MD Family of Funds 2017 ANNUAL FINANCIAL … · of dis tributions only and does not take int o account sales , redemption, dis tribution or optional charges payable by any securit

MD Family of Funds

2017 ANNUALFINANCIAL STATEMENTS

Audited Annual Financial Statements for the Year Ended December 31, 2017These audited Annual Financial Statements do not contain the Annual Management Report of Fund Performance (“MRFP”) of the investment fund. If you have not received a copy of the Annual MRFP with this report, you may obtain a copy of the Annual MRFP at your request, and at no cost, by calling the toll-free number 1 800 267-2332, by writing to us at MD Financial Management Inc., 1870 Alta Vista Dr., Ottawa ON, K1G 6R7, by visiting our website at md.cma.ca or by visiting the SEDAR website at sedar.com. Securityholders may also contact us using one of these methods to request a copy of the invest-ment fund’s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure.

MD Financial Management Inc. wholly owns or has a majority interest in its eight subsidiaries (the MD Group of Companies). It provides financial products and services, is the fund manager for the MD Family of Funds and offers investment counselling services. For a detailed list of the MD Group of Companies, visit md.cma.ca.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund. Standard performance data assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges payable by any securityholder which would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. You may obtain a copy of the prospectus before investing by calling your MD Advisor or the MD Trade Centre at 1 800 267-2332.

A Message About Your Financial Statements

Dear MD Family of Funds Investor:

As part of our commitment to keeping you informed about your MD fund investments, please find attached the 2017 Annual Financial Statements.

The audited Annual Financial Statements are produced on a fund-by-fund basis, and your report only includes information on the funds you owned as of December 31, 2017.

If you have any questions regarding these documents, please contact your MD Advisor or the MD Trade Centre at 1 800 267-2332. We thank you for your continued investment in the MD Family of Funds.

MD Family of FundsManagement’s Responsibility for Financial Reporting

Management acknowledges responsibility for the preparation and presentation of the financial statements of MD Money Fund, MD Bond Fund, MD Short-Term Bond Fund, MD Balanced Fund, MD Dividend Income Fund, MD Dividend Growth Fund, MD Equity Fund, MD Select Fund, MD American Value Fund, MD American Growth Fund, MD International Value Fund, MD International Growth Fund, MD Growth Investments Limited, MD Strategic Yield Fund, MD Strategic Opportunities Fund, MD Precision Conservative Portfolio, MD Precision Moderate Balanced Portfolio, MD Precision Balanced Growth Portfolio, MD Precision Maximum Growth Portfolio, MD Precision Balanced Income Portfolio, MD Precision Moderate Growth Portfolio, MDPIM Canadian Equity Pool, MDPIM US Equity Pool, MD Fossil Fuel Free Bond Fund™, MD Fossil Fuel Free Equity Fund™, MDPIM S&P TSX Capped Composite Index Pool, MDPIM S&P 500 Index Pool, and MDPIM International Equity Index Pool (collectively “the funds”). These financial statements have also been approved, in its capacity as trustee, by the Board of Directors of MD Financial Management Inc., with the exception of MD Growth Investments Limited, which has been approved by its own Board of Directors.

The financial statements have been prepared by management in accordance with International Financial Reporting Standards. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Management has, where required, made these judgments and estimates on a reasonable basis to ensure that the financial statements are presented fairly in all material respects. Management also maintains strong internal controls to provide reasonable assurance that the financial information provided is reliable and accurate, that the funds’ assets are appropriately accounted for and safeguarded, and that any compliance requirements arising under corporate legislation, securities regulations and internal codes of business conduct are strictly adhered to.

The Board of Directors of MD Financial Management Inc. and MD Growth Investments Limited are responsible to ensure that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the respective financial statements as outlined above.

The Board of Directors for MD Financial Management Inc. and MD Growth Investments Limited (“the Boards”), meet with the external auditors periodically to discuss internal control, accounting and auditing matters and financial reporting issues in order to satisfy themselves that each party’s Board of Directors has properly discharged its statutory responsibilities with regard to financial reporting. The Boards review unaudited semi-annual financial statements and audited annual financial statements including the external auditors’ report thereon. The Boards consider these findings when making their ultimate approval of the financial statements for issuance. The Boards also review the appointment of the external auditors annually.

The financial statements have been audited by PricewaterhouseCoopers LLP, the external auditors, in accordance with Canadian generally accepted auditing standards. PricewaterhouseCoopers LLP has full and free access to the MD Financial Management Inc. and MD Growth Investment Limited Boards.

Signed on behalf of MD Growth Investments Limited.

Brian Peters John Riviere President and Chief Executive Officer Chief Financial OfficerMD Growth Investments Limited MD Growth Investments Limited

Signed on behalf of MD Financial Management Inc., in its capacity as trustee for MD Money Fund, MD Bond Fund, MD Short-Term Bond Fund, MD Balanced Fund, MD Dividend Income Fund, MD Dividend Growth Fund, MD Equity Fund, MD Select Fund, MD American Value Fund, MD American Growth Fund, MD International Value Fund, MD International Growth Fund, MD Strategic Yield Fund, MD Strategic Opportunities Fund, MD Precision Conservative Portfolio, MD Precision Moderate Balanced Portfolio, MD Precision Balanced Growth Portfolio, MD Precision Maximum Growth Portfolio, MD Precision Balanced Income Portfolio, MD Precision Moderate Growth Portfolio, MDPIM Canadian Equity Pool, MDPIM US Equity Pool, MD Fossil Fuel Free Bond Fund and MD Fossil Fuel Free Equity Fund, MDPIM S&P TSX Capped Composite Index Pool, MDPIM S&P 500 Index Pool, and MDPIM International Equity Index Pool.

Brian Peters John RivierePresident and Chief Executive Officer Chief Financial OfficerMD Financial Management Inc. MD Financial Management Inc.

PricewaterhouseCoopers LLP PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2 T: +1 416 863 1133, F: +1 416 365 8215

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

March 12, 2018

Independent Auditor’s Report

To the Unitholders and Trustee of: MD American Growth Fund MD Select Fund MD American Value Fund MD Short-Term Bond Fund MD Balanced Fund MD Strategic Opportunities Fund MD Bond Fund MD Strategic Yield Fund MD Dividend Growth Fund MDPIM Canadian Equity Pool MD Dividend Income Fund MDPIM US Equity Pool MD Equity Fund MD Precision Moderate Balanced Portfolio MD Fossil Fuel Free Bond Fund MD Precision Balanced Growth Portfolio MD Fossil Fuel Free Equity Fund MD Precision Balanced Income Portfolio MD International Growth Fund MD Precision Conservative Portfolio MD International Value Fund MD Precision Maximum Growth Portfolio MD Money Fund MD Precision Moderate Growth Portfolio

and

To the Shareholders of: MD Growth Investments Limited (collectively, the Funds)

We have audited the accompanying financial statements of each of the Funds, which comprise the statements of financial position, comprehensive income, changes in net assets attributable to holders of redeemable shares/units and cash flows as at and for the years or periods indicated in the accompanying financial statements, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

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

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

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

OpinionIn our opinion, the financial statements of each Fund presents fairly, in all material respects, the financial position of each Fund as at December 31, 2017 and 2016 and their financial performance and their cash flows for the years or periods then ended in accordance with International Financial Reporting Standards.

Chartered Professional Accountants, Licensed Public Accountants

MD Dividend Income FundSchedule of Investment Portfolio as at December 31, 2017

(in $000's except for number of shares)

Percentages shown in brackets relate investments at fair value to net assets of the Fund.The accompanying notes are an integral part of these financial statements.

MaturityDate

Coupon(%)

Principal Amountin Currency of

Issue

AverageCost($)

FairValue

($)

DOMESTIC BONDSCorporate Bonds (26.80%)407 International Inc. 05/11/2046 3.83% 3,000 2,962 3,167407 International Inc. 02/14/2036 5.75% 1,090 1,108 1,411Aeroports de Montreal 09/26/2042 3.92% 25 25 28Aeroports de Montreal 09/17/2035 5.17% 1,132 1,242 1,450Alberta Powerline LP 12/01/2053 4.07% 255 255 273Alectra Inc. 05/17/2027 2.49% 675 675 656Alectra Inc. 07/30/2042 3.96% 470 470 506Algonquin Power Co. 02/17/2027 4.09% 500 503 517Algonquin Power Co. 02/15/2022 4.65% 750 756 798Alliance Pipeline LP 06/30/2023 7.18% 894 892 1,003AltaGas, Ltd. 06/12/2023 3.57% 1,005 1,004 1,025AltaGas, Ltd. 04/07/2026 4.12% 775 819 805AltaGas, Ltd. 08/15/2044 4.50% 622 622 612AltaGas, Ltd. 10/04/2047 4.99% 450 475 476AltaLink, LP 12/03/2046 3.72% 750 733 783AltaLink, LP 06/30/2045 4.09% 1,750 1,937 1,937AltaLink, LP 11/08/2041 4.46% 465 468 539Bank of Montreal 03/31/2021 1.88% 5,000 5,069 4,925Bank of Montreal 06/01/2026 3.32% 3,350 3,431 3,408Bank of Montreal 09/10/2025 4.61% 2,675 2,912 3,010Bank of Montreal 10/28/2021 1.61% 600 600 582bcIMC Realty Corporation 06/03/2025 2.84% 610 630 609bcIMC Realty Corporation 06/29/2022 3.51% 2,600 2,816 2,706Bell Canada 08/12/2026 2.90% 2,850 2,806 2,755Bell Canada 09/29/2021 3.15% 395 393 403Bell Canada 09/29/2027 3.60% 380 379 384Bell Canada 12/18/2045 4.35% 700 697 712Bell Canada 02/27/2047 4.45% 1,500 1,564 1,548Bell Canada 09/29/2044 4.75% 250 261 270BlackBerry Limited 11/13/2020 3.75% 14,467 18,806 22,637Brookfield Asset Management Inc. 03/16/2027 3.80% 1,300 1,299 1,312Brookfield Infrastructure Finance ULC 03/11/2022 3.45% 825 826 839Brookfield Renewable Energy Partners ULC 06/02/2025 3.75% 725 715 741Caisse Centrale Desjardins 03/02/2020 1.70% 285 284 282Canadian Imperial Bank of Commerce 04/26/2021 1.90% 5,000 5,071 4,927Canadian Imperial Bank of Commerce 10/28/2024 3.00% 790 798 797Canadian Imperial Bank of Commerce 01/26/2026 3.42% 350 358 357Canadian Western Bank 01/14/2019 3.08% 225 225 227Capital Desjardins Inc. 12/15/2026 4.95% 3,000 3,353 3,260Capital Desjardins Inc. 05/05/2020 5.19% 750 830 797Central 1 Credit Union 03/16/2020 1.87% 1,236 1,236 1,221Central 1 Credit Union 11/07/2022 2.60% 410 410 406Central 1 Credit Union 04/25/2024 2.89% 1,885 1,942 1,889Choice Properties Limited Partnership 09/20/2022 3.60% 1,500 1,474 1,543Choice Properties Real Estate Investment Trust 02/08/2021 3.50% 280 280 287Choice Properties Real Estate Investment Trust 11/24/2025 4.06% 750 786 778Choice Properties Real Estate Investment Trust 07/05/2023 4.90% 230 230 250CIBC Capital Trust 06/30/2108 9.98% 682 900 753Cominar Real Estate Investment Trust 06/21/2019 3.62% 200 200 201Co-operators Financial Services, Ltd. 03/10/2020 5.78% 455 503 481CU Inc. 09/10/2042 3.81% 3,250 3,154 3,423CU Inc. 07/27/2045 3.96% 425 461 461

5MD Family of Funds | Annual Financial Statements 2017




MaturityDate

Coupon(%)


Issue

AverageCost($)

FairValue

($)

CU Inc. 09/02/2044 4.09% 1,500 1,678 1,653Daimler Canada Finance Inc. 12/16/2021 2.23% 850 851 839Eagle Credit Card Trust 10/18/2021 2.85% 300 306 302Enbridge Gas Distribution Inc. 09/11/2025 3.30% 3,375 3,402 3,504Enbridge Gas Distribution Inc. 11/29/2047 3.50% 265 265 265Enbridge Inc. 12/05/2022 3.19% 1,320 1,320 1,334Enbridge Inc. 02/01/2021 4.26% 1,611 1,654 1,685Enbridge Inc. 03/11/2044 4.57% 980 975 990Enbridge Inc. 09/27/2077 5.38% 775 776 772Enbridge Income Fund 01/13/2023 3.90% 266 266 276Enbridge Income Fund 11/19/2024 4.00% 675 708 697Enbridge Income Fund 11/21/2044 4.90% 550 549 570Enbridge Pipelines Inc. 08/09/2046 4.10% 2,000 1,973 2,071Enbridge Pipelines Inc. 09/29/2045 4.60% 800 840 876Enercare Solutions Inc. Series 17-1 02/21/2022 3.40% 250 250 253ENMAX Corporation 12/05/2024 3.80% 1,140 1,141 1,156EPCOR Utilities Inc. 11/27/2047 3.60% 155 156 156EPCOR Utilities Inc. 02/28/2042 4.60% 1,430 1,658 1,668Fairfax Financial Holdings Limited 12/06/2027 4.25% 250 250 248Fairfax Financial Holdings Limited 12/16/2026 4.70% 265 264 274Fairfax Financial Holdings Limited 03/03/2025 4.95% 750 743 796Fairfax Financial Holdings Limited 10/14/2022 5.84% 115 121 127First Capital Realty Inc. 10/30/2023 3.90% 470 472 486First Capital Realty Inc. 12/05/2022 3.95% 535 530 556First Capital Realty Inc. 07/31/2025 4.32% 900 934 945Ford Credit Canada Company 02/23/2022 2.70% 2,230 2,226 2,206Ford Credit Canada Company 09/19/2022 3.30% 220 220 223Ford Credit Canada Limited 05/07/2020 2.50% 750 750 747Ford Credit Canada Limited 09/16/2020 2.90% 1,250 1,244 1,258Fortis Inc. 12/12/2023 2.85% 500 500 500FortisAlberta Inc. 01/03/2047 5.00% 136 148 173FortisAlberta Inc. 10/30/2039 5.40% 632 720 811FortisAlberta, Inc. 09/09/2047 3.70% 150 150 154FortisBC Energy Inc. 04/09/2046 3.70% 1,200 1,213 1,233General Motors Financial of Canada, Ltd. 06/01/2022 2.60% 600 599 589General Motors Financial of Canada, Ltd. 05/22/2020 3.10% 980 978 990Genworth MI Canada Inc. 06/15/2020 5.68% 1,734 1,733 1,834Grand Renewable Solar LP 01/31/2035 3.90% 203 203 200Greater Toronto Airports Authority 06/07/2040 5.60% 1,000 1,165 1,399Honda Canada Finance Inc. 07/15/2022 2.30% 3,500 3,468 3,460HSBC Bank Canada 06/29/2022 2.20% 2,500 2,478 2,455HSBC Bank Canada 05/13/2019 2.50% 1,010 1,010 1,016HSBC Bank Canada 01/31/2023 2.50% 3,050 3,051 3,026HSBC Bank Canada 01/14/2020 2.90% 2,050 2,107 2,078Husky Energy Inc. 03/10/2027 3.60% 355 354 354Hydro One Inc. 11/18/2019 1.50% 840 840 831Hydro One Inc. 02/24/2026 2.80% 3,000 3,064 2,996Hydro One Inc. 06/06/2044 4.20% 1,675 1,716 1,856Industrial Alliance Insurance and Financial Services Inc. 02/23/2027 2.64% 2,830 2,784 2,804Industrial Alliance Insurance and Financial Services Inc. 09/15/2028 3.30% 500 501 507Intact Financial Corporation 06/07/2027 2.85% 480 480 462Intact Financial Corporation 03/02/2026 3.77% 460 460 478Inter Pipeline, Ltd. 12/16/2026 3.48% 200 203 199Inter Pipeline, Ltd. 05/30/2022 3.78% 1,035 1,045 1,075Kingston Solar LP 07/31/2035 3.60% 227 228 221

6 MD Family of Funds | Annual Financial Statements 2017




MaturityDate

Coupon(%)


Issue

AverageCost($)

FairValue

($)

Laurentian Bank of Canada 04/22/2021 2.75% 1,500 1,501 1,494Laurentian Bank of Canada 09/12/2022 3.00% 620 620 617Loblaw Companies Limited 09/12/2023 4.86% 4,000 4,479 4,386Manitoba Telecom Services Inc. 05/27/2024 4.00% 650 650 684Manulife Financial Capital Trust II 12/31/2108 7.40% 4,046 4,046 4,412National Bank of Canada 03/18/2022 2.11% 4,000 3,960 3,939Nissan Canada Financial Services Inc. 04/09/2020 1.80% 350 350 346Nissan Canada Financial Services Inc. 10/19/2020 2.40% 560 560 560NOVA Gas Transmission, Ltd. 07/16/2027 7.00% 1,000 1,081 1,266OMERS Realty Corporation 02/23/2024 2.90% 3,000 3,137 3,024OMERS Realty Corporation 10/04/2027 3.20% 330 330 336OMERS Realty Corporation 11/12/2024 3.30% 350 374 362Pembina Pipeline Corporation 01/22/2024 2.99% 725 720 715Pembina Pipeline Corporation 06/15/2027 4.24% 1,125 1,187 1,169Pembina Pipeline Corporation 03/25/2044 4.81% 1,050 1,075 1,077Pembina Pipeline Corporation 03/29/2021 4.89% 1,822 1,989 1,944Real Estate Asset Liquidity Trust 10/12/2049 2.60% 610 610 605Reliance LP 09/15/2020 3.80% 40 40 41Reliance LP 03/15/2025 3.80% 1,450 1,459 1,448Reliance LP 08/02/2021 4.10% 650 650 667Reliance LP 03/15/2019 5.20% 275 296 283RioCan Real Estate Investment Trust 02/12/2024 3.29% 475 475 476RioCan Real Estate Investment Trust 05/30/2022 3.75% 225 225 233Rogers Communications Inc. 03/13/2024 4.00% 900 971 953Rogers Communications Inc. 08/25/2040 6.10% 1,575 1,998 1,998Royal Bank of Canada 03/02/2022 1.97% 10,020 9,872 9,818Royal Bank of Canada 03/15/2021 2.03% 2,600 2,635 2,573Royal Bank of Canada 06/04/2025 2.48% 110 109 110Royal Bank of Canada 09/29/2026 3.45% 350 359 358Scotiabank Capital Trust 12/31/2056 5.70% 1,565 1,888 1,924Shaw Communications Inc. 01/31/2024 4.40% 3,000 3,134 3,199Shaw Communications Inc. 11/09/2039 6.80% 625 783 806Smart Real Estate Investment Trust 08/28/2026 3.44% 1,425 1,411 1,391Smart Real Estate Investment Trust 02/11/2021 3.75% 20 20 21SmartCentres Real Estate Investment Trust 12/21/2027 3.80% 310 310 308SNC-Lavalin Group Inc. 11/24/2020 2.70% 210 210 210Sun Life Financial Inc. 09/25/2025 2.60% 3,045 3,043 3,047Sun Life Financial Inc. 11/23/2027 2.75% 365 365 363Sun Life Financial Inc. 09/19/2028 3.05% 2,500 2,500 2,510TD Capital Trust IV 06/30/2108 6.60% 735 896 823TELUS Corporation 04/01/2024 3.35% 2,000 1,944 2,037TELUS Corporation 01/17/2025 3.75% 2,730 2,749 2,832TELUS Corporation 03/10/2026 3.75% 3,000 3,169 3,089TELUS Corporation 01/29/2046 4.40% 500 481 498TELUS Corporation 11/26/2043 5.15% 371 369 412The Bank of Nova Scotia 04/27/2022 1.83% 3,445 3,399 3,349The Bank of Nova Scotia 09/09/2020 2.09% 135 135 134The Bank of Nova Scotia 06/28/2024 2.29% 570 570 556The Bank of Nova Scotia 03/30/2027 2.58% 350 345 345The Bank of Nova Scotia 06/04/2021 2.87% 345 361 350The Bank of Nova Scotia 01/11/2021 3.27% 7,760 8,170 7,968The Empire Life Insurance Company 12/16/2026 3.40% 700 700 702The Empire Life Insurance Company 03/15/2028 3.70% 140 140 141The Toronto-Dominion Bank 03/08/2021 2.05% 3,000 3,059 2,975The Toronto-Dominion Bank 06/24/2020 2.56% 8,400 8,600 8,468





MaturityDate

Coupon(%)


Issue

AverageCost($)

FairValue

($)

The Toronto-Dominion Bank 09/30/2025 2.98% 390 390 394The Toronto-Dominion Bank 07/25/2029 3.22% 1,140 1,146 1,140The Toronto-Dominion Bank 07/24/2024 3.23% 2,000 2,097 2,066TMX Group Limited 12/11/2024 3.00% 310 310 308Toromont Industries Ltd. 10/27/2027 3.80% 185 185 189Toyota Credit Canada Inc. 02/25/2021 2.20% 1,000 1,025 996Toyota Credit Canada Inc. 07/18/2018 2.80% 800 800 805TransCanada PipeLines Limited 06/06/2046 4.40% 1,500 1,539 1,612TransCanada PipeLines Ltd. 09/16/2047 4.30% 240 240 257Union Gas Limited 11/22/2047 3.60% 1,175 1,191 1,192Union Gas Limited 06/21/2041 4.90% 460 459 559Veresen Inc. 11/10/2021 3.43% 300 300 306Wells Fargo Canada Corporation 07/25/2019 2.90% 1,028 1,028 1,042Wells Fargo Canada Corporation 01/24/2023 3.50% 3,100 3,334 3,221Total for Corporate Bonds 246,918 252,240

Government of Canada Bonds (0.60%)Government of Canada 09/01/2022 1.00% 305 296 293Government of Canada 06/01/2023 1.50% 1,775 1,742 1,739Government of Canada 03/01/2019 1.75% 320 321 321Government of Canada 12/01/2048 2.75% 2,441 2,754 2,704Government of Canada 06/01/2020 3.50% 230 249 240Government of Canada 06/01/2019 3.75% 270 280 278Total for Government of Canada Bonds 5,642 5,575Total for Domestic Bonds (27.40%) 252,560 257,815

Numberof Shares

AverageCost($)

FairValue

($)

DOMESTIC EQUITIESConsumer Discretionary (6.52%)Canadian Tire Corporation, Limited Cl. A 101,894 10,918 16,700Corus Entertainment Inc. Cl. B 923,447 15,235 10,804Magna International Inc. 342,638 17,464 24,410Pizza Pizza Royalty Corp. 400,000 6,000 6,480Thomson Reuters Corporation Preferred 179,500 4,255 2,980Total for Consumer Discretionary 53,872 61,374

Consumer Staples (2.71%)Empire Company Limited Cl. A 223,920 5,276 5,484Metro Inc. 292,261 8,900 11,764The Jean Coutu Group (PJC) Inc. Cl. A 27,445 566 670The North West Company Inc. 251,924 5,810 7,575Total for Consumer Staples 20,552 25,493

Energy (8.48%)Cenovus Energy Inc. 398,380 4,611 4,573Enbridge Inc. 175,570 7,738 8,631Freehold Royalties, Ltd. 929,357 16,191 13,058Imperial Oil, Ltd. 355,045 15,367 13,928Inter Pipeline, Ltd. 308,300 7,291 8,025Kinder Morgan Canada Limited 102,000 1,571 1,735PEYTO Exploration & Development Corp. 412,565 8,775 6,201ShawCor, Ltd. 218,430 6,904 5,989





Numberof Shares

AverageCost($)

FairValue

($)

Suncor Energy Inc. 193,630 8,364 8,936TransCanada Corporation 74,280 3,231 4,545TransCanada Corporation Preferred 100,081 2,502 2,668Westshore Terminals Investment Corporation 58,438 1,397 1,536Total for Energy 83,942 79,825

Financials (21.75%)Alaris Royalty Corp. 722,140 17,672 14,927Bank of Montreal 88,260 8,205 8,878Canadian Imperial Bank of Commerce 78,430 7,955 9,611CI Financial Corp. 786,915 25,657 23,426Cominar Real Estate Investment Trust 1,056,203 15,387 15,209Dream Office Real Estate Investment Trust 241,090 4,395 5,343IGM Financial Inc. 416,148 16,603 18,373Northview Apartment REIT 403,770 6,465 10,090Power Corporation of Canada 40,000 1,303 1,295Royal Bank of Canada 314,740 20,377 32,308Sun Life Financial Inc. 184,960 8,898 9,596The Bank of Nova Scotia 335,550 14,487 27,220The Toronto-Dominion Bank 385,720 20,499 28,408Total for Financials 167,903 204,684

Industrials (6.03%)Canadian National Railway Company 173,350 12,665 17,968Canadian Pacific Railway Company 62,260 10,588 14,298New Flyer Industries Inc. 121,903 5,055 6,583Transcontinental Inc. Cl. A 129,989 2,416 3,229Wajax Corporation 239,843 5,551 5,917WestJet Airlines, Ltd. 333,442 6,138 8,789Total for Industrials 42,413 56,784

Information Technology (1.79%)Calian Group, Ltd. 328,900 6,605 10,541Computer Modelling Group, Ltd. 652,950 6,572 6,269Total for Information Technology 13,177 16,810

Materials (2.10%)Labrador Iron Ore Royalty Corporation 366,468 8,759 9,968Potash Corporation of Saskatchewan Inc. 381,630 8,659 9,838Total for Materials 17,418 19,806

Telecommunication Services (3.79%)BCE Inc. 201,339 6,724 12,157Cogeco Communications Inc. 59,700 3,740 5,163Rogers Communications Inc. Cl. B 69,316 2,834 4,440TELUS Corporation 291,500 11,033 13,881Total for Telecommunication Services 24,331 35,641

Utilities (2.14%)ATCO, Ltd. Cl I 99,170 4,814 4,463Emera Inc. 118,949 4,978 5,588Fortis Inc. 132,000 4,941 6,086Hydro One Limited 177,171 3,659 3,969Total for Utilities 18,392 20,106Total for Domestic Equities (55.31%) 442,000 520,523





Numberof Shares

AverageCost($)

FairValue

($)

FOREIGN EQUITIESUnited States (9.68%)C.H. Robinson Worldwide, Inc. 41,900 4,020 4,673Cardinal Health, Inc. 52,200 5,370 4,004Cisco Systems, Inc. 94,500 3,449 4,531CVS Health Corporation 50,000 6,015 4,538Danaher Corporation 38,500 4,391 4,473Emerson Electric Co. 55,140 3,804 4,810Equifax Inc. 30,200 4,498 4,458Fastenal Company 70,000 3,800 4,792International Business Machines Corporation 23,400 4,691 4,494MasterCard Incorporated Cl. A 25,400 3,196 4,813Microsoft Corporation 43,700 2,338 4,679Moodys Corporation 25,300 2,419 4,675Nordstrom, Inc. 56,900 3,809 3,375Packaging Corp of America 32,400 2,234 4,889Sysco Corporation 62,912 2,402 4,783The Charles Schwab Corporation 73,900 3,224 4,752The TJX Companies Inc. 50,000 5,077 4,786UnitedHealth Group Incorporated 16,100 3,066 4,443Viacom Inc. Cl. B 117,210 5,511 4,520W.W. Grainger Inc. 15,750 4,285 4,658Total for United States 77,599 91,146Total for Foreign Equities (9.68%) 77,599 91,146Total for Long-term Investments (92.39%) $772,159 $869,484

MaturityDate

Yield(%)


Issue

AverageCost($)

FairValue

($)

SHORT-TERM INVESTMENTSGovernment of Canada 02/08/2018 0.77% 32,000 31,974 31,974Government of Canada 01/11/2018 0.85% 10,200 10,197 10,197Government of Canada 02/22/2018 0.99% 20,000 19,971 19,971Zeus Receivables Trust 01/02/2018 0.57% 2,500 2,500 2,500Total for Short-term Investments (6.87%) 64,642 64,642Total for Investments (99.26%) $836,801 $934,126Cash and Other Net Assets (0.74%) 6,990Total Net Assets Attributable to Holders of Redeemable Units (100.00%) $941,116



(in $000's)

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

Schedule of Derivative InstrumentsFORWARD CURRENCY CONTRACTS

Contracts Pay ReceiveContract

Rate Due DateFair

Value ($) Counterparty

Rating ofthe

Counterparty*

1 87,000 U.S. Dollar 108,449 Canadian Dollar 1.247 1/25/18 (419) State Street Bank and Trust Co. AA-Total Forward Currency Contracts (419)Total for Schedule of Derivative Instruments (419)

* Source: Stardard & Poor's Credit Rating Agency


MD Dividend Income FundFinancial Statements


Statement of Financial Position(in $000's except for units outstanding and per unit amounts)

December 31,2017

December 31,2016

AssetsCurrent assetsInvestments 934,126$ 934,804$Cash 3,279 2,557Dividends and interest receivable 4,275 5,344Subscriptions receivable 150 201

941,830 942,906

LiabilitiesCurrent liabilitiesRedemptions payable 295 403Financial derivative instruments 419 2,586

714 2,989

Net assets attributable to holders ofredeemable units 941,116$ 939,917$

Net assets attributable to holders ofredeemable units per seriesSeries A 916,672$ 937,575$Series F 7,403$ -$Series I 17,041$ -$Series T -$ 2,342$

Number of redeemable units outstanding(see Supplementary Schedules)Series A 39,537,211 43,125,050Series F 721,578 -Series I 731,526 -Series T - 288,649

Net assets attributable to holders ofredeemable units per unit, per seriesSeries A 23.19$ 21.74$Series F 10.26$ -$Series I 23.30$ -$Series T -$ 8.11$

Approved by the Board of Directors of MD Financial Management Inc., Trustee

Director(Signed by John Riviere)

Director(Signed by Brian Peters)

Statement of Comprehensive Incomefor the years ended December 31 (in $000’s except for per unit amounts)

2017 2016

IncomeNet gain (loss) on investments

Dividends 20,572$ 21,669$Interest for distribution purposes 8,814 11,887Net realized gain (loss) on sale of investments 20,661 49,006Change in unrealized appreciation (depreciation) of

investments 39,838 27,465Net gain (loss) on investments 89,885 110,027

Net gain (loss) on derivative instrumentsNet realized gain (loss) on derivative instruments 5,251 128Change in unrealized appreciation (depreciation) of

derivative instruments 2,167 2,092Net gain (loss) on derivatives instruments 7,418 2,220

Other IncomeForeign exchange gain (loss) on cash (182) 75Early redemption fee 1 1Securities lending (see Supplementary Schedules) 88 73Other 22 2

Total other income (71) 151Total income (loss) 97,232 112,398

ExpensesManagement fees (Note 4) 13,034 12,849Administration fees 1,339 1,336Withholding tax on foreign income 280 201Transaction costs 177 408Total expenses 14,830 14,794

Increase (decrease) in net assets attributable toholders of redeemable units 82,402$ 97,604$

Increase (decrease) in net assets attributable toholders of redeemable units per seriesSeries A 81,697$ 97,340$Series F 106$ -$Series I 518$ -$Series T 81$ 264$

Increase (decrease) in net assets attributable toholders of redeemable units per unit, per seriesSeries A 1.97$ 2.26$Series F 0.26$ -$Series I 0.70$ -$Series T 0.25$ 0.90$




Statement of Changes in Net AssetsAttributable to Holders of RedeemableUnits ("Net Assets")for the years ended December 31 (in $000’s)

2017 2016

SERIES ANet assets - beginning of year 937,575$ 938,738$

Add (deduct) changes during the year:Operations

Increase (decrease) in net assets attributable toholders of redeemable units 81,697 97,340

Redeemable unit transactionsProceeds from issue of redeemable units 48,728 39,182Cash paid for redemption of redeemable units (149,854) (133,258)Units issued on reinvestment of distributions 20,054 59,873

(81,072) (34,203)Distributions

From net investment income (18,025) (19,940)From net realized gains on investments (3,503) (44,360)

(21,528) (64,300)

Net assets - end of year 916,672$ 937,575$

SERIES FNet assets - beginning of year -$ -$


Increase (decrease) in net assets attributable toholders of redeemable units 106 -

Redeemable unit transactionsProceeds from issue of redeemable units 7,840 -Cash paid for redemption of redeemable units (543) -Units issued on reinvestment of distributions 37 -

7,334 -Distributions

From net investment income (25) -From net realized gains on investments (12) -

(37) -

Net assets - end of year 7,403$ -$

2017 2016

SERIES INet assets - beginning of year -$ -$


Increase (decrease) in net assets attributable toholders of redeemable units 518 -

Redeemable unit transactionsProceeds from issue of redeemable units 17,164 -Cash paid for redemption of redeemable units (641) -Units issued on reinvestment of distributions 186 -

16,709 -Distributions

From net investment income (163) -From net realized gains on investments (23) -

(186) -

Net assets - end of year 17,041$ -$

SERIES TNet assets - beginning of year 2,342$ 2,718$


Increase (decrease) in net assets attributable toholders of redeemable units 81 264

Redeemable unit transactionsProceeds from issue of redeemable units 1,089 97Cash paid for redemption of redeemable units (3,418) (447)Units issued on reinvestment of distributions 21 4

(2,308) (346)Distributions

From net investment income (26) (53)From net realized gains on investments - (118)Return of capital (89) (123)

(115) (294)

Net assets - end of year -$ 2,342$




Statement of Changes in Net AssetsAttributable to Holders of RedeemableUnits ("Net Assets") (Continued)for the years ended December 31 (in $000’s)

2017 2016

TOTAL FUNDNet assets - beginning of year 939,917$ 941,456$


Increase (decrease) in net assets attributable toholders of redeemable units 82,402 97,604

Redeemable unit transactionsProceeds from issue of redeemable units 74,821 39,279Cash paid for redemption of redeemable units (154,456) (133,705)Units issued on reinvestment of distributions 20,298 59,877

(59,337) (34,549)Distributions

From net investment income (18,239) (19,993)From net realized gains on investments (3,538) (44,478)Return of capital (89) (123)

(21,866) (64,594)

Net assets - end of year 941,116$ 939,917$

Statement of Cash Flowsfor the years ended December 31 (in $000’s)

2017 2016

Cash flows from (used in) operating activities

Increase (decrease) in net assets attributableto holders of redeemable units 82,402$ 97,604$

Adjustments for:Proceeds from sale of investments 1,117,186 1,298,289Purchase of investments (1,055,651) (1,212,874)Amortization income (358) (450)Unrealized foreign exchange (gain) loss on cash 36 (28)Net realized (gain) loss on sale of investments (20,661) (49,006)Change in unrealized (appreciation) depreciation

of investments (39,838) (27,465)Change in unrealized (appreciation) depreciation

of derivative instruments (2,167) (2,092)

Net change in non-cash working capital 1,069 (681)

Net cash from (used in) operating activities 82,018 103,297

Cash flows from (used in) financing activities

Proceeds from issue of redeemable units 47,053 39,214Distributions to holders of redeemable units, net

of reinvested distribution (1,568) (4,717)Cash paid for redemption of redeemable units (126,745) (135,218)

Net cash from (used in) financing activities (81,260) (100,721)

Unrealized foreign exchange gain (loss) on cash (36) 28

Net increase (decrease) in cash during the year 722 2,604

Cash, beginning of year 2,557 (47)

Cash, end of year 3,279$ 2,557$

Interest received 9,840 10,400Dividends received, net of withholding taxes 20,335 22,274


MD Dividend Income FundFinancial Statements – Supplementary Schedules


Redeemable Unit Transactionsfor the years ended December 31

2017 2016

SERIES AOutstanding, beginning of year 43,125,050 44,675,911Issued 5,211,520 5,964,949Redeemed (8,799,359) (7,515,810)Outstanding, end of year 39,537,211 43,125,050

SERIES FOutstanding, beginning of year - -Issued 776,202 -Redeemed (54,624) -Outstanding, end of year 721,578 -

SERIES IOutstanding, beginning of year - -Issued 759,069Redeemed (27,543)Outstanding, end of year 731,526 -

SERIES T*Outstanding, beginning of year 288,649 329,381Issued 135,309 11,994Redeemed (423,958) (52,726)Outstanding, end of year - 288,649

*Series T was terminated August 25, 2017.

Soft Dollar Commissionsfor the years ended December 31 (in $000's)

(in $000's) 2017 2016

Soft dollar commissions 3$ 14$

Soft dollar commissions refers to the portion of total brokerage commissions paidto certain brokers that was available for payment to third party vendors forproviding research, statistical or investment decision making services. Theseservices assist the investment managers with their investment decision making forthe Fund.

Securities on Loan

as at December 31 (in $000’s) 2017 2016

Fair value of securities loaned 31,610$ 34,640$Fair value of collateral (non-cash) 33,188$ 35,720$

State Street Bank and Trust Co. is entitled to receive payments out of the grossamount generated from the securities lending transactions of the Fund and bears alloperational costs directly related to securities lending as well as the cost ofborrower default indemnification.

The table below sets out a reconciliation of the gross amount generated from thesecurities lending transactions of the Fund to the revenue from securities lendingdisclosed under securities lending income in the Fund’s Statement ofComprehensive Income.

for the years ended December 31 (in $000's) 2017 2016

Gross amount generated from the securitieslending transactions 109$ 92$

Amounts paid to State Street Bank and Trust Co. (21)$ (19)$Net securities lending income as reported in the

Statement of Comprehensive Income 88$ 73$

Tax Loss Carry Forwardsas at December 31 (in $000's)

2017

Net capital loss carried forward -$

Non-capital losses expiring:2018 -$2019 -in 2020 and thereafter -Total -$

The Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act(Canada) and, accordingly, is subject to tax on its income for the year, including netrealized capital gains which is not paid or payable to its unitholders as at the end ofthe year. It is the intention of management that all annual net investment incomeand sufficient net realized taxable capital gains will be distributed to unitholdersannually by December 31, such that there are no Canadian income taxes payable bythe Fund. As a result, the Fund does not record income taxes.

Since the Fund does not record income taxes, no benefit has been recorded by theFund in its financial statements in respect of its unused losses as at December 31,2017. As of the taxation year ended December 15, 2017, the Fund does not have anyaccumulated net realized capital losses or non-capital losses available for utilizationagainst net realized capital gains in future years. Capital losses have no expiry. Non-capital losses can be carried forward for up to 20 years.


MD Dividend Income FundFinancial Statements – Supplementary Schedules


Management and administration fees(Note 4)As at December 31

2017 2016

Management fee*Series A 1.25% 1.25%Series F 0.30% NASeries I NA NASeries T NA 1.25%

Administration fee*Series A 0.13% 0.13%Series F 0.13% NASeries I NA NASeries T NA 0.13%

*Series I unitholders pay a separately negotiated management fee and administration feedirectly to MD Financial Management Inc. Series F is a new series offered in 2017. Series T wasterminated August 25, 2017.


MD Dividend Income FundFinancial Instruments Risks

(in $000's)


Financial InstrumentsMD Dividend Income Fund (the “Fund”) invests primarily in dividend producingcommon shares, preferred shares, income trusts and domestic bonds as well asforward contracts as shown in the Schedule of Investment Portfolio. The Fundinvests excess cash in high grade short-term notes with maturities of less than oneyear. These investments expose the Fund to risks associated with financialinstruments. The Fund’s exposure and sensitivity to these risks are presentedbelow. A description of the risks and how the Fund manages these risks is discussedin Note 7 of the Notes to the Financial Statements.

Credit RiskThe Fund’s credit risk is concentrated in investments in debt and derivativeinstruments. The Fund’s maximum exposure to credit risk from debt instruments isthe carrying value of short-term investments, domestic and foreign bondspresented on the Schedule of Investment Portfolio as well as the cash as shown onthe Statement of Financial Position. The Fund’s maximum exposure to credit riskfrom derivative instruments is the carrying value of derivative instrument asset aspresented on the Statement of Financial Position.

As at December 31, 2017 and December 31, 2016, the Fund invested in preferredshares and short-term debt instruments with the following credit ratings:

Credit Rating

% of Net AssetsAttributable to

Holders ofRedeemable UnitsDecember 31, 2017

% of Net AssetsAttributable to

Holders ofRedeemable Units

December 31, 2016

Debt InstrumentsAAA / R-1 (High) 7.6% 4.6%AA / R-1 (Mid) 7.9% 9.2%A / R-1 (Low) 9.2% 8.6%BBB 7.1% 6.7%BB 0.1% -Unrated 2.4% 3.7%

34.3% 32.8%

Preferred SharesPfd-2 (low) 0.3% 0.3%Pfd-3 (low) 0.3% 0.2%

0.6% 0.5%Total 34.9% 33.3%

All credit ratings are from external credit rating agencies such as Dominion BondRating Service, Standard & Poor’s and Moody’s.

Currency RiskExposures to foreign currencies as at December 31, 2017 and December 31, 2016are presented in the table below.

Currency

Cash andOther Net

AssetsAttributableto Holders

ofRedeemable

UnitsInvestmentsat Fair Value

DerivativeExposure

Net CurrencyExposure

% of NetAssets

Attributableto Holders

ofRedeemable

Units

December 31, 2017U.S. Dollar 2,584$ 113,783$ (108,868)$ 7,499$ 0.80%Total 2,584$ 113,783$ (108,868)$ 7,499$ 0.80%

December 31, 2016U.S. Dollar 3,710$ 124,749$ (119,476)$ 8,983$ 0.96%

As at December 31, 2017, if the Canadian Dollar had strengthened against all othercurrencies by 10%, the Net Assets Attributable to Holders of Redeemable Units ofthe Fund could have decreased by approximately $750 or 0.08% of Net AssetsAttributable to Holders of Redeemable Units (December 31, 2016 - $898 or 0.10%).Conversely, had the Canadian Dollar weakened against all other currencies by 10%,the Net Assets Attributable to Holders of Redeemable Units of the Fund could haveincreased by approximately $750 or 0.08% of Net Assets Attributable to Holders ofRedeemable Units (December 31, 2016 - $898 or 0.10%). These sensitivities areestimates. Actual results may vary and the variance may be material.

Interest Rate RiskThe Fund’s exposure to interest rate risk was concentrated in investments indomestic and foreign bonds presented in the Schedule of Investment Portfolio. Theamounts of these investments by term to maturity are presented in the table below.In general, longer terms to maturity result in increased interest rate risk.

The sensitivity represents the expected impact to Net Assets Attributable to Holdersof Redeemable Units if interest rates for all maturities fluctuate by 25 basis points(parallel yield shift). If interest rates rise, Net Assets Attributable to Holders ofRedeemable Units will decrease by the amount shown. Conversely, if interest ratesfall, Net Assets Attributable to Holders of Redeemable Units will increase by theamount shown. These sensitivities are estimates. Actual results may vary and thevariance may be significant.

As at December 31, 2017 and December 31, 2016 the Fund’s exposures to debtinstruments by maturity are presented in the table below:

Debt Instruments December 31, 2017 December 31, 2016by Maturity Date Fair Value % Fair Value %

Less than 1 year 65,447$ 7.0% 43,879$ 4.7%1 to 7 years 151,417 16.1% 171,954 18.3%7 to 12 years 53,297 5.7% 48,918 5.2%12 to 20 years 3,282 0.3% 3,166 0.3%More than 20 years 49,014 5.2% 40,434 4.3%Total 322,457$ 34.3% 308,351$ 32.8%Sensitivity (+/-) 4,917$ 0.5% 4,325$ 0.5%



(in $000's)


Liquidity RiskThe Fund’s financial liabilities are all due within one year. Redeemable units areredeemable on demand at the holder’s option; however, the Fund does not expectthe contractual maturity will be representative of the actual cash outflows, asholders of these instruments typically retain them for a longer period.

Other Price RiskAs at December 31, 2017, 65.0% (December 31, 2016 – 66.7%) of the Fund’s NetAssets Attributable to Holders of Redeemable Units were invested in equity financialinstruments traded in active markets. If prices of securities traded on thesemarkets decrease by 10%, with all other factors remaining constant, Net AssetsAttributable to Holders of Redeemable Units could fall by approximately $61,167(December 31, 2016 – $62,645). Conversely, if prices increase by 10%, Net AssetsAttributable to Holders of Redeemable Units could rise by approximately $61,167(December 31, 2016 – $62,645). These sensitivities are estimates. Actual resultsmay vary and the variance may be significant.

Concentration RiskConcentration risk arises as a result of the concentration of exposures within thesame category. The following table summarizes the Fund’s concentration risk as apercentage of net assets attributable to holders of redeemable units:

Market Segment December 31, 2017 December 31, 2016

Domestic BondsCorporate Bonds 26.80% 28.06%Government of Canada Bonds 0.60% 0.00%

Foreign BondsUnited States - 0.18%

Domestic EquitiesConsumer Discretionary 6.52% 6.40%Consumer Staples 2.71% 2.71%Energy 8.48% 8.91%Financials 21.75% 21.63%Industrials 6.03% 6.03%Information Technology 1.79% 2.71%Materials 2.10% 1.74%Telecommunication Services 3.79% 4.18%Utilities 2.14% 2.75%

Foreign EquitiesUnited States 9.68% 9.59%Short Term Investments 6.87% 4.57%Cash and Other Net Assets (Liabilities) 0.74% 0.54%Total 100.00% 100.00%

Fair Value HierarchyThe following is a summary of the Fund's use of quoted market prices (Level 1),internal models using observable market information as inputs (Level 2), andinternal models without observable market information (Level 3) in the valuation ofthe Fund’s securities. The inputs or methodologies used for valuing securities arenot necessarily an indication of the risk associated with investing in thosesecurities.

QuotedPrices in

ActiveMarkets for

IdenticalAssets

SignificantOther

ObservableInputs

SignificantOther

ObservableInputs

(Level 1) (Level 2) (Level 3) Total

December 31, 2017Domestic Bonds -$ 235,178$ 22,637$ 257,815$Domestic Equities 520,523 - - 520,523Foreign Equities 91,146 - - 91,146Short-Term Investments - 64,642 - 64,642Financial Derivative

Instruments – Liabilities - (419) - (419)Total 611,669$ 299,401$ 22,637$ 933,707$

December 31, 2016Domestic Bonds -$ 229,156$ 34,588$ 263,744$Foreign Bonds - 1,688 - 1,688Domestic Equities 536,293 - - 536,293Foreign Equities 90,160 - - 90,160Short-Term Investments - 42,919 - 42,919Financial Derivative

Instruments – Liabilities - (2,586) - (2,586)Total 626,453$ 271,177$ 34,588$ 932,218$

There have been no significant transfers between Level 1 and Level 2 for the periodsJanuary 1, 2017 to December 31, 2017 and January 1, 2016 to December 31, 2016.

Reconciliation of Level 3The table below shows the reconciliation of investments measured at fair valueusing unobservable inputs for the year ended December 30, 2017 and December 31,2016.

December 31, 2017

SecurityType

BeginningBalance

Net realizedand

unrealizedgains

(losses)included in

IncomeStatement Purchases

Sales,Maturities

andRepayments

Transfers in(out)

EndingBalance

DomesticBonds 34,588 9,234 - (21,185) - 22,637



(in $000's)


December 31, 2016

SecurityType

BeginningBalance

Net realizedand

unrealizedgains

(losses)included in

IncomeStatement Purchases

Sales,Maturities

andRepayments

Transfers in(out)

EndingBalance

DomesticBonds - (1,811) 36,399 - - 34,588

The total change in unrealized gain (loss) on level 3 investments continued to beheld as at December 31, 2017 was $4,766 (December 31, 2016 - $(1,811)).

Level 3 Valuation TechniquesThe table below summarizes the valuation techniques and significant unobservableinputs used in the fair value measurement of significant Level 3 holdings as atDecember 31, 2017 and December 31, 2016.

December 31, 2017

SecurityType

ValuationTechnique

SignificantUnobservable

Inputs

Fair value atDecember 31,

2017

Change inInput(bps)

Changein

Valuation

DomesticBonds

Relative valuemodels

Option adjustedspread 22,637 100/(100) (181)/181

December 31, 2016

SecurityType

ValuationTechnique

SignificantUnobservable

Inputs

Fair value atDecember 31,

2016

Change inInput(bps)

Changein

Valuation

DomesticBonds

Relative valuemodels

Option adjustedspread 34,588 100/(100) (752)/752



Notes to Financial StatementsFor the years ended December 31, 2017 and 2016

1. Name and formation of the FundsESTABLISHMENT OF THE FUNDS

The MD Family of Mutual Funds (individually a “Fund” and collectively the “Funds”) are unincorporated mutual fund trusts formed under the laws of the province of Ontariopursuant to the Declarations of Trust, and the creation dates are as follows:

Series A Units Series I Units Series T Units Private TrustSeries

Series F2Units Series F Units

MD Balanced Fund September 9, 1992 October 25, 2010 May 10, 2017

MD Bond Fund April 6, 1988 October 30, 2009 May 10, 2017

MD Short-Term Bond Fund September 19, 1995 October 30, 2009 May 10, 2017

MD Dividend Income Fund September 9, 1992 October 30, 2009 October 25, 2010 May 10, 2017

MD Equity Fund March 1, 1966 October 30, 2009 October 25, 2010 May 10, 2017

MD Dividend Growth Fund January 4, 2007 October 30, 2009 October 25, 2010 May 10, 2017

MD International Growth Fund July 19, 2000 October 30, 2009 October 25, 2010 May 10, 2017

MD International Value Fund January 5, 2004 October 30, 2009 October 25, 2010 May 10, 2017

MD Money Fund July 12,1983 May 24, 2017 May 10, 2017

MD Select Fund October 29, 1993 October 30, 2009 October 25, 2010 May 10, 2017

MD American Growth Fund September 9, 1992 October 30, 2009 October 25, 2010 May 10, 2017

MD American Value Fund July 10, 2000 October 30, 2009 October 25, 2010 May 10, 2017

MD Strategic Yield Fund January 30, 2014 January 30, 2014 May 10, 2017

MD Strategic Opportunities Fund January 30, 2014 January 30, 2014 May 10, 2017

MD Precision Conservative Portfolio January 6, 2010 May 24, 2017 May 10, 2017

MD Precision Balanced Income Portfolio March 27, 2012 May 24, 2017 May 10, 2017

MD Precision Moderate Balanced Portfolio January 6, 2010 May 24, 2017 May 10, 2017

MD Precision Moderate Growth Portfolio March 27, 2012 May 24, 2017 May 10, 2017

MD Precision Balanced Growth Portfolio January 6, 2010 May 24, 2017 May 10, 2017

MD Precision Maximum Growth Portfolio January 6, 2010 May 24, 2017 May 10, 2017

MD Fossil Fuel Free Bond Fund May 11, 2016 May 11, 2016 May 10, 2017

MD Fossil Fuel Free Equity Fund May 11, 2016 May 11, 2016 May 10, 2017

MDPIM Canadian Equity Pool June 16, 1999 October 25, 2010 August 9, 2000

MDPIM US Equity Pool August 6, 1999 October 25, 2010 August 9, 2000

MDPIM S&P/TSX Capped Composite IndexPool November 21, 2017

MDPIM S&P 500 Index Pool November 21, 2017

MDPIM International Equity Index Pool November 21, 2017

MD Growth Investments Limited is a mutual fund corporation incorporated under the laws of Ontario pursuant to the Letters Patent and the series creation dates are asfollows:

Series A Series I

MD Growth Investments Limited July 18, 1969 October 30, 2009



MD Financial Management Inc. (“the Manager”) is the Manager and Trustee of the Funds. The address of the Funds’ registered office is 1870 Alta Vista Drive, Ottawa, ONK1G 6R7.

Throughout these Notes to the Financial Statements, the shares of MD Growth Investments Limited have been referred to as “units” to simplify the presentation.

These financial statements were authorized for issue by the Manager on March 12, 2018.

SERIES OF UNITS

Each of the MD Funds other than MDPIM Canadian Equity Pool and MDPIM US EquityPool offer “Series A” units which are available to all MD Management Ltd. clientswho are qualified eligible investors.

The MDPIM Canadian Equity Pool and MDPIM US Equity Pool Funds offer “PrivateTrust Series” and “Series T” units which may be purchased by either MD PrivateInvestment Counsel (an operating division of MD Financial Management Inc.) or MDPrivate Trust Company clients who have appointed MD Private Investment Counselto provide discretionary portfolio management services and advice to them or MDPrivate Trust Company to provide trust services. “Series A” units are closed to newsubscribers. Investors holding “Series A” units of these Funds are allowed to holdtheir units, as well as subscribe for additional “Series A” units of the Funds.

“Series I” units were established to support the MD Precision ConservativePortfolio, the MD Precision Moderate Balanced Portfolio, the MD Precision BalancedGrowth Portfolio, the MD Precision Maximum Growth Portfolio, the MD PrecisionBalanced Income Portfolio and the MD Precision Moderate Growth Portfolio. Theseunits are only available to the six Funds listed above and certain institutionalinvestors, and are not charged management fees.

"Series F" units are available to all MD Management Ltd. clients who are qualifiedeligible investors and who have a fee-based account with MD Management Ltd.

"Series F2" units are available only to qualified eligible investors who open an MDExO® Direct account with MD Management Ltd.

“Series T” units were established in order to support a new tax-efficient investmentsolution for clients. The series T units generate steady tax-efficient cash flow thatgenerally does not increase taxable income or impact certain benefits such as OldAge Security. Series T was terminated August 25, 2017.

2. Basis of presentationThese financial statements have been prepared in compliance with InternationalFinancial Reporting Standards (IFRS) as published by the International AccountingStandards Board (IASB).

3. Significant accounting policiesFUNCTIONAL AND PRESENTATION CURRENCY

The financial statements are presented in Canadian dollars, which is the Funds’functional currency. Cash, investments and other assets and liabilities denominatedin foreign currencies are translated into Canadian dollars at the rate of exchangeprevailing on each valuation date. Transactions during the year in currencies otherthan Canadian dollars are translated into Canadian dollars at the rate of exchangeprevailing on the trade date of the transaction. The difference in the foreignexchange rate between trade date and settlement date of a transaction isrecognized in income on the Statement of Comprehensive Income. Foreignexchange gains and losses relating to cash are presented as “Foreign exchange gain(loss) on cash” and those relating to other financial assets and liabilities arepresented within net gains or losses on the sale of investments or derivatives.

All financial information is presented in Canadian dollars and has been rounded tothe nearest thousand, unless otherwise stated.

FINANCIAL INSTRUMENTS

The Funds recognize financial instruments at fair value upon initial recognition. TheFunds’ investments are designated as fair value through profit or loss (FVTPL), asthese financial assets and liabilities are managed together and their performance isevaluated on a fair value basis in accordance with the Funds’ investment strategy.Derivative financial instruments are classified as held for trading and measured atFVTPL. The Funds do not classify any derivatives as hedges in a hedgingrelationship. Cash is measured at fair value upon recognition and subsequently atamortized cost.

Regular way purchases and sales of financial assets are recognized at their tradedate. Transaction costs related to investments and derivatives are expensed asincurred in the Statement of Comprehensive Income.

Subsequent to initial recognition, all financial assets and liabilities at FVTPL aremeasured at fair value. Gains and losses arising from changes in the fair value arepresented in the Statement of Comprehensive Income within “Change in unrealizedappreciation (depreciation) of investments” for financial assets and liabilitiesdesignated at FVTPL and within “Change in unrealized appreciation (depreciation)of derivatives” for derivatives in the periods in which they arise.

The interest for distribution purposes shown on the Statement of ComprehensiveIncome represents the coupon interest received by the Funds accounted for on anaccrual basis. Dividend income and distributions to unitholders are recorded on theex-dividend date. Distributions from underlying funds out of interest, foreignincome and related withholding taxes, Canadian dividends and net realized capitalgains are recognized when declared. Realized gains or losses from investmenttransactions and the unrealized appreciation or depreciation of investments arecomputed on an average cost basis, which exclude brokerage commissions andother trading expenses. Brokerage commissions and other trading expenses arecharged to income as incurred.

Other financial assets and liabilities, such as accrued interest and dividendsreceivable, accounts receivable for investment transactions, subscriptionsreceivable, amounts receivable for securities lending transactions, distributionspayable, accounts payable for investment transactions and redemptions payableare recognized initially at fair value, net of transaction costs, and subsequentlystated at amortized cost using the effective interest rate method. Under thismethod, financial assets and liabilities reflect the amount required to be received orpaid, discounted, when appropriate, at the contracts' effective interest rate.

The Funds’ accounting policies for measuring the fair value of their investments andderivatives are identical to those used in measuring the net asset value (NAV) fortransactions with unitholders.

The Funds’ obligation for net assets attributable to holders of redeemable units ispresented at the redemption amount.



OFFSETTING FINANCIAL INSTRUMENTS

Financial assets and liabilities are offset and the net amount reported in thestatement of financial position where the Funds currently have a legally enforceableright to set-off the recognized amounts and there is an intention to settle on a netbasis or realize the asset and settle the liability simultaneously. In the normalcourse of business, the Funds may enter into various master netting agreements orsimilar agreements that do not meet the criteria for offsetting in the statement offinancial position but still allow for the related amounts to be set off in certaincircumstances, such as bankruptcy or termination of the contracts.

Transactions with counterparties are governed by separate master nettingagreements. Each agreement allows for net settlement of certain open contractswhere the Fund and respective counterparty both elect to settle on a net basis. Inthe absence of such an election, contracts will be settled on a gross basis. However,each party to the master netting agreement will have the option to settle all opencontracts on a net basis in the event of default of the other party.

FAIR VALUE MEASUREMENT

Fair value is the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at the measurementdate. Investments are categorized as FVTPL and are recorded at fair value. In thecase of securities traded in an active market, fair value is based on quoted marketprices at the close of trading on the reporting date as provided by independentpricing services. The Funds use the last traded market price for both financialassets and financial liabilities where the last traded price falls within the day’s bid-ask spread. In circumstances where the last traded price is not within the bid-askspread, the Manager determines the point within the bid-ask spread that is mostrepresentative of fair value based on the specific facts and circumstances. In thecase of investments not traded in an active market, or for those securities for whichthe Manager feels the latest market prices are not reliable, fair value is estimatedbased on valuation techniques established by the Manager. Valuation techniquesestablished by the Manager are based on observable market data except insituations where there is no relevant or reliable market data. The value of securitiesestimated using valuation techniques not based on observable market data, if any,is disclosed in the Financial Instruments Risks section of the financial statements.

FINANCIAL DERIVATIVES INSTRUMENTS

A derivative is a financial contract between two parties, the value of which is derivedfrom the value of an underlying asset such as equity, bond, commodity, interest rateor currency. Certain Funds may use derivatives, such as options, futures, forwardcontracts, swap contracts, and other similar instruments, in a manner consideredappropriate to achieving the Fund’s investment objectives. Derivatives may be usedto protect a security price, currency exchange rate or interest rate from negativechanges (hedging) or to provide exposure to securities, indices, or currencieswithout investing in them directly (non-hedging). Derivatives contain various risksincluding the potential inability for the counterparty to fulfil their obligations underthe terms of the contract, the potential for illiquid markets and the potential pricerisk which may expose the Funds to gains and/or losses in excess of the amountsshown on the Statement of Financial Position. Derivatives with unrealized gains arereported as financial derivative instruments under current assets and derivativeswith unrealized losses are reported as financial derivative instruments undercurrent liabilities.

Forward Currency Contracts

Certain Funds may enter into forward currency contracts for either hedging or non-hedging purposes where such activity is consistent with their investment objectivesand as permitted by the Canadian securities regulatory authorities. A forwardcurrency contract is an agreement between two parties to buy and sell a currency ata set price on a future date. Investments in forward currency contracts are enteredinto with approved counterparties and are recorded at fair value. The fair value of aforward currency contract fluctuates with changes in foreign currency exchangerates. The fair value of forward currency contracts is reported as financial derivativeinstruments in the Statement of Financial Position. Forward currency contracts aremarked to market daily and the changes in fair value of forward currency contractsare recorded in “Change in unrealized appreciation (depreciation) of derivatives”.Upon closing of the contracts, the accumulated gains or losses are reported in “Netrealized gain (loss) on sale of derivative instruments”. The contractual amounts ofopen contracts are disclosed in the Schedule of Investment Portfolio in theSchedule of Derivative Instruments.

Futures Contracts

Futures contracts are valued on each valuation day using the closing market priceposted on the related public exchange. The fair value of future contracts is reportedas “Financial Derivative Instruments” in the Statement of Financial Position. Allgains or losses arising from futures contracts are recorded as part of “Change inunrealized appreciation (depreciation) of derivatives” in the Statement ofComprehensive Income until the contracts are closed out or expire, at which timethe gains or losses are realized and reported as “Net realized gain (loss) onderivative instruments”.

Credit Default Swaps

Certain Funds may enter into credit default swap contracts, primarily to manageand/or gain exposure to credit risk where such activity is consistent with theirinvestment objectives and as permitted by the Canadian securities regulatoryauthorities. A credit default swap is an agreement between the Fund and acounterparty whereby the buyer of the contract receives credit protection and theseller of the contract guarantees the credit worthiness of a referenced debtobligation. The credit risk exposure of a Fund to the referenced asset is comparableto the exposure that would have resulted if the Fund were invested directly in thereferenced debt obligation. In the event of a default of the underlying referenceddebt obligation, the buyer of the contract is entitled to receive the notional amountof the credit default swap contract from the seller in exchange for the referenceddebt obligation, a net settlement amount equal to the notional amount of the creditdefault swap contract less the recovery amount of value of the referenced debtobligation, or other agreed upon amount.

Over the term of the contract, the buyer pays the seller a periodic stream ofpayments, provided that no event of default has occurred. Such periodic paymentspaid or received are accrued daily and are included in the Statement ofComprehensive Income in Net Interest Income (Expense) from Swap Contracts.Credit Default Swaps are disclosed in the Schedule of Derivative Instruments. Thechange in value of a credit default swap contract and any upfront premium paid orreceived is included in the Statement of Financial Position as Financial DerivativeInstruments. When the credit default swap contracts are closed out, gains or losses,including upfront premiums, are realized and included in the Statement ofComprehensive Income in “Net realized gain (loss) on derivatives instruments”.Pursuant to the terms of the credit default swap contract, cash or securities may berequired to be deposited as collateral.



Interest Rate Swaps

Certain Funds may enter into interest rate swap contracts, primarily to manageand/or gain exposure to fluctuations in interest rates. An interest rate swap is anagreement between the Fund and a counterparty whereby the parties agree toexchange a fixed payment for a floating payment that is linked to an interest rateand an agreed upon notional amount.

Over the term of the contract, each party will pay to the other party a periodicstream of payments. Such periodic payments paid or received are accrued daily andare included in the Statement of Comprehensive Income in Net Interest Income(Expense) from Swap Contracts. Interest Rate Swaps are disclosed in the Scheduleof Derivative Instruments. The change in value of an interest rate swap contract andany upfront premium paid or received is included in the Statement of FinancialPosition as Financial Derivative Instruments. When the interest rate swap contractsare closed out, gains or losses, as well as any upfront premiums, are realized andincluded in the Statements of Comprehensive Income in Net realized gain (loss) onderivatives instruments.

Total Return Swaps

Certain Funds may enter into total return swap contracts primarily to manage and/or gain exposure to the underlying reference. An total return swap is an agreementbetween the Fund and a counterparty where single or multiple cash flows areexchanged based on the price of an underlying reference and based on a fixed orvariable rate.

Over the term of the contract, the Funds will pay to the counterparty a periodicstream of payments based on fixed or variable rate. Such periodic payments paidare accrued daily and are included in the Statement of Comprehensive Income inNet Interest Income (Expense) from Swap Contracts. At the maturity date, a netcash flow is exchanged where the total return is equivalent to the return of theunderlying reference asset less a financing rate, if any. As a receiver, the Fundswould receive payments based on any net positive total return and would owepayments in the event of a net negative total return. Total return swaps aredisclosed in the Schedule of Derivative Instruments. The change in value of an totalreturn swap contract is included in the Statement of Financial Position as FinancialDerivative Instruments. When the total return swap contracts are closed out, gainsor losses are realized and included in the Statements of Comprehensive Income inNet realized gain (loss) on derivatives instruments.

Cross Currency Swaps

Certain Funds may enter into cross currency swap contracts, primarily to manageand/or gain exposure to currency risk. A cross currency swap is an agreementbetween the Fund and a counterparty whereby the parties agree to exchangeinterest payments and principal on loans denominated in two different currencies.

Over the term of the contract, each party will pay to the other party a periodicstream of payments. Such periodic payments paid or received are accrued daily andare included in the Statement of Comprehensive Income in Net Interest Income(Expense) from Swap Contracts. Cross currency swaps are disclosed in theSchedule of Derivative Instruments. The change in value of a cross currency swapcontract and any upfront premium paid or received is included in the Statement ofFinancial Position as Financial Derivative Instruments. When the cross currencyswap contracts are closed out, gains or losses, as well as any upfront premiums, arerealized and included in the Statements of Comprehensive Income in Net realizedgain (loss) on derivatives instruments.

Foreign Currency Option Contracts

Certain Funds may purchase foreign currency options. Purchasing foreign currencyoptions gives the Fund the right, but not the obligation to buy or sell the currencyand will specify the amount of currency and a rate of exchange that may beexercised by a specified date. These options may be used as a hedge againstpossible variations in foreign exchange rates or to gain exposure to foreigncurrencies.

Foreign currency option contracts are disclosed in the Schedule of DerivativeInstruments. The change in value of a foreign currency option contract and anypremiums paid are included in the Statement of Financial Position as FinancialDerivative Instruments. When the foreign currency option contracts are closed out,gains or losses, as well as any premiums paid, are realized and included in theStatements of Comprehensive Income in Net realized gain (loss) on derivativesinstruments.

CAPITAL RISK MANAGEMENT

Units issued and outstanding are considered to be the capital of the Funds. TheFunds do not have any specific capital requirements on the subscription andredemption of units, other than certain minimum subscription. The Funds’ units areoffered for sale on any business day and may be redeemed or issued at the NetAsset Value (NAV) per unit for the respective series on that business day. A businessday refers to any day the Toronto Stock Exchange is open for business. The NAV foreach series is computed daily by calculating the value of that series’ proportionateshare of net assets and liabilities of the Fund common to all series less liabilitiesattributable to that series. Expenses directly attributable to a series are charged tothat series. Assets, common liabilities, revenues and other expenses are allocatedproportionately to each series based upon the relative NAVs of each series. The NAVper unit is determined by dividing the NAV of each series of a Fund by the totalnumber of units of that series outstanding.

INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO HOLDERS OFREDEEMABLE UNITS PER UNIT

“Increase (decrease) in net assets attributable to holders of redeemable units perunit” in the Statement of Comprehensive Income represents the increase ordecrease in net assets attributable to holders of redeemable units attributable toeach series of units for the period, divided by the weighted average unitsoutstanding in that series during the period.

SECURITIES LENDING TRANSACTIONS

A Fund may lend portfolio securities to earn additional income through a securitieslending agreement with its custodian. The aggregate market value of all securitiesloaned by the Fund cannot exceed 50% of the assets of the Fund. The Fund receivescollateral in the form of securities deemed acceptable under National Instrument81-102, “Mutual Funds” (“NI81-102”) of at least 102% of the fair value of securitieson loan. Collateral held is typically government and corporate bonds.

Income from securities lending is recorded as “Securities lending” on a monthlybasis when it is receivable. Securities lending details are listed in Securities on Loanincluded in the supplementary schedules to the financial statements.



REDEEMABLE UNITS

Certain Funds issue different series of redeemable units, which are redeemable atthe holder’s option and do not have identical rights. Such units are classified asfinancial liabilities. Redeemable units can be put back to the Funds at any date forcash equal to a proportionate share of the Funds’ net asset value attributable to theseries. The redeemable units are carried at the redemption amount that is payableat the Statement of Financial Position date if the holder exercises the right to putthe unit back to the Funds. Funds with only one series do not meet the criteria to beclassified as equity as they impose on the Fund the obligation to deliver cash otherthan on redemption. Each such Fund must distribute its taxable income tounitholders annually and has provided unitholders the option to receive suchdistributions in cash.

INVOLVEMENT IN UNCONSOLIDATED STRUCTURED ENTITIES

A structured entity is an entity that has been designed so that voting or similarrights are not the dominant factor in deciding who controls the entity, such as whenany voting rights relate to administrative tasks only and the relevant activities aredirected by means of contractual arrangements.

Certain Funds’ investment strategy entails trading in other funds on a regular basis.The Funds consider all of their investments in other funds (“Investee Funds”) to beinvestments in unconsolidated structured entities. The Funds invest in InvesteeFunds whose objectives range from conserving principal to maximizing dividendincome to long-term capital growth and whose investment strategies do not includeleverage. The Investee Funds finance their operations by issuing redeemable unitswhich are puttable at the holder’s option and entitle the holder to a proportionatestake in the respective Investee Fund’s net assets. The Funds hold redeemable unitsin each of their Investee Funds and the Funds have the right to request redemptionof their investment in Investee Funds daily. The Funds’ investments in InvesteeFunds are subject to the terms and conditions of the respective Investee Fund’soffering documentation. The change in fair value of each Investee Fund is includedin the Statement of Comprehensive Income in “Change in unrealized appreciation(depreciation) of investments”. The Funds’ maximum exposure to loss from theirinterest in Investee Funds is equal to the fair value of their investments in InvesteeFunds. Once a Fund has disposed of its shares in an Investee Fund the Fund ceasesto be exposed to any risk from that investee fund.

Certain Funds invest in Exchange Traded Funds (“ETFs”) which are disclosed on theSchedule of Investment Portfolio and these Funds have determined that theirinvestments in such ETFs are deemed unconsolidated structured entities. TheseETFs replicate, to the extent possible, the performance of the applicable benchmarkindices, or seek to provide long-term capital growth or income, as applicable, byinvesting primarily in and holding the constituent securities of the applicablebenchmark indices in substantially the same proportion as they are reflected in theapplicable benchmark indices or seek to track the investment results of applicablebenchmark indices. The ETFs finance their operations by issuing redeemable shareswhich are puttable at the holder’s option and entitle the holder to a proportionalstake in the respective ETF’s net asset value. The underlying ETFs are listed on arecognized public stock exchange.

Certain Funds invest in mortgage-related and other asset-backed securities(“MBS”). These securities include mortgage pass-through securities, collateralizedmortgage obligations, commercial mortgage-backed securities, asset-backedsecurities, collateralized debt obligations and other securities that directly orindirectly represent a participation in, or are secured by and payable from,mortgage loans on real property. The debt and equity securities issued by thesesecurities may include tranches with varying levels of subordination. Thesesecurities may provide a monthly payment which consists of both interest andprincipal payments. Mortgage-related securities are created from pools ofresidential or commercial mortgage loans, including mortgage loans made bysavings and loan institutions, mortgage bankers, commercial banks and others.Asset-backed securities are created from many types of assets, including autoloans, credit card receivables, home equity loans, and student loans. The Funds’maximum exposure to loss from their interest in MBS is equal to the fair value oftheir investments in such securities as disclosed on the Schedule of InvestmentPortfolio.

A table has been included in the “Supplementary Schedules” section of the financialstatements which describes the types of structured entities that the Funds do notconsolidate but in which they hold an interest.

4. Expenses and other related partytransactionsThe management and administration fees are unique to each Fund and are uniqueto each series of units and are disclosed in the Funds’ Simplified Prospectus or inthe case of Series F2, in the managed account agreement with MD ManagementLtd.

The Manager provides the Funds with investment management and administrativeservices, including providing key management personnel to the Funds. In return, theManager receives a management fee and an administration fee based on the NAV ofthe Funds calculated on a daily basis. Management and administration fees arereported in the Statement of Comprehensive Income.

No management or administration fee, or operating expenses are charged inrespect of Series I units. Series I unitholders pay a separately negotiatedmanagement and administration fee directly to the Manager.

No management fees are charged in respect of units of the Private Trust Series orSeries T of the MDPIM Canadian Equity Pool and MDPIM US Equity Pool or in respectof units of the A Series of the MDPIM S&P TSX Capped Composite Index Pool, MDPIMS&P 500 Index Pool, MDPIM International Equity Index Pool and MDPIM GlobalTactical Opportunities Pool. Investors in these series of units have agreed to pay amanaged account fee directly to MD Private Investment Counsel. These managedaccount fees are charged directly to each unitholder to a maximum rate of 1.56%per annum plus custodial fees. MDPIM Canadian Equity Pool and MDPIM US EquityPool pay for all operating expenses which related to these particular series.Operating expenses include, but are not limited to, brokerage fees on the buyingand selling of securities, securities commission fees, transaction costs, audit fees,sales taxes, custodial fees, IRC fees and expenses, taxes, issue costs, all expensesrelated to the prospectus and to meetings of unitholders as well as Fund servicingcosts. Operating expenses which relate to the series of units as a whole areproportionately allocated among those Funds to which they relate. The Manager ofthe Funds can, at any time, waive or absorb any operating expense for which theFund is responsible.



The Manager bears all of the operating expenses of the Funds, except for MDPIMCanadian Equity Pool and MDPIM US Equity Pool discussed above, (other thancertain transaction costs, taxes and borrowing costs) in return for administrationfees, calculated as a fixed annual percentage of the Funds’ NAV.

INDEPENDENT REVIEW COMMITTEE

The Manager has established an Independent Review Committee (“IRC”) asrequired under National Instrument 81-107, “Independent Review Committee forInvestment Funds” (“81-107”). The IRC reviews conflict of interest matters relatedto the operations of the Funds. In addition, in some circumstances, in place ofobtaining unitholder approval, a Fund may be reorganized with or its assetstransferred to another mutual fund managed by the Manager or an affiliate. Thisrequires IRC approval, and that unitholders are sent a written notice at least 60days before the effective date. The approval of the IRC is also required for a changeof auditor.

The IRC is composed of three persons who are independent of the Manager, theFunds and entities related to the Manager.

SHORT-TERM TRADING/EARLY REDEMPTION FEE

Clients who redeem or switch units or shares of an MD Fund are charged an earlyredemption fee equal to 2.00% of the amount redeemed or switched if theredemption or switch occurs within thirty (30) days of the date that the units orshares were purchased or switched. Redemption fees are recorded as income in theperiod of early redemption.

The early redemption fee does not apply to redemptions or switches:

of units of MD Money Fund;•made in connection with any systematic and scheduled withdrawal program;•where the amount of the redemption or switch is less than $10,000; or•made as a result of the recommendation of an MD Financial Consultant or MDPortfolio Manager related to a financial plan.

•

5. Redeemable unitsWith the exception of MD Growth Investments Limited, the Funds’ capital isrepresented by an unlimited number of authorized units without nominal or parvalue. All series of units are redeemable on demand by unitholders at theredemption amount represented by respective NAV of that series. Each unit entitlesthe unitholder to one vote at unitholder meetings and participates equally, withrespect to other units of the same series, in any dividends or distributions,liquidation or other rights of that series.

The relevant movements in redeemable units for the period have been presented inthe Statement of Changes in Net Assets Attributable to Holders of RedeemableUnits. The Funds invest proceeds from subscriptions in financial instruments inaccordance with the policies and risk management practices of the Funds, whilemaintaining sufficient liquidity to meet unitholder redemptions. The Funds’investment policies are set out in the prospectus and the risk management andliquidity management practices are disclosed in Note 7.

MD Growth Investments Limited is an incorporated company as opposed to amutual fund trust and, as such, has issued share capital.

6. Critical accounting estimates andjudgmentsThe preparation of financial statements requires management to use judgment inapplying its accounting policies and to make estimates and assumptions about thefuture. The following discusses the most significant accounting judgments andestimates that the Funds have made in preparing the financial statements:

FAIR VALUE MEASUREMENT OF SECURITIES AND DERIVATIVES NOT QUOTED INAN ACTIVE MARKET

The Funds may, from time to time, hold financial instruments that are not quoted inactive markets. The fair value of such securities may be determined by the Fundsusing reputable pricing sources or indicative prices from market makers. Brokerquotes obtained from pricing sources may be indicative but not executable orbinding. Where no market data is available, the Fund may value positions usinginternal valuation models as determined appropriate by the Manager and based onvaluation methods and techniques generally recognized as standard within theindustry. Models use observable data to the extent practicable; however, theManager may be required to make certain assumptions and/or estimates regardingrisks, volatility and correlations as required. Changes in assumptions and estimatescould affect the reported fair values of financial instruments. The Funds considerobservable data to be market data that is readily available, regularly distributed orupdated, reliable and verifiable and provided by independent sources that areactively involved in the relevant market.

CLASSIFICATION AND MEASUREMENT OF INVESTMENTS AND APPLICATION OFTHE FAIR VALUE OPTION

In classifying and measuring financial instruments held by the Funds, the Manageris required to make significant judgments about whether or not the business of theFunds is to invest on a total return basis for the purpose of applying the fair valueoption for financial assets under IAS 39, Financial Instruments–Recognition andMeasurement (IAS39). The most significant judgment made include thedetermination that certain investments are held-for-trading and that the fair valueoption can be applied to those which are not.

7. Financial instrument riskThe Funds use financial instruments in order to achieve their respective investmentobjectives. The Funds’ investments are presented in the respective Schedule ofInvestment Portfolio, which groups securities by asset type, geographic region and/or market segment.

The use of financial instruments subjects the Funds to a variety of financialinstrument risks. The Funds’ risk management practices include setting investmentpolicies to limit exposures to financial instrument risks and employing experiencedand professional investment advisors to invest the Funds’ capital in securities withinthe constraints of investment policies. The Manager regularly monitors the Fundadvisors’ performance and compliance with the investment policies.

The significant financial instrument risks, to which the Funds are exposed, alongwith the specific risk management practices related to those risks, are presentedbelow. Fund specific disclosures are presented in the “Financial Instruments Risks”section of the financial statements.



CREDIT RISK

Credit risk is the risk that a counterparty to a financial instrument will not honourits obligation under the terms of the instrument, resulting in a loss. The Funds areexposed to credit risk through domestic and foreign bonds, preferred shares,derivative contracts, cash and short-term investments, amounts due from brokers,dividends and interest receivable and other receivables. A Fund may engage insecurities lending pursuant to the terms of an agreement which includesrestrictions as set out in the Canadian Securities Legislation. Collateral held is inthe form of highly rated fixed income instruments. All securities under lendingagreements are fully collateralized.

Credit risks arising from short-term investments and fixed income securities,including domestic and foreign bonds and preferred shares, are generally limited tothe fair value of the investments as shown in the Schedule of Investment Portfolio.The Funds limit exposure to individual issuers/sectors and credit quality ratings.The credit worthiness of issuers in which the Funds invest are reviewed regularlyand the portfolios are adjusted as required to match the minimum requirement asset forth in each Fund’s prospectus. Each individual Fund’s exposure to credit risk, ifany, is presented in the Financial Instruments Risk section of the FinancialStatements.

Credit risks arising from cash are limited to the carrying value as shown on theStatement of Financial Position, except in the case of MD Money Fund, where thecredit risk is limited to the fair value of investments as shown on the Schedule ofInvestment Portfolio. The Funds manage credit risk on cash and short-terminvestments by investing in high grade short-term notes with credit ratings of R-1(low) or higher as well as limiting exposure to any single issuer.

Derivative contracts are subject to netting arrangements whereby if one party to aderivative contract defaults, all amounts with the counterparty are terminated andsettled on a net basis. As such, the maximum credit loss on derivative contracts isthe financial derivative instrument asset in the Statement of Financial Position.Each Fund manages credit risk on derivatives by only entering into agreements withcounterparties that have an approved credit rating.. Credit risk on amounts duefrom brokers is minimal since transactions are settled through clearinghouseswhere securities are only delivered for payment when cash is received.

Credit risk related to securities lending transactions is limited by the fact that thevalue of cash or securities held as collateral by the Funds in connection with thesetransactions is at least 102% of the fair value of the securities loaned. The collateraland loaned securities are marked to market each business day. The aggregate dollarvalue of portfolio securities lent and collateral held is presented in the FinancialStatement–Supplementary Schedules.

LIQUIDITY RISK

Liquidity risk is the risk that the Funds will encounter difficulty in meetingobligations associated with financial liabilities that are settled by delivering cash oranother financial asset. All Funds’ financial liabilities come due within one year. Inaddition, the Funds’ units are redeemable on demand. In accordance with NI81-102,the Funds must provide payment for redeemed units within two business days ofreceipt of a redemption order. To manage this liquidity requirement, the Fundsinvest primarily in liquid securities that can readily be sold in active markets andeach Fund may borrow up to 5% of its NAV. At year end, no Fund had borrowedagainst its respective line of credit.

CURRENCY RISK

Currency risk is the risk that the values of financial assets and liabilitiesdenominated in foreign currencies fluctuate due to changes in foreign exchangerates. To the extent the Funds hold assets and liabilities denominated in foreigncurrencies, the Funds are exposed to currency risk. The Funds may also use forwardcontracts at the discretion of the Manager. Each individual Fund’s exposure tocurrency risk, if any, is presented in the “Financial Instruments Risks” section of thefinancial statements.

INTEREST RATE RISK

Interest rate risk is the risk that the fair value (measured as the present value) ofcash flows associated with interest bearing financial instruments will fluctuate dueto changes in the prevailing market rates of interest. In general, as interest ratesrise, the fair value of interest bearing financial instruments will fall. Financialinstruments with a longer term to maturity will generally have a higher interest raterisk.

The Funds’ interest-bearing financial instruments that subject the Funds to interestrate risk include domestic and foreign bonds and mortgage related and other assetback securities. The Funds' may also be exposed indirectly to interest rate riskthrough their position in interest rate swaps presented in the Schedule of DerivativeInstruments. Short-term money market instruments are also interest bearing andtherefore subject to interest rate risk. However, due to the short-term nature of thesecurities, the interest rate risk is generally not significant.

Interest rate risk management practices employed by the Funds include settingtarget durations based on the appropriate benchmark indices and monitoring theFunds’ durations relative to the benchmarks. If interest rates are anticipated to rise,the Funds’ durations can be shortened to limit potential losses. Conversely, ifinterest rates are anticipated to fall, the durations can be lengthened to increasepotential gains. Each individual Fund’s exposure to interest rate risk, if any, ispresented in the “Financial Instruments Risks” section of the financial statements.

OTHER PRICE RISK

Other price risk is the risk that the fair value of financial instruments may declinebecause of changes in market prices of the financial instruments, other thandeclines due to interest rate risk and currency risk. Other price risk stems fromfinancial instruments’ sensitivity to changes in the overall market (market risk) aswell as factors specific to the individual financial instrument. Other price riskattributable to individual investments is managed through diversification of theportfolio and security selection and adjustments to fair value when there issignificant volatility in international markets after markets are closed. Eachindividual Fund’s exposure to other price risk, if any, is presented in the “FinancialInstruments Risks” section of the financial statements.

Details of each Fund’s exposure to financial instruments risks including fair valuehierarchy classification are available in the “Financial Instruments Risks” section ofthe financial statements of each Fund.



FINANCIAL RISKS FROM UNDERLYING MUTUAL FUNDS

Certain Funds may invest in other mutual funds. The Funds’ investments in mutualfunds are subject to the terms and conditions of the respective mutual fund’soffering documentation and are susceptible to the risks related to the underlyingmutual funds’ financial instruments. The Funds’ maximum exposure to loss fromtheir interests in mutual funds is equal to the total fair value of their investment inmutual funds. Once the Funds dispose of their shares in an underlying mutual fund,the Funds cease to be exposed to any risk from that mutual fund. The exposure tounderlying mutual fund investments is disclosed in the “Financial InstrumentsRisks” section of the financial statements of each Fund.

8. Fair value measurementThe Funds classify fair value measurements within a hierarchy that prioritizes theinputs to Funds’ valuation techniques used in measuring fair value. Under theseprovisions, an entity is required to classify each financial instrument into one ofthree fair value levels as follows:

for unadjusted quoted prices in active markets for identical assets orliabilities;

Level 1 -

for inputs, other than quoted prices included in Level 1, that areobservable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and,

Level 2 -

for inputs that are based on unobservable market data.Level 3 -

The classification of a financial instrument is based on the lowest level of input thatis significant to the determination of fair value.

All fair value measurements are recurring. The carrying values of cash, receivablefor investment transactions, dividends and interest receivable, subscriptionsreceivable, payable for investment transactions, redemptions payable, distributionspayable and the Fund’s obligation for net assets attributable to holders ofredeemable units approximate their fair values due to their short-term nature. Fairvalues of securities and derivatives are classified as Level 1 when the relatedsecurity or derivative is actively traded and a quoted price is available. If aninstrument classified as Level 1 ceases to be actively traded, it is transferred out ofLevel 1. In such cases, fair value is determined using observable market data (eg.transactions for similar securities of the same issuer) and the instruments arereclassified into Level 2, unless the measurement of its fair value requires the use ofsignificant unobservable inputs, in which case it is classified as Level 3. Changes invaluation methods may result in transfers into or out of the assets’ or liabilities’assigned levels. The level summary based on the hierarchy inputs is disclosed in the"Financial Instrument Risks" section of each Fund.

Level 3 financial instruments are reviewed by the Funds’ fair valuation committee.The fair valuation committee considers the appropriateness of the valuation modelinputs, as well as the valuation result, using valuation methods recognized asstandard within the industry. Quantitative information about the unobservableinputs, sensitivity of the fair value measurements to changes in unobservableinputs and interrelationships between those inputs are disclosed in thesupplementary schedules under “Fair value measurement” if significantunobservable inputs are used when valuing Level 3 financial instruments.

EQUITIES

The Funds’ equity positions are classified as Level 1 when the security is activelytraded and a reliable price is observable. The Funds subscribe to the services of athird-party valuation service provider to provide fair value adjustments, when adefined threshold is met, to the prices of foreign securities due to changes in thevalue of securities in North American markets following the closure of the foreignmarkets. The parameters used to apply the fair value adjustments are based onobservable market data. Where applicable, the foreign securities will be consideredLevel 2 priced securities. The Funds do not hold any securities classified as Level 3.

BONDS AND SHORT-TERM INVESTMENTS

Debt securities generally trade in the OTC market rather than on a securitiesexchange. Bonds including government, corporate, convertible and municipal bondsand notes, bank loans, US and Canadian treasury obligations, sovereign issues andforeign bonds are normally valued by pricing service providers that use broker-dealer quotations, reported trades and valuations from their internal pricingmodels. These internal pricing models use inputs which are observable includinginterest rate curves, credit spreads and volatilities. The inputs that are significant tovaluation are generally observable and therefore the Funds’ bonds and short-terminvestments have been classified as Level 2, unless the determination of fair valuerequires significant unobservable input, in which the measurement is classified asLevel 3.

INVESTMENTS IN MUTUAL FUNDS AND EXCHANGE TRADED FUNDS

The Funds’ positions in the mutual funds and exchange traded funds are typically inpositions that are actively traded and a reliable price is observable and as such isclassified as Level 1.

FINANCIAL DERIVATIVE INSTRUMENTS

Derivatives consisting of foreign currency forward contracts, interest rate swaps,credit default swaps and foreign currency options which are valued based primarilyon the contract notional amount, the difference between the contract rate and theforward market rate for the same currency, interest rate and credit spreads. Thesederivative financial instruments have been classified as Level 2.

Futures contracts that are traded on a national securities exchange are stated at thelast reported sale or settlement price on the day of valuation. To the extent thesefinancial derivative instruments are actively traded they are categorized as Level 1.

FAIR VALUATION OF INVESTMENTS (INCLUDING UNLISTED SECURITIES)

If the valuation methods described above are not appropriate, the Funds willestimate the fair value of an investment using established fair valuation procedures,such as consideration of public information, broker quotes, valuation models,discounts from market prices of similar securities or discounts applied due torestrictions on the disposition of securities, and external fair value serviceproviders.

The extent of Funds’ use of quoted market prices (Level 1), internal models usingobservable market information as inputs (Level 2), and internal models withoutobservable market information (Level 3) in the valuation of securities issummarized in each Fund’s ”Financial Instruments Risks” section of the financialstatements.



9. Future Accounting ChangesIFRS 9 FINANCIAL INSTRUMENTS (“IFRS 9”)

The final version of IFRS 9, Financial Instruments was issued by the InternationalAccounting Standards Board ("IASB") in July 2014 and will replace IAS 39, FinancialInstruments: Recognition and Measurement, related to the classification andmeasurement of financial assets and financial liabilities, IFRS 9 relates to theclassification and measurement of financial assets and financial liabilities in theFunds. The new standard is effective for the Funds for their fiscal year beginningJanuary 1, 2018. The Manager has been evaluating the standard and has currentlydetermined that the impact to the Funds will include additional disclosures relatedto changes to the classification of certain financial instruments to align with theclassification under IFRS 9. Adoption of the standard will not impact net assetsattributable to holders of redeemable units. The Manager will continue to monitorfor changes to this accounting standard.

10. Comparative FiguresCertain comparative figures may be reclassified to conform to the presentation forthe year ended December 31, 2017. Comparative figures in the Statement of CashFlows and the Statement of Changes in Net Assets Attributable to Holders ofRedeemable Units for "Proceeds from issue of redeemable units" and "Cash paid forredemption of redeemable untis" have been revised to exclude transfer in and outtransactions, which are non-cash in nature. There is no impact on cash flows fromfinancing activities or to the net capital transaction activity within the Funds.

Documents

MD Family of Funds 2017 ANNUAL FINANCIAL … · of dis tributions only and does not take int o account sales , redemption, dis tribution or optional charges payable by any securit