Semi-Annual Financial Statements - BMO E.pdf · 2010. 7. 7. · Audit fees 7 10 Independent Review Committee fees 1 3 ... Recordati S.p.A 21,900 165 158 Trevi Finanziaria S.p.A. 14,900

S e m i - A n n u a l F i n a n c i a l S t a t e m e n t s

BMO Harris Private PortfoliosJune 30, 2009

BMO Harris International Special Equity Portfolio

FS17-3048 E


STATEMENT OF NET ASSETSAs at (in thousands of dollars except per unit data) (unaudited)

June 30, 2009 December 31, 2008

AssetsCash 676 218Investments at fair value (note 2) 30,143 28,907Interest and dividends receivable 81 21Subscriptions receivable 17 18Due from broker 134 668

Total assets 31,051 29,832

LiabilitiesDue to broker 130 —Accrued expenses 17 51Unrealized loss on forward currency contracts at fair value — 8Redemptions payable 31 26

Total liabilities 178 85

Net assets representing unitholders' equity (note 2) 30,873 29,747

Net assets per unit (note 2) $4.66 $4.59

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

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STATEMENT OF OPERATIONSFor the six-month periods ended (in thousands of dollars except per unit data) (unaudited)

June 30, 2009 June 30, 2008

Investment IncomeDividends 511 1,612Interest 1 13Income from investment trust units 35 16Foreign withholding taxes (76) (226)

471 1,415

ExpensesAudit fees 7 10Independent Review Committee fees 1 3Custodian fees (note 5) 37 60Legal and filing fees 5 13Unitholder servicing fees (note 5) 46 87Printing and stationery fees 2 6Commissions and other portfolio transaction costs 55 112

153 291

Net investment income for the period 318 1,124Realized loss on sale of investments (11,632) (8,795)Loss on forward currency contract (5) —Loss on foreign exchange (3) (18)Change in unrealized appreciation in value of investments 11,657 3,183Change in unrealized appreciation (depreciation) in value of forward currency contracts 8 (2)

Increase (decrease) in net assets from operations 343 (4,508)

Increase (decrease) in net assets from operations per unit (note 2) $0.05 $(0.49)


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STATEMENT OF CHANGES IN NET ASSETSFor the six-month periods ended (in thousands of dollars) (unaudited)

June 30, 2009 June 30, 2008

Net assets – beginning of period (note 2) 29,747 85,560

Increase (decrease) in net assets from operations 343 (4,508)

Unit Transactions:Proceeds from sale of units 5,859 20,281Amounts paid on units redeemed (5,076) (16,768)

Total unit transactions 783 3,513

Net assets – end of period (note 2) 30,873 84,565

Change in Units(in thousands of units) (unaudited)

Units issued and outstanding, beginning of period 6,487 9,292Issued for cash 1,361 2,269

7,848 11,561Redeemed during the period (1,225) (1,896)

Units issued and outstanding, end of period 6,623 9,665


*For the purpose of the Statement of Investment Portfolio, cost includes commissions and other portfolio transaction costs (note 2).**These securities have no quoted market value and are valued using valuation techniques (note 2).


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International EquitiesAustralia – 7.6%Ansell Ltd 9,600 102 79David Jones Limited 202,300 702 859Dominion Mining Limited 20,000 91 86Eastern Star Gas Limited 112,500 82 84eircom Holdings Limited 110,000 69 118GrainCorp Limited 12,900 88 87JB Hi-Fi Limited 15,600 206 224Kingsgate Consolidated Limited 22,900 110 143Ramsay Health Care Limited 9,200 77 99Sino Gold Mining Limited 17,800 78 86Straits Resources Limited 92,300 103 181Transpacific Industries Group Limited** 63,700 529 107WorleyParsons Limited 8,800 173 195

2,410 2,348Belgium – 0.7%Nyrstar 8,500 90 84ThromboGenics NV 7,200 103 137

193 221Bermuda – 0.7%Hiscox Ltd 39,700 246 220

Canada – 8.6%Aastra Technologies Limited 5,100 156 151Advantage Energy Income Fund 15,100 81 74Aecon Group Inc. 14,900 225 172Alimentation Couche-Tard Inc., Class B 14,400 217 202Boardwalk Real Estate Investment Trust 4,800 223 155Breakwater Resources, Ltd. 282,000 86 80Celtic Explorations Ltd. 3,500 55 53Cogeco Cable Inc. 3,500 146 99Franco-Nevada Corporation 2,600 68 73Gammon Gold, Inc. 8,100 77 62Keyera Facilities Income Fund 12,100 258 240Laurentian Bank of Canada 17,400 640 610Lundin Mining Corporation 28,600 91 95New Gold Inc. 37,800 89 116Northgate Minerals Corporation 35,500 84 87Open Text Corporation 3,000 106 127SXC Health Solutions Corporation 5,000 104 148Vermilion Energy Trust 3,900 154 113

2,860 2,657Denmark – 1.6%East Asiatic Company Ltd. A/S, The, (A/S Det Ostasiatiske Kompagni) 1,900 175 74SimCorp A/S 600 92 108

STATEMENT OF INVESTMENT PORTFOLIOAs at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)

Number of Cost* Fair ValueSecurity Shares or Units ($) ($)

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Denmark (cont’d)Topdanmark A/S 2,225 401 302

668 484Finland – 1.4%HKScan Oyj 7,400 92 106Huhtamaki Van Leer OYJ 4,800 50 58Konecranes Oyj 3,800 148 104Oriola-KD Oyj 39,400 173 178

463 446France – 7.4%Esso S.A.F. 630 182 97Eutelsat Communications 3,000 78 90Faiveley SA 1,000 87 89ICADE 800 82 77Meetic SA 4,400 96 134Mercialys 2,000 80 72Rubis 1,200 89 104Saft Groupe SA 2,600 88 120SCOR 15,400 452 368SEB SA 8,500 516 410Societe BIC SA 3,600 233 241Teleperformance 3,600 123 128Zodiac S.A. 9,500 437 361

2,543 2,291Germany – 6.7%Air Berlin PLC 35,500 227 197AIXTRON AG 7,100 91 102Bauer AG 2,600 184 109Fielmann AG 1,500 114 115Hannover Ruckversichenungs AG 6,400 272 275Hochtief Aktiengesellschaft 6,700 349 394Phoenix Solar AG 3,300 157 177Software AG 1,200 95 99Suedzucker AG 9,500 228 224Vossloh Ag 2,700 355 378

2,072 2,070Hong Kong – 1.9%China Grand Forestry Resources Group Ltd. 2,042,000 109 123Galaxy Entertainment Group Limited 290,000 91 88Geely Automobile Holdings Limited 764,000 156 160Johnson Electric Holdings Limited 286,000 87 90Skyworth Digital Holdings Limited 471,000 99 125

542 586Italy – 5.5%Ansaldo STS S.p.A. 11,100 198 238

STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)


*For the purpose of the Statement of Investment Portfolio, cost includes commissions and other portfolio transaction costs (note 2).


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Italy (cont’d)Buzzi Unicem S.p.A. 6,400 177 106Davide Campari Milano Spa 10,100 84 94DiaSorin S.p.A. 12,700 283 368I.M.A. Industria Macchine Automatiche S.p.A. 9,800 233 200Kerself S.p.A 8,100 120 115Landi Renzo S.p.A. 41,000 202 214Recordati S.p.A 21,900 165 158Trevi Finanziaria S.p.A. 14,900 235 202

1,697 1,695Japan – 24.7%ADEKA CORPORATION 11,000 83 122AICA Kogyo Company, Limited 11,000 111 125Alpen Co., Ltd. 19,000 410 401Arcs Company Limited 5,000 79 83Axell Corporation 48 191 199CANON ELECTRONICS INC. 5,200 192 88Century Leasing System, Inc. 13,900 218 183CHUO DENKI KOGYO CO., LTD 12,000 83 115Daihatsu Diesel Mfg, Co., Ltd. 10,000 76 76Fp Corporation 2,000 106 102Hanwa Co., Ltd. 42,000 148 183Heiwa Corporation 14,000 175 189Hitachi Capital Corp. 31,000 422 488Hokuetsu Paper Mills, Ltd. 14,000 87 80Hosiden Corporation 24,000 363 357Hosokawa Micron Corporation 21,000 102 107IBJ Leasing Company, Limited 10,800 287 174IT Holdings Corporation 5,000 92 103Iwatani Corporation 28,000 76 91Kanto Auto Works, Ltd. 4,700 59 53Keiyo Co., Ltd. 37,800 272 221KURODA ELECTRIC CO., LTD. 12,000 178 187KYOEI STEEL LTD. 3,000 97 99KYORIN Co., Ltd. 5,000 87 88Kyoritsu Maintenance Co., Ltd. 4,900 110 95KYOWA EXEO CORPORATION 8,000 85 93Miraca Holdings Inc. 10,100 223 287MITSUBISHI STEEL MFG. CO., LTD. 71,000 229 194Money Partners Group Co., Ltd. 115 77 69Net One Systems Co., Ltd. 50 86 103Nippon Shinyaku Co., Ltd. 23,000 240 306Nippon Soda Co., Ltd. 96,000 460 500Nissan Shatai Co., Ltd. 56,000 425 535Okinawa Electric Power Company, Inc. 5,400 447 339Orient Corporation 73,000 92 105





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Japan (cont’d)Ricoh Leasing Company Ltd. 6,200 174 142Round One Corporation 9,000 94 104Siix Corporation 20,000 85 112TACHI-S CO., LTD. 16,000 178 150Taikisha Ltd. 5,000 95 68Teikoku Piston Ring Co., Ltd. 18,000 176 99TOAGOSEI CO., LTD. 56,000 219 179Toby Industries Group 23,000 47 51Tochigi Bank Ltd., The 30,000 199 180

7,735 7,625Netherlands – 2.7%ERIKS NV 2,300 221 180Gemalto N.V. 5,800 178 235Super de Boer 33,600 197 169Vastned Offices/Industrial NV 10,300 140 177Wereldhave Nv 900 77 78

813 839Norway – 0.2%Pronova BioPharma ASA 20,900 80 65

Singapore – 1.6%Ausgroup Limited 137,700 59 58Biosensors International Group Ltd. 241,000 85 93Chartered Semiconductor Manufacturing Limited 136,300 213 224Yongnam Holdings Limited 654,000 114 112

471 487Spain – 4.6%Construcciones y Auxiliar de Ferrocarrilies, S.A. 861 436 450Corporacion Financiera Alba, S.A. 7,900 549 443Grifols, S.A. 5,400 124 111Jazztel p.l.c. 168,600 74 67Jazztel p.l.c., Rights, Jul 9, 2009 168,600 13 13Sociedad General de Aguas de Barcelona, S.A. 3,700 87 98Viscofan, S.A. 9,400 219 234

1,502 1,416Sweden – 0.9%Betsson AB 2,600 36 34Elekta AB, B Shares 9,200 131 157Orc Software AB 4,600 92 99

259 290Switzerland – 4.9%Actelion Ltd. 7,300 461 445Allreal Holdings AG 700 89 96





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Switzerland (cont’d)Baloise Holding AG 5,800 621 502Flughafen Zuerich AG 410 183 107Galenica Ltd. 210 77 72PSP Swiss Property AG 3,600 195 200Valora Holdings Ag 400 94 84

1,720 1,506United Kingdom – 15.9%Aggreko plc 17,900 224 178Amlin plc 61,900 443 359ARM Holdings PLC 39,100 82 90Autonomy Corporation PLC 12,500 253 344Babcock International Group PLC 18,200 219 168Beazley PLC 79,600 257 148Brit Insurance Holdings PLC 31,300 226 113Catlin Group Limited 11,200 71 69Chemring Group PLC 5,700 234 237Debenhams Plc 236,500 327 368Devro plc 9,400 16 16easyJet PLC 14,600 82 76Enterprise Inns PLC 137,900 110 330Ferrexpo plc 43,000 328 111Fidessa Group Plc 4,500 94 94Galiform plc 152,400 102 103Game Group Plc, The 210,400 856 664Hampson Industries PLC 53,100 122 69Inchcape PLC 271,700 81 99International Power PLC 105,800 852 483Keller Group plc 9,300 204 99McBride plc 39,400 96 109Meggitt PLC 28,200 77 86Pace Plc 43,800 149 167Premier Foods PLC 150,200 85 106PV Crystalox Solar PLC 53,800 146 86Yell Group PLC 247,200 147 125

5,883 4,897

Total Investment Portfolio – 97.6% 32,157 30,143

Unrealized Gain on Forward Currency Contracts – 0.0% —

Other Assets Less Liabilities – 2.4% 730

NET ASSETS – 100.0% 30,873





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The Portfolio’s Investment Portfolio is concentrated in the following segments as at:

June 30, December 31, 2009 2008

Australia 7.6% 7.3%Belgium 0.7% 0.9%Bermuda 0.7% —Canada 8.6% 7.6%Denmark 1.6% 1.5%Finland 1.4% 0.6%France 7.4% 7.0%Germany 6.7% 3.8%Greece — 0.5%Hong Kong 1.9% 0.8%Italy 5.5% 5.6%Japan 24.7% 28.7%Netherlands 2.7% 2.0%Norway 0.2% 0.4%Singapore 1.6% 2.3%Spain 4.6% 3.5%Sweden 0.9% 1.4%Switzerland 4.9% 7.3%United Kingdom 15.9% 15.9%Other Assets Less Liabilities 2.4% 2.9%

100.0% 100.0%

*Credit rating provided by Standard & Poor’s.


Unrealized Gain on Forward Currency ContractsAs at June 30, 2009, the Portfolio had the following open positions:

Settlement Buy Position Currency Position Contract UnrealizedDate Currency (in $000s) Sells (in $000s) Rates Counterparty Credit Ratings** Gain

July 1, 2009 SG$ 29 ¥ (1,938) 0.0151 Bank of New York Mellon Corp. AA- 0.12July 2, 2009 HK$ 239 ¥ (2,967) 0.0806 Bank of New York Mellon Corp. AA- 0.09July 2, 2009 SG$ 24 ¥ (1,615) 0.0151 Bank of New York Mellon Corp. AA- 0.10

Total Unrealized Gain on Forward Currency Contracts $ 0.31

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Notes to Financial Statements June 30, 2009

(All amounts in thousands of dollars) (unaudited)

1. (a) The PortfolioThe Portfolio is an open-ended mutual fund trust

established by Declaration of Trust under the laws of the

Province of Ontario. BMO Harris Investment Management

Inc. (“the Manager”) is the Manager of the Portfolio.

The information provided in these unaudited financial

statements is for the six month period(s) ended June 30, 2009

and 2008 except for the comparative information presented

in the Statement of Net Assets which is as at December 31,

2008. Financial information for the Portfolio established

during the period(s) is presented from the date of inception

as noted in Note 8(a).

(b) Independent Review Committee

On May 1, 2007, the Independent Review Committee

(“IRC”) for the Portfolio was established pursuant to

National Instrument 81-107 (“NI 81-107”) Independent

Review Committee for Investment Funds. On September

12, 2007, the IRC became operational. The IRC provides

independent oversight regarding actual and perceived

conflicts of interest involving the Portfolio and performs

all other functions required of an independent review

committee under NI 81-107.

2. Summary of significant accounting policiesThese financial statements have been prepared in

accordance with Canadian generally accepted accounting

principles (“GAAP”), which include estimates and

assumptions by management that may affect the reported

amounts of assets, liabilities, income and expenses during

the reported periods. Actual results could differ from

estimates. The following is a summary of significant

accounting policies adopted by the Portfolio. Certain prior

balances have been re-classified to conform with the

current period presentation.

Adoption of new accounting policies –

Financial Instruments Disclosure and Presentation

On January 1, 2008, the Portfolio adopted the Canadian

Institute of Chartered Accountants (“CICA”) Handbook

Section 3862, “Financial Instruments – Disclosures” and

Section 3863, “Financial Instruments – Presentation”. The

new standards replaced Section 3861, “Financial Instruments

– Disclosure and Presentation”. The new disclosure

standards increase the emphasis on the disclosure of risks

associated with financial instruments and how those risks

are managed.

The previous requirements related to presentation of

financial instruments have been carried forward unchanged.

Adoption of the new standards does not impact the daily

price of the Portfolio’s securities for subscription and

redemption purposes, nor for the calculation of Net Assets.

Refer to Note 6 and Note 8 for new disclosure relating to

adoption of the new requirements.

Capital Disclosure

On January 1, 2008 the Portfolio adopted CICA Handbook

Section 1535 (“Section 1535”), which establishes standards

for disclosing information about an entity’s capital and how

it is managed. This standard applies to financial

statements relating to fiscal years beginning on or after

October 1, 2007. The adoption of this standard results in

additional disclosures relating to the redeemable units of

the Portfolio but does not affect the Portfolio’s results or

financial position. The disclosure requirements

pertaining to Section 1535 are contained in Note 3.

Valuation of investments

The CICA Handbook Section 3855, “Financial Instruments

– Recognition and Measurement” (“Section 3855”), requires

the fair value of financial instruments traded in active

markets to be measured based on a security’s bid price.

The Canadian Securities Administrators (“CSA”) allows

investment funds to calculate the daily net asset value for

the purpose of processing unitholder transactions (“Net

Asset Value”) using fair value measures as defined in

National Instrument 81-106 (“NI 81-106”).

The net asset value calculated in accordance with Section

3855 is referred to as “Net Assets” from hereon forward.

Investments are categorized as held for trading in accordance

with Section 3855. Investments are recorded at their fair

value with the difference between this amount and cost

being recorded as unrealized appreciation or depreciation

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Notes to Financial Statements (cont’d)

June 30, 2009

in value of investments in the Statement of Operations. In

the case of securities listed on stock exchanges, the fair

value means the latest bid price. For bonds, debentures,

asset-backed securities and other debt instruments, the

fair value means the bid price provided by independent

security pricing services. Short term investments are

included in the Statement of Investment Portfolio at their

cost including applicable foreign exchange translations.

This value, together with accrued interest approximates

fair value using current bid price. Unlisted warrants are

valued based on a pricing model which considers factors

such as the market value of the underlying security, strike

price and terms of the warrant. Investments for which

reliable quotations are not readily available are valued at

their fair value as determined by the Manager using a

valuation technique that requires the use of inputs and

assumptions based on observable market data including

volatility, comparable securities and other applicable

rates or prices.

Investment transactions

Investment transactions are accounted for on the trade date.

Realized gains and losses from the sale of investments and

unrealized appreciation (depreciation) in the value of

investments are calculated with reference to the average

cost of the related investments which exclude brokerage

commissions and other trading expenses. All net realized

gains (losses), unrealized appreciation (depreciation) in

value, and transaction costs are attributable to investments

and derivative instruments which are deemed held for trading.

Transaction Costs, such as brokerage commissions, incurred

in the purchase and sale of securities by the Portfolio are

expensed and included in “Commissions and other portfolio

transaction costs” in the Statement of Operations.

Cash

Cash is comprised of cash on deposit and cash equivalents

and is deemed to be held for trading carried at fair value.

Other assets and liabilities

Interest and dividends receivable, subscriptions receivable,

receivable for margin on derivative contracts and due from

broker, are designated as loans and receivables and recorded

at cost or amortized cost. Amounts due to broker, accrued

expenses and redemptions payable are designated as

financial liabilities and reported at amortized cost. Other

assets and liabilities are short-term in nature and amortized

cost approximates fair value.

Cost of investments

The cost of investments represents the amount paid for

each security and is determined on an average cost basis.

Income recognition

Interest income is recognized on the accrual basis. Dividend

income is recognized on the ex-dividend date.

Distributions received from trust units are recorded as

income, capital gains or a return of capital, based on the

best information available to the Manager. Due to the nature

of these investments, actual allocations could vary from

this information. Amounts recorded as a return of capital

reduce the cost of the investment in the trust unit.

Translation of foreign currencies

The fair value of investments and other assets and

liabilities in foreign currencies are translated into the

Portfolio’s functional currency at the rates of exchange

prevailing at the period-end date. Purchases and sales of

investments, income and expenses are translated at the

rates of exchange prevailing on the respective dates of

such transactions. Foreign exchange gains (losses) on

completed transactions are included in “Realized gain

(loss) on sale of investments” and unrealized gains

(losses) are included in “Unrealized appreciation

(depreciation) in value of investments” in the Statement

of Operations. Realized and unrealized exchange gains

(losses) on assets (other than investments) and liabilities

are included in “Gain (loss) on foreign exchange” in the

Statement of Operations.

Forward currency contracts

A forward currency contract is an agreement between two

parties (the Portfolio and the counterparty) to purchase or

sell a currency against another currency at a set price on a

future date. The Portfolio may enter into forward currency

contracts for hedging purposes which can include the

hedging of all or a portion of the currency exposure of an

investment or group of investments, either directly or

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June 30, 2009

indirectly. The Portfolio also may enter into these contracts

for non-hedging purposes which can include increasing

the exposure to a foreign currency or to shift exposure to

foreign currency fluctuations from one country to another.

The value of forward currency contracts entered into by

the Portfolio is recorded as the difference between the

value of the contract on the valuation date and the value

on the date the contract originated.

Changes in the value of open forward currency contracts

at every valuation date are recognized in the Statement of

Operations.

Interest rate swap contracts

Interest rate swap contracts are agreements between two

parties to exchange periodic interest payments based on a

notional principal amount. The net periodic payments

received or paid from interest rate swap contracts are

recorded as “Net income (loss) from derivative contracts”

in the Statement of Operations. Payments received or paid

when the Portfolio enters into the contract are recorded as

a liability or asset in the Statement of Net Assets. When the

contract is terminated or expires, the payments received or

paid are recorded as “Net income (loss) from derivative

contracts” in the Statement of Operations. Payments

received or paid upon early termination are recorded as

“Net income (loss) from derivative contracts” in the

Statement of Operations.

Interest rate swap agreements are valued based upon

quotations from independent sources. The change in

value is shown as unrealized appreciation (depreciation)

in value of investments in the Statement of Operations.

The Portfolio enters into interest rate swap agreements to

manage the exposure to interest rates.

Credit default swap contracts

A credit default swap contract is an agreement to transfer

credit risk from one party, a buyer of protection, to

another party, a seller of protection. The Portfolio as a

seller of protection would be required to pay a notional or

other agreed upon value to the buyer of protection in the

event of a default by a third party. In return, the Portfolio

would receive from the counterparty a periodic stream of

payments over the term of the contract provided that no

event of default occurs. If no default occurs, the Portfolio

would keep the stream of payments and would have no

payment obligations.

The Portfolio as a buyer of protection would receive a

notional or other agreed upon value from the seller of

protection in the event of a default by a third party. In

return, the Portfolio would be required to pay to the

counterparty a periodic stream of payments over the term

of the contract provided that no event of default occurs.

The credit default swap contract is fair valued daily based

upon quotations from independent market markers. Net

periodic payments are accrued daily and recorded as “Net

income (loss) from derivative contracts” in the Statement

of Operations. When credit default swap contracts expire or

are closed out, gains or losses are recorded as “Realized

gain (loss) on sale of investments” in the Statement of

Operations.

To-Be-Announced securities (“TBA”)

A TBA security is a forward contract for the purchase or

sale of mortgage backed securities in which the specified

securities are not known at the time of the trade. TBA

securities are valued based upon quotations from indepen -

dent sources. The Portfolio may sell the security before it

is delivered. This will result in the Portfolio realizing a

gain or loss which is recorded as “Net income (loss) from

derivative contracts” in the Statement of Operations.

Increase or decrease in net assets from operations per unit

“Increase or decrease in net assets from operations per unit”

in the Statement of Operations represents the increase

(decrease) in net assets from operations divided by the

average number of units outstanding during the period.

Short-term trading penalty

To discourage excessive trading, the Portfolio may, at the

Manager’s sole discretion, charge a short-term trading

penalty. This penalty is paid directly to the Portfolio.

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June 30, 2009

3. Unit valuationUnits of the Portfolio are offered for sale on a continuous

basis and may be purchased or redeemed on any valuation

date at the Net Asset Value. A valuation date is each day

on which the Toronto Stock Exchange is open for business.

The Net Asset Value per unit for the purposes of subscription

or redemption is computed by dividing the Net Asset Value

of the Portfolio (that is, the total market value of the assets

of the Portfolio less its liabilities) by the total number of

units of the Portfolio outstanding at such time.

The capital of the Portfolio is represented by issued

redeemable units with no par value. The units are entitled

to distributions, if any, and to payment of a proportionate

share based on the Portfolio’s net asset value per unit upon

redemption. The Portfolio has no restrictions or specific

capital requirements on the subscriptions and redemptions

of units. The relevant movements are shown on the

Statement of Changes in Net Assets. In accordance with its

investment objectives and strategies, and the risk

management practices outlined in Note 6, the Portfolio

endeavours to invest the subscriptions received in

appropriate investments while maintaining sufficient

liquidity to meet redemptions, such liquidity being

augmented by short-term borrowing or disposal of

investments where necessary.

4. Income taxesThe Portfolio qualifies as a mutual fund trust under the

provisions of the Income Tax Act (Canada) (the “Tax Act”),

and accordingly, is not subject to tax on its net taxable

income for the tax year which ends in December, including

net realized capital gains, which is paid or payable to its

unitholders as at the end of the tax year. However, such

part of the Portfolio’s net income and net realized capital

gains as is not so paid or payable is subject to income tax.

Income tax on net realized capital gains not paid or payable

is generally recoverable by virtue of refunding provisions

contained in tax legislation, as redemptions occur. It is the

intention of the Portfolio to distribute all of its income and

sufficient net realized capital gains so that the Portfolio will

not be subject to income tax.

Non-capital losses that arose in taxation years before 2004

are available to be carried forward for seven years and

applied against future taxable income. Non-capital losses

that arose in 2004 and 2005 are available to be carried

forward for ten years. Non-capital losses that arose in 2006

and after are available to be carried forward for twenty years.

Capital losses for income tax purposes may be carried

forward indefinitely and applied against capital gains

realized in future years.

The Portfolio’s available non-capital and capital losses for

income tax purposes as of the tax year ended December

2008 are included in Note 8.

5. Related party transactions(a) Unitholder servicing, commissions and other portfolio

transaction costs

The Portfolio is provided with certain facilities and

services by affiliates of the Manager. Expenses incurred in

the administration and custody of the Portfolio are paid to

BMO Trust Company (the Trustee and Custodian) and to

Jones Heward Investment Counsel Inc. (the Registrar) and

charged to the Portfolio. These expenses are included in

the unitholder servicing fees and custody fees in the

Statement of Operations. The Portfolio pays standard

brokerage commissions at market rates to BMO Nesbitt

Burns Inc., which is an affiliate of the Manager and these

amounts are included in commissions and other portfolio

transaction costs in the Statement of Operations.

(b) Other related party transactions

From time to time, the Manager may on behalf of the

Portfolio enter into transactions or arrangements with or

involving other members of Bank of Montreal Group of

Companies, or certain other persons or companies that

are related or connected to the Manager of the Portfolio.

These transactions or arrangements may include

transactions or arrangements with or involving Bank of

Montreal, BMO Trust Company, BMO Nesbitt Burns Inc.,

Jones Heward Investment Counsel Inc., and may involve

the purchase or sale of portfolio securities through or from

a member of Bank of Montreal Group of Companies, the

purchase or sale of securities issued or guaranteed by a

member of Bank of Montreal Group of Companies,

entering into forward contracts with a member of Bank of

Montreal Group of Companies acting as counterparty, the

purchase or redemption of units of other BMO Harris

15


June 30, 2009

Private Portfolios or the provision of services to the Manager.

6. Financial Instrument RiskA Portfolio may be exposed to a variety of financial risks.

A Portfolio’s exposure to financial risks is concentrated in

its investment holdings, including derivative instruments.

The Statement of Investment Portfolio groups securities

by asset type, geographic region and/or market segment.

The Portfolio’s risk management practice includes the

monitoring of compliance to investment guidelines. The

Manager manages the potential effects of these financial

risks on the Portfolio’s performance by employing and

overseeing professional and experienced portfolio

advisors that regularly monitor the Portfolio’s positions,

market events and diversify investment portfolios within

the constraints of the investment guidelines.

(a) Currency risk

Currency risk is the risk that the value of investments

denominated in currencies, other than the functional

currency of the Portfolio, will fluctuate due to changes in

foreign exchange rates. Equities in foreign markets and

foreign bonds are exposed to currency risk as the prices

denominated in foreign currencies are converted to the

Portfolio’s functional currency in determining fair value.

The Portfolio may enter into forward currency contracts

for hedging purposes to reduce foreign currency exposure

or to establish exposure to foreign currencies. The

Portfolio’s exposure to currency risk, if any, is further

discussed in Note 8.

(b) Interest rate risk

Interest rate risk is the risk that the fair value of the Portfolio’s

interest-bearing investments will fluctuate due to changes

in market interest rates. The Portfolio’s exposure to

interest rate risk is concentrated in its investment in debt

securities (such as bonds, money market instruments and

debentures) and interest rate derivative instruments, if

any. Other assets and liabilities are short-term in nature

and/or non-interest bearing. The Portfolio’s exposure to

interest rate risk, if any, is further discussed in Note 8.

(c) Other market risk

Other market risk is the risk that the fair value of a

financial instrument will fluctuate as a result of changes

in market prices (other than those arising from interest

rate risk or currency risk), whether those changes are

caused by factors specific to the individual financial

instrument or its issuer, or factors affecting all similar

financial instruments traded in a market. Other assets and

liabilities are monetary items that are short term in nature

as such they are not subject to other market risk. The

Portfolio’s exposure to other market risk, if any, is further

discussed in Note 8.

(d) Credit risk

Credit risk is the risk that a loss could arise from a security

issuer or counterparty to a financial instrument not being

able to meet its financial obligations. The fair value of debt

securities includes consideration of the credit worthiness

of the debt issuer. Credit risk exposure for over-the-counter

derivative instruments is based on the Portfolio’s unrealized

gain of the contractual obligations with the counterparty

as at the reporting date. The credit exposure of other assets

is represented by its carrying amount. The Portfolio’s

exposure to credit risk, if any, is further discussed in Note 8.

(e) Liquidity risk

The Portfolio’s exposure to liquidity risk is concentrated

in the daily cash redemptions of units. The Portfolio

primarily invests in securities that are traded in active

markets and can be readily disposed. In addition, the

Portfolio retains sufficient cash and cash equivalent positions

to maintain liquidity. The Portfolio may, from time to time,

enter into over-the-counter derivative contracts or invest

in unlisted securities, which are not traded in an

organized market and may be illiquid. Securities for

which a market quotation could not be obtained and may

be illiquid are identified on the Statement of Investment

Portfolio. The proportion of illiquid assets to the total Net

Assets of the Portfolio is monitored by the Manager to

ensure it does not exceed the regulatory limit and does

not significantly affect the liquidity required to meet the

Portfolio’s financial obligations.

8. Portfolio Specific Information(in thousands of dollars except per unit data) (unaudited)

(a) Portfolio information

The Portfolio’s inception date was September 29, 2006.

(b) Reconciliation of Net Assets Per Unit to Net Asset Value Per Unit

June 30, 2009 December 31, 2008

Net Net Net Net Asset Section Assets Asset Section Assets Value 3855 Per Value 3855 Per Per Unit Adjustment Unit Per Unit Adjustment Unit

4.66 — 4.66 4.59 — 4.59

(c) Income taxes

As at the tax year ended December 2008, the Portfolio has

the following available non-capital and capital losses for

income tax purposes:

TotalTotal Non- Non-capital Losses That Expire in

Capital Capital 2011 andLosses Losses 2009 2010 thereafter

($) ($) ($) ($) ($)

33,546 — — — —

(d) Related party transactions

The related party fees charged relating to unitholder

servicing and custodian fees are as follows:

June 30, 2009 June 30, 2008

Unitholder Servicing ($) 22 38

Custodian ($) 7 13

(e) Financial instrument risk

The Portfolio’s objective was to achieve long term growth

through capital appreciation by primarily investing in

small and mid-sized companies internationally.

No changes affecting the overall level of risk of investing

in the Portfolio were made during the period.

16


June 30, 2009

7. Transition to International Financial Reporting Standards

Canadian publicly accountable enterprises, which include

mutual funds, will be required to prepare their financial

statements in accordance with International Financial

Reporting Standards (IFRS), as issued by the International

Accounting Standards Board, for financial years beginning

on or after January 1, 2011. Effective January 1, 2011, the

Portfolio will adopt IFRS as the basis for preparing its

financial statements. The Portfolio will issue its financial

results for the annual period ended December 31, 2011

prepared in accordance with IFRS. It will also provide

comparative data on an IFRS basis, including an opening

statement of net assets as at January 1, 2010.

In order to meet the requirement to changeover to IFRS,

the Manager is following an orderly transition plan. Due

to anticipated changes to IFRS prior to transition, the

Manager is not in a position to determine the impact on

the Portfolio’s financial statements.

17


June 30, 2009

Currency risk

The table below summarizes the Portfolio’s exposure to

currency risk. Amounts shown are based on the carrying

value of monetary and non-monetary assets (including

derivatives and the underlying principle (notional)

amount of forward currency contracts, if any).

June 30, 2009 December 31, 2008

Currency As a % of Currency As a % ofExposure Net Assets Exposure Net Assets

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

Euro 9,001 29.2 7,127 24.0

Pound sterling 5,225 16.9 4,738 15.9

Japanese yen 7,917 25.6 8,572 28.8

U.S. dollar 5 — (7) —

Other European currencies 2,443 7.9 3,135 10.5

Other Pacificcurrencies 3,425 11.1 3,121 10.5

All amounts in CA$

As at June 30, 2009, if the Canadian dollar had

strengthened or weakened by 5% in relation to all foreign

currencies, with all factors remaining constant, Net

Assets could possibly have decreased or increased by

approximately $1,401 (December 31, 2008 – $1,334). In

practice, actual results may differ from this sensitivity

analysis and the difference could be material.

Interest rate risk

As at June 30, 2009 and December 31, 2008, the Portfolio

did not have significant exposure to interest rate risk.

Other market risk

As at June 30, 2009, 98% (December 31, 2008 – 97%) of

the Portfolio’s Net Assets were traded on respective stock

exchanges. If equity prices on respective stock exchanges

had increased or decreased by 10% as at the period end,

with all other factors remaining constant, Net Assets could

possibly have increased or decreased by approximately

$3,014 (December 31, 2008 – $2,891), respectively. In

practice, actual results may differ from this sensitivity

analysis and the difference could be material.

Credit risk

As at June 30, 2009 and December 31, 2008, the Portfolio

did not have significant exposure to credit risk.

9. Adoption of Future Accounting StandardsThe Accounting Standards Board of the CICA recently

issued an amendment to CICA Handbook Section 3862:

Financial Instruments – Disclosures. The new financial

reporting standards are effective for annual financial

statements relating to fiscal years ending after

September 30, 2009.

The amendments to the existing standard require

classification of the Portfolio’s assets and liabilities into

three levels based on the method used to value the assets

or liabilities. Level 1 values are based on quoted prices in

active markets for identical securities. Level 2 values are

based on significant observable market inputs, such as

quoted prices for similar securities and quoted prices in

inactive markets. Level 3 values are based on significant

unobservable inputs that reflect the Portfolio’s

determination of assumptions that market participants

might reasonably use in valuing the securities. The

valuation levels are not necessarily an indication of the

risk or liquidity associated with the underlying

investment. For example, Canadian government bonds

are generally high-quality and liquid; however, they may

be reflected as Level 2 because the inputs used to

determine fair value may not always be quoted prices in

an active market.

The Portfolio has a financial year ending December 31, 2009,

and as such, these changes will be reflected when the annual

financial statements are prepared for December 31, 2009.

BMO Harris Private Banking is comprised of Bank of Montreal, BMO Harris Investment Management Inc., and BMO TrustCompany. Banking services are offered through Bank of Montreal. Investment management services are offered through BMOHarris Investment Management Inc., an indirect subsidiary of Bank of Montreal. Estate, trust, planning, administration, custodialand tax services are offered through BMO Trust Company, a wholly owned subsidiary of Bank of Montreal.

Investment management services are offered through BMO Harris Investment Management Inc., an indirect subsidiary ofBank of Montreal.®“BMO (M-bar roundel symbol) Harris Private Banking” is a registered trade-mark of Bank of Montreal, used under licence.

TrusteeBMO Trust Company1 First Canadian Place100 King St. W., 9th FloorToronto, Ontario M5X 1H3

ManagerBMO Harris Investment Management Inc.1 First Canadian Place100 King St. W., 9th FloorToronto, Ontario M5X 1H3

AuditorsPricewaterhouseCoopers LLP77 King Street WestToronto, Ontario M5K 1G8

CustodianBMO Trust Company1 First Canadian Place100 King St. W., 9th FloorToronto, Ontario M5X 1H3

www.bmoharrisprivatebanking.com

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BMO Harris Investment Management Inc.1 First Canadian Place, 100 King St. W., 9th Floor, Toronto, Ontario M5X 1H3

ON OUR FRONT COVER: Monica Tap, 30-10-04 Hwy. 69, No. 3 (Evergreen), 2006, oil on canvas, BMO Corporate Art Collection. All images are reproduced with permission.

Documents

Semi-Annual Financial Statements - BMO E.pdf · 2010. 7. 7. · Audit fees 7 10 Independent Review Committee fees 1 3 ... Recordati S.p.A 21,900 165 158 Trevi Finanziaria S.p.A. 14,900