Global Alpha Worldwide Growth Fund

Transcription

1 semi-annual FINANCIAL STATEMENTS NOTICE OF NO AUDITOR REVIEW OF THE SEMI-ANNUAL FINANCIAL STATEMENTS BMO Nesbitt Burns Inc., the Manager of the Fund, appoints independent auditors to audit the Fund s Annual Financial Statements. Under Canadian securities laws (National Instrument ), if an auditor has not reviewed the Semi-Annual Financial Statements, this must be disclosed in an accompanying notice. The Fund s independent auditors have not performed a review of the Semi-Annual Financial Statements in accordance with standards established by the Chartered Professional Accountants of Canada.

2 STATEMENT OF FINANCIAL POSITION (unaudited) As at December 31, 2016 ASSETS CURRENT ASSETS Cash 862,063 1,492,754 Investments Non-derivative financial assets 30,223,253 28,767,860 Receivable for investments sold 388,665 Dividends receivable 14,961 17,478 Distribution receivable from investment trusts 1, Total assets 31,101,311 30,667,604 LIABILITIES CURRENT LIABILITIES Payable for investments purchased 64,724 91,139 Derivative liabilities 223 Distributions payable 654,247 Accrued expenses 141, ,199 Loan payable (note 7) 1,505,419 Total liabilities 206,097 2,363,227 Net assets attributable to holders of redeemable units 30,895,214 28,304,377 Net assets attributable to holders of redeemable units Class A Units 30,895,214 28,304,377 Net assets attributable to holders of redeemable units per unit (note 5) Class A Units $11.81 $10.82 The accompanying notes are an integral part of these financial statements. 2

3 STATEMENT OF COMPREHENSIVE INCOME (unaudited) For the periods ended June 30, 2016 INCOME Interest income 29 Dividend income 228, ,513 Distribution from investment trusts 4,717 8,153 Other changes in fair value of investments and derivatives Net realized gain 1,742, ,517 Change in unrealized appreciation (depreciation) 1,066,284 (945,737) Net gain in fair value of investments and derivatives 3,042, ,475 Foreign exchange gain (loss) 10,689 (15,729) Total other income (loss) 10,689 (15,729 ) Total income 3,053, ,746 EXPENSES Administration and portfolio management fees (note 6) 312, ,211 Fund administration fees (note 6) 30,722 30,632 Foreign withholding taxes 23,387 27,810 Transfer agent fees 6,970 6,854 Audit fees 13,327 13,169 Custodian fees 6,751 8,797 Interest expense (note 6) 6, Legal and filing fees 22,931 3,287 Independent review committee fees 7,508 8,181 Securityholder reporting costs 10,340 12,558 Trustees expenses 4,360 4,331 Commissions and other portfolio transaction costs (note 6) 16,434 31,269 Total expenses 462, ,378 Increase (decrease) in net assets attributable to holders of redeemable units 2,590,837 (262,632) Increase (decrease) in net assets attributable to holders of redeemable units per unit (note 3) 0.99 (0.10) The accompanying notes are an integral part of these financial statements. 3

4 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (unaudited) For the periods ended June 30, 2016 Net assets attributable to holders of redeemable units at beginning of period 28,304,377 26,101,281 Increase (decrease) in net assets attributable to holders of redeemable units 2,590,837 (262,632) Net increase (decrease) in net assets attributable to holders of redeemable units 2,590,837 (262,632) Net assets attributable to holders of redeemable units at end of period 30,895,214 25,838,649 The accompanying notes are an integral part of these financial statements. 4

5 STATEMENT OF CASH FLOWS (unaudited) For the periods ended June 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in net assets attributable to holders of redeemable units 2,590,837 (262,632) Adjustments for: Foreign exchange loss on cash 24,165 1,352 Net realized gain on sale of investments and derivatives (1,742,783 ) (891,517) Change in unrealized (appreciation) depreciation of investments and derivatives (1,066,284) 945,737 Decrease in dividend receivable 2,517 3,215 (Increase) decrease in distribution receivable from investment trusts (187) 9,624 Increase (decrease) in accrued expenses 29,174 (9,430 ) Return of capital distributions received 1,305 6 Proceeds from sale and maturity of investments 6,000,931 6,808,638 Purchases of investments (4,286,535) (7,770,761 ) Cash inflows on derivatives 684,728 Net cash flow from operating activities 1,553,140 (481,040) CASH FLOWS FROM FINANCING ACTIVITIES Distributions paid to holders of redeemable units (654,247) Repayment of loan (1,505,419) Net cash flow from financing activities (2,159,666) Net decrease in cash (606,526) (481,040) Foreign exchange loss on cash (24,165) (1,352) Cash at beginning of period 1,492, ,127 Cash at end of period 862,063 (307,265) Supplementary information Interest received, net of withholding taxes* 29 Dividends received, net of withholding taxes* 207, ,918 Distribution received from investment trusts, net of withholding taxes* 5,835 17,783 Interest expense paid* 6, *These items are from operating activities The accompanying notes are an integral part of these financial statements. 5

6 schedule OF INVESTMENT PORTFOLIO (unaudited) (All amounts in Canadian dollars, unless otherwise noted) As at Description Number of Shares or Units Cost* Fair Value EQUITIES Australia 4.2% Alumina Ltd 184, , ,815 Greencross Limited 106, , ,128 Perpetual Limited 5, , ,730 1,189,227 1,307,673 Belgium 1.2% Dalenys 28, , ,305 Canada 3.2% Boardwalk REIT 5, , ,428 Extendicare Inc. 70, , , , ,370 Finland 1.3% Outotec Oyj 43, , ,819 Germany 2.2% Carl Zeiss Meditec AG 10, , ,814 Hong Kong 2.7% Kerry Logistics Network Limited 218, , ,108 Vitasoy International Holdings Limited 160, , , , ,429 Israel 6.4% Caesarstone Sdot-Yam Ltd. 11, , ,253 NICE Ltd., ADR 6, , ,707 SodaStream International Ltd. 6, , ,517 Solaredge Technology Ltd 9, , ,568 1,582,764 1,968,045 Italy 3.0% Astaldi S.p.A Autogrill S.p.A. 47, , ,388 Salini Impregilo SPA 41, , , , ,946 Japan 10.6% Advance Residence Investment Corporation , ,628 CyberAgent, Inc. 13, , ,737 Fuji Seal International, Inc. 14, , ,285 Glory Ltd. 10, , ,288 HORIBA, Ltd. 7, , ,097 Lintec Corporation 11, , ,112 THK Co., Ltd. 8, , ,000 2,616,619 3,261,147 6

7 schedule OF INVESTMENT PORTFOLIO (continued) (unaudited) (All amounts in Canadian dollars, unless otherwise noted) As at Description Number of Shares or Units Cost* Fair Value Luxembourg 2.0% L'Occitane International S.A. 202, , ,420 Netherlands 0.7% Cimpress N.V. 1, , ,584 Norway 2.6% Opera Software ASA 58, , ,768 Tomra Systems ASA 32, , , , ,028 Spain 1.7% Melia Hotels International, S.A. 26, , ,083 Sweden 1.4% Hemfosa Fastigheter AB 30, , ,990 Switzerland 1.4% Schweiter Technologies AG , ,459 United Kingdom 11.7% BTG PLC 22, , ,203 Greggs plc 21, , ,068 HomeServe plc 23, , ,141 IWG PLC 158, , ,456 Jardine Lloyd Thompson Group PLC 43, , ,831 Savills plc 38, , ,012 Senior PLC 93, , ,775 3,493,098 3,621,486 United States 41.5% ACI Worldwide, Inc. 22, , ,640 ArcBest Corp. 6, , ,023 ATN International, Inc. 6, , ,480 Boston Beer Company, Inc., The 1, , ,651 Cambrex Corporation 4, , ,154 Carriage Services, Inc. 10, , ,587 Customers Bancorp, Inc. 11, , ,276 Envestnet, Inc. 8, , ,419 Ethan Allen Interiors Inc. 6, , ,833 Evercore Partners Inc., Class A 2, , ,743 Farmland Partners Inc. 33, , ,318 Gentherm Inc. 9, , ,171 Globus Medical, Inc., Class A 7, , ,922 Limoneira Company 30, , ,384 Lindsay Corporation 2, , ,053 MarineMax, Inc. 16, , ,918 7

8 schedule OF INVESTMENT PORTFOLIO (continued) (unaudited) (All amounts in Canadian dollars, unless otherwise noted) As at Description Number of Shares or Units Cost* Fair Value United States 41.7% (continued) Motorcar Parts of America, Inc. 14, , ,393 Omnicell, Inc. 10, , ,690 ORBCOMM Inc. 35, , ,806 Ormat Technologies, Inc. 6, , ,607 PRA Group, Inc. 10, , ,330 Rayonier Inc. 16, , ,852 RLI Corp. 4, , ,245 SiteOne Landscape Supply, Inc. 2, , ,340 Summit Materials, Inc. 11, , ,501 Titan Machinery Inc. 1,779 41,353 41,480 TravelCenters of America LLC 59, , ,977 U.S. Physical Therapy, Inc. 1, , ,069 UMB Financial Corporation 6, , ,165 Unit Corporation 10, , ,504 VeriFone Systems Inc. 11, , ,929 WebMD Health Corporation 6, , ,195 12,373,811 12,859,655 Total Investment Portfolio 97.8% 27,250,481 30,223,253 Other Assets Less Liabilities 2.2% 671,961 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 100.0% 30,895,214 + 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. 8

9 Notes to the Financial Statements (unaudited) 1. The Fund Global Alpha Worldwide Growth Fund ( the Fund ) is a closed-ended investment fund established as a trust under the laws of the Province of Ontario on July 20, BMO Nesbitt Burns Inc. (the Manager ) is responsible for the management and administration of the Fund. The Fund consists of Units ( the Units ) and commenced operations on August 6, Units trade on the Toronto Stock Exchange ( TSX ) under the symbol GAF.UN. The address of the Fund s registered office is 1 First Canadian Place, 100 King Street West, 3rd Floor Podium, Toronto, Ontario, M5X 1H3. The information provided in these unaudited interim financial statements is for the periods ended and June 30, 2016, except for the comparative information in the Statement of Financial Position and the related notes, which is as at December 31, The last close price as at was $11.10 (December 31, 2016 $10.05). These financial statements were authorized for issuance by the Board of Directors of the Manager on August 10, These financial statements should be read in conjunction with the annual financial statements for the period ended December 31, 2016, which have been prepared in accordance with International Financial Reporting Standards ( IFRS ). 2. BASIS OF PREPARATION AND PRESENTATION These unaudited interim financial statements have been prepared in accordance with IFRS and in accordance with International Accounting Standard ( IAS ) 34-Interim Financial Reporting, as issued by the International Accounting Standards Board ( IASB ). 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial instruments The 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 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 redeemable units of the Fund are redeemable by unitholders on a monthly basis for an amount based on the trading price of the units. Such a redemption causes cash flows on redemptions to not be substantially based on the net asset value ( NAV ). As a result, units have been classified as financial liabilities and presented at the redemption amounts. All other financial assets and financial liabilities are measured at amortized cost. Under this method, financial assets and financial liabilities reflect the amount required to be received, paid or discounted, when appropriate, at the contract s effective interest rate. The Manager has determined that the Fund meets the definition of investment entity and as a result, the Fund measures subsidiaries, if any, at FVTPL. 9

10 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 bid-ask 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 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 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 exchange-traded 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 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 a group of investments, either directly or indirectly. The Fund may also enter into these contracts for non-hedging purposes, which can include increasing the exposure to 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 (the Valuation Date is each day the TSX is open for trading) and the value on the date the contract originated. Income recognition Dividend income and distribution from investment trusts are recognized on the ex-dividend and ex-distribution date, respectively. Interest income from interest bearing investments is recognized in the Statement of Comprehensive Income using the effective interest rate. Interest receivable shown in the Statement of Financial Position is accrued based on the interest bearing investments stated rates on interest. 10

11 Foreign currency translation The fair value of investments and other assets and liabilities in foreign currencies are translated into the Fund s functional currency, which is Canadian dollars, at the rates of exchange prevailing at the period-end date. Purchases and sales of investments, and income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Foreign exchange gains (losses) on completed transactions are included in Net realized gain in the Statement of Comprehensive Income and unrealized foreign exchange gains (losses) are included in Change in unrealized appreciation (depreciation) in the Statement of Comprehensive Income. Foreign exchange gains (losses) relating to cash, receivables and payables are included in Foreign exchange gain (loss) in the Statement of Comprehensive Income. Cash Cash is comprised of cash and deposits with banks, which include bankers acceptances and overnight demand deposits. Cash is recorded at fair value. The carrying amount of cash approximates its fair value because it is short-term in nature. Other assets and other liabilities Receivable from investments sold, dividends receivable and distribution receivable from investment trusts are initially recorded at fair value and subsequently measured at amortized cost. Similarly, payable for investments purchased and accrued expenses are measured at amortized cost. Other assets and liabilities are short-term in nature, and are carried at cost or amortized cost. Increase or decrease in net assets attributable to holders of redeemable units Increase (decrease) in net assets attributable to holders of redeemable units per unit in the Statement of Comprehensive Income represents the increase (decrease) in net assets attributable to holders of redeemable units ( Net Assets ) divided by the weighted average number of units outstanding during the period. The increase (decrease) in net assets attributable to holders of redeemable units per unit for the periods ended and June 30, 2016 is calculated as follows: For the periods ended June 30, 2016 Increase (decrease) in net assets attributable to holders of redeemable units 2,590,837 (262,632) Weighted average units outstanding during the period 2,616,987 2,616,987 Increase (decrease) in net assets attributable to holders of redeemable units per unit 0.99 (0.10) Reconciliation of NAV to Net Assets As at and December 31, 2016, there were no differences between the Funds NAV per unit and its Net Assets per unit calculated in accordance with IFRS. Taxation The Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada). Distributions of all net taxable income and sufficient amounts of net realized capital gains for each taxation year will be paid to unitholders so that the Fund will not be subject to income tax. As a result, the Manager has determined that the Fund is in substance not taxable and therefore, does not record income taxes in the Statement of Comprehensive Income, nor does it recognize any deferred tax assets or liabilities in the Statement of Financial Position. The Fund may incur withholding taxes imposed by certain countries on investment income and capital gains. Such income and capital gains are recorded on a gross basis with the related withholding taxes shown as a separate expense in the Statement of Comprehensive Income. 11

12 Non-capital losses are available to be carried forward for twenty years. Capital losses, for income tax purposes, may be carried forward indefinitely and applied against capital gains realized in future years. As at December 31, 2016, the Fund had $6,823 of non-capital loss carry forwards expiring in 2035 and did not have any capital loss carry forwards. Investments in subsidiaries, joint ventures and associates Subsidiaries are entities over which the Fund has control through its exposure or rights to variable returns from its investment and has the ability to affect those returns through its power over the entity. The Manager has determined that the Fund is an investment entity and as such, it accounts for subsidiaries, if any, at fair value. Joint ventures are those where the Fund exercises joint control through an agreement with other shareholders and associates are investments in which the Fund exerts significant influence over operating, investing and financing decisions (such as entities in which the Fund owns 20% 50% of voting shares), all of which, if any, have been designated at FVTPL. Unconsolidated structured entities During the periods, the Fund had no sponsored unconsolidated structured entities. The Fund may invest in investment funds, securitizations, asset-backed securities and mortgage-backed securities. The Manager has determined that the investment trusts the Fund may invest in are unconsolidated structured entities. The determination is based on the fact that decision making about the investment funds, securitizations, asset-backed securities and mortgage-backed securities is not governed by the voting right or other similar right held by the Fund. Similarly, investments in securitizations, asset-backed securities and mortgage-backed securities are determined to be interest in unconsolidated structured entities. Investment funds investment objectives range from achieving short-term to long-term income and capital growth potential. Investment funds may use leverage in a manner consistent with their respective investment objectives and as permitted by Canadian securities regulatory authorities. Investment funds finance their operations by issuing redeemable units which are puttable at the holders option and entitles the holder to a proportionate stake in the respective fund s net assets. The change in fair value of each of the investment funds during the periods is included in Change in unrealized appreciation (depreciation) in the Statement of Comprehensive Income. Mortgage-related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset-backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. The Fund does not provide and has not committed to providing any additional significant financial or other support to the unconsolidated structured entities other than its investments in the unconsolidated structured entities. Offsetting of financial assets and financial liabilities Financial instruments are presented at net or gross amounts in the Statement of Financial Position depending on the existence of intention and legal right to offset opposite positions of such instruments held with the same counterparties. Amounts offset in the Statement of Financial Position are transactions for which the Fund has legally enforceable rights to offset and intends to settle the positions on a net basis. Amounts not offset in the Statement of Financial Position relate to transactions where a master netting arrangement or similar agreement is in place with a right of offset only in the event of default, insolvency or bankruptcy, or where the Fund has no intention of settling on a net basis. There were no master netting arrangements during the periods. Accounting standards issued but not yet adopted In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments, which addresses classification and measurement, impairment and hedge accounting. 12

13 The new standard requires assets to be carried at amortized cost, FVTPL or fair value through other comprehensive income based on the entity s business model for managing financial assets and the contractual cash flow characteristics of the financial asset. The classification and measurement of financial liabilities remains generally unchanged with the exception of financial liabilities recorded at FVTPL. For these financial liabilities, fair value changes attributable to changes in the entity s own credit risk are to be presented in other comprehensive income unless they affect amounts recorded in income. The new standard is effective for the Fund for its fiscal year beginning January 1, The Manager is in the process of assessing the impact of adopting this standard but does not expect that the adoption of this standard to have a significant impact to the Fund s financial statements. Collateral Cash collateral provided by the Fund is identified in the Statement of Financial Position as margin cash and is not included as a component of cash. For collateral other than cash, if the party to whom the collateral is provided has the right by contract or custom to sell or re-pledge the collateral, the Fund classifies that asset in its Statement of Financial Position separately from other assets and identifies the asset as pledged collateral. Where the party to whom the collateral is provided does not have the right to sell or re-pledge, a disclosure of the collateral provided is made in the notes to the financial statements. See Note 7 for details. 4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of financial statements requires the use of judgement in applying the Fund s accounting policies and to make estimates and assumptions about the future. The following discusses the most significant accounting judgements and estimates that the Fund has made in preparing its financial statements: Accounting judgements: Functional and presentation currency The Fund s unitholders are mainly Canadian residents, with the subscriptions and redemptions of the redeemable units denominated in Canadian dollars. The performance of the Fund is measured and reported to the investors in Canadian dollars. The Manager considers the Canadian dollar as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in Canadian dollars, which is the Fund s functional and presentation currency. Classification and measurement of financial instruments and application of fair value option In classifying and measuring financial instruments held by the Fund, the Manager is required to make significant judgements about whether or not the business of the Fund is to invest on a total return basis for the purpose of applying the fair value options for financial assets. Accounting estimates: Fair value measurement of securities not quoted in an active market The Fund has established policies and control procedures that are intended to ensure these estimates are well controlled, independently reviewed, and consistently applied from period to period. The estimates of the value of the Fund s assets and liabilities are believed to be appropriate as at the reporting date. The Fund may hold financial instruments that are not quoted in active markets. Note 3 discusses the policies used by the Fund for the estimates used in determining fair value. 13

14 5. UNITS AND UNIT TRANSACTIONS The redeemable units of the Fund are classified as financial liabilities. The units have no par value and are entitled to distributions, if any. Upon redemption, a unit is entitled to a proportionate share of the Fund s NAV. The Fund is required to pay distributions in an amount not less than the amount necessary to ensure the Fund will not be liable for income taxes on realized capital gains, dividends and interest. The relevant movements in redeemable units are shown on the Statement of Changes in Net Assets Attributable to Holders of Redeemable Units. In accordance with its investment objectives and strategies, and the risk management practices outlined in Note 8, the Fund endeavours to maintain sufficient liquidity to meet redemptions, with such liquidity being augmented by short-term borrowings or disposal of investments where necessary. The NAV of the Fund is calculated on each Valuation Date. The NAV per unit is computed by dividing the NAV of the Fund (that is, the total fair value of the net assets less the liabilities) by the total number of units of the Fund outstanding at such time on each Valuation Date, in accordance with Part 14 of National Instruments ( NI ) Investment Fund Continuous Disclosure for the purpose of unitholder transactions. Units Units were offered to the public by way of Prospectus dated July 20, 2015 (the Prospectus ). At the initial offering, on August 6, 2015, Units were issued at a price of $10.00 per unit. These Units are listed on the TSX. Monthly redemptions Units may be redeemed on the second last day of the month (other than the month of November (except in 2015, 2016 and 2017)) ( Monthly Redemption Date ), subject to certain circumstances. Units must be surrendered by 5:00 p.m. (Toronto time) on the date which is the last business day of the month proceeding the month in which the Redemption Date falls. The unitholder will receive payment on or before the 15 th business day following such Redemption Date, subject to the Fund s right to suspend redemptions in certain circumstances. A unitholder who properly surrenders Units for redemption will receive the amount (the Monthly Redemption Amount ), if any, equal to the lesser of (A) 95% of the market price of the Unit, and (B) 100% of the closing market price of the units on the TSX on which the units are quoted for trading on the applicable Monthly Redemption Date, less any costs and expenses incurred by the Fund in connection with funding the redemption, including brokerage costs. The market price means the weighted average trading price on the TSX for the 10 trading days immediately preceding such Monthly Redemption Date. The closing market price shall be an amount equal to (i) the closing price of the units if there was a trade on the applicable Monthly Redemption Date and the market provides a closing price or (ii) the average of the last bid and last asking prices of the units if there was no trading on the applicable Monthly Redemption Date. There were no monthly redemptions during the periods. Annual redemptions Commencing in 2018, Units may be surrendered for redemption during the period from October 15 th until 5:00 p.m. (Toronto time) on the last business day in October of each year ( Annual Redemption Notice Period ), subject to the Fund s right to suspend redemptions in certain circumstances. Units properly surrendered for redemption during the Annual Redemption Notice Period will be redeemed on the second last business day in November of each year (the Annual Redemption Notice Date ) and the unitholder will receive payment on or before the 15 th day of the month following the Annual Redemption Date. Redeeming unitholders will receive a redemption price per Unit equal to the applicable NAV per unit on the Annual Redemption Date, less any costs and expenses incurred by the Fund in order to fund such redemption, including brokerage costs, if any. 14

15 Resale of units tendered for redemption The Fund may enter into a recirculation agreement with the Manager. Under the agreement the Fund may request the Manager to use commercially reasonable efforts to find purchasers for any units tendered for redemption prior to relevant Redemption Date. The amount paid to the unitholder on the Redemption Date will be an amount equal to the proceeds of the sale of the units, less any applicable commission payable to the Manager. The amount of the proceeds will not be less than the amount that the unitholder would have been otherwise entitled to receive. The unitholder is not obliged to have their units recirculated. The number of units that have been issued and are outstanding are disclosed in the table below. For the periods ended June 30, 2016 Units issued and outstanding at beginning of period 2,616,987 2,616,987 Units issued and outstanding at end of period 2,616,987 2,616, RELATED PARTY TRANSACTIONS Administration and portfolio management fees The Manager is responsible for providing or arranging for the day-to-day management, administration and compliance services of the Fund. The Manager monitors and evaluates the performance of the Fund, pays for the investment management services of the portfolio manager and provides all administrative services required by the Fund. As compensation for its services, the Manager is paid a management fee of 1.90% per annum of the NAV of the Fund, accrued daily and calculated on each Valuation Date and paid monthly in arrears. These fees are shown as Administration and portfolio management fees in the Statement of Comprehensive Income and for the period ended amounted to $312,486 (June 30, 2016 $262,211). Affiliates of the Manager provide the Fund with certain facilities and services such as accounting, record keeping, issuing financial statements, and for general administrative support. Fees for these services are shown as Fund administration fees in the Statement of Comprehensive Income and for the period ended amounted to $30,722 (June 30, 2016 $30,632). Interest on loan payable BMO Nesbitt Burns Inc., as the broker, provides leverage loan facilities to the Fund. The interest charged on the leverage loan facilities is shown as Interest expense in the Statement of Comprehensive Income and for the period ended amounted to $4,499 (June 30, 2016 nil). Other related party transactions The Manager is a member of the BMO Financial Group. From time to time, the Manager may on behalf of the Fund enter into transaction arrangements with or involving other members of BMO Financial Group, or certain other persons or companies that are related or connected to the Manager of the Fund. The terms of such transactions will be on market at the relevant times. Brokerage commissions and soft dollars Brokerage commissions (excluding transaction costs) paid on security transactions and amounts paid to the Manager for brokerage services provided to the Fund for the periods are as follows: For the periods ended June 30, 2016 Total brokerage amount paid 15,373 27,856 Total brokerage amounts paid to related parties The ascertainable soft dollar value of services received as a percentage of total brokerage commissions paid under the soft dollar arrangement entered into by the portfolio administrator for the periods are as follows: 15

16 For the periods ended June 30, 2016 Total soft dollars 889 Total soft dollars as a percentage of total commissions (%) Loan payable The Fund has the ability to borrow from its prime brokers in the short-term. The credit available to the Fund from this borrowing facility is secured by the assets of the Fund which are held as collateral at a secured separate custodian account. The facility bears interest at the applicable CDOR and LIBOR rate plus a spread. The facility provided for maximum borrowings up to 33.3% of the total assets of the Fund. There were no borrowings under the facility as at (December 31, 2016 $1,505,419). During the period ended, the minimum and maximum amounts of borrowings were $9,918 and $1,509,918, respectively (December 31, 2016 $1,500,000 and $1,505,419, respectively). Collateral pledged In accordance with the prime brokerage agreement with a Canadian broker/dealer firm, the Fund is required to provide collateral against the amount borrowed. Securities pledged are identified in the Schedule of Investment Portfolio as at. There was no collateral pledged as at (December 31, 2016 $5,952,639). 8. Financial instruments risks The Fund s activities expose it to a variety of risks associated with the financial instruments, as follows: market risk (including currency risk, interest rate risk and other market risk), credit risk and liquidity risk. The concentration table groups securities by geographic location. The Fund s risk management practice outlines the monitoring of compliance to investment guidelines. The Manager manages the potential effects of these financial risks on the Fund s performance by employing and overseeing professional and experienced portfolio advisors that regularly monitor the Fund s positions and market events, and diversify investment portfolios within the constraints of the investment guidelines. The Fund s objective is to provide investors with the opportunity for long-term capital appreciation through an actively managed, diversified portfolio of equity securities of companies in the global small cap universe based primarily in developed market economies that have unrecognized and accelerating earnings growth potential. The Fund is intended to provide an opportunity for significant portfolio diversification for Canadian investors by focusing on attractive growth stocks in the global small cap universe in primarily developed market economies (U.S., Europe, Japan, etc.) and will limit exposure to Canadian securities. No changes affecting the overall level of risk of investing in the Fund were made during the period. Currency risk Currency risk is the risk that the value of financial instruments denominated in currencies, other than the functional currency of the Fund, will fluctuate due to changes in foreign exchange rates. Investments in foreign markets are exposed to currency risk as the prices denominated in foreign currencies are converted to the Fund s functional currency in determining fair value. The Fund may enter into forward currency contracts for hedging purposes to reduce foreign currency exposure or to establish exposure to foreign currencies. 16

17 The Fund s exposure to currency risk is summarized in the tables below. Amounts shown are based on the carrying value of monetary and non-monetary assets (including derivatives and the underlying principle (notional) amounts of forward currency contracts, if any). As at Cash and other current receivables & payables Investments (monetary & non-monetary) Forward currency contracts Net currency exposure As a % of net assets % Australian Dollar 416 1,307,673 1,308, Danish Krone Euro 279,171 2,875,967 3,155, Hong Kong Dollar 4,411 1,450,849 1,455, Israel Shekel 15,290 15, Japanese Yen 230,030 3,261,147 3,491, Norwegian Krone 50, , , Pound Sterling 198,731 3,621,486 3,820, Swedish Krona 4, , , Swiss Franc 74, , , U.S. Dollar (49,764) 15,039,284 14,989, Total 807,917 29,228,883 30,036, All amounts in Canadian dollars As at December 31, 2016 Currency Cash and other current receivables & payables Investments (monetary & non-monetary) Forward currency contracts Net currency exposure As a % of net assets % Australian Dollar 636 1,163,161 1,163, Danish Krone Euro 381,389 3,183,010 (12,016 ) 3,552, Hong Kong Dollar (11,822 ) 1,225,714 11,947 1,225, Israel Shekel 491, , Japanese Yen (58,574) 3,325,176 62,494 3,329, Norwegian Krone 134, , , Pound Sterling 2,559 3,067,165 3,069, Swedish Krona 2, , , Swiss Franc 64, , , U.S. Dollar 814,606 14,446,282 (79,648) 15,181, Total 1,821,260 27,864,127 (17,223) 29,668, All amounts in Canadian dollars 17

18 As at, if the Canadian dollar had strengthened or weakened by 5% in relation to all foreign currencies, with all other variables held constant, the Net Assets of the Fund could possibly have increased or decreased, respectively, by approximately $1,501,840 (December 31, 2016 $1,483,408). In practice, actual results may differ from this sensitivity analysis and the difference could be material. Interest rate risk Interest rate risk is the risk that the fair value of the Fund s interest bearing investments will fluctuate due to changes in market interest rates. The Fund s exposure to interest rate risk is concentrated in its investment in debt securities (such as bonds, money market instruments, short-term investments and debentures) and interest rate derivative instruments, if any. Other assets and liabilities are short-term in nature and/or non-interest bearing. As at and December 31, 2016, the Fund did not have any significant exposure to interest rate risk. Other market risk Other market risk is the risk that the fair value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in a market. Other assets and liabilities are monetary items that are short-term in nature, as such they are not subject to other market risk. The Fund has a significant exposure to other market risk arising from its investment in equity securities. Using historical correlation between the Fund s return and the return of its benchmark, if the benchmark, MSCI World Small Cap Index (CDN $), had increased or decreased by 10%, with all other variables held constant, the Net Assets of the Fund would have increased or decreased, respectively, by $2,589,610 (December 31, 2016 $2,436,937). Historical correlation may not be representative of future correlation, and accordingly, actual results may differ and the difference could be material. Credit risk Credit risk is the risk that a loss could arise from a security issuer or counterparty to a financial instrument not being able to meet its financial obligations. The fair value of debt securities includes consideration of the credit worthiness of the debt issuer. Credit risk exposure for over-the counter derivative instruments is based on the Fund s unrealized gain of the contractual obligations with the counterparty as at the reporting date. The credit exposure of other assets is represented by its carrying amount. As at and December 31, 2016, the Fund did not have any significant exposure to credit risk. Liquidity risk The Fund s exposure to liquidity risk is concentrated in the redemptions of units. The Fund primarily invests in securities that are traded in active markets and can be readily disposed. In addition, the Fund retains sufficient cash and cash equivalent positions to maintain liquidity. The Fund may, from time to time, enter into over-the-counter derivative contracts or invest in unlisted securities, which are not traded in an organized market and may be illiquid. Securities for which a market quotation could not be obtained and may be illiquid are identified on the Schedule of Investment Portfolio. The proportion of illiquid securities to the NAV of the Fund is monitored by the Manager to ensure it does not exceed the regulatory limit and does not significantly affect the liquidity required to meet the Fund s financial obligations. There were no such illiquid securities held by the Fund as at and December 31,

19 Leverage Leverage is the amount of money the Fund can borrow on the total assets. The Fund may utilize leverage in an amount of up to 20.0% of the total assets of the Fund at the time of borrowing. The maximum amount of leverage that the Fund may be exposed to is 1.25:1 (total unhedged long positions (including leverage positions) divided by the Net Assets of the Fund). The minimum and maximum leverage for the period ended was 0.03% and 5.30%, respectively (December 31, % and 5.56%, respectively). Concentration risk The Fund s concentration risk is summarized in the following table: As at December 31, 2016 Australia 4.2% 4.1% Belgium 1.2% 1.1% Canada 3.2% 3.2% Finland 1.3% 1.1% France % 1.9% Germany 2.2% 2.4% Hong Kong 2.7% 2.5% Israel 6.4% 5.8% Italy 3.0% 3.2% Japan 10.6% 11.7% Luxembourg 2.0% 1.8% Netherlands 0.7% 1.2% Norway 2.6% 2.8% Spain 1.7% 1.6% Sweden 1.4% 1.0% Switzerland 1.4% 1.4% United Kingdom 11.7% 10.6% United States 41.5% 44.2% Other Assets Less Liabilities 2.2% (1.6)% 100.0% 100.0% 19

20 9. Financial assets and financial liabilities Categories of financial assets and liabilities The categories of financial assets and financial liabilities, except cash, are summarized in the following table: As at December 31, 2016 Financial assets designated at FVTPL 30,223,253 28,767,860 Loans and receivables 15, ,990 Financial liabilities held for trading 223 Financial liabilities measured at amortized cost 206,097 2,363,004 Net gains and losses on financial assets and financial liabilities at fair value For the periods ended June 30, 2016 Net realized gains (losses) on financial assets Designated at FVTPL 1,976, ,484 Held for trading 684,728 Total net realized gains on financial assets and financial liabilities 1,976,059 1,108,212 Changes in unrealized gains (losses) on financial assets Designated at FVTPL 1,066,061 (947,670 ) Held for trading 223 1,933 Total change in net unrealized gains (losses) on financial assets and financial liabilities 1,066,284 (945,737) 20

21 10. Fair value hierarchy The Fund classifies its financial instruments into three levels based on the inputs used to value the financial instruments. Level 1 securities are valued based on quoted prices in active markets for identical securities. Level 2 securities are valued based on significant observable market inputs, such as quoted prices from similar securities and quoted prices in inactive markets or based on observable inputs to models. Level 3 securities are valued based on significant unobservable inputs that reflect the Manager s determination of assumptions that market participants might reasonably use in valuing the securities. The tables below show the relevant disclosure. As at Financial Assets Level 1 Level 2 Level 3 Total Equity securities 15,286,467 14,936,786 30,223,253 Total 15,286,467 14,936,786 30,223,253 Financial Liabilities Level 1 Level 2 Level 3 Total Redeemable units (29,048,556) (29,048,556) Total (29,048,556) (29,048,556) As at December 31, 2016 Financial assets Level 1 Level 2 Level 3 Total Equity securities 15,416,560 13,351,300 28,767,860 Total 15,416,560 13,351,300 28,767,860 Financial liabilities Level 1 Level 2 Level 3 Total Redeemable units (26,300,719) (26,300,719) Derivatives (223) (223) Total (26,300,719) (223) (26,300,942) Transfers between levels Transfers are made between the various fair value hierarchy levels due to changes in the availability of quoted market prices or observable inputs due to changing market conditions. During the period from January 1, 2017 to, $869,456 of equity securities were transferred from Level 1 to Level 2 due to reduced observability of the inputs used to value these securities. There were no transfers during the period from January 1, 2016 to December 31,

22 Administrative Office 250 Yonge Street, 7th Floor Toronto, Ontario M5B 2M under Investement Funds