Investors Canadian Corporate Bond Fund Interim Financial Report FOR THE SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2017 The accompanying interim financial statements have not been reviewed by the external auditors of the Fund. The external auditors will be auditing the annual financial statements of the Fund as at March 31, 2018, in accordance with Canadian generally accepted auditing standards. Copyright Investors Group Inc. 2017 Trademarks, including Investors Group, are owned by IGM Financial Inc. and licensed to its subsidiary corporations.
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 STATEMENTS OF FINANCIAL POSITION at September 30, 2017 (unaudited) with comparative figures at March 31, 2017 (in $ 000 except per security amounts) Assets Current assets: Sep. 30 Mar. 31 2017 2017 Non-derivative investments 1,590,558 1,459,028 Cash and cash equivalents 6,266 17,019 Accrued interest receivable 11,357 9,415 Dividends receivable - - Accounts receivable for investments sold 1,298 9,704 Accounts receivable for securities issued - - Accounts receivable from the Manager 3 1 Margin on derivative contracts - - Derivative assets - - Other assets - - Non-current assets: 1,609,482 1,495,167 Taxes recoverable - - Other assets - - - - Total assets 1,609,482 1,495,167 Liabilities Current liabilities: Bank indebtedness - - Accounts payable for investments purchased 5,068 11,902 Accounts payable for securities redeemed - - Distributions payable - - Accrued expenses and miscellaneous payables 5 - Dividends payable on investments sold short - - Derivative liabilities - - Taxes payable - - Other liabilities - - Total liabilities 5,073 11,902 Net assets attributable to securityholders 1,604,409 1,483,265 STATEMENTS OF COMPREHENSIVE INCOME for the six-month periods ended September 30 (unaudited) (in $ 000 except per security amounts) Income: Gains (losses) on derivative and non-derivative investments: a2017 b2016 Dividends 92 83 Interest income 22,395 19,062 Net realized gain (loss) 534 9,404 Net unrealized gain (loss) (32,543) 21,254 Income (loss) from derivatives - - Income (loss) from short selling - - Other - - Net gain (loss) on derivative and non-derivative investments (9,522) 49,803 Securities lending income - - Other - - Total income (9,522) 49,803 Expenses: Management fees 891 928 Management fee rebates (4) (4) Service fees - - Service fee rebates - - Mortgage administration and service fees 25 48 Administration fees 37 44 Trustee fees 34 34 Commissions and other portfolio transaction costs 3 - Independent Review Committee costs 3 4 Other 3 8 Expenses before amounts absorbed by Manager 992 1,062 Expenses absorbed by Manager - - Net expenses 992 1,062 Increase (decrease) in net assets attributable to securityholders from operations before tax (10,514) 48,741 Foreign withholding taxes paid (recovered) - - Foreign income taxes paid (recovered) - - Income tax paid (recovered) - - Increase (decrease) in net assets attributable to securityholders from operations (10,514) 48,741 Net assets attributable to securityholders per security per series Sep. 30 Mar. 31 Sep. 30 Mar. 31 2017 2017 2017 2017 Series A 9.87 10.07 35,858 40,430 Series B 9.87 10.07 15,603 14,915 Series C 10.25 10.46 9,975 11,258 Series Jdsc 9.88 10.08 31,014 34,548 Series Jnl 9.90 10.10 9,788 9,155 Series P 10.05 10.26 1,484,867 1,363,084 Series U 10.04 10.24 17,304 9,875 1,604,409 1,483,265 Increase (decrease) in net assets attributable to securityholders from operations per security per series a2017 b2016 a2017 b2016 Series A (0.14) 0.33 (531) 1,320 Series B (0.14) 0.32 (233) 346 Series C (0.16) 0.32 (152) 370 Series Jdsc (0.13) 0.34 (407) 1,235 Series Jnl (0.13) 0.34 (154) 312 Series P (0.06) 0.42 (8,867) 44,943 Series U (0.08) 0.40 (170) 215 (10,514) 48,741 See accompanying notes.
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 STATEMENTS OF CHANGES IN FINANCIAL POSITION for the six-month periods ended September 30 (unaudited) (in $ 000 except when stated) TOTAL SERIES A SERIES B SERIES C a2017 b2016 a2017 b2016 a2017 b2016 a2017 b2016 Net assets attributable to securityholders, beginning of period 1,483,265 1,178,624 40,430 41,199 14,915 11,617 11,258 12,252 Increase (decrease) in net assets attributable to securityholders resulting from: Operations (10,514) 48,741 (531) 1,320 (233) 346 (152) 370 Distributions: Income (21,276) (18,170) (196) (256) (79) (64) (52) (69) Capital gains - - - - - - - - Return of capital - - - - - - - - Management fee rebates (4) (4) - - - - - - Service fee rebates - - - - - - - - Total distributions (21,280) (18,174) (196) (256) (79) (64) (52) (69) Security transactions: Proceeds from sale of securities 275,310 245,519 2,966 5,684 5,162 1,922 780 881 Proceeds from securities issued on merger - - - - - - - - Reinvested from distributions 21,273 18,167 196 256 78 64 52 69 Payment on redemption of securities (143,645) (160,747) (7,007) (4,338) (4,240) (2,436) (1,911) (1,217) Total security transactions 152,938 102,939 (3,845) 1,602 1,000 (450) (1,079) (267) Increase (decrease) in assets attributable to securityholders 121,144 133,506 (4,572) 2,666 688 (168) (1,283) 34 Net assets attributable to securityholders, end of period 1,604,409 1,312,130 35,858 43,865 15,603 11,449 9,975 12,286 Increase (decrease) in securities outstanding (in thousands): Securities outstanding, beginning of period 4,014 4,101 1,481 1,157 1,077 1,175 Add (deduct): Securities sold 293 559 512 189 74 83 Securities issued on merger - - - - - - Reinvested from distributions 19 25 8 6 5 7 Securities redeemed (695) (425) (420) (240) (183) (116) Securities outstanding, end of period 3,631 4,260 1,581 1,112 973 1,149 SERIES Jdsc SERIES Jnl SERIES P SERIES U a2017 b2016 a2017 b2016 a2017 b2016 a2017 b2016 Net assets attributable to securityholders, beginning of period 34,548 37,247 9,155 9,699 1,363,084 1,060,943 9,875 5,667 Increase (decrease) in net assets attributable to securityholders resulting from: Operations (407) 1,235 (154) 312 (8,867) 44,943 (170) 215 Distributions: Income (216) (283) (65) (68) (20,493) (17,356) (175) (74) Capital gains - - - - - - - - Return of capital - - - - - - - - Management fee rebates (3) (3) (1) (1) - - - - Service fee rebates - - - - - - - - Total distributions (219) (286) (66) (69) (20,493) (17,356) (175) (74) Security transactions: Proceeds from sale of securities 3,950 4,280 4,698 2,420 247,977 229,739 9,777 593 Proceeds from securities issued on merger - - - - - - - - Reinvested from distributions 219 285 66 68 20,493 17,356 169 69 Payment on redemption of securities (7,077) (4,268) (3,911) (2,478) (117,327) (144,971) (2,172) (1,039) Total security transactions (2,908) 297 853 10 151,143 102,124 7,774 (377) Increase (decrease) in assets attributable to securityholders (3,534) 1,246 633 253 121,783 129,711 7,429 (236) Net assets attributable to securityholders, end of period 31,014 38,493 9,788 9,952 1,484,867 1,190,654 17,304 5,431 Increase (decrease) in securities outstanding (in thousands): Securities outstanding, beginning of period 3,426 3,704 906 963 132,909 103,733 964 555 Add (deduct): Securities sold 390 420 463 237 24,182 22,136 955 57 Securities issued on merger - - - - - - - - Reinvested from distributions 22 28 7 7 2,002 1,673 17 7 Securities redeemed (701) (418) (387) (243) (11,407) (13,977) (213) (100) Securities outstanding, end of period 3,137 3,734 989 964 147,686 113,565 1,723 519 See accompanying notes.
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 STATEMENTS OF CASH FLOWS for the six-month periods ended September 30 (unaudited) (in $ 000 except when stated) Cash flows from operating activities a2017 b2016 Increase (decrease) in net assets attributable to securityholders from operations (10,514) 48,741 Less non-cash impact of: Net realized (gain) loss (534) (9,404) Change in net unrealized (gain) loss 32,543 (21,254) Distributions received from Underlying Funds - (190) Adjustments for: Proceeds from sale and maturity of investments 375,236 427,318 Purchases of investments (537,203) (516,233) (Increase) decrease in accounts receivable and other assets (1,944) (556) Increase (decrease) in accounts payable and other liabilities 5 1 Net cash provided by (used in) operating activities (142,411) (71,577) Cash flows from financing activities: Proceeds from securities issued 265,982 243,056 Proceeds from securities issued on merger - - Payments on redemption of securities (134,317) (158,264) Distributions paid net of reinvestments (7) (7) Net cash provided by (used in) financing activities 131,658 84,785 Increase (decrease) in cash and cash equivalents (10,753) 13,208 Cash and cash equivalents at beginning of period 17,019 8,473 Effect of exchange rate fluctuations on cash and cash equivalents - - Cash and cash equivalents, end of period 6,266 21,681 Cash 466 583 Cash equivalents 5,800 21,098 Bank indebtedness - - Supplementary disclosures on cash flow from operating activities: 6,266 21,681 Dividends received net of withholding taxes 92 83 Interest received net of withholding taxes 20,453 18,506 Interest paid - - See accompanying notes.
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 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 23,273,109 23,420 23,316 BONDS 407 International Inc. 4.99% 06-16-2020 Callable Canada Corporate 2,500,000 2,824 2,690 407 International Inc. 2.43% 05-04-2027 Callable MTN Canada Corporate 14,475,000 14,287 13,904 407 International Inc. 3.43% 06-01-2033 MTN Canada Corporate 2,500,000 2,498 2,494 407 International Inc. 4.19% 04-25-2042 Callable Canada Corporate 5,000,000 5,562 5,304 407 International Inc. 3.65% 09-08-2044 Callable MTN Canada Corporate 5,500,000 5,492 5,357 407 International Inc. 3.30% 03-27-2045 Callable 2044 MTN Canada Corporate 9,500,000 9,248 8,689 407 International Inc. 3.60% 05-21-2047 Callable Canada Corporate 7,500,000 7,492 7,210 Aeroports de Montreal 3.92% 09-26-2042 Canada Corporate 2,000,000 2,054 2,169 AIMCo Realty Investors LP 2.27% 06-26-2024 Callable 2024 Canada Corporate 4,000,000 4,000 3,886 Alectra Inc. 2.49% 05-17-2027 Callable 2027 Canada Corporate 5,000,000 4,794 4,797 Algonquin Power & Utilities Corp. 5.50% 07-25-2018 Callable Canada Corporate 4,000,000 3,993 4,113 Alimentation Couche-Tard Inc. 3.06% 07-26-2024 Callable 2024 Canada Corporate 4,000,000 4,015 3,964 Alimentation Couche-Tard Inc. 3.60% 06-02-2025 Callable 2025 Canada Corporate 8,000,000 8,098 8,114 Allied Properties REIT 3.75% 05-13-2020 Series A Canada Corporate 1,400,000 1,400 1,429 Allied Properties REIT 3.93% 11-14-2022 Series B Canada Corporate 1,250,000 1,250 1,269 Allied Properties REIT 3.64% 04-21-2025 Callable 2025 Canada Corporate 6,600,000 6,600 6,363 AltaGas Ltd. 3.72% 09-28-2021 Callable Canada Corporate 3,000,000 3,202 3,103 AltaLink LP 3.67% 11-06-2023 MTN Canada Corporate 5,800,000 5,800 6,166 AltaLink LP 3.40% 06-06-2024 Callable 2024 Canada Corporate 17,600,000 18,842 18,372 AltaLink LP 4.46% 11-08-2041 Callable MTN Canada Corporate 4,000,000 4,000 4,428 AltaLink LP 3.99% 06-30-2042 Callable MTN Canada Corporate 3,000,000 3,281 3,096 AltaLink LP 4.05% 11-21-2044 Callable 2044 Canada Corporate 5,000,000 5,000 5,230 Anheuser-Busch InBev Finance Inc. 2.60% 05-15-2024 Callable 2024 Belgium Corporate 5,000,000 4,999 4,890 Bank of America Corp. F/R 03-15-2023 Callable 2022 United States Corporate 4,000,000 4,000 3,963 Bank of Montreal 3.21% 09-13-2018 DPNT Canada Corporate 10,000,000 10,406 10,134 Bank of Montreal 2.84% 06-04-2020 DPNT Canada Corporate 4,500,000 4,503 4,581 Bank of Montreal 2.10% 10-06-2020 DPNT Canada Corporate 15,800,000 15,997 15,754 Bank of Montreal 1.88% 03-31-2021 DPNT Canada Corporate 11,000,000 11,040 10,852 Bank of Montreal 3.40% 04-23-2021 DPNT Canada Corporate 7,900,000 8,388 8,196 Bank of Montreal 1.61% 10-28-2021 DPNT Canada Corporate 28,000,000 27,591 27,183 Bank of Montreal 2.27% 07-11-2022 DPNT Canada Corporate 10,000,000 9,999 9,910 Bank of Montreal 2.70% 09-11-2024 DPNT Canada Corporate 15,000,000 14,998 14,935 Bank of Montreal 3.34% 12-08-2025 Callable 2020 Canada Corporate 5,000,000 5,009 5,091 The Bank of Nova Scotia 2.27% 01-13-2020 DPNT Canada Corporate 20,600,000 20,713 20,683 The Bank of Nova Scotia 2.13% 06-15-2020 DPNT Canada Corporate 15,000,000 15,062 14,989 The Bank of Nova Scotia 2.09% 09-09-2020 DPNT Canada Corporate 15,000,000 15,254 14,948 The Bank of Nova Scotia 3.27% 01-11-2021 DPNT Canada Corporate 8,200,000 8,514 8,458 The Bank of Nova Scotia 1.90% 12-02-2021 DPNT Canada Corporate 10,000,000 10,060 9,806 The Bank of Nova Scotia 1.83% 04-27-2022 Canada Corporate 25,000,000 24,470 24,313 bcimc Realty Corp. 2.96% 03-07-2019 Canada Corporate 3,400,000 3,399 3,449 bcimc Realty Corp. 2.15% 08-11-2022 Callable 2022 Canada Corporate 6,000,000 5,952 5,898 Bell Canada 3.54% 06-12-2020 Canada Corporate 11,300,000 11,811 11,659 Bell Canada 3.15% 09-29-2021 Callable 2021 Canada Corporate 4,800,000 4,781 4,911 Bell Canada 2.00% 10-01-2021 Canada Corporate 6,000,000 5,975 5,880 Bell Canada 3.00% 10-03-2022 Callable Canada Corporate 12,500,000 12,649 12,670 Bell Canada 3.35% 03-22-2023 Canada Corporate 6,000,000 6,074 6,145 Bell Canada 4.70% 09-11-2023 MTN Canada Corporate 5,000,000 4,995 5,461 Bell Canada 2.70% 02-27-2024 Callable Canada Corporate 11,000,000 11,014 10,801 Bell Canada 3.55% 03-02-2026 Callable MTN Canada Corporate 13,700,000 13,829 13,890 Bell Canada 7.00% 09-24-2027 Callable Canada Corporate 2,300,000 2,951 2,929 Bell Canada 3.60% 09-29-2027 Callable MTN Canada Corporate 5,700,000 5,683 5,718 Bell Canada 4.35% 12-18-2045 Callable MTN Canada Corporate 5,300,000 5,568 5,136 Brookfield Asset Management Inc. 4.54% 03-31-2023 Canada Corporate 7,000,000 7,406 7,490 Brookfield Asset Management Inc. 4.82% 01-28-2026 Callable 2025 Canada Corporate 1,000,000 1,059 1,080 Brookfield Asset Management Inc. 3.80% 03-16-2027 Callable 2026 Canada Corporate 3,000,000 2,999 2,999 Brookfield Infrastructure Finance ULC 3.54% 10-30-2020 Reg S Canada Corporate 3,000,000 3,000 3,073 Brookfield Infrastructure Finance ULC 3.32% 02-22-2024 Callable 2023 Canada Corporate 10,000,000 10,063 9,893 Brookfield Renewable Energy Partners ULC 3.75% 06-02-2025 Callable 2025 Canada Corporate 2,500,000 2,500 2,532 Brookfield Renewable Energy Partners ULC 3.63% 01-15-2027 Callable 2026 Canada Corporate 4,000,000 3,998 3,938 Bruce Power LP 2.84% 06-23-2021 Canada Corporate 1,500,000 1,500 1,513 Bruce Power LP 3.00% 06-21-2024 Callable 2024 Canada Corporate 2,000,000 2,000 1,977 Bruce Power LP 3.97% 06-23-2026 Canada Corporate 1,500,000 1,500 1,554 Bruce Power LP 4.01% 06-21-2029 Callable 2029 Canada Corporate 3,950,000 3,950 4,012 Canada Housing Trust No. 1 1.25% 06-15-2021 Canada Federal Government 19,300,000 19,127 18,821 Canada Housing Trust No. 1 1.15% 12-15-2021 Canada Federal Government 5,000,000 4,917 4,827 Canadian Imperial Bank of Commerce 1.70% 10-09-2018 DPNT Canada Corporate 16,500,000 16,602 16,486 Canadian Imperial Bank of Commerce 1.85% 07-14-2020 Canada Corporate 14,000,000 14,003 13,882 Canadian Imperial Bank of Commerce 1.64% 07-12-2021 DPNT Canada Corporate 14,000,000 14,011 13,662 Canadian Imperial Bank of Commerce 2.04% 03-21-2022 DPNT Canada Corporate 14,000,000 13,728 13,770 Canadian Imperial Bank of Commerce 2.30% 07-11-2022 DPNT Canada Corporate 7,000,000 7,000 6,947 Canadian National Railway Co. 2.75% 02-18-2021 Callable 2021 Canada Corporate 2,000,000 2,089 2,036
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 SCHEDULE OF INVESTMENTS (continued) No. of Units, Fair Shares, or Cost Value Country Sector Par Value (CAD$ 000) (CAD$ 000) BONDS (continued) Canadian Natural Resources Ltd. 3.05% 06-19-2019 Canada Corporate 3,000,000 2,998 3,033 Canadian Natural Resources Ltd. 2.89% 08-14-2020 Callable MTN Canada Corporate 3,000,000 3,000 3,022 Canadian Natural Resources Ltd. 3.31% 02-11-2022 Canada Corporate 5,000,000 4,999 5,071 Canadian Real Estate Investment Trust 2.95% 01-18-2023 Callable 2022 Canada Corporate 2,400,000 2,400 2,347 Canadian Western Bank 2.38% 01-23-2020 DPNT Canada Corporate 1,500,000 1,500 1,497 Canadian Western Bank 2.79% 09-13-2021 DPNT Canada Corporate 3,700,000 3,700 3,693 Canadian Western Bank 2.74% 06-16-2022 DPNT Canada Corporate 4,000,000 4,000 3,957 Capital Power Corp. 4.28% 09-18-2024 Callable 2024 Canada Corporate 7,000,000 7,000 7,057 Choice Properties Real Estate Investment Trust 3.50% 02-08-2021 Canada Corporate 3,000,000 3,096 3,080 Choice Properties Real Estate Investment Trust 3.20% 03-07-2023 Canada Corporate 4,500,000 4,556 4,520 Choice Properties Real Estate Investment Trust 4.06% 11-24-2025 Callable Canada Corporate 2,750,000 2,750 2,830 CI Financial Corp. 2.65% 12-07-2020 Callable Canada Corporate 5,000,000 5,000 5,012 CI Financial Corp. 3.90% 09-27-2027 Callable Canada Corporate 2,000,000 2,000 2,013 Citigroup Inc. 3.39% 11-18-2021 United States Corporate 2,000,000 2,000 2,058 City of Montreal 3.15% 12-01-2036 Canada Municipal Governments 3,500,000 3,492 3,335 Cogeco Communications Inc. 4.93% 02-14-2022 Canada Corporate 2,300,000 2,301 2,487 Cominar Real Estate Investment Trust 4.23% 12-04-2019 Canada Corporate 2,000,000 1,984 2,025 Cominar Real Estate Investment Trust 4.94% 07-27-2020 Callable Canada Corporate 2,300,000 2,347 2,366 CT Real Estate Investment Trust 3.29% 06-01-2026 Series D Callable Canada Corporate 5,000,000 5,000 4,833 CT Real Estate Investment Trust 3.47% 06-16-2027 Series E Callable Canada Corporate 3,100,000 3,100 3,004 CU Inc. 4.54% 10-24-2041 Callable Canada Corporate 4,000,000 4,465 4,449 CU Inc. 3.81% 09-10-2042 Canada Corporate 12,500,000 12,882 12,495 CU Inc. 4.09% 09-02-2044 Callable Canada Corporate 10,000,000 10,072 10,405 CU Inc. 3.96% 07-27-2045 Callable Canada Corporate 3,900,000 3,900 3,986 CU Inc. 3.76% 11-19-2046 Callable 2046 Canada Corporate 4,230,000 4,230 4,177 Daimler Canada Finance Inc. 1.42% 10-02-2018 Germany Corporate 2,400,000 2,400 2,388 Daimler Canada Finance Inc. 1.80% 12-16-2019 EMTN Germany Corporate 5,000,000 5,000 4,953 Daimler Canada Finance Inc. 2.23% 12-16-2021 EMTN Germany Corporate 2,500,000 2,500 2,465 Dollarama Inc. 3.10% 11-05-2018 Canada Corporate 6,000,000 6,165 6,069 Emera Inc. 2.90% 06-16-2023 Canada Corporate 9,000,000 9,026 8,997 The Empire Life Insurance Co. F/R 12-16-2026 Callable 2021 Canada Corporate 2,000,000 2,000 2,012 The Empire Life Insurance Co. F/R 03-15-2028 Callable 2023 Canada Corporate 1,700,000 1,700 1,711 Enbridge Gas Distribution Inc. 3.31% 09-11-2025 Callable MTN Canada Corporate 3,250,000 3,249 3,349 Enbridge Gas Distribution Inc. 2.50% 08-05-2026 Callable 2026 Canada Corporate 3,900,000 3,831 3,753 Enbridge Inc. 3.19% 12-05-2022 Canada Corporate 1,500,000 1,565 1,519 Enbridge Inc. 3.94% 06-30-2023 Callable MTN Canada Corporate 7,000,000 7,000 7,306 Enbridge Inc. 3.20% 06-08-2027 Callable 2027 Canada Corporate 6,100,000 6,097 5,815 Enbridge Inc. 5.37% 09-27-2077 Callable 2027 Canada Corporate 7,900,000 7,900 7,992 Enbridge Income Fund Holdings Inc. 4.85% 02-22-2022 Callable MTN Canada Corporate 3,000,000 2,996 3,242 Enbridge Pipelines Inc. 2.93% 11-30-2022 Callable Canada Corporate 3,000,000 2,999 3,038 Enbridge Pipelines Inc. 3.00% 08-10-2026 Callable MTN Canada Corporate 2,000,000 2,000 1,959 Enbridge Pipelines Inc. 5.08% 12-19-2036 Callable Canada Corporate 5,000,000 5,130 5,550 Enbridge Pipelines Inc. 4.55% 08-17-2043 Canada Corporate 4,500,000 4,497 4,681 Enbridge Pipelines Inc. 4.13% 08-09-2046 Callable MTN Canada Corporate 3,400,000 3,399 3,310 ENMAX Corp. 3.81% 12-05-2024 Callable 2024 Canada Corporate 4,000,000 4,000 4,053 EPCOR Utilities Inc. 4.55% 02-28-2042 Canada Corporate 3,000,000 3,505 3,332 Finning International Inc. 2.84% 09-29-2021 Canada Corporate 1,800,000 1,800 1,808 First Capital Realty Inc. 5.60% 04-30-2020 Callable Canada Corporate 2,000,000 2,244 2,151 First Capital Realty Inc. 3.90% 10-30-2023 Callable Canada Corporate 4,000,000 4,018 4,123 First Capital Realty Inc. 3.75% 07-12-2027 Callable 2027 Canada Corporate 10,000,000 10,000 9,807 Ford Credit Canada Co. 3.70% 08-02-2018 United States Corporate 4,800,000 4,785 4,866 Ford Credit Canada Co. 3.14% 06-14-2019 United States Corporate 6,250,000 6,250 6,324 Ford Credit Canada Co. 2.45% 05-07-2020 United States Corporate 2,500,000 2,510 2,487 Ford Credit Canada Co. 2.92% 09-16-2020 United States Corporate 4,350,000 4,350 4,372 Ford Credit Canada Co. 2.58% 05-10-2021 United States Corporate 3,400,000 3,400 3,363 Ford Credit Canada Co. 3.35% 09-19-2022 United States Corporate 4,300,000 4,300 4,323 FortisAlberta Inc. 4.54% 10-18-2041 MTN Canada Corporate 9,000,000 10,402 10,026 FortisAlberta Inc. 4.85% 09-11-2043 Callable 2043 Canada Corporate 1,300,000 1,536 1,515 FortisAlberta Inc. 4.27% 09-22-2045 MTN Canada Corporate 1,200,000 1,308 1,291 FortisAlberta Inc. 3.34% 09-21-2046 Callable MTN Canada Corporate 750,000 749 684 FortisBC Energy Inc. 2.58% 04-08-2026 Callable MTN Canada Corporate 2,000,000 1,999 1,954 FortisBC Energy Inc. 3.67% 04-09-2046 Callable MTN Canada Corporate 1,000,000 999 975 Gaz Metro Inc. 3.28% 10-09-2046 Callable Series T Canada Corporate 800,000 799 731 Gaz Metro Inc. 3.53% 05-16-2047 Callable Canada Corporate 3,000,000 2,997 2,875 General Motors Financial of Canada Ltd. 3.08% 05-22-2020 United States Corporate 2,000,000 2,043 2,017 Genesis Trust II 1.70% 04-15-2020 Canada Corporate 5,000,000 5,005 4,949 George Weston Ltd. 4.12% 06-17-2024 Callable 2024 Canada Corporate 3,000,000 3,000 3,138 Glacier Credit Card Trust 2.57% 09-20-2019 Canada Corporate 6,000,000 6,032 6,048 Glacier Credit Card Trust 2.24% 09-20-2020 Canada Corporate 5,000,000 5,000 4,994 The Goldman Sachs Group Inc. 2.43% 04-26-2023 Callable United States Corporate 6,700,000 6,700 6,559 Government of Canada 4.00% 06-01-2041 Canada Federal Government 5,000,000 6,501 6,355 H&R Real Estate Investment Trust F/R 07-23-2019 Canada Corporate 8,000,000 8,056 8,069
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 SCHEDULE OF INVESTMENTS (continued) No. of Units, Fair Shares, or Cost Value Country Sector Par Value (CAD$ 000) (CAD$ 000) BONDS (continued) Honda Canada Finance Inc. 1.82% 12-07-2021 Series 16-4 Canada Corporate 5,000,000 5,000 4,878 HSBC Bank Canada 2.17% 06-29-2022 Canada Corporate 6,000,000 6,000 5,891 Hydro One Inc. 1.48% 11-18-2019 MTN Canada Corporate 5,000,000 5,000 4,954 Hydro One Inc. 1.84% 02-24-2021 Canada Corporate 16,000,000 16,042 15,834 Hydro One Inc. 2.77% 02-24-2026 Canada Corporate 3,000,000 3,087 2,975 Hydro One Inc. 4.89% 03-13-2037 Canada Corporate 10,000,000 11,249 11,490 Hydro One Inc. 4.59% 10-09-2043 Callable 2043 Canada Corporate 4,752,000 4,824 5,311 Hydro One Inc. 4.17% 06-06-2044 Callable MTN Canada Corporate 2,000,000 1,998 2,103 Intact Financial Corp. 4.70% 08-18-2021 Canada Corporate 7,500,000 8,305 8,106 Intact Financial Corp. 2.85% 06-07-2027 Callable MTN Canada Corporate 10,000,000 9,841 9,515 Inter Pipeline Ltd. 3.45% 07-20-2020 Canada Corporate 9,369,000 9,488 9,620 Inter Pipeline Ltd. 3.78% 05-30-2022 MTN Canada Corporate 3,000,000 3,000 3,116 Inter Pipeline Ltd. 2.61% 09-13-2023 Callable MTN Canada Corporate 2,875,000 2,875 2,797 Inter Pipeline Ltd. 2.73% 04-18-2024 Callable 2024 Canada Corporate 2,500,000 2,500 2,430 John Deere Canada Funding Inc. 2.63% 09-21-2022 United States Corporate 2,500,000 2,499 2,509 Laurentian Bank of Canada 2.50% 01-23-2020 DPNT Canada Corporate 10,750,000 10,800 10,741 Laurentian Bank of Canada 2.75% 04-22-2021 DPNT Canada Corporate 5,000,000 4,989 4,996 Loblaw Companies Ltd. 3.75% 03-12-2019 Canada Corporate 2,500,000 2,500 2,560 Loblaw Companies Ltd. 6.45% 02-09-2028 Callable Canada Corporate 4,824,000 5,468 5,869 Lower Mattagami Energy LP 3.42% 06-20-2024 Canada Corporate 3,000,000 3,000 3,137 Lower Mattagami Energy LP 2.31% 10-21-2026 Canada Corporate 7,000,000 6,754 6,676 The Manufacturers Life Insurance Co. 2.81% 02-21-2024 Callable 2019 Canada Corporate 8,000,000 8,166 8,072 The Manufacturers Life Insurance Co. 2.10% 06-01-2025 Callable 2020 Canada Corporate 5,000,000 5,000 4,964 Manulife Bank of Canada F/R 06-01-2018 DPNT Canada Corporate 5,000,000 5,000 5,018 Manulife Bank of Canada 2.08% 05-26-2022 Canada Corporate 7,300,000 7,300 7,131 Master Credit Card Trust II 2.72% 11-21-2018 Series 13-4 Canada Corporate 5,000,000 5,205 5,051 Metro Inc. 1.52% 02-27-2020 MTN Canada Corporate 3,800,000 3,804 3,805 Metro Inc. 3.20% 12-01-2021 Callable 2021 MTN Canada Corporate 4,000,000 4,000 4,077 Metro Inc. 5.97% 10-15-2035 Canada Corporate 4,000,000 4,495 4,654 Molson Coors International LP 2.84% 07-15-2023 Callable 2023 United States Corporate 2,500,000 2,500 2,454 Molson Coors International LP 3.44% 07-15-2026 Callable Series MPLE United States Corporate 6,150,000 6,148 5,976 North West Redwater Partnership 3.20% 04-24-2026 Callable 2026 Canada Corporate 10,900,000 10,875 10,891 North West Redwater Partnership/NWR Financing Co. Ltd. 4.25% 06-01-2029 Callable Series F Canada Corporate 5,000,000 4,986 5,303 North West Redwater Partnership/NWR Financing Co. Ltd. 4.15% 06-01-2033 Canada Corporate 1,130,000 1,127 1,175 OMERS Realty Corp. 2.97% 04-05-2021 Canada Corporate 5,000,000 5,301 5,117 OMERS Realty Corp. 1.82% 05-09-2022 Callable Canada Corporate 2,000,000 2,000 1,946 OPB Finance Trust 1.88% 02-24-2022 Canada Provincial Governments 7,350,000 7,261 7,218 OPB Finance Trust 3.89% 07-04-2042 Canada Provincial Governments 5,000,000 4,997 5,214 Pembina Pipeline Corp. 3.77% 10-24-2022 Canada Corporate 3,000,000 2,999 3,100 Pembina Pipeline Corp. 2.99% 01-22-2024 Callable 2023 Canada Corporate 7,750,000 7,715 7,608 Pembina Pipeline Corp. 3.71% 08-11-2026 Callable 2026 Canada Corporate 5,750,000 5,784 5,721 Pembina Pipeline Corp. 4.24% 06-15-2027 Callable 2027 MTN Canada Corporate 7,560,000 7,399 7,747 Pembina Pipeline Corp. 4.81% 03-25-2044 MTN Canada Corporate 7,000,000 6,670 6,794 1 Power Corp. of Canada 4.81% 01-31-2047 Callable Canada Corporate 4,000,000 4,000 4,235 Province of Ontario 2.85% 06-02-2023 Canada Provincial Governments 8,000,000 8,433 8,212 Province of Ontario 3.50% 06-02-2024 Canada Provincial Governments 11,000,000 11,957 11,677 Province of Ontario 4.70% 06-02-2037 Canada Provincial Governments 14,000,000 17,637 17,002 Quebecor Media Inc. 6.63% 01-15-2023 Canada Corporate 1,000,000 1,000 1,093 RioCan Real Estate Investment Trust 2.19% 08-26-2020 Canada Corporate 5,000,000 5,000 4,947 RioCan Real Estate Investment Trust 3.29% 02-12-2024 Series W Canada Corporate 5,500,000 5,580 5,472 Rogers Communications Inc. 2.80% 03-13-2019 Canada Corporate 5,000,000 5,152 5,053 Rogers Communications Inc. 4.00% 06-06-2022 Canada Corporate 7,000,000 6,972 7,414 Royal Bank of Canada 2.89% 10-11-2018 DPNT Canada Corporate 9,467,000 9,668 9,572 Royal Bank of Canada 2.77% 12-11-2018 DPNT Canada Corporate 18,500,000 18,839 18,703 Royal Bank of Canada 2.03% 03-15-2021 DPNT Canada Corporate 32,000,000 32,045 31,742 Royal Bank of Canada 1.65% 07-15-2021 DPNT Canada Corporate 5,000,000 4,914 4,876 Royal Bank of Canada 1.58% 09-13-2021 DPNT Canada Corporate 26,500,000 26,525 25,727 Royal Bank of Canada 2.33% 12-05-2023 DPNT Canada Corporate 10,000,000 10,000 9,823 Royal Bank of Canada 3.31% 01-20-2026 Canada Corporate 5,000,000 4,998 5,083 Shaw Communications Inc. 5.65% 10-01-2019 Canada Corporate 3,000,000 3,312 3,196 Shaw Communications Inc. 3.15% 02-19-2021 MTN Canada Corporate 2,500,000 2,497 2,543 Shaw Communications Inc. 4.35% 01-31-2024 Callable Canada Corporate 13,600,000 14,147 14,454 Shaw Communications Inc. 3.80% 03-01-2027 Callable Canada Corporate 13,300,000 13,399 13,379 Smart Real Estate Investment Trust 3.75% 02-11-2021 Canada Corporate 4,000,000 4,123 4,111 Smart Real Estate Investment Trust 2.88% 03-21-2022 Canada Corporate 4,100,000 4,100 4,055 Smart Real Estate Investment Trust 3.56% 02-06-2025 Canada Corporate 3,450,000 3,466 3,417 Smart Real Estate Investment Trust 3.44% 08-28-2026 Callable Canada Corporate 2,500,000 2,503 2,401 Sun Life Financial Inc. F/R 09-19-2028 Callable 2023 Canada Corporate 9,000,000 9,057 9,005 TELUS Corp. 3.20% 04-05-2021 Canada Corporate 13,000,000 13,553 13,306 TELUS Corp. 3.35% 03-15-2023 Callable 2022 Canada Corporate 2,000,000 1,998 2,045 TELUS Corp. 3.35% 04-01-2024 Callable MTN Canada Corporate 5,000,000 4,972 5,075 1 The issuer of this security is related to the Manager of the Fund.
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 SCHEDULE OF INVESTMENTS (continued) No. of Units, Fair Shares, or Cost Value Country Sector Par Value (CAD$ 000) (CAD$ 000) BONDS (continued) TELUS Corp. 3.75% 01-17-2025 Callable Canada Corporate 15,000,000 16,188 15,484 TELUS Corp. 3.75% 03-10-2026 Callable 2025 Canada Corporate 8,400,000 8,395 8,599 TELUS Corp. 4.85% 04-05-2044 Series SP Canada Corporate 4,000,000 3,965 4,096 TELUS Corp. 4.75% 01-17-2045 Callable Canada Corporate 3,000,000 2,979 3,024 TELUS Corp. 4.70% 03-06-2048 Callable 2047 Canada Corporate 6,500,000 6,439 6,511 Thomson Reuters Corp. 3.37% 05-23-2019 Canada Corporate 4,000,000 4,000 4,076 Thomson Reuters Corp. 3.31% 11-12-2021 Callable Canada Corporate 10,000,000 10,119 10,262 Toronto Hydro Corp. 2.52% 08-25-2026 Callable Series 12 Canada Corporate 3,000,000 3,000 2,917 Toronto Hydro Corp. 4.08% 09-16-2044 Callable Canada Corporate 6,200,000 6,376 6,500 The Toronto-Dominion Bank 1.69% 04-02-2020 DPNT Canada Corporate 8,200,000 8,218 8,122 The Toronto-Dominion Bank 2.05% 03-08-2021 DPNT Canada Corporate 11,500,000 11,510 11,421 The Toronto-Dominion Bank 2.62% 12-22-2021 Canada Corporate 34,000,000 35,042 34,350 The Toronto-Dominion Bank 1.91% 07-18-2023 DPNT Canada Corporate 14,000,000 13,848 13,474 The Toronto-Dominion Bank F/R 07-25-2029 Callable 2024 Canada Corporate 9,200,000 9,200 9,104 Toyota Credit Canada Inc. 2.05% 05-20-2020 Canada Corporate 7,000,000 7,105 6,978 Toyota Credit Canada Inc. 1.75% 07-21-2021 Canada Corporate 1,650,000 1,647 1,614 Toyota Credit Canada Inc. 2.02% 02-28-2022 Canada Corporate 3,000,000 2,999 2,944 TransCanada PipeLines Ltd. 3.30% 07-17-2025 Callable 2025 MTN Canada Corporate 5,000,000 5,014 5,110 TransCanada PipeLines Ltd. 3.39% 03-15-2028 Callable 2027 Canada Corporate 3,700,000 3,698 3,732 TransCanada PipeLines Ltd. 6.89% 08-07-2028 Canada Corporate 2,000,000 2,674 2,545 TransCanada PipeLines Ltd. 4.55% 11-15-2041 Canada Corporate 10,700,000 10,892 11,109 TransCanada PipeLines Ltd. 4.33% 09-16-2047 Callable 2047 Canada Corporate 5,000,000 4,999 4,997 Transcontinental Inc. 3.90% 05-13-2019 Canada Corporate 2,000,000 2,000 2,029 Union Gas Ltd. 2.76% 06-02-2021 Callable MTN Canada Corporate 3,000,000 2,999 3,053 Union Gas Ltd. 2.81% 06-01-2026 Callable Canada Corporate 5,000,000 5,000 4,945 Union Gas Ltd. 4.20% 06-02-2044 Callable 2043 Canada Corporate 1,500,000 1,474 1,592 Union Gas Ltd. 3.80% 06-01-2046 Callable Canada Corporate 1,060,000 1,059 1,053 Veresen Inc. 4.00% 11-22-2018 Callable MTN Canada Corporate 2,000,000 1,995 2,042 Videotron Ltee 5.63% 06-15-2025 Callable 2025 Canada Corporate 1,500,000 1,500 1,613 VW Credit Canada Inc. 2.15% 06-24-2020 Germany Corporate 7,300,000 7,201 7,242 Wells Fargo & Co. 2.09% 04-25-2022 Series MPLE United States Corporate 7,500,000 7,500 7,318 Wells Fargo & Co. 2.51% 10-27-2023 United States Corporate 5,000,000 5,000 4,878 Wells Fargo & Co. 2.98% 05-19-2026 Series MPLE United States Corporate 6,000,000 6,000 5,777 Westcoast Energy Inc. 3.77% 12-08-2025 MTN Canada Corporate 2,000,000 1,999 2,052 1,573,214 1,564,647 EQUITIES TransCanada Corp. Pfd. Series 15 Canada Energy 100,000 2,500 2,595 COMMISSIONS AND OTHER PORTFOLIO TRANSACTION COSTS (2) - TOTAL NON-DERIVATIVE INVESTMENTS 1,599,132 1,590,558 Net Assets (see asset composition): Total non-derivative investments 1,590,558 Cash and cash equivalents 6,266 Other net assets (liabilities) 7,585 1,604,409 Schedule 1 Asset Composition PORTFOLIO ALLOCATION % of net assets Bonds 97.5 Mortgages 1.4 Equities 0.2 Cash and cash equivalents 0.4 Other net assets (liabilities) 0.5 Total 100.0 BONDS SECTOR ALLOCATION Corporate Financials 38.5 Corporate Utilities 12.7 Corporate Telecommunication Services 9.6 Corporate Energy 8.9 Corporate Real Estate 6.9 Provincial Governments 3.1 Corporate Information Technology 2.4 Federal Government 1.9 Municipal Governments 0.2 Corporate Other 13.3 97.5 as at March 31, 2017 PORTFOLIO ALLOCATION % of net assets Bonds 95.7 Mortgages 2.4 Equities 0.3 Cash and cash equivalents 1.1 Other net assets (liabilities) 0.5 Total 100.0 BONDS SECTOR ALLOCATION Corporate Financials 34.6 Corporate Utilities 11.2 Corporate Telecommunication Services 9.7 Corporate Energy 8.0 Corporate Real Estate 5.7 Provincial Governments 4.8 Federal Government 3.6 Corporate Information Technology 2.3 Corporate Other 15.8 95.7
INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 Schedule 2 Distribution of Mortgages by Interest Rate Principal value Amortized Fair Number outstanding cost value Rate of loans ($ 000) ($ 000) ($ 000) 2.251 to 2.500 1 291 291 290 2.501 to 2.750 13 2,104 2,106 2,099 2.751 to 3.000 62 11,347 11,422 11,348 3.001 to 3.250 39 3,175 3,188 3,180 3.251 to 3.500 29 2,760 2,773 2,769 3.501 to 3.750 19 1,960 1,982 1,978 3.751 to 4.000 7 938 954 948 4.001 to 4.250 3 698 704 704 173 23,273 23,420 23,316 The rates used for determining fair value of NHA and conventional loans as at September 30, 2017 were as follows: Term Residential rate 6 month (open) 6.50% 6 month (closed) 3.45% 0-12 months (open) 6.30% 0-12 months (closed) 2.94% 13-24 months 2.89% 25-36 months 2.99% 37-48 months 2.99% 49-60 months 3.10% 61-84 months 3.50% 85-120 months 4.00% Schedule 3 Distribution of Mortgages by Geographic Location Percentage Principal value Fair total fair Number outstanding value value of loans ($ 000) ($ 000) (%) British Columbia 21 2,598 2,607 11.2 Alberta 29 6,801 6,819 29.2 Saskatchewan 9 1,031 1,032 4.4 Manitoba 8 573 573 2.4 Ontario 45 5,298 5,305 22.8 Quebec 46 5,208 5,214 22.4 New Brunswick 5 526 528 2.3 Nova Scotia 4 151 151 0.6 Newfoundland and Labrador 5 716 716 3.1 Yukon/Territories 1 371 371 1.6 173 23,273 23,316 100.0 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 147 19,542 19,661 19,580 84.0 Condominiums 5 430 433 431 1.8 Multi-unit Dwelling up to 8 units 21 3,301 3,326 3,305 14.2 173 23,273 23,420 23,316 100.0 Schedule 5 Distribution of Mortgages by Year of Maturity Percentage Principal value Fair total fair Number outstanding value value of loans ($ 000) ($ 000) (%) 2017 31 3,576 3,573 15.3 2018 66 7,539 7,558 32.4 2019 37 5,305 5,317 22.8 2020 37 6,640 6,652 28.5 2022 2 213 216 1.0 173 23,273 23,316 100.0 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) 137 15,697 15,735 67.5 Insured by a Private Insurer 36 7,576 7,581 32.5 173 23,273 23,316 100.0
NOTES TO THE INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 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 as at September 30, 2017 and March 31, 2017. The Statements of Comprehensive Income, Statements of Changes in Financial Position and Statements of Cash Flows are for the six-month periods ended September 30, 2017 and 2016. The Schedule of Investments is presented as at September 30, 2017. Where a Fund or series of a Fund was established during either period, the information for the Fund or series is provided from inception date. (c) Fund and series information Effective January 1, 2017, the administration fee rate for Series B, Jnl and U decreased by 0.05%. 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 has engaged Mackenzie Financial Corporation as 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. Date operations Management Service Administration Trustee Series commenced 1 fee (%) fee (%) fee 2 (%) fee (%) Series A July 13, 2012 1.55-0.05 0.05 Series B July 13, 2012 1.55-0.05 0.05 Series C May 2, 2011 1.55-0.10 0.05 Series Jdsc July 13, 2012 1.30-0.05 0.05 Series Jnl July 13, 2012 1.30-0.05 0.05 Series P July 2, 2013 - - - - Series U July 12, 2013 0.20-0.05 0.05 The fee rates in the table above are rounded to two decimals. 1 If within 10½ years. 2 Until December 31, 2016, the annual administration fee rate for Series B, Jnl and U was 0.10%. (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 unaudited interim financial statements (financial statements) have been prepared in accordance with International Financial Reporting Standards (IFRS), including International Accounting Standard 34 Interim Financial Reporting (IAS 34), as issued by the International Accounting Standards Board (IASB). These financial statements were prepared using the same accounting policies, critical judgments and estimates as applied in the Fund s most recent audited annual financial statements for the year ended March 31, 2017. 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 November 9, 2017. 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 as 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 INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 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 and other investment funds 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. Fair value of fixed-income securities includes consideration of the creditworthiness of the issuer. 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. 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. (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 period. (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. Dividend income and distributions from open-ended investment funds are recognized when the Fund s right to receive payment is established which is typically on the ex-dividend or distribution date. Distributions received from income trusts and open-ended investment funds are included in interest income, dividend income or capital gains, as appropriate, based on the best information available to the Manager. Due to the nature of these investments, actual allocations could vary from this information. 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 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) September 30, 2017 - - March 31, 2017 - - September 30, 2017 September 30, 2016 for the six-month period ended ($ 000) (%) ($ 000) (%) Gross securities lending income - - - - Tax withheld - - - - - - - - Payments to securities lending agents - - - - Securities lending income - - - - (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) (j) 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. Mergers The Fund applies the acquisition method of accounting for Fund mergers. Under this method, one of the Funds in each merger is identified as the acquiring Fund, and is referred to as the Continuing Fund, and the other Fund involved in the merger is referred to as the Terminated Fund. This identification is based on the comparison of the relative net asset values of the Funds as well as consideration of the continuation of such aspects of the Continuing Fund as: investment advisors; investment objectives and practices; type of portfolio securities; and management fees and expenses.
NOTES TO THE INTERIM FINANCIAL STATEMENTS SEPTEMBER 30, 2017 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (k) Comparative figures (l) Certain prior period comparative amounts have been reclassified to conform to current presentation including, as applicable, eliminations within the Statements of Cash Flows for non-cash transfers between series of the Fund, and reclassification of foreign withholding taxes from securities lending activity within the Statements of Comprehensive Income. 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 us 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 and Tc 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 or Tc 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 and Tu, if issued. The advisory fee is payable monthly directly by investors in Series U and Tu, 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.