29297 3024 E FS 2014 Semi Annual
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Semi-Annual Financial Statements BMO Harris Private Portfolios June 30, 2014 BMO Harris International Equity Portfolio NOTICE OF NO AUDITOR REVIEW OF THE SEMI-ANNUAL FINANCIAL STATEMENTS BMO Harris Investment Management Inc., the Manager of the Portfolios, appoints independent auditors to audit the Portfolio’s Annual Financial Statements. Under Canadian securities laws (National Instrument 81-106), if an auditor has not reviewed the Semi-Annual Financial Statements, this must be disclosed in an accompanying notice. The Portfolio’s independent auditors have not performed a review of these Semi-Annual Financial Statements in accordance with standards established by the Canadian Institute of Chartered Accountants. BMO Harris International Equity Portfolio (unaudited) STATEMENT OF FINANCIAL POSITION (All amounts in thousands of Canadian dollars, except per unit data) June 30 2014 December 31 2013 January 1 2013 71,870 51,126 26,162 1,076,073 — 1,251 1,585 — 1,808 1,152,587 932,533 261 563 2,207 — 571 987,261 527,636 — 511 411 4 465 555,189 5,123 430 295 — 1,934 7,782 497 375 — 0 1,643 2,515 678 175 311 — 607 1,771 1,144,805 984,746 553,418 As at Assets Current Assets Cash Investments Non-derivative financial assets Derivative assets Receivable for investments sold Subscriptions receivable Interest receivable Dividends receivable Total assets Liabilities Current Liabilities Payable for investments purchased Redemptions payable Derivative liabilities Distributions payable Accrued expenses Total liabilities Net assets attributable to holders of redeemable units Net assets attributable to holders of redeemable units per unit $ The accompanying notes are an integral part of these financial statements. 11 .38 $ 10 .98 $ 8 .77 BMO Harris International Equity Portfolio (unaudited) STATEMENT OF COMPREHENSIVE INCOME (All amounts in thousands of Canadian dollars, except per unit data) For the periods ended Income Interest income Dividend income Other changes in fair value of investments and derivatives Net realized gain Change in unrealized (depreciation) appreciation Net gain in fair value of investments and derivatives Foreign exchange loss on cash Total other loss Total income Expenses Sub-advisory fees Audit fees Independent review committee fees Withholding taxes Custodian fees Legal and filing fees Unitholder servicing fees Printing and stationery fees Commissions and other portfolio transaction costs (note 6) Operating expenses absorbed by the Manager Total expenses Increase in net assets attributable to holders of redeemable units Increase in net assets attributable to holders of redeemable units per unit (note 3) The accompanying notes are an integral part of these financial statements. June 30 2014 June 30 2013 158 21,448 11 11,961 28,891 (6,370 ) 44,127 (12 ) (12 ) 22,459 26,474 60,905 (14 ) (14 ) 44,115 60,891 2,734 10 4 3,384 223 36 221 7 1,032 (887 ) 6,764 1,483 10 1 1,803 141 25 215 10 625 (447 ) 3,866 37,351 57,025 0 .39 0 .87 BMO Harris International Equity Portfolio (unaudited) STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS (All amounts in thousands of Canadian dollars) For the periods ended June 30 2014 June 30 2013 Net assets attributable to holders of redeemable units at beginning of period 984,746 553,418 37,351 57,025 Redeemable unit transactions Proceeds from redeemable units issued Redemption of redeemable units Net increase from redeemable unit transactions 181,612 (58,904 ) 122,708 131,316 (77,786 ) 53,530 Net increase in net assets attributable to holders of redeemable units 160,059 110,555 1,144,805 663,973 Increase in net assets attributable to holders of redeemable units Net assets attributable to holders of redeemable units at end of period The accompanying notes are an integral part of these financial statements. BMO Harris International Equity Portfolio (unaudited) STATEMENT OF CASH FLOWS (All amounts in thousands of Canadian dollars) June 30 2014 June 30 2013 37,351 57,025 12 (28,891 ) 14 (22,459 ) 6,370 (688 ) — (1,237 ) 4,626 292 989 (194 ) (332,223 ) 212,721 (1,757 ) (102,629 ) (26,474 ) (324 ) 4 (649 ) (183 ) 1,014 452 (105 ) (192,735 ) 156,055 (851 ) (29,216 ) 182,234 (58,849 ) 123,385 129,659 (77,439 ) 52,220 Foreign exchange loss on cash Net increase in cash Cash at beginning of period Cash at end of period (12 ) 20,756 51,126 71,870 (14 ) 23,004 26,162 49,152 Supplementary Information Interest received, net of withholding taxes* Dividends received, net of withholding taxes* 158 16,827 15 9,509 For the periods ended Cash flows from operating activities Increase in net assets attributable to holders of redeemable units Adjustments for: Foreign exchange loss on cash Net realized gain on sale of investments and derivatives Change in unrealized depreciation (appreciation) of investments and derivatives Increase in receivable for investments sold Decrease in interest receivable Increase in dividends receivable Increase (decrease) in payable for investments purchased Increase in accrued expenses Return of capital distributions received Dividend reinvestments Purchases of investments Proceeds from sale and maturity of investments Net derivative settlements Net cash from operating activities Cash flows used in financing activities Proceeds from issuances of redeemable units Amounts paid on redemption of redeemable units Net cash used in financing activities *These items are from operating activities The accompanying notes are an integral part of these financial statements. BMO Harris International Equity Portfolio (unaudited) SCHEDULE OF INVESTMENT PORTFOLIO As at June 30, 2014 (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units Cost+* ($) Fair Value ($) 1,001,370 791,604 542,971 1,271,500 317,170 361,859 53,254 1,001,564 217,250 152,196 153,925 4,984 5,838 5,047 7,377 3,816 5,187 3,331 3,959 6,497 5,603 4,444 56,083 3,230 7,325 6,823 7,476 3,424 3,960 3,181 5,253 7,412 6,293 5,454 59,831 125,770 35,094 105,715 91,343 14,595 1,877 3,379 4,694 24,545 15,426 2,141 3,740 4,949 26,256 42,722 1,418 1,661 25,982 3,744,400 6,647,730 237,098 3,221 6,683 4,812 3,841 18,557 5,178 7,171 4,488 3,869 20,706 Denmark — 2.6% Jyske Bank A/S Novo Nordisk A/S, Class B Pandora A/S Vestas Wind Systems A/S 117,265 194,445 103,020 87,700 6,104 5,113 3,640 4,818 19,675 7,103 9,578 8,435 4,726 29,842 Finland — 1.0% KONE Oyj, B Shares Orion Oyj, B Shares 163,229 103,070 6,404 3,781 10,185 7,272 4,097 11,369 France — 9.2% Accor SA Altran Technologies SA Compagnie Generale des Etablissements Michelin, Class B Euler Hermes S.A. L'Air Liquide S.A. Legrand S.A. 78,297 250,930 38,567 25,140 79,820 70,693 4,324 3,016 3,513 3,196 8,696 2,910 4,342 2,859 4,923 3,221 11,499 4,611 Security EQUITIES Australia — 5.2% BC Iron Limited Brambles Industries Limited Computershare Limited Insurance Australia Group Limited Newcrest Mining Limited QBE Insurance Group Limited Rio Tinto Limited, Australian Stock Exchange Telstra Corporation Limited Westpac Banking Corporation Woodside Petroleum Ltd. Woolworths Limited Belgium — 2.3% Anheuser-Busch InBev NV/SA Arseus NV Belgacom SA Colruyt SA Brazil — 0.1% Embraer Empresa Brasileira de Aeronutica S.A., ADR China — 1.8% Baidu, Inc., ADR CNOOC Limited Industrial and Commercial Bank of China, H Shares Tencent Holdings Limited The accompanying notes are an integral part of these financial statements. BMO Harris International Equity Portfolio (unaudited) SCHEDULE OF INVESTMENT PORTFOLIO (cont’d) As at June 30, 2014 (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units 44,594 67,760 83,419 36,056 109,430 56,739 331,295 323,847 56,480 Cost+* ($) 6,948 5,036 5,294 2,270 5,201 5,036 2,789 20,773 5,029 84,031 Fair Value ($) 9,166 5,068 7,556 2,456 7,641 6,440 2,863 24,966 8,082 105,693 86,149 30,940 14,365 91,941 308,602 55,310 56,610 82,971 69,580 60,656 29,297 102,010 105,206 52,683 67,370 98,310 7,593 2,882 2,256 4,031 9,236 1,763 1,762 5,534 1,997 3,027 2,495 4,487 6,886 1,818 2,955 6,332 65,054 9,311 3,843 2,738 3,452 11,909 2,352 1,922 5,958 3,358 3,066 3,616 4,850 8,671 3,062 3,167 5,984 77,259 2,489,525 433,100 1,273,640 251,271 249,005 2,076,000 625,500 347,900 10,092 4,711 13,991 4,598 2,514 2,521 4,768 3,866 47,061 13,367 5,051 13,194 5,005 2,696 3,540 5,839 4,934 53,626 Ireland — 0.8% Accenture PLC, Class A CRH Plc 70,077 119,886 5,095 2,659 7,754 6,045 3,294 9,339 Israel — 0.5% Bezeq The Israel Telecommunication Corp., Ltd. Teva Pharmaceutical Industries Ltd. 860,648 67,830 1,317 3,250 4,567 1,720 3,797 5,517 Security LVMH Moet Hennessy Louis Vuitton S.A. Orpea S.A. Publicis Groupe SA Rubis Safran SA Sanofi Technicolor SA Total S.A. Valeo SA Germany — 6.7% adidas AG BASF SE Brenntag AG Deutsche Bank AG Deutsche Post AG Drillisch AG freenet AG Fresenius Medical Care AG & Co. KGaA Fuchs Petrolub SE, Preference GEA Group Aktiengesellschaft Henkel AG & Co. KGaA ProSiebenSat.1 Media AG SAP SE Symrise AG United Internet AG Wincor Nixdorf AG Hong Kong — 4.7% AIA Group Limited ASM Pacific Technology Limited China Mobile Limited Hong Kong Exchanges & Clearing Ltd. HSBC Holdings PLC Man Wah Holdings Limited Power Assets Holdings Limited VTech Holdings Limited The accompanying notes are an integral part of these financial statements. BMO Harris International Equity Portfolio (unaudited) SCHEDULE OF INVESTMENT PORTFOLIO (cont’d) As at June 30, 2014 (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units Cost+* ($) Fair Value ($) Italy — 1.7% Azimut Holdings SpA Gtech S.p.A. Intesa Sanpaolo S.p.A. UnipolSai S.p.A. 181,210 141,999 1,420,623 1,827,650 3,136 3,904 3,620 4,237 14,897 4,984 3,703 4,673 6,272 19,632 Japan — 14.2% Dowa Mining Company Ltd. FANUC Corporation Haseko Corporation ITOCHU Corporation Japan Airlines Co., Ltd. Japan Tobacco Inc. KDDI Corp. KOSE Corporation Kubota Corporation Makita Corporation Marubeni Corp. Minebea Company Ltd. Mitsubishi Electric Corporation Mitsubishi Estate Company Ltd. Mitsubishi UFJ Financial Group, Inc. Mizuho Financial Group, Inc. Nihon Kohden Corporation Oriental Land Co., Ltd. Pigeon Corporation Softbank Corp. Sumitomo Mitsui Financial Group, Inc. Sumitomo Mitsui Trust Holdings, Inc. Sumitomo Rubber Industries, Ltd. Toyota Motor Corporation Toyota Tsusho Corporation Zenkoku Hosho Co. Ltd. 484,000 29,392 818,700 393,300 133,300 130,061 173,300 88,000 471,055 68,700 481,000 497,000 458,000 180,030 861,859 2,705,800 104,200 19,500 83,100 55,833 157,500 1,235,367 432,200 333,213 205,100 67,100 4,884 4,181 5,757 4,642 6,990 4,731 8,284 2,505 7,064 2,890 3,730 5,919 4,259 5,178 5,211 5,991 4,404 2,598 4,260 3,091 6,945 6,409 5,518 17,568 4,774 1,707 139,490 4,884 5,420 7,044 5,399 7,872 5,068 11,303 3,593 7,141 4,528 3,760 5,972 6,046 4,753 5,649 5,935 5,574 3,567 4,680 4,433 7,058 6,037 6,669 21,389 6,306 1,952 162,032 720,058 6,022 5,804 3,213,500 584,860 1,667,200 2,283,588 6,668 1,412 1,663 6,817 16,560 7,445 1,914 1,690 7,461 18,510 55,257 511,026 56,596 4,308 6,518 1,996 5,487 7,651 1,914 Security Macau — 0.5% Sands China Ltd. Malaysia — 1.6% Axiata Group Berhad Lafarge Malaysia Berhad Magnum Berhad Malayan Banking Berhad Netherlands — 4.3% ASML Holding N.V. ING Groep N.V. Koninklijke (Royal) Philips Electronics N.V. The accompanying notes are an integral part of these financial statements. BMO Harris International Equity Portfolio (unaudited) SCHEDULE OF INVESTMENT PORTFOLIO (cont’d) As at June 30, 2014 (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units 103,891 246,008 277,620 126,908 101,260 Cost+* ($) 6,047 3,835 12,228 4,299 3,976 43,207 Fair Value ($) 5,416 6,018 12,256 5,889 4,726 49,357 304,260 138,350 150,706 78,450 4,390 4,633 2,679 3,961 15,663 5,931 4,554 3,659 4,197 18,341 Philippines — 0.4% Alliance Global Group, Inc. 6,821,000 2,817 4,851 Singapore — 1.8% ComfortDelGro Corporation Limited Ezion Holdings Limited Sembcorp Industries Ltd Singapore Technologies Engineering Ltd. United Overseas Bank Limited Venture Corporation Limited 2,453,000 1,352,000 727,000 769,000 238,400 440,000 3,251 2,105 3,168 2,352 3,793 2,758 17,427 5,238 2,404 3,333 2,497 4,597 2,915 20,984 Spain — 2.0% Amadeus IT Holding S.A., Class A Banco Bilbao Vizcaya Argentaria, S.A. Bolsas y Mercados Espanoles 239,489 444,730 123,820 7,491 5,486 5,711 18,688 10,528 6,041 6,310 22,879 Sweden — 3.9% Assa Abloy AB, B Shares Atlas Copco AB, A Shares Billerud Aktiebolag H & M Hennes & Mauritz AB, B Shares NCC AB, B Shares Skanska AB, B Shares Svenska Cellulosa AB (SCA), Class B Swedbank AB 95,144 156,187 306,810 118,063 196,460 248,410 176,131 204,210 3,589 3,919 4,745 4,147 5,901 5,166 5,383 4,082 36,932 5,160 4,811 4,751 5,501 7,214 6,045 4,894 5,775 44,151 Switzerland — 9.2% Adecco S.A. Aryzta AG Givaudan SA Holcim Ltd. Julius Baer Group Ltd. Nestle S.A. Novartis AG Panalpina Welttransport Holding AG 54,430 48,110 1,312 26,332 92,131 266,790 210,824 17,065 4,921 4,919 1,160 2,592 3,321 17,159 13,941 1,790 4,776 4,859 2,335 2,470 4,054 22,057 20,378 2,883 Security Koninklijke Vopak NV Reed Elsevier NV Royal Dutch Shell PLC, A Shares, London Exchange Royal Dutch Shell plc, Class B Unilever N.V. Norway — 1.6% DnB ASA Statoil ASA Telenor ASA Yara International ASA The accompanying notes are an integral part of these financial statements. BMO Harris International Equity Portfolio (unaudited) SCHEDULE OF INVESTMENT PORTFOLIO (cont’d) As at June 30, 2014 (All amounts in thousands of Canadian dollars, unless otherwise noted) Number of Shares or Units 61,810 14,069 60,370 5,427 345,930 15,599 Cost+* ($) 13,523 1,757 3,478 1,919 7,864 3,413 81,757 Fair Value ($) 19,681 2,281 5,733 2,164 6,763 5,018 105,452 Taiwan — 1.6% Advantech Co., Ltd. Chunghwa Telecom Co., Ltd. MediaTek Inc. Taiwan Semiconductor Manufacturing Company Limited, ADR 398,300 1,140,165 215,669 280,359 1,062 3,503 2,275 5,619 12,459 3,632 3,920 3,897 6,399 17,848 United Kingdom — 15.3% Ashtead Group Public Limited Company Aviva plc Berkeley Group Holdings PLC, The, BP p.l.c. British American Tobacco p.l.c. British Sky Broadcasting Group plc BT Group plc Burberry Group PLC Carnival PLC Compass Group PLC Ensco plc, Class A Experian plc GlaxoSmithKline plc Hays plc Interserve Plc ITV plc Kentz Corporation Limited Kingfisher plc Legal & General Group Plc National Grid plc Pace PLC Pearson plc Persimmon PLC Persimmon PLC, C Shares** Prudential plc Reckitt Benckiser Group plc Rio Tinto plc, London Stock Exchange Rolls-Royce Holdings PLC Rolls-Royce Holdings Plc, C Shares** Royal Dutch Shell PLC, Class A, Euronext Amsterdam Exchange SABMiller plc Shire plc SSE plc Standard Chartered PLC 304,290 519,282 88,340 528,601 73,203 235,939 562,884 153,380 124,593 298,300 56,798 358,173 197,174 1,036,150 390,540 1,378,860 210,890 1,173,853 1,342,863 304,041 345,520 180,432 219,210 216,830 306,870 98,012 68,924 46,185 26,451,466 179,449 94,295 77,700 167,496 193,885 2,476 4,898 3,267 4,440 3,230 2,536 3,954 3,395 5,163 4,317 3,242 6,942 5,142 2,227 3,363 3,192 2,813 5,086 3,065 3,523 2,954 3,169 3,470 — 4,815 6,511 3,851 670 — 6,128 3,719 3,454 3,893 4,578 4,856 4,856 3,917 4,967 4,648 3,891 3,951 4,150 5,016 5,557 3,368 6,455 5,622 2,760 4,273 4,482 3,574 7,687 5,528 4,661 2,251 3,799 5,086 277 7,510 9,121 3,968 900 48 7,923 5,830 6,501 4,790 4,228 Security Roche Holding AG Schindler Holding Ltd. Swiss Re AG Syngenta AG UBS AG Zurich Financial Services AG The accompanying notes are an integral part of these financial statements. BMO Harris International Equity Portfolio (unaudited) SCHEDULE OF INVESTMENT PORTFOLIO (cont’d) As at June 30, 2014 (All amounts in thousands of Canadian dollars, unless otherwise noted) Security Tesco PLC United Utilities Group Plc Victrex PLC Vodafone Group Public Limited Company WPP plc United States — 1.0% Liberty Global plc, Class C Schlumberger Limited Total Investment Portfolio — 94.0% Number of Shares or Units 745,667 307,102 53,720 1,116,771 134,803 Cost+* ($) 4,638 3,668 1,845 4,500 2,490 140,624 118,443 45,639 2,880 3,661 6,541 5,347 5,744 11,091 892,014 1,076,073 Total Unrealized Loss on Forward Currency Contracts — (0.0)% Fair Value ($) 3,865 4,943 1,668 3,983 3,132 174,042 (295 ) Other Assets Less Liabilities — 6.0% 69,027 NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS — 100.0% 1,144,805 + Where applicable, distributions received from holdings as a return of capital are used to reduce the adjusted cost base of the securities in the portfolio * For the purpose of the Statement of Investment Portfolio, cost includes commissions and other portfolio transaction cost (note 2). ** These securities have no quoted market value and are valued using valuation techniques (note 3). UNREALIZED LOSS ON FORWARD CURRENCY CONTRACTS As at June 30, 2014, the Portfolio had the following open positions: Settlement Currency Position Currency Position Contract Date Buy (000s) Sell (000s) Rates 16-Sep-14 CA$ 36,611 AUD (36,817) 0.9944 Total Unrealized Loss on Forward Currency Contracts **Credit rating provided by Standard & Poor's. The accompanying notes are an integral part of these financial statements. Credit Counterparty Rating** State Street Corp. A-1 Unrealized Loss (295) (295) BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 1.The Portfolio BMO Harris International Equity Portfolio (“the Portfolio”) is an open-ended mutual fund trust established by a Declaration of Trust under the laws of the Province of Ontario, most recently amended on September 18, 2007. BMO Harris Investment Management Inc. (“the Manger”) is the Manager of the Portfolio. The address of the Portfolio’s registered office is 1 First Canadian Place, 41st Floor, Toronto, Ontario. The information provided in these interim financial statements is for the periods ended June 30, 2014 and June 30, 2013, except for the comparative information in the Statement of Financial Position and the related notes, which are as at December 31, 2013 and January 1, 2013. These financial statements were authorized for issue by BMO Trust Company, the trustee, on August 12, 2014. 2.Basis of preparation and presentation These interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) IAS 34 Interim Financial Reporting. These are the Portfolio’s first interim financial statements during the first year of reporting in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). As required by Canadian securities legislation and the Canadian Accounting Standards Board, the Portfolio has adopted this basis of accounting effective January 1, 2014. The Portfolio’s financial statements were previously prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), as previously defined and as described in the notes to the Portfolio’s annual financial statements for the year ended December 31, 2013. Canadian GAAP, as previously defined, differs in some areas from IFRS. To comply with IFRS, the Portfolio has amended certain accounting policies, classification, measurement and disclosure previously applied in the Canadian GAAP financial statements. As required under IFRS, the Portfolio has: • provided comparative financial information including an opening Statement of Financial Position as at the transition date • retroactively applied all IFRS, other than in respect of elections taken under IFRS 1; and • applied all mandatory exceptions as applicable for the first-time adopters of IFRS. The interim financial statements should be read in conjunction with the Portfolio’s Canadian GAAP annual financial statements for the year-ended December 31, 2013. Note 8(h) contains reconciliations and descriptions of the effects of the transition to IFRS on the Portfolio's reported financial position, financial performance and cash flows. The policies applied in these interim financial statements are based on IFRS issued and outstanding as of August 12, 2014, the date the Manager approved the statements. Any subsequent changes to IFRS that are given effect in the Portfolio’s annual financial statements for the period ending December 31, 2014 could result in a restatement of these interim financial statements, including the transition adjustments. 3.Summary of significant accounting policies Financial instruments The Portfolio records financial instruments at fair value. Investment transactions are accounted for on the trade date. The Fund’s investments are either designated as fair value through profit or loss (“FVTPL”) at inception or classified as held for trading. The changes in the investment fair values and related transaction costs are recorded in the Portfolio’s Statement of Comprehensive Income. Financial assets or financial liabilities held for trading are those acquired or incurred principally for the purpose of selling or repurchasing in the near future, or on initial recognition, are part of a portfolio of identified financial instruments that the Portfolio manages together and that have a recent actual pattern of short-term profit taking. The Portfolio classifies all derivatives and short positions as held for trading. The Portfolio does not designate any derivatives as hedges in a hedging relationship. The Portfolio designates all other investments as FVTPL, as they have reliably measurable fair values, are part of a group of financial assets or liabilities that are managed and have their performance evaluated on a fair value basis in accordance with the Fund’s investment strategy. The Portfolio’s redeemable units contain multiple contractual obligations and consequently, do not meet the conditions to be classified as equity. As a result, the Fund’s obligations for net assets attributable to holders of redeemable units are presented at the redemption amounts. BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 All other financial assets and liabilities are measured at amortized cost. Under this method, financial assets and liabilities reflect the amount required to be received or paid or discounted, when appropriate, at the contract’s effective interest rate. cash flows, internal models that utilize observable data, or comparisons with other securities that are substantially similar. In limited circumstances, the Fund uses internal models where the inputs are not based on observable market data. Cost of investments The cost of investments represents the amount paid for each security and is determined on an average cost basis. Derivative instruments Derivative instruments are financial contracts that derive their value from underlying changes in interest rates, foreign exchange rates, or other financial or commodity prices or indices. Fair value measurement Investments are recorded at their fair value with the change between this amount and their average cost being recorded as change in unrealized appreciation (depreciation) in the Statement of Comprehensive Income. For exchange traded securities, close prices are considered to be fair value if they fall within the bidask spread. In circumstances where the close price is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. Procedures are in place to fair value securities traded in countries outside of North America daily, to avoid stale prices and to take into account among, other things, any significant events occurring after the close of a foreign market. For bonds, debentures, asset-backed securities and other debt, securities fair value is represented by bid prices provided by independent security pricing services. Short-term investments, if any, are amortized at cost which approximates fair value. Exchange traded funds held as investments are valued at their respective Net Asset Value (“NAV”) on each Valuation Date (the “Valuation Date” is each day on which the Toronto Stock Exchange is open for trading), as these values are the most readily and regularly available. For securities where market quotes are not available, unreliable or not considered to reflect the current value, the Portfolio may determine another value which it considers to be fair and reasonable, or using a valuation technique that, to the extent possible, makes maximum use of inputs and assumptions based on observable market data, including volatility, comparable companies and other applicable rates or prices. These estimation techniques include discounted Derivative instruments are either regulated exchangetraded contracts or negotiated over-the-counter contracts. The Portfolio may use these instruments for trading purposes, as well as to manage the Portfolio’s risk exposures. Derivatives are marked to fair value. Realized and unrealized gains and losses are recorded in the Statement of Comprehensive Income. 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 economic hedging of all or a portion of the currency exposure of an investment or group of investments, either directly or indirectly. The Portfolio may also enter into these contracts for non-hedging purposes, which can include increasing the exposure to a foreign currency, or shifting the 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. Income recognition Dividend income and distributions from investment trust units are recognized on the ex-dividend and exdistribution date, respectively. Interest income from interest bearing investments is recognized in the Statement of Comprehensive Income using the effective interest rate. Interest receivable shown in the Statement of Financial Position is accrued based on the interest bearing instruments’ stated rates of interest. Interest on inflation-indexed bonds is paid based on a principal value, which is adjusted for inflation. BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 The inflation adjustment of the principal value is recognized as part of interest income in the Statement of Comprehensive Income. If held to maturity, the Portfolio will receive, in addition to a coupon interest payment, a final payment equal to the sum of the par value and the inflation compensation accrued from the original issue date. Interest is accrued on each Valuation Date based on the inflation adjusted par value at that time and is included in “Interest income” in the Statement of Comprehensive Income. Other assets and other liabilities Dividend receivable, interest receivable, distributions from investment trust units receivable, due from broker and subscriptions receivable, are initially measured at fair value and subsequently measured at amortized cost. Similarly, due to broker, redemptions payable and accrued expenses, are initially measured at amortized cost. Other assets and liabilities are short-term in nature, and are carried at cost or amortized cost, which approximates fair value. Foreign currency translation 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, and 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 gains (losses)” and unrealized foreign exchange gains (losses) are included in “Change in unrealized appreciation (depreciation)” in the Statement of Comprehensive Income. Foreign exchange gains and losses relating to cash are included as "Foreign exchange gain (loss) on cash". Increase or decrease in net assets attributable to holders of redeemable units “Increase (decrease) in net assets attributable to holders of redeemable units” in the Statement of Comprehensive Income represents, the increase (decrease) in net assets attributable to holders of redeemable units divided by the weighted average number of units outstanding during the period. Securities lending A Portfolio may engage in securities lending pursuant to the terms of an agreement, which includes restrictions as set out in Canadian securities legislation. Collateral held is government Treasury Bills and qualified Notes. Income from securities lending, where applicable, is included in the Statement of Comprehensive Income and is recognized when earned. The market value of the securities loaned and collateral held is determined daily. Aggregate values of securities held in trust as at June 30, 2014, and December 31, 2013 and January 1, 2013, where applicable, are disclosed in Note 8(e). 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 and is included in “Short-term penalty fees” in the Statement of Comprehensive Income. Cash Cash is comprised of cash and deposits with banks, which include banker acceptances and overnight demand deposits. Cash is recorded at amortized cost. Taxation The Portfolio qualifies as a mutual fund trust under the provisions of the Income Tax Act (Canada). Distributions of all net taxable income and sufficient amounts of net realized capital gains for each taxation year will be paid to unitholders so that the Portfolio will not be subject to income tax. As a result, the Portfolio has determined that it is in substance not taxable and therefore does not record income taxes in the Statement of Comprehensive Income and or recognize any deferred tax assets in the Statement of Financial Position. The Portfolio may incur withholding taxes imposed by certain countries on investment income and capital gains. Such income and gains are recorded on a gross basis with the related withholding taxes shown as a separate expense in the Statement of Comprehensive Income. Investments in subsidiaries, joint ventures and associates Subsidiaries are entities over which the Portfolio has control through its exposure or rights to variable returns from its investment, and has the ability to affect those returns through its power over the entity. The Portfolio has determined that it is an investment entity and as such, it accounts for subsidiaries at fair value. Joint ventures are those where the Portfolio exercises joint control through an agreement with other shareholders. Associates are investments in which the Portfolio exerts significant influence over operating, investing, and financing decisions (such as companies in which the BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 Portfolio owns 20% - 50% of voting shares), all of which have been designated at FVTPL. Accounting standards issued but not yet adopted Below are accounting standards issued or amended but not yet effective and not yet adopted. The Manager does not expect the adoption of these standards or amendments to have a significant impact to the Portfolio’s financial statements. In July 2014, the IASB issued the most recent version of IFRS 9 Financial Instruments, which addresses classification and measurement, impairment and hedge accounting. The new standard requires assets to be carried at amortised cost, fair value through profit and loss or fair value through comprehensive income based on the entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial asset. The classification and measurement of liabilities remains generally unchanged with the exception of liabilities recorded at fair value through profit and loss. For these liabilities, fair value changes attributable to changes in the entity’s own credit risk are to be presented in other comprehensive income unless they affect amounts recorded in income. The new standard also addresses impairment of financial assets. It also introduced a new hedge accounting model that expands the scope of eligible hedged items and risks eligible for hedge accounting, and aligns hedge accounting more closely with risk management. The new standard is effective for the Portfolio for its fiscal year beginning January 1, 2018. The Portfolio is evaluating the impact of this standard on its financial statements. 4.Critical accounting estimates and judgments The most significant accounting estimates and judgments that the Portfolio has made in preparing the financial statements relate to the fair value measurement and classification of investments. The Portfolio has established policies and control procedures that are intended to ensure these judgments are well controlled, independently reviewed, and consistently applied from period to period. The estimates of the value of the Portfolio’s assets and liabilities are believed to be appropriate as at the reporting date. The Portfolio may hold financial instruments that are not quoted in active markets. Note 3 discusses the estimates used in determining fair value. In classifying and measuring financial instruments held by the Portfolio, the Manager is required to make significant judgments about whether or not the business of the Portfolio is to invest on a total return basis for the purpose of applying the fair value options for financial assets. 5.Units and unit transactions The redeemable units of the Portfolio are classified as liabilities. The units have no par value and are entitled to distributions, if any. Upon redemption, a unit is entitled to a proportionate share of the Portfolio’s NAV. The Portfolio is required to pay distributions in an amount not less than the amount necessary to ensure the Portfolio will not be liable for income taxes. The Portfolio has no restrictions or specific capital requirements on the subscriptions and redemptions of units except as disclosed in Note 8(a). The relevant movements in redeemable units are shown on the Statement of Changes in Net Assets Attributable to Holders of Redeemable Units. In accordance with its investment objectives and strategies, and the risk management practices outlined in Note 7, the Portfolio endeavours to invest the subscriptions received in appropriate investments, while maintaining sufficient liquidity to meet redemptions, with such liquidity being augmented by short-term borrowings or disposal of investments where necessary. Redeemable units of the Portfolio are offered for sale on a continuous basis and may be purchased or redeemed on any Valuation Date at the NAV per unit of a particular series. The NAV per unit for the purposes of subscription or redemption is computed by dividing the NAV of the Portfolio (that is, the total fair value of the assets less the liabilities) by the total number of units of the Portfolio outstanding at such time. 6.Related party transactions (a) Unitholder servicing, sub-advisory 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 of the Portfolio were paid to BMO Trust Company (“the Trustee”) and to BMO Asset Management Inc. (“the Registrar”) and charged to the Portfolio. These expenses are included in “Unitholder BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 servicing fees” in the Statement of Comprehensive Income. The sub-advisors (including affiliates of the Manager, where applicable) engaged by the Manager provide investment advice and make investment decisions for the Portfolio. For these services, the sub-advisors receive sub-advisory fees that are paid monthly by the Manager. These expenses are included in “Sub-advisory fees” in the Statement of Comprehensive Income. Any sub-advisory fees less than or equal to 0.15% of the net asset value of the Portfolio are absorbed by the Manager. The Portfolio may execute trades with and or through BMO Nesbit Burns Inc., an affiliate of the Manager, based on established standard brokerage agreements, at market prices. These fees are included in “Commissions and other portfolio transaction costs” in the Statement of Comprehensive Income. Refer to Note 8(d) for related party fees charged to the Portfolio for the periods ended June 30, 2014 and June 30, 2013. (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 subsidiaries or affiliates of Bank of Montreal group, 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 subsidiaries or affiliates of Bank of Montreal, BMO Trust Company, BMO Nesbitt Burns Inc., Harris Investment Management Inc., BMO Asset Management Inc., BMO Investments Inc., Pyrford International Ltd, Lloyd George Management Inc., F&C Asset Management plc, or other investment funds offered by BMO, and may involve the purchase or sale of portfolio securities through or from a subsidiary or affiliate of Bank of Montreal, the purchase or sale of securities issued or guaranteed by a subsidiary or affiliate of Bank of Montreal, entering into forward contracts with a subsidiary or affiliate of Bank of Montreal acting as counterparty, the purchase or redemption of units of other BMO Harris Private Portfolios or the provision of services to the Manager. 7.Financial instrument risk The Portfolio’s activities expose it to a variety of risks associated with the financial instruments, as follows: market risk (including currency risk, interest rate risk and other market risk), credit risk and liquidity risk. The concentration table groups securities by asset type, geographic location and/or market segment. The Portfolio’s risk management practice outlines 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 managers 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 financial instruments denominated in currencies, other than the functional currency of the Portfolio, will fluctuate due to changes in foreign exchange rates. Investments in foreign markets 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 disclosed in Note 8(e). (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, short-term investments 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(e). (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 or market segment. Other assets and liabilities are monetary items that are short-term in nature, and 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(e). BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 (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). The Portfolio may enter into securities lending transactions with approved counterparties. Credit risk associated with these transactions is considered minimal as all counterparties have a sufficient approved credit rating and the market value of collateral held by the Portfolio must be at least 102% of the fair value of securities loaned, as disclosed in Note 8(e). (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. The proportion of illiquid securities to the NAV 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. BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 8. Portfolio specific information (a) Portfolio information and change in units The Portfolio’s inception date was January 28, 1998. The number of units that have been issued and are outstanding are disclosed in the table below. For the periods ended (in thousands of units) Units issued and outstanding, beginning of period Jun. 30, 2014 Jun. 30, 2013 Total brokerage amounts paid ($) 89,703 63,099 Issued for cash 16,078 13,951 Redeemed during the period Units issued and outstanding, end of period (5,191 ) (8,280 ) 100,590 68,770 (b) Increase (decrease) in net assets attributable to holders of redeemable units per unit The increase (decrease) in net assets attributable to holders of redeemable units per unit for the periods ended June 30, 2014 and June 30, 2013 is calculated as follows: Jun. 30, 2014 Jun. 30, 2013 Increase in net assets attributable to holders of redeemable units 37,351 57,025 Weighted average units outstanding during the period 95,888 65,496 0.39 0.87 Increase in net assets attributable to holders of redeemable units per unit (c) Income taxes As at the tax year-ended December 2013, the Portfolio had the following capital and non-capital losses for income tax purposes: Total Capital Total NonLosses Capital Losses ($) ($) Non-Capital Losses That Expire in 2026 and 181,320 — 2014 ($) 2015 ($) thereafter ($) — — — (d) Related party transactions Unitholder servicing The related party fees charged for unitholder servicing fees are as follows: Unitholder servicing ($) Jun. 30, 2014 Jun. 30, 2013 149 147 Brokerage commissions and soft dollars Brokerage commissions paid on securities transactions and amounts paid to related parties of the Manager for brokerage services provided to the Portfolio for the periods are as follows: Total brokerage amounts paid to related parties ($) Jun. 30, 2014 Jun. 30, 2013 643 438 — — The Manager may select brokers who charge a commission in “soft dollars” if they determine in good faith that the commission is reasonable in relation to the order execution and research services utilized. There were no ascertainable soft dollars paid or payable to dealers by the Portfolio during the periods. (e) Financial instrument risk The Portfolio’s objective is to provide a long term capital appreciation by investing in a diversified portfolio of primarily equity securities of issuers throughout the world, other than in Canada and the United States. No changes affecting the overall level of risk of investing in the Portfolio were made during the period. Currency risk The tables below summarize 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). BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 As at Jun. 30, 2014 Cash and other current receivables & payables ($) Investments ($) Forward currency contracts ($) Australian Dollar 187 59,831 (36,906) 23,112 Chinese Yuan 269 – – 269 Danish Krone As at Dec. 31, 2013 Cash and other current receivables & payables ($) Investments ($) Forward currency contracts ($) 2.0 Australian Dollar 161 48,624 (26,473) 22,312 2.3 0.0 Brazilian Real — 1,462 – 1,462 0.1 Net As a % currency of Net exposure Assets ($) (%) Net As a % currency of Net exposure Assets ($) (%) — 29,842 – 29,842 2.6 Danish Krone — 27,567 – 27,567 2.8 Euro 539 305,520 – 306,059 26.7 Euro 208 265,657 – 265,865 27.0 Hong Kong Dollar 501 74,957 – 75,458 6.6 Hong Kong Dollar 59 64,000 – 64,059 6.5 — 5,517 – 5,517 0.5 Israel Shekel — 4,031 – 4,031 0.4 938 162,032 – 162,970 14.2 Japanese Yen (324) 151,474 – 151,150 15.3 1.6 Malaysian Ringgit 27 15,060 – 15,087 1.5 1.6 Mexican Peso — 1,568 – 1,568 0.2 0.4 Norwegian Krone — 9,690 – 9,690 1.0 15.8 Philippine Peso — 3,695 – 3,695 0.4 1.8 Pound Sterling 419 144,022 – 144,441 14.7 Singapore Dollar — 19,163 – 19,163 1.9 South Korean Won 425 4,064 – 4,489 0.5 Swedish Krona 138 43,476 – 43,614 4.4 — 84,158 – 84,158 8.5 1.0 Israel Shekel Japanese Yen Malaysian Ringgit Norwegian Krone Philippine Peso Pound Sterling Singapore Dollar Swedish Krona 41 — — 453 — 18,510 18,341 4,851 180,893 20,984 – – – – – 18,551 18,341 4,851 181,346 20,984 — 44,151 – 44,151 3.9 (363) 105,452 – 105,089 9.2 192 11,449 – 11,641 1.0 U.S. Dollar 2,037 33,743 – 35,780 3.1 Total 4,794 1,076,073 (36,906) 1,043,961 91.0 Swiss Franc Taiwan Dollar All amounts in Canadian Dollars Swiss Franc Taiwan Dollar 151 9,215 – 9,366 U.S. Dollar 1,172 35,596 – 36,768 3.7 Total 2,436 932,522 (26,473) 908,485 92.2 All amounts in Canadian Dollars BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 actual results may differ from this sensitivity analysis and the difference could be material. As at Jan. 1, 2013 Cash and other current receivables & payables ($) Investments ($) Forward currency contracts ($) Australian Dollar 60 30,582 (16,656) 13,986 2.5 Brazilian Real — 3,169 – 3,169 0.6 Net As a % currency of Net exposure Assets ($) (%) Danish Krone — 4,890 – 4,890 0.9 Euro 41 145,172 – 145,213 26.2 Hong Kong Dollar (17) 44,382 – 44,365 8.0 Indonesia Rupiah — 1,508 – 1,508 0.3 Israel Shekel — 2,626 – 2,626 0.5 Japanese Yen 31 59,771 – 59,802 10.8 Malaysian Ringgit 11 7,340 – 7,351 1.3 Mexican Peso — 2,111 – 2,111 0.4 Norwegian Krone — 6,742 – 6,742 1.2 Philippine Peso — 2,619 – 2,619 0.5 Pound Sterling 551 92,716 – 93,267 16.9 Singapore Dollar — 13,699 – 13,699 2.5 South Korean Won 56 5,654 – 5,710 1.0 Swedish Krona 244 18,584 – 18,828 3.4 8 49,438 – 49,446 8.9 Taiwan Dollar 1,611 5,771 – 7,382 1.3 Thai Baht — 1,896 – 1,896 0.3 Swiss Franc U.S. Dollar Total 286 28,964 – 29,250 5.3 2,882 527,634 (16,656) 513,860 92.8 All amounts in Canadian Dollars As at the periods ended June 30, 2014, December 31, 2013 and January 1, 2013, 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 increased or decreased, respectively, by approximately $52,198 (December 31, 2013 – $45,424; January 1, 2013 – $25,693). In practice, Interest rate risk As at June 30, 2014, December 31, 2013 and January 1, 2013, the Portfolio did not have any significant exposure to interest rate risk. Other market risk The Portfolio has a significant exposure to other market risk arising from its investment in equity securities. The Portfolio's exposure to equity securities determine the extent to which the Portfolio reacts to the movements in the relevant Benchmark. Using historical correlation between the Portfolio's return and the return of its Benchmark, if the Benchmark, MSCI EAFE Index (CAD), had increased or decreased by 10%, with all other variables held constant, the Net Assets of the Portfolio would have increased or decreased, respectively, by $81,749 (December 31, 2013 - $70,956; January 1, 2013 - $40,153). Historical correlation may not be representative of future correlation, and accordingly, actual results may differ and the difference could be material. Credit risk As at June 30, 2014, December 31, 2013 and January 1, 2013, the Portfolio did not have any significant exposure to credit risk. Securities lending There were no assets involved in securities lending transactions as at June 30, 2014, December 31, 2013 and January 1, 2013. BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 Concentration risk The following is a summary of the Portfolio's concentration risk: Jun. 30, 2014 Dec. 31, 2013 Jan. 1, 2013 Equities Australia Austria Belgium Brazil China Denmark Finland France Germany Hong Kong Indonesia Ireland Israel Italy Japan Macau Malaysia Mexico Netherlands New Zealand Norway Peru Philippines Russia Singapore South Korea Spain Sweden Switzerland Taiwan Thailand United Kingdom United States 5.2% —% 2.3% 0.1% 1.8% 2.6% 1.0% 9.2% 6.7% 4.7% —% 0.8% 0.5% 1.7% 14.2% 0.5% 1.6% —% 4.3% —% 1.6% —% 0.4% —% 1.8% —% 2.0% 3.9% 9.2% 1.6% —% 15.3% 1.0% 4.9% 0.6% 1.8% 0.6% 2.4% 2.8% 0.6% 9.1% 7.7% 5.0% —% 0.8% 0.4% 2.7% 15.4% 0.1% 1.5% 0.2% 2.3% 0.0% 1.0% —% 0.4% 0.4% 1.9% 0.4% 1.2% 4.4% 8.5% 1.2% —% 15.3% 1.1% 5.3% —% 1.6% 1.2% 2.9% 0.9% 0.6% 7.9% 11.5% 5.9% 0.3% 1.4% 1.4% 0.9% 10.8% —% 1.3% 0.4% 2.3% 0.2% 1.2% 0.4% 0.5% 0.2% 2.5% 1.0% 0.4% 3.4% 8.9% 1.0% 0.3% 17.9% 0.8% Other Assets Less Liabilities 6.0% 5.3% 4.7% 100.0% 100.0% 100.0% (f) Financial assets and financial liabilities Categories of financial assets and financial liabilities The table below shows the categories of financial assets and financial liabilities. Jun. 30, 2014 Financial assets designated at FVTPL Financial assets designated as held for trading Dec. 31, 2013 Jan. 1, 2013 1,076,073 932,533 527,636 — 261 — 4,644 3,341 1,391 295 — 311 7,487 2,515 1,460 Loans and receivables Financial liabilities designated as held for trading Financial liabilities measured at amortized cost Net gains and losses on financial assets and financial liabilities at fair value Jun. 30, 2014 Jun. 30, 2013 52,253 35,283 52,253 35,283 (1,756) (852) (1,756) (852) 50,497 34,431 Net realized gains on financial assets at FVTPL Designated at FVTPL Net realized losses on financial liabilities at FVTPL Held for trading Total net realized gains on financial assets and financial liabilities at FVTPL Change in unrealized gains (losses) on financial assets at FVTPL Held for trading Designated at FVTPL — 2,205 (5,814) 24,269 (5,814) 26,474 (556) — (556) — (6,370) 26,474 Change in unrealized losses on financial liabilities at FVTPL Held for trading Total change in unrealized gains (losses) on financial assets and financial liabilities at FVTPL BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 (g) Fair value hierarchy The Portfolio classifies its financial instruments into three levels based on the inputs used to value the financial instruments. Level 1 securities are valued based on quoted prices in active markets for identical securities. Level 2 securities are valued based on significant observable market inputs, such as quoted prices from similar securities and quoted prices in inactive markets or based on observable inputs to models. Level 3 securities are valued based on significant unobservable inputs that reflect the Manager's determination of assumptions that market participants might reasonably use in valuing the securities. The tables below show the relevant disclosure. As at Jun. 30, 2014 Financial assets Equity Securities Financial liabilities Derivatives Level 1 Level 2 20,504 1,055,569 Level 3 Total — 1,076,073 — (295) — (295) As at Dec. 31, 2013 Financial assets Equity Securities Derivatives Total Level 1 23,280 — 23,280 Level 2 909,253 261 909,514 Level 3 — — — Total 932,533 261 932,794 As at Jan. 1, 2013 Financial assets Equity Securities Level 1 14,945 Level 2 512,691 Level 3 — Total 527,636 — (311) — (311) Financial liabilities Derivatives Transfers between levels There were no transfers between levels during the periods. (h) Transition to IFRS The differences between the Portfolio’s Canadian GAAP accounting policies and IFRS requirements resulted in measurement and classification differences on transition to IFRS. The net impact of these differences was recorded in opening Net Assets as of January 1, 2013. The following information reflects the Portfolio’s transition elections under IFRS 1, First-time Adoption of International Financial Reporting Standards (“IFRS 1”), the standard for first-time adoption and the significant accounting changes resulting from our adoption of IFRS. The general principle under IFRS 1 is retroactive application, such that the Portfolio’s Statement of Financial Position as at January 1, 2013 was restated as though the Portfolio has always applied IFRS with the net impact shown as an adjustment to opening Net Assets. Transition elections The fund had applied the voluntary exemption upon transition to designate financial assets or financial liabilities at FVTPL. All financial assets designated at FVTPL upon transition were previously recorded at fair value under Canadian GAAP as required by Accounting Guideline 18, Investment Companies. Statement of cash flows Under Canadian GAAP, the Portfolio was exempt from providing a Statement of Cash Flows. IAS 1, Presentation of Financial Statements (“IAS 1”), requires that a Statement of Cash Flows to be presented as part of a complete set of financial statements. As such, the Portfolio has presented a Statement of Cash Flows in the interim financial statements for the periods ended June 30, 2014 andJune 30, 2013. Classification of redeemable units issued by the Portfolio Under Canadian GAAP, redeemable units of the Portfolio were presented as Net Assets. IAS 32, Financial Instruments: Disclosure and Presentation (“IAS 32”), however, requires an assessment to determine whether the units issued to unitholders are puttable instruments that qualify for equity classification. The Portfolio’s units do not meet the criteria in IAS 32 for equity classification and therefore, have reclassified as financial liabilities on transition to IFRS and presented on the Statement of Financial Position as Net Assets. Revaluation of investments at FVTPL Canadian GAAP required the use of bid prices for long positions and ask prices for short positions in determining fair valuation of investments traded in an active market, rather than the use of close prices used for the purpose of determining NAV. IFRS 13, Fair Value Measurement (“IFRS 13”), requires that if an asset or a liability has a bid price and an ask price, then its fair value is to be based on a price within the bid-ask spread that is most representative of fair value. The standard also allows the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair BMO Harris International Equity Portfolio (unaudited) NOTES TO FINANCIAL STATEMENTS (cont’d) (All amounts in thousands of Canadian dollars, except per unit data) June 30, 2014 value measurements within a bid-ask spread. Upon adoption of IFRS, the fund has determined that for traded securities, close prices on the reporting date are considered to be fair value, if they fall within the bid-ask spread. See Note 3 for the Portfolio’s fair value measurement policy. Reconciliation of Net Assets as reported under Canadian GAAP to IFRS Dec. 31, 2013 Jun. 30, 2013 Jan. 1, 2013 Net assets representing unitholders' equity under Canadian GAAP 984,736 663,943 553,416 Revaluation of investments at FVTPL 10 30 2 984,746 663,973 553,418 Net assets attributable to holders of redeemable units Reconciliation of increase (decrease) in net assets reported under Canadian GAAP to IFRS Increase in net assets from operations under Canadian GAAP Revaluation of investments at FVTPL Increase in net assets attributable to holders of redeemable units Dec. 31, 2013 Jun. 30, 2013 177,245 56,997 8 28 177,253 57,025 Manager BMO Harris Investment Management Inc. 1 First Canadian Place 100 King St. W., 41st Floor Toronto, Ontario M5X 1H3 Trustee BMO Trust Company 1 First Canadian Place 100 King St. W., 41st Floor Toronto, Ontario M5X 1H3 Independent Auditors PricewaterhouseCoopers LLP PwC Tower 18 York Street, Suite 2600 Toronto, Ontario M5J 0B2 ”BMO (M-bar roundel symbol) Harris Private Banking” is a registered trade-mark of Bank of Montreal, used under licence. BMO Harris Private Banking is comprised of Bank of Montreal, BMO Harris Investment Management Inc., and BMO Trust Company. Banking services are offered through Bank of Montreal. Investment management services are offered through BMO Harris Investment Management Inc., an indirect subsidiary of Bank of Montreal. Estate, trust, planning, administration and custodial services are offered through BMO Trust Company, a wholly owned subsidiary of Bank of Montreal. ® www.bmoharrisprivatebanking.com
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