BMO Mutual Funds 2013 · 2013-12-23 · investment portfolio as at September 30, 2013 and the statements of net assets, operations and changes in net assets as at and for the periods

BMO Mutual Funds 2013Annual Financial Statements

September 30, 2013

BMO Emerging Markets Bond Fund

Independent Auditor’s Report

To the Unitholders and Trustee of:BMO Equity FundBMO Canadian Small Cap Equity Fund(formerly BMO Special Equity Fund)

BMO Resource FundBMO Mortgage and Short-Term Income FundBMO Money Market FundBMO Bond FundBMO Canadian Equity ETF FundBMO Asset Allocation FundBMO Dividend FundBMO Precious Metals FundBMO Monthly Income FundBMO Diversified Income PortfolioBMO Global Infrastructure FundBMO Laddered Corporate Bond FundBMO Enhanced Equity Income FundBMO Emerging Markets Bond FundBMO LifeStage Plus 2015 FundBMO LifeStage Plus 2020 FundBMO LifeStage Plus 2025 FundBMO LifeStage Plus 2030 FundBMO LifeStage Plus 2017 FundBMO LifeStage Plus 2022 FundBMO LifeStage Plus 2026 FundBMO SelectTrust Fixed Income PortfolioBMO FundSelect Security PortfolioBMO FundSelect Balanced PortfolioBMO FundSelect Growth PortfolioBMO FundSelect Equity Growth Portfolio (formerly BMO FundSelect

Aggressive Growth Portfolio)

BMO Target Yield ETF PortfolioBMO Target Enhanced Yield ETF PortfolioBMO Fixed Income ETF PortfolioBMO Security ETF PortfolioBMO Conservative ETF PortfolioBMO Balanced ETF PortfolioBMO Growth ETF PortfolioBMO Equity Growth ETF PortfolioBMO World Bond FundBMO Emerging Markets FundBMO European FundBMO North American Dividend FundBMO U.S. Equity ETF FundBMO U.S. Equity FundBMO Global Dividend Fund (formerly BMO Global Science & Technology Fund)

BMO International Equity ETF FundBMO Global Monthly Income FundBMO Preferred Share FundBMO Tactical Dividend ETF FundBMO Global Strategic Bond FundBMO U.S. High Yield Bond FundBMO U.S. Dollar Money Market FundBMO U.S. Dollar Equity Index FundBMO U.S. Dollar Monthly Income FundBMO U.S. Dollar Dividend FundBMO U.S. Dollar Balanced Fund

To the Shareholders and Directors of BMO Global Tax Advantage Funds Inc.:BMO Global Dividend ClassBMO Canadian Equity ClassBMO Global Equity ClassBMO Global Energy ClassBMO Dividend ClassBMO Greater China ClassBMO International Value ClassBMO Short-Term Income ClassBMO Canadian Tactical ETF ClassBMO Global Tactical ETF ClassBMO LifeStage 2017 ClassBMO LifeStage 2020 ClassBMO LifeStage 2025 ClassBMO LifeStage 2030 ClassBMO LifeStage 2035 ClassBMO LifeStage 2040 ClassBMO SelectClass Security PortfolioBMO SelectClass Balanced PortfolioBMO SelectClass Growth PortfolioBMO SelectClass Equity Growth Portfolio (formerly BMO SelectClass

Aggressive Growth Portfolio)

BMO Security ETF Portfolio ClassBMO Balanced ETF Portfolio ClassBMO Growth ETF Portfolio ClassBMO Equity Growth ETF Portfolio Class (formerly BMO Aggressive

Growth ETF Portfolio Class)

BMO American Equity ClassBMO Asian Growth and Income Class

(collectively the Funds)

Independent Auditor’s Report (continued)

We have audited the accompanying financial statements of each of the Funds, which comprise the statement ofinvestment portfolio as at September 30, 2013 and the statements of net assets, operations and changes in netassets as at and for the periods indicated in note 1, and the related notes, which comprise a summary ofsignificant accounting policies and other explanatory information.

Management’s responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of the financial statements of each of theFunds in accordance with Canadian generally accepted accounting principles, and for such internal control asmanagement determines is necessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on the financial statements of each of the Funds based on our audits.We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standardsrequire that we comply with ethical requirements and plan and perform the audits to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basisfor our audit opinion.

OpinionIn our opinion, the financial statements of each of the Funds present fairly, in all material respects, the financialposition of each of the Funds, the results of each of their operations and the changes in each of their net assets asat and for the periods indicated in note 1 in accordance with Canadian generally accepted accounting principles.

Chartered Professional Accountants, Licensed Public AccountantsToronto, OntarioDecember 20, 2013

STATEMENT OF OPERATIONS(in thousands of Canadian dollars, except per unit data)

INVESTMENT INCOMEInterest 42

42

EXPENSESManagement fees (note 5) 7Fixed administration fees (note 5) 1Independent Review Committee fees —Interest charges —Fund Facts fees 1Operating expenses absorbed by the Manager (1)

8

Net investment income for the period 34Realized gain on sale of investments 4Realized loss on forward currency contracts (46)Realized loss on foreign exchange (34)Unrealized appreciation in value of investments 26Unrealized appreciation in

value of forward currency contracts 156

Increase in net assets from operations 140

Increase in net assets from operationsSeries A Units 26Series I Units 114Series F Units —Advisor Series Units —

Increase in net assets from operations per unit (note 2)Series A Units 0.09Series I Units 0.28Series F Units 0.04Advisor Series Units 0.02

STATEMENT OF NET ASSETS(in thousands of Canadian dollars, except per unit data)


ASSETSCash 1,123Investments at fair value 10,101Income receivable 128Unrealized gain on forward

currency contracts at fair value 156Subscriptions receivable 740

Total assets 12,248

LIABILITIESDue to broker 985Accrued expenses 5Unrealized loss on forward

currency contracts at fair value —

Total liabilities 990

Net assets representing unitholders’ equity 11,258

Net assets representing unitholders’ equitySeries A Units 3,372Series I Units 7,866Series F Units 10Advisor Series Units 10

Net assets per unitSeries A Units $ 10.01Series I Units $ 10.04Series F Units $ 10.01Advisor Series Units $ 10.01

The accompanying notes are an integral part of these financial statements.

September 30As at 2013

September 30For the period ended 2013


Advisor Series UnitsNet assets – beginning of period —Increase in net assets from operations —UNIT TRANSACTIONS:Proceeds from sale of units 10Reinvested distributions —

Total unit transactions 10

DISTRIBUTIONS TO UNITHOLDERS FROM:Net investment income —

Total distributions paid to unitholders —

Net assets – end of period 10

Total FundNet assets – beginning of period —Increase in net assets from operations 140UNIT TRANSACTIONS:Proceeds from sale of units 11,137Reinvested distributions 13Amounts paid on units redeemed (18)

Total unit transactions 11,132

DISTRIBUTIONS TO UNITHOLDERS FROM:Net investment income (14)

Total distributions paid to unitholders (14)

Net assets – end of period 11,258

STATEMENT OF CHANGES IN NET ASSETS(in thousands of Canadian dollars)

Series A UnitsNet assets – beginning of period —Increase in net assets from operations 26UNIT TRANSACTIONS:Proceeds from sale of units 3,361Reinvested distributions 4Amounts paid on units redeemed (14)





Series I UnitsNet assets – beginning of period —Increase in net assets from operations 114UNIT TRANSACTIONS:Proceeds from sale of units 7,756Reinvested distributions 9Amounts paid on units redeemed (4)





Series F UnitsNet assets – beginning of period —Increase in net assets from operations —UNIT TRANSACTIONS:Proceeds from sale of units 10Reinvested distributions —

Total unit transactions 10

DISTRIBUTIONS TO UNITHOLDERS FROM:Net investment income —

Total distributions paid to unitholders —

Net assets – end of period 10





Par Fair Value Cost Value (in thousands) ($) ($)


Chile – 1.9%Corporacion Nacional del Cobre de Chile, Series 144A, Senior, Unsecured, Notes, 4.500% Aug 13, 2023 . . . . . . . . . . . . . . US$ 200 . . . . . 204 . . . . . 209

China – 2.6%CNOOC Finance 2013 Ltd, Senior, Unsecured, Notes, 3.000% May 9, 2023. . . . . . . . . . . . . . . US$ 100 . . . . . . 91 . . . . . . 93Country Garden Holdings Company, Series 144A, Senior, Unsecured, Notes, Callable, 7.500% Jan 10, 2023 . . US$ 200 . . . . . 192 . . . . . 200. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 . . . . . 293

Colombia – 7.5%Bancolombia SA, Notes, Subordinated, 6.125% Jul 26, 2020 . . . . . . . . . . . . . . . . US$ 85 . . . . . . 89 . . . . . . 89Colombia Telecomunicaciones SA ESP, Series 144A, Senior, Unsecured, Notes, Callable, 5.375% Sep 27, 2022 . . US$ 250 . . . . . 238 . . . . . 235Ecopetrol SA, Senior, Unsecured, Notes, 4.250% Sep 18, 2018 . . . . . . . . . US$ 100 . . . . . 103 . . . . . 107Ecopetrol SA, Senior, Unsecured, Notes, 5.875% Sep 18, 2023 . . . . . . . . . US$ 100 . . . . . 102 . . . . . 108Pacific Rubiales Energy Corp., Series 144A, Senior, Unsecured, Notes, Callable, 5.125% Mar 28, 2023 . . . US$ 250 . . . . . 235 . . . . . 235Republic of Colombia, Senior, Unsecured, Unsubordinated, 8.125% May 21, 2024. . . . . . . . . . . . . . . US$ 50 . . . . . . 68 . . . . . . 66. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835 . . . . . 840

Costa Rica – 4.5%Banco De Costa Rica, Series 144A, Senior, Unsecured, Notes, 5.250% Aug 12, 2018 . . . . . . . . . . . . . . US$ 200 . . . . . 209 . . . . . 208Instituto Costarricense de Electricidad, Series 144A, Senior, Unsecured, Notes, 6.950% Nov 10, 2021. . . . . . . . . US$ 200 . . . . . 218 . . . . . 212Republic of Costa Rica, Series 144A, Senior, Unsecured, 5.625% Apr 30, 2043 . . . . . US$ 100 . . . . . . 89 . . . . . . 88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516 . . . . . 508

STATEMENT OF INVESTMENT PORTFOLIOAs at September 30, 2013 (in thousands of Canadian dollars, unless otherwise noted)

BONDS & DEBENTURESArmenia – 2.2%Republic of Armenia, Series 144A, Senior, Unsecured, 6.000% Sep 30, 2020 . . . . . . . . . . . . . . . . . . . . US$ 250 . . . . . 253 . . . . . 251

Argentina – 2.3%Arcos Dorados Holdings, Inc., Series 144A, Unsecured, Notes, 6.625% Sep 27, 2023 . . . . . . . . . . . . . . US$ 250 . . . . . 260 . . . . . 260

Bolivia – 1.7%Plurinational State of Bolivia, Series 144A, Senior, Unsecured, 5.950% Aug 22, 2023 . . . . . . . . . . . . . . US$ 200 . . . . . 202 . . . . . 197

Brazil – 11.7%Banco Bradesco (Cayman) SA, Series 144A, Notes, Subordinated, 5.900% Jan 16, 2021 . . . . . . . . . . . . . . US$ 100 . . . . . 102 . . . . . 103Itau Unibanco Holding SA, Cayman Island, Series 144A, Notes, Subordinated, 5.750% Jan 22, 2021. . . . US$ 100 . . . . . 102 . . . . . 103Itau Unibanco Holding SA/Cayman Island, Series 144A, Subordinated, Notes, 5.500% Aug 6, 2022. . . . . . . . . . US$ 200 . . . . . 194 . . . . . 195Marfrig Overseas Ltd., Series 144A, Senior, Unsecured, Notes, Callable, 9.500% May 4, 2020. . . . . . . . . . . . . . . US$ 200 . . . . . 200 . . . . . 191Petrobras Global Finance BV, Senior, Unsecured, Notes, Floating Rate, May 20, 2016 . . . . . . . . . . . . . . . . . . . . US$ 100 . . . . . 103 . . . . . 102Petrobras Global Finance BV, Senior, Unsecured, Notes, 5.625% May 20, 2043. . . . . . . . . . . . . . US$ 100 . . . . . . 86 . . . . . . 86Petrobras International Finance Company, Senior, Unsecured, Notes, 6.875% Jan 20, 2040 . . . . . . . . . . . . . . US$ 100 . . . . . . 99 . . . . . 101Samarco Mineracao SA, Series 144A, Senior, Unsecured, Notes, 4.125% Nov 1, 2022 . . . . . . . . . . . . . . . US$ 250 . . . . . 227 . . . . . 226Vale Overseas Limited, 6.875% Nov 21, 2036 . . . . . . . . . . . . . . US$ 200 . . . . . 206 . . . . . 208. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,319. . . . 1,315





Mexichem S.a.B de C.V., Series 144A, Senior, Unsecured, Notes, 6.750% Sep 19, 2042 . . . . . . . . . . . . . . . . . . . . US$ 250 . . . . . 241 . . . . . 240. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 . . . . . 737

Morocco – 1.7%Kingdom of Morocco, Series 144A, Senior, Unsecured, 4.250% Dec 11, 2022 . . . . . . . . . . . . . . US$ 200 . . . . . 182 . . . . . 188

Panama – 1.0%Republic of Panama, Senior, Unsecured, 5.200% Jan 30, 2020 . . . . . . US$ 100 . . . . . 115 . . . . . 112

Philippines – 0.9%Republic of Philippines, Senior, Unsecured, Unsubordinated, 4.000% Jan 15, 2021 . . . . . . . . . . . . . . US$ 100 . . . . . 108 . . . . . 107

Russia – 4.6%Gazprom via Gaz Capital S.A., Series 144A, Loan Participation Notes, Senior, Unsecured, 5.999% Jan 23, 2021 . . . . . . . . . . . . . . US$ 200 . . . . . 214 . . . . . 216Gazprom via Gaz Capital S.A., Series 144A, Loan Participation Notes, Senior, Unsecured, 4.950% Feb 6, 2028 . . . . . . . . . . . . . . . US$ 100 . . . . . . 91 . . . . . . 91Russian Railways viz RZD Capital Limited, Senior, Unsecured, Loan Participation, 5.700% Apr 5, 2022 . . . . . . . . . . . . . . . US$ 200 . . . . . 211 . . . . . 210. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516 . . . . . 517

Saudi Arabia – 1.7%Saudi Electricity Global Sukuk Co 2, Series 144A, Senior, Unsecured, Notes, 5.060% Apr 8, 2043 . . . . . . . . . . US$ 200 . . . . . 181 . . . . . 188

Slovenia – 2.6%Republic of Slovenia, Series 144A, Senior, Unsecured, 4.750% May 10, 2018. . . . . . . . . . . . . . US$ 200 . . . . . 197 . . . . . 198

STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at September 30, 2013 (in thousands of Canadian dollars, unless otherwise noted)

Croatia – 2.8%Croatia Government International Bond, Series 144A, Senior, Unsecured, 5.500% Apr 4, 2023 . . . . . . . . . . . . . . . US$ 100 . . . . . 101 . . . . . . 99Republic of Croatia, Series 144A, Senior, Unsecured, 6.375% Mar 24, 2021 . . . . . . . . . . . . . . US$ 200 . . . . . 215 . . . . . 213. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 . . . . . 312

Hungary – 0.9%Republic of Hungary, Senior, Unsecured, 5.375% Feb 21, 2023 . . . . . US$ 100 . . . . . 100 . . . . . 100

Indonesia – 3.8%Perusahaan Penerbit SBSN Indonesia, Series 144A, Unsecured, Notes, 6.125% Mar 15, 2019 . . . . . . . . . . . . . . US$ 250 . . . . . 259 . . . . . 265PT Pertamina (Persero), Series 144A, Senior, Unsecured, Notes, 5.625% May 20, 2043. . . . . . . . . . . . . . US$ 200 . . . . . 159 . . . . . 164. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 . . . . . 429

Kazakhstan – 4.1%Kazakhstan Temir Zholy Finance Bv, Series 144A, Senior, Unsecured, Notes, 6.950% Jul 10, 2042. . . . . . . . . . US$ 250 . . . . . 256 . . . . . 260KazMunaiGaz Finance Sub BV, Series 144A, Senior, Unsecured, Notes, 6.375% Apr 9, 2021 . . . . . . . . . . US$ 100 . . . . . 111 . . . . . 113KazMunayGaz National Company, Series 144A, Senior, Unsecured, Notes, 5.750% Apr 30, 2043 . . . . . . . . . US$ 100 . . . . . . 90 . . . . . . 90. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 . . . . . 463

Mexico – 6.5%Alpek SA de CV, Series 144A, Senior, Unsecured, Notes, 5.375% Aug 8, 2023 . . . . . . . . . . . . . . . US$ 200 . . . . . 201 . . . . . 205America Movil SAB de C.V., Senior, Unsecured, Notes, 4.375% Jul 16, 2042 . . . . . . . . . . . . . . . US$ 200 . . . . . 165 . . . . . 165Fomento Economico Mexicano, S.a.B. de C.V.(FEMSA), Senior, Unsecured, Notes, 4.375% May 10, 2043 . . . . . . . . US$ 150 . . . . . 130 . . . . . 127





United Arab Emirates – 1.0%Dubai Electricity & Water Authority, Series 144A, Senior, Unsecured, Notes, Unsubordinated, 8.500% Apr 22, 2015 . . . . . . . . . . . . . . US$ 100 . . . . . 114 . . . . . 113

United States – 3.7%Braskem America Finance Company, The, Series 144A, Senior, Unsecured, Notes, Callable, 7.125% Jul 22, 2041 . . . US$ 100 . . . . . . 94 . . . . . . 94Nexen Inc., Senior, Unsecured, Notes, 5.875% Mar 10, 2035 . . . . . . . . . . . . . . US$ 100 . . . . . 107 . . . . . 107Southern Copper Corporation, Senior, Unsecured, Notes, 7.500% Jul 27, 2035 . . . . . . . . . . . . . . . US$ 200 . . . . . 213 . . . . . 216. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 . . . . . 417

Venezuela – 3.3%Bolivarian Republic of Venezuela, Senior, Unsecured, 5.750% Feb 26, 2016. . . . . . . . . . . . . . US$ 200 . . . . . 189 . . . . . 186Petroleos de Venezuela S.A., Series 144A, Senior, Unsecured, Notes, Sinking Funds, 8.500% Nov 2, 2017 . . . . . . . . . . . . . . . US$ 200 . . . . . 191 . . . . . 187. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 . . . . . 373

Vietnam – 2.0%Socialist Republic of Vietnam, Series 144A, Senior, Unsecured, 6.750% Jan 29, 2020 . . . . . . . . . . . . . . US$ 200 . . . . . 223 . . . . . 220

Total Investment Portfolio – 89.7% . . . . . . . . . . . . . . . . . 10,075 . . . 10,101Total Unrealized Gain on Forward Currency Contracts – 1.4% . . . . . . . 156Total Unrealized Loss on Forward Currency Contracts – (0.0)%. . . . . . . . (0)Other Assets Less Liabilities – 8.9% . . . . . . . . . . . . . . . . . . . . . . . . 1,001NET ASSETS – 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,258


Republic of Slovenia, Series 144A, Senior, Unsecured, 5.850% May 10, 2023 . . . . . . . . . . . . . . . . . . . . US$ 100 . . . . . 100 . . . . . . 98. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 . . . . . 296

South Africa – 4.2%Republic of South Africa, Senior, Unsecured, 4.665% Jan 17, 2024 . . . . . . US$ 200 . . . . . 200 . . . . . 199Republic of South Africa, Unsecured, 5.875% Sep 16, 2025 . . . . . . . . . . . . . . US$ 250 . . . . . 255 . . . . . 272. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 . . . . . 471

Sri Lanka – 2.7%Democratic Socialist Republic of Sri Lanka, Series 144A, Unsecured, 7.400% Jan 22, 2015 . . . . . . . . . . . . . . US$ 100 . . . . . 109 . . . . . 107Democratic Socialist Republic of Sri Lanka, Series 144A, Senior, Unsecured, 6.250% Jul 27, 2021 . . . . . . US$ 200 . . . . . 195 . . . . . 197. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 . . . . . 304

Supernational – 1.8%Corporacion Andina de Formento, Senior, Unsecured, Notes, 4.375% Jun 15, 2022 . . . . . . . . . . . . . . US$ 200 . . . . . 208 . . . . . 206

Thailand – 2.0%PTTEP Canada International Finance Ltd., Series 144A, Senior, Unsecured, Notes, 5.692% Apr 5, 2021 . . . . . . . . . . US$ 200 . . . . . 218 . . . . . 220

Turkey – 4.0%Coca-Cola Icecek AS, Series 144A, Senior, Unsecured, Notes, 4.750% Oct 1, 2018 . . . . . . . . . . . . . . . US$ 250 . . . . . 255 . . . . . 256Turkiye Garanti Bankasi A.S., Series 144A, Senior, Unsecured, Floating Rate, Apr 20, 2016. . . . . . . . . . US$ 200 . . . . . 205 . . . . . 199. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460 . . . . . 455




UNREALIZED GAIN ON FORWARD CURRENCY CONTRACTS01-Oct-13 . . . . . US$ . . . . . . 534 . . . . . . CA$ . . . . . . (550) . . . . . 0.9714 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1 . . . . . . . . . . —04-Oct-13 . . . . . CA$ . . . . . . 600 . . . . . . US$ . . . . . . (582) . . . . . 1.0309 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1. . . . . . . . . . . 104-Oct-13 . . . . . CA$ . . . . . . 750 . . . . . . US$ . . . . . . (727) . . . . . 1.0314 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1. . . . . . . . . . . 104-Oct-13 . . . . . CA$ . . . . . 1,450 . . . . . . US$ . . . . (1,402) . . . . . 1.0343 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1. . . . . . . . . . . 604-Oct-13 . . . . . CA$ . . . . . . 750 . . . . . . US$ . . . . . . (713) . . . . . 1.0514 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1 . . . . . . . . . . 1504-Oct-13 . . . . . CA$ . . . . . 5,750 . . . . . . US$ . . . . (5,452) . . . . . 1.0546 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1 . . . . . . . . . 133

Total Unrealized Gain on Forward Currency Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156

UNREALIZED LOSS ON FORWARD CURRENCY CONTRACTSSettlement Currency Position Currency Position Contract Credit UnrealizedDate Buy (000s) Sell (000s) Rates Counterparty Rating* Loss04-Oct-13 . . . . . CA$ . . . . . . 550 . . . . . . US$ . . . . . . (534) . . . . . 1.0295 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1 . . . . . . . . . . —04-Oct-13 . . . . . CA$ . . . . . . 525 . . . . . . US$ . . . . . . (510) . . . . . 1.0301 . . . Barclays Bank PLC . . . . . . . . . . . . . . . . . . . . . . . . . A-1 . . . . . . . . . . —

Total Unrealized Loss on Forward Currency Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .—

*Credit rating provided by Standard & Poor’s.


Settlement Currency Position Currency Position Contract Credit UnrealizedDate Buy (000s) Sell (000s) Rates Counterparty Rating* Gain


NOTES TO THE FINANCIAL STATEMENTS(All amounts in thousands of Canadian dollars, except per unit data)September 30, 2013

1. The FundBMO Emerging Markets Bond Fund (“the Fund”) isan open-ended mutual fund trust established underthe laws of the province of Ontario and is governed bya Master Declaration of Trust dated November 6,2007. The Master Declaration of Trust was amendedon October 23, 2008 and November 3, 2009 to permitcertain funds to offer a multi-series structure. Inaddition to the existing Series A units, certain Fundsare permitted to offer Series I, Series F, AdvisorSeries, Series T5, Series T6 and/or Classic Seriesunits. Each series is intended for different kinds ofinvestors and has different management fees andfixed administration fees. Refer to Note 7(a) for theFund’s series and respective launch date(s) andNote 7(d) for management fee rates and fixedadministration fee rates for each series.

BMO Investments Inc. (the “Manager”) is themanager and Trustee of the Fund. The Manager is awholly-owned subsidiary of Bank of Montreal.

The information provided in these audited financialstatements is for the period(s) ended September 30,2013 and 2012. Financial information provided for afund established during the period(s) is presentedfrom the date of inception as noted in Note 7(a).Financial information provided for a series establishedduring the period(s) is presented from the launch dateas noted in Note 7(a).

2. Summary of significant accounting policiesThese financial statements have been prepared inaccordance with Canadian generally acceptedaccounting principles (“Canadian GAAP”), includingestimates and assumptions made by managementthat may affect the reported amounts of assets,liabilities, income and expenses during the reportedperiods. Actual results could differ from estimates.

Fund mergersThe Manager has adopted the purchase method ofaccounting for certain Fund mergers which occurredduring the periods. Under this method, one of theFunds in each merger is identified as the acquiringFund, and is referred to as the “Continuing Fund”,and the other Fund involved in the merger is referredto as the “Terminated Fund”. This identification isbased on the comparison of the relative net assetvalues of the Funds as well as consideration of thecontinuation of such aspects of the Continuing Fundas: investment advisors; investment objectives andpractices; type of portfolio securities; and managementfees and expenses. Where applicable, refer toNote 7(a) for the details of the merger transactions.

Valuation of investmentsCanadian GAAP requires the use of bid prices forlong positions and ask prices for short positions inthe fair valuation of investments traded in an activemarket, rather than the use of closing prices currentlyused for the purpose of determining Net Asset Value(“NAV”). For investments that are not traded in anactive market, Canadian GAAP requires the use ofvaluation techniques, incorporating factors thatmarket participants would consider in setting a price.

The NAV is the value of the total assets of a Fund lessthe fair value of its total liabilities at a Valuation Date(the “Valuation Date” is each day on which the TorontoStock Exchange is open for trading) determined inaccordance with Part 14 of National Instrument 81-106 – Investment Fund Continuous Disclosure(“NI 81-106”) for the purpose of processingunitholder transactions. For financial statementpurposes, valuations are determined in accordancewith Canadian GAAP. This may result in a differencebetween the net assets per unit for each series andthe NAV per unit for each series. Refer to Note 7(b)for the comparison between NAV per unit and netassets per unit for each series.

Investments are deemed to be held for trading.Investments are recorded at their fair value with thechange between this amount and average cost beingrecorded as unrealized appreciation (depreciation) invalue of investments in the Statement of Operations.


NOTES TO THE FINANCIAL STATEMENTS (cont’d)(All amounts in thousands of Canadian dollars, except per unit data)September 30, 2013

Securities and exchange traded funds listed on arecognized public securities exchange in NorthAmerica are valued for financial statement purposesat their bid prices for long positions and ask pricesfor short positions. Procedures are in place to fairvalue securities traded in countries outside of NorthAmerica daily, to avoid stale prices and to take intoaccount, among other things, any significant eventsoccurring after the close of a foreign market.

For bonds, debentures, asset-backed securities andother debt securities, the fair value represents the bidprice provided by independent security pricingservices. Short-term investments, if any, are includedin the Statement of Investment Portfolio at their fairvalue. Unlisted warrants, if any, are valued based ona pricing model which considers factors such as themarket value of the underlying security, strike priceand terms of the warrant. Mutual fund units held asinvestments are valued at their respective NAVs oneach Valuation Date, as these values are the mostreadily and regularly available.

The Manager uses fair value pricing when the price ofa security held in the Fund is unavailable, unreliableor not considered to reflect the current fair value, andmay determine another value which it considers tobe fair and reasonable using the services of third-party valuation service providers, or using a valuationtechnique that, to the extent possible, makes maximumuse of inputs and assumptions based on observablemarket data including volatility, comparablecompanies and other applicable rates or prices.

Investment transactionsInvestment transactions are accounted for on thetrade date. Realized gains (losses) from the sale ofinvestments and unrealized appreciation(depreciation) in the value of investments arecalculated with reference to the average cost of therelated investments which exclude brokeragecommissions and other trading expenses. All net

realized gains (losses), unrealized appreciation(depreciation) in value, and transaction costs areattributable to investments and derivativeinstruments which are deemed held for trading, andare included in the Statement of Operations.

Client brokerage commissions, where applicable, areused as payment for order execution services orresearch services. The portfolio advisors or Managermay select brokers, including their affiliates, whocharge a commission in excess of that charged byother brokers (“soft dollars”) if they determine in goodfaith that the commission is reasonable in relation tothe order execution and research services utilized. Itis the Manager’s objective that over time, all clientsreceive benefits from the client brokerage commissions.

Transaction costs, such as brokerage commissions,incurred in the purchase and sale of securities by theFund are expensed and included in “Commissionsand other portfolio transaction costs” in theStatement of Operations.

Cost of investmentsThe cost of investments represents the amount paidfor each security and is determined on an averagecost basis.

Income recognitionInterest income is recognized on an accrual basis.Dividend income and distributions from investmenttrust units are recognized on the ex-dividend and ex-distribution date, respectively.

Interest on inflation-indexed bonds will be paidbased on a principal value, which is adjusted forinflation. The inflation adjustment of the principalvalue is recognized as part of interest income in theStatement of Operations. If held to maturity, the Fundwill receive, in addition to a coupon interest payment,a final payment equal to the sum of the par value andthe inflation compensation accrued from the originalissue date. Interest is accrued on each Valuation Datebased on the inflation adjusted par value at that timeand is included in “Interest” in the Statement ofOperations.


Translation of foreign currenciesThe fair value of investments and other assets andliabilities in foreign currencies are translated into theFund’s functional currency at the rates of exchangeprevailing at the period-end date. Purchases andsales of investments, and income and expenses aretranslated at the rates of exchange prevailing on therespective dates of such transactions. Foreignexchange gains (losses) on completed transactionsare included in “Realized gain (loss) on sale ofinvestments” and unrealized foreign exchange gains(losses) are included in “Change in unrealizedappreciation (depreciation) in value of investments”in the Statement of Operations. Realized andunrealized foreign exchange gains (losses) on assets(other than investments) and liabilities are includedin “Realized gain (loss) on foreign exchange” in theStatement of Operations.

Forward currency contractsA forward currency contract is an agreementbetween two parties (the Fund and the counterparty)to purchase or sell a currency against anothercurrency at a set price on a future date. The Fundmay enter into forward currency contracts forhedging purposes which can include the hedging ofall or a portion of the currency exposure of aninvestment or group of investments, either directly orindirectly. The Fund may also enter into thesecontracts for non-hedging purposes which caninclude increasing the exposure to a foreign currencyor to shift exposure to foreign currency fluctuationsfrom one country to another.

The value of forward currency contracts entered intoby the Fund is recorded as the difference between thevalue of the contract on the Valuation Date and thevalue on the date the contract originated.

Changes in the value of open forward currencycontracts at each Valuation Date are recognized inthe Statement of Operations as “Change in unrealizedappreciation (depreciation) in value of forwardcurrency contracts”.

Amounts realized at the close of the contracts arerecorded as “Realized gain (loss) on forwardcurrency contracts” in the Statement of Operations.

Futures contractsFutures contracts are financial agreements topurchase or sell a financial instrument at a contractedprice on a specified future date. Futures contracts arevalued at the gain or loss that would arise as a resultof closing the position at the Valuation Date, the“notional value”. Any difference between the notionalvalue on each Valuation Date and the notional valueon the previous Valuation Date is recorded as “Netincome (loss) from derivative contracts” in theStatement of Operations. Treasury bills or cash areheld as margin against the futures contracts.

Credit default swap contractsA credit default swap contract is an agreement totransfer credit risk from one party, a buyer ofprotection, to another party, a seller of protection. TheFund as a seller of protection would be required to paya notional or other agreed upon value to the buyer ofprotection in the event of a default by a third party. Inreturn, the Fund would receive from the counterpartya periodic stream of payments over the term of thecontract provided that no event of default occurs. Ifno default occurs, the Fund would keep the stream ofpayments and would have no payment obligations.

The Fund as a buyer of protection would receive anotional or other agreed upon value from the sellerof protection in the event of a default by a thirdparty. In return, the Fund would be required to payto the counterparty a periodic stream of paymentsover the term of the contract provided that no eventof default occurs.

Credit default swap contracts are fair valued dailybased upon quotations from independent securitypricing sources. Premiums paid or received, if any,are included in “Net income from derivative contracts”in the Statement of Operations. Net periodicpayments are accrued daily and recorded as “Netincome (loss) from derivative contracts” in theStatement of Operations. When credit default swapcontracts expire or are closed out, gains or losses arerecorded as “Net income (loss) from derivativecontracts” in the Statement of Operations.



Option contractsThe Fund may engage in option contract transactionsby purchasing (long positions) or writing (shortpositions) call or put option contracts. Thesecontracts have different risk exposures for the Fundwhereas the risk for long positions will be limited tothe premium paid to purchase the option contracts,the risk exposure for the short position is potentiallyunlimited until closed or expired.

Purchased option contractsThe premium paid for purchasing a call option isrecorded as an asset in the Statement of Net Assets.The premium is valued at every Valuation Date at anamount equal to the fair value of the option thatwould have the effect of closing the position. Thechange in the difference between the premium andthe fair value is shown as “Change in unrealizedappreciation (depreciation) in value of investments”in the Statement of Operations.

When a purchased option expires, the Fund willrealize a loss equal to the premium paid. When apurchased option is closed, the gain or loss the Fundwill realize will be the difference between theproceeds and the premium paid. When a purchasedcall option is exercised, the premium paid is added tothe cost of acquiring the underlying security. When apurchased put option is exercised, the premium paidwill be subtracted from the proceeds from the sale ofthe underlying security that had to be sold.

Written option contractsThe premium received from writing a call or putoption is recorded as a liability in the Statement ofNet Assets.

When a written option expires, the Fund will realize again equal to the premium received. When a writtenoption is closed, the Fund will realize a gain or lossequal to the difference between the cost at which thecontract was closed and the premium received. When

a written call option is exercised, the premiumreceived is added to the proceeds from the sale of theunderlying investments to determine the realizedgain or loss. When a written put option is exercised,the premium received will be subtracted from the costof the underlying investment the Fund had purchased.

The gain or loss that the Fund realizes when apurchased or written option is expired or closed isrecorded as “Net income (loss) from derivativecontracts” in the Statement of Operations.

Securities lendingA Fund may engage in securities lending, whereapplicable, pursuant to the terms of an agreementwhich includes restrictions as set out in Canadiansecurities legislation. Collateral held is governmentTreasury Bills and qualified Notes.

Income from securities lending, where applicable, isincluded in the Statement of Operations and isrecognized when earned. The securities on loancontinue to be displayed in the Statement ofInvestment Portfolio. The market value of thesecurities loaned and collateral held is determineddaily. Aggregate fair values of securities on loan andrelated collateral held in trust as at September 30,2013 and September 30, 2012, where applicable, aredisclosed in Note 7(h).

Increase or decrease in net assets from operations per unit“Increase (decrease) in net assets from operations perunit” of a series in the Statement of Operationsrepresents the increase (decrease) in net assets fromoperations attributable to the series, divided by theweighted average number of units of the seriesoutstanding during the period.

Short-term trading penaltyTo discourage excessive trading, the Fund may, at theManager’s sole discretion, charge a short-termtrading penalty. This penalty is paid directly to theFund and is included in “Interest” in the Statement of Operations, if any.




Other assets and liabilitiesIncome receivable, subscriptions receivable, futurescontract margin receivable, and due from broker aredesignated as loans and receivables and recorded atcost or amortized cost. Similarly, amounts due tobroker, futures contract margin payable, redemptionspayable, distributions payable and accrued expensesare designated as financial liabilities and reported atamortized cost. Other assets and liabilities are short-term in nature, and are carried at cost or amortizedcost which approximates fair value.

Future accounting standardsCanadian investment entities will be required toprepare their financial statements in accordance withInternational Financial Reporting Standards (“IFRS”),as issued by the International Accounting StandardsBoard (“IASB”), for fiscal years beginning on or afterJanuary 1, 2014. As a result, the Fund will report itsfinancial results for the interim period endingMarch 31, 2015, prepared on an IFRS basis. It willalso provide comparative data on an IFRS basis,including an opening balance sheet as at October 1,2013 (“transition date”).

The differences between the Fund’s accountingpolicies under Canadian GAAP and IFRSrequirements will result in measurement andrecognition differences on transition to IFRS. The netimpact of these differences will be recorded in theincrease/ decrease in net assets attributable toredeemable unitholders.

Significant accounting changes resulting from our adoption of IFRSThe main accounting changes listed below shouldnot be considered a comprehensive list of impacts ofadopting IFRS, but rather the most significant ofcertain key changes.

The framework for fair valuation is set out underIFRS 13 Fair Value Measurement (“IFRS 13”), whichincludes the requirements for the measurement anddisclosure of fair value. If an asset or liabilitymeasured at fair value has a bid price and an askprice, the standard requires valuation to be based on

a price within the bid-ask spread that is mostrepresentative of fair value. The standard allows theuse of mid-market pricing or other pricingconventions that are used by market participants as apractical means for fair value measurements within abid-ask spread. Thus this standard will impact thenet assets per unit for financial statement reportingpurposes compared to current standards, and mayalso result in the elimination of the differencesbetween the net asset per unit and NAV per unit atthe financial statement reporting date. While IFRSdoes not require interest income to be disclosed fordebt instruments measured at Fair Value throughProfit or Loss, when interest income is disclosed,IFRS requires that the effective interest rate methodof calculating accrued interest be used rather thanthe straight-line amortization method. The Manageris assessing the impact of this change to the Fund’sfinancial statements. The Manager has not identifiedany changes that will impact NAV per unit as a resultof the transition to IFRS.

Where the Fund holds controlling interest in aninvestment, it is the Manager’s expectation that theFund will qualify as an Investment Entity inaccordance with IFRS 10 Consolidated FinancialStatements. As such, the Fund will not be required toconsolidate its investments, but rather to hold theinvestments at Fair Value through Profit or Lossregardless of whether those investments arecontrolled. If the Fund fair values the investments itcontrols, it may be required to make additionalfinancial statement disclosures on its controlledinvestments in accordance with IFRS 12 Disclosure ofInterests in Other Entities (“IFRS 12”). IFRS 12 alsorequires additional disclosures if the Fund isdetermined to qualify as an investment entity withouthaving all of the typical characteristics of aninvestment entity.

The criteria contained within IAS 32 FinancialInstruments: Presentation (“IAS 32”) will result in theclassification of the unitholders’ equity as a liabilitywithin the Fund’s Statement of Net Assets, unless allconditions required for equity classification are met.The Manager is currently assessing the Fund’sunitholder structure to determine classificationunder IAS 32.



redemptions of units except as disclosed in Note 7(a),if any. The relevant movements in capital are shownon the Statement of Changes in Net Assets. Inaccordance with its investment objectives andstrategies, and the risk management practicesoutlined in Note 6, the Fund endeavours to invest thesubscriptions received in appropriate investmentswhile maintaining sufficient liquidity to meetredemptions, such liquidity being augmented byshort-term borrowings or disposal of investmentswhere necessary.

4. Income taxesThe Fund qualifies as a mutual fund trust under theprovisions of the Income Tax Act (Canada) (the “TaxAct”). Distributions of all net taxable income andsufficient amounts of net realized capital gains foreach taxation year will be paid to unitholders. Part ofthe Fund’s net income and net realized capital gainsnot paid or payable, is subject to income tax. It is theintentions of the Fund to distribute all of its incomeand sufficient net realized capital gains so that theFund will not be subject to income tax. Income tax onnet realized capital gains not paid or payable isgenerally recoverable by virtue of refundingprovisions contained in tax legislation, asredemptions occur.

Non-capital losses that arose in 2004 and 2005 areavailable to be carried forward for ten years andapplied against future taxable income. Non-capitallosses that arose in 2006 and thereafter are availableto be carried forward for twenty years. Capital lossesfor income tax purposes may be carried forwardindefinitely and applied against capital gains realizedin future years.

The Fund’s non-capital and capital losses for incometax purposes as of the tax year-ended December 2012are included in Note 7(c), if applicable.

Under IFRS, cash flows statement is one of theprimary financial statements required to bepresented. The Fund will therefore be presentingcash flows statement in its set of financial statementsin accordance with the presentation requirements inIAS 7 Statement of Cash Flows (“IAS 7”).

3. Unit valuationUnits of the Fund are offered for sale on a continuousbasis and may be purchased or redeemed on anyValuation Date at the NAV per unit of a particularseries. The NAV per unit of a series for the purposesof subscription or redemption is computed bydividing the NAV of the Fund attributable to the series(that is, the total fair value of the assets attributable tothe series less the liabilities attributable to the series)by the total number of units of the series of the Fundoutstanding at such time. This amount may bedifferent from the net asset per unit of a seriescalculation, which is presented on the Statement ofNet Assets. Generally, any differences are due tovaluing actively traded securities at bid prices forCanadian GAAP purposes while NAV typically utilizesclosing price to determine fair value for the purchaseand redemption of units. See Note 7(b) for thecomparison between NAV per unit and net assets perunit for each series.

Expenses directly attributable to a series are chargedto that series. Other expenses, income, realized andunrealized gains and losses from investmenttransactions are allocated proportionately to eachseries based upon the relative NAV of each series.

CapitalThe capital of the Fund is represented by issued andredeemable units with no par value. The units areentitled to distributions, if any, and to payment of aproportionate share based on the Fund’s NAV per unitupon redemption. The Fund has no restrictions orspecific capital requirements on the subscriptions and



5. Related party transactions(a) Management feesThe Manager is responsible for the day-to-daymanagement of the Fund and its investment portfolioin compliance with the Fund’s constating documents.The Manager monitors and evaluates the performanceof the Fund, pays for the investment managementservices of the investment advisors and provides allrelated administrative services required by the Fund.As compensation for its services the Manager isentitled to receive a fee payable monthly, calculatedat the maximum annual rates included in Note 7(d).

(b) Fixed administration feeThe Manager pays certain operating expenses of theFund in return for a fixed administration fee, which ispaid for by the Fund. Certain specified expenses arepaid directly by the Fund and include interest andborrowing expenses, costs and expenses related to theoperation of the Fund’s Independent ReviewCommittee, taxes to which the Fund is or might besubject, and costs associated with compliance withany new governmental or regulatory requirementintroduced after December 1, 2007 (e.g., cost associatedwith the production of Fund Facts). The fixedadministration fee is calculated daily as a fixedannual percentage of the average NAV of the Fund.Refer to Note 7(d) for the fixed administration feerates charged to the Fund.

The Manager may, in some years and in certain cases,absorb a portion of management fees, fixedadministration fees or certain specified expenses ofthe Fund or series of the Fund. The decision to absorbthese expenses is reviewed periodically anddetermined at the discretion of the Manager, withoutnotice to unitholders.

(c) Commissions and other portfolio transaction costsThe Fund may execute trades with and or throughBMO Nesbitt Burns Inc., an affiliate of the Manager,based on established standard brokerage agreementsat market prices. These fees are included in“Commissions and other portfolio transaction costs”in the Statement of Operations. Refer to Note 7(e) forrelated party fees charged to the Fund for the periodsended September 30, 2013 and 2012, where applicable.

(d) Initial investmentsIn order to establish a new Fund, the Manager makesan initial investment in the Fund. Pursuant to thepolicies of the Canadian Securities Administrators, aninitial investor cannot redeem its investments until anadditional $500 has been received from otherinvestors with respect to the same series of units.Refer to Note 7(d) for the investment in units of theFund held by the Manager as at September 30, 2013and September 30, 2012, where applicable.

(e) Other related party transactionsFrom time to time, the Manager may on behalf of theFund enter into transactions or arrangements with orinvolving other members of Bank of Montreal Groupof Companies, or certain other persons or companiesthat are related or connected to the Manager of theFund. These transactions or arrangements may includetransactions or arrangements with or involving Bankof Montreal Group of Companies, BMO Nesbitt BurnsInc., BMO Harris Investment Management Inc.,BMO Asset Management Inc., BMO InvestorLine Inc.,HIM Monegy Inc., BMO Trust Company, PyrfordInternational Limited, Lloyd George ManagementInc., or other investment funds offered by BMO andmay involve the purchase or sale of portfoliosecurities through or from a member of Bank ofMontreal Group of Companies, the purchase or sale ofsecurities issued or guaranteed by a member of Bankof Montreal Group of Companies, the purchase orredemption of units or shares of other BMO MutualFunds or the provision of services to the Manager.

6. Financial instrument riskThe Fund may be exposed to a variety of financialrisks that are concentrated in its investment holdings,including derivative instruments. The Statement ofInvestment Portfolio groups securities by asset type,geographic region and/or market segment. TheFund’s risk management practice includes themonitoring of compliance to investment guidelines.

The Manager manages the potential effects of thesefinancial risks on the Fund’s performance byemploying and overseeing professional andexperienced portfolio managers that regularlymonitor the Fund’s positions, market events anddiversify investment portfolios within the constraintsof the investment guidelines.



Where the Fund invests in other investment fund(s),it may be indirectly exposed to the financial instrumentrisks of the underlying fund(s), depending on theinvestment objectives and the type of securities heldby the underlying fund(s). The decision to buy or sellan underlying fund is based on the investmentguidelines and positions, rather than the exposure ofthe underlying fund(s).

(a) Currency riskCurrency risk is the risk that the value of investmentsdenominated in currencies, other than the functionalcurrency of the Fund, will fluctuate due to changes inforeign exchange rates. Investments in foreignmarkets are exposed to currency risk as the pricesdenominated in foreign currencies are converted tothe Fund’s functional currency in determining fairvalue. The Fund may enter into forward currencycontracts for hedging purposes to reduce foreigncurrency exposure or to establish exposure to foreigncurrencies. The Fund’s exposure to currency risk, ifany, is further discussed in Note 7(f).

(b) Interest rate riskInterest rate risk is the risk that the fair value of theFund’s interest-bearing investments will fluctuate dueto changes in market interest rates. The Fund’sexposure to interest rate risk is concentrated in itsinvestment in debt securities (such as bonds, moneymarket instruments, short-term investments anddebentures) and interest rate derivative instruments,if any. Other assets and liabilities are short-term innature and/or non-interest bearing. The Fund’sexposure to interest rate risk, if any, is furtherdiscussed in Note 7(f).

(c) Other market riskOther market risk is the risk that the fair value of afinancial instrument will fluctuate as a result ofchanges in market prices (other than those arisingfrom interest rate risk or currency risk), whetherthose changes are caused by factors specific to theindividual financial instrument or its issuer, orfactors affecting all similar financial instruments

traded in a market. Other assets and liabilities aremonetary items that are short-term in nature, as suchthey are not subject to other market risk. The Fund’sexposure to other market risk, if any, is furtherdiscussed in Note 7(f).

(d) Credit riskCredit risk is the risk that a loss could arise from asecurity issuer or counterparty to a financialinstrument not being able to meet its financialobligations. The fair value of debt securities includesconsideration of the credit worthiness of the debtissuer. Credit risk exposure for over-the-counterderivative instruments is based on the Fund’sunrealized gain of the contractual obligations withthe counterparty as at the reporting date. The creditexposure of other assets is represented by its carryingamount. The Fund’s exposure to credit risk, if any, isfurther discussed in Note 7(f).

The Fund may enter into securities lending transactionswith approved counterparties. Credit risk associatedwith these transactions is considered minimal as allcounterparties have a sufficient approved credit ratingand the market value of collateral held by the Fundmust be at least 102% of the fair value of securitiesloaned, if any, as disclosed in Note 7(h).

(e) Liquidity riskThe Fund’s exposure to liquidity risk is concentratedin the daily cash redemptions of units. The Fundprimarily invests in securities that are traded inactive markets and can be readily disposed. Inaddition, the Fund retains sufficient cash and cashequivalent positions to maintain liquidity. The Fundmay, from time to time, enter into over-the-counterderivative contracts or invest in unlisted securities,which are not traded in an organized market and maybe illiquid. Securities for which a market quotationcould not be obtained and may be illiquid areidentified on the Statement of Investment Portfolio.The proportion of illiquid securities to the NAV of theFund is monitored by the Manager to ensure it doesnot exceed the regulatory limit and does notsignificantly affect the liquidity required to meet theFund’s financial obligations.


7. Fund specific information(a) Fund and series information, change in units and significant eventsThe Fund’s inception date was August 7, 2013. TheFund is authorized to issue an unlimited number ofunits in each of Series A, Series I, Series F andAdvisor Series.

Series Launch Date

Series A August 12, 2013Series I August 12, 2013Series F August 12, 2013Advisor Series August 12, 2013

Series A units are offered on a no-load basis and areavailable to all investors.

Series I units are available for purchase byinstitutional investors who make the requiredminimum investments and have entered into anagreement with the Manager. No management feesand fixed administration fees are charged to the Fundin respect of the Series I units as each investor ordealer negotiates a separate fee with the Manager.

Series F units are available for purchase by investorswho are enrolled in dealer-sponsored wrap programsor flat fee accounts. Instead of paying a commission oneach transaction, these investors pay an annual fee tothe Manager based on the value of their assets.

Advisor Series units are available to all investorsthrough authorized dealers and brokers.

The number of units of each series that have beenissued and are outstanding are disclosed in the tablebelow.

For the period ended Sep. 30(in thousands of units) 2013

Series AUnits issued and outstanding, beginning of period —Issued 338Issued on reinvestment of distributions —Redeemed during the period (1)

Units issued and outstanding, end of period 337

For the period ended Sep. 30(in thousands of units) 2013

Series IUnits issued and outstanding, beginning of period —Issued 783Issued on reinvestment of distributions 1Redeemed during the period —


Series FUnits issued and outstanding, beginning of period —Issued 1Issued on reinvestment of distributions —


Advisor SeriesUnits issued and outstanding, beginning of period —Issued 1Issued on reinvestment of distributions —


(b) Comparison of NAV per unit to net assets per unitSep. 30, 2013

NAV Net AssetsSeries per Unit per Unit

Series A 10.01 10.01Series I 10.04 10.04Series F 10.01 10.01Advisor Series 10.01 10.01

(c) Income taxesThe Fund’s first tax reporting period will beDecember 2013.

(d) Related party transactionsManagement and fixed administration feesThe Manager is entitled to receive the following feespayable monthly, calculated at the followingmaximum annual rates:

Fixed Management Administration Fees FeesSeries (%) (%)

Series A 1.35 0.30Series I * *Series F 0.65 0.30Advisor Series 1.35 0.30

*Negotiated and paid by each Series I investor directly to the Manager.



Initial investmentsThe Manager held the following units of the Fund:

Sep. 30, 2013Value

Number of UnitsSeries of Units ($)

Series A 247,355 2,476Series I 1,002 10Series F 1,002 10Advisor Series 1,002 10

(e) Brokerage commissions and soft dollarsThere were no brokerage commissions charged to theFund during the period ended September 30, 2013.

(f) Financial instrument riskThe Fund’s objective is to earn income as well asprovide the potential for capital appreciation byinvesting primarily in fixed income securities issuedin or by, or have economic exposure to, emergingmarket countries, and that are denominated inU.S. dollars, other leading trading currencies or localcurrencies.

No changes to the Fund’s objective or strategy, whichwould have had an affect on the overall level of riskof investing in the Fund, were made during the period.

Currency riskThe table below summarizes the Fund’s exposure tocurrency risk. Amounts shown are based on thecarrying value of monetary and non-monetary assets(including derivatives and the underlying principal(notional) amount of forward currency contracts, if any).

As at Sep. 30, 2013Cash and As a

other current Forward Net % ofreceivables Invest- currency currency net& payables ments contracts exposure assets

Currency ($) ($) ($) ($) (%)

U.S. Dollar (284) 10,101 (9,669) 148 1.3

All amounts in CA$.

As at September 30, 2013, if the Canadian dollar hadstrengthened or weakened by 5% in relation to allforeign currencies, with all other factors remainingconstant, Net Assets could possibly have decreased orincreased by approximately $7. In practice, actualresults may differ from this sensitivity analysis andthe difference could be material.

Interest rate riskThe following table summarizes the Fund’s exposureto interest rate risk by remaining term to maturity.

Interest Rate Exposure as atNumber of years Sep. 30, 2013

Less than 1 year —One to three years 707Three to five years 700Five to ten years 5,931Greater than ten years 2,763

Total 10,101

All amounts in CA$.

As at September 30, 2013, if the prevailing interestrates had been raised or lowered by 1%, assuming aparallel shift in the yield curve, with all other factorsremaining constant, Net Assets could possibly havedecreased or increased by approximately $730. TheFund’s interest rate sensitivity was determined basedon portfolio weighted duration. In practice, actualresults may differ from this sensitivity analysis andthe difference could be material.

Other market riskAs at September 30, 2013, the Fund was notsignificantly exposed to other market risk.

Credit riskThe Fund’s credit risk exposure grouped by creditratings are listed in the following table:

As a % of Net Assets as atCredit Rating Sep. 30, 2013

AA 8.5A 7.1BBB 50.4Below BBB 25.1

Total 91.1



(g) Fair value hierarchyThe Fund classifies its financial instruments into threelevels based on the inputs used to value the financialinstruments. Level 1 securities are valued based on thequoted prices in active markets for identical securities.Level 2 securities are valued based on significantobservable market inputs, such as quoted prices fromsimilar securities and quoted prices in inactive marketsor based on unobservable inputs to models. Level 3securities are valued based on significant unobservableinputs that reflect the Manager’s determination ofassumptions that market participants might reasonablyuse in valuing the securities. The table below showsthe relevant disclosure.

As at September 30, 2013Financial assets Level 1 Level 2 Level 3 Total

Debt Securities 2,187 7,914 — 10,101Derivatives — 156 — 156

Total 2,187 8,070 — 10,257

Financial liabilities

Derivatives — — — —

(h) Securities lendingThere were no assets involved in securities lendingtransactions as at September 30, 2013.


Management’s Responsibility for Financial Reporting

The accompanying financial statements have been prepared by management of BMO Investments Inc. Managementis responsible for the information and representations made in these financial statements.

Management has maintained appropriate processes to ensure that relevant and reliable financial information isproduced. The financial statements have been produced in accordance with accounting principles generallyaccepted in Canada and include certain amounts based on estimates and judgements. The significant accountingpolicies which management believes are appropriate for the BMO Mutual Funds are described in Note 2 to thefinancial statements.

The Trustee of each of the Trusts is responsible for reviewing and approving the financial statements and overseeingmanagement’s performance of its financial reporting responsibilities. The Trustee reviews the financialstatements, adequacy of internal controls, the audit process and financial reporting with management and theexternal auditors.

The Board of Directors of BMO Global Tax Advantage Funds Inc. is responsible for reviewing and approving thefinancial statements and overseeing management’s performance of its financial reporting responsibilities. TheAudit Committee of the Board of Directors reviews the financial statements, adequacy of internal controls, theaudit process and financial reporting with management and the external auditors. The Audit Committee reportsto the Board of Directors prior to the Board approval of the financial statements.

PricewaterhouseCoopers LLP are the external auditors of the BMO Mutual Funds. The auditors have beenappointed by the respective Boards and cannot be changed without the prior approval of the Independent ReviewCommittee and 60 days notice to the Securityholders. They have audited the financial statements in accordancewith generally accepted auditing standards in Canada to enable them to express their opinion on the financialstatements. Their report is included as an integral part of the financial statements.

Rajiv Silgardo R.J. SchauerChief Executive Officer Treasurer and Chief Financial OfficerBMO Investments Inc. BMO Mutual FundsDecember 10, 2013 December 10, 2013

Trustee and Officers

Trustee of BMO Mutual Fund TrustsBMO Investments Inc.

Officers of BMO Mutual Fund TrustsRobert J. Schauer, CPA, CATreasurer & Chief Financial Officer

Michelle MagnayeCorporate Secretary

Fund ManagerBMO Investments Inc.Member of the Investment Funds Institute of Canada

Directors of BMO Investments Inc.Myra Cridland

Barry M. Cooper

Ross F. Kappele

Rajiv R. Silgardo

Robert J. Schauer, CPA, CA

Directors of BMO Global Tax Advantage Funds Inc.Barry M. Cooper

Ross F. Kappele

Helen Killoch*

Douglas E. Kirk*

Thomas A. Pippy, CPA, CA*

Rajiv R. Silgardo

Officers of BMO Investments Inc.Barry M. Cooper, Chairman

Rajiv R. Silgardo, Chief Executive Officer

Ross F. Kappele, Executive Vice-President & Head of Retail Distribution

Kevin Gopaul, Chief Product Officer & Senior Vice President

Subhas Sen, Senior Vice President

Dirk McRobb, Senior Vice President

Stella Vranes, CPA, CA, Chief Financial Officer

William Chinkiwsky, Chief Compliance Officer

Michelle Magnaye, Corporate Secretary

Penelope Muradya, Assistant Corporate Secretary

Officers of BMO Global Tax Advantage Funds Inc.Barry M. Cooper, Chairman

Rajiv R. Silgardo, Chief Executive Officer

Robert J. Schauer, CPA, CATreasurer & Chief Financial Officer

Michelle Magnaye, Corporate Secretary

Penelope Muradya, Assistant Corporate Secretary

Fund ManagerBMO Investments Inc.Member of the Investment Funds Institute of Canada

Directors and Officers

*Audit Committee member for BMO Global Tax Advantage Funds Inc.

www.bmo.com/mutualfunds

BMO Investments Inc. First Canadian Place, 43rd Floor, 100 King Street WestToronto, ON M5X 1A1

For more information please call 1-800-665-7700

® Registered trade-mark of Bank of Montreal, used under licence.™Trade-mark of Bank of Montreal, used under licence.

BMO Mutual Funds are offered by BMO Investments Inc., a financial services firm and separate legal entity from Bank of Montreal.

Documents

BMO Mutual Funds 2013 · 2013-12-23 · investment portfolio as at September 30, 2013 and the statements of net assets, operations and changes in net assets as at and for the periods