MD Family of Funds 2016 INTERIM FINANCIAL STATEMENTS

Transcription

1 MD Family of Funds 2016 INTERIM FINANCIAL STATEMENTS

2 A Message Regarding Your Financial Statements Dear MD Family of Funds Investor: As part of our commitment to keeping you informed about your MD Fund investments, please find attached the 2016 interim financial statements. The interim financial statements are produced on a fund-by-fund basis, and your report only includes information on the funds you owned as of June 30, If you have any questions regarding these documents, please contact your MD advisor or the MD TradeCentre at We thank you for your continued investment in the MD Family of Funds. Interim Unaudited Financial Statements for the Six-Month Period Ended June 30, 2016 These Interim Unaudited Financial Statements do not contain the Interim Management Report of Fund Performance ( MRFP ) of the investment fund. If you have not received a copy of the Interim MRFP with this report, you may obtain a copy of the Interim MRFP at your request, and at no cost, by calling the toll-free number , by writing to us at MD Financial Management Inc., 1870 Alta Vista Drive, Ottawa ON K1G 6R7, by visiting our website at md.cma.ca or by visiting the SEDAR website at sedar.com. Copies of the Annual Financial Statements or Annual MRFP may also be obtained, at no cost, using any of the methods outlined above. Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure. NOTICE OF NO AUDITOR REVIEW OF THE INTERIM FINANCIAL STATEMENTS MD Financial Management 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 Interim Financial Statements, this must be disclosed in an accompanying notice. The Fund s independent auditors have not performed a review of these Interim Financial Statements in accordance with standards established by the Canadian Institute of Chartered Accountants. MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. For a detailed list of these companies, visit md.cma.ca. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund. Standard performance data assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges payable by any securityholder which would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. You may obtain a copy of the prospectus before investing by calling your MD Advisor or the MD Trade Centre at

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4 MDPIM US Equity Pool Schedule of Investment Portfolio as at June 30, 2016 (unaudited) (in $000's except for number of shares) Number of Shares Average Cost ($) Fair Value ($) DOMESTIC EQUITIES Materials (0.57%) Potash Corporation of Saskatchewan Inc. 767,950 21,516 16,220 Total for Materials 21,516 16,220 Total for Domestic Equities (0.57%) 21,516 16,220 FOREIGN EQUITIES Consumer Discretionary (15.47%) Activision Blizzard, Inc. 287,600 13,350 14,823 Amazon.com, Inc. 41,900 33,478 38,996 Comcast Corporation Cl. A 298,720 22,188 25,326 Ctrip.com International Ltd. ADR 212,300 11,657 11,376 Dollar General Corp. 217,625 22,771 26,605 Dollar Tree, Inc. 218,400 23,525 26,768 ebay Inc. 492,360 15,654 14,990 Johnson Controls, Inc. 369,143 20,784 21,249 Lennar Corporation Cl. A 264,024 15,985 15,830 Nike Inc. Cl. B 657,030 46,619 47,168 Omnicom Group Inc. 380,320 36,051 40,307 Ross Stores Inc. 195,505 12,372 14,414 Starbucks Corporation 413,700 28,997 30,733 Target Corporation 196,791 19,566 17,870 The Gap, Inc. 292,714 11,110 8,078 The Priceline Group Inc. 17,800 29,014 28,900 The TJX Companies Inc. 271,930 23,734 27,313 Twenty-First Century Fox, Inc. Cl. A 201,875 7,506 7,102 Twenty-First Century Fox, Inc. Cl. B 234,750 8,601 8,320 Whirlpool Corporation 50,113 11,396 10,861 Total for Consumer Discretionary 414, ,029 Consumer Staples (6.13%) DANONE SA ADR 1,072,770 18,530 19,770 Nestlé SA ADR 160,050 14,106 16,092 PepsiCo, Inc. 245,520 29,076 33,828 The Coca-Cola Company 209,730 11,061 12,364 The Kroger Co. 573,700 25,735 27,450 The Procter & Gamble Company 216,980 21,905 23,893 Unilever PLC ADR 204,520 10,966 12,744 Wal-Mart Stores, Inc. 281,447 25,198 26,728 Total for Consumer Staples 156, ,869 Energy (5.12%) BP PLC ADR 568,132 24,248 26,238 Chevron Corporation 122,517 15,177 16,703 ConocoPhillips 278,427 17,094 15,788 Devon Energy Corporation 273,470 13,425 12,893 Occidental Petroleum Corporation 168,285 16,082 16,537 Phillips ,666 36,115 35,771 Schlumberger Limited 198,795 18,615 20,446 Total for Energy 140, ,376 Financials (13.17%) American Express Company 339,478 28,276 26,826 Ameriprise Financial, Inc. 66,229 9,059 7,739 Percentages shown in brackets relate investments at fair value to net assets of the Fund. The accompanying notes are an integral part of these financial statements.

5 MDPIM US Equity Pool Schedule of Investment Portfolio as at June 30, 2016 (unaudited) (in $000's except for number of shares) Number of Shares Average Cost ($) Fair Value ($) Bank of America Corporation 1,059,271 20,537 18,281 Bank of New York Mellon Corporation 370,225 16,369 18,706 Berkshire Hathaway Inc. Cl. B 130,630 20,661 24,599 CBRE Group, Inc. Cl. A 293,390 11,047 10,104 Comerica Inc. 387,665 19,365 20,737 E*Trade Financial Corporation 471,200 15,920 14,395 JPMorgan Chase & Co. 228,178 17,841 18,440 Loews Corporation 141,849 7,183 7,580 MasterCard Incorporated Cl. A 388,150 47,682 44,453 Morgan Stanley 314,300 10,593 10,620 PacWest Bancorp 375,900 18,637 19,448 State Street Corporation 200,296 17,199 14,046 T. Rowe Price Group Inc. 144,600 12,843 13,723 The Blackstone Group LP 742,500 25,284 23,697 The PNC Financial Services Group, Inc. 203,331 23,409 21,523 The Progressive Corporation 448,445 17,280 19,538 Wells Fargo & Company 420,830 27,982 25,904 XL Group PLC Cl. A 259,800 11,492 11,255 Total for Financials 378, ,614 Health Care (13.42%) AbbVie Inc. 435,500 34,080 35,065 Allergan PLC 66,600 19,229 20,016 AmerisourceBergen Corporation 105,145 10,175 10,847 Becton, Dickinson and Company 163,150 28,694 35,984 Bristol-Myers Squibb Company 158,772 14,520 15,187 Celgene Corporation 202,300 25,429 25,950 Johnson & Johnson 414,506 56,632 65,391 Medtronic Public Limited Company 220,090 22,058 24,837 Merck & Co., Inc. 359,531 25,568 26,938 Pfizer Inc. 581,774 24,046 26,641 Regeneron Pharmaceuticals, Inc. 32,600 15,642 14,807 Sanofi ADR 108,505 6,431 5,906 Stryker Corporation 117,420 15,974 18,299 UnitedHealth Group Incorporated 287,730 43,194 52,838 Total for Health Care 341, ,706 Industrials (12.33%) 3M Co. 186,505 34,825 42,477 Automatic Data Processing, Inc. 112,390 12,595 13,429 Eaton Corporation PLC 184,383 15,319 14,323 Ecolab Inc. 155,820 21,426 24,034 Emerson Electric Co. 194,490 12,971 13,194 Expeditors International of Washington, Inc. 274,385 15,825 17,500 General Dynamics Corp. 52,219 8,840 9,456 General Electric Company 78,350 2,938 3,208 Honeywell International Inc. 249,923 34,680 37,808 Norfolk Southern Corporation 119,630 13,333 13,245 Norwegian Cruise Line Holdings Ltd. 288,700 18,116 14,959 PACCAR Inc. 218,830 14,782 14,762 Raytheon Company 58,802 7,791 10,397 Rockwell Automation Inc. 34,950 5,088 5,219 Southwest Airlines Co. 145,899 7,766 7,440 Stanley Black & Decker Inc. 291,918 39,642 42,225 United Parcel Service, Inc. Cl. B 116,620 14,421 16,338 Percentages shown in brackets relate investments at fair value to net assets of the Fund. The accompanying notes are an integral part of these financial statements.

6 MDPIM US Equity Pool Schedule of Investment Portfolio as at June 30, 2016 (unaudited) (in $000's except for number of shares) Number of Shares Average Cost ($) Fair Value ($) United Technologies Corporation 357,968 45,160 47,743 Total for Industrials 325, ,757 Information Technology (16.16%) Accenture PLC Cl. A 294,480 36,676 43,388 Adobe Systems Inc. 125,700 15,259 15,660 Alphabet Inc. Cl. C 52,500 47,129 47,256 Amphenol Corp. Cl. A 380,868 25,771 28,398 Apple Inc. 106,190 14,474 13,203 Cognizant Technology Solutions Corp. Cl. A 174,260 12,086 12,972 Facebook, Inc. Cl. A 214,300 26,326 31,851 Intel Corporation 431,124 17,566 18,391 International Business Machines Corporation 78,847 15,672 15,564 Liberty Media Corp - Interactive 379,711 12,998 12,529 Microsoft Corporation 1,186,145 71,862 78,937 NetSuite Inc. 184,300 18,484 17,450 Oracle Corporation 813,525 41,051 43,305 QUALCOMM Incorporated 272,300 19,004 18,971 Salesforce.com, Inc. 262,800 24,791 27,141 TE Connectivity Limited 209,890 15,181 15,589 Waters Corporation 83,540 12,432 15,281 Total for Information Technology 426, ,886 Materials (2.67%) CRH PLC ADR 532,889 19,663 20,500 LyondellBasell Industries NV Cl. A 277,900 29,193 26,897 Praxair, Inc. 154,460 21,526 22,577 Rio Tinto PLC ADR 128,490 5,610 5,231 Total for Materials 75,992 75,205 Telecommunication Services (1.96%) AT&T Inc. 498,284 24,123 28,002 Verizon Communications Inc. 374,367 24,488 27,188 Total for Telecommunication Services 48,611 55,190 Utilities (0.71%) Entergy Corporation 189,891 18,211 20,090 Total for Utilities 18,211 20,090 Exchange Traded Funds (7.60%) SPDR S&P 500 ETF Trust 786, , ,305 Total for Exchange Traded Funds 206, ,305 Total for Foreign Equities (94.74%) 2,533,448 2,673,027 Total for Long term Investments (95.31%) $2,554,964 $2,689,247 Percentages shown in brackets relate investments at fair value to net assets of the Fund. The accompanying notes are an integral part of these financial statements.

7 MDPIM US Equity Pool Schedule of Investment Portfolio as at June 30, 2016 (unaudited) (in $000's except for number of shares) Maturity Date Yield (%) Principal Amount in Currency of Issue Average Cost ($) Fair Value ($) SHORT-TERM INVESTMENTS Province of Quebec 07/06/ % 1,500 USD 1,943 1,950 Total for Short-term Investments (0.07%) 1,943 1,950 Total for Investments (95.38%) $2,556,907 $2,691,197 Cash and Other Net Assets (4.62%) 130,273 Total Net Assets Attributable to Holders of Redeemable Units (100.00%) $2,821,470 Schedule of Derivative Instruments (in $000's) FUTURES CONTRACTS Counterparty Credit Rating* Description Notional Amount Fair Value ($) Goldman Sachs A S+P 500 E-Mini Index Futures USD 2, , Total Futures Contracts 20 Total for Schedule of Derivative Instruments 20 * Source: Standard & Poor's Credit Rating Agency Percentages shown in brackets relate investments at fair value to net assets of the Fund. The accompanying notes are an integral part of these financial statements.

8 MDPIM US Equity Pool Financial Statements Statement of Financial Position (unaudited) (in $000's except for units outstanding and per unit amounts) June 30, 2016 December 31, 2015 Assets Current assets Investments $ 2,691,197 $ 1,102,699 Cash 127,671 75,729 Dividends and interest receivable 3,412 2,430 Financial derivative instruments Net margin due from broker on futures contracts Receivable for investment transactions 3,675 5,087 Receivable for securities lending transactions 5 5 Subscriptions receivable 3, ,829,242 1,186,740 Liabilities Current liabilities Payable for investment transactions 5,494 8,828 Redemptions payable 2, ,772 9,026 Net assets attributable to holders of redeemable units $ 2,821,470 $ 1,177,714 Net assets attributable to holders of redeemable units per series Series A $ 1,860 $ 2,332 Series T $ 2,750 $ 1,796 Private Trust Series $ 2,816,860 $ 1,173,586 Number of redeemable units outstanding (see Supplementary Schedules) Series A 161, ,244 Series T 184, ,005 Private Trust Series 209,070,755 83,435,994 Net assets attributable to holders of redeemable units per unit, per series Series A $ $ Series T $ $ Private Trust Series $ $ Statement of Comprehensive Income (unaudited) (in $000 s except for per unit amounts) Six months ended June 30, 2016 June 30, 2015 Income Net gain (loss) on investments Dividends $ 17,094 $ 7,342 Interest for distribution purposes 12 4 Net realized gain (loss) on sale of investments 13,307 80,806 Change in unrealized appreciation (depreciation) of investments (37,704) (30,261) Net gain (loss) on investments (7,291) 57,891 Net gain (loss) on derivative instruments Net realized gain (loss) on derivative instruments (1,236) 623 Change in unrealized appreciation (depreciation) of derivative instruments (34) (199) Net gain (loss) on derivatives instruments (1,270) 424 Other Income Foreign exchange gain (loss) on cash (3,396) 2,738 Securities lending (see Supplementary Schedules) Other 9 79 Total other income (3,323) 2,836 Total income (loss) (11,884) 61,151 Expenses Management fees (Note 4) Regulatory filing fees Audit fees 9 14 Custodial fees Securityholder reporting costs 14 8 Administration fees Independent Review Committee (IRC) fees 3 3 Interest expense 1 - Withholding tax on foreign income 2,217 2,297 Operating expenses absorbed by the Fund Manager (Note 4) (362) (176) Transaction costs Total expenses 2,829 2,575 Increase (decrease) in net assets attributable to holders of redeemable units $ (14,713) $ 58,576 Increase (decrease) in net assets attributable to holders of redeemable units, per series Series A $ (109) $ 182 Series T $ (50) $ 144 Private Trust Series $ (14,554) $ 58,250 Increase (decrease) in net assets attributable to holders of redeemable units per unit, per series Series A $ (0.59) $ 0.94 Series T $ (0.36) $ 1.32 Private Trust Series $ (0.11) $ 0.98 The accompanying notes are an integral part of these financial statements.

9 MDPIM US Equity Pool Financial Statements Statement of Changes in Net Assets Attributable to Holders of Redeemable Units ("Net Assets") (unaudited) (in $000 s) Six months ended June 30, 2016 June 30, 2015 SERIES A Net assets - beginning of period $ 2,332 $ 2,086 Add (deduct) changes during the period: Operations Increase (decrease) in net assets attributable to holders of redeemable units (109) 182 Redeemable unit transactions Proceeds from issue of redeemable units 1 22 Cash paid for redemption of redeemable units (364) (76) Units issued on reinvestment of distributions 7 3 (356) (51) Distributions From net investment income (7) (3) (7) (3) Net assets - end of period $ 1,860 $ 2,214 SERIES T Net assets - beginning of period $ 1,796 $ 1,687 Add (deduct) changes during the period: Operations Increase (decrease) in net assets attributable to holders of redeemable units (50) 144 Redeemable unit transactions Proceeds from issue of redeemable units 1, Cash paid for redemption of redeemable units (388) (295) 1,077 (80) Distributions From net investment income (19) (13) Return of capital (54) (40) (73) (53) Six months ended June 30, 2016 June 30, 2015 PRIVATE TRUST SERIES Net assets - beginning of period $ 1,173,586 $ 653,925 Add (deduct) changes during the period: Operations Increase (decrease) in net assets attributable to holders of redeemable units (14,554) 58,250 Redeemable unit transactions Proceeds from issue of redeemable units 1,740, ,119 Cash paid for redemption of redeemable units (81,631) (75,207) Units issued on reinvestment of distributions 12,534 5,235 1,671, ,147 Distributions From net investment income (13,270) (5,627) (13,270) (5,627) Net assets - end of period $ 2,816,860 $ 865,695 TOTAL FUND Net assets - beginning of period $ 1,177,714 $ 657,698 Add (deduct) changes during the period: Operations Increase (decrease) in net assets attributable to holders of redeemable units (14,713) 58,576 Redeemable unit transactions Proceeds from issue of redeemable units 1,741, ,356 Cash paid for redemption of redeemable units (82,383) (75,578) Units issued on reinvestment of distributions 12,541 5,238 1,671, ,016 Distributions From net investment income (13,296) (5,643) Return of capital (54) (40) (13,350) (5,683) Net assets - end of period $ 2,821,470 $ 869,607 Net assets - end of period $ 2,750 $ 1,698 The accompanying notes are an integral part of these financial statements.

10 MDPIM US Equity Pool Financial Statements Statement of Cash Flows (unaudited) (in $000 s) Six months ended Cash flows from (used in) operating activities June 30, 2016 June 30, 2015 Increase (decrease) in net assets attributable to holders of redeemable units $ (14,713) $ 58,576 Adjustments for: Proceeds from sale of investments 590, ,553 Purchase of investments (2,205,060) (688,485) Amortization Income (4) (4) Unrealized foreign exchange (gain) loss on cash 64 (809) Net realized (gain) loss on sale of investments (13,307) (80,806) Change in unrealized (appreciation) depreciation of investments 37,704 30,261 Change in unrealized (appreciation) depreciation of derivative instruments Net change in non-cash working capital (936) (41) Net cash from (used in) operating activities (1,605,971) (127,556) Cash flows from (used in) financing activities Proceeds from issue of redeemable units 1,739, ,975 Distributions to holders of redeemable units, net of reinvested distribution (809) (436) Cash paid for redemption of redeemable units (80,303) (74,856) Net cash from (used in) financing activities 1,657, ,683 Unrealized foreign exchange gain (loss) on cash (64) 809 Net increase (decrease) in cash during the period 51,942 26,936 Cash, beginning of period 75,729 23,718 Cash, end of period $ 127,671 $ 50,654 Interest received 11 4 Dividend received, net of withholding taxes 13,895 5,274 The accompanying notes are an integral part of these financial statements.

11 MDPIM US Equity Pool Financial Statements Supplementary Schedules (unaudited) Redeemable Unit Transactions for the periods ended June SERIES A Outstanding, beginning of period 193, ,775 Issued 752 2,131 Redeemed (32,299) (6,542) Outstanding, end of period 161, ,364 SERIES T Outstanding, beginning of period 112, ,830 Issued 98,440 13,770 Redeemed (26,295) (19,743) Outstanding, end of period 184, ,857 PRIVATE TRUST SERIES Outstanding, beginning of period 83,435,994 53,101,702 Issued 131,748,239 17,190,359 Redeemed (6,113,478) (5,670,275) Outstanding, end of period 209,070,755 64,621,786 Soft Dollar Commissions The term soft dollar is used to describe a widely accepted business practice by which the investment advisors receive various benefits from the broker through the course of a normal business relationship. Such benefits may be in the form of research or other materials that aid in the investment process, thus contributing to the long-term realization of returns for the unitholders. The soft dollar portion of the commissions paid to dealers for executing portfolio transactions is not ascertainable for the first six months of 2016 and Tax Loss Carry Forwards as at June 30 (in $000's) 2016 Net capital loss carried forward $ - Non-capital losses expiring: 2016 $ in 2018 and thereafter - Total $ - The Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada) and, accordingly, is subject to tax on its income for the year, including net realized capital gains which is not paid or payable to its unitholders as at the end of the year. It is the intention of management that all annual net investment income and sufficient net realized taxable capital gains will be distributed to unitholders annually by December 31, such that there are no Canadian income taxes payable by the Fund. As a result, the Fund does not record income taxes. Since the Fund does not record income taxes, no benefit has been recorded by the Fund in its financial statements in respect of its unused losses as at June 30, As of the taxation year ended December 15, 2015, the Fund does not have any accumulated net realized capital losses or non-capital losses available for utilization against net realized capital gains in future years. Capital losses have no expiry. Noncapital losses realized in 2006 and after can be carried forward for up to 20 years. Securities on Loan as at June 30 (in $000's) Fair value of securities loaned $ - $ 58,385 Fair value of collateral (non-cash) $ - $ 60,710 State Street Bank and Trust Co. is entitled to receive payments out of the gross amount generated from the securities lending transactions of the Fund and bears all operational costs directly related to securities lending as well as the cost of borrower default indemnification. The table below sets out a reconciliation of the gross amount generated from the securities lending transactions of the Fund to the revenue from securities lending disclosed under securities lending income in the Fund s Statements of Comprehensive Income as at June 30, 2016 and June 30, for the periods ended June 30 (in $000's) Gross amount generated from the securities lending transactions $ 76 $ 25 Amounts paid to State Street Bank and Trust Co. $ (12) $ (6) Net securities lending income as reported in the Statement of Comprehensive Income $ 64 $ 19 The accompanying notes are an integral part of these financial statements.

12 MDPIM US Equity Pool Financial Instruments Risks (unaudited) (in $000's) Financial Instruments MDPIM US Equity Pool (the Fund ) invests in equity securities of U.S. companies as well as futures contracts as shown in the Schedule of Investment Portfolio. The Fund invests excess cash in high grade short-term notes with maturities of less than one year. These investments expose the Fund to risks associated with financial instruments. The Fund s exposure and sensitivity to these risks are presented below. A description of the risks and how the Fund manages these risks is discussed in Note 7 of the Notes to the Financial Statements. Credit Risk The Fund s credit risk is concentrated in investments in short-term debt instruments. The Fund s maximum exposure to credit risk from cash and short-term investments is as shown on the Statement of Financial Position. The Fund s maximum exposure to credit risk from derivative instruments is the fair value as presented in the Schedule of Derivative Instruments. As at June 30, 2016 and December 31, 2015, the Fund invested in short-term debt instruments with the following credit ratings: Credit Rating % of Net Assets Attributable to Holders of Redeemable Units June 30, 2016 % of Net Assets Attributable to Holders of Redeemable Units December 31, 2015 Debt Instruments AAA / R-1 (High) - 0.2% AA / R-1 (Mid) 0.1% - Total 0.1% 0.2% All credit ratings are from external credit rating agencies such as Dominion Bond Rating Service, Standard & Poor s and Moody s. Currency Risk Exposures to foreign currencies as at June 30, 2016 and December 31, 2015 are presented in the table below. As at June 30, 2016, if the Canadian Dollar had strengthened against all other currencies by 10%, the Net Assets Attributable to Holders of Redeemable Units of the Fund could have decreased by approximately $282,060, or 10.00% of Net Assets Attributable to Holders of Redeemable Units (December 31, 2015 $117,734 or 10.00%). Conversely, had the Canadian Dollar weakened against all other currencies by 10%, the Net Assets Attributable to Holders of Redeemable Units of the Fund could have increased by approximately $282,060, or 10.00% of Net Assets Attributable to Holders of Redeemable Units (December 31, 2015 $117,734 or 10.00%). These sensitivities are estimates. Actual results may vary and the variance may be material. Interest Rate Risk The majority of the Fund s financial assets are non-interest bearing. The maturity dates of the interest bearing assets held by the Fund are less than one year. Therefore, the Fund s exposure to interest rate risk is not significant. Liquidity Risk The Fund s financial liabilities are all due within one year. Redeemable units are redeemable on demand at the holder s option; however, the Fund does not expect the contractual maturity will be representative of the actual cash outflows, as holders of these instruments typically retain them for a longer period. Other Price Risk As at June 30, 2016, 95.3% (December 31, %) of the Fund s Net Assets Attributable to Holders of Redeemable Units were invested in equity financial instruments traded in active markets. If prices of securities traded on these markets decrease by 10%, with all other factors remaining constant, Net Assets Attributable to Holders of Redeemable Units could fall by approximately $268,925 (December 31, 2015 $109,993). Conversely, if prices increase by 10%, Net Assets Attributable to Holders of Redeemable Units could rise by approximately $268,925 (December 31, 2015 $109,993). These sensitivities are estimates. Actual results may vary and the variance may be significant. Currency Cash and Other Net Assets Attributable to Holders of Redeemable Units Investments at Fair Value Derivative Exposure Net Currency Exposure June 30, 2016 $ U.S. Dollar $ 131,329 $ 2,689,247 $ 20 2,820,596 % of Net Assets Attributable to Holders of Redeemable Units 99.97% December 31, 2015 U.S. Dollar $ 77,356 $ 1,099,932 $ 54 $ 1,177, % The accompanying notes are an integral part of these financial statements.

13 MDPIM US Equity Pool Financial Instruments Risks (unaudited) (in $000's) Concentration Risk Concentration risk arises as a result of the concentration of exposures within the same category. The following table summarizes the Fund s concentration risk as a percentage of long-term investments: Market Segment June 30, 2016 December 31, 2015 Domestic Equities Consumer Discretionary % Materials 0.60% 0.59% Foreign Equities Consumer Discretionary 16.25% 14.51% Consumer Staples 6.43% 6.91% Energy 5.37% 4.07% Exchange Traded Funds 7.97% 7.47% Financials 13.82% 12.23% Health Care 14.08% 15.12% Industrials 12.93% 14.75% Information Technology 16.95% 19.01% Materials 2.80% 1.79% Telecommunication Services 2.05% 2.28% Utilities 0.75% 0.89% Total % % Fair Value Hierarchy The following is a summary of the Fund's use of quoted market prices (Level 1), internal models using observable market information as inputs (Level 2), and internal models without observable market information (Level 3) in the valuation of the Fund s securities. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs (Level 1) (Level 2) Total* June 30, 2016 Domestic Equities $ 16,220 $ - $ 16,220 Foreign Equities 2,673,027-2,673,027 Short-Term Investments - 1,950 1,950 Financial Derivative Instruments Assets Total $ 2,689,267 $ 1,950 $ 2,691,217 December 31, 2015 Domestic Equities $ 10,653 $ - $ 10,653 Foreign Equities 1,089,279-1,089,279 Short-Term Investments - 2,767 2,767 Financial Derivative Instruments Assets Total $ 1,099,986 $ 2,767 $ 1,102,753 *The Fund does not hold any Level 3 investments. There have been no significant transfers between Level 1 and Level 2 for the periods January 1, 2016 to June 30, 2016 and January 1, 2015 to December 31, The accompanying notes are an integral part of these financial statements.

14 Notes to Financial Statements For the periods ended June 30, 2016 and Name and formation of the Funds ESTABLISHMENT OF THE FUNDS The MD Family of Mutual Funds (individually a Fund and collectively the Funds ) are unincorporated mutual fund trusts formed under the laws of the Province of Ontario pursuant to the Declarations of Trust, and the creation dates areas follows: Series A Units Series I Units Series T Units Private Trust Series MD Balanced Fund September 9, 1992 October 25, 2010 MD Bond Fund April 6, 1988 October 30, 2009 MD Short-Term Bond Fund September 19, 1995 October 30, 2009 MD Dividend Income Fund September 9, 1992 October 30, 2009 October 25, 2010 MD Equity Fund March 1, 1966 October 30, 2009 October 25, 2010 MD Dividend Growth Fund January 4, 2007 October 30, 2009 October 25, 2010 MD International Growth Fund July 19, 2000 October 30, 2009 October 25, 2010 MD International Value Fund January 5, 2004 October 30, 2009 October 25, 2010 MD Money Fund July 12,1983 MD Select Fund October 29, 1993 October 30, 2009 October 25, 2010 MD American Growth Fund September 9, 1992 October 30, 2009 October 25, 2010 MD American Value Fund July 10, 2000 October 30, 2009 October 25, 2010 MD Strategic Yield Fund January 30, 2014 January 30, 2014 MD Strategic Opportunities Fund January 30, 2014 January 30, 2014 MD Precision Conservative Portfolio January 6, 2010 MD Precision Balanced Income Portfolio March 27, 2012 MD Precision Moderate Balanced Portfolio January 6, 2010 MD Precision Moderate Growth Portfolio March 27, 2012 MD Precision Balanced Growth Portfolio January 6, 2010 MD Precision Maximum Growth Portfolio January 6, 2010 MD Fossil Fuel Free Bond Fund May 11, 2016 May 11, 2016 MD Fossil Fuel Free Equity Fund May 11, 2016 May 11, 2016 MDPIM Canadian Equity Pool June 16, 1999 October 25, 2010 August 9, 2000 MDPIM US Equity Pool August 6, 1999 October 25, 2010 August 9, 2000 MD Growth Investments Limited is a mutual fund corporation incorporated under the laws of Ontario pursuant to the Letters Patent and the Series creation dates are as follows: Series A Series I MD Growth Investments Limited July 18, 1969 October 30, 2009 MD Financial Management Inc. ( the Manager ) is the Manager and Trustee of the Funds. The address of the Funds registered office is 1870 Alta Vista Drive, Ottawa, Ontario, Canada, K1G 6R7. Throughout these Notes to the Financial Statements, the shares of MD Growth Investments Limited have been referred to as units to simplify the presentation. These financial statements were authorized for issue by the Manager on August 9, 2016.

15 Notes to Financial Statements For the periods ended June 30, 2016 and 2015 SERIES OF UNITS Each of the MD Funds other than MDPIM Canadian Equity Pool and MDPIM US Equity Pool offer Series A units which are available to all MD Management Ltd. clients who are qualified eligible investors. The MDPIM Canadian Equity Pool and MDPIM US Equity Pool Funds offer Private Trust Series and Series T units which may be purchased by either MD Private Investment Counsel (an operating division of MD Financial Management Inc.) or MD Private Trust Company clients who have appointed MD Private Investment Counsel to provide discretionary portfolio management services and advice to them or MD Private Trust Company to provide trust services. Series A units are closed to new subscribers. Investors holding Series A units of these Funds are allowed to hold their units, as well as subscribe for additional Series A units of the Funds. Series I units were established to support the MD Precision Conservative Portfolio, the MD Precision Moderate Balanced Portfolio, the MD Precision Balanced Growth Portfolio, the MD Precision Maximum Growth Portfolio, the MD Precision Balanced Income Portfolio and the MD Precision Moderate Growth Portfolio. These units are only available to the six Funds listed above and certain institutional investors, and are not charged management fees. Series T units were established in order to support a new tax-efficient investment solution for clients. The series T units generate steady tax-efficient cash flow that does not increase taxable income or impact certain benefits such as Old Age Security. 2. Basis of presentation and adoption of IFRS These financial statements have been prepared in compliance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB). 3. Significant accounting policies FUNCTIONAL AND PRESENTATION CURRENCY The financial statements are presented in Canadian dollars, which is the Funds functional currency. Cash, investments and other assets and liabilities denominated in foreign currencies are translated into Canadian Dollars at the rate of exchange prevailing on each valuation date. Transactions during the year in currencies other than Canadian Dollars are translated into Canadian Dollars at the rate of exchange prevailing on the trade date of the transaction. The difference in the foreign exchange rate between trade date and settlement date of a transaction is recognized in income on the Statement of Comprehensive Income. Foreign exchange gains and losses relating to cash are presented as Foreign exchange gain (loss) on cash and those relating to other financial assets and liabilities are presented within net gains or losses on the sale of investments or derivatives. All financial information is presented in Canadian dollars and has been rounded to the nearest thousand, unless otherwise stated. FINANCIAL INSTRUMENTS The Funds recognize financial instruments at fair value upon initial recognition. The Funds financial assets and financial liabilities, other than derivatives, are designated as fair value through profit or loss (FVTPL), as these financial assets and liabilities are managed together and their performance is evaluated on a fair value basis in accordance with the Funds investment strategy. Derivative financial instruments are classified as held for trading and measured at FVTPL. The Funds do not classify any derivatives as hedges in a hedging relationship. Cash is measured at fair value upon recognition and subsequently at amortized cost. Regular way purchases and sales of financial assets are recognized at their trade date. Transaction costs related to investments and derivatives are expensed as incurred in the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets and liabilities at FVTPL are measured at fair value. Gains and losses arising from changes in the fair value are presented in the Statement of Comprehensive Income within Change in unrealized appreciation (depreciation) of investments for financial assets and liabilities designated at FVTPL and within Change in unrealized appreciation (depreciation) of derivatives for derivatives in the periods in which they arise. The interest for distribution purposes shown on the Statement of Comprehensive Income represents the coupon interest received by the Funds accounted for on an accrual basis. Dividend income and distributions to unitholders are recorded on the ex-dividend date. Distributions from underlying funds out of interest, foreign income and related withholding taxes, Canadian dividends and net realized capital gains are recognized when declared. Realized gains or losses from investment transactions and the unrealized appreciation or depreciation of investments are computed on an average cost basis, which exclude brokerage commissions and other trading expenses. Brokerage commissions and other trading expenses are charged to income as incurred. Other financial assets and liabilities, such as accrued interest and dividends receivable, accounts receivable for investment transactions, subscriptions receivable, amounts receivable for securities lending transactions, distributions payable, accounts payable for investment transactions and redemptions payable are recognized initially at fair value, net of transaction costs, and subsequently stated at amortized cost using the effective interest rate method. Under this method, financial assets and liabilities reflect the amount required to be received or paid, discounted, when appropriate, at the contracts effective interest rate. The Funds accounting policies for measuring the fair value of their investments and derivatives are identical to those used in measuring the net asset value (NAV) for transactions with unitholders. The Funds obligation for net assets attributable to holders of redeemable units is presented at the redemption amount. OFFSETTING FINANCIAL INSTRUMENTS Financial assets and liabilities are offset and the net amount reported in the statement of financial position where the Funds currently have a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. In the normal course of business, the Funds may enter into various master netting agreements or similar agreements that do not meet the criteria for offsetting in the statement of financial position but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or termination of the contracts.

16 Notes to Financial Statements For the periods ended June 30, 2016 and 2015 Transactions with counterparties are governed by separate master netting agreements. Each agreement allows for net settlement of certain open contracts where the Fund and respective counterparty both elect to settle on a net basis. In the absence of such an election, contracts will be settled on a gross basis. However, each party to the master netting agreement will have the option to settle all open contracts on a net basis in the event of default of the other party. FAIR VALUE MEASUREMENT Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Investments are categorized as FVTPL and are recorded at fair value. In the case of securities traded in an active market, fair value is based on quoted market prices at the close of trading on the reporting date as provided by independent pricing services. The Funds use the last traded market price for both financial assets and financial liabilities where the last traded price falls within the day s bidask spread. In circumstances where the last traded 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. In the case of investments not traded in an active market, or for those securities for which the Manager feels the latest market prices are not reliable, fair value is estimated based on valuation techniques established by the Manager. Valuation techniques established by the Manager are based on observable market data except in situations where there is no relevant or reliable market data. The value of securities estimated using valuation techniques not based on observable market data, if any, is disclosed in the Financial Instruments Risks section of the financial statements. FINANCIAL DERIVATIVES INSTRUMENTS A derivative is a financial contract between two parties, the value of which is derived from the value of an underlying asset such as equity, bond, commodity, interest rate or currency. Certain Funds may use derivatives, such as options, futures, forward contracts, swap contracts, and other similar instruments, in a manner considered appropriate to achieving the Fund s investment objectives. Derivatives may be used to protect a security price, currency exchange rate or interest rate from negative changes (hedging) or to provide exposure to securities, indices, or currencies without investing in them directly (non-hedging). Derivatives contain various risks including the potential inability for the counterparty to fulfil their obligations under the terms of the contract, the potential for illiquid markets and the potential price risk which may expose the Funds to gains and/or losses in excess of the amounts shown on the Statement of Financial Position. Derivatives with unrealized gains are reported as Financial Derivate Instruments under current assets and derivatives with unrealized losses are reported as Financial Derivative Instruments under current liabilities. Forward Currency Contracts Certain Funds may enter into forward currency contracts for either hedging or nonhedging purposes where such activity is consistent with their investment objectives and as permitted by the Canadian securities regulatory authorities. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. Investments in forward currency contracts are entered into with approved counterparties and are recorded at fair value. The fair value of a forward currency contract fluctuates with changes in foreign currency exchange rates. The fair value of forward currency contracts is reported as Financial Derivative Instruments in the Statement of Financial Position. Forward currency contracts are marked to market daily and the changes in fair value of forward currency contracts are recorded in Change in unrealized appreciation (depreciation) of derivatives. Upon closing of the contracts, the accumulated gains or losses are reported in Net realized gain (loss) on sale of derivative instruments. The contractual amounts of open contracts are disclosed in the Schedule of Investment Portfolio as the Schedule of Derivative Instruments. Futures Contracts Futures contracts are valued on each valuation day using the closing market price posted on the related public exchange. The fair value of future contracts is reported as Financial Derivative Instruments in the Statement of Financial Position. All gains or losses arising from futures contracts are recorded as part of Change in unrealized appreciation (depreciation) of derivatives in the Statement of Comprehensive Income until the contracts are closed out or expire, at which time the gains or losses are realized and reported as Net realized gain (loss) on derivative instruments. Credit Default Swaps Certain Funds may enter into credit default swap contracts, primarily to manage and/or gain exposure to credit risk where such activity is consistent with their investment objectives and as permitted by the Canadian securities regulatory authorities. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. The credit risk exposure of a Fund to the referenced asset is comparable to the exposure that would have resulted if the Fund were invested directly in the referenced debt obligation. In the event of a default of the underlying referenced debt obligation, the buyer of the contract is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap contract less the recovery amount of value of the referenced debt obligation, or other agreed upon amount. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments paid or received are accrued daily and are included in the Statement of Comprehensive Income in Net Interest Income (Expense) from Swap Contracts. Credit Default Swaps are disclosed in the Schedule of Derivative Instruments. The change in value of a credit default swap contract and any upfront premium paid or received is included in the Statement of Financial Position as Financial Derivative Instruments. When the credit default swap contracts are closed out, gains or losses, including upfront premiums, are realized and included in the Statement of Comprehensive Income in Net realized gain (loss) on derivatives instruments. Pursuant to the terms of the credit default swap contract, cash or securities may be required to be deposited as collateral.

17 Notes to Financial Statements For the periods ended June 30, 2016 and 2015 Interest Rate Swaps Certain Funds may enter into interest rate swap contracts, primarily to manage and/or gain exposure to fluctuations in interest rates. An interest rate swap is an agreement between the Fund and a counterparty whereby the parties agree to exchange a fixed payment for a floating payment that is linked to an interest rate and an agreed upon notional amount. Over the term of the contract, each party will pay to the other party a periodic stream of payments. Such periodic payments paid or received are accrued daily and are included in the Statement of Comprehensive Income in Net Interest Income (Expense) from Swap Contracts. Interest Rate Swaps are disclosed in the Schedule of Derivative Instruments. The change in value of an interest rate swap contract and any upfront premium paid or received is included in the Statement of Financial Position as Financial Derivative Instruments. When the interest rate swap contracts are closed out, gains or losses, as well as any upfront premiums, are realized and included in the Statements of Comprehensive Income in Net realized gain (loss) on derivatives instruments. Cross Currency Swaps Certain Funds may enter into cross currency swap contracts, primarily to manage and/or gain exposure to currency risk. A cross currency swap is an agreement between the Fund and a counterparty whereby the parties agree to exchange interest payments and principal on loans denominated in two different currencies. Over the term of the contract, each party will pay to the other party a periodic stream of payments. Such periodic payments paid or received are accrued daily and are included in the Statement of Comprehensive Income in Net Interest Income (Expense) from Swap Contracts. Cross currency swaps are disclosed in the Schedule of Derivative Instruments. The change in value of a cross currency swap contract and any upfront premium paid or received is included in the Statement of Financial Position as Financial Derivative Instruments. When the cross currency swap contracts are closed out, gains or losses, as well as any upfront premiums, are realized and included in the Statements of Comprehensive Income in Net realized gain (loss) on derivatives instruments. CAPITAL RISK MANAGEMENT Units issued and outstanding are considered to be the capital of the Funds. The Funds do not have any specific capital requirements on the subscription and redemption of units, other than certain minimum subscription. The Funds units are offered for sale on any business day and may be redeemed or issued at the Net Asset Value (NAV) per unit for the respective series on that business day. A business day refers to any day the Toronto Stock Exchange is open for business. The NAV for each series is computed daily by calculating the value of that series proportionate share of net assets and liabilities of the Fund common to all series less liabilities attributable to that series. Expenses directly attributable to a series are charged to that series. Assets, common liabilities, revenues and other expenses are allocated proportionately to each series based upon the relative NAVs of each series. The NAV per unit is determined by dividing the NAV of each series of a Fund by the total number of units of that series outstanding. INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS PER UNIT Increase (decrease) in net assets attributable to holders of redeemable units per unit in the Statement of Comprehensive Income represents the increase or decrease in net assets attributable to holders of redeemable units attributable to each series of units for the period, divided by the weighted average units outstanding in that series during the period. SECURITIES LENDING TRANSACTIONS A Fund may lend portfolio securities to earn additional income through a securities lending agreement with its custodian. The aggregate market value of all securities loaned by the Fund cannot exceed 50% of the assets of the Fund. The Fund receives collateral in the form of securities deemed acceptable under National Instrument , Mutual Funds ( NI ) of at least 102% of the fair value of securities on loan. Collateral held is typically government and corporate bonds. Income from securities lending is recorded as Securities lending on a monthly basis when it is receivable. Securities lending details are listed in Securities on Loan included in the supplementary schedules to the financial statements. REDEEMABLE UNITS The Funds issue different series of redeemable units, which are redeemable at the holder s option and do not have identical rights. Such units are classified as financial liabilities. Redeemable units can be put back to the Funds at any date for cash equal to a proportionate share of the Funds net asset value attributable to the series. The redeemable units are carried at the redemption amount that is payable at the Statement of Financial Position date if the holder exercises the right to put the unit back to the Funds. INVOLVEMENT IN UNCONSOLIDATED STRUCTURED ENTITIES A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. Certain Funds investment strategy entails trading in other funds on a regular basis. The Funds considers all of theirs investments in other funds ( Investee Funds ) to be investments in unconsolidated structured entities. The Funds invest in Investee Funds whose objectives range from conserving principal to maximizing dividend income to long-term capital growth and whose investment strategies do not include leverage. The Investee Funds finance their operations by issuing redeemable units which are puttable at the holder s option and entitles the holder to a proportionate stake in the respective in the Investee Fund s net assets. The Funds hold redeemable units in each of their Investee Funds and the Funds have the right to request redemption of their investment in Investee Funds daily. The Funds investments in Investee Funds are subject to the terms and conditions of the respective Investee Fund s offering documentation. The change in fair value of each Investee Fund is included in the Statement of Comprehensive Income in Change in unrealized appreciation (depreciation) of investments. The Funds maximum exposure to loss from their interest in Investee Funds is equal to the fair value of their investments in Investee Funds. Once a Fund has disposed of its shares in an Investee Fund the Fund ceases to be exposed to any risk from that investee fund.