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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
FS06-3043 E
BMO Harris Opportunity Bond Portfolio
BMO Harris Opportunity Bond Portfolio
STATEMENT OF NET ASSETSAs at (in thousands of dollars except per unit data) (unaudited)
June 30, 2009 December 31, 2008
AssetsCash 2,607 6,446Cash Collateral 5,710 10,580Investments at fair value (note 2) 225,112 224,302Subscriptions receivable 50 38Due from broker 11,308 418Interest receivable 1,587 1,822Interest rate swap contracts at fair value — 102Unrealized gain on forward currency contracts 456 2,327Unrealized gain on to-be-announced securities 53 17,236Unrealized gain on forward bonds 1,670 10,456
Total assets 248,553 273,727
LiabilitiesDistribution payable to unitholders 13 —Due to broker — 768Redemptions payable 433 132Accrued expenses 20 20Interest rate swap contracts at fair value 861 19,238Unrealized loss on forward currency contracts 7,519 1,479Unrealized loss on to-be-announced securities 117 15,906Unrealized loss on forward bonds 328 521
Total liabilities 9,291 38,064
Net assets representing unitholders' equity (note 2) 239,262 235,663
Net assets per unit (note 2) $9.87 $9.39
The accompanying notes are an integral part of these financial statements.
2
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BMO Harris Opportunity Bond Portfolio
STATEMENT OF OPERATIONSFor the six-month periods ended (in thousands of dollars except per unit data) (unaudited)
June 30, 2009 June 30, 2008
Investment IncomeInterest 5,031 6,487Net income (loss) from derivative contracts (8,507) 2,500
(3,476) 8,987
ExpensesAudit fees 9 12Independent Review Committee fees 2 5Custodian fees (note 5) 46 32Legal and filing fees 8 18Unitholder servicing fees (note 5) 51 57Printing and stationary fees 2 4
118 128
Net investment income (loss) for the period (3,594) 8,859Realized gain on sale of investments 5,192 1,150Gain (loss) on foreign exchange 16,420 (449)Change in unrealized appreciation (depreciation) in value of investments 4,129 (873)Change in unrealized depreciation in value of forward currency contracts (7,911) (2,789)Change in unrealized depreciation in value of to-be-announced securities (1,394) (635)
Increase in net assets from operations 12,842 5,263
Increase in net assets from operations per unit (note 2) $0.52 $0.18
The accompanying notes are an integral part of these financial statements.
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BMO Harris Opportunity Bond Portfolio
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) 235,663 272,202
Increase in net assets from operations 12,842 5,263
Unit Transactions:Proceeds from sale of units 21,024 40,394Reinvested distributions 955 4,646Amounts paid on units redeemed (30,247) (26,028)
Total unit transactions (8,268) 19,012
Distributions to Unitholders from:Net income (975) (4,724)
Net assets, end of period (note 2) 239,262 291,753
Change in Units(in thousands of units) (unaudited)
Units issued and outstanding, beginning of period 25,098 28,720Issued for cash 2,206 4,215Issued on reinvestment of distributions 99 485
27,403 33,420Redeemed during the period (3,152) (2,713)
Units issued and outstanding, end of period 24,251 30,707
The accompanying notes are an integral part of these financial statements.
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BMO Harris Opportunity Bond Portfolio
Money Market Investments – 13.6%Federal Home Loan Bank 9,900 11,237 11,515United States Government 18,100 20,834 21,053
32,071 32,568
Total Money Market Investments – 13.6% 32,071 32,568
Money market investments which are grouped by issuer earn interest rates ranging from 0.10% to 0.13% and mature between July 2,2009 and July 23, 2009.
Bonds & DebenturesGovernment Bonds – 13.9%Government of Canada, 3.500% Jun 1, 2013 2,900 2,996 3,034Government of Canada, 3.000% Jun 1, 2014 700 739 717Government of Canada, 4.250% Jun 1, 2018 400 458 432Government of Canada, 3.750% Jun 1, 2019 12,300 13,215 12,698Government of Canada, Series A55, 8.000% Jun 1, 2023 8,300 12,323 12,075Government of Canada, Series VW17, 8.000% Jun 1, 2027 2,100 3,166 3,177Government of Canada, Series WL43, 5.750% Jun 1, 2029 130 153 162Government of Canada, 5.000% Jun 1, 2037 800 961 955
34,011 33,250Provincial Bonds – 22.7%Province of British Columbia, Unsecured, 4.700% Jun 18, 2037 3,100 3,100 3,067Province of Ontario, 4.400% Mar 8, 2016 19,700 19,897 20,547Province of Ontario, Series HP, 8.100% Sep 8, 2023 1,950 2,734 2,615Province of Ontario, 6.200% Jun 2, 2031 1,700 2,057 1,970Province of Quebec, Debentures, Unsecured, 4.500% Dec 1, 2016 9,800 9,947 10,199Province of Quebec, Medium Term Notes, 4.500% Dec 1, 2017 6,500 6,543 6,681Province of Quebec, Series OS, 6.000% Oct 1, 2029 8,215 9,472 9,155
53,750 54,234Municipal Bonds – 1.4%City of Chicago, O'Hare International Airport, General Airport Third Lien Revenue Bonds, Sinking Fund, Callable, 5.000% Jan 1, 2033 US$ 50 49 56Golden State Tobacco Securitization Corporation, Tobacco Settlement Asset-Backed Bonds, Series 2007 A-2, Convertible, Sinking Fund, Jun 1, 2037 US$ 50 31 24King County, Washington, Limited Tax General Obligation Refunding Bonds, Sinkable, Callable, 4.750% Jan 1, 2034 US$ 50 50 57Los Angeles California Unified School District, 2007 General Obligation Refunding Bonds, Series A-1, Callable, Sinkable, 4.500% Jan 1, 2028 US$ 1,000 843 1,041Los Angeles Community College District, 2003 Election General Obligation Bonds, 2006 Series E, Sinkable, Callable, 5.000% Aug 1, 2031 US$ 500 461 566Los Angeles Unified School District (County of Los Angeles, California) 2007 General Obligation Refunding Bonds, Series A-1, Callable, 4.500% Jul 1, 2025 US$ 300 256 323
STATEMENT OF INVESTMENT PORTFOLIOAs at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Par Value Cost Fair ValueSecurity (in thousands) ($) ($)
The accompanying notes are an integral part of these financial statements.
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BMO Harris Opportunity Bond Portfolio
Municipal Bonds (cont’d)New York City Municipal Finance Authority, Water & Sewer System Second Generation Resolution Revenue Bonds, Fiscal 2008, Series AA, 5.000% Jun 15, 2037 US$ 200 185 228State of California, General Obligation Unlimited, Build America Bonds, Extraordinary Redemption Option, 7.500% Apr 1, 2034 US$ 500 625 532State of California, General Obligation Unlimited, Build America Bonds, Extraordinary Redemption Option, 7.550% Apr 1, 2039 US$ 300 377 318State of California, Various Purpose General Obligation Bonds, Sinking Fund, Callable, 5.000% Dec 1, 2037 US$ 50 47 49Tobacco Settlement Financing Corporation, Tobacco Settlement Asset-Backed Bonds, Series 2007-1, Sinkable, Callable, 5.000% Jun 1, 2041 US$ 60 49 38
2,973 3,232Asset-Backed Securities – 3.8%Bear Stearns Adjustable Rate Mortgage Trust, Series 2003-4, Class 2A1, Floating Rate, Jul 25, 2033 US$ 454 464 479Bears Stearns Asset-Backed Securities, Inc. Series 2006-HE8,Class 1A1, Floating Rate Bonds, Oct 25, 2036 US$ 136 133 143Chase Issuance Trust, Series 2008-A13, Class A13, Floating Rate, Sep 15, 2015 US$ 400 428 465Countrywide Asset-Backed Certificates, Series 2005-14, Class 2A1, Mortgage Bonds, Floating Rate, May 25, 2035 US$ 385 412 201First Franklin Mortgage Loan Asset-Backed Certificates, Series 2006-FF12, Class A2, Floating Rate, Sep 25, 2036 US$ 132 154 150Ford Auto Securitization Trust, Series 2009-R1A, Class A1, Asset-Backed Security, 3.396% Nov 15, 2011 1,000 1,000 997Ford Credit Auto Owner Trust, Series 2008-C, Class A2B, Floating Rate, Jan 15, 2011 US$ 782 781 910Ford Credit Auto Owner Trust, Series 2008-C, Class A3, Floating Rate, Jun 15, 2012 US$ 1,400 1,400 1,634Residential Asset Securities Corporation, Floating Rate Mortgage Bond, Series 2007-KS3, Class A1A, Feb 25, 2030 US$ 365 424 369SLM Student Loan Trust, Series 2008-9, Class A, Mortgage Bonds, Floating Rate, Apr 25, 2023 US$ 3,143 3,282 3,729
8,478 9,077Collateral Mortgage Obligations – 2.3%Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-1, Class A-4, 5.451% Jan 15, 2049 US$ 200 179 174Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-3, Class A-4, Floating Rate, Jun 10, 2049 US$ 400 363 329Citigroup Mortgage Loan Trust Inc., Series 2005-6 Class A3, Callable, Floating Rate, Aug 25, 2035 US$ 1,082 1,088 912CS First Boston Mortgage Securities Corp., Series 2003-AR15, Class 2A1, Floating Rate, Jun 25, 2033 US$ 123 130 119
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Par Value Cost Fair ValueSecurity (in thousands) ($) ($)
The accompanying notes are an integral part of these financial statements.
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BMO Harris Opportunity Bond Portfolio
Collateral Mortgage Obligations (cont’d)GS Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 2007-GG10, Class A-4, Floating Rate, Aug 10, 2045 US$ 2,100 1,861 1,846Indymac Indx Mortgage Loan Trust, Series 2004-AR11, Class 2A, Floating Rate, Dec 25, 2034 US$ 103 106 91Merrill Lynch Mortgage Investors Trust, Series 2003-A3, Class 1A, Floating Rate, May 25, 2033 US$ 104 109 98ML-CFC Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-9, Class A4, 5.700% Sep 12, 2049 US$ 2,100 1,823 1,685Wells Fargo Mortgage Backed Securities Trust, Series 2004-CC, Class A1, Floating Rate, Jan 25, 2035 US$ 303 308 294
5,967 5,548Corporate Bonds & Debentures – 35.1%American Express Centurion Bank, Series BKN1, Medium Term Notes, 6.000% Sep 13, 2017 US$ 1,200 1,260 1,273American Express Company, Senior Notes, 6.150% Aug 28, 2017 US$ 600 637 644American Express Credit Corporation, Medium Term Notes, Senior, Unsecured, Floating Rate, May 27, 2010 US$ 300 297 345American International Group, Inc., 4.900% Jun 2, 2014 500 328 175American International Group, Inc., Series 144A, 8.250% Aug 15, 2018 US$ 800 836 548American International Group, Inc., Series 144A, Fixed to Floating, Junior Subordinated, Callable, 8.175% May 15, 2058 US$ 900 902 299AT&T Corp., Unsecured Senior Notes, Multi-Coupon, 8.000% Nov 15, 2031 US$ 800 1,040 1,074Bank of America Corporation, Series L, Medium Term Notes, Senior, 5.650% May 1, 2018 US$ 1,400 1,409 1,439Bank of America NA, Global Bank Notes, Floating Rate, May 12, 2010 US$ 800 802 922Bank of America, Series L, Medium Term Notes, Senior, Unsecured, Unsubordinated, 3.125% Jun 15, 2012 US$ 4,200 5,450 5,038Bank of Nova Scotia, Senior Deposit Notes, Unsecured, 4.580% Feb 15, 2011 1,400 1,400 1,463Bank of Nova Scotia, Senior Deposit Notes, Floating Rate, Jun 23, 2011 1,400 1,400 1,392Bank of Nova Scotia, Deposit Notes, Senior Unsecured, 3.030% Jun 4, 2012 600 600 602Barclays Bank Plc, Series 144A, Subordinated, 10.179% Jun 12, 2021 US$ 1,120 1,407 1,346Bear Stearns Companies Inc., Senior Unsecured Notes, Floating Rate, Oct 2, 2009 1,000 985 998Caelus RE Ltd., Series 144A, Catastrophe Notes, Floating Rate, Jun 7, 2011 US$ 300 305 317Caisse Nationale des Caisses D'Epargne et de Prevoyance, Fixed to Floating, Subordinated Callable, Perpetual, 4.750% Feb 1, 2016 € 600 816 440Caisse Nationale des Caisses D'Epargne et de Prevoyance, Fixed to Floating, Subordinated, Callable, Perpetual, 6.117% Oct 30, 2017 € 100 139 83Canadian Natural Resources Ltd., Senior Notes, Callable, 5.450% Oct 1 2012 US$ 700 760 853Citigroup Finance Canada Inc., Series 2007-03, Medium Term Notes, Unsecured, 5.500% May 21, 2013 1,200 1,198 1,112Citigroup Funding Inc., Series D, Medium Term Notes, Senior, Floating Rate, May 7, 2010 US$ 600 604 683
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Par Value Cost Fair ValueSecurity (in thousands) ($) ($)
The accompanying notes are an integral part of these financial statements.
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BMO Harris Opportunity Bond Portfolio
Corporate Bonds & Debentures (cont’d)Citigroup Inc., Senior Notes, 5.500% Apr 11, 2013 US$ 2,000 2,008 2,180Companie de Financement Foncier, Series 394, Euro Medium Term Notes, Callable, 4.550% Apr 28, 2017 500 500 498Consumers Energy Company, Series L, First Mortgage Bonds, 5.000% Feb 15, 2012 US$ 600 648 709Consumers Energy Company, Series B, First Mortgage Bonds, 5.375% Apr 15, 2013 US$ 700 753 836Credit Suisse, Senior Notes, Unsecured, Callable, 5.000% May 15, 2013 US$ 1,400 1,424 1,665Deutsch Telekom International Finance B.V., Multi-Couponed Bonds, 8.500% Jun 15, 2010 US$ 300 362 367Deutsch Telekom International Finance B.V., Multi-Couponed Bonds, 8.750% Jun 15, 2030 US$ 600 775 817Dexia Credit Local, Series 144A, Government Guaranteed Notes, Floating Rate, Sep 23, 2011 US$ 1,100 1,248 1,275Duke Energy Corporation, Unsecured Notes, Unsubordinated, 6.250% Jan 15, 2012 US$ 600 684 750Electricite de France S.A., Series 144A, 6.950% Jan 26, 2039 US$ 300 387 392EnCana Corporation, Senior Notes, Unsecured, Unsubordinated, Callable, 4.750% Oct 15, 2013 US$ 700 724 821Exelon Corporation, Senior Notes, Callable, 4.900% Jun 15, 2015 US$ 500 519 541GE Capital Canada Funding Company, Series A, Medium Term Notes, 5.730% Oct 22, 2037 2,400 2,399 2,069General Electric Capital Corporation, Series A, Global Medium Term Notes, Senior Unsecured, Floating Rate, May 11, 2016 US$ 2,300 2,146 2,130Golden Credit Card Trust, Series 2008-1, Credit Card Receivable Backed Notes, 5.106% Apr 15, 2011 1,800 1,800 1,882Goldman Sachs Group Inc., The, Senior Unsecured Notes, Unsubordinated, Floating Rate, May 18, 2015 € 500 608 692Goldman Sachs Group, Inc., The, Series B, Medium Term Notes, Senior, Unsecured, Floating Rate, Jul 22, 2015 US$ 300 257 300Goldman Sachs Group, Inc., The, Senior Unsecured Notes, Floating Rate Mar 22, 2016 US$ 500 413 492Goldman Sachs Group, Inc., Senior Unsecured Notes, Unsubordinated, Floating Rate, Apr 12, 2016 AU$ 1,500 1,107 1,101Goldman Sachs Group Inc., The, Senior Notes, 6.150% Apr 1, 2018 US$ 200 203 226Greater Toronto Airports Authority, Series 2002-2, Medium Term Notes, Secured, Callable, 6.250% Dec 13, 2012 800 867 873Greater Toronto Airports Authority, Series 2002-3, Medium Term Notes, Secured, Callable, 6.980% Oct 15, 2032 700 840 763Hewlett-Packard Company, Senior Notes, Floating Rate, May 27, 2011 US$ 300 341 353Honda Canada Finance Inc., Euro Medium Term Notes, Unsecured, Unsubordinated, Floating Rate, Mar 26, 2012 1,600 1,600 1,483HSBC Finance Capital Trust IX, Fixed to Floating, Callable, 5.911% Nov 30, 2035 US$ 200 220 123
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Par Value Cost Fair ValueSecurity (in thousands) ($) ($)
The accompanying notes are an integral part of these financial statements.
9
BMO Harris Opportunity Bond Portfolio
Corporate Bonds & Debentures (cont’d)JPMorgan Chase & Co., Series C, Medium Term Notes, Floating Rate, May 7, 2010 US$ 900 999 1,043Kinder Morgan Energy Partners, L.P., Senior Notes, Unsecured, Unsubordinated, 6.950% Jan 15, 2038 US$ 300 331 338Lehman Brothers Holdings Inc., Euro Medium Term Notes, Senior, Unsecured, 7.875% May 8, 2018 £ 400 796 111Lehman Brothers Holdings Inc., Series I, Medium Term Notes, Senior, Unsecured, Floating Rate, May 25, 2010 US$ 800 763 137Lloyds Banking Group Plc, Series 144A, Fixed to Floating Rate, Junior Subordinated, Unsecured, Tier 1, Perpetual, 5.920% Oct 1, 2015 US$ 300 319 122Macquarie Bank Ltd., Series 144A, Series B, Medium Term Notes, 2.600% Jan 20, 2012 US$ 1,400 1,755 1,638Macquarie Bank Ltd., Series RegS, 2.600% Jan 20, 2012 US$ 1,300 1,628 1,524Merna Reinsurance Ltd., Series 144A, Series A, Catastrophe Notes, Senior Secured, Floating Rate, Jul 7, 2010, Extendible to Jun 30, 2012 US$ 900 892 974Merrill Lynch & Co., Euro Medium Term Notes, Senior, Unsecured, Unsubordinated, Floating Rate, Jul 22, 2014 € 200 231 250Merrill Lynch & Co., Inc. Medium Term Notes, Floating Rate, May 12, 2010 US$ 1,600 1,603 1,851Morgan Stanley, Series F, Medium Term Notes, Floating Rate, May 14, 2010 US$ 800 804 928Morgan Stanley, Series F, Global Medium Term Notes, Senior, Unsecured, Floating Rate, Jan 9, 2012 US$ 400 418 419Morgan Stanley, Series G, Global Medium Term Notes, Senior, Unsecured, Floating Rate, Jan 16, 2017 € 400 410 511Morgan Stanley, Medium Term Note, Senior, Unsecured, 6.625% Apr 1, 2018 US$ 300 343 348NAV Canada, Series MTN 2007-1, Medium Term Notes, Floating Rate, May 3, 2010 1,250 1,250 1,238New York Life Global Funding, Maple Bond, 4.300% Mar 19, 2014 1,000 998 948Ohio Edison Company, Exchange Notes, Senior Notes, 5.450% May 1, 2015 US$ 700 745 801Pacific Gas & Electric Co., Unsecured Bonds, 6.050% Mar 1, 2034 US$ 500 549 603Rogers Communications, Inc., Senior Unsecured Note, Unsubordinated, 5.800% May 26, 2016 1,300 1,297 1,333Royal Bank of Scotland Group plc, Series 2851-1, Euro Medium Term Notes, Fixed to Floating, Callable, Perpetual, 6.666% Oct 5, 2017 1,500 1,500 600Royal Bank of Canada, Fixed to Floating, Medium Term Notes, Unsecured, Subordinated, Callable, 4.840% Mar 11, 2018 1,100 1,100 1,139Santander Perpetual Sa Unipersonal, Series 144A, Fixed to Floating, Perpetual, Subordinated, 6.671% Oct 29, 2049 US$ 400 389 344SG Capital Trust III, Fixed to Floating, Junior Unsecured Bond, Subordinated, Perpetual, Callable, Tier 1, 5.419% Nov 13, 2010 € 400 319 366Sprint Capital Corp., Senior Unsecured Notes, 8.375% Mar 15, 2012 US$ 900 1,115 1,031Suncor Energy Inc., Series 2, Medium Term Notes, Unsecured, Callable, 6.700% Aug 22, 2011 700 770 754Suncor Energy Inc., Senior Unsecured Notes, 6.850% Jun 1, 2039 US$ 1,100 1,123 1,263Swedbank AB, Series 144A, Government Guaranteed Notes, Floating Rate, Jan 14, 2013 US$ 3,900 4,411 4,521
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Par Value Cost Fair ValueSecurity (in thousands) ($) ($)
The accompanying notes are an integral part of these financial statements.
10
Corporate Bonds & Debentures (cont’d)Toronto-Dominion Bank, The, Senior Unsecured Deposit Notes, 4.854% Feb 13, 2013 1,800 1,800 1,903TransAlta Corporation, Medium Term Notes, Multi-Couponed Notes, 6.900% Nov 15, 2030 700 784 613TransCanada PipeLines Limited, Medium Term Notes, Putable, Multi-Coupon Notes, Callable, 7.340% Jul 18, 2028 700 849 796TransCanada PipeLines Limited, Senior Notes, Unsecured, 7.625% Jan 15, 2039 US$ 900 1,228 1,222UBS AG, Medium Term Notes, Senior, Unsecured, Subordinated, Callable, Floating Rate, May 5, 2010 US$ 1,700 1,733 1,983USB Capital IX, Fixed to Floating, Junior Notes, Subordinated, Perpetual, Callable, 6.189% Apr 15, 2011 US$ 250 279 196Verizon Communications Inc., Senior Notes, 5.350% Feb 15, 2011 US$ 900 984 1,092Verizon Communications Inc., Senior Notes, 6.400% Feb 15, 2038 US$ 900 901 1,025Wachovia Capital Finance of Canada, Medium Term Notes, Senior, Unsecured, 4.000% Feb 1, 2010 3,400 3,313 3,435Wells Fargo Finance Canada Corp., Medium Term Notes, Unsecured, Floating Rate, Dec 29, 2009 1,000 1,000 991XTO Energy Inc., Senior Unsecured Notes, 6.250% Apr 15, 2013 US$ 700 784 863YPG Holdings Inc., Series 4, Medium Term Notes, Unsecured, Callable, 5.250% Feb 15, 2016 400 390 354
86,311 83,992Mortgage Backed Securities – 1.3%Claregold Trust, Series 2006-1, Class A, 4.712% May 15, 2033 1,220 1,224 1,216Harborview Mortgage Loan Trust, Series 2003-1, Class A, Floating Rate, May 19, 2033 US$ 574 601 568Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2002-Canada 7, Class A1, 5.530% Apr 12, 2024 328 334 330Merrill Lynch Canada Financial Asset Inc., Series 2004-CA14, Class A1, 4.596% Oct 12, 2036 205 202 205Merrill Lynch Financial Assets Inc., Series 2006-CA20, Class A1, Mortgage Bonds, 4.510% Oct 12, 2039 266 266 264Schooner Trust, Series 2004-CCF1, Class A1, 4.580% Jun 12, 2037 633 637 628
3,264 3,211
Total Bonds & Debentures – 80.5% 194,754 192,544
The accompanying notes are an integral part of these financial statements.
BMO Harris Opportunity Bond Portfolio
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Par Value Cost Fair ValueSecurity (in thousands) ($) ($)
11
Total Investment Portfolio – 94.1% 226,825 225,112
Interest rate swap contracts – (0.4)% (861)
Unrealized Gain on Forward Currency Contracts – 0.2% 456
Unrealized Loss on Forward Currency Contracts – (3.1)% (7,519)
Unrealized Gain on Forward Bond Purchases – 0.7% 1,670
Unrealized Loss on Forward Bond Purchases – (0.1)% (328)
Unrealized Gain on To-Be-Announced Security – (0.0)% 53
Unrealized Loss on To-Be-Announced Security – (0.1)% (117)
Other Assets Less Liabilities – 8.7% 20,796
NET ASSETS – 100.0% 239,262
The Portfolio’s Investment Portfolio is concentrated in the following segments as at:
June 30, December 31, 2009 2008
Money Market Investments 13.6% 7.7%Government Bonds 13.9% 9.2%Provincial Bonds 22.7% 24.9%Municipal Bonds 1.4% 1.1%Asset-Backed Securities 3.8% 12.5%Collateral Mortgage Obligations 2.3% 2.6%Corporate Bonds 35.1% 33.3%Mortgage Backed Securities 1.3% 3.9%Total Swaps and Swaptions Agreements (0.4)% (8.1)%Unrealized Gain on To-Be-Announced Securities — 7.3%Unrealized Loss on To-Be-Announced Securities (0.1)% (6.8)%Unrealized Gain on Forward Currency Contracts 0.2% 1.0%Unrealized Loss on Forward Currency Contracts (3.1)% (0.6)%Unrealized Gain on Forward Bond Purchases 0.7% 4.4%Unrealized Loss on Forward Bond Purchases (0.1)% (0.2)%Other Assets Less Liabilities 8.7% 7.8%
100.0% 100.0%
BMO Harris Opportunity Bond Portfolio
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Par Value Cost Fair ValueSecurity (in thousands) ($) ($)
The accompanying notes are an integral part of these financial statements.
12
BMO Harris Opportunity Bond Portfolio
AU$ Interest Rate Swap Receive a fixed rate equal to 5.000% and pay floating rate based on a 6-month AU$-LIBOR Deutsche Bank AG A+ 15-Dec-15 1,080 (58)US$ Interest Rate Swap Pay a fixed rate equal to 4.000% and receive floating rate based on a 3-month US$-LIBOR JP Morgan Chase Bank, N.A. AA- 17-Jun-19 5,100 (123)US$ Interest Rate Swap Pay a fixed rate equal to 5.000% and receive floating rate based Merrill Lynch on a 3-month US$-LIBOR Capital Services Inc. A 17-Dec-38 4,100 (680)
Total Interest Rate Swap Contracts Value (861)
*Credit rating provided by Standard & Poor’s.
To-Be-Announced SecuritiesAs at June 30, 2009, the Portfolio had the following open positions:
Credit Par Value Market Unrealized Counterparty Rating)* (in thousands) Cost Value Gain
Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (1,000) (1,200) (1,200) 1Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (1,000) (1,201) (1,201) —Ginnie Mae, TBA, 5.500% Jul 20, 2039 Credit Suisse Securities (USA) LLC A 3,000 3,551 3,603 52
Total Unrealized Gain on To-Be-Announced Securities 1,202 53
Credit Par Value Market Unrealized Counterparty Rating)* (in thousands) Cost Value Loss
Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (8,400) (9,978) (10,085) (107)Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (400) (473) (480) (7)Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (1,000) (1,198) (1,201) (3)
Total Unrealized Loss on To-Be-Announced Securities (11,766) (117)
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Interest Rate Swap ContractsAs at June 30, 2009, the Portfolio had the following open positions:
Credit Expiry Notional FairSwap Counterparty Rating)* Date Amount Value
*Credit rating provided by Standard & Poor's.
The accompanying notes are an integral part of these financial statements.
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BMO Harris Opportunity Bond Portfolio
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Unrealized Gain On Forward Currency ContractsAs at June 30, 2009, the Portfolio had the following open positions:
Settlement Currency Position Currency Position Contract Credit UnrealizedDate Buys (in $000s) Sells (in $000s) Rates Counterparty Rating)* Gain
2-Jul-09 £ 488 US$ (747) 0.6531 JP Morgan Chase Bank, N.A. AA- 652-Jul-09 US$ 481 CA$ (557) 0.8641 JP Morgan Chase Bank, N.A. AA- 32-Jul-09 US$ 300 £ (182) 1.6494 Royal Bank of Canada AA- 16-Jul-09 INR 168 US$ (3) 52.1200 Deutsche Bank AG A+ —6-Jul-09 US$ 3 INR (133) 0.0209 Citibank NA A+ —6-Jul-09 US$ 1 INR (35) 0.0209 Citibank NA A+ —23-Jul-09 AU$ 126 US$ (99) 1.2764 JP Morgan Chase Bank, N.A. AA- 323-Jul-09 US$ 1,000 AU$ (1,235) 0.8097 Royal Bank of Canada AA- 730-Jul-09 SG$ 210 US$ (139) 1.5063 JP Morgan Chase Bank, N.A. AA- 630-Jul-09 SG$ 250 US$ (170) 1.4678 Citibank NA A+ 34-Aug-09 US$ 2,699 CA$ (2,958) 0.9123 Royal Bank of Canada AA- 1804-Aug-09 US$ 1,847 CA$ (2,091) 0.8834 JP Morgan Chase Bank, N.A. AA- 574-Aug-09 US$ 3,507 CA$ (4,025) 0.8713 Citibank NA A+ 534-Aug-09 US$ 972 CA$ (1,100) 0.8837 JP Morgan Chase Bank, N.A. AA- 304-Aug-09 US$ 442 CA$ (500) 0.8848 JP Morgan Chase Bank, N.A. AA- 154-Aug-09 US$ 2,160 CA$ (2,500) 0.8638 JP Morgan Chase Bank, N.A. AA- 114-Aug-09 US$ 1,041 CA$ (1,200) 0.8678 JP Morgan Chase Bank, N.A. AA- 114-Aug-09 US$ 245 CA$ (281) 0.8713 Citibank NA A+ 44-Aug-09 US$ 259 CA$ (300) 0.8643 JP Morgan Chase Bank, N.A. AA- 26-Aug-09 US$ 14 PHP (688) 0.0209 Citibank NA A+ —27-Nov-09 MXN 579 US$ (39) 14.9050 Citibank NA A+ 5
Total Unrealized Gain on Forward Currency Contracts 456
Unrealized Loss On Forward Currency ContractsAs at June 30, 2009, the Portfolio had the following open positions:
Settlement Currency Position Currency Position Contract Credit UnrealizedDate Buys (in $000s) Sells (in $000s) Rates Counterparty Rating)** Loss
2-Jul-09 CA$ 682 US$ (618) 1.1031 JP Morgan Chase Bank, N.A. AA- (37)2-Jul-09 £ 1,171 US$ (1,934) 0.6055 JP Morgan Chase Bank, N.A. AA- (9)2-Jul-09 US$ 21 £ (13) 1.6448 JP Morgan Chase Bank, N.A. AA- —2-Jul-09 US$ 296 £ (193) 1.5311 JP Morgan Chase Bank, N.A. AA- (26)2-Jul-09 US$ 2,687 £ (1,650) 1.6284 JP Morgan Chase Bank, N.A. AA- (32)15-Jul-09 CNY 289 US$ (45) 6.4180 Barclays Bank PLC AA- (3)15-Jul-09 CNY 289 US$ (45) 6.4160 HSBC BANK USA, N.A. AA (3)15-Jul-09 CNY 489 US$ (76) 6.4290 Deutsche Bank AG A+ (5)15-Jul-09 CNY 733 US$ (114) 6.4291 Barclays Bank PLC AA- (8)15-Jul-09 CNY 1,009 US$ (157) 6.4475 JP Morgan Chase Bank, N.A. AA- (10)15-Jul-09 CNY 937 US$ (146) 6.4160 Deutsche Bank AG A+ (10)15-Jul-09 CNY 1,008 US$ (157) 6.4425 JP Morgan Chase Bank, N.A. AA- (11)15-Jul-09 CNY 1,212 US$ (188) 6.4480 JP Morgan Chase Bank, N.A. AA- (12)15-Jul-09 CNY 1,698 US$ (260) 6.5292 HSBC BANK USA, N.A. AA (13)15-Jul-09 CNY 2,325 US$ (360) 6.4590 Deutsche Bank AG A+ (23)
*Credit rating provided by Standard & Poor's.
The accompanying notes are an integral part of these financial statements.
14
BMO Harris Opportunity Bond Portfolio
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Unrealized Loss On Forward Currency Contracts (cont’d)As at June 30, 2009, the Portfolio had the following open positions:
Settlement Currency Position Currency Position Contract Credit UnrealizedDate Buys (in $000s) Sells (in $000s) Rates Counterparty Rating)* Loss
15-Jul-09 US$ 18 CNY (131) 0.1375 JP Morgan Chase Bank, N.A. AA- (1)15-Jul-09 US$ 39 CNY (287) 0.1374 JP Morgan Chase Bank, N.A. AA- (3)15-Jul-09 US$ 65 CNY (470) 0.1375 JP Morgan Chase Bank, N.A. AA- (5)15-Jul-09 US$ 79 CNY (573) 0.1375 JP Morgan Chase Bank, N.A. AA- (6)15-Jul-09 US$ 1,238 CNY (8,527) 0.1452 Barclays Bank PLC AA- (12)27-Jul-09 US$ 1,991 € (1,424) 1.3978 JP Morgan Chase Bank, N.A. AA- (9)30-Jul-09 US$ 2 KRW (2,038) 0.0007 Deutsche Bank AG A+ —30-Jul-09 US$ 2 KRW (2,012) 0.0007 Citibank NA A+ —30-Jul-09 US$ 295 SG$ (449) 0.6567 Citibank NA A+ (18)4-Aug-09 CA$ 557 US$ (481) 1.1570 JP Morgan Chase Bank, N.A. AA- (3)4-Aug-09 CA$ 915 US$ (806) 1.1355 JP Morgan Chase Bank, N.A. AA- (22)4-Aug-09 CA$ 2,625 US$ (2,285) 1.1488 JP Morgan Chase Bank, N.A. AA- (32)4-Aug-09 CA$ 8,944 US$ (7,992) 1.1192 Royal Bank of Canada AA- (350)4-Aug-09 CA$ 18,741 US$ (16,619) 1.1277 Royal Bank of Canada AA- (585)4-Aug-09 CA$ 101,243 US$ (92,450) 1.0951 JP Morgan Chase Bank, N.A. AA- (6,270)6-Aug-09 US$ 20 PHP (968) 0.0207 Citibank NA A+ —12-Aug-09 US$ 16 MYR (59) 0.2759 Deutsche Bank AG A+ (1)6-Oct-09 INR 35 US$ (1) 48.2900 Citibank NA A+ —6-Oct-09 INR 133 US$ (3) 48.2899 Citibank NA A+ —
Total Unrealized Loss on Forward Currency Contracts (7,519)
*Credit rating provided by Standard & Poor's.
The accompanying notes are an integral part of these financial statements.
15
BMO Harris Opportunity Bond Portfolio
36,000 Government of Canada, 3.750% Jun 1, 2012 TD Securities (USA) LLC AA- 16-Jul-09 265 50,000 Government of Canada, 3.500% Jun 1, 2013 TD Securities (USA) LLC AA- 16-Jul-09 161 17,100 Government of Canada, 3.500% Jun 1, 2013 TD Securities (USA) LLC AA- 16-Jul-09 55 800 Government of Canada, 4.250% Jun 1, 2018 TD Securities (USA) LLC AA- 16-Jul-09 11 1,400 Province of Ontario, 4.300% Mar 8, 2017 TD Securities (USA) LLC AA- 16-Jul-09 21 7,000 Province of Ontario, 5.850% Mar 8, 2033 TD Securities (USA) LLC AA- 16-Jul-09 266 8,700 Province of Ontario, 4.700% Jun 2, 2037 TD Securities (USA) LLC AA- 16-Jul-09 274 1,600 Province of Quebec, Debentures, Unsecured, 4.50% Dec 1, 2016 TD Securities (USA) LLC AA- 16-Jul-09 31 5,400 Province of Quebec, Medium Term Notes, 4.50% Dec 1 2017 TD Securities (USA) LLC AA- 16-Jul-09 119 8,800 Province of Quebec, 5.000% Dec 1, 2038 TD Securities (USA) LLC AA- 16-Jul-09 467
Total Unrealized Gain on Forward Bonds 1,670
Par Credit Settlement Unrealized Value Description Counterparty Rating* Date Loss
(25,900) Government of Canada, 3.500% Jun 1, 2013 TD Securities (USA) LLC AA- 16-Jul-09 (328)
Total Unrealized Loss on Forward Bonds (328)
STATEMENT OF INVESTMENT PORTFOLIO (cont’d)As at June 30, 2009 (in thousands of Canadian dollars unless otherwise noted) (unaudited)
Forward Bond PurchasesAs at June 30, 2009, the Portfolio had the following open positions:
Par Credit Settlement Unrealized Value Description Counterparty Rating* Date Gain
*Credit rating provided by Standard & Poor's.
The accompanying notes are an integral part of these financial statements.
16
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
17
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
18
Notes to Financial Statements (cont’d)
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.
19
Notes to Financial Statements (cont’d)
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
20
Notes to Financial Statements (cont’d)
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 and Significant Events
The Portfolio’s inception date was February 1, 2006.
On June 24, 2009, the Manager announced the Portfolio will
be merged into the BMO Harris Canadian Total Return
Bond Portfolio. The Independent Review Committee for
this Portfolio has provided its approval in respect of this
merger. On July 31, 2009, the Manager received regulatory
approval to proceed with the proposed change. Investor
approval is not required for the merger. Upon implemen -
tation of the merger, holders of units of the Portfolio will
become holders of units of the BMO Harris Canadian Total
Return Bond Portfolio, and the Portfolio will be terminated.
(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
9.87 — 9.87 9.39 — 9.39
(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
($) ($) ($) ($) ($)
8,531 7,858 — — 7,858
(d) Related party transactions
The related party fees charged relating to unitholder
servicing and custodian fees are as follows:
June 30, 2009 June 30, 2008
Unitholder Servicing ($) 24 26
Custodian ($) 13 14
21
Notes to Financial Statements (cont’d)
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.
22
Notes to Financial Statements (cont’d)
June 30, 2009
(e) Financial instrument risk
The Portfolio’s objective was to generate a combination of
income and capital growth. The Portfolio invested
primarily in a diversified pool of fixed income securities
such as bonds and debentures issued by governments and
corporations or obtains exposure to such securities. The
Portfolio may also invest in inflation protected securities,
securities backed by mortgages or other financial assets
and instruments that provide exposure to these fixed
income securities.
No changes affecting the overall level of risk of investing
in the Portfolio were made during the period.
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 ($) (%) ($) (%)
Euro 91 — 17 —
Pound sterling 206 0.1 1,987 0.8
Japanese yen 10 — (10) —
U.S. dollar (9,760) (4.1) 8,538 3.6
Other Pacific currencies 87 — (59) —
Other Emerging Market currencies (9) — (21) —
All amounts in CA$
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
$469 (December 31, 2008 – $523). In practice, actual
results may differ from this sensitivity analysis and the
difference could be material.
Interest rate risk
The following table summarizes the Portfolio’s exposure
to interest rate risk, as categorized by the earlier of
contractual re-pricing or maturity dates.
Interest Rate Exposure ($) as at June 30, 2009
< I year 1-3 years 3-5 years 5-10 years >10 years Total
74,454 19,289 17,407 60,387 53,992 225,529
Interest Rate Exposure ($) as at December 31, 2008
< I year 1-3 years 3-5 years 5-10 years >10 years Total
55,413 11,194 22,562 43,410 82,997 215,576
As at June 30, 2009, if the prevailing interest rates had
been raised or lowered by 1%, assuming a parallel shift in
the yield curve, with all other factors remaining constant,
Net Assets could possibly have decreased or increased,
respectively, by approximately $11,099 (December 31,
2008 – $10,236). The Portfolio’s interest rate sensitivity
was determined based on portfolio weighted duration. In
practice, actual results may differ from this sensitivity
analysis and the difference could be material.
Other market risk
The Portfolio’s significant market risk exposures have been
discussed in Note 6. The Portfolio was not significantly
exposed to other market risk as at June 30, 2009 and
December 31, 2008.
Credit risk
The Portfolio’s credit risk exposure grouped by credit
ratings are listed in the following table:
As a % of Net Assets
Credit Rating June 30, 2009 December 31, 2008
AAA 37.6 39.3
AA 15.3 33.3
A 30.1 12.9
BBB 7.0 5.0
Below BBB 0.9 0.9
Unrated 0.4 0.3
Total 91.3 91.7
23
Notes to Financial Statements (cont’d)
June 30, 2009
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.