Investors Mortgage and Short Term Income Fund Annual Financial Report MARCH 31, 2018 Copyright Investors Group Inc. 2018 Trademarks, including Investors Group, are owned by IGM Financial Inc. and licensed to its subsidiary corporations.
STATEMENTS OF FINANCIAL POSITION at March 31 (in $ 000 except per security amounts) STATEMENTS OF COMPREHENSIVE INCOME for the periods ended March 31 (in $ 000 except per security amounts) 2018 2017 Assets Current assets: Non-derivative investments 5,323,935 5,617,749 Cash and cash equivalents 65,179 154,821 Accrued interest receivable 24,434 22,836 Dividends receivable - - Accounts receivable for investments sold 85,065 - Accounts receivable for securities issued 177 - Accounts receivable from the Manager - - Margin on derivative contracts - - Derivative assets 858 - Other assets - - 5,499,648 5,795,406 Non-current assets: Taxes recoverable - - Other assets - - - - Total assets 5,499,648 5,795,406 Liabilities Current liabilities: Bank indebtedness - - Accounts payable for investments purchased 53,391 - Accounts payable for securities redeemed - - Distributions payable - - Accrued expenses and miscellaneous payables 93 12 Dividends payable on investments sold short - - Derivative liabilities 1,811 - Taxes payable - - Other liabilities 3 - Total liabilities 55,298 12 Net assets attributable to securityholders 5,444,350 5,795,394 a2018 b2017 Income: Gains (losses) on derivative and non-derivative investments: Dividends - - Interest income 141,785 141,922 Net realized gain (loss) (47,356) (11,871) Net unrealized gain (loss) (55,975) (35,326) Income (loss) from derivatives 4,735 - Income (loss) from short selling - - Other - - Net gain (loss) on derivative and non-derivative investments 43,189 94,725 Securities lending income 47 46 Other - - Total income 43,236 94,771 Expenses: Management fees 15,197 17,914 Management fee rebates (400) (422) Service fees - - Service fee rebates - - Mortgage administration and service fees 4,058 4,027 Administration fees 1,043 1,224 Trustee fees 575 629 Commissions and other portfolio transaction costs - - Independent Review Committee costs 18 31 Other 29 25 Expenses before amounts absorbed by Manager 20,520 23,428 Expenses absorbed by Manager (41) - Net expenses 20,479 23,428 Increase (decrease) in net assets attributable to securityholders from operations before tax 22,757 71,343 Foreign withholding taxes paid (recovered) - - Foreign income taxes paid (recovered) - - Income tax paid (recovered) - - Increase (decrease) in net assets attributable to securityholders from operations 22,757 71,343 Net assets attributable to securityholders per security per series 2018 2017 2018 2017 Series A 9.46 9.64 247,065 319,850 Series B 9.46 9.63 101,975 113,446 Series C 4.83 4.91 171,155 209,296 Series Jdsc 9.52 9.70 174,663 256,083 Series Jnl 9.51 9.68 45,727 62,739 Series P 10.65 10.85 4,494,294 4,681,036 Series S 9.64 9.81 74,874 77,881 Series U 9.71 9.88 134,597 75,063 5,444,350 5,795,394 Increase (decrease) in net assets attributable to securityholders from operations per security per series a2018 b2017 a2018 b2017 Series A (0.11) (0.02) (3,363) (689) Series B (0.10) (0.02) (1,267) (227) Series C (0.05) - (1,971) (144) Series Jdsc (0.08) 0.02 (1,865) 327 Series Jnl (0.07) 0.02 (461) 36 Series P 0.08 0.19 32,008 71,656 Series S (0.08) (0.01) (689) (102) Series U 0.04 0.13 365 486 22,757 71,343 See accompanying notes.
STATEMENTS OF CHANGES IN FINANCIAL POSITION for the periods ended March 31 (in $ 000 except when stated) TOTAL SERIES A SERIES B SERIES C a2018 b2017 a2018 b2017 a2018 b2017 a2018 b2017 Net assets attributable to securityholders, beginning of period 5,795,394 5,239,010 319,850 371,704 113,446 98,768 209,296 244,330 Increase (decrease) in net assets attributable to securityholders resulting from: Operations 22,757 71,343 (3,363) (689) (1,267) (227) (1,971) (144) Distributions: Income (125,583) (117,740) (1,772) (2,418) (693) (650) (1,165) (1,473) Capital gains - - - - - - - - Return of capital - - - - - - - - Management fee rebates (400) (422) - - - - (308) (308) Service fee rebates - - - - - - - - Total distributions (125,983) (118,162) (1,772) (2,418) (693) (650) (1,473) (1,781) Security transactions: Proceeds from sale of securities 2,073,640 1,822,264 27,794 50,236 71,778 79,610 11,254 13,236 Proceeds from securities issued on merger - - - - - - - - Reinvested from distributions 125,927 118,125 1,770 2,411 691 646 1,465 1,770 Payment on redemption of securities (2,447,385) (1,337,186) (97,214) (101,394) (81,980) (64,701) (47,416) (48,115) Total security transactions (247,818) 603,203 (67,650) (48,747) (9,511) 15,555 (34,697) (33,109) Increase (decrease) in assets attributable to securityholders (351,044) 556,384 (72,785) (51,854) (11,471) 14,678 (38,141) (35,034) Net assets attributable to securityholders, end of period 5,444,350 5,795,394 247,065 319,850 101,975 113,446 171,155 209,296 Increase (decrease) in securities outstanding (in thousands): Securities outstanding, beginning of period 33,196 38,240 11,783 10,170 42,591 49,304 Add (deduct): Securities sold 2,913 5,186 7,521 8,242 2,311 2,682 Securities issued on merger - - - - - - Reinvested from distributions 186 249 73 67 302 359 Securities redeemed (10,189) (10,479) (8,593) (6,696) (9,747) (9,754) Securities outstanding, end of period 26,106 33,196 10,784 11,783 35,457 42,591 SERIES Jdsc SERIES Jnl SERIES P SERIES S a2018 b2017 a2018 b2017 a2018 b2017 a2018 b2017 Net assets attributable to securityholders, beginning of period 256,083 297,752 62,739 58,583 4,681,036 4,071,861 77,881 70,077 Increase (decrease) in net assets attributable to securityholders resulting from: Operations (1,865) 327 (461) 36 32,008 71,656 (689) (102) Distributions: Income (1,913) (2,782) (477) (545) (116,351) (108,592) (691) (549) Capital gains - - - - - - - - Return of capital - - - - - - - - Management fee rebates (70) (93) (22) (21) - - - - Service fee rebates - - - - - - - - Total distributions (1,983) (2,875) (499) (566) (116,351) (108,592) (691) (549) Security transactions: Proceeds from sale of securities 38,167 69,701 40,486 46,055 1,726,803 1,466,091 18,032 23,791 Proceeds from securities issued on merger - - - - - - - - Reinvested from distributions 1,978 2,868 490 559 116,351 108,592 691 549 Payment on redemption of securities (117,717) (111,690) (57,028) (41,928) (1,945,553) (928,572) (20,350) (15,885) Total security transactions (77,572) (39,121) (16,052) 4,686 (102,399) 646,111 (1,627) 8,455 Increase (decrease) in assets attributable to securityholders (81,420) (41,669) (17,012) 4,156 (186,742) 609,175 (3,007) 7,804 Net assets attributable to securityholders, end of period 174,663 256,083 45,727 62,739 4,494,294 4,681,036 74,874 77,881 Increase (decrease) in securities outstanding (in thousands): Securities outstanding, beginning of period 26,411 30,443 6,480 5,999 431,518 372,137 7,938 7,082 Add (deduct): Securities sold 3,969 7,155 4,214 4,739 161,126 134,573 1,857 2,412 Securities issued on merger - - - - - - - - Reinvested from distributions 206 295 51 57 10,844 9,973 71 56 Securities redeemed (12,246) (11,482) (5,937) (4,315) (181,672) (85,165) (2,097) (1,612) Securities outstanding, end of period 18,340 26,411 4,808 6,480 421,816 431,518 7,769 7,938 See accompanying notes.
STATEMENTS OF CHANGES IN FINANCIAL POSITION (continued) for the periods ended March 31 (in $ 000 except when stated) SERIES U a2018 b2017 Net assets attributable to securityholders, beginning of period 75,063 25,935 Increase (decrease) in net assets attributable to securityholders resulting from: Operations 365 486 Distributions: Income (2,521) (731) Capital gains - - Return of capital - - Management fee rebates - - Service fee rebates - - Total distributions (2,521) (731) Security transactions: Proceeds from sale of securities 139,326 73,544 Proceeds from securities issued on merger - - Reinvested from distributions 2,491 730 Payment on redemption of securities (80,127) (24,901) Total security transactions 61,690 49,373 Increase (decrease) in assets attributable to securityholders 59,534 49,128 Net assets attributable to securityholders, end of period 134,597 75,063 Increase (decrease) in securities outstanding (in thousands): Securities outstanding, beginning of period 7,596 2,603 Add (deduct): Securities sold 14,217 7,431 Securities issued on merger - - Reinvested from distributions 255 74 Securities redeemed (8,201) (2,512) Securities outstanding, end of period 13,867 7,596 See accompanying notes.
STATEMENTS OF CASH FLOWS for the periods ended March 31 (in $ 000 except when stated) Cash flows from operating activities a2018 b2017 Increase (decrease) in net assets attributable to securityholders from operations 22,757 71,343 Less non-cash impact of: Net realized (gain) loss 47,356 11,871 Change in net unrealized (gain) loss 55,975 35,326 Adjustments for: Proceeds from sale and maturity of investments 3,360,406 3,239,247 Purchases of investments (3,200,634) (3,808,090) (Increase) decrease in accounts receivable and other assets (1,598) (3,395) Increase (decrease) in accounts payable and other liabilities 84 (3,524) Net cash provided by (used in) operating activities 284,346 (457,222) Cash flows from financing activities: Proceeds from securities issued 1,981,167 1,754,720 Proceeds from securities issued on merger - - Payments on redemption of securities (2,355,089) (1,269,421) Distributions paid net of reinvestments (56) (37) Net cash provided by (used in) financing activities (373,978) 485,262 Increase (decrease) in cash and cash equivalents (89,632) 28,040 Cash and cash equivalents at beginning of period 154,821 126,781 Effect of exchange rate fluctuations on cash and cash equivalents (10) - Cash and cash equivalents, end of period 65,179 154,821 Cash - - Cash equivalents 66,567 178,990 Bank indebtedness (1,388) (24,169) Supplementary disclosures on cash flow from operating activities: 65,179 154,821 Dividends received net of withholding taxes - - Interest received net of withholding taxes 140,187 138,527 Interest paid - - See accompanying notes.
SCHEDULE OF INVESTMENTS No. of Units, Fair Shares, or Cost Value Country Sector Par Value (CAD$ 000) (CAD$ 000) MORTGAGES Canada See Schedules 2 to 6 2,301,245,551 2,314,015 2,272,972 BONDS AECOM 5.13% 03-15-2027 Callable 2026 United States Corporate USD 940,000 1,169 1,170 AerCap Ireland Capital Designated Activity Co. 3.30% 01-23-2023 Callable 2022 Netherlands Corporate USD 4,470,000 5,540 5,612 AIMCo Realty Investors LP 3.04% 06-01-2028 Callable 2028 Canada Corporate 460,000 460 457 Allied Properties Real Estate Investment Trust 3.64% 04-21-2025 Callable 2025 Canada Corporate 4,060,000 3,914 3,968 AMC Entertainment Holdings Inc. 5.88% 11-15-2026 Callable United States Corporate USD 1,830,000 2,196 2,325 Amneal Pharmaceuticals LLC Term loan B 1st Lien F/R 03-23-2025 United States Bank Loans USD 3,070,000 3,931 3,962 Aramark Services Inc. 4.75% 06-01-2026 Callable 2021 United States Corporate USD 4,550,000 5,746 5,686 Artis Real Estate Investment Trust F/R 02-07-2020 Canada Corporate 13,060,000 13,060 13,074 ATS Consolidated Inc. Term Loan B 1st Lien F/R 02-23-2025 United States Bank Loans USD 1,060,000 1,335 1,383 Avolon Holdings Funding Ltd. 5.50% 01-15-2023 Callable 2022 144A Ireland Corporate USD 1,670,000 2,140 2,124 Bank of America Corp. 3.23% 06-22-2022 Series MPLE United States Corporate 490,000 496 497 Bank of America Corp. F/R 03-15-2023 Callable 2022 United States Corporate 1,410,000 1,407 1,393 Bank of America Corp. F/R 09-20-2025 Callable 2024 United States Corporate 1,620,000 1,658 1,630 Bank of Montreal 3.21% 09-13-2018 DPNT Canada Corporate 10,000,000 10,272 10,062 Bank of Montreal 2.84% 06-04-2020 DPNT Canada Corporate 27,000,000 28,067 27,270 Bank of Montreal 2.10% 10-06-2020 DPNT Canada Corporate 108,100,000 109,647 107,208 Bank of Montreal 1.88% 03-31-2021 DPNT Canada Corporate 50,000,000 50,293 49,087 Bank of Montreal 1.61% 10-28-2021 DPNT Canada Corporate 64,750,000 64,234 62,592 Bank of Montreal 2.27% 07-11-2022 DPNT Canada Corporate 32,310,000 32,252 31,792 Bank of Montreal 2.70% 09-11-2024 DPNT Canada Corporate 51,940,000 51,747 51,496 Bank of Montreal 3.32% 06-01-2026 Canada Corporate 5,200,000 5,326 5,257 The Bank of Nova Scotia 2.13% 06-15-2020 DPNT Canada Corporate 76,800,000 76,605 76,349 The Bank of Nova Scotia 2.09% 09-09-2020 DPNT Canada Corporate 50,000,000 50,223 49,579 The Bank of Nova Scotia 3.27% 01-11-2021 DPNT Canada Corporate 5,000,000 5,203 5,102 The Bank of Nova Scotia 2.87% 06-04-2021 DPNT Canada Corporate 80,000,000 83,192 80,727 The Bank of Nova Scotia 1.90% 12-02-2021 DPNT Canada Corporate 40,000,000 40,000 39,001 The Bank of Nova Scotia 1.83% 04-27-2022 Canada Corporate 41,000,000 40,114 39,676 The Bank of Nova Scotia 2.36% 11-08-2022 Canada Corporate 24,560,000 24,558 24,195 Bell Canada 5.52% 02-26-2019 Canada Corporate 43,293,000 46,624 44,592 Bell Canada 3.25% 06-17-2020 MTN Canada Corporate 10,000,000 10,327 10,152 Bell Canada 2.00% 10-01-2021 Canada Corporate 15,000,000 14,914 14,612 Bell Canada 3.00% 10-03-2022 Callable Canada Corporate 34,750,000 35,022 34,898 Boardriders Inc. Term Loan B 1st Lien F/R 03-21-2024 United States Bank Loans USD 3,850,000 4,864 4,910 Bruce Power LP 3.97% 06-23-2026 Canada Corporate 3,430,000 3,529 3,566 Calpine Corp. 5.25% 06-01-2026 Callable 2021 144A United States Corporate USD 80,000 102 100 Canada Housing Trust No. 1 2.35% 12-15-2018 Canada Federal Government 8,000,000 8,190 8,044 Canada Housing Trust No. 1 1.45% 06-15-2020 Canada Federal Government 110,000,000 110,954 108,892 Canada Housing Trust No. 1 1.25% 12-15-2020 Canada Federal Government 24,750,000 24,847 24,255 Canada Housing Trust No. 1 1.25% 06-15-2021 Canada Federal Government 160,000,000 158,921 155,825 Canada Housing Trust No. 1 F/R 03-15-2023 Canada Federal Government 100,900,000 101,253 101,308 Canada Housing Trust No. 1 2.35% 06-15-2023 Canada Federal Government 267,760,000 267,593 268,387 Canadian Imperial Bank of Commerce 1.70% 10-09-2018 DPNT Canada Corporate 63,500,000 63,871 63,459 Canadian Imperial Bank of Commerce 1.66% 01-20-2020 DPNT Canada Corporate 79,000,000 78,622 78,119 Canadian Imperial Bank of Commerce 1.90% 04-26-2021 DPNT Canada Corporate 50,000,000 50,147 49,089 Canadian Imperial Bank of Commerce 1.64% 07-12-2021 DPNT Canada Corporate 45,289,000 44,874 43,976 Canadian Imperial Bank of Commerce 2.30% 07-11-2022 DPNT Canada Corporate 8,270,000 8,270 8,147 Canadian Imperial Bank of Commerce 2.47% 12-05-2022 Canada Corporate 29,900,000 29,912 29,617 Canadian Imperial Bank of Commerce F/R 04-04-2028 Callable 2023 Canada Corporate 8,490,000 8,487 8,521 Canadian Western Bank 2.92% 12-15-2022 Canada Corporate 9,270,000 9,253 9,216 Capital Power Corp. 4.28% 09-18-2024 Callable 2024 Canada Corporate 9,000,000 9,104 9,120 Central 1 Credit Union F/R 02-05-2021 Canada Corporate 12,670,000 12,671 12,637 Central 1 Credit Union 2.60% 11-07-2022 Canada Corporate 7,650,000 7,647 7,520 Chassix Inc. Term Loan B 1st Lien F/R 11-10-2023 United States Bank Loans USD 3,162,075 3,929 4,099 Choice Properties Real Estate Investment Trust 3.01% 03-21-2022 Callable 2022 Canada Corporate 7,650,000 7,649 7,645 Choice Properties Real Estate Investment Trust 3.56% 09-09-2024 Callable 2024 Canada Corporate 3,140,000 3,140 3,154 Citigroup Inc. 3.39% 11-18-2021 United States Corporate 4,130,000 4,224 4,222 Commonwealth of Bahamas 6.00% 11-21-2028 Callable 2028 Bahamas Foreign Governments USD 2,770,000 3,527 3,726 Communications Sales & Leasing Inc. Term Loan B 1st Lien F/R 10-24-2022 United States Bank Loans USD 3,441,288 4,146 4,287 Coronado Australian Holdings Pty Ltd. Term Loan B 1st Lien F/R 03-21-2025 United States Bank Loans USD 1,815,000 2,270 2,315 Coronado Australian Holdings Pty Ltd. Term Loan C 1st Lien F/R 03-21-2025 United States Bank Loans USD 495,000 619 631 CSC Holdings LLC Term Loan B 1st Lien F/R 01-12-2026 United States Bank Loans USD 1,260,000 1,563 1,625 CVS Health Corp. F/R 03-09-2020 United States Corporate USD 2,730,000 3,520 3,533 DaVita Healthcare Partners Inc. 5.00% 05-01-2025 Callable 2020 United States Corporate USD 4,560,000 5,652 5,691 Dollarama Inc. F/R 02-01-2021 Canada Corporate 18,710,000 18,714 18,698 Eagle Credit Card Trust 2.63% 10-17-2022 Canada Corporate 4,260,000 4,294 4,238 Enbridge Inc. 3.94% 06-30-2023 Callable MTN Canada Corporate 19,000,000 19,773 19,655 Enbridge Inc. 5.37% 09-27-2077 Callable 2027 Canada Corporate 9,500,000 9,373 9,158 Envigo Holdings Inc. Term Loan B 1st Lien F/R 12-14-2023 United States Bank Loans USD 2,320,000 2,856 2,936 Fairfax Financial Holdings Ltd. 4.50% 03-22-2023 Canada Corporate 9,000,000 9,388 9,386 First Quantum Minerals Ltd. 6.88% 03-01-2026 Callable 2021 144A Zambia Corporate USD 7,850,000 9,931 9,614 Ford Credit Canada Co. F/R 12-01-2020 United States Corporate 13,430,000 13,430 13,452
SCHEDULE OF INVESTMENTS (continued) No. of Units, Fair Shares, or Cost Value Country Sector Par Value (CAD$ 000) (CAD$ 000) BONDS (continued) GFL Environmental Inc. 5.38% 03-01-2023 Callable 2020 144A Canada Corporate USD 7,460,000 9,465 9,451 The Goodyear Tire & Rubber Co. 4.88% 03-15-2027 Callable 2026 United States Corporate USD 1,820,000 2,234 2,265 Government of Canada 3.25% 06-01-2021 Canada Federal Government 4,830,000 5,027 5,028 H&R Real Estate Investment Trust 2.92% 05-06-2022 Canada Corporate 9,000,000 8,913 8,866 H&R Real Estate Investment Trust 3.42% 01-23-2023 Callable 2022 Canada Corporate 3,680,000 3,680 3,679 Home Trust Co. 2.29% 08-01-2018 Canada Mortgage Backed 133,766 135 134 Home Trust Co. 1.30% 08-01-2020 Canada Mortgage Backed 14,841,194 14,739 14,616 Hornblower Sub LLC Term Loan 1st Lien F/R 04-28-2025 United States Bank Loans USD 2,540,000 3,266 3,280 HSBC Bank Canada 2.54% 01-31-2023 Canada Corporate 12,720,000 12,720 12,534 Hudson River Trading LLC Term Loan 1st Lien F/R 03-20-2025 United States Bank Loans USD 2,140,000 2,772 2,767 Hydro One Inc. 2.78% 10-09-2018 MTN Canada Corporate 47,250,000 48,360 47,498 Hydro One Inc. 1.48% 11-18-2019 MTN Canada Corporate 5,000,000 5,000 4,947 1 I.G. Investment Management, Ltd. 2.05% 11-01-2018 Canada Mortgage Backed 7,726,008 7,685 7,737 Inter Pipeline Ltd. 2.61% 09-13-2023 Callable MTN Canada Corporate 14,500,000 14,076 14,033 iqor US Inc. Term Loan 2nd Lien F/R 04-01-2022 United States Bank Loans USD 2,380,000 2,845 2,963 Itron Inc. 5.00% 01-15-2026 Callable 2021 144A United States Corporate USD 4,560,000 5,721 5,798 Lamb Weston Holdings Inc. 4.63% 11-01-2024 Callable 2021 144A United States Corporate USD 1,270,000 1,598 1,627 Lamb Weston Holdings Inc. 4.88% 11-01-2026 Callable 2021 144A United States Corporate USD 2,470,000 3,131 3,163 Laurentian Bank of Canada F/R 10-22-2019 Canada Corporate 7,410,000 7,410 7,414 LD Intermediate Holdings Inc. Term Loan B 1st Lien F/R 12-09-2022 United States Bank Loans USD 1,599,502 1,825 1,854 Manulife Bank of Canada F/R 01-27-2020 Callable 2019 Canada Corporate 12,200,000 12,200 12,202 Manulife Bank of Canada 2.84% 01-12-2023 Canada Corporate 5,680,000 5,680 5,686 Mattamy Group Corp. 6.50% 10-01-2025 Callable 2020 144A Canada Corporate USD 4,550,000 6,079 5,927 Meredith Corp. Term Loan B 1st Lien F/R 01-18-2025 United States Bank Loans USD 3,530,000 4,374 4,580 Metro Inc. 2.68% 12-05-2022 Callable 2022 Canada Corporate 7,650,000 7,650 7,575 Mondelez International Inc. 3.25% 03-07-2025 Callable 2025 United States Corporate 2,400,000 2,389 2,394 National Bank of Canada 1.96% 06-30-2022 Canada Corporate 4,230,000 4,107 4,109 Neenah Foundry Co. Term Loan B 1st Lien F/R 12-08-2022 United States Bank Loans USD 1,540,000 1,961 1,974 New Red Finance Inc. 5.00% 10-15-2025 Callable 2020 144A Canada Corporate USD 5,340,000 6,666 6,571 Newell Brands Inc. 4.20% 04-01-2026 Callable 2026 United States Corporate USD 810,000 1,028 1,035 Numericable-SFR 6.00% 05-15-2022 Callable 144A France Corporate USD 4,820,000 5,937 6,079 NuVista Energy Ltd. 6.50% 03-02-2023 Callable 2020 Canada Corporate 2,640,000 2,640 2,649 Ocean Bidco Inc. Term Loan B 1st Lien F/R 03-02-2025 United States Bank Loans USD 950,000 1,219 1,229 OCI Beaumont LLC Term Loan B 1st Lien F/R 02-16-2025 United States Bank Loans USD 1,450,000 1,818 1,882 Osteon Merger Sub Inc. Term Loan B 1st Lien F/R 02-06-2025 United States Bank Loans USD 940,000 1,171 1,223 Parkland Fuel Corp. 6.00% 04-01-2026 Callable 2021 144A Canada Corporate USD 10,600,000 13,877 13,744 Pisces Midco Inc. 8.00% 04-15-2026 Callable 2021 144A United States Corporate USD 220,000 283 283 Pisces Midco Inc. Term Loan B 1st Lien F/R 03-29-2025 United States Bank Loans USD 2,680,000 3,435 3,435 Polycom Inc. Term Loan 1st Lien F/R 09-27-2023 United States Bank Loans USD 17,820 23 23 Prospect Medical Holdings Inc. Term Loan B 1st Lien F/R 02-15-2024 United States Bank Loans USD 3,600,000 4,429 4,649 Province of Ontario F/R 06-27-2022 Canada Provincial Governments 25,000,000 25,000 25,161 Province of Ontario 2.60% 09-08-2023 Canada Provincial Governments 31,080,000 31,078 31,291 Province of Quebec 1.65% 03-03-2022 Canada Provincial Governments 10,000,000 9,990 9,787 PS HoldCo LLC Term Loan 1st Lien F/R 03-02-2025 United States Bank Loans USD 920,000 1,180 1,197 RBC Dominion Securities Inc. 1.43% 01-01-2021 Canada Mortgage Backed 7,277,608 7,280 7,168 Reliance Intermediate Holdings LP 6.50% 04-01-2023 Callable 2018 144A Canada Corporate USD 965,000 1,294 1,297 Reliance LP 3.84% 03-15-2025 Callable 2025 Canada Corporate 1,660,000 1,660 1,655 Research Now Group Inc. Term Loan 1st Lien F/R 12-20-2024 United States Bank Loans USD 3,840,375 4,693 4,924 Rogers Communications Inc. 4.70% 09-29-2020 Callable Canada Corporate 15,000,000 15,853 15,780 Royal Bank of Canada 2.77% 12-11-2018 DPNT Canada Corporate 103,500,000 105,627 104,112 Royal Bank of Canada 1.40% 04-26-2019 Canada Corporate 20,000,000 20,089 19,883 Royal Bank of Canada 3.70% 08-01-2019 Canada Mortgage Backed 3,197,536 3,278 3,265 Royal Bank of Canada 2.35% 12-09-2019 DPNT Canada Corporate 55,000,000 56,484 55,123 Royal Bank of Canada 1.59% 03-23-2020 Canada Corporate 10,000,000 9,999 9,876 Royal Bank of Canada F/R 03-23-2020 Canada Corporate 30,000,000 30,000 30,159 Royal Bank of Canada 1.58% 09-13-2021 DPNT Canada Corporate 9,500,000 9,520 9,186 Royal Bank of Canada 2.36% 12-05-2022 Canada Corporate 6,220,000 6,219 6,130 Royal Bank of Canada 2.33% 12-05-2023 DPNT Canada Corporate 25,000,000 25,074 24,430 Russel Metals Inc. 6.00% 03-16-2026 Callable 2021 Canada Corporate 5,260,000 5,260 5,293 Shaw Communications Inc. 5.65% 10-01-2019 Canada Corporate 20,000,000 22,234 20,964 Sigma Bidco BV Term Loan B 1st Lien F/R 03-07-2025 Netherlands Bank Loans EUR 2,320,000 3,695 3,647 Sigma US Corp. Term Loan B 1st Lien F/R 03-06-2025 Netherlands Bank Loans USD 2,320,000 2,989 2,991 SmartCentres Real Estate Investment Trust F/R 12-21-2020 Canada Corporate 20,680,000 20,680 20,766 SNC-Lavalin Group Inc. 2.69% 11-24-2020 Canada Corporate 1,880,000 1,880 1,878 SNC-Lavalin Group Inc. F/R 03-02-2021 Canada Corporate 15,240,000 15,240 15,255 Sprint Spectrum Co. LLC 4.74% 03-20-2025 144A United States Corporate USD 1,160,000 1,502 1,503 Stepstone Group LP Term Loan B 1st Lien F/R 03-19-2025 United States Bank Loans USD 1,160,000 1,494 1,504 Sun Life Financial Inc. F/R 11-23-2027 Callable 2022 Canada Corporate 5,660,000 5,658 5,608 Superior Plus LP 5.13% 08-27-2025 Callable 2021 Canada Corporate 4,780,000 4,780 4,798 Syniverse Holdings Inc. Term Loan 1st Lien F/R 02-09-2023 United States Bank Loans USD 800,000 996 1,044 Talen Energy Supply LLC 10.50% 01-15-2026 Callable 2022 144A United States Corporate USD 270,000 337 300 1 The issuer of this security is the Manager of the Fund.
SCHEDULE OF INVESTMENTS (continued) No. of Units, Fair Shares, or Cost Value Country Sector Par Value (CAD$ 000) (CAD$ 000) BONDS (continued) TELUS Corp. 3.35% 04-01-2024 Callable MTN Canada Corporate 7,020,000 7,122 7,116 TerraForm Power Operating LLC 5.00% 01-31-2028 Callable 2027 144A United States Corporate USD 4,109,000 5,100 5,058 Teva Pharmaceutical Finance Netherlands III BV 3.15% 10-01-2026 Callable Israel Corporate USD 4,369,000 4,537 4,522 Titan Acquisition Ltd. Term Loan 1st Lien F/R 03-16-2025 United Kingdom Bank Loans USD 2,720,000 3,552 3,502 Titan Acquisition Ltd. 7.75% 04-15-2026 Callable 2021 144A United Kingdom Corporate USD 1,200,000 1,571 1,545 TMX Group Ltd. 2.30% 12-11-2024 Callable 2024 Canada Corporate 1,480,000 1,484 1,468 The Toronto-Dominion Bank 2.17% 04-02-2018 DPNT Canada Corporate 20,000,000 20,241 20,002 The Toronto-Dominion Bank 2.45% 04-02-2019 DPNT Canada Corporate 57,000,000 57,739 57,245 The Toronto-Dominion Bank 1.69% 04-02-2020 DPNT Canada Corporate 30,000,000 30,069 29,629 The Toronto-Dominion Bank 1.68% 06-08-2021 Canada Corporate 58,700,000 58,535 57,394 The Toronto-Dominion Bank 1.27% 07-01-2021 Canada Mortgage Backed 28,982,531 28,801 28,302 The Toronto-Dominion Bank 1.99% 03-23-2022 Canada Corporate 52,310,000 51,137 51,104 The Toronto-Dominion Bank 1.91% 07-18-2023 DPNT Canada Corporate 20,000,000 19,729 19,211 TransCanada Trust F/R 05-18-2077 Callable 2027 Canada Corporate 9,500,000 9,454 9,388 Trico Products Corp. Term Loan 1st Lien F/R 02-02-2024 United States Bank Loans USD 1,820,000 2,188 2,362 Uber Technologies Inc. Term Loan 1st Lien F/R 03-21-2025 United States Bank Loans USD 3,470,000 4,461 4,496 United States Treasury 2.38% 01-31-2023 United States Foreign Governments USD 58,910,000 72,646 75,333 United States Treasury 2.25% 11-15-2027 United States Foreign Governments USD 790,000 997 975 Valeant Pharmaceuticals International Inc. 5.63% 12-01-2021 Callable 144A United States Corporate USD 2,178,000 2,585 2,687 Valeant Pharmaceuticals International Inc. 5.50% 03-01-2023 Callable 2018 144A United States Corporate USD 3,160,000 3,588 3,570 Ventas Canada Finance Ltd. 2.55% 03-15-2023 Callable 2023 United States Corporate 7,770,000 7,561 7,599 Videotron Ltd./Videotron Ltee. 5.13% 04-15-2027 Callable 2022 144A Canada Corporate USD 9,967,000 12,750 12,601 Vistage Worldwide Inc. Term Loan 1st Lien F/R 02-01-2025 United States Bank Loans USD 1,520,000 1,898 1,973 VW Credit Canada Inc. F/R 03-30-2020 Germany Corporate 12,500,000 12,500 12,515 VW Credit Canada Inc. 3.25% 03-29-2023 Germany Corporate 5,000,000 4,994 5,034 W/S Packaging Holdings Inc. 9.00% 04-15-2023 Callable 2020 144A United States Corporate USD 760,000 982 996 Zotec Partners LLC Term Loan 1st Lien F/R 02-09-2024 United States Bank Loans USD 2,140,000 2,666 2,757 3,080,299 3,050,963 TOTAL NON-DERIVATIVE INVESTMENTS 5,394,314 5,323,935 Net Assets (see Schedule of Asset Composition): Total non-derivative investments 5,323,935 Cash and cash equivalents 65,179 Derivative assets (see schedule of derivative instruments) 858 Derivative liabilities (see schedule of derivative instruments) (1,811) Other net assets (liabilities) 56,189 5,444,350
Schedule 1 Asset Composition PORTFOLIO ALLOCATION % of net assets Bonds 56.0 Mortgages 41.8 Cash and cash equivalents 1.2 Other net assets (liabilities) 1.0 Total 100.0 BONDS SECTOR ALLOCATION Corporate 38.3 Federal Government 12.3 Other 5.4 56.0 MORTGAGES BY YEAR OF MATURITY 2018 2.6 2019 5.8 2020 10.5 2021 12.4 2022 9.5 2023 1.0 41.8 BY INTEREST RATE less than 2.5% 7.2 2.5 3.0% 27.4 3.0 3.5% 5.8 greater than 3.5% 1.4 41.8 as at March 31, 2017 PORTFOLIO ALLOCATION % of net assets Bonds 52.9 Mortgages 44.0 Cash and cash equivalents 2.7 Other net assets (liabilities) 0.4 Total 100.0 BONDS SECTOR ALLOCATION Corporate 37.4 Federal Government 12.5 Provincial Governments 1.9 Mortgage Backed 1.1 52.9 MORTGAGES BY YEAR OF MATURITY 2017 4.3 2018 4.7 2019 6.8 2020 11.3 2021 13.4 2022 3.5 44.0 BY INTEREST RATE less than 2.5% 8.5 2.5 3.0% 26.3 3.0 3.5% 7.0 greater than 3.5% 2.2 44.0
Schedule 2 Distribution of Mortgages by Interest Rate Principal value Amortized Fair Number outstanding cost value Rate of loans ($ 000) ($ 000) ($ 000) 1.001 to 1.250 2 202 198 196 1.501 to 1.750 1 619 585 576 1.751 to 2.000 1 281 277 268 2.001 to 2.250 12 4,143 4,107 4,024 2.251 to 2.500 1,635 397,302 397,887 387,210 2.501 to 2.750 3,923 824,709 829,305 810,240 2.751 to 3.000 3,534 686,064 690,488 682,188 3.001 to 3.250 1,069 184,703 186,345 184,598 3.251 to 3.500 803 127,355 128,311 127,499 3.501 to 3.750 405 56,246 56,701 56,443 3.751 to 4.000 102 14,268 14,391 14,337 4.001 to 4.250 28 4,504 4,543 4,528 4.251 to 4.500 4 673 694 684 4.501 to 4.750 1 77 79 78 4.751 to 5.000 1 100 104 103 11,521 2,301,246 2,314,015 2,272,972 The rates used for determining fair value of NHA and conventional loans were as follows: Term Residential rate 6 month (open) 6.80% 6 month (closed) 3.70% 0-12 months (open) 7.10% 0-12 months (closed) 3.10% 13-24 months 3.10% 25-36 months 3.29% 37-48 months 3.34% 49-60 months 3.44% 61-84 months 3.75% 85-120 months 4.10% Schedule 3 Distribution of Mortgages by Geographic Location Percentage Principal value Fair total fair Number outstanding value value of loans ($ 000) ($ 000) (%) British Columbia 1,534 344,954 340,538 15.0 Alberta 1,720 414,789 410,017 18.0 Saskatchewan 821 158,799 157,039 6.9 Manitoba 1,010 173,064 171,016 7.5 Ontario 3,862 800,821 789,706 34.7 Quebec 2,050 337,396 334,036 14.7 New Brunswick 179 22,568 22,272 1.0 Nova Scotia 165 20,782 20,554 0.9 Newfoundland and Labrador 121 20,196 19,988 0.9 Prince Edward Island 43 4,309 4,268 0.2 Yukon/Territories 16 3,568 3,538 0.2 11,521 2,301,246 2,272,972 100.0 Schedule 4 Distribution of Mortgages by Type of Construction Percentage Principal value Amortized Fair total fair Number outstanding cost value value of loans ($ 000) ($ 000) ($ 000) (%) Single Family Dwelling 9,571 1,954,638 1,965,713 1,930,632 84.9 Condominiums 1,658 294,588 296,031 290,688 12.8 Multi-unit Dwelling up to 8 units 292 52,020 52,271 51,652 2.3 11,521 2,301,246 2,314,015 2,272,972 100.0 Schedule 5 Distribution of Mortgages by Year of Maturity Percentage Principal value Fair total fair Number outstanding value value of loans ($ 000) ($ 000) (%) 2018 967 139,970 139,808 6.2 2019 1,860 314,970 314,882 13.9 2020 2,873 572,763 567,845 25.0 2021 3,131 687,251 673,866 29.6 2022 2,425 528,399 519,071 22.8 2023 265 57,893 57,500 2.5 11,521 2,301,246 2,272,972 100.0 Schedule 6 Distribution of Mortgages by Type of Insurance Percentage Principal value Fair total fair Number outstanding value value of loans ($ 000) ($ 000) (%) Insured by National Housing Act (Canada) 2,491 349,126 345,905 15.2 Insured by a Private Insurer 1,600 357,263 353,243 15.6 Uninsured - Conventional 7,430 1,594,857 1,573,824 69.2 11,521 2,301,246 2,272,972 100.0
Schedule of Derivative Instruments Schedule of Forward Currency Contracts Currency to Contract Currency to Current Unrealized Unrealized Counterparty Settlement be received costs be delivered fair value gains losses credit rating date (000) (CAD$ 000) (000) (CAD$ 000) (CAD$ 000) (CAD$ 000) AA 04-13-2018 15,030 CAD 15,030 11,500 USD 14,812 218 - AA 04-13-2018 9,997 CAD 9,997 8,000 USD 10,304 - (307) AA 04-20-2018 9,993 CAD 9,993 8,000 USD 10,302 - (309) AA 04-20-2018 22,756 CAD 22,756 17,885 USD 23,033 - (277) A 04-27-2018 9,993 CAD 9,993 8,000 USD 10,302 - (309) AA 05-11-2018 15,019 CAD 15,019 11,500 USD 14,805 214 - AA 05-11-2018 22,745 CAD 22,745 17,885 USD 23,025 - (280) AA 05-18-2018 15,010 CAD 15,010 11,500 USD 14,803 207 - AA 05-18-2018 24,479 CAD 24,479 19,050 USD 24,521 - (42) AA 06-15-2018 24,465 CAD 24,465 19,050 USD 24,508 - (43) AA 06-22-2018 24,478 CAD 24,478 19,050 USD 24,504 - (26) AA 06-29-2018 15,001 CAD 15,001 11,500 USD 14,790 211 - A 07-13-2018 24,414 CAD 24,414 19,050 USD 24,495 - (81) AA 07-13-2018 24,452 CAD 24,452 19,050 USD 24,495 - (43) AA 07-20-2018 24,464 CAD 24,464 19,050 USD 24,491 - (27) AA 07-27-2018 24,421 CAD 24,421 19,050 USD 24,488 - (67) AA 04-20-2018 25,885 USD 33,331 33,331 CAD 33,335 4 - AA 05-11-2018 14,885 USD 19,159 19,159 CAD 19,163 4-858 (1,811) TOTAL DERIVATIVE ASSETS 858 TOTAL DERIVATIVE LIABILITIES (1,811)
NOTES TO THE 1. ORGANIZATION OF THE FUND, FISCAL PERIODS AND GENERAL INFORMATION (a) Organization of the Fund The Fund is organized as an open-ended mutual fund trust established under the laws of Manitoba and governed by a Declaration of Trust. The address of the Fund s registered office is 447 Portage Avenue, Winnipeg, Manitoba, Canada. The Fund is authorized to issue an unlimited number of securities of multiple series. If issued, Series P and S securities are only available for purchase by other Investors Group Funds or other qualified investors. All series generally share in the operations of the Fund on a pro rata basis except for items that can be specifically attributed to one or more series. Distributions for each series may vary, partly due to the differences in expenses between the series. (b) Financial periods The Statements of Financial Position are presented and 2017. The Statements of Comprehensive Income, Statements of Changes in Financial Position and Statements of Cash Flows are for the 12 month periods ended March 31, 2018 and 2017. The Schedule of Investments is presented. Where a series of the Fund was established during either period, the information for the series is provided from inception date. Where a series of the Fund was terminated during either period, the information for the series is provided up to close of business on the termination date. (c) Fund and series information Date operations Management Service Administration Trustee Series commenced fee (%) fee (%) fee (%) fee (%) Series A July 13, 2012 1.55-0.08 0.05 Series B July 13, 2012 1.55-0.08 0.05 Series C n/a 1.55-0.13 0.05 Series Jdsc July 13, 2012 1.30-0.08 0.05 Series Jnl July 13, 2012 1.30-0.08 0.05 Series P July 13, 2009 - - - - Series S November 16, 2009 1.30-0.10 0.05 Series U July 12, 2013 0.20-0.08 0.05 The fee rates in the table above are rounded to two decimals. Date operations commenced are shown if within 10 years Until December 31, 2016, the annual management fee rate for Series S was 1.55%. Until December 31, 2016, the annual administration fee rate for Series B, Jnl and U was 0.13%. The Fund aims to provide a consistent level of current income by investing primarily in short-term debt securities and mortgages on improved real estate in Canada. To achieve the Fund s investment objective, it will diversify its portfolio by investing primarily in fixed term, liquid debt securities, including both corporate and government-issued (or guaranteed) debt securities, as well as Canada Mortgage Bonds, mortgagebacked securities and mortgages. It is expected that over the long term the mortgage component of the Fund s portfolio will generally not be more than about 50% of its assets. The Fund may invest up to 10% of its assets in residential mortgages with terms exceeding five years, but generally the Fund intends to invest in mortgages with terms of less than five years. The Fund may also invest up to 10% of its assets in equity securities. Generally speaking, it is the Fund s intention that its investment in foreign securities will range from 0% to 30% of its assets, but the Fund may invest up to 50% of its assets in foreign securities from time to time. The deferred sales charge (DSC) purchase option of the Fund is closed to all new investments. For Series A and Jdsc, the DSC purchase option is still available for reinvested distributions and investments through switches from series of the Fund and other Investors Group Funds held under the DSC option. For Series C, the DSC purchase option is still available for reinvested distributions and investments through switches from Series C or Tc of other Investors Group Funds held under the DSC option. Effective October 23, 2017, the Manager engaged Mackenzie Financial Corporation as a sub-advisor to assist in investment management and trade execution for the Fund. This sub-advisor is a subsidiary of IGM Financial Inc. and, therefore, is considered an affiliate of the Trustee, the Manager and the Distributors. Effective on or about June 30, 2018, the annual administration fee rate for Series C will be decreased by 0.05%. (d) General information I.G. Investment Management, Ltd. is the Manager and Trustee of the Fund. The Fund is distributed by Investors Group Financial Services Inc. and Investors Group Securities Inc. (collectively, the Distributors). These companies are, indirectly, wholly owned subsidiaries of IGM Financial Inc. IGM Financial Inc. is a subsidiary of Power Financial Corp. and Power Corporation of Canada. Companies related to Power Financial Corporation are therefore considered affiliates of the Trustee, the Manager and the Distributors. The Fund may invest in certain securities within the Power Group of Companies, subject to certain governance criteria, and these holdings, as at the end of the period, have been identified on the Schedule of Investments for the Fund. Any transactions during the periods were executed through market intermediaries and under prevailing market terms and conditions. 2. BASIS OF PREPARATION AND PRESENTATION These annual financial statements (financial statements) have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). A summary of the Fund s significant accounting policies under IFRS is presented in Note 3. These financial statements are presented in Canadian dollars, which is the Fund s functional currency, and rounded to the nearest thousand unless otherwise indicated. These financial statements are prepared on a going concern basis using the historical cost basis, except for financial assets and liabilities that have been measured at fair value. These financial statements were authorized for issue by the Manager on June 6, 2018. Standards issued but not yet effective for the current accounting year are described in Note 3. 3. SIGNIFICANT ACCOUNTING POLICIES (a) Financial instruments Investments include financial assets and liabilities such as debt and equity securities, open-ended investment funds and derivatives. The Fund classifies and measures financial instruments in accordance with IFRS 9 Financial Instruments (IFRS 9). Upon initial recognition, financial instruments are classified as fair value through profit or loss (FVTPL). All financial assets and liabilities are recognized in the Statement of Financial Position when the Fund becomes a party to the contractual requirements of the instrument. Financial instruments are derecognized when the right to receive cash flows from the instrument has expired or the Fund has transferred substantially all risks and rewards of ownership. As such, investment purchase and sale transactions are recorded as of the trade date. Financial instruments are subsequently measured at FVTPL with changes in fair value recognized in the Statement of Comprehensive Income. The cost of investments, other than mortgages, is based on the weighted average cost of investments and excludes commissions and other portfolio transaction costs, which are separately reported in the Statement of Comprehensive Income. The cost of mortgages is amortized cost. Amortized cost is the principal cost of mortgages purchased net of amortized premium or discount. Realized gains and losses on disposition, including foreign exchange gains or losses on such investments, are determined based on the cost of investments. Gains and losses arising from changes in the fair value of the investments are included in the Statement of Comprehensive Income for the period in which they arise. The Fund accounts for its holdings in unlisted open-ended investment funds at FVTPL. The Fund has concluded that unlisted open-ended investment funds in which it invests do not meet the definition of structured entities. The Fund s investment in unlisted open-ended funds, if any, is presented in the Schedule of Investments at fair value which represents the Fund s maximum exposure on these investments.
NOTES TO THE 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Fair value measurement Fair value is defined as 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. The Fund s valuation policies are as follows: (i) Mortgages All mortgages are recorded at FVTPL, which is the principal amount required to produce a yield to maturity equal to or not less than one-quarter of one percent below the interest rate at which major lending institutions are making commitments on the date of valuation. All mortgages are subject to pre-payment with appropriate penalties being remitted. The Manager retains credit risk on all mortgages sold to the Fund and therefore mortgage valuations do not include expected credit losses. (ii) Fixed-income securities other than mortgages Investments in securities listed on a public securities exchange or traded on an over-the-counter market are valued at the last traded market price or close price recorded by the security exchange on which the security is principally traded, where the close price falls within the bid-ask spread of the security. In situations where the last traded market price is not within the bid-ask spread, the Manager selects the point within the bid-ask spread that is most representative of fair value. Unlisted or non-exchange traded securities, or securities for which a last traded market price is unavailable or securities for which market quotations are, in the Manager s opinion, inaccurate, unreliable or not reflective of all available material information, are valued at their estimated fair value, determined by using appropriate and accepted industry valuation techniques including valuation models. The estimated fair value of a security determined using valuation models requires the use of inputs and assumptions based on observable market data including volatility and other applicable rates or prices. In limited circumstances, the estimated fair value of a security may be determined using valuation techniques that are not supported by observable market data. Fair value of fixed-income securities includes consideration of the creditworthiness of the issuer. (c) Cash and cash equivalents Cash and cash equivalents includes cash on deposit with banks and short term investments that are readily convertible to cash, are subject to an insignificant risk of changes in value, and are used by the Fund in the management of short-term commitments. Cash and cash equivalents are reported at fair value which closely approximates their amortized cost due to their nature of being highly liquid and having short terms to maturity. Bank overdraft positions are presented as bank indebtedness in current liabilities in the Statement of Financial Position. (d) Currency All amounts are expressed in Canadian dollars. Foreign currency amounts have been expressed in Canadian dollars on the following bases: (i) Fair value of investments and other assets and liabilities at the rate of exchange at the end of the periods. (ii) Income, expenses, purchases and sales of investments at the rate of exchange on the dates of such transactions. (e) Income recognition (f) Interest income from interest bearing investments is recognized using the effective interest method. Securities lending and repurchase transactions The Fund may be permitted to enter into securities lending, repurchase and reverse repurchase transactions as set out in the Fund s Simplified Prospectus. These transactions involve the temporary exchange of securities for collateral with a commitment to deliver the same securities on a future date. Income is earned from these transactions in the form of fees paid by the counterparty and, in certain circumstances, interest paid on cash or securities held as collateral. Income earned from these transactions is recognized on the accrual basis and included in the Statement of Comprehensive Income. Securities lending transactions are administered by The Bank of New York Mellon (the Securities Lending Agent). All the counterparties have a sufficient, approved credit rating based on ratings provided by external credit rating agencies, and the value of cash or securities held as collateral must be at least 102% of the fair value of the securities loaned, sold or purchased. Collateral received is comprised of debt obligations of the Government of Canada and other countries, Canadian provincial and municipal governments, and financial institutions. Value of Value of securities collateral loaned received as at ($ 000) ($ 000) March 31, 2018 - - March 31, 2017 126,238 132,960 March 31, 2018 March 31, 2017 for the period ended ($ 000) (%) ($ 000) (%) Gross securities lending income 63 100.0 61 100.0 Tax withheld - - - - 63 100.0 61 100.0 Payments to securities lending agents (16) (25.0) (15) (25.0) Securities lending income 47 75.0 46 75.0 (g) Redeemable securities The Fund s redeemable securities entitle securityholders the right to redeem their interest in the Fund for cash equal to their proportionate share of the net asset value of the Fund, amongst other contractual rights. These redeemable securities involve multiple contractual obligations on the part of the Fund and therefore meet the criteria for classification as financial liabilities. The Fund s obligation for net assets attributable to securityholders is measured at FVTPL, with fair value being the redemption amount as of the reporting date. (h) Commissions and other portfolio transaction costs (i) Commissions and other portfolio transaction costs are costs incurred to acquire, dispose or otherwise transact financial assets or liabilities. They include fees and commissions paid to agents, exchanges, brokers and dealers, and other intermediaries. Increase (decrease) in net assets attributable to securityholders from operations Increase (decrease) in net assets attributable to securityholders from operations per security for a series in the Statement of Comprehensive Income represents the weighted average increase (decrease) in net assets attributable to securityholders from operations for the series, per security outstanding during the period.
NOTES TO THE 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (j) Offsetting Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. In the normal course of business, the Fund enters 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. Amounts subject to master netting arrangements or other similar agreements, and the net impact to the Statements of Financial Position if all such rights were exercised, are provided below: ($ 000) Gross amount presented in the Statement of Financial Position Set-off amounts Net March 31, 2018 Financial assets 858 (509) 349 Financial liabilities (1,811) 509 (1,302) March 31, 2017 Financial assets - - - Financial liabilities - - - (k) Future accounting changes The Fund has determined there are no material implications to the Fund s financial statements arising from IFRS issued but not yet effective. 4. USE OF ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of financial statements in accordance with IFRS requires judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the reporting date and the reported amounts of income and expenses during the period. However, existing circumstances and assumptions may change due to market changes or circumstances arising beyond the control of the Fund. Such changes are reflected in the assumptions when they occur. The following discusses the most significant accounting judgments and estimates made in preparing the financial statements: (a) Functional currency The Fund s functional and presentation currency is the Canadian dollar, which is the currency considered to most faithfully represent the economic effects of the Fund s underlying transactions, events and conditions taking into consideration the manner in which securities are issued and redeemed and how returns and performance by the Fund are measured. (b) Classification of financial instruments In classifying and measuring financial instruments held by the Fund, the Manager is required to make significant judgments in determining the most appropriate classification in accordance with IFRS 9. The Manager has assessed the Fund s business model, the manner in which all financial assets and financial liabilities are managed and performance evaluated as a group on a fair value basis, and concluded that FVTPL in accordance with IFRS 9 provides the most appropriate measurement and presentation of the Fund s financial assets and financial liabilities. (c) Estimations of fair value The Fund may, from time to time, hold investments that are not quoted in active markets, such as unlisted securities or private securities. To estimate fair value, the Manager uses valuation techniques that make use of observable data, to the extent practicable. The Fund categorizes the fair value of its assets and liabilities into three categories, which are differentiated based on the observable nature of the inputs and extent of estimation required. Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly. Examples of Level 2 valuations include quoted prices for similar securities, quoted prices on inactive markets and from recognized investment dealers, and the application of factors derived from observable data to non-north American quoted prices in order to estimate the impact of differences in market closing times. The estimated fair values for these securities may be different from the values that would have been used had a ready market for the investment existed. Level 3 Inputs that are not based on observable market data. Various valuation techniques are utilized, depending on each situation. These methods and procedures may include, but are not limited to, performing comparisons with prices of comparable or similar securities, obtaining relevant information from issuers and/or other analytical data relating to the investment, and recent arm s length transactions. Key inputs and assumptions used are usually security specific and may include estimated discount rates, credit risk, volatility, correlations, and future cash flows. Changes in key inputs and assumptions could affect the reported fair value of these financial instruments held by the Fund. The estimated fair values for these securities may be significantly different from the values that would have been used had a ready market for the investment existed. See Note 11 for the fair value classifications of the Fund. (d) Structured entities In determining whether unlisted open-ended investment funds in which the Fund invests, but that it does not consolidate, meet the definition of a structured entity, the Manager is required to make significant judgments about whether the Underlying Funds have the typical characteristics of a structured entity. The Manager has assessed the characteristics of the Underlying Funds and has concluded that they do not meet the definition of a structured entity because the Fund does not have contracts or financing arrangements with the Underlying Funds and does not have an ability to influence the activities of the Underlying Funds or the return it receives from its investment. 5. MANAGEMENT FEES AND OTHER EXPENSES (a) Each series of the Fund will incur expenses that can be specifically attributed to that series. Common expenses of the Fund are allocated across the series of the Fund on a pro rata basis. (b) The Manager provides or arranges for the provision of investment and advisory services for a management fee. See Note 1 for the annual rates paid (as a percent of average assets) by the Fund. (c) The Fund pays the Manager an administration fee and in return the Manager will bear the operating expenses of the Fund, other than certain specified costs. See Note 1 for the annual rates paid (as a percent of average assets) by the Fund. Other Fund costs include taxes (including but not limited to GST/HST and income tax), transaction costs related to the purchase and sale of investments and derivatives, interest and borrowing costs, and Independent Review Committee (IRC) costs. (d) The Fund may pay the Distributors a service fee to compensate them for providing or arranging for the provision of services to the Fund. A portion of the service fee related to Series C is rebated by the Distributors to the Fund on a quarterly basis as outlined in the Fund s Prospectus. The rebate is distributed as a capital distribution to eligible securityholders and is reinvested in additional Series C securities of the Fund or another distributing Fund held by the securityholder. See Note 1 for the annual rates paid (as a percent of average assets) by the Fund. (e) The Trustee is responsible for overall direction and management of the affairs of the Fund. See Note 1 for the annual rates paid (as a percent of average assets) to the Trustee by the Fund. (f) The Fund pays the Manager a mortgage administration and servicing fee of up to 0.15% annually, applicable to the value of mortgages held by the Fund that are originated and serviced by the Manager. (g) An advisory fee is charged by the Distributors for investment advice and administrative services related to Series U, if issued. The advisory fee is payable monthly directly by investors in Series U, and not by the Fund. (h) GST/HST paid by the Fund on its expenses is not recoverable. In these financial statements, reference to GST/HST includes QST (Québec sales tax), as applicable. (i) (j) Other expenses are comprised of interest and borrowing charges and other miscellaneous expenses. The Manager may, at its discretion, pay certain expenses of the Fund so the Fund s performance remains competitive; however, there is no assurance that this will occur in the future. Any expenses absorbed by the Manager during the periods have been identified in the Statements of Comprehensive Income.