2018 Semi-Annual Management Report of Fund Performance

Transcription

1 (the Fund ) For the six-month period ended March 31, 2018 (the Period ) Manager: BMO Investments Inc. (the Manager or BMOII ) Portfolio manager: BMO Asset Management Inc., Toronto, Ontario (the portfolio manager ) 2018 Semi-Annual Management Report of Fund Performance This semi-annual management report of fund performance contains financial highlights but does not contain the complete semi-annual or annual financial statements of the Fund. If the semi-annual financial statements of the Fund do not accompany the mailing of this report, you may obtain a copy of the semi-annual or annual financial statements at your request, and at no cost, by calling and , by writing to us at BMO Investments Inc., First Canadian Place, 100 King Street West, 43rd Floor, Toronto, Ontario, M5X 1A1 or by visiting our website at and 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 Results of Operations During the Period, the Fund s total net asset value changed from approximately $1,959 million to approximately $1,901 million. Series A units of the Fund returned 2.21%. Please see the Past Performance section for information on the performance returns of the Fund s other series. Canadian equities benefited from improved investor risk appetite at the end of, driven by renewed hopes for U.S. tax reform. In addition, strong Canadian economic data and gains in the labour market continued to support equities. However, the first quarter of 2018 was challenging for global equities and Canadian equities were not immune to fragile investor sentiment. The S&P/TSX Composite Index declined every month of the first quarter of 2018 as investors became more concerned about the sustainability of household debt, the potential impact of new mortgage regulations and higher interest rates. Meanwhile, ongoing trade negotiations continued to impact flows into Canadian equities. Global stocks declined in February as the U.S. posted strong economic data, which raised inflation and interest rate expectations. Canadian stocks continued to decline in March as investors remained concerned about cross-border trade. During the Period, the S&P 500 Index, representing performance of U.S. equities, performed well, posting a 5.8% gain in U.S.-dollar terms and 9.3% in Canadian-dollar terms as the Canadian dollar depreciated. Cyclical sectors registered gains, in particular, Information Technology, Consumer Discretionary and Financials, while more defensive sectors underperformed. As a result, interest-rate-sensitive sectors, such as Telecommunication Services, Utilities and Real Estate, declined as the U.S. 10-year government bond yield rose to 2.7%. International equities posted uneven performance over the Period. European equities declined, partly as a result of political risks and softer economic data. Conversely, Japanese equities benefited from strong corporate earnings. Despite struggling global equity markets, in which international equities declined 0.9% in local-currency terms, international equities gained 5.8% in Canadian-dollar terms given the weakening Canadian dollar. After a string of strong economic data at the end of, Canada posted net job losses in January This change was in part driven by an increase in Ontario s minimum wage. However, given soft employment numbers in early 2018, weaker retail sales and ongoing trade concerns, the Bank of Canada ( BoC ) held its policy rate in March after raising interest rates in January. Global investors were concerned about the potential for U.S. tariffs and Canada continued to face domestic challenges, particularly in the housing market. As a result, long-term interest rates declined, while interest rates for mid-term bonds rose as mid-term government bonds underperformed. Overall, the Canadian bond market, as measured by the FTSE TMX Canada Universe Bond Index, gained 2.1% over the Period as a result of the change in long-term interest rates. Meanwhile, corporate bonds benefited from narrowing spreads (the difference in yield between corporate and government bonds with similar maturities) as corporate credit outperformed government bonds. During the Period, the majority of the Fund s relative performance in equities came from stock selection, primarily in the Materials, Consumer Discretionary and

2 Energy sectors. Sector allocation made a slight contribution to performance. Individual contributors to performance included an overweight allocation to Teck Resources Ltd. and an underweight exposure to Enbridge Inc. Teck Resources Ltd., a producer of zinc, copper and metallurgical coal, benefited from rising commodity prices, which increased with rising global demand. Enbridge Inc. was negatively impacted by rising interest rates, as the U.S. Federal Energy Regulatory Commission s rule changes related to its master limited partnerships and concerns over the company s debt level. In fixed income holdings, the Fund s slight underweight exposure to interest rates contributed to performance as short-term rates rose significantly. An overweight allocation to corporate debt and underweight exposure to sovereign debt also contributed to the Fund s yield. Stock selection in the Telecommunication Services, Industrials and Financials sectors modestly detracted from the performance of the Fund s equity holdings. Individual detractors from performance included a holding in Pretium Resources Inc. and an overweight exposure to TransCanada PipeLines Ltd. Pretium Resources Inc. s share price suffered after the company reported poor production results, with metals grades coming in lower than expected. TransCanada PipeLines Ltd. was negatively impacted by rising interest rates but outperformed Enbridge Inc., which had other issues as well. From a fixed income perspective, an overweight exposure to corporate debt linked to the Real Estate sector was a modest detractor from performance, as that market segment underperformed the overall corporate universe. The portfolio manager added a new equity position in Canadian Apartment Properties REIT, a large residential real estate investment trust with over 50,000 suites primarily located in Canada, the majority of which are in Ontario and Quebec, with limited exposure to the Alberta market. The company has holdings in a diversified segment of property types ranging from luxury apartments to mobile homes. Occupancy is at all-time highs in Canada at 98.9%, and close to 98% in Alberta, which is the weakest region. Strong demand for rental properties should allow Canadian Apartment Properties REIT to increase its net operating income by increasing rents in excess of the cost of inflation. Outside of Canada, the company expanded its portfolio to Ireland in and is looking to replicate that success in the Netherlands. An existing holding in Methanex Corp. was increased based on strong global commodity prices. This low-cost producer has good free cash flow and should generate strong returns to shareholders via buybacks and dividends. An equity position in Restaurant Brands International Inc. was eliminated from the Fund as its earnings estimates have been revised downwards over the past few months. While news headlines regarding rising wages in Ontario and franchisee discontent are likely to have only a modest impact on financial performance, they are a negative and may continue to weigh on the performance of Tim Hortons Inc. in the near term. Popeye s Louisiana Kitchen Inc. samestore sales growth has also been relatively weak, but this remains a much smaller portion of its business. Canadian National Railway Co. was trimmed after high demand and a difficult operating environment, a result of winter weather, led to operational inefficiencies and reduced earnings. Even with warmer weather, the company continues to face challenges with its rail network. The portfolio manager also modestly reduced the Fund s corporate debt allocation in favour of government securities. The shift was made to protect the portfolio from an expected rise in volatility in The Manager confirms that the Fund did not borrow money during the Period. For information on the Fund s performance and composition, please refer to the Past Performance section and Summary of Investment Portfolio section of this report. Recent Developments The portfolio manager has become more cautious with respect to the economic outlook. The Canadian economy has performed well over the past several quarters, but concerns are mounting. These concerns stem from the possibility that trade tariffs and the renegotiation of treaties, such as the North American Free Trade Agreement, may push inflation higher. There are also concerns that inflation could rise as a result of decisions, like those made in Ontario, to increase the minimum wage. The impact of these types of policies may not only have an influence on inflation, but may also lower economic growth. Given current economic conditions, the portfolio manager believes that the BoC will raise interest rates once more in 2018, which is lower than the general market expectation of two more increases. Overall, given the prospects for inflation, the economy and the BoC s monetary policy, interest rates, while potentially volatile on a day-to-day basis, are expected to trade in a fairly narrow range. As such, the Fund s interest rate sensitivity will be maintained near the benchmark. Relatively narrow corporate bond spreads (the difference in yield between bonds of similar maturity but different credit quality) may limit the ability to increase the Fund s yield through an overweight allocation to credit. The CBOE Volatility Index, a measure of stock market volatility, has

3 been low for some time. Long periods of low volatility can be an indication that investors are becoming complacent about riskier assets like equities and corporate bonds. With this limited ability to add yield to the Fund, and given low volatility, the portfolio manager will look to maintain a credit rating profile that carries lower risk than the benchmark. Should corporate spreads widen, it would present an opportunity to increase the Fund s exposure to the credit sector. The portfolio manager has positioned the Fund s equity holdings in anticipation of a strong domestic and global economy, with an overweight allocation to cyclical sectors like Consumer Discretionary and Information Technology. Interest rates rose sharply but have stabilized in the short term. It does not appear that interest rates have risen high enough to dampen economic growth, which continues to be strong. While labour costs may be an increasing concern across several industries, this may lead to wage inflation and, eventually, higher interest rates. As such, the portfolio manager will maintain an underweight exposure to interest-rate-sensitive sectors, such as Telecommunication Services, Real Estate and Utilities. Subsequent Event Risk Rating Change The risks associated with an investment in the Fund remain as disclosed in the Fund s most recent simplified prospectus or any amendments and fund facts document. During the Period there were no changes to the Fund that materially affected the overall risk level associated with an investment in the Fund. However, beginning in May 2018 the Fund s investment risk level is being determined by calculating the Fund s ten-year standard deviation in accordance with the investment risk classification methodology under National Instrument Investment Funds, which came into force effective September 1,. If the Fund does not have at least ten years of performance history, a reference index that is expected to reasonably approximate the Fund s standard deviation is used as a proxy for the remainder of the ten year period. In May 2018, the Manager reviewed the Fund using the new standardized investment risk classification methodology and determined that the risk rating of the Fund had not changed. The Manager reviews the Fund s investment risk level and reference index, if any, at least annually. 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. 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. Administration Fee and Operating Expenses The Fund pays a fixed administration fee to the Manager in respect of each series other than Series I. The Manager in return pays the operating expenses of these series of the Fund, other than certain specified expenses that are paid directly by the Fund ( Fund Expenses ). Fund Expenses, include expenses incurred in respect of preparing and distributing fund facts, interest or other borrowing expenses, all reasonable costs and expenses incurred in relation to compliance with NI , including compensation and expenses payable to the Fund s Independent Review Committee ( 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, 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. 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 and or

4 Buying and Selling Securities Investments in Bank of Montreal Common Shares or Preferred Shares, Investments in Bank of Montreal Debt Securities in the Secondary Market, Investing in Bank of Montreal Debt Securities in a Primary Offering, Related-Party Underwritings, and Trades in Debt Securities with a Related Entity, Trading as Principal During the Period, the Manager relied on an approval and standing instruction provided by the Fund s IRC with respect to the following related party transactions: (a) investments in common shares or preferred shares of BMO, an affiliate of the Manager; (b) investments in debt securities of BMO, an affiliate of the Manager, in the secondary market; (c) investments in debt securities of BMO, an affiliate of the Manager, in a primary offering; (d) investments in a class of non-government debt securities and/or equity securities of an issuer during the period of distribution of those securities to the public and/or the 60-day period following the distribution period where BMO Nesbitt Burns Inc., an affiliate of the Manager, acted as an underwriter in the distribution; and (e) trades in debt securities in the secondary market with BMO Nesbitt Burns Inc. who is trading with the Fund as principal (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 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 Manager, uninfluenced by considerations other than the best interests of the Fund, and (iii) achieves a fair and reasonable result for the Fund. 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: Mar. 31, 2018 Mar. 31, $000 $000 Total brokerage commissions $ Brokerage commissions paid to BMO Nesbitt Burns Inc. $ 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. 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 annual rate set out in the table below. As a Percentage of Management Fees General Annual Administration, Management Dealer Investment Fee Rate* Compensation Advice and Profit % % % Series A Units Advisor Series Units Series T5 Units Series F Units Series D Units Series G Units Series I Units Classic Series Units * For Series I Units, separate Series I fees are negotiated and paid by each Series I investor. Since the Manager pays no distribution, service or trailing fees on Series I Units, the combined management and administrative fees for Series I Units will not exceed the management fee charged for Advisor Series or Series A Units.

5 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 $ 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) $ 0.02 From dividends $ From capital gains $ Return of capital $ 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 $ 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) $ Net assets, end of period $

6 Series D Units (6) 2018 ) 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 G Units Feb. 14, 2018 to Mar. 31, 2018 Net assets, beginning of period $ 10.00)* Total revenue $ 0.04 Total expenses (2) $ for the period $ 0.05 for the period $ from operations (3) $ 0.06 (excluding dividends) $ From dividends $ From capital gains $ Return of capital $ Total Annual Distributions (4) $ Net assets, end of period $ Series I 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 NBA Units (5) 2018 )(7) ) Net assets, beginning of period $ )* Total revenue $ Total expenses (2) $ for the period $ for the period $ from operations (3) $ (excluding dividends) $ 0.01 From dividends $ From capital gains $ Return of capital $ Total Annual Distributions (4) $ Net assets, end of period $

7 Classic 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 $ 0.00 Total Annual Distributions (4) $ Net assets, end of period $ * Initial net assets. (1) This information is derived from the Fund s unaudited and audited financial statements. The financial information presented for the periods ended March 31, 2018, September 30,, September 30,, September 30, and September 30, is derived from the financial statements determined in accordance with IFRS. Information for periods prior to October 1, 2013 is derived from prior period financial statements prepared in accordance with Canadian GAAP. (2) Includes commissions and other portfolio transaction costs. Prior to October 1, 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 either paid in cash or reinvested in additional units of the Fund, or both. The allocation of the distributions from each of income, dividends, capital gains and return of capital is based on the Manager s estimate as at March 31 or September 30 of the period shown, as applicable, which is the Fund s financial year-end. However, the actual allocation of distributions is determined as at December 15, the Fund s tax year-end. Accordingly, the actual allocation among income, dividends, capital gains and return of capital may differ from these estimates. (5) The information shown in this column is for the period beginning December 12, 2013 (the series inception date) and ending September 30,. (6) The information shown in this column is for the period beginning April 7, (the series inception date) and ending September 30,. (7) As at the close of business on October 26,, the Series NBA was terminated. Ratios and Supplemental Data Series A Units Total net asset value (000 s) (1) $ 1,741,992 1,824,630 1,793,114 1,929,689 2,010,809 1,575,072 outstanding (000 s) (1) 82,831 85,997 86,444 97,535 98,751 86,401 (2) % before waivers or absorptions % Net asset value per unit $ Advisor Series Units Total net asset value (000 s) (1) $ 78,523 77,919 77,873 75,387 75,757 71,173 outstanding (000 s) (1) 2,641 2,599 2,657 2,701 2,629 2,758 (2) % before waivers or absorptions % Net asset value per unit $ Series T5 Units Total net asset value (000 s) (1) $ 1,544 1,757 1,823 2,319 5,819 3,045 outstanding (000 s) (1) (2) % before waivers or absorptions % Net asset value per unit $ Series F Units Total net asset value (000 s) (1) $ 52,692 47,633 23,000 7,683 2, outstanding (000 s) (1) 3,684 3,311 1, (2) % before waivers or absorptions % Net asset value per unit $ Series D Units (6) 2018 ) Total net asset value (000 s) (1) $ 5,632 4,606 3,919 3,862 1,719 outstanding (000 s) (1) (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $

8 Series G Units Feb. 14, 2018 to Mar. 31, 2018 Total net asset value (000 s) (1) $ 16,204 outstanding (000 s) (1) 1,598 (2) % 1.14 before waivers or absorptions % 1.15 Trading expense ratio (3) % 0.02 Portfolio turnover rate (4) % Net asset value per unit $ Series I Units Total net asset value (000 s) (1) $ 1, ,781 8,076 5,529 outstanding (000 s) (1) % before waivers or absorptions + % 0.01 Net asset value per unit $ Series NBA Units 2018 )(7) (5) ) Total net asset value (000 s) (1) $ 14,644 17,392 20,895 outstanding (000 s) (1) 896 1,121 1,293 (2) % before waivers or absorptions % Trading expense ratio (3) % Portfolio turnover rate (4) % Net asset value per unit $ Classic Series Units Total net asset value (000 s) (1) $ 1,981 2,065 2,374 2,512 2,622 2,574 outstanding (000 s) (1) (2) % before waivers or absorptions % Net asset value per unit $ Operating expenses are paid by BMOII and management fees are paid directly to BMOII as negotiated with the investor. (1) This information is provided as at March 31 or September 30 of the period shown, as applicable. (2) is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. (3) The trading expense ratio represents 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. (5) The information shown in this column is for the period beginning December 12, 2013 (the series inception date) and ending September 30,. (6) The information shown in this column is for the period beginning April 7, (the series inception date) and ending September 30,. (7) As at the close of business on October 26,, the Series NBA was terminated. PAST PERFORMANCE The Fund s performance information assumes that all distributions made by the Fund in the periods shown were used to purchase additional securities 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 that 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 management fees and expenses allocated and payable by each series. On November 13, 2009, Sanford C. Bernstein & Co., LLC ceased to act as the portfolio manager of the Fund, in addition, BMO Guardian Canadian Balanced Fund merged into the Fund. On April 15, 2011, Harris Investment Management, Inc. and Martin Currie Inc. ceased to act as portfolio managers of the foreign securities equity component of the Fund. This responsibility was assumed by BMO Asset Management Inc. On December 15, 2013, BMO Nesbitt Burns Balanced Fund merged into the Fund. On February 1,, the management fee on Series F units was lowered from 0.5 to 0.45%. These changes could have affected the performance of the Fund had they been in effect throughout the performance measurement periods presented.

9 Year-by-Year Returns The following bar charts show the performance of each series of the Fund for each of the financial years shown and for the six-month period ended March 31, 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 each financial year. Series D Units Series A Units Series G Units 2 (3) Advisor Series Units (2) Series I Units (4) 3.29 Series T5 Units (2) (1) Classic Series Units Series F Units (2) (1) For the period beginning with the performance launch date of March 5, 2008 to September 30, (2) For the period beginning with the performance launch date of November 11, 2009 to September 30, (3) For the period beginning with the performance launch date of April 8, to September 30,. (4) For the period beginning with the performance launch date of February 16, 2018 to March 31, (5) For the six-month period ended March 31, (2)

10 SUMMARY OF INVESTMENT PORTFOLIO As at March 31, 2018 % of Net Portfolio Allocation Asset Value Bonds and Debentures 41.4 Canadian Equities 33.5 U.S. Equity Fund 14.6 International Equity Fund 8.2 Emerging Markets Equity Fund 1.4 Money Market Investments 0.6 Cash/Receivables/Payables 0.3 Total Portfolio Allocation % of Net Top 25 Holdings Asset Value Issuer BMO S&P 500 Index ETF BMO MSCI EAFE Index ETF+ 8.2 Government of Canada, 0.75 May 1, Royal Bank of Canada 3.1 Government of Canada, Unsecured, 2.75 Dec 1, Toronto-Dominion Bank, The, 2.3 Province of Quebec, Unsecured, 3.50 Dec 1, Province of Ontario, Unsecured, 2.80 Jun 2, Province of Ontario, Unsecured, 2.90 Dec 2, Government of Canada, Unsecured, 0.50 Mar 1, Canadian Natural Resources Limited 1.5 Manulife Financial Corporation 1.5 TransCanada Corporation 1.5 BMO Emerging Markets Fund, Series I Suncor Energy Inc. 1.3 Magna International Inc. 1.3 Bank of Nova Scotia, The, 1.3 CGI Group Inc., Class A 1.2 Province of Alberta, 2.85 Jan 19, Teck Resources Limited, Class B 1.1 Franco-Nevada Corporation 1.0 Methanex Corporation 1.0 Air Canada 1.0 Onex Corporation 1.0 Government of Canada, Unsecured, 0.75 Aug 1, Top Holdings as a Percentage of Total Net Asset Value 60.6 Total Net Asset Value $1,900,522,075 +The prospectus and other information about the underlying exchange traded funds held in the portfolio are available on the internet at and, also at ++The prospectus and other information about the underlying investment fund held in the portfolio are available on the internet at and, also at and 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, Ontario M5X 1A1 and If you have any questions, please give us a call as follows: If you purchased BMO Mutual Funds through a BMO Bank of Montreal branch or BMO Online Banking, please call If you purchased BMO Mutual Funds through a full-service or discount broker, please call or clientservices.mutualfunds@bmo.com. 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. BMO Mutual Funds are offered by BMO Investments Inc., a financial services firm and separate legal entity from Bank of Montreal. BMO (M-bar roundel symbol) registered trademark, and BMO (M-bar roundel symbol) Mutual Funds are owned by Bank of Montreal, used under license.