent simplified prospectus or any amendments and fund facts. Results of Operations During the period, the Fund s total net asset value increased from approximately $175 million to approximately $836 million. Advisor Series units of the Fund returned 12.27% versus the Fund s blended benchmark new, composed of 2 FTSE TMX Canada Universe Bond Index, 25% S&P/TSX Composite Total Return Index and 55% MSCI World Index (C$), which returned 12.91%. Please see the Past Performance section for information on the performance returns of the Fund s other series. began with a chill in both the weather and investor sentiment, as a polar vortex covered large parts of North America, freezing out industrial production, distribution channels, and even consumer spending. With profit taking from strong equity returns over the prior year, heightened geopolitical tension around the world, and concerns over the sustainability of global economic growth, all combined to make volatility one of the key themes of financial markets over the year. U.S. equities benefitted from one of the strongest economic environments among global markets, with strong job creation, rebounding housing starts, and increasing disposable income, leading markets higher for the majority of the period, despite a short early January sell-off and a shocking first quarter gross domestic product ( GDP ) decline of 2.1%. Economic growth rebounded sharply, however, as inflation pressures including wage growth and energy prices remained tame, relieving much of the built-up anxiety over the potential impact and timing of the U.S. Federal Reserve Board s (the Fed ) ending of quantitative easing (i.e., monetary policy used by the central banks to increase money supply) and eventual interest rate increases. A global rout in oil prices during the fourth quarter, however, led equities lower, as OPEC s decision to not cut production sent the Energy sector of the S&P 500 Index plunging to finish the year 16.6% lower. Overall, the S&P 500 Index finished the year up 6.7% (in USD terms). For unhedged Canadian investors, the depreciation of the Canadian dollar versus the U.S. dollar over, added an additional 9.5% to U.S. equity returns.

2 Eurozone equities were volatile over, as uncertainty over the timing and scale of the much discussed quantitative easing, combined with sharply slower industrial production and GDP growth, produced a 10.8% decline (in local currency terms) for the calendar year, owing to sharp sell-offs in the third and fourth quarters. The Ukraine-Russia conflict impacted investor sentiment as well, increasing market volatility, while plunging oil prices in the latter half of the year brought headline inflation to virtually zero, amplifying long standing concerns of an imminent deflationary spiral. Despite a much stronger economy, U.K. equities were volatile, but made no distinct headway over the course of, before joining global markets in a December sell-off that left the benchmark FTSE100 Index roughly 7% lower than the beginning of the year. Japan proved to be one of the strongest major markets of the MSCI EAFE Index, as the Nikkei 225 Index fought back from a 13% decline in the first quarter, caused by fears of negative impact from a sales tax increase, to end the year 3.2% higher than it started, with only modest gains in export demand and manufacturing output. Canadian preferred equities, as measured by the S&P/TSX Preferred Share Index, returned 6.8%, underperforming the S&P/TSX Composite Total Return Index ( S&P/TSX) of 10.6% in. Virtually all the returns in this asset class were delivered during the first half of the year when interest rate sensitive securities, including preferred shares, were up sharply. Despite the widespread expectation that bonds yields would gradually increase during the year, rates actually declined. As a result, the more interest sensitive subcomponents of the preferred share market, such as straight perpetual preferred shares, performed substantially better than the less interest rate sensitive floating preferred shares. Canadian equities, as represented by the S&P/TSX, were up 10.6% in, underperforming U.S. equities (in CAD terms) for the second year in a row. The Canadian economic back-drop modestly exceeded expectations with full year growth likely at 2.3%, largely in line with U.S. economic performance, buoyed by continued strength in consumer spending and due to improving export performance, courtesy of a lower Canadian dollar. In terms of equity markets, the commodities sectors were the weakest performing sectors across the S&P/TSX during the year, with Energy down 4.8% and Materials down 2.6%, the only two sectors that were down in. An area of strength in the S&P/TSX was the performance of stocks that have exposure to the U.S., as Canadian companies that incur their costs in Canadian dollars but earn their revenues in U.S. dollars, benefitted handsomely as the U.S. dollar appreciated meaningfully versus the Canadian dollar during the year. Finally, there was surprising strength in the performance of defensive stocks, particularly Consumer Staples, which was the top performing sector this year. Defensive stocks benefitted from their safe haven status as investors shunned the volatile commodity sectors in search of greater earnings visibility available in sectors such as Consumer Staples. During the period, 10-year Government of Canada bond yields rallied from 2. at the beginning of the year to finish at 1.8%. The Canadian yield curve pivoted downwards with very short rates staying virtually unchanged, while rates fell across the rest of yield curve. As a result, Canadian bonds posted positive returns over the quarter, across all maturities and sectors. More specifically, overall short-term bonds (1 to 5 years) returned 0.9%, mid-term bonds (5 to 10 years) returned 2.7%, and long term bonds (10+ years) returned 5.3%. From a sector perspective, overall Government of Canada bonds returned 2.3%, provincial bonds returned 3.9% and corporate bonds returned 1.9%. was a volatile year for U.S. high yield bonds, as credit spreads widened, from 400 bps to 504 bps, detracting from the sector s higher coupon yields, resulting in an overall 12-month return of 2.5% (USD) for the benchmark Merrill Lynch U.S. High Yield Master II Index. This was driven primarily by a sharp decline of -13.3% in the Energy sector of the index in the fourth quarter, as the rapid fall in global oil prices piqued investor concerns over potential defaults among junior oil exploration firms. Broadly speaking, higher rated credits outperformed lower, with the B-rated sub-index rising 1.3% versus the -2.6% decline among issues rated CCC and lower. During the period, the portfolio manager maintained an overweight position to U.S. equities, while underweighting Canadian equities. While working to the Fund s disadvantage during the first quarter of the year, this decision added to the Fund s relative return over the full period. Additionally, the portfolio manager increased the Fund s exposure to the rising U.S. dollar in the fourth quarter through currency forwards, further contributing to relative returns. During the period, all of the underlying holding of the Fund delivered positive returns, contribution to the Fund s overall performance. The Manager confirms that the Fund did not borrow money during the period.

3 Recent Developments Oil remains the point upon which equity markets balance, with prices dipping below the US$50/bbl mark, sparking a sell-off for the first few trading days of While it is not suspected that oil will remain this low for an extended period of time, it is possible that it may remain at such levels for the next several months, affecting the relative performance between net importers and exporters of crude oil. The portfolio manager expects U.S. equities to continue to outperform in 2015, barring a strong near-term return in oil prices that would benefit Canadian equities, which have historically shown an extremely high correlation between annual changes in oil prices and equity index returns. Despite the recent increase in volatility, fundamentals still indicate better value in equities versus bonds, with macroeconomic data supporting a continued overweight position, favouring U.S. equities. The drop in oil prices has resulted in outright deflation across the eurozone, including Germany, suggesting that the European Central Bank ( ECB ) will most likely finally adopt the purchase of government bonds as part of its quantitative easing program, which if implemented to the extent previously stated by the ECB s president, Mario Draghi, could result in a strong gain for European equities. Inflation pressures remain subdued globally, suggesting that interest rates should not rise aggressively, even in the U.S., as wage growth and commodity prices remain constrained. Cash flow yields remain strong among North American corporate issuers, which should result in corporate issues again outperforming government bonds in Overall, the portfolio manager expects a flat return from Canadian bonds in 2015, despite the surprising January 21st decrease of the Bank of Canada s policy rate of 0.25%. As 2015 begins, the portfolio manager continues to favour equities over bonds, U.S. equities over Canadian, and corporate issues versus government among North American bond markets. Despite the pronounced appreciation of the U.S. dollar over the past period, the portfolio manager expects further downside for the Canadian dollar, reflecting the longer-term impact of low oil prices on our economy. Significant Accounting Changes Resulting from our Adoption of IFRS Effective January 1,, the Fund adopted International Financial Reporting Standards ( IFRS ) as its basis of accounting. The annual financial statements for the year ended December 31, are the first set of annual financial statements prepared on an IFRS basis. The adjustments made to reflect the impact of the change from Canadian generally accepted accounting principles ( Canadian GAAP ) to IFRS are presented in note 8 to the financial statements. Key changes to the financial statements as a result of the implementation of IFRS are: Statement of Financial Position replaced the Statement of Net Assets: - The Fund s unitholders investments in the units of the Fund did not qualify for equity classification under IFRS and have been classified as a financial liability for financial reporting purposes. - Classification of financial instruments: derivatives and short positions have been classified as held for trading while all other financial instruments have been designated as fair valued through profit and loss. Following adoption of IFRS by the Fund for financial reporting purposes, the Fund now fair values its investment securities traded on an exchange at close price, which is determined as the price within the bid ask range that represents the best estimate of fair value. Statement of Comprehensive Income replaced Statement of Operations: - The Fund accounts for interest income using the effective interest rate method, rather than the coupon method previously used under Canadian GAAP. Statement of Changes in Net Assets Attributable to Holders of Redeemable Units replaced the Statement of Changes in Net Assets and the Fund now presents a Statement of Cash Flows. Other notable changes to the financial statement notes include additional or enhanced information in the notes to the financial statements, including a more detailed note and reconciliation on the Fund s transition from Canadian GAAP to IFRS. RELATED PARTY TRANSACTIONS BMO Investments Inc., an indirect, wholly-owned subsidiary of Bank of Montreal ( BMO ), is the Manager of the Fund. From time to time, the Manager may, on behalf of the Fund, enter into transactions or arrangements with, or involving, other members of BMO Financial Group, or certain other persons or companies that are related or connected to the Manager (each a Related Party ). The purpose of this section is to provide a brief description of any transaction involving the Fund and a Related Party.

4 Buying and Selling Securities Conducting Inter-Fund Trades During the period, the Manager relied on an approval and standing instruction provided by the Fund s Independent Review Committee ( IRC ) with respect to conducting inter-fund trades (each, a Related Party Transaction ). In accordance with the IRC s approval and standing instruction, in making a decision to cause the Fund to make a Related Party Transaction, the Manager and portfolio manager of the Fund, are required to comply with the Manager s written policies and procedures governing the Related Party Transaction and report periodically to the IRC, describing each instance that the Manager and/or portfolio manager relied on the approval and standing instruction and its compliance or non-compliance with the governing policies and procedures. The governing policies and procedures are designed to ensure the Related Party Transaction (i) is made free from any influence of BMO, BMO Nesbitt Burns Inc. or an associate or affiliate of BMO and/or BMO Nesbitt Burns Inc. and without taking into account any considerations relevant to BMO, BMO Nesbitt Burns Inc. or an associate or affiliate of BMO and/or BMO Nesbitt Burns Inc., (ii) represents the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund, and (iii) achieves a fair and reasonable result for the Fund. Portfolio Manager The Fund s portfolio manager is BMO Asset Management Inc. ( BMOAM ), an affiliate of the Manager. BMOAM provides portfolio management services to the Fund. BMOAM receives from the Fund a management fee based on assets under management, calculated daily and payable monthly. Brokerage Commissions The Fund pays standard brokerage commissions at market rates to BMO Nesbitt Burns Inc., an affiliate of the Manager, for executing a portion of its trades. The brokerage commissions charged to the Fund (excluding exchange and other fees) during the periods indicated, were as follows: Period ended Period ended Dec. 31, Dec. 31, 2013 ($) ($) Administration Fees and Operating Expenses Other than in respect of Series T5, Series T8, Series F, Series C and Series I, the Fund pays a fixed administration fee to the Manager in respect of each series. The Manager, in return, pays the operating expenses, other than certain specified expenses that are paid directly by the Fund ( Fund Expenses ). Fund Expenses include interest or other borrowing expenses, costs and expenses related to the operation of the Fund s Independent Review Committee ( IRC ), including fees and expenses of IRC members, taxes to which the Fund is or might be subject, and costs associated with compliance with any new governmental or regulatory requirement introduced after December 1, 2007 (e.g., cost associated with the production of fund facts, filed in compliance with the relevant amendments to NI ). Fund Expenses are allocated proportionately among the relevant series. If the Fund Expenses are specific to a series, the Fund Expenses are allocated to that series. The fixed administration fee is calculated as a fixed annual percentage of the average net asset value of each relevant series of the Fund. The Fund pays all the operating expenses of Series T5, Series T8, Series F and Series C. These operating expenses are allocated proportionately among the series. Separate fees and expenses are negotiated and paid by each Series I investor. Further details about the fixed administration fee and/or Fund Expenses can be found in the Fund s most recent simplified prospectus at or The expenses charged to the Fund in respect of such services during the period amounted to $1,614,188 (2013 $89,276). Distribution Services The Manager markets and distributes the Fund through Bank of Montreal branches and/or (depending on the series) through registered dealers and brokers, including BMO InvestorLine Inc. and BMO Nesbitt Burns Inc., both affiliates of the Manager. The Manager pays to these affiliates a service fee called a trailing commission based on the average daily value of the units and/or shares that are held in investor accounts. This service fee is paid monthly or quarterly and varies by purchase option and by series. Total brokerage commissions $ 50,094 Brokerage commissions paid to BMO Nesbitt Burns Inc. $ 14,292

5 Management Fees The Manager is responsible for the day-to-day management of the business and operations of the Fund. The Manager monitors and evaluates the Fund s performance, pays for the investment advice provided by the Fund s portfolio manager and provides certain administrative services required by the Fund. As compensation for its services, the Manager is entitled to receive a management fee payable monthly, calculated based on the daily net asset value of each series of the Fund at the maximum annual rate set out in the table below. As a Percentage of Management Fees General Maximum Annual Administration, Management Dealer Investment Fee Rate* Compensation Advice and Profit % % % Series A Units Advisor Series Units Series T5 Units Series T6 Units Series T8 Units Series I Units Series C Units * For Series I Units, separate Series I fees are negotiated and paid by each Series I investor. Because the Manager pays no distribution, service or trailing fees on Series I Units, Series I Units will have lower Series I fees than the management fees for Advisor Series Units. FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the periods indicated. The Fund s Net Assets per Unit (1) Series A Units Net assets, beginning of period $ )* Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ 0.14 Total annual distributions (4) $ Net assets, end of period $ Advisor Series Units Net assets, beginning of period $ )* Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ 0.13 Total annual distributions (4) $ Net assets, end of period $ Series T5 Units Net assets, beginning of period $ Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ Total annual distributions (4) $ Net assets, end of period $

6 Series T6 Units Net assets, beginning of period $ )* Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ Total annual distributions (4) $ Net assets, end of period $ Series T8 Units Net assets, beginning of period $ Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ Total annual distributions (4) $ Net assets, end of period $ (6) Series F Units Net assets, beginning of period $ Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ Total annual distributions (4) $ (7) Net assets, end of period $ ) Series I Units Net assets, beginning of period $ )* Total revenue $ Total expenses (2) $ 0.00 for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ Total annual distributions (4) $ Net assets, end of period $

7 Series C Units Net assets, beginning of period $ Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ Total annual distributions (4) $ Net assets, end of period $ * Initial net assets. (1) The information is derived from the Fund s audited annual financial statements. The financial information presented for the years ended December 31, and December 31, 2013 is derived from the financial statements determined in accordance with IFRS. Information for years prior to January 1, 2013 is derived from prior period financial statements prepared in accordance with Canadian GAAP. An explanation of these differences can be found in the notes to the Fund s financial statements. (2) Includes commissions and portfolio transaction costs. Prior to 2013, withholding taxes were not included in expenses as they were included in revenue. (3) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period. This table is not intended to be a reconciliation of beginning to ending net assets per unit. (4) Distributions were paid in cash or reinvested in additional units of the Fund, or both, where applicable. The information shown in this column is for the period beginning August 12, 2013 (the series inception date) and ending December 31, (6) The information shown in this column is for the period beginning November 4, 2013 (the series inception date) and ending December 31, (7) This series is available by way of a simplified prospectus, but no Series F Units were issued and outstanding as of the date of this financial period. Ratios and Supplemental Data Series A Units Total net asset value (000s) (1) $ 820, ,256 outstanding (000s) (1) 71,741 15,981 (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $ Advisor Series Units Total net asset value (000s) (1) $ 3, outstanding (000s) (1) (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $ Series T5 Units Total net asset value (000s) (1) $ outstanding (000s) (1) (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $ Series T6 Units Total net asset value (000s) (1) $ 6,379 1,082 outstanding (000s) (1) (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $ Series T8 Units (6) Total net asset value (000s) (1) $ outstanding (000s) (1) (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $ Series F Units Total net asset value (000s) (1) $ outstanding (000s) (1) (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % (7) Net asset value per unit $ ) Series I Units Total net asset value (000s) (1) $ outstanding (000s) (1) % before waivers or absorptions + % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $

8 Series C Units Total net asset value (000s) (1) $ 5,325 5,813 5,207 4,925 4,996 outstanding (000s) (1) (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $ (1) This information is provided as at December 31 of the period shown. (2) The management expense ratio of a particular series is calculated based on all expenses allocated to the series, as applicable, including all taxes and interest expenses but excluding brokerage commissions and other portfolio transaction costs, divided by the average daily net asset value of that series, annualized. (3) BMOII absorbed certain expenses or waived certain fees otherwise payable by a series. In doing so, BMOII attempts to maintain the overall MER of the Fund at a relatively consistent level. BMOII may discontinue the absorption or waiver at any time. (3) The trading expense ratio represents the total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. (4) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio manager manages its portfolio investments. A portfolio turnover rate of 10 is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher a fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a fund. The information shown in this column is for the period beginning August 12, 2013 (the series inception date) and ending December 31, (6) The information shown in this column is for the period beginning November 4, 2013 (the series inception date) and ending December 31, (7) This series is available by way of a simplified prospectus, but no Series F Units were issued and outstanding as of the date of this financial period. Year-by-Year Returns The following bar charts show the performance for each series of the Fund for each of the financial years shown. The charts show in percentage terms how an investment made on the first day of each financial year would have increased or decreased by the last day of the financial year. Series A Units - - Advisor Series Units (4) PAST PERFORMANCE - The Fund s performance information assumes that all distributions made by the Fund in the periods shown were used to purchase additional units or shares of the Fund and is based on the net asset value of the Fund. The performance information does not take into account sales, redemption, distribution or other optional charges that, if applicable, would have reduced returns or performance. Please remember, how the Fund has performed in the past does not indicate how it will perform in the future. The returns of each series may differ from one another for a number of reasons, including if the series was not issued and outstanding for the entire reporting period and because of the different levels of fees and expenses allocated and payable by each series. On July 14, 2008, BMO Asset Management Inc. (formerly Jones Heward Investment Counsel Inc.) was appointed portfolio manager of the Fund. This change could have affected the performance of the Fund, had it been in effect throughout the performance measurement periods presented. - Series T5 Units - - Series T6 Units (4) (3)

9 Series T8 Units Annual Compound Returns This table compares the historical annual compound returns of the Fund with its blended benchmark new (composed of 2 FTSE TMX Canada Universe Bond Index, 25% S&P/TSX Composite Total Return Index ( S&P/TSX ) and 55% MSCI World Index (C$), in addition to the S&P/TSX, a broad-based index (2) The FTSE TMX Canada Universe Bond Index is a broad measure of the total return of Canadian bonds that mature in more than one year. Series F Units The S&P/TSX reflects the price movements of selected securities listed on the Toronto Stock Exchange and weighted by market capitalization. The MSCI World Index (C$) measures the total return of equity securities available in developed markets globally from 24 countries (1) Series I Units (6) Series A Units year years years years Inception (4) BMO SelectTrust Growth Portfolio % Blended Benchmark % Blended Benchmark new % S&P/TSX % Advisor Series Units year years years years Inception (4) - BMO SelectTrust Growth Portfolio % Blended Benchmark % Blended Benchmark new % S&P/TSX % Series C Units (1) (4) Series T5 Units year years years years Inception (3) BMO SelectTrust Growth Portfolio % Blended Benchmark % Blended Benchmark new % S&P/TSX % Series T6 Units year years years years Inception BMO SelectTrust Growth Portfolio % Blended Benchmark % Blended Benchmark new % S&P/TSX % (1) Return from July 17, 2006 to December 31, (2) Return from January 2, 2007 to December 31, (3) Return from January 8, 2008 to December 31, (4) Return from August 12, 2013 to December 31, Return from November 4, 2013 to December 31, (6) Return from January 1, to March 23,.

10 Series T8 Units year years years years Inception (2) BMO SelectTrust Growth Portfolio % Blended Benchmark % Blended Benchmark new % S&P/TSX % Series I Units year years years years Inception (4) BMO SelectTrust Growth Portfolio % Blended Benchmark % Blended Benchmark new % S&P/TSX % Series C Units year years years years Inception (1) BMO SelectTrust Growth Portfolio % Blended Benchmark % Blended Benchmark new % S&P/TSX % (1) Return from July 17, 2006 to December 31,. (2) Return from January 2, 2007 to December 31,. (3) Return from January 8, 2008 to December 31,. (4) Return from August 12, 2013 to December 31,. Return from November 4, 2013 to December 31,. As noted above, the table shows a comparison of the historical annual compound returns of the Fund with the S&P/TSX, a broad-based index. The Fund, however, uses a blended benchmark to compare its overall relative performance. The reason for this is that the blended benchmark is a better reflection of the asset mix of the underlying investments within the Fund s portfolio. Accordingly, the blended benchmark is a more accurate and useful comparison. In, the Manager realigned the Fund s blended benchmark, which better reflects its asset mix. A commentary on the market and/or information regarding the relative performance of the Fund as compared to its benchmark can be found under the Results of Operations section of this report. SUMMARY OF INVESTMENT PORTFOLIO As at December 31, % of Net Portfolio Allocation Asset Value U.S. Equity Fund 29.5 Canadian Equity Funds 22.8 Fixed Income Funds 18.9 International Equity Funds 17.4 Global Equity Fund 5.2 Emerging Markets Equity Fund 5.1 Cash/Receivables/Payables 1.1 Total Portfolio Allocation % of Net Holdings* Asset Value Issuer BMO U.S. Equity Fund, Series I 29.5 BMO Canadian Large Cap Equity Fund, Series I 20.1 BMO European Fund, Series I 9.8 BMO Asian Growth and Income Fund, Series I 7.6 BMO Global Small Cap Fund, Series I 5.2 BMO Emerging Markets Fund, Series I 5.1 BMO Bond Fund, Series I 5.0 BMO High Yield US Corporate Bond Hedged to CAD Index ETF** 3.1 BMO Canadian Small Cap Equity Fund, Series I 2.7 BMO Mortgage and Short Term Income Fund, Series I 2.5 BMO Short-Term US IG Corporate Bond Hedged to CAD Index ETF** 2.1 BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETF** 2.1 BMO Floating Rate High Yield ETF** 2.0 Cash/Receivables/Payables 1.1 BMO U.S. High Yield Bond Fund, Series I 0.9 BMO Mid-Term US IG Corporate Bond Index ETF** 0.7 BMO World Bond Fund, Series I 0.5 Total Holdings as a Percentage of Total Net Asset Value Total Net Asset Value $836,330,927 *Represents entire portfolio. The prospectus and other information about the underlying investment funds held in the portfolio are available on the internet at and at **The prospectus and other information about the underlying exchange traded funds held in the portfolio are available on the internet at and at The summary of investment portfolio may change due to the Fund s ongoing portfolio transactions. Updates are available quarterly.

11 BMO Investments Inc. First Canadian Place, 43rd Floor, 100 King Street West Toronto, ON M5X 1A1 For more information please call This document may contain forward-looking statements relating to anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent our beliefs regarding future events. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed or implied in the forward-looking statements. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including but not limited to market and general economic conditions, interest rates, regulatory and statutory developments, the effects of competition in the geographic and business areas in which the Fund may invest in and the risks detailed from time to time in BMO Mutual Funds simplified prospectus. We caution that the foregoing list of factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to investing in the Fund, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Due to the potential impact of these factors, BMO Investments Inc. does not undertake, and specifically disclaims, any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law. Registered trade-mark of Bank of Montreal, used under licence. Trade-mark of Bank of Montreal, used under licence. BMO Mutual Funds are offered by BMO Investments Inc., a financial services firm and separate legal entity from Bank of Montreal.